. .,.

..... ··\
. ,··
. ";' ,•. MARIA,CARISSAC.'GUlNTO, .
Su_.b)ect Chair- ., : ·

SrIENA GLADDYS:r. BAYLON:

:,';
". · . "_ .Assistant-Subject chair .
·.
. ' ~· . . . · ANGl:LICAMARIE c MANUEL
. . . . . ! . . .
. -:: ' . . ~ubjec~ Blectronlc Data Processing ." .
·.·. ' ... · . . .

· G~~~ral Principles R,EINA _G. :f',1.B~~GA:S · _ · . . ....

.. . °Inca.me· Tax AT~NAI .FRANCE,S:R. QUINTON
-C·.AR'L.OTAN. VILLAROMAN .
,. Transfer Tax APOLLO jULIUS S. STA MJ\RIA
. .. ·. Value:..AddedTax ·. }ELLYN c."CLEMENTE. '. _; .
·,
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. : :T~ A°drtiin:i-stratid°,i,j,;Jdr9~)h~nt, ·.. -. ·. . ·¥JGUIBL A/DE ALvA· . ·
• . r .· and Remedies .
·_.Re<i;l Prop~rtyjind Local Tax~· .· . :A,THENAI·Fl_lAN~E_S R. QUINT(?.N j.

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materials. available to the publlc.iemphasizinq pertinent details-that its-readers 'need to .
·be.familiar with.' Being thorouqhand extensive, 'the MernAitl aims to help barristers in.. ·
· ·, · their preparatfons forthe bar, rnaxirnizinqfheir time by' doing ·away with the needof .
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differen.f .review materials .. TIJu$, the 'MemAid is the barristers' much . '.': ·
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its. legacy .of. ~e.,:vi.c;;e.and ~~·c;e.llen.c~ in'. helpi~Q}he _ba.rrlst<trs·.hurdle the. b~,r.. It f~ then
· the. fervent .hope of the CBO that the Me,:nA1d will contribute to the success of all.
. .. . barristers. asthey h'urdle ·th.e'Iast leg of theirjourney towardsbecoming the lawyers
·, .'· they· asplre .. to. be. ·it may be. .arduous 'but as ;Pci'ulo · Coelho .. puts- it: ~'When.· you · want .
.. something;' all the·universe-'conspire foryou toachieve it.". ·. · · ·.... ··· · .. : -: :
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. ~· ·.: THIS IS.. THE:.'fNTELLECTUAL PROPERTY OF THE··. ·.·.
- .'·. -·:SAN.BEDAUNIVERSITY'CbLLEGEOFLAW. ·, . .
. ·. , . ,:. :_.: · : . CENTRAtitEJ)·BAR·bPERA.TIONS~: , ·~.· :.,·. > .
" . tJI= UNAu'fH~R!kEI:> qoPY1Nt3( ~i~RoDuCT;8N . · . . ·.
. ,-: _=:"·'. . · · ..~ ·. · · MO:DiFiCAJ"tON. OR DISTRIBUTION . . . .' .. · ·
:·,_._· · ·. OF.ANY o:F THE.CONTENTS. OF THIS BCJOK ·1s- ... : · .
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 I _ __
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TABLE OF CONTENTS
~-----Bli-l rm_1_inJ,
Il
, SAN BEOAlAWCfNTRAUZEDBAR OPfR.dTIONS •• MEMORYAID 2019
m!til:IIPl.lhf¥ir~·J:ul'

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS· : . ii

Tlv<.ATION I.AW COMMITTEE . iii
· PREFACE , . iv
TABLE OF CONTENTS _ , ,. .. v

POWER OF TAXATION :................................................................................................................ 1

NATURE OF Tlv<.ING POWER ,........................................................................... 3
Tlv<.ES : : : : :.: :....... · 7
Tlv<. LAWS : : ; : ;...... 11
DOCTRINES IN TAXATION : . : . ·.............. . 12
.l.lMITATIO~S OF TAXATION _. , .-, . :.. , ; :....... 22

. .
DEFINITION AND GENERAL PRINC'IPLES : . 37
SITUS OF TAXATION : : . 40
CLASS I FICATION·OF TAXPAYERS · .' .' .. 43
TAX ON INDIVIDUALS .. : : . .' . 49
TABLE: Rules of Taxability of the lncorr.e of Individual Taxpayers .. 58
TABLE: Summary of Tax Rates on Passive Income Subject to Final Tax . 59
·~ TABLE: Summary of Rates on Capital Gains Received by Individuals .. 62
TAX ON CORPORATIONS . 63
TABLE: RULES 01~ TAXABILITY OF INCOME OF CORPORATE TAXPAYER~ . 78
GROSS INCOME : , . 82
ITEMS OF GROSS INCOME, : : . 83
EXCLUSIONS FROM GROSS INCOME : : . 91
FRINGE BEI-JEFITS : : . 97
FRINGE BENEFITS TAX : .. . 97
DE MINIMIS BENEFITS ::: : : .. 103
TABLE: SUMMARY RULES ON GROSS INCOME :.a : :.: : , : .. .105
·DEDUCTIONS FROM GROSS INCOME : : : :. 0 113
· NON-DEDUCTIBLE ITEMS : .' : , .. - : . · 144
RULES ON CAPITAL GAINS AND LOSSES , : : '. .•. : . .146
· SUMMARY: LOSSE=S OF INDIVIDUAL VS. CQRPORATION ., : .. .. . -- 155
TABLE: SUBJECT OF CAPITAL GAINS TAX ON THE SALE.OF REAL PROPERTIES B'i' AN
INDIVIDUAL AND A CORPORATE Tlv<.F'AYER .. 156
RULES ON EXCHANGES OF P.ROPERTY .' :.: .. 157
ESTATES AND TRUSTS : . 160
ACCOUNTING PERIODS AND ~ETHODS .. ~64
TAX RETURN AND PAYMENT .. 166
WITHHOLDING TAXES , : . 170

BASIC PRINCIPLEB 177

ESTATE TAX - :.............. ·17a
GROSS- ESTATE.............................................................................................. 179
NET ESTATE : .'......................................................................................................... 184
DEDUCTIONS FROM GROSS ESTATE................................................................................................ 184
EXCLUSIONS FROM GRbSS ESTATE :..................................................... 189
EXEMPTIONS FROM GROSS ESTATE - :.............................. 189
ESTATE TAX CREDIT ,.............. 190
ESTATE TAX SETTLEMENT : ,...................... 191
ILLUSTRATIVE EXAMPLES
(Family Home and Standard Deduction as Deductions from Gross Estate)........................................... 195
DONOR'S TA)< ,-............ 197

':!01,3SAN SEDA LP.W CF:NTRAI.IZED BAR OPERATIONS l v

 §[ · ei SM if)ifi-M RA Wi·WIAM.·
"
TABLE or ·C.ONTEN·TS
SAN BEOA-~W<:~NTR/<CIZED /!AROP.E.f{~,TION$- MEMOlfi!·AID:26i9 . . . . •
iMMitkFi i 6 .• ?AAWP~i SHI . ¥84&#-iOri#Mt#GJ.MA +WX·if¥!51t1;r!I,~

. ,.~~
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. ~::ta°N~~~~~N~EV~i~tf:.~t~~·.~.~t~!.::\::::::~::-::::::::!::::::~/:::::'.':::~:·:·:~~·'.:::~:·::~::'.::::~::.::~:::::::::.:::'.~:::::::;: .
'VAT, ON SALE OF GOODS OR_PROP.~RTIES ;: : ::.:'. , ;~-:: : '.: .- :: : :.. 21·2·· .
~g~ ·. ·
. . VAT.ON SALE. _QF R.EA1. PR.OPERTIES·.:·.: :··· .. , ,. ...• : : .. , , .- ,•.. ::·: :'.: .. .-.: ::. 213 ·.
VAT ON· IMPORTATION. QF.9ooos --·;.··•···--:.····· .. -·:: .. -~ ~ :··:.: ,. ; :········~ , .. : ...: . 2'1;:f
. · VAT ON THE SA\,:EQFpERVICE.AND.tJSE; OR LEASE OF'PROPERTIE$ r; ••, :;.: •• :,:·· .. ···,······ 215 .
.YR.A.NSA<::;TJONS.QEEMED SAU: .. ,.:: . .':.:: ,: , :.'. 1:.:;·.: , :.;··:';;, : :.:: : , · . ·219
CHANGE OR ·CE$$ATIQN OF STAT.U$ AS VAT,REGISTERED PERSON :; : : : -,. : , 220
. -ZERo~·RATEO SALEs:or:-VAT. REGISTERED PERSONS : :.:.:, :::·.~: : : · , :.,.:-. ;· .. ', · 221-
. ·~11\!PUT':r.~XOI\J
A:.u~\~IN1R~j~~BJ 1?~.: : :·:':::::: : : ::::::::::: : : : : : :..'::::~:: :::..·: ,: -: : :-: :_ ~: .: : ::::::: : : : : :::.:,.'.:::.:: :: '.'.:;-~..·:::::: :
D~PRECiABLE Gppos .; .. ;.: : :.L: .. -· ..
·... ·~235~
~~ .
TRANSITIONAL AND PRESUMP:JWs INPUT.TAX : : -r: : : .. :., .••••• :.,;, ;.,., •. : · · · 23_7

!i!iJ:itl#~~;~~t~I~~~1it~f~i.~!i.iir:/:~2::1:iiti:~;\::: :~:':i: '.t{:~:;\~:, Di

.· if~1~1~~i~~~]l3f~?'.I~:f".~f:•: :r:tt:::tt\t\!"lit\Il\I!i::'.!)i•·il •·

272 · ·
-272:
272 · ·
:275_
279·
29'1
296
.301 ·
·301- .
. : Period of t.lmltatlon on Collection .. ,., .. .. ." : : , : ': ,·.I., ;·., . .,:: /.::••..'.... : ·302 .. ,
· ·sumf!1ary or Administrative Remedies ; '. : .. " : : , : .-.: , · 30~:

.- i lf~§I[¥~;ji;~fi.i.~}\?i?:r:~::::::i:: :;: ~~if (:}:~: 1::ii E:::t · · . Jg·

vi 2Ql9 SAN BEDA LAW CENTRAl,.JZE;D 87'.R'OPERATIONS
 TA-J3.LE·C,.F CONTE:Nts
SAN BEOA !;AW (;_f.NTRI\LIZED ~R. OP~IU.TlbNS .~ ~EMOR't' Atp,;2019
IM 8t& PhAH+MiWMJA4wit, fi&2tW41Mi GWSSWMM#R&ffl I A f#EW,i!filtU & My&

· TA.BLE:.PeriQd ofCollection and Assessment andsuepenston Thereof'. : .: ·.· ~ :·.. .. .. : ... ··· 3~.6
. TABLE~ Protest.i..v, 1,::: .. - : : , _.,.' :, : : .v..; .' : , '. · ., . 318
· FLOWCHAR:r: Assessment Process witl) Government and Taxpayer's. Remedies : : . 3~0·
,F!-OWCHART: Procedure .to,rDls~raint and Levy- ~IRC ,. :·····.': .- : :· : :.:· .. ,.: 321

",. 1
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;.~1il~~~ ~ rr,···::· ;.' · ~ ·
:::-:·~,.~ ~
0 INt:RociocTIONi·c~urt
• ~~ ~~x-App~~ls .. ·~.:.·.:~:·:: .' , ..'. :~.::-.: : ..:.:·.·_ _::.: .: ..: .: .. ~ '. .:. 322 ..
'JURLSD1e·1:10N OF. THE.COURT·O·F TAX'APPEALS , :,.: , : : '. :.. .. ·.. 323
...: ..

. !~~~t:~-g~1~~~~~i~~-~: //:~·: :.?:~: : '._:'.:.:::;:: .: : :'.~: : : .: : : ·: ::i.: ·:?:.;:::~·:'.: !:~{~:-;: : :i~;·:·:;.:'.: :~:.;: : : }: : · · iii .
· ·. PRO~EOU~E AFTER·OEOISION>OF THE.CTA DIYISION ,.. .. ·.'...:,:,:.- .• :, '.. ,, .. :, .-: : .. ; .. -'. ·333
TABL,E:· Summary·qf Jurlsdlction in Judicial Tax Cases , .•. : : : , : : :.. ,.. ··336·· · .
,··' . FLOWCHART: Procedure· for Ai:lp.eal ln Civil'Cas~s: :: .. : .. : :.. :., ~·-·-· , .. :·.,.~..: · · ·. 338 :
.. ~LOWCl-iART: Procedure j~r Appeal ln Crirtijnal Cases , .. .:..,.. : : ~..;; .. : .-. .'.,.-..:: ,, .. :.::.:.' .'.' ·.·· ·339
. ·. . . - ·.. : .. . .. .:._ . ' -.. . . . .- •. . . . . . ..

. Eit:_~~~~i~~~~-~-)::~}::·:::::::'.i::::'.:'.: -:::::::~:'.:.::::·::::.: ·:·: :::::::.~:.:::::::::·::::::.:::::::/:·::i:::::::·::.:t::::::.:·: :·:::::::: .· . : -~:.~· .

. '·.
. COMtv10N-llMIT~TIONS ON LO.CAL TAXING POWERS .- .. ;_. :.,, ~ 1.:., .:...,.: •. : . 344
. TAXING .POWE~S OF LOQAL GOVERNMENT UNITS (LGUS).;.,, :.. : . .-,: .. .-.. ;, .. .'.,: , : · 347
. ·. Specific Rpwefs of LGUs to·lmpo_se Ta~·: ,;.: .. :: .. :., .. :.- :· : , : " :.. :.:·.: : : : 347
·:. Co..r}'.'1111:uni.tiiTax,,.:: ..,: .. :.- ,.: , .- :· : : : :,: :: .' , :.:'. '. .. ; : : ; .. :i.:... 358
.·· ··Residual/Ottier Tax. Powers of 1he LGl,J ::;,,,· : , : : ,.,: ~ :.. ;.: :{ :........... . 361 ··
~-. ·. PRESCRIPTIVE PERIODS FOR THE ASSESSMENT ANO.COUECTION OF LOCAL TAXES :. 363 .
. :F:.· : . .' QUTL.l~E Of= ~EMEDIE~.:: ;;:.: :_..: .. i :: :::: :· .:. _: :.. ::·:·-, : :.. :: .. :: ..•.. ,:.: :. : :. 363 ·.
i; . TAX-REMEDIES OFTHE LOCAL·GOVERNMENT·UNITS· : · : : : .. ,.:: :...... 363 · ·.
. TA)( REMEDIES -OF THE .TAXPAYER: ~-~-·:., .. .'.. : :.:.:: ; ~ : :, :: : ;.: ..' : :.: .. :.- .'.;;. 365:
. · TABLE: .T#ing Powers of ·Local Goverrimerit Uhits· :., _. _..: .. : ,,;.: ;.,.:,. :: ;_ i~ :.. . . · 368°.
FLOW.Qr.lART: Proced.1..!fefor Distraint Qf .Person~I.Property .. : :.:: _ ;:., .. :: :.,.:.: ,: , .. : • .- : .· . 372 . : .·
.;:-, t

·~:i : -~~ . ·. FLOWCHARJ:: Proced~re for b.evy of Re.al Property. .-.....•.. :.:, : :..: ::.'.: : :.:·.. : :.:... ·. 37'.3 · ·

r
:. .: FLOWCHARl'·:Taxpayer's.Remed'ies'from Assessm~nt 6f.Local·T~xei,-OtlierThan Real Property. · '· ·
T~xes· .. ·. , ,:.~:. :•... : •... , :: ..;: : :..:. ~: i,.. : .. ,: :..,, , ..:. : : · :.,: :; ~ · ·.:.. , :.. : .. '.... ·:· · ~75 ·
· FLOWGHAR.T: Proceduredor Distrai°nt.'A.nd,_lev~;-For The-Purpose Of Satisfying Lpcal Taxes., .. ,:····'.. · ·. 376.

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G~~E~~'Ai..-PRiNci~i:.~s··.:.,..;::..·.... :·... : .. : .. .'., :.-.: :·.. --.:._.::, .. : ·.:
_IMPOS.IJIO~.-OF f.{E_AL PROf'.ERT-YTAX. '. : :
: ~·:.:·•.. ~::
i
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.31i ·
: ::.. ·--··
W9 ·,.
Et- ·· .. ·. Declaration·of:Real Property : , ,;..: , , _..; .. .; :., ·., : , .._. ,........... .. · 319
'ff:: · · Listing of R~I Property lr,.the Asses~rrienf Rolls : : :···:· .. : :.: , :· , : .. : ..• · 3~0·
~- ' .. °AP.p'r.aisarandValuc1~ion. of Re.al PropertyL , .. : , ,- .. , ~ , ;: ,; , : .. ., .., :.. :: ; :······· . : . 381
ir· · .Detetir:linir;ig Ass.esse.d,Vall,ie ~fnq the ·T~x .l;)ue , ..• :,. , , , .. : ::,.: .',...... ,: : ': ~...... . 382

l:~ . TY:e~i:"~tlti~~~~~;.~~~:::::::::::::::~:~:.: :: : : :::::\:: :'.:::::::::::'.::::::::: ::-:::::_::<_:::;.:::-: :::·: ::\::,:.:·:::~:::,

~{~ · TAX E;..XEM.PT1pf\lS.i·C.0~DONATIONS,AJ\JDR~DUC_TIONS :., _.., _. _.: .. ·····.• .. ··:, ..··:··::· .. ···-:··· ...... :.· , _387.
. ~;
~-·. :D.1$TRIBUTION Of PRO~EEpS , .._. , ,_. _. ,.· , :·:·'·":···.··:···: .....•.!'.,:,. ,:·:···.-···,: .: . 391:
i{ . · REMEPJES.IN REAL.PROPERTY.TAXATION:(L~U) , , : , .. ~.._. : _.'.'_.,., , ..~ '-::·:.... 392
{f. ·R~MEDIES IN REAL PR~P~RTYTAXATl_lDN.(TAX~A~~~) / : _. ;:·· ····:'··:--·······, ..::·:··.:·:···· · · 395 .
w ·
Rl.:, BOARD
.. OF
. ASSESSMENT
.•, APPEALS . . .v . .. , . .
,.............................. .. .398.
-~;'· TABLE:-[ocal Taxation vs. R~al Property Taxation .-: ,:: .. :·.: : ..,.:: : :'. :.: : , .. :. 399
ij~'. ,. F~OWCHA~T:'Pr9cedu.re,9f.A~.~e~sm.ent ofLand Yalu_~ fof Re.al Property·Ta_x .. ::.:._.:··:: : .. :,: .. : :.: ..:·.. · .· 401 .. :

~r.:· .
~·.'·.' .. F.t.OVVCtiART;T~xpayers_Re,:t1ed1es Involving Collect;_on oJ.~e~I Property Tax:·:·,.:·· ,
FLOWCl-:IART: Proce<:1ure for Le.vy for< Purp'?ses of. Sat1sfyl119Real Property. :axe~ ,
:
:._.:.: ,.,
:· 402 .
:.... , 4_04
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· 2019.SAN 6EDA
. LAW
' . CENTRALIZED.BAR
. OPERATIONS·
. . . I vii.
..
 . TABL.E b·F.CON·TEN.TS
. SAN SEDA C4W c~rRAt:IZEO.BAR OPERAT/Of'J.S.': ~Ef!1QRY.Ma 20i9- : .
. . -'4:W&~»il_rifM'WfiSOW: IAMLWA W .

·GEN.ERAL ·PR.INCIPLEs·:.:.;·:.,::.:~ •.......... :: :.: ...•. :., : ••.. ::·=:.: : : :;:.:· . .' .: : :.:·......... . 41.0057·
AQl'y11N!STRATION Qt=·,T:ARIFF AND CUSTOMS LAY'/S.. : , , , :.. : : , .. · ,..

. ~f~i~K1~·ctt6r~·~:~~..~:~~~i~i;;::::::.:::: :'.::~::: :/:.::::: :_:.: -: :::::::;::::'::·: :::::'.:·:::;:-:::'.·:::\::::::.::;;.:::·: : :'.~~:::::: . : !~~ .

TA~~~ $.p~cific Articles under CondltlonatlyFree tmpcrtationsr;.. ,.: .. : ,.: : .... :,. ,: . 413 ·

~~J~~t1Esis.TI~.~:.:·.:·:·:.:: :~::.::'.:·:::::::::'. :.:·::~:::'./::::.: ::::'.: .::::::::.::::'.::::::.: ·: .:-:-: : ::.: ~::·:·: :::.::::::::::::::::'..: >.:::::::::;:· . :·~ .
. :TABLE: Comparlson of.Customs Duties : :: , : ,.,: - :, · : :.: : : :·.. · · 42.4 ·
.· METHODS·.OF.D6TERMINING bUTJf,.eU.~ VAl,.UE .. :-,.: : :.: ..: · · : .: :.:.... '426
IMPORTATION IN GENERAi:. .:.:.:.' ::: ..•......... . : : .. , : : :.:.,,.::: :., :: : :...... . . 428
IMPORT CLEARANCl;)U..:JP.FORl'y1ALITIES .:: .. :r···: : :.\.: .. ::.: :· , +:: ;

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· ::., : •• : : .•• :,..... ·· 429·

FLOWCHART: PROCEDURE·IN
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. . . .· •,,

.· •'

,.

.. . . ... . '·
viii I 2019 SAN BEDA
. LAW CENTRALIZED.
.. · -
BAR OPERATIONS
. .
 G:ENiE:RJ(L··PRl'NCIPLES .
s,a.N BEDAJ,AWCEN~RAUZ!D BAA OPE.RATIONS - MEMOFIYAID 1019 ·
IMAM Mil IF &iH¥Ei PPS - MNS,i.4
1
1
I
' • • a, Promotion of General Welfare - taxation
_o_w_._:E_··_R_o_·F-·T_A_X
· ·· ...._ ......._·:r_· ....·A_,_:r_1...io_N_.• _·_._._,·._.. may be used as· .an implement ot police
. • power- in order to promote the. general
, welfare of the people (ABAN, Law of Basic
... Taxatlon, ·. . . Taxationin ·the Philippines, ReyisedEdition,
. . It is the power by which -an independent. State,.: . p . ..5) [hereinafterABAN]..; . · . .
. ': . throuqh: its' . Iaw-rnakinq body, .. 'raises _'and' . ' ..
' accuinulatee revenue from its·inhabitants topay the .. Illustration:. Sugar Adju$tment . Ac~-. was
· · necessary, expenses .of the. ge!'ve·mment.". As
1;1 _: imposed to strengthen' the sugar lndustry".
, . 'means, it is a way of collecting and)1ppqrtioningthe. . •· . (Ll.{tt .· v. ·Araneta, G:R. No. . L-7859,
cost of gov.e.rr~mertt arnonq those who.are p,:ivileged De~emb~r.~2_, 1~55): "· ... :;
·.. to enjoy ifs. benefits and. must. bear ils 'burdens .. . .
.. (VAi.:ENCiA· & fWXAS,''tncome-texeuon (2016), -p. !:i. Begulatiqn .- taxation, may 'be· used as ~ri
·. 2-·3)'[herfiin.after_l.(fl,Lfi.f:.JCIA & ROXAS]. : · · im'plement of the pollce power· of the State
. . '· ..... ', . . . " . . . . . 'with 'the end view of .regulating a particular
... T;:ix~tion j~ a destructive power, w6Jch int~·rfereswi.th...: activity (DIMAA!y!PAO, ·iax 'Principles ena:' · ·
the .personal and property right.s ·Qf th.e· pe ople and · Remeaies (20.18), · p. ;.. 26) , . {her.elna'tt.e.r ·. ·
takes.from them a-portion of:fheir property-for Jhe . · D.IMAAMP,~01:_ J
.· .· · . · . . ·,
·suµport. of.:·ttie ·_government·' (Paseo Realty.. and· . . .·1. · · . · · .. ·
Developmenf..Corp. v: ·court of App~als, G.'R. No0/() _ I lustrat ti~n: Taxes impo~~d to· ·~ehabi,lita~e .
1.1~286, Octob'er·13,·.'wiJ4).· .. . , , · . · ·,.:1)'':t1·1..( . and ~ at)1hz_e a thce?_te~~d mdustry, wnleh rs, '.
,-·. · .. . · . . . ·. :·· •. :: ,. : · · ·.: t. t'·'{,.f' \\. · . affected with pu_bl1r: .!nfP;fP.st And g~neral
.' : Thr~~~Eleme~ts of Tax~tio~:-_(l;SI;>)·· .. · ~.._- lfi;i~j:;'.,')~'l ·. . we_lfar~.'Ii.~ th~· oil)~dust~ ·rc~ttex .Pf:'IL v:
· · 1 .. ft rs an .!;nforced ·proport19nal·contnbut1.on-.t.,l;.oroi:'.::.:;;"',l•.C,"r"',. Co,1)1.,;russ,on on /A!ldtf, G.R. No. 92585, May
· · d ·
-: ... · · ·p~rsons.an ,PFOl)t!I Ires; ..
· · ·
.. .
·
· ,0
·l-.. 2.: ·I~· is. imposed'. ,by the State b.y '4~e;_.rof its,L.· _J . · .: ~5~~tion
,r~=·· -,.
·7' J ·-···rYfJ."·"~e-·--,_8· ff.9.92)
:vt-, ·a'r#.IJ;'U, · . .
of . Social .
...
. ·. _
lnequalitv/
'
;·
· S · d
-?.v~re_,Q_nt~;-an · · . · .·
· <- .,.. · ·
. \ :r ;, ·.· L hi "~ -·
).' ·"'\L . · . ,,
.
Co ·~satory . Purpose - the ·_pre~ent t~x
. ,,.
~; 3 .. lt}&fev1ed ~o_r:~e su~port ?f th~gyv~ern~~;..~cr'}) . . · :5 te,r;n ~as adopte~tthe·progre'ssiye·.system.
: : for ·a_ll -~ubhc ne9.ds. (~epuf?.tc,,,--v.·<;f'?J.'J}!}?gco~. !?f.' .·. . . . . . ta~ab~n which .aims at· reducing the ·
r' . · . G.R:·Nos:.. 147?62-64, Deq(!-1~f!r J#/2.001j,_..,~ · ~/i . ·· . J.n~9ial~ty'i~'t,h~. disfribUtioo 0f~ :we.ci!~ b'y
,. · . · · . : f..:/·.v·.~-~'( . ~ ·
::· ~. T"."'oC_or.1.~~p.t:-of,.Taxat_1on:.\{,t_·... ~ d;_/if .. ~;l . Yf{, . . . ~J?.§.i'9J;:t?ft-J1-tew
l'i1 · ·.·
~.:-/p,~ey~.r::r"-~g,~t~un.due G9n~entr~t1on 1n. the
indivitji.Jals . .(QIMM.MPAO;
t · . 1.. Power tq tax: and .. · ·. · · .. ~ .... <~-.:l?- · · )!f. f!li· · ·s1./prcrat~25):, · ·
r· ·.2 .. The c;1ct or proees~. by wf'!ich IJ\~;ra'i<ing;power,)s . W .. · .. . . . .. . . . . ..
f.,:.
tI.'
.exe;rc1s~_d.. (YIT:Uf3-: &' AG.OS.TAt 'lf~~ ·_qJw. ?nd .J.+•:·;:r.:fttd.
,!;ricour~ge: ~conomio. · ~rowth · ·_ . tax ·
· J,ur,sprudence .(2q14), p. 1) '[herf;lfAajt{:/?wIU,G..-.-/ ',.,,i!''.£1:i'~"::'lre.>t'jJmptions .. and tax· rehef~·,.·.s~r.,,e · as
t. & A.(!q$TAJ> ·. -~- : .': .. ·. · .. · f~f: . · 1(?.,-,._._~~--:~~- ·. ,-·-rt-1centi~es_tQ encourag_e investrne'nt jn ~L!•. ·.
}Y. , · . .· · : . ·. . . · · \.h,.. }4 '-:. . . ·. local md~stry. and ·· th~reby p~omotlng -
f'.' i:>urposes·aod:C?~Je~taves:., :";_ . ,_.· :., :;: _r~:;:,<.,}.. . . : ec0nori,ic grbwth:-(ld.): ' · · . ·· · ·· :. ·. ·
~.:: ·. 1. ,.· Rev~nu~·rn•~mg. ::-- r~.Ve[lU~s, denye_d . frOJ'11. •· . · · : . :.!. · .: ·
if . taxes· ar~ intended :,Prim;:iril_y. t9 f,iriance· the . . . l,llus.t'ratio'n: The grant pf· ·preferential tax
it . •· .. ,governmental'.ld it~ acij,,iities'(/d.·a.t.ti... ..... . . . treatm.~ritfor bµsihes.ses that are'i'egistered
Af'...·. · ·... -. . . _ . :·· . · : .. ,. , :. : 1· .: ·. · . . . . · witti ,Pbllippin~ · Econe>mfc Zone Authority.
ii·. 2. · '.Ncin.-tev~nu.e/&µmptuary·purpos.es (PR2~P). .. : .· ,:_1P.EZA),. Subi<;:·· Bay !\Ile.fropo_lit~u:i .Auth'ority
~- .. · ' - .·. .

if ·.
~ . . EXE(rtirivE COMMlfflE
iMARY-CYR!E~I; C:
.. ·;OBJECTCOMMITIEE . .
~~qm .·
'MEMBERS . :· . .
··.MJl.!UA··CARISSA' ¢.; 'GUINTo" : LIANNE.
,· . ADVISERS . ·
MAE.
?· .'ENRl:QVEZ, Justice)~ARB:DI.t~i~AM.P~O
,';!;-.. Over-al/ Chili,person, ·. 'ERICA"··-Subject ':-. . Chair; · •. ~Hl!.NA ANISHA M. HADJI .HASSAN; · Atty; NICASIO:C;C~BANEJRO, ..
.
•.

,- ... : · Mifi:c;:, VISI'A.CliaiT'J>(rSanfor 'GLAD,OY~P:!IA,)'L9N_.,A.sil~tant. MARY.. EVmLYN'N·, 'MATE.O;. 'CPA, .and. Aity:_ DANTE 0. :.
... ~ _ Academic$,.'
f..i,;....,:' BEN ·.'Rm· E. · S.ubject: ···chair, ANGELICA MARJE' ··sHERRIDANE .. C. ·. .QELACRUZ,CPA, . . ·
. fe.ARB~O (:ll_alrpersorijor llpt# ' .. M.I\RIE . c:
·.MAN'laj,·. Subj~'c't· , REYES, ALY~A R. ~GA~"· . . . -.
: Opiratlpns,_.~A :LOOI~~ B,: .Ele.ctronic ·_ Dcua - . .,Proc.e~sini, < TAG¥A. . ESTHER ; .. V. : . . .. . . . ·'
D'IMA:AN:O Vice Chai~~i1 for REINA ·G. FABRJ!Q:,'\S' ~eneral GAI~ILES, ·. . MAREANE,
~:· Secre!qriat; EARI.·· JUSTIN M, . ·.Princip,les;A'P'J:ENAI.FRANCB.5 .. ,MABEL A.;~HA.~Z. JEWEL ... ·.
:•.~·. . YAM_BA0 Y_Ice.J::hairpeYSon .for· R,QUIN1:<;>N-?%1d·C,ARL~TA N.. · J.9JCE C .. DJ\.YTI,A, ~-·
~'\.: .. Opera'tiQ~,:.MA, ~pEUCA.B.·. :.yn.LAROJl.!,AN. Jnc9me Tar,· S.MO~.ANDREAPATIUCIA
l]j{'· . · .DE LEQN Vice Chairpusori for .Af>QlLO 1~.t,.11).S S. ST~ M:6RIA D. · DAQl:JIAL, . ALFRED-
ic... Flrian~e,' ·'ARR}\ . C:!LMJ).Y~ J'. · Tran's.fir ·. TllcX,· . ]ELLYN .C.. FRAN~ P. GAlJ..EG9S, JOY
«;'$:.. · BADANGAN'· Vi,~t'.. Cha(rpel'son Cu;ME~ Valuc>.i\d~ed Tax,· CRIS,!"EL,. .'G. .· GAY_ON.f',.,
~: . · forAudlt,']QRDJ\NN.qIAVEZ ,·MIOUIEI:. A.·DE AINA .Tax .·MARIONE· NICOLE · ·p,
( Vice·(::halrp,,,:sonfor~DP;.HAfiZ
,1dminlstrqtioii, .· Enforcem~nf, BUGNlfN, ond'KATRINA'ANN
,~·\: 0.A,RRYL 'D.TIU· ., .. \f!ce
:and Rem~dfe~. aiJ'd. ATHENAI . S. PRApO,
i~~ . ' FRANCES R. QUINTON Real . .
Chairp~rson for Logistics, ·and
ii~" DOHN ALFREDE. AQtm,izAN Property and Lpca(T,ax .
<t · . Vice . · Ch.airperson · for ·
t,,.-· ·: Membership,
.!--,,
 GEN·EJtAL PRl:N·CJ.PLES··
'SAN.SEDA LO.W.CENTflALIZE_D'BAR0P.£RATIONS. - MEM01Y.AID,201.9

. (SBMA) and-the like (RECALDJ;, A Treatise-. 2. Nece.ssity Theory - the • existence of : the .
on 'Te»: Principles and .. .Remedies.: p. .5) . government ls. a necessity. 'It 'canrrot continue
[hereinafter RECALDE]. . .- . without' ·.El. means to pay its .' expenses and
therefore has a right.to .compel all· citizens .and .
~: ·P.r;t~cti~nii'fn - In·. the case of foreign· property within. its power: to contribute (AB.AN,
. ··,Tmpori~tions.. taxes". sometirnes provide .: s1:1pr;a· 'at 7). · VVithout -taxes, the- government .
/protection to local. lndustrtes like protective · · cannot fulfill its mandate of prornotinq i;ieneral:
tarfffs and 'customs duties (ABAN; supre.et we If ate. and weli-beid·g ·of· th.e· people (National ·
6_;7): . .· . . .....
Power .Corp. · v. · City pf Cebenetuen, ·G.R. No: .
· .149110,-Apifl 9, 4003).. .
. ·ni~~tr~tion:The AhtH:/um.ping Act, which
protects. · .our . local . .lndustries aqainst . 3. Ben~fits-protectlo~i . )~e·cJproclty_ . Theory ..
importations . sold' ·. at · ii . lower cost . · .. ·(Qo~trine·. of-~ynibicitfc Relationsh'ip) .~ .taxes
(DIMA~MPAO, supta ·at 24)_.· ·. :c: = · · · · are paid -for ·the enjoyment- of the benefits· of.
.• r, ' • . • • . ••. ; orga_nizedsociet.y. Suchenjoyment also ~xtends ..
Theories and Bases-of Taxation: . to· those members of. 'a -Statawho do not pay ..
1. Lifeblood . Theory ;: . · . taxation- . is ~1~ ==""~ ..,!gxes because tneyare not able to do.so (ABAN,
· · lndlspensable and-Jnevitable-price f%,,ei~j11ze9 1T } 1\ ··su!J...'f:a~f 7). ·The government for its :part, is
· . society; without taxes, the governm~~oqil'Ei,bl:l . P~~ .l \{ e,lpe9,tecl-torespond in the form of-tangible and
. . · paralyzed ·f<?: lack a~ motive. p-9-wel"-.tO~dti~~~~~citan~,\Pfu~~.Refits intendE:d to i~ pro~e t~e lives
.., ~nd 01:.~rate.1l.TJ,lls,. the col_lej%>.Ci;.p~ts3,s1"1:,1usi_.,; _ . · of:-tt,e .~?>J~\~nd_ enha~cE: their mat_enal and
: · b$·.ma?e. ~i~holit h!r-i~ranCf'.1( -fli~~tat~,~f6 ~atp~~-~~f~\ (Commissioner 0f -Internal
·: _man:i!ain 1t_s orq_erly e_x1steofJ~'1{!.J'!l{'!'sfioner f -.I. Jr Re·,/'9nd(}).:vrJ,iJub- <i No.. L~28896, Febr.uar.y
G,R,

Feb_ruary 17, 1988). .r~.

· · ·,' · - . N ,,;~~}! . t - ., ~ f
· Internal ~er;enue v. f!,.Jg~~. G,':_p o. J-28B_Q , ,).\_ • . _ 17, 988)\~ i;-~ ~- ·.
j . . i\..;:_.-:"'~'·P .
.However, ·~uch ~oll~oti~I) Shoifld: P_~. ade-;'!1;,...-. J:Bl ~
~:xA \
. 'i
: · .
. : . . ·- ·.
Ii ~-;n•i,,A P!:l. son ca~~~,Ci:l~lectto _or. r~s1st.the pa~ent ·
ip6t tq· es s·o~i\).ly_~e4useno personal'-be_nef1t to.
'aCC!)rda~ce y.rith' law 8i' .l--rr'f ~rbl_t.!!!f.1rfSS w.111~_@1? hi.m. ~ b~"-Pbin~~ _out arising. from :the tax
.. · , .
. '. ·

. nE:gaJe)hE: y~ry reason:;Jor~~v'!lt~.~M}.1~.2..----';.~.(L9r 1·. '~osaq~s. G.R.,-No. L-.43082, June

is .. ther1?f~r(;) · ~e7es~aW,1 . ;,tp\\rec0F19\_8\;.~he~~- ~";l"'·~
appatel'.)tly conflicting mteie.s'ts'Q~he l:lut~fr4t1e\~ ~\~.J&"'b . .
J..;, ~J . · ·,,·
J( .
. ·
. ._ • .
.
·_ .:
1.
and .!he t~xra,y~r.s SO·.thf:!\ t~e .reiaJ. P.~~!)~~ot-., #~\!~~I ~_ict·ion·ov~'f._~llbj~c;t~·a~~ Obje~t~.- the·
taxation, which 1S: the pro~,t!on ()fihe co .. i'{fui""ii._ . . ~Ppqwer;f tax c~K. only be exerc1.sed· ',Nlthm the
good1 may be'. ac.hjeyed _'{Comm~ :<q€J.EJ',.irt).pte?~~juri~gi~ioi:i ofa taxing,authorlty, except .

. _. . . . . . . ·. . _·, '~,l
·lhterna[ Revenue·. v, 'Atgu_e,. ~18.: No;-~8.$~--;,.,,~~n t[1er,e,P~ists.Prlvity of relc1tir,,n~hip _between_ .
F~qruary 17, ·1.f?BB) ·..
For _lh•.s. re~so11.. . .. . .
.· · YQ..,,~~.,
"-,-<
. .
IV{l~}~E~qt~
. ........ -..c..~~-:. ·1 •
'Wli~~Yt.lli.Ptl · State and the · obJect . of tax

· .. a.... Injunction generall:y. does._not li~Hl9aJl')Stthe · : s.. Uabilities'lnvolve!J .-·civil. liabilJty· to.pay taxes ..
& ROX~~: supra_at 8): =
. • ,. . . . .. • . .
.
. . . . .

. 9oll~c\ion qt taxes .(Commi~Sionetoflnternal. . · .. ·
· Revenue v.. .. Cel;,u · Portland ' Cement · .
·. -.c;o,rip~ny, GR •.No. .L~29Qf?9, :December ~5,. .
. · . 1'987) ~-. , · ··. . .· . · . · · ·. · ·
_·:b,,- -.Taxes a~e ge1:113ra11y not ~t.!bject to:~eH>tt .or"
compensaflon (Republic· v. · Mambulab,. (;i.R.
- . ' .. :No: f.-17725, i=ebruar02B, 1962);
.. . c:.. The- State:is·not .. estopi,:ed frdm collecting·
: faxe~ by the(mista.kEi°S·or'qrrors Of its agents..
· ... · (PfiJ/ippine --Gt.if#J.fanty. Go,, .. Inc:.' v.
. · Commissioner of ln,ternaf.:.Rev~nue., G,R
- No~·J:..~22074, April 3o; 1965);
d. ··.Tax.exemptions'. 9re ~ev.~r presumed:and
· ar~ strictly construed .agaihst:the ·taxpayer
arises . from :: tt)E) (act · that one h.;is· engaged •
h'trirself'in busin~ss, and not because· ' · of ', ·
.. any ·cril'.liinal ~ct eqmiilit\ed by .him. Th.e -criminal .
. ·. , · llabiljt'y c!f.ises upon failur¢ oftlie debtor to s~tisfy
his civil -~bligatlon· (RefJublicJJ{the'Phi/ippinesv. ·
Patanao,-~.R. No ...L-22.:)56,,'.Jl.!.IY 21, 1967). · . ,
· · · ·: . . . .:... · . -_: ..
, .,-. In ad~itio~;. _1~ shq~ld· b~ bor.;i~ iA. mind. th~t.t~i:1· ..
· · .. tax'and .th~ .Ql;iligatiOf)· tq pay the _Sqme ·are al!.: .
.. ·. · · created by···stafute; so. are its collectiori and ,
. payment ·governe<;l by ·.statute:· fhe. payment- of:· .
·. · •·· ta~es:is a.duty;whic~the-!aw requiresfo·~:paict.
:. _ Said. obligation ·1s not a·'.con,!>e·ql.ience··.of th~
felonious ·ads · charged . in· ·the·. criminal
=

(Smart ·communic'atidns, 1ric.; :v.. .City' of . i?roceeding f'!OI'. j~··i(a mere civil Ha~ility .arising
Davao,. G.R: ·No. ~.{5_54~1,·.September .16, from.crime~th.atcould be-wipedo!Jt by the-judicial .
2008); . . . .. . · declaration .of non'-exist~nce qf the criminal acts
e. Taxation is plenary and,uolimited in its range charged.· '(Proton.. Piltpinas C9rpbration ii.
,. (Ch(!mbet of Real Estate.·... and..· Builder_s Republic of the Philippires; G.R. · No. · 165027,. ·
Associations,: Inc. v. Romulo, G..R.· NQ'. O.cto.lJer_12, -~006). · ·
160756,~ March
. .
. 9,. 201.0); . .
·a·nd .· . . .

2 ·2019 SAN BEDA LAW CENTRAL!ZED. BAR'OPERATIONS

 GENERAL PRINCIPLES
SAN BWA I.AW CENTRALIZEDBAR OPl:RATIONS• MEMORY AID 2019

6. The PowP.r to Tax involves the Power to any law or the Constitution (Diaz v. Secretary of
Destroy - the power to t_::ix involves the power to Finance, GR. No. 19300i, July 19, 2011).
destroy (McCulloch v. · Maryland, 4 Wheaton
316, March 5, 1819). But the "power to tax is not· 3. !heoretical Justice - a sound tax system must
the power to dtistroy while this court sits" (Sison be based on the taxpayers' ability to pay (Ability-·
v. Ar.cheta, GR. No. L-59431, July 25 1984). to-Pay Theory).. Our laws mandate that taxes-
·-·:-· ,.must bEl rea.sonable,just, fair, and conscionable.
Note: The power· to tax includes the pow'3r to Taxation .. mu~ pe uniforrn and equitable .
. · de~troy if it is used validly as an implement of the (CONST., Art. VI; Sec. 28(1)).
police power in discoaraging and in effect, ultimately
P.rohibiting certain things or ei:iterprises inimical to Effects of Viola~lon of the Principles
.. the public welfare (Cruz,ConstitutionalLaw, as cited A tax law will ·retain its validity even if it is not in
in DIMAAMPAQ, Tax Principles and Remedies consonance with . the principles of. fiscal adequacy
(2015), p. 20) [hereinafter DIMAAMPAO, Tax and administrative feasibility because. the
Principlesand Remedies]. Constilutio,, does not expressly require so. These
principles· are only designed to make our tax system·
. However, while taxation is said to be the power to sound. However, if a tax ,law runs contrary to the
destroy, it is by no means unlimited. When a principle oi theoretical justice, such violation will
legislative body hs vlnq the power to lax a certain render the law unconstitutional considering that
subject matter actually imposes such a burdensome ..- ·;· under the Constj:ution, the rule of taxation should be
tax as effectually to destroy the right to perform !.~El:·· ':< uniform and equitable (DJMA/\MPAO, supra at 31;
act or to use · the property subject to the tax,._1tif..,:,•.'.. CONST., Art. VI, Sec. 28 (1)).
validity of t'1e enactment depends upon t"le n.,i;ft-"'
and character of the right destroyed. If so greata. ('!'" · ,,:--. , •
' lf td t d 't t , ... ,l,<"l'~·L,:-:,>, •~•,>
a buse rs mum es e. as o es roy na ur~~f'·a .,, .,r., ~#-:~-. ·«¢,:v ciF· .· ::rr,"i -
fund~mental r!ghts "".hi_ch no free gover~},E::~t~could;' ~ NATtii\.E OF TAXING POWER
consistently violate, 1t rs the c!ut~ of tpl1r1.~1r.1arytgtr?
hold .. su~h _a.~ ~ct unconstitut!onal.i . 1;113~~~> t~ . r~. "!',,~~,--.-------.
----,/~µ*":
fi; ~.

mod1f1callo~. The power to tax rs 9;>JJhf _l?.!!lw~r to . t.{ SpectrulJ;i' of'Ta,!ng Power
.
...
·
destro~ w~1le the Supreme ~o~~g.-~1\s(DIM'~"A'MPA~'=>. P\ I~ is the ,9ne 't*at riaches every trade or occupation.
Tax Prmc1plesand Remed1e\~l?~Pl< ~- · [;:j to e~~~.9,.J;>.~i~,~t~!~}!J~ust~, .. use; ~r. enjoyment; to_
Principles of a sound Tax System: (f..~)( ,~:l. .1 · .1 ev~ry liP,~C)§S At~ss?ss1on,nn? it imposes a hen
. .1. fiscal Adequacy. _ :source~~:&CJi~...,~rri~~t- . ~~ which; m'-'ease-~·of · failure ,to 91s':hargf;}, may be
revenuen must besutnclent to lri,eet gov~·fnr~efa t(/:..,...,f~l-lowed by .seizure or _confiscation of _property .
. · · expenditures and other public neea_s._(Q_l;lav~zv. jf.,r:._&~~f!.f:JCIA_&ROXAS,supra.al 3}.
Ongpin, G.R. No. 76778, June C,t:?'990). Tpj~s~(:.:..::::i;- .. . · · .. · · · . Th ·
In consonance with the doctrine t°ilat tax6~1are ·, 1:..:,:
· .;..\:iif?2-:';;
In ere~t A~tnbu~e ~· Sovere1_g~ty;-- e po~~r
the life-blood of the government (Cd(fj[P.J#Joner ?f fax~t,o.n is an incident of ~ove~e1gnty as 1t is
of Internal Revenue v. Algue, G.R. No:'f..:28896, 1~hemnt m th~ State, belonging as a matter of
February 17, 1988). nght to f!Very mdepend_en~ government. It .does
not need const,tuttona! conferment.
2. ~dministrative F~.asibility - tax laws must be Constitutiorial provisions do not give rise to the
capable of being -effectively enforced with the power to tax but merely impose limitations on
least inconvenience to the taxpayer (ABAN, what would otherwise be an invincible power
supra at p. 12). (DIMAAMPAO,supra at 15).

The principle requires that each ta>: should be clear
and plain to the taxpayers, capable of enforcement
by an adequate .:ind well-trained staff of publk;
officials, convenient as 10 time and manner of
payment, and not unduly burdensome upon or
discouraging to business acti'v'ity (Report of the Tax
Commission of the Philippines, February ·/939, Vol: ·
1, pp. 23-31). · Non-ol>~ervance of the canon
however, will not render a tax imposition invalid,
·"6xcept to the extent that specific constitutional or
statutory limitations a·re impaired." Thus, even if the
imposition of VAT on tollway op13rations may be
burdensome to implement, it is not necessarily·
invalid unless some aspect· of it is shown to violate
The government having sovereignty can enforce
contri~utions upon its citizens even without ·a specific
provision in the Constitution. authori_zlng it. It is so
because the State has the supreme power to
command a'nd enforce obedience to its will·from the
people within its jurisdiction (VALENCIA & ROXAS,
supra at 6). ·
·. Taxation being an attribute of sovereignty, ·its
relinquishment . is. . never µresumed (Luzon
Stevedoring.Co. v. Court of Tax Appeals, G.R. No.
L-30232, July 29, 1988).

2019 SAN SEDA LAW CFNTRALIZED BAR OPERl,TIONS I 3

·.··
 . GEN·ERAL ·PRINCIPLES-
SAN BEOA LAWC£NT8A~IZ£0BAR Qf'ERATION~-:MEl\'fORY i\/0'201'9 .
tWKSi iWMMifCSPM IM&i lklh +-a, NM
..
The taxing power of provinces, cities, .riluni<;:ipalities, c. The ·resources Of the: national governr:nent
. and barangays (L<:,Us) is cldthed with n.o inh'erent will not be und~ly'dis.turbed,; and .
po,wer of taxation, unlike a sovereign plate. And th_e · .' ct: Lo.c!?.l"taxation win be fair, uniform, a~d jus.t
pow~r •. when grante~ i~· to be r::onstrued in'sfric;tissifT}i ·(Manila Ele.ctric Co. v. Province of !,.agunct,
juris.:{Pelizioy Realty Cprp. v. Prov.ince of Benguet, · · G.R: No: 131359; Ma'y.5, 1_991).
G.R. No .. 1831.37,_April 1.0,.2013).
.. ;
2. L,egisl~tive i_n Chara~t~r.
Grant'ofTaxing·Power to LGUs
'! .· By the Coiistjtutio.~; or . . . . in
..B;:isis; Thepower to. taxls' ihheier'lt the State; and
. · . .' · · · . tt)e' Stateis ffee ~0. select th_e .ppject.of ~axatiori. such :
tuustratlon: The 'Cor:istitutfcin. provides... that .. each ... · po.wer being excluslvely vested lrr the legiSfc;llure,
_: . local govetr'lment uhjt~frannave.·tt'i~ power to create excepfwhere the. Constitutionprovides otherwise.;·
.' its: own sources of revenues and 'to, Jevy )axes, fees- . · (D.,MAAMPAO;: supra' at' 1 ~r , citin.i/'C.ONST., Al'f. VI, .
and . charqes . sublect . to. S!JGh ..gui~eline~' and· . · Sec: 28 (2)f . . ·· ·_: -".·. · . · -. · · :· · .· · ·..
limitations as-the. Congress rnayprovrde, consistent . . · ' · . . ..
with. th'e 'basic policy' 9f focal:autpnomy: ~Y<:h t~es~~- ~~ope~Qf L,~gis.lative P.owe'qo;Tax:. . . .:
· fees, and._c~arges shall. -accrue exqlusi~elk,~!il-'<~ "'f 7 •. f~~i&qet[olj.'asto: (PAP!<ASiM)'· · . .. ·. .'.. , .
local gov_ernments_-.(CC?_f!JST._, :Arl: X,. Ses._,p5J. ~..;._ . -\.l) [\la. 'i(~~.P.n, ~roperty, or occ~p~tion to· be taxed. ·
· . · . : . .. .: · . . ..,-fP~ f "'>--,.,'="-~>::i.~ .It 11)-e::'l~,~-'~l~ture.has unlimited, seeps ·_as .to
N_ote: ~n?er \he q'?o.s~1~ut_1,on.whe~t,er~~ ,J~ttl'ier . . ,~ ....~tl:i4°pe):s~s,"pr?perty..or occupatlon ..t.0 be
a. gr.ant nor.a proh•~(t10~ by st~tL5fe~,thJJax._e~r.---~7..;;,.,,..,,,:.,~{a~et,..r~.@{e .there. ate no .constttuticnal
mus! be deemed t? ~x·~t · alJhgi~~~r1p~:r,ss,fl'.lc!-~) y w . 1e~f~~ trovided: t~e pr-O(?~Ffy is within·
provide statutory· hr:mtat10ns 1anch~':P.clehn_es. -.II"& ~\- }\ · , ·.tpe.1~\iilorial\urisdiction· of the-taxint1 state
. b_asi~_.rati~n_ale for.tf)e--e~rren~f.u1e is tpsafe~uard·the :~~-: -~ .... {f;JIMAi~F.Giis,supra··at '1~); · .. : .. ·
~·~b~hty ~nd self-_suffJc1en_c}7~pi019al.. go'{ITTn'!;1-ent~:.0.; / _.'o:,mount'\\oC:i!~\ep,o!'.the· tax:-ihe-legislature
units b~ direcyy,grantl~g-~h!3-f."!'10D!}g~1~nd_. ~roa!;l~? ~JiL,-(~ · rpay· Jev~ \a ta~ ~f a.ny amount ·it sees fit. It_
"'8 /}Jay: be fidani_ed.~01') . e"'.0rl to the ElXtent of
GR. tyo. 13135~, -!v1~Y 9., .: Qf1f.~
. · .. ,. . _ _. · · · _.: _,. r () \
t · ~\~ ·. · ~1J.,';1) ,
powern (Mam/a .Ele~~rtc· Cp.~ V. j'J.f:>rtmce. oftt;afIU®,\.~Ifj

'?i) :\ ·.( .
f'
~-f:;;·.;·. · --;·. ~s!fJ>n. arfct&d~s_1cuction~.tnus ~ec9(11ing
ii ,.f'I.. ~ e?(erltr~~1powe(_to d_E:stroy (let: at 2.0).;_
2. By ·a valid . del~gatio~ o\-hi'x. ~o~er )~~: · ~~ · ~ : J~~( :de rpoiis f~.r ')¥11Tch faxe_s shall· be levied - .
statut~· .from ._th-a nationa~~l~gi~latur.e .. ~!i~f~€1... · .· ,.#'.;:,_~~ hey_jhoull.,e _for public -purposes (Id.. at
.rocar:governm.ent units or. -olitical)ubdivry.;1~~ 1
• t?-j;l··.. .·· . , -·. ·, ·... ·. ·
tq_ e:xere:ise,.such:.power; in h_e ap~e~~5JEtf.t\ ~i -.·,,.:~t(dA(ta~9·~:·cot!e~te'ct(tcf at 154-_1'57);
·constitutional·provi~ion (.VAli!M.,CIA'f--r(;,ib-~~r:-~~,;t~rm'le.t:i_t of the.\~ -:wh_~ther th_e' tax
supra_atw. · .... ~·.. ·..
· ·• • . · • • ..
. ·-
. .;,. . ,
~~~i;.2. . cVr · _"'-
• ~~
.'f -~ ~\$~)ef15e genera1. ~r nrni~ed :_ro a 1?.a~ic.u1~r
• .-:J.i.. • · ~.jlf,'\..,;_'<A. ·19cali.ty.or partly ger:,era} af)d partly. l~c~I (la .
. Illustration: _The. Constitution mandates . tq~ln.~~ ~--d:$~ at 53.-58); ·. · . · · · . : · ·, . . . . ·
. dongre~s $ha1J -.~ii~ct .an ; ~rgani9'. .··~c( ·to?· each- =':i . . _f. ·.§.itus .of.~axa\ion .-. place .~t ·tax·ation' .(i'<i. at . .
autonomou~· re.gio,n. ·(C<JNST.,. Art. : ¥,··_:Sea .... 1.ar .. · · · .. · -. 52); ajld.:: · -.. · , , : · . . . ··. , · · . ··.
,Wit~irf ifs t_erritoria!· jl:Jri'sdigtio'n, a!"'d suoj~ci_-to th~. . . . · ·g. · M~nn.~r. in:eat;1~.: and age_npie:s.of: collect!on .. ·
· provisions of this Cortstitution·an.d:national laws, the . ·....: the', discretion · ·e~tends fo>". the ··mode,.···
organ_ic ·act: of_ ~utor:iomous'f'e'g.romi.:;;h_aO-Pro"'.id~ t9r · ·,_ ..:. . , "method ·or k·inas of tax.(J.d:at·.20), .·. · . :: : ..
legislative. po'Weil"S OVE;lf.. 9realion ·.of· SO_urc·es _of , : . · . ·. . ·'· .... ·. . . : . :·- .. . . . :· t,, .,
.. re~enties, amohg· oth_er~ :· (CQNST.;. Art. X, · .Sep .. _ ' . · .· .. 2,.' Gr-ant tax e.xemption.or·cohdonat1on (Id. at .134j: :
20(2)); : -~ : · · ... · . · · ·. - . . . ' . . .
. . .. .. . . ' · -~ . . .· . ' Judlci'i:!J Review of taxati·o·n ·:· .· . . .. . · . :
N.ote:. The. f~ndar:ne_rital . 1c;1Jv_·.. 9i_d. not·. iilte_nti ~tli~ . . . Whiie·taxatiol") is saici to" be' hie power" to "des(roy; it
d!:!leg~tioh·. to be' ·a,bsolute · arid ~ncorrqiti.ori;:31; the . is by no me·ans:unlim'i,teg (!<:( at' 22)_;. . . . . . ..
constitutional opjecJive obYiOUl;lly,is' to-.en:;ur.e t_t1at,. ·; ' · · ·
Whife ,-.the. lo.cat .. g'ov.e'rnmerit.' , units . an~ being Wh~n ~- _.leg,sl~ti,Je b~-~y acluaJly Impose~' su~I:'!. a
strengthened· .and -m·ade. m6re au!bn.omous,. ttie l;>urdeosome ta?C, as etfeotuaUyfo destroy. tt,e tight to·
l~gi.slatu.re.must stiJI see.. to it that: . . .. . ~ p~rform the ·act or. t~ use.ll)e ·pcoperty subject .to fax; · ·
.,. · ~ · · · tr,e· .v~HdftY_.-~'f the e_rjactrii_e.nt."tJe_p~hds· ,uporl_ th~. ~.
·· .. a.;· The 'ta~pa.yer ~ill not b~: ov~f-!;>u~d~n~d :or·.· ·natqre ~nd _ch_aracter 6f -th.e .. right destroyed. If ·so
· · ·saddled .. with .multiple and unreasonable .. gre~t fhe. ~bU.l?e ·Is manif~st.~9,as_ to destroy-iiatur.al
. : ·rm positions;.. :· . . . . . . ·,. . ar-19 fundametital right;, it is the -duty of-the judiciary
'b. Each local government Or'lit will have its fair to l:lo.ld·su_ch·an act u~c~>nstitutlcinal (Id. ?1.2~)_. .. :
~tiare·of available resources;: · · ·

,·.
·.4: I 2019. SAN SEDA LAW
·. CENTRALIZED
. . . BAR
.. OPERATIONS
. .... ,:•
 . WAI IS4!Mi8¥1 IMIPAMMhfil4:'!ti&ilpiM
t¥. $-W±iiil 4asi- WNSWMS iry&SPMFIA0·46

,; . ' . ... Extent of the Taxi rig

Power: .The power 'of taxation. Police· Power as . an Implement of Pow~r of.
;[: reaches to every trade or occupation, to 13veryobject Taxation
:~:; of industry,· use, enjoyment, or to. every species of Fees may 'also be· reqarded as taxes even though ·
ifi possession, and it.imposes a-burden which ih' case . they also 'serve asan instrument of'regulation. If.the
,,,:· of failure to discharge th~ same may be followed by. . 'purpoie. is primarily revenue.. or. if revenue· is, at :
~.f,'._l.f.:.-seizure, conflscation.or forfeiture of property.(/d. ;:lf teast,' cine ot.the real-and substantial purposes, then
. 29), - . . . . .. · . . ,,._.
: the .exactton is propertycelledtax (Philippine Air.fine~ ·
){·· · tnc;v. E(}u; G.R. No. L~ 41383, Augi/st :15;.1988). dn ·
it Taxation is said to. be: (CUPS) . . theother hand,a cliarge.of a fixed .surn which' bears .
1 .: tompreherisive .: . ~ .. '.it .' covers ·. persons, . no "relation at. all to the cost of. inspection" and' ...
;_~._·-,.~::_:,_,_:_:·.~;:c_.·_-,
..:

. . businesses; activities, :professiqns',\ riqhts, and . requlation: may' be held . to

be a tax rather than. an
~.<
>;.,.

,
privileges.(/d. a( 30). . · ... · . . .
2. <!J,niimited-·-,-, a tax. does-.not cease -to be valld "
· exerctse.. : _of .. the~. police power JProgres~[ve
Development Ootporetionv. Quezon.City;·G.f?. No- ··
~}· · .. · rytereiy. because it -, requlates; dtscouraqes;' or 36081, :April i4,._1'989):. :·'.. . -. . · . · · . ·
· •· ·· even-.defitiitely .deters the activities 'taxed. The ..
:it;
__-~-.-....
t_;::~_~:
__ _::
···:._·_:_;_:::_- · -fpow~r t.bd.
impose .th~xes_-is otne.tstho·
.u1nt:hli.mitedrtin
· :, _ Illustration No. · 1-(.R.A'-: No:. 413.6, th_e
:;:, .. orceane so searc 1ng.m ex ~n a · e cou s .· payn:ie·nt of mot~r vehicle re~istratiori 1ee~
req1,.11nng
levied to·
. sc·arceJy·ven~ure-to declare thc;!t ft is s_ubject to · . raise fund.s for the construction and maintenance of.
ani~estrictioh whatever_;· except such as .r~_st i~ /0. · highways and to pay .fcirtti~·oper.ating 'expenses~ of
.. th~ di~cr~ti6n of the aUth.ority, which 'exercisEJs}z;~i,.. t!7ci ~d111i~ister'ing _agency .(~rbr:Jf~~sive D:evelopinen_t
(Tio v.· V1d,e_ogram Regula,tory Bo_ard; ·G.R/Nqu:,i:~\ ~orat101J v. Quezon .. C,ty, G.R. No. 36081, ApnJ
: 756_97, Julj.e:18;·198'7). ,. · .· · . .' · tf{j',;~:=·~~;,t-~·y=1~89). ,. · :·: ·· · · ...
~- _e~enary - 1t ~~ compl.~te. -Ul,'ld~r 11:le NIRC\}-t~~,,,Jl ~ _, ~-. . _ ·. , . , .. _
BJR may avail of ce_rta1n remeches.to en~}(e tli~; •-iltt1si.rm:l@ti,~'O. 2,. Where. a permit ·collected fro!:11
. colleption of taxes (D.JMMMPAO,,,}/;J[r.11' at 30).( alien i?b' a!:fi~icants.· ..is· i~ exqess· o'. the cost- ?f
4. .§Upreme -:-?lthough re~ei:red to alt{ie_)trong~~ll regulation, Aqe\_exact1ory1s a tax '_(Villegas V: H1u
i·
of all the powers ·of the _gpvernme.,~tz":it~qf!nD9t.be• 11 Chiong Tsfr "f?a<a_ Ho,. G,R. No. L~29646, ,November
!rterpreted to xrre~r-i· that it ~:~P~ri_~~~Cf·pth~r.. ·i~i . 10, '1978}1. -~ \ . · . . · ·. . ·. _
~·· ~nhere·nt ~o:,v~rs of. th~ ~9:'?f:rnr:ne~~· ~nly t~~! 4~, tt:l ·. . f ·
.. f . .. \. . _ · · .. . · · .
~,:.,.-_'._.:..
-~~
I~ supr~l'!1e 1n.sofar as-~_hef~l~c}1?lf;.~§l~.~-~p~~ct . w:~- Pow~~'. ~1Jr).<j1'f:g~~
of t~xaf~on 1s concerne~tJ7.110 -~,.~';;~{feog,~~ ..1'',f ·'. of Emrn.~~~-'?~~~~-
a!) Implement of.t~e Power·
: . . .. . · . ·
fl· Regulatory Board, G.R. No',:r;-J,tJ§fl?;~JJ!.ne 1~.· (;f T;;ix · measures are but .enforced contnbut1ons
~i.'. · .' )987). ' . · · i(J:-:-"',;;: -~,\ ,· /! _:i; e.~acted on pain of penai s;3nctions,and imposed for
[1;\· · · . . ·. · · -. . · · · - f,~_.,C) .· · ·, ~~?,;'~·~;;,,dl.!.91lc purpbs~.. The power· to .ta}< _has in9ee.d
f.hl. · 'Power of Taxation as a!'l lmph;~m.ent9ftflePql;t~1r-,.ir'. ~ '"".b~.e:~m~~st.(:l~ept\ve·toof to rei:ili.ze s9cial justtce,
~~¥_ . Power (ReguJa~ory M~,~sure) .'· . :t(.' . .Nff' · pµblic :welfare, ar;id 'the equ.itable ~i~fri.bution ·Of.
t:i" T1:1xation is n<5 longer: envisioned:. as'<(~},m1e'~su.re- wealth :(C<;>mmissionet of..' ln.ternal· R'ever,iue: ii, .
~l·
;)1l., '
mer~ly'. to, rai~e revenu,~. fo,l,iup()Ort :~he ~x\stij'fice of
the. ·gqvernrn\3nt; 'taxes.)nay' b'e: ~~vied;Jvitli · a: · . . . 15, 200.5): · · .
. c;ent,:'al
0
Luzon Drµg C_qrp.; G'.i~. No. 159.647, April
. , · · . ·. . · . . ·.
ti't:: . i-e.gulat6ry p1..frp9se,, to pr.o:vid.~ . means _'for _.'tt'le ..
!fJ;mJ· . · rehabilitation.:. and .. stabiliza~ion . of a_··. th~eatene~ Note:· T'h~ 20% senior citize~ dfs'c~unl 'was an
f ·. >.
industry. which is· ~ffe9ted with public i_nterest as -to·. , .. ·: exe'rcise of polic_e po'i"er and ·noiof em.it,etjtdofn~iri'.
,J) . ·be.' v,.,ithin : the .police _power . of 'the. ·state~:.(qalte'x · ·.. - The.20% discounti.s·in~ended to ii'nprove the .·welfare:
~~,:_:_._,.·:_· ~·.-~Philippir,.es.
'.~-· ,::·.,:':'_.'. Ind., v. · Commission on Auc{it,. GR. No.- - of senior·.~itizens w°bo,' at'1heir age; iare.-Jess. likely t9
;; .. 92585,: /,(fay_ 11; :1992)-: . . ,.. . . . ... . be- gain,fuily emj:>_loyed; mo.re prone .to. illr.iesses. and.
·. other'.disabiljtie,S; arid;·:tt(us, in rieed.' of $Ubsidy Jn -
Hlustrati.o~:. ·.Tli.e. tax l~vi~c;l .'uricfe( the Sugar·' · purGha!;iing: b~sic comn:).odities. The 20% .disc.oun.t
·Adjustment· Act - is orie ".with a. ~~gulat9ry_. purpqs·e. ' · ·. may .be· pr.op"E1rly.viEiwedas· belong\ng to the ·categoly
wliich .is to provide 'nieans'·fot' the .rehaoffit:!:ltion. a:nd . . 'of. price; regulatory. meas'ures:. which affect ·tbe
sta~ilizaii0n. ;of ,·th~·. thr~a~ened ·sugaf. '.indu.stfy In ·. p~ofita.biiify>ofestabiistiments:·subjectecith.eretq. 01) ·.
. other w,ords, the act 'i~ prima'i'ilY:.an exercise 'of'the. its face: therefore; ttie. subject r.egulation is. a police
police.' power ·(!.. ut:z ;v: ~Araneta,.' G.R.' No. L~ 7859 · ~ . power .· measuri,r_ (Man,iJa. Metnorja1. Park Jn,c'.. \!'.. -
December22., 1.!?55). ·. :: · ·. ·.-· . :.-. ·" ·-se.cretaryofDSWD;G:R.No:17q356,"becember'3;
. 2013). - .· ... , ..

. SAN
. 2019 . B.EDA LAW CENTRALiZED.BAR OPERATIONS
- . . 5
 --l

-GEN·.ERA:L PRINC.JP~E.S
:;AN BEDA. LAW CENTRALIZED
. -BAR OP~RATIONS .
. . AID 2019.
.··. -. MEMORY
·, .

.' ·Tax~tion bistl.nguistied from ... _·. ,· ..

· ·other lnher.ent·Po'-'lers ·

Covers all·. Covers all. Covers 'only. a ·

persons, P.ersons, · particular
property.and property, rights · property.
To raise
-", "
To promote ·i-9 facilitate the
excises·. i:mg prjvileges.- .
revenue. pubJic welfare ·.taking of ..
througt\ .. prfvate property
r'egu(atio_11.s, for public use.'
. :, ,. ·.
1. Exercised·
by _the .'
gover.nnient.or
· its political
subdivisions;·.·
or
2. Gianted·to .
., ~, . public. service
· companles.or
public -Utilities·.·

.Can be
. expressly . . .
·. dele_gatiad to .. ·.
thelocal.: ,
government .
-units by the-
[aw making
'body .

. Operateson
.. the .partlcular .
private . . .
. · No.direrir ." . -N6.dir~6tb.~~efit -, . pr'qpert}} ofan
. benefit is . . . · is received, ye.t:a resultsin "tHe: . indivic;h,,a1.: ,
receivec(b:y . ·., heaithy .economlc formof just ..-, .• ·.
· ttie.taxpayer, .standard of ·.. ·. cornperisation.
m'ereJy·~eneral· .soclaty is.-~ . tothepropetty · ·: Inseparable for Protectlon., ··Common·
· 6.en"efit of · .· maintained .. ·. owner. . . .the. existence- . ' -safety, a'nd· . necessities
. : protection ~i')d. •.. ·: ·: ~- .: . .. .ora natlon -_lj. ··-welfar~ of.: · and. interest of
. promotion of'. .. . ... supports · · .".. :· -society,' the comm1i"nity
~ .. 'publlc 'welfare_. . :r;, police power · · · . . · · transcend
., . and 'eminent .. individual
domain.. rights lri
property..
Confracts· m.ay., ·cb·ntfacts· may be· Contracts-may.
np~ be, . fmpaire_cl.. ·. be'.frtiP.~ired. .. "..: . Constralntsby ·. Un:iited:by, th_e , . 'Boun,dep by . · ·
lmpalred.. - Cons.tit1,1tional . :t;:1em~ric;!·for: ··., . public p1:1rpo$e··. ·.
and ·lnher.ent public.interest and Just ..
limitations: . a~d clue··. . c:ompens~tioo.
r"ax~·s. pai~; \ No tFarrsfer bµt : . Transf~r. is P~?~ess. __ _- ...
form part of -. . only restraint !:>n . effectecl"in.
public fµnc:ls, -the e~ercis~. of. · favo~ of the . · -(VALENCIA·& ROXAS:s~p(a at 4-5). ·
. ... . . . \. . . . . . .
·proP,·erty rights.. State.

;.·

6 I 2019 SAN. BEDA LAW C~NT~LIZED"BAR .OP.ERA TION5.

 GE_N . ERA~· P·RI.NClPLES
sAN"Ba)ALAW"CENTRALIZED_BAR
OPERATIONS.-MEMORY'A!O°:Zo19

.' . · Exception: . . · · . . .
. TAXES. · If prior to the payment of estate tax on the transfer.
of· decedent's · estate, the· properties of· the
deceased are distributed· to any beneficiary, the
Taxes . . . . ·.: ." . . . , latter shall be subsidiarity liable for the payment
f~ ·Taxes 'are enforced proportional contributions from. 9t such portion of the es tate tax· as hlsdlstrlbutlve
\ . persons and property levied by the law-ma~ing body share bears· to the· total value of-tris net estate
'.&\. . of the State by virtue of tts-sovereipntytor the· support · {Id:): · ·· · · ·
lk of the i;j"overnmen~:and for public needs'(ABAN, supre , . .
,.,.,r·:· a(J_.1~:.: .. · .. , .. ;_ . · · · b.. Exemption from liaqility of. stoc!<holder~ in
if.It-. ·.. . r: ,. case of the corporation's tax delinquency .:
It .
'~(··
Ttiey · ~;.~ ri.ot ·ar~l~ra-ry exactions but ~ontributions
f I d' b · I f
Ex ti
c~p ons: · · .: · -. .
...·
. .
, e. . levied PY· autt:iorlty.:o ·. aw, an · .·Y some ru e .0 . '.i. stockholders ,nay be helct .liable fcir the :
't:-. . . . proportion which is intended . to insure. unifo~mity_ bf . unpaid taxes of
a· disselved corporationtf .
g!i · c::ontribution.ah'd a just apportionment oftt:ie· burdens. . it appears that the corporate assets h_av~..
\,;_°: of government-(t Cciotey 64;. Questfon_lVo,·1(~); 20Q4(
I ;:r,. . .Bar Examination). . . . . .
passed into their, hands· (Tan TiongBio v..
Commissioner df Internal Revenue, (3.f{ ··

ri.'. .·
~-,~.

f.
.· . · .·.:
Attr:lbute~ or,Es~ent1ai Cha~act_enst,cs~ ..
(SLE~-~ -RP) · . · · ·
·. · . · · . . •

. · . . . . : .. ·.. ,-,·?';/).(
.
.j'"°c>i
No.. L-15778;-Aprjl 2J;.}~62). .
ii. ."Wtiei:,· . stockholders' • ha~e · .. unpaid ·
-subscriptions lb· the · capital·· of the.
'. · . · ·

1r.t. 1. It I~ ·1mpo~ed b)! the-§ta~e· wh,_tjl.ra.s !UTISPl~t~~';.-:•.,.;'1, · . corporation, th~y can. be made liable to
·t.z . . . o~er-.th7.pers~m. prop~rtyr~r services, . (i.1_... ~;.i·)<:.':, the extent of their unpaid subscriptions.
~,: · ·. 2.. It 1s l_ev1ed by·the J,.aw:l)'la~mg_bqd_y.of tt:ie st~t_yi'";._i/i:fJ. . . , . . (ABAN, supra at 4). · . · · . ·... . . :
~~·ll· ·?. It is an'!;nforcep_·~ontnbut10.n- not depende,)31 ~,1;;-y•~,~~,~=--~~. J'.•;.l . . . . . .· ·. . .· ,
rJ· ·ttie ~ill of ~he'p~r-so.r;i taxed,"l)~t :a coni~fbut,a,rff\1>:~L'isitef~~jJ~
ii:.:
!t . pos1t1ve act of the_·governrnent_. j:.~. ·
4, : It is gen_er~lly·p~yab!~in Mon~y_-·lt'(~~pE:cuniaw.-ci~
,\.JI · .
Valid.Tax: (J';"PYL) .. ·.
1: · ·-:rhat e1th~wl!re person or property"faxed be Wtthm
rthe J_uri_f::11,ctl1:mof the taxing· authority (Reagan v.
. .. · .

]~,,:... . burden ., paya_ble. 1n . rn_?ney,Jiut,_~~-~~~pay_. f[t\ . . Coirlm{~sl!Jn.er of Internal Revenue, G.R. tyo. L-
{l> certjficat~s may be_ u~ed}n .~~)'Pl_. _n~~5?-t.t~x(D~ t:f~ · . ·263~!Depe~er 27, 1969)i·. . . · .
~t\0-- · B~rJ~. v. G,elfi3, G.f:?. N_e. L~f330, :i#f!:_3~96~ [!i 1 2: That• t~e ~sse~\s~entand ·c_ollE:,ctro~ ·of ~ertam :
if · · . ./ ,· ·. ..-: ·(;,}lt;l. · ;7-Y':;t; · -~. 1,:t. .-. · · 'ki~~ .. ·l?Hi~~~?.l'Wa.rant_eeag~1.nst mJusli~e t?
_Rea~~~: "!"h_e.taxpaye:-1s.h~t af~~Wtsett~ef ..::,t}ef rr~;i .· in_di~-ic;:!Qif.I:i.i~i*<:i~II~ .by_,providing .no!ice c;ind ·
Fj ·
·f:~.i,_-.~.::,-:·:··
.•.
;·~·-_·:·.·:····· ,

-//.-. .· ·tax habrhty by convey1_ng.pr01?$l~Y,!n~~1~.wo ·}} opportunity ·for he~nng. {VITUG. ·& ·ACOSTA,
· pr~blem·. of · ~~~!gnl.l)~ vahle ·t~sl'.l~~)rop~rty JJ·. ·. supra· at 12); · : . · ·. · .
~-'· . :_ (fyfAMALA_T_E0~ ·-Reti!ewer .on. :I;a,..~t19.p_i20~8},_ 1.,()r\~;!-iiµ'r.~atit should be for a .P_u~lic purpose· (Pa_s.cu_al v, .
;."l · _·
.r., ·• ·
p:BHhere.mafterMAMM..ATJE.D_, R,f!'rJ<5wer}/.?--:~t&f!:..-:ttifili.~ief';iry
. ·' '-· •.· · . .. : ,. ··: 1'.;1 · ·;:..,ff..
o(-PubJ~c ~orks and Commun19a~1ons,
·G.ft:No. L~10405;- DecemtJ,er.?9, _19_69):, .. : ..
~,if·... 5. It is f~opprtiphate in .ch_aracter_-:-! ~~$.!..;.m_ust-.b~ 4. The ru!e of· taxation shall·.be Y.nifqrm (CONST.,
l~/ . ·based 'on ability to pay in c;i_ccordanc.e.,tiw.rt_h:.t~e . An;' VI, Seo, 28(1)); and · · _. .... · · : · ··
~~.-~.~~~_;
__\··:·.::. · .· constitutional tnan·o·~te to .Go.n.gre~.s lo: evolv.·0·.a· _ .s·. · The. tax. must" not ir:npirige . on ,the . int,ere.nt and
~ ·. prcigr~~sh,e 'system· of ta~ati9n (DJMAAMP~O, . :·constitutio.nal,bimjtaiions tin.the p6wer.of.taxation
- supra .af 1-2);. '. . · · · ~-(Basco. v. Phi(ippine:_A_ri:l~sements· and_1Gamfng ·
i{. 6 .. ltis. ievieti onJ~ersons,·prbperty,_and excise (Id.};:· -C6rf?,; G.R. ty9. 91649, May 14; _1991), .
.f . · . 7. It is-levied for Pi.Jblic purp,ose/s.. (/d.J; . '
. ;'· , ·:~- ·-_it is paic.f <:1t. Be9 ~1ar p~riocis;·:_ar:.,_interv.a1s~ a~d Classification~ or Kln.d.s·oiTaxes:·
., .:· ·. :·· ~*~-in~1ei:. _" ·., .·_. · . ·::· . · ·. ·_:.-. · . ·.. · . t ... A~ to-~ubjectmatter · .. ~ .. ·,: · .. · . : .. . .
·.a. : Perso·naf, poll, qr. capita~ion, :- t~es of a
· a. ."lr1coh1e. Taxes are· pc;1id_ . quar:terly · ~nd_ · · . f'D<ed am9unt:.upon ·au pers·ons :of; a c~rtain
. ·:-· aririu-~lly: . .. ·,' . ·. . . . ·,. . . . ... · class ·within' .the iurisqlction· ot.-the .taxin~.·
·. o.· , . · Value-_Addecl Ta?{es<a~e. paid.;:r.'non,lily and po~e.r. withouf regar~ to. the am?ul1t of their.
.. :· .... ·.quarterly... · ·.. :_.:.·.•.. ·· .. · . -: •., ... · ..... :" ·:.· ·. · propertyi or thJ· oc,cupaUe_r:is,~r. busl~esses
v ~- - • • • • • ••. •• • • • • .• • • . .. they may be engag~9 (~.g.• c.ornmumty tax)
t· 9 · It is:Personano the taxpayer (ABAN, supra at 2-·. .': ·. :. ·.. ''(ABAN, supra_ at ?3J · · ., ... ' .. . ·. . ·.
¥ . ·. . . , 3/•··.- . · . : .. ·_... ' .. :· :. :· ·:: -- .: ... : . -. : . ' .. · ·. b, :·Property-,- taxes _as,sessed on all pro~rty-or ..
all · property· 'of ~ · certain ~lass· witl:lm th El
.Examples: .. . , : .. · .... · Juris~:liytion:. 6! the· ta~ins:r power-.(e.g.; rel;'/
a. Non-enforceability of estate taxe_s. aga1rst .property tax) (Id.). . ·. · . . ·. . .
. heirs accruing.· .upon: tra.r:ismis.s.ion. of . c. Excise or privilege - · those taxes :U:iat are .
." (:lec_edent'.s.·e~tat~{Id. at 4).. . laid upon. _:the manufacture,. sale_.. or
consumppon· ··Of . c9mmotliti:es. within the
·,.

."2019.SAN
. . SEDA LAW CENTRAl,JZED
·. . . BAR OP~RATIONS
. . 1.. 7·
 GEN·E°FtAL·PRIN .CIPLES
·SAN. B.OA
. . L:AW"CENTRALIZEOOAR OP£RATIGNS
. ~
- MEMORYAJD
. 2019
I++ . MIM&ti
. '. we.+ IENMNM#W #& . d¢fti&fftri . 89hi

country and upon the. lic.enses to. pursue
certain ·. occupations and .. upon corporate
privileges·(e .. g.; donor's tax, estete.tex, V);\T,-
. ··ir,:come tax) (Id. ~J.26), ·
. : 2.. Asto -~ho bears, the burden.and iricidence
. · a.. .Direct - taxes wherein both. the.incidence of
lial;>ility for -the payrri'ent of the· tax a$ well as ·
the impactor burden of the tax falls on- the
sa·me .person (e,g.,. income. tax, 'estete tax,
· 'cJ.onor's.tax.) (Id: a.t.23f · :
. b. ,, lridirect .:.:. tax 'wherein the incidence. or
-. liaPilitY·tor. J.he payment- falls on one. person
.· 'butt'he burden·may oei shifted. or passed on
. ·· to· another.not as· a "tax- but as part of the
· purchase '. price · ·(e . g:;
.VAT;· excise tax, .
. ·-percentagetax) (/di af'24). .·
.. . . -· .. · . . v: . . ·. . .·" ...;~,?;"
~at~: !he i~pactoftaxatlbn_1ifthe poi~~~-~ whJ~~ tax :·
~s,ongina_lly 1mposed. It-falls qn -~>ne.,_gn ~lioftljfi~j!~=--"--~.:t
.1s fo,:m~1.1y asses~ed, Mea_nwh1~~..,v~e iri¢1tJ}1{5e of_---«= __ . . """1..;,jcori;if,tt;&.:on_ individuals, · estate tax,. and.
c. .Mixed - tax having both the.' characteristics .:
of specific tax and: ad_valorem·tax {Id.).
s. As to taxing authority . . . .
a. National-' . ~ levied by . the ... National
.' Government, ·.. through . Congress, and
· administered by-the Bli=Cor the BOC. (e.g.;
. NIRC taxes, . customs . duties): . (VITUG & ·
AC,OSTA, supra'at 29), · · . . .
. b. t.ocat. orrnunlclpal ., levied by the LGUs;'
. through 'thelr respective· Sangganians, 'and'
. ., administered :. by the. local . executive
government through- the local treasure{(e.g.,;, ·
reet 'prope(ty. tax, business ·:t-axes imposed
.. . . : U.?_df!r. the LGC) ({d. .ei 29j. · . ' .
. .. . .
""P.""'=""'=e'l"'-~0 rate .. · · .
. · fui -· '\ r··
.,r-r~gressive. or graduated,_ the rate or.
J'\j;,,:a.rflotkli)!_,increases as 1~e amount.of"income
o~z,.e~rning _to be· ..taxed increa~es·. (e.g.,

r~sts_ or settles down (ABAN, ~'/P,.f;,8fBi ~3).·

. . . . ·- ' · · . 1/ . ~~i . ffl · .
.r
taxation 1s the· P0!!1t·on .which ~~ (a~~!-den.ti::iall~i;, -=:='=...-..,,,_.,,(~h.~§'faJ?):((d.). .-
'ji:1) .. ;{
Jr.
),'?" b .. J'\eg·~~~!yEr~lhetax rate decreases as the
a,fa .._,~ · a'in_oun\~f iacome or. ~arni_,:ig to b~ _ taxed
. .

3_. . As to p~rpose_, . . // .. , _ ·., . . . . : . . · _.johrease,{d.i} ' .. . .

tax,T._J~-- i:~.. i: .
~-·. General, f_isc.al, or ,fe":'_,~1Juf ta~1m.~_~sed -·"", p.., Piopo[lio}.Jat_e,\'f ~ax ·rates are fi~ed· (in
· _ . · . for ~.he general._?r-q~~~ar;-}-1,,·P!Jrpl:>~,~s b-t1!:t~ t'--~ ·afuounts ~r 'in pejcl;)ntage) on a flat-tax base,
· , Gov13rn~ent, · . tq- tt ~l§{l• ·..rE:ve!iue· 'i!.~-;_;.fil'.IJJIWr.::1 .• g.c, · ref!r='prp}J.erty tax; -VAT and 3%
.gc,v.ernmental nee~s.....~ ·• ~':)t~•
· donor's tax, ftstate t} pr_
(Id at 26) , · · \ '-&~ .) ·
\t(µ
;J!~cl~'°'taxi=
~ "'-
Uf"~-·:
,~
_;,f, 1~taiie.ta?I) Jd>at 30).
1 ~- : . r: {~~ If _· . :
'U · .
_. _. . , _
·

·b. ·sp.ecial,·-~egutit6;y,\<>l' su
J3tu~~a :i ""~~ ~1~f. <:tio s o~_Ta'.x f~!Jm ~-~he_r i=:_o~'.11~ o~..
-levied 'f,or special purpose_s. (~g. : a~q[Jtqg~~ ~ ., ·ris1 ij~acbons .
. 1% rear estate 'tax /evieii und~dl:1.:ff. L~-y_~or.,{E-·
the be~etit o_t tf]e _publi~)~t,001,s s.1iwr__rft~~: 7
J'{~. ga1 c .. _Debt# .. . .. . .. . -

-- at,27): .• . · ·:· · '- -~ o~·--"'=-::;:;J'

Note.; :,~;I,
mo~~Y-~ollect~d ~n a~y'S;:~ar~
special pu_rpos_e.shal_l. P~. t~~ated.a:3 a_ specim,.fulrie_,.~
]\l!,:.~~'<=fl3
-:- "' . .1gat1on_
. basecl,
. -'. .An. : obllf]atl~n
oi:i
. . . . b~s~d
. . on.
· ·and-paid out for-suc.h· purpose !':>nly. If th~ p1.1rpose }aw, : · · · . ,. contract.or Ju~grnent,
. .foi:'which a speC,ic:!t fµp~ w~s ,cre.ated has beerj
. fulfilled.or abandbried; th!3 .baJance,..-iLany,·:shall
,m11··1·1111111
[\:
. . be . ·fran_sferr.ed to, : the -gel']eral: fl.irids· pf. the
0:qv~t.ntnent(CO,YS.T. Af?T.· Vl,Bec_:29(3)). . . ..

4•. iAs:to hqw a~ount .is. det~rmined . : ...- ·. : , · ... ·

. a Sp.ecific ;_ _tax.-of a fi.x_~d ar.nourit imposed by
: the head or"·number 01' by some .sta_ridard of.
· · .: Wl;light . or-
.m"e~surement; it requires no·
. . ...... valuation other tha_ti,a· lfsting or
classification. ·..
. of.·,the· objects"'tQ be taxf3d •(e.g.,. tax. on
. · ..ffirinenied.--/iqi.Jprs, cigars, d1stilltid. spir7ts)
. : (ABAN; supr.a ·at27).' · · · , - .. .· . .
· b .. Ad valor;em (Value) .,:_ t.ax based upon the .
_ .. . value of the e.rtl~les .subject to tax ·(VITUG. &
. ACOSTA, supr.a at.'-28) .. It· req1iires. the ·. G'eneraliy-,nofsubject May be:s~!:Jjett,1~;: .. '. .
· . ·intervention·. of ~ases.sd~s cir_· appraisers to. to compensation. or set-: compensatlorjor set-off.. · ..
·estima'ie the value'.of'such' property 'hefore . 9ff: (Pleas.(:] 'toter to . . . . . . . . . .
:.. the.amount due from each··.taxpayer can be . . 'dispussion_s on
determ)_ried (e.g., real property tax)'(ABAN,
supra at 27) .. ·. · · c-· · . . ..

. ·a. 1.2019. SAN. .BEQA-LAWCENTRAUZED'BAR

. . OPERATIONS·.
 -,.
rl? .., GEN.ERA~ :PRlNC·I PLE:S
.JP

~AN BEOA LA!'V CENTRAl,IZ~DBAR_,OPERA.TIONS- MEMORY All) :zo19

Hi e s AFEi+ew11 . -,,.. , ·
. .-,,.
Ill. As. against Sp.ecicll Assessments

. j•J.I; •
EnforGe.cf proportional -. 'Enforced' proportional :
<: contribution from, contributions from . .
persons.or property. .ownersof lands · ·
•. especially .c_>r"petuliarly
. benefited-by public
. . '.irn rovements, ' .· .
.i:
~v.......
;:-:
..,
;,-.· ·, ,_1 • • 1;
~,.: . .. . ' .
ft , .. Deterrrilned by NI RC. : · Determined. by the Civll .
~-.' .... · .· . · ... Code.. · .. : '
\·r.. · (MAMALATEO, 'supr« at 16) .. -j
i,:···
t.
!

II. As againsJ Toli ~ees.

t:f°,c...
ii.\. Sp.~cf~I applicatio~ only
f .,; as to a-particular time ..
and· ·1ace: . . .
~\,:
.
~ -
i~r .
,·: r :

II(· .
~--.
?o~~-mm:e~t.

1{··. ~· 111111111~
[;r· No~imif. .. L)mitid· to
:t_l=le. cost of: .
~(-. 1.- lssuance 'of license:
~f ·. ·. and .··, ·' · · ·
~¥)· \"o• • 2'.i Inspection and · · .
t:·:: . lri1P.OSE;l<fby (he · sur'veill_ance, except fcjr·
non-tlseful oC:cup.ation .
~~: ·.goven,mE!nfor private .
't'ti>: . .'. indlvldual.' . . ... ~.. . .. (P_bysica!Jh_er;fipy ...
e{. (MA/v1ALA'tEo; ~upra·."at.16-17).:-· .··: · .. · · O,:gaoizf)fion :orthe ~
I<-~~ . . . . .. ·. . . . . . . . . . . . . . . .. . . · · PHI:.; ·tnc:: v;. Mvnic,ipality
·;r. F~es)>aid ·l:>y._ttie.-publi~ to toll ~ay· operators for. the· ·
. ·,: · ·us~. ~(toll "'!..3Y~. are not ,taxes; These are 'exactlons
.. · .. .
.
Boar.dof tl'fe·c;ty bf
Ma_nifa, G.R, No . ."/:) .
10448, .August 30, ·
:;;; .·-whiqh end upas .earninqs.of to]! way operators, and .. _'195_7): · :. - .
ft _not_the govemmert.:Taxes maybe imposed on_fy by .
l· the: g9vernrjler,f-u·ndet-.~ts sovereig_fl authority. Toll
~-, . feesmaybe demanded by elther {he'goyernment ·or
>; '. private· individuals or entitles, as an attribute ·.of Nor-maliy' paid ·after the Normally paid before:thEf
of. : · business. commencernenf · ; of
~:. ownership (Diaz 'v, Secretary of Finance; ·G;R; .No: start
operations. ' . ' business operafions.· . .
·. · 193ow; _Juiy 19, 201.1J. · . . . - · · .

201.s sAN .sEDA LAw oi:NTRAUzEo·sAR oPERA T·10N? g·

·,~- ...
 awl .. :! ... MAC

·G·E·N ERAL ·P-RI N.Ct·PLES····

SAN SEDA LAW CEf,/TRAUZE.OBAR OPERATIONS- MEMoiw AID 2019
·r _HMSCPGfi INf .. tc&i- iffi . i*?,?fiziWfitBWA·Mmwi\N'.

·. Taxes, ·· :· beirig , · .the Llcensa '.tee ·:·r,nay. .be

lifeblood of the·. State, surrendered witt:i. or :
cannot. be 'surrendered wlthout consideration ..
except · • tor lawful '· · · ·
.s,on.s.ide~a~ion... . .. · ,
May be imposed only~by .May be imposed by the:
' the government: .. . . 1: Government; or .
.. . . . ,._ 2 -. 1:'r'ivate indiv.idu~ls or
. entitles. '.

. ..·..

! .
.. . · ...
·:Levie'd.by-.th·~ taw~ A legislative grant of '··: .
,. making·bodfof the. .... . . money in aid of a .
·.s~~te Jar the support .of·. "private enterprise . ; . . . . ..
Enfo.rcE;id. . proportiona! ·sanction·- imposed · a ·~s . . the governr'ne'nt·and for. ::aeeme~to 'promote the . :
publi.o.r,ieecf~ ·. . public welfare: .. ·., . '..
· . 'ccntributlorr- ·: . · from ·p!Jni~hment -for violatlen · · . . : ... : . . . . : .:'' .· . . . .
· persons and P!PP~rty. ·· · of law -or- acts.-:·d~e.tne~· (Id: a~·-22) · ·, : : . · · .. ; ·'. .. ..,, : ..
r · · · · · • • · · .: inJurio.us; violation: of lax -,
. . · , .' , : . · •". 1;:i~s . may give rise, .· to " . I?(~ 1'.~ ·~g·~inst. ~ev~-n~.~i· ·
.. . . . imposition
. ... of··..penalty.
• ..
. ·. · ·.". . ,· .. .
. ,··

.. 'A.so~rce of r.even.uefpf .: ··A broad terrn:tti~t ·: . .·

Ta)( i.5 .c! ·-:civil Jiability.; A'
It is_.a.
p,unishm.enffti.r. the . :· the govemrri·ent. . : / ·: . ipclud~s ·not.only taxe's· .
: personls criminalry liable comrnlsslonof.a crime. .' , .: . . . ·but income'from. otl:ier ..
. in taxation only when-he ·· ·· . ·
fails. to.' -satisfy his civil .
· :' ... sotirces··~s well;
.o.bli~aticm ."to pay.· taxes . .. . (Jd.. at?~J. ... ~ . .. ..
. (R~publlc · 'v, 'Peteneo; .. · · .·-:
·G.R. No., L-22356,. July ..
·21, 1967): .
·· ..

·10 I 20}!;!
·. SAN. B.EDA
. LAV:.i CENTRALIZED
. . . BAR·.OPERAflONS.
. .
f· ..
GEN.-ERAL PRINCl.PLES·
SAN CJEDA LAW CENffiALIZE.D.
BAR OPERATIONS-MEMOnY AID 2019 • .
Pihii9fi&W aa ms iFHSNlriMtA 4¥ A ti# Hsi@HMifS . 161 SIPfif i#.JiZ5JEihitr..rzi.jf::/z.~·
:~·1~~~

i.· · ·· · Importance of·d.istlnctlon. . ·~- Provisions. of 'tbe -, taxing act ·a.re not to .be
}. It .is .Important Jo dltferentlate . taxes ·from other' · extended. b.y impllcatlon. It-is a hornbook doctrine
!, exactions, especlally-when it comes to problems and in the interpretation, of tax laws that "[a]' statute
r.
}.
issues on double taxation and tax exemptions and
the jurfsdlction of the.Court of Tax-Appeals: ·. · . ··..
will not be 'construed as irnposirrqa tax unless.it
. does so ciearly; expressly, '.and unamblquously."
t:.. · 1 ... tf an exaction is not a. ta'x; then .the defense ofa A tax. 'cannot be imposed WiJhout clear. and
,·· taxpayer of double taxation will 'necessartly fa.ii; ; -express'words for that purpose.' Accordingly, the
~'.:. . 2. In -the sama-manner, a tax-exempt indiyidual or· . genera/. r'i:J/e of,~e.quirlrig adherence 'to-the letter
f corporation is generally only exempt from paying . in construtnq -statutes . app)fe.s with .pecullar
r taxes; ),ence,Jf the:e~~cfion is not .a ·tax,. then the . . strictness to .tax laws andthe ·. provlsions- of a
'-'... . indivldual ' or . corporation must. ~mi . pay "the . ) :.-taxing act ar.~ not to. be. extended by im~lic~til;>n."
• · exaction . (IN~LES, . Tax f,Aade Less T~xing: 'A · · - Parenthetlcaily, ln arfsweril')g the question of who
i\- : .... Revi'~'wer wit!J: G,odals f!nci Cases (201 BJ,. p. 4) . issubject to tax statutes; it is. baslc that "in case.
P.- .{h_ereinafier IN~LIESJ. · · · · of doubt, such statutes are .to. be construed most
t-i,. .: . . . stronqly against.the goverrfmentand iri)avor of
!:· · the-subjeots or citizens· because burdens are not
[;'· I; ·. . -. .. to ·be: imposed._n0r presumed· to. he ... fmpo.seo.
~~. . . . ·. T ,!\X .LA ws. •. . · . peyond whgt.:. statu!es expre.s.~ly ."a~d·= 9learly
f:-' ·. _ .· ... · .. · ·
~ . _ . · .
. ·: .·
.
- ·.
. _ .
· .. ·-
.
:> _- ·
. ~ .. 1.. -./
?1/(,1,,Y)-r .
import" (G'?,mmission.e'f of ·Internal Revl;]nue, · v:· .'.
Cou~ of -Appeals, G:R. ·No.. 115349, Apnf
~ · '·. N'ature of Tax 1,.aws: · .. ·. · · · J;,. //'"'- 18 1997). · ·- · ·, . :. ·· -· ·. ; ·
ti : •' '.1- .Not_ po.litical _in ch_a~ai:::ter; _effective, even .1~~f;·_1::;~}·1. ra~· l.aws.. are special laws ari_d prevail ·~ver
g:... . belligerent oc;:cupation (Hilado v:- .Cpl/ectq~ P~;~;,:.,l ""~gen.eral).aws (Republi9 v: Ganc_ayco,-G.R. No. L-
s· · .
i?,· 1956)~ - •·
Lf · 2. Civil in naf~re; an·d.. : , . : . (:~
. ~ .·· . ,· ~· r· ·
lntf'JrflaJRevenue, G.R.· No. L-9408; Oc.topfr ~1'-.i,,·~~::.:.~,;1:lJ.3.();7,r'a([fle
• ,,....,,,,.,..:-·- .,4~~.Jt~,--- .
---r-<-:-.
. A"~.:::t · Constructio9.lfp,!.:__st~tute
30, 1964). ·
. ._-
_oy.
. . ...
- · ·
., .
.

:. ·. .
p.redece~sors is not
!k: 3. Not penal 10 c~a~~cter, henqe, n~}-21.f~Je~tt.o px· fk · bi_nd_ing·._orr,th~.:~u~~ess~rs. '!'hus, ·the S.ecretary of
post.fq.q_to pr~h1b1t1?ns mf=9AY?S:··S11l.f.a:a{5)'- .. i?I F1Mrl'_c~· is,'te~t~.~~wrth·a~tho~1~-:to

I- _
:~vo~~'.repe~I'. ~r
• · . . . ·. · .,~ ·. V·~ ·~·· rA abrogatelth.e~. aci·p ·or. previous. ruj1ogs. of· his .
.~: ·cons~r(,!_ction t?~ Tax ·L~ws: (h;,:'. · ~::,~ :tJ
.._· ··. " predece{~)~9.fli~~~l;)cause·tlieconstr.t1~tion of a·
f;J
I
1: ,T~X: 1~.w~ are.P~Cl~pectiye ~fl_;6petl'itiQD_;1~/ess-..J!l;?. ·sta'tu~yf~~~~J'.~~jJlsteri,:ig i.t is !1.0{ bil"!d_ing o~ t~eir
": . · lan~ua~e . -~f, .ti:-~· ·. staful~~c,!e~tt..ilr~fl_clfp !Hf suc.ces$_ors';-1fLtt=Iere~fter the:Jatter become~. sat1~f1ed
:. . otherwise (Comm1ss1oner of lr,/e[!].;Jtl~fl,l{_en.ue;v.· ~:t Uiat. a differer:it construction should be given (Hilado
{. Aco~·ta, _G.R_. f'.!o,_154,068, Aug~i.t(?:. .2~5?:J). · ·. · J1S;i:i,~91i.e~fpr·ot lntemafR_evenue, -G.R: ..No: 't-9408, ·
:{ 2. le~~slijttve 1~tent1on must. b~ e_0ni1~feo. (_l;/!J.12.._,./,,,':'pcfc{iS'e?\q{fi>1:.956). _. · ·. · . · ·
f· . Leg1s.~t Amma):.... ta~·-stat~tei; atl~.go.-re9;.~1~a""·~~------=>:""W-:- .· . . ., . ·. , .· . ..
t:· . re.a$.On~ble con~tru~t,o.~ ~1th,~- y1e~.~!9·_c;:~ri;ying ·: ·. . Th~ ~IRC beih~.. ~ _sp.ecial_!a:w,preva.ils o_ve:.a- ~13ner~I
_o":'t their _purpose=· ..and mtf3_r)l- .(.C/R.'v.,',§°hli.dbank. . ·_ law ·1.11<e·. thfi:. ·c1vJI Code<in. case ..of.,c.opfl_1ct·.1.n their ..
Corpor~t,on, G, R, · No. · 148.191 > November .. 25, .. p.royisions (Republic.v:·G~ncayco,' ~.R.. No, L-18307,· .
· 20Q~).: ·, - . .. . '·. ', . . . · :June -30,-1964;- Cominission·er oflnternai .Reven1,1e. v.·
· ~ _ Where · tfl~re :· i&. qoubr .- Ta,ces.... · b~ing . : ·, . 1/agcin:Elecl;:i,c :and 11::e Plant,, Ing., G.R. No. L-°3,1'364,
.. bufdensotne,.are not to.be'imposed or presumed: . ·Marph 30, 1979). . .:· . _, · ' : . .. . . ·
to.be imp:cised. l:leyond_ wh~ttr1e s'tat~t~.exprel,isly. · . · . · · · . ..._.. . . .. · .
.' ·arid clearly.d~.clares (M.ec/.icard PIJilippirJes, Inc., · . N.ote;·The.,Tax Gode r:nay be·co,:isi(:lered a general
,,; ... ·· · ··ii. CIR;-q.(J.'No,'22~748;Apri/.5;- 2017). ·' .. .\. · ·. · .law.".witl:i.respect to. oth,er 'lay.is. If is:-:settled th~t ·a
,,;. 4 .. · Whbr_e'language ·is pla\n (Verba.J:_egis or Strict general·law.canhot reP.eal a special law by if!Jpiic;:atipn .
f: . :Construr;tian) :-: rule of s~ct constructi?n against for th~ !egislature. is pres.lJ:f!1ed.tc,> know all).he laws _on:
i··' . the· .. .go':'ern.ment ·does _n?t ~ppf¥ · wher~. t_b~ ..tt:Je.subjec,t (B!R Ruling.No.4.09-05,,. Oct9/jer 4; ,.2(!0,'fS) ..
~~-' lar:ig'uage 9f the tax law 1s plain. and. ther~:.1~ no
· d6tibt ·,as· to. ·the legislatiye. intent: - .Tt)e: words.· ... : 8 . Prin.cipl.~·~f Le6is.lafi~e-Apprqva1'b.y·~e·eri.acfrrienf..
. ·,.: employed ,:!re·to be.given.thejr·orclin~i:y meaning. ....:.. it. meims't.hat· the reertactme'nt of,· a statute
: ·.(F'(-.DT .'·v'. Cit~/. of Davao·, :'.G:R:. N,o.· _ 14386'7 s'ubstantially urichang:e·q is 'pe.ri;uasil(e indication
. March-25, 20Q3). .. · ·. ·.. :·. _ --:' · , ·.· ... , . of the a(,!option by Congress ·of ·a prior executive
. 5_ ~· Public: purpose. is: aly;ays presumed, This i~( in ·. conStn.Jctioil· (~ECA~PE..-supra.~at 24). .
· · consonance .with. the doctrine .thaf like any other
statute,. tax legislation ·ca'rries a pr~suniption 'of.'
constitutionality. (Chamber of· Rec!/ ~~tate and :
B.uilders'· Associf!fior1,·. Inc. v. Rom'ulo, G.R. No..
160756, March 9, 201oj.· ·· · · · ·
. . . .... ·

2019 SAN SEDA LAW CENTRALIZEJ?°-BAROPEAATION.S I 11'

 ·.GE·NERAL.-PRINCIPLE.S
SAN BEDA LAW CE:NTRAl:IZ~OBAR OP~A_TIONS·_ ME:MOflYAICJ.2br9
~D11a1 ..,..ll1illlilll111tFF111111111111111m11iSlll11111DS1111~mn,wmAmn1mem&za~s•+-ma:i:~,em_.,~**~*~J•D2u~wfflAme~s&~i*a.um1~@~tt••c~aa·fag;w•'e~~&~aomMDa.
. .
Kinds.·of Pr~v.isiQns 'of .Tax Laws: . Exception: . When the. laws provide. for statute of
1. Mand.ato·ry._- those provislons Intended for-the · .. limitations [Commissioner .of Infernal Revenue v.
security ~f the citizens or which are· dE!'Si!;Jned to .. · . Standard Chartered Bank, G.R. No: 192173, July 29, ·
. · ·. insure equality oftaxatlon or. certainty as to the . 2015). . . .
nature and amount-of each person's tax; and .. · ·. Examples:
2 .. ·Oir~ctoi:y -.those previsions designed nfer.ely. for · a. ·
Assessment of internal revenue. taxes.within
. the information or direction ofofficers·6no secure three. (3)' years after the last day prescribed
. rnethodleat and. . .sy~tematic. modes: ', of. . "l::>y law for filing· of. the return (NlRC, as.
proceedings· (JJ..BAN,supre et 145)..·. ' : emended by TRAl{'J_,. Se9. 2()3); in cases of
. .· . ·.. · -· · · · · . ··· · . .. · · · '··. . ·ffau·d,,.at any time Within ten··(10) yeers-after:
trnportance of dlstlnctlon ·.. . . . ·. . ·. ." .:.· · . · , · . · the discovery of the fraud (NiRC, Sec. '222):.
The emission ~o followmandatory provisions renders · . . .. . J:>. ; For L_GUs, five (5) year. prescriptive periq9 for .
inyalidJhe actor proceeding to-which.it relales .whit~ · .. . assessment ·.anp collection . (LOC,A_L'
the pmission to follow. directory' provisions: doe~- not . · . · · · . .G(JVERNMENT .CODE [hereinafter L(3C];
: T~volye su9h. r-6ns~quen~e"(JdJ -: . ·. : .:. -. ·... ·. .. . .. · . Secs. 194. f!nl::i 270). · ·

:Soutce~· of.Tax L,~ws: (CLe.CA~JI) .. · .· . .,~~;u-:-2?~r-o~ctivit~'~r°~ax 1,.~w.s.·. ·; . :' ..... ·

.· .1-. -~O!)_s'tltu_tion; . , . (. .: '. · ·-,L:· .. B'l-.. :.. ' · ~. ~~n~rf'.. 1r"'!~= · Ta>.< laws· _are prO$~ec_tive. in· .
.2.· · Leg1~lat1on or_. statutes, · mGlu9Jfl9-\~,s~~~,=,,,s-aJ~.r;>i.!_c~t1o~j.Gllt«. CODE, Arj. 4; Commissioner of
·d~~rees and ex.ecutiv~ qr1ers·.9'}!~~!=1tj.9,~;}IGOl~x . ·.
. : -. ordlnances; Jax treaties, ajf :<:;~ption~w~th~2?J'1o,J.,.,._,.,:,·(}'
--: -r , foreigncountri!,!s:· J.:C.h':fY._(''·· ID). ·~1~
lntem',l~eveQ/ie;k

· i( ·-: \ ~,?.~\
> .. ··PNB; 9.R. 1\/_0. 195147, Juiy .1.1,.

· · ·
-,
3. ·. ~Ol")~e~per_a~~ous C°.n_~twi~~r'l•;li,Y.~x,cutive:!Gir -~ . E~e~~tior: W~~fi· t~,E\l~ngu_age bf:th.ef statute cle~rly
a~mm,l:;~~ative . ·officers1v-,.~c1u1~~ng. ·1B~.:.nue cr~dem~nd§.pr exp,{~es t~at,.,tshall have a r_etr.oa,ct,ve
. · -~~9ula_t1ons by the:Dep;ar_!J}.J.el'\Y.O.f·F.1ni13nc~ ~.!:!?- ·ft1 ~e;a_t.,(Lolenzo v~Resa.~~s, G.R. No: L.:43082, June
adminl~trati~e issuaocef ort~~IBIRor.lhe ~£?
4. Administrative rules a_ndlr.ec9~1a~ons;_ rul;s, aili\m.m,.1/.,;fl~ . · J
~I '"'1,.B!(-1'937); . ·. wr. ·ji·~
. ~ l=""j: II
. . . .
.-
.• .

?P.inio!-'s:. _of_ t_~x · 9fficia~:ila~lpula(!¥~! ~J;.Lf3,>,-~:etieci:~%~-pli/~i.~~j~.q¥ ~eve~u·e· l~\'.,'s m~y ~lsp be

. · · mc!udmg op1~10,n.s pt the~~qEijlry. o~~t \8 (Dlf~ eif111p~~t~:it wilt7 n9tq1/ny. due pro~ess. · rhete, is
. . . LE~JJN,NIRC Anno~~tef, \s't:Jpra_~ 8) f.it'e.r~~eB. <:1~~l~~~f·duf pr_o:cf!~[,_when th~·- tax li:lw imposes
...... , . .PE_e~<;)N, N/f.!C]. .\\, \_ . -~'.~-...._ · J:i~~---fct.0Rfkess1vej'.tax (DIMAfiMPAO,-sµpra at
·. .5.': 4ua1c1al dec1s1ons - dectsr~ns .~f. ~- s rpr~1.. 1t11,/_1} .. :;;;--·. ' ,?: ·. . .. . .
··. . . ., • Cp\.Jrt. a~pl~ir,g, or:: inte·rp.r~tir'i'~e~lstirl~.!3k-J~.[~~,~~/·. ·. . . ·. . . · .
. . ·. <;1re p1ndmg on aU.subo~d1?ate~u1:F'"Pf1"b~~~o~e~tp.J~t,i~ty of.Rul!ri_g·s. · .· . . · . · :
: __ the .force a~(:l _effec.t o~~a~ .. T~ey j~~-tlal:'9~ttie. .. · · . Q~i'{e.r..._~\, -~jJI~: Ariy r~vocation:' 'modific~tion,_; or
. s ~eg_al sy_~tern of v.,_e.i;>h1h~_p1_,:ie;:; (CIVIi;. f>.fJflJ!.Art, M1evers~Jl'(:)f'any_ of the rules and. ·regulations, rulings,
_BJ ... :They .:CC?nsbtl)te_ .el/1c:!"en~e Of· what tJie-._.1~-=a~cularsp.r.or.nµlgat.etj by th!:I Commissioner shall
.means (Peop!ey,Ltc~rq. G.R._ No. L-:)9.9.9(),July : not tie given. refroactiv.e. application if it will be·
... 21.2t•._ 1.f1751· ~:1·.· . ····.. f· ·.,A .. ; .. · · . C. ·,·rt;. . . · ,. . ·. · ·.. p-rejudiciai' tb tfu;i ·taxpi:iyer:s. (NIRC, $~c. 246).. "< ·. · ·
6 . :-n erpre.. a 1pn .o . m.!)ncan ·. .o..u s. - : .~m.c,.e : · . . ·. · . · .· · ·
-: P_!iiliPJ?i~e. l~C'!r;!!~' tax law~· a~~ of Jv.r.l~rica,:t . · . _lll1,1s'tra:tio~:. During tlie· period .from D!;!c{:l~be( 10;
origin, mterpret~t1ohs.,by_.Am.encan:-courts on- 2003 ( 'Ii · ·-:SIR R r ·N 0· ·oA-489-03-· · 1· d)
. parall~I .Ph[lippine t~.x laws·, .have p~sua~ive, .. , : _w ~.n :_ : . ~mg· . : :"'a~ ssu~. ·
·. effe¢t on.th~ iriterpi:etation .ofthe iatter:.(8af?as'v:.. ; .·to ~c!qber-6,.201~. (~ht?.n_}he P"~· v.. Arch! Forging_
· · Cot..irt i:,i Appeals. G.'R. No. 102967 February1o . · c;;ompany of A~ra,- -Inc., _cas~ .was: prom.ulgatE:d .
· 2000);.:\-, · · ' · ~- · ' ,. '· ·' .:"'h.er_ein' _th.13 B/_R .Rulin:~ No. PA-489-03··. was
· - ·· · 1nvo1Jda~ed),.. taxpayers-cla,mants. n~eq Jl9t. ~bserve ·
. ·•· -~ t!'l.e 1.20-day-peri~d be.foreit'c;;oul~ file·a ji.idicial-claif!1
_for ·refyni:J: pt exces_s. input. VAT bl;lfore . t_he . CtA.
6efore-\ind 'after the. ·af6remel')tloned.· period ·'(i..e·:; .
Decem!:,eir .10, . 2003 . to October·· 6,: 201.0), the.:.
. ·. ,. observance:of. the. no~d&y.(N.ow'::90-day·pursuant to ~:,-
1. .. l_mp're$cri.pti_billty"-of T~x~s. '.· ·.· . . : ·... · ; . . TRAIN "Law) perk>~ i.s ma.h.dator.y.and jun~dictional to
. General Rule:·Th~ right to. as~_ess and to collect·are . .... the tilU19 of such 'c\?1iin · (Com_mi~sioner. of .lnt~mal
. impres6riptible ( Commissioner_ofintemalRevenue v. Revenue v.. CE Lu:ten GeothermafPower Company, ·.
Ayala. SecuritiesCorp.', .G.R. No. L-2941)5,'November · · Inc.; .G.R. .No. 19019.B: September 17, 2014). Thus,
21, .1980).· . .
. .. .. .
">. . .': .
. . , .. : .·. . .
. ' ..
. .
the .Aichi. ·ruling·
.
was
" not,' applied. . retroactively.
. ..

: 12 I 2019 SAN..BEDA LAW CENTAAUZ(=D BAR OPEAAtlONS

 f.:-'.· ii OWi

tf
t/ ·. . . · . · ·· . .
G'EN,ERA·-L PRIN·CJPLES
SAN BEDA LAW ..CltNTRALJZED BAR 0PERA.r10Ns ... MEMORYAJD 2019
{ :: . ttuiWFMl¥ibdW*¥f4¥HJMHWHW'i ff f •t1stSMEWHM~»P.DiiXSH'A?*:4 ¥¥1,HiNem,ZWf!SFS P?,qi»W

.f · E?(cepti~ns:(MD2B) . · · .
Ex·c~ptlori:_ ' If the obligation
. to pay faxes and the ·
a, Where·th_e ta.xpayer.deli~erately.,MJ$slates or .
.. §.·,.~,':,,_·. taxpayer's claim against the government are both
,,,.. omits material facts frorp his return or. a_ny 'overdue, .. dernandable .. and." ful_ly. '. liquidated,
t:· ·
document; · · ·. ·· · . compensation .takes' place by operation ot. /aw and
lk b. · Where· t_lie facts ·subsequently. gath~red by both obliqations are extlnqutshedto. their concurrent:
.;. · · the BIR .are materially Different from the . .: · >-
i}f.;. . 'facts.on lN.hic;h'th'e :ruling·ij' based;. . . _amount (Commissioner of internal" Revenue . Ii.".
~- · · . c. 'Wt:iere the taxpayer acted in .!;!ad faith (NIRC; . Tole._.do Power lnc., G..R-, No. _183880, January 20,
•fii': s_ec. 246•·, or- 2.01'4). . ·. · .. ·· . _ · ·
k•
ft./. <!-, .. ·wt:iere:-.. ~it- is the' court . and'. not .. th'e. . . . .
~{ . . Commissioner which Declared null. and void . ··. _·Ther.e can be leQal cornpensatlonfor tax purposes as
~'. · .. , ·~ ·'BI_R. ·fs~·uance · (Philippine. :a:a_nk .Qf: · long as air the requisites under Article .12i9 ofthe
~,., · - - · . commuriiceiionsv. 'Commissionerotlnterruil. · Civil Cede ·are present {RECA{.bE,.·supra.at ·17). . .
': · · ·. Revenue>"G.R.·. NQ-. --112024, ·..;anuary 28;. .. In order .that . .compensatlcn may · be .proper •. it. is
ii . :-.· :· 8; 1 9:9). · .: · . : :.. · .. : . _' · _ .. · :. · · .. ·.' · nec:~sa~at e~~h o·~~\f· the obligors .be· bound
~t.. . 3; _:09ctfi~e ~,:.Eq~ita~.i'~· Recouprnent ·. · : ·. ·:. .: ~rincipa!ly, and that he at the 'same tim~ .a· be
fcir
i~ : · This ·doctrine ·of law Statesl.h~t a.ta~ claim refu.nd, . . · ... p~i,9ipal creditor of the other; . .
ti::. ~hicl') i's-preV~oteil by, prescr-iptioh, may be allO":'fed to . b. Tnat both debts qonsist' ir, a ·sum of m9ney, ·
iti · .be us~d ~s payme.l}J for unsettled fax liabilities if .bolt:i/) . . ·9r· if the: thir,igs due -a.re.consumab~e. they be·
r.;i;r taxe~ :·arise fron:, the same transaction in. "'{liitt-iy:.~ . . . of the -~ame kind; and also···of the same
;)t- overpay(!lent :is. made ~nd . underp~yment 'is(:,d~~·•,: I~''·).·•
quality if the latter has been stated; ' . '

l it (VAL~NCIA & ROXAS;sup_r.t;1·a_t ;38).

;:tl1,,
,:ffL
ijf. .
. · ·_. · : · ~- . .
. . .
:
. · _ 1::1,·-\.,-./··
• \ /. ,. • •' .
r-:. Ihat.the two ~ebts.be
'ii' . h
,JI . .
.due;
·. . .. f,.,·.-•./.:,,7 ,f.:.. T. ~\i~eybe l!~u_idated ~n.9·dema!1dat:>le;.and
~~te._. !~ts-. doctrine _1~- riot- •.apphcabl~.rr;!FT Ol!ICJ .~1:F.ti~t<>,?ver, ne1ther 9f.· t~er:n. there· be any
~p
.
·

VJ(· Junsd1~t10,n. TtJe re_as~n. 1~ th~t .. 1f _all~~~~.:t:?oth. tb71 ? , . re~efJ;~~n 9r ·controversy.,,. commenced by ,
~f cQIJeyt1~g _.c1gency and th~ taxpa~er m1~~~ -~~.temp~~9. . thir~~'er:sons an!'.1 commynicatea in du~ time

,.
~~ .: to ?e.lay.a~d neg~_ec_t.the_.P~r_swt ·of tr,ie_1n:re.~P.~~t1"'e: to H,iei.8Jbtor (Ctv!L CODE Art. 1279) ·
ii cJa1ms w1t,h1n;th':3 .PElrlQd pr~~.cribed;!?:Y,.l~·~to?.t?YG ..~ . ·\ ··: .. . /! ~ \\ . . .. .'. , '. . . · ,
it ·. ACOSTA,-,~1,1pr-c3!·· at .16~
·c1lmflr{D011ec;to['·0f,nter.n,q,t.U.A- .. The· .Gof~m~entl,may be allowed to set-off' a
Revenue v. Umvers,ty·of Sto,:J'!F-ema~G1R Na:. L- · r.,1l· t · dt, · 1 ;f, '· · · · · ·
.. 1958). - .. '(( =-'r:dh'f "tr.:,..; -I.A a~pa~_.--·rr:ivu~w1.1e~uml

I
>; ... 109.36,.Apru.'25, that ·~S beet'l ·tir:iallr
/( . ·. · · .·: . . . >. -~ :;._ ?i·~;~ f.'."\,-:i,. l·,'., · adJ~d$e.~~~¥~:h,;.g>t:1rts .1n. favo_r. of the ~axpayer. as
{i ·. 4: · Compen~tion and Set~off.~/':.::1P~-:-1.)~ )!.. -: ~1/
~~ams~ . a · t~ assessm~nt t~at _t!,e. _Governm~~t
-l~~:·. Compensatiori-shaJl'take pl~ce_whe~ tvt:o R~fs.ons,:in ~.t-~~- ,1~~u~~ to su9h taxpayer even.if. s~ch_ a.s.se.~smen!~s
their· bVJn right, ar~ creditors . and dJ~~~t ~~ch....--:'ir•~\-~9~1X~~~:i;iland exe_cutory.(Comm,1s~ion~r of lntemar

1
.f:.: .
t;· olt)er (Cl-VIL COD[!i;·-Art. 1~78):.-'. ·; · 'f,4 _ .
./if''/':--"~-~e,,,mi.w.e:...MJ.<:JebuPortland c_ef'f!ent, G.R. No. L-
~~:· .· .·.. _, . ,. > . ·. \\,
f'J>.d· . -~~os~._Decemb_er15, 1987)... ·. · · .
~- . . Thi~ pr.E:suppo~~~ ll"ll;ltual: bbli!:jations b~e.em_· the - . . . . ., . . . · , .. · · . . . . ..
·. ~. . · parties, · ancJ_: that ·they· .are , r:i;i\Jtual· creditors_. and .. Op the other hand, th~ ~a~payer. ~n~o~ cla1i:n ~he ·
Ih · debtors ·of eac_h.ot~erJC/V/L C.ODI;, Art. 1'270(1)). · . · defense. o~ c'?m~ensafion s1n.ce th.e.. claim for.efund .
":·· . . · . · · · · was not -yet. h_quidated ar:id demandi;ibte. S1,1ch claim
. ;,;., .. General. Rµie: The~~.. ~a,;·.·i,~:.no.:off~s-ett.i~~of -tax·~~-. . cannot be.raised -as. a "defense.·agai~st a .deficiency.
l . ~gairist _ t.l;l,ei clqim,s; that'. ·the taxpayer may ·have ·:. _as_ses5.rrie,-it(RECALDE;supra at 1 !)): .. · . · ....
~~}/
• .. .en.t r,tJG.~·i=s:·
a.gai!°1s.tth~·.go_v~r~m ..,upra_:at.~B).
:s_ ·.· 5: compr:o·m,se . .
:f: N'ote:"A: p~tst>_n· ·c~n~6t r~f1.i~e :.to. pa~/a tax · on. t~e. A cont(a~t_whereby the parti~s. by ·makir:19 reciprot::~1- .
g~ound that- the. goNemment owes -liim ari amount · ccmcessions, av9_id liti!;Jati6.n or puCan-'~nd: tci one
.equa.1 · to or .greate'rth.an the fax beir.ig collected. The: -already ·com_menced .(CJVIL(CO.DE, Art. :2028). · ..
· -collection c>'f-a tax can riot await the·results of a ·lawsuit . a. · Compromise~.·are "'llowed.. and .. enforceable·
'ff·: amlinst' the .£jbvernmen( (Francia.. v. ·· 1hterrne~lat~ . : · when . the· subj~ct .. matter thereof· is not _:
,. Appellate Cotirt·GR f,./o L 6764!1° June 2'a· 1988) prohi~ited from .being conipromised; an.d · · ·
f ·. . . . ·. . ' I. •• • .. : ~ - • • ' •. • : : .... . ; ... Q. Tl)e _.person entering su'ch. ~njpro~i~e.. i~
·;k, .' -~eal?,on:' ,:a~es :'are_' nqt .lh
the. nature of confracts . d~I)'. _ai.l!Mrizea_ -tq. do. SO-. (VALENCIA &
f., ~f!tween the p~:irtle_s-.fa.itgrow ou~ of dµty'to ar.e and ROXAS, sup_tfJa·~ ;39r ..
~/ · tlie positive ac~s:of the government to·'the making and · . · ;'·
t ertorc1ng of which, the personal consent of Individual: Plea.se . .refer to Tax. Administration and·. N/R~ .
'\-. taxpaye_rs' ,is . not requirE,;~i (Repubifc v. Mambtilao, ..· . R~rrfedie'Sfo,:-furthei'd/sci,,.ssion.. :_ .
G.R. No. U-'1·7-7?5, Feb(l!ary'28; '1962). .

201~ SAN SEDA LAW CENTRALIZED BAR OPERATIONS. I 13

:~ .. . . .
 ff ME WI

GE.N ERAL· PRlNCI PLES

SAN. .BE:DA .
. LAW CENTRALIZED
. ·BAR OPERATIONS
. ~ MEMORYAID 2019

6.. · Taxpayers Suit · · .

A taxpayer is allowed to sue· wh·ere:·(CDW)·
. a .. There is a Claim that public funds are illegally
.. : disbursedrcr . ./~ ·. . .
b. That the .pt,.1biic money is being Qeflectep. to
any jmproperpurpose: or ·. 1 . . .
.c.. That "there · is ·wastage· of public funds
through. the enforcement of an· Invalid or··
unconstitutional. law :(Con~tantino, . Jr.. v.
Cuisia,·G.R. No. _106064, 9ctobe/·13,.2005).. ·
.• ·r- ·,
. .i"t Is ho~ho;o·~· pr1n~iple thata taxpayer is allowed to
· ..sue where· there ts a claim that public funds are
· illegaliy°. disbursed, "bt that ·_public. mimey .. is. ,bei_pg
, deflected lo any lrriproper pi:lr.pose, ·o~ .that there is
.... wastage: of public funds thro"ugh the, enforcementof .
As to the second requisite, the Courl, irrrecent cases,
has relaxed the stringert "direct ii;ijury-test" bearing
in mind that (deus standi is a proceduraltechnlcality.
In· cases where serious legal issues were .raised or
where public expendltures of millions 0{ pesos were
involved, the Court did.not hesitate ·to giv.e.·staridi"ng.
lei taxpayers .. The. Court firicis· no· reason .to .deviate
from the jurisprudential trend. The amount involved il'i ·
thls . case is· .substahtial. the 0
Under the. various ..
• ag(e~me·nls:tatifi.edby Sang[JUniari_;.the province .
would incur costs totaling ~231 ,908,232.39 (Mamba
v Lara, G.R.. No.- 1651()_9/December._14,·200f}).
. ..: · . . .. . . .. . . . ..
· Note: The decision· to. entertain a taxpayer's suit is ·
discretionary upon the Court (Mamaa· v. lafcJ; G.R.

· · 'a .t~xp~x.er, howev~r. mus! .show t_hE!Yfj?- ·act

complained .: ct d!rectly. mvP!.v~s :i1'~
_rll~J!a.1
u }\}· ;-, .· . , . · . . . . · . · , .
~in lnvahd' or·.Ul'.i?bn!3tit~tioi:ial tp~. A person SU_W,Q,-oas•;--=.:a;...-:::::~o~~~1~9,. Dt:fcemb,et.14;.2009.),. ·

· J:c<>:t;)c~pt·~T.l::Q..fU~ Stand, as Applied to Taxation

. -di~burse111ent of public funds. de_riJ7'ij·f~(ri')tf~i~J'F"''"':""'"~ftl'~lret~pt~·cfl).~ness for· judicial determination: In
. .

.. (La'r.ld B~nk of the _fhilippines.Yi(~ap~f~f( GJJ._,-,,,_.,,,==~.'!':._~Q.iC?l~Q°\. ~pendit~re-:. of ..: public funds, .a

· No:1fl16?f;.April.1-7, ·?013)._T~_µs.,.~·i"t_ft~~~t~s""'suit· ~b ta~~aye.~ c~.J;fa~ _\,s~anding to_ ·sue, ·if it can be_
'(,'ould f~ll rf vyt)at are _alleged ~c;{~lTf)ljiJ~llyflsposmf . ~awn th~t: .~ 'fJ-.P ..~\ .. ·· ~ .
··9.f ~re objects whi~fi were /,?cqurf~f frO'iJ'l Riiv#ll:l. Jl'l\. a .. ~e ha~S·l;J.ff!G{~nt ir;itere's~ ir:i prev~~ting ·t~e
_soyr~~:=> {.Joya et al., v. -'.CG(j.:,e.f..$,jG,f?.: /\{~.~.§~,
n~ .,_ · '.~Jlig~I . ~~RJ:!~~~\t-ir,e .of money_ _raised· 1n

·
August.24, 1993).
· .
·
Ii· ~·Ji
Jf
On·IY. on~. who _'W!II .. sustai(le_fa' ttdirej~~·
t -~~\,.··
.· \
-~
ii
t~'x~tron,fAd"-'!'\ ~, .
~ .· -·~ .J.f:t5,,.. ~a.will s~~taln '.~lrect"injt.iry as a ·result.of
1~jury_ :i~ll:7JW'ci
c?nsequence . of· tts e_nforcl~-~·rw·r.raY-:,R •. \~.sLthe.~~-:-.~
,..·enfo~if.~rrfe}l,,of· the, questiqn13d statute.
_: ~@.a~JQ.o'.J_~Y,ction. anet pev't.· Corp... v,.
: . ~-af "(REC_ALLD,t!}up~\at\~'-~. "/I
idi~y·-~~ a stfl}.~te_ 1~'2~:h~W{;f :':!ffonW.~·. N°.:
.-7~:983;-~ugust 10, .
."sas.is: The n9H_t is.bas~d·a·n i~ f~cttn~te$f.i>cijt~i i<J .,_
. of pc,ib!ic ·. funds by _an_ .officef\tor· the\t?,ur-pgs~~if~tnjul.?7":fest,
-7~~.}~/. .· i'../· :. :._- ·. .-. . . ·, . :: ·. . .· . _· . :
adr:ninist¢ring 'or .. in.,pJerr1entjnK' an· . 1ri~lld~ip]J.bl:{k~~Pe'.~tr~ho im,p.tigos.the.vali_dity of a statut.~.mast
. ~uric<?_n:.1it'utionalta~·is: .;i, misappli~i~,n ot,5-)~~~qs . . ·. __<i!Y,.e..;a~rs~na1P.ndsubstanJial interest· io' th~· ca~e ·
-: (Gas~_O("I-·.v. t,~toyo,. G.R. No._ -78389i~~we,;16~=-~.sij"c;;~~t~etbas ~us·tainei:f·or will sustaip direc:,t !f!)ury.
. 1~89); ,. ·• . • · · . . · ~ ..t:• · .. }v[j~~~~l:l~(Plant~rs.Pr¢d!.!Cts;.•.·f.nc:. V.· Ferflfhll .
· : · : · ..-. .. · · ,·. · · · . · · .. · . · """""••····~;_,,;;J;;l2EPt:Jrat1011; G.R..No_ .. 1660061. Ma.rch_ 1,4, .2008). · ·.
RequisitEi.s 9.f·a. Taxpaye~s· Soit: (O.VA) · · · · . · · . . . · · ·· · · . . · · .. · :·. ··
a_.:.' ·pu·plic fµnds · d~rived. · trpz:n ·.taxati~ry · .·ai~ · · H?w~ver,. being- .a: m~r'e. pro.ceidural technicality,· the
· .·· .. · Qi·sbursed by · a·.. ·µQliti~I -·.su!)division_ or· re.quire.mer.it" of locu~·standi-.may ·be·v,,,aived b.y. ·.the
· lnstrumer-itality;_.. · · . · ·· .Court in. ~e exercise .. cit .its discretion · (Dayjd· v.
: b. Iii .. doii:ig· so,... :a ia\,\'- ·_is. Yio~~_fed _or some MacapagaMrroyo."G :R/No: 171396; May 3,. 2p06).-'
0

· irrEK.JL!larify. is committ~; and' . . . · :,· · f · ·. · · ·: ·" · ·. · .

: .. · ·• ·c ... Pet!tJoher·is"directly. AffEj!cted by the· alleged . ·citizen's Suit.
acf("!3agc1tsing v.:S?m Juan;·G:R.No.J)77.87,' ···It. is a. suit .where~y" ~ny Filipinq . clfizen .in·.
August.. 1, 1996; Mamba v. L'ara, GJ?.· No. ·repres~ntatf911 -of:· others, jriclu_d.in·g minors,, or
165W9, Decemb.er 14; 2009).. . . : ,· . ·gei:,:ie_rations,x~t~u1,1borri, n;iay.fiJe afl ~·c;:uor;i.to·:~'irlforce .
· · · - · · · ·· · · rights or obliQ~tions .undet :erivironmental·. iaW$ .
. :· lllust~ation:". The Court held' :that although. the. · _Cijizen's suits are ~ile~ under R.A. No .. 8749 (An Aqt_
'. "cqi:,structio.h:.of .the:·town·. c~rite~ y.,oul~ .b~.. primariiy.. .•··· .Pioyid{ng.for~ Comprehensive;Air:"Po((l!tii::m.._Control ...
·. so~r?ed ·;from .. (he .proceeds of.· the -bonds; w~icp , . · · Policy.-qnd tor Other. Purpo:;es). ai:1d RA Ni:i: 990.3 ..
'r.esponaents·.insist ·ar.e· not taxpayer's. money, . a. ' . (An Act pr.ovidit?g· for an. Ecological $0/id Waste ..
. · governmenf support· in,- the. aJnount of P187· million · · .~ Ma_nagement progran:i,.. Cre_atihg-.. the. ·Necesfa_w:..
· -wo~ld sti!I be sp~nt fp( payJng. the in~erest. of-the· .. • . :: Institutional Mech~nisms aoc/ lnc~"f?lives,' D~cfaring
. -b,on_d$. Records· -also sli6w ·that the governor· · Cert_ain °.Actg: Prohibited·.and Providing . Peria/ties,
,· r~que'sted·-t~e :Sanggu(lit!!7to _ap·p'ropria.ti,an ar']:lou,r:,t ~ Appropriating· Funds . , therefor, ior . Ot{ler. anq .
· of P~5 million for tne·:interest"of the bond. ·Clec:irl.y,. G.R ~he- P1,1rposesJ(AM. No. 99-~8-SC, Sec. 5).
.. No_. ·. . ·. . . . · · , . .
0

. . first requi~it~ has.beeomet{Mamba-v. Lara,

1~5109, Dec9._mber."14,2U09).

14 2019 SAN Bl=DA LAW CENT.RALIZED BAR OPERATIONS

J: . ., . I fy ¥.

{· .·GENERAL PRINCl·P·LES
IJ;' . SAN BEDA LAW Cf;NTRAilZED BAR O~ERATIONS - MEMORY A(D.201:S, ·.
~; W 4± SM11¥1Yh iht+XS&i Fae M 161 t±F@N •.st!ffePSM44-t&fik£W+i 'fl)~~·
t'i\.\. Taxpay.er.'sSulf·distjngulshE!d from c·1uz~n's ·$.uit · ·
·- questions being. raised. (Francisco: .Jr: v.
· · ·· · ·. · · · · ·· House of Representatives;G.R. No. 160261
: November 10, 200.3).: · : . . · .'
~
I'mt::,. .: the
Pl~intiff is. af~eded 'by ~Jainliff ... is . a.
-expendlture of instrument of
mer.e
pybllc . -,
· While the court has .taken an :1ncreas.ingly liberal
approach to the rule of-locus 'stendl, evolving from '.the
'ft · pubHc funds, · · e:or.icer~:. . · · ~trif!9.ent requirements ~f "personal in]i.iry~ _to the·. ,:

fi .; :
~ ·. _ . , . -, ... · . ·, broader "transcendental · importance" doctrine; such·

'·
·e· One ls.allowed _to:.s.ue. Per~?n complalnlnq rnust , liberafity ..shouldnot be -abused, ll is: not. an 'open
where there is a_n.. ~ll~_ge that .h~ has been: qr . . : -, invitation . for the ignorant and the igno.ble to. fil!=l

I
.a!wertiqn that. public· is. about · to be denied . petitions that prove nothlng but their. cerebral -deficit ·
f tunds.: are ilfegally some right·or privilege to . (Lozano· v. Nograles; .G.1~. No. ·1_87$83, Jun·e .. 16,.
ft:· disb.wsed__ or .d1;1fl_ected which · ". he has . 'been . . 2009). . · .· ·: · ·· - .. ·. · ·. · _. · ..
'f'.:· . to an·illeg~I. purpose· or .lawfully entitled or that lie··.· . · ', .: ;. ,. .. . . · ·; · .. ,. · •

i1(:t · ·.
g1.·;·
that _tt:iere is wastaqeof lsabout to be s·ubjected'.to ... · · Piincip!e of Judicial Non;interference in Taxation
pu.bhcfunds through. the some . . burdens . or . · General Rute: ., The ·.Supreme· Court · c~n . revtew

lt:··
enforcement . of . an penalties by reason,of the · ju.ilg·ments. or 9rders ·.of lower. courts.,'in all. cases
f '.invalid. . . ,.. oi: st~t_ut~· or·act cqmplained. . involving tM legali.ty of any.tax;imposf. -a~essment,.
: uncon·stitutional law of <(Agan, Jr:. v. . PH. : . or. toll, . or any .penc;1lty ·imposed in· relation thereto -
<r( . (Public Interest ·ce.ntef .Jnternation'al Ai.,: Termina.l~:.J':?\· (GONST. Art· VII( Sec. 5(2)): :,. ,· :· · · . · ·. ·
'12-' Inc.; v! R.oxas; G.~.. :NO.· Co. Inc., G.R. f'.!o. 1-55qP,l;· ;~J( . . , , ~ · · . . :. . ·: .. .. .
't25509, .. '{anuary 31i }v1ay o, 2003)> · · /'·.'.:/ ·\.';f E~.ce~tipn: . .Th.~ courts .cannot , ln~41~e: Int~ the .
~ · 200.7). . . . ·. · • · · . . · . j-' ·";-i'' ·.:·'..... ,:~r~1sd~m. ?f. a ta·~1~9 ~ct, ·unless th~r~ 1s -~ v1orat1oi:, of
.f.. .. · ·. . . . .. · \:f l,/: · ~·,,;/ cg_Qst1tut1on~1 hm1tations· b! ·restnct1on.s (ABAKADA
f coin plained·.'.·. of Petitia°~er, · stan.c;!ip.!:f1l~( iF.::'!.;.q.!'"~'"Efi!ft.Y!f.t:,Y
"-~
~t·.
·A!,'.:t
involves . . . .·u1egal citi~en·. is abJ~-;ief~raft
disbursement of public Jssue of· /ta'r"iscenden~I·-·;,
a11> tr 1; 200~1-~1i.. . - . •.
· ·1:' .
.. Ermita, G;R No. '1 £i8056,:s.~ptember

,r~·;·ty ,·f
. ·. .
E · r , 1
r;... . . .
A ·1 t
. . ·.. ·.
th
i= :
,if.. , . .
..... , .
fonds derived from_ impo1:tcinc°e
'!>!'." . taxation.

. · · .
·.
· . , .. . is involi;!ecf'.;:, . i:~s,
. i . ·7,.-Y
0),:~~(

·; par.amount,ip'ub1i?.:tnferest
•• wh~fr>-!\ 7:· 1
t'\' . ·,i·app.~'}a1tl
.~v~r,lm~n_\\ .·
. 0 ·. ~.oppe

•· Gener~I· ~I~~ Td.'1~·~~Vflrnmen1t 1sthn.otb_;>und by ,thef

.· ~ -~ ·" ' • .. ~· . :", ·errors. cq;nrmtte... u:£1. it;;agent.s, n e.p~11brrnance. 0 ,
.. ·
gans.
. .
e

·.~;·,(Province of North Gotabato".'viii-G~incfi:.,en.t ~ th.e !;.';~ .its g~v.er.i:1rn~Atal~ftm,.qtJ.ons, .. the ,.$tafe pannot · Qe.
J''. · PHL,. G. R. _No~ .f83591,. 6..cto6~f. 14, 2pgJ;..Joz~~v. .. J'.:'r estopp~cj[~j;Ji:i~~~~ct·of- i(s .agents.. and· officers
(.· · Nograle~, .G.R. No. ? 8788~, f un"e_~;fi;:JP.~ . · . "/) , f,'::j · (C?m'?:11~s1one.1,· of · 1nter,:i<3I Reverjue_ v.. Courl · of
-1 ~· ,· . ·. . . . .... ,, : . ~ : \\. · ti .,:11 Appeals, G.R. No .. 106{3_11, July.2.1;__ 1994) ..·. . ...
l· Docthne of.Transcende'1tal l~ppi'fance) J . , : . , , . h-!·r,?::;L.. · .·.. : .. · . . . ·. : ..
t.. It is a principle that the <;:ourt;_in the,:e~rcrse:9Li!~:::'.'~~t:~,..3~ .s~i2"1!e.blood' theory· (First .Lepanto. ·T"!!sho
·;;,: ·:s:ou.~d · dil?cret(on,: · b~she~. a~id~ t~~ prot~9ci,f~I ·. . . lnsprance. Corp. v. CIR; :G.R. No ..197.117;- Apnl 10,
./' .. , bamer a~d;tak~s cogri1zc_ance:.of.a. P..e~1.li~~,.:-((?,h.am~er ... · ~013):· · ··.: >. · . . . ·. . . . .
:i ,·· ofR~al Estafe an.d EJu.!f.ders' A$soc1atio:~;,.fn.o.,. '(· : . · · :. . ·:·.. · . . : .. : . .. . · .. 1 . · ; ·· : ·
\ Energy Regtllatory <;;ommi$slof! apd Mamla_Electr,c ... Ex~~P~!~n~ Th~. ':.IR ·l~ pre~lude~ from_ ~dqP:ti~g. a.
l ·-.: Company. G.R.. No. 174697, July.$,: 2010):. ,·. · ' · · . pos1t1p11 _me<;>ns1s.tent..w1th the. on~ prev1otJ~ly ~aken
·,,, ·. · ; · . ·· .. · .·. · •. ... . ..• . · ·where inJustice would. resuJt therefrom or where.there
"} : Jh cases ·.of- param.our.it: importan9.'e· wh~r~ ·Se,riqu~:, . - :.has b'ee.n. :a ·mis'reJ?rese.ntaHon .IC) .th~. l~ixpayer··.
~.. constitutioiia]' qj.,:estions· are)rivolved; .. .sfanc!ir~ . the:· : . · (ycJrrimi?.siofJer . of tntem~I JJ~venue ·.v.- . Be.i)gl{et.
'i'{ requirements .may. ce ·relc!xed ·i;111a a: s~it :._!li.ay· be ... Gorp·:,. G:R .. No. 14ffe559(Juty 14,..20Q.B). · · ·...
~'· · ,allowec;t·to ·pr<;>s-per even where. there is A.b dir!:)ct'.. · · '- . · . - ·: - ·:.· · · .· . · ·
.;;_.:·',. injury to ·the. patty clajming·the f.iQhl ot judic)~I review. . .· 8. ~oy,?e.r.to.:l;a~. in.vol,/~s'th~~·~ow~r: _D..Elsiroy:~. to
f (Coconut Oil Refiners. Asso9iation; .IM. v. Torres, ·The power}o t~x includes ifle power ~o destroy 1f It 1s
·t . .
:·. .
G.R. No ... 4 325:?7, :July ?9,: 200S) ... - : - '. .
·. . . . .. : ..... ,. . . : ,'. .
· ., . ·. · . . ·(.Jsed .validly a~ ·.an irtJplement of ·the police· power. in ·
. .... - : . . . . . ..disc;ouraging and' in effect; (.Jltimi;ltely. prohibiting.
~:.. What det~.rmines. tht!:Prfn!=iple.ofTr~mfoende".'tal certain: things or e'nterpri~e~.. inin:iie:a.L. to th°Ei pubiic·
·f · ·1n:ip'oi1i;1nce.~ (<;:PL)_.,; : . ·. . . . · ·. . · ' .w'elfare·.. Btirwliere th(i:·powerto·fax is used sol~fy to,r·
':\: . · ·,,( . Th'e·~liar~cter. of th~. ·fundif or c;,t.her.. assets t~1;r. purposEr of raising ·rev~,riues;the. mod.ern vie.vi is .
y . ·.. · involved hthe c.c1se;. ':· · · ·' · . · that it c~m!'lot b.e ~llowed to' ~onfiscate or c;!e.stroy. If ·
.:.. · b. · The .eresence ofa clear ca&e of di~regard ~f · .- . this is sought to be done, the tax' n1<?Y l:i~.su~ce~.sfully,
~. · · ·a 1::ons.titutionalo~ statutory pro~ibition: by 1~.~ · attacked· · as· c1n . unconstit~tional · exercise .. of the
/': · p1,1b!ic re.~ponde.nt·age.ncyor inshumen~ality ·. dis.cretio_n usually yested .in ·th~ legislature: in
., ' : of the governrr:ie.nt;.o~ · .. ' ·. . . . . . asc.ertair,ing. the ·~mount' ·.·of'.. the tax .. (CRUZ,
· · ·-c: The· .b~ck · of any .oth~r P.arty with a more Constitl.!tior:,(!.I Law· .(~015),' p. 1.84)- [hereinafter
· -. direct° .and
.' specific;
. Interest . in raising
. .. the. ..
· CRUZ].
. '. . .
 ~N~~lA~l~~z~~~o~£t!~!f~~~.
SH ,isa·a, -iee, . bf A#WRJ .• W&HW4¢ 5 ? PtM!MWHl§&i&SWJPMWWl315
(£1,Ehih
, . .
'· ' I . . • . . , '.' -

The .power to taxls sometimes called the power· to . ··A scheme used outside of those lawful means and · ..
destroy. Therefore;. it should be exercised with - . . when-availed .of, usually subjects the taxpayer to
cautionto minimize lnlurytc tti,e proprietary rights of.· · (further "or .additlohal) civil . or criminal 1l,;1_b11ities
a taxpayer. lt.must- be ·ex~r~ised fairly, equally and · .(G.ommi..ssioner of Internal Revenue v. Estate of
unifo;mly, lest the taxcouector kill:.the "hen that lays" . ·aeriigno· Toda· Jr., G.R -. No. 14-71-88, ·September 14,
the gol~eh egg":(Roxas_'v.. CoLi_rtofTai ApP.ea_ls, G.R.. 2004).' .' · · ·. ' , '. · · ··. · . · .
No. k-25043, April-26, _1968): - . r: . . ' . , .. -~lei:ne~ts ~f.Ta~ Evasio,:i: (ESC)' ., . - .. . ..
N~te: But JIJe:. "power 'to .tax is not th¢:power to; 'i.- The .!;nd to. beachleved.Le., paym..e.nt9f less .
d¢stroy."'!hile tn_is court si_t1:;".($ison y .. Ancheta, G.R. . ·. - · thanthatknown by the taxpayer-tobs legally
No. L-5943~;· July-25,- 1984). ·.; _·· . · . ·.... . . : . '. ·. · 'due.; or p_~ying no taxwhen it is shown that
. . : .·· the.tax is due; _ :· . . ' . ,. ·. _
9. Escape from Taxation .. . .. .. i\, ·. AA accompanyiru; .§.~ate· of mind· which: is
.'. , The "doctrine of escape'. from taxation" permits .the described as o~iRg.'evi_l, in·bi:IO faith', 'willful, o(
. taxpayer' to minimize (if not-to escape) payment of tax' . . . deliberate and not colncidental: and. . · ..
by. f<?wflil means, tHe same JS . effected through· the . .; -_iii. ·A £our.s~_;of.action or failure of action which ·
following (AvE,:,scTEx):

.
a. Tax Avoi~arice:
b'. Ta~ ~v~s1on; , .. · . :.
·.
. .. .. ·,f.~~~
/,;?
· ·-.:._=~

I~~ .. · ~. ·~
·vu·1."\j
~. · is-.· unlawful. (Commissioner ·Of 'Internal
--~~~~,:'enuev. ~sta{eofBenigno Toda Jr., G.R .. ·
~]i"'f~{l1,BB;Septernbe~_1'4, 20~4)_. . : .
c. §h1fttng, ,(,14"~ J:" ;.,,,....==--,<:.:;.": ..,. · ,,. i• ';>''\..', . , . · ·
d .. £_api_t~lizat101:;, .· R'~. _\..! ~- . . . m~tc1!_of~rat11;!'.+Q ~a~ Eva~_1on:;_ . ·: .· .. :· .
·e .. Iransforrnatipn; and ,If~);/.'. =·-~="&.-'=-l-..;;"'F~tl~e';t'a-<!~~l~re for:t.axat10.n._purp~ses:~rue,.
f. Exemptidn.(VALENCl~{J!t'fi0"¥~,flii,ra~t · ir, ""~na~et~al••rq~rne?enved fron;i busine~$ for .
. .. , 32), · . . . !j ::'"'-W1l
.,. § : l~
J'.ik );[ r~O .t{)?con~,eCU!JVe : .ye~rs. .· (Repub/Jc_ . v...
·· ' ' . _i, · · . !J . ·. . ~-i>.-- . GfirizaJff,_s,,,GtFJ.JfVo.L-1796?, ·Apri/·30; 19q5);
a. :r~x Av~ldai,ce - al:50 c,?.IJ~~P/ mini1fzatio1J;-lt~-<i:t~-·. ,~0, . \ \~I ~ \ · ·. · . .'. ·. ·. : . .
. is reducing .or totally_ e~w~P.tt!.9.-PiaYfT1eriJ of,l~~-.:i· ~,·~ S bst~mt1atil1'iclefideclarat1on of income in th~ ·
1
. through_legally perm_1ss1rele mjfs(!d: ~t 33).fu~·: 11 . .::_>,~ ljX. r¢lurlf;.=9fi·~· he taxpay!':)~ for four (4)
·. . . ..· . . ·. . -~ "'.~~ ;~ -,.-a\ . . . W:illf!.!f!!'· .. · 1; w,s~cutlre 'y~a s coupled with. inte~tjonal
.. Tax ~v~\dan.~e is.th~ t~~!sav~~ffiev.lwr1witbinl~2 . . . : ~~ e~tate~.,g!,P. d.edl;lctions (Cpmmis.si()n(!r .
· me~.ns s.anctlonE:d by t~1,.
[~lsjl1\etbo~_;s)..'b;µ1d b~!J~L!) · "()t.;_f,fJte.trJ~I mwJf.rue:v.. Reyes, G.R. Nos: L~ .. I.
u~ea: l;>y th~. tl:!~P~Yet: 11'1 Q,OOd fa)l!J:<:l~~!t)~rn·t~
length (Gomm1ss1_oner :of·V!ltem~ Rerl~_ti£.."'- . , _.;;,~~
~:J7 ~~·'53.4' ?17dLi'1-
~ ._- ._ . "tf : : :·,
''fs58;. November 25, 1958).·
. ·.: . -:. · · ._ . . · · .- .
. Estate of __B~nig'!_o "(6da Jr\ G.R,. N.o,·. ·1'}4,~'f!-...._ · /36~\ailu~qb_repo,.. saJes,·r~ceipts ~rinc~!11e in an
Septern~er 1.1,. 2004). · _-· _.\.-,.. .... ~~.. ~lp~nt e~ce~d1~·g_fo9~ of ~hat_dec:l?red per_ re~um,
. ·. . . . . . ·. · .·: · ', ·,;-n ,,.,._____, ~-~Jl,:.a<t~,':1'~<!,e1luct1ons. in an amount exceeping.
. . · A taxpay_er· _has · l_em:il nght. !o~ec~,f~ :;rtlie1'"c::--~o?<'!.~,~~~~b:d'e~u~tiors1 shall render .the taxpayer .
. . amouot of wh~t would ott,erwtse be~_tai~.o~ l\tiIJ~,~~ystibstanti~I unden;feclaratio~ . of. -sales,
: •. · · ~ltog~ther ~v~1d.-.them b~ m.eans _wh1.cti"'the-la:W __.:1_:1.t~Jp.t§':°or.:·inco.meor for-overstaternen,tof d'eduations -
: permits (Delpt,er_ T(ades <;Jb, .v.. .. lnt1;Jrtne~~-:-..-(NIRG; Sec: 248 (B)). ·· ,.-· :
_.APP,ellate:~ou(i, G.~ ·N.O- L-:~925Q,_J~riuary 26, .. · . · ~ · . -~ · ... · . . .. ··= ..
· 1988). ·· · .Tax J\vp_idance)ts. Ta~ Evasion .
-. . . . . ·. ·. .. . - , .
· · · Exatnp1es:. · ... : · · . . .
·{ · S~lifrig ,:shares "Of . stock:.: th.rough :a stock : -' ··.
· . exchang·e ·:iri order tc{avaiH>.f the,. lc:iiNer ·tax , :
' - rates;· · estl3t.e planning·· within .:the means
, ; sam;ticined by. t~t;k'fax·co·i:Je.•(VALENCIA & ·
. ROXA_S,· sttpra. a_t 3.CJ). · .. .. . . · ...
ii. '. A~f.ling·'of all dec:Iuctio~s allowed .by law· or.··
·.. . (e.frain/rig .from .en'g·c3gi_n~·in activities'. subject.--: .. Ac~omplished·by· l~gJ;lT Ac.sompli~he_d~y· bf:e~king .
. · .tq lax . (VAtEN.ClA- & RO?(AS,~upra .tit 33): . ~' ·
~ . - . .. .pr.o.cecl,l!foS.or·maaris· .. th~· letter'of·tlie.law. . ': ·:
. .. whic):i·maybe ~ontr.ary·· . . . .
-.b·.· Tax .s~.~sl~n· - a~ illegal means of:~s'ca·pi~g .
·to the intent of.the law· ..
- ta?(ation. lt cc:inn.c:ijes. fr<?_ud --through the !JSe of. ..··. · .
-- yet do not violc;1ts the .
. . ·pr.e~enses ~rid ::forbid.den .. devices. lq fessea··. or
· defeat· taxes· (Yptivo sons Har.dwar.e.v .. · Gourt of _letter.of the l~w.. . :
· Tax. Appeals., "G.R. No. L~13203, ·J.anuary 2.8; ·
.. 19B1). Hence,. it subjects tti.e ti;u<P.·ayer.tq_further : .
··or ac:Rlitional "civil ·or criminal. liabilities-. Tax . Min)mfz.atlqn.of.taxes. Alrt1~st.alviays results in .
.. . .. . ·.. the absence of.tax.·. .
: evasi~n i$ sometimes referred,'t9 .as ta~ d_o.dgirig ·.
. .Pa'YJTlenfs.. ·. ·.
. . . {VA~ENCIA'& .ROXA'S,supra at 33).
'-
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(Commis$iOner of Internal- Revenue v, Estate of . ·-111~-str~tio~: In VAT whei'ei~ the sell~r is· required by ·
Benigno Toda Jr., -G.R. No. 147.188, September _1-4, . law to pay tax, 'but the burden "is ..actually shifted or
2004) passedon to "the buyer (ta, at 24), ·

Z':· . Willful Blindness "Doctrine :·- . :. . . lmpact,vs; lnci~ence.

i;"-._ , , VVh~re·. t~ere: -"i.~ ·a .natura! · presumption · that. ·ttie.
t: · taxpayer knows his tax: obligations under the .law;
i . mere re1iahc_e.on another person ln preparinq, filing
ic and ,p,ayirig· income· taxes -is "n9.t a justification for
8-. · failure to file !he_ right. i_n{orn:i_ation on :income_ taxes.
F· (P~c,pte..V,, ~mtarar,_:C. T.~. ~.B .. CRI_M. No. 006, .
{-:.. oecember 3,,2010). . . · . ..

t··'
~:c
c.:· ·§hitting·_ fhe· trans~ef 9f. the. b~rden of tax ·by
the original 'payer or the· one.ori ~om .the.tax was ..
;r . . assessed or imposed (impact of taxeuon) to-
~'..-: ." .· ... another- (tncsaenc« of ta~atio,:,) (DE.LEO!:,J,· Ttte ·
~:... · Fundamentalsot Taxation; ·at o; 5.2). [/J~retna{t.er
ifz:. · · DE LE~NJ _. . .. - . ·~\ . . . . . · .
l<t.- -· • . • . . .,./..,'{
t: Note:_"Onl~ i~dir.ec_ttaxes, -~s opposed to dir~ct t;y.rfo;~<-:" from WhOJTI the tax is- .

!\ ·
~"'.: may be shifted (OommlssionerpOntfJrn_alRe11edd~ ~';-.-)-~';_;.\ colte:ted.
PLOT,. G.R. No. 1_4~230, D_~c.~m_ber..15,2005). yr:~~-~f:i .
~t. lndtrect Taxes - the liability for the_paym;i_r;t-~ t'trfY t-",>.:1---H·e-<~hitte;Gl_,·. . .. Maynot b~ sh_ifted_..
tlf. · tax remains with the taxpayer, but the 9ufft~nthereof -:...Y'"-'''--·..:..·_.,,;~~.,:.J.!'\...--'.'-----1._-,---'----,..,-----'
f;f . is· shifted -or passed..on to. the purch(s€fr jp.g. VA.fy' (DE LEON, .Ji °P. at 52) · · · .: .
Ji_ . f:l.XCise tax, ot~er.peicentag_e tax, ~oc/pJfJ1t~y:y_f!_at11~ . · '. . /J..f-.. \ · . ·, ·. . . . · · _ . _ .
tlf,'._ tax) (IN(j, Banlj_ N. v .. v. , Comm_1~9J6ner,1,?k!..,.!J!emal r:/ It.· is·· -~;:;i{;ob~I to know . ~here the .• n~p.i:ct o~
d;;: Re~enµe,_G.R._No. 1~7679, :"/'c(it:2"0~jg?..!)·. · _ · ~.: f:/1 taxatlo~fties-~ec;i\se I! generally_determme~: .
~: . · . . • . . · _ .. . . . ·. -_ii fifl! .,.:c:,:'.:~1 t,,, . ;.>.-,.. 1-tP · · . 1~~:".:)i;i,e7f:>';:9.P~jr,.9arly ·to claim _a r~furn::t ~.of.
/. · The: 1_n:ip~1tion ofmdirect truce~ 1s _n_~t7~.;Y~~l,ati~~?.~f {,j · . · . '<:,ef.~Ef,~V~-Y-1fnp9sedind_irect_~ax~~.r._aria
·f .. · the. principle th.at taxes ~re per~~9.i!tfJP1.L~1e~,-t~e.· v1 . 2.- Whetl'ieF the indirect taxes can b~pa_ssed 0n
·f . . paym~~ -0f which cannot be· tran~~r.rea to/an~tbi~r i'} . -· to an e_xempt buyer (INGLES, supra at 7)..
f person·. When ·tl)e seller passes· oi\ ,tpe Ja.~. to . his 11:,,ry:-;_~ . · · · . · .· · ... · · .
f ·. .~uy.~r,·_be:· is ·?nly sh_iftiilg. thE: .tax b~~~feh:'(n~!.1)~&:::Zi.Kufi'l&Esf<'Sl')lfting:_ ·_: · . · ·· . · · ·. · ..
~"/:;.· . :ltab1hty to p~y it) to _the p~rch?seH~s P~1* of \t}.1i~~,osts ·· .. i. . Fc;irwar~.s!jift~~g - when th~ burden. of ~ax
')t:· · of the goods so.Id or.serv1ces·rendered"'(l~M{supr.a · . . is· transferred from· a fact9r ·of -prod~ct1on
J· at 24): . . · ·.·. · . ·. '·. . · . . , : ~ · · ~? · ·. throogh . the .f~¢t9rs" .of ·. distrib~!ion Ul")til it
!\,; '· · ~nally s·e~les on fbe"'ultimate pu.rc.haser or
$;,: Th~. tonstitufio~ doe~·- no~ proh.lbit the in,:position. of ionsumer-. · · · :. ' · · ·
f.{: -"in'direct taxes."iike the VAT:-The Constitution htfS be(:!n •·.···ii ... B~~kward · sh_ifting ·-.when .the bur<;len is
iP,1•· -, .interprated:tq.mean simply_that"ct1rect t1:1.x~s·l3re to._b~ ·. . transtei/ed tro_rri the·· c_on~umer throu~h: th_e.
,: • preiferred: and· ·as much as possible, ".-indfrect ~xes · . ·factors. of. distcib1,1tion · to · ttJe f~ctors . of
'~( . ~l)ould be .:minimized· (To_leptiCJ?y,.. :·_[3ecretary. of . ·· · : production; .. ,"_ . . .. . . . . .
·t -·Finance, G_._RN.o.__ n54pp;_ :oc_to.fer_;J.0~·199_5),, .. ··• · ··_,i{ Onward shiftlng--when".th.e tax.is·snif.ted
. two or moredimes·efthedorwardo~ backward.
,.i.:~.-: Direct.taxes - those. th.at carin0t be. shifted.and- are ·: (VALENCIA &)~~>0S,supra. 3'1--35).. . . at
" exacted frcim the ·very "persori"°who,. it ·is intended cir" ' ...
(:: desired;... shoulp ··p·ay · .. them : . (e.g:·· 'income tax) . d.. ~~pitallzat_idn_· .· ·, . ; . . . .- ·.:, .·.: '· ; . ·. .
f. (DIMAAMPAO;.·s1:1pr.a . .a{ 1·42J.'Those ·wherein both · . · ,. ,Ttie redt:i(?~·qn-in. tl'.le:price,"ofthe taxed ·objec~ is . :
the incide.nce of the.tax· as wefl as the Impact thereof· - . equa.l· .t<:> th~ capitaliied val\;ie ·qf future· taxes,
·at
falls on -the s~me· person (ABAN,·supra 23). . . . . ···· which-the purchaser expeyts .to be. called upon to
· · · · · ·· · · · · ~ pay~ (Id: at _35).,··. · · · · · ·
.lmp~ct pf Taxati~n -. ~qint on which tax is ori_g.!na!iy·:
.• . _imposed; falls on -one· on wiior:n the tax is to:rm~lly T~x -c.ap_itallzati(>'n i~· made yvf1en th_e .price Qf· the·
•· ..·.. asse~sed (Id.). ·· . · .prope.rty°ls .. lowsre'clto i:iccornmodate the excl~~ion of
\~:-· . ..... . . · the tax which· is expected_ lo be. paid by the ~eller as
{. Incidence of Taxat"io.n . - point on whit~ t_he tax: a resuti ofsale.transactiori (ld:J_ · · · · · ·. ·
·~-:. . burden finally rests or seftles µown (/~.)- · ·
c.. . ..
. ..
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.G.EN·ERA-L PRI-NCIPLES.
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Example:. Oapltal ·expenses Incurred. by. private to 'be . mistaken and 'too categorical to be·
educational institu.tions for. t~e · expansion of school misinterpreted (Philippine Amusement. ena Gaming
facilities (NlR9, as . emended .. by TRAIN,. -Sec .. Corp,.' v. Bure.a.u 'ot lriterrial · Revenue, G'.R .. No:
3',1(~)(2)).. ,, . . . . -f:2987,. March 15, 2Q11). , .

e. Trtmsformatlon . : . : .,. - . . Rea~o~·;:for t~e Application of Strlctis~iml Juris: .

. T-t,e·:m.anuti:16turer or producer upon ·whom tfie 1. : Life-blood theory (DIMAAMPAO, supra 2); · . at
tax hasbeen imposed; fearing ther loss· ·of. his 2... · To minimfze .differential· treatment and· foster·
·. market if he should add ;the· tax-to, the pri9e,"pays . ' · . , irnpartiallty, 'fairness and eqµality of. treatment
'. the tax. arid '.endeavors,.·to _r¢.c.oup hlmself by: ~ -amonqtaxpayers ·(Maceda v, Macaraig Jr., -G.R.
il'.flprdvin'g his' process of production, .thereby" . N0.·'88291,'June·a. 1993); and ·· · .
. producing,.t,is units ar alower cost (Vi?,L~NCIA & 3.. Taxation ·ii;; . a high. prerogative of sovereignty
ROXAS, st.fpra ·aJ 3~): . · · · . 'whose relinquishment, is nevef presumed tt.uzon
.. . . : , 'Steved0ring· Co. V," Court/Tax <5f Appeals, ··G.R. ,
.' t: . Tax Exemption: ·, · ... · . .. · , ' ·. No. L-3d232, Jµ/y 29,:;1988): .'. · . · ..
· The. grant :of· IITl!l)Uni!Yi express -or:_,implied . (or . . · .. . · ':
. ... co_ntractual){ to pa'rti~ul~r.·pe·rsonsorc?ri?0~~~9ns,.,.~~:'~~-p,tions.to ~he. Application o~. Strictls~imi
· .,_.Qr._to pers~ns.oi; c?rporations o~ a_ paf!~ufa°J;f).ass·iJJ. Jl{r1s:~ . . .. · · .' . . . : . .
front a. -tax :W~1ch. persons OJ:;::f-':Sfo~o!ati_~ns\ :1(,\W!3~njl;li~tatut~granting exemption provides _for.
· gene_ral(Y. withlrr.the san:i~ -~~~t~ftir t~firlJJ,,~l§.'tr;iet~=~l~a~nis1_r.'{.~!ion ther~of; .. : · . · ,.
are obl~ged_ to pay (f:'h1/Jpp_~fl1J.(/;0QY,:,P1s_t~nc;;,d,'r,=-:_,k,.~~~nca.(i: ~~~~~a,~L~axe~ relating to special .cases
· .Te_lephorre. Co., v. c;,ty o(!fB._acolpfjfi"f3,,R-:-:T:vo..:~ . _a't:rd.. _~ffe~t1ng_g_i:il\spec!al ~lasses <;>f pers~ns~ ,
.. 1191_79, July 1q, 4005). 4t);/ ·.
/ i·· .- .. ·. JFD · . ~.:%'. I~ e~Elf.1Pt1\n~i?fJ~!o _the pu_~lic property; . ,
·. ·.... ·. . · . , . · . · · ·. .. ! . !!' _ . · . . ·. . . . 4-:' .In .,C~fes Q/. ,p~ec,yi1rtio_ns.gr~n.t~d.. to r~hmou~,·
Reason_:. T~e mher~nt powe,( ~ej;stati::·Q..!!l.lQO_ ~ · ,· .. -~r_~eblH a~~edt.i~atronal institutions or ..ther.r· .
taxes naturally carne~ with it, tl;ie-p9wer.tollgfaQ.!~t~~--·· · ~.,p.ropefty; ·. \ ~ ~ . · .. .. ·. ·
exerripti9ns .. The.power-to i~rriP.ltfrqmtaiatio,n;~§r> ~~?ii' cjses of. ·ex~i·· pt/ons in favor·· .of ·the
yvelt as, tlie po'l".er to tax,.·i~\~~J~~n.ti'l~J~{ibute'=-'~~ ~ov~-~/ ;f.!:~nt,;U_1ft5'1 olitiC?I . subdi_vi.sions or
S()V~~l.!;J~iy, -~~d n:iay be ,ex,rd's-e~'0>'\Y~P\\i~t~--.;::, _ .._iosf;y~r.1t~l1t ~IR' 'AAMPAO, · s·up_r~ at 137);
Constitution, expressly ' ~r if) \y. \•~li~tic;>dm~ J..5}~,.a · f-;: . . _ ,.;-1 ii · · : , : . · ·
(DIMAAMPAO, supra at 13_4-ff5J.-.. \ ~ ~~'-. ~ ~$l'JF.Jlf~, I~ c:J . expr1p,s .mention or 1f t~e taxpa~er
· . · · · .\ . .. \: ·. ~ ,~ . 4"~}-91~ .1th~he. pur,v.1ewof the e?(empt1.ol).by clear
. Prin':li'ples ~~verning 'fax ~:ice!Jl~tions~·- .'!ir:-. ,;,- __ ;-f~~1~1a9ye ·:,1nte~f (~om'mission_er ·.of Jriternal
Tax ~xem1?!1oris1,.lncluding,.-1ts·.e~~-~-~<;nt.1>~S'i~~evepue·v, Arg_oldus Carpentry'$hop, Inc._; G0R.
· such a~: d~ductiol;)S, .. tax . :?~111~:t_,,J-;a._9c1~~{.:J~1102J:,Mi3~ch 2~, 1988).
i·'\~l'\,,. . ~JY . . . . .'. ·. -· ·. . · .· · : · ·
.c~ndbn~tions st:ial~. be governed. ,,1;>~ ..we.:;i.~~ing : ';
pnnc_iples: .' . _ ' · · .. · '- .. l . Mf"•R.<!.s'\?J_;fax'Exemptiory: · . ., .- . ·.
• 1..: l'hey ar!;l not pre?u.me_c;I '(~IO,r.C!. .9e.(17~Qe€e,~.,;;.-,,:Expres.s:_:.exemptio_ns ar-e. expressly granted. by.
· v. G9.mspe, G.R, ..No, ~~.4.6.7_87,Jl.ugu~f .12,. . . ·· the Con.stitUt!qn, .staMes, tre;:ities; franchises or
, : .'1.991):. : .. · .... · . · .. \ · ·. : . ·. · ··. ·.. . . .. similar-~egislatlve· acts (DIMAAMPA9, •supra.<,1t
. ~ii..·· Wlie'n ·graote,d, they ·are. strlc\iy · coostrl\e·d ·· · ··.· ~ 135); · -. · · · · · · ·
. ·: .. against tj)e. taxpayer · (Luzon.'.'Ste·vedorlng . . _ . : ·. ·.: ,
·. ·: Corp. .y, Go.urt .of. Tax Appea/s, G.R. No. L- · · Tre- .. fo'nowiqg·. are -~xamples : .of :staM9ry ..,.tax
. .· 302;32, J.uly 29, '1988)... ·· · · · ·. : .. · · · . exem,j:>tions., .· · · · . . .. . . . .
Iii;··. They are· highly' disfavored Md may,almost .... · ·. · a.. ·lnter:corporate,-·divic:Jends ·_by . ,;1 ·• domestic
·. be said_to·b~ d,irect1y.9onti:ary._fo'the.fntenticin· · .. corporation from. · ~mother ··domestic·
,. of th13. tax'.'laws,(¥aqila Eleqtric Co. ·v. Vera, .. ,. . · _corporatiql)_ (NIRC, as _amendecj qy TRAIN;
. G;/J, No. ·L:-29981,.Q'ctoper 2,2, 19'75). . .. · · Sec~ 27.(D))r · : ·. , . . ·
iv.•; H~·who:claims ta.X"exElrriptior.ismust be able. · · .I:?: .. G;ondilionally· · tax ..· anolor,.· duty-exempt
.. . to justify his ·cl~im- or rigbt .(Commissioner of . .. i'mport~tl!)!lS(CUSTOMS MODERNlZA TIQN :
.. ·. lniema'I Revenue· v. P.J: Kieoer Co.; LTD., · · :- AND· TARIFF A'CT [hereinafter CMi A], Sec ... ·
. q.R..No.. L-2f754, JuiY:1./J; .f9"f5).· ·' . · . .. . . ·. ·. 800); . · · ', . : .. . . . . ...
.. . c. Exerrip~ions from Real Properfy- Tax (LGC,:
.. P.rJilciple of·Strlctlsslmf Juris ,~-Tax Ex_emp,tlon .. . · Sec. 2;34); and . . .. . . .
laws granting. ·tax exemption .are construed in c! •.. · Othe,r ~pe,9ial · laWs. SU!=h' :~l? .. Omliitius
'strictlssim( juris against. the taxpayer' ar:id liti:e.rally in •. ·. · ln:v.~~.t~e.nt Code of 1 ~87 :· (Execµti.ve Order
·of
favq'r the taxing .power. raxation is tt)e .rule and . · 226); Phlllpplne Overseas Snipping Act {R.A.
exgrnption ,is .the e~cep\ion·. The law doe's n'ot look. . . N? ..1407) (VITUG'·& ACOSTA, supfa· at.:J4) ..
with favor on'tax exemptions and·that he' who. would
. ·seek to Qe p~vrlege~ m_ust-1ustify itby .wor.ds'too p'iain
.....

1a 1 ·201s
. :sAN. BEr:>A. LAW
. ,CENTRALIZED
. . . . BAR OPERATioNs
.
 r
i·
o:
-. GENERAL PRJNClPLEs·
-~.,~!
(,.
f..' ~N BEDA LAW-CENTRALIZED BAR OP.ERATIONS:.. MEMQRY AID 2019
~ ,..,. ,e waew 6 A!M'f&iJMY,i.iwl&Ms~, ••r,MMM·P Altii#Wf P#HZIHM!APflASUlr~.V1'/,,.!2~1-~~
> .
f 2. lmplled -. - whenever · particular persons. . 2. . Adherence to . form .: .if . th~ tax exemption' ·is·· '
i1-;,_ properties, or excises are deemed exempt .as grante.d by the Constitution, its· revocation may be
f.- . they fall outsidethe scope of the taxing provision effected·thr6ugh constitutional amendmentonly..

~· .
t:_.-_
R:
·
. 3.
· ltself (DJMAAMF?AO, supra at 52-~3); .and · -:
Contractua(..:..tax ~x~mption in consideration of
3. ·where the ·tax exemption grant isln the form af a
special law and not by a general law, the special

If\t
a contractual agreement with the gov.ern'me.nt(Id. and local 'statute applicable 'tothe particular case
~ · at106-107).,·. . . . is not repealed by.. the · later statute which is.
, .· genera,! in its terms,' provisions, and appllcatlon.
The ·1eg.islatwe of 'a State: may, in the 'absence .of even if the terms of the gener.af act are broad
special .restrlctions 'iri -,its constitution; make ~ · valld ·enough to lnclude tne cases· In the .speclal' law
y.!;- contract' With a. corporation ir:, respect to. taxation, and. .unless there ismanitest intent to-repealor alter
f_ thatsuch contract canbe enforced.aqalnst the S_ta.te 'the speclal law (Province'oi Mfsamis :oriental v/
~: . at _\he 111·s~an_~e .:of the -cori?ora'ti.on·_ (C~~ano_vas v. · Ca'gqyan :Electric Power·& Light Go: Inc., .G.R,
,~-, .: "" _G.R._. No: 34.73,. Ma:.ch _22,; _1907)..' .. _· .. No. L-45355, January 12, 19rJO).

i> · ·. Contractual tax exempflons.rnust not be confused · TaxRefunds · , ....

~- . with. th_e tax · e>{~mptjons wanted under J__r;anchi_ses., ( Tax refunds ar~ in t_he'nafure of-fax exemptions. They
t_. . w!iich. are not contracts withi,nthe PU"':'iev.iof the n~'"!- . are regardeo !3~ a derogat!on bf soverei9n authority
( · irnp.airment claose of. the Constitutio°" Con\rac_tual./i') . and to _be cpn'struea strictissirni juris ~gains! the
~i Jax exemptiof)~.'are th6se·_1awtu11Y_entere9 i~!9 br1tr~>'{~. -~ersori'~r entit_y._q1_ai_m1ng-th_~:e~empuon. :h~ b~rde_n
f~.- _gov~rnr:ne.n,t tn con,tracts ~nder .. existing -~. ~.w.~(t;_-;~of proof1s upon h1rn."'.'ho __cla1ms_th_e exempti<?n 1i:i his
~" (Caeayan._ . E_lectric po_wer_ & . Light·· C9_.;·. ·Jn'c_-t--F.: ,, favo~ and he must'b~ able to J_ustify his claim by the · :;;i·')
f: · C9mmisSi(?ner _cjf Internal: 'f:?evenue, G.R .. N.9).{L_~,-,,~,.,~:;9.le·ar~~ gr~~~;-ff organic or statute. law (D{'lvab· ~ulf
[· .. ·. ·:6.0126, Sept.em1!er .. ~6; .1985;· · VIT!;JG . & ~80St~01'l1~~itinb~,;_,JJ(!!!!t,,f· <:;ommis·siqner ..of Internal_ Revenu~,
f' · . supra ai-35)... · · . . · · · . /-;./. ·· .. /, G.R._No .. 1.1~ft~9, Ju/y-23,.1998). : . · ,r..
G.•'-.::;J j(. fj ~. · '· . · · · ·
r· .· , ·
~.- . . '. · · . , . _(:' '( Al ...
If_ ·special· privilegefJ::o,hfe!f.~d. ,_o//y ~} Ta~ ;Amrie}t~1,.'\: · .
·A frandhise_··is- c;1 . . · .·. . .· . .
governmental: authority, actinQ.,-<;.q~J~"su,~J:if9,ri·· ·a~ · ;, •. · A tax,arnn,;est~ is-·~ g~·l'}~ral pardon c,r the _intention~l--'-
-\.mde_rtaking t_hat__ iswithin the· ~9'epe otgo\fornment~t 1.\· o':'erlookjflg _ti~ the~_State:Qt its authority to ·impose !'
1f
It_· . functio,:is.. Contractual :.'tax fte~d~o~CQV;Sring·;
: .rl)~tlers· that_ are "not .es·s~n)l~lly ~o~tifi:~e~t~t)p
~ ._ n~t~r_e, su_cl'i as !J:1:ose: ~~nta1Tw~J~g~~frnm1,~t.
·
bonds··or debenture~. unhke 1r:i frar:i~ijses; ~f'Y. .n9t'be ·
p~ha[~ie~-en.-.pefsor.,'5;-,9th~rwi~eguil~ o_f·violating_a
tax la~~J.t'\9;,~,e·s
;•:J
}d
a_n absolu_te ">'."aiver- ..~y .t~e ·
g~yernmentof1ts right t? c~llect_what 1s due 1t and to
91~ tax eva_ders_who wish to relent 9 c~anc~ to st~rt
::·!
U.
_
u;' .. r~vol<'f;}d ~thql!t impairi~g tlie oblig~t,o'e!?~9!{~ntra_c~s) ,~::~!t~_-:~rf;t~~.~
s.late.(Asia. fnternationaf Aactia{Jeer$,, If?.<?_.
rr.-··. (V[TLJG,&/i.COSTA,, supra ~t 3_9f. ·: f,'./" · . /"';_;:;: ..2,,.,l2.......11._..~C.o.n;,m~ss1pner of ./riterna/ Rettenue, G,R. _No.
rr~t~ · · ;··Reyocation·o.f
· · · . . · ·Tax·:Ex~mptlohs
· . · . · · . · ·.. ~if · Jf:t~i
· ,~} •. :!_ · .
· '17911_5, Septemp_er 26, 2012).
'
. ·

·.
,. ·. . .Sincy ·t~~ation : _i~·· th~.- rule_ 'and .. ~xerrypficlrl,s.. th~
-~xcep.tion,the-··e~e!llplion. rn,ay ·.th~s ~e Wt{hdraw_n·at
Rules' on Tax Amnesty: .':- ·'
r. Lik'e tax' -e)5l'lrj)pfio_n, it is .-never favored nor
i . . the ·_pteasut.e: of the t~ing. authority. (M_CIAA v.-
_:
t. '
· Mar_qos, .,G.R. No, :1-2qba2; :s~ptember
'_How~ver, if the te1x exernp?on consti~~tes ~. bihding-
1.1, 1996).
presl,!ined: an'd ·.construed ··stric\ly. against :the
. taxpayer {fhe· .tax.payer mµst s!Jow ·comple~e ·
· qomp'liance with tt,e·law) (Luzon Stevedoring Co.
~1 c,ontract... anp · for valua~le 'cons1derat1or-t.,. · the . v.. Court of T;p<Appeals, G:R .. No:"L..,_3·9?3~, July
IJ.-.: governi'ne!'lt c~mnot :ur:iilaterally re.vbke · the tax· · ?9, 1!!~8); ·: · · · · . . . ·' ,· · ·
f exe'mption{PIMAAMPAO,.sup~ ai 108).;.- . . ·2. The govemme·nt 1s . not· · est9pp1?d from
{ · . ·, ... ' · · . · . ' . : ' . . . .., q·uesJionl~!;J th~· ta_x.:liab,ility ·even if_ amnesty ~l:3X
X" . ~Qte: P91ice.. !pow~r _pre~_a_ils · o~e~ · r;ion-impair'rT1e11t p1:1yr:nents. were already received (PH National Oil
,. ·' clause (Oposa-v.:Facti:>r...an;.G.R. No, 10.1083, Ju/y-30; Company v.. Court bf Appeals, 'G.R: No. 1099_76, ·
i' · · 1993).. · . · . . . . · . .. 'Apri/_'_26; ·200SJ;· ~f19 : . ' .
• ··!" -. .
Restrictions on Revocation: .. : . Reason: Erroneous application and· enfo.i-cement of
·1 .. ' .N~n:,-1mp~iiment 'C_lau~e·-:-:- w_here-the· e~~mptio·n. tne ·1~w by. .public" bfflcefs do· ncit block' subsequent
.. was granted to priv.ate pa'rties.bas~d on material' . of
correct applic;:ition. tl)e_ sta\ute.. The g9vernment is
coilsideration of a mutual nature, it.then. becomes .. never estopped by mistakes or errors 'of i~s agents
confractul;!I and. is .cov~ered!:>Y the non-iry,pairment (Commis;,ioner .'of internal Re.venue V, .Coart of
f
·clause of. the Constitution· (DIMAAMPAO, supra·. Appeals and. Cftytrust Banking· Corp.; G.R: No_.
•, .. at .1fJ7). · · 106611,
., .. ,. ·Ju/y-21; 1994)
. .

. 2019 SAN BEOA LAW CENTRAU2ED BAR.OPE~ATIQNS 19

 GE.N.ERA.L~.P·RI-NC.1 PLES··
SA/! BE(>A IA.W CFNTRALIZ.ED OAR OPERATiONS - MEMORY f<I0-2019_

There couid . be NO tax amnesty·· granted · by the 'retroactiveapplication (People v. Castaneda, G.R.
Pr~sldent qf the PhfliRpines. beca·use the .same is ·in · No: L-.46881, September 1.5, 19~8t
the 'i1ature of tax exemptlcm, which.could be granted
· only by.. a concurrence · of Congress (People v. · Meanwhile, tax exempt/on is freedom. im,;,unity,· or
Castaneda, G..R. No. L-:16881, September-15; .. 1988). privilege from the burden of taxation to which others
are .subjeeted (A$AN, supra, ·at 118-120).'' It is=
3. D~f~nse of ta~ amnesty is a: personal . .d~fense geriera11y: prospective· in application. (DIMAAMPAO
· :· (People -v. Castaneda,. G.R; .· No.. L-46Bl;J1, supra at .11). · , · . ., ·
. . Septefr!ber 15,: f98J3)- .. :. .
i'a>.e Exclusions . . ._. .
Reason: R·~lcites·to the circurnstancesot a pa,1ic.ul~r, Both in their nature and in their· effect, there. is .no
.. accused and not the. character of the acts charged m diff~r'~mce:between tax exemption and tax exclusion .
. the ·information (Pe.Qple· v, Ca$tatleda,. G.R .. No-·. .Exen;,ption.is animmunity o(p'rivil!:)ge;_ 1t'is fr~e<;lc?,m ·
·.4688.1,-Septemb{ir 15, 19.88). · from a charge"''c;,r .burden ~o which others ·13re
· · . ...:· · · . ·· · . subjected. Extlusion·, on the other . hand, is the
T.o avail· of atax amnesty gran'ted by the ~o\lernment, . .. removal of otherwise taxable Items from' the.reach of
and tobe lmmunefrom suit oi, its d~linqu~nci~s,J;,the,~. ~:-"":tax-~.£!.l(e.g.;_ exclusions from gross 'income and .. :
taxp~yeL must . h.~ver., voluntaruy dis~ hi~'ffj' ~1(or.ya_~}?:"1,_~df1tfor,s)-, ~i<clus)on. Js t~us ~lso an
previously .~olaxe<f_income .and ml!s~}la~~p~i~~~e l 1.1S1~0TlftY ~(r,~1lege_ which trees a· taxpayer fro_m a
corresponding .tax· on such pr~ylol'.fu,lyJu:hJ~xe~e~~~g§to;wJa1cft'b"thers are subjected, Consequehtly,
income, (~anas, ·Jr. v. Court ·of. '#pt_~alsi";rp#l N9. ~ru~e::o..fh~J:.(!};l~.exemption.should be applied
102967,:February 10,' 2000), l, ,q_r~~-'"' _· ~e, i~ stileti~si',i".fUf(s,jis~nstJhe tax~ay~r and liberally
. . .. . . . ·.
. 4. _ Th~: completlon .?!
. ·: r' ~rj /,' ... L~~.'.;,)P>:· I\ iij!(favor~f t' flt'(B-\9er,qmentapplies. equatly to tax
the letjulre¢'en.tst providid , ~ -Ef~~Lusion~.(PhYliPl;!,'lr\iigngDi~tance Fetephone-Co.,
'. under the tax amne~tY,Jcj~_lltbe de~JuJ)
. : · -com·pljance with the tax,/,elil'lneJt~ pro§ri:l~.}l\~ fU J .,l9JJ£J,
DI.' ~~'-1t.....<:24r o( B{lc.Qldt:!-\G,R. fl!o.. 149179; ·Ju/y 1.5,
H. . l ~r,:.:,~ \l · :. , ·.
· taxpayer shall th~reaft~r. 6e:!,i1{1\'0une tfrom~t:1).Ec,- Ii H ·"\,. ~- • '., K ·i
. 1-----'U. , . ... _ ._ .
payment _of ta~~s. ~-l')d ~<:l<i!.\~b'n$ th,i:et<\ ~l> .n~1~gi':11eth~r"f/tx Stiitute~9.onstr.u~d ·5\rictly,Agamst · .
- · as the apeurten~nt.:peialtie-.SI:~ntjE1._1;,ttb~c,.2-~ G~~~.o :~~V.-~r 'i:~!!~l pver Rule. or:r Exer,:iption
. qri.sinQ. ftor:n fai!ur~ to' P<rt-Ji}y~,an~~~ te~a~ 1
··~.tC-~'JsJ~"'.Stn~ .1r~a1n.st_·Ta~pay~r.. · . . .
· r~venue . troces .-· (Com~/.§s,on,;;.·_, ~lfJ e<,n~ · ~e;~(J;t-~rretjV. rn ~ptJy111g the pnnc;1ples of -tax
,

; ~.- Revenue vs. Philippimr Af~,minu~"(Vl)e~.(il, ·, t:16,..._ .

.G.R: tyo.. 216161;.Augus_t9~~2017). "-. ;
~r)(!m~pp.tJ~ :1Jt~o~~. fJFf . aP,plyi_~g- the. 'welf~s.ett!ed
f~.cJc;,.·tn· ~ of fitnct. 1htj¥pretahqn-in .the 1mpos1t1on of
. · . · -. : •, . - , · . · - ~""-'. C'lE1,r@:. ~,1.i.ef~th,illo~foal ~Ad_ iryipractical to determine..
lllu.stration: While· the R~f~ren~ .. an&,-?as·i~~t~~ex~mi*iti without fi.r~t d~terrnining· wh.<> ar:e
Va!ua!ion !ri. the, SAL~ i:terf!..· left _·b.!.~11R'1~ii.r:-- · c.e~t;lr'e.a\~¥-.o/cilor~s~id _J;>royisi·~ns. As sueh,it ·must
attach~d:sc~edules. to ,~s SALN, wh,chpr;Q.~,~~.the:]:'~l;J~~~ITpJAedfirst 1fth_e person ,s·co.vered byJbe tax
;required. infc;,rrnatici~- tind~~ 'RA:. No. 948P~l:iu~~~.)l·hiclPJ?IYingthe rule ots_tl'ict. lnterpret;:itiori·<;if lav,.,s
conslderjng:that C.EPHI completed the requirements ·imposing laxes arid other burden.~.. on the populace;
and. paid'. the· cerrespohding arrihesfy. fax,. if 'is .. ~jefore asking' the \same person 'to ·prove: his_
: c<,hsidered to· haye · totally complie'd _.with'. the .tax . exen'iption. · tliereft>.i: (Commissioner or·· lrrtemai
_-_ a·m,nesiy prograr.n pursuan~ to ,R,A. No. ·9;i'8Q. :As .a._ R~yenue v.. Court. of·Appe.a/s, {3,R .. !Yd-:. ·1.15349, Apdl
· matter c:if cours~. CEPH I is entilletlifo the immediate - .. 18, 1997):'. · . . . . .
enj~>'ymenfof the in,munitie&and 'privileges of tfle tax . .
amnesty .· prpgrar.rr ·. (¢oromis$kmer .. pf 'lnt~rn·a1 : 10. Double Taxation· . . .
Reve.;tqe.vs.·'Covarita ii;nergy Philippine Ho!.dings, .. An. act of th_e.sovereign by'taxing twice.for'the same
'. fnc., GR; Nq. ?03:160;Jan1:Jary i4; 2018). . . · · :· · . .'purpose iri the sam·a·.ye~rupqn,the sarn~ property.or'
· : .. · : · .. · ·:· activity of the .same perscih; when ·it shoold .be taxed -
. . Ta~ Am'nest~vs .. Tax Exemption . : ~ once,for .t-he ·~ame purpose. and·with the· s'amEi Ki'nd .'
. - Tax .. amnesty. :fs ·.:the· . governmenf.s : absolut~ ·. of ch1:1racter of·ta~ ·(.VALENC!A & ROXAS; suprf? ·at '
. forgivenes~. waiver, exercls'e·of ~ general pardon,. or _ 31). .. · .· : · · .. · ·
interitlc;>nf;!l.coridoriation ofits. right.to _c9Uectpast due .
· an~ unpaid , t~x collectible~. including imposable In the ,.broacf sense, double t'axation ·means. indirect .
p~flaJtie.s·on pers9n~_g·uilty .of evasi~n or violcitiorJ. of duplicate ·taxatiort. It extends 'to' all cases·.ln which
. a rever-ii.Je or-tax law; giving tqX ev.aders who wish:to . ttie're are. two or. 'Tlore pecuniary impo'sition$. Tbe
.. ,,'. re(ent' ah·d are _wJllirj.g . to ~efo.rm a chance to 'do·. so ·constltutiori- does. not .prc;:,l')lbit · the . imp¢i,ition .. of
· · (ABAN, · supra: at. 118<120). It is· .immunity from all . · · . double taxation l'n' the bro;:id..se'nse- (Viilanu'eva v. City
.. crimln.al.,-an.d <civil ..obligation~. arisin'g. from no'n·. . . of.lloilp, G:f?. No. L~26521, December 28; 1'968). It is
. Rayri,ent of taxes. It ls .ii' g!:lneral pardon given' to all . somethirig r-iot .favored . buf '.:is ·nevertrieless
!~payers_and it ~pplies to past tax periods, hen9e of permissible {VALENCIA &ROXAS, supra~~ 31}.. .

.. .20 I' 2Ql9"SAN

.
SEDA LAW .CENTRALIZED
. .
BAR.OPERA
.
TJO.NS
' .
 r
:.·

F,,
~· .
~:: anasw
.,. Kinds of Double Taxation: {pt2t;.) 3. !nter!"_atlon;al·Juridi~al Qouble t.i'xatio.n - th~
;~ 1. . Qirect Dupticate' Taxation I Obnoxious I imposition of. compar~ble taxes in· two or more
, Objectionalll.1:!'l Prohlblted (Strict serise) - it is states. on _the· same. t~xpayer 'in. respect :ot the
f
r;
the iobjectionable kind of double taxation in its
prohlbited sense, since.' it violates the equal
same s:ub~ec.t. matter and for· Identical periods
(Oomm1ss1oner of tnterne! Revenue v.. · S.C.
f .protection · clause • 'of . the Constitutlcn .. (City of .Johnson & Son, lnc., G.F?.. No.1271.05 .sJune 25
P;. t3aguio·v. De Leon, G.f.?. :No .. L-24756, October .. 1999). ! . .· . . . ·. • ,

f.i,·, '31, 1968). . . .. ·

F· . ·This-.double.::taxation. usually takes place when a
iJ:.. Ele~ents: (P2TA-jP~) . ' . - : · · . .Person is a resident of theflrst contractlnq.Sta.te and
f"· . · a. The same fr.opertyQi' subjectmatter is.taxed · derives .income from, or .: owns ·_capital· In· the. other

rf
t'·..
twice when it should be taxed only once; · ·• ·
b, : Both taxesare levied for ~he. same f.u~ose;
and ' . . ' . . . . . .. . . .
.ecntractlnq State and. both · States· impose taxes on
Such Income or. caplt~I:. Iri order .to. eliminate double .
taxation, the two contracting S.tates enter into a tax ·.· .
t·.~. . · c. !rfipqs~d. by the ·sait)e'!.~xi~g/~uthority; :. .
·1. W1thmttie.same Junsd1chon; . ·· . .
treaty (Commissioner of 'Internal Revenue. ii. S.C. .
.Johnson & Son, 'tnc., .G.R. No.' 127·105 .June ·25 .
r . ·. .
r
r.·, ·
· ·.
..
iC · Duririg·the same:taxrng feriod;.and·:.
iii. Covering the same· fSind or character' of
~ax ( Villanueva v, · City· of 1/oilo, · G.R. No. '"'
1999) .. ·
..
: ·
.
. ·.. .»

.
• • •

lnte.rna~ioi:ial ju.ridica.l.:d,ouble tax.ation; only ·occurs·

•• • • ·'

..
• • ' ••

r . . . L~2652.1, Dec.ember 2~. 1968). ·. _1 c_::;if .vher;i the 'St~te op:esiden~e of tne taxP,ay_er impose~
~ . :. . ·.. : ... . . . : . /,:-/J·i·"';,. ta_x _bn...the.. m~ome of ~aid ta?<payer·.from solJrces.
f lllu~tr.at1on:. T~e. G1ty· of. Ma11ila :imposed'fJO.~t{.,;· .\ w1th1n .. and w1th?ut th.err. State (Commis.slon'er· of
~..
t· bu~!ness tax o':' manu.factur~rs_,:of Jl~uo~s.:·::di~Hll~d:,!\~.fntemal.Reve'!ue:v. s.c ... John.son .& Son; Inc., G.R. ·
sp1:~ts_; ,.and .:w_ines. ,and_. lo~I. busme5:s, t~~1.p~/i/.):.7/j_ap~~!OS.;;u,yne.25; 1999). ·.. . _. .

I
, businesses subJE,l'ct.to exc1s_e,VAl\, or pflr<::eritagetax_v 1£"_..., ,..._:..:,.,~{.;..if, . · ·. · · · .
·: underthe NIRC. · · , . . d-:if>'".. ~ \{ . ·.R.easo.n for' {Xv,.oi.dingInternational Jui:t.di·cat ._. . . ·
)>· . . _ : . · · _:. . . · · .y,'(.,f .' ·. :(;:,: 1~ Do~ble TaJS~ii~':'.: .To· enco1,1rage the f.ree· .flo""'.. of .
~·, · ·!h.e. Court hel?. t_hat:J,!i~~e ..1s. d1rec;t d,Yl?J!c,t.e.J~~at.1~. V. g0Qds ~n<j;s1p11~es .a~d :the movement of ca.p~tal;
f Jf respo~de,:i~ ,IS SUbj,ected .to. the.,-,t.W0r)?Ca.lf6~ine5·5·. (.\ tech~.9.fo~r · -~rTdt r,?e~on~ ,'betw~en cc:,unfnes, .
ft.: taxes, :since. these are b~in9,::lf'mpos~.i:l:\1'y.on tlift\ .';·:~. c<;>nd1tJol')S d_,eme\j , ·vital . m ·<?teat1ng · roqust a~d.
Ki. · :>arne .st;J_pje~t m~tter.- the. pri~U~>f~,~.o~;·. bus[S~ss
- .dYfla~I~r.;.~c~~9~~l~"";
_.l.J)j. (C.ommisfio_~et : bf fnten:,at .·
·;':' m the C1{y of Manila; (2)for V'le sam~~.1.,t oi:ie ":'·to. k'1 Revenu!J..tr~~:p;e~:_,·'/._f!J'finso.n & .So(I; Inc.:,. G.f:?: -No...
~··· ·mak.~perno~s conduq!ing_bus.in~~~~~rifl"t·.e.cft'y{8t 1~..:1 12.710s, Jw?fH2sf:7999J,.. . . . . : · .
<Jr,· . . Ma.!11la coritr1bute to "?'.ty·n::1v.en.u_es1._,{9')"by'1~e
J. ·
t:L ·, " . ·..
58~';1 . , ·. .
taxing aut~o,rity- petiijoi:iet ,Clty·.of lv1;f!'lil.a;;~)with.in . 1:, ,,."49'h~fal· . Double Taxation ,:- happens wlwn ~n ·
.· . : . . '. · . ". . . . .
~. · ~~- s~n:i~ taxin~· J~r!sdicuah· _·:wi(nirttr.i'e"'ter~,~9~:!g:'!!i!!H,.~::.:..~~JJ·iropose

*~.
<} · ·: 1un~d!ct1<:>n. of.. the City of M~nila:. (5):JP!.. thE(~·ame. .
taxing penoas ·-:- per c~lehdar ·year; af>!<h,lqj,1of.the
".(' . Sa.!l'I~·. ,J<ind· or 'c;baracter -:- a kical· bllsii:fess· tax
. . impos~d.·ongross.~ales:orreceiptsoftfle'.busfness' .> :, . .
a..tax that is·a1reai:ly'im,posed _by
. me Natlo':'al _Gov~~m~,:.i~or by a.nother L<3U·that
· . has . terntor,a!. ·1unsd1c:t1on . ov.er' .;such .Lqu .
. · ·. (RECALDE, supra at'66)... :. · ·
,t .• : ··- ·:' .... ·. .
·.
.
!..; .(Niir'sf#ry· Care ·Corp. ·:v. · Ac.e,/ijdo :and.,the City of· ·To avoid-."loc'aJ· double t.aication,'.'.Congress preven,ts
l::· .. Mani/a, G.R . .'p.lo:.. 180651, July .3(!, 2014).. ·. ·, .. _. ., .: J.Q!J.s . fto.m imp9sJng taS<es. : which · are - alraa(!y
· · · · · · imposed · by the National· Government .'.'unless
~:...: . 2... : !ndirect Oupfi~at.;Ta,cation I BrQai·sense .:...i1f otherwise proVid~ in tlie, l,.ocar Goverrirnent Code.'·
.._ .·. ·extend~ to.ci'II ca~e~::fn whi!3h·the.r~:is a burden of T~is )imitation, knoWrt as the pre-emption rule, is
f ·· · tw~. or more Q~quniary imp~sitions: :f°t'is usually. co~111on. to all 1.p.us (/d. affj6). . ·
l> .
·.,:'\;!'.·..
allowe·d ·as long as· 'there 'is no. violatkin· of ,the
ecqyalt;tpr.?t!:)C(tV:iEaNndc·
onL· yniformity .clause~ of .the.
. .
Thhe. PhJlipPi.!Jed .. tatx' sy.sl.tdem::p~~vj~es.t·hf~r·h.certah. !n.
:. ons I ut1on . '.A .• IA & ROXAS,· s'upraa.t 31).. · sc emes in o.r er o avo or min1m1ze e· ars or
"'· . ·. . .. . . . . . . . . t?i.i'rdensome Sffe'cts Of'clc:i'uble· laxation: ·Thei"rneans,: .
; . ·Examples:. : .. ·. . .· ·.. . .· , . . . h'owever, de'pei)d orf.whether'ther~· is:·ihterriational
a
. . ·a_.· 'A ja)(upo~ cc;:iri:>.oratio_n·foi' its property. and double taxation or loca~ cio\,Jble taxation :(id_. at 65).
·· · upo~·ii:;; .shareholder~ for thei'r,sha're.s;. ·· . .. · · · ... .. · ··
b. ,A tax upon·.the samer prope,rty irryposed by. Mod.es ·ot Re-lieffrom·P.9uble Taxati~n~ (C.REDT)
· two·differentstates; and · · ·.· · .. ·. ·· 1. ·. Ti?ix·g,redits.::. an·~rriount.is subtracted·fro·m an··
c .. · A. tax on a .mortgE!gE; as personal prcipertY. · indivi~ua'I · q~ e~~ity's · tax li~~ili~y ·to arrive ·af the ·
. and upon ·th~ mortgaged property as real . total. tax .hab1hfy· · (Commtss1oner· of. Internal
. estate (Id:). ·. : . · . · R_evenue y.:~.entra/'Lµzon. Drug Corp., GR. No.
15964'7, April 15, Z()()q): · ' . · .. ·.

~ .2ois SA~ BEDA LAW. CENTRALIZED

. . . . . .BAR OPERATldNs 1 21
 GEN ERAL··PRl-r'1·c:I P.LES
._... SAN DEOA 1..AWCfNTRALIZ£DBAR OPERATIONS,- MEMORY AID.2019
= a PMHIM iw
2. ,Be.duction of thePhlllpplne Income Tax Rate the· latter- (Cbfrimissioner: of Internal Revenue v.
- .<In example is the Tax Sparing· Rulewheretn . S. C. JofJrlson ·& Son Inc., G:R. No. 1271.05, ·June
the· 'dividend earned by a. non-resident foreign . 25, _ 199.9).
'corpqration'. (NRFC) withi~·- the Philippines -is
reduced "by ,m·p.osing a. lower rate of.15% (in' lieu. BIR Cannot Impose Additional 'Requirements
of the 3Q%), on the.ccndition.that thecountryto In Deutsche Bank. AG Manila·. Branch vs.
Which the. NRFC is domiciled shall allow a credit Commissioner. ·of tmerne: Revenue, the [Supreme]
iiigainst th~ tax due from the NRFC, which taxes . Court cateqoricatly held that the BIR should not
are deemed to have been paid in tn_e.P!°)ilippii:ies. : impose additional requirements that would negate
(NIRC; · .sec, 28(8)(5)-{b)); ·.commis$loner ··of· · · th~ avai!ment · of tJ,e reliefs prov.ided. for 'under
totemet. Revenue K· Procter & Gamble, G.R. 'No. international agreements,. especially slnca.sald tax
L-66838,. Qet~rilber-2_, 199.1).> -, . . .. treaties po· not provide tot c!OY prerequisite at all for
3. Tax, ·gxempfioils.· :_·freedom; · -immunity, or . the availrneht of the-benefits under s.ai.d aqreernents.
priv_ilege fi:'om .the 9ui;den 'cf taxation to which. :· It bears reiterating thalthe application for a.Iaxjreaty
.. others are subjected (ABA.N,supra/it '1-18.~120) .. · ' relief from the _BIR should· merely operate to 'conflrm
4 .. ·.Tax.·Qe"cfu~ti~ns., the amount of tax i~·written off-, . th.e entitlement of tne ..taxpayer to the ·relief (CBK
· . or. treated f'IS d~ductio~ fr9m . an Jnd)~ld_,V~.b~Po~""'
·• entity's gross income on .which th~f,U~tmg
:alT)ourit- .the . tax liability _j,~C?lo~l~M \
lf-·J i.o~p)-A-:
-',Cqrrjpany ;_ Liinit~d · vs. -Commissioner ot
fiJ{e_rparr-1~f!::(enue,GR Nos. 19338~-84;Jenuery 14,
if'-·. : · · t: ..• '.:· .• •
(Commissioner of lntema( R-e~enc(e.· v~} ~Ji)l/at="=~~-!, -V ~--- . , : ·: · · ·.
Luzon Dri:Jg<(;orp., G.~. No,./i~64}i;:/,M!ril.'.~-~.!'..Pst·fa~r~~ !'I ..rt·i~n clause in Tax Treaties .
200?). · ._ . : . · · /,:.;-~~?.it""'.. •.--... ~I:". Tne'j:jt1~P,0S'~~of ~'rqb.st favore.d. natio'!l .clause. is to
5.. Tax Ireaties- ---: ar:i agre'e,~.f~ ;et~een· ~wt'.>. h{- ~~t· to \the\co~JJr,adu,g· party tr~atment not less
· · · . co.untries speci.fyfngwhat{tems1f1nc·oir,e wm lfe ~ f~orable\han}~€it,~p\ct.i ha's.been or may be.granted
: faxed by the authorities, ~ftt_b.e c9untry v.\!hg[§_t_b~_.fr::'~?,Q ihe_'.'.m~st fav\>~~~·-"a\nong · other countries. It is
, . income is ~ar-ned ·(Air qp_"tJ9~lf- ·qom'.fn7s~~{}lil~-J~jd'l );OJ~.r,i.e...eftto ~st~pJist:i,~tf,le .p_ri~~ipl~1.of equa_li~ of
.. ..of Internal Revenue; _G1 ff.·"7ira. fl1
?9.507~ Janul!¥~:Jl!,U ri9A~n~llo,. al trea1.'Je·~~"'.f~..,Prov1d1~g th·at the ~1t1zens

'. ' . 11, 2016) .. ·. · , . ·

· .: · ,· ·:"~ \ · . r':·
·?, ~:{'\,-.,.
Met~od.s. ~esorted .to. b¥;_a\ 6fiJ~taty1~<_9~er
Yr~J'r·- ·:. t,,g
= ~fil.Jl]b:q. s0ubJej S;Qf the:j~nl~lrJrn~.nat~ons may. enioy the.
.,..2.:;;;:;;SP.JJYJ.le.Q~~~o~dl!ifl bk!Jrt1"1er,._party to tl"!o$e_ of-!he
pl'<J!l,;tf".~d- ,.t.ti!lll'. (('omm_;S~ron.,. of lntOma/
El_ln:unate Double."fa-xat1on \. . \_. ,t.. . · :--.; ·· <t~~Y,,P.!J~V.-
~irst Mefhod: An exql~~~ve ri!!}ht to ta~ is-.c~~7r-~~-. · .I :.J9.cffifilf5,·.J1:1ne·25f
f c.... .Jc/fms_o,:i. & ·..Son ._./nc.r .G,R.
Jj9~9). · < ... · .: . ·. ·
,n one of the contracting state\·<howe~er, ·t?7o'trf~ _\7 ··. f; ~ · ·· · . · · ..
. _i~~r(·i°s·Of inc·o_rne.or.ca~ital, both~tes_.a~':!i_~Ve~jll~'f~f'\b> /~- -'.· · . ~ : .. , · . ·_.: .·,> -· '·
. ~19~t .to. ta.~·althougbJhe am_oupt .?f\JaxJ~\:i-t~f~.9.~--·. . . .-~~~ .. . . -~ . .. . · .. · . . ·... _. , .
rm posed ~Y .Jh~ -st8;te of sou_rce. ,_s.h~1.ter;f(R.S~L-OE;'~·~~: ,!{~_l,1'J}A°l'IO ~ S ··o F. 'f,A~~ ..'J;l ON .
s~pra _at 6~}_:". · ·., :_· ~ .. · .. : .- _ . · , . :':'~ '~.' · -~ »-~"".""'. _ ·_~ :.- . :. ·~'. . . .. :," . ·.. · . i· .
'second -Method: The.state·;of source is given a full · While·the State has an· 'inter.est in swift coilection of
; or_ Ii mite~ right" to tax· "toge~her.. ~(tli. the· state. of . · · th~. tro<, _its po~er fo"tax.is by no,rrl~an·s.:8P$O.lute.. The
.residence. In .this case,·the.tr"l:laty m;;i~es it i-ncum.be.nt · power-of tax.ati91,;~nomatter h.ow Yig·oroµs it.may.be·,
. \JPOl'.l tt:ie-state.9f residenq_e·to. allow relief· lri :order.t~. · b_as lts. Jimit~ti.ons.. ,S!,lch llm.itations ·A}ay eith.er· be
avoid double ta_.xation (Id. at 6_pJ66): . . .-.... , · · ·. , _. inherent in the e~ercise.of the po~er iJ~elf or imposed
· · · .{ . by th.~.Cbnsutulion ·(RECj\LDE;.supr~ at 2?V . .
Two Ways\inder the Second Method; ·: . ... . .
1. . Exen'lptjon Method. -· ihe in.come · .or caP,i!al, !nh~re!lt and c·~-n~titutlqnalllmit~tl~~s _.'
which is:taxat;,le i!=I the state ·of.sol,!rce or situs, is. · .. · lnhes:e!lt Liijlitatl.ons: (PINES) ·.
· exempt .',r-i -.the· ·state of residenc;e, although ,n . · t:. ,eub_li_c.Purpose;.··.
·'some instances it may be. ta_ken into- a9count. fn ·. · 2. ,!iiterriatiorial·Cdmity:;·
1
..
.. · det~rrriJl']ir:ig. the. rate .of tax ,applicaole .. ~o, the . ·3; .. N_c;>n~delegability,ofthe i~xing. power;·. . . · ·
· taxpayer's·.r?maini':19· incbme or ·capital:: (This . ·ll-_.· gxempti6n of the G~.vernJne~t;_and ·
. l'Jll:lY'.be don:e.by usir;ig the tax d$du9tio·o m~thod, . 5.· . ··§it1;1s orTerri_toriality (ABAN,·sup~-at ~3). ~
which allows ·.foreign. income . taxes to . be . . ·. . . . ; . . . . . . . '
. . . : .... de.duded from gro~s income, in e'ffeqt, exe·mptlng . . Constitutlo.nal-Umi°t~tion~ : . .· . . ·
the pa.yi'nentir~m peing furrher·taxed). The focu!> 1. Ge,:ieral.-or J11direct: (DENR F.P2J) ·.
. · ' here i~. on the incqm~ or capital it~elf(/d.. at 160). · a. Qu·e process; ... · ·. ·. ·.· ·: · · . ·
. 2: .. The Cr.edit Method ...., alt.hough ·t!Je· income or b. _!;qual protection;·· . · · .. .
. capital; Which is taxed In the state·ot so.urce,.is . · c: 'N,ori-impaimien~,of.oblig~tions of contract;
· · · ·sfilLtaxablEfirr tffe ·state. ofresi"dencei tli'e .t~x p~iid d. ·Religious. freedom , . · .. · . .
' iR fhe·former is Crf;dited-agains°t t~e tax levied-in.. e, . freedom. Of.S~eech,;lncf'.expressipn;

22 2o'1e sAN sEo~ LAW c:ENTRAuz:Eo BAR OPERAT10Ns ·_.-·

 r·

I
,. ~'li!IIIID ... ar:.. lllli ..
~rz~l-,r!IIZllllmlll8llllllml= ... ml:IZSlmll .. ~.mz~IMllllmRallllll::SZ~... lllil.. ""'·IISlllll:la11111azs1111111 .. :ailmmlF.i!!'~::i!'::
o>;::

r.. GEN.ERAL ·PRlNCIPLE·S

~;.· lld*:'!h,·. eli¥ffflti¥& WM~ BED~ lA: CENTRAL~.:: BAR OPE~ Tl~~: ::.::::::~U~;:: iii

.! ·
[
'»:... .
f. fresidential .power 'to grant . reprieves,
commutations and pardons, and rernlt.Ilnes:
Publlc use. is -, no IOn!Jer confined to the traditional
notion of use'bY, the public, but held synonymous with .

.,· . .·
,. ·
.and forfeitures· ··after 'convictlon by. final.
. judgment; .
. g: . 'Law-making frocess; and
. ..
.
.

h.. No .taking_ of private property without Just

public interest, , public· benefit, public- welfare, and .
.public .conv,enience . (commtseioner . of. Internal ..
Revenu_e v.. Central Luzon Drug .,Corp,, G.R. No.
· ·. 159647, ,April 15, 2005).'· ·

I ... . . ·:. compensanon.

";'.; . '· : ·5.
. . . ·, ' .

·-r.ts'.> · ·-. a. frb~ibititonf·ag1a1.tin'st.imprisonment for· non-

n
f· .
· · · ·· paymen o · po . ax;
b. frngressive.'~ystem of taxation;
... .
·.fl: · ·. · · · ... (P··~u· ·0· SER·.VJ.A ,. ·· .
2. ' pee, c or Dlrect: .: T · . IL)· ... ·

.
Thh~ ·hphra9,e.has no~ been broadened tob·coveruses
:w re
a(·2d0v1a5
redound .to. the ·general P.U lie indirect

:. .
~;~g~
14o9r .(CRUZ, ·.Constitutional Law
. 'h p. . - 1~e0~e~it
v 1..
. . . . .
,.''j. · , C;. :·. ![nlfor.m1ty.and,.'equal\ty Of taxation; . . lt-is 'the ~ssential character of 'ii).~
·.dfre·ct:~bj~~t the qf,
f · · d. · Dele~ated adthorilyt .of . the President to expendlture.' -whicl). rnust-. determine its ·validity.·
,;,· -'·... . impose. Iariff .' rates.: import. and' export : . 'Incidental advantaqetothepubllc or the State, w~ich.
,,:·_.;'. : :' quotas, tonnage'~nclwharfage:dues'(i=tex!ble . results from the promotion. of private interests, does
[ft · 'Fari~_qlause); -, · · · . . . · . · · not.justify their aid tiy the· \.js~. o_f · public. mo11ey
~2.-,· e. Qtigin . of. revenue . and. tariff . bills and .. .(Philippine. Coconut Federation; lnc., Jr. Republic,
I ·
approorlations; · · · · ·· ..· · ··. ·G.R. No.177857-58,.Janaaiy 24, 2012).
r. Prohibition on use of tax levi~d 'for .§pe.ci~h.·,;a . . . · . , : . · · . ·
~{ . . .. ·pu'rP.o'se';,· · . · · · .'. · · _ · :. · /Jv::«.-·)..· The· legislature .rr:iay ,determine within reasonaJ?le
· g. Votes required fo grant tax §xerriptions·t~,/"l11;~-1 'ii bo!,Jnds what is necessary for.· its .protection and
: h. · T:ax ex.emption -~fJ~~eligious, charitab\e;fa·?,c;l,"!_i-;,~(Iexp~~ient- for .t.~~ ."·Pt.Om~tion. qt. pul;)li.c i~terest.
. .. _eauc.altonal enb_tiesi
I.· • ·Pres19ent'.s Yeto power; .
j. · Non;itnpaitrnent · ot
. ·
. .. ". 0
Supr~l'Jl~/Go.urt'~· f
.
j.
y·t:J ~r:;·
j,,,1,J1 .. /-;{S112,~f!AN(';,?xatJon
-A-B~~:i}
·.· l''i. ·
Law Rev1ew.,p, f}) [hereinafter
. .
.
: .. .
· ·..
.
..,
. · .' Jurisdiction;··. · - . . ··: .\'.;( ,i ,(s;::i · Hpwevf!r, ·tl~if\wifl .. not .prevent .th.e' court from
: . k. · Non-Appropriation~r use·of P.~i~li¢;9.19.l)ey,..for ltJ. <1uestic;:>':'in(;fi.~'11-Rropryetyof· such a ··~tc1tute on tne
.· religiousi::i.~:Poses;_. :- ;...:{1!. l~~~: · .. -'i,. Qro_und_.tl)Jit.fe\aw.-.enacted is·:n~t . tor a·public
.. i_. .. · Non-t.a~a!'·litY, , . of ... ?~~stockl. tr·~on°profi.\, fr.t
py.rp.~se~,t"out nce~t ,s. settled. lh~t tt,e .'law is ·for .a
. e.duca_t,onal·!nstit1;1tioi~~nw.~,1;-..- .· rq,... · ·~\J' .pubh9,-pww,..os,....1· .:;m~;,2PY.rlma~ h~ 1on_ger. inquire into.
· · . f!l.·. bG!--l's power to crea(~ its _ow,tt::-:spurce,s~p.f. ~·.' ·the wis~:!~~{~xpegiencyor n.ecess·tx .of· such tax
: .... · ·1~v~nu_e.(ld:.a;f66)._.. ~.~~)Sf$\,-_v-_-y . f}J'.~eas1.1r~'7DIMM~PAQ, s_upra_.at.47).... ·.. ·: · . : · ..
1.'. INHE~ENT LIMJT}htONS : -~ ?\.· · }?.) . ·
r:-1,Jtf.~:~,-~.an~-be·.readily. employed· agah1st _one .class of
,· Those whiy~ · ·~roce~d fro·rri· the. yery.~fifJtJlfe.~f... ~~::·il!f''.h9dl~"'f,illil~~-f~~or .of another so· as. to..rvin on~ clas~
taxing ·power· ,t,seJf. ·.They· are otherWise· kno~"'as . ·. ·ana 9Jve:un11m1ted weal~h and pr.opertyJo another, if
eleroents, tenets, · or characteristjcs(\o.{ f,.fxation . ··there. iS no implied. ,limitatiOI'! dn the· use.~ for whicli
(DIMMMPAO,supr~·at 45). · · : · · · ~<-to-~.._.·. . . . s.uch taxing . ri.0W1;1r may be exercis!Jd·· (1 '.DIZON,·
..... ·. ·· ·. . .. : . ·. . .' : ' : ..... · - ·. · · . ·· 'Taxatiqri ·.' J,,avy . GompeodiJJ,m.· '(2()13), ' p... 92)
. ,: . A violation of.tHese inherentJirnitat(t;ms.can· amount to · [hereinafter,-i'bJZONJ.·. · .. , . . .
i~·. · the tclkirig .Of pi-op~rty With~ut··due prbcess .of Iciw · . . . . . . .. · ·· ..
ft"· (P.ep$i-9qlaBottliTJg. Qo .. it.· Muniqjpalityof Tana.u'a~,, · ·.·The ·l~gislat_ure is· .wi~o1,1,t p_ow.erto. ~ppro"priafe pubHo
l'l'.: · Leyte, G.'R. N.~- L-.31156,February 2-7; _1976). F:fence, · . cfeven\,1es f.or .anything, but. .a ·pubhc p_urpose.. It .'is
'V. in' tht.s, sense, :.it car:i · be ·s~fd.: that ·any· tax Jc1w.· . ·robbery if it is.approprlated·-tor private purpo~e (Id.).
c~ntra~ening any limitat1qn of taxation; .In e'fte~t,:will. -"' :' · .· . · ..
··. m~_ewise be ·uncon~tltu.tronal (VITUG ·.& AGO$tf\, ·, :i-,he levy is f<;)~:~_public purp~~e'·if:· ·:: .' ..... . · ·
iupra at·5).· :' ·· , ·· ' · .1.. It-is fqr the·welfare ·of the ·oa.tion.:or greater
. . · portion ·of · the popul~tion (VALENCIJt & .
a .. · ·Public·PI.Jrpose. . .. ..·····. ROX7fS, supra ilt .6); ·,.. . .,
Th'e te{'m. "public ·µurpos.~·: I~ nof·defin.ed. · H is an <
2. It-affects the area as a comrritinity .rather than-·
elastic coricept'.thafcari ·be. t1ammered·to:tit mocl~rn. ~- as individuals (V/TUG &:ACOSTA; ~upra at
.stand;ud's:·Juri~pruden.c:e.states.thaf"public.purpbse", · · ·· 5}; or · ·. · : · · , · · · ·. · ... ·
should be· given a. tfiOa.d interpretation: Jt dOes not ... · · 3 .. ~ rt ·is designea to· suppdrt the ·ser'ViceS ·Of tHe
~,; .. only pe'i'tain'to those-purposes which are traa\tionally. · ... : .·· gover,nir1ent-:·for :~ome ·.ot' the' ,recegnized
;; . yiewed as· e~sentially goi.femr:nental flJnCti_01'1$(SUCfl· ··. . · objects ·a.f the c·ountry:(/d.}.·. . .
I~·:: . as t;,ul[ding·roadS and·:c1eJiVery, Of ·baSiC Se[VfCeS, .but ., ' ,,
" ' ~l~O 'inclUcili)S ·tt:iose purpose.s <lesigne9. to ·promote
t'.' . · social · justice (Pfanters. Products, Inc. · ii. fertiphi/
.- Corp.,
. G.R.. No.. 166006,
3 . .March ·14;"2008).-..
t,.'
.,
).··
~
·. 2019 SAN' 13,EDA 'LAW .C.ENTRALIZED BAR'OPERATIONS ·1 ~3
..,... l
;:.,
 GENE:RAL PRfNC]PLES
SAN"Bf.OA_t:Aw;ct.NTRA(IZE_D
BAR QPE~T-IONS ::},1EMORYAID 201? .
. a1wiwM• MiilWA& au Sib ,w.cm, ff iJMWM&?iaih

.·tests.to Determine Public Purpose: . . international law (DIMAAMPAO, . supra at.

. 1·.- · :o':-'tY test - ;,..;l,ether the thing· to -be furthered : 5i). .
by the appropriation of r:>"ub.lic revenue -is 2.- .· Income derived from investments in the ..
something which is the.duty of the State as a_-. Philippin·e in Joans, stocks; bonds or other
governme.nt to provide (ABAN, supra at 53); 'domestic securities, or . from interest on
an.d . '. . . . . deposits in banks in __the Phil"ippi_nes. by: (i)
2. .Promoti9n_· of Generai Welfa~e. Test"-'-.. foreign .. ·governments, (ii) . "fina_ncing_ ..
whether the proceeds of the tax will directly. institutions. owned, controlled or enjoying
· promote the welfar.e. of. the -cornmunlty "in ""refinancing from. foreign gbve~nme11ts, and
equal "measure. (id,),. . . . . . . (iii) . international or . r:egional .· ..financial
' . . institutions ·. established by . - foreign
. it. I~ the. Pl!rpo~~ ~hlch dete~ni\nes the public goverrimerits"" is exempt from: income Jax
character -,of the. tax. la~-. not the number of persons. ., .. · (NIRC, as. amended ·by. TRA/f\J, Sec.
benefited . .As long asthe ultlmateresult favors the. · . . .· 32(!3)(7)(a)). · · · · ·.. . · ·.. . ..
welfare of. the publi~ in g-eneral, thE:1 appropriation Is · 3. Dlpfomatie and Consular-representatlves are
dE:i_e~ed donefor:a pu_~licpurpose'(a.g._20~'dfsci:n~nt -: · . ~- exempt from .paying -the :-. community tax
pnv,lege for eentor citizen:;; as mandated by -~J)!W:.~=--~ {LGC, sec. "1.59). ·
. _G_!tizens' A~t) (D"IMAAMF?AO; supr« at 47)~:r.;._~ ·. 1f
'T --J'\ y. ~- . . . __ : .. : · .. ·. · ..
· . · ', . _ ·. . <?t-,. ~ -'!..~ U!n~er fint~rfla..t1onal laws, foreign embassies -are
Public purpose , must e_x1st at . t~~·~~e\ P-;:!.~;,x-":'~..:'c}"OR~.l~er.eft,l~ei<te~ions - of · the . territoriality· of: the
. enactment of the law. levying t~~ !a~,..ar afipr~i;>_r:ia1i~g . . fore1g~tiifes,i~\ll'lilposetaxes upon them would be
· funds n f!~ZON, sapra at_ 95j... /;:.,/'"~Y.._P._..,~~"3.~niam0.u~t:Jrn .~\l,rcise q{ juriadtcticn. over these ·
Cases.of Public- Purp(!~E:1:-.(~.r.8-Bl.it~~flRffbSE)JP)· Ji
f_2~ign s\\tes·¥p.fMA~'.¥.PAO, supra at 5~). . .
· 1. _eubJic improvement;/ . 'J · 1
. · .,0 ·· \\ (r '); 't .. · · · · ··
2. · Unemployment reliefh--.... Jl ·· · nQGB~~~~-.Qf.l,_he·R~e.J. \ • · , .
3, §uilding·s and_ roa.ds£fi;;1tiJI(tllicture;;i . ,~it---,.,
! H, t__,~~ D~c~ri?~l 9-f"':Soy~reigri_. Equality -:-" -"~tales
4. Sub~idies· for bocal,oli~·(arce.$u~der. ~-·' ,:_ ·': • -~ . a e Jund1~~qLa1, e~Jo~. the ~am~ n~hts.:
. _6~12 (~n Act f,men. ;,1~'f!aih Prq,_y[sio:iso~l~ · ~.,..~v.eJe~u~J {capacity -m. their exercise.
.· R.A. 4869..:.. An Aqt uth9dzing ~/;/~F.'}~s1det1["<Z:J=S~fG · nng1p~1;JJ.1.~s 1~. r_oots.tn t~e r:ul,e of par
I
to . Oblai,n . For:;1ign't Q;t>a~~c1~'&t.idit,~ ·. /jfJ..-7 re_i!f ri"o&'fff1b:~t 1mpe_nu'!1 (as. :1Jetween
Neces_sa·,:y l9' F1,:iancf(A_ppr. },le~'Yl{~iasW.
_}:(!_1~. ·. ·, ~~g(J~ls}phere_ .!S.',tlO sover:e1gn) .(ld.). : _ .

5.
Purposes_o_rPro1ects),,. ... .·
ln_dustries Ql.assified ·as~tRdispensable . n
.
·r~~ I
~"'-,. . ~~. / ..
~. f . ·. · · .
D~pctnne__ of,7Sov?re1gn·)mhlµmty - It IS ~he
.
P0.1987, (An /kt _Cteatin,g t(le .'0~o~'f.~~ :pte,.. of.. 1,12,ternatton_a_l _ law, that·~ ·t;ore1~n
· RegufatoryBoardj, as·ame1iqe~r~~"92-3.@.:.~.:-,,,,~-C\o~i"r-u~nt .m~y not be_ sued ·w1t~out its
· (Optical lvfedia.. Act of 2003); ·-,~f'U1 ~ . _· i ~,~'!--.SP'P~Y't.T_h.us,
-· 1t wo.uld be·useless to 1mpos~
_.6.·- ,g_o_~str~_c_tion0f -~om~ s.ite~, .. : ·-~ _'' .. J\l!_r-.\ -~ ~pta)(,_-Wh1c_h_could not ·_be col_le~ted . (Alf
7. _Rr.oihotiori of sc1ence·arrd invention; · · ~~ ..,.,.,,~;~..-,-ra_nsport_at1onOffice v. Sps. Da_1!1d,.G.R.·No .. ,
B: ypfiftrrjent ·of'the :1mderprivilege.d; . 159102, February-23,, 2011 J.
.9.. .Behabilitation- of.the sug_a~ industry; . . . .:·, · · ·, -
10.,fensions to-de~erving·retirees; : . ·.'.. C:": ~on--del~.gation_ of Taxing'Power:- " .,
-11.· Qil industry's protectiqn;: · · . . General : Rule: .· Delefrata,. potestas pon· p~test"
,12. ·$ociaiiie·ahoLiSing;:"ancl: ·. · ·. · · :· · · '. _ . · · c:. delE;gare ~a del~gate·d_ p_owl3r . cannot. b~. further
. 13, .gducation'.al·sub$i.dy (DIMAAMPAO; supra ·at . . . :<;f'ele~at~d)'. ~in.ce_ the·power of taxatioFJ, is:a-_power
·. ... · 48):. · .' · · ' · · · .~ · .. ,. · . ·lhat 1s !=!~e:cJ~ed ~Y Gongr~ss as delegates: oUhe
· ·., · · · p~ople, therr · as a general rule, ,Congress· cQuld- not
b.: International C~trilty . re-delegate-this d~legate_d power(VI.TµG:"&ACOSTA,
UFJder intern-a_tior:,al comity, 3 state must recognize the· . . .supra at 11-;: . . . . ·. · . . .. '. -
generally accepted .tenets of intem"ational-law, some of . . . .- . .
which·, ·are thpse that limit the authority . of· the Ba"s.is:: Delegated pbw~r- constitutes.'not -only a right-·
·. ·government fa effectively impos~ taxe~ on:~ sovereign . . . but also ~-. du(y ta.. be ,perfo"rrne"d by 't!ie delegate·
state.· and its. · instrumentalities ·'(VITUG ~ ·ACOSTA,. thrPugh. the· ir:istrumental)1Y 'of his own-Judgment and .
·supra at "11)." . . · · ... ·._ nofthrbugh tl")e intE:rvening mind of another.· . ·..

IHus~r~tion: : .. . the followii,g .. m~tters. cannot be" ,.·delegated . by. :

. ·1. · If ~ tax J.aw _is .pass'ed· 1mpos,ng taxes on .the Co~re~ ..•.. ·. .
. income "of foreign _ambassadors· or·imp.o~ing-
. real prop_erty tax upo'n foreign -ernba'ssies, it.
<
i..· Selectiqn· :of property. or.. transaction ·ta be
> ·faxed; . . . . . .. . .
. is not a valid Jaw because the . imposititin.is in it Qetermination of pur"poses;
violation·. of the un!vers!:11 _principl_es· of: iii. Rate of-taxation·; and

. . .
24 I: 2019 SAN BEDA l.!AWCENTRALIZE:q BAR OPERA,:-10NS
 GENERAL PRIN.ClP·LE·S;_
· SAi!/ BED4 LAWCENTRALIZEQB,<\R OPERATIONS- M_EMOIJY.AID_2-oi9

iv. · Rule's of taxatlori (ABAKADA-Guro·ParlyList d.. ~~emption ofthe Gov,er"nment · : :

y, Ermita, G.R. · No.· 168056; September 1, The Inherent limftatloiT · of axemptton
:2005).. . goyemment from tax covers; .
. I. Governrnent entitles.-
· .. Exceptions:"(PAL) , . . .. . ii.·· ·Governrn_entaqencles; and
· 1: . 'D1:1legation· to. the fr.esident - delegation of: · . iii. Government mstrurnentantles.
·-~~ ,• . . .
·. a: :Iar-iff powers by C,ongress under the · Government .Entities of . the
(~oyernm~nt
_flexible · tariff clause (CONST. Ad.. VI, Republic ·of the Phlllppir'u~s) · .
'. · Sec. 28(2))";.and; · · It refers to the corporate gov~rnmenf~I. entity through
· , -, -b. · gmergency: powers (CONST. Art. VI, which the functions of the. gol(E;Jrnmen~.a.re exercised
·Sec.- 23 (2)) · ,lhrQughout the Philippines; including, save. 'as the
contrary appears from the. context,' ·tti.e varlous arms ·
.· 2. · .. Delegation· to ~dmfnist~atiye .age.ncies ~ also· . through which the political· authority is. made effective
. known. ·as the power of '. ·sµbordfnate. . In . the. Philippines; . whether. ·Ae.rtaining . to . the
: . IE;Jg~slafion,.sLitijectto the f~Uowing-tests: ' autonomous regions, the· provincial,' city, municipal. or. :
.... 'a.. Corrfple{e'n'ess.'T~st i: .the _law must -be · baranqay" subdivisions or other forms of.' local .
· .... · 'complete in:a11· its essential terms and . · government '(REV. ADM. .CODE, Sec. 2): ·. . · ·
·· . condltlcns' When it leaves the, l{;?Qislature . . . . . .· . ·. . . . .
· · so th;:it"the'r~ wiff be nothing· left for the-<:) Reason: Properties .. of the national qovernment as
... ··:~e1egafe .fo .do when it" reaches ~!W,'.';;., well as those of the.local government units are .NOT.
/ . . except· to .enforce i.t (G_RU'z., Ph/li£pifr<f.'.,·,'.>~s~bject to tax, otherwise, it will result ln the absurd ·
:, . · · PoliticalLaw,(20,14), p. f76). . . ~'f'"i/''·f::1.,J situation- of the govemment,"taki(lg:money,from one
~· in
' b. · Sufficient St~ndard Test-:- tht: _la~,,ru~(~;:~:';.:;P?,~f~/.!!,nd p_t;ifting i( enother" ~erice, it would n«;>t -.
;_~-Y_:·_.·. · · ·offer a sufficient standard to s~~«;lfY. tt.i~j {::~be"'-Se.Ji.Yfil!P~fpurpose · of taxation. (COOLEY, on
f ·· lim)ts ·of. t~e deJeg'ate;srt!a!,!thtiritY,~ f.1 . Taxalioh;Sadr §21, 4th ed. as cited in Social ~ecurity
t· ... anno~,nc.elegi~!ative · P?l.i~t{'a!(d. speciJ~1-f System Ii: c;f()Jo~f3ac.o/od~ :G.R No:L-35726,July 21, .
E- .. _-pond1t1ons ·under wh1c~:{~11.>l1,,i:ir.,.b9:.l,·e !)' 1982)... ·
i
/1 ;, t- · . ·
r . . . , _ · .' < : . . .
~-

~
... ·,mple_mentEi~ {Id. at 1Z8J..-,·... /tr{::-
, ·. · ·t
· 11; · · .. · ll \\ : ·
>·;;7:°.. . 1·~-'Z>. . -~ t~ ·. As.'a·mai~r _of?pub\!{p~_l_i_cy,p~operty ~!,th~ Sfat¢.an?
·, 3. D~leg~t1~~ ·. to- _,!;;oca~'?P~nf.:~t.·-\~e._
· · ·. .
.9f_ 1ts-1f.l:iJ;!P~<?'P.~1,.P~:1tJ.~!¥!~!.onsdevpted to govern.ment
i'· · Co11stit~tion _grants, e~n_t.;Gtl _4:h~~ow~~·:}P 1 r;,,~
til u$es aiiQjz~f.Pr·C>fe,~_Jfg_~n_erall{de_ern~d:t~ ~e_e~empt ..
t . c_re.~te its own_ sources 'Q,k-.r.~~~)i,and"le/Py·1(1J fro~ taxatiof!_LaJ~no1,1_gh·no express. prov1~1on- m .-the .
ffi· ... · tai:<.es, fee~ F.lnd.. charg~s • .y~fcl'i"_sti~)!-a~.cr.:tiel'I.
I ·
,i. ·
~xcltisively·to.the LGU (CP~sr. A'r:l_JX Sec. }_,',··r·fi':Jf~: . · .
q.. · · :
law ,s l'!'ade·therefor.(51 Am. Jur,_503}. .
. ·. ·
:. · ·_·. · . i'r.;;P.' :,.,.~·::""-':'4~1/~tJ~s~uti_ny~f_ 'the defi~ition ·-of "go_ve~rment- ·
. · · .· · , .
· .. ·.

·i ..... ·. _.' . . .· _ ·. _-. 1.·.

<_' . ,- . °,J.(ii"r-:':''--' ow~<f'or"'controlledco~porati_oi:i" in Set:!ion 2 (13) of
l f: Mur,1c1pal·corporat1ons,funhke sovete1b9:Jtat¢.s~ are. · ·the .Local Government Cod~·(LC;iC}. will i;how _that
,':,· · clothed witW-no inherent power"of taxatiot1~l't'.eharter
~f '. ·o(a statute:mu~ cleariy ihow· ~IJ,intent i:g cq_nferthat
. Manii~ ·fnti:!rnatiqnal . Airpo.rt Autho,rity· (MIAA) \IVOUld
·not fall u'nder su·ch ·defin1t10.n, MJAA i~ aigo"vernnient
>:· _pqwer .or the· municipal corporation- cannot. assume ··instrumentality": Under· th·e:·LGC, "local gq'{"ernmant
~-;_ . an'd e:X:erclse. it, aii.d. that· any s.uctl" p6wer, grante9 units have. "no ppwer.- to· ~ax- ,inslrumentalit1es of the
:.i: · mu~t · ~e. cpnstruep strictly; ~ny .douqt or :a~bigujty national gove:rnment · l!ke_, l'vllAA:· F~rthermor.e, tli.e
}:". arisi_n·g··trom. the terms of the ·grant .to be· resol:yed ·.: . . . ai~port Jands ~nd buildings_·o.f ly\lAA .a.re.Jitopen,iesot
~fl': against the· rriul)rcipality. (Ferrer; Jr.,· v'. B?titista, ·G.R.. . , public dominion lntend~d ,for: pu_bliq-use,.arid as-such
·<.- . loJo. -210551:, JurJe ·30, · 2015). · : ' · · · · . ~ire exernpt from,rea! p~operty ta).(_.under Section .-234
1;_( . . . . . ·.,' . , . -~ . {a)_of the Local Goverf'!ment Cqde". Howe._yet, unper.
.:; . Limitations.of ttie Exceptio'ns:. · .· the·same 'provisio.~;ifMIM l~ases it~ reaJ·property to.
t. · · · . 1 ... ;The. delegation. shall not contravene· any a taxcjble p~rson, · the·. ~pecifiy . property le.ased
-;/,"' ..... : · con'stitutional ··pro·vi~io'ns or. -lr1h~rent becomes subject to. real property tax.· In this· cas·e:
-~ , · . liniit?tions; . . · .· . . · . . only those·· p.orti~ns of the NAIA fasay. properties ·
2.· .- The.: (!elegation is: effecled. either by the.· · whl.cfi are le.ased .to taxabfe persons. like' p'rivate
'. · . Cb!'JS!ih.ition Qr·by validly e'oacted" legislative· - . parties are subject to" rea1·.property·tax· by·the City of .
: · ·. · measurtits or statutes; arid·. " ,· . . P.as~Y..(Mtict'aneCebu lntemationa/ Ai,porl.Aµ{hority._
'. . ~3., ·:Tl"ie 'delegated !~vy po;;_,er; ·excep, whe·ff tt,e (MCIAAFY- · City of L'apu-Lap1,rnndPaca.fdo; G.R, No.
· ···l:lelegation is "by an express provision 'of the . 181756; June 15, 201-5). ·
Constitution itself,· should -only· ba. in favor of
tbe local legislative -~dy .of -11:ie ·.. local· or
municipal government ·concerr:ied· (VITUG '&
A~OSTA, supra a_t 9). . . .. · . . ·

~ois SAN SEDA .LA w CENTRALIZED.BAR OPERATIONS ·1 25 · ·

. . '.·.. . . : .. . . . . .·
,.
 l
SAN -BWA LAW CENTRALIZED BAR OPERATIONS -. MEMORY AID-20(9· ·
IWMM16tt Ail aa?1AMM&·aFSfiwHM &4± 'RM¥$! EIMW~"*' HP
' .. . . . .
Government Agencies . . Note:. Real property; even if owned by the Republic
It refers to any of Jhe varioup units of the goverrtment, or any of its political subdlvisions; may still be subject
. including. .a · depa"rtment, · bµr.eau,- · . office; .to real property tax if the beneficial use 'ot the ·r~al .
instrumentality; 6r government-owned or controlled property was- granteci to a. taxable person. /Manila ·
corporation {GOCCs), or a local government or a · Int'/. Airport Authority v. Goud of- App~als, G.R. NQ.. ,
-district unit therein (REV. ADM COD(=; Sec. 2). ·. . 155650,.July 20; 2006). :·. ·

· Taxability of Gove.rnine~tAgeflcies: . . . Government-Owned qr Controlled Corporations

. ,. 1 .. · Agencies performing gov1;irnmental functions_ ·(~OCCs). . ..
·ar.e exempt.from tax unless expreS$1y taxed ... · . Refers to 'any agency:
-2.:". Agencies. performing proprietary functions: · 1. · Organized as . a- stock or- 'non-stock.
. are 'subject-to.tax.unless.exp'resslY,exem'pte_d. corporation; . , .. . .·
. ·.... (QiMAAMP~O, supra f;J( -66).-' :· . :2'. Vested ."wi!h . functions -rel~_ting · .to ·. publlc
. needs, whether governmental or proprietary
· : ln_strurmfr1tali.ty of'.~he Gov.e(nrrient... . in nature: and · .·. .'.
It refers to ·any agency of the National Govern.ment, ·J ... Ovyne~ by .the· G9vernment directty through .
not integrated within the department frame_wor:kp?"=~-- its· Jnstrumentalities. either who_lly, 'or where
vested with Special functions or jurisdictipn<16.y1aw,
endowed with some if. not all· corP.9~~~ p'h4w~r~.
YU""J~ ,·":'·:·"'=ar;,.plic~ble. as . in the ca~~- of stock
I. -.\ :_r:ofoo(~tjo"ns,to the extent of at least 51% of
adrninlsterinq speci~I funds, and e'n~rri9:.0~~~!!9J;1ar"~-.,.....,,~~~1tf~ar:i1taJ1:;stoc_k (REV. ADM. CODE, Sec. _2).
.autonorny, usually through a cb~r.ter~{Ri!W ADM.· """"'..-·'F. b'l-:"l,,.. it.'ooAc~· · ,
CODE, Se.c.2).:.
..
.Example·s·. . ·
. · . .· .
..
· 1·
r ,.
_':y/~· ....--,"'"''· j1o "' -a:X-a ..i.11~,o)\-... .
/.,t;.?._"°'1.,f'/_
" 'Y.# Ii 1· 11
T~
?.~~
-~["- J\v90?0\IS~§.~~~~~):~ubJe?t
_ .ii. fdJiowmgjilre n~subJe~tto income tax-..
. . . .· .
to tax, e~cept that the

_. 1_. Ph.ifippihe F.ish~ries/4e~·1qlmentk_l.l!t1.P ..rHy,· / .:.~_1_. _Gp.\:'er~l-~~~~vice insurance Syst~m

; (PFDA) (Philippinemijk:_efTe,· De.i/'t-l-Au(gp(,i.t¥, ~~..,?- ,·~- f(}S!S), ·\~.,.~~ \ . . . .
· v. The Municfpa!ity#of 'K!af!,otas, (i. R>{Jlo ~ ~, '?¥2· Sf?!al ~~if~ntY::SY~tem (SSS), . . . : .:
. . 1_50~01, Octob~r2,l£?tV~*nd. --:i\ .· l!!J·~_.,ijjjjT'i:,j3_ ,,h~p'.n~~~e=J1r.. Insurance Corporation
2. ty'lanila lntem_ationalt-,1[.poittW,.ot(%!~{M!-Mffi- -·· ~(~(;), .cjpd,· _. JI.,. . , • ·
· The SC held that the~.r~~1:Jf}~0pertl~s:\1..n;MI. ·. J?l ;4f~~~,j(Wler~!('cts:(L~DSJ. . ·.... . .
are owned by the Natl~na! l3,Rver'r3~~~a
thus. -exempt from ~eal e~ate ~}~
,~~rte tj,Y1;i.J'RAt l;aw, pcso·was.included
..ram:6'.'a]_;,tfie t~exemp,!)'entitiesun9er Sec. 27, par (c) ..
. ?ons1dered . MIAA ~~ 8 't9pverpfl'l~r.l-~.;:~ ...uant t~{('h'e am1:-:,li'~n;ient,}he inco.me of PCSO .is
ms!rument~hty ~n'iler ?~c\,.133~o)_B~~~-~~E.timdw(s'°uhject.,.to
which prov1d~s that exer.cts~ of:il;~~'t~.1.9-_g,~S.e~\af,(;ccJ}( · . ,
'as
ta# (NIRC ·amended. by TRAIN,
. ~- · . · ,
powers .._.shall nae extend" ~~~e~won=_;=~i b--·~/\. v~-- ·. ._. . .
-"t~es; fees or ch~i'~','}S- ?f -a_ny'.~&__d\Ji:(_tftel\if~t(!.te'~Mactan Cebu lnter(laiionalAi;p?rl Authority .
~ati.onf:)I_ g~~err.iment, . its agenc!~>,;~~"'::"'-....,..;~,1b,-Mafcos, ~-R. No. ,120082, September.-11, -1996,
1ri~tr~mentallb~s al'ld.-.local:government !Jrnts · . . MCI.AA. w.as._considered-:as a GOCC. and thus··not
4Manila Int'/. Airpprl Authority v. Court-of ·.· exempt from.real ~i'°opl'lrty tax .. : <:· · · . · · · . ·•
· Appea·/$, G.R. No: 155650,,Ju/y-20, 2006):· ··- , · ·' · ·
.. ··. · · ·. Hdwe~er;_this-da~sificatiol') ,,.;as .revisite'tiirl" Mact~;;.
· Re°a$6ns ·for'.·the Rule.·on. Exemptioii: . . Gebu JrifellJ.?fionai Airpor{_Authority"y. •.City ofLapu-·
. . 1;.· Sothatthe·function.s.dfth_El,g.overnmenfshqll . ·Japu,· G.R. ·No: ·1817!56, June ·15, ·2015 where the
riot be unduly impedep· (51 /1,,:h .• Jur. :550-:-51 ).;_ · Supreme· -~ouit . neld · that ·. MCI.AA·. is: ·-n-ot. a
:and . - . . ., •. . . . . government-owned' or . corttrolied. corpqration :under .
. .2. 'To· r!:?dl!ce. the amount of nione'y th_at ha'S to Se<::tion -2'{1,3) :of ·the ·introductory Provisions ·of the .
' be handled by tile. government in the course Administrative·<;::9de beicau:~~it is not o'rgar.iized as .a·.
of i!s ..operatio,ris (Maceda v .. :Macaraig,· G.R. · · sJoe~. or.. non•stock . ccirporati"o('i.:· Neither "Js Mc"lM. a·
.· No. 88291; Jumi 8,, · 199.3).· .. govemment-.owned -or_.controJle<;I co.rporation ·.uride-r
· NIRC,
0 · · · · .Section 16, Article XII of :the..· 19.87 Constitution .'
Pursuan~ to th~ ~revisions-of: t.he the ·National. . . .becau.se"·"MiAA is .not required<to -meet the test of ..
: Government.may levy income tax upoh corporations, . .·ecci'nornjc 'viabilitY: ·.·M.CIAA ·. is·. -~.. government: ' -
agencies and instrumentalities. owned or, coritrolied· · . · i11strutn_entality vesteg· wi_th - c;orpofate,·powers -'and
by_the gove_mment subject to exceptio11~ as provjde_d:. . . · per'fo~ii:ig ·essenti~I: public ·-services pµrsua~t, to ·
therein (NIRC, Sec. 27(CJ)>However, intome'derived · ·S:ectic:in 2(10)" of the Jnt"roductbry·Prdvisloris of the ·
· bythe govemrnentfrom any pu_blic utility ahcl from the Administrative. : ·Cod~. · As · · a:. ·governm.er:it .
exercise of.any essential governmental functions are- . instrumentality, MCIAA is not·subject to a1w·kind of
exem~t from income ta_x (NIR·c, Sec. 32(B)(7)(bf . . tax by local govemrnents undefSection 133(0) of the
·· · · · · ·· ,. · ·. · · · · · LOC~I GoVernmentCode~
,,
26 2019 SAN' SEDA LAW CENTRALIZED B.A.R.OPERATIONS
 - Afi:!W IA

. GENERAL ·PRl·NCJ PLEs·.

SAN BE:DA LAW.CENTRALIZED'BAROPERATioNS- ·M£MOflYAiD.:ioi9
M IWWW ISHi.. .9 . . . . & .. WWW . . RI I

N'ote: Section .'13 of PD 1869 states that 'payment' of Situs of Subjects.of Tax: -
. the 5°,Hranchise.tax.by·PAGCOR and tts.contractees 1-.. Pars ons :·_ · poll, captteuon, or community .
and licensees exempts them from payment of any taxes .are based· upon. the resldence of the
. other · - taxes, · including · corporate. income tax taxpayer, regardless of
thesource of income
· (Blop,riberry Resorts and notete Inc. vs. EJIR,: G.R. or location qf the property of the taxpayer .. - .,,-,
No. 212930,'August 1-0; 201~). ..:· · 2. · Property . . .
a. Real property - lex rei sita~ or lex situs.
Unless otherwise .provlded herein; the exercise· of the ·. (where the property is located): . . .
taxing powers ofprovlnces, cities, munic)palities;and b. : Tanqible ·personal· property · - where
baranqays. shall not 'extend to the levy of "the · · the: property .. is · physicatly 'located
,altho~gh the. owner resides in another ·
fcillowing:"x xx (o) )'axes, fees or charges of ·any" kind
jurisdiction (51 Arri. Jur. 457). · . .
on -the.· National -Goverhment, tts aqencies and:
c, _Intangible personal prcperty-« ......
insti'"Qrnentc1liti~s. and ·ioca1·· gov:ernitlent .unit$ (i.Gf, "". Ge·n-1nar . 'Rule: . M9bilia . sequiimur · .
s~_c. i-;J3). : · '- · · '
.• personetn (movables fbll_ow -~h~ person): ..
. ,· ~ · The .siius is the··domicile of the. owner: .
. e.:.. ' 'Terrltori:iillty
·. - ,• . .
or Situs·pt"Ta~atiori.
. . ..
·. · _.(A.BAN,-"supra·a(59j: . · · ·· ·

S~tusof Taxatlon · ·. . . ·. :· . . . ,..,_ ·' · · e.xcepti~ns';· . · .· ~ , ·

It rs a1eyf known as place: of ta_xatlon. (ABA(I/, s~pra (caL-).J i. · Franchise, exercised in ( the
~7). _It is .,the place pr author!ty _th__at ~as th~·. ng~t.;-, o;~.!'~ · . ·· Philippines: .. ·. . . · .
:,
(
_impose ·and coJlect tax?..s (Comm1ss~o9 .. er _of lr:1_te1?ff~. ; :) . · ii. ~har~s of sto.ck, otill~_ationsi b~tJds · ·.
.:

'"..... Revenue v. Maru_ben,- C?rp., G.R... _No .. f3{ff•,. /';'.J .: . ., ·. 1_$su~ by. domestic c.~rpor~tu~~s
~f:·. Depember 18,.2001). . . . · . . _/,! 1_,;;,!· ,i-;~'7?>--;_ ..(~ .org_amzed · ~nd.. -~on_s~1tute? _ill
· · : · . .. . .. .._.,,..../f./ _,.,,,.\!) Ir(".'- ~---.~d3t"f._,,.,(_ accordance ry1th Ph1hppme laws;
[· Gene_ral Rule: . ~ stat\3 may not tax ..,PT<?!:'!:!r,IY lying. !1 ·..
outsidE:J its ·borders·or l~y '_al} excise ?!,(P~vile~~
u~n the P.inrcl!:;o·or enJoym_ent of a ri_Of~~·P:PJ1le{(e
tf~
I .·
D ·.
·
· i:'} Si1ares. 0b.lig'atjon·s, QO,nds i.ss1..1~d by
/U.'3
!/- ~: ~ ..
forei~~- cforpo~atio~ where
bu?mess . 1s. · located· m ' the ·.
~5% of.

ir-:
_clenved . frol'!l the laws of- anoth!;:f.;:\'fate ·ift~;M}ere1n EA ·. . ·jf ~~· '.~1hppmes. Jt 1s_ subject to donor'~·
~xercisad or enjoyed.(5¥ Am. rff.!r'."~87~~8J.~ '. .?:, \t{l · . -~ .· ', :· ta\and·es-ta~~ t~x; ·. . : .
: · .· ,· . · · · \·:-"77- ~-~. ~--. f':"l: t~0:":"1¥":'7·""".,~-~-~?,s_.,_ob11gation.~_._bonds. issued
.
w.- . Reasons:·
·-
··, · . . · · ,,i[. . .._,.,.;2-!). · a;)
. : · 1,." taxing.power·of!"l·cou·ntry"1.s-Jiro_§.r:'J.to per-_s~"n- r'.~f .
('d · . ~&,-~;~.?:b~foreign_ corpor?-t1ons which has·.
··.; ... ~ ..acquired busine~s situs, when euch ·.
iw:.·.· ,
· . and property .. within an{li_(~ut:,jet:f' to 'its . ~/.
1urisdiction'(DIMAAM.PAO,""su,Jt;a at!~2);.and: )/?;')-;-~'-'-. ·.
. - . · · have l;)e.f)n use.d m .the furt_hei:.ance of
·. the pusines~ · ·of· ... the. ~foreign
(4a_X,v,-suprpd!i!' .

l
"";(, Berief.its-Protection"theory .-> ,,-..,t/'Jcr":Q : corporation; and . . .. . .
:. i). · · · .: · · . · .i'''{ If} · · · ·. ' · v. · St,a_re/s rig~t~ in. ~ p~rtner~h!P.
~> · _·. · ·.. ~?~.. ,_,,Jf . ._busme.~s ?r ~ndustry establ_lshed m-
.l;xc~pt_ion.s:
· · ·. .: ,.. .
:.
.· · . .
. . ·
~ .....,J
, ..
... · ·tt,e Ph1hppmes (DIMAAMPAO,supra ·
t · · · ·
~.
.. 1: · W.here" tax" laws. .op~rate
outside· territori"al a 54:.55).. · ' . . · · ·: .. ·
· · ·juriSdi~ti<~J"n (J<ilj~ or ·. · : . : · : · . ·. ~
I
n;. ..
·exam·~le: Taxatior:i. of resident- citizens· and:
~.·: ' ·· . . ) ·
3.. Income -.F.~ctors that deter.mine the ·situs of
··

do.·m~_suc.corp_6rat1q11s. 9n tlieir inc.om~ trom_ ·incom~ t~=--<y~~wwP> · ·. : . : · '. . :. . .

,.;
ff'. · . a.. · Natio~ality or&_i_tizens.hip of.the-taxpayer~
. .·,.' sourc;e.s WilhOUt the .Philippines.. .. . . b: .. fiesideFJ"CEf or domiqi_le· .(;if the taxpayer;
[t . 2. .Wh!3[0 ·tax - laws do . not. Ope.rate within. the ' '. and, · . · . · ,,..
~-- · -ter_ritorlal juril,>dictipn .of 11:)e state: -' . , , c: sour.ca of-the ·income:· . _ . .
-. a. · Whe.~ exemp\ed by.treaty Obligations; or · · ."•,.'. . i·.. -_Frpm sources Within the Philippine·s
~:
~ ... b.,. w(.ldh.)~.n .. er<empt~d !)y: i_ntemational coini.~· ..., all kinds of,taxpayers are:s.ubjecqo ·,

1
~·. - int;ome, tax "ori income "derived.' from .
~-.
~:
. · i
,. i=a~~rslh~t"De.~erml-;:ie:S~tus:·(K·P·~ICE)- .. : : :
sources witliin the Philippirles: · . · ·
~·· "ii:" F.r9rn · ... · sollr,c;es : Without" · _the
. 1 .': Kind.or cfasslficatlon-of the tax·being levied; Philippines .,.... .or,ily_ ·resi(lent. citizens
.(. 2::. ~itus
of the.thing or P,rop.erty ta~ed;·.. · · . and domestic corporations. ar!;l-liable
3. "Residence of the tax\:)ayer;. · .. · : . . to.income-tax. · . ." . . ·,_-
4. · ·. source ot the "!ii.come;· · · . iii. -fc.1rt.1y with.in and. pa_rt1y without the·
5. Qitiz_en_ship_ cit th·e taxpayer;- and · . · · ."P.hilippines . - : taxable · income
· ·s. · Sitµs of the §xcise, pr,i11ilege,· busin~ss· or attributable to· sources within the ·
%:_.· ·occupation-_being ~xed (A~AN,.supro ~t.61), . Phili"ppines · may be. ,determined by
.~ : ~ .. ·.. . . .. . . . . proce"sses· or forn:1i.1las ·of .general
.:
:
._ .

1: 20_~9 SAN-SEDA LAW'CENTRALiZEDBAR,OPE8AtlONS_ I 27

 .GENERAL :p·R-1 NClPLES
SAf"! 8EDA'0WCE/I/TRI\.LIZeD BAR OPERATIONS.··~·MEMORY)l'.io.201:9
.. ii - ti N r . isiiewlsus-ei s..;,iu
apportionment prescribed . by the 2) .Procedural due process .; requires.notlce
Se.cretary of Finance (NIRC, Sec ... . .. and hearing; or-at least an opportunltyto be
2~. . _heqrd (i.d.) ... _: · · · : . · .· : .

. 4 ... Excise or Privilege upon the p·erformance _M""st the adverse. party.alway~ be notified? .
. .of.an ~c~ or the erfgaging i.n a_n' occupation NO._ As a rule,' notice and. hearing ,or the· opportunity .
:-: depends upori _the place. wh~re. tt:ie act is'.. . to b~ heard- is necessary only · when expressly
· perfo·rmedor oqcupatior:i is ~ngaged in. It- is · required by law. VVl'\"er~ there is ho such requirement,
'not .upon the domicile of ihe person subject. · ;-n?tic_e·_··aricf .the -oppo_rfur:iity -to be__ ·beard are f~:-
to ·the excise nor upon. th~ pliysical-loca~ion -dlspensable (S~BA.BA_N,supraa( 9). · .
. . . ~
Ot1hE{prope.rtyand.in connection Witt) the a.ct
.. Y\,'J)il~the San"g_gun~ans.are required to. ci~ndtJ:ct public ..
or occupati9n t-axed·.-'(Allied. Thread· Ii. ·.City
. hearings prtorto the· enactment. ottax or.dinarices and
Mayor . of. Manila;: G..R'. '. No: L~4029.6,·
"NovelJlber21, 1-984)1 •
revenue measures, the':Natianal Legislature, the "on
· other hand; has the dtscretlon whether or" not they
Rule ~nsittis of·busiri~ss,tax: . .. wouldconduct publi?.heatiliQs·_before the, enactment
1. Sale of real _property.:.. where tt,e _Bl}~P!ffy~-f·'"~ 1°f~~t:
(L~c;_ Secs. 1:86 & 187).

2_ ~~l~t~~ ~;~~~:ie;; !!~Y~ \,,!/"·.""~L

0
perfected and· consumm~tE!1f..,._ .: · wW,~e~e [l?. ~~Pfic,~~.t~xati_ori .requ~res; (PTA)"
---:"'.'"~'!.~ T~~,l'hus\b.e~or.·.a B.~bh_? ~urpc~e;_ . .
· . .

3..: VA.T - the' place wh.eref(~~ti&idsa-'c:tfon._v".,~--.-::n:,~-.23. ~:(Qpci.S.~}b~t1.!r1~ Ierntonal-Junsd1ct1on; ~nd_

· · · · · : · ·. ,...- ~: 'v.;1r. ...--·""- ':><""«;:ff'\:..~lrJ¥ra,rmess, · or · :oppression · in

t-..:. · · 1_
made. (Comm,ss,'!ner~f;l!JJ_fl!f,._J!1-Rlv~ri~ey~ ~' -WT a'sse's~m~i:ll\\r. collection· (DIMAAMPAO
Amencan E:tepress fn,1~mat19ff.al,~,c., G.!R. : ~ If\\. \SW6) \
s~pia - · · ·· '
· No. _152609, June 29Jj1!).!j_5),f . ,r"\f~ · l · : . _'\ (f) \\ · · . . .- .
· . • ,· : 11.ttfrJ ·· . . -~sf'>-, ~~-~Q_µe,,1~ro·c~s~iii ."~e(.atioq doe~ not.raqutrs: ,.... ·· · ,
(Please-see 'fur:ther fls~fJ"§Sian-_on \'tHJ. .....,'.F _,::J~ -,. ~ qet~rmfn~ti~!!.:_,.,ih'fough judicial inquiry ·0f-.t~e· ·
.
. .
. · fr~. K · . .\ ~ -l?~;erty.ijtloJegt1jo·ta~ or the amount of tax·
-~-;
;ra~~~o~:c1~i~l~~7d.rt§f}).rop
. donor _to a d.oneel'i .)
~1jl;4'm b
._~ ~.
i-rJ:~---2:J~ ~~f~f~Afn~·-as ~~ ih~.a~_oun~.~f-the ·
·,-~~ ~r.orJ~eman.fer· of apport1on~ent (/9., -as
b._ From a decede_nf\to 111s \J,r~~a. ~/- {$:p(edjn·PepsfjCo/a Bottlif!Y Co. v. Mun., of
· subje_ct to ~axati?ll ih th~ sfat~whqre _fr · · • "'-· TalJpuari Lofo~ G.~. No.):.,-31156, Febrl!ary
- transterqr.,~ a c,ti;!:e~~(;)r_resid~~;,.~~l-EN""'\.e:;,x1~76J.l- . : . · . . -
Q. . Where thE1 property 1s ~~t~'.:k"'.15.~~e--~~:.._--,,,:#. • .
a non-re·sident.. (DIMAAMP~J:/:;-::i!!}f.1'at··-~i~hf~~~~
4' _j;'?' . ·. . .
#dti'e pro_cess cl:;ius.e 1s mvoked,-
67.J. · · ·. · · ,'-~~ ..£..•. iVl ¢s~~t.l"e~tg!!fft::iat.i_tis not a fixed rule but rathe·ra broad
·. .. · ·. · . · ~ , . · ~-~!!aedafd,there js a need for proof of:slJc.hp!,!rsoasiv.e
2'.: CONSTITUTIONAL:a UMITATiONS . · · .- :_char;;icter _as wo.uJd -lead .tc:i su_ch conc!usfon.. Th,e:
- ~oilstitutio.nal li.mitations .. are,·. provisions of the:.· _.1axin~.. po.wer."!ias, _a~t.h,<:Jrity to". rl)~ke_, re·ason~?.le
, .fundam._ental law 9f the Jal').d that rest.riet the supreme,· . class1t1c~t1ons .f?r ~.l!rposes ';)f· taxat1~~· tn~1:1u~ht1es
P,lenary, unlimited and· ._compreh:ensive power to tax. . re,~ul!mg .fr?.m. ~i~ghng .ol!t ?f o~I?. p~rt1~ula! class for_
by ·the ·state. As a rule: the Constitutfon.- does .not · ta~~tion :· or exemption·. do: ·.not :mfnng~ . any
create_.-ttie powert?:ta)(o~ the'Sta,te.-i'nstead, it simply· ·. ~~nstitut!onal limitatipn_. T~e·re~I ~st~t!?.indu~try is; by
defines··and. re9-u_lates: the exercise of _tax power.. in . !tself, i:l Cl?ISS ~nd can be -v~hdly treat~d. differently, .
. orp.er to·safeguard tile interest of affected taxpayers . fro_m oth_~r b_v~!ness:ente~p~1s~s.(Chamber of Real .
(VALEl'yC./A &_ROXAS,supra,at tit · . . ·· .-_ £state ·a_f)d Bw1der-s A~soc,,at,ons; -Inc_• .- v.. Romulo,-
. · · · · -, · , - ' · :_ G.R~ No. 160756.;·:ft.1.ar.ch9_,-?010). · · · · · · . · · .:
a: .General
. . ... or
. . 'lridir~ct
. Constitutionai
. .. Limitciti"ons
. .
. :.. .
lllust~ations of .Violaticins :~t ·-the i;:>ue Process
ctause:, · . · . : .· • .
i. Due Prt:u:ess Clause. -:: · ·. . . .
be
N? person sh_<_.ill · ~eprivedoflife;tiberlf or properly ·1: If; th~. _tax amour:iis . to a cbnfisc;ation·. o/
_ property; . · .· , .
w1(hout. due process of law (COI\IST,, Art Ill, Se¢. -1)".
. ~ . . . .. . 2. . If the, subject of confisc~tiords outside the
. Two Aspects of Dlu/~rocess: . . . .. • -: jurisdicti<?n 9f the t<!xing authority; · .
· . 1) '.'·$u_bstc1ntiv~tiue process - the tax stat~te 3. · If the law is impose~ ·for ~ purpose other than
mµst be within -the constituti6mi"i authority of · . a public purpose;
Con_gt~ss and that it must Ji~ tair,- just ·anc:i · 4. : If the· __ lciw _whi.ct1· is _appliea retroactively
· ·. _rea~onable (SABABAN, supra a_tB) .. - . · .. : : impos·es unjust and Qppressive faxes: ·or_ .

. · ..
· 28 J· 801~ _SAN. BEDA LAW CENTRALIZED BAR OPERATIO.NS
 GEN .'E"-JiAL.PRI-NCI PLES
... S/IN BE.DA.LAW CEN~RALIZED !IA8 OPERATIONS - M£MORY AID 2019
..
5. Where the law is· in violation .ot lnlierent Vertical Equity and Ho.rizontarEquity .
limitaiions.fABAN,
., . . supra
.. at 67-6.9). · Vertical· ~quity connotes'. a difference in the tax
treatment between those who are financially well-off
II. ii.· -". Equal· Protection ·Claus.a . and those who have relatively: less. It is fairly in
" .... nor $hall any person be denied the. equal relation to each taxpayer's ab!lity to pay the tax, .
protection of th~ lew" (C.ONSi. Art.· II/, ·Sec: 1~ ... . . . -: ..:.. '
.~'· Horizontalequity implies that those who· are similarly
L:~ Eq~ai· 'protection . rieilher. 'requlres equat rates· of . situated in life should be taxed similarly (R~CALDE,
(. . taxattorr On dlfferentclasses' of property, nor prohiblts · supm at·44-45),, ·
f -unequa] taxatfo·n·l,o long: as. the lnequallty-ls ·not.· iii. Freedom .of ~he· Press. · . · :
f: . based .:upon arbitrary classification, It merely requires
No:Jaw. shall be·. ·passed abridging -the· -freedom
.
of
·,
., . that all. persons (or property.iof tht( sarne . class) .
(' · s.ubjei:(ed. to such ·Jegisla~ionshall be. treated. alike,' -. ,speech, ~f expre.ssion, .or_the press • .or the right of the
! . under like.clrcurnsfances and condltlons, bothi1 tiie . .,. · ·peOJ:)le- .. peacea.bly ~ t6 as$embJe. and' .·petition- ·the
t :· ·.priviieges. 'cooferred .and ·in:. tt,e. liabili,ie·s . Imposed ', · govern111ent for redress Of'grieva{1ces (CONST., Art ..
/JI, Sec. 4)~ : ·· . ·
f. (Cooley, as cited in-Sison, Jr. v. Ancheta, G,R:No .. L- r

;, 5~431, July 25,.1~84).. .. . .. · .. · .. . ·. . Four primary reasons' why freedom of·:expression- is

t·
i.
. . . .
Abs~lute .. Equ~l.i_tl(, Not·R~qulred · ..
. , · . · ,-,: ·
'essential to a·tree society; : .· ': . . ·...
· .. 1. It isthe foundation of self-fulfillment; · ·
:' ....

;. ' ~ra.~tical equality- is .constitutional equ_~lltY.:.Ther; J!,~).i 2. If is vital to the attainment and advancement
,. no .1.mpe_ratiy~ r_equi~~ment. !hat t_axati_on: sha~:-'}?f7;( ~\. . of knowledge: . · · :
. absolutely equ'.al .(~llv1AAMPA supra at 86). · (. 9,_ ~·:t\>.t ? . 3. · 1t. · is necessarx· . to · our ..sys~e·rn _of self-
?· · .' · · . . · · · . ·, , , .1,:'.·.,./ ..~· · · gov.~mment-; and, . ' . ·
20 . T:he ·e~m~!:· pr_otection clau.~e· may be. v1ol!~~)'t ~?\,(;~
;~":~4-.-;J.f(pf9vi(:les .. a ".chec)<~ ·ag_alnst . p~ssible
;,·. 'tw<n~ays~·
r..
. .. . : . . .._,,,..,;P'_ "'t.;t
1. When. cla~s1fi~tlo~ _is mad7.;:;~Ber: !h:ril_jj- ..
lr:~.,_, .! ..
. ·
gch,~inmenf.corr1.:1ption and· excess,· wf:ijch
see1·\to· .be: permanent features of the ·
-~ · st\ould ~e. non.e (1:e.;. "'!herr,'f''s~,fi~t:.!(~;;-~ .· hu({i n~conditfon (1 DIZON, supra at 162).
f,~·.·· do':s no~. re_sHt.~pon f.Ub~tanl!f:J,fdf,~!'!}fil!Pnsl, ~:') . · - . ·,; .11 . \ · .. . . . .
11,J Chiong })ftt·: f"!=!J?;.1.~b G.R_. ri
There is c,¢rtajflieotof press freedorrr.and freedom of.
1•
t·
l ·.
(Vi/legas_..v.
No. L-29645! No1:-em1ifto, 1i{~J;. Cir · ~
. ·2. Whe,:i cl?s;,1fi~t1?n.1?l.J~?11~.;!Pt;1,1,e.,.~en
r;.~
.thought jhd ~xj:)re\s.ro~ ff a tax is. ievied. in orc_ier. to
id
suppr,e5§1ctp~~~;o~;i~rights. and impose: a· prior
t~ substa~t19:I···. d1.stmc~lbJJ.,S;. ··e~J#b:1but;,t;P,P: .Y.:fJ resftainr~.tllst~~9J,&9i~en·sefee may __not be imposed
[ · cor:r;~sp~ndfng_cl_aSSlfiC~fll '7--f)!~pe
0~ t!')e. ~-(/ _on~~ pres's·~e_da~se it lays a _prior restraint on the
!· . b,as1s tt:ierl;lof (A~soc,attp(fI:-~of.}"'Gustoms t~1. exetc1se,. 9f its nght · (Tolentmo . v. Secretary of
~- Btokers,_ln_c.,, et.al ~~·The'M~~i_p,}Jl;Jo~rd,_)/..i7"Iif_~'?.,~fJ;_G.R':No·.115455; August.25, 1994). ,.~
f.> . _G.R. No. L,4375, _May 22, 19.!['JJ.Y . /t~1.~-f.:,;.if:<!_i!:,':-~~»j . · ·. · ·.. . · · .
f .. :. . . .. . . , .. . i:f1· . J.r,1:X". · · ---nie. if.~:. S\Jpr-e.rne Court hel~ ~hat t.o· apply .an
t" . _T_h~ \egi$la\iite, power_ to ~e.l~ct _sµbj~{~;.4?!:}:f~at_ion · · ordinance requirJng a ·business license. t? t,e· obtai!'led ..
ft-. and appor:tiol') the public ~burden_. .amo_pg,J·them be~or~~ p_ersor:u:~ould s~lt ne~spapers.in the s.tre_ets
f!· include.s th~i power to ..make classificatlo~s (Villegas- · would be to imposij:a priorrestt_aint .on~press fre~dom
ff . v: Hili .C_h_iong: tsai Pao ·H_o; ..G.R.. No;··L'-29646; bec~_use_a· news·~ap_er is ·n:qt·i!i -~he s~rn~· ~.ategory as .
~:· November 10, 1978).. ·a, pineapple, qr a ,soap powder, or a. pair of sh~es.
r.
~·
. . : . . . . . .·: · .·
.Requlsi!es for a· Valid_ Gla~sifieation~ (SAG~) .. · ..
·.. . whosejale.!]iay.~e condit!pri~d o_n the possession 6~
'. a business. Hcense·(F'eople -V.i.Kofl~s. 385 N, Y.S. 20 ·.
(. 1.- It must·be pased on Substantial distinctions; 474, ·1-9.76). · ·· · .-· · . · .
p} .: : . -2 ;·1t m~st ~pl:(· botf,~o. pr~~~nt ?nd._f~ture. · .· ., ·._: . . .. •.. ·. - . ·. ·.
Ii> .: conditions, .. . ·. . _. ,. . . . .. . . . ·. Separat~ s~le~ .tax ori newspapers with ~ir~u.lation ·of
I: :' .3.·· It ml!st oe Qermane- fo. the-purpo.~es of ~h~ ·.mier20,00Q imposed was a:de'fiberate and calculated
~:·. Jaw; anq . . . . .. . . ·. . . dEi~ic·e in-· the guise ,of tax to· limit the.. circuiatiqn of
I\'~ .4.: It must i:\pply J;qually to all members ·-0f the ·· info~matior.i to whicfr tlie pubJic is .entitled in· virtue of
i· -.
saml3. ciass (Ormoc_:.sugar Co. · v. Treasurer ... ·. tt)e· .Com;,ti~uti.onal: .. guarantees..'· (G;:ossjeao v.
B:. ,..of. Otmoc,.-G.R. No. L-2;3794, _February 17, : · Amf!!(ican Pr.ess, 2p.1 U:S. 233,' 1936). · ·
t\\:. . 1968): ·. ·. . .. , ; "' . . . . .Ho.,;_,ever, if the .fee imposed is n~ffor- thi,/exerclse .of
",:.·:.
..:: .· . .
Sub.stantial D!s.tinctlo.n .
.
. .
of. .
. . ? pr.iviJege b.ut only (or the pufpose of defraying,part
. . . . .

if! . .
Tl)e principle ·of .equality- admits, classific::ijtion- or· . of the co·srof registration (e.g. annual i'egist,:a.tion fee)
qist.inctior.i ~s long as. th~y .are· based· up~n real a!i.d or ~hen a tax ·is impq~,ed on the sa.r~:; bart~r. Jease or
sub.stant1al. differences . between. the . per.sons, . . . ~xcharig_e qf goods a.nd properties or services. pµrely.

t'f . . .
,;.i. -
. . ..
pro.perty.,_ <;>r ·privil_eg~s· (ABAN, supra at -7.0).. · for ·revenue purposes (e.g. \7A 1), the. ConstitutiQn is .
not 'violated (Tolentino.v: Secre.tary of-Finance,.. G.R.
·;No. 11"q455,:August-25, 1994). · .' . . .

1,: . 2019 S'AN .

SEDA LAW CENTRALIZ.ED BAR OPERATi°ONS I 29.
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 G.ENERAL ·pRfNCIPLES
SA!J BEDA LAW CENTRA~IZED ~ OPufATIONS:- M~MORYAID ·?019
WWI , wna .. +. PEMWII tfS_ffi@#ij

Freedom of elrculation, the unhampered dlstrlbution
- .of newspapers and other media" among -custcrnere
and among the ,general .public/may bE3 interferedwith
· in several-ways. _One ·of whlch include requi('ing the ..
paym·ent~--of_·a ..f.e_e or- tax, imposed ·either'· on ·1he
. publisher or
on the distributor, wlth the i_nte_nt to lim(t
· · or restrlctcjrculation .. This mode of !nterferirig with the
freedom -to circulate jias been· constanJly stricken
. down as unreasonable llmifation on press, freedom
. ; (Ch~vez v: Gonzales, .G. R. No: 168338, fef!>rU(l[Y :rs,
·. 20Q8). ·. . . ..
Society v:· City of.Manila; G.R. No. L-9637, April 30, ·
1957) .. · .
Not ·every impositio.n of tax, however, constitutes
curtallmentof religi9us freedom. The free exerciseot'
. reuqioncteuee does not prohtbttirnpcslnq a generally·
applicable 'sales and use tax on the sale of religious·
-rriaterials by a r.eligious· organizatipn.. vr«, which rs
nota license : tax but .a revenue . tax, is allowed ·
(T.oientlno..v-, Secretary'ofFinance, G.R:No .. 115455;
·- . O_ctober3(),. t995). : -

Thus'~ imposing -~.. licEinse; -t~x measured ·_by g_r_c;,ss... : : Income of Certain O_rganizations ..... , : · .; ' .
. . receipts for the privile.ge df:er19~ging in the buslnese ·.. · G.eneral Rule: Income lsexerript fr<1_rh taxation if the
• of advertlsinq fri..·any newspaper, or:ch~rging license :. followlnq i~ complied with: (N.ON) · ·• .: ·
fe:es for" the .privilege o(selling_.-reUgious books. ar.~~ ·:. . ·. . 1. . That it tsa Non~sto.i:,k corporation: . ·. ·
. · -lrripermlsslble . restraints . on the free~q~~fu·~~Orgc1ni~ed· .. and ope.rated exclusively. for
expressiqn ·(lg., citin'?i 'Grosje_air v:
~m.e,!!_~rit~e s L_J · 7 J\..[ l"
~igl~~;,. ~h.arit~b1e,· ~d_en_tlfi?, athletic · or
90.; 297 U.S. 233. (1936); fv!u_r_dock.;ffp~rinsi(.va'iJ!j3f-':=,.=~-~-....:.:.t q,~ra~and,soc1al welfare_purposes; ar:id·
., . 3~9··:v.s_.· J~5 (1943), ~rid Amf!_ri<#l)/BJ.bt°';t,;ef9.d!Jly:v . .:,,_r.,,, . · ~~o__g,~?t:),8\~theincome )~ures 'to the·.ben~fit
o!
. . _c~~y Mam/£!, 10_1__f=!h.~I: 386. ('!f?lJ':'f~~y~ ·$'. ~..,,,~- o~"qy'm_W~-~er,-qrgarnz~r_•. o~ any specific·
· · · · . . ./!. ,Qj . 7 .' [ __ ,, 1P) . ;y( l_.
)er5~_1i\.-(l::JlRq,_S~c. 30(E)).. .
lf.ha.s be~n ·held,·t:i_oweye_r, e:yen. in_';tf;ie-P~iJippi_he~ .• '.ti_' . ' . · t . \(- · \-. · · · · . .. ·. ·
th~t ·pl:!b.lis_hers and: di~tribu_~p~~~~-@~~!>~~g,~rs...,a.n.9 r/ ,( ~Exc~~!!..e.~: lnco~~l@~~c.h organizatlbns.-i~. taxabi~
. alh~d .media cann6! ?Pmplatn.-~M;f requir(~ t~-i~.Y.--=-111·,,. reg,~r91e:>~ of th~'i1i:JJ.Sf1JOSttlonmad~ ·of sue~ mcome 1f
or.d.mary taxes.suc.~.as·.t~e liafes!rr Tt:i~ etac.ttot~~!l.~~1ze~_f(om:
·val)d only When the ob_VIOUSq{l_m;J:'1~me91c!I ~effect•it~~-.1_.. ~-
. to .,e.5trict oppre.ssively ·th,\\ difu~4t1<), :\' {wt.kste<';'
. matt~r "(/d.),
. · . ,. · .
. ' . . -\\_ (}) ~' .: ~ :~~
. ' ~· . \: :· · ~ .. '~-. ~.:f:&,9
T---,f l. --JU . . .·.
wt
ffOQUCt1~i'us~ property, real or p~rso_nal
1,lipjonf",,-<!iY!,<'.~nd5.,.tnte,estsJ;o, .
. .
.. ,
J?,~2.f . · ri':efitalil'elm~1~ess pu_r~~its (Co1?7rni~sione_,: .
ln~,'ft,al RwenUE! V: Courf:.':'_f:Appeafs,
·.

i /.
. · 1v. -R~lig1ou5..Freedofl'i· ·. · .
· The: Constitutiorfpsovides f~r th te two ~,lll.st_si:5'~[~~
.· "\_:· · tf>, ·

. · ·1) . "No. Jaw - sh~JI. ~e -ma~· tesA9?;.(i,{1~~eJ!l~n,:.1-'est.·

.....;,.
·2:; . · . , .·. · · · : . · · . · .
~G.fi/No-,"124ifH~.O.etober_.. 14, 19.~8).·· ..
h · _.,/
· . · · ·· . · · · · ·. · .. · · '. ·
. . ·. ' e~t'ab{ishment of"reJigioh;. 'at- p~~i§Jytfg"'.l~~·~I\ o\;se.araUon -that . mlisf ):>~.. rr:ic:1i_nt'ained
·. . : . · · free _exerc~se there9f: - alsq'caQe""(f.f~.iro:n:'ii . (I' b'~t~i;!f\JBl6._0flijrchanq the siate !S: blurr1:1d, indistinct
·.. _. ·. e~!ab1ts~1nent.: .cta:u.sa: it·.· c~~~~]he 1Vlfn\i.\a1J~fire_ b~rri<c:r depending: on. a1_1 Aircumstarice9
... : .- .,, prohi!)ition to _establish a natiofi~i· <>.r o~iq"iw-.~o-f~cul~rrelatio·nship. The fol(6Wirig are. the! three
... .- - . reJiglori sJrice in-tti"a't case; ttiere woi.ild'hean . tes.ts'• to· .. assess.: 'whether 1:1·. law"·'·vJolates . ttie
apps'opriatlon:from taxes pa.id by ttfe P.Mple·' ·establishment "clatJse:' . · \ · , . . ..
: (CONST_.;'Art:.ii{Sec::°{?hani:J . '·:_- · . . . . <
: . ·. ·_.:·.1. Dees-the law ha.ve _secular purpos~? ._:. . .
2:). ''.'7:_ne· · free-· .}i~eicise ·ari_d : enjoyment _of , .2. · Is .the p"r.!mary e~ect either io advance
. . · _-relig{ou~(pr:_ofessi(?n)md.. worsf}iP,.. withou! . = , religiori or to inhi,bit-rerigiqri? .·. · ·. .
. discriminat1o? or ~r_et~rence~ sfialf.-(ote~en 3, ... Ooes Jhe · la'h'. · fo-~ter: . ~n·.: · ~xc.~~:sive
· · ...)~e .allow~d:" -:-=:Also calted th~·fr.ee·e~erclse , _:. · ·. governm.enta.1 entangle{Tlent ,with ·r~)lg_1on? ·
. '. !=!~u~~. w~iqhJs theb;i!$.i~·.oftax-exerripti~~~: (1-.P'iZON, citing L_emon v." Kurtzman,.:4.03
.·
g~a~ed_to r~_!igi<:?Lis ir:ist1t_t1tions (le!.). .
. . . . . ... . ..
· · US 602),.: · . .. · , :

· Th~· c-onsti.tLi"tional. guaranty of tt}~ tree exer.ci~e. ·and In 'order to pass qonstifutionaj mus~er.undei: tti~'.Non.- .
enjOY1T1.ent of_religiolls. PfO.feSSiOn and worship"'cafrie·s. Eslablishn:,ent' C::Jausei a.slatute: ... ·· ·. , . · -. · ·. :··
. · witl;l it t.he right to ~isseminate religi"9us in.forrn~tion ., . 1'. .Must hav.e i:l secular legislative purpose; . .
(INGLES," supra .af -12).·. · . , · . .. · . ." . . · 2: . ·'Must iiave··a· ·principai "6r prirnary ~ffect that :
.. n~i\t,er adv.ance.s·rior inhibits i"E:1ligion;· :: .. ':.
. Th~~; ~--~fru_n!~!pa11icen.~e-taxtiri.th~-~aie oft?lb;.~l.-~~? 3. :'· Must not foster an e~CE,}SSive·governmShtai".
. re!ig104s art1tles . by.· ~ non-stock,·. non-profit .. entangle·rr)ent'with religion (Id}.·' ··.. · ·
missionary org~oital'i'.on at nii(limal :pfofit-consiifut~~ ···.:
Cl!)'tailmeQt. Of , religious fre~~Oll1 : a~d worship \.

. _gu~rante~~ by : the .Constffutjon (Ame'r:ican Bible

30 I 2019 SAN BEDA . . LAW CENTRALIZED BAR OPERATIONS

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GE.NERAL,PRl"NCIPLES·
rlMIW':'•7UWW.:..1":*'i'wa+.IWt·:·amA.~:1~7TRALIZEO ~R OP~Tl=,j.-:EM::zr.::: dbl
"'414{.mB~
.·~~a~•
v. No· Taking of. P.r[vate. Property ~ithout:J~st' R.A .. No. 9334 'tailed tospecitically identify P.O. No.
Compensation (CONS_T. Art. /~I: Sec.{)) .1.590 (a special lawgover.riing the franchise of PAL).·
_as one of the acts ·)nf_endedto be repealed. Thus, the
Plea~-e 'reter to .' previous discussions on power of franchlsa .of PAL remalris the governing lawon- its
taxation as i'ln implement bf the power of eminent exernptton fromtaxes (Republic v. Phi/Jppin_e Airtines.,
domain. . .·· · · ·. • · . tnc., G;R. Nos. 209353-54, .. Ju/y 6, ·2015). · . ..
.,
. .;": . ·vt N~.n--lm'pairmen(Clause. . . . . . . lrripaJr~ent$ -. !:Ire perrnitted; provided that the ..
. Nolaw ·impairing )ha-obtigatio_nof contracts shall be leqlslatlon:' · . · · .. .
passed .(CqNST; Art .. JO, Sec. -10).. · 1. Must serve· important and legitimate pubitc ..
. . . interest; and . .. .. . . ' . . .
To·lmpak tl:fe.obligation ofa conlract is to .alter .or
· 2. Js . ·a reasonable . ·a.nc;l.. riarroi;<,lly ·t1:1ilored.
change .the terrhs Of effect ·Of. t_he:.cc;mtra.9t,'and thus means ' of -, _.prorn"otirig;. ·: that . interest
iii contemplation· oLJaw,. to. weaken the position or. (~ol?eriway ' Merchanqising · . Corp., ·. v -,
rjgh\S ohme· or. ail onh~ parties to it (ABA.N, sup~a at .
: Eqwtable PCI Bank, G:R. No. -.19554.Q,
·. 77);.. · ... ,.. . . . ·
_Alfarch 13, 2013). · .. · · ·
No~-lmpairmerit .'ci.au.se as a -Limltation to ·t-he ·
to
.: Power Tax . . . , . v.ii. -Law~Making Proces·s
. The non-lmpairmenr clauee becomes .a limitation .to. ,n, Ret1ui$.ite~: · : :· · ·.. · ·.
.th€! power to tax wtien· the taxpayer: enters into att>rl 1. · Bill. should . embrace · only 1 · . subject
. aqreernent with ttie govern'fnent.(SABABAN; Sf!pAf.'a{( '?- . . .. expr~s_se.din the !itle thereof; .
1,3): . . . .· · · . . . ·. · · · : (1,/1:",--:;'); . · .2: . M~st pass 3 ~e13d1n·gs_.o.n.3 separate days; :
. .. . . '; . .." · · : . · ·.. . : ·. · · \ t 'I'. ,, ·.;.1 3. Pnnted copJes in fina! ' form must be· ·
If applies only where one party is the Go~er'~~iit;•;'"-,-,f·.:r;r'_"'t,-:; di~~~l~utedto members of"tt)e House 3 days
-andthe other party, a· privateindlvidual (fi:/.}j::?" . ''\'.) [,('-'--:--41..:::z_n:ll!&feits. passage((!ONST;. Art. VI, ·sec..
. · · · /.y 11 .. · · · 26;-/®d , . . .
l· : . . .
·I'
Example·: A ta?C e_xehiption bi:is.eci\<{(,1·oontra'2t?;1 4. ·.. Prj~j~)~t -~hall 1he~eafter.·:sig·n or veto· the
ca1;mot. ~.e re_vpkecfby a later faxi~i:(~faJµ'!~z;:]'htfr'e ti' s~m~ ("(S.ON_S.T_. Art._ V~I,. Sec. 2!,)- . . ·
. ._,,~s ~n-. 1r:n~a1rment .or:the _coqt!~$t,:ei<lsW;~r-fl~Jwe·en.,~;~\ · ... ·. . ·.,~ ft . ' .· · ,· . · · .· ·
[- . the· ··plamt_1ff-c0rfc~ss1ona1r_e J1:i~..Od · . J!}e,w ·Spanif"°• :1) _v,11... Pres;,.t1.ent1~l\fo:wer. to .. Grant· Rt:_pneves,
~ · . Gpyer_nment::considering th?tu~oe1;-.;.saL~-~cr~:ncir) . · G'.~n'!r,:I~!~~~~D1'1~t;td Pardons ~nd. R~mit F~nes
' :· -t~x~.s _o·utside -oql)o~~ authorited, thEU~idicoul&fi~ ~-','~ an~·?-,r.f~t,tY~S)'after. ·Conviction by .Final
,, levied on. mining concessions ('tsascfneva.s{v. ·Hord [t} · Ju~gme11t0-- · . • · .- ,

~ G:R .. NQ. · 3473, Marr/h · 2~ ... 1 ~07; AB1Jfl:_s_µp_r.f1 at 9.4: · r;{ Ex.c~pt i~ qases . of i_mp_eachm~nt,_ ~r ?'s otherwise
,. 95):-. . · .. · .-.. · · . . ·.. fl~;y · : . J(1'?;Pff>f'fd~ in tt'le Cons~!tu~1on,_the Pres1den.tmay gr~mt.
, .: . _ . :. . . .; · : · . · ,' _ · ,1;,r.-_ ,- ,r4'.-;-;::..:;:;'c.:1:;.::r.~~lW-~!?f-''£0mm.1Jta~1ons;. and. par.d?~s, ··and ,!;emit.
~:·. · . Re~son: W.hen _tl"le S~ate.grant.5 an_.ex~/*1pt_io.~$b'the. . !mes !3nif · f(?_rf~1tu~':ls, .,..afte_r conv1ctron ·by final
i.._, ~a~!S Of a c_ontract,·eons1deratiorl'is pre~~..~e\:!)~.be . : . JUdgme.nt. ~.e sh~n alS(? have , the : p9w~r !.9. grant
{:. ·. . pa!d .. to )he State, a_nd the put,?Hc· .i~ suprdsea ·. to. . . . . amnesty._with .th~ ·concu_rr_enceof the rn_~JOflty.of. al.J.''
~:- re9e1ve. ·, the. .:: whole·. , equivalent. . therefrom . · the Members of the ~ongress-.(CONST.,Af!. VII, s.ecs
iv· . (DIMAAf'!f.P~c;,;supr.a_af.98). :·. ·., .... ,· ·· · .19). ·. · ·· ·. . ·.·. · · . · .
' . . .· .. ' . ~ ~ . . .. ' . . '
. Exc~ptioh$: - . ; : ,. ;. '. . . ·_-. . ' · . . . ' ,. . .. Please· fefer_to dlS<;USSiQflS Of} tax ·~rrin13~fY-.·."·
~ 1: . .Wl)en tlie. exe"i:npti~n.is ..(.niilaterally gniinted . : . . ; . . . . . < •• • .· . ··• . . ·.
· · by law. and the same.is wit!;Jdrawn by v.i_rtue .. · · b. Spec,flc.or D1rect,Constituttoria1·Limitation.
, of another law; · · · : · . · · : .- · · · . · ' '. · · ·· , ·
2, ,When ,th~, exeo:iptiori _is grante_d--,under a .i. ·.. Ta_xation_:sh.all ·be. U.niform.:an~t" ~quitable
·': franchise;· · · ·.. (C.ONST., _Art . .VI, Sec.- 28(1)). . ·· ··
3 .. , A: .'fran~hise: is . subject to. amendment, . .
. · alterat19n; ·or,re.pe);1!b'y:congress .when. the : Uniforlllity ~ . .
is
· cpmmon good . · s~ . .'rl;lquites .·(Philippine · . __A-tax '\mi.formin;applicatron''. if it operates with the
. l Aft:Wsement flhd- Gaming Corp: y. BtJreau of. . ~ame force. ~nd effect · in every_ place where : the
. lnterrJa} {xeveriue,· G.R. N9." 172087, · March s.u_bject _may. be -fc;i,,.md (Gpmmissioner of lnterrial
15, ·2011). 1 .··· • · . ~evenue v. Lfngayen Gulf.El.ectric P.ower'Co~; G.R.
.. . -. . , . .. . . . No: LQ2~7!1, Augµst.4, t988). lt.-rrieans that persons
Note: T!ie•. repe$! . or"-'c\meini:tment-":must . be orJhings ·belonging to the sa_ine cf?ss sh·a11 be taxed· .
·· · . expressly--._provi.dec:I (TaWflng ,tvtulti-Purpo$e · 1:1t.~he ~ame rate (CRUZ:,supra at 9Q).
Gooperafi'le v. La · Trinidad Water District,
G.R. no. 16647_1,. March 2?,. 2Q11)... : ·.. :

2019 SAN.SEDA LAyV. CENT8AL1ZED BAR OPERATIONS 31 ·

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 GEN.E.RAL P.RI N.CI Pl~Es.·
SAfo! B.EDA LAW CENTRAllZE/3 BAR OPERATIONS -_M£MORYA1f? 2019 ·

. l,lniformity, not Equality ·. iii. · Non~lmpr.isori.ment for Non;P.ayment of Poll

Reason: Th.e equal :prote.ction clause does not ' ·Tax (CONST.Art. ll(Sec. 20) .
require the universal. application of the- laws on 'all
persons wlthoutdlstinction. Thi·s might in. fact result in ' Poll tax· . . . ._ . .
unequal protection. \-Yhat ·ttie. c_l~!:JSe requires is: A poll _l!3X (or- persona.I or capitation tax).ls a·tax. of
equality. among equals.as determined ·according to a fixed anio"unt ori-indlvic:luals res!dlng _wi~hin_ a specified
· valid classificatioh--(Al;iAKADA-. Guro PaHy Jj,s( v.. · ... territory, whether citizens or not"; -Without t~gqrd to
. Ermita; GR. No: 168056, Seotember:t, 2005), . tneir prqperty_or th_e.-o_ccupation in which ~hey miy l:>e
· engaged (51. Am. Jur. 660, cited in Villanueva v. City
o,trer~_nt artlcles or. otier subjects ·:m~y- b~. taxecf at_:. oflloilo,.G.~. No_, L-26.521°; Qecember 2_a; 196(1) .
. different rates provided that the rate is_unif9rnron the.
same class· everywhere (City" of .Ba_guio v. De Leon, R~aso~: One cannot beimprlsened for ri6ri.:payrri°en~
G..R. No. ".L-24756, b~tober_3'1, 19p8J."· . . . . ofpofl·tax"be_cau$e payment thereof is not mandatory
.. . . - .. . . _(SABA_BAN,supra at J4). ·. . . \ ,- . .
Equitabili_ty .. · _;" · : . . .- .- · : · · · . · . · . . · . ._., · · ·' · .. · · .
Taxation lssaid to be equitable wl;len-ifs.burden fa~~ile_:·c:1 person may not be imprisorred'for .non-
ori u{9se·be~er-able to pay (.ABAN,.·supra_ahi9:2-):"Tt"ieir J P~Y!V~t~9! P?il tax,__ he m~y.-~e-·im_pris~n-ed for n~n~
progressive system of taxation would ~<iJ~str~s on \.I Jla~e.~'tqt,0-!t1er kinds ·of taxes -w_h~~e ·the law so.
qir_~ct-. t~es rather . th_an. i_ndir~~td'~x~1.A.f:~}9-~~-e~J{;§.Slyi~_t9-v~~~ (N/~9. $ec._ 255). . . '. . ·
example _1s the current md1v1?ual J1i.Qf'11~1~_;;s-yste~; ,._ . ~ :'-(·,.(,.z')?\ . . , . . ',
that imposes· rates _p~ogressmg/tpw((>l:ll~~,ttie~:fa~~ rfote,:~~~n:.~a_yme!J.f'§.f.po_lltax may.be penalized by
ff
base increases (VITUG & ACCJS:t..Ji~'j!Jra :t7). ]» · !'gine.. ~ecab:~_EF'j(.;is,1>,pnly imprisonment which. is .
. • ·.. • . . ..•. ·••.. ";?
Umf~rm1tyv.Equ1tab1hty ,Y;-.~J
~t .· ra , ' . - ,",
, ..:: -· fl·\_-'2~3
'ptbh'.bited~.by•'fl;;l€.q.fi~mutio"r:i (t RIZON, supre at
., ... \U: ·\\ . · · .. · ·_ .' .-' ._· .
· Uniformity in taxation r'neahg J!}ar p,er~9ns or. t.l)j~Q§..._ .1 ~~-?' ~ . \ to.....di ·,, ·. ·. · .,.. : .
, belonging to· the same claJls'~II~ be tax~d. a1~fh~"• i5Y,
~Orjg!fl of Retenliefo;r Tariff Bills , ·
. S?me r~te. (DJMAA_MP1·0. lu,g-cf~l 91),,.;.'f,t,ere ~"flk~~~.a~HSf[P,;i~ti~1J1.4.re~epu,e or : ~~jff _bills,·_ .. bills
d_~ffereflhati?n ~on1plained ~fipqnto~s-toy:i\~ra~bea~c:. ~tt.l0~~z,1~~:'JP.'f 'f!';[~e} ?1.tt:ie . ~ubhc c;l.ebt, -~1\ls. of
dictates of Justice. a~d e_quity~i!fo)i\t dik(F;~~t9rf.i &lo,q~l-~{~wat1m;f an~ p_nvate 1:!1lls shall_. originate
,withfr1 the meaning ·.of this _cJaus.e ·a~d i~'t~(q_rf.'Jri ~~915:!(~1i.n. t~~·.Houie :tjf..Rep.re~entatives·-bl:Jl. tl'.l"~ ..
. uniform (:v_JTUG &"ACC?STA, s\lf.ra al tK.).._ · · . ~, . : . · ~[t~fu~yJropos~tor .concur with ··amendn;i~nt~
. · · . . ~ .. "\:··. . -~(?, ~T. iytv1,_ Se_<;/'24). ._ - ·. I•

. Equitpble mea.ns _fair, Just,\rea~onJl~ · '-' _g lE1'-~~ b~ ./ .. . · · ·. · ·: ·. ·.. : · .

proportioriat~- to one's_ a~ility to paytJ.if.J..f";:9~bill;~r:_i~n~t~gi'in _t~e House may ·und~rgo such·
· . · - : .. . . . · ., . . · . -~ VJ -. l'" if ~~J?t111~~.!tJ$:angesin the-S_enate th~t the result may
Taxation may be· ur.uform but 1_11equ1table_)JA~,e· the .1v-1~i:e1WJ!il'ig_.9f the-whole (ABAN,-sup.raat.80-81).
amount is "excessh1e ·or .unre·asonable,.-i..e •., wh~A';-~: _ ·. . . • . • .. - -
· there i~ ·dout>l.e -iaxa.t(o_n,(CRUZ,:sup~a at.ii2;:. . . -·'. :_.
Ncite: If ls not tlie law, but thi(bill'wh_ich is·:reqliired to
. . . . ·: ·. 9rigin~te · :exclusively. , from .. ·. tli_e .House .. ·of
·. . i : . Progressive_ System of :T.axat!o~ (C.ONST.. Art. . ·., Represeotatives. A bill originating ht~e· House.'n,ay
V/,:Sec. 28(1)) · ·:: .: ":_. . . .. ·, . ·_undergo'such.extensive:chahges-in:tbe Senate that.
;· ttie re~ult'~ay be a rewriti,ng_o(t~e-wl:io1e·(to1eot1no
.. ~-- Progre~sive:-1-axauari ,i"s_.t>uitt-on:-.the principle oUhe: · . v:·
Secfeta"ry. of Fina{Jce, . GR. No. 1154°55, August
·' . · . t~xpay~r.'s· 'i:ibil_ity· -to . _pay (DIMAAMPAO, $llpra· at · -25,-_19.94):_ . ·.-_.: . ·. ·. , ·.. : , . . :':_ : :· , '. -:. ,
. · 104)... As. ·the.:resourqes of· the taxpayer becom_e
· : ..- · higher, ·his "tax. rate··nkewise increa·ses' (e.g.; inc;ome
_tl!;X sysfeim). i. ; . . -~ . . · .. · · v. . ~~t~ ~-owe~-~~:the ~~~~Iden~- ·. : ·. ,_. :·.. ·. .
Veto any parfic!-!,a~ item_ or ite'!'S- in:· (ARl) ·· · · ·
.. \(AT is admittedly°"r~g~essive -b~c:"aas_e·it is.imposed ': · 1) · . ~ppropr.\atio_n..bill; ·
regardles·s· · of income .. (INGLEs;· supra at 13}. · 2) · . Beveii_ue:bilf; or-·.. .- . . . ---
However, rt fs· sµII .valid <lS' the. Con:;titution' dq·es. not · . 3) .. Tariff bill_ (CONST: Art. VJ,. -Sec •. 27 (2)).
. . ·: . . . .. . .
·really prohibit a "regres~fvEi syst!;lm.but m~rely d_irects
the·. Cqngre.ss . to evolve·. a progres~1ve ·system · of . The President shall have. the ·-power .to vefo· any
-taxation. Iii ·a cas~.- the, VAT" system minfmizes the particular item "or. items an.appr6pri€1tiOn, r~venue;. in
·. regre~sive . effec~·-. by providfng:· ?efO:rated_ . ·o·r tariff bill, b'ut the veto shall "not .affect the item or
. transactions. (ABAKA,pA Guro Party'"E.ist v:: E;rm.ita,. items-to which he .does not o_bjec~ (Id.)'..· -
· G.R.
. No.. 168056,.
Septem_ber·-1,
. 2005).
. . ·.. ·

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 GENERAL ~RINCIPLES
SAN OEDA LAW CENTRALIZiDBAR OPfRA TlnNS - MEMORYAID 2019

vi. Delegated Authority of President to hnpose . is used for tax-exempt purposes" (Lung Center of the
Tariff Rates, Import and Export Quotas, PHL I(. Quezon City, G.R. No. 144'104, June 29,
Tonna_ge and Wharfage Dues 2000).

. Flexible Tariff Clauea
The Congress may, by law, authorize the President
to· fix within· specified limits, and subject ·td such
limitations and restrictions ·as it may impose, tarift
rates,' import and · export quotas, tonnage and
wharfage dues, and other duties or imposts within the ·
framework of the national development program of
· the Government (CONST. Arl. VI, Sec. 28 (2)).
vii. Tax Exemption of Properties for Reli'gious,
Charitable, and Educational 'Purposes . (DIMAAMPAO,supra at 1.'2-123).
Charitable institutions, churches and parsonaqes or
convents appurtenant thereto, mosques, non-profit
cemeteries, and all· lands, buildings, and
improvements, actually, directly, and exclusively
used for religious, charitable, or education~J,;;;-1)
purposes shall be exempt from taxation (CONST! ' ~~"'!~\
VI, sec. 28(3)). ·~
. ..
· The Court ruled that the above-mentio ,
constitutional provision which grants tax exerfli"pti;
I ; .•
Note: The rule enunciated in Herrerait. Quezon City
Board of Assessment Appeals (G.R. No.· L-15270,
September 30, ·196.1), that-the exemption extends-to
facilities which are incidental to arid reasonably
necessary for the accomplishment of'sald purposes"
has now been ABANDQN§Q. Further, what is
exempted is not the institution jtsi:llf; those exempted
from real -estate taxes are lands, buildings and
improvements actually, directly, and exclusively used
for ·religious, charitab le or educational purposes
viii. Voting Requirement for Tax Exemption.
No law granting any tax exemption shall be passed
~ithout the concurrence of a majority of all the
Members of the Songress (CONST. Art. VI, Sec.
28(4)).
j Reaso~: To prevent lnolscrlrninate grant of tax
,:.-~~~~em_pt1ons~· ·
;,-$"°~~.;;~-1··:~;,:,-·~;~~
"'-\..,.~ . ~,. ·\

a~_plies only to_ property and ~eal taxe~::~js~ssed OIJ. rl T~e a6ove7,,~entione~. provlsion requires the
such properties used directly, (~.ctu~ally al(~J concurrenci a malority, not of the attendees
1ff\
-exclusivety for religious, charitable ~~{~us~tioR"al I;\ constitutin9ia !fi~rum bat of all ·the memhers of.the
purposes (ABAN, supra at 84). ,ct:;,,--:. .[J:.. ( .( Ccmgressp(VJ([UG, & ACOSTA, supra at 20). · The
. . . . ~,.pr." .,.,,.:! •.;'.<',-· . ~-. i}.:;i phrase . ~-. rtj~jorl\r of . all the. members of the

· Test of Exe~pt1on: It IS the 1!1~:-e~.~r)>f9Rertx~nd 1 r-~~ Congr;~sf ...gi~~f.l~~,t.:;1_!3~S! fifty percent (50%) P!US
not ownership (Abra Valley OoJlege, IIJf.-lf- Aq°t,Jfi!.O, i;-J; one .(1·}~6f:.:a_llft~e-)nembers of two houses voting
G.R. No. L-39086, June 15, ·1.988).. _ .: ?·)~~ '1 [J.j separately'(ld}y· ·

Nature of Use: Th~ .properties ~:tb:~~\ctu~;ly, i:::~:exemptiongranted by a presidential proclamation

directly and exclusively used for _'j~e·.;r~lig!9\:l.§.,,,.;~~~'iW'i?J;l~¥i.~wis therefore invalid (John /-lay People's
charitable, or educational purposes. :t . ::•
· October 24. 2003).
.,\ctually - as opposed to seemingly, pr;t~i'ldidly, or
feignedly, as actually engaged i11. truly in fact.
Directly - means in a direct way without anything
intervening; not by secondary, but by direct means.
Exclusively - means apart from all others; without
admission of otners to participation; in a manner to
exclude (Black's Law Dictionary, 3rrJ ed., cited in
National Power Corporation v. Central Soard of
Assessmenr Appe~ls, G.R. No. 171470, January 30,
2009). . .
I( real· property is used for one or more commercial
purposes, it Is not exclusively used for the exempted
purposes but is subject to taxation. Wliat is meant by
actual, direct and exclusive use of the property for
chenteble institutions is. the direct and immediRte and
actual application of the property itself to the
purposes for which the charitable institution Is
organized. It is not the use of the income from the re:11
property that is determinative of whether the property
· Alferna11ve Coalition v. Um,. ·G.R. No. 119775,
Rules on Voting Requirement for Tax Exemptions
1) Law granting tax exernption - majority of all
members (absolute majority);
2) Law withdrawing tax exemption - rraajority of ·
quorum of members present constitutfng a
quorum (relative majority) (ABAN. supra at
118).
~eason: Taxation is the rule and exemption is the
exception. Thus, th~ law makes. It easier, by requiring
a smaller mirr1ber of \!Otes, to withdraw exemption
compared to Its grant (DIMAJJ,MPAO, supra at 1~5). ·
Ta" amnestiei;, condonation and refunds are in the
nature of tax exemptions. Such being the ~.ase, a law
gra'nting them requires the vote of an absolute
majority (Id.).
A constitutional grant of exemption may be self-
executing or may require an act of Congre:;s for its
operation. Where a Constitutional provision granting

2018 SAN SEDA LAW CENTRALIZED BAR OPERATIONS I 33

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. SAN /)EDA LAW CENTRALfZ~qBAR OPERAT/ONS - M_EMORYAl~ 2~19 ..

. . . . . .
an exemption is selt-execunnq, the legis!at~re can limitations as the Congres$'-·m·ay·provide, conslstent ·
neither add.. nor detract from .it.. lt may, however, wfth the basic policy of local autonomy.(CONST. Art.'
· prescribe a· procedure · to 'determine whether .a ·~,Sec. 5)., ·. · ·. · .. · ·. · . · : .:
claimant. is 'enfltled to the constitutional exemption
(ld.): "! . . . ' .· • . .·• ': . . . • : ·sue~ taxes,' fees and · charqes s~·an accrue
. ... ~.. .
exclusively to the local gov,ernments-(CONST,Art. X,
ix. Non-U~e of Pub)lc· MonM or 'Property .for s1;:c.5)._._.,:·. ·· .. :··· · .. ' .··
'ReHglous· Purposes·(CON$.T..Ar/.iVi,: Sec.· 29, .
.(2)) :. ' . By necessary implication, the regi_slative. power. to .
create potlticalcorporatlons for.purposes of local self-
E:Xc~ptlori·;· If' ti p:riest is assigned to. armed forces; government carries 'with •if the . power th confer on
penal Insfitutions, .; government orphanages . or .suchlocal gov.ernniental agerit:ies.'"the power-to tax.
.. leprosarlum (Mf.JNOZ, Philipp{nil !:3ov~rnanoe. and (Pepsi~Cofa-Bott]infj"Cb.·of !fJe PHt.:v. City of Butuen,
conetiuiuen, p;8_2) /hereinafterMUNOZ]· :- ·. ·· . . .··- · G.R: No. V-22814; Ai.i{ji.ist· 28, 1968)". · . . . . , .. ·
. .. . . "' . .. . ~. . ..
x. ~P~ohiti,ltion ~n U~e
b(Tax.\.evied'for SP._eci~I. . Co.lJ.g~~ss· qmn:ot" ab~l!sh ·. the' government·~· l~c~i"-
·P~rp_ose.<;>r ~pe~,a·I Assessments .. · . ..,..,,....~~!"P~~ir;Jotax- l:!S it_.ca_nn"of.abro~atew.t:lat is e:kpresslY. .
Alt. money collected on any tax levied fq~.a"special.1[" 'l· 9]i3"1-ecf''b~-"4he fundamental law. The only authority
purpose-shall-be treated as 'a speci~.f~~n~i-.p,,?id11..Y.Q:.ci~t'ei-~td 10~..~?ngr-ess. is "to provide guictelil")es·a.nct
out for suchpurpose only.·lf the pur;i;i~se,Jo'rywl]Jgl;l:,<a""_"'~limilf!ti\'.>ntn')t1e..local government's e~e~ci_se of the·
special fur;id was created ha~Jtie7q 'fdlfilfe,d ~powetlo, ax (fi),!,11./Af/APAQ;·sup;a at 143). . . ·.
abandqned., the balance,. if any;l~h·~~~.~lfa'~sfefre_~ j)';, · ."-'-~~~ ~.... ·• \ \.": : . · · · . · ·, . . .
hl . ·~{,.,. '. 1f _,, :' :~. ~J'i'\
to_the·generc;1I funds of.the G.ov,e~~}'t-fCO.NST.;~:its. P1fas~.'r fer~:tptif~~Tax?t10n. ct>apter for further
:VI, Se~. 29(3)(_ . · ·... dls'!;uisio $,. ·\'0?\ • . · . · · .· · , . · .,
: ~i:-. su'p.reme . Court•i .· ~~·: ~o:- .. R~t'4e.w· iru1 )ii~~x_ex~mp~~;~~lnt:d-~o: NC)ri-St~ck, .N~n,·~...
.. . _- .Ju<:fgll)ents or Orders if Lof1rr:_Co.11 ·:f · _ :·f7. llnlS f Prot1i Educa~.1ona~~Jr;ist1tutions · · · · .
,:The Supreme C.o.urt can -revJe~aogme~s ~ord~r~J ,.l .. !~. · ~ ~1 R· . ·.. · . ·: ·
. of low_~r -co~rts in· ~II cases iqvo~r:\~ . · ~~· · . : · >:?::~ -~klJ}:1.??fof~;· -::.<-1 ~·on-pi:~fit . _ .l;du.catlonal ~

.. · ot toll~.a~d · . ·. -~ ",. · %_. ~~~*' . ltlJ· ~..;t;if!·

· ·1) ·. The le_gahfy of any tl!l(:_ ~ri!)iist! ~fjf.e1~nt1,~ .J,....r,\,,..··'.~~'.tut1.8n""'\,.
~y-reveliues afJf . . . . . '. . . · . ·'·· . .
a~sets·of. rion-stock~·non-
-2) ·. The. legality of a11~\~Jnally.;lmp~!k~i~ . ~~~- rofit_.lfduc~t}<p1alInstitutions use~ actually, ·.
. · relation thereto_.(COMS~. A~_v110t~I>,..·; ~~,~t(y, .. ~mf exclusively for_~ edu~ationa~· .

· .. .
. .· ·5(2)). · . . : . .
. ..
· ·. \, _ · · ' ·:~
. · .., .. .;{·n ~ · ~--:?
GJE!'--.r.:£\" . ~r&qs~s .~all be e~e~pf f!~m ·taxes: .~nd .
.i;tuti\}~@/IIST.Art. XIV, ..Sec...4 (3)). ,, .
. ..··.Prin~iple pfJ~dic.ial ~o~.~interfer~~~~,Y().,: ."'°' . · · '."\·"~\.~.)-:.~,... · . ·.. .. . · ·. · .. · -
.... T~e courts.~nnq_t 1r:i_qui_re ,~to ~~e w1sdom'i~~{'!?<ing M.t4\~p·riJi~ucationallnsti_tution.:_. ·. • ·. · .
. ~ct: :·~_nl~S$. ·ther~. ~s. ':1 v1olat10.n ._-CJf.: ~9pst1l\Jti0nm.,_,- · -'-,a,,...,~~ ·a) . It is-_.a non-~tock;· nori-profit·corpora~iori
hmttaMr.s ·.or restnct1or:i_s.(1·D/ZON, sµpr_€! at 207):. · · ' or assoc,~tion;· .. _.. ., .' .. . .•..
. ·. . . . _. . .. . . .. : .· . : :. · ~. : . . .. . _' \~} The. pi.frpose for which it.·was9reated is
.. The Con~titullon; as ·t1:ie Jundamental law, .ov~rnd.es · one of those.enumerated under .Sec: 30
. -~·any legi~!alive or executive._act·tha.t ru_ns cou_nfer_t!).)t. . of"ttil;i·NIRC·, ~s;amsn~~d"b{Tiy,;I_N: ...
. )'Vhere.J.t can.. ~e c;le~onstr~te~ th.at.the. ~~al\er'\ged ·. , . ." -· _, .. :_··c}" · N9 .pa_it·: of\ ·the· cor.poratiqn· _qr.
. .stat~tory pro.v1s1onfalls to·;ab1de by ~ts· commaf"!q, then. • · · · asso.ciation's net income shall inure to . .
th~ court ":must. s_c:( declare .. and_. 7c;"!djudge_ it .null of:
·ttie benefit" c1ny private individJJali arid
(Af3AKADA- GU.RO _v:. Ermita, G.R. No, 168056 : cf)° :rhe · trustees. of . the·- :no_r'laprofit · • ·
· .. ~eptembe'r1, 2005). ··.... · . · · · ·. . . . ·.. .. corporation ··or ···associc1tion d.o. not -
.. . . . - . . . l . . .. . . . .. . .. .
· · · ·. · ·. · recetve: any · compe_nsat1on or
It is -axiomatic , ·tha.t.. ·,·uaiciar p"o.·wer eml)races· .the. .remun·erat1on · o N
\R.M, . . o.. 0~2013,.
1 . 2 .
. · ascertainment of facts ancl the. application· of the iaw, :Sec: 5(-;;i)): ·: ·.. · ~ ·. . ·.
the Gohstit1-1tion as ~e high.est· la"'!~super,seidir:,ti an~·
statute or o.rdinance in conflict therewith, it C<,1nnot ·oo · Covei:a_ge of.Exe~ption: . ,,
said . that a .city . ~ourt is bere.ft. of- compelehce to . . · 1; .. Reai properjytax-(see previous·discussions);.
proceed· on· the. matter .(City of Bagi.jio· v, De t:.f';on, . . . 2.. _ln.c9rrre tax "(DIMAAMPA.b,. supra.ai 130);. : .
. . .. -G.R.'.-No,. L-24756," .October 31, 1968):
•{.
·: · •. . . ' ·· . · .. ·3. : Donor's Tax - ifis .ta-x.=exemp.tif" the "dori~ is
l:i ·noi:,-stock; non-pr.bfit educ:'ationaJ institution
of
Xii.· ,Gr~rit ta~jng Authority·to L.GU's. ' . '.. ·· . (NIRC, .. as .. amended ... by ·. TRAIN;'· S.ec..
:Each local goyernment .yrilt sha)I ~ave the-power.to . 101(A)(2)); and·.· . . . ..: '
qreate its own sour.9es of rev~nues l:lnd tp levy taxes, . . 4. ·customs.duties-(INGLES,,supraat.15).
fees aricJ.. charges .
subject . to such
\ \ . guidelines· .arid

: 34. 1 ·. 2019 SAI\J SEDA LAW CENTRALIZED BAR OPERATION_S

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 GENERAL:-PRINCIPLES
SAN BEDA LAW CENTRALIZ!:D BAR OPERATIONS-. MEMORfA/0 2019
~-'.;, biiMiMIMM A - when IRE.WM CFY+:w '' APl?iiiMf!ias+ Mb ... ,.-E,
···. Tax~bllity.of lnc~~e Derived from the .Oi>eratloh being ·1h·e basic and ·paramount law, the N_IRG must"

: ..~ of Dormltories,·Canteen~·an~·Bec;>k$tores
;.. .. -Exempt from taxation provided:
f They , are. owned and operated- by· the
.
.
yiel~ to its p_rov.isions {[?IMAAf.:ttPAO; supra at 131).

.Pr~v·aili.ng· Viev/ In Co~imissio_ner pf l(l(erhal .

I . ; .. ,
.
.... education~! .in_:,ti~ution €IS· arici)laty a~_tiviti~s;
. and. . . . . . .. •
'i'.:.·· :. · ·2'. -The;· same · ·are. ·lqc~,ed with_ln,. th_e· '~ch_ool
. . .. .. .
Revenue v, De La Selle. Univer.sity lnc.,' G.R. No. ·.
. 1.~6596,. November-o; 2016,- the Supreme ·court•hela .
that _Section 30· of the Tax Code (which provides that

lit·-. ·
·.· ..
.
of.
premises- (R.M.C. No. 7-8-2003).
.
Taxab.ili°ty· l~te-~est Income ·on C~rre-!)c~-- Bank
Deposits anct'Yi.efds frodm,Deposit Su~stitutes .
. ..
· . ..

:.a. or
"the Income otwnatever kind and character of non~ .
sto~k. :and non-.epro:tit educational institutions; among
'others, from any of their properties; real or personal,
from any_ of "their activities conducted :or "profit
·y· _- . fntere~t, incon:ie _u~E: · actua_lly:,: directly an · .. _regardless. oJ the dlsposltlon made of such
-.V exclusively lfl pursu~n~e of. _th~1r purposE:lS' · -~~ '. . Income shall be subject.totax) is without force and
,:;> ~ eql!cafionai institutlon are exempt fro_m the _20.% and · . effect, . prov.i~ed, that. the non-stock, ... non-profit
\·:··. ·1.5%. tax-under the expanded foreign:~urren~y deposit . .: educational institutions .prove that ·-it~· assets arid
\:: · . system in:jjl"t;,sed under: Sec.: ..27(D) ·.o_f the. NIRc· . . .revenues .are used ac\uMy, dire.ctly and. exclusively
-~·- 'subject to the.compllance v;it{l theeondltlon that the- · . for educational purposes; Tne Gourt emphasi:z:.ed that
\ . in corn es . _are . ihcludec! .. in the sc_hool_'s . ~fr.inual . . ·. the-tax.exemption granted by the-CQl")StitutiQn to .ri'on-
l _in'forr.r;iatiqo'. retu~I"!. , a_rid · · du.iy · _audit_ed . fin_anci~I . - stoc(<;.-· .. non~profjt-.. ,.edu·c·atiof)al · instifutio_ns . · 'is
1;: s_tafemer'l~s•. tog~t~'E:r\:'1th:. . . '". · · · . , · ·. ·~1{,,,-7 conditioned only: on the ;:ict1,1al,.direi;;t, and exclu~ive
if- · · 1. ~G~~1ficat1ons..!rom_ dep?s1tory ban!<s a~ !r,t. ~lf.).. ·use of thei~ ~ss~ts, revenues and inc':_me for
~ . _ ,.. amo~nt . of. interest 1ncom~ eame -~~.9.~j/''-'/\ .edl!Catiqnal purpose~. As such, th_e tax-exempfion
;;_;:_ . . p~ss1v~ mvestm~nts . not ;;ubJ~ct. to- t_he\~Qt:Y~ ;i·':1 .;t constitutior.ially-gmnted IQ non-stock, _' n'on -profit
t··.. . . . fin1=3l_w1tb~olqlng tax; .·. : . · -:i; ,j·i\•:J,f··t~P-~tional(l~~tittJtiqn_~.-·is not subject to limitation~
W'· 2. Cert1fic9t1on, of. aqual, d1_rect· ~nd- exJ~~,¥~,/lr..t.:intp~~tj§.;f· · · ·
u~ili:i:ation of. said· incqme · ·tor ..;-~&ca~ional: -. f't ·. ~~ }~~ . · . . . . . . . . .
purpos~s;· and- · .. ·i")P ·t ./)·mj ·. Taxability.of~·enation · · . . '
3. · B_oard: resolution:~r-~ropos~aj.P,f'}!~~~J.o)je ~b\ Ex.empt_ frgFh_~a·~por!~ tax if actually, directly arid
, fun~ed ou_t of- ~he money d,E;l_P.,Ps1t~1,i:1t1~1'an~~ ~ ~. exclui;ive[!· u~ d .,for ~d_yca~ional purposes; pro'iided
or placed mrn,on~y m~$,~f.plac;rqenfS:-('?Q~ fi~~ that" not.,1\o_rerttl:ia\30% o( the donation, bequests,
. . . .Order.No. 149-95) ... · (/;fir! ·. ';i~:: ~ .. vJ deyis~~;fi~....leg.acie~;·?P§lll be· used by_,~uch insmutlon
·•.. ·. · · . · .:· · '\,{ . ~- ,:,-'~., · ·. -,,0-;_ (;d tor adm'J6'~t1~ti6rt{P,6tposes(CONST, Art. XIV, -Sec..
:n,.e Rp_o sh.<:111 · conduct a.n· -'\!;~~! ""otr_vvr .an11~_.;il ;·.t1,~ 4(4) in"reJatiGn-:'i'/1-f.:iikc; as ~me_nded '-?Y TRAIN, Sec.
mformat1orrreturn.fi)ec! to determinf~o:iplf,a~c.e ~ith 1. ,, 1/ · 101(A)(2)). · . . · . ·
the cqnditiohs_s·etfqr'th·(DOF OrdeJ\'~<?: "149,.::~5)..
. ~ . .. . . f~,...t::J.. . i r1;-F:".--i\.
,1.. ,,,.~.:m . . .
Ji,
.. . . .·_. . ·. . . · · .
.
. Not~_: ,~~c.' 3_0(h) i~. ~el~tion to th~ r,;1~t~'.p.ar~gr~P.!):;Pff£~1,~,<i>tj;_e·.-._Artide x1y.v: Artie!~- VI
,t~e NIRC _,- appears_: .to be ..- _unco~~J1tut1q~~Jt-.- It
disregarded ~e re·quis1te o_f- use (CONqf:.,'1~1- XIV, _
Sec/ 4(3)), and instead .used the ph-r~se"refgardless, ·
. of the dispOl:litipn m_ade." .. · .· · ·. '.· .
First Vie_w;._.S~c: 1 · 9f P.OF Q.rder ~o-.' ·14_9-95,'wni9h
ar:riended DOF Order No. 92-88.-and DOF Order No.
: 1~i.~a7;- .provides

},_:.
I :.\hat. these non-stock, llQn::profit. , . •
ft.' · · . · educat_ional, in~ti_tuti?~s sh<;1ll ~be i,ub)_ect to_ .iri,temal . ·1~ lncom.e tax; : · · . : .. · :· .. He.al property tax.:·
re:;,enue taxes· on 1A09me· from trade·; busme~s :or ... 2: Custom dupes~ and ·. · · -· .. · ·

!:r_
t.
·~:
'-
·othe,(. activity ttje ci;)ndu~t of WhiGh !5: not rel_ated fo the. .

. .
exercise or. · perforl"()a.nce· by such educational · · · ·
institution:of-its _educ~Uonal purpose or functioh." .. ·
.. . . . ·. . . . . ·. . ··
·: : ..
3. Heat,'prdperty tax
(DOF Ordet No.-137- ·
-~n . . ·-
. . .·· .· :
.. ~ :

' ·Seco.nd View: $ec. 30 ofU-,e NIRC, -wl')icb- pr(?vides (O~MAAM~AO, s_upr_a at-129).
that "the iricome from wh'atever kind and charaeter . ·.
from~ any·'of the properties; riial or p~rsonal, ··or from · ~fProp,i'\et~-ry Ec;l~d~tion~I lrisut:µtlo.n ...
'any
'{:
of the a.ciivitfes" conclucted tor prof.jt"of_non-stbck. . Proprietaly edu9ationa) it:1stjtuti6ns, including
,,.'·. noo-profit.. edu~_tlona1:··',inspti.rtions. ''.regardless;· of _ ... . . Uiose cooperatively :owned, may" likewise ·be
i' . tjispos_ition'' appears to be uri~onstituti"c;>nal. Sac;. 4(3), . · ·l:lntiti"ed to s~ch ·exemptions subject to
Arj. Vl·of the-1987 ·canstitutlon_expre·ssfy provides· · .. Jimjtatiqns provided bylaw including: , ·

I,~·:
1·-. .
i~.
r.: ·
that _all. re.venU!;lS. ant! assefs actQafly, directly, and :
· exclusively USl;ld for educa~i9nc!f putposes shall· be
. exempt, from·· taxes ·and duties. The -Constitution,·
a) .. Restri~tion? ~n .divisions,· and

at 88J. _: . .
·
ti) Provisions for rei_nvestments.(ABAN; supra
.: ·
..

· ·· · ·

,.·. ·2019 SAN.SEDA LAW GENTR..l\LIZl=D BAR OPERATIONS I 35

 GEN-ERAL ·PRrN:CIP·LES·
_Tax exemptions of
proprietary educatio_nafinstitutions .
require prior leqlslailve.lmptementatton since the use
.. --
SANSEDA L:AW CE:f\(TRALIZ&D~AR CiPE:RATIONS-~ ME:MORYi'IID 2pi:9_ .

Summary of Ta~abiiify"of Educatiomd

· lristltutions
4EEFSMiHSMI.

of the. permlsslve.term "may" [n the provision .gives

"Conqress discretion to determine: whether not. or
· a~sets and .' revenues of proprletary -~d_~cational
institulions should likewise .eruoy exempbons Jrom
Exempt : .Exempt, if the
ta..1'~.s.. In short, the tax' exemptron here is not self-
executing (ABAN, supra·at 89). .:· . · _property . is
. . . ·. aotuauy.: ·.
dlrectly,' ,-and
exclusively '.
used. · tor
.educational
purposes ...
Se.e · Art: VI
Sec. 2Fi(3) of
the · ·
Consiltunon;
Exempt

.,

I .:

3) : G~vernment."Edu"cational ln~titutions .. ·
-"Goverrime_ot educational · ·· i"nstitution·s· · are
. exempt fromc . .··. . . . ... . . ~. . .
a) .lncome t~x
(NIRc;:sec.-. 30(i)); .
. ·b}. Real property tax· (CONST.; Art, VJ;·Seo.
· · · · 28, .pen.. 3); and' . " . . . .
c) . Donor's.· ta~ (NlRC,. as ·amend~d ·by
. ... . TRAIN
.. - Law, .
Sec.. 101 .
(A)(2)).
.
. . ·.~ ·· . . . .

. . .
36'. ( ;;:019 SAN B~DA LAW CENT_RALIZl;:D BAR OPERATIONS.
 ~,-.
I
tiJt'"
·..
'·

+
INCOME.-TAX
·SA,Y BEDA LAWCENTRA(l~ED BAR OPERATIONS .:.MEMORY AID ;2019 .'
e nila , msa ·4ea,,A±aaw 'Aiif*'*
r·
die HS

(Madrigal v. Rafferty, G.R No. L-12287, Augu.st 7,

~c ·D)i'FINITIO;N AND GE:l'{ERAL . 1~1.S). . . . .
i,· PRJ;NCIPLES Income Tax .
rt . tnccme.. • ' . . .
: It is a tax on all yearly profits arisin_g from· property,
professions,· trades·· or offices: or as· a. tax on· a
t 1!1 the broad sense.Jt means ~II wealth that flows into
~~-· · .. person's:income, emoluments,. profits and the !Ike
rf' t~e taxpayer other .thari as ·a mere return of capital. It (LG· Electr.onics Philippines,:· Inc v, ·. CIR, · G:R.. No.
16.5451 ~ Decemb.er·.3, 2014). · · ·
ii .... includes the forms of income 'specltlcally described as.
f. · a'tax on tncome.whether. net pr..gross·realized ·in.
a: 1·. .;·
gains and profits, lr.icludir:ig· gairis derived from the
sateor olher disposlfton of capital assets (R:F?. No.~-
i;. · 40, Sec. 36), · . . . , . · .
It is
is due.onor before:ftie.''.15th.day·
onetaxable year .. lt
· ot the 4th month following the close of the taxpayer's
~/ ·-l~~o~e me.an~ ~a~·h
recei~~d· ·or· its ·~.quivalent. ttls taxableyear. and-isqenerally regarded as. an excise
~".:. the ~m?.u~t:?f .~.oney.cominq .to.~. per~Q~ within .a tax; levied upon. the right- Of a 'person or· entity to
(~;. .speciflc'; time .. W means somet~ing ,distinct from receive income· or profits :(~obi/Philipp1nes,..f1.1c., v; ·
Itr.> ·printip~I or capital; fgr whi)e capital isa fund, income
is a flow.As.used in our income tax law, income refers
The. City Treesurer of.Makafi, · G.R. No. 154092, July
14, 2005). · :' ': . · ", · · · · · '
t. tothe flow of we~l.tl:t (CIR V,. Japan .Air. L~nes, Inc., . _ . . .. . .. . . . . .
r( . · G.R. No: 60714; OctqberA, "1991). · · ·. . . _,.•./;). lt-ls a kind of tax lev~ed upon the-prlvlleqeotrecelvmq
~··,, . . . · · .. . · . . · · : · · ;v':_./}j, Income or profit. It 1s an excise tax and.not a tax on ·.
~. .: .. I~. is an. amount of rncney coming 'to a perso'r,i·~·qf/.\\ property (Dliy/AA,_MPAO, Basic Approach to Income·
f? · corporatton within· .._a· spe_cified ..ti~e, wheth~.fi~~/,'.~~;_'.1-lTaxation (2018), p:·-3) [herei,ya'tte,:01MAAMPAoi · ·
k. · payment . for .· se.rv1ces, 1ntere_st, or :pr<?fit. jron:li, ,11:.I 7-"'J"~ . ri.i\ . .. . · . : . .. . .·
r,~· investment.. 'Un.r~ -0thef-Yfise speci~i.ed, )iJ~rhef,..{i'.::.!:'.!.s~.~. :.:J~[:-r!.~;~lRlg~f:o.f'th'e ·.Govern_m~.nt to Tax·
t nJea_ns. casb .. or. jts e~uival~nt_ {J:fema1dft;!Jbnw( v;_:--· t] · lnco~e:-'f>'a.~~erstJ1p.Theor-y ....
l:- Court·of .Tax ,Appeals, G:R.··.No. 485!3?:~'Aygust. 3i/·-_J·l 'The nght o(L~~g<;,vernmentto tax income ei:n.anates
· ..

( . 1992). · ..... '.. ,· ~. . · · .. ~·:'.:.:fl: .,., ,)··"."·) from. its pa~~fi~~,pin .the production of income .~Y
rte.. · .
f:· , ,. . . . . ·, .
~{",.. •
·. · . ' . . . ·. . . ·; .~f.t.!>. 1,)?::r . .
; .
.1.ncome v • . c.a!?:~t,~ _ 'd..•r.~·=f'::;:;;, -.. .
_. .
r~H .·w~v1din.g -:9.1effPr'_:Jec~.on,!'. re.s.bu~c~s;.. ince.ntive. and
pr(?pe.r clj¥1ate;Jfor , lich prod.uction (C.IR· V; Lecf.nicky;
· . , .(,1·.G.R.NojL-18,!69,~uly3t,.1964). - . . .
tt· , . ·
,ii . • ,. . . . . C,: . _. . . • • ''i
·. )11·~
1~~tl . ·. ."-.."-',ir,-'i.'J.'I ,. .,,.,'.---.;, · · .
-v ..J· r,;j.P,: t(~ ..
·. .
.
. •
f De.not-=:~· ."'-. fl~w >.:of
.i::und ~p~o~EfJ!:,~i!}~.isti~pj ·i:d Fe~ti.Jr~of.,P.hilfpp~ni,dricomeTax: . ·· -
..
·-.. '":'e~lt_h donn!;J a defir:11te ~t one .·q1~,W)Pt'\!~omt ·. 9f · _,, 1; [?l_re~t Tax· - t~x burden is 1?.om.e.py the ipcome · •

period . of. tim~:: . All lim1;t-;-.w_h1c~,c1~~ b,B~e9 !n .

w;ealtt:i other th~~,.:3s a prod.u_cmg· :;,9J.(;l~s · .. or _,;;J~J~2;/:!~tl?~~~ssive-Tax:-_tax
'L~rr-m:; recip1ent:upon whqm the tax!~ imp~Secj;,
rate Increases .a.st~e· tax
..

,:,. . .mt}re re!uri:i.of .cap,t~tl·' .Ser-{1(?es.·· -:.,:;;,.· -(~--~-.............i~.f .....bas·~inheases. It .1.s f9unde~:Lon .the abil1ty-t9- ·
f · · :s·e'rv.'1c'e·.of we'0·.,Ith.·..··.: .•• . W"ea.
:r· . '-. · ·.,
Jth ·
.. l•.
"\'.-\ . · F '. :
'tlnl:),•J.,:··.···
. pay-prin9iple·:and is pons1sterit With 'Seq.-. '2-8(1 );
Art.Vl,:1987Constitutibn;· ....
~' . · ..Fruit".· , !'Trei··
: ......
" . · . . . . ' . . . .
.. · ...· ...
:-. .. · ·EricUTIVE·c<:>.~ .··~·sunfe.crcoM~nrni . M,EMDERs .·. _ ·. APVISERs
,:i: . MARV CYRIELL C. StJMANQJJI . fy1ARlA ·cARISSA .c. OUJNTO L~ ·MAE ·o. eNR!Qll;Z, . ]Ul>li~ . ]AP.AR , B.
.t ·. Over-1i1i ·.cfiairper~TJ,. ERICA • .' Subject ·. ·Ch11fr, .... · SH,ENA . ANISHA M: HADJ.I. HASSA:,N. · )::iIMA.Afy!PAO. Atty.,N1CA,SJO
¢: ·.~·C~VISTA'Ch'f,ifpersonfor_.: G~DYS .' P., BJ\YLON MARY.'EVIELYN·N. MATEO, C.CABANEIRo;cPA;andAtty.
,;: · · .Acade!11ics, .. BEN REI.' · E.. · 4S51stan~ . ., . Sub;eet Chair, . MARIE . ,SJ-iERR)1)ANE . · C .. .DANI'E.O. 01µ.A..CRUZ, CPA, ·
t' .. ·BAR$ERO c~airpcrsonfo,:Hotel ,ANGELICA ._· ~IE . ~ REYES, ALYSSA R. ~GA,. ·. · :... . . . '·
.l,'< .• : oj,eratlolts, ')HELSEA J,OUISE.· ~L Subject. ·.Electronic TAGMA' . ~ .'. ;y:
i. . · ·· ·• · :· · ,. . .. ... · · Data ProcessJng,. ~ G. . .,Am>A"=.
{(·. B. D~O Vice (!ha1rp~rson.: FABREGAS ·Gener11l Principles; G~~.. "=~"
c:· · fo.r ~~cretaria~, EARI;:JU~TIN M: . ATHENAI .. :~CES ... R. MABJµ, A . CHAVEZ, .JEWEL.
· _Y~':"q .Vtfe Chair.pernm.for . QtJINTON and ~ARLOT~ l't.... J~CE G. DAYTIA, MIJ5KAELA ,
Op_{'T.atlons,. MA .. ANGµICA B.· VILLA.ROMAN'. Income . Tax, S. . .. ; MONES, ·. AND~ ..
:bE l.E01:l ..Vlu·C.~o.irperson for APOLLO ·:JULIUS. s: STA P.ATRic:;~ ·. D .. DAQU!At-. · ·
Finance, AREA 01.MAY,!'. ·J. · MARIA: Tr.an.sfei; :rax,.·JEU.YN AJ)'RED0~CIS . . P.
. . . BADANG~. Vic~· Cifalrperson C. CLEMENTE · Value-~ddeii GALLEGO$,.JOY ·cRISTEL G.
for.Audit,JORDAN~. CHAVEZ ·· Tax; MIGUIELA DE ALVA Tax GAYON.~.;.MARiom;· NICOLE ..
. V~ce. Chq'lrperson. for .,.EDP,: Administratign,. ·~nforcemtnt,. P. BUGARIN, and. KATRlNA'· -
. HANZ DARRYL o:TIU .. Vice · . an4. Reinedif:s,. and ATHENA1- : ANN S. PRADO,
. Clla!rpe~n :-for·. Logutlcs, · aria . FRANCES. R QUJNT?~ 'Real . · . . ..
. . DOHN ALFRED E. ·AQUD..1ZAN .Properly and Local T.ax
· Vi~~ : ·. . Chairperson · for·
Mtmbership, ·
 ,.. aw-;wu .. ICIIPW l . FJ:

1:NCOME-.TAX·
_SAN BEDA LA W-CENTR'AUZED BAR OPERATIONS -
0i\1EMORY
AI0-2019
NAY ii WM.>FN¥HSQS.£Pf:ti&MfMMSM41fi: ·e+til k&ii·C WWW
...
. 3. Comprehensive . System . :_ adopts . the excess of it's cost. (MAMALA TEO, Philippine
· citizenship principle, the residence principle, and Income Tax · (2014), p. . 11) · · [hereinafter
the -source princlpte.: . . MAMAL.ATEO,income Tax}.,
4. Serni·Schedular or Semi-Globai; and .
5 · American in
origin. f;xamples·... of. Income· · Constructively
Received:· · ·
· Note: Thu.s, · the authoritative decisip_ns of the a. ·· Matured interest coupons, due and payable,
u:s. courts and offfcials" charged with" enforcing". 'not yetcollected by thetaxpayer·(R.R; No. 2-
the U.S. · internal Revenue ·code have. p~culiar ·40,. Sec; 53);h'_ . ·· · . · · · ·
force. and0-p.ers1,1asive effe'ct fo~. the :Philippines. · b. "lnterest .. credited 01') savings. bank deposit· .
(GIR-v. Baier-Nick~/,GR. No. 153793 .A.ugiJ$(291 . (R.R, No. 2.40; Sec, 53); . · . .
:2006). . ·-. c.. Dividends applied by·tht:i corporatlon i;'lgainst
. : the indebtedness otastockholder (R.R. 1No.
Re"quisites·for Taxability of Income: (PRN) · . . . . ~-4A Sec.·soj;: ' -~. ·. . . . .
1 .. · There must be- a gain or"._e_rofit, whether in 'cash · d ... Intended paymentdeposlted in. court (e.g.;
ts
. . or i equivalent; . . . . · renti11 paymer>_ts .r~f1.1ser;J 'by the. lessor," •Mien
2, The gain -must be Reaiized or. received - when . . . the fe~se~-:fendered peyrnen: and the latter
. . . income is actually ~r pnysic:ally-1:ransfefrec:i"·to a . . a
. .mede judicial depositof th_e rent~ldue); and .
person, or· constructively received. by. h)~_,.J.his--c-~=-=--=-~~~Distr.ib.utive. sh~·re of.th? pronts.of a· partner in
i'!'p.lies}nat 'not all econo~!c gains._,,.s;1oi1s{itute}I_ J }\.
f. ;~~er13Ico'-partners~1p(RR: No. 2-40,Jff_c..
·. · _taxable income; and
.
.. .:Te~t 0~ Realization
.
· /_
f •I

_.(j. }.'\?";;.
,~~--=~~-~(·
: _ : ·.. · ""'~"" .f-;,.,_:.),.,.. ~.... .J. V j53Y;y-.. . ~
=~~h~tn_
. , • ·. .
II/~
ro.li'i_~~~_oLbe_
·
.· ..
exc.1u~ed by law or treaty
· A-;:tual vls-a-vls _Constr\1ct~yE!~ec,~jpt .,,..~. . ;,,'* · · flil/Jyj,A.IA:~Auff.11,!_.fra_at 8 to 11).: . . . ·
Actµa/ receipt-wf:en incory1{6~®tai:lll;fed_i.Jcef ·A\· W .). -'~,,~;-J. \ ·· . · ·
.. to possession. The: r~~lizatio~·.ot;;gain f,_ay tal<e )t~R<ft:og_~u_t~pno'fi:/_~;0,Vl~\. . · .-- .
Sec. "',;2,1r-: · .·· . . .
·'
~ r,17
· ~, ,s:'-,r· · t< •··""flf°"'-'->.
· -~,I! ff
f
I
the form of actual reeeipt ~f-..c;;ash'(R.R."No-2=40~21,nco~e~\~ecqg~~JDwnen the_ income has been
rec~1ved,
4~~
·;1ther
·I
· ·. . . :· ~-, · ·- \ :_ "'1;7" ,c -~;:~:sl;)r::vites__renqi. red-jsdreccig~~zea wli~n sei:vices
acl11::iti"¥or
II c.>r- 7• 1\
constructively.-Revenue ·

Constructive_rece_ipi-_wli~n~~,Sqr.ne-ts-ct~i:litelfu~~·:~ee1~~rfor1~"'i!~i ~~e b1llabl~. 1t·1s _re_co~qe~

the account of or set a~art i.~!-a· t~P,~· · r--afld~,;;;-' ~th~Jlf~,r.e~~~-~~~r.~~P_e.~t~d to ?-e re~e1y_~~
which may _be d~a'.-Vn opo\ l§f l:ii~ at-~ · f Jj.lEJ.!cs_"Sf''1-l"'o/_,ecorj,m"1Jnfc,at!ons'. -Inc.· v. c,~ of P.a_s1g;
subjec.t to t~x· for· the ~·ar. du'\in~- ~ J~/)0,.,;Jf~,6-~jNov'1,f,ber22, ~00!)- . . . i.
•t d . .' . . h . #./ ,._<:;j-:/ /f ' .
;t.fh ( LI"-
,t::re.dI e or set"·apart, alt O .9h·_nof·"lo-:en ·. ~~11, ·. #'~ iBasH'Met od
J{
ViS~?-V.iS-Adcrual Method . . '
r~_duced__to ~oss~sslon. To \\~n.s_titut~rec~p~Q~::/. , ' · '· .• · . ·· · . ·
sush ~_ense,-t~e mc9me must,e.,cred~o'ff-ie.l,gl - · . ••
. ·taxp?yer without · any subs~aniliaJ.; li#i:i@'~).~{ot":o~ .....:--
-. r.es!ri?!ion as to the ~imeor m:annE:r'o'fkB._"i:lY~~l.?r -r; A.J , "' • ; .-
cond(tlon upori. -.yh1ch. paym.ent is_ to. ~...made· -1\ J. A . · ~e~·of 'accounting A method· of aecouhting.
-(R.R. No .. 2~40, Sec.. -5:?)'.: ·. ,_ . . '.· . . , .. ~~ :'\•(~eby all items. of g_(oss for-in_coni'e iii the, period
. jncome ·.received .c;luring. ills earn.e·dr~gal"dless of .
lnco"ni~ is re·cei~ed ·h~t· .only.\vheri'"it is:aqtuafly": th~·: ye~r· . st].aJI"· . be whether -~It has been
handed to a .:pel"son. but' also when it l.s. o:i"eteiy·: accoul::)ted° .for . . such r~ceivecl.ckr:iot·. . ·. . \ .
··c_onstru,ctively · ·receiyl;ld by: him · ·(LJ.rnpan.. .taxa~le year. · · ··
lnit.estment Corp. · v. CIR, 'G: R. · No, L-2.1570, July .
~6. 1g66). '.· . . . . ·.-
; . .~ \
In.come. is· re-alized':upon-· 1nc6me. ·. is· earne:d
Increase in the Value of the Property is NOT.· ' rec.1~ipt.. of . ·c~~ll. or" its regaiclle~s ohvheth~r it ..
· ·considered as lnqonie ·, ·. , · · · · .·
. equivalent inGIUding·tbose has beerri'eceivector i,ot
. It is' ·merely_ ~n u·nrea.lized ir:1crea$e :Jn capital.··. constructively : .. _received . . . . . ; . . . . . ' :-
Jricr~ase. or apprect;3tion _in . the ·_value . of:.the buUibt includinf) 'gifts and· NoJe: · · Expen~es, are
property. is- not. even an.accrual°bf income to the - '· . dPnl:ltions · ··. · · ·.. · . . ·· ·. _a<;:counte~ . fo( · in · th~
"taxpa"yer... p"rior -to' ..."fJ:ie. rea.liza)ion °t>f 's'ucii .. · ' . r.. . . . . period they sire_iri.cun:ea
appreciation lhrough sale. or" conversioo of·the·.·. . Note:. · -0,:ily . expenses' ·~nd not·. i_n tlie : period
.-.property "(liALENCI.A. · ~- RO*s_,., Jn9017?e_' .· actually. ·paid· for·sh€!11 be. they are.paid. ·
' Taxat.i_on (2016), p. 1q1J [hereinafter, VIALENCIA claimed .. as ·. deductions ; . . . . .
. & . R.OXA$, /()come Tax].. No income is· derived . .during. the. year· ' .
'
. . . . . nor a loss incurred by- the. owner until afte_r" .the
. actual·sale
. . .
or other. disposition
. .' of.the property .. in
~

38 2019'SAN BEDA.LAWCENTRALJZED"BAR OPERATION~

I
 II
• q

INCO-M.E TAX. -
SAN OEOA I.AW CENTRAL/ZEE>BAR OPERATIONS.-MEMORY'AID 2019
1M1Ns1i1 ; · ette ' a · 1 aaw4-a9wtWifi+MR1a+·s
.3. Claim of Ri~ht ·
'o~ctrine - /\ -taxa~le gain· Is
· . ':Conditioned upon the. presence.of a claim of right
G·ene'raliy .u.sed· by .Generally.··. ·used. ·.. by .. to'the alleged gah·anq·the: absence 'of. a definite •
taxpayEl!S ·'who 'do 'not. 'taxpayers wro~e 1'_'18ture Of . . 'unconditional ob.ligation to return ,or repaY. that
.keep ,regular books of bl.Jsines.s· uses inventories ·' - which would otherwise constitute7a gain. This is·.
accounts, such as since . 'this . method of .. a[so · ·called tlie Dc;>ctrin·e. of ·ownership·, .
· indiyi.duals engaged.· in a~cou.nting ,will cor.rectly · €ommand or. Conti:ol (CIR v. ~i/c0,x, 3?,7,.LJ..S .
. business and pra6Uceof refi.ect... . · il")come · by· .. . · 404, F_ebrf.!ary_ 25, -1946). .. · -:.~ . ,
· profe~sio_n · matching purchases . an.d · ···.·
· expe_nses .:ag9inst ··sales, .: ·In.. the .clairn of right. doctrlne, if· a taxpayer
such·as:medium an(:! large receives money or other.property arrdtreals it as
ik
f.;: -:.
cq'rp9.(atio·ns.· .,-
. : .. . .
. . its own under'the clahn of right that the payments
-are made .absolutely and not' contingently; such
r. ·yRevenue Audit. Memorandum· prder .No. 1~2oqo,.. · · .. ·. amounts are included.Jnthe taxpayer's: income.
.).t · Chapter ll(~)'(B)) [her1inart.er R.,4-.!vt.,O.J: · · · : .. ·. even-though the right tothe lncome-has not been
perfected .atthat time .. rt ti'o~s. not matter that the·
., Note: 'The taxable ·:Income shall be .cornp~ted ·_.upon·. . , · -taxpayer's title to the. p~o(mrty 'is in. dlspute -and .
.;~· , the basis of .t.he ta_xpay,er'.s annua.1:· accounting thatthe property may later be'. recovered frorntrte
{' -period ·in : accord<'l,nc·e with 'the .' method.. · of .. taxpay'e(. lf the . ·taxpayer who -has ·:_incluaed
~l . accounting re·gul~~ly e.mployed in keeping· the ,.~~.,... .amounts 'in income pursuant to the 'clafm: of rigt)_t
r. books_ of_.~uch_:t~xpa~er; put if_ no .such met~o~f~g(~/,)J-
c :'· ~c~ouab.ng has been: so employed, or 1f 1t~.e(5.:· ,\
doctrii,~.s.ubs~quently.·rel?aysthOSEl;ain?u~~s(the.
taxpayer may be ent,tJed to: a :d~9uct1on :m t~~
{_ method employed .doe~ not ·clearly -retJe.ot tm~·./,}.i·;(~· ye~r of repayment (C/Wv. ,Manila E/13ctn': . co.,
Income, .. _the . con:,puta.tton. shall .. be ma?? :t!m.s,,·,,(;'4:..:-7,./~c., CTl}!g.n'B~nc No. 77~, November 13,201_2; ·
accordance 'w1~f:i ·S!JC._h method. as m ·UJ.e, °.P.JJi'IOh~::·:r~r·i~1.§L1J,,·~.J_ay~er; ·G.R. No: 71~?9, Ju/y.31,. 1991).: ·...
.ct.the C::ornmls's!.oner.:c!early,.reflects ~~;,m.come_V 1 ··
~-:':-:·""jlj.~ . -. ,
(NIRC, as. aine,nded b.y T,RAIN;' Se.c.:4~[;,}r. :.. · · . ~1.~.:.:.~l 4. A_ll~Ev~n~f!j' est_:r ~o.r lncorne or expense _to_,
·· · , . . · _· ··
. ·.,.1"~':. ,1' · . ;.,°?-tJ;. · accrue, !liil~ t st requires: · .. . . · . ·
. · c · . : · . .. . · • . · · .. ·.
· 'l".fote:· R:)\.tv.1,9 · N_o. _ 1-2000_ proviq~J_.ti.ati~}\d..ef.tfle· ·.
· accrua~ meJl'rod! · expense~ R~1,:';9.!:lflig .~1~irired. af";- · }~-· :
ti): .
a.. The,fxirm c\ar_ig~tjQ income li;:ibility·to_ pa"y;
. ::in, ·'IJ: ~\ .· . .. . . .· . :
or.
.c!~duct,on~ .by fl tax~ayer. m :t,r.~~9,urrepf~~ear ~~en\ ff_, . ,. ·b .. ~ .ayf11a~1\Y ·of ·the.. reasona~(e ~~curate- .
they .~r~ !n_curred. ·cannot. b~- .~J~1med:::a,§1,9'~due.l!SQ .. [ );' · ~~ff!.n~il.~r.;.'9f.·~u,ch income or l!ab1hty .(CIR. ·
from incorn~ f9r.:the ~!:,JC'Ceed1ng1'.,~,!lr.(f)l:F.f~_v0sab,;e1f3) Y;( . . .. _vr.Hs~_fig]J_fGulfural!Corp.! G,.R.. No. 1-72231, .
~i.J/tural Corp., _GR. ~~···'..72~31,ff]'/fJl,:f¥~1}\~007)f: f.:[·. .. ·.
~e/)rtJary ·12'. 2007). ·. . .. . . .
Kind~ ofT~s~s.i.n D~t~.rmining'.y.v~j'~t~r,.. ~9_&m4::i;,_};;:f;·~E.!wi~g,zyJc ·13~nefit' ,Test or' 'of :Q?ct~1rj,e.
Earnei:Hor Tax,,,P..u.r.poses-:.· ... · · : ·1,t" ·, · ·.,r<~~-,-.i'.~l;~Prej)rtetarylnte,rest :...· Any ,econor:m<:: benefit to
.1. · Fiow.'?f ~-e~it.h Test.~Th7-te~t ~f ta~pil_ityffelhe_ .. · :the·. e"!ploy~~- . that : in.crea~E!s ·: his ~Ell :,wo_rt~,
f.-' . · .~'imurce", ,•.e.,th7'P(-OP.e.rly, ·ac(1~1ty.9r-,s~1.'YJ§fitthc!t·. · · . '. .whatever._may_ h_f!!ve ~e~n _the rn_ode.by .w.h1~hit 1s.
{t · , .·.produced ·the.· !(IGo_mfJ. rj~terrn1f!e_s WQ_etner any . ·. -: :effected,.(~ .taxa.ble (M~MA.LATEP;, Reviewer on .·.
i· gain i,vas de.trved froin the·:tra_n'sc!,ctlor,,.(CIR·v. · .··· -T~xation . (201.4); ·. "p: .. 114) . [hereinafle_r.
"· British' pv~r$e.as Airways_ Cqrp_., .. :.G.R. ..Nq: i-·. · : MAM(',LAT~O,Reviewwf:. . .. .'. : ...
657J3-7;f',prif-,30, 1987): ·.. · :; ·. · ··. · . · ..
·6_ ·.c.9nttol:Tesf-t~h~-p~..-Ver fo :d,sposi ~f i'ncome :·
2 .. Reali~ationiSever~nc'e Tes.t -. -Also kn6wn · as .. · ·. ·is'Jhe equivaler:it pf ownership of'it. Tbe ~xercis·e _
, ·.the .. M.a~ombe1::'test.The.re is· no· taxabi'e lri.qo_rl)e··· . "of. that power to; procure the payment'of incqme '
,iJr.,til. · there ... ,is . :a se.paration fr~m . capital ·'of .. to ariother is >the.
,'enjoymElnt, an'<;l (:IElnce. the .
..... sc:imethjng' . of- e){c~arigeable: value; .. thereby ·· . r.e13lizatlon,·pfthe:income by.him whe:> ~xe(cises.it. ·
'~ '., . · · .· supplying the. real_i:zatioA.or .transm.utat]on which . · (Helveririg v.· Horst, 3:11' V. $. 11~, {\Jov,eff!ber:25;: '
'.!: ' would result ir!'. the: receipt of in~orne: The . 1940). . . ·. · · . · · .. : . ·. · .. · .
' ·essence of'the)est is:'.that hi order for .'ihco'me;to
. be taxed; it is. to be:severed from the'_pr.operty Income Tai Systems the Philippines: :. in . ·· . ...
... f-rorri Which It was derived. . .
~. . . . . . .·,:.
.. . . '· 1. Global Tax
Sy;;tem ....:. The:· tax: system views
.
. . ·. . . _.. . . . ,. . . ind:iffere'ntly Uie' tax'.bc.1se: and. ge,nerally .treat~ in
The CGurt'ar.ialog'ized ''.capital" as.tiei.flQ se~arate . Cc;>mmon all C?)legories bf la~e,1ble lni;:ofne Of the
from "income" 'ii, the way·that a tree. is separate ir.apividual, It taxes a.II cat~gdries·or ir,corn.e.exc.ept .
· from .its :(n,Jit. It ~equire~ the P.resence:of.a. "ti;ix · certain passiy~ iricc;mies and Cf!J,>itat:gains (Tan v.
.... evetir which is an event which triggers· a·tra_nsfer Del.
1994):Rosario, Jr., G.R. No. 109289, Octo.ber 3,..
0

of-. owne.rlihip. bf property (Elsnilr v:. M?comb~r, •• .. · . ·. : . . ·. . . . ·: .

252'U.S. 18.9, MarcfJ 8,.19~0). '. .
I ,

2oi9 SAN BEDA.LA w CENTRAU.ZEDBAA OPERATIONS' I_:· 3~r

 . JNCOME·JAX .
··· 2. Schedular Tax Syst~m
,, SAN.BWA LAW CENTRAllZED "BAR·OPERATl(!NS -'"M"E:M,OFW AID 20,:9

.System .empfoyed
. where the income tax treatment varies· and is
.,,asws MIA IWFW i_&@h

5.. Capital ~ains·T~x (CGT).on safe or exch~nge·bt

unlisted · shares of stock .of a Domestic
Ii
.-
·. made to depend on. the· kind or. category of . . Corporation· classified as a capital asset (NIR.C,
taxable income of the taxpayer. )( itemizes the · ,- Sec. 24(C)); · · ·
·different·. incomes and ··"provides · for . varied 6.. CGT on sale or "exchange of real property io~ated
.percentaqes of taxesto be applied thereto--(Tan in. the : Philippines classlfled ·as. capital. asset
v, Del Rosario; Jr., (3.R No. 109289, Octob"er 3, (NJRC;, Sec,.24(D)); · · ·
1994) .. · . . . 7.' Finaf-Withholdin~j" Tax (FWJ) oncertain passive
or
3. · ,.Se.mi;Schedular Semi-Glbbal Tax System - lnvestrnentIncorne (N{Rc;·S'?c.28(8)(5)(b)); · .
·. It is:.: .. · :· .. . . .. ·8".-. Final . Wi~hllblding·. Tax ·..(FWT) on. income
· · · · ·a. · Global, in 'the s~nse that all compensation payments rnade to· norr-resldents (individual or
· income; busfness or professlonat income· riot "corporation); · . · . . .
· :subject to finat withholding: income tax, and- . 9~ Fririge Benefit Tax,(FBTJ (NiRC,"-Sec.33j; ·
. other .. income ;not 'subject to final-tax are 10. Branch Profit Remittahce··,rpx_-·(BPRT) (NIRC,
added togetherto arrive at the.gross income: · Se~.· 28).;. . · . · · .... : .. · . · ·_-: ·
and the taxable incame-(i.e., gross frJCO(lle n,. Improperly Accumulated__ ·Earriings Tax (l~E":r)
less.allowable d~_duotions and exemptions)is (NJ~C,,.Sec.. 29);_ and · . .· . . . ;
subjected to ope set of graduatep tax rates (if .. 12. Gross.lncome Tax .(G.IT) (NIRC; Sec. 27(A)). .
· individual) or normal corporate iAccime ta~-=-.;.· . -: · .. . ·
rate or minimum corporate .i~come t;;if:1:me: lf ~~ax~t?)e lncon:ie:.. ' . ' .
-as . the case may. be ._.(1f~o'.fp0r~lon)· lJ.1j.\9o1ri>rfp~~t1ort Income - mcorne denved from
(M..AMALA TEO,· Reviewer,s'/;P_ra:(cit"l3.5):~... ~~.._.,Tu~f
rer.id~Ang · of services .under an employer-
·b. -~chedular, . in the.. s':1ni~tha\Jttassive .. : . ElrftPlqY,~:re-1:iliRnsh_ip;.. . . . . . ·. .
mves_tljl_ent m~me :subJ~'ct t0~$!1'1Jµ,A!:l""~ie"'?."""'P....J;Q.fes'$r--'!3' l!"RO~e - tees derived ·.from
capital ·gains 'from th:fs~t~~o,ttrapsfer ib. T
'\1.~nga}ing'\1~4iJ \ende·~~Gr-: requiring.. special,
shares qf stock$ of aJdoiif~$»aco!iPoration -~tra!niri'\i as-~ 41~
R(afession~I · ~s a · means .of- i
. ·and real propertfes-re"i;ii1:1insu1:>1ect t1''di\ferent_· ,,.?'~, Jiyelil:i{od, wli)jGfl;\n}:~de, but are n9t limite~ to. the
reh.,
sets···of _tax. rates c1'f. te1Na•l>Y:. diff ~x . : : ~ees ·cPA5i\"~o~s,lawy~rs, engineers and·· ot
·.
.·
g. ·
returns (Id.)_ . . , . ~ pr_~: ·.
· . _ . · ~ . r,: . · . \ . -~
-~~;?). ~_::: JJ_l.'ie lik~; . · -~ \ · .· ~
.
. .
:susirless.lnc9f.rle,.-'i_~ains.or _profits qerivedfrom
.~ -·

: (:rite~i~in lm1;>osing P~i~iPR!~~~1qJ~mffff~;' .. ;~~~~reridir~. slrvicest:'.l" . selling .. !llerc.halidise,

· 1 .. C1bzensh1p or. Nabo~~•tY.r(f!~mcrJ?fe1!;.~ifie~.. 1 r1":'\. n:iasi~ ~c)_6rmf ·~f~U ts,. fa'rmm~- an·d long-term

·
basis of the .i.mposlti~>n- ~- ~mt<line. ~-~~\
taxpayer's cit1zenship.. _T. us,. cili~ens ~~1
~:F
:_t{.__~~
·
!'Jlf..@:C~f,XD_lti~>n.eontracJ_;. ·. · · ~- ··
lf.-::V.~(~}.v.e.lnsfBme -,.income 1n which the· taxpaye~
, ··· ·

.. Philippin~s •. ~hettit;H' 'n:!_side ,is <;>r nl:'.>1ftes-1r11t); ,.,,/~j;i'~r,ely wefits'. for~ amount t_o ~ome _in, which
at~ su~j_ect to o.1Jr,inoome taxi@W-(2 C~$,'AS~~~1<J9Jud~sf}iut 15.;,flot-fimited to, interest" inCo!'fle,
NIRC (201.3), p; · 77. "[hereinart'i!~2 ,.GA§..~S:~~~f'W~l!Yi~g..mjl.;~ivjde11d in.com~. wir:mihgs and·
MAMALt,.TEO,lncpme-Tax,supi-';!J,at-tf~'§fff)i.~':~:Pri~{s1;i.~¥..· ' - ·. '·. · ·_- ·. '· ·
., 2. · Re~idence Principl_e. or Domicil~.tjnc.i.p_llf-.1\ ~101\~P.it~a.in.·-:-g~in fram·dealings·ln capital/
· The.basis."ohhe·impositi_bn ~fincome ~~')]1e.. .1.'Y-11~~:et'l;;(~.R. f\Jq:0a~201a, ·sec. 2(i)). ' ·
. ,residence of·the taxpayer".-Alrincome'derived ~---- . . . . , .
. ··persons... residing· iA.. :· the f>hilippines· ·.shi:ill ··be· . .·.. Significanc~of·Know.ing .the Type ·of l.ricorn~.
subiec_t·toir,icc_:,me tax 'on tf-1e incorn·e· derived (rqrn . _ ·It is .irnpo"rtarit to kndw the. lyp·e o.f income reafized.bY
··sour~es. within th<::. P.tlilippines (Id.); anq .: _. _ · · ·. the ta~p.ayer.since- the·:Phllipp,_ines. has· adoptec;I. !he·
· 3. .S9tirce Principle·- .The basis of-th~ imposition· semi-schedular/semi:global ta:>(syste.m."T!i,us; some-
. :6f)ricome _tax· is the-.source·.of thEl income; All . types qf incqrne are subjected fo. graduated.tax f~t(;)s.
income · deiriv.ed · "'from· '.s,ou_rces: withio ·th\,. wtiile· others· are ·.not ·(2:..A DGMONDON, Taxati6~..
. · · Phjlippines shall b'e subject to in·come'tax (Id.,): · ·· · (2013), .p. 56 and-68)... '. ·
. . ···. · .•. ! . .. · ·-.... . : . . .

.· Types· of P~ilippine Income Tax: : . . ·. . ··. •' ~.

. . i . ·G~~ouated fncom·e·:.
. Sec, 24"(A));
on Individuals. {NIR¢,
.. ·
· 2 .. :Regular(N6rinal.' 'Corporate· .'1ncqm~ Tax:. on .
· · Corporations {RCIT} (N/RC,· Sec. 2_7(A));: .·
Tax
=· ... ,

.
· ..
~<·
· ..
: ·_j ', Sir[JSOi TAXATION <
~
·l
3: · Mihimum Corporafe Income Tax 0n:CorporaUons .. . ltisJh~--place ~'-~-~thority-that.tias-the right to impose"
. (MCIT) (NJRC, ~ec. 27(E));. · . : _.. . : . · and ccillect-taxes (Commissioner9{ Intern~} Revenue:
4, · s'pt'icial lncom~ Tax_on·certai11 torporations"(i.e., · v. M~m.1beniCorp., G.R .. No. ;137377, De'cember 18,
. private educational institutions, -foreign currency . · 2001). It i~· also ca Ilea "place offaxation" (ABAN, Lf;lw
.. deposit uriits·,.a_nd inl.emationalcarrier~);'.. . . ·. of Ba$fo Taxation,supra at 57). · ·
. ... .. .. ·.· , ,· .·
. ·.·

40 2019.SAN SEDA LAW.CENTRAUZED"BAR OPERATIONS

 .-

INCOME TAX:.
SAN BEDA,J-AWCENTRAllZEDBAR OPERATIOf:/S.~ l!lEMORY.A/0
I . . .
:1019'
ii ISM. PS

,, Income from ·s.ources VV.iU:iln th_e:Phiilppln~s: . the place.where, the shares weresctd (NIRC,
.11: ... 1. -lnterest . derived from . sources within the as emended by TRAIN, sec. 42(1=)). . . . .
1:i
· Phillppines and interest on bonds;'notes,or olher' .
. J. interest-bearing . obligations ·of. residents, · Income from Sour~es without the Phlllppines:
~-- corporate orotherwlse (NIRC es .etnenaed by- 1. Interests other than those derived-from sources
TRAIN. Law, Sec. 42 (A)(1)); ·. .. . within ~e- Philippiri~s (e.g., Interest earned-from·
. i Dividends received from a: ·. deposits· on banks, located outside the ·
a. Domestic corporation: an<;! · : ", · . .. · · Philippines, · ;,md. interest· on -.ioans wherf! the
b. Foreig·n:: corporatton, -provided that at least debtor is. not a resident of the Philippines)(NIRC,
_50% of; its gross Income .for the. -three (3)- . ··as emenoea:by· tRAIN,-Sec .. 42(C)(1 )); ··. · ·. . .
year' period' ending ·with 'the. close of its. ·2. · Dividends.other than those derhied from sources.
taxable yearpi'ecec;li)'lg':1be'declaratlon of within the Philippines (NIRQ as· emended by·
. such .diy(ifonds or 'fc>r -such p~r( qt sueh · TRAINL{3W, Sec. 42 (C}(2)); .
.. period. -a~.:the- corporatton. has been ·,n. • -, . .· ..
. . exlstence wa!:i.·defi"'..ed· from sources withih ·. . Exa·mples: . -, . .
. ~- .. · .: .. · -tf1e · Phlltpplnes · (NIRQ, ·as.· amended by . · e: Dividends . received. : from . a: : "foreign·. ·
~--~.. · , TRAIN,- Sec: 4.2 (A)(2)); ·... : -:·- . ·· .: · · . . corporation. les~ 'than 50% ; of its gross .·.
?if: · · · • · incomeforthe t~r"'e
(3)-year. pe·rlod·.endlng:
.. Note/rt is'lim,ted. onlyln an-amount Which. : ·. with"·" tM•. close" of its taxable year
. tiears the same ratio to-sucridividends as the· .;':A pr~cedlng the ·de.~laration. ),t . such
.. gro.s~ lncorne ·of- the corporation for' su~h<tY',!1.. . . dlvldends.or for such part of such period·
. 'period .. derived 'from sources wlthln 'tJ. 11e(,:6./p . . as the corporation has b~e·n in existence
. ~-hlli~piries bea_r~io_its ·gross incom_e·trorv,a1t.tiP/.~ · is from:sources.\'."it~in µ,e Philii;>pines .. (Nl~C'
· s~urc_es [lnc.~>"me P~rtly,.Within an~· p·~_r-;tl~~/·-'ht.::-":S...as. ·<}/"!lended by TRAIN Law,. ~ec, 42.
• . ·:,with~utJ ({'J~RC,._as·· afT]er1ded by. !r,~IIVJv.,JifA:;;_:.£#~Ef:~ f1}l(-:?f,~J; and . . . . ·.. . . . .
-~_l . '$e9.. _'42JA)(2)(b)). · . .. . . _,,/:"J"· ~ Jt( · ···. b.. -D1,;,1deJ11.~ · rece1v~<;I from_ a . n~n-resld __ .ent-
}_. · . · · .· __·. · · · · _.. : · '. . · . {;...!<. · . ,;~.,. . ,l · · : · .forei~l)j .. ~orpora_tion .· (BANGGA_WAN,
{ . · 3,:_ ·C_omper'isafi0l'1 f?r. lab~r. or_. pe·rsCil~J~l{ser-vjc~$Y-- ....\\ . , . . lnc9rf.~.-t~ation _(2017); p,·. 78) fher~inafter
.?: · . \·.;7RA~f~J~t~t!W~Jy{?~:ft~f~V~de: · ·1:r ., . . ,8-1G~AV(t'!
1· .. ·· : .:: :, . .' .·· .. ··; .. ·.
> . · 4.·. 13e~tal~ ~_r:i~ r.oyaltte.sfro~eff.»~!1YJB~t~~m. the"" f/~3._ .C~m_0e~a;_~h~r · l_abor or. ·P-~r$on~I. serytces .
Ir ·.. . 'J:'h1hppmes or fr9m:any 1nt~w.-~t<1J:r:"StJ.Ch})?r:P~~- ·.fii· ·. ~ pen~rw,~~~m9~tt:ie·Phll.1pprnes: (N~RG,. a.s-
t(' . . (NIRC.,: as a_m·ended byTRA.,.IN.,·Se§rrif2t~)(4)-ff"-.'''· ~)[ a'JJ1eneledf1ii.([}JJ(/N;Sec.- 42(C)(3)); .· :· · ·
'f · 5.·. GaJn~;.~pr9fits.=a.~~_-inc6~e. f~~~tti.~fs~J~\ofref _ (~ -4_. . Rental~:or_r.d'yal~ies fro':°1·.pro.pertytoca\edwithout
m
-~'. ·: · ·. property._-·locate<:! . -the, ~.f:l1hpp.JileJ-JN~R~..as ·) r ., -::'-A9~-~h1hpp[ne~ 9rr<:'yalt1e~for t!J.~ u~e o~_or forthe :
,;::' ·: am.end~d·by !~AIN, _Sec. 42(A!(5}J:::.f!,'f).d;jf_.. , . .• , :,r---~f1Js~1}~9.~~f.us1n~wrthol!~.the Phtllpp1ne~ •. patents,
,. : · 6, :·. G~1~s•. profits· an.i:l . ,~com~· f.rom_'J~\~~. saJ~~~!~f<'.Je~pyF1~Ms, · se~ret. processes and form~las.__
:-· .. pe.rsonal prope:rty, sutiJect to·the .fo!Jo'wmg;fu[~s: · .. · goodwill;. trademarks, trade brands, franchises
f. · · ·as
a .. .-ln66rrye '.1s . .:tre~ted partly,::t?c,m~ii!.lr~es . . . a.11d .ot_l')er_iike. prop~rti~s (f:JIR_C; as amer,ded by;
r · -wit~.in. ~nfl _P~\r;t!Y fr.9m. _sourc~s. wit?o.L!t_. _the . t~N, Se~: 42(C)(4}); and . . . · .' . · · · · ..
· l?h1hpf?.1'!es ,_f: . . ·. ·· . · · .. _. · : . . 5. ~ar.ns., t:?rof,ts. ·and ,mcome fr.om· the sale· 9f: real .
i. · · Prod1,1ced; in wt,ole.or in pali witl1in .and· .'· · · property:locijted without the Philippines (NJRc;
·. · ·sold \,vitho.ut the Philippin_es;' or... _. · · : · ·,. . . as ;:Jmericf'ecf by TRAIN, $ec, .42{C}(5JJ. ·.
if. · f?{OdOcid,·in.who!~ orirypart without and . . . , .. ·. .: . .. . .
:,.:solq within. the: Phi_l.ippine.s {NIRC, ._f1s - ·.. · · l_nco.me. !rom.:,S.oµrces_;Pa~ly Wtth_i~ anq · Part_ly
.·._;.. amehdf!d:·by TRA1N'.t:.aw, . .S'e"C:,, 42· (EJ .Witho~t th~ Ptiilippiries . ·. · . . :
··: ... :· :: • ._ • '' · -:'p't;Jr.. 1f. · . . . . . l_tems- of gross. if'1COh1e .hot .allocated to sources from
· ·· b: lnGciine .is. treated as derived ent1re1y ·from· ·within · or. · with.out . the Philippines . stiall, .. unlE?ss
. . . . . . . sbur.ces. wi~hin ·.the'. cou_ritry where .. th!=?'. . . . unmistakably._from a so_urc~ wit~in o(sotirpe with~ut.
· prop~r:ty is:sold if:' · · · · · · : · · . . · ..the· F'hiJippihes;'. b:e treated as deriv~ from· sources
.. ·. :· .j; : ·Purch~iiecf with1r, ancl· sold' without_ the . -iiar.tiy, wi,thin' and partly.without_ the P_hilippines {R.R .
. . · : : Ph'flippin~s; ·or· ·. _. . No_. 02:4o_,. Sec. :16i). .. · ..... · .. ·. · ·
· . · .:i1. ·Pur~t;ias~d without :and sold w.ithjn .the · . . · · .. . ' · .
• • ·: ·.as·
J Phi!ipplnes ... :(NIRC, airie.n.ded by ·Pe~sohal Pr~perty Prod.~ced/P.urchase~.and· Sold
42
.TRAIN~L'a'!';Sec. par:
(E)' 2): .. · . .: . . .1. · _ Gross income denv~d from the. sale of personal .
' ·. ·. . . propei':ty proquced (in· ~hole 'Of in part) by _th~
~,. .th~ ·exception.·is gair) from the sale ef.sha·r~s. ·· . . . taxpayer within the Philippines arid sold ·within_ a ·
·,
I·
of stock in a domestic: corporation, wherein . foreign country, 6r produced (in whole ·or in part)
. the in.cb'meIS treated as derived E1ntirely from . by the taxpayer.'within a _for~ig_n·country ·and sold
· so_urces within ihe Philippines, regardle$s. o_f · within the. Ph!lip_pines - pa~ly withio ~od partly
.. ,,.·
~-. '\

. .2019. SANBEDALAW
. CENTRALIZED
: . B.A.R.OPERATIONS
. I ·41.
 lN.:COME··TAX
SANBE~ LAW CENTRJ.\~/:ZED BAR OPERAT/.ONS._ MEMORYAl~ 2019

without" the .Phlllppin.es (R.R., No. 02-:40, Sec.

162).. .

The: . word . "produced'" includes created,

S~I~ of Shares of
Sto_c.k·
Of · Domestic Corporation · Income within the
fabricated; manufactured. extracted, processed, Philippines· ·· ·
cured, . or age~ (R.R
. . -. No.
. 02-4Q,
. . Sec
.
. ..1.62).. . -.
.
Of Fore°ign' : Corporation. Income · Without the
2 · Gross inco~e. -~~r.iv~d;_.from the·· p~rchase· of
f?hl!ippines ·
persons! property within and its sale. i.yithouf the .
. Philippin~s. or frorri the.. purchase of personal
-, · property, without .· .and .its .. sale :.. wi~hin ··the·
Philippines -de,rived entirely from sources within:·
the country In.which it is sold (N/RC, es.emended .
·. by TRAIN, .Sec. 42(E),'R.R: No. 02-40;:Sec. 162). ·..
. . l .. ··- ... . . '. . .. ·· ... • ...

Sui:Jlmary <:>fF~ct~rs.:C..onsfdeied)n
Determining the Source of [ncome- .
. : .. · ..._. ·. -~ ·. . . . . ·: . -~· ..

·si1Je _6f real property· . . 'Locetlon of property .

·4;2 I 20~9 SAN SEDA LAW CENTR'ALl4ED. BAR .OPERATIONS

·\.
 l"f~J. CO-M.E·:T.AX
SA/ii BEDA LAW fi:ENTRApZEDBAR OPERATiONS - M_EMORY:AID 2019
.
• SM¥4ta

Urider Sf!'<: .. 28 (A)(3)(a) of

MAM

the NIRC, th·~: tax of

·W awe . ff ••

. two .and 'one-half percent (2 1:12%) of Gross CLASSIFICATION'OF

Philippine Billing_s· attaches •only when ,the
· carriag~. of persons, excess baggag_e, c~rgo, TAXPAYERS
. and mail origin_ated from the Phllipplnee In a.
contlnuous . and.' uninterrupted flight,
Taxpayer . .
: regar~less of where the paasaqe .docurnents ·
Any person subject to tax imposed by Title II of. the
·rwere sqld (AicCanada·v, C!R_,. G.R. No. 169507,.
. ./f!ln.uaey 1-1!'._201-6).. ; ·. ·· . . Nl;Rc .(NIRC fis· 'amended by TRAIN Law Se.c: 22
·.• (N)), .. ·,.. '· . . . . ..
. ···'su~inary ~t 1~comi (based: on source> · The term "person" .means ~~ . .lndividu.al,. ,a: .tru.~.t. .
. ·' . ·. ·.. ·Taxable
. -- ~ . .. :
for Eac;h"Taxpayer
..- . . . . . . . .
.
; . •" ."" estate, or corporation· (NIRC as· amended by TRAIN
-;.. Jaw, Sec. 22 _(N)). ·' · ·

-1· Si~~lf.lc<Jnce o_f -Knowjng . th~·· <;;iaisific~tion' ·. of ·.

. Taxpayers· . ·. ·, '. .·· . · . ··
sources within and w1thout the· ·.. · .ft ts i.rni:>ortMt ·,know- 'the different groups 'of to
PhilipRlnes·: taxpayers in order to' determine What grqss·incomes
. . . ·. · : · are to be.recoqnized for tax purposea, .the.excluslons
:·only_: ~m
i~:c~[li~- ~eri~~d- !rom 1;;~
._from .fr,eir . gro~s.- income, ·. tt1e. exemptions," the
:sources. wlthln th 9 Phllipplrres': r;r ,,·. allowable .deductions ,arJd_ the, apphcable. tax rates (2-
.-' ·: · ·. ·_. · . · . · ~-~:;;./'.,,-\}A,OOfvJONDON.,Taxatien(2018),p. 134) {h~Yeinf![ter
. · . :. . ·r . ··.•'~:.- .• ~-A DO!v1.0N()OtJ].. . . .· . . · · . . · ·
·Qnly on income.from sou,:9Js .. : 1 J-::---r:-r-. · _.. -~--;:-,. , . .: :
within ' .the. P~lli~p)tiesl (p;..:..·,r~:.:in'&t~1Jti~hxpayers
· . ~rovi~?_d,· that- a }~~~n ~ho A lJ. · · ---. {~i, .
. 1s·.a c1t1ze1J. of,tlif :,f.~}hPpmes; ~;;:;(! .'· ·. · ~enera1i(R1,ss1f1catl.on Rule for l_nd1v1d.,..al'
. ·: . . .. . . .
~n~·. ·re~~ives ·y.~~~-~·~.li~A' . f~. .Taxpa~EJrs/ t. ·. , · ·. · .. ' ··
-~,broa~. as ,;:'~~tnb~r.;.of,.,ttie !'.!~ ; -·~:.
_1i:i~fnti6n:.~rli~ _intention. ta?'p~yEir f>f.the
complerrfe.Fff·. of •.:....aV.. · vesse · {,.q· · .
rF1~~rcfi}g .. fl\e .natlm~- of _h,is -stay .Y11th1n :or
~~9l:l~.e~';1;pe~~J~~,Ly . -~J.Jl : t\J ·.
mterrt!3tiOfl"L tra,,c;!~&-~(~.a!I ,h~- . ~,A. .
~~$.t~(~rk:7t~f/~~}iPPi.ne.. sha_Jl ·?eterihin_!=J · his .
'. . a~9Hfi~lrJ;;es1der:t~Y... cla~s1f!c_at\on .. The
. -treated as';"':~':o.yerse.~s: !taxpayE:r shaU_- ~ubm.,t. to Jf:l«=: CJ_R· the_ BIR
ccinfract wo.r.k~si. ; ·:
·· ·: ,. . · · .l\ .. /' : .
P' .'L1 1,.H
uL~. ?oc_u~e~taJy
'·l·.-~·<.1.,• • .l.,..,1_otent1.on, and :
.:P!,Oofi,
.. ,
md1~allng . ·swc_h
.
· · · · . ·'1 .·....-c<,,., ;.t,· ., ... "''"' -,··1. - th f . I. d f It f •. h
· :·· · · .. · t'":· . · . / rr. ·~~.i!.:~L:~'::,Ji;.!!QW. ·.. ·o S_tay: .. · n . ea\! .. o · s1J9
_Or:ily on·•~-~~m~·-~~·v~d/{.~m. · · · · doc.utoentary .. proof, leng_th of .stay _9f an
·sources within the\i,_U!R91nes- . lndiv!du?I Ta2<.P,l:!Ye_r" in a co4ntry js·
• , ·-·'.. . . .. ~...:,1.t.:'.' . , . con$f~eredJB".1NGGA.WAN,'.supra-~{ 71) .
. _:.. Kind~ ·ot-,h.di:vic1~a1 ·T.axp~~~t;. . ..
. AIL - jnco.rne: . cietived -fr~·m . · i:v:: R'e.side·n·t.: c·1t"izen_ -(R~) ;:_. ~ citizen of_,.the:: .

.s.o.ur~es·.within·'aiid with~u't 'the · Philippines·. res_iding_ tfier~in,· Li~less qua Ii.fies· h~

c;!S a non-r1;Jsident9itizerfund.er Sec. 22 (~).of:the
_Philippines .. ··· · , .. ··:.· NIRC. ·.: . ··.' .··. ··· ... ,·: . .
·.: ~ . ,: . . :·' .·

Qnly. on ··in.com·e cferiyed 'froni. : . Ttie. · .tolrowi~g .. ··ate · tt:i~ .

Citizens of U,e
-~our.ces withfn the. PhiJippine_s ·· . · · . 'Phllippines: "(CF~N) . . ·
\. ... ·.. . : . . · 1):-: · those who are dtizehl?'OlJhe 'Pt,ilippines at ·. ·
·. ': : ~· . tf)'e- -titn~. of· tbe. adop.tion.' ~i-·it:ie 198Z ..
. ~ Qciri&titutiori (i.e., F'ebruary 2, 1~87); '
·. 2) ·those·, \'.-'lwse . .E~\h(;lrs or mot!i~rs · are
· · · ciliz¢ns 6f the Ph_illppiries; · ..
··3)_ · Tho~~ .. b9m: ·".!;!efore · January · 17, · 1.973
··(NIRC as amend~d·by TRAIN J:..aw, Seq.. 23)
~·?. . . . . :. . ·. . . . . . : . - . : .. . (effectivi~y -of.1973 Constif4tion)·. of Fillpin.o
\ . ;.· ·.
· _mothers·, who elect P.hll_ippine. citizenship ·
upon reaching, the, age of rnaJority;. and
i: . 4} Those who are Naturalized in accordance
· · · · with iaw (CONST:, Art. lit, Sec. 1):· : . ': · ·

2019 SA~ BED.A lAw <::E~TRALIZED BAR O~ERATlciNS I 4_3

 . l·NCOME T_A)(
sl\N BEDA i.Aw 'CENTRI\LIZEDBAR OPERA.TiONS- ·M£Monv·A1b,2of9

Note: Citizens of the. Philippi'nes who marry employment with a Phlllppine.ernployer

aliens shail retatnthelrcltlzenship, .unless .are not considered . non-resident
by the.ir act or :omissiori, they ar~ ?ee·~e~; 'citizens .. · beca~se they '. ar~· . not
under the · law to · have. . renounced 1t . considered employed abroad {INGLE$, ·
· (CQN$T.; Art. IV; Sec. 4). · . ·- . Reviewer, supra
at._39).· . . .

Rasldence . . . ·. ._ . 4) .Has ·be~n:~reviously ..considered as cl. non- ·

It is the · permanent home,_-tli~ place . to which... resident .citizen and 'who . arrives. in, the
.'whenever.-absent for business or pleasure, one. · Philippines at any time during the taxable. .
intends · to return· · (Salu.do, J,:. y. American year to reside permanently in the. Philippines ·
Expif?,SS International, tnc., G,R. No- 159507, shall' be, considered, rton-rasldent for . the
. l)pril .19, 2006),. , ~ ··..~ .. taxable' year 'in which he arrives· in. the
' '. Philfppines wlth respect -to. his. incorne
ii, . N6n-Res'1~~ht;C.itize.n.

·n
. .
:Philippines who:.(PIMP)
(~Rcr-
.·
a cltlzen .of the .

l;:stablishes . to ; the . satisfaction . of. the

Commissioner the :.Jact of !1i$· · f hysjcat
presence abroad with a: defir:iite: intentlon :·lo
· ·.. · ·. ·
~*
. ,;·derived frQ.ITT·sources .abroad until _the.date· .
. ·6fhis11hival In.the Philippines:(N/RC,Sec ..
. (£)). .. ;. . . . .: ~: ·:-, _./ ·._ .. ·. ·:-_:: .. -· .- : .
. .
. tilote: The 1ist~d 'peraonnelof ~- domestic
_

. reside therein: . . ... : . . ... -.. -P"""'"'*'=~'corporation, who' ,fre temporarily ~ssigried .
2) · Leaves the Ph11ip_pin~~ durJryg·. th~,r.1Ja~a~e. J 'J A, )': ~i[br.-Q,adand who'do not have the intention to·
year to reside abroad, e1t~era~J!l!f'!fn:'t.9-':{mt. l., \J
1 /re~ia~
or for e_mployment on a perm3.1,ne~i3p~,(!:.ee,;.c=-":--"'"'.,,.,,.,.,;,.-a.:::d.eJ~9~1~o,
at the _:places. w~ere."· they:. are
<:ither. as immigr~nt~ .or. on_,a_
O~erseas ~~n~ract Wof!f.~:> . (.p~W,o~,,...,.._...,=.,_..,,. ~~",vi~tbasis, ~annot b'; fOns1der.ed a:'
· : Overseas F11tpmo Wi~-r. -e~s~t.Olj~(.R~".:; ~"~... ~"\on~.s1dJ:.Jt1~.e1~i~ens. _Hence,.. '.their·
No. ___1-2011, Secs .. 2f!n··JJ.i:.'""i ·-l· ·I., .}¥. ~ !A- ·:·c:;\mpe~~t1on\ .aunr.ig: ·.t~~·r .pen?d. of.
· .1 ""'¥ f ' . -~1. -- · as;;,ignm,en) cap\iotbe.considered as income ,.
ll /· · . . A~-»--·--'
. . N9tes: . . . · .
a). lilRC. under··. su~~q_tlpi (b)
: co~sidere~··as R't fpr-tot,
~'"W[Jf:;r[ . .d.~.i\led·a'br:d1c,t:s4ncethey ~re ·not''rende_r[ng
---"''°"" _;,, sef"ice \f~J;·,,dawother. ··corpor<;?tion, · but
ax,i1bl,_ re~1n~· ii_C\ ·~t,- comperJScl(ie_i:!_J (!erive'~ _ : . from_.. -·s~rvic~~ ..
·· w_h,c~ he.. depa!'J_e,g~fl:-6 . ·the_Ph~1ppme ~JP:] · ~j1di-fedijnqefjt~e:ER-EE r~la,t1~msh1p".V1th
: with respe~t to Jiis ,ikp ·. e,~~~~rof!'.)
. . , · the _beg1.nn1hg· oiitberr5fV_dfa1~9~"year f81 -1
-~ f\fr.: ·
n. · ,:
(B,.,Rjl.JirVg
'R
k"-• fl
517~2().1·1, Decern.,ber 22, ·.
.. .
.I
·. imti! th: date oft({!;.ttepl:l_rtu_rW..r~rn~th~A 1
. ~4;] t: . · · · · · · ,
/;.... · · . '.
Philippines. . \ -.. . \ ~u)~.
b) · :raxpayer sho!,!ldonl~be 1:~~~d ~s,}'f'!~~p.,ffi~)Vno
:
.

fl>~~:, s·e.gntra11t Worker (as NRC) .. . . ·

<;.i;fizenem21'o~ed· in.'af9:eig':_CO!,Jhtcy, who
f(!r the taxable ye~~. ·~-/Yi~icl(l~~'fT,;'l\T"~i'.ha~dally pre~e'nt m a forergn cou~try.~as a
... d~partedjrom the Phh1Rp1n~~~e_~~¥g'{~n1c~j:ms employment thereat (R.R. _ljo...
departure. ~ ~f:.Y/1 """'"'''""'"''"'"'"l~tr.K\.~& ~Y.-·
. .'c> An individuai"·taxp~yer rn~~-ib.~f a-1\/ ~:\..~J.~~
resident ahd . a· non-r_e.s1dent ll'J""iQ.ne .L, ,,l~b'e"considered as ari OCW: (FREa)
--. ·.
t.
· · ... -
·. .
·
. ·

taxable'):eara~~the ~~-term(nationif'.o~---= j) . He:. must be .'pt}ysicaily · pre,s~rit in. a foreign .
. ·iS.resideJlt OfJlQn-res1dent IS_. done .m .a.
year to. yE;i~r basis. : .. :·. . . ·. .
:.. .· :, , · . ; , . · < ' . ~ : . · . , · · -:, , ·. .
3)° Works.:,and der1~es 1.ncome from ~broa9 and,
who·sei ,e_mplo.yment t_h~reat req_u1res .Iii~ to.
. be j)hysi~l!Y present_a~road·M_os.t~f:the time
durir19· U1.e taxable year;· and . , _- . ·· ·
.; .. .
· Noti:ts:. ,·. .. . . _
a) .. io b~. considered: _ptJysically p'resent ·
.· abroad ·moi,t o('th~ time:·. during ::tre
:taxable . year;. a cpntract : worker :must
,, ·, have been· outside. the··P.hiJi'ppin~s for-
·.
· ... ·. not ·less than 1°83 !:fays"during such.
·· t~>s,able yec)r (R.R .. No. !-79, S~, -2). . :
· ·b)· · Citi'zerjs · who . wor1<· outside . the.
· Philippin~s· :for ·at leasi .1·a·3 days in.~-
.. taxable ye,ar .. due . to . a cqntract. of
· ··
. :·:, c0untry.aira c::br'l~equ_EinceotJ~ls ~mplJ'.>}'l'!.leflt; -
. 'ii) ·' i-te· must be.'.du!y ·Registere.d as_ ~-t)9h with:ttJe ·
· ·Philipp:ine ·· ; . · Ove~seas ·: ·: . :·,E.f1:pl()Y.~e~t
Administrati~ri (PO~) ancf_1ss1,1Eld ,~1th·a-vaJ.1d ..
.- Overseas Employment Ce,.,ificate.(<;)EC); anc:! ..
iii) · His· salaries. a·nd: wag_es ,:nu~t be __paid by .~n
gmployer ~broad'~nd nl:?t borne .by' arw er1.tity:
· · 9r_ per:so'n in the ·,PhilippJnes-'(R.R. No. - 1_~2011~ ·
s.ec. 2·(1)). · · · · ·
. :N~t~':• A~· oc:~lorOFW's' i~Co·~~··arising ouf of his
OV~rSC38.S emple>yrryent is. exerript'from··inC'<)me. tax.
Ho~eyer, if an OCW·or'OFW has.in~om,e:,eamir.ig$
: from bu·sin~ss· ·a9tivitres oi' properties within 'the
,.Philippines, such- income. e_amirtg$ are sut?ject .to
income t~_-(R.R.No. 1'72011; Sec. 3).

44 I ~019 SAN Bl;:DA _LAW CENTRALIZED BAR OPERATIONS

a Ii "9

·lN·tOM,E TA}(
,,...,. SAN BEDA IAWCENTMLIZEOBAR oPiRATIONS"'MEMORYA/0'2019.'
lti.lSM G WMM#MMI JS?bzihfM

.A seaman is considered as an
OGW provided :the. The ·aggregate period of more than ··1so. days
following· requirements are met (CA_IRO): . . .. provided urider·Sec. 25'(A)(1) of the· NIRC· must
1 )· · A .Citizen of the Philippines; be within the same-taxable year for an alien tobe
·2) . Receives . compensation- for· services considered·engaged in trade or business:
rendered Abroad ·as ·a member.' of the- . The . term "trade or business" · includes the
complementof a vessel; . .·, . . : . · performance · of the functions of .a public. office ·
. 3) Such · .vessel is engaged exclusively in - (NIRC, Sec; 22 (S)) but excludes, performance of
. [nternatlonat trade (NIRC, Sec. ·23 (C))~: ... ' · services by the faxpayer as an-employee "-(NIRC,.
4) · He. must beduly fiegistered·as such with the· Sec. 22 (CC)J;
. ·POEA; and. ;_,. . . . . . . ··.
5) H~ has a valid QVerse_as.. Employment· ·. v. Non-Reside"rit.Alie.n Not.Engaged in Trade or
. . . certtncete · .(dE.C) . and a Seafarers Busin~s.s. ·(NRA~N~TB) -A· non-resldent alien
, ldentlflcatlon· Record.Book or Seama·n·s book ·who shall come. to the.Phillpplnes .and ·stay. for 'an
,. · issued :by .the .", Mar.itim~ .lndustry A1J.th·ority .: aggrega_te period of one hundre.d eighty (180)
(MARINA)-(R.:R; No. 01-2011, Sec:.2;. : .. . .d~ys qr less during any calendar year (R.R. No.
8-201;8,_ '?eq. 2· (i) issued. on February20, 20-18) •.
.• - • • • . ?

iiL · ; Resldent: Alien · (RA): ->_ an individual· whose · · . .

residence i.~.withinthePhilippines and whoisnot ·. ~- . ccrporattons
-. a c_itizen thereof" (N~~C, -Sec; 22 (F))-. .
A {9'. Kind~ of Corporate,Taxpayers
. A~ · alien·.: rs'· considered. a·· resident. of 11\l;,('~):{ a. Oo.ntestjc_ Corporation. (0,C) - . a :_.corporatio!_l
·P~ilippine~for income tax purposes if.; .:·./-.~.:/.f.I/}· ·:~re.ated or organiz_ed_.in the· Philippines or under
1) He is not amere transient or sojourner (~{R:.,, .. ;1~;1 . 1ts.l':~s· (NIRC, .S.f!c, 22 (C)J._ . · ··
No. 2-40, Sec.-5); · .· ·.... · .. ·.;, r,,-,:··~';;:~f~~._,e_s1~e~};11to~e1g~-Corporall~>n ·(RF.'.<;:) -a
.. ~) He ha~ .no.definite infentiori fs to_ ~i~".gay ~,:··.1rr·-:~f.p.~r~tWHt:"~1~1'T IS l'l?t domes~,~ a~d engaged
. . ,\pe Ph1hpp1nes; or. ·:· :. · . ~~),~' },~ '.· . . m tr.adg-:--_O)J\busmessm the Phll1pp1nes (~/RC;
.-. . . · . (; (" . · -: .~!:~ . Sec. 22 (f,'1)1~, . . .
Note': An alien who stayed in t,~'.l,pj{jlipP,jni3l-:-i.\. : . . )f-: u . \ . ..
. . for rpore th~n )~n.~-y~ar as)~J'.:!h~~ijij~!.~he . . [11. :;.~he terrrJ(~~win~.busi~~SS" (n~l,Jd(:!S: ; . .. · . .
· taxal>.!e . _y~ar , ·1s . a....,.~°')res1de{;\t~ahe(I~, ·t,Q. · •·. . . $Qjfcj11gg o.f~e_rs, sery1ce ~o~trac!s'..·~penmg,
..· (BAtyGGAWAN,. supta(t{t/q1-.J,.~~")- .. ~ . • .. i~ .. ·. · ~--~.}!iqes~.~~\~.:r· called: ·•11a1son"· offices or.
. .. • .· . . . ; : . ,,·-\;f_;=:r~:,I..Y~ \~. 1,:4 ·'.'"4'.9f~Ql:!! J~~ ..
. ~) His_ w
purpos~·- of suc~~i:i-~1t~th_a_t~Jyf:} . L . A~ ·...
.'. ·. exf~i;ided:, stay . may .b~- n1r.9e:;;sal)(ftfor.ijs • Nt-. ·.
. . : r'eprese~~ati~~s. or. dist~i?utorS:
dc>rn1c1led 1n "the ·P~1hp~1nes or whp, in ~ny
: · aGto_mp_lishn:i~nt and t(?_ thalb~ifid, t~Er alien Jf..,,...:..~Ji]j. ::. calE;n~ai: ye_a~.~tciy m. the count~y f?r a,p_eriod
· ... m~~es .: · .. his . h~·rne . ,tem·por~~,i~in- ml3,, i1r~!!JJ1;,i~3{Jf;:P~[-'od_~.tot~lmg one, h1.mdr7¢J· e~9.hty ( 180)
.. Ph1hppmes. (BIR DA_-ITA_pRuhli~/Jo_. 1..,o/$!OeFll;~~··:--~-:(l.ay.~~r.rno~ef.' - . , .: ·.. · < .·.
· da_te.d p~cember 12, · 2006; 2 t,OASA§Ol..A; · · · . · 11, · Par:t1~,p~tlng-1n th~ rnanagem~nt, superv1s1on ·
supra at B~) . .- · ·_, · · · '.~·.:J . 1 . c;>r. ?~n.trQI'._of _a_n--y.. d?mestic · ~.usi~~ss, .. firm,
· ., e11t1ty.or_corporat1on-1r th$· Ph1hpp1r:i\:ls;·and .
. · Mer.e' lntenti9ri . to -Ch'ang.e his' R~sid~nce fs ii!. Any i:>ther act or acts that imply ·a continuity
Nof Enougt(to.Ctiange R,esidency qf an Alien. :. of .commercial·dealir;ms.or arrangements, and
An alien· 'who h~s acquired ·re:sidence>in .the· :conten,plat~ to t~at-.extent the performance'
: Philippir:ies retafns·his· status. as a resitl(;lnt aiien : of act$ or -works, or the exercise of some of
. until he. abandons the same ·anc! ·actdally, departs the. func~io·ns: normally incident to, and in
. from the Philippines "(R.R. No. 2-40, Sec. '6). . · progressive prosecution of,.commercial' gain
· · · -; · · . . ··-- · : . · Or of the:purpose· ary.d object of:the busih'ess.
·. · · · · ··. · · . . · · - · ·' · } · . · d:·.· . organjzation.. (R.A. No, .. 7042.,.. othe.rwise
· iv., ·N.on~~es.ident"·Ali.en. EnQag·e_d··in. Tra e. Qr·.: · ..... . ·kno.wn.-~_S:For.eign.lnVestmeritsA.ct Of 1991.,.
· . .-Bu$iiless- (NR,A~~B) - ··ar.-: individual ·ii.)hosE! . 39(d))_.--
. . residenc~-is not i.yithin the Phil_ippines.arid who is. . S~c: ... · · . .
nqt' ~ citizen therec?.f b.ut doing t:i1,1si11ess- :in ·t~e fn· or-der :,that. a . f<>feigr:i·. ~orpon:ition ma{ b~
· ..-. Philip~ines (N~RC/Sec.:_22(_G))-.. :- · . . ·. regarded as·doin_g business within··a State, th.ere
must be a continuity of conduct and intention to.
·.· .. A NRA ~ho ~hall :cp;e to .thEi Pliili~pin.e_s a~~- esfablish a. 'co"ntin\JOUS.bush:1ess, such ai( the
. stay fot an· a·9gregate period of mor.e .than one ·. appointment of a. local agent, ana. not one of a
hundred eighty (1$0) .days .di.Jring __-~ny° taxable temporary . qharacter (CIR. If.. ·Bdtish. Oversea$
a
year; shall be <Jeeme.d N~A-ETB '(NJRC, Sec. 1-?,iryiays ·corp., G.R. Nos: L-65773.-74,April 30,
·25_.(A)(1))_- ·· . · . · . · . · . . · .. 1987): . . ,.

·zo1s
. .SAN BEDA .LAW CENTRALIZED
. . . BAR
. OPER~TIONS. I .45
 .:' JN·COM.E·TAX
S'AN BEDA 0W CENTRAt.lZEDBAR OPE(IATIONS- "MEll{ORYAID 2019
aie - [ &MME WAtE WS&&sit,JMIO

An · Offline .inter~atio~al. Air Carrier 'Selllrig

·Passage·TJcket~ in the Philippih:es·, throu,gh a
Factors to Constitute a
Joint- Venture
. : The· . following .. are- the essential factors- . to
. Ge'neraf -Sales Agent; is Considered as; a constltufea [olntventare: . .
Resident Foreign Corppr-atioii·: . .. . . . . ,I a) Each . party. making . a contribuhon, -not
Ar(oitii~e carrier h~IS jlPPOinte.d ·an
agent ln. the. . necessarily of capital but by" way of services,
Phil.ipplnes, · through _whom, it: sells· o.r offers · for _skill; knowledqe, material c:Sr money; · . . . ·.
sale. any air transportation-rs undpu.btedly.'_'doi.ng b}. P_roftfs must be shared among the pa~ties;:.
business" or ''en~jagect-in trade or-ousinesa ln tlie · c) Profits must ,be a [olnt proprietaryInterest; ·
"Phlllpploes",' therefore consldered. restdent cl;} Right.of rnutual control -, over: the. subject matter
foreig~ ·_~_orporation .(Air _Canada .._v(-, C(R, G.,R.' ···of the enterprise: and ·( .
No: .1:69507, Jan,uary 11,.2016) ... ,. ·e) Usu~lly,.tqerEi.i.s -~'.single.-J;lu~ir:ie~s transaction
. . .. . .. .:- : ·,. · -; · . , . ~ · .' (MAMALJJTE9,Income ·ra'x, sqpra at 'J-1-42) ..
. 'c. -Non-ResldentPorelqn Corp.or.ation_°(NRFC) ;...a: · · ::; . ·. . .. ,, . .. . . .
· corporatiorr .which --1s ntjt' 'domestic and : not. · . -: : · Note: ·_.Tq: be. a·, tax-exempt .J"!J·; tfie· .fqi._lo~ng · ·
e11gage.d in. tradeor busfness _in·:ihe J?hilippif)es. · c -, ·. requirements must b~· satisf_i_ed: (URL-'L.) · . · , ·
(NIRC,.Sec. 22 (i)f · · · · · : . i) For the !J.nderta~ing·of a construction
. . . . . . ·.: . . - project· . ' .
Oorporatlon lncludes (PJ-JAI).; r: . . . ·. .. . . . -, . ' : ji). '•$hourd'· . involVE!. joining or pooling . of
,.a •. ~aftner~hips. · 1_10 .. matter
·_.. ·orna.nized eyen .if· the ,.part.nership. 1rt~l}',;7~s_ated-
pur~uant id la_w ·or no.t: W~et~er sto,9.lf.'~..ndfp~~fit . .
~o-:-Jl\.~\1 ·.
how . ~reated~.,,...~~~-- Beso.ui:.c_es. by licensed local contractors that
;~ts·""'Ufeosed· :a~
a. 9E?~eral contr~ctor by the
jPhj!iJjpJn~r·· Contra.tl_to_rs_,. Accteditali<?n B_oard
. . or noo~~to~k.. nonpro.fit, · 11_. 1~-~:..~!l~~~~~=..~{(P~AB~-Q,f the Department of:."frade · a,nd · ·.
COl'porat1on ·beG3USe.of the pO~l?1l:>1hty:f>J·eammg
0 : . · ··. -~titJstr.f(-rn_]);,- . .·· ··. · . . .
, profits from,$QWrces_ within_ th:1f.PBi1~p~e"'{~..-..;,..-}...-t~--iii<}~~~~d~~~on~actors · are_:: engage9 in

·.
: e: !ns_ur.ance companies (NI -~~.¥,-22
· .
t
b. · ;!oint-stock ~ompal"lles; · · · ;f/j,i ~f'; · j: · .
c.,· Jo.int acc.ou.nts (cuentas er;Jparfro;r;,acierf · .' .
· d. ~ssoclations; and /I ·. ,t :· .

·< · .-.· · J ·~~-# ., · i~ ~-~ ii. ~~

rm (
-·o/l' : · · c~SnJ~e,lil:i_o?b'4_siness;ancl ·.· ... : .
k · }t .
.//'µiv), T_ e:J~jt~lf,JJl~~-t likewi~e be duly·_bieensed
:t:.Z?.J.· .
(11):-~'"".' ~~
.· .
as~suc_h·~~lBe1P1.CAB_oftheDTl·(B/R Ruling ·.
'-No. 4-75c2014; f:Jovember 26, -2014,:_R.R.-No: ··
:1JJ~qo12,:.Se9. 3).
.

t _. · .: ·. · . . · :
Qorpor~tio.n·excLude~;·. ·.. :..,.~ K.-:: ·.· ,~\ · ·
t.:r~ . ·. j · ···- :. ~ i,,.=:-j-•· .'. ·. · ·.. _- . .
.· i. Geriera!:P_i'ofes~ion.a~~ah~e{shjp~f.!s) .. ..c:?:: EacnpJ.litre' ~i?q~erit9rair.s ·ti;Hhe JV'agreefD.ent is ..
:ti'r~J5i!J1§of.1·
. , fi.
· · · (Pl.ease see dtscuss_!9f!~jQ
Pa_rtnersh/ps helow);_.~~df.·::· :~...
"ii. , Jomt .Ye_nture·,(JVJ'or iohsortl . m .fo
L~
~~~~
'< ~: ·rI ~n$~Gt
~~:r. l·.
·t:r;,"'ll~e~;._rJ~~ halif~!e\~e_payment of_ th~ ~oi;por.ate ..
:a,?._x.o#he proflt~-distriquted _to the"':! by.the
,{.\~r:i~ur:/ Othe.ino,nt_ venture{,,. alth~ugh_ not
the ·purp9se'of: · \\' . : ~-- . ~~mally. j,;i'torp0rated;,_. are, taxable ·as· ordinary
,_1·)- Ur:id_e~ki~g cqnstrµtl~n proj~e;;ts.; rScr~N1'\.S~~o~tf6ri7 (f.·IJ.E LEON, NIRC._(201:5), p .. ·111)
, 2) . ~ng_agmg 1~ pe_trol~um,:~._,aa·1, ~~l:_h.e.~~_-at:L.~~li.~ie·f aft~"-Cj)E LEONJ; ·:. · _·. - · .,· ·· .
. · and -~~,her ~ne.rcgy op~r9~lo~~1'~t®aJl} ra~~~~-"(\ . ~~~-:..· · · · . , ;· . ·.
.. , . ·:·an ..· 9peratrog . co_n5.ort1.uln~~ire..e~~nt_ 1\J,_AA33f\.A,[,s st'afe ~nd Tru.s.t~ . · · . . , ·· · , :. ·.
. : .-un'der a· . -s~ry,ce .· contract · .. wi~~t .. e -: -refe,r.s ~~ the:IT};:iss 9f prope~i~s,l_ef! by a :
· G_oyernme~t (f't/lRC;. S_e_c. 22-(B)}. · - ,... :deceased p_erson,(OllvfMMPAO,$Upra aC1.$2).
. :·- . .... . . .... :·

,
·:' J~intVe.ntCirs-an~-·co~s~itium-
It 1s'.:gen'erally understood :to
·· · . :·.. . .
·mean a·n. o'rganiiation ..
. '· _:.~~t~~\~e--~~-~~~/~t'. Ui~ eqt~~e 'iS:.de_t~rmirted,by ·
the. status-c;>fthe de_ced_enrafth.~ til'!J'e 9f h_is de~th.. · ·
for~ed.for:the e~ecuti'on':qf a.single fransacfion ·ar~ :.- . So, .ah. estate, as.-ariJncome tl"!xp·ayer, ca1fbe a
is t~us of'a_ tempq_rary .n~tui:e~ :w_l')ile·:a. <;:oi':porati.ot1 ·: ·. ·-. ci_tizen qr
.·. . . .
-an.:·~,i~·n.
.• . .
{fd.)~ .. : :
.,
'. . . . : ..
.... ·.:
. . ·.
. C?iimot ._gene_rallY:.Emter. into .a GOntract of partnership, · ,.
. ·_. unless authorized ·bY,. 'la~ .or-_its ·chart~r. · it -!'!as been·· · i1as~i!ipatlon ~f :E~tat~:5: . ;. . . . . .. , .
. · f:lel9 _thaf 1f m~y enter"info- .a j9i11.t ~!:!nture which is akin .. ' ... ·., :~:· Estate :uod'er. -)u.dicial.:ad·ministra_t(on --
· t0 ·a parti_i;ular partneFship·_ (Philex-Mir,ipg .~orp:. Ii. ··. _ -~-~ttl.~f'r:lenf bf which. is ~qe object of 'jl.lqiciat
· 1 ,CIR, Q. R •. No. 148:187, April· 16~·.2008'ci(!..ng: 1u.tba<;h :.,.:. . . · ,te~tam·entary ~r _lnt~state ·proc~edirjg~; an~
. · v. Sanitary- Wares Manufacturiog·. Cbtp., G.R: · /\Jo. . '' . . ·.:. · .. ·. .. ·.·. . . ,· . :.. y·· '
75875, P~cem6er 1p, .1989) ..'.". · -. ··• . · · . ·. . ·. Not~: Income .bf- ·the . esta"t~ · untie( Judicial.
. . . . . •, .·
·,.·· · .. . : , · adrnin.i_stratip.n·: is ·ta:i<al?le _uri9er. ·sec .. 60
. • ·~·., . · .(A)()) of the NrR.c "to the fiduci.ary _oi: trui.;~ee ..
~~ ,!i . . . '· .' . .
.·.. ·,b.: .. · ~stat~ nl>t".u~d~r j.udi°ci~i'
adnil~l~tr~tio~ -
. . settlement of which'!$ ·not _the o!)ject o.f ju~ici"al .
testamentary or-Intestate pro~!:)dings -(R.R.·
. No. 2, Secs. 209 and
2-10): .. _.-
. /

· 46 · I 2019 ~AN. BEDA l;AW CENTRALIZED BAR OPERA TION.S

~... :
 ,.:..
~f~·---:111m--------·-•-----~.--~m:11 1 1..al!lllmaB11111111i1a1111:a ..m,!:;;:;:e~~-
tt ·
.. ,
· ·. ·.
w
. .
wPii e4ea o' · c
Note,;'tncome of the estate-not under judicial.
adrriinistration, since · no executor : .or
t·NC.O·M·E.
SAN BEDA ~W C.E.l'iTRALfZEiD
SAR OPERATIONS.- .MEMORYAID 20151
'ef . ··· ·
iii e .. 21141 ame.•«e ·,
T.AX
aw

person' not having any substantial ·adve'rse

Interest
. . . in·the. trust corpu,s
. qr in its income;. and
.. administration, is· ·taxable to. the heirs' and ..
·. beneflclaries,ta'cti heir and beneficiary shall . . Note: The Income of' revocable· trust revested to
include .said income (as, distributive. share of the grantor' shall be included. in computing
the net lncorne otthe estate) 'on his o'r. h.er- · ta~aJ:?le in~.~m,eof the grantor'(N/RC, Sec, 63).
.,.}.. income tax return. . ... : '. . . . .
~~:·.~·• • • • •• • I • • • • ~ • • '• c.'. Employe~•s· Trust -:Trust which''forms part of a' .
· r'f. ·: -Taxas Payable uppn Deathof.a Person · .· · : ' .pension, stock.. bonus' or prom ~ sharir;,g 'plan·, of I
t{ · When a.person whoowns.propertydles,the-follqw,ing .an emp)oyer for the benefit .of !3ome or all of his ·
y,_'. taxes are payable-unde} theprovisions of the income. ·. ', employee~. . '
f :fax law: · ·· · · . . · · . .... ·. · ·. .
-<1.i .. ·. a .. Income 'ta'>c for irtdividtials· (to cover' f!'Je" period Note': ~ Income 'tax shan not . apply 'to
,:: beginning .Ja:nµary-. to the.. tiri1e. of death) ·(NIRC, . . •. · 'employee-•s trust .(NIRC; Sec. 60 (BJ).
·as. ·?)n:,e·nded by TRAtN,J.aw; Secs. -24 ~nc! 25); · ·· ·
.and .. ,· . . .: .· .. . .- :. ·. .. ~ .. : . ''. . . . ·: Jri~o~e~· pf.· E.st.ate· ·a~d Tru.s~ is. tax: IJke .an
b. Est~te -income tax 'if ttie . estate· is· under . . lndlvldual Taxpayer .. · · . · ... :
administrat19n.,or judi~iaf settlement (NJRC, . The taxable income of the. estate or trust, shall be
. Sec.·:6o'(A)(:3)). ·. . ... · .. , . . . . . . computed in the same- manner and on 'the same.
. · . _.. .• . .. . , :,/:"°', . basis, i,is
in. the case of an· individual (NIRC; Sec.:
Note:.Esta{e-inc9me.tax ~~d~r:s~c. eo er t~e·'N18.~<;.//':fe · qO).· · · . · . : ·. · .. · · · · .. · . ·
ii, different .from thelmpostnon ot.estate tax. V\'ihHf?(.i:r.. · . . -~ ·. ' · ·. · · . · · ·
·the· first is in the ..nature of ii:icome tax,'. the latteriis'.:cf;,-;.,i~,;:} Please. refer to the.separate discussions·on Estates
transfer'tax impo$i;icfori !fie·p~hiilege.totran~ie~·l'np;:! i.,.~.i,-[_ap,d·tru~t.s.~ . . · · ·. · ·· · ··
•. prope'r.tie.s..ot tt:i,e·a.ecease¢·.to ._his: h~iFS. . · .
4/ .t~;;,-J;;~~:¢:itt0_?,--;:rr.•1~~,t. . . ·
o't
'rrysf_: a. rig~·t. pcoperty, ·re~l'or:pe~~1:i(;~l~··.bxtt){·.· =-~~;1:~~~~~,o·f~~sion~I ,Partn':lr~h.ips (~~P).' - :
·~ne '?arty .f?r.the.be~e.fit o! anoth~.r;}fJf}.!1~~ere.1Syr:,~ , ... ..form~.d·rb¥·-:~er.sons for. the. sol~· purpo~e. of
. f1d1:101aryrelat1~:>n;b.etwe7n,at~~t~e·.ar:{&ar;,f!Jttifgue_. .1~,! . · exe'.ciw~gja· '. J11!710~.i;irof~ss1on apd :!'lo P._art ~f · ·
. trust c;1S' tegard,s 9ertal!1_. propertfY:real;'eRe~ona~ m\ . t~e 1~.fom'ii'o~ hl«?h 1s derived from ~ngagmg 1r:i.
moneyor.cho$e~ irr.f;l¢t~"?n_.(Pl11fp,ine·'}iafl,qn.a/BcmH• J1,J :any:.itfade ~~·b.usiness·(N/RC, S(j]c. 22 (B)):°'.. ·
v.CO(!rt ,()( ApP.ea/s .and ':B:P{'.f«a.ta:Tati.rJ,,{;p.,G.?- . W;.1 : .~t,•741;~.~.r:r:rt!:7. . ·- . . . . ...
No'..'.97995, Janu~r:y 2.1;, .1993) ;\~_ :, ?;:;:,p/{y.; .;.~~~ . it,iJ:-· · ··!,~"'impJJ.Q~tiQns.of th~. ln~orne o.f GP-P:. . ..
. . · ·· , · ·. · . · · ·. · ..~~d-"'~'.\ . ;l-· . '\i••f · · r.. · A GPP 'Is no~ cons1der.Ef~ a..t~xable e.nt1.ty
Clas~ifi.caUon·<:if"frusts: ·. · .. · ·.·,~ f · ;i:'l: .. : .
. ~;tF-;-i· ·.
for income tax·purposes ~inc·e it is.only ~cti~g·
a. Qrdin,a.ryTn-ist-:"We incom.e.~nd ~C?,l'.pJ.fJ of the · ,.;~;·t::,·.~SR·~~,g:;pass-through~entity (RR. -N9. r-~018! ..
. · . ·irust do not.revert to th!:! granto;~:tlt' i~-~f<!f-6p~1~.-sec,~~J:... . ;·. . . : .. · :· . . .. ·. .' .
·'t_he.{ollo;""ihgJrust:. : < '. . . : ·. : . ·. \~
7[ ·. ftl.:.. . . ..
Y·: It I~· tt_)e.. i~,qiyid~?I :Pa.rtner.s_ ·who ·.~ha!_l.·,be.
.I : . · :_·
f . . . 1.; · A t~ust where th.e; 1n,come·. a~ci:i~J~~d· 1ri . -
,.: . . . . .. · ... trust·. ·tor .. the 'b11mefit .of unBorn°· or .

,·:
unascirtained pers6n···. o,r' petsons with :
... · · .confi,rig.ent.interestif; .,' . · ·
·" .. ; .. · · u ... A.· t~l;IS!. w9ere. th.e.. in~o\Tl_e_ accumulated .?r ·.
.·. ·. · ·,: : ·_' ·
.·
· . ~\J~JE:-9\to mporry:<tax ,n. ~t\:iei,r-·separat.; :and .
· ·md1v1dual .c;.apa.q.1t1es .(f1.R,... N.o:.. a~201a, ·.se.c•. ·
·: . .:s). ' •, .··. :· · .. ··.: ,:, : ,·. :'. · ,;
· ·. ·n1. J'<>r _pumose,s e>f. ~Of!lJ)u~i1g the, ..·9istribu~iy.e .
. . . ·.. . . :-__
·. ,· ·.. : ...:.sryar.~·.of. th7 p~,rt!:)ers,. the. ..rie.t. inc~~e ofttie · .
t. . " .·.· '. '.·. heldJo~'fut~_r.e.. c;Ustnb.utip~under.t!,e tern;is of. ·. : .. GPP s.~an be·.~_bfl1!)U.t~~rn·the.~me.~anne~
f, .· ·.tlJewtll,or.tn.1.st;., ·. · . .- . · · ,...:... c · .. '.. ., , ·:·. ·9S. a.. :corp?rat.10~:,(RR. Iyo.: 8,-201A.Sec.. B,·
rt,. 111 .. A trust where the income· which. IS to . be . . . .',· NJRC,. Sec·. 2.61' . . ·. . . ·. . . ' ' ..
'\: .
clis.tribU~f:~.~l!rrently:by ~h.~.:fi~u"ciary_to,the, :.; ; ... : lv.:l}te·_G~P-.i~ s.tilf obl~~ted to
benefic1arie·s.; . · . . · · . .• . ·. : · ' ·" ..
0 fiJe
· · .. · ~adrr11mstr.al1ve pyrposes·, but the partners are.
<:3;riti.irn.for.

t ·iv . .-A 'trust.· ~h.er'e the i.nc.ome·cqllected by.ii .. . . . iiaql.e fc;ir the"paynient·of lnco.n;ie tai'irrthelr'

I\· . .
,:·
;
: . : ·guardian qf an 1nfant wt)tch iS.tq pe helc,1 ..or.
· dfstriQutecl as 'the·coilif may. direct; and. ' . , ·
y.. '. A th.ist.. 'wh:ete ; the. \ncorrre ·which;.· 1~' the.
. lnoividi;ial CBP,;3City'(Tan.V: Oef Ros';Jrio,··G.R ..
··. -: . . . No: 1'09289',' October 3,<19~4)';',
~ . . , . . ., .'
..

I_,.,

{,
... . .
~: . .

[:;_·
discretio'n. _of'..t.li,1;3 ficl~c{ary, "ii"i'c1y be, ~either .
. . ·distribote'd . to . the' .. beneficiarie~
. ._ac.¢.u~'ulated,.(~iR~; .:SljJ,C. 60 (A)(1),.' (A_}(2(
.. r.ind (4)) · ,. : • .
'b. ~~v~c~bfe Tr.list'..;. a ti'u'st .In vi~ich the. powerto . ', . .
·
·. b. '.Taxabi~. Bu~inesi. -~~rtnershlp. ·~· All . other.
or.'. ·: ... '. . partnerships;' 'no matter how . created.. ,pr ..
: .. orgahized, Which ,inciude . unr:ajistered .join'f .
. yenh.ir~s..(fJxqept.tax.exempt JV Qt'consorliums) ·
..and QU$ii'H~SS ·p~rtner$hips, are subject to the
!:"· .reveslir1 the grantor title tc:, a~y part.oft~e.corpus.. ..~ . . corporate income tax (2 ·CASASOLA, supra at\
ft.'
.. ·- · . . - . . . .
of the trust is ve.sted in the granlor himself or·any
:, . . . :·. 116)'. · · · · · · · ·

f:.. .·.·
,...
~
2019 SAN SEDA LAW CENTRALIZED BAR OPERATIONS I. 4?· ·.
 .·INCOM··E TAX·-
~N BEDA't.A.WCENTRAl/ZEO BAR OPERATIONS - MEMORY AID 2019 ·
. i i&itW+d . -· WriAA NA &Bi
Tax .. Llablllty .'. of -a · taxable Business
_. Partnership·. . .. · ·. .
: They are taxable as an ~ritlty subject to norrnal
.. corporate incometax (Id.)_. . · ·_- ·. ·
is · subject
.to ·: 1 ;;0;;
The .partnership i\self -Is subject to corporate creditable withholding
. taxatlon-while individual partners are considered . tax, if the gross income
·-: stockholders.cand therefore: profits distributed to . ·for . the current taxable
. . them by the· partnership are taxable 'as dividends · year exceeds P720; :
(Id. .et 1"17j.- · : . . .. :· QOO; and . 10o/o; .· if
l 'otherwise.' :· , -

. '• . ·. .
·"'

'
.If· net'. in.c~me, 'ih;!)~I~ ·.)f riet 'iricomtl, . 1t ·stiafl b'e·
form ·part-\'>Lthe.:gross- treatedas ~iv.iden°d ·a.n:d .
. -r. Ifnet loss.Jt may be t~ken·by the ·indi~iclua'i partner
income of eachpartner .shall.be subjecttoa fiti~I
based .on hls" agreed· tax'as.-follows:;. . ... in his return ,of ihcome.
. . . · · , · '. . . · ··..
ratto . . St:i_f:?jecf · ·. ·. to ·1_.. ·~c. NRC, RA- 10% .·- ·.
1'0%/15%: . . credltable ·. . , (NIRO··· as. amended . .
withholding:" 1~'X . }R.R.,: · .. by_~·IRAiN Law, Se9 .. . c .. C-o-Own~rshlp . ·. . __·. . . . . . . .. . . :
.{'Jo. 2-98 .as emended by . - 24 (B}?2))Y · . · · ·· . . ~:There is· CG-ownership w.t)enever the ownership
. R.R:No. 11-201,-8)'. : . 2.· NRA-ETB · ....:.: 2Do/.i . · : · . otan undivided thing or ri~_ht belongs todffferent
· .· . '."(NiRC; .... Sec. '2.'i, . · person's· (CIVIL CODE, Art.' 484f: . · · . . . . .
~. ' . . . .· ... "'
· ._Note: . . . . . ·... . . (A)(2J);.or · . ·
. · . ~.nder Sec .. 2 of R.R. '3. NRA~NETB <: ·25% General Rlile:· Co-~wnership' is a'· tax-exempt
. No; .11-~018 ·issued. on ·(NJRc·'$ec. 25 (8)).. entity. . .
; January.._. 31, · 2018; · · ' ·
.mcorne . payments. to
partners · · ~~ general·
professlonal partnershlp

48 I 2019 SAN BEDA L~\/1/ CENTRALIZED BAR OPERATIONS

.·.
 .
. INCOME·TAX-
MEMORY
SA!<! BEDA_.Ulw·a~1.:(rnAuzwBAR OfUlATJONS- AtD'2019·

Note: It is· not taxable when the activities · $.: Capital Gains. Tax (CGT) on capltal assets
. are limited to. the preservation of thevco- subject tocapltal g~ins tax·.. ·. ·
owned property· .and the· collection of the . . ~ .
· income therefrom. Each co-owner is taxed · GRADUATED RATES-OF 20% to 35% .
. ·..• individually" on his distributive share . Taxable Income subject tograduated rates of 20%.to-.
· (C>na v..·:c/R, · G.R. L.-19.34}, May 25, 1972). · 35%: refers to -those items of income; otherthen
. passive .'fncome and capital· gain~ which are subject • .
.Exc~ptlon; 'co-ownershlp is" c;nsidered as a --_-.·-to fin·a1 tax (and._ca?ital·~ains tax).". · _ ·: . ·.
separate: taxable. entity if qO:oWnership is·
converted into anuni-egi$tered partnership (Ona Income Sul;ljec"t to G~~duated Rates:.
v. CIR, .G_:R. L~1.9342,·l'y1ay'25, .·1972} "like when . 1 .' Compensation tncorne; . . . .· .....
. llke when the income of co-ownership is invested 2, Business andprofessional income;
by_ the owners Jo business. or 'other tncome- 3... Capital' gains not· subject to ffnal tax; .
. ; producing properties orwhen a co-ownership.ls ' 4- · .piissive income not subject to flnaltax; and ·'
:._. formed or established. · yotuntarily, or .. upon 5.. -Otherlncorne ·: _4 . :- : - · · · .. ';
. . c!greement of the parties. . . . . . ·. . ' . '
, ;. . . . Notes: . . . .. .. . . . _ . . ..
. : Note:. tn the exception, Co-owri~rshi~ ·a .. NRA-NETB is _not 'subject to the gradu.ated -
, .. r should-. be su.bj.ect to. 'Income .tax ~s a" .. . . ·. rat~:~·. Alt . iri~ome · {except. capital· gains -·
. ·. corporation·(Ona- v. CIR, G:R. l.-.19342; : · subject to capital gains fax). reqeiyed:bY rnrn ·
. ·. May.25" 1972). · . · -~--ft:) from sources · wi_thi~ the Philippines. are.
-r ...... ·. . ' ... · · . . · . · \• /':'!' 1r/,;·~. . considerec;l c:!5 gross incoi:ne subjecno 25%
T.h~-Divislon of Property upon P!ssolutlor-'9'":.1/ · . . fina1·withhofding tax:-(NIRc: Sec. 25. (B)j. · .
. Co-Ownershi[>by Agre~ment"i_s NOT Subj~;<fj;{j1,~!/ · . b. Speci~I.. _classes of .. employee!? (e.g.,
t~ ~apital Gain~ Tax . . · J:l"f-~t~'.-;~:,1 r;~ ma'!t{f!/fria~emplwees of RHQ(RAH) a"re ·
Tl:le· transfer of -title. to co-owners·-ts !"JO!..-~ale10 )1.. ¥-J--:-...:;i:~'!_o~c;_ted

i~ .
_to a preferential ·tax rate .qf_ 15%
, b~rle~: exchange . or other ,...,""'S~!spositi_onPr JII · iml:>os1.i~.on their_ gro~s . incorn~ (NIRP as ·
·contemplat¢d by law subject to·th~;irnposition of-'·· ."t.J amefJp,~ by TR~IN L.aw, Sec: 25 (C)/'(Dr
th~'· t~ (~I~.R1,1/i'!f! ·N_o: 145~98, t"j'ct,{Pi,:;}J9~{-~ /El\ :_: · .. · .. ." · . . . · · . . : . · '
:;;ind
The _act. !=)f parti.tion_m9. a ·co!ti~Q.l~kf,Wned. •{. · · .l :...\l '\_.· · _ . . · .· . : · .:. · . ·
· prope_rlY.to. ~ach ·e:o~owne~··?r~~ld '};'~.~t:re"treate~.. -~ .
···as a·:taxable·:event·as itfl~'bthing~fli1.ote.!tian · ·1~1 .
N,~.
. e •. ]he J!lJ:efe1ent,al _tax tr~at1:1ent shall not ·
-~P.P.IY ll!?!:.<!,mployees.of RHQs/ROHQs,
·.

. t13rininating· the C0~0Wfie(~h~p by'-l'makl~g e'ach. jiKf ' ·.. -~©!39.~;~:,an~Je1.roteUn)se"n(iCe. •CQOtfaC(OrS- ..
. c0:0wn~~.bwiier of sp"ecmc"lct~mif!a~nrP.ertiptfc:59-.
· un_it of th_e prop_erty (BfRRu_lir;"fNt~f93,'f) date'd ·
t~;,iL · ·. ,: ar.id•.sxib~~fractor$"which_ regis_t~re~ .~it~' .
the se_cur!t,es ~nd Exch,;mge Comm1s~m;>n_ .:
· October-.6;·.19.99): .. .. · .. " (~ ').,-} :. . J'..·'lif'"~" (5.EC).~J'.ler _Jan1:1ary 1., 20.1_8,·they st,.all·_now
... _,. . · · - ,· ,'-...,;~ ~~1;f;v_;~:1~."~1'l~:..i,.~~b1ec~ · i~. ~egular i~coi;ne ·t.ix. rates.
. . . . ,. . . .. · · \,1., • ,.- •.-1,.,..-- . · .. ,.'"0-Plovided,_ . however, . : ·tha_t_ . ':'xis_t!ng
. ·. · . · . . . . · .. · \f\ ~- · ~·?.-J·· 1 RHQs/ROt1Qs,- .. Q'BUs. and ·. petroleum
~AX .ON INP;fVI~lJAf;·S:j2~~ . - _.s~rvil;e:~ontracfqrs. presently ~vailing_ of
· . . .,.·· . . . ·· . ·,. · _ preferential ta)( rates for. qoali!ied employees
:. ·shaU continue J.o be ·.-enti\led to avail ·of the
Applicable 'iax~s-:: -. . preferential tax. ·rate for.: present· and future
1: .Effe~tive 2:01 l,Mo 2022; g_rc;1duatecl {ates .of 20%-: : qualified.employees (R."(~,..N6: 8-20.1.8, $ec:
4-·(C);.NIRC ·r,1s amended by TRAIN'i:."aw,

:t. .· . .
39% .on their ta.x~ble income;· - . . ..
f( - 2·:, 0%· or ~·xetnpt"on.Jncome.Jess.thah P250,000; ·.. Sec.'°2"5 (F))-:- · · :· · · ·
t%'. · 3·: ··Option·· to··· be · taxed · at · 8-0/o": .ori - ·Groi,s . . . . . ". . ~ . .. . . .
~(-. ... Sales/ReceiP,tS for .th.o~e who"fall below the VAT . . . . . -~Faduate.d Tax.Tabie : .• .

II.: · .
threshold·' ·: .. ' ·' . · · ·: · ·· ' · . · . (NIRC,.as ·amended by IR..1IN,S,ec. ~4(A)(2)) · ·

( .
Note;- ~~e·· optiOIT °tp .p·e ·~~X~~ at-' 8% ·.js·· ·n~t '.
· · _a\lailab_lEf .t_o.·-.a .. -V~T-regi~ter'e~- t~xpaye"!",
· : ·:_·.·.-EtrecUvff._1 Janvary 20:1:fJ:.:

r~_ga.rd!es~ ·of t_he__· .. -amount ·of .. gross ·

·: - · ·. s~lesireceij)ts, ~n2.to a ~a~pl:lyer.who is subjecf P25P,OOQ 0%
~- · to Oth~r Percentage Taxes. 'under Titte·v.of the ..
t _ .. :~·~x-Qode•. as am~nded,_excep!.thos~ subjee:t
~- : . . . ~n~er Sec~1on 1_ 19 of t~!3 same·T,tle '(R.R. No. 8-
P-?50,0qo .. P400.00_0, _
P4QO,OOO 1"8°00,000_" p30'.009
20%
25%
P250,000
P400,000 :·
- -

h· · .. 2018, Sec... _P'B00,000 P2._ooa.oo_o P130,000 30.% PBOO.~

t 4. ·. Fin~I Wit~·hold"ing Tax (FWT) on passi:ve· in~ome · 1>2.000:000 PB."000,000': P490,o.oci" .32% p2;000.ooo
~-. · subje_ct to·'final tax: qr · · . . .· . PS,000,000 P2.410.ooo 35% Pa,eoo;ooo

r·.
,. ; 201~ SAN BEDA.LAWCENTRALIZED B~R OPERATIONS 49.
r.-,.
 l~·l°COME TAX .
'SAN BEDA LAW (fN.TRAL/lED.BAR"OPE~nq1:1s-:. MEM(?RY.6."10,2019..
·.·,
. 1 Jan1:1ary
. Effective· . 2023. Klnds of. Oivlden'd)n_to01e: .. . . . ": .
1 :" Cash QivJ9end,-·di'v'."idend payable In cash; ..
2:·. 'Stock Dividend· .- · .lt is 'dividend· payable: in
.. unissued or increased or additional shares orme
corporatlonlnstead of incash or propertycutof ·
P250,000 0% the· -unrestrlcted retajrred . earnings of the .
; . corporation; . · . · . · · ' .'· .' . · ·
P25_0,000 ;. P400,0()() f>?50,000
.. 3., Property Divldend ~ it Is dividend 'dtstrfbuted to '
P4QO,OOO Paqp.ooo P22';EjpO .· 20% . ~ilo~.000 . . .the stockholders (~ !11e: form of proj;)e.rty,. real or .
persona]: · · · · . :· . . . · · :
· ·pabo,ooo ·: · ~2.000,006 · ·.p_~o2;soo . 25% . . :ll00,000
-4. · Llquldatlnq Divjdend,._~ ..this -.ar~ -dfvic!Einds :wliich
P2,~,000" P8,000,()90. P402,~0. 30% · ;P2.o~.o<io are actually distrlbutions of ·ttie· assets of the .
··-. c.cirpurauor:i.upon dissolution br·.:V;~ding up of .the
· ·pi,ooo,cioci : ~ .. 'same; 'and- _.. . ' . . . . •. .
5.:
Scr-i~_'Diyidend -. it is.d{vi.dend ... in.tha .. form'of a ·'.
· FINA'-.tAX · ... . ..... : . . writing: er' certificate ·issuecf to a stotkholder ..
"Income l>U!Jj~~t to i1Jla• ~X~ ·refers")o·.ari income .. ,·en.titling .h!rri: to the'·paYfTl!:ll)l of money, ~teick, or
which tax · due- is· · fully. ' ·collected : through' lhe , . · other benefit ·at- somefuture time (DE LEON1 Tbe .
. w_itbholdil'.)g ta?< syste~
i~ the fomt of~~aFw~~p-~latng"'lf""J~~-=-.~~or:R._ft_fati(?n. (?ode, of fhe' Philippin.es.{2013),' _P·
tat .Under this procedure; f~e p_~yo~. ot~J.~; in,cpm~· ll... • . 1"J1,1yl'tfJ,... . , ' . · . . · . ;·..
w1thti_olds the tax a11d r:er;oos 1ttoH1e 970Srnme1P,J ~ru""'"-..:x.~ .. :.£ -:ii-~>",- ' .· . ·· · · -; :
· ·t~e ~IR as final settlement of the i2,~~e\l~pi.,.g._t1t?·'on· · C~sh"aQ,dlProp..e~ !)lv~de)'.lds , ' · :
said income ... The .r~c,:ipr~rat is ri91ro:ng~J}~quf~d:.,t0-.~inal~'R,.,a(~~-: ;}., : . . · '.' -v-, · · · . : · • •
m9ud~ t~e !tern <:>f i11_com~:5~bj~~1i'(o?finaJ1ax"9§> .. 'r. 1~n-:. \ ·,~ \. . .. : ;. . . ·-, ·
1lt~ :~··.
part of his g(oss .m_cor::ne. 1n hts,fncqrn~~f~ retu~ns {Q..• Ca~h_- ~~n.Wor , toP~rlY.' · d1yiperyd~ < frn!11. a

·
CASASOLA, supra-:at
·. ·
aa~. a 9Ji. · . ,. ·
. ·.. ·. . 7,,.,_ . . .
l
-~jr-:7:
y_it'\. . : ·. -'dc}nest1\ ~~o.ration.or _from a Joint ~tock
! · - ...?""'co!!1JJ.c:Jfl?'lt.~}lt,an9.e . : ~r · · ·.mutual t~nd
p1~"7..J.i_~.:,"·
Passive .ihCOJ"fleS are· .taxed n'fill'}"f~ so·urc.. '_( ·cOJ'.rlpani,~!> ., anij . r.eg1onal ; ?~rating
PhilippineAirlines, /~1c.,. G.R\r{it{f!~52Q., · tobef<!B~·,jiffm:,l:ifft1.gaua.~~~~!J~L!ltin~~ona(:<;?mf?ani~_s; ·.. ·
· . ··it · . --• &-' ·\- · 2 P' b. $~ff!'~'int~~ d1stfijuta_hle net 1oqpme _after t~x
.2006}. .
. . ' .. . . . .
· · ·
·.. ;.,_ '\\;( ·f} b\. . i . 1.1"1; ·. ::::-1g,a-ta~a!Sle"'_~busi.n~ss,partnership; a)ld
P~ssive lnc.9mft . · · \ .;t. \_. - ~-' . ~ ~~-;;~'t,./ ~).{:e. the inc?ll)e· · ·a)'ter. tax,. of f bi~ _an
. Income_ · 9.~riv'ecr ,ff~~ : a·ny · _a¢.tiyity •. ,~, v,,;fi~ ~' : · . ,,:1,'~~ ssci?l~ti.o,n, jofn,t. . ~ccount, · · o( ·c:1 ..Joln_t 'aj
. ta·xpayer d9_e:;;.. : n~t,· i:natenal\·.Pci.rtic1~!l=I,: ~~, K' yenJ"!~e ·_ .orL<.on~.~rt1~"? · _tax?J>.le . as. a
DOMO_NJ?PNi·supra atW9}. · · .· .. ,_ .. .' . 27" ~~~~,-.;.;itef~~a~.,.of,~h!c~
'~ ~e 1~ a_me~~e~ or <;:o~
. ·. ·. . . : ·.· ~-- . ,/o~ ..~~~:,:lt~Qlxe:r- . : ' . :·.- . :. . . .. . ' . ·.
,P.as:-i_v~_lnc~me StibJec~'ti>,F.l'naJ·T~x~(Q.R[~PJ.7 ., ·~ J,f' A-:"tN\.~.- . ' ·. . . ··. · . · . · · · ." '
. :: . Cash-<an9(·oi frope,:cy:_·Di~,idends· ~cN!~ as-_. lVLJ""l-_,)...flna .. T~X ~ates~ · .. ·: · .· .. :·· ..
. amended by Tf?A1N,.iSec. ?4(B}(2)); , : · · ~~~""""-:.-: . RC,.NRC;RA~ 10% (NIRC,as
. :. 2. Royalties. (N:IRC.,. tis 'ame'(Jd~d bj.t 'TRAIN; Se"c.. · . · .·.. :. ·. . arrlendecf'by TRAIN Law, ..$fi>c, 24 ,
·
.. '. I4(B)(1));: . <_ .. · ., : .. : ·.,· ··."·, · :.· . ·, .. :·.. . ' .(BJ(2jJ. _, : · . . . . . . , .. ·
3·_,:-'!i5teresf:im;.cirne:{NfRC.: a.s an-fended· by TRAIN, . .. ..· .: •. : :NRA-ETJ3....,. 2(}%.-(NIRC;jec . .25:. ·
:. .. · Se.'c,. 24(BJ(1))';: -~··: . . . . · ... ·.. . :." ~ _.·(A)(2)). : ·.'·.·.. .· ... ·, .. · ·~- . · .. \ ·. · .· .. ~
4. frizes .i:,nd· winriii:tgs{N/RQ, as. ,fJ_inended ~y . , . ·• · ·. NB;A-NETES·.:.,._25%.(M1RC Seo>25'.(BJ)::: .
· · . .TRAIN, Se9. :24(B)('f}};"anf1,.. . . . · .. , . . . · :. . . ·. ··. . . .. :,::· . . . ·. ·, .. '.,· · . :.: · ·. · · .
5: f_~rt~ar·~ s.ha,r~fronj tt:ie ~~t in.came ·after. tax ·of 2. . On . .' cash. -~nd/or · :'pfo~·rty . divid_~·l)di from a.
. ·bus.iness p;:irtner~hip •. joii:it aeco't.11:i,t, joint ventur~ .. · fqr~'ign 'cQrporatlon: ··. · ··. · · -~ ·,
.or· consortium:· (NIRC, ;:ts am.er,de.d .. t>.y T_RAIN;. . ' · . '· · .. · : ,· · .. ·· , .
·< .s~,c: ?4(f!J)(2JJ... ·. .-·-~·:: ':_ .. ·:. ·..'."-... · · · · .'·. · · .• .. ·_; ·_\p·p·1ic~b1~·-r~·~ates~' · . .
.. ·.. : ·. . . ·. ~·. •·~ RC:.,:ia,· .gradUate~- ·r~tes. of- 20~1o "fo .3~o/o.
Di~i~tend~·· . . . . . . · .. (N!.R.C'ti't;' ainl!nde.a-l)'yffiAifiJ'Law;· Se.c.
. . . Any · distribution
. . macte. by a cor:p'prat1on.
. to · its· ·· · . . ·· ·.
. . . .. . . .· 2 ~JA)J?)).
·· · · . ·. ·· . ·: · · . . · .'... ··:,· ·,.., · :, · ....
· ·
. stockholders ouiofits eaniings'or profits and payable . . . • ·,. : N.ij.C,.R_A;: NRA-.EtB (1f_cq.nsiclered from- ..'.
'tq .its snar~hpid~r~, . whether·· in. money Or .'other : ·. . .·.SQ~r.~e~ within)-:grad1,1at$d rates Of·20%
properf1.·(f:IIRG,:as ·a-mendeq,by TRAIN, Sec::7.3(A)):. ·. !o 35.% (NIR.C. :as amended by T.RAiN
Law; _Sec. 24 (A){2)). ...
 SAN
INCOM·ETAX.· BAR OP'E.RAT/ONS . - MEMORY
·. . 8£DA
. . L:AW C£NTRAUZ£D . . AID. 2019 .

• . N~A-NETB (if considered from sources outside PhH°ippihes, Therefore, Ms. NRC's
.within) ::-< -:fa% -based .on ·Gros.s' income diyitjend lncorne is all from foreign .source
-~ {NIRC, Sec. 2q (BJ).: [lncom:e .withou~] and not taxable (Id.).. ·

· .. General ··Rule; Dividends. _paia by· i3 . foralqn . Stock:Diyld.end~ . . . . .

corporation · are considered · from · foreign source Genei:-al Rule: A st9ck. dividend representing,the
and not subject to Philippine tax on thepart-of non-· transfer of surplus to .capita( account.shall .f"!Ot be
resident, citizen ·,and ·alien recipients (2 DIZON, .· .taxable.'(NIRC,' Sec: 7:J (BJr . ·. ·:.
Outline in, Taxation ·(~071,6), p. _i10) [hereinafle,: 2
· DIZON]: . . · Rea~on·:. i~o~k dfv)dend~; . stridly sp~aking, ...
t. •"i ·r~present capital a.r:id do_ 11,ot constitute ·rnc,ome to
. J:xce~t-i<?n: Wtiere the foreign .corperation meets : .1ts recipie_nf. Sq. that the mere 1ssuance. tt,er.eo(is
the .50% threshold ..[Pr.e~d.ominan:ce TestJ, a· ··not s,ubject.tp ·ihcom~- tax .as th~y ar~ nothing :tiut.,
. _pq_rti9)i.·of iifc!h/idehds·y,1iil -~~ treat~~ as_.~qrri!ng · · enrichment through. increase in value· (1 DE
'frb,ni Philippine source ·(NIRC; as· aineoiJfJd · by . }.. EdN,:°svpra at-:710) ... ,· . .
T~AI/V; $~c •. 44(A)(2)(b)) .. · · ·· .
.. . · · ". -~- :.-- . -~ .. . . . ' . . . ·. . ~t~ption:. lf°.a:,cotp~ratior:i ~ancels or r.¢deem~- .
_The· 50% _thresh_old is met·. where· at least '5~% of . stock .lssued as a _divH:!enq pl su¢h lime. andjn .
.lts gross·income for the three, (3)-year period such .rnanner as •tt:>_lilake the ·aistribution and
:e.m;nn~.1~itt:i -. _the . clo~e ."of lts ta:i:cable year,,,/'~ · canceii~tion. or rE!de.rriptio~,' in whole
. pr~cedmg_t_he declaration .of such d1vlden9spr '/H ·· essentially 'equlvalenf -to the dfstributron _-ot, a
.in 'part; o:
. ·. ·. f~f S!,:1-~h·~aq.:of..slich·f>_er\Od·a~th.~.cQrporay,o~jy{; l; .· \a~aEile .dfviaemd; · ~l)e ~mount': sq. di~tribuJed in
.. · . h_?,s..~~!?~ m ~!_s,t~nce_was depved_from_-souf€~'r'··'-'~ _rede~ption or cancellation of the :3tock shall be
. .:· '«llhin the. f'h1hpp1nes (NtRq-! . a.s am~,:idE1dvl6x.r '.l_.,!1 :J ., _;,~considered.as taxable income toJhe extenfthat it · .
' TRAIN; Sec. 42 (A)(2)); . ·. : .. ·. · ... ,;JI i> ·~/i\'.~:.-r.~~es~r:itiiF distribution of earnings: or profits...
· · · ·· ·. · _: · · ·. · · .. 4/-· ""~~- ·r ---: · ff;f.fei-;:s~-i/73 · · · · · · . · · --
· · .· No~e:. It is lim_it~d· only in a,n.:amo~~J;-~J?1ch ~ears).-:!~ . · ( .. · '. · fj~ .(~,-_~ , ., · _- · _: \ .' . . .·
!he same.. ratio to suc:t.i d1v1dends.,_a~. Jf.e grosjf.,;;., ~~ -N.ote: Fqr{tfi1e}_exemp!mg.clause to apply_. 1t IS
tor
1_nc9_,_'Tte_~f.the _c~~p.~r?~'~-~- _s.a.~~:p$rt~4-~~gv~d. t-,f{ : ihdispea/a_ti1et~at:_ : .. . ·. . ·. ·. . .
·. (ror;ri_ ~?u~~s _:.v1.~m tt)e P~_1)ip.~fies-.b'r3(.li.-.tp rts . _!I'~}·· ;1.- -Th~r~ is3r~dW11ption or.cancel_lati9n;. ·. ·· ... ·,,. .
. · gr?s.~ mco'!le /rorn. .~11 _s?yr,~es (Inf~~~-P~rilA· .t;,J
2. · ni.J tral}_sactii(m,nvolii-es stoc!<, dividends; and
. W1tl)m, ~_!'Id ~:a~ly,W1th.~uUf{tv!7g~~;.~!1'e'\~~ . f~~· -~. ~~~!'.'~~-~~ma1Jne_r ·_of. the tr~n~act!o·n
· by Tf!AIN, .$ec .. 42- . (A)(?)(b)fto..._
.• -....,
'#"~~~ ~,,'-! ·
/,~~~ . h-' r•~.
t't
make.!l,~J£e.ssent1atl}'leqtoval~nttoa d1stnbubon
.. . ., - .
<-.=of.m~ia· . ·· :-. , . · · -~?,:.:::'.:.-<' . {;i, ·, / . of 'tax~bl~ dividends:. 9f, t~~se, the. most
"-. ~-- :· ; ,·. :.. : '· ·. · · ·
· .· .· . · · .·. . . · · .
._, -~ ..- .. -r- · . . .
··., · - ·
·i,;'/

\;~,
1\<i;
....
!:f. .. ·
i,:nport~i;i~ is ~he third· (CIR v. The. -C9.urt_..6f
j,,.~v_~als, G.R. No. 10857~, January20, 1999):
,. . Gross,.trcomefrom· · . rl.J 1. . ,i.1,«£-~-~~_....~.§,......J . . .. . · . ··. -:_ ·
. ·:· : ... PH_$0U~CeS' . .. . ' :Amovnf~;grv1dencfi{t_. : . . . . Llquida!ing.. D.ivtde1:1ds . . . . ·:.· . :· . · .· . ·.
..
. '. Gross'lntoinefrom·
.x declared by.a~o'relbn·
: '.. ··corpor.ilio.,.i}Jf:;i.
.
. .... Th" · t d" ''"'b t· · f II th · 'rt f ·
is:rep~es_en . ISu_, u l~IJ ~·, .. a .. · e_.Pr?p~ y (). a
. : ,. ALL sources-'': .. · · : .. corppra_tion In complet~ lrqu1oa,be>rfor dr.ssolutron ..

. .. . . . ~--<::·~~;oii~'s,rneportable ._ : . . \ - ~.:;1ei· -ui~n-·.s~'rs:e~~~r.-~V:the·.stockt:io,~er·:of~it~ ·

. ' . · -_.. - .- . · · .qvld?rtus.. : · :: , ·.:. _- . -. sh~ires.'· jn_
ei<c.hange for . ~'sir andlor iir.pp~rty·
.. distributed by the corporation\jpQn.its. disso'Ju.tio'n..
. / (RECALP£2;! -" ,.r.reatise· ·on. P..hilippirJtJ · /f,te,:na-1
.and liq~idatiori,. the stockholder· shatr ·recognize· · ·
.. . , ·..kev.ehrie..Ta1<-es;
: . ·. . . .
(2014); p;
.. .
467)' ·. · . .
: . ~itti°er capital ga°i_n or foss, . . . . . .
:,-. ·.
r- . ---~·,i,~~t~atf;;n~:: .• . . . . -· ' . . .. . .. · ...
.:'·1~. · usNco;. °.{ co~poration o.rganizect i~ ca1;tor:n1a, :Ft>i:m_ula: ·. . . .· . , . , .
r-:.•' _ .. :-·.lJSA,:earn'~d-67%·of°its fo.tal. gross income·
·.- L_iquidaling. Dili-~erids.(~um oflhe CfJSh
. : '· ?nd th~Jair.,.m.arkftt.valu(fl ·or property
~. . .· : .. <from its· :"p.f:iilippin~:·bu_slness ·d~ring. years · 'received) · · .. . ·. . ;p .)QOO( ::
!:.•
}''. .;: ,:· · 20.1a.2012.-:io·2b13;usAQO P,aid ~ P1oq;o.oo .. : Less: . Sto.cktiolder's cost of
r . · .. , ·. dividend.to Mt, NRA,.a non~resident alien. Mr ..
·.. ·.' ·: .. ~RA has.1>(>7;00.0 of Philipp.inesou~ce if]come . ... . thi:i shares
. .. lrivestA;lent'lti .·· surrendered
.. ' .. .
. . .
. xxxx.
·· . · . '. :as a· -re.sull of this dividend from l:J.SACO (2 ·capital Garri (Loss} : •.
. .. ·.•.
·. '·PXXXX
.. DIZON, supra ·a_t-2-1.0~21,1). . : ... · : · (R.~ No: 0f$-?008, -$ec. 8)..
, 2, ,US!\CO, a foreign:_coq,oration w.as'.organjzed . . .·
in · 2008; . In 2009, USAco·. ·distributed . a · The c·~pitel gaih -~~ lo~~ -!~- s~bj~t to.· regular .
·p,100,000 dividend to N.RC, a. non- . Ms .. income tax· rates u'nder the: Tax Code; and not
resident cilizen. · in:'2008, 9:i% of USACO's _to the-(;GT on thE:l sale of s~ar:~s (BIR Ruling f>lo.
. gross. . rncorrie 363.-2014, September 22, 2014). ·
. . was from. its. .foreign. business . .
,/·'.
2019 SAN.SEDA LAW CENTRAl:.1ZEDBAR OPERATIONS I. 51
 ·INCOME TAX ..
SAN B~DA:LAW"C.£NTft4LIZEDBAR,OP£/fATION$ ~ MtMOR';(Alp :zb"19

(See Rules. on; _Capitai Gains And . Losses- for F.inaf t;:ix Rates:
turtherdiecusstonon the computation.) ,· · . ·

Applicable Tax Rates: .. . .. Roya!ties .trom books, .RC,.NRC, .RA, NRA-

RC, NRG, RA·. NR'A..:ETB -· gra.duat~d rates Iiterary works andmusicar El'B.- 1°0% (NIRC, as ...
· (N7RC,: as am.e,:ided · ·by TRAIN· .La-.y; see..
·· compositions. · : . qf1Jende·d.'by-TRAIN ·
, · 2~(A)(~)),' . : · · ·. · . ·. . . . .ILal'\'., Secs. 24 .(8)(1) ..
· .. :NRA-NETB - 25% Final tax (NJRC, ·as emenaea >
. by'TRAIN i::aw,,Sec. ?5(8)). . .. . . . end .~5·.(A)(2)). '
l>JRA-NETB · . - ~5%
-, Notes: · · . < (NIR~; Sec: 25:(B)). ·
. L The recl:<onin.g point is the. time of declaration ,__,~~-----· ;.,....:.----+--=----'--'-..._.-:----1
and not .the time of payme.ri\ of .·dividends as . ~oyalt!e·~. . . other . than 'R·c. ' NRc: RA,:.. NRA:
· .diviae'nds : are· taxable . whether 'actually or · 'above. · ·. . . . . , . 'ET\3 ~ 20%. {f\//RC; as .·
: . constructlvely received (2. CASASOLA, supra. · amended .. by'.. TRAIN; .
. . . · .at 9()). · .. · : .. .· . ·. '. .. $ecs.:.·24 (8)(1) and 25 ...
· i. ·· tax· on income ·is cjifferent from taxon the ·(AH2)J-· : · .
· . · dividends; . ther~fore·,. -there . is .. no .. double . . , . NRA,NET~ ." :_. . _25%
·.. ·. ·. taxation (Afisco' lr,surance Corp.. v. 9:_9,1Jrl.:. 5p=_L_ ·J· . -..:"'.::--< ... ··.. . . . ...
. · ·Appeal:;;, G.R. No. 1.12675, Janua,r,y)-25,··1-~fJ~}. ·
·.... _ii.. b'udng. liquidatlon, th·~ trarisfe~,pr~q~!fy'!:J&~..;_
. h· '···
•
'
• •
- · .
•
· ,,m·imn
·(NIRC, Sec. ·Z5 (BJ).

Mi • • • ·
1
-~ ' · the dis~olvi~g. ~pr~orati~~. ~!i.ts;slh.c;J<J;iplcfers_ -' ~ ,RC ~r~ u~~~;}\t~s.(2,DIZON.supra at;.1 'eis.
· .· _by ~ay. o~ ..hqwda~1r:ig d1vi,~e~\t~J_od(~at~1;· 'ffl"~~~t~-:"l~]:B.~RA.'.NETe.·-. Exclu:ged (2
aubject to incom~ tax, ~c:>j~~encta,iffstiJ~Pt~ful. _:-4r OJ~ON;:.supra,M_·Y-t;~JJ\ . ·. ·. . . . ·.
. ·and credltable w1thhold1~9 ta~•{BJR'R1!J1(1g.D& ~ :.i~ · 1 · ~\. · \: , , · .: · · ~ . ·
. 316-2007,. May 29, 200/i.-f!IR 't1uling fA o. 363-. 1{\·,1._._,_;_,.,-- , . · (j · \ : ·. . · _ · · ·
. . 2014, September22,.1pt4).? If. · .. . · nf~re!tTripome, - ;;,,:.\ \ . : · . . ... .
. _ . ; . ·.. ' .. · .. · . . .l
Roy'~lties . ,
r,..,;.,. 1{·· : . .. ~/' .'
M .,~, ,. ~ \ . . .. :\!
:_-~om ijn_y i:iur l'Fc~-.bjryk
f:lepo,si.~, Xie.Id or:any.
, i'dthed m~n.e~ar,y-'j ren~fit _:,rom .. ·~~-p~sit
. It is the pa~ent · for th~· ~S~O e~}~o·: o "--'i-c: . sub~f~s· a~9
·.f~~~,vtn1_s~:{';JJ,ldS .an~ _s~~,l~_r
. pr~perty··such as-·ea"r'nings.fr\ne $°>' ijgi,~~a.ents,1 · ,,r1,arr,rffi~mintsY~e~,cf_from:~ource.swJthn:i ~f)e

tas~·~1j;f~-ir~ett
tradell'!arks, forinul~s .arid nat:i re~tJr'S ~ .rJ.:e6·.,.F~j~fes J . u" · . · .· · · .
..
1
~~:e~ts:·'\~-~:..·.~. "' ·.
0·
·'"',~v::.·-~~te.~~-l. : '• . ~ : .
. 2 .. Gompeosati?n whi,ch a perso~O!Jl~~oligl_~ N$~· RA,·i:iRA-ETB. ·-· 20% (N!RC, . as.·
• to pay for fraudulently copying -or in~i'1_gi~~-tbe · . -JJJJetf{1ed(tw
. . 1-_e{Al['JLaw1. Sec'. 24 (8)(1)),
.. 'righ\.(Mode/ Tax
Co_nv.enffqh_on ~~WtJaio~~~~~'f!Y~5%.(NIRG, S~c. 25..(f!i); ·""·.- :
.Gap,~al(~9_1?\Jl:rl. :1~,-f:!.8'·._2) ;:; -<~:••s~~~\];tfslrsu~stitute .·-· · .. ·: / . ·.~ · ·
of
Royaltie~ .is defineo;I. :-as· 'paymenf~·· .any. ~ind· . . .Arr alterna~ve foi'_rrf of.obtaini.rig·fund$· fr_om·:.the .
. receiyed; as· C<,>°n.sideration for -the use pf, or the.:, . . . publit: !3QlefJ~~J:, deposits., tt)rb_ugh.ihe···.is~uance, .
right to ·use;·arany: .. : . . . . . · ;· -endorserrient;.·'O~ acce_pta.nce.-o!<:Jebt i'?strume_l')tS
· · a. . Paterit; . .· .. f9r,ihe'bor,tow_er'sown accou·nt,.for the purpose of
b. . ·Ti-ade ;,,ark; .. : : : relending "or. purc{las-i:ni o.f rec~Jv~bles· ~ntl other .
c; . Desigl) ·o"rmodel; .-.. : . .. . . . . obligations, or· fin.ancing;·thelr qwn "needs :Or ·the .
:~ ... Plan; .." . . . · _ ·. . . -
·e.. Seer.et formula .or process;· '. · ·, ,- · :
<.. :
.
.·. ,.rie~ds ..of!their-agentordE'.l<=!l~r (NIRC; 'sec. .'22.(Y)}: ·
. .: .. '. . . .., . . . . . . .. . ..
: 'f.. . CoP.yright of.1i.let,=!ry,;:t_rtisticor.scientific woi:I<; . · · N<;>te: The· term "P.ul;_jlic" ··mean's borro~pg· (rom.
g·. · lnd_ustrfaf; _ .col'!lrrier~if'f, · .. '.·· or· · sbien~ific . ~enty (20).o~ ni:oreindivid.ual·or.cprporate lenders···
·eqµJpment; .'.or .for '_inform_ation ·concem_ing··· . · · : at l:lny one ..tii:n.e. (NIRC, Sec. 22·(Y)). · , ·
·indu~trlal, commercial .or. scientific ....•... ; ~ '. .. : ' .. ~ . ' . . •, ..
experience:.'or . ot
. .. :·.. i-lem:e·, the:n~mb.er 1~ncie~·is aeterminativeror
· h., Cirnimatpgraph films; 'or:.tapes ·for. -raclio or. · . .. whether a da'bt 1.nstri.J.rrientshoul.d-be considered ti""
television broadcasting .. (CIR· v. : Smar.t · : deposit subsl[tute,ai:,dcons~quentlysu~Ject to the·
. . Communication,.Inc., G.k. -Nos,. 179.045:46, :io% final withholding tax. Tl')us, a BIR ruling which
August 25(2~10}, . . . . . . . . . . . . . . . : . · . . states' that . ~II· government bonds are ·.deposit
·. ~Obsti~ut~s regardless .of t~e number of lenders is

.. 52 20i9._SAN.BEDA.0W <:;EN1:"RAUZED.BAR ?,PERA!JONS ..

 'not valid because it c~~pl~tely disregards the "20 .· Notes:
?r mor~ lender rule" found under Sec. 22 fY) of .' · 1: Interest income must be· derived from 'sources
within . the · Phili,Ppiries· ·to be considered·. ,as· .
the NIRC (Banco_·De Oro v. Repub.Jic'..-of the :
passive income subject to final 'tax.
.Philippines, G.~. No, 19_(}756, January_ ·13,. 2q15)... .
2 .. 'If ttie depositor .is .an· empl_oyee trust fund or
retirement plan, such· interest in9ome, yielq or .'
Public -. ~or_r~·~,!.1~.:..: borrowir1g fro~. twent;·:(;O) ·. .. ot.h~t- mon.etaty b'enefit is e.xempt from. the-.final
or mor.emd1v1c;l,ua,l ,o(:~on,o_rate .l~nders at any one · . -w1thhold!ng tax (CJR. v. .Court of. Appeals, ,G.R,
time (R.R. No. 14-2012,. sec. 2)-.' · · · No., 95022, (!Aarch 23, 19.92).: . , · ..
.. 3. lr:ite.rest .income from savings a~d time deposits .
·Ta~.- ,~~·licai,'an( it..· the · bonds .·~~~ · consid.~r~d · of members .with their cr~dit cooperative Is ·also .
deposit _s.ubst.itufos (20 .or- more lenders), 'the . ·: !i!~em.pt from _final withholding t~x.'
jriterest..,r,con:ie is'. geherallY.· S\Jbjed· to the· 20%
Final' Withholding "Tax, If· the bonds:··are ridt.
consider~~·. deposit· substitutes '°t1-.9' or -Iess . . · ii. · Froni? depo~itar:y ~·al"!k under the expanded ·
· ~Einders),}he.. in~e.rest.income. forms ;part,pf_ gross · . 'foreign currency deposlf"system . . ·· ' . . .
i_ncorn.e and 1s -, subjectto the' rf!gular·incom13:fax · ·- ·
rates (Banco··· De' Oro ·V. Republic of 'the- .Foreign Carrency Deposit Syste·m ..:. · the
Phj/iPP_ines,G.R .. No: -198156,.-J.ailuaiy.,.13,,2015).. 'conduct of banking .transa~tions· 'wh-ereby' any,
c
-, . . .. . persorr whether 11.a.tural or.juridlca! may-deposit'
;~
,..
! M~aning of "at any one 'tirne", f;,r purposes of.,..('.,,); ·torei!,;fri :curr~ncl,es forming part of'th~ Phillppine
.'~. det~rmininrf._the "20 or rn_ore._l~nder,s'.'. . /'{i·[~i\ · '. '.~ternatmnal reserves {R.R. No. 10-98). . '
;. Every lransaction executed :m · the primar#~i{t ;.:.' ~ · . . · · .
>,, . secondary marxetinconnectionwiththe purcna'J~~)Fl:\·l . Fmal Tax Rater, · ~ . .
_or sale ~!.seq1.1~i_l!~s (BancoDeOro.v. Repu~p6t,\;-'''{{i'?. .:.:-,:;r;~J2·R_A·-;:;-:1,5% (NIRC, Sec. 24 (8)(1)); . ·
. the. Ph1lipp1nes,. G.R. No. ·1987.:56, Janµap/ 1~;-:J~.,µJ-~~2P-~r~r.FTB,
201_5).. .
. .
.
. . .
. ·
(1'!< .
,--f,;i[.v

The reckoni_ng.~f "2Q or mor~ fende/'s~rl~stors",tt''i\ .

. t
'fJ..,..r:~•
I~· .:
'!"~. .
NRA-NE"T:B- Exempt (NIRC,
.. .
Sec&-c:Q.!41'1f.1U1)), 25 (A)(2) ahd·25 ({3)).
• .. . .
Note: .lf)n ti~nk ts jqintly in .\he name of a· NRC.
. .,

·made.at.a·ny-_,_tra~saction.in CO!jlij_t.ttio#.,",'t{Jtg
the · f-J . s~ch ~l ~\j·. ~CW, or a Fi[ipino.S£:a,ma~, find
·~r
~s: · _·. ·. . : . . . . tt?P ~>";j}'·.
· p\J(Chase or sale of iM g_?~ESthmentgrinds. suc!i::., i:ir4
t :._· ~ .-f.,.,f1
. 1: · lssuancE! by the.-BureaU,Jof Treas6~f of}the k} · ..
h1s/hefy~POf~s~ d~penden~ who is a re~)den~,qf ·
.thE;, P~hp~i:.~~0,_'<, of the.mterest incom~ from
s~~5W'IB:;,q_~R?~°V'shallbe. exempt. w.h)le -the·
.. bo~ds· . t!>. Gov~rnment · ~cu.fitfci~f~iEiig'ibi~ .. l~,)1 ot_her ·,5.0.?f.2,.~lst\all be ·subjett to · 1-5o/o final
.. Dealer !G~~Ds) in f~~.P.~niqrfglarl<~~~· }'. f,;1. . · withholding tax(.~·~· No... 14-2012, ~ec_-· 5)... . .

lo
·~~t'e:· ~S.ED ref~~~ a· SE~jic~~~cie~Le~~:l'.~~F,\?,~:)s,,..~g-ter.m. dep';'&it· (!:.T.D) ·or_ invest~ent
•· . ,.n. government _secur.iti_eif . .,icc~dJJed.'·q,,yf1Jt1e ~Jrttie-f'?~~·~f: . , , . · .· .
. Bure~·~.ofTr~asury to pa~itlpate)ri:t~.~fir]m'ary · 1: · ~avmgs; . . _ ·, .' ·. , . '
. or ongma.tf.o.n. ~a.le of G'~\femll)ents~idriti.as .,. ~~:· · . C0m.m.onor 1~d1Y!dual trust funds;
: (D~partment of: ftnarice, D.O. No. ·20--201'0,' . . ~11 •.. De.posit substitut~s; . ··. .. · : . ..
Art .. 1 (1·5)). ·. . ·· · · ·· · · . · ;.. 1v. · !r'lvestment management acco1.mts; · :. .
· ·, ... "v._._- O~her·.ir:ivestni~n.ts .evidenced by certificate's:
. ii: :Sare:. a_rtd. d.lstrib.utio~··bY GSED;:: td. va~ious ·, . in St_JCh form prescribe~:fby hie BSP (NIRC, .
,, ·lendE:r~tlnvestgrs i.n:~he·:secondar-y,rriarket; . ·: ,, .Sec: 2'!- (B)(-1)),. · · . .' : .' . · , ....
11r. .$~bseque,11t $al~ :or ~rading. by a bondhol!:ler. to . ' •' '. .. '. ' I . ' . c ·, ' ' • ' ' ' •
,,..... . · ·. · "Cln_ot.he~ ·l\3hder(inv~stor. ·in·.. :ttJe.. secondary Common T,rust Fund·~ A fund m,;iintained by~··
" . ma.rk~t:usu~lly thrClugh ·a-broker or dealew or'. · . ·. trust .corp0ration, 'bank· .or. investment. house
·. lii •. ~ale_ by ~.-·financial·i.ntermed!ary-o'or:idt,oider of . .':. . 31uthoriiea to 'perform trust. flinclions· ~nder'··.a: ..
. .its· partrcipation intefr~sts· ··1n the· bonds. io... ~rit,ten and fo~ma_llyestablished plan,.exclusively ·
. · .'individl,!21 . or' ·. corp.or~te ',: lenders' . in':. the . ·. fo.r ttie collechve ,nvestment' and reinvestment of · ·
. secondary m·~rket-(Ba·nco De bro v. Republic,, .certaifl:moneys representing: partic)pations·in the . ,
.GJ~, No. 1987,56, Ja'r11.iary 13, 2015): · · .·. · plan r~c.ei"'.ed· by i.t in ·Jt& cap'acity c1s··a trustee
·· · · · · ·· (/R~, R.A. fl!P· 9160;._a~. amended, Rule 3.a":3 (f)).
.·,
" Wheri, through_ any <?f .the foregbi.ri~'..~nsaotions, .'1~yestriier/ Manageme.nt. ·Ac~~~nt the
ful'ld$ ate sirnultaneou~ly 01::>taihed· from· 20· or investible funds ·or· any. investment · portfolio
',.
(
l'nori3)eri~ers~rivestors,'there is deemed be a. 'to hanc;Hed.l:>Y a. bank or an. investment house in a
!'
pubUc borrowing ·a'nd· th~ bomfs at that ppint · in · . represerttat~ve c·~p~city:as financial or- managing .
,1me are deemed deposit 'substitutes (Sanco·'be agent, adviser, consultant ·or administrator of ..
!·
: Oro v: Re.public, G.8. No. 198756, January· 13,. ~nancia! ,or inyestment m'anagement, ~dvisory,
'·,· 20-15). '• · :. . . . .. .

. . ,
2019 SAN SEDA lA W CENTRALIZ~'?- BAR OPERATIONS I 53
 · IN-COME-TAX .
.SAN BEDA:LAW C{NTRALIZED BAR OPEI.IATIONS - Ml:MO/{Y AID 2019

consultancy .or any. similar arranqement Whict) NRA-NETB.(prizes and winnings regardless of
does .not create or'. result in trusteeship (2008 amount) - 25% (NIRC, Sec: 25 (B)) ·
ManufJl-of Regulationsfor Banks,. Sec. X403"(C)).
. Not~:... . . . . . .
Fi'nal Tax Rafo: i. Winni_ngs .( except.Peso and Lotto w.i.nnings
1. RC,"NRC·;RA, NRA..-ETB {heldfor·5 ye'ars- .. amounting to P10i oqo·or less) are subject
o_t mbre), exemp!(NIRC; ~ecs. 24(8)(1) and a
to final-tax of-20% (NiRC; S.e~. ?1 (8)(1)):
25.(A)(2)). . ll, Prizes amoµnt{ng to P1°0,000· -or less,
although exempt from filial. tax, are to be
In case· ~f .pre-termlnation . .'b~f6re the fifth included in g_ro~s income and 'subjectto the ..
year:,. . . .. . . . . i:,ir~duat~a, rates (NfRG,. Sec. 24 (Bj(1)). .,.
iii. Prizes arid winnings frorn sources without

. . ~
~ 4 to less.t~~n_6years
1 .. \ •
..··:-- '5%
the· Philippines. are: included .i11 the gross
a
Income of. RC,- but- riot· NRC. RA, 'NRA-
. ETa, NRA-NETB.- ·· -:. . . . . . . .
3-,'to less ,than .4 yea ts _: 1.2°/o . ..' . .,
·. . . _ ... · . . · _· . .. . .Pch1t:1er's share froffl. the. net i.ri~OITJe·.-aft~·r -tax of
:'·
. Les~·than:3 yeai'$ ' , . ·. · 20% .. business:'partn~hihij>, jofr1t account, joint venture
· (NIRC,·Se,cs. ,24 (B)(.1)'ahd 25.(A)(2JY . :"""~.,,.~~~sortium_. ·. ·. · ; · · · .- , ... · , · · ·
' '. · . · .; ·_ ·. ':,> : · · · ·_. · . · · · · ... · ;,;:~"t"~" 'JTJ.-P_'ft1_S.'ff't.-ef,W/°..the,d_iscussi9n of Partoershlps above.
· . !\lot~:_, ·The-, above ·· rule · apphe~ onfNo . \. . { d }J; -~-. ·. ·. · · · · . ··. •· · . . ·· · . ·
ihdividu~ls_.. !nte~est ·,ncome~f1:,if"'tliq~1.=.::-"'-¢~ei:r,L ~~ffS~TAX. .,» • . ·•••• '.. .

· 'corporallor.is rs always tax~qJ~,{';< ·~ . · Please"-:r:_~'1-rto.;Rf!lft!!-J?n Capital Gams__an.d Losses

· . . : ., . . . , ;,t?.· ·.: '.J-;p/ ,,,_;,,:-~•-,..=-=:;zr.-..,{jf';'diS,G!:f.SS.iQ_,:f:·· '\ ·. <, . . . · ' . .

2: ·NRA-NETB (regan;:l!ess -~ol9i,ragt piqd} ib) '4,r'.: ~.v'

25%. (NIR(;J.- Se_c. 25 (B)Jf"' ""'(#:
't"·O _\\
•t . '1\~
· · . Jr: {~ J.A'XABll,.'fY '\HF·~-~fECIAL .Cl:ASSES
. . . . . <;>F
.;. . · . · · 'f{; · _, ..... · . . ' ~NDIVIDUJi?,L E~P{S_C;rf:(;1:fS : . · · ...
Prizes and W~.nnings ··...
. Pr.izes_ ~ ·res~lt. of an eJfort rtifairra·'
J::;.--;,-,{. . . · I7'~ :".\.;. '~~r-1:~mrmum Wa~~~5,~r,n:r (MWE) ·. .. , · . .
CAS~stf~,"?,- ,j' r...:.._ ~fers/o a ~C?rU!;Ji: i':1~)tr private s~ctol'Wh.o is paid
g ,<'-~ . >· .· . · b\.StmW'_J,#:illte stlilitory,IJiliRill)\ll')JI .wage (SMW), or to an
. · wpra-at 90)."·, - · .
.. .. . .. - ~ -~,t
'Wirinfngs ·-.re~ulf of tr-ansac{lQl'l·r~;~re,t~~~om.elql1J
a . ~~-:S:.J.fmplq~~}l 'th~ 'publi,b'-'sector wfth compensation
~1 inco~~:av.np!fn'm~:.f~an. t]:l_e s(atutofy i:n.in!m'?i:11
. depenC:,s upon· luck o~ chance1Jcf.'J. :\~ · '-'-:'"~ '\~9
· r~WJ~--.:fylhe ,~on~aQiculturaJ s_e~tor where he. 1s
. · . . ·· ·. - · X· · · . ~- .. ~,2_~-.f- 1. -~ -~~~- ~1;1.ed(~lf!C, ~ea._22 (1:11:f)).. . . .. ·: _
Final Tax Rates: - -', . \ - ~"L
.. "; ·',f_; . ·-/ . ·. · · . ·,
. . . ~c.~R~; RA; NRA-ET~: ~ . .·
. •. 1. Pnf'.es ·p10,00G and. be!<)~ . - Gta_cl_µ~!.e~
':~.~Cl£tir". i:-~~~riient:_friir)imuni. wa~e-_e.arn~rs shall be
J.>!. &-em:P.-1e· payment __of 11:,c9m~ t~~ an~
lneom·e t,3x. of 20.%. to 35o/i."':f£1JPs.q_-:a"'s.~ .. _: l'f~l.9[9gJi.t< based on their_statutqry m1rnmum
amended.py·~!RAIN Law; Sec's~4.-.(!;j[(1)· "?i.f ifAif~g- -~~1~Et·°I~e·holiday_P1?Y, ove_rtime PE!y, n_ight.
and 25 (A)(2)). .. · -.-.: · ·. -:: . . ·; ~~-..;,;.: __ n.~~"'~tffe_rrnt_i;:il.p~y a~~- hazard pay.. ~ece1ved by
ii.. Priz~s above .P10,000 ·-.20°~-- (N/RC;."a~-:suchearner are-_l1~ew1se .exe~pt (R.R. No. 11~·
·. · ,. :amerjdedby TRf,IN·L~~- Secs. 24 (8)(1) , · ·,. }018, Sec. 6};. · .:·
: . and 25 (A)(2)). · ·.. · ...: . . ·. · · -'. . · · · ;, · • · ·: · · . · · .. ··
· i!L. PCSU. an.d _lqtto wiri'nings · P.10;000 . and Note: _,Hi,i'~ard_..pay 'sn;ail, f!ieai:i.the .:imouht paid by ·
· · -bek,w ·- .. extmipf·(N/RC,. as·:amended by the· emplqyer--' to ;,M\IV!;s ·.who. ;we~e · l:!Gtually.. ·
· ' TRAIN, :Secs.- 24(8)(1)and 25(A)(2)) .. · .... ·__ · a.~sigri_ed tg Qariger ·or- strif~-tonf a·reas, dis:ease- ..
:iv.'..'PC_$_9 <'lli_d·-lotto w1ri~ings ~-~o~e,~10,000 :..:.. inf(f!.st(:)d -places; or Jn · :clistresse.d _pr .J~61a~ed
... 20% (NIRC, as-a([Iffndf'#d.bJ(TRAINLAw; - . stations·_and_ camp.siWhich_expose them tc_> great·
. -: ' · :· - Secs.:24 '(B):(1)' and 25-'(A)(2)). · , ·... · · . d.:1ng~J Qr,: cqptagio_n '9r· peril .'fu !_ife. ,A,nY h<1zard.
·.. . . , · · · :, ·,:' · · ·, ... · · . .p~id to, l\i1WEs.-wl;iich· (:lc:ie~. hOt· .satjsfy·the above
. : Note: ,S.ecL 25(A){2) of'ttie· NIRC was .not , ctiJ~ria is. de~rTfed sobjeqt._to'Jr:icome' tax: aflo: ·,
-, amended._'by TRAJN law-: --He~ce,. NRA--~- c<>n·secji.iently, .wittitiold_ing tax oh. the.said hazard
, :· ETB's · ·PC$0 · .. and . ·Lotto. 'Winn'ings, . ·. . - pay (f?.R. Nb. 1 J:20.1_8_dated Jarwary._31, 2018),
(egarclless of the amount are stm:~:XEMPT . . . ,. . ., ·· , ·. . · ; . . ·
. froin inc.onie tax::·. . . · ,· )-; · · . A.senior citizen whos.e ~alary is'eq1,1ivalent to:ihe
statutory'n1fnimtim.wage -shall also. considered be
v. b~-~'r Winning& - 20%. (NIRC, as amended .as_ a rv,wE ~ntitte"d to exemption.s(2 Cf.\SASQLA .. ,
.: by TRAIN. Law, -'secs·.. 24 (8)(1);. Sec. 25 supra ~t 88). . .
(A){2)). · .

54 r 20l9_SAN SEDA LAW-~ENTRALIZED BAR.OPERATIONS

 f_.. __ ;11!1 ...
. .
I
1 INC.CiM·E
SAN BEDA.I.AWCfNTAA~IZfQBAR OPERATIONS- MfMORYAID':2019.
lli!II__ Rllli:::'-.mi·--·ll!llllill••··
· •m•-!l!llils'
-m·
TA.)(. ™.~~- . ....
-----·u.t']jr.r~ . '. .
.

·, ~.

:i,,. Th~. fo'llolfling ~ income payments. to MW Es are . .To be a ·manage.rial. employee, the .foliowing
~'
~ . ..
Taxable: · . ·...
a .. · Additionai · · compensation
· · ·
such .
·
as
. elements .mU$t'CQncur:.(~AD-20%)
. a. His -primcJry ·duty consists of- performance of
.
If· comrnlsslons, .honorana, fringe' benefits,
Q'- .. work directly relate~ ~o Manage·ment policies;
. . . .benefits in excess of the .allowable statutory ; · b. He r_egular.ly and directly'· 8~sists ·in, the
i. . .. amount of P90, nco. taxableallowances, and man.agernent9f the establisl)ment: . .
. . . other taxable inccime glveFilo an MWE by the c. He· customarily and · regufar.i.y exercises
. . same employer other. than -those wh,icti are. Qiscretion~ ·an.ct independe.f-lf:judgment·inttie
, 'expressty.exernpt: and· . .. . .: perfon'naJ1c.e.of his functions; ar:id · · · .' · .. ·
b. Other jncome received by MWE.s from other _. d:; ,He ·does pot-devote 20%of h.1~· time to work
sources in 'addition to compensation income; : · qther tha~ those _above pres~rib~d. ·:
such· . as · income.. · from . other concurrent
. . empleyers.: 'from 'the.:. conduct of trade, . .. · ,P.n th'e.other:harg; tt,e t~r.m "technica·I poi,ition"
·'· ..
. . busirress, · or practice. at: profession, except. . · is lim.ited only. to position.s.whictf'are:· · · ··, .. · .
_ -·. lncornesubjecttofinal tax, only·to tli'e extent "a. · Highly._'technical in..nature; c1rid •. · · .
·ofinc6me.OTHEWTHAN SMW; ~oJiday pay, . o, · Wher~.. ttiere ·. are· no. Fi.lipinos . who are
· · overtime pay;· night shift dlfferential pay; and . competent, ·able. and.,1Nilling to per:folm the··
. hazard. Pi'IY ElarneiJ duririg tha taxable -year ·.setvices'for.wl}ic.haliens are desired (R..M.C.
. ·.. . · (R.F?..No. ff-2018.,S~c. 6 ctated vanuar.y .31~. No. 41·?009) .. .-· ·
. .. 201'8). · . · . .. . .: . .· .· . -::;~
. . •. ·. .. .·· . . t./7~f
Filipinos· ei:npl~:y:ed: in. said· establishrn .. ~nts
2 .. l11cjividuals ·.whether· Fillplno " or· ·Alt~n;}<:)\ '. !'iav~th.e.·option.to·paybywa~-o(: .· ·: .
·.. emp1~.Y!d':bY:~ . : . . . .. · . _ · ·. · · :_ 1;';(,/:'·';;';,t.) .A. :Fifte~n percent f15%t-final Income tax; or
_:.~a -,; -> Reg_1or:ia1.or. area headquarters apd _r~~~of~t{ r·'': 'R,equIJ!!m':n.ts: i--« · '. . . · . . . . .. . _
. . ope~atm9... ~ead8~a~e~~ -?f.1 mulbnc1~~ni~N·f!_;+A2!~.;~':c!~ff(11J.lnap?nal companies_--. Flllpino .ri:ust :
' . :companies. In .the Phihppines JNffeC, es=« ~r:
-~"'-be·.7fuold1ng. a managerial. or technical
_ .. · amend.e.<!_.bf-Tf!AiN L~w. Sec.g_l(C));·_· . /.~-:-,::~4 . . . · P9~~~n 'tho_llgh .th~r~ .are no .aliens· .

~t, . · · [': . .
b. O~stJ.ore:..ba.nkir.ig. urnts._est~bh~Q~. m ·t~~,. yl · -'}9.l.c/)n9. the same position. .-. . . ·
··;P;hilippines -'(N1RC, as amem(ff.lt. Pf;JJ:~AIN_. · ~} . .. l;i. · ,J'ffst,~li.~ ~an~ing.. µnits.-. a:nc! petl'6!e,um .
L?W,: ~t;.c.. 25· (f:!)).:o~ . /f,~ . ~A . ·v~·. ·.. -:-
. )f.ieNi_':e~\E'ntractors·a~d ~ubcontract~rs-~
c.. ·f.oi:e!gn . Service ·?t'?,r.~ctor~~'t?.r.. ~ub~"\
.contrac:tor~·engaged m,p.~troleJ:Jrg)jP:rra_· tiQ.8_.S, . .
. ··in)he f'.~ilippi~·e.s (NIRG.,,._ as,~'f}lfi_ticle~bn·:
rr.
Ji~P.!n~ir,ust:be.~olding a.n:ian~gen~I
9.i·•:;;'.·'" 0r::teq:i(,IJCalpos1t1on; 'c;!nq . . ... . . .
ii: .
·:~ii:i.f-'11:i~.r~_.,..are·,·.aliens holding the Sc!me.,
·... T~~-IN ~~W;_ ~~c .25JE))-.,~>;~'.<: ( .. ~ · .. : .· . . . pcs.'.tion ..<R:~-_.No,;12~20~~):_- : .

·Mi.tlt!n:ati.~nal ~orn~i!ny~ a'_fqr~i~~:!if:gi!.~fenfity~~;;;~!.~\.~!:~~-~~t~

t<;> be met'by.·a FHi~lnq b~.aljowed t.o
43nga_g:d: m inte\natio_nal·trad~ v.-,1tp,;,.~tryh,at~~J::'<!ir.u~~:-,.......o.1:t"'=~"-!l'ie•o'pt_i?n to be··.tax~~(at·1..5%: ·. .
sub~1d1~nep_pr bfc!'t'.1cli_.offlces m. th~?t;:;1a-~~1{ic . . .:<. 1. ·.-_Pos,.t~on ~ndFun_ch~n .Test·.-: _mul?to~cupy.
Reg1_on-·ani:1.Qt'1er fore1~n m.ai:ke~s (R)!~.9,, 11- ·: · . ·-~·'I!18:9enaJor,techrnca,I pos1t1on and must
· 2010). · - ·. · · · .;- ·. _ . aqtuaUy exercise mafiagen.aror techhical
· ' · · · , fuhctions.pertaining thereto (R.R. N~. 1-1/
Tax Rat~: .Pref~r:enti~l.15%. rate based.
tli~ir grpss inco.rne, P(oVided; that, ~he .same t~ic
tax on
2q1.Q, Sec, 3(a)); · . . . _ ..
. ii. Compensation Threshold , Test -: m_ust
,:·. . . freafment st:ian·.apply to: Filipino~.- employed and h'ave receiv.ep,qr· is due.;to·re.ceive under ·
~\
.,:: ..
:
· occup>'.irg 1h~ ·sam.e positions as· .thos~ of ali_en.s · · .J ·.a centr~ct of ernplo:ym~nt;,agros~ .a~riual ·.
. :· e,mpld,'.ed.. in ~HO; :ROHQ, OBU; .and PSCS taxable. ,compensation of· .. at least ·
. : . : (NIRC, as '!mended by. TRAl[V /;.aw, $ec. ~5 · P975,000.. (wt.1ether .. or.~- neit .. actµaily.
(C),(D) and (E));: . ' , . . .. .. ·. . ·. rer;eivep-)(R.R. .N9. 1·1~2010, '.Sf;Jc;.3(b)); '.

.... : Tax 'Base': . G;oss. incbme' ~ec.eived
. : . wa'ge.s, ·a:nriyiti~s.,_. CO'ITI.P.~~s.atio'J:; remuneration..
· .. · , and other einoluments,.·such as .honoraria .~nd
~r- . . .allo_wances.. (NiRc, :as- ame.ne!ed by T~ll1{l.,a.w; ·
Sec·. ·25. (G). (P)'and (E).·.
: ... . . -:· · ·.. -- · .
. > ·.
}
Reason: Only:· alien ind.ivid1,1als .. occupyihg.
·n,~ri.ageri€11. an·~.-. technical' .. p9si~on'S in sai'd ..
· establistiments··and ·'Filipinos· employed in.·the
same positions ·as those 'of ~lieris are subject to
the 15~ final hicom~ ta.l< (R.'R. No,._ 02-98). ·
as sal~ries,-:_ ' N'ote; · · Provided · that,.. a· °'.,chan~e . in
compensation. 8$·'8 ·conse:quE,Jnce'· of which,·
. such enipl9yee ..subsequenll.Y rec;eiving less . ·
·: ·than- the· compens~tion ·threshold'.stated in:
. this.s~tion sh~II. for 11\e calend_ar year when·
· . the c;_hang·e .pecornes effecti:ve;·result· In the
: · .. employee being . subject· ·to· the· . regl!lar
income,- tax rate (R.R.. No. 11'-201(), Sec.
3(b)); and .

. 2019. SAN SEDA LAW CENTRALIZEQ SAR OPERATIONS I 55

.:. ·.

--------· ... ·- ...

 lNc·oM·E TAx·
S-AN BEDA LAW CENTRALIZED B~R'OPERAliO~S- ME,',,j.ORYAID. 20.19
HL- Exclusivity Te'Sf , - the · · Filipino:·
managerial or technical employee ri,'ust
be exclusively wqr(<ing for the· RHO or
RQHQ ·as. a regular employee and not
just as a. -consultant . or contractual
person.riel (RR. No.11~2010,.sec. 3(c)).
Note: Beginning January 1,. 2018,. the.
Gr.aduated .. Tax Rates· of 20% to-.3~% -shall. be·
applicable
.
(R.·R.·No.:·
. 8-2018,
;~
Sec.
...
4 (0)).
The preferential'. · income . tax . rate. !Jnder.
. subsection (C):. (D) and (E) 9f·~ec.tion 25 of the
: "Tax -Codei .as .amenoed, 'shall. no longer ·be
applicable ¥Jit~out prejudice· to th'e 'applicatiqn· of
· preferential tax rates· under exfsting international
.taxtreatles .. if-warranted. Th~s;: all concerned
employees ofthe RHQ, ROHQ, OBU, and =scs . .
shall be subject 'to. the regular Income Tax ra~-~~-,/·,
under Sec. 24(A)(2)(a) of the Tax. C~def,~as·
amended (R.R. No. 8-2018, sec. 4(Cjj~,,- G'-
- . · ·. · ·. /..YfP~-\.l~P;=:,, _~ ,tJ_ · .{A~AS:~-~1ste~~d.taxp·ay.er,_
The preferential tax treatment ~flail n~.J~,iy·"for . .
employees of RHQ/RAH/Ol;}6.4aiJ~ .i,rE!troJ,e1:1liY'l;"'~~'"".J.l;.,_
service ·contractors- and ~µg~)ntra.e_tort,.,..whic!]
· registered with the Secu,rit_ies'<ft1ld·Ejchan9'e·_ ~-~. ][.. C~~e:\~ Q'l'.!'_~m,t;l~d.by ~RA.IN_L~w. and
·Commissi<m·(SEC) _after,}1 Janyary ~Oij18: They·.·
sha)I now be subject to,. nlfg'g]~r· °'.'come fax rares
(R,A; No. -10963, sec. 6; 'k.:;tff.~ . -8-201 , s~- ,.0
(C)). - . · · ,. ~ -~ l. . .· ·
. ff ' ·.tt.· r~n\-
· ,. - : · . . , -~ .· _ .. t· ~i:.r.~ \,,___ ..-.k----S;..-Exc~lj,t~:1-1'!1,., OJ?JjqJTtO be taxed at 8% income
3. Pu~e_ly Self:E~~l9y~d Pf.~f~f~lf'l~. ~\1\\.
. lnd1v1duals · earning· m~':~e~ pur.;~ly .. a~, :tel
employment a_n~/?r..practi_c\ of pro'f~ssio~Wft~,- . ·/..a:ri'l. al ..gr~!s .sal~J and/or· gross receipt& not
_?ross_ .saJe.s/r-ece!p~s .-~rid ~t~er n©~;'pi;~U9.1t_~&~x
· in.come does. .not exc_eed tri P3,001J{l:£.·. V~,.EN1':\.~ 1-,,tef[~R<C as,{amend~dby TRAINLaw··sec,
· threshold, sU<;:_h ~<:3xpayer·may o J to b~taX~Q-._t':<.d:..~t;J:ti{'.""·: ~,~" : .
~---. The gradua~e? rates un~er $)(;:~~~)(~);cii:r--==~--: ...;\\_..,, '/ .. :. .·. ·
· arT)ended by _:Y-RA!N J.aw and pa~':9~_,;~A!fge. 1\Jf.41:\~~~o"!~Ea mers.
tax (f?.R. No. B-2018, ,s_ec.. 3.(C}). or:~,.._,
b. An 8% ~ax . Oh_ 9f<?$S. Sales' or_ receipts: an~
other· rn;m-operating· ·income·. in . excess. of
· P25l),000 in li~1/of the gradi.i_ated ·inc~rn·e-tax
. '.-rates arid ·perc~ntage ·tax.· (R;R; No._ :8~2018,
. St'fC,. 3 (C)).
. · lf:i:;f uring the taxabl13' ye.ar the taxpayer.-exceeded, .
the VAT threshol.d within the year: ·
. a.' . The taxpayer sh'all autom~tici;llly :b~
·. ·
·subject
' to the._graduated rates .under·Sei::": 24 (A)(2)" .
: as amer:ided by TRAIN L,.aw·.(R.R. No. 8- ...
201~;~ec .. 3 (C)).;·-and· ·. . .· · ·.
· b. The taxpayer ~hall'be allowed .'c;1 fax credit.for .;· · · ·
. the previous q.uart~r/s irico.me· tax.·payment/s. : .·
under .the. 8% inc9me tax rate option (~.R. ·.
. No. [!~2018, Se'?. j (C)).·
56 2919 SAN.SEDA LAW CE;NTRALIZED'BAR .OPERATIONS·
Unless the taxpayer signifies the intention to·elect ·.
. the. 8% Income T·ax rate iri the tst Ouarter
. Percentage .and/or ITR, or on the initial quarter.
return ' ·of · the· taxable 'year after the
. commencement of ~ new business/practice of
profession, the taxpayer shall .' be considered as :
having :availed .·of ~he. ·graduated rates under
Section·. 2<1- (A~(2)(a):. Sy.ch election shall be
irrevocable and no· amendment of option shall be
made for the.said taxable year (R.R( No .. 8-2018,
Sec.' 3(C)). ·
·
.· -- The election tobe t~Xed.a(8o/~ should be signified
· ,-by filing an App1jcatibn'for· Regi~tration Update.
. (F.orm.1905) 01:r or before. the .due.date for filing of
, . the Percentage Tax.Return arid si_gnify the .same
. iri the -1st-9ul=:frter ·IT.R ·.(R.R. -No; ·:a-2018, Sec.
· ~(C)). . ...
l'"u. .: . . . . · : ·
~~~tal Rule: _The opt1~n to b: taxed_ at 8 Yo
·J\~/racop~-i;i_xr~t~ rs not available to. (VOP)
·..:· · 0
-
reg_ardle~s.of th_e
. ~~,1311J.O~~t1,~rosssale~/r~ce1pt_~. :. ,
- T~~ ~.f P.~Y:_er who rs s~bJect ·, to Qther .
"-)f ~fr~~ta._~e."'(~es. under Title V ~f the. Tax.
.
.. · 11'- f_4fl~~r~\\pff]i~GPP by v1rtu? of their
. . : _--::-:91\'tr!b';JIIV~'-s~;r~.from _GPP Wh1_ch already ..
~';;\" ne, ;:::ost ,a,trd e~,;enses (R_-~-~,.1'-fo. · 8-2018,_
~ . ·'- ~ ~fC. 3 (C)lp~.,;,l . . : . · . . .
~~>SillJJIJ!l . · /fl~ · .11 - j . · . · . ·
~-,1.,~Jaxi'.(!~'f is/.fvai&iW-e· to cooperatives, ·,self-··
4!"-~-'95.(~yed_ in.divi~,ua'lla~d profes~io~at~ Yfith. tota!
e~di@ P500;_ o_o_o. (R.R, No.. B-2018, Sec.
.· · . ·'
., ·
. . ' . .
~· ~l"-'~m,xed mcome ·earners·. (~armn_g ·both~
com·pensatibnincome and income from business
. : or practice OfRrofeisio"nf their i'n"come'tax~s shall
be: ··. . . . . :,-- · · · '. . ·.,: ·.: ,: . . · ·: . · : . ·
a. For income from·c~mpen:sat1bn-....: ·Graduated .
·.:.,. income tax for
rates ind1vidui:iis-· AND. · · · .
- ,,b:_-· · For .. i~come · ·from.. b~siness.· b~ ·· p°fa<;:tic~. of
. profession:' .· . ., . . ·. ' ... . . . ·;
. f: :. G~oss . sales°/re~eipts· which_· do not
' . exceed the· VAT -threshold o( P3·; ooo,
· . '. oo'o - 8% . income tax. on' gross ·
· sa1es/receipts and other non..--ope,:-ating!
·. ·incom~ OR graduated .. ir\come'.tax rates_,
.: on tax~bre. income,.. at Me I taxpi;lyer's
· ·option; · · · ,·
ii: Gross sales/receipts' and other rion-
ciper~~ini;(· income whfch · exceeds the
··.' ···VAT· ·threshold:· _of· '.?3, 000, ·: 000 ..
graduated . income ... tax rates :, fot ..
indi~i~~als . (NIRc: · as:: amended. by
TRAIN, Law, Se9 .. ·24(A)). ..
 -I
, .· ! .
t"Nt:·o·M.E TAX
SAN BEDf lAW CENTRALIZE.D.BARf:)P~RATIONS- MEMORY-AID2019 .

Note:· The provision. under Section "(24)

(A)(2)(b), · whlch allows an option· of 8%
Income tax rateon: gros$ sales/receipts and·.
other non-operatinq income ih excess of
... P.?50,000 . is· available only to purely self-·
employed ·indiyiduals .and/.o"r· professionals .
. The said P.250,bOO is not·applicable. tomlxed
.. ·. income · earners since . it ... ·is · already
incorporated In the· first tier of the graduated·
... income 'taxrates appllcable to compensation
lneome. und~r)he .satct- graduat!;iq. rates, the·
-, excess · of the· ?250,000 ·. ovef the : actual·
taxable compensation income is not. ~ ...
deductibi_i{agai(lst ti:ie taxable income from .
buslness/practlce Of profession 'under the 8%. ...
·income tax ·.rate 'optlon (R,R. No, · 872018,
Sec. ·3(D)).

(See.additionalindi.viduatsnotall~wed use to .
/!%income iax op(ion:a_bi;>ve'.).".. . . . . .: '/!~d'.t' . \.
· .. ' . . ~A-~· . .
5 .': ·SeniQr Citizen . ." .. '. . .: ... (:;~/,.',.<;-'. . · .·
A'·1>enior citizen refersto any resident cmzepzo(1r}J\ .: . ·· : ..
. · the .~bilippines at least 60 -years old (R.A ''J}jd.{J.''-".:.i,{~r:...,. , -, ·. , _. . ,~-
9994,'Sec. ;3):_·... · ,,;,fY ~{:"-'i'.~;.'.-l~J~[.,(~eI:2~
." · • . · . ·
· .
.

whe_ther . '·tnei · income '. is

1'j/'1 . . ."<¥
Se;niot citizens are subject to regul1~f~coma·ta~,f.\;ili,. .
·d~.rj~e9 . troy-··11
: . . ··
~:f
_--2...... I ·.

/I 11. ·\
·. . ·
i,ia\ · · ·-, · .
. ·.
. co,mperisaticm. ?r ot~~_rwis~; ex~~.P.~ )t)z:·-:1 . _ . ·1!}
. . a. . If. the. senior citizen 1s,,.;a;;'.Mm1rn~fnl'.::Wag~,. 1~ · .
, tl ii ~ . . . . .
JJ. ~: \.~ ·.... · ..
. ·E~u.~er ~n~er RA. No;:,,fq4.(2,QA,.SA?O':,A~· · 'frj J .. : J! · · it J) ·- : ··
· · $t:J?ra ~t'88).>
· · · ··~ P-1;1.t').
Ylf.-·;r:-.r"~. ~#{:
<ee:». ·
· .,,..
)·:pr.
r;~;··
. ~'1fjf${-f!i:1}';?fjif:'·. ·
· ., : .

.~oh~.: _.The
exeri:pti~h. cif -Se.r'lif['~tiie.,_~{>froi .. ( . ,· .: · .
. !ncom~ taxes ·w1n: . not.ext~nd·<-lo"all ·types·: of . ~ . .,;f-;.-:·,.;:.., . · .. ·
income -earned dunng th~ ta.xable 1~afa.,Frence,;,_:{J:1.1~,4,1T,. ".·•
. , lie i::an still be liable for.., othe.r:ta"xes·· i.e.;;ff"rraJ,.~J,:;.,i::.;::...,~~: ·.
• : Wittj_h6Jtji,:ig tax or:: c·apita! gain ·tax~R~··
"i..R. f.J,///"7- .
· 20101-
. • , . . · . .. . ' . . · t...,.t;1.,.
• · . 1'.:;J!-!.,> ' •.. ;
.. .. - . :
-:"•

.
.,
.......
.: '; \

- .. ·..
. · .. ..
·.·· ·- ·.

·.-: ..

~ .. '•
i"

.·'

2019 SAN.BEC>A.LAW CENl'RAllZ~D BAR OPER~TIONS I_ 57

 C Sri M M• 'MMiii

IN·COME.TAX
SAN.B'ED.(', .LJ\~ CENTRAllZED BAR OPERATIONS.- MEMORY Alb 2019

. Ruies 'on t~e TaxabiJlty of th~ ln~qrhe ot, Individual Taxpayers

Inceme de·ri~ed ·during a taxabta yeir

from all sources; within.and without the to gr<;1duated rate of '20% to
·Philippines · (NIRC,, ·as· 'am~nded· by .3_5,% (NIRC, as "a,:nended by
TRAIN, Sec. ·23(A).).
du~n!':r' .
0
. . TRA~N Law, .sec. 24(A)(2}(~);
'l~co~e: de~ived a tax~ble year"_dr. · ..... '. . . '
frbm · sources ,within . ·ui~ .' Phflippines. 2.: Option· to be taxed 'at _8%. of
(NIR(?, as amended by TRAIN,· Sec: Purely . . Self~. : 'Employed
23(J;J)). . , . . . . individua'i/Professionals and
lncome deri~ed· duting. a- tax~bJ~::.y~·a·~ Mir~d; · h;tCPrfl9 · .. Ear~~rs on
from .sources . wi,thin the. Philippines _<;3ross. $ales(Rece1pts .f~r those
(NIRc,· as· amended 'by TRAIN,'.Sec. who fal! . belo~- the · VAT
23(0)). ~ . . : . threshold (NIRC, · as amended
' · · · . .. · . by ··TRAIN· Law, Sec.
· 24(A)(2)(6) and Sec.
. ·24(A)(2)(c{

.... . ..

,.,· : . RHQs, .. ROHQs, : osus or

.· . :petro.leum: service contractors
· ·registering '.yvi~h:the · SEC after .
·.: : · January: ..1, -: .20.1.8, . · : the .'
. · Graduated .Tax Rates of 20%
·to .. ;35%. 'shall Be.. appflcable .
.. (NIRC,-as:amendedby TRAIN,
... ·· ··:, ·. Section 25(F)}. . .. ·. · : · .
. Income. deri~ed.·during· a. taxable year Taxable net lncome ' subject to
from all sources, within and wlthout'the graduated rate 0(20% to 35%
Philip'plr,ies.. (NIRC,. as. amended. tw (NIRC~ as'amended by TRAIN:'
TRAIN, Section.61 in retetionto Section ·section 61-in.relatlon to Section
24(A{J . . ' . . 24(9) . .

·., 58 2019
.. . . .
SAN BEDAl:AW
. CENTRALIZED
.. . 8AR'OPERATIONS
. ·..

- .. ·-··----------------------------'
 INCOM-E TAX .
. SAN ~!DA.I.AWCEf'!TRA~IZED BAii OPERATIONS-~ M~MORY Al~ 20,9
.
mA-
"
Wi:!4 IMMWS . . IE Pii'e'5iik 1UW4MM 4 0 .
-·. Summary of Tax ·Rat~s on P~ssi~e-lncome Stioj'e~t to .Fln~l ·Tax .
·. . : .

20%. . (N.IRC~ 25°1.;· (NIRC, .

a.s amended amended. " as. .
.'TRAIN ·. . Law,. rates (NJRC,. by' TRAIN by. · ·'· TRAJN ·.
·sec~: 24(8)(1)j:.. "as_:,.'amende<;J. Lew., . : .· ~cfW, : .· S.(!C. _:. t.
. by . · TRAIN Secs.24(8)(1)' 25(£;3)), · ··.:' .. ·..
.. ,' Law,·.. <Sec. arid·25(A}(?)).· · · ·
. :· ·24(A)(1)(a)· t----_,...,....,---.....,·--~~--1
.15% (NJRC,- _as in relation '.·to RA · - · 15% exempt
enienaea. by Se_c. . . (NIRC, · as (NIRC, ·. as .
TRl}/ff),· · Lew, 24(A)(2)J. . amended. 'by · amended by ·
Se'c.-24rB)(1)). ·· . TRAIN .. Law, TRAIN . La.w,
'JJ;ff}~1A- ._ . ' Sec. 24(8)(-1)). S~c. 25(8)).
1J "· .. , I .. , l · .' .
jf (,":'-:~--:j_.,.;...,....._. .
r r,, .• -~,,1 ...·1··' .r-;11-·,;;-,.,..
n _. ·..·Era
-v:\ ·
NRC,. .NRA~
· ·
.. tr :Ii (~~·- ,.'(, .i~.
_·. ·_ .;\.)1 . ·_ . . ,.· ~~-~-~)1i\, . -~,0~~t -.
·,:!7

as
.y
,h· .: L.
lr:,{ ·
- / ~.H '\\· t' amended- · by
TRAl'>f · Law;.. ·
' . · i;~ .. :~y.. . . · . P, \ ~ed._25.(A)(2)~. · .
"- · r i \ ·. r;"' ;~---~ •e-«, 'I'" ' .
···~ . P~!i ·. · .. ·c.! ,,;;\:,<,;f·t"',;,,f,~xempt; . . . 25% (NIRC,
£*emp!;,7. . •. .~:.;f.,':,...iL:: 5%; · es -emended
5°~/, \,:1 . 12%;. · bv '. · . TRAIN
r,. , ···
.1 /o; f ,:.,..;;.:~,.1
01
. - .. · ..
20"/o;
'.J
[~w,
•· ·
: Sec. ·
.{t;iR~1~~~)/~~~cf!,1;,7) -~~=~d~d · ~; ~~(B)).: . - . :_- ...
c~inended'by : . . . _TRAIN·. L_aw.-··.
_-TRAINL.aw, _ · Secs. 2"4(8)(1) .~ ·
_7ec.- 24(lj3)(1.)); · . . . ·l:Jnd'.·25(A)(2)). ·

10% · (Ni RC,. as . 10% : '(NlRC; 25"/o. .· -{t'JIRC,

t;imf!_hded .: .- -./3'/ · . ·as· amended as · ai'nf:!nded
TRAIN Law.,. . by.· . TRAIN .by : '.·. TRA1N
-sec. _24(~)(1j). · ..... Law, -- . . Law,· . Sec.
Secf~4(f3)(1) 25(8)). · ·
. ,:· and'2_5(A)f2)).' . ,· ., ~
. · ..
20°io · (NIRC,. as 20% :. (NJRG, 25o/o . (NiRc:· ·,
amended c . by .. ·as. amended as . amended
TRAIN.· .Law, by.· -TRAIN by: TRA.IN
Sec. 24/B)(t)t Law, · . · · .. .law; Sec.
Secs.24(8)(1}.: 29(8))..
and 2~(A).(2)). ··

2019 SAN BEDA LAW' CENTRALIZED BAR OPERATlONS ·, 59·

. . •. . . .
'
 .l°NCOt~fE TAX
SAN .81'0~ _LAW CENT~LIZEO BAR OPERATIONS ~ MEMORY AID 2019
,
AAFWB& &SMSIWEPEiiM Wf1$i:15 Cl

29% to. 35% RA, . t-iRC,

25% (N/RC,
graduated rates NRA-ETB - as amended
"(NIRC,· as 20% to _35°.(o b,y · TRAIN
am~nded . by . graduated · Law, Sec:
.TRAIN Law, · ra"tes. · (NIRC,. '25(8)) . ·,..
see. 24(8)(1)). !; .: -.~m:;~ri ..'.
)..aw).· ·
Secs.24(8)(1}< ·. •
ena .25(A) (2)}. ·
20% ··(N!Rc;; as 20.%. . (NJRC, ·2s%. .·(NIRC, ·
. emenoed :·. by as . amended as. ··amended .
TRAIN· Law, ~Y.·.·. :TRAIN_. "by . ·.TRA(N .,
Sec. ?4(8)(1)). · Law, ·. ·• · .Law, "Seo.
$ecs.24(B)(1)- 25(8)).
·a.nd 25(A)(2JJ. . ··
.. .
25% (N/RG,.
as as am~rided
. . ·-,~IN·
Sec .

. :.·'

20"/_o· · (NIRC,. as · · .. . ' · .· :29~1c;- : · : ... ' ·_:" .25%- "(Nlf;?C,. _:

-emended _by ... '.. ·· .(f'/IRG,. _ ·. ··-~s .as .. arr:ie_nded·
'TRAIN. · Law ,. · am~nd_ed _: by. ·by._ · "TRAIN, '
Sec'. __24(8).(1)). :'. . TRAIN·, ... Lawi Sec. 25(B)f .
24(B){ij;
0

. • "S_ffJC~· . :.. . .·. . . .

Sec. J5(A)(2JJ; ·

....
. ,,: . ,:. '
. ·, · ..

.. -:,:
·' -, :• .
,' r ... •, • \ •' I
.
·,.
. . ... •· : ' ..
..... ·.
·, · .. .: I • • ~· •'

. . ~,

....

.60 I 2019 SAN BEDA LAW CEl'lffRALIZED BAB OPERATION~.

 'INC:OME tA·x
"SAN 8£DA LAW CENTRALIZE()"B"AROPERATIONS - MEMORYAID 2019
SF) . . A . . Ah-A4 ifSFUMt A

NRC RA - 25% · (NIRC,.

10°/~' (NIRC, as amended
as· amended by TRAIN
-by TRAIN Lpw,_: Sec.
Law,··· . Sec, 25(8))
24(8)(2)) . ·.

NRA-ETB ...
20% .· (NIRC,
as· amended
by · .. TRAIN"
Law; $ea.
2~(AJ(2)j .
: ·:....

20% t<f35% 20% to 35% .is%, (NIR.C,

~-,:!.~:~fed .. graduated'. as amended
.:~te:S7f{fl1f?<;; · as_ ·. rates (NIRC, by. . · TRAIN
;f'
• ~ 'ended!
.,·. ,-t ·.· by· · . fJS ", amended Law, Sec.
f'flj~lpi'./):~Y!.~ .· · (:-'; by. :r · TRAIN 25(£;!)).
,St!9i ,J_:41,_r·
1(2)~'.c.._·,:;--;·~=z:.) . Law, . Sec, . .
- t. \ 24(A)(2)).· · . Note: This is
Ni~~.:.);\
hls . is jlfi~ - r 'subject . to

.
supje-~fr.Jo pre- . .
'd~miha_~ce te~t: · , ·
(s · L~ . ·. . .- . \
1;
:t' V. t . Note: This· .ls pre-
_I~! __ \;. subjectto pr!?· dominance ·
'dominance test..
. ~ t,-.:~ · · . . ff_.' .· .J . \\ test'. . i
·::.-- . ::tr1 · .r.~")-t.7/'!:·::?·s· --r.::;·,.w .. i.
!
-~ ,fJYi-';.~ . -,
'·, --...~/.(;.._..,,
~yi
j'I . ,,
~i:1· . ·. . . ~!.~~ .......\"-;.;.:.c.,:..+~~""-~~~-~-,-L~--''--~~-'
. . .
.
t',.'•'Y ~ . /7 . {

· .. , ~~~-- t1 -
.·
. . . :\: ,;r
,1r:r;~:~-r~ ·: ·
.-.;c-., . · ..;:,,....-,,,,1,'~~1.-~,·n.J,.-~{z;n-
.. ,,"?'., . ..:r...,,_,,.,,.=.tt. • .0:-c.O · · ...
. . f;/t ft.v' ·. . . . . . .·_ ..
·~~~0 ·. . . . : ....... ~ ;: ..
! ~ .
,.,.·,
' ...

(·.

. ..·· .··.• .
,. l·
!·
::' . ,•

... ,
"
. \ .. , .. : ..
.. - . '. ~

20i9 SAN SEDA LAW CENTRALIZED BAR-OPERATIONS

-· ~ . . . . .· . . .
I 61
.
 ·,_

INCOME TAX
SAN BEDA LAW CENTRALIZED'BAR OPERATIONS.~ M!MORYAID 2019
:.~ .. llm&illtllEl •.B.1111.MMRl·HE!lll,li~ABIIIIDmlllll&!iYIBl~Milil:IMEIBl!F!Smi~la"z'
.. !IIIIIS~(imts..-~~fkPHllllll·rllll 2FaiHDHDmiMmJFR~Wims::C\a-m«at~imte~MSlll!lS&:ml·&
..)

.. . . . . ~·
.Sum~a·ry.of Rates·..on Capital Ga.Ins· Rec~lved. ~y-ln~ilvidu.~1~·
.

·- ~ • • Ji-,

Percentqge .Ta~J,/-10 off%

.of.Gross Selling i:>~k:e (NIRC, as
.ainended
. bY... TRAIN Law, Sec. 127(A))
. ... · · · · .~ '. ·. ·. .
. .' ~ .
i::ira.l:Tax ")5% .6(Nej Efelling Pti.c~ (.NIRC, ~s· ame11dea Py
TRAiN Law:
.1 ~ ~ •' .
Sec. • 24(C)).. ..
.J
, . · · ..
, •
. . · '. ··
• :
··
••

; ....

G.eneral Ru)e.'; Final-Tax of S:% 'l'.fRC; -'RA·.-~· same _with BC .

based on gross selling priceor ·(NIRC; ·· as; · emendea .' by
fa1F',i[fill{pl1f:fl~:ie.;,ihicheye'r fs. ·TRAiN, $ec-, ~4(0)(1)) . '. .
f
· higher (MIR/{ s :J/ii're[J_</e_d'by : . . · . . .. · · ,
-J;R~~~'3fl.(IJ/)(1}} -~, N_RA-ETB ·:.. .sarne wl ·R~ ·.
..
··.~.: _ · ·:"•,,;:,;~.JJ.,,/j·.}~~,., ·(Nlf?(?, as amenqed · by
.NQ,te.~J;iraaL,.Tax:·~J..·,~<1'\.o.~ TRAIN,_S~c. 25(A)(3))..
Graduated Ra~---.,oP .l>/o.,.J~.
ar !!,. ,..,.,,. . y;; . ·\· vr, ,, '~ . - ;~ . '. · · '.
;3-n%; ..,'t~s..tQ~ opti~n. ·o~ Jf.T~ N~~NETB 7 ··.s.an:ie. -wf R,C..
taxpay,e~1fgains frof sales or;j "(-{'11.JRC as 'emended by
otl:lef."'.'11n~·~os!tiE?:~l of' 'Jav
J:.f'flN; Sec. ~5(8)): . : :
-P.r8~~,t~the,gov~r.nmenJ,'r'"
~··L__II ".lz;;,. •. .,..,. . ~~.\\...: .. · · . . ·. ·. · ·\. : .
t~~'P.~« ~,-~ grn&n~i .ff ~ ·Ji-" .' . r -: · .
I
,.
ReS'¥ep~:1s-=:~et'£>j}n1rj.it '"'~Ii., : , . . .. : . < . ·.· v. 1 . j
,t~e J.l,ll~~~Jf:<pliS~p co!1/ur: "! 1 · · · , .· ' ·· iI;
".!-~6 ~r!5ali1;,~~P.IIX ut~1z~d · iJ • . · ·.
~~aQggi~!pf;l'~~nstr~~(i~gl
.5.. , -- ·
l ~]DP-$~\1~e~1de~p~. w1thn}
··. , , . .. . .
~.ef{~~-~Jld'a~_[ton~e
1r0.w· -t,ti~Qate:.:0t
:Oispci\itio:r-;~ \);J~ ~N
'!ray· or. ..
·
. ·. ~ .
2_.CQ~~f}~~nej-_.s~· .·have.
eeJ.1:a,:,.d.1:1ly-===i'lotified· by · the'
~axp~yei' within thirty (30) days
'from the date . of ·sale: . or :
disposltlorr · · .·.: · ·
3 ... Only be . availed of. once
·every ten (10) years · · :, · . i.
4. If there is no full utilization of .
the.. proceeds .. Qf -,s~ie cir .
-disposition.. th·e· portion Of ihe .... L" • • • • •
gain presumed to .have been :
realized'- from · ·tti~·· sale. or..
dispositfon · s),all be subject"tp
c;:apital gains . tax (NIRC, as
amenqJ?d .. by TRAIN, Sec.
24(0)(2)).' ·
.: .

. . 62 I 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS

 MiWIIM1#18ft-th

lNCOM·E TAX·.
SAN BEPA LAW.frNTRAL_IZEO8.6.R OPE;RA_T/0111_5 ·- f!JEMORY AID 2019 . .
raiie KWMW4M

.I Formula in computing 'taxable income:

Gross Sales, ., xx
Applicability of Different "faxes· on_·corporations.' ·Less: Sales returns. (xx)
· .. ~Sales allowances (xx)
. . ·$ales discounts ·ootl
Net Sales xx
Normal . Corporate . ,./ . x ' Less; Cost of good:(solc;I
Gross income from sales ·
(~x} .
Income Ta?<· (NCIT) ·xx
(NIRC, , as .
amended ·Add: .. Incidental income . I Other
by '. TRAIN, : : Sec. · income ·. X)( I

27(A)). Gross.income · xx
··· Less: Allowable deductions. . .m
· Minimum· ·, Corporate· i · Taxable income : .· xx"
lricome Tax·: (MCIT) · , . Muitip.ly by: . " 30%
. (Nl~C, .es amend.e"d . ·Neff due · ·Xx
by T.RAJN," . . Sec.
27'(E)), . . .
!-.-'-.·_·_·_--'--....:...,~---+.-~---+----I---
.. -.. ............j . . -· Mii:iim_ u_'m C_o_rnorate Income T_ax. (M.CIT) (NIRC_,·.as.
Gross Income Ta.x ":.; ,./ X - · .,.
Glli) . (NIRC,. . . as . . .· /'··:)).amended by .TRAIN, Sec. 27(E)(1)) _ · ...
( ,l,,H;:·)'!,. . .· . . . .
.emeniied by TRAIN; {,., j ,hL ·' R. t . 201 (o·c· .d RFC)
· · ··· . ;,, ;,;!J~~·.,i,.,i;ax a e-. ,o
. . .. . · an .
f-.·_s~e·_c._. _·-~-+----4---~--,/-·
·_2_7_(A_)_).-'-·-, 1~~ ;·,"~\max · Baser. Gross-income except Jncom~ exempt
_[.:.,;•,;.-,ir·
Capital" .·Gains · T;3x · j -./ · j) !-''.' .. :,~,ff~e,w.l:;~r1com_e:~i:~x and inceme .subjsct .to final
-( c·GT.) .. (N./R· c,
as· ../}"r ~}.''JV;.~tthi'lolEltrig'ia\S::H
. /'',}> . ...,,_ j~ -:·-..u.:IC.::i~ -.. . .
am.ehded :by
. Secs. · 27(0)(~).
TRAIN,.
and
'v-.:
.,·:
·:..x?'
,1
i it Rat·.rona I e f or;t,,.e.~mpos1
,_,:-..:.=-'{-
.. if1.l\r · -·t.. · M IT
ton of C .
(f5)).. ·· ·· ., .i; l~.:.;,; /' -lf.~As a fix og1'·i~1is. i11pome, .·.M~IT prev~nts . tax.
1.-'---'---~--..:...c.--+---"-.·· -4--•.-'~_,,.,-.-·...,_
~...-,.-~··~--~;:-.,,«--~,=·-·
--1 it\e~a~ion ?<f:.f .. ~\rii~]ze$ -ta~ .. _ avoidance schemes
. · Finai Tax on· Passive .· ',; / ,,r J e \( . '~ -~ . L•· a_ch1~ved__/t1J_rql,J9.h l. s?ph1sticated_ and ·, _artful
1.ncorne··· .(NIRC, as V
:-a.7 c.,i}h;,.. , ~ . -!.~t~a.r:upu,l&1J1~~~.,.~!-~,;.8-~r1•§>nS and other s_tratagems. ': .
amended by : TRAIN,
· Sec. 2_7.(D.~). - : . .
1-...---~--'---'--+---,
·
·
··' ( ·
·.
-4--'
"-<~.
· , -"'· \..~l
fT"·
.::. ::_,,it.
r~ "' ~) .. ""'\
-.k
·..:..a:""' •·._.....--+1:·
_-·:i---..;;\-"'
1
~ . h,-~ince th~:\2,!~J1<l:J~{~t~s
--t11 · · 1·,ons;.,nc._
t(~s~octij
broader, the tax ratE1. was
. 1.;tow_ered (Gharnber of Real Estate; and Buftders'
, , · v. Exe c u,·ive,.·s e~re tary,. G _. R , N o.
lmpfoperly ·. ·· .;; "'X~\ . • 1 X _ .. uJ~,fl~,6,:,,March 9, 2910). - , . .
Accumulated
. .
Ea.r.n.ing·s Tax-· (IAET).
. · >·'"~
'f'•
·r· ~ ,,.,
..-..-r.-. • tioli'•,~
... I.,(.-;·f.,.,.. · ··;crrh~ntTax-on
1~!t,J~ · :...... · . .
,-·lf.\t~4"4·~ '~ .t'W:.,~ .
Capital .
-
''.
· ,
f'!'ti .. ·.
· (NIRC, as a;neMed ~--.'h.'.f'/~. . .The MQIT is imposed on· gross inco~e .whi~li is.,
15y TRAIN, Sec .. 29). · · ,,._l,'f,0 · · .,. . arrived . ·at· by <')edU:clini;i .the ca pl.ta! ..spent. by a
f;._.-.-'---·-~·~-· ..:.._-1·---,.-,-+..-~-+...:.......----{
_·__.;"·c.,.· corporati.on"in the sale of,its'g9odi,;" i.e:; tJ:)_e cost of ·
Branch ·. · Profit x· .J ·x. goods'and other direcrexp~nses'froingross·sales.
Remittc!n¢e·: . . Tax . _.Clearly, the.cap_ital is nqt beipgJaxed.i{Cham:ber·o(. ..
(NIRC, .· as .amended. · .··.Real Estate and. Butlde,:'s 'A~~ocifl(iQns;: ,Inc,.. v. ·
by · TRAIN,· :sec, ' ·.Roini,Jlq,.-.614.-SCRA 60,5, .<?i?; ,G.R.:No. ;169756,
2B(A)(5)), March 9, ?61(!)_ · _·. · 1 :- • · :·

When MCIT colllmences·. · ,, . .

Normal Corporate Jnco~e Ta~· (NCIT)·(NIRC, as
. MC.IT- 'is imposed =.beginning :on_ the, fou!1h:: (4th)··.
ame.nde.d by _TRA}N;..Sec: 27(A)) ·· · . ·.
taxable year im~~f:l.1ate.lYfollowiJ"!g ~l')e year in Which.
· : such · corpor,~tion . ~ commenced · · its . business
;...- operations (NIRC, as amended: :b.y TRAIN, ·sec:
. Tax .R,ate: 30% (DC and •"RFC)· ?7(E}(1)),_.. ·. ,· '-. · . . ..
; Tax· Base!. T~xable income
Note_: M,c1:r._..-~-~all.:Ji~e.Wise apply, to
.tlie quarterly.
...:. corporate .1ncome tax · but the · final . comparison .
bety,i.een..~h.e:NCIT due, and the .MCFr shall· be made·
., .. - at: t~e . : 0~9 . ot.: . t):l~. taxable ·. year . taking into
consiQeraJ1onquarterlytax payment made (RR. No.
. 12-200'7). . ·

2019 SAN BEDA LAW CENTRALIZED BAR OPERATION$ I· 63

-----------------···---
· -------------------------------------'
 . INCOME.·-TAx·
. SAN B~DA LA.WCENTRAllZEDBAR OPERATIONS • Mt;MQIWAID 201.9

When MCIT Applicable . sales: ·xx

1. ff taxable· income. is· zero (R.R No. 9-98; Sec...
J 2.27(E)(1), as amended by '.R:R No. 12~20e7, · ~ Add: Other income .
· · Sec; 2)};' . · · · .. · . . ·· · ·: · · · · ·
.2.· 1(taxable inco~e is negative. (R.R"Nq. 9-98, S.ec. ·Gross irtc:bme . · : · \.._r.:..

·. ,2.f7(E)~1)," ~-~·.·~inendec/ by R.R No. 72-2601,._.

xx
·: .
!fee.. 2)), or-_ . . .· · . . . Mt.iltf_ply·by: ' 2%
_3 .. If .MC!T is g·reat~r 'thai:l .NGIT due·. (NiRC, · as
MCIT.due
. amenc;/ed
. .
by TRAIN,
. .
Sec. 2!(E)(1)J.-" ·
. . · ·
V'Jheil·Mi;;IT NOT Applicabl~ . .
. · 1 '. · 'lf the DC or RFC is nor subject to NCiT; ·
. __;2, ·.. F,or, pc whose operations are partly covered by. . Rules; ori Car.ry--~o~ard· of .Excess· .M<,;iT:
· ·. the. NC ff ..and pai:tly .covered under a special . i. .The excess · of "MCIT over the. NCIT can be'
... :i11come·tax."~Ystem,U1e·M.CIT.sMllapplyoa°ly"bn' .. carriedforward: . ·: . '. . .
. operations-covered bythe NCIT. (R.R. No:9-98, ·ii. "It cari be .credlted. c:1gainsnhe NC:IT due in. the·
"S~c." 2.27{.E));_anq ·.. · _ .... · . ·. : .". · ·: · . next three.. (3)"imrilediately-·succi3e.dirig taxable
3. ····F.:or RFQ, only theqross income from sources . ·Ye.ars_) ... : · . ·
·.- .:w.itl,in· the· P_hilippjnes shau.be bor'l.s_iclered-_!gf.=:.-::·-·J~!\f'lYexcess not _ct~dite9 in the .next' three {3) ·
. c;tet_ermini_ng;.applic·abili!YQf MCJT (R,R..jj9tf[,!98,.. ·ir· ~ 1,y~r:~~hall_ b,e !~rfe,ted . . . ·· • · . ·-
. .Sec: 2._2B(A)_(~)).· . ~ .. . . . ·._,_1. , b:~ . u1vJ\ypr7.ff~~.IS posslble.only if NCIT is g_re~ter.. · .
- . .: . d'·~) J. ,~. -=~ttaawMGJ'f.p,.~ . .· .. .
Gr~ss ~-ncome "f.or MCIT pu_rp~s;s~· · -~ y;,:::,:.~~ v.
~1'-~~~~-~up;ra,~ountthat ~an be credit~d is up ·
. _ Grqss in~ome. shall _mean _·g~o·s#'.sal~.!IEJSS~le~.,...~~ am~~.t~ft~e NCIT; · . .. · ·
. · · returns.idiscounts a,:rd allo,~~r:ic1~fld~t oygooJ!% ,t:v•.ypi-e. e'Xce's~s·Mx.1\ ~,~r:inot be clai'!,led as a _credit
~e1'.T
sol~: ln case. the taxpaye» rs er.igageQ!J« the)s~le oft'. ~-\\
· serv,c~. gross· income. meartH
grq5p returns, al)owances, ;l."Jc,9-ilnlS.and
2os~f-recei~ts 1ess . "~e- :
rcosr.o~~r
-~gains\ the
Jos~es:\and !-:· · .()
!~self or -~gamst any. other
\.. . .. , .
~T-t;,Erl~l<:l payab,\~h~Jl1•,bethe MCtT whenever it
r.••• • • •• • • • •

-services (NIRC, i':!S a1J1_end~df,t-'FR(J/_,:.,; s~ci 27(Ef£y j. t""!~re~\e~than~_tl"e'.l"JCbT (Nlf?C, a_s:-amen_decJ. by

9 : ff· ·. ·..
. ·. , .. ·. . · ~-~ ~ . ·.-. \ :::.-:.·6.~~lRAIN,/Law;.S~"r;t,ZI.(ff.(2);:2cA§AS.OtA,
sap!a
Not~~ If apa~ '.r9m-derivin_g i comE\fro~~I}~~

· mcqme realized or- eame~l."by t~e.fa:(p~e.r'- iri:lbghe -~

ta~~~r~.·period which _-are· subjict to, t~e N<S'@. ~ ~
~~·at·13~J0;:;aa)
:bustnes_s a~tiv1,t1~-~· t~~re ar~~·g.~r,:~em_1$Qt.'gross·~'R ·J .;n:
j :ltr~t
t1 Ji~·
~'tfi?'154.fffe
lg· 1~: i-1·
·. . "'-./ ·· . . ·
cor~oration_. ·ad· the following d?ta on ·
·< . · ·_,. :
..
·same .1i~rTJS · m_u~t be in~lu~_e9· as P.€1°rf -~f,!th, ~J7
~t'a;1 n:ofJl'ie NCI ,. ?.Ind _the MCIT_iorfivey_ears. ·
. t<;1~pay~rs gros~-1~come tor.. com°R,!.Jting ~\T." lif!.brE
,..-c\!:i,,;.i'l'4 /y5 . Y6 :, ·, Y? Y8 · ·
. means_ t~~t_gro~s 1ricor:ne wlfl als(?:l~lu~~;,a'.W"!~,. ·sf~~J:f~A>tH)K \',,-,..,,,50Jf 3J)k 40k .. ,35k ,.
. . . . of gr:o~s mcom_~ em1m_~rated 1.m.der ~e~~~~)lo1iQ"~.Ql~JO{_ J-~0k ·. : .40k . ~Ok ._. -?Ok · ·. ·
· · · NIRC,_ except 1r.come·.exempt from ·mcom~,tq-V~d ~\. ·If -".;-...\~'\ ~~-- - ; ·.. · · .. . . · ··
_ir;,c~me·.su9ject'to_ fina_l. ~ithhoidit:l"gJax·((RR'W.o,._,9-.. · !v!tlij~~S"~CIT_ov1::r NCIT ca'!Y-forwardjs shown
98, Sec:· 2.2_7(E)(4),. as amencled bV R.R No.· 1.2~belew: · · · . · . · . ·. . .. ·
. ?007, ..Sec.:2N.". ... · · · · ·· ,, _., .
. ·...
..._ tr i!I
· Formula~.
' , :sal~
,
.of g~~dslsa"ies
,. "of. .servic~s
. .
... . · ..
. ·.

G·ross sales/receipt_s·. '·. :·· xx

. . . . ..
<:·Less: ~~l_e~ _retur_n~: . . . xx' t .·
. Sales a·llowances . xx.
. .
· Sal~s. tliscooi-1ts xx .. ml·
. Net S~le~:- .
. -:.· .· Nqte~: . . . . . . . · ·· . . .
·. l.,.ess: Cosi of goo·ds ··(xx)
· 1) Arrow pointing downward means that the
sold/se.rvices.' . ." !'JCIT Is higher so thatthe're can·be an.exc~ss.
, Gro~s income from MP}T carry-forward agalnstit. . ·. .
 ··.·

. ·I N·COM-E:·TAX
SAN BE()A LAW CENTRALIZED.BAA. OPf,RAT70NS- MEMORYAID 20;·9

• ·, • *
ii. The figure \viih. asteri_s·k. (*). - Can~<;>t· carry-
·'ii)'"* Domestic non-proflt hospital - . subject .to
SS S?M+i¥

ten
·. · forward an amount h!gher 'than NC.IT, hence percent (1~%) on 'their taxableincome (NIRC,.as
'only the 40k of the excess of 60k fromYear 4 amMdf3d-by.TRAIN Law, Sec.·27(8)); ·
. may .be carried forward agajnst 'the NCIT ln · iii) Domestic depository banks under the expanded
. YearBvThe unusedzok remaining fromYear foreign currency -deposit system - subject to
. .4 cannotbe carried forward in-Year.8 because. · · final income 'tax of-ten' percent (10%) of {heir
Year 8 was beyond three years from. Year 4. taxable income; .. , , . .
iii, In Year 4., the taxpayer will· pay the -MCIT. of iv) R~sident foreign international carrier :-c subject to". ·
.BOk because the MCIT js higher than the . two and. one· half percent (2.5%). of -their'Gross- ·
·NGIT. The 'excess MC.It of.60k·(80k-20k) can . · Philippine Billing~ fNIR<;;; as·amenaed by TRAit,i
be carried forward'!r'I tlje nextthree.years. :. L.:iw, -Sec. 28(A)(3)); - ~ . .. . . ..
· · iv. Iri Year 5, thetaxpayer will pay.the 50,k MCIT.. -v) Resident forofgn offshore . banking units ·...:.
slrtce it is 'still higher thanfhe • NGIT: The subject to· final income ±~x ai ten percent (10%}
excess MCirof60k in Year:4 cannot be used of such jncome'(NIRC, as emended by TRAIN
in :this· instance: But the excess MCIT qf"20k . Law, .s.ec. 28(A)(4)); . ·. ·:
canbe carrled'forward in the-next three years. .vi) . Resident .: · foreign· _ · r¢gib'1al .. · operatinq
v. · 1n .Ye.ar 6, where·!J1.e·NCIT'.·of.40k is higher .headquarters o-subject to tax· at ten percent'
-', than the .MCIT of 30k,.'the.taxpayeds allowed '(10%) of their . taxable income (NJRC, . as.
. . to clairir as· credittheexcess MQ.IT of Year 4 emended by TRAIN Law, Sec: 28(A)(6));
· .· but. only to the.extent- of the amount of the ·~.,:;')vii). Firms enjoying .speclal inco_me tax rateunder the
·.. · · NCIT.for· the .current year {e.g., up to 49k·<..;/?:· . PEZA Jaw, Bases Conversion and Development
. oi)ly-). Hen<:€!; the _taxpayer w!I! not"be liabl~:tp:("';}~· Act· Qf ',1992 a!1d· th_o~e ei")joying income \ax
. · ··pay ar:1y tax. The. rel'T!aining f\ACITJnYe.ar·,fo.V.~·,~~,A. · holid~y incentives; . . ·. . . ·· · - . : ·
·20k {60k-10k) m·ay still -be ~rried_ forward1,J~~;.::·:·~~)1,~9~~r~s.idE_l.r,{.foreignc?rpor.aUons :-- slJbject. to
x~ar 7:and the. ~xcess_ ~CIT-in _Y,ear 5 5?..f¢Ol{~t~1r:f~~i)~f"O!•:th?grqss· IIJC~-':'19. rece1veq froi;n _all
.., : the· '-I>' ill ·
·.may s~1IH>e c.arnj;lcf forward l/P to.-'!'J;!:1.[i8'i-'lf sourc:eS".!~1f~1n thee .P.h1hppmes (fYIRc;,. as
.... NC~T 1s :~re~te~ than _the MCITJ1l;su~h_.y~ar,. .1, ;:nJ! .. amend_ed k'ztiRAIN Law;·Ser_;. 2~(8))-; gJ1d ..
. . . .~s !t_fa ~till V\'.1thfry-.th~ 3-year pencf~.JiWw~ve.~;..-:·~t~i~) .R,eal ·EstJ.l't~ll'\testment Trust (R._J:..·. No. __9~?6,
···: 11) the g1v~n 1llus_tr.at1Pfl;_the·MC.lf,;.m~,a~.-1s.-,:-· T;;;_ .. Se'?. 10y/. n'.t, . . · .·.· .;- ·
· :Wt:a1e_r t~~n !h¢_:NCl,!· !jfi!J,c'~re_xce;~C:m . · t,j · ·. ·. /I O ·. \ .' · . · · ,.· -
. ·: IS not ~reciJta5_1_e. · . .1i~· A',-2\., ... . . ~ r:)::l· _R~aforl T~r· _enw1es en_umerated. _c~bov_e .are.--
.· .. . . . · · :. · , . · · \f? =-~.?)~ ~ f;r .exenWf.fffirn.i~P-J=r:-~causethey arn no~ subJe9t
.~e·quisitttsfortl:te Sus_p,~.nsion1~..fth~-:ljVJt9s_i~i~!\i\ ~-,~ tq NCIT~(~B..f...#d.P9-98) ..
.. of.M~IT:_(1h~-~~)·· . . · J\':°,.;~·'(_J\ ·.
1)' Suspen~1()n·. "'.{as~·upon tlie. AtJlh$lnfy:)~f the
JI..
f,-''1 .. · . - . · . · .· .. :·.. .. . ..
~f.,G!,9,~?.<lnco,ne Tax (GIT) (NIRC, as arr,ended by
Secretary· : of• Fin~nce;-"
• ·
. ·
• '
. · · ',,},....<_,.;
• - ~ ·'
· . ~,:,:'fRA!tvFfiec.·.27(A))
":1 -· · \·;·,-tJif.,,;.,c)A.i~ ";~:)\)
· , · ....._
2) Substantial Los'ses.were.su'stained;•,a·M'a: ·.· ~---~~.. . .-. ·,.!-...:.----"--- ~- · . . · .·.
, 3).. The.l9~~e~.m:usf1;>e due (o _any. o~ ih(:{oto."'fffl_g{ .. . •. · Tax· Rat~! 15% .o~tional rat_e .
..,.\'·
. ·. · a) Prolonged ,babor:dispute·-1osses-a~1riJ!:.frorri
. . · a:strilte by fhe :employees .for more than six (6) ·. ·
Tax aase: .G.ross mc.ome

.... · . ·months-.'within. -a· . taxabJe· ):>eriaa ca1.,1sing- .· When GIT :is-~Jjpiicable: · · · · . · . · · .· ·

.· . . tempor'a"ry.shutdov,,n·of busin~ss' qpe·rations; . . . : ~ · Available or1ly to firms· whose· ratio qf ~Ost. Eif
. . . b) force majeure ·-: caus~ -dµe...t.6 i;in .irresistible . . . sa"res.to·.grcisssales or receipJsfrom all;sour~!;is, .
. fi:irce, as· by "act ·of·. g'od"· like.- lightning, . : doe~ ·nof exceed·flfty-f.ive percent (-f>:5%);-,a·nd"
~~-
It .. . ear:thquake, storm, flood ari'd. \he ·_like; also • · . Its a'pplicatic:,n in lieu-. of ttie NCIT must :.b.¢. ·c
> . ·.. includes· ' armed ~ conflicts.·· like' war and authorized . . by the . ·President. . ·. UP.~!}:.

I
· ...
· . ibsurgency; _: . - . : · . . · . re"comrnendation ·by the S~cretary of'J;i, ~·/.,t
. c) · Legitimate_·· busine_s.s Bever-ses.: ....:_ ·incfue,je {N!RC; as af!lended·by TRAIN., S_er;.,2~(A} ····-·
' ·.. ··substantial· ·IOS$eS. sustained .due. to·' fire; .. .· . . .. . :: . • . '~.:_;. ,i1~:'
. - ·i-ebp,ery;(t)efl,:or 'embi:}~Je_r:n.ent, .o"r,-for <;>ther . ··Note: To date, no auth6~ity has bee~ ·giY.8,A'.~~:
[-. . econ6inic. reaSOr,lS as . determined ·py thEf ~r~sident. ~ . ·:·_ · · :'- ·. . ' · ..':, . ·:· .-1_ /);\_tft,
~e<,retar.y cl flnanc.e. {NIRC, as:~mend_ed by .
t.
;t TRAIN,. Se(!. -~7(ti)(3);. BIR. M_emoranc;Jum·. 6-: ·
?.9~2). ;'. . . .' . · · '.- :-. . .. . ·. . . .
Conditions to be . .'satisfied befor.~ /~fte~::'gf~;
P.r~sident's aut1:tority: ·. : . . .. . .: > . .,._. .,:::·:. . ,..
~}.fi

I .
;. En~itie~ to whl~~MCIT.,s N~t-.Ap'p.licable; ...
1) Tax effort ratjo -·20% of ·Gro:5s:N?t[o~alprc,,d~~t~ ~~ .
(GNP); ,.. ' . .

r.t . D Domestic. proprietary educational institutions -

. subject 'to ten 'percent ·(10%} .. of-the_ir-.taxable
income (NIRO, as amended by TRAIN La~.
se~: 2_7:ca;;; ·. :. · · .
?) Ratio of inso.tne. tc!X co[lectl~n to· 'fotal' t13x
revenues - 40°1<i;
. VAT tax effort- 4%-of GNP; and

f....
l'
~· ·. 2019 SAN .BEpA ~AW.CENTRALIZEDB.A.R OPER.ATIONS.I- 65
L
·.:
 1·NCO·M·E ..TAX
SAN BEDA LAW CENTRALIZED 'MR D_PEflAT/OfvS.-{MEMORYND 2019
· ·, -. 'Ratio of Con~olfdated . Publi~ Secto.r· Fin-~ncial .. ·Rules on Inter-Corporate
\ . . . . . Di~idends:
' . .
. Position . (CPSFP) to ~t-.!P - . 0.9% (NIRC;· as
amended by TRAIN,sec. 27(A)). ·· ·

'Not~: ·.The. ~lection. ~f. the ·.GIT :option. shall' be

irr-e~ocable
0

for three (3) consecutive years during. Exer:i,.pt (NIRC;' 30% ,

which the•' .corporatton is .' cjual med under. the .as .emended by (NIRC, as
·. scheme·(NIRC; 8$ ;imend.ed b}'. TRAIN_, Sec; 27· TRAIN,. ·· Sec: 'amended· by
(A)). ·.·: . . .. .'27(0)(4)).. ·. . · TRAiN, .. :Sec.
.· . · · . 27(A).
:·eap.it.1t-riains .Tax _(C.GT) (NIRC;· esemended by_
Tf?A:IN,· se«. ·2?.(0)(2) and (5n .Ex~rnpt (NIRC, 30% Neil' .
· : ·· . .Plea;e refer, lb Rules on .Capitai. Gains .and Losses 'as amended: by (if income within)
TRAIN;·. · · Sec.' - . ·. ." .
. "for discussions .. : . .
. .
28(A)(7)(d}l.
. ... ·
ii·n·~1 T~~ :~n P~ssive ,lnc~.~e (N/RC, a'; amended ·:15% Fin~I .Tax .·if 30°".'o Fina1·tax .
..by TRAIN;' Sec: 27(D))'
tax· sparing rule (if lncomes ,within)
applies.
' .

2.0o/o(NIRC, · · as
arrieri!;fecJ ... . by
TRAIN; · Secs. \', .:

2.7(0)(1) and 28
·(A)(l)). ·.
. c~ncfitions ·for .'ttie· io·
1s0 fi'n~i 'tax ·1~po~e<;t on· .
a,
·. diyjd~_hds: r_e.cejyed t:iy'-~. NRi=C fr6m. domesflc . .
.... ·"". . corpoj'ation.{Tax Sparing Rule). . .:
1: ~The 'couniry.ln whipli. the non-residentforeiqri ·
. "corporation is· domlclled allows .. a tax. credit
. : agafnst . the:· iax: due .frorn the· NRFC · taxes :
.. . ~ . . deemed to· tiaye 'been ·paid. in ,the. Philippines .
. · . · equlvalent.to 'fjf~een perceht (15%); or· . ·, ·.,
.. 2. ·· Such country. does not impose-tax on divic;lends
. (N/RC, · as emended : .. by . . T_~AIN, · . S13:c.
. . . 28(B)(5)(b)). . .

·. . :.,

· 66. j · 2019 SAN. BEDA LAW CENTRALIZED !3AR OPERATIOl'{S

 INCO.ME TAX·.
...... ai
SAN Bl':DA.IAW CENTRALljlf.O BAR OPERA1:t0NS - M~ORY .AID 2019.
&12 t&Wib ¢-r#ElliMf!IIP riFHA4i&idM!W¥-4¥ MMi&

Tax Sparing Rule Closely-held corporations are those corporations

The fifteen percent (15%) represents the. difference at least 50% ·of th.e total combined.vo.ting power of
. between the. NCiT. of thirty percent ·.(30%) on· all classes of stock entitled· to vote is owned directly
corporations.'and the -fitteen percent ·(15%) tax· on . or. indirectly by ..Or fqr not more than .20 lndlviduals
. ,. dividends:. a -is the amount of lax sparedswaived, (R-.R.·No.
. . . 2-2001,
.. .
Sec. 4): · .
.fo[giyen or
otherwise as. if paid by. th·e Philippine
govem.rnent in favor. of the· non-resident corporation Note~· A branch· of a . foriigri corporation 'ls not·
(CIR v. Procter and Gemble PMC, G.R,. No. L- covered by the lmposition of IAET;tiie.same being a.
166838, D~cember 2, 1991). .' · ·. . 'restdent foreign coq:>o~ation'(R.R. No. 2~.2901, Sec..
_;.
~:... . .
Tb expound, th~-'ordinary-'30% ta~ rate applicable t~
diyidend remittances to non-resident corp.orate · Computation of'lmproperly Accumulated Income
stockholders 0U1 Philippine corporation goes down Th'eterm 'Improperly accumulated taxable · · · ·
'to 15°1o if the country-of" ddmicile' of fhe.'forE{ign : . infOm_e'.m,eans tax_abl~ lncorne.. ·· . '·
. stockholder corporation "shall allow" .such foreign' .. 1-. Adjusted by: .. . ,
::corporation a tax credit for "taxesdeemed paid in the . . a: lncorneexernpt from. tax;:
· . Philjpp·i~·e~;. 'appllceble .against the tax payableto . b.. 'lncorrie excluded from gross.in.come·;
the domlcillary country by .tne 'forl3ign stockholder c. ·income subject to finaltax; 'and .
corporation (Cl.ffv. Procter end Gamble PMC, G.R:: . d. The amount of net operating loss carry-
No. L--16683.B, Decemberz,1991J. " ·. · ,.../}• . over (NOL~O) deducted; .. .' .
. :. · . , . . . . . "/i/··~~ .( 2. Reduced by .~he 'sum of:
Effect.if tax· credit is not allow~d:.Such. conditibl~_./('... ,. .?-,. '.1· 'Dividends· actually .or constructively paid.
must he strictly c_ompliecl.:witi1 because t_he 1_5%-~1l~{(:;.'}.. .· issued fr-om ·the. applicab[e year's. taxable
r~te Is a concessiorrjn the nature of a tax e_x~ry,Pt!9~(,,-:,-.1d'.~:,J··. lncome. ... . . : .

-<~:r·. 'I· · .· ·
. vis-a-vls.. the·30% N.CJT (2 CASASQLA, supra. <!.!1721_:;;.·fV'.,'..:.2~, b. ._Income tax pc;11d/payable for. th.~ taxable
· citing Marubeni ·corp;, v.. 9'R·and C·TA,,.,.GfJ?:·.-No: · 0 year; ar:)<:I .
7657.3( S~pte,mber 14,.. 19$9). · /,;-;/-_.,.· · · ·· ,.t. amount reserved:·fQr..the re_asonable nei:lds· .
. · .... ,.· .· . · . · , .. - }:'~;1. · ~ .,r-'."':""!; ·. · :of.th~.bY.Si1Jes.semai1atingfror'n.th~covered.
Nofo;. The Tax Cod,e does not ·re~tJlt-e ltt,\a~-the 11.~ • ·, year's taxable inco·me. (R.R., Ne. 2~2001,
. foreign tax law d~em the parel"lt.,~Pfila.ti6'&·i:6.:t,rave~..._. l'i·~· .· · -Se'qtion 5; NiRC, Sec_-·._29'.par. _(d)Y:. • . ·
paid the fifteen percentage poiJits.(,15-%~o~divid~nd -~ · l:i · ·.-{- · . ~ · :\ . · · . . . . .
. tax waived oy the F;'hiiippi~es; it-:~rfy·~[e~thaftQ~... t':, ouch!~pe;.~gt~-::;_:yfability' • It. i.s the- ·p_.ur.pose
foreign country "shall allow": the la~p_ay!;)Jl!~-,1'0d~erry:et:f)· t· ~ehind -the"~CP_QfJJ1Jlat1on of.the incorn~'ijf'1d n_ot the
'paid~ tax crer-;lit irrnn arn.ountequi_va,~g@tti~i.fifteei:if..;!;conS'equences.of the accumulation. Thus; ·if the
percen~age:. ·poinJs.· (1·5%) (CIR v-.-j.·-K'oc~~f a_nlt 1:~!~il,1.!t:r,topay di~idend~ is _du·e._to_s<?ni? <;>ther c~u.s~s.·
Gf)mble Pf!A,C,· · ·G.R. ·. No. . L-166838.~: tD!ft.cembw .,:ff;\~~f11~si,s.rt').~ ~~e.o! und1_stributed.earn_ingsand profits.
2,1991).· · "·. 'r-ri
: · .. · · ('?:~""7'_'.;u-:-fer.,.;u:iet-tease"n~_bl.e··r:ieeds··ot.tnebus1n\3ss.: such
. . . .· . . ... · · . : -~:&{ t,·V . 'purpos9:.w~.o!~.not;g·en~~~lly mak~ th~ accutnulated.
lmpr<.>perly A_ccu.murated Earni,:igs Tal!;(tlET) . · or · u_n.c!1stn~uted ea~rnngs ~ubJei::t· t? . thf: tax.
·. "(NIRC, as amende.dbyTRAIN,.$fJC: ·2~) : · · · . · Ho~eyer, 1f · there . 1s a .• det~rminatior .ihat a
·· · · · ... · · ·· · ·corpor;;iJion has· accumulatact .. intome:b~yond the
Corporation . liabre: ,DC · ari9 .. _closely~held_ rea.sonable needs of:the · bµsiMss·, ten perc~nt
iorp6ratic:in.s · . ·. ·- . -(.1 Qo/o) IAET stial_l.be impos.ed(R:R:' No. 2~2001, ·_Sec.
T x R 't 10°A . . ·..,_ 2)..- , · . . .· ·.-. ·.. •.
. .. a a~:· o . . . . ·. . .
. · Tax·aa!;e; Improperly accumulated ts:ixableincome:
·-c.overage; lmprope_rly accurrit.il~ted'earnings tax=is · Rajiona1~'.ot'°IAET . . ..
imposed· for· :.eaoh faxable · year on ··.ttie·: im ptop,erfy .. If earnings and' profits were di~tributed, sharehblders
· .i1ccu·f!1ulated:. ta:xat?le. ·incprne ·.· py · dc;,sely-heid· . , _woul_d_·be- lia~le _to :income )ax_ there_on; wheri3as_.i.f
dotnestjc _c9rporatlons ·(2 CASASO[A, supra at·· .. : there._1s.no distribution, they wou,ld incur. no tax.in
·'1·75). ... .· · : . .· : · . 'c.. , 'r(;ls'pect to the·unqistribute:d earflings and profits of
· ~ ·· · · · ' · · ·: · ~ti.a cor-poratfo'n:Thus, a. tai is being· ir:nposed: · ·
.. frnprqp~rly Ac.cum.!,llatedtaxable.Income r:.efer to . . i. :· As· penalty for the improper ~ccui'nulatitin··Of-its
. profits ·of ·a, · corporation th'at ~re permitted·. to . . eamings·(penalty tax); and .
. adci.Jrnulate .:1nsteac:t :-of. being c;!istributecl -to · its · . ii. ... As a ·.forl'!l of. c!'eterrenqo the a\'pidance .of t~x
. Sha°i'etiolqersior the·purpos·e .of avoiding the income . ·up'on·.sharehol<i.ers _who. are supposep to· pay .·
. _- tax .. ··vith.. r.e'sp~ct ··to ,' jtS.'. ShS~~h_olqet~ . or· -tre 'dividends tax Ofl .the earning distributed to them
shareholders of another ·corporation (RR. No. 2- b_y t~e corporation (R.R. No; 02-200-1, Sec: 2).
: . 2()01, Sec. 2). ,..
. . . ·..

. "· '

2019 SAN BEDA LAW CENTRALIZED BAR 0PERATIONS 67

 .. -
INCOME TAX
SAN BEDA LAW 'cENTRALIZEDBA_ROPERATIONS~ MEMORY Alp 201?.

The. tax· on improper accumulation. otsurplus "i$ to· The following Instances constitute proper
· discourage tax avoidancethrouqh corporate surplus -accumulatlon of earnings for . the -reasonable
accumulation. ·when corporations clo not declare ·- 'needs o(the._b"usiness:"(P.LACES)· · .. · ·. · .. ·. ·
dividends, income taxes are not paid . on the 1 ), · Allowance -f.or· the 'increase in accumulation of
-undectared dividends received by the" shareholders. : . earnlnps Up to one "t1undre'.d percent (1 QO%°) of
The tax· on· improper accumulation: of surplus 'is· .t.h~ faid:.up capital;
essentlally a penalty tax desiqned to : compel ' . '
. corporations-to" distribute earnings ·so that _th~ sald Noter The _basis ·.of· the one hundred 'percent .
earnlnqs coutd, frr turn. · be .taxed' -(Cyanamid · ·. (100%) threshold of retention 'shall be the pald- .
Philippines,..Inc. v. ·cou_rl of Appeals, G.R. No. · .' . Up capital .or tlie -amount cc:>htributed. Io the
108067, Jaouary'2.Q;-2000). . . · . . . . · . ·. corporation".representing the. par \ialue.." of. the
. . . Divlde11d · shares of. stock. Any·.excess capitat over . and ..
of-: .· ·. :
0

Period for" P~yment of ~r. Payinen.t" above tti"e .. par· . . (additl"onal.·· · .. paid-ln ·
"IAl;T · .. · .. ., . . .. __ _. .. : . .. · ·capita~premium)"shall pe 'ex.cluded (R.M.C1 No:·
Dividen·ds rnust be declar.e·d anct paid or issued not. . 35-2011)"... ' .-. · · · ·· · · . · ...
. later· tl;lan one· {1) ·y¢ar following the. clqse of .tli'e. . . . . . . . : . .
tax·able·year. Otherwise: IAE'f. (If My) s~ould _be pafd · ·2) 'Earnrrigs · re.quired· · py · ::_baw. or. applipabl~
withih fifteen (15) ~ays thet:eafter (R:R. No. 02~2001-,· ·. .: . regulatiohs to b_e retained; · · ,
.Sec. 6). ·.·. . · · · . ·· . · ···.- · .· · .~ ..;;).,.,.:_~nings.-reserved lor .. puildihg;. plants or
. . . . ... . .: ~ ru,. ")}e_qµJpm_ent· ~cqulsl~ion . as appr_oved qy the
N_o~e_: 1.f ~- t~xaQle pa:t('lership does _4of"aeeJ,~e ! · j~far~ol~ctcirs_or·eq_uival~nt bo.~y;_ . . . ·
.. thv1dends, 1t I!? not su_bJeCt to .IAET b,e(.rius~ ',lf.l~~r;,;,.~.-:.4}~~ngr~sesred 1[ for £omp)(ance :Mth any I.can
Se,c.13(_0).o"fthe.·~l~C, the (let ~h~r-:;0_f~~net'1s· . , . ¢oV~Q.~_m.t''o~,_ITTf~~istin~obligatio_n; _ .. : . /·
d~e~ed: · construct1..vely rece1v,.¢B~~ops.t_iy.9ti~~a~QJ.Q~.~~e·f}(e,d_. for. defir:11te - corporate;
D1st:1but1on). . ·. . · · ." I £.;Ai. _:"',I. ·. ff . .. 15) it . ~xpansw~~OJ.9f.§br pro_gr~i'ns,approved by the
. . .~ . · _ · · - . lf. "Y!J.;y .f- · · J.C.·~ ,~.o~r\:l,df_P1re~\~r~~'~qu1vale~t-body;an_q_; :.
L11_r11tat1on · on IAET: The P,r~fit ))at h~~ bee~\: In case ~f §!--'t5~1~1~ri~~'offor~1gn ~otpora\1ons ,n:
.suf?jec~~d-to. lA~T s.h;:111 no 16ri~qe subj~cfea-to~1· . -:m_e ,.121-illlppine§,;:,~ undistrib'uted .ear~ings
. IAEl' in ·later.:y~ar_s ev.en if nof~oeelpf:d ·~s _d!yiae~ ri, ~iafy1Yd~1or .restrvedi r investmer:its. wit_hip .t~~
However,. profi.ts · "."h1ch· ~~i_;. ;.!?;e'eJll·.su~~ted. ti.· , 1)1"".J)EL'/'tirhppik\eS (R.Rj No~l001, Sec, 3J.. ··. . .
. lAET, when decl~r~d aS-dlVI. eiids~ thpJfb__!~i'~ubJ~Ct ~~-.' in'??f}· .. ff•' . ·W :. . ·. . . ·. : .
to tax on. dividehc:!$ except·i111 hp~~~st~~~- ~Jiere -~, ~jlma_~~!f~star:/ce~p!>(Accumulatidn of Profi_ts
the recipi~ntis_not S!Jbject the ~!:!td'(iR.°R .. No~~,z~, bQ1-, ~ _;~i~nd'~~)}lon#,Ie~e!1~S <>!°t~e s·u~!ne~s . '._
.Sec. '5). . . .· ·· · t ··. ·. . '\_ . · '{fl~ liLlii _,. ~, s~ent ·q[t'sub_staAti?Iearnings a.nd prof1.ts of
. : · . : .. . . . . . · '-\ · · ."X . ~, . . . !!fe-~rporatfciri1ri uf!i'f.elati::°d business·-or. in stOCK .
. Re~sonable ~~cu,m_lilation .<?! ·~~p_m~: "' . . ScIE;i\~~p~u_g.ti~
The accurnulatio.n1s. reas.?f!c:lbl~.1! 1t~lj._i:ie?ess"a.f.Y,..~~1..:...lii~J-~'1jenf>.;1P
-'!·f un.y~iatecl?~sines~;. .
,:,15_ond.~: ·ancl· . othec. l~ng-term
,.
the pu_rpes_e qf_ the bu.smess; conS!_(il.~rnf~l~tg'e~=---"S'Securl~e,~;.{;?: : ,· · -- . . · .
circumstanc~s: of._the ~c:i~e"- .Th.e. t~r_m· l!re~tfoaJle 1,.Jli:l~Of_~\:ll~~~of earning~,i~ e_J:(ces;:;cif.10.0% .of
m~eds of·.the_ bu~1ness~. 1s ~onstrued to .rnea~~ .-.!.'ii Jlrp'1_g,,1:1j:i''\ap1tal,· f!d.t 9~he~1se ·int~rided·.-tor the
imrru~diate . nee~.s of Uie bu.sfness; . ,includiri'g~""'r~a~onableneeds ofthe Qusiness (R.R. No. 2-.
retaso.nablY. anti9ipated -heeqs (NIRcr·as.·c1men"ded_ ·. 20Q1-, S~c: 7);· · · · · . . · ·
by TR/J,l/il;_ Sec; 2·9(Ejtf?.R.:No:.·2-2601, S~c. ,3).:To -iv: AccurntilaJion. of_ liquid h~t.,a~se!s apprpxim€1.lf!llY
. dete·rm!n-ethe r~asonabJe"needs of the . busi~~~s in. ·. equalto"ffie: an"n·uafoper;;tting'nee.dsjo~ the year'
. order to· 'justify"° an.i acc.u_mulation of eacniiJgs, the · . to. ~over .co~t · o( . gbods .··:sold., and :·operpting
. lmr:nediacyTest.is -used _(Cyanamid,'PhilippirJes,"Ji1c. . expe_ns~s.·. · .. beci3tJSe; . it · · .exclude·s . proper .
v.. Court .. of.Appeals, G.R,: No. 108067, ·January 20, ·,: ·. consfderation: ""Of ·.. fo.nds -~.ge'nerated · by "the·
2000;: ... . · · . co!lec:tion· of hotes:receiy~ble"qr trade acc.dunts
··· during ·th~. course of .!~e ye.a_r·(Basilan· E~tf!fes,·
.lrnnie.di.pcyTest .. ·.: . . . . tn_c.. ·v. CIR, G.R. !Vo. L-22492, September ;5,
·. It construed ttie -~~asonable needs ·of-Jh,e business .· · 1"9.67); aad . : ·.,: · , ... · · ·· ·. ·
. as th!;l--immedipte-and.reasonably anticlpated needs ." · - v. 1.ndireict Joans to stockhoJdei:s(2-f\"DOMOND'QN,
supported by a dlrect- correlatlon of anticlpated sLfp"ra ~h.37J:···. · . ' .. ·. : · .. · ·
needs .to , such accumulation of ·profits.· Jf the.
..corporatlondid not provean immediate needfor the , ' ;._Hpld_in_g ·or-:i~~esirrie~t ~-<>in~a~y - a ~e~poraiion .
accumulauon of. the. .earninqs . _and ."profits,. 'the which· has pr.;:ictic~lly no· activities except h"olding·
· .. accumulation Wf3S not. for the reasonable needs Of property, :and co_l_lectjng. tt,~. ·irico.rne . there.from. or.:
· the business, andthe IA.ET would.apply (Cyana.mid.. inves~ing the. same (R:R· N?,:2-2001, Sec. "7). · .·- ·
Philippines, 'tnc. v: Court of Appeals, 0.R.. No: .
·1o'[J067,:·January
. . 20, 2000).. . . · · · . ·. .

68 · 1 2qis SAN BEDA LAW CENTRAUZEO BAA OPERA1p_Ns-

 l·NCOME TAX
SAN BEOA LI\W CENTRALIZEDBAR OPERATIONS- MEMORYAID 2019
............ llllllllmllllll 1

Corporations Exempted from the IAET: (BPI- or other fixed or determinable annual, periodic or
TENG-F) casual gains, profits, inc9r·ne· and capital gains
1. §.anks. and other. non-bank financial received by such foreign corporation from all
intermediaries (R.R. No. 2-2001, Sec. 4); · sources within the Philippines unless the same are
2. fublicly-held corporations (NIRC, Sec. 29(8)(2)) effectively connected with the conduct of its trade or
- domestic corporations not .falling under the business in the Phllipplnes (NIRC, as emended by
definition. of closely-held corporations· (R.R. No. TRAIN, Sec. 28(A)(5)).
02-2001, Ser:. 4); .
3 .. Insurance companies (NIRC, S~c, 29(8)(2)); Exceptions: . .
4. Iaxable partnerships (R.R..No. 2-200·1, Sec. 4); · I. Those. activities which are registered with the
5. gnterprises duly registered with the Philippine Philippine Economic· Zone Authority (PEZA)·.
Economic Zone Authority (PEZA) under R.A. No. (NIRC, as amended by TRAIN, Sec. 28(A)(5)).
7916(Philippine Special Economic Zone Act of ii. Enterprises registered with the Subic Bay
1995), and enterprises registered pursuant to Metropolita,1 Authority (SBMA) and Clark
R.A. Nn. 7227(Bases Conversion and Development Authority (CDA) covered by R.A.
Development Act of 1992), as ·well as other No. 7227.
enterprises duly registered under special
economic zones declared by law which enjoy Ratiomlle for imposition of BPRT
payment of special tax rate on their registered ,, The rationale for the imposition of the BPRT is in
operations or activities in lieu of other taxes, ,,11fiiJ order to . equalize the tax burden on foreign
national or local (R.R .. No. 2-20011 Sec. 4); . ;("/!/)::..,corporations maintaining, on the one hand, local.
6. Noi:i-taxable joint ventures .(R.R. No. 2-2offefJ.:;;.l~''{~ranchoffices and· organizing; on the other hand,
Sec. 4); · i
·~'} 0 '.: ~ubsidiary domestic corporatlor-s, Prior to the
7. Qeneral p~ofessional partnerships. (ex~JP~tif::-r/0.:r.&<?J.Jti~D,.,~£{~) BPRT, local branches of foreign
!j
taxable against lhe partners (NIRC,·as Emended'\::> corp.orat1on!L;:.w~,remade to pay· only the NClT
by TRAIN Law,. Sec. 26); and r<t'-·i;i"' J.i-..J:j applicable to ;~,dent foreign corporatlons doing
8: Branches ot foreign corporations {R:R:: No -, 2-fY·h. business in ,r't9e~ Phillppines. While Philippine
2001, Sec -. 4). _.4'f.,~ flt!:):'.,.' ?. ~ ,isubs~diaries fit tretgn. corpor~tioris were su~j?et to
. . .~ 'Jf-=~..- !-"~he ia) NC.ff G,n t~eir net income -and dividend
Notes: ··. 1-,c;~. ~ 1;. ~~ t':i?ayrnents;,f.~nd ~b) w~re additionally subjected to a
For nos. 1-3: exe~pted_wit~~c..t t;iualite~tton;1-~;~~~ rJithhol_dl~~_Ff~~(:;J_rf)Y.der to avert what . would
For nos. 4~7-: qualiflcation ffia,t IA9"~~~\be .fo~j f.,:ftherw,se'~~il~~'.!9-:eea~. unequal tax treat~ent on
the reasonable needs of the bU~]M.i·st\~~ldb~" .;,tuc:h subsldiarles vis-a-vrs lonal branch offices, a
satisfied; and ·~· %; ·· g,fU1:was ; imposed (Bank of America NT & SA v.
For no. 8: not covered. ·.:, ··•· . . ,· ,!:.'IJ,'l!lf;:~!J..fllls, G.R. Nos. 10.109?. & 1031C6, July
:}~ ri'.~~·'- ' l~, · •· ·,-t1~i~J-4f~.:.~-
Branch Profit Rarnlttance Tax (BPRT]\(tv/Rs'.-"ias
emended b}- TRAIN, Sec. 2a(A)(5)) · {;;,·i: BPRT of 3 foreign corporation derivir.g income
from the Philippines
Tax Rate: 15% (RFC) General Rule: The followir:ig shall not be treated as
Tax Base: Total profit applied or earmarked for branch profits for purposes of remittance 'tax: "(IDR3-
remittance without any deduction . for the tax SAP) .
component thereof (N/RC, as amended by TRAIN, 1. [nterests;
Sec. ZB(A)(5)) 2. Qividends;
3. .Bent:.; ·
Note: Tt1e 15% branch profit remittance tax is 4. Royalties;
Imposed on any profit remitted by a branch to· its 5. fiamuneration for technical services;
head office based on the. total profits app.lied or 6. §ala~ies, and· wage premiums; . .
earmarked for remittance with·out any deduc~ion for 7. ~nl")uities, l=lmolufnents or other fix.ed or ·-
the· tax compon·en.t thereof except' those· activities determinc1ble annual, periodic or casual ga.ins;
which are registered with the Philippine Economic and
Zone Authority (NIRC, as amended by TRAIN, Sec. 8. Erofits, income and capital gains (NIRC, as
28(A)(5)). . amended by TRAIN, Sec. 28(A)(5)).

If it is a foreign corporation, the following are not EY.ception: If effectively ccnnected with the conduct
included - interests, divid,:nds, rents, royaitie3, 0f its trade or business in the Philippines (NIRC, as
including remuner~tion fqr technical services, amended by TRAIN, Sec.. 28(A)(5)).
salaries. wages preimiums, annuities, emoluments

2019 SAN SEDA LAW Cf:.NTR1'.\I.IZl::O BAI~ OPEl~t:rt0:6 I 69

 EWE

I.NCOM-.E:T AX
SAN BEDA LAW ~NTR(IL_IZEJ1 BAR O~E~'rlDNS .: MEM(!~YAID2019
~!ilt!~~~DUllllmAMllll!llll!IDl .......... ll!BmllEWalilldDllllllllllllll!Bl~i21!11!1a!Dlli~i·D-••111111in1zae!Pllilllim~ZAFDWm¥~·~WMll1illlEEIIIMm+neC111111111:=02~··~~t~
...

Note: If i'ncome is not.effectively.cormected with the. 3·_. Governrnerit owned ;:trid controlled'corporatlons. :·
conduct ·of the corporatton's business . within the . lnsfrurnentalities : or. agencies (NIRC, as
Philippine~·. then the corporation is liable for the ?0% ·. · amended by TRAIN .Law, Sec. 27(C)).
NC!T- . . . . . .
P.ayment of Income . Tax on Branch Profit -. · Prop;ieta,Y, Non-P~ofit, Educational Institutions
Remittance . .· - . . · .· · · .. - and Hospitals (NIRC, as amended by TRAIN, Sec. ·
The income tax on J:lP~ shall .be- collected ,hrougt:i_ . -: ·. 27(8)) · '. ·.. · ..•.
VJith:h~:>lding · by .the __ .payor-corporatlon .and/or. · . Proprietary educational ·_Jrystitution --Ariy private
persons, covered by a return and. paid. t~ ·an <schco! .. maintained · and admlnlstersd by 'private
· authorized. ag~nt bank, to the -Revenue District indivlduals.. or grot,1ps.. -wlth · an issued : permit . to
.. Officer, Collection Agent,. or·. d!JIY. authortzed .. .' -operatefromthe Department of Education .(DepEd)_.
·: treasurer of- .tne city 'or municipallty. (NIRC, as · orthe Commlsslort on Higher Education (CHE:O). or·
amdndetf."by. TRAIN,··:Sec. 28(A)(5) in -relt:ltloil to . . the: Technical: Edu<;citi6n .and $kiUs. Development
Secs. 57 and ·58).. ' ·> . ·: . · ~ .: · ·. . . Authori.ty··(.TE$DA)"'(NiRQ,as amended by TRAIN,."
· · · ·· · · · · sec. 27(8). · · · · · · ·. ·. · . · . '
. ;. . ..Note: The: 1~o/o"BPRT ls.lri ~d~iti.~n
imposed on resident foreign corporatlons (R.R, N6.
~o the r.e~~lar t~x .:'
Non-profit h,eans:n-o-net i.n~o~e·or asset accrues .· .'
.2-, Sec. 15fb), as·amended·by.R:R..No:·a.-79): to or benefits any memberor specific person; With all
.. .. . .' . .' . . : . ;· · , '· . >p-~;Jll"l}'-net,,i(!COr'neor asset -devoted to the Jnstttutlon's .
:Tax on . Non~R(isid'ent Fo_rejgn_ Cg_!:,ptifatjon
_(N/RC, as emended by TRAIN, Sec .. ~s3y;~~-
l
f~\~---=/~~!~Y
!P~°Jbf}~};?-~~all. its activities conducted not for
_)i'l,Onfpr~f~doesnot neq_essaruy· rnean .
.· _·. · . ·ff/",·~w~·
.~~-"'. . """'i.Cfl?trtt~~·g<,eTRJ, s_t.·.~uke's·Med_fC[!f.Center,_ "Inc.
Ta~ ~ate, 30% · .. ,_. ~-· /'·/\.t'-)_;p -~~"'&G.f.?.:...~: 1'0..x.~9/Sefember 26, 2012). · ·.
Tax Base:.~ross· 1ncqr:i,e r.ece1v., c:1, y;9n\pJl se,:.prcp.~,s·· e1!i> ..: ,; ~: ,\..; A\· · ·.
. Within . th~ _Philippih~s su~h. as _ht'er~tl.·.·dJiv.(dendsf I\t'J~)'t H_osttal~1i'-a~e.dlic~tiona)institutions that. fail
r.e"'ts, · royalties, .salaries·, .,·premi,/i:ns: (except- ·. ,...r.J o meet· tlir at?\~~ fJ'i"efi~itiQn of ·"propnetar'y" and
reinsur-ar:i<:e :premium.s)1 ·.annPitr\;l~~!i'11<?ll! ·.ents:er>.-+Y<.: or:i"pr-ont~f'!h.all t'll·ta/~&.a_s. a reg4l.ar ·corporation
other. fix,:9- or <;lele!":.'1inabli"'ta1.iw-1al,: ·pe~fdi_d~·~ :~'!Of. 6~-20~r·:-~. . . '. . ·
cas~~I _g1:1ins., profits and- tn·c · m~·-<·{lfd cap1t~I :gat.11§'~.. ""f\.-.;i··• .I· . l .· .
~ t==-1_ . ··
·exce,o.!,pa~ital.gain~·re~ul~ingj/~.!fw.s·~~\1:!.ar~ ~ -, 'e:._·tax./~l~~~mdti_on ~,rc!nted . to pr?prietary.
o( s.tock of a domestic ._norporrtlf.lQ"i(1,otj~~~an ; ; ~-. ~ca1Tot~4~t1\u~oa~l!ln'cle,_r Sec. ·4(3); Aft. XIV of ·.
traded through a · 1oca1·. stock,e,<J!hli~ije, , .Lt~\a ll- ,;ll'l~ ~a?_"{:eons!ilutioll'ifequires. prior legislative
.. ·, capital a'sset·{t,JIRC, a~ ame_riqed i5y't[RA)-6i.~\J: ·e~ l~~i.F,-@',~tion_&1hce ,tJ~use of.the perm,i~fs1ve term
. 28(?) (1)"): . ·· . . ..: ·. _- . \, -, · ·_. . . '\. . .:. · C~A'l'a~l:;~ fi~ -.~,"".is ion,ffe.l'les. Congress disc~etion _to ·
. ; . · . ·, · ·. . ::i ., .., : ·S'CJ£1': ~~1 . e;»fiether. og'not a~sets arid revenues ·of
.. ·Reason:· A NRF~·. is ·.not sabject -.to· NCti~o~ - . 1_ ~01;1r ~J1ef e~~t@tj,9fia1. institutions. shot,.1ld likewise
· ta.xahle-income. but, i,:istead .suojeet~flrf~axf9n~~ei=ljtif'e-~;ptkictffrom t_?Xes ·(ABAN, ..LfJW· of Basic··
grO:si, incoro~ witnout. the benefit. of c:1ny,..4§dliie1,ipn ;_ 1.'I, lT~~oA"(2Sj)Jr[supni at.89};.·. · · · ·· .
(NIRC Sec '28(8)) .· . . , .-. ·. :. , . •i,,.~'''"·•···•/V.H·")..•:.;p.:"' .,_ . · ··
. ·- .'. ·":-" .. ·.··. ,·· · ·.:._ :.,.:, .. -. ~~u1;ite'~JorAppllcability".of.10%Rate_:(SPUP)_:.
· _SP~t::;IAL~DOMESilC,C.OR.P_ORAJ:I_ONS: • • . .- . ::f.. · §:toe~ anc;l non~profit_institutions; · ·. · · , · ·
.. T.h~se. ~~e _the dO_ll)..e~tiCcorpor~tions·_.thc,tt are subje_ct : .·.. 2. .f_rivate't=lducationa.1 Jn~titutjon. pr_.hospital;· :···
· to concessionary tax rates that are ldwer·tban·those 3. ·Gros~,inc0me from Unr~lated trade, business, or
. imi:>"osed ~pon ord!n~r°5' domestlc e;:orporations.'They · : · activity_· clbes i'icif.exceed fifty -per.cent" (50%),cif
. are_not"osual!y co,:iducted for_profit, or-ev~nJf.th.ey · , · . ··9r6ss 1"11come"froh1all sources: ;,md ; · .' ·· . ·
are,"they.ate·usu.~Hy ~ngaged in ac_tivipesth~t ¥'.Ol:Jld · 4:: F9.r /educatio.n·;:11:-iri~titu)ion~... iSS!Jed a ferml_f to_
~ g~ner_ally b.enefit the public (2-00MOJYD.<;:JN, ·supra _: . · ·operate from DepEd/CHED,. or TESDA (fJJRC,
at 1';1-.1), · . . · ... · ·.· · .. ,. · :- ·,.·· : · .. · · . · ss amendedby"TRAIN;-Sec.27(8)).
. . .. . ·... ·. . . ., ·. .

· .· Th~ ~ollo~i~g·· _':ar~ · . :~P.e~·ia·,·: :· D~~~s~c_... ·.. .· U~telated ..Tradij, ~-B~~iness or. (:>ther Activity.~ ·
. Corpo_ratl.ons~ . :. _' ' . . ." . . >
Any trad~; .b.usines·s·-or ·activTty,the coridact of which · ·
1. Proprietary Non-Profit l=ducationat ln~titutiori.s is · n.ot substantially. relat"ed :_-to tl:ie exercise or.
and !-fospitals "(N/RC, as amencjed by TRAiN, ·. performai:i.ce by ·s1Jch .educational· institutl.oi, ·.or
·Sec. 27(8)); · . · ·· . . _ . ." · hospital of its primary p~rpose or fu_nction (NfRC, as
2. '_Deposl"tary· Banks· (Foreign Curren&}( Deposit·~ ameri"ded oi:TRAIN,-se·a: 27(8)). . ·. · -- · .
. Un{ts) (NIRC, as amended by R.A No. 9;294, . ' · · ·
_sec. 2!(P)(:3)); a~d ·

70 ·1 2(?~9-SAN SEDA LAW CENTRALIZED SAR OPERATIONS

-------------·--·-···-·-··---------------------------------1
 ..
\.:"'·
":'i,

·.
. . . .
'.
I.NCOME.TAX· .
SAN BEOA LAW CENTRALIZE()BAR 'OPERATIONS._M£MOR'(-AID 2019 • . .
ritAiCM&p&ft411¥ .... M wilz•ei1Ni&IWM8il? Wit §hill¥ii; -if5CW I Frttfla.."/,' ·.

Exceptions: . .. · · . . . ·
1. Net income from such transactions· as· may be·.
Proprietary:'. · 10% on· -their "taxable specified by the Secretary ·of Finance:- .upon
educational- · income · (except income recommendation by the Monetary. Board to be
,. lnstitutions which.are .subject to oapital-qalns tax ·subject 'to the normal corporate Income ~ax
~-· ....
nonprofit'. · and P-~~siv!:! _ income) payable by banks; and . · · . · ·
(NIRC, as a·me.nded. by ·. 2. · Final tax of ten percent (10%) on rriterestincome
TRAIN, -se:c, 27(8)). · ·· from fore.ifJn 'currency toanajiranted by such
l----'--.,-,,~~-+-......:.._....,...._·_·-·-':··--.---'-1 . depository. banks under said expanded syste~.
'i.t .gross income 'of 30% on the·entire taxable to:
.Proprletary · ,'.· Income' {incluqirtg Jhcome a. Residents {other than .offshore-un'its in the
educati.onai , . · subjec] to tax andjncorne ·Philippines); W '. . . . . . ·.
institutions ... -· · ·. from i,yllich. are: exempt) o_r 2\)'!o.· . . b. Other depository banks under the expanded
. 'unrelated · ·. trade, MC'IJ.(N/RC, es-emended, : -· system . (foreign . _..Currency :' lnterban~. ·
business cir . other by TRAIN,. Sec. 27(8)).. · Deposits] : (N/.RCJ as· a(l?e_ndeq by -TRAIN .
'activity .exceeds. '.fifty .':' · .· Law, sec. 27(D)(3)). ·
: percent .(50%) of the· -, · · ·
total gross income ·N.ote~ 'Income of n~n-residents_.(lndividu~I or
derived . from. . all . . .. '... " .: ' 'corporaticn) from. transactions ·w,th_ depositary
. sources, . .' · ·.. . ·,(.:()'i.! .-· · banks under FCDS· is ex~mpt from final tax ...
. . .. . . . . /v,_:/.;~;\ -·~ .I. . . . .. . . . .
· . ··.· .. · . . ~- · . . ·: ··~.~ill'·'. ;,soverrinient'. · Owned and Controlled.
·lilustraUoli: ·. · : . ·. · .·. : • · . l,.('1,/:'.!'Corporations (~lOCC) · · : · ·
If a· proprletaryeducatlcnal institution. earned a .Del,,,)'..;·~· :=;-:-::--,171I,~ . ~.) . . .· ::. .: .-
.. 1·
income of P 00:000,000, . .' 5 .•·
· · P 0000000 '. ..
f ~1>-'"'-ul·?· r·l)' ·~-· J
~ ,,,-~·1c,1.;;\{.Jff··Genef~1'.;;,Qule:kiThe roles govetni~g domestic
·

. c;:am~ from unrelated _trac!e: busines~~o;.~~!_i:v1ty, fhe, A r,

corporations e~~.~-~ed_ina similar business, industry,
net mcorne ":'oul_d be subJe~t :to 1?
Y'o:·!_tlx.ipn_ th~/!! or activity sh.~m.~~ply. In short, they are ta~~ble
_other hand, 1f. P51,og~,OQ.O _came fr9~,p~~1e .. ,:r\NIRC,as anfe~l:le,,by TRAIN, Sec;, 27(C))..
trade business or· activ1t"'· the· P1001000',000 ,,-< ,w9uld_ . ~, l''JI.\ . · . Jl. ,y ., . . 't\ •. . . . ,. . .
J • •

. be _subj~9t to}Oo/o (2.·:ot?(!!"~-~~µ}!.iPat

,., .... c. ,~
~!jg/~ ·. _ ·. .. ~- k. X~eJ?·tio!J,$:· ·. • ~ ... ·. · . · .. _- .
.· . · · . · · · · · :- ·. . . -:~f;;'. :.:c;::.?-....;,):_ ,-t,_ . l';·,;1, Go~tnm~,;.~!;1:V1c-e-;lnsurance ~ystem .. _. -
With.
Jegard,.to .~ .hospital,. , .
1t 1s~~xemp~!Pf<?V1d~~)
. \\..._ . ,. l' l·- .. <r>\':1 . p· ,
l\J .·. (GSIS)··~~:- ;,iis-~~.V
, .- ......,..,___ . · : · . ·.. ,
<' . that:· ·. : · . :: · . . .. . · .. ~ ·°',n:~_~:~( . : Jl ·
ptJ~.. SQGial Security $ys_tem {S$S); ,' . · . . · ·
J; . . ; :: lt'}s n~ri-s~<>Gk and. non-~r?fit,. al\~"" ·.. }~· · , · r:~3,....-.g~ilippine·Health ·insurance Corporation . , ..
tli- .. . Jts. a$~ets,.. _Pr!?Pe,rty an~ reYen,~~J,--~tJ.used . .' J~~i:t.ffm~H~);,~Q_d· . . .
· actually, d1r_ect1y,· and e'.>cclu?'':"e!v- for )~.l':~tm1:.~t~,!!~f<l&alWaterDistrict$ (lWD) (NlflC, as amended
. . ·.. .. ··.:. ·

r/ ·prim.a'ry·pu~os_e·(NIRO,~~- amehde,.Cf:l!;TR!. f-/_f", .. /J.y T~IN taw, Seq; z.7(C)). ··

;· Sec. :]()}: · · .. · ·, · · . ~, · .\ ·· · · · ·
if.·. ·: · .. · :· · ·.: ·c-~ ·· ;:. c· ·""~/t. ·_·,_ -:0.-:3;u':-'rt:het. · ·. '·-.N~t~: R·.A. ·N~-· .9337 d~let~d PAGCq~ fr.a~. tdh·ef. list··
'. P./ease see· ":Tax,c..,i.err,p .. · orp.,ra 10ns · t< ,•• ,. • · • ··of.exempt GQCCs, p,AGCPR's income c!erive . rom.· .
.c(iscussiOns, . , . . . .: . . . . . its .gamin·g_<:>°pe.r.ations'[& subjecl;to 5% .frao_chise tax,
~' · · · · .. · · · · · · · · : · "· · ·, · · · in neu ·of -a)I: naµo.n.al and local taxes; while \ts_.income
. l;)eppsit~ry,, s·~nks·· (For:eigri.: ·~urren~r·.:peRosit . from other. related se.rv.ices or: op'erat_i?i:lS i_s subje¢t.
' u·n'its~°(.NIRC,__ eys amended· by R.A. .. N_o. -9294i Sec. · to ·tt:ie regular 'c<;irp.c:>r.ate.. inco'm~ . tax: :1;)9-d~r PD:.
If . 27(0)(3)) . · . .·: .. :. · · - . ·. · :· · · · 1869 ~s· amended, PA~COR is subje'ct. to income.
~'.-' · · . . · · · '·- - · tax ~.n1·y' with r~spect to' iti · ~peration of rela~ed·
f' Ge.nerat-;·Rule; Exempt ftoin. aif taxe~· or:i. i_ncome services. Accorqingly, the . income. -tax ,;,exemption ·
~:. . .· · de.rived :.-i.inder.:tt:i"'' Expanded ·Foreign, ):::urr~ncy . : ordained 4nd~r s·ectiqn .. 27.(.c) of R.~ .. No .. 8424
t':,. ... · Deposit: S.y,st~m (EF.CDS) from· foi:eJ~_n_ ~~rrenc~ · .. ··clearly pettai.ns only· .to.. Pi\G~.OR'~ income from ·
tr . · · "trarisadiohs wlth:'{NOLO) ·: · : . :..
1.- Non-residents; ,, . ·. . . .. . . . : ~. .
'.. .·
....
: . operatio_n ofrelat~d. s~rvices. (Philippine~171us~m~nt
and Gaming Gorp. v. 8Uf$.BU· of lntern_al 1;ev.epue; .•
i. ·2. :Offshore Banking l)nits:.and · . · .. · · .. · . . . GR No. 215427, December .10,· 2014). ·
t~ .a .. · Loca,:comrfi0rcia·I ~ankS;: inclOding ·br~rc~es of . · · : · · · ·
!:. . . ~.' to.reign' baoks: that may be authotized·_ by the ~ote: RiNo. 10963. [TRAIN LAW). re'm6~ed t_he
t.t' :. ·. :-BSP.. ta tra.nsa'ct. busine.~.s. wi_th foreign currency
depqsit system 'units (NIRC, a.s"_amended by. ·.
.. corporate incom_.etax exemption of P_CS_O. .
i . T,RA/ffLaw, Sei;.'27(0)(3)}:_ . ' _'. · . .
t
20,19 SAN SEDA LAW CENTRALIZ~D BAR OPERATIONS 71

'. '
 IN·COMETAX
"SAN OWA LAW CENTRALIZEDBAR OPERATIONS·
- MEMORYAID 2019
··,
.GOCCs. not . enumerated und.er · Sec. 27(C) of Tax. Option of )r,t~rnational canters Doing
T"RAIN. Law m;1y still' be ~xempt from income-tax Buslneas lrr the Phlllpplnes
under- Sec,. 32(8)(7)(b) .of NIRC: . · · 1. · Preferential tax rate of 2.5% based on GPB; or ..
Even if the GOCC ts not one 'of those enumerated 2. Tax.exemption: · · . . .
underSec .. 27(C) of the Nl RC, it mays.till beexernpt . . "a. Based on. tax treaty· or International
if ·it 'is perforrninq. gov_ernrnenta"1. funcnons .' Under. . agreement' to· which" the.' P·hilippines is ;:i
· SeG. 32(1:,\)(?)(b) ·of the NIRC, income derived frorn . signatpry;· or : ·
. 'any public 1.1li1Jty'or from the exercise of essential b .. on ·1h~. basis of reciprocity (t.e. home .,.,
government·functiori accruing to ·the ·government of . -country: gran.ts income· tax exemption to
'. · the Philippines .or -to any. political subdlvlslon is . Pt,ilipp/ne carri~r.s) (RA, No. 10378) ..
. exempt from income tax (NIRC, amended byas
Tl':!AIN, Sec. 32(8)(7)_(b)). · . lnternatt~11~1. A(r :·c~rrier· ~- a foreign." airtme .
·.· ... · -· · -corporatlon doing business 'in the· Philippines,
Difference between S~c. ·ti(C) and Sec. 3~(8)(7)·. . . hav°ir1g 'been granted' lan~ling rights in . any
.. ··.of the NIRC ·. . 1 · ·· Philippin'e -port. fa perform . 'lnternatlonal air.
Sec, 21-_(C}_of the' NIR:C exempts :rrotn income tax transportation ,,.servic.es/activities, · or fJight".
those enumerated.withoutany qualification whilein . · operations anywhere' in ·the world (R.R. fyo.15- ·
Sec. 32(8)(7) of.the."NIRC, the requisite qualiflcation . .20Q2, Sec.2(a)). · · ,
· (fe., income'Is derived from any public_ utility o!;(r.omr.:-:':"=-:~·:::.~~'~'- . .' . ..
exercise · of .. an.y 'esseritlel .99vemme17ta~f1!in'citC!n) ¥. l. <P\-lin}"fli~~ts or voyages -. refer· to flight. o~
must 'concur .be.fore it may-be exe')'lpte.e;l<'""'~\
.· . . . . ,· h \j ~pP
!""\.. ,,.;_:::"..,,!J~J1~~-o~':e_tat~rs carried out or maintained by an
mffirtsl~oi,.a.rtc!Ri~rbetween ports or points in the
SPECIAL RESIDEt.ff FOR!::IGN qQflP:9~-iffo~..,...,.-~?...,;,..,_~e_r1':~ial~~t~otitiTt of the P~ilippines a~d any.
1. International C~rriers doi~~""Q.,!:!S'lnessqi-f(t_h«t . 2[-' ·. P-9,0 qf~pfi~\~ut~[qe'~thePhilippine~. (R.R. No. ts-
Phlllpplnes (Air Carrit;~r/an'd~_i'acta.rrierll»... J~~ l'@2; $_e'f:2(eft/:r;. \ . · ,-·
. (NIRC, Sec_. 28(A)(3));R.Ft No: 15.-2013}. · ·./.-.A_.,. ; · i .. ·. :if .J'iJ '\\ . · , ·:· · .
. . . · · .. 1, }7'-o~ ,f, r---:-'~f~·hne-"1,J1gh~s\~"=~~,~~9:e,s_--; rel~r '? flight ()r
Tax-Rate: ~.5% . .-- . u .4:---; :J · l :'l:-.J.1t"·7.' (ruu ·,.;;:vq_'¥f~~o&eralto".pfi:;ar~ie,~out.or mamtarned by an .
Tax Base: G.ross P'1iliPP/t1e Bi.llilhgs (~Pl3). .ff~}fiJwzw~r~atigl ca'Jfi~~ween ports or_ po!nts
: · . . ·. . . \i..'~ t· _r']\- . .. ..:~~~u.~s_i?~·tt~~rritqri~Lju~.i~dicti~n
Note:·The tax attacl')es only _whE:m the carnage Im ·E';'I.13-~-"'Ji.f§fioo~;.-S.'(d~(d)),
of_ the Phillppi~es
· ' ·
of. persons, excess oagg~ge, car.go, an~. _IT!ail ~ ,i2!J4.,.,, /,L.J;;f..- · }-. 'V /!. · . · . · -
ori~inated from the Philipp~nes in e;1· contln.uous ~ ':t;f-E(~~~ilipP,_rj,e E;li.11/jigs . ~ · .. - .
and unir)terrupte~ flight, regardless of wl)ere t~:e.~ ·<"~~ern.a!),6na.1A1rf Garriei' · ,- .Gross re;;,~nue
. passage docume.nts were_ ~old (Ai: C<Jnad;;r v. ~STFi-ft\.r;-.!Wn:!~<>~r.r~.9~;,P~. P_~rs?n.s, exce~.&·:b~~~~ge,
· CIR., G.R. No. 169507, January 11, 2016) . ~---~r~p_ apJJ...rJ1,~·ong_1gatmg tr.om the Phi/1ppm_es
._ · · .' .. , . . · ~ ,(J;).rr''"~~1r-v'\a\: gbjtm~ous. and· unihtE)rrupted .night,
If J:!,e · in.t~,:national air carrfer doe~ott'4'te ·'""r···V! ,~""'t~~'t(ct1ve of tM place.of iSS\Je and;the place
·, flights. to and from ~he. PhiliJ:>pi~~~~ --A...I: ·,;..._Q.~~eht of the ticket or p'ass.age document·
n9.neth~less ea.rri income froin · other:..activitie~ in . ~=--= . · (NIRC, as · · arnen_,deif. by TRAIN, "!:,ec:
tlie c6µritry, -~en it -~hall be subject to the _thirty 7 . ·. 28(A}(3)(a)J:-.. . . . : · .
. perce.nt-(SO.%JNClT Of th~- tt.iirty perc~nt. (30%) s-: . ln.ternational Shipping·,~ Gross .. revenue. .
·final fax:c:,n gross. inoome, respecti'-i~ly (Squth · .... ·w.tietherfor passenge·r;cargo. pqiil origin~ting -.
. African ·°N[Wf1Yi ·:vs· CIR,· G..R: No,~ ·18();356; . . . . ·from the Philippine~· up· t~ .final destina~ion,
Ffibfuary 1-6. 2Q10). . ··. . . regardless of the place of s_ale· or paymenls of·
. . . ;, : ... the pass9ge or_fr_eight_9~curnel:lts.(N/RC, .as
· An offline c~·ri:i~r- w·hich .h~s·a· branqh/ag~nt .in ~ .· .· am~ncf.ed..by TRAll'J,· ~ec .. 28(J!,)(3)(b)) ...
. ·the Pti_ilippfr1~iiand "seils-p'ass~ge.-doc_ume·nts .to · · · · . . · · · · · ·
.· cover offiine flight of it~;principal c_>r oth~r'.airtiries· Continu·ous ·.~n~. ·uninterrupted Flight· or
- · · is taxed for the. ~olle of-the· tickets ev.en if the- . vo·yage · ·· '. · · ·'
service to be . ren'dere"d , is outside ·of the· This refers to.a. fli_ghp:,-,- ·voyage in th.~ caqier·ot
Philippines· based on · the . situs . <>f taxation the .· same · 90·mpE\nY"' _from . the.' moment... a·
principle (Air Canada· v. C/Rr G.R. No. 169507, . . .. passenger, exoes_s baggage, cargo, f:l!lcl/or :·mail ..
Jan"uary""11,.· 201:6). · · · .. is lifted from tlie Philippines up Oto the point" of
. final". ":d_e.stination .of the pas~eng er, e.xcess 0

baggage, cargo and/of" mail. (R.R.- No.15-2.002,

$ef?.2(h)J. . .

72 I 0 2019.SAN SEDA LAW CENTRALIZED BAR OPERATIONS

. . . . -
 ,·
Notes: authorized by.the.BSP to transact business
1: The flight' or Voyag'e .' is not · consiqered with foreign currency deposit system. units ..
. contiriuo.us . ~nd . uninterrupted. if . (,VIRC,·sec. 28(A}(4), as emendea by R.A..
'tr.ansshipment of . passenger, excess 'No .. 9294) .
baggage, cargo and/or mail takes place· at
any port out~ide. the. Philippines ori. a no th.er. ·Exc~pti°~n: Interest income dertveofrom foreign
· aircraft·. 9r. v~ssel -belon'ging. _fo ·a different· currency Joans granted to· RESIDENTS (other
compa~y (2DIZON, supra_ at 343); .. · than OBUs or local commercial banka.Jncludinq
local branches of foreign banks authorized by the· .
Eff.~ct.of flight interruptfon (l:e: change_ or . es> tq transact business with' 'osusf·shali:be
'transshipment at any pdrt.· outside .. the· -subject orily to the finar withholdin·g:tax 'of ten
. .. ·. Ph?/fppfries.'trom an airlinetq a,:,other airline)· percent- ·(~ 0%) . (NfRC, .. · Sec ..... 2B(AJ(4), : as
.. '· . · Only the aliquot portio~ of' the cosf of the . amended 6y R.A:_No(.9294),· · .-' · ·, . .
. . ticket :corre!;ponding to the ieg, flown fr.om
.. the Phiiipp!nes to the- poinfof transshipm.ent ~·ote: .. lncome -ot non-rasidenta.. whether.. ·
~hall form ·.p:arf .of ;the ~r(?ss . .'Philfppine · ', individual· or corporation, from-transactions with · ..
Billings (kndwn as flo'livn__revent'.Je)·(/d.J; · · OBUs is exempt frorn final tax. · . · .. . · ·
; . ·-~. ·.:In.case of·a sto~ove~-. i~ is stili.considered as .: : -i. ·3. Resident '-Foreign Pe.po~itory Barik · (FCDU)
· ·1:mlnt_errupted ·if the' stopover · does noyf:,~~'. (NIRC, Sec. 28(A)(7)(f?),esemended b'y.RA. No ..
exceed.~·8 h~1,1rs (R~. ,No_,1'5-2_~13, s_e~. J)r'/(!::'"\ 9294). . ·. · .. · .· -" · · . · : ·
3. An .offline -mternationat .earner. with !;(;!,El':-"..,;;,?:). . . . .
landing rtghts iJi the Phllippines,.is·not lia'ble(.,.·,,,<;l .Fo·reign Currency Depostt Unit(FCbU') ·
·.~.'~'.;~t,g~~f~
to. tax- on. _Gross· Philippine _Blllirigs_;jAi1~:i
Canada.':· CIR, G.R: Mo. 16950~.J.fferuary/•,:~
'1.1, 2_(?16). · .- . ·. . · /'>'" .. · :J...i
v· @t~~ ~nit or department in·a:loC<;1I bank
or '!n"-~l'l ~)(l~-i~~glocal branch 0Uore1gn banks, _;.
. which .is auJ;t:Ji~1.zed by the BSP to operate ·und_er.
4: A foreiqn .airline company· selHt;i9 yitl<-ets Jri{:..--r l· the .expan,<;l'J~\or-eign currency deposit 'system
'the Phillpplnes throuqh th.e[tt,~.c~l~enf:f-·. ~.;. '(P.D: No.i7/t1kl~ec. ·1(8)) .. · .: : . . ·. ·.
shau be -, conslderad as..,.!~C Al1l7i=l~~ in · ·r-{ l ,1 · \ · .. · · . .· ·

.trl:I~~- ·or ~usi~ess·. i'(f>.;'.!fl,?_. ·c.b~r~V~

.. · The~ f'.;~ · G~~er9fRul~: Extmptf~Orr) t:111 _t~x~s on inco,me.
· ab.$ence.. of flight op.er;at10!'1s:?,~1thin ·.'l~e, ¥,.,!' den.v'{Itt';l:i'5'fll:i'fill~?ff,Qtn ,1ts FGDUs· or· EFCUDs
.J:>hili~pine territory ean~~~~~~9~!\~~t' tbi:i\i).. J,.-, f . ~~orri for_ei~J?}$ii~h~cy transactions with:· ·
Pf
;;
.the income· _re~e1ved was;~~Ne~~frony
activit_i~s -:vittiin the Philippiill~.si\T_he),\est<!_f. .
· taxab1hty, ,s--the i,ource, .anq ti;l~,..spl,irce1s
r~, . 11 •. Non-residents;_. '
,,.Mh,Pfl'.shore·s:ank.i~g Units; a~d . : .· ..
,'(;,;/ . l':t. ko~j_commerc1al banks, mclyding · branches
. . .. ·

;·.,·
t.
,; ·
~ t_hat activ!lY.wtiich produced th~11Jcioine/~p":'£~-~..:.t~-...t-'cif'4erel~n
.. Ca,:,a.da -v: CIR,· .CTA ·case.'l''No, 1.1'5.~2,
becernber: 2~; :2004). , '<.~~: ·
·
ba.nks th~! may_~e autho~ized by !he
~SP to transact bu.S1f!e~s· with .. forergn
currency ·deposit· system· units:. (.NIRC,·.sec.

IT. . .. .
·t . . . .
· . .·. .
:2: Offshore _B~nking Untts (S)BUs)~µthorized'by.
. . .., . 2$(A)(7)(b),
""
as ame,:ided by,R.A.: No.. 9294)°. '.

I
the _BSP. (NIR9, $eo. 28(A)(4), as :a"Jended. by :. · . ·. Exc.ep}lon:Interest income derived by bankfrom .
'._, .,:·. ··. · '.R.A.. NQ;9_294).. . '. · .. ,' . .. .· . : · ... ·... ·. Its .··_FCDt,JiE_F9DU_'from foreign ct.irrenc'y, loan
. . _granted 'to .residents other. than 'FCDU/EFCDU js
1,,:; · . • ..Offshore Banking~Unlt . . ·. ·subject to final. tax: rate .of· 10.0/9·.'(NIR.<J, . .'Sec.
r'_ . . . A~- br~n?h,. sub~J_dia_ry.:?r. ::3ffiliate -0.f .a._}oteig_r{ · . ' . 'W(Aj(7)(b),as amef!qedbyR.A. No_. 9294).· .
( . .banking corporqti~m which .is. duly__:;:i~thopz~d _by , .· . ,
fi:': ,the· BSP,,.as ·.a separ~te accoun.tmg ui:11t, to. 4.':_R~gio.nal · .or ·.·Area·. :·:,He.adqua.rters· · · of
f; . · tri;\nsact offshore·: banking .'business in . the . M_',Jlti_raatiorial.. co·mpanies.. · __'{NIRC, :Sec..
f· · Philip,pi_nes·(P.D. No. 1034~ Sec,· 1{8)). ·... · ·. ·. 28(A)(6)(aJY. · ·

tr~:. Ge~.eral .Rule: Ex~hl-pt fro~-all. taxes on in'Come.

derived by bank-s from·its O~us:.arid.Expanded· ·
'ta·x Rate:
.. Exempt'from
. . :. income.tax.'
.
f.!' Note:·. It . is.· ais~ exempt from ;a.II kinds ·ot.' lcx;al .· ·
f· Foreign· Currency Deposit Units {EfCUDs) from
. for~ign c·urrency ~ransai;:.tions.wjth:
· a. Non-residentsi . .
. ' taxes;. fees; or charges ir,:ipos.ecl : I,){ a . loca.1 ·
government _unit 'exceptreal pr:operty on land .'tax
·b.· .Off\;lioi'e .Bahkil)g Uri its;· and. · . . i_mprpveme.ntscind·equ'lpment{EO. 226, ChapteF .
. c. J:.ocal . ·.c6mmertjal . ban.ks,.. including · ill, Art. 65}.' .

I
. ·brar:i(:hes of foreign ~an.ks that may be .

. '-.
. 201~ SAN.SEDA LAW_CENTRALIZED Bf\R:Ol;>ERATIONS '!' 73
('
 1-NCOME ·TAX
SAN BED/11,.AW Cf!'/TRALfZEDBAR OPERATIONS7 MEMO!N'A/0 2019

Regional. or Area· Headquarters (RHQ): - An · ' . 3. N'cin-Resident. 'owner or Lessor .of Airc,rc1ft
.. _. office w~9se .purpose is to ad as · an · and · Machineries · and· Other Equipment.
admintstrative branch of amultlnational company (NIR.C: as emendedby TRAIN, Sec. 28(8)(4)).
which: ·. · · · ·. .· ·· · · · ·
i. Principally ··serves as ~- ' supervision; . . ,..Tax Rate:' 7.5% ..
communications and coordination center for -, ·' · Tax Base: <.?ross rentals or tee
its subsldtartes, branches .or affiliates in the
Asia-Pacffic Region (2 CASASOLA,'' supra st, .' ~ TAX-EX.EMPT CORPORATIONS
164).;· and · · . . . · .. The· follo::..ing 'orqanizatlone shalt not be subject to
·_!>:. D(!)eS_not'derive income lnjhe Pliilipp'i_nes (ki.). ' . tax provided they are 'not. organized for profit: . ·~
(BLQG-COM-F2t=N) . . . . . .
. 5. Re~l.C;>nal . :operatiJ19. · Headquarters . _of. . : ·1 .. ·§usiness -leaque, chamber of commerce, or · ..
. . ·M,ulti~all~n_al . Comparries' : ·(NIRC;. '.'Sec. · . boardof trade, mt organized for. profit and no
.· · 28.(A){6)(b})· .: . .. . . part of. ttie net' income of:..which'·:inuref:to the .
·.. . . . . . .. ·. benefit 'otany private stockholder or ,lnqividuql .
. Tax·Rate': 10% . . . . . . (NIRC, ~s amended by TRAIN, Sec. 30(F)J;·· ·
: ' T·ix.Bas·e: Taxable income'within tne Philippines :· . . . ., . · . .
. . . .. . . .· · ·. · . . Busine~s le.ague·-'-. An assoctatlon ofpersons · . ·

. ~oreign bu.siness _entitY)"'.hl~li i_s allowE;__g,,tef'ar!!_Ye ·

income !ll · the Phlllppines by:~_pe~Qrr.11139 ·
lJ
. Regidnal:.. Operatil)g Headquarters (ROH9~===,=""=hav.i.Q9'som'e common, business interest, which
.z~Jll]llt~;'.it~~~ctivit\es'to . work for s~ch com~on
_ __ -~te~estjf.aq~l.-zdoes not .engage. in' a regular
: qua1irying ~ervices·t?. it~ _affln-a!~S::,f.1bstrJ.ririt8'.'crr~=·~asL~~-df ~lQd ordinarily c~rrie.~.on_ fer profit
branches. m 1he.Pn111~p1.n7s, ~',/t:h~t,~s1 #~c1V2...,.,......x~a:if:_""~·,oe;~.~,ec. 31J. i. . ..- .
. Reg1C?n and- in other- f9re1grJf?"'w:ket '.ancl'1nay. . 411; .. ;, : _ ·.--:\· ~ _:,<>'\'\ ·. · . .· · · . . :
.': ~1_1~age. in the fol~o~ng:_actit~Ues;;} . . _.b. .f km Jf:i. · ];ij ceas,es f._ ~5(1ax\ex~pt}f i~ ~li~ages iri 'a .
. · a. General _admin1strat1onfnd plcJ.fll:'Un!;J: ,:ii),,. . regufarlbus1nl~sfbr~profit e'llen 1f. it conqucts
. b. : Busi_n~~s _plarinin~ and,a't>o!Jlipation;_ .. --~:....J.....,._b1,1sir;re~.?.n \~~1ativ~ bas!~ or: p!odyces
.. ~- .~our~_1ng and prqcuref.eti'tqt[,' a,~ rn8i!en~~~ .! · • c:.~E.l1-su!fic1eht11:11tome (-o be self-ass~ssing.' :
· · and components; ·H · ~ · · \· · T ~~
· d .. Corp_()rate.finance a9y~se~~i'.rvi~l'rsfil:t.. ~
e. Ma~k?ting control and~~J~~om~~tp!}·.·~
1
An :i f!f~
· .( · · . 1 t:=,,,,,l !j ··· ·
i~tfiri ">t~gaged · . in . ··rumi_shing
.. ~-::-. ~m ?r!~-~~ig _to/p.ta~§livc ir-west?rs; .~o enabl~
. . ·

f. . Trai.n1~g ':'"d ._personnel.f1:1Jlnagtme · ;.~'\: . ~1,, }i,t~.~~, ak~ouncl ;nvestrri'ent, 1s not ~x7mpt, ·
~- Logistic seiv,c~s; \ , . . ~\: , ~J~ trr..lil . 'w?JJ!@;;;,ll m~,mb~rs t,ia~e n? comm_on bus11:iess
h.. _Re.s~arch, and ?eve_Lopi~ient se1;:V1ce~a1:10 · ;F°'ft,t~st,_1;¥lfn thou~~ ~II ·\ts income 1s deyoled to .. ,
· pr0du,c~ oev~lopment; . '- · , ... ~~E"f.n!~ fl~se·~tatep (R.R.}'Jo. 02-40, Sec:·31).· ·
1· T.ec.hnical su~p<?rt a·nd mairifenan?~r..,.:.~~-~~
..• J: ··. Dal~ p'.oc~ss1ng and,cor;nmunTu_a~06§Jpri.c(~""'.'""~~-:~o[~jl~'.$"ffur~I
-~-1-
. · : . _- .· . · ·. :·: . · :
~r. hort1c~ltur:al._orgamz~t1on ·
. k. B_us1nes~ dev~iopn:ient (IFJR, R.A.".B,l_&,MJc. Jv{f~J~\.,~~Jl'l¢.~d. pn~p1pa_liy fo,r profit (NIRC,· a~
. 4(b)). · ; . _. . ·. :· -_-· . . ·: . ~~~.,Jtae,:i8ed by TRAIN, Ser _3~(A)); · . ·. . . ·.
SPECIAL. ·;N(>N-RESIPENT .FbREIGN Ag·r:i~i..iltural or ho~iculJu'ral o~ifanlzatio.ns:.
=
CORPORATIONS··· .. ·····.,·.. .
. ·"-· · · .. .'a.
..Mu.st_ hav.~ no· ri_et · ·if?cqm~,inuring to the. :..
:1. Nori~Resld~nt Cinematog.raphlc Filrti 0\i.tners, .. . . benefit.of a_ny'membe_r; ·. . . . . .
·. Lessors Cir D(str.ib utors (NIRC, · as amended by· . ·· · · b ... - Are. e.d~CaUonal. Or io.~tr.1.;1ctjYe iO· character;,
TFMIN, Sec:.28(8)(2)). . ... ·.. . . · .. ·. : .. . .·., and ·... ... . . . .. . ·. · .... ·.
0f 0

. ; C, . Must haye as th.eir otJjects the. betterment

. . ·,:·tax Rate-:.' 2.~%: . . .. . . . · , · the cqnditions of :those engag·E!d.·.in such
· · Tax. Bas~: .Gross incomerfrorri ~II.source~ within · . , pursuits _(R.R. ._No .. ~40, S~c: 25). ·
· the Philippir:'le·s . . ~ ··.· ~ . .- ·~
. 3. _<;;ivic · ,~ague 'or Qrganizatiq~-ri~t. ~rganized f9c
2. ·Non~Resldent Owner or· ~essor of Vessels , : · · · profitbut.opei'at~d exclusive!yJbr the prpmotion.
Charter~d by ·Philippine Natio~a!s (NIRC,.· as . · · ... · of.social welfare (NIRC, a~ amended by.TRAIN,
~· · arri1:m<;Jeiipy_TRA·iN,
. ~e.c. 21)(8)(3.)J- •. . :. Sep. 3Q(G)); . ·. . . .. . .. .. . .
. '4: .. Qoveniment ~ducational in~ljtution (NIRC, as
· .. : Tax Rate: 4.5%. · · ainendecf. by.TRAIN, .Sec. 30(1)); · · · ·: · . ·
· ·:Tax Base; Gross rentals, iease· or-'charter-fe'es 5.- £emetery com'pany · owned- an·d op!:)rated
from. leases ··or charter~ tQ Filipino citizens qr. 1;1xclusively · .toe the Qenefit .of :its 111"ember~
: corporations,
. . . by the MARINA
~s approve.d . (N(.R.G, as amended by TRAl"f, ·Sec. 3Q(D)j;·

74 2019 SAN BED.A. LAW CENTRALIZED BAR OPERATIONS

 ·'

WiEPME A S & H±fWPMI# ff

6. ·. A· beneficiary soclety, · Qn;Jer. or association, \ the basis of the quantity ofproduce finishe.d .by
operating . for the exclusive benefit . of the .. ·them·. (NIBQ; as emenaea by TRAIN,·. Sec ..
members such as a fraternal organization. 30(K));'. . . .·
·t: -operatlnq under the lodge· system, 'or a mutual · 9". .Earmers· or other . mutual typhoon or fire
:tr aid .assoclatlon .. or a· <non- stock corporatfon . insurance company, mutual ditch or .ii'rrgation
'··. orqanized: by ..emplqyees provfdin!:f for the : company, mutual .' or. cooperative telephone
r(. 'payment for: life, sickness, accident, or.· other •· company, or lik.e organization of a, purely local
~; benefits.. exclusively to the· members of such . character, the income of which consists solely of
~'.': society, order or associatlon, · .or non-stock .· • assessments, dues or ··fees collected from ·.
tf · corporation cir thelr .. dependents ·(NiRC; · al members for the- sole "purpose oi mee~ing its
=.
:.:
~

;: .
emended by TRAIN, 3~.(~!);
Ope~tlng. U'nder the·Lodge System =:-':M~ans .
carrying on.'! its . activities.. under a.. form of ··
· expenses (NIRC,.as amended by TRAIN,.Sec.
' . 30(J)); and . .-: . · '· .· . .
.. 1 Q. -A .. :f'!on-s~ock · arid.: non-profit. . !;<;lu_cational ·
lnstitutions (NIRC, as amen,ded'by tRAI.N, Sec.. ·

I
f.
·
f'- ·
....
·>·'
organization: th~at .comortses ·local. 'br1:1nches,
.. cnertered b.y a. parent organization and· lar.ge'l}i
ca
.. :self;gove.rning,' lied lodqes, chapters, or' the
·
lik:e (1.pE.LEOfll,. supra at 330). ,' · · · · .
· ., . . ..... . · · · .. _ · "'"'
3_ O(H)).

G~neral
. .
,
·. . . . · ;·

. Rl!le: . · Non-stock," Non-profit_ -

'Educational,' Institutions . ·c;1re exempt from .
taxation ''(NIR9, as .'81J1e1Jdep· by TRAIN; Sec.
ff:· :Not_es;,A grand lo,~g_eestablished for t~e c_~re_~f/1%)./ · 30{H)). · · · · · ·
k .
the. members.vthejr ·~ep~nd~nJs, .anc me.mb~r,s··.Z:,.;/~,, . . . . . ·. . . . . . . .
r · of an. afflliated' lodge unable. to earn a livelihqod•l ··,. ·;;; ·'\ •. Exception: Private education~! institutio'n.which ·
ff-. b~,:-r:easo'n. qf the infjrmitie~. of age'W!3S Jield 't.~t,·,:·,,:,:,-''J deviate~· f~p.,.rh.. its.·p'ur~IY. ed~cat_iqnal .. purp?ses'
t':. exempt. . . · · . : ·· · ·· .. :. - JI (>ti.'~f ..~~1--a_.at!v~1~;s.hal~ be ·treated hke, ·f:my pnv?te
ii:.· · ,.. .· ·· · · .. · ·· 4"
'"'\5' '!,( . clbmesti.i::"'!corporation·engaged in· busimfs.s"for
''. .: MuJua.1 protective, s,ocie}ies n.ot op.~r,~gund~r;{l....:.,, ; 'profit '(MA!ff./~f.ATEO, Phi{ippine . income Tax,
rt , th_~ .·.10.dge, _syste:m · a·nd · traveie.r's(A;iNJCiatto1,.,, 1t
·supra at 1/if.p,i~. · . · . . .: · .
f·· : ·.. : /i ft· ·. ·. · . ' . · · · ·. · ..

~.
··prov1~1~g . for . ~X~d.: de,;1th. b;.riJ$fsf-!t~h~ . !'~
fu · . benef1c1anes.ormember~:ar'e,:-pt<-taxe;>1ef.npt. , r-:)·. Not_e: .e!'I·rJ~: ~es s,nd ass.els .of non.-_s~ock;
i£: · · · · . . . . ;'. '. . : ,;;~ · -~ ~ . :~..,J ,· n?~PfP.fit ·e~atJfn'al ~ns.titutions,.used act1,1aJly, ..
!-tJ ·.
I'
7. Mutual saving_s bank,n.ot ~ti"'Jng:a,~~Ist~k;.. . d_1r~\~~~-~...gl)J~lzslyforeducat1onal purposes ·
· . r~pr~sente·~ by" shar_ef a_,:rct,$.~o~~~-~.~,'l-b~Ft~) .· Y:#£_:~·· . are e_x"e~f.i'((§:0,NST: A~:. XIV,. Se~. 4(~)); Th~
· w1thout.,c.ap1_ta1·stock o.r~~F11zep··f.1~e,~~\ed fof
L-_ · . phrase '1~11 r,evenue·s" _-1~ · .un~uallf1ed .bY..'. any .
mu!u'i'I purposes and with-Out l?)'~f'l-,(Nl~C•. as · . . -f,; -:-iiP~erenceto the so.1.irce ,gf. _revemi~s. Thus,:so . : ·

I ·
'·
..
• ··
,arr,ended_by'TR.AIN,.Sf!C: "30(8)); ({~-:..-3.~: · .:.."'·./.i/f·;:..,)?~517P.,.~e
· .. : : : . · · · ... · '. · · 41('
In order that ?· corporatio('{ may i;>~(entit~~d'.;fo'..
· e::x.emption; · it .must ·app~ar ttiat"~~l:.~i · an· ·
J-: '· · - · orgar:iization:: .· . ·· ·
· .. · a:·.. Which i,as·:~o capitafstock represented by·
·
re~enu.es.· and ._incom~ ar~ used
A:~"'."'-·~1~.:.....a'etuallyftllrectly·13n~ :ex~lusive\y for.. educational· ..
. ... purposes; .tl'\en .said revenues _and income ·shall·
·., be exeinpt_from faxes arid cfuties (CIR v. De· La ..
· Salle Unjv.ersity,G.R. fjo .. 19.659(3,, /',joveml:Jer.JJ,
·. 201.6).": ·. ·:'· · . ;,._ • · .· :· . · .. ,· · -·
l . :·.: · ~ . · ·.sh8res;ancJ::. ·· · · ·. - -·. · ·:. · ··- -.. · ·,
f~-~·;·.'
1•.• • • . ...: b .. Whos~ earning's·less only 1f'.le· expenses of
. op'e·r~tior:i;aredistributabl&V{hol.lY, a'~ong the.
The . exempti9n·· bf .non~stock, .': nbn-·profit:
.'education.al:in~_tit~tjo11s.frorn. in.con,:e ta)< ~xten.ds. · .
'
- depositdrs (R.R -No: 0240, s.~¢.:'2.~) .. · . · to· _·incidental· !ncoine · from'.. ancilJaty · activities_
r such as·: .
t' Notes~ Exe.mptlon'~pp'fies to :·bott(foreign ~l;ld. a·.. Income . from ·.C~fcterias, ca·n\eens ..·and.

r·~·.t' ·. . ·. · . · ·Npt.qu~·lified domestic barik~.. ·

. ·..... ' as niutuai ~~wings . • .
" . .bank 'if. cle~sits •, -~ooks~ores 'are also 'exempt· if they' are'
?'o/n~d. <!nd operated . by. _the. educational.
institution and·are located within-,the school·
',~.'. · .are rriade compulsorY. ~rider contract b~twee"!· :· : . pfemis~s· (R:M.~:, 7.{;~W03). .··.. ·

r .. .
,,
the p~nk' and_the depositors qnd is operate,dfor
speculation rather.fo'r savings. ,.. '
· ·b.· Revenues..'derivei:l ·from. assets·used In the ·.
Qperat!9n .. of . c;;afeteriasicanteehs .and· .
bookstore.s. ~re .. exempt from . taxatiori,
? 8... Farmers,. fruit ,. grow~:irs or like ·associi:;ition ·., · ... provided . that . they are- ·. ow1:1ed · an~
f . ' :;rganized and operated.as ~:sales ~ge.nffor the -Operated by t,hEi 'eduqationaf institution
;. . ..p.urpose of marketing ..ttie . pro<;lucts of its. as. ancillary activities and ttie same are~·
~ 'members·and.turning back to thE!fn the proce.eds 'located within the· School . premises·
, of sa.l~s, 1ess the necessary seliing.experyses o~. (MAMA0, TEO, Income Tax; SUPf[!. ·a(-~ 14).
(,
!
(
I, .- ?019 SAN'BEDA ~w ~ENTRALIZED BAR OPE.RATIO_NS I ?fr
 \SI iL BP.
. SJ!N BEDA

-c; The interest -incorne from currency· bank

deposits · and the- yield from deposit
.

substltutelnstrurnentsused.aetuatly, directly
IN·C.OME TAX::
~w cpvrn.:,.vzm BAR OPE/MTIONS, - MEMOR,Y AID 2019
. . --· .
--·,-
In case ~f religious activities.. lncome from ihe
"conduct 'of strictly religious activities,. such as
fees. received ·for administering . baptismal,
Y.MMSM.

and c ~xclusively·. In . pursuance. of they solemnizing · rnarrlaqea.. attending . burials,

-". purpose. as an educational institution are .. holding masses and the like, are exempt.
. E~E~.P'T from; . . . . . ·. .
. i. ... '20% fina'I. tax; and . · . . · .Ch'aritable ccrporatton includes assoclation
· · ii. .' 7%s12%. [Now:· .7.5% ~· '15%] .tax on . ·for 'the,.relief of the families of.clerqyrnen, even.
interest income under the .. expanded thouqh the lattermake contributionstotrre fund
'. foreign ~urre·ncy·deppsit system (NIR,C/ .. . established for this purpose, or for fu.n:1i°shingthe
as emended by TRAIN, Sec. 27(0)(1 )). . series of trained nurses to persons unable to pay
. . . .. . . . · . , · .. for them or for aiding the general b9dy oflitlga11ts
D.ocum.enta.ry.Requlrem~nts: :. '. ' . : .' (2.-CA~As_pLA, supra at 190). .· ··. · . . :·
·· · ·. 1. "Annual Information Retum; and . . . · · . · . ,./. . . . .. . , · . . · ... _,. · . .
2. Duly· audited financial statement,to ga.ther.· ' . -SclentiflcCorporatlori includes ari assoctatlon
' . ,'.. . with the follqwing;.: . . . . : ,. . .. . : . for the scieritiflcvstudy of: law ·w]tb. a. view' to
, . .. . . a. , Certification from'their depository banks- . improving its administration.· .
: .. as. Jo the. amount of interest income ·. . . . . . . ... . . . ·. . . ·., .
. ·, ... earned frorp_, passive investme!}~o~5.~R.e.qulslt~sfor Tax Ex.~mpti?n.: .
· . subject t~·the 20% fin~l'with.h.9kim~a:i<·
and 7%-12°/o '[NQw: 7.5o/o;;:7~%:\t x. :.n .
ilJ .•Y. ~µs_t be a . non-stock corporation .: or
J"'l\.'fl
' V · pss9"c'nltiph organized and: 'operated
int_!3~~st . -income·' under:}tb~}{;~~!;le-ct'tP"-'f'i:==.;:,;.,._~xqfu~t-i~~·. -f~r · r.ellglous, ·-cnaritable,
·. · foreign-: currer:i.cy ·..ie:P.g_'!:lii:dyste~-.--..,,-.si1~~~T ~tftJet1c, or cultural puri:ioses, or
. ' .. in:i~sed _by S~c.. 27)9:)~~4o(~ Nt'Ffc_; . ~ ~~ ttie.._ce..t1~P~~'f~~onof.~e.vett:rans (R. M.'O .
. · b. ~ert1fica!1().IJ. of ~ctdal"ttt!!J~~tio.ni'of.sa1cf} Jf~ ·.X /IJo\ 20-"'~p:{tJ:'SiJf,-6); . ·.
f .· . 'l / . ~{ .
mcome; and· ...
c,. Bp~rd ·. R~s9Ji.Jt!~r*:;P~{:, t.h.e. ~M!
~.dtnlnistr~_t\onon.,P.f'~~s~dproj,?1s'(~~~~
. <?On_stnictlon . a~olc;r,.-if P_r<?vef!!f.'!!. _o
. · school , . bwldmif-J·s"t.r;:1iJnd (-7.,,~~l,t(e'S,
~j:~~ -8'
.-
·
b._ · It s~ol,11d1iffe[t;i\ followmg'tests:~ . .
. ~~ .· -.-.-.ii2·o_rga,jf;taffOJ1,a~T~st -:· It~ purpose is
~11 7 · . excl~s·,~,~~l!~ite,~to'. OI')_~ ~r: ~ore_- of
those . 1;1sitfd 1n Section- 30(E)· of ,
. . ~~C. · J, · .~ /1 . . -~ · . . :
·

. ·, :. . a.c.quisi{ion of e9.~{P,~enJ\bo'o1<~~-uw~-~···~· ii'. rfJf!erat/g~~-r}~st.- Its r~gular activities..

' ' like) t?. b~ _funde;_ct.Jk1! _\;!f, ~~r~~ll8Y.~\ t],;;, /t>~:
~<SFTf~st -e~flus.1ve1y· devoted to :the
<le~os1ted·m;bank\or pl~'E,~ !~~n~~>;i· (~~~~"%ccr.phs1")ment ·: of !_he.·. specrfi~d
· mar,~ets, on qr bef6r\lhe.14i\d~w,it,;tb~
tqurt~ month folloVJif.l.g the, e)1,d' .df..4.t~m ...
""'-·~Jf~:;!f\Y
rr\b. /· ·. ' .· PYJP.O:G:e: .. · ·- ,
. .
.· .-

·:: : ·taxa.~le year· (FfQaii'tfl. DeP'imR:J,..~~~ ~~9te}yf~· ~ration/associ~tion .fails ''_to

. Orcf.erNo._.137-f!l, S~c. 3)\"-<..91i~l ·.Et:?-..,.,,;:·:-\'\.~~~ ·test 1f·c! subst.ant1al part. (?fits
. · · :· · ... · · · · ·. ·,·V..,_ : . M·{S.~pe~J;ltlons.. ':, is - considered . '_'acti,;,it!es.
· No~e:·. The .. exettipticln. : does... :nol ""'c~L.. ·. I. ~~duqtedfor profit" (R.M.O. ,No. io.2013,
. withholding •
taxes.
... •
A,s· e·9ucational
•
· inslituti'on:~-=--~-
.. . • , ~t
. Sec. 6). .
. .
. they are ·constituted -.;:1s -.withholdir:ig agents for · ,, . . : ··.. . .
the·gov~mrnent:required to WJ'.tJ'ihpld..ttie'tax on·.. c. Ail'the::·net' income/assets must be. devoted
. compel'ls~ti~Jl in~nie. ol thei(emp.foye.¢s~odhe for :its _'purpose a'IJcJ, ·iro pa~t ac~n.ies.to any ..
-withholding ta~ fncome ·paym·ents · t9:' per~_ons · pen{en(R.M.O. No. ,20°2018, Sec. 6);' and ··. :
. subj~t to t~. pursu.ant to Sec: ·57 ·of tl}e Tax .· . d: ·· 1t must. not t,>e a. branch ·of a. forslgn non-· .
· ..·. Coded}~~t(MAMALATEO, Pf!ilippit,e:Jncome · stpck, ·non-pr'Qfjt corporation (8.M.O.. /v9. ·
· 7:a_~.. s_ilpra at' 1'(5). · ·. · , . · · · : '. · '.'. · · ·. 20~29·13,' Sec:·~}.. . . · . ·.. · ·. : .: · ··. · · · ·
. .. · ~,. : . . ·~ .
·11, Nor-i:.stock· corporations or .. association ·. < Note: A ,:ax ·Exemption .Ruling f.or..:non- '..
: ~. ·. 6rganizedan!:l operatect.exclusivety'.forreligious,. .· ... · stock, flOn-.:p°fofit ·COrporations/associatidns
ct:iaritable,. .scientifi'c, athletic : or culturai . shall ~ ~~li.d·for .a period.. of .thr~E?·· (3) ·y~a~
. ·. purposes, or forthe rehabilitatio~.ofveterans,no ,. .. unl~ss sooner rel(oked or cancelled (R.M.O.
. part of its net income Qr ass.et sh'all belong or' .to ·. No: io:_201J; Sec_. 9). . .. .
inur.~ to_lhe· penefit Of any' mernber; ·orga,:tizer,.
_-offfcer or any .~pecific per$on. ·

76
. I .2019
. SAN
. . ·~ SEDA
·. .
LAW CENTRALIZED.BAR
. . . . OPERATIONS
. .
 l··NCO'M E TAX
SAN SEDA l.:AW.CF:NTRALIZEOBAR OPERATIONS.- MEMbRYND201.9 .
· · ·; && aw && , · r · .a
"
A non-stock and non-profit charitable ·: Bara.ngay Mi~ro Business Ent~rprises . ·
iosti.tuti~n is not automatically exempt from refers to. any business. 'entry or enterprise
paying taxes · · · · . · .. engaged in the productlon, processing or'
. To·be exempt for r~al property. taxes;·Sec;tion · manufacturinq ofproductsor cornmodlties,
28(3), A_rticle YI of the Constltutlon requires that ineludi'ng . ,agro-'processing, · .tradjng . and .
· ·a charitable· lnstitutlen use. the properractuatly, . series, whose total assets· 1n.cludin'g those
. dJrecJly; · and. ·--·axclusivefy". 'for' charitable arising .from loans- but exclusive of tht'i°land:
. , ·purposes: To_.·be, exempt' frorri •irrp6me: taxes;· ~n· which tne_ particular businessienttty's "
· : ·section 30.(Ej: of the. NIRC'. requires that a- office plant and . equipment' are· situated; .
. · ·.. charitable 'institution' must be:··. · ' , shall not b.e morethan P3, ,060.000: (f?._A · 1,
. . . i. . :,.A.-rion~stock corporatlon cir association; . · No. 91 l~i -S~c, ·3 o»-. : . . · · . ·
: · ii.' .Qrganjzi!c;f ": · exclusively ·. for -·charitable .. !
. . . purposes" . . ·. . . ' . . Exempt. only for" income 'ari~ing . fr~~- the·
iii.:· Opera,ted1 : ' excluslvely . for· charitable operations of tlie enterprise but not. from
.:' pu'r'p6ses; and ', . : . finai. truces on deposlts, : interest income,
iv .. No. pa_rty bf its· net income or asset. shall r ": : ..capital' gains· l~x.'royalties, ~tc... (R.A.. No.
belong to o: inure to th_e··benefit of any . ,. · 9178,. Sec. 7)'.. '. .': . . . ' . ··:· · . .~ .
·,vetn9er, org~ni~er. · officer or any Specific .. _ · ~ . . · ·. · .. ·
'. ·person(~ CASA~OLA, suoree: 1_92). '· · · .' :?i ". 4: Foster Ch_ild Agenc(es _(f{A.'No. f01~5); ,
. · ·, . . · . . : . · ., · /:-::;j;. 5. Tourism Enterprise Zone (T.EZ)'Opera~ors
· Eff~ct if a charitable iostitu~lon. engages Jti';f,/;'?.\. (R;A. .. No. !J~Q3, ·. Sec._ .86(a))' · ~ TEZ .
· :actlviti~s ~onducted.for.profit · . .. . µ.>?:y,.;/i\1 · · Operators are given an incom.e ~ax holida_y
It ~oes-notlo_se its tax-exempt status for·its··n~t':i:_.·,·.-?'..A .• · 'for six. years-. · . , . · .. · .. ·.. .
fo~ .. :P.~Ofit · _actiyjties•.. However,. sui;;h_ prcj!i,_9isr~..,t1·;,t;!~".);fi~J.9f!,~~on· _Due~:, The ass·09iation ._dues
subJecl to tax.-(JNGLES, supra...at 10t~.--,:.;/. . ·."'tz.'f.. •jr · -"'"C-andEin~me denve_~- ~r<;:>m, re_n_tals. of. the:
· . _. . . . : /f/'J;} . · J\__J' . . · h~me9~~~~r·.sa~soc1atJon's pro~erhes are.·
N.9.te~. -~on~stoc~;,. ncm~profi_t :~O~ftons.'.oy"rt . · .exemp~1rr~mih_CQ!°1'e tax:proy)dE:d: . ·
a,ssoc1ations :Wht<;:h c_la1m to ·oer.r:.c;pa~1faW.e'or· t~l a. 1he.hd,!lleow_r:,er) ?s;mc1.at1on·mus~ be_
.so~ia/. -welfare . ~~t,.:are0 n?-~r.;:o~gan}t'iffuai:1d · . ·: (( .. : · /a aJ_1y:)pnstiMed: "assocjatioi;i". und¢r,
o_.per~ted"exc.lus1~ely!' fot~c~ai:itctl:!l~orsocial~ ~:'~'\ .. J!. $eqtion ~(B)..:R.A No. 99Q4;. ·.
· welfare' purposes are. not' ~i:\'titlecl~a1).a:EfV'co~e. fr! . · ~1:~i.T-tre,!il!Gl:i,;t.raving jurisdiction over the
· . tax:exernp!ion-orider.Se9ti6~.~'3b($,)'~nt(G).{0(1
. the "NIRC, as: ,ameaded,. :·.a·i1'd?-.>,-t9Jir\t~xabl~f j'J ·. . .
(;;-4- . . .. -~(ti9~ci,~~~sassociation must is~oe a_:.
,ce)'fific~lio_n . idei:itifying the basic
::.- ·. :incqme· ..shall.:· be su!Jf?ct'. k~ ~rgi~ary..~30% ·. ~h--;-~i~· - · services . pro~ided_ · by :th~-: ass~ci~,tioo.- .
: corporatE;_rate und9.1: Secti<?n 27(N·ot>.t,tl~l-~C, _. r,1_:.;;.\..;r:\i"0- ~-~d :st.~tr,ng 1!~~ack'. ~~: resourc~s to
.· . as. ame'n_ded (R. fyf. C. No. 6.7-2_012)1:~'r · . /t~~;i,~,~~rovrdesue~ _ba$1C seryrces; and . · . .
. . . ·. . . . . . ·:. .
.
_:. : - . . . . . ~t~- 't. · 'f1'¥
A11-lristitotiori u·nder Section 30(E) q_ncf;;,~J'.]oes
c. . The ·homeowners: association:: most . ·
. ·· ·p_resen_t:proof that t_h.e in~ome ai:id. du~s.·
· _)iot lose !ts tax _e~¢mption 'if ife~rns in·co~e fr.om . are us.ed ro·r:~1eanl.iness;.safety, s.~curity
· --· i~ · for-pt9fit. ac;tivities. ~1,.1ch: i!"lcome from. for-: . and .othe·r. basic. services ri_eeded by th_e
··profl(activilie$,is r:r)erel{su,bject to i.nc·ometax at_.- r.nembe_rs. (f?._M.C,-No ...9~2013),.-.
. ...
·:, .
. · the.-prefEi'rehtial 10% tate (R.iM.C. tvo: 97-2012)_:· · · · · ·
.-· .. ·-· . .. . . . .
.... ,· .
.l'ax-Ex~mpt ."Cor~oratlolis· ·- u'nder· $peclal'
Laws: · ·. · . · .... · - · ·
"1, ·Qoqp~ratlves, subje,ct't~ ce.rtairi.:con,<;fltions· • !; •
~ .: . · · . .. (R.A.: No. 6938); . · . . , . · ·. . · . · ..
....·.
:. . 2 ... ·Foundation: .· .. -created - . tor · scientific .
e' - .. ad~anc':ement (R.'A.Wo. ioq7, Sec.' 24);.
· 3. Bar~n-gay Micro· B~siness -~nterprises (R.A_,
. No. f}17B); ... · .. - · >. · .. . :· · .
. -' .: .;. . . ~ .. . .
,. :.
,,

I.

2.019 SAN SEDA LAW Cl;:NTRALIZED BAR OP~RATIONS 77

 IN·COMETAX
SAN BEDA. LAW CENTl'lAlll~D BAf? QPERA7:tONS'-MEMO~Y AID, 2019 .
:lwriMl!M WA fifii#SSWl§AISSS!ffii· M HS
.. . . '• . :•'. . -.
\ . . ,'

; Rules on-theTaxabillty ~f Income of.Corporate Taxpay~r~

"''

lnco.rrie -Jro·m sources ~ii

wilhin and -: without ... the: ·· . .,: 30% of
'Pbilippiri'es· · .(N_IRC; 'as - .
Taxable· income
amended: by TRA.ll)J- La.w· · . (NlRC, as amended
'.·.Sec., 27(A)).'.· ·' . · .' ". · · . by T~AINLaw, Sec.
' .. . :27(Aj); CJr_

··>-, 2 .MC_lT-2% of.Gros_s'.

.. IQ_come · (NIR_C; ·as
· . emendea by T:RAIN··.
law; Sec. 27(E))
. Whic;:h-ever is higher,

.. :·.
·\ ,: . '-.: ..

:::· l~t:o·m.~,>·. derived, - - from _. ·1.0"/~ .. ot Tax~bt~

.sources .w.ithin and without- ·Income-· 1f. -·:gross·
. the: P.hilipp°fr1es (NIRC,. as
· · income -from
:. emendea by °TRAIN Lay;; . "unrelated activities
· Sec. 27(8)).. · ... · - . . . does . not .. exceed
. . . ·, I
·. 50%'. of· total .qross .
... ·· · 'I . income ···(NIRC,. ~s· ...
:amended · by TRAIN .
· : . : ._L.aw; Seq,''2_7(8)) ... ·.
... ,· . .
· · :·~ : . NCIT/ MCIT :__. 1f '
-:.
·. 'exceedlno . ·50% · ·
(NIR<;;; as. amended
by Tf?AIN Law, Sec,·.
2,l(B)) . .

78 I aois SAN °8EDA LAW CE.l'ffRALIZED OPERATIONS

• # • : • • • • • L.
 SAN ,B£DA i.Aw CfiNTRALJt£DBAR·OP£RATION$ -. MEMORY Aio 2019
tMfM iM i·MH $18¥2

. Income derived · . fr~m .. Either: .

sources within· the . 1. NClT - 30% .of
Philippines .(NIRC; as Taxable Income
amended by TRAIN Law, (N/RC, ·, as.
Seo. 28(~)(1)). · emended . . by
TRAIN Law, Sec.
.,
2B(A)(m;:'r

2. · .. 'MCrr - 2%. of
·' Gross , ·. irico~e
· · (f\JJRC, · as. ·
'. . amended . . by
· · TRAIN Law Sec. · .
. 28fA)(2}) ...
Whl'cheyer
. ,. .. . is higher
. ·.

Gross. Philippine Bililng.~ Ei!her:· . .

(!ii/RC; ..as. :amerjd,ed· .DY · .-,. · · . · .: · ·. ·. ·. ·
TRAIN .. t..aw,:-:; See. · Prefe.r~.n!.1<;11T?X ~.ate..
·2a(f.}(3)(.a))·>::·· '.. · .. .t of 2..5_% ·_. or . Tax.
· · EX.empt10.n- {on. ._.the.
basis qf reclproclty or ..
t,. tax:·-Trl,iatyJ ':(NIRC;. ·
. as,.:_' _amended : l?Y ·
. TRAIN .Law;·· Seo.
.. 28(A){3))'.- .
.;•.

: OfflinE;l ·. .ca·~~ien:;/no
.. · landing .rjghts .:.. 30o/o, ·
. · hb'Wever . t.
·· · · .:, ·...'.the .· ·
-: . existence . of. ·a . tax .
. .,
: treaty "must·· .· be ..
.: · ·. . ·. 'considered " (A'ir .
~ ..... ,· . . Cc;1nada vs CIR; G.R ..
No.· , . . 169560-7, .
Janua,y 11;,2016).

2019
. ·. -
~N BEDA LAW CENTRALIZ~D OPERATiONS I 79.
.
 SAN'B.WA
·1·N· cOME.'.TA·X
JAW. CENTRAilZED BAR,OPERATIONS- MEMORY AID. 2019'
.. . . . . .

~~~ifA~~:mg~,; =r ... __ ..,.1-n-co-m~e-.

-.-f-ro-m-.
-.--fo_r._e-ig-n--.--E-x_e_m_p_t_,
-e-x-ce-.
p-t-·-.n-e-t-.
· .. currency transactlorrs With . income . . from
nonresidents. other OBU.s. . transactions as may
local . commercial banks; . b.e specified by. the.
includinq ·. branches of · s;cretary of Fin.ince
. foreign banks ·(NIRC; · as. (/iJ/Rc;; as
.emended ·.
amended M. TRAIN Law, .by TRAIN. U1w, Sec .
. . Sec'.'·28(A)(4));
... •. . . . .. 28(A)(4)) : . .'·

int~rest · lncorne dertved : . :1 d%. ,.fir:i.aUax. (NiR9, . .

. from· . fore.ign . -currency . .es . amended . by .: '.
·; loansqranted to residents, . TRAIN Law: . Sec. ' .
otherthan those: included, ··2B(.A)(4j) ·. ·. . ·' ·.
i~·th·e ·~bove.list (NIRC, 8$'.
-~aiffen!!~iY..
TRAiN. Law,
. ~ ''c1t8. )7t.JJ~'. .: . . . ;, .

.~ . ·....

lrrcorne ci~ri\(ecl ·~ithio Jh~· .: .25%: .9f. Gfoss. Income ...

Philippines only. (~IRC, a.s· ·
(NjRC, · ·a~: emended: · .. :.
' amendec!_by :,R/3.IN. La~, : by TRAi'fi,I Lai-v, ·· Seer ·
.
: Sec. .4{3(BJ(2))
. . . .
. · · ... ·-.::
.- ·:- :: 28(8)(2)) · ·
. ..
·

G;9~s. ·re!)t~I~. : lease :.·or: 4:5% .. '. of . · groi;;s·

·.d:,a'rterf.ee.sfrom leasesor . :rentals,.'.· 'lease· or
. charters to ~iliplno .eitlzens, ·: -charter, · fees · : from
. or corporations: {NIRC,. es. ', leases. or' charters.to"
: .emendea by . TRAIN LaW, ·. . Filipi ho citizens: or: .
Sec: '2{3(/3){3)/ . · .» • • coft,or~,tjOf}S, . ; ai
. . . -, . . .. ' . . ; -approved'->: by . the.
Maritime. ·· 1ndt1.stry· •
· Authority, (ii!IIJC, ·a.s
,, ''.'attiencJ.ed TRAIN by'
.: . Law;· Sec. 28{~)(2))'

· ...
. (30 1 aois .SAN:sEot,,. ·LAW c~NTRALIZED OPERATIONS :
 ,U". ..
r INCOME-TAX
r,,
;
.. SAN BEDA I.AW c:ENT,~LIZbf) BAR Ol'fiRAT!ON_S - MEMORY AID 2019
I
I.• . ' 6 '" #
!'..
;\·,·
:.·. · Rentals, · charters, · r 'and 7.:5% of gross.rentals
~· other fees derived 'within· or fees · ((\I/RC, es
~ the Philippines (NIRC, as amended'. by· TRAiN

r,,
\•
l'-·
r,,
emended ~y TRAJN'Law, .
. . Sec .. 28(8)(4)):
,-
.
Law, Sec.. 28(8)(4)) ·

t
i··
>·
it·
\·
'}:.'
~·

"t
f-.,

..- .
Bt;:
•,
•..

/.
.\ .•.
(- ..
~ . . .. . .. : . ~ '•,,,-· ,I .· ..
.. ,·· ....
'

.:;·.

. . . ·.,:
...

. •,"

·. 2019.'SAN
.
SEDA LAW CENTRALIZED
: . . OPERATIOl\!S I Si..
 ·l·N-COME. TAX. . ,
·:SAN;BEDALA\'.i' CENT(!ALJI_EDSAR_DPERATl()NS-MEMORY'AID 2019

·t- . _··_G_R_·
. o_s_s_.__I_N_c_o_·_M_E.......,__ _.l.: them and donot by
redound .to the Law)
'taxpayer's ·
• TRAIN . connected
wi(h · income
production:
· · Income - , · , . . . . . ·. : benefit: (CIR ··v. Note: . . The (R.R.. No .. 02-
. I! refers -t? all: weattn which nows into the taxpayer .' E{PI, G:R.. No.' phrase "and/or · 40, Sec. 36).
othen than a merereturn of capital, tt includes forms ·147375, · Juh.e. personal .ar:id 2. Ordinarily the
on income . specifically .d~scribed. 'as . "gains and 26; 2006, citing additional .: · . . net income is
pro{its,.including gafns. .deriVedfromthe sale-or.other CIR: v. Touts exemption": fs · · computed ·
· '_; dlsposltlon of capital-assets (R.R: No. ·02-40, Sec. ·. .. Specialists, · removed in the · · based on· the
. ~6). :. . . . .. · · . · . . ·. · . ·.. : tnc., G..R. No. /.;- -deflnition · method of
.• 661°tf3, · :.M~ir.ch.pursuant to accountinq · ·
Gros.s.lnc_6nie .: . . , , . : .. ~ 21, ·1990): · . TRAIN.Law. reqularty ·
-All mcorne -cleriye<;l·from -whatever source, including . ·· ·· employed : by
.· but.notlimited to the· fqllbWing: (CARO-.;GRJP.4) . .'. '. · . the taxpayer
. 1 .. · _g_omP.ensatior'l; , . · .. · · .. ·.: · · : : . · (R."R. No .. 02-;
· 2·. 8nnufties; . .... ". . 40, sec: 36) ...
. 3. ··Rents;_. · ; . . . .. .. . . . . ·
. · 4. _ Qtvidends; ,-. : : ·.: · ', . . ' · , ..- · _ ~~~-.,.,;J:-b$.· enurneration' under, Sec. 32 · ,(A) i.s • not .
5. _§.aiCJS·~!Om de.~lingl:;· jn property; . ~,,:,t-P y)
ei~fyJflV.'i!s,."!:t)e,
f~JIO~ir.,g· are llkewlse inCILJded in the
.6 .. RCJyaltie~;..
.. 7: Jn~ere;,!s,. .
_ .. · · . .
. . ··. .· .
./,if!
f_·-<)
.f\..· .: : \ . : tax·~~yrs..9r~~s- inco.me: . ·
·r:'>:_~:.-b{~o.Jls.e.~~n\J€)_1
.. ..
darnaqes representing, loss of
.

~· : Gross·!hcome from erqfes~io,Jf.}t~~9:::P"' · . y1<!titi/sea111iQ!:J:capacity (BIR Ruling.026-2018,

•.. · business:, · ... · · .. ·1 ~~~c·:-"i".~-T""""""'agua'~~>iot-ai: : ·. . .
9. · f.~e-~and .winn_ing~_ . /j ,Q:"1/' ' · . . .m) . 'f _~·mistake .(CIR v. Javier, G.R. ·
2..-.w,AmOtf..rjt!.<:tc~~v/sJ
1,0. fens10.~s; ~nd.. . .. .
11._ fartner.s .d1stnbut1v~ shari from:ll;ren~t income jt·
'if: ··'f!I . '. -_.._· lf" 41~ .!&.No. 7~95~~tJIY~.:!./t199.1);·. _ .·
i'·~3. CanceJlat1on)~UJ'1(}.tfxpayer's lndebtecjness· on
.. ', ~f the gel")e~al profe~siofla,Epertfl.!:)rSh!Px~-(FJ]R~- . · I . . ~couJptof S~Jce.{Elfldered( R.f?:. 02.40, Sec.
· .

:. . Sef.. ;32..(A}-as am_ef!de.i bf"'"f.Rf.lf'!. La ~ ..· ~:.:.j:~ · 1 -~-?!e);_ ·

1 · · -e, t.~
· ·. · · · · . · · ·
. . :· . · . . .. .. i! -r4 11
• . .• fiJ'\.~Y{{Jiu"i/)ii 1 .. ll ~,,,,-J t . · ·.
Mean.ing o_f the· Phrase'fGl'b.~~ .I~~~-=- Not~.J@=_!Je ~ncellfon and·.forgi_veness. ·of
wh~tever_So\Jrce Derived"~·--n\ ·~\-· .. , ··~L"~l]. ~- m ~~~jl.e.ssy:ml;!ylpmount ta :a ·payment Of·
All income n_ot·ex_pressly ~xcl ~e~ oi"•{(_>.<e':IP.,t~f.tor_ ·. g~Jtffl}.f ·a _,ligi~. 'V51r. a . capital trans~cti~r:i. .
the class ·of .t~xao.113 ·m?~"'!. · _1rres~ecf\\i'e~~)r~.. -~E,Z.~~e~e· i:len~/fpon-,thj_c1rcumstances:--· ·., · ..
.. votu~t~ry-·or·1.~v?l!Jntary._.actio\of ..tl")~taxpaY,~)n_, /y .. ax2!5le rnc~Jhe:.-:-.ifan inctlvidual performs. ·.
_p,ro~~cmg tn.~·mco~~ and:re~ar't1Jess·d~!:1,~ $~~)JE1efn~ s~~V(Gesto,t'cr_editor·who,·ir'l,C?nsideration: .
of ll)Co.m~,. 1:s: t~xabl~- (Ban.co·-~,(?ro)"_~t5~~L~..,;~~ere~rS.,"1cels the d'ebl:to.theextent of that·
R_epµ~l!c,J~:R.No. 198756, Ja_nuary'1./}l2.!iJJ;-~ ~~;_,'\a_q;iq,{r:iy·,.· . '·· . · ':
' · · •, : . · . · ', . ·. . · . . . ·,·. · . S-.:... J :. i\l A 1\_~"Gftf:f 1f a credit.or. ~erely d_esires.t? ben~fit. :
·' ~ro~s lnc_ome.v,s::1:"a,,i:.able Ir:i~~me vs~ ..~~·,-a'°'. debto'. an.d without. any· co,:i.s1derat1on · · ·
. · . . · · Net !ncome , . · · .· · : . . .tl)El_tefore canc;eJs the ·debt;",the· same -need · ·
: not be· include.d [n the latter'.s gross income .
~cau·se:it is .an 'exci!Js1oo.under Sec. 3·2 (S); ..
·. or · · · ·. · · · · ·
.'r ·, '. c: Capitai'· .. ,r~nS<!Ctio~· - .if', tti.~ . cor~bration
· ••1 • All fncqrrie·;.·P.Eirtinent it~ms Gto;t . .'income·
. forgives:the debt of·its .~tockholders whtch·. ,
gai~. '. -Or pro.fit ·o( . . __gtp~s_.l~ss·., .. s.tatut'ory .
· · suqJect ··.. to ,lncom~ · . deductions - ··· has:the effect. of.~,n lndir.ect clividend (R.R.:·
02~40, ~ec.. 50).:. . ·. · · · .-.: , . ·
. income · ·~ax specified in tl'Je '(R.R .. 'No. 02-40; • ,.·'"·I
undai: ·Sec:. ;32· NIRC, · · less Sec. 36) . . · \
{A) of the NIRC, ,deductions,. if ·... . . . . .· · A.. Pay~ent -~f "µsurious ··inter~st; (DIAAAAMPAO,··.
· · sup'ra.at·6). .. . ·· .· , . · · ·. · ·.· ·
. . . ·. · any, ·. · · · .: .· Ne>tes:'
·5;,, lf!eg,i'· .gai~:s (e:g., ": gains · fro;, .. extortion
r,.iotEt:' _Gro.ss aulflorized ·for ,i .. statutory ·. embezzlement.,. . .Jueieng, . and . . gambling>'
income • ddes such types . of .. · - aeductions :
· nqf . include. income · · ..by · · are. · · · in . {f!IMMMPAO,s~pra _at '6),
.r:nonles . or NIRC '_or other ~ general,
. ·.. . ~ . . . . ;

· ,, reqei_pts . . . · . · ·special . ·1aws. . . expenditures· . · R~.asori: w~~ri the tai<payer"~cquires·_~arping~.

lawfully. or unlawfully, without the · consensual
entrvste~ to the (NIRC,Seo. 3·1 ·other ·. ·· than
. recognjtion, e:x'pr~?s'or impl_ied, ot an obligati011
·.taxpayer.. whict'J as .'~me11ded capital· ._
to repay and without r.estFiction as to their
do not. b.eloryg.to· . · expenditures,

• 8~ I 2015i° SAN . .
. . SEDA. l,.AW CENTRALIZED BAR
. OPERATIONS
. . . ·
 t-N·cbME . TAX
SAN BEDA LAW CENT~LliED BA_R OPERATIONS - MEM.OR'( AID 2019
)

.MNA
:.
EE &Fdi&S A C#&il

olsoosltron, hehas received-income which he is which thatresultis accomplished (R.R." No.

required to· return, even though -it may still be 8,2018," Sec. 2 (.e)). ' · · .' -· .·
adjuqged·. liable. -to restore.: its equivalent" b. The name by Which the -remuneratfon for
: (MAivfALA [EO,· Income· Tax,. supra at ·75/ services is- ·designated Is immaterial. (R.R.
:· .. ~ (1/9. "8-2018, SE!C, 2-(a)). . . .. . ..
6. ·T~x refunds __and. -bad debts· recovered to· the · .' ' ·•· · ·. : , · · ·
•.. extent ~( the Income tax benefit derived from ( Compensatlonf~r services rendered by
· -·ded.u9tibn :of the :tax and bad debts (please _see · · . an. Independent contractor, where there .:
the. · concept. of 'Tex · Benefit ·. Rule: under is .no EE-ER relationship, does ·not fall
~~- 'qedµctions); .. · . ·. . .uncer: .~gros~ "compensation lncorne".
f;"" · · 7. Sii~sidy for- advertising expenses (CIR v .. Sony However, : [t .shall · be. recorded as
t ·· ·· Philip.pines; lrtc., G.R .. No: .}786.97,:: Novomber · income from jrade · or business .
( '. . 17, 201.0)" :... . : '; . · .... ·· _.·. (DIMAAMPA-0, Basic. _A.ppro~ch to; .
-'!':. • . . 8 ... U~ut_n,~ed~ -or .e·~~es.s of the .carnpalqn - funds,' · lncome Tex; (2015), p. 30).-. . ~- · ·... .
;, -whlch ts tlis. ~xc~ss~o.f campaign contributlons . ii.. Amounts .paid ehti!:l~ as : advances. or
f,l ;:. ·. . , . · over the. candidate's campaign·
CASASOLA; $Upra at
235)";
.
expenditures (2 ·
. . · · ·
0
-relrnbursernent · .· for · transportation, .
: r-epresentat[o_n a'nd:.,:6~her :bona .. fide".
, ·9 ... Gash:., 'deposits:_ .ot -advances . received· by · · ordinary ". and necessary . expenses.
·.·. . _· taxpayers · other than. Gener-al ·Professional· .. Incurred_· in the. pe_rformance '.. o.f ·an.·
. ·.. ~~_rtn_ership?cover~d- bf R,:M.C., No: _.89-:"201~~~·.;;",,' employee's duties ar~ · not. ·taxable
. .(~.M.C.__ No.. 1Q·2~13) .a,:ld. . . 1 . . ·.. /t·,<;:,-/~_·z · · ·~Ompe~saUon iricoTTu~:. (?r;rly_ttl~ ex~eS~, ·
· .19. Pr~cee~s · of -Stqlen· or E;mJ:lezzled -P~op,~,;ty,.(.,:,::,\ 1f. _any, oyer . the: actual -~xpenses 1s .
. ·. (Unit.ed_ States v._ J..ozia;_ 101 F: -~upp. t~~9.:.i,-t;·~.. . taxable (Id... at 30). . ·. .
·. QCJDI\JY:, :1952; MAMALATEO; Income rax.,:,•···-,-,1~ ••-,.... . . . -, . • • • • • . • • ·
• supra at 75),·, .. · . · · . · -./,.~ .1.;j,~';r-~i~°'ef.l;llJAil.a~on tor services. unless. exc·epte.d_by ..
·
,. · · : ·.1 · . .
. · · . • .··~-::"/.:. 4-''.. · ..:,Vllf
. .i·· ··~' 7' .. 'l···· .
the--··s~t~.%· con.stitute~. co~pen·sa~ion . ~ven
.

· . N~t_e:\ltopined th!lt-unla~u!; ~s(~!.11,a~·iawt,.yfr;::ii. :...

, .gam 1s co.'T!·prehen_ded.. w1thm.·tli~j·:lefm.. "gr~s·-:- f\ :thou_gh.. ~'l'i_he .time· ·paid _me relat1onsht~· of .
_.er;nployrtt ~aAd employee·. no lo_nger exists;-
·... · inco~e·.{.Jaf!1es: v. United Sta"tf)t.?-6.~·;t;!fs?'213, . }, ... ·. -l;>tatweefn-1\h~\ person !P.·. wh<?.s~· employ the ..
· ··.May· 15; 1961; . MAMAl_f:T:..£;0, ·1n6q./nin.~Tax.:::!" .;~ · s~rvi.9ls -.y.ere~~~rfo~med·and t~e individual who·. ·
. · supra at 75). It i~ ~ca~s.?1tie·meyl'l'Y.- or ~ther'~ J)1,l .. · . P!~W~!tl(.them~ a_t354). · . . · ·· · ··
..... _ _proce.eds:-of the sale or(1~1sposf(IQ'r.:i-<~pfs't~l~,.n ·r·,:,1 ":'.<,:1-:-;_1i,f,l~.'~~1;\' . . . . .
. , . . · · property. are. received? un~c a.~cl~i,W.b ?f d'IQAl .. i•f .va,1uati~n1~U~nt bf_ C.on:ip~nsa.tion: ·
' ((!r'lite_d."· State~ \I· .Loz_ic~, .-··t'()~ffj,,:§upp.. 31,~, . 1;1
~f .payr:nel")t-_1s _made in:, · · _- :
DCJ.DNY;,1952),_ .·. : . · . .,~. ·_: . \'\ · , · · 1·¥:-;-1:->.r.".Cash-full .a_mount_r~ce1~ed; . ~ .... · . · · . ·
· .. : · · ·. · .. · · · · · · :. · . -f~..,_;/1.Y· .· .:_
....)iW~-t.!>!·\~~~an cas_h~f-~urmarke_tvafy.Je(FMV)_ofth_e .
· ' . · · · · · · · . :. . ·. · .<V: : : · ,;4:::::=-:-: ...... ~ll=lmg'-·atJ-the· time · of payment or.· rend~tion of
.· ..< 1-TEMS:~F:-G~oss ·iN-io)\4:~~ i,:er:vice-. . . . . . • .. ·. ,
. . ... · ·. . .:... · · .. ·. · ,.. .
. · .. ~~~ · -Note: 1F.'uie .servic·es were ·rendered .at·. a
... . ·stiplllatf3d ..orice~:in· 'tbe·:·abs.ehce. Ot:· exlidenc.e.'tO
r. co.nip~rs·ati~m ·. . ~ . : .. :-· . . ,. -the contrary; such pric.e wi1i" be pre~umed to.be
.:· · :A11. re_rn_Lin~r.ation.for ~eryic~,s· perfpr.m~d ·.by·.an the fair val Lie of..:the.· compensation ·received:
·. !:!mpl,oye.efor·his er-nployer:upo.e"r-a.n· employer~.··..
· : ·employee· -: (ER~EE): ·reJati:onshJp, · · .unles·s ·
(R!R;
..
N~-:
-Q~:40, See.: 41)_. . , . , · _... ··

. . ex~inpted ·unsJer NIRC (R.R. No .. 8-2018, S~c• .', ·· .. ·3) Pr~missory note. or othe't )widence of
... · 2(a))... .. : . . . · .. : ·. indeb"tedness...: ·' :- . ,. .
.. · ., · ·. · .. . . · · . ···.a) ·.Noldiscount.ed~"F~ceValu'e . . . .
.Te~t · to: · Det~tmi_ri~· ·whether . · income ·fa . ·. b) ·: Discot.inted:·.the 'fair discc;,unt~d value :of the
· · Co!llpens"atjon·or: No.t: · ./ : . . . . : .... : ·, note as. of "the. (ime of re,ceipt .·ahd the
· a.. Whether such Income fs:r-eceived. by. virtue ·. .employee:-· ·shall··· also ·, record·. ~dditiori§!I
· _: : of-..an· ·ER-EE. re(atioliship (1 DE·-.LEON,; · income 1,1po·n .the:.recovery··of the discount
supra_ at"353),'. . . .. · . ~-.-·· ·.. · .·· . ·.. , (DIMMMPAO;-Basic Approach to 1n·com~
· .. · · · :Tax,. (2015), p.~1). ·.
. Generally, an ER-EE · relatlonship exists
when .the pers~n . f<;>r w110m_:· servic~s are 4) · -Stocks ::-··FMV.of thE! stock. It i~ to~be.t~eatf:3d as
~- performed.has the right to.control anq dfrect · if t_he q9rporatiQn solq .the stock for the _m~rket
tl:Je. in.divid~al who performs the s_ervice, ,nQt . value and" paid the employee in:cash; anq
only_a.s tothe re~_ult to·be accomplishee! _by
the . work
, .. but ;1lso. as·to· d.etails
. anc;l
.
means·
. by .

201~ SAN SEDA LAW

.· . CENiRALIZED.BAR
. OPERATIONS-I
. . a3.
. . ·

.. -·-----------·
 .I N·C,O.ME TAX
.SAN BEDA LAW CENTRAL!ZED_BAR"OPERATIONS ~ MEMORYAID 2019 .

. Note: In· case ofa stock optlon.jthe difference · e) Director's fees - if the director. is, at the
between 'the FMV of the shares at the time the same time; an employee. of the employer-
;option is 'exerci~fed ··and· the ·. option price : . corporation (e.g., President of a corporation
' constitutes additional compensation income to .. sitting .as. a 'member of the boar.d of
the-employee {Commissionerv, Smith; 324 I.AS... directors)· (R:R. No. · 02-98, sec. 2.78. 1,"
. ·1n; DIMAAMPA.O, Basic Approach to Income R.M.C. No. 3'1-?00_BJ; and ·: ·
Tex; s1,1pra :at 39). · ,
. .. . ·. · ·: Note:.. Dire~tor.'~ fee~ 'paid to -~n .individual
. 5) Living :·quarters. furnished in addition to cash . who is. not .an employee of .the corporation
salary- the rental value of such ·quarters (R.R. ·. ·:: paying such foes (f e.,' whose 'duties are
No, 02-40, Se~s.41:-42):· . . :. · · contined , to the. . euenaenc« -. of · and
Com~nsatl~ii Income .intludes: _ .PE!rli.cipation in: the me,etings of fh:lfr, board of ·
. .a) .. Wages ...:. 'means all -remuneratlon . (other . dire<,tors) are not. treated as compensation · ·
.. · ·:· than . fees. paid. to.
· ·· · • ·
a·
public" 'offlcial) :f6r · because of fhe . · -absence . of ER-EE
·· . relationsblp, ·. but' rather.: the same: shou.ld
. : services [5erformiJd' by an employee for his . squarely fall 'as groi;;.s )r1come· de.rivec1'-fr6m
.·.·~ : · .' employer, including the cash value of. all · the· coriduct-oftrade or buslness'or exercise ·
•'' · remuner.atlon paid in any medium other than · · ·
cash {NIRC; Sec. 78.(A));- ' .. ', . .. of aprofession(RM.C. [Vo.. 34-?00(3). · ·.
• ~ • '' - • '.- . '

·. Note: l~·does not include remun~~-tio'n;;paid ·

·.- folrth.e following: ·(AO-CaS)
• ••

~ -c . ~~ •
llLJ . · ~V
::;::l'"~A..'"::::.",:~~

• ."'-
' • I . . ·.' '

f}.;. ~r.i~e· benefits_ 9ran!e~ .to ra!lk-~nd-file.

lmplhve:e._However, fnhge_bene:1ts_g1ven to
'. . '

·· i) 8gricultural. labor paw?. :'~pf~-~JA-----="'=~ J.._lfa'1~2~-Ql~employees may be incladed as

... • · , products :of the farm fR~e.. \ttEJ:)at'oris · ~~ · ~'p~~of,,-th~1~,ex(;}mpt .1.3~.. month pay and
. V/'-??"q.-
... perfouned; . ·· · f,...,.
ii) Q.omestic'service,itfa.ArNj>e hare; r- I:· x . er:~~e:,~~-
<Jt ~~~{. u_p to . P99!. ooo since _rank-
a"'d-fiff?.-~1,glo\tes,. u~hke 'manag~nal :9r

'iv} §erv.fces'by a :cj~j~~,·

'iii) ·casual labor notfn th~c~ur~ 'of th ·. --~:
, . employer's trade10,r~.b&s1otss;a d

Pbilipp1nes. for fo~e1g :govsm.men~'r·;-:' , ~"f .....t.: we

I), . s~~ervt?f~;:empl~yees, are· not' usyalJy
{'~~ er:?_.~Ued t~f{!_~\penefits (R.R. No. 8-2018,
resi'!,e~t _o(t.tt.~..:...,.~!r. .. . ~~!(- ?Jf}h ~~\\·: ' '
ifi,5,-: receive~ _ b. astors from
' .. j
i'

1,
!
. an'. intem.ationa .,Qr~a J;zatiQr;i;.\{NJR&,\_~ ~. . ~s~~ral nilr'hst -'f!31R. Rulmg_ Np.· D.A:-214-
... :sec.·7B(A)). :·.: ~1 .:: (:1 \l\.._~~ .~""-~6).~iJ/il!5;~2006_f .· .. · .· .. : .. ·.
' . . .· . ii. f If)\\.
b) Separati~·n pay·- !~~~bl~co~pein·s!lR._.~·~d.
"\.i?\.'\._ ~' 1 ll'S~f : '
!--;:,,iJr../!
.rg9_~.
?J. ,;. iV
'i ~~1·}( : ' . ' ' '.'
is ~~~t to ·.income_ tax. ·~nd ...
: the s~P,"ar~ted official_ .o~· mp_lo~ee.~ ifr-i'tl;ie~J.~~~f hol~in~ tax).JE.very.:orfl'1of c_ompE;nsat1on- . · ..
. ·.-- . · cause. of the s?paration_ s·with1n~_he .c ~Jfi?'~~ _Y' 9r peri's._o~als1~"Y1ces 1s taxabl~, _ rega_r:gless
. ~ 9f· such -·official· .or .. ·eryi-loyee· t!·"!'.tbC[f:NT\~ ~~$w 1t 1s Eparf'!ed, by.whom 1t 1s·pa1d, the ··
/ · · ··.f~ITlploy:e··~s feJjarat~<!-'!n~r-:.a_;'tJ9 aata~~l~el~Y.,..lt<~c~ it is de:>ign~t~d. U1e _'!:iasis
. · : separation program of the em~~~:)·~ · ... iQ..P~1WJ;)1ch.1t 1s determ,n.ed,.or the· form· by
· c) . Retirement benefits-,- taxable k(?rA~r,ts~in. ·1\/fA"'t-~)?l"'l:itgtl'ffis.receivea (BlR Rulln_g./jo,.DAr214- '
. : to the ... r~tiri.ng officia! ·or emp_royee.if·'.:s'~ ~lf;April5, 2006). .. . . · .. : .·... ·
b~nefits"were .received PY a.i:i employee whp ·.. """' . ' .. ·. . : - ' ..., ... ·. . ' . . . . '
. fa.il.s.to mee_ftlie rninimµrti"requireroents·b(r;i · . . . ~~ Annum~~. . . . ·: .. : . .. . . · : .
. ' r~aSOf.l":1.bJ~-privclte benefit. plan under :R:A: ' .. ·:. . '' ' It refers.·to .the periodic inst~nm~~t pa}'ments .of
·'. No. 4917 (An Act'Providfrig that Retirement ·. -· income :or .. pensio.n by-insurance companies
. Ber,f3fitsof Empioyees of Private'Firni's shall . a-
. . · di4ri.ng··the· life of. persqn ·or· for. a gua~ant~ed
'..-not.. f?e . Subje·ct ·tp,. A(tachin~nt,. : ievy;. · _fixed : peri~d :of. ti_me, : whir:;h~v~r Is.· .IQnger, in
Execi:Jtiofl,·or any. Tax·i.-/Hatsoe·ver):or R.A.. " co.ns\deration of.capital pafd by him . .It is paid .
·Np. 7641 (An Act ../.l.mff'Jdin{j A_rtlc/e ~87_ of . ·.:·aF1nt!<;1lly,' .mo~thlX ;or periodi,<;:~lly,, d9mp~t~~· ..
P.D.,· ·No. · 442; .. as ·amended;. otbt;Jrwtse · ·.upon·the.amount.pa1cfy~arly,.but:not nec.ess~rily. ·
known as·the Labor Code of the Philippines, for, lffe (feralff(V:Aaditor Gen~'iral,·G.R.. No;· r.:
by P.rovk/ingfor ReiitementPayto Qqalitied. '8_480!"1_arch 29, 19?7J:' ......
Private·SecJorE"iriployeesin-the Absence of · ·. · · · · · ·-
. any~etireme.nt:.,Plan in the' Estaptisfime;ft) .The anr:l!:.iity pi;iyments 'reRresenttwo p~rt~ t!)at' . '
(please r.e(er to· discussion-.qn·:Exclusions are either taxable-or riot taxable. . . . . ·
' .. ':' from Gi,oss Income);'· ' ' ' .a: NotTaxable .,-:Return of premium',;',and'
. "d)~. 1'46netary ·benefits·: .. (e.g., ...bonus~~, 1?'h· · · · · · ~ ·-·. · ·
month. .pay) in excess .. of the P90,· ..000. · . ·Note: Life insura.nce annuities are ex.eluded·
tt,reshold. for ,. exclusion' (ple'asf) refer to from Qros.s if)cm:ieJ(IJJRC,See, 32 (8)(1)) ....
. . :" 'discu.ss~~n· on Exclusions· (rom Gross
· · · 'Income);..

·84
' -
2019 SAN BEDA LAW CENTRALIZED-BAR QPERA TIONS
 'IN.COME TAX
•'SAN·BEOA 'LAW (;ENTRAUZED BAR OPERA.ilONS~ .MEMORYAID 2019
t!'i 1141 iii · : · · ttkff:t.Ma w · wae
b. Taxable .; Return which. 'is· excess over -lt is applied .. ((0/MAAMPAO,
Basic.:
prernlum andinterest (R.R. No: 02-40, Sec . "'Appr.ba·ch· to Income Tax, supra at
. 62). : . . '50). . ' ,•.
3.)' · If the. ·security deposit .is to ensure
llh.ist~ti~n:. lvlr. A' ~l!rchased a .life an;.:\Jity for'. contract compliance' (security
P500, 000 which will ~pay· him . P120, 000 per deposit With acceleratlon .Clj:IUSe),. it
· year.. Assume that lhe life expectancy qf Mr. A is not income to the" lessor .until the
is five years, .: reckoned from 'the cfate of lessee violates any provision of .the
· purcha~·e.· M·r.·. AV:Jill receive· a total df pefoo, .oo_o · contract (2 ·CASASOLA, supra at
(P120, .ooo per .year x 5). ·Put. of tbe P6.QO, 000 . · 2221- , . •, , . .
to.be receivedby-A,·PSOO,. COO.shall.be ex.cludeo. 4) Whether an .aqreement which in , · .
from gross il)cornc:i as .it"represents the return· of. . ' . :a
fem,' is' tease.' is iri. ·su b$tani::e a . '
· premJums paid .wt,ile the excess of. P1.00; 'ooo -~ . . . . . conditional sales contract, depends ·.
shc;iJI. be tc;1_xable,., · .· . UpOI'} · the intent' of
.the: parties as : .
, . evidenced bythe 'provlslonaof the.
· 3: · Rents aqreement; read in ·the light of .tlJe:
. The amount paid fqr · the .use or lease or · ·. facts and .clrcurnstances .existing .at .
enjoyment .of a property; whether real or . . -:.the time th~-. 'agreement ·was
. personal property, · to· the owner: of the property . . ex~.~uted:(i Dl{.ON, supr;a a't 52J} .
. (2 CASA_SOLA, supra at 220), · , . ·. . //;\ . . . .
. . . . . · . /vr.;·1{ ·· Nofe: The· differe~t treatment for
Scope; ·All rentals derived .from leas~(-=_qf/ ,.t''\ . Ieasesand condltlonal sales:.'
property, whether used ,inbusiness pf .not,k~o.ifi,~-:'.;:~.r) . . -a) Lease: the arnount pald far the
real__ <?.r .personat- property, sarnlnqs . J5qw·:;,-xm.;.,.,:r-;,. ... · r.:; . ·.:
lease shall ~e considered part
C??PYrl9flt, , trademarks, _patents a11d ·· ~atuf~: /l"~t:'."~~~~};..s ··of _th_e_~ross income. . .
resources under le.ase, It includes: ~ · · ,j H · . .,
·----...<l--]:\ b) Cond1tlonal sales (rent to own
a·. . Agree"d amount pet· month' O~(~r'°year; . {'wt" .' .
j1Wt schemes; etc.): this ~will be..
b. Obligations of lessof'to,th,ird~:p_ijrtfes_~nJ~--·-g. . · /J(
·'\\· · treated .as sales hence, _the
. the l~s.see undertakes .. _19-;Jay!'c;~.further ,~\ .· .. . ... 111l · \ .rules on gains from the sal~·of
.. ·c?.nsid~ra~!,t>n ofthe IE;_a~e:!,su_e~i~~~I_DI)~ · ~f ' /·· ~ \.
as~ets. _will. apply, and_ tht:se
. -[: : Beal ·estate.taxt~o.9l~~.8~preru1ses; · ~:< -: .ll · L_.,.,:ga_ms.w1Ube tre.ated.qs_1nc9m~
.. 11: !n:5~r?ne~ p~er:nt~?1spa1cl' ~>Jt'ilsS~e.P.P . j{•.t
: . · polrcy covenng le~e_d QOOP~1¥; - c-:;,it · !"'~. . . · ~·!~n
·~-~~1~,~-~JRECAlDE;· supra at ;302-
·
..._.~n'~rtl:J.'t..v-" 303}. . . ·
!'.
I
l

·. m. ~~~t~~1;~r~·~r1es'l~{~~~i~~n:·1~ l(T.~~ . . ·:. ·. -:-..· .· · Whet~e~ an ~gi~emenf:.-whic~·

. : .. lieuofrent(USv. i3ostbr/;tr1,_.R-..c€o.,.279
.... US 7.32, June' 19_29,,cit1rf.lf·W~~~~tffriif.:!.J,.:.;...;~'!.t1J..f;~t"f."f:;:;
. ·.Railw.ay.~o, v. Malley, 2}/,f}f,f:-.9?.!S'}~,t;Jnd
iv, fot~rest, p'aid · ~y ·.iessee '\{q}'tld1er of· .
. , ·... bonos : issued· ·bY'· les~or::co}poration_, ·
.. . . )r:islead· of',re~t. (DIMAAMPAO, Baslc. ·
_Approach to:lncp_me-Tax,'.stJpra.at 49- .
sor ' . . . . ' . .. .. . ' . . -.:·
- '.
,. Notes: ·.
'; ·-1)· P.repaid."or-advanc.erental·is:taxable
incomE;l: ~o the 1e·s·sor ·in the year ,
:. · ·.r1,3ceived, .if- so receiyed. _under · a ·
. claim of right and .without restriction··. :.
·, as tci i,ts u.se, regardles_sof method ' .
: of.· · · ·.qccdtinting. · employee;!·
..
·: .· · (DIMAAM..F'AO, Basic Approach to..
·-
»,
· ·lncoine,Tax, supnia(50}'.,. · . ·
2) . ·Security deposit 'i~ not taxable as ao ·.
advance· rental.' However it is:-'
· ·. taxable if the .1eisee . violates any .
. .. , .. . .. provision of the contract: When. ft is
· .' · ·. · ·. · ·.. applied to .the.rental of the· terminal
. ·· · · ·rnonth or period-of contract, it must-.
' b~ rec~nized"as inco~l'E! a~ the ti~~
·.l:~·;~~;i,_~n"" .:
in ·form is ·a le_ase, is in
substance·a·.cond.itiona! sale~ .
con.tract· dep·emds · upc;i_n the
·fnte:nt of· · the pa~iesi . a_s
- ·· e.vkjen.cedby·the, prov_is_i5}ns of._
." the .agreemerit, r_ead· 1n ,the.
.light · ·of tl]e. · fact ·a"nd .
. ' cir:qumstances;' -NC? . general-
. ·. .... · tule,". appli9able··.to all_ · cases ·
. · can 'be laid .down· (f?EGALl)E;
supra a('$02-303). · ·
Op~r~ti n_g · Le·ase: An .. _op~ratjhg . lease. i~· a
contract·un~er:whicti: .. · .. ·:' . · · ·'
. )a.i Th.e..ass.et'isnot'wh.olly·amprtized duting the.
primary,p~r[cio of ttle 'lease', an"d ': ·. '. .·
b. Where.'the le·ssot do~s n'ot rely solelyor:i.the· ·
rentals cfuring' "the primary" period· fo:r. 'his
prof.its,. but_. looks for. the recovery 'of' tt,e '
balance·.of his costs :and for ttie' rest.of his - .
profits . from. tt)e ~ale : or: re~i'ease 'of )h~
reru'rneif as~e\...of. tt:ie primary. lea~e period . ·
(RECAL[?E,supra.at297·298). . . _. .

· _201~ SAN SEDA LAW CEN1:RA.LIZ~O BAR OPERATION$ I 85.

.. .. . .

·-· -·-··- ---------------------·

 ·IN,COM-E TAX.
SAN BEDA -tAW CENTRALIZ'EQ' BAR·Of?ERATIONS -. ME,M?RY ,(vD 2~19
1¢;; N@ Ai ¥ I FffWM G iitS iA#iF 1¥. ff

Note; In ~,{ operating lease: M.ethods of Reporting lric~me from.Lea.sehold- . :

i. · The. arnountpaldror the·use of property Ini.provemeots·: . . . .. .
... ls considered · as rentaf income whlch . . Wh:en ?1 buildi.ngs .are er.ect.~d or- improvements ·
form 'pert of the· Gross Income of .the rriade by a . !es.see · .In the- lease.d .·.premises in · :.
lessor .. · · · .. pu.rsuan·ce of an .agreement with the lessor; ·and ·
ii. .. .Thelessor..may deduct all ordinary and : th~ ·~arrie 'are ·riot subject ·to· .removal . by the
. necessary .expenses paid . or incurred. . . lessee, the· 1ess6r· .may. f'l .·his opt!on: report the· .
· ·<;iurin.g· the. taxable· 'year. which are . income. therefrom .. upon· ·either-' of .the ,following ·.
. ·. attributable to tbe earnlnqs' 'of. the ·.· oases: . (. . .
. 'income.. .. . .
iii, Lessor. may clalm v.an allowanceTor i. .. Outright· .Method,'-. recogniz.eQ 'as
of
depreciation ·. the: -leased property, . . . . income to l~s};or anh.e tiri\e·wh~r:i such. .
. whiGtl· is tobe .'c1educted from Jhe gfoss. ': · · : ~ buildings or- .. .lrnprcvementa'. are.
income. {ld_f · ·.. . . . : . .. . ·, sompletedat-fatr marketvalue; Or ;.
. .-... . .,. · - ii" Spread-out }f)ethoc;t .·._ · ·the·.' lessor '.
Fi~ance l;ease.:.Afinahce leaseor a full payout- . spread· over the·. lif~. ·co-r remaining .
. Jea.se is .. a. contract . cheractenaed by . the. · ·pe~iod}:. of .. t~e , 'lease : .t.tie ·: estimated ..
following: /· · . · ..- · .. · deprecletedvalue.ot.such buildings or
. a. , The·. contract -rnust b.e a .. non-cancellabl~:.._.,..-- ..
-. · .. tease: .. ·
b. · ·:he
·
lessor: ptJrcra·ses .the pr~®
. .• .~J:f:P:~~
~bthe i · .
r3·=--
~;' :
l\/· r "". . .' improvements. at the termination bf the.
..,"'-',_lease ·ana .report as·: income ·fQr' each· .
~e~oft)ie1~as.e,.ari-a11quot partfhereof .
. instance of.the les.see; ,,.f":~~),.. 1;.. ~=--=-~ -!! J.f(R°:F(~o:02-40, Se,o. 4.9).· · . ·. ·
.c. · Tbe-ooneloeratlon tpr·the.f._aid.prl~~is .": ~~~.;~./~. · , .. :. ·. •·
.. : ·th'e: periodic.p'ayment bytine:f~A~o'f ~~~~=w£"'~H1.1.§l,r~1.~-·~,(~.leased_~isrand ~o·~s. Y:fqr
f ·· · .
. . amoun.t 9f. money; ·
d:·: The. ·:periodic le~~e/payrn¥t ~ust
·
.11'.Q""I --:/. ·
sufflc1e.nt to, amort,z~!f:e!..:'ea;t.70.'%, o.t ~e
oe · ·1·\ · ,·
1J;i} ·w t!l~e~ (3)~~aJ;ili 1t, was ~t1p·urated that'.-Ms. , Y.
~~ha!I ~o.~st'l/:1Qt a;_g~taing thereon. TIJe.~~)lding _
, . ~l~mp1.~l~t1.jUt\~ end .of.the·1•1year·ofthe .
. ' i:,u~chaf~ pnc~·· .9.r.agq'u\~Jtl'<;>n·.c~stfioveLan ·. · ..,.,,., .•e.~se'.~lt h~s ~,~f!IE...~~[ket value.~f.P·1; .500, .~oo·
. ' .obligatory·.P.enod,:of~r(<fr-ieHs ~hanltw.0.'-~1-,? ~~nq ar·~X~ec.te'd·l\feto/five_(~) year~.}n·.a.9d1~1on. '.:
· years;- . , . ,. 1~ :4.& Y \. '£~ .do, th\1', anr:ilJal~rent~f~P50: 000. paid by Ms. .Y,
e-. Di.Iring the period ·o~ IEira~~.~thE!(Te£\e h~s· ·· ;-c:;1 M(:;..t;~!,9 re~ort
1 tife~Jvatue·of the impro~ef!1eilt
the riQht to-. hold a·nd\ us~·iJtt prf~tW0"itl'lff? I~. as,a Ell ~~)l(~C~ri) : In reporting, Mr. x may
. Jhe right to expense-t~?..Jeas~e.nta~~(to~ ~9M ·~ el:»~e!l· tn'I~ two l!lethod~: _ '.. · . ·
. . the !e.5.so.r, ~s .well· as-. o.ear\.the\:~~l':'.' ~n~y.
.. repairs;· maintenance\. ·insurlil,Rce,"..~Gf''"-!.>..-~lfl);i~~r.~~.foutrrit~.t
f . . .. ;f' .. : . . ·.. . . .
.M~thod, Mr: X.sh?II report
' .. ·...

. P.resarv.ation of the prope11y l~c;ise~.antF".§~·~r\11bJ

f. · ·At-th~·epd·ot-th~ leas·e cont{:act,·~~e.~~lfe°'le~.~ · · '·
Pv, ent~re 50 ~ OQO at the end oqt,e 1st year .
· · .·-. , : ; ·· ..
·::: .. has ·no qbligation :~r· option ~~uf:cn~~ ~~ : "\~\·'\,...~~.: ·. · ·· . · ·· . · -'
. . leas~d·. po(ierty . from the ow.iier:~s~,;,r ~ ;f J\ "zy&tJ~fbUiiding ·.. : - · · i1.
·500: 000 ·
. . (RE.~AWE; StJi?f{;l/Jt.301.:302,3~4;).~•.~..,,_0.,,., ·J,.'V!,·£:;;'~:.:.
·: ·. . . . ·., . . '. ' .
. ·,. · :. · :-. ,. . . . · · · · ·. ~-= · Add:Annualrental 50·000·
. · Note: ,1n'.a·flnance. le~se: : · . · ·- · · . · . . . ,. · . . • . . . . .' . .
. . · : f .. · ·it tf-l~ agre~rri'etit'is°:considersd·a·finance: :rotal· lease 'in.come .. ,·..
.. . . P1, .550, ··0<>'9_- :
. ' .·.; lease,:. the: ...;periodic::: :payl'l'.]ents .- :are . -:--
.. ---y--'-...:.:...- . ·,' .
.·. . :·cohsfde.red rentals. : · ·' . . .· . · :·N9te:-'lt..shal1:'..be .Mr: X ·who.,shali ,:'eop~d a~~J·
ii. · .Fel'r. VAT' purposes, a finance. lease is· · - . '· ... claim the depreciation of the builcling. ·· .. ·.. ' . .
· t~xei!·Hke an operatiog lease ·(ld.)... - , ' :. · · ·· ·· · · · ·

. ln;~~e. f(oi:n l.;:~cise.hold .irt,pr6venien1~ ·. . : . '. ..

·wqen :the .. Jel?se~ ;erected','or t>uilt pernianebt:.
lmprovements:·\n th~ leaseg property. whjc/i Will · ·.. ···:·, ..
·-.. ·b,!3COl1'l0 .. ll::Je.. prOJi)erty ·of ·~he:' lessor.; up0n '.ttie· .. . . : ~·
. exp.fration.' of Jlie lea~e. · .the ·value.· .of· the .. · ·
·· ·imprqvem"Emts should b~: reported~as· income of
. ·. ·· the less9r-(R:f:?:_ No_. ·92-49, .~ec. -49f.. ·
..
: '. .. Note: No . i'nco~e · a'ctrue·s.to the :le~sor if the ...
.'1mprqvementi{ ·ar-e subjeet to. rempval. by t'1e. ·:. ·:' ..
lessee'(D/ZON, Q &A ir.rTa:Xafion,(2006) p:136).
• • • • • J •

86 29is·sAN BEDA L:AW CENTRALIZED B~R OPERATION?.

. <
 . . I N:CO.M·E . t-AX
... MJHltiiPM-
SAN OEDA LAW CENTR~tlZEQ'BAFj"OPEAATlpNS- .MEMORY AID 2019
. P, 0--Wi? SA .g MWIMMiffPiiAW
; .
.
MiMtkW
·;
ti!OiYl';~K.·A

Under the !?i>read-Out. Method, Mr.. x· shall NRFC -gross rentals, lease; FWTof
report an addltlonal income of p450; 000 derived arid charter fe.es of foreign 4.5% ·
as follows; · . . . . . · ." · . ; vessels (NIRC, Sec. 28
(8)(3)) ·
· Val~.e of building '. Pf. 500, ·ooo ...
t.ess.Accumuleted · (600, 0_00) ·. NRF:C :.gn;,ss rentals, lease, ,FWT o( .
depreciation al. the end 'of .and charter-fees of aircraft, 7.5%
the .lease_·(P1, ·500;. 000/5y_rs.) "machineries, and . . .
x.2 yrs. · . . · .. · · equipment-YN/RC, Seo•. 28
Value of improvement at the 'p 900;. 000 . (~)(4)}.
endof the lease. ~· ..
.Divide: Remainin.9 term of the· 2 (yrs.) : _· .. :RC- and pc (NIRC; Sec. 24., Normal ·
lease . . . . : ·. .. (A)J1)(a); Sec .. 27 /A);.Sec. income tax
. Arfi:rual·inqome'on leasehold .. · · .. · P. 450,-:006. -, '.·· · ... .~2 (A)(5);:Sec. 4~ (G)(4)l '. ,raies · ....
. .improvement" . : . . . . . '.·
Add:.Annl.Jal rentai · · · .50, 000 NRC, RA, NRA·.ETB, N~~ · "No.t subjec]
.:T_ot;;d le~~e".inco·me· 'p· -, 500, 0:00 NETB, RFe. NRFC (NIRC,· . to. lrtcome .
·, . -~ec. 24 (A)(1)(b)/.Sec. 28 . .tax ·

lff6; ariy other reason than a b(?J18"fide:pU:rcha~e

from .the .. lessee .!)y . ttie ·-les~o.r, the.. .. Jeas~-v~S,;(),{
_.,. :.
>; . ·.
:
(A) (1); Sec. 3"2 (A)(5);.Sec.·
42. (C)"(4))•..

te.rminated,- so that the· _lessor.· come~ ;J1_1.t0j:l,,\ · · ·· ·

( ... possessien or control oqhe·p(operty prior .toi).hfut:!•:••\ 4 .. ,Diyidends .. .. . .
.. ' : time. ?rfgir:i..ally. fixed for the.. tern:,ina~on otiit~:~;;~;:~:
lease, the le.ss?r. _ shaJt recegnJze, mc<;>_,. qJ-e~.:~.fi:i,;:'.:.:!:~w~r.~tq?f-P,W~
L_.;
Any dis~\~Uti_?A _'ma~e by. a cor~oration 'to its
. out Of ·the unrestricted retained
.accordance wit.h the tollo~iog rules:,.....<JV .. \~, ·if ·
earr.urigs~I.WY.able_to·its_ sharehol~~rs, w!iether in
· 1) . T.he ·p,m~unt of inc()_m.e.1,.~~a)I '.be· t~~~J: . : ~oney;:J?Y~f{erty or. stocJ:< (NIRC, Sec;. 73 (A) as
d1ff~rence betweeh . · , ',;,\. /( . ';".J.·l,;t · .. amendt;rp;Ftf.....fRAIN Law). . ·
. . .a.· The y~lue·.of t~e._bu!J.9jhff~~Jb¢'tiffie
. : ot the pr&.-te~mm~!}Pn~of tlie~@:liltract; ·t.';.
J~~ .- ... · /! ~, Yi, .. ·. .
· 1:he,l:$'x Coo , mposu:ig.tpXo~ d1v1dend income
. ·. _- • . . .
·· ·
· ·
'. and . · · ·.
· ·. '
· ,/f"·
, ...... -.1
,.-._.,~\J. , .=.~ ~- ,i'I'
?, · .... l,1
. ·. refer/ onl l, to sli and ro ert dividend (R.R:
. ,., ~ . "\
. • ,b: .• The . amc;,unt ',1alrea£ly_.· ie"florte~·-
1, f
.. as r1~1·.;
~t>-
· N.q_r'p/l~cik;:7."''f-v
· ....... ''.t,,ff;,i:<;·~:..i,,j!T
1• · · . ·
. income on accO'l'lnt_!?q~~Qfodugti-91)1 l'~-1 · . · . -~·!t..WV- .
.. • ' •/ ""'
·· · ' ·. . :. ·
of such property-~;- 7'\·~- , '!!. ·: tPI · )t alsq~ does not cover liquidating dividends.
2) .N~ appr_eciation' in v_~!u.efaue:tq:"cauies·· .;1{.:-v. . . Howeve~.,-:_the capital gain ·or.·lo~s ·derived.
other ·than·. pr!;!mature terlT\)'}ic.1iiqofof the . t·~~;.~-i:;I!:!er;efroms!iall .be ..subject to the regular income
·1ease . shall be. induded (R:1ff.~MJ._d':!~·:;.1:.._;t:1. :{ttwiiff:~(F?,'.R.._'.No. 6-2008).' .
. · · -sec . 4fJJ. . . .. ·.-· · .- ,.~(,. .·. ·-r:R1· . · . . . · .. ·. · · . · . · · . · .. ·· · . ·
·~~~.·
.·· . : ·. · _: _, ..· . , :-'t~~~l . · · ~«:>te: _ l.Jnder Art.·· t1 :,{~f of th 1~: RP-U~ Tax
,it , .. Tax Treatm..{3ni of l_nco'rn_e.R1;!~41.iveintom· ... Treaty; the term· ., dividends . · s_hould be.
r~..·. - . ·.. ···Leas~.of P,r.operty· · . . ·understood according· to_ the taxation law·_of the
·. ···. · · ·. · . · :. . State in . Which the. ·corporation · making : the . .
. ·. - ... : distriblltio'n. IS. a ·resident (C/R->v,.·· ·GdQayear .
.
~ ··· ~ Philipi:,ines, Inc., G.R. No! 216130:· Aufl.ust.3, ·
( -201.6) .. - · ·. : .. ' .. ." : .. ·. · ... : .. · ·. ·
r RC, NRc·. RA::NRA~ETB,· · N~mal. . • .~ • '>
T~.al:iil~y of Stqck Dividends. ·_. :. . :. ·· .
• ; •

r-' · ·. .
f:"·
~(N.iRC,Sec:.24(AJ(1); ~ graduat~i"d .
I".
25(A)(1)-a~rarriend_ed by_ · '.i11coine tc1x . . "General· Rule~ .:Stod< divLdends are aot tax.able
. ·'·~pplyihg the· Se.ve.ranc~Test) .
~,..
,'. .: '
. .·.
.. ...TRAIN
··. Law;
.
Sec. ·32 (A)(5)) rates. · .: ·.
.· . ·. .. . .. \ ·. . ... ... ·-
p:
r.;·."'. be ~nd RFC (NIRC,·Sec:-.. Reg~la~· . .. : ~eas6ri:. Sfo~k :.~ivi_d_erid' is ·riot an .in~ome. ·Jt
32 (A)(S); Sec. 42 (A)(4)): · • corporate m~rely evidences the interest" of tt\e stockholder
~-t·-··. '· · · · ·' income tax
·rate ·
: io _ the incre.aserd ·capital qf the, corporatiori. An ...
~··· . ii:rcome may be defined as the_ptnoui)t of money
f.. of . coming t9, a p~rson qr· co'rporation within a.
,....
·;
-NRA~NETB (NJRC, $ec.:25
0

.
(8))°
.
-
..
.
FWT
·' .25% .
..
. specified tfrDe, wtiether as P.~Yn:i.entfo services, r
0

-, · .interest, . or·· profit . for invei:;tme.nt. ·· A mere

NRFC (NIRC. Seo. "28 • ':. · FW'T of · . advcuice i_n.th~ val"ue'of p-roperty of a per~on or
: (8)(1)) ·.. . . . . . 30% .. · corpo"ration in "no sense constitutes the "lnco·me•
·specified indhe re.venue law. Such. a(!v~nce'

,; 2019. . BAA OPERATIONS

. . SAN SEDA.LAW CENTRALIZED
. ·. .. '
1.87
.'.
:, .
 . IN··coM·E TAX
'SAN.BEDA,1.AVI CENTR(\LIZED·BAROPERATION_S~ MEMORY AI0-2019

constitutes and can be treated merely as 'an Note: Royalties. muit be derived fro.m sources
· increase .of .capital. An income .rneans cash -within the Philippines· ·to be- considered as
.. received or· .lts ·equ(valent: :It .does not mean pc:1ssive in<iom(:)' .(NIR·c, Sec. 42 · (A)(4) as
choses in-action or unreallzec lncrernents in-the _c}"!ende_dby T_RAIN Law). ·
value of the 'property (Fisher v, Trlnid~d•. G.R.·.
No:L-17518; .October.3Q, 192?):. · Royalties· m_ay be passive. or nqn~passiv.e
. '. ·•, . (a.ctiv.e)ir,come,..Where1he royalties are derlv_eid
Exception:. Cancellation . or redernption: of. . . · from "the. active ·pursuit .of·the primary purpose ·of ..
shares of stock issued as dividenqs,' th~·an,ounr . . the busi,:,ess . (e;g.; di$tributlon of licensed.
distributed 'in redemption or cancetlaticn shall be . mc1teria/s,./icensing and Sub"licensing of musical
considered taxable income· (NIRG; 'se·9. -73 (8)),. - . ·i;;omposilion~). the r9y~fty fees a·re in.the nature ..
of. attive income (BIR Ruling DA~368~06, June
·.. :·No~~·=-·.-F~~:;h~: e~~mpti~g _'c)a.use. to .ap~ly, \.-is. . ·. 13, 2006; BIR R_ullng.DA-684-07, De·cember2_7, .
. )ndispens.able· that: (RCSE):. ·. · · : .. . 20.07).. · ·' . · ·.
·a. · There.is· Reqem.ptio,:i or·CaAc.ellatiori;.: · .
. 6·. · The trar:isactic:in. -involves' Stoel< dividends; . .". , · .. : ·Acco.rdlngly,. . the. royalties · in~!uded .. in jhe
-.· . and .... : . : . . . ·. . .'~.. - . .: . .• : - . . . · . . computatlon of .gross income are those w,hi_ch
c. . 'T",he "time and manner" of the ': transaction . ' are not subject ·to final "tax, .such as: . .

u ·I:~r
, . . -. ~ak'.'ls . \t ·. J;ssentlally_. _eq.1,1ival_13n_t. ·. t<;>,i..!h--:....,.==:=~%_.,, Tho~,~ royalties ... d~rived:_ ~~om · sources .·
d1stnbut10~ ~f tax_ab~e d1v1~e~ds..• £~1iese;.· l · T ,~~e-of !he f,>h1hppme~; an_d. ·. '. .
the .most lfT!POrtant IS the third _:(~(.R·v.i.f/7e_ )'h~le':'::wh1ch· are -not .pas_s1ve. lnCOIT\9 (2_
. . Court of Appeals,:G.R. No/ 1alf5·(6~af.l.~~~~:fDlZ5?).l;~~r~ l:(_t 528). · . · · · ..
. . 20. 1999).
, : .• .
.
• _:-> •
u·
. . ~.,.:,:~ .
/~~1:;J,i/:
:f
: ~~- .
,.,.,....-.~,.,_~laX>~.R~es
k'\. . ..
· "'.P<>~ed· _on Royalty Income
-. .

.Recl.a~siflc_at1~n/Exchangf ,{9J-"$~~-ref '.~~e~i'ii 1f w s4,b)e\f,t~t)o'~I.T~x.· · ' · ·· ·. · ·

.. N~~ G1v~}~1.se t_o ~.Ta~a~le E_~1f ·
. ·. ~,e1t~7.f Iii~. recl~ss1fic~bQ#,;;or e'1f1han!;I~ per s~~-_:_.J as .a1'_{/l!J!~
yields realize income. f?(firx- fpurposr~~
. ·. Jr ·1,tt~ ;~ ·i. Tin ~11:erak-~0% (NfRC, Sec. 24 (8!{1)
l TRAIN _Law): .. ,
-l~j .... , ii. -~ Deriv~d..(r..QOil . pc,ks, _othe_rmerary ~orks
·

. e.xch.ange of st,ares~·w1tio1it·n:ror:e,. produce~? Jlj_$1"?'. ··=.i or mu§it~I ff·· positions - fGJ% "(NIRC;
· . real_iw? inc?~e. to the s~~~l~ir.. Th~r!\ i_s :only\mJ-~@f = .... J. ~amin?°~~tly TR_f:,IN, S1;tos.·24 to '25).·
. a . n;,od1fic~t1on .. of. the $p!:>"'scqtlers~~~s_.a~d ~~, . · ,11ff '4!71' all], in~a.'flces. at?ove, . for , non-
. pnv,leges • wh10.h 1s not.~l'~}'l"Rfw,~~a~lt· f~·tax·tm,'.·B~- . .- j' ~~~idint~t~·?J~~no~e_ng~g~d \n_t:ius_ines:s.;.
, purpose~_(<:fR_:V. The_ CoJ. ef.Ap~eal~. Gl:.· ~o,~ . ~h'-9:;,"":' t~)'?· "25o/i'. wl:i1_1~. fq~ _dome~tib and.
·_ . 1p~87?, J~nuaiy-.~~· .1~99-._\ .. · ~- .·. ~p . . .- · . ~~ , res1€fentfor,~1g_n .~orp~ra~1on., ..20_%;_ ?Ind·
. . . . ·· ·: - . . . .· ·. _ . f'§ .. ·f .non.resident (ore1gn .corpor-atlons, .
. ·-S~e_prey~ous.sec:tio_ns:orr:1:ax-\in1,:,div.1 "-~~(;fENL\~"'.-· ·.· . 0%. -'{~c,· ~s, a(!lended'1Jy° !RA'I/\J,.
·.c9,:pof'f:Jt1ons !or d1scuss1~n·?~o·~-Jfpt.J,'tl~e,,._~~:-,: 4 ·s.)6~.27to-28). ·: · .· ... ·. _. .
. . . . from. donJes~c ancf to,:e,gn_ .c~,rP{l,1~·ftjfJ7e-:--:_.. ~~\ \ ..)- / .. - · : · · .· . · · · ·· ·
.'Cl.1._. · ~-- A7Alfere:s;,#7 . ·. . . . · . ·. . ·.
'-.· . : . ·_. ·. · · . · :., _ _- . ·:'. :. ·. · >:~~ '
·taxed, . · ·· .· ·
.s..V.itI'~;gp.ditions for hiter~st_.li,come to.·se Treai:eg · :·
.. 5.. : Gc;tins·from Dealings ·in .P.roperty· .. : · ·. . ~s Pi;t~slve Income: (WEC) .. : , . .'. · · · . . .
. : . P.i~ase ref.et to. Conso/id{1ted Rules· on Oap1tal· :.. a. : [?eri".'ed.frorn-sour~es WiJhin -t~e Philippines;
· · Gains ani:1-Losse$ and on R_ules on- l;xchanges_. . · ·b. garned by, ~n ind.ivi9~~1. · cit!zen;. resh;lent· .
olPropertylordiscusslori, ·. '.. · · · .-· · .· ·:3liE:n. · indivi9ual,.: ~~- non.~re~id~n~ -al_ien ·
· .. .· · · ,... 1nd1v1dt,1_al engl;lged 1n· trade· or bu·smess in· :
·. 6: ·~oyaltles. : :;_ : . · : ·.: .. · the .. Pl:lilippines.or·-ea,r.ned -~y' a· do_mes\ic ·.
. .. ."The$e ara··pa·yroEli:its.Jorthe use.and exhaus.tion · . · corporation or resident foreign· corpc:i"ration;
.... of" property ,.slic~· as "ec1rrjiogs .fro"~. ·copyrights; ' and . . . ·. . ... ,: .. : ..
· patents,:. tradernarks, formulas· and natural: c .. Deriv.ed from· ahy. ,£urrency pank. deposit ·
. · resources · under i~a.s~ .(R.°M. C; · No. · 44.-,2005, · .. · ··and yielc;l or any of her moneta'ry_benefit fro·m
. $ec:'~) .. : . .-..- . . . . . . . - .. tjeposit"substitutes and-from:t£1..1st funds':;ind
similar arrangeri'l£mts ,(NIRC~·as. i:ime.rided
The d~firirtiq~ ...cov.ers .both , payment; ~ad·e. · ' '·bi T-f?Alt•{Sec.
I • :.
·42{8)(1)). '
· · ,.•,.I• · · ·
under a license and c;:6rnperisa1i6n which a
· p·erson .would be ob"llged tb ·pay for;fraudul~ntly· EJ:car'nples .of lntJ~~sfwh.fch :~r~ifncl\,Jd~·d. in
. c9pyi11g· pr inf_ringjngttre right (R.M.C: No.' .4tP. tbe computation of Gross Income:· _. . ·
· 4oq5, Sec;. ·3). ·.. i. · Interest incom~ fron, long-teifrn·depositS
- by:. corporations. (l')Of issµe_d . by ·banks
nor· withi.n the . c;:overag~ _:of.' dep.osi~ .. ' ·
.. J;,., .·•
subst_ifutes); · . . · · ·

88 2019 SAN B~DA LAW CENT~LIZED BAR OPERATIONS

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IN.COMET.AX .
SAN BEDA LAW CENTIW.IZED OAR OPERATIONS - MEMORY AID 2_019

ii. . Compound interest;

Iii. Usurious interests earned by a loan
shark;'
· iv.' Unconscionable interest income (even if
knowingly and voluntariiy . assumed};
~nd · · · · ·
· v. · Theoretical' interest· income (2. DiZON,
. · . . : supra. at 51-7°5,1-8):
lnteresfIncome which are· already subjectto
·final .. tax need not be. included .in the
computation for,grciss income (INGLES, T,ax
. . .
.. foreign currencydeposlt system increased from
t .5% to. 1__5% final tax (NIRC, as a'fended by
. TRAIN, Sec. 2.4ff3)(1)).
Requlsltes for. 'Tax Ex,~mptlon 9f : mterest
Income Derived from -Lonq Term peposit.
(LTD) or Investment. (OIS~-5.·DIET) · .
a) .· Th~ Qepqs.ito( or investor: is. an · individual
citizen (resident or non-resident) pr resident
alien or non-resident alien engaged in ·trade · ·
or business in the Philip.pir.ies.a,:id riot a
corporatlcm. · ,· r- ..

fvfade Less. Ta)fing, ~upra at- 130{ b) The .LTD or investments certificates. should
· . · . · . . be under the ~ame· of the. Individua] and not.
Tax Treatment-ofInterest Income Depending on . ·_ .. · under the "name of -the corporatipn· or. the.
. SOurce of Jl)cC:>rne . · . . .. ~.'~ . · ·. · . . bank Or. · the ' trust- 'departrnent'unlt of the
. interest' .income. derived; from . sources Y"ithin· 'tne . bani<;'·. ' ....... '• ' . . . .
Philippines may_ be ~ybjept to final f~I(.· Of. exempt. or:
c) The LTD investments must bein {he form
Interest income 'derived. from source's without the . . .'of. §.avfngs, common. or,' individual' trust
. Phillppi,~~s are subject J.o the. gradui,1te~:··~at~s (~:t1;i.. funds, deposit · substitutes, -: investment ·
<raaldent citizens) or normal corporate· mcom~4a>C0'.e1< management·. accounts and · other
. rate (for domestic corporations). t:'
· ·. · •i::~'.;.;:;:'.A · jnvestments i;lyi~enced ·:by·· certificates -ln ·
· . •. .. · . . '(!'~i.': .; ,,;·J.J .· such form prescribed by the.SSP; .. ·-
'. Note; To. d~termin~: if: Interest income 'is. in~r&.e:.• :i1:{"'~~:1h~l~~1;tliD or in_ve~tnients must be is~u~d-~y
:.f-. . · . WI·th.I n or· tnCOf.Tl.~ · .: · lthout, determine t<st. tti\',;-e-~f !¥;- .~~.... ~·B.an!(~
rtr.lf ·. . . . . ..
only and not bt .other financial .
,r ·. ·
;. .
W1 . ·' .,"( )f~ I~
resid~nce of the d~~Jor: Source is w1~~"1~··debt?rJ.s':_;;:1\ . ·. :e) ~~~i\f-'ns, inve~tm~n·t~ ~~st: ha~e
a re~•.d:nt of the l;'h1!1~p1nes (MAMALf,f.f;r;), IJcorjj~. 1·\ . · .
.
or a.:_.
·m·a,lrliy eiiod of 11ot. less.· th~n fiv.e (fil. . .
)~!~ · .J~l ··. lrsK. · . · .. · , . : · . __ . · ·
·~
it·
'Ii::.
:·
Tax;·supra·at 63) .. · · .·.
. :.·. ' . .
· /1:)~
. . o/'" ,r,~-..,.
.:.·. ·. ·· ~ .·k· ..· ~ .. \J --- -~ ..t<:·
_ .T~X'Rat~_OJl lnt,ere~t1nc_OrJ\~}?._.}lb~i·t~!naf.J_ax:t:;,,
1· · ,. ·l. . . Y!1r ~ ·t
f). ~ne.·p,_TDtor 'investments. mtist.':be, in
"'W'Qep..~.miAatt~fli!:Of P.1Q:,QQO .·anc;l .. other.
. 1) · ·..Fram· any CU(l'"El_ncy.b~nk~epos1~~:~\.~~~"§ij;l,Y .
. ·. _o~~er mon!3ta.1J be_nefit_fro~~ee,6sfl...~.~bst1tut7 r.r-· . . s.
r:· . . ·. N.d,iri,qifi(iJ~1S.as ·mat qe pre.scribed.~Y the.
B$P~ .. . . · · . . :· ~ : · . '· ·
· · ··c;1nd fr~n:, trust funcfs a11d s.1m\!~i'Zarrar.i?Jf:lme~{s · r.J · ... g) Only the .!nterest . mcqme from .·.LTD or
'd~r.ived fr.om· so1,1rce.s ~.thin.·!){·e1~Ph~IJP~iF1es -. J•·!:;·-''·":S'ifi..,..~inv~strnen~s.c~rtifi<:3tE::> ~re covereQ by the· .
· ,. ·. 20°1, (NIRC, ~S· ame'?ded by ~ffj'A1N, .,. .~~~i~'..u·~-~_Ji'r.-.~o;;,1n£Srle tax e.x.en:i~h<;>n;. . _.
. 2'4(8)(1)); . .. ':. . . . .. · ~\; .·.' . .fJ.~r. . . h) lncom,e tax 5XBmpt19~ d?~S not COVE:r any
;~ . . ·2). ·From· long".term deposit. (L1D) or~p,v.estifi.entm · · . other moome .~uch a~·.9!llnS'. from trad1.ng.or
;.\ '. . . ·~. therfotm:.9rsavings, ·con'lti16p or. ina~@6-~1'tn,1~t ~- . ·. ·for~ign ~~cJ,!(lnge-, gait);' a_nd · .
. · .. · ,: tu~ds, substjtutes;- ·· in.vestment. ri:ianag~i:nent , i} ·. The · LTD or,._.iiwestme~ts · should riot be-·
~· · . · · accounts;".anct other Jnvei;;fments evitlenced by Terminated by. the__investor bef9re the 5th
'I · , ' . . : 6ei:tificat~~·. in. $.uch. fern) :.prescri_bad: l: >y BSP. - . . ye.ar-1. otherwi~e 'it sh~II _b~ _subJ'ec.ted.to the
sf,·· · . . exempt (NIRC; ar,; amended by .TRAIN, Sec. . gradu.ate·d rates ·of-.5%;. ·12%, . -pr; .20% on
. · 24(8)(1));. . . . inter~st_'incorrye ·earn,ings · (R:M.~. 'N,o. 18~ ·.
.. . . . 20,11). . '. ·. · . . : . •, .
, Note:. in case.,oi pre~ter.minat!.on betore ttie sth
'.yec;1r, a final tax shalf be iti)posed on the _en~ire
income, whose, holding period was: ..
. . The 20°/o'vvithhol~ing ~ax
o:n passl~~- interest
· · income ·on·: depo.slts ·dr;1es not apply- to·',
a) 4_y~ars.to:-(es::} than6 yea_rs_·~So/o;
., ·,·cqoperativ~!; .. : ..
b) 3 to les·s than 4 years - 12%°; · , Ut-lder.. ttie ·NIRC,. interest =·from· any currency
:: _c). Le~·~. ··thafl_. 3· .year~.- .. 2£?% .(NIRC. ·as
·am~ncfed oy. TRAIN,, Sec; _24(8}(1));: ·.
·: bank,depo·sit arid yield or
·any otHer. monetary
. benefit from deposit sub~t1tute's.'and .from trust.
. funds.'and simil_ar arr.angeme'nts''is'subject to a
· 3)... Frorji·-f9r~fg~'· curr~-n~y:deposit.
units, e_xcept · 20% · Fina( . Wiihh,ofdin_g Ta,x (NJRC; se:c.
· . nonre~i~e!lts -d5%(RR. No: 14.-2012) .. 2'4(B)(1)r This provision a·pplies only to ir:'ltere~t · ·
paid by banks and does not cover interest paid
·,No·~~:-Und~r th:e TRAIN.· l;aw, th~ -raf~~offinal tax .
by cooperatives .. M.or~Qver, members' deposits
. ·an intere~t income" ~eceived ljy resident.
with. the cooper.atives are not cummcy .bank
Individual ~axpaye'r. under 'the expanded
deposits nor depqsit s~stitutes. _:_Thus, lntere\t

2019 SAN BED.A LAW CENTRALIZ~D BAR OPERATIONS I 89

 INC.OM.E TA-X
SAN BEDA LAW CENT~LIZ'ED 'BAR.O~ERATiONS- ~ENIO/lYAJD l01!? ·

of members' .savinqs .and time deposits.with duly Business Income

. ~e-gistered 'cooperatives ·. are not Subject .t~
income and · withholding tax. The legi_slative
intent.under R,A: No: 6938 orthe Cooperative ·
. Code of the'Phil.ip.pines is.to give cooperatives a
··preferential' tax .. treatment and tax exemption,
s
Thl tax exemption should .. be construed to
to
0
. It refers to income derived from 'merchandislnq,
mining, 'manutacturlnq, · farming,· .and other
similar · operations. It ··arises from · habitual. ·
enqaqerrient in any comrnerclal activity i~yolvir'ig .
regular sales of gC?ods .. or services by '. an
individual or' a corporation, The income. from
business, )egal .. -Of , illegai; registered · or

extena '·members. of coooeretlves.(Castillo; unregistered,' is-taxable (BANGGAWAN, 'supra .

. · Dumaguete ,<::athedraY Credit . Coop_erf}Jtii,:e·. :i(· , at21~. · · ·
I , CIR,· GR. No. 182.722, January 22, 2010) .. ·. . ., .
Nete; It · is nor material whether they have a
8. Gro~s· Income from Profession, Trade,. or· buslness' license or whether they. _are-registered,.
Basln~s.s·. · · · · ··· · orself-declared (BANGGAWAN;·supra a,_(219) .

.' .Self-Employrnent Income . ' . ..· ·. '. :.f.r~de o; busin~ss .lnc~~e ~,~~II- b~ . s·~-bj~~/t~
. ltconslsts of
earntnqsderived by an' l.f1dividual . g~aduatec( .rates. (0% 'lo. ~5Jo).·.(NIRQ; as
· from Ihe practice of profession, or conduct of · · amended by TRAIN; Sec. 24(A}(2}(a))· · for
C 'tf:ade· or business carried. 011. qy 'hlm. SS a -~~~-,=:,-~Jm;!ividlials·and normal .corporate'jncome. t~X for
. _P~~prietor,__ or by ~ p~rt_nerSl'lip of wh1chp1s.a r T
-iccftj>'or,.~~ions_ (~0%) (f':IIRC, .. as amended by
· · member (NIR<?, as ·am~nd~c:f .by _Tft,'AIN, [~- l.J
J. ~~~'J}N/f:~~27(A!)-... · . · . . ... ',
74(A)). . . · · f:.("1.J.. -~~--<.( · fi-:.>·~, · · · ·
.·. :., · . . . : : °/.f;'r-_ 'Yr*<?... _:'. ~""""~ · (F"ii:-"ftf.."e.f8;'JJ<~?t,ts, see. 'aisoussion o~ Tax on
Prof~s~1onal l!'lco~e . ;7'. \{:) Y~ .,_,.--"'7~jl,, ~~~IREil,l(jf!ve.._(tl....,,. x.~ ... . . .. . · •
. It refers·t<;> ~ees re~e1ved by~,::p;s1e~~?~ffror;u"'7,_f · w _· ... \ ~ ~-::t:J... · · · ·. . . . · ··
the practice of-. his pr.ofeg°s1ofl:l-,1P.fov1cfied·tha..F 1!f'19.,lti'f.>nze4and·W1nm_ng:5 ·. ·. · ·· · .
0

· there is no E_R~EE relatio~hip b7fweenlhima_nd ~--">.)-;, .:..t;:iour:!it of m,~t,"ip \ash or. in-_klnd_ receive? by ·
· ·his clients (MAMALATE{J)!'-~v1.ewer,
t2$)°: It r~clu~~s t_h~ .fe?.~rfdetiv,~/J
r.up7a-at- f=
_frdm e_.p~agi!!,[g-~ .. :1i 5:':~s?'a
c anceJor by.f~Rlr ~,~es refer _to those obtained
re;ult o.f e'.ff~;·w.~i.1~ wi~nings are: p~odu?fs ..
· in an. endeavor requm~~--""~R~t,_~ t~!.!"ung- fl§: ~ttfiliWP ~f ch~.f!...ce or !U:~k-"f4"f~LE:ON; ~upra a_f:-146) .. ·

, ..
professional ~s .a·_ r:ne_a~,S:-:Q~l~~hijOO~~
indu_d~s,-but 1s not hrmte.E:f to-i
wh•?h·
~·fee~s~(.~P.:s, ~
dbf-s__,___, J, .. ·. _- . ·
f~- ll .. . .- , . · . ·
il!f';·· ~ri~e~").-:lr'r_1,-~gr,:Su_bJe,ct to· F.inal. Tax ·of
doctor~. lawyers, erigine\rs)'a, 1#3t th~ i~~~f?-~. ~- ~Jr_;(~~ .". .. : VJ · ,- .
. . No'. o~~98). - _... ; \- · \~_ ~;s, ~ leLlil· I~~PJ-__{'~1~e-~ ·~ er-iv.edf}o_lT). ~·ou~ces w1th_1~ tl]e .
. ,. ·. ·_.. . . . ..· .... ·. · t. ·' ,-~~~~..;z\t't,lhf?J:)rn~ by;an -1nd1v1dua_l amounting to
Ptofess,onal h:.1~·oi;n_eTa_xpa¥-er . . · .. 6(CJ t;1'.f:tk~>~jre' than. ~-fo,000.. S'!Sh_·pri~!:)s ar.e. taxe.d ,
.It re.fers t~ a pen~on cert1fie9:~\ a prgf~--~1:.-:....d.-.;.'.:'~;,;:~ a ~r;,-1!',~nsacti011basi~; .'.·. ·. .· ,
body b_elongirrg to a sp~c1f1c ~of~s.ft.o"t,.,~""""'"'-':'-1;>, ,,th,_~l'!}'jtmings (~xcept wmrnng~,am9unt111g _
. h~ving'cor:tip(eted a· re_qo1~ed cour~!!)~s -~ufi)~\~o~tO:QOO <;ir.less from Philippine Char.ity·
al')d.. or practice :(DASClt, . .-Nl~C. ~!!: ~sweepstakes ;met. L.otto which ;_sl;lall.- be· ·
. Philipp1nes (i018); p .. q7).' ·IJ 'also. reJer5 to a:-c= . ·:-exempt),':de(ived ·.from·:s~µrc~s. within the .
. . person:· who .engag~s ih some_ .cJrt :or' sporl_'-for_ · : · F.'nllippines; .and. · .. · · ·. , · :. '. . · .
. : 'money,.,as.a meal"!·s,off~vE;Ji.hq?d!·r~~e~_~an.as. · . .c. P_li_ilfppfn!;l .Cl:larity .S~~epsta'~es at')P. L.otto .
a.-h1?bby· __ (TABAG: ,Income Taxa~on, ._supra._at . .winni_ngs -iri. exc~_ss:of. P1_0,PQO (NLR<;- as_
. 69).- . · ' ·: · · . ' : · .. · ame_c:ided by TRf.lN_ L,.aw, Sef, 24 (8)(1)), ·

Professional lncb.1he . ~s. .:Compe'.nsatl~n · NQte: !Jnd~r Sec. 25(A)(2). of the. NIRC,
income. . . . · NRA-ETB's · PCSO an!! Lotto· wih1:1lrigs,
f he . . existence· ·of- e_mployer-employe~. · · ·i-egardi~ss of. tl:l!:! ·amount is.. EXEMPT ftom
.relatlo'nship. determines _Wh!:!fher ·the inc9r:ne-.: il'.)~Ome tax.·.. . .-· .. . ..
.shall . he..treated as compensation -income .or
. profession~! f~e. This _'fa~t · ·i:> . i;ria~ejial ·. for .. N.ote:: NR'A.-NETB · _(prize$. ·and · winning~
purpose;s . of 'fax~t_ion because the'r~ .. is no .. regardless.:of' al'l'.!,ount): - 25%- f:ina_l.' Tax. (f:JIRC,
·· deduction · . allowed against·.· ·corrip(;lnsation . §ec.·25 (8)) :'. . . .. . · : .. ·.. .' : .
·income; wtier.~as allowable deductions may· be
. ma.de from ·professionc:11 inc.ome (MAMALA.TEO,.. · '. .··Priz~~ ~n·d Winni~g-lncJuded ln Ck~ss ·,nco·m~
· · : lncof(le Tax,_ ~uprf at 87}. . · .· · · ·. to Be T~x~~ ·at Reg~lar R~tes . · . ·
. ·. a.. Prizes 'derived. from .sources within . the
. . PhilfppintlS
. ·by. an · i.ndlvidual'. ...(except. NRC-
. .
.
\

90. I 2019 '.SAN.-SEDA.LAW

. CENTRALIZED'BAR OPERATIONS· ·:
. . .
 IN. COMETAX
SAN BEOA v,w.c~NTRAUZE(J BAR OPERAT/ONS • · MEMOf!Y Al£!: 201?
.DP wt . . . SPA ·i98&¥MS 9&8
. . .
NETB) amounting to P10,000 or less (NIRC,.. · inc~rrie tax :.in t~eir separate and individual·
Sec. 24(A)(1)(b)); ·· . · capacities. Each partner shalt report i:IS. gross ·
· b. Prizes and winnings_ from sources without- . · income his distributive share, actually or
the . Philippines . by: a RC lndlvidual .are constructivelyreceived, in thenet income of the
included· ·in the gross tncome. In other partnership (R.M.C. No. 3-2012; R.R. No. 8-.
·winnings, there. .ls no. threshold amount: 2018) .. · . .
(NIRC, Sec. 24.(A)(1){a)); and,
c. Prizes and winnings . of corporations from (See_furth~r di::;cJ.ssiof).0(1 GPP under Texon
.· whatever source -are ,riot.subject final tax but · . Corooretloris'and OSD) . . : · · · . . . ·
: . · included' .c;lS part of thelr g_ross Income"
· (NIRC, Sec. i~_(B)(1)).·. . ·

Prizes Excluded from Gross· Incorne ,.·. · • .. . ExcLusi'oNS

.
FROM
,, .. .
Gn.os~· ·. :.
. . . . ·.·(·
. a: P~ies· .'.a11d ~~_ards·. made" ·primarily_ 'ln · · _. .··. INC.OME·-·.. . .
~.r· '
.
recoghition of religious, charltable, scientlflc;
educatlonal, · artistic, literary, pr -: civic.'
~~ 'aehlevementbut only if: . . . . . . Exclusio_ns . .- . . .
. I . ,". ·'; ~.:
'I .
i.·
i. Tne recipient was selected without any· . . Income received or earned but i~-n-~t lncluded-lrrthe- · ·
t· action on hispart Jo enter'the contest or· .
', proceed_in~;.a~d '. : . · -'. ·.
. :deter~inalion o(g"r'bss income and.thus not.taxable
.,. ../:.;J
either b~c~use-(N/RC, .Sec. 32 (B)j:' : . ·, .. : · !
ii. Th~ _reC?1.p1ent.1s n_ot required ~o re~,9.B:~{ i _ ' . .· · · · . · .. . .. -. . _ ·
. ·. substantial- future, _se.rv1ce~ .. -~f
;,,~_:;.1.f-)) 1: - They are not income, gain or profit; .:
condition to - re~eiving the · prii~;t:-9r, ·• ::.1:,;t . ·· . . . -· · · ·. ·. ·
· : a~ard: and· _. ·.. · . · · . · · .. ·)11il'".'.·:;;;:~1::,:;;-pl:~$!111Pl(~'.\life-'ir)surance· proceeds paid to .the
b. . A_ll pnzes ~nd aw~rds granted. t~ a!!J!~!~~:ro t:{!....,.L..~E!ir_g'i._~~~neficia:ie_s·. upo':- the. ·d_eath .cf the

.
. ·/ t~al anq mte111.at_1onat _sports, ?f. .i:nl'_~lition~L
. and toumamen,t;,_ whethe(6i~el<J, in· tti~~.::.:',1
. ~J ir_,suted efwf ~l:lmag~s··(ece1ved _on ac~_ount of. __
personaJ,11 4nes or sickness. · '
Phi!ippioE?s or abroad and}~ff.t~?.~~~-~y . f;I\.. . . I l '\. .. . . ... . .
. tl).e1r ·national .sports as~ffelat~ft:(NIRC•.. r.:1 2. They r-epr~sef\t-returo of capital;
. Se.c. 32(8)(7)(d)' to e)l,tfP" ,.[~ ·. ~ r~:1 ·l . H·· ~ ·. .: . .
·
10· Pensions
· . ·· · · · ·, (ili:~ =_
'~?
~f?\ .. 1, .) ·.
.,y·?~- -,,......,. ·· v?,.
~!t · ~,~·RJe~~f,1;l~1,1n1 received . as . return . .of · .
'·-··" ·""- .;t.:t-'f;.,,/'./ . · ..
•· · . <....f •. - =-·d .
· · , · .It ~~f~rs to t)1e_~m~U.f!t_of lll?r~Y-.~~e~!):'f§l._1~I6~). ').'}'': ,!a
~{ll
. -•,
pr_ellll1,J.~~.fii,i!.,v. · . - . . .
.
· sum ·or· on staggered . ba.s1.~-·1r-v .f~.s1a~),r!'~r1Jof·. i.!(. 3 ... They. are ·subje~t~ to· ahother . _k~nd 'of internal ·
· .: serv!ces:- render~d g1vE1n after:_-(~n. i~~1v.1d.~al r~;-~~r:;t._eyenuetax; or·
· re<;1ches th~ age of ~etireff!t=mt(Pe.~~t~Au$1'l~~:i:!:.~i_1~~:.ii.'f;m;m· - .~ _. · - _. ·. . . . . . .. . .
~--. General,. G.R. Nq, [-~480, tylc:1rclii~f 1. 9f1;·:·:7~·. - Exa.lJlple: gift~·. bequests and devises wh1~h:a_re
· ·· - ·· . · . . · · · "'J.. 'I:
$ec. ·32(8)(_6).(-ia) of NIRC · pro~~~!) that
;,'!' . :.
sabJect to donc:>r's ta?< and estate. tax.
·. .· · · ·.
:reti'rement ben_efrts a_nd p~_nslpns rec.eived,_other·. . . =. Nole:-The. ,defi.nitlon d gross income is broad
than 'those-.received under R.A: No. 4917, R.A: enough to include-all passive income subject,to
·No. 7641, RA. No: -8282 (The Sqcia)° ~ecurity . . . ~pacific rates·: or fin_al t~~s. ·.However-,·. si1_1ce
Law, as ameFTded)' a!)d RA .. No. 8291. (The. ·. ·- .. .these pas$ive Incomes· are already subje9t_,·to·
·. Governmen.t Service lnsurar:me- .System) and diffe-rent:r~tes.and taxed finally at :s0urce, they .
. ollier :1avii's on' p~nsiori benefits . excluded from . : are .no · range~ ~include9-. iti. the. c.omputatl~n. _of .
· :.gross ihcon,~ are· consi$lered. ta~able.is' already gi:9ss iricome. which_-det,mrilnes t~)(aqle· in·c~me
repealed. by 1:RA)_N _Law. · . :subjecfto the.:r!:)gular income t;:ix;,rates (CIR v,
P]lilippin_e··Airlin~s, :/nc., . G.R," No.·. 160528,
:_.Tax.Treatment o.f Sep'a·ration Pai. . . ..:: ..
· <;)G.too_er9_; °20()6)::·.·· _. .....
: . Separatio~ pay. m·ay or: may not be ..taxable, ,
: ... depending ., . ·on< the . :voluntariness. . or:. . '4.. 'They are -.incortre.,'_·gain,: or.' prcif)ts"\,vh·i,ch are ··
. involuntariness· of the cause of separatio11. It is ·. . ··expre&,slY.·exempt from :income· tax under th_e.
i-.. ; . taxable. when Voluntarily_. availed'-'of. It. ~hall ·not
Coiistitutipn. tax treaty, NIRC, or genercil or
be taxable if irivoluntar:y .(VALENCIA-ti, .ROXAS, special.. law:: . . .. ·.. . '"· ' .. . :
-,nco_me Taxation; swpra~at· 210).. · : . · ·
ExanJple: retirement be.nefits. received. under
·11. Partner's Distrib~tive. Share on the' Gen~ral R.A. · No. ·7(341, income. derived by foreign
Profession Partnership (GPP) ... ·. . · . ·goV!;!rnments, ·and .. GSIS, sss; or other
GPP shall riot. be· subject. to. income tax since it. contributip~s._
Is the individual_ parti.iers w.ho shall b~ subject to

2019
. .
~N B~DA LA~.CENTRAUZED
. ~ . BARO~ERATIONS j.91 .
,·.
 1:N·co·.M E·TAx·
.SAN BE.DA
. LAW CENTRALIZEO
. 'BAR'OP£RATIONS- MEMORYAID lOIB" • 4

- .. . .
All klnds Qf. -taxpayers, indivt<;!uals (cltlzans. or
-~·. the characteristics of life insurance
altens ). estates . and. trusts, and corporate proceeds payable b.y · reason .of death
(residents or non-residents) may avail of the ·(NIRC, · -es ·fim.ende(I by mAJN,·. Sec.
exclusloris.: · '34(£!Jr4)): , . . · . . . ·. : . -
b. 'lf the amount of 'llfe insurance .proceeds-is
Exch.J~ion v. l:xemptio~ ·helc(by the insurer under: an agreei:nent.to
. pay interest thereon, the Jriterest pa~ents
· shall.be includedin the g,ros~ income '(NIRC, ·, ·
' · . . · . . .. -R~fe'rs to an immunity or · . · as emendedby'TRAIN, Sec.,{?, par. (8)(1))..
Refers to ~e removal privilege, : freedom from· · e.. Interest do not fofP.i part.otthefhdemnlty but ·.
?f -otherwise -taxable .charqe or burden, to' which :: are earnings· or 'income. from .the use of
1tem~ from t_he reach of other persons are subjec] capital (i.e.,. the msurance proceeds _Wh!9h
taxation . ' · to tax ·. . . . ·. .· . · ,were,.. riot .taken) whlch .are: ,-taxat:ile (2
DOMONDON, Texetton, supr?J"af'1.93). . ..
. (Philippine·tong Distanc~ . Telephone . Co., Inc: v, d. . The·. de.~ign;iltion · of the. beneficiary .is . not .
. Province of.l.,aguna, G.R. 'Nq.151899; Augu~t 16, . essential for·
purposes of excluslon of tite .
2005.J. ·. :.· . · . .. --: · · · · -.. · insurance proceeds from:tt,e ·gross income·
· . -· · . . .. · . :- , ·. : ... · .·: of.{he reclplent, The concept _'ofrev9cabJJitY
ltem~ of Excli:a.sions: (LAG-CRI~) . . · . ,..-;,..,;,,=-~~"'or -irrevoca~ility o~-: · de~\g~ation of. ~he
1: · !:,if~ Insurance; · :.. · . . -~ . "if· 1 j\._
"'be__ll£fiCiary-1s material only -m deterrnininq
2. · Am.cunt received- · by insure~· ·:ayelu.K of' 1l_) "-{ }~h,ll'lerthe insurance proceeds are to form .
. P.~emium; · _ . · .· //.<~~ . r>"~-.=.-. -~ ..{,paf gf~fi~
gros~ estate of th7.dece(:fent or
3: §.1fts, bequ~sts,,a~d _d~v,ses; .'.;~~,,___Y,,1;,?~ ...· :· ~"'-ril.~t'f2 ;Jl.¢if10NDQN,Taxation; . supra_ at.
4. ~ompensat,qn formiun~s_or,,,c~q~~?j.~ ··>°"'.,;;...--"":t~-:._ . .t9't~'Z_"-' \ •. ·. . . . ·
. r. ~~~~::i~~e~ei~~·~~~;st~~f'?;l_JJ.,;~tler?·"
7, · fv!is~ellaneous 1~e!11s : . ./ . j
· lP 4 2t . '.:in\~~~)i~~r~ ·~
·
ti~e .
Prd~.eed~:~fe)\ !!}eluded in .The .Gross
.~~ura_nc/
· . ·a,. · lncome <;ien:,,ecl by f~~-d~g?vernm0en~1 .· .
b.· Income d.enved byf!t.Je.;.gp,vern"'!e[to"'~~
. . political sub~ivrs_ton~J. £~ « · : . · · ...
.-
~~~ 1. nobme: ('iPAgf)\tMOV-f'C) .. : .
i·~ · U. · ·-:>: ·.. --~ · ·
~-~liliil,-'>rB · i: Paym~s<:f~ ifeasons other th_an d~ath ·, .
. .· · .

C, Prizes and awards; H-<~.~

· . d. Prizes ~11d·pwarc,fs i~s[)o ,.~tf.9dl~Jlt1qn, .
n . ~- 1.
~:. -~ - '· ~!;. .s.yp_Ject-tJ'tai<.fo the ·.extent.of th.e ·.·
.JJ~ . , . ~ ceis~f1.t(ij erer:niums· paid:.lf .tl;lere
e. 13th i;nonth pay not ext~ .ain\P9 O·, ~d . . ~~- · ~'"ire -a~y ~i~y-19an§ (borrowings m~de
.other _.benefits. · \ . .._.. · ~> x-1u . · .• jf
vi ..:~ -~.n ~·e.- P.<tlicy), ~hese · are to.. be · ,
f, GSIS, . · SSS,. ·_Med)·~re · nd. o rM~'- / ·. ~ns1clereg7· ~s .a.dvances.. dedu.ctible
c.ontr:ibutions 'I .. · ,.. . S. ~ ~ t"- , . ;.,t!om t2-(. life . insu.rance .. proce~s .·
g. · Gain_s fr<:_)m. sale o~ ~on s d~l:.1erilb~~·- 0 · lEN U -·~;~. -r~;:,$veft·upoh 9ea~; ·. .. _- . ·
· other·. ~er1ifi?at~ pr 111deb~n~!~t(l~~~ ·i~~\s_y.cff amounts·are hel.~ .by the'_ir:\surer
r'!l~h.mty·of rnore-tnan five {s> ,;ea~U 7. . ii; .!l. 1+,..~ ·,:._i}. :.1a1ffiler.·:an···.Ag1eer.nent. to. pay- _interest
. h. Gains f(om .r!3demption.'~U;hares 1~ua~. · l'Vl.l~~'thei:eon,:tr.ie 'int~rE!sl p~yments sti.all ~·e:
funds '(NlRC,· as- amended__by .TRAIN,·S~.=~> · · . inclucled -ih gross income; ·· · · ··
. ···32(8)).. '• :, · .. · . . . ·iii.- When the 'insu·reo. Out!iv~.s-.the policy,
... · ttie. proce.ed~'.frnm·Ji(e in~ural)C0.. (less.·· .
'1_ ., Pr.o~e~ds·.of Life·ln·s~r~(lce ·. . .. ·.. :· . .' · ·the'· total' ·amount :of premiurns -paid) ·
. · · ·"Reason:;They. partake· more·.c,f ,inclemnity .or · ' ·should.be. inducie~(it-i:thi gr.oss'irieome · .
. corr,p~nsation rathe~ than .gain to the recipient . . sirice death 'Is 'an essential element for
· :(2-4_DOMO,ND<;)IY, .supra a't41-7). . . :-. . th~ ~xclu.sjbn; . . .._. .. ,.. .. .... .'
· ·· ' · · · ··. · · . ··. · . ·iv. Wh~(e the :tffe insurance policy is used ·.
· Conditions'fQ'r··Exc.lusion: :The life insurance. . . ... : :-·to.sec1.,1re,~ Money QbHg~i6ri;. :- .. ·· ·.
.': proc_eed~ ·rr,ust .. !Je · pi:li~ .. k>. _.tre ,·.heirs·.· or· . . . v ..·. Where ..the. life 'inst.ircfr1ce · policy:._ W;lS -. ·
,, beneficiaries.upon deat~ of the insure!:1,:w.hether · ·· · tra·nsferredfor-a Valuable conslderation·;:-
in a ·single· sum. ·or ... installment· (f\!IRC,. as-- · .:' .. ,· · ~ · · . - · · ...
amended by TRA.JN, Sec. 32{8)(1)).' :. . . . . . . 'uiustr~tion:. A j~sured his 'life...f6r. P1·M: 'He' .
. . : ·assign~d the. · ir:is!J_rarice to ·:-B: for_' yaiuable
Notes: .. consideration of P..B00,000: ·A then djed ·and B· .
a. :rhis .exclusion· fa. ·~P.plicaple to group life was·able to collect-the pr~eeds of P1_M. In the.
· .. · insurancie · · ·: proceeds, · death · benefit . · .
present scenar-fo, B. shail recogntze· an lncom~
·payments· under · . tlie wockmen's .. .of. P20t>,ooo (proceeds:, of P-1~. less. the·.
· . corripensi;lt.ion · ins·urance .contract, ar:id . · .. . c;onsideration· 6f · P,800,000). However,. the ..
· health.or accident_ in~urance cpntract having.·. incorne -recogryized sh.all be reduced further·t?y .
'·. .··.

: ·92 2019 SAN BEDA LAW.CENTRALIZED BAR OPERATIONS

··~
 I.NCO·ME TAX .
SAN pioA LAW CEJilTRALIZE:OiJAR·OPERATIONS
~ MEAIIOR YAtb'.2.019 _' 0

iPW ISM IW Fili VIM ftlfftldhih A

s
the premiums paid by reckoned from the time '• included in· the 'gross ihc_ome .· (N/Rc;
'. ·.. 32(8)(3)).· .
Sec.
of .the assignment of the said- policy. Hence,
· should .. B pay. premium of P100,000'. after the
. transfer of the policy. to him, B shall recognize an . .Gift Tax Test .
· income off>t00,009 only (Proceeds of P1M·less . a. _If there ts no legally -demendabte obligation ..
consideration of P800,QOO; further. lessened Q.y · to give ttie gift - not taxable; and : .
the premium payment.of P100,0.00), · b, . _If-there is a legaily· dernandable obligation to
give, there is income .- taxable,' (2-A
vi.: of
The reclpient the tnsurance proceeds · - · DQMONDON, supra at 43{i).. ·
.. is .a· fartiiership in which- the insured is
. the partner andtheInsurance was taken 4: Compensation for..lnjuries or S.ickness
:·.'to compensate the partnersbip for .any : Reason: This is· inthe nature of Indemnity· for
·loss :li:i income that' may result from the. the .: ii:ijury or damage ·suffered.· They. are.
dissolution of the partnershlp caused· by lntended to" put the -,injured. party in the posltlon .
· . the death of the insured partner; and .. inwhlch he was-before-he .was inj1:1red:The term ·
·vik:'.,~ The reclplent of the life insurance·· ~injury::'iocludeisd'eaJh produced.by the injury or
. . , ·procee~s ,is a ~orporation in. whlc~ the: . · s~ckn.ess~( Oceaneering contrector« (PJ:lils), Inc.
lnsured ':was an employee< or- -offlcer · v. Berretta, G.~: NCJ-, 184215, February 9, 2Q11).
(~;R .. No. 02-4oJ... · . : .v·:.·. . · .· . .
. . ·. . . ~. .rt'inclu,de~_an::i~untsr-eceive(1: . ..
2.· Return of i;sur~n~e ~remi~.m. ·.. . . . - . ·~y,;5f;;f ·. a. TJu:ough accident Qr heajth insurance.'
·Reason: The amounts returned are notincbm~/,·.,.-.':, -b, Workmen·s·compensation; and
but retum of cap\tar..T~ey represent ear~jpgs":°/1:'?" , C: · Dam~m'?s .re9eived 'Whether -by . suit ..or.
which wefre.previously _taxed'(2~ADOMONDJ~N(') t·:~:-.. -:n~ ·.f1W7e'{lent·.on account of s1,1ch injuries or ..
SU{?Fa ~t 426). . . . - : .' .. : __,.;_,f' L~ot~;::(iLLG.{.;?,:l?'~1~$S . .(Nl~C, a~ ?mende(i. by TRAIN
, .. . . · ._r;;..;.'/ 1:( .'- · ~w, '8,~, 32(8)(4), R.R. No-:. 02-40, S~c.
Conditions for E~clusiqn:. The(3"r.o~ntsin4.~fl.:..J.1 . 63). JIU'~ :. . · · .
. be recei~e~ _as a rett.Jrn of premil.ijp.$1~id~)' ~J.11,....,f~ . · . /I !J ~~ · : .. · · . · , . . . . ·. ·.
:·uoder· hfe. rnsurance;.~ndo~PJ~nt ):>~annuity .ii::{ . . Ki}}'d fft>amages·:_Aris,ng From Personal
\:ontracts (NIRC, Sec_. 32(~),(ZJf ."((~..c:., . -~ ,'.\:. . . : ll'))'Urif,.. aytd ~fcl<~ess Wh~ch are··exctuded
. . : .. ··. · .7,r,--;'J1 _.tr.:.'.';A.:·. ~;J ..
·.. J,Jom.ipro~·lncom~ . ·. · .
Notes:.. · .. · · · . \...._( .=:--~..-.?{': ~~'\· ._;·,J . ~~/}f.~eJY~.;~~mpensatory dam.ag~s - this ··
a., ,YI/her'?tlJf' tofal premiu~}.uf~jf.fee<tt):;i1,: r•tl ·: -~_:..:t-.:i~Jti~< ade~uate · compensation for
. · · aggr~ga.te,P~emillms paicliltb.e1exqes-s.sq,all . r,1 ,. r:n~Y
pe~unia:Y loss suffere9 ~s b~ ·duly
be included in the gross in\:Wle (1R. · No .. ,r.,.i~ · pr<;>Yed. .· · · _
·: · :·02'-40, $er:.' 62).. :.·.. v:>-#·. ,· . · ·. or
4..;~~.;.-4}·°f." i); Moral; n<:>m:ina1, temperate moderate,
b... In case Qf · a · tra.nsfer fo1#'a-~·a 6&6~~~~~-,1~.·~nd l_iqµidat~d.damage·s -:- shd.uld be on..
· consid~ra!ion.. ·, 9(·. a:· ._ lif~f( ins 1· ance, · · .· accoun~ ?f ph~sical injuries or sic~nes~: ·
. endowment ._or- .a11.n1:1ity contra·~~-gr. any . . . .. . . · .· . · ·
interestltierein,'only the.actual v:alu~e'ofsuch · Note·: · Punitive:_ or. -exemplary damages· are
cqhsider~tio'n . an9 .- the. a'inoorit . of. the. .. · . ta_xable ·withtn. the" bro~d. · concept of. gross
prernlufi':l.s. ~nd. oth~r sums· si.lbs'equently inc9me _(Glenshaw .G~as~. ti: ,Cl~, 75- US 473
pa.id by . U:ie ··transferee:. ar.e ..exempt- frqm - . · · (1·9.55))'.The p~rsonal injury exclus.ion. d9es not
taxation·(RR. No. ·0~-40,· Sec. 62). : ·- . 1 • apply_ b!:)cause'·the arriouhts · ijr~ awar9ed qn
·:·
· · · · · aceounr of the defendant's conduct' r.ather than
·3. : Gift, BeqO~s~ Devis~ o;De.c~'nt' ..· ·, , ·. .. th.e.plaintilfs p"erso'na!'injury'rus'iRS Rev: Ru/ ..
· .. Re~son:. They ~re .n-~ither· prbdocts of capital _84-108,.198f2 C.B. 32). . . . '
nor. -industry;' thus, .ther!:) ·.fs. no in.coin~; The .· · v
. :c:onslderi:ition,.is· b.ase.d ·on ,p·ure'liberality and. Is : Compensation for Lost' Profits .
· ::a1r.~ady subject'to donor's:tax· (gift)· 6r .estate .tax · · Cornpe11satory damages,:actu~1 ·damages. mbral .
_..: · ·(begµe_st or qevjse} 'as 'the_ case_ may:·be. '.: ·damages', exeinplary.darnages, ·at{9me.y's'fees,.
. More:o,;,er, UJe(e is. no irycome (2 DOMONDON, and tne· cost of the suit,. received on account ·of
.. :· Taxatio_n,supra.-a.t ~Of!).: .. ·.. . . death·are excluded from g·ross ir\conie. However, .
: consequential damages·representing Joss ·of tne ·· ..
Note.; Only donl:!t~ct··property is excluded· from-· . ·. ·. victim's· earning capacity are not excluded'·trom: .
gross' income·. 1-:!owever, the income from such . .. gr~s lncort,~ ... Such ·damages. are . merely.
prope·rty, as· v.ien· as gift; bequest',' devise, or , · replacement of income which would have been-
·.desceor.of income ,fi'Of!1 any prope.rty, i.n cases· . subjected to tax it'.eamed (BIR,Ruli{Jg·· 026-2018,
of · transfers ·of. dividend interest; shall be 'January 1Ef, 2018); · · ·: ··: . ·: : · ·
.. ,, .. '· . .

. 2019-~AN BED.A.LAW CENTRALIZED BAR OPERATIONS 1 ·9..3

 IN-COME.TAX
,,. SAN BEDALAW CfNT(IALIZE_QBAR OPERATIONS- M£N10RY AID 2019
.A. WWIIWBl&FWIA . 4HW¥Pb W . 'Jyyp ;;µ

5. Retirement . B~-nefits,. Pensions and income. Howev~;. if the retirer,'.,ent Is

Gratuities -, · compulsory, there is noneed to comply
Rea~on:, Reti_rees. !· ai-e_.' most deservlnq of wi.th the above requirements before the
compassion and should not- be give11 a -strtct · retirement benefits .would be excluded
interpretation under ·the law. Retirement laws. because the -sarne would be excluded' as
aim-to assist retirees in his·otd age, not to punish separatlon pay beyond. the -control-of the
him for havfog survived. H'inciudeir: . . ·: employee (2-A DOM'oND.ON; supra .at
.a. . Those 'received 'by o"fficial,s and empl_oyees 236). . . ..
. . of private employers in -accordance. with a
. reasonable private benefit plan under R.A. . . . ''Ca...; be availed ~f OQl-y° orica... .; applles _only to
. No. ,mv; . . . · retirement. benefi~ jrorn a · subsequent private
.b. Th.ose derived under R:A. No: 7641. from .· employer: It. does not apply to subsequent publi.c
. _private .. ~ir,m~ "without a: BIR-appcoved . employeras the benefitsare still.exernptlinderRA. ·
· reasonable retlrernent'plan: · · . .· .· · ·.No. ·a~91 (1 DELEON, supra at.363). : ' ,·. ···, · · ....
c. · Separaticn pay due 'to death, sickness or ··
other. di&abflity pr· any -other-cause beyond · "Reasonabfe Private Benefit Plan". ··
)h~""C<:;'ntrol ·of the ernployee or· .th_e;official Jt'm:~a.n~ a ~nsi~n, ~fatuity: Stock bonus, or profit-
. (e.g.retrenchment); ··. .. . . sharinq plan maintained by an employer for the
' ', cl. So9i~I:. ·. securlty · benefits, . re_tirem~..Q.t,=:a:,-..,.=b~~-efi~ 'of so"r!le ~x ~)I his' Offfci?I~· .or employees." ".
gratuities., .· pensjons .and- other 1-"5iinilar. 'r. ~~t~n,.,~9nt_nb_ut1_ons .are m~de ·by such employer
(?l;lnefitsreceived- by .cltizens or"'aiThns~h.o uf0Ji-1£1e.;Pm::.~ -?~ e_mployee~. -<;>r. both,_ f~r . the .
. . come . · _t0 , reside p_ermag~fitly~f.L.1~..R.:.JP.Os_f of i~,-~r1~~tmgthe earnings ~nd. pn~crpal ·of ·
· Philippines from · fore!(n.... g~~ment · the 'fi:l!).i;!_J,hJfs-aic~uiulated,a.ny part of which. shall·
. age!")c_ie:5, priv1:1tt:·<>~,pubJ¢;_,::{~~1/ · - ..~rao.t.P-~~.:'~~~~1re'rl~<j.to ~ny_purp~se otl)~~ipan for
e ... Benefits due. tq res1,dent~~qerylair~th~: _,:,,;?..,th~\fliexcl1:1f1v~ beJ~:,~ib\of the said official~·- and
. Unite~ siate"s. admin!fere~9 u.,J U~ifoa. .. e~lfloyee' (NJ~~\,as.&<rend~d- by TRAIN, Sec. ~2
.States.Veter;ms A~fT1J'),1.~!~liR.A; .·
f .. SSS benefits rece1v,fd..,J.1i1•·1.!rcorda ce .wiffi -
·1·=_;. - 1(6Ha)~ . . \ ( If) \
. · . . ·, · · It "' \\ .
·
· --
., . ·· · . ·,
·
.· BA No. ·8282; ang_Q~ '··· ·, .. ' '"<.1["~· ;:..B~!l~emT'n.tB~nef:its,iinder"R:~ ~o . .7'.641 ..
g; ·.·GSIS benefi~ rece"i-•iec!J:!~~ j." RA. fl". 82Sd~
· · .(NlRC, as.· ame~J.~a·~b>'f T!Rll.1Rk Se.c: ~j!qualrfietg};\Rloy~ls!4~··
;T&.
. foil~w~ng .ar~ ,t~ell'tle_s. on ret1remen_t pay of
J .. . .. . ·.
. 32(8)(6)).. ff 11"\:: .\~\\ . •,
· · ~ ... . ,.-~ /.~l\te ..wK.~lr, ment.plan is.established
. :. · · • •. \J. 1:3. A- t-''\-6):.:\ · _fgj )d~" ,.,!'.:::;,. //t1i;i;.thf : C~· · or other .applicable
~,~;;.4<.;
R~Jii"ement Benefits 'un~~r R.A.'W1'<>.ll~i'~-~
, . In ord_e( ~- avairc:irth~ ex~mption-~th
. to ~efiremerit b~ne.fits. uit~r ~
~1-
reaso a~~1:,. r~~ment ~~e establlsh~d lfl the CBA or
1plo~1ei:it ;ontract . ;.... Any_ .employee
~~1''1.,,,,,..-G".-\"':' . ~Y_y,~e , ·r?tired_ ·· upo.n · :eac~ing .. tlie
pi"ivat~ pl~n-;_ the .fo.llowing_ .re~i'rem~~s~i:n. s~.µ__.::_;/~tf\er !l?~!i6able empl<?y~e-~t;contract; . ·
. be.-rriet: . : · :, . , . ·. .. . -" x{"Q~~~15.~-~ We';_.J.ibsenc~ of .. a ret1.rement plan or : .
. . i. The_ pl.an m·us~ · be ,reasp~·abl_f'"(fe/,else· 1· ,[, i\, ~1\€1Q~ement· 'J.)r~vidif'!9 for · · -retirement ·..
·· · · ~~e {he. r~_quirements· of a· re7ls9(Llble · J,)/{j"'\..')... "'.be~efits . . · of empl9yees in . tpe
... ,.reUre_meFil beriefitpian under Deductkm~I"=--~ ~stabJishrtJEint- ·~ Any erriployee may tie. ·
·: . of P.ension T.rpst Cpntributio.ns);°. . . ... .. .. . · ~etired. ·uri_der.tf-1e f~llowing.:: . ·. . . .
:·ii. Tfie . benefit ..plµn rnu~t .be a·pproved. by · L · Optional.· . Refiremen.t -. the' .
.. · th~ BIR;. · · . ,· . . . ·.. : . :, ·., : . GORd.(fiqns are:·.(6Q,5~~> .; .
iii, Th_e. retiring. official. or emp!OY.ee _must . 1) .An employee 1,.1pon reachlhg the ·
. have· been.· in.".the s~r.vice pf ftie. "same. . agE:)"of.sixty.(60} "years·or more; ..
empl_oy~r for atl~ast ten (19.) years- ~rid · · · ·. 2) ·"."\lh~ has.served aqe.astfive {fil ·.·.
· ..mu.stat least be fifty (50) years·o1a at the.. . .. years in the said_-estaP.lishment~ .
. time of r~tlrement; .and . . . .. -' . . ·. . . ,: . an<t . .. .. .. . .
iv. .The re'titjng official ·or-emplc:iyee .should·· : . 3) : May,._retir-e an9 shall be "entitled.
· . 11ot- have "pre'lilousJy ·. ava1le!=f of. the:: . · . · to ·retir~ment pay ·equivalerit_-to
: .i:Jri.viJege. tiru;fer' th·e·- _ret\re'me·nt benefit .. . % month salary. for_ every. year
plan of ·t~e same. or anothl;lr ·employer of sef""'.ice, a ffact_ionof.at least
. (Nl~C, : as .. ameQdf3d by TRAIN, S.ec. ·· six .£fil months being cqnsi<!ered·
· .. 32{B){6)(a); "R.R. No'.0.2-98, · .Sec. . as one whole year.· -: :
.. 2:78.1(8)(1)). . . .. .Ji. · Mandatory· Retkement ~. the."
. conditions ar.e: {65-5~6)' ...
. Note:. It . does not matter whether the · 1) . ~f.l employee-opon reaching the
·· :retlrement" Js v_?h.int.ary. As ·,ong :as the ,; . · ~ge of beyof"!d. sixty-five (65}
·. requir.ements are met, the :retirement year's which !s. the corppulsory"
proceeds: are. -excluded" :frO!Yl . ."gross retirement age;·. . . .

. . . .....
94· ·1 2019 SAN SEDA !.,.AW CENTRAUZEp BAR .OPERATIONS .
 JN·t(;)tvt"E:TAX
. · SAN SEDA LAW CENT.Rf,t/ZED8;6.R ()PERATIONS- MEMORYAID,2019

. .
· 2) 'v'.Vho has served 'at least five.~ ·---asked .or initiated by him:·fR?R 'No .. 1tB6, Sec:
·years i'ri the said establishment; "- ?(b)):·. . .
. a~a · .· . ·.·
3) ·May retireand shaube entitled Illustratlons ;
- ·to 'retlrernent pay '; equivalent to . a: Retrenchment . of employees · ·as .a
· Y:z month salary. for every ,Year consequence of -either ttie saJ~,of the entfre
of s.ervice;.a fraction of.at least business -Io ' another .. corporation or. the
six 1fil r.non'ths being considered cessation of the. employer's business
'as one (1-) whole year. (LABOR (LABOR CQDE, Art, 283); . . . .
·CODE, . as emended 'by R.A. . b. ·separation of employee due to dissolutionof
· .' 7641, Art. '287). · · . a law flrin; and ·. . . · .
· ..., · · .c. · Separation due tolnstallation of labor saving:
Terminal. L~aye . , · , .· devices or bankruptcy (LABOR.-CODE, Art.
·. T~rminai Lea·ve· :Benefit. :is '11:ie commutation . or . 283);. . . .· . . .
monetization 'of -an_. employee's 'accumutated .and I , J' . ,

unused vacation leave (VL) and sick leave (SL} Notes: . . . . . . . . . .··
received. by .a retiring, ... retlred, · or separated · i: · The exemption holds reqardless of the·
. employee ($ABABAN, Reviewer, supra at 93-.94); employee's age and .length of service.
. . · '. · · ." · ii. The law · does · not require that "the
· Reason; terminal· leave pay· is applied for by anY.~:-}, ·· · ·. · exclu~ion be enjoye~ 'once. .
employee wh9 isno longer wqrkif-lg. It is no Jon9e1°''.Jf . . , : ·
compensation fat services rendered. :(-!··:;£<..>!\ ·
GSIS ·B.en~flts·.under R.A .. No. -82-9.1 . · .
· · . ·· . ·. . , · · · . · . ,' 'i"::.~;·;·~·~~ · The retirement _of most government officers or'
This· . includes ·. monetized val_ue .of reti~~1:s,., ,._, ;.,:~---~~mployj,ll;&-under the GSIS 'is made 'automatic .
. -acq~mulatsd :.racati~n leave (VL} and sick lea~_((St,)", ~F,µ:Jl,-'.'-:!,.&fi1~'.~~l1~Ulsor~· at the· age of s(xty-fiv_e (65}
subjsctto the fol10~1.ng rules; .. · . .<'<Y . \J j l . years:-"'att~r.having serv.ed a. certain number of
· ...1.- For· compulsory.r~tir.~tne_nt- sixt¥~C::>) years te1~1
years otlse;rvice(R..A: No .. 8291, Sec: 3). ·
· . . · private . · entities/. _sixty-five · (?~",./v:'e~r~.; _tor" ~~ · l.@ \ · . . · -: . · ' ·.
· governiner)t er~P_l.oyees; seve_JJ.~,t;fOJ~'xe-~rs _for . ~?'( ·The .. ffe~,.~m.~nt, benefits ~.r: monthly GSIS ·
,the jud.1:!)i~ry - e~en:ip_t _(L~_b9P/Co~e"tiSeb'.•
..28'l:_,-,. f~~-
pen.s1?n.S~a.ll'\.e exempurommcor;rie t~x (R.A.
F?.A No.. B~91, &.c. 13, f§Jd9No.~!,-?, _$ec.
and· · ·. .. . . . . z';-'r -.::r.($
·It£~ ··
c.:;;ij>:\
f}; ~;.J ., ,~t?.~!J.
~?'·-·
tf!,f,!:.:~f~;d,
. ·,...~,--/.l',.,.,..,T.!.t-•'-'
..-,:,,7 .. ·
· ,. · . ·
· .... 2. .' F.or:option'alretirement-:- sl)s t~a~le~V( ~t~ f:.,it_ 6.-'·· lnc~~m.ii:fpt't;J_1:ide..1Treaty .,- ..
· ten OP) days is: ~xempt; 'a'q-!j!f?'e~~\qt;iss
y;ixaqlt:i (~/_easf:?efer.to·pe M!rilm1s BeJJf.fits fQr·
rt . ",Reas~n;
J.1~ ·. {t1.~·n. .P~QliC pol,iCY r~ogni~es tlie,p~inciple.s ·.
·.Pfre_c1pro.c1~y a~d com1ty·a.mong_ nations. (~-A
fu[th_erd1scuss1on). · t~,,6) . , N'''·_,,,:1~t@@MQNDON, supra at 2.30).. ·
· ·· · .. ·. ·.. · 4,,y- · · ~...-J"''l~,td!"··:;..,;dlit.t~t'!!~:U:~ .
. Se~.ar~*ipn_Pa;: ~.c.lti~ed·from Gro~Jlrt_c·#r.', . ,. ·Not_e;)ax_tre~ties ar~.··en!e'rectinto "to reco~~il_e .·
If due to· death, :sickness, or other ·phys1·~~ab1hty . t~e r:iationa.lfiscal .leg1slatrons of the _co.ntractrng
, ·or for antcause beyond µie ·coritr9l of the .ip;pl0ye_e _.. p·arties. and, ·ii') ~um; Jre,lp· t~e- taxpayer avoid
.. (NIRC; as. '!'Jm~mjed by TRAIN, .Sec. 3Z(B)(6){b)r_ · . , . simultaneous · : taxations. · .i!'l .tvyo different
· ··....... :· :-· .. · :'· · · ,. , .- · : : . . . · ·. . . juri~dictio'ns,".ClR v. s·:c. Johnso,r·and Son,.Jnc: ·
Con.d1tionsJortx_cluslo~of Separi!bon Pay- frpr:n · . fu'rther clarifies that wtax eonventions.~re drafted ·
·: ·clroisJncome: (EHES). · > . .' . .
with: . a.
view.· 'towards·:'\He·· elimination ·ot·
: '1. Amount 1~ receiv!3d by an official, gnip!oyee, or, . intemationa.i )uridica.l .douhl~ taxation,'. which is
. by_his fl~irs; '. ·. , . . . . . . .-'. :· . · . · defined as the imposition'ofcompifrab.le'taX';>S in
2. It was._,rec_eiv~dJromth~ !;mplo.yer; and.. two or, more states one th'e s~me· t~xpay~r .in
· ·3_ It :w.asrec_eived as. a corisequ1:3nce of .§eparation . ,re,spect of the :sarn,e. ·subj$c~ · ma~te'r and . for
·~ Of such official.or· employee from the servic.e of. · identical' ·periods:. ·:rhe: app'arent ratfonale· for
_ >the ·ernplpyet: . ··. . . . . doi.rig away with double'taxation iS;-to·encourage ...
. .•: a. Because ·-o'f d.eath_: . sickn_ess or' other" the. ftee· flow. . of, goods . add ser.viqes an~ 'the .
. , . physjcal,disability; or. . . . . . . . . . movement of capita). technology and persons
t{ .. For any cciu&e b_eyon~ the control 9f ·such between countries,. con.di.tions deemed vit9J ifl·.·
. · ·,·officia.1. or employee (N(RC;'as .afT!eri'ded by . 9".'e'ating . robust _i;lnd . clyriamic ·. ecoriorriies .
. TRAIN, Sec. 32; par. (8)(6)(1?)). · · F.or~ign investments will only' thrive in a fairly .
· · · · predictable' and · rea·sonable international .
· Cause .Bey_ond the Control· . investment .climate. and the. protectio'n ag'aihst .
This connotes .involuntariness on th.e part _of. the daub.le taxation is .. crucial In ·9reating Sl:lch· a
offici~I. ·or 'erripfoyee~ ThE! separation· from· the climate" (D.eutsche ~nk AG Manilc1 Branen v..
servi~e .of_the·official Of employ~e ~u~t not be 'GIR; ~.R. No. 1BIJ55d, August 19, 2013).

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS I 9.5

.. '· '
 1·NCOM-E TAX'
. SA~ BEDALAWCfNT~LIZEDBAFI ePE:RATIONS- MEi\19RYA10'2019

. tnternattonat Convention or-Tax Treaty·
Shall o·nJy . refer ·to the · Double Taxation-
'Conventlon (DTCs), · or . ·091,1ble .Taxation
Agreement (DTAs) negotiated between the:
Philippines -and .. the other Contracting· States. or·
jurisdictions tor the ·avoidance ofdcuble taxation
· and -prevention of fiscal .evasion with respect 'to
··tax.es
. on
. income
. (R.R. No.10-2010,
. . . . Sec. 1(F))..
. . ~·
lncorne of any kind to.the .extent required.by any.
t~eaty obllqatlon blndinq-upon the' Government .
of the Phiiippirie~ maybe exclude[! from gross
.-· . income (NIRC, :S~e. 32(8)(5)). Theprovislons of
.. . a tax treaty must take precedence over and·
·· :_· above 'the. provisions .of lhe local taxin~i' statute
. . . consonant ,with· the principle · of international ·
comity. Tax treaties are accepted, llrnltations' to.
·tr,e power-of taxation (USAFFE VetefaHs.Ass'n.: . .
"tnc. v.rTreesurer, G.R. No. L-10500;-June.•30,=;---~--.does not render any service or where he is
v,
li., Rectpierrt did not take 'an active part to
. · -join although he participated; and
.. jii .. · 'Recipient .ls not required to ··render
substantial _ . future , _s.ervices
(uncondtttonat receipt of such" prize)'
(NIRC; es amended. by · Tf?AIN, Sec.
· 32(1;3J(7)(cJ). ·
- .
: ... · t>lote: Scholarship . of student. granted . by .
. . educatlonat lnsfftution may be .considered
as gift ·9~ compensation inpaymentof past ·
. or ft,1ti.fr.e services .(the v~IU§t,.of .the same'is
. .: ·. ··considered .as compensation· income. of. the .
recipient) (2-A DOMONbON;supr;3.. af 211.:..
2_74).. · . _ . . . . .. ·:· .· · . · .
It.there .is a penalty clause that requires the
recipient to reimburse certain amounts if he.

.
1959).· .
-. . · .
.
· . .
... · . ~~
. "",!!;' . rs
u'. . I.'... 1..\T
ji ~~,able to ~ender .full servi~e. -:thE:~ ·the
r.-e,r.y,.~r~em~nt _d<:>.es not form part ot. t~e
7. Miscellaneous Items (1.3.-P31G3 )A
~j t. 't.,-==,.....'
a: 131h month pay and oth~.f':beneftts..,M'p°fto.
1 Jroffil3 ;.n~~me of the_ granlor ._because 1t rs
. ·· · .~.QRrtsrdeJ.~\~s merely a payment of a loa·n ·'
P90,000 _ (~IR(?, · a_s .·~j/rRlefJi~(J~IM_~:"'?(/*=.,':'~-,.,.,{? 1A~~?~,ON, sup~a. at .2~1-271). ·.
~Al I _ . 1W ..~ W[ ¥·-0 ~ . . . .·
Law, Se9. 3~(B)(7}(e),)J.lC"I""'.
· ·. ,r - ~ J~
i . i.l 1~ '\. ~
/M. ·. Er'fes .,nr,aw~rqs.grant_ed · to c:1thl_etes 'in
,'fhese are exc,ludedjr~m 9fSS .inf;ome to. :v.i·\ - sp~H~-.d\p\lP~~1~,nsi~cally o:· abroad and_
wit.
the exte,:it.of·P90,0~0~_,~·.exce~
~ncluded as part ofil'\:~.!:gra~ corn_. n~al~7·.;W~~-·asioc1atio~~N!Ra. as amended-by TRA.IN,
L. .~··-1Ic~.
Je:..
1.
,!!_ . r--,,.saTJ~~'?"~~~'~Y,,~ lln:rn · 11~l1~11c:1I . sports

rnc~me. .. · . . · · ·
_ · · :
#!G
11~t
· '~
a · . "- __.__ ·, .
f.f~ , , 'Iii 32(B)~}(d)} . .

"Uther -benefits" inc!T:JdS,;-6{{,ristr(~'<'onus,~ol ... z-tl#{Q~alWP-Qtl-S~ssociation~ . . : .

1· .. _
,. ·
.. ·
p_toductivity°ince'piive~~0fitfs~foya1@a~ci,rdr~- j/fJ,f .fl},l~yf':!;/r.to tt.!qse duly ~ccredited by _tt)e
:gifts·,n ¢ash ?r.in l_<ind\md ot.lit,be~fifu~~
_sirhil~r .nature (R.R
?7f3... 1{B}(tHb}).:
\f!o..
.' ·\
'~~v
7J.~98,.
... ,
.: ~f.J,1fpp1!tt::-OlynJic Comm!ttee. (PO~) (~.f\.

·CS~b:)A~Jt1isG~1,:i
-~n
o:. 7p49, f~t·Exen:,p_tm_gAIIP(IZf!.s.. an.<!
afromLocaland.fn~e_mat,onal
; · ·. · . _ . ; ·. . ~~t1or(s:J;~.w; a([lents a'!d Competitions from.
.'b·. fassi"'.e income b'y: . .· , · ~f..9/"I -... ~._ 1.t~~ ~a 2.
ent . (?f. lncom~ ._.Tax and 9ther
!: .. F~reig_~ ~~verpm:tlts; ... : .UJ . . lV'fj\_Y;:..Y:J>!!/JP
-
11: F_1ria_hC1rw IO~tit(J~.IO~·sOWrJed,, .. ~*~~_.;;:_.»eC.?{2));. · ·
of· Ta~~s and fo~ 9t~er P_urposes,_-
· · . ·. . : ·· :
.C4:>ntrolled, 9r ·enJoying refinan~1ng fror:n · . · ''. . , . . . :-
.foreign.·gQve~iti.ent; ansJ· .. · · · · e .. _!nc.ome. · de!1ved . . f?Y . th.~. Ph_111_ppme
.iii. lgtern~iio_rialo:..reg~bnar_1~~tit~tfons' : . . ·. i6::r~~-en.t. and :.'.'~·. pollti_cal subo~v1s1on;~..
e~tabhs_he.dby foreign gp11err:iments . . · i:. . Ariy public. utility_;·or . .
(NJR_C,_ as amended.by_ T.~IN, Sec.. . ii. · the . exercise .' , of ;:in'y esse"tlal. ·
.3i(B).(7)(a)). g6vernm~htal _ftmctlon . (NIRC; · as ··
· ··:. _ · .: .amende·d by TRA'IN, sec .. 32(BJ(7)(b)) .....
. ·. ··Rea~~~; To.. le's~ei:i .the-'burden o{foreign · . . · ' ·." · .
' .. ·'loans inasniu~h as the intelest · .ot' these .. : Note.:_Th~ ¢onstitu~iondoes no·tcont?tin.any_.
loans are, by _ccintractua'I awee.m.enJ,'bQ°rne : . . . provision _gra.ntirig . tax :exemption. to- the
QY l!'le dome~!ic bo~ro_wer~..... : ·:: : · · . · ·... · · · governnie.nt. ,Obviously,_the: ·r.eas6n' foi:. th.ls .
·. '."'is . that the gov=emment'-s exemption ·from· .
. c.. P,rizes and Aw.ards . taxes.. is an inherent limitation·'on °the.State's
Requisites:
. taxing: power."Not~ithstari~ingthe rmrt,unity ·
be
·c. -Pi;ize i:nust received in recognitiol) of. . Of the govemmeRf..from ·ta~eS,. it ·is· also a· .
~hari_table, ~i'stie,. Beligious, ~ivic,
.well-recognized .prin~iP.I~ , thc!t the.
gduca,ronal, .biterary, · · or · Scientific
· achi~ve_nie:nt{CARC.ELS); : ~ gov~mment may.. ta~·:·itself (ABAf'!, :Law ·of
· 'Bt!sic Tc!'xatlon,
. supra a.t
. . 65). · _ · .

· 96 ·1 2019SA_N.BEl:>A LAW CENTRALIZED BAR OPERATIONS

 lN.-CbM-E.TAX.
SAN BfDA LAW CENTR(IUZ£D BlrR OP.ERATIONS - tAEMORY1110 2019
ww4- 1 +aw a, · EhhEEt+ · eistS#Wur• · Ms;,,kil,
f. §.SIS, sss, Medicare·(now Phi/health) and··. whether loc~I or ·national,· such as .in~me
· RAG-IBIG contributions arid union dues of !:ind realtytaxes.. . ' . . . .
. mdividuals (NJRC,. S~c. 32fB).(7)(f));· e. RA.· No. a50·2 (Jewelry . lodu~try
Development Act" of _·_199a)' --: certain
These:· include .both th~- contributions and · -·incentives are available to Qualified J~welry
union· dues .of private and government Enterprises; and . · · ·. · · · · .. · :
. employees. . . .. · . . . . . . . f. R.A. No.
9504 (An Act AmencUng s·ec: 22,
·24; '34; 35, 51 and -79 of the. NIRC.) -
Only.' • the mandatory· . contrlbutlons: are . · compensation income falling within the term ·
considered as excluslons.. Voluntary social, . "statutory minimum wage·· {SMW) paid-to
· security .contributlons made by employees · ·sMW earners shali.be exsmpt from income ·
·are.subject to. income.tax (R.M.C. No .. 53-.' -tax.. . ·
:20H). .

9: .. ·Qains·- derived· 'trorn .sale or .exchanqe of .. · 1· , ·

.. --~ . bonds, -debentures., or other certificate -of . . J?RI~GE: B_EN~FITS .. · ·
·. . . indebtedness with: a .maturlty ·of more than . .
: . ffve'(5) yews (!'Jl~C, Sec .. 32(8)(7)(g)); and : · ...-..---.-.--~-...;..---~--------'
. . . Fringe ~enefffs .
The . term "gain" as used in .. _'Secfior:i~>.<.;· Any good; -s~lt::e, or· other benefit furnished or
32(8)(7)(9) ·cfo.~~ not ioclude)nterest, w_!;iiGl);/~r s;irante'd by an employer,·. in cash. or -in , kind, in
represents· forbearance for -, the . us~_·-t·,~t:;._\,~fi,addition.to basic salaries., to an individu~I employee
. -m~n_ey: Gains. from· 'sate .or e?,'_?~~nd_~t9ir..,_;,:,kt (except rank0~rid-~le employee) (R.R: No. 03-.:ga, ·
· .r~J1rement of bonds Qr other certificate .of, ,-,,:.J. S~.q. 2.33 (B)~ NIRC, as amended ·by TRAIN, Sec.
: indebtedness fall· within. · the :JJE}ri~~~J°'-'*}iiE~...1-~~J;;~: .. · · ·· : . · ·
catepory of "gains deri~ed fron;i··deatfngs .if}·" i1 ., ._· ~...:..11":7-\: :- -r , • •• : • • • • • • •

. property" 'under -Section ~z-~(3).. wh!!el~-'t! Valuation ~tF.ligeBenefits:· ·

interest from bonds or . .ot~ef:·,9-~~i:ficate...,Gif;'-t11. Money,171tricl_i-ectly pai<;l_b.y the employer -. the-
iridebtedness _falls with)n,.,,.t~~hqa'i~'!'~tify.of t~l -:
value 'i,f ttre.a i101;1i1t grant~·<>r paid; . · _.
"interests~. und~r · se9.i~2(~)(i4J?°-(Ban"ig: _ 11?} 2. Prop~fty ithe~,t~afl m.oney: and : o~nerstiip is
De (?!'_O·· v. Rep,1:1b90t~~G.Rif'~"'.--... ·198756~ ·~;~ . transferr~_t<:>ti;i~ employe~ -.the value:oft~e
· January 13, 20.15):, -'{_;Y.~2J)'.j · -~:--. ·. t.{t" • f_rl~J·P.~!:'leJU~,r.~l'qe- eq~ial to··tn~· fair market
· ; · . · . · · · .,~ · ttrr:;i~{ · iP<~,J ji~li' . val_ue'.'i·:Qf::;~~~property_ ~~ · .det.efmined· ·in.. .
. · ~- -Gains from. red~mptj9n·bt~§!test.mutya1 E,nj
-.c:1ceo_rdance .with· th.e .~uthonty of ·the. B,IR to. -
. · ·: fund.(Nl~C;. Sec:32(8) .(7}:Q'l)): · :'Jj · ·. · · ;._ -~"l'.~ •.!?rescri~e-r~~l-property:val~e.s (zonal.valua_tion}; .
' I.' '0"'
.. . ~. .
'
.
. .
·
('\;_ .A_:.,
J!.l'!"''3> ~~ .~\l.·;.~i~~-"·,1.~.- .....~ . . . ' ' · · , .
_8. · Excl~siolis upd«fr Spe~ial Laws;f · · ,1c{J.~_:,_..,.~~P-fep~fty otherth~m n;~riey bu(?w_oership ·i_~ not
· a. R.A. N?. 7916 -(~hillppins l~e,_o_tj\{;9ne_. : .. · trf;!nsf~f;~d to the en;pldyee-th~·.val~e.Qffnr:ige
. ·. '-- · Authooty , LaW)- ...:.. PE~$tered. . ben~f1t is.equal_ to tli_e depreciation value of.tl:ie.
·· enterprises are ·given Jncome tax 'i.1olidays · . ·· .. · p·rcipe·rty (R.R. Nq,03~98, Sec: 2.33(A)). · .. · .·
. ,' for 6 or. 4 years from. the date. of start' of .. ... .. . . ,· . ·. . . . . . .
. commerciai·; operation; ···dependii:ig 'on
. i whether their -~ctivities· ar,e consid~red 'as
. _pron~et ·or:: ·non-pioneer;. a~er . enjoying "FRINGE~BENJ:tFITS'
. . .. ··.· ..
·'.T:A:x:::.
· · incoi-n'.ei.tax'..boll~ays,. t_tiey.are· subject to the
. 5% 'final·tax o-n'"tneir_gr0$S Income· earned; ' ' . . \
ii:iJieu of:all.nationaland- local·tax.es; • . . Fringe Benefits·Tax (FBT) .. . ,.. : .
p~ R·.A. No; 665! "(Comprel'i'ens!\(e-Ag"i-arian · Final ·"'."iihhol~ing ta><.'imposed ori.· the gross~d-up '·
,· Refor:m Pr-09~.im) ·-:- ·gafn a.rlsifrg _fr.om the. · · mon~fary. val~e (G¥Y-) ·of. fringe !)enefit furnished,
.transfer. o.,f· agricultui:c:11· prqpe~y . ccNered . granted, or:·paid by tne-~mploxe.r .to the employee,
under. ttie: 1$W,shall ·o~ $xer:npt tram· capitat .. ' . :-.except. ra_nk·~ndafile e_mptoye~s~: whetlier such
gains.tax for 10 years;. · .. · . . ·· ·· : · employer is· ah individual; professi'onal partnership,
c .. R.A. No. ·'7653 (New Central Bank· Act). - . · or corporation,'~egardl~ss:ofwhether the cortioration ,
.the BSP _is exempt :from·· all nafional,_ is taxaqle,.:. or. not, at _the·· g~~ernment: ahd its
provincial, municipal· arid' city taxes .,fQI' 5 ·. ·.·instrumentalities (R.R. No. ·o3-f}B, · Sec. '2.33(A)J.
. d.·: k:;s-;-~~:~-.
72,79 :. (Urba~ .. · Developm~nt .·
· Housing A.ct of 1:992) ...,tm(Nf'!Ais .exempt . .
. 'Fr.in.~e !)er:iefit 'ta·x' (~~-n i~ a fi~al ;~/
1. lrnp.osed on
.. ..
the ··. mana.gertal/sl.ipervisqry
. . frorri ail · fees· : and , charges of any kind, · employe_e.. · ·

2019 SAN SEDA L.6.W CENTRALIZED BAR OPERATIONS I 97


. .
2. :Withheld by the employer who files the return
· and remits the tax ·within. 25 days from close of ·
each . calendar qu~rt~r (C°JR:- v,' · Secretery . of
. <Justice 'ena PAGCOR, G.R:· No. 177387,
. No:.lembed, 2016).· .. . . ..
. This taxis imposed on .th.e ~mploye~·an.d n~t on the·
. employer, bot to be patd.bytheerrrpjoyer-The FBT.
is, collected from theemployer even i_f the employer
. is a tax-exempt corpotatlon or .an instrumentality of
the. Phillppine govemmenUn eff~lct, it is _irripo~ed on.
. the ernptover and not o_n theemployee who received .
. the fringe benefit "(.R_.fl. .No: ()3-98, -See. -2.3:J(A);· ,
"APP... end,1'x O_ ~: -· · . .. ·
l'.leason: · Employ~r is the o~e required "to _pay
income tax-on fringe benefit -~ec_a·use the v,aluation.
. of benefits is easier a Ad does not depend upon. the
• self~e~_laration.. J>f_ . a? .'e~~lqyee . ."-:(09cup~ih~=~-~
_-sup:f\ll&ory or. managenal_.pos1t1~n) (Df:MAjfffAO, ,·.
,:- . Basic ApprQach =
lnr:.ome Texetion, SURJ:f1:at q~
"IN·co·M·.E.TAx··
. SAN .BEDA-1,AWCENTRAµZEDOAR.OPERI\TJONS·-MEMORYAJD~o19
. .. . .. MHAWiPlf& ti H l#IMBEft?MIWQ WW42,¥WM
. . .
2. If _given to rank-and-file·. employees - the
· value of sucli fringe benefit 'is not'_subJecit.to_ F$T
but . shail be· considerecr as part of t/Je
'compensation)ncorrJe cff such ·empl,o.yeesubject ..
to 'applicable. income· tax rates -'(R:R. No:.. 3-98, .
·se·~. _2.-3.3(C)}: .
Rank-and,:;file. Empl~yees .' - . . .. .
They are th~ employees·w.tio are holdfng neith~r
manageriql . . nor .. ~ superil(so(y . . position.
(DIMA'AMPAo;: Ba'$ic Approiicb..'. lnCOITJ.I!. to
·. Taxatidn(?018), ·at-,1. 40; R.R. No: 03-98, Sec. ·
"2.-3,a(A)). : . .
..
··-3. 'Exe.nipt from Income tax, .ieg·ardless. if. the
benefits· were. ·.given· .. 'to.' :managerial · or·
s1,1pervi~_ory'._or:rarik-and-file !,!mployees, if:· .·
. . .· .· 'a .. ·Fringe. · bi:m·ems . arEl . autt-ionz~d and
exemptedfromJn~me tax under the:NI~~.,
J J
1\- "1:l~~Qderany spec1~l law;, -". . .
\..;.- .J ~ly . .;rheJ~(~::contribµll~ms<?.f th~ employer for.
.

, ·:· .. -: .· ,· · . . ../·C.\ !
"'-;,~=~~ ·"'A-theU.~~ftof·the ~.mP;loy?~ to-retirement, ·
FB1: on. fnnge. benefits rs paid by ~e,.~~PY~~t · ·... · ~'-i(;!stirari.c,~~aQdhospitallzationbenefit plans;
he !S allowed· by law to: dedu,cf ·tfte~gr9~~;,.~~~-------~ '.,:(?, )\ · . . · · . . .: .
mone,tary_value of !h~, fringe~-~~J~fll-Jfa?oi!jf.ied·_-.~~ ·- .F_ ·"'W . ·.- ~;- e~:!he~~~eferto volu'j'1taf>'. ben~.r~pla~s ,
gr_ante~ ~o the_ employe:·.as·~·· us1n~:i.s.exf1en!:1_e 1n · 4't.. · e~ blis e({._ b~, -~e: . ·l:lmployer. for·. its
·determinrng his. taxable .. 1ncq..,..,e._pr~y,~ded ~tl1at· t~e ,; .. . ·em _loye· stfo~t-i a~ the· emp_!oye~·s · .
. final tax· im_po_sed·under S_e·qJi~!)~,/,'has ~~-en7l~it1-~ . ~i'sonal '<Efl~t)\ 'fand .. Retire:men~. Accou_nt ·
(NIRC, -a~ ·a.men_de_cf ~!(. _TRAJNfi-S€3 :. : 3:4(J:1)(1 (a;(iU~;~ ~~/p
WE~A). : ~ c _¥, .: · ·. . . · . ..
The.fBT 1s not an ad~1t1onal lkx .~p:t e ~i:nplqy~r: ~,:; . . b · U ·.J.. . . · r~.J.ff ·. ·, · · ·. . . . : ·
can· cl?_fm the ·_fringe benef.i~8;tl.9~th~. ·--~~Y ~-e:~· T -~r.m"ti>.!?Yel-.s/J_~qr:ittibu1i.9·n.. -to·. the
· deduct!ole expe~s7_ . from\ ~q,'h\o
· (DJM_A.J:'>MP,ti,O, -~1;Jpra at 40). sv.,. . ·
.. ~~n:,e 'ia'l fi
-~'~11J,
~~h~·
;.ti
.,'riki)'eej,FR-.~1sh_al.1 n{>t _fonn pa~-of the
. . ~rby~1,s.. taxaB_le Q:Oss·, ''!.con:,e, t.i.ence,,
. : . · .. . . · . , · ·.. ·. . , . . ·. i:.P. . .. , . h · ~ empwd ~ro/i w1tt,holdin~ c. t~~ . _on
Tax Tre_a~r,~nt'of Fr.1ryge B~'? ;(its· · :. _ · . . · . ~ om@nsati~n,;.nd fringe b_enef1ts·tax (R:R:
.J
1 .. :~:,';;;e/~-~:~~~s_7~·j~~~ . :~~~~~~~O?/S:.
-i_f(ftfJt/ia;)i{
. (tJIR<?, as amendeq by_·T;RAJN,~~-1~n~~
~ · -? W):_ : · . . . ; : _ · . : . m1f?1m1~. benefits (Pl~a~e:~~ff:r
. · · ~ ." .' . ·. . . > . · ·.
The. F.BT cove~s Qflly·the,!a~.a~le fringe .. :en.$flts .
v]_ . ]·~ /f fl«:·'Na,..~ef:>arat~
.V.',l;~~if#ff6efits);·. .
disq_u$sion · of D~ Mm1m1s-
. _. · :, . , . ·,_ :_ · ...
· of managerial and·supervisory empl9yee!:1, ~ d: rhe grant··af fri.nge benefits i~ required py.
:: .:purposes. ·of _FBT·, ·RR.. No, .3-~8 .clarifies that. ·. · ·· the'. nature: of•·or .necessary"°to. the trade,
.-: faxa~le' · f~nge, benefits: ·_eXCIUdE: , thos~ items."· .. - ,l;>usiness."or prQfessjoi'{of'the employ~r; Of
_cons1dered · 8$ · .. 'CO~p.ensa(i0".1 .lnCOnJe· ' . e: :. If \he want _js· .for .. the GOnV~l')ienc.e· .or
: . (~ANGGA WAN, supra at ·36?)., acfliantag'e ohhe employer (R.R: No.· 03-98, .
· ·.. : · . :-... · · · ·. '., · .. . ,: Sec. ."2_•.33,(q)). ·_. , · . .-· .:· · _: : _., · ·· ·. ·. · ·.
Ma11agerial Em~l9yee~. .-. · . · : · · . . ·..... · ·. . ·.. , .. · . .: .. · . ·. · : . .
Th.ey-refer -to tliose: who: ar~ ve.sted_·with_:powe~ . . .. Conyenlence. 'of. the .. E.mployer. "Ri.Jl~ . .:,. grants .
... or ·p~ei:og~tives:·. to • lay", ~<;iwn. 1;1:nd .execute . ·· · ~i~~mpti.oh' to-' the ben~fits' whibh. ·.ate. gi'!en tqr the . ·
ma.nagement- pol.icies an_d/or to· 111r~; -trai:isfe~.- ,., exclusjve be.nefit or· convenience of: t!'!e. ~mployer . ·
SL!spend.;_. lay-_ofl,. rec;:all, · discharge, assi_gTi, . o-r.·, · . (DIMAA.MPAO; 'Ba"t;,c Approa'i::h,to /ncorn.e Taxation, ..
disdpline employe_es '(R.f{:."No; 03-98,: Sec.. .
·2.33(A)). . ' . .
at
·s.upra ~2). ·
· ·· · .· · ..
··: ... . 0
, .
•• ·

. Fringe .Benefit .Tax _ijaie/T_ax :eas~':. Gros·sed-up· .

Sµpe~lsory· Emplo.ye~s. . ' monetary. value. (GMV) of the fringe .benefit' (NJRC, ,.
· They are.those whb _effetti'(~ly. reco_mmen.~·su.ch· as. amended 'by. .TRAIN,
,,
·S~c. 33(A))...
-
:_ .. .
-
.in.ar:iagerial _actions · If the ex~rci~e of s1,1cf:l : ~·

·aulhori~y [s not merely routinarf or clerical in The FBT. · is imposed on. the grossed~up monetary ·
n~ture but.- requires the use of independent . vall:ie of fringe_.be'ne(itfl,lmished; ·granted, or·paid by
Judgm'1r'lt (R.R. No. Q3_-9~. Sec. 2.!!3(A)): .. the er:nployer'to·ttre employee·,: exce.P! r~m~·and file

,".- .98. ! 2019 SAN SEDA LAV.iCENTRALIZED BAR OpERt>.TIONS·

 •• SIG! MC IF&4&i:@M4P

iNCOM,-E TAX .
.: SAN SEDA LAW CENTRALIZEDBAR OP.ERATfONS -·MEMORYAID 20.19
I sie' . i 4i,. . .Ff!?fF&f IMR$iil&4"6P .

employees; whether such .employer is ari individual, : the . alien .. employees (R.i~. No, 03~g8, Sec.
'
>•
(.
professtonat partnershlp, pr corporation, re_gardless· . 2.33(A)).
of whether the corporation is taxable or hot, or the
•,'
~! goYemment and .itsJnstrui'T)ef)tali~~s .(R.R. No: OB- Formula: ·
9~: sec. 2.3_3 (A)). · · STE_P):·b~termine.the GN!V ·
f;
,•
: .. Monetary ':falue. = G~os~·e-d-~p .
. G.. (M"a . MQnetary Valµe ..
. roase -~p· (GMV'.
dlvlsor .. . . ·1

;,
STEP 2: C.om~ute for.the -~BT
'~... . m,{ss·ed-JJp.
:,· . . . ·..
,,. . . M.one~~ry value' PXX. · .PXX . . :·.-.·PXX . . ~.6:ne.taryVafUe
. J '. •· . . . . . . ~:. .
· Divide' b.y gross· .. . . .
monetary value · .65% 75%· · · The rates .of frihg.e benefit tax vary. dependinq on· :
.85'}'~ ,
fa.ctoi' · · how the employees ate taxed .."Th~ reason is. that the ·
·-:·· ----~--------~-~.L.([ti · .. FB.T·tend~torecover in6?me·tax of tt:ie_~mployeeso-
•· Grcissed-·up p XX · P XX· , P XX · it{, ?;J•( '. tfl~. · rate ,. follows. the. income · taxation of · such·
1'
·,
.... ;'
monetary'
.value" '
.
. . f;,
,/j.1_~)\ e~pl_oyee~:as shown in. the. table below: .
.. . 1;·•1'\, /~ ..... } d ~.
x·FBT .rate · .... 25%.
. • 1·5% · \I I' '·{_; l.'
· ··,. iii_
. : · j/ r- -H -t~,A
. .Fringe .
tax·,
~nefit
. PXX' P.XX·· ·· p. -oc:>
· :?.;::PY .
l..1)
. ~
1
rt
I·.
I· .VI: · l'I
•
...c....z?.
RC , -:\.•iR' , -•'j ,
~ 35°'0':
" · .(Nl'°C, .
d d b.rv . ..
,'.. · _/..,.."·"'"
. \;// ..· .· ..: .
·
.0 ~ ETB· · rj: \
,1·,' .
'§ITIBn e '. y

. ·. : . . . ... . . . . ·.· . · · . ·. : . ,,;<~{~;~:~ ·.. ·: r~t\ _i..:'."-'-~...:·.'~·

.....:....·:...·_!J.:._.
'~;-'-·
·_.. :.1,·~:
., ......... -1-_s_e_·c,...;;
-'3-3-(A~)-J_.
__ -'---I
· Gros.setl~U'P, monetary v.al~~r: fringi('tie:nefi~~. NRA::.:N.eTs... l{ ·. \\ . ~:rr . <2s%' . (NIRC,· : as
represents: : 1·~1.. · -~\.;,. · · ·· ~--~ ;r!~.~Kf,.~\~ . · a'n:iended ·. ~Y TRAIN, :
1.:. ''Fhe ~hole ·atnounf'o.f·i~~~fne-re~llz~~L~~!Pr n·:1 ...
·~,:~;j/;;11-:,:,;i'~ S.ec. 2_5(8)):
. employe~ which in~lude_s'.•lp.~·'1:f:~f.£~~01,1n("tl 'r~._;,·. . . : · .
~c...,...,.;"-: .... ••.

· 'has been receive.d'; plus . ·. '(:;;: f" ·

2. The arT)oUn~ o(FBT t~er'eori ·othe~p-0!ie·
r,. . · . ·
:, money or net monetary value?of45r.6pe'i;tywhteh. Ji.i, .1--.-.-.-.. . :. . ,.·- ..-.-.-'-'.--+_.~
~/r~td~al~ empJ9yed. ;;lf.:.
!~~·-J..ti·l·r~Y~\;i~~
or,. _R0 0•
"
------(N-IR-C-.·
0,-0-. -...:.......·_·-.
-a-s-1

t:
1-5,. .
trr:.n::(~)·:re:.rs(,.~:. .
the emplbyee bµt pa1c;l .qy the ern,e,(oye~J0f~~n£r ~ ..<:{ , · ... 0re1~~ sen,!ce ,
:in. Qehalf of the;.e!r_nployee. (R.R. Noliq~-9([';'se.c. contractor _or. · for~.1gn and Sec, 2!J(E)). ·. ·. ·
2.33(A)).· · .. · . · _.·:. · ·.:. ·: .. -~~!J. . : . ,s~rv1c~ ~ll~cont_r·actor. . .... ~
. · ... · .· ..· : . . · . . .engc1ged ·'· in ~etrol~um .
. Deteri'r1ln~ii'o"n·of G'rossed~tlp M9~~tar)i·Va!u·~ . . .. 'qp.~!"8ti?ns: 'iri . tt)e·
0

GMV o(.th~ fringe b~n~fit shall l:>e 9ef'ermi~e~__by · . ..Pht.l!ppi,ne9,. , :.

. di_vldij,g the :acfual.. (non~ta·ry \1a!ue. on~e.fri_nge·._.'.. .. ;.' ... , . · .
· .··. · '!:>enefiU:>y:.. . ·. -..:'. .-.:· ... ·. ·. · · · .· ·. ·. . '(NIRC,.asafnf:indec;/.-by-TRAIN, Sec;.33(A);.R,R,. No..
• , . ·f.:: ·:55o;., -Joi citizens; ·re.side_~t .aliens,: and non- ··03-98, sec:·2.B~(A)) .. ·, .. · .· · ·• ,: : ..
.,: . · · · · . · r~sident.t;iliE!ns..engaged ii"!'trade or busine!:;s in. .::: . · . ·. . . · · .. . : . . . ..'. · · ..
. ·. -ttie PJ,ilippines;: ... "< '. _. · ·.' : . ·:·
NQ(e:_.-\Jp0n'.effectivii{of the i"RAlr~i"L.,aw, .Sped~I
... ·.2 .. · 75%.,·.:- ·t?r n!Jn_~r7~iq~.?t .ali':3n.-indivi?~a1., not \· .Alien· Emplqye·e~ ·an.d .. Special .Filipino 'Employees.
. · ~mgaged ttl'.tr?de·<;>r bu~1f'\eS$;1l1 the l?.?1hppmes;·. . are r:iow .subJect to _grad.yated tax rat~ on· t~eir .
. an.d : . : . · .. :, . . ·· . · · ·. ;- : ·. · .compensation income: Cons~q1:.1en.tl;y.,the- FBT 'rate
3. 85% ...:1ar. al.i.en indiv!dual. employed. by r~gio~.al. .' . 'applicable tb th~m shall be..35o/~.'Qeg.inrilng.January
or. ,afea . headgua.rte.rs · Or regional Operating : . . '1 ,·2018., 1"herefQ,:e, the 15% ta?( Fate ill1;1sfrated in the
. he:adq~art!;!rs· . of multi.riationc1l . c~mpanies •. · . table -sba·11 only apply i.f the t'axatlle fringe·beriet.itwas .
. ·. offshor~... b~ilking· un!ts ._of a for.e1~~ :· b~n~ _·given-prior fo :201-8.taxable year (Nl~.c, as amended·
.. established -in. ,the Philippine~•. fore1g,::i serv1~e , · · ·by TRAIN, Sec, 33,(A)). ·
. con~ractor$· or su.bcoritractors' engaged . rn . ,
.. petroleum operatiohs, 'or any Filipino individuar :
. employees wtio are 'employed ..and occupying
. . the .sa.m~ posiUon cfs. tl:)ose o:coupl~d ~r held by ·

,•

.:,
261~ SAN B_EDALAW CENTRA~IZ~C? ~ OPERATIONS.! 9~ .
 .··INCO.ME TAX . ·.
SAN aw;,. LAW CENTRALIZED ~il'.OPERAn9Ns - MEMO/jYAio 2019' ·
ifA GplMI-± 61891 i-aiwa MiWMY I swwe
· Fringe·Benefits Subject to FBT-:.. {HEV,H)M-HEEP) Non-Ta>table Housln'g F·ring:e·Benefit: (MTB) .
· (NJRC, as amended by TRAIN,-Sec. 33 (8)). a. · Housing privileg~s.of Military officials ofthe
1. !:!~using · ..:· . . ·'. · AFP consisti~g 6f -offlclats of the· Phillpptne ·
Army, Philippine· Navy· and Philippine. Air:-
Force; · · · · ·

Reason: The Stateshalt provide its soldters'

En:ipioyer Am~tmt· <···of. 50% .· of t-he Witt) necessary quarters which are within or
leases .. ·.... 'rental p~ici" . value .. of the· accessible from the military camp 'so. 'that
residential '· . benefit · they can readny-be -on .oall 'tomeet -the
property · , for exigendes
. vf. their
. . ..n:,i.litary
. service.
use of. .the
. ·.. limployee .. . b.Iempor~ry hou.s!ng· for:. an employee. who
stays.ln a:tiousing unit for three-i(S) months
E~ploY.er. ·. Annual _; value· 50°/o. 'of the or
Jes~; .and ·.... :. . ' . .. . ...
.'owns · '. · the is 5.%. of .the value of 'the c .. Housir,g unit· whlch is ~ituated ·, Inside . or.
re:3id_eritial · higlier. amount benefit . · ·, adjacent' (i.e., fifty (pO) . meters ·:from . the
property . ,and ·_betw~en: . . . perimeter of the tiustness premises) to the
as~·Jgns· )h.e a .. The.Ffi.1:V·i.n _ . : _ . _ · ---;~., prernises.ofaBuslnese.cr factory (~~R.No.'

·,
. same ... for
-. ', by... .
employee .
.u.~e.
.the .. ,. R~al ..... ·_.,;rr ..
_ Hie. Property_ ··:.Ta~ . z
Declaration ·
. ~'>.··
/".'.<-""~
r_'l>-.,=-=-2"°~ x6en~qcpunt·.
J..;.j J\ ·i-·~"'@.~
l . .,. . . . ~.~8.~ · ·. -, .
'Sec. 2.:}__3(£:)(1))..
. ·..
.: ·
.. . .
·. _ ·.,· · _ · ·
A . V~;:Fpr- . . .,;,1_ ..:~"'\:· . . .
:.
'

. ·
.
..
.

,.-
..-
·.
. ·.
-._.-·. ·

·: ·. ·.
.

.·
. :m~.

9et~rrl'!m a~- /'..

th.~ p1R,/~ ...
.
b. Tne. ~o).;l'al .~,/(.' ·.. -.~~-~
:valu!:! :- jt,e~f .f V... /r· ~, ~
· .
....;GM.~J~l,~Ul.e:lfxpenses. incurr~d · ~y. the
::)f' .-w,empl9.~ee~4,t:4vf>i1~_tl.are.pa,.d by his. employer.
~ .tll..~nd. eipens~&,pa1d'}.for by !he employee ~ut
!~- _· ·-~~ .. -~eimbu1,sed 6i~tt£le~p!oy~rar~·ta~able. fringe
· . , . ,,?--' , 1I , ene 1 (R.R., o. 0~-98, Sec. ·2,.33(8)(2)(~)and
ii ~·.--a.~'1'
Ert'ipli:>y~r ~ . · f.-nn.uar
purchases . a. ,s · 5% Uor . tMJ value. of thj ~ .
rf:$idential .·. - .ac(!uisitton<.;(_~fb~fl!:1t[_:
soro '.fp_f .~i . "';.). '1 e;:=°?fiff.-· ~.
~~J>f[~
·~· . · l . · 'ti
1p--"'.'. ~ ·
¥~
. .·.. · · ... · .
H . -. · · · . " · '
If: ~~ ~feo~i:isare duly r.eceiptep·
prqperty

~.as,s·.
on· cost, ex~l~s~ , . · \.~~~-
1nst~l.lrtl~l')t.: . pf int~re\t(B:. \
and : . · . · \
'J<A"\ . _ .
:· . '\_ : ~;j~ ."' --
. ~·· ,;,, . for ./&J0fl.,the.nall"~Jof
~'eJ~@.~re$j.do-
\;"'~g:eui~~I
1 =the emp.loy~~ a.nd .the .
n'€,tf partake .the nature of' a-
e~eo~e.~ffributable t?)h,e.employee,
. all~ws.. _use' b~. . . ·. " : .· · .. , .. - · ~ ,-., ?·~~~aid-~pense~41i~e:noqaxabl~.(R.R. No:03- ·
th!:! ~~P~~ye~. . .· . · ·· · . _, ·.· ·'\, ·. . ~TENY\~8)Sefof.2.~3(B!j2J(a) an.d·(b)),·.. - .. :· . ·
.. ·_.E.mployer; . ··;· A~q~Jsitibn: · ~ntirp~~ ·, ~IJJ,~. ~~ ~~-.. ,,P · . · · . . · · . ·.
purchases·. ·.a. ·cost.· or. zo~al. of...ttfe 1'.l ~fjt·
·reside·ntial ··. .va11,1e. · .as:-,·'- ~J.. ·: '\:J
e::=t ~o~" -f~~~pffal expenses of. .the.. ~mployees
Aw~n~~:udby. the ~n;iployer,or re1~bµr~~d.to
. property · · and ·determined by . .· · -~ . l~tJ:1.,g.cernpfoyee~hc!li be treateq ~s:taxable fn!:)ge
transfe'rs
. . .
the ·lhe . CIR ' • . • · _,,I · · ~.
. -
b~nefit.(R.f:?.
. •
No.. 03-,98, Sec. 2,33(8)(2)(c))_
.
··
ownership · Jo wh,che:.ier: .is · · · · ;· . · .
employee.:· .. · higher·. : .. : . 't-4oW: . · Repr~sentation:.._ · and · . tra~spor,tation.
. . allowanc,e~·wJ:iich ·c1re fix¢d ·.in amounts·and _are
. l;:mployer · Difference· intire · valt.ie .· . -r~gula~y .r.eceivl:l.d ,9Y the·ei:nployees as~part of
. ·P!:Jrchases·: . a between::--_·. :,. of tlie . henefft. . . · ,. their niO'nthly·.~OT'(lpe_nsat_i91\c!Tenbl. trea~ed. ~s .
i:esidential: - . a .. .The ·high~r. · · . · · . · taxable · fringe· .ben.i:ifits·· but are. constdered '·
property· and of the FMV in : . · · . taxable.co·mp~nsa~ion in~ome,subje~t.to regular .
.tr'8insf~rs.·. the .
ownershfp ..:. tc,· . Pr0perty Tax
.t~e Rezil r ·: · .. tax
rates (R.~.• No:·oS:-98,. Sec:2..33.(B)(2)(d)). .
.. · · · . . .. · . . · ·· · · ,". ·. ,: .,
emplo1ee at. :a ~ Declaration · · ·-
price less t.han and th.e Zbl"\al .. ,- . .. ·
the acquisition value .. as .
cost detemifned .. '
by·. the Cl~; .. ,
·and ·
·b. The cost ·to
the'· . · .. : ,
., . ·employee:.. ·. .
· (R.R: No.03-98, S_ec, 2.33(8)(1})· ·, I

.. .
.
. J QO. . I• 2019' SAN SEDA lAW CENTRALIZED BAR OPERATIONS
. . . . . . .
 lN.COM-E TAX
SAN 8£DA LA.W CENTRALIZED BAR OPERATIONS ~ MEMOR'lAJD2019
IM61Wfiffi
• #MIAMI "a;; ewaa, tiMiNifiti&WHMXN!WWP+EW-S
•MC~'.141'.1~ ... ~

3:. yehicle of any kind service and -

other non-
.personal
use· ·divided
· by· five ..(5)
Employer Acquisition .. Entire _value . of the· years
purchases: cost - · benefit regardless of
the vehicle in Whether ··.the MV is · 50% of the value of
Employer. Rental
employee's . used . by..
the - leases ... a- payments . the benefit
name . employee . partly for ·. fleet 'of for .. motor
. his personal" purpose' vehicles -for vehlctes not
.and partly . for the· use of . 'the normally· · ',
- ·, .' beneflt of . his business .: : used _,__ for
-(" .. employer . . and . . . sales; '
employees . freight;
-Employet Entire.' value. .of ·_ the ... :delivery·, ·
furnishes received .benefit regardless of . service· and
employei3· .. whether the MV is .. · other - . non~
.,,- .· ·with'· cash.for-
. the·¥. · .. · ·
used . : .' qy-
employee partly for .,A -
the . _ .personal · .

!,~,
. use
;,~·: purch"i;i°se _o( . his personal purp,r.~f ;;?J.·
:~; . .
~fl
m:-.
irehfcle and
· ownersl1ip is·
plated· in- tl)e
.• name. of. the
.
a~d . partly . for :,tb;e', '/~')1. · (R.R. No.03-98, Se~. 2:33(8)(3))
b_e. nefit I O
f Lh1s'
employer · · · _:,') 1.'\"·,).,:-r:'""=;Notes_:.
1,, ..~ .. ··
1..,-{"; .. ··j·-·,r-.i:4 . .
~%)-
.
·
<

· _,..,,;;9 ('.-; ;1~.;....:l-:..:~ati'.;"'.J;t;re¥t~seof aircraft (includin'g helicopters)

· , · . ·
•

I,r.. -_
~
~--·.

·;. ..
·.
·
ernpl~yee.
·
.Employe_r . ·

:portiori·ofthe by
·
· · • -

•
v-,

•
~--;;:Y-:
. Ar.nount _ ._Entire__.1~~·r~-<;>,.:1
. shoulders ··a shoulµere~ bJ»~-firres~@]El3.~S?f
-· ·,..
,, ,,, ·
: ·'.ii l1

.the_;t'_!lethe_s""t~·e_ fvlY: 1s .
;, :_fl _ . ·
. f
;: :;,:.,.!·i
tl,../...
ne 1r-a

f~·:'-. -
1\

H\
· ·

\f _.
?W~~iand _i'nai~tained. by -the employer.
shalr/tle\treat~d.as, business use. and ·not .

b, 1;~e· use
,,.•./'
.: . ~uife'f.t \o .
. ·.. . 2/3~(~)P>¥.p)).
u ·\\. FB.T. . (R.R. No. 0~-98~ S.ec..
. - · . _ · •,
y.ac_ht, whether ··owf!ed and,
·
amount · · ol employer · r. .~~e~:;:;-.J:}~Y,i. ~;.ti}e fj . _ -· :~~;,tif11~Jt,;c?Pl~ased· by the employer shall
the . . . -~rnplo~~f'~~rtly,{oj . (;ii · · ._'ii5~ti!:[~go,,;a~ taxable_ ffinge bene~it. The
purchase.: . hfsrP~t~P.9~plJrpo17 11(l ·· . ·value of the- benefit shall be based on the
pric.e of. the :
·vehic!e ._arjct
- · ·1f0
eneti ,, or,7
1
abn_d\:JPt~rll~- ~-11_ • th~e h(-;no:--, ···depreciation ·of.- a yacht .at an. estimated ·
ts _}-J·t •it~ · · · · (
- 1·p·_.·r-s . -1 ,'b,,>-J;-;- · . · -.,. 't:,1~':-,Ji~f.U"~~~(u_l1 ife-of 20-"years- R.R.- No._03-98, 8·ec ...
Ownersh emp_ 0¥:.""1,.ir .. _/! 7'""' ... -u~,...:-ci·~~!3_d(8)(3)(h)). ·.... .
placed in the . . \,{ t·:tef. . . ,. . '
·nairie·onlie - · · .. -''.,(...,, o;,- • Note: the hig·1,- cos_t·ot bwner_ship f aircrafts -
o_
. 1· "' .· • . '"-~~·i'_L:) ..
J301P oy..e . ~, mak'es ft inhetentl·fprohibitive or.impractical to -
~ ... ~ ~ ... ~ 'be·. for~~ perSOlial. ·_us·~: 'Th4s1. ·aircrafts: ar~ .
·_ ~r.np!oy~r·. A~qui~itip_n. ~nti!e- value ·of. :the . '·deeme<:I by reg:ulatjons as ;,olely for ~usine$S· .
purch_ases. · .. cost, · · . ·benefit regardl_e~ss:of use; he.nee;: they . are E!Xernpt from. fringe
th~ vehicl~_in exch,.rsi\/e of- _y..,het~er 'the -MY-. is . !:)enefit1ax. Yachts, th_ough pricey ori the other· ..
irisJallm~nt ' Jrite_rest,.... used .·. by the . . hand, generally l~ck anyisensible· -business
.and . :· . : . . d' ·.d d b : employe_e ·. partly for . . .·purpose. asicj~· fr_om_ peing for~.- per~onat
O'!'Jner~~ ip ·_is ti~~ e . -(~ -~is _personal. purpose pleasur~; . hence, ·its.· depre~iation- vc1lue is·
__ placedmthe: · · . : . and_ partly for the _·._ subjectt9i=BT-infull-(~ANGGAWAAl;·:suptaat·
name of the yea_rs. · benefit ."of· his :372). ·:. · ... ~ · :
employ~~- · ·_ . ,employer·: - .. .. · · · · ·· '·
4 .. .!::!.ousehijld ~xpen~es .. ·. · : . _:·_: · . · · .
Employer_ . Acqqi~ition .. 50% ·_of ·the value- of :;: · Expenses 'for erripio.yees whie.h are borne by·the
owns a. fleet cost. of ·all the. benefit. . .•. employer for· hol.JsehOld. personnel, ·such as.
"o(:: v"eh!cle.s the.vehicles . safaries of lioµseliold heip; personal driver ·of the
employee; or- 9ther ·simllar per_sonal ~xp.enses
. foruse"ofthe· not ·: ·'
·bµsiness . n_ormally .. (e:g., payment for homeowner's-- -association ·.
. . : 'and. used . . -for 'dues, garbage plies,. etc:) shall be· taxable as ·.
~f ••
. . employees .. sales; . fringe benefits (~.R No. 03-98, Sec. 2_.33(8)(4)).·
,.; ·· · · · freight,
~ .. ~ .. d_elivery
f,
:~ .
'·.
.~ --
l"
...
201s ·sANBEDA LAW CENTRALl~ED BAR OPERATIONS, ·101

I. _
 ·1N:COM .ETAX.
SAN BEDI,\ LAW CENTRALIZED BAR' OPERATIONS - Ml:MQ.RY AID 2019.
~ . iii a 6 a rf1DW66WIIW'IIDYti
BfJllllllllmlll!lllllll~;.;;;;;;ml~miilllllllll&llllllft'DlalBm·u~~a~m.lll~lr.llll::mlml!-a~llllllm!lmllimM¥1Dl,RKim@~4~WMal!i9=·Bllllllr.lllM
f "'O •.••

5. interest on loan at le~s than market rate· to Summary . of Expense~ . for Forelqn .'
the .extent of the.' difference ·between' the· Travel subjectto fBT. (30%-L TE) _ ·
market rate and 'actual rate granted .: · i. - 30% of the
cost offlrst. class ·airplane .
lf'the employer Iehdsrnoney to his employee . · tickets· · · . ..
tree-of tnterestor a rate lower.than 12%, S.Ll~h·. ii. :!:odgi~g.cosi.(n a hotef or si_milat ..
.I
interest fo'r~g'one by the employer.' er the ·. establlshrrrent in excess of us $300
,, difference .of .the interest' assumed by. the . perday; and ". · :.. _ _
employee and the rate of .1-2%· shall be treated. iii. -T'ravelling Expenses paid by the :
as taxable fringe benefit (R.R. No. 03~98, Sec. i111ploye(for the tr..iivel_of the .faniiiy
2...33,(8)(5J(a)). · ·· ' ·
_ · membersot the .smployee;
.,'(B~NGGAWAN, .supre at 374). - -, .
6. M~m~ep~hip fee~·.·dues,._'a~d rither_~xpens~s
borne by the employer;for·the._emplo"¥"ee, m .. Nofe:: Wheri /there. is ·:no documentary
social. and athletlc": clubs and .. sfrnilar "evidence shcn,ying,thatthe employee's travel
. or_ganizations.(R,R.No.J13-9!f~e¢. 2.33(8)(6)) ·. .' 'abroad was "ln connection ·with business
Th$se expenditures shall be. treated a~ taxable . . . . . ~eeti(1QS 'or' conventions, the Entire cost of
· fringe benefits of the employee in fulL(R.R. Nb.: the .. ticket . including the·· cost 'of hotel·
03-98; Sec. ·2:3~· (8)(6)): T(:le· monetary vah.ie is ,.. · , - ... accommpdations' and other . expenses
._ < ·_ the amount paid (8ANG_GA WAJ'.lf,. s_upr~ _af_ H.2k:,:.:;-~.:.c,,,.,,_J_!iddent .' thereto, - shouldered . - by .. Jl'Je
· . . · . - . ·. . · . .
7-. ·.!:!.oliday and·vac~bon.expen$_e~-·
. _ .f_~-
.
il(j._ ...f\\).
f>~'"_: ·
r· -~'PlQ_yer,.shall be treated.as.taxable _frmg_e
/oerip~it&JR._R.;No.03--98;.Sec.-2,3~_(8)(7)).
: Holiday al.'ldvacat1on:expenses ot,,fh~fo~~----:~~iC t/. }~ ·,. . · . ·. _ : . · . ' ·
. borne by_ ,hir·.~mPtoyer sti~J~}':~~~!fd'. a:_..,..:,.;..-A,_.,,,. ~dtl~aijonar~fS$JStadc;to ~he empl·~yee.o~
taxable fnnge benefits (R_.F).l.~N<Y-.vfp9.}..-See. · 2~ · tfis~ep'e~den!,~'~ ... · .
· .. 2 33(8)(8)). ·. . /f:Q;:'\ '6 Ii . · ··'@ ~ )g' 't \ "7r.'7 \ · · . . .
. .··. ·. :- · . . , . ,.'. / . ·V/f. ff. .·. it · .1J.~, 'Gener\rRut~i :q;ie ·~ducational assistance. is a
~- . gxp,en~es·for foreign tr~i~ l:. .L._Jt:.1f'~-taxap~.'fring1{wn~t1t (R.R. No .. 03-98, Sec.
. General Rule: Expense~ }2J:?.f9fei_gQ;·tr-pvetar!:'--, U~ .,,..,.,.,,.~"~3(:B '{9)(a)).l i;,:..-.qi , . ·. · .
taxabl,f3'fr.i~ge .~enefits, "'fJ:te~r-c1'kelhn~.ew_en~~L~)Jl_~·-Sf'.. I. · '- u; .;;.J ~ . · ·. . · .
of the _fa1111ly m~IT)be~ i·~lt'~.\'ll'T1Pl~~e~w.h10~~~ ·exce91iQ1,1..s: -~ ~ '.'H., . · ·... _ ..
ar~ pMI for by tlie ernpl yerlafil~~~j~ \iFBT ~~~a...--:-Bomt~~oi, f,;!!!,.ldj IS directly conr;iected ':"Ith.
{R.R. ,No. 03-98, Sec. 2. {BJ.fj){-l'f)):!(~~;:.z_· ~ · .,l~f.}. , )j~tbyer! tra'~1pr business and ther~ 1s a
· · ·-. · . ·'.·\ ~ · \.. ·. ~*:,~ 't5if ·~~1:iit~n~ ri.tract-;J,natem"ployee.shall.remain
_Excep_tion! _Busil')_ess. exp~(l;ses p~d.:fo~W~b~ ·/.~.,.~~~t}fnplo.i'dwithJ1e empl9.y~r- for.'a p~riod of
employer shall n.ot b,e treat~d-?s ta~able'f9n~_K"5lime·mutually,p"greedupon (R.R. Nq: 03-98,
· ·ber:iefits' if.th_e f~ltow.ing ~ondft~r-is-~r.~t:~;'c f£:tfn-.f>:J~£,?- 33(B),.{9)(a));,a_nd · .· .
a.·. Th~ _exp~nses were rE:a~on~le;__ (-~~~ - . . , Jl./~ ca~e~offclependents,. the assistan<?e· lf;la;s· ..
b. Expenses.were pai_d·for the_ mr~_l9~?J.!,OF~ ...., '.P{.O~id'act'"thro!,Jgh a col1)p7titiv~ scheme
. . employee . for .the "PU.fp<>,~e· · of:..,'t,tten.~ng lvif"'\..t"'-:\jgs;Jef" ·the . s:Chqlarship. progr~m ·of tbe ·
business meetings .oi:..qonv.enfiori;>;..a'r!d·~~-=--~"'"~mpa_nyeinployer:.(R.R. No. _,08-9~;. Se~.
Fe .. · .. Ttie _ : employ~e'.s _ tr;:ivel-;,. abro~d._ . ~as · .. · · ·-. - .2.3~(B)(9)(b)). · · ·
. .. . ·supported 'by.· documentary: · ey1~_enc9. , _ ~ - · , ,..· _.
: : r pr9ving .the ·· ~t:~ual. occurre.rices .'pf· th,~. - . ·1·0 .. lns·~ran~e ·Prehlium
·· ·.meetiil.gs· o~ Ct,nvent!o1:1s (R:R:-.~o# 03~§181 ·· · · ·. = - -.. -~ .

- · ..· S~c. '2~33(8)(7)(a);· 1· D'E LEdN,. supra .!3t.
. : , 39).: . . : .. •, · .. ,..: .. ·...
"ThE! .. ·~xerriptior:1 . eov~r~. ''_ini~nd' - ·. trav~i .
expenses, sµch· ,;IS· ·expens.es for food,
beverages a'nc;l· local tra11spqrtat[on, except ·
.lodging cost . af a . h9~el . or.. . similar
· · establishmentsamqontii:ig to an~aver~ge, of.
· more th'aii·.US$300 per (jay:(R:R. No. 03.0.98,
. Sec. 2.3$(8)(7)(a)J: :.. -. · · ..· . · :
qr
i:i;e '.cost ec.oncimy. an~. ·business: c1ass ..
airplane. ticket 'Shall not be._subject t~ F.BTi.
· However ·:30% of the cost of.the-·first.tlass
. , airplane ticket shall be subject to FST (R.R.
' No.'· 03-98, Sec. 2.33(8)(7)(a)):
.Ge·n~~al Rule: Th; :premigms pai~f fqr. ,lite. or -
health 'insuranqe .~nd' 9~h~r n'9t;l:life inst:Jr<,1rice.
:· bo'rrie by' lh!3. employer for '_his. ·~mpl'oyee. ·.are.
. . tax.able .fringe benefit~ · (RR: No, .. · o~-98, _sec. _
: . 2.~3(8)(10)),.: , .. '• · . . -
Exceptions: . . ., . .
of
~- . ¢ost _pre_m{Llms borne'· _by' t~e ,.empfoyer
: . ,• for the grou'p insµta nee, of emgl<Jyees;an,d
· ~.. Gontri!:>ution~ of. ihe empl(iyer for. the·
- .. ·ber\efits_ofthe employee·toth,e·SSS, GSIS.
and similar . contriblltions 'arislng - from·
proVi$iOnsof any e'xisting raw'(R.R.No. 03-:
98, Sec.· 2. 33(8)(10)): . . . . · · · · · ·,
· .. ·,

102· I 2019. SAN BEDA LAWC.ENTRALIZED BAR OPERATl?NS

 . '
I NC.oM·E, TAX·.
. ·. SAN B£DA LAW CENJ:RAUZEo·aAR OP_E:RAilON5 - ME'M.ORY AID ::1019
· mtllllllBl!ll.. lll!l.. lllllN~S?YlmlllllmlmCHMBl~·ap1111~1=a~22nsa2MIDIJl.. llllllll:'me~,air.lil&l1B11~llliiil=IMIIIEt~d~G~EM!ml!lmWib~.~·~
.. lllllllAm~~llSll+-11111J.~~·~·J!i~~~
The following benefits are not subject to· the
FBT: · · ·.
i.
· .
. Those: which . _are at.ith'o1rized ·~nd
.· exempted. ·,from income · ti:ix under 'the
· = .. ·
- .. ! ._D~E_M1~N_1_·M_1s
. · _B_.:e_N'
__ ·...;,,._,Jl
...E_.F_1_T....;.s_,..;.·

Nl~C·or under any special law (R.R. No.
03-fJ[J, Sec. 2.33(§;)); · ..
[i. Con{ributions ·. of the .employer'
beneflt of the employee -to -, retir.ement,
lnsurance : and .hospitaliza.tion · benefit.
plans· ·; · ··· · · ,· · ... · · ·
iii. .. i3enet\ts giverl to ·_rank ~nd:tfle ernptoyees..
v.ihe.ther . granti=;d:- under . a .collectlve
. b;3r.gairiing aqreement or. riot: .
iv, · Pe tntntml« .benefits (NIRC, as
· by · Tl=?AIN,. Sec. 33· (C); R.R. No. 03-98,
-Sec. 2.33 (C));: · .. · · . ·
v: If required by Hie -nature of or necessary
to the trade.rbusiness er profession otthe :
'employer; · ; . · . . : .
· De /ttrinimis. Benefits ~xempt .from' income Tax:
· These are. the facilities or. privileges furnished or
for the. ·. offered by· an emRloyer to his ·emplgyeeifthat ~re
of . r~latively · small. yalue . and. are· offer~d or
furnished by }he employer merely as a' me'ans of .
· · · . promoting., the· healtli. goodwill.· conteritrri~ht ·and
effic.i_er,cy.of his' employee.s'(R:R. No. 03-98, Sec. ·
. 2 ..3~(C)). T,hey,are the fol.lowing: (R.µ.2M3,c29U~) .
.
amended. .... 1.:· . Bice su·b~·idy'o{p~,000 qr one (1) s~~k of 50kg ..
. . . rice. P~.r month amountlhq to not rnore than ",
.» ·: • P2;000.(R.R.'No . .:.f1.-?018,:.$e.c:.2.78; 1{$)'(d));·· _.
. · 2. ~niform and'clothinq 'allowance not exceeding·
P6,000. per annum (R.R: No, 1'1-2Q18, ·sec.
· ·. . . 2. 78. 1 (3)(e)): . · ·' · ... : . i :. . · . · .

vi.. ·. If it .is•.f9r:the convenience or.advantaqe oL,j~.. 3... Mo.netl~ed!!n~sed vacation leave (YL) credits
·. · th,e employer (R..R .·N<> .. -03,98, .. $~c.~1r'J,( . pf private employees not exceeding ten '(1b).
2.33(C)); and . . · ,:.. · · ·. f,i·'',/7·~!\· daysdurinq the year; , .· · · ·.
vii. Benefits received by . an employ~e\'J:Jt' S_!5~l . . . -: . ·. • . . . . . . .
or~·
vlrtire .. GB1 antf'pro-~u~tivityirice.i¥if.{;.:-~:;f.....:-;H Note:;,/vlonetization ?f · u111.1sed VL ·~re~its in ,
. ~chemef. provided tt:ta.t .the .,tota!~ijo!.l,af··;;,-,;µ.t.:~,;.:~t,Jf,.e~:rsf ten .<t~) days ;an~. rnonetlzation of
. . .m.onetary valu.e received frorJ?::·roth CBfo.d lJ . ' . : .SIC~~ea't'(Seven If not exceedlnq ten (10) days .
and· . productivity ince~~~v--.,,schemt?i.rzi.1 are nqWn¥empt.. · . . . · · ·
combined, does nor excee19,R,t.9,ooo ~lilr ;;\. ,.!
-· ·. . Ir~ .- . ·· · ·
employee p.er taxable Y.ip.'i.i(R~R~o. 1.- H · 4. Mon1ttzit_d ·~alue of vacation- and sick leave
· , 2015). · . · >~:-- - "if!~. · · f ~~ · cre¢,lfs.. )paicl~.'to . governm~nt ..pfficia·1s and.
"'I ~ . 1· . . h . , .
(,i',~7 . '5);,, . .~'".". '"'~'.' . em,.,.oy~es
, · · "');:.- u .
· . · .· . lo 1m1t ·as ·. to t e number. ,of
Not'e: E;xempti'?n fro~ FB~fs n~Jan,,~)5emptio.n ,t:l ~~~t!>.~'.:tr;1~ · . . · . _· · ·
from other: iricome tax.es•. unti~~- .$~~.~~en~m;~ !·i:i1 5. · M'ed.i~.a'.:o..t.:~~,..alJowar:rc~ · .to depend~ots of .
also stated_ expressly )o. be e~?°~t'Jr°??J~tl)er . r;f· . . .
iri~ometaxes (2 CASASOLA,.l)JIRGJ,;suprf/at 273).· 11,/~'fn:\ el'J')ploree,.pe~ .semester. or P250 per mo~th'..
employ~es not. . excee.c,hng . P) ,?00 .. per ·

. · •. t_r,1,~:J-: . . · .11~,,f:\~Jt:f.i~(f?.,R. /\Jo. 11-2018, Sec. 2.7B.1{3)(c;));

Note:·,whil~· the be,:iefi.t~ above m~~;(beef.~fript:d~~~..~•. e.oi~1.ili~ year!¥. !'Jled~cql benefits no~ exq:ieding
from FBJ•. 1t. m~y ::;till for part· of met. ~rnP.tO).lee's
~ro~s. compensa~ion.Jncome.which 'iSZ~flC! to
_· mco.me tax (~R .. No:·03-98) ... ;··
· ·
Fringe . , ~enefils '. Giv.en to Rank~a.nd~File.. ·
Employees· . . .,
. Similar. fringe :benefits g111nled to. manager(al or
.. supervisory .employee.s ~!iich are· sµbject :to 'FBT, · :. . .
m~y lik!;?Wise pe· given fo rank~and-file enii;>.loyees.. .
··· · . . . · ·: . . , · ·
The m·orteta~y value of ttie,'.f~i~ge benefits. given to
_rank-and-file employees, although not. subject to-'.
· F:BT. shall'.- qe cons!d~red .as·· part·· of ttieir.
. . cpmpensation 'subject ·{o ,a'pplicab,ie .income fax
·.. 'rates (R.R. No. 3-._9,8, Ser/ 2.3J(C}) .. ·.·
'-·'
_ . P.~o.oo,o per;.annu~; , . , .
.7 .. :Gift_- given· durir.ig' ~hris~tn.as: ~nd · maJ~r
.. , : ·: _. ·. . , .~nrnversai:y· ·, cel.eb~;:it1ons. , not exfe!ld.ing
f>5,000 ,per. employee·,per annum; · , ·
.8 .. ~e!'iefit~ r~ceixed.by an emj:iloyee by vi.rtUEl pf
. -:- a ~ollective.b~rgaining agreemerit (CBA)'°and .
prod(:!ctivity',incentiye .schenies: not exceeding·
P10,000! . . . .. , . . .: ·.·.
· · 9. Daily· meal allowaoce·for Overtime work aria- ..
. · ·. ·. · nighVgra.veyard·~·shift . .not ~~c-~edir.ig':twerity- ·
m
.. fiv,e percent (25% > 'of the:basit::- inhn_t,!m wage
· . ..on.,a P.er reg~ori .basi&; . · ·.. · . . ·-: · · .
)0. ·bat.indry· Allowan~e 11ot exceeding P.30'o per .
month; and. . . . ·. : . . . .
. · 11: Employe,es' .ac_hievemerit.. 8wards,. e.g.',. for .
. ,Ieng.th .bf .Se!','.iCe or'sa~ety ~chievement, Which,
. must be . in the form ol a tangible persona,L
. property othe(than·cash or giftc~.rtifi~ate,..with
:_ an .. arinual -mohetary',val.1,1e· of naf ~xceeding
P10,000 (eceived by the employee under an-
· establishe(;l written plan which does not
d1scrJminate in favpr.of highly paid employees
(RR. No. 0~-98;.Sec. 2.33(C); as amendedby

2019 SAN BEDA . LAW

. CENTRALIZED
. SAR
. OPERATIONS
.~- 1103 · ..
 tNCOMETAX .
4 WI-, SAN BWA i_Aw CENiRAuiw BAR CiP_ER/1.TJONS - MEMORY?'J0,20!9
I f ¥'.fidbfi nu ···
R.R .. Nb .. 05-2011, R.R. No: 08-2612 andR.R. Hence, in the pf~sent probl~m. the excess of P500
_No. 1-2015).. . . . . · multiplied b"y 1·2 (representing 12 months for orie ·
. ·' . . . -year) plus:thEi 13t_h month p~yamou11~s to P94;ooo
· Reason for exer:nptron: The fair m·arkefvalu"E:f (P6,000.- + · P8,8,000). The · ·p4,poo excess is
. of lhEi prop~rty · or service·· is_- so. "i:lm~il. tha~ · taxab!e, ·
. accountipg 'for: tl:ie- property or se(Vice would
.be · unreasonable . · or administratively . Deductions fQr'the- E~_plciyer .
impractica) · (1. DE-LE<DN, supra a.t 403), · · ·, . General Riile:· Af\Y benefits· given .by the employer
: . . .· .. ., .
_whether. con~ldt;1_rEl,d . as:·-qe· ·mh:1imts . Qr. fringe
No_tes: . . . . . , .. ·benefits supje"cMo income tax shall be ccinsidered
'a. . The -. ·list of · ·benefits· ·enumerated. · is as· cteduttible expense of the eini:>ioyer. The fringe
. · exclualve.>A11-··oitier benefits given by . beri~fits _tax is ·also deductiple (R,:R .. No. ·!:>3.-9·a;
.: . . . ..· . employers which are not "included ln.fhe ... .~ec. 2.33(Dl ·. · .. · . .. . ..
. · .... .: enumeration·shgill not be .consldered as de
·· •· ininimis behefits, ·henc.e; ~hall be subjectto.. . Exception:' :·1t. the basis. to(tomputati~.ri of' the
• · . 'Income tax (R.R.'No .. 05-20:t 1,. Sec: 1).· · · .. .: fringe· benefits· tax. is' the depr.eciation .value, the
· · b. The de minimis benefits .enumerated · are, -, zdnal val(ie or. the fair market.value-as determined
·, exemptfrom income Ja~ ooly up to the. . . . · in t~e-curre,:il"real.property tax declaration, ontythe
. ·'~xtent of the <;eiling'prescribed. Any amoupJ;::::.:;,r=@gwa1"fringe_,benefits -tax paid Shc)II constitute a
- .; ,in', ':}Xcess of. the _ceJllrjg)i~o~ided-~):l<!;f~e···u~ .., _de~1l_b.[~:e~pense.:~~e v.afue of the fringe Mnefft
· taxable to the. employee ·on1Xt,1f' suc~1s .· .... J~n ,9ot';:b~dedl!'ct1ble·.(R.R. Net 03-!:18,. Sec .
. . "beyond. µ-ie_ pg_~.ooo thres!;j..ol.cv.~~,/.e~.t>~~~~P./->'- . .' . . . ·.:. . . ·
131h month p_ay and other bai;i~fits\(R~-:--Wo.. · . , f;rf'"_. A~ ·. · · · ·: .· · ·, · . ·
: 02-9"8, Sec. 2.3.3(C)). _- j1 ~;J,/7" ,,.,.,...,.-·-""p:ex-ceP.~~,'\-,fti~\px~eption:·.If the aforesaid
· . . . ·.-· . .:
i'lF : , ·
. ." ·· I' ..O""'l ~. 11))< r· · ~nal vaiue· i-talf.Jntket'.value· of the 'property is
Note: De minim is benefits mjj.nfo<li>'fan ployef.~ ,A~ -, '.g¥ea~e"r t ~I') .1f~ fosjtJ~e·excess amount shall be·
shall f6rm part of co.rnpens~t!on ihc~me s bjec~r'·'<. aJIOV\'.e.d s a de9Cic;tion~rorn the employer's gross

n'•, ~. I
··of the ce1!11:i_g prescribed -~~e-.'Sname.-~e}eg1v-~? .Iii ~f?2·.~1,(D)):·· ·. ~ \" ) ~

.
aJ;
. the grad~?"" ra)es,but on\¥ ifil;;,,IJiount ; 'ex~~~~~rife frJng~i,~'!!ll.f<jexpense (R. R:. No:03-98,
J~ ·. . n >='=j ~ .
. ' ·. · . ·

-~Av···-.<, . ·.
.. to Farik0a_nd~file i?mployee.sff·!J;,\~e\~ame·we\e_gili .: ~ . : ._. .... · ·
to manc:!gena)_.,;md supervisory,e~~lo~\- . - , ·· . f,'.)
.. .. . - \~ . . ni -~~ . . . ""~- ·1· . . ·
- : . : ·..

. '.The an:i?u~t .~f de:mi~~~s;h(r-illefi~t~~n~~ to;·. j. .· .. ·. :·.: .. ,.

· the· ceiling of·_dEf mlnim,s ~enef1ts\?hal~t>st,e. •· ~ ~ ··. .. . . fl ·: ·: .·· · ..
considere~.ii, ~~termining tfi\ . ."P9.0,0b~.:cei_lii;J~\-..,/:_S:; . .
. :oth~r.benef!~f ~xduded'fro~'\!he.gro~nl~cwn~~- - ··,. ,· 0·
.. ,r-- . :. ·: :, .
.
under Section 32(ij)(7.)(~~ · of\J~.e -~~~:.,:s---~~~;.:,.,.,-
. ·. amendetJ·.by _th_~ TRAIN .Law. Qn tf1~· af~;h~o.~-=-'>11'_: ,~-\;;),
't>~ · ·. . ·
, ·'
· ·,
· ·
... _th~ _exc.~~s ·9t:t~~ de .mi~J~i~_-benefits,~vf ..'1~fr .. ·.} .A'-l\.~-~~- · . , .
·, · respe9t\ve · ·. (?J:lllings· pr~~~:nbed .. ·. unde~s· ...:.V,Jl):1,. ~ . · . .-.....
. . tE?QUlation shall oe conSjd~:!"red ·as· part·of othe~.: . '
·... "benefits s.ub]ecno tax oolyori the·excess o.ver.th~ . .. . . . . ·-. .· ... . ·. .., . .._.
. ,•

. : P9Q,ooo; ceilirig'(~.M-C, Nci: 5:.2011).'. _. · -" .. -. : ·· ·

. . . . . .. . . ·.-: ·. .
lllusfratr~n: .. _::- _-::. ... . . .·.... ...
..·.
Mr. A.received a)ice sub~jay .of f.>2,500. per rnonth ..
H~· 9ls<'.>-'receive.s a '13·th· month pay of P88;0:(:)0. ·
: . •,, ··.. : ;
-: ....

,·. . it, the p~~sent scenario; the rice subsidy received°" .. ·.:.
_-· exce~ded .P500.".Before dete"rrnining·wh~~her_lh13 . : · .
. . exces,5:-ist~X:ab_le,"the total excess thereof must be ·. .
. added to.his·1·3th.month·pay and otner.b·enefits: · . ·
Slfould the sum 'thereof .ex_c.eeded f:>90,000, the. .
.-excess'amount
• • • • ' • •
over
• ~
P90:000
• • •
is
•• •
taxable:·
- •
· •
.- •
· • i •• I

.'-

.... ·.
·104 2019 SAN.BEDA'LAW"CENTRAUZED
- . .. BAR .OPERATIONS
.·:
...
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I: ..
,..·
~..
..
.. INCOME-TAX .
.SAN BEDA LAW CENTRALiZ{b BAR_DP£f!ATIDNS ~ MEM9RY AID_:.;019
w fl A. WAAW MiiiMF IIAiES FSA &Rli±ftt'

I
~.. .
.. .
(

:
. SUl'l)niary Rules on Grqss Income
I • • . • • ••

.
t....·

i·.
r- .
t.·:
::
·.·. ..

c'qmri.en·~ation. and a. Fro,(!! -s_ource_s·y".it111r:ithe ·c1 .. From .SOl.J~C~S · ~!thi~. a. Sepa'r~tio.n.

Pensions,· exceot · .. Phitippines · derived t;>y . · the · Philippines. . . employees· , ue to causes
·'given . toflay

I; ,
Fringe Bene.ti.ts ' ·. . NRA~NETB · who 1s -. not .: derived by RC; NRQ; , . beyo-nd ff1e.i control; .: ; .
.·
... subject to . ·pfef~rential RA'; and' NRA-E~.B ·b, Ret_irement ~ay and other
·. rate -·25% -FWT (NIR,9, who ·~re·.not sublectjo : . benefits.exempt pursuant
. . as,arnen_ded.by TRA?"!· .. · the preterentlatrate;" . to. ~A .. Nof, 4917, R.A .
Sec. -25(8)); and · · .. · arid, · · .. . . . No .. 7641',•R,.A. No .. 8282
b. From sources wi!hjri' the o.;. From-sources .without · · and R.A. Nd. '8291 ;· ·

I~f~~-
;
,,,. ..
~' ...
· Philippines· derived ·_by' · .. the. .
.. \n.divjdua1:·' employees r-:-.derived by:R_c.-_:. · ·.
· 'subject. to · preferenti;f; yJ:f}" .. ·
Income· fax rate :-- 1 ~f'/o·; 'ft~~- ..
· FWJ .
amended by
(Nl~C. .:_ _(fJ{).~~1~Jt.~·. . _· _'. · ·.
TRA~1Y.,1. ,1.,7 ·'<.iJJ. ·. _ .
·phil';ppiries c. 1.31h month·~1ayandother

:.
.
.
.· .
., .. .
benefits .a ounting to
.. P9.D,OOO · (NIRC, . as
·. · ainended b~ TRAIN,. Sec.
32(?)(e)); . _. · - ,
.. d: GS~S; .. ~s. Med1~re
.

~~:f . Sec. ·25(C); Sec; 25i£Jli ,~·<;nr:-<r:'.tlJ>.;.. · r./~) · contributions and union

I~
...,,~~w.:·H .
·.
an'd Sec. . 251E))':.,/,-~- !.: f·F't!I ~J...~.._,
.. ----~a,~\.· .. . . . . [ .. . d ues;
t
rt; ..
.
1,
· ,ri.<1,)~ ·.
J,
Note: RH¢,s.~' OH.Qr'lf.s, ~..g · .
·· . -¥. .i(
y J.1 . . . ' . iit·i ·
i'~"'
e. Tnos.e . exf mpt u~.der
.. special ·lawr or treaties;_
':", .. :
;j;·.
. . . - OB.Us . . I.. . , .,.tcoJ,9.\.! . .
or./·
" · · ·. s·e1Vice16?,e0nt~tors· :-r;A ·
. I~
(~, . ..· • . 1.
l . \.
·t.. : · and . . . · . .
f: ·. J\:11 other . F°mpensijtioi:i
·

. ·. regl,s~~nng w,ith~the SEC<t ·\ ·L·t:0.- : ·// · · ·. ·v .

···:from sources withoµt the.
~~.
· aft~i~::Jan~i'~).{\20;W,
. ·. the ·<1.~r<1d~~i:~~ . T~~. .
~.~. 9i;S~'it_f.n"":;i ~rp · Ph[lippines derived . by
·-~iif .
~~~:"& 1>. .NRC;_ RA, F\Ji_RA~ET~ ~nd .
+
..-~ R<!tes",l.~f~Q!{i,t-Jp' 3·5oJo! . ~><:J .. ·.. .. . .ii:-: . _NRA-N~TB · . · ..
··.,~hall . ¥':'~ _app).\c.at?le · i~- . ..:...- . :. · • · · ·. . · · .. • ... · ... · ·· · .
.: (NIRC, as~_.f!,':7_f!;llifjd by. j~~i1·'J~\,.. . - · · ·, .
. ~- . -SeP,t19rZ5.(F.J)-,;;.·
•• "(RAl/\1.; .,. . ., t :::»ifl:.~~1l,;,,~r.-~l;'J
J":' • • • • •

AnrnJ.ities· .. ·.:: ... a. F.com ~ourc~~~JthJfhhe' ·a.... Fr.om sources.·within. :a; ·Retur'n:afp,em_i~ms;.
~. ...,-·., Phllippine,s deiW~&iy;· · ·.·the. : .. · Phll.ippines b-. '.Those . e :e_mpt ·.under
1.· ~RA-N.ETB wt,o .. ·ls'· · . ·- derived by'RC, NRC. : ·spe.cial· la or treaties;
',. : .not · subject.· )o RA/ · and · N~A-ETB .. ~nd · · . ·
· .. preferential.. rate · - · . "'.-'ho .are not-subJe\:t to c .. Annuities rom sources
· , · 25% FWJ:(NIRC, ·as- . ·. the. prefer_e(lti'al. rate, without_. th PhiliPP..in~s
·am.ended by TRAIN,: · OC and RFG; and :· :- · · · · derfved . b NRC,. HA
/{ec. 25(8))': and · '... b.: Frorifsqurtes:without ' NRA-ETB, . · NRA-NE,:B;
: ·ii,· .NRFc··.-· 30% FWt . · .. 'tb~ ·... . Phiiippine_s· RFC, and RFC.
(N/RC, as .amended .. : derlved . by. RC. and
,· . . . . b-y' ·: TRAIN, .Sec: '.PG.·. '. . . . :.
... )··.· , : ·-28(8)(1)):. '. ·: · ~ ·
.. '.b>f.rom .sourc·~s~.within .the:
Philippines-:·.d~rhted .. by : ·.
: · individual · ·.employees· ... . .. ,· .
. S(lbject .' to preferantial
. income: tax rate. - 1'5% . .
·.FlivT ~- (NIRC, ·. · )
.as .
amended . by . TR~IN,
.. Sec. 25(C)). · ·
. ' ~
... .. ';

: ..

. ·. 2()1~ SAN BEDA LAW .CENTRALIZED """. T"HIOt'5' 105

 • . w

·.- I.N·COME·TAX
.- ·, LAW (;ENTRALIZEDBAR OPERATIONS
SA/'J'BEDA . ' . - MEMORY AID.. 2019

,.
:·. ··"

., ... ~ .

Dividends· . :....

: ··:..:

.. ,
! ••
: ... \, . :-. ~ .•·· ... · .
.':··.··'
..~ .

..
:,... ..:.

106 2019 SAN SEDA LAW CE.)'JTRALIZED BAR OPERA ~JON.?

 ....

·INCOME TAX
S~N BEDA !AW CENTRALIZED 9A/l OPERATIONS - M~ORY AID .io19
a 118& i@ iW&&MMWWI &Sil i 5

TRAIN, "Sec. ")

25(8));· and .
vi. NRFC - 1.5%/30%
FWT. subject ·to
tax· spc;1ring·. rule
. ·(NiRC,; as
amended: by
TRAIN, Sec. ·,..
28(8)(5)(b)).
b. Cash ·or .. ·property
divir;lend~ paid ·by FC
to . the · following,
provided thc;1t · Income
.was . derivea·· . from.
. sources · within the
·.....
Philippines: · , i.
· j. · 'i-JRA-NE;TB- 25%
FWT. · (NIRC, as·
. ·amended . by . ..
·TRAIN,.. · Sec:. I';;;~
. . ·_25(8)); a'!d )f u;-r.
..ii. . NRFG...:30.D(o Fv,(Jf ,;,;,.,;. ,,
· · ,,1.NIR"C
. .• ·[I'. ; . . ··'•
,fi!:i/ , :•!·'.:A : . . . .
amended· r..~Y.~;..;r~~5,f"J7.I?'~;,~, ·· . (1-??i, · '
TRAIN·· '/Sec!2,,,tr·r.,-~··j}7'",;:J!\> ~_i.J;,:.:.•,
f.· /' .·· . • · . · l · . .
' ..,.. ,#. \_/ • •

. 28(8)(111'.9/· . 'I
. ../' ,<
. , V\ ,,1 ·
-··'---·)
"'~~- ..·ti
'°' Ii.
.f .t.l.
·.
.
. . 'Gains··. From· a.;. Or9ir1ar}'.1&~1~;;ae-=rr?~d·a. ~·CDrd(nar'y' I. ai~:~ a .. Cap1~"11 g~in; from sate C::,f ..
. --oeali_ngs . · '.in · fro/~:t,Osqurc~f,:~ithi11c~ f~~eriveo frq_ii.~o~rc~~ ·· ·pr_ir:icipal residence, as
·... Property · · t~·~l;.mil\Prtl.ry¢~:by:, , . • r,~ithin··:th~J~et!i~~~--, the cas_e may be (N!RC,
' i.\;j~Rl,~1JE.:f.~-.2~f~\ f::PkY. RC;·jj}1P][+w.i,l~V as emended by TRA/fv,
· F,WT4qN}R.C,
'v-~ ..~··,·1
t
,as.
.i '~RA-.ETB, BC,.:;i.ar:icl~
.... · , • Sec. 24(D)(2));. ' • .·
. . an{Jfl;'tfJJed'\;'·_. _by . ~~FC; - ·. . -, b. Tax-free exchariqesj
TRAIN1 .' (a Sep."• b, i 'f.?,fjj!i'.i'iY : · gains e. Gafns deri~ed from sal_e
·- 25(8));;,'cJ~d~ ;,, _ <f:.:,o,!rJ,Y~ab:W,'..!,i),1so\Jrce~,
.. ii. . NRF0;t30~ f.iWP'~-·-·w1tl)olli~-~~w : the·
OF_ exchange or bonds,
·.; debentures, · or . other
. ·(NJRdt{~ q/,s: . Philippines . t>y · RC .' · · feirtificate . · . :· .. . . of
. amende:eJ~)/:_!iby · . and DC;·. . . , . indebtedness . With . a.
... :r~IN,. Sec. c. · "Net _capital·. __ gains. . rnaturity. .of more .than
.... 28(8}(1))- . :iJenv_ed-trom _SO\JFCeS . fi°v¢.(5) years; . . '.,. ...
.·· b .. Capital .· gains ·, · 'or · within .other than · d... · Gains from redemption of ··'
presumed gains, as· .: those subjectto C_GT : : shares in mutual fund; ..
-tr:,e case may be, on: . .. _by . RC,_-. NRC. : RA, e •.- Those .. .exempt. under
i. .. Sale of. shares of' · ..NRA~t=T~. · DC; and ' ·special raws or treaties;
. . ··stock of . DC not . ·.RFC;'and ·. . .. and. . . . .
listed . and not .d. · Net: . ··capital · ·gains, :f.. 'Ordinary ga1ns and. net
. traded . . tnrough derived from sources . capltal . gains. derived
· ... · .... ,.. ~.tock exchange...: <
with9ut .· . : ·. "the .. ·. from:soi.1rci;lSwithciuJ the
0

· ··· · . a. RC- 15% CGT 'Ph11ippines by_ RC P):)ilippines tiy NRC, RA,
.(N/RC, . as antfD,C.. . .NRA-ETB, . NRA-NETS_,- ...
amended· by ;· · .RFC, ·and NRFC . .-.: ..
TRAIN,·. Sec,
... · 2_4(C)); . ..
... : . . b, DC.- 15% CGT
(NIRC, as.
amended by
TRAIN, . Sec.
27(D)(2)) and; ·

l ,,

2019 SAN·BEDA LAW

. . CENTRALIZEo" BAR OPERATIONS)
. . 107
 ·.INCOME.TAX
SAN BtDA LAW CENTRALIZED
. BAR. OPERATIONS~
. . . AI0,2019.
MEMORY .
Sf NMi#:Si 4 Mil A SCNl,H 4t HS ... &-

c. RFC/NRFC- 5%
and· 10% (NIRC,
as -'amended by.
TRAIN, . Sec.
. 28(A)(7)(c)).
ii. Sale·: . of . real
property-located in
the - F>hilippin~s :--:·
6% · CGT (NiRC, · · · ..
·as . amended by
.TRAIN, · · · Sec.
2.4(0)(1);· · $ec.
. ·27(DJ(5)}.
c. - Net . · capital gains .
. · · derived from s_o.orces
. · . within . the· Philippine~
. bther . than . those .. . ~- . '

subjectto ccrev.. . . . .
'L 'NRA-NETB·~

, TRl},JN, ~
. . 29.(Ei}f;:ar.i~? ~.~
~~~'"'"""~·
.· ·r=;:,;,,,d~'i/~'. ~: U J\T .,-
·:'J~e,,
v-: ·
·==--'"'~~,.; :,~ t,?·'·~, ..
.. ·. ~- · ~ ,. ,
·

ii.,

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~F.C~O%,P;NT -
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by
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-

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·.... :· ·y j(ilt;1-<m-- i· · ·~~r~~.--1\1-<~~:-._ ·I'. , -. ~~ i·t · - .
~ . · A. · .... · !. , . __ .-, · · ·. ~....~

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1_08 I 20lfl'SAN.SEpA lAW.CEiNTRAU;zED BAR OPERATIONS

 INCOME TAX
SAN BEDA LAW CENTRALIZED 81\R OPEF1/>:TIONS - MEMORY AID 20'9

.:.!· ·<·~_'-',"'.i. :TaxTr~atment

'•S ,·
; . ·•
.·_~"'/1 .
·,+:: '"•·:'.,o:,.j'··:·~-:
~ .... f . ., . ·.... -.' . " . :· -~, .:,.... ·, ......... ·'· .. ·,-·. ' . - ' ......

,. • 1\·.,, .. ~ . . . ,. i --· . :'~- ': •· tr'\. '._:, ·• - ~ t

· · ,. • '· . ,: ·->· · Subject to i=!iral. • ... Co11slde~ed ln'.c,on,1puting
lt~ms of d(oss, , .· - .Wlthh~lding !ax, . ·.. : ;. : .the Taxable tnceme.
.•. • - ·:··:·· •. : . ~--
·. Exer;nptio~s.and
Excl/.ls1of1~ '.
,I
,··

.. • lnco~~. : .'- (FWT)/Cap1tal Gams Ta~ • . ~upjec;tto'~egular ; l, ;: ... \ .:

i\ .
'
' . 1.. ~:-_..:.J_/: .::
i ,:.; . ~!. . (CGT)/Frln~e· Benefits
.. , Jax (FB.T)'.,,-• Income Tax R~tes•.
· , t' .
i 'r
, ,,
·: •· •'. ·. i ,.
.• :1 ..

Royalties a. Passive royalty income a. Passive royalty· income a. Those exempt under
derived from· sources derived from sources special laws or
within the Philippines without the Philippines treaties; and
by: by RC and QC; b. Passive and active
i. RC, NRG, RA, b. Active royalty income royalty income derived
NRA:ETB - 20% derived from · sources from sources without
FWT . except within by RC, NRC, RA, the Philippines by
royaltles on books, NRA-ETB, DC, and NRC, RA, NHA-ETB,
literary and RFC; and NRA-NETS, RFC, and
musical c. Active royalty income NRFC.
compositions derived from sources
which is 10% FWT ,.f,,\without the Philippines
· (NfRC, _<!l [(.~{l>Y RC and DC. .
amended . · :J>Y,· 4.,-.,:•\ ·
· TRAIN, · S:e~~:~-.'_'J\1.
· 24(8)(1), Sf!'pf:, <:,. ~\:{ ----.· . · .
~5(A)(2)); ..
ii. NRA-NET,Bu25% '.;;~~ rn
J" t:~.ri::.::Ili\:.~•·,7~~0
· ._.-.i,,_~,·A ·
,. ,., ·• fi(c,as'__/1.. ,,,,1
· FWT,.r-fiKl_ . )~1 ,,}1!'l~~
amended~ 'bj{ t"- · ;;, ~-
. TRf:.ttlr ~~.,-;,f;ec:
~~~rlr}); '}~1;,.... < '
l'J
\~
I ~ '\.
i u \
L \
L- ~

iiiff:Q,C aric.k,. RFC - ~... j.;.t, · /

~~~0%"'F~'f··,fN/Rr
• ,f: • .. ,. ~ ,,.\\
. .,,._ ' .. •i. ,,,;:c:7::-,;1;:
"'!'>'·· •· ,,, ..• --:r:,;;~
. ., ' .•. ''
"' as <Jmerj/Jyd .1bfl :'11~ ''·\t· tc· ': ::.~.'?--
TRA·IN-''!}'>i.{,, Sec'f
··:a..·--'... <::,
1. r* -, ,~-·
-27('~(1));
iv. NRF0':...3Qifo FWT
anp · ~
;~~-::-·~~ :
l;·.,;.,·,".',-:, ,-..,
·~~··r· .. · ...... ~..-:.:.:<:1':.. ;:~-..
(NIRG;;1 _.,,::_~S' ~- f.P,,~=-"-·-'.:...c,,
.:.:~:-- I • ,

amenW,d ~·l ,.
.t./\by
r,i
TRAIN;~),.i,P.:_$ec.
28(8)(1))~-'<: ' ..
b. Active royalty income
derived from sources
within the Philippines
by:
i. NRA-NETB - 25%
FVvT (NIRC, as
amended by
TRAIN, Sec.
25(13)); and
ii. NRFC 30%
FWT(N,IRC, as
amended by "
TRAIN, Sec.
28(8)(1)).

2018 SAN SEDA LAW CENTRALIZEDBAR OPERATIONS 1109

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 :- JNCOM:E-.TA-X-
SAN BEDA LAW CENTRALIZEQBAR-OPERATIONS'-·MEMOflY AID 2019
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SAN BEDA LA\.\'.CENTMLl;lED DAR O'PE:RATJONS-- MEMOR.YAIQ .201!1.

Gro.s.s·lneorne'fr~m ·Fr.om. ·SO~rces·· ·withi°ri..-· the .. a. ·. From sources within the ··~ .. Those. ·. exempt . ··u,r1tjet
Profession. . -fr9d·e· Pbillpplnes derlved-by; ' .:' • Philippines. derived · by ..·. -speciallaws or treaties; .
. or Buslness : · a. NRA-NE;:TB- 25°(0f:WT . : RC; . NRC;.· RA> and: . and , . .
· ·· · .. (N./Ry; _as emended by ' · NfV~-EtB, · QC · :and b. l~corr)'Ef" · derived · from
.· .:·.
· · .. TRAIN,:· Sec; -: 25(8)); .. · . R~C; and . ,.·. · "..sources · . without tne·..
.... .. .. and.... -~ · .' · b . .; from · 'sources ·w1thouf · Rhillppine!';'by NR~-. RA,·
: · "b, · N~FC . ,- · 30%::· FWT. , - .the Philippines 'derived- :; · NRA~ETB, NRA-NETB,
.- ,. .'. ·.: '(N/RC, as am~ndf#d.·by . ·. by RC and DC;· .. , .. . : RFC,a'r'1d N~FC.. .
." TRAi~,. Sec. 28_{8)(1)),._ . · .· · .; . · .'

·rriz1{s ·. ·. ·-:. and.

_Wjnnir:ig~.· · ,:< . ·

,··.·

.·_ ..
,•

. ... .. ~

. _.·· ..

. · Partner's ·... Frpm sources .-~ithin th.e.

Phllippihes derived,_by'.Nf-0-
a. 'From souxc~$-~i.thirith"¢ ·a,.
Tho~·e exempt under
.'· . · Phlllppiries derived. qy, . · · · special · . laws ,,· . or
. D.i!itr.il:lutive.:Share
. 'In the Net· l,i:1come '.NE.T~ ....: 25% '.FW,T (NJRC, · · · RC', · N.RG, RA; .. arid .. · .•treaties; and .. .
·. of GPP as··. emendea ' by ·-TkAIN, . · NRA-ETB; arid . , : · ·.: !) ..: Income 'derived from ·
Sec.. i5(B}}... - .'• . ": . o: From· -sources" wjthout · . sources. with6u1 · the
· · · . the Philipplnes derlved . · . · Philippines.' by N.RC,
. ·oy RC.. . . ··. -:·.:· .. ': :~·· ~ .. ~RA-ETB·, ·and
. . : . . . NRA:..NETB:.
.. ·.. ,• ... · ...
. ~ . .. .
: f rfnge Be~efits ·. . a. If.. · the benefits, ··were. 13.' If,' f!1e. ~·ne~ts . were· a·. Those .. exempt under
earnecf.'. fro'cn . sources . earned ' from . sources · the NIRC . or other·
witf:ii'n the Philippines and' within· t~e .Philippines special· raws: ·· · ·
,:granted 'to managerial or a'l'ld granted. to ·rank-. -b, Contributions . · of
;t· superylsory. . employee . and-fil,e fi)m-ployee who employer ·for th~~ .
who ls, . . Is RC, NRC, ,RA· or retirement, · insurance
It'
~:· .
f:.:_ NRA-ETB· who. is·· not·

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. BAR OPERATIONS
,,,. ... . 1.111
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SAN BEDA LAW C£NTRA1IZED BAR OPEflATIONS - MEMDRY.A/fJ.2019.
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·112 I 2019'SAN._BEDA LAW CENTRALIZED BAR OPERATIC.NS .

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~-· . DEPiJc'Ji10Ns:FRO.M Gnoss
Note: S~bstantiation requirements a·re· not .
· applicable to· a· taxpayer .claiming : deductions
~;: .. . .. under the Optional Standard Deduction (9SD)
r.
· · 1Ncri~a:·\ · . which is based on. a· fixed "percentage of..
(' ~ deductions . without regard to a_ny actual
r· ... :
expenditure. . · ··· · ·
'· · · .Daductlons . .. ·. . .
t. · Items or amounts. which the jaw allows to be
t> deducted from grO$\> income. In eroertoarrive.at the
3 .. si:ibject to'li~itation- the·l~xpayer.i&.mand~ted
to deduct amounts only within the·limits·allow_ed.
f taxable income (MAMALA TEO~ Reviewer,supra ·at bylaw. A taxpayer is ftee· to deduct froi), its ·gross
~t
4'
1~2{·· . . · '· . income a· lesser ·amount, or not to "claim ·any.
f:· 'deduction ·at air (CJR. v. Phoenix.Asswanc_e _Co:;·
,, It. 1s: a go~er.nYng · ·i,i:incip!~. ·in taxatlon that tax
?. ei~mptio11s· must -be construed in · fttictissimi j(Jris. '
ua., GR. No". L-19727, May 20,·1965): · .. · ·.
.( ··. against- the. taxpayer and liberally· in tavorot the. 4: Addifi.onal requirement; relating to withholding·-
r. taxing authorlty; and one Wl)O .clalrns an -exemption .any amount pald or payable. which 'i.~ otherwise
s."' ... must be 'a.bJeto [ustity thesarneby. tf:ie clearest gr.ant. . deductible from.: or taken into account in .
•· · of. ·organic-.or- .statute. law: An exemption ·f.rc:,m the . -cornputinq" gross . · tncorne or . for; · whic~· .
~ . common b~rden cannot.be permltted-to exist upon .. depreciation. or .amortization· may be .allowed," ... ·
,,. vagu~ . infplic~tions. -And, 'since a deauction . for_,<_· . shall be allowed as a deduction Only if.it-is shown ..
income tax purposespertekes.ot.theneture Of a _f<[JX::·/;'f .. that. ttie'' ta~· required to · be .dedu.cted af!d
;,;. · ·~xe..mP_tiqr\ fJ?~h-.it m~st also_ be :st,tctl{ C(!nsfii~r:~.:\ .
.wlthhef.d therefrom has been pai~. to tl'le ~IR_
(CIR V.· lsabela Cultural Corp._,: G-.R. _N~. 17 \'?~./'..-.,i::·~ (NIRC; as amended ·by, TRAIN, ~ec:. 34(K);
. Febrt1a.ry_ 12, .-200_7),. .. . . · . . · . · . \f ·(_:::.,:.:,'~~:;-,;-;;t-;~:M.C. o/_~·. ~~~2013).. .. . . : .. .
t ·.. No deductions
.. . . . . d . ',,,,,,~··· .f:.'
shall be . allowed to ,iAd]'itidUi'i\J tr-~et-:.ri{~c;;roa'Rltal . . . . .
:µ-,--.~J-,,} - . .
. .
.
.
.
. ..
t .
tax"payers. e.a~ning __ compensatiS?"n ip_.99~e". a"tisi~~Ji lnc~me tax Jjilt~,vied_by law only on_ income,-which ....
,.. frbm pers9~af s~rvic~.srende.req·und_~~~_n,.em_ploy~;:"i} may_ be :-gr%i~~ i9,_come or net..,in.co~e; -hence, the ·
i_:'. . .. employe@ rela~onsh1p.; and-~ho:5e ,~. M\eJYome _ ~~ . amo·unt-·re-pr~e~ng return of qap1tal ~t)o1Jld be ·
tax~. at 8°,'9. income. tax -rat~· ~"l)~y.ie1~: ml,~~ fro~ · i•J\ dedµcted,ffro~\.. th'\ proceeds· from .sales of assets
t· . business/pra~tiqe ·of r>~?.ff?SS~~~.r~·.'}r;./lr .8.-201&;:, fj and. ~h0,~~~...9{t·.~e'.~ubj~ct to. inc~me_ ~ax (R.R.. _N~.
fi-.' ~ Se.c. 8).: · . · · · , - · )i~~Jl-1. =~.t..._,\ .. \'--<,'.-:._-. f·itJ·· .02-4.wr._8p.<;/6fr)./@'·~
)!\°\. • • "l,l} I ·t·,~.,' · ._,»°.
.. . .· ·
, . v , I :. .:• ' · - . ~• . ~,,.. ,'-1;..:.
>
· ~,'I ~.i-~J · ·-•'.t.t.!Z,.f.-.•.,,._,,,... '· . , •· • , . · · • •
· .
f . '.Gen.eraI -Rµles: ·. .".. · · . . . '. , ~f~'--:,;J}_l.';;.\ · .. /,J · . t·;:Ur K.1,ndpof Dedi.ictlons:. (ISO) .. - • . ' .·
l· ·.. ·1'.' Matching Conc~p~ for.Dedl!ct1b~1ty ~- O~~u9~_1of1s ..;~~,,J;i,...ltec:nized ·. Deduc~ion~. w.11ich__ are or~ir:i~l1:' and
t.~-·-·· ·. must m_atc}1 -~~e-·m.c<?~e;· .deddcJfQ.12,~:';Ql~st _be !;.~.i1if~~~p~es~ary,-incurred or pa_id for th·e-·pra~~c~_of
~ . . pcJid · or incurred - in conn_ec~P?~w.1t~.,.,~1t~_g.__-d~irr,~ -pr-et1lls~n-(NIRC, as amended. py TR!HN;.Secs:· .,.
F" · · · taxp"ayer:s· ·tr1=1de, b~siness·· <;>rt{~~o2:1:s1 (i ·
·.:.. · · DOMONQ'9N,_.Taxat1on,- ~upra .a. "'~·:i,;i-;-;, · ,.
~,,o--r , :34(~) tq (K));_k:fi·No. 8.-2018)-·
2·.. .§.pecial pedlicllons;,an.d... · ·. :
..
. . ·· ·
~- ·~·. · · '. · ·., · · .· ; .. -: :, , , ~~-~:~ . .·· 3: · QptlonarStandard Deauctlon· (0$9} (fl!IRC, flS
;':. .. - .N.et.e:·A-taxpayer wh<:> .1~ authon.ze<;j to deduct · . amended by TRAIN, 'Sep. ~4(L);· R<R.. No.. ,IF
~- •. : . :cartain .. exp~~~es .· :·1:md· · . o.the~ .al_towable .. ·. . · · 2018) .. · · : ·· ·...
:.-" .' ·. deductions fcir tJ,e currer,t year.but-f~1led. to do · • · .·:. . ·- · .· .. ·. · ..
. . .. so: cannot -t1educf ttie:· same for tM. ·11ext year. · · Note: .'·Pre~lum- -payments 'on hea.lth. 'a~~Jor .
· ·. (C!Rv. lsabel~..Gi!ltj.iratCor'p., Y?R, N_o. F2231; : hospitalization ihsUr<:!n~e.(P.PHHI) :i:i.rd P~r'spn,al:
~---- · Ffjbn:aryJ2, ZOO'.'.;.· ' ·- r~Tjt;;/5. deduc~ions ._~r-e _remov~d 'by_~h~ .
: . . . ~ 2-~ s-~·bs(a.ntiauO.n:.·Ri.Jle . -Deidu~tJOr:18: :·m~.ist. ·be· . .
;' ... •. '.s1,1ppp):ted.9,Y- adequat~.. rec_eipts;_or_ i~V?ice~.:: A Itemized'.·. Dedi.icticins ·v~: . Optib_nai. . ·Stattd.ar_9
· .. :faxpay,er has tlie bur;den of· .proving em1t1e1:1~rit · oed.uction . . . _ .
to ·a ·claimed· deduction or.· refund (Paper . Itemized deductions are those allowed· by the NIRC
·..
>
industries ..Corp..~·of the .PHL v, ..t;ou.rt. of Appe·a1s, _. to be ai:?ducted "from the ,gross. income· before the.
·G.R." Nos:·-; 069.4.9-50,DecemJ?er 1"; 1{)95). The inc9me is. syJjjected. to tax" .(NiRC, as ame"nded .bY:
·.. taxpayer-mus~ s~bsiantially prQve' q.y .evidence· TRAIN,' Sec. 34t On t~E(6thei' h~nd,. a11 optional .
-··
r ·." ·or records the deduati'ons cleilm·ed u11der the law·
:··otherwise;the·same wlli.be c:lisallo.wed (Pi/mica·
standard deduction. (QSD). is a, ·fixed perceotage ... ,
deduction without regard.to any actu.al:expenditure, .
. Mauri Fpqds ·Corp ... v. -C1R, G.R. No: 175651, ·. in· lieu ·of. the" itemized deductions. It is .m_erely .a,
· Se_piember ~4,. 20.16). . . ·· . privileg~ that ··may be enjoyed. b.y certain taxpayers ·
(NIRC, a~ ~mencJ.edby ·TRAIN; $ec. 34(L)), ..

2019 SAN BEDA-LAW CENTRALIZED OPERATIONS ··I 113

 INCOME~ TAX.
~·
.. Optional Standard Deductlon
: SA,N BE(?ALAWCENTRALl!EDBAR OPERAnONS- MEMORYAJQ20;9 · ..
MHHfHWIMild

.. ,
Pursuant to TRAIN t.aw," in- lieu of 'the deductions
·E Hill ME

Note: Partners cit ;a GPP. by virtue.bf their.dist~ibuti~e

share, from ,GPP· which. is already het of cost: and.
a

altowed under Secs. 34(A) ·to (K},·. an 'individual. expenses cannot.avail 6f the 8% ·inco'me tax rate
subject tci· tax under ·section 24, other ·ihan .. a option (R.R. No.· e-·2()18, Sec. 3(C)). · . . ·
nonresident alien, rnayeleci-a standard deduction - . . . : · · .., ·. ·
ln.arr'arnount no.t exceeding forty percent (40%) of Summary Rµles on 'Allt>wable Deductions
his gross salesor gross receipts, asthe.case ,:nay For. Individuals: ~... · · . . ' · -:
. be (NJR9, as,aa,endep by TRAIN, Sec.. 34(L)).·.. .. .. a. N.o·deductions.shall,.be.allowe.d to. ihdividuar
. ." ~ . -, · · · · ~ · ·. taxpayers. earninq compensation 'Incorne ..
. In the · (::ase of ·.a .. corporation subjec; 'to \30% ·t~x ~ ar.isin'g from persorial servlces -reridered .
·(Nl_RG; ~s amended by. TRAINi Sections 27(AJ° and. . , · 1111der anemployer-employee relationsblp,"
a
2t;l(A)(1)), it. m~y. elect .slandard deduction in an . ': and those .who .·opted to
.be "taxed .at 8% -
. amount. iio,t exceedinq forty· percent' (40%). of -_its . '·· inc?mE:_ tax . rate on their- in~ome from .
·gross Income (NIRO, as amended by TRAIN; $~c. _. . ·', buslness/practlce of.profession.. -. ..
3.4(t)). . . · · . b.,. Th.~- partners···cpmprisinif t.~e. _GPP can no ·
-. - • lonqer . claim. fu.rfher· dedu.¢tion from their .
c '

In: the,. abs~nee·.·~·f ·-a~· express" sel~ctl.~~; .· .a · ·. · distrlbistlve share 'in tne -nat income · of the ··
taxpayer- is . constdered to have. availed; -of ·, . GPF''and:a'tE:l-ncit allowed avall ofthe 8% to
. ite~ized de<;iuc,;Jions . '. . : .. ·. . . . . ,. . :;,,,,-::,c,=:o=,._:;.;. _ir,lC°ol'}le tax rate Ojj"tiOri ~irice their-distributive ,.
U_nles~ .. the taxpayer ),lgriifies, in his ·r-eJurb"""h1sj. A-:"".>:::~!ahar.efrom the- GPP· is alread!r'. net of· co$t
1
. · . if-!tentiat? to.· elect the OSD', h.e .shall be c,ai{§.ider.edas l_) .l-·~ '7·. ni,-'!t~xpe~ses. .: · . ' ·. . . . : . .
:having avail_ed binis~lf of .the ded_u1,tioAS~t1<?,Wi·d.J£b,.<.r=::o:a..- Ve:.[ If ~~(tne.ral.so detives other. inc;om~ from
~ecs.:34(A) to(~)- S~ch electio'njwh~n)paJJ.,er-irft~e · . •,·~q,~acf'e,_)l(fi~,iness·or··practice ·~t: professio~·
~etum shall be ·irrevocable. for ,tn~t,{x)~e''\!~r .. for,---=I-:,,,--~ aP>_a~~ortiiti,eshare m·t_he. net income· oNhe
which the- return is r.ra~e/.~~l'.o-videcl,}that .,w;i •. , . w ·,. . ~P'R·· ih.#jle_ductioflthat ~!,.8r;1· be claimed
indivld1;1al, who .is 'entiU_ed tC?.a9drcifufi}{q.tog tne -~$.'t> ~ ·
~t}all .-nC?t· b~ r~qyired to su1$rnit_ ~i.}h.hi~ ta.x return ,z~,._ Jt.. ·,. ·
!lor~)~efolhe\i~co~e -would, either· be th4? _
1t~m1ze(.f~ep!iJ~t1_0fls.or OSD -(R.R, (\Jo. 8~ ·
such fioan_cial'staten:ienls_ol~is'e req~ifecJ":t1'n~r. ~ffi · .
f18;:Pl(R~ 1 am_end(!·o by fRAIN; Sec.'
~i?7
(m ~~ .~---~ (f..i). · _\: · ·. ., _ .. ·... _,,.
-/~R;'.No: ~~201~'. Bec. t l<~:-. .., ~,
the Nl~C (NIRC,J1.samen"ci'f:(lw-ir!,,}Al,__Sec.
t:,:--. · :-:- · · .... ' :l · · . · , · ·
··. ·
.

Allowed for 'Ml _kihd.~ ·o ~eri_erafly allowed' 'tor ali

. taxpayers,,<,.. whether kin!1_s. ·. '.'of. · .. taxp~yers,
· .: r.iatutal or juridiqa,l:. · · whether natur~l 6r juridical: . : .
. RFC' .. · - .. · Mtty,'p;_a~.:1il~d ~,'by· ~ay.:b~ -~v_a;l~tj .. o(~-~~·a:
. . • . . . . , . . ,. : · NRA-1;:TB wbether . or NRA-ETB whether or not
.
* NPCI -~Not pur~ly compen.s;;1ti~ni.n~~rrie·earners- · : is
no_t H'i.efe reciprocity .. the~e-.is reeiproc1ty.. : .
".-"."· A · general . pro_fessfon·i:11 . partner!:ihip .. anc! t_l:1e · · · · · . : . · .. - ··. .
.. pa.rtners_ comprising such partne~i;hip .~_ay_ avail of. : - N/A , Jl.!lay, :~e · s1.,1btra~ted. _only
th~ optioha_l standard deduction only ·C!nce, either .. from. incoi:i;i.e den:,'.ed fr0rn
.. by, ~r.eg'eneral professional part'n~r~hiP. or ·the ' . t~ade, bus!ne~s or exercls!!.
- : : partners comprising the partnership .(NIRC,=: as .. , · of p~o_f~S$10n:":
. . amenaedl)y TR_AIN l:.a~ ,Sec.' ~4(L)). ·· · · (MAMALATEO, . Reviewer; .supra .. at· 192; ·.·
. DiMAAM,PAO,-supra at 98).

------~-----------·---..
 IN.COME TAX
SAN BWA LAW CENTRALIZED BAn OPo.RATIONS- MEMORYAro :zt>',9
·ms«+ coie w ··· ·a :wa*4wesw t1W-, sw
·""
I. .ITEMIZED DEDUCTIONS: (ExlT~LoBa02- .While· iilegal .lncome' will form part of gross
.. CReP)-: . income of .the taxpayer· (within th'e concept of
A, Businees Expenses: "income .. from whatever . source"), 'expenses .
. B. Interest; .., ·: which . constitute· bribe," . kickback and other ·,
. c. Taxes; stmllar P<}YIT)en!; ·-J:Yeir{g aqains! ·1aw and 'public '.
.o. losses; policy .are not deductible, from .gross income
E. Bad Debts; (NIRC; e$,. emended by. TRAIN!,. Sec: 34, Par.··
· F. · ~epreciatio,i:; (A)(1)(c)) ... ·other expenses necessary· and
G. · o·epletion;_ · ·: · · <"'" . ·. ordinary 'expenses in connection oJ such illegal
. ·. H .. Charitable arid ·Oth'er Contributions;. . activities are, however, ..allowed 'as 'deduction
. · I. Research ancf Develol)rrient;· and' . . . . w1thih·tlie purview .cf expenses uoder the NI R_C;
. J: Eensiori · Trust. Contrlbutlon (NJR_C, as · asarnended by TRAIN .LaY', (R.R. .No. 02-40):
·.: ,·amentled by TRAlN,' sec. 34). · :· .... · .. amended· by TRAIN· ..Law (R.R 'No. 'Q~-40): 1 · . :

~'.;, . N~te: -~on~r,e$ident ~li~r1s .. n'at e_ngag~d in -trada ·· : · .: Ordi~arY ,1,;x~:er:i~~ ~ lt::i~. that is n0~mal ,~r ~su~i· in
.,. · · ·· or busi~ess · it, t~e. ~ilippi~~s ~N_RA-N ETf3) and. . . · retation , to. ~e . taxpayer's . business · and ._the
fi:·'. ., · non-resident foreign corporations· .{NRFC) .are · . · sur~ound1,ng circumstances . .In order to be deductible
~ . not allowed- the above deductions -oecause they - as a business .. expense.' three. conditions -must
ti- are faxedon their mc:J"ss'·
income .denVecffrom. · ... · ·cq~cur {b~_siness .tast]:__ .(1) the expense· must be : .
(-". sources withiri the Phillpplnes. NRA-Ni=T_B.ang,,,"1?~ ?r.\:l!nwy ~_nd_ ~ece~sary; ·(2) it must- be paid or
e· N~~C';> gr~ss_ i.n~ome. f-rom_:~oU~C!3S._ -wilryin.:1.lf,~/lf inc:urred_- ~1th_m the taxable year: ahd, {3)· _it· IT)~St be.
1r, . PhiJ1rpp1_~es· 1s ~u_bJe'ct to ~ tiri_c1I ta?( ·of 25%;,i:ipj{f);-~ p~ud_ ?r.1p~urred in carrymg _i_n .a _trade ,or_ busme_ss ... ·
l\;. !{,,
, 30%. respectively (,Vt"RC; . as ·amet1del;i?l.py:"... , Md1t1onally, the taxpayer -my~t. subst?n!ially prove
~;· .· _ ·TRAIN, Sec. 25{B)"and ~ec. 28 (8)(1)). ·. 'fi•J:\'-/}·i!
by~ evidenc~pr ·re~~r~s.-lhe ·deductions claimed
~~- . ~, · · . _ · : . : - .. ·. · .>!';I: tH:;. ~:f;l!.~~;$..~-.1~~'11·-c!~d1tion, not only-must !,h? taxpayer
.- 1_. Ordm~ and Necess~ Trade. B~~ines's an·, !l:ll ll)~e{t~e.:tt'~slf.\e_$s test, ·he musJ subst~nllally ~rove

~· , · · .
;
:
- ·.
· ·. Professional,Expense·s··· ...
'. ' . . . - ·.. : . .. .
-r"!';.'r-.,. · ·
.. . ·.. . . vf}.,4' ..
4)-~&- by ev1denceh,pr_ records .the dedl.,!ct1ohs·,cla1med
...;~.....-"'!~ . ·1,mder . t~e 1r~1
Gt. Nj;o~
ot_herwise,,. the· -same .
· - . ~\ disalloW.ed_({A.Jas,pon.solidatect Mining & pevt_ Corp. ·
be will

I:
Requisites foi: Ded-uc·t1611ity:·:(.!32iT80~fil)
y . · ~-It rri~st __ be_ ~ai.d · or ·inc~d _Qur~ipJij~he t8Qtbl_~;\ .C_IR~v. LV691'1, Janua_ry 27, ·19E}t) .. ·. .· :
·, · year, · ·. . -{>~.,~ ~ · -.. . · . ,. b~t .. ·. · . .· · · . \ · · . · . . · ,
f···· . . ·. -·. ·· t;1y' -~~~ :~ . ·11;"- _Nece.___~. r}'.i§ ~~-~y,lt is one 11'1.hich is.aP.propfia~e
'f~e te~~·"paid·or.;ncifr.red'';.s~;il~e ~o~ueil{ ',ln?-_ tiolr~.!f).f.'lft~~evelop('pen~ ?f. the ta~payer:s .

I
~•
l.
.
·.

·' ·.
aeeordm·g·to the me.thod~~~tlti't{ng. \.Ip.of!

· · . .,. ~ . i- ·
(Pleas~ . _.refer to .. : Acc61;1(1iifi~:per_~od~~Ndi::Jftt~ ' .,• .c.-.., -
thf ..
?us_mes_s an~are intended· to m_m1m1~e losse~. or to
.. basis of. yvhic_h }he' ·n_e1· .i\kom~--··1~~ c?r'ripute_~·f,,. __ 1n~r~ase-_prof1t~ (G_e':eral Electric (P.1.),)~~-:v. CfR,
· ·-(NIRGi> as ·amended b<, . TR~'l£,J)..·1ikc. 22(Rl~n ~ggse N~_. 11_ 17; July 14, .1963).--· . . .
iNl- ,,., - ~k.~!''
Meth,ods for the discussion·oN/{fferer:it!'roethods .: ·1 :· e ex_~E:A_se~ ~re ~xtra?rdmal)'., __ t~e-~xp~nd1~ures.
· . ·
. · ·· : · : ·.• -
·
. . •· •
·..

[' of accountin· ,1;-. :· ..- ·. ': . . .tt;,\)),,J.t . . . s_hall_t;,~ «?Rl!alJzed for wh_1ch_ 9eprec,at10'"! .~llo~a~ce .. ·
~ .·. , . . . _ ,JJ; .. · .: , :)"'-......,.......~ . . .. rriay, be .~Ja_lmed (VITUG.&_ACQSTA,.-Tax La.w. supra·.
t · at.:JJ,5_1.. ··· · ·· ·' · · · · ·· ·· ·
f . · .He·ri·c~;· under ·ari ·~ecru~! m~thod of:accounting;· 'I'· · ·
f .,
protes_s!onal ·tees· incurr.ed ·Jn:. prior: years but".
r: .. . ·:
which were claimed'--qS: dedu_ctions". only j.,; the.
r. year,, 'the ·billings· ... were_ received' shall. ·be .
f. . . disallow~~- (CIR_ l(•. lsabela_ Culfv1i,1 Coip.;_ G.R
\ ·. ·. · .:No: 172~31: Fffl>ru~_ry·1·~·}007):·. ·,_· .-·· .. , ll'.c~ll{l.Ote:ui:_j;,_ijyr,nerit; Wtier~ flJ~ expendlll,ire is.''
;.-_.· · . - - ' ·' ·b · ·. . .. : ··. ·· : '.. '. . -: _ .. ·W:hic~· '.is:'. n<>r(na.l- .irf: '-i... ·:a'pprop"rlat~".:'-o_r 'tielpM:
I b,.: . _lt;must . e -~u_bst~nt'.ated .by pmof; _ . . .. ' : ·. . .. re.l_a,t!on to. t!Je buiinJ3SS. :: - . i_f]·, th_e·. de~elopri,e(_lt of
;: . . .c. It _m_u$thbe _1~c;;..urred: 1_n I~ade or_ ~usm~s~ carnect._ . 'of._the t~p~yer afld fhe .. : .. the )axpayer's
:), .on_byt e_taxP,~yer,, ·. . _: ·. ··'.··. .. . . sLirrounding· ... · . . ··busihess . ,. . .
~ , :d .. · It. mus_t b.~.. R~a;;onabl~ (not lav_1sh,- ~xtr~vagan_t. . . . -1 .. . 2. or that. tlie . same is
f or excessive under the·circumstances)· · _c_rcumsta~ces . . ,. · . . , · . .
f'. e.' if mu~t
. . · ~
be
.Ordinary. and necessary··: _; '. .
. · · · . , · · -
(Genera"/. f;lectric Inc.,.
· .. · ·. '· ·
. prop.erl/~r- the P.Urpose
of-·rea 1w:1g ''a .profit or
f. · If· subjeci · tq. withh9ldi.ng· taxes, ,·.have been·:
. ·. . p.roperlx ~i.lhheld · ancl remitted ?1'1 tii:i:e
'. BIR;·_and. · ... ·..: . · ... · .. . . ·
t_he
._· .
!o
v.- Collector,. C_TA Casf . .
· _No.· . 1117,. -July . 1 ~· · ·
1963). ··•
;;:%~ ·. ·. ·, : · ·
1
9Ele~~;ic 1~~~
v.:Coliector, C.TA Case
g, ··Not c~ntrarr to law, _p1:1bllc policy _or morals N&. 1117, : July 14,.
(Nlf:C, as;amended by._ TRAIN! See. '34(A) and· ·. .·.. 1963).. .
.(K), R.R. No. 02-.40, Sec. 65). · ,
·. . . . . . .· . .· .

2019 S~N BEDA LAW CENTRALIZED°_QPERA

TIONS I 115
 /

:, I Nc·o·.M'E TAX.
SAN BEDA ·lAw ciNrRAµzeo f3AR OP.J.RATIONS - MEfr(ORYAID-20,.9

· .Two Tests· of Ordinary and . !"ecessary b. Deduct.. . allowance · for .depreciation

Expenses:~ . . . .(NIRC, as.amended by TRAIN Law,.
1. Reasonableness· of the amount s; based on sec. 3~(~)(2)). ·
'various 'factors· SUCh as, but not fimitecj to:
ij: . Type and 'size.of thebuslness: · .. · Notes: :.. · ·: · . ,
b. · · Volume· and· amount of earnings: . . · . a. Cohan· Rule·.- "if there is showing that
c.: Nature of.the expenditure itself;· · .. . l' expenses have been incurred but the exact
d.: lntention'of the-taxpayer; end: amount thereof cannotbeascertalned due
e. General econemlc-condltlons. ·. to the absencect-documentary eviderfce, it·-
2. · Amount incurred must not be· a .capital outlay Is the duty, of tfie: BIR lo make an estimate of
to. create "goocli,vill~ for the product and/or · ·. deduction that may, be allowed In computing
. ·... , · ,t)usine~rs}CIR:y.. qeneral FoopsfPHL),tnc.; . the.' taxpayer's· ·taxab)e. lncorne . bear(ng
... G.R. No. 143672,'.A,pri/'24;.2003).. heav.i_ly __ ag~ihst · 'the ·. 'taxpayer whose
· ·. · . · · · : : ·. ···. .' .. ._ tnexactltude ls of tiis-own··m·akirrg. (Coh_an .v..
·, ·capital ·-E~p-endit1,1res:(CAPEX) -: __payment · , CIR,. 39- F. w·540; Marf:h :31 .1930[as cited .
... ·. which createsorenhanceswhat-is e~sen'tially a ·.in:Pflmicu-tvfaqriFoods:Corp., v. CIR,C. T.A.
. · : · separate.a,~d-~stj_tictasset ermade tolncrease _ EB No/97,.A·ug1,1st·29,. 200(3]). . . .: ..
the· value of the taxpayer's .property .or ,for any · . · · b, Expenses paid or incurredonrnere passive
• . .arnount <expended jn restorjng::P.roperty cw i~ investments are 6ot.·dedu.atibla from any · ·
. . . '.mi=ik.ing · good the exhaustion ttiereof,,.J1fmcer1j· 1:- -~,·. ~~te-rest o-r._di\lidend eS~_ne_d·thereby b~ca~se ·
Mersieet Alloy Corp. II'.· CIR; CTKCafA,_No,i · \ f1~o not -come, within the purv1e1# of,
. -~~92, Ju_ly. 1;· 1993). . . . ..... ;if/.~C,", J: -~- ><,i
~d,,.,,,,~·~..., _c{rry,i~g;g_n an_y '.'.tr:~_de_.o.r business~ (Hos.pita/·
. . .. . ,~L--~· . . - .,derSf';,~l:liJ..h·de DID_$,, Inc: v. CIR,.. G.R. No.
· _Ge.i:i_eral Rule.: ~ • ·jf ¥~ 7' :.,.,.,-~°';{I"=-,._~~~1(1}'>5,~. ~ 1,0, .1990). . · ·
.. CAPEX ·are. i;iot·. deductjf:JJ©a~ rdhfaiy ~Wj T· -,w- c. Ex~n~~ ,i\,lJ~rred 'par.tly·for thi:i taxpayer's· .
. . necessary exp-e_nses in tJfeyea!/1· aid .o;r inci.m:~cl· 4i'L ..B'1.. . · -t\:3de\~r. b.~Si(lE;!S$., and·. in· part. for. other
because they do not he!p-,earn.I, cor:11e,~_heni_t·is 6_~ . · . p~rposes( _f)s~all . . · be · apportioned
h:l'curred (2-BDSMONl1f~ xatiohlf7{X~t..J;""." · ~t""c-clr.rresp_~JJ.clin.9W (Cl~. v. Jamir,'G.R. N.o. L:.-
_81.4),· :...,_rJow~ver,·.· thej, ar-e1 ~apital~ieo~fl~ · ~ · ·_1f552,.MJa%h-.3 ,t ·~, 962). ·. · . :-.· ··
.depreciated _o~.a~or:t11~0~ r the. h(~-.of.~1'1~.,.~:) :· J ...... ·1.~· •. ·• ·· . •. ·• . •
. asset.-T~e- penod1c de'?l."e-ef~~i· n, <;>(' a , l;)rt1~t1011~ ~~ ~-- ~vjIDiJ,ol 1ng. ~'1 l;,xpens~s .. ·.. · ·
. 1s,··t~e··'o·ne Q!=l'd.uc:tible .ff.>r. i_~c9.. S ~~-. s~?.: ·I~ -ry_ ~/_ q~l!J~-fP.aid.•. or· payabl~- .which. is .
- (Please see discussionV,.-:Oep~~eciaYfe,· - '~~ ~~;,_.l'~pe~we .:de~/ctibl.e. from; Qr. taken. _into'• .
: . · · ,_ · · -as-;imend~d by TRf:.,IN[·aW.;' Se , 34 ('It 1 • '. · ~~- <!"'~ cp~tr. Un. coF.putin9'·_gross in.come or.for-
. :. . :.. :· ·.. ·. : . . '. , .. '\:"· . a .. : ·.: • . ,... . "' 'y.,hi. depre~!atibrf l,)r' -amortiza~ion mar-.be
. . . • ·. ·. ExampJ~~ _of 'CAPEX: .·. ' . . ·.. ... ~. . Scp·,;:--:-.-M ~ . J.l~ ..~&-~~»1J be. allb~ed.as. ded~ctioi:i only: .
1·: ·Af:J:!ounts spent·on acqu1nag fi.xeg,.a"'s-s~ ·..Cl""'l _k.~- ~-,r rt~. stJ.Q'wn -tt:iat .the tax req1.J1re~ to. b.e ·.
: ..-... 2:, ·. Orga~izat)oii_<;cists;_ ·· ,:·_:-f'J)A ·. -~.: ~,:.\\1l~1;1~(1fd .and .wJ~hheld the~efror'n.h~s oe_en-
. ·3_.: .A.rchitect's ·fee:> c!S · th,ey ·.fc:i~(?~rL6ilt~e f\ J.f P'(\~ '!'fJ.,fildPk> · the _BIR. (NIR9.,.:· as amended ·by_
builditJg -<::o~t (C/~-v._. Sori~h_o·& C'7<1,~~Vl-,. , ~RAl':'J,Sec: 3_4(K)).. . :. · · : . .
No . .L-24£!93,.March 26,_1f}71); .:· '.. ---~ · · ·. . ·:· -.-· , . ·' · ·. ... .
.4, · .l;.egal, costs of. e_stabl_isplng.or maintaining Previously, 110. ·.fl'lore · d~duction- '.'.wili .. be . :
·9nfs ·ri.9liLPf'.owner~h1p· in a·: piec~ of allqwed-· ... notwlths~ndlng·:. paym1:1.nts . of
. propertY/ · . . · · · ... _. .. "., :... ·. · ·. ·· withnoldirig ta}( at ·:tf1e/t1me. of ·the audif"
· !5:.· · ~mo!,Jnts~pent or,: rest9ririg· or aqa'pfing i! .to :- inve.s~ig_atiori·:· . or_. ... · >. reinvl;lstigation/ · .
. ·. -~ .. a·ne~or:differef'!t'l'.ise; . _, .. ·..-, ·. : . . . : 'rec~r:isideratfoo .. in: ·c~·ses . where·, no
· 6. Ap.nii11istralioncosts ofan:e~fat~; arid.:.'·. •withholding·o:ftax was·m·ade iri acc_ord~J'nce
. ·.7., ; ':C0:l':-)m!~io~: pa'id in: ~selling . secu_rities_;:as .. · with Secs. _57 ·ancf~8 pf fhe),,IIRC(R.R. ,'12-
ttiey form part of th~ cost of-the securities·. 2013). However, R.R.. No; 12-201·3 has
.. purchase~ .. (M.AMALATEO,:-Income·. Tax; . been. r-e_vokecl; thereby_.:~!lowing 'expenses .
· .· . supra at 273-_275). · · · ·. · · _not su!)jeded .tc{.wit~hqJding·as:de.ducllon.s
· · = :~. · · fo.r-~s JO~g as ~e s~J~. ·w1th'1old ing ·t~xes are
. ·. · :'·Exc'eption: ' · .' .. paid~a.t the-time of audit (R,R_. No.. 6·201.8)
'. ·lh. c.a.se or' prop.riE!tar}(edu~tional institutions, it . ·. . (Ple<;1se refer/o. Wi(IJ~oldilJftTaxes). · ·..
has' the option to·either:. . . . . . . .. . . ..
. .a. . Qeduct . ' ·ex:penditures~.. otherwise ... :N,~fe:· A d~~~cilion will ars~ b~ allowed in the.·.
· cotlsiqered . as capital _Ol_.Jtlays . of . follo.wir19 c;ases ~her:e no v?ithnolding of t~
depreciable assets incarred .during the· ·was made:· {Re-F•Er): · . .. . .
taxable year for·the·expansior\ o,f schoor.- · i, ·Payee Reported· the' lncpme ·and· p_ays':
facilities;·o-r · the ta~ due anq 'th·e withholding agent'
......
p

. i'?
.i:N.C:O.ME TA·x· ..
"$AN B£DA LAW CENTRI.\LIZED BAR OPERATIOf'.!.S - MEMOR'j'II.IQ 20;9 .
- -·· .
iad iii+ rjti HWili ili-AYlihM¥t9Epi&Afl

pays ·,.he. tax, includif!g" interest 'and . ·.-.such employer .(2-8.DOMONDON, Taxation
surcharge, )f any.. at the .. time of 'the . (2(!13)1:supra at 860). · : · ·
. audit/investiqatlon · · . or · ...
r~investigatici'n/reconsid.eration; . Requisites · . ·for\ Deductibility. · of .
. .:ji. 'Payee failed to report the income .on Compensation for . · Pers onat Services .
the due date, but. the withholding Actually Rendered (OP'r-SPR)
agenUtaxpayer .pays the.. tax, .: ii:lcludirig .1). The expense·must b.e.both,Qrdinary and
. 'interest-and surcharge, .if .any,. at \he . necessary; . . . .
· time . of the . audif!investigati9n'. or . 2) The salaries must.be faid or incurred
relnvesflqation/reconsrderatlon: and · within the-taxable ye'ar; · .
. 111- , ·Withholding · ~ agent ·. Erroneously .3)' The salaries ·must be . incurred in
. · . underwithheld. the tax 'but pays the . . c~·rrying on
a Irad:oor business; . ··
. . . . 'dlfferenc~ between the-. correct amount 4)-.. The expense must in fact be.§.a]aries or
· · .. and the.· amount · of· tax withheld,·· .. .. ·: other. compensatlon; . · · . -
. including the lnterest.and surcharqe, if 5) The salaries .rnust: be for Personal·
· any, at-the time of.the·;,11,!qitlinvestigation · .. ·, services .acfually rendered;" and - .
.' 'or reinv_estigationtreqonsidetation ·(R:R.' . 6) The· salaries must <be Reasonable. in
. ·• No. 6~201EJ): • · amount .:(JyfAMALATEO, Income Tax,
: · '$Uf;f8 at 187r , . · ,, . . ., .
e. · No deduction for· ·gro~.s income :sh~II . be.>'J ·.. · i..
allowed for-· any-payment made, ;directl}l)5r/b ·· Payment· for. compensation is deemed
jndlrectty to 'an, officif'!I or employee of;.ure>(.~ · . · reasonable only ~s to such amount as would
: national goveiJJrvent, -LGU, · Goc1;~t~~t'.?t·:4-. ordinarily· -be paid for. services in. like
. employee. or reJjres_entalive of a fo!;lji~Jj~!':~:1t·,:iJ~ ente_~rises..'in strnuar circurristances (R.R•
. · · government or. ·t~· · a private. cor!??f~ti~/.:·~·(fJ)J!;.d!i;§Z>.:·;M~Q~,.40; Sea. 70). · ·
general professlonet partnersh1r.~~,a"s1m1l.a~ l)J ~~~·'}l .. . ·
e~ti,ty. if tl'Je. payment ccinstif~es J bribe ,r:r'r!-,'J;~~~. . .. b) Trat~'i~!p·g/Transpo.rtationEx~ense~ ·. ·
k1ckbai;k.. (NIRC, as amend~f&p,y. Tf!AJJ!Jf"·1, . Tr~:reUu'i~. exp.enses · as·· ord11'.a:1ly
Sec. 34(A)(1)(c)); :. ,;:-/}~.J~~,r, . . r';'. .. unJerfto~,. · include _. transportation
.·. · . /-:_;/J..v 'tf°'r!:;;c7. . ~ IN\, ~ . · ~~pe11~es1tnd meals ar:id lodging·(R.R. No_
f. Paym.ents . made IY14xch~9}t foi;,._ tre\ .. k-~~-. . . fj2-4dd Sec~6).. . . . .
--., revelation of.a comp~tit~r'-7-=tt~~~~cret~s . ~1 : : ~~~;~r~v.~~· ?. . . .· . . ::
considered an expensil~J11t:L-t1~--;-c1~1nst1~. m~ · . 'lf6fi.:}}!~~1p 1$ .\mdertokcnfor. other.than
morals,. good custorn~~"t:PtJbli~· ·poli~y. ·yq . · bl;)siness ·purp6s.es, the:. transportation
which is not dedi.ietible. (3MPJ;,ilipp'J1le.s; Inc .. ·. tL; · . expense_~·are personal expenses, and the

..
.. 19£38)~·
. . . . .. .
· - ·
. . . . .Jf.
~r· · ·iii>-~"'
.v. CIR, $.R. No. P2833; '$ept~fiber ~~:__.1;~~~~P.}~i~.and· l~ging ar~ living exper:ises, and
··
K _41. ,; . .
1;,.:...,,".""'".~-f-- ... ,ttjer-~f~re,. not. deduct1l;>le.J~..R.. NCJ.

·. , . Sec. 66). . . . ,· ..
02~40,

1) .. Kmds·of Busm.es,s Expenses:. ~~f.b'1}. · ·

·: a) · .CQmpeosation for P.Eirsonal s·erl.,ices. -· .. .
.. · 'it ihclt1des: · . · . ·. .: ... : -·. . . .
. . .i) . ·salaries>·.: .. wage~.~ :·c9rnm1ss1oos,-
· ·prc;,feS$ic:>l'.)a[. fees;:· vacatioiiale,ive MY,.
. r.etjrem~nt;pay and othe(coinpe.nsati.on;··
-ii) .Bonuses, in good fqith; · . ·• . . · · . .' .. :·hon:ie; and ·...
·iii). ·Ma.(lage.ment.Expens~s; .. .
Iv)·.. coatdbQtioh t<::»penSion t(uSt·cr.eSted for·
. . \the benefit·of l.()e.employ~es>.if'!clUding·
. contribution under·ss~ Act;.· . . .
.v) '. P.remiums.. : ·and . corripe11.sation. · for . · :. _
· injuries, if riot ,_compensated ·:tor. t:iy· .- ·
· · · .. insurance or ot.herwise;'and
. . vi}: Grossed~up mol'ietary v~·lue (GMV) of .
.•. '. .fri11ge benefit pr;~vi"<:1ec:! for,. as l_ong· a_s: . ,
~· · . the final tax imj:;o.s~~,has been paid:· .
No~e;Any.;.r.nounfg{ven·tiy the! etnpioyera~·
· benefits fo its ·employees; wilether classified .
as cJ.e minimiiJ benefits or fringe:benefits,
S.hal{COf1StitU\0 as dedUCtibf.e·expense UpOI}. I
. ·-. Requisites, · . for·. . Dec;lu~ti.bHity . 9f:
. : Travelling/Transportatio.n, . · Expenses;
·.(PA,R} . . :. . -
: ,t. -1n.-the.f.urs1..Ji~ 9f .trade or.business;
.:.. · 2. lnc.urreo or. 'paid . ·while - 8way: froin
·· · · ·. . ·. . . ·
·: · 3. :Beasoria.ble. and.'necessary::'(F{.R.. No.
. ~ .02-40, secs~· 6&.66r.· . -~ · .
. . . ..
· lJ1e'.term..''awaylrom·horri~U.in"eans away
. . from the i~cation of the empioyee's principal
... ·place of er:npl.oyment ·.regardless ·of where
. · · ··.-the· .fa~ilY. ·resi.dence is.· maintained like .
·· · ·. · . business. trips;· It. i.r,cludes transportation.,
m.eal~·and lcidging. Thus: .
. 1.. Transpo.rtatlon: expen~es · fro'm · ·main.
· ~. ·· , · ·offic;e to brarich ·or-ftom bran9h 'to. main
office are deductible. ·
· 2..· Transportation· expenses· from office· .to
. h.ori'le :or from home to offi.ce ar·e· not
deductible. ·

·2019SANBEDA
. LAWCENTRALIZEDOPERATIONS
·. I 117.
 i;
. . ~. '
tN·.co:M·E.TAX ·.
SAN B£QA'LAW c;ENTRALIZEDBftiR OPERATTQNS - ·MEMORYAID :2019
#+,; ·, .A I A Mil EMM

. 3. ff.· ~ofupany car· Is utilized bofh for • .A.dditionar Reql!.isite·~ for Deductibility :1n
buslpess or personal use,_.in proportion . case ofReal Property: (CU'.r·R) .
to the use (R.R.. No: 02-40, Secs. 65-.. f Made as 'a Condition· to the continued
66). . . . . . . . . .useor possession ofproperty; .
··~ 2. Property. must . _be -!!seq ··in · trade or
. 'c) . Lease· Agreem·enf Expe.ns.~~:-: it·iricludes~ ·. · ··business· ·. · -.
·. · · i)': Aliquot part of ·the, amount used to ·. · '3. · Tc!Xpaye; has not Iak$n' or is not taking
acqulreteasehcld over t_lie' .riurnber of . . . . . · .. title to the. property or _h_as n_a equi~y .
years the lease wtll'ruri: and· , . . . . _other than that of a lessee,. user or_
·· ii) Taxes· and . other· obligations -ot" the. . ·. · . . . posses_sor; and :. . .
· fessorpaid'by the lessee; and · - . ·. ' ·· ·.· :4. · Must· be_Beal Property (R.R.-No. 02-98,
\ JII} : Annual: depreclatlon .er: the- cost· -.of Sec. _2.51.2{C)). · . .
.. : .. - .. leasehold improvements introduced-by::.. . . . . . ,· . . .
. · the -Iessee overthe remaining. term of': · d)',. Eritertainnierit; . . Amusement· . ", 'anti· .
-, the .tease. OR .ever :ihe· life. of: the · _ · Re<:reation·(EAR) Expenees=- it includes:
·.... irnprovements, · .· whlchever .- period · is". ·. ·.. · · ·. ,, i. · ·Repr.es'entation expenses: and .
· · . shorter (R.R. No."02-40,· Sec. 74): · .. , : · ·.'ii.,_ Depreciation or rental expenses relating . ·
• • :.· •.. ·,.. •• • • I. • • •• • : to'entertainmentfa6ililfes:(R:R. No: ··10-
...~.....
.. . · ,·
. ·._ Req1,1ISites·for_o~·~u~ti~iUty of-Rt,~b.=--~
-Ex·penses (~UTTJ-) . ·· ~~·::'..
1). It must be' made .as._~·tor:i9mQfl'to.
-u, ·[''\j~ . _
. .
,.
~~02, Sec. 2)'. .

~RF,~Sehta~ion. -E~pen~·es_ · ..... 'expenses

. . ,: · ._ ·. _ .. · . . ·

. . -· the Qoi:itirrued Y~-~f~p9~ioJ19.t~~--l. _1r11::ur.i~~ ~ taxpayer.i~ _c~nn~_ctio~_·w1~the.

·, ·. · , -prop~rtY; . · / L . V .;:r'I.""- . · .- . · .. · ~""-":~ciTI<luit.~f his trade, business or -ex~rcise· of
2)' · Taxpayer ha!i· ,jl:io'r:t_~-e~~i~·--nof.""''E.~,. -P!'.~~ion~ in. . ·entertaining;,", provi9ing. ·
. · takihg Iitle tdi~r.9.~eftyr.r; h~il·(iliJ ·1.r · .. w . "_mu~~~t ·-~~cl.· recreati~n.· to .or m~eting
equity, ot~e~/,th~n·tttfal .of_r less~e. .ud~ . -4')., ·- . 1ith ~~~~v~~, 'tl.1 .a dining plate; place of
· ,_. .: . user-or P9:Slfl_ssor;:f ·. · · .: · ,,i{ b amuse~~ntiJ;6\)ritry clut:1: 'the<;thi(; concert:
, ·. :· 3-) · F,?ro~erttnili~~~-(ise.d-'i~:I~a~
.. -'.. . . .·.
:.·:·
. ·: bQs111e~s;,. A"cF:-t·U· .. ' l ~V?:Jml
.->1) Subjected'o.wltlilflolding'F.axof-ti·~~\ ;~~ · · /.. .
.•Pr.!!.:"ji
<~- · · · pfay;-_SP}r!w~~~entan.d 'simita'r' evepts. or·
RIaces <1·.R N.o,~10~02,Sec. 2).· . ·. .
;l)·..xc=lij·. : · .· ,
..
,
. . . . ':(R.f?: No.. O~Q,\'.Sets:i • ~1:~1.1!# . '. ~ril'itta1_rl1nenf fucil.ities:refer. to: .. · , • . .
-· - . _- _· ·and_((W·- ;r.·
. . . . , . . ..
f):\:. · _ ~ '\. , .
·"" . -~- · ~' ~ "· · ~~~V.
.'J.\tl · _ "7f2"A .- ,(ta~'J!!t,J: ·'(acati_o~:.. .ho_me;·· _or_._
col'}1Eloin1nfign1 and · · . . . . . .
·. Al(ow:abJe_-ded1,ktio · s_ by·te_ssor. .. ·~ . ··· · : ',,,,~,V. AJ'!I. simi!iV' item of. real- .or·: per~onal
· :·'All.ordinary anc;t necesiar-ye~~n.se ..al· Jor--.,.:,_ ,..,...... ?.'</ . ·;ro~erty,~sea by th~-taxpayer primarily·
. inq~~red du_rj_ng the'tax~ble y~ai\'th(~~r~i{\~y:_,,t.?''for' the/emtertaihme~t. :'amus~ment or .
. . attnljutable to thefeqrni.ng~f th'7.1Jl..O~E3~~~/. --~ecrea11on of guests or. ernp,loyees (R.R.
· Jnch,!pes _co.st of._repair;:;:a!1.,m~~1~c-e~~~--(\~bffo:a2, -Sec. 2). · .. ·
.. · ·s·atari.esand wages qt e.rn·p!oy~..,,._a_tte~~: ~ ·: l\_\:'""'- ~ .-,,.~. ·. :· · · : - . · ·. , . · .
·• .. to '$~ch: :,~_as-e, i~~er~_st. pa~ent-:1prQ.erty lVl~G'°uQsts .:.:. 'pers?ns or e~Uti~-~ ":'1to whfch t~e
··.'~axes, etc. (R.R.-_NP:-·19'-!1_6,: Sec.._-?,Q-1): · ·:. · - .. · ta~payer h?s direct busm~ss relatipns, suqh
.- ·· · - · .. · · -. --=· ·'· · ·. ':_.': . · as ·but 'not limited to· clie'nt$1customers or
-~ ~ AHQ~a·b.le;f:leducti_o.nsPY· l~isee: .· . . . · · · · ~ · prOsPectfve · CliSri'tS/cu~tOnfEfrs ... It Sh811 ·. ~ot
: Amount of nmt pai~, or accru~d _ijlcluding an·· . . include . employe:es,. : officers,· ·_·partners,
. ·expenses' whicl'l under'• 1he terms · of . tht3 · . : dfre~to~s.,. stoCkhc;>lders, . Or.-, tr.ust.ees of !he ·. ·
.•. agreen,entJhe·:·l~sseE{i~ r.equlred to''pay to,'.. . . : ta~paye.r (R:R. Np.·10-.02, Sec .. 2)... . .
or, for .the· ·account--:;oi- 'the· ·1ess·or. ·.If ·the ·. -·. ..:,. .. ·. .. . .- :· ·, .
. payments a're.. so. ar.i-ar.iged as·.Jo.'constitot~. . . ' .. -~ . ~eq.uis'ites- 'for' Dedu<;tibility. of EAR
'.-: .. ··. , adyance rental$, such jjayn,enf Wili be duly· . -l;xp~~ses (D.R-t.B.:.SPWE)'·- . .. .· .. _·. . .
· ·. · -appor:tio·ned ovet<the-'leas·~·term (RR. No. 1.: QirectlY, coriMct~d: to. the. ~-ey~fopmel')t, · ..
· 19-8.6, $fie; ·3.'!J1). ... ' : : ... · ... · ' ·: management-, -and. · operation. ·of· the ·
·. ·· . ·· · , · .. · . .. •. .. · tra!'.iei. --business o,.:·:professicin. of the-
-: Np.te: T-he "cost bomi'3· by... the lessee io ta~payer.;-. qr 'dir~cilf." related tq or . in ..
'etectin'g bujid'(ngs or·'rn~klhg' imprpverflahf~ . furth~rance. of 'the conduct. o,f trade,
, · '.pn the groliJ'ld,of which he Is a tes'sEie 1:, held .·· .. busine~s; or-profes~i<>n (R.R. Nb.. 1P-02,·
· · to be a capital {pvestmel!t~nd}1otdeductrb.le Sec. 4(8)); · ·
~s .a business e,xpens~- (R.R:. No.- 02~40,'. 2. '1$,BeasOni:ible; . . .
Sec,.-74). .. . . . . . '. -3. 'Not c;ontry:i'ry'.f.o._baws~ morals, policy or.
P':Jb!i_c qrder (R.R..No: 10-02, Sec. 4(C)).;
,· .:

-118_ 1 ·2m~ SAN SEDA LAW CENTRAU.ZED OPERATIONS

 · IN.COM,E TAX.
..., ·,,, Cd!§Wt
. SAN OtDA LAW CENTRALl~~O 8f1R'OPEW.,T/ONS - Mfl.!IORY.J,l(D 2019
RM RR W&
J
Q@QMMf*i'*"!f CA 4 #NAilMO&Mldi
.

*
Lil}'litatjon on t'1.~· Deductlblilty. o:f EAR::
· 4. ' .. Does not constitute as:Jl .§.riq~ .• kickback
.. · or other similar.p~ylTlents.(R:R. No .. 10- It: must. n.ot exce~d: ~ · ·· : ·
. 02, $ec.4(D));· . _ · a. Fo.r taxp~ye'r5.: ·enga.gsd in sale of ..
5, . §.l.Jbst,;1ntiat¢d. with adequate proof.' The go.ods/p,ro'perti~s-· 1/2 of 1% (.90%)"of
official ·receipt; or invoices,'. or bills, or 'net sa.les'; . .. .
statements of accounts should be·in the. 'b . .'Fpr ·. taxpayers e1:19aged: In : sale .of.
. name of
-the -taxpayer 'ciaiining . .the . services-. 1 % .of net revenue·;.';;ind .
' deduction (R;R. No. ·10:02, S(Jc. 4(E)); · c.· F~r taxpayers ~ngaged in both· s<1les a·f
6. Must · be · __eaid· or'· incurred during . the goods/properties·· · and ··services ·:...
.' :taxable. year (R.R... N_q. 10-02, Sec. .. ·:determln~d- using: .an _."apportionn:ient .
. .4(A)); : < , ·~ ,, .. : ·. . .. formula, taking' into ,tonsidefation- the"
7.: The appropriate amount ·of Withholding pe,rp~ntag~ c,eiling prescribed 'aba.ve
· ··ta><;.: iCappli,cabie, ·should.·. have 'been (R.R. No. 10,~02, $e.<;.· 9),:: ·
wi1hneld theretrem.. and paid to the BIR
-, · (R.R. No: 10-02; Sec. :4(F)};,and · · · : · :Apportionrru:int'F.ormula·::·; .
'a. -Doas riot Exceed:· . . . . ·: Net Sajes· (or Revenues} · .. -~ . ·.:¥.R. ·
·: -a. . For tcixpayers engaged In sa,le.. of . Tot13t Sa!es· and..Revenues .
. ~.
. . goods/properties. ..:.. one half of one
. · percent (.50%)·of-net·sales; . Ulµstr~tio~: . · ·
. NefS_al.e:i. , . . ... f>200,000
b. For. taxpayers ,ehgJ:11:jed in. sale qJ./~) -
Add: Net'~e.venues . 100.000
: services "- one. percent (1 %) o!.,1:1~v1~ .
. .. reven\Je,s:.and . . . . .. ·
T9tal.
r::;_,67.;/9i. ,- PJ~olooo
. . •,, c, . For taxpayers ~m.g13~ed i:' bot~.¥~1~;~·,~·~_:;::j. ..EAR Expense · . P 3 Q9.0 .
. of go9~s/prop~rt1es· and se:"'':3~~:::-::;',';',J.,~ .. · 0.?.i . · · . ~. ·
, .' . determ..ined. ~~1.ng_·an:appo~913m.~r-Wrfi,,...+:!!L.:l;.'.:~ii;A~i!,f.s ~pportione~.= . .
-, . · - . formula. . takinq. into .J~?Ji'~~~rat1on._,.,11 . . . : !;'AR t)~sed ion net sales: . : ; .
the percentaqe. ceilip(r'.r?,rescrib~.elt-::l.1 · · },~f200.000_x P3.000 = ~
.. above (i.e.. · Neh'1~$ales · :far~ .Lt: 'ff !.. 1(?30.0 000: . ·
. -. ·. -, Reven'u~sx..: I . .T.9tef/;.; ~4ii~~ .'
and k\ . "'
~R '. as'p .o~ net revenues: : .·.
-,=. .
i··· · . .: ·. : ·. _·. ; .Re.}enu:~f~(R.R:_ffvo::;:.1~-~J<,~;iA..
-, . Se.c. 5).. ;{;'J;? . ;,{.,., .· il~·
..
~ ~ P3 0,000
;f ·
IJ .P~O ooo x ~3,0?.o .= ~
.: : .
..· •.

:~ · . · ·. . : : .'~AR.;x-pe.~·ses: e;~Wf~i/=;~4.· :~\) · ·. tiJ! · ~~i.f~ilii¥~~tq :-~~cou~~ · !h~. p~r~ent~ge

-~-~,'.,.· 1. , . Expenses treated ~~~£iDpe_~srtionfor. ·};: . . . . . pce210hnOgO. 00 . 0 5.o~ p.·1· 000· . EA.R f N. t
·. fring.e benei'fits;· .. ·, 's\ r t.t ·:. . · :·~· ·. .· . · .x ·,. · 1.0 · • . ·: .. ?,r · e:
( · 2. ·.. 1:;xpens¢s for ·ahant~b.le q"r-,-..fYf!'d'ra1s1n_g_,i·ri::,,· ..,.:~>!,.fr;t~~~s. · . :, --:
J..',.• ·1·. . . . •r.· :.,-,. ,, ,. ··- , • ••. • ,., .... ·'' ,., . . ,.... . .
t · ·· 8,;llVI 1es· . c • , ".{ · ,;/ ,.,..,.......
r ••..;.~ _ _,_,,,.~.-'-"-'.""" · . • · .

[ ·.. ·:3,···E><:pense~. ·for :·bon'ii 'lzd'~'):.b,efp\~ss' P100;000.><:. 1%· ='P1;,oo'o EAR'for N~t
,· · . meeting- .of:. st~c.kholq~r~}:~rs_..9r. · 'Revenu.~s. · ·
. · · directors·.· · ' · · · .._: . · ·, · · · : · · '·
.. :·4-,· .Expehs'et.for·atte~(:ling or.sponsoring· Hente,'the. foJaJ allowal;"Jle.·~R.i.s P2,0ob..
·: :=,,· · • · , ·• (Pt,00,0 for ·rieLsales aric;I .. P.1;,000 for net · · ·
' ·. ·an ·er.nploye·e t<> a bl!Siness·. le.a_gue or·. revenues). Ttie_excesif>t,OOQ·arisii,g.fforn ·. ·
· · · professiorral :org~nizatiori.· m.e~ting;·.. .: EARqf,net sales isno1 ded't:fctitilEi': .· · · ... · /
. ·5: Expens~~ {or .eiyer,its : o'rganize'c:l : .for ,,Note:·Anyfindings of imp:roper d'assification ·.
: . prom'9tion,. ·marketing··: and. advertising ... b(EAR' to ·avoid being :subjectecf fo Geiling·
· .. including , concer:fs,. .·. conferenc:es; ..
.. $etnjnars. workshops, conyentj,ons"ar.Jd .
be
.· : shall disallo)lied fn·its totality:. . ....
. . . . . .' .
·

. 'olher.Simii'ar events; and· .. :.', ·. ·. . . e) : C~st·of Materi~is and,Suppl)i3~· ·. " .. · · .

· 6:·., Other exp·ens'e.s'of simila:r·nature (R.'{~. · ·. Deductible oi:ily to ·the ';::i'mounMhat they 'ar~
.. . · No; fo-_02;.'$~c. ~i,'. · · · :·. : . ·. : . · : · · actually··.con&umep .arid::used . in· operation •. .
.. . . . . .... ·. .. . .. . ·.: .. : . ,· during the yec:lr for which the 'r.e.tLirn is .mad.a; ...
. Notwithsti=!nding· the. foregoing, SllCh items provided that' the.CQSt of such materials 'arid
... . of el(CIUSiQ)'.lS may,. r:IOl)et_hel~§S, qualify· c:!.S · supplies.. h~.S. · not been d~.duqted : in
.· ··othEir it.~ms o(d.¢?iJctior1s ur.id~r S~c:-·34 .of. deterl')"lining the·riet i~come for.any-previous
· . t~e ··. 'NIRC;. subject .. to . conditions.: for year' (R:~.'~~, ot4o,: Sec.·67) .. · ·
. dedllctibilltY the.rein .(R.R.:: {)lo.· 10-02, Sec .. · . . ..
: 3)., · · · . . . · ,... · Method$. used .. to determine materials· ~sed~.
~) Actual consumptjon. method . .
b) · Direct . . Purchase:. . . Method
(DIMAAMPAO, supra f!l 104): . . ·

2019. SAN BEDA. LAW

. CENTRALIZED.OPERATl9NS.
. .· . I 119

.·.. ::
 . .
I N't·o_M _E· TAX·
SA~ SEDA LAWCENTRALIZED·BAR·OPERATIONS - MEMDRYAID.2019
. . . . riNM . .
I.PM Hi
. -,'
. f) .···Expenses of.Prqfession;1ls:' · Major or -:extra'orcllr,ary repairs ~ Not
.· i. .Qost Qf §.upplies used in the practice of deductible as an : expense- _since major
', l:! protession: . ' : : , . · · · repairs- t~n_d to- ))r0long the life ·of.thE;l asset..
ii. -Expenses paid in the operation and . These.are capltallzed.cr added. to the cost
. repair: of ·Iransportatiori .5.qlliprT)ent· of th~ asset: subjected to 'repair.._(Refer to
used jnmaking professional. calls: . . }iriordiscussionpn the' Coricept b(Ci\PEX)..
~iii. · Dues to ProfessioTlal ·s·ocietieS; · · . . . >. : R • • • ••

iv. ·su&scriPTic:m to;Profe$~iqj,aLJol!rnals; . · lllote:. Thecost of incidental repairs which •'

·,/' Rent paid for: Qffices·;. . . . -nelther materially 'add to the value. of the
· vi; Expenses. for.. Y.tilities· 'used in. such 'property nor appreciabty prolong its: life, but'.
office; ·- · keep it in -~n ordinarily' efficient. operatinq
vii. Hire of office ~ssistan~;,; . . . cendltion,' rnay be. deducted as expense,
viii.- Salarjes.of employees: and- . provided the plant ororoperty account is-not
ix. Cost of . §.oaks,. . furniture -and . . . ii.creased . tiy· ·. the - amount · of. such
· professional equlpment. the useful ·life. . expenditure. · Rep.air:s .Jn : the .n~tur~·- of
. of which _is short .(R.R.- No.' 02-40,'_Se"<;. . . replacement, to.. the -extent that they arrest
~9).. · -:· :-'· - '. . deteriorattonrand- appreciably prolong ·the
... ·. ·. . _,life ot the. 'property- should "be .charged
: -ArT)ounts expended for books.furniture, er,.d. __:_ _ · . . . agair,ist tfr~. depr~ciatio~. reserves. :if such
.. professional instruments and eq,u,Jp_meli~~u-·
': a p·errl'l_anent-character ~re n~~rf~l,'f~b_l~~s u . . _'"'l.v~:.
.. 1~ _·;- r. ;,_ . . .
s~pc6unt.is kept (~R_.'.Np: 02-40, Sec. 68). ·
:... .. . . . . . : .
· - .deduG!10ns (R.R:_f'!o- 02-,r3e~~:ct"'6~Jr,(R_gfw=-:-=~ '1fJ-~rti~~9-.E~p~n~es-1! mcl~des_the use
to- pr,or .dJSCUSSJOn on/•'Jf-1~_"-'r;p_n<;tf{:Jrof . __ · · . '~~.l<e,_n~~'°'."~1\l~n. WO~d. In pnnt.ed. n:iatter,
··CAPEX). . .
·
·. Pro-~ono Legal
·. .. ·,f.£:r\·
l;,ei;
f'-
i,ces,t/ .·
·t
. · · / "'-9/:/-"""""'°'.'~~:""=...;,~"'.f'0.¥!~
!
.: . J~ . ,~ .14· . ·
ra5;t1p, and·te!~v1s1on to,~cqua1f:!t th.e
: ; . ~- ~_,. . · · J?,ul:if1~ ,wi!-!})t~e-·taxpayer's merchan<;lise or-
_{er-vic'esf(qeri'.f.al F6?d~, Inc: v, CIR, :cTA
· . A . ra":'yer. _or . . P.r.:. f~sslo~al -.P11..~~er~hTL~.: ·.. : 5.as~ IM.'<j§M;, F(!~ru~ry-8; 1~94). . ·
· rendering ac_tual J rl!i~1e'gal .s1rv1c_es~1s. ]~Ir" · ii · · ·. \ . ··, · ,., · ·· . · .
entitle_~ to an allaiabie".pfduc~jell\ fr.~m_1fl~
gross income, theii_an:!}}U1 that5~la hm;re;:;_~ ·
~fil: . ·• · •. ,
• ~. ,.~· IIJ· 111
i ,..
bee~ c9ll,ected. fO,(Jt-i~~f11CtVe~· r(~B, lega
. servic_;es rendered_~'f ,ro~~\,!?.~,- ~rcen1 IB. r. ;, • ve
.

. <10% ),-of the· g~oss ·\cd'm·el_eri'I( a; RliQ.. th:/ . ,:_ it!tJ:: . ,. . .. nt : sa~e°f[C?r · -· ·. · · :
_ . . . . . . •.~.~~
. to_. ~ti~[M:1l~te J?e<:l~cti.ble .
-·
.. . ···. . act_ual p_erf~mnance ~ t_l:ie le9al.p ~J'$~i"€l , -·.. ~~~flt~e - . r;._µ_s r.. of · · __ ._,- . , .
whichever 1s low~:= ~~©VJd~d; 1-~i~e.,p"G · cl ."" ,.:>"' -~' s - ... · . . · , . · :' · .. . ·. ·.. · , · ·
·. . ·free ·Jegal. services ~rem _i:;o,~rrfR._tgl,el-EN~ t · • ./- · · . _. · : · •. : · - ·
. · shall be e_xclusive !)f. th~l.'l:liniiriurp~.x~OO). ·. _ . v;.1J.sln~~._-J~~ulate N_o.t de~uct1b~e o~tnght,
-·.: _hour mandatory legal-aid ~r,viei;!f~nP..i~~ -· ~~i-·;t;~[e_ .. o.f ~p~~ad .ou~ o~er :a
.. · to iriaige_n.~ iitiga.nt~ (R:A.. tyo~.E. _'9./J:J:ee l.. · _- ·Q;,ri~~~or __ use ·Of: _r~aso~abl~ __ penod ·of
·. · ~eg_9t~ss1stan._ce~d of 29_10", ,$ec:"6).~ SwYJ~- ... '. . . _time'.... . ..
- · ' · · . · • ·· · · -~ . ·.Advertising-topromote the ·Nc>t decluctil;ll~ · · . ·
· g}. ·~epair-~p~Qses . . . · ·.. · . .. sales of stiare·s·of Stcicks: · ... , · · .
. . · · Minor ·or. orciinary ·r.~palFS. """'. De'ductible ortq· create· a. fc1vo~1:1b'fe : · ·. . .
·._.- ... from gross income l;>J:1¢a.use I~ ·.k~_eps the· . image, . · ·.
. ·assets -.i~ jts o_rdinarily. 'effici~nf "qp_~rating: . . . •.', .
cdndition (R.R': Nb. 2-40, Sec: 68),. · · · · · . · ·(Ge_neral F66ds, Jnc: · 1( CIR, CTA Case ,Vo: 4386, ·_
.·;. ·.. ·. ·. :\· .· ·· -: . /.~"Fef?IJ:lafy-8; 1Q9n.,.. W6Jcnv:·Helv~rin[J,2.90.U.S.:111,
. The followi~g'conc:.litions rritist be present:.· . · -l?L.Ed::212, 54;5-cf.·B/1.993) .. ·, ·: . · · ..
a. The · repairs. p·lace thEf .'pr.operty··.tn ·an_ . · · · · · ·· ·. · · - · · ·· · · · ·. · -. ·
ordinc':!rily efficient 9perat1~9. condition; · .:_N~_te:°r-he iatt~_r'lypeinybl~~s _expen~Ji.tur_e~in.curr~d,..

., '
b. · It-must not ri)aterially·ad~ ,6 the,vah;1~ of . in_ whol!3 or. in 'part; to:crec1te ·or maintain' some form ·.
-·the property· or ·appreciably_ prolong its· :. · · ·of 9009 will ·for·the t~xpayer's)rade; or '.business. If
life;' and . - · .. . . · • fl:le expenditures .are' f9r advertising bf th.e'first.kind,
c. The. plant or- propefrty:9cc6un't ·must not. . tl:len, ·e~cept for the ·re~sonabl'eness ·of amount,
· be. i_ncreased',by the. amount· of s.uch· there is ri'6 · doubt· .that. suc'h expenditures are ..
_e_xJ.)endifui'e(R.R:No:-~~~· S~c.- "68). ·. · . deductible as.· business:expens$ )G.erieta/.. Foqds ·.
(Phi!ippiJJes);. Inc. vs· .Clf:?, . CTA Case No.. ~B~,
Februt!rY.
. , .9, 199.4)1 · ··= ·. .

120 . I . ~019. S.A.N

. .
. SEDA LAW
. CENTRALIZED
. . OP!;:RA
. TIONS.. ·
 !':.
{ .INCO·ME TAX
f
t:
.~or:a·:1111mAH
.. 1m1m11B11Pmllm!~e+aa:111B1m11e~--llll
SANJ~f:DALAW GENTRIILJZ£0BAR OPERATIONS- MEMORYAID .2019
... a.~Pll!ll:!IB·m·
..111!11111!1ail·•·l:l!l·P::;i¥

There' are two conditions set by American

.... =D!llilZl&1~*'8!1m!l¥DIAA18111l11¥1m·m:mist~~~j!IJI~
4. The· indebtedness must be ~onnected With
f_t : [urisprudence before an expense may be treated . the taxpayer's trade. business,. or exercise
~ as ordinary, hence deductlbte: . . . . of protesslon: . ..
{~, . I. "Reasonableness" . : of. the. . amount 5. · The interest must NOT be between Belated
!k incu"r'fed; .and . · . _ taxpayers;", · . · .. : · · · : , .
Ii:· .ii. · .Whefher .tne. questioned advertising· 6. · The interest must NOT be incurred ·to
f.· . expenses, are actuatly capital outlays· to · ·. '·.'tin·a~c~· petroleum Qperatfci.ns; v ' •• •

~ create'a "gopdwill"·to'the productand/or . 7.. The interest must be stipulatedln Writing;.-·

f_, · business; and .hence, considered as . . ·:a. The interest' must be_ legally .Que; · . - ' .
( . capltal expenditurestobe spread-over 9. In case .of 'lnterest incurred -to -acquir:e
J:
~--
'the life:· of 'the 'esset (Generai FOQds
(Philippines), lnc. -vs ··c1R, . C.TA Case.
propsrtyused in!rade. business or exercise
of profession; thesame wa_s-NO::J: treated as.
ff : No. '43"tJ6;Pebruary 9, 19f)4). ·. · · capital expenditure. (NIRC, alJlended by. as
i"· . : • ·.. TRAIN Law, Sec.~(B));.anE(: . . . . . . ;·.
t·t !) · Exp~nses Allowed-to Private'gdllcatlo_nal
· Institutions . . · · ,. · · ; ' · ·
·10, lnterest expense is . subject" to - lnterest.
· · Arb.itrag.e rule . {CIR v: Ludo ; & .· Luym
r,: . . in 'addltiori: to. the. expenses .. allowable as : · G_oip9rafi6n, .CTA En _[Ja_fic ·case No. 1559;
Ii deductions under 'the . NIRO,· .. a private Ju(>~-B,:2018). · . . .
(_._:·.. . 'educatlonat institutiorf may__ants opilon elect .. .· . • . . . .
t · .. - · either: . . . : ·. ·· . . . . _ ·. . ,~ .. ·.. ·. Gene.rat Ru.le,: ·The entire amount of interest
f: ·. · . 1. To ~educt ~xpe_ndityres ()the~~1 ~,_;:M · · ··_:,e~pense ·shall be}llow~c;f as .deduction from the
f,'...·· ·. . . c;ons1d~red ·as . _cap!!a"I. ;outla_Yfl)[;,·..::;>·-\ : taxpay~c·s-·gross income (NIRC, as ame_ndecj by
;. . ,dElprec1able ·ass~ts mcurr.~.d ·.d,t,tn~g:._,.,~~·i, · . TRAIN. Se~. 34(8)(1)). · · ·. · .
1: ·.• the·tax~ble. year fo(the exparisi~rt>~~-J t(i.. ~-:. . .. · . ·. . . .
f-: ., . scl]qol ta~iiitle.s;-Of . . . · . , ./· }/)ir'i'-:}l:~Ji_-~~_cip~f ~_;- No- ·d~ductip.n 'Sh.all be· ail'6wed . in .
r·f: .
l.'f·
.
··.
. . . . ,. .?· Tq deduct allowance: for d.§~;tec1at1ork.,..
(NIR_C,. as amended ~y~T,RAIN, SeJt,,.1_q.
. ~4(A){2)). - . . )~ ((.-. .. 7": fj,·
r, respe'et·oJ\ntere~t:
~Jfpi~
a.. ff .
·: · ,
the' ~a?<~ble. year an. individu?I . -·
taxiefi::tv~portmgJ!1COfTleon the c'a_stj basis· ·
..

ij,. . . ·. . · · . · -... . .- ·. · . .· ·ef!/·>

~-- . B:. !nt_e_rest ·.:. _...
-~\tz:tl' . ..
. ... ·,.ii"/< . ·,"<-1:::;;,·;
li · . ·.
li\
in}t6rs ari~n·debtednesson which an .interest .
: if .pa . fit_· ad':'ahce though -~_iscount-· or.·'
f · .
ri:;' .
ConceP.t. ~~mp.ens~ti~?,:'}~: t4~1\ ·.
. forbearance or_.d~te~t1q~/?~··rn...9EJ3·i~,:r,.~9.a~r.-r· .:
\J~e ~- ·•·,:l..
t# .. . . . ,9the • ,se:lRrovid~d,-That-s_uqh rnter~sfshall ·.
~:15~J~Jl~W.cf,:~g' .deductio~. in the y~a~ ·ti)e ·._.
f._.·. '.
~:
?f the name, ·It .1~. _cal!eUu.:or· d{,~ni~t!1a.t~.9~tJt.
rnqlu~_es_ tl)e ~mount P._a10 f~,t~1J?:w.r:~i,yers u~e t~f
fsi ·.''lK~Md.oe:SSjspaid.._-Provlded, further.That
.. · · if ~he · lndebte_dness . is p~ya_qle in: periodic
r.. of:m~>n~y.d_~~ng t.h~ t~rm;of:t~~-1~an·~~"'.>'el!Fcl~. J1r.., . . · amortizations, {he amount C?finterest-which
ff' !or ~1s c!~t~.nlion-pt money after.~e-,?,~,$;):fat~for ,.,.J,:~.':?'""~~:&orresponds to··the amo.unt of,the. p~n_~iJ:l~I.
{--- 1t~ repayrr:ienf_(~.R. _No .. 13-.2000_,;;~fJ_c,. 2(~Nt··p:::.~(,..,~.f~a;0~ized_ or P.'.'liq ·during- the year ~hall ,be
f :.- . . . . · . .'. ·:. ,
i:i· · · . ·Reqµ,1s1~es. -~.Qr ,Dedu.ctl~ll_1}¥: ("t19t:G~~-~vD- ·
<. ·. · .. · tr hft:~ · ·, . ·. ,allowed as deduction.in s1..1cb taxable year;.•
· . ·.- :b. · ·:1tboth·the·taxpayer.and the·pets9n .toyvhorn ·. ·
,.·. . · TA) · · -· · · "<.u~ ·· · · · · ,.. .
;~_:._: ' . ', . . . .: · . .- . . . : . · · '' , ·. : -,: · · the ·payment· h_as.·been ma.de ·-Cir _Is· to be
,: 1. , "T:he _1nd~t;>teoi:.1::s~ m1:1st. be ~ha_t_ .of .. the · made;ar~:· (Fso·-Ho.q~F2) . . . .· · ·
f· .· . r,a~pay~r_; ,.- · . · . ·: • ':' ' · . i. ·. · Between family ~erttbeFs of. a !amily; .
F. . 0 . Nb.te1 The term· -"indehtedne~;~' has _been : iL , ~xc_ept. in the .cai;_e of· aisfribi.Jtor~ h,
t . ··_:-d'efineq .. as ·an U.QC.b~ditionar:. ~r\d legally' .. "9.~_1da.t!_on, · be~e~m_--two. corp.~ra~1~m.s

r
t

._. .
.,. · · . enfor.ceable obligation ·f9r. the payment :of··
money (CIR v..~piieto, · G.R. Nb. L,~139_12,·
. . 9.eptf;Jmb·e,::~.0--_1960):·. ... . ·: : . . ':
_.l'l'!ore ·.-l~an, 50Vo · 1.n "'.alu_~. . ~~ ttie
.' , . _outstandl~? ~toqk, of which IS. OW?ed,
- : ·. ?ir~c.tly.o~ lfldl~e_ctly, by.or fo'. me_ ~!'lr:ne
'{;· .. · · . . .. . . · . .. · .. . . · . .. . 1J.1d1v1dual, .· . . .. . ..
"··. . ?_•. ··l,riteres_f expers.~ 'mu.st bh,.a~e. t;,~en= p~ld. ~r. ·,iiL. l~1q·xuceld.Patti·Ginn· thbee~tw.cae·
seen:·otwf.odicsotnr'bpoutr.oart?1.on·f_ns
Incurred during ttre ta,x_a ~ yt3ar.;. . . . · · · · · . , . .·. , . . . . .
f' i 3. it inust.-be. bas.ed on a·bbna·fide Qebtor- . · more· thar:i .. 50.!o_-·m value .. of-. t~e
f: . . · cre,ditor-r~l.atlonsh.ip: ... : . . . • .. · _- ·. .. ·. . o~tsta~d!n~ ~tock o_f_ ..yh_is!i· is .0wned_,
:t . · : . . · · . •·· · , . . . . . . · d1r_ectly.qr rnd1rectly, by:or for ~he· same
f: . . .· Note: A . bona . . fide .. ··.debtor~credi~or: . , ·.' individu~I;·: . if. eit.her . one. qf . '.~!.!Ch
t -relationship ·is ··one. based on a_. valid and ' . corpo~tioli, . .a . . ·persQr:,aT . ·. H olc!fng.
f_: ·. e_nforceab!e obligajion·V,!herein thl:l deb.tor is . . · qor:npa!]Yor a .ror~ign personal holdi_ng
t: · und~r unconcjiti.onal o~ligation to.-repay th~ '. company·' · : :: . · · · · · . · ·
· i_·_; . ' . ·, .· ... cre.di_t(!r, , . (Phi/ex. : Minin,i;J. Cow.. · · v. · · iv.. Betwe.en 'G·rantor ~nd a.. fi9t1ciary and
t ::: Commissioner,.CTA Gase·No. 5200, August _berieficiaiyof ~uch.trust~ ·. · ·
t .
t 21, -1.998):
.. . ,._ .

~ 2019.SAN SEDA L!',W C!;:NTR.t>.tlZED·OPERATIONS J 1-21-. ·

tr.·
,·.
'-=
 1.N·c·OM.·E-TAX'
. .SAN llEOA·LAW C!NTRALIZEDW,R OP.E.RATrONS - ME:MOFJ.YAID 2p19

- ..
v. Betw~en .fiduciary of a~J the· fiduciary ·. investment was 11),ade for as -long as, 'quring the
of a -trust and tfie fiduciary of another . . taxable year, there :i'S 8() interesr expense I
trust if the same person-is a:g~aiitor with . incurred"·on. one side, and. an- intere·st ·income
. .respect to: each trust;·and . -: . . earned·on the i:l'ther·siae, ·which Interest ir,come
· . : vi. · Between . .Eiduc[ary . of .. ~ trust and . . .. _had. been s1.,1bjected to ,.final· withhol_dihg tax
· ·,. beneflclary of· such trust ·· .(Nl~C, as · (R.-M:C. NQ.. ~-1-2.009;. R.R:· No_.:· 13-2000;. RA._
. .. ?Jmenc!ed.py TRAJN,,$ec:·.B6(B)); and · 9337).. - . . . ..
· .: ·c. -. If. the· indebtedness· is lncurred. to· finance·
.. . : .· p~t.role).1m·.~xpldta:fion·.(NIRC, ·as· ·,iru;inded - ltluatratlon: . . . . : .. . . .
h TRAIN s · 34(8') · Corporation x· borrowed from ABC. Bank<an
.,,y . . :- . : .. ; .. f:C.... : '/ . amoyn~ of P!iQO.o.cib ;3!:~ 10% annual. interest
· . · .: . . Limitation on Dedl,lctib_ll!ty ~f 1.Qt~rest:. · : · . (resulting to . Interest · expense). · lmrnedlately
. . · :-· : .frit~rest.,~bitrageRul~ · · .: -. . . . , -th1=1reafte~. the proceeds of the loan··.~ere placed ·
·.·. :' · ta~· Arbitra.ge··refers:to a-situatton.where .a · ina local bank deposit account which earns a
. .t~xpayer.. prO:fits.Jr.9.rrt '"tt:ie differences on how .. · · .1 ·0°io annual. interest· rats (resul.t,ing .to Interest
· •.. income or .g.ains .a.re· taxed. The· tax arbitrage . :., income). : · . . : . ·- . ·
. · ."·-contemplated under theTax Cade is a scheme. . .. A °:'. th t th. ·. ·j· . : · t · :: t . . · ·-
.' · .: .... h. rein. the ·proceeds·· Of. ·a taxpayer's loan : · • S~U-~ln~:. a . ~ -.rue ·.O!"I' .. 1~. er~;,; . expense .
· . ,w. ~. : . · - · . . ·: ;· ·. · · .. . · Iltnitatlon lsnotyet m plpce,.tne interest.expense
. O?tamed:m t~~ cc:mn~~(l_onwi_thtt1e._operat_l~~%-~~.<a!J>50·,Qpo (1 O.o/o·of P50(),00(:l)will !esult to._a tax :
. -h1~. tr;:id.e,.busmess ~r exerc,s_e of p_ro~ss1on ,s~1
· · · · · · · · d (2 DI
j. )._
. .s:"? · 1\:[.11~3,, I · -;-,... ~~ 1~<;> 30
f... ->:,;::fit. f .. 0/,o o_r n 15
..- , 000.
h"! th · t · t
•· , vy I e . e .l!Hl~es
. d_E:~~s1t~d..or m"'.este · ZON'.-/,!:p.a. .ai ~·(_:;-.=:.t :~1~fo~\~t50,oop·(1oo(o ·01 P500:~b~). bei!lg a :
.. . .. . . ·. . "' ~ -~- r
... _Th~ taxpayers ot_he.rw:1se_ a~tk~-bl~jda~t~n-
·."O~ . ~~SSJ,¥-e"mGOA'.le;WJIIonly be .Sl:lbJected to ·final
..,.,.~-:~ · Witltt:Jglq_i ·-~'\~~:·;;j ~0%_. ·or ,P1.0.,000. The
, . for ~~ten~st ~xpense.sh.~11,~ re~.~fS'/.'.,..~3% qF ~c ~~yer.~wou!_~)eriv.e a· net.. benefit of. PS,000
, the _mtere~t mcor:ne.WhlC~/T;t~et,rn fUbJeC\~,9' ~ from\the\ortrbin.etJ;effe<::fOf a lower rate Qffinal
.!o _fmal w1thhold1n!;! t~x.f Thu's,,P e_ ~m?unU~f -1~ tax Jiibmff~· ~d ~ft.,il': her rate.of tax deductibility:
·!hterest _exp~nse equ1vttnt to;f:~~o/~.·J.mt~e.st ~. . ] .. \;JJ,,,. :· ; ... ··., · · . .
. . . _1nco,me;: SUbJec.ted .',to!~~~~,.,<. ~111.. ~~'1(},~. . . ~:~E,eialif_i!"lg~h. w~gatVe im·p~ct ~f ta~ -arbitrag~, .
-. · , . ~educttbh~;~~d onls:.!_hfell'l:81fln9.f>O I_O~ of~~~ ;::;::_ -fi.~fie ir;iteres(e, =se~ir,;ti,~ti~nWas ~~g(s!at~qt~ .
1nte~est e,:cpense pan ~f),..,9!1'hJ~das e en~M · , •. !.!51:-?:111ak,, ·l .tax! ene~ttf clai.~rnng.ded1;1.~tion.equal .

·
. . · tfle. 1~~o_me ~x c?_:11P~,M~~~Rr
· ·· · · ·
,).;ii:>te~-'T~e·limrt~tion o\'tl:ie ~·1owa"{i{~reit_?j
~ ~9QO ·.· ~?• . ~;O.-,:-l
~-
· h' () . v.)',\, · J&ii f ,i) -m ~e
~"· ~- · ......
l
· -~ · 1. o~~~!J~a_lta?< .paid.. 0_11;Jhe: interes~· ·
~1.;{11
· l
.· , . .·
·.· . · .. : . _. .
·· ·
. · .
. . ·expsnse:~~~11 apply, r.~fi)at-01.~·s o_f .VY.~~ ~ . · · - e;4&,s', if ~N'-._we~~ I.ff,re~uce. the. interest expense
: ·. .-n.ot i;l .t!=)x'i;lrl:>i.tr:ag_e:'s,ehe,r:n\ _wa~--~ ~e~:i~ .. ·. _- pdf~50.J)_OO· b¥ ;,<3~.% o! th~ _interl?~n.· !ncol'ne
~i.
. . . ·:... !'1~ :taxp;;t~er.,_or.r:egar.dl~~s tfa~ da . ~t(~~@[E1\i~~1;1~-~d t~. fl,(a1 ta~- (P~0.1000);"_tbe mt(:}rest _
. interest b!3anng loan atid-·tn~~dat~ ~!Q,h~~p~nsp91J~'ked_ a:>· ~educt1on:WC?"1,1ld· pnly .be .
· ·· · inve.stm~ntwal:1.m.ade tor a~ l~n~~s~.J:P11}g-tfie'-~~P.a\~~·:rn.e,!ax. b.eh!3fit the.reon.. o_f P:10,ooo..
·,. :.. !axa_b!e .. ye:ar,.·the~~-- is an '~!~~t,;,_.~.~P.1nse.1\.·AJ(.\tib~¥f>.33,3.33n&~no~,~-qual _to the fi~~l:_~x·
. 1~cur:recf on one-. sidt:: · ~~ct:: -~.n: 1~~Elt1?,st~•in.c.Q~~aicl1f>1 O,OOQ):, ":.: · : · .· ·.- :· ·_ : ' . · .
. -earned on tli1:n;>th~r·s1~e. vyh_1ch m~~rest_incom~ .. : .. ·. . . : ·. . : ..• · _ · ·. . · ·. ... . . ·. . ...
. . . · .had been Sl!bjec;tad to.fi.nalwitht:ioldmg tax (R.R.~.· · · fycept1_9~ to the .Llm1taho11:, 1.nterest_ 11:icurre_d
. ·. · · : ... No/ 13;2900).:··. ·.:-.-· · · : · : · .... · :··· .: : , · ·:: · :. ?r .paid :or:i:.u.npaii::t ·:bu{i_n~~~~retated taxes-s~all .''
-··. . · .. , · ·· ·· · , be f':111Y . deauctll:!le · (1.R-... l':ff>.: , 13-2000, Sf3c.. ·
Pufpo~e · of: qmitation: .. ·.Jo di~co.ur.agp fa~ . ·.4(c))., · . , . ·., .. : . · : . ·
a[..~i~ragb Wherein b~ck-to£back. JO.an i.s. ~se~ t?. . . ·. lntefesi Oti Deli'nqUertt Taxe~. ~ . . .
: : . : . !ake adv.an~ge of !~e 1owe'.- ta~ (~fe·00:!nterest ·. ·.. < · Interest paid or ·incl:.!~re·d· t;y ·u,·e· taxpayer ciri all
' .. Jn~?me and "'··. _ti,gher.Jax_. -rate:··-on interest. . . : : ·: unp:aid. business.. "reli;ltea·· taxes· .shall _be fulJy
· · - .. exp.ense.deductiop. · · . ,. . . . . deductipl~.from gros~i.incom'a·ana shall !101 be
• . •. ·. . :· ' ·. 0 • • .; •• : . : . ·. . . . . . . sut;)ecf· to' the 'limitat_ro11 ·_or,i ! deictuct1oi'J.. J-hu~·.
· · · · B~_sls °.~-~3 Yo.__ . . . . . .. .· · _ : · :such .interesrexpens~;paid ·or._io_curied ~t)al! not. ·
· .30% N_IT-:- 20% FT· .... , .· · . . · 1 . ··._ . be _diminished by· -the 11ercentage.. \:if iri.terest · ·
· · Ni~, · ~ : = · · 3·3%.· ·.. · · · · · · inc,l:)me. ear:_ried ~i~h lia~ Q~eh· supjected· to· .·
30%· .... ·.finalwithholdlQg.ti;i~·(R.R;, Nci:. 13.;2000, Sec. 4,
- P~(· (G)}; . · . ." . . · : , . : .. ·. . . .
·N.~te:: The: limitation on the. allowable interest· ... ·
expense shall apply; regardless ·Of wliether ·or· . Interest pai~fon de.li~·qu~nrtax sh.1::>'uld'b.eb~sed:.
not a tax arbltrage.scheme. was. entered into by . '' on .the tax _proper only withqul .tt,e includin'g t~e .
or
·.ttie. twc"payer, regardfe.ss·of the date when.the . .. ".interest,. surcharges,. anct pen,!lty incidental .
. lnt~rest. b~aring loan and the date· when tt,e. . · .· ··.~ereto_(R.R. No:·~.3~2_00~,.S~c. 4,'Par'. (C)j. .

122 I 2019 SAN BEDA LAW.CENTRALiZED OPERATION~ -..

• ' •• '• I • • •

. ,' • '•• ,'

 SAN BEOA
·0w·lNCOM.E.·TAi<-· .
CENTRALIZEDBAR OPERAr,oN$.- lii1:MORY.AID20,9
WIPF Wirt 5' Aiaws wem-ils +ewaeisA aw;wwa, '*'
Advance P.ayr.nent of
Interest of lndivid~als . ~·ithet one 'of such ~orpor~tions, with respect
Under (,a~h Baals . ·. . . . .~ . . . 'to the taxable year of ··the .· corporation
If an individual reportlnq income on cash basis. prece·ding the date 'of tt'ie ~ale of exchange
incurs Indebtedness on which ari·interest paid. is was.• under, the· law applicable; to such.
· in advance through' discount or otherwise, the ·. t~xab!e year, ·a pe.r~onal holding company or
interest may only be deductible: . .. . . ·, a foreign··personal'.holding ·co·mpany.(except
'1.: Inthe year the indebtedness is. paid; and · · . in c;ase of distribµtiolJS iri liqui9,ation); ,
. 2.: · If. the indebtedness ls payable' kt periodic . . d, · Between the gr~ntor and a fiduciary of any
. . amortization, the ·amoun't of Interest. which . .:tfus_t; . · ··
.corresponds to the. amount of ·-pi:incipal .. . -e, ·.Between the. fiduciary of a trust .and the·
· amortized' · or · 'paid she1ll be allowed ·as : flducfary Qf another tru'sf if the .same person
. deductio1\ irJ sucj-l taxable year (NIRC; as . · .' ·-. ·. is a granto( with ~esp,ectto each trust'; 'and
t·
•: · -, arr.ended by.TRAIN; Sec. '34(8)(2)(a))·. '- · '.f. .-Between a. fiduciary. of .. a· tru~t ·. and.
. . ' r : .. ·l' ", . . .. . . . . '~. . .ber:iefi(;ia1y,of such trust. .
~: i lrtterest. incurred·. to Finance Petroleum
' ...' Expfor,;1tioi,.s · · ·' . ·· .
.. : . ·.·.Optional i:'rCil.atment of ln~er.es.t Expense
,.· ..
n
-, ·.The lrite'rest is'non-qedudible arid Capitalized a~ : A\ 'ttre .. : option ·of the. taxpayer,' 'interest
.: "qeferred explqratior:i':c;:ost".(NIR.C,.' as,.amended . . =.· incl,J(red· ·to ·ciqquirei property used ··in the ·
·: by' TRAIN, Sec, 34(8)(2l(c) in relati(,m to· Sec. 34 .· · trade, ··busine~s· or exercise .of' a .professior.i ·
.(G)). . · ·• :-.,;<l .
n:i~Y oe·anow.ed,.as: ...
. . . · . . · ,:v' ;,,.>~U. . · · ·, i: · Interest expense; or
The ..J1oh-a?d~_ctible ·inte_r~st he_rein', r,eferr.(d.i
. pertains to interest or other:consideration p~1etor:• ·.,--".'\ .
:&<;;\.: .: . . . .; , . . . .
11.- ~ap,tal ~xpenditure wherem.th~ am.ount
_. :·. · . : .' . · .
,. ... i~currad by a· s'ent.'ic~ ~or:iu:ac~or'eni;i~ge,d iiJ)t~~··>"{J r:-~ . · ·. ~Qt_ intere~t. is 'add~d. !o the· ~ost of the
!· discovery . and pr?~li~tion .: of .. 1,:i~~fno~,.f;V~~.tt:i,...;j,fR~~perty (J.e.! cap1t~l!Z,f!. the mte:e$f as
f!. .Petrol~.um m_ tl:).e Philippines in, ~~~ict of .th~v r.l · : . -~.:,.;,;!{if(!: of the a,cqu1~it19n cost _ of _the
i·.: : flnan~tng of ltS :P.~treleUQ1· Opera{w1s,:j)UrSU<!~!~,-:; . . ,.· ' 'fi/ff>/}8rtr ·a_nd .subse,9uent}r avail '?( the

,~
t·.. ·.
t1_: ..
t~
to Sec:~~ of ~.D. ~o.. 8, :~s ..am;~%'i~ by P.;J2>-:-·"'}--._. · ..
·.:ls!o., 87.(011.f;xplo-rat,qn andD~,&JopF.~nt~.ii.ct-of ~~i
1972) (R.R.:'No.1-3-2000, Setfl'4;Pa'fw3f::,:r: . ~ · Y,~
. ,. .. &.·" · - IJ
· J)cf~d1~ct1on .trol1} ~u~m~ss mr;ome m the
: . · ff fojm·t. of .. d.epr_ec,ah.~n). (NIRC, as
. . . //. a.rpe!'l,.d-by TRA(N, Sec. 34(8)(3)).
· -· ...\

.[r!~ . ·. · .: .
i · !L. ·11 ~~
·'\~)i~~?.i?P~?P~ a~e .mu-~uauy·e~~luslve. ~~e· .
• · - · •

t·r·' .· .
. lnt~re~t ln~uri~-~bet;;~}~~ta~~~P~Y._~f.:",
H .. ,s. 1Jot cfe.duct_1ble·. (Nl~~t ,a~~,f.!'Fflde~'{>y f:'.4
TRAI~. ,-seq. 34(8)(2Hb)). · ~~r.:!•''-:"<:- · . f. _l~if: . .
· · !a~PID'.§ri+~-not.enbtled-10both the·ded~ctron
. : f~om · woss- 1.n.?ome and ~~? adJ~ste(.l·
· , · . -· . ·. ._, · '\ci;. _· ... J~ . . ·~tr:-;=r?.. ·,(inc_reased} ba~1s for .det~rm~~}~g .!:!~'"·Of·:
w---·
fr:·· . Related .Ta~payef~ (NfRC, .a.sit{l,1?3.enb'ed:,by, J;~tr-'_,,.!·1)~,p!Q~~-and :Ure. allowable deprec1atiori charge
~ · · ·: · TRAIIIJ-Law; Sep. '36(8)) ;: . ·. ,<1 7·. ·
.qP·:-r.'·'-'~r-,l'y::..,,.._.~P.aper l,:idustrie~ ,Corp_. 'of the f~HL v.. Co_uit ,
t .a .. Betw9E;ri ~em1.:>ers of the faniHf.,, .' {,(l ::
.or: .Jfppeals;.· .G.R: .. .N_o~.. · ·1069f.~5o,..
ti, .. . . .· . . : ·~. .. . .· \:~~
· · · · · ·. "Family" lnclades only .tt'i'e t?roJh¢r~, sisters,
.·. _ _.. .. pec~mber ..1-,, 1995).
· · :, .

! . : -:
~
t;·.
. , ·whole ·or hal.f blood; spoi.JSe; aneestors., ~rid · . . . :.. EX~!Tlples .of'DedLlctiole loter~st E~pensa: ·.
. ; . ,lineal·descendants .. ·-.

ri. :· ~~.::,.;e~
. . .

an'.indi~idua; and.·~~il>~~cit;o'n'rt1ore
. . .. .1) .. loterest p,aid' 'by a: corporation on . scrip
·· ·
·.. : · 2.),
diVidends· . · ...
lnter~St -~r/.d(')J)O.Sits
. . ·
.paid
~·
't;y.: autho~iz~d:
t,. ·. : · than fifty · percent (50%·) . .in . value-· of · the . . bani<~ of the BSP to..de'positor:S, if it is. stJown
t:,:,.: .·;-·· .> :, . outitaliding.'stock of whjch:is'owned,:dir~ctry·; . ,tt")at the.tax.on:such interest. was withheld;
f .. ' ...... or·indirectly, by'\)r.for si:ich indivi~ua~ (ex<;epf
r . in case of <;l.istrjbutloris in liquidation); ·. .
·3) lnlerest.pc;1id by a .corporate.·taxpayerwho·is
liable .on:·.a tnortgage 'up.on real .:property .
f' . Noie:··+~~ -fa.ct: that. tt:i~. P,~~si~e~t of one : · ·where. the ·S~id corp.oratidri.. is the legal or
.equit~bl~ owner, e¥~n.'though.' it .. is 'not·.
C corporation is the: Chairman of._the Board of .
{ 'arromer does '. riot. mean that . he . 'has- djrebtly,Jiab/e for the:fnde~tedness; and. . ..
t,
t · cont~olling.
\ ownership-
·. . of. such: corporaticn
. . . · 4') . Interest paid· or. incu_rred · abror,td.' for debt
t . -,
".: . ·.
(Oranbo Realty Corp. v.. C~R, CTA. Ca~e. No.·
. 5:222; Apri/-7, 1997). · .. · ·. . ·
a·ctually il')cµrred· tb provide funds for: use' in
. bu.siness in ·the· .Philippines (~.R. No. 02-40,
- ~~.:~e~
,.. . · :· ... '..··..c:·
t, · ·. . ·
.t~~-(~) ·~or~ralions more:th~n
· ·p~r~eht. (50°(<,~ in ·"'.alue. ?f. the. ~~tsta11<;1ing·
fif;~{ S~c. 7 BJ.:, -· , ·, .
: .. ·.
. ..
'f · .. stock · of Wh1cti ts '. owned, . directly on
1-·.: · :. . lndlrectly, by. _o, for ·th& same individual ;1

201~·.~A~ BEDA LAW CENTRALIZED OPERATIONS I 123

 . I N.co-r~1 E "TAX
SAl:IBE:DA tAW,GloNTRALIZfDBAR OP.ERATION5 -MEMORY AID..2b19
.~ ~~~MIIIBll_..... ll!llllll!lllilll.... 181mll .. mllllllll ....!IBllmlllll!II..... ISlllmlll!Z~.fri:IIEl·a·ma11111111111i.. maifBfM!ISl!lF'*mlllM~·gmwm·111111:ilm,'IIN

Example .of Non~Deductible Interest. Expense· ~- Jn- the case of a·· NRA-ETl:l ahd a RFC, the ·
·. (APD-C~S-SR) .. . . . . taxes for which· d.eduction i:, claimed must
1 )', 'lnteres,· paid in ~dvance by atl individual . be tonnected with income from sourc'es
· .. taxpayer lhrougtTdiSCOUl'.1t or otherwise who within the Philippines (N/RC, as amended .
. is. reporting income. on ·.casfr basis. The . . .. by TRAIN, Sec. 34(C); R.R. No. 02~40;$ec.
lntere.st may on1y·be deductiple: . · ·
,. aor . . .
a) jn the- year the indebtedness is_ paid; .. :
· · an~ . . . . .. .. . . Ge~eral Ru_ie: A11.taxes, whethernauonat or
bf If the . ·indebte_d'ness. is p~ya!:M in ·. 'local.-· shall be allowed. as" deduction.
.. periodic - amortizatioi1; . the amortized ·- -.Exampfes -are: . · · ·
amoi.JJ"!t of interest-paid duririg''the year ' ... a. Import duties; .: ·.·
shall. :be allowed·· as dedu.ctlon··fn · s·uch b __ . Business license,· privilege, ··excise· and
, "tax.able ..ye?r (Nl~G. as· 'am.ended·· by, . . : stamp-taxes; . . · .. ·.
.. Tf!AI~~ $";~; 34! pai. ·_(1?)(~)(a));__ . . ... ~ . ... c. Locfi'I .'gove'mment ..taxes '(.e.g.,·. rear
property ·. . texes, .- · ticense . taxes;. ·
. 2)· If th~· incJebt~dl'less 1$ Incurred to finaric~. . pr_Ofl(JSSional texes; emusement taxes, .
J~etrolet.1m exploration, the interest.incurred· , . · . franchisetaxes);· ·. :. : ....
. is capltallzed as . "(!eforrec(expJoration_;~ostM . . . d. '.,Oocumentary stamp taxes: ' .. .
_·. (NIRC,. a~·amende.q l?Y -T,R_AJN,Sec; 3'!J,E.Wi<~-
. . . (B)(2)(c). ,n retetion to Se.c. ·34 (ql[iP":..>- .
·3}_ T~t~rest- inthe f~xin. of 'Qivid~tt'as. "IB~Ld.to· ..
yu-:J\ ·t~..,~·: . e. . Excise ,~~es; ·. --,:

J }"~.., .
P~rce_ntage taxes.
·
--.
.
·
·ij!.~ r~gistration fees (althouqh jheyare
·
.
.preterred shareholders. ({1:R~(F{?>;. J,o;i;:41);:::.=~.!!, ·. · /.J.e~~1cal~y not taxes): an.d. · . ·-~
. Sec. 7_8; R.¥:C. No.·17-?/f):'' · :,y/-7'1-~. . ~ ~W f3..t·Q~-~t10.n-_:fees of vehlcles. used m
4) lntere~~ tor· .Qost keE1P.i~g~·-~nl-~i:'r1· i:i0t-•uf"""'.51'.~"'~ ~~~sin~~\(~DIZON, supra. at 727)..
c~pital or _surplus inve~\l{~li!',l'W~iri ss whi?.P, it' "'(,?'" 1 . \;~"'t.-~ :·\~ · . : .. · ·
does not .represent -tbarg'ef ar1sl.t g und-er hlJ~.a\\. · (ixc.ep~1qns: ~ . . '. , . ·
Interest bearing' oblt1~ticins/(R.R.
,Sec. 79r,. · ·. ·· ,7/ ,.:
r.;o.
02-4°-1J!!'">"
f . ;;i I -
· 1. Phil(P.,(>ii%)_i!, co~e t~x; . ·, . .
. ~ Fore1.9.n ,..,...!.n ome .tax.. provided. the .
: .

s.r lnter:est pa.id ~hen hire~i~7.no§tipplati&'iiij~ ~-J.?f:& ,. .• taxp~yer a¥,<!il~ o_f the·for,eig~ tax, cred.it;,' · ..
·the· payment th~re,of..qrJ.~here Jb,\re' iskn_~1fllllh'. ·· :, . othe~is8}1tl:!e tax ·may be Claimed ·as
· inde~tedness · as ~1-illn,i .lti1(~l{~·uon iP.- . . · f:,,~~duf.~On. lfi?m. _gross. 'incom~ (plea~e· · .
J.menforce·~ble:·(C{ , y>fiPl~to,
13912, .Sep(ern/)l}r 0;-'1~68.-J;
~~,\:o.· ]:f!.;:;{i~fJ
L'JI? _ ,_. Ufl\~
· .-,0~~ · ~ ~"-,~,/',
J/f1~~~J10n$•qfl. tax. -crei;J,t -~e.lo.w), . . .
<~ · (Nfp<C,. a'sf~mendfJ_d-by Tf?~l~,-sec. 34, ·
· ~ "6) .lntere~t paid "?n e rned :fin.~ 'l:l\toJal ~~ J. · -~ii"'~. P9.r.. (C)(1j.and (3)); .. ·, . ..
~~lary (Kuenzle ·8!-S!tc iff,;lnc._~~jpo1l'e9'!J~·J,.,1>~ :<. . -c. E·stat~ a9~ _d.on<?r's tax;_ . : .. ·.•
Intern.al Revenue, Gfl.\:[:Jos:· .L'-.'1~0-1fJ.. &(£JEITT\h · )"'·l'spe~1aJ/ -~ssessments · arid taxes·
12_113, (?cto_be(2,0,: 1959'J'i( · - . ~ "":-, ., · . -~ · ~;~e9§edag~ins_trocal b·enefitsof a kin!f ·
'7) .ln_t~resr·paid q~ _-in.d,ebtetm~.:~-~s,4~_-~('\\)'JJ.tt\end to morease the vali,Je of -~he ..

.
P.U(Ch/~S~§ecunt1es _by one_ wt.in/![ot:.a
_dealerin~ecuritie~;.~~c_al,ls~_.such.~'ter.e.§.,_~~~
1v_~-A"-'l '!I, ~roperty assessed;
. .'... · < . : .·
·: : .
·: . '. · . · · · . ·.
'

· · ._ .. part·of~the ..ac_qt11s1tion of ..a. cap1ta1·.asset. · · Note: A· tax:1s __ cpns_1dered· assessed ..

. . - : ..... (NIRC; ~s amef!ded by. TRAIN/Sec.' 34,}'fl'· . a~a!nst Jocal b~n_eryts.wbe.n the property· .
.. · (8)(2}(b));·a~c} · . . .. · . .. . . . . .. . · -subJect to J.t:i.e -tc:1x -·is·- limited to .Jh~ .. ·.
8) · Inter.est pai.d on Tnoebtedness. between· . · ·. pro·peFty · ·. . · b.enefrted. . · Special.
. . Relc:'lt~d taxp~y.eri '(NiRC, l:i's amended by '. asseS,$f!1ents· a're ii?t _dedudible,::even.
· TJYI.IN.,·' Ser;. 36(8)). · . . · ·. :_ · ·,: "· . · thol!gh. ~n ·in~iderital ben_efit may. inure .
· · · . to ·, the ... pllbhc · welfare.. The taxes .
. .. c. :·rax~s ·. ·. . . .' .. ··- ·, ··deductible'' afe .. _those. levie'd 'fo~ th~.:,.
~equisltes·..for Deductibility: (TJL~E:c).°-, . , .. ·.: ger;ieral ·.public· welfare, -·by the· proper· ·
· 1. ·paym·ents·.mu~h -pe for Taxes and nor for . ·. ·· taxin,g -~tj;horitles at a like· rate :~gainst.
. ' amol!n!s' '.' ·repleseritirig- _·spr-charge o"r ', . . . all property iri· the .te·rriJory ove(.whicb
. · · pe'nalties·inc;;id!:mt to·qelinquency; : . ·. .· ·. sue.~ authorities ha.vejurisdiction tR.R .. ·
?· .Pai~ ·or !ricurred\dur.j_ng.the taxable-year in . ·Nb.,02~40,. Sec, B~Y, .. · · · . ·. ·. .
'connectibh with taxpayer's· ·trade, business· · · '
.. ·or profession; .. · . . · e. · Taxes· !).n _sale;·. parter or' exchange· ·df•
'3 . .-., Tax tnust" be ,·jrp·po_sed. by... ,baw -on and. . . sl_la~-es· of· stock: listed and·. traded
payable by the taxp'ay¢r; .. . '·. . : : .... 'throu·gh the "local stock .excl:lc1l'lge or' ..
, · . : . ' · . 4, Taxes ri1),i~t_.not be specifically g~clu_ded. .by . thr6!-Jgh in_itial public offering {NIRC, as .
law from bein.g deducted frorn .th'etaxpayer's. -amended by TRAIN,. Sec. 34(C) (1) and
gross incom~; and· · · ...: Sec. 127(D);R.MG_: 'f\Jo. 57-~Q13);

. 1-24 .I -2019 SAN BED.A LAW CENTRALIZED OPERATIONS..

 a
·lNCbMETAX
SAWBE:.f)A tAW CENTRALIZED !JAR QPEIVITIONS - ME~ORY AID .:iot9·
.,e4· ;,, l*':f SM:H MW Wiift± tiii, ·v,M,i+r
Fin.al )axes, · being · in .t.he riature · of
Sources: Foreign ·~ources: . . Deductible
income ta·x; and
income war-profits and taxes such as business
g. T.axes paid· on capital ·assets. that are· · .. excess 'profit tax . tax, e'xcise . ' tax,
subject to· ·~ . final ·tax, such as· real . · percentage tax · and
: : property, th'e. disposition . ·of . which '·is ' · other · . . · .business-
subject- .t9 .the. presumed capital. gains cohnected taxes.
taX. (?aB DOMONDQN,. Taxation; sµpra (DIMAAMPAO, · Basic
atB?-7; . .
Approach . · to
·'."In.come

Jf:
~,·... '
·. ... i',!ot~: 11;1 th·e C<!Se .of.NRA-l;TB arid RFC,
deduction is allowed only if .and to the extent
}~a?(afioh;_·supr~ .at ~ 1:3);

,,,. . 'that the'taxes for

which deduction is claimed

f,·:
tt: ·
·.-areiconnected with income frorrr sources
within)he'·PhilipP.ines (NIRC, as amended
. NoterTaxes withheld from the en:iployee's.saiar,ie~· ·
will "not-affecl'the-former's'taxabie"inconie'beca"use
they are not allowed: as tax deductions but a:s ·tax .

r-·I .
by,, TRAIN,_Sec. 34, P.ar. (C)(2)),- .. , .
, -r= - .. credits. Tax reductlonreducesjhe taxable income.

' ·tax li~bility based on a'conttngency

0 . '. . . Whiie t~x credits ·reduce the tax"'iiagility "(CiR· 'v.
In the .case of
c6.riting.ent tax liability, the obligation. Central Drug. Corporetion, G..R. No, 1.59647, April
f· to deduct' arlses . 'only · when .the · tax . is: finally · · 15;-. 2005j. · · · .. · ·. · ·
li- .detennined(D7MAAMPAO, supt» at 117-118). .. /.' · .. ·
f . . .·'. . __ ·. . . . · . ' .
1vf.)}2'. Tax .G.re_dit . . .. · . .
t . :Wt:io .can claimtaxes a.~ deduction: . "!-,,''// <r\
Peso-for-peso reduction from _a taxpayer's- tax.
[l ·. Taxes: are _deductible .as such -only by 'the· pe{~pij~.,':""·'!\. liability, It.is a d_irectsubtraction from the tax payable
fi~·"'.'.~
-. upon whorrr they are Impcsed by law (Id. et 117}]. !.·.•·'': ,''''} t9...,thegoverp}tlent(CIR \I. Central Luzon prug Cot,
f;,<~~-'~i'·M ·1 ,, L>'
ft. •
. , . .. · .. '· · · · ·, : · ". . · · · · · .,,y·;,' J•.l,{·. 11,·,~f-_;0.!~:,,.,q..,.: .59.,,11.0,. June 1 2, 2008). · . . · ·
~ Options·. tor· claiming ·. as'; deductiop~:/f6coni~· fj . · _=1:.:~r:: .;,;J . . · ·: . . ." · . · .
J: taxes l).ji·~~to ?·"Y,fo~eign·co1,1n~ry <!?y..>. . .J~!I .
1 .. Tax. Credit AppfQach: Claim. ast.".f6re1gi'.l ~x-· k\ · . a. R~~Ja~n~_c1t1zens;· ..
Who can·cJ~fTh~a~.credit: -.· · ·

t .
fI
·crecJ\t.~~ainstP_hilippirie. iri~orry!;i~~ ~~1~r~f · : fl{ . b.' ..R~'-1d~n.t:~a.liehs, under the. prlnclple. of.
•r-, • • 2, · Pe_du~J'C!n..~PP.roaqh: C)~.i!ffeas dedljqfi~n frO!J1 :v\ .
r~c1prpc)tYl -. · : · · . . .. .· . .
. ,_gto.ss income fNIR9; a:$•·amen_d'!}:J..}y T@l/lf;'. [(:,1, · c, .;1Pon:ie~t1e: '\\ . . c.orporat1ons · mch:1~mg·
·.·: Sec.:_34(C)(?) .af!d;-(3)). yt}JY
~2,'f:). ~1"' · !~1 f.~Q--~· _)N~,Yc?~Pt.<;3Fts;.and. ·..
"'-~..-~:
:',~.;:' (For deduction approach; l~;e dt§..C"QSS19h 01!1':Jfhe -l'.1·-i · d .. Be Qs!P.eS of estates and trusts; and · ..
>i' !Lfl!:J on deducti~!fty,~ftaxes~?~yf{Y~t:. ··}/· it., :
e... _Memb.ers·"of GPP~·-{NIRC,' as 8/J)'endr,d_ by.

t · .

. . . .... .
· .• · · · .,. · .· · . \\ · i :- ·

:::~S]lJYJtifi17~t
, , j: TRAIN Sec· 34(C)(3))·
~·ntitl~~ t·o·t~xtc~edit:

rt . . · · · ·. · · , · · · · · ·
(
°f"" ·
·
· • ·
:ReJui;:~~ th~ . . Philippin.e-:f{educes • . ,, '~iaxabl.e ·: ,, . .
· . L . Non:-resident C.itizeas·; .
iL -.Resident·a.lienS'i°fwithout-re'ciprocify;
Ill. No11-resident aliens; anq . · · . ·-~
f-. . jncome:tax)iabjlity income .. upon. which, tax : fv. :Foreign. corporatfO[I$·, w.hilther residef\tS 9r. ·
(" .. .lia.t;,ility. _is· . ·caicul.ated . · . ·. non--r.e~idehts: (MAMALAT~O,- /ncorrre Tax, .
from . . . ·- .. · . 'silp(a a! 215). . . . .

f .. $tib.t.ra~ted:'trb~·tiie t~x: · S~btr.a~ted. ··from ·g:ross/ . .:. Re.as9n: These ~axpay,~rs_:are subject to Phijipriine.
(net) amount f<> be-paid· Oincom~." ·(M.E..· Hoidirfg income: tax. only on in.cqrne derived· from .s~tirces
· · · ·· Corp.. v.. CIR; CTA-Case within·the Philippines (Id;). . ··. · · · · ·
. No::,: 5314, Aµgus_t 17,
\ ·, .19~~) ' . . LimjtatjQns on A:vaillng :.rax-Cr~dit: . .
f) The afnoun~ of th~ credit i}:i-resp.ecno the tax
. ' LJ~ed ·. '. by · private. Used . .before" the tax is ·paid o( _inc!Jrrec!. to any. couhtry sJ:iall. .not·
establishment only after computed . (CIR, ',-,. Ii'. l;l_Xc~·ed the, sarri.e. proportiqn of the: tax
ttie . tax has :. been Central . . Drug ag~in$,t:whid,'·s~ch.cretlit is taken, whicl:l the '
computed·. (C.IR. v. Corporation, . ·G:·'R.. · No. taxpayer'.s taxable im:onie from· sources.
Central . · Drug _15964 7, ,A,.pril 15, . 2005) within ' such country 'be'ars . to hiS:. entire
Corporation; G,.R.: No. ·.·. . taxable income for ttie··same taxable year; ·
·1_59647, April 15/2005) a~. . '. .

2019 SAN BEbA

. LAW CEmRAllZED. OPERATIONS.
~. I 1"25 ·-
 .INCOME.TA.X
SAN BEOA LAW CENTRALIZED BAR.OP.ERI\TIONS - ·MEMORY AID 20,"9.
~D~111nmmllilil111111m~,ell!l.'l1m+~ia· .-ii.,. .. ,m,e,~e=mamm1MRS11mz1m1m&1111111111E111ma?;im1~·eea·me11111•e~eaa+ll.'lll@IIB!a:&:eatm•m-~11:111111B
2) . l'tie.. to.ta1.· amount' of ·.the ~redit ·shai1 ri"ot (,NIRC, · as :.amended . by .. TRAIN; Sec.
. . excee.d . the sc;1me prop~rtion of the'. fax . 34(CH!)>."
. . agai.n,$t which such. er.edit is taken; which _the .. ·'·
. ·taxpayer's".inc9r.ne from soukes without th<:! Deductibili~y , of :-s:urch~rg~s. Interest and
Philippin_es taxaple under Title II .of the NI R_C ··_Fines for Oelinqu~ncy ·. '
(Tax ori lnc9me)"bears to his entire taxable . .".surchar'.ges,. interest; and. fines · are · not ..
income .for the satrie taxable, year (NIRC; as · · .. deductible·(R-.R."_No.:02:.40, S€fc.·.ao). To allow ,
. amended by.TRAIN, Sec. 34, par:. (C)(4)).- · '.them to be deducted defeats the. prescribed
. - '•
. . punishment (Qliti~rrez ·v. Collepto,:. <l ln_ternal
Limitatiori A: Per·coun.try limitatipn .Revenue, G.R._ Nq .. l.~19537,. May2Q, 1f)65).

Taic.a.ble inc·orne · : . . ,. · .Note.: -1.nteresf·oQ<: defici~ncy ..t~1fos rriay "be

.. . (foreign country): ! .. ·. ,. . . .. • •.. ·. ·allowed ~-s d~ductior,(R.'R: No.13-200.Q). .
·· . · · · x . ···Philippine _Income. Tax.
,Taxable income·· ·· · ·o .. Lo~se"s,.,... ·~: . ", ·.·. . · . .. . . _. . ·........; ·
. ·(all" sources) . ·. Losses' actually sustalned during· the· taxable. year
.>, . and . not. compensated. fqr by insurance. or; other

.Limlt~t-i<>n" B: _over-all. Uillit-ati?n . ~°":,=r4X•1°:~:d~~w:i~;;Z,%t:;r:~~~~~~:itn~;1,~~e~~~.

.
Taxable income
.
,
··
.
'/t·~~
L;<-~ J;.
-.u·-1tr}~: _ . · . · / -. · , .
~...ur...,.~~;~,u!.Sites,.toKQ_~ductibility: (rEN-ACIDA) ...
. {outside country)' 'x . ~1r;;i~!;V;4r. . . . 1. 1:h~J6-ss rn,b~t;·b~ that·of the·ra~payer; . '
· · -· . . .lnc25",. ij~#'-~-..;.,.,,,_i.,,ypete{{l~~xpax~ operates 2 phases of industry,
Taxable.in_come .. ,f'l'J« ..< ~ f .. . ,•Ol')~exe)t"!P.Yf~income tax pursuant to-R.A.
. (all sources) . . . f ,. , ,{).,,{ f ' '.JI» _ ~ ~ No: ~.01at.i~~/he,,,,~l~er~<;1-xa~le,, losses susta_ined...
··· · · · f· ./' . ·
ff · · · · · ,. . ii") thel1ax1?~e~_1j>tJ:>i:aerationcannot.be-deducted
AJ?plicati.on: :·. ,/,~:.c?".( .. r-:- "" ·~· ,_;.,.ff~'rmiliicom~··qu~el!~~able. in9.u~try _(Marcelo
One fore,g:n country ~W~-~l~?W~d?r1ed1t'1l@)'jE0'j r:::."'"' 1µSteeli-_Corp.~}'{. C.ol(ecto1;,..G:R. ·No. -L-12401!.
1!960~tJ
or;,e_to"".er-b_etweent_h~ r~wt.ff Lrr:rnt \ andlthW-iillJJl.W:-8:octo er 31,
foreign mcorne tax pai . or--~~4h.1eq~{i\ . : ..
. .: ·~ -. ~ i ni . \%.,~ . :T·~-~?'fne,;{
. ·. f
...27---':/;_ ·J~c.) · ., ' · . . ..". :·, · .· ·
. .. . ·
s ,Of,fth~:<f!)'ae_nt ·company_ may -notbe .
Two· or more foreign'\,co.un'trles ~~~ _ 1nl 6~- ,.;~;~@>"":Jld bf its ~J;!sidiary_. Butthe loss of"the
first the amount· lower b~tw.e~~'\!_mit
total· foreign inco~e taxe-s,'f>aid.oi"<accr~~-~
:~i)t · ·'7A~r,
:~t~ ·1 ·
~~~~~t(;}<fOctil;>J~
w)friin ..or.foutsid~ · the ·Phil[ppines is
~om. .tne gro~s _incof!le_ of th~ .head .
. · compare th~ res4lt with_ -~~mi~ . A~.e
~!!'ount is the allowed.er.edit.~
-'~:z.E£itt~
. ·,7"· -~~:.... • ....1-. ~
·ce~focated,tti:-tlie· :Phi!ippines •. since the
~h:.~n~.a.n 1rxtensi~n ofits.heac;l office and.
· · . · · . . · · · .· · ~,~·..(' S~l1i·;~~~::.;:ft:
: i"e{~~~J~~9.a'3>ingle. entjty. If the- t?xi;iay(;}r.'is·
When cr-_e<:'it .for taxes. bfj! taken ·.. :- . Y~l 'M·./\· }:~)i,..~;'1':"1r'l s.ev:e~~i _bu~io~-~ses_. los~ su~t~ine~
. !he.cred!ts may_at th~ opti<?n.of the ta~ ~_r~rn_d ... ·.. 1r~e h~~_-qf-pus1~es~cannqt be _d_e_ducted_frorr:,·
.. 1rre§pectrve · .of·. ttie _method ·.·of. accour;itmg""7~. :the 9th.er lme~ of business (8/R Ru/mg No. ·1p-
. employE;ld, 'be-takenin,the ye~r the ta):(.es of the · 87, May-4; 1987). · ·· - ·
for.eign .co4ntry wer~ · incurred: .Jn such ci;lse; t~e ·,.. -
·C.fedits f~i' -all: slib.sequ_f;mt years sha_!I be- taken. ·.2; · .5VidenCEld . by .. ai: clo~ed. -~~ti:_- ~coltipl~te.d ·
.. · · ·L!pon .t!Je same basis fll'"!d n·«:> port.iorf of any suctt . · transaction - "there· should bei_,:an: identifiable
.. : .'.tax$s shall· be allowed as .oectuctiol'l.in"the same . ~eventihai:fixes the Jos"s like the'.delivery of the.· .·
or any succeeding year (NIRC, :as EJinended,by . ~hing pu,r:chased; The-taxpayer's failure-to record
TRAIN,'Sec: 34(C)(6)): . . . ·. , . . .. · · in'his books.th~ all~ged loss proves thafthe lo~s
had. not :beeh suffered; henc.e, not deductible .
. • .-Pro.ofof~re~its . . ... · , ·. ::. . · · · ~ (City·L~fTJl.}~r. v. Doinirigo~ ·o.R.. /llo.:·t.-18.611;
. . · The foreign·taxes may l;>e credited only when th~ j_~i,i,~,(~O, 19:64) .. · ·.·· ..
.. · taxpayer establishes the tollowfi:ig: · . · .· ..
.. a) ·· Total atnount of. ihcome:derived.from. foreign 3. Not ciai~ed. :i:is : a· ded~ction · for estate ta;
· ·sources· . ..
-purposes(for indivicl,u1;1ls) _;; ttie ta,ipayer"cannbt·
b) . The am bunt ·of· in com~ deriv"ed ..frdm each claim double ·.benefits a'rising from the. same·
· cbt:mtry; the .foreign: tax paid or. il'")curred, ~ ,cas.\Jalty." loss. for income ._.tax·,·an~ ':estate ·tax
. .Whicll is claimed.as a GFe'dit; and .. ._p·urposes; ·· - · · · · ·
c) All ."other: information necessary for. the
verification
. . and
. computation
. of. ·SUch·-credft
. ..

1"2!> I 2919 SAN SEDA LAW CENTRALIZED OPERAT10NS .

 ·r .;·.
·1t
. -mt""
.
WI L. . .. .
I N·C'O:M·E·T.AX-.· · ·...
~N SEDA lAW d.NT/t4LIZED'"r;JAll:OPERATIPNS
- MEMOIIYAID-20,9
fWWRZI MM,#¥· .. -~ EM MW
Losses within six- (6) months after the death pf shipwreck or · other casualties, or ·. from
the decedent can be .' claimed as itemized · ·robbery, theft, orembezzlernent (ld:). ·
· deduction: of· losses . under Sectl.on 86 Par. a) Total· Destr.uction.-· the. basis of .the
(A)(-1.)(e) ot the NIRC. However, it may· be· . loss is the net book value -immedlately
claimed as· deductlon In. the. estate. tax return preceding the casualty ·to ·be reduced
. provided that tfie·.:sal'ne are not claimed" as by:· the .. amount of·. insurance -; or
. itemized deducflon' of losses under Section 34, compensation received. . ·.. . .: .·
Par." (D) · -: · · . · . ' ·, . b) . ·pa"rt!a_i De~trudi0:n,-:- the" replacement
..
4 . ·· ~ct ..., ally sustai·n···e-·
d · d h 1J
an c a'.'!;l~u o ff d_unng· ...th.e
· ·. · · cost".
·. - .. to restore,
·· the
· . . . . .to · its
property ·
taxable year: · normal -operatinq .ci5:ndjtion, .but in no,

·_ :·'. .
.5. No(~otnpen~ted for.b'y insurance or other form : case :sbaJI" t!,_e deductible Ioss be more-.
. of indemnity]: , · . .. . .:/. ' . · . . · than the net book value. of the property·
\is .a ',Vhole/Jmrnedi~teJy .. _b.efore
tr:.
,~ .
. : "Note: ."if the loss i$.·cornpensated'by insurance or.
otherwise, · the ;_lo~s .. is .. postponed. .to ' a .
subsequent year- in y,thich it ·app~ars ·that "r:10
cornpensatlon at all ~an be had; or there.Is' a '
. ··
casualty.The'excess.over therietbook
value immediately before -the casualty
. 'should . 'be eapltallzed., '. subject to .
depreciation over the-,e~"alni(lg usef~J
i;- · rernaininq. net ·loss (pr . there is. no . full- , · .life of the property. · .. · '
f compensation) (P/aridel Surety_&_ Jriswance Co./~ · ... · ·· · . · .. . ···,. .
v. ·Co#ector' of. fnte_rrial·8eilem:1e, .G.R. Nfuo ;_~1.>,f .
fft·· ··
21540/b.ece,;nber 11, :1.967); · .. .
. .. · . ·... · . ·. .
· /'://;;;\: .
fr;r>!·'./r,t ·,
Characteri:stics of Casualty.·l.osses:
. -~he loss. n:iay·result from arJ e"ve,:ifthat is:
·
.1). ·.!den~1flabli;1.,-·the:.ev.eri~must ~e c1.e·arly
1,· 6.. For 1t1d1v1du~ls,-the loss must _be conne.cted,~}h.·';·:ii,{__4;.. . · JS).entl~e;das·the d.1rect cause o~ the loss·
tr-·· . ·
his .trade, bL/~iriess '?r. professi9n. or inc~diJ1.:J)::1~Ji!l'?.iI~ii9~. or· p_!"iysical dam.ag~· to t~e pr~perty
f.::. a~ytran~ac,tton ent~red Into f9r profit-t!)ough not~ ·14 · · ~----11.'-g,~ed 1n. trade, bus11")ess or ex~rc1s~ o(
f.: · connec!ed · wit~ hi_s tta,de,. /J,o§in.es~ p~··:;':l'·.. ·· · ... }~\profes.sion; · · . . ·
p-: profes~1on.; ... . . · ·.. ¥1~,/t..... : · JP>- , n}irs~ucilden :- one that 1s sw[ft. ·and r:iot
1~--: · . 7~ . For. casiJalty loss!:!s, Qe~lc;1r.atlot;1t.f>Jqss7m'ffst be . ~- ·. f QJa.d)1.~1·or·progressive;; · . • ·· .
f fi_led.."".i~h-~h~.BIR vic;1 a.swy~-~·clar~i!Si:l--0f l6is· .. ;r\ · ·
W,) · '{h~~ect~d.-one ~hat is·not ordinarily"

i .
· ··

R~ ·
r.r ·
- . (1.e,,: W!thm ·45 day$} frorrr~!;\~1dat019f.~ccurrenc~ ~-![~1 .
or d1~covery of the. casu~:.or""FGoh'.e~.
embezzlement; anc;1 · .. ··- "h· .?Viii~
8. .1.r.:i cas_e ?\c.asualty,;,capital~_u~if'e0~k lossis,
A'.: j;' . : · ·_ ,
-t~'eff1.or· · !'P-~
't·J
.--J:·. ·.
a.p~1c1pated. ·9r . foreseen. ar:id: .occurs
~:~:-r-g;:.~11}tip.~~~ _intent 9f toe one wtio ~Uffers· . . ....
. · ~...:r.~JG"s.s;.a,nd ·: . ,·· , ..
!V.~ ynustsa! . ln.;c!iaracter -:--" on~ that is
t .th~ ~9d1t1onal/spec1al· rules ··1;1f.td.. condJtions for : ·i/,,.......;;. . e).(traordmary and non-recurr'jng,. that

fr;:. · >
their : deducti.bili~Y·. ~~st : .b.e . --~ati~fiE:~!~i:t?. t~~ 5i~:1· ,<SP;_fil.J.L ·. d~es_ !it>t c9rnmorily occw In t_t1.epp~rse
amount. to:·. be deducted musf be~_ilm1ted 'J(fli:,t;r~-.;,.~,.t~~~~~)··,~af · the wtaxpayer~s trace; bus,ness· or
t :·. ~roount pre:s.qril:i~d·. (NIRC, . .''. a~\'iiroenpff!by. • .... : . e~ercis_e . : or th~:: : professio)i . "(:?~!3
f·f~ · , _- Sec .~(b)):
.TRA_JN;·.Secs. ~(.PJ.; 38 .~nd 3{!; R.R~g_!JJ2-77,
... \ .. , .· ;: .
DOMONDON, suprfl_.al 6_~3-634). ·. · .. .: ··.
. . .. ,· · ·, · · ·. . . . .
1.:; . . . · , . . . , .. ·.. · . RE1qµisjtes. ·to.r b~ductibilicy .<:ff.: Casualty. ··
i. · .. s.ub.s.tan(i~titin.R~qµirem~nis :·_-. · .. ·. . . . ·· . , . · ·i..osses· . :- · · · ·· ··· · · · -
~' . . . a ... 1-.d~cl;:i_ratio,n_<~fIQS$ wh.ic~ m·~~\b~filed W.i~~ _-: · ·.:· . :· 1 )". The~tax·P.~yefrilu~i. ;·~l;>.mi{ ~ ~i~claration.of ·-.
( : .. . Iha ·-Cl~-. or his dep1,Jt1es: w1tf110 a Gerta·1r:i. : . · ~ casua_lty·.l9ss .not later .than ·forty-five.:(45) .
t, . . periocj· presciib.edji:J":lhe~e regulatiqns after" days. fro"rn. the dat~· of discovery ,OT .the
the" occu.r.rence pf ·casualty," robbery, th~fi or.::._;~ . · · event givln9_ Tise to '·the "loss "(Rf=CALD"Ea ·
·: · ·ei:obezzh;:im"~nt:.~nd" .: .. ." ·.'· . · · supra at. fl.05).· . . . . . ·. . ··: · ..
;.
. b.... Proof c;i(~l.e,menti,.ofthe·loss ._claimed, SL!C_h. ·: · ;2) · P.r9_of:of Loss: . · · : . . . · , .
?. ... : . ,..· · as "1he.. actua~ nature .and .pCJ::I_Jrr.ence of.the· .. · · · · · . a).· .A".de,r::tah:1tion of. rciss, whk;h "rri1,1st be.
. · evai:it an~ amol!J)t'qf los.s· (RR. No: 12-7'!, .. . · fi!ed ..wifti the." C::IR,-or his "depu.lie~
. ~~c.,:2):. · :· · : . ·.-. :· - .. ·· ·.... · . :· ·: withirr'a·ceiiairi periocj,pressribed after·.
·· . ·ttie 6c9Urre.r:,qe ··_of-. the~~·_ca~ualty.
:: o.f
C.l~s-Slfic~Uc,>n L.os~es . . . ··.. . .. robbery, t.heft or embezzl.ement;·a(ld" the 0

.. ·1 )· Ordinary. Loss~s :- ir"\Qurred. in trade . or .' · . ·. b)·. P,roof· of ·~Q.e·. °e{~ments of, : .loss '
;. ·· · · · p·u·s1~ess,:. or prac1i~e· .' ·.of p·rofessio11 : clainied,) such as·. the actual nature
.. .(f)IMAAMPAO, supra.at-120) ... : . . 'and occurrence of the. event.and ·the
2)· . Casual.ty Losses ·~· i.r'lcurred _: by property amo"unt .of loss (R.R. No.. 1 ~~77, See .
. connect~~· ·with · trade; . .t,usiness,' or:· · .·2J .. · · .. · . · ·: ·.. .:
. profes~lon, iftlie loss:arise~ froJ'!1.fire, "storm, ;··· :
,...
,·

,' .· . .. .
2·01s·SANsEDA
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·. SAN Q,ED'A L.4W ~E~TRAtlZEO BAllOPERA'rlONS - lylEMORY ~!Q 2o'19

. Robbery, theft or ernbezzlemerit . 1-.. Ascertained to be Worthless and charged

losses- . off within the taxable- year; ..
i) · Sworn declaratlon of loss, to. be 2, . Held: . as f;_apita( i!_sset; . -·(NIRC, as
.filed wlthin 45 days after the date· ~men_dei:;J by. . TRAIN, Sec. 34,
· -of the evennand-. , · . · . Par.(D)(4)(b)J;'and · . .
.· :: ii)'. Proof cie1e:.nents of the lossles) · 3. · Loss was incurred by a !axpayer,OTt-JER
· cl~imetj (R,M._O. No. 31~2009). THAN·· a bank .. or trust company ·
. '°.""'-.:-_, .• lncorporated · under P.hillppin!;i laws,
· Only losses actually· sustained and . -substantlal part of business is the.receipt'
· wrltten-otf ."dtiring tlie year.: .not · ofdepcsit (N/RC,.as amended by TRAIN,·
. · com pensated· for. 'by. insurance. and · · ·-sec.'· 39(Ci;,: Par· (C);Qhina · 'Banking.
· · evidenced by' dosed· and completed,·.· Corpo/a(ia/i\1: ex, G:R No. 1'25508, July
. transactions are' generaily" allowed . ' 19, 2000). . . . . .,
.as deducttorr: from gross income / ·
JR.R: No. 02-40, Sees. 94 and 96). · fiote.: .S.ecurities :b.ecom~ng worthless are
·· ·· · corrsldered · as- ·a loss -from the .sale of '
· . :_Note:·. Although bpth··. oraln.ary_: and. . capital -asse.ts on -the [ast.. day- of' such
casualtylosses are qualified as allowable taxable year {Sec. 34, Per... (D)(4)(b); Par.
., .·· • d~d.0c!i_ons . fro,~ . wo~~-- income, .. W~·=7"'~ (E)(2)). . . . . . : : ... ' . . . . . , : . . ..
. distinction .lies mainly In the_ ~(4d1ftoqal·~u- • . "\ .......-~;_.-., .. · ·: . ·.' · · . . -. . . ·
· :"f~quirement. for dedu~~ibil!~if.tth~f~~e n . .J \j-
. pt~s':!alty lq~ses, thafJ~vl:1:i{si:)t>ipJs~g~·---:''~.,_,
Jh~~:1!_.f?!e.meco~rt uph~ld the CIR d~n(~I. of
-4.tt:ieffi~u~nfrom gms~ mcorm: of "securities · .
.. of a, :dec_l~rat1on of ._19~ _to~e'~~ as .' . . ~~06m,i.R~.>w~rthles.s~ cl~~med by CBC_ ~hates
-. . provided .. m !he_ la~fpar<li:Jf~P~_..J.t ...Sel!~"T-.,.,~,.__<,?J~t~~~.7wj)ld. be or.91nary_ assets only to a . ·
. 34tD) of the Tax 9o,~. . . ~·(j 71
}}HZ.q,v, SL1f1l5{1 --,~ .. ·wr . ·. d~1'll_e~r; g-~ri\e.sor a _pen,o,:i_e:ngaged inJhe .
. . . : ~f 747-_748).
. ... · ... ·· ·.
:>./:.~-·if. ·
·. · .· f., f'
J ·. · i( .
{· .
J~ · _.P~\c~G1~t~n9 s~l~_:of, or a~;acti_ve tr,ader.(for .
.· h1s,,own i:l\~~~)};1n,sec::unt,es .. ln_the hands, ...
3) Capital Losses._·-::._ll~e'S'.:~risingffrb~
· ·. ~c:1le ~r'exc,hange ot,§~·p1tatfsseJs and lo"§fj.e's~_ < -. -~-.-=::n~~eve,r •. ia~an2tl\e~.~~oholds tti_e· shares of ..
A~_s!ock_:_bywf;rof.~n·investm~nt, the:·shares to
res_ultlo!iJ from _secur~t_1~~i~tfomm~\rorthls~~-i.WF~~ · hi~·would ~~~1fia1assets. \/;"hen the shares._:
. whmh are. capital .as~etsi.-,.r~el?<{'loj,s,~~!!?:~sE: :,'2: . hJ!~Y.sa · h 1nfe1~torP.~.come worthless, the
. be_ 9educ~1ble_ o~l_y td~t9e6e-*tent '<llt1J.~P.'_t~kfl .,Jt;is.Jr?e,lme~~?/b~a· Jqss from th_e :>ale .or
· . gams (Plea_se refer totf?<1fes\n Ca'pi~~~,~~1 r';/' {~tihgo/ of_ 'f ~al?-ital . asse.ts. · The . los~·
. · a_nd.: ~asses for fufthr:tr\liscussi_fn):~~~- j
- ~D ./~~~~ai~ilby thljsa1d holder of the securities.!,_
· : . : _ . · --_ · · · · · \ ·. \ · · -~.. .,y' ~~hicl).1.are·cai;,)fal §ISSets (to ~im).,- -is ~o _.be
4) . Wagering.Losses - d~\uctible~y t,.o~the[F-ff\h.-,,tre_w'.ed as-a ...¢t_pir~J loss a.s if incurred from a
. ·. exten~ of gain or' win~ing'." (N_{RC,f!,f a'ffl!;r/_de1J-1.-~ :.,-s~!e~IJXji.ti"ange: _tran~actr~n-_-~apital losses
. ··?Y J~AIN, Sec. 34(0)(6)).-1~>!'!~P~e>l\if't0~~1_~e~Jl?jYec:l .tp be"ded~c~~d onl)'. to··the- extent.
- md!v1dµals __ . · ·., ·
. : · . · ·..
., J . 1\-f
. . . . · · ··.. . .. . · ~~.
'I{;./ .J\''t·:·~~<;:apital: gams,: t.e:, -ga_,~s 'derived, from, tl']e.
l. V)LE""!:,-~ ,.~ale or_ -exch;mge of ·capital as~ets/ and. not
Note: Tlie excess,of the gain 'over tl)e: loss.~~-from a.ny--i;>ther-'income-of tfle lc1xpayer.(China
· ·. liowi!ver; taxable: A wager-is made.:When the · . ·. 'Banking Corpe.!'·. CA, G:R fl!o_·:125908, July
.• · outcom.!f: depends ; . upon · · chance · 19, 200.0). · · · · ·
-· · (DIMAAMPA0, supra: ·t'-22)_ at - , : ·. .
' ". ' .. . . . . . !;l)°. Lo~se~(~n-V'/°ash.S,alesof ~tocks_ (NIRG, as
of
: Cost unsold tickets of a.Osweepstake.$figent · ·. amenaet;J by TRAIN,"Sec: 38)- · · · · ...
· . con.stitutes . his . .-inyestl'l}ent: in.· a . y;,ag~ririg . · ·Rationale: - To . pre.veri.t ·.: t~~payers . ,' from
, _trans~ctiop (DIMAAMPAO;·supra at.122). . ·claimlhg.: pr~tend~d · lo~~es.: Th~f· _law :is
. : designed- to · prevent · a :s1tuatfori where the
R.A. N·o, 1169 '(Ar\ Act Providing .for. Ct)arity. . .. · "anege~:h5eller r:r1ay°-tr¥to', g'i~e .the. impression':
· · · .. · S.weepstakes. H.arse·. Races,. and. Lotteries) ' .. ·. ·.Ofa" loss ii') Sl,Jch_·'N~~Ji sale·_wh~n !~~ ;.l_oss" is,
· · _. exernpts.sweepstakeS;winnings from faxafioni ·· · · _actually ilegate.d.by the effe~ts of his having
· . It: follo°ws· that ·M· iasses ·-incurred. therefrom : , _bo1,1gnt · or a~gi.Jired. ·"su5~ta-r1tiall.y. id.~ntical
can··_be allowed as'-:._d_eductions from' :gro"ss · · stocks or ·segurities"·Within ·a: peirici_c!v~ry_:close .
:·i_ncorrie · (8,IR Ruling No. 62-006, January 26;. . to the occorrence of:the sale-of·his shares"'of
1.962), .. . stc>cks.
~· .
(ABEL~,. Ta~aiion ...
LaW: (2017jj_' .
5) . Losses on.:securities becoming·worthle~s . · Was~ · sales - -~ ·sa!e.·of stbck· or secllr'itres_.
In order to be deductible, the securities· must whe.re. s1.1bsta·nti_all.y i~entical securities · are
!J~: (WoCAl) . .· · . ·· · . acquired·or pCrchased
.. . within· sixty-one
. .. (61)-

128. ( 2019 SAN BEDA°_LAW.CENTRALl;zE·DOPERATIONS

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:,

f
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. ..
.. ·1NCOM--E.TAx.:
. SAN"BEDA:LAWCENTRAl,IZED•BAR0,PERATION.S
.- MEMORYA!D2a19

f'· ..... 111111... .aa.... mllll.. l!lmllBIIBllmllllllllllll.. lBlllll!ll...lllllllilll.... lDllillliilllilllllll:IIBlllllmlllllmlll:Dimll':ZgJt;A&fil.l'l!l!!I~

i ~:. ,.".
.,.
;;,·,..
t'
dpy "period, b'eglnning thirty (30) .days before
the sale andendinq thirty .(3Q) .days af_ter the
sale. (NIRG_!.c?S emended by TRAIN, Sec.38)
Exception to'.ti,e exception:- (OSG)':
.a. If the taxpayer is -? deal.er in securities,
·.and _the trarn~actlon from. which the· loss
resulted· was-made· In the Qrqinary course

I"'
•. , .Substantialiy .ldentlcal Stock.or Securiti"e~ · •,. of business· of such dealer, the. loss from
if
~.': Stock or' securities of the same.class or Which · · · · .. ·. ·.. wash "sales'is deductible in fun'·; . :
. -
!f';· . are .similar on· ih~ir .lrnpo ..rtantfeatures. For .. b: . Short s~tes transactions; and
·example,' bonds or 'preferred stock of thesame C: g9.in's in 'wash sales· as ~ucn gains .are

I~~.;.:/
':!... ~

~~. ~ 'coroorauon 'are+ordlnartly. no\ "considered taxable (N/RC, a.s f1mended by TRAIN, .
. -substanttally identical to the common stock of . Sec. ~8). '· · ·
. the 'same -corporanon. However, .a··preferred
ii(
· .. stock. is ~u!)stanti~lly i_d.entrcai.toa common.·. ·'Reason:·: Loss was ·incu'r~ed in the-. ordinary
~'.' . stock if.lhe.preferrad stock: . . . ·. _- · · course of.. business or-trade (ordinary loss) ..
!' .
~>
t. · Is convertible ·into common 'stock:
ii.. Has. the. ·: same . 'voting: _rights as the
-~ . -Moreover, losses from wash sales of stock or .
securities· incurred- by, faxpayers other. than .
,f~.. · ·· common stock: ·· · · .. · . · · dealers ii'.! stock or securitlesere treated in the- -,

:
~-
i··
iii. Is ·. subject to the same dividend
· . restrictions; .or. . ·
-· ,:'_'. same i:rianner as other capital losses. These. ~
losses, .. if ~rJs ider~d as- capital losses, are

!
0

?=·.. iv: Is. unrestricted as, to 'convertibillty (u.s: . . deductible only from· 'capital gains. not from
t
t~. .' . D~partrri~nt of Treesury, _IRS, P_ublicatioJ r.ri _ · .
ordinary gains ·(2-8 DOMONDON; Texetion,
t·- . ·. s5.o. January_ 17:2Q7_~)- . _ _ . /1':};;,f:l. . ·.
sup~a at 829)_. ·. . . · · .. _
k
r-
1'£:•.
Note:·The term "substantially id~ntical".rrfqfr/f?i(J;i 7) . Aban_donmen_t .Los~e~ in· Petr.oleu~
th<:3f the -s~ockrnust. be ?f the same c~ss,)r'Jf}~~}f.l 'i Op~r~!l-?ri::...· a).I accu~ulated exploration and.
~--:
· . the 'case; of bonds, the terms thereof l"f.lJ;ISt ~~' ;tf52'~';tde~~l,6;.imentexpenditures pertaining thereto
f::·-~.. .. the sa.me. Iris ·necess'ary'-that U;i.~.r,'e'(ni~st~eJ if : ·. _ .''sn'all-'ti~(~llow_ed.as ii aeductio_n;'providedtbat
l:fl. ': .·: ~imifari~ie.S .01"! · ·aJI irilporl~fil.9">°pl;lr!iCUi~'5~F1 . . rioti~etof~{lbandonment.Shall be filed Wilh th°e
__ (ABELLA,'-Taxatjo!J Law_(201:7);).l...,,t) . .)>'.-ki£ . . . CIR;/~; :'ffrovided, . ·. that · accumula_ted
!ti< .. · : .· ·, : -.·. - .: · _. ·. · _4;£.=J~--~~--,:; -1 . i. ·.-.:. · .exp.,nd _ur~s incu.0=-.ed·.in _that area prio~· to·.
w
t
Elements of.Wash SalesC{C:-30-P.JG:t.NADJ.: r,1- ·.·. - Ja~t,1a
· ·. ~- .. Th~( sale-' or· ~th~V:9i~p~s-it~,t·Qf 1•~ 1:_· ·-.
· sto2k~:
1,\ 1939 shall pe. allow~d as a .. ·
-~du~~ oAtv_~omany income deriv,ed_.from. ·:

I
f .·
.
·.

. \
· _. _resulted _to a !,,oss!~;,r~--~ .<,~7~ - ~~. : ~~-
b. There was an acquls1t1on.ier:c~rt.rael\qr-.
. . ciptiop for:acqt.ils[ti¢1'l- 6~,St>e(?r-~\tcu(ilJ.e's· ,:i..
_..: wj_thin tt,irty (3~}-days. oi?for.:'.tn2e1~at~
ti. , . .
or: t~,tiT-'l.·
· ~·.~9-0j~f.'t?tJlCt

S~c. 34(D)~7)(a)).
area. !n all cases, -~ot1ce of
aba~:~1;1-r.nent . shall ·be · filed with · the
·. Cortimisstoner{NIRC,as.-f!mf!ndedby TRAIN,
_ . _· . . .
f'
f
. thirty po) d't:lys ~tt~r ~t:ie saf~,;e-,...J , . ,,·-._. ;J~,"~J"f!-r.';J.,~- . ..
c .. · T!:)e aeq~isition mi.J$t be<_~:y ._eurcJ.f:~ti-~~8-)f.l!JS.banaQ".'ment
. . . -~
LoS'ses 1.n Prod_ucing·Well-
·...

~}~: . taxable· exchange ·or· thro4gp· ·at14)ption .. · · · , · · the· uria_mortized cost- _th_ereof, as well <!S tti_e
.
;. · ·contr,;:ict ui>?n whici:, 'the .en~~carfi~unJ-of . · undepreci.ate~l'costof equip_ment dire.ctiy.used · ..
t-. . .. gain.'or losswas1recogriize~ by t!w;· · , .. th.erein;.shall .be· gllo""'.ed as ·deduction in the·.
i ·tj.· . '1:he ·.. stock·- or ;;e~uriti~·s·. s~lcf were. . . . ye_ar ·. "the ·weli, ~q1,1ipm'ent . o.r facility. 'is.
t ... · · ·:.sQbstan·iially·the:same as .those acquired ··· : · · _·abandoneti'by the contraclor; Pro'vided,that if'
j: .. •,
·.. .within.the sixty::-'ori"e (filJ-day.period; ahd_ . . . _: such_ ~b~n·don~q_ well 'is .reentered· ai'!d- the ·: -
. 'e: .. _; The·. ~eller; .(S _tiot -~ Qealer-- in securitie~'- · · ·. · . _.Pr:od1Jotion. i~ resume(!, or if- such ·equipm~ht ,
-.' {NIRC, -as . ~mended: by, TRA~N. Sec. •·. or:· fa(?.ll_ity is- restored intp · service;. lh<;l. said
~- .· ,. ·. · 38(AJ; R.R.· No .. 6:-2908, S.ec, l(s)). ·, cos.ts ·shall ba included as part -~f. th~ incory1e ·
, ~ : .. · . . . . .. in. the year or resu·mptio_n. or restoration and ..
i',, 'General .Rule:._. .L.oss~s- 'frolii. ~ale.s· or :shall b~·a.mortized or depreciate.a {N.IRC,·as··· ·
f,·. .· 'exchanges of-. ~tock · or. sec1,1_rilies. are . . arrie.nded·by__TR/MN,_Sec .. ·34(D)(7){b)J.. ·
f : . dequctible '(NtRC,. as· amended by TRAIN,.. -· · · · · ··· ·
t :. . .. . . S'ec. '34(4)(~)); .. , . . . . . · ... 9) Losses .'due .'to ·voluntary· ·removal- of
;_. . . ' building .. 'incident. . to . renewal . or
( ·-Exce'pt.loi1: Loss_. from _'wash sales is ·not .. ... replacem:ents;.:; ·deductibla··expense. from
t- deductibJe.-(NIRC;- i,is. amended by TRAIN,· gross income · - . ·
i,: . ·sea: 38): . : · . . . ... . Howev~r,: if arc er:,tity b..uys ~- land with ·a
' · ' t:>uilding wit!'! a view of · erecting arioth.er
. .'. ,- ·. . . building, lhe value arid the cost of demolishing
the ·old building are not deductible losses but
added instead fo ttie cost.of.the land'(R,R. No.
·., 02-40!. ~ec. 97). ·

. .
· 2019 SAN BEDA LAW CENTRALIZED 0PE~ATIONS ·1 129 .
 IN·coM·E TAX
, SAN 8£DA LAW CtNT-Ri\LIZ,i°DBAR 01?£RATIONS- MEMORYAID 2019 .
- · \ · on; e *"' ,iuiMMi&&YIP MEE~,Mi

, . ; lnvo.h:mtary demolitiOl'.J 'Such as· that or<:lered . iv. Th!,l taxp~yer was · n~t ·g~e~pt . from.
by · the .· · City . Engineer's .· Qffice;. . Which inccih'ie tax·: in·. the year· the loss was·
. I
. considered-the building as.a fire h~zard, may incurred;· antl.'- · .
result to -deauctlbility.of the-buildl°ng's value If · v: There.'ttas .been no Substantial change. in
the loss is not'compensated. for by-ins.ur:a·hce .the· . own~rs.hip .: of the business '. or
. (CIR v: Priscila·Estate, Inc., G.R. ·.L-18282, enterpi'ise·(N/RC,. as EJm'ended by TRAIN,
· May 29, 19~4).· : . .. : · .-, · · ·: . · . Sec: '.34(0)(.3)). · ·. · . . . ..... ·_. · · · .
', ..
· 10.) .Lo~s ~/u~~fu"I valul;l.' of cap.ital -~s-se.ts.du~ Not~:.'fn the: case of ·mines .bthe; thari oil.
. to .c~~~~*s.,in bu_slne_ss' coi:tdJtior:is and a .. = and gas well~. losses incurred without:the
· · .c~pital asset. i_s .terminated.-' occur~--when. .. · . benefit' _6f'int;ei:itives- under ·the Om'nibus
. the-. ta>.(payer. ·qiscontim,ies. in· ·business .'or ' .. -... · Investment Code of 1.9_87.in _any_of the 'first .
. discards· such ~ssefs permanently'from use in tt=:n (10) ye~ir.sof o.R_eratior:i may be carried .
·.: , ·such bu~iness .. He·may qlainfcledµction.··onl.y . over a~ ded!,Jctioi:i f.i'am··the gross income
· ·, to the extent- of. actual loss ·sus.tained .'i;iffer · · 'to_r·the· next -five (5)-ye_ars 'following _such
13djust.mea_ts·.· for· improvement, :dep.reciatiQn, loss (NIRC; as ~mend_ed :by TRAIN;·Sec.
.... arid s:alvage·valo.e· (R.Ff No .. 02-40, Sec. 9.8). · 34; par. (0)(3)). · ,· · ·

.. 11) Lo~~e-~ bf farmefs :...-, ({?SSes incurred i~:.t~~~~ . . -~ub:stantic1i Cha~ge iri the ·Owner.ship· .
v- •oper~tion .9t'. f.arm · business are· '!~d!!ofiblelrj . :r~ ~"'~~fthe, Bus(ness ·o~ E;:nterpri~e .· : ..
·. .· . frorrr g_rpss rncome (R.R. No1_,~-40t;.~ec .. ~ [ \j· J?. ,t{-e~rs to a change m the ownership of !he
. · :· ·. · · ·100):. '. .. . · · · · ~ ,'.""\ J~ ~~~-=.,;;... .J[ !by_s11'\~s. or.. enterprise.. as a result of or ·
· · . ·... '. . · , '' · ,IC· · ·. ~ _ '· '. · ' ~~Siffg.f~~imJts_ mer_ger or c~i:,~o.lida.tion·or_.
·12) N~,t· Ope.fa~1ng· Less CprFY~~)!p(N,9J:£·0)~iT--..~;,.·~prt_biAat~n with. another person in the ': ·
-. '(Nlf?C~·as amended byJR'!,lNi ~ec/:(14(0)(1); · -. -~#. -· 1'
m'at!~ef!s!prqvided in- SubsectioA 2.4- qf
%
. · - R.R_..No.14-2001)

. .:'
·. ·. 11 ,,.,~~ exce,; or a/,~,+~du~;
f
f ·:---~~,/:I .
gross. ii;i<?Oni~_ of. the ~i_A~~s:'.oij'r
k. · A\\.

oOe/ji. . -r- \~\ _.· . . ·. . · . _ : .

. Jlhes~/egulations (R:R: No. 14-()1, Sec.

.a . y ta~~>.. ~ <_,,.[I!;,:". A-K,N()L_<;;~_'sna,I) ~e alJow~d if. there .has ~een ..

year, ~hlC~ had r:tot.f!'f;;~-~~rev10~ otfse.tca~.il~2
deduction ·frQm .grosNq~~ me.. · s..~f?C, ~~
emended by -1RAIN,~gca~ p_a · :[{!Xf"3).f:
· · · . , · . -l'.J'.· . .- .. -~-,~ · .- ~~@'/
. General Rule:- NOLC~_sliall ·1e·cat~: -~
r·--~sa deduction !r.oin gr~~· 1ncori1~ fo(l:~hi]t>~, ,_;.;?""
.·
.... _ttiree· . (3)· ·· c9n.secutiv~. taxeybl~.. ,(y.@..~r·..,._.N~
· in'lmedi~t~ly/ol_lo'-Ying the;'Y.ear-ozJ.bqi_Jbs~ .! \H,}: ~,_,;;/ ~,$0,!Jfbration, if the bttslness.js in the
_-· ~- · . (NtRC:. as_ ainenped_ ··f:)~~/.)-:.~e~~ ....,,.f-"'"-"';. ,~:v~~9ameof the corporatiQn, is held by or
' ._:. -34(0)_(3)). . .. ·~ ' .: · .. : .. ·. -.- . ~';'1 . -~ ·lvf
.. : .·. . _ ... °>' , ·_.: ·-: .. · .... :· ~; _l: J-r~~
: Exceptlo.n: 111 the .casE:1 .of 01[. an9 ga~. weir:-..~
: : losses 'Incurred in· any·qf the. first teA'(tp)years'
· · ·. ·_of operatfon may ::t?e .· .carri~d· . over· ~s~·.
.· (jeducti<;>n from .the gro~s 'income. for th~-- next . .
: . ·fiv·e. (5)·.xears ·~ollow.ing sU:ch loss ·.(N/RC,'.°.a~.
_: ·.jmended by TRAIN, Sec. 34(D)(3)1.- · · · ··
', . . . . .· .· . .,
Req.u_isltes·.·. for . ·E>e'du~tib.il.ity :- of. i-ie(·
,·PperatiogLoss·ca~ry:o."'er··tN;OCES)'. .
·.. ·;.-· 'It.ts from the ·N_ef o'p_erating ·ross of the· :·
. ':·bl!slness for any taxablS. yefi.r imm~diateiy, . . .
· : ·precedingthe cu.rrent.taxable ·year;· ·.
ii: It ·.has· -not bee·n :previously .Qffset as ·.
. deductiotdro'm gros.s-,income; · ·
iii.,· It st'iall· be Carried .over as. a deduction
. .from gross income, for the nexf'three (3)
. . .· consecutive taxable . years. jmmepiateiy.
··following tJ1e y~ar.'pf such loss only;:·..
. ~ .
·. · ,nb S!,Jb~far;it..Ji,c~a·nge·J~~~e pwnerstJ1p_Of:,-
j 1
1
i,.:11, ~-,
J.~Jbusin~ss o e_~terwrse rn;Plat: . . .
cj_::f)I N911.:-tes-~, than-. seventy-five. percent .
· 0,1.:)- ·•.. (15%) irf-piorilfnal.valu~ .of QUtstanding
~ -~'i_r.,\)'-, ·-,;.~sued snar..es;-0c- · ... ·, · . '· ·.
.. 2)/ Nqt. tef'fu: 'thc\n sevi3nfy.;five percent ·
r:~ ,.,f-. (1s%f ot the pa1a .up c~pita1 ot the
.t~t_<-<\:\.. ~on b'~h~lf of. th~ sarp.e ~erson~ (R..f;·'
· __ No. 14_•0_1,.Sec. 2.4),.. ..·· ,··
·. · .. · .. :_ ·. · . · . ·· , . . ··: , ··.
The t~rm .:bf:or .ori. behc;ilf ,.of the. sam~
a . ·. p_erso.ns" :shall·refer to ths mairitena.nce of
, : · owne~Ship d~spit,e ch~nge as-when.: ..
. . · :a): ~o .. actual ·Cha,r:ige,:in···owri.e~ship is··.
. ·.. . involv.ed in case the. transfer lovolves ·
. . ·.'.change . from . direct . ownership. ;to'.
. . :. ·. indirec:t.ownership; Qr vice. versa;·a~d .
. . b)<N·o .actual'ctiange ·in' own·ership is.
. invdlv~d in.the:case-of,.ri;i~rger .of\he .
su~sldiar.y. i11to the pa,rent ·co.mpciny ·: .
; ·· · · (f?.R. f>lo: J 4~9.1, S~(:, 3. ~ 2). .:. . .. : ·. '
The· seve~ty-fiv9"·(75%)' equity, .ow-~ership
,• · . or. interest rule, ~hall· onlY apply to·a .transfer
. or assignm.erit of .the taxpayer's net operating ..
· losses as: a.' re~ult of or arlslng from the s~id ·
. taxpayer'.s . merger- :or . consolidation · or .
O

business ,"combinatior:i with . another person

(R.R. No.. 14,•01. _$ec, 2.4).·.. · .. .· .•..
. ., .

130 I 2019 SAN ~EDA !.,AW CENTRA~IZEq-OPERAT.\ONS · ·· · ·

 . INCOME TAX
· SAN BEDA LAW CENTRALIZEDBAR OPERATIONS.- MEMORY AID 2019
.
• . . y· . 04***' Mt .

In such case, thetransferee Qr assignee shall
not · be entitled to claim the 'same as a··
deduction from gross lncorne except when .as
-'. a result of the .satd merger, -consolidation or
combination; . the.· shareholders of the
. t!ansferor/assJgi::ioi: or· the· · transferor ·gains
-, control of:·· · · . . · .
. 9 . At .least .seventy-flve (75%)· or more in
· nomlrial' value of the outstanding issued
-shares i:-or paid, .up - capital of· the.
. · transteree/asslqnee, of .a corporation, or
··ii) .At least seventy-flve .(-i:'5o/~} or more
· ·. .: interest- . tn. . the · buslness, · of the .
. transteree/asstqnee, if -not .acorporatton
· _..(R._R.No; 14-01, '$ec. 2.4)." · -·. · . the factthat the taxpayer-pald'jncorne tax
·· · .. · · ·· · :· under-trre M~lt· or 'availed of *he· OS_D'· (R.:t~.:
.·Note: 'However, -In a recent rulir:19 ·b.y the:BIR,
.. .in case of.tax-free rn~rger,_.it"held that.NOLCO.
· ·· ls · riot one of the -assets. of the· 'absorbed ·
· · cojporetion that: .can·· be· transferred an4_>::1-·
absorbed··_by the survivin~ corpoFation asjl)is;.,;Ji.
, privi)eg~ or deduction C~n' be' availed of/qr.il~.r,, :fil\
by tlie absorbed corporation (BIR Ruling)oJ&.:' ~;~;a
·f) · · A.11y person, . ~atur-al · ~r . juridic~!; e~j~yin°!;J ·
5 xemptic:in from income tax {R.R. No. 14-01·,
Sec. 4).. · . " . .
Summary Rules on NOLCO,
i)· NOL CO shall .. be allow.!,ld, as,·. a deduction
- from the gross income "of the taxpayer who .
sustained or' accumulated the net operatmq:
losses regardless. of the ct.ia·nge ·,ih its
ownership .._T6\s rule shallalso apply in case
of . a· rri~rger. Wh.ere the taxpayer Is; the
. surviving' entity (R.R. ·No.'_ 14-91,,-Sec. 2.2).
'. ii) - The three; (3t·Y.ear reqlementary period.. for _:.: .
. ··,cl!'}iming NOLCO-wiJt·co_ntim'.i_e.to rundespite .
. No. ·t.4-01, ·Sec.s. 2.5 and 2.6). : . . . . .
iii) NOLCO is deducted on a -first. in, .. first out
(FIFO) basjs (R.R. No: 14-01; Sec. 2.7). ..
iv.} The. net. operatinq ·. Ioss- incurred by:,.a ··
· ta)_(p.ay~_r"in t~e year iri which_.a substantial
Chang~ in OWn~rs~ip_ in. such taxpayer ,'
. occµrs sh.all not·be affected'bysucb change·

.
214~12, Match 2E{_-2Q,1-2J..
.. . . . . .
<· ·. -~:;!~_:- ·
)Lt;;'~; ... i_no~~~tship-"(R.R No. ·14-01; Sec. 2;~t _:'_.- _
": . j'i?. laj' rr.::l\.:!.:,~yt-:;:~e¥,<t9shall be allo\Ne_d"· as d_edlJc.tton 1n .
ta?(p.:1yer~ . Enfitle_d . ~o ~ed~9.,t<JJOLC0;--:i'1· j· · . . --c_<:~f5-:~t1!1.
g th_e· taxpaxe{'ls i~come t.c1~es per
;(~1-~l:T}-. . : . .- . . , . (}·)~-, . : . /\,..)~ · · : qua~ef-•and am:iual f1naL~9Jus~rnent mc.or:ne
:.. t} · ln~1v1duals· en~_aged 1~ ;1ra~e,),<?!_\b..u_sm~y~:!!\, ; . ~~X/f.Elf~}{\1 (R;f. f;J_o. 1_4-0'1, Se_c._ 6.4), . . ··
or 1n·the-exerc1s~_of h1~ ~~~~:,1,gn;-i:P · ·. ~-~ ·.: v1) AAta~fa~~r w!'lo cla1rns.·the .f~rty per<,:.~nt
: 2) 'DC..and RF~ subJecU0'Jhe n_ofcyia~!nco112e fa:!\- _. ·(jO.% kopt~nal _standar~ dedu_1.: t1onsha_ll _not
t,;1x; ·. : .· . -f.~~ • I_~:-.. · _. ~ ~.,I\· . .....:.:.,~1multa_fl!30tlsly claim deduc!ibn -0~ )he.
-3) $p~CIJ~I. · .. corpo_r~,fns=.:~~~'f}lpc~ '~~!? r:.;J ·,,,;}~f}.~©;J.~;p9504,.Sec. 3, m reJat1on to .,
freferent1~I· · tax·: -rat~~ ,t,(~}@,:,r, pri9'~.te. l!.!q . . 'PJ."'R1?N:0A:4:.01,S_ec. 4:5).
•. . . -e<1.u_cation~r · in~titu,tiohft~IJ:,ospif~ts; eJld . rT · ·- · ·
... ~ - _·re91on;JI Ofi'erat1J?g. hea.dqu1r_te,rsi:J1hd. · fArr\~·c1{L~.
4)_ .!;st'.'3tes .and trusts (R.R_.. Nff;.,J§,0_1, S~e. i•i,-·,A;• . -'tH,;•i.
. 4) . . .' . . . 1- r _4.·e~~:'_,&.;:d'!..u..'.....,-<._ul'!.3
:. (· .. ' .· . ·_. : . ·.· .· .· ·(k (i~<" . · ·. . .. '·
Taxpayei:s Not Entitle~ to. ,N0t:_Co_:i:;toFIP- ·· · ·
BFEr · . · . ·. . · . . "":". .
· .. _a) Qffshore banking units (OBlJ) of.a foreign
. : . banking ... corp~ration, prid . foreign
.. Currency.: ·Q.ep·os1f · Unit (FGDU) ·. ·of .......
. "dome~tic: .or foreign ))anking. corporation .
• .duly authorized py.th~-B$P; · . ·.
·I:?) : M enterprise .r.egi"$tered witli the. Board.of . ·
. '1nvest.ment (B.01) v\iiYi. respect td ,,ts;_BOI-
. · ,.·:" '-registered ·_activity enjoying. Income·. Tax
· HQliday.{ITH) Incentive;_·· .
· -. ·c) -· An:_erit.erpr.ise: registered :with th~ EEZA ·
· ·. : :with_· .. ·resp$ct _ .. to ifs · PEZA:-registe"red ..
· activity; · · · _ _·· -· ·· ·
·d) E;nterprises · registefecl: with the . ~ases ..
·conserv~tion ··.and- . ,Development· . Act- ..
. (~CDAr . (e.g.,: ··. S.BMA-registered ·', ...
~nterprises with re_spec;t to its registered ..
QUsfness activity); . . ·. . . . .
e-) foreign. ·. Go.rpo!atio11s- engaged · in
. intem'atiqn~I 'stiipping or. air· carriage··
. busin~ss.ih the -Philippines; and. ·

- 2019 SAN BEOA LAW CENTRALIZED OPERATIONS. I 131

 1-NCO·ME TAX
°sAN
. SEDA LAW C.{NTRALIZED'
. ·... SAR OR(AAT/0.NS
. . .
- ME°iAPRYJf/D2g19 ·

Closed. and Corop.leted Tr_ans;:iction :.. . one.

which· the facts .indicate that ·tt,e transaction· is
sufficiently:··fin~l to. ~scertain--.: that losi h~s: .
occurred (MERTENS, · taw of Federal Income
.Taxat~on). ·. . ·

rb
Thus, -i~· th~ 1oss is due- ·shrinka~~ -in value oi
stock through. fluctuation. ·of market; price or
T!3xpc1yei-:may tie · · . otherwise, the !:!·mount.of .loss is·.not. deductible
·ar.i.individ_ual .. _ :_ · i.mtii the same tias. b·een.- disposed. The loss .
(engaged in . alfo~a,l)le IS tti,iit actuaJly ~Uffered when- the.St?Ck .
trade ·or business has already ,been· dispo~ed of· (R.R: ND: 02-40,
·or ·iriJH~ .exercise· · _Sec .. 99); · - ·
. ' . 'of pro_fession) or'.
.The .same P.iintipl~ ap_pli~s-.to- losses of-far_m~rs
corporation . arisin'g.frOfY! t~.e shrlnkaqeln weight Qr_ physicc!_I
· value of. farm · products. Such losses are riot
. Losses incurred . . deducti\:)le° -~xc~p~. as· sue~ · shrlnkaqe rria'y_ :~~.:
· .· · t d -- __ reflected·, in an .inventory 1f. used to determine
.. or conn~c. eJ~r-<=' ~ ,._ -.-=s...,,,,... _ ·.
. · . d-= ,r J '1l.. p,,(dfit§>fR.R._.No .. 02 40, S.ec.. 100).. . ..
w1tt, [~~- t::·.0~ V, .. _. ( '\f ll: ""-~ ., · . . . ·
. -~'{~i1.s~(ft~~-~ %...,i:..J!_i.{c'a~t."
pf'.~l~ss.from ~ sales. "transaction.· Tbe ,
'. . . • . /P.~rattg,r?,~p~ · .. 'col'l-suih'pt~~~{~thes1:1le is the ipentif,iable ·event
· . fl _4 ·: ',;/~, P. ~ :~~""'Wbjc~~~};tn~,!-oss:.(DIMA~MPAO, supra at
Carry-ayer as , A t3~s19essl~sse~\2)· 1f' '"1-( 121).-\ -~ 'f'"0 \ .: . .: . .
loss from·_sa{of ·n~yPrE;vpuslY. H $.} 4r,;_ ·. \ . ·'\ ( ,,. ~ . t: -. •

tM next . ,.
·succeedinJ..year
-?' -Ee
-capltal i3Ssef ~ . offset a$! a . ,
~1id~~!idn_fr0.)~ _·
gros\ income o\
_ ,1 ~~Q exarn~s) ~/ no11-~edu,ctable losses .
:::e~.c3.~ethew ~£!°.ti~.not.ev1_<1~r1ced _l:>y ~l~sed ..
, 1 n'd:-cp~pl~t~~ ~ra~~~~tion,._ . .. . . .
·. . .R ~,',{ ·r.riedi1~Ei"r alt' ,·mm.; . a.,: ~o~!es_ ar,1s11'!~fljgm.reyaluaUon of property,
_.. .
. '!\ ~~-t.::: · ~~; __\!t}\ · · ~~ .. :, . j>~tan~dl'e.qu1J5rflent;-and
. · \i. .• ('. ~U~!i.~f~ ~next,';;-l~f:M:limf'aliz.'
i ,®
d.f~rj . r
n exchanqe loss-es arising.
(.t. l\~ee ~~- . ( •. }:'((<~}r.,rfor. ign lcia s .(BIR Ru~ing No. 14~85),
· ~. · COFISeCIJ~~~ - · -1· ,;;:,t:/.ff./.«,_'V,. ,f · · I . . . . . ·,

. \ ·. ye~ .. ' -. ·. ' _ . · . ~ _e~~l9.{~'in· 6~ ·e ?f.

loss -~f us~ful. val~e o~
. . · -, ·' · , . . . . .TE -~\~P.s!P.itf!Yassets,..fJueAq_ changes. 1n_. bus!ness
.: (DIMAAMPAO, s_upra_at_ 131). '. , .. ,"'~J~~r,i,5Ji~i~~ (~ prev_??us/y.· dis?ussed. ·under·."
· · . '~ :.,(7-O.r.\ ~--=~P,Ct~'t..O$~es), the loss.may.be de.ductedeven
LQsses are person:al a_nd .not tra~sfE!~lf to·-1, i"
A-Xt!:iQi:tg~f)~rt? was _nq sale or dispoi:iition of the·
a.nother. · _ "· · . .. · . . · ~.,,.~ · . .iV.JL.l':gr.c,rri~rty_ (RJ{ No_. o~~4Q, Sec: 9{)). ·.
The ro·ss of..' predecessqr partr:i.ersh1p '. 1S,~~~-, . · · ·. ·· . · . . ·
. deductib!~ by.a successor corporation (R;R No.. ·16_:-. Losses can'·be claimed.·as. itemized ·decfoction :
86).. · · · · ·· · · -· • · ' :_ ·witl)iri:,si~ (~}..mc;m*h~ :after ·the .dea~h,- of th'.e..
.. decedenf provided. tfia_t_;.the· same . are. not .
The. loss "Of. the. parerit' conmany ~a¥· not b.e claimed.as deduc:tio'n:fo.r estate tax pilrposes.
deducted'py its.subsidiary. Ho.Wever, a b~nch }nay . (NJRC,,as '?ine__n.i:led by-TRAl,Y; Sec, 31(D)(1)(c)) ..
·claim:the 'following home office ex!)Elns.es:. . . .. . : :
· . 1.) . Losses, expenses . and. ·othe.~ ''·deductions· ·. · -~ .·,G·e·neral"Rule: Loss is·d~duclib"ie..iri the year, the
. .p.roperly allocated to.the_.Philippin~ branch; arid i"oss was sustained (Plar.idel Surety>& !hsuranc;e_
2) : A ratable portion·. qt the losses-.· expens.es_. ahd. . _.· CcC v. CIR,', G:ff N.o:·~L-2-1520, ·_:December 11;'
· oth~r c!ed1;1ctioris ·effectively connect~d. with: t~e _ · . . -1967). · · · ·: · · ·· ·: - ·. · ' · ·· ·
business ·or trade conducted e~olµs1vely wi.th1n · . ... . ., .\ .
the Philippines vyhJc;h can.not_ be clefir,itely .-~e- . ·Exception:·_, If tlie. Joss· .is comp~ns~ted by
allocated to soine item~rnr ·~lass of _gross-fncome '· in.surance or otherwise, th~ loss, is -post"poned to a
(R:R._No.16-86).. . . .
~ubsequent. yea'r' in which _it' ~pp'ear~ .. ti:.at ,'00
compensation at all' can_. be had, or there .is c:l
·cfosed and ·comp1.etec1 Transac.tion re_rnaining . net lo~s ·.(or, there.· is no· ·full .
General Rule: .L()SSe~ must be ·evidenced by-:a . c:ompensaiion) (Plaridel Surety & Jnsi.Jrc~f!Ce Co. v, ·
closed. anc;l completed trans~ction _to. b~. dedi.ictib.le'
. · (R.R. No. 02.-40, Se~. 96).
CIR, G:F?.._ No: L-21520, Decen:iq·e~ 1 1967). . ' f,·

132 '1: ~019 SAN B.EDA LAW CENTRAL.l~Eb OPERATIONS

) ...
 INCOME TAX·
SAN Bf.DA LAW CENTRALIZED BAR OPF.RATiO'IS - MfMORY AID 2019

E. Bad Debts 8. For ~anks, the taxpayer. shall· submit to the

Bad debts refer to . those debts resulting from the · BSP/Monetary Board the written approval of the
worthlessness or uncollectlbulty, in who!e or ln part, writing off of the indebtedness from bank's
of amounts due the taxpayers by others, arising from bocks of accounts at the end of the taxable year
money lent_ or from uhcollectible amounts of income (NIRC, Sec. 34 (E) as amended by TRAIN Law;
from goods sold or services rendered (R.R. No. 05- R.R. No. 25-2002) ..
99, Sec. 2 (a)).
Note: Despite additional requisite provided for to
Unpaid advances (cash and property) which ·are be satisfied by banks, its non-fulfillment shall not
investments by a partner in a partnership cannot be prejudice the Commissioner's determination of
claimed as bad debts deduction from .gross.income. worthlessness and uncallectibility of debts (R.R.
(Phi/ex Mining Corp. v. CIR, G.R. No .. 148187, April No. 25-0:!, Sec. 2).
16, 2008; 1 DE LEON, The . National Internal
Revenue Code Annotated (2015), supra, at.470). Mere Re~ording of Estimated.Uncollectit-leis·
Not Writo-off ·
Requlsites for Deductibility: (IR-WASC-~B} . · A mere recording ln the· books of account ·of
1. Existing,· valid, . an·d legally deinandable estimated uncollectible accoi.mts . cfoes . 'not
[ndebtedness due to the taxpayer: comiti.tutea write-off of receivable (R.R. No.· 05~
2. Must have been B.eported as receivables in the 99, Sec. 2J; . · ·
income tax return of tlie current or. prior years; ~.,,;:*'·1
3. Actually ascertaTned . to
be . Worthless a.A;<tVJ.! Factors affecting V\'.Orthle~srl'ess: .
uncollectible as· of the end of. the taxable ye~i'(/,{;;,. i: .· Bankruptcy or insolver-cy of the debtor;
. • · r Wt"' f ·;}. 11. Insufficiency of the collateral;
Notes: . .) _ '. .f....---c:,iii; Statu)fl of llrnltatlons: ·
a. Before a debt can be considered wor!W'e t·;;,~.;.....-,L;1w:ir;Qe~tn::Pfthe debtor leavin·g no· assets;
the taxpayer must also show thaLlU~ indee . ~ v-:-'''''lnjufy'.-'ethe
,f debtor making it impossible for
uncollectlble even iii the futef,W (fhilippiq!}~~Jz
0 · · him J.5~~;3,rna living; . · .
Refining Company v. Court o(Appeals, G.R:- ~ . vi. Meefg~r ~.mounts involved;
No. 118794, May 8, 1996). :t · ,; & . ti. vii. lm/fro~abiJ,ity of success of judicial
b. There are steps outlineqJ:c:fbe i.mdetfaken I:,}· ·:g cd!lecfjon;",,md
the taxpayer to prove tf.i'a.t,he e!i<~lited diliQenf :~. viii .. IDestn.i'ction\ by' fire of original invoices
efforts to collect the de~tg:'viz::-'(1f-:s~~d1~gf {f:: '"·4iv.1~'~F.!'19j,;;.."inde.btedness (Goodwill
· statement . of ac~ounts;~Z)~.S'E!)J'Ping····'Af f ':] . /ntemetio'Flal R11bber Co. · v. Couector of
collection le~~ers; (3) glvini);~ac:09J,mtto-a ~/ lntemsl Revenue, CTA Cas~ No. 468, June
lawyer for collection; and (4ffilif1.g a-9qllect(on ~-;~,,."!'"'~ 8, 1963). . .
case in court (Philippine Refining:,Q0mpany v.. ,.,h'.' .,,f, {'\,.:;.1_ _,_ . ·. . .
Court of Appeals,· G.R. No. 11§]94, 'bt~fS;,:j,-<-U:d'.:.'T-ax-Benefif1Rule . . ;
1996). ' .. ~{, d~~ o~
The 'recovery. 'bad debts previously allowed as
c Good faith on. the part of the· talcf>.~isi.~~isnot deduction in the prec~ing year/s-shall 'be included.
enough. He must show · that he had as part of the· taxpayer's g'ross income. in the year of
reasonably lnvestlqatedthe relevant facts and · .such recovery to the extent of the income tax benefit
had drawn a reasonable ~nference from .the of said deducflon .(NIRC, as amended· by TRAIN
lnformatlon..thus obtained by him. (Coliector of Law, Sec. 34 (E)(1)).
Internal . Revenue v. Goodrich International
Rubber, G.R. No. · L,·22265, · December 22, Illustration:
1967) .. In 2010,. A Corp, repo.rted net income amounting. to
P480, 000. Juan, a debtor of A Corp. in tho amount
4.. 8Ctually chargE1d off in the books of accounts of· of PSOO, 000 was declared.tc be insoivent. Hence, A·
the tc1l(pa:1er as. of the end of the taxable year of Corp. charged off the clntire amount owed by Juan,
worthlessness; resultinfl to net loss of P20, 000 at the end of the
5. Must not be s, ,stained in a transaction emered 1ear. In 2012, Juan was ab•e to ·recover from
into between related r.arties (For further insolvency and paid A Corp. the entire amount of
. discussion, please refer to Interest Incurred P500, 000. How much should A Corp. reporl as
betweun Related Taxpayers); income from bad C:ebt recovery in 2012?
6. fonnected with the taxpc>yer's trade. business
or practice of profession; ANS: Only P480, 000, since this is the only amount
7. For !nsurance or surety companies, bad debts of income tax benefit A Corp. obtained from the
must have been declared closeC: due to deduction made in· 2010. The recovery of had debts
insolvency or for any such similar Feat=:on by the previously allowed as deduction in the preceding
lnsurancu Commis·sioner; and years shall be included as a pa:t of the gross income

2019 SAN SEDA LAW CENTRALIZEDBAR OPERATIONS I 133

 l·NCOM·E TAX
SAN SEDA v,.w·c_E.NTRALIZED_BAR
OPERATIONS- MEMO~Y AID 2~19.

in 'the ye·c1~ of ."recpvery.t/~tie e;t~~t ~f tha.mcome . 3 .. Allowance mJ~t'~e _B.easonable (NIRC, Sec. $4
tax beneflt of said deduction (NIRC,as amended by (F)(.1));· · . . .· .. . ·
TRAiN Law, Sec. 34(E)). · .:" ·. · · .· -, . -· 4·. Stat!=l.11:ent cm the- allowance mustbe ~ttached.
·· · · ·: · · · · · to the return (R.R .. No: 02-·40, Sec: 115); · ..
. S~curitie~ w~itten Off th~t -~r~ c·a~it~I As~ets.are 5 ... For:' non-resideo"t alien engaged in. tratle or·
Not Bad ·P.ab~s1 'but Capital· Losa. : : . . · , business ·and· resident foreign : corporation,
.. Iii. a. case Vl{here .securtties "are ascertained to be· · ··pfoperty must be-boCqted within the Philippines
· worthless .andcharqed off within 'the taxable year,·· · · (NIRC, Sec:.34.(F)(6));and: · · ·
·: and ·are cap°ill:!l 'assets,' thelossresulting-therefrom. 6. , .For deductibility .of deprectation of Y:ehicles;.
·· ." to-the taxpayer; other than'abank er trustcompany other conditlons under RR> No. 1.2-2012· and
.: -. incorporated ..under.. tbejawsiofthe Phillppines a.· ·. R_M.C. No.".2-201.3 must have: been.complied
: substantial part of whose. J:>usint(!ss. ls the receipt of . · · .. · wjth: . . .. ·· ·
·. ceposlts, wilt-D.Q!:be treated. as .bad debts:.. but as . .. . . -, . . . '•• . . . ·._, < •
. . capital · 19-ss_. on the "last d·~:iy" of ·.the 'taxable . ye.ar . Propertles.Subjectto Depreciation: (UETI) .
(NIRC;· Sec: 34 (E)(2)). ·_:.: . . . . .. . .. . • . . ' ._a. . Property,' that.is !!sed for. trade, ·busi~esa or.
:'-: . . ._., . ·exercise. of ' a profession or i held for: .the
When. Mortgagee·, buys. Mortg~_ged. ·Pr.operty,, .. '. . • .•. productlorr of. income : . ma/Ian-"'. .Thai-
. DIJfe.renctf • 1:Jetvieen · Purchase Price .and · Development.. Puf,lic:. Co.· ..... Lfl:J. v~ ·.
·. .lndep~edn-ess. fs. NofB'ad Deb~··'. .. :. · ." ·: · _,,,;.r= ...'?=i~· . Comrr,is$ion.er:df lnie,:rial.'Reven"i.1e,.CTA· ..
WJ,ere "\JOd.e.r· the foreclesure of a r.nortfj~9€.'"'theu. l\ -~9_,a-se,No. 6172,·Novembe,: 12, 2002);. ·
.,.mortgagee bµys the" mortgaged P{Oper.!¥.and~~di.ts . l\jb. p.,~p,erties .subjel;;t: to .!;xhalJstion within a
t~e "ii,d~bfedn_e.ss . with . the . putc"~a"'(~p'r.ic~ •.;.,t~._,;;=-=.~- ~ ~'!~ri:Wi~ble ~e;riod o_f time, .t_hat is,_ it.has a
difference betwe.en ,.~he _purch~et"-P.nc;?@ntl. the . . . ~h~1te&~efµI hfe. (Jta/J_a,nThai Develop,ment.·
indebtedness ·js not -allbwable ,;1s ·~~Mu~eiio ·:.r.or""a"'·:}i-.....,._,,,~~t1~!_fk._'£o);td. v. Commissionero[ Internal

1
. b.~q ~~bt ~!=lc·ause'jn such· ca/~~£\p;lfi:>e'.y wh~r. · , -w-:- · ~e~e.Q~t::.iri&· Case No. ~17.2, · November · :
w~s -s~c_un_tyf9r the .qebt sta~~s. Jn'-~.fpce o t'1e·~el5 . . ~ : ·1f 2lJq_41. · ~ '~: . · . .; · , ·. , ·
The determination qf loss i~ .such /ase i deferred , . ·c:-. ~I kine~:(?jf]a"r,gible Whkti property used· in. the
. until the dispo_sc!I o( the _pi(,~~~.t(.R.~ r·
y .. i5:q_T-40; '.:"r7°'-~p_deor,~~~~~s
0

:is: slJb}ect'to we:ar ·, ··:

. '',~ec. /03),·· .. ·:· . . ·r-""-1 . . . . . . ~~z_ ; tZ,.."1f< .. apd t~ar~·.ro.-·~1iay: or decline .f.rqm.natural. .
·. ·. . •. : . . .. . . . . . ~ · . .. . · ~~- , 71711':.l ·j,auses~ :1l>texhi3 stlon. and to. obsol~scence
.. F. Oeprec1at1on · : : · ·~ :·. r7'J,l . . ·--~~ · . -q~o tl)p noi;hj. I progress of the art '(R.R
· D.ep_reci~tk>n is the grc~du.al dj!l}.i. ~iori\~'f.R~userqrffj~ r,Fq)~2-4_~i. 0.6);·and ·. · · .· .· ·. ·
Vaf~e. Qf fa'tlgib_le," property, rtsulting}.fr-0'3..<w\a['.3rie~ f ~~- ,,;o:.:..)1:._ J· , cf I :.. . ._.., ."· . : · .' · ''
. .. te~r a!19 ~o~~al_obso1~st:enc~."f?~sil~n Es~_§s~~~: ~ ... .s,-;Notefff dOes1 orapply. to mventones o_r t'?.
. . · .... v. Go"!mlss10r.ierof ;(nternaf · ~v~n_u~~- R~~'- .,..._ :· . · ~to~~ :in tra ,: nor. to. "la~d a~_a.rt _from _the
.:· -~~492, :~?te7~er_~~-~9-~? . :--\ ... ~~l~~t\~~~i~:1. rd~-~s·:~~r~c:J1;.~~v::;:t~~ :j, .
·It.is also.ap(<)hed to1he· amert1zah~~.¢"h~yaJ~<::>~,c.;:=:::?· "\\~9P(~I~ which through the process of
... the'in~ngi!>le ass~ts, th.e us._e. af_whrcnJn/ti:a.5t~ or.'}..., K. ~
· busiae$s~~ ~-~_rlmit~d-?uration.(§asil?nE~~1t:!~ft;.c.J.Vl.t;
-.v~ qomm1ss10,:,~ro'f ·InternalR~venve, · G.R. _Nb.·~
-s1.~,:., ~. :r~.ci.v.a1·suffer· depletion. (R.R No. _"02-40, _
-F$~r;.. _J_Q~). :· . · .. ·. . '> .. · -· ·
· :· ... ·. . . .. . · ·· . ·:· ... . . . . · . .: · .. · ·
?2492; Septeinber_.5,:196?): .. · . .· .. ·. '.:. ·.; . . , . . d. ,-AJJ kind;, .~f .frita,:igible prop.~rty (otj1er than_:.
· , · .. . , : ·.-s.b~r.eli!ofs~k),"tt)eu~13ofw.bic"1in.tr~denr- ·.
..' ~~ej:lson: ·."Firoperty. g·rac;lu<'!Jly FIP·~~pache; ..
a. pbint.: . . ·. · bu~inE:ss'iS' deµriitely·in 'limited duration 'sl!ch:
. w~¢re its. ..usefulriess · rs. exhaus.ted: By, usj.ng., :the · . ·as.,pa_tenti:,:,_c_opyfights ·and franchi:,es (R.R
. prop~rty.. a,· grac;l.ual. :sal~. !s; ,mad,e of i.t, ·.and·- th~· ·: .: , .. · ~o-. 02740; s~_c.:107).. .· . .· · · .
depreciation !-hi:lrged is the measur.e of th'? :cost·.:
. whi.ch ha~:b~en ~old (l!,:s.- v:. f..ud,ey;· 2.74 U.S. 2°95, ~afl'.lp_l~~-...:· o_f ··,Properties.·.. NPt: ,.,Subject· ti;>
. M.~r, 16,71921'}.:As' in~ome Is ~a,:neo;j~en tlie a~s.ets.·.. P~preciation:. (FAB-L21M-PR) ..
th~t·c.oritribote. in. earning the income .likewis'e sCiffer i. ·. f urr:ii\ure- ._.or . furnishings . ·used: rn · the ,building·
. ·. ·~imin~ti9p· (2-a; DOMD_NDqN, Tf;lxa~cm (201_8)'P: · .. used 'sblely by .ttre taxp~yef: as his-:residence .
44): : . '. .. · . . ... •, ~ . . . ; . . . . ~ .. . . (R.R. No.. 02-40;:Sec>T06); - . . ·.. . · ·
ii:' Aufomoblles · .- ~nd ·qther . · transportation .. ·
Req_ui~it~s ·f~r.,Oeductibl!lt~; (PORA.~~V) · : . ·.·. ·l:)quipment."use~ ··solely. by" tl1e" taxP.ayer for·
1 .. · l'he allowance ·:ror depreci~ti0n rnust b,e for 'the: .. . pleasur.e .. (R.R,'No."02-40; sec. 106); . .': · ·
exhausPon. . wear and . tear,: . ·including. . ii/. !!uilcljngs used_ solely by. the
.t~xpayer. as. his . " .
obsolescenc~. of·froperty used in the .trade 9r · . r~sidenGe "(R.R. No. 02-40, Se-c. 1.06);. · · .· .
. , _bysine_ss (NIRC, S~¢. 34 (F)(:t)); .. -: iv/ ,band ap_~rt;Jrorn. the imP,r_oyem~nts_· of physical .
2. · ··It must !;).e qtrarged Qff v,,fthil'} th~ taxabrl:). year · developm~nt. added to It (Umpao. In.vestment
. (R:~. No, ()2-40, Sec:·1·13);. ·_.: · · . · . ' . • · Corp. ·v.. Comin(ssioner . . . of Internal
: .
.R.eyenµe,
. . .

134 I 2019 SAN:BEDA l.:AW CENTRAUZED·B~R OPERATIONS

; I • • ,• • ,. •'•
 .l·N.COM-E-TAX .
SAN BEDA" (AW CENTFW.IZEDO,,R OPERATIONS - MEMORY i<IID.2019 0

G.R .. No. L-21570; July 26, .. 1·966; R.R. No. 02- 4) Any other.method whl~h may_be:p.res~ribe_d b/
· 40," SEit. 10ej); · ·. -.
. . . · · ·. · . _·the Secretary of Finance upon recommehdanon.
•. 'v. · [nventorles or stock tn trade--(R.R.- No. 02-40, o~ the_ Cornrntssioner (NJRC, Sec. '.34.(F)(.2)). ·
'{;:, . · . S~c. 1-06).;_ . · · · · . . . -,
r..·. . vi. .!ntangibles;· th.e use ii") 'trade,' business or Special"-Cases~·· , . . ...
::-: · . . .exerclse ofa profession is not pf. limited duration a. Prop.erties used In 'Petroleum Operations · · .' . > · ·
:;,: · .(R.R. No." ·2~40, Sec. 107)i · -, ·: · .. i. . Pro' e
i s dlrecll ." used in . o .. e1at ·d' tci,.- '". ·

: ·: ·
&'.· ·
t·;
vii. Bodles of Ni"inerals\vhich. through the process .of
, removal.were 'already subject .to' depletion·
allowance, (R.R." No. oz-so, S~9: .106); ·. .
. production of petroleum - 'deprecia.tio -shall ...
.· be allowed under .straiqht-llne' .method or·

f·I ·.' ·
. . . declining _bal"ance· method at the option of. the
;:: viii. ferso~al eff~c!s._ or ·ci?thing, except costume~ ·· · · ~-. service ·c.ontrac,tor. The useful life shall be 'ten
s · · used .JR theatrical business (R.R. /)lo.. 02-40, · (10) years or such .shorter . life -as. may be
·sa.a:· 106); and . . · ... " . · . ·. . . .. permitted by the Comrrilseloner (NIRC,· se·c.
i·· · · _)x_. .ln~!i:lf!lntal Bep.;;iirs W.hicn·neitl:i.e~_mat~fially. add 34 (F)("})). ' ··· · · · · · · .. ·• · · ·
f · ·to the value of the property nor· appreciably . ·.

t:rr:..·, . . . .
» · P.(Olong "the -life,·. but. keep It ·1~ ·an ··ord.inary.

efflclent operatlnq ,conditionJ~:R. No. ·2~40, Sec.

68{ · . . .- . ·. . · . . .. . .
. '. Note:. If s~rvice contractor "in.itially .eiects the ' :
deciining-~al_anc~ · m~thod! · .. · it· ... ·. may; .·
subsequently shiftto stralqht-line .(/\IIRC,· S_ec.
r" · ·
Note;· Repairs,ip (he nature ._of: repl~ce.ment, _to . .· . . 34'(F)(4)). . . . . . ·. •· . · .
f ·
the extent ~he.y_appreciabJyprolong the life ont)e 6 ·· . · · .· .· ·. . ·
~. proP.~rty ~l:l~lJld' be charged ag~in_stdepreci~t~~V]'.~ ii. Prop_e_~y . not 'used directly in production ~
tf;;"' · · · ·
.·
(RR. No.: ?~41J, -S7c..
. . . ,. · .. _
08). ·
. •. .··
.
d},('.1 :
·(;({iY"' .
·deprec1at1~n shal_l. be. ·un~_er_ straj£1ht-li~e·
rt. ~: ..
m.ethqd on the basis of ari estimated·t,.1seful·hfe
~;
~ Depr~~10a.tion. comr)i~nces . -at~ the. tlm_e__,.ojf' t!X~r:.:, ....,!:.i!J~~;~~
f
CQm'!l~n~_etnent of DE;P.Je_<;_iation _: ·.. . . · '1) :-;/._:,~{J.~·}:. .of frve1,i>ye!:l_rs· {NIRC; ~ec .. 34 _(F)(4)): .
. _- . . . . . : .· ·: ..
f,i . acqu1s1t1on of the ·property (Ba.sllan Est;;ites(lnc. v., 1\ b. Propert1es·lused In Mmmg Operations ..
t. . . ciorri,,;:,is~i~ner.of. fnter:n?t( -~evenue.{;/Jf:R.. Nb:· Jl,Ll.1;. .
i ... ~epreji~\o~·s~all b~ compt.ite_d at normal.rate

I i· . 2~4921 S~pfem.ber 5;"196i:). ·.. · -)_r}i,/f..... · • .,.-1-µ;..

o · · · · . · .· · · .. · .4.kr-'> hl:~
{ :· ~.ote.:'If th6.P.rop~!iYJs beJn,g. ~~e,(l·.i:iar.tly_-fq,.:t~_~sQl\~i _
f:." . ·anc:{ partly Jor b,.~siness, de~r,~~9,,~ion.11gtn~emusl'_
· . ·fl·
··l.. .· ·
·1f.e~P,~q;e_&i;hfe 1s .ten (10) years or less (N.IRC,
. Secj34(.(F]i~).,
ff1· ··;
:ii. if ~)<pe1te.ci .
.
. . . , .
·re:·
· . ·
is. mon( than ten ( 1.9) -ye.,;rs,
~r:'eper:tt:~~J..,: be.· dep~~~iated oy_er. · ar;iy .
t J::>e. _PF~ra~e.d· _an~- onl~ tiJe \i~f.\)_cf'n'.:pw.r~,~tatI~.to-'{[J . ...~~~ffl.lt~';er:?betw~eti five (~).years. anl;t :· .
t . bus1n7ss. Lise .1s cfe_du~1t>le. · . -~~ fl~,!,·;~... ~)-_ 1,F.W , .. the_-exp~~~e~lffe, 1?r.9~1dedihat the- conti:act~r .
( .. . . - · ' . . ·. ·, , . · .. . ·. · --:. ~i.1-'t.!~/. ·\~ . · jl. l~iJ · . · notifies the.-Comm1.ss1pner_at -the beg(nn_n.'lg of
f. Detel1)1i'na~ion , :of ·,-the l:Jseful' :tl,i~~ . ,o.~:\ whi'?~ ?:,\-~::fa: t_he . d~predation pe~od whicli" depre~i~tion·
t~. . o_epreclatlon RaJe_,s !3ased ·. . . f/i·d!-J . : . ,,1/~1111'.}jit·'"7e!~~~IIbe used (NIRC,· Sec. 34_ (F)(5)). .
t, . The BIR and ~.he taxpayer ~ay ~gree~J'iJ:Wi"iti_hJtff,f.BL--~-'-d~............,,~ ·, · . · ·: ::- . · · · . ' ·
r..
r ., . . ,
.th"¢ useful.ljfe arid fa~e i;>f_ depr~clatic;>n bfltt;i~.pfj{if,·ert~(. . Basis of D~P.r.!3~1atl9n
t<;,J:i_e.: 9:epr:E;!cia~e9. _whi~h ~r(;!enie_nt: ~i~'::i~lt~l§i~di~g · . · · 1.t sh.all. -~e. based. on _ac_qufsition _cos_t le~& s.~lvage
. , .

~. · , 1,1pon- :· both . Jhe · _taxpay_er .. anq · the ... N.atrqnal. value .(without adJustment for .revaluatlor,. ·losses pr.
~ Gover~ment. an.d _...vvbich. ~h~il·· ·o~·- subject· -to, " in'c:r~ments).".(R,M,c::-Ncf._70-fO). · · · · . ..
;. rl}cic;liflcation if jpstifieo by fa~ts.-o_r cir9urnstanees no\ . . . ·... ·. ; · ' . . ..
;"" . ta~_e):lJnt9·consider-atioh _dyring ·t.~e··ac:Jopti:oni>.t_sucli . . ··Who· ~a·. _cla.im- !)epreciation .>Expens~ ·.as ..
· ~gte~ineri\.- Ai:iy ·charig~ SJ:l,:"IVrrpt be· effe~~ive prior. . . deductJon on Taxabl~ JncQme . . .
'.: · .- tq ,·the .taxabl~ year .on ·which riotice· If"!: ~riting·· _by . · .·. The person -.yho ~ustains an economic loss from .the: ..
, . . ceitifi~il mail"<)f i'egis,teretfmail is seived by tne: party" · · . ·decrease 1h property "vafue .-due'. to :depr.~ciatio,f·.
;-._.· •. -ini_tiating (NIRC, Sec.:."34 (Fi(3})... , · . ·_.·.-_. .... : . ·... yvhi~h i~ usu~!ly.tl:leowner,. . . .. ... . ,; '· ·

;.. -~·ot~/;tt~-~re,"1s ~~; ~~;e;~~n~ ~n.ci'.t)1~·.BI_R ~~;:;._-~·~~-· .' .

~~eci~i ~.ul~s.pn ~.i~imi~g·_ D~pre.~i~tiori·Exp·e·~~e _·
.object ir;i writi.r:ig _tp.the rate:ang us·~tu] .tife ~ing 'used ·: ~s· de.duction on· Ta)!;able ·income:· ·. · . · . ·
. by the' l!;IX payer; "•the·sam~ sha!! _be. binding {NiRC, ,• . a:·,n'case the property is held l;iy one person.for life:-
0

Sec. 34 fF)(3)):.. ·. · ., . : · · · · ·. (beneficial owner) with· r-efr1a.inder· to another ·. ··'

· · · · PerS011 {naked· iifle} -.· .. dedtictiSn·· shall -~ be· ·. :.
· ·Meth~ds:_of Co~p~ti.:ig Deprec'iait!pr.i;.. ,,. __ ... - . ·computed as ifihe tenant was the absolute:own:er · ·
1). · Straight~line method; · · .. · · ·· .ohhe property·.and; as ·.su"cli, "the expense ·:snail · ,
.. ·2)--: · Declinin'g balanFe. tri°ett)_od ·: usf11g .. a ~ati,!' . r:i.ot . accrµe to· him _(NJRC, Sec. 34 (F)(1,): ·. . .
· ... · .. ·. · exce~ding twice the rate-wh.iqt"i wquld _have· been · · b. For property held in"'trusf - dedl.lCtion shall be· ,.
. ' used· had the ~nnuijl allowance oeen com'·puted . . . . apportioned between the income. beneficiaries
.. under' straight-line method; : . : ( . . . and the trustee;, in' accordance with th'e.·pertinent-
. · 3) _Sum·-of-th~-years c;!Jg1t method; ar\d .· · pr~visions of the ·ins\rument created ·or in .the .

. •/

. 2019 SAN'S.EDA LAW CENTRALIZED BAR OPERATION$ I_ 135

 ·INC.OME.TAX·
SAN BEDA.L'AW CE:f"TRALIZIW DAR OPERATIONS-< MEM.ORY.AID2019

absenceof such provisions: on thebasls of the Formula· fo·r-· Rate . cif Depletion. (Con·solidated .
trust income allowable to each (NIRC, ·sec. 34 · Mines, lnc., vs. Court.of Tex Appeals, G.R. Nos. L-.
(F)(w.· . . ·~1884.3-4, August 29, 1-9!4): .t

Rules .. 'on . Deductibility. of . Depreciation. ·at ... .Rate of ... Cost of ·Mine Property ."
: Vehicles .. ·. .. . . Depl~!ion =' · Estim~~ecf ?re·oeposit r '
. a:· Th:e -taxpayer. must substantiate-the purchase .
::with sufflclent evidence, which. contains t~e Qepl~tfon.·M~thod: Tile iot~i· of the accumulated
following, arnonq others: . . . . . • exploratlori and.c;l~v,elqprnentexpensesiS ~iviqed by·
. · i. : .Specific mctor.vehloleldentlflcatlon number, · thenumber of recoverableunits·to arrive at a.per.unit
· : chassis · number .. or .i other registrable . depl~tion cost (simila·rto unlts-of-production-method
identlfication numbers of lhe vehicle; · ofdepreclation]'(R.R. /vo/05-76, Secs. ·4 end 6).
· .. ii. .Total price ofthe specificvehicle-subject to . . . . . ..
depreclatlon..and ... · . . · . : · . . . . . · T~~·, Treatr~·1ent oLJnt~.~gi15le. E~ploratfon· and
iii. Direct ·conriection ·or relation 'of. the vehicle: · · peyelopinent Drilling Cos~s: (NIRC,'·sec, $4 HW ·
to . the . development; ... manaqement, ... ·. . . .. ' ~ .,·· . ' . . -
. operation. and/or conduct of. the. trade or . ·1ntatig'ible Costs .i.n Petreleum Operations. ·. · .
. ·. · . · ·. business or' profession of.~~ ~axpa¥er.(R.R. · .... Arty co~f incurred ·in petroleum operations .wfli9h in
· · · No. ·t:?~12, Sep. 3J; · '. · · · · . · · · ;:,.;.~ •.,.,...:2~tsel{_t1ai no _~alva~fevalue .arid whict:i. ls lncldental to _
. ... . . " . . . . ~ ,ru·
. ah,dy.~ce...ssary Jar the : drilling of ,·w~lls·. and·
b. Only one vehicle for lanct·tr~nsportJs'~llo~cffor .,~.~~ior.;~~w~!ls fo'rthe production. of petroleum
· 1he_ wie.~f an official or erhpl~J~(fn~:vti~,.,..o~-·=r2-rO::~AC19A'k"N-CASASOLJ:\> ·NJRC· Annota.ted, ·.
· wh1~h should not excee<:J P2_t~;.009 f3,., ·: No. ..., supra"'Eif~?.Q);~I\.'\. .. . . . .-
·' 12-12, Sec, 3) ;-and
.. ·
- .tf'
. ./l::t-:i
'.~-)
f 1:~ · ~
\.,...-~.:~~'-~
._v-,, · 11 ·_ "il'.l). ·.
:.;.('\
Tl'~tmtnt;1:}.\ ·· .
Note;_ The t~re~h~ld flmfappl\~f J:>ro pec.t1v~y i;~'· -~~.-.It. ·in1urr~ if~r.f~q,n·p~oducmg_we.Us and/or ·
. .
· . : .. . . . .
. -.
·

• · vebJcle~ purchased pri4qli'5pCh ~a(i,

n t: .· . :t.!Tl-!'-~~
· . · fror, .~tober .'17, 2012.,. It .d'2rs .. n~ •.,;.,,~P~Y __to .~~inef:.OutrJgb,_ve)(p,e!1.se~eduotible 1i:i the y~ar

";:4~, . fo~
31
.~lq.curr:ed(NJR.q~e.o.~\1 (<3)(1)).
t%.. ~1,..1nc'Lrre<:1. pro·.. ctng VJ.ells and/(?r mmes
..· .· . ·- ..

I
. No. 0?-13). . ~-! i,.
· · : :· :-· N .,.,JA .. cf if!fjl"r.ilintlthf-
~me ~o'nfi} tarea;. ·· - . · ·. : ,'
c. ·No.- depreciation .. sh~11\6~r w~_i\ ·~1;~.~!~·.;:;::J~~·-Ll. ~*.P!rfg ~f.!~ht. ded.~c.ti.1?1~:in.t~ei.year pa~d .
, hebcopters and/or a,n,~~ d la~~ "!•*" jjf\ · 1. .-h)lt'~u"~•~o~i · .
which excee~ · ~2.'. 41f!_f. ~,?©t>, ~~1\~_th' "*~£,~~;-"(~~jipita?~ed arij .amortized (NIRC; Sec. !14 .
_ taxpayer's. i:nam· Ima 9h},,~usme~f IS ·,wns.i;,.w · /.·. ~SV(.G)(t)J. [ . · . · ... · · . · ·
· operations or lease of tran.sp0Habo{1·eq ·. ~)~~./"_) X..-·: :/. /. · . · · - · . .
an~· !~e ·V~hi9les purcha~~ .are ·u~~ .@~J~f\.\.l:~t!??~~ compl)t1ng'taxable -ir1come from mi~1.ng
operations (R.R No. 12-12;~. 3)-7._ ~"'~ .. · ~op~at16"iirs-{~ t~xpayer may. at his .option, ..
. · · ·: - ·: · · :._ · '~ ·.f~"1-:r. ,,.....,;:;--.., - . ' d~~c;:t,;\:~xploratioo and: : development
Note: bepr.eqiation.. .tor . yacht~~be~.coy~ers,'.1\/( J\.~')(pe'{qifi.i(e~:a'?cu.n:iulat~d-.as cost or .adjustea .. ·
and/or · aircr-atts· and,· land_:-vehLcles~tiajl:.. + be V •~~l:J~ . for cost . (1epletion as Of .date or .
. · ..disa:11owed ir:i case .. of·fa.ilure to rrieet all ore:-=~::..,. "'": prb\,pectin"g,: .as·.· ~ell /'as . expJor;:iJio~. ·and ·•
· · requirern¢r')ts.: T~e · rna(nt~mince· e~pen~es .and, , -: . . · . : developl"flent.· expendittJr.es.· p~id · or .. inc~·rred
loss'.· ori ·saJe of the- non:c:lepreC'iable· vehicles_ ·. ·. ... during tl}e ··ta~able·,: year: _Provided;. Thci)tJhEt_
shall likewise be -disallowed (R.R. N(). 12-2,012, · ·amounf . ,. deductible.·.: .for . · ·explora(iorf ai'fd
Sec .. 3; RM.C-ivo: 2-2013). · . '.: . . .. , . . deveiop.m'ent:.expeti.d1tures: Shall .. not, ~xce~d
.. ·,.• . . .. . -~ ; · ... :--t . . . · ·: · · . . · ~i5o/o of the net'jncome frdm.:mflljng operaJiohs. ·· .
.~·'·Depletion.of Oil and Gas.Wells ·and'Mines .. · :.. computed·:.: without ··the'. be.rfefit· ·of · i3ny ta~,
.. ·. Dej)l~tion is the ·exb~ustion of .naturalr~sources_ .. incentives-· under.· existing, .law~: The actµ~!· - ··
· ·owi.ng' to.:pr~uction ~.-. sev.erance· {2 .CASASQL~; · .. ·explf?falio·n· .. ·and· ··dev.eloprr)ept expenditur~s
.· NJRq, Annptated (~01?)'. supra.~t 363);., · ·:. ··· ·. · .· min.i:Js ~wenty-!!_y~ -J?~.rcer-it .(2~o/~) of. the. net .
· ,. : ' · . · . · ·· · ···- . .. ·· · · .· :-- income from·.mmmg· shall be earned forward to.
· : : . Th~ciry ~rid Pur.pose .~f Depletion All9wan.ce:·.The. . · . the suci:;eeding years.until fulli c:ledu9ted .(NIRC;
· .. · allow;:in·ce .for: ~epl~tioh is·..based ~n the tt'!eo·ry that · . Sec. 34 (G)(2J). .- . ; . . ...
the ~xtraction· of mine~al~.gradually·. exh~usts the · · · · · . .
capital· .-investment iri · the li'.l!neraf· .depo~t.. : The · Th~ election. to. deduct .the. ·ex,plor~tic:>'n ·and
· purpo~e of tlie depleHoiY\ledu·cuoi:,. il? · to permit: !he., ·. devl;llopmenl. expe·nc!itur~l,> ·is·: irrevcicabJe.,a_nd·
owner of a.cap.italir:iter~.st in mineral in place to m_ak~. ·.. shall .. be bin_d1t)g·. fn s·uc.ce.eding taxable. ye1;1rs.
. a ·tax-free· recovery· of ·that d~pleting capitaJ asset . (NIRC, Sec. 34 (G)(2)).·; ·
.(Cohsq/idatedMin~s, ./nc.y, Court of Tax Appeal$,
GR. 'Nos. L-18~43-4, Augu§t29,: 1974). · · · ... ·
I
!
I
. I
i 136 .) 2019 SAN BEDA LAW CENTRALIZED.BAR OPERATIONS .
:~ • I • • • ' • • • •
 . . .·

INC.OME TAX··
SAN BEDA LAW.(ENTRALIZE~ BAR OPER/1 '(IONS ,- M£Mq[IY AID ~019

Exploration e:icpe~ditures ·.:.... means expenditures ". N~te;· lrrespe.ctive. of the accounting. method
. paid or
incurred for the; purpose of ascertaining thl;l used by the donor,· donation is recognized· as a
existence, location, extent Of quality of-any deposit· deduction only when It . was 'qClua/fy pale{ or
of ore or other rnlnerat, and·.paid or incurred· before made,.riot in the year. tne deed of donation was
the·beginr:'!ihg of the development siage of. the mlna . perfected.. The. deductibility. of: donatlon. is not ·
..or deposit (NIR_C, See. 3.4.(G)(2J:..· ·. ·· · .,... · govemed by the 'o:r<;llnary rules on deductibility of
the expense, Donation must be .BOTH perfected .
.Deve\oprnent exp:enditur~s - meah~ expenditures · . ..· -.-and. consummated .oetore it· cah be allov.ed as a
paid or.incurred durinqthe development stage of the .; deduction (Philippine Siock Exchange v. · CIR,
·. mine :or. other natural deposits·.. The· development · ·. · CTA Case t:Jo. 5995, Octobe/,1q,~002).
. stag's of a min_e or-other natural deposit shall.beqtn., . -· . . . '. .
at. the time When deposits .ofore .orother "minerals · K.inds· of.Contrfbutions ·
are shown to exist ii')· sufflclent-comrnerclat quantity ,a.. ·ardinary/Partla.lly··Pe~uc.tlble . . Coritrfb'utions· ..
,v ' ·, and.'quaiit{ and shall end upo~- commencement of '- those..which are subject ·t~·lir:nitation as to "the. .·
..f · . :. actualccrnmerclal'extraction (NIR'C~'Sec. :J4 (G)(2). : amount d_edu.ctibl~ from ·gross income. (NIRC,.:: . ·
\: ' · ': .. · '. ·. . . _... · · · . : ·- ·. .,• :... .' . · . ·:. : : · Sec. 34-'(H);R.R .. N?. .. ~:J~QB); ' . .
· ta:
f. Who:arfEritiUed Depl~tion,AJlowance ·· . : ..
_. Annual.depletion deductionsare allowed ontyto ": . R~cipienfis:,(GAbl).. . . .
• ·.mini.rig· e"nfities . which · owri' ."n·· economic. . . i: Th'e:§.qverhment.oftj,_ePhltippines or anyof
, • S • i1Jterest 'in mirier~(· ·deposits .. An .·economic'.jt:'; • .. ,' ·,ts•. -agencies ·Or • political. :gubdivisions
\ .. : .'. . _interest' is posses.se?:in. eve1 ca.se."in· wh!ch jl}~/~;r . .:-- ·e~cluS:ively'for public purposes; . · ,.
·~ ~· ·· .. : ~axpaye~ ha~. ·acq~ired :by. mvestmer:it in 6fN).¥...fuf)!'\. ·.. 11, '· Accre?it~d . . dofnE:is~c . co.rpora~ions . or
~ . . mterest ln}!'llneral;.ln pl~~e: and s~cures, ·. tilr~yi\,1jt.~ . ::. assoc1abons.. org~rnzed and : operated ..
· form·. of le9.al re.lationstiip, such as P~-~ not .11'9)t~~'::·1:,;t.i.-i-_~-~~~ ~~c!_t;i~J~.e!~for: (Recs~YER-CS}
tor ,op~tating .agreement and· service c~fr~r;r~;:!.!.L~ ..:,.~.-~~H~..;R_?hg1ouG.:. . ..
., -.. agreement; .. income from · . the e~ctme{rc;,n. &· I~ . · - ~2-r-:-Qjaritable; . .. .
~ii:,eral, to wt"!ich it must look· ton;~'fe\urnof Ql,:z~~· . :. . ·~) .~\i~,ntific; .
,. ca.pita!. A person vyhe> has.no cap-jf~Lavestm!V'lf. ~ -
in. the·· miner~I deP,os·it: dqes ,;.m6~ ~.t~fs · ap ·. hi .
tf..iul~
4)· & spo~s·development;
5) 1?g u~i·onal; .~. ·. · · .
·. ·-

·
...

~con~mic· inte.re~t · merelY...:~ca1Jse\tnY~~h & t:1.\ . ~if :Bgha?1litatiorr'<?f v~teran~~~ .. · · -

1.;u11lraclu~I ·rel~tmrr .be:'JJ;i,iss~s~~ ~: ;{11er~ · ~\ . ,; .~ ~il~_~a.,..(,.or · . ·.. · -·
ec?noll."!lc or pecuntary a~anfa§e:(;te·~jyed·:fl'.QJP . t[i.f ·. :.:~~lf~~e.1~)ilir-ttare. ,. . . · . .. .
(2. . CASA~.0L4;.j~fi1~l~· N7R...'q;. · ,t-•"- 111:, Nen..!g_c&ernmen~ _orQani_Z:at~ons (NGOs)
. . .. pr<?,duc~1on · ·
· .' .: ·1~not;~.ted,.suprna~364r--.·: :r.~., it1~...1 ,: . .r ~7_: ~--,. (NIRC, ~ec. 34 (H). F_(.R_: No.. 13~98) ...

. . : Note·:·. :I~ the.Gas.e- bi;a N.%,~e-r-:~~p:l41)~.f;;_,~;.. ~n~:.:::fa7.HW!tatio·ns p,f ~mount ~e~ucUble: · ..

· aU6~ance for depletion,,.of. oil·.a~~'~a.$· ~Ellf~o_r:--~ · .... · · . ~~orporate taxpay~r.· .:..... 5% :.of. taxal:)IE:
mines shall. be authorized only 1nl\r'e:,.pei}~,t'<:fo·.01I · · .· income befqre ·contnbutions.. , ·
. ·and -gas w~11s· or· mii:le.s-'1o~ated~~6.fC1 ·-the· .· .: ·· 2: ·-ln~ividua!,..•taipayer -. 10%: of· the
· ·. P!illipplnes (NIRC, Sec.. ·J4 .(G)(3)). :.. • .· .. ·: taxab!e ·_·income .'before pontributioos .
. ' - . :· . - . ·.. . · · ... . : : - · : (NIRC, Sec:.34 (H}{R.R. No.13~98). · ..
2 ... Oep!etiq'n Y: Depre~·iatlon : .. . . · . . . . ·. .:. . ..
. . .: . b. . Special/Fully Ded.actibl.e. co'ntributlon~ -, . ·,
.don'ati?,ns.which.::,~e·d(!~_uctib!e'.in full frpi:nthe ·
gross. income: . . . ' : . ·_ . .. . . ' '
),ss~tss~bJe~t.'to depletion Assets·. · ....subject :· ·. to
could rio·t be repl~ced. : _ · ~!3pre~ia(ion 'may :be ·. Recipient ·Is: (~FA) ., · . · .. ·· · . . _. .
·(~placed. . . .
_ i. The §overnment ~f.th_e Pt,ilippine.s or any-of
o.ePrEfci~ble~ssets. ·. . · , its· . agencies . ·.or . pollttcal · subdfvisi0r)s. ·
_ . ·,~~luding · ·. }~Jliqwned . : ·goyer'i:iinent
' . ' .•. '. . corporations .exclu$ively fo ·. fin·aT?ce,.: to
·. H.. Charit~ble.and Other.'Coritr,:buti6hs . . . ·. firovidi! ·tor, or f<?··.be ·used)n ur;,aerta,king_
·Requisites f_or D.~1:1ctibility: ·(SA.MAt · . . · :__ - pri_ority activities in: .(MEY-HECS)'
·. 1 :: It- must ·be gjv.en. to org~riiz~tions·. .§pecified by . . · ·.. 1) · !:!eaIth; : · ·
· ·law; · · . _ · .... :· ... :· .. · .2) · gducation; . . . ..
. 2. . The contr-ib~.tionor gift musf t?e Actually .paid; : - .. 3) ·: Y'.puth & Sports .D~y~l.opm.er:iti
3 ... It imist.be·Made within the taxabre·year;.and · . 4). !:!.u.man Settlen:,enJs;·. ··
· .4. .' = It must be evi~en~d by Adequate recelpf$ ·or · · :s) .Ec6r:\o'mic Development;
. . · ..re·co~ds ($ub-~taotia~ion RuJ,,).(NI.RC, Sec: ·34. · · 6) ~ultu~e; or ·
(H)>R.R.. No:1'3°98).. . ' . .

2019
. SAN .
. BEDA !AW CENTRALIZED
~. •' . BAA. OPERATIONS. · 137, :
 l·NC'.OM·E.TAX·-
• ,"sAN8/;0A UIW'CE/'ITRALJZEDM,R OPERATLONS - MEMORY ND :io19

-.
7) ·.§.cjenc~ (NIRC, see, 31. (HJ; R-.~·' ·. .orqanlzed ·(NIRC,. 'sec: 34 {H}; R.R.
·. Wo.13-~8): · No.13-98).

. ·. Th~ .above adtivitle~. must' conform Jo ·
the National- Priority 'Plan: according· to
NEDA in -corrsuttatton · with the
appropriate .. · ·99~ernrne1,1t · ·: agencies :....
. ·'. (Nlf:?G, 'Sec.. 34:(H); R.B..-No..13:.QB).
·. ·.· . : . , . i
· .. ·Any donation not in accordance .with
. . . saii:fprior~ty·pla'nshall be subjebt to ttie ·
. . 50/o · 'Or 10%·,_ 1imitation {NIRC, sec. 34 -.
. . . .· /H); R.R.:No:13-9.~J. · . .
. . Any ·doijation··notin compliance with the .
fqregoing requirements shall· be subject
to .th~ 5% or- 10% limltation (NIRC, Sec» · ·
"j4 (HJ; R.R. No. 13-98). . .
. .Note: · Wtiether' deductible. in full· or·
subject to tirnltatlon.' the recipient NGO
Q1US.t be, accredited. by· th.e Phi!fppine '.
.· . <;;'ouf)cil'for N¢0 Accreditatjon-(E.0. No..
7~0, April 1'1{ 200{J).

- . ji, '. .Eor~Jgn Institutions .: ;Or . : : . internl3ti9.nal. . . . ,, 'More.imp.orta_ntly,E,:.• No: 7?0·j:>r6yides o.

-organi-zations -pursuant » to' agreements; . _.that NGOs 'p'revioC!sly granted. qualified
.)reaties or' commitments .bf the Phflippine : donee-lnstltutlon status 'shall .remain to
governrrienf .and such institutions.: or in· . . . .· ··. 'be: so l'.infil the expiration 'stated in their
pursuance of special laws;··or1 • .. ~~~.:;,,...,;_:,,.• r • Certlflcates ofRegi_st,:qtion.(BIR_ '1ulin_g .
. iii, Ace::_tedite<l f':JG~s. (NIRC.:· Sec, __34JJ#i;.'R.R:y] -},;, :"(~_~~· No. DA-~2p~·Septembet 10, 200~;1 DE

·.:·
. ~?:
13-98(
· .
. : · · -· · <. .,_
. ,. ~
?!" ·~ \ . · .
J. \J..
P: ''.'!>-~4tON, NIR9 Annoteted (201°[)),:·supra_
.-~"""'""~ -:l f ·at~{!(>}... .. . · . . . : . · .
.Requisites_ (t;JIRC, s;z·c.-:-
~f/1)(2~?,-·. . .. . -~·V .~~: . .. ·: ·:: :·' _ ..... :. . · . . .
tNIPU;;AD)_ .. _·,- ·. : -~~/-~~cl":P~~~t!-iR~ons,\DeductlbJe. in· .Full under·.
'1) NGO. IS . "1 .. · ~'i)pr · .'6JOrncsnc ,t
'.\'o/ ~p~~·aH(al!YO ~ ·· · ·.'' , .·. ·
, ·· corpqration; -~ j .-~l, .
j/ ·. ~-: 1li~
i{& lriteg\ated\~~°r-!:>ft e Philippi_ne~-(P.D. No.:181,
- ·.2)' · No .. 1/ctr.l or i_ts n~t i_rino . e !nu1es to_ the.!"~~)._,Sec. ~); .. · "\\.( J) .· . . :. ·
:,, : · ·benefi.t_1c;it ·any};p~at.'. sfoc~~ol~er?f'lIDJ-'_,r.-'Dey.efopmer:f&~,g~e .Y,of'the philippiries (AD._
· .· individ(ml; ·. «~ · · ~. -~'7:I_Wfil_.i.:;:-'~o._205, S~cf12);~· -. ·.... :-, · : · ·
3-f, It i.s·ar~anlze~ ~·~ q~0pwrated·e~~Jusiv..ety.;umuJJJ.»''"B· A~u~~c~!!Yre@e · . Ii enl of th~ .~outh.eas~Asian
(~~~~!~§.'a~-
1

for tl)e folloiN_nl,·f:1111:pQse(~C-CHR~ .· Dev_ 19pment Cenfer·(S'EAFDEC)

0i-. '(~~
~-.
. .
. •.. $0) .

···.I?-
' . If'
a. Scientific; ,.., ~~""A-'\., .
gdu~tiqr,'al, , ....
a· ·
Y]~tp~~-
·. ·
Yt'a. ~r.fl_ . ~ .-)$ . 29 /=~:!~),'-. ' . . . . - ·. .· '
~t~,,.l},l~fi .I M eutn r.f.A No. 8492,. Sec: 25);
1· ·-<"?~tJ~rsity_;&:th!=l.Pffi!ippines.(R..ANo.'9500,.Sec.
. - :-:c. Cultural; .· , . . - . ~"·::lb))~n·d · ot¥ler · $tate"· Colleges and
· ·,a.... ·~~~ri.t~~fE!°;.. · ... ,·.:. '· · . ... Sc1E~~ tP~iv~1£i'.'!J.es;· -j' . -· ...... _ ·. ;_ .·. · · . :·.
e. : .M~alth~. - ·. ,-:- , :·-)' ~~L;-.t~~~l(.uriur.~ \<i ~-!31' r .of..
.Jt \he· Phlh~p1~~s:(P.O_No, -15,
f · . Research·.. · · -9/1 ·
'-,, ,<· ~--.,:.,,,,...,,Se~.,13• . .: . ' · ·.. · · .. •· : ·. ·. .· .
.' Q> .io'ci?tlw.~frqrt::;..~r .··. ~ Yl . t/i _pQh}~~j{'nal·. Rice .R~sea.r~h· ·n~titLite (P._P~Nd.·
Ii. .§ttaractef ·._buil.d1hg·:and yc5tJtf;J,~ ar:iq :·..l.'! It.,_ . · '1.P,20, A,:t. ·.5);·. . . ·:. . · · · . . :. · :
·. :'~potts.dev~_lop'ment; _: . --~~irf."'Nationat Sci~nc;eDev$!oprne11t Board''{now ~he
4).: Coptributiphs·_', : ·are. ': !J.ti.l_f:zed.· . ({6 . ·. . . DO.ST) : and. ·i\s · l;jgericies .. and t(?'. pt;tblic ·'or.
· --~c-complisf\.. oT;le ci( i~· ·purpo~~s•. :to· ·.,-·· . ·:· .r~cognized· nofl-profit,'. 71on~l:ltc:i~k. ·.epuca,tional·
· ·acquire·asse~1hdo·s~iasid~fo(-speGific. . .:.·instituiions,:(R.A Nd;-apB9; SecL-5);an~.··,:· : ·
·,,project) directly· t1ot· later th.an· the 15th~ '. · :ii$.· bohations'c:>f priies:and.awa(d!fto athletes (R.A. ' · ..
day of·the··3!" tnon\h (unless E!X,en~eqj
aft~r. the- close oH)'le.:taxable· -ye~r' i.n ·· ·
· ; ·No.j549;.·.S~q.. 1). _'-'
"
. ···-. ·. . .> . :. . . '•
. .. . . .:· whlCh c'ontrib'utiOiis 8re reCeiVed'; · ·. ~ .-·-R_e(loi_S(t~s:_·.(A~}· . . . l ._. ·... ·. . · ~
.. ·. · · ·5y ·Apbual ·:Adrriinisfrati:v.~\ ·expeDse · dpes :-. · · · · 1 )· Grant.ed to Athletes i!X · Jocal ,: and .
· · not· e~ceed ·thirty percent {30%) of its. . . · ··international . : tournaments ·, and ...
·· · . : tota·I expenses; and .. . . .: ·.,. f::ornpetitio.~s-held. in ..the Ptiifipplr.ies or
. · .. 6) · .Upon: Qissolutlori,-. it!r. asse_ts wqu,ld: be : .. ·. . · .. abroad·· arid··: · .. · '.. · ' . : . '
· ~ . . : ·. distri~u~ed~ to··.another .N.GO ·ar·gan'ized · . · · · ·· 2). ToJJi-o~riients ·antt COn'lpetitionS m~_st be
. ·, .. •· for' :simila·r.:p,urpos~· or·_pUfp(!SeS, o'r ·to .: .. •· · .§.anc.tioned· J;;y 'tt,eir:respective'n~tional
· . the ~tatefor public P':.'rJ29Se,'or.Would be· . sports. associattons (R.A- · No.. 7549;' ..
·. · . di.stribuled : by. a :court· to. another · · Sec. ·9. :. · · ·
Orgij~i.za)io_n'to be· 'used in:sllch nian.ner- ., ·
as ·-rn the judg'ment- of said ·court shall
:_ best accoiJ,pJi~h.the gerjeral purpqse tor . Note:. ·"Natipnal-' 'sports' 'P.,,ssoclatjonH
which tl'le: dissolve·d
.. organization
. ... . . .was
. · ·shal! mean th9~e dµly accredited -by, ~e ·

, 138 ·.1 201~ SAN BEDA LAW CEN!8ALIZED'l,3AR.OP!=RATIONS,

: .. .... '
 ,· ···~----..-~...-~--~--------~----------mim~~
. · t:N.-COJ~1E TAX- SAN BEDA LAW CENTRALIZEDBAR OP_EIIATIONS - MEMORYAID 2019
u· •'"
. eti\. 4 ·; HMM . W
· Ph_ilij:)pine · Olympics Committee (R.A. .2. lncury-ed in. connection vyi\h hi~ trade, p~si~ess,
No. 7549, S~c;. 2·(2)), ··. . :... .- . . or profession ({v/RC, Sec>34(li(1 )), .. . .· ·
•. • ~ t .

. ~x~_mple: 1he.- :-~l:!tional Chess -R~~earch - . oriqinal and planned Investigation

··:. Federation of ttie Philippines, · the
·. . : . . . ·P~ilippine · Canoe-Kayak .:: Federation,.
: . · and the· Philippine Votleyball Feder'atior.i . .
. · ,_.,. .. are 'some ~f _the accredited members of - .
· · .·. . the National _'Spqrts: Assoclaflon, Note:
. that · ·. the . Philippine. sa·sl<etoall
'. Assoclatlon (PBA) is not included,'
. · .· .. · . · ., . ~ .:' ·
Yaluatic:>h: . ..The _:amount .. _of any . charitable
,.. . contribution of property other. than money ·Sl:'lal'I. be
;. , · · based on the acqulsltloncost of.the·prop·e.rty (Nim:;;
undertaken · by the .. taxpayer with .the prospect .of
gaining new scientiflc or. -technlcal kno'.Yle.dge and
undersfandinq (2 ·.CASA$QL'A, NIRC Anno'tated,,
suprEf at 388)_: · ·· · · · ·
· ·
Devefopment . . ,. lt is the appllcatlon .ot research
·. ·a.
fiiidin9.s or .other knowledge io plan or: 'desiqrr fo~
-the pro·d·uction of· new .qr l?Ubstai:ltlaiiy. improved ..
..materials, devices, products, processes,' systems or
. servlces before _the start :of corrirnerclal production or
. us·~{2 .qA~ASOLA, NJ~c:Aniiqiatt;id, su'p'ra ~t. 388).

f;;,f ·. Se~. 34 (f/)(3)},. ;·, · · ' · ·; .. ·. .

·r. ..
~respe~t,ve.{
· f th. :·--~ :. . I.: ·: .. ·. . .
· ·
·.
·

_e acco~nJ n~- IT)ethodd duseti~l;>y_-th1e

. . Notes: . . .. · · .· . : ..
. ·· 1 ..: R&P expensesmaybe for:· .. , .
.
··.

a. · Acquisition or improvements of . property

. . o_nor,. on.<! ior:, is reco~nrze."f as a e ~c on on Y . · · 'subject to depreclatlon or depleflori .used in. ·
when ,t ".>'~S :actu.ally par~·.or madf:, no\ 1n :the _Y~.~~ .. ·. . research.and deve)opment;·c:ir · .. . . . · .•. ·
._the d~e~ o~donat,onwas perfec~ed: Th~. ded_u_ct1~1lf>'.Y./.·,· . b.· · Other research.and developmerit'costs.: ·
of don~t1~n Is. not governed bY, the .or~_mary r,-ili{.~ '?f,;.:;;g~: · · . . . . . · · .. · .· ·
_deducJ1b1hty.__ of the . expen~e. Donation _mu.~,~.!-~~Hs\W'; 2. · Treatment ·ot R&D Exµens~ . ·

1 b(?tf! per:fe:ct_edar:id conSJ.!~m.ated·.~.ef«;>f!1t

·be allowed. _as a deductior:i · (f'h1/Jppme~:#~oi.:ft.
,1n-, .
;~.'t-vTf.le-:-t~_xpayErf;j.a.s the-pption lp:, · ·
~·ff{.:.:.U.!tiX.::i?.:"G)Qfir-qJ:Je
·
expense as deduction.in the year
1• .
.y. ·, Exchange·_.v. Commissio,:ie_r, qf .li'!ter!1£f{:ft.evenµfl';;('h · :. . . .tfuarr.~~;
or . . . · . . · . . ·
:f ... · CTA C~~:fl·N~: ~99.5/~-ctob~~1_?· _2?j~~~(_
"§.: . : ~ubstarJJia~Joo Requn:e.me~t· .
1~~ 1
/ t:
';,.ef~"· {~,:yJ1.. · t\~
· b. ·. ~;;C.h~~:.c~;r:i~!~g~~~~;i~·~:t~1:e·r~:~
s~e ~ve) sixty: (60) months(Qegf~ning-:,vith··
:-- Do.nor~ · cla1ml~g donat,~t'!S .,J!~i:'1-_· pont~put©fis . ·to· _1;;\._ tl,:!e mqnlhJh-wh1~h.the taxP._~yerfll'$t realizes
r· . acar_e~.ite,dri9n_~stock, n~n-J?~p.(t!·.9orp_o_,!!,QnfNq9:a~ ..~,;j · ·,;,~es..et~••.Jrq1b,s.uchexpe·nditures (N!RC, a~
,·, ·. _-~educ::trorys ":u~.t ~ubr:n_it C7(t:~a~~Qf{J-.Q'n~1ori~. )HJ· , ~\,amtJ1Z~(f/g[~}1fPR1'.INLaw, Sec: 34(!)): : :
issued l::>y such .entities mcl1f~tm~lti'~~e1nvfl;i~. · -~f.<1 :'!l:~,._,-••r. . . . ·· · . . · ...
folJ?wing:.: · .. · :·. . , : ·: ·.. . :·. -.~;¥:2:P'<i:.°\. f . t; 1f.. , Not~: : The:. cnethod so" . .elected · ana .· perioq,
_ 1. Actual:r~ce~pt by the·sa1d ent,tr~s ff( th~~c;!pnat1on·. lifr,:7-~elected:~Y .tl)e taxpayer .shall be adh_er!;l,d:to in
· .. Of .contr.1but1on.and. the date_ of _rec.~.fP;J;tar-1~ ; ·. ..;,1.w?i~-F~~~m~~-!l:~gta~abl.e i~com~ tor the. taxabl~ year
2. ~rr:rount of th~ ch~ptablf:·donation Q!{f<?ntr1,9~16n:':""~--~or"""~h1chthe elections 1s · ma_de: c;1~d. for an_
if m cast);-. 1t:·property; · r~al -or l\:2.~:_'f~l'J;:){~the · -~ubsequent taxabte.. .years, . unless .. ·a~ diffe.r¢nt
:.,·.:. acq1,1isition cost 9f th~ s·~id _property,(~~@~ 13- nieth_od is auth~rized amf approved by th¢;.~1R·
.~ :·. . ·-98, ~~-c.·a·(a)). · · · .: ..... . :··. . ' . ·.. ("".JR~. Sec: 34(1)(2).:The e_l_ectio,:ishalF1;1ot ~ly. ,.
.. to' ant expehditwe .. paid _or.i_nc:urrep during any·. :

ooo: ,.
t'.. :··· • . . .• .• .

.' .. Note; ·If the·do~ati9n':is·more .than J?4, 000; taxflbl? year. prior .to the "taxabfe yea~ for.which;·
." a;notite:. of donation' ml.isl be-- submitted ·to.-the"- ·.the taxpaye·r makes··th.e· ele.ction.'(NiRC, $ec. 34 ·
~-. ··Re~enue: District ..O.fficer:·. where. 'tiis- place of ·_-. . . (/)).. . . . . . ' : . . . .' . .
.. buslness'is located_-within 30 d~ys ~fter rec~pt_of ·. .., . ... ·.. . . : . · · . . .- . · · . ·..
#_. ·' the Certificate of-Dor-1at101.1 (R.R. 'No. 1 :J:98, Sec. _J.: Deduct1b_lli1_Y·of R&D., e.xper;id1tur-~s shall not·
f ... · .. .13j::: · :··.. ·_.· · .. · •.. . ·'. .. · :(·. 'applyto:· ·.' . ·,., ·.· _,.
· · .__ : · · · .. a. Any: · !:lXpenditure . for tt,ie ac.q1.1lsition<or,
1.: Re~~~-r~h·arid- ~~ve'iopment·{R~Dl- · · , · · . . .· . . · irnproy.e.rnent'9fland· or tor th·e improv~rnent
Goncep~: All costs incideri~.~o-.the.de:veloprrieni'o_fan · of prcip,eri:y,. t6 :be used- in ·cor'iMction · with
expedine_ntal or pilot.· mooel, · <t '..p)an·t; process',:. a _re$earch -. ard . de.yefopmerit subject- to
produGt, ·a· for,ir)ula or .invention, .or si.milar property, . depreciation and depletion; and·: · · ·.
and t_he·improvement.qf ~lready'.i'lXlstil'lg property Of 'b,. Any -expenditure -paiq :or incurred for. the
th_~. type :-l'Tle.ntionet;l-'(2-B ." DQM_QNDON, TaxatiorJ . purpo~e .-of: ascertainj_n_g. the . existence, .
(2018),,:.p. · 92 citing .. U.S.: /RS Reg.,, Sec, 1.174- location,. extent or qciaUty of any.deposit of
.,. . '2(a)f1)). : · ... · · . ·. . . . · ·. . · · • .. ore :·or other- mih'eral. including oil or' gas :
· · ·· (NIRC, Sec. 3.4 (1)(3)). ; .. : · .· ··. \ . ~ .. · .
Gener:al Rule: Exp~nSEIS for R&D c,;1n be" treated ·as 4. Pre-operating. Expens~s -. ·expenses. paid or ·
. ordinary·and Aecessa'ry°expenses prqvide'd that:... . . incurred in .. Connection with :_.creating. Or
· 1.. tt'is i_ncurr'ec;l dur.trig the ta~able year;-'and· · · · i~~estigatlng. the _creation or ...acqulsitlor;i·of an_.

2019 SAN BEDA LAW C!!NTRALIZED BAR OPERATIONS I : 139

 ·' .
. ·INCOM.E·TAX
.SA'/'I B~.ifLAW CTNTRALl~ED BAA OPERATIONS - ~EMORY AID 2a.,9.

• M MftNHFIIM¥¥+e Ii

active trade or -·business. entered into ·by . the . Requlsltes of a Reasonable Retirement Benefit
taxpayer.· These are expens~s paid. or Incurred .. Plan: '(WriP-C21N2F,oT) .. .
b~fore, and in .an:ticip!:ltion of the business_in ·a·n . a. Written program -.it-must be a deflnltewrlttan
aativity for· pr.a.flt·or the prod!,.lctionof income: :. · program setting forth all provisions essential for.
a.1 May be ·treated· a:s def¢rred .expense~ ·and · qualiflcaticn; · : , . . .- · .
deducted' from gross in.co:rnefor' not mo~e·- b. .fennan'ency . - it . must be' permanent and
than i{ixty.(60 ). il)ontt,s. · · · .. · . continuing program; ·
. b. Amortization ·periQCI . commences witli fhe c. ~overage.:-- . . . .
.month in which the b.usin.ass begins:. i: Percentage. Basis=- 'it must -cover at least
. ~: . A ·corporation ·js . co.nsiderecl to :. begln -seventy 'p~rcent. (70%) 'of alt offlclals and
b'usines·~ when it_,comrnences· l_he ~ctlvitie$ employees. ll the · plan provides eligibility
· _for whiqh,. it. was· organized -an~· reckoned . requirements and at least .seyenty percent
. Jro.mtlie.tln,e-the .C_er:tific;ateofreglstration 6'r :
0 '{70%) of all· officials and _em pi6yees -'meet ..0

. license to t:lb'bu"siness is lssued ... _. . ' • them,' at least eighty percent. (80%) of those •
• •" I••• • • • • • .., '

. el.igible.m.ustbe. covered. . ' . '·. . .; .

lrivestiqatory-, expenses ~hq-.s~rt7up costs, · . · · ii.. Classificatlon basis>- If the-empleyerdoes.
· · · · intereston loan -obtafned topurchase. landand · . . .. . ·not .wlsh to co'(er gr.eater,po~ion of his
·ottier incidental costs. and project development' ·. '. employees, 'he may setup a.plan under a /
· · ~~o-s(~. .of re~I -esta~e. q~yeloper~ •. can no~~~ ...~ · _. .cl~ssifi_catiol') se!-up and lin:iit the .coveraqe ·
· consldsred as ... part .. of the · Pf!::,;~P.Efratmg7u -A,. employees . IA .a certain classjflcatlon .
· . expenses, . , · · . -"~~, ·. (->~ ·
1 ":"'>:;,..g_(
! f . { '\/, t!p~v.l~ed.~h~t it is not discriminatory; . , . ·
;. · .. ·. . .· ... _:_ fl'~~~ r. ,~= . .
,.,Jt.~..~~ritrib~i3'~:....the ernplcyer.vor officlals and
J. · Pension Trust Contributionb 'V ,:;__. . ·. · el'!l,P.l6yee§_l"9,~J>oth,shall contribute to thefund; .
. Requisites-for Deductibilit:r~JP.~~~~~o(~;..~i"'~·::,...,Jine.~~ibt!_i\y ~}!y.ersion-.th~ corpus 9J. Income
· 1: ,Employer__must have e·st~~'1~? ffn!H~niqr JA. ~7' of tht tr\~.f4ti:J.!.Vmust at .n·o time be used for, or
retire!11er:itp!an for -the ~~ymefltf?f. rc~onalfile ·.t, ~- {f\.d~,ver'tedtc,~:.~PY.~u\>~s~otherthan the exclusive
. pens1_qn to its ei:nptoyee,; "":: ·,r_ ·.: _ --- _. . --~~neu~of_tn:~t~1(j\otf1c1~lsa~d employees;. . .
r N.~:>n_~1sc(1ml~afQr,y~-:-
· 2 .. Pension· p\ao is Bea~cfnabtef and. , . fOanalTy
. · ·. sou.n? (R._R. t-,Jd .. 2, .S,e~r.f.{8),J._-· .·4- -~ 1 there- must be no·
-~~isci.i in~ti~1.fnfa~1rQ_f'~ffic;:i~ls·anderrrployee:s·
. 3. I~ 1s_ ·funde.d .by ·.th~ .EmRloye.r·- '~:l°mpl'"l\~LWl~~h~are off1'fte~4~~r.eholde(s, su~erv1sors or
•. : . C:Ol'Jltit:>utes.cast));. . . ~ ~"t.~~ .. r- .,, ' : . . . . ,':::)._...~ hlglj ~f.'Persatecll .-. . .. : .
J
4. Amo1,,1ntconttibute.dmu\tp~<f,~gef\l)~~~{ecft~ i,#l~d'?1Je!tu_r£·1i:;g,tit's_,-it mustprpvide that upoh
' the Qontr6,I ofthe ·~mpl~~IP, ~- .. ~~ .· ~~ 1.,1z~;~~ynir1/on o'1,1he. plan, .the. rights of each
5 .. Payme.nt . ha_s ... not. b~e'~ . ~llo~ed. _· b·~~u>~~'.:k.. ·.~&g!!f.~)~I or
1 _mployej-.fre~on-fc,,rfeitable;· .,. . _.
·· · dedu_ct1on;, and_ : . · . ~ .. , . :'\ : . . ·-~ ,~/~~i'fe1tur.fi-·the p!an- _m1_.1st'expresslyprov1d_e that
. 6,. : T.h.e· ainou_n~is ·appqrtfqn_ed l(re·quai)~rts '&'r~TuEi:i::=-'.:"rr(\~fqiielW~ ·fpr' ~~f reason mu~t not be· applied ·1o , .
- period ·af· 1 O co~secutive years begjfl~itj~~~g9r~s~..:-1He .l}~nefits Qf any ·employ~_e; ·and . .
· trye. year' in· Whic;r. the tr.ansf~!~P9fnf9l'"t~~~s1-r)~f6nd must be 1;1dministered qy a trust
· · . ~:1 t (1
: .
·?~ ~EO~, N.l~C ~nn.otat~~~--~iAJ_::~~-:-0_1-9-8,sec. 2):.-: ·
.. . .' :
. -- .. · _
. : . . .,,...,...~.,,~--II-tote:.· :Befo,:-e'' ·the -employer ·can · deduct its .
-·~ . _ .

Nature:.AppJi~b.le only. _to the ~mployer pn acco_unt:_ ~ contributions to the ·lrt1st,. it ml.is( s.e~ure.fi,rst a .- .
· :of ils :contributiori" to ·a J31R:qualified reas~nable· . · . 'certification from the ·s1R to the effect that'the: ·
. p'ri\i;aie\~ensiori .pl~n fofthe:benefit of;i~s ~m_ploy_e~s·. . . : plari is:qualified (RR No .. 01~68;..Sea: 6). .
It ·if purely···busine~s !n--,ch'ar-actEfr (DIMAAMPAq,-, ·. ·. .· :·, .. · .' · · ·; ·. ·.:: · ·. ··.·. . ..
Basic Approach ·to lncope 'Taxatior:f (2018): p, ·119): ·. · . · C~mtrib'utions to ·non-qualified. retirement. pl~n · are
. . .. . . ·. . :. . . '. . .. . ·... . . . ' deductible~·only' In the'' year paid to employees .and
DeQiJctible .P;lyment~ ·to Pension·· Trust·. · . . . .. .nol'at th.e.time .the contributions··.were·-mad~ (N/RC,.
·1, · .. Erriploye'r!~ cu_rteht 'li'1;1bi!ity' or' present . ·:._se.'c. 60'(B);R:M.c. No."39·2014, P?JF•. 3}. · _- . · ·.
. . : . se.rvice. cost·...:.-:ain·ount of' contr.ibation fo the . - . . . .. . . . . .
.... fru.st_durin'g the.taxable y,ear~and _.. . . : . . .· Tre~tme-~t of lncoml:I from P~nsioh Pl~ri ..
. . ·. ·2. .:E~ployer.'.s liil:bility· for f.ia~t:
serv'ic~s (past ·: , .. 1'): Nor. .. taxabl~: . to· the emP.loye~ '(BIR" Ruling, \ ·.
· · .·. · servi·.ce· c.ost. ~ecu.lfres- ·.h,tmp _ _. ·sl!m .to the. . . · Novembe.r ~Q•. 1956}; · ·.. - , ·. . · ... : ·.. ·
. pension fu),d) .. -· o_ne le nth.· (111. O) 'of. the ;2) In ca~e any-portion._of the fi.inds is reverted back ·.
. . reaspn_a_ble. ·am·ount_. paip by the empl(?yer to · ~q the :employee; ·said: fµn.d Jorr:ns part of the
' · . cover pen~ion liability-appli.cc;iJ?IEttq prior ten.{10) incorrie of !,he employee.during th:e:. taxable, year
. years (DIMAAA,JF'A_O, ·supra aH 50).' · : ·. · ·of reversio~ '(BIR;f?u/ing,· A'pril .3,· 1959}, -·' · ·

140'1 2ql9?AN BEOA.LA'iyCENTRAUZED BAF.fOPERATIQNS ·

 INCOME.TAX
SAN 8f:DA LAW-CENT'W.IZED BAR OPERAT/01>/S - MEMORY AID 2019
OPTIONAL STANDARD DEDUCTION (OSD)
Concept: A f;xed percentage deduction without
regard to any actual expenditure, in lieu of the
itemized deductions. It is merely a privilege thatmay
be enjoyed by certain taxpayers (N!RC, se« 34 (L)
as amended by TRAIN Law). · ·
Who can avail OSD ·
As a· rule, all taxpayers who are subject to tax on
taxable net income can claim deductions except the
following:
a. Non-.resident alien engaged in trade or business
b. Taxpayers mandated · to use itemized
deductions
I·. Exempt GOCCs and non-stock, non-profit
corporation·with no taxable income
ii. Corporations 'and individuals with income
· subject to special/preferential-tax rates
iii. Corporations .and individuals 'with income
subject to regular corporate Income tax an~,~15i) .
special/preferentialtax . . . (<J\/)i
iv. Exempt indivlduals under the NIRC f~nai/:}?
special laws with no other taxable incom~;~~-'.:j/~
v. Non-resident alien not engaged In tract~
business (R.R: No: 02~2014, Sec. 5):~l'
..-</'·- .
Hence, the following may avail of the<.QBD: (ICG) /i,.,,!l
1) [ndlvtduals (including estate andff~P,..f), excE;¢fH·:~
individuals earning pure comp('!.@ati,&.f:),.-incoine f·~
and non-_rnsident aliens; ~r.fi~..,_~~-. 't'"'',,. ,. . .,,..
2) ~orporations, except 1~.9,n-res1d_£DJ forergit ;~
corporations (R.R. No. 15k4008,,-Sey.rf'f); ahd,..,,_
· 3) .§eneral Profcsslonal P?rtne.r,-shJ_l?
1~:,~,P~l',
.. s~
(GP~) Fi.I
provided that: ·.
a) GPP and partners compnsrnm_,sucn~
partnership may avail OSD omy_g.n~~ 1-)~
b) Either by the GPP or the part6-ers .&-;'°i<;.-#''="""~,.,;..:_;c~,:-28rJB).
comprising the partnership (NfRC.! S,'&f34
(L) as amended by TRAIN.Law)~:!?~
Note: Unless the taxpayer signifies in his return
his intention lei elect OSD, he is considered as
having availed of the itemized·deductions. Such
election, when made i:iy 'lhe qualified taxpayer, .
is irrevocable '.'or the year in whith made;
.however, he can change to itsmized deductions
· in succeeding years (R.R; No. 16-2008, Sec. 7;
R.R 08-2018, S1~c. 8).
Tax Rate:
1. Individuals, except non-resident alien:
a. Under accrual basis - Not ex-::eeding forty
percent (40%) based on gross sales; or
b. Under cash basis - Not exceeding forty
percent (40%) based on gross receipts
(R.R. No. 16-08, Sec. 3).
Note: The cost of sales (individual sell&r of
goods), or the-cost.of service (individual seller of
services). is not allowed to be deducted for
· purposes of determining the basis of the OSD
'(R.R. No. 16-08, Sec. 3). ·
2. Corporation: Not exceeding forty percent
(40%) based on gross fncome of DC and RFC
(R.R. No .. 16-08, Sec. 4; NIRC, Sec. 34 (L) as
amended by TRAIN Law). ·
Some importantrules:
a. Unless the ·taxpayer signifies in his income
tax return his intention to elect OSO, he is
consideredas 'ravlnq availed otthe itemized
deoucuons. The taxpayer is not allowed to
use a hybrid method· of claiming its/his'
deduction for one taxable year (R:R. No. 16-
08, Sec. 7, iii~ amended by R. R No. 2-2010, .
Sec. 3). · · · · ·· , ··
. b. Such· election to avail of the OSD, when
made: by the qualified taxpayer, · is·
lrrevocable'forthe year in wtiich the returnls
made. l:'lowever,tie canchanqe to Itemized
deductions .iii the succeeding· years (RR.'
No. 16,08, Sec. Tas amended by R. R No.
·· .. t_.;..,.v. 2-20{Q, Sec:3).. · · ·
actual expenses is not required, but
. H1~::E:.:_~~:.f:i~6f:i3.f ·1h~ ti:ixP.ayer should keep records pertaining
to ttiilgtosssales/receiptsor income (NIRC,
. Secf 111\(l-) as amended by TRAIN Law).
d . Thelt fox'ce1Jt when the Commissioner
f) . · ot'1erv;,is~\~rmit~. corporationswho avail of
1.ne 0SD ~-should · still submit financial
11;~ -~afe~~ms-)W°htlr
it files its annuai income
t'ti~r.e.Ki"rii~ndkeep such records pertaining
f' · ~ 'to its gros!'; income. (NIRC, Sec. 34 (L) as
§i.. <!l',,:;:--;-,; amended by TRAIN Law; R.R. No. 02-1_0,
)f;..:1i:'(,_f\ :,:S.~c~ 3 amendirg Sec 7 of R.R. No. 16-.
•- • ·-· •, -~:--:.-~·~ •• -•."l.•"·r""-~ ·_ ,":' -
1. OSDof GPP and·lndividual Partners .
The GPP is.not a. taxable entity for income tax
purposes since it ls only actinq as a "pass-
throug~" entity where its income is ultimately
taxed to the partners. comprising it
Section 26 of the Tax. Code.. as amended,
likewise · provides that- "For purposes of
computing the distributive share of the partners,
the net income of the GPP shall bP- computed in
the same manner as a corporation" As such, a
GPf> may claim either" . .
a. the itemized deductions allowed under
Section 34 of the Code or in lieu thereof it
can opt to avail of
b. the OSD allowed to corporations in claiming
the deductions in an amount not ex.ceedlng
forty percent (40 %) of its gross income.
2019 SAN eEDA LAW CENTRALIZED AAR OPERATIONS I 141
 •
rNco·ME·TAX.
SiNBEDA tAW CENTflA(.IZED.B(IR OPERATIONS·_: MEMORY.~ID20!9.

Note: EvefY GPP shallflle, ln'dupllcate, areturn . . o/Allowa~·ce. of.

Summary osn
. ..
.of its income, except Income exempt under Sec ...
· 32' (B) of.NIRC the items of gross .1n7ome and of
. deductions. allowed by this Title, and the names,
· .Taxpayer ldentiflcation ···.Numbers .' (Ti.N). lndiyi_dual
' . addresses and shares ~f each of the pai:tners RC .. IAJ1~wed
,.. TRAIN Law,. Sec. 55). .
• ' •' r'
(NIRC,
' . as ..amended by
NRC_ ..... . Aliowed
Tl').e share in the net-'in~orpEfof.tl')e,partn~rship,, :
Al.lowed
actually. or ·_constru~tlyely · received; · shall · ~S.. · ..
.. reportecfas taxableincome of-each partner. · ·-·. ~o.!A11owea
". ,The:p.artn~rs c~mprlsi~g the G~~.~~n :119 lo~g-~r '.. ·· . N~-~ETB. NbtAii'owecf- ·.·
. I

''I· •.• claim furth~r. .deauctiorr from. their di.s.tributive. -:·corpQration· . (' .
. . share irr:the-r:iet tncome ofthe GPP and 'a.rfnot · . . · · ·· · · ·
i;!T!owed-toavail of-the 8%)ncome.taxta't.e op.lion·· : .oc ,· · · · .. ·J.l,.llowed .
. . since their dlstrtbutive.-ehare from the. GPP is. . ·· · ·. .
, , · alreadynet.of cost and 'expenses .. · . . ,. RFC '. :Allow~d .. : .. ,.
· · - . _.: : . . · · . '. · · . . · . · . < · . · . .~===-~liFC. ·. . . .· · . Not Allowed · _: . . · · ·
.... If .th~ partner' also derives: other iricotR~trom--rru·· . ~- -·~·- ~ . - . ·. . . · : . ·
. trade, -buslness, .or practice of ·projefs'io'ID,aparf !J.NJ..FfC;~G~4·(L) as arrJ~nde~.by .TRfl:{N L.aw). _
. · -and dlsflnct.frorn the share ih .t.otf~c1~fri):9~~~ ;[.~J ,>-_~,, · . ,. · . · · · · · .· ·r . ·
·. the GPP; the deduction that c,ffi'l.becl~~ed'lrorri· -', · . e..."1.:-~~ · .,~"!~· .N~F~ cannot · ava1~ .. of .. any .
. the other income ·WOU'l9 ew1ef-if~_;tfi.tf:itE1Jli)li!,E!'d"'";~~~lllt~t .![-0.~_ftf~S~ !ncom.e · ~!1)97 t.h?lr .g_r?SS ·
. deductions or- OSD.(R.R.·N:£08-ldfe.fserLm.~ .· -~"' ·(:'CO[ll~·f{Orl\,~~!-l~~$)r1t':!_inthe Ph_rhpp1n~s is.sublect
·. : ' . . . < , . .-._- {. il.yf ·1· '..J-t\, :111\. ~!~ady t~ a.{19.tii:;~ ofi·2~% (N~RC; a:s amend~d by.
Partners . .
1
Freqi,,ency. of Av ailment o.f the O,~D byiGPP ·ai').ct.
cpmprisin·g·suc [1....-:;,._.Jt .. ·
f ~,·11
ThEl··GP.P·:-~nd,. t!ie 'pa. rrers~f.omprisig'l:~~
- .
. . . .
f~f:,IN, ·:3,~c:- ·2~!.l~d_\~p Yo .(Nl!'?C, <:s amen<;J_~.d _by ·
.
.~m1.S6J-
..
.i!i°2:.?· ... ·
c._-?Brf:3)(.-1)}, rpspe~tlv,ely:
·~ \_.,:.,.,,( ,,
.i.
.
:'A··. - .. ··. · .. : ....
· ·. . .
·
.Partners,hip, may avail ..of he.fl.SQ ··9Nl:, . ONG .•~7.,.;;:;(l::!"~1~_...:~E_I?U~JJ~t- . . ·· ·.· :···: . · ···
eit.h!=lr by ttie .GPP ;Or. the ~ifrt'i:t~Ps_ q~l~in·g· the~P.e.c1.~IJij~1t.ct~1 ns. arr usu~lly. .all~wep _on.ly fo!.
p_aqriership.: Provi~_eo. fin~lzy.,.TJi~i~e)Cc~~-t'.)vlieifffie~ ,cf-artre~~fC1.~1n~~~1ir _en.ter~.nses. and n~t to.
Corr:im'iss,pner otherwise pe't~ils;-ttt~·sa!QJ1~~d9/ti.t- J?~~:?.9'j:@t\roayq, .allo-.:,:,a_for all but_are.no!?fOV1d~d
sh~ll .keep: su~h records pe~ai~ing t~+~i11_s~~)' &.-sa~'P~,YJ!~Ei.fl· N)~t b~t. ~'CJ.n~er.. spec1at l~w~. !hese.
or gr.ass re.cetpts,~or: t~e .sa,g.·~~rpr~Ul~lts·~1IV,~~,;y1n'(:f-trd~(~ut;ite not ·h.r1tedto, th~· follo_wm~: ... : '. .
. · ·::, .. su_~h,. re~ords· perta111mg ·.to. h)\ gr'!ss.-"."~~o~ ~~9 e~i~J..: dedµ.9{101).s c\llowed to · insurance , .
defined m·:Sec. :32 .of the _Nl8C'~u.rn1g_:tfle.::.t~ e! :' · . 9.9mpi_l\lr ~)!JIRC; as amencJed.l?y TRAIN i:aw,.
ye·ar, as nray · f:>e r!;lqt,11red_: by~1t)_e(~s) al'fi;l~,..--~Sfc:\3?': ~ · · ·. . . · . ·.. . .. . ~. . ·.
regulations: · pr(?mulgated· .. bY. t~e . --:Se,.creta.lj·,..of "f-1 I{ ~~P...~1:;! ~e,duct\91J.S· for .prod~c:;Jivity t>Qnus and ,
· Finance; · ,uporr, . · recommendation· ""'of.,. · the: 1Vi;L-':~:b.,iar:rpower· tralnlng under' the Productivity ·
Commlssiciner. (NJRC: .s~c. '3¥ {L):as ~men.~.&}:""·---_,. ...'"";""?"'f11centives'Ac(of.jQ90. (R:.A No.. 6971, $e.c;. 7);. .
-,:R~IN Law; .R:R. No~ 2~2010,.Sec .. 3)... · 3.· .~e~\Jc;lions. ·.f~r. trairii11g:e:>(penses bf _qu~lified ·
· ·· : · ·- · ... · ·
a's.:roitows:
0 . , . jewel!Y._enterpr~es·(8.:,A t:,Jo..850?f Sey- .3((1)}:; ·
· ·, The. ~les iodicatea:~'b.o~e:i~ iummaf(il3d . 4. . Dedacti6ns, 'under. the Ad0pt0a-School 'Act· of
· · .. :. · .·: · ·. ·:. · ·...... ·: · · · ·.·. ·,· ··: :. ./ .f990.(R,XP[o:B?i5,:.Sec.:5);an9· .. ···; ·· ·: · ·
· 9: .D.eq.Uf?l)o,nsunqer. t~e Exp,13.rided SeniorGitizens
. : ·.. A.qt of_-2,r;nq.(~:A .t:J<?· .9994,
.. 6 .. :Ta?.< -Incentives Given· fo Pnvate·.Entitles ·which
,1~c. 1 O); :an~~-·· . ·
... :·' E)'npfo/ Disabled Persons (R.~. No:. 727_7,:'Si3c
' 8 (A)) . .' : · . . ' . ' .

. 1 .... Speclaf dedu~ti;,~s· · allowecl .to . l~s.~~imce

Itemized deducttons
.r . .
. ·. ltem_ized .Q._ect\Jctio~~..
ONLY_··.· ...... ·· . ::··. . . . co.mpao1e~ .. : : . . ' .. :. ·,. . . . . . .. . .
A. · Insurance, Companies·.- whether domestic or.
. . . forei~ri,· ·.doing .bus.iness in th~ ,f>hiffpplnes, .are
OpHorial·st~ridar~:f . ··Neither item1zed nor a!lo'A'.ed,-to ·d·educt, in: ad.ditio.11.. to the .itemized·
. deduction,' ..... optional sta.ndard . . . ·de.du.ction~.ltie foilowin.9: ··. . . :· - . . . . . ..
' deductiGliiS ·,. · .. i: -Net additions,.if any, req~ired by law to be
(R.R. No. 02~2010,.Bec. 2) . .. . niade' ~thin·.the year t~ r~s.erve fun~s;.and

'
'. ··.
'· 142· .. I 2019 $A~ .BEDA LAW CENTRALIZED i;!AR 01='.ERATION_~· .
 lN'COMETAX
5.<fN E/EDA ~W ~ENTRALIZED'~:6'R-OPE~TIQN~ - MEMQR~ AID ~019· .

ii. . $urns_ other than dividends paid .within the to · a progl"pm. prepared by the. labor- '
year on: policy and annuity contracts manaqerrrent ': committee for the .
(NIRC, -as emended py tkA1N:Law,.Se.c. development .. of" ... skills identified . as
3_7.(A)). . . . . necessary by the ·appropriate government
aqencles (R.A No. 697"1, Se_c. 7): ··.· ·
B: Mutual Insurance .Companles ·(MICs) - · in :_
case · of mutual -fire.- and-. mutuat 'employer's .. , ·3:. · oedu~tiohs tor rra1nr"9 -expenses of qµ~Hfied
liability and mutual workmen's cornperisatlon . . jewelry enterprises .... · . . ..
and mutual _cas.u_aliy· insurance · companies ·. A quallfled · jewelry. enterprise · .in the je'welry
Je<juiring-m'ilmbers tomake premium deposits. . · industry is granted ao additional deduction from ·
to provide· for tosses and expenses, said- . . ·taxable-in.come o_f"fifty perc~nt°(50%) of-expenses
companies shall. not return as· ·inco)ile ·aryy . .. . . incurred in training schemes. approvediby 'the-
portion of the.prermum deposits· returned -to •. . · . appropriate ageriqy and which shall be deductible
·. theirpo,llcyh6'ld~rs,.but sl")al.t return as taxable . · during'.·the Iinancialiyear .. the expenses ·,were ··,
:·_1r;ico111~ .all income. received b~ them 'tram· all incurred (R.A No.8502, Sec'. 3(d)) ..
· · other, spur.ces •·plus · such . portion of: .. the · · .... · · · · · ·
. prernlurn deposits . as . are. retained' by. the .. "4. D~,ductlo.ns under. th.~ Adopt-a-School Act of ..
. 'companies for.'. purposes other 'thah the 19~0.. ' . ... . , • · . ··.
. · payment of Josses .. and · expenses, · and, · 'The expenses incurre~ by the .adopting entity for. ·
. reinsurance reserves "(NIRC,.J1S amended.-~.<)· . , ·the:"Adopt-Ar.Schao/"Program"-snall ·be _allowed
· TRAIN u,w, Sec. 37 (B)). ·. · . .. · , · · }'l• r;{~. . · . ~n. ~~~ition-c!.1 dedv~tion- from the ··gross \nc~r;ne
. · · · . : · : ,· · . . .·· tf-.-!ft/..i.Hf). : 'equ1v.:1lent · .to fifty percent (50%) of· s_~ch
.; . ~ C.. Mutual Marine· :lhJ,u.rance - COl}'!Pjl,nle;f,d~·~~\l· expe·ns_es (R.A No,' $525, Sec. 5) . :
tJ} (M_ll,'IIC) :.. MMI.Cs s~all ihc!i.Jc!e ,-1r;i th_eir. r~;ufp.t-~f>1.;lc.;<P:~· :.. ;~ . ·:· . · . · .· . . ··
iw·
ll',-.
.... of gross mcome thc·gross pref!'IUITlS.e<;>~~ct~c;ltJ/i~r·. (Sl(t:.Q-'=_~~H9·~-~ .· under the . E',~:panded · Senior
.'.3nd received by th~m-less: : ·-.,,·r(ffJr'_ . ,-';; ~· .-. · Cltlzen~··.AFJ-of-.~.010: . •. ·. ·· · , .

I
(t
\
1.
-.·.
. .
.:. .

.
1. Amounts repaid to . pohoy.'>tiolder.s o'r1:p('

11.
• acCOL!nt of _preh'!iu'ms _.pr~v~~1,:1sfpaid Jf'>'1·
Interest _paid .. · t1~,~-~ho;e;./.~affioun~ ~;,A ··: · f19_94,j.
between tJ:ia ascef{jjlr;}f!'lent ~P1PaY.r,ni,u:ir ·. ,,1··.... : --~N,;. •.,i,.•}.4 _j)w
· · it{~1- ·: . ·
1 ·.· ·.: A ~eni~f.c)ti~nr~fers to any resident cit_iz_en of
.: . t~e.m;.aod· .· .· ·. :: :._,,d!:.>.·J.r<~· · . ·.'. ·. ·: the. Phtfrpp~e\a.t leas~ 60. yea.rs old (R.A._ f\!o .
tc.hi:Jt.,; : . . . . · ...... · . · . .
. · . ·. · ..

,;,.
~· - .. thereof. (IV/RC; 8c$.~mEfiffddff'J¥ i~IN
.... :: Law, Sec.. _37(C)). ,~- -~'l.i-~.f>··--~~
_- · .,. '. :" · ·. · ~V:: ··f~\:> ·.f . ·
D. ·Ass·essm~nt lnsura(lce ~Comp,mes . : .:.. ..
· · wh?ther doi:nestic orforeign;.m~)l9:e:<e1?et·f~o'J1....-:"~;,!:;:#'-'f,~i~1r~9.~,s
· their w~s~ income the· actual dfJ>..9s1t_of.:.~gtns~~~-.eit1:ze.ns,subJect- tq. t~e _follov.:mg conditions:
""'.it.ti· the officers ..Of. the-. G:;over,dtuentfpfithe .
.·~ Philippines· p!-Jrs~ant.10·· 1aw,. as"~itigns·:tq:
· guara_ntee or· re~e.rve· . fands.: (fYIRG.;.:_ .. as
·. ·amende,d_byTRAiN Law, ~ec. ·37 (D)): :· · .
. . . ii. ; Gross selling· price an,d sale·s cliscmunt
2. '.Sp·eclaJ d~d'uc~i-ons for. pr!)ductivity bonus . ·. ·
·.a.rad: · .. _manpower· · trafning . : under t~e .··
Producti"i,'jty lnc.entives A~t of 19~0
. . . \, . . ·' ·~.... · .·· . . .
A , special deduction' . from ·.. gross- 'income
··equiv.al~i:,t. tP ·fifty -per.cent (50%) of the totat:
amount of bonusesfg(ants over an~ abbVe;the . ·
···allowable ·'ordioary.·an(f necessary "bl!Siiie.SS..
deductions \jndeF· NIRC, as amended, shall be
.. granted'.to;: -: . ; ·.. · . . .' . : . ... . ,• .
L a. business ·enter.p"rise. which· ~dopts: a·
productivity· ii")centives 'program given to
employee.s;''d1JIY and mutli~lly agreec(\,JP.On..
by· p~rties ·.. fo tlie .labor-rnanag~·ment
committee; and . . . .. . .
ii: .a business ,enterprls~. :which gr~nts for
manpower training .. ahd ·sp.ecial .. &tudies
given to ran'J<"-and~file· employees ·_J)CJrsuan't
. · . . . ··
ft~~ _ . 1. ~SlP!S,lf.t<:ffi.zm~s·Discount. · , . . ·
-~?.~ · Alf"'estahlisl:iments_providin~ ~he.-prescrib,ed
tf;O. . . d!_s~ounts -le> S~nior ~itize,:is· may cl.aim· ti)~
fl.$-; _~~ scimE:_.a;, a tax d~ducti.on based on t~e· cost o_f
•. soJc! ·?r . ~ervices. ren~ered to. fenior
.. · i. . Ol")IY porti~~-pf gros& sales excl.usively
. .' . .. · · .used,_. cons.ume_d. or:' erijoye~ _by· tl}e .
· ·. -)ehie>r citizen.·sfialL be· eligible fof the
· .. deaudible ~ales·discm.ints;.; ·.· ·.
. must- -be .sepc;tratety· indic.ated · in. the··
:, · ·. · official r.eceipfor sates Invoice 'issued by · ·
. ·· . tpe ·establist:im'ei:it for ~he sale of'goods :_ .
. . · .. or :;;e'rvic"es""to the·~enior citizen; : . ' -: ·,
... iii.· Only the. "(i) . a'i;:tual' amount 'of , the ., .
:· · - . _ .. discou~fgrant!=)d or.a (it) sale:,. ciiSC(?l,lnt ·
· .··.not less··than,twenty_ percent (:20.%).-:
· -:"' Wl:'J\ch~yer-iS higJ,e'r,:.based°o'n:the:gross' .
' .. · .··. se)ling priqe; can be.deducted fr.om the . ·
.· . gr<;>ss 1ncome; ·.. . . . ·. . .
iv: -The ··seller . must ·record·. its· sales·
... : .· .. lnclusive'of the_rjiscoun.t granted;.·,. . . .
· : .. v.. The disc(?unt can.c;mly.be allowed' asia
. . deduction· ~rorr:i gr9ss iricoi:ne for the
'. same year . that .. the· .. tliscount :.was .
. granted; ··. . . . . . . .
, vi. ..Tl:ie ._.. business .establishment.. giving
sales discounts. to . qu'al~ed senior

·2019 SAN.SEDA.LAW CENT.R~LIZEDBAR 0PERATIONS 0 .143. ·

.........
 .IN'CO.M·E TAX
. ' : SINBEOA 1.AWCEN!JW.IZED8,AR DPERA_TIONS • MEMORY AID 2019 ·
•I

· citlzens is requlred to keep a -separate
and accurate" record of -sales, whi6h
shall include the name ·.of' the .Senior
·Citiz~n. OSCA 10., ~;i'ro~s sales/ receipts,
sates discount granted; . dates of
. -transactlons and· inv'oice 'numbers. for .'
every sale transaction to Senlor.Oltizen;
. , vii. ·on1y" ,·. selected .' '. estaotlshrnents
· . . . mentioned in· RR. No.· 07~201'0 .ti.e.,
·· ·. ·.. · those ·. · . supplying · iireqicine, - giving ·.
. : profes.sion_al;,dent~!or medical sen/ices,
etc.), may. claim . the satd discount as
·... · .. : deducnontand' . . . . ·.
·.. iliii: The seller must .not- 'clatm the O~D.
···:··: dunng·the" taxable year . (R.R ... No:_:oz~
<· -~0-10jmplenyentingR.A, Nb .: 9g94i. : ·
· percent . (~5%) of .. the totaf 'amcunt' paid as
salaries. and .wages to disabled persons (R.A. No.
7277, Sec. B· (A)): ·• ." .· .
. 'N·ote:: Pre~luri{ Payments on :Health and/or
. ·Ho.spit~llzatlon .tnsur~nce (Sec.· 34 (M). of· the
NlRC)·of an.individual taxpayer.was repeale(l·under
. Sec. 1.1 of R.A. /No.. 1·09(;>3 (TRAIN: t,.aw). Als.o; · ·
.. Allowance of P.e~son~I. Exemption for. individual
·raxpiiyer .urider-$ec, 3.5 of the NJRC wa.s repealed
. by.Sec: 12 of R.A·.·}.Jo.. 109E)3. Hence, they can no
· · ·1qngerbe _cpnsidered as deductibie expenses.
I .· ·. .-·
·>-. ·;j~{o_~~D··~PUS!i.~t.E.
. ·. · ·
~:E~s ... ·. ·.r
·1

:
. ·. Note·::With.the eff~~tivity of RA No. 925.7" on . . .· . . .
·. · .. ·-21 M_arcti·-2004;: there, is _riow, a 1:1ew,Je_~~~~~D-~dllctjbl~-lteins Jh.Computi9:1g Net lncorne .
· treatment !qr· . senior .. ettlzeris' ,.,.EHsc.ount:-ru·.fRlijfl~"tY.Vl • . · .' . .. .:. . . .
. grant~d. by all covered ·esta~l~!J1t!_ntf~:.liis _) 1:\!t:P°~~l"fi.~::!ng, o(farnll~ expens!:s; _.- , :· . . .
dlscount .should . be. cons(c(er~~.ra~,.,..~f,QO~'i)'t:..,J>01.d out . for: -.new bu1ld1ngs or for
deductible expen~$·· troyfl.'~!'J~~in'C'o~·e. _ .· · per~M'en!;JtQ}.~ovements;.6~betterment made to
and no Ionqer as tax ~cfa~,.ftrovl$d ..,1T'k~~1~~~s.e1he- v~l\J~. of. any· .property or. estate
. • R:A.. No;_:1 ~32. Ta~: ~r~w~s d"~fi~d. aSi U.: '1('. . ~\J?.(_capital1~p.~1'1-~1t~~~~);.· . ··: · :.,. · . . · .
peso-for-peso reductign.fron;lltax¢.~yer's i§x ~(~. 3Z~mou)t eXP.~ricfed~n- Bestonng property or.m
:

:tl'Vt\. 0':'~9 g(?o&.i}~eJ~ttaLJstiontn?reof fo~ which an

: Ua~ility. Wis·a.dJr~-ct;~~~~~tfqn fr~~m _tl)e ta~
~1
.'payable: to ·.the_._go'a°'ll!J'Oif: _On. ffie:om,e:-· 1~a1f5>w~ceha~. ~J.~-~ade (_maJ?r repa!r~); ..
· •. :: ha.nd.,_.a .tax -~ed_uc.tJ?{l''l&tdn\ya _& btra~ol}~ ·~.l ~4::~rem~lilm~ .. p~d.. oq ~~Y . hfe · m~_uraa~e ·policy
from -gross lrJCOtn"f' r.e.sltlting t9 a · ro~ml ~:.coveqng·the .l~~~arJY off1.cer or employee., or of
.··taxabl.e i11come.rct,$rli~.!i~nef·¥. ·fhteina7-~ ,..... a~ ..P. .~.9f·fiwancia1!i i~ter.est\')d- !n any trade·or
. Revenue v: Centraf!J..1.fzff';/flr.uqW'ot ·,e~t,ol,.
'A·_. %~7J;I/ . ·
i·,r,~- u~i · .&$;carr,i~~i:rljy tht;i taxpayer, indivfdu~l or .
·.. · G.R. No. 159610,.-~ufi!e-t1T,'~o~BJ("*-~
. . . . . . . _ :.. . : · . .· . :. \." - . : :.,§;i~ ./ds-~ fe, . /h~n '\~we ·t_axpay~r. . is , ~irectly or· .
ty ~oen_eficj.ir:y.~nder such policy (NIRC, .
.. <."_
2'
~~:;ree~::!:~!;:n~~~~teen~~O i:~~»toi~~~ -t)~:~~~(
· .tfP;;_e~6
. ·-·,. ·. citizens ·~ir~ entitled·to a.dcttt~nal djld't:lc.~oo-a~sal. .,. o~lJft>,Pe ·. ·betw~en related. parties; :
bati ~~~t~ a~~: lds~·~s· from ·:
.
. ·.. ·. fi~e_e~·.P~r.cen~·.(15'.'fo) _of_-th_e~qia~p~~·"a's......,,.,._-=- . ..,-o~~~~ro s~les_ or ~xchan~e. of prope"rty. ·
·. ·salaries and wages ·to $ernor c~l~,(s~je:ct~~ I[/~ '(,,N)ff?-,;;~t!G .. 3,6..(B)).. · · : · . : ·· · ·
·. to th_e ge·rferal ~eq·uisites.Jor.expens-E1's>aa_c:IJtle' 1VJJf)N"~eductible.interest; · , . .. · ." . . .. : ,- ·
:.· ·following addillo·n~l ·ctmditipns: ·• ··. · ·. · -~~~o·n.:ctedi,Jctible·taxes; · · . ..
. :·. 1. ·-Employment ~hall have-to continue.'for a·· 9; Noi;i--<leductible.losses; and .·.· ·· · · . ·· ·
. · period of-at-least six (6). moiJths;.and ·, ~0.-Losses fr'~m· Wash :sale~-:of ~to~k. or securities ..
. :- .·, 2... Annual taxable· income· of "tlje ·senior (NIRC, Sec. :38).• · · ·· .' ·.· ....
citizeci do.es not exceed·the pqvert~ level . . ·. . . .
:. ·· , . .". ··as.may pe dete"rmined~by the NEDA thn.i. · 1. ·Pei'~onal,_Lhtin_g c:,... Fam"ily Exp~nses - these .
. ·: · "the National :. ·statistica'(.. Coord"ina"uon . : :·· -~re personal_expe(IS0S and ni;>t related to conduoL
·:·. :i3.oar~:(NS.CB"): ,Th~ :seni,or' citizen. must oHr?i;le or_qusiness (Nl~O.·sec. 36' (A)(1)). '..
· · ·submit a . swon:1 · .·certification . tt,at· • his · · · ·· · · · · · ·· · · · · ·
: . anniJal taxable,..income.does:ri:ot·exc.e'ed .·.·':Re~.;~n:·-··thes~ i.t~~s_.-~fe :nt)_t ·.de:du~tibl~ from .
. ·· ·. · · the ·pove·r1y· 1eve1 (R.R.: "No:.·o~iJ6,. se·c: : gross ir.rc;ome·-beca~s.e·th.ey did.not h~lp-·earn.the
· . . 9), . , . . . · .. ·· , . . · ···.-. ·. .. . ··. · 'irico_tn~ ·, TrieY: . i;ire' .: ron7business . 'e;iq::i"ense
. . . . . . , ··: ~ ·yoJMAAMP.AO; s11pra .at 152). ·.
6. · T.ax lnce-htlves G·iven to Private Entitles wliich . · . . . · . ' . , . . . .. · . · · : . ·
·employ·Dlsa'bled Per.ions. :.. · ... , .. • ... ·: '. '.2 .. C~pital Expenditures.··. · : : · . .
· .Private entities that. eniploy .· disabled· Rersons ." . · . An:iount · pai_d· out. for· . new 'buildings or ·for-..
' · ~ho meet the requfred.. s~Jlls or _q·ualifi_ca\io.rl$, · p~r:i'naoent·[mprovements, br:: b;etterment made-~o·
. either as regul,ar e_mpror.ee, appren~ic~·or lean:ier,. .. incre~se tfje yalue .9f-.any pr9perty ·or_ estate·. ltis
· shalt be ·entitled .to an additional dedl!ctiol'), from · expenditures · for .replacements; · alterations,
.. 'their .gross. . ineome,.
. ' . fo twenty-five.
'eqiiivaierit . lmprovements,.or.additions
., . . . . . which prolo.ng the life

144. I 2019 SAN SEDA LAW CENTRAtl~ED·BAR OPERATIONS· ·

 ;L 1-

st<N
INCOME TAX
Ii/EDA LAW cENTRAL/ZED·BAn OPERArioNs -: MEMonv A10·20,9.

.. .
of the property (Albambra Cigar. and Cigarette 5. Losses from Sal.es or Exchanges of Property
. Mfg. Co. v. Commissioner of Internal Revenue; bet.weM·.Related Taxpayers (NIRG, $~c. 36. ·
... G.R.= No .. L-23226, "November 28, 1967).These (B)); . . .
are. added . to the.. cost· of. the property a'~d. tt):e I .

perlodlc . depreciatlon -ls the amount that 'is· .Rea~~n: :to prevent avoidance on· income tax by
considered as deductible .expense (NIRC, Sec .. · means of a simulated sale. or exchange. (1 DE
: 36 (A)(2)); . . · . . .· . : . .. . · . LEON, NIRC. Annotated (20·15),. supra at, 508}:
: The. law presumes that the · transactions are
Capital expenditures are not 'deductible because 'devoid· ot free bargain between -the-seller and
they do not'help. ~arn income when it-is incurred. · · buyer, · It is lrnrnaterial .. whether: the sale . or
However, the i:1r6PQrtion of -capttal expenditures exchanqeIs ~on~-fide.9r not (La[<eside-Jrrjgation.
. Which~O!Jldhelp.earn income for future periods .c«, lnc.vs: Commissioner of fntetnal Revenue,
'are allowed .as deductions for depreciation or .as · .128 F..2d 418 (5'h Cir: 1-942), .as ·cifed··'Jn -, 6
. amortization (2 DOMONDON,: Taxatio(l,'.supra.at .. DIMAAMPAO,.supra at 154). . . .. . .
. 52~-530). . .. .·.
. ·' Note: the. pr~vision· ~etween .related taxpayers
Example ... of Non·De.duc.tib!e ' . Caplta! · . · also applies to the foll9wing items of deductf~ns:
. . Expendit~res::- . . . . . -a. lnte_rests'(NIRC, 'as a'rrJende<J PY TRAIN Lew;
'f ., · · a. Amount ·'Paii;I out .tor new· builqings or· for . · Sec.' .~4(!;3)(2)(b) in retstionto Sec .. ·36(8));
· ~.- pe,r'm?ne.nt lmprovements•. or ... betterme~,t:.,,..('J}. · · 'and .· .. . . . . . · .
_ 'made.to. increase the. value pf any pr.ppert~,or;~\ . b. Losses (NIRC, as amended by Tf?AIN Law,
.. estate' (N!RC; Sec: 36 .(A)(2)); and ·' b?'t>-·',)ti ~ ·. 36(8)); and · .
b; · Amount .expended in .rest~ring property ~pj~ 1~'. ';;,~j c. . Bad Debts (NIR<;;, as 'emerided by TRAIN,
. making good the exhaustion thereof for ~~if!'t\,jl'~"°'.-,.:.,_ Law,,~ec.· 34(E) in relation to Sec . .'~?(BJ). ,
.: ail allowance has been'made.·(NIRC, S~c. $ n''J~1..~ilt.~·~-fr?>' .' . · · . · .
. • (A)(3!)· ..... ' - ' ,·' -~· .. ;,di:P'_.· . i',: H'. _':rhe t8iloWJ,e9ate related_ta>_<pa~ers: . . .
• • I • •' : • •• {,,·/A.. 4.f<'{,q. ·.. I. . Mei:n~.er\ of the sarne family· (brothers and
·. ·exl:lmP.le of D~d!Jctible .c.~pital ~p~il,di_t.Llre,.\)~<"'· f~- · sf~tE!Js-Ji~~ther.by th!3 ~hole or half blood,
. a. _lntangi_b)e· ~rrning· a_nd d~\'.~~r:fl~.~'6:fils to · f:l . . · · sp~S~j ari_cesfors·(md:lineal descend;mts); ·
.... i:>'3~~b!e.\J.m,o'J~eratiol'!s("'//~G, _Sec:_q.ot~J(2) ~ ..{;_;\ ii. ·Stpckh~lde~ and a cqrp0~a.tion-, wben· the
')µ_,~ · • . . h:i~ ·. · - ~C!~M~~,!:.~&'.s!s·mor.e ~ha_n 50°/o i~ value of
·, · · · ·: re[ationJ~ Sec. 34J.G)p))_6fa,n,d
. b.· Expe.n~1tures·cons1~er~~fas':e'api1a~8~tl~~! .
· · ·
i~~: ,· · .
dep.r_13c1ab_le·. assets__ 1nQ~{r.:,\i:'~i1Jting;~y ~;;_. .:: .ex·c_eptmn1eas~of d1strl_bution m hq~1da,t1on;
~:ffp~ip,.q~.~t!,«s ·.~utl?ta'!.dm~ c_ap1.taJ. stock·,
.
· taxable year: for the eXP.c!,Ofil~l'l ~~ :sch9ol ·~1 . 111,.. Two corporations niO(e than 50%·1n value of ..
· .·facilitfes,· When this option:\_;,,\ e~~t~~~ 1:tf the ~~:';;:r:.f?J outstancllng·.capifal stoc~. 0f ~ae:h of-whichis ·
.. Private .ed~catioilal_institliU?A (N_!!~J)... ~e_c4 31,_/.t~;:.i;:t~'~i::?;~~I-Jfld·:'di~e?IIY , or_ ilidi:ecl!Y, by or for··the .
·· (~)(2)). . · . ·. : · .· ·· · .. y1Y: . · /:ftif1··~1·iJl!f~:~a.":':sa'm'i:!md1v1d~al. 1.f .. either one o! · su.c~
· · .· ·. · · : . . · · ·., ·~li)..: 1/.'v _ · . . corporations, V.:itb respect_.tq the taxable year
.3'.. Arno1.mt··~xp~nded m restoring prq~,,t!y· or m. . · ..... : .. of the corporabon pr~cedmg th~ dat~. of the
· .,. makin_g·good-the ex~a_ystion thereof for.. whic_h an. - ·. -sale . or exchange w~s. a persci_ryal· holding
altowa'nce.: has· been · i'na<;le ... (NIRC;: .S~c. · 36. - . ·. compa_ny:: or 'a. ·torejgn , person;:il' · holding
: · · (A)(-3){ . . · · ... · : :. · · • _. · '·' · : ·. · · · . .·· · .. . . .. . company.;.. . .. . · · · . · .: .
· · '· · · · · · · · .. · • · · .. ·. · iv. - .Granto_r-and fiduciary in a:tru~t; . ·. ·
'4-: p~~mi~·~; :p~-,~· on: any· iife ins\.fr~nc~· pcili~y· · · .·. v. 'Flduciary· of a ttus.t and.'fiducii;'iry. in'.another
. covering the life of any officer or"ernpl_oyee;',or.~f . ' .. -: ·:. . :trost, lf..the sa~e person is a . grantor ·with .
. . i;lny, person fin.ancially·inter~Sted in_.any_ trade Oi:_ ·, re.speGt to each trust; and. . . · ..
. . bu~iness carried Ori.by the Ja:xpayer, individual qr. . ., · .vi. : _Fidl.ic_iary·of a ·trust' .and beneficfa.ry o.f ·su.<':h :'.
. corporate, : when · _the·. taxpayer : is. 'directly ·o'r trust (f:IIRG, Sec .. 36 (BJ). . ; · .. · ·
. · 'indirectly .a·..b°en'!:)ficiary uni;!er ~.ucti· pollcy.' (N(R(;, . ' .
-~ Se.c. 3_6 ('A)(4)). · ·- .. · ..· . .· . · Note: R~latives . by affinity ani · collafera)..
\ . - , .. . . . relatives, otherll'lan brothers.'and sisters are ..
f . A.person is said·ta be "financially.interested'.' in .. · . :.not related partie's. Thus', ·i~terest.payrrients
~1··.
1·..
,.
"·
. the t.axpayer); b\JS.ines_!i, if he· {s. a Stqck.f:iolder · .
..·. ·thereofor. he.'is to receive as his'compensati.oh a
. ·. ·made.lo parents~in-law, .,brothe~~ or sisters-.·,
. .in-law, as .WP.II i:is to ·ail kinds. of cousins,

I..t'.
shar~ ~f t11e·prbfits of the busines~ .. : . . . .. ~ncles:. ~-nd aunts ·may. be ded1:1ctlble'' from.
.
. '· · .. g'ross income (~-B DOM<?_NDON;. T~xati9n,
·. ·· · · suprB.at824).

~-
~....
i::'

i(;·:
,./
' _ .:201s SAN SEDA LAW CENTRALiz1w BAR OPERATIONS 145
 ·.. J.

IN'COME_TAX
SAN BEDA LAW.CWTRALIZED BAR OPE~I:lONS - .MEMORY_AJD ;0,9

o,her- Non-Deductible Losses from the S~le 3.0-2016, March"14, 2Q16, emphasizing R:R:
or Exchange. of: Property · . · . . · . ·No. 07-2.011 ). ·· · .
· 1.)" Losses from sales or exchange of capital b. _Corp6rafions, whethe( domestic. or.· foreign,·
assets. shall be allowed as deductions only are .. prohibited from making .. political
.from capital gains ~ capital. losses 'could be. contributions under the Corporation Code.
deducted .:only from, capital · gains nqt frcim Should 'a · .corporation, violate. "this; their
.: ordinary gain~. Furthermore, if the taxpayer is contributions -: . no. matter if "they · are spent
an. in.diviqu.al;"a net capital .loss carry over -is. within the campaign. period or not --- will .be
· allowed .· to be: deducted only from. capital ·· subject to .donor's ·tax · (CORPORA-:rJQN ·
,gains. On the other hand; wnere there- is' a net . CODE,~Sec.·3.6 (9)) · , .: . . . . . · .
. -capltal gain'fro.m·. sale-of capital assets other . . · Note; Under the· Revised CorporationCode;
thanreal.property orshares qfsfock;_saidgai_n $ec. 35 (i); only. foreign. corporation are·
is-added to all. the .other lncome elements to ... _prohibfted"·Jo··-gjve donations to jn 'atd of any
'form part of.the gross ir1.9on'le from which the . . political party or. candidate 'of .for purposes of
.. allowable deductions coukf-be made (2-8". . partisan .. political activity. The Re\lised·
DOMQ/\JDON,Taxation, sµpra ·at 825); , . : Corporation .Code' is. not included . in the ..·.
2) -Losses from securities considered as· ·~apital. · . . , ~o.verage o_f 2019-Bar ·Examfriations; . . . ·
, · .asseta becominq worthless arenot al!Qw~d as c .. Every·pe~son giving -cootributiori,. whether in · ·
· ."' direc~·deduction against gross·income b_~,t.§!f.a~"~ cash .or in kin~ •. !o any. candidate,_ ·pC?litical ·
considered as losses from sale ·or·Jixcnange~LJ. "'-· · ..,.:""J).a._cty,. .or party-hst ·group.· or their duly
of capital assets on the· la~t:,!].,(Y..<?p~uch ' . .J.A.°'.f 1~t~Pr~d. reP.resenta_Uves, ·s~aff file_ with the
taxable year.(NIR![;, Sec: 34,j,l!~}:\".1~_;;...,~=-;=~4'.,ne~r~t 6.0~ELEC Field OffJ,ce .. a Report on
· · . · . (,i'/ ~~-~ ·J . -~?F.Jtr1b,ytioh~. in o,uplicate; wi_thin -thirty (30)
6. Non~deductible ·inter~st.,/(p~~~pfe,..-f6~:'°":" ........~9.aY~""@ll6wii1_~ 't~e. -day" of· the elec~ion
di$_cussion on Itemized_ Da,tltlc..(i?J~Pntfest)_; f.t;i) ')(' · ""l·7'. · .. (C[>Mfi.LW,..;,;.R~solution . No. /J991, Rule ·5,'
· · . . '- . . !! ;~lj_' · ,, · . · l! .a\11}.. ~- Sef, 1)\ ·( : \" . . ·1 · - .

·. ·7. N~n-de~uctible :.taxe{;,..,.Jf:~f/ia~iJ · H,ef~ to ~n¥

. d. ·:cohi!i,i~Jfqn\in cash. or i~ kind to any ..

:
d1scuss1on on lter.mzed_ D~,gJ:ICl~'fmS
.·
-T~r·
· . . . H ,. . . ,..,""if·,.· .
E1"S);_~""'-,_;_
'"'-t:~\._
· ·.,.;... · Cqijd1~ate\o{..;J1cl'1,y for ca~~a1gn p~rpc;,ses;
~yJ"/..dul~ reP?rtf~ ·toJlie Comm1ss10~ •. shall -'{.Of be
tax .
8. Non-deductible

9. Losses from wash

(NIR~. _Sec:
. t.-11". f)'t .' . .-~,
sale\,bt
38) (Please~!;._efer_
~tci{k:o?~~,ti'titie~i..
1~·· ·e.f~
to·s!i~s..r-#!/f!as_e.... . e(er _E: -~~-
discussion on Itemized b~katwnsrL~~~s); an_a:-~ .. A(G~fyf_,,E!iLE(J;_ Re_rilutid'! No. 99$-.1r RUie. 5,
(o?'i"
-..··~~Jre ·. ~.
fot_pis<?cls§i?iif!Jr·
..
. _s~j~_ct · :ta; F-it.iej·fay'ment · of dof)or's ·
,¥ )<.-..=-rfi' •. .
~~x-p~qld
C\:i~9- tnb~fbn·t~ c!.~d!~ate o: part~, also,~nown·
. ·: .
ti~ra~ce _:)rom . a.ny
.. . .

. Itemized Deductions-Loss.,- Los'sfip:-orf,/ffl-i!:$]'-.~~/~ ~- :e!!i<ess ..co,nb.uttons,- shalf .~.e subJect to

,Sa/es.,o(Stoc~s) . . ·· ·. · · ·_ . ,, ~CJ~ff\~ nc,9~~ tax (iOMELE~ Reso/~t,on_ No .. ~f?~1,
.:' · . ·· · . . 7 ~~ · ~ .....,;;JRule~ef):: 5J. . ,· .
10. Poli~lcal ·C_arnpalgn.£~~-enses~~ <.::_9()·;~~"."~,~.r,n~aj9ri expen<:li~ures, whe~her- paid by "to:.
. Ge~_eral Rule: These.are not d!3duet~~ tit~r a~ ~- ,!, ~,~~'l:i~]lclate~.. . parties,-·· "1t)eir. .- -aiithonzed
·business_ e~pens_e· 9r a~ ··.:co·ntributi.on°~,.,(~l!~...=repr~sei:itatlves 9r c_ontribut(?rS, are subject to
Montenegro, /nc: v. Comm;ssioner·of :1nternar--··--. : .. c;:red1table income tax t.o _be. withheld by the
·•. Revenue, CTACas.e:No .. 695;-.April 30, 1969J. ·· . ·· payor · from· ·in9ome, payments' ni°ade· .. to:
. . . .. - . '. . . .. . el.ectiori. col'.)tr.actors, suppliers, al"l~, . other.
'Excepti~n: 'Contrib.~tions . ..t~: . politic~I· . parties . service .providers-(COMELEC· Reso/ut;on'No:
: registered· with .. tHe COMELEC are deauctible .::.; _9991!-Rule.ASec. 8). ·. · ' · · ·
. . (MAMALATEO; "Review.er,
. : .
.supra.
a.t fo4)." . . , ·)
. . ..... .-
.: .. Notes.: .
.. ·. a o'rily 'contributton~
. . . .. CAPiTAL G;INS
spe.nt ai)d·.utlliz~d during: : '-R
· the. 'ca_mpaign ::periqd · are ~?<empt frorp · tax: . ULES
.. . . ON.
. . . ./ - .. . •. '

Any p<;>litical ·contributiorL or donation ·spenl · . i\N.D LossEs. ".

)?_afore dr.·aft~r the c;:_amp~i~n -~~ri.od set·tiy_ the ·.
,:. Commi.ssion .on Efections. c1re
s.u~i'?..~t tp both . . .. ' .
_-Gair:i.s. a_nd ·1oss from dealings .in" property shall·. :
{
donor's .t~x and ·_income.:tax .. Any·:µ11spent
. political. contributions form part' of-the tax~ble. ., lnclude. all. gains .or losses derived from the·
income anc;l are s.ubject to incilme tax. Income .disposJtiori of
propert•i (re~I.· persor.ial; or mixeq) fqr .
payments made ·by" political .-parti~s and . moneiy in oase of sale, "or: for property ·in case of .
. candidates· of Jocal:"ahd national elections are .. . ex'<,ha.nge, or from a conibinatfon of. both s~re and
'.subJect to _Sto
.creditabl~. withholding tax: (RMC ·. ex~ha~ge (6 D_IMAAMPAO,_supra at 178). . .

·'
146 2019 SAN_BEDALAWCEJ:-JTRALIZED BAR.OPERATIONS.
 lNtOM.E TAX··
. SAN BEDA LA,WCENTRALIZEDiJAR OPERATIONS.: ME/>lOflY'AJD 2019'

The rules. on ·capital gains ·and ,losses shall apply. · tax.in the case qf a corpora1ion"(NfRC, Secs. 22,
only if .the transaction on capital asset is· either a s'ale · 3..2.- arid 34 as amended by TRAIN L_aw). : ·
orexch,i3nr;ie, Th~re·is a sale qre>.<chari°ge of property_
wheri there is an effective .-,,md actual transfer of 2. Capifal Assets .
own~rs_hip ofth-e'pr9perty to another'as would divest AILO,ther properties held 'by the ta~p.ayer whether
. ti,e ':transfero~. of ·the ·i:,snefits -:accruing frorri the or ndl connected with his trade or business not .
ownership'.' of· the·. p'roperty, ·.-fo( a ·vali1a~le class!fied as· or~linary ass·et (6. DIMAAMPAO; ·.
consideration·. (MAMALA TE_O, ln'coine, · · ~upra· at at
supra 162)... . ... .
-302) .. ' : .. ·. .: . , . · ..
Exam°J:>.les: . -.
1. Ordinary Assets: (SOUR)· a. Accounts receivable;
a .. §tc;,ck in trade :of' :ttfe · taxpayer .or'' other b.. lnvestrnent ln sfocks:
· , properties ofa kind which ':.vou.ld properly be' c. · Goodwill., . . · ; . · . . . . ,
: includedin the ·ir.iv.eritbry of.the taxpayer-.if on ·~ . d. ·Real.Property not used h:1 trade or business:
hand etthe cfo~e.'Qf the... taxable year (fJ.g., e:' ,Persona.I~ Property 'not 'used "in.. trade. or
. . sl)pp!feson h_anct,-rj,er_cl)andise inventory); . . . . business. . . . . . . . .· .
b. .Property held by- the· taxpayer primarily for- · Yardstick . in . Det_ermining- whether · ~eat
sale to customers in _the.-Q~din'ary course· of -Pro'j:ierty is Capital or Or'tji.n.ary-Asset. · , .
bustness (e:g.,. s.ubdivis1oh. tots . by a. real · · »: .The yardstick for determining whetber.a property .
. · estate developer/ groceries by 'a retail-store); ~fif.1 · 'is capital asset or· ordinary 'asset rs· its '.'actual
c -, P.ersonal property _!!sed 'in trade or busin_~i;,s.v){ use" . In the determination Qf whethera piece pf
subject· to depreciation (e:g.,; delivery truok{(,,,>(\ property is ,a capital. a's;>et or ordinary asset, a
store end ottic« equip_o:,ent); and \:.f;&/1 F'1lr-~; . ca reful · examlnatlon- 'and weighing . of. · all
d. ,Beal property u~~d·in'tra_de ~r ~u~i~ess.(~-11:::.t,;;;t--:~"fi~~llmstl!'Ni:s·_reveal~d 'ln each .ca_s·~ .mu~t ·be
warohouso, factory,_ office bwldmg)j,ffelR'f;~r;p;<J.f!.·d'f)lf~&.'.fBlf;(;;,ru(mg-No. DA 212.-W, April 3, 2007).·
Sec.·.39 {A)(1)), . · . · · ~dV .. ; IJ. .......,,.,,,1.f'""'Jt-\' · . · ,. · · .
·_. . · . -· . . · ... '. . ·:(;;?·-: . _ .. !::·~·.
<:.1 Rel':yance ~fa\e.~enniningV)lheth_er_ an A~se1 _is.
Note: The· above-mentioned h~1~!.~/ixcll;!SLY.e' f.} Capltal.or .0r~il'i~ry . : . _ · . ·
(BJR-.Rulirig No. DA 212-Q7;ti,p~lpft.-Otf.7).
:. · - . · . . A;:::r- . ir·~ : ~ rJ. Tl"!e ·:relevJnq~ 1~f the. distinction lies .in tl:ie
,M~ applicabilify o~tihe1bllowil'.lg_proviSi(,?AS/li_mjtations of
W~~n Sha~es of ·sto·~~,0~e· T~~~td a~- ~n_. .. ~;(f ~he ~IR_91:,~J · ~ · . · · ·. .·
. · Orama~·~s.set~ or i'l~ C~1ta!:,-Ass~!f) .~
An equity investl'!lent 1s a c.9p1taJ~q9,.;~9rd1r-ia~~· -f~j ~:
t~, Ho?~t!i!~.1>;1~?.J9§e'r Sec: 39(8);.
·.u. Loss _btnitat~n-Rul~ !,Jnder Sec. _39(C)i and
..
~sset 9f the investor the ~1~¥.exc:i:~angej9f · ?( Iii. Net Gapital l,.oss Carry,Over .(NQLCO) . Rule
which re~tl~ts in.~ith:er a_capitaJii'g~i[l o.ricap!ta! r:~·'i~~fdet_sec, 39·(0). , ·. · ... · . _. .
. Joss. Shares, of stock hke th~· ot~'rft&ecul;.!.tl~/,i,~~}~;,)i1·:-:iih.:..:- · _ ·:. · . . ·
' . ~efined. in Sec .. ·~2 (T)'of the .NI~~· woplot.6e~d>I!!~~te':"-'f"1'os~th~ee proyisioi:ls apply only' if-the
._orc;f}n~u:y~sset~ 0~ly'to:~ d!;?_a_!er i.l'! _r$~ic~rilif£br~ · • <,iss~tinvo!ved.is a capital asset .(NIRC, Sec. 39).
·· · pe~s.on · engaged. m the .. pun;:hase. and!'Sa~-qf, 9r
· an a.ctive· trader. ·crar· hls · ·owh- .. · a~unt)·. in, Mernb~rship ' Se.~t. )I'\ the· Philippi_ne' . Stock·
.se·cur.ities, lr.i'the'har.icJs', how~v~r." 6f ariQ.ther.who' ..~xchang~_Con~1dered·a·capital Asset: , ... ·
. ,holds-: the ., sf.lares, of : stock by -way_ of an The existence· of sea_t·connotes that the taxpayer: 'is·
inve:StCTJent, :tt1e''shares: to him -V,'.i::nil!=l· .b~·cap_ital' . engaged in 'bus{ne~s:- .A ·person ·wtio' deals_ iri
ass·ets.·When the shares· he,ld.·by s·uch_.,)nvestor-. · · securilies-·or invests· iri stock market to .monitor-the ·
become: worthless, ".tlie loss' is deemed· to be a ·. ~ay·t9 day tr.af!S~ction_s;Will have. to ·maintain:$uch .:
·. loss' frorri·th~ sale or.·exchang~ of capital assets :seatin.PSE where stocks are:being tradeq~_Wjtt,'tne
.. (China Banking Corporotioi,.vs. 'C.A.,·G:R.· No.. . said seat are som'e rights'aild. prjvileges enjoy~d by.
125508, .July 19, 2000):: .- · ·. · · · it_ie member which· · _are · infangibl.e assets,. the
"~ . . . . . . . :
la~p~yer n:iay never..have c.arried irJ his books (;1 DE
Treafin~nt of. Ordinary Gain:s,and Loss~·~:·. LEON., N(f::?C Ai'motated;suprfH;1(534).: . ·- · . · .
L Ordin·ary.'g<,iins are ir:iciuded jn_ tpe gross ... . . . ·. ·. . . .. . . . . ~
iricome.· (NJRC; as am.ended by Tf?AIN (..aw, . No~e-;. The gain r~ah:z;ed by the sub~equ_e.nt·sale .of
· Sec. 32(A)); and · · : .. . · . , · . · . · . ·the·seat should be incl~ded in the .taxpayer's gross:
. . . i.i. '.Ordrn·ary lo-ss·es ?Ire. deductible frpm gross · income :<EJIR Ruling No. 15·1 ~98) ... · ·. . · ·• ·
. income.(N/RC; as· amended by TRAIN Law,·
· .-Sec. 34(DJ).-·· .. ·.. , · · .. . · · · Guidelines ir:i Determining Wnetii~r a Particular
·,
'.·;.
. Real Property Is a Capital or Ori;Jinai:y Asset
( . Gai'~s ·or l~sses from ·sale .or .other· dfspo~iti6n .of (R.R. No. 0.7-2903) . . . ·
. . ·ordin~ry ·ass~fare subject tb graduated. rate~ in: 1. Treated ·as Ordin_ary Asset under. the following:
.·case of an iridtvidual ~r normal_ corporate_ income instances: ·
. ' .

2019 SAN BEDA·lA~ CENTRALIZED 8:6,R OPERATIONS ! · 147

. ...
 . lNCO.ME TAX
SAN f!EDA LAW CENTRALIZED8Afl'OPERATJONS~ MEMO.RYAJJ?.;20)9

. , a. Failure to operate a-real estate.'busine~~; ... , . ·: co~·sum~atio~of the ta~atile transacti;n~ involving
b. Changing business from real estate to.. non- · said properties · (R.R. No. 07-2003; $ec.. 3(e));
real estate; · · Celeeenz v. Commissioner of lmemet · Revenue,'
c.· Abandoned and idle properties in a real estate GR. No. _L:26284; .Oc.tober 8, 1986; BIR Ruling No.
· business; . ·; . · · 142-2011,· May 4, 2011):'·
d., Property purchased -. for future use in the · · ·
business (aHhough thwarted by A Property ,·nitlally Classified as Capital Asset a
. circumstances·beyond the taxpayer's contri;,J);·;: . l.'.her~after May Be Treated as an Ordinary _A~set
e. · Transfer of real· propertiescfassified as capital · Jurlsprudence has· consistently'held' that a property .
. ·of ordinary asssf in the .'hands'. of the. initially classified as 'a capita! asset may. thereafter
selier/transferoi: · - .. · · be treated as an'ordlnary asset.Ita combinatici'ri of·
·j_ . 'iax itree' . exchange PY taxpayer not . the factors 'iridupitab!·Y tend toshowthatthe.actlvlty..
. .enga·g.ed 'in' real estate· business.' to .a was in furtherance. of Or· in· the course Of the
' taxpayer. who ls . engaged .: in . real .. estate . taxpayer's trade or. 'business. 'nius;--a /sale of
business; or .. ', . . . . -inherited real property usualifgives capital -,gai.n or
ii. Although· not engage~ . in. 'real estate loss even.thouqh the.propertyhas to b.e subdlvlded
business will use in business t~~ property or .ii:npro:v.ed or both to make. it salable.' However, if·
. received ih the . .-exchang!;l R.R, No .. 97- · · .the inherited property ls ·substan~ially improved or

·
2003).' ·
. . · . •.
. ,
·• . J
. : .· . .' . ·.,-a,..:.,,~l~--~ftiS(ely·sold'?~.bcith·it ffi~Y, be:t.re~teid a~ hel~
· ,,;:ft'::~~·. 1
2.. Treated as Capital Asset uode~_Jhe fqJL~wmgit._· gftJiep'a1.r:?1,1,~smess(Calasanz v:. Qomm1s~10.(ler of
·Pit1tt1i3r-1_~Yizyrsal~ to customers m the ordm~ry.cou,rse

instances: . : ·:/7 -(""\ f. ·';;,...iP·~~i-Lf.J.!.f!!1iff/:·1,e~fl'ue,G.R. No. L-26281, <October 8,

a ... Re!:!( property usedby a'!') ~en;ipt~~~petaJ.ion·· , ·-19871),.::,~, "',,/(~}~·· . _: · .. ·
. in its e~~mpt operations;}''.~~).; .. ·~...-..~....V·;r,:.·._'."""~-;...,;_.. ,, ., ·~ _. : . · . .. :
·
·b: Tr;::m~f~r ~freal prop~~if~Ja~s_!fted~api~I
.or ·ordinary ·.asset .'i# ·ttie¥\J;i'and?J .o! tte
f. . ..
*-· ~{le folJow.~!¥,{fir. co.nsidered · as· .. s~le or.
e'Xcha':1gf of~fr.ntal ,a~~ets: ·. · · .
. :~eller/tra11sferor: :
I. If
If~;.. · .. l
transfer,:ed t~ro~]lh/1 suc<;:eSSIC;>!'l Pijf
L.......;~~#&\.1. Retir~rent.?S.~;(rr,~(N/RC,.Sec. 39 (E)); .
._2:-B'fiorf ~ale_s oir~ct]y·(fy'/RC, Sec.. ,3[!. (F)(1)) --
. dooation·Jo the tieli'!er~fonee ~ho.1~~· t_s:?la'n'ySjle_of a:·isecu(1t}lwh_icfi the seller-·does not
~r'lgaged in 'the rr~est~te buaj,l)~SS. Kl'.I _. ·':tt'JWii dlwn:ir .ar:iy s le:<W~ich is consummated by t~e
·. wh.o does. not ;ut?se~~entru'te..sue ~; . de Iii~ ,a p s~cu~il,¥ borrowed bY,,' or . fpr the
property in tra!;fe.: r p.~!?ift:ess~~~t.' , i,w . l. Hf"·· ac9~J:\l;9f th~. settet,;i{ . · · : . - . ·· . .
fi. If received as divi ~M l:ly~e-~\ c~~lder~ t~~~~.aU.~~fo
who an!! not- eoga'\ed in .'toe .f. I ,~fe ~
·. business ·and who .,90· not~~bs~E!}'!e~~~:;/~,;fOriti~"''becom·
I· exercise!f.rivilege or' option to buy ·or.
v~ ~~opert/ (NIRf:C·Sec. 3.9 (F)(2));.
g worthless·: (Nlf?C, Sec.' $4
. .

use s~ch rea!.propel:~ tr~de'b..t,_ou~&1,~\tff?/{4w,')J1 ...... f : . · .. · . . · .. . .. ..

. (even if the cor~~rat1<:>n ~~1ch ~f1ar:tfl'tl.i~Si:""'Q,~fl'fiu~~~/f1q41dat!on of corporatic;>ns {R.~ ..
: tea~ ·propefly d1v1den9 is~v.ga~_9/IW~}:- ...'"''''~r.:Nqr\~~30.9;JfSec_;8);, . _ ... ' , .~ .', _
estate bus!nes~).~.R, I;Jo. O'?ie;~)/1_ . . .''ft\ /!.·~~e~Jlt,~tm~nt of, 1.,nte~est.~n a. GPP. (1 D.ELEQN
· . . · · ·.- .. · . . :......,._ .lV ,lI:Y'?!).:tiSf, supra at 519), .. , · · : . · .
Note: l~v?\ili'ltfry·tr~nsfer has r')q ~ff~'t'~pacioh, ~n paf]Q .(Filinve~t. ·:Credit Cprp. v.·.
the: cl~ss1.f1eat!on of .r~al. ·p~opertx:,n ,the ... · .. : · Philippinf! Ac.etyl~n?1 .co.,. Inc., .. G.R; Nb. L-
hands .. of the. i.nvol';lnt~ry seller (R.R... Nb, . '50449, .Jaryuary,36, 1982); · · · .· · . .
: · ~· .07-2003,. ~e~ .. ~(9)). · ·! • :a; . ConV:BY.anc~·.of :prOPerty "Jri <;:6nsiQ0r:~tioii of .the·· .
. . .. ,ttan~ferEJe's assutnptfon·. l?f. ;:iccrued. tc.1xes. for .
Ge'n~r~I' ROie.: Once an: ordinary: asset. always an ' .. .wl:iich:'J!i.e t~ansferor was persorialiy liable, . as :;:i
ordinary asset. A pri;>p.~rt-y p_urcti~sed for _fllture u~e : . . com'p.romise of.tax.liability on other t~alty;. arid · · .
in· the busirJe~s. ·-even though. V1is. p1.1rpg~e J.s later
'9. · Forced sale arid fore.<;losure.'sales·:(R.R N0:. 7~.·
. thwarted 'by, circurnst\:m.ces·,beyond 'the. taxpayer's : . 2,003,_ Sec; ·3(g)): . . · .. .·
cont~oi. 'do'e~ 'not ·lose Ifs: 'characfe~ as· 1:1ri' 0rd.inary ·
asset.. Nor does a mere:discontinuance of tlie activ.e:
· Excepti9ns: . . . .
.. use of the ·property change its. character pr~vjoasly. .· ..
a ... Rec1I pr.operties h~id .by' a· real estate.'dealer,. ·
establishe·d as .a ·busines.s ,prope'rty.(R.R.- /Vo. 07~ ..
. . : .-· which are foreclosed, shall.be treated.ordinary.
2003, Sec;. 3(e)). · L. ' · : •
asset~· fo( ·'purposes Of. ·.determining : tl'l(;l . .'
Exception:· Properties classit\ed .as ordin~ry assets appl)cable tax- on.such foreclosure .sale (RF/
.· .. No. 7-200~, S(:)c'. 3(g)). · . . . . . .
. tor b.E'iirig used in 'business by'.'taxpay~r eng~ged::in.
. bus'iness· other 'than .rear ·estaJe . business a're b. ,R~al pro~rties· c1cquired by banks through .
.§!Utomat1cally converti;Jd 'jntp capital' ·~ssets upon ·. f9reclcisure .sales are ·considered as their- .
· showing that the sc1me have :not beer\ used· .in- . .ordinary assets (R.R · No. . 7~2063, Sec.
. '2(b).(4)). . . . .
. b.usiness for :more.'than ·two'. (2) years. prior'to th~

. 148 J 2019 SAN BEDA LAW CENTRALIZED BAR..OPERATlON~S

 _.INtO·ME -, TAX
SAN BEDA I.AW CENTAAf:IZED BAR ~~ERATIONS - MEMORY AID 2019

. Npte:' In condemnation proceedJng;,".the sale
occurs .at thetirn e·of the taking_ of the property
rather than receipt of proceeds of the . ·
judqment.. · -~017) .... ·. · ·... ·
Sale e>f·(3_<;>odwlli°Not.Subject to Qr~linary Income
Tax · . . .. . · · . . _-.:.: ·
The sale.of gciodWil! is not su.bJe.~t;to ordi_na_ry. income
tax since goodwill is not an· ordinary asset-and is not
.v,. . among the exceptlcnsunderthe definition of capital
:;«~·-. ·assets in' ··section °39(A){1-) M. the" 1997. National. .
::.;. Internal Revenue ·code. It issubjectto caplial :gail')s ·:·
\ .. tax (WM. H.. And.erson v: Juan Posadas./·Jr.; G.R. ·
f:j;:· No.'.44100, September22,' 1938). ': .:... · .. ..
;:_. .: · · ;. . · · ,, . · . · · ·
,.,;:: .. The T_ransfe( of.Ti~le. t?
_Real· P~operty from· the· ·· . owners · (Republic: of· ibe Philippines· \I. , Spouses
,,.._ "Trustee to the ~enefu;:1ary. W,1thout · NJonetary
··. · · Conaideration Under and .By, Virtue- of theDeed
p . of Ackil<?wle.dgmenf cit"l~piied·Trust:.anciWaiver. ·
t to·
selier,_-as it i_s -a:tax on the seller's gain·fr~m the sale
of .real. property (Repµblic. of thfJ Phi{ippines v,
Spouses Salvadqr,·. G.R. No .. 20542-8, June 0_7.,
...
CGT · may not· .. be awarded ~s · consequentlat · ·
.. darnaqes · ·. · In · . · exproprtatton- . proceedings. ·
Consequentiel-demeqe« are, only awarded if ~s a
· result "of the' expropriation, ·tfle. remaining property of
· t_he:owner:suffers:fro·m an impalrmentor decrease in
value -. Given that the paymenf'of capi_talgafns raxon .
· the transfer of the subject property has no: effect Of?
the increase oi-decreese-tn vatae 'Of tn« remaining
.. · .. property;' it ca1:1 ·hah:!_ly .. -be . cojjsldered ~Ji
. . · .consequential darnaqes that may .be -awarded .to·
.Setvedor; G.R. No. ·2051-28;June 0-7,,2017) .. ·
· · · · ·· · ·
Capl_tarGain v, Ordln~ry· Gair( :::. : · .·

.
o( Rights ·and·.lnferest Rear ~sf~te Properties . ,,., . . ·. . . . . . . . .. . . .. . ,.
L Not Subj~c(to ~GT. . . .. ·. ... .. . . ;/~:,3·/~·
There ·,s. ,n fact and· in law np transfer· o.f b~neficlaJ.P,
ownership si"ri9e the· na~ed .o_wnership- cif the_ tn(&i~~ l'ri~-: . , . . •, . . . . .. .
.::\l1,
< and the. benE!ficic;1l ownership· 9f the benefidary~~a~r)1 .Derived · from. sale cir .1i:19ludes· al_l gains. citl'ler

i
consolid~te(l".in··.the ~atter ·(BIR Ruling !'Jo.-
1.~9~ft}j.i{:; ~ffen~~~lf .{i~t·.
0 capital ·than ~pital_gains · ·:
.·
. June 2§}, 1,998).·
.
· ··
..
.· . ...,i--1)-f.. ·.--: ~_") f1J · a_s~els,:~~Le •.
. ··A< .. .,, . ·t> Ii
m.. ·. . .·. ·. . ·. · . . .
· CG:,Tr.e~t~i:mton Expropriation P,~~'f?d_ln~s iti~. . ,. _' .- . ,
If: The acqurs1t1.on · by .the:__ Go.~~11')!1;_.,~t ·9,~_,:P.,.lilVafe. J.l · Can be acljusteit_by the
l· f1 ,
~/f-"~'!'. ' •·, • • • ·
properti~S th.rou.gh _the ~xerCISE;3("',.QfTt~el;'/!gwer Of:· holdin"g pirio. . . ~ '. -
,;- en:iinent. domain, .. said _pr~~Hies ..:~i.ng'Just, ·. ,,. · · · \\ ' ·
~_:_.-_·. .compensated, is: emti/ac~~~~tlJQ-°'J.lf~'.J..,r~·i;mi~g-of·

l "-
thet~n:n"sal~"or"dispo~iti6n.0Jprope~-f3:uti~!'£~;?" .f,i. "t i'{"·"·~,.1~"iVi(b-.
-v. Court of Tax Appeals, G.FfNbs;.L-itS.8,'SrL-977.f, · 1 • ap, a . oss~.;, _-a . · e 0.d.
c 11
r mary. · asses
. ·. •·
are
;

;. .
~i,-; ·
[·
May:.3.t, 195l):
· · · .. · . · .·· : .-· .
· ·. · ·. · · ~~~<.·,~\ . , : jl- .
. . · .. · ·. ~~. (;I,
-tf'.
d~du_cted . only .to ~h_e. de~u.cti~le . fro~ .. capital ..
.tJ:' ,. . . · . r:r: 11
-r1 ~!~n.: of_ ._the,._ ca_p1tal g~ins but net pap1tal loss
~PE~:~.,) .:_ . :_
I
~~.:II propertjes-trahsf~rf-~d purs_u~nt t~)~JtSfop~~J!<:l.P~E~ .pan not -~e · ded~cte_p .
•. proceecJ1rtgs. are. s1;1bJeC?t· t9 · capital ~~Jn~ .t!3J,-:'f:fhe ·, . ;·.· . _ . . · :rom <;>rdmary ~ain -~~- .
. t~an_~fer . of· . prop~m, _ ,tJ,rqugh ·,exwo,Pfiat10~ · . .-· ·. ._income_ · .. · · ·. . . ..
f . ·pr:ocf?~dings is· -a. sale· _or' excha_'?9E(t~jthln. tne. · (1 '0E.LEON (20'15}, supra at 516-_to '-518): ':i. ·
t" . m_ean_ing of $~ctjor:i~ 24(0) an·q,56(1'.) (3) ot the.Tax · . · · · ·. · · . ,.
i; .Code, ari·d. profit· from-the, transaction. consfittit_es: ·. . Net Capital· GaJn .v:
Net·Capital 1.'..oss . . · ·
t,.- . · capital'gail')_. S\Jc;:ti.:Ca_pital_.gain~ is·~i,ibjec,lto capit?tl ·· r:-,iet°~apitai.gain. means
the:·exc~ss.of thEf gains-·from .
f' ·: of
gains tax· (f:epubltc.. .thiFf?IJ/liPP[f.l~S, r_~pr~s~nted · · s·are~ror e'xc1?_an9es·:or capiJal a·ssets.oyerlh_e _l_osses .
~· by. the D.epartment.of .Public Work~ ana,.H_1ghways · , ·. from such . sales· or.. exch_anges . (NJRC, · Sec.· 39.
I_· . (DPVyH) ;v, $pouSf!S, Sena,ndo · F;:·Bal'(ad9r and · , '(A)(2)). · · .... _~- · · ·
f, Josefina R : Sa/vapor,· .G.R. No. 205428," June 7,
t: . ~017).. : .·· . -~ .. ·_.· -_.-. . .. ·:. ' .. ·... Net capital. i6ss means ..the ~xoess ,of the·l~s$.es ·from:
. sal,es. Qr ,e.xchanges 9f ·capital assets· over·tfre ·_gf;lins ..
t:_:
; . : Jhe expropriation ·of. propeqy ·cJa_s.sifie_a . as ~pltal .. fr<;>m .. sach. sales o"r .exi::lianges {NIRC1 S.ec•. 39.
asset is subjept fo~ CGT· and ,QST based. on ·the." ,. . ·(A)(3)). ·:_ .
amount.of just .compensatl'on -(~.Mc. No: 41.t91): It · . . ·· ', :· · ·
is· not' subject. ·~o Creditable. Witl)h6lding. Ta~ and ... · _N~te:" :-r.fie. net .. ·capit,:il' ~a{ri.· ·e;cept: capi~al ,g.alns.
Valu_e-Added. Tax· (BIR Ruling No, DA-2·1·2=01, ·fi..pril su_bjec;:f to final tax and·- per.cent~ge · t.ax,· sl:lall tie
. 03, 200~)-:. · ·,. . .· . ·: ·. . : ·.. . . repor:ted in ·the taxpayer's 1nc6me "tax ·return- ·and
.. . . . . .. .. :.. · ·sttalJ be·subj~cqothe grad:uated Income-tax r.i:ite_s.in .-
Since .98pita!"gai1,1s tax .is a tax on pass.ive income,.it .. addition-to the·net income from other-sources: The '· .
is ihe-sel/er, _or.respoadents In 'thi$·.Cl;I_Se, _who are.·. het capital ·.Joss·· cannot ·be d~dlicted· frorri. the.
llal;>le to: shoulder the tax·. Ttu.).s, _as. far-,as tl:le · ordinary income because the loss can be.·deducted
.gov.ernmen.t is 9oncemed, .. thE: .capita\.gai_ns .tax in -only to· ihe··.·axtent · of capital· .gains '(INGLES.:·
expropriation ·proceedin~s r~m-$ins 11 liabllit'y·of the Reviewf!r,supra -at· 171 _a(Jd {i6)-. . : .
 . lNCOME TAX ...
SAN OEDA LAW,CENT-R_Al./Z~O.BAR
OPERATION,S- MEM9,RV.AID2019

I , . . . I . _. . , ..
. Treatment of Capital Gai".ls and Losses· . . Per.sons Liable: .
.Under the NIRC, capital"losses are ~eductlble.o,:ily .·. ·'( Individuals - citizen or· alien, except non-
up to the extent of cap.ital. ·gains ftom .dealings in resident. alien· '(RC, NRC,. ~. '1;-JRA-E;TB,
.'· . capital a~sets 9ther t.han domestic stock.s an.d real · NRA-NETB) (NIRC,. as emended by TRNN, .
. properties. Hence, capital gain and -capital losses . · Se¢. 24 (C)); · _ .
· . ' . a·re 'offset -A net capital ·gain is an. item pf -gr.oss . 2. Corporation .:. domestic or foreign '(DC, RFC; .
· [ncorrie :subject to .reg'ular, il:1c;ome .1ax,. except for·. · N_RFC). (NIRC,.. as
amended by .TR,AIN, Sec.
..certain cases:· A net ·capital Joss is· not ;:in it~r:n of , · . 27.(0)'(2)); 'and . . .. : · .. : .
d~d.uction ~gairist gross ln6ome: Th_e faw views·net -3 .. Other'. taxpayers such as estate, trust, trust
. capit.al\lo~ses as' unnecessary expenses·. since fundsand pension, arnonqothers (NIRC,
'emended bj'TRAIN_L,;Jw, Sec, 60). .
as
capital assets are-not use.d in. th.e business or trade
_of 'the taxpaY.er· (BP,.,NGGAWAN, ·tncom(f Taxation.
. . .. · (2017),' supra:at 39:3); ·... ,, · ·. . . ·.. Determination ·of.Selling Price: ..·
~ .. · · . ,. . ·.. . ·
a.. In the case of cas~ .sale.-':- fhe ··selling price
Capital gains and losses on transactlons.lnvolvlnq .. ·. shall 'be: the total _consiqeration deed of per
capital assetsareeublect ilither to.' . . . . : . ·. . . sale· . . . \. .
1:' Capital Qalns Tax- (CGT): . . . . . b.1.lfth~,tpta.l eonalderafiori is partly I~ ·mc;,ney,
. . a: .' Sale:. of- 'shares .ot stocks-of .a .dornestlc . . ... arid in :kind - the 'sel(ing price shall 'be ti:ie·
: ·• ,·. . _: . : : . corpcration not l~s_Wct'and 110!.'frc:1de~thcoyst;!~~-,'~u'!1.ofmoney J:!'?d the fair market _v~lue of the.
. ~. · . stock, .exchange (NJRC, .· a~ · amw;dtla'byv.u·· :y: 1~ · ..::_.Pr:QF...e,rty recelved.. . · . . · · ..:
. . · 'TRAIN,, Sec. 21 (C}); and ../. ': ~ · .J \~· 1!_ tije-.cas.~ of. exchanqe - the selh~.9. price
. b.. Sal~.of_teal propertyfn tli~Ji'ijfpp~~~~~~h~fi.9~0.efai_r market v~lu~ of the property.
as capital . asset (NIRC/}!'S a~ped by . . . . ·. ~:i-~.elv~':f'IP .' .· · · .. _ . · .
.·,: · .. TRA/f:J, .sec. 24 (D}}:_ ,f ,.~_y1 ,,""~~-cb,J,!':(~.as.e·t~~}'~ir:mar~~-t value of the,s_har.~s
. . . . , . . -Jr~.'/''.. '._./ · .. ' ¥,J) .' -jf" ~?· :°f\S~~,:gl.d;i.bartered -or .exchanged IS
· Capital gains andJo~se~su13j~iWfoC~_T·w1ll ,l;io ·. .b~ •.. «~.: .
gr,ate~\t(~nJHt amount' of money and/or
· -~<?i19er be ·~onsJ~~red .if\:2°-mffu~n.g·th~~)\· ... · _fai_~ !lla.rRf(~~J:u~op~~ property received.
·. . .: :lnC~'.11e'SU~JeC.t.to r~~ulfp..et~ t_ax.tal_e~-$.. .' ·: ':~i:??' ;~?r:~e~~\)~~t~•f~::~~~e~t:~;h;~~:~
2. · Regular !nc~me. T~.Ja!.~~" · ·
. · . T~.e.:qi_pitalgaiR$ a~d~6MEt;>\lothesfl\7·1h.b.s~~r,o·
. .. ~u~ject~to, C~T ·.·wifl '!ff<
\ . · ~

i _e;,,, ..
~

· t:\
·~tm;~
· . ·
_ovk the·amotmt·p} men.Ely a~d t~e-_fa1f ma*et

~9fl~J
f ,ie pro~!=lrty,.·_if any; recei':'ed .as
~rafd~st;(~JI be dee111ed a gift subj~ct
11cpt·~id(~.);-"n
deterf'!lination of gros~.x,tnco.ml.s_U,b)e~~:l~th,§ii·
f9.1Jowing_r!Jles:·.. ;.,. :., ~ .. 'i,\ .. ~u·~
1
·~@?~"
~!£.EJ . ,dY ..-,i~
:6.~ · ··d~or'~)~l',under the NIRC '(R.R. No.
· 08, -~~c._._7.(~JJ· .. · . . .. . .
_a. Holding penod (NIRC\$ec. :J~~)j';',,, "'1:: . ~,,_..,,,;=· · . · ·. ff J : · . ' ·. . ·
_. ··
b, :- Lo~s Li~itatior'I· Rule (~JRC,_ ~e~, 3 · ~~~'.[l:.'1..filt.C.9: e, .'9e:: ,A .· .. , . . .. · ... '~ ...
· .. :and,·' .... · ··. ·.: ·".\ 7·~· ~a of~~~ies,.of~tockof?,,~omesticcorporat1on.
·. c... Net C.ap1ta1··L9~s,.Carry:_Ov~.,_~E..!@p1 tl~ . - _-:-( not-.:(s,{~ft-J.ipc1.n'?t trc!dec!,_m the·stock exchange
.,, ...
·.·~,;i.
,· .(NIRC,-Sec. _39':(PJl··· . · ::
=~., _ · . · . · · . ,. . . : · ' ·. . · · · : .' :· -
U : }\/1}.\.~y,;~~p.atdealeri.nsecupt,es (NIRC, as amended
· < . . · . · . · . ·. ';' ·. · " · ~..,.._,,,~. . . \ JJ!ififJ'All:,J,,Sec. 2Z_ (0)(2)). · .. · .· :: . , ._, ..
Determin~tlon· o.f'.ti)'e ~!'!1:o:il'"!t of .T-.~· ; .. · · .._ ...
-~· .·Sale:·,·of:.·D'<>i:riestic. Shares··.of .Stock -'NOT
: .. 'jr11ae:d-,\n-.t~~,S.to~i(Exchangei~·subject t.o. · .·
·,. · Note:·What is eontrolllng is:whetner'.or·not the·
.· :sh~res of. stock:'.are traded in th·e ',local sto'ck
: CGT . - .· .. , . :. . . . .. · · <. · .. · ,. . _ · · ex~h(mg~ . and not ·where . the : actual ·. sale
· 't1.appened ·. (Del . R9saria.: v: Cr;,mmissioner ,'of
. c·c;T··~ate:_.· , _ -~ . . .. : .. ... . . _ .,Internal' ~eJienue, · C'rA. Case . 'No,. ·'4796,
·. If Sille·is.by.a.Dome.s'tic.Corporatlc:in:.final tax . · . _bec'emb'er.1,.1994). ·. ,'. . .... : . . ..
... . at thf rate of 1_-5o/~·([Vl~C .. as.'am(i}/1ded by . .jRAIN'_. . : ·,·
Law, Sec:;24(~) ,and Sec. 2!'(8)(2)). . · · Exclud~d fi'.Qm·ihe .CQverage:· J · · ··
,~i.' · Sale' .of shares· of: stock' .. of .'a foreign
··.· 1isa1~ :,s by.a Foreign·CofP,Ot~tlon;:Final.:t~x ,:,·· c.cirj:mr~tfon if 110~ :s·ubjecrto CGT - the gain·.
. : · at·the. rate 'of 5% .fo_t net gain' notover, P1.0.0,000, ' Ori\vl)i'ch Will be.subjecno rf;lgular. inc;ome'.tax
. '· and 10%. for amot.int in -excess · o.f .P100,000 . . . . rat~s·;. · · . ,· . · : .. . .. . · · ·
. (NIRC;as :~f!lended'by TRAIN Law, Sec: 24(C) . · : ·ii .. ·, Sale .'made. 6y ·a ·dea/el in· securities -the
and S.ec. 27 (V}(2)). . · .. re.suiting ·gain . or:· 1oss is .considered·.. as
'. · .... · ·ord(nary. gain subj,a<:t'. t<;> gr~duated ·. rates·
.'T~x·Base: Net ca~iial galris (gro~s ~elli~g .pri_C\;l · (20% .to . ·35%) fqi' · jn~li'.'idual and' normal
··or·cqnsideration less c6~t or adjus,ted· basis) on·:' corporate income i~x (30%) tor:corporations
. . a .per' trar,sactioq basis (fl!/RC/a.s amencledsby .. (NIRC;. as.amended l;Jy TRAiN, $ecs: 24 and .
. _27) .• · ·. .. .
· TRAIN Law, Sec. 27(Qj(2))..... ':. ·. .

. ~ .
. ll?O 2019 SAN·BEDA LAW CENT~LIZED BAA QPERATION$
 . . . IN.C.O't~E fA)(. .
SAN BEOA LAW CENTRALIZEO'BAR.OPEf{,I.TIONS - M.!'.MOR\f AID .2019
,,_,_,.. ;";, • ff# •

Note: The term 'deale.r hi securltles' means· 4. tn. case . of sale subject . 'to right· of
. a. merchant of stocks or 'securlties, whether . .redemption, (i.e., extrajudtcial foreclosure
. an. individual, partnership.or corporation, with safe· ot capital. assets 'tnltieted by banks,
.an established. place of business, regularly . finance· and. insurance.·.companies), such
engaged in the purchase of securities and the rig.ht must nothave'been exercised upon-the
·· resale thereofto customers; that.ls.ionewho, expiration of the period to redf!J~m·(R:R. No. ·
. as a merchant, buys. securities and re-sells .. . 04-99, Sep. 3J. . .
them to customers witha view' to the·.gaio~ . , .
. and profits that ·may be derived therefrom · · Exceptions: (RPG) : -,
(f>JIRC,,Sec.:.22 (())): .: . 'a... In · case: of . sale· subject to right of
· · .: . ,fiedeinpti9n,'the.CGT shau bebased 011 the .. ·
· iiL Stock traded In. the -stock -exchanqe other. · · . .' bi.d. prlce-of ,the highest bidder (R.R. No. 04-
a
: : than thesale by da.all3r,insecurtttes-, which . · 99, Sec: 3).. . . . · . . . , .. . ...
.will he subject to stock-transactiontax of 6/1 Q. . b. · In .case.rof sale of Principal residence - ·.
of .1·% on its gross:sellihg price.'(NIRC, Sec. . capital ·g~ins',. presumed to have been
· '127, as
ameri(led-by TRt,'INLaw).· .· · realized tbereinahalt be exempt-from cm:-,.
· · .. '. · subject to.. certain conotnons (F.'lease ·see
B. s~ie or· Qth~r Di~posi.tfon of ~eal Property ; · sep·araf,i . discussion s'are · of . 'Principal.
Subject ·to CGT by·:a ·Non-Dealer' (NIRC, as · · ·. 'Residertce); and .
amend~d by TRAIN .Lai,y, Sec: 24(0).(1); Sec ../"') · c. · If ·th"$. 'buyer ·of.· real property is the
2{5(A)(3) and (B)); Sec... 27(p)(5)) · . · · At;:~{( . ·_government. 'or: any of · its. political
. · . {{::i/{;:-11.1;,., · . subdlvlstons or age.ncies·or <;30GCs-and the· ·
· CGT Rate·aryci Tax Base: . . : . · J.fi;~~\t:ti:~ · sell_er is an individual,. the· !axpayer has the
~~ne,ral R_ul~: 6%. on t~e. Gress .Selhng Pn.C?fl Pf~
:'\;i/7,~·~:~-....,. ·optJJti[to.subject the capltal gains to the
Zonal Value· or .the FMV as shpw~,,..ijl'tli.ft..;;".ft ..r·;:..:.~~::r,reQl,ll~·jnc;om~·tax rates. ·. ·.. . ·
schedule ·of values Of-the .p·rqVil"!_f.iatfa'nd citf.7 ·I' ' ... ~= .. ·,! . · · . .· ·. ·•.. . ·
asses&6rs, whichever is: hig~f?'fi)'IRC, -~~Ld .. · ·.. Not~;fi~?.in-orl_oss is !mmateria'l;there being
amenped by' T8A'IN,_ Sec.. 24(D){i);- P.\.... . .
_.,1-tJ- ~- f. . a Cjn~h.l~{ve pr~sumption of gain. ·. 0

··. .,· . . · · ·· ··#~' ~f~. · :r1!·~ · · II -~·· \... · . · ·.

:Nc!fU~~: _Capital Q~.inf?_, ~Sj;.."fi-:"fl:!x __; 5.fi~~ssive . r:;, Actu~r.G~,n y1,.Pres:6.m,ed·Gai11 .. . .. . .. .
inc~~e; 1_t· Is the: seller~~W ~~::_b,~er,.~h~ ,trF A,~·<')tge~~r~t_r~l!~!l:11~income .tax l~w .1m~ses
.gener~ll.Y ~o·µld sho.uldec;Jtie"lax-JRtrpubt,~ . ~-'',f., t~9.ewi,1flerJ~~re.IS :actual· ln?Om~. ga1~;. or
the Philippine$,repre$ente"4:by' tt,"e~E)~~artme,rit :-:i;, · profiNi'.y.tcte.a.Uct_ingthe cost or· adJusted b.as1s of . ·
of Publi~. ~oiks arid Hiqh'W'iit~v:"f1'Wme.}? .. [11 the property ;ibid ·from \he· aq,'oi:m~· realized ..
·.'Sqriailo, G.R,. No. 2116_66, F-ebr.uf-\ry 2.s:;i201~)... ,, t!:i- .-f/:JIRC;: as: amend~ by TRAIN,· S~c. 40,_par. ,
·. :· · . · . . · · ' . · . \•:'\<>...Ir..,·. - · · · · )1f;,,.fi::i~t).1-Jhl~!s known as "aclua! gain". However,
.'P~rso~s_.L.lable': ... · .. · . (-. .'°j;;f . ,· .
1, . lnd1v1duals - c1t1zen·or.·a.hen;;,fe{ce~"'1on- . .
::;J;;a.:t.t.~-~a:sJ<-<afi'..:....~xqeptiqn, where· an. indiv.idual: o_r a
· corporat1pn sold a real prop~rty (land or bu.1ldmg) :
.resident ,alien. (13c; NRC, RAt~~E.T..B, .. · · · classifi~d ·as capi_t'al .asset, the ~aw presumes .
. . . NRA-N.ET.B).(N/RC, ·.a$ {:Jmended by T,RAIN;-'. · · · ~~t--t_here was ~ capital :gain ,realjzedi !3nd the .
, ·.···Se<;. 24. (D);' . :· · .. : · · , ··:capital . · £ia[ns tax· . is. 6% .. 'Of • the· · ~ctual
· ..2.. .' C9rporatiot1. .:.. :dome~tic corporatiol'I .(DC}.. . -· ·. consideratior:i or.the 'fair marl<et'\Jalue·c!t the.time
· . · . (N/RC, a"S. amended· ·by · TRAW •. : ~e,c. 27.: · . of sale ·af the.re,~I property,..whichever is hig)ier.
(0)(5).); and . : · . , · . . · · ·. · This is k.riown as the. ".presumed gain!'. But', as
3. · : 0th!:lT· taxpay~rs such.'. as estate and· trust : • ·an. exc,eptiOFl . 1.Q th_e. e~ception; _the·. rule : on .
. . (NIRC, as i:JmencJed Qi-TRAIN Law,· See,.· presum'ed ·gahi ooi;s NOT APP.LY.to ~.are. of
60). · · . · .. ·· ' .shares of.stock bf a· dolllesti_c.corpo'raik,m;.not
... ',•. . lis~ed ancl sold through.' a· stock. exchange,
Coyerage; . ., .. . . . . . .. , . because· 'there. is actual' gain. whenever an
'' .'1. . Sale,' "exchange or ... 9th er: diSP.Q~itic>n' . · ir;tdiVidu~I ·or· corp9rate taxpaye~. sold.'shares of
, , .'(fncii.rdiog.,pacto.. d'e._'retro ··s~le~ a,ticf ott:i°er · ~tock'treated as capital'.assets (DOMO,VDON,
.'· 'forms of conditiona.1 sales) .of: ~ . . · NationalTax~tion, slipr.a·at 1s2r .
· ·a.. .'·.Re~I· propei:ty with _respect to-individual· ,. · . . . .
· :_.. ·. ~axp'1'yers;-esta.,e·:and.trus.t;. ~rid;.. .
·. · p.. L:arid .·and ·.'building~· with r~spect. to ·
· domestic corporations; : ... .
2.' Located ih the.Philippines; ..
. 3. · i?Y ·a nor:rclealer in real .~state; and
< •

·· ·201s. SAN BEDA LAW CENTRALIZED BAR OPERATIONS 1'51.

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. IN..COME_TAX -.
:·· SAN.SEDA LAW-CENTRALIZEDlJAR OPERATIONS - M~MORY A/0~'?''1
REFF IMU GMNSP MtfMi&& EWEI

Actual occupancy is nof 6onsidered interrupted or

·abandoned by reason of tempor?iry· absen.ceclue
to travel or s_tudies or work abroa,d'·or such othElr: .
similar circumstances (R.R.' No. 14~2000, Sec.. ·
Ci:>mputed by 'deducting Does not consider. the 2.1).. .
the cost or: adju~ted . cost_ of pr_opertysold
basis . of the:: property
sold from. the. amount .
· · · If the lan:d-i's leased, Qnly th.e dw_elling· house can·
-be rreated as prin~ipal residencie:·· However, .
· realized: where both 'the owner of the land and owner of .
.the qwelfing. house. ·actually reside 'ji). the said .-
dwelling t"!ous'e, -then _both -said land. and t_he
.biffer.ence between th_e Gain which assumes as dwelling house shall be !reated as
Jl')eir principal ..
selling pric~
.
and
. ·-
the· ~ost
.
having bee_h -~e~lized. by te:fidence
. (MAMALA
. . .
TEO; Jncqme,
. .. supraat ~26).
the ···seller· .from -sale,
exch_a"ng,e· . ·or other .· · 1( the'· principal . res.iden_ce .is . co•.owne'd; ·the
di_spo~;itio"n ···.·of
·~
real exemption appli~s · ·only ~to._ t~e· e_xtenC ()f _his
property.· · ·. ,.proportionat~.s~are_ (2 DJlON, s.upra~t 252). ·

· . · ---' ·· --·-····--. · Gen~ral Rule~ The address.shown in the Income

- E.xclud~d from the ·covera!)e: _. ·. -. · ,.,../~-;=--:;;.u-:--·-1;-~~':':'f:~~-rn. is_ ·conclusiVely presumed as the
1. Sale made by a. (!ealer m ~ea.I ~sJj\te_or.\tphe ~ . · 1\"?r11Jp1pal~res1denc~ (MAMALATEO,- lncome.,
real . .13ropettY. 1s' . an. ordmai;y~~~t
re~ulti_ng gain -of yvh1ch _shall bef~_1:1bJe~~,,i~-g_u1ar ·
t-'- >~ £ ,:,. ~' _· ,
.':!.be~--==~~.1:'era J~i- -, . _ · . .- . .
· . . ·_ . .
income tax rates. · · ./ .A'-~i.'~~... _,.-='.""":ii~---ex~.~:iptio(\~~tll\.Ji:dividual is n?t required to file
: ·· · II,,...,,,,..,_ '.I- -f- · 'lf_'i) "'if' ,\,:;..a re~rn.::cf~~ji~nfrom Barangay Chairman or
Real ~state De~ler- any.(.REii's'ei#ngaged Jn t!i)1e. ft~ . ..i~Buildjrig Acirifriil?tr~,for__ (for condominium units)
. business of bu_yil)g·and .~jllingor,t,exch~hgihg"teal' . . .-st)all s~ffice'fl~)\ . . ·. . . . . ·.
properties.on nts -O.Wri 8f!,C~9t-as'a pnw-cipata_!Jct_ ~., -~ . 1~: --..-.w---\ ~ _· ...
holding himself.out as atifwlloOQ,art-tim~ deat~fl!'t;. t;,_~--~~9U!~!tesf6f\Exept~tion:(TUCT~) .
. rea_l estate (i.e., _r..eal _es ate...<fe. ters, d~e!opgr$'..:-JI!!llJ"r:¥.NIR(!JJ.s.am~hded. ~Y TRAIN, ~ec.- 24(D); R:R. ·
BTJdlprlessors)(R.R. N ·. '9·11~·,.03,·~:5'"~.~M~·.. r:=--~-. . No. f'IJ:~]fJO)Q · .1 ~- · : . . · .
·· · · : · : · · : . ·.. \--.,. fI'\ \\ . '1>~:\ · , r.~. 1 '1'-li 1~~(R i~ d1!1Lf~9tified by the taxpayer within ·
Note; Regrstrat10f!: w1t_h -,\f.l.el f.l~sm. (a,. ct,-lant~l ~-@?':./~~~.-(3~} ·day'~.j from. the+date of sate.tor
.. Use Regulatory 1?oard (Hl-,.URBf~[ Ho p!: !,~~.?- • . -~~i_~positi,ES'n.thro_~gh a sworn declaration o_f his· .
. · Urban Developme_nt ·,:d~ordin_a_t~g. ,_ tt~t:•1,~~nten!~-to avirl of the tax -~xemption. Such
(1;1UtDCC) as a real e$tate~e~ler Ol\~eVael~e1"~~.,..?"'swofn. decla,tio_h shall be:: inclusive, among .
. shall be sljffic.ient for a. taxpay~lo· be jO~!i~f~~~ .::,otf\ef-@',.,8.ft_!;re following: . ' _ . -·· ..
as· habitually eog-ag.edjn the s.are.ph~af.e,s(fitEl,"-Lt_....,...-,.--r.?1' "'\·f'\.C(ST-",:~turn; and ' : ·· · .
the t~xpayer. "is'_. n~t_-. r~giste~e1t.~,,!li;iiV,Jiay ~- /.f A~_~'P\.~efy.t<f'm_statem_ef.il. from the Ba'rangay.
ne~ertheless be-deemed t_o b.e_ engagetldlt~~e ..tv'll["'">___:.,-.,,.~Qhairmanthat_: . · : -....; . .· _
real estate busiri_El~s.throug~ the estaolisl'lment~of-~~-:. . · i. _Tf1E? taxpaye.r;s p'r_ir:1.cipal re_sidence is:,
substantial · -r~levant.: . evi9¢nce {s_uct"!.. as-· . , . . located within tbe ·jurisdiction of. -tl')e
corisurnmat.ion du.ring. the preceding ye~r of_ at ·__ B_arangay; ·and. . . .
lea·st six .(6) taxable rear:· e~tate_ ··tra~sactions, ii. The same.has·b.een his resioeni?e as i::it
regardless of."am.9unt;, registration ·._as h.abitually .. the date of i.ts "sale or..disposilion... :, .
engaged·in real estate bu§ines~ with the LGU or . . ~ ·· .
. BIRi etq.f(R.:Bd\fo. 07-2003, Sft_c.. 3).:·:: . · · · · , -.·Jf t6e·taxpayer's ,principal r~sid~~ce sold or'
disposed of is ·a cohpomTniU!)lunit,)n lieu of
"2, Sal~ ·.-of. Prin~i_pal. ",Residence· (NIRC,. as · th~ sajd Ba_rangay .Chairm~n. 'the· cei:tifi9ation
amendeoby.TRAIN-Law~ Sec.. 24{D)(2);.:R:R:Nor · ~hall be 'issued \)y the .1;3uilding Administrator
as
13-99 . amerided
.
by R.R. .. : Ncj.-:-'14-2000/
..... · .. . .
.- . · of t~~ condomirtium buil.<:ling.
. ·
. . .
Ruie: 8<empi fr~~:~ ..~ CGT (N/RC: a;; amended. : 2. The proce;edscif th·~~ale.·or disppsiti~n ihe-reof
by -TRAINLaw, .seb. 24(0)(2).. : .. · ·.. . .. . has, in :fac:t, been· !!tilized in tlie. acquisition or ..
. ."con~truc;tioh of t~e -~eller transfer.or's . new· .
Pr!ncip~l'Reside.nce . . . princip~J' .residence,· withi11· ~igh~~en (1&) ;.
lfrefers to .the dwelling house, ·including .the· .I.and c;:alen<!ar·mon!hs· frorp ·ttie <;late of th.e.,said
on which, it is situated,· whel'e .the lncliviclual and sale or disposition.· __,,
members of his famjly_ reside:. and 'whenever . . . ..
.., . absent. the said . individual inJeods _to r'e!i.Jm..

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. 152 I "2019'SAN BEDALAWCENTRALIZED BAR OPERATIONS
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 . INCOM:E.TA)(
... '. Notes:
aae··
SAN BEDA LAW CENTRALIZED BAR OPERATIONS". 'MEMO/WAID 20i9
· u tin;__

Formula.:
a. Th!'! salr or disposition of a property refers For sale of property
to the date of notarization of !he document Selling price (in terms bf money) · ·.·xx
. evidencinq _the transfer of said oroperty, Less: Cost ': . .: · . .·
b. _ If the taxpayer , constructed a . new .ffil
. Net capital gain 'or loss. ·XX
. residence and then sold his old house, the
. ···tran~action- doas not fall Under .the
exemption because the law is clear 'that . For exchanQ~ of'property. .
<. •• the proceeds should. be used in acquiring . FMV of the property received in·exchanrie .. . xx
and · constructlnq . l:) new. principal
residence; Therefore, the old residence
· Less: Cost · .
Net capi~I ga_in or loss ·
· · . · · ·. ·· .'- :·· mu XK
should :f_irst· be· .sold before acquidng or ·... . : ...
· constructing the new residence .and not
vlce-versa (DIZQN, Q&A; supra at. 82). . Special- .Rutes on .C~pital Gains .:or= 'Losses·
c. If there. is rio:f1,1ll utlnzauon, the portion of SubjecHa-:Regular l,:icorruf Tax Rates · . ·. .
the gai'ns. presumed to have been .realized 1 .. Holdlhg_ period - rules on tio.l9ing··period are as
. · · 'shall.be subject to CGT. . tonows:· - · · . . ', ·. . . _ ·.. . . . ·;· .
a. ·1n ti)~ -case of an individ~al taxpayer, only'··
3. The historical ·cost or adjusted basis of his old . . .the 'follov?,ing.,percentages of the .g.ain or loss
p~lncipal ri;)sid,enc_e· sold, exchanged or.,-=<·).· . · re~<;>griiz~<!':,u·po~·t~e sale. or ', exchange of a
disposed 'of shall ·t;,e earned over to the' c.o~l·.:<:/} cap1!al asset 'shan be taken mto account in.
basis of hlsnew principal'residence. /.',:~;(/~'.t.f}; .comp1,1ti_~g i:i~t capital gain, netcapital loss,
4. The tax exemption granted~rnay-be.ayail~!:l[df'\ ..}11..\ ·. anfi net income: · · . --
only once every Ien "(1p) years. · . J). /os.\1;,,~·:;{...,..,.;:.:...._ a: 1 ~,9%:.... if the capitalasset has been held
5. gsr:row · agreement - the six percel}~(6~q.ktl~~-i,..!lt"!!~1t0to,r.f£.ot. more · ~_han t:,velve. ...( 1:~} · months
. _cq1 shall be deposited in c~Sh pi:.;!ffenager'~"."
. . . c.h_~ck·. i~ .. inte_r_est bearing . ac{qClrt with ~~--,hti. ., .· ~ 501h~if
b.
·1;Sh9r:f ~erm cap~taf gam); .
the capital asse,t·has been held_ for · .
·

·. -Authonze~ Agerit · Ba".k. '(M~1~m~d~r ,§lti"""·:;t m,,9f:{~,a1:tw~lve (~.2) mont~s (Long.term

, f;scrow Ag:eement. · · .· · · Ji!-'. 1.p-::1.;µ'.'":'·. ·.. . f'J!_ .. 5/!ipl gfm) (NIR(?,._S.ec. ~9 (B))... . .
;. · . · . · ,,-ff>-· <'v~'.'.b< R~l b. In »_ase of a corporation, regardless of 1he
s·uch_. deposit shall 9if.JJ-~(r.,~_~se_d·.;upo~\.
S~OWll'.lQ, that the· taxgaye~"-'1~-t~n,title'(t;tcto
r}·;~ .. ~9Jaf~g · .~.riJi~ !OOo/o if the ca~i~al ~ai_n or loss.
!,;{ .' · ~-1.,t_r~~"'P,~~~!j~·rnl_eOn holding period does .
exemption... · · · . \_ . t-:PJJ\ .
~V) . 'r,i.~ . . not-appJ~f.lt/lRG .. ; a~ amended by TRAIN Law, .
. · "'~~rv, . ) · ,if · .. ~ec. 39 (fJ)). . .. · . . :- . ..
Who may.avail c:,f the exemptiJn,.· . -V1 . ·~;r.r,,,;..
c\ _The_ above rule_s·d<;> n9t -~pply .to (eal property
01'11.Y_. ~i RC,_. NRC, · and- RA ~~~~~ti.tied--~!? "lt1f~1:{t~~~JJ.~r;r, to 6% ·c~~1tal .gain t~x·.and shar,es ?f
_e_xempbon.frorn.,Pa~~nt o! .c~p1ti»fga111s/~l,1n'ill-.....;..;~ ......;.sto:~~f a_.domestic co_rporat1on,not tr?ded. in
·qase of sale of pnnc!J)?I res1denr:;~ (':'-.IR<tf as ·!" .. the stoc_k exch.an_ge with_ a tS_o/? .rate, T~ese
af!lended by TFJAIN; Sec. 24(A)). · ~~}~ ·• . - . ·. a~e not .mclude:d.1n.the. taxable income. since .:
·. - . ~hese are subJect.fo_ final tax already. For
B .. Oth~r Cap.ital.As$ets No~ Subje,~ttct <;:GT · · · cofRdra.ti9.ns. capjtat gai_ns and losses are
. Coverage: It imiolv_es.. sa.le or exch$mge -0r one: . _ alwa·ys, 100% '.{ING LES, .. Reviewer, supra at
considered·. as equival.ent'.to a. sale oi: ·exchange : '1:75), . '·. . . .
. ··of proper_ty classified as capital asse~ except:.
· 1. Unlist~d .. '$har,es . of stock of ~ .. dom.estic Note:. In sale ·of shares- of stock not tradEid
corporntion:·(NIRC, as: amended ./;>Y TRAIN, . :thro1,1gh t!le loca!.'stock exch;:i'ng~. what' is
Sec. 27(D}); ·_and·. · · ' .. · c;~.ntroilh:1~·'is. whetb~r·the. sharei .of stqck ·are,
· 2. 'Rea.I property in the Philipp ires held_ as capital ttad~d in·. ·thE;i local ·stock 'ex.cfiange·:imd ·not·
:. j:ISSet· . _ . . wher:e .the ~ctc,ml sc;1le happer,i~(;I (Del Rosado.
y. : Cci_rninissioner. qt_ ll)trirnal RevemJe, CTA .
·Ta~ Tr~atm.ent 'and Rate:''.'iricluded in the ·gr.ass C?se
i1,c;:9me subjE_:lct to.the regular income (a5c r;:ites . . Nd. 4796.;_
.
December
. ·. 1, · 1994):~
•.. ·:·- _, . . .. .

. · Tax Base:' Ne_t capf\a1 gc1ins

r. . Non.;Deductibiljty ~f Net· .ca~itar ·_Loss (Lo~s .
· Limitation ·Rule).·'- capital tosses are allowed · ·.
only to-the extent of capit~(gains.Hence, the .net.
capital loss is not deduGtible ·(NIRO;as am.ended
QY TRAIN.law: Sec._ 39(C)). .- . .

. I ·. 20~'9 SAN SEDA LAW CENTRAl,.IZ~()BAA OPERATIONS 153 .

 r·NCOME TAX:
·SANSEDA LAW CENTRALIZEDBAR OPEMT/0,NS - MEMORYAID .2019
MC ac,a,· _,wa' ••+c-a
f '

· Re~son:. To ensure the .matching

"
of. .costs lllustr~tion:.
R?'J .

. ..
· against revenues' ·consistent with the' rule· that · Mr: Rhad. ·E;stoql.ie, a Filipino· ·Re.sident, had. the
only b,li~iness expenses are · ded uctibh~· :fr9m. · following incomes clnd losses for the years 2015 and
· gross· incorbe. ·Capital .loss is· not a business· .20~6. . .
··.expense (6 DIMAAMPAO,
. .supra
. . at 170-171).
. ·· .·

N9te: If the taxpayer" is a :_:ba;,k or trust · ··

company, incorporated. \mdE:r·: t~e laws· of. ·the · . ·o~cii~ary Taxable 'i.ncome J?7,000 .' ,. 1?90;000
· Phflippines.ia substantiat part of whose business : 1---~· ..;,.·-',-,--1----~------"

(· is the receipt. of .d~po·sits,. sale of. anybond, S_~ort Ter~ Capital.Gal~ . 10,0QO ·
debenture. note or certificate nrother evidence
.of indebtedness tssued .. by, .any .corporatlon .. .Sho·ii Terl'l')·Capital Loss ·1a;ooo : ...
(inclu~Jng one issued. by a, .qovernment .. or
.political. subdivision), capital.qains- and. lesses 52,00.0.. :·
,. · are recoqnized.to the extent of 100% ii.e., not' . ' .
- s1,1bject to holding period): ar:iy- lQ.$5 shall not be . : .Long.Te.rm Cap,ital Los!i .- 20,000··
. · included' i.n· determining· the -appllcablllty of .the
limitatlon (NIRC, as arpende'd by· TRAIN tew, . .. · . · .
·sec:.39(C)).. _ . . · .. : ·.... :- . ·.: The taxable income.cf Mr. Estoque before personal
. .. .. · .. · .. .
IL . Net-CaJ?.!~lLoss Car,ry-~v.erJ~Etq_g>
. . . an lndivldual taxpayer ·~~arni in·~_n¥=..;,..,,,..._
r-lfu ')\
. . · . . . .. · ... •. . . · ~,,,....~=.,.~~~j,9nsfor ~ac_h year i~ computed asfollows:
J ,~"',.,. ,., ,__ · ·- ~015 · ·
'1 { J -~ . .: · : ·. . . '.
· · ·
- -·· "taxable .year _a net ~Pi!p1J.Lo·s~~!:);,,t6ss.. .-"<Sc1~1tal~~s"eJ~s;:an~a.c~ons:·.
·. (_amou~t n?t . exceedll)Q 4ti,.e-.,;nJ.t· ta~9.!e~~"'-.;S·h~"s,;.s,f\;~ -c•• · • • . ·.
, ,incoi:neJor such ye~r),$~<1,1,kb~~eatetl"in~he ~~. ' ~ ~. ~\_el;Q\.. ~J.;: ·~ .
succeedinq taxable·Y,13~~)sf1ossffrom L!i'e Ji\ 0
""rapitat Los~'?°"t.-i' -....~18,000 100.Y., f'H3,00.0
11
. . ..

. sale or ~xcha~g~ .o.ff~ ~ap!f".?'T assf t hel~ for.~- Sh~rt J<errrt~~'(~ i.) \ . . .· · . · .
. .not- mor~. tha_n- tw11v_e-:::G1:2): ~y~i'l'.>mufGain .' \jl I mo,ooo . ',100.%,
~or~t:is-:-fi,e.:r'--1•" 10,0QO

.'. · · TR~~NLaw, $~c. ~(r)).t ~: · - .. L·

,l . . ·~f~=i
· .... 100% deduction) f':ll§Ji,gas·.am~ndf],d~y~I' !·t,.-,ry~ ..
,:·l ./· _
~· \
;~{Jet-C~i~al'LQij
·. . ; · JI: . . . . · . · ·: ·. 8,?.00.
. f',l~~e: N?".cii~ry~qve~·is~-;1}~te~.to~}~i~~~~,:·. b'!e 15ctm~ . ·. :_. ·_': .. _7,~oo_
I 1_?"'; · --/__,,·,!· . /!~<,., c ' ... · · · . • ·. r;·
.
. as OTJlY appli~S to md\1e~~ta~p.i:\~~~~;·

./u ·. . :-. .
It I~ I~
: ',an :exception to the '!U~~tha~J~s~~~~R 'l ot'!t ,<?~~"fa:~)!: "<; Be~re·.. . • . ,. 0 •0.
d_e.cJ.ui;:ted frO(_ll ~he_-·grqs.~mp.om. ·in
. taxable ye'ar.m whtcl:l tbe'.~sses
To:''~iwe
re.ir\'e:~),e~~v· /.
:'·J.
~~'!'Pion . ,
. . r·. . . .
1?-1.00_~
,·. . .
.

(CIR, vs. PAL, (l.R. N,o. }7,9~59, 'sept~i;Vbe.eZ~lEN'1~B-te~9!>~~e· t~' ~he. net.. ca'pi_ta_l·Jos~ }_s' 'nqt .
2013). ,·.. ... :· ·. . ·. ""· · ·~o.,·?~~"'"'~~tlb.Je~~lip-we.or~marygam
(bus1r,-ess mco~e), ·
· ·. ·. ·. .· .. · .:. _-:-,_..;(jp.1)1~~lf~.Qc~1~~\.-~xable.Income Befpre Exemption
,.· .··>·.
.
·N~LCOv;·NO~CO. · ,~ -~:.l··. ·
. ~
}M"l~~!i~tt~~~e.
11L'i:.',.,:;;, .
· . · · ·._ ·. . · .. ·
~, ... ·. · .._:. 201'6
· .. : ·. · , ~-apiial Ass.elsTransac~ions: : · · :· . :
ii
-~~~ess cap.ital gain~ Ex<;:ess ·.:of: .. allo..;_,~ble . .\.~~-~·; errn: · .. ..:_ . ·
over capital l~sses . deduction's : over· gross . .Capit~I L.'OSS' •' . _- ~20,00_?·. ·"·so% .. :, ?10,000
. i!')CQille '
· Long Te.rm- ·
·capital G~i!l . : . ·. · ·. si,odo : so0k 2~ •.000.
Amount .Qot to· exce~d
No:~uch:li.mltatlci'n. . ·: ... N~t Lorig Tenn Capital Ga.Jn" .·1ij~OOO
the net'taxablei incoriie' :.' ... ", .. ,•,·. ': ·. . .
· for the year. )he. lo~s· · · · · 7"
... NELCO ~01~· ·... ·. ·. . ::
wa~ incuJ!ed.- . · .
- . '--·.· . 1,.000·
P.9,QOO: .

C~n. be· c,arri~d~over in

Cari be carried ove'rfor .the' Note: The. N·~t qapital Loss t~ be carr.ieq over .frbrn
the· succeeding taxat?le. nexf three (3). consecutive' .-20:15,to.ye'ar 2016 should only t?e·P7,000 since.the
year." . . . · . · ,ta.~able years.imrriedia~ely. amount- of capital· loss · should not exceed. ·the
following the year of such . . amount of {he inc4?me befor~ exemptjor:is at the year
loss ..: •,,' whe'n-the loss Wa$ Sl,lsta1ned (VALENCIA& RO.XAS;
supra·fJ_t 309), · ·
'.

. '
·154 l ,;2019 SAN BEPA LAW CENTRALIZED BAR ()PE.RATIONS
 I N·:co·M E .TAX"
SAN BEOA LAW CENiRADzED.'8/lf?
qPERATIQNS,- MEMORYAJD '.io,9
k
*"'++ . MM Hi&. if i . I

. ·. . , SummaryTreatment: : . . .. ' _(VALENCIA & ROXAS, supre at 309)

LOSSES OF
~ •
INDIVID'UAL
.
VS
.. .
CO.RPORATION
I •

, , ·,
I
· · Gan be '-dydu·ctedfrom capital ·gains if :
'OJ3DINARY. ordlnary income is-not enbugh·t6 absorb
· LOSS . . . it..
\ ..
I•

Apply_th~ee-year·rule; can be deduc.ted :

NOLCO from ordinary income or. (net) capital' .•
gain·.· . · ·
~:·.. INDIVIDUAL. · .;
TAXPAYER.

· ·.~.CAPITAL Apply _t1cii~·ing:·period.Ded~ctlble ft~~ .

. i.oss : capital gain only (NIRC,.as amendedby·.
.TR.:4IN1 Sec .. 39(C)J. . .

. ,

c·oRPORATE.. · '
.. TAXPAYER .
': .. ·.

,'/.Y''

1(
,.,..
s~-..
.- ··:

,·

..
\ . .

: r:

!··

-,....

2019.SAN BEDAtAW CENTRALIZED BAR OPERATIONS I 155

 .IN.CO.ME.TAX
SAN SEDA LAVl·CENTRALIZ~OfJAR OP£RATIOJ>!S-.M'EMORY·AIO ~019

. . .. . . .· . . . ~. .
Subject of Capital Gains .Tax on the Sale of. Real Properties by. an ind,ividual and a Corporate Taxpayer
. . . . . . . . . .'· .. . ' .

Citi~en (Resident or Non-resident): . . Th~. capltaf ·gain~ presumed ·;fo· have···been .reallz~d . from the sale,
(NIRC, as .emended 9y TRAIN. Law,' exchange.. : qr oth'er 'disposition 'of· real property located ih the
Sec. 24.'{0)(1)) · · . . · .: ·. .Philippines, classified as capltalassets. · .·
. . . . .· .

.B.e~ident ·~lien : . . . ·. . fhe·;·~a~ital ·.gain.~. pres~~ed·:.to- h1ve 'b~en'

r~~llze~ .. frc1rr{·'the-. sale,
. (NIRC; as emendea ·.b'l TRA/N'Lc!W, exchange. 'or. other dispcsition .of :reai property 'lb.cated· in ,the··
-Sec. 24 (0)(1)) -; ' . ·· .· · .... Phitipplnes; classitled as capital assets, .' ·
. .. . . . ·, ~ . ·. . ..

NRA·ET·B or ~~t within the Philippine-~ Capiial .fl ains:real~zedj(QO,'the sale: exchange or ~the'r dis):icisition C,f
~al""f[i'ope1·.J· ]\J~~:,.,· . : . · . .. . · · . .
0

. (f'!l~C~ es
.ameQded:J:)y·TRAIN .. Law,_ r
··: Sec.·2? (A)(3)). .
• • • •
..
•
·· ,.
• • •
..~
&
:""" ~
'
~ .. '\ ·f :r· ~~, · · ·.
.J;. . ~~J.:::~~-". _,.?, .

. ·.·.··

. ·., . . .·. ..
·. ,·
-. .. -,· . ,, ' ~

...
:·- ·. . '. ·- ...
. ~ ·...
. ',,
...
: .
r-

·. '

15s 1. 2ois SAN BEDA LAW_CENTRAL!ZED.BAR o~ERATIONS.

 -·
l'°NC,d.ME·TAX.
SAN SEDA I.AW'CENTRALIZED BAR OPE:RATIONS - M~MORY AID :20J9
H :Wii&-4 aAµW) . i!HIR+

. (I\JIRC, as amended by TRAIN; Sec. 40 (BJ;

RULES.ON.EXCHANGES OP· . INGL.ES, ~upra ~t 181-182) . . ·
PROPJ}RTY' Note: Nos.. 1-4 abov~ are· considered the original·
basis. of'prope.rty to ~e transferred_. If th_f?. _acquisition
cost of the. property· is incteased l;>y !he amour.ti of.
. D~termiriation of the ·Amo'ut'!t of Gains, and' L:os~
improve'ments that materially add fo the·value of the:
'.i\ 1° . ·Gain .:..'excess of the amount realized. overt.he.·
%' . ' 't5asis or adjusted ·ba~is :: . . . . . ' .
_· property · ot appreciably' prol.ong its_·. life :iess ·
a·ccumulated -depreciation, the adj Listed basis of .the
$..: . 2. L.oss - excess··of tl)e basls or adjust~d_.. basis,_ · cost in No's.. 1 ... 4. shall be -used as_ original basis (Id.):
;t<', ·over the amount realized .. ' ' . ·: ..
l:: 3.. Arri"ount Realized. - · sum of money 'received
: plus ·the fair marke~· yalue 'of tfie. property (other
Sub_s_tit_uted.Basfs . . . ., · ·· . . . , ..
Basis for .determ,ining gain or-loss on a subsequ_ent ...
. than. money) received {f\j/RC, as._ amended by
~ale,o°r' disposition ofproperty:subjecto.f the tax-free. ··
.,· T~AIN L~w., Sec. 40)- · · . · . . · .. ·
· excflange (NfRC, a·s amended. by TRAINLaw, Sec .
. 40(C)(5)(c;r)J{Please see discussion l:)eloW 'ori 'Tax-
Formula;_ ·. · Free Excha.nges). · · · · · · ·
xx

Add: FMVof:the property received ..... xx

· 1. -subsututed Basis
"'"
'stocks or securities
reeeived by the. transferor. _on a .tax-free '
ot
. . . . . ./if;}' .. ;. exchange · . ·.
· Amount realized · . · · · · Kk-·· //.'t ·.1 • •
. . .. . .: ·.f.~t.;._.r"i/.~:-~.f/..\ . . . . . . ·.
Less: BasJ~ of the.'· property sold 'or (\&)':(.'.i---~f~:.:).·_. · Formula (R.i:l. No'._' 18-200_1, S13c, 2):
·
disposed -- · · · . J}: {/~ 7:1'{.;~>'.'.~ . ·:f)r;ig_
. ina_I °b:~s,is of the stock ·i:lr securities
;.,;;/ ·[·,f"',·· ..:•1/!.••)j)'.,'•.-,··l'IEirn' "'d?} ... ·• . ·.
GAIN or LOS~.. from.' the saie_ -,C?-r!.!'J!', ~;~Rt~-r,~-~xe~l\ . · . ·. ... . . . l(X

·dispositiqn. ·. · · ..... · ·. · ~::'.--:,,.,..· · .xx_;J"'~'' . ·. LesJ;,f~oney.received_ (includlnq .

. ·, :;- . · . · · · · · .- . . . .: r;t;t -,· · );,"1'~ · · · 11 [rht,
liab,ility assumed by the
e···.:ii· fS 1~or-~xc.tiange-ot.P)"dp)~"f . ; :~:,,. . /(. · ~tra~,s-tere_eofprope_rtyorthe .•
'· asl, p a .. · · · .. ·•. ,,_'(!(:,;,_: . ··",#'':-:;> . ft\ · f/ .. ham~~nt_ of liability OR, the ., .(XX·)

. '/.ii':.~r,f.
,~' :2~ , V..C,::.;i' \ ~i~·. · .. ·. L ... ~~E.~ ,.
. .. 1 ; 'p'
. urc , . h.aJ,e . .. v • •• ,.· • -c,:.;$···.•f.
,-, •
.•.-.,.
..,.., '['_.. ,,~ .
'. ffJ ,t;
. , s·ff::i]t',lf.H~l,ri-/!J:,
,
,. ~· 'ii . 1.1\A\'Jr
. .
~~·i~,...v: 0 f 0ith er property
. .
(XX) .
L_:.:...:._;::.:...::......._ _:__ __,.....:..-c..---+F.:... .,,·,._"i
••,. . -~:,i::.;,:;,.°:'ir-.l.:~.-"-,
..:....,,:--,,,.;::::ir:-..-'"'4'
• .;= ti!/,
-'-~'i..lir. . . . .. -'.""received ·
2. lnherltance . air. : m,~r.-.e, · i,~~ce . '!' . r~f . . . , . . .. .
.value: a$sto;6, th~)zate .of 1:l0.1='',tl~dq: Amo4nt treate<;I ·as· dividend, .. xx.
acqvii3itioti)\1.£fa. ·..,,...,. --:1~Y~~\,,,<:i~·~":/hr.-~·. ·. ·_. · : ·; · · .
L.--..:c...:...:. __ ::.._-=
•. -•.-.-;1:;,,.~
~---=-~--1---· ...;..,:-'-'-.- ..:,__. :. .,_ ..,;;t"-·:?. .......~--~--~--~·:c;;l')'lo,unt of any _gain recognized
iA;;,b'.ic,;..f·
.3.. ·Gift The _same ~- !f _1t-1Yt.~al_d . , . · . . . on the exchange.· · · . · xx
be in tlje .!J~'tl~_~f.th_e · · · · ·
donor . or... 'ti\¢:::'· 1ast ,, .
.-·,·
.. ·pre'9ed_ing: ·.OY,mer .•: by Substft~t~ci the Sto_c!<s.or,' .Basis ·of
.·,
wJ,om• . it · wa~ . · not
_. acquired . . ·. by ' . gift.
Securitie~ xx >
. .. ·' .. ' . .
.· The 'property r~ceiv~d Bf? "boot" shall fiav_e as basis
. Excepf.i(subh 't;>as·i~ is - ·. its' f~ir:,rn,frke~value._ ·
·• ...... ...: great~r th~m ;tbe-'._fair
soi:it~ ·il·1oney: andl~r pther. property· received>i~
... j
·, · · ·market v.alue .- of the .
. ·.property. the lim~ 'of . at . . exces~ ·of the stpck or :securities received . by:the .
.. · · the .gift -thei'r, · for the . fransf{iror_ on !3: tax-free_ exch,mge ' .
' ·. 'purp,bs_e. of _d~_tE:rmiriing· . ' '
loss, the basis sh.all be .. If the transferor receives several kincls of stocks ·or .
· ... such,fairh'_la_rkef val.;i.e. · seicurities; the CIR .i.s-auth'orized to ·allocate the basis .
4'. A6qufred for l~ss · The- ·amount paid b°y_ the among the several. classes of stock~ or- securities
(R.R. No: 18.-2001., Sec. _2}. . . · · . _.· ·
··'than ar.1 adequ13t~. . .transferee- : :t9r' ·_the
. ·cOfjJ:;iderati<:>n: property .
5.' Acquired in a. . '.
' ·pre~o'us·tax-free
' . ' e)(c:hange

2.019 SAN BEDAl,.AW CENTRALIZED BAR OPERATIONS ] 157

 Mi •
INCOME.TAX
SAN SEDA LAW CENTRAL/ZED BAR OPERATl~NS.- MEMORY AID 2019
. Mi M tis . MiiW-S
- HWiMIWERF

..... &&, Af
w

2. Substifuted Basis.of tn'e Property corporatlon, a ', party, to the . merger. or

. Transfer~ed fn the. Hands of the Tra'nsferee.
. a:.Origincil basis'in "the _hands of _the transferor_ ..
Please seepreviouscii~c_ussion .. ·. .
b. Pius: theamountof the gain recognized-to
. the transferor on the transfer
· · · ·
· R~9uisi\es:toi- re-cog_ni_tion.of. gain or toss iri an·
exchange· of property: .• ·
i. . The property received is 'essentially different
. from the propertydlsposed c;:if.and· ·· · .. · ..
ij. The property received has- mar.ket_value.(R.R.
No. 2;. sec.· HO).: .. · . ·
, . ..
. · G·eh~ral·. ·Rule::'-"l)pon,: -.th~. sale, or:··~>«:ha.r:ige .of
. pr.operty,"the entire amount of the gair:i or loss, as the
case may be; shall be': recoqnized.. (NIRC, Sec.
consolidation (securityfor stock); or ..
4. rt property is transferred to a corporation by a
person in 'exchanqe · for, stock' <?.r unit of ·
.p.artidpation in such a corporation otwhich_ as' .
a result ohf_suc~t:hexc1hhari.sat_id _ge persod~·a~fone
. or toqet er WI O ers, AO excee ing OUr
persons, gairi·s control of'.eaid 'corporatlon: ·
· Provided, That stocks issued for services
·. . , shall not be. consldered.as issued in return for
property ·(.estate planning) ·(NIRC, ~ec. 4(!
(C)(2))._· . - .. ·.,. · ·'.. .: ' · : ... ·,
. . . .
· · - Note~· Con trot means ·-0v.,-~€jrship of stocks in. a...
corporation possesslnq 'at least fifty-on~ percent.
(51%) of the total vof)ng.power of all cl.;i_sses- of
stocks entitled to' vote (NIRC, 'Sec. 40 (C)(6)(c))".
. ,. · · · . e •.

. . .: .· . . . ·. ·
· .40(C)(1)).

.Exceptiorisc'.
·, _.

, .
·.
»« · "ifJ
. ·· . ~-=~T-a~.ree

.· ,;P'.-.-z, I:\ ....

Exchanges · ·.
T~x'.:fre\'::...._~xch~ngesre.fer.. to those instances
\. .Jn't)foe/at~d~l~Se<;:tion· 40(C)f2) of the, NIRC~ as
.

· · . 1) Gain re~qgm:zed but loss ~,;,t r~c?~hft:.~$tJ.Q.:=~ame.o._e:ied}.~y~4'~~ •. that are. not su~ject to lncom_e .
. · . _·tran:,act,.o~s between ~e~~l?E-~l:.l~e~l'.>..:(-Nl1:S~ .......J:~ ~J;}Jtal~l~~\J.l~~x. Documen~9ry. Stamp _T~x .
. as $mencfe_(f by TR_AIN/!-aw-;;.~$.p5j.y'3'6@}):=. d,f:,~ anc:t/or~V5'Jlcr~.;aadeA~~ax,as the case.may be.
2) ·Exchanges_ Solely tfjj._f~/·"ii1nd!(ax_~Fnt.~ · J: };,(: \ .'\'f""J..J \.. :· · · ' · .
~c~ang_es.
.of,
/ '"VJ'. ·.:J . .!; ~t Ta)t-Free\Exch'~ng~s,<?J ~roperty . '' . . ..

and . u .·_'{;;;,,
: p .r
It IS ·a11. e_xcha~ge p!,operyWill{ e~ert¥.Q1~~-..NQ.--!fl(n:Of, C1~ss\1s. recogni:2ed w~en':· m
in~
·,->-~ ,.::_.,.m;-~rsu,13nce ofic'\--~latigit merger or conso.hdat,on:
_ .no· money is mvolv~cl-(~fi'._sh,are, ohff.i:..~"9j[ :'\. __,!fta,. : Akorpor~Ji~H~ch·is·a party t9·a·rnerge~ or,
·· . ': ·exchaT?_ged . f~~-. ~?J!'~' ij of stopt?." (Q;.~ill"liir$cl : ~~~lid.ajii:>nr~X}~.al)g~s_Pr~J?erw~olely;for ."
. · ~--;:.=: . JsJ..~WirJ{rcorp.w~J1oh,which 1s a,paftY.·to the ..
. D9MON_DO"f, supr:pa{-3{)~)•. , .,...;"'~ ,

where. the' exchang~'-is 'not so. ffy~:i~rn~,

f
3) Gain .recognized l::i~~·.'l~l no r:9~~n12;e~. .lji] . /. )"iger.Pd'r{GO~solidation (Property . For·
~lf~?d'~ock)' f }J . · .·
·. a
(NlR<:;;i as : ame_nd\1 by.\TR > -0~~~,:; J~,.,;- :SS . sQ$r~hold,.r . .exchanges st_ock. ·}n ~-
."'"sec.40(~)(3)). . . ·. ;. : -~ ~.,._~/ ~ co~i>ratio~;_i'hic~is a party_to the m_erger-
. .. ·,: .. :.. ·. .. \.)C/Eb,_rf\.h. ~.9~c9nsoli9at1.~nJ•.. so1ely· for the stock. of.
Note: - 6x~hanQe. spfe!y~~n ~?~ s . ·~-".ano\h)}r,Abrp0ra~1on also a party to _:the
exchange of property_ w1t.h amot_m~,,rciP,te ~~~tl-"9j~r .eonscilidation (Stock For,Stock);
and no-money is ii:ivolved_.(e)~~af~s of·MN~"ffe"' . - .· · . , ·, ·
stoc,R excha119ed for,.sh~res_ ~f stc;ick,,~~~ .....~--·0:-P· ~ security,hpl~er of a corporation, w~ich Js a
DOMONDON, Tf!Xa_t,on, s.upra at.3~6).·. . party_ .·to the- merger. or. cons9hdabon,
·:ex~hanges ·. ·h.is . se"curities . itl ..... such
. (Piease" . see . previous;. diSCJ!$Sion ... ·o_ri
,. . , corporation, i;;olely for stock 6.r. securities hf
. transactibn$-.b~twe{m relatedparties).
sueh -corporation, a party·"tQ. the merger or
. corisolida.tion. (S.ec_tirity_ForSto.ck);f,l;)d · .
· lnsianc·e~-w~en .the. G.ain .~~ L9;s o.ri·the ·:s~i~
2 .. · ,r proper:ty'·is transferred_to·. a ·corporation:bY a
or Excha'nge·of Property J,s .Not Repognized'.. · .., · perscm ·in . exchq"nge. ·fqr ·stock · or unit of
.f. ·A°cbrpo:r~uon·whi~h· is a·_party·~o ir"J'!.lergei'. qr· · P<:1iticipation il\.such a' corpo~ation ofwl:lich as a
.. · c6nso.lidation,:.~xehanges property :sole.ry Jor · result of such exchange· ~aid· per~on, alone or
·, stoc~ in. a cp~pbration! w~ich is a p_arty~o t~~ · together with others,-, nQt exceeding f.our (4)
"rr1erger .or ~nselidation ·(propertyfor stc;,ck); · · · · P.·ers.ons,.·. g~ins. control of said corporation:
·2. A·· -shareholder·. exchanges ·_.stock .:_in· a Provided,. that ·stocks -issued 'fq·r services sha]t
dorp,oratic;>1'.i,wtiich )s a. party .J~ the rnerge.r_or :nor- be considered .as is"s"ued· jn retui'n" 'for.
Gonsolidat16n; ~oreLY for ~he stock _of. anotner· property .(Estate Piaririing) .(NiRC1 "?.$ -~mended .
·' . . corporatio"ri also a party to, t_lie merger. or by.°TRAIN Law, "se_c. 4.0(C)f2)(r;JJ: ': · .
· · · consolidation-(s'tock"for stock); · ..
.··3. ··A ·security hol!-1er of a <:_:orporation, whiclJ ·is. ~: Illustration:.. . . . . . '
. . party. .to. the'., merger ' or .consolidatio.r:i, A and B· assigned _or'con'!eyed to X Corporation real
exchanges hi$. securities 111 such corporation, properties in payment of the stocks"· qf.X. :After the
solely' for stock or secur.ities in another exchange, an_d as a· result of such exchange,. A and.

158 ·I 2ois
. . . SEDA LAW
SAN .. CENTRALIZED·BAR ...
OPERATIONS
. .
 IN.CO.ME TAX·
...'!..... 'SAN BEf:'A LAW CENT;RALIZEDBAR OPERATIONS - MEMORY AID 2019
~" . d.F PAW OtWit. ii HEWN FPIS'F IP
Jt·
1·
:. . B gained control ·of X. Accordingly, no gai'n or loss 'does is to tax "paperprafits" and, to altow deductlon
'?:,·· shall be'recoqnlzed to both transferors (A and B) arid. of "papertosses" (ExplanatoryNote to H:B. No.
l·
•{~
the transf.eree'fX). .
'
·
,I
· · 7235, enacted inu»R,A. No: 1921 whichinserted the
. exceptions). ... . .
lt· · HoVl(ever, If the 'transferors later .sell or excnanqethe .
\ .. '. shares _of-stock acquired bf them mexchanqe, they Rule;of'I Upstream Mer~ier· .
"' .shall besubject tolnccme tax on.the gains derived. .. . . An upstream merger between.a parent company and·
from such saleor.exchanqe (1 DE LEON,.supre at · its subsidiaries where iheparent company wili not be
542) .. ; .. . . · · . . . issuing any shares to the' aubsldtartes in exchange
·'fi·

;t . Note;· Tec.h,nlc.ally,_'ther.eis, no-tax exempti~n:,evencif · .:

r.1 · . · the exchange .ts solely in-kind. The exemption refers
forthe assets to be transferred 'as .a result of the: .
merger takes.the nature of.a donation .macle by the
subsidlarles to fhelr parent company· arid' not a tax- ..
;;:-:· only · to . the · initial e):(.cl:la.nge; There· is merely,· a; · :frEle 'excbanqetrahsacttcn contemplatedin Section ·
.4· ·. deferral- of· .the; ·income 'tax ... Thus,' upqn . the · · .40~q(2) of the NIRC '(BIR .Ruling' No: 614-12,
;~\' . subsequent, sale. or' dlspositlon qf. the .property · .Novemoers, 2012): .. . . .
1-"· ·· 1;:·ove_red ·t>Y th~. ri-)er~er,. consolidation or. tax-free ,.. ·
.if· exchange, by the transferor .to the. transferee, the : .llh1stt~(io't'1:· .A Corp., a· domestic ··corporation,·
t, historical CO$.t or basls shall be used for_ purposes of . . . entered· into. ·· a : rnerqer- with . ' tts. wholly-owned
· :. · determining tfte gain- or loss from the subsequent domesttc.subskflartes, i;3 Corp.. and C Corp·. A Corp ..
f. ·sale or_fr~_nsfer_ (MAM,'ALATEO, Income Tax; supr(!.fi':,, · is the $\Jtviyi_ng ~orp·or~tion. Pursuai:it.t~ the metger,
· at.?20).. . . . . . _ . . . . .· · · . »4:f~\ ~ .c.~rp.. and C C~rp, w1I! transfe~all th.e1r a~sets and
. · · · . ·. · '. .· . /',,,1({ . .'l',x··l!ab1ht1es to A Corp.: H~wev~r. ·.smce l;3 Corp. and C
· DefiniUons - . ;. · · · ·. . · · . . Ci·i{;;,;.:':_;:;:icor.p:_ ,are .wholly-owned by A· ~orp. prior to the
·1. Securitie~. ~ . b~nds and ·debentures· l:lu(in·~!~· ,:ii)Lr.nerger, :A C.O[P. will.- nb longer ,is~·ue any share~_of
,. . · . ;'!nqtes" of whatever-clas~ or.duration (N.!ftl!;; \f??f~_ti!!1le..\:!t!nfF.O~jperatjon of the· asse_ts 'and liapllities
·$· . . · · · · amen,ded_ by TRI,!~,_ s':_c.. 40 '(C)(~2{flf{- ., .. -;:,' IJ transf~rr~d~·l~i.t.re;~ergerbet~eeri A Corp:. B Corp ..
k: ·
f
2., .Me_rg~r or-C~>n,s().hd~.bon~ me.~0i:rtli··-~~~dtnaJtr".J'! . anq _c· Gorr:r#r.cRns.1d~red a tax-free merger .under
merger,_or .con?oltd.;ittor:i, or·thel,c(f,q~1s1tton..u-by·~\- Sectton·-40(~Jt2~._oftheNIRC? .· . ·. · .. , ..

~~:J:~i~i:~~~1f~~~~~.rP~r~~(~~:~r~~~!tJ~i..·. ~~•.:·~o.. T~~tt~id:i~r~.-~rga~i~atio~is': ~n·.;~P~t~~~m :'

~ndertaken for a. bona !~i 1·busi:ry~1f·.P~Wo$0) :·.
. and _not. solely· fa: the pl'l1f?OS_e"''t5f~(;!Sr?pm!!)io.~.
r"'~. m~~~e~,tf~~e_:ntfl pa·rent:·. company: ·. af'11 it~
:. ~::~ ,~,U~~l!Jl~i';t:t;~~i,W.\te.~f~lr par.et:if?-~mp~11r Wiii · ~ot be
burderi of taxation· (NIR~1.,..aSY<{TJJf?(;lded<by_ {;1 ·issumgar-iy~~sJo the subs1.d1anes m excha~ge
·. TRAIN ~aw,:._Sec.·4Q·.(~)(6){b)"f;¢/ ''{\: )· .
. .' · .. ·. . · · . ·~1, ; :
b for the _assets to ·be transfe.n:ed· as. a result of _the
.1.~j. :. · . . :• .hr,tn,~~r. l_n effe~t. the transfe! ~a~e$ the na~ure :ol.a . · .
In . deterrmrnng whether a bona \;f1d~bus1ness Ji r,• ,donatron-made by (he subs1d1anes· to their parent
to
pu·rpoife: exists;_ ea9~ an_d .everR;-;stepj?t)ne-~~,;~iNpaWw?lontrary· what· -is· c<;mteinp_lated · in .
tr~nsact1or;i_ ~hafl be ~.on~1d~re9 -~J;"d th~qwflo,le . : _ S1;ic~qri 40(C)(2) of the NIRC: In .the same marm~,r;
trarisactio.n ''bf series. r;>f. V~l'isactidQ,\:?,.§!\allbe· . · . th~ intende_d.merger also has fhe effect of di~olving
treate1d ·as. a ~ingre .unit~ .Prc;,videa: · that jn'. ·. · and iiqui_datio.g thifsubsidiaries wittiodt. p~yrnei:it.'o'f..
. determining . whether ·ttie 'property. frar\'sferr~d·. · · cor.respondin·g taxes (BIR Ruling q14-:12, November.
· ., constitutes a.s.ubsta'ntial ·portion of ·t11e.property 9, 201.4).': '! : · · . . .. , _ . .
. of. tl:ie .tr,:insfe(or,.'the - term. ·"pr.operty~. ·$hall . .
include.\he Ccj~l)·a~sets i::>ffhe tr~osferor'(NIRC, Exc)Ja~g~s· No(~oleiy.inKind: , .
as amended by TRAIN/Sec.. 40 (C)(6)(b)). ' . · lt'·imi.olves -an·: ex<;:hange pf property_ ·riot solely for
;,\ . ·· · · ·· · ' · ··. .· stocks{for shares ot.-stock or SI?ci.Jrities· p!Us mone·y
~; · · 3." ·.control..- C1wn~r.ship of stocks i~· a cbrporation'·. . ·an.ct/or. otrie·r . propei':ty including· .assumption ·of·
possessing -at le_ast 'f:ifty-orw pen~ent (510/o): of liability); . . . .... · :. . .. .
the,fotal voting-pow'~J of aJJ.' classes of stoQkS· 1: If the individual, a,sh.ar~holcier, a sectirjty.holder
. etititled·fo vote '(NIRC,: as- airzehded by TRAIN. a · or corporation ·receives not' on.ly .. sfock or
. · Law, Sec. 40(C)(6){.c)); · · · · ... securities but also,moriey and/or property: ·. ·
. · a .. · Gain, if any,. is recogl'.lized in an a1J1,0.unt not
R~ason'for'th~.E.x~~ptioris , . ,· ,in'·exces's orttie.. sum of the r:noney'and fair'
. More often . , thah not, exchanges · involved . in ..rriarket ·.. value.· 9f ~uch. otlier 'prop13rty ·
corporate combinatlont do not .r-esult in: substantial r,e<,eived. . . . : . . . .
. a_lt.eratiol').. in .:tlJe · in~erest of those .who· own. the · ··. ·b. Loss is i:10t. recognized (NIR.C,.as af!lencfed
business affected by the traf1saclion b'efore it was by TRAIN: Law, Sec .. 40(C)(3)(a)).·
·.refori:n.e·d.·When, the.-goveminent imposes a tax on
a
'th,e:suppose,~gain'.or when it allovyl> de.dliction on
th~ suppp~ed. loss,· what the gove.r'nlll~ht ~ctually

2019 .SAN SEDA LAW C:ENTRALIZE.DBAR.OPERATIONS 159

 INCOME.TAX
Sl.oN BEDI\ LAW CENTflAJ;/ZED B~"R OPER'ATIO!'JS - MEMORY AID 2~19.
a, a DIA

Note: In ca.se of a shareholder, if the ·money."

. and/or 6t~er property re_ceived bas the ·effe9i. of ·
. a distribution of a taxable ci_ividend, there shall
. ·~I--.-_·_·
E_· A_N_n_ .....·S!""s_T . I
_s_i_A_T_E_s_._.._T_R_u'
· be taxed as·. dividend· to the shareholger an
aniounfot the gain recognized:not in e~cess of Esjafe . . . . .
•his pr9po'rtiona~e. Sharee 'Of -the.· undistributed . It refers to the mass of properties. and .assets left
earnings and 'profits . of. the. ·corf:)oration. The · behind by the.deceased(~-,'!\ DOMON[).ON, at supra
remainder:, lf any, of th~ ga.in recogn·ize.dshall be .. 74), . · .
treated :as a capital ·gain (/II/RC, as amend_ed. by
TRAIN La·w, Se.c. 40(C)(3)(a)).· .. · . · .. · . /1t ini;;ludes· not
o('lly the .property and .transmissible
rig_hts and obligatior:is ,existing at· th.~. time --of his
2 .. ·. If- the. transferor: corporation .. re~~ivetnot · only death; but also ,tJiose. which have accru'ed thereto
_shares .of stock but also 'money and/or other slrice't_he openin~ o(the success.ion (CIVIL :90bE, · .
property, · . . · · · . · ·. • . . Art: 781). .
'. i;. . 1( the. corporatlon · recelvlnq · such· rnone.y Trusts. . . .
. andf<;>t .. ot_her . property .. dis?"ibµtes it in ..... "Ar)" arra.ngement created 'by Will or 'by. an agreement"
· . PL!r~u~nc~ · of. the· .:~Ian of · merger .-or .. · . under which the property is passed to' a'r1other- for.
consoh<iat100, no. gall"! to the corporation . 'conservation . or' "investment" with the : income
.. .; ~hall ~~- re_cog"ni~e'df~orn _the e?<-chang~-.;,-::=~==ttie:r~fzyrn. ·af)d. ulti"mately'the corpus (principal) to be
_II. ,• Othe'""".1~~ •. the_ gain, 1f. any, ~~b~II belLJ. d)strt6utef~~ accordance with the directions. of the
· recoqnlzed but m an a_m<>1,1ntJ¢~..f'.i~,~ie.~~t, .t;;f&i:ftor!as),ext,~~sediri ihe gover.nin~r instrument (1
· of. the sui:n of. such mOl}.~Y~na~t~-~!lf..~--=~""D5J.EON(stJpra~at 694)-. : ·· · .
market value :of such ~Jper -~fp .~rf.y so · · . . ·,·~. V · ~~-, : . ·
. received; ~hi!;:~ is·:not;_pl~~ibV}'fo' ,.,l).?A0s· ;t>."'_tl·r:rsWi'iM~,~al..leJationstiip between oneperson
. to the corporation rs ~041rc~fl12ed (NIRj. , h~ving
. · as· amended by £1. TR'A·ilj)
. 40{C)(3)(b)).· . · fl .
Lt; 1P ~~4i1bJe\owners.hip·of property -anc:J .
t
sJ'c. -;;~ a'rrqti"Jer. ·· -~rso~, 1fAi~,g. the_-. le~al title to such
.f' · . -=--·- ,.r·'-v_~.£e:~wtheef~Dle~ ownership . of the former ·
. . . . . t /-~"·µ, . . . . : : ,---~~
1_
. r, epji~!!)g·h1'!1 to tl:\e E?,~~rt,nan,ce.of certain dutiesand
_If the taxp.~yer ~ec~!".'efsteic~~?r~e?~~1es.µ. ~-~ ·., t::fh~e~erc}.se ~-f ~\rtai~_11wers ~y t_he_lc1tt~r (Estate
~~sump;it1on of hab1ht1ef _;-,::'! N .. . . mntiP--~a.baif.u!JfJ.an Y'· ~~J{? .· et. al, ~-R: No. -175073,
· ·· r~~ r~ ~ . ·.
l
. "..

· _General Rule: S.uch asi::~l\~on-6{f~~tj'wl5iuo~. 1 ,;.-: .. /);._:);

,;:;J-C.J11.1gpstimc2])11 ~# · q ·.·· ·. , . . . · ·.
· JI t-.~1
. .
shall not: be tr.eated: ~s\,.fuon~y· aAtlf~l~th1@. 1~'1;f~~S/,@.yeither exp'r2.ss · or implied .. Express or
. pro~erty,_: an<1. ~h~'-' not\c~y~n\th_e \~~a'hsP ~1 ;ep(--tr sts a;,~ cr~.si\~~- by t~-~-.direct and po~iti~e
frofQ bemg w1thm ~he· ~fcept10~ .(~fR~ .. -~ e parties~· b:6~s.ome °"'."ntl~g ?r ~ee~. or.~111,.
ame_ndedby TRfHN,Sec. )'(9(C)(4(~l.. (.3'cf Eif{l>r~pY, ra{;ttforarat~si,r-1'.lnword:5 evmcmg an ·mtent1on
.. .· :· \.: ·;... f~,-~~~0 ~~·a·Yf~Jjrhplied trusts :--also·caned·':trusts
_Exc1;ptioi:i: _If. ther:amount .·o~~t!i~~~hfiers~=P-foP1ff~J).~JJaW,""i11dif.?ct ti:usts".ana "involu~tary
as~ume_d Rrus t_he:amo\'ntpf th&ciltab1li l
to.~ -1J&.~~~W;1se ~Y l~gal 1~_Ph~~lion:.based o~ th~
Wh1ch the proeerty 1s st,1bJect exc~ed ~.._ I of 1V .pr~2)'Jlel1: m_tei:it10.~ of the parties or on. eq1,utable .
. the adjusted ;l;>asis :orthe property-_ transfefr ; . ":""1>rint:iples itid~penc:fe"nt of ·the particular iritention. of ..
. then &.uch e,xcess shan be considered as a gain . Jhe· pai:ties,. They are· those which; . Without.' being
:·tr<:>~.the·sale or:exchange of.a cap_it&l a_sset or. . . exp·ress?:,li are dEidllciblE:drom. the .nati.irei" of Ole
of property.which .is not .a C~pitai_:assEid, air·~he . transaction _as ,matters of in,t~nt or;. independently 9f
: : case may- be .(NIRC,. as.· amefid~d:by TRAIN . · . th~ . rarticula.r• intentiori. of. the · parties,· as ···beitig
· LaW.:Sec. 40(C)(4)(b)).•. : · ·: · . ' · ·.. . · ·inferred->(rom· th~ t(ansaction bY:. 9peration ·of" law-
. ·:. · .. · .' . . . . . . . ··· .. : .. oasic~_lly by reasori ofequity (fi:s.tatebfCabacilngan..
·other lnst~l:)Ces· wheri Gain 'IS Rec.ognized but ·. ·v, Laigo,et fl/, RR. No. 175073, August 1Q,; 2011)...
Lo~s ·is N,ot Recognized: (I~ ·wAR) . .· · . · . · ·· · · · · · · ·· ·
. 1 , . _IllE:lga I · trans1;1.ct1ons · (R"R
.. : Nf.?: 02-40;.Sec. 96tl:.,:;. · · Taxa.bility of-Estates a_hd.Tr~sts' . . ..
· 2 .. · Wash· sales .. by_ non~ealers .Qf. secur1ties. and. ··Estates' ahd. ·1rusts· are ·.considered ·as' in",;lividucils
.. ·. when not suqje'ct ·to ttie ·stock' transaclion tax . . . . taxable" as separate .ta?(payer, : exc·ept revocable.-
.. (NIRC;" as amenr:Jed by TRAIN, Sec: 38(~)); '. · .· trusts,: the income· of which shali be . included in.
3: · Sales and excha:nges_that are· not ~rm's length; · ·.· . computiog tt'ie taxable'.incom.e· oft.tie gra.ntor (1.DE.
and · · · .
· · LEON, ... .
supraat 695), ~. .· • · · · -
4. Tr~n.sactions . between ,Belated . taxp~yers·
; (NIR.C,a!:i amended by, Tf:~IN:Law, Sec. 36(8))..
. ·:The iricc;n:ie· ot estates or a~y k1nct -~t property.·h~ld in .
. 'trust.are tax~ble, including:. . . . . . ..
L · Income accumulated· in trust"f,or.the· benefit or"
. unborn or unasc~rtained person or.persons with ..
C?ntingent. interests, and incom'e ·accumulated ..
'.·
....
160
. 1· 2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS
. . . . . . . ·. . .,,. . . .· "
 r. - . 1-NC0"'1-.E'.TAX
"'.
t'-.
SAN BEDA LAW CENtAALIZED.~ OP.~7!~lNS.- .MEM,O(?YAID 2019

t['--
,
· or.held for f~t~;e.ci'istribution.under the terms.of
the wiif_ or trust; : . · . . · ... · - · .
ii.·. Income which is to be distributedcurrently by the
.
'. guardian df pn rnf~nt which is to- be h~td or.
distributed as the court may.direct (NIRC, Sec.
61(A)).
~ fiduciary to the . beneficiaries, and. income
~1 · _collectecl 'bya guardia·I). of an infant which is to Notes: .
ff:. be held ot distributed as the court- may direct; i. The aorount so allowed as a. deduction.
f-. Iii. . Income received by estates. of·. deceased . . shall pe included in .computingthe taxable

~-·. ·
::.,_i ._

~ persons durln·g· th_e·. period of administration or - income .of the beneficiaries, .whetner ·
,f[ settlement of. the estate; -and . . distributed -to .: them or not . (NIRC; Sec.
11,·. iv. tncome.whlch, i'n.~the.discretion of the.fiduciary, . . 61(A)). - . . . .. ., ._
~- ..:m!3Y Q.f? either-dlstributed to the beneficiaries ·or' .. ii: There is· a creditable withholding. tax on
accumulated (NIRC_, Set. 60): · payment to the: heir of 15% {R.R. No: 02-:

I
•.... T~BLE INC.OME:OF,ESTA.TE_S.. 981 Sec. 2·57·2(F)).· .. · .· ._· ...
:'. . For. lncorne.tax purposes, estates are classified into: · b: · : There shall be allowed as an ·
additional .
· a. '. Estate· under-ludlciatadrninlstretlon . ·. '. , , . · . . deduction.in computing'the taxable income of
'..:· . b..:. Estate riqf under.ludlcial adrnlntstration.(N/RC, . . . the e~tafe 'the 8mount" ot the income ofthe
K _- · es amended by.TRfi.lN..Law; _.Sec. _69,(A)(q)). . : .estate -or trust 'for, its taxable year,,' which is . . :
u--· · . • • . . • • • .. .property paid or. credited. during. such .year to ·.
~. A. Est~te _u_nd~r JL!d1c_1al A:~m1.h1strat1on : ·""~ .- . any ·legatee heir or beneficiary (NIRC: 'se«.
g~. ·_ Income received by estates of deceas_ed pers~!:i~?f) . 61 (B)). . .' · ·. · ' ·. ·
l.: ~- · . ·_during the pe~o_d·ofadminlstration-or .~stuern;~~;})~ · .-. . _ . . . . · . . - · ..
~ . of .the estate _1s taxable- (Nlf?C, as:.amend}i:J.:.,D~/.. ,<!_?;;1 N.ote: i:-~e. amount so allowed. as a deduction
f- TRAIN Law, Sec. 6Q(A)(~)),- · . . \I 'f.·r·":'-1}__ . shall be,~included. in . computing the lax·aole ·
! Gros~ l~~o-i'ne.of Estiite ·. . . -.-,,~.,::--:f1 trj"'r~f$.9?:1-~-:6.'f:~~e. legate,e,h'ei_r _6r.b~nefieiary (NIRC, ·
The items :~f gros.s in~omEd~~bl~_:t~1'naiyidual3> J;J · · ~ec:. 6'f-(BJ~, · . : · · · .. . . -_ i·

ii : .
g-
{ ·

'
;.
und~r Se_c. 3.2(A) of the .NI_RC.:are\~s.9ll:ie Sc!_111J~b1 _ ~. ·- · · ·I!~~---.
· i~eni~ of. groi:;_s· _incoll'!e· .v.,hfch. a1:~~-'!{l.1<a.1?.,e~1to·- I\ ·
~. __ .. - ;e~ta~~s-:(NI~~ 'Sec.
f?_1(A~)~iJ_f1'P_J/tk·- ~ -r.1· ...
R_.ites 0P,1J~x~
, ·· ·. ·
. .· .
~~:~;:.~:.f\;8-~t!'~~~~~"1~~~r:!~-:::i.t~=~~~=-
.
·· .' . · · .
: I
t:
?-,:f-_..
··l~ciuQed.in'iti'e .gro~~--inco:6?,~;q{a~$,tat~-
"'following:·.
are-ti-i} ,.1~1J.... ,_· basiJ1:~·s_i'2,"~e.~~-e of an-in9i'-'.idual (N.JRC, Sec_::._
· . · · · · · .t'<f"-.--.d-~--;;·f) -·~~
': tr;icQme._ ·received by: tQ;E:_-ry.,.'~fla1~-\9fv"'fl;i;.e.
. t!eceased . person d1,1ringt 1.lhi,r· P,~riod -;of ~ ·. . . ·
o
(,:_I , .. 60)J{{.~1ip~o3).~:9Pfhe.
r~; .follows!,.!&~~-
. .
. .. . administr~_t1 9 or. se«_1ernent\;qr·ee~_t~te, · .. I}.~;i~ ~he-estat~·s gr~ss· sa1~~1re<?eipts-p1u_s ot_ti'~r .
· ·. 11 ... Where,. p_nor.to th~ ·settlernenfJ~ftt~e· est~~.,.;....f.l-~·~t1'.iA_\iQ~J.7.1:9P.""~fatmg,
e~taJe_shall be taxable as
. .
·· ·
. . . _. . . .
··

· income . ex~eeds the V PjT . ·:

. .. I
•I
!'
_ the. exec;;µtor or administr-atorsell~the=pr~rfy-.t-:-'""~ ·t1:tres'flolci of P~,000,000: ·It _shall be..ta:l(ed on its .
. . ot'..a,deeederit's' 'estatiVf6r-rhi~--ttilni tMe · ... net'ta;xable income _tJS.in~. th~-.g_ra_duated.'-rate.s .
appr~ised.value pla9ed' l!po~ it .at~tibath of : · · un1er _Sec. 24(A)(2)(_a) of'the· NIRC. . .. · .
the dec·ederit,·the ex<:e_ss,.:isincome.taxable to· · ' ·· .. , ·
. the estate . ·. · '.. . · . . · If the esfate;s"gro~s sales/receipts piu~ other
. ' .. . . ,.. ·. . . . . . .. 'non~ope'ra~_lng! income DOE$ ··NOT E~CE~D .
~- ··Exei~ded.in' the 'g·i:oss i~6o·me 'of an
estateJs the. - . . th~ VAT thresl)old of P3,060,00.0; The executor
· · .g_ain derived'frol')1 the,'pasiag·e.of property to th~· · . · or aclmirl'istraforoMhe e'state has. the option f<;>r
executor or administr-~tor· Ori the death _of -the 'th~ estat!3'.to:b:e ta:xe.dat . . . . ; ... : ·.. . ·
_,decedent, 'eye,:i, though the:--p~operty m_ay ·have.. a.·. -_The gr1:1du1;1te.d rates u'r,19erSec. 24(A)(2)(a)
appreci~.ted iri value Siri_ce.the· deeede.nt. acquir~d: · of-the NI RC;· Or ·~ · .. .
·:·it;· · - · . .. ·. . . .. . . . .-. b.. 8% gross sal~ or 9(0SS receipts, plus other
,:,,. ,· :, non-operating· income. in-. ·.exce'ss:_ of
t· . . · D~ductio·n-in 'tl:l~ Gr.ass Eii~te -_.. · p250·,o_oo. in '.l_ieci ·of. ~l:)e- graduated-. income
-t 1. 'An estale ·c~n ta:l?e -up. the . sa.me items .of . faxr~a~es.uncfer Sec. 24(A)(2}(a) of t_l']e N!RC
:_~_-_.,_· · d~duetlpn .af19wed 'on .'.inqiyidual taxpayers,. and.'the ..3% Other Percentage Tax .under
_ ·. : . urider $ectlori '34: (NIRO, Sec, 61): · · ·· · sec. 116 of. thEf NIRC ·
t ··' .·. 2: Specia1.d~!'.fuc.:tioijs~ . , .. ·
f.· · a:.
· · Tt:rere · sh.aIf be· allowed a~ ·-a ·deduction in· 6.' Estate ·N:o~
~l'.)de(,J_udi.cl_a~Administratio_n .
· · computing ths.:taxable loco.me of- the e_state· Pending the- extrajudici~I settlement; -the income
.. the amount of the income of the i:rsta'te'.orti:ust .. -. tax ·nab)lity depE1nds on wl"!ether or·. riqt · an
for th'e taxable year which is to be distributed· · ··unregistered parfnersh.ip_:.or~ coaownersl')lp·. i~
; currently by' ttie fidu.ciary to tlie t:ieneficia'rres,. . created (NIRC, as amended by TRAIN, .'Sec.
~. . -aod'the,·. amount of.the.ins:ome.-
.. colfa<,ted
. by-a
. . '60(A)(3). . .

. . .
2019 SAN'BEDA LA'{{CENTRALIZED BAR OPERATIONS 161
 INCOM·E·TAX
SAN SEDA LAV( CENTR,ALIZED [!AR OPERA T:IONS : MEMORY. AID 2019

. ~· ..
If the' heirs contribute to the · estate rnoney.. v. A t.rusf.wh_ere the Income which, in· the .
property; or lndustry -with· intention to divide 'the · 'discretion of- the fiduciary, may· be· either
· proflts between/among them,. an unregistered distribute:cl · to the · 'beneficiaries· . or
partnership is created .and _the estate becomes, accumulated (NIRC, Sec. 60, .' (A)(1), (A)(2)
jiabla, for. the payment of corporate income· tax · ·and (4)). · · ·
.. (l=vang~lis(a .v,: Collector-ot Internal Revenue,..
· . GR. No. L-9996, October 15; .1957): . ~- -. . 8: Revocable. Trust . . .
Revocable 'trusts exist .when the power to revest in
, Not~: The co-ownershlp of ln.herited properties is·. = · ··the 'gra:ntor title to any part of the corpus of the trust
automatieally' converted into' ari · tinregisterect . ·is vested: : . ..
partnership the . moment'· the: said .comrnon . . ·1-. In ttfe grant<X; enner alone or in cqnjuncti~nwith .
.. properties an~/or the incomes derived therefrom · . any person· not h?Ving.''.'.a .substantial adverse
.. arev'used .asia -cornmon furid with:.inteht to. .Jnterast in the disposition .of ~u~h part of the
- . produce profits for t,he. heirs tn proportion to their . 'corpus'orthe income therefrom; or . . \. .
'respectlve shares · 'in , .. the . inheritance. .as 2. In ·any person not having a.substantlar adverse .
determined , 'in- a: . project . partition· · either duly · lnterest · in the disposition .otsuch part of -the .
. .executed . ln an . _extrajudieial' settlement or . corpus or; the. income -therefrorrr (N/RC, ~s ..
approved -by the · court . itJ the corresponding . · amended by TR,4/N Law, Sec, 63).' . ..
testate. · or . intestate proceeding (Ona :"'~-=;.._-;:....,,"'"-""' " · .. · . . . . . · · ·. · .. . . .
. ·. Commissione»ot Internal Revenue, Gft,4.JO:L~.lfu· . -w ~~~-!tax purposes, the- truster or the granter,
·19342, May ~5, 1972). .,· . . --~ ·,t:;~ , 20\.fn.,_W-t~t:i}tself,'is subject: to the payment of
. · · · ·/-P:C~:}, ~"'°=-='ttl.ElCO~· ta.x o:&.a~vocable tru_st. ·
·If the heirs; witflout.contributing'j-ion.e~.-efperty . _,,~"'~~ !~ A. · ·. ' .
· or ind~str.y to improve the ·$~tai'r4~}_,,~pi~.1:v.id'~~'1rreot:l;\~ ~hi!pl~Med;,_~ -~ . Computing ~he Taxable
th~:fru1ts tl)ereof betwe'e11/.fl~9J'l~ !berryf.elv,eszyff ? 11;1,~ome-"'Qfthg.~@tqr . .· . .
:co-o~ners~ip i~ cr~ated;im'd''l~J~iii/J~u-'/1 in~orire ~~. lncome'of the·tn:,1st·~h~II be in,clucfed. in computing
tax is. i~posed_ on the' infg,me refceive1: by each-'. . tti:e ta.xabJe income on~~ grantor where any part of
· ?f _t~e .heirs, -~aya_ble_hi~]Jt.rel_: sep.ifu"'!~. ~- the i~~oi:r1.e.of_ a·trust:,,,.rt .· ,. ·. ·. . · _
··1.nd1v1dual .capacity (Pas't1:1~·~¥::kcomm1is1.on"e'f;;O~ ~f(·1) _15;.l C!r.m th~SCfit1on ·of the gran.tor or·of any
Internal Re-Venue, ~.R. ~~~~it33, Ocrber ~118~"ijj!'lsJ ·. ~~,?n ,npt-~~jfl9 ~- sul;>sfantial adverse
1988}. .. . .f. .,.,:. ,l~It . ~,,,.(, \_,; ·. c::-;::$---.::,J.IJ:~~s~1~ the q1~pos1t1on of sµch _pai:t of'the
· \\ 1c0~ : -v~;;~,.-~ p·.:,".). · /'r[<w;ne tr'aye~efheld or accumul~ted .for,..
TAXAB!;-E.lNCC:>ME _OF T.Rt\JStS" \ ·. i(?,, . ~- ~@~ /~_t-wreql~t.ri..but~g_'fi to t~e ~rantqr, or. . . .
.Trusts are cl9ss1fiEid·mto, · ,,· . ·,. ~ ... ~ ...~~~ay,~in the}1scr~t1on of the:._grantor or of
· a. Ordinary Tru~t .· · : . ·. . . · · · ·, "'· .' ~y~ny,lD·erson n9t ha,ving a substan,ti.al adverse
-~ b. Revocable Trust · _
_ c. Employee's Trust , . · ·
.. ~
"\,. z'-~ Sc.n~:rf\.
. "- ·. ':
.~ . ~
. !~~est irf·!J')~. d_i~~os1fio~ at Sl,J<::h part of .the
..,,:.eff.'Jn.c~~P ~e'~1str1b~·teq to ·tl'ie grant~r, qr · ..
· ' .,. , ·· . _ . . ·. "~:.'(.-9/) ~c.="'~(l~~~~1njfle- d1scr':t1t!m of the gran1or or ot_.any
Note: 1.ncome of -.employees' "trl!~To~~~!~.mpf,1\ ·/rt. ·r.-,,~ .Pefi(n. not having. ~ substantial ·adverse
.. from 'irn:,ome tax (NIRGi:as -iimen'ded}:iy_*;lJl.,_AIN_·IY.l.l."'\..:#"inferest.in the d,isposition.of such p,art of the .
Law, .Sec.· 60(8)): (Please see· tiiscufi;on~~-· . inc?me rnay. be. ~J?plied to the ·payment of · .
Employees'Trusts):· , .. : -· .. 1 ,. . premiums upon.policies· cit ins·urance.o.n the,
· ... · · · · lit~·- o('the· graritor··(NIRG; -~s· am13nded by
·A.Ordinary Trust . . . . . . TRAIN, Sec. 64_(A)).::· . · · .
The ineome 1:1rid corpus of the.trusf-dci not revei"Hp ..
. · the grantor . .l_t Js any dft'1C;l ~allowing trust . · . ·· . C. Employees' Tr1,1~t . . .
,. L A lrust. where the .iricome:. accumulate~. in ·. ·. ·Trus_t wt"iich forms part ofa pension, 'stock· bonus· or·
· trus~ . for., the· ·oenefft.-.:o( ·~unborn:. cir- .· ·, 'pr.ofit.-:- sharing plan o.f an.empl~yedor the,benefit of
unascertainad . person . ,·or . .''persons·.·· with . . some or all of his emplo,yees. ' .
< . .· •. . . . · ·
. c;;c;ir:itlnr;i.e'nt interests; .:_ . . . . :.. ._ ·. ·
· ii. . A trust . where ·the income accumulated or . · ., !=mploye~s'. trusts ~re . not subject to· income, fax
held for-future: distributic:m-und'er- the-term~:bf · ·provided the following requisites are m~t: (PCDE)
the:wfll·ortrusC ··..:: . .· . . . .· 1. Emplqyee;s-trust- niust.'be Ear:t of'·a. pension, . ·
ii,i. · A trust· .Whl:l'r'e the in.come ·whi<::h i~ :t<:> be . . stock.· bonus . ot ·prdfitsharili.g ''p(ah· ·of the ·. -
dislributed -currently' by the,fiduciary,to-,the·· employ~r for the.. benefit of some or' an':of:his .
beneficiaaes; . - .· . ·: . : ; .:employees;. . .. ·. •' ·. . .- . ' .
·iv .. A truit · where the.· iAcom:e c9llected by a . 2. ~ontfibutions . are made to ·the·. trust by such ·
. guard!an-'of an infant which i$ to. ·be held or ... empioyet, 'or·sucli employees;, or. both; . .
distributed.as th~ court roay.ditect; and . 3. Sue.~ .con_tributlons are-rri<1d~ for the purpose of
Q.istributing . to su'ch . ·employees· . - both. the

192 I ·2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS ·.

 ' ,

INCO-METAX
.
. . .
SAN 8°EDA LAW COORALIZ&D
. BAS OPERATIONS
.. : 7' MEM.ORY
. AID
. ~01!,)
. ...
ti MRI WA AA.? DAMI

earning;s ~nd principat ~f· the fund accumulated which may be h'eld or distributed for the 'benefit
. by the. trustjand . . of the· gsant9r sl)ould be included in' the return· of ·
4.. The trust instrµment makes .it imposslbleforany the· grantqr (NIRC, Sec. 63). · . ·
part 'of the trust corpus or income to be. used· tor . ' 3. Sucti par:f of the. 1ricome of the .trust whicl) may
.. · or' diverte~ to, purposes other than the 5xclusive . be ·applied . to the payment of premiums upon
· .· be.nefit of sucb.'ernpteyees '(NJRC,:as amended· polipies of.insu~an~e on the life of the' granter.
. by TRAIN.Law,·.sec. 60(~))::. · · ·such .Part of the .inc.om.e shall be·include.d in
computing ''ttie taxat?le. income of the granter ·
. Ta?< exemption is. likewise .tc/be. e~joyed-1:>y the . . · (NJRC, Sec. 64(A)). . · · .
income .of the pension -trust; otherwise.rtaxation -of .
those e.arniog~··. would resutt In . a dii:riiiiutiori. of . a. Items coinpr.i.sir'lg the ··Taxable income . of
accumulated· income. and. reduce -whatever ttie .tfUSt. T~u.sts Gross Income - same as . 'individuals
·beneficiarie's ·.woulcf receive; out. o'Hh'e trusl tu.nd . '. (~_/RC,esemenaed by TR__AIN,:Sec,,,60,(8)). .
:· ( commtssioner of lntet{lal'-f.?evenue v, · Court; of · b. Allowable Qeductions · - · same. as individuals· ·
Appe"µ/s, GCL' Retirement -Pten, G.R. No.. 95022, ,. . .(NIRC,--as amended by. TRAIN; -S.ec.·60(8))., .
March23,. 19~2}: · ·. · · · · · · ' · ··· · · ·"
. . ,. ', . . . " . ··Note'~·The··amol.mt so aliowed .SS de.dudion shall
·. Si.nee. the fi~al tax and the withholding ther~'of are, . . . be mciuoec In. ~om'putin'g the. net income of the,
.,. · embraced within the.title onTncome Tax", it-fqllows. · heir, legatee, Qr beneficiary (NIRC, as amended
f . that employees' trusts .are deemed· ·.exempt ·, _: · by TRAIN, .Sec, '61(8)). .· . . ·
··:· therefrom; ·.C>tt.ie'r.wis·e;_, ·th·e exsrnptlon ·beco"!1~$/:,=:yt· ·. . · ·. · .. : .. -". · · . ·. - ·· · .
i~.... ·. rneaninqless (BIR Ruling No .. 0_42-QO, · Septem'6'ej,.(i.i .. · . q,. ~~ec1al Peduct~ons . . . .. -,
'•. . · 15, -2000).:. · ··: . .. ·· · .· . , .. . · (<~!:;,/~\ · ·.· r., The ~mf.U~t .of the _inc.ome,of the es_tate ·or
,':. . ·. · . . · · .. '. : : . :· · . . . .i,_'j''7,i;,t',;J · .\rus~-~~!ch 1s to be d1st~1b~ted eurr~n_tly by~e
' . A_n_y _amou,nt actuaf!Y· d1stnbut~d t~ ~ny empl_oy,.,e~9ri,·1~;,~~;~-;~dµ~J3".';! to !he b~nefi~1ape$; . . . . .
. distribute~ ~hall bE!_ taxable to· h1_m)n ~~@1ea_r~1~•.l'rr"""-·-·1~.:.1.;.:J~:!:~C:)Uflt Of the.1r:,come· cpllected by a.
which so'c;!l~tributed to 'tne.extent_th.atJ~·~ieeeqsthll..,.. il guarai(~ of. an· infan~ which is t~ be. field or
am.punt ~qntribl!Jed by su<?h employie!/>~~istrib\.lte'e:::..,.! · · distrit?,titei as, the court .may direct: ,The ·
(NIRp, ~s.a.me,od~dbyiTRAIN.t.:aVr; ~1~'e~;~O(W).~: Jd ·.amo9nt~ s.~: allowed: as 'deduction shall tie
· : · · . · · ·. ·· . ·' ·. · . · .d._,.~
),!'.$:::,, ·. · !{i._.. . . .iri¢1/<;teft·in{.fompulin~ the net 1neohle :of the
lnaome...~f _Tr,ust.Tax.ed to· t_h~:}rust~e.i) . - · Ch~ i ,,I\ · . ... · h~f·~ le~atee•.or ben~~1ciary; ·ahd · . . : . . .
. 1, . The 1pco~e _of~ tn;ist~-~!R~!w.,.to~~~m~J-~!~cl.·. ffj .. m, ~!1'EJ
1~pJ~lJ.nt~t-iJhe ,_nco~e of ~e. estat~ or,.
or held_ f_ot fu1u~e d1stnbutl~,:"~~etb_erfons_1s~,.9, 1~14 _ . . ~~h~~Jfh'.t•.s~:prqperly p!;!1d or credited to ·any
of q,rdt?pry..into.me, o.r ga11,1;.rt?~n~~.
as~!3ts.i~clu~ed in .th~ ~orpµst~fWhe·.ifH~t . mpst . Ii :
s~fe ·)9f •. f;1: ·.
leg~te~R'e.lr or.. benefi"iar_y . (.NIRO, 9s
, · ainehded by TRA,IN Law;_Sec: 61).· . . . , . ·
· he returned.by and will be t~xetl b.y trustee. · . · 11.i ii-. ..-.-.. · .. : .. · . . ·.. ·
2. The·ir:1com:esi.a° trust, \Yh~tber ci:~t~d~tiy' will ~r_d.:~~~·!f:.~t~:;.fo·t, the case of.~- trust .:a<;lministerM )•i°:· a .
dee.d',·. for. acc~m·uiatio~.. of _ _inc99~; :,vhe!h~~;fc>r· . -c....<"; ':""''for~.n~country·, 1tie .ded~ctio_ris rne.nt~o~ep·in" i; ·ii,
·an · .una~c~r:tam.ed : pe.rso.n. ?r .. :·J?e.i:so'l_f"'w•th· · ~n~,.111above s!'l~II ~ot t;>e al!OWed: Pr?y1ded,.That .
. ·.cori_tingent ,.nterest~.or oth~~1se, s~Jo~taxed , ~eamoµnt·of..any incom.e. mth.ide9 .m·th.e return :
· · to ttie trustee.. ' . : · . · . · ..... · ... . .. ·. of si3id ~rust. sf:iall not b.e ,included ·.In .computing ·
3. .The fn(i'oine·ora. trust,.where·under V.,e terms .of ' : . · the incorrie'cif the beneficiaries (NIRC,· Sec. 61).
the, . will . o'r. <1.e'ed, .•the tn.i.stee .· may, : ln: his . .. .. , .. . . . .
'di.scr:etion, 'distribut_e.. the incpme 6r a~CU!Jlulate ·:·· · Where· iio:: ~uch 'df~tribution·.to. the heirS"is. made :
it, "the 'income is taxed to the. trustee, ·irrespective ', . au ring· the' taxa.,ble,year-when.'the incoi:ne is. earn.ed' ,.·.
·! of t~e'exel'ci.seof his discretio~. : . · ·/ . · i and such fncom'e iS subjected to.income ti:IX payment .
by'the .estat~,. the. subsequent distribution thereof. is'
tncome,ot·)"rust.i-axed to eenet1~i~rred .. ··, . : .· · .. ·· rm lorige.r: taxabie· on the part cit the recipient (BIR
, The incom'e.cif a·trustf9r. lh'e·taxabl·e·year.which is to .
. ' be dis'tributed:to the ..benefida·ries ·must b~·.return'ed': .. ·. .
Rulit,g. 233-86,.Nov'e.mber 7, 1986j;
. .. · .
•

b.y and ~IL b~Ja>(~i:1 to .the tesp'et:jiv_e·ber.ieficiaries, · · · Exemptions ...

. P._ursu,;1nftq Sec.
1'.

19
; ., :

of RA,
. •

No:·
.

109!53' (TRAIN Law),

·

There .ts.a· c:re'ditabl~'withholdln~ tax'.on'payment to.·.

.the heir.of -15:% .(R:R: No. '02-.98, Sf:10. 2 ..57.'2(F)). : .the, tax exemption allowed ~O' estates. !:)hd trusts
• ••• • • • • • ~. • •l • • •
aine>untihg to ·P20,000 previously provided under.
· · .fncoine'. of Trust Taxed.to·the ·G~antor : . . · . s:ec. 62 of ~IRC js hereby repealed." .
. 1. . in case of'revocable trust; fr1come fr.om sucli part
. of t~e \ru~t' es.t;:1te title.to··V'!'.hi9h rrl!:!Y .be·~evqked .. . Rates _of,Tax.,_.. . . . .
or
by the .granter' r1;1vesteg. in the 'grant~~- . Since.the taxable.Income
in the same manner and on the same basis as in the
Qt.trusts shall be C.(!mputed
-2_ · In-'· ttie case .of a ·tn:i'st the. income· of which, in
wh.ole or in'
part, may be held or dlstributed.for' . case of.an individual '(f':/IRC, Sec. 60)), the income of
the estate ~hall be.taxable as.follows:
the·benefit of th_e.graritor .. That p~rt of t~e incci!lle·

. 2Ql9 SA~ SEDA ~'IN :CENT.RALIZE.D BAR OP.ERATIONS I 163

 · ··INCOM . E.tA)(.· -·
siw' SEDA' LA~ CENTTIALJZEDBAR OPE:RATIONS·~ M£MORY AIQ 20J9

If the trust's gross sales/recetpts plus other non-

operating Income exceeds the VAT threshold of ACCOUNTING, P,ERiODS AND
.P3,000;0()0: It shall t?e; taxed+on its net taxable
income using the . gra'du'atl3d" rates .under "sec .
.· ·M·ETHODS .
. 2:.t{A)(2)(;:i)·of th~.NIRC: · . . . ·~...
If the. truststs gross ·saies/re·c~ipts pius other · Accounting Period :
non-operating income DOES NOT EXCEED the : Generiil .Rule:· The accountinq period- of a taxpayer
· VAT:-thre.shold of P3,000,0<H): :The trustee 'has the . is a·:p,e_tiod. of _1_2 .rnonths (2 CASASOLA, Nlf:?C
· option for the estateto be taxed at . . · .. Anho_tated,·sµpraa(471)... · · .. · . . ·· . .
· _a .. ·. ·Th_e madua_ted r.a~es under Sec .. 2:4(P1.)(2){a)· of . . .
the-NIRC;·or . .. . ·., .. · .. · . Exceptiorf:.A taxpayejmay have ataxableperiodof
b. . . 8% gross: sales ot gr9ss recelpts.. pl:us. other . . less than w11elye,.( 12).month~ (short,period)' where:-.
; poh~o:i:ieratlng income in .excess ofp250,000' in. 1: Taxpayer, 'other th.an .an individual, chanqes his
jieu of the gr'adi.iat.ed income -tax rates .under accounting period ·frcii:n fiscal 'year. to calendar
·:·· :.. Sec, 24{A)(2)(a) .ofthe-NIRC arid the 3% Other · ,; year, or from c.a.lendaryearto·_fisc~ry_ear,or-fror:n
Percentage Tax.underSec. 116.of tne-Nl~C one· flscal yearto another (NIRC,' as amended PY
. .· .. :. ... · .· . · TRAIN Law, Sec:·47);
Filing-of Income TaxReturn . . . . 2. Taxpayerdles (BANGGAWAN,.Jncome.Taxation,
· 1. · If income is distributed to' beneficiarie_i..,.:..~~UQ.Jg at 101);· · · ·.··. .: . · ;. · ·· · ·
IJ
.· 'b~neficia~es s~all file ~hl3 r~tum an_ipsfft):etax;
2 .. l(mcome is to be accumulated:ovtj_r:il~b~-i~jure~ ar jtcfo.rp,oratj.~nis."~e":'.ly otg,aiiized_ (BANGGAYfAIY,
.4- \1hcd'mq)Ta--~t1on, sapra 10.1); ·. .· . ·
·: _c.li~tributioA, the trustee or -~~fl~i.3:-l:1~~ifl''flf~-~f~'~'€1~~.of}t10\i~9issolve~. (BAf'!.GGAWAN;~htS9rr_ie
·~ the.~-~t~m and ~a_y '"t~\(~~~7,~~·~-ir~~~~~~r,ta~~\J~~d.~~
.~xcept1on. Wb.er.e·at any ti~,.~!a_~)~,~er1~ rev~t ~: ]((a~thof,1ty\0(~a\,
the q?mmiss1o~er.by
.. under · ~he following
in the.·grantor-·t1tle to any. p~rt~of.i!'i..r.·corJtus 9f tffe ..,{~ c1rcum~tanc~s((N/R,~,as amehded by-TRAIN,
trus~ is_ ~este~ in. the :1) gr~'IJ-tut ..1j~he.r.a\b.n.e:....~q....,~---~Sec.-.6fD)):(R·IP.-)~)Ji · _. .... ·. .· ·
· conJunR1i.on w1~h,~ny per~ol")Y~aR,1ng·a s'!J_1?.st.~t1~.-i~ll c-~"iffe·i1Talfpayer ii \Bellr-i\9 from busin·es~ ~ubj~ct to
m
a~verse m~erest ~e d1~.1>.Ss~~o!I~t sup~- J\art ~ff~r,'.'l ll~t t'a~f ·~t......,..;J ~ . ·_ ·. . · · · · ,'
: corp,us_o;. in.come;' ?.r. 2) m ~l!f;!peiso~~f'ivtrl?f
su_bstantlal_adv~rse·1~terest11r;it~~"'~sp~~~9 ~~uc ~
· pa~ of t~~ co_rpu~ ~r mco~~=t thlf~q_ome~@ , .tn,is'
- -r/ !' ~ - li
cf;@li?f[!-;(/ -b.. T1~~,!Y,er-if !nte.dd1og ~p·l_eave the Ptii[ippines,
iP.!.9-P·w_rtf therefrorrl, or hide or
~~, -~~r;i.c,.: ·at hj prbRefty; c:1ftd . ·. . . · · .
... ttie__gran.tor (NIR9,, "!~ 817!&n<!~ bY_'TIZ~- Ii_

.
63). . .. · ·
. ·.
• =
·.
· ·
· . ··
· ·
.

•
°' ·._-w:: ~,~_Jh~
. . sh~II be ln!'.tluded 1~·c?mPU!!ne'1fie ta~abl~~ ih~qli"_j.~~"'

·I> ·
• • ~
"
,/
[~_....,dV.render.
~~El~e\~l\~/'-'u~!ess
ye~ is. fefi'ormfrg any.:aqt te.[!~ing _to
a~o!Dstruc,tltha ~r~Ee.edin.g~for th'e collection pf ..
J!;!1 for th7/pas±.·_or current quarter 9r xear ·.
Alie same :·totally .or. partially·
· such · proceeding~-. ar~ , ,
Fo( the. be~~fit,~f the_ gri:i~lor__ Gra~fo7:ff.lLR. · {as
Jvt~~,;;1mm~~-,a~~I~ · ·. · ' · . ·.
·.. _. . , . , - · . .;~mend.ad_by"':r.. fN ~t:m_ay·be: . . . . . . .. . . · ··, · .
· ·· ..- . · ,Law, :S~c .. 6.4) · · .' · · 1. CalE\hda.( p~rjod ·:...:. an. a·cc.ol!.ntingperiod· which·
. :Re.faiined:by'the trust . F'd · , starts-from Jariliary 1 to December:31. Taxable
. . . . . . I u~iary : . . . . ineom'e. shall be. computed : 6ri-.the bas'i~- oMhe .
. ·· : . Distributed tci):ie~eficiary : . , i3~nefiq_i_ary . : calendar\i~ar -if thEl": (OP.BI)· . .. . . . .
. · . ' . . .. . 'a., Taxpayer's: a_cccitfriting·.period ··is -Qth~r: than
Con·soliclation of incorile of TiN~-~r More Ti"u~ts _.·.. ·. J:i:
:~!~t;;y:~r~a.~ryo ~nnl,lal.·a·cc;bu~ti~gf.eriod~·
. Where.' two .or more trcists ~re :crea~ed by)he. same . _c. ·Taxpayer·t1o_es not keep. §.ooK:~; ·or. . ··. _- .. ·
. IJraptor-, ijnd tJ:ie.. berieficiary in each· in~tance is ttje d_. Taxpay.¢r i_s a'n.!ndi~idua.J (NIRC; as amended
same .Pe_r:,on, the· fidl\piaries ··snal_l file' :a :sep,:!.rat~- . . . ~y-TRAIN"~aw; S(;Jc. 4~); · · '. ·. :· . ·· .: .
return fqr, ~nd ·P.ar tti_e-m_com~tax of, each_trust, but 2. fiscal- period _ ·an· acco'uritin,g peri_od of: 12 .
t.h~ ·FIR shci1t _9a1,1s; thf? 1ncori:e_~a~ .to be_·c~mputed : . · . _months !:!Clding·on·_the 1asf9ay.of any-month qther .
on the · cor:isohdate_d ~ax-abl_e mcqtne ·of, the sever.~I · . · than December' (NiRC, as. ·~,r.,erided by TRAIN
trusts (NIRC, Sec./>O(C)J .. · . · ·.· · ·. , Law, ~ec'.,22, par.. (Q)); ~hich--is allowed._oril_y for
The.·.·income. tax· computed on· the c~·nsolldated .. . corporation.s .(BANG(3~WAN, Income. Taxqtion,·_.
: supra.at 101}; an'd. . . . . .. ~ ..
ta~·able income.· shafl be ··allocated. between . the ·.
several fru~ts. in proportion to their· respective
3. Short per(od . :..:. an accounting· p·eripd 'where
taxable lncorj,e ·(NfRC,Sec. ~O(C)) · .. · _- · .. : . income. is computed on th~.ba'sis of. a-period less
t~an twelve (.12) mont~s 'when thf?: · ·

.. · ·164· 1· e019.SAN BEDA:lf~.wCENTRALIZED BAR OPERATIONS-

. . . . . . . .. .,. . ' ..
 .J Nx:O"t~1.E r AX. .
. SAN SEDA LAW ':ENTRAllZED ·BAR ,OP.ERA!IONS ~-/AEMORY AID 201!) ·
·.QhAA WI .If¥ ..
~· Taxpayer, other than an individual, with the Genera.I Rule: The: faxable:i~_Co'me sh~II computed
approval .. of the (~ommi;;;si.6~~r; changes his'. . . upon the basis of th~ taxpayer's annual·accounting
accounting period'frorn fiscal year to calendar ·~eriod (fiscal or calendar: year,. as. the'·case=may be:),
year; or from calendar' year to fiscal year, or in accord·ance with . t)'.le· method of accounting
from one fis.c;aJ.·year to' another (NJRC, as r~gularly employed in· keeping· tl')e O!)O!<s 9f such
ame.nd,ed·by-TRAlN.Law,. Sec. 47); . . taxpayer (NIRC, as ~mende~ bi TRAl"f, ~ec . .43),
b.. Taxpayer: dies. (applicable to the decedent's
'finaf personal income tax ~overing the: . Excep.tio~: Corrrputation :·sh~il. be made in .such
Q.eginni.ng of the taxable yei:Jr until his death, method as in th~· opinion of CIR. clearty reflects the
the income "of his estate, and ,estate tax return) . income: ' . . .
(NJRe;_' as emended by TR-4.JN Law; .Sec: 90, . . 1· l'f no such method has-been so employed by the
p~r.. (A));.··· : ·· · · ·. :·: . · · '. · ·. · · ' taxpayer;.or · . ·· : : · ,. ·. ·.: · · · ·· :
c. Corporation is n·ew~y organized; · . , . . 2. If ·the method of accounting employed does not ..
d. potporc:itiqn is dissolve.d . (BAN(;'GAWAN, . cleady-retlect th·e· in·corr1e(N/RG, ss am.ended by .; .·
.· (,icome Taxation, -supre, et' 101 j; and . . ·. . . TRAIN Law, Sec; 43} .. ·
e: · "(ax period is. terminated bY..t.tJe Comm lssioner . .. : ·· · · ·
by-authortty of law. (NIRC, as· emended oy· · Me_thods.Re·cognized'i:,y L::.aw Regula~ions: and
. ·rRAIN Lavy, Sec. 6,. par. (D)). · .. · . . . . . . \ Cash,Basls:·M~thod,--incomf;l.is repofted in the
year payments: are. received while expenses are .
. Change of Accoun ting· Perlod . . · . . · . . . ,,·0.·• · deducted in theyear paid (DiZON,· \ioJ. II, supra .
A corp~,ratiqn may change \ts:. accountinq P.~t:i~/f(· at 1006). -: · · · · ·. · · ·
·wherein the net.income )~hall, with the approy~};~tfJ·~ . . . , .
. the CIR, ·_be computed oh 1ne basts-of suthf·pe,W'.( ~··· i Cash Basis ~ethod - income is realized upon
-accoun~ing period."· A. separafe adJust~erit .or'firfa,lit;;;.;__~ ict_ual Of~~onstructive rec~ipt or its eciu_ivalent
tij~A1·1$fj~!J~~.!11e12,m~,l!Js~s
return. shall b';l _made for t~e. per(?d betw~e,1:fi. are d!iJ~Ct1ble only~~pon actual
ii· close Q.fJhe qngin~I account1hg period 33;ni9}ttie dat.e"' !{
payment;~.egar_dlessoft~e ta1<able year when the

t
t; ·.
f · ~;rd (Nl:Rp, a~ _a':1enqed

. , ·· · ·- · · .
br. T~~~t5 '§nr-~
de~ign?ted aS· the close· of. the n\E(I.Y~r_afCOUntiQ~;:l~ .

,,-:?"':-. ·. 1f-:,.S:
Sf;lrifrCe is1~~;tormed OT' the .expense JS· incurred
_<11J'(
·.
!1t - · _(2. ?Asf:r.·,.:JRC;,Arync?t~d, su~t~t 474).-.
·~i . Und';lr.lt_hJJ.Ci3f,l1 ~eth~d _o:f_ · ac~~-~.mti.ng (ca~h·
f . No~es,. .. . .· . . _ ._f:~:;,rJ '~; · . ,.. . ~ ~fti .-: receIJJfs~~E::ements m~th~d), 1!1c?m~ 1s
~ t. The request _for· chang~~~f.ac-C-o!,!pt)ri,g.Per.~~d. J,.l/-- :· rea1~~'2-f~P.p.9.~~~~e1ptof :cash· or. (\S. equivalent
~:..·· · shou.19 ~.e. filed at c1ny t,m~not.sle·s;~~tJiiancsiX~'.·· t-•'/ . 11'}cluamgtt!:@s:~constru~bvely rece1vec;I (such as·
£t ·
:i - · · · .· .J60), days prior.to.-the b'e_giri_n~~~th·eql>rop_o.s}d
f'!eW-a<,countil'lg perj9.d (R.~. J:-l6.{0.3~~'f;J1.1, Sf?C,
· 4',1 •. · ·· • ·· • - -· · ._. . ·f>·'"-;.-.?--
' iJj
. If
,J__
. deposits· for : . the_ taxpayer's.... a_ccouht , . by
..,..:.,.cpstomer_s) but not including gifts .or tjO:nath;>ns
· 1t.1~.,.. ••~ 'f.f:7. A d't Me,:noran d um.. 0 r,d er N o, · 1 -2000·;
~ ·.. . 4;,.,;:,;,'r-,.,ty.."(}.Y.~JJH~ u I
~;'. 2.. The_ce~iflcatio~ approving tile a.d.~pJ1o~·cif.c~jj~w..i.~-...-~.·i.-!!i;;naM:ll.::'AJ .. .- · . · . · .
~ · _acq~untin~ per~i;>d must be_ relea$e<l w1ttn1Nfurty, · . · · · · ·: ·-
~· . (.30) working days from the date oN~J.&ofthe ·2_. Accr.ual Method:- income.is r'eported in the ye"ar .,.
i: . _.: co~p(~te ,d<;>.dum'e~tary':requhme~is·~(~;R.No. . . :it is·earn.ectwhiJ~ expense i~ deducted in·tJ1e ye:ar·. . .
f" . 03-201~; $~c. 6),. · · -· · · it i$· · ·_ir:icurrec;! ··regardless · .of· ,receipC or · .
t. · Methods of-Accounting .. . . . . disbursement of ca.s.h..(2·[!)JZ?N_: 'supra ''{it .1006). ·.
t ,·T.here is rio uniform m~thod.ofaccourtjpg pr~.scribed .Accrua_!-'Mett)_od- ir:icome, gains, arid profits are
f\. . 1axpayer
for au la'xpa.yers·.The. .Ja~ contem_pla\e~ that ~a.ch ·
sh.all · 1;1dopt such form~ · and s.ys\ems of
·includecr in· the· ·gross · income whe·n earned .
· ·. . · . .. .
· accounting a's are in t:iis judgment best' suite~ fo his ··. rega!<:fless of ·~h.e~h~r 0.r. _n9t act~_f;lll~.. rece1ved_, ·
purpose (2 DIZON, supra at 1105).. ·. · · ·. . .... · .. a~d t~e .expen~e:;, ar:e all~wed a;, d~ductlons ..
. · - · · ,., · · · ·: ·· · ' ·fro_!ll 1he g~o~s income wt;ieri. actuqlly m<,urrecl, ;_.
1....
),
·
Accounting -~e.thbd~ .co~prise a
~et· of. ·rules: f~r· although . not' yet _p·aid ..(2 - CASASOl,A; NJRC ·
~ .. · cieterminjng. wJien ·:and· hoy/ io report· income: ancf . . An.noff:Jted, · sup"ra_.· a_t. 474f .. · .. ·. . · ·' . . ·. · ·
d~uctidn·s.. The accounting.methodfor tax purposes
musf be one·:genercilly employed .ih "keeping. the All-·evenis Te~t·- urider·the·accr.L,1al method: an ··.
· taxpayer's· books; provided that ttie meth_od. cle_arly · · . . expense· 'js. deductjble for
the taxejb)e· y~~r in.:
. ·rEiflects:· · t_he . i~con,e . · ·(2 CASASOLA,." · NJRC . · .. wliich . all the ·event$) had · · occurred . ;which · ·
· ·.Arin'!tate<!, supra at 472). · : . determined tt:ie fact . o{ liabili.ty "and the amount
. thereof can be. det~rmined with reasonable ..
: The' method: reqular regulariy · employed by: the · · . :accuracy ·(MAMALATEO,- Review_er1• $upra - at
· 323). · .. . · . . . . . ·
taxpayer must clearly reflec;t his lncomefor the year .
(MAMALATE9, Reviewer, supreet 321). :

·2019 SAN BEDALAV'iCENTRALIZEQ.BAR OPE.RATIONS I 165

 l·NCO.ME: TA·X
·SAN B£DA _LAW C.ENTRALIZED BAR OP£Rl\f/ONS - MEMORY AID 2.019
e • Wis Nlfh
.. · ,· •,

under the. accrual basis metho~f.of-acc·ounung, it. ·.... , Re.venue:v. Binalbagan Estate, Inc_, G.R. No:
is tne rlqht toreceive income, and not theactual . L-12752, January 30,: 1965: ·
receipt, tliat· determines. when to . Include the
amount in gross income. G.leanable from thi,s · Total .
notion are· the following· requisites of accrual · Gross •. · ln~ome fpr
.mefhod ofaccountlnq: . · · · ·· . Profit .... ·1~sta1Jment the year .
· a. That the right,t(r.receive ths-arnountmust be x rec.!3ived for = :subject to , ·
· . ·valic:t-;uncond.iti'onaJ,and enforceabte.La., not $~~,~~Jg · _ the yec;ir in~onie tax
continqen] upon future. time; ...
· · ·· · Prlce:
b. The ar:rioun~ must .be reasonably susceptible .,,
of accurate estimate; and. . - . . .·
a
· · c_ There mustbe reasonable expectation that ··
e
. 4·_ Pefoe'nta·g. bf Completion Metho.d .·_. in the
the amount will.
be · paid . in . due . course ·. 'case, Of ,a· bµilding; installation· or construction
. (Filipinas syntti~tie: Fiber· corp: \,: Court· ot .. contract covering a. period in .exc~ss.·of 9,je (1) : ·
Appeals, · G.R. ·f:los: 118498 . _&· ·124377; year, • the. ·gross· income·.. derived. from · such
· contract rnay .be reported- upon: the· basis .. of · ·.
. October 12, 1999)".··, . : ; . . : . . . . .. percentage ofcompletion (N/RC, as
am_~crd.edby.
· 3.. lnstatlment M·etho-d.. ·.- appropriate _. when . . . . ·. TRAINLa'!',_ Sf;§, 4~): .... ·. . · ...... . . ·· .
. .coll_e?fi.?.n·~of the prciceed;:i"o(s~Jes_.~rid )n~-~,;~~"':~-""-· ~i.:h~return must . be accornpanied. by a ··return.
·ex ten~ over. rela_tive~.:l?~g· penods oUi~~- an.d~u · 1· "cprf~~
of architects or er,gi~~ers .showiriq the
there IS. strong.p0ss_1b1hty t_hc!t._fuU ·9:°'~ctifi-\,_wtll . :· . -<ve·~9en.1ag
a ~gf.corripletion during the taxable year
.not. be m~9e (2. ~IZ?N,,supra ~t1,1-'?,8J\ X..
,..,i.,.·=-:~".'~t;~1ejplir.e;~'.k .performed under the contract.
. . . · ·. '. , . . . -~~,. .,_ -Y,,/~;· · ·
-(NIR~ 8$ ~m~nded by. TRAIN Law, Seo. 48). ·
Thls mstttod is .con.si.derec:IP'.aPP{$f;p~~J:reh".""':~~~ ~~_.,,.. '"\..· :: .·. ; · .. · · ·
.~olle~tions ~xt1:m~s·overre,lp~)i~-!~~ ~eriodS<iB! ~ 5:.rCrop\Yelif'X!4to'1- applica~I~ oniy for far:mers··

-
~Qllectt,on':,"Ill not be
_An_~ofated,_ s~pra_-at 4751.
- ,, .. . · · ·R ~
?t· . : . . ,\ ·. . ·
t1n:,e a.nd t~ere _ 1s · a· str9rig pe1~1bt!~~ tti,at {liJJI · j~, · -1.&eng~g~d. 1~\tlSe p,.r,.~uction. of crop_s_ which take_ ·
m,?1AJ..2
c1s1~aLA;- N/RC- ' '"!!2.r!:Jr~n·a l~.P_fi!o'fr·.the!111:ie .of pla_n~ing to ~he .
_. · : ~ · · ~~-+I 'S:
?'"P-~~c7ssof ga~~r:t-~ind d1spos.a! of the,hfuv_est;

I
(E:i<i:?en,,~espaitor 1~~rred dunng. the y~ar· are
· lnco.me .-trof!! deter:red..jpa_y~e _t sal~s rn_ay·~~-i::-aedugt.it>Jf.fr.ogfth:eJqt?ss incorre reall.z~d·from·
reported ·under this ·fr\'e1fi0°:l. n \~ ~J!9Jlli!~-J!:!£l=~"/l _'"gPtME:r'9rops'{(·R. No. 02:10, Se<;. 166)..
. t:as~s: . - . . 't
tf) . . '\.r. t-. '\. ~ ~"s· -7 . . . . ~!'!. K. . , . . . .
a. Installment 5?le·'.:by.jJdea~r ~\C~,~on4Ji..· )(·4~ /k,_ ./ .. _ . ·'/ t .....
0 ·. :· . . .
. . . · prope.rty_ r~9ula~ty.. · s~Hng :- q~··' i"ntij·1 ~t;:"' . . ~~ _ jl· · ·. · _;. . . · .. . . . .. .· :
··. (NJ_RC, as-' amender;J ·b¥, !R'J:iW,..;J:-aW1"-e.§.'•~.:.:;~.- ~N RfETUjN AND ·PA-YM~T·
-. 49(A));· . . . ':-.. .. . A,~- '5~IE"'·, ) ti" . . . .;. . . . . '
b. Cas1,1al sale or·. casuai~ dispos1tlo'~·-on~ ··_./ .\'--:, · .. , .. · . . :· .
. : · installrr_ient ..of p.~rs6n~I prci~y:(£'lll}l)fi'~~=T~~Hf,111{fl~y,· .. ··,.· · · .· · ··_:·:. · ..•.... :_ ·.
. .... · inve_i:Jtoryw.h~re: .·.:. ·. ·· . ·.:~,V . . . .1l,. ,i f,{°el:>Cil.'tt~~ by the. t~p,,iyer.to ~hE! BIR of ~IL grpss
.. i.. T~e Initial paymepts.~6.oot·exceea,tw~.nty- !.V!,f11G~~1;:'re~e_iyed dUr.1ng· t_he .t!3x;:ible . ye'f3.t, . the
, five petcent{2$%) oft(Je s.ellirig,p,ri.ce;;~'a~ll~aore dec:fuctions ihcluding-:e~emptions; the riet
· ii. The· ~elling :prjce ·~xcee9s;e1 :oop. (Nl"RC~·- - ·. ta_xable income';°the incc2))1e.i~x rate; th.e incor.nefax· . .'
· ... as a,:nenr;Jed by· TRAIN .Law, ..sec. 49(Bj)~ '. · ·due_. the_ incpr:n:etax .withn(!ltd; -if-ariy; and the rn,corrie, .
. , ~r · · .. , , . ·... . . , ... ·-·; . · - · tax still.to.-be _P~1d or refuncla!Jle. . . .- . ·. , : .. · · ·
c·.. _$ale -or. other'dispositiOr)· of r!,l~,. property.on .. ' , : ·:. . : ' _ . · .. : . · · ·-. . ',. ·.··, ·. , . . :· .·. . ·,. ·
·. ins.tallnieAtwhere the initial: payments di:> not . Who. ar~ ~~Al!trec;I to· _fill( Income. Tax :~etµrn .. ·
exceed twenfy-five 'p·~-rceni· ·{25°/~)- o()he (ITR)t. :.·· ·i : ..-,. -. , : . . .:. · · · ·
selling ·price (Nl~C. a.s amende(l''by TRAIIV.. 1_. -lod1v-1~~al ... ·. . · .. · .
Law,-Sec .. 49(B))."··. · · ·. '. .. · . ·' . · ·a, .,Resident C1trzens; a~d_ ... · ·· . . .
. ,: . . · · · ·· ·- · b. Non-resfdent Citizen;.. -Resident Alien. and ·
: Notes:. . . . _ . . '.· N9n-~esidenf Alien -~ngagea. in 'T~ade. or
1. As cusfomers: make ·,nsta.llment · payr:nents·, _ . · ·,Busii:ie~s V1ith_ re;:;pe-c~to·1nco"i:ne:fromsources
· the seller rec~ni:ze~i-the .gross._profit.qn .sale : . ·_withirfthe P.hilippi_nes·. . · · . . · : · : ·.
·in :proponioh t.i::> the· cash collected·(Chapte'r · . : . .... . · ., .,:-'... . .. . · .• · · · ..
· 11. · E, Accounting ,Methods, Handbook ·on . . ·.:: Exceptl9ns: lndivJduals Nof ~-equfred to F.ile ·
Audit Prbcedurf3sand f ectiniqi,Jes,.Volume 1. ITR . . . , . . . ·. - ·. .. .
· (~evision 2000), ·p. 3-4;::: . · . . . · .. _ . · 1.- ·. {'-n indi_vidual earning pure~y, compensation
2. ·The. income from. installrnerit · r.eceivsd -is· .. .income·. who.se taxable. lneome. _dqe~ not
· deterni.ined·1n accordam;:ew.i~_h, the·followl.ng .. · . . e~p.111ed tw9 hund~ed fifty •thousand pes~s .
formula· stated in- Collector of .'tntern<!l . (P250,000);_

1.66 :l 2-Ql9 SAN BEDA·LAW CENTRALIZED !?AR OPERATIONS

 ···. IN·COME TAX . · ·
SAN SEDA tAW CENT.AA!IZE:DBAR OPERATIONS.~, MEMOR~ A.ID 2019,

Note: The· Certificate- of Withholding filecl by 3. Persons under Disability (DOG-R)

·the respective employers, duly stamped If a taxpayer is unable to make his own return,
"Received" by t~e . B"tJre·au; 'shan be it maybe made bY. his; . . .
.tantarnountto the substituted filing of-income. <cl· -Quly-autho_ri"zed agents;.
tax returns by said 'employees. . -·b .. Other person charged _with thecare of his
. . .. · . . . ' . -per.Son or property who wilr assume the
2. Arr in_div.fduaf ~h~se ·ine.o.me tax has 'been . ··respon~ibility of. m~i'kirig the return and
correctly withhetd by his employer.rprovlded inpurring . ·.penalties · provided ... for
that-such .individual. t'ias only ·one employer- erroneous, . false or. fraudulent return
for. the: taxable year.~ .the ·certificate of (NIRC, as emended by. TRAIN,. Sec.
Withholding .. · filed -by ." the respective: 51(f.)). . . .
'. ~inploy_ej::>l du.ly _stamped "F{ei"ceiv_ed" by· the . c .. _Quardia11; .or. .
Bureau . sh·au. · be ' tantamount . to the . d. Representative;
substituted :filing of Income -tax .returns by . -· - · .-.. · , -·:
saidemployees: .... ' .. · . :_-" ·> · · . . . 2: 'Taxable Estate and Trust
3.:· An individual whose soleincome has· be~n:. The fiduciary shall file·a· return if gross income is ..
. - subjected.to.final".wiJhhofdlrig tax; and. . . at lcast"P20,.000 (NIRC, as amended.by TRAIN.
4. · .A-m.inirrium wa.ge. earner as deflnedln these .. ."Lav.(. :~ec .. 65)._.:· .
. reg1,1latj~ri~ ·- the Certificate 'of Withholding . . .
. . fi_ledi. by: ·the ..·.~e~pticti~e · employers, _duly~~) 3. ~en~r.a(.Profes.siona.i"Par;tners!iip
. . st~rnp!3d ."Rece1v~d" by_ the B~~eau ~hcl~;1,91(V)!._ · . · .: Every GP.f>, shalt file; in duplicate, a return of_ it~
tantamount to the substituted f1hng of HJ'f.?igl~;;.~-·~ ', . income, .exceRt In come.. exempt under Section
. tax re_ll:1~s =by-_s~ic! _emR_l6yees (R.R. ~.?,.. ;.f;;;:~!:~ '. 32{8)-~f Uie Tax Code, ~~ttin~ forth the items of:.
. ·201.8, S.ec.·_9) .. ·. .. ·- · .· . . s'\/ J:~;:·i,,-1,l...:;;;·,;-WPSS 1.~;,~r-r:ie ·~nd of_dedu_c;;tions- a_llo""'.ed, and
· . ··· · · · · ·. ·. . · . . :. . . · . 4. {,-1;_j· 'J-O~-~.:.....~fle;.Rcir].fl~·ilN, ad~resses. anp shares of each ,,
Note:· In_ . _all ·. cas~s._. all . 1nd1v1.du<;1.J~.$~rjvmg.,/· j . ·. . of'th'elf)a~ners (Nf RC, as ame:7ded by TRAIN _ .
· t:ompensatiQn income, regardles~111-th~ ~mo~?}~,,,,;i. Law, sejJ\15). . . . . .
. from two. (2): or_. n~ore .C:O~~-~rrentfar. ~~cc~:~iJt~JII . . . . - .. · // fi. ~ .· : . . · ·. · ·
·employ~r~_at a_nyt1me_.dunr:ig t~~~}:i~a~J~.Yft~.r are ,. , · 4.. Corp.<;>/at1on\ · . . . ,. -~ : .- . ·. · .. · · ·
. n<?t quah~c~Hor:subst1tut~~JiJl?9· Thl:J~\eJh.ex ~re . ~,.~ , , Everf.c9~~ora~on· su~Ject to ta,x ·s]1a_ll ·rcri?~r ,a
.' Stil\ reqUJ~e~ to:file. a _retrffff._jR.lj~~o/.,.O. t,-20.fm, If.'::, ' .~elU.!;Jl_Wh.~Q:h shall Qe filed by.the·presld(:?nt, :,11ce-
Sec.· 9).· ... ·· : 4(j'
. · ·. -'°""~~1-\.·.·· t~ :- -~f,J .. _ ··pn~~IJ~9;K~~i3'p_ri~cipal officer; and shall b_e ·
~~f" . . P¥) .. ful . swor.l'll~\1~?icfi offi~er an_d by the trnasurer o_r.
?i~·\.t ·. -. · ;: \f ..
• . . • .. r • • . • . • • : ~

· · Sp~cial. Rul.e~: · .. . · · ·· assist':'nt . treasprer .. (N/Rq?_ as a,r:p~~d~~:._by· ...

1.,; Return.pt: Husband-,and yv,t::~ ·· j} :· . · . , !~:n-;it· . ,TRA~N J,..aw, S~c.. ,52).: :· . · .. · · . ..._- :· : · , ·
.: File one .r~tun:,·,for the ta_x9.bfe.·;~e~~-1f- t!"1_~..4·;:~,... .~~-~ . . : · • · . ,... · . · ·. : ;·
.. · . following· ~equisite~_are.compli~~~1th:._. (e'~-'.'-"'".,.i!.~..,Whaffl~s to_ Fi.le: . . . , · . : .. . .. · ·...
· !:!·. Thetan~.marrred~.an~ .... : \Jn·: ;t(_,-_ · :_ · .·1 •. Q_µart~rlyandAn~~-aJ.ln~ome.Tax~e.tum.(.11:?>,.
b: They. do not denve _1nco!Tie.'{I?,~~~¥ from. . .a~d. . . . . .. . - .... : .. , . · . · , , ..
co.rrtP.ensation (N(R9;·· as :.a.m~'nded- .by · ?· ... c;ap1tal.<3a1ns.Tax ~e_turn. · ,.
. TRAiN Law, Sec. 51(0)).. . . . . · . .
·, · . .. ~ . . ·When ~et~rns·:~re .f1.led; _:. ·· .. · .
. . : . ·If· it .-i~. lmpractJ9able to fire· one .retur~,· each . 1., ._lndivi.dual.and· Co~Po/ate ffR .. :
.spous·e shaJI file .a.separ~te.re~urn .of iriC(?me · .. ·. .=-·:· .·• ·· · ··· .. · ·.
.but the· ret!Jrtfso file<;l.shall be consolidatM.'by:
, the· BIB. ·for the. pllrpo~e· of v.erific_atjon for the .
year, (NIF?q;·asan:,endfJd.by TR~IN_Law_, _S~c.
. 51(0,)). . . . . .. · ·..
01 reff.irj,. .
.. 2. Unmarried ·Mfnor· ·,. . ..
. .: . lnaividu.al .
deri\iing '. _.: ., ·:· >·,.. . . . May · 15· of ~an:ie
y~a"r .. , ..
. p·urely "tr~de, ·a·2· return... . . . .
Income a Of ·,unmarried minors deriv~d train ·. 'business · or ·· August-.~Q of·same
· .. · · ··pr_op~rty. receive~ .frdm the living· par;e.nt: ~~all 1-,-_;_,,.::...._...__'.. .i:.;.·Y:_.~.a._-a_~_·.··--"
0

.. ·professional ... _._;·_·_· --I

~f, . be includei:l. in ·the· return of the parer.it, except:·
t. . a.·· ·when donor's tax· has ·been paii:l·on such.
income; · .or Q3 "returtj · . ,
mixl:ld.income
l\!C:Jvember 'i 5 · of
·same year. . . . . . : ..
~ . ._property; or · ·. ·. ' , . , · . 1----=----4---'-..:_ __ ..:__--I
[.. . b. Wben tra·nsfer, of su9h property_ is exempt Ann1,1al return· : April 15 · :. of the
~- . . i... : . · fr9m · donors tax· (NIRC, as aniehaed by : following . year
TRA./N.Layv, Sec.··51(E)). (N?RC, ' . ·as
amended.· by
TRAIN,.Sec. 74)

~- '
. .
2019 SAN.~EDALAWCENTRALIZED BAFH~P.ERATIQNS I 167 ..
\.

'·
 . -
· 1NCOME TAX.
,SAN·BEDA LAW CENTRALIZED ~R OPERATIONS - MEMORY Alo 2019
t .,., FAME 1118W· Ii . 5 ;pigpp

Domestic' 01 return ·· 60. days · afle-r the Neyerthe.less; a· person (i.e., employer).. may be
corporation close· cif each of the required to.file income tax return on behalf of-another
·l;!nd resident 02 return first 3 quarters ·of (i.e.,. employee) when ~0ver.ed !iy the rules· on
~<;,reign ihe taxable year · ~ubstituted filing .. · ·
03 return
0rporatic;>n .
..
Ann:ual tetllm ·qn .or before. the . -Suhsfltutad'Filing _
15~. day of th'e· 4th Mode of. filing .. when- the . employer's annual
morith "following lnformation .. return ... of.· withhold_ing_ . taxes··; on
-· .. the taxable·y_e~i' compensatlon ·(BIR Form· No.· 1604-CF) may 'be
..
..
' considered ·as . the "substitute" IT~ of 'employee t.
... I
(MAMAL,.A TEQ, Reviewer; 'suore at 26~261;· NIRC, ·.. inasmuch as the jnformatlon. provided. in his ffR
. as :.amehd~cj bf TRf\iN. Sec.. 7f!,} . . would exactly-be'the.same information'contained "in
- .· · the employer's -annual information· return (R.R -. No....
.: '2. · c·GT ::R:~t~r·n~ -·: from' sate or. e~change· of . 03.~2002, Sec,.~:: R.M. C, No. 01-2003). ,· .' . . :. ·. ·
. 'shares of stock not.traded".fhn.i tocatstcck . . .
. :·excliangij:'Wjthin .thirty_(30) days after. 'each": .. ~~.bstitutedf(ling vs. t:,lon~Fl(ing .•
. transactlonandaflnai co'ris91idated returnon or Under .~subst1tylect filin·g", an individ,ual.. taxpayer
. . 'before}~,pril'15-of'each-year coverftfg -all stock · . al~ho.4!.!~ requiredunder t~e-iaw to flle t)is income-tax .
. . 'transacttons ;of .the: precedinq. ·t13xab1e:,.i~_ai:~,.,,J..e~;yi_will
·. (Nlf?,·as emended by "(RA.IN~·Sec._:§.Jf~J/._ .·
. . ~· CGT ~:eturns·.from sateor d!~P9,sitto·n_:BlJ,?al \i;·
lJ-.~ __. n? l~rger·~_aye to 'personally fllehls own ..
-!11~op~~.~etu_rnb~t in~te_a_d ~he e_mp;loyer.'s annual
!tf~~m.~1oq.:::~~}.urr_ifiled w_,11. be considered as .the
,: · · prop~rty under Sectio·n 24_(-g.}1t'.;.wUfuiJ'.tn.1i:ty-~:-~:ti~~t1tutef_:.,,JJ;!C'0,_rpe~ax. return ·. of' the employee .. ·
-· · . (30) days .. folloy.iing eacJf',t.ii"ale~o';~her · ·. 1nasn1~~1i!as.~.~~fy>nnat1onIn th~ employer's return ··
· · ·. . · dlspositlon-(NIRC, :as· am_.epJiecl~Y,1'1/RAI._~sec.'.'""""7-~":(S':'&~~S,[~~;5?~\~ info~~ti?n ~or-itai_n~·d.in the

. .
. · 51(0))..
. · ·.
. .. ·.
)\
· . · ·
vif,(]{-)-"/,'.
· , :· lf. ,
. ~ ii
~ .
· p·
. J · .·
j :\ ~pl9ye~s . "{~1!,l~,
..'m...f .
... '¥.Non-f1lrng"
t\
';'· ~ ain · t ·es 'i'.- ndiy1ijual taxpayers who are not
rs applicable to
.

. ·Extension of Time to File ~~Ern f . . . . ~~';!'equired·,~nde_r \~~ !W~~o.file an in.come t~x r-eturn
· _.· :_·_The Cl~. niay, on merjtgn9.u1r ifc.ases,· gr~. ·a·_ • ·-~;e"C7'1'e~ 1~20()3.f 4.~ · . _. · ,. · · : ·
·. : ~e.ason~ble -~xtensi91_1_'of-1i~~fot/1i_l,ing "in 'om~~a~r·~:;"· .· J ...
· · retum (NIR(!;as.ar,:iended.t~~fNLa~}~ec. $~, ·- ,.1. ·f/}.tli.v1du4ta~pair~~i.J,v,ngpur.C?IY _compen_sat10~
J~ ~- . · . · · .. . . . .· ".
-. . .·-. ·. . . . :. : .~·, ~R\. ~ s;th?.,.q_m~"}fg@J}r~11.:ss .. dt}~'l'.lount.-. from· only. one
Deadline .fo.r · Filing··· of • ecL~~i-~n~\t1~ated_~ ·i). f~P~J~'ij-ne P,; Hi13_ei~¢sfor.th_~ c~lendar y~i:ir, \fie
1,-i
Income for !-he Current·T a~le"·t~!lr ~~~- ~i1ffF~~~_pof_wJij1chti~l p~~n w1thheJdcor.re~tly by
!he .. deadlin_e · for filin!;l of. ,~·eclarc;!1:i£?r5 ~m· .~ : '.'i~s§r£1',e91p.16J:er~tax:<fye equals ta:i:c witht,el_d)·s.f1all.
income ·for the currerit taxable\~ear isst~n.o~· ~ ~~~ . .,Ai~ - ~qu1~ed 'to filE{.an annual income tax· return.
May 15 of the."S?me.t_axal;>le. ye~L --C:he )5~' er:t~@i- ," . '~t~rtifi§fcft('!of witfih_old°ing ~led by th~ _respective
n~
the _f~ur instaJlm~nts shall .be; _,· . . · . /'
.. : ~. First.,.... May 15 ....-. .
· , • .Second -August"15, · ·.... . ... '
•. . ~ ~v.v ,, . · -~~-- : ~
·j
ml51qyEfs,.~,p.zys,hf'mpe~'received' by the ~.JR, ;;;hall :
Af~.~~~ t~~ substituted: filing of income tax
· f\. _/[ ~~ ,. ~.by;Ra1aemploye~s ·(NIR(?, .~s amenped .py
·,·.Third;-:- November 15· :_ . .. _:: .. ~ ·... .1,:yitr. ~'(!y.1"$ec'. 51-,4).. . . · ·. . . ·.. . ·
··Fou"rt_h:~_on):>(befcire:May·15 . .of. the follow~ · · . . , . · ·· ·
.. . calend.ar year-when.'the fih~_! adjust.ed i~.~ome. ·: . : ···cq_nditions for_ s·ubstifote~Filh:ig to Appty _._- .
: ... tax'-retum-;.s·.due.to·be filed {NIRC; a$. amended Based on ·-R~venue ·. Re9ufation.. N9. ·-3-2002,
... qy.TR(l.lN,.-Se-c; Z4):. · .. ' . ·. ·: ·. : .. · · . · · :5ubstituted t~x filin1J t>r'l'fy·apj:)lies .to employees who
· · . .· · ·.· ·· n_,eet al~ th~·folrowing ~~ndltiqns:.(1:'01:;~-FF) ..
W~ere'.Reti1rns~~~t·a·e.'Fil~·d· .... ··._ :·:. · . : .. , 1. T~e einpl~yee. receives f_ure/y ·compensatjon ·
. ThE; I_JR sl)aU l;>_e fil~d wi"th ~n authorizefagent tiank,. . · · income (regardless.e>f ~mo.ur:it) dun,ng· t.f1e·faxable
Revenue District Offfcer (RDO); coll~ctirig. 1;1ge·nt or · .. ... · -year . · . ·
. ·.?uly':a,utt,orizedJreas1,1r~r_ of the munidpa}ity ~r·Gity. . ·2.--Th~ -~niployee ·re_ceives .t'i_,_e. \ncome .only :f;om
m which the ·taxpa'yeE. has his.· l~9af"residence · or . · Q!1~ employer _in·· lhe · .Philippines ·durifl~ the
prin-c;:ipal place of- business.' ::If ·there 1~ ·no.· legal taxable ye~r · ._. ·. · ·· · - · . ,
residence.or-prin~ipal pla'ce -of b.Llsiriess·,·.it' shall be 3. The amount oUa_x dll~ from the_ ~inplciyee·at" th·e . ·
nted with ~he.. Offi~e.of tl:le Commis.siorier (f..JIRC, as . .-.. end-of the year Equpls the.amount of tax withheld: ·
_amen.ded by TRAINlaw; Sf!c.. 5_1(8)). : · ·. . . · .. '_ :by.th'e:employe:;::-. . · ·· .. ' . . · · ·.··
4. The empl~yee•s· §pause 'also complies. with. all
. .l:lo.w·Re~.nj.sa.reJg B:e ·P.lled· . . . , three"(3) conditibril? st~te.d abqve.: . . · . ·
Generally, ITR s~al_l be fileq p~-r~onallypy tl}e ·per~bn ·5; Th1;1 employer Fi"!es·"the ·annual information return
required to file returns or his. represehtc!tive as the·. (BIR.Form _No.16b4- c,:=);··and : : '_- '
case. ma_y be: . . .

168 2C)~9 SAN·Bl=_DA.LAWCEmRAUZED E3°A~ OPERATIONS

 t·NCOME.TAX
SAN BEDA LAW.CE_";ITRAL/ZEDBAR OPERATIONS- MEMORY AID 2019
6: Employ~e _-ha~ BIR f orrri' 23·15 o~. Cer1ificate of
Final Tax Withh_eld at Source (BIR .form 2306)
!ssU~d tiy 1ts ·employe_r"(R. ~- ·.11-2013, Sec: 2) ...
N~te: In c~ses·6,overid bysubstituted 'filing., the
. employer shall submit to the BIR. the duplicate .'
cp'f:,.y 'ot BIR F.c:>rm- No. 2~16 hot · later than
c • :February. 28 followinq the-close ofthe calendar
·>
b.· In
"'''
case. of failure:.to- qualify for exemption °Linder.
. such ·special raws and IRRs, the tax due on the
· gain.s re~liz~d frorn the original tra.nsaction shall ·
imm~diat~ly become due· ·and payable, ·i,ubje.ct
to the penalt.ies ·prascribed und.er. Nl~_c; as
· .. amended by TRAIN' !,.aw. . . .
c. If the seller, having· paid· the tax, submits. such
proof of iriten! .. Wi.!hin : 6 months · from ..the

: : penalties (R.R. .Np.. 11-2013, ~J, =.

. year. otherwise, it will basubjected.to prescribed
·
registration 'of the document transferring·the,rear
property; .l;i~ shall be e_ntitled to a refund ofsuch
tax 1,1pon verification .of his 'col')'lpliance with the
lndivlctu"ar~ Not Quallfl~~ fo~ Substituted ,Fiiii-19 requiren;ients · for· such· exemption (NJRC, as
.(BuO;till requlred.to file":ITR): . .- .. . amencJ.ed 'by TRAIN,.
. Sec
. ~ .. 56(A)(;J)),
. .
·
1 . 'lndivlduals aeriving_ ccmpensatiori. fr.oh') two (2) · ·r·
OF· more employers concurrently orsuccesslvely . Note:·
at.anytitnedurinq the taxable ysar.; .· : · ,· 1;- In caseihetaxceyerelects and is qual.ified.. ·.
Employees · derlvihg ..compensatiorr . income, to . report. the gafn .by lnstallrnents under.
re~ardless of the amount, whether from a single. Section 49' of .this Code; 'the tax. due frorn
. ·or several employers .d(!rjng the calendar year, each installment payme~t .shall be. ·paid; ·
the income .tax of which has not been -Withheld >-'7l... - within· 3.0· gays ..from the· receipt of such
." . ~oi:re.ctly resu)ting to collectible or refund~p.r,-/{. : . payments (NIRC, . as ·amended by TRAIN,
". ret~r~; . . ". · .. "; . ,, · . . ·". : . . · 1: :.;;;,,;.,-~~ti .. . Sec, 5?(A)(~)).· . . . -. . _
· 3. ).nd1.y1duc1ls darivinq . other. non-business, l~O.!;i;.:,, ~:~~Ji\ . · 2. · N!J re.!;J1Stratton o.f any document bansfe.mng.
: · profession~~ela~ed. · .: income .... in '. addit1~n] · 1to :·~:~!!I_"!'-+; ........ .· re~\i~groP.er.ty sh~II· -·be . effected... ~Y. the.
. ~9m,:,~n:3at1on mc<:>r_ne··not. otherwise s~~~cttl,7-'·} E~~~4:-,,d:~i'.f;:;~~9J.~~r of_ Deeds ~nless_ the,_(?orr:m:1~ss1oner .
. final tax; and. . ..... : . ·:~··v' -:-' ',
. . ~J - ;
,i.,}. c, -·~r.tni~\ duly authorlzed r<;ipresentative. h~s .
··4. :,lri'divi~u·ars· req~i0n.Q ·purely. (~0m,pensati9.ff,:.jf. .ce_rtiJ~~{: that' such .. transfer· has ·· l:>een
. · i~c~me:_ from ~ :,sing!~ e,:nploye~/~lffiou_g~ W,e:""~lC. ·. r_e~1~rt~a~~ndt~e ~ax h_erein imp~sed, if :,my,
; . Income tax of ~hl~:.has.be~ri _sOJJiEf°ct11~'t'itJ:\hE:I~.
,:t. : _- . · ; . .
· ·. but wh(?se ~pou~e, falls u~-~~"t9} ~!:ios;-e; :.Q- . h•\ . ·::. J:~llff, ~~f 56(A).(3)): ·
1
ti~s -~~Ei~ . pm~ (NIRC, a.s arpendecf by ;_
·. . >· .
5. N_RA-ETB · deri~mg. ·:' .plJ.l.,,f~Jy rtr2.n:ip~n~at1on\ .r.•.··i . :,1t · · :ii .i · . . · · .· · . · ·,.
inc~me;,9r, con:pens_ati~:>n~_qtorne-apli,tper~Q~(l- :. .-· ~~!~ -Ele~t~,']{9,i:~tl_!r!;f~~}'f>cl)'~ent Syste":l (~FPS_) -:

·,
busm~ss; noh-professron-'i1~lat~¢:n:i.9;c.?~e{R(R: .,-"~~. refers _to,.~1:si~
· .. NoA 1-2018, .Sec.· 13),..
. . · .·. -. : . .
~-~--::'.~,:---\,~ . ·
~-. . ,;,\ .
f .j/J
.
deveJ?pe_d.and mamt~med._by
the·BIR tor..electromcally fihng tax returns; 1nclud1r:i!;I
1f. atta~hmeots·, if an_y., ar.id P.aY.ing taxes due th~reon;:
. Manner of-Pay~e'nt_-' -·..... ·· . . . ('f.,,ljj .. . · ·. ~:~~~'~9lf!'?J'~through the irite~net· (R.R No. 09-2001;

~r'. . i tu;.
.. Rule: Pay-As-xc;>l,J·Flfe · Syste.m · .1:{1ncorr.1~::-(axfLli1'l:..'S.~..:d}:!~J ... · . . . ·· . . ...
, .~how!l _9,:i the. return ~h9u1d._be .p_aid .c!Jftie·tirpe' the·. · cover~g~: : ·. · _ · · _ · · . · · · ·. _
6 1s tiled (~!RC, as ameqded_oy t~~· Sec. · .1 ... La~ge. Taxp~yet: ~ __sh.~II - e-fil~ their .. fi~al ..
· (. H1)).. . . · · ·. ·, . adJustn:ie.nt·. incom~ · tax · retwns: .for . the ·
tt,· . . . Exceptlon·: . l~divid~al~ : .rn.c:i/ pay in two equa! . ··:· c~len.dar/fiscal_y~ar· and shall e~pay. theii: t~x~s .
E · · installments. if the income ·.tax due on the annuaf JR.~. NQ.· 09-~0~1. Sec. 2) (Pie.as?~~~ Vt(ho _are
r . tu . cee"d . P.2' 000 ··a to'tlo'ws·,;. . . . . "
1~· · · r~. rn ex :. . s · • , • . s . ·· · · . . . ·
. . Large Taxp~yersu.nder _Tax ,t,,dmm,str:afl.O.(I an_1
· E. r, ce · eritI1 · •
if,.. a. · First lnstallment-·at th·e.tiine'the return is filed. · . - . !1 or, m ;••

t,. . b. .S~co_nd lnsta!hnent. -. on:or be.fore October 15, .·.. ·.. 2; ·flion~Larg·e Taxpayer . -:· g€in~ra!ly., are not· ·
r:· .'. , .. .following the c!ose oft~~ -~lenclar.year .(f:IIRC, · ·- requited to fife rettims thru-EFPS, .exce.ptfor.the
t: . · ~s ljrflended by Tf?A.IN,·sec. 56(A); R._R. No. 08-.. · ,.-· following:'.. . . .. . . . . . · · · ..
1,:....· ·. ·?018~ Sec. 11)':. · - . · ·. ·. · · ·. · ·. ·· · -. ··._.a:· The'.,vq{unteeririg ~OQ· or..more· No'n-Lar-ge
,,\. · · .. .. · · Taxpayers 'prE!vi6usly ic!E':l'.'ltified by ..l~!=l .BIR.
1. Note: ·Befor.ea!)'lel'lc;le·it ~f 1•.f1~c );y TRAIN Law: 'the : to have c!Vailed · of. the option ~<? file.- their
,. . d~adlloe was on·or before July 15. . . ' . . . rettJrns lfAd·er. EFPS · and . received ·' ·
•r · . . .· .. . ·. . · · no.tification' leher duJy .'signed· by.Cl~ to {ile.. .
i: ·, Additlona(Rules I~ Manner-of Pay~enti.n:·Cc!pital. -. th!:!ir returns.and paytheir.taxes"thnj'EFPS; ..
~:. G~lns· .Tax .. : . ... . . . . . . :. arn;l . .. . .
fr €!-~ · 1fthe s~ller.subn:,1ts·proof of his inJehtion. to avail · b. Th~ fop 20.000. private- . co~porations.
,. · himself pf .the benefit. of exemption o_f cap.ital. (taxpayer.s duly id1:mtified ai:id notifie.d by tl:ie
1~ :
t gains·. uriaer .-existing 'special :raws,. no 'such
·pa~ents.shall ~e 'requi(ed: · · ·
CIR ~s includ~-d irtsuch. group unde·r RR.
:No .. 17-2003, as a.mended) (R.R.· No.. Q5-
. 2004;.sec: 3J.' ·

2019 SAN SEDA LAW CENTAA~IZED BAR OPERJ.fflONS I 169 .

• t ......
 INC'OM-E.'TAX
SAN ~EDA I.AW CENTRALl4EDBAR OPERATIONS - MEMORY•AID 2019. .
·. . .
N RH
* • FAAIA A Hf

3 . .-J·~int Venture or c.~nso'rti.um Formed for .the No.21-W02,. -Sec. 2, as emended :by 7-200,7,
Purpose of· Undertaking.. Conatruction Sec. 2)..
,; Projects \ _ ... . . ·. ... ..
All licensed . local contractors are hereby Statement of. M'ana'gement R'esponsibllity
: required to ~nr0II themselves to the Bureau of 1. A11 taxpayers- required to. ·file. annual ITR under
Internal· ·Revenuefs··. Etectronlc Filin·g· and' the·. NIRC; as amended, shall. be r.equired to
. Payment. Sysfom· · (Ef PS). The ·enrollment··· submit a : Statement o.f. . Management's ·
-''should be done at ·the Revenue District Office · Responslblfity. . ·· ·
.(RDO) where - the focal .contractors are 2. - Aside from individual· taxpayer, President.' and
· . registered as t11xpayer.s·(R:R, No. 10-2012, -Sec. ·· Managing Partner,'the CEQ and the CFO orany ·
: 4). . ·. . . I'.· , .. officerperformlnq slmuar functtons regprdleSS Of
·. . i • . their desiqnation 'are also required to affixtheir
4. ·. Other Taxpayers: · . . . . . · · ... · , signa'tu.res· in thesaidStaternent •.. . ." · ·. _- :: · · . ·.
a. corporanons with paid-up capftal stock of 3 .. In the case.ofa.forelqn corporation withbranch .
· P-1:0,00_0,0.09:an_dabove; · . .. · . . . .,- office in the Pt,ilippi1yes;·the Statement shallbe
. .~ ' b .. ., G.orp0rations: wittl 'complete. computerized: · signed by its local rnanaqer who .is ..irt charge of
· syste_m; ,' ·. ·. . · . ·. · ·· .·... · it:;; operations .(R.R: Nd. 03-2010).·. · ·. · ".
c.- Taxpayers joining publlc'blddi,:ig pursuant to . .. · . · · . · ·
s.o.
u
No. 398" i:l? i_mpiemented by R.R.~N9,,,_,.,;.._..,,"-B.si!!rn~. . <?f : Corporations Coryterpplating·

z
· ,03-2005; ·. · . ·· . ~""" . DtssJ>iutJon or ~eo_rg_ani:zation : . ·. : - ·
d, ·· Jor? · 20,00~ . private · ·cbr.po;-atf6~s~~dufy \. !{v_,tsrt 9°r'~r:~!!6n shal_f .. withi~ thirty (30) 9ay~ after
. notified .by_ the BIR; . ;?'-0
·.: J.. ~.a::<:'--:--~_:ac{bpt101),,.'6~i~f- corporation of a _resol~tmn or
· e.: _Top_ 5,900 individual ·~r;.,s~_;;:P6~ified ~ . pJan"'toQtk'"dis~~on,or: for:_ the llq~ldation of the
,- ·, bylhe-BIR; ... ·· , · -'~hr .. ~---~-wh~l~~-ii(part.>.~f ·its capital stacl<, inclu~i_ng a
· f .. PEZ_A-..registered_entiti, ,S.:)R? pro~e1locat~JJ ·ic:, .s~1,poraffpn~i.c~,i> been .. notified· qt possible
.Within·Spedal Econlif'ic2Q~tfl's; / 1[ ·..01~, irl~61unta1,r d1·s'5.6luttot,1 by th·e · Se.euri~ies a'rid
_g., Goverr.i171~lit offices,J,n so f~f as re'(nittan~~s tt<~Exch~ng~ cort}p,-fsJi9n\ or for its reorganiz?tion,
_of. withheld . VAT H~~~1:1sir_iesrfilf.,JS. JC,["rifndtrfa""ce>rreet~itl!I1M91theCon:imtssicine·r, verifieq·
corie:eme~. ~ , . ~-~~ a _: · . l "....,"1,"&:" ...1j~i
0• -~~pa~f. se_ttlh ·fortq we·terms of such r.esol.ution
h.. . Ta~payer Acc9L!_nU:~"!a~ement \f'rog~~~m~la~·c'!f.tl sl!c_f::l· _t!,1et"'9!iJ.orm~tionas _th~"Se~r~tary
_- . ·:(TAMf?.taxpa_}'.e_rs;t,a0s~ ~ ~_{(\_:_>---:s=;<?f F!_!)J\~~k. ypon .J ~ecommer-1dat1on ·of .. the3
1. '.°'ccred_ited · 1_i;npoJ\ef r,-a~d ~r~t~ct,ve~~- .()"1-G<_?mm~Jj~~7· ~'.allf';fijy i:ule_s and re.9ulat1~ns,·
·importer r~Eju1r.~d t~'-se4u)~ t~~~otte~ . )-'·:fi>.f,.E)S~9~~ NIR '. ,· as"t!fr(/endedby TF?A/N".Law., Sec.
:Clear~nceCe~1fic~tJf .. (·1c~s?~and ~~~~~ ~ ~~~~ · · . ~- .· ·. ..- --. . ·
Brol<er'Clearanqe .ce}\jficates ~,§CC } ~:.f!.":~..,,?., . . . _,. · . . · ·,· .
No. 10~2001! ·sec. 2r ~~ N<;>. 1t~q1~~ !>,. )- -'~ , .. ·. ·
· No( 1 Q-2014;. Sec .. 3). ·.. '.I\: ·. 7 ~"-;...~. ··•:£:..£:_ -:-· ~-, ;f,' . .. .. . . · : _- . .
7~-,,..
. . · ·... · . . ." <.9ci~~-=,c..,.;:c_-"'-· -~_,11}ifHOLDIN.G TAXES
Reportorial· Requirements· · · . :, . · V ! · ·i\ ·jff.t[~ '\-... \.. 1 ,,-,~.. : ... ·· , · · ·.
~i..rb_missioq· , ~f. . Flrianqi_a.1: ._.$laie-~ents~-~-f.4l_Js.·.l V ll .. : ;:;::#" . · ... , --. · . . '... : . . · .. ' : · ..
·mandatory e'vE!n if th~re is-no 'inco(Tl_e .(R.R. 'No, 2f~W1thholdiogTax ~ystem ·. ·,... .. :·_
·'. 2002,· $ifC.· 2; as amendecJ-by 7~2007, ·sec. "2))."· . · ,:axes _imp9sed or pre1?cribed are to·b.e deducted a·nd
·: . ·'. •. . . .- . . . . . ·, . < . . · . : . ·. . . withheld. q'y,''t.hi;i _ payor~corporatioris': anq/or pe·rsoris.
.... : ·· N~tes_: ... . . . . . , _ _ "frorn :payments made fo payee.s-corpdratlon and/or-
' ·_. 1. ·"F-s . shall be· corn posed of tbe'. 'balance sheet,: · p¢rs'ons ·forlh_e·fori-nerto- p:ay the3 same'_directly·to' the
·. . . '_inccime ,sta_t!il_m_en_vprofit. ai'\d.-. lo·ss ·. statement, SIR (,?-B DOM0NOON, · supi.a·aCid58).· · · ..._ ·· · . .
· ., . " statem(;ll')t of changes· ·in· ~quity, _ statei:nenf Qf. · · ·.: · · · .. : : : :·
. cash .flows,. notes: comprising a 'su_mmary of It·. is.~ m~thod of co_li_ectingJncom¢ t~x-' in. adva~c:e..
. ·.- significant .accounting 'polJc,Jes and':e~planatory .. fr9)11 the faxable income of the r.e:cipient of. income .
· nofos _- .'and. : schedule -~ 'attached to ·sucti. · Th~s. the taxes are collect~cf pr-actically at tti.e time
.. 'statements . . : ..... --~ ..... " _._. . . . . the traris~fcti?JJ is :'made or when _th~ ~x~ble act_.'
· ~- .FS filed with ·a~co~panyin·~·~udftor's c;:~rtificate_ occurs (taxation .at sou·rce). . .. · ... , .· . . · .
· · · ·. stia.ll'show .the,eomparative 1igu'res of the curr~rit. . . . . . -~ . .
... year and the pr~vious year:' ... -· . ·. ··. - : . ·. Jhe:payee is. the taxpaye'r, th'e.:perso'n on wii6m .the
3. · Taxpayers are ·mandated fo reflect in fts-books . tax is-imposeg, white the -payor/a separate e;:itity, ·
· of ac.co.ut'lts (i.e., general, subsidh=.iry· · ledger$, ·· · acts no more than 1:1ri _agent :of the 9Q\'.errii:ne.ht. for· ..
,al'ld. jol.ir[iafs) the aao'ptec,Jacj;epted yea·r-end. .'·. the· collection. of the tax. in ·.order to. er:isare· its
· - .~dju'stii:,g. e,:itries made ·. qoro,11:ary · · .to ·. the p11yment(DE LEON, .supra at 656). ·
6
··
· . Preparation· and· filif.ig of _its· audited. finapcial • • • • • • • • • •

. ·-s~tenients . . a·nd annual income .· tax returns (R.R. .

 :.1
SAN BEDA LAW
NCOM-E '.i'Ax-· . ·
CJ#.TRALIZED .BAR OP.E.RATION~-- ME~ORY AID_201i,
. .. aw M Mi 1pli

.Earmarking NOT THE SAME as'W.ithholding . Reasqn: . .

Amounts earmarked 'do r:ot. form part of· gross 1. To provide the.taxpayer aconvenlent.manner to
receipts because they are· by law. or regulation , ·' meet his probablelncome tax liability; . .
reserved for some person other than the taxpayer, . 2..' TO ensure the collection of the 'income tax which
although delivered or received. On. the contrary, could otherwise belost or substantlallyreduced
amounts withheld form ·part ·. of gross receipts ·through the failu're: to . file the. ccrresponcinq ..
'beceuse they are in constructive possesslon and not . returns;' · · _f_.. . . . · .
subject to any reservation, 1he- .withholding: agent .: ·3,-· "To'Improvethe goVernmer:it•s·cash flo_'N; and .
b·ein·g_me_rel_y acondult inthecollection process (2- · . 4.• 'To minimize tax eyasion,· thus.. res.ultin'g in -.:1
B bOMONDON, supra· at 1058)." . · · · · -m9r~: efficie.n_f: tax. collectlorr . system. (2~8
. · .. ·· . , . · . ·. · . . . . .. . . DO"':f~ti/DON,.SUP_rii-clt 1059):· ... ·. . . . .
Deflcjency;·VAT ·and· Excis~. T~x C~~not ··Be .>, • • • • • • :-.'

. !'Deemed" : · as . Withholding-_ 'Taxes·- .. Merely .. Wlthhol~ing __Agents_' · .

~·:, Be.cause .They Constitut~ [ndlrect.Taxes ·. ·. . The withholding .taxes shall b!;l. withheld·.. by the
.\.: ·. · Indirecttaxes; like VATarJd excise tax, are diffetent · ..~. · person-.havi.ng control over ttier-paY.{Tleht andwrro at.
f . ·. from Withho~dinf;ftaxes.' To qisting.ujsh, · in Indirect' · . · the same.time 'elairns. the· expenses; ThE; 'f9llowi~g
t\: "taxes, the ir'lcidence of ·taxation. falls ononeperson · persons are· constituted aswlthholdlnp ,agents:
·~· ·. but the burden th~feof..cali-.be shifted -or pasaed on · a.. .Juridical person, · whether-tor' .not. el'1gaged in
i· . to ar-19the'r person, such as when the tax is fmposed · . .t~d'eor busin~ss; ·. : . ·. •' ..
/... up?n' 909ds.: ber0r~:.~e·~_ch_ing the c~mslo/l~r' '.Y.-h_~~} .b: · .. lndivi_du~I~. "':'ith' :es_pect to pa~_t)'lents rriade:i~
·"':·, ul~,rn~tely pays_ fqr.1t: On _t~~ oth_er hand, _in C~:>t.3,1'i.v')i1 .·. _co~n~c;;t1on 11th__ l11~ tra_Q~ °.r b~smess; · . . ··. .
J w1t~holdmg t~xes,· the ·_incidence . and · bu.r9~-~';'~.f.4'.{\-!~~c. lnd.1v1tlual· ·buyers, . ".fll~ther:_ .or_ (lot. engaged u:i
taxation fall on· the· "same entity, trre· stafutqfy~J.1:t'':_ . '.trade ·or business· .. insofar. as. taxable sale,
~r~
)l,,.

.,:.. . .
•;,.. ·
·

.. . . . . I ,J "-e~1t _....,,;i~•-"'"· .,t

w_1thholtling · agent · wh? . merely co le_st,~y',:: ¥ i "i~si· · ·~B~~~- ~':'j-·l'll'.)u·_-
:v,,,~ . ;.a • •
e.:
tax:~ayer.-Jhe burden of taxation:isnot st:ii«ed~bl-tG~~~:_i.. . 1':.::· - .. excha;· ·or . trans.fer of. real ·property_· is·
•
· : .. _·_- .· . .
• • • •
. . ·.- .
f _withhol_ding·;:.the·tax due from- income payi:r-fents to-) \i d.__ , Alt-governrcient offic~s including G9qcs as well ..
;;_'. . ent~fes·arising from __ e_eitciin t,ran~adig~s"ancl r~tnjt~t~\J·. · as prov}~jl~l_, cit'? an~ f11lii1idp,al.governmen~s·-. ·.
S:f the same _to th.e. ~OVt;:lf_r:u'i'lenL {As1a:.~IJ?.ifama!1.o_g]J(.... (\- . · an_d·ba~frw'fi)!_(R.R, No. 02:98, .. ~ec. 2.57.3) .. , ..
!V Auqllon.eers,. Inc .. v.· Cornmiss!Jrx6t> q[.~lri(e(hal- ~l - . .." · U \ · . · :- ·,_ ,,.' · ! .- .. · .
,.-:. . Revemie, G:R.,No .. 1~9115 (R_,'?SOlut1oii);§_e'j:1tembf(. ~:~~ ... Noje}.flfUW wi~liol~_ini;i a~_e_n_tis the <:3<;>~e~ment' .
..fj. · .26,_-2012). . · . . ·-P~· . ~- . · · . . . t. t}.~ =. , ·. ?r ~ilit
oflJ!S a€JK!;c1es, _pollt:1cal subd1v1$1.ons or
k' _.. · .. · . . <? ·. · . . . . .. ~:'"' ...! ~ ,.!,'.~~\ ~- i·,.:J . · ..
in1;!i:-nJi;i:~fali1~.(/ora .. gO.V!3rnrn_~nt:owned · or
~. Whe_n· to withhold . . . ~~< .. t.=.::;;:.;;,'~ _ ~)) . ~l~J' ·: , .
co_tit01te(~tf:l6tation;: the ~f!lplbyee t'1ar_eof
~\! · Aq~e tifTle.an.-info.me pa.yme.nt is-;paig:or'f:taY~_bte/)f t!l' . resp"Qn_sible.tor the withholdirig,and-rernitt_an~e bf
:·., .. . aqcrued, pr ,:ecorded ·as. aFI· exf:@9ise. 0~.- as~e_t, . ·1i\--,-,iii~1he·-=ta"· ·-shall · b.e . per:sonally liable for. "the
~1·;· · · . wt!_ichever . is ,:-applicable_ in·. th~ p'§y_J.?r;P
book-;-; -1,/.;.'.;.:~~~-~~efi~i~J}'cy:taxe_s (NIRC, as' i!ihierided -by TRAIN ·
} . w.hich~v.~r GOm~s finO?t (R.f?. No_. 02-9,8_($ec:",?·:tp-.'7f!-.:. ...._~-~~~f'a'f/l7$'eh24_7(b)). . . . ;_.'._ . ·:
f'· · · . a~ Bf11~n~ect-:pY ~.R. _ Na.
·., .,,. . ·. · . .'
12~2_001).·
·.· · . ·.-. ·
~J ... · . t1_~ .
· :-.;~h · . .
· · . ·: · ·: ·. .' , ... -~-.
Character o(w1thflotding a_gent.
.,·. _ ·..
. ..
· ·
·Th~ te.rm ,"pay.a_ble.~_refers to the· date the. oblig~t.ion · , lri the operation 'of the·.-w.1thl'1oldi11g tax system, the
.. becom~s- due,. 'denj~r.idable. .br .legally· ·enforceable · ·. .. ···withholding ·ageQt .is not the.'pay.or but ~eparate' a:
_(R.R<No . .02~98,: S,ec: ·.'2;57_.4 _as. ainerided~by R.R: . · . entity·: _ac_ting__ no_ ·r;r,9re . tl'lan · an ' ·age11~ ·· of. th.~ ·.
_N.9, 12:.2001k: . . .' . ·. ·: · govefnm4:;'11t-foJ:'the ·c·onecpon· of ..the ~):{ _in order_to
. ·. . .. ·· ·-- . · · · ... en.sure. Its. :payment. Tfle payor of the:..tax · i.!3 'ttie .
· How Wlttiheld.and.Remitt~d. · . taxpayer a·s tie :1s ·the per$c:'.>'l'l: 'subje"ct to the tax·'
. lt'is"withheiq b¥ ;withholding agents :and_ it sh'al_l be· ·_. imposed by law, ai:id:the payee: is' (~e taxing a.uthcJrity, " .
. 'cove.reel -by.·.a· retutr:i and paid' t0 (except' in Cq~es .. (2~?·1JbMONp.ON,'supra_'at105~);_ ·. ::-· ·.·
·. where ."the .:C~mniissiom1r; otherwise ·.8ermits)' ·an ···; -· ·· · .· ·· · ' · ·. · ·
'.· · authori~~d· agent bank, ~DO, col!1:3ction· ag'ent,--or: · ·-°i.n\ega~a· .to.:ttie ~i;'ng :~f
ttii/neces·~<;1iyi~a-ome~t~x
. duly.'au\horize.d·treasurer of the cjty or municipality.. ·.:· retu•rn an~:J'tfle payn'len't 'to th~,g6verr;im~nt; he-i_s. the .. ·
where _the Witl)h.olding '-agent has his le_gal (9Si.~ei1CE:: . •.. _agent.bf the fa_xpa¥~_r;.With·respect to _the collection .
-or· principal. place.· of -t1usines.S1 or· where tJ:i~ ... and/or withholding .of .th~ tax, be is the goveri'.)menfs
.·:withhc;,l{Jing ··:ag_erit . is a ·. co'rporati'on,, ·where·· the . :agent.. Tti4s th~ ·withholding agent 1!:i the con·s·tituted
i;,rici,eipar office. J~ 1o·cated (NIRC, as amended by· .· .agent b.gth of. the ~overnment anq the.taxp_ayer (2"8 .
.
T~AIN Law, . Sec.
. 58(1!,)).·.· . ..· · . · 'D.OMOMDON,supra a.t 10'64).<·. -'· :. ·
' . . : .. ... " .
· ..
. .

The taxe; d~ucted .and ,;...it~heid by th'e witiiholdin~ ' . Duties of

the viithljoldln~ Agent ..
.,agent·shalfb~ hel'd' as. a special fund·in trust for the. .The Ta~ Co~e imposes certain .obligations-upor:i the
. gov~rnrrient untilr' paid to·-.:tlie .'collecting officers withholding agent-to-monitor it~ compJianc::e with the .
, (NIRC, as.amended by TRAIN la~. Sec. 58(A)). duty towitl')hofd. They lnclui;:te': .. · ·
. ~ . . '. .
·.· ..
201s sAN:BEDA
·.. LAW CENTRALIZl:D
. . BAR OPERATIONS 1 ·111
 ·1N·c:0M-E TAX.
SAN BEDA LAW CENTRALIZED BAR OPERATIONS.- ~EMORY AID 20)9
Mil ¥Ei
i. The· filing .of the· quarterly ~ittih_oldin.g tax TRAIN, law (N!RC; as amended by TRAIN Law;.
re.turns; . - . Sec. 5.8;-R.R. No. 11-2018,. $.ec:5).
ii. . The- submission to th~ paye~, in respect of_ • J ••

. his or its receipts during !he ·calendar. quarte_r · _·considering that the taxes ·withheld, _:by' the
. or year., of a·written"stat~ment showing th!;l Withhof9ing .~gent -<:lr.e 't1eld: in . tr\.)St .. fqr the
'income qr othe.r. payments made by the .. ·. govemr'nent . and-. .its av.ailability . is: an· ·imperious
withholdi°ng agenf-during._such q1,1.arter.· or · · nec.essity-_.to ensur~ !,Ufficferit · cash inflow t. the
year anp .th~ amount of tax ·deduct~d. ·and. . National Trea·sury, ·withholding.agent~ shail file .BI_R.
withheld-ther.efi:oni;"anci: . . . .. . ~- .. : M_onthly 'Remittance Form· (BIR Form No.· 0.619F .
JiL The filing with the· BIR of a- reconciliation . . and/or 0619-~) "every tent!:} (1 Qlfi) _qay the following · .. of
. statemenfof quarterly payments ano a .Jis't ?f . month·when the-withholding is n:,ad~. regardless ·of .
payees and income.paymei:)~S. · th_e a_mot111t withheld (R:R.- No. -11_-2018, Sec,· 5 pa;. ·
. . .· . . . . . :J), . : .· . . .. . .·
: 'r- The codal .. provisions ·.on. :wittihOlding .tax are.
· mandatory and. must . t)e .
complied With ' by . th~ . · · Note: .Befor~ tbe passage of TRAIN the return· Law:
· ~ifhho.Jding _ag~n_t (Far. .Eas.t . Bank . :and . Trust· . for· FW.T .and the-, return for .-creditable withholdiflg·
_Comp;:my v, coun of App~als; .G8, No.-1.2f}130, .-~a·xes:(EWT'relurn~).s_hall be filed.within -ten· (10)
December 9, 2006). · · . · · . · .. · : . . ·. · · · ··days after, the end of eachmonth (Sec. 2.58: of R.R.
. : . ·. . . ... _--:· -· .· :- _:. ·. .- :.. ·--...r~~,-4-98).· .. ·:'. ·-.· . . . .: . .
-Note:.A taxpayer cannot be compelled to ~s-werf9ru _..,.t-~~--. . . · · . ·.-· . ·
ttie'..non~perfo~anc·e ':>Y the. withh?ld)QD~~eri~~fits·.. . · .~f~J1iiije.s;o_ttheW_ithhbldlng Ag~~t · ·. · ..
Je~al dut-y,to_\N1tphol~. L!"!~s~ there 1s;coU~s1~rB>~~..,~·AL..,~:F.lilr .fa1luroe\\~ collect: and re~1t taxes- -. A!1Y.
faith. F1:1rtl)er,)he .tc:ixpayer cou_l~tfpt-,9_~,~~~A'ieo to . . . .pe1;~o~'r-~~ui,r~dto ~1th~~ld, ._~ccQunt for, ~md .
have evaded taxes. had, the,, wjft;i,_~J#ng·.Jl9~El!Jl!t~n~'tax )ipposed by this Code or-who
_performep· its. duty (far_ l;f!.~t"Y371f:.~rcl· 4l\.
compeny v, Court of Appef}ls, ~ r No: 1291:!tf, .
'Jr "Trt.{;~f. wwiltttlJJyJ,·ifa/~..Mt~hc,,I~ s_u-~htax, or acGo,untfor·
.a'-:S:. and' tem1t~fc!1'J.a~. or aids -or abets in any
· December s, 2006):. ,r,,___ · . , ~.:..~--6~- __. m~~n·er.to;.~~f~~y·such_tax or_'the:_payment ..
· .. · - . ·, · Z-U.. - . l · . . . lm!I . , ffier4t be. hao1~.· --: \ . . ·.. . .
9bligation of the Employ: r,'fo•WJlhholdtAcc'~~t-(~·- "!P W~rlmi1aJ,
~he_. penalt!es of -~n·e_ and .:

. !f·
Bonus.es · . ·. ·. d [ ·_ l . : ~~r±.
the t~xpayer claim~ _b~~µfe~"~l?\f' d-~- -µ,9n m 1~s;._:7-_.("<_:
income tax return, !he .wit~91<;1,rn~-tax.'qJ:J\~ sa, 51~~~-
.·
Jtjt~)R:'l.and_· i· · ·. . . _. · .
'P.![>r_1so~1~9r~v~ded:'.urt~er·

_. ,, !l'G..a.' penal!Y.~tr al to_ the amount. of tax not_

Sec. ·_255 of

bonuses sh_ou1d be wi_thheldWFlei relbitte -~,~~J·g\l' ~~li@¥' ~).Kh:-1~fo~ n·0i accountect:tor. anct rei)litted
in the year of accrual and (lot dur~g th ·-c~~~f · ·. ~. _:s,;- IRCj' as am'e,:,tled by. T"RAIN Law, ~ec.
payment. Th~ ob!igation :of-ti\~. p~yoA_e~p 0¥. -;t~ •./ ~ -~ 251)/ _.. 'j'jf . - .- ·: ·. -· . . ·.' ·.
.. . deduct ·and .~1thhold the ·r~fate,¥thho~~ J~en.7r:;:i:::fr\h L · .. , · . · · · · · . · · · · .· ·
. · bonuses _ari.~es fil. the-~ime :the in(;om~ '1<!.s~f)~fil~P:..,or:1¥Ji~~;EiJ.,o~~fundexcess withhofdfoq tax -Any ~-
accrued ·or recordet;l a~.- an. e\~n~nj tffe-- ......~,emP,1~y~Ntitnholdihg agent who .fails or refuses .
payor's/employer'.s ·b_ooks, .Whi~hever~grn~~}rst·M'· A~~~f~,9d1'txcesswit_hhold_in!:Jtax.sh~II be lia~le: ·
:(ING. Baf}k N. V. v.. Commissi9r'l(fr CJf".'-'/n@rnc1f le' .. ~,i:1P.Th.,·- the;' criminal·. penalties. of.- fine . and .
·. Revenue,.G.R. No.. 167679, -:July.. 22, ·2015). ·: ·· ~~ .•- :imprisonment. provitled under: Sec. 255: .of
. · '. .. . ·-.· .- ·· . ·· . ·. . :· . . -. . . . ·the NIRC; i:lri"d ·. . . '..... ·. .
. .The obligation 'of tt)e payoi' empl9yer .tq: dedu~t and . . .-·. p. _·T.o- tbe total amount of_ refunds· w~(ch. w~s
· . y.,ithhold the· r';ili=it~.d withholcl)ng_ -tax. o~·· bonuses . . ~i;iot rElfunded t«? th~ ernpfox~e ,res1,ifting from'.
· . · arises· ar the. time thee.income was· paitl or accrued.or · •· · any excess of the amount- withheld over.Hi'e.
· · .. "recorded· as_ an expense." in. -th~·- p"ay.6r'~/emp_loy~r's. : _:_ t~X. ~clually due· o·):i. their .return. ·(NIRC; as
books, whichev~r comes _:first (JNG.:'[;3ank -N. V.. \(;· . · . · ·. amencl_ed by TRAIN {-_aw, S,ec. 2q2). ·. ·- . .. ·,.
Commissioner . of lnte/tia/.. Revenue; G.R. No. . : .. · . . · ..-. . : ,c · ·
1-676_7l}_,.-./l!.IY22, _'291.5/ . · - . ·, .· Npte: _The:; withli?lding. ag~nt. is:..- explicitfy.· made.
·· ·. ;. ·. :. . .. . . . . . · p~rscmally 1,aµl_e unde~ the NIRC.- The.Jaw sets·Jio ,
Filing_ of R~tµrn arid· Piayme_nt:of the FWT. ancl.: .. ·-condilion.for the per.so):ial°ljability of th~ wiO:ihoidlrig. ·
. CWT . .: · · · · · . · ·. : · .. ··: _. . . . . . : · · ag,ent _:to· ~ttc;ich.. :-This . ."Is·. in qrder· to· ·coiripel tlie. ·
The -filir,g of' final an~. credita~re withholding· tax .. :_ . withholding_agent to withhold the-ta.i<'unqer"any.~"nd ·
r_eturn·s and payment ofthe·taxes. withheld-at source~· ·an circ1.1.mstance~{2-B-C>OMONQON,s.upra at 10q3- :
. , .. sha!I be madtl not ia~er'.than tlieila~t day ofthe nion~h 1064) .. ·. : · . · ·· · : .. ._- · · ·
. following· the. close of the. qu~rter during Which the. . .. .
withholding was mad_e·. Th~: provisi<;m_'. that · the .
Commissioner may require th'e payment of.the tax~s
'~ithheid at more frequent intervals is re~ove.dund~r'

172 ·1 2019 SAN BEC'.>A lAVVCENJRALIZEDBAR OPERATIONS

 SAN BEOA !AW
I.NCOME TAX· ·
CENTRf.o:LIZEO BJ\"R OPERATIONS ..; MEMORY AID 2019

Withholciirig of Tax ~~~II Not Ai:>p!y to Income applicable · (R.R. No. 02-98,
Payment of the- Following: . · Sec." ·2.57.5, as: amended by
( National govet.nment and its irrstrumentalities. . R.R. 'No. 1_ 1-2018,. ~ec. 4).
including· provlnclal, . city, or .· munlcipat
gpv'E;lmments, as.wellas GOCCs: and . . Conse~uences o~ F,_a.ilur~.to· v,viihhoid: ·
- Persons enjoying income. tax exemptions: and · ·1. Liable for surcha-rg~s and penalties; . ·.
Exempt ··organiza.tions· under Sec. 3.0 · oi-..the 2.· ·:Liabfe upo"n c6n'victron to. a penally equal to the
· NIRC, except income- derived from rear .or ·total ·amount of ·the ta~ ·not ·withheld,· or ·not·
. personal .property," or: from . c)ny" -activity accounted for and ·remitted (NIRC, Sec. 25.1); .
.,. . , conducted 'for profit. : . .. , . .r- ·-and · · · ......, , · · · . · · . .- ·
:,7:· .. 4. Persons :~njoying exemption from payment of. ·· 3. Any · inco.me payrnerit whic;h· is ~therwist}
·r· · lncometaxes "p.ursuantto .the provisions of any.. deductil?l~:fr'orp ~e p_ayb(~ ~rc:>~S iT'CQ_me Will not .
:].:. · · . law, .tJen~r~I or speela], such as ·b_ut_ not l_imited . . . :be allowe'o as a deduction.if it is shown that the.
.i , -to.the follow.it;ig:: .._. .. · .· . . . . ··income tax required:to be ·v/ithh_eldis not paf~ to
t
'K: · ·
·. · ·. :_·a..' .~ales of real property by a corporation '
· · ·. whlch'Is.reqtstered wlthano certified by
: the·BIR(~--~· Nq. 18-2013, Sec. 2)-. · .·. . .

if: . the -HL-liRB or-the 1:iUPCC.as engaged Wh~n· .. irr~omi3 'tax withhe.ld .by _the· lncome
~- · .in· socialized houslnq project where.the payor/withhQldlng :~gent is in· excess of .what "is·
I·. -, sellin1fp~ceofihe. house and lotoronly · . prescrlbad · . . . . ·.
,, . lot.:do~s· not exceed the socfc;11iie·st.,..ef'S\ · Any. lncome' <tax wlthheld. by the -incorrie
housing .price appllcable to the- are·~_as)'};i payor'/withholding age!'lt· in excess of what "is .
. . prescribed ~nd ceryifi~d. by · the /s-~io,/:t,(l?rescri_b.ed-I~ 'these re~ul~tions shall b.e re!und~~ to
, bo?rd/counc1I. a~ provided under\!8,;,;:.~m,1the _payee by. the said income· payor/w1tti_hold1ng
: No, -7279· . and '- its · implyme~,liri_g,;:',~hl ag;~(lt.. T!3e )qcome· payor/withhol<;ling "age.(lt · shall·
1
. -r~gl.ilations: . · . · , ,_p' t.-~;Jf'~ri[Ei_9t':".t~~~?rj,~ounl'·refundedas adjustment to the ·
. b. . Corporations which ar~·.-':-:1:;x~p~fro+ 1 ~r remi~o1e::-wj,1~pq1ding tax- due for the, first quarter
· the income tax·under.See~~~O of.the T~xf,._1· withholding ~~return. The a_dj.usted amount of tax
.. · Code, as atnended, an'c!~gp,yernm!,!Jjt!'.'"'"··~ . wjt_hheld shlill~a~so.be reflected ii:i the Alphalj)etical ·.
·. ~ o.wnid. _controlled c,o~f~tiqn_~:e-x'elilpt t_ft ··ust of PaY,e~~ "tc\_t>e attached in the ~.aid 'first s_tf . ·o
. -fr9,l'rl ·: ·ini::?me: )i~V::unde~e~tic;m .. · h~, quarter ~~~!{r)} T,\e ·said list of payees; wtio 'are
·. 2'1(A)(C) ·of .ttt~,J,.~me,€09e, t6 wit\ 1,1., subje~_tt~_reflffld- either due to the change Of rates of.
.. .. GSIS,.$S$·. PHl~rcl1nd-i!vY..:P}~1ovi.eye.r,-
"the income paym'eQts ~rJsr~g~!rom:P.iflY·
I~
1/,J
withha:t;,.cfjng~_6r-7"cft®':W..th-:S:qualification to avail of_:
eXefT1pl16r:i';.J~l.ijifliholdingtax· shall' "likewfse. be ·.
·· ·activity_wtJich is cdH~Qt!!d"fo~profi~6r·.;~ attach~ in t~e l?aid·.r.eturn, which shall'be"filed .on or·
income ·derived frQIJl-~e.f;ll:ar)~ersona!. · !1(..,...:~tqre··April 30, .20~8-(R.R. No.··14-20"18"isswed on
·. -"propertY:st:iail !)e·subjed1t<iftftt:lt:io_lding ./s.1)!}'1'B"~-<£ff2018): · ·
0 · · · ·· ·.· · : .
. ·. · tax as p~escribed iri the$~:,regula\i,o~"s~~~~·\.P"•fou;T,;)· ·. . . . . . . .. · · · ·. · ..
, :c.' · .)qint vent~res..or consortijfo fc:>~e.d.fo~ . _. . :.. · Co"i'1sequences.of the _Failure·.~f t~~ Withholding
· ·. ·: t),e ·. .-.purpose· ·. of. ::~it~~akil'.IQ_ . AQe.nt-t_o·.Refutid·Ex~ess.Withholding Tax,·.
·· · cb"r1struction projec.ts. ·pr· -engaging ·in , ·"Any employer/witt,ljoldingagent who falls or·refuses
. ·.. . petroieutr( cc:>al.:·geothermal, :and·_-0tl1er : . t,6 refund ~xc~.ss withholding tax s~ail, _in:.addi.tion.·{9 _.
· -et:iergy . opera\ions .. pursuanr . to an · . ·· t~e penalties "prQY-i9ed iri,fh_is-Title (i.e. ,civil _pena.lfies, ·.
·:·- operating ·or ·cc:inser'tium agr~~ment. · lnfo"r¢sts iti'cluding deficiency- ·and~.--d~linquericy.
· :under if S£!rvice· ·co"i}tract ·.with _'Uie: ·,nterests, and"}mprisonme.J'.lt), be liaqfe to ~i"penalty
, _: g_overnm~rit. . .- . .: ·. . , ,. to'.. the · tot~I :aniounr.o~ · r~fonds \;Jhich. was not· .
. d. -lndividupls who -·~am· _P.250,0_00 ahd · .":refunded to the- employe.e re~ulting from· arty exc_es$ '
. · belov"i:from ·a lone ..iricome· p~y.or.· upon .of the.-~,:n.ount.witht:ieid'.over.-.the ..tax actu~lly "due· on
,._ · ,· c;.omplian_ce ·': wit~' '.-."the.· · following · · .\heir:.returri (NIRC, Sec.. 252).· · ·
;; · .. , requirements: . ·· . · ·•. ·· ·· · . · · .. '. . . · ·. ·. · .. · .. · . :·
' .. I, · The inclividual has .exec1.i"ted a ·when- deduc"tion· ·.stilf ··allowed .d~spit.e · ri~n~
payee's. ~worn . declaration or.' : wjthholdlng of taxe.s . . . . . . . . . . .. .
gros~ receipts ·in' accordance: Any. income. payment which. is otherwise.·d!'lcf1Jctib!e
with the format per attached . under the Ta.x Code, shall be allowed as,a deduction
{' . ·. Ann·ex···s-2~-; · :. . . from the payor·s·gr.oss·income·only if itis·stie::iwn that .
r . ii. .The-' . sworn - declaratiori· ha$. the income ~ax require.dto be\,1i!hheld has been paid.
_; ·. been ~su!:)rii"itted -:..~6. tl.ie ·lone . to the BIRfn"accordance with Sections.57 and 58 of
.. "ir'lcomEi :: : payor/witnholding_ . ·the Code. ~evertheless, a o~duction·~ill be ·al.lowed-':.
agent oA·.or.·before ~anuary_.15 · "in"the. following cases where no withholdii:lg of tax
'of ·each year· or before -initial . · . was made: (FUR). ·. . . .
::incom~ payment, ~hicheVE;lr. is·. ..
'··

. . 2019
. .SAN SEDA
. LAW. CENTRAUZED
' . . BAR OPERATIONS
. . . : · 173
~·
 :,.
. . I.NCOMETAX .
SAN BEDA ~~ C~TRALIZ£D·B_l1ROP£RATIONS - M£MOR,Y~-ID ;jo19

' .
1. Th~ recipient/payee to
Eailed' report the income Effects of fWT . · .
on the due date. · thereof, but the. withhold_ing i. : Final tax. is constituted as,~rfull and final
ag·enUtaxpayer·.pays the . tax.. inciuding ~h.e · "payment of the income tax due from the
interest incidentto tlie failure towithhold:the tax, payee; . : ··.. . .
. 'and surcharges, . if applicable.. a.t the ' time 91 . .ii. The income subjected to final tax is no
'a-u"diUinvestigation . . . . .. · .· or longer .:subject tolncorne tax;
· ·· ..reinvestlqafton/reconslderation;": . iii. The'.. fin.al . tax i&.'·.iimited. only to the · i
2. The .. · withholding·. · agent : . erroneously: .' payee's Income tax ll'abillty and does not '
ynderw:ith_held 'the· tax. but Pc:lYS. the. difference- · ·extend to' other: taxes Jhat may 6e·· i!
.. between t~·e. correct amount and. the ~mount of imposed pn said income,.. . . . . .. I

·:·.tax,wlt.hheJd, incluqing ·th_e interest incident to ·iv. Liability for the payrnentof the tax rests I·
... sucn error and. surcharges, if appficable, at the . primarily on. the,' payor as withholding !
·. , time . . . ot :, · ·:_aueit/investigf1tiPn. ·.. . or : ~gent; and' ' . ·. . · :._ . . . .
. . reihvestiga_tion/recorisiderat_iqp;·aAd · . '; .. . · v.. Withholding ~g,ent'(not th~ payee) files
· . 3. · The payee' Repor_te.cl' the 'Income and .pays the · ' , the ·· .' return- · '(2 '. · CASASOLf!,;"' f:,IIR.C ·
..·· · - .tak'cfu.ethereonand.the withholdir:i:g agent pays -.- . : Annotate,:/, s.upr,c1 i,J( !$2(3);
the"tax, including ·the'' interest incident .to the . .
... faifure to-.vJithhold. 'the _tax, 'and surcharqes.. if .Commen~ernerit of Prescriptive' P.eriod tor'
·· .· ·: applicable, at th~. tirne.of c1uditlinvesUg~tiqriJ,..1:=-=-cE_~tmd_··of.FWTs ·· 1·. . • •• • •
. ·, 'reltwestiqatlcnrreconstderation (R.R.;.~6~-~:..,:u· "f FJn?4-"'wi~~olding 'taxes are 'considered 'as full and .
2018 is~uecj,_ on Ja1;1uary 19, 201:§,fJ::~kir._~,R'~ ·, · .":!t~\~J.
pa\trn)ht_~fthe income. tax due- an.d thus; are .
-NC?, 12-2913-n:J.lative ·-to t(le t~qll((em.ebts·~~~Q!~ufije~(!.O- a.r;iJ adjustments. Thus; the two (2)-
de<;luct(bility._of certain expfms,es)-. :\;~ . . year'"pt:e~ijfiptJ.¥.e~wiodcom,:nerices to ·run fr~m ·ihe_
· . . · .: . . ' · ·. . / "V' fl/:~='.:'. . ""'"l;"1Jme.tb~refu{~is a~~,erta_ined, i.e., the date such.tax
· Not~: Items· of :peduction_ f~Bt~er.}igJitum 1 eJ 1~ ~~ pa~¥i· ;,,'ari'"9?.'1£>,t\yponthe. dis~ov,e_ty _by the·
capital, such as those perta1r-wig to;puf'chi:iies of raw .tit~ ta*payer'Of th\t~'fron~~\us'Q_r"exces:>1ve payment of·
m~terials forming part 9f finiihed pr{ciuot ·1urchases ;;,~ taxes. In lthe 8-f.~ef s)t:1,bar., it : is u.~disp_u~ed thc1t
of gobd~_for r~sai_e., shall be~~U"01ed as:.· ~cfu~.~>rt'·~frllifetro3anF,<'~ f!~ak ~j.t!~~?ing .tax lia~ility in _Mar~h
u~on_ ""'.~tb"1old1pg· agent's{f":)~Y!'Jil~t_. ot he ~~s? il ~ .4~~as~r.em!lt~&f~to·t~,U~I~ ~n ~pn.~ 25;20~1..~s
with hold mg_· tax. and . pen~ltu~p~ c1dent ~to · n~~. 1t pnly. ha~ hlR~v .'.Apnl . 25, .. 2003 to file .its
withholding.or underwithhot~Mg,./ ..R:1""q"; l\~01sJ.';::j-~dminii
· · · - :' · .\";.. f.'\ . .' ,%~.--·ml-~
·~~v». ~~-d. jo4icia1 ~ c1a!n:1~. to~· r7tu~d:
1~wev. .r.:C.WJ11IEl.t/Me.troq~nk!s,.adn;11rnstrat1ve claim
Bas.ls· of Tax: Gn,)SS amouri\hf.li(fc pie. ~- · 1gjj- ~~& .tr~Sn. D~lemb~rJ.i27·:2002, its.:·corresponding ·
.··: ;- :_ ·. . · ~- · .. ·,.. ~~ , · · )J~J,'.~~!Jm·~s only£!189on Septembii3r10,.20()3.
~i'nds·of_Wi_thholding-"f.ax~ .~'\ -. ~, · · <~~"'0,~(Nere;,Metroban~s._9!aim for refund ·had clearly,·
1 .. Fir\al .withh.~lding tax (FWTHflR9, a~\~IJ'.l~~~Y--ENrP~:strJ?e,tff Metr:of?.6/itan · ·B~nk·. ·& Tru_st ·qo. · v. .
: . by TFJAJN La":'; Sec._ 57(A)); ~! ··;."' )':~~GO~J~0/1e~ 9,f( l!7fernal.· .. Reve'!.u_e;· G.R. ·,No_ .
. z; · : Cr\3q1tabl~-: w~hhold11)g tax·.. (~t~lf)~fMr~-=::;4fr{!rJ?"i\¢~f7,: 201.7.,: First _D1v1s1on, Perlas-
... (NIRC'. a~·am_~n<jed ?Y T~IN La~"9-f#.C~!/.B))'._ 1', -~ 8_'fln:{'~'?.e;-Z(Jc . . . . .. · . . _
.-a,_ W.!thhold!ng tax on com_p~flS!=lt!ol'l~~ !VE..-I'~-- . . : . · . ·. _- ·. : . .·. ,
:· · -b •. Withholding-VAT; and·,... · .... ·. · . .. ·: -~~, Cre~_itable..(E~pl'!nded.)W1~h_h0Jding Tax ..
.9,. ··. Expanded.. · Y.Vithhql~ing-. : . ·ta~-·, : .(2-B_: . ·. Wifhhold_ing:taxes. o·n .or.dina'ty'bu~iness:income
.- . · DQMON_DON;-svpra'-?t--10.5.5). ·. whic:li is-· still. :subjected ·to income tax· and
. . . . the(e.for~; it-is dedueJil;ll~ ~s tl;ix credit. : . .
. -1.· F:_inal Wlt.f}tiol_qing ;rax
· . , . ,. . .
(FWT)
·· .. . ... -._ .
· ·. · · ·
. . income of Recipi(lr.ft• . . ·,.
· ·Exa.mples of -Income Payments ·subject· to . · ..·· · lncom~_which .ahy cred_it~ble tax i~ .r~quired.Jo ....
·-_::FWr:· . . . ... · ..· ·:: ··: ... ·_·.. ·.· ·. .. ·.- :b~ Withh~ld ,;:it·sour(?e shall be -incl~d~d ir;i __ the ..
.. . a. l('ltere$t- im::ome on currency baok 'deposits. ·. return . of its recipienl: (NIRC,.. as afneod.ftrl by· .
(NJ Re;_ .. as . ~mended· by ·' _TRA'lfV,·_. Se_c. ·· · ·· . · TRAIN Law;_ sec. qB(D)).
24(8)(1) 27(D)(1) 28(A)(7); -·~-.. . . .. ,. .. · . ·. · .' . < ·, : ::_·· ... : : -. .
· .. · b. -Pass_ive roy_a_ltyinco:me· (N!RC; a~~-~fnended - ·.: . · The exces~ of the ;:infount, o.f tcix withhel_d over
· by TR~lfl!; Sec: ~4(8)(1) -'Sec. 25(A)(2))); ·. t/)e ~a.x.due. pn. his return shall. be refuncled :to
. : : · · . and. · . . · . him, sµbje·ct ·. to · Se.c.' - 204 ,~f · the. .NIRC
· · _c. ·... Prizes : ~nd. ·winning~ w~i.ch :_ ·e~c~~ds · , · ·, (abatement, ·refundicnietit ':taxe;,) (NIRC,. as··
. .p10;oo·o(N!RC; · as ainf3ncled by .,T~AIN, ' . a_mend_ed by TRA_IN; Sec. 58(0)). .. .
. . · . · Sec. 24(8)(1) -Sec. 25(A){2))t.. '. .
. . . .. :· . . . r

.J ~4 I 2019 SAl.'J· SEDA ';-AW C~NTRALIZED· B~ OPERATIONS ..

 INCOM.E TAX.
SAN BEDA LAW CEN'TRALIZED.B'AROPE.RATIONS- MEMORYAID 2019
· s · ··,;ii,ew,Aimm ¥AMI · -• ,· IE

Return . . on. . Credifable

(Expanded). . Personal properti~s 5°1o
· Withholding Jax . .
. .The Income payor who withheld a creditable Poles, . _satelli\es and transmission 5%
· income tax.should fiJe JI. return' and pay the tax facilities
withheld.- · · · ·

· Requisltee: (E-FLAR) · , . '15%

a. An .!;_xpen·se . is. paid or payable: by the
taxpayer-iwhich is. incorn~ to the recipient 10%
thereof.subject to.income:tax; . .
b. . The__ inCOmE{is :!:ixed or, determinable at the·
time of payment;' .. · · . ..
c .. The income is oneof the.iric0me.payme'nts: .
,.· J,J$ted. in th"e·.requlations (F?R'. 'No, 02,-98) If ·gross .income. for. -cu~rent .. year 15%
. that is subject to withl)olding_tax;·. : . · · · ... · · .. ex'ceeds .
¢1. _-. The payor-withholdinq ~genl lsa' resident of. ·. p12_0;000·
·the Ph.ilipj)inei:;; and . . ·. · ·. ..lf-grqss _inc'ome. fbr cur.rent- year ·does· 10°£
-e. The ·income -Recipient .is .. a resident of the .notexceetl P720,0QO· . .
Philippines liable to ..- income ' tax .
fMAMA~ArEO, Reviewer, 3:upra at-266). . /.[<:'l .
. ·. . . . . . • ·:f.?·A-( .
.Wher:i to
Fil~ Annual ln.form;tioh: .Reto'rrr?)~ij(;';.t,,.·. . <. . .

Income Tax Witf'lheld..:... Final and Creditable~· .. rl.",,• e:f~ If gr.os:5 income for , current . year 1-5"/o·
· · · •"""'' -~·'!
The return sh'all be file:d and the payment made·in;9t··::~,;r
exceeds
· · · ,. . . ·
later t_h_an tt:ie. last'a~~.Qf._the_.rri~nth" .!oll~w.-~~'~ef··?r:~·:: ,~~~~~~i't~i. . . . . ..
close, _of the_ quarter aurmg wh1c~ Jhe<..,.Vf!l;tit1_oldm~..,..- if . If gross"1ne8,'r)i)e·for ·current .year· does 10"/o. ·
:::ta~~ (NJRC, Sec: as [SB(c) arpr:,\~e6;fY
TRA~%::~J.. riot exceed · o.ooo , ....-,,.i---C---J

·
0 S_~mrh~ry.-~f
·
E~~and~d.With~:ot~itf~~e=:~-
' · · .. ,r-:,,,·· .. ·• ··· ..
. r;f Q: ·
~t ·. .... ~ .

!d
. i'i'f
; ~
.f'tofessi~n,al_f~~s:·.tal~nt.fe_es·,."et~r;.'.tt>7~~~ici:i-~ · f:it· Mi+i!iJ
·!]!.
-rendered by lndlvlduat pay:ee · \_\ ~ .· · l,1 · f/ari:•~lrij~
• "' . , • . . ' ·• •• · ~· .<i;~, r~ -; , /,.;·t~ft
. If .gross .rncoll)e-tor thecurrent year'r;ll~ .. 5% · /f;;-;1 t._.1-i:i
. not exceed P3';tl00_,000,· · (,"K . tt{'-5 · '
.' . . : . . . . . . . ·. " . :. . ~ .,"·:,,....._,~-~ ..
lftne~gross income tsmore than P3M 4.Ql>A,>.
6'rVAT register:~~·reg_ardless'of ~mquri_t · . - .
;_,_. _ ·. Not_e/:sef6(~ 'the· ·.p~ssage of. TRAIN
.,r . Law, the professional f~es;'_'for services
,, rendered- by- ir.idivid.uals 'are· subject to
f-. - . 15%/10% rates ·dependin~' on' the
f amount Qf their gross . inc9me. if. -it
f · ~xc_eeds P.:720,000 or'not (R:R. · No; 2-
if f}B, _Sec. 2:57.2)-. . . ' .

!, .
rr·
~-
If gross· iilcome for the cur.rent -yeardid 10%
.riotej(cf~~ct
. . .
P720.060
. ·.. .
.· · :· . ·. . · . · ·
(MAMALA T_EQ, .Reviewer,·. supra at.:- 272-27~; · ~.R.·
No.. oi-98,
... .. Sec. 2.57.'2;
. R:R:No.
.
g-2018,
.

.
Sec.2)

r,.
Ir gr9s~ inco~e ·exce_eds f>7.20,QOO __ · 15%

. 5%
' ;., .
~·-.
ft
~2ois SAN SEDA LAWCENTRAUZE.D BAR~PE.~r10Nsy 11s ·
 INCO.ME.TAX.
SAN BE'DA LAW CE'NTRAJ.IZE'D~R·OPE'RA_TtdNs.: ME:MDRY A(~ ::i.0;9.
. . a+*@~
&FR /MNM& cw
Ffna1\•l.iithholdingTax Systel)'l v. 3.. Witbholdiag Tax·o·n Compensation · :
C.reclitable Wlth_hol~iilg .Tax System· . It applles to. all employed 'individuals, whether
citlzens or .· aliens, · deriving· . income .. from·
compensation · for 'services . rendered ·in ·the
Pl:Jilippines wherein ·the:·employer .is constituted
the. withhplding aqent (R.R. No. ·. 02-98, Sec.
2~- .. ·: . .
·.· . ·. ·con.stit!Ji~d as· ,a fuil . ln.te'nded to. equ'al ·o~· at
. and final payment of. least .. approximate !lie . J:.x~epti9n:· Mihimu111 IN age Earners as defined.
... ffie income-· due from'.: : tax due from. the. payee under. Sec. · 22(HH)·. :of· . trre.. 'NIRC . (2-B,
· the payee.011 it:i~
said .. 'oh'-th~ said frico'rne. . · D.OMONDON, supr_a.at ..
1.100) ..... .; · .: ·: ~.
. :. jnoome (R.~.·NO. 02,..
: 98, .Se~. 2.57.'(?)):. · Th~ ·ir.icome recipient ··(i:e:, employee) :is the . ·
.person liable to ·pay the.vlncome' .tax, yet' to
. improve thecotlecfion .of compensatton'Income .
. ·.'.. of employees.vthe .. State requires· the employer
LiabiliN '. r'ests-. . Liability rests upon .the . .to ·withhold .:tti'e. tax upon payment of the·
' primarily · on ·· the . taxpayer, . . · compensation income.:" •' ·: .·. · .... ' ·· :
. witt:i.holdir:igag~nt:,.:.· · .... ,. . .. .· ~=·~~·-, .·, ·.,. . ·· ·. ·:· · .
: . .· .. . ~ . 'J' !· 'R~.\l)SJtes: (EP) . ' .' .
: • • . • • • • • • • r \.. J\k- .PgiTSJ;?l~y~r-employeerelatlonshipand .
. · Payee is:not·r~quir-ed··· •. ln.torn~jfa'clhie~t sJtill" .:.~o::.·~~1~·.e.1wie~\~~d,ct~1pe.risation:.qr:: ~.ages. for
to file an income tax . ·requ~e.<?,t<.i1~,;1itff.'.an. ~ ~~16·!~{ ere._.. . . ·: .'. ,_ . . .
.
return
rti I . ··
. pa. cu. ar mconJe
for · the . incg11J..e · \,tWi r·,!'~
· ··a.,&.J'. )'*"i "'p''ay,· ·
'J,"' o.i;_,.,,.14".1 ..
· ,'.'{'t' ·
· . J, .Ji~ tlif .
-:'""""-.,., S:; · a..+.~
iF ~¢'-Com:pe ~aYW ~,ubJect
~ (SBC- FAi\\' f . . to W1t~holding
., · :. •
·
· • .
·, · Tax
• -, •
· .
. .
·· - . ··
.. , .
·.
dtfferenc~.. between tH · /~
t~}(~w.ithtfeld.ar{d.tti.eJax.../'.~},,)}\.
. ·' ·. t !I •· P:\, ·
· 1• ~plane<>.~~ ')';YG(ges;
t ., · .. · ·
.
. ·
'.. · - .'~~n'lt1~.in.c.~~e~
• • ••.
. .Fr;;~(; ~b~~7s~~} .: . . - .·:· .. ·.· . <
·~·Riv.. .Eringe be1pefi~s}~frankan_d file em.pfov.ees;
v · X~an"~s· ann~ · . · . .
1 .. All jncoi:ne:~ubjec_i ·i~o·iE)\, .-\-;;,;~omef§··, ifri~t:if~,~fr~iiYJ._rRJ[w~,PiJ}~98,-Sec. 2i~8.1(A)i ··.·.
to final. laxes (.e..g. : Rcl~~!1ls c'81.e~cl~..bY,~-. ~'•(wr.,::, ~,...'> '. l. . ."1 /! · . . .. : . ·. . · · . . ·.
PcJSSive; · gr_oss: . !~e ·. · . \:· :.. e~_y~~~ S:_ep· lP,'~ci:' ati~ljl' E:i:cernf ed. 'frpm.\fV.it~hciJdi.99 .Tax:
income of ,-NRA:·· wifu~~ldin9Xax~'H;g_.-.,_,:,.,A ~~f :ABflD~E) ··.J. ·. · ·.':· · : .,. · .. · ·. ·
. N~T_B); .·. .
~" Fringe .. · .benefit
. ·.N_o:~~98)
, .·. ·
... ,. . Sc E1'- v11-.b!J>·... ~~i.Jr1t. rec;~ived.l:>y- the iris~re.d: as. getu~
·..r. ·~:-:;:;.';! C1.'lll·~ ~#?'of$.!Vt~. ·. · :· · . . .. . , . .
;(NIRC,_ · · .· . as·. . . '·. · .. ·: -<-:Q?.'i~ ·~2}r(~f.~)').yrran_ce; : .. · · . : :· ·. .
. am~nde·d. .. ' ·.by'. ·.. . . . . . . ·.. '{)._/ :. . 1\ 1r1~~-· \3r.\.\~~!1)J:)ensa.t1on fot !nJµnes. ~nd s1ckr:iesl:i; : .
· TRAIN, Sec.· 33); . , ... · . · . ·. · :. · ..lV 1 1':if)_....,.Remunerations.. r~c·eived·ijs an lncidei:it of .
. and . . . . . . . :· --. emp(oyment;·· . .. . : ... - . .
:3. · Informer's . reward · . ·. , · . 5) <;:olnP.Eilisal.ion. for,. Services· 'of.. a .. citi:z:en,.:
. : ..to · , .... ·pers~;ms .. · · · - ·. ·. . · resident ·uf 'th~:'l?hitip~i.ri~~;.. Tor· a ;f9reigA
. 'instrumental ii'). ttie : . :: :.., . . governmentor-.an .ir:it~m.ation~l..organi,('.ation;
· disc;overy .·. .· of. .. . .. ·. ·.. '6) 'Income. exempt.under Ireaty; ., .·... : . . . · .
· vii::>laticins of ·the··. 7). Remuneration1?..paki for Ag_riculiur~!Ja\:>0r;· ·..:
"''·RC,- · ,~i:'ld' · ti).¢,. ~. · 8) .'·Thirte.enth . (:131h) )ri<;>l'.lth ." ·pay" ·and· other·
· disc9yery · · '. and : . . . .. · .!;!enefft~ in· an ar.nount not e.xt:ee~ing P90,
:sei:za.ii'~ · ·. ... : . ·,. of .. 000; '.. . , ·· . . . . . . '
·'.smuggled··· goo.ds · 9) · GSIS, .. 'S$S, ·. Philh~alth·. ·c!n1:f·: •. other
. (NJRC, · . . as. ·. · · '£ortributJ.on·s,"· :·. .'_ · .... '. ;-:· .. . . ,
amended. · : by.. -·. ,. ·· 10) Rem.ur:i~.r~~io11spa\<;l..fpr Qom·estic services;.,
TRAl/\1, Bee. · 11) Qam.ages; and.. ::· · .... ·· · .: .. ·•
. . . ., ~82(8.)). · · .,12) Remunerations for 9asua.1. not.in. th~ course ·
. of al'?· srnploy~r's. trade ·or ;Plisiness (R.R:
No. 02-98, Sec, 2.7.f}.1(8)): · ·
.. '··· ..
:4. WittihQldl.rig.VAT ·
Pli:J.ase
.... ~ refer. to
. \(alue··Addsd Tax. chapter .

· 17.6 I·. 2019 SAN. SEDA LAW CENTRALIZED

. . BAROPERA TIONS .
 TRA·N.SFER TAX··
. Sf,N B~DA LAW CENTRAllZ.EDBAR OPERATIONS - MEMORY AID 2019

Fixed rate. of 6°/.o · Fixed rate of 6% ·

01~:· Tax rates ranqe ... oie. tax rate rang~ from·
within 5%-2Q% 2%· to.1.5%; (Family):
,. ~Oo/o•(S)r.anger) •

No exemption. for
·cu'rrwl~tt.;ie_ dOl:·i'a'tkin_s
'thecalendar year to th~ .
N.qte: T~1N Law .extent.of P250; ooo.: ·
aboli,sbed- the
·axemptiori.otP290, '000
below.. ·

Yes (NIRC, s;;c. 1Dfas.

amen.ded b.y TRAlN ·
Lay.,) ".

'.
i.
I
I
I

·. . ~
.. ,/ .. , ,•
. . .
EXECUTIVE' COMMITIEE . SUBJECT c6MMirnE . MEMBERS · .. ·ADVISERS, . ,· ~-. . .
MARYC::YRJELLC ...~OMANQill MARIA CARISSA c, ·Guwro· Llll.mffi· ~ D. ENRIQtieZ;. '. Jus)i~c ... . . JAPAR .. B;
.. Over-all. . Chdirp~rso_n,.: .ERICA. Silbject~ . G:hair, .. : "sHENA ANISHA M. IieJ:j]I ~AN, .' Dlf'¥,AMPAO, Atty. :N!CASIO.
· , MAE C, VISTA Chairperson for -GLADDYS . l\ .. Bl}.YLON. MAR}' EVJ;ELYN N. .MATEO, C,CABANEIRO,CPA°,a.J)dAtty ..
· · Actidtintcs, · . BE,N . · REI E.'· &sistant . Subject . '(:hair,. , MARIE . SHE!Ul)'DANE C: DANTE ci. DELA CRUZ, CPA,
:&/\:eBERO Cha_irperson Jot Hotel . AN.GEJ,ICA : . MARIE . . • C. . REYES,:Ar..Y$SA R ZARJM.GA, .. -, : ' . .
. Operations, J~L.SEA LOuisE · MANtJEt . · Subject· E/~clfonic TAGMA -: ES1HER . V..
. . Jk D~O '{lce.'Chatrppwil ... IJ''iia ', _frocessing: @)!'1A G: . GAR,ABILES, . MARE~
for Secretariat, EARL JUSTIN M. FABREGAS General Principles,.' MABEL, A. CHAVEZ, JEWEL
YAMBAd. Ylce·.Chaitperson /or ·A.'1_1-IE?ilAI, · 'FRAN~ .·R: JOIC~ o:·bA¥qA. MIKKAE.~. . ~,
Operations, ·MA. ANGELICA.B. QUINTON and CAI.U,OTA N,· S,. · MONES, Al'IDREA
· DE-LEON Viet Ch.atrpirson for Vll.LAROMAN Income Tax, PATmCIA D. DAQUIAL,
,finance, ARRA · OLMAYA J. 'APOLLO J(Il.IUS'. ·S, S'[A ALFRED-FRANCIS· . P.
B.ADANGJ.\N. Vlce.Cfiairpe7<9n·· MARM: Transfer Tax, ]Eµ.YN GALLEGOS, JOY'CRISTEI:. G.
. . for-Aadtt; JOJU>AN N. CHAVEZ C. CLEMF.NTE Value-Add,d . GAYONA.; MAIUONE. l'jicoi.E
.Vice C:,i'alrperson .for: .EDP, Tax, MIGUIEL·A. DE ALVA Tax P. :BUGARIN, and KATRINA:
· ·HANZ DA]l,RYL D.TIU Vice· ·Adminbtr"tlon, ~forcement, ANN s. ~o.
Chal_rpersonfor. Logisti~. nnd . and Remedies, and '1\'.THENAI ,
DOHN ALFRED E. AQUillZAN FRANCES R QUINTON Real
Vice · Chairperson · ·. · for · Property and-Local Tax · . ·.
Meinbcrship, · · : ·
 TRANSFE'Jt TAX .'
/.
SAN·BEDA" 1:AWCENTRALIZED
., .·. . .. . - M£MOFl't'.
BAil OPE(Jt.TIONS .. AID 201.9

in the. accumulation of
p~operty -~s it "protects·
every indivldual within .its territory (ki.). ·
Withln 1 yearffbm.death .Withfn 30_-d_ays··arter t_tie
(NiRC/ Sec, 90 rBJ)" · .dat~ the .gift· i$ r:nade_ Kinds of Gratultous.Tran.sfer subject to .Transfer
. ·. ·. · · (N!RC, Sec. 10~ (B)) ·T~x·· .. . .. :- .. ' , ·
1. '· Succeaalon - otherwlse .known · as donation ..
moriis . ceuse . because . the effectiliity of. .
gr;;1l_ujtous1y·tran.sferring properties'to' the hei.rs i_s; .
.Not exce~ing ,30 ·da.ys; .N.Q·ei:<tension ·is· al,1.owed . .caused by the deathorthe.property'owner-,either
·iri' meritorious . cases· . .. •. . . ' . . through the operatlonof law (intestate Transfer) ·
:{NJ~c,. ~ec. 90 (CJJ : . . or by: .a written ~ill {Testamentary Transfer)
. ·'. ·. (VA_LENC!A .& ROXAS, supra-at.39-49), ·, ,:
·2.: Donation - also called' donation inter-vivos.
. donation is a gratuitous transferof property to" the.
·done·e:duringthe lifetime:of the donor, Sine~ the
. At the tlm·e·ttie 'return is· At the lime tt-ie'return ·,s property .Js giveif!. for free, . the." .donee :has -·n·o.
_fired (Payras-you~filE!")·.· . filed,(l;>ay-a,s y6u-~l.e} 0 obligation' to give; any conslderatlon:_This kind' of . ·
· "(NiRp, ;se~,::91 "(A))···_- (NiRC~, Sec:.103·.(B)) · gr~fuftous . transfer of .. property- Is subject· to
.:= - ... qo.nor's.tax (to.): .·.· · .. · · _: ·.
.· : . . . · ;.:_.l.,._: .J~a~y
», •. • • • • • •• ·-. • ••• • •• • • .· : . ·
gratuitc;>us··transfer - the convE?y.~nt.e
. Allowed if ayment on Not
.allo..y~~<')~
. : .· ; ~~ ·l\
~Jnsiger.titi'on_:
k)f ·,properJ:y is made possible fo~/n )n.adequat~
It is usually called ~1sguis~d sale_ .
th "d
e ue
~ate would" · .:
·
/~,;--Y
. ~r\ . · · 'o'e~_.(1~we:1~~fl~.of property transfer/ls partly·
.:/1..,,, ·' -) · r-'.;_,..,,.,;"' . :"""-"""= ~~.s~~~
~i- . 1 ...,,: .. 1r'fl
~!?.~-~9\'·. : · · . 'ft(ld) '
: .: · · '. · . . . .
impose undue ·ha_r.ds~iP,
upo11.the.~state~i:he1r~.
except in cas~s of
/1<2·
'I : ":o/,+
1 ·-/ · · 1Q · ~ ~<' .
. .... .II . ~-- /.t,;,. . .\ : . '~ ' . . '
·i. :--\YJ-P :" · .. · ·
. .
· · ·)
n~glfg_~~-~e: : . U[1dUe. ;"~;,.~ .,...
disregard,.of rul<9s · and , Ii. L · :.
-
~
~,
. ~ f'o;,
· :!- ~
-~j . \~.
.. ~
-~ll~E
. ~..,.~ ii;' . • ·:
TA){•.
·
regulations, .a.nd ·_fraud. r fl.._ --11 . . · . ~ .. ,,II -~~ .... · ·-~· . . . -~,,a~ . n
(NIR<;;; .Sec. 91 (B)). ..d't4-~ · · · . · · · ., !Z-i 1 ~WE17.£state·.. -~ K . . . ·''-] . .. .
. . · ... · ·. · ·: : . ,·' ... ·. ,,..;::}" --·. .. -~ .:"(~~;·· ~1is~_4t~inzi;iosed.. OR t~El·. privileg~ '."of
· .1heories regarding. ~h~ f~~\e· ,~~- •. a~sfe~ . ~f' ?,~pwtr~~'a p_ipenyppo_n th_e death.of. the ovmer j.
Taxes: (BE;AR$) ·. · . \ · · i}, · . ~%~~. ~~~ (};"IRO/.From Li,ying to_ Llf!S.Ving {20.1.8),· p. 127) j.:
1. ~ehefi~-Recei.:,,-e_c;t !heol){_- th~~ is ~ t ~~- ·. Alj..etJJ ....n.i'fter ¢,BANE;j'R.OJ.· · · ~ · . ··. · . · ·
rY . ·.
I.

,·. for -th_e ~rot~ct1on.-and. servt~Els ren~Ieci. Yh;> . ·,/. . . ,fl · . · .. · ·:. . · .. ·
State m the. _accumul"'t~>~. of_:::P,~_pe 18JEt-.:J~~t ~-o~.:~sta.te,}ax ... 1 . ·...• ·_. • · .. ··
transf~rred gr~tu1~ousty. resuf~n~ )bcfJl':l~~,;..;'JQ~i(P~tf~ or: exc~sp tax;· · : . . .. . · . . .·.
. receJ\'._edby tli0iestate and the.r~,tSifentt&!''e1f.S or ::i··, Z(·'1tJs\.t1<:>ka· pr_operty ta1. b(!!Mus·e ~he_1r 1m~o~1t1on
:. don~_e) (V.A;LEfl!CIA & RO~AS,_ Tfal!J§/dr,.tan</ i:ViJ-\.:.'~g§..S".not r~~t"t!-P(?q·.generalo"'."ner$hlP.:bul rather,
· Business Taxa}10.n·(Q0_16}, P; .1~-13) [he~nafi~~ey are imposed ·o~ the a~t of pa$sing .owner- .
. : VALF,=NCIA &.RO~ASJ. .. .. . . . . ·.. , . .. . . : ship· of. property: (2-;B· DOMOf'/OON,. supra ~~ ·
2. gqui"ta~le' · Rec,oupm.ent T~eory ·-: the_ · Stat~ . . . 399).; arid· . _. . . . · · ". : : .. ! : .
· . · ··impose·s. trari"sfer taxes· to._-. counter-~ct .. tax ·3 .. It.: is "different- froff) inheritc1nce _tax (Lor,.enz6 ·v ..
·. evasion, ·orto reasonably r,ecoverthe;clJrrehtanr;I,. . --. · P.dsaclas,·G.R: No. ~-4:3.082, ,!.r,mfJ 18', .fg3"7):
· future . anticipated, reduction of goyen;im~nt'~ . · ··· · ·· · · · · · ·
· income tax collection (Id.). · · .. · . : . ·. ·: · . ! · . · ·. lnhE;rit~n~~··r~·:~a_.t~.x1~-P~;e_do~ ·th_eJ~ga_l ri~ht · ·
3: _8bili~.·to-Pay . T.h~oty . - every(. in_heritance . : .qr privilege to succe·ed-to, rece1v~ or t~~e prop~rty
·received· by· an .heir. -is in· 1'1.~ natqre-.of u!"'e,arr)E3d'.. .by or:under..a will, intestac,y law; or deeQ; ·grant- or
we-a Ith .tlie-tax is based ori'th~ act tlja.t-,he r~ceipt: · . ·· · gift becomi~g·op~rati"ve··ator:_afler"death .(Lprenz_o
of inh~ritance ·and gifts creates .an· ability lo ·pay :-_ . .·v.Posadasr G.-R. No. L.~082.,_J'-!ne ·18, 1937).: .
· and thus contrlbµte.to governmentalrricom.e{ld.J.·. . .. ·· /, .. : · . , . . · • ., . : . ..- . : ·. - .
4, R~disfributlon-of.Weaith Theol'.)' -· propertiel> .·.:Note:·. :Pi-es.e.ntly..,·· there is ·no int)e'ritan.:_ce·tfuc
. given for .free· contributesJo. lJl:1.equ~i'd,l~frioutiori-:,. .. imposed by.lay.,.- P·.D:.No. 69 passed.o~ Nover'rJb.er
· · · ·of· we·alth. at)d earnings· b.e.cause the· re!=ipient 24 t972 effective January .1, f97:3, abolished lt,e ·.
. (h~ir -or ·done~) .h~s. riot actt,.ally worked fo(Jt_:' inhEl~itan~e-tax. _·: .:". . ...
Thus, the'·if\'lpOsition .of·transfer tl:lxe~ ~elps,u:ie·
. equitable ·distributi"on "of ~ealth ·t<;> ·att~m soc1.a.l
progress and ~ta.bility_(Id).·· . ·: · . . , -::.
5. : State-Partr.iership The,ory·- the· t~x 1s m _the·
share ofthe State as:a passive ~-n·d.siJent partner....
.. .
. . i . . . . .
178. I ~019 ?,AN 81;:D~ LAW ~NTRAUZED BAR OPE~~IE>N$ .
 T.RANSFER TAX-
SA_N OEDA,LAW CENTRA~lZED DAR OP.ERATION$.- M£MORY ('ID 20_19
Si iM? ONE& t ¥¥¥SWP9M&AA
. .
Purpo;;e or .Object ofEstate Tax. .
1. To generate additional -revenue · for . the
·gol(ernrrierti. . . . . .. . ·s% to20% on riet
2. To reduce concentration of wealth; . . estate gradti°ated scale·
3. ·' To provide for equal distribution of wealth; .
4.· It is the. most appropriate and· effective method .Classification of . o·e.cedent · for . Estate Tax ·
·tol taxing the.privilege which the decedent enjoys . ·Purposes.'· , .:
~- jri, controlllnq the. disposltlon at death ef. property 1. ·.. Residents; and .
~· .. 'accumulated during the lifetime.of-the decedent; a.'· Resident Citizen (RC); antj .
• and · ... · . . '. . ... . · ·b:.: ·. Re~ident"Alien (RA).
s: itlstheonly method o(c,ollect)ng the.share which· 2. · · Non.:..resioent , :
·· .is· properly. <Jue tQ the· Stale as a "partner in the. . ·:8· . Non:resld~ni' Citizeri·('i-.J°RC) .. ·_- ... · ..
-_: accumulation -of . property ·. which 'was ·. made. · b... NQn-resjc!entAtierf(NRA) (NJRc;·_sec. B4)-:
. 'poselble on account of the protection given bythe'
·.. · State. (2 Report ot- the· Tax .Commission ·on . Not~; .;tr; ~q~poraJion, domestic orf;reign, ls not liable:··
.. Na.ti_onai.tn}ernal.R_ev~nueLaws,-'p.5p~57). ·. for estate tax because 'it Is not capable. of a natural .
?. . death. .
t ·. Accr!J.al ot' E-state Tax. · ,
. . . .: . · .' · ·
,\, The- 'estate ·:tax
'accrues- as
of .the ·death 'of the " . Oecedents-, and estates are classified in accordance
F:.: deo~detlt. The accrual i:s distinct trom the 9bligation1{';J with _the .
benefits p_rdtection )~eory. · 1n . h.J~':· the
1
to pay- the tax, which is 1:·.ye_ar after the: death o J~r)h . dass1ficahon dt:lern:un_e~what 1s the comp~.s1!1on of : i
decedent (R.R. No. 12-20.18, Sec. 3).· .,· . k=.:f.l~'i'"i'>,.gross· estate for purposes of estate taxation. The
. · - . .-. . .. · · . . · · . . i.~ ..J'fi1)~J·~i\. protectionglven by the Philippines to the persons of
Law·that G·overns tha·l~position of Estate Ti.J !~':'' ··~,·~l cm_~eris and. r.esidentauen'extends [o their properties l.
Estate-taxation is ~overned ,bi the statute in J~>J~~f;~,;~~~ve,.~~t@~e~
th~·time of the.death of tne desedentfl.r~,..~o. 12t· r,J · · ,· ~~
(2-BP(!MON£?0N, s.upra_ at 401)_.·
. · . · ·.
I
1 ·
2018, Sec. 3). · · . .. ·. · ·r / · /····-~·j · . · ~~ · . .
· ·. ·: - ·. ·. . .. . i; )./,: · ;,:.:,~r.>f\. . . · ·,r tf · · . . E . · . .
Time ~nc;t Transfer of .Properties ~JJ. }.'.:~· .- . · l;;J . .. £. .· h . '.. _o SS . ST A TE
The.tfan.sfer·of -o_~ership·.take~pla?ea(l9",e·.:ni:ne~f .. ti;' . ..
1 k· \. . . . . ., , . ..
death, not at thebme when·tt(&..;~~rtifi~i.\~~-of.t1t(~to\ ·!;;f~roi:;~~g,~.tat~~-'....: i~~ .. · · ·
real p~operty_~re _traosferredfr.pm the::de.ru:i9,~ri~f'q::iti~e )~it~· The. val(ie"tt 0,~aw.rtt;ie property real or personal.
. · . · . ...
transferee:. The ·transfer"does:1QOt aJ¥?·t~~e-pl,l3"p~ i.~lj
tangible ~.\.flntlhgitie. of. the de~edent (NJRC Sec'
when the,_t~ansfereetake·s physica~t?~osses·sJ~11,q~·1fi-e . ;~ 85). . :._ · . . ' . . . . . . ·.. . '. .
. p~rsonal pro·perty tr~hsferr..ed by th~ fte.e:e9~n_t-_(.1-f! , 1i-h-.·.1r-:,Jn,-j , ... 1 ... •. · · ... · .. · . ._ . . · ..
DOMOND<;JN,_supra a~ 40-1): .-· .. · . v;:..~·f!) · ~, . ,;-.J~!·;::~q:,:;rn~Jt19nof.the ~,rc;,ss,Estate·: . , : . · ·
. · : _' . , . . · · . · . . . , . · · i:/' . ·
/i·:~d~"':'1~~H.ffe:~~cedent 1s a. resid,ent- or .citlz~n. - _All
.· The.State c1s ~n-~~tr~ordina_ry C9mP,%s~1,~1r_qf__ : .... · p.rqpei.r:t-t.el?,·.. real. ~,Qr : persqnal, t~h'g1ble._ · oc
.. Dece~~nt... : ,.··-. . ~~.::._., . . . .. 1ritang1bl~,.w.t:ierever ~1.tuated. , · , .
UporJ .th~: d~l:ltp oqh_e dece9.ent, ~uccess10~. takes. · 2 .. !f the -decedent is a. non-res(de.rit alie_n .- Only
<plaee and the ·nght-'of ~he:$tate. to·.t~_:t_he.priv1leg~ to :··· · wopertie.~ s,tµat~d iri the Philippines provided
.. transmit the estafe yests·instant!~·upon .del:lth (R.R .. · :··~ ..that, with respect to· intangible· personal property
No. 12-2018, se·c. 3).-. · . , • . : .._··. · · ... .' . . . .its: incfu~ic:>n is. su°qject to.th~. ruie o(reciJjrocit;.
· ·· · ·· · · . _provided fo(ur:id.er ·sec. 104 of'the:N1~c· (R.R.
· ·Q!3spite the- tr.;;insfe(of p.rope~i~s ,ancf ri~hts ··at; the ... No. ·1'2-:?.-018, Sec: 4).
· ,tlme:.of death, :the ·e~ecut9r or judicial ·administrator. ·
· _s'tia11 not .c:1euve.r :a
distributive. share. to. any ·party : · . 1ntangib1Ei P~opertie~ co:~sid~red··situated in_: ttie.
inter'?Sfed:in·Jhe.,es~t~\ml~ss.there ·i$:-3 .certification.- Pl}ilfppi~e~: _- '.· _. _. - :- ·. '. · · ···. · . \ · .
· froin the Cor:ninis~i9ner thaJ-estate tax.·has been pa"ld: · t :. .Franchise .. whic_h. ·,rriust be exerc1se9 in the
: is. stiown ·(NJRC, ·sec. '-94). The . State. fs··. then · . · Philippines; · . · ....
. con.sidered-a~ ari "extr.aordinary/'lei~ of a· de.cecte,nt/ 2.,. Stiares,· obligati~!l.S · .or bond~ issued· ,by ·
. iakfng· j:)recede,:i~e .over aIL .legitimate '_!,eirs · in- the . : . · corpprati.on_s ·or9anlzeq: or· constituted: . in .th_E3.
distrjbutlqn of the d~cedf:ln:t's assets. (CABANEJRO, . : . Philippines; ,. , ·: ; · · · .·
supm..a_t 36), ... _ · . 3. : Shares, oblig!3tions or.bonds i~sued by a· for.eign .·
· corporaJi9n 85%· qf ·the business of which is
R'?;tt_eof Estate Tax · · , . . , . . . lo,¢ared in_ the .Philippine~; . : · .
l:. Whether.·r~sident or.n6nre!?ident of.the PhillppiAes. a. 4.. Shares; obligations o·r bonds Issued qy· a· foreign·
.§. ' tax·.at the rat~ of six. percent (6%) ·based <in the. yalue · · corporatior-i if.such s.hares, obligations .or bonds .
.·of net. est~t!3 · (NIFJC, SfJC.: 84 c1s· ainetlded by. TRAIN . · have acquire·d a business sltv.~- in_ the Philip.pines;
·Law): ·. and ·

201s ·sAN ·se:oA· LAW ceN'rnALizEo

. BAR OPERATIONS
. I· 179 ·
 T'RANSFER TAX.
5,\N'BEOA LAW CW.TRALIZ£0 BAR OP£Rt,TIPNS ~ MEMORY Alp 2019

5. Shares, rights in - any partnershlp, b_usi~ess Or' b. lf·listed ..:. the F.MV is the arithmetic mean
lhdustry established -ln the Philippines '(NIRC,· '. between the highest and lowest quotation 'at
Sec.. 104). : · · . a date nearest the date ·ot death, if none is .
· available on the date otdeath itself (R.R. No.
Rule of Reciprocity . · . . . . . 12-2018, Sec .. 5).: ·: · ·
. :rhlal intang)b.Je personal property of.deced.ent.NRA, if: .·
1.' -With reciproclty - shall not be included .in the. 2.. Participation· li:i any .association,· recreatlon,
gross'estat~'if: . . . ~. . . : . ·: or amusemenfclub ·cslaich_ as golf, pole.. or
a. The decedent 'at the time of his death :W~S a . ·Sil'iiila'r .clubs) .:.. fair· market value of the unit
.: .. - C!\ize~ .. and resident of ·a
fo(eign .country partlclpatlon Shc!ll··'be_.·the. _arithmetic .rnean
which at the time of.his.death did not impose · between the hig),est and the lowest quotation at
.a transfer jax of any character, in .i:eipect. ot.. a date nearest the. date of death..- if none js
intarig_!bl~~p,ers~nal.property of _citiz~·n·sof the . , available t>ri the date of death itself (R.R. No. 12-
.. ., · . Pflilippin ~s_. hot· r.esidin.Q .. in ·-~h9\. forelqn ·. ·z._018; ~~C .. 9).· ·: · ·· ' ·· -,
country; t,,i.. : .. . .· : · , . · 3. · -~ighf to :usufr':JC~, ;use_. or Habita~!on, ~nd ~
. b.· The laws of, the, foreig11 country which the . ·. . Annuity - The probable life. of the benefjciary In
. dec~dent wa's a(citlz~n· and re.sid_e.nt at the . . 'accordance 'with_' the latest b.asi.c··. standard
· · . time ·of his death aJIQW a. similar exemption . · · . moftality table is· to be taken into account, to· be
. . .. from . ·:transfer or _death: . taxes i:if?F.Y:-"'~~~eerovecf:by, tfie Sei:re'!ary of Finance, upon
.. character i,n respect of. intangi~,t.er-·p'"1~ona11f. J Jr\ t9c,<21'r.1.Q:i,:ef'ldaijonof the Insurance Commissioner
. · prqpert(~wn~-~by citiz~~s o'!J~l~\~ihpp,i.!JeS~-- :- ·\J(R'.R. f1ot~?~2018, Sec. 5). . . . . .
. ·• :'19t" residing m th~t fore19nifo~7 l(JYJR6!""~'?'"::.itp:flrj.'(.ement_ - The ·construction _cos( per
. . Sec. 104). . . ~ .Jl.~>: 1~ -=·-=·=;-~\J•Ri~g__1f'.\~.f!llt or_}he. FMV _per .late.st .tax
P.t\'\\· . . ·. ·.· . . . '. ·. ·. •, .
.· ·
. 2 IJl!jthout .. re~·ipr~icity :-· sh~'1l;i~d1d-rinthe

. '. .·
gross ·estate (NJ~C,-_$ec..Jv'4i!'i-~./i _-
. . . . . // : . Yf
·t f> _.
..,,~...,..

. '
·:
~r€1't§~b_,{
}i{ · ~~: ·\'\r:tre.~·
.. : .. ·. · .
. ijote-: An._: lnCO'flr
. · .· · .
· .Va!uation of Gr~ss· E~tate I;,~ r . ~--.- ;'r or increase II} the value of
th9-:p~0pe, les le~ ti~tf\~\dece(lentafter h_is de:atti_. wm iI•
1. . PropertY,~ The prop•'1J~.-pns;nglth•'Jl!lt"~ 1 ,;"<J!>f9im · art:o.f~O'!jfO,,~ estate. (BIR RuNng DA-220- . i.
~slate sh~JI :be v.alued. o~ase~J:>fi;~heid,ir ·ma~ ("'. L~O(f!S'Ap~lf.. 200qJn ~ I . · .. · .' . .. · : I·
I'
. valu.e .(FMV). as, of the· ll}'e,.}ot.P~iecr,d"i 's d9c!t _ rrijjl · .. · '/ffi;;;J . ,,H. . - _.D . . .. · . · . I
_(R.R. No; _12:.20_1{,, Sec;\ 5t_y;J:,._\ ..·, ~~i\- ...
, 0~. · .1 ·
~~J.,._n:ch1~to118'f)n ttt~,:!,qs~ _E~tat~: (ITR-GP~PIC) .
·
.
.
· ·. · ·.· ' . · .. :'. .
Real tr:.o~erty- wh,1q~e~~ 1s h1g~er
FM\f. . . . .. . \. . . :\. ·:.
(f!=i,
~~
Jv1~ge~~~!'.s.ifr~ere~!{at~he time of· his de.~t~; · ·
~e.'.:ih . ~?4~f~r1'l{f onten:1J?l~b?n ?~ death; · .
... /,..a~!~o~~~tfl:ra~~~r;.
. . : · · a. As .deter~rn~d ,by .-the l!)omm1ssl~ner z_gtf<31~Dsf~PE;fY pa~s[lg under General Power "of
. ·. .. . . . . .. I
· ·. · value); or : _- · . · '\_. . . ~ · .L1EN....L\.~,X~0fn\it1!3nt;-.4 · . ··
. :·· : . b. As s)1o~ In the·s~edule.:6~~1!l{~fcM;iy~-~;=~-tJ~~~efili~d#'e··insurarice~ .. · · .· . , ·-
. · . th~ Provinci~I· .l:11').d .C,ity Ass~~UJY/.-RC,·11.· .$ ~~'trui3j;.:111{e(e"~t; · ·.. · · . · .. · · · '
aw·.. ·.-. · _.:.
· Sec: ·. ·. ~.,.:' · lVJi~'k·:JJ"~~~r~for !asu_!fi~lent cons1_de:ation; a~d ·
· · •. : . , . .·, · .f .. •· . · · ~-=-,·~~ap1tal _of\t:i~.surv1va,gspou~e (NIRC,Seo.. 85 as.
· ·..Shares-. of Stocks - _th~.-.FMV .shaU d~pe'rid <_>!1 . . , f!m~nded_;.bytRAIN Law),... ·. : . · . . .
·. w.hether-the. shares are listed- or- unlisted-· in. the :- · · · · .- · ·. · ·
sfock.exc.hange:.. . . . . .. ·cecedent's 'friter~st: , . .
a .. ·lf_t.iri'list~d · . .. . . ..· . . . . . ·. ·. To tl:Je extent of the 'jnter~st therein qf the dec_edent
i. Common shares. should. !Je· _Yalued :at ·: ~t- the ·tirne of his death '(NJRC; Sec. 85 (A}). It.
.. · .book value c:\t ihe:,dale of·de.ath;\ _ . inc.It.ides'any inte're$t h'aving value 6r.capable of being
.. .' ii.· P'referred shares are valuea at par value- . : . .· valued, ·transferred by.·the'dec.edent·atthe time.of his
. ,'. (R)1. .No: 12-201~.:.Sec.·5) ... --.. . . ' :' . -~eath'(MAMAlATEO, _Reviewer on T'BxtJtfon(Q(.'J.14),
. - . . · :· .. . .. . . · p:· ~59)[h_er.e.i'n_after'MAMA~ TEO].. . ·.
··Note:· f~· · ·deterinining- th~. book . \/aru.e . of: ·.~ ,·... . \ ·. .
~omman·;s'hares,v:~PP_raisal ~·urpl!,JS and the Example.~:. .. . . . . . .
· value.'assigned 'to·_preferred· share·s. if there · · 1 :· ,Diyidetr~s declare4tl by corporation. before death .. a
.· are . any;- · .~hall·: not. :.be : considered .. The ·. . · .. · · of stockholders although ·paid. after· death; if the
-valuation ·o.f unlisted ~hares ~hall be exempt· . . decedent:was·living on·the--rec:Ord date;.··· , ·.
from the Jirovislons of R.R. '.N~. 06-201~. as .2, ·~artnersliip· p·rqfits eyen if paid :after death of
amended.·. . partner;.and . . .
3 .. Ri'ghf 'bf usufruct if trani,ferable _to · th.e heirs
.(AMP.ONGAN,Trf:insff:Ji&:BusinessTax~s (2015);. ·
p._ 24)' [fleteiriaft(!]rAMf.!ON°<3ANJ. . ·

1.80 I ·2_019·SAN SEDA.LAWCENTRA~IZE~ BAR-OPERATi6NS

 .TRAN:$FER··t A.X
SAN BEQA LAW.C~NTf!AL11ED BA~ f?PER.ATIONS - MEMORY-AID 2019
.-i .... -.lll .. llllllllilill! .......... ll:mlml...... 111111............. ll!lllll..... l!lllll... ai:IIIJmllZIUl."~
'
Transfers·ir\ Contemplation of Death ·. '. reserving to the donor X for his life the. usufruct of 3
The transfer" shaH:_be consldered -as -transfer in· : tracts.. ·
conternplatlon of death if, the d.ecedent has-at any.
time made a transfer during· his" lifetime; under which ANS: The. facts warrant the interenc!,l that the transfer
he has retained -tor his . !ife 'or for any _per.iod wmch was an advancernent upon the inheritance .which the ·
. does not in fact end ..before.hls death; . . : . . donee, as the sole and forced heir of the donor, would"
or
1. pas.session enjoyment ofthe property; .. be entitled 'to receive upon the death.of the donor.
t;_·.. ;z. -~ightto the.income ..of the property: or:· : . . "The law presumes that such gift_s.have been made in
3 .. Ri!;Jht, either alone 'or in conjunction with .any · anticipatlon of inheritance, devise, bequest, or gift
1 person.ito designate person 'Who shall .possess ·m9rtis cease, when the. qonee, after the.death of the
f~: •· or.enjoy the saidproperty or-income therefrom." donor proves to be. his heir, devisee or donee mortis ··
' , . ceuse, for.fhe purpose of evading the tax, and it is to·
>.' "Not~; :-Ex~e~·r .ln case of ·a· fide .:sale· -f~~ a~.·b6~~. .. ·. prevent "this .1hat it provides that they shall be added
-~ · ... adequateandfull considerationin money or. money's to the resulting. amount (Dtzon v. Poseaes, G.:R. No .. :
,G ··worth. (NIRG,- Sec. 85 · (B) ~s:. amended by· TR/J.IN .J,.~36770, November4, 19.32). · ·
~ ... Law):_ . . . . . ._..-.. . . .."R~vocabr"e·Tr~risfers .
Ci~cumsta~ces-taken i~_to account: . . . A transfer is a revocable transfer where: .
1.. Age and .: state 'of health of the. a~cec;ler-,r at ttie . 1 .. · There i~_-a transfer (except in case of bona· fide
·uri:1e ?f the g_ift, especiallywhere he wa~ aware o,~.t:)·. · • sale for: an. adequate and ,full conside~atio~ in·.
a s~nqus·lll_M~~;.. . · .. · .. : . . Jl(.'.:?:;,k
· · .. . _111<mey_qr money's worth) by trust _or otherwis_e;
. Lengt~· of·t1_me. ~etvi(ee~ t.he g1_ft a_nq the d~J1,Sf{f,·ii.;). · ·and·. . . . .. . · . ·· . ·: · . .
.. death. A s~o.rt mterval" sugges_ts. the _con.cl~~i9!}"t''~~;., 2, · T_he enJoy_mentJh_ere<?fwas subjectat th_e datf} of .
· .•that-the thought-of death was in the decedent's;:.. r~-f.~.h1s death~to-any change.through the exercise of. :
.-minc;t·,-a.nd ·a"lor.ig ii;iterval. sugge~ts"the <?P~Si~/;uf~:;~--~ ...~~~w~i:r,~lrf~hat~v.ercapa_city exercisabl.e) by: - .
ahd .· · · . ... · ·. -:·· .,-""/ ··· · ·, · · a.·--i:-n·et~ecedentalone· · ·· ·
·3: of
Concurrent°makif"!~- a will .~ithj~if~hort"tirQtl1-':4 · . b.. Th·e ~~t~\e?ent in· cohJunction. with any other
afte_r .the_. _lr?Jnsfer· (1 .· DE t:EO"*',.'~f'{J.f]_:_:J)IIS,f;"':' 1\ .· pe~foii {f1fhout regard _to ~hen o.r from what
. ·. A,motatei;t_ (2015), p_. 160) ..ftif!J:Etnf',f!~t:;1DE ii£ · ·.. _s~~rci.m~ de_cedent.acquired. ~u9h powEjr),
. . . ... LE<:JNJ.. ... . . _. . '. . : # . \{'"-? ~ 'Fn .' t~ altEff, art~nd, revo_ke Of !~rr:r,i~at.e'..oi:. .. :.
· · · ·.·'·. . .
· u t ..
. . ·t.i'"f' ..,_ ~l', ~ ·. ~ · : ~ .. .;·1i,
t . ,,.... ..,,,_>,.~
f."'~ c. 'I/he~~ .an* such power :is rel1nq1:11sl)ed. m
-~v:::·-~hriraT----. f th d. . . . ;.
., .. o E!S. .·.. . .. · • . -~1 . :),;) ~~-. ·1fQ1 . "-.-.:. r-'WW<llhir..~~ 0. e ·, ecedent's deat~ i
1. ThE: conce;pt oftr_ansf~dn-~?~~i:r:'Pl~_p.r~9fc,te·a.tJh. ~i; . . . (IJf.fIQ;'t...S.ee:-85 (C)(1)). . · ·:
. l)as a t~c,hnical mearnpg. It q~s?n.6frtj,~nth'l,t-'a .· l'l . · · · ·. · .. . . ·. · ·
.. ·. persofJ · tra~sfer~- · his · ,P.ropert'i~s1i, !:>~c~~s_e he .... !~pn~pte_: lt'is· sufficient tha~ the· decpde~t hc!d!hE{ po_wer
. ·. · kno~s he 1s.- going to -~le .. lt.-1s 'f,l'<?tdf.le · mer~_....,;,,p1,.!01f~:r,Q,~~ .•~!t10ugh he_ d1d not exercise the powe_r.to
: ·:transfer .. ttiqt. cons.titu.t~:,:· .a_-1:~~arisf.eEf~,;fn~a~rev,ak&(/NGLES, supra ·at 2~2).·.. . . . ·. · . · .
. ·: cont~mp_1ationorde~~11.:~un_he:re<MJ.i12_n ~ome · ff · ·· · · ...
·. trpe· of controlover..~e.prop~rty _tr~n~!wle.~ (i~~ . · · Exaf'Qples:. .. ·. . . ~ -
: DOMO,YDO.N, supr.a, at f?.~).; ·. · . . ·: . ·: :"' .· -: 1. . T.r~nsf~r with ret~ntioh of iriteresf to Income: or
,j.: ~- .The law. does not specify· tl:le.- number of :years ' wi.th right "to deslg'nate•-persons: who will enjoy
. . prici·r to· .the decedent•~·-death within· which . the . . "income or prop~rty (NIRC," Sec.· 8:5 {B}):. ari,d . , . '
,."" . ttarisfer ·can.· b~·:,:xm.si~ered in -~onternplafl91J of . 2:. · Doj,atjons mortis cai.lsa evenwithout retentfon of'.:
;i: ae_att, (BIR Ruling:No.. ?6"1·, _$eptf!mb'er 2, 1987); ·. · ·int~rest .while,_ tne·· ~e.ceden.t l>tin":Hves (P.uiii v:...
l' . · ·and · · · · · · ' · · '· . Peiiaflqrida; ~R. No. L-· 15939, JariLiary 31., ·
~- · · 3-; '. Wt.i~n if comes·· _to. transfl;lf~ dor.,~· du;i~g .·th·e · · · _ 1966),.. ,· · . .
·{· :: .. lifetime of· a: 'de·c.edenf,· there ·is .;:i· disputable · Y
'. .. ·..-presumptioA .... that.: 'ti'te· .. transfers ... ar.e" .. in ... lllustra'tion~ "Along dona_t~·d ·re;;il . pr~perty ....;~rth.
i;.; · · . -: . ."co,ntemplatiot.l. of death if ·the: recipients. are .. fi>"500,. 000 to Barc;lagol during· his lifetime, An ·item in . ·
· :. '· compul_sory ·_h~irs ,(1NGLES, fax · Mad~ · Less . the. qeed, howevl;lr." grants the donor. to .revoke the

._· ·
·•
· · .. ·Taxing:.A R~\iiewer ·with Gdd?ls Jfrid Cases
(2018), p:-:?66) {hereinafle(lfV,GLE;SJ .. ·
Illustration: X died i:!n Ap,rH":21 ;· .20.18.
:>.<: before. his
:cton~fion·af~IL

Q1·. is the P500, . OQO subject" to

. estate tax? . · .
· · · · .
. qonor'~ ta':(. or· to. ·
· =· .". • · : ·-.·.

' . death, mad~ a gift inter vivos. in favor of v·o{all:his . .. .. .

. pro~rty ace::or,dihgto a ·~eed
of.gift\,v,-iichincludes _all . ANS: The...~evo~~bijity "of the d~l'lati~~ at ~iii 'or' the

,tI'· . . ,the property·o_fX, Tti~ .deed 9tg~t'"was ex~icuted by X . donor mape the dc::i'na.tion ambulatc:)ry. Furthe.rmore,

;I:
on Aprif· 9, :201 a;· ih favor of his .son Y. This d.eed of no right yvas Vl3Sted in tne. do"nee. w.hile the. donor is
f· gift._transfer.red ··22 tracts.. of lan'd to the' ~-o~ee Y. . ~live. Therefore, the donation Is _subjectto estate ta?(

• • : • • • •• ,I

• 201\3 SAN BEDA LAW CENTRALIZED BAR OPERATIONS 181.

"-•
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 .TRA·N.S.FER TAX·
SAN SEDA IAWCENTRALIZEQ BAR OP~RAT/ONS'~ MEMORY AID 2019
N I ff Chi A A!t+eww wfaryw;

Q2. $uppose. the deed of donation contains. a . Property . Pa~sing under General · Power of
condltion that Atonq could reacquire only the land 'Apj:>ointm.ent (GPA) · ·
upon giving o.f a· 30-day notice to Bardagol. Is the
donanon su~)ect' to donor's tax or to estate· tax? Power of p.p_polntmer:it - In its gener.:11 sense, is ~
power· to. designate who . shall eniey · the use of.
AN·S; The donation· is st1i'1 ·morti~ cease' subject to -property (2-8 DOMONOON, suore at 432), . . '.· .
. estate-tax because the requirement of notice.has not . .. . . . .
, qllang·eid the ambulatory nature 'of the donation Propetty over which the 'decedent held· power of a
·(AMP0NGA,N,.supra·a{2_!), . appointmentls not.ir.icltiqed in his gross estate' unless
. . . ... such power is.gener~J'{1. DEE L£0N, supra a(760):
·· The po_wei: to. alter •. · amend, . or revoke· Is ·· · .· · .
· coilsi~er~d '.tp ~n~ist ~n, .the. date 'of .decedent's · ~.lnd~:~t:7e~·o~:~·~\~t:~;~rii~s.· the donee
~::~\roi:igh'the exercise ~f.the pow~r is -.subject to'a··. . .(d!=!cecfe'nt} to ~pp_oint..any person 'he.'p'i_aase~;' •.
. . precedent" of giving -'notice or av.en . though.' the ·. - includir:ig himself, thus -~~v.in,g-~~11 'dornlniori over
alteration, -, amendment, o·r· revocation takes effect . the property as th_DU!;j.h he owned it.. . ..
1
only Pr"! the' expiraffon of a . ~tat~d period after:Uie 2: · Special '-:- When the ~onee ( decedent)' can
.exerctse of the power, v..iliether ornot,' on Or before . · appeint only ·~11'.fOr)Q a· restricted: or designated.
'the decedent's death, notice ni3s 'been given,.' or:.tne~""-classof persons other than tiimself (ld.}: . ·.

~~;:tr:;~-:~:i1\:x:~~:1~~~~:iit~~j~jl{;r:U .hi~r~,?~~x~-~iii~~:(~~P)·:. · : - . . ". ,·

which would.have been excludedPs.im~t[le1p~eF"'Tf~~~-~xist~-e~p~9·~F'A~·... :· · ·
_the decedenthad lived (?-B.DO#fQtl;f_Q'Jy;.,-<€1,1praJt.l-~'. ~~'gy.er~_i~"'~sl~hpow.e:r by the decedent by will
'v/'· ~ ~~; . . . .
. . ; : .. . . .. . . . . 'I· ifJ;,)f~ f . - . ·r A\. JF
430). . . . . . . - . . .. ·_/"; "at-~y a~·~cf!!},,.qe~1f.lcaaas; and . - .
2"),
lf·notice. ha:s· not .b~en_ giver-y,or. tt,e:· pow~.r.has not
.. b~en :~xerc1se~ o,r:i 9r. beforl;) tf.J:\e,;.d..t~ of prs..deatl:l~
such.in~Hce sha!I be. considf rJ~~-~ave b1.en.9}v,r
. or. the· _power .e?<er<;;f~ed,, 91 ·t1:1~\~~te of ~is <1eJt _ ·.
L--9. · .\l."-..~.·..:.;:]'\~. · . . ..'. . - · ,
The\f at'sJfi~M ' e· ..property. by virt_ue .of .'sue~·.
exe~tise}d!JjJJ'F) ~ ·. . .. ·

'.'! ~J.h_~t-~P.
· · . ·. · .·
r'nc1y b'~.1~rG1sed·by the De.¢edent:
-~By.__ ill.; ·
(NIRC;'.- Sec._·B5.{C)(2)). '.:_ (,i'( ~ -~J· ., · ·. ·:;:;.':!!]? .. B~j ·1e elecuf~t?,' Jp · cqntempi~tion· of, -~r
.. ·. ·:. · . · · , ·,. . t,~\. . · .. ·
.\\ • ·. -t \\'. ·" tr,
-~~.3. : kl.a~eq. e~ect in_ ·possession or .
lrrevo.cable Transfers !'J<;>t.lfl'~~~d -· . ~\._\- .I· ;L~-1~,.'))_~ ~n~ ~t. o~~.(~erbrs .c;le.ath; or_ : .· .. ,
Qnly r.e.vo~able. transfers .. sn\:in .be '\jc1u~~rl~e~ ~@';.%.~~ed.u_A9.erw!Xi~,~ .J:le h.a!fret_ainedfor his life .
.. gross ~state .be,c:;:aus~.of t~e tf\mendo~ pc;i~e;-~~ ~~- ~~y-an~_perioqf.not · a~c~~inabfe... with9ut
·Control _which::'.th_e 1ransf_¢ror··_O,?,n'·exer~e-( j~~[~rf\~r~fe~}t1~e. to·~jf.dEJath odo~ an:y:·period Which.
·tr':'lnsferor can" anyhm~ revoke thti ~rari~E:tr,.,_!1~n~~~as·nQ~.r2,e.t e_n.d.be.fore,hr~ df!§ith: . ·

/awr~v,ew(~.o_o.B~~- ·.: :-6~.. . . .

Exa.i:npl~s Qf In:evocabl~ Tra·!.'\Sf~rs:· ·
·-~~<~l . .
there wa~. ~o tr.ansfer ·mad~ (SAEM,,f!..AfJ,/JfJ~lltir;;D=,., :~3;,~TAp-~osses_sion
1v1A1,;;]i.~ng_ht
?~ enjoym~nt.th~pr9perty; ·
·~ _t~~ _·income fr~-~. ~e-:p.ro~e_rt~ .
·. : _ ~~ .c.. Tre right,.eith.er alo!le or fn conjun9tiqn wit~
. 1. . If _the .df;l_ced.ent!s p9we~ <,.oul~.. be..~?<ercis_~~ only'· ariy)er~o.r.i: to d_~si~~ate the _per.sons wh?
. ·with the:.,consent. of· al! ..the· parties · _having an . . . sh911- posses~ or :enJOY· the prop,erty or the .
. 'iti\erest in --th.e traniterred- prcipE;irty,:-.anq ·if the > . · .. income.(N/RC/ Sec:''85 .. (D)). . ... .
p9.w.er<:Joe~ .nor affect the ri.gl:its qf all th_e par:ties,. . ·
X
'. tbe property_.transferr~d · woufd ·not be "inctuded . : · . Jl.lus~ratl<:>h~ In 1999, ·ptfrchasecj-_f~orri,Y ~ paintrng
as· a .revo¢abl~.tran~fer; · ·· · , · · tor ·P500, .ooo. The. FMV tnereof :at 'tt.ie .·time ot'
2.. : Where:ttie decedent .was·completely..stripped of pur~b~se y.,~s P1, 000, OQO. iri ;;!001, X :died.·:I~ his..
· ', th.e 'pQwer(to:alter, amend,' or·.revoke) at the time ·. .lasfw_ill and'testaf(lent, .x _beq~e9thed:the' painting Jo.
· · . o·f his .d~~th; .and . .. · :--:\. · ·, ·: .. · his 'C>l)ly.-soh,'z. z·wa::L'granted th~ .power.. to .appoint ·
3. ·~Where t!ile· . exeri;ise. of th\;3 · power· ·(to,. ·alter, · · · .. his "'.life, W. as s~cc~ssor- to the, painting in the.. event
· · amend,· ·or -revoke)" by .:the decedent was . · • of ~·s.qeath .. 4:.died in-:?007,·an'dW. succeede,g ~o tt:ie
•... ~ubjeded to · a . ·cqnti.r.:igency'- beyond. ·the . . -property. Sllould th·e painting be included i,j the grqss
. de:ceaent'scontrol which did not occ.urbefore''his. .to
~state :i;;t Z 'in 2-007 and be' !;ubje.ct estate Jax? . · ·
death (34 Am. Jur. · 2d.f ··
ANS:. 'ftie: ·.p~ihting. ·sh6ulc( n.6t· be . included ··in the
·gross -estate or::Z' because. only. property ·passing_
under. a generaLpower of-appointment .is i[lclude.c;i in-
.the· ;gr,oss. estate of t~e decedent. - In the case, .,in . ·
accordance with the will of Z's /.ather, the ~~i11tirig ha~

182 I . · 2019
. SAN'B~o'A LAW
. . BAR OPERATIONS
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SAN SEDA.LAW CENTMLfZW·BAR.
OPERATID_NS- 'MEMORY'AID2019
.:,:;..
f./'.... Ff ' A I '7¢ 4¥1
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t · to be transferred to.W, Z's wife, and since the power· · Furthermore, the P10, 'ooo. 000 is not part of
f: ·of appointment granted by X to·.z:i;:; specific (i.e: only -Antonia's prop_erty at . the . ·time. of her dea1h (2-B.
·t: to his wife), the property should not be included in Z's DOMONDON, supra . at
. '448),.. .
:;;' 'gross estete in 2007 (MAMAL.ATEO, supra at-366).
~· · · ·. · · . . · · . ·. · ~ · P.rior interest', · .
ii" . Proceeds of l.lfe Insurance . Eifoept as· otherwise provided in: . .
•f · ·Requisites: (bAm·ER) . . . . . .. • . .TransferIn contemplatlon of death
i;: .1. The Decedenttakes an insurance 'policy on his .~. Revocabletransfer ·
i. · · · own ttfe; and· · · · · · · · • · Proceeds'of life.in$u'rance
1~;.:. i .. The Anio'uhts.ar~ recelvableby: . .' · sec. as· of the. NIRC as amended by TRAIN. Lai.v shall.
fr-:.· ·. a, .:rne. ,gst~!e(hi,s, exec~tQ(',. or _admi~j~trat~r .. applyto the, transfers. trust, estates, .interest, rights~
,t . .- ... · irrespective · of wheth~r-· or· not the insured powers; and relinqtrlshrnent.of powers, ~s severally
ii· ·• •. · retained the· power 9f revocation: or· ·: .. · enumerat~.cf· and described therein, whether made,-
. b.. Any beneflclary designated. as B~yocable. created, arising,. existing; exercised· or rellnqulshed "
· . (NIR<;; •. s~c. 85-(E))'. · · before or after the effectivity of the Ni'Rt· (NIRC, Sec,.
. . . ·. . . · . · · · . 85.(F)). . ..
Note: 'the'·prdcee~·s -~f'lifeInsurance.are not i~~fuded . . . .
t: in a decedent'sqross estate when.the beneflclary.ls · . Trarisfers for lnsufficlent Conalderatiorr
l . other. than the estate, h1& executor; or adrnintstrator · · Ariy · trarisfer th contemplation of 'death, revocable
.C . and the -desiqnatton is irrevocable {NIRC, Sec .. 85 fE))1,1.':J,·: transfer :or· property . passlnq · under GP.A made,
•· - · -. . , · ". · . - · · .- ,r.'..(,\/},{_· created, exercised or relinquished for. a conslderatlon-
1 'Determlnatlon.of the Cfl~racter.Of..the Proc~~~~ti:l~,\.~~;\.jn~ money· or money's wqrth bµt .~s· not ·a bona fid~
i'I:,_. 1. ·· Policy tak!m. before ,narr:ia_ge_- the sour\Wi.f !;<~I'-;\·sale fQr an· adequat~ ~md full ·consideratlo11>irr
\. funds determ,~es. ownE3rsh1p of the proceed~;9f1!~ J,;4,. mP.~eyor 111,:?~ey'_s.worth {NIRC, Sec. 85. '(G)). . .
~- · life insurance (2-$ DOMONDOf;J, s-µpr~ at.;4"40),J,I~ !,~,d~~..::tt~~1j .· . · . . · .
i(_~'- . . · . · · . . · . · · .. · ' .-_....,,-y ,>~-· · ~~· , ~· · Th~ v_a ""'1~1',t•-...
ue -to .-~ mclu · . d ed . ·m.. th_e gross _estate! ·,s· t h e .
·· 2.· PQlicy taken during marriage-(.,("". _ . !.,\;; · . excess.?f th,9 !ti~{ market val_1,1e of the property at the
.·a. Beneficlary'Js_.t_h~estate of1t~_e,{)ns~e~y ·. h ti_(l'le .of the,p.~Gegent's death over the consideratior:i
. -p~bceeds are presumed ~tiJuga~ence, · J:t\ received (MR"ir:, ·$~. 85 (G)). ·. , , · ·
: one-half st,are ·of);;~~~fng ~~6~s·e~_,s ri~ ·.i;~( · . ,f · r ·. . : .· ' . _.· . . - · . · · .
-·taxable. ·,t.·,-...;; P-i·'.";\_. ._ '• i!srl Formula;, [l .
b. B~nefic~ary·i~ tJ:ti_rd :~fs~fo,~~eds'tf:}r.e:' (itj . FM~{/r;i~~~~ced.ent's date ot'death. ·
f:iayab.1~to the benetip~~-,?"~er,1)!;wem_ief'~s - ;sf Less: A"cttafc~~siciei-auonreceived by decedent
were paid out of' tlie· Ccirtfi'gi;il!Ipljlr.tner.si;t1p ~-~y ' ·• · · , · -
D ~ · ·; · ~ ( G\ · · N -~ 1i__9374 ,ri .· Amo!,mt lncll,l~ible in ~ecedent s gross estate
... ( e1 . a1 1.1. 0 e . , a, , .. ' . n o. &t.r. . , . r.#•try·~· 'I! . . . - · -
~ . · February 16 1915). . · t ....:~ ... · . ,.J_,.~'d"\-·~,.;,- - · - · . . · : - · · · . · .
t-.,. . -. . . ' . . . {i',. . 4~:-:.:~~llltflsfi;atfoA-il, . . . •. •' ·. _
i·, . Note: Prcip·eri.y_reiations bet"'{eeri ~-u~b"~~ct):I~d~~ife. .M~--A-~~-ld·to·Mr'. 6 his '!VOOd_en.•ca_binet.worthPqOO to
~-·· s_hall be .. gov~rned. {.1)_·_.by .rnama~e"··~~tw.n~_r:its . _be-9_e11_v.e.red._onl~ upo~ M_r.,A? ~eat_h·, T.he:·cl,lrrent ·.
'" executed before ·the. marriage; (2)·by. the _prm;,is,qns. · m~fket.v.;1lue oft_~e cal51~et at the t,~e ofde_ath_of Mt ..
>( of th·e· Family· ~ode;, an~ .(3). by· t~e )peal: ~ustor:n' · . A ,s·P.7~0. vyha~ <:1{llouotsh~uld b~ included in.Mr-. A's.
,._ (FAMIL y.c;OFJE;-Art. -.74).· · . . _estate.if the ·pnce, agr~ed. ~1:xm ,s (a) P900?._·If (b} .
{!: · · • •, · · · · P300.?,· '· .... · , ..· · '· · .;. · .. _.. .
Illustration: .Antonia Sa'ri,tos, ·30_ yea.rs old, galhfuii~ .. ··
employe.d;. is. the sister:of Edg?[do $antos..: She. d_ie~ SoJutfpn: ·.',..
in ai, alrp,lane_'crash. Edgaroq· is~ -lawy~r. and ·.h_e / .
.: . negotiated .with ·the' airline ,comp.;ihy:and.-insu~ance
~ .. company. Edgan:le,. the. airline· -.compa_ny; ~11d: the.; ~:- FMV st the ti_riie.0f transfer' · ~{500. , psoo
~ · lnsurante. comp.any ag'ree _to. a total... settle,:nent_.<;>f :
\ ·, ·p10,·000, ooo. -This is what Antonia'wo'utd .have,·. . 2. Con~ideration received by the P50Q .· ' P300
: .. earned'·.as. somebody who:w~s gainfully.,'employed:_ . . . trahsferor-dececlentat the 'tiine"of.- .
f: ·. Edgardo was ·her- 6n_ty heir.' Is. the·.. P'10, 000; 000 · .. ' tran_sfer . :. ·. . . .
~ . ·.
.,._.:: . s1,1bjecqo estate tax? Reasqn briefly. . ; · ' ,. .. · .
3'iMV at the time 0f. the death
'ttal')sfer.or·.. ·. . . .
of. . P750.· P750,
...
·p1
ANS:· Th~ o>ooo, 000. js··n~t 'subject to:~faate tax' .
· 'because t~e proce~ds_are· not p~r:t 9f Antcmia's·g(oss Value to be .included in ~he PO· P450
estate .. It is clear t~at the payment came ·trom, the. - gross_ estate
a'lrline and ils insurer. 'There is no showing that'tf:le · .
·P1C( 000,· 000 c:ame from, an inswance' policy· taken
bi the • dece~ent ' Antonia on her . own· life.

·2q1s SAN SEDA LAW CENT~IZED BAR. Q~ERATI_ONS I ~83

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 : TRA.N·SF.ER. TAX.
SAH·BED'A
. 1:AWCENT/!AllZEO.
.. B'AffOPERATIONS'- MEMORY'AID 2019
. . . .. ~ ..
;
To· determine the adequacy · of ,consideration,
compare ltems- 1 and .2, .If there is not .enough· ·, D~~.UCTIONS F.ROM .
conslderatlon., or no consideration at all, get.· the
. difference between Items 2 and· 3 to determine· the·· . GROSS 'ESTATE.··· .
valuation.fer lncluslonjrr the
. gross estate .. -.. .
' . ' .. . .
D~ducti~Ms ·ai'1owed ·s~6se.qlie~~'and. pri6r'tq .TRA·l~
Noter Follow Ing·· taxable· transfers are part: of the
gross .estate and.vtherefore, are subject to estate Law are as.follows:.: · :
tax:. · . · . ~ · · ·
.1 .. Transfer jn contemplation of death; ..
2. Revocable transfers: · · . · . .' ·. . -··
· 3_: ·. Property passing under· the. general power -~f ·
appointment; and : . ., · . .. .
4. Transfer· for· lnsufflcient-" consideration.. (NIRC,.
·.
SeG: 85 fa);'(Cj; (0). and (G)~.·
),
_ ,. · Standard 'Deduction . '
. .. §tahaa[d Deduction
· :(-f:>~. 990,-~00J . ·· . (Pj : 000; UbO): .....

·EL!T; · . Funeral
Expenses, and _judicial'

'Fa111i.ly Home
. _. (P1, Q00,000)
..
Medical.Expenses .. · :_ .. ·
. .~ . . .

·.·Amount.received by heirs uode(R..A;"Nd. .4917 · ··

• - "•'>.· •, • 'I' • •',, '.· • ,'

. : . ,.· .·
-Note;. Upon ·tf;13 eftectivity of TRAIN Law ·the: es;t;:ite
. · tax. rate is now fixed, at 6% -and the · gradu-ated . Nets.hare 9f .tti·a surviving spouse·
a.
· schedule 'with rate of·S-20% under:.th·a.Tax Reform
• • I'' •• •• •• •• _;_ •

Act~f 1997 lsnowrepeated." ..... :··

.·.· .... (NIRC, Sec: ~6f . : · . •(,

.1. Stan<;farl·Deduqtlon' · ,· ·. · ·
6%·on-net estate . 5% tci'-20% on net·estate. . :A deduction.ln.theamountof PS,;_000,· 000-shall be
. :gradua~ed _s.~le_ allowed as an additional deduction. without need of
. substannation; The. fu.11 ainqunt of P.5, 000, 000 .shafl
· . be.· .c3Jlo',','.ed as
ded.uction 'for, the·· benefit . of the
....decedent (iv/RC;·sec,'86.(A)(5.)); . . . .· .. · ... , ..

_:184 I 2019 SAN-BEDA LAW _CENTRALIZED BAR OPERATIONS

·:··
 ~:··:
,-·RAN·S.FER ·TA.X
SAN B_EDA_ ~w CE{'ITRALIZ.E.DfIAR OPERA T/ONs·- MEMOR_Y;o.10-2019 . . . . •
1:1 .. ..
,,..,. j NIH&- IMHIS#Sl~NZ!t1L:·YL'!a·~=::111

:; · It ls adeductlcn without need of substantlatlon in the b. If the unpaid obliqatlon. arosa from.
\: . amount of:. · · · . _ , . · .. purchase of goods or servlcas
f a.
Gitiz~ns and residents - . five million pesos i. Documents evidendng . purchase . of
(PS, 000, OQO);· 9r · · . . . goods or service or contracts 'of service;
· b: .Nonresidsntaliensc-flve hundredthousand . ii.· Duly, ·notarized·. certification from. the
·: . pesos (PSOO, 000) ...· .' credltoras to the unpald balance.of the·
c., The full amount of either. PS-, 000; 000 or. . . .: debt.tlncludlnq interest as etthe time of
. ·psoo. coo shallbe.allowed.as deduction for:,: .. .
-. ·
t ,~·
benefit pf. the· decedent (R:R. NQ.. ·12- ·
2018, Sec.. 6 (1}.and Sec,.7 (1)). · ·- ·
death.and... ·: . . . . .
iii. Certified true. copy ,of the latestaudited
-balanoe sheet of the. creditor. witn a·
r~·:. . r • . • . • • •• ••• . . • . ·detc;1ili:id ..schedule of Its . receivable .
,E . 2. Claims.Ag·atnst t_he·Estate ··' · ·· ... showing: the unpaid- balance ·(R.R. No..
· This refersto debts or demands of a pecuniary nature. · .. 12.-4Ma,:-Sec,.6 (2)(2.2)(2'.2.2)).. · '
{ . whicl) , could. have ;be.en- e,:iforcaj .aqainst. the. ,:
l deceased ir.r· hi~.: Hfetinij3 and. could have been . N~te: \/Vhen settlement is· made, through:-the· Court (in
· reduced .to. simp_le money juc;lgmeo.ts.. It may arise O\Jt: . testate/tntestate proceedjng), pertinent documents
of contract,' tort or .un~der operation of law· (R.R.- N<;,. . . fired with -the Court evidencing claims and the· Court
12-201 a, sec. Q (2JJ ... · ', · . . .· .. . . . · . - Oroer approving-the claims, it qtreac;ty issued, .should
·<' • . ·• • · . . • .• · ••. · · · .be given .. in 'addition to: the -~bove ehumeration (RR.
k Requlaite s for ~ed_~9t1b1hty: (F>G'fC) · No~ 12-2018; Sec. 6 (2)(2.2)(2.2.3)).. ·
. \ :· a. Th~ .hc!b1hty · ~epre~ents a . fers~fWJf Jl · .. 'l'
.· · . ., . : . · . . . . ··
·. . . .
.

f>. _<:bhg_atJo~of t~e. d~cease~ existing. _ai~.1:IJ'.l. fji~ Not~: -The date·~of-deatti v_a-,u~ti9_n rule s~ould be
,;: lltt:1~:of _fns.,death, . . . . . .... · \•~~·#;;. ·.J:~
. 1 applied - t_he net· value of the properly tr_ansferred
! .. b. The cla111Js must.be contracted 1~ Qoo~·f?•.!~it!'~_;L~t-iould be <},~~r.rtained, · as· nearly as possible, as. or .
. t: . . -i:11'\d for .cfdeql!~J~ .and f~!I cons_1.de-~t!.9.n:W,.if,·~J~~~a~.?.;':1 <;t_eath. This ,mean.s -~~t ·po's.t-d~a~!i .
.•· .. · mon_ey ?r mon~y s .worth, · "-rv,f!. . \;!Ji h developm'eng;~ sholJld · · oot · be considered rn ·
lf . ·_c .... Th~ c~a,msmu.st-be a de.bt o,~JJ~·rn~hich,.th~~ determining/!~·~-, net. value c?f the estate (Dizon V; .· ·
~:· . .Y~.hd !r:1 law ani:I e.oforce.able:t~~prt,and).>-:-."~~1Court- of Ta_'x..·r· e@I~, G.R. No. 140944, April 30, ·
~\.. . d ... Tl')e.. md~b_tedne:5s · m~s~ ~-~.!. ,.~w~een. 11,· 2008): .. T , . . . · ·
~.
·,. . · _son~oned. by the ·cred,!\.e~or·~b~r.~s!ipn t_e . · ~i .' ·: .
. . collec.t:.froln the. de.~1~enL 111..~~ not .h_~v'e;, e... 1. :· : . • :· . \. · . . •.. . ·. . . .
3.. GlaiLJ,s Against, Insolvent P.ersons· ;·
. . . . ·
.
:

f_. · . : ·.. ·. · .. _·pre.~cnb~d.(R:~. ~~~{J"f2Q;tt},!zi·f~iJ,{ ~~-· 6 Clai~~s11?~ri:t~;~~~A$'a against insolvent 'per~o~~- as_-
\' .. S,ubstantiatjon Requiren:ients:~~-.,..~:--~.
, ,.. · ~II.. cl.t:1ir:ns. ·-ag~in_l,t. . the ·. estat~ -\~re'l"a"~\ed.
Rii- lw rcis:.
·~vf. defined L~n®J,,Ja,.;6;._~o. _.10142. and. oth~r -~~1sbng._
layVs_•. "".he:e ~e ·Y?lue .. of the dece<:lent s, interest
·,.. deductions·from gross esta_te-, prov.id\cJ_\!haVqlfowir:ig. ·f ~:"!' ..tper,~~h ,s mcladed 1n the ._valti~ .of the. grbs~. e.~tate
:r.
~·I
re.q1:1iremen.ts/ci6cuinents: .. ·:. aFe·
,
' . with/submitted:..
·
. ·
·.
5~t·
·
,;:
· J-.7
.
/f'f·:.r . ·
=u..............,.,· . · ·· se,c.
j_{;,cbmP.liecki~,;~~:~WfD.~t;~~;,l:1.~-201~,
· n:,.,_,_.. . . _
·
6
· (3)).. . . ... ·. . . · '- . . ·
· :
,. · :er. #1.. cas·e of Slhlple · Loan\·-\Vfoc!iO'Jing. . The ·ded~ct1on, f~om th!::·· gro~s es!at1::. w1_ll . b? Jhe ..
·advan.ce·s·) . . : ..' · :·· . · · · ~:.-:..,-.;i:
..,.r-., ·. .. uncc;,llectipl_e
.. portion.
. It w1I\· be-wrong to tncl4de~ m the. .
• L ·Debt in~trum~nt tnusfbe noterized.~t th~: co~p\.lf~tior:i.fort~e tm~ableest~~~-only the.reali7':lble.
lln-i°e the. indebt"edness-wa·sincurred· : . . · portion of _th_e,claims. (REYES,.. A s.tuc/y on Business .
· .. · · ·· · . _ .-:· · · . T~xes: and ..:,_ Transfer. Taxes.: "(2018); p, ·. 14-2'
· Ex;cept: . for· Joans . gr~nt~ by. fioa~ci~f _. :. .[hereinafter. REYES].· . .. . '- ·
. . .. -instittltioris where notad:zation i~ dot part .of.
. . •the bt.i"Sin"ess practice .. :· ; . . . . . ~equisites..fo(Deductibliity: .::) .
. ... . ,:· : · . ·. ·. . . . . . . a. · .The·. amoµnt · theFeof has been· initially
·.-:-. ii.· Du.ly. ncitarizec;I 2ertifi~tion ·fro·m·.the ....... · ·. ·_. : . inclu~ed ·?S', P?rf ,of .·'his' gro.s~. 'est.ate· (for .
· cr.editor'as to the.unpaid balance of.the .. :: · .· · otherwise ·they would cbnstitute -~doubl.e··
d~br, 1nclu9ir:rg .in~er~st as-Qf the time of ·. . · · . . ·. d.ec;lu.ctions if..~ey\yere to"·bei.c_fed_u~ed);~a~d ~ .
· deatli; . . . - · ... · · · : . · .. · . . . · . ·. · · · ... b. .T.he. i.n.capacity:of the debto~· ._tC> ·pay~..t,r>ei~ .
. . . iiL. Pr()()f, of financial. Ci:!pacity of the creditor ·. ol;>ligatiol'\.1.s p~bven (Monserrat.v, Collector
. tp. lend the ··atnounf at the tlnie the Joan .. of ./l)te.(!l_al · ~~venue, . OT)\ Case v_fJ./1:>fu.'!tP,·_
was granted_; arid . . . : Decf:mber.~a.·_1955).. · ,o.l e~tiz!.upgf(
.... iv.: ·state.rrier'lt uhder .... oath.. ,._by th~ '. . . . . . . . :(io{>!J-so~l~))
· administrator·or executor of· the ·estate Not~: In case, .the claim.is the-sxcltl~i.vi;;propetty,ot ·
reflectfri.g the• diwosition ·of the .proceeqs·. tne d~ce~sed, the .same is not tcii-tiE!ce.a~dered\n
of th~ loan if said loan -was .contracted . · · · detemiining the share of the ~oF;yiv.irtg;;spo.llse(1 DE'
. within three .(3) years prior to._the. death . LEON, supra at 773)1ot . be1~en0Qmoo: · t\?.1'1 :d .
· .. of the decedent (RR. Nq. 12-201(!, S.ec. · · · · ;%i,,rmrllq ·
. · . · (r(2){2.-2)(2.2.1)). . . .
. . . •' . .·
 TRA'.N.S·.FER TAX
SAN OED~ LAW CENT(?ALIZED BAR OP£FIATIONS.-·M£MO(I\' AI0.2b19 .

. .. . I •

· 4. · Un.paid Mortgages; Taxes, and · Casu.<!lt~-.. · . c. lncurr~d· not later than th~ .bast' day for the .
· Losses . paymen~ of the estate tax.as· prescribed by. ·.
. ·Jaw;: .. . . . .
Unpaid·Mortgages . .. . . . d. At the filifig of the. estl;!te tax ret~rn. such
Requisites for.De~uctlbillty of Unpaid Moi1gages: ·. losses · bave Not been claimed as a
(VB) · . . . .. . . . : Deductionfor.incqme t~ purposes in income·
a. · ·The Value of-the -decedent's.interest therein, : · tax. return; ~rid . ··
. l,mdimiriished. ·,.by ... Sl!Ch· ·mortgage. or
indebtedness, Is included .in the va1u·e of the . · Note: ·c~nsequeritly,'c:asualtyloss cari°.be all6wed
.. . 'gross estate;· and ... . . . . as'
de.d1,1ction · iri .one Tnstante· only, . either for
· b::. 'The mortgages were··.cbhtfacted .§.oha. fide ~ · . .incom_e ~ax. purposes ·or est.ate,tax·pu.rposes..
and:tor a.n ai;fequate ·,;1na.Tull.c~,nsjderati()n in ..
· .money ur":mon$y's.worth·(f?.R No. 12-:2018;. ·: e: ··.,n.cur~~c1.~~rJn~:1h~--·s~tt1~rrient.~t the estate·
.Sea. 6·(4)).::. · · : .... ·.. · .:· , .. , . .. (R.R;No.. 12-2018, Sec. 6 (4)). · · ·.. ·.. :
·. ··" . . ..... ; • • • ; •• • '1. f

:·. : ·~o!ei: In c~~e· ti~paid. i~rtgage . payable . is·,. b~)ng. 5-: · ·P,:9perty . Pteviously Taxed . (,Vanishing
claimed by the estate; veriflcatiorrmust De. made: as · .. ·. Deductions) ~ . · · ·. ·.. ·
. (c;, who waii ~he beneficiary of the.toan.proceeda.: . . The. a~~Clc;tion allowed. from "the · gross· 'estate' far
· · a. ff· th~. loan.:. -i~. !ound .io,. _.~e _mer~ly ~""~eertieswhich
.accornmodation loan .: where · t~e::-if-loan~u~
=:
pre~i?u~ly~subject to d_?n~r·~ ·
· cif~tat~tax, The deductioh ·IS called.a van,~hmg·
proceeds went to another pe,';E.!fthEf~alue~ . .9-~pc}Jo°J~~u.sethe deduction a_llowed dimi~ishes·
of ttie unpaid. loan must,b.e,..i~ICid.efls.,.a~...:.~.f:ftPe11og,.ot~5 years (2~8 DOMOND0/1{1 supra at .
·r.ecE:jva?Jeof_the_ ~stat~, ij ,. . . Y,::~:, -·
470)~.V . ,;..:;. · · · . . · · · .
. I). lf.therels a-le~a1·1~p~d1~'en'l~~~~ ~~~&t~-e,,_-:ib".:'-"-':'-....,.,.~,'"{..\,. · ~- . -· . . · · .. ·
2?
same-as receivable ofjf~stat .• ~a]<:I unp~~- .lvopera\~5.~'<~~e·\theharshness. of successive·
···· · ·· · ' obligation/mortgage;.:f..aya_~1.J;.~.haJ}: · rot . ~e · J\. 4f
tak.ition t~e·~<!~e~r.Rpertywithin ~ relatively short
~ · .· allowed as a·df;lduct_,pQfro.mJfiegr ·ss·es.tate. ;;·\J·\.penod · o~ .tlme'\,~~1~necj by untimely death of:.
· ' . · - · . : · · · f '?; ( · : . f 11 TTrans~r~- after. tl;le ·r~9e[pt of.property from ~he pri?r'
!
' ·· . _1.nal! iris~artce.s"tti,e·rJ\Or:t~ag}cl'J!>r'?~ert~:, to h~_Ef$.~ . ~qentid.o~,or.,~~llFON,eupi« at-, !75). · · .· ,

~tt~J:'2~1~~r~p,
.: · ~:~:1~;:~~~~rr:~~(!t:~~~Jrt:;,.o;.l,d o}:;,;:;;.l;J;ty,_(DIPI~) ' •. . . . '
. .. Sec. ~ (4)).. ·.: · .' - :- cf) ·. ~~. . . ' I . ,;~'-i >.a..,.A,~·h:-jil:l-e~(e1E:l!'lt·:de~ed.~ntdie9_within . :·· ·:
..•. _. .• • '. . • . ' .. - ' • • ....~ , ·ie...-r-1. ~~~ /'-<ID~ ye~,s fromqU1e re~1p_t-ofthe prop~rJx·
, O_ni,-,,~ Ta~e-s · .. . : · .. - · · .. ,. · ' !s. 0~· ~~ '. ~- ,~~ oi:n fprior,d~~edentq_r donor; .. . ··.
: ·.: Requisit.esfor De:du.ctJbi.lity_o.Uni:>.al~ax~s.ff~ ·!<f.~f1ty - the.· ·P.roperty · S(?.~g~t .:.t?. be
, · a .. Taxes.which h~ve :8c~ '1;!,0d as ot,pr ~~~fPN~b 'stfi~ucted· i!f ,tie .bne rec~jved· from. a ·prio"r ·
. · . . the d~att:i of.the d~cedenf~~d ·. J":~~-" . ~- · .-~es~-~~'6r" 1qnor; · . ·. ··:. ,. : . . .
b, Qnpa1d .as· o! .t_he time of ~1s~~$ath<ikr!f'}'~~~c-:t~)('~!,91isl}'. . detetmlne~ <!Od. pa,~ ':"' th,e..
·, ·· . 1?~20:f~::Ser:.·6-(4))_.. :: · . ·'~i'.J..(, _·· lt-.i{ 1\.d.~}.:~~6rs tax O[l the gift:or f:?St~te :ta~-~:m}he.
. .· · . . . . _.--· . · · · · · , ~- .1.. v .o,.~_.,.,;,,?'pnor _succe~s1on . .wa.s finally detetrnmed and .
This d'edurition for uri1pi,t1d taxes will .not incl.ud~"""'":",.~'""=--"'' ·.' p~i9;. . . ·, - . , .. . .. .· ... , . , · .·
·1 •. :·. ·fncoirle tax updi, ·.incoi:nereceived a:{ter"de~th; ·:. . ." d; !hclusion ..1·tlie. property must have- ~armed.
: 2: .. Property-~axesnot·~cciued· before hj~ d.~at~; or . .... . part· ·of: th~ ·. gross- ··.estafo .. siitJ<,1t_ed. in: th.~..
. · .3. The ~ta~e· tax'due from the transmission of hii, ,-: Philippines ·of the prior:deceder:it, or the total'.
~stat~ (Nf~C,." Sec. 86.(/'i.}(1)). ·.·.: ·: · .. · :. -. ··.. : . am.ount of .th·e· gifts: of th'e d9nor; and .· ·
. ; . · .· . . . . . · :_, · . '·. · e .. ,No ·previous dedut:tio.n ·-:- ·no·'va.nishirig ·
Note:··To be: qeducti-9le. taxes: shO':Jl.d q4alify ·as ·: :. _deduct(on on the property'was allow~i:ftQ:the ·
· claims a_gainst tl1.~.estat1;1; l'.he.y must be::e·nforceable ·est9te of the prior: decedento(REYES,.supra
·· ·obligations· of !lie:decedent ·at ttie ).me Qf his:·death . ·a.t-·1°5-1): .. :. . · ·.: · ·- . :, . . . :_.· . ·
.. (VA~EAf.9!f.-. & R':)?(AS; sµpra_.at 198l .. _ . ·. ·. ·· .. : \: . . _
: ·· . . . · ·.. ·· .··Notes: · ... .
·.. Casualty.Lo~ses '- . . ·: ·. ·. :_ . · ·. . · · ·: · ·· . . ' 1. ·t.he deduction shall .. be . allowed · only· where·. a ·
... Re.ciuisit.es.. for. DedClctibilify ofbas.ual~ .losses: . . ··.. donor.'s ~x. o~ estate tax imposed Wf!.S. ·finally
.. (.CN<?H,.N.ot) , · . . ·· : :. . . · . ·.'· ··determined.and. paid. for iti behalf of suth donor .
. a. · .J\rising from·F.ire, storms, s_hipwreck,Oi' other·. · ... ~ Qr the-.esfatEfOfSU~ti prior de.cedenti · . . '
.. j~asualties, Pr froryt· .robbery,_ .. ttie~. or ·2 .. The .. deduction all(?Wed is::.only in· the amount .
-erribezzleinent; . : . - .· . · · , . finally det~m,ined as the value ·of su.ch property·.
b. ·Not'. fX)mpensated · .for: by, Insurance" -0~. · . . in determining'the value qf tli.e gift br the gros~ .
· · otherwise; . · · ·· · · · . ·estate of such prior decedent . and
.
only
. .
to the·

1!36 1··:2oi.s SAN BEDA~\jj·cENTRALIZl:D.BAR.OPERA TIOl'ls .

 (.:. __ 11'.1111 ...
~t-RANSFER TAX.·
lli BlllOPERA;TIO,NS-·MEMORY·'A/D 20f9.
i.. _
:SAN i3EDA /.AW~ENTRA.1.IZEDBAR

l . . 'extent that the value of such property is jnc.luded' .: 4. Transfers for public us·e,
-~:, :·in the decedent's estate;.. . . . , . . . ·. .
f.~ . 3.. Where a·deduction was allowed 'of any mortgage . Step 3: Computafion ot final bests:
r·. . or· lien in datermininq the donor's tax. or the ..,
;r estate tax pf the prior decedent, which was paid Initial basis · . xxx
}:. ..fn\'11hole or ir'l partprlor to the.decedent'sdeath, .· - Less:· 2nd· deduction: xxx
~t . . then · the deduction 31l19wable for property Final basis · ')(~)(
t. previously, taxed shall be reduced by the amount .
{ ·.. ~Q paid; .: · ... · . . _; · : ". , · · . . . ' · Step: 4; .. C.omputatib~.of \i;{ni~hing,d~d,lf~tion:,
J . ·4 ... Such-deduction allowable shall be reduced by an · _.. . · · Pereentage · . -:. . ... .
~~: · · · amount :whic.h' bears · .the 'same. 1'1;!ti6,· to . the · · , Final : X · pr~v'ide·cfontler = ·_vanlshi,n·g..: ..
~. · ·. . amounts . allowable · as -deductions for Claims · Basis . . Sec. 86 .(A)(2) de«;Juctior1
·~--- .: ', agalhsLth_e estate, . Claims· a~~inst_ · Insolvent: · ofNIRC . . ·' .
;-;. . . ·persons. l)npaid n'fortgc1ges; taxes, and casualty
. · losses, Transfers' for pµbiic use.. as the amount · A~pli~abte·Rates:.
· : .. otherwis.e: 'dedlictible. ff?r · P.roperty · previously .
taxedbears to the value of the decedent's estate; .
. and.. . . . . . .. . . ;
5. · Where;the property referred to consists of two or : ·
r;1_ •. : ·· more Items, .. t~~:· ;;iggregat~ value"ot'·suc~ item;;:/v;~
~~~ . · .. ,.stjatrb~ used for th~·purpo.se <?_f·com_putmg;:-tNC>1·(.
i. : . deduction (NIRG! Sec .. 86-(A)(5) 8$1:fmer,df/c!/lY,.f'-1.~!\. .. . . . · . . ·....
,... ·., ,. TRAIN Law), · · . · . > .· -ti{;;;Nlih'.!_'r1 Witqin the year priorto the death of
,,.. . . · • . . . .
. · .. · . · \~;··~··nl'.d··d·t
... c-O ., ~- ece· en .. . . . ·.
) .Classi(ic;atiq~.ofVanishing D.e~uctioils '(V~1 ~it,~.•~rf'e ~~";~itf:i:"·""1;~.~-b tr . th ·· ;· ..
~1' 1._ .U()_der Oonjuqal Part~.~rsh!P.O! GjJp..s~ VD is!-;· W ,. e:rs ~n""'.!Y. ~r, u .ess_ an . · .8.Q%
alway~ chargeable. c;1gc1mst .exclus1i:wiseparat,c1LJ.l ...Y_._. --·-··_,,,;-'~*~-.--------+---,--~----'--f
. . prbperty of tt'!e ~ecedent. . · : )''r)i,.{( · _..tY.,.....~\ .. More.than jyl;}~!:>lit less· than 3
.2. Under Absolu~cf C9mmunity. Pt~$rt~tf3,agime -. · f( y~ars r ~ ~; . . .
6Q%
. . . . .VD. ·n:1~~ , ~ither, be ..?h,a~?flatil.e <\~~(f.rs_t.!?: . ·i~ .. More tha'fi°3 Y.. ars. u.t'leis·t~an 4·.
. com_mu~1ty. property .. :ot..-..wcciu~i'"~ .prop~rty\! 1"-"'l' ear~dl'-· .-~\.~ . 40%
depepd1ryg ·on-.tfle ,c.lasslfJ,_{:;,.atlofll';'f1t;,d111e. sVbJ!'f.Jl··. ;~.~ Y._ ·;;,:;r; ~-~.·.:·-: ·-' · ··
property (AMP.ONGAN,.siJp't:.a at YJ£<?),-1.t · 11.r,,~1 ?' · .More·ttia~~9~s,1Sutl~ss than 5. ·:: zo%
.. · · ·. . · : . '-_. . · . .. . ._'~i;:gr:!~~'4 · .'}!: ti!'. years· . . · · · ... · · .. .
: · . F:o.nf!ula_ -foi:. Cqmp1,1ting ,.Van.ishi!:W oJ)ucti?n. .)• _.~.ta· . . . ,. . . , . . : ·. . . .
,:,•. · . (VD)~ . · . :' . . ii~;,# · ., . .,.~,J;.~jJ~~ttifa'ti£>..JJ {AMPONGAN, supra.at 109 .-1-10)
0

,;·, . · . . . . .. ; ••. . --4'-,'l;. . i,f.:·~-~""'·o-~re~d'bn:~ct6~er_ 21; 2008 le~wil')g a p~_rc~l-~f!anc!

~- · St«:9 1~-_Computa__t,on?.' ln~t,al b~sl~1.~ "- .-.Jef'lf · · which_ she mhenfed_!rorn..h·e~·ml:?ther; · M wtio the~ ~n
· · .·· · · , . . . . · .. ~(!Pl~ . . May 20, ~005.· The ~?Ill.le of.the p_rop~r:ty at the time
:Val.ue of~e.prop_erty.subject to VD. · xxx_. of. death ·of ner. mother M was i:>350 000 bur it
. Le~s: '.An(M6rtgage:paid on :!hatizrop~rty ·. )O<_)<· appreciatedto P47f?,. OOC>'in.'2098... . ·,._.' . - . ' .
Initial basis. x,q<- · · · · · · · · · · ·.-·
The ~ross estate:·. ded~~ticin~·. an.d · other;·· date
.·: ~~e_.ot
. :.:V:a1ue· ~t .t11e·· dona:tion·_~i- ~1:iatti··~fV1~ prior. . ~O~l?iStedof the.following: .· . . . . .. ,. !
.,.... · · decedent, OR value:atth_etiine·of.deathot,the present .
ti ·=. 'decedent, :Whichever i's ·lower. 1he·qecl~~tion·is based
: . <;;omij,~nity .Propert~. ·..
.. · on -the .individual valu.atioh of each..·property. (1 DE.
: · L.EoN:-supra
. : . ·. ~ ai 775).
. - .
·. . · · · ' · · · · · •
~clu~ive Prope_rty of' D . ··650, P<?O
.· ·:. . . ··· .
St~p ·.2:· Compcitation . . . '
·~; 2~d
. .
deduction:· .
· ,. Claims:against. insolvent Person Bs;ooci
. • •t •'

· : lnitlal·basis · . .pars:.(2), (3), · · : T.rans{er.for-Publi'cUse · ,.. .19,;ooq

· : .Vallie of the. GE : · • · (4')':'and·(6) of : · =· znd .
X Sec:·86 (Afof · deduction· . :~lai_ms
.... against
,•
the. Estate
. '.. · 1-5,.000
· 'the NIRC .... · .. ·. · ··.-
·-·
*Th.El Sl,I~ of tt)e following is the'inuitiplie~: (C2UTra) . At_'the time of death ~f _M,Ufo parc~Lonand ha¢ an
:. . ·1'. . Cfaims against'the- estate; . : . unpaid mortgage of J1>50,:ooo ~f which P20, 000 was
: .. 2: · Qlafrn's against i.nsoiverit person~; . . paid by D. Compute the vanishing deductlpn;
... · .. 3. · Y11pafd_. mortgages:· ta?(es·. · and··.· ca~ualty
toss.es; and . .

2019 SAN. BEDA LAW CENTRALIZED BAR OPERATIONS I 187 .

 . ·T.RA.NSFER TAX·
·SAN.SEDA LAW CENTRA(IZEDBAR OP~RATiONS - MEMORY AID .~019

Allis·:· 7. ·Family Home . . .

Family Home :- the dweUiog h0us.e, including the·
_Step 1:· C9mpu~ation of.Initial ~as/§: land on which it-is situated, wh~_re the husband or the
wife,; or head of- .th~' ·f~mily, .and member~ of their.
Value subject to VD* . · P350, 000 family r~side, as certified by the Barangay Captain of
· · · Less: Any Mortgage paid ·.20, 000 the locality (R.R. N_o. 12~101.8, Sec. 6 ·(7)). ·
·: · Jniti!='l-ba,sis . · ·. P330,.000.
Requlsltes for t>e~uctJbiJity~ (ATL) . ·· : .. .
•val~e .·at. t~e ti.(l'le of donati~m or. death of the prior a. ·.·The. family· home rnust. be the Actual
<;1ec;eden·t (P350·, 000), OR 11alue .a~-the time ·of cfoath'· . . resldentlal' home· of the: decedent.' and. his
of Ute present- decedent (P4 75,. 000), ythicheVer is . ' 'famiry. at the time of his -death, as certified by
-lower. · · •. · · · · ·. . the. Barang!'IY Cap(ain of the locality where
=- -,' the· same i~ situated; ... -~· ·. · . · . .. . . .
Step. 2: Cqmpµtation qf 2nd d~du~Uori: . ., . 'b. The Jqtal v~lu~ qf the ·famlly home rnustbe
· · · ·- :. · · · -, ·. included as part of the. grosSi estate. of the·.
·:P3.3o·;000 . . .. decederit: (owned .by onevor .. both, of 'the
·. (9(5.0, :OOO'·t/650,. :J< 12D;·cib_O~ . · . ·. =.:P24, ?~o.· ·., spouses): and ·. .: .. · . . : . ·
. · . 000). . ·· · '. c. · . ,Allowable cf!')<:t:udipn·must be ·,n an amo·u.r_it
. . : .... · : • · · ....._ . . .. . . ~:c.:-··- .··. equlvalent.. to th~.".b9\/Y~S.T ot; (Cl1 O). . ..
*The sum of:
Claims a a\nst !_~solvent Pers~n·.
· Transfer-forPubhc. tJ.se. . · , .
. . , · .

~<
.
··;~65~00
~ J
1
'.·U:
O. o: El.~-=-..;;"';:,_
<:
=><] ~ ... ~ The ~urrent .fair. market value of the ,
Jr:. ~ ..ecedenrs·tami!Y home: : , · ... ·
11.f ~~'
. .!,[. e><terit. of t~e· decedent [nterest s:
Claims a airist the. Estate. . . ~ ...... 5p0UO . . . _- -"'°,,,.,· M~w :ea.er. . con;ugallc?.rnmuoity: .or·
Unpaid Mortgage (P50 ooo - ·:?{)"' ' ~'( i Ao S).00"-- · ...1,·-~ , • Xf}lus"tv,,_e property); or., ' .
000 ·.. . ·. . · .,: ' • 1/i'.... v..f"· . ./1-'. ·., .~ .:2~.. · . ~")ii.:,. ~.,@Q.0\.000 .(NIRC. Sec_.. 8.6 (A)(4)).'
.. . , 4' I . f . . . ~( ... 'r! ~~ r; ·\. . ,
·stefp 3:..·c°imputa~ion of.J;n,rbas~~f · .· ~ t. . -· ff-ttie.. fa~p,itx·1roi;n,hi~. ·~, ~orii~gai ;·or·. ~~mm unity
· · :_ {!>--.)Pf: . ·.· r:-··. . . ' 6,.
-~r.op_er:iy.,..,~ea~d1:1~t~9ip~.de.~_ucted.'~ ~qal~ale11t to
.. . . '. Initial basis. . . · .. ll ~- .f>:330, ~O.O'-::~.g~;!\. . .. .Y.~.b!he ~at_r mar\~t-val~~: .but s.hall not exc~~cf P1_ 0,
·· · 'l~s~: 2~ _deduction. ~· .. ·~A . ·· 24,..]:§Q__i:f(. ~<?B·. oool~GL!;_~._, §yPfi ~.( 278)-. . · ··.. · . .
. . ~in.aLb_as,.s . · .. ~ -~ ~- ..,.~~~.. 7g/E!lff'r~otf!S;/'J]P.s)_-~ ·n,,,~~4.. , . . . . . : . · .: . · . ·.
. .· · . . tt~.:1,i.11>.
\Id'.)\ '~" .- !;ij <'.£$,:. -~ef~J111y~_bm~1 ·~f;lemed constitute.d.on the .

. ._ : : . . . . P305 ,X . . ..
·: . ··, 250.
* _: . :- . .. . ... · · :·: .
.
40%\
. · Ste~ 4. Com~u.tat,~n of va~s.-nm.g1_e.d~f!...Jf>,.j . .
· · \ · ·
~-= ~'tj
. 10-9 ~
·... ~ · . . · : Sc~~~~r~r~s
._ , · ~
=----~~\:orisi9_ftred
. . ~ a?-~·. l~t. tiom the tif!I~ _·it ·h~ ··actually· .
f.
· pief' f:l·s.. . fam\ly. · r!=}siderice . and; .Is: ·
·as tuch·fo.r as lcir.19 as any of Jts
#t~ally.-resid_es·therein; ·. · . . · .
. :fbe . ~~Jd1r:ig, p~nod of the pr?pe.g.y is P- e~~~.t~9-~a1\~ee}!11>"ancy of the hou.se qt. house _and)ot
montn~ and 1-day·,henc~ 40~:'s u~~q. ..(' < !Y-1~. --·-~ :a~.m.~.lr~ily'residence s~~II not be ~on-sidereq
· ·. .. . . , . · . ... · . ·. · · '~ Vl . :MA~~~Pt.ed-~r abandoned. in such .cp..ses f!S ·!h~ ·
. Note. Jllu~trat,~n. given was . only patt~ltt§_f/1>:J!J..;i}!' · .l ~-rempo_(ary c!bsen~~.f~-om. tti~ co.nstitµf~dfamily._
.example, given m the book 9f Af!IPOrJgan. Some Q.U~. home due··to travel or studies or work abroad·
. ·. . . give.n items were. changef to sl)qw · "C6mpdta_"tion ·. . ..etc .. ; _ · . : .. . . .. · · · .. -'
,.: - based on th1n,!me~<!_"!e1ts t~ the.TRAIN {,.aw. 3··.. · The·f~f!1ily home is."g~n~raliy·cti'aracteriz~d by.,
-, . . . . : : . ·. ·, · • · · ... : '.· . . : ·· ·. . · : . . · pe·rmcinericy,,.Which, .is· ttie pl'ac!';I ~o .. which
· . ~' _Transfers fo~ ~ub(1cUse···. · . . · · · . . . . . wheii'even;1bsen~foi:°l:ius1ness. or pleasure, one
· The a111ormt dequct1ble shall bs th~ ent,_re am9unt of . .. ·· stlll.iritends·to'return·.: .. · . · -: · : .. . .
.. ·a!I b~quests, l~~~CiE:s• ·devi.s~s or_trarisf~rs:_t<>,_-Pr for . :.· 4 . .":· The fai,;;;ily home:· ~ay: b~ ·conslituted· l:;-y ··a.n
the US~. Of. the· ~Qvemin~~t ~f th~. ·-~~_PUbl~.c Of- the . . .: . uomarr.jecfhead :of. a ··.fa.mily on his. 6r her 6yin.
· ·Phl_llp~mes or .. a.i:i_Y p.oht1cal ·SUl:>d1~1sron thereof: .' . .property~ .. * .. / ·. :.. . , ..

. _exclusivelyfor.pu~hc. purpo:>e (N/RC,·.~ec. 86 (A)(?)}_- ·.. · ~-· . '. F.or pt,1rP.os~s·· of availirig· 6(. a family · norne,
· · .. detfuction tcHl:ie extent allowable, ·a person may .
. The 'requlsi~E!S are_:'.(LAGPI) . '.
· . . a. The · disposition is ·in a Last will and · : . .. . 6.· . : . :constitute.only one family home~ arid. ·. . ..
. :Husbiind al)d -~ife shaU refer ·to those !~gaily
. •te.stament; . .. . - .
: . married man and w.o.man (R.R. :No. 12720'18,.
b. To .~ke..effect AftfiJr'depth; · ·. $ec. 6.(7)}> · · · · ·
c. . lh .favor of ·t.he Gbve·i:runehtof tlJe.Philippines
or any poll!ical ·subdivision il_1ereof;.
d; . ~or exclusive .e.uRl.ic purpose; ana · . ·
.. .. 8 .. A~~UNT ~CEIV~~ . .'9y':HEIRS \R:A.
. 4917) . . .. . . . . '·
NO ...
. e. : The.value.ofthe:prop~rty g1Ven is fnclucfed·in . . Any •. <;1mour.it re~eived by .. the heir.s. :from · t~e
. the·. gross estate
. . (RE.YES;. . supra. at 14~5).. decegent~ empioyer as'a consequenqf:! of the dec;1th

1 aa. i 2ois-SAN.BEDA ~w CENTRALIZED BAR .OPERATIONS

 .£.
·.·.:.•!.·. - : .'
T'RANSFER TAX
:SAN BEOA I.AWCENTRA(IZ£DBAR OPERATJQNS '-•MEMORYIIID.20.,9 • -, .. . ,
. ~ ~ I IWAMM& -··. wss-- Hll'1'l1J.

t of the 'decedent-employee in accordance wHh. R.A. S4minary.of.De.ductionsAllo~ed to the .Estate

_i{'· No. 491/ is allowed asdeductlon from gros~.es.tate,. . ·of Citizen; Resident, and Nonresid~nt Allen
· ~. provided the amount ofseparation benefit is included · · ·- · · under TRAIN Law·
.,.:; . aspart of the g.ross estate of the· de.cedent'(NIRC;·
,,;;.: Sec. 86 (A)(7),"R:R. No. 12-2018; Sec. 6·(8)). ·
:f·.. . ·. . . ··. .· .... ·· ..
: , ,Appropriate.Treatment . . .
0-. Amoi.int received ,by the 'helrs-,under RA No: 4_917 ·1~
ireated· as one of the items under exemption and ·
Pr9rated
exclusion from· the.qross: estateunder special laws,
The .. basis .of such treatment ls justiflad by R:A, :~o:
4917. which' 'provides that retirement -benefits.. o(.
· Prorc1te<f·
{ E]l'.l'.lPloyees· of. priv?tte.·firr'ns s~ail 1;.ot be sublect to'·.
l·
':3l
attachment, le'v'.r, e~e<,\Jtion·; or any tax, whatsoever...
· •••

/ .. If .the amount is treated- as exemption .or ~xclusion, · Prora.tecf

\ . the amount received under RA: No. 4917 is no longer ·.
/.. allowed tobe deducted from thedecedenrs gross ~ , .
'.?!.. estate (VALENCIA . .
&ROXAS,supra
. at 212-213).
. ·. ·.:
'"':•.
:(~
.
.
•,
. ·. . . . . . . . . . . . .... . /-,
YES
" Note:: The amount received by the heirs under R.~:,.< -~ •
·{ · No -. 4~J7-i; required ~o be i~cluqed in·the gc9ss
·,.. only if the .same is claimed· as a· deductrb'n!!'_1J,,f.:'>''""'
?~!~ff~i·,( YES ..
:f;2,._::};?t.}
~~:. corr,p','.!tJn~ the ~Tl)ount _of the-net estate. (R.R.. ·N,~~' .
,. ·20.18
1::...- . '· Sec.
· .. 6'(8·~.1). •..• ·
. . · ••
. .. .. h -t,r-,
[ ,!~- ·~.rtw. ,NO··

~¥:-·.Req4i~,~~s..f(>r. rie.~uctibi_lity: (Re~Hl).. ~,-:-;~: .. ·.

t · ai Th~re ·~s '. a ·Reasooable ·pnva~'~flErfrt.Pl~i:i!n-}1 ·.
:;,r tf :No··
ti:'-..
.-:-.; ·
·. '. maintain.a~ by the employer; ,~.'f';:./;\ _,.
:b, · _Retiring·employe¢_h.as.~e~V.~~{h!(~J~ic~of
p~r,J~l,:,· YES ·
. the Same etnt1loY,E!f fof19J.1ei::ist1.~y~a'.s ar;i~. t;q • . . . ·. .
. i~ not 1.esst.hc;1·n·s0ye~r:s~f~~f~Hhe-b[le.of' 'f"'~· (NIRC,..~f!.C. 8.~...;f!§~nded by. TRAIN-Law)·
•it:.:'.
..,
·· •
his retirement;
• .
· · · ,1(
,
""-'.-,'--
_.i.;J,'\
:/11__
"~'··
,..-··~~
Y., .... . ~(j~r't.lf~,.,~~it.li,)#.'
· ~~. -~':f-V:·~)ljj .r .
~ c. T~~ ~mo.unt.~ust ha~e·bt:_~..~r~,e~~~d1:?Y.1~·e H ·. . . . -:-~r•-·, ~: . . . . . · · .. : ·
:j ' .... . .t!.eirs . of 'dec~dent-~rq_J~J,cr.yee'f:,as: j/a . ~..,. ·. : . ·. . . .. ·. . -. .;.
t. :·. . '.consequence·ofthe latter's_'i;le,ath;~~\i: . ·f~-+ 'if"'.~···.' E~CLUSIONS FROM
~.. .
l· . · d. · . ThC;l amount is !~clude.d in the $~~s-Jsta~'i>.
the qecedent (1 DE;· LEON, sdm;~ at ·rr,tr'.5t:- ·-
0J..A1t::!·
i~;Ii~~~71?'G\. ROS.S EST A-TE . .
' . · . • .;,., · •·· ..
1!~~~
~>_shar-e· in. C~;J.:.g~\ f~op~~ · · -.. ·_. ·. · · .·. ~c!u.sl.or)s.fror:n.'Gtos~· E~tcite ·.. ·.·
.The:net share qt the."surylving sp~>usein,the"conji.Jgal · ... ,:he_· dapi.t91 (excll)siye. pr'op_erty). of thci' s.urviving :· .
~ partn~rship prqpei:ty as diminished bythe·obliga~ions· spouse. (IJ!JiR01- Sec: 85·(H)).. ":- -· ...
.f · · properly chargeable -to such propel':ty. sliall, Jor. t.he
r.· · purjSo~Ef .of· Sec:.86 of the NIRC, f?e: deduct~ from...
the.net ~s.tateof:ihe·deced~nt :(N/Rc.:Sef,:fJ6.(CJ): . ·
.. N'ote: The s.har~ of the ·. survivl(lg · spouse ·in.· the
abs,ol\Jte... ·comm·unity/conjugc;1I · p~tthership · ·is
\ ·.

. After ·, · dec!uctir:ig. : . the.·· alloWable . . de~~ction~

." con~1dered
.. ..
as·a deduction (NIRC,
. '. ·. . ~· . . .Sec .. 86 (CJ):·
.: . . :·
- ····
1:.
1·~. app'ertail"!ingto the conjugal pr'commu·l').ity·prop~rties·
: . J~XEMPTIONS .FROM·. · <;
includ'e.d in the g ro·&,s·estate, the sha're Of the· si.frviying

f:
f.
spou$e ~must be' ·removed ·to. en~ur.e that orily. the
decedent's interest in . tlTe. estate is· taxed· ('R:R. No;
12-2018,' Se.c, ·~. (9Jj:· ·. . .. . :· .
. ·. . GR<>SS-ESTATE
. . . . ·.· _-~
. . . . . ·,.: . ·
f. · · Deductio'i'1s·. f~om · the G.ross . · Estate · of. :-a
' '
.Exemptions from.Gros-s Estate: (MIFA) . ·. ·< ·
-!f::. ·. Nor1reslde!it .Allen . · : · • · : ·. ·. · . " · . · · ._· 1. ::The Merger-of usufri.J.ct [n-th,e..QWf:le'r of the·naked ".
::· · A' decedent w}'lo was not a cit,izen or. resident.of the· .. title (NlRC, Sec.:87 (A)); . ..

~ .·:
·~ · · of
:PhillRplnes at the tin:i.e dec!th'. withipropert)~s' within ·,
" .and .. outside the Phflippine.s, is.subject to'tax only. on · · · : lll~s~ration: lyir:'A died Qll June ·2011. 111 his Will,
~: tJis· estate withii"! 1hei. Philippines: Due ·to this,· the · hS: deylsed ,-an. agric'tllt\,l_raf land to ~ ·Wt10 shall.
{{ .. e·state.in.lhe Philippi.n~sJs all'owe'd iimited.deductions · use the property over 1C).y~ars and thereafter t9
_:.(R.EYES;.suwa a.t 14-!JJ. ·. . .' C.' .. Subsequently,· B · died resulting In · the
~- . transml!\sion·oftl:le property to c .. · .

I 2·019 SAN BEDALA~ CENTRALIZED ~AR OPERATIONS I . :189 ·

 ~ ..

TRA.NS-FER TAX.
Predecessor · Current
. · ··. becedent
~ '
- SAN BEDA

. @].··- .. --.- [g' ..

I.AW f:ENTRALIZED BAR
• ·y
'?ff.RATIONS - MEMGflY AID-~019

· 4 .. ~i bequests, devis_es; legacies .or. transfers.. t9.

. s,ocial welta·re, cultural and.charitable.institl.itions•.
no 'p9rt of the net incoriie -of whlch inures to the
6¥1

· (Usufructuary). (Owner i:Jf . : · benefit of any individual: Provided, h'ovvever-, that

·· · · · · ·. ·.Naked. Title). not.more thcjn 30% of the said beicjuests;devises,
'legacies:. or transfer$'."shail . be used .. by '-such
The transfe~, fro~· ~sufructuary' .B .to 'the. real . institu.tions for· admin1stration purposes -{NIRC, .
. owner c: upo~ B':f d~ath does_: not constit_ute. a . . ~ec.. 87 (D)).
donation :morlis ca'usa. as
it is a mere return of the
. prc;>_perty_to the·real ow~er: HeAce, it is.exdu'dep
· Jrorn _ _gross ·es.rate (!3ANGGAWAN, 8u5.in"e~s &

. 2.
Transfe.r · -Taxation-· (2"{)17), : p ... 3.9_1J -.[here,nafte(
B.?'WG<;AWAl\lJ;· . . : . .

The. transrnlsslon or delivery of-the ]hherit~u:i,c·e_or

.,
~ : . .
·. -'E_-:,STATE TAX.
... · ·. CREDIT
·.

Estate Tax-Cre~lt . . . . I .
. .
··

.
·"..

. .
.

...• ,.
I
. legacy ·_qy the ·fiq_liciary.. heir· or." leg~t~:e to the The .~st,;1te jax- imposed under, the NIRC shatl be.
. fidefco~mi~sary·(N/RC, Sec. 87 (B)); >··' · ·: . . credited with the amounts.()f an.y ;estate.lax imposed
·. · · .-. : . · · · .· · . . .-.-.. ·' · . . • by the authority of a fcireig;ncountry (NIRC, Sec. 86
lllus:~~tion: Mr: A died leavin~_.-_ar.i.:inher:H;;,!nS~:=~f-..
0 .: ·.- . . . . . ·· : : :
consisting of _real . e~tates· to 111~ · gr~.9.-d~~C.--rru·~: ·"J':~~ · . ' _ • ·
Because C was a minor, Mr .. A ag,i;,emlefb,B· as Jfi~1tatror.i~~'- . ·. .· · . ·
fidu~ic!.'Y of ihe:\inhe.r(tanc,e.Be.to~ap·~~~!.;!P}p:,,i.,;~~.-.'fr. q~_1fahi Basi.s - Tn~ amount of the credit
·.. the property to C, ~-died. . - ~ V,p"':· · · · . ~tl:l r~speptJo...the :tax P?ld !o. any country s~all.
. · ., . . , / . ~)I:-/,~ ~--~"""'7.Q.Pt~~e\{i;.tne's,ame· proportlon of the tax against
.. Predecessor . . . Curren_t #~'"), f. I . . ·115)· 4r .'#~_owhi'of;l s"ti.~\.e::@lt~~ taken, ·which,.the <.!ece,dent's
·- · D_ecedentf .. , 'i{f · { · . ·. t ..
4-\J-. . .i'-1.. net:~1>tate~1!!uat~ ...i within. s~.?h c~untry. taxable
~ . . · ~ · · -' ~ A ,- lg. .. , , · ~:\~ . ·· · undei-t_l'!e t.l'~(d )~,8:rs to his, entire net estate
· . (Fiducia,ry,{fetr)ffeiil'!icomfi'gssryr !{. . :,,,, r"if.l'R_ ', Sec~'-ff!}§l{f)(a));and · .
· . ,, ·. ..}J.~-1f·. ! ·-~~ ;1 .r-Z:1$:.fJv.er.ll.'Ba's1f --T,,,P~ total amount of .the credit
The .delive_ry of the·int:i~.iitan~i}IP:6n th\deat~fmtr~~·shall.fnot exc1 ed~e~s~me p_r61!)9,:tioh of the .tax
B (fiduciary_ he~r), t~ C .(!J~~(QQ~isf~~lhall nor-_;.._:c::'1, ...~gaj~hiq · sudh~credit · is taken·, which t.he
be inciuded·-_ln.tne_-gross,e1tqtttl{>!·~~~c:.-N_"s~"'-:-'r;;r.-~~fl~t's ,t11et:-:::.~~t1Je· sitl!at_ed. '_outside t~e.
transf~r doe~ not m"'.olve a.,lransJero~ReJ:sh1.i, lk~-:;C~?:"~g11r~~1n_es .Jaxable}mder the ·NIRC bears to h,s
from ~ to C, l;3 is f'r1Srely_a\tru·stee\l'.~e· ~vety._!,~ · ~ ('~?e.n~t,.e;tazt( /RC, Sec,, 86 (E)(2)(b)). ·
. a mere retu·m of_propertNo·the,~·aro._ A ~G~ --~~- ./, . '· · · ._ ,-. . ·. · .·
. (BANGGAWA/IJ,.-supra_at~~r- . s~E7).. ;:ll{O~JJ:ai19Jl~ _.. ·. . · : · . ·.
. . · · · :· .. · .- -.'\: · . ,l':. :. · . 1 ::.1.-\.}vf?.B ·.f'cit~~n of,t e Philippines, di~ on May 201Q
· 3. The tra.~.s~!_ssion from the·Efr~ei(l~!}~r--==re~~i"<f~_!,~e~liilippin_es, leavirik{a net e~t~te of~1,.
· donee m. _tay9_r ·or. 1;1r.i_p~her b~l1€~YI: ·m 1\.. ·;f fJt°t"_~Q0-·,:._Q.i'ttle Ph1l1pp1m;1s and_ P;300'. opo in foreign
a9cord~11ce w1!h the des1_re,of ~~e .P~ecl~~~ J_V L~-:Y'andP,150,.000-m fqre1gncountzy, Z:The net
.(NIR9, ?ec~·87fC)); and: .. . . ·' · .- ·: >::':---'-...~esta_te i_ii coun,try'( paid-~f! estate t~x of.P25, 000:to
. . . . · . '· ttiat country.;The net estate i11 coui;ltry Z pai~ f>8, :QQO~
·. llll.istratfon: In !Jis. will, _Mr. A devised a P.iec~,of ~ · The estate tax due, after.credit would h~v.e been P68',
Jand:to B §IS the first h~ir and ther~aftet to·C as . ·. OQCt cqi:nputed}is follows:'_· - ,_ r .
'the. _ second ·,. heit:.. ··. B subseq'uently.- died
. transmitting tt)e property" tci :c '(n ~ccordaoc.e with . ~et _Estate, .Philipplnes. {PH)' ·.. · P1,.os.o'. 000-
Mr_,N$.v.t111;_ .. . ·:; ... · Net Estate; Y · . · · · , >300; 000
·pr~de.cess_or · .-Current-.
. -.Net Es'f(;lte; z· -:. · ·, '.. . ~ .
. 15.o,·ooo
· Net !;state,- Wprld ·.: ·. · .P-1, 500. 000.
.. ~ Dece.dent · · . · . . . . ~ . . -~
[Al . r.;i . . . 19· .
O ---._-(1•,t f{e;~f . . . ~-, . '(r' /:l~ir) .. . ·.. PH ~state t~l<on P1; 500, .000 . ·.p . s'o ·ooo*
·.. .':
~. L~ss:· _Estate~ax. Credit .. , ' ..
.. '(See Fi91ire Al:.·. 26,000
Tbe·trani,;fer f.rom,~ to G is _ref~~re.ct to· as iran_s/er;: Estate ta>( still due P . 64, 0_00
··under a spe~1c1/ ppwer oJ;a,ppomtment. The. same ......
. · · . i$. · ri~t B's. donatio"ri mortis. cau,sa. Th'e transfer
. * .f>1,
,... 50Q,·OOO x Estate·Tax .Rate.. of.6%:
. .. ·- ·.
.·
· · . · from .B to . C· is merely,-an imple_me,:itation of the '

·: t,.:_ansfer . which · was _origlnally · mandated 'b.y '··

. pi'e.dacessorA (BANG.G_AWAN,·$upra at 392). ·. ·.

190 .2Qi9SAN-BEDA LAW CENJRALIZED-~AR OPE~TIONS

 -· TRANSFER TAX. . .

~N BEDA LAW CENTRALIZED·BAR OPERATIONS- MEMORY AID 2019 '

filE...1: Estate.Tax Formula·

Limitation A (Per Country ~asis) •,
... ' :~.·.,:.c~,!f~~~-'~siy~fj:~!1':~~~"
Net Estate Philippine Limitation . Gross Estate )()( xx xx
Foreign Coun~- X Estate = A Less: Ordina,y (YX) (xx)
Net Estate world Tax deductions
Net Community
·- >--··---·--
xx
-----
STEP 2: Compare Limitation A with actual tax ~Estate
payment in the foreign country. Whichever is lower Less: Special
-- !-"··---··· - (xx)·-
Deductions
between the two shall be the amount allowed as tax - ·-r-----
credit. Net Estate
Less: % share
·.- ~-
(xx)
Allowed for Y is P18, 000 determined as follows: of surviving
s~ouse
300,000 x 90,000 18.000 Net Taxable
Estate
xx
1, 500,000
Multiply by: Tax .. •%
rate
Compare P.18, 000 with P25, 000 paid. P.18, 000 is
lower. ·
Estate Tax Due xx
Less:Tax · (xx)

Allowed for z is '?8,000 determined c1ii..fotlows: J{~!~fl \f

. -if!"'' Credit, if any ..
Estate Tax still .
due, If anv
··- xx
150', 000 X 90, 000 .= 9, OOQt';,.,.:,\,(~~f-\
1, 500, 000 .,l""s ~~;~i:::~:e·~.x1,.~t~-~ff.~\Prop1 includrt~d'in
e~ies gdross.edstatte
. . "'"" •· ,., :,r·- arefoA y..icu.Q.$.e;.exc us1ve prope 1es o1ththee ece en .
Compare P9,000 w1th·fi>8,000 paid. P8,P,G.0:1's lower.; l
.,..,;!'~· .,.. , ,, N ii\
.l!r, .,
;
I
<~ r- ~ •• t ote: J ~\ II
STEP 3: . . .,(;(· ;'.•. , t 1. Only o~clinpryi;deductions are deducted from the j.
Add all amounts allowed per country,' ... · .. · ~:
conjuffal ~r cemrnuntty property from which as
!
;l
dimi9ishecj shaij be taken the Y2 net share of the .
j.
. ;i.·

Country Y · -~... · P'l1t-&, 000 ""',::~ s11_,1i~wing.jpo1Jse .• (J DE LEON, supra at 778).

Country Z 1Ir-f _..,.,-,:_;~~OOO"~:.
·:._--=---:;:--~ f-!'···,-~ z. R.R'.:-,~El°f~:ltt9-1·8
"''. • .
-"'~'-'-'-'--"-"''---------=-··,.___
Total for LlmitatlonA
0_..
\:.·.,- I<" ;26:,&QQ_ 5J t'\
gross -esrate as . ordinary
classified ·deductions on the
and special .
!

~,~.· · ~t~
t~-···-·~-~deductions, however, Sec, 86 of the ~Jl~C. as
S:E_P 4_: . . . ~"'· ,.i;9 ,f:,;::{.;\;::.~m~nd~d. by TRAI~ Law, .onJy classify the
L1m1tat1on B (Overall Basis) ,}'9-"' ""·:~~,:;\.:,,;.:.;,__,~~'~e,ggg,!~gnasdeductlons allowed to the Estate
ll,< /~i( ,
of Citlzeu or a'. Resident arid · deductions
Net Estate of all ·. Philippine\~>J:.!.mitation . allowed to Nonresident Estates.
Foreign Cou~ Estate x. ':=:.:.~'1JB
1 ·
World Net. E:.~tate . Tax

Compare. R with. ·iotal .actua! taxes paid In foreign

country. Whichever \s IC?wer shall.be limitation B.
ESTATE TAx SEITLEMENT . .I
__;4:.:;5..: .0L0::..:00:..:;___;c.._X 90 ! 000 ·= 27, 000 1. .filing of Notic·e of Deaih .
1,500,000 The TRAIN Law has expressly repealed NIRC,
Sec. 89 Notice of Death to be filed. Thus, the
Total amount actually paid is ~33, 000 (f:>25; 000 + notice of death is no lonqer required (2-B
PB, 000), which is higher than the computed overall DOMONC'ON,supra at 494).
basis. Then·P27, 000 shall be limitation B.
2. Fiiing ofEst;:ite Tex P.eturn
STEP 5: . a. · When ETR shall be FllerJ:
Compare Limitation !, and 8. Amount creditable shall i. In all cases of transfers subject to estate
be lower between the two. · tax;
ii. Where, regardless of the gross value, the
Limitation A ~ 26, 000 estate consists · of registered or
Limitation B 27,000 registrnble property such as real
property, motor vehicle, shares of stocks
Amount allowed as credit P26, 000. or other sirnilar property for which a

2019 SAN SEDA LAW CENTRALl7ED BAR OPE:RATIQNS I 191

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... SAN·BEpA LAWCENTRACizEDe,4n oPE!JATIQNS-:- t!!EMOR.YAJO2019

. I
· · clearance from BIR is required ·as a iii. Non-resident. Deced_ent. ·with _No
prerequisite for U.,e transfer of ownership · Executor or Administrator In the .
. in the name of the transferee (NIRC, Philippines - the ETR shall be filed with .
.. Sec. 90 (A)).·· · · ·: · . and the TIN .for the· estate shall 'be ·
secured · . from · the · . Office . of the
Note: VVhen the ·gross estate exceed,s ps,· 000,· 000 Commissioner .Officer (R.R: No.· 12- ·
(previously .P2, ooo, 00.0· prior· to ·the effectivlty of · · ·2018, Sec. 9 (8)). · ·
;r·RAIN· Law), .the ETR shall: be: supported. .by a .
statement duly· certltled by a CPA ·.containing ·ttre· N'ote·: No_ti,yith$tanding . · the · f-9r~going; - the .
fc;>tlowjng: . . . ·,:. , . . .»
.Con'.lmissfoner of intEl_mal·Revemie may·_contlm,!e fo
1. lternlzed . assets. "of· the . decedent -with their ~xercise his power to allow a d.iff~rerit venu~/piac~ in' ·
. correspondinq gros~· value at .Jhe: time of .his the :filing of tax returns Offic.er (RR, · No.. 12.:2018,
death, or in thecase-of NRA, 'of thatpart of his · Sec.-~ (8))... > · ·
gross estate situated in the· Philippines; · .
2: hemized·deductioils from grO$S·.estate allowed 3. ,· Payment o.f Estate Tax . . . .
· in Sec. 86:· and · · :.' . · : . · ·, . Gerieral Rule: .-.'.'Pay-as-you-fjle". system - the
.: 3: '.. The arnou~t:of.tax due, whether paid _cir-stiff due': · 'estate tax'shall be paidat the tim~ 'the return ,is filed. :
. and'outstandinq (N/RC, Sec. 90 -(A)): by the executor, administrator or.the . heirs (N/RC,
.: ., .... ·. . . : · · . . . · . . . . .. . . ,....,:..-.,,. _.,. -=~~~-91 (A)). ·.· · .· · · . . . : ·
· ·Ther.e is also an additional requirement of ~gis1efipgl T. . ~-. ~ . . . . . . . ·. · .
the estate and getting a· separate T~(NIR<t..\Sec.
. . 2:36· (/)).: . . . . . . . ' . ;!:. :<1 .r \:..) · .f}c,_~°"tpJ.t~~enthe Cornrnissloner finds that the .
;..,.i::<',=...,,-c<'. _-:R€!.].'J;:l~nt rJ/nJt;ieidue dateofthe estate tax or a_ry part
. . · · · ../ ../'.;_ ,/~:.<..>- · there~f~OLi!sJl~~ose .. undue hardship 'uporr the
. b. . Period ·of Filing:· . · · If:.....· ~'1%,Y~,..,·~·"estat~~raq~rth~~eirs, he may extend the time tot
Ge_neral Rule:'. ~TR mu~~J.5...Q_l!'}~~itKjn ·t Y~'if.. ,. ~y(Tlenvr_ner~9.t.:9._:€.t 't~ exceed 5 yearsor 2 years as
.: _(previously 6 months.-prj~r. ,a~?,fi ··"efffcti\li_ty]of. tlfl'~.. cr,1se ay b~f(NIR~ Sec. 91 (8)). · · ., , . -
TRAIN [aw) "from the-d/lcedenJ;s·de*h (NIR.C, ~ ~~~ ~·:: .· \ (f) l ·. . . . . ··
Sec:,90 (8)). . ff'';?'// · ,-~~,. .. ·. !e~p110 : to tij.e -~~-~p.tton:.Wtien Ext~nsion for ·
, ·: · ... ·: . ·. ·. .1~.!(-_ . . . \ · '.~~/ rP®"6fent . IS', No) \AltOf.f~:·· ._wtier~. the_ tax~s are
Ex~~ptlon: . !n . me 1to!J.sll~ cas~s;''. fth~~s"se~·seby reasom,,etj )l .', ·. · · . .
·. ~:!:~~3~1a;?~~~~,~~io~f~t.~~J~,d of'?IO~a~d ,e,iulatipQ~;
.... c; .· .Wh~re ~o_. Fil~ t_h~ ET;~ ao~ _'~.Y t~~lil.·f'%~"1raud/on
thef ~ai1 ..o~ the. t_axpayer· (NIRC,
· ·: .. ·· !ax D_u~ . . . .. .' .\ .. ~ .. ~ seg,/91 {f!)Jj . '. · . . . .· .. .
. · .... 1. J~.esi.d~nt DecedE:nt~,":"·the "El~c~~j'{ofrr;N-r\J:---.Y.. / ·· r ;- ... · . · · , ·.
. . adm1nistratqr. shall re~tst~r t'J}: e-~~1~er~1rg.~·!fes~E;~te.ns19n pfTirne:.(ABU-5) ...
the decedent a~~- ~~9ur~ ~£.ll:ff~~_,$...,.a-.,"'\_~~}-9.:!m_missioner or '1is du!y ~u.thorized
the · RDO. where · tt:ie d~~eo.t' lw.as .'!\- /f l~~~ \:~~entativ~shall· wprove. the applic;ati_on; .
a_omii::!.led at ·the: tii:ri.i .of his ·_a~tlt,c!nct.lVn..~;~..,:;=J'fi"e · reque~t · mus·t : be· fih,id §efor~ · th~··
shall · .file · the. ETR anµ pay .. 1he,'"-':"--="f"'.'°'-., · .expi~atiori"of Ure ·priginar period to pay. which·
· . ."c.cirresponding:esta.te tax with: ... ·. ;· · .. . .. . is within 1 \iear fr9m··death; ... _ ..
· 1) '.At.NlQr_ize<f:,Agent.Bank (AA.B);. · ·._'· c. · The're .. must ·.be.. ·a. find\ng. by_· th~·
· · ·. 2) a~veQue:DiStrict Officer (RDOJ;·:or.. . · ·· · ~ Cohlinission·er. tl:)at th.e pay'niE?nt Of·the. estate
· ." . 3) ~-evenue/Colledion.-.Officer (R.RfJo. · tax or 'an"y_.part'fhe~eof would_ irhpose.-!J.ndue
.. · . 12-201-B," Sec... 9 (8)}.:· ·. . : · ·. tiardship·.upon the-estate or: any of.the 1_:ieirs;
. . .. .. . . . . ·. . . ~m~ . . . . . . . ; . < . .. •
. · · .. ii. Non-re.sil::ie~t .Dec~d~.n~ wiih·-~X~~ufo} . d ... Tl)e extension . !l)USt be. f9~. a period . riot,'
·'. . ·or Adininlstratci,: in .ttie: Philippines· ~ :. ·. · ._· -exceedin'g ..§. ,years if the· estate is· .settleq
.. tl!e ET~shalt be· filed·\vitl:r arid..th}a} TIN tor . , . . : through the_ courts.'.(j1,1dic;ially).- · or 2 .y~ar~. if.
· · the est~te sfla_I! b~ _s_ecu,redfrom_ the_·.RDO . . .: - · ·. settled. extraji.Jdicially-.(R.R. tyo. 2~200:),-Sec: · .
·, \ where··sucl:J, exe9utor or~admioistraJ9.r I~ . . · 9 (E)),-.·':. ·. · ·. · : . · : · ·:. ··· .: ... · ·
· registered . .J.f the ex¢9ulor. ot administrator . . . ..
is.. nc;>_t registered,. ,he ETR. shall"- be .filed . Effect~ whe~·· the' E~t~n~ioii ,~ Granted: ...
.with and the TJN of the .e·sfrite shall ·~e a. . The ~niou.r:it in respeet:of -hhich the extensiqn ··
··--. . s.ecured. from: the 1_:mo l:J?v.ing jurisdiction ·. ·. ·fa_-granteµ shall be J:>aid on or. before-tl)e- date ·
over th.e exe·cutor or adrninistn:itc;>r's· Je.g~I-' .- of the ·expiration of,ttie perib.cl of exte.osion:
.· · res1denc~ Officer ·(R:R. Na. 12:201 B, Sec.·.· b. Any .amount paid after the statutory due date
.. 9 (8)). · · · · · but Vw'.ithin 'ttie extensi"on . period shall be
. subject to )i:iteire~t but "nOt- fo su_rcharge;

192 I 2019.SAN BEDAtAW CEN.TRALIZED BAR .OPERATIONS ·

 T,RAN.SFER ·tAX
SAN.BEDA L:'.'W CENTRAUZED BAR OPERI\TIONS·-1:4EMORYN0-2019
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c. T.he running· of ~he."sfatul~- of limitations for iii.. ·-The, written · request for the -partial ·
deficiency assessment __shaube suspended dlsposltion-of estate shall be approved
for the period. of any such extension; and · by the .~I~. 'The said request shall be
d. The Cornmissioner or .his·, dµly authorized files, ·. together with the notarized
·· representative may require the executor, or· . underta_king · that th_e proceeds thereof·
administrator, or'. beneficiary, as the .case shallbe exclusivelyused.forthe payment
may -be, to furnish. a bond i(, such amount, -of the total ETD; ·. . .
· not exceedmq double the -arnount ct the tax iv. The computed..ETD shall be allocated-in , I

f11
. and ·with sureties as . the .·commissioner .' . . . ..' _proportion to the value of each property; . l'
·. deems . necessary, conditioned upon the v·. The estate shall pay to the. ~IR . the !
i.
t .payment of the 'sald .tax in accordance with . · · proportionate estate· tax. due. of the i
t ·. . · 'the terms of the 'extension (R.R .. No. ·12-· . property intended to be.disposedof; ."
(:' ·.· . 2018, Sec.~9 (5)).-.·. . . vi. An ·~lectronlc- C~rtiflc;ate Aut.horizing
'l- · • . . . .. . · . · .· .. _Registration- ·(eCA~): shatl be: Issued .
l?' ·Pay1Tieift·ot.Estate Taxby Installment-and partial· upon· presentation 'of ·.the ·.proof. ·.of:.
;,".-,: dlsposttlon of Es~t43 ·· . . · · · payrnentof the-proportionateETD -ot the ·
!l · In case . the, available cash of the estafe.. is. not · property ·. intended: to : be disposed. ·
it' ;, sufficient to .P~·y Its .total. estate tax due, the .estate · · . . .. · AccordihgJy; eCARs shall· be· issued as
{ may be· allowedto, pay the .estate tax.due through the · . ·· . rrie:1r:iY as there as· properties.Intended to.
·~: , . followin·g options·.(R.R."No. 12~2918; Sec. 9 (6)). · /:;, . · · · · .. be dlsposed-to cover the total ETD, net
~!; . . . . . . . ;. . . . . . ff
. . ·. ,1 .. :)JJ ... : . . of proportlonate estate.tax:( es) pr¢vio.us]y
·~·. ,<;ash lnstallmen~ .· :, .· :" 1::;,·it{,1}1', . · paid underthis.~ption; ~nd . .· ..
. i. The cash ir:istallments sh,all be. niad'ej1?!! ll vii. !n case of failure.to pay the t<>ti3I ETQ out
I
... within 2 ·years fr.o:m the_ d;;itE:_ 6°f"fili~£J-#f~;~/t;~!,;.--:-j-, : .:lom·~e proceeds cifUte said disposition,. ! .
the est~te tax return; . -,,.,{.! -'.:Jl.!JJ'itf..i.,,.:~'. J]Y;;--:':m,.tn~ETD shall ·be irnrnecilately-due· and i
·ii. The ET.~ shall be filed withiri~~ar from...:. hl •i,.~cfe\nandabJe: subject .to. the· applicable
. ·... the da~e of decedent's de,a(ti\1. . . ~t.-J~ .. t§;l:lalties and iriterest·recko'ned from the
·'iii. · The frequency. deadiine··a·M/~mou·nt,_6f'·-t1,
.. : · ea.clfinst~ll[Aent s~al! J~~.{p~i,1~f~~:ih.the:..
ETR;· ~L!bJoct to th~/.!Je,r appr,9°ifal,byt9e · ~~~
·: .. BIR; ~ · · : l~~ . ~-- ·. -~.
,f(
J;ll~
·
' · . Rprit;~ribed deadline fo.r flin9 the return . ·

j''.
if ai~: _i:}~ym_ent ?f the::estat!;). ~ax, without
P..ff,JUd~e·of w1thhold11ig the issuance of·
. -~:... El~~~.W~fhe r~rtsa(ning:~r~perties·~n~I
iI
·1'.". ·In.case of lapse~Y,?_Ye~r§.:::.""i~hoo~;_;t,hr.~· t,f . ~·?·~Ej,t(\laY.!)1,P~tof.th_e rema1rn.ng ba}ance of- !
. paymen~ of. the e~tireu:~(:.,~ue.~-tQf t·~·- · ~~£81'0, ·mclud1r1g the :Pe.nalt1es and !
· . remainil')_g !>alai:t~e ~li~.~e:i~~~ . ~pcl ~- .. - . . irit~rest (R.R. fo.!o. 12-~018;1Sec 9 ·(6.2)):- I
. deman_~_able subJ~Ct M tre ai)phc.a~le . gi~,r.'.~ . . . : . : . . . . - ..... · . !
I
pe_nalt~e~·and iht~rest r~c~Ql=IJ.~(Jrom.thE:,~~:~l~~!?~~~~.J}'i-9,~ble to Pay: . ·. : ... , . · ..
. prescribed d_eadhne for fil\ra,g .. the·.r~1Pf°n--'"~~Tffo,,estatetax shall be paid by.the. executor or..
· and. p~yment of..the_est~tJ1~~;.a_~t('l'. . · . administrato! (primar(I_,'_ iiab_l~)- ~ef~Fe deli~ery .to·
v. ~o; t:1~1!. ·penalties pr: ·mt_er~~~.QrfY be. any· ~nefic1ary ot ~1.s distnbut1:ve ~tiare of !~e
-·imposed on ·estates ..perrn1tted to· pay the · · estat~;·imd .". · . ·. . _ ·. : · •. .
. . . · . . estate· tax due by in.stailrn~nt,. Noth ing_·in 0 2. When- there are ~WO · or rrior~ . executors· Or
. this . subsection, however: preven.ts tt:ie . ·administrators; all · of them ~ha)I, be s_everally·
· ·. · co.r:nmissioner ·. . fr9m · ·: executing_.· .. : liable f!=)r the-p~ym~nf onhe .tax- (RJ~, No: :-1_2:- .. ·
·... -e-nfdrcement · action·: against the e~tate : · . · . 2018, Sec. 9. (9))". · · · ·
after. ttie du.e·. date of the ·estate tax ' .· .
. . provided that ail the applicable iaws and.· · . N~te:· Jhe h.eir, or beneficiary .shi:!11 be. s.ub-Sjdiarify'
.. req.uired .. ~ . . proced(.ires:. : : . ·... are for
·.. · 1iable. the. paymerit qf that portion ·of the estate
• . : ; fqilowed/observed· (R.R. No... 12-20·18, . ... wt,ich his .distributive·sbare Qe~rs· ~o the -value ·of tt)e
: ·_sec 9 (6))::.. · · · total n~t est~te. The'exter.it· of.hfs· liabili~Y;"l1owever,
shall in no c·ase exceed,ttie-vah,.re of his share Jn;lhe
_.:_ . ~:-. Partial · ~i!?P9-~it\o.ri:. ·.-of·.· .E~t~~e ." .. at1d ·. · .:· _inherit~nce (R:.. R. Np. 12-2618, .Sf!C: 9 (9)).· . .
· . · Api:>l.i.catioii -of its Proceedl> to the Es.tate·
· ·Tax p·u~ :· _ .· . . R~stitut,on_of Tax _Paid . . ·.. . :· ·' ...
c: Th~ · dlspositfor:i, for p.urpo::;e.s of. tlils In order that a taxpayen~ay claim the b-enefits of S~c.
. . . -opti.Qn,.. stiall refer to. the conveyance of · 96,: it is nl;}Cessaryfor him to.show tlie.foilowrng:· ·
. . . . . property. wt1ether· real, . person.al ,or j. The ·obligation~ ·of th~ deceased nor known ai or . :
. · int~ngible -property, with the equivalent . b·efore the·time of the ·payment of the tax;· ...
.· c~str c·onsideratiori;. . . . 2. · · These obligations . ·. have : ~een Judjcially. .
·ii.. The E'rR shall be.filed within 1: year.frotn. recognized as proper.:claim against·the·estate of. '
. . "the date Of decedent's ~eath; ..... · . the .deceastfd; · · ·

2019 SA.~ BEDA .LAW CENTRALIZEDBAR OPERATtON.S 193

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AA ill 1-WBN#At ff .. 4f'.· ii l&M#WMI

3. The court ordered them paid.; and . The Cornrnisalouer-Is AuthQriz~d to 'Inquire into
1· .They-have been· actually paid (i DE LEON, supra·· the Bank Deposits of a Deceti'e'ht toDetermtne his.
af 797). · ·: . · · · . · · . . Gros s Estate· : . · ·· ·
Notwithstanding any contrary provision -of Ii.A: N.o: ~
· Dutle~,of Certain OJfic.e-i:s qr. Debtor.s;.: . . .. 1405 · or Secrecy' of Ba.nks Deposit Law .ana
-other'
1. 'Executor or adrnlnistrator must ensure that general -or _special :laws, the. Commissloner ls
. payment shall be made of the. amount of which . . authorized to Inquire into the bank deposits of:
· : -·· · 1.:· A decedent to determine his gross estate; and
'he '1s notlfled before tie·-~halJ be discharqed 'from:. . ·2._ .Any taxpayer yvlio has fjl~d · an application for
personal liability (NIR.C, Seo. ·92),: . . compromise' of ·hls' tax liability under Sec. 204.
2. ·Judge shall not authorize to.'deliver.a distributive ." · . (A)(2) ot. thls · Code . by', reason., of "financial
. share. unless · a , · certification· . from the · ·:incapa~ity to· pay hls taSc -liab'i_licy. (NIRC; 'Sec.' 6
.· .. Commissionedhat·the estate tax has been pakl :.(F))-_.·.. . . . .
'· is shown (NLRC, Sec,,.9_4)·, .,". _". · · · · . . •· · ·
. : 3. Register·· of , Deeds shall not register in. ·the. lllustratio1/ D "diei·in '20·16 .leaving.~ bank.·de,p~it of.
.: . . . . Registry of Property. any document transferring :P2, 000, 000· underjomt account With his associates
.. ' ·~ · real ·. prc;,perty or real riglits therein without lri a· law- office, (earning of D's death ·'fr9ru · the
. -, certiflcation.from·the Commissioner that the tax newspapers, the,Comrnissioner. ·of lnternal Rev.em.ie .
.. . , actually. cue thereon-had been paid (NIR,c;· ~%=,,=--~~~ to ·eve:rv. bqrik _i.11 .f.!1i .c'o(mt.ry. askin~ ~em to·
. _9pJ.:. -, . . · -, · . .' . · -.~ lf J· d!scp!:i:~o him the amount of deposltsthat might be
A .. Lawy~r, ~otary· publlc, or-·an~~j'ove~~ent I\. . _jllt~ta~d_i~~i~Q(S~ame or.jolntly owned wlth.'others ·
. · officer, mtervenmg. m _-the..~,f'lrel5a!-1t!t>n;-"'9..J;;r.=s•=:~~at-da1"e.P.f't.\lS .death; May the bank holding the
· acknowledgment of ·docu!Jient~'\;r~,g-a'rcli.ng· . , dep,9si~,·r.e'fus~~ib-~corriply.on .'~he ·ground of the -
.. partit_ion or di?posal· _of -~01ii°t_fili{~$9'f~~iYJaS•'"'(:}'F"rt·?ee_ie_9fE4!3.~k'.~e\osit Law? E~plain. ·... · ..
. ·.. ,nortlS causa,. legacy or l!)'nff[lta[l~1·S~ali h9iV~-: ··1, - ~1'' \ ~\\ ~•-:Q ~ , . . ·. · .
. th'e _. duty of fumishinW' tfie\!}.~msrissionfr, · ~ .. 'ANS: Not~cl3µfe"thet.!IR~ oU997:has·empowered
. Regional Director,: .Rev~riLJeDjstrict ,Pfficer ·or!,'·~ the <;;:qmm,ssio1l~p~ap excaption to·th'e Secrecy of
', Rev.enue Gollect!on c;>~;c,~;b~4such,drcu~m.~n!s". iim: 13~nR"'1Y"'e~osi( ~~~g,:~Mqi.l!re.into the oeposits. a. o!
. . ·(N!RO, Sec... 95) ..... :Ii ·-~-ff · ~ -~?_j!fflj:~le-ae_ntdepositodqr,.}he pu.rpose ~f. ~eterm1111ns
. 5; · A debtor of the_deceas~d sa?alunot ®.¥,,his deb~qm~e)gros estateL·~·~=l(. . · . · .. · : · -.
,ll'·. . . . ,, _- .· ·
·. to the heirs, legatee,. exe~t0.r.cf a'tj'm~\trator·o'f~@" . i~c0· .,, . ·
. h;s c"id;to,; ·. unless tit'> iB'ffiOli\ll>)J.~ fh\ll, ~~- · . ~>pP._ : · , · · : ·
Comn:ii~sioner t_hat_ t~e·'tfstate· ~x· ;~P.P~"ei b~ .k41; .
J
K, -_- -,:.- . · .. :'1 ·. · .
;: . ··

. ~, ·... ·NIRC lias .1:>een:pa1d 1s ..sh0\vn, o~t'he~~_,),~lfl1: · '~ ~~ · :.;,{(. . ·:,/,.. · . · .. '
th~ ~~acuter 9r judicial ad~nistratdti..wit.ho"lt~}i'it~/ ~-) · f· ' .. , 1f. ·:: .
. . . .. · ?erflficafi~p if.t~e credit' 'lJs in<,11.,!'a-~~- Jq,_Sh-~l-E · .. ~y;:;·f\P..:~) :/· .:, , f · · : . · ~,
· · myentory· of the estate of th~dec.easecJ"".(~R~~--- ~~ ,,I' .· . • I ·., •

., · · Se-c:95) ... · .. . · · ~,~.,({)/.)~-"'~~\<'\, ..)~ ;/.' ... _. ·

. 6~ i(1:i'b'ank·has knowl~dg'e ot:-th~~~a11'iwJ'a~~fSOr'l·,. ~ · ;,f.~\~ ),:~ .. : ...

·, · · -~~9·.mai_ntaineij a ba_n~ de~osit acco1;.n:il~ale~or:l::.ll.I ":-z,::--'-'~:- . . ·.. · '. ··

'•_r•" •

Joinfly .with another, 1t shall allow any withdrawal--~ .k •

from the sa1d:deppsit c!Co.ot.int, subject ·to ·a. fh:ic:31 · , . .. .· .. ~ ' .;

witl')holding· ta~-~·of 6% .. (NIRC, ·sec:. Q7 a~··. . · .. ·. -
amended by'·tRAIN law): ·. · .,.. .· .' .... . · ...
:,. .( . :. •,'. ·...
· ·.. '· · Note<·.11"1 a s~'rviVors!lip\_~green:ie.n't,. the ·bank
. ": ·. c!Elp~sit oo.es· not, forrn),art·,of.u,~. grci~s· esfate·.of
."·.. the dece,;1sed. ·.The eontract. imposed_. ·a mere·
.' . oplJgc!l!Ori. with ~- te~m,\th!3 terrrr'being !:leati:l-,· S,u;ch ....
.. . agreement ·is permitted by the Civil Code ·under
. Art. 201'0 which prov.ides "by 'an.afeafo_rycontract, ·.· ...
··.one. qf. the 'parties ··or· both· recip'r,'b.criJ}ly.° 6ind
·themselves.'· {o :give or .Jo. ·do. some.thing·.in . . -:;,
. · . cons/aeration·of whfJt tl:,e other shall gl•,1_~ ~>r cto·
· upon the happening of an event . vyhich is.
or
. uncertaio; which is :to occur at t;ln irideterrhinate
time" (Viti.tgv.: Court of Appeals,_G.R: Nb .. 8202(
. March- 29, '1990). : · . · .. . .. · ·. • . ·.

194 . go19 SAN BEDA LAW ~ENTR~IZEO BAR-OPERATIONS .: ...

 · ·TRANSFER.TAX- .
., . SAN BEDA LAW CENTR.ALIZEb
ff I .
BAR OPERATIONS·-MEMOR1'AID 2019
.AASAH ·. HtMdPN i@1+ UEl :. '
. .~ ·
ILLU§TRATIVE EXA-MPLES TO PROPERLY PRESENT FAMI.LY HOME·AND STANDARD.
DEDUCTION.AS DEDUCTIONS FROM THE GROSS ESTATE
.. . (R.R. No: :12-~(J18, ·s~c. ai. . . .
-~·
~~-· (1) DECEDENiis AN UNMARRIED.HEAD OF·~. FAMILY:
:·~· . . . ·.
t.. (a) Wit~ i=amily Horne. . or,.More. Than i>1·; ooo: oo.p:
- · Real and· personal properties
. F~mily' Horne- .
· Gross Estate
. ·~·
Less; Deductions' .. ..
. . .. Ordinary·.Qedu~tion~ . ,·.
Ui:1'f:)a1d:R.~al Esfate Tax ' . :. (2, ooo.oeo) ·.
.... ~ .
Special -Ded uctlons
· Family.Horne" ·. ·(10,.000·, 000)· .....
. · · Standard Deduction · '. . : ~:r.,:;:i. ,; (5, ooo, oo·a-)
.: · .. Total Dedudions . . r/.,,1),t_ (17,;000, 000).
.NET TAXABLE·E.STATE · ··.. ·: .: f,'1-'j/'\!\ .- ·p 27 000, 00'0: ·
. .
· .
. . .. . .
··
.
":'lo-,.. . .
.
,;f~ .
:·· l'-'l·.-.1.,.f!, ..,1
. · . .\,rt
. ·
.rJ
·.1i·sFl.
) , 'j-1:( ,·{Ull,;·1·
·
. '.. .
.
.
.
. ... . .
. ...
.

·~ .Althouqh Uie family horne:is,vah..i~.c:JAtft?30ttjoe.fo~6;,atfu\:i;pJa{i~~m· allowable deduction.for the ·

family home is P10, 000, 000 ooby.~-··. - , t· y . :
,-·.7.,....?),i. · . · ·
·. ' ·. - . . ·. . . · ctx. : . . /:;#;al· . . . · . · It1~'~ . , .· . .. .
: ..
·
(b) Wi.th.FamHyi.HQl'l'leot'
.
·. f .~.f( ,)/' . i~ .
u~;:iJP~h ~1~Q,.~oo:·~ .
.r-·y .I>-;· . . 11il . : ·. P_, .11,;@.Q,;
. . . .:-/:P J '. \.
,1 '.~

l'I!~ ~~~ .
· .. ·ilJ. \
) .
.· j·
!
. : Real. and p~rs.onalp~f>R.TJ1'~:>·%''\ !}0.Q. i
. Family Horyie· · · \~t : ".:'-~ ~>,.J . -~, .'· t,Hl . ~'~'.'~i"q~Gf,ooEl? . . I
.. :Gross ~s~te · · · ~ ~')~">· _.. P..<{) : ·~·~,.:,·?.. P 2~, 000, 000 . ,f-'f
r:J-
.
.. .
. '.L~s: Ded(l6iions
: '\.f:';,;"..,,.:('"(•) . ·y. -.
. ·. ·'. . ~·~\ · . · )j) . . : · r:il'7;.L. . . ·
- . ..
.· .
!'
..s.',
t~ ••
. · · : . . . · O.rdinary ~eduction.s ~ ;-..p'., ; ..J.1•~r:•~ o.oo, 000) . . <:~t,:.~~:iHi
. ~pecial Dedu.ction~ . <;-~ . . ;{.'2".,~<dif...-.._._~.=_
.
· .
tb
}(•
·· . Fc:imi!y Horoe • Jt'! . '<\
(9, ooo, 000)
.: Standard Deduction· "·~··;!,;} (5., 000•. 00~} . ·'
?·· · ·. (1-6, 000, 000) .. · : .
· . Total ,Oed.;ic.tions ..·. · . ~ .. ,
1·.:~.. ····:. NET TAXAB.L~.ESTATE .. · , .. .P ~oo . o~o . · · z·
~.,··
t. (2)·~·~C~ENT·,s·· 'A ~ARRIEi:i ~~··viJ.lt°Jaf: s0Rv1v1NG $~d~$E:i~ .. :
;
,j,' . . '·c;).Th~ t~~11/t1~m,.;;=~·;s ·~x~iusi.~~··~r<>pe~/
• ', •• •• ~. • ••• J • • • • • • • ••
· > .· . < . •
. . .
... : . E~alusiV~ .. ;. ·conjugal
Conjugal Pr6p~rties: .· . ·.. . · · •. · · ·
.Real andpersonal 'properties P 14,'.CJOO, ooo ·.· <P 14, qoo .. 000 : ·. ··
Exclusive Properties:
. ··. FamilyHome · ·9, 000 •. 000 : ..,_.,...·.---- 9, 00{1;· 000 .. · · ..
Grc;>s~ Estate: . · ~· ODO;()OO. •. -14, ~DO, 000 P 23, ODO, ODO· .. '· .
.. : ...
. . . .'-

f., .

{ ..
·~
,'.'.
i,, . . 2019 SAN
. ·. BEDA
. LAW CENTRALIZED
. BAR OPERATIONS 'I. 196. · .
~\·
~.
.:..
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 .TRANSFER·TAX
. . · SAN"BEDA tAW. C:EN}RALIZ£D.~R
. 9P£.Rt,TIONS
. - M.EliOR)'
. AID 2019

· t.ess: ..
·Ordinary Deducfions,
. Conjuqal-Ordinary Deductions ·: ..... :{~ •. QQQ,.9.9.9.}.. . ..... (~•• QQQ,.9.9.9.)
· . Net Conjugal· Estate · . 12, 000, 000 · ·
~peclal peductlqns · ·. . .
• · Family Home.** · . (Q. 000, OQO) .
. Standard Deduction. .; ... H?,.QQQ,.9.9.9.l .
Total.Deductions . (16, 000,.000). · . ··
' Net E~tate · . . . . P ·. 1, :000, ·000 · · ·
. . ·. -~. . ..
t.~ess:.i Share·of Survivir;ig Spouse. . .'
· .Oohjog;3I Property · . ' P14, 00.0. 000 ..
. . Conjugal Deductlon" . ·. (2. 000, 000) · ... .J
· Net Conjugal-Estate. . P1.2; .ooo; 000- · ' . t-

', . . · (P~2. 90.0,-000 i2} (61 000.- 000) .

.. N.ET·.TAXAl;:IL~ESTATE · .. ··· . . ~. · ·P 1,-000, QQQ.-·

** :If f~m11y horn~ i.s·v~1~ed ·at ~ore- th~~ ~1 ~. 000:':~~~. the h'l~ximum all~~able.'ded~~ti~n.for the
. familyhorneis._P1Q,ooo,.ooo·onlY: .. _.. ·· -..~==~ .: _' .. ·. ,- ,_· : · ·. ·
. .
.: . . : .
.· .
: . . :
. '.
~ if.J' "''- '.::',_.
. 0..#: . ·h-." . ~- . .f\ T. ·;ii-~~"'"'
·-.· " .
. .
. . "I;"/ -~/;,;~ . . :~
(b) Fa.mi!~ J:l~m~ is ·f conjugatif(~rr1P'!µiilty"pt\perti:'+/.,{ · l,,.'
.>:~ .
·. · , .

i::7( . .. . ·. . . I
f,,
· · · . ··:· . -~ . . . -.· .· · .,, ~i:~<&>fc.· sivf?"""_ . ·oonjy~}t'.,~"0· ~- Total .. 0!-
.. ConJug!3I Properties. . /...Y""i· · ·m) , ,w '\ ., \-11{} \ · Ii.
. · .Real andpersonal .JP·· -4'e · 11l~OOO, ~oo , {P. 1~:. Q00,.:000.: . i ·.
. . Fa~ily Hpme. · · · ~~. 1,r- . . : . . .· . · . 9,-0_<;;>. o_oo \ <})9\ooo, ooo . -' .
· Excl~s1ve:Prope,rt1es: . .. quq;:n . _ . ;. "" , ..;_,; ~~ 000 •. 000
_Gr.o_ss .Estate ·. ~· . : . ·\ 5, 00,9:~p t,~(JOO," ~?O '\'~- 2s· ~~o.. 000 ... . · ..
Less: .. __ .'. ;~i.
1~·.
-~-·~(.·~
Q ~ v1~l"' · I y- .. ·.· , · · ~-
. ':-;
: '/fl· . ~
,,~K·:,·
l - :.
..
. Ordinary be.ductions
.. Cqnit1'.ga! Or~linaryp 'Jctq~s...
. . l':J_et C(2.nJu~-~I Estate \.; . \: lS! . -~
1~-~:J.. -.:.f)~~"Q.P-
1 .;:.iQ~·
2v_9.Ql:&
-. ... ji :·.... l~QQQ,_.9.QO,l
'{I_; .·-~O. /.·: _'. .
· Spec.1al Oeduct!o.ns · . ~ ·. ·1\( ·· · ·, .~ ~ ., .. . : 'j ·. · .· ·'
.· fa.rn.ily H·ome*** ··· . ,~· ... . · . ( 0~ "r\~). --~/
: . .#(4, -500; 000) ._. .
. . · ··: . · _: $tandard Oedu~tion · · . . 1. :.~~£: ~ :.... f.!?;_QQq,.Q9.9.l° , ·.
. . . . : '.fo"tal Dedµct_ions· .. .· · , ...(_9'1 7~~-f'~\.-~- . · (11; 500, OOOl . . !"

.' ·~_et _Est_a_te·: . --~ . > . . .' . . .-: ~~ .(. }\!IA\~ . :~_- ~.6'.:_5~0-'. oo_o ..
· Less_:.'Y2Shanf of ~~rvNllig· Spou_se . .· ,. -~ ...~~ · ·• ·.. • . ·, · ·
. . G.onjugal Property · P23,.000, 000 · : · · · .. · .' . . ...
· Coajugal Oedu9ticin ( 2, 000, 000)-. · . · . · : .. ·.
·' Net· Conjugal Esta.t!:l •. P21-; boo. 000. . · · .. · ·.
,·. . ·.· {P21·; 000,. 00012) · . ·' . : ·....
·· . ·
.. ·_-
·
· · c10, soo; ·ooo) .. .. ~
~ET TAXA6LE. ESTAT_E • ., . . ' . ·p 6. 000 .ooo ..

•.... . . .. . ..
. ··.. ,::..": :_ . '.

: . ~
''j ...

.. ....

196 } . 201~ SAN BEDALAW CENTRALiZED BAR OPl:R~ TiONS

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 f:'·~----..--------~-------.
,..r·
-,~.· ·
.TRANSF· -------------\11111---
ER. ·TA·x· . .. . SAN B.E.DA1-4wciNi'lt~illEa.pAR.o~RA'T10Ns
- MEMORYA10:201-9: .
le!!:;:::l:1!1:!:!~9!1111

1, ....... ~11a:11111:1111 .....-.. ..,,.~•-'91Dlllilll'l111!11.. ae+IBl4m&~e~1111 ...ll!'Jlll .. 1B11EI0 .. 1D111:nM~~--•BaE1mw::mB111r:m:lll'I~

'f.r[· . .· . . D.' ONOR'-S · -~ · · ,·

~)··--
1· 3.- °Qellvery, whether actual or constructive - There
'':>. - 'l;A_X . I~ dellvery if the subject matter is •within the
~i~~~~~q~~~)~ontrofo.fthedonee (R.R:. No. 12-
,,., :-Oonor's·'.fax . _ . . · A-· Acceptance by the donee.s-Acceptancemust be
,t· An excise tax imposed on the privilege-to transfer - made .during thelifetime · of the. c#>nor arid ·of the
-1f pcoperty by way ·of gift inter vivos ~y 'ariy person, , donee' (CIVIL CODE., 'Art. 746), rf the donor dies
. 1-::: residerit or nonresident, based on -a pure act of . before·he-learns of the acceptance, the. donation.
't'.. .liberality . ~ithout · .any . or.. less · than · ad:equi:i!e · . . does not take effect (CIVIL' COQE;.Ar.t. 1323).. · ·
.i~ cons19.eration and·-wlthout 'any le~~l 'compulsion to . 5. f6rm·pr~l?cribed·byfa""1 . .. ., . . . :
:.::;>·give (2-8 D__OMONDON_,_supra at 531).. a ... Dor:iation of personal. property ~ if .. the
i.'i;.·. value exceeds P5, 000; the dohation ancthe ·
1- · Nature of o'on.(ir!s·T_.ax . . . .. · . acceptance "shall be. made .in . writing;·:
} . 1_. ·· 1t:l~ not a tax onthe ptb~.~rty dcnatedbut on.~1-!e otherwise.ifhe 'donanon shau be void (CIVIL. ·.
J.; r .. privifege:to transfer.property-(.L/adopv. CIR G.R. · '' CODE,°Art. 748). ·. .: . ·· :· . '
J( -No: {:.1~401;_:Jun~:16,1~65). . . . b. · Donation-of immovable prop~rty.:.. it must ·
\':' ·. 2. It is Jevied, assessed, collected and· paid 'upon . be made· in a publlc document specifying ..
t:.. · tra.n.$_ferby ar,Y. person; resident or non-resident, · therein . the . property ·. .donated. · · The
1~· of property by gift· inter vivos (2-B DOMC5NOON! · . . -acceptance may be-made in ttie .sarne Deed ·
· SUPff.l flt 53,1) .. ·. .'. . .. ..' . ,6(/} ". of Donatiof or in.. a 'separate ·pubiic
It Is a t~x irr,pose~f?~ th~·privileg~ to gratui~?~!.~!y;.-<''.'.\ .... · docum_ent, .but i_t shaU n9f ta~e·e.ffect unless ·
_,. tran~m1t pral)Elrtywhile hvmg·and1~.measureq,by!,>"-.\' '\ · · it ls done. during the lifetime .of the tjonor. If
·~ : .the. value ~f tlie. prope_rty '(~-'ff poMONE);O{'f;~:;·;::,- ·. the )fceptanc'B_ is' m~de in a separc;1~e ·
t. · . supra _at__ S,31).. • . : . . · . . . ~:J' ~J(~",;..if~~~U~~~.1~~·nt the don?.r slJall . be. ~otirye_d
,\ ' ·. .. . . ·. · ··- :.. . : · . . . . _ :--:f ·. I.el t~ . · -~·tt:ie~9.f. m .an a~tt,ent1c ~orm; ,and th1~ step .·
;~. Purpose7' or QbJects ·of D~nQr'S ia_~:'7·. <l-.}1 . · . :
. shalJfl;l'Ef hated, 10; both instruments (CIVIL
j• · 1. Don~r:'.s-. tax. _sup~le_men.t~ the. '~~ta,ff .·tax -~~\·:-?-\· . cqLDlf\~rt.. 749; ,R:R. :No. 1~-~018, -Sec.
,\:

;,r
pre:~~n.tmgthe ~vo1d~nce of.~he l,~Jt~r}~.."~~gh_fhe ?'+
t . . device of donatJl'l!}.the propei;ty%ormgf~fet_1f!J.e
of.the,.,d_ec~ased;,:in_d ·· . ';t,..., ·
--:$:!~. . ·":\'.••
~!tJ . . · ·.1f
·. . 9 .. l
fl . ~. _-· \ ·
B.aage~/<>f·O~nati~n Inter Vivos: ·. · .
·. ·
. · .. · · .
- . · ··· ··.
·.
· ·
·
.\; 2. It also prevents the_ avoi~a9.·t.e,o0J;:ii:{~~~e.f~fs: ~--;J;" ·.1. M*1r;ia1_.fft0Jn.o~~pmdaffection; . . · ·· ·
L .si~c7 ·? gratuitous trcfn_sfef\t.,?",;¢~iz!~~io~ ~¥. · :1_~ 2 .. Re~i-aii.Q&6.f,usu~ructin-fc1vcir ofth~ ct:onor (i.e.,
!. grdss me\:)me. l;Jnder. ~.ec:3i-Ew~~Nt~C._(1 IJE . ;J . · ·. the t)a)se~·ownersh1p h_as bl;)en tr~nsferred toJh~·
.:~· .. LEQN,.supra·atBOf)). · . _·~·"l .\~ j'·t\=.~on!<)e);: .. · ...• ·- · · ··
J: ·. - · · · ·: · · . · '· · . .. . · 0-,,.':t.;.!f,:v · · . . · ;~<l1i,3,;.;:.1!lPl'.l~reserved.c~rtait:1 propeiiie~. for himself;
:"):.' Requisites.of a Valid Donation: (Ctr~J\F)· .. _..,A'p~-:.,.,.:,b,,olL~~-nW~,2.:r. : .. . . . .. /. . ..
~ t -~~pa~~~-of.~onor.:.,.A_J~pef~P,.nsw_~;h~YfF~fact·.. 4~· The .. c:ior:iee .~c.c~pte~:'the (jo~ation (no :ne~~ for
/. . . and ·.91spo~~-_-.Qf .tpe1r _pr~PE:~··ma.~ke ·.a. ·. a~C'~ptan:ce·1f d~n_at1on m?rtis. causa) (INGJ..ES,
"?. don~t1on_.(CJVIL ,CpDE,.Att,,.739):·The donors · · · supra at 29.9).
f· . . capacity shall be det~rrni\ted as ·pf the .time_'of the · . · ·. · · .
!f.. . . . · : rna!<.t,:i'g. ottfie ddnation .(CIVIL COQJ;, -Ari.· 73!), . -Law ,that°Goveros lhe Imposition of Donor's· Ta>F
\: 2. · .Oonative intent-.Donative.inten~ must be-pres(;lrit · fne law. in. fQ,:ce at .ff,e ..tim·e_. of the· perf~i:;tion/
·i·
·~\ ·: . °fn a:~ireclgift:°o.{property in or1.erfliat_tbe cl9n~r's : comple.tlon of the dpl')a~ion (R.R.' No~ 12-2018; Sec ..
it. . tax :can· be. as.sessed ~n<;I, colJe9ted. .D~n~t1ve . . ·.1~)·.: : · · ·
:· inter.it ls ·A.at., however, ·required in transfers of . .
·.,' prop'~rty · for ... ·.1~ss )ban .: a.dequ_ati:f <0d .·,_full'. ·. .: •nie ·tra·n~fe'r-of property. by gift is pe_rfecte~ from:th~. : ..
f-' .· consider<:!tion (MAMALA.TEO,· supra at ~87). . . . .moin~nt the 'do.nor krio~s of the 'acc.eptance of th_e·. ·
~ · . . · · · _··. . . ·: · · > . ,. -· · . . · · . · . · · donee; it is ·c{ompleted))y 'daJivery, either ai::tually or· .
(:. · . :N<?~e:: However;. even· if the·
sale;' ex.change, or ·. .: .cor:istruttjvely; of the· don.ated property· to_.the do nee
J. . . othet tr-ansfer of prop·erty ·1s_-for ar;i irisu~fc::ient. , (R.R.:No. 12-20'18;Sec. 1?). · · ·- I: -
·-~ :corisldeya'tfon, 'the. s.arne will '.be.. cpnsiderea· as . ... . . ' .
. . maqe for .an-adequate arid ·{ull consideration· iri
money or· money's worth'.if made· in tlie:ordiflary ·
. co~i·se. of . business (NIRC, ~s. _a,ri.enqe·d by .
. TFRAIN Lciw~-Sec; 100}:.
• • •• ; l -- • •• ••
. . .. .

{.
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2019 SAN-SEDA LAW CENTRALIZED BAR OPEF?ATIONS I 197
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 ·_· TRANS.FER TAX
SAN BEDA, LAW C£NTRALIZEDBAR OPERA~IONS-: MEMORY AID 2019

LaVJS ~oveming Donations 2. Gifts of' real .and tangible· personal property
situated . in the 'Philtppinea.;' and intangible,
personal. property with a situs in the Philippines
unless exempted on the basis of · reciproelty,
belonging to the donor who is a -non-resident
alien at the time ·o~. the donation ·(1 QE LEON>
··TRAIN·. Fixed- rate of 6% • .supre at 801). ·
-Law .
. (R'.A. No'. · · Glassification of Donors:
. 1. Resident and cltizens.: ..
.10963) .
2. 'Ncn-resldent alien; .
3. Domestic corporatien: and ...
. 4: Poreiqrr corporation (2-B DOMONDON;supra at ·
:··:·'·NIRC '.bf G~aduated rate of . 54~).· . ..
· 1997 .:..· 2-15%-·ancf 30% for'
(: ·. {R.A: No. · ·.-stranqers
. ~ ...
.
• __8424) '.

.
(
Note=··. Th~ ~~~~ ·t~ristef', of···pro~~r:tY• fn-'.\ru_st:. o,: . . Note: . If
.
th~ .dort6r" ls, a non-resldent alie~. · ·
intangible properties· belonging to him situated in .
. . 6ih~rwise, direct . or.· lndirect? is· used · in the. most
'. 6omprehenslye" ·sense: · it includes riot ·:.orily-'"the : · the ·,Philipp.i119s shall be- subject" to· 'rµles-. on..
· . transf~r 9r §iny· rig~t or int~re~t- in property, but :i_ess' ,· .reciprocit:y,(N)RC, Sec:··104)': : , .. '• · . ·. ·. · ..
. . . ~. . .. . '
than title, A transfer becomes complete and taxable.
.only when the donor· has di:vest¢d"h_imself'"of :an ·. ··Pr~p~rty lnph{d~d.in . Gro~·s:Gift if RC, Ri··or NRA
. . .. : . /·. . . . . : ~ . . ~ . . . ·. .·. .
. ·beheficfal 'lrrterestm himself. or his' estate:. The. law ·
COQtemplgt~s .. tM. passaqe: :or:.
controf.: over the
economic' benefits ~f_the propertyjrather than mere
technical" changes ih the title' (Estate of-Sa.nford vi
. Coni'l;issioneroflnternal ~('Jvenµe, 3,08U.S. 39).•.

c:ov~rag~ ot:ooi:ior-'~ Ta~ . : .. . :,· . . ._

·included
. ~ .. Gifts· .ot real. pr9perty. and personal property. ·
. wherever sltuated-belonqinq.tothe donor wlio is
. either _a resident: or citizen at' the . time qt. the. Included·
donation: and· ·

. 198 [ 2019 SAN BEDA LAW _CENTRAl.JZE_DBAR QPERATfONS. . •.

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TRANSFEJt.TAx··
. ,; .. !.AN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2oi9
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.~· P~operties Considered · Situated In 'the . 2. . All other property- it shall be.varu·eci·at the.-FMV
it· Phi.lippines: · . . , , of the·property at the time of. the· gift (NJRC, $t;Jc.
~'·.. · 1 .. Re.:.al,intanqibteandtanqible-personal properties; · 102).. . - .
·: ·, . or mixed; .locatedin the· Philippines and outside
~.. . . . . of the P..hilippines. depending on the kind of. Not~: Valuatio~ of.Gross. Gifts '(under 00f'10r'S Tax),
.tr. donor; · · . ,. . · · . shall also follow the rules uoder comp\,Jtation of gross
F. :. 2. · Franchise' which. must .be exercised· in the estate, . provided, .that ··th~ reckoriing' ·point · for
,:,- · Phlfippines: : . . . . · valuation shall be' the date when tlie donation is made
3. sr,a.re~:. ,:o~ligations.. or 'bonds Issued · by any (~.R. No. 12~2018, Ses. 13),.. . . . .
', -corporatton or .societied· enonime orqarilzed or· ·
constitutedIn the Philippines In .accordance with Spe'cjfjc Cases of Transfers Inter Vivos:
~. . ': . Its laws: . . . . . . . . . 1 .. ·oonations.'3e~een Spouse-s. :'_ .-'
)it'. ·4 .. .' Shares.' .obliqatlons or: bonds .issued . by any: ;_ General. Rule: .. such. dol")§t\on"durir_,g tlJeir. marriage
:". · foreign ·corpo(ations,·.85%· of wtiich ·Is located in (s void (FAMfLYCODE,:Art:87). . . , ·.· . . ·,:.
{ . the .Philfppiries; . . .. . . . .
s: ·s .. 'St)'ates, ··oofigation.s or t!cinds tssued' by. any E'xceptions: .
fore_ign'corporation if such shares, .obligatiQns or a. - Donatiohs mortis ceuse; ani:i"
. bonds have acquired a· business situs in the· -b. Moderate gifts v.hicfi· the spouses .may give ·
. Philippines;' arid . . . . .. ' · : . each · . other- on the occasion ot; any family .
6. · ~hates or rights ln- any partnership, business · or ,""'. · rejoicing· (FAMJLY(;ODE; Art.· 'B!). . ·
industry· established _in. the Philippines (N(~<t;);ll-. ' . . . . .
·Sec.:!04): ... .: ', ·. · · · ·. · .... '; ·. . {".'};:~·,{\. 'Void donations are notsubjectto dono(s _ta~ (2~B.
J. . _ - . . . . - .. · : . . · · .' 1;,f,/~'_"<:";f·. D_OMONQ(?N,· supre at. 534). How.ev.~r. if 1t was
:> · Re.~rproc1~y R~le m,Don?.r'~.Tax ... ·.. . )! {i':::;;/-:-r.,·~~:.eady P.~.rd, taxpayer only.~as.~ ~~ars from th.e
[_- ~o d~nor.s :tax,-.&hall .be co!lected rn... re~,~.etl<;>{Jlt';.';1__..!!93:t~,9J..:P,~¥me~{'to file. fo_r. ~ clall"(J ·for refund.:
K :- . 1nta~grble personal propE:rty: ·. , . :.,."'/;,,,·' . ·. -v 1:1 . reg1ira1~·!£s"J_~t any ~up.ervening,event (NIRC,.·sec ..
: 1 .. 1f.!he .. d.onor aqhe trme.-0f !.he.q!'.2,?c!t~?n..~as.,A::::f. 229) .. If!~ .·- ··· . :. ·
· · .. citizen and resrqent of.a·fotergfl c9untw_,wh1clylt" I'} ff. 1 . · •
f.': . , .. tt,'e time·of his donation did not if.!Y')'6s~f~-::tr.ansfer [;} · .2. - Dona~flini b~ One of the Spouses, . . .
f: .· ... ·
I
!~X ·. of. any, bharacte~, . i_n. {-&.$p%'ct·.:c{f(J°l~t~ry~i~J.~. f1· H.u~band?,t"ani·wi\ are consi~ered: s.epar~te.· and ..
personal pto.t>el'ty of c1tir.~~s1of. ~:-:Ph1hpp111e~: t..f:1~1 dJstrnct t~pa)iers f~r pur.poses of dona.f's tax (R.R. ,.
.. . ·~Pfnasiding In lha~ fo~erg!'{~1~.un~'g);:'1'.h.· ~-,..,.. ~; No. 1Z~W.W,~'"cz~".:fj,ft .. . · , .·
2.·' if. the laws of.the 'foreign C:ounti:¥..:'ti#w.hicl~the },('! . "'-·:!:..;1:t!!;.;,..,,.-' ·: ·. · · · ·.· ..
· .dor:ior:w~.s.a'citjzen and re.sid~~t?~!,'it\~{Jtne.of)}fs 1.t#. If what'.-wa~ donated i!i a ~onjugal or community .
. cjor:i~tion"!119ws·a·sirnilar: ~.xeniptiof!Ji'?~f}r~n~fe~ rl'.--ltw;i 1e;ty_'and. only the husb~!')d ·s,i_gne9 the deed of
or death ta_xes:of.t;}~ery chara_cterw~fts.cnP.tion_.;;.~1;,~9.1\1,a~9~.. !,here 1s · o.nly. one donor, for dqno.r.'.s tax ..
1n. ye~_pect of .\htan.gib_l~.P~.rsonal.11f9pe_rt(fffo1i'~_,.,1J.t.tf1:1r~e.se·si~ithou~ ~rej':ldic·e tg the· ~i~ht ~f. ~he wif~Jq
.. , by c1trzens of the Ph1l1pprne.s·not·r~~1~1n!;J)!lfthat , · question"·the valr<;l1ty .of th.e doi:iat1on without h~r
· · farel.gn cou~try (NIRC,· Sec.. 104i: ·. '\~";-:.di· . . : '~onsent (R.R:.N~. 12~20.18, ~eq. 14).. . .· · · ,
\ . . . ' .
. 'si(us·of DC?no.r's..Ta~aticm !; . ,. . . .. 3. :. Donatjo:tl's.to C~:1n'cei~ed an'd lhiborn .Child :
The situs o(<lonc:ir's··t!;l"atior:i is wher:e..the,trat,sfer:. . SU~h.cl'ona:tions'.may be accepted.by thqse per'soris."..
. took p/ace.·Thus,_oAly transfers'thtlt take place'w.ithin·.· , . who would legally_·representth~m jftheywe~·alre?dY
. -the Philippin·es are subfect' to donor's taxes ~nless born (C(V,IVCOD~·Art.:742),·· . . , . ,'. ·... · ·
.the ttonor~.. ~re Filipino citizen.s,~vl'lo.are·.residents
·.of: a. foreign country,.. ThisJif·so. becalis~ dc:inor'.s ·. 4. · Contributfon for.'Electfon C~m·p~ign · ·
taxes· are. in t~e· nafu~e. Qnal(es;iniposed UP,On 'the . . Any"contribi:Jtion in ·cash Pf ifl. kind.to'any.cand~d~te,'.·
.Piivile,9e to :do.. ~ome~h~ng,·which in Jhis ..9as~ is to . · political. party' c;,r coalition ·of ·par.ties .for. ·~mpaig.n. · ·
~rarisfer"W.operty·'(2-[! POM,Gfo.!DO.N_.; . supra ·.a(. 548).. . purppses:shall ,!)e governed by ·the Electidn C.ode., as
. amentfec;,l: (NIRC, S.ec..99 .(BJ},. ·.. ·..' · · ... · \ · .
•,.t, ••

. Valuatioirof Gifts· ··. :· -· . . .. .. .

. . .· .
1.. Rea1.·:pro·j:,e,rty~ it.shall; ..be ·v~ltJed at.the: FMV.o.f R.A: .~~·. 716~··.(An A'ci Pr~~idi~g for Syn.;hronize'a..
· ·. lha property at the fim_e ofthe·gifi. The·§lpPraised Natfor,al and .. /..ocal .Elections) provides·· t11?3t · .•a.ny.'·
.~· FMV. of th~·prop~rty st'lall·be.whi~t,ie~er.ls t)i~her provision of.law to th~ cortrary notwithstal1dir:ig,any
·. ·:betwe~.n the FMV ·. ·. · · . · :·. ·. contribution in cash or kind. to .. any .:can.dldat~; or
a~. As·dete·rmined ·b.y the: Con,mjs'sioner (zonal . politica~. party or :coalition of P..arties fqr campaign.
·. ··value}"'or . . ' .· ··. . . ·, purposes, .duly repqrtedto.the Commission, shall r,frjt.
b: · As·sh~wn'ln the sch.edi.Jle of vaiues fixed by . be s1.1bject to the pay111~nt of any gift tax'".(R.A. No ... ·
.Provincial and City Asses~or~ (NIRC, . Se<.:. :7166, .. Sec.· 13). ·. · . : .. . ·. ·. .
.· 102 anci ~e,c. 88 (B)). . · · : · - . ·. · :. ·

·;·2019
. SAN l;lEDALAWCENTRALIZED
. . . . .
BAROPERATIONS I ·H)9.
 TRANS.f ER ·TAX
SAN "BE.OA-U\WCE.NTRAflZEO BAR OfE.l'IAT'IONS.- MEM0RY AID 2019·
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Eyery . corporation incprporated . under the But the ··.'renunciatior:i. 'c.i

the wife's share in the
Corporation Code. has the _power, and capacity to . inheritance" fro.m her deceased· husband" is not a
make rea~onable donations, .including those· for . ta~able .. _gift, -considering that ·. the· property· is
_-.public welfare or. for hospital, charitable, ::cultural,. automatically transferred .'to . the other heirs by
scientific, "civic, Of similar purpos·e:s: Provided, .that n O · operatipr,i of ·1aw. due tO", h.er repudiation of her
· corporation, domestic or foreigri, shall give 9bnations iti~eritance (BIR . : Ruling · No... · DA-333-07;
in· aid . of ariy political . party, or candidate or for . MAMALATEO, . ~ supr.a·
. . . at .389).
.
·purposes·.. · of :. pa.rtisan · political 'activjty · ·
(CORPORA Tl9N CODE; S_ec: 36 (9)). · · .. · .6. -~~n'4nciatjon of lnheritance to a Co-Heir .
A general renunciation of. inheritance in favor of a co-:
.Note: with the ettectivity.oi t1:ie Revi.~ed CO"rporatio~·. · heir ls not a -donahon for .the purposes of .taxation, . ··
: CocJe· pn February 23, 2019, . .Sec, 36 (9) is now Sec.. · unless speclflcally and categorically done in favor of
.35 (i) which npw:_states:.~· ..·.Pr:o.viaed, that riq foreign ·identified heir/_~ to the exclusion .or' disadvantaqe "of,
. corporation" s.hall·. gi~e· dbnatio"ns in aid any of the other co-heirs in the her~~;ia_ry estate, The .same ·.
. political party·or candidate odor purposes of partisan becomes thepropertyof the co-heir aricl -,treated as
pol.itical activity"· · , · · · · ·. ··. · · . . : . ·· an-. .additionalfnherltance (R.R Na> -1¢-201?, Sec,
12). : • · '. ··'.;'.. · ... · · . . , ' ·.-·
Did Sec. 95 of-the Omnibu~ Election C:ode (Ol~C), . - .... ··. · ·· ·.
whlch · enumerates the:jurfd_ical entities· that ~r~-==.c!.;., Renuriciatlon : ot lnheritance to An_9ther_.
prohibited from · making political contrjbulfltn'°s"'T.· -· .,, · "'~~~on N~t a Co~~eir · ,/ . · . · :
amend 'or repeal Sec. 36. (9) of th'e.,,e"l:frpdta.tion t} lq~fe !ffe.°!o?!1aJ10~su~J.E:ct t? donors tax since there. is
Code?' ... · . . . . . . .,/-<""'\r·~~\.-,;,,t_~n~jfgeft~~e dlstnbut_1on of the e~tate, untess .
. NO. ·The SEC· clarified that the p~9y1s.ion'-9J1t;it=f'CCP , - ~p~c-~(~ltY'1'la'~{ategoncal~y. _don~ in f~yor of
was nq~ specifjcally repealed _h_tf ~t;fde~fb,y;..Sel'.:':"'""t~:-.d4~ntif~\.Qe.y'/~~)b- t~e· e?(CIUS)O;n pr d1sadv~nta~e Of
~5- o_f ,the OEC.-1\!e.ither_has ttl~~,·q,~~rf ai:rTmRli~JSl . 9~ !tJe{oll'iet ~t~'~S::J.1~-IJ~ hereditary estate (R.R. No.
a~~ndr:r:ientor repeal of the (gC~ ~li~jfsioint Therelis- .4l\ Jf_20.1B,rec:{1Y.; . \ . . · . .·
no-conflict:?etween the tw~_Rt;?.:'.'sr<:>JI~ an ~\h can 4:, __:..,S.e.ll\urera\Jt:Y1~Q\atiom( · . · .
be ha~mo_nr:2e<1 arid be 91v~n 1 ~ec~ ·
1!1_sotq_f ~!_
1r-··e.. A""',°f-~ffei.li~'
rat?.!)''4.dpmru& is one where .the do~_ee
CC_P P_rovtdes ·. a__ · bl~~~~r~1~1~1onl 0~ .,a'lf,... j
' "-' ,~s so et,hing rew'd past.orfuture services· .or.
corpo~at,ons makrng pol1t1cal ,c~~t~ut1_0~~1\whr_ll;!cttr:Et'mlJ.217iiel"cause ·!utur.W..:!~rrr~r. ~s.or b.urdens, "wtien" the
9~<:: -Imposes .the s~_me. pr~f.ilbltl(?I\I. Of-\aJ!~~~~r~! ~.r=~;,.aJU~~r~ f se~ices , Urde[)s· or: charges .is lc~s
Jllr:tdtcal.. . persons. · fa11~\9r f,~nde,.(._:;:;>,_,iwectfr~~·J ,Ltfj~nJ..f~ ue Jt'.tn~f>natioti {De Luna v.· J.J.brigo,
. categories. The SEC ~xplar~d ma\s.':"\"-'ii.f th~~- ""'~G'!R./£i&:·l2-!i74~GJamfiary 10· :1990). ·
OEC sh:oul~ b~ ~rprec1_ate~ a\a~ am~t~ca~>bttfi~.'i!l:'. ;;"%,::-.s.~r." · 'Jf _' I· ' ' . .
, . absolut~ prohi~_,tro~ 1;ontame~ ,n t~e ·.f:C.P ·~i'i~~e~;rera~ d9!')apons_ -~hall be gov~rned ·by. the
. actuallr 1llu_stratrve·of some ~peC~f c,rcurrr~taR~~oflW'P.\Q.'~slo_Jpibn'don~ion· as regards that portion which
· . th,e_ ~vii, sough_t to be avotd~d' ti'h-,~/,w~~G..;,.;,::.--~~'.e.ds th~)"i/~p;te:of the ·burden ·imposed· (CIV.IL
: Opm,~n.~~· 1~_08), .. _ .__ .. {:!'or~r:re;o.wtl?,,PV;¥!).. ·. ·. : : . . . . . ·. · . · . .' .
5.. 'Renunciation ~fS~are ofSlirviving S'jmifse l\![~\sit~MD) . · _., ' · .'·.
· Rei'l"unciation by the surviving_ spouse of his/her sfia'r~"P.·- a•.: A person gives another a Iliing or. right; .: . ·
. in tfre c;orijug.af'partnership or -.absolute community. , b. On . account ,of 'the·- latter'.s . Merit$ ;or of ·
. ." after-the diss61Qtiono(th!3· marriage i_n Javor of the · : : :_ ·. !· servicE?s rend~recJ):5yhirn to ,fhe:.donor; 'anq
h¢irs 'of tile deceas.!:l<:i spouse or ari"y o\her person is · · ·c. · Th~ givicig does n·otcoristitutea Dem_c:1ndable
5.Lil~J~ctto.donor';;;"tax (R.R. No. 1_2~2018;Sec. 12). · .:< .-del?t,. ·or-\lv.hen·the. gift imposes upori t!"le
·· · :· ·. ·. . ..· "q9ne~_·a _burden which is less-than the'value ·.
· ·-Illustration: 'in the···settlement ·of ·t1:1e""e~tate: of Mi'.· of the thing g!ven_(C/V/L., CODE, Arl,"7.26). ·. ,
/Barb"era -who ·died intestate,: his wife re.riounced her . ' . . .· . · .-, . . . . .. . .
_:. in~eritance· and ·her.share of th!:l conjugal·propertfi~ · . l1· ·. · Gi'a~uitous.Dc>nati~ns fo Ass_ociations. · . · ..
· ·ravor'of ttieir children. The BIR determined that there . ·. Gifts, ·donc:1tion~.- an<;l ot_her !'.:qntribLitiotis received by
'N<)S .a taxabJeg1fhm~ .thus· assessed Mrs. Barbera as . __.. Homeowners_; Associations . are : s~bject to" · the.
· a donoti Was th·e. Bl R:"Correct? . . · .p_ayr.nent of 'do.n.or:'s ·. tax.;co.nsid.~rfng Ula.t. gifts· to
· ·· · · ·· · · · A~soci8tio_ns= :~re hot Qu81ifiecf fo'r .exemption_: t:tnGter
-ANS; YES: The ·aj~ is corre_ct that there was a · . $.ec.. 101 (A)(2)_ofthe.NJRC (R_,MC.)Jo: 53~2013).. ·
.. taxable g1ft t?.ut only insofar as the renunciation of the
. share . of ttie. wif~ . in the conjl,lgal· property is o·nerous-Donations .. ·" .
concerned. Th.is is a. transfer of property ·witbo~t It is one which is sut;>jectto burdens, charges:or futll~ ..
·consideration, which _takes effect during the lifetime_" .servi~es equal (or more) in value than that'oi'.the thing
. of the transferor/wife,and i~ thus_qualifjes as a taxabl·e · 9onated (De _Lima·. I(. Abrigo, G ..R. N9." l.-57455,
. gift (RR. No ... 12-2<;J1EJ, Sec. 12). · January-18, 199.0)..

200 I 2019 SAN SEDA LAW CENTRALIZEDBAR OPERATIONS

 !·• . .
f.
~·
TRAN.SFE-R TA.X .
SAN BEDA.._ lAW,CENTRALIZ.ED,
BAR OPERAT/0/'JS - MEMORYAID Wi.'9
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t ·. ponations..:-"'ith .an onerous cause' shall be. govem~'d Transfers which .may: be Considered.· as
J::, · 6y the rules
on contracts and remurteratory donations · Donatf o.ns: . . .
:::· as reqards that poition which exc;eeds the value of . . 1. Transfer for Less·. than Adequate· and Fu'II
-~; meburden imposed (CIVIL: C_ODE, Art-:7;l3).- . Consideration.· ·. . . . · .
!iii, Donation with onerous cause is _not strictly a donation General Rule: If the property transf~r-red is for l~ss
c· since · i~ is governed. by the rules. 00' contracts. ~h?n adequate and ful! consi9eration in .rnoney _or .
<- Technically. the contributions are not ·given in. the. money's· worth; tlie. amo'unt by which·· the FMV
1;,· nature of an endowment -or 'donatlon. Rather, the. exc;eeds. the cqnsideratio'n shall be deem'ed. gift . a
'!,: . amounts are_ in. the con9ept .of --~· ·fee ·.or. price · ir\. . anc;I 'b~ included ii') computing . the amount 'of gifts .
f.· . axchanqe :_for_ th'E: ·performance of a service, .use _of __ made during,the ~lerida~_year (N_IRC;-_Sec:' 1_00) .. '
(: . properties or .dellvery of an object (R.M.C. No: 53- ·
ifr· 2013); . · ·... · ~ ··. : . .,:· · ... · Reaaon; The .NIRC consldersrthe transfer as· a"
}: . . . . -.:...-·. ". . . : . .' . . . donation. since 'w,hat' motivated the transferor in .
} Onerous Donatlonvor Donatloo in l;xchange for · · '. transferring" the.: property 'Js", hfi · generosity.· In
f .. Goo~s or Services, or.Use or·L;ease·.of Properties.: · -, essence, thedonor intended a donation butoptedto
t . is net subject'to Donor's Tax . . . · ·. . ' transfer the property for Inadequate ccnslderatlon so
f · Ccntributions to:associ~Uonsih excha1igefor goods,· to avoid payinq-donor's tax. Where-the consideration
•k . services a_n~ use. of properties constitute as other . . is . fictitious, the . ·entire:- value . of- 'the property
assessments/charqes from activity in:·exct:iange for- · 'transferred. shall tie. subjectto donor's tax .. (1 DE
a
the pertormance of servlcev.use of p·roperties-or./~ LE<JN, supra at 8~4). . · .··. . .. ·: -
_ . delivery of an object. As s~.i::~;,'ttiese fees ar~:i_~opi1~"Y1 . · _ _ - . -, _ . .. _
~,r:- ·?h the part of- the.. assoclatlons. t~~t·'are ,SUbJ~ct:-tq-_$.,i/~-N_otes: . · · . - _ . .. ·. , ·
-~. -rncome.t~x 8$:_Well as to VAT(R.M.C._No. 53-2.Q-'113'[- ir-·d,·~ 1. The--rl;'le does not apply t<;> re.al property. held 8$
i:'. . · . :. ·. .._ . -.. : . · .· . .. /t-J;:°"~~4. --~·
\j capi~c!J.,:isset, 1.mder Sec. ~4 (D) of. th~ NIRC,
:;;.. lllustratiori? · .AB.C Ho'rr!'eowner's Associa~,01.: 'ii~!-1'[(~!:£.::'.a,:;~iB,9~t~eg,'i:)f_?less·-9ftheam.ount r?aicffor,the basis··
~- collecting association dues and other c!)~es fror~f' 11 · for-;determmlng the· capital gains ta·x therein
j' 'its memb~r~,-Ukewi~e: it' is acceptirig(99t1aJion~_fro~rlJ·,µij · wb~ld ~§T')the FMV _or ·gross. · selli~Q ·. pri?e,
t- . non-m_embers In excpang,e for st1ckers,:(0r/t~ rwhJ,Gf f~ wl)1che}fe~1s;ti1gh.er·(NIRC, Sec .. 21'.(D) m·re(a._t,on
·: way_ in· their :.subdivision road or_J9lf>!i~J>i!brth_e .. ,11{(
:._.· m~inlenan_ce o_f the roa~. · : ,dfi:..,-_~_
:_ · _ t. ·. · : fJ;.,.,."·. ~i~ ·,
\] °":""',. ~
_ ~'
bl . to·RJi,i'N~; 1'2~2018'. Se?. 12). , . _· · '-· . ·, ·_ . ·
2. Abs~nce1of dp_n·nt,vemt~nt doco n·ot c~'?-mpt
pf
the'~res st~ tran,sactron.Jr~m dory~r·~- tax·
·.. · In this" ca.se,·.assadaJion·dues;~~rfiB'efst.iim.fee~_Jl,P
-t" · . ottrer assessments/charges sollec:.t€e~NFcimir:--the. · 1;~;J · .·.
• J~ · . · sf~~;;~~;,~§f;:;"tb~,.NIRC.categorically states
.thanneJtlnQ.unrl:5ywhich-the- FI\AV of the property'

*.
~. members'_and.t.be donations fro~l)~ftie",ul:lers-9f~··
subject to incorne tax; and.VAT orp~.centa~~tax. as . ~>~-~~~emed. a _gift. _Ev~_n if 110. aqtual donati~n. the
.t· . the case ma~_be (R.M:C. No. 53.,201::iJ/i.-1J:sr·. . · ""' -~r~,ll1;t•o•f:f~imce m pnce rs .considered 9 don~t,on by
ex~eeded ~Efvalue of the cons_ideration $~alt be' ·

"i' • _ - . . · _: . . _ . · _ ]~(' ~Ji'~~-¥i.11L-·~fie.!!_0fittf l~w (Th_e Philippine Amerfcan Li~e and

10. Donations,made ,by-a Foreign coi!ltor~fJcin - · ~ , GeMrat IT1s'urance C--o:. v.. The :secretf)t'y. o_f ·
F6reigfrc~rporationseffecting a danatio~tif~uQiict . ·. . .. · Finan.ce,_(}.,R. N9. 210g87, Novem/Jer 24i 2014).
.. to dof.ior's: ta~. only jf the pr9.per(y i~ .l_p'cated:·in th_e.: . . . .. . . .. . ·-. .
.' Philippin~s. 'Accordingly, the dohatfori · of ·a foreign· . ··. : ·.'ex~eption: .·:Transf~rs mad~- bona ·fide in the .
'.'i. · . corporatio,:i..o't,ts_ own sh~res6f ·sto9ks·,s :noi su.bjict ·, ' -ordinacy··. course. .. or business·. and .'tree- · from
.. to donor's tax. However,.if 85% of th~ bt1s'11iess of the.- .'clonative· ·intent.· even· 'if the consideration, -is.
-~ ·. · ·foreign corporation js loecjif~d. in the P.hiifppir.re~:OT the· . -: Jnadequate in ~qCOL![lt; is 'excluded. 'They are not . .
f · share·s'._donated.-t,ave a·aquii-ea.·blisines.s situs ·in. the.- . con·sjdered as.. dMa!ldris (e.g.', :a: Bad· .~amain).'
';,:-. Philippin¢s,. -the .. donation may-. be -raxe~ · in. "the. This is also prov.ided-in Sec. 100 of the NIRC. as· .

.· : .
If_. Philippin.es s1.ibfect to th~·rule·of ~ecipf~ity·(TABAG ainended_by·T.RAIN Ll;iw, which state th~t a··sa'ie,
& GARCIA_ ·Transferand Business T?xa'fion- (2018);.-- · exchange/ or othe,r-~ransfer of. prqpe~y m~de in .
(. p. 194)[he(einafter TAB_A~-& 'GA~.CIAJ. ·· · · .. , : ·. · the-·ordinary . .c9, ..fr~~ p.f. business (a transaction
; which is ·a _bqna .fid~;; at arm!s Jength, and free
a

I:. ·.
On th~--other_hartd;· donation _of fc;reign·,corpor~tjon . -. from any donatfye int~nt);·Will be ·consi~ered as-
°/ . of_-.its,:own share~;-. of-·sfocks in 'favor of a resident . ··made for i:i'n ade.qua~e.'and ·full-consideration in .
~:· employee is not 'subje_ct Jo. dc:mq°r's .tax because they. ·. 'money or m'oney'$worth.- ; :· . . .
,. Wfrl'e give'n · In co~sideratiori· . of. th.9. . resjdent's . . , .. .. ...... . . . . · . ,. .. · ·
;.. e~ployee's ,_se'rvices_ to· th~ corpqratron,, hence, . ·. Note: Transa~tion 'v\'.~S done ~t _3=1rm's Ieng.th _if:.
si.Jbjec_t to Income·. ~ax· ·.(BIR' Ruli,:,g_, . No._ · 01 ~87, . · 1 .. · The pa.rt1es are unrelated (whether In the,farnilial -

I
~ January 26, 1987). · · - : :· . . . , · .. ,. ·or business sense); · ·_· .. _·. · . : · . :
". . · , .. - . · · . · _ . - ·. , . . - ·2, They )Jave_ equal bargaining power; and
· , . .. . ·. : . · . 3. · Ttiey are actirig · in · their . oWn · ·self~lriterest
,--. (DASCIL,.Nl'1C Arin(?tated (2018), p. 253). :

2019 SAN
'• . . SEDA
.
LAW CENTRAUZED-BAR
.. . .OPERATIONS
. . . . t 201 ·
 tRAN:SFER ·t Ax.:AID
_SAN 8EDA i.A~CENTllALIZ.ED
BAR OPERATIONS.- ME.MOfi.Y 2019_

Req.uisites fo ore.I.er that Ex.c~ss ot FMV over the Payme.nt of Loa~ by Guar~ntor, · .
:Value of ·consfderatipn be . consic;IEfred as A:guar;:intee as a. rule- is gratuitous (!hless oth.erwi~e
Donation: . .- . stated. However, ·if the qqligation is: jointly entered
In o~der"that the· amount'. by ""'.hich the· F!'JIV
qf the into by the guararitor·and the borrowerwi.th a :creditor-
property exceeded ~he value of consideration '.be·. :bank, the security. given by the. ·guarantor •is ..not
constituted ·as donation -the .following requisites must gratuitous· · because the -guarantor n'tust· .be· ··
be.observed: (PLI) . .. .. indemnified by the' principal debtor in case the
. · a. . froperty transf~rrecf- is- re!3I or personal ·guarantor pays f6d~e debt. fri :such -case, payment
... property,. except real property referred. t_o in · by the.- guarantor :_is NOT subject to donor·s fax (BIR .
Sec. 24(D°)of·NtRC; . . . . Ruling No. D_A-006~2005,January 11, 2005f. . . .
. 'b, Transfer is beSs than:an adeq_uat.e and full_
."consideration .in· rn011ey or _mo"riey!s ·worth;
... · ...
· . c. ~~insffJr.is tnfor '!livo_s (Nl;C, as arriende~ by ,. : . r.-- . NET.·GIFTS .
. '! ..
. TRAIN Law; Sec. 100):-'- . . •

"Npt~: Based on· the" foregoing, the fortnul,;i" to. be . . ·('let Gifts '.
used i~:: · · · · · · The ne.t- 'economic benefit from . the transfer ·that· .
.. · . . · . . ·. . . · .:~~fE-l~1is to ~he donee ·(RJ{.N.o.J?-?018, Sec. 12)_.
Personal Property: . . ,,,,#:--.-- ~r. T '\ -.. ~ . . . . ·
· ·· · . .· · · ·. · . .if::_, --~ tJ
-J~brglhgt~(~mortqaqed property is,transferred as
.FMY of.!he property a~ th~_t,my~e'fJ!-1,[ ~-=..-~,_{D!,Jtt~fi:>os~g upon the donee the obllqation to
~~ss: Actual_~alue of consi~(f.~'tje~~.9.§l_ivea ----<--~:---~}:,,ay "th~"'- :r10J19"1;!~~.: l~a_l;li_lity, . ~h_e(1 the n~t gift is· ·
Amount constituted as aon~t,on~.,;; ·fl i,;',.,,,-r-P"': . -~l~.
rrfeas.1.1rtt1.,~1,~~d~ct~g from the Fl'y1V
of tHe property ..
• • • .· . . •. ·II! A,,./' .1 / . 0 -JC -t~~amo~nt o(~~oµsag,eassume~ (R.R; No._ 1.2-2018,
· · . . . f · °"'Y...6 - -J i' ~ · S~c. 12).\. °'.'\ [ · . 1,·
.Real Property:_' . ·. if . .'·Ii· .. · · ·. .. \ . -~K(Jf):\ . ·. . . . .. · ..
FMV ~;~hJ;;;;Jrj
whi~heve·rJs. zo~allvalU(:~!~ ... , .~,{~~~)!xa\~;.~\ ~alend~~ year "shall_ b~ ~ix· .
. asse~sor s value · - M · ••,;.H,: _ ·. ~: r, /::,--... \ •· ' ~~cen_t to-%) (Ol~t..:..2>=15:f(oor 30_%) computed on the
· Less._,Actu.al_.~alue_<;>f _~P~~~~~' w~~~.~~ ~~~is.,,,~f~'atal .m!fts· i xce~s of P.250,. 000 exempt
Amount ~ons!1tuted as~o 'lion ~ ,, . . \'f<8 J .-,.9if\$~~a ~e 6ri!1~'Jl'l~,'. r,·r~ga~dle~s of whether the
. ·_ ·.. . . . ., • '!-,.- · · ~ _· fii
~ ".,( ~~7t1· · ma~-t~ a:jlatjv~ or to-a ~-t_range_:·(NIRC,
2. Co11dona~i<m(-Re_m1ss1o~?fqeb\ (~~-·I:" -~~~-~d l:tY TRAl?JL?w,Sec.; 99)~ ._ . , .
.If the creditor condones· t,be. "'1pdeblecf1;i-ess f· , e~-'.5 · : .' / · . # ·· · . ·. · ·
~.ebtpr ,the_foilowi~g _ri:iles will appl : -~~1tete:. _
. ·.} .· · :9-}~apphc~tion of. tt:ie. rate_-:.~:;;.· rmposed on
. . . a, '. Qn ~ccount of. d~btor's)~rvr__pet~1!~--"'~}lo~~J!,)l\s ~~g~ .9~: or ~fter the e!f,~ctJv1tydate of the
·. ·. ·creditC?r, the same is taxabte'<\iQfeFtt'Oojthe-:- . :f~l"'l~iwfi!~his January,1, 2018 (R.R. No. 12.~-
. _deblor;
. . . · ..... )\1
.•_· . . . . , ~ ... .4- · · 1Y-l..-""'bfltf"'~\,r/11_).
~ . _· , ·. .· · .... · · · · ·
h._. _ If_ no. sel"'.'.JCfS were fend~red/1~t~he.. cie'~i~~»<"°':'· .. ·. ·. . . ." /-·,
O 0:·
. . ,' ... · · .
simply· <;:ondones·the deb_t, rt-rs taxable gift . · . . · Sum_m~ry 1
qnor S i:,x ~ates
and not the taxable incoh1~i and. . . ..

c. ·• If-~ corporation forgi:-Jes· a stockhofde..r's .de6t,.

. · the 'transaction-has the .effect ofthe payme·nf'
.. :_:-of . dividend (1 DE LEON;'supra at,~04)... ·.
•!·: ' • • • 6% whether-relative.or'
A:
1i1u~tratio~: cr~dii6rs ti and ·c-coneione.d the debt ·.str~nger.s· · .. , . .
of. Company · X ·:pursuafl_L t6. ·a ·court ·approved
resfructuri~g.
. . . .
Are:the. cred,itc>"ri·
. : .
for
liable
.· : . .
dqnor's"tax?-
. ~. . ..

AN.S: N0. Th~ lransa~tion IS .'Abt-'sob/ett to donor's · ·. .·. · ..:::.

tax sine;:!:?·. the co~donaiion-was not irnplem~ntecl with.·
. a donative-inlel)t but only for husiness cor:isideratiorr..
The. restructuring. was . not. a · resu"it of "tlie mutt.iar
. agreement of:th_e debtors'.. and creditors. ·11 was
·through CO\J.rt acti'orf that the.debt reh~pilitation_.plan
. w.as approved·:and_ iriipfei:nepte~f(BIR Ruling No•. DA.
,02B-20os; Jan_':'ffY 24,.2oos). · ·
' ..
. ....;: :

202 f 2019 SAN. sE_qA LAW tENTRAUZED-BAR-0PERAJK:iN·s·

 .TRANSF·ER ·TAX .
--
. EXE].\ilPT·n·oNATIONS ..
:-.....
. SAN BEDA u.w (ENTRA~IZED oAn OPERATIONS -; MEMORY AID ~019
CAI EIPIM 1 a
,
+
Note: O.onation of ordinary assets. to charitable
lnstitutions is. exempt from ,dono r'. s. tax .provlded the
abovementioned .requlsltes are, complied with· (BIR
0 0

RulingNo. 97-.2013,.Mafcfr 20, 2013).

f E~eJl\pti9ns. are not. to be
treated as exclusions from
·qi the gross gifts.of the dbnor: They partake the nature . If the donor is. VAT-registered·. person and the
.t of deductions at.Id are,' therefore, deductible from the ·. : donation involves, ordinary assets, the· donatio.n is
t gross: gifts. jn. order 'to arrive aha~able net 'gifts.: ~ubJect to VAT, the sal')'lebe_ing a ·t,amiact.iorideemed
i~ · Hence, same amount· shall likewise be' presented in. ·. salEl (.BIR Ru/jn{JN~: 97-2013'; M?rch 20, 2013).
.,. the "gross .gifts of1he donor" (TABAG ·& GARQJA,
l- . sµpra.at-195). · · · . ·. 4. Athlete;~··P~i;es and ·A.ward .: : . ,
~- ·. . . ·.. . . . . . . · . .. , · . · · · Re.quisites: · .
s. · Gifts Made by a Residenti (NIRC, Sec; 101 '(A)) · ··.a, Awarded in 'local . and· internatlonal · sports
/1- .. (. · p~wriE:s:··: -'. ... ·... · · . · :··: ·. ·. _-.: ' · · tournaments and competitions: ·
·,.· · · TRAIN, law .rem'o.ved .the- exemptlon of dowries or . b. · Held in. the f;>hillppines or. abroad; an·c;! . .
, gifts madg on account ofman:iag·e·. .With this; dowries.·_.. c. Sanctioned .. by-·· their respective. nattonal
or gifts :ma.de on account of marriage regardless of . sports associations (R.A No. 754.9, Sec. ·1).~
the' amount are ,now subject to donor's tax regardles~ .: . . ' ·.
of amount. . . · . · · . . ·· · ·, · · · '·. . . · . Note: "National Sport$ Association" shall rriean those
~ . . . ·: . -' ·.. . . .. :· . · _ . · . · . ·' . . . . . , /.Q . d°UI}' --~ctredited . by the . P.hilippine. Olympics
f -2. Gift~·;Made to orfor th~ U~~-of.the N:at1f>p~J,~~-; Cornrnlttee (R.A. No. 7549,·S.ec. 2'f2)). . . · .

;.' '.· ' . . . . ·:.

lr". Qov:ernment pr any Entity- .Created by .a~y,10/1:.·'-·:i_:') ·. . . . . . . . . •.
·rf .
,. ·
~.. ..
.its: ~ge.n~ies ·whic.1:(-_is·.- Not· Con~ucted!_ff1?J

~al~,Goye~nmeht . . · ·
1:;l~\J
~ro.f1t or t.o ·any Po!1tical .Sll~divls1on. o/:,:t~~r::-:i!·;-,:;-;."~.~~~~m$~;:1,bY
, y· t-(J1 1. 5: En.cum~rances OJ'.l, t!ie Property Oonated if ·

~_"l"fies_e'!~~
t~e Don~e ... : . . ·. · ..
claims: or. hab1hti~s _a,tta(;lie<;I· to the .
/.!.,:";,.• . . . ~ ·1 property suc~~,mortgage; secun_ty interests, cost of

I
t
.'

r·
•: '
f.·,·.·

~
,
3. Gi~ · 1n. Favor ·of an· Ed~cati{n~J andleff/,q.. ·right&·'a.nd jf:p~id taxes which ·are allowed as a

··
C_hari.table, ·. Relig.!ous, c:1,11tu!~:t'~f..:c_.8,o_c(a_l. C. de.ductio11 onde ~sm'ned b,:' th_e donee. : . . ·
yYelfar~ forporat1on, ln~tit'b~l?~•-~,,.~,~d1t13df{·.
.N~~-Gove~fl'Ufnt · · · :· _f~,ifaniz_etioh· ..
Phil~~-t!1rOJ?~C.. 9rg~n~<!Wf~.91--?;;,~e~~!!t,C?h.
ln.~t1tutiQ~
. ,
,
.. ·
- · ·. '-~ . · ,r-.1;Jr! ~~
· ~ ....-~.... -!')""~\
OT\, ~-~~

~l- .
!f''~
· ..: .'/. . ~ . \:- .. ·· · .· , . :
m?~}flQeti·pro:e~rty is transferr:~~·as a .Q_ift,. but-.
r~~J,i1mQO~JJJ,QT-.t:1f~~:;tb.E}j.?2J1ee the ob!1g.~~on .to._p~y -~h_e
mortga~~~tty,:Jf.ien.the net gift·~1s .. m~asured .oy
·
·

,
}J · : 9educting from the F..MV of the ·prqpe,:ty tf:le ai:nounl
~j · Re,qu.il=>.ites:.(ANT-0-PAN). . _ '.\(('.""... \) .. )'
a. . Not m9re·than- ~0% of th~ sa1ct.)~lft,,s'3QUld be J~:;?7:,-,f\.,,.-,; ·
f of_!!lorlga~e ass~ed'-(R.R.. No._ 12-2018, S.ec. 12):
· : ·· , · . .· . ,
i {

t'...
~·-'."
used.for ~Qrninistrative_purpo~:t~"'~~· 4~=..~:~d:.d1,i1fttta.twru)< donated a mortg'ag~ 'p~operty ,to v
tl~ Tl_'le done~. m.ust be a . .ttor:i-,~l!:!t·· n9!r~rofit . ·.. . will) thee ~Qn~itioh that Y wi~I _a!:jsum.e the. ~ort~a~?·
. . o~g~~[zaUon or ir.i~ti~~ti~n-~_. _ : :-(!,:~.ff~. . · · ··The· ·vaJ~e of th.~ ~ort~ag~ _assumed .bY . .Y .1s.
c: '.f:he·.donee.orgamzation_or. ~n~t1tuti0rt~.ho~_ld . ·e~empted:from. don~,·~. ta~.a.s 1t.1s d~~uc!ep fr~m.. the
't ·. ..be,-.goyerned~>1.'Iru_stees·:"'~o.do n-ot receive_ FMV_of the property. to.amve·,<:1t the net.~1ft_ suJ:>Ject to
J _ . ,,
f
.an~ ..go'!lp~n~at1<:m;. ··:.. . . :'·· . dono·r?s tax. .. . .. ·· · . ·. . · ..

~· ;· · ·
'.d.' The ·.sa!d ·?'?n_ee.shqul<;J ·not be au_!por~ed-.to
~·· · ·· . receive .D1v1dends·.· ·· ·· · .. . r6.. · Donatio~s · macje io· the·. ft>ll~wing entities : · :·
e. · · S~id. dop~e.de~otes ~11 of. its ·in~ol'ne fo 1':1~. ·. ~>(empted' under sp'eciartaws:· . ·. . ·•. . . .

i, ·. . . .
ij'
-
1. · · ,,.
·
. accomplishment . and · pmmollon :of
·,P:Uq:><>ses · er\umerated· in· its Articles., of.
. .. ·. tricorpora~o.n; :: ' . . . .
t: · Th_a:Nro. !'!lust be -~~r~~ite~. b¥ PtJUippini;! :
. . ·.
its ... · a. · .(>.quacuit.ure._Departme·nt of the Sputheast
Asian· Fisheries· DevelGpment Center (P.Q.
. No.,:2921; . . . ·_..._ · ..

!i
b:·· Aurora Pacific Econofnic_:Zone and Freeport .
·. . . _· ··.Col.lriciHor.NGO Certification;·and_- ., ·· .. . Aothority'(R.A. No .. 1·Q083);· . · : : . . . . . .
·. . · g, · The donor. engaged .in. b~siness =shall ·give.· c. · 'DElyelopment Ac·ad.emy _of the· P~·iliP,pi~es
li!;>tice :of dona~ion'.on· 'every· donatici(l. ~or:th .· . . (P.P. No, 205); . . , · ·,
~·- at ,least ·PSO,. 000 .'to \h_e ~D'Q wl_liqh h_as :. · ·d. ·Girl ·sco!,Jts of' the Ptiilipp1nes (R.ft · No.
; Jurisdictlqn.oy~_t' l;tis place of buslriess. wrthil'l . -. 1007~);, . : . . ,: ., . . .
'. .. e: : lntegr.ated Bar' of the P_hilippines · (P.O. ·.No.
i
thirty ·.(30) days ~f:ler receipt of the qualified. ·
. '·. donee:s instifi.ition:~·d.uly issued .C.ertiffc~te-~f ·. . .181); ·. ' . .. . :· . .
,. . D<;matioi:i (~-.R. No. 12-20~8•. Sec. 17). : · .. f.' trteroational Rice Rese~rch Institute- ·(P.O.·
(.' .. . . .. .. . . No: 1620):, · . . . . . . · . · ·
.9· ·_. Natio.n·a1 Commiss.ionfc_jr.Culture ar:id t.he Arts
.. · (R.A, No._.1()066);
•._ ..
~019.SAN SEDA LAW CENTRA~IZ.EDBAR OPERATIONS 203
 •~;:==a----------~-1111!1--ml!lll!!II..
llll
• ~~
.·~
TRANSFER. TAx.·,. , :
SAl'J (}EOA.LAW.ciNTRALIZEP ~AR OPERATIONS - MEMORY ivD 2019 t"

t. .Cumulatlve M~thod -
The . computation of the donor's. tax . is on a -
of
cumulative basis· over.a period one calendar year
(R.f?. No. 12.:.2018, Sec.14). ·
. Illustration:
Donations made on:
January 30, 20.18 - P2,. 000, 000 . ..
March 30, ·2018 .: - · .1 •. ooo; ooo··
Augusns, 2018 .- · · · soo,. . ooo.
. .'·

Solutiorr I Computatioru.

com,~ti:•.~;1'on- ~:~:oo~~r's taxr . . . . ._

·.:: _ Donations S:hal.1 be. subjectto.donor's' taxapplicable . :. · .*"P.2,750;.Qoo x 6%
.at.the time the donations are· made.. Only donations _ · ' ·
or·
on after-January 1 .- 2018 sha.11 be '.s.ubjecfio cfonor.;s . .
tax rate· under the· TRAIN· Law ·.{R:R. No-, ·12-2018;. · .'·
Sec.14); · · · ··
• • . • ..• . • i •• ~:-.;.: • .• ._,· .,. . ... • • • •..

Husband ~·na wite. are -. considered .separate arid · · 15• 2018· · ·

distinct· taxpayers for .the purpose :9f .donor's .tax. . ... · AugY:st >
However, .jf. y.,hat was .donated· is· a G<>rm;r1u_,:iiW· or '. . . Add: .
. _conjugal· property .and only·the' husband .'signed· th~·· . . ,._
·. deed of donation, there is o"nlY. one donor:for donor's. · · · · ··
, tax purpi:i!>es, without pr'eJuqice to. the right of.the wife . . . 'January 201.a . _ ... - 2.000.000. · ..
· to. question the validity ·of the donaUon without .her · ' · ·
'consent' pursuant .to 'thepertlneni provisions the of March2018 · .. 1,000,000
Civil Code and Famiiy· Code (R.R -". 'No, 12-2018, · .·_. :i:.es~,· Ex~mp.t gift. (25<?,_000)
Sec.14):.· · .:', · · · · ·

'
.204 I 2019 SAN BEDA LAW CENTRALIZED BAR OPERA'.~~NS :
 Tolai . . ~.3.250,000 .
.. ,
. · ..:.,h,ch ~uch credit is taken, which the. net ·gifts
. situated wi~hin such. country .taxabie u'nder:
Tax DueThereon . P1_95,000"";: donor's tax bears to entire net gifts; arid .
· · · 2. Overall Basis - The amount ofthe taxcredit shall
,. . Less: Tax du~/pald . 165,000 not exceed the same-proportion of the Jc!X against

.
~~: on January and·
M~rch do·n~Uo~:
which such credit Is taken, whichthe donor's net"
gifts -s_ituated · outside. the' . Philipplnes. ta~abl~

l
~:·
_,·
.
. . ' .
ta·x Due/Pay'a·bleon August·
' ···0.3
.,-Li ~OMO.
.
under' donor's..tax .bears to hls entire net gifts
(NIRC; Sec. 10.1 (C)(2)): ·
.. ·
· . . .. . . ..
·
,.. ·
J· Donatl6n. . . .. .: Note: This.tax.credit is allowed only.for residents .and.. ·.·
~:. '**~3.~50,000 x '6% (RR. No. 12-20·18, ~-e_c. 14)· citizens of thePhillpplnes tor the donor's taxes they
r·· . ·. ·. · . . ·. . paid in a foreign-country ((:I/RC, ·s!3c. ·101). ·. . ·
i _·wm.~t. notd-amou_n_.
k t
_no double-taxatlon,
I d
sinc_e -the'
bj ·
." .
Illustration: Thefollowtnq-weredonatlons .. m'acte·~y · ..
.
fi · previous · · ona ion_s. were- 'atrea y· su · ~cfed to Mr. G. Alante, a Filipino; to another person.for taxable
I~~ : donorjstax? : . . . ·_. . . . . . ~... : . . year 201_8: . . . . . . , . , .· -. .
f.. · NO. There ··is n.o · double· 'taxation .. 'Under the ·
ft. cumulative meihod, the "tax paid for the previous . . .
ft··. methods :will .be -considered as. tax credit for· . Donations ofpr'?.pecty wh,lch·arelocated Iiu'
t, · succeeding ~onatipiil,. : . · · . . . · /;) Fore~gn Country A .· · P,' 300,000
i', . · ; · · . . . .
1,. <',./.1k Foreign Country B . · 200,000
t',
,;;-
2: · Splitti~g·M~_th9d-:-Sin·ce·~h~computation
donor's tax is on a cumulattve,bas1s·overa.p'epo·a:.?:,,t<..-~ T t Id . t_P
o}J~('. •
~t~· r:~ip~~:~ lio~ ift in Sec. 99 ·.
gd .
soo.ooo
(25o,OOO)
r{.. .
. · of one ?a. Iendar y~ar: (_R.R. No._
· · · • · v. · , ·• t";' o a ona ions ma e.
12-2918,Ser:f11~Ji.'·<,/,.r-f7!~;<. . {') : . ·.
. p 750 000
'
e,' spreading the don_at1on or gift over !)lltfiero'us:1f t;;i,;...Ac1ua}F-oi~'ig'r·>d , ', t . ··d·
t ~lendar. years..', allows an· avajJr;n'.e:Rt',.of the'.-' jJ - · . , -. . ,;~1 onor S · axpai · ·: . .
t exemption·.from donor's taxes of. '·1<5wgrdonqi;i~µ;1 To F_ore'.~nffeF"1,~try ~ · · · P 10,6?0 ·
~l . t~xes. (~~B,D.OM,ON?ON, supra a~J~f)>-~?P ,:/: t/~
To Fore1gwc~uh{ryB .' . : · ·- 10,000.
i
t · · · . . · · ,,-,fr · .ti,i."' · i,;. · Total, If I~ ~. ·
ii · · 111ustraUon:·Donor:f'., 'h'.ar.its ti;,p{on'ate.~500~~00.,t-q,-:J:f .'
hi,s son Bon Oe.;:ernbe(201-8!ln'~1ead)5tabnatir;ig the 1\i)
·· It' .. f .·\_
· ;r__ • L
· • -. · .
P 20 600
·. ' ... I
I

f. whole'PSOO, 000 PO Decemtfo(201a,::J;t"fan optt?. -~j

}

~omP..ffl!!:,f'!Ji~';J/JJ.Pr
5_~ax
·. ·• ,'.. · : · · •• ··

m the PIJ...11Ip~,ln~!i.;
.

1 ·
!
r,(.~·-.. · 9C?nate P25b, 090. on December~3.9,!~~:~ ,~moth,~r t~
~50, .000 .on Januar.y, 2019 to ~vo1i1..:Pay1n~i}i<1ono'f.s,
tax ~hich would be l_n tne atn6unf ofP.~1 ~Q-~ This i.s
Tax on Don?fions:(P7.50,000 x 6%.) ·.
l" . · ·.
Jr·)r:·'-l~eJ~;.
T~x :re~its -~119v;:ect
. . . ·. . ·. .
..
p 45;000
·.
O 6u0
. . ._ !.

~· so because· d.onor's tax is computed -~Hfle"l>asis..of- .,..:t•!' ~PJ~n0r,1i>tais_st1IIdue· · · P.·2~,400

~ _the total net gift_s._niade du.ring.the cal{~~ar YE;.~f,1,-:..,--_,il§:.,:-'
..... ~:~""'m~ · .
f. . . . \(t'iJ.id·~ . . ·. . Computation of Allowable Tax Credit:

f:~_{:_,_'.:,_··.·1·:· ...
~ _
_o_ ·. ·o~~-R._ ._'S.}:AX_·. C~DIT_
..... _·.1
_
.. · Llmit1:P.erC<;_>untryB~sis:
Country-A:- .. · .•
,· .. ·.:.
:
(P-4§,000.x P300,000/P750,000}- .. P18 000
.. Actual . , . ·; ·. ·· . : · · . . ~10:aao ..
Donor's Tax- Credit . . ·
The donor'.s.-taic li1'1posed ·up~n a citiz.en.or tesioent at' . ChCJ?~e 1~.wera_~ount. . P10,600·<, .
the time ·of. t.he don'ation. shall be credited w.ith the
. Country 8: .
amo.\.m1 of an'y ;donor;s. ta~; ()f any character ariq (P45,900 x P200,000/P_150,000) . f> 12·..000.
de.scri~ti.ori, i~po~ed. by the;-authoritt of a :foreign Act~al ... · · · P 10,000.
country-(NIRC, ~ec. · 1 (!1.(C)(1)) . . . · . ·. · Choose lower amount e· 10.000.
Purpose ofD9nor's Ta.x Credit . .. Tax.· C'redit Allowed . : . tlQ.,6:QQ .
Iii orde·r to ·minimize or lessen ·the· h·arsh--effect of ·. :·· . . ·:·.
taxing_. the sam,~. gift twice, the ·donc;,r ·1s allowed to . . .
claim the. gift tax paid in. the forei.gri ~ountry as ~ ,ax . · . Llmit_2·: Ove·rall Bas,l.s
· ·, cr.edit.agalnst'th~ gift tax. P.aid the.Ph,ilippines"(TA8..l\G-··
& 'GARCIA, s:upra f!'t·204). . . . Country.A&B . . .
(P45,UOO_xP_500,000/P750,000) f>30,000
Limitations t.o the Tax·Credit: . Actual Tota! Foreign Tax paid · ·f'>20,600'
1. '.Per Couht,:y Basis ~.The amount of-c;:redit shall. Choose lower amount · · P2Q,'600:·
nofoxc'eedthe·same proportionof~he tax against

201s.sAN SEDA LAW <;:ENTRAuzeo· BAR QPERATioNs 1 20s

 · TRANSFE'.R TAX
SAN BEDA I.AW CENT{?AUZED B~R OPERAT/QNS ,. MEM0RY A/0 2019
. ·,,. iiiMMI idl riMe+it ?! .

Nofo: The allowable tax credit"is .the lower of tax "limit ·. 4. · PAYMENT.OF DONOR'S TA)(°-The donor's tax
and actual· tax paid. Thus •. the tax credits .on donor's . is paid . up9h fi_ling. ot return. "40 ·. extension is
taxwould be P20,600 (VALE.NC/A & ROXAS, supre . allowed as compared to estate tax (NIRC, Sec.
atJ44). ' · · · . 103). . . .

N~tice·~f Donatlon . · .. , _ .
·1 · . · .· · · · . · . · · · · :. · , ·. · Inasmuch as· the· gift-ta'x .is -now payable within 30

. . · .DO· ~_OR'_ST_· _:AXS_ E_:TT_._L_EM_ :ENT_· ...r:_ _·. _ days_afterthec;late·thegiftismade.andthei-~turnfiled

within . the same · period, the filing ·:cit .a notlce of
donation ls-no-tonqer required.. _(1"D£ LEON, supre
. f .. FILtNG OF" DONOR'S TAX "RETURN ·. 823).. ..
. Anyirclividual who makes anytr~nsfer·by gift·l:!rid .
'are required to paytax due shall make 9 return . Note: 1n.,order to be -~)(·empt from.donor's tax, 'and
· under oath in-duplicate 'andIncludethe fo_lloWcirig: ct aim fulldeduction 'of the donanon. given tcr.qualifi¢d
(EDP~_C)· .· .·. : . . . . . . . donee ir:istjh,1tioiis:dulyaccredited by ttie:Philippi"ne,
· · a, Each gift. made during the calendar year .C.6'unc_il.for NGO :G~rtification,. lnc. (PCNC) tj,e· donor
which is to be included in.computing:net'gifts; ' E;!ngaged inbusinesssbaf! give riottce.ot donation on
b. · geductions claimed and allowable; . ,· every donation . worth · at least. P50,. 000 to the
. c. · Any£r~vious net gifts made:duri~g the s~~-==·~.J~~y.e_ilue·oistrict,ciffi'?~:(RDO} which has'juris.dictiQn.
/' . calendar year;' .·
d. · The Name of the donee; and · /
. ·>:?.~·
t\~ ·
·1 j'·
~h1$.t~~ace."Of·.business "within 30 days, from" the
l, ·
<A~jlfi~ dft:t~e, institution's·duly issued Certificate of
-e. ~uch further- inforri:iatio_n ,.\;:s~t~~~fijls.=,;"'~tQ_..Q~fon,ustatii\~ that l")O more than 30?o· of tne. said
. stoner may reqwre·(NIRCf~t3]:1JH~)<-""?' · donffe\10.Q_if(r:~e~'axable. year shall be used by Sl,JC.h
· · _ . ' .
Note: The .donee, not being t~afil~ -~--~ofr?quirtj
to ~le any thereturn unless he,f.aG~~-~n:.rlent o~_tl!le.
:~g·
T
/. '\,,;}.:ff_~~~"';~ee~eg.ite<f~~:~;£~~i.t''y.~;

S .,1_1-~8, ,€.uJ)
~on-profi~ corwration/NGO
IJ}~tltut9,fq.~~a~ : 1~~at10~ purp_?ses (R.R. No. 12-
). ·, \~ · . . . . · _.. : ·
r • • • •

. · donor (VALcNCJA&-ROXA!fJ/fYP'1~t."24_f"- · rf'~ . · . .. '

2. ,. T!ME.OFFILlN~_-.Thefe(ir:sr~11 b'efi~d~,~1 ~-- .I'.~ '·· . . ·.A-~~~;\

· · thirty (~O).days afte( th, 9etEJlte gift is mad~~il@"l:d.. · ~
· M
. ?6.mplete~ (NTRC, $.e9.~a~l~fz!,f_ -~-:--. ·. ~-:.: . ._;J'J'.'~ .- .. ~~ .,~·
3. PLACE OF FILI.NG.:. uiitJrt\\_co"~~~ri
·'ot_h~rwise_Permit~. the rdtwr·~~ll""J'.je~.. f..
~lJ7~_j/(c-.'.·.
. . "-,~/-&:? ) f ~J,.J_
' .. .
the tax paid to:.
. . a .. Aumorizecf~g~-~tBan_k:\_:
>' . \., ; '\.
b. Re.venue D1str.1ct_Officer;. ,,~·)'
. ·,
·. · c. · Reven!Je Collection Officer;~ --t...:.:.,YA-~~
~':£;:. · . .·
~'IE.'N'T\r-· ~.
Jt,· ~,;;;'' .
.f'
v·
~,w~ ·
:b-~~~
·# .
d. .Duly_ .~uJ~orized treasurer ·Q ,tae ~i:f\f .-°:r }.;f f-\.i~ : . .
.. mun1c1~ah~y_where !~e ~ono_r wasobRl.l..EI!J~.· ~,: .· ~ .. ·. · : ··
. . - · at the· t,me,of the transfer; or ' ·'~ · ·
._e... : ·1r there ; be .. no. · legal rnsipence . iii. ··_the. . · ... ..··.,
rf:'l:lilip'pir'jes,. with. ·-t~E:l .. Office·... of· .. the., .•
· CO,mmis~ion:er.(NIFlG;_·:Sec.1f.J3 (BJ)~ ·., ·· · . · .): ·
•.• A.·

Note;. In ca~e of gifts. m~d~ by flqi_l~residen.k ti,e ... : . .-

· return may be.fil~d -wifh the Phi_lippi.ne E;mbassy or
Consulate in ~h.e country-where h1i'is dqr(ljciled.at J_he· ·, :
time· ·of the transfer, .or directly witti the Office of the ..
:···
Cqmmi~sJoner (N/RC,.S~_c.. 103 .(/;3)). .
,. · .. ... ·
-...: ..
. .·: .···
.· .... . ' . . ~-
,.

: .,2_06 I· 2019 SAN SEDA LAW CEN,:RALIZED BAR Of?ERATIO_NS

' .
 VAL.lJ.E-ADDEb TAX.
SAN,_BEDA LAW CENTRALIZED BAR OP0ERA·1:IOf:IS- MEMORY A,I0-2019.

v·t · ..------,--,----.-------,-----.
i·[·~-
. VAL.·UE·. AD.'n•ED T.
. . .
'A~_.. ·
.l"1.A.
.· .
Ncte:: Once the. -VAT is shifted to the
buyer/customer' as· ariaddltlon to the. cost of .
:.f. . . goods' o~ servicessold, tt is no longer a tax but
,rv- · an additional cost which the buyer/customer has
t· \l~l~e-Added -Tax (VAT)_ -· _. ·. ·. .. . .
t_.;: !t tsa tax on corrsumptionlevied on the sale, berter,
to pay in order to. obtain ttre goods·.or ssrvtces ..
The buyer cannotbe held directly lh:1bie to pay:
r- · excha_nge or lease- of. gooas or properties- and tax or invoke· an exemption privilege to avoid .
t services. in: the' Phillppines' arid oa importation . o_f , .. · pi3ying the output tax passed. on to them by the .: ·
~:. good.~ into· the. Phl_lippines· .(R.R. No. 1.6:.200[5, ·Sec:· · ' vendor, in the form o( t\igher selling' price (BIR ·
·'.[,. 4.105~2). .. . .· .· : ·· _. . . . . ·. ,.. · :_. Ruling :No. 639-12,. D~cetnper-4, '?.6.1?J.,. ·

fr-i.-, . Characteri~~ics.rif
1.. Is I~ Bf!
P.hilippinEl'VAT:" .
incl[reet-"tax.·The. amouat 9f t~~ rn\,iybe. ·
2. It is a. tax i0p~s"ad·:on-_.val~~~~dde.d to goods,
· . · .. pr:operJies or seivic~s of"a:taxpay.er,The t~x is
/. . shifted or; passed on by. the '.seller .to the buyer-, ·S_o-callea . VA~ because it is impo.sed on the
,.·. . tran,s~eree.:or. Jesse~·.'of goc;:,ds;''propert_ies ot : .. valuE:i not P.,reviou_sfy.subjectep·to .. ·the. VAT_·. i..e.,
f,.. .· se.·r.vices. ·(NIR.C, . . Se.c:. 105~1• ._ • : . • ·
. · ... o,:,· the -value adc/ed .Co the godcJs·.or ~~r.ifces. at.:"
"·{_· l'mpa_ct_.of- T_ax~ticin ~ -poin; whe~e- th~ ti;IX: is .:. . . ·;··,'ea.ch .. St{Jge:·:of fh!3 distrib.utiQ(l. chain (~.DE.
originally impol'ie9. or fi1e .one·oA: 'lf~qm· the tax_ is .. LEOft, -The: : Nl~C Annotat~p (2016), _.P· 2}
· fqrmally .asifesS:ed: (iNGLES,. Tax Made Less Jht3remafter2 DE= LE;ONJ. . . , ..
Taxing (2018j;°p: 7) [hareinaftedNGLE$].; · -;,.~~ . ·: ·. v·al ·."e adde. d.. · · ·th. d'ffi · ... · ··b·. tw . ·. t. t_- I :'-
.. . · - , · ·. · ·. . . · . , ,~,;t /":1, ., .u ., . :-.rs_ e: r er~n,ce e .een o a ..
)nc:ider:ace ~f Ta~a~ion ..,.._-~eJers_ t~ the· ~~-6~;,P,~~;,-i~f ·. · .. _sal~s ~f- _the· Jaxpaye.r- for. the- ta~aple ~uarter
. entity lo whom the bu(~efl,:oq~e indirect· ~r)s::~;:i-.,i:) · _- subJeCt _to -val_ue· _added ·. t~ ,-~n~ .hi~ totc!l
sh I.fled, the one who ultrmately bears the:bOtden\~';~f:·°(·r-Pw:ch~s!~'i.forthe s.arne period· subiec~ also to
of "t6e tax . (1/;·C :OOMONDON,. Taxatiqo·(;f0.18:Jt'"1i~-!.--~1i1tt~::-.~-~ 1rd
... tax· (MAMA_LATEO, /i?ev,ew._er: on
· supra a't·10) [hereinafter.-ll-C QOMONt}'()N). · :- ~ JI · · : Ta~at1etyJ11(2014),· '. p. , . 3~9) . .fheremafter
. ·. · · . _: . : · . ¢/t'' :, 41:ti.k-l . · '. MAMA,'ffiliO,Revie_wer]. · · . · .
· . lhe. seller. is: the one statutori\y}~~~l?J~:f~{·!~-e.··
. pa·~_eriL?f:the .tax; ~ut the am..~~n1~<:~n:~ t.a?.'.. ·
'X" · ·.
C·~., . ·:
1.
~ \. .·

must~» ~or: .. \ . . ·: _. .
. · • · .,. : ·

· ·
, ..

~:.;t_ <. ·~ . ,, - . ..
niay be.· shifted or pas~~n · to- tfit't;ffuyer.~~t · . ·
transfe~ee 9r _lessee -bf tt.l'1r;w,,o_d~;WrJr~ptrties\_-
k'i: , ·i~~ :. .
_or _s~.rv_'.ce~J(~G~~~'sup~~3at:$>f~~
.Exceptfon:·Tectini~J-_impo~l1
,:
~.g§'.~-R"~f: . f
·. In the y_a_sa.offax-fl:ee tmport-citi!;!J'l·ot·ggods·1n;o .1;., __ -~.:. · ·, . ·.
-~1 . A~"'. ::; !S.ll'.~c~.--~?!is·. craft_s. the· .wood
ot__wo,<?c:Mo:3~ms .... y1to_~,rocking.-~harr and
· : ·.. ·. 50!d 1\t~ <_:;fetus. · ..
th. e, p.h ·r· · b · · tit· ,<1. ., ·"' • • •;,111,-Z , !!•.•.Prrce_. P.100 . P.1:ice. . Pt50
_- 11pprnl:l&. Y.PeJ~on~; ~n '~f'~J:::ag~-~,e-~~-;.:.,..ti1,·,:\i_~·.-rtaVA1~12% ~- VAT 12% __!§-"
·E;xempt from tax •. wl}~~~ :sue~~- good_~;.,,~':"'""':~::;.Al...,._~T~fal . p112 T.otar ·. P-168·
.-suf?s~q~~(ltly so_ld.,, tr~('l~_feJ.red_9~l.e~-~ha~g~ ·ir:i · · · ,·, · *Net--'ilat Pa able ;;pe:
. th~ . Phrhpprn~& to; .nQn~exen:ipt .~Rl:!'ri~Jt~-. or. · · Y ·
erititie.S, ._·_- tb~ . :P.!-}rchciSefS; : ·. ·tran~fetees · .Or . · · · '' .
. recipients shajl _be -e:onsider,ect.as_. th~· importers . _.. . . . ''*"The 'tax. on· the·. valu~ added· by B6r.is·. can be
.the~e<?f,. · who· shall, _be _
_-1iat;>J_e_ ·for--i:my: internal' , . . ..seen· in the tever-ci(the. price (Value. added .of-·
·· reYepue_.fax. on such irn.p·orfciti6n (NIRC;· _Sep.... P.50 x 12%·'\iAT;,, P6 which is also.the Net Vat·.
107(~) a_s "!m~rided by TRAIN_-Law).-': :. . ... : · _.Payab~e ~f ~ris):·(./_NG_LE_S~supra ai:11~); '.. .
EXEcir:r.1~.«coM'M.rt:riE .·. :s'eli]Ec;rcol\,JMJ.TIEE .. :-.. MEM.j\ms . -, = AnvisERs · ., . ·.: .
~-. MARY. C~L:c. SUM,wQ'UI MA,RJA ..-c.e.iussa· c. GUiliITO . LIANNE M4E' D .. ENRIQUEi, "Justice JJ\PARB:°DIMAAMPAb,
7 . Over-all Chairper'$on, · ERIC:-\ .. Subject . ·· Chair, SHENA ANISHA M... HADJI HA5.5AN, . Atty. NICASIO.<;;. CABA1'1E!Rb, ·. .
r- . Acid~rrib, ..
MAE 'c, VI,~A' Chairpi,.;on.ior. G~oys:p, .BAYLON As#s(al'lt MARY EVIl!LYN. N. MAT-Eo;· : CPA, and ,Atty. DANTE 0. :DELA·.
BEN· . REI ·E.. Subj,ecf" ···chdtr, : -~p~ICA. :. MARIE ·· S~·IBRlt).'I)~;" · c; CRUZ, CPA. ·... . .. ·· '
BARBERO Chairpers.on.for.Hofel. ~ C.·· MANUEL· Subject .:REYES, ALYSSA.R. -ZA,RR.AGA, .
· Operattons; ]HELSEA LOlJJ.$E: B. ·· Electl;onic .. Data . : Prucessing, · TAGMA • · ESTIIER ·V .
. .DI.MMNP Vice drai,person for . REJNA G. FABRWAS ~eneral . G~ILES, . : . . .MfJU!'ANE
.~cretariat,· ~ .JUS'rn:,I M. : Pr.l!lciples,;A~AI f'RA.NCES ~ A. CHAVEZ, JEWE.1:.-· · .
. . .YJ\MBA.O Vic.e Chairpetsbn for · R. Ql:}INTON ~d CMlI.OTA N. JOICE G.. l)!'l,Y.IlA,.Mll(KAELA .
Operailon's;.MA. ANG~l-.tCA, B. "vru:AR()l\1AN · Income . Tax.- S.:.M._ONES; AND_~A PATRI~iA ·
DE LEON 'Vice ·ch,airpersoitfor 'APOLLO J(JllUS s. STA MARIA '_D..
·. Finance; · ARRA. Or.MAYA .. J. tr.tmsfe,:. T,u; ]ELLYN.
DAQUIAL, : .ALFRED· ·
c: 1-"RANCIS P. GALI..l;:GOS,- JOY1• •
·~ . ',• .
. -~ApANO~ Vi~e· Clialrpe~'}. 'c;:t.ID,®'1l'E.' Valu~:Added Tax, CJllSTEL . G.' . ··oAYbNA,.
'for-Audit,JORDAN N. CH,AVEZ : .MIGUIEL A.. _E>E Af..VA, Tax. MAlUONE · NICOLE. · :r:
ViceChairpersonforEDP,, HANZ . Administra(lon; E_nforcement,-and BU.GARIN, and KATIUNA ·ANN ·
· bi\RRYL D. - TIU . . . Vice· Remedies, and A'IJiBNAI ; S. PR:ADO,
ChairpersonforLogis/JC$, and · FR.ANG$" R. . QUll'ITON Real · :·
DOHN ,Af.J'EED E. AQUil.IZAN : Property and Local Tax . .
Vice·C}ialrpersonfor Mcmb.crship, .
 VAL"LJE-ADO.ED T-Ax··
SAN .BEDA LAW f!ENTRA.ltZE() BAR bPER~TIONS - M~(?.RY AID _:iq19
TIWH 'SIMS IMWUJM I

Note: As it ls a tax. ~n
,the tc~·ns·ac;~ion,' there 1s.. imposed. to. form part.ot, the cost ·of the go~ds ·.
. . no. need whatsoever ·tor there to he a' taxable destined for consumption outside the· territorial ·
. · ga{h (unlike·in income tax) (Id.). . · · .· . . border · _oi the . faxirig authority {Atlas
· Conspli.dated MfnJng and· Developtnen! Corp. v ..
3. ,It is a transparent form of sales tax. VAT_is atax Commissioner- of' Internal Revenue,.-· G:R, No.
on the· 'taxable sale.' barter· or. exchange of 141104, June B; 2007):
goods, properties or .servlces., A barter ·o( · , · · ·
exchange: has the same· tax consequence as: a . Exp~rts are . zero-rated bec~µ~e_. these. shall be ·
sale. A sale )tiay pe, an' actual sale or .a deemed . . consumed outside'the Philippines; while; imports
.sale, .or an .. export ·sale. or ·a local . sale . ··are. generally sueject' to. regul&r" "VAT (ate
(MAMAtAT~O,·Reyie.wer,supraat40.1). :· ·. because they· are: for 'ccnsumpuon ·in the
, · · . . Philippines (MAM.ALATE.O, .Reviewer,' st1pra at
Tranipafent·.- the la~."requjre~ that th~. tax 'be .. · 403). · -, , ...
~~Owi:1 as:a separate 'iterft lnthe VAT·.i.AV~ice· or.· ·" . ' . -
reyeiptfR.R.Nb. 18-2011). · - · .. ·. ·N.ot~: In the case of services, 'ti:)tfconsumption
: · '' · ....... . · takes place where the aervlce. is· pe'rfo.cmed ·
. , · 4. Jt · i~ a.,' broad>b~s·ed · tax on; consumption, ·. · . ·. following the "situs of se'ry/ceprinciple" (Id.),. .
. imposoa on .alf .stages of taxable .sale· bat the. · : . · . ·. . - - .· , : · ·' . . · . ·
· burden: rests with. U:1e. final • consumer wfm~==,;~-Freeport an:d Eco·no!1Jfc .z~mes. · ·.. . · · ·. .
. consumes, the -qooas, propenies or.·S.?l)lit~in-u-: - . -~- ·:1re~8,.0rt ·~o_n~$'· and E.conomic.. Zones · are
the. Philipptnes ·(MAMA LA TEO, ReY)i1ixer,p,supra· j_\;coiJsid~~fiz~ as. separate .customs territories.
at 4_02). ·. . , .· ·. · . ·/".C\·,~~!~ilE:s}.b¥ft~~!ies r_egis{ered wm:i· these zones are.
·. . · , . . . '. · _ : ..,(f'/', \,~/~- . eitniifeate<t,'~ssales outside. the country {if the
· Broad-baaed :.... there. is_.V/},:~6f,~1.~_ye~9"~HJg~,coFr,~=µ,~a:~,?fis ';~~Q- a _loc~for:, or if the goods are
the taxable sales of · g!i>2_cl},1' · t6perties 'lfY' 'y': '\.V/'. f~r: \exp~:_P<@ ,~ co.1,u1try , 9ther . than .. the .
. ' 'services·(Ja.). . "!/ ~~i.1 . ., . 1r ··~ Li:';. P.hi\ippi~.El~~,~~-d~rq_~stlc_sales, If.. c9:1sid~re!d ~s
. . . : · ·. .. . . /!,,;... . ·1. · -~· . r4,.!l-~ d.or:ne~ttcs.:11~s$t!lle~e sales are 1mporta~_1ons u1 : .
5, ·. It. · i$ ·.co.lfected· through Ktfle'j!:t{'t>.< cr~d (''~tl[oa'~t:=;:~""nands o\fle R\'Fifhaser and are !hus. subject
· .(~91Jietime.s. r(f]ferred _Mt~-ft ·. th~·· ."i~~~Jil~c''~ :t~ corre~r~~~!i·c.ust(!m~. duties ·anc;I_ other
·. method? (Id. at 401)-. M.· .--.,,,:~ . . . '-~mn-rmiif~taxe on impM~.6'f.?r~ducts_(R.R.'N9.2-2012) ..
. •. . .. . . ~ ~ \ . [:ll - . ~~p .. ·. ·.'~ . g .I u : > .. -
-_'_ ~ . : ;,J{'· .. ~ iliPM'°~: ~em~rfii . Zo'ne' 'Autho~ity. ~P_E4A)s ·
.:t;ax. Cr13~it. M~thoct (oJ;~\Jy:,tru~~--~({~l"..-·d~
· mput. ta.xes. sh_ifted ·by .,~el/el~~\~ ~Q.uy~t~. ~'"'r~_g(4lbl"ed'.jnterp1'.1_ses are VAT-e~e.mpt.and· no
. are crndi\e~ aga(rJSt 1f1e, '.buyer'.. outp.._.. t~~
_- wh~n _h_~-: 1n tu~n sells ~t_Jfe_1taabh('g rb.~s,<
/?-~~n-~~
<
. id ~Ele~r
pas~ld ~n to ~he,in. ~or.isist~ntly,'-
_Jtfe ·_·C.r:o/'-s · ~order ,o_oc_trme, actual
J:>ropert,~s._or service~: (!d.). '\ - . -,~ Sc1i::::, T\1,}exi?o . of: go.p_cl.s · and· serv~ces · f~om _the
. ... ·.'. · · : ... . ... , · · 7'"~,,,,,_ Cl"l :l.~11 ppJ;·to~ foreign cc;n.lntry. must be-free .of
musf~ation:~ .. · ... . ... , . ..tOr{"'•:·-~=.. :-·?4-A~i~~i .ter0:-rated~·whiie';· nrose-.~estine'Cl.·tor.
. lo ttie _tran.saction ·above,:.wherr.Arie11:i{.~_c:ifc-l the '\\ ;r· .f\.""ttis~)e_J;c 'ns~mpti.on within .th~f Phj!ippines sha.11_
·f':,.
. wood· ~o ~C?ris'. u:i~· 1?,12 o_ut~u_t.Tai:(o~A.~~s ~~~-;~"!1~se~~th _1 ~% VAT--:(Toshiba:!nf~r(J'lc1tion ··-
. b_ecomes the :lnputTi3X· of ~ons. ·When the ctial~-:-::: · _Eqµ1pment· .-(PHL}' Im;, v. Comm1s'sl()ner ·of
·:·is sqld io'··:Ctetui{,Boris inay clairn. ttJe P.12 as his · · . Internal Rev.enu.e; ·G.R.· 'No .. 15-7594, . Match ,9; :
· lnput·.tax.which.ls ~ed1.ictibl~-fro.1il'his:6utputJax·.,· . .' . · ·201.0)- ·. . ·.·.,. . .
·of P.18 (!NOLES, :;upr.a at 313)- .. · · . · · : ·
. . . · · . · : · ·, ·,'· . , . :.i,j~as~: see.-iurther.:di;cussion. ",:egarding VA ton.
· ·: · 6. It ·adopts ·the ;'tax.;inc1usive. method",·. U~les~ PEZA-registered eniity · on the· 'Kinds of Zer6-
. . ' ·. ''·otherwise stated, any pi-lee: qharged, hy 'a VAT. . . . rated Sale~'. beiow. ·. . . . . .
-· · · . .reQiStereicf ·Person shall be deeme·d to inCJude· ..: ·. : .. .. · · ~
. the VAT . ch~rQed (MA¥ALA TEO, Re'{ie~_er,··. . 8 •.. Ji does·· riot cascadiJ" (tax on. tax), !Jenee,. t!)we is
supra at 404). .-'. \: ··· · ·. _no ta:><.. pyramldir?g WA!v!ALATEO; .Rf#'viewer, ·.
: ... . . . . . . , . . . .· ·: . Si!P@' ~.t 405).. .. . .' .
· 7, It follows (he Destiiuf1tion-Princip]el(;_rr;,ssBorqer .. ·'·: .
D_otfrinEt {Id. at.4P2-103)- - · ·-- : ·. . . • ·. : ·. ~. . '. · Ca~ca.dinS. ~. T~x. pa~s~.Q. on ~y _the .previous
........
'• -·
. seller, which is . now · a .. oomporie.nt of · gros.s
Destina.tlo.n . Princip_le -br· .··cross . Bordar. · . : _selling. price/r~ceip~ .. of the seller,. is~ ag~ih' : .
Doctrine'· · · subj_ecte<:llC?·~a~.(l.d.). · · · ·, · · ·
·. <;3oods. arid serviaes a're· taxed o'nJy'.,· in' the.
. country where these. are cons·u.med, arid·. in . . . Reasoh:' Beca1.1s~ °vAT.a!Jows \;,s~iler to credit ··
·. . connection with. the. $~1~ principle, the Cross ·. ··. · his· input ti:JX (wtiicfi· is· equi-;,al¢nt to _the. 01,1tp!J~
. Borde~ Doctrine mandates that no VAT shall be .... tax of previous · s~lle'r) from hls .. _output' tax, ·

20~ ·1 -20l9 SAN SEDA LA~.CE~TRALIZED,BAR OPERATIONS

 ~,_. .... mlla! ~---=~
·1~- 0
.-VALUE-ADDED':TAX .
SAN·i3EJ)A
LAW CENTRALIZEDBAR dPERATIONS.: M_El~ORYAID :;1!);9

Hence, there · is no tax on tax (11-_C

DOMONDOf:J, supr« .at~~O).. 1· PERSONS LIABLE F~R VAT.· 1
VAT foreqorie in a prior exempt transaction may'
be · recovered from the.. succeeding . customer 1 .. 'Any.'person. who in the course of trade or
.llable toVAT 1:1nder.the "catching-up princfple" or bustness: . . .. . ..
'.'r'ecoupment · principle" (MAMALA TEO, . a. Sells, barters, .or exchanges goods or
Reviewer, supra af 405). · . · .. ,pro'perties .' (seller or 'tr~ns'teror), leases
goods· or properties (lessor);' or
10. 'it.is 'a··regr.essiv~ tax, _The VAT is. ar:i -~ntithe~is .a( .. . b. Renders services (service provider) (NJRC,
progressive -taxation. ·.BY lts very nature', it is.'. Sec. 105f. ·. · . . . . ·
· · ,regr.e~~ive·.. Theprlriciple of prcighissive taxation
has f'io t'elati.on with.Jhe VAT system. inasmuch Exception: A person, whether.. or _'not. VAT-
as the VAT paid by the consumer or business· . reqistered, whose 'annual ·gross sales ..or receipts
for_'eveiy goqds· b'ought or ~servi9es-,..'enjoyea.ls ·. does.not.exceed P3, 000, 000 'shall hot be liable
. the·· ·s.~m~. r~gardl~ss .ot-··income.· (Af3AKADA:-.: .: . to °VAT, but instead he· shall be 'liable for the 3%
·. <;,vro,Party_Ust v, Ex.ecutiv.e Secretary; G.R· No. percentage tax, unless he. opted td be registered
···168056, Sepiember, 1~ 2005). . . .· . . as a VAT person ·(N/RC, Sec. 116 ·as amended
. . . . ... ·.
- by TRAIN La.w), . .
·~ . ·.Adv~nlageS of''IAT·:·.
.;;, · 1-.:VA,T
# • ••

J:ias·a b'!ilt-:in self~pqlicing teeture.

• •• ~:. .·~. ,

... /1/'/_:lr
-~"~ _ • :-.. ••

2:_: Imports ·goOds.; (importer) .-· _the person who i,.

t, ;·. This feature_·wilt ensure :()~op~r ~bll~cti<;>n. ~f, ti:i.~-..;,;.';\.· · .
bn-~~s-~0¢,d~ lrito the Philippines, wh~~her or not
tax 'at all staqes of . d1stnb_4pon, . sinc~i.,}SJ.~.·.·i:~;.,;~l . . made _,n · the course of trade ?r business (f:?.R.
pay~_ents are based 'on t!l~. output tax. (VAT)}Jll;IS'.:·'. .~~;.J-.-
1f,.~o. 16-?ljQ5, Sec. 4. 105-1). · . . .
the__ mput l<!ix - {tax : ?r.ed1ts)- as suppo,,.rJ.~fal'. Q.~';fh·J~~~,~~*:'2'!·~:1 · ·. · · . . .
r~ce1pts, t~er_ebf providing .,i m~re ~$.G~~ate a.\Jd'rk · ~j
In· the-_co~'[l~ _of Trade . or -~l:'s!nes_s (Rule of:
tr~U ot evidence. for l;ll_R rno.rntof''lg··r,urpos~~?:-·:>, Regularity)_/U,t . · . ,· · · ·
Fµrthermore:, ·W wiil _encoura~~ . P,l!5,~i·
~e(s.)o'...!-' 1_~, Regular coptl~ct~or, pursuit of a. coi:r,mercial or· a.n
de.mand accurate -receipts to aqg.arnu1 t€9'more . If~ ·econotnicpctit-ity'.}_,including transactions incidental
'tax cre~its. It will' ~flu's riii')}.mjzJr·~ax~1v~.Ion-~ thereto, V('~ 91.
an~ pefSOI') reg~rdl~ss of w_he_ther or hot
OE LE~N; supra-at 14). · /ii[._~~ ~"1"'\· : .. · -~ (~!f.the per~~m.. e.fjgag~q therein 1s-_a non-stc;icl<, non-
;, . ;.. _ . . . . . V1'(.' _..,,...::;?'Lrj\· . ~f-:!\. !J,·ii profit~.r;i~'aleM'>r.ga91zation (irrespective. of... the
-~ '. . 2: VAT covers_" more transac11i:ms-.. -if)~,:;/fiderJ,'} );~{ dispo~it18n?&titil~"Fi:~'f income . and. w~ether· or -riof it
. . base·. . '. . . . . ' ~.,!:j/-,(). . ' I.
rtl. s1;1lls exclusiv~I}:' t~ me_rril?ets 'or their. g1:1ests), : Of
'VA.!... ,s · g~rieraUy r_nor~ ·broa.d-~as~~ ~1t 1s · g~g,~v~rnment entity (NJRC, ·$ec., _ 105; .R.R. No. 16-·
. . extended . to cover both.- goods· apd~s~rv1ces). .J~il1'.21,i@5:'fS'e9. 4. 1'05-3). . ... · - · .
.. . Every saie_ ot,g~~s,; pr.ope~ieSor.~i,'l'vic~s-~;1irer•.•:-~4~..d.;.:u~~-. '. . . . . . . ... - _ : .· ·
. le',,'.els ... of .~.ma!1ufact1:1rers . or pr@~c~r~~J?Jnd_ . A transaction will.- be charactenz.ed as ·having be.en
. tjisfributors :is- si.Jbj~ct to. VAT· (M~M~_{:~-TEO, · . enterec,l .into by a' _p·erson· in ·the co.urse of trad~ or
. ·: Reviewer, s{Jpra .it..4Q2). ,· ·.... -q ~· . business ifitis: · · . • . . · '
... · · · ·· · ·. ' . .a. --Regularly conducted; and
VAT:·i-i-fakes ::·s'al~s. tax
:more. eqi.Jit~ble:· systefin... b.. Undertaken· in ptl~uit .of ~ comm·ercial or.
enc;oi.irages:savings. . , . . ..... ' ....... · . economic. activity'.{JNGLES,supra at 31,f) ..
The VAT SysterTI enCPurag~s. SayingS beCBvse. . . .. . . .
.the. tax is i,npo,sed·· ohlf upon con~1:fmgt,lon;... Regular·.. ·irivolv~s. · mo~e than. - 'one isol;3ted.
M6repver; investrnents..in capital ·goods· su·ch a·s transaction. It requires. repetition and. continujty of ·
· .rii~chiti~ry. and; equipmen(:~re ·ettectiv~IY- not..· ..~ action (id.).. : . . . . ,· ··
... subject tq yalue·.adc;iEf~ Ja,:c tt? th0 p_rOYis1o)i.iri t~e ·· · · · · ··
: · Tax.. Code all<;iwirig · taxpayers to: recover.- input . . l·n~idental ·-~eans dep~ndlng \p~n or app~rtaini~9
taies' ·. 'pi,i'id . on .. acq_u.isition .'of. capital .. g9ods . . ', to .somethiJ:lg else. 'ptim,ary; somettiing n~cessary, .
thrQUgh refund <?~ tax· credit .(fa.).. . , ... · . .. appertainirrg fo, or ·dep'ending upon. ·another, Which
. . . . . . . ·: " • - .... is terl'T1ed·,the principal;' something incidental to :the
4.' It is simple ·and cons';sten,t. '.. . . . . .. . . : ~- ··,.· ·. mairi· purpose (Black'sL~w'Diqtiona"ry,6th f=dition).
-. It h·as only 2 tax ratei;'.(0%' a,:,d 12%) ..' Henee,'it is ··. · : . . ."· '. . · ·: . . . .· , .
. easy° ·,to. administ'er'" and·.. to toin~ly:· ~jth;. _and ·.: lifola'ted ti-.arisacti6n is generally not In th.e.ordinary
expectetl to generate large revenues. (2 DE .. · c;:ourse ci( trade or business, (,ence, not subiect to
·LEON, supra a_t 14). ·. . . · ... · .· · business tax (TABA~. .& ~ARCIA; Transfer and
. . . a·usiness .taxation .. · (2018), · p. ~28) [hereinaf!er
••1 TABAG & GARCIA].· : .

· 2019 ·SAN BE.DA LAW CENTRALIZED BAR OPERAJ'IONS 20.9

 VALUE-ADDED.TAX
SAN .BE:DALAVI CWTRALIZE:D BAR OPERATIONS.- MEMORY AID 2019
AWHiiMIWS a a AA frfs+MWi&WW kfNA•3fMJ
•
Not~s: -·. .; . . subsistence Of livelihood .and not. in
. i. Transactions, incidental to the pursuit ·of · the course of trade . or business
'a commercial or economic activlty are (R:M.C: No. 4-98).
considered as entered 'into in the course
: of trade . or' .buslness . and. are -also ... VAT-Registered.Person
· subject to '.VAJ (Kepco (fij(!n Corp, v. . These are taxpayers that are ei,her:
Commissioner ot Internal.. Revenue, · 1. ·Registered in accordan·c~ with th!:l lawi. or.
· CTA Case No: 80,91, October 23; 2012). .· 2. Opted to be registered as _a VAT 'person.
ii. It does. · not follow. that an . isolated
' . transactlon cannot ·: be. an . Incidental . SuolJ. status Sha.fl . continue until. registration .. is
transactlon · for · VA't :.· purposes cancelled qr· until the , .3 · 'con~ecuti;;;~ years
· · (Mindar.iao.II Geothermal.Pa'rtnershipv; moratorium had lapsed .tor .a person who .opted to
Commissioner.. of ·. lntemet Reve(lue.,: register <'!$ a· _VAT person and -th.ereafte( dectdes t~ ·
.G.R:. Nos. 1933.01'.-?nd 194637, 1)11a;:ch. . · revert to exempt status ·(NIRC;. Seq. 236 "(H)(2) as
11, 2013). '. ·_ . . . . arnendedby·TRAINLaw)." ·,. · .. .' . ·.
iii. The ·$ale,. which: Wc:!S. involuntary 'and· · · · ·· · · · · · · · "; '
.madepursuant to the declared policy of·· . · ~xc~pti~~: -, F_ranc;h1se· gr_al1t.~es of: rad_io and TV · ·
. , ,Government·-for · privatization Wotild _no, . fjro<!d~sting. whose annual gross ..recelpta.for ·th~ · .
· .. longer bf\ repeated or earned "on ~ij!!,-.,......,,,J>re~edmg·yea~ do not· ex~e(! ~lO,QOO..O?O: In their
~eg_ularity. Heilc~, if the sale i~-:~ad~~?t·if.J ·~:.m,~~!1! o~t1on ~ec~n:i.es perp_!:l~U~!IY irrevocable
·. :tn p~rsuar,t to its -r~gCJla,r;~s~vttl})l.is I(.. !f(J :f?)~ ~?18, Sec. 2,)- ~ 1 • •. , ••

. con_s,de~ed as. an 1so~te~?q·~ia,.9--r:b:..:.:""":"'VJ:>,·T::J!egi~~~-p~rs.on_· . ·.: · · . : . .

not subJect. to VA ;/9_ 0m . £~.1f9.~~
0~,.,.:,,~~,LP"er'~!l·JY'J.~
:~~the col:Jr~~ -of trade qr bu~iness·,
lnternaf Re.ven~~ ',J Aila~p~at,...l,..mes'..,5~ sells~ba{!e'F~\.or~.Pf~anges 9000s·· or properties, or·
G.R. No. 146~84, ,/tfJ2i3~, 'j. Off)· · . . ]7ll .' 'Ji... "*gagestin. tt.i~s'.ale Qf exchange of services, shall
iv .. The ~ale of the jow.ei,·R to
an~sets .not 11J. '.(~. IJ~liable regi~/~iPc'vATif:. · · . . _
the co.urse of Jrade o business'.'. ·: as 7,~~· . . l. ·}; \.JJ-J. \\ ·. . . ·
contel'n~l~ted. l!fl~~,.. ·.?-c. 1.<[5'~~~f!!~~11 lf· '.. i.,,-".J::!Js-iross··~a~'lI~QAre.cei°pts fqr the past. ~2
_NIR9,.~nd tt,uspnot-s:u-p~~ct!C!tAl'! ..A°l..Jiy>1!(t'.:~;.,frnon_ts;.oth~l tt,an~t~~se that.are exe,:npt under
_sale .of. tl:ie pow~r_Blaiilt.s rs -not·1n P!,JrS.Oltw,:ruzyro Sec.~09 (A}.ii5"'(§B!)hav!:}, exceeded P3 OUO.
• of. a commercra\ or~.c;~rofli{ic~h:ity.bu~-£_ oooi ,@ ,'~ ,! n.-. . • . • . , .' . ,: : ' .
a govern:ne~tal~ fJ.i~c~o.n ~#,)l~t~
la_w to: pnvatrze .~f?F·g~{e~~~-~s~~
_Ei~., ·}:2~t. . .-
1..Jl:t..
.J~!;l_.!.~r.oss iafes
9re rl~~d~aJ:;le grpunds to beli.eve tllat.
·9f
I

_r:eceipts' _for_ the ·next- 12

.. : . _(Ppwer. _S.ector \ss~ts -~ntl_ -~~)~!!!_~- I. ""~9t[s,.ott\er tha~"those Jhat c;1re exempt· 1;1nd~r
, . :Manaf}el')1~nt Cor~; }IS. ~mfriis~fe~~:iw- 1_0#(A),tp ff3B);' will exceed ~3 •. 000; 000 ·
. · of lnfe'!1al R~veou.e).;~G,R.· No..~,Sl~1Jf..7!!IEN1\~(J)ll~9.~~c.. ~3t (G)(1) ·~s, <;1mencJed tJy. T.RAIN
., JJ:4gu.st8, 2017). :"'~ Jr.-_~---~Z~J . · ... ~·7 - ·: . . .:. ·· -.
. . . . ·. . ·~~ -t Ofl.~==-~ -<t \ ,-.:, /. . .. . , .
. :-,,· .. _Excep_t!ons~o·th~ ~ul~ '?f'.~.(U~J,ity:
=. .. •tvr
~~l?;~l..i1ersonwho. is .re~uired' to. register· 'but
. . • 1) lmp_ortahon - ,s ... -subJect ~~ ..l. ;l'JLt:a~~~o~ ;,o. As 1:l'fo.rm of penattx; ·he. $hall'not. be·
·· · regardless .of wtieU,~r or.r10t it is ·rn~ntitled to claim any ·input tax crepit; alttiough. he is .
r · the· G.9L!i"se ;'of trad·e·. or.· l:1uslness · liable to: output tax. in· his· taxable.$ales (NlRC,: Sec> . ·
(R.8.. N9..·1-6-2QQ5,'SepA.107-1),. . '
,·. . 236 (<;3)(2)
. as amended
. . . by'-TRAIN
. . Law).. :·: · ; .. .. ·

Note:. VAT· sha)1. be. levied, .assessed .. V.A'J"-,Ex.em.pt Per.son . .

.and. 'coli'ected PO every, importc;1tlon of' N.ot·liable: for Jhe.·imi:i'o~i\ion .of o.utput \/ t;,.T on its
· goods (NfR'C;, Sec:· 107 (A) ·as aine.nqed_ · $ales, either~because:.· · : .. . ·.
J;,y TRAINLaw). . · · . . . · · .· . :- · . 1. · His trarisa~~iO.[)S ·are. thos'e '.falJil'.li} unde( the 'list
: . . . .
.. '· . · of't~i:isa<;:tkms:that ·~.re exempt fr.0m VAT under
........ 2)~. qervic;:~~ ·i"~ndered :i~. "tt:i.e. Philippines .· · ·. $,e.c.. 109. A·. to_· .-NS .' a~ ame~d.~d.. · (11-C:
by ..-. non-resid\3"At . foreign. persons. :: . _DOMQNDON, suiJra"a(5_8);_or. · . .. . · .
·.~ . . . ·be:
shall COflSic;lered ·. as. being . : ·· 2: He is. specifically ·exempt ·from .VAT by specific
.-rendered· ir.i the··course of.trade .or· .. · .. · provisi?IJ .of .the· Co~e; -.by specJ<;1l ,laws- or. by
busin~ss ·.even. if ·th_e· performance of .. . _intemational agreem·~nts (Id. at 56).. · . · ·
services·. is· ncif -r~gular (N/RC,· S~c. · . ·
105). . . , . . .... , :·. Note: ·"ill~iell~r· .ha~ .'no. -o~tput t~~- liabfiity -~n .
sales, but th~' input taxes passed on fo .his by hfs
~i~
-3) · Any bu,siness where the gro.ss sales
. . or receipt do nor e'xce·E;d f>100:0.00 · suppliers '·of-goods, -prqpertles or. services form ·part
d1,:1ring any·.12-mo~th period sha,lf be· . hi_s assets or opi:lrating exp:enses (MAMALATEO; .
considered pr.incipally·' : · ~or · Reviewer,·supra.at 431)...

210. I 2019 SAN BEDA LAW ..CE.NTRALIZED BAROPER~TIONS

 VALLI E-A-DD'ED
SAN BEDAU\W CENTRALIZEDBAR OPERAT}ONS:..MEMORY'A/D2019
·rAx
•awllmllltF~.EIBlll!li!ll!!IIIWMIIIIIIBl·~(~MSSRIMlll!llll!ll..m&~rl!lllmllNNm'i:llll!lla~IDlllllSillllll~IIIZIPllll!•l!lll&FHm_..111111111~gm111111illl!~illllllmlrGlllilutr¥m.,j/jJ~:l'!ll!ll~

Th~.following persons ~re VAT -exempt: · 4. VAT_,Exempt under Tfe~ty· .

1. -Per.sons n_ot ~ngagep · in · undertaking VAT· Under· th'e Vlerina Conventiqn on Dlplomatk:
. taxable tram~~ctio·ns: . . ·. Relations of 19.61, diploniatic'agents are exempt
. a. . Thqse:whose .~nn.ual gross sales .or receipts from· all.-dues, taxes, personal br real,:-nati.onal,
. : do not exceeq· 'f>.3.,.· 000, · 000 ·(NLRC,. Sec. · -r~gional or ~urii_cipal. · ... ·
. 109 (1)(BB));' and · ·
· b; . Npn~stock/ nonprofit organizations. They ·are, ·nev~rtheiess, subject.to the· ·indirect
These . are. organiz~d . primarily'. for the . taxes of a kind whl9h are. normally fnco'rp6rated
. . . purpose . of enga'ghig·. in nontaxable in theq:irice·ofgood~_or s·ervic~s (?IR R4/ing No.'·
,. ·transactions. · · ·065-96,.,f_[me. 18; 1996). ·. ·· · · ·

A. parson; : who is engag~cj, .iri · b~sin~ss· . bf 5. · ~ln,ema/theat~.r Operators _

u_nderta.king.~xempr_tr-i:;i,,:isa_~tions,.i_~· not liable to . Grq:;s receipts of cir1err1a/theater owner or
.-value added: tax. However, if at the same time, 'operator from. sates of tickets to-movleqoera are
· ·he ·.also· .undertakes taxablejransacttons, the. e>.<empt. from. VAT. ·cinemaftheat~r: movie,
vc;1lue''of.wti'icl) does ..not exceed ttie:_presc·ribed ,. . _houses.a.r~ not induded·_'in th~·.enumerati_on··9f_
·threshold, be' is not' liable to .pay value added. 'taxable servlcesin the·VAT taw (.Qprrirnis$ianer
tax, untess.be opts to register··as a VAT person . · ottntemet Re:ve'nue:v.SM'Priine--Holc/ings,G.R:
f .- (MAM~LA T.EO;Reviewer, sup(t, at 4.$0). · No; 183505, February-26;'201 OJ ... : · -, :· · ·
~.\ 2. s:u~s;~te.nc.ej!.Li~eiiho~_dlnc.om_e·· · _1(,';j~-'·Trab;~~tI.ons:of~-p~c·i~l\lA;~e~son.s, · - .. '_ :
. f:-"':( . businessor businesses. purs~e_q by.,_-~li;t·c~ 1 -, · H.4sband_.-and VV_ife '. · .· · . · : : . . .
f.
,. .
md1y_1dual where the aggnrgat!:) -. gro~
rE;ce1pt~ d~. not exceed P1 O:?,
000 ~!J:m~ the\, tf_~·-.,
saht~·P\ ,:••'~ · . .
Hus_t;iand_ and wife shall be considered separate
;~t,J .:
ta><paye~ ...._for. purposes ·. of the P3, 000, 000
\;·:··.:
•.,'__._,·(·'.. ·./ smuobns~1hst·eP:cneodorsh1·1avlel
lb1·h~ocdon;n'dderneodt
P,n·n~hce1~~J~rf J1111'.;!.:."'~~~fih~p<·.:,SHoweyer, _tn~ ag·gregation rule . for .
. each"-·(axp·ayer· shall· apply (R.R. No. '16-2005,

i'Il't·lIP"'· •·\ <. . . . ";

.,, •.• " . · . . . • "· ,.. ' .,.-,.;;.,, . "'·~ 1 .
qt business (R.M.Q-. No. 7-g014). ~,.,/ . ·
' • . ! ,;-
,'!.
-<:''',,-/fl. ' • .
t1
Sec .4 1:0.d>l~) . .
·. .· ·
. · . . . ' , # · J,\Y~ • ~ (! I \\ · · ;
. ·He.rice,· not subject to business t.ax$s-({T@AG-v~- ~;(. A.: · 1,R· ·1 · · · - ~~ . ·
GARCIA··supra at 2281· .. . ·,,;..-f).., -·r.;,r.<·~· ·. r ggre a . u e ... . . . . ' . . . . .
:; ,. . · : · · ·.'. . ' . : : . · '.: >it-..v: ."bf::'-""?·· , rt;;~-.
A_ sp9, se tt,'h'?!~erive~ r~venue· not ooly·from- .the-
.- . 3. Persohs e:xeript from ~'V-_AT.. _u@~r .SP,eciir b~ract!_~· .dJe/~,s~rofe.ss10!1 but ~lso fro~ ot~~r
· Laws; . :_- .. ·· .· .~~yY
~-2,-j~ -\~ , -~~ 1~·.
.::h~-t9,t~~.)~&:<?J'j)~~~11es~~-~~ ~h1~h_are_hk':}~1se :
:a. · Cooperative · DevelbRl)'iei,t=i·~·t,\uthorJty · !~1~. · . sub~~q!:.:,..'ilA'f, · _s~all be. aggregat~ for .
. . · r.~gistered cooperatives "'(lff.;gfr'Nfjj.· 691$$; ·!rH·.
purpc:ises 9f: de~e~~,m~g -whether_ the. threshold :.
. R./t No: 84_24); .
.. . . .
.. ..
.
_".~·i . );.) ·. : ··!,}}mtr:;:~!lr:n~uri~ ha~ .been .exceede_~ (~-R._N?-,1~~.2005,
,;-;,:.,•·"' ... ,., .:.:. :...l:i~lf,'·· i ,1 ~~lf,9,,4) 09 1f ;. . - ' . . . ' .
A . . qualified cooperati_ve. 1~f;SO .ep19ys~..:.:·~...,_""1~,,._ie!a ·. . -, . · ·.
: . exemption fr:om ~~ .req4ire·mept of a<£venc;e , .2. J~int Ven.tu re ·. . ..... , . .
· paym·en(-ofVAT- ,upon- y.ii~~ra~~tf{9'Jl1. _the · . -.'A11· ·unin?orpor<;1~~d_ joint venture· · un_der:taking .
.'_Tefi,:iery/rnill; .Tbe agri~µlh,1_r-~I _,qoop~r;'.l~ve's, · e:onstrue.tio_n or-:· energy-re.lated .. coritractual
.exempti_on ..froin·the·r.equir1;1,ment of advance · a'ctfyities·with the. g_ov~rnl'.ne.n_t, although._:~xempt
· ·· ..... payment is· a logical : c.onsequence ll)e of · fror:n i_ncqme. tax·, ; :-~bal,I be . : Hable_· to. ·.V,AT :
exenfption-.fr.om,'VAT:i;>f·ils· sal~s of reDned · . (lvtAMALATEq;·.\/alue'.oAgded Ta~ 2007/p. As)_.
·.sug·ar: (CIR-..;._Unite,<:l9adii;sugarFf;lrmers ·_.: [h~reinc1fterMAMALATEO, VATJ... · ·.,· ,. : ..
. A~so,cia.tion .. Multi-Purpose : Co.opf1r..ative, · ·
·. GR:. No. Except,on:. If the, .uni~~orporated:join.t-'venture i~
. . 209776,.
. . -·. Deceinb~f'..
. .
7, 2016).
treated merely. 'a's. ~· "flowsthrough, entity"/ the
b~ · Et;lterprise regi_stereci with Specia( 'Ec_on~rrtic ·mem~rs qltt)Ef].oint venture are ~espon~ibl.e' for.
. z.o'nes.or. Free"Poi;ts in th~··Phllippine.s; · · ·\heir. respective · oblig~tions._ -.yndE:i_r , the . jo1nt
veinture agre.ement .a.rJd can· claim Input taxes on' -
... Wt)il~ · an. ;co~cirie' is geogri:Jph·i~ally .. ~_ithin . · . their-.t~1<able .-pu(ch:ases '([;HR Ruling.:No. 2~97;':.
the Philippines, it· is . deemec:l a· s.eparate · J_anuary._14, 19.9'7).· ... · · .:i,.: ·.
:·cu_stoms lir._ritor/cirid is '.regarde,<t ii:i law _as ..
f9reigo soil: ·(Commii;~ioner , 'of _ Internal .. · 3. Government. . .
Rev~nue .· v. Sekisui,Jushl Philippines, Inc., a .. : Performan9e of es.sential . governmental
·· ·· G.R.-N_o. ·149671, July.. 21, 2006). · ' . ·fwictions ·.exert:1pL· froro . .'; VAT
.·. · . ·. (Ml!,lvf!\LATEO,.Reviewer,'_sµpra·.at 430). · ·
c. . .Regional or Area· .Headquarters. establish_ed
· b. · ,Performance of their proprietary ._functions ....,:
: in _the . ·Philippines :· by · · :multination·a·1
liable to pay. VAT ·(BIR Ruling N9. 060~2000.
corporatipns (BIR Ruling No. ·1.76r88); and
dated November-8, 200p); ·
d. ,nventors (RA. No. 7459). · . .' ·

20l9 SAN BEDA LAW CENTRALIZED BAB OPERATIONS

. : . .-:;. ·.·. .. I ·211
.
 . YALlJ.:E-A.DDED, r AX
SAN BEDA LA','(CENTRALIZED BA_R OP~TIO"'S--', MEMORY.AID zoi»

.Note: There is ·no automatic exemption ·from 3. The right or privilege to use in tlie Philippines of
value-added tax registration requirements of ... al')y.. ·· in·dustrial, · commercial, or scientific
.Iocal gov.ernment units. · F.or a~ · long as a .gquipment; and . . ..
governm~nt. entity· sells, barters, exchanges, 4. The .right or. privilege t9 .use _Motion picfures
. ' leases ·goods, ·properties or, renders services in : films, tapes,· an·d discs; and . · . ·
. · the course of trade· or business, it is required to ,5.. Radi?, televfs!dn, : satelllte Iransm.lssion · and
-reqister 'as -,a· VAT taxpayer. Accordinqly, .if the: . ··.. c~ble. teJ~vision time.(NIRC, Sf!c.· 106 "(A)(1J-as
. localjjovernrnent falls within the- provlslon of .amended by TRAIN Law)> ·
.Sec. 105- of the Tax Code of 1997 (l.e. in the
performance of its. proprietary functlons); 'it ls Req1,1isite_s for Taxal,>lllty of Sa.le of Goods and
required 'to -. register .as.· a VAT taxpayer · .. · Personal Propartlas: (WANT) ,
otherwise, lt is not (BIR Ruling No. 060~000 1. ", The gbods or: properties are · located Within the
datedNovember8, 2000;: . .: . . Phlllpplries and are for USEi of consumption .
· : · . . . 'ttlereln;· . · · . .· · . · ·
-4. Non;Sto.c;k; N,;,~;p,-_oflt Asscctatton: . ·,.' 2. There is: an' Actuil ·ar deemed sale, barter 'er
a. ~ot ui:,_dertalsin'.g·any. taxablefransactlon.>- . .:.. · ex-c:_h~rig~·Of'Qoods or personatpropertles for a.
exempt from..
VAT (MAMALA TEO,·.Reviewer,
. . .
. . · ·· valuable .
consideratlcnt
.
. . I . . . .. . . .
.
supra_a.t430). - . ., . 3. T:he· sale is·Not exempt from VAT underBee,
· b.. Eng~gE:s in . any . taxable· .saie _·of: goq_osJ?.!;. .~~9 ·of _t~e ~IR.c, speclal law, ?i tnternaflonal
. services - 11,abl~ ·. to pay VAT: (Af,j,f3.:~ec: 1J ;· 1~-·. j_9~~ent. brndrng.. ~P0!1 t~e government of the
105).
, ,... : . · .. · .
. . ·· ~
· f~t
-~·,. l . \.r.t1J•PP.Jl'l~s1and
[~ .~....,;.;.~.::'._T,~e·s~~~~~ithe courseotj'rade orbuslness.or
..

!t is exempt only fr<;>m dir~Jf):tfxe~%U.ert""'.as . . .· ~"}c~se ,i>_ .J?i"ofe~ion . i~. ·_- the P.hilippines
rncome tax.: and this exnmptlQD;)J::301).~t ..'!'b~-~(~~~ O~l}evjew.er; supre ·ar.414); ·: ··. .
extended. to- indirect :taxew).l~'"'iV"A>T-. ;if:hus, .J& ·,
1;.; .~v~-, '\" · '\ :..:"7\ '\ · . . · · ·.
pµrchas'?s of_ goods a11c;t·Yser?r~t (~j _.yell .as ~~. :ir~~(Bas.v an~~ Rat~:nwelve pe"r.c~mt(12_%) of
rmportations of goods) _th~: Vj"f· r~gts~e.red_(or _- ·;.the gro~~i ~elh~ ~~e\or:gross·.value rn · money of ·
. .VAT registrable) .supphers~r.Eysu_bJeit lB'"VP:. · 1J'l'"e"''""""goo~s· .Oj .:.gf2()~rtres· sold, ,-bartere,d · or
. (VAT RiJ(ing_:No.. 005-0Q9~1'11;/\' 007-:0~! ~pritEg2:;;i,R· X(). ang,~d.Slic1laJ< ifi' to·-~ paic;l by".tl)e seller. or
2009). . . · · \· ~- .. : \. .~ sfer~_; (NIR ·. ~~- 106 ·(.ti}: ..as. ·amen.de~ by.
. ·. . . 't~ · (Jl\ 1 •
~-~~'2.'iJ·.
·
' . ·. ·... · . . : . ;
I

I
. ·s. ~!~-l~1~. it ;s th~ s~1/r~l,s·h1(~\~~1.~j. Jt.iJ~t~~}<ac~/:~1icfe "barters. a.~d·,~x~~arige~:.
I·
. output tax .~11 ·i)is· taxaotf sal~\.-Ho~_y.~t.,.'-,!~- · ._. ',ef;Jp;g_~s~or_pr51pertiesJNIRC, Sec .. 105). . · .' . . . ,
case ?f irppbrtati_on;_it shal!xbe the··itnpor-t~I\N)lo~y.'v- ·;!' .· · :,f ·' . · . . · .
·. shall pay VAT·prior to the· feJea.~e ~e ~'esf~~if~fP.!J §¢1!!:!Q . P1ee· for_ Gqbds or _Properties
.. from the ~u;>toms .te_r~to~~· TRi.\ is a!)'i~-~~tio~~.-Ptt?e;::.:t_!i~~- ~~ProP.~rt_Y. - the to~I-. ~moun_t" ¢~
. . .. : to· the g~neral rule ··requmn_g ~ ~le'<l)~_w-eiff\To,::.-'"'~~6:Y!f.'r~t ~-~1.11yale.ntwhich the__purc~a-~er pays or
·, ,shall. be t~curred (MAMA LA TE.O; ~~ &ue[_a a! '\jf i.~o~li&ate 1:to. pay. to -the seller. rn cons1de~atlon of
: : .. ,4~)... :
, . .
:: ·· ....
. ..
'. ··.
. .
. · ...
· .
:~~_!.,fr-,t~... ~aJ<barte-r.. or __ exc~ange :--0~
the·.. goo_ds or
. .. . . .· _. ITToper.tre$, exc(udrng VAT. The exc1~e.ta~.. If any, on··
____ ...,.......... .. ....., ..,...____ · . .· ~elling·price
si...ch good_s or prope~es_shall form.paii·of._the gross.
(NIRC; :S~c.. 106 (A)(1) a,s.ame.nded by
··vAT ()N:SAI:,E ·oF. . . TRA!f'! faw). ·: .· . '.' ·. .. .· ··. . .
Goons. oi. PROP°:ERTrn_s . ·. ."If the VAT:is nqtbilled -se.paret~ly, the ·~elling "price
..._ _.._..,.. ......_ _. ·stated· iri \he sales docume·nt shall .be. deem.ed to..l)e .
. Go~ct!i 0~ P.roperiie~ _·. . .. . . in~lusive of_YJ\\. (~:R.. Ne.. 16-2005, :4: 106~4). ·sec_.
·. ·M0anS. all. tanQible anCf-·intanQibl~ .objeCts· which are · . . . . . . .. _ ~ . ·.d ·. · ·: · •
. _.. . ~ of
c~pabl"e_ ·pecuniary".estimation and sn~II :includ_e; : .. ;____ Allowa~I~ ~edoc.tl_ons·fro?1Gr9ss Selling ~rice: .
arl')ong othenf {RJ'-EMT} . ··.. ·. · ·. ·. --. · . . 1 ... ~ale~-~sco\mtl,> qe~~rmined an_d ~ranted__ at the
1: aeal ·prop.ecties. h.eld prirnarily_ f<?r s.a_le to . ~.me. of_'the :sale_..as·_~_xpre!>_s_ly._111~1?.ate.d ,n ~he
. customers or . '1~1ct for .lea$1;1 iii lhe o.rdlnary . .. . . . invoice, . D1~~urit5.. cond1t1oned . upo~ - . ·the
... course·of trade or business; . .. ... . . .. . . subsequ_ent h_app~rnn_g·o! an f;lvent or; f~lfillmer'lt.
· 2. ·The ·right. or privilege "fo
.use E~tenr,. copyright, · · ·.of..~ert:-31n·,condrtions s~~II no( .be ,~!!owe~ as
design,. or. . model,. plan, seqret ·torn,ula ... or .. deduct1o~s;. and .<R-~: No. 1 S.?095, ~eG. 4, 1_06-·
process. _goodwill,. trademar'I( trade. b·~and; or 9). . : · ·. . .· .. . . : .·
other 'li~e pr~perty·or· right; . . . . ·. -' .. '.

----------------------------------··· .
 ~:.
f~:/ . VAL.UE-ADDED. TAX
. . °sAN BfD,:i LAW CENTRAL/ZEDBAR.OPERAT:JONS ~ Mf:.h10RY A.ID 2019
·;.~· -2-.·' AA Pi ff

if'
0

. Sa!.~s ;eturns. and ~llowan(:~S gra-~ted. where ·.. Gross Selling Price _in Case .of Real Property~
'i, .. ;° ~.
-propef credit" or refund W9S ·rn·ade during · the It is whichever is.higher.between: . .
l, month or. quarter to the buyer .. for sales ·.1. · The coi:isideration· stated in the sales "document:
· _pre'(iously recorded ~s taxable sales. (R.R. No.· or .. · . .· . - .· ·.
·16-2005,. Sec. 4·..106-f!).· . : ·. . _2. Fair market-value which shall mean the higher of ·
· va1u·e .. as .. determined by : · the : (a) ·
Sales returns .arise when customers return a11 Comi:nlssioner/BIR zor:ial value· or (b)- scl)ed.ule
. or, aportion of Jhe. goods . that·. they . purchased .of valu.es of lhe Provincial and .City Assessors/.
due .to wrong -speclflcations, ~oqr quality qf·the Real Property Tax ,Decl.aration · (R.R. "fl/o. 16."
merchandise, or. .if erroneous merchandise was 2005, Sec. 4. 106-4). . · · ·
delivered .·(BE;il(JON, HINAYON,.. 'tRENEQ,
Ftln(i_c1ine_htals ot Accounting (201'!5), p. 28"4)... : Jf the V.AT is not billed· separately in dccumentot t~e
. ·. ·, : '. ·: ·" .; · · .. · ': · · · . · · ", sale, the .se.lling price· or. :the conslderation stated ·
S~l.es allowances aris~ wh.en.. th~·-.c~_stot.ner: !s · . · therein shall be dee ed to b0. · · -, I" I · · 0 f VAT
w1llmg to . accept __ the · goods despite certain ·. .. .. ·. :m . . in~ _u~ ve_ · · .
defects ·in exchanqe for a pric~.a-djusfment oran . . Howeve_f, ·If. the !JrOSS Selling. pnce IS ·based on th~ ..
"allowance" gra'nted by the seller (Id/. . z~mal. ~alue or ma,rket value :of the ._,prqp~rt~. _the '
. ·· . . · . . . . zonal or market value shall be. deemed .excluslva of ·
;,-· . · · vsx. Thus, the zonal valuezmarket.veiue, net ofthe
--- ........---....,..;..;--.....,...--..;...- ......~---....;., output VAT, "should stiil.. be higher. than . the
. VAT
.
hN. SALE F REAL ' ·;, j~~ consideration i_n·.the document.of sale, exclusive of
. O . . .... [.i.r.!~~\i the:VAT (R,R..f\Jo. _4-2007., Sec. 4). . : ....
.:PRo'p·E'.RTIE:°s··· : •'a··11 ,,~...... . . '
:· · · - · · · .. · ..t;~,l ;};:;}Re~i ~t;te Dealer -· any person ertg~ge_d,in the·
. . : · .·. : · ·., - · · · . ~ . . .· : · ... · · · .. _.- . : · ·'.\1 (;_~)~;J'*-;...~~1>!.i:;iessof -~H_yin~. ~~~elop}ng, selli~g:;, e~changing
Requ1s1tes f~r Taxab1hty of Sale. or. f;iXchang.i or;;fi··n(t~.,re.a.tp)'P~~efif.,$} as pnnc1par and .holding h!tnself out
Real Prop~rty: (~.P.~-PN~ _., . · .~-,«:' .,· . ~- f .· _as a rd{h,r-'!'~i,~ume de~ler in. real"estate (R.R. No:
1. · The. seller .. execute_s.a deed· of ifl1e, rnclud1r;_i9.\}.~ 16-_2005, Seii/~.1(?6-3).. · · ·. · ..
. :dac(~fn. ·.en- pago, ·· _barter . bJ.;t>r~?<ch~l'.lgit' ~ . · · .. · 1.r-K \ . · ·. .· . ·. '· · . · !·
ass1gnll)_ent, :tr~nsfer;. or ~onve~~e.;?f~~e~ely _· ~"'t.
Sale,ofReal Jw~ert~ Covere? byyAT .. · ·
I
!:
.contr~ct·:tosellm".'9lvm~ ~qpt~ope~Yi.{~ .
2.- the··. real property · 1s!'.t!f9cate~Withtn th~ ,,,.~
J:~1. Real_ #pro · ert~,s. held . pnm_anlt for_ ·sal~· to
custc::)'fr;ers or ."'!el~. for -lease m the· ordinary-_
I
I

·_ehilippine~; · ... · .· . '·IC;?= '·uff ~!?';-· }:~1- ·. c~~~fit[.~jje:~f;Business of the seller st')all be·.· i.I .
3 .. The: sell~r, or -,r~rsf~ror _1'-.:.;_~ga~~~t)in·.~i~I. 1..t:J ·... su_bJect!.o,~'rJ.(IJ-CDOMOND.ON,supra__ at ~3); ·.
. estate busm~ss · either as· a . r~ak;~s~aleidealE;i'r, --~<fl
developer, ··or lessor;··· ·.. ," ... \l; 0. ". 1, ' · and :• · .
(-~ri,,~.•.Sale of residential. lot, -residential -house. and lot,
. 4. Th~· r~_~I pr?pei:ty._is .h~ld f.rimarily;:J~t~!ire 05;t~~- :;·;1·:!_.(~!;}?rN_,~iti,er;dwelling~·· wfth gross· selling price· .
. . !··
i·
i'
lec!_~e in the .ordinal)'. . cqtltM QfV~1s .tra.~f.ljY6:-1'-~-exee~i!igthe .VAT-ex?mpt ~ale under Sec, _ 10.9
. business; ~nd · .. · · .. · .' ~.\. f(J_ ·:. · ·. _(1)_(P) _of NIRC (See,d1scuss1on ori_VAT~f=xempt
5. The Sc!I~ -1~:Nqt ~xempl'_froi:n·.-VA~Jir!.Q.~ Sec;~ .· ·. · - Sale ofReal._Propert,es). . .... · .. .
· :109 of. the .NIR~. special._laW, or· ir:i~emational ·,. . · · '. ·. ' . - . · .· .
. agre.em·en.t 1:>inding· upon the .. m:>v.ernn'lel)tcif the . Tti.e- sale ·of ..p~rking:: lot~ In ·a· condomi.nl!Jm is a ..
· Philippln~s (tvfAMAUi.Tl=O;°VAT, "s'µpra-~t74).·. . .. sej)c!ra_te an<,! dlstinc_t transaction. and. ls npl i::overed .
.. ,· .• '. . :. . by the. -r~les on :thre~l}~ld amoµnt: not . being. a ..
Note·: Tra!')smlsslon o(prop~rty .to a trustee shc!II not : ·. :· residentiaJ--lot; house . .-~ 'lo.t or a :resi,deritial .dweliini;i•.
be subjec:;,Oo VAT if tbe ptoperty ii to·be m!'lretyJ1eld · ·. ~hu:;;;s~oi.J_ld ~e slibJect"to VAT reg~~d.le~sof·amourit. ·
inotn:ist for the trust.orand/or .beneficiary,, However, if -· of selhrig · pm:e (R:R. No. 13-2012, . Octpber ·12, ·
the.prbperty transferred is o~e for-sale, Jease or _use ... 2012).. : . . . . . .
'in the 'oh;linary qours~ "of trade or' busines·~ ind .fne" . _:} .. . .
tra_nsfer constitutes· a COJllpl_eted·-gift-, :the. trah~f~r is· · · 'Moci.es· .of S·ale of-.Re~I P.toperfy by "~eal Estate . a
subject";to· VAl' -as .a. deemed· sale ·transaction. The.· -D13aler''. ·· .. ·. . . · .
transfe;r ·i~ a 'c.OinP.leted- gift -~the; tranf?f~ror· divests. '1. ·On ln;Jallment Plan -. Ksale. whlch "has ·initial:
himself absoltJt~Jy of cpnt~~F"OVE!r the prope"rty",/e., ..... ·payments:in th.e yec!~ Of Sale not-excei:!ding-~5% :
: irrevoi;;i;'lble· t(?l"ISfer· .of·. corp.us . an9/or irrev9cable : · of"the gross selling pri.~e. · ·· . . · . ·
.des.l_gnation o( berieficiai:y (R.R. No.A-2001, · Sec.. 3).". ·· . . ....
·· · · · · · ·.. · ·. The· real estate .. dealer i,han pay. VAT' .9n
i:-ax .Base.i,i~d Tax. Rate: :rwelv~ per;~nt (12%) of: . jnstallment paym~nts,· including,.Jnterest ar:id :.
the·_gross sell_ing price· or ·gros~-.val!,le in money of . "pena!ties, actually and/or constructively· receive·d
· tn·~- ·goods. 'or p~ope~ies ·~;old, barterecf .or · ·. bytheseller:(R,R. No.·16-2005, ~ec. ~.. 106-3).
exchanged.. Such tax is to· be· paid by··tne· sell~r ·or :
transferor .. . .
(NIRC,,sec.
.
·.1.06 (A)).
. . ·

"::.
l~ • .. C:019 $A~ .~EDA LAW CE!'fTRAl)ZED BAR OPE_RATIONS·.i. 21_;3
 VALUE~AD,OEb TAX-
. SAN BEDA LAW Cf.NTRALiZEo'
. . . BAR OPERATIONS
. -. MEMORY AfD ' 2019
..

Initial paY.ments ~ .Payment .or payments which

the seller receives before or. upon execution of
the. instrument of sale and payments , which he The .buyer of : · the. O\Jtput tax shall be
expects or is scheduled· to receive in cash or property-can 'Claim the.· . recognized by the
property (other .than the purchaser's evidence of .. ·inp.L!t tax. ,in the ...sa.me seller· and . inpu~ tax
'indebtedness), dl)ring the 'year when the sale· or period as the · -seller shall· ·accfue ·to the
disposition of the realproperty-was made. It recogni~ed the : putpOt · buyer', at the time of
tax. · · · . the: execution of·. the
covers ·'any--dowrfpayment'made and includes .;,i'II
payments actually or "constructlvety .r~ceived· · instrument of sale.·.
: d~ring the year· of· sale, the aggre.g_ate of which ..
'determines the- HrrJit set b.y law (i.e.,' Pt, .500, o_oo
. pr P2, 500,. :000) (R.R .: No.··16.:2005, Sec • .4.106- ·.. Payments . that .· are . · ts ·
Pay'men.· that are.
3). ··· · ., subsequent to . "iriiti~I... subsequent to "initiat.
. .. . . .. ' . . .. .· _. . : payments'' ... .shau. :t;,e .. payme~ts"· shan ·· no
N~ie. Initial P.~yments do not include t~e amou:~t . : subject tooutput \'.'AT. . · ·.. lonqer. be subject to
of mo.rtgage on. the real property sold ·exc~pt . · · 'output VAT .... · · ·
when such- mortg·age· exceeds ·tJ:)e cost or. other . : .: . .. . · :. · '
. basls of the property to· the. setlen, Also i'exch,ided . '. (R:R: N9. 16~2005, Sec. 4. 106-3; Id.) .
from.initiai payments arenotes or other eVidiilJLSEb,:.S::=~,.,.;..::.·. .·. . ·. ,., . . .. ,. ' . . . ...
.of indebtedne::is·.isi;;t!.ed by.the _purch~r,;,tcn,he.vu· - .'fi.~lt'!'>-W;._qm,dl,ie sal_E: of low-cost houslnq u,~it~ ttiat .,
-J~~re1Jth.~£.:!_C~ceillnq o! P750, 000 per unit I~ ~O!
.
,·seller at. the t1rrie·of .the sale (R.R.J',16=_, 1&:'2005,'
Sec.4/~6-3).
· · . . . ,
· ., _,/,.,.-.,_<~ . r~~.,_.-
·',T/" · '\) dp·
.,;u.;~!J~~l~- f~'r .:)[A.I ~xemption -for .tow-cost ho~smg
·. _: · . untier--·~e&:"1 OJll:(fl ofthe I\IIRC, the sale may still be .
2.. On a .°.~fer.red P:aymen~. Bl'-s.is~~+S~.~t.lielT~lfXEl.ra:uif!"°-!!'~Atjt<i;the sell[ng prlca otthe property ·
.~ has . m~bal payments m/)f?.'."}~ffa~ l'~f s~ . ""'/t l;\_~Jd pnlllarfly~~f::;'!~~to cust?m.ers_does not ~~ce~d
i·
.eXCf:ledmg.25ro of the gr'!~s·se1~rjjf pnce. . -~ · ,dtr~ 'tile. thresnoldS-(~~P1!- 5,,00, 000 on sale oheSrdenlla.l
L . · _~ : lot~: ~~~ t2, ·s.Cl.Q(qpg !?r sale of;_house anq lot: and
• : . ,..
· Th? frapsact,on.. shall_ b/
. ·· . If.,__, · / . ·
1y~at~a

wh~ch i:r,akes: th~ 'ent1re~seH1~g,' pnc~ ·~xa\51~1-.

....as ~as'li~~e . 6t~~:-'.:~1dent~al\· {tw~r):!gS _p~rsuant to t~e same
~€)~l\(o:J1
~r~'."§1onf of ~f t~e NIRC. . .. ·
l
.·
~- 106-3): .·· ··--:
-. . . · .
f~-r ·i'~2h~~he
the month of,the sale (f.-~-""Nb. 16 2@\05, Se ""''J~TFffti... .:..l
,.¢-,
· · .., ,("', i.. .,:k \: . ·m~·
~
, ! i= ,._,,
J .,, .Q0"1>f~f}r,~Jow,fes.~#9iusmg-urnts. sold py a real
· . ·
Bl'J'.~~(jjtl.~at·.while.~h~ se_l.lin~n:,riceof f:':1, 250, . I
i
Note: .(?utput tax shall \b~~·r~c~gni ~\~yt.·th~-1 )1~~J~~ef?,(1'2,ompa)jfy.d<YE;j3 .not, Ql;lalify .und.er the
se11e~. and'.input .tax sha!1 ;fcru~ 'te th~~f!l,..·~. ~}r~..JJ.."@U9n w._a· t<?w-eost housing, th.e semn_g_price l
· the fime. of_ the execu.t,on~f the·11;1stri.Jin;~o.. · . •stij~h'.ieft& ·tttE!' VA,T0J!!xempt t_hreshold of P3, 199, i\
s'ale, _Payments subsequent t~ ''._i~itia~QslY. ~l~EN·~21'>~,$'ow_;f, .500, lj60] for sa.le. of house 'and .lot ai:,d
sh~JL rio longer ~e subjecl\~o o~ti;)'pt4~1\."t:~fl:.iWe1i~1:1falj)Nell!.n.gs und~r Sec_ 109 {P} of the
(MA,..MAL,ATEQ, Revie_wer,_supta."tii(.4/3f[b,.)v· · .. .:·~-.,,.-,..=~~C:,;~·. n ,e;_,:ithe.. sale o.f the h~using units· with
_: . . . ·· . _ ... '·· .... · ~~. _/ :· ._.').,:· J,f s~T!t-i~~~e,¢'of-P1,_.. 250, OOO)s ~xempt from VAT
S~I_I:! on. ln~:~alln'lent"Pla~-v. S,~le ?" -a Defer.rs,.t~-!~!~/mg No, 285-2.014, .July 9,.2Q14). · ·.
· : ... :. : Payment Ba!i_1_s, · ··. ----- · ·
. .. ·~-
. VA't.oN IiviPO~T~~io~ ·
Initial ·p·ayments do:· not: ··Initial .. ·_·:. · payrrfe.nti
· .. , 6F:GooI'>s .
ex·c~ed · 25% ·.. of · the · exceed 25°/; · of . th.a · .. .,.•.
:.,
... :.. · .. ·. -
gros:f seiiihg price.
~ . ..
gross
.
selling price.. :
.•.
· :_VAT on lmp6rtation-of _Goo.ds . , ·.' :._ ·. · · · ·
. . Th·e·importation of gooqs herein 'coritempl?1ted refers.
to impor_!a~iqn by, ~!1Y p:erson, · w!'lo 'may .o.r·may not
. Seller ~shall be s.ubf~ct . Tran·s~ctioo. shall'' be. · be engaged in_ tra,de·or business ·in. the P.hilippfn~s
to ::.output- VAT oti . the '· tre.ated · as cash· sale· (R.R. No. ·16-2Q0,5,SecA.10.7-1-=(a)):. · ·
installmeri~ . piilym:e..nts ··wl)ich ·.·fri~k~if · the
. r-eceiv.ec;i, including the.. .entife . 'selling ·. price Ta)(·· rfase ,~~d Ta~· ~ate: Ty.,~1t~. p~r~enr (12%)
interests· and p~nalties . taxc;ible---in ·t_he ;montti _ba·sed:on; .:- . . · . · . · . · · ..
· for · late · :. . payf'.11er:,t, o(sa_le... , · .-1 .. :-Tota.l value' used by.th.e- BOC.'-in deterrtritiir.ig
actually . ·. . ~nd/or . . . tariff .and customs dulieii, plus. customs··duties,
constructively reee_ived:.. / . . excise· taxes; if any, and· other charges· prior to
the rele~se.of.gooqs·tr9m,th~ customs~or. ·

. .'. 214_ I .2019 SAN BEDA LAW CENTRALIZED BAR OPERATJONS.

)
 VALU.E>·A-DDED .TAX·-
SAN BEDA LAWli:tNTRALIZED BAR OPERATIONS - MEMORY-AID 20,9
ii . . f_lFM4&8APR-M #FIS i'WSW
.. . .
2: Landed cost in case thevaluation used by the . executed if the property is leased .or used in the:
BOC .ls based on volume and. quantlty" Landed. , Philippines (INGLES, S.Uf)(B at 320). ..
cost . consists· of the. invoice amount.- customs ·
duties, fre.igtit, insurance and other charqes and Requisites for fax!;lbility:. (SPCVN} _·.· .
also exclse 'tax, 1if. any (NIRC, -Sec: 107 =es . The.re is a ~ale orexchanpe of servlce or. lease
· 1.
emended by TRAIN Law). . · . ·· or use of property enumerated in the law · or
.other similar services;' . . .
The same .rule a·pp!ies·to technical lmportati~ri 2, The service is Eerformed. or -to be performed in . ·
. ,. of goods sold by a person .tocaiedtn a· Special th-~ Phlllpplnes.tand "_in· case of. lease, property
'Economic 'Zone to :'a
customer located in· a leased --o"r· used must be. located . in the
customs.territory (RR. -No. 16-2005, Sec: 4. 107- ... Philij:Jpine·s·(place where the contract of.lease or
1 {a));' . . · . ·. . . . . · . : .·. . . . · · . . . · the . licen"sing · :agreement \vas executed: is
. . . . . . . irr.e'levant};° .. : . . ·. . . . ' .. .
.Sale, transfe~ or ~x'ch'.~nge of jrriported goo.cis b/ ·.3. :The service is.in the ~01,frse ctthe taxpayer's
tax exempt persons (Tectmlcat Importation) .. :_ . . ·.trade· or' business or, ·profession (except in the
ln'the case o~ g90d~ iipport_8d:i_nlo th·~ P.hiljppines by , ease of services donein, the ,PtiilipP.ir,es done by
VAT-exem·ptpe·rson·s)~ritities or ."agencies wnich are · a ·non-resident person); . .
subsequentlysold, transferred _0r exchanqedin tt:i"e 4.·. The·· service is for· a Valuable. consideration
Phillpplnes, to non-exempt persons. or entitles, the . actually or constructivelyrecelved; arid .
tatter shallbe considered the importers, thereof, .Who C) . 5. The· service is ~ot exempt 'under the NIRC, ·
shalt be-.li~-bl~ for· ~he.VAf. du~·-t?ri !?Uch_ imp-~rta\}?,~~~\ . : · specia"i-"law, ot int~i.'~a~ional a~ree"rnent (Nl':C, .
(R.R. N_o.. 16 2005, $ec, 4.10.7 1 (c)), . .. / .. ,-t,(,,,.. Sec. 108 (A)). . • . .

·.ii1~si"rati~~=- .~~".is· i·.tax-e;i.1,:m.pten.tilY.that i~pgi¥~?t;:t111~~ti/9f ;tfle-~~ov~ :,~sse~ti~1. requisit~s. is. ·not met,
goo.ds, and "then' suMequer:itly sold it_. to.: E, _a;\'ii~T ··;·i.;·,·u.~ansacti6~ 1s exem ptJrom vaiue addec;I tax; but
:E
reg_iste_red "perso·~· hast? :pay for_ the:·v~-'E·carit/:1,t"~,it .. mi'y"•-!!i;ie.'"!}~ubje~tto· other perceritage.. t~

·!h~:~1-~r,~; · · ·
claim the_VAT;pa1d as cred1~~ble_ rnptJf-;t.¥e~.. ,,(,'~;.} · (M!iMALA T.lf:J}Rev1ewer,_supr.a at 439). ·
· ·· · .,., t' - -. . .....
f · · ·- ·
-~heri_and _by_.wh~~--~~td:The_Y~Tt~nJfj;tl?~rt'atit~, r;., _r,foie: 1~he'.~-_-·1h~ _s.e~i~e ·is p.erformeo··
s_hall be pa,9 by th~ 1mporter.P,rt.,9f.-fother,:cl:ease9f ~~- det~rmr_n.Efys _tfi.e· Jl:!J1.sd1ction· _to._;1mpose. the value

· 2.()95,.Sec: 4, 1,07~1"(b)}. · {ii•·(. ~~<1~- · ~:i;~,-

1.
_sucti .goods ·fr_otn·customs· ~,~1.!~dy ·(,f}fR_.· No. 16-_w-. ;::~ ·add~.a · ~x. ·· 9e_o ~~ov.n as ·the situ~-of~e_rviC?e .
[i.t pri_nc'rfil~U,tre·mf~Ji1'.9f P?Yment is immaterial {Id. at
· :. · · . ·. : .. ·· . · . · . '-._; . ?---~,-;-; ....,· · ,~J. r4
424-425J;~i!t:.;:::;~;,.-, . - . . · . ..· .....
. · lmporte,f :;- .refers. to_- ~ay p~r~o}~-~p_aS"rir(q~ goocrs . i-v : ·. . . . ,. . . . .. . .
~- .. into_- th.e_~Phi!ippines, w.~~th.J~r·.o_r Jfot;.,,m,;1cf~_! in'.
the l;;t.-:-T,~~~Base:and T~?.( ~a~e:. TwelVE:. percent (1_2°/o) of
·· c,ouFs.e of h1$ yad.e or t;>usmes~. It l\).,_gl!;f..tle~ n<:m- )'~·1!:Jl;\El:ti\~r9.ss ~ec~1pts ·de_nved from . ttte . _-sale _pr
exempt. persons. cir. enti~i~_s_ ·whq atj:igi'r_e.t~x!fr;.eei=";;,J!~E!)\cit:t'a~g°E#1i""f. servrc~:'·- fncluding ·!he i.Jse or lease of:
. im_p.or.t~d goo,ds_ fr~m exempf. pe-rs61\sii.r:it,i9e__[or . ·. prc:>perti~s ("}/RC, Bee. 108 as amel}_cfed by TRA1N
ageACI~~ (R.R. N<t 1.6:200_5, S~p. 4.107-.1.,.f?ll,\· . -.La.~)., · ;_. . . · · . . . ·. . .
. . ... . . . . . . ~ -:.. •: ..
. : . ~ros·s Re.ceipt~. . . , . ·. . . . ..
·
.•• :
1 .V .,AT"
· ·
.6~
' ·· ·· · :
THt:.S-4iE• OF._·.· . ,
·· · · ·
. · ·. TotaJ.anio~nt: ~f money or its eEJuivaleM actually. or
,:
cortstruciiv:e1y r~ceived.for. ttie sei:vices'.performed or:
· .SE--R·V_.I· .·c··E·_.A·N
.. ·0_· u' . ·SE,_··:0·R·:-~··E·As··· ·,"'.- to be'. peiiom:i~d fqr ·another·_person:·.exc:luqing VAT
.&:, . representirJg: . ' . . ,. ·. . . .
. · , ·-'oF,_.l>n."oPi.llT.:x°E.S . '. 1. Pl:IY!l)ents on. the·contn:1ct.price, conip~nsatiori.-
. · ,: · · : se,:yice fete, rental_ or royalty;-. · . . '. :· .
2.. · Ttie ·am.our.it.charged· for:materials ··suppli.ed· with
Sale.Qr.·EX:c.ha~ge_ of Servic~-~- : ,· ·.-. .-· · . the services:· and. · ·
Means the perform.a.rice of all k.inds of- ~~rvjc;;e_s in · · · ·.·3: pep0sit", applted ··as_- payments ·:tor . servi.ces_
·a:
·the f?hilippines_:for oth!;i:r~ for fee, -r.~fnuneratlon .or · .rendered. arid. acfva_ncepaymen~s (R.R. No.. 16-·.
~005,_ Sec, 4;·108-4)." ,1
.. cons!d.e'.ratien·wnether·in kind'.o·r·lo cash (NIRCi Sec.· ·.'
· · 1orr(~)
.
as"amer,_i:lf!_d~y·TRAIN
. : . . .
L~w). , ... . :. . . . ·.
Ex.cept: .,
. Lea~e of"Pr'Qpe"rtiElS . . .· .. : . 1 . ' Ttiose · amqunts .: ea·rmarked for ~aymer_it to
Ali forms of prope.rty: ·for· lease, wh¢ther .real or or.
1..mre'lc;!ted thitd party; .
persor:ial, .· are. liable·· to VAT ·except when the. gross _· 2: Amounts received··. 'as · reimbursement tor·
annual $al~s do not exc:eed .the tpreshold. It shall b.e advanced paym_ent "on behalf .of. another which .
·subject .to· VAT. irrespective of .the -place where the. do not redou.nd to the b.en·efit· of the · payor ·
contracr o'r, lease or· licensing agreemenf "".as_
. (MAMALATEO, Reviewfir, supra at 438).
,:

~019 SAN BEC>A LAW CENTRALIZ~D BAR OPERATIONS _215

.·:
 v ALUE'.'"ADDED
SAN.BEDA LAW CEt:iT/MllZEf? BAR OPERATf.ONS·- MtMORYAID ~019
_TAX
mMw+l:*ri. ·&N!iddi WWiJtRiM&dti
'

Payment.to Unrelated 'Thi'rd· Party: payment made Lease of property shall be subject to VAT
to settle· ·~m •'obligation .of another person, .whlch reqardless of the place where .the contract of
obligation is evidenced by 'the. sales invoice/official lease or licensing agreement' was executed ·it
. receipt . 'is stied by sald' "third party . to - . the ls
the. property· leased or- used: -located in the
obllqor/debtor (e.g., customerror client otthe, 'payor Phlllppines (Deatlnatlori _Prihciple)· (R.R.. No.·
of the _obligiition)°(ld.). . . . 16-2005, Sec. '4._10_8~3 (q}). .

.Adyatlc~ Payment: made. on. behalf of another if : . 'The ·license~. shall. b~ ·responsibl"e:.. f~r the .
. the same .. i&. paid to 'a third party for a present ot. . payment o(VAT .on sucl:l. rentals arid;,or royalties .
future.• obligation of- said · another party .vvhk!i · in·-behalf ot"thl;! non7res_identforeign corporation:
·. 'obligafion is:. evidenced ·by a. sales in-Jofr;;e/officlal or owner (RR. No.,16.:200fj1 Se_c.·4'. 1'08-3 (a)).
'receipt issued by the · e>bHgee/creditor . to ·.. the
obllqor/debtor . (i,e,, .. the, ;;ifo,:emeriitoned "another. 'm a ·,ea'se contract; the advance- payment by !h~ · .
parly'J for. the sale of' goods or . services . by-the . . lessee may tie: . · · _:. . .-·· . .. . . . . .·
former:to the latte!' fld). . . .- . . ·. a~ , A!oa.n to the lessor from fiie tessee: · . .
. .. . ·:-· .. , .b.. Ari 'option money for the pro~rty;
Unrelated' Party: .. shall not .. include taxpayer's· . c. A·,security. deposit 'to insure .. the faithful
employees, partners, affiliates (parent, . subsidiary . . . : pertotmance· cif. certain . obligation~;· of . the
and other related .. : companies),·. relative§_,:;:,r.09:: :,"'=~~ssee'tothe lessor; or . -· · . . . .
consanqulnity or affinity within the 4t~ c"Lvi11i~ree, LJ J\f
and '.!rus_t· fund wh~re the ~axp~y~1"1~th~ l?u§.t'?r: - --~;..._\.-. { 4.if.O}P<.?:, (a)).
_;r."~~~eaid rental (R:R._ No.·· 16~2005, Sec.
. · ,..
trustee or beneflclary, even 1f,,,fc<;>V1e~redl ·,b. ~~ · · -~-:: - f/~ . . ·. · . · ·
·. · ·· ,f.o~ ~/".' f.""~
. aqreernentto the contrary (Id. a(.{13,f~9'[';; · ~~_.~.-,,:~~\<t~a:9cre~~~ymeot
3 e .
is ~ither_-of (a), {b) or.-(c;)
abov,e,~eM~vance payn:ient ,s not subject to_
Con~tructive _Receipt· t'
ff
Occ.urs when the money cons1~erat10 __ or its
~Q/ . · .-. JP)
equivalent is placed_ at the c,91'<ltr:9J;,of the p rsen-whe ·
1,
]{ VAi_;,\ B~~~lf~ )~). (b)_ or (c) i:' -r:iot · ~et ,
·: .. ~ons eredtcis ifc1£Wal or·. constructive recerp_t
· · habl · for VA~(~'.RlNo. 1&-2905; Sec. 4, 108-3
. r.endered the servi~e:· wittto,1: 1,f'f.J;,eftricUon _ by~·e;-./ :~-::-"~)):: . .
.. payer ~e.g., deposit m binks .Jri.ade avc1,/fablfJGI@-.. ~. · J: · . ,
II ~=J.U
\\:.<:~.
i. · . . ;.· ·
·· '- ,
·
· seller- of services or set-off 8t<s'~JLe~of ~es' deb~..:jJ!!j!!P. f-:loj!~ se.curity!~eposits.. in lease contrncts
.with the consent of the:,(aJte.~ws .'P..tfygj"r{fir1fil~n.
-:-:~~~re.,z}i!"" ct-t/;i;~¥,r'-.yhen·applied to rental-~t' the
services rend,_er_ed to the_ forrtJer:.Y (#<~: N· -:J:.,'--{905~ -li?:c-:r:ti '1~. its ~pplicatj,.€>n·. If ~he advance payment
Sec. 4.. 108-1). . · . · . . !\ · \.- ~s~~~ · ·,~- . ~~~u ute~;'l:i pr-E:p~id rent~L, then su~~ :payment
~s~~a'2),e to t)\e' lessor · in the. mor:ith, whe11
. . . .

Amo1:1nt~are constructive_ly"re·~eiv.ed~~n
_. . • • ·'\

1. ··Qred1te0,to the ta~payer's acc~f;. ,;,;::,~~ ~f:.1--

. ·• ,

Sc .
• ~ ...
7

......:i',,n-<\.~e\eivfrB;
-

irre~~ective of-th~ accounting ,metho~ .

--~~IP.P!oy~~y)fieles~or .(R.R. No. 16"2005,-Se_c ..
2 .. Set apart for the taxpayer; or ~-.£ U.flr ~ ..~-41~~,(~)}f''· · ·.
3. · Othei'Wis~ ~ade. avai_lable. so _that:tb_~k'°a~,yer--~ A" C,~ ~~2 · . . . . . ·.' · . . - ·
· . · mt:}y .draw upon it at ahY. :time,. or drq_W'-'tlppn it· _.1V !,L
;;-;i;1;1Effeceipt of <I deposit as a r~quirement of the
when nqtiqe_ of intention_ to wit):,draw'hai;· b~"-=~ . seller from .his tenants in ·~hefor.m _of security or
'giyerr(R.R, No: 1.6..-,2005;,s_ec. 4_.108-4)_.: ... ·:: . . . · collater:al. does ·not <;:onstifute a· sale .i;ilid the
. . .. . . amount . thereof does· not ';form part o~ . the
_f\c;tual-or·ct;m~tructive rec~ipt 9(the, co-ntr~ct·_pfi"ce,.. ·, . · lessor's grhss '.~elling price. -It: is _.only- 1,1pon-
cori1pensatiqn,.remunerc;1tion or fee.makes 1he.seller . ·. fo,:teiture of such..deposit du~' to the customer's·
of·seryice'liable toNAT; even if the service is yet to .s failure. to ·fulfill· certain. conditi_ons creating .a ,
.'be p~rfqrmed :_ by him (MAMA~ATEO,- Reyiewer, . taxable .evelif ttiat. will ·justify 'inclusion of :the
supra: .a.t 426) .. · · · · deposit and.'!a~ base (VATRulfng No:_ 276_-B.8}.'

·.·. S~le.._:ar.' ~xch~nge of· se~i~es. inciudes :·services 4: ware~ousii:igservices_;.: ·. · · . .. . .

·: performed ·:or ·rende.re~ by:_ (NIRC, .Sec. ·.108, as . \~ 5,'.: .. Lesso_rs or cjistributors of c_inen:iat9grpphic-tiln:is,;.,
· ame.rided by TRAIN Law) · . . · · .. ·. 6,'' Persons· engaged. in milling,·. processing,
1; Con~truction ;;ind service .contr_a!'.:tors;. ·: .. maf!Ufacturjng .Oi.-repacking goods"for. others; . ·. .
2... Stock, :real estc1te, commercial, ..'customs.."and . 7.-· Proprietors/opef~ttirs,. or' keepers of hotel_s,
·· immfgration ~rokers; . · · . · .· · . motels~ . re~t . h"-ouses,.. pension . houses", . ir,ns,:
3. · Le~~o·rs of property; whether pers·onal o'r real; · re~qrts; .· : . · ·· · · · ...
·~ . . . . . .
?· Proprietors or· · operators .. of. .restauran~s •
.. refreshment par!ors, cafes and: "at.her. eating
places, incJ_µding-clubs .and 'caterer~;· .

21'6 I 2019 SAN. BEbA LAW CENTRALIZED BAR OPERATIONS

0
 ·VAL.UE-A·o.DED· TAX
. SAN BEPALAW CENTRALiZED 'BAROPERATIONS.
- MEMORY AID 2Qf9

The· .. gross receipts of recreatlonal." clubs 108 ~f the NIRC.that sh6uld be subject.to VAT.
including but 'not limited to membership fees, W.hether·a profif.is ·realized or not is' immaterial.
a.ssei;;sment dues, rental income, . service and As long as · there Is ·financial ass1stance or
. foes are subject to VAT. .. . . . . service for'a fee, remuneration-.or con~i(;leration,
such .'servi<,e '. rendered · is · ·subject' to · VAT
9. P~a.1ers in securities~ (Watertro{Jt P.hilippines. Inc: v.. Commission.er of
. Internal. Reve.ni/e, CTA. EB. Ca.se No. 10.70, .
. Deale!'.' .in · Securities means merchant · of · De_cember 4, 2014). · · · , ·
:stock 'or· Securities, whether an individuaf,
:partne·rsbip · qt corporc3tiorl', with_ an established· . 11. Trarisportatio_n c.ontractofs or:i . th.eir transport· of
plate 9f .business, · regularly. enga.ged in th·e . · ·· ·goods .. qr .. cargoes; .incluqing . person's · who .·
p~chase of securities .. and theJr resale to . transport goods · or cargoes for: hire and. other
oustomers<(R:R. No. 16-200_5, Sec: 4; 108-3.(g)). . :. domestic comrnon carri~rs ~by :rand . re_lative. to
· the_ir.transpoi;t of go?ds. or cargoes; . .
· .:For De~le'r. in ··Securities, the teirm "gro.?s
· receipts:'. means gross SE;illing prlce.l~ss·cost. Of. .12. Common .ca·rriers b.Y. air ~nd. se~ relative.to their.
the secLlritiei .sold (RR. .No. 16'-2d05,. Sec .. transport of passenge(s, go_ods or .cargoes from
4:1QB-3 (g)). . one place in the l?hilippines 'lo another place in
. the Philippines;. · · .. · ·
The. tra~sfer ·_of. as~ets .of _a. cor~orntiQnAt~~~j .
. :~nother CO_l'P?,rat~?n -in exchan~e Jo(_' sh?.r1f/~'¥i.ii"i\.:
the· latter. rs · s1;1bJect -to VAT. The. tran~f~f,.}?!:,',,e;:~~·i
. assets is not :" among the . transactjp!Ji;~/t-P\•/..,.,.;..,,. .. · ..-· .
e.numerated.under Sec. ·.109_ of -the NIRS,;wli{l}:~J'F.\i!~J!i~.Y... -l!~~.~-"} · . Domestic·
_is
. exempt from VAT •.. · . _0;.:-r' ~ tJ · 'l$eat_'-""""'7.\ · (Philto.P.hil)
·. ··· . · · ,t~ · AI~ : . ' (tiJJRG,'i'll\\ Passengers, ~ooas .
Tax exemptions are construed itfictly againlt_;":'.:,l Secs. ·Irr~ .or carqoes
the ta~payer and'.lib~rally ln 'fa.~9};~tfqe;trocing·. [j .. . .(A) ·;pci a· :I~. . . , .. :.. ·. · .. ·.
. O°loVAT
auttiQnt~;. h~ ""'.ho cl~1ms ~n.~1<e~p_t1qp-f.Ntfst ~'- ~i\. (B)(°f_ an;' ,Vnterna_t1ona/. (Phtl .
able-to Just~fy its claim bf1_,{\t;i~cl~f.~t grtnt ot· dH.
statute. Nowhere in: Sec. '*Q9 6T-i'ffl~~'3:~y '~~ J:.;~
-~.:~,,,., l.~ _50 f'?re1gn country)
:-..S.~·"r.t~~tff~il:_'~sen_gers,gC>ods
it state· that the ,transfer pf·~~s~ts'J~~jchan~§! '..•.j .. · ~....._rJ:;}.ff,tl?.,~ercargoes : ·· ... · ...
for. shares is .exempt. from V~;;..1>i_enc-e, ln tffe .
_a~sen9-e of _leg:al..basls to exerilpt;~o.n~J';f~
ra
T the -~fo-;;!~ -.__ . .
. International
. · · . (doing bitslness in
30/o OPT
trarJSfet ot assets· by a ·corporatipn--;:tq·-anoY,~i;.:,,,;,,,~~'.''°'':-'i:.i.. :.-i:I ·. the Philippines)
. corporation i11 'exch~mg~ f9.r ·sha~e(f, the,?~~rne~-·--···-~ ....._4 . Carg·oes.
·shol:Jld be-s_ubject to VAT (BIR.R'i:t4!J.Jl.: /lkf::~24- . . .t--~---,··,--·-'---t'------.,----+------1
.2014, Octob.et2,4, ·2014). "<~!) ..: . · ·By.la_m;I · ·tJomes(lc 12% VAT
. .. . . ' (NIRG, to
(Phil i:,hil
·.•1 O. -L~n:ding investors; ... ·: : Sfics .. 108 . 'Goods. or cargoes
and ·117J· · 1--··-·--·..,_·_·~~-· --1-~-----,-
A ."lending ·· frivestor~·, is a .persqn other than a. . Domestic . . 3'Y~·OPT
·ban~;.· ncm~ba~k financi~I /ntennediary, fin.~nc_e_-' (Phif.to Phil
. ·. company and :other .financicil i_ntermediary not Passengers
performing· quasi-banking foncti9ns who· rria'k~s ·
a practi\:e of lericjir.ig, moheylor ·himself or others·
-· at interest {MAMA.t.ATEQ, Reviewer.· .supra a( .. 13: s~ie ot:;ie.ctri~fty b,y gen•e,r:;ition, fra.rism.issio'n.by ·
·428). · . ' " . · ·any · ~ntiti ·· il)cluding . · ·: th.e. ·. National · Gri~
· -Corporation. '·of the· Pbilippines · (NGCP}, · and
. Reas.on: S~rvjc~s··of bank. rion-ban~··finan~i.al . clistribution . comp<;1nies . : ·including . electric
interrriediaries; . performing . . qiiasi-banl{lng . cooperatives shall be subject tQ 12°/o VAT .or, ·
· fcinctions-;'. ·· anc;I .. other: . non-bank ,·, financi.al theiri;iross-,receipf~(R_:R. No. 13-2018,;Sec. _2).
·intemiediaries'. are VAT-exempt. transadions·
(NIRC, Sec. 109 (VJ). .14. Fr-anc;;hi~e··grantee~ ofelec~ri.c G{ilities, teiept,qne
.and . tel~g·raph, .(adio .. antlfor. .television
· The- act ..of: e·xter:1diri'g· of ba.sh acivanc.~s·· with·. . broadcastih!f and all. other franchise grantees·
interest to. re.fated p~rties is a form of -service for except th,?se. under Sec._:1 \9 of the Ni°RC; · . · . "
a fee. whi.ch 1~ cov,ered.-by. the provisions of Sec.

... ~.
"20i9.-SAN BEDALAW CENTRALIZED BAR OPERATIONS f· 217
 VALU.·E~ADDED.tAX.·
SA~ eefoi. LAW CENT~Z/:.0 BAR OPERATl0NS - MEMORY AID 2019
Note.: Franchise ··.gran.tees of radio .. and/or' .
televfs.ion broadcasthig wt-lose. annual gross
receipts of the· prec~ding. year d<;n:1ot exceed
p·10, 000, 000,. and franchise grantees of gas
. and water utilities· are h9t'subject to VAT(R.R. ·: ·.
· , No. 16-2Q05, Se.c. 4. 108-3 (h)J:. ·. . . · .
15. Nori-life insura~;~ ~6mpanies Jexc~pt th~ir ~rop
... ·insUrc!nCes) tncJuding. sut~ty, fidelity, 1ndemnity· .
.and ·.bonding· companie~.; •and· · ·
The· gross receipts from, ·.non~li(ei _'. insurance
.. . . · . companies shall. mean total. prernlurns couected,
. whether -paid . in 'money, . notes," credits or :any
substitute for money (R.R. ·No .. iff-2005,. Sec.
4~ 108_-,1 (i)). . ·. ·. · .
• ·1
·...
4. The .supply o( arty assistance .that fs ·ancillary
ar:id ·Subsidiary to and is furnished ;:is a means of
·enabling the.,application or' enJoy·m~nt· of any
s"uch property; or : right as is mentioned ·in
subparagr,aph (2) or·_ any suer;.· knowledge or
information as is. ·rnentlon~d ·in ·subparagraph
. ·.(3~; .
. o.
.Tl}e·suppJy of.servie:es by !:l n6n-residei:it person
. or his errjployee ·in connection with 'the use nf
. property or. rights·belonging to, or'"the installation
or. operation of any br.and.' rnachinety. or ·other
.appara.tus
.,person;.
. ·.·.Purchas~Q · from· ·suc;:h nonresider:,t .
:. · ·
.
6: · . Th~· &~pply. of technical · advice, .assistance or
: servicesrrendered in-connection .wilh technlcal

. Non-life "re';ln~J.rance , prel]i!~rris· .are ·no~_· · -: · ~al')ag~merit o( .aomi~!str~tiorf of ~ny·:s~ientifiri,

. subjectto VAT (RR,.No. 4~2007, Sec. 19J~-:""'."'"'~ . . .,.,m.!:!~tn~l or tommerdal· .unde.rt~king, venture, ·
·.. . . . . . · - ., · ., . .-F · ~-~·
. . II 1.• 1\,.ro1.eet or scheme· ·
n.)1•\ fl'~ ' .
. ·.· · · · · .
Insurance and reinsurance -~~~nfsslen~~ : · · 1{ }: · ;'~<· · · ·.. . ·. ·. ·. '. . ~ . . · · · ·. . ··
·y.h~ther life or non-life,.are sut;>_]l3d t~ . ·fJ;?"'R.. ~~;J:~:ltas~.,£(~.rrfotionpicture, frlms, _f1lms,., t!3pes,.
"-Y!. , ·
· ·· No. 4~2007 Sec. 10;:· ·. /
. . . :·. : ' . ·' :: . . . . ':- .lt)~ · ~(~ ~ -,
16. Similar s.ervrces regardl~::.i,S.of w~!fher~.
~"•c.-::a...,,..

r r:i.o! . e ~
f · ·x·.N:;i~-~~\~:·
...!nd'~sc§~n~\ · '. ..
ter' operators
. to· shoulde\tnt} y.~ component from fheir lease.
;~'y r'IO~· refuse

.1 performanc!3 thereq!.cail. for .thj;exercse·of.l'se f.-4p~t.~~emat~f.a~~~c·.film!?:.Tqe exemption .f!~m

. of the phy~rcal or rnent 1 ~.m(es (R, ~ ·· ~:.,. 1"r;;;i~·11. . ~)!, Tlf was·"~~,
cinerr:r94hea~er- operators or proprietors,
2005. ··Sec 4 108-2'1 · 1 ,-;:;:;:.._. •

i··
, ~..,.~ 11 .r--:<".]1. - · .• , . . .. . . . .•..
·. : "y.,hic . d. by S1,1pr~me . C~urt.
·
·· .... ·• · '
··
. /· ··
·
' ~-"''(, · . ' · 6rcif
· ~ • .
, .~~1 · ·
· \
· ~~:-'ill·
~· J~·~q
,
rut.. · ·· · }r=,1 ,t
" J... •.. 1:CQ'l'Jll!ft.~'odJiro J{~ma Revenue v.. S
,· • MP" nme
:h~ ~hrase ."sul~·o~ e.~c.hinge;~ s.~\--.\: e.~... s.halL. ·-:-·'- eJ 11Jf!JJi.!~-f~.. f:j.gir ~~.3:5qs, ·Fe_qr~~~Y.26,.' 2q1 O),
~1kew1se 1~.c~u~.e. · . . ·-\ ""_11 ) \.. ~ ~-\. • . ~ Jl\""1 ~ il~''!l'.tfrl to'J_tj woss r~cerpts derived. py
. L T~e 1ec1~e qr the ~.s~ ?f J~~f~~ ~~t. ~(.~~~l~g~ · ~/}f{e.;a(th5>a_ter. ~~erators .or proµrielqr~ from
. . to u~e any ~opyngl:Jt, pa~~t, des.t!\ln o~<'tft:"' . ./.. 1ss1olii' trcl<e~~j'and does. not extend to the

. t~ad~.m~r.k, .tr~d.e bra~d or .ot~r hke

· .. n~ht,. · ·., . ·
t~~:
·.: ·.:·.·pl.an,. -~ecre.t , ~?Ill)~_la Or\;:~roc~s\. ~~,~ IJ.,~f.l . chi;l (j( J#se·· of ci~~fl"ia{9grai>t1ic . films .
rty~t:1J~,rrefe,\}~~':1}.~s·,P.r?~u_cers, , a;id J~ssors , of
\~ ..(·,9.n~~~JrA~~i~phrc·films rr:ray _pa~s·. on·. the .. VAT:.
· · .· · .. · ; · . :: .. ·· · · : ... • ·~~ t,J 1. · 1\ f b,.'"~IJ.~nt to.· cin~ma/thea.ter . ,oper~tor~: . or ·
· Royal.~y.pa_yme):lt~ to non~~e;,rd.er.its·:.a.r-~su!:,j~c~ !'-/µ. >~tfetors .ort. the ...~·c;11e· · .. or ie.asif. ~of
. . t9 12 Yo. -w1thh~ldm9:· .value:add.e.d.,t~.- ~~"'-=~ ·ci.nerriatograj;,hic filr.ns .. (BIR R.uling N~. 04-7_:
· .. .T~e resident. payor 1s requ!red .to .withhold 12 Yo 2013, Jam.iary-Z4; 2013). · ... · ·
. VAT before pc;iying .the. royalties. tp,. tl")e... non- ·· · ·
..resider(payee (BIR RµHng "tiJo. Ii AD· q2'-2Q1-2, · · · 8: : ·The:. ·i~as~ ·o~ th'a···~~e· ·of, or: tti'e ~lght • to · use>
.. Janua(Y 1 o,-2012r ..:... . . . · ··:. . . . . . ,· . r.adio,. televi.sio1.1. 'satellite- transmission. imc{cable
.... ·. tj3Jevisibn time. (t?:R.' Nd. ·.1.~2005, ·Sec .. -4:.'108-· ·
.. Royi:\it_ies. pai.~hor. the :Use of . tra.demi;i~ks. are:. ~; . ··. . ..·
generally subjE:l~l 1o VAT. However, ~hen _the. . .···. ..
· incom·e p;:lyo,: is. a.· PEZA-registered entity. ·to . VA"fo.n·.Pr:o.fes$i~nats . · .. ,· .. '·' ,· .
. w,hom. \IAT. miiy not b.e.passed on,· the roya{tjes .· ·. : .ProfE::~ional, ·.cJa~s)fied}.~-.s~lf employe.~;.'r~fets to 0

shall be exempt.from'\JAT, [BIR-RulingJ\Jo~·iTAD: .. an ·iodivjqual. or a :group,. ·.practicing bis. or· their

:jJ65-2@12, Octol:)er
. . ~ . 24, 2e12), . . ·· profe:ifsion·or. calli11g, with ot'withol,Jt.license i.mi:fer a
;,,, . regui~tory '.boari:I or° :q9dy .. Apart'. from . ~ppllcable
·~·. · The· .I.ease OF tt)e·. u;,e ·of, or the .rf~h<to.: .1. i~e any::. . )ncqrne 'taxes and, withholding taxei-;, _ne: or they ·are ..
. industrial, commercial; br Scientific.equipment; . also. su.bject to VAT; (R.M:C. No.' 6472012, October
. . . . ·· . · · 31; 2012). . .. .. . . ' . ·.· ... ·.· . . . . . . ·.
. 3. The' supply of scientific, technipal ·industrial or
. cotnn\~rcial knowl~dge·or inforrnati.on;· .
·.:

21 s · 1 . ams sAN a·E~A LAW CENTRALIZED BAR OPERATioNs

. ··.
 VALUE-ADDED TAX
: SAN'BEDA
.. . I.AW CENTRALIZED
·. BAR OPERAT.IONS:..
. . .
.MEAlORYAID 2019

\ Nof~;·. The grc5s~ annual receipts must' exceed the·.

,t P3, 000; -oco threshold to: be held, liable to VAT,
!~ · otherwise it' is subject to. 3% other percentage tax
!j' · under Sec. 10~.(1.)(BB). ·. · ·
!? ·' . . '. . . . . . . . • . . . .. n,~. fo\lowrng· are transactions deemed s'ales:
~/ Note.. Services rendered by doctors ·and lawyers (:TDCR) ;(NIRO, Sec. {o~ (B)i · . .
if?·. were previously VAT~ex.empt under ~.A. No. 9238: · 1: ''rransfer, · use;· consumption. of ·.goods or
::.. These exemptions nave been 'deleted under RA. p'r:~perties . ~Of . in th~ CCiyrse. .Of tiusin~s~ ... of
i·· No: 9337' and mad.e.VATable.. effective Noyember 1, · ·" goods or- properties origiflally:irit~nd1;1d fqr sale'
· .zoo5_·:profession·a1s now covered by VAT pursuant • · or for use in the·course of business (i.e.• When a
[ · to R.A. :.:No.· ~3?( are required to "update thefr · . . . VAT-registered person .wi!fidra'w~ goods . from
,t · . regis~rati~,r'l. (R,.M. C. ·. No: . 6~-2-~qs, October 18, . . hisbusin·ess'for;his pe_r.soAa(qse); ..
i..
:1:· 2005)
. ~. . . . - . • •' • • .. • • : I

,.;:,., . A ~~o~ess.ianal-· :practic.in~·. his . professton: ·,~ ·. ; . ·. ''the. do~ation: bY..i'VAT-regist~~ed: p~rson.:of its
'~ .subject to VAT:-if: .. .' -: . : ... · : : -, · .> · · . · · ordinary assets is subject to VAT pursua.nt to
-~ Sec. 4; 106-Tof R:R. 'No .. 16-05, as. amended,
1. -·there· 'is no employer-employee .. relationship
. .between him and the> person to . whom he .
.. th'e $8.me . being considered·. a . tran$'actj6n
. : deemed sa.le. .
?}__:. renders.professloriar service;' and ..
-~. 2.· His· gt().s~· rece)pts for. 'the· .n~xf tweJve· (1;2)'__.,?-;-, III\Jstration:
. ·: . months exceed P3, · 000,. ooo (R.R. No.. 1.13!://e,. . A C · · .d· t' .1 t t d. d · ted 23· ·
··.:· · . ·2018 · -. · . · . · · . /";.r.i>{)·t~ · · . · o., a. oryie~ 1c.re~ es a e ea 1 er, pna
-~:--_ } .: ,: .. : · . ,. · · f'\.il:1,_.,l\ . residenttal lcits·with the improvements thereon to
f .· Not~: :jf.~ ~rofessio.n~I;_~~ide fiom the practice 6fi~7.f;.'//tJ -~-B .C~.. '.! non-stock _non-profit_ or~~n.ization
k .· profession, aJ.so'derive~,re.v~nu~ ,.fr~r:ri .other HrJs_ !?.!~,-:.
Jl'.'ii:..:':!.~~~~.~-~ .. ~or · ch~r!ta~l.e purp?ses. . and
business which are otherwise subject ~,,,YAT, ttre)Jr· .r~~tfil.~~~lth the. P.h,hp~me Council tor .N.~Q
·sime shall l:ie·<;:om_l>iri~d for-purpos.e_~(;Ci~;d~termi_ni:f!!!ii~-~{ . Cert1fiqi~9:1' (PCNC). : .. · .. ·. ,
whether. the thresh9Jd has been· exceedeq;l_R:R Nf4~'.,..e·" . · . . . . ./ ~ \ · · ·
• 16-2005, Sec. 4.108.3 (v)J. · · Ji;,f,~ ·P ..• J. ·2. __ D,1stnb1Jl1oi_o"-tra_nsfer to: . · · . .:
'!;: -: . · ·.- •-. · ·_. . · . •• · rtfi.:;::.r :~1~..,.. . . ·( ·a. St,iare~ol(J'.,(s. or investors a~. share in· the.
{; · Note: -'self-empl9yed individy.~i()md~p!;_¥tessio'ria'isi~
\~· · availiny uf the 8% tax on .gross-s·a1e~--et1gtor.rcociP.tS · .\i,:.1
tP . . . 1l'.o~ts~of afA!;regi.st~re~pe'rsori (Property .
"(!:'fF>ll(.!tJ~t;).(j~)!'J:))_9 · · · · .. .
\. and othe~ no_ri-oper~ting. in.co~~~.·uni~-l·~ic~. ~)'i(?!.. f·'"f;· ' . l~. '"{,j{~~if~~l~j:l'ayrne~l of a-d~qt or oblfgati~n;
:;-_ NIRC. s.hall'_l;ie .~xempt frornJhi~lJ><.lY,t!ie,~~ur .12:o/o ~! .. . . . . ·. . . · . .
"··
i ·vAT (R .R . No. 13.:201Q . .,,, Sec: 2'/... r'i""·~
~ . - V.1
) 'II . .· 7_· 1-:·.1{c:¥"'?."")
· ....~mustration:·
. . · , · · · . · . .
£'. . . . . . . . . . .. '· . . . (),...~;1. .... · .1\p~f;i?:;~~f$.1e·ofthe.·importati~ns of JG.~ ·c-orpora!ion
~ VAT o.n .H_ealth Malntenance·Orgfjni~~lion~ .o1<~~~J,; d·!i·!Jle,:.,;:,1:01»·cars which are _intended to ,l;)e -.sol.o
~~- · · · · : · · · · · , .· · ·: · · · {t('. · 4:< 1 . · : . • ·lo:C.ally. The cars are·.Ct,JrrentlY. be.ing sold ih-th~·
. HealtJi . M~.i~t~naric~ .. ,c:>rg~mi~atior:is,jJ,:~i.3tities,'· : . loeal_. r'n~rket .at .f:>500,. :ooo. per ~nit. Tw.en~y·unit~ ..
organlzecj :1n ac<;ordanee... w1tn,Jhe prov.1s1~ns of the ·· . of · .the$e ·cars we.r.e. declare9. ·as. prqperty ,
.Corporatlori Code .9f .tfle Philippine.!? ancl lic.ensed_ PY . . dividends and di~t,:ibuted to. its stockholders.. . . . .
. the.i;ippropriate govemrnen.t_aQency, whic~:.arrange$ ' .. . .. . .
for covera·ge or. d_esignated ma~ag.ed ~anL_services - ·. · The. di~ttitjutio~ at,. io ~nits· i~ .deiin~d· ~- sa1~"'.'
. rieetied .Qy_.plan- h<Jloer_s/rneinQe.rs.'for,ftxe_d prepaid ·. -.· and.subje~t ti:> 12%VAT on .the. taxabJe base of
nieinbershij:i'fee.$and· for··a •specified p~iioa. of.-time ·pso.o, 000. r~r· unit, . . ·. . . ' . : . .-
.·.(R.R. Ncl 16~2oo's, s(!.a. 4.1of!~3 (kJ): . · . .- · · · · . ..
· · : ·.. · · . · · . · ' · '. · · ... · .' 3,. £ol')sigr:i.t:1ents···of . gqods if: .actu~I ·sale .ls· not
.r1MO.'i:i' grcis~: receipts:.~h.~li -be the_ total' am.aunt of· made ~thin . 60 :qays .. followihg the date· suet)
'or.
mcmey· lt.s equivalent (eprE;ls~nting ,the·.sery,ici: f.ee. ·goods·. wer.e. ¢onsigned; 'arid' .
f. aci~ally or con~tn:ictively receivE:1d 'during:ttiftaxable··
\.. p~ribd ~'?f the ~e_rvib'es perform~~·~r t~ b~·pertorn:ied . . ~ot~: pon.s.fgned. 99¢ds pf:lysjca11,/·;~t1:1rnecj..~Y
f': fe>r an.other person,. excfudlhQ thei va.lue.-a~ded tax . . ··the''consignee within the 60aday· 1:ferio~far.e not
~; · (R.R. No,· 16-.2005,-.St;1c.. 4, 108-3 .'(k)). · ·: · . · : .. d.eerned.$old. . .. ' ·. . .
1}: · Th~
',
~m~u~ts.e~t~~ik~d . :nd:: ~~eht~al;Y ·~aid by.
MED.I CARD to· the medical ·service .providets do ..not 4.
.
Retirement fr.om. or
....
-cessalioi:i·
,·.. ..
qf business wit.h
.

(.
respec.t to all .goods on ha.nd,.whether'.capita!
form.': part of gross:· receipt~ 'for. 'VAT ··purpos,es
(Medicard·PHL,· '!no. v: CoriJ.mfssioner of· Internal··. gboas, $toc~-in..trade, supplJ~s or ·m.~teriars as
'of the date of such retirement or cessation.·
Revenue,'GR. No_. 22?743, April 5, 2017).

·,\m~g SAN:B.EDALAW C~N-TRALIZED. B,AR0.PERATI.ONS I 219

 Lh a

.VALUE~ADDE·o·tAx
SAN B~PA.LAWCENTRALIZED ~ OPERATIONS - M,MORYAID 2·019

a. Cha'nge of ownership of a business when: ·

.. I .. ·single proprietorship lncorporates: or . - Ci1ANGE" on CEssA-i-IoN. OF
ii. ·Proprietor of.slnqle proprietorship -sells
· his business. · . · · · STATlJS·~s VAT.-l{EG_I$.T.ERED ·.
b. Dissolution of a' partnership and creation of ._. · ·PERSO~ . ·.
.. a new partnership "'.-'_hicb takes over ;the·
· business (NIRC,.-Sec. 106(8);- R.R-.- No. 16-
. 2f)05,:Sec. 4.:100-7). : · ' .· · Subject-to -1·2% Output VAT: . ·
.. The. 12% VAT shall. 'apply to gooqs or properties
.. lllu;,·tratiim: . . existing as of the occurrence .of the following: .
A Co., a · domestic realty corporation, was· .. · . 'i: Change .ofbuslness activity from ·:VAT taxable .
. dissolved· via shoft~ning ofIts corporate ter:m.·1(" ··· status to VA'r-exe.mpt status· .(~:g.,- A VAT-· .
executed a, Deed ..of Assignment to transfer a .. · . in
. ... reg(stered f?-erson f,ngagec/ .a taxable .ectivity
-of
parcel ·land "to : its stockholder, Mr .. x. as : . · like a Whole.safer 'ot ~ ietsner who decides to
'a
liqu"fd_ating'_dividend. /s "(he trenster "deemetl dlscontinufi".such.·i/ctivity and im"gages insteadin
sale 'trensection"far VAT.purposes? . . . ,fife im{ura']£~ /;JlJsiness or in ·any· other bueiness :
.. -, . .- not subject to v,1n or; . .. . .· . . .
Yl;S. Under Sec. 106 {8)(4). of the·· NIRC, ' 2 .. Approval of a request for. cancellation of VAT

U
transacnons deemed sa)e i nclude the .r.~i:_!lJJlei'ft-=~-".-'··f-~straticin
. from_ or cessatlon of business; _witbyr.esi',
.. -lnventoriea-of taxable goods exi~9ng~s· ~:!!})Ch _
.ect to
due to: · . . .
1· \ p-· r.~e~{rsion"to exempt ~tatu~:;.. . .
~Jb:.,f D~1~t9 revert to exemptstates after lapse
·· . .. . · .

· .· retirement .and cessatlon. _Tt,us~th~~ y.affce"='-·~og_;a,)> 9 c~ec_utive . years from the. -time of
·. of t~e· .real_ property as.. liqui,~fil1~g-_9i~e~1)~ ..,a~i:''._ . r-~i~Jl~,e~\ by . a p~rs·o_n who v~luntarily .
_: "deemed sate ln:)nsact1on~f~tt,~J,?cf.f;fo · Jl'Te .12% :=f'· ~ · · ... ..,~eg~te~~q.,ie~p1te beinq exempt under .sec .
..·-~ VAT (BIR Ruling··-··f'-!8.'~201fl
. September 22,, 20.14) .. /. . :
· · , ·
·I , · K· ·· .
f '"'~r:- 1 • · J-,-
'dat'f'll.Jt· }[ .. 1\P?(~~b~\He~.RC;-or
'·-~ti) .,
, o;._}-, · . c. Pj11l~r!:l ;Jct
._-.
l'jl~ek-the. specific threshold: [P3,
..-:@~O; 000:! l:>y on\t wt,o commenced business
· .·

: . Ta:x ~a_se an'! T_ax·Rate:_ ]we.fi~:fpe.rc_en~} (1.2%~~f~.1 .t:;-".'.':'!J;°:;il; "'fth.tpe '~·tfc'faJion·?f rea.ch!n.Ii.tti~_required
th_e. "!ar~et value of t~~ g~ods~~EJemE:c! .~p.ld. _a~ot'm'~ . iss·san9~~ ~ece1pts. during .the·· fi(st 12
tt,e ~'11'.1~ of :the -occurre·n.ie'"!_,gJ..i~fle -~ra"~~.~ctl_oni~ . ·., -D..Ws .fpt opettlon (R.R.. fl!e. 1_6;~005,
·e!lu~~~ate_d In (~),:(2)t._an~.\(,_~)~ab';-'i'ye:.\,~w-~ ~-. ·· I.~--~. : fSj'f.1()~.f)MR{f--,No.. 1?-2018): .. ·. · .
retlre·m.ent or- cessation. '\Mu!J\es~ ~i:-/4Ly.· j "f'
l;>asr..,, .• : . ·. · . ··
_shal,I · be.. ·t~e, ~cq_aisiti~_n. ~o~t- or\. tl:l~'\.8. r.~nt!;·. '~~~~~-~ ijject to\'1'2°(o·(3:g!.J:>utV.ll.T'--~· . .. :- ... ·.
. . ·market pri~e . ·of the· . 90,s-11s_- . or"\._prop~- ~~o.,,.,.J~ -il~t o/o·vA:[ ~hall l).6t apply-to .goods. or_ pr~perj:1~s
.. _VJ~lchever·ls _ 1.ower (R.R;. N_o. f..s2005. ~p: ~-~rtrtGA ·a.~r,gma_llY{,1nten?..e.d for- s~I~ _or for. use IJ\ .
. 7}.. · . · · ... ·. . . · 7~ · ~he"to,.1;1rse·.~f..l;>u~essexisting as of the dcci.irrence
. ·. : . · . · . : ·. · . . ·. · *:9/'i~~ - . ·~Pt~~fyilr~~~_w~CTM) -::·· .. : ,r. · •· .- .

·. 1 f1 ~e G.ase qf:.a ~al~ VJ~ere the_ ~·ross ~ "IU.Q~tp~e ls r..j{ P.i~_flfe;'~Yof · £o_ntrol·~<?!, ( .c9rpo~ation by ~tl:)e . .
.. ·unr~a~.ona_bly_)oW~dti~n· hte _f~!_r.,.m~rt<et_v~lllle..._~e ). \ _,;,..:.:. .,.:~t1ls1t1?n of .the contr?)llng .1nt1;m;st ..~t s~ch
actual market·:value shall. be th~ tax base (R.R: N~~ ~orpo(at1on by_~nothsr··stockholder.(md1v1dual or
16-~0.0~, .Sec, 4::106-7): ..- . . . . · ·.. · . : ·. corf;)brate)'9_r group ·ofstocl<ht>lders: · ... · .·..

·' . Rea~on:·'·Tt:ie .inVe~tbry left" <,Jt the' 'retiremel'lt.. Of. .· ...

._busfness:is,de~med ~old for VAT purposes· b!;!Cause -:.. . .
if gave ·rise-to lriput VAT when acquired.which may· :
't'fav~ beeri claini~_cfl;>y thEi:VAT registerett as . per$o.n
... input VAT cretti( . 16 recapturi3 the input tax that"· . ·.
: y",'.~S claimed _by. ·.!he ··b[Jyet .· in -tt1e ."_m~:mth thl;l:. of·
p1,1rchase; .the inventory.left shall be cori~ldered. sofd· .
(VALEN_CIA ·&·ROX/IS; Transfer.a'nd·-Busln,e_s~T,ax
(~00.f}), p. ·33_2} [herein~"tter"VALl=N_CIA_& R9X,4$].. -".

. Note: ·set:.: joi:i . (B) of .NLR_C" .enumerates

. tfanifactiqris dee~~d- .sale -of goods- and· properties
·' -and ·not of services·:.· : ·. . . ·

220 I 2019 SAN SEDA.LAW CENTRA\..IZED_BAR OPERA!l<?NS

 VALUE-ADD·E·D TAX
SAN BEDA !-4W CE,YTRALIZED/MR bP.E_RAflONS- M™.OR_YAID 2019 .

.Illustration: . . ·. If X has no other transacti'ons Which· will give rise to

AB¢ _: Corp. (transferee) is a. merchandising business tax lia~ility," its tax .credlt/ref_und·. would be_
concern and has an inventory .of ·goods for sale . _as touows: . . .·
amou.riting to P1, ·. 000, . 000. ..DEF ·c.Qrp.
-(t.ransferor).,:a .real est<\te.develo.per,. exchanged Eiport· Sal~Output tax (PS.DO, ooo x··oo/o) P . o
its real properties for the shares of stock of ABC · 'Less: Creditable.Input Tax · . 36, 000·
·.· corp. resulting in· the . acquisition of .ccrporate Net VAr ~efund·able . · ... P 36. 000
··:cor-it~ol. · · . >. · . . , . . · .· . : . ·
.. .. . . ,. N.ote::The selfer must be a VAT~registered .p.erson
The inventory of .ABC Gorp. i~· not subject to · to make his export sales zero-rated'. Any Input VAT
· output tax despite· change in corporate ·control · ~ttri~utable to the purchase ·o{ 'ccipital goods or to·
because the same corporatlon stul.owns !hem -. .·~ zer9 ra~ed_sales by a VAT:~egistere.dperson may at.'
.·n1is.js In recognition of jheseparate and distinct . his· optlon Jje refurideq or er.edited against other
. personality :df-. :t_he"·. corporation . from jts · · inte.maf' revenue tax~s. SlJbject to the ·provisions of: .
. stockholders.. However, .the-: exchange, of- .rea] · the NIR~,-sec. 112 (VAtENCJA-& ROXAS,.si.Jpra at"
. properties held: tor sale or 1e~se by DEF-'Corp.;_ · · 284) .. :. . : . . . . · . ,.. . ... · ·. . ·
· for the shares otstock :of. .t\BC Corp., whether. .it
"would, result -to corporate control Qr not, . is. Export sale by a rion-V AT registe1red erit.ityis .a VAT-· ..
subject to VAT. · · · · exempt. transacticn. · Un.der Sec: · 109 · of the Tax •
. . . ·: · : .. ·. . :. . ... , '../..:). Code, a VAT exempt sale .. is not subject to VAT
2." ·.q,ange iA Ira<,je' name, OF corporate r.ia.i:ne>,'l,cfi,~-'?k (output tax): and· the- seller/supplier is not: allowed
· the business: an~ .. : . ·. : : . · .. · (:!ii./~::.\ .c~ny tax credit. of VAT, (input taxr on· purchases
3. Merger or consolidation of corporations. . ,tJl'.·
::_f(tl related to such exempt transaction (TABAG &
· :· '· •
· · · · . ·· ·. •
\{ .1~···:.'·'-'.
,. <\s'
·~uA','
1~/ GARCIA
;:,:,• '""-. A
suoce.et
•/"': '
276). · · . ·
The·. u~used; Jn_puJ _tax of '. the_ .. d~~~plv~~i~(!!0:'...1]!1~·if.,"'.·w1·.w. · ." • . -: .. · ....
· corp_or.ahon, as of the ·c;l~!e·. 9f .. ff1"¢i'ger oi;-' l!y Input ta~atti;;l~utabl13to zero~rated sales of VAT-
. consolid1:1tion, shall · be .absoff1~~~ by t1;1.~t.J register(?d P;,,ri~pn, at his option, may_be: ·. . .
survlV!ng corporation.(R.R. No. 10,,?91~). .,J?:"11 :t. Refu~d~d!fo\.. . . · ; . ,
· ·. . · · · · . · . .- . · · ·. t~:t'-,f .
j;' 2·. _ _-Cre?,t~a ~ga':(_lst o.~her Internal revenue taxes,
.· _ · .. ·. . · .: . . · .. ;,,.~.·1j:J>
· _;_ "\)'~-..;~ .. --:, . ·'t-~1i subje~~ to~ the~p:ovisio~s of Sec.. _ 1_12 ··(R.M.C,.
. tt.;-Y,) :. 5te .
P~,~~.
. : . .. . . K_-,4 No:.f!;...~gJ.!._~!J.t:.;t~3. 2013).. . . . ..
. . ZERO,-:RA.TE:O Si\fLES=-0:w/\{A:'.£~~,·. r.~li _· ~·;J.~~;·J·!-~'·'·~·:·~\·,.,-v.. . . . . . .. · .. ·.. .'
• · ·: '· •. "'·1. ..;&r-r~~- ·. '0{'i (.•'J" Kr.ncts·o'Fz~ted Sales:·, · ·: . . .
· · ,REG!~!~~~~ J': r.;7 Jo
·_1, .· As o~je<:t.ofthe s~11e:····. . · ·. · .-
.. . · .. . · . . . ....1. . .· !<·.! • . -1~'.'l'::--:--rf· : Zero-Rat.ed SaJes of Good~ .or _Properties.
: · ·· ,·. · · · ~ ., · . !\.....:.-'1.v .. · ·• .~~-:i•-~<,:1 -~-~-(SRROII) (NJRC, Sec. 106 (A)(2)). : . ·
A zero-ra~e~ sa~e' by a_ VAT-.rewste~~~'.p~rsoq~!}.q".'.".:~,,.t'·::-:..5My"=;:~Sal.ea~d.actuai §.hl~ment of good_~ from
taxabl~ transa.ctlo.n.for Y~T pmposes;i_,~ut .s~.'}'.t!ffl0 . . . ·the .. Philipp.iAes. to .·a . foreign . country ..
result_~,~ any- outp~t t~ fRR., No. 1~~(}J:iS'ecs.. . irrespectiv~ · .·. of . ·any: sh!ppir.iQ
4 .. 10.(j 5 and 4.1,08 5). · . · .· . · :· arrangen:ierit that r:n.ay .be .agreed_ upon
.which may influence·· or." determine·· the
.·The. purpose of appiying ·o.% _rat.a. 6n ~ 'taxabl~ :'.
. · tr,an·s{er of· 'owh~rship of the goods: so ·.
trapsaction':is 'fo ·exempt the trans_aciion .completely· · exported;·paid for in :acpeptable foreign.
. frqm VAT: pr~viously . collected on furchases. This·. · .· currency :9r its.-equiyalennn gi:)ods or.
arise ·b.ecau'se the 'sales oftheVAT~r~gisfer~d seller · . ,: . _.:.5en1ices: . ,and" ... acc.:ounte.d '· ·tor.. in ·
are 'suoject tb 0%-;rat!3, wt,ile the Jnpu_t 1axes Of) liis· accordance- witl:i the·. . ·rules · · a_nd ·
. 'purc6ases passed.-6.ri. to· hin:i by the· VAT~registered . regulations ·or the· BSP; .
suppliers ._may.:be recovered b~ck .'iri the form. of tax .
.·refunds .or"-c'redits (MAMALATEO," Reviewer, ·_sµpra
. at~64). ,:. .. · · · .. ii. s~1e pf. Baw · .. matedats packaging or.
materials· to a ncinresicfent buyer for -
del.ive(y· to resident' locar·export-orierited ;
Illustration_:· .- . . . . : .. . ' . . ... enterprise to be used In- mc1nufa~turing, ..
X, is ,a VAT :registe.ted business, e·ngagea·. in . export. : , _proc.~s'Sing, packing,- or repacking·in -11JE! • ·
otlocany made. products. During the taxable.year, its · Philippines. of .the said' buyer's .goods,
total. · ~J<port _sales all·. denominated in . · fo_reign, Whi_ch- must be paid for in' acceptable
currency is equivalent to the value of PS.00, 000. Its ·
r,
><·
total input payments _for purchases· and utilized
'services all In · connection . with · the conduct of
foreign ..curr~ncy and accounted, fo~ in
accordance .with . the . n,iles . . and .
re·gulalions of B~P;
' · ··business. amounted tc> P3~ ·000. .

· 2019 SAN BEDA LAW C~NTRALIZED .BAR OPER~TIONS 221

 VA·LU.E-ADD.ED TAX-
SAN BEDA LAW CENTRALIZED BAii OPERATIONS - MEMORY AID-2019
· .. ·, .· ' . it W41154 ch± 2 ,,,.
iii.. Sale· of· "Raw materials· or ·p·ackaging_ . ·agencies and/or i~strum~nta)ities
. '. materials to. . an . export-oriented "grant~d .. tax .. irnmunittes, of locally
. enterprise; manufactured, assembled· or
repacked products whether", paid for .
:Export~Oriented:. Enterprlae ~ Any in foreign currency or not (RR.. No..
enterprise whose export -sates .exceed 1:l;-05, _Sec.·· 4 .. 106-5). ·
70% of thetotal.annual production (R.R.
: No. 13~2018, Sec. 2).· . '. . ~ . N~tes:.
. . ' a) . Export· sales '·of . registeri;,id
..iv,· 'Those "co.nsid~red eX.port sare:s··uncl~r · export traders shall · include
·· _E:Q. ·: No. 226" .. (Qr.)'lnibus· Investment · commission income (R.R.. No. ·
., · Cqde .o( ."f987:) ancl-' other· speciaf laws; -1~~05;··sec. 4.106-5). ·. · :"" ·
. : -and"· .. · ... · : : :·. . :,: .'... . b) . Expo!1ation · of · g·oo.ds· ·. · on
.. .c~m~ignment . .shall : . not: be"
. C6n~ldere.1;I Export S~les·-(~nder E.0_. . tfoemed exportsales. untH the
.· No. 2i6) shall mean tlie Philippine P.ort . export products cqri'i:;lgned are
· . Free-On Boa.rel {FO_B) value d.etermined · ·· . 'in fact' sold l:>y "the .. cqnsfgnee
from ..involces, l;>ills' of" ladi,:ig!· and· other' . . . . , ,(~ ..R._ Nd. 16--05, Sec.. 4: 1P(f-.'5).
. . .... -cornmercial doc~men~ . of . ,$2'-P.Oft::''""':"-~":~
· ·: · prod_uc~s exported __ dir~_ctly f?.Y;i~f~te;~e_d
.export pr~ducer?,. o~ the ~e~~np-~!JC~..,,_,==-.:::.,-
·u ]\V _(/ .l~.
. cf Sales of goods, prop_ei:ties ~r
'r '),l- ~::,._ - :·. sef:'iC~s . m,ade .. _by-: a VAT7 ·
·-<>,A, . reqlstered supph~r -to a·. 1:301-
.. _of. export i:>~gducts s_oJ~y\~~J~ere'd ... ~,~ V,.;,...:" · regist~red . · ·. · · .. -: ·
export .. producer. ·.~f~{~r,io)~~- e~~'ri~-....~ -:(_"'r:>. {"anufacturer/producer. whose
producer, -or to <3:f_..,ei~eoij/tra<:ffifll)at .. ;i;=, . ·w· ~ ~"-""... &\ p_i;:o\'.J.ucts. are · 100%. exported
. subsequently
. exp.nrf:NgJ.sarn.e{
.r -y-j' . V · ,._. ll J~_l. · 'l
.II,~ Jt»· · . \ ~r.~ ar~ .
't considered 'expot:t:.
. sales·
·-,: .·- · .:_ . · f IF ;-' . : .t~~- . ,
v, ~
·
.
. \ "J"!jJlf Nr;,._ 1.6-D_S; _Sec. 4)06-5).
·. Prn~ucts . sold. ~ll~JJ:;-·bjilybe}~cleemet--.,.,.~ --1 1\_ , ~, ·. · ·. '. ·
.the. ·.other pro9;uc~~ ~r · expo\{ tra~2'.:ll.l~f-)~
'P.rovideq; ,thai· _g·~r~.,,p'f.,expor1t~r9ducl~
· l
· . export sales 'w.~~¥~/;!~IJy·.expqrte~-py...,_. · r::--'".f#!/. v•.: Sale\of-"990· s,,sup.plies,. :equiprnent_.and ·
·tu~I. t<>i~P..e.r'"'s ns engflged exclusivE;?I:{ in.
· if)'c~ll)teiation!~ship'ping"·orin'ternl3tiona1air
·· · _to. ano.ther wo\lu.s:~-~~r ~q'}~lb't1expof:(!r ·~ . .· · C)ffanftre{!.-d~e~ations:.'frqvided, ·that the:
. · trader sh·a1~ onlt-..ibe \tee"~~~P9,}. -~49:;../£y~00Jsi · ~~plies;· equ1pn:ient.. an~ fuel
~clles . ~.he~·· a<::t_t\~I_IY:. eJ:(t,>,~rt_e~}'·~t~~ · .'~..%~~1$_,"
·
~l]pll : . l: >J u~et;i exclusiyely ·. f<;>r:
. . , . latt~r, · ·.as . ~_vlcle~~d ~,by·· 1~~9';,J,/~~ : . , 1p~ern~tl~fial shipping- .. or .. air tr!1nsport .
certificates . or . _-s~~.1Jar- · -_:'b~m':J;ef9~'1f{t~ ~o~erat~qn~.(R.R, l:!?: p-2008, _.sec,
doct:Jments..
··
,
.
"\,,- .,,-~.~-~- · .~ ·
~ { 0 --~-
tz10.fi,
(a)(5)). · :
~·,. .,.,-: ---, l- t
: · .
· · · · .
· .
'::·;;q~nsider~d exp.~r.t· · s~,a~4.QJ:;~~1\.
. No. 226'.'.. is·expaF)ded to m~ke-~s,9f
· A-~(~\(;.':;;. ti~~ s~-~iect~o -z~rer.r~ung_are i1mit~a
. l{:b~ to_.go_od_s and_:pas~eriger~_.tr.ansported,
.· goods·;,md services-by i:i:VAT-re.9ist~cf~-=~ : ·· from ·a pcirt in tn~..Philippines directly to·.·
.. . in the cus.tom.s.territory. to. Ec9zorie,a'nd .. . . · · .: a·· foreign" port~· or. vice vetsa, ... Witliout
.... : · . freep,oi1· e_nte_rpris.e's·automatically *ero- · ·. . ·i. d?.Ck}ng or-~topping ~t a"r1y.-othe_r· port)n
-r-: . rate.d-: .. · · ,. · .. · :· . : · . · th.e Philippines( .. · , · . · · :: · .. . . . · ..·. · ..
J.) . sales to · .bon~e~· · manllfaptul'ihg · · · ·
· · : i,varehouses pf .. export-oriented ''W!t.ho~-t-.dockJng. ~r: sto.pping_:~t~~~Y ··
· : · manuta.cturers, · . · · : · · · . · . · ·· ·· other port .._h:i ·the.: Phllippin.es"... - .an·
. ·..
·. 2) salei"t'c;~xport processing zones; · .:. · iriternati~inal . airline": . tl;lat···· ma~es- ·• a.:
,
:. 3f' sales.· to_. regrster.ed.::expor.t _.trad~rs. ·· stopo~er ,in a .Philippin.e .port (o ·unlb~d
_:",: .. - ,.- ·.· . · 'qperating . '· bonded ··:- • .. trad(ng :·.. pal:iserigers ·: atid/of: -cargoes· front· . a·
.. · .. :; '. . . :. wa~e):louses < .. ·'supplying raw • ·: . . ·foreign: destinc;1tton . or.'· . to'... pipk.· up·.
. . • . . materials·. in the manufacture' of : · .. pass~nger ·and/or"',cargoes- for 'f<>reigri
... -~ exp.ort _products "tinder gtiid_elines· to .. ·destination . is deemed" ·-not . to ha\te
. be s~tt qy ·.th~ -Board ·in. consu)tation · ·doc.~ed ci~ s~oppe°d.at an·y oth_er· port in
with ihe Bureau·of-ln.terrial Revenue the· Philippines -"(ftR., No. ··.4-:2007,,,·~ec ..
(BiR) and the··Bureau. o(·Cus.torris . ·· p}.• , · : . · . · . ·,~ . ·
-(BOC): and·. . .'.
· 4). safes to forei~n· .mflitary bases,
: . ·. diplomatic '.missions.: and . 'other'

222' I 2019 SAN BEDA LA\/'y ~ENTRALIZED BAR OP.ERATIONS

 VALUE"'."-ADDED ·T·:t(X
_SAN"OEOA ~W CENTRAlJZ~() fAR OP~RATION~ -_MEMORYAID-2019
·w,hce ff &S&MitW NBS
•••
. vi. Sales Ip ,persons or entities deemed and accounted for in accordance . with
tax-exempt: under Special Law or · the rules and regulations of the BSF);·.
· · !n.ternational Aqreement · ii. , services other than those mentioned .in
· the preceding paragraph rendered to a
.The·.fcillowing sales .to. enterprise~ _duly.._ person engaged in -busir:iess conducted
.. registered- and ·. accredited with" "the QlitsldEl the Phlllpplnes-' or . fo a non-
( . following-'shall be effe"ctivery subject to resident :pe_rs_on not engaged · in-
.zero-ra~e::,_·.. .. ·, ' . ' . business · who.'is outside the. Philippines
·.1) Subic ·Bay Metropolitar.i Authority : w.h.en. the. services are. 'peif9rmed· and
(SBMA); . ' . paid. for if! acceptable foreign. currency
2)' PEZA; and accounted tor: in· accordance 'with'
.. 3) ·Asian De\(elopi:neht Bank ·(ADB), the rules and reg_ula"tions of the BSP.; .
·,;1nd . · . : . .".Ttie VAT:'sy~t1:1ni: gene~allY,}oltows the.·,.'
4):.Jiiternationai ... Rice · ... RE;i'search · .destlnatlon ~rinciple (expcrtsjare' :zer9-. ·
·. IDstili.Jte_(lf~RI} (R.R.' No:. ·4-2007, rated : . whereas · imports · . are
·sec.5).·· ::_ · ·· taxed} •. However, : an .· exceptlcn to" this
·:principle .'is the 0% VAT ·on· services
Note: "The. President. vetoed "secs. .enurnerated in ·S.ec. 10.8.' (previously
··31 -and 33 otTRAJ°l'J Lawon-sate . Sec... 192) and -perforrned in _tl)e
· ·and . dellvery · -qf go,o(:ls/servic~:·1?:{. · · · Philipplnes. · To.' be .exernpt 'from _the·
rendered Jo: . · . · /-',l/ 1h ·· destination · principle· CJ rider. Sec. ·108.
a) .. Registered-, enterprises ~itgi~:i.·~,'<. f~i \. (b)O) and \4), Jhe se.~ic?s must be·'(a} ·
:. · sep~rate customs ~erntoryJ~s;:::,,:#. . , p~rf0:med, '.n the Philipplnes: {?}' for ~ .
. provldedunderspeclal!aWfy n:,;:~!l~~".-'. ,. .;,_ ,~rson. d_o1~g· .business out~l~E;l .the
.b). Registered· ·-enterpri~~s_;1'wittiif1i.:ft~iL::.:tt~~~lippines;· and (c) pai~ _iry:a_cceptat)le
. · tourism Enterpris~1:q>ne. . A .~ : . . f~fi~igri c.urrency : accounted · for in
·· · · · · · if .
(I ·y;::::1} · gi·q~ordance ·. wi\h · BSP · rules
.' However, .. the provisie?'"0JiiS_e·9: 1,es: · l~li · · ·1fro.'ohynissioner of Internal Revenue. v.
. , (A)(2)(~). and ~g~~B!,;<~)XS>· still fii j B~1i:m~(ster. and ., Wain . Sceruilnevien
coris!der~ s~es tor-~ersons ~r:i, li;.i· : ... !{ C?jmtra~tor.· :Mindanao; tnc., -G.R. ·· No.
entiu~s whSs~ ~~~liP~n -~f!~l;!r . 1:?iJ . ,~7lfft~2g5T'_ :
'/!,;Jnuary· 2_2'.·_2007).
. .. _ . ·
special: la~· or . ..;1ot~}natioi:l~I. · fnf · . ~f.:,..l-'~1.~'-1~>:;>_7 · ... ·. .. .. . .
, .. ·agre~ment rem11ii(l,~i~~~~te.".·.";/ · ~If1 . ,: · iii._-~s~re1cesfend_eredto'.persons or entities
. , . . . ·. . . '-6.~ rN _:; . . .
;,\. . ·. . . -. ~hose ?X~nipt,ic>n under §peci~I ~aws .or·
PEZA Mer,nora·ndune}fJfS~.iar No,. 11):;~~~Ji!·".~•:.. ~'!'l~~~,:i13J1o~al;: agreen:1en.tsto. whu;:l;l, the
?018-3.3 d.ated, fyt~c;~?"~ 2,- A~J8.~;;uJ.:'.!~·.Jr-"~1~,;.,·,i!"'.Ph1hppines 1s a . s1gnator.y e~ect1velY..
ptov.i~e~ : 1!)at !Jle ~!Pi=l.rt'.}1'.fQ,f }.if' . . ·· . · · ·. subjects the· supply- of sucn se"r~ices to
,. · .. Finance mfqrmed th~J~h.,..~~i'.f"RA,IN . · .- , ... -0% rate;· · ··:. . · .. ·.
. .. . Law does not affect the. zer~ratirig
... .:Of s_ales:_of,gb.6ds. and· services to . i~. : . s~rviee~ ·re~dered ·to perso~s engaged. ..
. . . PE,ZA.locators.: Accordingly; Se:ea8' .. : in. !nt~rnatiotlal "shipping or air. transport ..
. ·.. . ·,of. R,A N_6. 1,916, know.w ~s. the. ·operatiqns,. includiog "·leases of J)roper:tyi .·.
"qpeciaL _Econotn.ic Zon~ Act. of· .. · .·· ·. fbr 'use:_.th~r~f: ·P,:Qvide.d, Jhai U,e~e ., ·
·. )995", wh_icl) _p,rovides.. that·speci:f · services" sh.all.~ be .. -exclusively'.,.. for
· ··economic· zones . are to··. be . ·. '·'1r:iter.riational shiJlplh9. or air transport.
' ,.· - . ciperat.ed ' .. anq. .. managed :_ . ·as. . op~[?li0ns.' · ·
. . . ·separate customs "territqry; has not;. . ....
.... , beeq am.end.eel· or repeitled by the · · Not~:, Crewirig. services.. r.ender~d. ~y' a·.
·T~IN. ··•. · .· ..... YAT-tegistered ,company· to· a foreig~ . ·
·.·' .... . .. ocean-going vessel ._that' "Is p~id·· tot "in .·.
b_.' ·.Z~riR~t~d· S~;es;-Q'f.·Se~ic~!i: {·P~SIST·~· · - ·. ·. ·f9reign· curreric'Y. is :sµb]eft to VAT at .
R).(NiRC,.- Se~. ·108:(B)),. · · .· o·%. However, :.tlie . entitlern.snl to · Oo/o ...
·.. . . . · VAT does:· not" -:.extend·· to. ser.vices ·. ·
. i. . ·f roces~ing, mi3nufacturing qr r~packipg ··.... rendere'd to" common carriers. -b'y sea .
of goods· . for either per.soi,~ doing . ·with.respect.to transport pf passengers, .
business olitsid~ .1he.Philippines,. which . ·goops, or_ca.rgoes fron:i'.one place Int.he
goods are slib~eqliei:itly export¢d "ahd· .' . . Philippin·es . to ·. another · place . in· the ·
paid f~r in:·acceptable 'foreign :cu"rre,:icy .· . Philippines, the same being subjec;t to
12Cl(o . VAT in· accordance· with· ·sec.

-~019 SAN SEDA LAW. C6NTRALIZ5D BAR OPERATIQNS. I :223.

 t t . 5. .. . Mis . . :. J

VA.LUE-ADDED.TAX
SAN BEDA LAW <;_ENTR,AL/ZED·~R·OPERATIONS - M£MOFff A.If! 20·19 ·

4.108-5 (b)(4)·ofR ..R No. 16~2005; 'as~ ·. Distinctions between Autori:i~tically :te~o- .
amended (BIR Ruling· No. 299-2012 R~t.ed'Sales and Effectively Zero~Rat~d Sales
·' . . .
dated May 3; 2012).· ·
. .. . .. , . . .
v. . Se~ice~ ·performed. by . §tJbcontracfors .
and/Or · coritractors · . in. . prncesslng, .
converting:, o/. manufacturing. goods :for ..
. an enterpris·e wt,ose · exp:ort: . sales . Refers.· to. the expo.rt · . Refers to . t~e '.loc:a1
·. exceed ·70% · · of. the ··total .-ann\Jal sale ·'. ·of .. .'::goods; . sal~ . . of . . . goodl?, .
. production; ... · ' · · properties: and supply . propertie.s and_ $Upply.
.. . . . .
vi. :transport of passenqers and cargo by
. - of. servic;:es by· a VA:f- · . ·of servic~s by a Y.AT-
registe~ed person .._ . r.egi~ter~d· pers9ri .to' c1 · .•..
. domestic .alr or sea carriers from the .person or entity who·· ..
. -Philippines: to.a foreign: co.untry;.a~d. . w.as' -gr-anted. indirect ....
.: ~ax·. exetiiptiO!l· :'Und~r .·
Note: Gross··rec~ipts -of .iriternational air -<1n~f ·... special, : · law.s : ·.of ..
'sea earners ,doihg, business in 'the .Philippines ··
.. · · intemation'af
. --· ...
shall -still be subject' to 3% percentaqe · tax . agreements., .. : ....
·:· (NJRC, Sec. 1-18). . . -. ~_. . · .. · .;.~~7 , , , • , •· · · •·• .~ ·
. vii.. saie-~f· p~·w~r .or..f~el·g~qjii~~b,';t~h.t) ·, ~n.ilfn!ti~~rided to:.·. ·.,lnte~~~d to . -be:nefi,t
. ·R~newable sources ofAnet~y)Jcl):;:a·s-;>="":"',bJt;~enJP,Y,.~d,~y' the , , the p~rch~se~ who,
. btit ri"ot.'limited to biofo~s; ~~(wind·_ = · .se[le~tl?,f.:~~ ...di~ectfy· -: not. be1r:i~ .d1re?tly and .
. hydropower . · ge·~tl;i'frJ111fVati"ar-sr~:="j1 ah'd~g.a~~ti~tv.or .Jegally '[!able -f,or.. t.he . ·-
. '. · ~r·fi.J-<r.l.tt:ffr emergi~ . T. ~)he V~·il'.,m,1'3~11).9.<SU@h · payment qf tl')e VAT,
. ocean ..en~rgyt, . /0 · j-'$..g r ·ih as f{J~I iJfu. : ~II.er· , intert.la~~~<l.fir. , will u.ltfmat.ely'bear the i .
. _ sourc~s u:;;.1ng e19hno O~f. s sui ·. tom e tive. ·\ V ,b~ : burden of. ·.the tax.
tz:': .
.
.
.. I
. c;:ell~. a,n~: hydrogffl~I~·-. . ·. I -. ·.
The sale· of·~·~t;.-,J:fuei-·iJ,, th~?,\
,n~:r
beil)g subject t ~1 a~d no~~~ s.a.le o
.. '•·
services .relate t<;r1l\~\ ffi~~t\'!i\AE:~~r,
· operation. of the., RJinfs~~n(@.,!R~:>a1§.!!~'f§p
:~..:..:ic '· · ·
t.::!,'timTJ}.l..C
~J.L~!n the. r~'fup,'il.co?i· shift~?
er-ediLpf..i~p0l ta~e~~ suppllers. ... .
l~at 8Cft,.attr:ibu1a6JelpW .
cf s{ifil:.' _ 11 · : ·
-;~~1';2~· >T·, fl ,~~f , . ·..
i"1 n;:,I,of . Jiftjrnal Revenue v: Seagate
..by . the .

I. . · · - . · .
.
.:

'

... .-. ·... _· ~~~er.:(~-~-. ~o·:_.~2.0~-:f:~~~~~ · I ·"'!?~~:9.r.L)'.:· ~f-. No, ·1 ~3/366,:. .' Fe_bru~-ry..·1 'f,·.
2: 'As,-to ho_w.the fransa·c~l.<:>n.~h~II _1?1\s~b~t~'l\ >/·. : : ,/ . , ·. ~ · ~ ·., · ·.
'·ze~o-~a!ing: .-· · · · '\: · ..~.~A~ajioi\"J~fgjfective Zero Ratipg.' . . -
. a..:-~·Auton:i.atically_ ~e~o-Rate~~sat«l9aet:e~~ed_ ~ tit,.i'R';,.~ No,. 4707, whi,c,h: amend~? :.Se?- .
to a. sale of g~o~s • .pr~pert1~s\~11.~ . ~le~ 1\flf41\; 'f\?""..:fi>'\§f:;PR. R~ .No. . ; 6-~5 . d1sp~ns~_d . w1tt:i: the -
·. . by a v.A."1:'-reg1~ter~d.. seller/suppfl~r:.~ is. I".' ~i.rei'i?e'Bt. f<;>r· P.ribr ~!R appr~~al ·'.or effoct1vely .
regarded. as .. e1thei; ~n ·export .~.a)e .or·~~-~o:,rated' sales:·ofg~qds .and. pn;>pert1es. However,
- for~i'gn · c::urrency . denqmii:ial~d · s~e under· . ·. · tt,e ·
.y Aj zero~r-ate<;f sell.er:s_.have· :to supmif t~e ·
. Sec. .,1_()6 of t.be·.NIR~.·:Examp!~~ q~E: sales. _sµ'pporti{ig_' ·d,qcurpe.nts·,a.s r~qujred b'y the exist~og·..
. to .reg1ster.e.tl ecozones· and freepo.rt. zoJ'.).~s. ..:-rules--anq regulation~ to qualify:fo~ \(AT zero-~atmg
· ·(R.M_.C.·N9. 50-200,7, $ec... 3J:.: · ,.·. ..·. . t6.the-'.concerned BfR'Offices for post-aud.it·and f~·r
. ·.. • . . . y~lldatioi1- of the zero-ratecj transc1cti9ns (~JR Rµling .
b:. ·'Effe~tively .Zero-Rat~d :s1:1les.·;_.: refers .to . DA-No:(YAT-003)'010-2009,.J.ariua(Y 14,.2_00.9)> .
. . the local sale' of goods, properties and,. .. . .. .• . ,.
services by· a .VAT-fegistered: persor:,· to ~o 'co~tri~~ ~rt E~ec~ively i~;.~~~a'ted
s·al~s· .' ·.
entity . that'. was.: gra,nted ..in.direct. 'ta'x The ·sc.held. tti~t .P.b. No .. 1Sf?9 ·gave PAGc·o·R
exemption ·unde'r special · laws .. or . ·. blanket'. exemRtiOn to taxes; 'with ·.no ·.distinction on
intematiotii:!l,.;1gr~i:liT)ents·.· Sin_ce..th.e buyer Is . . whether .. the taxes ar~ .. dir~cf 'or . inoire9t. . Tf.ie-.
• . exerr:ipt frotn ·~ndire:ct ·.tax'; the seller.. C!=3n'n?t .' :. ,legislature clear.ly,granted. PAGCOR'..exemption from ..
· .. pass on ·.the: VAT. ar:id. therefore; . the · indirect taxes by extending e,xeniption·.to .eotities or ·
exempt_ion ,enjoyed by · the· buyer· · s~alt ' . indiv'iciuais. · :dealing: . with th.e . !attar. . It fpllows
·: exter:ic;I 'to. 'the seller, makiPff. th~. s~le · ttierefore that services, suoh as· le!:lse services, ·
effectively.zero:ratect:(R.M.C. N9. 50-?007, . . re~dered! :' to ---.PAGC9~ ·.will .. ·1;>e. :,zero-rated,
':.sec: .3). . . . . . . .- . . . .. ·.. . . . . : (C9mmissioner. o; Internal- Re.vetJtie· "· Ace site ·f-!o~e/
·. · corp.;·G.R .
.
.No.. 147295, Febr1;1ary. 16,.2007) ....
,.·

224 2019 SAN BEDA LAW CENTRALIZED BAR·o~E,RATIONS

-------------------- -----·
 .:t1. ••-•------------mi:~-----1a11i'IJ •·•· --ma-illllilili~m1-=imamil!lil.a11=:.:z:E':'f:~i1il•
J~ VAL.UE-A.DDE·b· tAX
f·
:1, . . SAN SEDA .... lllllliilBll!IB-m;mm-.mmmm
LAW.CENTR;\LIZED BAR OPE~TIONS
1!111,11111 ~ MEfl,ORY AID,2019 ~~•
·1;._
:t.·"' . . . . ·. ·~
":;... Even with the passage of R.A .. No. 9337 which · · - While· .an ecozone .. is geographically· within· the
· J' .rem·oved PAGCOR's . exemption from corporate . Philippines, it .is deemed a. separate customs
\f .tncorne tax, PAGCO~_.remain~ to 'be exempt-from . : territory ·and is regarded 'in laws as foreign. soil.
:;-t, .VAT. because. ·~.A. No, 9337' retained. Sec; 10.8. . -. . Sales. -by suppliers · outside . the.' borders of the
9;;:.. (B)(3) 'Of the .NIRC. '(Philippine . Amusement. end ·_.ecozone to thls separate· customs territory are .
l' '. Gaming (!orp. · v. Bureau of fntemaf Revenue; G.R. . deemed exports and · tr.~ate.d as . exp.~r;t · sales · ·
<t No. 172087, March ·15, 2011) .. · (Commissioner ottbternel Revenue v. Seksui Jt.ishi .
~/-. ~·.: -· . · .. ·... · .. ~ . . . · ·· PHL,. lnc., G,.,~.' No:.. 149671, JU/y·21, 20,06).' ...
·;;,-:-: sales Made to F.or~lgn l;:mbassies . . . . -: . . ..
?i. · For .taxatlon . purposes._ ernbassles are· considered- Proof of VAT Zero-Rated: Sales· ·., . : . .
\ .. .extenslons oftheir respective countries.' territory.. As T6 prove that there is a·. direct · export :s.ale, tt,ie
:; . such, . any. 'sale .... withio ··a-. foreiqn embassy is . t~xpayer-~hould·preseritthe'Jollowing-do'curri'ents: ..
•'fi: ·. · considered foreign "sale- or. transaction outside' the . · ·of
1. S;;iles in'ioice· as proof sale· of.goods; . ·
\. Phlllpplne .te'rritor.y.(2 .b~ LEO/\J, supra al 93): . -r- 2,. .'Export declaration andbiilof lac;lj~g or'airw~Y bill
· as proof of actual shipment cih:foods from .the
.Transa~tion.s of a· VAT-registe~ed person . with. -the · . ·. Philippines to· a foreig·ri. country; and . · ...
. embassy. of ;:i.foreigh. state 'and tts.oersonnerwnt be · 3. · The ._.bank credit advice, certificate '. of bank
,_ -zero-rated, 'provided ;thatjh~-y can· subrnlt .to the . . remittance or'. any ··othe'r. document proving
·:,:.: Comrnissicner a· copy of tti~ specia_l [egisl~tiori_. or ~ · . payment Jor t~·e goods_ i_n . acceptable. f9reign .
•~i ... internatio_nal agreem..e~t showing: th~~ sai~ _for¢JQrb,?'.tt _ ~.urr_e:ncror..its. equivalent_ I~ g<?ods a_r:).O services
tr. g·overnment allows·s1m1lar: t.ax exempt1.pn pnv1leg~rto'/'.~J\ : . · (Phi/Jppme. Gold Processing & Refining Corp. v. ·
J," the_ Philippin(!l ·erril;>assy· arid jts personn~I;· fi,yt\S:"•t,<i:A. C91:1.missionerof Internal Revenue, CTA C<!se·
, : · , ri.oweve~· l_i~ited to .~ales .made.. to the em~assr~;,}p;;.:;~;;L,'f'..~o .. 827fi-,i/Wie11, 2913), .. · . . · . . ..
-·~ their, offlc1al: c'apac1t1es. and doe~ .not apply tff't'&1,v-~;'!~~~;;;p} ..t~;· · . ' · . · __ . . · . .·
~;. ir,idividual purchases rna(ie 'tSy the rnemR.~~of their..,.J·i ·. ·-Z~,:o-Ra'fod-·;11Sales : tjf Services must . · be
k diplomatic ·staff· {VAT Ri,:iling··. No.· !~2=-88.. dat~~; .J · sub.staht!ati~byValid VAT Officiaf Receipts;_ Not
{ .August 24,· 19'88). . . · : . .JI'!:!?/( Jr :''l, by. any Otherl'_ocument,:No~- even ·by .Sales
'i'. · · .. ..': . :- ... : . : .. :. . . ·:-...jt'f .Jf~: . . ft . . ~-J;'ii<;I,
lr:i!ioi<_:e; is. !)roper to· a· Sa.le of Goods or
}}c. . .S~~e.,.Ba~er ~r. Ex~h~11geof, Go'6ds,Prope-f.t1~s '% }{f1 Pr.~p~rt,~,s - . :· \ :.. ·,_. ... · . · .. _-.· . · · . _
:r1, Serv1ce.s m Ecozon~s : .
r. . . . ,. ,
r _ C~stoms Territory: . .
. . ·(~-
l(,9 2~-, ,, · •
: ~~. ;!::;r?. . ~,
. . ~- .... t•~:,.r:,;R. ,p)I
~~; D.~uw~~~:.r.?of~},g.,substant~at~zE:ro,ra,t~d sales
lJ>.! "of s1;3rvj~i_i.!;?~~st~~/~o~·sales. invoices. and. :othe_r
1.~:,· secondary··M~'Xi1d'~nce:· like, transfer- ~hps, . credit
'_., .. .Means. .t,he riation~l_. !erritpry &ifj~tVP_~ipplr1,e's ~· memos, · cargo ll)anif~!:l.ts! and .... credit n~tes. a~e.
:,, . outside' . of "1~. pr.oe!'aimed_ . b6ti~d~ri~~,4;,pf t.h.e. rt'pj~i,E;;JUate .~~ s~pp9r.t ·.sales . .'?( .~e'?'ict;.s (Ni~PO.n .
.~ :.. Eco:rories except·. those ·area.s sgecif1f~JJydecJ.~Y3lktff1I~Bt(;IJf:;f_f.,.]j,i/Jppmes) Gorporatron· 5/. C,ommrssroner, .
;: . by, ot~.e.r laws· ari~/qr pr~sid.e'r'itiat P.r~(DJam~t11rrto ... · .of .mternal Revenue,. G,.,R: N._q. 1_91495, ~UIY,_ 2~,
~.. .. .~ave· the status (?f .spe.c1al. 0C0f!Om1c ~~~~~;r~d/or 20.18): . . ·· · . · ' · · ··
f· .. f~~e ports (PEZA Ru,les. atu:J.~egu_lfJtit,_ns':"-S.ef?.:11([J)j . . · .. . . . . .
';-. Commis.sioner·· 'of:"fntemal_ 'Revenue· v. 'Seagate.·< Enhanced VAT Re~un'd Syst~m ·:-.·a. VAT· refund · ·
Tecfmalogy :·Ph1/ippines, ··Inc., ·G.R.. No,. 1·53866, ... s,ystem 't.tia(gran\s and::pays - retunes of cred.itable·. ·
·: . Pebruf1f./ ·J1~. '.2005; ,.'commrss,oner. ot Jn.te,n_al ' . . inpi:i'pax wi.thin.nlne.ty· (90) days. .from the fili.ni:i' ~nh.e
.... · Reve.nu,e,v. T-oshlba·lnformation·syste.ms PHl, -G.R. ·.VAT ·re.fund applic~tion with' ltie. Bure.au· (R..R. N.o:. ·
~:., . No. 150154; .. . . Augu~t'9, 206~):.. · .
. ' .
· · .. -:·
.
13~18,: $ec. 2).
.
: . .
.' : ~ . ~ . .
·

\· · ·. E~Qio.~e.or~pec.ial E~.pnom_l6._'?.:~n~·. . . 'Processing period:· Th$ 90~ay period .shall. start

!!.:~ ·Selected areas Witti highly de~i~loped or. which·)"la\;'.e from. ftie filing of
the: _'appli~fiorr/clairn· f9r refund up ..
the'. 'P,otentiar.. to be. de~eloped. ir.ito ag·rq.~ir,dl'!strral, · to the release·.of the. peyni~nf bf the. VAT. refund."··
. · industrial, tourist, recreational, comm·ercial,:banking, .· Provided, fhat, .the ,claimlap'p1icati6n''is ·c:OriSlde'ted
., . iny.est~ent an~ financial 'centers 'whose. rtietes':-and ·.... to hal(e · been:· filEi<f 'onty UP011. submissi61'1· of .the
;t·· .. bpuhds : are.. fixed ·or· delimite.d .. oy · Pr.es1dei:,tial official. receipts or invoices ar:i'd oth~r. dotumenls ·ifl ..
·:: Proclamati?.nS: Ecozoi:ies, by fiq.tioh·. Of . ll;IW, are . . support of the app!icatior:i as . prescribed under
considered foreign territories ·(R.A: No. 79.16, $e~. 4 · . pertinent' revem.i~ · issuances · (RR. No. 26-20,1"8-:
. · (a) &$ amended by.~.A..No.· 87.48),. · . ·. · · . · · . -··issued oa.De9en:ib~r 2~. ·2.~18) .

· 2019 SAN Bt:DA LAW.CENTRALIZED BAR OPERA.TIONS 22~

 -~:n: :.i:_. _ l m l l ~ ~ - -----
·VALU:E~AO-D.E·D·.TAX
mlllllDBBIIJll ·. -:1
llll(lllll_~:l!fii
-~
sAN BEDA LAW CENTRAuzro OAR ePERATJONs s: ME'MOf?'i,Aio 2019

.:
. Effect of Successfui' Establishmiint.of ~ohan.ced
· VAJ Refund Sy~te~: '. · · . - . :
The fol_lowln!;J zero-rated VAT transactions shalt' be
·. subject to.·12% VAT:. .- ·
.•..

1. Z~r~ Rated· Sal.e· of Goods .cfr'Propertles:

a. Th.a Sale of Raw materials or.· P,ackaging
. . · materials', to. a;, 'non-resident buyer . for' .
. . . . . dejivery to a
resident local export-oriented·
' . 'enterprise to' . b.e·.- used . :In . manufach.i.ring·, · . . · .
proce~sing-, _packing "o'r r~packii'lg. •in" the .. ·.
._ -.Philfp·pines of the -~ai~ .buyer's' · go~ds, paid ·. ;__ '· ·
.- . . for in acceptable ·-foreign . currency, and . - . ..... ·. . .. : . ~ .·.·
, : . accounted'.for' in: accordance "with fhe rules .
ano regulatio_nsof-the BSP; . . .
· b, The· sale .of lpW· 'matertals '. or packaging · ·
: ·. .
,· .. '
. . materials lo .an ' export-orlented ,enterprise'·.
. . · whose.,export sales exceed 'seventy P.erc;en~;.· · .· . . . .
(70o/o} of'totalannual P.r(2d_µctj~p;_af!q-,::~ · 'y->-i.""'
u. · . · · . ., . •,

, c·. Transaf:ti_c:mscon~id~red e~po~.?i31es('1n~et

,'E,':). _'. N_o. 226,,· otrye,:wis~_->'Je~~ (s~n~-= . '/ .;;_ · iJ
J;J ,~~~-
. · . . ·.. · -
·u·
'» .
· -Om_n!bus,-Jnv.estments <;:(td~~M~
. · etherspeciallaws. · - .. 7
~::<-~_n_d ' .. ~"""-· _,>. ·
'er· -=4-~~~,:<f\-).
· ·.··. ·
·f<
.. .. .J'.,,,,.. . . . ·. .5 . ,.,. "-""'" '11;,\:
2. Z~r-0_-Rat~d. Sa;e -0f_S~~~~Qir
. '.' · .,. . l\:· . ii··· \ r.'.-: ·'(. . ! .

a. ·P~oc!,!~sirig. ma~u_f~fttiringi r -: rep~~~g ..

.. . ~~oo:ds for. oth~_r · ~~~ domgA'.'"(>u~~~s. ,:;_ , ,
(J) \·
._:\ ~\
~! _. . .:. ~~...., . . . \
·· . -,outsid.e.:th!3 PhllippJr;ie"S;-1-.yhi~h~od~"<o.,r.~ ~--~q.:. ' · ),; ,- .81\~
· ~ilb~equently . e~p~~.~..-t~nd:.P-a~·j\ to~·cti~J1:::1: .. I -~ · •1 t1-
.. .-· - acceptable. foreigo: wrt~h . · a~:-'t• o~o_unte~ , ·. ~- l ,_VJ ':._ .. ;d i•
:.:k,r· m ~ccordance\:-tWJ~-- th~ f I~- :k-.,,,,2. . ~ml· h, .,. '-. ;'), . -:-:-~/'' I
j.
I
-·1-reg';Jl,ati0n_softhe-BS~~anf!\ .. : ~,~- ifll .. ~~,./;~~-., . • ~':" I •
i
b. ' Services · peri.ortned\ 1;,y· .. :S!JbGC?l\ttaQ~~ , · "?'.6:...-...:;,,'-,-: ·. ·. · fl-·.
. . and/or;contra~tots,in pr~~s~in~~onv/rWf!.~~ ~- . . . . :· /. . ... ~ .
.- ~. ·... or.manufacturing gooµm-Jor._an. e.Q!e.r.rir'i~.f¥1ENW,.. .· · . ~-. . . -.,1.. .
·-. , ·.w~os~ ex-port.~ales .e~ceec!:i0°~("1li~JQ!~~.;,:.~ ·X.. -~ . · • -<(\°
_.:,.;·
....... .:
\
·:: ·:·: an_nu.~I ~r~uct:LC~?.·W·~:
. -·
__N9.
. .
-M··.!f ~ ~\'S-'l).)~. _": ._: .. "'·
....
-~·:·.~
BffiJJ~J-. 1-n-- ;?-~-- . . . :
·Note:. ·Au::·_pen~ir:ig'.·.VAT ··-retµnd·:claims.-.a~~-- .. ... '. ; .
. "qece-ru_be·r'3\. 201 i ·shalLbe. :fully· paic,t "fn .~a.s.,ti. tiy . .. . . ·. ·· .
Decernber-=.31',."201.9 in orderto- effect.th~ imposition. __,· · ·
·of VAT o.ri the foregoirig,enu"maration {R:R.:No. 13_< ... : ·. . . . . -~.,. . -;--
- . ... ..: .
201-a; $e·r:;,.2(·· . ·. . ..:.--: :'. · ·, .. ·.... -·· . .-: · ·._· . . . ..
·.·. ··. : =··· . '
'.
. ':..

,·.. : . : ,•, \
··· .. ·.· .I

.•·. '
·." ..
.
.
. \
',..
.
;. ;:
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:. :.~
... :, . ., .
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• I

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• '"• I

. .... •·.:.. .:., ..

,· . . ,, • .. ··

.....
. ;-

· ·22ii I. . 2019 SAN.BEDAL.AW

' . .
..CENTRALIZED.BAR OPERATIONS
. . . . . . . '
 l
i :.
~~·~. J&
VALUE-ADt>-ED.:TAX:
Y!N SEDA LAW CENTRAIIZEO BAR OPE(lA TIO"!S- MEMORY AID 2019 .
&iM±if-1 . . M . ICM
;1~·_.p· :
f[vA'J'-EXEMPJ: TRAN~AtTioN/l I· Revenue ·v. Seagate TechnQlogy,..G.~.No. 153866,
·:F~bruary 11, 2005): ~ ·

i'f .·;,VAT-e~e~~~ transactions" r~fer .to l.~e . s~IEi. of.

goods or properties and/or servrcee and the. use. or
,:- 1eas.e ot-propertiesthat is not subject to VAT (output
?;. tax) and the .seller is riot· .allowed any· tax credit of
lf:.'.VAT {input tax) on purchases (RR. No. 16-200ti,
;; skc. 4.109-1). · · Still · . a . taxable N.6f: subject to ou~put.tax
.transaction but does not .

r-,::..5- The person. ma~i.ng _the saJ~ of · g~~s •.

exempt,
prop~rtie_s or servi~~s 'shall r,of.~il) ar::iypu~put !ax to
his customers · because the said .transaction rs not·
i:~s~lt1n·an <>\.Jtput tc;1i<

.f: s~bjeci toVAt(~.R- No. 1~2Q05,:Sec. 4.109-1) .. ·.

.lnput- ·tax on . purchases Seller ·is.· not entitled to'
:To,/se·ll!lr does .. ~o(~harge, VAT ·and. he. carinot. ·rnay· be ··allowed. 'as tax' any .:Jnput' tax on nis
.ctalrnexernptlon from'what.bas been passed to hirri credits orrefund . purchases despite the
· lssuanceot VAT lnvolce
(INGL,ES,__ supra at-2~9). .. or receipt .
. . : ,. .. ,.,'.") .... . ., .• ..
Features·of .YAT_-l;xempt.Tranaactlona: · 'j /,~;:)( . , • . .•
1. VAT;_e~empt transactlons, sh~II not. be .incl,~1?,"..rp~lx , . ,: . •. . ··.. . . . . ·
in. d_eter91ining .the general threshold presc[1!ii_~f,r;:·t.4}!\Req~1redto register . . . Re9istratiori IS optional· ·
:by law [P3, 000, ·000] (R.R_. -No. 1-6~2011, J19.,,•.
,:,1/1 -'--:·. · · :-i:..,~·-·_· ·_.___-_. ~ _ __.,
. 3).. . . · : . , . : · 4. i1.,s'!1'1;•f":41'~0.MQf!fJON, supra at 40)- . . .
2. · VAT-exempt transactions sha)I not ~l'l-;:[iaf>le- f'o)".£."' lf . . . . ..
a.;tl!~--~~~ . · .. . .
VAT oi: the 3% percentage tax vmJer Sec. 1'!!.1~f'i1\,j . Tri,Jnsactions,11~xempt-from.VAT: (NIRC, Sec. 109
of"the Nl~C except those, sale or..·\~~.s,.,..!f ~f go?}j.s::-r,I:. as amendef/ ~YV:RAIN L.aw)' . .
and. properties under Sec .. 1.09)ie>. ~!.\:i.1:fsnall vt · ... - ff k·· 't, . . . ., · ·
.be subj_e.c;:t. to 3%. perc~_!J(age :\~X..~f· ngt ~l
1. Sa!e,or 11poq,ation: (AFAB). · . . .
exceeding the .VAT.: thri(f:iQ,I~-·[!.q{~!able frorit. . ·~·A a. ifor-ic~ltural\ and marine _foo.<l ... products· in. I
'Sec. 1.16 of the _NlRC an~i·Seei::4':'WP!~ ·of!.~~-: ~..~ ~tli~~gfo1v.tate,live;;.tock and pou.ltry <?I.a I
· No. 16-2005]; · . , . '1.;:_... ~;6_ . ~~) r•:1 kiA1a!l~t:i~~rally u_sea-· as, or. yielding. or I
3. ·. The _Pe:son f!1ak1n~. the _-exernw.t~-?}~·\2{ goo~,s, ~;t. . · . :
produci~!;J :foods for b.~man c<;>ns1;1mpti_on;. !
· , prpp~rttes, or·seryrce~ shal~ nq_t; bill a'1~ ?.utp~t. t,·1;..--~"tft; ·. and. breeding stock and genetic ma~enals ;
.tax. to. his .custol'!lers .becau~e .....J,b,e.·· said ·._}<·fJ\!;~·o.-,~,:i~,.'!~l~e..refor: · . . . · .
trans·action is not Sl;lbject to VAT1/{f;R. N9fyti.tw:.t.~:!;"''.11·•... ~~i~hl'N~n·f?odproducts are· _n~l. inclu~e.. d ..
. · 20(!5, _Se,;. 4.109-1) .. · . · \:1',:,:· ·
/fi'11: · urider. this. category, . Lr~~stock" or
· ·. , · ·' · . . .. . . '. · . . · · · . · -~t~.~.k . poultry d~es not in.clu~e fighting p_ocks,
E~e.mpt Transaction~ v.-ExeJT1ptParty . '". . race. horses, zoo -anrmalS:; and · other ...
t,.::.·... An:exemppransactiortinv01ves-g,oods.orservices '> ·-anrmals. generally''.considered .·as pets
.i • wliiph1 by ft:iefr n.ab.ire, are sp~cffipa_lly listed iJ1 a~d (R;R:.N~. ·16-4oos.:se~. 4.-10971.). ..
;: · exp'ressly .e~empted ··f.rom·_.YAT. u.r_ide.r. the NIRC ii.·· Original State-~ products classified_a?-
f· · i without regard to tt:i.~ tax statvs-:--VAT-exempt or-not .. such. ·snail' remalri, su.ch ev.en if they
ii; . - ·:of,.. th~· party .to the ·.transa.ctiori. tndeed, sucf) . have u'ndergon~ the. ·simpf¢ 'process pf
i;; · t.r-:an~actior:iis not. s'ubjec;tto, the VAT, but the seller· · :. preparation or .. preservation· :for. . ~lie··
;f is. not allowed ariy ·tax. r~f1,1nct of pr cted.i\. for .any : . ·. .'. , .. market such·as .free:zing,drying, s:alting, ,
.( inpi:Jt ta?(es paid (Cotnmissionerof Intern<!/ Reven,1e broiling~· roasting, sfTibking or stripping.. ·
,.. · . v. Seagate-Technology;G.R. No: '153866,· Feb"ruary. Advanced · technological means. of
. .11;. 2()05)., . . . . . . . . ..packaging such as. shrink ·wrapping in , .
. . . " ·. plastics, vacuum. packing, tetra-pack; in
on
. .An e~empt:par.:ty, .the other h~nd, is a persdn:or itself does not make 'ihe·sar'ne liable·to .
. entity. granted VAT e~ernptio·r:i 1:1nder the Tax ~ode_, .- · VP;.T (R.R. No. 16:2005, Sec...4:10~~1).,
r..
'..
'a special law: or. an in.ternatioiialagreement-to which.
.-th~ .Philipp!nes. ts a);)gnatory, and'.tiy virtue of w~icH Examples ·. of·. produ~ts· in .. 'their · ·
its taxable transactions become exempt. from. the·. original . : state: . ,frozen . boneless
~; . VAT.. Such party ·is. also not'subject to tli'.e VAT. but ·briskets, frozen.bonelhs buff~lb: 'meat,
:i. may· be. '.allowed a tf'IX .'refund ?f. ·or credit for ·input. deboned fish.
~· taxes paid; depending.on its registration as a V.,AT or
(.· no~~VAT_~· taxpayer .. (Commissioner· of . lnterna1

:2019 SAN SEDA LAW

. . CENTRALIZED
. BAR OPERATIONS I 227

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 VALUE~ADDED TAX_.
. ·_SAN !JEDAJ.A_WCcNTRALIZt:Df!AR OPE.RATIONS - _Mf,MORYAID.2019 -
~.,. llm 11111 lil!ll:l llll!llll im
. Polished' and/or l'lusked rice, cor~ gr.its, Notes: .
. raw cane sugar and molasses, -ordinary 1) Sale of Aridok's roasted chicken is
. salt ;ind copra- shall · .be · consldei'e~. in · exempt from.VAT. However, should..
their original state. (R.R. No. 16-2005, Andok's maintain a (acility by ;which
?ec. ·4.109-1) . .-. · the roestedchlcken will be,·offered.
as a menu to customers wnowould
. . . R~y,, :Cane· . ~~g'a( _:,,·· natural · · sug~r dine-in, then it wili be. subject to the·
- · · · :.extracted ·. from · suga,rcane .. th.rough VAT · on sale of service which is ·
. :. simple mechanical process 'i:,y pressing, .simtlarly . Imposed ori restaurants
.. , · boilrng, filtering- and drying :resultJng to' · · and other eateries. (VAT Ruling No.'
crystallized· brown suga( dae -to natural . 09~2007, 'June 21;· 2()07) ... ·. '. .
.... : molasses- content present · 'in · sugar. 2) · ·RM:c .. :N,¢,. ·~272007 reiterates the. ·
· . · c~ne. . If. shaU. be ·µr.oqliGed , from . amendment uilaer RA !'Jo . .9337
.. , :conducting only one "stage· of filtering ,. · imposi'ng.. VAT on' the ·sale':of non-
- . · ·. ahd c·entrifugal without· anyother "further · ; food ·agricultural products;. marine ·
. . _· process .. (R.R.·flh ·~.:201·§, S~.f;·2;. :· .and forestproducts, ·ancfo,:i the sale
. .- . . · 'of cotton ~nd cottonseeds -in .their
. · .. )fote: For internal revenue 'purposas. · ·original state.: . . . . . . · ..·
. =«
the. sale' of c~·1ne sugar is .0J:<911}J_>t,..,.,,~..,,.. .· . . . .· .... •, . . . · . · ·. . ·. . ..
from VAT because it il, .c-onsid~r~cffo"oe1ij ).._~E'ertili:z:ers; seeds-seedllnqs, and fingeJling~;
in' its ·original· .. state. g.p!-',,.theJ~9thSrq Ji/ J'~f...;.erawo, ·tiv1,3slo~k · and. ·:poultry feeds,
hand, refined sugar. i~/~~£i~1,11f~q,1~~., _-=~...t ·irJl~1~~ . ·ingre?tepts, · whettver. . ~Joc_al~
,prod1:1c~. that· . ca~ . f~J:lE> ... ~9~!;L9~9 · : ~o'd11x,-e(!\;, ~r . 1~po,:ted, µs.e_d : in .the
considered .to .be .j.t(.1fs(~ag1naJ,.,,~ta,e"."~"""!11'~n(!factur\, of f1111shed:·f.eeds (NIRC;· Sec.
because ·jt has u.Jig,{~gqn'¥.'th(:refini!i1..9 "')!" .~ . : ~9\i.B),li';Oir{endedby TRA!N Law); · ·. · :
process: its·.~alei, tn1:1:l:/ubje~· qo \/Ai ,41tt Lt\\. · . \ .. \. ;....__\·· · .. ·· · · · _.· ·. · .· · · ·
(Commission.erpf lntefal f3 v~nue v. , . !=xce · tion~(~'1AJ:~) · ,. ·. · ·· . · ·. _
United. ..Cadif ?Sagar . atfner. '-'--'-specialfyfeictsfortfiace norses, f.ightirig c9cks,
. A~sociation_ Mq/ii~pur;pt{,s.e,-Cofperaf/.~ t:;3~qu~Jium'fi~,r'ic>P.\~nimalsa·nd.·Qther animals
. G.R. No'. 20~77;\6!,jf?.f:eymber7;\~01&~.JP d ge~~t~ co , Sidertg as. P.ets'(NIRC, .. Se~, 10$1 ·
.. ~. :·, . .. . : · ~-1 \.\. Q\~. ; «-::,::;:::$ · ···(BJ p ralen, ed P.f 7f.RAJN,'7aw). : . · . · ·,
Exq~ple~· ·of._ rp~O,t~~- n1ifA~li\ ~heirf"·.· I'&""· ·. j'
. original st~te: \91!:{_r,s~lt;"-i~~\Q\Sa\fl
1
~.,,,.ef
~..:s.. if f:"<'11 J · .. . · . .. . · . .
~~ eas,e ?f p1f~sen_ge~~r. cargo yessels a_nd
chili. pow~fer, on\'i?O . po~e<}'l14·,~~~.J.tc~- ,%~1,rcra,~m~i:li _mg . :enm~e, . ~qu1pme.n_t and
..pow~~r s1hce..anti:?:>~1da·nt.s~ave"\!~~~... -~pa;e_.. pa{t:s . th~e(eof f9.r:.. dom~.stic: ; or·
. been m.c?rporate?~~.R:-f1i~,;!._.ft:'/lf{5.!~E~~ i),X~er._n~~?na tra!1sport:opera~1o~s;: . · ...
. -.Sec.4.109-1). . :'\.,.· ·.:~'-~~~···~ / · . ·· ·.. · .. · .
. . ·. · ·. . . . :• .. : ··.~-/_:9n~ -"11.1\y-~~se_.of. e~~mpaon ·frorri .V:AT. on
. -No~ ... a .. "simple·. proce~s!~~ ~W.Js a. 1'..,.1f ·J\..~~~1mporta.tion:· · ..... :. ,.:·· ·. ·. . .
, physiGal or--.-:h~Jcal ..· P!oc~ss~gb .!::"'l~~ .1) T~e·· ves.sel; .1.nclud.m~: ~he .E:~gme,
· . ;· would alter · ttie. ex.tenor,· or ·. mne?.-,......""""· · · · :and ·~pare · parts of 0sa1d vessels,
swbstance . of a' :.ptoduct'·iln: such-. a . .. . . ·; niust·.'weigb: at least one. hunqred.
'·· . : · manner as· to pr,epar~ -it,f9r sp~dal :use · fifty (150)'to'm,;· ·. · .· . . ~. •
. tp. which it. could not. tiave· been put in its 2} · Tl)e ··vessels to· 'be ·icriport~,d: must .
. :' . .. ·. ·. original· form · or.' conditior'i (R.R. No. 16~ :. cqmply :'.. witn :,: the· · ag~· . ·Jim.it
: · 20.05,' Sec. ·4. 1Q9-1). · . , . r~quiremen,t, at ... the.··: time · · of
.. . . .. ,.· . •:.. . .' ., . acquisitiori counted from the .d.ate of
B~Jjasse · is nO:t. included ir1 ·the ·VAT. · ·· the.vessel's· original comi:nis·sjoning~
.. .. .··~xem.ptioi:i.·H~i:ice, subje'ct..to VAT (R.R.: · as.follows: · .. · .'-' ..
.. : -~ . ·. No. l6-'20f!5, Sec. 4.169~.'t).: · ·'.
· · ··
. .a) . Passen·gers. : ,."and/or . cargo
· .. ve·ssels :-.fifteen (15) year~ old;'
.···.. CeiltrifCJgal prqcess .. of produ~ing ,:s.u.gar' .: ·. ·. - b)' Tankers.:- ten 00) y~ar.s.019;.
"' Is ·not in ·itself a· .simple- process. ..c) H'igh-speed:passenger cr.afts.-·
Therefore;·.qny Jype .of sugar' producid · . five (5) years o!d; .and· .
therefiom is not 'exemptfreni VAJ (R.R.. 3} $1:)c~ 4 of ·rt.l\. No. :. 9295';. ·1he.
No.. 13'J20-13,..Sec. ·2).. ·. . · . . D_oiliestic . · Sflippjng : Developi:nent
· . . ·· · · .· • · Act' .of - 2.004; ·must · have· been
complied with. . . . .

.22a
. I ·eOl9 SAN BEDA ,'
LAW CENTRAJ..izeo
. BAR OPERAT1o~s
,.
 VALUE-AD·DED ·TAX
.
SAN SEDA. LAW CEN°TRAUZ£D
. BAR OP£RA'r10NS·
. . . . • MEf110RY.
. 'AID.2019
...
wee
11 •. In case of ~xemptioo from VAT on 16~·1. · .v. House· and. lot and othe~· residential
.. purqhase - .the vessel must weigh; · awellings. ya1ue~ at ·P2; s·oa; ooo· and
including the engine and. spare parti,. at . ·b'eloy.,:- (NIRC, : Sec.109. (1)(P). as
f.e'ast '150 . tons (RR No. 16=2005, · atnerided-by TR_AJN Lawj. .. · .
Sec ..4,.109-1 (s)). ·. · . . ·: . ·, : .
·Note:.· Beginning .J.anuary. .1, 2021, 'the· :: ..
cl, · ·:;,gle, importation,' ·printing· or publication of. VAT exernptlcnahaltonlyapply.to: .
. §'9<?ks . ·and . a'n.y . newspaper, . ·l"(lagazihe, 1} ·:~ale. of real. properties · not primarily
revjew, :Or bulletin; · 'h~ld for. sale to .customers: "i:i"r : ·
2} · R_ear.· propesttes · not prjmarily held
·. '. R_~q-ui~it~s·to l;>e·.V AT -Exempt: ' _for ·lease .ln 'the' ordinary .. course of
Tne· newspaper, · maqazlne, review or trade or .busjness; 'ot' · · , ...
: .. bulletin must: {IFP)· . . . · .. 3) Sale of.. real ·pro·pei:ty'···u.tilized· for.
i. . B~. printed · or published at · ·regular ·. soclallzed -housjrig;'· sale of
.house
· lntef'Vals; : . · . .· . · ·· and : lot, .' anti· .other residentlal
= ..

.u: . ·ae.available .: for subscripti.on and.sold at dwellings'· wlth.. selling_ price -·~ot
fixecl prices; and ·· · · · · · · 1 ··. exceedlnq P~. ooo,. · coo · (NIRC,
· i_i.i.. Npt ·:be . p.rfn_cipallY. · devoted · to Jhe · . · · · S.e~. · 109 .(1)(P)' as· amended . by
fubli9cition of paid advertisements (BIR · .- . TRAIN/ law); . ..
. . ·.· Ruling N~. !72·1~)-. .. . .. · _ ,..,(1 · · . · · · . · · · .· ·. · ,. · . .; · · ·
, · : . . . · . · ,,.1/'·~~- · , Gener~I Rule: Threshold -1s· qn a per
Nate: Tbe t~~s "book".. ·"ri.ew~pap,~r,t1··/h .. . ... ·tran~action. : basis· (MAMALA!EO,
:'m_agazl.rre"; "review", and. "bulletin", as l~~~1}f,:1t\ ·. ·· 'Rev1_ewer, supra at.473). ·. . .. ",
·· in.Sec, 1.0~ (1)(R)·.of the NIRC shall refg-r1q.i>i:f.'!.f,' .,~. .· N'> .' .· . · : · · · ....

.lnclude. those . . . .m diqital

. . . or el~ctro.r;rJc"'forma\t,
. _ ..... ,.,_.,
or computenzed versions, 1ni;:1t1ilmg but ·riof..:-~.
.
.: · printed.materi~l_s i~ ~ar~. copies, an9,,stc> ~t•rt·!~~f~~·;;;-r::-'._gj~el)ti?n;
. . .
.~l!:~res1dent1al
..
If ~o or more adjacent .
lots are sold or-disposed of
· l~~r of one buyer; fpr. the P\.!rpose of ·
. in .

limjted to the following: e-bo6K);~~jourA~·:--1,

,.. electronic c~pie_s, . (?Oli~e-)i6~ary?soi1rces,_ .
.•. -C.Ds a.~d $Oftware (~·"/f!1.Nc?,
u. '
7f?j2'°at:2).~- +:!\-:
1~r!·
. ti.!Wifwg the lots as ~me r.esident1al lot, .
I~ sh'i;iU be 'exemp~ fro(Tl V~T ,o,:ily .
. ! _ ,frfhe.· ggregate value of.'the l_ois do not '
i
!·
. - . ......9 .• · "9".:-:~
,../: .· · --rA· i Jf . e.~cee. P1, .5.00, 000 (8.R. No. 13-2018, ''
I

. _General. R_4le_:. Al!. ime.\?rte·e<=tio.ci~~-:;wn'et~.~r · Ii~. . ~if',{/~$~if{JJJ_ · · · : . · .. ·· . . .' ; .

.for commerdal oryersor,ial·(Jj,e:;~~{~ exem~t .r.~, · · · ~1.":un..,r ·. . · .· , _... · ... · . . i
!.
· .from VAT an~ cµst'2ms .apll~f(P<?.f C>~<j,er.
Np. 57-2011). .· 'i. · 1.-r.. , .
·. "!.
r.i . . iii~~
-This_._ do,e~ not ·_.i1,1cluc;le. th~ S'.31~· o{.
. · pa~king·l~ts which.may or may not,be . ·.
I
I
: .'· E~rieptl.~il-:.~·s.<?~k~: :p-ublishef :,};~:~>9;i~~!~ffr~~ir&~·.f~~~~~it~~~~
of1~:s~f ~~~~~~~i~u~: .
privatt:: ?omme~c)al _enterprise ·~t~eniirllY.for· ~. ·. . .. · .. a: :~_eparate. and :· distinct tr;msacti?n: .
. . . . adyertising.-p_urpo.ses as:~tated~.©~nne,x.A antj 'no~ covere(1_.by . the rules, on;
. ·, ;c,f tlje : Florence A9reern_~11t.{Ag~ef!}ment -~.n . · thre.sho!d. · amount:, : no_t ·. l;>eirig ' : a
!he. Importation-.. of_..,Ed~qatlo(l~I •. $.cientific · . resitjeJ'ltial _;l~t. house· and ·1ot, · or ·
.-·.and Cultural M1:1terials} {DOF·Order No. 57- residential dwelling, .thus,. ·should be
,.;-._ ·· .. 2Q11)._:. · · · . .. .'su.bject to·VAT regardles~ of-amount.:
t . . . ·ofi(ellirigpri~e.(R.R." No, -13~201.2; Sec.
{ · · 2: ~al~: (REC2;s~i:;>) - · . :.··: ·· .. 2)'.' · --·, _. · :,. · ·

' . ·.a: sale . qf geal prop~rtie; ·. u.nder.'.
. (J )(P}; . .. . .
. · ·: ., the. Sale ·of the. following Reai Pr9 pe_rties·
. · :are.VAT~Exe_mpt: {SLSV2) .·; . · ' .
· i._· ··Not p_r.imarily ),eld fof:§.ale:t<? ·_customers
· or l)eld for l~ase in the· ordinary· cowse
.. ·of tr~de or bu.siness:. . . . .
. _ii. Utilized·for:.bo~.cost housing;..
.. iii. · .Utilized ~or §.oi::i.alizedhousing;.
iv. Residential lot 'Valued at ·P1, 500, 000 ,.
and:.below; a,::i.d -. ·
sec. 1 og · N9~e: ~v~ri. if·. the·. real:property' is.. ri;t.
_primarily field··.for si;!le to· ¢ust6mers or
·. helg.f6r: lea's_e-.in.'th~ ordinary·c(?(!rs~: 6J
,.Jra·c1e- or _bOsil"l~ss but· the· same. is u~~d
. . · in the trade ·or business· qf the seller,
· ·. tfie sale th'ereiof stiall be subject to-VAT
· ·befng a ··transaction in_cidental. tci . the
.. . . . ta:x'payer's main- b.usihess. (R.R. No. 4-:
. .. 2007, $ec. 14). ·· · . . .. :
Example: VAT--~~~istered. person .eng·a~ed. in
· .. manufacturing _s·ells hi's ·warehouse, Which was
. _used ir:i·his t,usiness, th.§) sale shal!'b_e subjecOo
· \(ATbeing an in.cidental to his business.

2.019 SAN BEDA LA'W_CENTRAUZEP BAR.. OPE~TJONS. I 229··

 VALUE-ADDED-TAX\
SAN BWA., 1:AW .
f:ENTRALIZED BAR OPERATIONS
. - M/;MORY.AID20·19 .
·1n BIR Ruling No. '185-2013,. the ·s1R ruled ..t~at shail. also b~ exempi .(Compare :with. letter D )
the transfer· of.: properties • by trre ,- Presidential ·below). · "
Commission on :Go.od Government (PCG.G-) · to
private individuals in a ·sale at public auctlon [s . Sale of . ·Marine'·. or. Agricultural . Food.
exempt from income tax, .WT, VAT and ,DST-. . ·· ProducJsin Pro~e.ss~d FQrmSubject to'VA1
' · The ruling was-Issued-pursuant to a Supreme - .Generally, sales of marine or· agricultural .food ... :
court decision which held that the Be'public of pro<locts in p{ocessed· form are'si..tbjecno:_vAt, .
the· Philippines is .the 'presumptive . owner' for . ~excepr for those:·. sold" ;by' 'agricultural . ·.-
taxatlon. purposes .· of .. certairi .. surrendered co~peratives· . _duly . reQistere(l . ·under· .. ODA
. .properties, : and ·• thus, the. "disposal of · . ~he . (N(RC, Sec. 109' (1}(A) correlatedto. Sec.. 109
. . properties' to. private iridivid1,1als -throuqh public (1)(L)). , . · ... . ,:. . . . . . ·. · . ·
. :: . bidding ,.Js exempt from the aforernentloned .
·, . taxesc The PCGG . filed ···a .request tor· .. a ·Note: Sales: by. agricultural cooperatives are.
·,: :stif>pler:nental ··ruling to· extend; the· exemption . 'exempt· from VAT. provided . {n~. foJrowing
· · grante~ "un~er' BIR· Ruling ·No.· .1-85-2013 to. concur: · ..' , .. : . ·.· · .; · .. .. : . . ·
. include .exemption .frorn CG'f '(BIR Ruling· No.. 1') Sell.er· -must ··, be, an.. agricultural. ·
' ,3'60-2014), · · .. · v, · -; · · ·: •·. · . . . . · cooperative duly-registered with the·
. . . . · ·. · . CDA;· and . ·. ·.. . .
.The sale ..of power. pla~t;, pursuant to. EJ?IRA ~~-==. . : . . . ·. : . . , . . . . .. , . . . _
·is not in pursuantofa commerclal or ~¢!;:>r:rom'r~. ·J -,. ~~ An agrl.cultural .coo.perative is . "duly. :
'activity but ~- g?ver:n!'l)~nta! func~~1fiia~~a!e~t_;
by law to .. pnvatize National Po>;'),!e!.'i(e~rpfi\~Uo'}~~
J\l. · 'J! ,;~~ist~ref-,.when·.· it ·~as' ~een · i~sued
·.Jt_ !, jt-c~rtif!ca~e .. of. ·reg_1strat,on by the .
· (N5:'G).gene_ration .as~_et~:' ThY.?,i~ !5.:,:.¥e~,y.,~·t~r · · .: ' ."~-s V CJ??~,Th\s. certifir3t~ . · ls. · concluslve .
that .the sale. of the. po"'.t,ir-",~~~li~a ..§-8~~ -~1de!l~e of.its re91strat1on;. · . · ..
: exercise of· a- gov~rnment fyf cfl h ~~·c;l.aJ~d .5 ,; .. : r..· ~ . ,.,~;;) \_ .· . • • ·. , · · · ·.

~~<? assets 1,:i accorda~ce}'IIII the. · UJd('.lhrres ;I·~· ·i .· . ~-a,rjey!lusivelY,to_1ts f!')etnbers; or

. rmp·os~d by _t~~. _E~l~t..:W»'.f·(F,?.ow r-See_to·itr,.ffl ~~~
. As:sel~:a'?d f.!ab1h~es':{/<JIW9~{Pent ~ rpOr,!J,[!P'?!i }i ~~ . ·K.
.
J·~m1.
b) . t&·ioth . m.em~ers and no~-
~e!s.•. i~s. produce,· w,hether
· v. Comm1ss1_oner. ef lnt,r-na'1,:~,,
~{~t.,t g\.:. _. . ·.- ~f.ffil :. i_./f!?;r ).
venue, GR. /j/q--:- ...,,?:~ . J• . · , J,... ,n'fi ongmal state or· processed
fo~Jj, (c;orr,fniss!oner.of_lntemal
·!{$//',~·-~~fi/t~~: v:Js:~~1a<;;:,z!Ct:
198146;Augu$t8,.2_01

b. ·.gx~·?rt sal~s.'by·-P~.i~( h~:.;~~~,\~:·VA~ ~7,

. registered; .. ·,. :.. ·\·: .. \. :_ ~ · ~- . ,.,. · ~. P{,'pose:Cooper:ative,.G.R ..No .
.· . · · , · · .. · "',.:}\. .\...... ... · . . · · .. · ?,09776;· Decem,ber7, 2016)'. ··.
lf'l'Je.is VAT-!~gistet~d,-tis e~p~f.l.sa~1 . ....:.-~\~· , .. -.; L_ ·. ~· · , · ·. · . · : · · .
z;er~.rated..,under· Sec . ..1'et2. ,(N(2):ai:~rs JENI· 'p' .,., i:i~ bi,.rnon-agricultural,. AOn~eledriC ahd·. ·
.108. (B) of._the·..NIRC.-'ari_p:_c)_~im~~v· ~~clit,;a~-,.,~~ .I(\it~~;cjdft ·~q~pe(at~ves··duly,r-egi_~.tereQ?nd .
·
ref~no. : . · · . .' .· ·
. . ,, ·. 'J
-~--? . 1~:~ ~t :-'.'l\.: /f }Di~\~Ft(9e'oc,slanging WJth.__th_e· CpA. _Prov,dec:f ··
, .. · · · .. '
(P/e~se:.·.refer·. to--:th~·-· discu.s;s~on'ii~A·:r~.!;,.••/ . . :'\ ' :stiare . ··~ap;~i31.. ; c~·~tri~Lu6·~.. of. ::each.· .
·.· Refund):,·. :< ... , . .. . rtiehib~}:does 'riot'ex~~eci P.1.5,_ 000; a6ci ·..
· ·· ' · .. · · · ~ ii, Regar.dless ·Qf the aggregate -<,apita! ~nd
:.\.'. ·.· By. agricultu~~.1·· ·_£ooperatlv.es ; of.' food. ahd net' 'Surplus rfltabiY. c!istribut~c:l among ..
non-food products' (wtiether i!'l origin~r or· the members (NIR(;,;,$ec. .. 10'9.(1)(N) a~.
. . processed form) duly"r~gistered .ari<:1 !n good amenqec(by."(RAINLaw). · .
· st~ndir;ig'.i#ith the Co9p~·rativ.e.D~yelopment:·
· . ·. Authe>rity (CIJA). to:- .· . · ·· · .::... · .. ,- · ... frnportalion . by ... these . coope.~ati~~s. ; Qf .
: ·. · i. : · Their r:nen:ib.ers ..:... VAT-exemptwhether . · .. machinE!ries and equipmen~.-includirig:sp;ire.
. ·pr not m.e ooop~rativf rs :itie producer of : ··parts '1trereof, to · be., used by · theni' : are
:·th~ goods· or:· .. •, .. ·,. . . ·... , . . . .v
. . . 'subje.ct''io' AT' .'(Coinpa'(e'·-wjth l~tter .. c:
ii. Nori-~~,;.~~~·. ....; . YAT~e'icE;lmP,t· orly-. if.. ·. :' >· . . :.·above).... : : ·. · . .= ·, ... ,'.- .
·.. thf) coop~rative_.i:i)he pr9(.lucer' (NIRC!. ·.·'
· ·· .. Sec .. 10_9 (1)(L) as amended by Tf?AIN
. -Law).:.· · · ".
e.' .. or J~a~~ of -~~ods ·and -·~~~ic;:~~- to §e.nio~.
. citizens· ~nd · p~rsori_s -y.,itll · . ~m:;ability; ·· as
provided imper R,'\.. W~S-' 9~94. (.Expand_ep
Importation. of dir~ct· fc1mi· inP.Uts, n:rachinerjes· ·s~nior. Qitizens Act·~f 2010), and.1,07'.54 (Ail.·
and eqyipnient, including spare· parts ther~f •. . A~t ~pan.ding the Ben.efi~s·aod Privileges of
·. ·to 'tie ·Used ;d(rectly anti excl'i,..1~ively .it1 the Persons
. produc;:tion and/or pr(?cessing. 9f lheir produc.e·.:
. . . with' Disability);
..... ·

230 I· 201s
. SAN' SEDA
. LAW.CENTRALIZED
. BAR
. . OPERATrONS
.
 VA·0~Lu.E~A-DPED TAX.·
SAN-BEQA CEN~L/ZED BAR OPERATIONS - MEMfJRY AID ~o19

f. . Gold to the i3a11gko Sentra·,.:_ng.P.IJi_piri.a.s;,an,/ ·- ·· actually ·coming to settle in the .

o · ·, ·.
g. ·cfruis· ·.and.· medicines for
': ··
.presqr.ibed
Phillpplnes: and . . . . .
. 2) The goods 'are brouqht from their .
,a · etes. high -cholesterot, and hypertension former place· of 'abode '(NIRC, Sec. ·
to begiryning January·1, 2019 as determin'ed '109 (1)(0) 'es emended ·by TRAJN
, by the Department of ~ea Ith. · · ·. ~ . ... Lew),' . · ·. .·
~\3.·. lmp·~rt;lion': ·(P.PF). (Nl~C, .. Sec. es : · 3) · fu"!:!l,.goods.and supplies bY:p'ersons·· ·
199.
-~:. · . : amende'cl by .TRJUNLaw) . .. engaged. lri ·1nt~rnatipnal shipping ·
~r·: . a. .. fersonal. and hduse:hold ·effects t>.efonging or airtransport operations: ·. ·.

,f· :~:__.··~eside~ts of: t·h~ . ~~ilippines retur~ing· . . N?te·:_.R,r'ovjded·,·t.hcili'th~·.fuel, goods and. .,

. . from abroad: and- ·. · . : , · ·, · , j' , sup.pl~es·· shall. ~e used' (Qf. mtematicnal · ,
. ii. ', ~on:resjdE1'nt citizens comii,g ..t9 resettle' . shipp1tJg or a_!r' transport operations .
· _', -. m ~lie Philippines (NIRC, ·. sec. ·109 , (NIRC, -Sec. 109 (1)(U)' as 'emendea by
. : (!HO~ ~s·.amended by TRAiN Law). . . : TRAIN Law)_. . . .
N~te: Pr:ov;def/,.th~t ~·~ch.gcio,~s ~:~~-~iempt . . G~neral R.u.~,·.Such fuel.: gobd~·andjor· .
from.. customs duty. -under the. · Tariff. · and· . . ', , s.u~plies · :sh·an · be· used exclusively or ~
·Customs Code.of.thePhilipplnes'(NIRC, Se~. . >.. . . :. . -· _shal! pertain to the: -transport of goods·
!0.9.(1)(C),~5.·a.a:ieqct~.<l..by Tf'0_IN·L:aw)._ -=. . {!/;_;,·~-
r·:
t;'_:
•••
.....
. : ·ar.i~Tor __ passenger from .a port ·in the ..
• · · Philippinef· di_rectly to ·:a·. foreign port- .
,
b. -~rofessio!1al instr.u:~~n~s. ahd. impl~r7\~~t~!~;_!i1 . . .. With~u_t docki2~ ·o~ stopping. ~t any other
~:ools. :Qf Jra,de,. -oecup_ation :or.. employrm~r,tf"~'Si{i~.-, ·· ~rt In _t'1e Ph1hppin_es (R.R. No. 4-2007,
.. w~anng apparel; .··dom.estic· :arii.ni~ls·p.,. aQ.'cl,:?1l~t~J~·,·~::-,.~.-1-$~c. 14). . .. . ·. · . . . ·
. . _. .. . .
.. ,p·ersonal and household
. . . .
effects··
. ... ·,;:·!,«f',,,
~.. <"Jr . ·
!,)'·':. ·. -~:1.:-..J'
.~~i" .
~ .. I -~:'J!~~,.i1 ·1?f· . t·:,. : .. : .. .'
...,n:.,The ·docking or stopping at .
· · .

1
. · •. ?f.~ep_
.... ~equisite~ to be VAT-Exe_mp1 . . . <i\.OS(?Afa"1, . . ·. . . . . · ,~9t-~.oth.~r Philippine 'p?rt is for. the ..
:.:·~- ..
,'~·.. · t•. : ~Belon"!;_11n~. t~.-~e~s~ms~~~if!\jr_to-..;.'.§.att)e.
. . '· . In the .Ph1hppmes.o_r.,.~ersea$lF!lltpinos· '.'!:-\.
·r'~ · . ·. ;··P!irp~~s~e_. of . unloadih~.'.- '_"p~sse~gers·
. . : "1 a~dfo cargo,es· that _19nginated. from
ill:'
~; . . , : tfr:::;·.· I~'. • ~~ 'f.~~- . ,.. · . : / : a 9a }..,C>i' ~0-"load. passenge°rS ~r:,dJor.
~.~..:. .. · O~~~eas _.Filip·il\~.t! ~~:i;:mfilf,i'q~·ot'..tJ1!eir.. · ~rj ·. . '-=··rJ:ffi i~~u.i:i.df_or·abr~~d (R.R. No. ·4_
fa~1hes .and desce~~~nt~,..wr~an~~f?.} ."f ·. . ~~;~ec.'14)_. · · · .· ·...• ·.
res1de~ts·. or~ citizen~_~f·;g.tf.le'r\qpunµi~s .~

.... . ;
.· ~·~, . ·. · !~=~
. . . , ·. (NIRC, $ec.. Jp9 .(1)(D)~aR am_f!Jde"<l'i?y· ;!.! . . . . ·• If· an~ port1.0n ·of such ,.fuel, .goods .or ..
· T~AIN.Law). :.··
:. · · . . . . .. - · .

. . .. ... ... .' . ·t'.~?: .·. ,::''-'r~~'(' ..~r.,O-.~~;purpos~~·, :other : ·. ·. tlial) .

.· . . .
·~upphes ~hould · not _be . usec;J ·for
·. · ·.. ,.

intended.;
.'·i,.. ln~gu_anJilie~ "and:?,f ~e ci;if ~1.-11tfi~ht<;>' · .. · · ·: _othetw!S.e,.:they's!)aU ·.be ·.~_ubj~ct.fc:, V.f:.t"..
. )~~· .prq_f~:51on'..ra._nk_ o~.po~l@.pf ·the· =~.. , . (R:t::N<?·.!~~oo~,, ~e.~-. 14) : .: .
.\ . ·pers0!15. 1mportlng said 1t~ms; . ... . . ·· · .. · .. : -- · · , · · · · ·. · ' · ·. ., ... ·
iii..· _Fo"f tj:leir Qwn use 1:'ir)d n:ot-for.. bartei'.'qr' 4 ... S~rv~c~~: ·'{P~f;_ERB).' (N/RC, ,.~ed•. {()9· as
·. · :·· · sale~ arid . -. . . .. . . . . : , . .. . amende_d !JY !RAIN Law) . : . . ' . : _- ·
: .'iv. 8"Cfc9mr,,anyin~sir.ch pe_rsons, ,qr arrivjng· ·. · : · · --. · · · .: : · · · . · ·
· .. _.Within· a reason~ble !ime: (NIR,C, Se_c: : . a.. ~Li~je_ct· to·.:;th~· -_e~rcentage tax~; ·. uhcfer
:. . =.10~ (J)(D) as a._meQderJ.by T_RAIN_Law>: ·... ·:. Se'cs. 1~6-12.70.f th·e l~:U.~C: ;_ : ..
t. The· YAT:ex~~ption:d~~s not ·~pply''to tl:le
-~: . · ... follpwing · !r:npqrtat_ipn:. . Vehicles; .'.vessels. .
-~ .. ·· ·-~· >By'AgfiCl,Jltoral ~ont;act··9;?wers' and m11iing
. for others of pEJlay' into rice; .cor.n into. grits;
\"'_· ... ·. c;1i~crafts; machineri~s. ·anc:Lothe:i' similar . .goods· ... · . . . .· .and·sugar cane i{ltp'raw sugar; "·
~ :: . ·. .for /~S~ ir:i. ma,:mtac;;tui'~,.:' shall:: b~· · ~1Jbje~t. to.- ·. ·. : · · ·. '· . :" ,. : · '·'. . :, · _: .· · ·. '". · · ·. · · · ··
f . . . dubes, _taxes,_;:1rid,other. cliar~es. (NIRG, .Sec'. . . Agrjcultural·, contract.. gtoweri( ~· Persons .
r= · ..
:.
1()9_(1.){D) as~ameilqed by TRAIN Law). . '·.
. .. - . . • . . . . .
Pr~dl,ICing. .for othe'rs,':poultr'y, Jiv~stock, or ott:ier'·.
. _agricultu~al· and. iTiarine food pcoducts . in .. their .. ·
·· · · . N5't~; /The·; B~re~u· ~f· .'c;u~;bins. ~ay. : .original state (R.R:' No; 16-2005;"Sec.·4.109-1 ·
.ex~mpt_ such g<:iods: fr9~ payment of .'. · . ·. (£3)(1)(0)-: ... · _.-· ·· · : · ·· · · · . . , . •.

*'.~-.
·"· . ·.du.ties.. and taxes . on · the .too~·wing . .·· c. . Medical; . dental; ho~pitat ar:id . v~teri~a({ /·'.
con·ditio·ns: : · · · . . . services . except : . those· ren_dered , ~· t.lY-: ... ··. :.
....
I pro.fessionals (NIR_(?, Se(?. '1Q9'(1,)(G)); ::· :-= : ;:; .
·.. 1 )- · U~n prqdudion of satisfactory ... ·
.·.. · · ey1d.er:ic~. that , such· pehions · are
. . . .. ~

;
:'

.. · .·
..

~019 SAN.BEDA.LAWC~NT~LIZEO
. . BAR.OPERATIONS
. . I ...231.
'
:-
 VALU·E~ADDED. TAX
SAN BEDA' MW'CENTRALl!ED BAR OPERATIONS,- MEMOR.YAID 2919

Laboratory servlces are 'exempted because ·· · Note: P.awn$hops. are considered as non-bank .·.
. it. is a hospital s:eryice (R.'R. No. 16-~005; . · financial intf:rm'ediaries, thus exempted . from
. Sec..4;109.:1 (B){1)(g)). VAT•. but liable to percentage· tax. (Tambu.nting ,,,
Pavvnshop,<lnc: v. Commissioner of lritema.l
The· sale ofdruqs and-other pharmaceutical.. Revenue, G.R. No. 179085, January 21, 2010).
items to ln-patients 6f the hospital is .VAT~ .
exempt transaction within the meaning of 5. othe'rs: (L2iTO·MAS}. (NJRC, Sec. 109 as
S~c. 103.(1) [no~.Sec-:.199,.(1) of the Tax'.· amendeef.by TRAIN_Law) · · · ·
Code]. (MAMALATEO,'· Reviewe.r, suprf:! at
433). . .
. .
: .,
. . . :~. .
. . · a. : !:ease Of re9..ide.ntjal units, if the monthly rent
per unit: · ·
Ri'iqui$itGl? to:be VAT~Ex~mpt: (HDI) '. · i.:·· -Doe$ not exceed P15i 000; or . ·
1. :. ·Tt)at_tti"e'.tax'pay.eroperates a:J:!ospjt_a.1; . iL Excee.ds P1.5, · ooo. but the .aggregate
ii; That the. sakt.hospitel .has .a pharmacy · ·..- _renta.ls·re:ceived bythe lessor during the
·· or-J;in.i'git6r~;'and ... · · '. · ,-·. . -year do· ·-n~.t.. 'exceed. 1"3,. 'coo. :o.oo .
. jii. That 'the sale 'of drugs - claimed to be :. 'However, the same 'shall· be. subject to ·
. 'exempt frqrn ·VAT -. was made by the . 3% 'percentaqe tax (RR. No. 13-"2018,. ·
· saldhospltal dr1,1gstore or pharmacy. to . . : Sec: 2).' .· . · · .· .. ·. ·. . ..
· !n-pat.ie_nts··.·:of the :' hospital · . ~9= -,.,.;;...._=- · . _ . ·. . . .
operated. by: the taxpay~. (.t;J.ermc:no11 i: .. 'fl..--·~~..:; _su.m.mary of Rules r
. (San) . ,ytigue/ · Feb_r~~ · Co,;9e~. Af/,t:di'?al
Education. Foundr!)tion ~(tJ.i('C:~ F~l.p~
u· .J \l r · ff~~)
.,/(
Monthly: rental P~ 5, 000. o_r less.
i» "'-~r,~gardless.of armual grqss sales -
: · ..

· tfefll!h . Sciences (n{itute;-y/;Jp7!: .. v. · ';f'- ·;AV.~T-exem'pt·a)ldno percentage tax.

.
·· "CTA Case N9. B.1~/1·;;,,M_arj.,'5,2p12);, ID)." ~\ w ~·
~~ts::
. Commissioner.· ·o.f jfntel/pcf~/F?f!)!,elJltle';-="t,{"~-:7"", Mot\thly· r~.nt.~I abov~, P.15, 000 ,but
~'\,.·'cl-:SJ!}).~._woss . sa)es ·do: ·not exceec;I
. : tf ~-Y:r . 0 · . .ll" ,!l~ ,h'.\. · · ·\ : '-f3, o~o;,ooo - VAT~ex.~mpt but
. d. · · £.ducatio_nal_.' servi??.,( rend,~l'e.d ·~ Y!!';~te ..19,., , · . . 1 ,~~fi'l'i~_.x
· -3_%_ percentage tax under
· educa\ional institutt·n~ujy accJ!ea1teo "15y . :
.". th1:: . D.ei;>~rtrrient . i4:8€Jllb.at.iq~ \ (D~@)y-,
G_omm1Sp!On.. ?~ Hu· ~~r.,,._~d.~ca\10~ (QHE_~~. fen . ·
l i?~" : l. '·:.:. Jl $.ec,.,J~ 6 ofthe NIRC. · ·
3 )-' . Mbnt~ly~r~ntal.above_-P15, ooq ancl .
.. ii,maj' ~~o~s. sales · e~ceeds. P3,
: ,_ .

. c1nd T.ecl:m1cal ;~~E\t19n ~~·· Skills~~ ~f 0J. 900, _OO~ - tiaqle for.VAT. . . ·
. ·. Dev~lopment Auth~~l~y ~~ttSD.~<~~~os]f\ ·J.ff,, : f.~~.4). ffe.p1:Jlti~<il . threshold· . _ (?15, .000 .
rendered .. b-y . go~~r.nmes-~~)qon~ .;;!;-4,,~""../ ~~. ;,fmontrl\t · .re_nt~I) · ,. and . g_eneral
...·.. ln$tit4tions; and \ ·. ~&~{ .
. /./-A('-., ·.../'-threslj,bld :~(P3, 000, 000 anriual
. . : · . :. .... ·. ~ · · ·.. "". ~-,_;,.;, - · · /. grosff.saJes) stroul.d b~_both.met for
. Eday~tional. Ser:vi~es :..... acr~~em1c, echn.~&f~·· /,. . thif~rcm.saction~o be Jiab_!e to VAT:
vocat1~n_a1. ~d.~c;,a~10.n , _prm)~e!=I. · b~i;t~~-.· . ~'~ ~",,-. /~- - · . .. - :·
e~ucabona_l mst1tubqns duly a&i~ct~/bf?h'e~;-·- · -•('\V~,,;:;lrn case tne· lessor has- several .
DepE,~. :-:the CHl::D and::,.1:ESDA,~nVtt:o.se\\ if ·i.}..~ ~>';:9.". rt;3sicjE;mti~I uni~s forJeas.e, ·so.meare ·
rel"!.derect· PX, goverr;iryient,... ·. eat)'0:ra~na1.1:V.t1r~p"---., · leased·out for·a·!Jlonthly,rental not
· institutic::>ns. · Jt .does not 'include semin·ars,~-..=- ... · .' exceeding P15, · ·ooo, · while others
. sei:v.jce·, · training,'_ review· classe~ · and .. ottiet·.. · :, . · . · · are· leased·.out :tot lilqre ttian P1'5,
. similar services l'.~n<;:f~red. .by peri:;ons· who .a.re . .:· .. · · OOOrper'i.mif,the, tax: liab.ility will !)e
.... nqt ·. acCr.edifeq.. · by> :~h~ ·, · afore.itientio·ne.\:I . . . .' as.f.ollc::>WS~·. : . . .' , . ·
. institutl9.ns· (R.R. °11Jo. ·.16...2005,: Sec.' 4.10,~·1. · af' ih~··gross.receipts,from ·rentals ·
. '(8){1).(h)).. · ·.. . . .. , . . · ·not· ex~e·eoing' ·~15, ,ooo ~r.
. . ,-: . . .. . •' .' . . . .. -'. ·'""month shall be exempt from ...
e.- Rendered. by . in~l)viduals ·. p(.fr~ua.nl .. to .an . . . . . ·. . . VAT . regart:Iless. . of ' the
: . '!;mployer,e.r~pl.oyee:fe.Jatfonstiip; ·.. : _; : . ,ag.gregate.. :·annual> . gross.
· · · ,: re~eipts.' It is ·also e?<en:tPt' from
t. ..-Rerid.ered tiy .gegion~1 ·or ~rea h~:adq1.1a!"lers · · • · . the 3% percen\a·ge·tax. · · · ·
· .. · establis.ti.ecl iri ·~·the.. ... PhUippines .. " ·by ·. b)_ ·tt,a groS~ :r0qeiPts· fl"Oni r~ntalS~
. ~ultina_ti9nal . : corporations : '.as .. satellite~. . · e.xceeding P15,. ooo·.per month ...
· . centers for lhe ·1atter and which 'do not..e!:lm stiall -be. subject ··10. VAT if· the. ·
or derive .income ·from ·toe Philippines; ai:id . .-aggregate. . ·. atini.Jal grci~$ ·
. . ; . .. . . .. receipts ·from. said . units . ·only
g. ·. .§.abk~. · non-·bank financ;lal·. il"!termedi~_ries excee·d 'P3; .'000, .. 000:
performing quai:;l-banking . tuncti0n.s, and . Otherwise, :the gross· receipts
other non-bank. fina11c;;ial intert.Aecjjaries . will be' 'subject to.' the 3o/~ tax·
(N./RC, Sec... 109 (1)(V)); · imposed under Sec: 116 of the .

232 2019
. SAN
·. SEDA.LAW G:ENTRALIZED .BAR OPERATIONS
 VALU E-ADDE.D. TAX
· SAN BEDA IAW CENTR.ALiZ£.D_BAR OPERATIONS- MEMORYAJD-2019.
. . . -~ ,,... . &A&WiW ?¥¥f

Tax .Code (R.R.· No: · 13-2018; · .was made except for franchise qrantees of
Sec. 2) ... · radio and TV broadcasting whose annual
. gross receipts for the preceding year do not
Residential .. Unit refers to exceed P1 o, 000, .000 · Where the · option·
apartments and housesS lots used -becomee perpetually lrrevocable (R.R. ·No~
for. ' residential purposes, and 4-2007, Se,9. 15). . . .. ..·
.buildings- or· .parts or units thereof .
'usedsolely as dw~lling;pl:;lces (e.q., Note: v_AT exempt persons under Sec. 10?:.
. dorrnltorles; rooms and bedspaces) ·. who -di.c:I not opt to be reqlstered as ·.VAT
except motels, motel· rooms, .hotels taxpayers must register as .' - non-VAT.
... and vhotel -roorns, Jodging. houses, taxpayers (INGLES,. supra-at 365)_
:·· . .
.. ·.'inns, andpenslonhocses- (R.R. No.
· 13-2018, Sec. 2). · · · · · f. Transfer ofprcperty pursuant toa .Merger or
· .. consondatlon.accordlnq to Sec. 40 (C)(2)·of ·
iJnit· -· mean ·an:
apartmeri~ unit in·. . thE;l-NlRC; . . . . . .
-.tiTe·_.!,(\~e 'of apartments, house "in'
.. tl')e case of residential houses; per . g... ~ssobiation duos, i:nembership• fees, 'arid
person i11 the case of. dormltorles, . . 'other assessments and . charges ·collected ..
. boc1rqing houses 'arid' bed . spaces; . ··by hom.eow.ners: . ·assoqiations. : and
. and per room_·in. case. of. rooms .for_,./';~: . · ~ondominiums; and . . · ·
rent:(R.R. No__ ..13_-2018~ Sep. 2)jv5.7~~i :
, · . · · . .-. · · · · p-,1..;l:r /':-i'ib: . h.. §:elf-employ~p-iridividu~ls and professionals·
. b::. _Gross -rec.~ipts. from -!:ending .:,ictiviti~~t\lft::/~!\ :- · · avail!ng of the_ 8% tax on gross?ale~·-ari_otor
credit or multi-purpose -cooperatives '.ji{UIY,,,,,,f,:'J. ..,-- . r.ece1ptl, and other non-operating income,
reqistered ·.im.c,l _in ·good stancting\~w? t~~;~fft~'!"~~~,1;1~~'WJ
Secs. · 24 . (f\)(2)(bj .anp. 24
CQA; . '. !~ -:, · ..
·· • .,,efJ,~,/,:,. :-" -~A)~2,)((9)(2)(a) of the NIRC · (R.R .. No .. 1.3- .
. . . : '. ·. . . ·. ·. (r'< . . J\:.:.11 . 2018.,rR,ec. 2). . . . .
_.c. ·: Transactions which .. are -, :'fX;JJ)lpt ·uri~r · f.\ . Jq \ · . ·-
-!nt.e:r:nauonal:· ·a9r1;3em·¢nfs.;(tt0t· J.tf:1~11
t~e- iit .J. W \\ . · .
P.ti_iljpplnes:.~s· .a s,tgnat~;.·orqnter.?.s-pec1<;1{: .J.l · . . f ·. N . ): ·.. · ·· . ·. ·: ' · . ·..
J~W~. ~_xcept-_ithose.
(Petrofeum·Act_·-of194._-9J(
iffif.1~~ ~<.J-t7.. -~. -r'~fk(·
1er _:fo-~No:,_ 52!1>.
!t.· INJt.~_ . ~j~l,AND OUl'Ptr:r· 'I'A:X:
. :"-;,:;,;t-L·.,:,:~~#'J",,/ · ·. · · ._. . ·
-. . . . · > ..: ~-- . · ~~-,..~.··15.~!!-; :· ·.::r--:;r - :w
_fj'. Jnput:rax - .. ·
d,. :~::r{:l~;'lPP,ri of_ P.a~seng@rs{i_.!>..Y.,._,;rn!~.rra.llo~al_· .
,. . ~~~. ~--.,. ,.-
... . . . .. .
· _came~!>_(R.A No.: 10378); aod,'I.. ·· ~-{;- · .. · ti;~"FJ.\~itYATdu~ _fr9m_ ·o_r pa~g by a -VAT r791stet-eq
.·· . .. ' . . . . · . );;--~!:.-- ,,,,, . ·1itf!."'}e@r.S.G,F,i1'.JP.;Jbe. course Of _hlS trad_e .or bus1ress on
. -~ot,a:-·. The:. trf3nsp·o~ otZ.carg1<F;,5,.t,)V~:·"-~-rm,~tib'ti.JJof,goods ()~ local ~urchase of go"<;>ds/·or·
_1ot~~,:ia~19_na!_c~rnEl~s. doing. P\:if.'QeSS;jlll _.t~e. · · · -services·.- jncludin_g lease. pr use of property, fro01 a
. _ph1hpp1nes·1::.:h~~wise VAT-EX.ElYt.,s>.rt~s 1t is ·vAT-register:ed pers·on (NJ{;G,. Seq. ·.110 (A)(3) as
_ ..sabje.ct tp- Pefce11tage.:Tax 9r:i _ International ame_ndei{by TRAIN Law).· , · · . ·. ·. . · .
·'. Came.r_(~ ..R.-f'!.o:=15_~2013,:$ec::6J: · · · · · ..,, · - ·
·- Input ... tax .is ·pc!SSed: · · on . ·to . tbe
is : -~hat
. _e: Olh~r _tha~i: :tne.. transactlons m.-E!r'.!tioriecj. in_-. . .p\Jrcha·ser/taxpay~r_.bythe seller, It.the purchaser is
the pr!'lcedin~f par:agraphs, the--gtoss a11nual.· a VAT-Registered.pe1's'on, then ~e.can use.(h_e ih.put
. ·sales' an.d/or .reci~ipt$•.-'dO· not .exceed·. the . tax·.-creclit to the'"output ta.xes he is lia.~le to i-emiUo .
. .- amount bf ~-3,JlQO;000. . '. • · .the; BIR· (ING LES; supra._at 348). .·
. • .. . . . :# ... . . .. . . . .
. '.' ··.: . ·. N,~te: _.Any :P.er:;on· who~~/ s~leS or rs"ceipts·. . Sources of lnp1,1t Taxi.· . ·... ·. ·. .'.
~-. ·_ · - do '.not. exceed .threshold am9i.mt ·and whc;> -is 1. · P.urcha.se ori111portati6n_of'goods: ·· '
· . riof~-a · VAFrEi~ister~. person are exeni~t .. a: F6r sale; or
· from VAT. but shall. pay 3% . pernentage tax. . . b. For tonversion into .or intend~d to form '!)art
. '. · of his . quarterly_ .salea -or· _receipts . (NJRC, . · o(. a finisheQ . produ~t for_ 's.:i'le, :inc:1.udfng_
..Se_c . . -116as amendecl_'by TRAIN Law). . packaging materials;·.or ·: .
· . -· . , . . . c; For :Use·. as supplies in· th_-~-- co1urse of
. :A VAT reg_is.tered person. ~ay.-eiecitliat the.... business; or ..
·: above exempt transattions ·sh~II not apply._ · d: · 'For use. as r:aw material_s s'upplied in the :
. to .his:_ safes. of goods·. o'r prop·erties. or sale of services; or
. · services. -once 'the. -election is rrfacte, it· shall e.. For us·e in trade . or business tor .which
a
.pe ·, irrevocable . to(' period of 3 years . deduction for depreciation_ or. amortiz~ti9i1 is·
:coµnted ·from .the .qyarter ·when thE;:1 elE;lctjon . allowed under the Tax Code . . ·. .·

...
2019 SAN BEDA LAW CENTRALIZED BAR OPERA_TIONS I 233
 §4 er M en • I EM h

VALUE~ADDEi:lTAX.
2. Purchase of:reaf properties for whkh a VAT has
47
SAN BEDA LAW CENTRALIZEDBAR OPERATIONS·-M£NiORY"AID::1019
: n••";*++ · ei-t•:••tt
Formula:
w i+1 .7s -~. 58& !!·.
·,

actually been ·paid( . .

· 3. · Purchase .of services 'in which. a VAT has
Outp~t.tax: .p )<xxx
actually been paid; . . . ..
Less: Input fax . itxxx
4. Transactions.deemed ·sale Linder Sec: 109(8)' of.
the ·Tax·Code; .. · . VAT ~ay;a_ble P~-
5. Transltional Input.Tax; . -, . .
6. · Presumptive 11,'lputTaxi· · · . ·, ·· . ·
7. Transitional Input-Tax Credits allowed ·under the · tu~~ Outpu~tax .P -XXl(X
transitory and. other provisions (R.R. No .. 16-. Less; Input tax
, (xxxx)
200~,'S~c. 4. 719~1)..:.' . . !=?{cess lnpµt' :(P~
Tax··.·:
. .i. .
·
. Out'put Tax · · : · . . . :-_ ·. . . . . . -, . . . .
'. The· VAT due o.n the- sale· or lease ·af taxable good~
.. ~ or pr.opertiestcfr)s·eryice~ by anyperson.reqistered or Notes: . . . . -. . . . .
required.'to.'regisfet Lln_der·VAT (NIRC,.Sec, 110 ·-1.· :it at the. end of:any.taxab!.e''quarte_r;VAT tsa r-
·. (A)(3) 8$ emendetiby. TRAIN La·w). · · : · positive· amount '(the ·ou~p\Jt · tax' .exceeds -the
•
1
• • in·pui.- tax.: .such-' amount 'i~ ·~.1.recr,a.s excess
•• •· , I

Note: The. cutout taxof _t,he seller isInput tax t~~~,,~~~ut"puttax),_·then·:if is the Y_AT pay.a91e by t~e
purchaser (INGLES, supre at 34_6). . . #:el-'·· !T. )~' ,,. -..Vlf'f...:r,egiste~e9 person. VAT pay_ablE: m case· of.· ,
. . · .: . . · .: · . . . · .. · -~~: f},\.. t: J\fmpo~t~Q'
1s already the amount due o~ ·such ·
Deterrmnatlon of O~tput·Ta~. a:~Vt~,p}YYJ,~-~ . . . .,,..~~porl~i~n~nd
. .· · .. · . ·. ·. .. . · .
· and-the Compu_ta[fon of _'!.AT !/'xa2_~e,'-9/, ,ecess~: _lf'.th~~h~,l!~~nclu~iv'e of input:t_ax ~arried~pver
-Ta~~ Output Tax . · · 112. ~~- 1'_~-
·.fe., ~°"""::"fr-0~,1J?re~J,9\lfquarter; exceeds_ ~ne_ ~utput
1.. . For 'Sale 9f goods or prop!.~!') / il3) Jr . l:
~w tax, the .e<§.s~s~i,:i~uttax shal.~ be c~_rned:over. t?
-:VJ:.: . . . ·
·· :· .· : . . . · .. /f ··
selhng P''.'."' ~vr,~.f O~Pr'•.x"- t'i?
tl"'" ~· .!ti_\. the ·s\Jcce.e~#iJJkl~arter or quarters as_ tax credit
CJR,tlNo ·,~ ,.c, 411":: (b)) , • '

·b
· '"<9SS

2. · .F_or·sale:"of ~_erv1ce~_:... f '~ ff . . ~ :· ~Ii

... . . . Ii-~~: \~fI['I
Gross receipts x VAT r:et~pu'tp t · · : : ~;;_":. ~
. . , :· . . . . : - . ~ ·tr"!t . ·r~~- , . ." J?f. '1· .. .' ;:-1 ii..,
k.">2:·, . 'O - ..
·!~J.· · iJ.~"
)2%/ Payalil~:.
3. . Where tbe b~s.1s f~r c~~~titi~,~· o . P.~ · .t x ~
e~lher:th!3·.gross._..sellmg ~{1ce.or1!fqs~~
.. · but th~ amount of VAT 1s~errqneollslybU)~ '"'"· ,,;,-;'. . _
~ Z .;. ,J · .. . · , 1 •
1~/
· ·.
,·.12:., ~~-
· /t:
.· ? : ·_2 . _-. TaxCredlt
. ·. . · _
· •

, ·. the' .invoice· ·~ The· tcital.'\in'voice~~o(i~'~1~ '"".' ~.; · . · ·;,to.: 1·.21- , 0 · 12. ·. Refundable/
· - ' · · · ..-·~ ·· ' r,© '°" · -J.lE1:,.i • Y ~ · · · · · Creditable
.· -_pr~su~ed_'_to .be, _c0rr,ipi1s1_n.~6f _gr~s'S ~..~1_11, ~...,. ~- -~;. . -. . . . . ·: ..- : ... · . ,·
· price/gross receipts. plU!>,' lhe~-~f~~~=f.;?.~ ~)!~11;1~\ .· .r1,, ,,/ 12 ·. O' . . .12 . Unrecoverable
.·. L?sin·g 12°(0 Jl~Jhe.-:y~T, r~te_,.t_~~~o;i~a.-_to 'tv1 ~··. _:·. ·_. .· .· .· ·.: _:.· .. , · . ·.
. compute 1:1-~
c;>utput ta~:1s:., ;_ · . . '._ ·~~~:.;A1J.,.ar-,11Jimf~ ~r~ as~;umed_for. 1l[LfsJr~t1on·f!ul'p"(>~e:
. · . . .. . 12%· ·.· ·o t \ t·· . · 't:>e't~r~in~~fo~·~, C~eaitabie ·,~·~µ_t ·Tax: ,
·Total invoice·amQuntx., u pu_' ax ·· · ?1~'rc,: .· = The ani<:m.ot·of JnpufJ_axe~-er~tjitabl_eduriri~,a rr:io_nth_..
· ·· · or, quartef:.sh·~11 be· determinea by: . _:. : : . · ·.. '· ' ·
. T~~- inp~t tcix .that .ca_n~be·cla1_miid by thif buy~r .s.hall 1' .", Adding : a!I credita_ble . (np_llt 'taxes ·dliri·ng :: the
' · be the: corrected. amoi:mt of.VAT (RR:. No . ."16-400t,, · month•.or quarter and any· amount .bf' input tax·
Sec. 1."110•.6). ·. , .· .: . · · · carried.:over .-tro·m · the_: p~c~.ding': m~nth ·;.or·

·· · VA~ P~ya~l~~_gxcess:input :;,-ax.: ... -·· :- > .. ·

. , ·. . Output tax_ less jnpaj ~ax· is·VAT,.Payabl.e or E~~~ss_
:· .. · l1Jp4t c,re.dits, -.yhi~liever -~~.t.he cas~. _on· a ._mon~ly ·
. VAT'declaration and qliarterly:.VAT returns,-subJect.
·tc>'limitatii::>ns ptescribed by·thEi r:egulation·s (R:R. /Yo. ~-. ·
:t6-~QD5, Sec-. 4.110:-6). ··· · ··. .·. :' . ·.·. ."..
·,;, .
. ,.
2. · :.~~i:t~!nl?~-~he'.~~ou~/~f cl~inf·t~;:yp;~·~efu-~d: .
6r tax· _credit. c~rlificate ·(whether.. filed wi\l:i'-J31R, ···
. . With·.: bepar:trnent.,. orFinanpe, ·· Boarg,_ of .
' . Investments or tl)e BOC} a_nq,olher a~jl!$tments;·
·su.ch:as purchase. returns ·o_r· allowa!')_ces,:·.input
'tax attributabl~ to.exempt sales c;1n~Unput.tax ·
attributaole·· to i·_salEis··:s'-:'bjec.t 'to·. final , VAT:, ·
with~olding (R.~:- No: 16.-2005,_·Sea:'4.f10.:5).

·234. J . 2019 SAN. SEDA LAW CENTRALIZED BAR ~PERATIOr:-tS: ...

. ,··
 ;.., .
.VALUE-ADDEO TAX.
SAN SEDA LA~ CENTRA~'IZ£D_BAR OPERATIONS -MEMPRYAID 2019
~· dF7'9h iMPiii@ C Bi I Mili\4WR di &fMWHISM,MWkiW.Ptst.il
:,_ : . . .. :) . . .
... · tnputTax on Mixed Transactions: . 1: Estlrh~ted: .useful life i·~. 5 years. or more -
1;, 1. All the Input taxes that can be directly attributed input tax stia.11 ·be spread evenly over ifl'E! m'onth :
'.,/ .. · to .. transactions subject ·to. , VAT ·may.· be: . of acquisition:ano the 59 succeeding months. ·
-~ recognized for input tax eredlt; . .. 2. Estiin<!ted us~ful lffe· is l~s.s than 5 .years.·-

t-
J;. · 2. lf"any input tax cannot be .directly .attnbuted to
either. a : VAT : taxable. or. ·vAT-·exempt ·
~:· .. transacuon, · the input tax shall be· pro-rated-to ·
input.tax shall be spread evenly- on a :mo'n.lhly.
: . basis by.- ..dividing the input tax by the actual.
· n1:Jmber- of. months co"mprising. ttie estimated:
!.~:.:.·~.·-·,· ·tt,e -\/AT. taxable and _YAT-exempt· transactions - us~ful life. Su.ch.:. claim. ·tor input tax· shall
. and · only to the : ratable . portion. p~rtaini~i;i to cor(imenci:i i_r, the. calend&r .. morith the capital
',r·. transactions subject 'to VAt. may be 'recoqnlzed · good is .pcqufred'. (NIRC, · -Sec. 110 (A)(2Y ;,s
tor input fax credit .The- allocation- of input taxes · ·arnend_ed by tRAIN.La~).. ·, .. : · . ' . ,,.. .
. shall.' be done proportionately to each category .
. oftransactlon; . . . . . . . . Notes_: . . I . • .

3. The· inpufJax· att~ibuti:3bJe to v_AT-exempt sales 1. · The arnortlzatton of th~ -lnput YAT shall only be
shall not be ·allowed· as.credit ~ainst output tax. allowed until December. 31, 2021 after which
· but should be treated a.s· partof costorexpense: taxpayers with unutlllzed. input· VAT 'on· capital.
, .and. ',.·. · . · · · · · · . ·' · .• · · ·goods purchased or. imported. sh~li_- b~ allowed
4;· .For.·persqns engaged in both zero-rated-sales ·10 a_pply 'the, same· as scheduled: unti! fully·
. . and· nonzero-rated sales," the aggregate, input· . utilized (R:R. No.: 13-2018, Sec: 2):. ·: .
. taxes shall be allocated · ratably between. 'the ~ 2. · for 'purchase 'made on January . 2022, no
.· z~~O-::'~ate·(j sale :and. nonzero-rated sale
_ · No, 16-29?~· Sec. 4'.110-4).. . .. ·.
(~1i~!_f . _.;
/::•;,';:.ti.,:.;{!-.
amortization shall be made .arid the input'VAT
shall be._ claimed' on .the month of p~.frcha_s.!3 or. "
. . .... · . · .: ·. .·. . .. . . ~'.'J'1u,_,~, .,,. J~nu_ary.2022(/?·.R.No. 13-2018,.Sec. 2) ..
·.·. ·~ ·' · . . ~1 ...,H'f;:,·,·~ ;.,-.... . . ·. .,r-<
· ·· · ·. : · · · · ..
. · - · ·· D . · · :. .-!·/)' ,·t 'tr•~~EU!'._in"t.iti;~J.I:"-\
,~ ,;.)r . ~-,iJ,,. -~.1· · .
INPUT . . . TAX ON ~PRECJ-}\:BLE ~ i' ·.. · · ~/?t. Input Tax ,
. · .. . Goons~ ·4!f~. : ·)( :,J,t · · · . . - -f1!J\µseful Life in Mon~hs* · ·.
~t\ .. . il
.

·
.

. ·
.

.
Capita~ Goods_ or Proper-ties-f.r;:G- .·.
. .

. : :..
. .. T

:
.. ·

.-.·; ~
. ,._\"';;;.;(

{{ ~ · ~\ ~A o~l!mo.tocj!_nss1julli'{!
_·.. ,)~

Jf.j;;.,;. .-; . .. i~r ~AcJu_al

,s 5pumrnr_more: _. ....
U§efuJ
H \ .. . . . .
_Jiff, _.~r _maximum.
·- ..
of. 60 months if .

Refer to good.!i. or prupwlles:(;r*~1. .~~ . ·. r/;.i

'L With an _estim-;::1ted usefu~~jfe gfcut~r71ho~~·~ f·•-1 Effecl\i:J~Jq~;?[;.ggr~gate· acqu1s1tlon· . cost-
, l,;, :. ~---: _ ~- . · ..
. {1") year~·· . ·· ·: ··. _.'{.·~ :'~.;i~;)· i1' ,·?. !!~/
(exclu~1ve,.9,f~-:P)~oes._n9t.exceed .P1, 000; 000:
2 .. ·whfcli ~re treated 1,3~ ·deprecla§f~ass~)~un~"er t'.;
The. _total ~mount of input_ taxes_ "."ill be alrowa~l7_as·
· --:_ Sec:"3.4(F) of.tn_e NIRC; ·a~.d ~-\ .-· fi . · ;;f~=::fr.eqitaga11.1st output tax tn the me:nth of acqu1s1t1on
1
:. 3. Used :tj\re~tly or _indirecUy· in f:ie),r>J:0<:l~·~tion.,pr .... :.~:~·~fil:~r,;-~~:.g_~wps,
S.ec. 4._110-3). ·. . ·' · ._-:
_sale of tpxable ~oo~s or 1?erV1C!.ep:~f Kepq,,5lR'l!!l: · · · ·· · · · ·. ' . ·: ·
c9rp. v. Commissioner, of fnte;:n'gj,!'o.Rp.."J.e~ue, Effect of_ sale·. or tr~nsfe~ Qf. d~prec~al;>le _g~od
(· · · ·_G.R. No .. 179356, De.cemb.er14; 2op~)i}~l' . .. ·. wlth~n. -~ perJ~d of 5_ y~ars o~· prior··~~- th~
-, · · . · .. · · . ·· .. , · · ·. exhaustion of· the .amortJzable input, tax: The
f. , i:>rop~rty i.s .con~i.~_~red D..epreciable if: .... · .· ·. · .. _ .enfirif u·namortized ·inp1;1t ta.x on .the papital. g~_ocls
i .1. -it ·.is usep, in" fraae or business or helc:t tor. ttie ~Qfd.or ~nsferretl.cart be ·c1a.!meqas inplit tax c~edit
/· · , ·'- pro
,,:- ··d· uc·t·1on,o
· .f..mc·ome;·anq.·
· · d ·
. · ·.. . ·., . - .during .th~_mo.ntJ:i or .qi.Jarter,.:..Vhen sale··or transfer
} . 2,·· It is subject exhaustion Within :a determin.able · to . wa$' rri_ade (R.R: No...tp-2005, Sec. 4; 1-10;;3).. ·
~Ji_··.. . . . , :periocf o{ . ti.me (it: has·.
._
limi°tep . useful life):..
(MAMALA T/$0, f!~viewer; supra at 489). ·. .:
a· ·
lllus.tration .No. ··1: .
•· · · · · · .. _.In . becember 2016,: a VAT-registe~ed pe.rson-
. Aggr~gat~ -~~~ui~itlon .c~st ....... ·. ~~fer~··:to .the( t~tal, ·re·poi:ed the. folio.wing acquisitlp_ns.'_of equipment for-_.
· .price.,. e}j:.cluding VAT; ~9reec(up.on.for orie or mqre . its.busin.ess use: . . . : · · . : ·. .
asseti, acquired- c!ntl ·not on. tl)e paYf'.Reri.ts a:Ctu·auy · ·. · · E;.1: Pt,soq,ooq (estimafud useful lifo·s. yei:,rs)·., .
· madefduting.t_he calen~ar·mon!n· (R.R. No. 13~2Q18, ·: · · ·I;~: P629;oop (e~timated us~ful-li_fe 2 years)
·. . $et.· 2)". . . . . . . · :· . · . . . _ . . • · .. _- ... · ·.. . . . E~ :_ P750,000. (e~tirn.aied· usef_1:11·1ife·~ ye_~rs~

. .lh~lJt Tax.~ii De~reciable. G~ods . 'The Credita~le)nput v AT* per month ·sh.all. he: . ' ·- .
f_·.· . IJ.yhere a . VAT ·registered:·.:perso11 : purchases or . E1: P3,000-(P,1_8.0,0Q0/60 tnonths max.
t. , imports capital .goods,. which are· depreciable assets . : f)mdrti~ation pe.riod)· . . .. . .
{.' for 1n·corne fax purp9ses, the a~19re.gate acqutsltion E2:.P.3;125 (P75.,000/24 months)·
· cost of which·· (exclusive. of 'VAT). in ·a . calendar ·E3: P2,50Q (P.~Q;000/36 ·months) .
month . exc~ds p~, oo.o·, 000 . regardles·s · Qf· the . .
acquisition C?~t of each capital g<;iod: · . *Acquisition Cost (~xcluding '!AT) x ·12%

20i9 $AN::BEDA LAW C.ENTRALIZEDBAR OPERATIONS , I . 235

 -VALUE"."ADDED TAX·
St,N BEDA.LAW C£NTRALIZ€0 BAR OP£RATidfl!S- M£MORYAID-2oi9
.·,,. ·. • .
.The .P1, '000, ·090 threshold · Is based ori · the · . ·.treated' as depreciable ·asset" applies to "input . all
aggregale . acquisition . cost . regardless of the taxes on. c~pital: · gopd_s availa9le as tax. credits
· acquisi,ion- cost of each·cap\fal-good· (R.R. No:_ 16- against-the tax1,1ay~r's·VATablEi transactions, be it
2qos. Sec. 4.110-3)'. · . ..- · .· . VAT. zer~r.ated
: . or. subje.ct.to
. .
12%.VAT.
..
·

mu~tration No: 2: . . ~c;ith ·.·. t~xabie .... ·s~les and' ~ero~rated ':sal~s· . are
ABC. Corp., a VAT-registered person plJrchased . consider_ed. trarisactions·subjec! to output VAT." The
Ci;!pital goods ofi "different otcasions as follows: . difference·:. llis. ·qnly ·on. lt)e ·vAT rclte ·use.d.
Cor:,sid.ering tha't."the output" tax· due is 0% in the
?ase_·of zere:,~ated..~ale's. transa_ctions; ·!be c:reditabl~ ·
· input -tax _attri_butable ·ttiereto m a ~a.xable quarter .
. . . becomes unµtili?.ed- or exc~s~ _input :·{ax which. may.
. . . : .~a·n~ary ... ·. 8.5.: : -~ yr~·· · Oecertrber.- ' tie the subje_ct 6f' a claim for refund -or
1ax cr'e'Clit
· 20~8 · 2022 ... certificate" un_der Secs'. 110. (B) and·.1-12 "'(A) _of. the"·
. NI_R,C, as ar:necid~d by TRAIN Law.· : -· . ·. ... · ... :
february 8".5 · 4 yrs. January
.. 2022 ..
,,-.... / . . . . .. . . . ~ . ·..
' ·2'018 ...
· ·~..:.- ...- ~. . ·. : . · . ·On.the argumeof.'.!hat tlie amort_izatiqn "o( i~put·VAT
· pe2c0eb_er.
2m1. . - 19_.. . 5 yrs ·. · November '. · · · on. capital :. go_ods 'runs counter: to the provisions of
l---'-,..----1---~~-+----'-··-=-· __,_ ·,.,,§,__~';;.~.12 (A) o(the l':JIRC.~s the claim f<?r refund can
. .,..·__ ·2_0...c.4...,,6"""'·:~:::,"""=r~-:-c-:-
January. . . .. . 1·o . 5 yrs . ·i' :_ C>Litrcigh't'9)aim, ljf: .. T ~~. ~~.tte·ctiv_~lybeyond the two .years ·tror.n the .
· 2022, ·. · . ·. : J~a~':t1up -l~J 11o'?~e 1,: tl)~taxabl.?_..q~_arter when: ths s~le_~.~~re
.. . . ·. · ·. · . . · · . #~ -~ : i 7J: :.......~~-=-~$L~.(th1j. QT~mamtamedthat tl1e amortization of:
: . . · · ·. . · · /;I'..:·-~. r~ ~. _mput ...y~~:?.e1t~~1ays tM C?r.e~ltlng of the_ input
1._ F~r. purchase made on )l_an11aFci)i~me~t~a.ol~t~N~e-fy1ug:o~.~he.cla1m.Hence,_ 1_t_t:1el~i.
· . amortization shall ~ for ~Jf~~-lir r. Pjr~_0d ofW 1f ·,r.~..Y~\~~eg1~.t~~~ ~fl:CP~y~rs are=not. d_ep~1ved of
. years ·on_ly or up to Deceiber'20 .2 altfij~~g~- tl:ie-. 11t.}" tlile.1r:pr!v'/~9,9"\~·fr~d1t)h~,1rmput ta~ a~·long as. they
· useful life is ·s years: J;--.:... . . . ~.:..:. · · · t::/f''>- fileJlieir -~la1m l'~')l~ears-from the close of ~he ·
2. ·For _pur~hase made q,n ..,,..f;.ebtu~ry ~!)18-;-'"ffie ~j:f"lax~me:1J.uariet~.~,g_~,nl the sales w_ere made.
. amortiz~tion shall be fq[P'P.eri~ ~f 4 .~ea(~~ ~~f c;fc"_f,d'm1sf1.qner- ~ff h1t~ffi)al Revenue· _v. North~lnd
_or up toJanuary 2.022 ~it_~·tti1 useful~fe oftttw~~owe~.D£Velop~r~:t,,.Gpl.P:,GTA ~B &o.~. _103_7 and_
.asset_is_sl'!orterthan 5 ~~~i':N ·'·a.,. . ~~42re!ff!:i-
-a For ·purchase_ made , oi "°'?~b_el?'iR2.t,_.ltJ~-; · !f·. r-jJ;aganJ{9,~. mglef:o(p-ff·· Commls~lo.ner of·lotema7
:Case·~1:tCa11~; D~cem};)er,:16,_-2014;,
amorti~ation.shall·be.for,~!itJpet1od o~j~s ·<Mi .}fJiJ.~'7,':}_,'n5.~ TA7f=8. fVOJ93_5_and 93_6 re CTA-9~se
·. up to N_o:vemb~r?026: . \ . ~ \ .:-. --~~~- .. 'i/f?;1:if!.f·:, pec/moer1§6,2.014),. · · · ·: .., . .
·4.·· For._ pur~ha~e mad~. Oni\.Ja~ua~ .~0.2'~£>'1.R.if. . . / · . j-· . . . . . ~: . , . ...
·· .. amortlzat1pn shall be" rn~de\~f)d th~i~ut,&4~JlfiN1.~~;r~P'>n m
.C.onpructlqn Progres~. · · .
· · sliall. pe ~lai_rned ~n:the .m,ontt:) of PJJLC)la{>]tor.·~~-:.\'>..,..., .i · · · : . ·· · . ,· ·.·
· Jariu.ary 2022 (R.8,: No,. _13~2<J_1~efc}:}Jur·-; ~~,S"~str.®~~n.pti 'Pr~~re~s .(~IP): It IS th~ ~OS~ of_
.. . - ·. · · ·. · . . ·· . · · · ·.· · . . . · :~,.;.. . . .i · · :\\:· ~ ®~tl;t.JGti9!J~~ork,w~,c~ 1s · not, yel corT1plete<;1· (R.R,.,
. __ As~et _acqLiir~~-in l~s!altrilerit ... :·;· · · .. ~~ .J~1-~~>?d07;·_sec: 1~)._ . _>., · ·. .. , . '. ·' ·.: ··
: '- An asset acquired ·,n 1r:istalln:rent fo.r.· an ~cquis1t1on-" · .· . .· . . • ,;-.- . ·
·.- · . ·. cost pf·m,or.e t_ha·n l:",1, oo.o·, pqo; ex.clud!ng V~T. \'fill· : ·)•fot¢s: : .~. · ·· :-~_. · · . · . · '.._ ·. ·... . . ... . ...
· be subject to_ 1'in1ortization'. of input 'tax· _despiJa :~he 1 ... Cl~-1s con.s.l_dered-,:for pmposes_qf ~JairnJ.ng·input ·
fact that thei.. monthly· payments or .Instalments· may · · :tax, as a.purchas~'of ~ervice,."the. value of which·
. not exceed P1, 000, .000· (R}?.· No. 1,6;2005, Sec. .' : . . sha(I be de1ermiijed ·based: or:,. -tbe. progress·
·4110-3}" · ,. · · ·· . · : · · .. · · · · : billings· ,. . · · . · , · ·· ·:'. · ·
., .. · , ... ·.. . · . . ·' .!'. . . ·. · .2 .. "Input t<ix- credit .cari-be i:ecogniz~d:in 'the month'·
.. ' · . · lllust"ratlo.n: .. · .. _. . . . .· . . . . . · ·: · t~e ·p·c!ymeot was.· 'n)ade:·.. P;rovided·, ·_. th,H. a'n
· . NJ. Corp. acqµire'd-' an asset tor ·p·1, 500, oo_o ·official receipt.' c;:,f- payme'nt has ·Been· issued
· payable in 3 monthly·instalJme.n.ts. The input tax of . ··. t'>al'1ed,pn the·p~o~_ress 'piili~gs;_and- ·-: ·· ... · · .. ·
P.180, boo will be ·~iubjectf6 amortization·i:lespite:the ' -3: O"nce the .in'j)ut ·tax .lias already been: claimed .
. fact: that the monttily.° pa1rnenpinstailrnei_:it is . .P.~00,.. . . . white. th"Ei· construdion. i$ .still· 'in. progr~ss;. no
,ooo (less t~ah_P1, ·ooo, 000).- · : additio'!c:!1 ir:iput ..tax. ·can be . ol~imed· upon
· · - completiori of the·- as$et when .it ·tias Been.·
Arriqrtlza!io~· -~f Input Vat on lmp:ort~·d Capital . a.
recla~sified ·_as cjepr¢cf?ble capital a~set :~nd
Goods Applicable. to Both ·zero-Rated and 12% .. depreclat!;ld (R:R;_ No, +2007; SfJ.c.· 1·6): · .. · · .
yAT Transaction~. . _ · · · · ·
Sec. · 110: (A)(2)". of tt:ie(. NIRC· which. tequires· · ' ..., :;
.. amortiz.ation.cif input tax·on ct:i"pitai'.goods purc;hl:ls~d
or imported w_ith aequlsi~):m C?.~t'of P1; 0,00, 0'00.arid
J·

23µ I ·2019 SAN.BEDA'LAW CENTRALIZED-BAR OPERATIONS· .'

... ·---------·--·---------------·
 t.t.(. ;a-i.-=-------------------------lliill---·
·vALUE-AD-ClEO TAX·
. sm:4_
··--fl!l l---lm:ll! r: z: l=t'~~-
SAN _. MEMORY AID W19
1.J.\WC£NTR~UZ£D"S).ROPEf!ATJONS, 41,P'!' 6,A
i~:. .. . . . . . . . . . . . . .. . . -. .
\. Contract for-the sale of.servlce where oniy labor· , · Prio~ p·aymerit, of . Taxes NOT. Necessary . for.
v~ will" be ·supplied,. by the contractor
} · h,aterials will 'be purchased by the contractee .
and the :·· · Avallment of. Transitional Input Tax
. There is. nothing in the 'provlsions of Sec. 105 [now .
./ froni othersuppllers . · · . · Sec, 111] of the' NI.RC 'which. inl:licate··that prlor':
ii_. . 1, Input tax credit on-the labor contracted shall ·still· . p~yn1eritoftc\><~s i~ necessary for' the avallment of
;,, .. , . · be ·r1;1cogriized on the month the payment was the· transitional -input tax. ·Afl that is. required -under
~ '. made based on progress billin_gs; , . : . · , . -, . · Sec: 105. (now Sec. 111) of· the· NIRC is for, the·.··
(t . 2 .. Input tax :.or.i the purchase ·ot materials shall be- · . taxpayer to file ii beginring inventory with the .131R
:t'. ·. -recognized· at .the time the matertals.twere ' (Fbrt-Bonifacio.'Df]velopfl)entCorp. v. Commissioner·
,; : : purcniised'7R.Ff No.:-(1-2007; Sec. '.,1,6). · . , . . . . of i(lternal Revenue> G.R. No. 173425, J~nuary_J2,
... ' ... ·.· .. . - ~013).. : · · .. · . ·.· ,·= ....
. . . . -,. - ,
'·-·
---,.;....----------.------•-
__ _.;....;...-~'. .·, · : -Nate: ~Of transactions on real properties; the value
TRANSITiQNA'L AND . ., . . . of th_e.,latter,.·t99ether·Wi_th._the_ improvernents thereon .
. . , · · are included· in.. the beginniog inventory· of goods,
P.RE~-UMPTIV~·IN-P-UT- TAX· -_.;' . · ,niateria_ls.· and: suppues' based on· which the
{ -. · · · · transltional· ii:iput tax credit · is to be · corrrputed ·
,.,,:, · · , · .(MAMALATEO, Reviewer, supra at·487), · · · · ·
{",, Trahsitfonal lnput.Tax (NIF{C, Sec:" ,111 (A)) . . . ·• · . . . . ·
t':. :_ Tra·nsition~_I.input .ta~ orr the_.in~ent~ry oo hand 'as of·.~ : Pretumptivelnpuf Tax {"f/RC, Sec. 1 ! 1 (BJ)
{. the effectlvity ·_of ·th·e VAT:reg1str~t1on .of't~~pay.<ilrf~/jf Per~ons or·~~~s engag~d m the: (~M) · · :.
-t<' who: ·. . ·. , . · ·.: _r.~:(;f'~·, 1. R_roce~s1ng · of mackerel; milk _.and· ~1;1rd1nes
:~ = _ 1. · Became · VAT"~egistersid · '-p_1_:!rs9ns Jij:f9.jj'i!~1::'-~). (MM~); anc( ·.. _, ·· , : · . · ' - . · · . . ..
<. ~ . excE:~di_ng thEr minir:n~r,:i, turnover o'. \R6rO;,-~-';·:.t'?
.P.3, 2-,_/Jl~nufa9t(.J_ring_~o_okingoil_; Qacked-noodle-based
\ . . ooo_ in a~y _12-r,:io.r:,~_.pli!nc;,d; . . · . .«f~--lf·'.;;/!.f~·:;.,,~"':~tant ~{31S- anq refin~9- sug~{ (CPR).-_ . · ·
cl;- :?,. Volunt~nly: re_gisters as _a VAT .pay~r':!1J{te~':-t1v [1r'"" ·. ~.t!:-''·. .... . · : · ...
~ · . ,t1:1rnover d_qes not ex--c_eedP~. ooq:iJ)00 ~exce~LJi .Pro~~ss~IJ@ . - :· ?.ha~I i:r,ean . pasteuri~at1on,
.: · : ·'franchise grantees, of. r<?~i~. ~nclz~or,.1~el~visiq,!td~ ·. canm~~f~'ri~.act_1~1t1es which ·throu~.~ physical _or .
,z;,._. :
J ::_
l:Jroadcasting whose ttireshdld is. f;1ttl~}oop,,oeo;.
·and·· : : . ·,. ·. · , . ,,.;,:ft-·!: )-'~t:·· · · · ·
t\;l · cheJ'D,lcal ]prqcess' alter the exterior texture or .
form .(r:. ir:y,efhubstance of ·a. product _in such a
:·~- 3.. '. If .he' is alr~dy ~-- VAT-r1'9itfere~Jtr's<fn
}~: . .
't'
also deals in goods··or ~f..qp'e.J1i~r:.i!Q.~Scl_~~ of [1
. which i$;". ~xempt, ·but. itl.;:..becom:e~ .,,......,,-.' F .. · ·t
a'n"t\,

..,,,,
~1 :' .
~>"!}' ·.' '.
~- .
~ai'lfl'hr.a'tt9 -~.repare it for .sP.e~ial_:u~e' to" Which·.
l~fH>,~l9_,ij.p.W;J,;1_~:~:.p,een
);:il fax~1.e .· ~r1 ... . . 1cona1tf._q_r.ii,(F.J}R'!:'No
. ~.tJn_l:j;V'
put in 1!~_ ongmal form _or. ·
.. 1~-2006, Sec: 4.111-1). ·
1.
_;..,· · tr-ansactio't'1 under a- new. 'oe;-_;,ame.r.idatory law . ;'- .. . . · · . . ·.
...: • · (MAMALA TEO. Reveiwe'r: sup(~r'.'48r.n 1 . · ,; De!errninat~on:of lQf)Ut-Tax: ,The ~r~sumpt1ve 1np~t
~--. - ·· ··-. · ' ., ·. · .' · · · ·r-.·· . J.; ·. }'i,e.,'!'tj1!x-shall:1;:>e..4% of th_e gross value If! money of their
~{ . p·~-r~~se: It ';s ·apparent :th~t-th~ trans~iwr:a.il~P.\l~-}9~,..:'.11f~B.if~};\f~l~~ primary.a~ri~ult~ral pr.oducts which are.,
t · credit . opera~ed to . b¢nefit. ,newly· '(;AT--r~Qj~Jer~d. -~ ui~d ,as :inputs to--t_t1e1r pro.duch.~>n ·_(R.R.,· No.__ ·16-
,i::- persons,.whether or. not t)'ley p~eviou~\w,aLcf~~es 2005,-Sec. 4_.1·11~1), · , . , · - · ·
J!._:: in: tne .ac,tjuisition _-of thejr ·, b~9.inning. in~~rito_ry. of Th~ i,irnount i~. er.edit.abl~ °iigai.rist,the out"p.ut tax,-of ~ ..
.;. goods, materi~[s,and supplies:' Dui-in1:J tha, perioa of :·. VA<T.-registered person- (R.:R.' No:.' -16~2005; Sec.
tram;iti_9n/·from .. ron-VAT t9 .y:f,.T_._'slaws; __ the_ 4·1111) · · · · · · '·
trai)si.,iooal_input tax·_cred_itserves _to allevjate·the- ·' - ' · .-: · ..
linpact . of the VAT on the ta~pa'yer (Fort--Bonffacio ··· · '
. . ~ .....
DReve/.dpme;:,t. CNorp ..1. 7.vo'6.·8.cV_omo"'t'isbsion2er2.0·o0f9,,tntl$ina,,I
. el(elJu,e, i,:,.~. o .. · .. ,, .. co er_,;·. .1· .: , · .. .
...
_'. ·
·,-----w---.I.X~H?LD·l1:1'G·
--·_:,:-_-:~-.
· .' .
. _--.-. . . _._..V. -A·. .......T...., -.-,··: -- . . . .1·. .
_
t_: r\: All.~V{e·d.
T111n~1u'o·nal"lnp~t.Ta·~:credi~':._.·.
Whicnever is'·higher: be.tween: ·
·..
· · : . . ...
.
· · .
.
.. ~
.Typ'e~ ot"Withhs>lding VAT: .. ,,'._._, . ., . . " '
;~ : · 1. ·. Two p·erc~nt (2%) of_th¢ yalue of ~he ~eginnir:,g t.. . Ofl. pi;lyments by-- Govem_m·ent(fjnal witht,olding-
·~,.- · inventory on· hand; or' ·' .. , . . . . VAT);·and . . · ., ... ·.· · .. · ·. . ,:··· · -·
2, Actu_al VAT paid on-: such 99od,s•. materjals: and . . 2. On ,paymen,s, to· Nonresl_dents (final w1tlibolding

. .
·:3upplies·.·
: . . . ··: . :-,· .... ': . . ·... ·
. VAT) : (R.R.
. No. 16-2005,
. . .
-S~c. 4.114-2):. . : ·

T,he arftpunt is c·redit~ble_a·gainst the output ta$c'of a Finai. vilithho!dlng VAt on . :

Payments. by .
VAT~registered -pe~on (R.R. .-No .. 16-:-2005, Sec. · , Governmel'lj · , . . · . ..
'.4. t'1'1,~1), . . . • Sale of goa,ds and serv"icE!s.. to government is s'ubje<?,t
to.12%.VAT .. However, ttie Gove'rnment is require~!"
to deduct arid . withhold a· final '\/ AT of 5% for its
purchases.'(R.R. No.
if3:?005, Sec. 4. 11_4;·2)..

2019 05.AN: BEOA LAy,.t CENTRALI_ZED BAR OPERATIONS '_'I '237

~.... ·.,
 .YALU.~~ADDEO TAX· .
sAN·BEDA CAW'CEN'T'RAUZED BAR OPERATIO"{S.- MEMORY.AID'2079
ISM asi-weitaw»sM@ere,_ ,n,NPl+Airi§in,· · nae+ 11+1t1M@¥A M

Note.: · B.eg.int:1ihg .' Jan0ary. · · f,' 202 { the·. VAT' ·Situation A:

withholding system under 'this subsection shall shift ·.. Actual ~ost ·.of goods of .seller is P89.60 (Pi30. +
from final to a credit~ble system (NIRC, Sec. 1.14 P9.60·1V): · ·
{G) as ~in(ind.ed by.·1'RP.,IN Law): · ·
· Stand?rd Input VAT . ,:> 7.Qb.
<;reditable Withh.olding of VAT on Payments to 'Less: Actual Input VAT ' s.so'
Non-Re~ldehts ·. · · . . . . l;:xce~s A~tµ;:il lnput YAT" ~
The !3ove'rrimept .or any. of· its potlfical' subdivisions, ·. -. . · ·· · -. · ·. ..
Instrumentalities or agencies, including GOCCs; as . · .• '*Since. the: taxpayer cannot credit. as input tax.. the .
wellas.private corporations, indi1;1idua1s;.estates·an.d . amount '.of 'P2.60, it. is constdered as. part o( :'1
'trusts,' i,vhether large or.. non-J°arge· taxpayers, shait .adc:Htion~I ex.p~nse of the seller. . . .
\.vi.thhol~.. 12% VAT, with respect toi . . . . . ·.. · ··
1 .. Lease or: use of properties. or- property rights '. ·Situ.ation B:. : ··:·.".·. . ..
. . ow'nedby'·.nop~r:S~idents;arid - : . . . . -t: .''Ac~uaJ cost ·of goods. of Seller .i$ P50.40 (P45 ·+:
· 2 .. othetservlcesrenoereo -ln tfie·,Phl!ippine·s by· P.5.40 IV): · ·' · · · -, · · .·. ·
. · · -non-resldents (:FU~. No. 4-2001; S-ec.'·?2).. . · . : . Standarc:11.nput VAT · · ' · · · P 7.0Q · . . ·.
~.· ·· t.e_s·s:,A'ctual lnput VAT. 5.40
Sta11dard. lnput Tax ·. ·• ., . . . . ·.Exe.ass Standard l'nput VAT* . ·. e.,1 40
Input .~xes .. that '.can· be -directly .a~rib,,$.fePle""~o/~"'":7--..,,.-"_., . ": . . .·. · . .· :'
VATabie. sales of goods. and · serv19~s .f~..:., tli_e·ij. f iI!t.tnt:e;~~an.credlt as· input tax P.7,00 instead ·.of
~bver~ment.\or .ar:iy of _its .. poli!i~Jl~l1b~i'1)gt~~~·.-:/g,e/ict_u~I ),,of. PS.4?, he.. ~ained from !he
. :mstrumentah_ties o~ a~en_c1esmclupJ.1.$_G~,?.!~<;s~fiall. · ·tra~aw1ct~"'fi'ep~~1'.40,s·recogrn~ed as d~duc!1on..
not be credited }:lgamst outf?u_tf'f~~~)3!,zys1ry:9-,JF.0~'IO·tt.l~, s~l~r:,1'expe~es 9r ·cost.s. . ··. · . .
sale~ to·. non:-G~"'.ernme.r1t entJ,_~_'f!J3\{~tFJ.{No. 11§~ -:f ·"w.r · ·"'\: ~~~\ . .. : ·.. : · · ·· ·
2005,S.ec.4.1.14-4) .• · '·f· ~J ,.'{.
l ·1\ ~ ·. ·\· .,:..-· .· ·~
· ·.·-·
, ~~';,,':.~r.;;~\t'~~~~~1~~f~~tg~ ~j8u~wtjl1t~~N01' .·.·· ·
. deduct ~nd ~1t~tiol_d· a fi_na Ybr·cl_~ue.at t~e rate:i Tr. . ;1'1:i . · . J... · · :1. ~.:.. .· · ··: · · · ·
5% o.f·th~ gro~S,Pc!Ym.~nt· /R~ ~9(j}.\~(SW;.~=::;;..._=:c.. ~R,v:i). ... ', "·:·.~: 8 · . ·.. · ..... · ·. ·
=. '.' . . : · ·. '() · ,; ; ~~~\ ·~ · f!Wtio,Fa~ aim ·,tf,:ro~VAT· . · .
?tarida~d lnp.ut yat-for sal_es. f,'g~&~.s~J'~ck~~~ Jl~~c: Py/,ehase·<1~f good.s. or 'properties. or
~overr,irti.~nt .· _or . a!1Y.... of·'!.s .
]ifi~I ~~bdi\lJ~19.Ji~~e~9es .. b,f., a .. ~~i'-registered .person shal.l .. be
. : 1~strur,ental1_~e:5 ~r. ?~enc1es ~~-e:ltJ~!n~ ~QC_G~~a"it~e-( i,· · • •. f'. : · : · · .. . .
ratabl~ ap.~ort1C!ped to. sucli ~~l~s ... ·.
:, · · .·· ."·"< . .' . ·. · _..- . · -·~~.,.,
~~o 1 '"[\
he~ of. :,the .a~~ual. mpu.t . "-.~t d1r.e6'1:t~·a~~~Tubl~~~~t~e ;~.s_ry~spr.upon . Gonsummati~n. of sale·
:'l" ··~ ~oW~!fl'~9rtat1on_.9f.go?ds .or properties;
· lVli'.~~he·.,n;,~~rter upo~ payment of. the ~aJue~·
. .'.

. {. \
. Output \/_AT.·. · · ·-., 1.2 !Vo ·""'""'·-~"'"'~ijodedtax prior·to the release of the goo9s.from
. Less:'Stanc:lard.lnplJt~AT . 7 % -- ... ·,- - .- . · ·. the custody 'Qf·the Bure?ti pf C~.stoms; .
·Final Withholdin~J'VAT .. · ·~ . · 3'. To·.t~e .PlJroti~i,er qf i;ervice.S' or th.e lesse'e or
· ' · · ~ ..... ·· licenSee ~pon payq1:en('.Of ~ttie' CoinP~n~tiQI'); ·
·1f · actual 'inpu,t .. VAT· attdbtit~ble · t6.·:. ·s~le · to·~· ·rer:1tal;· roy~l~torfee,: .. . · .
·goverrimenl.'ex~eds .7% Qf."gross paym·ents, 'the-·. - . 4. To the par.~haser of real property un<;ter:.·., .·
·. ~xces.s m·a·y_form part ·of th~ s~IJer:!s.: ~xpehse: or · a: basJvDeferrec;l: Payment·· ·sasls. ..,. · upon
cost. . . · · ·.. · .: ·,. · .. · .· . ·. e:qns~m~.atic;ri ofsalE/ · .·. · ·· ·
.
.. :, .. , · · ,. .". · · . ~. ·, ,. · · . f
· If . 'actual input . ' 'VAT . attribu(able,.. to,. ~?!~ ... to
. . · · ·.. ' b. - Installment Basis· ....: · every ins.tallment·
. ' . . ' payment (NIRC, S~q. 110 (.2)) .
governir;ient is less than 7% "of gross payments, the . · - . .. · .
"Qiffer(;!ncam~st be closei:!'·(cieducted) to ·expense,or:. . '.
. cost.(RR. .No_. 4~2,?07.,· Sec, 22).''· ..
·· .. ·.
Illustration:
_: :Sellif19 Price, (!11clusj\;'~·of.VA,.T): . · · .P11'2.00 ..,
. VAT withheld by the gov{lmment: ,p 5.00· r·
St'andar~ lnpvt VAF(S.IV): .p .7,00 ,,

'·

23a·· 1 · ~o~s SAN BEDA u,..w cENl'RA_uz1:io BARQPERA T10Ns

 waswaw. ,aw
VALUE~ADDE.D-TAX . .
· SAN BEDA l.;4\"'. GENTRAUZ.ED ~R OPl:AA TIONS : ME!,10RY AID 2019 ·

.. Ri;qu_ired Supportlnq
Documents: - {ATP) was "secured by the taxpayer for the VAT
. involce and official receipts. (Emerson Electric. (A~iaJ
· Ltd. ROHQ v. ·cdmrilissioner of Internal Revenue,
. C'fA"Case No. 8470, October 1, ·2014). ·· ·· · . ·
. .

Strict compliance. With substantiatlori and invofcirig

.- .: . .. . requirements is necessary considering VAT's nature

.. and VAT system's tax.' credit method, where tax
payments are. based on output' 'and ·_input taxes: .and
C~sl'.\/Defe_rred.pasi_s P~b!ig- . Instrument·. '(Ii~.:· . .where the seller's output "tax. becomes tlie buyer's
.deea.·· of absolute·:·sale., ·. input tax that is available as tax credit. or .refund in
deed. of. Coriditionai. SE!fe, ,: the ·'sanie transactlon, . It-. e,ns1;1r.es :t),e ·.proper. ·
.. ~ : cori(ractl. · ,agr'ee.m'ent .to oollectlon of -taxes at 'c!II· staqes of, distribution, · ·
· .sell, :etc.) together with the·
.. facilitates -computauen' of -tax "credits;: and provides.
VAT invoic~ fo~th·a entire.
·selling·p"nc.e·and Non-VAT · · accurate audit ·trail cir. evidence for: BIR -rnonitorinq
ORs for:. the ·.fnitial. ·and . . purposes> (Team . Eriergy . Corporeiion . v.
succeeding-p~yments_· _... · : Commissioner of Internal· 'Revenue, G.R.. · No..
197663, .. ¥arch 14, 2018). ·
Public instrument and VAT · ·. · · <. · •

OR· for every payment · · -~·. ·. . . · · .. . ·

-:i~~~~!s ~f~~~~:~c..
. . .
0
.
-~A~_rnt. . · . · .:.ftEi.2:~-
;,_ · t··<l
·-. _ llEFU·E. N·ti.o.F:iI.·~x_"<:REDIT
. VAT
OF
.
. . •. · · · . · ·. 1 · . ·. :;_·. 1 • • XCESS NPUT''
Input '·tax· . · on· · Import entry. or ·d.lhfl'r-' ~·-:-~/.r, .~·· · ;--. ·. · · · · ·
·. importation ot goods . equivalent · . .- doc1;11¥ieti.( n;;-.: :.i:i1:t!,.:i1/t,,\:-=-:=>1} . · ·, . · .
shA_OT~ing.act';/l~rJy'rne1:1rtt odf~'. ~I· lnsta.ric""ei\;V.:~. r.e .c.Jaims fo~ VAT refund/tax credit ·
t\"' 1nlpo e •• ...;-1.1 · ·
V .· d on . :<;'.•:· }•1.-.• . · . ' . · . . ·. .
·l(•\
·
.. /l . , · "/;;. roaY; be av~limof ._ . .
-~~0 _5 ... J->f,':'.~.,t <'~
_·.1. _·zero-R,ite"d,~d ~ffe_ctively4er6-~at~~ ,Sales:_
. Jran~ftiona(inputtai:c
. .. . -
•lhVen\p(%.>'-'of ')91?-P.9.~ a~·'~}
·.s_hi'il't(~.<!: .~~~ailed list.~~ ·
. be~()°'fjm~1.9J!'l~ Blf.· ·
r~! · s.:
·'.?. 9e~s~~o~1of ~usm~s~ .... · :
Ce~,tio~of T ~1!=1tu_s . '. · · ·. · .
r.'~J . . . ,. ,__..,. _. ~-~:sr.~:=-:""':'.:..,~ . . · ·
Vt ., .
. ·· ·
-.

. . •. :'·. :. ,...~·:,it-: ~' •· lr:1 Note~T~-~~·.9I1w:1opµt t~:cannot be .qla1med 9~ a

t!i~J.J:~::,;g;:,riled_. Re9~,F.~~$?~,>.-. t- J/ ·_ti[:·
.r-~~u~.dor cre'd_it-{11:'JG_L,_E=.S; s.?'a at_ 31,6)_-.__ .. ~: _· . _·_ :'
·input:, ·tax-.:. irip1:1t- . ta°l< _·. Monthly . . ;l, .. R&°ffiit.tance. t,i'l,?,~(Q·Rate~.and· Effect,iveiy.Zero-Rated . ~ales ._of
·· '• •""y--'" ., '··,>•G 'w::-n.P. "'. rt• S I . . .
fr.om- ·P~}'me_rits'made· ..R~tum: of'
(N.i!ilue... .Actil0:a~.!'.~~,,c~'t..~!li.:~e · l~S ~~ _erv_ces:. . · .. • , ·
to rion·r.~stdents(such ·Tax Withhetd[ (BIB~)t~rin. T? cl~,~ refu~d or.!ax_c'.~d1~;_cla.1,nant_ must comply
as for. ·. -services, : ·1600) flied· tiS,-·tf\e-.[~Sid.en,. . With the follOWl(lg ?r:1tena, : ·. . .
re~tals: °:~ro°yalties):~_... . payor in b<;1h€!lf'of!t}Ye.ni?n· ..· ~ ·.. Tt:i~ ta?'pay_er1s.yATregistered; . .
re~f{,len, _ ~ · .. '. evfpericiog_ .··. 2·.-·:,The. ·t~xpayer~ ·1s .. er,gag_ed in. ·zero~·rated. or··
. · remittance. of VAT··· due .· . · ·effectively-zero-rated sales;. . . · -. -. .
.. · .· ~hich. ~a~ wit!"lhe~-b.y-tM '.. ·:.-'. ·j, .Thl!J:inj>utt~~es ·are clue_-o:,: paid; : .. ·, · .. ·· · .
· · pa~or: -· . · . . · ·. ·. · 4·:- Th~ inptit ta~es are ·not tra'nsitio.na! input·tax!,3s; . . .
·· · ·q, . The·-input tax~s have· r:iot been· ~ipplied against ·.'
·.Ad~a·nce.: ·_yAT. .... 'bn Payment ··order· 'showing .. ·. · . · .output ti;lxes ·during': and in the succeeding . '
. sugar payment' .6( the' 'adv~nce. .. rt · · · ·' · · •. -
VAT . 6. .. j~:
i~;~t tax'es. cl~fm~d ~ttributa.bl~ to -~er~:. ·. afe-
;;;. · · (R.R: No.. 1 f3:.20Q5,. Sec; 4.110"-8). · , : · · rat"~d or effectively Z!:lro-rated s~les; · ·. ' > . · ·,..
~-· - ·
1
. ' · · : ' . · : · '. . . 7: for· zero-nirted.. safes. Linder-· S~cs·. 106 -(A)(-2)(1 ) ..
{ .. Ail p'urch1:1ses covered by· invofces...9ther tfi'<;1i'l a·VAT. .. : :and (2};· rn6:·(!i3)-; a,:id -fos (8)(1) . .and -(2), the
l,°. · . invoice· shall not b~ .entitled to a· refund.of ihput VAt . acceptable foreign cur.rency exchang·~'proceeds·
. (f',.t/as··' ·Copso/idfited ... Mining . and. .. Developm_en{ . : · have· been duly a.ccounted for. 'in·. acccirdaace.
!,·.' •' Cbtporiitidn v._- (;ominissibriet.of lntit_mal Revenu~, ~ith..BSP rule.is a_nd r~gulatiohs; · · . · . ·. · .
{: .-·· · G.. R. 'No. 145526, March 1-6,' .200.7). · . . . . 8; Where there. are both. zero:rated .or effectively ..
.;_~ . . : : ... ·.·. . . . . . . ... . ' ' . .' . . ' '. zer.o-rateq.sales ·and t~xable· or exemj;>t sales, :
[I-- The co·mpany'.sfailure. ·to substantiate· it!'l:zero~rated ···.'·and the input taxes cannot be· -dir~ctly .and.
sales with .duly~ registered VAT· ·afficii:ir. receipts·., .. entirely attribulable to any ofthese· sales, the
·re~ulted irr .the. denial. of ,the ·application for refund. input lro.<es shalr l:;le 'propprtionat~iy allocated .on
VA,T invaipe ahd: official receipts _must ·be duly the basis of sa_les _vo_lum.a;. · .·
~.· register~dwith the- 81~; )he prpper -authprity to print
..
•.·
.
• • p • •

I~:.
:t.
. '2019 Sft:N_BED.A. LAW CENTRALIZED.BAR OPERATION$ I 239

-------------------------·-- ·- ··- -·----

 V ALU·E~·AD.DED . TAX· . .
SAN.BED1,JAW.Cf.NTRA(/ZED BAR OPERATIONS.,: MEMORY Al'?.2019

9. · The claim is filed. within. two years· afte~ the
. · close ofthe'taxable quarter when such sales. ·
: were rnade ·(in contrast'. with .the period of.fl ling
an action to recover taxes already paid whlch is .
. reckoned.frern the dale of payment); and· .
10. Duly supported by VAT invoices -or receipts in.'
accordance with-Sec. 4..104-5 of RR No. 7'-95
. .i~ relatio .n to .. Secs. 113 and· 237 of the NIRC
2. Jud1cla1 Claim .
·Ge'1eral Rule: In case of full or partial denial of \he
.claim for tax. refund, the taxpayer affected may,
within 30··· days from the .fe.ceipt' of 'the decision
. denyh:ig the claim, appeal the . declslon with the .
amended by TRAIN l.ew}. · · · . . .
Court of Tax .Appe~ls (NIR.C, · Sec. 112 · (C) as

. _(R.R. No, i6-2005, Sec. 4.112~1).. . °NQte': . The . CT

A . Cha.rt.er provide;. that . A shall .
exercise an exclusive appellate jurisdiction to review
ct
Rules on Prescri'ption qf.VAT.Re.fu.nd(Tax. Cred.lt' by appe~I inaction by .ttie ·Commission~r ..of Internal
· · · · ·· . · . ·· · · ·· · .. Revenue in :c~ses ln_v~lvlrig ~i~.pµted .as~essm.en~s.,..
. 1. Adml~ist_ratlveCl~inf(With'the:B!~) · . . .· refunds of. Internal .revenue. laxes, fees . or other
· · The administrative claim is filed within. ~9 -(2)· years . ~h.arges; . penaltles , j~ · relations thereto, -. or · other
: aftet tire· close of the taxabie quarter when the' zero- ,-.rpatte(s arising under the.Nationat Internal 'Revenue
rated or effec(i.veiy,:zero-rated sates.. were-madey.·T.t:ie Gode or other. laws-administered bythe Bureau of
CIR h:cis.90 days fr:om·the,date.ofsubmi;,.sion of~e Internal Revenue, .w.he·re the. N~!i9r.ial. lntem~I
official receipts or .invoices and other documents in · · Revenue Code .provldes .a specific. period of action, .
. support -,of -the "application· (NIR~.· Sec. 1_12 (C~-~~,.,...=-:....t~~ich ease the: r~~cfio~ · shall be deE:med a
am~m.de~ ?Y TRAIN Law) ... · . .
· .
.
.
/<~
TLJ, .--~-.~m.J!"tJ?.,A.~No:
.-('. I;.,
?2?2,.~~~: 7..(a)(2)~: .
· ~.J JI -~
, .. . .. · .:
·· ·
~ote:· Should the Cornrnissioner !i'19?}Q~t:\th~·gr.a~~~hi. ~~l;>sf~imc;,~. of . the 120,+30'.. day. period is
of ref~nd

·
!~-

.
/0,g·
~ot pr?per. :th~ C~JTI)J:1\SS,\~~~u~t . . mafl'{l'atg_..Y ~r~~Jurisdictional . (Qommissiof}er . qf
. st~t~ -m w~t,ng__ the l_egal .a.net f(ct~a~f~~F1nte(';l_iti}~~(~ue
·. ~en~al. · .. · .... ._ .
ll "'~·;,,/ H
f. ·. 1m. ·'tr·
. .1.r- .5~ J1:
'i)<-i·Tole_do Pow_er_·Co:, (}-_R. No.·
{-$~~75~U~f{S{4;~2q1s).; _
\r. ~\
~ .- · · -
The ·two-~ear: prescriptive i:>7fi?_d ref rred J_o :in S~c.·,A:~ T,he. 30-day. pefic.f'd~t~ file a ·judicia·I cl.aim. with the
·. . : ·-·.

11 ~ .<J:\) '.~P.ph~ only.-.to:. thr// f1h;!S. · f .-adfll(A~~~h~~~ :irr.;)...cr1.1;:-,nee~d'

1 · notl~~~ri_ly fall within ._ti,e· 2-year
. 9l?!ms -~'~h .ttie ~IR anq nf._i&st)rf ,ftllng pf J~~rJ~? ~mr .r@eriptte J;>eri~c!. _ a~. uq_ng· as. ·the_. a~ministrative.
claim.~ with the. _CTA .. (CJ.·.mm1ss~Qne_r'. ~ lntem~ ;,-. ·l~IT) · '!~.· fiJedi_~~~}~m . · the ·2-ye·~r. periqd
: . .·~;~;;~~F;;,,;;,;. ·. 3)}~~ f~~·
1~~~~~- ~~-No~~A.Mt!!j°iJ:~tsu,:~a. a.t 50~!', . . . . · . :
.. . \\.\' D\ ?J.\'~Ji·J~~· e_;;! ~yer. t,:an ~lits adm1~ls.tr~t1ve ~!aim tor
. R.¥,·C;· r:,o., 5~-20.1-'! _requ,res~~eta,t~a·~\iW e~!c.CTJ ~Jjf'....c!l'.or> c~~~t-o'f \:~· .a!,_ant.time w!thin -th~ ~o-
.c.la,.m..with ,compl~te .supp~~Q9 doc;&~ept ~·:<e..)~1,:9"'Y .. ~f'wi§scnpt1ve per~~cl.· If ,t file.s Its cla1cn <m.th~ la~t
<;1ttest· ·~h.~t .h.E! WII~ !1~ · I~,:we~,. sut:?mlts._any ~~' ~~~~,_9J·sai.<f' perio.d,!it ·is· still 'filed 9n ·time .. -Tli.e CIR·
?ocu_ment t9 pr9.ve ·~'~ ,c:1a1m~ ·:F. h~f! th~~ ••"'13~J.:{J;~fa"h~vef'wo-.. da~! .(Now: 90 ·days). from ·~uch filing
IS b~~r.ed,fro~ ·s~bm_1tt.mg.~ddltjo~a ~~~~j.S°'~~~~af;Gjd~t~'.:,Sl~im, I( thi,PIR decid.~s' .the ?lai~ .on.

·. . . . · · ·.
tu~
:·. h_e .hc;IS filE:d_
·
admm1stra_t,1v~.cl~l(ll ...
. · · · . : : ·, _ ~--
,~VJ.. 'i\ ;;,1l~~-OTh_?J.Na\"{.:90'."H1~Y: or.does not dE;CJde. ,t ?n
l\r ,{h,l$1;':1To~ · taxpayer st,lr. has 30 days to · file ,ts
J~e rec~onmg of' the J20-d.ay · .per.~d.· h~ ·:·l;ie~~f~~cialclaim with the· OTA; .:otherwise; the. judici~I·
· w1thdr~i.yn fr?m . t.h? tax~aye..r by f:tM,C.. No. 5~- ... .claim wc:,ufd . be;: pro~riy 'speakfng, dismiss~C, for
,, · •· . ?0~4, ~i_nce. •~.r.eq.1.11r~s hJm <:1t ~'1e.bm~ ..t:ie file~ his. < being fil_e~-out ofti.me.anq·ri<?t,-a's·.Uia ·cTA·l;n- Banc .
. · _cJ~1m. to complet~·,h•.s supp.ort,~g do<:ur.nents.. ahlidr· . puts. ··it; · pres~rib.ed.·:· '(Comrilissic;m{r· of· lnte'!1al
. attesf _that he. w,11 !')o l~ng_er submit. ,any . ot . e_ :: .· Revenue -v. Burmeister -and. Wain 'Scan_dio'avian
. ?OClilm~nt to. prov~·~'~ cl~1 r:n: _Further;.. the.·taxpayer.· . . Ccfotractor -Mindanao, : Inc., G.R.. No: ·.190021;
,s·barred f(om subm1tting·;:id91t1onal do.cutnents·afte~ .. Oct b··:22 .20141. · · : . · · ·: ....
tie has· file'ct his ·administrative'claim. The foregoing,.. • · .. 0 er: ·.'. . t · · . . . . · .·· . ·. · ,
'!l?SU.a,n.~e.cannot b~:·appit~ci.'retroactlyely'.'si"!C~ It-_. ... (Pleas~ see disi5ussfo;.~.,; p;rii:Jd,·~f 1;;,fi~ ·~ppeal fbr
_ imposes .. ne~ .. <,>bhga~lo~~- ._up~m. ~axpayer~ _In.-:.· . ·refund of other' taxes in Remedies. whioh inust be
. . ~rder · .. t';) :;perfe·ct· .the.Ir ac;lm111istra~iye_· .cla.1m . . , : 'th. the e · limit) . · ·.· · ·
. ..... (f!ilipihas.' Total Ga·s, . lflc.. . v.. ·. ·Cof!?missfon~r of · · w, 1~ . 2:-Y ar. . . · · .
. · · . tnterQal ,R_evenue,,-·G.R, No, .20711;?! Pecember, 8, . . Pridr t6:suc~ :·p·e~iod, .th'~ CTA 'l:ias
. 2015\. . . .... ·.·.·.· . ·... · · t•
no co~'p·~t~-~~e.
'/ with .all due 'respect;.: to !3nt.ertain . the . ~ppeal.
Effect .of is1R;s 'failu~e· to act. up<>~ the cl.aim · · :(Miflda,nao ·. //: .. ··(3eotHermal 'Partnership · v,
within. 90~~a-ys:. Any official,.· agent, or· employee.. of Coi'nmissione; of Internal Re•,lenue, CTA ·EB No.
the BIR to act on the application wlthln the ninety:' ·95~:re: CT,1 Case.No.' 8247, ~epterr,bei-1'6,'·2.~13).
(90)-day p_eriocfshal.! be ·punishable unde.r·Sec. ~69. . ..
amended by T~A/N
of the NIRC, as anie.nded '(N/Rc;·Sec.· 112 {C) as.·
~aw). . .

240.
.. 1 ·· 2019
. SAN .SEDA. IP.W
.
CEf'!JRALIZED
·.
BAR OP~RA
. TiONS.
. .
 VALUE-ADDED TAX -
SAN SEDA LAW CENTRAllZ~D BAR OPERATIONS- MEMORY AID 2019
The failure of a taxpayer to wait for the· decision of
the Commissioner of Internal Revenue or the lapse
of the 120-day period wili render the filing of the.
judicial claim with the Court of Tax Appeals
premature (Nippon Express PHL Corp. v.
Commissioner of Internal Revenue, G.R. No.
199907, March 13, 2013).
Exception: If the taxpayer relied to f31R Ruling No.
DA-489-03 which expressly declared that ·the
"taxpayer-claimant-need not wait for the. lapse or the
120:day pertod before it could seek judicial relief
with the CTA by way 9f Pelition for Review,
Herice, from December 1 o, 2003 to October 6,
201.0· which refers to the interregnum when BIR
Ruling. No .. DA-489-:03 . was · issued; taxpayer-
claimants need not. observe. ·the. stringent 120-day
period: buf before' and after said win.dow. period, the
mandatory. and jurisdictional nature of the 120-day ...r..\
period remained (CE Luzon Geofhe_rmalPower <;;9.:;-,1!~{ .
Inc. v. Commissioner of Internal Revenue, 1
·Nos. 200841-42, August 26, 2015). ·
Gtf/..l?,\ ·.
t;~?{/.i.J' -,1
i · '.i,,,.::·~ ;, incurred by a taxpayer prior . to its VAT
In Taganito Mining Corporation v. Cf.R, the ,Po
held tnat reconciling the pronouncernents-jn t :· ~ · · · ~'tin·de~~f
Aichi and San Roque cases, the rule )\11.ti'St"therefore.. ;1
be that during the period December 1'Jh 2Q03 (wh~-''~
BIR Ruling No. DA-48_9-~3 was iss~~f ~9;,;9ctober ~
6, 2010 (when the A1ch1 ca;;e,·'.~<:1$' prqJ;il~J9ated\ ~,1~
taxpayers-claimants need- noh?.'oserv,13,.!_He120-day., g',.;i
period before ii could file a J1:1t:1tcia.i,»:c;!af".§3tor rf.l~d i4
of ~xcess input VAT be.fore ·m~ C1:f:,~eforc~r.td 11.,~f
after the aforementioned period'f4E::;~_.q~c~ber1P,
200.'3 to October .6, 2010), the o'b$ervan<lJE3, of the i/
120~day period is mandatory and jurfs~ictipt;1iilto the f\:.:::.~;}f}_(ey_,;.nal Revenue, CTA EB Case Nos. 7650, ·.
filing of such claim (CBK Power Comfjapr-Limit~--.v...;;..;;:;.:1.!'!)1Sfl&.D.11J!II.if,
Commissioner of. lntemal Revenuet G.F;l;'.;l'f:Jo.
198928, December S, 2014). ·. \7p.,._J'{,
~:.,;._,.,.,.,, .
Notes:
a. Failure to print the word "zero-rated" on the
invoices or receipts is fatal to a claim. for
credit of refund of input VAT on zoro-mted
sales (.I.R.A. PHL, Inc. v. Commissioner of
Internal Revenue, 'G.R. No. 177127,
October 11, :!010).
b. If engaged in transport of passenger and
cargo by air or sea vessels from Philippines
. to a foreign country, input laxes are
allocated ratably between zero-rated and
non-zero rated safe· (subject to regular rate,
final withholding VAT and VAT-exempt
sales) (R.R. No. 16-2005,. Sec. 4.112-1).
c. In a claim for tax refund or tax credit, the
applicant must prove not only entitlement to
the claim but ·also compliance with all tho
documentary ~nd evidentiary requirements
therefor (J.R.A. Phi/ippfne's, Inc. v.
Commissioner of Internal Revenue, G.R.
No. 171307, August 28, 2013).
2019 SAN SEDA LAW CENTRALIZEDBAR OPERATIONS I 241
----------------------------
- -·. ----·
d. Sec. 11 O (A)('i) of the NIRC- provides that
creditable input taxes must be evidenced by
a VAT invoice or official receipt, which must,
in turn, comply with Sec. 113 of the same
law, as well as Sec. 4.108.1 of R.R. No. 7-
1995. The foregoing_provisions require, lnter
alia, that an Invoice must' ref!ect, as required .
by law: . ·
i. the Blfl Permit to Pnnt; ·
ii. itie 11N-V of the purchaser; and
iii. the word "zero-rated" imprinted thereon.
, In .this relation, failure to comply With the said
invoicing requlrements provides sufficient ground.
to deny a claim for tax refund or tax·credit..
.
of
Secs .: 204 and· 2~9 fhe NIRC pertain to. the
refund of erroneously or illegally eouectedtaxes,
while Sec. 112 is the appropriate provlslon of law
for claims"for excess input VAT (Comrriissioner-"iJf· ·
tniemel Revenue v, Das,'l Engineering PHL, lnc.,
G.R. No. 184145, Decemoe: 11, 2013).
-lnput VAT attril;lutabln to zero-rated sales.
·
.--0rr:~i,;_!rati@.•may not be the subject of refund.
112 of the NIRC. one of the
cond.itiom,A{~rentitlement to refund or tax credits
of exces%~11,Juti/ized input tax from zero-rsted
salf!S if t~a~the taxpayer shOlll~ be a VAT-
reg1st~f.ed taxp~yer. Thus, to beentined to refund
of inp.Jilt V,p,T, th.e taxpayer refund-claimant must
pr~~ef;·~~.f,:jt,:-,-w~.· a VAT-r(:jgistered taxpayer
during(!,_~;Ji't~9d"it incurred its unutillzed input
:.7 VAT _- (JP"""'M'orgarr Chase B~nk, N_·A: - PH
Customer Care Center v. Commissioner of
7722, March 13;· 2012). ·
· ·
3. Cancellation ciVAT Registration
A VAT-registeredperson may apply for the issuance
of tax credit certificate for ahy unused input tax
within 2 years from th'e• cancellation of.registration.'
Such tax credit certificate may be . used in the
payment of other. 1nternal revenue taxes, The
taxpayer shall be entitled to a refund if he has no
internal revenue tax tiabilities against whic:;h th~ tax
credit certificat.e may be utilized (NIRC, Sec. 112 (B)
as amended by TRAIN Law; R.R. No. 16-2005, Sec.
. 4.112-1) .
Cancellation of Registrat!on may be due to:
a. Retirement from or cessation of business; or'
b. Change in or .cessation of status (R.R. No.
16-2005, Sec. 4.112-1 (l!)).
Notes:
i. In the ·case of .claims for· refund of
unutilizod VAT on account of cessation
of business, the two-year period shall
commence-from the date of cancellation
of registration of the taxpayer, and not
-···
 -~~~=:!ll!lllilm ml!lm ill!lllllm!l_lllli_lll!I_Glia_llal!:ll-illl11111-t:1111mi:sa.m11r.1~ZII:*'!
. ·.~

VA-LUE-A:oo.ED TAX ,. ·-·~

,,.
··-
SAN SEDA LAW tENTIIALIZEOOAR OPERATIONS:- MENiE!~Y.AtD 2019
· 111?4&1 M FIE I I AR MM ffiftwl .. ·

. from. th~ close .of the. ta~able quarter . Except: Franchise g·rantees· of radio and TV
. when the sales were· made-'(f\ssociated . · broadeastinqwhose annual gr9ss · recefpts for.
· Swedish. : Steel$. : PHL., .. Inc. . 'v the preceding year donot exceed P10, 000, 000
Commissioner of · Intern et. Revenue, ... whose -option is perpetually. irrevocable.•(R.R ..
· CTA .Case No. 7850, August 23, 2012). · · No. 4-2007, __ Sec. 15).. · ·
· ii. Sec: 2·3.6 (2-)(b) · of the NIRC; as
amended provides that the cancellatlon Registration. is ari . indispensable requirement
. pf registration .will be· "effective.from the . · under cur 'v AT · 1aw (,Commissioner of Intern?.~
first dayo! ,·the follpwfng
.· . .
month .. .,. .. . Revenue·v. Sea_gate Technoioqy PHL,. G,R.' No,
-_153866, · Februery. -11; 2005) .. lri .otner words,
Wllere -t~. file. the · claim·: for .-refund/ta~. ~redit rion-replstratlon as' a VAT.. person 'does not
certlffcate: . . . . _·. .. . ·. : . ·.. . . · exempt the se!ler from value addedtax (output
Claims'fo'nefund/tax. credit certificate shall b·e filed . · tax) lia_bility. · Based on existing law.' and
with . the. approprlate Ell'R Offic~·:L?°rge: Taxpayers · requlations, the.' seller.who did not register as a.
· · :ser,iice (l TS),'or .RDO ~a-ving jurisdlctlon over the· ..' VAT. person cannot claim 'any inpuf tax passed· .
. principal place of business of·tlie taxpayer- (R.iR. No. on. to him. as 'a .. penalty for non-reqlstration
. 16~2005, Sec. 4.112.-1 (c)).
. ~ ~ . .. .
.· · (MAMA LA 7:E6, .{:?evie.wer, supra· <;1.t-508).., ·
;
,.
. . Mann~r·of gi;,iing_re(und. · .. : -. . . ·,.:..-~-=-=,.The· registratio~· .of income, ,t~x 'as' ·a tax, type
.· Refunds shall be made upon-warrahts d.ra~,.15y{he-i!' T'
)\"':°ij~~'- ·no.t· .autornattcalty .carry with it . toe
· ·Commis'siq~er · -~r · . by · hls . duly/~ut~oy2;edIL.,;.1 ve~i~tw'ti,Q,n_of YAT ..antl/or percenta9':}_ ta:X c;IS a
. -repres~m:allve _without · t~e rie.ce,;;fifC·~t.tf,~gg~~~:;-~verp,~~1stered tax. _type. (R:R; No .. 7-.:2~12,.
counte~s1gned by·_the G~airm-a.n .9:2Me -~,9~1is1on . · d';~ · . " 'Se..;_ ~,fF
· ~ .·. ·
of Audit (Nl'1C, :Se_c .. 112 (D) as(am-e:,·'
Law) .. ·. · · · ·... : · . .
)-1@
1iY:,,IPA-fN=-T~.--..,,,,,."" . :.' '--i(.,. . ·
-f ("'A_,.,,. . If:· , 1m< 7°'""' w· Any'lerso·':l,..w~-.,.a)ntains-? ·head. or_ f'Jain office
. .. . ·: .
. · · · . ·. · / ~/ . ff.: ~· -~
and · ran'ati~.ii'!_ -~_ifferent places $~all. .re~i~~e_r .
. · . Qua.ntunyo~ Evid~n~e 'to_ ljrov~ c;j~im.fpr·r~~uii~ t ,: -~itt he ~~-~ w,,)1~h.·has _jurisd_idion over·tl')e
. or· ,cr~_d1t: Piepan:<:fel:anc? Pap7Ei"'.1~erio~r~. · . j51fil:e, where,n:t~efilfllrl- c;ir head <Office _or.branch,,..
. (;o,:nmul'}ications· . Servicfs';"l'~p.r_ l., . ffnc.. ~"!%~... · ~?;,'~{:_· ~~?~l._l3:~.!' ~ -~separ~te . and · ~ist.t?_~t.
Commissioner ·of fnt'j)m~. R~-lf.. f!Ue, C\R.
M~~e~t~_P,hshmerp.-sfl~!ljn:1r~n~my branch ?r;fac1hty-
17.212S/·.Sep_tember_12, 20Q8~{~1 . · .. , .\_-_t2--~_:_~h1r~ale.trranJa,.ft1ons-_ occur. Each_ -VA!-
. , . ·. · : .· : . \..-if"\. : · ~~ \. . l"d? ·1· !~f'·~!;}J;,te,r.e'd··~JJl's~!(~haU·be'.,assi_gne~_.only.·one .-·
· · ·. ·- .. · · · ' \..ti ~:, · ·. ~':~,\ ':. ,~J,'A~~er
lif~ntific~jJon.Nu,nb~r ~f!'I.N} (~.R: No. ·
·
· · .. \
.. REGISTRA-«'IO~...
-" 0'''-"'·
:-,. .:,
·1t ·~:.G:9'
· ·.,,f:.A~j:2-:ec.
· · . ·zs,
9.2:/6-1)..
;! · .. · · · ·. ·. ,· .. ·
.. ..

: . . ·.. . . · , · . ,' .,'~ · ·,.; , .. · . . ·"' · ~~.;:-i{\?:E ~Ti, per~onfaho_ .~eco0es . ·liable :.'to. _ _'be
: · · .. · .. _. . -~·-'. ..... ··~~~~~1?fete~s!Ja!Ireg~ster W!th the _ap_p.rop~1ate-
Regi_stratl9n... ~~ a._VAT ~e._r~°._n."(N~~c/~j91"~~-=''''~""":''-~reve~uJ.'t ~ttlce (l TS -or RD.O) ~hi.ch· has ..
. .(~! an.d 2.36 (HJ) .. ·. · . .. ~-- 0· 7'.-· } A p.._J{?MCil1.S!ier:i.o'-(er.thehea9 office or'branch ofthat
·1. :Ma"!~atory,-:-Ariy p_erson, -w~~-i~ th~.Q~.of _i.VJ~~on and,shall pay the i:inou~_i·registration·fee
. . ,. · tr'.':l_~e _or ._bus1ne.s~_;. ~ells; b.art.~r~. ?r ex~~ang<:t~· . . presc::ribe~ (MAMALA_TEO, R~viewer; sup~ at
, '; . .. goods or._ prOPE:.rt!~s; ~r--_er;~~~es·1.r.i·~~ ~.al~_.or 5(}9)..· ., · · · ·' .\·
· · exchange of -services,·1s required .to:reg1s_ter-tf: . . .. , ..
· .a. ":His gross ~-~les. or
rec~ipt~-for the'past_.12 . · ..• .., .
. . _.... : (l"ionths,.. p'ther....thc;1hf fhose:, exe.rnpf' unqer;. . ·_i.
·. . .. Sei;:.· 10_9 .(f\): to (AA}. hay~-,:~xeeeidecf-.f>3;: tNvotci'.N(lREQUIREM.EJ;'t'r's'·
b: . .. 000 coo·
Tti~'r-e .
or .. : . ..
aie .reasonable
. . . ·:· ' . . .
grs,und°s
to.' belrev!:)
---·--·----...,.,.· ---·-,------·----
. 'that ·his 'grass_-sales or receipts for. U,e·.next 'A VAT~Registe·r~d p'e~rin stt'a.lfi~s.ue: .
. ::· 1.2 n;ionttis, other tlian thos~ E3xemp( l!~der 1.: VAT·:,Invoice :_...::· · fqr: -·every: sal~, _barter .. or
.· Sec: 109: {A(ito:. (M),. y.,l11· exceed_ .~a; '·exchange ·of goods or· propertil;is. ·. . . . ~ "
'.000,QQO. · ·. ·. . ... :·_ .- .. . .. . •.. '·: 2.- ·VAT Official Receip_t - for .every l_e_ase.o(go_ods·
·or:· p'ropertles ..and"'for- ~v.ery.' ,sale, barter_ or.
-;2.· Optional . ...:. /.li.ny- VAT.-ex·empt..person may.elect.. excha!"l9~.or'sE3r:vic::es '(NIRC, Sec. 113 (A)) .. · .· ;
. . '\ ... ·· : . . .·
··. te register as ·.a VAT persorJ by' p_ayfng. the .
.. annualfegistrationfee. . · . · . ·: :· . ·: ·: .. Only~VA.:.r ·-r~gistered 'persons·.ar,e.. required print' -to
i-ie ~hali ~ot be entitled to cancel .liis _regrstr-ation
ttieir ,ax:.
lde_ntiflcatfonNu~ber..(TIN) foll<Med-~y the.
word 'VAT" i'n .their invoice or official receip't, y.,h1ch
a
. as· VAT.per~_on· for thE(next 3· years from _the .· s_hail be·:c9!1sider~d-ttie "VAT invoice~ c:ir "VAT oR• .
.. · quarter when t~e election.~as.maqe. · · Alf purchases noU.:overed by i,nvoices/receipt~other

· ?42 2019 SAN BEDA L.AW CENTRALl~-ED BAR _OPERATION$.

 ·'
~·oiamdi .. 111mm11111i111m11191 .. llllllS!lll!lll .. 11i11.. _.a_l!lllamma•wc:m
...._ .....~MU11111111mimim11:mpp~~,~@mnD11 ...m1:a:a11111111:1:~::::l~~~"'t!l!m:II
•
r
f:_
VALUE-AD.OED TAX.
SAN B'E.DA LAW CENTRALIZEDBAR OPERAT/ONS ·- MEMORY·AID2019
·~: ·W. Mil EMFSPIB . . ;i;; . . L . ttii : . .. i&i g

../ than. the,·VAT invoice/VAT offici~I receipt 'shall not 4. . In ca'se. of sales in the ~mount of ·P1, 000 or.
\:.:.give rise to any input tax (R.R-' No. 16-2005, ..sec. more i:lhd· the sale is made to a VAT-registered
t·
'v. : 4.1°13~1
. (A)).. pe:rsQn; ·.the name, .business style; address and
~t:- . .. . . . . TIN_.of ·the .purchas~r· (R.R f:'Jo, )6-2005, Sec.-
·~: tnformatlon contalnedIn VAT.jriv.olca or receipt: . , · 4. 11.3-.1 (B)). . .
J:·,· ·1. ·.Sti:itement · th.at ·the· s.ellef is a VAT-registered ..
{-. .persontollowed _by-his TIN; ·. .: · _· . . Con'sequenc·es... of Issuing. ·· Erroneous: .VAT
f :2. The total-amount paifb~ the. purchaser withthe lnvolcc.or Re~~ipt .. . . · :. · . '. · ·'. . 1·
,1:· indication tbatsuch amount includes VAT; · If a person who 'is. not \(AT-re'gisterE}d tssues iirt
,• . · a .. · Arnau.htof tax must be shown separately on .involce or receipt showing ,his .r1~. followed by the i.
· - the.invoice' or receipt.· · . .: -.· · . · , word "VAT",· tl$. 'erroneous issuance shall result to !
· · .b .. 'If th'e sale is exempt, the term VAT ~E)'.(.emP.t. · ·. 1h~ffollow,ing::... · ·._.. . · .. ; . . .. . . . · !
'·: . S;ile must ·~e.-w.rltte.n .orprlnteo prominently. . '-1. The lssuer shall, in addltion to any 'll~bllhy -to
- . . on the lnvofce or.recelpt. · . .: .. other.·p~r't;.~_ntai:w~ax,;:beliable,-to/ ., · .. ·,. . ·: ·
_.<\ . If th~ .sale Is subjec.Ho·O.%; the .terrn Zero.. · ' . a: The· twelve percent (12%) \.'.AT witlic>llt'the.':
· Rated· .~?le· must be .. written .or printed · .. · benefit of any inpuf tax cre.dit; and · · · .· :·· .
P.r<?_minently on ~.e-,invoice o.r.r~peipt. · · . ,. _ . · b .. A_fifly percen°t·(50%r surcnarce .. ,' . : : : ::
.. . . . . . . 2.·· The-. VArst,all be re.cogniz~d ~s· an· input ..tax
..<. ·Tti'~· app~aranc~.'of the word "zerO:.ra!ed~ on .. c~edif to· the purchas~r. · if the ·o.ther ·r.eq.uisite.
_. ·. tfl~ f;:lce-.-of invoices covering ·.zerp-:rated.;~: ·intorr'nation i:s s):iowo on the.tepeipf:qr:irivoice:~s
· .- ,-.:~ah:i_s._prevent~ b.l,JYe. rs from.·falsefy e,l~!'][~Jf :providecfin ~e~..-11'3 (B.) of'.he f:>!IRC. .: ...
·. . input '!AT from ..t~~I( _-p.urchases wher.i:•}}R{:\).3: ···If a_V~l'.-re!;}1~t~re_d per~qn 1ss~es a Vft,.i'-in~oice .
· · VAT was actually_pa1d. If, ab~~nt ~uc.h WPl~r<-Y ',,.i<l · or -.VAT . ·off1?1al :,rec.e1pt fo~.· a . YAT-exempt

. · credit cel\ificat':3 is pas~d on \'1.~r.existe?_ce,.o_~- ·.

_ .. ·:z!:)_ro-rated.~.ales'b~ t_h~:~axp-9y~?tiuJ.J!f§!J.!s,,...
li
. _a_.-successflildaim for input· VAT.-is. ~~~.:ei;~:;.f~-'-;",,..~~riln~ac!i,q~.
·. · · the· government would be -refunding mon@¥.,;!ii;f;....:..!yt~....1Jil11e'ltb ·or· receipt the' term "VAT-exempt
. ' ...,.it did·· nof' collect.-. If .. Hie claim f.9r4_fdild/fa~<

I.
·b.ut .fa_ils·_to disjJlay promirier;i~ly on

~fg'~th'._~~fuers~~li be .liable to a'ccount for th~ ·

!welve_ P,~fjt1e~t {12%)' _:'AT ~s. if the· transaction
Jrv,.
,s _not ~ery,pt. tra~sact,o_n.. The .purch~ser.
·, .. . ).o c:>m_plf.',:',!Ith th'~m~_o_,cm,~1J~U!f~~ri!~.m . h, s~all ~e '1P~1lw.d to claim ~n.-mput tax.cr:~d,_t on
.. · : Uj_e !ss~~i:,?e of sal~s :;n;,"01ces (¥g~failU[,_f! _ l ,1. . .. his P,l!Tch~s.e_ ff:F::(_.16,-2005, $ec. ·4.113-4). .- ·. · .. ·:
· · to 1,:id1cafe, th.e Tl'i{J~its _5-!~J\J fer· t.iix> i~~'l. 1 . . . . :.../l, . J......:..·. \ ..,·, . . . ·. . . . . · ·.,
.-cred1t/r~fund· o_f VAT~o,rits\:p1,,1~~ses~t).all···.~. ll'°!vo1~l!),9~f,~F1.m';-~ecor~mg... Deeme.d Sale
be. de.11ied consiq~riri!flfuat tj:l~;lrt?s,icefiltf's. ~~ Traris~ctia111~;~Ji!if"'· .. ··· . . .· · . '· . :· , .
· iss.uirig to }ts cust.~rr_,~rs~, ·_.b/
..fil.;f.1ot'Jl.,,epi~).fs 1,.:-:rran$(er; 1,1~e·_.or.·.c~nsumption._not in -~he
.. _._bemQ .c1. VAl:-r:~~1st~r:ed "-taxr.aye·~1 ~l')ose. ;;;..~oy~se.. of .bu~me~~ of -g_o~d.s,_of ,prop~rt1es
; . ~ale~ · are · class,i~ecf · as z~r~}.ra~t~!il'~alE:s:,....J~"·::C,r,t,'h\e~·g~~lly.,i:,te:nde.d for sale, .or use .in t~e..
No.i:i.eth~tess, . tn_1$ tre~tme~r1s -·~1,t>[t-"-!l!-:-~cours1totbus1r:1ess .- a memorandum .en,ry !n i.
: _prejud_ice_ lci __ tn_e tf~ht of. ~h~Jt~Xl?f!:~a~ to .. ·th~::s_upsi.di,ary.sal~s'jo_um~l;to·re~orq w}thtj~awal
.· ·.-c~arg~· .th~_-input ta~e~:!o ·._th'='.··(~,QP.Pnate·~ . . ··o~ go?"~.f!:lrf).e..rsonal.us'::.,s. re~wred:· ·· ..
. · expens.e account or.:asset.ac<;:ount· subject ?: · DJ~tnbu.tior:i: qr·-transfer· to sharello.lders or.
·: ·. ·· . 'to·. q~pr'!:)ciatien,. whichever ·'is·: appliCc'!.ble. · . '!nvesio~~- ~~:share in. ~he pY:Qfits of the VAT-
. ·(Pa'nas.onic Comm.:· Imaging· <;or.p, of the. .-t~gistere.cL .persons : 91" :· .tQ' ·. credit.ofs . in
I . '. PhiCv .. Comm,sslonerof lntern~/Revenue, : paymerit'of.debt;.ahd.co.nsignmerit of.'go'rias~·
. ·, •.: :.G.R.· No. ·178090, F.e.bruaiy 8,°'~010). ·: .. - . · .·. .· ·.lt' actuar'sa1~· j~:,not mad~' wlth~n six_ty· (60)
. ·: · .. ·. ·. ·. · · . . .·, . .-: , ·. :days follo~ir:1.9· lhe·.;date· ~1,1ch .goo(ts -were
·d·:, Jf the-:sale· ii:iyolve's ·goods,· pr.ope't1ies.'.or· ·: · consigned :;.. an· -invoice. which. includes all-. the
. · · .ser.vic'es sbme .which &re subject to VAT and. · • ·Irivo1cing· requirerne~ts: · T~.e data appearing in
.... som'e ·.are·. exen.,pf m··_ zer.O:rated, the: . .- ... th_e·. invQic!3·. shall .-be. duly ~ecorded ·Jn. the'
. ·>breakdown··of. the sale"'price·· .. betwe'en. . subsidi.ary·sales JoumaJ.. Tl=te totaf'amount ·Of
• ti;lxable, '•, exenit>t, • • anc;t zero~~ated , 'Nd~:iemed .sale"·.sh~lt be ·included' irf_ the 'return'.tci• · .
. _..,.cornpor'.fe.nts· must'be shown on ihe invoice . .befilect·for;themohtt:iorquarter .. ·. · .. " ....
. . or -'re~$ipt... A VAT-r~gister¢d. person ·.~ay· ·.-. _3( ·Re~ire.me~t' fr.om· or··.cessat.li:>n 9f 'b1,1si.neS$.
- issue· a single invqlce.:o~ t~ceipt _for. YAT- ' · · . · with re~pect. .tq. irh:~ntc;,,:ies· ·on J:la.ila,:_ an.
. t~xable·· ·-a.lid · VAT-exempt, trans~ctions · .. inyentory shall b·e p~epc;1red·and:submitt~d ~o the
... provided . that. the . invoice.' . shall . 'clearly . RDO . who .. has juriscliction_. over tfle taxpayer's
. ·Indicate th·e brec;1kd<;>w.r:i of the sales. .' pri[)cipal place of_.bu.siness no.t !ater tha~ ·thirty .
' ·.. ·.. (30) dayS: after retirement··_pr · ces_satlqn ·form
,..
~:
·3. :·.D~te··of the 1r~r'l~acti~.n. quantity, ·~n.it ·co~t an.~( business, An ··invoice shall also be prepared for
· 'descriJitjon 'of.goods; ant;J · · · · ·' . the entjr~ ·1nventbl)', :,.vhich shall be the basis of·
· · · · · ·, the. ent.ry in.to .the sybsidi~ry_ sales 'jt;>·urhal. · Th~ ·
· .. ,

· . .'2019 SAN BEDA LAW

·. CENT-RALIZED
. BAR OPERA:rlONS
. . I· 243
 ·~~DZ3lo'lllillilllll!ll~-----------Bmli!II----------
v ALU E-Abi:l'ED. TAX
· . i
l.
SAN, BE~ALAW ttNTRALIZ£D B'AR:OPERATIONS ~ {'AEMORY (<lb·w,9
.,-,
>

jnvelce need not enumerate the· sp~cific items ·. · A. VAT-Re9istered Person may Cancel his ~
appearing in the inventory, but it must show. the · Reglstr.atiori for
VAT. if:·· .. ;
total amount, If is sufficient · to just make a· 1. ·He makes written application , and can "
reference · to the .inventory, regarding the , . demonstrate to tne -:CIR's· satisfaction ·that his .
description of the goods (R:R: No. 16-2005i gross sales or receipts forthe following twelve
. · Sec. 4ft3~2). · (1.2) ..rnonths.i other than those thatare exempt
: transactions. will not exceed P3,· 000; 000; or
· 2; · He has ceased to carry.ori.hls trade or business,
· and. does not expect to· recommence "any trade ·
: ·FILING OF .RE~l1.RN· AND or business withii'). the next.twelve ( 12) months .
. -~AYMENT.OFVAT (R.R. No. 16-~_005, ~~c: 9.'236:-·?)- . ·

·. . ~ . -. . . . . . . The. cancellation .of .reqlstration will be. effective'from '.

. Who are recjui~ed to tltea VAT R.et1J~n: · : · ': · ttie first cf~y of, the'. following.month "(NIRC,:Se'c.. 286.
(F)(2)). · . . . . ...
Ex,_ery·person ltable.to pay\iAT shall file .a.quarterty
: r.ett:Jrn\.othis~,ross sales or-receipts .{Nlf?p,·Sec. 114
(A)):·. : . :

Time:fo'r.Flling ~-~E:·tu~~-:
. _... . . : . ·.. . .. .

Everyper~.~nliabl:_~o·pay_VAT'.~h'.;11_1filea~,~~
.
1. .Monthly return.for.VAT-reg1_stered..p-elrson's~ho. . ·
:.;~~,~=;.
·u·~:7:"':,.,__
. ·. . . . .

OT-~-E.R
1\,A
'.

. · ... · .·. ·
:V:- -,~, .
.: . ·.

P_E~CE:N.iAG~ TAX
....
' ·, '· · ·
.

·.
· .,·.
· ·.: .
·
shallpay the VAT._on a mori!hly Q~~) ..t:,~==2E ·'?!'( Rt'.5.!qtfge Tex ./s: excluded.. Itom the·
2:.. .Q_uarterly__ return of -~e a~o~'F"'of. r-its;.quarter.ly .. · -Ta~.t~~~a~~~~ve~ge · m - the _20.1~ . .BAR·
gro,SS -sales ·or receipts W,!Jftin~e)?t¥,f1~f25)~,)(e~at~pnz~ ;:\.: ; . . . _- .
. ·(NIRC, Se~. _.114 (A)).. f ~""9 .- ..'t· ibl'· · ·
days following the __ close fiit.lfile,;7ta quart~r ·T ""'·i ·. \ ~- !.,:.,f.') ~ .-. . , . .
Jf' · ~: .. ~'?);'~ef~rs.\~pec1f~c§1ll'f~t~ th~: b.usin~ss_'taxes ·.covered
·
· .. ; .: . · f, -... >. _ · . . . -~·'\t~.by_
Tit!e f.qf~~e_w-~l~C of, _.1.~97, as. ~mended,
-N?te~.·- Beginning J~nuary /f,1 ~:023,. the .fiJmf1w'O: [payabl~-fY. ~nS,, perspf? or .. entity _whose sale, of
paym~nt reqv,ired · shall b4· 1f-on'~vy!thin l ~5 ~o~y)"": ! 1. t:;,,9~-or 1l?_erv1c~! ~~t\coveredby th_e VAT system
· Sec: 144.(A)): ·:.
·, .
. ·--~~
. ~--J':'\
Taxable : quarter sha!I me ~th"e\~J.Ja~~~ ~t. i "·
~i,
following _the close of eactj t~xab e qul:!...rl,~r yN1d~Jll:fQ11CASjSOL~,

·-;<Ws?l~--'.'o/. A·~.{
·11- ~Jt!-~"
. ~&\. , ~AnnotaJ~Jjs) (~f?13), ,Jf· · ·935)_ ._[h~reinatt_er- 2.
!f'tqt/!fai'··'nternal _Revenue. Code

fl.
/A~-~·. . "'1 [ · ·.·: -·. · · ...... · .·.... · . ,
syrichronized to the. in~om· -!~)( \uart~~<..fo\:l.~:-"' ~~~fj _a~ ~oi~s;.; c,yei:-e.,f!'Y-.0~T . ·..... _ ·.
. :. .

.. · ..
·_

taxpayer. ·(;.~... :·calendw· .or ..'fi~' cal ye1'(t (R\9'.~1 ~~~O!:JJ?P_dsi(.or, seFV1c~s. of P~rsons '1(Vho are
2005~·sec. 4.1.14-'1)._ . . . .. •. : . . .-. ?,· (
Amounts -~eflected. in the m9~fhly~VAT.-:~pl.iis::~h~JJ":.¢~{,.ap.
.sc,~E~Nn:~\~~mP,v.tr~llJ Y, · · u~~fil.r Sec. ~qg (1.Y(BB)_ o:~·th~
Whp -'~- not. a· VAT-registered.
f<?f the· first. two .£2) rry_ontl:l.s of. tfie qt1artE!&s°Jfcl.ll~ll·''':,,.i:;.,,,,.,, ...~·:.P.e~s'\n~'-anp_.. _. w~ose · gr8ss . ·annu~I- ,- sales . ·or .
be'incl~ded_ in the quarterly_,VAJ retu~-t~tW".fffeicts._1\ .,,f b \~~)~?~- r_i~t ~.xqee,d _P;3, ·900, ·qoo.- exc_ept .
. the·. cl.(mulative :figures· ··fc;,r fh~ _-'taxabl.e~~t1~ft_,¢r: l~µ:~~_J2perat1ves_ ~1ch·, sha_ll be. exempt ·.from·
Payments i.n the~ montlily. VAT. ·declarations· sl:J~ percenta~e .tf;lx (Nlf:.c_, Sec: '!! 6 as amended by,
h<:>-wev~r:,. be cr.e~ited._in tti!=! quarterly.VAT ri:lt6rn fo · . TR!ilN~a~J;-a_nd . . ... · · ·
ar,:i~'3-,a~ the ·!'let ,VAT .-payable· 9r. excess .ini_:,ut:. · ··• .·.2:. Other. kmds o~ _1;>us1ness su.Qject.. to the other.
,. ·:tax(over:paymertt a~ -of:tne_ ~d of a quarte_r (R.R.· percentage taxe~ \,Jnder Title V of_ the NI_R(?. as
16-2005;- Sec. 4.1_-14;1)c ·· · ., ,am.en9ed>- regardless of _whether or not.-the
· ·· · . ·· gro~s . annual · reqeipts exc·aed PS, . 000, 000,'
· suchas: . .. . . . ...,. · ·_-
.• · ·!
. ·:. : . ·a: : Doniestic :carri~rs. ~Y· -l~nd: and keepefs of
. gar.ages.(NIRG,''.Sf!c. 117); : ·, .. ·. . . ·
'CAN~·ELL:t\:TlON OF.:VAT - . . .. b. -. l~terri_atio_nal.carrier~ (NIRC, Sec. 118);. ·
.. REGIST.
.~
RATiON·. . .
' .. , .. · ·.- · ·c'. Franohis~ grantees (NIR'C,-Sec. 119);
·' .... d .. oyerseas. :·_ -~ di.~patc~ •. :.. rriessage .. _. or •:
'.· .:. ; ,·. ccmversafjon-9riginatjng frotn the Philippines.
·. The regisfra'U~n--9f ~nx pe~~on: who .cea~~s- to·. be· ·, - {NIRC, :sec. 120); . . . : .
· ·. ·na.ble to_.a ·tax type shall .be cancelled upon filing' w1tli. e. Banks arid non:bank financia~;ir:ite.miediaries .
. th~· RD'O. where. he· is ·registered; an application for ·.(NJ~b. ,Sec; _121); · . · ·
registr~tion iriformatipn upd?te in ~·:·fbr,n ptesc,dbed.. f. . Ot~er · non-b~nking :financial interrnec!iaries
tneretor·(NIRC; Sec. 236.(F)). · · · · (NIR(;,· Sec: 122);.
·:.·

241 I :;Ql9 . SAN. SEDA

. . - CENTRALIZED BAR OPERATIONS
LAW .
.. •'
 5, •.
vALU_E.;.AD·OED
' • • . I
SAN BE!)A LAW CENTRALIZEDBAil 9PERATIONS - MEMORYAID 2019
·TAX
~} IDll+w& A MM H

t g..' Life lnsurance. companies (NIRC, Sec.. 123); Philippines (NIR·c: 1. Government;
f·· -h. Agents of foreign insurance
. (NIRC, Sec. 121); . .. ·
compa_nies
...
Sec. 120) · · · 2: Diplomatic S.ervices;·
;
3.·. Public International
..~~.r i. Proprietors of· amusement places · (NIRC, Organization; and·./ . ·
\.'· .. ~~~~;·. . . 4. News Services.
l- ·
Winn.ings '(NIRC, Sec, ·126); and :
k. Sale, barter orexchanqe' otshares ofstock Banks and non-bank 1. Interest: from lending
· .· fisted: and traded. through the· local · stock · · flnanclal · activities and income
~xchar.ige or throuqb-inttial iPµblic offerings . intermediar.ies (NIR"c, from . .flnanclal leasing
(NIRC, sec. 127} (2.CASASOLA,·.supra a(.. '(ba$ed' on' maturity
Sec."121) ·
~.,.. 936).: · · · ... . ·: period); ~- ··
}:' . .... . · · c1. "!? years or les-s-·s%·
r·
,. Naturo·.... of.OPT · . '· · .. .b. More. than ."s· years - ·
1%. . . ..
•l · The nature of· O_Pt-~is. essentially a tax on the ·· -
'fi · transaction -and not- on the .a.~icles. sold. bartered odr· - -, 'Divide~ds ·. and E_quity ··2.
/. , exchanged. H Is an Indirect tax whic_h. can- be passe shares ariq net income ··
(·. on to -the 'g.uyer, (Philippihe.Acetytene .Co., inc. v. of su!)s.idi.arjeis- 0%·
';:· · Commissioner · of ll)terna1 Revenue, G.R No. L- · .: , 3. · Royalties; _,rental.=.-. of
.:... · 19707; Augµst 17, 1967)-. · ·· . property (teal/per~onal),
~~; .. · · · . .. . . . ·.· . · . . ,,,.-Ir} .. . profit.s .. from . exchange
f. tax _r;:,ite·for transactions subject to OPT : · Jl./;'.'''.;1~: ·· ·· and · 'all other items
};. ·. -Any p~"f\>P~ wtJo~~'sales qr receipts are ex~~p~'.fr,{ii;if::.1:\ , . . • under" Sec, 32 . the- · of
:{, '. t~e. payment of. value-added _tax a~~ who .. is 1 ·t·?~.:~t.!~i_; NIRC-- 7-%
_v
i'.:. Ai:~.regis.tered person s~all pay a tax. eq\.,1V~IE;n.t{t0<,>/:1~., ~....,.~ . .1-r.) • .. 4. Net Trading ~c1ins
ii; .. ·three. per~en,t (3%) of h1.s· gross: quarterly ~~)€s.t9r\1~r·>l~'~{~,.,._~JJ~.~~- -~~>: . wi,h.in taxable· year .·on
;, receipts: P.r_ovidecJ,'_ That cbppe·r.atf~1~i;~all.: b~Y ! . .
foreign .qurr~ncy, d.ebt -/}· .·
'0·. _exempt fro.m
fli':3 t_hree per.c.en~· (3%)(-?fOS~ r~cei~!~d,~ · · · ·. . !~~urltie~ihe/eiri:t~~I~~ 1W\ ·.
·:.._'.-..·. tax·heretn 1rnpo·sed (N.IRC, __$ec: 11.~ q,~'affi.:;ncfed,/)Y
-(.; . TRAIN.Law) .. ·. · · '. ·. · ·.· . /.l~(;~.P~ ... ·. .
h
_instru_. ments- ?%
r~ .. .. :.,//·__··~:
·./ _\· ~:···._
,. . .. . . . : ·,,,r(/K ~"'\D· ... ·. r ;, . ·). . . . ' ..
l,. "Qther.._kiocl_ ~--:?,. bu_sj~"ess i;;ulij,(~ fQ tti-n/!_•PP.T .. ~~ :(;:'_.'., . . ;/ .: '~
Nott:!': _Prov/dfJd, ho-.y~ver!. in
, . . . . . . 'fo. ..... , ~-~ .. '>- ,,,.,11 ~'l~:.-.,..;~t;~,?1,,.;~, cas·e ... of ·~re-t1;trmmat1.on,
' . . '~!,hi!t.;~ ...!"•.J°# maturity per.,od .. sha.11 .be
"\''~"");I,,,,.\.
il]r.;~
' ~r .
· · (!!1:L:...;.,,'."""' reckoned . to.' end as of· the
.oi;,m~suc ..c~rn.eni. tiy \qa_arterlY.,>l·. . 1r. . . . pre-terminati6n .dat~.
land and.,.keep_e~s .of ~ 11 ··, )j .. : . r,7t=:;::/\---'"---..-'-':·,,___+-~-------........:.-~-'----I
garagei,._ (NIRC, Sec. . . >.>··,;--~~(· : 4.,~,~ ;:ll_J;J~9J~f.i.;~,·223r:i~b~hk'fng5d%' ·an thef· gros~ ~ecei_pts
1 fj). . :_ .·· .· . , . . 1~( -7-·I/_,-· . -:- fin'aricia ..
StlV0d .
rofT!.' interest,
~---1---"-------''$'
1--..o..::._.:......:...:_ ........ .'··· iritermediaries. (NIRC, .dfscounfs ancf all i;>ttier ite,:ns
International·. ca.rriers 3% ·. of _" .ciucih~l!YJ~g~oss ·Sec. 122) .. . - .
(NIR_C, .Sec,. 118) · · .receipts- · · · · ct, · · ·Note: . E_xcept for_ interest
from . lending·: activities 'and
Fral")chise grantees·- 3o/~ ·of . the. ·gross receipJ!i· income . . . fron:i .. fin"ancial
Radio ·. · · . ' and/or. der.ived from ."the t?usiness · · leasing, whicti shall .be taxed
.television:·. . . ··covered by the law .granting · ·at -(bf;Jsed ori maturity 'period):
. :broadcasting : · · "franchise · · · · · ··1. ·
5 years'or.ie.ss ~- 5%
. _cornpan!~s··: :··· W~?se .. Note:. They .have the ·option· . .
2.. . More . .
than·syears
. -·1% . .
anm1a_~ wos~ _receipts to register a,s VAT·Taxp~yer .. ·
of th~ pr~cedmg ye.ar Once ·. option· · is : · exercised;
·' ..... Provided,:hOwever, in case·of
. pre-termination, ,. rn;;ituriiy
~o _not ex.e:eed . ,P1·0, said . . ~ption ' . . shail · be· : ·
-period stiall· b'e reckoned.· to
. · ooq, .ooo.
(N/~9. ~ec. irrev0cable, · · · ·. . ·
en.ci" as of the pr.e-terminatioh
. 1.19) · ·. : ·
date. · • · ·· ··
• 'Franchise :9.rant-e:es. -· 2% · of . the· gross · receipts
'Gas·. · and Water derived: _from ·the·. ·business ·ure .. - .. insurance 2%- on the .to~i premium
Utilities.' (NIRC; ·Sec;: cciver~d by the law"grantlng companf~s (NIRC,. CQ!lected, ::'!Vhethe:r l?aid· :in
119). · ·: · . . · · franchise · . · .. Seq.-143) .. · money, notes,."credits.or. an_y
' s_ub~titute, fo~ money ·,
b.verseas qispatch,' 10% on the amount p~id for .
· ·. mes-sage · 'or such servica Note:·: The· ioli'owi~g. are not.
. .
.. convers"ation . - included . (n the taxable
·ariginaUn~ · from th~- Note: ·.· The _following ar1;1 re~eipts: · ·.
exempt from th~.. 10% OPT_:

· 20i9 SAN. BEDA LAW ~ENTRALIZED BAR Ol=>ERAT!ONS. I 249

. ·-· ... ··------·--- ·-------·--------------'

 .VALUE-.Ab.DEb·TAX
Wii>IW SMf
SAN BEOALAW CENTRALIZEDBAR OP.ERATIONS - MEMORY.AID ~019
PS@ffMJlfll'Mi . WM# +111we Alff riti9¥&4-iiirim

.. Note: 'Tax -hereln shali

be in. lieu of .aJI .OPT of
. whatever nature ..
-
5.· Jai Alai. and racetracks ..
of tlieir gross· receipts
(irrespective of -whether
,. ! • .•
they charged admission
. . or· not).-~~% ..

•·.

i
!
i

I
iI-

· Note; . : Provided· · · · .· : Note: _Tax, shall' ·be

-~aid· .f:?y .
: . howevei:. that .. :boxing . • .. · , . . _.. , . r:>s1,Jing eorpqration. in. pfimary .
. exljibitrons - '. . wherein •. : . - .... - .. : of(erir:,g -pr by the seller•'in
vyo~ld : or · · Orierital- · ." . . . . . secondary offering, ,., ·. .
• • • ' I' • ' ," • • ~ ~ ' •.

Championships in.. ~ny

· division is at stake-shall-
. : ·... <:;lci!iely. ;.he.i'd •,. corporation'
. ·. pe · . ·. ex~111pt: · ..- from mean~ . ,:any . cor,poratio'n· . at
~: . 'amusement- · tax, if '. at least · 50%' . in ' value · . of· .
· . -, least" · ·1 · · · of the· ·. ... outstandlnq ~pita! 'stock ··or
. . · contenders ls 8 'Citizen : . ... 'at least 50% of· total .
. and 'said. exhibitions are: · combined."voting power,:of ·-a1f
promotedby citizenis .. or ... classes. is' uwned dire.ctly· cir
by · , ·· · 'domestic· . ·1nairectly· .by'or for riot· more
corporatlon/s. . : · \han 20•in<;livlduals:'

4, Professional· e'asketball
Games (Linder P:o. No.
871)-15% .'.

~46 2019 SAN· SEDA LAW CENTRALIZED BAR OPE;RATIONS

 VA.lU.E-AD:O.ED
SAN BEDALAW CENTRALIZED/lAR OPERATIONS- MEMORYAID·2~19
TAX
r;{. . . .. .·.
~-. . . . .. . -. .
·.~ Returns and Payment of OPT 'Persons paple to Pay Ex.cise Taxes onImported
'f'., · · . Articles· · ·
'f ·person Liable . . ·1. Owner. or Importer; or. .
f ': Every person· subject to the percentage 'taxes shall 2·. Person who .is found in possession of . articles
l file a quarterly return.. and pay the tax due which· _13t~ exempt from. excise · taxes other. than
f· thereon .with ii,, twenty-five'(25) days after the· end ·. : those legally entitled to· exemption. (NIRC, Sec.
;· of each taxable' quarter:Provided, That in the case" . f31), . .
·-:::':.of a person whose_VAT registration· is cancelled and · . .· :
i'. .. who 'becomes liable to the tax imposed in Sec. ·116 Time of' Payment:.. Before the release of such ·
)_·of the. NIRC, fire. tax shaJI accrue 'from the ·date· of 'articles from the..customs l)ouse·(NJRC, Sec. 13·1).
•1:·· cancellation (NIRC, Sec:·128 (A)(1)). . . ·.· · '.. · · · · · · ·' ·
·' . . · . -~~!e::-.·. tn the case of iax-fr~e· ·artic_le~ tiou.ght Or·.
!-:', Per.s~h..R(;lilrin~ ·fr'a.m '3u~ines'~ . . . : ·. imported into 'the '.Philipptfies by person's, entitles. or
..[ : Any person · retiririg·· ·from . a· -business . subject to . ·_ a.ge~cie{ exempt from tax whiqh are .subsequently
'':' · percentage. ·tax . $hall, notify ,the nearest Internal · sold, 'transferred or-exchanqed. in the Philippines to
. ·revenue officer, file bis·. return· and pay the -tax . non-exempt:persons or entiiles, .the .purchasers or .

his ·~.usiness (Nlf;?C, s=

. duethereon within twenty (2.9) days after closing·
·12{1 (AJ.(2)):
. . - .
· ·.
·. reclplerits shallbe considered the ..importers thereof.'
. and sf\an be· liable· for. the.:du.ty ari'd internal -revenue
tax due on suchlmportatlon (NLRC,.Sec -:J31j. ·. .

.~>·.: 'I , .
t· .. ·
·,
. : . . T.A:X
-EXC~SE ·. .: : . . . . . ·' · . p(j1_l·'l
. /}) . :. . .
.
. . . ./ . . .
Pe~s!'iis Liab,te ..to Pay-Excise Taxes o~ D:omesUc.
t.1·.r( ;.·i1}\,Art1cle.s . . . · : . ·. ·
.:
. . ·
. . . .

~=
f
- ·.
·. ·
' . .: : • ·
· ··. ·· ·
: · : <;\J:
''Jl·~~'nrJEvery·· person lia.ble ·10 .pay. excise t.ax shall file'. a
. . · /J·/, ~'f..j. ~ep~r.aterelu1,n.for ·each place of productiori ..-Should
:~\. *Excise Tax is excluded, trom· the Taxat~L~~;hf?.dct~PetiS:;.r/r§~cts be· re'movea'from 'the pi~ce of
Coverage in the 2.019.[;JAR .Exarr,inationf,--:;;:f- : ·. 1
t~ pr9du~tton°vJl~~olltthe payment ofthe tax;·the ownE:r
. . . • •· . · . . {;/. /> • · ·41..-i
1. · ot person 'ti~~!~9: possession thereof shall. be Ji.able
· It is. a tax levie.d. on. a specific artlctEf T~f\~han wie- .. t... for t.fie'tax <;tfi11tller~<?n(NIRC, Sec, 130.(A)(1)). ·
upon .the ·performance, c:arr.ying OIJ,)Of• tljl'E),,e)(erc(Se. ti. . ·
l1 \ ' . II
· .. · . . . •
.
... • .
i
1 ·

· of al')_aciivity,.:EJ.<cise:t~.refers1~faxesa·ijpf~a'?!et~ l\·
Note:· 1'1 thf, ~~e ~!
i!)digenou~.· petroleu.m,. i
. !
· certain spe~,fi~d _or .. selec\e.~,.,po_oc:l.~;Pr ·article~\ ri~.l1·natural,'.9as rr·llq\l!_fred na.tural gas,'th~ excise. I:
. . . manufa~tured or produced. 'f~~'thett:Pfuliijin.e~.;to,rIf. i t~x s~~~·i,~:J?:¥9fhefir.st buyer, purcha~er or ··: .
[.: .. ~?mes,t1_c sale or c.on_sump\9.~- fq~W . ol~.,'."
i:.,. · d1spos1tlon.. and . to thing's 1mg0~d-'{11Jto Hie
rt
t~an~fereerJ~caH;ale,bart.er or tran~fer;w~1I? the
·i·f.
~xc1se.Jax on exported produ~ts shall be paid by
I!
I.
i~
Philippine_s; whJch ,tax .~hall !)e ::iM.9,~tliti1,~ .t() ,..{he· . , . ,;,JJ;i,r,owner~ les'See-, conc_essior:1aireor :Operato~of th~ I
I•

. ~~~~~.a~de~·tax NAT) ·_r.2 C~$AS1r~·~U~::~~~Ilttii~~~~~···(fJIR~

Sec:. t30(N:W.·.. · · .. i . :

;:
J ·
. · ·:: . , · . · . : . ·. . · .· . ·. . . ~ '.{ . . fib· . . · ·
Nature.of Exc.1~.e·:rax~ ·.. . ~ · .x~}?,!;; · .
Tl.me . of· ·Payment: Before removaf 'C>f domestic
. products form place. 0f .Prqduction (NIRC, $~c. :130 · ·
i Exc::is~.tax,may.be cons.idered tflx.<m proat,ictjon·as· (AJ(2)). ·. / . · : · · . · ·:
;.·.·/, they are. ·collected only •from_:· n:ianufacfurers and .. . . . .
: : ·producers'. ·B~sically ..an indirect ·4!x, .;( ·is. . directly · .· · Mode. of ... Computing ..._ Conte'nts . of Ca'sk; or· <
/.; .. levied· UJ'.)01) manufacturer.61' im.i>orter' upon'removai: ... Packag:e- ... ., ... . . . . .
. of Jne:·taxable. gocitfs from ·tts' plac·e of. producilon· or . !=very fractlonal part' of. a·. proof 'liter equal·. tti . or
from )fi:e custorps · qµ.stody::T?ese ta~es, ·however, . · gr~at~r. tl,'l~,:i "!· h.alf liter' 'in ...a. cask .:or.· f:?aC.k~ge : ..
it!·" · may.be .. a-ct.ually pas.se.d.on to :·the.e11d~consumer .as coot.a1nirig mbre. than o.ne llter:s.haU be t;:ix~d. as·a · '·
f. · · par'l_:of ttie ·van!,fe~-yalu.e· or.· selli~g ~ri~~· .o~ goods: · · liter,. and a.hY sl'!laller ~~ctidnal part .shaU ~e. exem_pt; ·
• .sold, bartered. ~r exchanged. (Si/kair .Pte. L(d. v. : but any package·of sp1rits,lhe total c.ontent.of.wh1ch·
. Com_m/ssioaer ·of . Internal Rev~~iie, ..9.R. ·. N.o:· . are less ·th.an :a .pr.oof !iter; shall be t~ed· as liter · on~·
. 184~98,.FebiLJary 25, .20fo).: · ·· · ., ··· ·(f'JJ!R'G, Sec. 132)..· · ·
.. : .
Kin~s ~fExcis.eT;ax· .. . · .. ,
1 ... ·spepific· fox -· refers .to tl:l!? ~xc;:ise tax. ·l!Jlposed
.. whicb: is ba9ed' .on· weight-or· volum.e c,apa'city or
· .any other pl"!ysical ur:iit of m·e~~!ire.rn~nt;·and
2: Ad valore·mtax,.,, refers to the excise tax which is
· · · l?ased .i;>.n. se,lling price or otl;ler spetjfied vah,ie q_f
· : .the good~ (N_IRC; Sec. 129). . ·

2019
. . . ~w CENTRALIZED'BAR
SA·. ~ BEDA . . . . OPERATioNS .1
.,' •'
·247
.. ;

'·.
 '·v A.LU E·-AO..DED :TAX
SAN-!}.EDA1.:AW CENTR/ILIZEOOAR OPE~ TIO('/$z MEMORY~/°:2ci19

.l DOCUMENTARY.STA;MP·TAX .. f
· 6.

· 7.
Bank Checks, Drafts, Certificates.<?f Deposit ri'ot .
· Bearing Interest, and Other- tnstrurnents ."(NIRC, · -·
Sec. 178); . · .. ·
.O.ebt Instruments (NIRC, Sec, 179);
. . · . · ··

*Documenta,y· Stamp Tax is 'excluded. from the 8. All _:Bills· ct ·Exchange or Drafts and on Its·
.. Taxation· ~aw· Coverage·· in the ··2019·_-·_BAR acceptance (NIR_C, ·se.cs_._:180:and 181).;
...
· Examinations. · 9. F.oreign Bills of _Exchang.e and Letters of Credit
"(N/RC, sec. 182); · · . , .. _-
-· It is .a· . tax on documents, i.ristru.me.rits, loan · .- 10: ·"Life Insurance Policies.(N/RC/ sec. 183); -.
agreements, arid· papers. evidericing the acceptahce, 1.1 .: Policies· . qt. insurance upon P,roperty (NIRC,
· as·sighmenf, sale o(transfer. of an obligat[on,}ig"ht-or sec. 184); . : . . .
· property incident ·.thereto (?. CASASOLA; .supra ·at. 12. Fidelity .Bonds and Other · insurance Policies
. 10771 · .. · ·. . .. . .. · .. · · (N/RC, sec. 1.85);. · . · .. . _ . . .
' ;1• I • .• -. • • -..~ • • ' • ·, • ' • • •

13. .. Policles of:. Ann_ui"Ues -and Pre-need ··Plans · ·

. Nature of Do~uin_entai:y.StampTax (DST) . ·.... ·. (N.IRG, Sec. 186).; · . . ·. <,
A DST is 111 thenature of an excise tax levied on the 14. Iridernrrity Bonds (NIRC,.'se·c: 187);' ., ·
_ex~rcise by persona of certain privil~g~s ·confer:red '-. . .1!? .. CertificE!tes.Je_.g. certifit;ate .of"f}amagf!_) (NIRC, ..
by law. for the 'Creation, revision.: or terrnlnatiori of -Sec: 1813); • · ·· · . . · ."
. seef!f~c.~~gal relationships thr,ough the·execut~~··o~t~?reh.?.use-Rec~i~t~(Nl~G,.. ~~c:189); ·, . ..
specific . Instruments -suctr as leases. ~l~nils,:iiu· 11·r~1~a,.Horse Rc!ClnQ Tickets, lotto or .otner
mortqaqes, P_l.edges•. _an~ trust a~d. ?9.9.'.:,gya:r:f~~?
re~I property (Commisstoner. qf~nte:n:a(f3,°Elr'~Cf..~-db.=-~~'...
;pf· ·. ·. \/ Aytti_<j!iz,r~_N1:1mbets .~ames (N/RC, 'Sec, 190); ·
~lls·9~~atllng qr Rec~1pt_s (NIR~, Sec. 19J); .
I!.
F..nst Express · Pawnshop Co., -,,pc., ,r;~'f!!os: .. · 19.~r:Q.J:CH~_s~h)ll$_~,.Sec, 1.92); .. : .: :
I.
.172045-46; Jure 16, 20.09). "'\"\)/ ,....,P.~~~<i,.~~<~Att!?_qley (NIRG; Sec•. 19:3);. .. ·
. · · · . · ·.. .. · · .. /A~·'/' :r._ . i
.Hence, in imposing· D_ST, ·ie:
ID) "if .·. ~.zt. · lea~es\?°q.d(,gtl\erHir_i!'l-g· Agreem~nts (NIRC,
¢"6u.1fcon~1_ders·:1.11:ot Aft~: Ji. Sf?c'i':194Ji·t", \: · . . · . .
I
i.
I
o_nly th~ do~ume!1t but al~? t . !:_.flab-!,~~ ~ndgc~aracter ·
of. the_ t~ansact,on. (Phthp me;;;B_qnkm~ -~·corp.
. ComrT11s,stoner o( lnt~rnaJ ~Re.y~pue, trRX'~9--t~i·t-~3~0eeys
··_17057~1.Jenua,y3Q,.2009J.ft·4J
. Under Sec. 196 .of th.~· _NIR<f., alq~urm;n
..,.·: \
~2. · ~o~ages\~idg~sa_nd, Deeds of Trust (NIRC,

-~lif.:.stam~~---r-; , . . /~&5)_
~e~.119,SJ; \\_ ·;.~- ~ · . · · '.
-of S~/~; C~1 _eyar:ices and Donations. qf:
-~~m]!Jfti ReafPrope~yl_{Nlj··,S~c .. ~~6J;··.
.!'-'
··, .
.., .
J-
1. _.. : · ·. _. . ·:· .
I
II
!ax shall be ~01lect~? o\cW"~~.Ya~ ~~~e·ed~ -,f.~ N;<U .:.:..B~:>!~ ,!0{-"th. ~. co,:i:;i_putat1on of .DST 1n: a
instruments, ·or· · wn~1ngs . ~~~'te@y · n~~ni:~ ~~·-·@". ~(~ ·'tfc!_nsfct1on°"loY prey1ously mortgaged rec1I ·
t.e,rjement,_or· othe'r._r~a_lty.sol\ shaU .'rlz~~@e_._~t~ . ~- . g1iouf,d _b.ithe:: ... · :· : . . .· . . · ~._t~1Y
_ 1hl:l pu~eha.ser or ·_.purchasers\-H~n~ .· ··tra~~~C?.~- . · . . ~~s~ Selhtfg . P~J~~ · or.:the, c?hs!.der;3tion :
: propert1e~. by means, .of' mer~e~ is no.:'\,~ubf~<J°(~'~ : ~nfracte_pffo·be paid for":>l!ef.l realty; and .
docurrienfary _stamp t~ (C}o1:7n:i1."!J~/oner .Q"'p..f;je h"ti .. N ~ ,,)111'· f~~- M,r.ket. _Value . ····determi_n.ed·.- in
Rel(()nue.v.. La_ Tondena D,stille.rs, · ~ {[.!J}j);f_!~\~ "'(\'\ac!:~c(a_nc_e~th Sec. 6. (E~. of the NlRG
No. 1751$8, July 15, 2015), . . · = "=.~l!-. '.- · i\; /ff:.~\~~ ~Jp;-1et,c._·.. N~. _19rf018 .. dated· M_arch 19"
"•l.v~·l018) ' • • .· • • • .· •
tt>
• • "• • ; • •" •, • • """ N • •

. .ri°ocumen.ts su.bject DST . . . . ·.. :·,...,.........,_~-: . . . . ·_.. . .· . ·. . ·... ." ·.- .. ·. ·, .. ·· .;

... : : .. It is- apr:i"licable :on
,all· d9ctirr,erits ·.riot :otheri.(is.e . . . ··24; .. charter. PartieS' and. simil~r·instrlimsrits .(NIRC;'
. · · e_xpres!3ly" exempted, notvvith~tanding. tre .f~ct"tMt.. · : • .- Sec. 197); a.nd°. ·.. ·:· · · · .· . : .·· · . .
th~y-.ar~ in electroniitfo.rm "(-2:CASASOlA. .supr~·at · ·. :2s. -Assign!Tlent.... and. -R~iie',o/als·. -of . ~erta.iri
1d77). · ·. · .· .. · . · . · · · · . .· ·: lristruments·(N/RC;Se9.
- . . . . . f~8).
.
nie)~1iowing ~r~ c~ye_re_dby...DST: · . _: .· ~- ·: . . ' lnstructionai"·-1:~tters, · Journal E~trles, .o-.r ~~sh
-1-. Docurtients, · loan·· ·Agre.ements,. ·lh~trumeo~s · ·:yo11.chers . i"nvolv.1ng .; Ady~hces ··are· .c;on.sidere~.
· · and Papers:(NfRC,.Sec. 173); : _ . . :Oocum.ent~ which. are subject to osr,·,
. 2:: Original: Issue of .$hares of Stos;k (N/RG/S~c. .· lr.i :cases. wher.e no formal"agreemerits or' P,roinissory
... 174);· . : •. : . ... ,., . . . . . . . . . . : : .·. . . ; . . ... notes have -been executecffo cover :credit f?Jcilities,•..
3. Sales,. Agreements .tb. Sell,. Memoranda :bf :··:·the doc·umeritary stamp.tax-shall be.based-on th.e .
. ·.. ·$ale.s, De.liveries at-Transfer ··of: l;)ue-bills; : all)ourit .9f ·dr~Wir)gi:,. ~r avail!llent .o( the· facilities',:
. ·· ·cetWlcates . of ·obli·gation·. 6r ·
Shares · of ·: . ·- which·· may .be. evidenced · by credit/debit m"e"m.o, .
. : C~rtiflcates of ~tock (NiRC, Sec; 175); · · ·. ·: · · advi~ or drawings 'by ·-<'!ny' form. withdrawal ·slip· · or-
4_. · · Bonds-;_.p~bentur.es, · Certificate _ol S.tock or . · .. (Commissioner of Internal R~yenue ·v. · t=ilinvest
: lnd_ebtedne$s_ ls!3ued_ ii'l· Foreigl') · ·countries . Development Cqrporation, ·'GJ~. No. ·.16365~, ·j.u/y
(NIRG, $ec. 1_76);. · · . . .. ·. ·19, 2011)-. ·· .. ,. · · . ·
.5. Certificates. of Pro~ts· o"r"lnterest in Property ·or ·
. : l!,ccumulations (NJRC, Se_c; 1..77); . . ,.

:•
248. l. -8019 .SAN BEDA L:.AW.CENTRALl~E~ BA~.,QPE~TIQNS
 ~;._
( . lim!llll mic mi:i BIEl!n::.:::=~~SII..

i>\ . . . : . . . . . VALUE-ADDED TAX

SAN B_EDA LAYJ'. CENmALIZED'.BAR '?f'E~ATIONS - MEMORY ND 2of9

1
(· pocuments Not subject to DST . Time of Filing-an·d Payment of DST ,
~ 1hose. items enumerated {a-n) in' ?ec ... f99. of the · DST returrr sh.all ·be filed Y.'ithin ten ·(10) ~~ys atter
~i·:'.NiRC, as amendedare documents not subject to·. the close · of the. month· w.hen the taxable
/. [jST. In additlon.. remittances of :all .Overseas 'document .was .. made, Signed·, Issued, accepted,
-:.: FilipJno Workers,. "upon showing . of the . Overseas· · or transferred, ..and· the tax thereon shall be paid at
~'. ·E;rnploym¢1"!t. Certlflcate or v~!ld Overseas Workers.· the same time the afcresaldreturn is -filed (NIRO,
·:~.·_Welf~He. Adrntnistration . Membership Certificate . by_ Sec. '200 (1;3)J,:. - :·
.f .rthe OFW beneficiary' or reclplent, 'are ;also· not
£,:.. subject to DST -as provided ~n Sec. 4 of BA' No: Pe.rsi:m Liable
·,. 10022. · .:· . .: Th~ . DST is. a. tax on ced?in transacti.ons. It: is
fj.' ·. ; . . . . .. . ·irr1poseif. a~ainst Nthe person 'making, sjgnlng,
,i' . Elect_ronic. Bank Transfer NoJ Subject to· DST . . iss.uing, ·accepting, :or tri)nsferring" thEi document or
,f '. .subjecrtc th.a phY$i~I _impossibility· 'on .. {he. part ·o.f. facility ·evidencing 'tJie transaction: Thus,. in genera1:·
'{ 'the · payer .. to be .,pre~~inL and' prepare and &ign an . it ,n:iay -~e lmposed Qn th'e·transa~ti,on itself or u·pqn
.,r·· .tnstrurnent purporting..to .pay acertam obligatic;m, an ·the docume_nt·.underlying.such acf (R.R. No. 9-2000,
t . autornaflc bank .. transfer of local fl!nd.s· from a Sec. 2). · : , · · : .. . . . · ... · · .
• .;·, savings account to a checkinq account maintained.
/ ·by. a depositor in· one bank shall not be subject: to . . : However, whenever .. one oarty. to the taxable
r
!f
documentary' stamp tax. .. Lil<e1A1ise,: the. receipt of. document.enjoys exemptlon.' the other party· who is
funds from . ano!he'r ban.k ·hi. the· Philippines .. to,~,<'.) , not · 'exempt',would th1;n :be' liable (Philacor·. Credit
;:f:,..depo~it-to. the payee'.s ~ccOL~nt ard thereafter l!J;!!Jp1.'):~·Corporat,oi:i·.v1 • Comm1s_s1qner.of Internal ,Revenue,
..,. : instru~tion . of the . non-r~sident. d~positor-p~y9p/:.~>' . G.R. No: '169099, · Februa_ry6, 2013). · · .
-~ , . ttiro1Jgh ?JO electronic message, the' depo~itory·rbanlt:11~\ ' ·. . . . , ·. · · . · · . ..':
!··: · to..d:eb1!-.!'ii~:accou_nt:aod:_pay a named.re~1pieot~h1~!!r1,1.~'.~•.fg,~ris~~':'e'lq.~s . o_f .. NQn-Paymen·t of . DST
·i . , n.Qt ·be su!)Ject: to do.cymenlary stc!mp tax (HSBC~~~~1f.lfl~ltl~~J~r(!fl~dm1ss1ble before. the, courts; Jurat
~:. · Commissiotie_r. of Internal'. Reiien_ue0.c;iFl. No{ i ·. v.,ill nort6et~i~1!1 o.y'thE! Notary·.pl!blic;·a.nd Failu.re to
!\' 166018, -Ju(J~ 4, 2~11) .. ""' . . , ·. (r}(~,, _<}1""·-l.
pay is··a dist/lif:l_r·~ffen~e(NJ,Rq,·Sec. 201). · . .
:, . ·. · .. . ·. · , ,.,).1.t · ,; E~\. · . ·, ~· . · · .
f··. ~cen:ial of.f;_>ST L!abili~y ·. . ;.,j:9 J~,~y · r-t Note:· .Tn'}IT~i re~t<? affix ·the :~equ.ired',docur:per;itary
ij Doc_u_rrien~rr sta~p. taxes· -ar~l,~~~-irt~~p~frl'.l_e~t!X. stam.ps · ~n. t_pe. ~cument_ would_ .-not . re~'de~, toe
~··::i·
'i of_ .~e legal stat!JS. 9f ~e- tf~f,.~pcti_C?_!)];~g1vmg. rise• -~ co~tractp$p1d·.iTh~:-~ •.:ontract r~i:nam~ _b1_r.:idmg t~ .all
;· . theret9. They must i;,e pa~d ~j;j~.fl'tlrs:1s,$.ll~'l_l,ceof,J'l_e ·ii,;'l: partie~tl~~;1:'l?.l'.llfac~everi without_ documentary •. •
t :.. · said i11struments, -.yithout regard t~::':wn~ther.?-t.tie trd stamp_ affl:x~..;;.\~~(VAl.ENCIA& .ROXAS, supra at
,:r -co~tract~ ~hich. give' ri_~e.. to th~in;~wfe·r~jpissitff~;
·;, .. void; vo.1.d,able Qr un·e.nforc~.abl~ (.Jakp ln.vp,rtments,. ""'i-15:i,,...· . . . ·'
i··"''
504-505): .·.· · . . ; ·. · ..
. . . .• . .
:· ·
. .
·' ·
. .
·
•
?, Corp... v, Qommissioner of)ntemal R~vf!Jl~e, G.~. _,.. ::1t1r1Jii•~."'i\~ · '' ·. -·
1t·· No' 147629 ·July 28 · 20101··. · .. :e·,; . . ,'(~"$'.~"" ··i• ....:.· .,,,&"¥:.W,t
'J•I •, . ··fY' /!:i=.··. .. . ...
t\~t~,i~~ . ·. ·.· . ;.: . ,, ·. . ,.
J."J • • ' ,

~: . 6ST·_~a~;~nt an~· D.~r ·D~cl.~r~ti~n i

upon .. Loa~in_t31Rel<?a_ding. ~f . DS;. :Mete.ring -
!,
.1: . :Mac.-ii.n~ . N9f c:onsidered.as ·~Date ·of P.ayme.nt"
;,; when the·.Pre:>·criptive·J?:eriod ·to. 'F.ile.·a. Claim. for a.
~,·.. ··Refund/Credit.Must co·mmence · · · . · .. . ·· •
f. For· os. ~et~ring m'c.ic~Tne· ·us.Jr~.
the ..P~ymen·t 9.! the
.,.. : 0$T upon.'-loqding/refoadil')g is merely an_ c:idvan~. . '·..
~-. ·_payme.n(.fi:ir.. fu~ure. appl!cation_.-_The' liabilify for .the'· . ·. ..
J: . . P.?Jymen\ · of . th~ . OST· falls.. doe· o.,:ily up~n · the :,.·
. - . . ..
!:! . occurrerice of ~.taxap,le transaction .. It i~. only then-
;~. tha.t J),;lym·ent- may. i5e consictered: for the .'purpose of ;
F , filin·g·a <;;laim·· for :a: (ef1.11id or tajc cred_it:.-Siri~:ac;tu?tl:
~~.. ; payment 'was··already.·mape .upon loading/reloading : .
~··.· .of the. -.0~ mei~r)ng -mac~ine a'r:icf.the.. fi_l!ng .~f tlie .
,·~ DST Declaration Return, the date. of imprinting th~_·
1' . , documentary" ~tamp on . th~ . taxable .· ~ocum'ent .
,,' . must . be . considered: as 'the .. date of . payJlle.nt
\·" ·conte,'.nplat~d: · ·uniJer· .Seq:: 229 ·. of ·thq_· .. NIRC
·i:. . (Philippine £;Jank · of. : Communipatlons.· v,
Commliisloner of· lnteinal·. ·Re·vej,ue,. G.R. No.
'19'4065, June~20, 20i6j. ..

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2019 SAN BE~A LAW CENTRALIZED BAR OPE~TlONS I 24~.
 I&
• SA

TA~ AD.
.
MSAN
INl~. TRATi_OBARf'J°.A~D
BEDA'LAW.tENTRALIZED
E~FORCEME.NT
OPERATIONS.- MEMQRYAID 2019 ,. . ·.
~ ()11111' i h+ F#Mlhf7'1FI @at-4 MAii Ii

.
l [
. The first 2 staqesof taxation are.. referred .to ·a~··U,.1e
OVE·RVIEW impact. ·of taxation, . whereas the -thlrd phase is .
referred. to as the incidence
. ~ ~.
.9t
taxation' (Id.). ·
.

EXEGUJ;iVE COMMITTE.E . ·sun.rocr COMMITTJIB . . . ', Nf:EMBERs·· ··. ADviSERS .

. MARY CYR$1.L·C. SUM:ANQ.UI .. ~ ·'CARISSA; c. _GUINTO LIAN.NE'. MAE n,' J,.NIUQUEZ, Justice... . ·. ''JAPAR. . B."
.pi,q,-all 'Ch:a,i~perso~. 1!R!CJ\. . Si;bject; .. : Chair;_ . ·. S~A.': . ~ ·M -. HADJI rJA,,SSAN,-: -D~Ao;·Atty. NI9ASIO ·
· MAE C, VJ~A (:h'Q.irper;son for. · GLADDYS P.. . . BAYLON : MARY ·E:vnµ.YN -. N. MATEO,. ·;C. CAB~O. CPA,-ru\d Atty. ::
Aca'delr!ie's, .B~. REI. E.: -Assistant ... ·. S.ubject . 'Ch~ir, ·MAIUE· .~HERRYpANE' "C.. D~o.'o:e:µcRU~,CPA, .
BAJOJEP,O Chairpersonfor Hptel ANGEI,.ICA . MARIE · · C., · · REYES, 4LYSSA R ZARRAGA, . . . -, · ·: .. . .. .
· .. .<;ipertltio,!s,JHELSEA tOtJrSE ~- . ~L· '. Subject ·.Ete_c(roni~ . TAGfy!A : :: · .;STHER V... . . ,
· btMAANO .Vice'Chaliper~n for . Dula . Protesslng, . ~INA: G; <,~ILES,:· · . .M:ARE!\NB ·· '
. Secretariat, ~ · )US'tlN, M. ' FABREGAS Qenera_l:,Prlricipl~s; ·.Mfill'E,i:..' A: CHA.\IEZ, ·JEWEL· : .
. -, YAMBAO Vi,ce Chalfperson'f!'r· ATIIEN.AI - FRANC~ . R ·-JOICE G. DAY'fM, ~~ ·. · _· ..
OpeFattons, ~- AN9EU<;:A }3; .: QUIN:rON·and CA:lU:OTA _N. · S,MONESfANJ?REAP.A~c:IA ·
· DE I.EO~ '!'Ice Chairperson for· VJµ.AROM.AN.. Income Tax, · D, D.A:QUIAL, · .Al'.-FRED- ..
. Fin'ance,.'· ARRA QI.MAYA j.'' APOi.LOJUUUSS.·STAMA!UA · ·fRANCJS 'P, .0-ALLEGOS,-JOX.
BAD:ANGAN Vici! ·c~a1rperso11 Transfer . Tax,'. )ELLYN' · C. · CRISTEL · : · G. · GAY ONA, . · · ·
-jorAudit,JORDANN.ciIA.VEz -C~. Value-A'diled Tax, MARIONE:· .. NlCOLE. .P.·
.Vi~.Chairpcrson for IIDP, HANZ MIGUJl!L A. · D.E .. ALVA . Tax'. . BUGARIN, and l<.ATRINA,"!NN
. . D~YL · · D.lllJ .' 'Vice Adml1Jis!r.at~on, .. Enforceme1Jt,.. S. PRADO; · . . ·.
. · Chairperso» for Logistics, and . im_d- Remcc#es, °'nd· ATHENAI ·
DOHN~ E. AQUIP~ FRANCES R. QUINT.ON .Real
. 'Vice Chairpers!''n. . · }vr Prapcer,tyand Eoca! Tax: · ··
Memflersliip,, ·

.·:
 Large Taxpayers . :B · The ·office of the·Se~i-Or Depufy- Coinmlssione~ is
. '.Division
.
create!'.l to assist--the Commission~r i~ administering
Large Taxpayers·District Officers
. .
2 - ·BIR· operations an~ directing :an officers and
Rev~n':"Je Offl_cers . 3000 o"r more
employees-of tl1e Bur~au ..to improve tax
collection
· l;lnd administration ~fforts and enhancing ttie public
( 1 DE LEON, p. 85). perpepti.on or image.(?fthe agency (E;0 . .8.27, s. 2009,
August 14, ·2009). ·. ·
Powe.rs and .D1,1tles 6_f the BIR: (ACE3) :: . , ·.· , .
The · !31R is · hecidl:ld · t?Y . the_ · CIR · and 4 Deputy · · ·
. 1. · Assess and Collect all.natlonal ir1ternal revenue Commissioners (NIRC, Sec. 3J,:each.ofwt)om heads ·
~xes, fees, and charqes; . . .. .
the tollqwi~g: · ·
2 ... gnf(!)rca . all . forfeitures, "penalties; ···and . flnes , ·
a. · OpEHa~i9ns· Group; ' ·
. connected·with 'theassessment.and collection of
- . taxes, fees;'and charqes; . ·: . ·- : : . . . . . . b. Legal and lnspe~tio.n Grou·p; . · .
·.C. R~sou"r9e MaAagement "Group;'··.' .
3. · giecµte judqrnent ln all cases decided in its favor. d:'· )nformation Systems .Grt>up. :· .,.: · ·.. .- : ,.
·by the'CTAanq theordiriary courts; and: ·.. ' .

.
· e .. Tak Reform and_.Administration·Grot.ip·.anct-
· 4. Give .!;ffectto and administer the· super.vi.soiy~nd : f. . $pecial Concerns Gro"tip . . . :: .· ' ·. J • ' •
:po"ttce·powers conferred uporritby tne·NIRC and ..
otti~r·l~w.s (N!RC_, Sec. 2) ... : .· .: · ·. :·. · · .· · . ·. · · · .
,:ti.a existi~g BIR·.Organization.al Structure does not · ·

I
. ,.
only-_.yhen'
0

: . Th_e .. BIR. m,ay .clalm ··police _poyver inclu~e the newlycreated positions of additio?ar2_·
.: necessary in the enforcement of itsprincipal pqwer.~:jx'.. · Dep~t~ ·<?O(llm1ss1oners · (T~x Reform and
[\ and _duties consi§ting of ~he "collection of an. nati9'lial~i(jf.·Adm1rnstrati?.n _Group·.and Sp_e~~al _Concerns G:oup) .
ff internal revenue taxes, fees; and charges, a·n1;,th~:;~11~ a_nd.the. Senior 8eputy Ccmmlssioner. BIR-continues
f.i. · enforcement-of··a~l,_forfeitures, penalties,·and t~n~-~~''-"i,;)to
[. connected th~rew1th". (Vera v, "Cueves, G.R. ty'd. [k~-~?J·~9.Z.~T~sioWfJ.(/d.J .. ·
=.
~eaded .by th~· CIR and 4 :.·Deputy.
. . . . .·
~, 33693-94 May 31 1979). · · · _,,,,{;/'·· .,.,i:T·t"L".,_;~,~-.,.....,;fti · . · ·. . . ,
~;.c. t:J ·2. ·· Fieltl.c.tS'er;vice.. - the Bl~, operates under a

,· . ·
~~ · · - ' - ·. ' ·. · r.'i),-.?.
(. Agents in.Tax-.Collectioh .· .· . . Cf<; . ·. /1--: .decentrqlfz~dsystem primarily charged with t~e
T.h~t0:flowin~officials are constituted·3\8 -aglnt~.;9~tl'le("'~~~i .· , operati_~~Q.r~ctiv_i~ies .of the ~ureau (1 DE _LEON,

it\ ·
~-
,..,.
·
·.or
Cof!lm_iss.foner _ln_ter_na~. Rev~J:i-~~.Gl~};1n_the I ·1h1.·
colfect_1on of nab_on~l.m~ernal r'~~nue.y~?.Ce..s:~. ~ •.
1. · Com:mJ~sioner. of.: ~USfofr!,i2-.:!~_~nd.., ~ his. rn}:~ · // .
p.__84).f. ~ .\ :" . . .
H . ~~ . . ·. - . ·
.. .

a:-=-teg~c!b,I\L-:wces: (ijO) - -. for- ~~e~t[V~ .

~ub~_rd111ate~ with. r.espet;t_Jjto 1Qe· ·~9Jf~ct1dfl:.of t,J · ._. . ~~cfmJji.~tf~ti,~and.contr~I. tne _PhJhppmes ·
.- . . . : .
:, .

. · national .. inte~n.al revenue ,t,.a?<~#-ri;,~r~jmpcfrt~jJ- h . tl_~s!~b~,e~teli~1ded.mto RS)s ~h1ch dir~~tly '-, .

'.
.
go'ods (NfRC, Sec. ;12(a))_;. . ,-~p' -\~\ . .}! ~i . , ·
t~r ·. execute a~d .1mplern!3~t: the· n~t.1onal pol,ic1es .

I '.;
1,:~.
~\
2. Bari ks duly .acc;red1ted·by.the C'tR M1ith'respect to·
receipt: pf payments of inter~c;II {~)JI~ t~~;~~,-j-f;~~:tt)•/;,l!!:;Jf1Jf.ice·

$ec. f2(c)); arit'l .,

tf: 3. Withholdlng·t~x agents withfesp.;i~t~.iiicome·
:. , · ·. M'" ., . ,
71 .and pr.ograms prescnb.ed by, the Nat1o~al

authorized lo b.e ril?de. throughio_anks -{:rflipC;-'~-,.L~"'-n -revi!nue law,;.: Each·office·is headed by'a
<i., .
fpr th§l. enforpef!l~nt of. i!°l!emal -
· ·.: .Revenue . Re~ionaF .' Dlre~tor.. (2. · DIZON;
· . · .. Taxation. Law. Compendil/m, (2015), p.55)
· · · payments. .subject ·to· final:.- and credi~al;!le ·. [/lereinafte_r:_2 DIZON).. · · , · ·
withholdi1Jg taxes (Nlf:ic;-Secs_. ·5-1.'ahd 58{ ·. . . · ·. · · ·· · ·· · · ··
· · ·:: : . , ·.. · . · · · P9wers...and Duties· o(Revenue Regldr:ial
·Headi;r,qf t~e apprdi>riate governmept.office and .t,is- . Director~~ (1A,l~PC2:,Ep.) .. · ..
subordinates, prevlo1,1sly 1n·_charge'with tht\l coOection .· i. . -Implement· laws, . policies, plans, .
of .energy tax .(NIRC;- Sec. 12(b)J, no longer. hal'.ldle '· .. programs, "rules. aniHeglJlations 'ofJ~'e :. ·
the ·collectiolJ .of :said tax· because·· the -sale: -of . . departm.eni.o·r agencies i,n the regional
electricity by··: gen~ri:itio.n,· ·.fransmission, .· and·· . . . .. area; : .· . . . . . . . .
,...,.'_'. · ,.dis.tribution compJjnies ·i~piow subject to VAT (NJRC, . .Ji.· ·-'~dtni~\ster· _: aJ~fi, :enforce . int~irrial .:
t ·.sec:- 108(c!)), 'a ·national is:iternal·reve:nue tax; to ·be . reven!Je l~ws, and ~les and regula~i.on~1.

i:b\ ... co.liecteq b'i, toe BIR "arad..'noiby -~rix other.government

~·.·.. ... : . j:...
'.' ·.. indudi_ng th_e· aia,~E3s·sment ancj collection ..
. r;:~ltternal~~v~n,u~ taxes, charges an~
:'
~ffl.cf '·:.. ·. . . : .·· .. ·. ·, .. ·: ·.
f . ·BIR· OrgaA_izatfonal Skuct_ure · · . . · iii. Issue .. Letters: of Authqrity: for lhe
1. · Nat_ioni;i_l Off.1.~e ::-- its.:fu_n_ctlon_is. ·confined ~C? t~e · · exaf01nation,_ qf .taxp~yers · within· the .

I'.· .· ·
·. ·
}· ·.
general ·-:direction, guidance,· and· control of the .
···erytlre 'operations ·of :interna! revenue( seryiee;
.na~onal . P<?)iC¥_ . formulation, ·. and .. prog~m
region; ·
· ,iv .. Provide economical; . ·efficient,
.. effec~_ve se~ica· to V,e·: peoplE3 jn
and
· ·

the

!':. p_lanhing . . f9r · . ~ffic]en~ ·· ·.alic;I · . effective. ·:are.a;

~· . · .
~· implernentatiori .. of internal· revenue law. ·and
~: · regulations (1 DE LEON,'p. 83).

I
2019 SA!'l SEDA LA.W CENTRALIZED BAR OPERATIONS I .251
·,.
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 ··.TAX.ADMU'·~iST.RATION.ANDEN"F-ORCEMENT·
. · SAN !3EDA LAW C£NTRAJ,.I.Z£DBAR OPER/IT/ONS- MEMORYAID 2019 .
. ..
v, .Qoor~inate .. with" ROs. . or · .other · customs of th.e BOC. ~ay; as ~ matter .of.policy,·
.·. ·departments,.bureaus anc .aqencies-m : be assigned ln.thelrhorne province; Thispollcy
·· 'the are~ · ·. · will befollowed rigidly' in all_ rnatters.involvinq the
vi. Coordinate with LGUs in thearea:' · .assjqnment .of: personnel, ·as well: as· In !he
. vll, gxel'cise:contrcil and-supervlsion over re.orga"f)ization of the BOC. and -the .BIR.. This
··. the. <>ff.leers and employees within the: policy, shafl not;' 'however, include. mirror-
: . region; and :. . . . .. . .. personnel' of ·the 'customs cir internal revenue
·_vHi, ferfor'm auch other functions _as may · services (DOF:o,:de,:No; 8~70), .. : .
. . be . provided . by' . law' and. -as. may be· . .
qe_legated·by the Cl~ (NIRC."~e~. 10). . Duration of t~e Assii;Rtm:ent .
· . . · ·· ·· · · No, provlnclal revenue ageo~ ~~-a!I be stationed ....
b. .Re~~n!.'.Je. oi~trict :o°ffices. (Rt)O) i:: under. .· ", . lq_nger than three years· in -any one 'provlnce for
· each .HO arid headed · by· Revenue Disµict.. · mor.e tha.n'two years.' in Manila and' other,'citles
. Offlcers., who 'are under . the control. and. arid' places where large number ct business
· .~upenli$ion of the Regiooal Director. It shall estabflsnments.arelocated, t_t1e territory sh~ll'_l;>e
: . be·the ·duty of every'RevenueDfstrict Officer· ·, divideel tnto districts and the necessary number
· 'or -other .int~r'mil. revenue .. officers and '.-of field n_,en shall be asslqned toeach.. disttict.':No
. employees to ensure that all, laws, and 11:Jf.e~ . · . 'fi~Jd- man Shalt be ass1gf)ecf to. a district for more
· and regulations af(ecti.ng national'. re~~="=.-..,.J.~an ~ix months. (Section 59 bf E_. 0. 94, e. 1947)_. · .:
are faithfully .ex.ecu~ed ;Gl':)d 'corryg~~'cl- w1th,-rr- T :1" ~ · · ··_; . : : · .. · . .
and to·aid in the·preveotion; 9,e!~~IJo~~n_d U 1~~ \1Auth~/~ of ~even_ue Officers . · · ·. ·
punisbme.n,t.. ?f frauds ·,or ·deli~'~u~n~ie~ i~~=-~fR.el!;'.P~fficer i~ .one w~o · is assigned .to
:connecU,ontherewith (N,,.-{(_~~c.'ip ·: . ., c •._.~ . perf-9rfn~~~~s-~$nt f~r19~iqns. ~e may,·pur~~cmt
. . ·. ·· · . . · .. f,,,.· -:<~ . ,~·..-._" -*
Dyti~s· !)f Revenue @'i_s._!J,it:t,.,· ffi~ers ·a11~ ][ '\o/ R~Qlfn.at~f~E>r'~(E?<~e): . ·
"'~~~!~of~\th:onty 1ss_ue_d ?Y the R,~YElnue
. ·: :
Other Internal , ~.efenu'e~JOffic~er:S .. "'. aJfcf ~~ . h\'l-.. ai Ex@~Jn7d~r.pa·y~rswith.inth~.Jui:isdiction
Emplo}'ees; · . . ~·r-, J .· ·-..&1)) . · __ ~. of. lh~Jcl1stf.1ct Ir) order to coJ!ect the
i. · 'Ensur~ : that· 1t;).ra'ffs, ~y e~, ;__;,f=~ 1rur. .ti",,,,.,.. . »_ corr~ct:sm-p~nt oftax; and ·. :. ·. ~-
. · ·. r~gulations _··~ff :~rrygt matiijAa Jii. ~if];.'
. ·i.nterp~ ~:t .a · Rec1·· · ml?n1 !he·· ~ssessment. ~( ar:iy
. rev':'n~e ·.a~e.... a~9tt.rl1x exec ted·
. c;omph.ed.w1th; qnc:l"i.:..t ~ .. . \.
-~·~mfuit.a1.':3"
, ;;;,;---<
h~1,x·
;_,~·.defic1 dtJ~ m-1!:ie same ma.nner
:- . ~i'c;1t the· sc11d_· ac1s co_4ld.. haYe ~en··
·•· , ii. A~d .ir:i ·.the. pre~eflyt5jlli. de~\~\·an~ . -~t,1) / -~pei:f1ntretf1 i,y the . Re".er.iue Regionpl
. P.ur.ilshmeri!off(~e:I~ oF'~eiinetue._i;i~ts ..i!J'.~ ~(ff;'r/.,~l DlrJctor hfrtnself(fVJBC, Sec.:13): : .
·· · · connectionther~~h (NIR~s°e"t;Jtlr:t_)t' T: : h~Y~:., · · :· · ,
' ·.: · · . :... -\_..:. ., ~-:~ · ~iopi:>e _Again~ -th.e.G·ovemmentRulEf . · .· ·
. ~dditloiial Duti~s 'otev~ntl~··or~f©JE1'-fn ~-J,~filetj. rul~f!J:i~t...i,ri 'th.~.Perfo~a~ee. "of it.s.. ·.
Officers: · .· . >' ~~~-~.::,;:.~.;!.{)'O'V~men!@-L..;. fyf.ict1~ns, . the State ...canpot be ..
·1) .. Exami,nethe·.effici_e"i)·X,_~-~6p9er~!s(pptfe~~¥ ,JWe 'n.eg.ligen;t acts 6t its" .officers' or
' .and;en:i~loyee's.of t~e BlR,.uf:i<il.~.,!1is.·~ /,sm.~~t~~Wf1ere:_is !h.is .m~re trus th'an in _tfie fietd of
. · supervision; ancl. . .. . . ~.~ . '1.\ !..t~~ol'F"·(Cpmm,ssJOner of. Internal RQv~nue v,:
. ·. . 2). R¢poit in writ.Ing to th·e CfR; thro~==<*procter.·.an_d Ga(J1ble · Co,. .: 'G.R. No.:· L-$68;38,
·.··~ . · .· .· the.·R.egi0nal.Direc,t9r; a·ny·heglectof ·· · December 2;. ·199.1).: . · " ·.· ·_.
. ·. i:Juty;"incompefericy, ~elintji.iency, or:·. . . . . . . . ·... :. : .. ' : ·. . . '·': . . .
. malfeasance. in.office.6t.a_ny.intemal :· .· Rule o·n. "'N~ Estoppef Agaln~t:tlie.'G,o~errif'!'.'~i,t" ·
', revel')ue-·officer: of wt)~ch. h.e.. m~y . . .·,NotAbso1ute · . ·. · · :. : . · . · . ' . .:. .. ·
a
. obtai_fr knowledge, with.' statement· A~mitte.dly,. ti'\e .Goveml'!Jent·is not estopp~q: from·· .
. .of.. all Hie-facts and· ar:iy eviderioe ... collecting. taX!:)S :regally.due· beCcilUSe .of mistakes_ or .
'~ustain-i,ng . each case .. (NIRC, .Sec.· errors.· ofits agen~s:: Byt like other- prin.cfptesof. raw,.
. . 11, par:' 2).·· . ' .. : . .. . - . . this admits of excep,tionsi_n.tlie lnier.~st9qusticeand
. ·· . .. . · · . , . . .· .. ·.. . · · ·. · fair pfay, as Whe(e·h:ijustice will result.to .th'e· taxpayer.
Proh"ibftion agafnst_the.A~s)gnment.qf RDs Qi'-.· -: · (C.ominissioner. ~f ·1ntemal Revenu£i :v.. Court of ·
.. RDOs in- t!)eir' H<?iru~Pr.~vin.ce · · · · ,. . · ··. Appea..fs, G.R. 7'!6. 1179112, February_6, -1:~9?)";
· . -,Pl;Jrsuantfothe pro.visions ofSect)oiJ79. (B)ofthe . · . · · ·. · · ·· ··
: .Revi'se'dNlinlnistra'tive Code, in order to further . J;:ff~ct 9f .Errors:co,-nmjtted by Tax: Official~-' : · .· :
improve .. the·· efficiency and · .effec~veness of. : · The Government'is· nof estopped by tl)i,3.mistakes or
lnt~rnal r~venue and ¢ustoms pt;irsonnel,to avoid . errors· ·of its· _agents;' erronedus' application and:
fratemation:~s:id co_llusion ·between tax collectlng en'torcementof.la~ by public officers do.not·block ttie··.
officials ~rid taxpay~r.s, arid the interest ·of 'ttie- s.Libs'eq_uentcorrect application 9( stat-ute.s·(Philippine.·
p4plic.seryiceso r~qtfiring, no ·regional director qr· · f3;1sketb·a11 Association·v. ·court .. of. Appi,ais, G;R. N9. ·
revenue dJstrlct officer ofthe BlR and col!ector of .. 11'9122, August 8, 200·0). · ··

252 I 2019 SAN BEDALAW CENTRALIZED BAR OPERATfQNS·. ·

 ·TAX"·ADMfNISTRATiON
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ANO.E.N.FORC"~fMENT:·
. .. · SAN BE:DA LAW"<;Ef'ITFJALIZED BAR Of?Ef!ATIONS - MEMORY.AID-2019. . · .
' . . .

l· ·.it is important tq _c~nslder ·that a- fav.cirabi·e.)i~ding or

~:·. position fa ken by !!:le BIR in an inve.stigation-inv_olving
r-- a. parti~ular taxpayer should not" be. a ground for.
·f according the .sarne treatment to a different taxpayer
,;.; in . another inves.tigation if -in that prevlous
t-. investigation·, an error was committed (Tan Guenv.
t: Court of Tax Appei[JIS, G.R .. No. ·L-23676, April 27.,
f )967): . · . . . . , ·...
...
_;.;' _Exceptio.i1.: · For the · purpose · of liafeguardinf •.." :
~ : taxpayers from ·any .unreasonabte examination,.· ..
\··. investiqaticn, .or assessment; our tax lav..t provides a . .:
t. statute of limitations in -the collection of taxes. Thus, ,..
{ the l~w on
:prescrjptio.n; bein~ a remedial__ measure., .
\\;.. . shoultl._be'_hberally construed. ~n,_orde~ to afford such :··
\: . protection. As a corollary, the 'exceptions.to the law
t·. _on prescrlption-should perforcebe.strlctly construed
{" : (CIR v. Goodrich Philippines tnc., G.R No.. 104-171, .
i, February. 2~. 199.9).". · ·
:+t ·. · ·· ·
· · ·· · .
b. Refunds of interna1 revenue· taxes, fees_, or
other charges; . · · ··
.C: . fer\al_ties impo~ed in r~lation thereto;··or
~-- · Qther. 11'\atJ~rs arising \mder t~e NIRC ·or.
.. ·: other l~ws ad.ministered· by_thE; BIR . . ·.
·· Note:. These ·are subject t~ the. exclusive app~llate
·· . . . · · ju(isd1¢tio"n of the Ccit;irt_ of Jax Appeals.. (N/_RC, Sec.
· 4) . .fPl~ase s~e -further discussion ori· the· jurisdiction,
ofth_e CTA) . . .,
Other Rule~ untler R.M,C>No.-44-01 . · · . . ..
A ru_lin~ by t1'le BIR ¢ommissioner:~haflbe_presumed::
VA_LID un!t::ss. modified; "t!:!versed; or supefseded ..by · .
~he Secretary.?f Finance (R.M,C. No. 44-01, Sec.1): ·· :
·: A taxpayerwhoreceivesanadverse.rutlnq from the
Commissloner may, within 30 days from the date
: .Qf."rec-~ipt of such.rulirrq, ·seek its review; either by .
· ·. . ·'-:lf~·.' .~im·selfor nls d1.4Wauthorized representative (R.MC.
. · · . ,,~Jf: .,.'M . No ". 4;4-01, .Sec. 2), r .• . . • •·

. :" : . Po~~Rs· OF ;iiE

,- ...
.. A\ey_ers;l.·~r_r(lo~iflcati~n "(:lt1 ii;\
the BIR ~uling ih..:111 .
· Vf P' ,-1,;:-Ji/ terrninate its effectivity upon· the receipt · "by . the
· . ·
"of
·.. C_Ol.Vl;MISS~ON-E:(~.._op IN'fER.N1¥l!i.1!~·1;~~~Ji!~y~~rfts1RQfttiewrit~~n n:otice ofre,jers~l.or. ·
... . · .. : . R.EVENUE- _.;f;p .
_moo1fi~ti~~pich~v~rca111~.eart1er(R.M.C. {IJ_o.1'4- :
;:i · . ·. . ·.. . . .
?1: Sec/:_:P;~·p). r?:>"· .. . . . . . ..~. . . _·
:.. . .
. ... . . ,.
. . . '/'~' . v4i 1 ; ..,·; !· ~ \ . . .
. ·· .. ··"2 f~-: · , i~·} T.):1¢, ~1;crE;J.~Qi 'Ot Fi_na~pe- m.:1y -review tne· rulings
.
Poy.,ers <:>ft!le Comm1s_sl9ner.. (!P$>'.M AJ~. p, ..motu pro'pJio {PG~ Order No 7.-02}.. · . . _ ·.
-1. ·. !nte~pret tax-laws; ,r:fr;~ ·~"""'f; · ·,: ,::~ /,... . .f ~-. ~ _· .·'\>- . ·. . • ... · . : .
. 2. ,Qec1~e ~x cas_e~; .· .'·"t:.~:"7 ...-:.-.:~#~--~-, · "'-., .. · ~ _3_. . -P.~~~t1Pi{~t,>~.3!'},l~formati~!l·ant;t t°c? Summot_1,.
. 3. -Qbt;i11"). mfon'.!1at,on and \Q[s_umm9~i{f3xan:i1rte._1fj .· · Ex~\JiJ,ti~;_;,.,,!~i).<!t-:-1'akeTestimony of P.ersons
and tak~ test1mo!1Y of per_son~?'-·q:'L·.:;.·. ~ . ri! ' . (als~n"6w'WasThird Party.· Information .Rule)
4 .. Mak?·· assessments, anc:f pre~l:r-ifie :'-a'.c;!ditiotial ~Q .. ·
(N~R9,S~c:·s; . . . .. . : .
requirements .. f«:>r tax adm1"nistrati9J · ani:L ~f';•,p ..;?$ , , ·· . · . : · ·:. . . · · · · ·. · ·
•. ,
,t
. . enfor<?em~nt; ... · •.
5. M~ke ai:rests and sei·zures; .
· 1
·-~"rP~'· :·
•.,.-.,-:,1J/!!fiJ,~V!P..9,~Ff.s
t/:·· · . 6P- . :·
oft~e._Power: (AM~eCoE}. ·..
.af.""To-_Bs.ce_rta,n the porrectn~ss of a,:iy retun:i;
·

~{: 6,- A~t~o.(i~yto _dele_gate.p_owe.~;- . ·_..'.\\J..~,fJ\J · : .. -: · · b:~ To.Make a ~~urn._w.~_en_~one has b~en-made;
jz" . 7,. Ass1~n-,ntema_l"re.venueofflcers;·' .. -,;;tr;·.:.J, .·. . ·12· : To Determine _1he.hab1h{y of any p~r~on for
i:? : 8.. Impose duties."on certain· officers; ·and· . . · My internal revenue tax~· ·· . '.
!t. . 9 ..•. §l!spend_ b_usines~ "operations of .a· ta~8ay_er. · d. . QQ.ll~ct. !o" from
ahy person. liable -~or ~~y. ·

r.:.
·~·-

: .
·. :

. : .par, 1)\
· , .. .·.
1: .· Powe.r to "Interpret'
.

.
:·

. ·. :
t~~
.~·
·
l~ws (N{R.C, Sec •. 4,·
: .

·. ·: . · , · :
: . internal.revenue ta~;..and . . . .

. . . ·. :
· · .
. . . e. "To·· .5va!u.at~.ta.i ·:compliancE;i. (iNGLE.S, T.a:X. ,.':
M~c/.e Less. Ta>;if!g:.A rEw1)Wer with .Cpdals. ·
': .The· powerto interpr~t ~~e provisi9ns :of the Tax·C6de . /ind· · ·Cases .. (2018), p.377) . [h.ereinattir- · .<· :
· and ·other· tax. ··laws· . ~hall ·be:· under.: ihe: sole •. ·... · INGLES]. · · · ·. .: · .. .
-jurisdi<;iticm$: of the Coinmis"sio~er,:subjec~ tc> review .. · .. : .. • · ·
-, .. by t~e: Secretary· pf ·.Finance.: The. po~er.·to decide Extent of.the P.ower: (El_S~TC) ·
t · di~puted.s:1sSessm~nts, r0ft.Jnds·~of int~rnal..revenue . ·. · .~· i._. .To·SXamine 3':)Y book·; pap.ert 'record. or.
-~· ·. ..taxes;fees an9 other charge$;penalties imposed and . · _.-._ , . . .. :· . oth_e~ tja[a which · may be rE!l.evant or .
.:. 0th.er m~tters-vi0lafive _of- the Code or other_.laws is ·· . ·. . : . m~terial. to· s~<;:h inquirYi ·and : . .:_,.
.. . vested· in tlie Coriimisslonef, sutijecf to." appell;3te . . T~e power-: fo: require · i:i·roc:1uction · Qf
juris~iction· of the CTA (Dt,SCJL, N-(R0.(2018),.p.1~) ... · bOQks; papers, re~ords, or :other· c;jata is
[hereinaft('jrDA.SCIL, ._NIRC]. ." . .. · ·· .. · .
subject 10 tl:le rn\e pre"i;crjbing a· p-erlocj to .
2. ··Power to Decide Tax Ca.~es· (N/RC, Sec. 4, p~r.:
pre.serve. :·books. an<;i· other. ·i:-eC?"fd_s.
Beyond·such period, 'the-document_s may ·.
2) ... ·... . : .. ·. no·: longer be covered: by a subpoena
The CIR has the power to decide: (D.RePO)
a:· .Qis·puted ass~ssmen~s; ·. · •
duces tecuiti (/\I/RC, Sec. 235; DJZ<:>N,. ?
· ·supra at 18). ·

2019 SAN Be.DA LAW .C:ENT:RALIZED 8.6,.R OPERATIONS

 T AX-·ADM IN ISTRATI.O
. . ' S~N·BE:DA LAWCE:NTRALIZED
N AND. ENFORCEMENT
. . . . B,1R OPERATION~~ MEMORY
. AID:2019 ·.

ii. To obtain, ona rl';)gular basis, [nformatlon
.. from; ·. · : .. .. .·
· 1·) Any person other: than the. person. ·
. :' .. :whose internal revenue tax liability is ..
. . subject tci.:audi( or- investipation: or ·.
2).· Any -offlce .or Officer of th~ 'national
· arid Ideal governments, .government
. . . agencies, .. and ,' . Irrstrumentalitles
'inch,iding · BSP and GOOCs· (J<.JlRC,
,. Sec .. ~ (B)) ... : ·. . .
Such .. information . includes . (but n~t
limited to})he following: . '. -: .: ..
. a} . Costs· and .vojurne production;" .
. l?f Receipts- . .or 5$:!)es'.' arid :gro.ss
. · -: incomes oftaxpayers: and .. '. · ··
· c);.: Nani~s;·: .. : tiddr!;)SSes, .·and \,·
fir:it:incia!' . . statements . . · of "· ·
: corp<?r~~Ol")Si_',.: mlitu~I .. J~.,....,..;.-i:cc::,,=,~· · :.· · . concerninq: .
· · C?l!JP.ah1es,. · · · .. . 1ru;:a1'ance1ru .. · }, . -:"
- . co!'?.P.~n!es: ~.e~ioqaffip~ting :· · J . .;/}! .~·
. 1.-'f~P~PJ.
. . '· H.ea?q.!:l.~rt.~rs: .;;,9f,.~
't.
..
· Note: While·the ·supreme ·court recog~i'ied
the. power Of .'taxatipn of goverilment, if
: however cautioned th.e governrrient lo
exercise such power to mlntmlze the injury.to
· the proprietary rights of a taxpay~! (Pilipinas
Sbe'JJ.. .Peiroteum .; ·corporation.. · v.
Commissionerof tntemeiRevenu«, G.R. No.
172598;·December-~1, ~007) ... .: .
..
· !v .. :ro tak.e the I~stimdny·pf the person
. concerned. under· oath, as:. may be ..
.. .relevant ·.or-' material to. fhe. inquiry
·. (NIRC, }Sec. 5. (DJ): ~rid. _., .. ·~ . :·
· v .. ·.'l'o .. cause- reve·nue · bfficer;> and
·. employees to make a &arw~ss from.·
·. ·\trtle to tlmeot any rcvcriua.distric(qr
. . ., r~gion· and . .inqulre after and
. ,
. . . 1} Air persons who.. may be liable to
- '. pay.internat revenue tax~f;·and .
..(_ . V,/~~.· .All persons .owning or l)av11")g the .

·
I
. rnultinafional, -~m~~,.Q!~V~o~nt-...:,__..
. acco~f'\1S, . / ssl!>~JttJ.Oi1~~,,..Jo1r-it
.. ..., . ., · ventures of>..,-~0P,to1a, .a~~
.. . ;i.A' '\care,.· ; . ll\;:tn<?gemen!,· .·. · _or-
·~~~':'(_'7 ~A·t1,ossess19J1 of a·r:iy obJec;l wil.h
"\W°. ·· :~, ,j-f..Jlr~spect- to Which . ·a 'tax ·. is
. . .
· · _.,.
. ·reglst~rewpartn,elship,/ndth.eir 4.:
. . . r:nem.t;,erf .,,(NIRO,··$,ec.. 5 (B)}. · ·. 11;Ji,~
.t&,: . ·l,
. .'.. a
'\f:t0· ,\.\ . , i.QiP.osed (NIRC, ~ec. 5 (E)). .
· . ·
...... ·~nder, ~ti:e .
Th)rtt'
. ·. pr~9.ram,.the BI.R C.~.f"! ~ss
.,:~~i]torma~?.n' .:4]r.~~ rA~!?~o~~. ~t.~~~~=r-~7r~s:e~~!~a~·~!~esc~::
..th~.·reC?rd~....;..·" ·a#~Admi,!;!1strati ·1t~'d 'Enforcement· (NIRC, Sec. .,..
• .. the t~J~ayers' .~VSJORa~Slt.Or($ h~fS 'f~ .....§Li,~~ . .A ·•• , ,• , '• .· , , .· , I
. co.nfirrrr'qccur.acy of th,tf'.ecla.r te'S":"O~":"'& · /'-}.~ ~ J:,wq;,4 / . . . ·. : ·
. ·p.urcha~~s· i.n· the· ·1~:GretJ'm~:.\fii,t\s a~ ,rJ.~.~({i7ot!tf'.e·~~~,;r:·. _ ·._·.. : ·..... .' .. · ·. ·:: • ·
. m~r~as1~ly pow~rfu~~· n~ {o\t-eff~(li_f.~~~ ·'!.. ~/~~'-. ~':IJ~ation NJ..
of·. ~eturns ' . and
to <jlS'?OVe~ ma,ny inst.a · ces ~fl,(!~err,ei9~~@' ~~ glt.i . Dei'fmlnatiot of Tax Due: Plea!ie refer lb
(R.M.O 30-2903: R.M. 3'4-209~ o, :&{..,.._--:--_ \·~ ..r i-, i·
·
·.,r£ "' , l'' · : ·, · (NJRC ·s
. i0<!7/R.Af..O·OZ-201.?.iR/(O,_:??t/.t~fJiN-f:;;f?.)fr_,·r;:_;~:'.e.~~o~~u,.d1scu~s,o~ ... :. _: .ec .
. . ·The la~k of <,OnSen.t'°by tt:ie)a~P.af~O.~cre~"" ·: ·~~~~~~Pl .. t()~~k¢.Asse~s~en(S,ba_sed on..
·. inyestlg~tion 'does:.not imply :ti~~~BIR lvI.A~\.~e>"
• · obµi1n'ed .the 'infb_rrnatlpn from third 1Yatt1es....,,.....~--"""."refer.
Best· Ev1denc.e_. Obt~mabl.e:_ Plf!a_se-'
f? Ta~ J:?&m~.d'.es fqr. 'ful~ ,d1scu.fs1on ·
. 'rnega11y·.o'r that info.rmation re.ceived.:.is:-ta1sa··, · .:. , . . .. . (NJRq; S~c.. 6 .(B)), · .: ·. . . :
. or inalicio.us; Ndr: doeS''the 'lack .'of:conssnt .- . : . •" ·~- . Au~~>FIJy to: .con!Juc;:t .lnventory~tak.ir'ig .
. ptecluci1{the: B1i:nrorti as'sessi.ng 9eficiency . ·. '· ·. : and . .'s.urv~il!ance .·,,.a11.d.:. ·~t°' · f'rescribe ..
taxes . on : . the. t~xpayer: · based· ·:an:, th.e . ... · Pr.esumP.tive Gross Sales. -an(I. ·Receipts:: : .
.'.documents .. "(Commissidner ·Of' 1nternaJ - .. · ·Please r.eff:!r·:, to. Tax· Ri:!rned,ies. for full
Revenue. v. Got1z.ales;· G:R.'. 'IIJ0.'· 1ii..J79: . :. ·. discu~slon(NI.RC,.sec:~ (C)). · :, · ·. . .
October..1.t '2010)... · · . · · · · · '. . d .. Authority to Te.rmir:ia.teTaxab}e:,P.er.Jod
· ' . -~, Tax periQd·rilay be terminated l(lihen: (Re-Le·
.ii~. To' Summon ttie:' tr~OPA).: .', . . Pto2) '.,.' ·. . - . . : : . . .· . ,• . . ..
. . · · 1} -Personlii;ible..for 1.a.x; .' ·. i. /The. taxp~yer' is Retirfng from·.'busitle$·s
· · · 2}'- . Persbr1 'i:equired.to·file a E.etlJr}i; · ·~ubjecl:to tax;: •. .· _
.. ' ····3}, Qfficer or.ernproyel3.of such pe'rsbn; . ii. The·.. iaxpayet .!~·infel')ding·:to teave .the·.
. 4 ), . Any .. .per.son· haviri'g · . fosse~sipn, Philfpplnes·;· . . . .. .
c~stody,: . or . .'· ·care ·.·of ·.· bqo.ks of . . · iii, tt:ie taxpayer'is.intendio.g ·.t6 r.emove his
. accour.its .. and ·. otli.er'' ....accquntii'lg : . . In
. Property t.he PhilipJ')Jne$. qr. to. hide or
.. records 'containing entries relati.ngto . ; . : . , ·conqec:il his property: ·or . . . . . .· :. .
tlie busi.l"\~SS of the person l!a,ble for 'IV. The taxpay~r . is. perf9tming an ·act
tax; or·.· · · : . · : terid\ng to obstruct.the Proceedings fpr ..
5) inY. other pe,rson '(NIRC,Sec,5 {C)). colle~~ion' of the tax· for pa$t o~ ·c4rrent.
·q~arter or year' or to re.rtder. . 1.he sari'\e..

. 254.
..
·1 · 2019. SAN.SEDA
.
LAW Cf:NTRALJZED BAR OPERATIONS·
'i
 . . l : . : ", .·.''; .·. ·.•

TAX AOMIN.ISTRATION AN.D E~.F°~··RCE·M. ENT~J-

• : SAN BED'! q\W CENTRALl°fEDBAR OPERATIONS- MEMORY.AfD :tof9 . . . ·. .
fii¥iU MUMME ¥ •

totally or. P,artly irJe,ffective (NIR.C,' Sec. of' the .'fQ{eigri' tax authority when .~ucli
'6(D)). .· . . · · ,I, requesting foreign ta~ autnonty has
.pro\,'.i~ed . the following information to
' Ett:ect of:Termiriation·of Tax Period.. -. demonstrate the ,foreseeable· relevance
The ~axe~ sh.~11. be· due .and_ 11ayable ofthe information to the request: ...
. ··iromediately'.-ali.d ~hall· be sut?ject to au· .the 1.) · -.The. Identity .df . the person under·
penalties. prescribc;id, 1,mless paid :within the examination or lnvestlqatlon.> ·. .
time· fixed i.n· the demand ·made ·by fhe · CIR · 2) .A statement of the informati<:ln being -
(N/RC, .Sec. '6(D)J. ·. · : , · . .. . . . so.light inclujjing its naturaand the· ·
. ·. · · form in· whleh :the.,.saic;I foreign tax
. e. 'Auth'ority to .. Prescribe Reaf· .. Prope,rty . authority prefers, : to. I receive the
. Yalu.es . . . .. . · · 'lnforrnatlon from the Commissioner;
·,. .The CIR is authorized to· divide· the '3) Tlie · tax · purpose for .whiph . .the :
.. Phlllppines.into different zones or .areas and· . information. is being·sougli};.. . .
. · upon ccnsultationwith competent appraisers . . . · 4) .. Grounds. : for· believing ·.: that ··the
.trom. -the private" .and public' sectors, . -, . ,•infoimation..requested,.is held'in the ..
determlnethe fair market.value (FMV) of real . . . . Philipplnes or is in ttie possession or .
properties located.in -each zone or area. For ·· control .. of. -a person · withln the
'purposes of computing any:. internal revenue· ...· . jurisdiction of the Philippines; .
'tax,. 'the Value of· th~ property· shall b~,/f-;'). .. ·, 5) To i.he.. extent known, the name and
is.
·. Jwhiche\ier.. higti'e~):. · . . _: . ,,11~ ~~~~ ·.. ,, : / ~dqr'ess of a!ly person believed to ~e.
.. ,_. F.MV as de.termined by t!"'e c;tR (referr~'<>.i~t: '. . :· . · · · in. ~s~ess1on of. the requested
. . to as the zonal value).;·or . : .· . . {!f{.:,.~~·~,~ .· ·. · · 1nformaUon; . ·' .
·.·ii. . FMV as .sh~wr-iin ~c.hedule of ~al~is {of:•:·".~'-!k:'!'7-'.,. . · .. ,~)'} ~tate~e.nt tha~ the- ~equest... is 'in
the Proymctal. and City Assesso.r~tFM.\'.l~'/r.:...-.:r}!.~~!~··!J.c<?nf~_rrtuty . w~~h -Ihe, . law .and
·. per tax declarat[oR)'{NIRQ~S~~6{E)),;~ · ,1
· ·. . ·. - · · . · ·(···~>:.. .(•!.....,,.~
f · . ··,. -~1\
.
ad,-ninistr.ativ~,.,practi.ces.of ·the said
· ltl\for.eign tax ai:ithority; and.· · ·· ·
ftif
f, Authorit}' to 'lnquir~ intQ ·Bc;11~Rf
· <Gene.~I.Rule:- Tli,!:! ,CLR·c~,<;)t,lnfl!:liremto .' ·~
. lM ba~k .. deposits ..bf -1P
Sec .. 6(,:=)J. -: . . . · ·.... {;':!,1 · :-"~
.. .... .. . . ~ -~~j')
P~~~Jt:?.~j~ ·

tc.1.?<ria";er:::r-NtR~
· '.
~:-...: · ~,:
t~~. : . ~ · .
~.~:t ·
· . ~~at1:?m~ntt~?iHhe reguesting'foreign
· . ,· b.· laX: ,a.uthonty has. e.~hausted all
! m\,?t:is'·avaifa!'lein its own t~rrit9ry to
...--:!- . -.--:- . . o~~in tl')e in~o~mati?n; ·e~~·~ptthoi;e
"'(:;:~. ~~ wm1ln_ O!Vfl nso .. t.o,
p;
Except-ion~: . . T.;;~ v..:=,~:rlf~ '1%{)
, . The CIR ~ari inquire·in.t~ m~~b:al3~d~J?°:sit~of·.
tl')e f.olk>W1!')g taxpayers.• (.GJ;S)n.. , /"1 . -.- ~J<i~:.l
t · ·., : . ,:.... .· · · 18i)r'o~ortionoto. difficultico .(NIRC,
.Sec: 6(F) <JS amended by R. A,:,No:
. • 10021, Sec. 3).· . . . .
L .. A ,_q~9edent . to · d.etermiri~Jiil
- . ··estate (NJRC, $ec.. 6(F)); (1:~
Gr~~d~~,.:::.;.;~;~!1,.--... · . · ·. ·
;.'{?.r...:..:1!11~-~L-~~.ote:
,· , · .·.
A taxpayershaHb~,duly not1fied·1.n
:· ·
ii, ·.'Any·: 'taxpa·yer ·wt'ao .h~{ .fil6'.(hf an · : writing· ; ..by· the. Commissi6ner. that-. a
-· .... applicatiqn to compromise M~ta)::fiability . .. , foreigq . tax :authority . is ~eq~-~st!ng.tor .
·. · .. bY reason of :f1il?; fina.nciaf incap·acity to.. . ·..... : . . . .. exchange of -infopilation held: b.Y p·~~ncial :::· ·
. p~yhis taxes· (NIR.C, .Sec. 6{f)); a.rid · : . . . · , ·. . . · : institutions pu~uant .to . an ir:iternational -·
'· - ·· ... -;condltion:.Thetaipayermust:executea.' · ·.: . : :._ conyehti~noragreerrien(ontaxrn·attE!rs,
1 •• ·• • -.: waiver in: writing ~tiicti shall·. constitute. . : · ·. · • within sb~ty (60) <;lays from ·rece!Pt of sa)d:
. . .: .as a1,1thcir1ty·.of tl:,e·C.IR to inquire into tl')e · ·. . ri3ques't: (R.F~. Ni:i.'1.CJ..2010, ·~e.c, 10).· .. ·
.. :: ·: b.a,nk Clepo'~it~ of tt,e taxp~yer(R..R. No.. . .. .. .· . . ;
:. 30J20'02, Sec. 3(1);par2).:. · ·. . 9·.. Authority··to. Accredit' anci Reg~iiter Tax.·
iii. A specific;taxpayer/s~ubje~t.ofa req1:1est.: ' ·Agents : · . ': . .· ·.•
for. the·.§UJ?,P!Y of ta.x info~ation froin c1
.' .foreign':t~~'a.ut~ority pursuant .to·a :treaty. c·~i't~ri~for Ac~red'itat';9~ 'ot Jax Agij.nts:'
::.,..
. <?l;>ligaijon; .upo.n ... the . or(:ler. ·9f'. the·, ·_. . i; ·.'Profes:sio'na.1corripetenc,e: .' · . · · .
:( ~. ii. . : Integrity; and ·~ · . .
· P.resident ·of ihe Philippin~:S uncte·r- h.iles
.,=·. .and regulciti~ms as ,may be prescribed.by .. . . : iir. : Moral mne.sl>.'(NIRC;·Seq. 6(G),' prir. 1).:
\' :... . . . . . : . : . . .. . .
,,"' the SOF, t.ipo'n t\,e.:'recommendation··of
... · Pe'r.son~.qualifie.d.to ~e Tax·•Agents: ·.
,-._;~ . · tbe· CIR :(NIRG; as .amended, by R:A.
. 1) · Individuals; and . :.. . _'
. ~No.100:?.t: Sec. '3).. ·· :· . . .. • ·
. . ',• ·. . . .. 2) · _ Gel)er91 Rr:ofe~sional ·P~rtrterships
r· :'_ Cor.nmission~.r·. shall: provide _th.a· ·t.ax-
· · :.(GPPs) arid thei(·representatives.
· · who: prepare .and file. tax returns, ·
' · · · · . · ·, : · inforn:iation obtained· from ban.ks ·ancf
"· .
t . /· fina'ncia! .. institutions' pursuan.t to . a · - s.tatements;'·reports, · protests, and
... <?ttier. papers with er wh.o ·.~ppear
,' conve'otion or agl'eemE:n\ 'upan request
,!
,,.
. =--· ;2019'SAN.B.EDA lAW.CENTRAU~D BAR OPERATIONS 1 ·255'
f
'\
 .,..TAX AOMiNlSTRAT-JON AND EN.FORCEMENT·.
. . .. S~N BE~A MW CENTflt\OZED BAR OPERAT/ONS - MEMORY AID ~019 .

. . .
before the BIR for-taxpayers (N/RC, . · accreditation_ (RR, No. 11-
·s,ec. 6(G), par. 1). · · 2006, Sec.· 1, as. amended
by RR. No. 14-2010, · $ec ..
· · Minimun:, Qualifications· of . 4). .
. Applicants: · ·.: ·
a) lndividu_altax agej'lts (other than. · .. b} G.Pp~·.{ottier than-those erigag·ed in
· a member ofth_e_ Philip.pin.e Bar): the practice 6f law):·
i) . Must tie- a CPA.With current I) The . partners and · ".duly
professional .: license- from · ' autt,orized· officers · or
th·erPRC·· . . representatives. mµst meet. pll: \
· ·.: i,i)°. If not ii CPA,· he must have the ·qualifications ·of.an it:iefividual .
obtaii:i-~d-at l!3a5t-a degree ii) : t~x agent~ and' . . . .
Law, ·Juris Doctor (JD) or" its · ii) ·part,:ier~hip must- .be- registered
. ; .· eouivatent.. or. a_. Bachelor's· . . - __, . .--with.the.SEC (R.R. No:..11"20()6,
..-__: , ·. · deg re~. .in- Arts, Commerce, · · - ·. · ·---s~c. 4;.as amend~dby_R:R.·No..
- ·Of' Bus.inE!s·s· Administration. . ~-· · 14~2010, Sec. 4). , .
.. . · with at ·reast:>.-18 .. units in . < ·
.· '... acqot,fnting and/qr •taxation . . . c): .lncorporated _entitle; other.. than .
• I • . in . a .··coll.ege or tmi~~lt~~ ...-, . GPPs: . . . .

· · ·
: recognized' by fhei-::<Bepl;d, ·iu-
'Cf-:IEb m.in.a_J,1:1reign ~);.p9011 • .J \J~--""'ff·'Pi'<
· . \,.: . i) . The applica,:it-officers. or duly
'Jt '~ . · authorized . representatives
·. of known r~p~t~tfectu~Y.-,...."""°':.-'~~t
· recogniz,,~~(J;. '~{/ ·it~
·v ,· must m.~et a,11 the. qualfflcations
•· • ~"'- d\, ., .ot ~-n individualtax c!ge)'it;,and
. .. · · ·.govem1;i-ent~1YJ~l.'lf"l'ie ~~---:~~ "'°\::<)!ii}, ~~_irm must be registered wit~ ~he
r_n~st 9e~l,IEj!?~~r;,ionstr~~' ·x: · W _ · \ · ~~f~S~C (R..R. No, 11-2006, Sec. 4).
· -or preisent'~t::onvu,C!ling ,preof ,,m-\. .!fr:. · l · ·~f- -i· · ·. ·
. of si;t~cial c~fupete,nce.in tax ,?-if~. . l G~nE('efRule:Only' those who have
. · · . .. . ., matf~r.,a.x
m:f~ ft
,, .. _7-:;-:,,j
_P.!a~tice.;.,.;;· ·. . b~.~t'[..J_§§.~,f ~ with . a . · ce·~mca.te . of .
._,;,.}'!!,,-. . _Accr~1ftat1<a>~ ~hall be . 'allowed ·. to
I;
.', ; . ·;. _.. ~ •• 111) Mupt. ~ of.. 99<\~- :.
.. . . -~ . chqr,3g,_taf. .JG -~fi'fied mt ~\j;Jjil)~ . .l-iep~~lerrr=-1~ taxpay~r . _or . _tr~ns~ct .
' . - . ·. \J~~er~atl\i. bx~ :\~e~t. 2-;:.,, --.. .:; ~- J ~~us1;fess WI~) the BI.R m represei:,tatiori
· · .. d1~1~\1.')l~~ p~c;· ij,wh,· ··~Y1. . 1ofafa~fl:ffJ (RR. ne:. H-20~~... ~e~; 9)..
are~1ther·l'r,teml) :-, fth,.. · ~~ :9;:;; ·!·. f-:r· ... , .·. , .
' :, good standing:\,.. '
:iv) Must no\have'·b~Q_etof~9t.~r.'-
°'~
?hilip\irJ.~ ~ar .Or·~-~"'i : . .'. -::J ~
"-.;,V/ .f . ·
·Ei(ceptiof Tt\e_following iA?i~idyals are
. · .. a'iiowed Jo. appear and pract,c;e before·
· #iPth_eBl~ithout u,:idergoing accreditaJion
.· -~ith ari_d);onvi~t~sC'.t>-Y,Jwal;....- . . ·.'}.<'?. .• xbr~c~tdings: (IMO) . ·. · , . . _. _,
. Judg!lle,r:it. ::oi':','".!.J/'f.pm~ :'\\_\.,,,~:. D. '. !ndivi~ual · Jgixpayers actir:ig on.
,; ir;ivoly_ing·mQra'f.lttrpj\l!~.,or·Nf.A..~-~ . : . :1hei(own-behalf,.pr9v~ded, they
fou·nd 91.!iltY ~! -anf"'~c.t,,pr~ . · · •·. - · · .· · :.Pre.sent. · · · · · satis~cto,ry
_:qr:pissicm p~naUz!:!~ .. tmder . . · ,.. . • · idetitificatioJii ·' . . · •.
·· · · . th~: _Nl~¢;_.·or found guilty <;>f · .• ·.· . .. ii) ·· Members of. the· PhflippJne: Bar· · · ·
. . '·. ~ . . . . . - _· aiding··or"abetting or cai.i_sirfg. . . ·' . . ·:.. : not sµffering fro·JT).suspension or ..
. ·. ·': ~, .. : '.: , ; · _:th~ _commiss'iori·of any Sl,!Ch.:: . · _- · .. ; '·. ·disbarrrjeht. l-!<>W6V~~-1 t!)ey may ...
: : .. · · · .. · ·:offenseby ano\her; ... :· ... . ··. ·. at , their. :option,· apply- _'for·.
· v) . M.U$t\ be a. ·citii-e"n· qf .. the. · :· · . . · : -~ccfeditation; a·ad · .
. ·Rl'.lilippi11.es; i'3F1a · . · . ' · · .-. .- : · .. · · : . ' · iii) ·Qther individuals · pre~entirig
·vi)°. M_ust. ·ti~ve : c.omp!eted: at° · · · · · ·:. · ,., ·. , · satisfactory. · .. : proof · · of ...
, · · .'.· . · . . Je.asUi hour.s ·pe(yeer or ·a :·. . ·,. · . : identifica_tion. or,-au.ttiorityin any .
·- . tqtarof'tfhqurs for.3 years · · ~me. . o( · ··ii:,ei· .'. followipg ..
. . - ·of corifrnujng: .'professionai- . cfrcumstances·oflimited:practice .....
. . · edue~tion ·(C,.J?E) in taxatioh · .. : ·. ' -. : ot specja·1 appearance~:(MEET"' :_
. . · from · · _.traiJJings/seminars · ··. · · . · O) , ·. . .. .. ..,
.. conducted. by __ the -BJR. or . . 1). ·An-individual·re·p~e~enting a·
.fro:rrr prlvaie IRstitutionS·W_ith Member-' of .his. or her
the'number oMraining·hQurs. .. , . · . · ·immediate family;_ .
· earned printed Pn. . the . . ·2). f., regular full-time gmployee.:
certificates,and oblained not " ... representing .. ar.i Jndiyidual '
more than a year prior:t<i-tbe empl·oyer;·
. applic~tlon/reryewal . . -for .

"256 I '2019 SAN SEDA tAW C~NJRA0ZED BAR OPERATIONS

 _TAX . ADMlt:~HSTRATION
. .·AND ENFO-RCEMENT
. .. .
"SAN BEDA LA)'V CENTflALIZED·BAfl OPERATIONS i- MEMORY AI0-2019 . ."

'. 3) A bona fide officer or requtar . This does not require any.previous warrant, but it
"fi:JIHfme . gmployee · in must cover only violations committed within the
representation of his view of the internal revenue . officers. and
.. employer-corporation, employees (Id.). · -.
· association .. or- · organized
t . ·group;· ·. · Note: This does not violate the- Constitution since
4) -A Irustee, receiver, wha"t" is· .protiibitea . "is . unreasonable search and
'' guardian, admlmstrator, · seizures of wh"at~ver nature arid tor ~n:y p"urpos·e.!tis.
executor or regular full-time· not unreasonabie to . effect arrests and . seizures .
. • • z ; employee in representation · wi_thout. war.ra"nts if "th~. violations are ·done. in. tt,e .
... bf. a . trust, receivership, presence· of revenue officers. "(NOLL.EDQ,. NIRC,
guardianship'or-estate; and · Arufotated(1978), p. 10). : ·
5) An. Qff1c,er or a. regular . ·_ . . ;- :. . . :·:· ·..-: . . .
employee of· a .qovernment 6_... · Authority ~o o·eJegat~Pqwers .(NIRC, $ec_. 7) · .
unit, . . . . agency, . . or . G_ene.ral Ru.le: The GIR may d,elegate"the power:;
instrumentality· representinq vested in him··to" any subordinate. officiai with the
. said unlt, "agency;_ or rank .eq(jivalent to· a:
~ivision chfef -or'. higher'.·
instrumentality jri the.course. (JYJRC, $ec. !)-: ·
· of his or her offidai duties
(RR. _No. · 1_1~·2906, . .Se0,-. . ,;~. Example·:· .Delegati_on of. the 'authority to sign
. . 3(8)(1)): . · . · . ,11/~V7~ ·· rulings· 9ra-nting and/or · confirming . -tax
. . ... . . . . . . . . . ·.. . . {.\itflg;;;,.\ . exemptions, tax· Incentives, .and tax treaty relief
l~divi,du·c11s and. GPPs. .and , -ttieit::~Jt~ . ·
throuqh the .ruling process to. . the "Deputy·
rt3pres1;-nt1;1tives ·.~ho: : are .. d~pi~~;;.-J;:}?~!-~gpmmis_~~n_er.·qt: the . ~eg_al ·an_d Inspection
a.c~red1tat1on ,by.·t~-~ -CIR· a,'}2?ot ~~::,.'( t~'...;,.:~-..@J~P,rl~!~s1st;,mt_Co.mm1ss1~m.e;r: of the ·L.ega!
1·

n.'.'1tio_nal and- reg1on~~}l.~$f~di~tior;i~ l . Ser\11Ce'"'.(;!toup and Regional Directors (R.MC.

_boards. may appeal fW.ch,,,denral-~<1---.:,i No. 37-~pj(~'-Se9. 2(~)). · .. · · · ..
.the Secretary of Fin~9e,~:X,,hO· s~.,alr~. ~'.\" ... · {I 1 · \ · .· · ·
•.
c:;:
ruli: on_ u_re -~J.>f.>t"'1Y(~!*'rf:~~µays··
. · fr<?n:1 rece1ptoi\~~ppec1llra.11LJ_re
rule · '?n tht/;i;1}PPe~?~1thlfl,
·~-
. the\ r-,
h'rtr
ki\Exce"P.fio, ~:\ :, .. · -. .... . ·.
The /qllo, _1n~\powers . cannot be delegated: ..
.(~lCQ\L,,.A ,.,.-·----"'~~"!"4 . . ·.
. ,. ·.. ' '

. - , . :-: . . .
"r-· ·[!~. .: a~;/itfi~~ci,~;d1J:~b~:ul_g~tton.-of
: . , . ~~e,~c;tr~t~f~~~~~i~~~~~~~~~:
,,. . ac~re_dit~tlo~ {NIRJ?-_p;;f!t{gf,,G),p}fr. _ j.2 , . ~- . Pow.er t<;>·[ssue' rulings o.f"first__ilT!pressio_n~.or
~. 1).. ·. _: . . ·~ 'i\ · )l : . . J~iill"":'""l · to _reverse, revoke,. and: mo~,fy any ~x1.~tmg
· · . , · · . · · ·. · · J.1.w?.-· ·. 4 ,.,.·._i(i(J.t~<Jf':~!~~rlir~JW9 :of tne Sµrnau; . . · ·. . . . ·.
{ ·. ·h':• Authority.. to;. PrescribettrAdQi.ttc;inaf""--~i.>&,tu.,PoWerto £ompromise ·or: abate ·any tax ..
:;.. ·Proc.~dural . , . or. ""':' · ·: ... ~o!!urefenfary. . · . · . . ... liability, . ~xcept ·matters .. :W.hich, . may . be .
-; · Requirements. · ·: ·: . · ' ?~~· . . · · · c.~mprom,s_ed· by .the Regi_onal-. 'Evalu~tron
~:· · · Tt1"e qR l'T_lay.. pr~scrib.~. the mariner of .. Board· . , and. National · ·Evaluation. Board
· · ·::. c~rrip1,~·,:iCe: .wit~ . any ... documenrary ._. or .. ·. (PleaS~ rerer tO diicu_ssion :on. compromise.
'proce,;fural req:u,ren"l~nts in". cdnnectlo~. with. . .. . , under: Reme_die~C!fthe. Taxpayer); and . . .
the. submission or· .preparation of filianeial : · d. · Power.. to . ·Ass.ign.. or · re-assign · internal
. s_tatements . a¢compa.n;ying ttie. -tax'· retum . . revenue officers to e-stablishments wt,ere .
· .-(NiRC;· Sec. ,6(HJ). '. · . ':·· .. ··. : · . ·. articles._subjecHo exc.ise tax are.produced or
. . .. . . . . kept (N/RC, Sec. ·7). . -.
5. Auth.ority to M~k~ Arrests.and ·s~izures .. ·.·-
The·· CIR~' the' Deputy .::commissioners, the Nqne. :of· the· . ~xception~ . relates · to :the-.
~El\l!;lllUe".. Regional . Oire~to"rs, :. the' . Rev.el'}ue Commissioner's power-lo approve th!;)· filing_of ta_x .
· .District. Officers.; · and other. ·-intefnal: revenue coliecliori ·cases (Republic·v: Commis~i~itiec'of.
· offlcer:s'shall have· the .autti_ority .to IT!;l~e c;irr!3.sts . · -·. · . lnternal-Re.vehue, ·G.R .. No. · 130430, -{iecem~er .
. · anq seizures for: the· violation of"pena·1 Jaw and · · · ·. · .. · ~3; 199~)-
,·. ·. n.iles·or-regulaticin adminlstereq. by the Bl~. An.'J .
· ·. person arrested..shall be 'brought ~efore a .cou'rt, -. · Under 'S~ction. 7 of the· NIRC,. the· C~m-missioner is
there to be. dealt with according to Jaw {NIRC, .authorized to:delegcitEnq·hissutiordif:!atesthe powe($..
. Sec. 15). . . . · . . vested in him except;·· am·ong·Qthers, the poy.er to
issue ruliiigs:.of first impression. H:ere, the subject
· ' This ie~ipn sa.nctio~s ·r~id~."~hich gives inter~al rriatter·of the :letter-does riot involve the· exercise of ·
: revenu~ offic;:ers. the·, i;tuthority to· m~k.e arrests the power to · rule :on novei· jssu(;ls. It merely .
. . an~ seizures :(1 DE LEON, sµpr<!_ at -97). . . _i_mplenientedlhe revenue re_gulations'then. in forclii.

. 2019 SANSEDA LAW CENT~LIZED BARO~ERAtlONS 257

 IRIS=~~ll:2',i:"91
i11'1111ISlll!llm.ll-m1EllhEll!ll!stll
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TAX A·DMINISTRATION .AND.ENFORCEM,ENT .(·

SAN'OEDA.L:AW CENTTIALIZE:DBAR OPERATIONS
., - MEMORY .
.. AID 2019
. . .

. ..(Se.cretary .of ·Finance v. LsSuette Cigar, G.R. No> Authority to. Impose Duties :e:m Certain
8..
166498: /u'ne·11,' 2009'). · . Officers . .
· Unless there is .a certiflcationfrom the CIR that
.7. · Auth~rity to A~slgn lnter~·al Revenue. Officers -the tax due.thereon had been paii. ·
Those involve~. in Excise Tax. Functions a.. ,The. R.~9ister · of Deeds shall· not regi.ster ii"!
The 91~ stJ.all ~~ploy, ."assign, or, reassign_ inten:ic;1I, the R,egl~try ·of Property any document
revenue officers· involved in.excise· ta~ "tunq~ions to transterrinq real property or real . rights
estabiishm!')nts or places' where articl~s.'s.ul;>ject to" therein or any .chattel rnortqaqe, by way 'of
. _'excise·tax are. produced.
. or k~p((N/RC;
. Sec. . 161. glfts -inter vivos 'or mortis ceuse, leglicy or
. · int)erita.Ace (fV:£[{C; Sed. 95); ·. . .
. Li~it~tiQn . of. Ass'ig_nment: . An. ·inte~nal revenue b .. A debtor of the· deceased .shall not pay his
officer 'a'ssigned. to such ·establishment 'shall· in no debts to· ·the. 'heirs, legatee,· executor,· or
. case stay Jri .his a!?signmenf for: morti 'than· 2 year~· administrator-of.his- creditor (N!RC, Sec. .S5);.
. :(NIRC •. Sec~ ·16)'. .. : . · · c.. The -corporatlcn ,sh~·il. riot. transfer to any new
owner of anyshare-obtlqatlon, bond; or right
A~~-igrime~t-{o:.Othe'r Sp~ciarDuties:.. . by 'way/of gift inter vivas or mortls: ceuse.
The CIR may, subject to the provisions of Secllon 16 · '. · . legacy, orinherifance ·(NIRC, Sec. 9'1); end
and thelaws.on civll service, as well as· the ruies and . d. "The bank shell-notauow any.withdrawal from · ·

er- t J.· j ,~.!..;.· r )t' .

regulations . to be prescribed by the Secret~~.¢,-=cc.~""=- ~~e deposlt account of a deceased depositor ·
· F;l.na·nce, · . upon the ·· --recor:nmenqatio~ ..... the,r °h .~P:J4RC, Sec. 97). · . · ·. , .
Commissioner, asslqn or re-ass,ign if'\t7Flfal .re~~nue
· -officers andernployees o.f the B!R; ~ttiqut'ch/ng~a,.:::,~""'--J.otr,epPbties:· · . . · ·
.-; . · . '. .' . .· ·-·
· .
their official rank and salary: to ot~er.,O>;S~~Vcffities· . °":-~i~ Ari'}~~wyer, · 'notary public;. or : any
connected With the. enforcement ,;irtcf:'.?t'J,rni~lF~tib..,,..,.f;~,-~'~~~~erhrtie'nt efficer' l,'/it~;dlity to intervene
of .fe:,'el')UEl lawsas the ·.~Xige~9i~~!jt}¢'1se,&ice rtlj~y.." t
1f . ~. _i\_,,!Jt~,l:lration?r ~Ckn~~ledgm_en!_of
require·(NIRO; Sec... 17Y . If . -,.,, ,{ f·. l d~u,m.ept~_r~gardmgpart1tton, _donation
· .. ·, : :
.Spec1at.Dutles.
·. . · · Ji~·
· K.· (JI""' · ·
,fl . f-~
.f.. · ·
l- /p . .ti'~.
. · · .::_\ ·.!nte\.~ff~·~rrn?rti? causa.,:·legac.y,. or
. ' .. !, ·mher,,.t~~:shall have,the duty·to furnish
a
The term refers not .to srl'~6raN) extraot.din~~.. c..J'W j. copi~'s to ttii BIR "of.such documents to
_ difforent undertaking_· but .t?;tl1pcti~ns··.q,r_w.\rk otl:!e~~U- · J~iljl Me"'.l::°tji1,rqti?n of_ t8:xes· (NIRC, ._Sec..
than o~ not rela.ted lo. those~re$J\ilpr.lydJ~.• -ar.9. ~_by
· ~he officer or empl9yee con~'.rr.n.~l:l~~Th~f.g
. ..~ ~.s· ..~.P....~?lj.. nd
~tiratio~~.J-11:r")':~-f,rt:!-IM1Jf.'tf{laJ.~(ff.
~-J, ·. . . · ·. .
1'."~o :· ·s1~n·... 1rriportan~ .
.
. 1s not. P.erm~mMt but merel~'t~mpq{a~\·.~st((> -t~~·~~·
"-~~, ao~l:l.rnents,;r' _wit~ .. s1g~1ficant _t~
. Hechanova,. G.f? .. No,L-23635,Augus~·1, ~~&)~ · . · · .·.~~- :co~sequeJces.. , . . . .. , ·
· · ·.. . · · · · . · : ~ · · · ,·. ·. . " , . . . . - )1 N.ota;i'es· ·public. with respeat to ·
. LlmitaUons ?f'th~ A~!iignme~t\:- : :., ~ ...
a.· .jnte~?I re.venuE! offioe~s assl!;!,n~d. Jt;,.,P-e.r,!~_-..,.1..,~~
S'Cli\~rf\.t!;-;)_ ,,/ff•.· . 'qp,i}vey.a~ce~o~·· real. prop~rty and
... ~. l~a~e cl?ntr!=)Gt:>; · . . ·.. ·
·. _,. assessment or. coll~ch~>n fun~~}'j~ij_1i:i·o~-~ ~ -::..iS,,2Vs.ank ·bra1;9h rna.nagers· with respeq_t
· · rem.!3io_i.n.the same assignment_fqr~~.J~~ ~ ]\/fl\..\~\~~ toJoan:pC:>~ui:nents·;:and:· ..
.yea~s;and . . . · . . . . · .- ·. . · . · _:~·-~~~"".rf"'. _ .. · 3.) · ·StoG.k... and· tran.sfer ·?gen~~ . y.1th
b: Assignment.= of: internal re~enue office~ .or . ·. · · · · .. respe.ot..to sale or d1~pos1t1on of
employ®\:Ho special dl!ti~s· shaJ not--.exceed 1 · ' . ·· .. shares: ·.. of :stocks ·.of. d_omestic ·
year'(-NIRC,_ Sec. -17) .. ·:. ·.· . .. :· -'. · ·.. . ... ·.-.. . corporatjons. , · · ·. ·, .. ·, .,
•... . . ·.:
.. · Time 1imitaiio~s on.. :~ssi9n.ment~ ·are· 1mposed··.io . 9. . 'Poy,,E!."· ·su~pend t(?. 'the_ ~u~i~'es; Oper.atiODS·
preye'nt famiJiarity .and .. 'fraterri.izitian .between ·:the. :: of a Taxpayer · · ·. · .. · · · "• · . : .
. t~xpc1yer, ~ndttfie'r~venue:·officer~ (DASCIL;:supra."at . The Cl.I~ .or· tiis'· ·aiJth9rized representati.v.e . is .
··-35/ .· ·: -- . emj)<:>wered to si.ispi:ind.business operatjons :and
temporarily close the .ousln¢s&..establishment of
:~·.· · · .. · No.Vested Rig.ht t~ ~ ~°iR. P,o~t ··.. · . . ·.. . .. : . ·a'ny·p:erson for the.'folloyving viola~ons:.. ·, ;, .
There is no·ve~ted righl-to· a BJR ·post-..The.refore;~ , · .a .. In oa.&e of.a VAT registe~ed p¢(sc;m:· . · .
transfer does 111:>t ccinstitute ~ demotion just beQQU'Se, · -i. Failure tc;i-"issu~ r.eceipts or i!"ivdlces; . .. . ·.
jD effett, tne SP!=)i;l..O{contr,oL.in.. ten:ns-' of jurisdi<:tJo.n. ii.. Failure fo file a .\I.ATretµrn; or. · · · ·. · '. ... ·
. and personnel has bee.n considerably.diminished (2 111. Uriderstat.ernent' of 'tci~able . sa.1!')$ ·. ~r.
. DIZON, ;supr-a at 6?1 · citi{lg .Cf>ato Ii.· Natividad; . GR.. . . . · receipts by, 30% ·or more:of his. correct
/tlo.'.113843,.: ,lune 2,, 19~5).. · · taxable 'sales oi' recefpts for the 'taxable
' . •.·· · quart~r. : · .

~..

258 1: 2019 SAN !3EDA ~W CENTRAL.IZ~D BAJH)PERATIONS

 !;. ..
· -lll!IQl-iz;mm-.r;llDICIICIEIIIZll!!l ~---lllillicc!:IZllllll!llll!l~~
=~&l\::a

TAX-AOM·INISTRATl·oN AND·.E}\IFORCEMEN.T
SAN BEDA LAW CENTRAllZEDBAR OPER.A.TIONS : Mf.MORY.AID 2019 • .
39&¥Mihi &Af41&1FIA&ti Abril tic . . .
b. Failure· of any person to register in which. R.ivl.~. Np. •10-2017, January 19, 2017
case· the temporary . ·. closure . of· the National Government Agencies (NGAs), Government
establishment shall be for the.duration of not . ' Agencies . and Instrumentalities· . (GAis) ·, and
less than 5_ days and .shall be flfted only upon · .. Government-Owned and Controlled · Corporations
· compliance with the · requirements in the (G'OCCs) . vested with -functlona relating_ to public
.closure order (N/RC, Sec. 115): -: . needs, . .yhether. governmental or: proprietary· in
. . .. . nature; are required to register and-keep their books'
Reportorial Duti.e'Sof the Commissioner : . of accounts. . .. . . . .· ·. . .· . . ' . .. .
The CIR sticill:(FS)° . . . . . . .
1. furnish-the Conqress upon request and inatd of· ~ Required Form of Books of Accounts: .
·legislatiop p,ertinent lnformati.on including but not. . 1. · Simplifie·dform .of bookkeeping records duly
limited to: (ICS) . . .. au~horized.: by .. the· Secretl;fry of Finance:·
a. ·. Industry.audits; .. _Tax~ay~rs·with gr<;>ss quarterly sales, E,!·arnhigs:
.· b, .. ~olledio~ performance data; and -, .. receipts _or output.of P50,000 o.r li;}Sf._(NIRC. Sec.
c, .§tatus reports .in cr'rnlnar actions initiated 232 (A)) ·· : ·. · · ·· · · :· · · · · r, • •

a_gainst persons and taxpayer's retum. · . : 2. J°oilmal. and l~dg~r: or :_ their . equi~alen.t:·
(NIIRC,Bec. 20); · . . . . . . · Taxpayers w_i_tt, gross quarterlysales; ear.nirigs;
2. · Submit to the Chairmen of the Committee on receipts -or output-exceeding- P"50,000 · but not
·ways arid Means of botn the.Sen'ate.arid House . -rnore than P150,.000; (NJRC, $,ec. 2~4 (A)): .
, of Represenfatives ~ re_porton the' exercise -~f hi~·,(,(;; .: 3:· B,ook$ of accou_nt~, · ~:x:amined and 'audlted
pow~_rs _to compromise, abate and: refu,.n91_;,4~~~( · , yearly by an indep~nde~t CP~~T~xpayers'rith .
.. credit taxe~ every. smonths (NJRC; Sec. ?C!-4f(:.:.~:i'\ .gro!:1S _a_nnual sales,.earmn~s;_re~_e11?~s. or output
· The report 1~ mandatory (1 DE LEON,· suP,F?.~fi1f.,;;:A'~ . ex~ee.ding .f'~,0_00,000.00 .. Their mcome .. tax
101).. . . . . ·· . . . . . ·. · . -~ f;.:-~.-.;,~''.,~,;.,.""".'Jefll.lrns;.~,~all be- ;ac~ompanied by:. an ,Account
. . . . . ·. . . · . · ... · . . .. .,,x't. i>"''·f~~r
1,>'!:~fG1:1J1.iJ1R~ .Formwh1ch;shal_lcdnta1n: , · . •
: No -PQwer to .Presc_ribe_f>~oalties · . ;..;;:;(,·< ·~ tr · ._a/"'"'.lfi'f¢frJWtior:r lifted from· the certified balance
The CIR .. ~as . n9 . pc;iwer to pres(~ipe ·.penalti~s;~;_,;'~:. · ~heets.,, · , .. · · · ··. · .. ·
becaµse 1t 1s_ lht Sec~et.ar.yof, Fi~an~:>-VVQ_o issYfis~ . t ·
b. _f:'rciiit ~n~ las~ s!at_ements;_and . . , .
· rules·ahd.r.egulat,onsfo.r the·effect1\lt:enfdr:e::~~ntof ,·:_ · ·. c. Scliequle,$ .. hstmg 1ncome-producmg
the ~-revisions ·o.lthe: Tax Cod,,_edfJ1RC,Sfj_tsP-244 J..i:/... tJ . . ·. ~fSpe~ti~s\and·the corresponding ·. ihcpme.
refallon to Sec..7(a)). . · /•_r-":::; · ':}i.'.'i\. · , . · ~· ~i~ .• · il!lerefr,om 'ti!_n.d-other re_levant . stat.ernents ..
· \(r··.-~5~j)",:~;;"
,?::tt:rl~ : . Cr-, j .
~:ri
p~
· _ , ~J,!ijmi~~.2).
~.t-·li- . . ; . . .. . .. : · . .. · . .·... ·.
-~:.Lti:~ici? ~~!;:;~· ~-·
. ..,: •

C-.-o-::_M_P..,_
. . ·r_-_. c-. .
.-L--I..._A-:-.-N.,.. -E-..,._.R-.E--~.,..·:u~-~t-i..,:/k"'"~~""~•. 4_·.;;~,..;i~l..~.--,T__,i..,;~;..J ;_r:Jc_l~_de-~he· j~y·r~al -~nd_ th~ .
i~ -. . · . , · . · . · · \,\.. '. ,<:,_; . ·. . Jt"1tiel.ed~Wr.~nd.tt)e1r subs1d1anes .or other. equ1val\mts
t ~. · · · · .· . · ·(~:,,"'. ·. ·,.('jfaii:~,it~!!CB!B.1YJ{1!f!S.:ec:·2J, . . ·
t Keeping of.· Books 9f . .t\~c.ou·n(sc1~d ,~~orc;!;>V . ~ .. :· . · .· ·: . . . . . ; . . . .. . . . ._ . . .
', . All c?rpo~tlon~;cornpa.~1es,.Rartners~1p~ortk~rSO,J'.lS. , .._Journa~ book: _of ?ng1F1al · e~try m_ Wh!cti )t.,e
.. requirJ;~d by l~w to- pay internal revenµe taxes· shall . ' happen.mgs.or tJ:ansact1onsaffecting the business of
i . keep .. _and ·use . relevant and . appr,o~riate, set. of· _: .· a_._t?~payer.ar~_rec9rd:eoconsec.utively.day·by-day_as ·
. boo)<keepirig.records:' (N/i;?C,. "Sec: 232-(1'.)). • .: ~hey occur.(R.R:V-_1,· _Sec: 2), .· ~ .. '- · · . .

Al~o·.: ev.en ~a~·

exempt or~-~n;zalio~:~-.a:rer~q~i~ed '~o· . _Ledgi~ .-:- .book:o(fin~r· ent"~ to ~h.ic~ are. ~o~te<;(the.
keep .. books- of accounts :(NIRO, :_sec .. 2$5J.:"f9r _classified a~c:ouhts or items·. of ·an
transadi.o.ns
. purp9ses of. -ascert~ining: compHan.ce. ··wifn ·the ent~reg in th~· joi.frnaf qr
its eql:livalerits (R.R:· V-1,
cooditions. unde.r'which they have been. gr.anteci" tax . · Se.c_.:2). ·.. . .
exemptiqns or t~x inc~npv_es,.;3nd-~th-eirtax !i;ilpil(ty,- if
any'(NIRC;-'Sec .. 115 (A)). ·... ,:- . of
$1~pliti,,iC:fSet Bookkeepirig R~~ords:~consist;.
·of the"_ record of duly $8les and" fash. r~ceipts; 'the
Purp~i;~ in.Req"uiring_B6oks"ofAcc~~nts · ·:·· · . record.. of daily :purchases_, ··expeljses·. and ·cas.h
. The. reason for requiring·the books. of accounts to be . · aisburserneryts, . record . of . the". summary" of
p"reser.ved is . to. 0ri$U_re that all taxe's due to the transactfo.ns, and" the yearly statements· of. net worth
Q(?Ver'nment may.·. be·. r~a~iily "ahd accurat¢1y and operations,which may be·in combined form or in'
· ascertained ai:td determined ariy ti.i:ne· of the year separate·booklets"(R.R.'V-1, Sec. 2). .' . .
. ,·. . . . . ,· .
(R.R._ 17~201"3, Se.c:· 1, par. 9). ·
_G~nerai. Ledger:- is a recprd of ~ -businesi entity!s
accounts. which- makl;l._ up it~:..financial sfate!'flents:
lr.iformation contained in a. general ledger is gathered
from. source document"ssuc;h as account-vouchers,

· 2019 SAN BED.A LAW CENTRALIZED BAROPE.RATIOf:'-lS. 259 .

 . TAX A·OMI.NIS.TRATION· A·N·D.ENFORCEMENT
· ' .·· . . . SA/>rBEDA.LAW CENTRAltzro
. BAR OPERATIONS.~
. MfMORY
. Aiv.:zoi9 . . . . .

purchase· orders,and sales invoices. lts equivalents, There· must also be 'a permit for a~y· co~puterized.·
· may 9orisist qf several ledgers such as..
customers' . accounting system-(CAS) to be used (R.M. 0. No. 29-
. 2002). · .· . .
ledger, .credltors' ledg~r. 'stock ledger, and such other
books, ·as the taxpayer may find convenient for his
business.(R.R. V-1, ss« 4).': · ·. · Therequirement of registration and approval prior to·
. .·. . .
the use. of .tt:ie [ournat and · 1·edger is applicable to
In. case of variance between the source -d~cu~enf subsidiary books (2 DE.LEON, NIRC (2011), p. 5.78)
· . and, the generc)I .ledqer, the'_.form~r. ts- preferred [her1:tiriafter Z DE LEON] and -official, appointment
· because the· :YAT .iQvo.ice.s and . receipts,.. taken 'books of .professlonals-(R.R.
. . No: 04:.201_4;
. '
sec.' Q). ·
'collectivety, 'are necessaryto substantiate the· actual
amount. or quantity' of g,oods· sold and ·-!heir ~elling Manual b~oks of accounts ·previously. r.e.gisteired but
. price· (proof of transaction) 'andthe best means to .... whose, p~ges are not' yet fully.: exnaustedcan still be ·
Rrove 'the input VAT -payments (pr.oaf· otpavrnent).. · usedln.the succeedinq yearswithout.the need of te- ·
.. (Kepc.o · .PHLC.otp ... v; Cominis.s/o-,;er -ot '·lhtern.al ·:· rei;jist!:!ri1;1i;r or' re-stampinq the same, provided, that
'Rev.enue;.-G.R. No. ·181858,.Nbvernber 24; 2Q1:0). . . the portfonsj:iert;3ining·t6a.paruculer yeat should-be
:· ·· . ·. .. . . · :· . · .. · · .· properly -labeled or .''Tlsli'ked ... by taxpayer. The .
· .Additional ··Requirement..: for· Se1{0empfoyed · ... · reqistration ot anew.set ofmanual books of accounts
. P~Qfe$siona.1s. · · . -, . . . . ·. · . · < . · . · ·. sha]] ·onl.y be at the ~me when the.. ·pages· .of the:
In· c!,dditio.~to the maintenance ;qf books of a.cc?~!l!~-=-~P.E~...'Q?us!Y registered · books" nave · all been · already
.they sh~ll.~lso: .. . ·, . . . : :~
1: · Ma1nta1h offi~1al .appo,ntm~nt boo}s:!f' con~.r;ung,,:
... · l J .]\j_ £
.~h~~t~-MO.No, 82-2008).
'fl- ~\,. . ._ : . . .. .
·
:
. '

: , . th~ n~mes of their client and t~a~ljle-(?t'tbe~F.!.t.~§_e{VaJl.~~ .BQOk~ and. ()t!l~.r _Accounting
. meeting; and · . · · ·if'/" · ~~
'o.t
· ·. Reio.rdi;:-(NIR~~c.235; .as·c;larified by R.R. No.
· 2... Submit an ·affidavit .iriclicatin!1fth~-93~°?,.JP~nn-er\'.(f"'-~@.1;u':)~Q~ '('!.. · . '.· ..: ·· · · · ·
· . of billin_~~·;. and ;tlie f<:1ct_q..rilJp)t1i,9o~sid.eredyt/jl· i,( A~f!a.xpat'e':5\~n:,ej~~ite~ ~o:preserve t.heJr·bo.oks of
. ·c:1eterm1r.img their s~rv,.celfe.e!,
.. Secs. 2). '· · .... · ,· ··. ..
; : ·. , · .
l"·· · f ·
(~·-]l NoJ04-201!4, ·1rf ahipo_ur:1tsj mc:liiq1~g,f,A~bs1d1arybooks and bther ·
.· Q~~g r~cor-o~fo~,period:~ft~ye.~rs!eckoned
. -r-_;;,, l' · · . ,t · , ""':. · trq,i;n_9le f~y' foll\\Ai!J.P94\e.de~dlme m f1hng_~ return,
Subs.i~iary-Books .. ·. · ·.:, JI~· ... · -t. '::,~.~ 1
~-Jt.fll~~pfter.t!1!3~deacllitae,from tne._date of.the filing
· All corporatlor:is,cqmpan,esBP~~ sh1p>o,\_p~r~&~.\'~.utii]Jf\tt)e.ret~ , for·
1 t b1t~~,efb.le year when the Jast entry
.. · keeping th_e,books. of· aq:ol(ptsJrn:a'\,,:a'(,!Q~~OJ?-UOn, · -=<was m_<Je~ th1.e ,boo!<' of. ac1:;o.u_~q;. (RR. Nq. 17-
_ke.ep Sl!b~1d1ary books a~ th\ ije.~oft~.,~~!n~s931 .:t.:#.f13,d~.;,. •:P.a. 1~ · . . ,. . .
may reqmr,e,.. prov_l~~d·that·V-<~~e"'s\ch ~9,.QJ?.nelf.J,. ,~r-(~ ~,t;J,;-'y · 'f .· , .. ·.· . .· ·.·
· .ari3_kept, they: s~all form p rt: of·:{~_: ~'ll ·,cm i.!'19-1~ : "!:£:.t e..,~~pc;1y~/tia~ .a9J p·eriging protest..or _c::Jaim for
· system of the Jaxpayer and s an· be ·s1;1i:>JecN b.~ "'fa: --~Urefo'r,ldof t~es, and the books and records
. 'S~tne.· rules·· and /egulations ~"\..to· .thelt~~EfEt~ JE1_,,-l"f\~}ne,9~remaJ~'fial -to .the case,:. tl:i,e taxpayer is
translation, prod1,Jctio~, .·and· ·inSQ._ectiop:.;a~"are;:. fetjyiietfto\pE.~~FVehis/its books ·of accounts and
r app'licab~e·t~. the ]9urnal ~nd ·~.he· le~!:)~(~p.9· ~"e~dll)~"(~t)i,~~f_l~~g· ··r~co~ds . until •the c,ase':is finally
. . . :83( . . .. . :·. . : . : . . . . .. : ·. ·.. . .
,, , .
,S:1'
. -......,
.l·. ti ~~2~~t.
,-.11.
1Vl..(. ~
-.R,. No._ 1_7:2~13, Sec.,2, par. 4). . . :
.. . .
Language in ~hli;lt:·B~nks ~re to ,be. Kept ·. . ..___ ~ntess ~ Jong~r-°petioci'ot.'r~Jehtio"ilis. r~quired unde~
1t:may·be.anY,·ofthe_following:·:(NES) . the NIRC o~ ·9ttier relev~.nt laws; the independent
1:" · NatJve language; · : :. · CPA · .whq. 'audited . t-h~· records. arid .. certified the
. 2.· griglish; or· . .. . . · ·fi.naricial staterri~rits .9f tt,e ·taxpayer, equally. as·.a
· · :: : . 3.. fil:ianish.(NIRQ; ~ec; 234).. . ta~payer·,· h·as . th~ 'responsibi.lfty · to , maintain· :~nd
• .. . ... , . preserve:·COP,li;is oftt:ie aUdftecl ansJ .certified'fil')ancial
·. · Jf In· ad'dition.. to ·s~id' books·:~or''records, the· ·taxpc:iy~r-- . · staten:ients:~dqi period:Of ·10 y~a~ from·the dl:f~.·date
. · ·keeps qt~er. books·: qr: r.ecords: in. a· l;:i~gu\'1gf 9ther of filing.. the . afi°nu.al incon::ieHax return ·or the ·actual
. : than the .'above,.i.n¢nticiried,h~·st:ian ·make a true and. . d~te of tiling th~tiiof, whi.clieyercomes latei--(R.R. No.
·, C::Oll)plete:translatidn.'of all the ¢r_1trie.s. The ~eeping of· 17-2{)'13; Sec, ?,par.·5y: · · : - .· . · · · . .
" such book..s or records in any language other than the· · ~- · · · · .. · ., · ·
· ·: above-me'ntfoned is p~ohibitecl(N/RQ, Sec. :234)-. . · .Gener~f · R~le:. ·T:h~. bqoks··. i;>f accou~ts ·.shail -b~
·.. · · .. · . suOject fo e~amrnation ·and· Jnsi;iectiOn· .only. once
'-'. ··:"_ ··R~gistration. of,BoQks of Accounts ' :.; every taxable ye1:1r (NIRC, .sec:' 235). ·. "·-. . .
:. Before-the required books ·of acCoUrtts·are usea,. the · ·.· · · ' :
· _taxpay~r ·must .tir$t• present. ,hem for ~ppr9val . and
. r.egistrati.on. to the RDO of ttilf provin·c'~ or city where.
,the busin~ss is tcx:ated:(R.R.-V-1, Sec.. 1~y:
·.- ' •.

.. ~.60 ·1 20is SAN BEDA'LAvV CEN1RAUZED BAR OPERATIONS

•' . ..,. . .
 . ~·· .. ·. . . . .. . . .. ..._~;~, .
.TAX ADMl"NISTRATION· AND .EN·FORCEM.ENT.
~t/.
·r~.r:
. SAN f!E.DA fAW CE.NTRAUZED.~R OPE.R,4.TIONS. - MgMOR'(_A/0 7019. . . .

f." . .. . . .·.
.,;· exceptions: (FRe-V~O)_ . · ,. . "Marginal ln~ome. Ea-rner.(MIE)
J-·.1. .Er~ud, 'ifregularity, or f1'.listakes; as determined by An·. individual · not derivfng compensation a·s, an
.f. the. CIR; . . . .. employee unde'r an emplpyer-empfoyee .relationship
. · 2 ... The taxpayer requests Reinvestigation; · • .. but who" is "self~erriployed and deriving gross sales or
}" ·3. ~erffication.· of compli;jnce with Withholding tax receipts not exceed'rng ·p100,00P. in _any· 1 ~-mont.h
laws . and regulations;· · perio9 and whose. ;:tctivities shout~ ·&e ·principally for
Yerifica1ion· of Capital gafns tax liabilities; or . subsistence or livelihood (R.MC. No. 07-2014). ·
J"n the ~xerc_ise of tl')e ClR'.s power :.to Qbtain
. ... .
iofbrmatio.n. from·other ·. persons (N?RC, Sec. Where- to i;egister ·,
?35). · ,· · . ...• .· ~ per~on maintair:iing_ ci"head office, branch.-9r f13cility
.: .. shall_r.egistet with-the Rpo··h~ving jurisdiction.over
·"::' In tl'le .abo~e:m_entioned ca~es: a ta.xpaye~ may qe · the head office, branch odacility.(N/RC>Sec. 236(a)
;·., subje~t to··muftipf~ a·ud)ts"(2 DE LEdN, sup_ra at 588):. par, :,3)".. · · ·
f<,:
.~i: •
E~~mir'.l_~ti~n a_nd 'j.,ja~e-s:~f l~_spection '. Facility· .
It may be
done in any ofthe·foflgwing: . Mayinclude but.notbe tlmlted to sales.outlets, places
1." . Taxpayer's office or. place of business'; or of preducuon, warehouses orstoraqe places (NIRC, . :
2. In the office "of the BIFHN/RC,Sec. 235; R.R..No. sec. 236(a) par. 3)'. -·· ·
1!~201"3,.-~ec._. 3). · . . · . .
.·
1·~
. · ·. .: · . . . ·: . ·. -«/:;, ·Contents _of.the Reqlstratlon: {NPO} · · ·
All corporatlons, partnerships or personsthat r~t[reY,)l 1. Taxpayer's Name arid style ofbuslness:'
~,.-, from business shall submlt (heir books of accou,&~il.Pf.::1:.~\ 2. Elace of residence and business; and' ..
, . t~e CIR _or any of his ~epu~ie~ for-exami~a!io~ ViMbJi:\;_(~~-~ 3. · Such Qther tnforrnatlon as may be required by
-i_ · 10.days from the date o{ retirementorwlthln ~µc,n··:·J
4,f._..-;:rr-_theCIR/f.,1/RC,Sec. 2~6(~) par. 2). - ·
~ ·: .periodof time as maybe allo~ed by the 'Cl_~ff~~rf,.:.:,.dl~~lri~'1' _- . .· · . .. .
f . which; the books of ac_~ourit~shall be rety.~;(f(NIR_Ct.(I lnternal'~e.~Y,~lleTaxes which may be re~istered: ·
t. Sec .. 235 (e)).
.t. · _ :- - . · · . · . . ··· __
.· . -r(' , , · »: f1
· . J'{!>,~•\~
,ef.~~1 · (IVWC-F_0Ef11\ . . . .
_1.. !ricom~iai: ·~- : ..
.. . · . .

( · Admtrustratlve-Provielons- .· :;,;p>J.r ,· ·. ·. yl."" 2, ~AT ~~r,id/<;1rP\rC~ntag~ taxes · : · . . .

'. · _: : · ... · · · . : . · · · ~1rtjl," . '."\(~ ·~-.. .tJ, 3. Withl;l;otdjefgt~tes on. compensation · . . . . ..
. · R~gistra~i~n·.~eq_':l°lrernents(,}r;r
Who m~y register: (SE_AM) '~y . · ..... ~)
d~":i...· · ·., · :~· ~ 1~- 4. ~,!2~ ..!i-i..~l.t.fri.J.ml.loldingtax_ at source. on certain
-~~ L!l!j. . moom..,E'.!iP~Y._rr.l~eo..W;"f. · . . · · , .
.
'.

1.: · Every person §abject to any 4')!~rrJa.f!"te.v;1nuEfffj1-· r:r,1.t !,. · finaf!~.J.w[iliHbltl1ng · taxes · on certain ~income.
He"shall.regi~te_ro_l')Ge:. .. '9:;#··\\ jf. . ~~1- ·.paym·e.nt~; · . . . -.
a:_- Withi.n-1.0·.day~·f~om.date.Qf~~p~OY,merft; · ·. · 1}_i.,..,.._?~Qo.c_ument8:ry st~mp taxes (DST};. .
b. On· .. "Or - before . ·the comrn~ns,lflfent~ · of ·.•.,:ro,~·tul'~s~s~. taxes;·and · . · . ·
"t?usines.s;·· ·. -· · v.f. ,
c·'. '"seroEe·paylTl~nt of ar1y· ta~ du~t'oc j:?":'1 .
,.1fil;,-;£.,.·~•'i,tlJe~L::!.~11#tiali.'fegistrati~ri
'. .9) ·.. . . ·.·.. ...
fee (R:R. No. 07_~2012, Sec:
: ·.. :. .· . ." .
·d. ··Upon filing. of a. r~_turl"!, :s~~~flt; ·or · · .· . · · ... ··. · · .. · ·. · · . · .· ·
-decli:iration._as requii'ep)n· t/ie NIRC (/VlRC; Manqat.ory Regi_stration·fdr VAT' . .
· Sec:· "2.36(A)J:: This· inclu~es ·a.· .person . The· fdliowing persons are ,required to·. register· for
. cohstltute'd as·withholding -~"gent .(RR:. No-. · VAT: . ., . . · . ·. · .
. -,a·z-2()1.2, Sec .. 1-(2J.;(l0_ &, Set: 9.(vii)'): . . c_ ·. . .- :1:: . Any p~~son who.se gross sales "?i' rey'eipt for the_.- .
2. ..Those·cov~red.by gxecutivl;l .Orde~ (E:0.) No. 98 •. · · _. past t'!'lfelve (12) ..mo(lths, qther _than: thoSE!: that
series of Hi98 wf"\ich'· are' ·p_er~9ns; riatuf'al or · . . · . are exempt ·.u:~der Sectiol).109 (A)lo_(BB) nave
jµ(i9ical,· dealing \'with .. all .9?Vernment. agen.cies. · . e~ceeqed the.. ainot,rnt . o~ P3,000,000 -·.br
·and · jnstr:umentalities... wtio are.- · requiretf.fo. · . ·. ·· · -P3,500;000- :. ' · · · · ·
.-1nc.orporate ··.their.· TIN. in :"'.all forms·, permits, 2; Any .per's~.n-:has rea~o11able·ground~ tp be!ieve
. · n~en_ses,-. clearances,· ···.official . papers, an.d . : th.;lt his gross sale.s or rec.elptsfor then.ext twelve·
· docume:.1ts y.,t:i,i~h."th!;!Y~!'JC~r~ fr.rim g6yer.nni"ent. . · ·(.1j!)_.mo.hths, other- than tt,ose that -are eiernpt
,;. ··agencies; . instrumentali~ies,.: Including . GO_CCs · und·er Section ·109·.(A} tQ (eB) will ·exceed Th_ree
f. '. ., · and LGds (R.R. No: · 07-20-1?, ·sec. 4(iv));"' . . .. " .n,iJlion peq.os·(R.3·,ooo.ooo)(IV/RC;·se9, 236fgJ as
r,... · 3.. ··The Administrator o~execu.torwho shall i:egist~r · ameo.df!d-by TRA!/1/ L'aw}. . -
'i. .. ·· :.- the ..estate of the decede.ntlaicp;:iyer (R:R No. 07- . . ·. . . . ·.
· 201 ~' Sec. 12);and_ . · : . · .. '. ·. . · . '.. Optlrinai Regist~atlon of VAT~exempt Persons. .
4. Marginal income" ·~am~rs . althcmgh. they . c:)re. : Any person who is" hol required to -reglst~r for "VAT ,•
{ · . · exenipt · from : the - -paym~_nt : of.· the · arin,ual may· elect to. register and· pa{tbe :ann-~a_lreg"istration
t- . ·registration fee, VA.T" · a·no. p"ercentage taxes
_(R:l)-1.C:·~o." 07~2014): · · ·
fee: Such .r:egistration m~y' not be cancelled for the
next 3.years' (NIRC, ·~ec. 236(h)).

2019 SAN BEDA lAY,iCENTRAUZED BAR OPERA TIOl;JS" I 261

 T·Ax-A·oMr'NISTRATION AND ENFORCEMENT
SAN BEDA LAW CENTRALIZEDBAR·QPERAT/ONS - MEMOllY All} 2019
·4 1 . ii AES,.;· •. . . A,ei,, y&ihiE IM M.; men
· Ta~payer's ·lt;le_,itiflc~iion .Number (TIN) 7.. M~'rginal Income Earners; . .
Every person required. tb .make, render, _or.. file ...a 8: Eersons regist~:fred under E:O. No. 98, s·eries of
return, statement,· or other:· document shall be 1998;_ . . . . ·;,
~upp!ied with TIN (NIRG, Sec,. 236(1)}: . . . ·- 9. !ndividuals.ear!')ing p~rely compensation income;
. . . ..
whether locally or abroad; · - ·· .
S?me Gen'etal ~ules.in the l_s~uanc_e-of.Tlt-1:. '· ·. 10. Non..:stock/non-profit· organizatjons (NSNP). not
1. · -The- T_I.N, once asslqnedto 'a particular taxpayer. · . . engaged in business;· and ·
. · is non-transferable and'thereshaltbe no instance· 1-1'•. Tax .!;xempt qorporations, under. See. 30_ of the
: ·y.,here· 'l- or severe] '\axpaye'is.ate bolders of th'e NIRC ifl pursuant.a of tax-exempt·ectivities . .-
.s~me_TIN-(NIRC, Sec. 236·(/)). :·.- . .
2: . Only 1 _Tl~ shall b~ .assiqned to the taxpayer . . . .The exemption ~_y GAi~. iGu_s, N_SNP. and other fax- · ..
, except for banks withboth Regular B'an~ing__ Ufiit . exempt entities .is predicated -on .ths fact that their ·:
· (RBU) and .witt) F!)reign Currency '.Deposit Unjt :· undertakinqs/endeavors, · are : · not directed . 'nor .
. · · (FCDU) where: eech unit is assigned with · intended to--'generate fncome/profit"'(R.R.· No. 07~ ·
. _d.iffer.ent TINs ('R.R. No: 11-2008,' Sep. 3).; ·· . . · · .201-2, Sf!JC, 8). . .
3. The estateot a deceased person or a trust under . . . . . -·
. ?,fr irrevocable trust' agreement shc'.iJI t5e issued fl. . - Persons. interested in the estate who· continue the
· Tl~ separate and distinct from th'E(TIN_ of the··· _.. business, ofthedeceased arealso not liF1bie-tq pay .
· ,·· · -. de~eased_ person _and/f?r trustee (NtRC, ,§)i~~~IE'.l;.:_~henthe same had prevlously.been paid by the
.236)... . · . · -· .' · -~- · •. ·1c-1_·d~crs-ec,UN/RC, $e.c. 242). . .-. . ·. · .
~- Minari, v.h9 are ·earninQ.and/or w~9.;ai7eunlie~t:i_eLl J \ ·· }>' ·--;.."'-~~1:, . . . · . ·. · . · ".
.ci2c1:1rnstari'ces prescfib~:-1-1n<:JJ1f' f¥5)rJ~1,;s.aF==R~fra~j~i·of<(=~ch :ry!'e of T<PC ·. ·
· series· of 1998, s:hall be suppli~t,w.it~-~ (R.R. ~~~~~ery"p~,._t.~o_n;e'np,\i_s require~ to re_gister with the BIR
. . . No. 11-2008, Sec._·$). _ .: Z, ---..y~- ,,."":"""'°'"':_- {e,, s~~ll""'-~!~t~~~c~~t~peof internal revenue tax for .:
_-
,5. ·. N,RFC.and N.R:6-:-Nli;T'.f?~~ll~fjs.$'ueqfTINs
". ,_pµrpc3ses :of . .w1th_h?f~mg I.faxes -,~ftl)~fr. incorl\e- ~
fg, . ·'"l. w,~1cli h~\IS o~!r~~~cl,~~hall.
s'1:'.lGh tax~f: an(!,~halgit1dat~.
file a retur~ and shall pay .
such r.eg!slraUon .f?r any
· fro_m sourc~s . within qlJ;i~.PJ.i1hpp1TJlli,,.;._T.h.~~t ~an~-~N.IRC~~-2~~(C)). . . ,- -
withholding _ag~nt_.shall!·c!PPIY pie Tl~ ol\...:t~k:..:. ~Jf_ . ,;_, . · · ·:, · . -"""~ ~ . . · · . . - ·' ·.:.
:b":half (R:R. ·No. 0?-2~f~Se'ct4(1}(v)\- .. ·. ~-/.~~ns_ferfqf R~9'f!_r:atlf~ -: . .: · . ,· ...
6. Only 1· Taxpayer- _ltlent1!i@.?'fldh- Nu~~e'r rfr-~m~ase-k~~1sterettrri1~sondec1~es. to-transfer his i
shall .be_ assig~e.c! to.a t~i<P:a\7(:l_~f~!· ,..~~~d.i;i.Wfill:;;;;'---; la_ce_ g_{O(~~esfl OF h1~j head -~ffrce -~r_ bra,ncties, it I.
shall· secure. more than ; ~F}t!l:111· --e-;.~hinall~ .liS~all, 9~":.'f cluJ,r.>l~~clate· h1_s-._reg1stration status ·
Habl_e -under ttie -pi-ovisif;in bf ~.ecti \~~:·o~ z..~"'. · - ·
·1~~(®j,~~-~-- · 23?.(D)). ff· · ·. · · iI.
· 'Violatio'n · of ·_'Other Provi~jons·. of~ttiis ·~f:i' .r· , . , .,f _: . . ;J' · . · · - .
. : . · _ . ,. . _ - · · .· . · · . 1," ,. · ·.h.-t~
·

· Annu'a~ ~egis.tration :F_ee' (ARF) ''-

- ~:. '..
Regulatio~s 1n -Gene(al' (N('!_q;se·~36(JJ ~- ~:: ...)~fcir- .. a t~~yer tlclfl'sfer~:his place...of business,. ~e . .
··'-:1Cp-;-,...,-y·-.t!\_qs.t.,...-s!:)~µre_Jhe: n/o~ssarytax o!!:)arance fr9m the .·
r •. -~~1:1~ ~~~~J~yE)fficer· (RDO) where·: bis offipe is ..
Arno_uJit:.. P500 . for·. evefY.. ··separcJ~"'&/otstin_c~1"1res~~~\.IY~1st'er~d .. Any tax· r_~tu~. currently: d~e
estabhshment'.or. pl_~c~ _of _b_u~in~!>s.,.inc~i.Q~ia~ility -}v~· ~~!l)-1..1:l<'fOed with !h.e RDO wh_~re th~ taxpayer is ·
typ,e_si_w,he_r~-,~al~s-'.t~nsactic;>l')S:_c;>cpllr shal! -~'·J:J:ai~j2.9l~!eri@c:I (NIRC, Sec.·236(0)). ·' · .. _ · _. ·. - ·. · __
1,1pon i:egistr:atio'h' an~ .. ev~ry· Y.ear· tl)~r~after_-oii_. pr_ .. · · · · · .. _.-. · ·
before:Janu_~_ry3-1..(NIRC,_S~c·.·!3~(8)).. . ; · Other Updates. .
Any- person 'registe.red·-~hall, .wh~i:iever.· applicable •.
·_ ~e.n~r~I .Rule;-·T.h~-..p~y~enl o_f ARF, i~- .marid~or,y•. . update·. his registration· information· with . the RPO
. Nonpayment of regi~tration .foe i'rrakes,:a btJsiness . · Where h~ is regis_tered;SP.ecifying therein any cilc;lrige . ·.
\
megaf(R.R:-No. ·7~2012,.
. .. . . .
sec: 8;-Sec." 15)... -·
. ·.. : · ... •'
. ··in· typ~ · and ott.ier taxpayer: details: (NJRC, Sea.··
~36(£=}};_ · ':' . - ,• ·
. Exc~:ptrons:JGOLF,-COM,-~iNE)·_' .. _- . · ... . .
_ .The_'foJlpwing·ar~ not liable. tq p_ay ARF:.- .. , -.. . . . Cancellatio!'l .of R,egisti-atlon · :· . . . .
· 1. · .@overrlment agencies_orinsfrum~ntaliti~~ '(GAis) ·. 'The registr~tion of any per-son. who··cepses to be
· · · . in the .discHar.geof their. go.vernme·r:italfunctions; : .liabl~- to a fax type .Sh9II ba··ca.ncelle·d upon filing with._;,
·. 2. Persons'. subject . to:. ·tax · : u'ndeF. · Or:ie-time · the,~DO _where h'e.is·registered, an application·tor ·
·. · _transac~ions (O.NETI) su:th'as: ecipital gains· tax, - . .
registration information-
. Lip~ate
: . . .. (NIRC; .. . Sec.':236(F}),. . . .' ·. ·
.. , . ·... ·dc,n·or:s and estate taxes; · · . ·. . . . · . . ....... .. .
, ..... 3,· ,bqUs _In 'lhe discharge· of ·their governmental Ap'pli9a!ion for. TIN or. cancellation for 'registration:·
· . : fcrr:ictions; · .. - · . - . . · . m~y t~k~·.place upon any'of the following, (DF~2). .
4. -. E~cili_li.eswhere ·no sales trans·acti_pri~·o~cur_(TAX · · .. 1. · Qeath of i11divid1Jal not subject t.o estate. tax; . -
:. . COPE, Sec, ,236;R.R. No. ·07-2012; Sec. 8);. · . ·. . 2. .full settlement of tl)e tax liabillties of the estate;· ·
.. · _5 .. tooperatives duly._registered with the CDA; . ; • 3. Qlscovefy .of a taxpayer ·having. multiple .TINs;
6. · Qv~TSel:!s ~orkers· (OCWs/OFWs)~. : - · · · and · · ·

_·.- 262 .I -2019 SAN-:BEDAlAW CENTAAU~ED BAR OPERATIO~·s .·

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{" "TAX ADM1 NtSTRATION. AN-D 'E'N FORCEMENT

· . . .· SAN B~(?A I.A_W CENTRALIZEDBAR OPERATIONS- l'(IEMORYi:10 2019_ .. . .
) ·11a•rsilll!lllllll!IIIB•---~
,h
·:m111zr::=ASHa.mFliB11E•elllill..
· .. Dirl!Mll!SII.UIWm&IIIAdJ!\111.---iml!-allliWm!Mil!llmD:1i:i ~f.4:l~~
a:•r:1+11!111al!Z~"1:..r.J,
.
r; . .
~i-4.... Qissolutlon, rnerqer or: consotidatlon c;>f juridical the possession of the harder. thereof: subject to
..
~f. ·
1)! •• -
persons. (R.R: No. 07-2012, Sec: ·12). ·
• •
production upon demand of. any . irit.e"rnal ·revenue
officer (NIRC,:Sec. 241) .
~-· Issuance of Receipts or Sales or Commercial • • - • .- • J •
!,;,.. Invoices. · · · . :. . . ·· Submission of Inventories, o~ Goods ·of the
if': All _persohs, subject,to a!1 Internal revenue· tax shall, o·eceased . _ .
.fo:for ..eachsate and transfer of merchandise or for. · Persons.interested Jn the es!ate should within 'th1r.ty
~? 'servlces rendered valuedat ?100.00 ormore, issue _. {3°0) days.frC?r'ti the death of the_ decedent ,su~mit to"
:l1 .duly registered. receipts .o~. sales. or commercial ·. the BIR or the Regional or ROO inventories of goods·
:} i_n\lGices showing: ·(DQ-UE)) · · · _or stocks had at ttie tim~. ~f- suc_h··d.eatl") (NIFJ¢, ·Sec.
j;·. 1. .Qate qt transaction: · ,2~2). . . _ .,·. ·. ',. -,_· . ,,_. .
i:;- 2. Quapt1ty; , .
·\. 3. Unit cost· and- .- . · ·· · . · · Rules .a.ng R_egulatl9ri_s_ ·... · . · · .. ·. ··
,f 4: . Qescrip.ti~n ~of the merchandise, or the nature of The· Secretary ofFlnanee, upon recommendation of
'· ·· .service'(NIRC, Sec. 237).. · the· CI_R, shau. prornulqate all needful . rules: arid
,f" ·. · . . . ·. . reguJations forthe effective ehforcementof the NIRC.
5;,- The original receiptsha]l bs Issued to.the purchaser. (IV/RC, Sec. 244}. . ., :. . . . ·.' .: . '. . .
·( customer... or·. client at .the #riie of the transaction · . . . . .
:t'· (NIRC, Sec: 43·7). ". , · · .. . These regulations are.. the .consequences-> of a
}·. · ·. . · ·· · . · . · . • ·· . ~...(~ delegated power to issue legal provisions tnat have
(i,'.~· N~te: .For VAT receipts. ·!'Ind ·invoic~_s,. there ;are,{~[ the effect oflaw (Commissioner of Interns!Revenue
::.. • additionallnformatlon required to be indicated op· t~~f.,.;:-j\. v.. Solidbarik Corp.; G.R. No .. 14~191; Nov.ember·25,. ·
d:-
f. · receipts invoices (?ee th_e_ '?,haptet on VAT fQ[}fJ,e_.;,i;:JJ 2003). · . · . .· .. ·. . · -.
~,-. enumeretienof s.1,1ch mf9rmat1on).: . . .'µ _; ..... •·t•.•lt.-"7'\• . . c~ . . . . . . ·. . . . .
s· . . . .· ·: . ·. . . . ·. -~, . Lw··1frll~'·.s'p~~:·.~,;;9y4sionsto b~ Contained In the ~u,l~s·
{ .. P.rin~irig. of Receipts or ~al_es or..,.-C~m.e~cia_l:;)j1rand·~egula~fons: . : . . ,. . :. : . ·. . ,
.-~ In-voices.·. . . · . . . .. ·. . . <tr. 4 . .. J.~"'"F!. · 1. T1_me an~~\a.nne~ m wh1~~ Re'{'en~J"eRegional
"' ~II -persons who are, e11g!3ged m: ~J:!pl}1ess ~s~slr'r·-, · Directojtsr,ialianvass their respecttve Reven!Je ..
{: $ecµ.~e frofn the BIR an -a11t~ori!t,J~ }flrf!:(AT:}
··--. receipts. ·o.r. sale.s. or comr.n~r,9,1.~Clnvorce§'before c..~t
.1;.J. p.•i\
.~e~i~ s f~f t ·. e · purP.°:se· of di?co\fer)ng pe_r.:3~r:is .
and OP~fY:h.,ble to."mfernal'-re~enuet~xes;:
:~. printer can:print·_the.sarne._T.h~fr,et9.i£_~)':l!,lst: ( . . '· ~1·1 2.. Fo ~ <.?!;J~bel~'. br.an~s or ..ma_rks to b·e·_re·qui~ed.
f. 1._ · -Be sen~lly -num,ber.~:1:.:., · X(:jv' '!"·..,...'.::!)_]~-- ~ !>;~, . . ·ofr"~~9~~)ef~l;>j~~~-fo.an. excise tax. anct mcludmg
{ 2, Include tfie:name, business &wle·~(f1Ef:1J:1xpay~; (·11 . • . the mar-mer.!1~~sfiallbe effe9.ted; . . . ·
_c'-. · · 3. Include tire TI.N; . · . · ."-~;'_,,..~·:1~ ·y . .f~,f _3. · Co~ditiqns· under ~hich and tt)e·maoner _in which .·
} : 4. lnc~u.de '-the bi:Jsines~ _add~es's'of fhe -~~r~on:or ~~·~::· ~,;.,gooqs . il')te~ded· "for" expo~ shall be labeled,.
:~: . e-:1t1_ty..to use. ttie.sa~e;,ar:,d : . · J:?-\P.. · ";.'-~J1~:~;~;. . ;:;~mn~.~q,.or_marked; . . . · . · . . . ... · .
.!:; . 5. S.uch=·pther .infprrnation that may:~e;requ1r.e:a_;;.e~lfl,-.4-:--:-eqn'd1t1onsto _be observ~d·by Rev.enue,Officers
%' . .r\Jles and regt,1fati0ns·(NIR(?,.'Sec_._-~)~)- f.tJ · . : Tes'pec"!ing .iiJs"t:itu~ion~ · a,,:,c!·. conduc~·· of:. legal.
"- . . '· ·· ·. ·· · · : ,. ·.· · ·. · . · ·.. ).~>r2;..,).. . :· . acflorts .:!nd·pro<,eedln_gs; ,.. · ., · _.: · .
~- All p~rsor:1~··.who_·.p~infr4?ceipt.or sale~ or :c,omrrt~rcial : ·5 .. Condition"s· _under w.hi~h. _good~ int~rided.: t.9r .
t:,·_ jnvoices_· s.t,"~11 _i:naiotain. ·a logbook/register qt : ·. stqrage' ·-ih.- bond~ .. warehouses· .shal\· .·be ..
~: ·ta~p.:!yers wt:iq,·availed of their-printing se_ryices: The con·veyed.,.including the·_mimner of st~rage ~·nd
~;_·. ·logbook -or · register shall contain .. th~· .following. metJ:,od of keeping entries· &nd reGOros~. . · ..
f information:. . .· .. · . : ~ '· .. ·. · . . : 6. · :Condition.s· tfr1der which. denati.lr.ed alcoho_t: may · ·
·;'; 1. ,Na.me.. and.TIN.of persons .or ..entities·for whom. ·, -be· removed.· a11d· dealt 'in, -the· Charact~t a·nd _
;·· . -'·.the i-eceiPts o~ s·aies or cO~m~Jc1a1Jryvoices were· . . .qua.ntity Qf..Jhe .den.atqr1ng ~Gl!eriar . Used,: th.~ .
·f;: _. ·-' printed; .and ·.- · ·· . :·· .· .. . ·. ·. . . . · · ·::- · ·. · ·mann~r iri wh!ch, th.¢-de:naturing process shall be
\ .•. 2. · Number of boo.klets, number. of"set~:per l;>ooklet, ·effev~~a;·· ···· ·. · . · · . . _
. . •· number ,of cpple$ per set a.nd the seri~r" num.b.ers 7. · Mann~r In which. th~. reve119e shall b~ collected
. · cif the·receipts·br invoices ir, ~act, ~ooklet"(('i/RC, . . . . :and· pat~. ?_nd:. iris.tn,.imenVdocume·nr to·. which·
. Sep,_238). . . . . . . · . ' . revenue stamP.S shall be .affix~d;" .
· · . .. . .- . 8. : Condition~· -: to . · ."be · observe.d - r-espectirig
Eih~bi"t10~·o(certmc.at~\od>ay~ent at·i>1a~e· qt enforceme.ntof the.prov1s1C:n~: irnposirig t.ax <;>n·
Business · ' ·.-· · ·· ·.· · ·· · ·· , · · . · the estate of a, decedent and· .other tr.ansfers
.. The certificate.or receipts"showing-payment)oi.taxeS.· morlf~·Gl;IUSU, ~s-well,as 6ri-_gifts;_ · .. · . '_ : ·.
issued to··a person engaged ih a· b·usiness subject to 9, Manner- If""! whicli tai returns;·· ·information ··and:.
ARF ~hall b~ -kept.·c~ms.picuously· _exhibited ·-in. plain. ·reports sh"an·be· prepared and-repqrted inciu~ing.
view,_ifr .. o.r at 'the place wh.ere. the .. business -is lhe prep~ration·and.pul;>li~ation of·tax·statistics;
. conducted; and in cas~ ~fa pedqler or other persons and . ~- ·. . . . ;.
n?t havina a. fixed place of business. shall be-kept in·

-------·-·------------------------------------------------1
 .. l!',;!;~!1';!!1:z;;~~illlllllill~s:m .. --,:am1B11111111 .. IIB!1imlllll!...... aa.-m:1 .. llill~ .. 11m1...... ._ ....... m11a1--. ·1
·TAX ADMINISTRATION.-AND ENFORCEMEN·T·
.. . SAN BE'DA L:AWCENTRALIZED/MR OPE'RATIONS ~ ME'MQRYAJD 2'019
+ . e6et Me . " "
10. Manner in which internal revenuetaxes shall be insurance, telecommunication, -ufltltles. ·
· paid .through the 'collection officers .ot BIR· or, · · petroleum, tobaccoand alcohol industries; and .
authorized ·ageht banks _inclJJc'ling the manner b.y . fO:-Cor-porat~ taxpayers engaged in the production ..
. 'which the r'~tu~ns and payment of taxes' of Large . · ·. · . of metallic minerals (R. R. 'No. 17-2010, Sec. 4
. Taxpayers may 'be filed and paid· (NIRC, sec: . ·: · (1:.:5)).· . · · · · ·
245). . . . . : . . . · · , .- . . ·
· · . - Administrative Issuances (1 DE i.tio&. supra· a(·
Large Taxpayer · -•. ·- · 2$-26) . . .
A Large }a,xpayer IS a taxpayer which has been. . 1 ... Revenue 'Reg4lations ·-formal interpretationsof
. -classlfled and notified in-w.riting bythe CIR as one 'the NIRC provisions by. the -SOF, upon the
.. Jhat hassatisfled any of the foliowing criteria: ·. . . recommendation ·of the CIR' (2°'DIZON,' supja· at
1, 'As .to payment: · .: ·. ', 1'1)': '. . ,- · ·· · · .. ·.· · · : . :
. a. VAT ._:• at Teast P2Q0,000/quarter tqr the · .. · . . . . . . . , .
· · · preceding y~ar.; . . ·... . . · · ·· . · ·. · · Requisites for V.ali.d.lty ·of Revenue .:Regu.latiorts:
-b, ·. ·-excise .tax ....: at. least P1 ,000,000 -for the · ·. (NCO) · .. . · ··, · .... · ·. .· . · ·
· 'preceding y~ar; .:. · · : ... · . . . . · a'. Necessary to the proper ehtorcement of the
;.,c. .Income-fax>- at least P.f,000,000 for tlie 'law; · · · ·.;
preceding yeaF; · . · ·. . · - ·. . · 'b. Ncit §:~r_i_tr_a·ryto lawandthe Constitution; and
·. . d. · .Witht)oldi':19:.tax ._ 'at least ·f'.1,00.?,,00J.2.,,.f..~,""""~·~ Published. in:. the ·.Qffici~i· G~z~tt.e (2 DE ..
· : the precadinq__year; . . . ~P' j ·J\. ]'
··1· ~l:,J, supra at 673). . · . . . ',"
e: Percentage ·. tax~s.. . - .~t _r')(e.ast .C·v,. ;Y_ i'~"' . . ' · '. ·. · . · · · .· .
. P200;000/quc1rter f~r the pr~t~dlllg te.ar.~Bd,..~*~.J~$U~J.!ce,of~~r~venue ~egula_tlo.n .authonzed by
f: · Qoc.umentary. ?ta,:np 1~5t ~.«"'fE;?as!_,...,..,.:.._~a,t~.teti_aY.1_1':'l?Jc~ ?nd effect of lc!W, _ Its details and
. 1;>1,000,000 .{R-R. No: 1ft20~·"o;}j-,c-)>f&t1}).· f~ ':ian~~~~~j,11:rjin2"li<!£!m ou~ are oftentime~. IE~f.t to th~
. · . · ~" . . . i ,0 ...., ".!' .. 1 .. ·'·'"ID 1[ a.qmJl'J.IS~tivti:v::w-en,cy entrust~d . with . their ·
2. F)_ri~nci~l·co11dition aAd;ffe~iill,fo.f. oJ}~ratro~· 1,~. ffitorce111~nt. ('cio.mn;ijs~on~r· 9t 1nlernal Rever,ae v.
a.·· Gross_. sales/re_~~·~. J_-. ~-.1.~~
,P1,000,000,090 for·j~e,prfalredmg.yeari_., . ·
.b. ·1'1et ~orth -·.at le~s('Psop;900,op_o. at~j~
S<?lil:fb_a~ Gorp',·
..,~2J.·.· 1· · . ~
·~ !/..~
,-~i, · · · :· ·
'@JR. ·f-}o. 1'18191,. N_ovember 25;·.
. · . ~ 1 . · . ..: .· · . · · . · · . · :
close of each taxable ~at;~ ,\ . r.~lli.TJ~al\.ie·.o~~even9-e~Re'g· ations .. · .' ·: . · · . ·
c •. Gross .,iu,t~~ses ~ il~<.h8~· ~OO;QQ02crcecGe!J.@!aii'g!t:A.~.1.J!lc?nst\t~tl?nal·ac~ for tfia!'ma~ter
.. ,. for_t~e prec~din~ ~e\r;,a~\·
. d. ,Top__ · c.orgora~~ .. tix/ay~_r.,,s
·.- · · PL\bhshed_._by t~e, ~EC TR.R,\f;!_o.~,P~
:'l\~~\
· ,ig-t~ a~!~
e_ ~~i-~~Y ·"a
m ttf~t m,
ffi? .-I~ exit:i:J~M . or~~~it'a}.~,u:im1palordinance hl<e~1se
1,,ty, ~n.n~t_bEl. ~he source _of
~jftfigh~fbr·dut~.- Norean 1~Just1fy ar:iyof(ie1al
. . · Sec. 5-(5.2)r .· : 1:,,. ' · . ".~ . · ~ ....,'?...9. :fii~en ui}f.er it. Jts;~pµgnancy to the'fuf'\~amental ·.
.. .· : · .· ·: .., . ·,' . '-.'· ·.scr·•"Fffl\~J;1Ce·j\!faj~jaJiy.,-ecl~red_result~ in·its.being'to all
. , Large. Taxpayer Candidates . : ;,~..,__ .C ·ll'lt~pJ~d\~lA):P98eSa· mere s~rap of paper. As the
: · However, .the :following ·taxpayers _at~,at'.i§roaticall~"Tl°'eyl ¢1yi~go~puts it: ".'{v.hen the·Courts cfe_clarea
... cl~s~l.fled:~-~ ~n~id_~~e .t.o. be a Large ·Th·~~E(r{a.nd· 1\1[ ilit\~ ~:t'n.l5onsi!>:tentwith . _th~. Constitution, t!ie · _-
. Will ~e·.not1f1ed 1n wnting by t~e·B1~: · ~->:..,~:..,;f9,!;.©~~ha_11 ·be ·void and.·_the latter ·shall ·g?VefT1.
1:. All · br.;1nches of a t~xpayer under · the L:arge -· Admm1strat11t~" ·.or executiv.e. - acts, orders· and
Taxpayer~ Service;·. '· . . ·.· , ....: , . regul~tions· :snail· be ·valid on!y- ·when· they ·a're '.not ·.
2 .. ·Subsidiaries; :affiliates and · entities : · ·of ·contrary· to. the laws ·of'the Constitution" (CIR v. ·.San·.
conglomerates/group· of: qbmpanies .. of.. .a ·La.rge . ·: Roque. Co,;p'oratio,n,.G.R,. NO: 187 485;:February 12; .
T~xpayer Initially list.ed as: ofNovel)"lber 16; 201 O; · . · 2()1'3}. · - ,. . .·. : · · ' . : . · .: : · . , ·
3. ·T-he '• survi11ing . company: .jn ... : .ca~e· of . . ' ' ' .
· '' : me·rgejfcqnsqlidation ·· ·involving '!3 · ·,Large Excepti~'n:.iil.the same· case.,.citing Sei:/ ..246 't:,fth.e'
Ta.xpayer.;.. · · · ··' · . . ..:· . . NIRC, the court' ~aid' -th.at taxpii'yers acting.·io g'ood ·
4. .A'rJy, · corporation tha( ·absorbs·.· the faith should nqt be madi:i' to suffer {or adti~rir.ig fo
. . qperatio.nlbu~iness i!'l case. of spin.:off/s of any general ·.interpretative: rules of the· Com·mlssiorier ·
. · Larg~ Taxpayer;. . . . . . .. · . .a _ . }o.terpretJrig:taxlaw&',.shoulcl ·s·uch··interpr~tation Jate.r ·
. 5. · Corporatiqns wit.h_an· authoriz~d capJtali;zation of turn _cJ'ut to't>e erro.neous· ~n<,l- bf revers.ed by.. the.
:. at !~as't; P300,000,000·registered·with SEC; : . _ ._ · . Cqmmissiqner _or: this ·. c:ourt:· Thus:,; a .getieraf .
s; Multinational. ·: ~nterprises .· . <rviNE~)". with ·. an interpre.tative rul~. issued by, tt'ie Commissioner _may·
a~thorit.e9 c~pitalizati{>nor.assigned capital of. at 'be.relied'upon by taxpayersdrom.tlie time tt:iet.ule .is.·
leai,t ·p.~QO,OQ0,0001 . · . . . .. , . Issued. up .to its.rev~rsal. l:)y the- Commissioner or this .
· 7: · PuQlicly~listed corp6rati9ns; .: · ·' . · · Co!,!rt (CIR v. San ~oq4e Corporation, supra)_
.: 8. Universal( comm~rciat and· foreign banks; ' .
9, Taxpr;1yers with.an authorized ca'pltaJization.of at
1!3ast- P:too,090,000 belorigihg· :10 · banking,_,
. .
264 I. -2019 SA·~ BEDA LAW CENTRALIZED BAR OPERATIONS

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TAX ADM.INISTRATION.ANO. ENF.ORCEM{NT.
. . SAN BEDA LAW.CENTRALIZED/3AR'0/?ERA170NS-:MEMORY AID :w,9 .
• t • • ' .• • • •

t/ . . . . . . . .
·t. Note: Section 246"iS not-Iimlted to a ·,everSal only bY· 2: . Rulings Wlt_h Established Precede~ts
f: the- Commissioner because ·this Section expressly .retteration o.f.. previous rulings, opinions and
"'· states, ''.Any· revocation, modification. or reversal" · interpretations of the CIR, as delegated to a duly
\;>.: · without. specifying who made th~ revocation; authorized internalrevenue officer in responseto
. . rnodifica.ticin oF· reversal. . Hence, c;! .reversal .by this · · specific request f~r-
rulirrg ~led by a taxpayerwith ~ .
.'.f court. is covered under Section -24ff· (CIR Ii. San the BlR (2 DIZON, supra at 16): · . i
t ·. Roque Corporation,- supra). .: . . . .· . · '. . . .' 3. D,_el~'.g:ate.d . Authorltiea' · or. Unnumbered.
i", .
}·'. . ··... . Rulings·_ rulln"gs ·signed by revenue. of:ficl.als ·
!
• BlR Rullngs'-.less' forrnel-Interpretatlons by the.. lower tf:)an \he c·IR, who havebeen authorized to
·CIR 'or his subordinates involving}ax provlslons si~n .the'r.n because ·-previou~ rulings on the. same i.
and requlations.These are issued In response to -~ubje~t matter ha'd already been approved by the
.queries-of .t~·xpayers, whlcbincfude: · · CIR.(ld.). . .· . , . · ·· · . :-· - ·
· .. a ... BIR.rulings;.. . , . · .4.· Revenue. Memor.andu111· Rulings ', (RJV!R).• ~
· b, VAT r4Ung~; . . rulings, opinions, and tnteroretatlons 'Of-the. CIR
c. · lnternatlonal. Tax· Affairs Dlvtslon . (ITAD): . to> tlJe provisions nf true laws, as app1ied to
·. · Rulings; and . . ., .· . . . 'specific setor facts with. or without establish~~!:.
·· d.. qeiegated, At/ihorities · ·or .-·-v.nnumbered': ·. · · precedents (lil:·flt-13). . . ·.
. ~ulin!Js-. · · . . . . . . . . 5. R.evef'!ue :·Memoran~lim Clrcujars: (RMC) . -·
. . issued to a·mpli.fy therules, precedents, laws, and
· ~·. · These rulings can .be re:p_ealed.;_rnodi~·ed; or .<!-rnend~<;l~.r,.) .. ~ther orders' issued· by· agenc;ies: other. than the_
~- .. by a. subsequent·~li,:ig iss_ued b_~·the s;ame_ or anot~~}"''"~~. BIR, for.the guidance and complian~e of-revenue·
~-. .CIR (2.0l~ON, suprtiJ a.t 14). . . . . . {.~ri_'/,,,}l·· 'P';)rsooi:ie~ (Id)-. . . . .
·· .· ~ · , . ·. ·: .·: ·. . . ·· , . i_:.(->J.•:•i•::th-1 6. ·· ·earik. Bulletins -· issued for the guidance,and
.· Review ~f ~1;l!ings_by the,~~c~et~ry.:.~f F_inan·$E} ~:::.1.~:;!--.,-/-:-:compliaf.fi.e.. of bank. pe.rsonnef authorized. to
~-· . A_ ru)_if")g by_trie .CIR ·shall .be.p_resuineci yali9;~,:ile~~~Yfp1C~r~"rJ¥irf:'~Yme_nt-of taxe~__(ld. pf 1,6).. . .
/~. mod1fi_ed;·reversed~ot sup.e_r.s~d.~d:bx:·!~(y,;~~~F.. 1 ll 7--. Rev~not~·~\..ud1t.~emoran~um _or~ers (RAM.O)
taxpay~r has.~O·days fron:i the.date o~A.re~e1pt ·. pi·~::.:., . ...: gu1del e'1. fqr ,re\/en_ue officers m·.condu,ctmg
I'(
f".: the ruli._ng ofth(;3.'CiR to.s~ek_its r~vie~4~bfithe SQ.F~~
~-_:,.. eiJh.er P.Y· himself/it$elf, or tiis/.its. . i~_9µ')0~.e·$~9.ent
or r.~ptei;;ei:ifative (R:MO .. N-0. ,,.,f!,.3':'~001.;f;f;~fl N@:, · _;~ 8 .. ~ev~,uefMe.~~r.ai"11;:lum·
et .: th_eir · tft. ~:a\dits 9:nd. · ..fr;ir, higher officials _in
re"v.ie:"i}ng ithei~: reRorts of exami_natiOff (Id:).
·orders .-:(~M~). ~
..

44-2001). · · . .it~<~tl ·
. A";;\.. · ~. . ..~ . d~~-C:~'!!ng, ·proce'dun~s·. :wh1c_h·:. ar~
. ·. · :. · ' ·,· . . 'f/f .·.~.:£/-:,.;,_· ~- / · ·nee::ess~I.Y'f\S?~~ifW out pr:ogrnms or .to- achieve
The SG_F's power ofreview, ~t~1h·irnpli~5:ttJe p6f~r. ~~~, . policyf~oat~a'nd-~t:sjeo!ives {ld:_a(13). . ·. .
. to reverse or modif.y, is limited oni\,~n:il;(IJJint.[:is~u,,ed · t~. 9." .Revenue: Adrninistr~tior_, Order~ ·. (RAO) :....
by· tne CIR yvhich are advers({ en~t~e.}~xpayar. }~1-r.-~~~s~uances Whi.~h _cover s1:tbjed._mattedera.tin,g to
(R.M.O .. No_._. 03-2001_;R~-9- /1!9. 44.~fi9~-1'J .. ··.~ ·;, /;l.~r,::.~:~1.1i~./,~;ot1e~s per.manent. a~mi~isirative setu_p of.
. . . . · . · .•.. ~
1'(,.
• • .~.rJ:i;>-"..14~-tHe4.t-:f:tiR (e.g., orgam:zat1on?I ·· structw:es,
Kinds of·.Bl~lpterpretative RulingsJ,i{· .... ·(pf ·... · ' ; .-statem~nts offunctions-anci/ial)ilities, etc) (Id. at·
1. . R1.:J.lin~s of\First·lmpressi~ns ..:. ref~!9-:'.t~ilings, · .. . . '16)>.. .' ·. ':. ' . :_ ; ·· · , . ·
· · opinions; ·:··and Jriterpretation· · of the ··CIR with- 10 .. Reven·ue Travel Assignm_e_nt Orders·(RTAQ)-
. respe9t to ~h·e NIRC and ottJ~r·tB?C \a\Vs witbout :assign ·reven.µe. personnel· to-. specific units
· · e.stablishe(! .precedent. and. which are· issued .in . . ·· · ·(R.M. 0.- No: :JB-2Q11). . · · · · : ·· · , .. '
· -response. to .. a ·specific· r~tj\Jesffor ruli~g filec.f.by. ·. · 11. Rev:enu·e Special Orders··(~SO). - itisfructions
Jhe· taxpayer- witli ·the ,_Bureau. Ttie teriri -also · · . :. · or directives. ..for tt:ie: accomplishnierit .of SP.eciaf
.. inciudes. reversal, modifica.tioh· -'or revocation ·qt .... assig_rirri"erjts·· or .mission"s 9f signincance which·:·
any existing tuling'.(2_ DIZON,.s~pra at .15), . are tempor~ry in nature·or for..a··definite· pe_riod 'of.
, . ' · · · · ·· · ·· · time not ei<ceedin~j"1 ye.ar.fR.M.0. No. 3~20r/:1),
. Requisites:·fp~ ·the .::Valigity of )31R ~-uling ·of . . .. . . , -: .
. . First_lmp):'e~sion:_-. ·. . . . . . . ·.. . .... .. . .:. . '. Non~Reti'oactivity of Rulings . .- . .; .
. a. ·····Must be·issLied.i11-a·ccordaric:e\vitM1?epow~~ .. · ~-~n~ral . Rlll~:. Ar)y revocation, modification, or
· .··.onhe·CIR to make.rulings· c:1nd opihioris in_ . :reversal.of any of.the rules onegulations of .af")y qt·
.• connection . with the. ·impleme~taticin of. ·. · t~e ·rulings.or .circulars prcm:,tJlgated by the:91Rshall
..... internal revenu·e laws; and . . : . . . . . . . . . not,be given .retroactive application. if. the:revi)cation,,
' : b. Must .riot . override, s1;1pplant, o'r rric;x:iify the l'TlOdificatio_n. pr' reversal . _;wm . tie . pre)ydici;:il . to
,. :- law !)ut·, must he- consistent :with-. the. law it tax·paye~~ (NIRC, Sec. 246;-Commis.~(o'n'eroUntef.nfilf
i_ntend!!>. to carry out.(CIR I:'· ·Michel·Lhuif/ier ·Revenue v. Philippine Health Care.-Pro.vJders;-lnc.,
· Pawnshop, Inc., G.:.R.. No." 150947, July· 15, · G.R. Np. 1681W, April 24, 20Q!)- · · ·...
2003)..... · . . .

, ...
2019 SAN BEDA LAW CENTRALIZED.BAR OPERATIONS I· Z65
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 TAX ADMINISTRATION AND·.·E:N.FORCEMENT .
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· . SAN• DEDALAW CENTRALIZED
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BAR OP.ERATIONS- MEMORYAl0·'2019.
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.

Unde'r S~ctipn 246, taxpayers.~ay rely. upon a·ru1e or' · .· 'General Interpretative Rule . . .
.ruling issued by the'Commissioner from the'time the ' It· is a· response to ~ query made not by a particular:
rule or th.e ruling is issu~d j.Jp.. to its -reve~sal by the .taxpayer. Example is BIR Ruling No. DA-489--03
Cotnrnlss.ioneror this Court: The reversalknot given·· where· the .query on refund' was made by. a
retroa'ctive,effect.Th.is; in esse-nce, is the .doctrine of . .'.QOVeri]nient .'ager,cy tc:lsked with ,proce.ssil)g t.ax .
. operativ.e fact (Corn.missioner of Internal Revenue. y .. · ··refunds · ang. ·credits (Com.missior,er · of Internal .
Sc'lri .Roque power Corp:,_ G.R. Nos. 1874.85, Opt9.lier· · . .. Re.venue v. $1;mRoque Power Corp., ~upra);' · · ·
8, 2()13) .. · · ', . ·,. .. · .. -· . '.

Exce°j:>tio:n~:· ,.··. , .
.,· The revocation, modlflcafion.. or reversal would be ·:· .STATU:r°ORY .OFFEN.SES
· 9iven .. retroactive . effect · in · any . of ttie · foll¢wing· : · :: . . . . ... ,AND .PENAL.TI-Es:.
instances: (~·hraB,'!f.'i .. ·.. ·.·. .· . . ... ·. . . :
-~ .. Wflere. the ·taxpayer .detiberatety . Misstates·. or.:
·- . 'omits 'material· 'facts from his return· .or. .any · Additions to the- Tax:. ·
.' docurnent requlredo! him by..Uie .BIR 1NIRC, $ec. Generql Provlslc:fhs. · ·. :: .
·24~J: . · .. : .. ·'· · .: · · · Addition.s to the tax or deticlency tax shallapply to a11 .
:2 .. · -,Whare.t~e:Facts·subsequently·gathered _by the ·. · "taxes, fees; and .charqes imposed in: ·Nt~c. Tl'ie
. BIR .are ma~e.rially d\fferen.t.'fcom· the·.fa:~9.fl:'r... _ --a~~~o~d,.ded..to.the tax shalf be col_~~cted at the,,
. . 1.Y.h1c.h.tne ruh':lg was based (fl!IRC, ~.e¥f-:;2~'16); f
· .. [ .. s~':'..1: ·tlme"'in the same mannerand as.part of the tax
3. ·. Wt.Jere _ti'):~ ta.xp~y~r:ac~ec!.. in, ~a_gl~t~.{ _ J(!<p, ~_:.,, :(fJfJ;fC,,/Sei~217(a)). . . . · ·.
4:
.S~c, 246); and . · ·· f.·~1
·~=--=;=,.~:. ..!!. .
W_here:th~ retroactive appl_i~at~~r'l~wo~lg;,Jreriefit ~.~,J".hei~
V ~-·' · · · · ·.> · · · ·
~~~~~clµ~·es-an offi_ceror.employee ?..f ·
· the. tax~~Y.e:. (S~pr:em~ -~r. Ksiirl~.,/l(tTB~-:"Bf!'r ..J.1:.· ~f1:J_Drat1~r,i_·w~9,.~fs · such officer, ·. employee or:
'· . .Fa,:nily S.avmgs_ Ba,:,k,: In .•~~jN.<}"K t65~Ji . j\.
m{:m;lb~r'i~ i.J~p~t;a.Jiuty to perform the act in respect
, ·Februa,;r_2.5, 2011~- .: / · ... ·-~/" ~:
· · · · · · .g~· if ·
, :
fl"'<· , ·
·, o;·
1f'~h!c~~~e v.i~tl~op1~9urs(NIRC!, S~c:_247(c))._
R \ lJl ., \ . . . .
.

T_he;.~qr_-Retroactivity PripcJp,!e·f._oes .ot;~r:>f,.J_Y·-· EH..Ci?.'9Se.,J To· ,dj~~lJ~gp-d~Jay.. 'in the paym~nt of

. wh.~r ._t1;1?_ ~uUng.;l~v.~Lve,·11~"".Nt and: Voi.u1-0r -· ~~~·s
?~q-to:t.he·tpvE:~fl~.Eiri~~rid, in this s~ri.s~. the'
,. · B!i!~!'l9:·C.~n,rao/. to._-!..aw: .'i ·.:~ lt_.'-c'2-11.\ .. · ."· nal~ fn~nter~sf'.afJ ~o.t-penal but ~ompensatrn:y ·
Well-entrenc_t-i~d .. ar~·:· the _~p}i~~pleuwi.,at . ·, 1he.::;i--t:::fOLtbe.!3olV'~'<l lt1}"!t us~ ~f the ·funds ·by th.e taxp~yer
11
-:. GoV(;l.r~ryientis..rievE!r:.est9p~i;I fft)rla'cqll~'e!i~~taxe.~ .. V,~~yohd..J~· at v;~ .~1e·is :~?p~os~d. to ~ave paid· ·
· b:ecause of. mlsta)<esand errdrs-qrl't!~.gebfsl~~~th~~· .:!~}~€~, .
~p:,,emm~· t (Ph.i/Jppme Refinmg Co... v.
· there'are no ~~ste.d·rigbt$ iri ~\~9.J:1~)1erp~ ,©t'.~'~.: I· _,Y.~~Appe_.pJs_, G.~. No: 1 J-8794,./v1ay 8'. ?996). ~ ·
law (B!R R':'/mg No. 370~11; 6ifitob_er_.~,i0-!1.. _ . ,.,,:~_,.'.;" .:;'(.· . . .. . . . . \ ·. _ . . ..
. . : . · . . . · ·, . . · Su··
· ~: ()C[EN'\~_8;pef.1(!1~ncy v.lax Delinquency . . :· ·· ·
. Doct,:il'\e,~f.~p~r:ative i::-act.: . . . · ... ,l'.n.~ ~~,:°J.t~ii~vY/1~· tlie amount by .which the tax
Taxpayers ·may.rely µpon a. rul~ or ~g~~Cffd~~- .. ,mP..';)_St9epeu~ds th~ aT)1qun~ st:i~wn as the ta?( by t~~
-th~ ~IR fro~_tne.time the.rut~ ?.rruling·is,.1~"!~.up:.M~1~~_liyeb,pon his return: but.-t~e ~IT!o.unt so.'shown
to1t~.r~\7ersal,!:>ytheCl~orby.P,e·Court. Jh~r.sal . -·o~~fettim shall be m.creased·.by· the. amounts
.. :of. the rui('.),:·Or ri,IUng_ is .noi •giveri,:retr~.acti.ve·eff~re~ioCisly .. a$.Ses~ed :. ·{or.'· collect~d '. withp.ut .
. (.Commissioner. of-lntein.a,J·Re.veni.Je. v.. $an- Roquf!· . ·.assessment} as a. defid~j:icy,"arid. decre·as~d·b.y the
. F?9.wef Corp.;.. _G:f?:-flios, 18'7·4:85,:qctqber:8, .~01.3).. ·. · . amol.lnt · · prevfously aoatect, . credite'd., re~urned·. or -
· ·r ·· ..'. ·. ·· ·:· •.. ·.'.· .. > ;: · · · :: ·.. . - . . : ·. · • .... otherwise repaid in respect:6f such tax (NlR.C;.,Sec.
·,There· mu!llf'how~ver, pe·a rule qr. ruling issued .by 56(8)). . -::. · · · ··· · , . · ·, ..... - · · .· · .
. . ttie .CIFHhat- is re!ied··~pon py th.e .taxpayer in· go.od . . · ., . . . . . .
... faith.: Th~ rulirig:.111ay eit6er.-be a: ·:. ·· _ . ·: . · .. Tax Deliriquency'tefers to.the state ofa,perso11 upon
· 1. ·· ·specific nJling, iri· which c..~s'e th~ rev.ersarof the . wt.Tom the personi:ll' obligation to pay the ti,i,i:'hasbeen ..
ruling ml,lst- not- b~·applied .ratf~<::lively.on.lywith : : : . fixed QY lawful' as.ses.sment an cf who thereatt~r fa.ils·to
··-re~pect-_fo the· _particular t3¥p~yer:.who wa._s ',.. · p,ay;·tJ:ie tax~witf'.iln•.t1i~·tiT)1e .. [im_1ted by.·l~wws. \/..
· . m1sle(fby the.ruling; or . · •'- ' : . . ·.. · . · Abejo;,G.R. No;L-123.62,·Augu.st 29; ·19.17) :
2, ... Gerier?f i';)teq:~r~tatlv~.;r.ul?,. in V(fl'l~h.case .the . · . :. · · · . · :· · , '· : .. __ · <· : . 0
•

revers.'al fT!USt_nol.P!:l applied retrqachvely to all · . Civil Pena)m~~·. . . . ·. .. . .

·? . tl)e .taxp~yers who were .
·misted by the'- rut~· Th~rc shall be :imposed; 'in-addition to tli~ ta~ required .
. (C9mmlssioner :of.' lntema.J :Reveilue, v. ·:$an to be paid; a-penalty·equivalent to twenty-five percent·
Roque.Power.Corp., supra). · . . . .'.· .·(25"/i) oft_h~ a~puAt ch:ie, (NIRC,.~ec. 248). .
. . ~ . . .. . . . . . . . .. -... . . . .
. ···. ·....

·· .......
, . ·:.·
•'
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26.6 . I 2019 SAN SEDA LAW CENTRALIZED BA~ OPERATIONS

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 . TAXADM'I.NlSTRATIO.N,AND ENFORCEMENT
. _SIW BE/Jt. I,AWtENTk/,itzED BAROPERATIONS - MEMORY Aio·2019 · · · ·
a rwe w,acwacsi; fhaw
t;; ··. T·ax laws imposing penalties for· dellnquencles are .. Payment ofsurct,arge ~andatory .
t. intended to "hasten' tax payments. by ·punishing General Ruler: The payment of "the· surcharge is
(- · evasion orneqlect of duty in respect.thereof (ABAN. .. .rnandatory · and the' · Comrnisslorier .. of tnternal
;'. supra.al-208).. . . · · ·, · -
t~. . . · . · · . ·. ' . · Revenue is not vested with ·any authorlty towalve or
r . . dispense. with .the collection thereof (Lim Co Chui v.
n: .: N<>te:'·The-GIR._ha,s no powerto prescribe-penalties· Posadas,
. . . . . No.. L-23487;
G:R. . . Februery 11; 1925).. ·
-~,. since it is the Secretary of Flnanca who iS$U0S rules
l: and. regulatton~·.(NIRC,: s_~c~. 7 a_nd 244). · l;xceptiqns·:. . .
Sl!rcha.rge .and ·. Interest· may·:· be· deleted in the
t;_ .~ Surcharge .: . . . . -; ... . followlnq_insrar:ices: . .• . . . . . .
f:_·· ·A civil:pen~lty imposed by.law as an acfC:litiOn to the . 1·. When.there is good faith and honest belief that
¥ . 'baslctaxrequlred to be paid. A'surcharqe added to 0!'.1~ is not subject-to tax on V,e basisof previous·
f· ·the. main ..tax is subject to inter~sq2 DE LEON, eupre . ir'.l!eq:fr~tationof.goyerriment-agenc;ie$ (Mfchel J ..
'.1• :· • et 683).· . • · .· · · ·. . .. . · ·. · Lhi:ii/1/er- Pawnshop, 'Inc. · v. · commissioner of
·· internal 'Revenue, · f3.R. No. U3-678(), · Septetjlber·
Rates .of S.i·ir~'1ar.ge.:. · . .. . ··.1-1, 2006); or .. · .. · ·. . .
1 / . Tllirenty::-five pEfrcehf (25%) of the amount due . · 2.. When· .the imposition of a: tax statute was .
. ·. shall be imposed.in the foilow.ing: · . -~ cqntrov.ersial.°{Cagayari Electric Power B _Light.
a,. Faflµredo'file:~_foi return· and pi,iy the tax due · . . Co., Inc., v. Commlssionerot lnlemal Revenue,
· · thereon onJ~.ff·date_prescnb~d; · · .· . · · . ./\ . G.R.:No. L-60126, September 25, ·1985).
b. Filing a retum-~ith arrlnternal'revenue offici0<.,!f . . . . · ·<
· · · 01her than those ,:witli · wtJom the retu¥~-.ik,-''1~ lntere$t . · . ·. ·-- . ·
, . ··reqpired t? be filed-{wro~g.vei)ue); . ti.'-1.t};;;;fi1.lntere~tin gener;=d is i::qmputed ~ased on any unpaid
c: Failur.e to pay the :d.eficiency tax ."."i.tl}il_!f1n~il't#i.ft1~i;,i:i·~.!,lftof tff.~~.at the ra!e of do1:_Jble t):le legal inferest
· time l?rescrib,ei:1 fo(_ its payl!)~nt in th~.i:iouf;e.ff ff1J!:..r,at~~;Jo:~~:;orforb_~a_ra~ce of -.any m~>ney. iri the
.. · of assessm~nt; .or· · ·. .. . ...,.,8;-,:t7 · ·· ~, !i. · absence~of'.f.lJ express· stipul~_tion as .set by .the,_
d. Failure to. p,;1y_the· f~II or. P"!_rl qf),he .f~<)~nt~~j· Bangko·se_n)f~l~g Pilipinas ffOm the date pr_esci-ibed
·· . tax shown on ~~X .retu,rn requJr:1fl;19 b_';)il~ir, ; ~i
for j:laym~JJY~U~ the amount is fully paid (NIRC, as
!
.. oqhe _full ~n:i~unt of -tax_...r;1.~~'f~;l~19hn_o.._ f'.'( _amended'/Jy_lJ?Alt'JJaw, Se9, 249 (;A.)). · . . l
return 1s fequ1red to b!3 ,fife'd on ·q_~1.f3ef.ere tJae ~:~ . . . /!·..
ii 't;. . . ·. . . ·
.. ~a~e p~~s_cr-ifJ.~d··torit~[~Yf!le~_J/\JIRC,,.Sert,. ··iii.-!A ~er Bs~{cir,c~lar·Kt~-,.Z99, s. 2013, ~heinterest.rate

f : .· · .. ·
.,
.; · ·
. . . Z4B(A)). . . · ~if'. =>?'4:J.);· v.;,;ii\· )(•~ 1s _6%~t~e.r~fi~'i;.XfJi1~rate.
· . ·.
2, fifty·__percent. (50_%} petialty.;;~as.~,:
·· .follo:v,,.ing:·(W'7). , . . · ·.
. . · . -:'~- i,U~i.i~ .
,t, ~: ·
of
~t, ·1•1:1- (R.._R- N~:''.Q..'f:,.2.0.it'{ff'Sec:2).
tfie ~;I
lj. ·. · , {..
·
ct.general ir:iteresf is 12%

· · ·. · :. ·. :· - .·
.. .
·. ·.' _ · . : · ·
~~.?0t~:_TheapP:IJcah?!'l: of th~ g_eneral interest r~te of
. · , ·.
: . · ·: I
!
i·
t--4 · . . ··a. ; Willful neglect.to file a._r.etum wlt~p-~e perio,d ..,,,\~..z,.,. .:1~'{~..,.,,~,~~ct1ve
. ·..
prescrib~d; or · ·.... _.' t~~ . . _;.,,;;~1;•nt.,~s.~c~_c!te-,~the.
__ sta~1ng ~an_uary 1, 2018. Pm?r to
pre~IOUS m~erest rat~ o( 20% per
I

·. . . · : · · · ·. ·. · : . ·. . .: . · · · {~ , · 1·.J_·. : ,,. _. anr:iums~aJI be app_hed: _· . . · . · ... : .

f-.. ,
Note: If· the raxp~.y.er volutit~rily files-@);\Wlet.urnr·: . . , · . . · ..... ·.. ·· · . . ·, . · , · .
L wi.~~91.1t· ·t;iQ~i\:~· Jrom.: ihe.·;BI~,.. _only_ -i::>°lo . : Classe~·'?f Interest .. ·- : .. ·. _. ·:·. _.
t. · .. : :surc~arge s.hall be (mpo~_ed forJate filing and late.. 1. -pet1c1en~_Yln~e~~st ~-l~p_ose~. on any deficiency ·
· · . payment ofJhe tax. ·.. · · · .· · · . m the ta~ due. Any ~efi91ency 1n the.t.ax due shall
- · · · · _.be ~ubject· tb· .the inter.est/rate aqo_ve; Whi¢1:i
~uf jf1tie\:1xp~yerfilesJ_he·r,et~m.onlyaft~r_prio.r _ interest snail be assessed'and ·coll~ted.frciodhe ·
· notice in writing. from the . BIR, tben. the 50% · ... · date. prnstnbe~ fo[" its .. paymerif ·until . the ·Juli
. : -~urcharge wm.··b·~ ·irnp9~_ed·: (JNGI;ES,. supra at. . payrtient ·-thereof, :·o"r l!P~>n issuance of _a notic;e
·-4,0_4):· _. · · · · · · . a,nd·.-.demc'!nd by the ·com.missioner of Internal
Revenae,.. whioh_ever ·com~s .eai:tier :(NIRC. as·
·>. b .. -~lse :nr ·fraudulent retu·rn .willfully mad~ amended./Jy.
.
TRA!t:J
.. lawt
.
:$ec.
. . 249 .
{B)).: . . ..
. • : (IJ!RG/S,ec._·z_4'EJ(B)).
2. Delinquency ·interest ~- sfian o~ ;ubject to the ..
: ··Pri"ma-facie-.· Evld~n~~ , 6f ~·False or-
F.raudJient intere~trat1;1 abQve; and_imposed in case oftailu.re ·
to pay:· , . ·,· ·. .. . · ·
·Ret~rn Substantial . Underdecl~ration.'Of . Sales,
rt ·. '- ~ecelpts_· \;r .inco.ri)e 7 -- failure·- to·.: report sales,
. rece1pts,.--or:income ·_;n ;;in -arobunt exceeding.. 30% of
· . . a:· The ·amout1tc;,f'ta~ due o.n-ar.ineturri requi,:ed·
.- - . . to be filed; : ·.. · . . . . . . . .
·. tti.at-det;lared per return: (Ni~_c, Sec. 248(~)). Ii The.amour-it of tax due for which no return.is
:· . . . .. . .. ·. . ...... -requir,~d; or ."-. · .. · . . · .
·subsfantla!_Overstatertient ·of
De:duct!ons- cl~i,:n :c. ·A_ deficil;!ncy_ · tiix, sl!rchat~e or· interesf
· thereon on the due date appearing· ori the
of dedudions. in-.an·amoont.exi;:e~dil}Q 30% of actual ·.
deductions (N/RC,s_ec. 248(8))'. . ' : .: notice and·demand.ofthe·:CIR,.tbere stiall be.

2019 SAN BEDA LAW CENTRALJZED BAR OPERATIONS I ·?.67

 . . .
.TAX ADMl·N.IST:RATION AND ENFORCEMENT·
. SAN_ BEDA.I.AW C:EIVTRAUZED8AR (?PERATIONS~ MEMORY)tll).2019 -.

· assessed and. ·collected-' on ·the· unpaid

amount, sllalt'be subject lo the intere.st. rate
above (NIRC as Bf!lended:·qy TRA.,IN law, Penalties for 20% deficie,:icy · Pay
Sec. 249-.(C)): .:. · · . · · deficiency tax.: interest- . penalty
Paid on time, error Imposed on the
Note! Beto.re. ·pi~sage of TRAIN· law, d;li~qu~ncy in -cornputatlon deficiency · tax
. and .. cfeficiency interes.t . . may .. be .. imposed resulting ... to from . date" _dtJe
. . . sirnultarjec:ilJsly. However, · after: tf;le. eff~ctJvity ·of .detlctency tax · up to the date
· ·· TRAIN· 1aw/in · no ·case ·sh~II ·the deficiency and ·· paid: . No
. delinquency interest · 1:>e sim'ulta.neously.' lmpos.ep surcharge since
(NIRC as . amen~ed by'TRAIN1aw, Sec.·_2.49·(A)).. there are. -no
The Co'ul't · holds : Jhe. impositlon . of . delinquency
gro1,1nd~
·· · lmposltlon . of
tor
'tlie
: interest:undl:lr s·ectibn 249:ot the. 19.9i NI Re· to be . · · the· . · 2.5% ·.
proper.vbecause-fallure t9 pay the:.defi~ie~cy, tax ·. surcharqe. · .·
'assessed within_ the time prescribed for its ·payment
. )ustifies the lmpositlon qf .the int_er~_st at the rate of : . P~n~iUes 'for· -~_Oo/~ . detlclency Pay_ :. . . the .'
20% per annt1m, whlch.Iriterest shall .be assessed · : · deficiency . tax; interest · . . ... penalty .
,and collect!fd from· tile -date ·presc,ribed .. fo~.-1!§:.~-.P~!d.on time, BIR im~o~ecj .' Q~ · , ·
. payment.until full payment is made, (Firff._,j:.eptintou· . °''f5!11.e~~. . :· _def1c1ency tax
Taisho.tnsurane:e·Corp. v, ·commis;;io!Jp(?t lp_.t~rn~I ' i~u9;10Qs.'- .!rom ~ate ?.ue
Revenue,·GR.. No. 19.7117, Aprll 17~2-o:J3"}'::-. .I. 't,-~~l~~~~-~-ngff..>. ~t? up, to. th: time
· • _ • • . . •• -~ .·\) •0;:? . . . def,~~no.1"1ax,~"'i> paid: · . No
· 3. lnter:e~t on· ~xte!'l~.ed·_ Pay."9.,(nf~fup;ef{d_,,WA~m·...,.3t; _;, ,~~:,~~{5 ,
· ~s~rcharge 'since
. thetaxpayerhasopted to P~YJ?~l)stilf P.'f.enf'buqa~j ·1-'F . ~~ .. '"'~ '-\:.v.O w.ere . qr~ no
to. pay the tax. or · any infall~EiJ}Jf on [the. dJ1e · ~\. . :~ ·. ·l · '%. ( . ,grf~nd_~ for -~e
prescribed for payment and ~l,so tn t>§lSe,sXJhere the, · , . . '\~ i ~~oslt1on_ _of
<?Omf1?JSsjoner has.:qllthor_izffid~fie~terist¢n
. time tor:the paxment <:>f the t,_,ffNlFf ~s any.ende.~~~
~ems . ·. ;.~-~ ~ ~-~. ·_. . ·
~-,thei . 25%_ .
\: =-~9. arge. ·_. , _ · :.·: .
.

_ TRAIN law, Sec. 24!}_ (D)). -R <:;5·"'11. . \ ... · ."" , ~llilf.!P e'1:a1t1~~ · • r sdo/~'surcharg~; Flay . 'the
·: .. · ·. . · · . : ~ ·, _\._.;~ ~' 1~ g)r- . ~ c . -:---- .de.tici,t'JJ.<.Y t#t 29~. deficiency s1,1rchc\'rge
.·. .,_,.., u1~~tr_at1ons based o~· ~t-J·f' _:I\~- -~; _f-.Jfi aid~~~~. #,uHijt¢,res_t . . . .. plus · "the
._ •• · • • • · .. · )'l'\': ~lli ~_.nd .f~ te be iri]J~osed · o_ci penalty- . · ·
· .. . " ::, I. ... fal~e . · 11and c!¢ficiency t~x · · ·· ..
. . ~a~e:filing~a-nd_lat~· ~2!fYc) ,sLi~<:~~~g~. P~, tb ~-. ~/ {~~-5).!enV: . fom 'da~e ~ue .. _... ·
· paymehtoftax; Ng fqr; rate fi)1Qg .c:tue~ JI .lEN\_r~l~.~t-.... to, up,,to. ttie da_te
_ ·BIR i_ntervention·or and , · . I~~ p~~~~~ ;,::,o,ez,,)f.eJ:jCle._cy t_ax,.../ .pa1a · · · · . ..
: , _. · - der;n~nd· .. paym~nt; ~0%.. ,,. -'()1 ·, ~ -1X-·fJ/YGJ.,.'f;.9,,_,~p a fJ.f 407-410)) .· ·: '. · ·
· > ge~~ral in~er~~! · ~ · · -{ · lN-~~'--. · · · · ... . · · . ~ ·
lV .- · . .; .
: · . · .. Jrom .. 9a't~ ~ue'. . . • : · ., . .~aH~fo t_o File Certain 1.nf~tmation· Retu~ns. · ·
, up to the {im.e . . · · ·(;eneral Rule: For·.-.fail!J(e to fil~ ~my i.a.fotmation
_Pai~ '.· , , · ·: ··: · · r~turn,. state~ent ~r list,~or keep rec::ord, .or stJpply any
inf6~m.1:1tion required on f.he'date pr'escriped tl:lefefore·,
... Tax r.eturn filed.on. 25% · s·urcha.r.ge P~y. . tbe . .tf1e·tiixpayer shaiLbe liabfe to 'pay P1,Or00,00.fa~ each.
. . .tim.e;· b\Jl paii:l. In ·only; .. ~ . No· surchargei;.
·: such' ..failure .. The.. aggregate.' arnount ·rer· all" soc;h
.. t~e wrong-v.enu~, ')nterest charg'e ·_liJci =.n.!;led· to
-~il.ures during the calendar,year shall .hot .exceed.
· · because. · . · . , · p_ay · the · tax:
.. P25,000.0~ {NIRq,'Sec. 250).; ·. · .. · ,.: .. ,. ·
. .. . paYr:ri'eiif is oi:i ·· _d!,Je·' ·. ·
'time; ·:even .• at . . '
· -Ex~ept1on.; Whe~'it is shpwn·th~t su~i; failure.ls du~
,the-w(on'g·plac~ . . . . .
.. to .reaso'nab_le.,cause:and ·not due to wil_lfuf neglect
Late'. filing ·and ··late 50% sutcharge';: Pay·tax, ·pfu~ ' :· (NIRC, -Sec.. 25Q). . . . ·. ·· . . ·; ·:
) ... •. .
payment due · 'to 20% . gene~al penaltie~ ..
taxpayer's·· : willf1,1l kitere&( , -from . · ·· , · Note: Atiy .~mployfir/Withhblding i:ig~.nt, includi~g· th~·
negl~ct . . ... date ._due .. (not . gov~rnrn~~t or any qf its p,olitical subdivi~ior1S:,and
frQm.. dem_an.i:J) · · . GOCC, . wh~/wtiian . fails . to . comply. with·· the
up to· the 'time . · flling/s.ubmlssion · of- BIR Form Nb. ·23.16'·within the
paid.: · trme required; may be· held liable under Section 256
'of the.Tax Code, as amended, tor'·each failu.r'e (R.R.
No ... 11-201 a; Sec. 12). · · ' ·· · '· ·

2.ff8 I 2019 SAN

. SEDA.
. .LAW CENTRALIZED
. BAR
~ OPERATIONS
 --~---.lm!S:IDWAillllollR------
~=::~
J·.t '~':;...·~--~~

TAX ADMINISTRATION
.l\Zll-m!IISlllllll
.......... !111111111..iiaa"

~SA-N~B;E;DA;;_;tA;W.~.
A:Nrf EN.FORC:°E:MENT .
_ .. llill!IIIIJil!;tUA~~m!Wt~
C~E~N~TRA;;U;Z;ED.;BA;R~O;PE;;RA;T~IO;N;;Slll-;;M~·
E~~biO~RmlY~A-{Dlm2;0~19PJ,;I'
,t-, ·.
,i/. ·The lrnpositlonof any of the penalties under the Tax 2. Willfui' tailure to fiJe return; s~pply correct and
,·i- Code;. as amended, an·d -the'· comprornlse. of the accurate inforrnation, pay tax, withhold andremlt .
..-:.~ criminal p·enalt:y,on such violations: shall not .In any ,_ tax · and refund excess taxes withheld on
~, ·ri,anner relieye · the . violating taxpayer- from the compensatlon {NIRC, Sec.,-255); , . : • ,.
}-:·oblig~tion to submitthe required documents '(R.R. 3-: Willfully makihg false.entries, records or reports,
if No. '11 :201E(Sec. 12): , .. , , .. · .. .: or using· falslfled or fake accountable _forms
·~· ,• , , . , ·(NIRC, Sec. 297); , ,. . ,
,~? Crimes; Other Offenses and· Forfeitures 4. · Unlawful pursuit of 'buslness or, carrying on a
'.;}'.' Gen¢rai P.rovl~ions :·· · . , .. business· for which .an .annual regi.stration fee is
~· , 1. A person convicted Of a .crime penalized by the imposed without ·paytrig the tax, requlred.by law.
t:, · .: 'NIRC -;shall' be subject to thapenatties imposed· (NIRC, Sec. 258); ,- .··. .. ... , , ..
? · . ·: .. by the OodeIn addition tothe payment ottaxes. 5. , Failure . .<?r refusal tq · issue, "r,eceipfs, or -sales
.;: • ·, The payment of the tax doe after apprehension .invoices; printing. o.f ·~eceipts or, ~.ales ·invoices ·
Ji~-·: . . shall,· ·no(, constltute a · valid: defense Jn' ari~( '. . · . without authority·from ~IR;:'printing ·of double or
./::. , . . , , prosecution for vlolatiorr. of .any provislon of the · · multiple sets; prjntinQ c:>f' unnumbered.recejpts or,
:t. , Code or in, any actiontor the- forfeiture of untax~d · invoices· or not bearirig the· required information;.
;,;,,. artldes(fy'/RC,Sec,.253(a)):, _., · . ··_ orfailurefo indicate.VAT as a s_epata'te iteinin
•,F 2. Any person·who willfully aid& ·or-abets or cause.s ·the .invoice· or· receipt (NIRC, ..a~. amended. by
,.· the corritni~sion of the crim,e by·another.shalf be . . TRAIN, Sec. 264;.R.R. No. 18·20'11, Secs. t 'and
.· .· 4iable in ttie same manner as .the prjncipal (NIRC,.;~? · 2);, , , ·, , . . . .' , ·. · · .
·f. , ·: Sec. 253 (b)V · · ·,. ,. . ... · ·. /i/.V/\. 6, ·. Fairur~:to ot;,ey surnmo11s (Nl,RC, Sec. 266).; and
(. : 3. 1~,the ,offen.der i~ not .a .citiz.en,of ti,e P.hiliPP,i.rn~~~t{,'.·r~/,7. Perjury_-(NIR_G, Sec. 267),, . , . ' .· · ·
,~· · , . he ~hall be'deported·.1mmed1ately after se.~1J;Jg;:;~f{~ . ·. . , . , ·. , ,
ff s.ente:nc7 wi~hout further pro'?.~e?ings \;I {o.r.·:.;:1;\~J~i~g_~itiqn t$-J.~epenalty'imposed f?rthe violat!o~s ~f
r ,L.11'
depoi:tatlOI') (N~RC,. Se~.· 25~ (b)): . . :
/., ·4. If. the off~nder IS a pub!1c ~ff1ce~ or _;,l'T\J?}.PYee.:, , t7 r~ :
l.:-t:'r!"!~!..lJ:ie)Rr9~1~!?.P.&1pf.Title )5, the .sam:e _shalJ,car~y With 1t
tfle, coriflsca!!~n .. and forfeiture ·u~ . f~yor. ·.of t!1~
'
'i
~:, a. fv'l~x1mum penalty shall ~e 1m.P.,9,.se~; , , .<(~~-11~ . Govemmenttqf'tpe·pr.oceeds of the cnme or value of ·.
b. ·. He· s]lall be disrn)ssed from ~~)!>)lft!?!fice;-;,!ld"' '(,':-< · the goods, !fn<N tl\e i~stn,1r:neDtsor tools with which the
i·
q: He· ~hall· b.e. perJ?.etually .9'J~U~1,if1:e:W'from :~ crime wasi~oiml\s..~d.:(N/RC,Sec. 279J. , ·:
. hojc;ling: any p~blic· offio~!·?to· v5.\e\!:!an9 W. ~11 ·f i .,, . : · . : . . . . · . , · ..
. , participate i~ any ele9~;~9. JNJ!ffCJ_Sec .. 253- r;.j Wh~~!jf~.~--.:~ime~~·~emed:C?"11PletE:: .... .'· . ,
. · (c)). . - · : . , ~1,1(, ,c;;y0'.7,'):\ ~~·,.' ~~'\1 A cnm~J§>'CJ?-~P:1!3-t~en the .v,olat.or.has knowmgly
'5'.,, If th~' o_ffend~r is.:a S:~A,,t,l~~E~e~1.s:~:~ff,11. !:!P'9.f1· i% and willtoriy:1..~i:icfla frau.dulen( ~eturri; ·~it~.int_ent t9 .. ·
, :conv1~t1oi'), ·be a~tomat1cally r~'IP,~~-or\~arcell~d . _ i .. evad~.: ~nd . defeat· the. tax. The, ,perpetr~t,on. of the. ,
.... (NIR.c; ~ec.. 253 (c))::: . ..,.'.!. : :;} . • ~ff-:~~,T~ is ·grounded upoJi.-knowledge:on·th~ part otthe·~.
6. · . In , cas~ of: assoc1~t1oris, P~ttri~f.up~.,, ~k:'~J;;;J~~-P~f~f-nt,l;ii:it~e has . m·a.de c1nd inaccu.rate ret!-,Jm ,
·. ,corporat10.ns,. theJ>enalty,shal.1 be t":\'Fseio,~;~e-:.··~:-:----:-(tli'lgab::v:-eLs,, G.R.-No_. L-41919,May,30, 1980), .
, , ·partner, president, gener:al·. rna".ager, p~l,ench · . · · ·· · , ·· ·· · ·
. r:ria'nag~r; .. ,tre~sur~~;.. .Offi<?er-i~~eti.;t~~'..:and . Cor~llariiy:.:an as~~·~s;..,ent Qi':the '~ax deficien.cy j{.
,, . employees· re~po,ns1ble for tyie. v1plat1on .. [N/RC; . .. not. required. ir\ ··..a crirnln.a.1· prose.cutiol') f~r tax· : ·
Seq., 253. (d)).· , · .. , . . ·, , . .' , . · evasiorr. However, in: anolher case·; the Court clarifiE!d
. . . . .,. . .. " . that" ·although . -a~- .deficien'cy .. -asses·smenf. f~- .. riot·
Some.'A~ts Punishabl~ uh.~er ,NIRc:', ,. ., ( i"lecess;;iry;· fh_e· fact that a. 'ta><:, is. due· must. first .be
The, ·e1R may institu.t~·a .crJminaJ..cic;tion··against the , · · . proved baton~ one 'can be p,rosecu'ted for tax evasiqn.
taxpayer fodhe commisslon af.tMe·foi,iow,ing acts:.·~ ·. · . (Commissioner of •}nterna/, R~ven~e , v. ·.·C9urt, of:
1. :, Willful attemptto eyade or de!~.a, any t.ax (NIRC, : Appea,ls, ·~Spquses Manly,.. ·, G:f!. No. ·1.,97590;
, . ·as amended by TRAIN; ;Sec. 254); .. · , . Noviitnber 24, 401j). '. . , · : ·
.,.
'E:ie~'ents of Tax Eva~ic;,m .<,E,S.C) . , ' . ' . . .. . ' . ·.... Wllli~i·Blindness Doctrine· : . . . ' '
. , a: .. , The·gn~ ~· be a~hiev~d; J.t:J., the paym:entof·. A-.taxpi:3yer ca·n no longer. r~ise the defen.se ·~ijt.the
· . less t~an that .kl"!ow~.,bY .the.!axpayer to be. · ·. errors on tlieirtax returns ar~,not their responsibiHty
, . ~e?a)!Y du~. Qr t~e n?_n.pay~en! of ta~ ~he,ri. , . . or that-it· is ·the .fault.of the .accoui:it~nts they .·hired
·.1t.1s:~h,ownt~a.t~tax.1.sdu~, ... ,· .· ·. . (INGLES supraat413) .... , ·., · ·: .. · ·
Q: . Accompanying §Jate of rn1rid whjch 1s evil, 11'.l ~ · · · · · ,
'bad'··taith; willful-,, or·. peliberate' and .no.t , Note: ·-i-he' only thing'that rieeds to. be·prqveri is th~t
.::'·. : accidental; and . ' : ' . the ti:ixpayer was aware.of his obl!gation ·to file the tax,
.c. lfnlawtul course of action.·or fi:!ilure of actio'n retum'b1,1t he voluntariiy, knowingly,.'and intentionally
f (Commis°slqner' of '{ntem.at'.Revenue v. T:he
Estate· .of Toda, : Jr., GR. No. 147188;
failed to·file the requi(ed.retu.rns (/cf.). , ·

·t:' . Sep,tember 14, .2004). . . . .

IJ: ......
~:
r
\.
,;( .
 Prescript[on·in Criminal Cases.: , ~!')d/or'.conviction of:the·giiilty pa~-ty
·and/cir imp~sition: :
. The· prescriptive perlod for criminal cases is 5 years of any flne cir penalty (R.R: No. 16-201 o,. Sec: .2): ·.
from the time depending on the nature of the violation · An- informer's reward is given. to persons iristrumentat :.,
of the taxpayer. .. · .· . . . in the: · : < · • • •. • • : • . :·
· .1. If fc\ilure or refusal to pay taxes. due: from 1; 'Discovery of violations of the NIRC; and. · . ..
. service of finaLnotice and demand for payment of ·2.= · Discovery' and -~eliu"r.e of sm·uggled .goods (R.R .. ·
the deficiency taxes. upon the taxpayer.; . No. 16-2010, Sec: 1.1). ·.. ·
· 2.. If fll_in~f of false, or fraudulent retumsrfrom the . l'' .

. dlscovery and lnstitutlon of judlclal proceedings

. 'for.!its· investiqation and p.uriistiment(N/RC, Sf:IC. 1. For Violations of the -NIRC .
281). . . . . . -". ~equisites:._(NIP4S-LR) . · ·. ·.
. q. · The _ir1former is t!_ot disqualified. The-informer
'f.he . presc_ription .. Sh€)11 ·. be· : interrupted· ; V)h.f;!n· ... should not· be any of the following~ (.B~Cf : . · .
• proceedings are Instituted aqalnst the-guilty persons· •. i: l!IR .Pffi.cial or~emp!qyee cir any other
and -shall begin to run. again- if' the .proceedlnqs are in·c~mbent publlc _official 'or .employee.,
dismissed for ,r~asoris · not constitutirig, jeopardy ii. . · R_elative with'in Jtie .§1h·_ qlvil degree of
(NIRC, SfJO.: 281).. . : ... .' . . · :.'. : · consanquinity _· of -a · BIR official or.
.. . . ,, . . · · .er'npl,oyee, · e>r· :o~her publlc official · .or
. 'The term of prescrlptlon shall -not<rtin· _whe_'!.,..tll,e:-...,.-~ . · employee: and· . · ·
.·. offenderls absent-from the Philippines f~Jfi?.ff'$(')c, ~u·. ]'l, ~'tji~_Ttioug_h_. alr~ady ~e!i'r~d- or. ot.h?rwise.
281)_.. ·:
·. . . · . · .
·.,. -:-~, -P\. . 'V ·]f ,t,.''S·!;~ar~te_~from ~~rv1~, ·!3JR·o~1p1als or ·
· ·r-C":\·.f,.,~~~::!I- _ I, ..emp~yees or other pupllc offic1;:1l~·-y.,h_o.
Penal Liability of CorporatiQns-;.r-fY- V /.P- · ··· . . · .
The penalties sh,;ill be imposed,.J~.fn\qj~;e~P.,9J"Sil5_firT--.,_·.,~
-,':
. ;,""'·
acq\!}~~.dth_e information in the ~ou~se ·of
.,-~~ies. during ·their· iiic;;un,b~n.cy
i
. corporat~ _.officers,;_ ~artners,/9.t):'~.ployies. ·::r·fiV-i! ~r. _'."W"' . \. ~.-.!f?,-i'fip.~16-2010. ?ec. 3). , . , · .
!-~
) corporation; ;:iss':c;\atlon .or. Jfene~a~fco-~.artn~rst-l/1p 4\~ Li'>:,.~-· :r\he f~rm~i;\ ve>luntanly. -~rov1des.. sW?Cl\l.
·. · .. !'
. shall ~Isa be. punished by ~r,i11~.dd1tiA1narf1~e (NIRC,~i . ~nfqrma 1~90Vtie tax t,:aud or. v1olat1on
_Sec. 256);.·
. , . ·., . · . . . . · ·. : . . . 1· 4!' i .· .·
.,. .""{ 1 ·. . · .
1~-
. " · ·.:-.
~~;?
: · _ ·ia _egedl i·\c.gmrfutted ·by·· the .denounc~d
t-(:'1"d._ t pc;1yer R.~·i-'J?-.·1-6-2010,. Sec. 5(b)). . .· I:
. Co""!prqmise. Penalty · •• -~.P.'t'~ R . · 'N\(1UL.'~c·. . e.. sai F[nfgnJ1ation is n9t . yet . in · the
A. compromise :penalty--is ~ll"a~f;lunt(~ b ~- .: . · : .. :~sslbn .·otJthe . 1;31R · nor' ··of. fublic . I.
..... . . t~xpayf:)r. .i~ lieu of ·criminJ:i t,P,o)ltcuti~~l is· a'W ' .j?); / Jk~J.vl~~~e"':~~jll 'reasonably come inf_ri the
amount paid to"cof'T'\promisiaJ-v10JatT~_n,fo~il't..'e..'btn~~ ~~ ~..gts'e\$i9.I') Mie ~IR jn the ~~rs{;) of 11s 01
, provisiqns <;>f.t!J_e ~IR~ .. Since-~.eornpt~~is~ij~:"@...,,..,: ... -~-.,peraJ1?fl:S·.(R:#,f'!o. 16-2,010;._Sec_:s (c}): ·.
' nature of a c'Ontract; 1t 1s no"'!\ w~Jl-·set}!ed·00.,ct~~ , .Th~:.sa1cf'infplfuat1on does not refer to a case .
that a COl!)prpmise penalty cano.,o_t be .'i, ·. oS~.l@-JEtff\r". ~reaa_y- .e~tfcting or fre_viously investjgated
: · coll~cted'. without t_he agre_e,ment dr~~on:o : ·. "-Q4.~::.~;.-,,,-.:-"'9r ~~~i9it'd.~y_theCl~ or by the SOF'or any
· .· taxpayer (Wond~r. Me_chan,ca(Engme~': .' ~orpj ~~~:'{\0;'1~Jii~put1es; agents._or _exami!'Jer~--(~.R ...
. ·.CTA_,·G.R. L-24805, Jane-30, 197.5}·:
· . . . · . : .. · .. . .· .. : .:
,vJ· .
:...· ·. ~
_.·1\.M.1\s:~_N,..,gA'§~20_10, $_e_c,_!5.(D)).
,P::,~~T-hesa1g ·information does not refer to or 1s
· .. · . · , . ·

Effect Qf .-the:·T.;ixp~yer's.-Failure-:fo· Comply-with ... ~~ ·.not .exactly'§imilat to·a previous information.·

the Cqm·prom~se:Agreement .. · .·. · ·. ·. · · . . . .. · . fileg by ·a·nqth.e{info·rm.er·i:overing•the·same
.. ·1n ~se Uie taxpayer rerieges·on l:lis coriformil}do.the · · - . ': ··. taxpayer .describing .the. ~am!3_ i;ch~me' or. .
payment of th.Ersuggested comprom{se,.the.CIR may.. : .• : , . ~' informati.on·¢overing th~ 'same .1axable'.yi,!ar
not .collectthe Com·promise pe.nalty through c;lf'l action .' : 'or 'period (R.R. No: 16-2<)."i0, ·s.e.c. 5 (E)).· .
in_ ~qurt. or .Qy distraint.aod. levy;i .This, \s betat!se : 'f. .· . Such· )r.tf0rmatio~ !,eads to the'. cil~Covery of.
. comp~omi~e penalty: 'is · i'leitheri :,a Jax ... nor .a11' . frauds·· ·ap_ory_ internal : revenu.e. Jaws · or
. administrative . penalty for! tax delinquency, ,. the -·' . violations· of any of the provisions.thereof.
·· remedy.of.the CIR is-to ·file-a ~rirhio.al acli~n against g~: Th~r~, ··f'l)u~t be R~ccivery'_.of_. revenues,· ..
, · th~ J.~xpayer ~or: the tax-':violatron, (R,M.0.-- No. :19: . . s_urch~rges.. and fees .(NIRC, .Seq._. 282(A);
·
•
. 2007;111(5)): .
,, •' ' • •
·.
'
· . . - . ' R.:R:No. 1~1010. Sec.
I .: • '• '
5):'
• •
. .

'rnformer's Reward- ,. Note: _irifqtme.r's, :rewa~~ is

c.oritlitionecf .llpon-: the
· An informer. is ·_any ·qul;!iified ·petso.n who· voluntarily p.ay.m~nt:an~ co_He~tion.ol µnpaid: or.,defi_cJencytc'!Xes
provides definite ana sworn information not yet in the· (Mf!ra/co.~ecuritiesCqrp.. v. Savellano,,G.R. No. L~
. :posse~sion-.of ihe · BJR-.;:nor .of
pu~lic knowledge,· 361~1; O~t~ber_23, 19Bi). · · · ·
leading. to ·,he discovery '0f frauds- upon, the 'internal.
revenue _ la\'.>'S o.r viol.atior-is of any provisiQn of the
_NIRC; res~l_t!~g t~the recovecyof'reve,:iyes an.cf fees·. -·.
·: . ...:
:,·.
,,•' . 270 1· .2019 SAN.BEDA."LAW CENT~IZED .BAR OPERATION$.
 ·TAX A.DMfNISTRAiTION
.
A·ND
SAN BE:DA I.AW C£NTRALIZED_BAROPE~TIONS- M_EMORYAID 2'019, z-
ENFORCEMENT •.

{ Amount of .Reward: ...Ten. percent of the revenues: .. 5. _Eer!=entage tax - a ta~ imposed-on a·fixed. ratio
/ surcharges or fees recovered ano/or fine ,P( ·per:ialty' .between . the _gro~s . sales ,or. receipt ano the
.r · imposed and collected or ·P.1,000,000. per case, burden imposed upontjie taxpayer. ·
.~ . whichever is·lowel"-(N/RC, $ec. 282(A)): ·
.!;xcise tax truces Irnposedonspeclfied goods
6: >-

::. : :fhe same arnountot rewarc:! ;hc!I! also· be. given to an r,ia·n,ufa_cturector. Pf_odu~ed. i!1 tp_e 'Phihppines for
r.· lnforrner .where . the. offerrder has:' offj:lred. to >.~omestlc sale 'or .consumptron _or for any other
!'. · · .._c;o!:flpromise the violation. of law. _comrriitt~d by him· · disposition and to' things imported, . . . .
•f · a.nd his offer has· been. accepted l;)y· the CIR and
f:
,;
coile_cted fr9m tlie offe.nderfN!f?C, Sec. 282(A)):.
·
·
r
· 7. Qoc;umentary_ stamptax - an.excise tax upon ·.
· · : the· privilege, opportunity 'or' f9~ility offered at·
: .-exchangei·for transactlon of the business. It is
\· ', ~rant (,)fl.llfo~m~r·s Rewa'rcns NOT Dapendent-on an excise upon fadlities·4s_ed. rn·th.e transaction.
~: Classification·of Oeiiriquent l'a>tpayer : .· .. · · ·, .. ' . of the bu·slnes:>. . · ·. · .. . .
:r ·.:r!)at theinforrner's reward wassouqht and: given in .' · · . a:·... Such ·.2.tlier.'t1"1X0S as. are or. hereafter rriay be
'.:': .· .r.elation to-tax delinquencies of gbvefr)m.ent_agen·c;e_s . .·. . : Imposed or collected by the BIR (N/RC; Sec. it)..
1'. provides.no reason.for dlsanowance. The law on ttie .. · · · . . . · · '. . :· . ·. ·. : ·. ·. ·.
·i: matter ..mi:ikes no. distinetio'n. whatsoever. between. : . ·Sour:ces' of i'~x Laws,· . . . . . ·. .
/ . · deli.nquent taxpa'yers .in thii regarcLwh~tl)er p(ivate 1. ,:he statute or law; .
-~;;'· persor,s or: C'Orporafr6_ns,. or pub!i9. or tjuasl-P..Ub!1<;: · 2. Reg_ulat!ons (~m R.evenue,.Regulaticins);. . .
agencies, it··being·-suffk:ientJor.lts operation that the~,.<)· .~. _Circufar-s·(~1Rfy1emor<!ndum Circulars); · : --.
pe.rs9n'-i>r entitr.?.on-c~r~ed_is.~ubject t0, ~hd vi~l-f.J~.6.i~~ · 4 .. A~Hninist~ative ~u_lings,(BIR:.Rulings) or ..opinipn_ of
. rev~nue :raw~.-.and. tlie info~.n:1er:~ · repo~ _lh~f~9~~r;\·~:~· :· the ?IR;· mch.id1~9 lhe opinion of the ~ecretary of. ·
resu!te~ in the.-recoyery of revenues (C.omm1ss1r1.r1e!l.ff,...,.·,.~~- . Justice on taxation; . :· ; · · ·., •.
of-/n'ternan:~evinue 'v.. Comf:r1ission .on Al.(dit,.'W-~1 s_.ry~J~i~la~x~vecor~s; .. ·. . ~:·i.~~(..
· . . .. .
Nq. 1019.76, J;m.u"aiy W, ·19f)3). · · .· _;..--Jf
tt:Jfr~6ili@~Gisid[lJi~f!_he.
CTA and SC (DASGIL, supra·at·
w~
i\.. ·
- · · · ·· "7· · · '37t~JL. I"- . . . '
a( 2 .. 'For Dis.cov.ery. ahd. S~.izu·r~ ~Vs°lnuggi~~~t . . . : . ,·'Wt: ·. · . · . . . · · : . . ·
':.'. ' '. Goods ·. ·: · . · · . . )b~l! . . : :Ji·-:)( .
-~- Am~~_ht·p:u~:ev.rar:d:.~ash'reiwar9~9ti~~~~:@,t::f~1.0o/i(.-~~·· _I :.'\··.
''..· ·of the FMV of t~e _smuggle~. ~~e'?-_nf1~.c~t~~'"'go_~,.If~:. /f · 1·: ~ .
r;,l : . ~. ~
'l •. or P1,000.P.OO ·per·ca.se,. wh19My.~r .IS ,!OW~{· ·sha.11 be<+·
t ... gi~~i, :to. pe_rson.s·in~trun:ient~~li'.ttr~·c15vers,~,~f·
· ':' seizure of th~ gopds (NIRC, _S'eo.,.,?.~2(B)~r:!~ . ~-i ~}~ .
l~y~ · - ·. ~:rt;::.~.,.~~-i,~.:·.
· . · ~1~ · ) .
·- . . , . . . ·.: .. · . ''f•tJi:~.&"''l.,,,y\ .' ,J!
. y: .. ·. .
i:·. lnform~~·s _Casf_Rew:a·rdsSubjec'tl'.\'? ln.~~!"e !ai ...:. :,.-;;~~ ·. . . .
'f. . The cash rewards.of the tnform~rs-sh;;i_ffi.:t:i~sUbje~t to""il~~!>:";:t.~~
~- · ·in¢ome tax collec~ed as a finaHvithhol~i~i;, t~1iat~~~-"-" .· ·• ·.· --·---:---": ·
J::. . rate.. ~; 10%· ({VIR~, ~~c._ ?82(8)):· ·.
~- ~...
:
. ...
t(\~'.>](ff . . . . . . · ·.. · . .. : . .
. •J...~"· .•
... ·.,
=:.... .·. ,• .
'·
;~f. . . . . :. : . -:' •:: . : . . :-. ,- . . .:- .
,;: . SOURCES .OF· :J-N.TE-R;NA)i : . ·- ,.
1;.. · · · .-· .. ·.·. · ··.' :·REVENUE .. '. .
~ . .. ~-··
·r~.. . . . \

-: . . .· - . . .
t .· So.1,1rces of lnti3rnal Re.venue;. (IEDV-PE~O) · ·: ·
·i: 1,. · !ncom~ tax--·ii:~x-on .tt:ie y~arly pro~ts ·arising· ...
.',•

;( '· frpm prope!iy; profes~iqri·,_tFa~e;_a~d _o!~c;e,: · · :·

2. . gstate ta~,- a tax levied upon the. traQsfer. of the._
net ~st.ate ofa.~ecei:lent ~o ~is
h~irs.. . •.. ·. .
... ·.

3. Donor's tax· - an .. excise tax· imposed orr· the . · :. · / ,•

transfer.of property by way"of.gift-inter vivos. · .i .- . . ' ... · ·.·. ·' .·· ...
4. ~alue~Acided.· Tax ·- a· tax ofr:·c:onslimption .. \ . ~ . :•..
inip<>sed.on·.each s~le; baiter';·9~ lease. of·gqods.
properties, o($ervices ih the ~urse of. tradir or . . ..
. business as . they pass along the distribu~ian.
·chain,. 'culminating with. the· sale.·. to.. the . final
consumer, and on eve.ry Importation tit goods, · .
.. whether.in the coarse of trade t:iuslriess· or riot. .or

. ·, 2019 SAN SEDA !;.AWCENTRALIZEDBAR. O~~TIONS I 271

 . ·. ~1
~~-~-~~------ss-.-amaraia-..lll&Zm:II......_
·-REME_DIES
SAN BEDA.1.:i!WCENTRALiZl!QBAR OPERATIONS·- M{MORYAID 2_019
-~ l
aMS.i.ww1.ia+Ni..... I ·?k . Ciel& i4l91Mtiiil48
. RR®Mtii ~
. ·ii
Taxpayer:'~· Remedies .
· 1: ·.: OuTuNE tiFREhrnn_~Es 1. · · Assessment:
. a.
· ·. · l
Protest _with•req!:JeSt for reconsideration qr. ')
request for reinvestigation; and . . . .
Ta~es ~re· tti·e.· lif~blobd '-of the go~ernme~f -and, so . b.
.
Compromise and abatement. ·~- '
should-be collected ~ittio:utunneceissary hindrance .. ,. 2: couectlon; . · '·
However, such collection 'should. be . made In . · a. Tax Refund; and
.accordance with .law.. It- Is .therefore necessary· to · b. Tax .Cred.it.
. reconcile· the. apparently. confliC!ing. jn\~rests. of the.
authorities and the t~xp~Y,ers so that thereal purpose
oftaxation, which isIhe .. promotion of comrnon-qood . · 1 ~ ·.
may be achieye.d.(Reye_s.v.',Almanzor,G.R -, No's. L-·· !\-S$ES~¥.~~T . ·:
···
49[!39-.46;Aptif26-, 199·1): · : . . . . . . .
. . . '· . . -·· · . { : ·.Ptiw~rof the: Ccmi-~jssi9nerto Make Assessr:ne·~-
__Tax ~erne'dies. . ._, ·: . . · . . .' · · . . . . · 2: · P~ri_o~fof Limitation orrAssessmsnt : .
·rt refers -to procedural steps that may .b1;: ur:ide~a,ken.. .. 3. . Assessment and Protest . . · ·
bY. the government .or a taxpayer for the· r~~olut1<;>~ -of . . . · 4, . Compromise and Abatement .
<;lrsp~tes. co~cern11:g .. the, levy-· .or . ,mp_os1t1on, : . - 5. Tax Refund and Tax Credit
_· assessment.' <;:oll~yt1~n •. ·and refun?· ~f_-.taxe~ ..-'.~~~~ · .. ·. · .· . ·. .· . . _
.. DQMON.P~JN, ra~afl~n, Tax·_R~med,.e~(-il~{~)P· tlj $'~1fjasses~Jng · syst.em govei_ns -Phllippine imeme! ,
.209) [~e_(f]mafter_._2~CDOM(?N_DON]'_A_~-. , ~;..' ~. _A:ev.'fnJf-~11~~ . . . Suet) asystem fmposes upon the
•. r...,...:.,~--~~:XP.iafarth.e.lofill~~tion _to. cond.uct ~n asse_ss~e.ntof
·-fir . ;y ·
. r • . ;·. • -: . . • . ,., ' • •
Gov~rn~~~t Rl=l.m~d,es . ,,..,....:...,,..-,,..Jwnsel_f.:,,~:e :!l~ould -deJermine and d.eclare the
1.. Adrr:ifnistrat,ve ~e'"!'e~~?s/~~#[2· _ .· 5}. ~_IJW[lllt,~o~,[e.:~~~~· tax basis; ~~Y :_-~edµc~i_ons
· . a: A~ses~mery_t,_ and . If ~r) 'l' . _, p . tl)\.tfrefrQ~,an~~hj3ll\q~-~.ta~due (Philipp1f!eNaflor;at
. b. ~ollect,on < . JI . ~/.' . . · ..... , · 6/l•co. :v~.Cout~/ot..Mp~als,G.R. No.-109976, April
·· · ~: · E:'for~e'!len~·ofe}.ti~~~.fl;,_.. · ,...' ,2.i_;.,2.QQ.Qf . \l;(fJ·\ : ·, ·.. · .: .
. II .. D1st_rarnr·:of·. ~er~0na.v- ·_proj:\erty ~ ff -~ _.,· · a ~~~~t, \\ · .- ·.
.- .·· gamishmef!t ofit>fnlt"tleP.OS\ts;~ ~~,· ~~I
iii .. :. tevy_:qf rea! prl~P,~ ij · · :.
. IV. Compromise a '9 a!Sat~me_~.~-
t;.:1 " t . ·. . .' ·. _, ' · . . . . ·. ·
.~POVl(,ER O~'A-1:l:!_E..~fOMMISSIQNER.TO~.AKE.·
'1 ==- -~:tASS~~ E~l".:>~]
·,---'< lnfem!i.1-~ver,i_ue ta[~s are·self-asse_ssing and no
v:" .. Pe_rialtie~ an.~.fi · es;ff) \ . .- -~: ~~'\.: .~. (_Jfi').._ f~~~ a_s·sJs~rrt~ryJ: by . the go_ver.~r:n_~nt is
VI.. No~-a~f')tlabrhty \· fnjun,-ti.on_ -~ ~Sr.a,&~- ~_;J,~{a'~_re'q·-~ 0 -_ crtate. -th~ -tax ·habthty. An.·
')• ..· .colle~hon -o~_tax; . . : .· iJ). ~. . . ~'l . . ~tsme t·, .. h9.,.-r/;_e.ver, .. !S ·. n~t- .. _altogeth_er
. vu, Forfeiture; and . , \·. . . · .. · • · ' _..~:~~°tonsl1Q ential;:11t. JS' relevar:it m. the . proper
viii. Suspension o~ busin~s opera~,o·r(~\'C:[£Nt\,tPur~.it'"of·jud}c1_li! ~nd.. ~~tra judicial re.medi<;i_sto
.. . · . , . . · . ·. : .,._· . )' ~~~;..,.;--;;.--_ei;i~9rc_e\",1-~w.1'ferhab1lrt1es .aod certain matters
2:-- Judlcl:it Rem~di·es · -~~>(' _9,r, ~~(~~?to·it, such: as. the. imposition ·of .
a._.· .Civil;:and .. ,.. .· ; . . .". v]. . 1\1A~\~i:~e~-andi_nterest', a11d. in the ~pplicatiqn of·.
b.. Criinin<:11. · ·. ·::·. . ·· . ~~tatflfe~oflin'lita~i.ons·a.i:idJn·t~e-establis~n:ient of._-:
· ... _ · ·· · ·. tax· ·· hens· :(Tupaz · v. Ulep,· · G.R. No:
.· ,. · .. , · . • · 127T17,-0~tober 1.;· 1~9~). ' -·· · . . . . . .
- '.
;
~ ·. ... - :·:
. EXECUITVE COMMITIBE . . SUBJECT GOMMlTI'EE .. ' MEMBERS · ·. · ·. ' · .. -ADVISERS · .
. . MARY 8YRIELI. t. SUMANQU!- · MiUUif CARISSA c. ."GuiNTO UANNE '.MAE D. ,ENRIQ\JEZ; . Justice.: · JAPAR · .B. .
Over-air Chairperson;.ElUCA .. Subject· ... Cba(r, . . ~1-ffiNA 'ANiSHA:M. HADJI" HASSAN,·. DIMAAMPAO,"Alty.· NIGASlO .....
MAE.(;, YI~A Chairj,er-sonfor · GLAD.DYS' ,. . P. . BAYLON MARY )lV!El'.,~. ·if . MATEO; C: CAD:ANEID.O;CPA1 and Atty. . ·
·Academics,: BEN· REI E: ~slftant·_... Subject .{:hair, MARIE _., Sl-ltAAYDANE · ·· C .• IiAN.rE."O:DELA CRUZ. "CPA, .
B~F..RO Chairpcrsonfor!fotd i:ANc:JELICA ,~ C. REil;S, ALYSSA:R.: ZAThru\GA, : ·, · .. . ·. .
Operatio1fs;]HELSE;,>.L<;)IJISE ~. MANUEL ·.subject · .Electronfc;; TAGMA : • ..ESTHER ·· . v_. • .·-· • : ·,.
DIMAANO Vice ChairµnonJo'r Data ·Processing'; REIN,6. ·'~. GARABILES,... MARE~ .
Secretariat;·EARL . JUSTIN · M. · p'ABREGAS Gen~ral Prlni:iplµ,· MABEL · A. tHA VEµ, JEWEL ·.
.YAM)3AO Vic~ :tn~lrpei-son·for". AI.HENAI. . FRANCES .. R . JOI~ G, F>,I\YTIA{M~
Operatlo-,,s, MA. ANGELICA.B. ··Ql,JINJ"ON an11- CARLOTA N ... S.·MO~.ANDREAPATIUCIA.
mr LE.o~."Vice Chair.personfor Vll.I,AROMAN . ·lnC!)ine .. T~, _D. .DAQ~ . ; Jµ.PRE_D-
Flnance; ARRA CLMAYA J;' -~qLU?JUUUSS.STAMARlA_. FRANCJS ·P. GALLEOQS;JOY
. · BAPAN:(?AN Vi,e Cltairpel!son . Transfer. Tax, . P,LLYN · _C. c:::~··:· · G. GAYONA,.
-[orAu.dlt;JORDAN_N.CHAYEZ CLEME~ Valw:-Add~d Tax; . _MA,RIONE .• ~coµ.. P..
. . Vic_c'CliairpusonforEDP.. ff.ANZ. MIGU!EL A. DE ALVA . Tax. ~UGARIN,andKATRINAANN
.DARRYL , . D.TIU . Vice· -Administration, . Enforc_ement, S:PRADO,
· Chairperson for .t~gistics, and and Rimedl~s, and A'Jl;IJ!NAi
· DOHN ALFR£D E. AQOII;IZAN · fRANCES, R. QU~ON . Real ..
Vice . · . Ch;airperson for ·.Property and Local Tax. ·
. M~m"betship, · ·.

.r.
 . . ..
REMEOIES
., ·. SAN BEDA LAW°CENTRAUZED B).IR OPERATIONS -.MEMORY 'AID 2019 .
· ,§Ji • · s Rawe pa121aiw&rm1.t

It. must be stre.ssed that· the assess.ment·. of the taxpayers.. (C6mmissio17er of Internal
internal·revenue -taxes is··one of the du.lies. of the Revenue v. Pascor,Rea/tyant;fDevelopmeilt
· BIR under Section 2 .of the NIRC. In connection . Corp,qration, G.R. · No. 1283.15, June) 29, ·
.th·erewiih; · ·the . CIR, .. may . author.lze the· 1~99):.: . .
. examination of.any t~payer an.d corr.espondingly
aA:
rna.k.e: asse!?Sment Whenever necessa.ry.. Withdrawal of .. · ·R~turn, Statement . or
· Thus,. to give more tefeth to· sucti power of the· Declaration
. i;::1R., · to maker ··an asses~tnent,. the NIRG General Ruler . Any . return· . statement, or
allthorizes the CIR to examine any book, paper, declaration· filed ·in any · office; authorized . to .•
'. T~Cord,'.·or .data. of
ai:iy perso~.. The powers . receive the.same. snail not be withdrawn· (NIRC,.
: ·granted .!ly ·1aij/to the ·crR are intenc:Jed, among as amen'cled.~Y .TRAIN_,.Sec. 6(A)). '. · · . ·
qther. thihgs'! :to 9.etermine .. th_e ·1iab.Hi.ty of :~ny.
. person · for any. national Infernal · revenue tax Excep.tioni The .. 's~me may :
be . modified,·,
VJ: . · · · (C~'!7rri_issionetof lnternatRe~enue v. Lf!n'caster· . changed. .or amended provided that: . . .
:,.Pbll1ppmes, /(le., 0.R. No.. 183408, July 12, . i. · It Is done.within ·3 years from the dateof
··2011J
.· ... · .·. . · - . . : . ,· · . \
. . · ·. · such filing of thei return; and .: ·
Ji.·' No -rrotlce of. audit or invest1g·at(9"n · of :
.;Exami.natiori 6fRet~~.ns a.nd.Determih.atJbn of such has been.actuallyservedupon the .'
Tax. Due .. · . · ·· . ·:. . . .· · · taxpayer (NIRC, as: amended. ·. by.
. 'After a· return has be~ridil~d, the Commissioner ,.,.r;-1 .· TRAIN, Sec: Q(A)). · ·
· (CIR) or·his,duly.-authorized:represen!ative r'fi}ay)'}f · ·· . . .
authorize- the examination of- any taxpaye?';~~r,i~>fri·t\ A~sessrrieryt_: Bas.ed 'on the .. Be.st. Evidence
the. assessment .of the. correct amount 6f,{ax>1~r~;;~ . . Obtainable ·· · · . , , . ,
. (NIRC;.as amendedby TRAIN, Sec.. 6(A)). ~ (~;:\ttd-_..-:-;,--.The _E:1~~~11-asse~s the ~r.opertax ?~SEl~· onthe
·. . .· .~ ·. : . . . . . !(({,' t.;i~·{r~l!~~~~xm~ce.obta1n~.~1.ein the following .ca~es:
Note: The-failure to file a return. shall.,1:1.si;(;prevenJ-·~J · 1) :'Whenra report required.by law 'as a _basis for
the CIR from ;;iuthorizing- the exaiiriinalion of any. ;...h. the :~f1.essment of any . national internal .
. taxpayer. The tax or ~my ~.~f~;,n.cfy ta_.x )o,,. .'·1i · .re~f~'J~~ax shall not be.forthcorninq within
assessed :shall be paid UP.O') noti§el~p<lr.cteman<;! . if~ : · .. th, -tvne 'fixed by . Jaws or rules and
frolj:l the ·~1~· pr from·,...w(!~uly\al:J't~nrize;? }~-!\. · . re'guJ_ation . O~· . ·. • ', · .· · .
representative tax (Nlf·~o/as .:<a.mended ·by• t.?i.{ · .. 2) · .1'hE!'1.ther . ts reason to believe that any
TRAIN, Sec. 6(A)). .·.
- •. . ·· :
~if ~~~ · . ~~").. -~ff.
~""" · .r/4~ .4~ · "'"'1:;J. . ·W' .
-~~ffl:i~~)mils~, incomplete, ~r.err.oneous ·
(l!Jlii.t.tS.eC'.6(8)). . . . .
. What D.oes .Not Col)stitute· anY~se~fmEint":,..:· r;/ · . . . · . ·. · ,: , . . ·
t
.· , a. · kV\'."itten comr:nunic~tion,~§'. r~venfili officer ifi.m,~f',lot_e::S:y using the best evidence obtain~ble, the
. ·.,· .. of tax·lia?1J~,qf the taxp~y~r/~.9,~i,dg'hirr,ian·;:r~:i~1.~;-~iRl.~m' make.~r amerid t~e. ret(Jr~from.. his own.
. .· opportunity· to -contest or d1s)?.tqve · th.e'i.J:nff;:.;i~.~fJR1~~1ed'ge and from .such.111format1on as he. can
· .· ·examlher~s· findings· is ,:iot. ~~{~~s.~i,01en! . :• · · obtain through tes:timony or o.th~rwis,e, whi.cb. ·
·- ... _-since·-: i~' i~ y~t. indefinite.'~~~. salcl shall _6e.prima'fflcie correcrar:id suffici.enUor'all ·
· .!recommendatiorj·lettei::·serv.ed merely.. as the '·1~gal purpo~~ (NIRC, ·Sec. 6(8)).· . ' ·
.: '.:pr,roa. facie '.·Qasis. for: .. filipg·: criminal . ' .
· infomiation·':foi'.: the vioiation .of the NIRC · .. Bes.t"Evtd~n·ceObtaihable··.
: ':{Adamson'V,.. CA. .GJf No.· :(QQ93~. May 21, . i·
ln~ludes"ihe follqy.ring:: . ~ ·.. · . . . . .
·· ioo9), ... · · · · .· . · . · . ·. · . ... . a) Corporate :and ac~o~.ntirig records of the·
: · b; .· Jhe ·advi~e of tax.deficiency_c;il')d .prejim!nl'!ry . · '. taxpayer·· WhQ' · 'iS· the ~~bject : of ~he
·.five-day .. l~tter. ··give~-.· by. the. C!R t~ .ari . . assessmenfprocess; · · · . · ....
a:·
{'. el)1ployee ·,:of.·. -taxpay~r are.·· oot .· 'vaHd . , ll) ·Accounting records oi. othet ·.taxpayers·.
. SUQSti.t.utes.·forthe m<'!.ndato1:y.n:oticeiA ~rit)ng ·. •. \. . ehgaged, in. the . same Ji~e O.f bu~i~ess,
'of th.e' lega.l ;and ,·•tactual. tias.es of .the· . . . _induc;:lihg .. th!;li(gr,oss. pfofit and :_net-'profit
i.s~es$_r:r,ent.(Samf}r-l Pee.trierP.odperative..,·. . sales; '.. ·, . . . ::· "> .
lnc/v. Commissioner of Internal :Revenue; : · c)· _Data, r~cord, pap~r, .~ocument or any
G.R.. No.· .193.100, ·pecember10; 2014). : · .. . evJ~e.nce · gather~d by .'internal: revenue
.. ·. c: The rev'eriu'e.office~· Affidavit~Report, whic.h . Qfflc~rs from· other taxpayers who had
~-....... · ... :· .· was:atta(:li~d to the criniinal.'t:;°omplalnt filed .personal :transactions,.qr. from ·whom. the
f:.:. ·: .. · With the Department of justice, does· not subject taxpayer received any income;
.,: constitute an ass1;3ssment.·.Revenue .. officers' . . and - -- . .- . ; . ·,.: : . . . . . .. .
"· -Affidavil.m_erely ·contained a computa.tlon of d). Record( data, docyment- and information
re~pomients' tax liability .. lt-·diq not' state a secured· from ·government offices or'
· demand. or a peri9d for· payment. \J\lqrs~.• 'it· · agencies, such as tt:le. SEC, the Central
·, W€1S addressed to the justice se~retary; not ,o . Bank of the Philippines; ttJe. Bureau of
. . . . . .

2019 SAN. BEOA LAWCENTRALIZ.ED BAR OPERATIONS ,: 273

 .R·EM.EOIES ·.
SAN BEDAf.AW CE/!JTR'ALIZEDBAR O!'ERATIONS- MEMORYAID io19
iM A MYCMWM+ Ah3,·iiMS~riflit5ifli.M1Sit#IBU¥PsisiAIWW&•i,if84F'tleki
-.
:··Customs, and the· Tariff. .and Customs 'correctly reflect the declarations 'made or to
Oommlsslon (Commissioner of Internal be made in a return· (NIRC, Sec: 6(Ci . .
. Revenue v. Haniex·Traqing Co., lnc., GR.
~ No .. 136975,.M_arc_h.31, 20,05). · . Berichrnarkinq of taxpayers .
Process· of setlin'g .a· standard to determine. the · ..
lnventory-takinq, · .. Surv~illance, · · .·:-·and.: · performance level Of taxpayers in a'· .given line of .
. _Pres~mptlve:.Gross _Sale_s and. Receipts . industry or sector '(R:M.O .. No. 5•2012).· .
.. r .

· . inve.nt~r-y-ta'king._ . . . . . . ·,.Con.structive.: · Method · of tncorne

. The. CJR .n:iay, at any}ime.durip!flhe taxable ye.pr;. Deterrnination . ., . . ,. . .
, 1·•. · order .inventory-takinq' _of goods. of any taxpayer The. following are the ge·neral (constructive)'
as· basis for ~etermining· his. internal revenue tax rj,etho~~ developed by the. BIR for.. ricons'tn,Jcting ·. ·.
. . . ·.·~ia_bilitfes (N!R(?, .se».
6(0)): ·.' · :_ . : .' · ., : . · ·- · · · a ta~pay~r·s inco,o::i~ ·where. the' ·ta~pay.et_ keeps·
• z • • .. • • , , no. record- or inadequate records: or. where there· · ·
-. ... ·Surveillance- ' ,... . . ls stronq suspicion 'tha't,it. has recetved.lncorne ·.
i: .. Tne 'CIR niay· pJace 'the business operatlons of from undlsctosedsources: (PNB.~CUtS) : ... :
· ~ny .. person, · natural· ". or_:: jL1ri.dical; .11·0.der : a). fercentage .Method ~. equivalent of ratio a
.... -observatton or.surveluance if .there is re~on' to · .. ;'. analysls of percentages corisldered'typical of .:
. . believe. that such .person .:is. n?t declaring;J;i~,,,;·~:--~..,.~ ... , . the bu:sin~ss 't'.lnder jnvestiQ~~ion_.to indica~~:
" . · correct income, sales · or receipts fgr:,..IA'terrialu ·A ;~otent1al areas .of revenue adjustment -m ..
. 'revenuetax pur~oses· .. The'.findi_ngs:fl'l~, ~.;.f!sed· · . ./\-J .;l'e~'O;)J(latf~n · w_here revenue _re:cords: dp. n9t'-.
as !he·bi3Se$ for.assessing the·ty~~~~ ~~F~-._:il e~isJ,?.r:2;;.c DOMONQON,•·SUP_ra:.at,.3,13).'-_.'
01::i)';'.~~Eff
2
, months or quarters o..f ,he ; me ~i:l91f.ffirent .. · · -~6~h Method·.·,·-:' .. ·method: of
'!ax~b(e. ~~~rs an~ · ..¢uch a1sessm~~J;.1;.all";".be~"'1r~~ ....;'~~~ ...r~~~str~~~~. incom_e based .9n t.~~- t_heory. ·.

·
deemed prima fae1e ·c~rre.9/,~/ff6ec_j6(C))fu,
. · . . , · ... · l ·.,,if . t· · .· .!!.,.
_.1J.r~.
)r · ~! ~cl:,t'-l_fJ~..e}!~P,e~er's net wo_rth has mcrecisE:d ·
L('o: . 1r;i a ·g1¥i,eify~\m. an atn~unt larg~r thar.i. his .
types·_of S~rv~illa~_~e. lf. I/ . 1-~.' · · t,A/'\. · · riporte~,.. ~~-gfl1r•. he h_aa understa~e~ .his
... I.. 1). . Cox.er:! Su~e_lllf!'J:C~ ,~rrept~!C?Urana,r. ' ' -·:: 111come f~J:~~at year; presumption l <:>f.:
. . . :· . .-.1..lnde·r~o':er ··.w.atc~i: · 11ie tbusn:f~'JcJfli .<"".V _.uh~ep~rt~d IQ~~rn.e; . (2-C· DD_M(?Nf?ON,.
· ·· .. operationso: a P,~r?S:P•fC?ir a certam ~er~,~~-. · li1pra al .'1@9.)~ ~. ·. . : .. . · . ·· " , .: .
11). Overt-Surve,llan.o.eS.,c.q~menc'~}\wi.th;the-;;:,.._< ·' ... p . .
·i)JJ?J). I) . . .. . .
· · inven~or_y-.ta~ir:ig ttoh 'y:i:~1~~.1'"!e~~··i~i-' ~-~r~j~nl~A;/,. ·.; · · ·. · , < · · .
J ·,y·. · l~~~:aQtu~ · J(.-1Slir~'f;;Jan_\J~ry-1 ;'2ff1·9, ty,1.a_T~erese's-net.worth_
doc_umeryts·
obs~ry~tlon :~-~?.
folJ~\JeEI'
c~se _m~,~iton~5'~~t:"ttl~-i .
· - · busm¥iss-act1v1tie~o{:s.uctfp~sohN .. ~~-
;:fr. ~5zP15.6'1>_00fOO;lf\t yea.r's enQ. D.ec~mber 31,
·; .g;-m, )~r r:ie!7.worlh was. ~t.150,000,00 .. :
..

··.condu~ted_f<,>r .a .mirii~ulJl P~.c~qd~S{'·"[~i,"r'\~·esypP,o.sing_,at h_er. 2019·.in~0me tax return·

days aod a inaximui:n, p,~i'iod. 0,~Q"-Q~Y~-~t~·:~ ~o©e.ct,Q_nl)' ?.·g~o.sp i{ieome o.t:t>700,000,00 and ,
.unless otherwis.e. e.xtendEl~ .ii{ J,)jtiRsfby==-<'"'"ft~9:\etsJi'~fi01,ying of receipt ~f'exch,ided income
, .·,,/ the . .auih6rized-sigriatory; .c;1rrd~ ~) 1· · ·i . .l b~i~.:.gf~s:;Ynon.;.taxabl~ winnings,· lifl:) 'ins~r;:ince·
· . . . · · ii°i). Short.-_dl!,rB.ti(!n_·. · ·., sU,veil/anee.~;;.(.:~1 {t.!J.: ~,'gtseeeds · and oti')ers· _of sjmilarichara_c)~r ;_then it.'
.· ·. · . · Pompliah<:eQheck)- bus.iness <;>perations~__.,__,;.pm;;ix. be presul'.!led.:,that. slie ha~, .unrep'ort,ed·. ·
. ' of the. la.met, taxpayer: are;.ob'ser.ved for . . ~ . incom'e_ pf p3.oo;ooo-.oo:·(/d,),... : ··:., .. ' . . ·. '·. ':
"plirpose~· 9f - :d~f~ctiri~,, · n~h~,compiia_nc;~ . i ,, . · ·. ·· ·: · · . '·. · ... · :-- ·. ,. · .. ·· · ··· · · ·. ·
·;with. the·.Bureau'l?.;primary· and.se.condary : · · _Net_~orth.a~ .a~.De.c, 31, 20Hl . ·f:>.1._150,900_· .

2oo9
· n~gis~rat!on '..re'qulre_ihents. (R.M.,O, _N_o._ 3~
r ·, ·
. ·.-·.tg~t: .~:~~ . ""'. 0rlh.,a~; ft J~·'\. 1, · .(P150_;._00~). _ ..
._'.°., · · . · ': · ·· ·. ·. ·. ·. .: · ·. Presumeeifricrease·h1.-netw9rth. ;~·t:000.000 .
. . '· Pr:~s~mptiy!=IGro~s_Sa!es· cir .~(fceipts . . . . . : in··2Qt9 · . . .. ·: .. · ... : .. ·· :.. · .·.. ,. : , .·:. . ..
. . The; .. CI~. ·att~r taking.:irito~·accbynt' the sales,. ...... .': Les~: Reported. gross· Jncoi'ne. ·(P:70.0,' 000)· .
. . ·r.ecE:1ipts, income or. o_thel' taxable .base 9f -~the( .· ·. · . · for2'01S .. - ·. .. ·. ·".,,..,·~~·---·
. · per~o,:iS;· eri_g-aged in ·:simil~r:. ·bus_inessE:?s: unde'r . ,,. : ; . ·: Pr4[i.surriecf .:2019.·: .unrepe:rteti
··P.300,000·
'. Similar .situati.bns ,or ·cir~_t,Jms'tances, or after··: .. ·· -inchrrie · :. ' ·.. · :.. ·. · . · ·
.. .cl)nsidering; ·. ot~er releyanf i~formation,. · may. ,. ' · · · : · · · _.,. · ·
· pres~ripe: · a ·miiiirnum· . amount .'of · s_uch :' gr~ss ·:· · : ·c). !!a~.k
Dep;,sit Met'h~.d.:..::Jh1fba~k rei<>rq~ o( ·
're!;:eipts, ·Sctles, ,'antl taxab.le bc1se in the following / -. . . th~taxpayer' ar'.e analyzed and :the Re.venue'
ca.~e~: . . . . . . ·. .. · · · " . . . Of.ficer:esti111a.lel?_income Ol'l;tt:ie basTs Qf the
.1) .When ~- peq;on- ·has· failed to issue t.eceipts total bartk deposit~ after eliminating. non·
·. ·.,..and fnvqices; or.. ·., :. ·. -· · · income item~; (2-C·DOMO.NDON,.~upra·af
. · 2)· Wheri·. there is .reason. to believe th~t the · 31:4).~·.. · · ·
-c .: · ·. · ':.books ·of accounts 0r ott,er recdrds''.do not

274 ·1 2819
.
SAN
. .
BEDA
. . LAW.CENTRALIZEQ
. . .. BAR QJ;?ERATIONS
.
.:.. .
 AM A

-R·EMEDI_ES·
· SAN BEDA LAW CENTRAl'IZED"fJAR'OPERAT/ONS
- MEMORY lj/D 2019
~~:.tllZia Mfy i . dg . tfi§A M 41M ttiWiWS&El J .• M&fPM@i¥Whi· ff PIA ff 'fl.
','

§~~:·,:,_. -Note: it is to be used only where the BIR'. B.F .. Goodrich PHL.J. tnc., G.R. No. 1_04171,·
~i· : : · · allowed legal access to the taxpayer's bank'. F_E!btuary. 24, 19f]9). ·
f. . . . "records: Tl,'le . Bank Deposits· Secrecy Law ·
Ji' prohibits ·. inquiry . into· bank' . deposits. Co~putii'lg. fo~ the Pre~c'riptive Period ·' ...
·,,_...:. · However, . the BIR · .. Cornmtssloner ls Both Art. · 13: of . the' Civil ·Code and' the·
· authorized to inquire into the bank deposits. Adminlstratlve codeoeal \Vfth the computatlon.of
. of .any taxpayer who ·has filed .an application legal.periods: Under the Civil· 9ode, a year is.
. for· cornprornlse of 'hfs: tax liability by reason . equivalent.to 365 days whether It be :a regular· or
~- . of flnan~ial lncapaclty {Id.).·. ·.. . .·. ' a. leap year.: Under. the· Adminisirative. Code, a
:·. · ·: . . · : . r. · . . .. year [s composedof 12 nionths'·and-,th'e number ·
'd} . g,ash ExperiditifreJVlethod.- assumes that . of ·day~ ..i$··1rrelev;3nt. Th~ AdminJ~trati1.1e Code·,
"the -excess .. of..' a taxpayer's expenditures . -being. themore recentJaw, it shall gove~n the
p~ring-,a -tax -period ·o.ver his reported income ·. . .. cornputatlori. _ of leg a(: pe~ie>:d$. : . L~?< posienori .
. fl:~r that periodjs taxable to the .extent not ·. · .. derpgatprf.or/(CommlssioneroffnteinalRevenue
approved otherwise: tz-c' ·DQMONDON, '. v.... ·p··"
nme·t own. ··p ·
· rope rty Group, Inc., GR • . · No..
'supra af-;}13). ·. _ . . ·. 1(32155,.-Aµgt)s( 2.8, 2007). ;_" -
. :e):··Y.nit and Va1µe Method ~-the determination ·. · · ·.
· · -or :verification. of .gross .receipts- may be . 111Jstr~_ti6~ . ·of.· \he" general i:u1e· and
. ·. · ·_cbJ"(lplllr{by ap.plyin~-pri~~-and profit figures . . · .. computatio.n of th~ 3-year period_: .
. . ~o ·. the· knowi:i . ascertainabl.e quality_ of .,?·} • Atty, Meg Valdez is~a cqrporate· 1awyer.ec1rnin·g ·
,. . . business · -.don~ / by !he.·· taxpa~!=!r; · (li,1 (t;y;.:, - ·. purely, compensaJion' 'in_c;:o~e. · As .suet.\ she i_s
{ · . . • , . D9_MO.N_DON,.~upr_a at ~-14). · . .: .. (,~( /.;,.~· .. r(;!_quire&ta~_~I~ _tier incom~·.ta~ re_turn (ITR) not
,'?.;,· •• f) !hard Party !nfor~aJ1on or Accesf'i\;~O.:·;,i~P!.;- '. later. than.-April 15_. 201~. If .~he-files _her ITR on·
x· ·. Records Method.~ third _party _contact;)are':·-.. ~~!~. _April ·15.t\\',20·19, the 3-year pre~criptive period
J
~--.
_t
.· · th~ s9~roes· of cinforrnatio"n (Id.); ;l:lhd //
g). §ur.ve111anc!3. and A~s~s.sm~J)~•J;Me_th.od,../
... JHand~9ok on .Audit Pr<;:~<;dd~es ary!l:.-.\·:
L::J
~r ·fn}~')all.st~r-do· run from thafday. If sbe files he'r ITR
·o~<fat1ffi;iate,e_.g.. June 10,'·2019, t_fJen the 3-
_year_pf:lrJ~9)haHsta~frotr).June 10,_201J) •. Qnthe
f
·. · . -'1~00).: .. ·.
,.~' 2 ·peRioi> oF:LIMlTATION.-ci:i'~ 1
· .· • . ,·e,'·. _· .-. ~il
;,,;:;;,>:-)~_
ASseYsilENT,-, · ~,1
1
.. _Techmquf:!s.- Vol. I {2-000) un~~J,.f!?-M<? ~y:-f)' . 1. Qther h3:jn~. 1\t,er .ITR was fil.~d 9n an e~_rlier date,
e.g.· FP,b a~ 8, ·2Q19,_ t~en th~ .3-_ye_ar p~riod
-~oulaJ:'sta !o ~n fro_mAw11.1_s._2.01.9, the.la~t0ay
;';;
}; .
·-G·,·,1'R·1··w·th· 3.-,.;~·i·,c(~ I t.d°'i) ,;:{· pre.s_e'nbe,,.bv\law for.-.tihng·tt,e-iTR
·!ner_a .. u e: 1 1n. ~'r,,.~ ~~r-,t: ....e, as,~y •<f. . D?i'fA"',ITTEiDQ~praat 234). . .
(2-C.
·· .
~,

~= .. · .
.· _pre~cnbedb,y. lc)w far. the·,f1.IJ~g.9J}~~:-retu~_?r
•;, ... :{ro_r:n. t~~. date .o:-act~al: fih~g·,;.9~~\. retutr;I, . bi•~,1 ·· ' , _:;;.~~"6;~\~i?? . ·· · · . . .· .
~urden. of pro:qf that a r.~turn' was _fi_le.d to .. :
"'.'h1c_h_ever: comes !at~r, prov,~~d1hal'r~ retlfrn.. ( f ~apply the 3~yea(·Pres.cripfo£e·p·eri~d
· _· .
·.
·:. .. frl~d, !:?~for~.the last,_da_y·pr~~cnbeq,A,ey !a~ . tar-th~ ·i,~,;~_;.,i:~.,·t1TI:must· · be 'E;imptiasized · .that · ln _' invoking ..
~ . •, : . fih~g t.her~of-~-h.~11·be cons1d_t::red ~~;Jrr~ Of)..SU~h-:~ri.u-aL~.!WH~s~r-ii~hon as 'an .affirmajiye· defense'i.rr1der the..
. · la~t da,y.(o~dm_wy:qrnoffi!alasses~rpent)rf/¥jf?C;, . !\JIRG-, it·is in~rnbent uppn i:i tc1xpav.er. to.·p~ove \· .
.Seq, 2~3~.. · : .. · :. · . ·.. .._- , .. l~} · . that h,e~ubmitte.da ~~tur.~:·.lf he f~ilstq do _so, the···
· ~x-ceptions:. '.· ... ·.: .. ;. , :· .· · · :. . .. · · . · : · . concl~s1'?n.. ·sho!,)_!d:be __that .no S!J~h :re~u.rn_~as .
. ·a>. j·n. cas~. of. faJse·.Or fra"t1du'lemt ·retuhi witl'l... fi.~~: In wh1~hcase theGoyemment ha~ 10 ye~r,s .
. ' . ~ .... ·~·l9terf1tq'~yape tax br ~ili.ite't<>:fife· a·~etUrrt-·.' · w1thn,_ . -.vhJCR· ·-to · m<:Jk~ ·th~- .co_rre~J:>on_dmg
'. · · within. 1 o ·years· ;,jMr .the. ·dfscoyery of. (t,e · . . as:;;es~ments.. (M. TECJ:J. · P..rqdue,ts: Ph111pp1r:1es,
fal~i~,' fraud. or· omission \extraordinary. or_· . ·· Inc., v. Corpmis~lonerof ,Internal R.even~,e,(!TA
·aQriorm{Jf_!l_ssessment) (N!RC, sec. 22,2(a)J;·.. ·. : . :' Ca~e. No. :{}_331, · De,cernb.~r.- ~1,.:2018 e.,tmg.
b. In case there is valid waiver-'of the Statute of · . · Ta(,g~man _Lum_ber Co., Inc v~.. T.IJe· Co/flflctor of
1;,imitatjb_r:{s· _ up. 'i0· ·. the· ·e~teri-de.d .. p~riod: l(ltemal_Re.ve,:,ue,.:_.G.R. No._.l-15'716, Marc.h 31,
agreed upon (N/Rc;; se.c.· 222.'(I))).: , ·. · . _. _ 1962):,__ . •' :-·
. . ... ·. •.. :· ,I' '\. .j . . ~ ..

·. ,Consfruction. ·. of sia_tutory ·. Provision on. . 'Requi$!tes in: order·. that- :r¢tum .!'llaY ·be"·. a
.. :. Pres_ar:iptlon·_. '·. : . . .. . . . . con~id~red filed· 'for 'purposes·,Q.f starting the .
-~·: . F'or the ,purpos_e.of .safeguarglng· .taxp·,;1yer~ from runn·ing · of' the pre~crip_tlve 'period:.' · · · · · . · ·
S.. . · :·· . . an_y. un~el:lsonabJe _exc;1,tlinaticm_. ir.w1::s.tigatl_on.-_.or. i. . The_'·re(urn must -b~ ·ya/lei.:.. 'it must comply
sµbstantially ·_with 'the -requireme'nt& of the
, . . ·ass~ssm~n.t; .our .tax· law.- provide~ ·a. statute of
. . . . . llrriitatfo'ns incthe 'cdllection of t;:l·xes.. Ttius, the law· law; pnd ,' .. · .. ·'. . .
. . .:on.
pr~sc,riptioii, .being.'<!: remedial. me~sure, ii.· The return .must. b~· appropclatr, - it is a- .
. return foti' the . particular t;ax. requirecf by la.;y...
·. shouid -be iiberally. construed in order to ·afford'·· .
· such protection. As a corollary,_ the. exceptions to · . · Thus, ari income tax ·. return cannot be ..
'lhe law on prescription should perforce be strictly . coniidere(fas'the equivalent of a. sales (VAT ~ ·
. CQnstru~cl (Commissioner 6f lnterf)tl/Revenue·v. . . or IJ.ercentag~) tax return (Brituan Sawmill,.·
. .. . ·, . . .

2019 SAN'BEDA LA\/'f. CENTRALIZED'BA,-R OPERATIONS I 275

 . . ..
REM-EDl·ES
SAN'BEDklAWCEtf!RALIZED'BA!i·
OP~RATIONS • ~EMORYAID 2019

Inc. v .. Court ·of Tax Appeals, G.R. ·NQ -, :L-
· 2060·1. February:2"8, 196$). .. ,
· Hence, the amendment is not
of.
. A'~en.dinent T.ax Return : . .. . . .. .
General Rule: The. folloy;i_r:,g.shall govern.in ease _
.th_13re-i~_an amendmentof the refurn: .. ·. :.
· 1) If the -amendment. ts substanttat.. the
· counijng of. the 'prescriptive period .shau .
be reckoned OA the 'date the substantlal ·
amendment wasmade; or. ·. .
· . 2). If .the amendment was- superflctal, the
90unfing oflhe prescriptive- period is stil°I
,, the original- ·period (Co_m{!liS's_ioner: of .
· · internalRevenue.v. PhoenixAssurence,
· . .·GR.
. N6.. l.:.:-19727,-May·20,
. . :
'1!).f}5j..
.. . /\loveiriber:23,201{5). .,-_ ·
..
: ·. -Income Tax is J:iigtie.r; the latter was
used In the computation of tax payable. ·
. substantial (Central Azucarera Don .
Pedro, inc, v, Commissioner ot tnternel
Rev_~nu'e, GTA Case No .. 8459,
November23, 2015). . · ·
·. b) Amendments . ot. VAT·.. returns. and·
with'hol9ing . tax.: returns. whtcn only .
. revisedthe number of attacbedpaqes,
·· · . Hence; . the . amendments w.e're :riot.:
substantial. (Centr._a/. Azucerer« Dori.'
. Pedro, Inc: v_ commtestoner.ot lniernal
· . · RevenuiJ,. · .CTA ca·se. · No. · :8459; ·
' -c, · •

R~ason;' To prevent taxpayers _f~Qm ~ya~in_g·-t~~ .. The .char:i~e.'in a~~urit to.. bepi,lid·,:,;~~ bcised mer~·Jy
. P~yi;nen; of taxes by simply I ep_orting .1_n · ~he_ir. .... · ori Jhe·r~flec_tio1Tof ~ne payment accompanied ·by the
. ong,n33I return h_eJ1v.y_losse~_,<!11d.ameQ.dt,ng t~_:~filit1gof th.~. Origii:,al Return. ~ence,Jhe· amendment
· s13me year~ l!3te'. when the_ C_II~- ha~.:J~·~+l,s1r i~J"$1:.1t>.~tantial:.(.Cential.Azu.carera·T' Don Pedro, Jnq_
auth9_ri\Y to assess th~ _pro_pe~ ~ytierl~der.. L, t'!i..¢brrjm/~ioJjerof lniemel Revenue, CTA Case No.
The ~bJect·.of the N)R?.1s to l~J'.l9,J~ta~sJ!0:).~~~4.~9,(NoieJPbe~23, 20:f~): . .: .· .· . . · · · ..
. needs of the Govemt:nent a~d pq.l to.,nJ:>P.p_ce-,fax · . · . ).'':"'...;;...· P., . A'-:~ . ·. .. ' .. · . .
. ·avoidance. tc. it~ prejudir;;ef(eq{T:lfll!§,s'i~Qer QL..~-Pal~R)'tur(~"'·:Jc\-· ·. ·-, . · ·. · · .. . . . . .··
ln!ern(;J_I R~venue _v.. _Pho~,A"~~s'sjjff:lnt~~----c)f _g~nlai~ --~r,o~.9J:)in{~>rrnat19ri due:· to mistake,
No.-L-19727, f:.Aay 2~, 1~f5~f, .. . 1P-' ~ e~tel~ss\ess~:~r~1gr:1orin.c(:l (Aznar·v.. Commissio(J~(
Ex,;:.ptio~, If the .re1u,1;1',l\-~tt!,enu, ~mµ4uof /rife,riil/ R•"\_~{!'No.. L-20569,,ll_upUst 23,
·to ena~_Je t~e _CIR Jo '~fEJ.J!it:,nJIY.9~~~miln-,r~Q~. ·. ~ :-~}~. --J. ·· -~_v,="4·q -. . . . ·· . ··
pr:oper amo-un.t of tax Hf b~ a.js.essed\thE}1'!'1h~-.W:llS(~:fl0• .. '· ,. · ..fn · . · · . . . . ,· ,
frifr\~
• .

. p~escriptive· 'period for.}s~.o/l:len1-;s.tlrts,- ,subs~ tial. _lll) ier,,~er~tanc~pf w1thh_?!d1t1? taK on

the filjng of the_ originr,l°'te!'!!n .'fM~~ip.me ."::J- compel!. ~. C9ns~1~1,s.J~1~1_ty_to waJ'!:aht th~ 1.~
. · Transportation v. ·cgll?<;~O~.J~ qa~.'~o~ 54~· ,l}l;·· J:
ar_ :efcnp!~~.e-c~,'f nod· .. (~ama_r-1. ·. f!lectnc
6. -~ ~?Pz. ..JJ,,. }Jo.. vf. Comm1ss1on"!r .. of _ lnter,:,al
. ..
. No_vember. 10, 196§).
. . . . , •. _. . • • : .
-~
•
Examples-Qf substant\ t amenE},W~n,.l>·
. : ·\.- · .--~~~-'
:\,_.. : ~1 "-- ._
'.",~
I ~}t~p , <3_.8,ff'!o.
· .... #.
.. 19· 100, ~~~-e"!ber 1q, 20J4)_.
.. · · · : . : . .- . ·
.· .... · a_) An.am~ndm~nt ~~an.0~91ri~.l.i~.Qol@p,..·-
0~
rt~ .ulep(Returrtf·: . ... ·: ... · · . ·,
.. : . . .: _-·. -· .tax :r!=tur_n sbowi~g ,icet l,~s7;:~~\.F..~---:F6f'!~1"o-i~~ i:i~¢scnpllv.e peno~. to·apply b,:isecton
. . · . ._ more· \osse~ (Comh?1ssi91J:eqi7l-internaF:-""'.""""'fF€~~1i~~'-~~t be: P,rovecl. as ~ fact _by ,the. BIR
· · -Revenue· v. Phoenix -Ass'i:lr~ee(:·G.R.-Mi·®EJ'AilSf/\s_tJf})'ti at 274).. ·. . . ·. · .
·
', . .
· .. NQ. L-19727,,May.2Q, 19'6.5}! .. ~~
. -~~ .\:: . 1-~>,, __,;;ii'
· .,.,,_-:rr..,,,..-. • .
. . '. ·- .
· .• · .. , ·· · ·... ·, • : . : .·.,
'
·,.
· · ,' b). Ari- amendment . -of . a .. creditaole ·. -~<'.icb fact ,n a fraud as~~ssment which h~s alr~ad_y
. ·withtroldifig ta2(· ·retuhi. Which- reflect~d . , . b_eG~_mefinal _anp exe~toiy~shqll _ be juql_ci~IIY. tak~n
.. : an::increeise·',in" payment.'of:-ren_t~I'ar,d ·c·99n!z~ace __of in _a.. civil or cri_rrtirial. ~.dion for ·-1he
·contractor's· income resi:ilting . to ah.> · · · colll;lct1on th~teqf (IV/RC, Sec. 222(a); R.M.O. 26·
· . in.crease'In the' total i;imo,,mfof·tax d~e .. 2001 ). .'. : . . . . . . . . . . . · .·· · - : ...- ..
. · : from ·p·J..184.15f.86·tC:rP3',889.,7.33.24,. · · .. · · ·· · · = · · · •

or. ·a differe_rice :'in the-- .· ar:nourit · of ~ub~t~~tia_l .·. unde"rdecia_ra.ti01~, 9f : ta'?(~pl,e .. sales,
P105,581.38;. ·it likewise revised the . receipts or incom,e~or .a substantial ov.erstatemenfof
. : ri.um'ber:of. attached pa·ges.-Hence; the ·.· ·. dedu_ctions·,· as det~rmined ·.by the: CIR:p.ursµaat. tc
. amend_m~nt .· is·. ,subs.tantial;·· (C€;f!tr;t :· . rul~~ _ahd:.re!;j'~_lati~ns_pr~inillga~~d -~~ the s·ecr~ta11
Az't,1carera Doo · . Pedro,.-· · fn(j. -.: v. .. . . · of F1_nan~E!.~onstjt1:1t~s-Rr!mafac1e1;1v1aence of <=!-:false
Commissioner.'·of. Jhteinal Revenue · .. · ·. or fraudulE!'nt.·return:.Provide.d, 'further. Th,:iHail.ure··tc
c.tA Gase No, :8459' /liov~mber 2tf . re'pprt- sales,·. receipts, ·or. ·.income Jn · an ·a'n1oim
.. 201.5). . . : ..- . . '... : :· · · .· ' ·_- . · -~~~ee_diflff.30°~ of. ~M.t'ped,:ired:·pef'ret~m,}1nd c
. . , . · , . . . .. · . · ·a1a1r:n of.dedu<a:t1ons1i:i an·.amount exceeding ~C5% q
· · E~amples of superficial ·arrlendrrrents: . . . actual deductions,· shall· render the taxpay~r liable to
a) Ali ame,:idnien~ of 'tt'!e or'igjnat- income ' .. ·. substantial · ..undefdeclaration . or :.qverstatement
tax ''rewrn which. only. change~_ the : (NIRC. Sec. 24"(!·(8)). :· . .
amount of Minimum· Corp.orate Income · · : . .
tax .. Si,:i.ce .1_he . Regular: Corpor~te· ,

276 I_ .?019 $AN BEDA LAW-CENT,RALliED BA_ROPERATIONS

"-?!';
rt.,:

Instances Negating Fraud Failureto File a R~turn .

The following instances negate the existence of fraud Instances Constit•Jting Failure to File Return
and preclude the application of the 10-year The following constitutes failure to file return to
prescriptive period: warrant the 1 Q-year prescrlptlveperioo:
a. The CIP. f,1iled to impute fraud· in the i. · .A deficJent return which prevented the CIR from
assessment. notice or demand for payment cornputlnq taxes due. Such defectiv& return is the
(ABAfv, supra at 274); same as 'f no return is filed at all (Commissioner
b. The CIR f;3iled to allege fraud in nis answer of Internal Revenue v. Gonzales, GR. No. L-
io the taxpayer's petition for review when the 19495, November 24, 1966); .·
case !s appealed to the CTA (ABAN, supra ?t ii. Failure to report income in the returns which were
274a275); clearly not exempted from tax. The Court did not .
c. · The fact that the CIR raised the question ·of treat this as-a simple omission as the s.ame
fraud only for . the . first time in his involved substantial sums (Standard Chartered.
· memorandum which was fifed· with .the A c:r . Bank v. Commissioner of Internal Revenue, CTA · · ·
. after he had rested his case (Tafigaman EB Case No. 731, September 13; 2012);.and .
Lumber v. .Commissioner of tntetnet iii. Undeclared VAT-able sales more than 30% of
!• Revenue,. G.R.' No. L-15716, March 31, that declared in Asalus'. .VAT returns
1962); . . . (Commissioner of Internal Rl3venue. v~. Asa/us
'd. The fact tt:iat·the-.CIR did not include the fraud Corporation G.R. No. 2215~0; Februaiy 22,
penalty in his deficiency assessment whic~,4~ . 2017) ..
was is. sued after the filing of the return ·is •Jng,-)J . . .
indication that he himself does not be)J~v'.e~}. Waiver of Statute of Limitations .
that there was fraud (Gomez v. Doniifi · ~., , .• ,..,t,. Roquisites of a Valid Waiver of Statute of
CTA Case No. 1168. February 15, 1964jt ,.~-~·~ ,~im,ifationst(FoSNA-DeDa3)
e. In an assessment, where the BIR ap.J?.ce'a ... 'ri~$:.~Jt.:;li,~eS~siver must ·be in the proper Form
"not so sure': as to the real amo.gltf-of thEf·· ~~ -pre'sq~!bed by RMO 20- 90. The phrase "but
taxpayer's nef income, as ~~(e the- B~ . .,. n .not ~~~{ . . 19_", which indicates
arrived ~t thre~ highly different~.9,rniputat19~t<--lil.1. theyi1Pi\ydate of the period agreed upon to
[·1
(Rer_wb//c v. Lim de Yu, G,q,.;.Nq,}'i;f ...11438,
April 30, 1964); ,,,,~~,p'
f. The Cl~ merely r'11!f~ ~po~.~n altegea, · f'i'i
1;'- . . , ,. ·~ ~ rno~ a~~e~/c.¥1ectthe tax _a~er the regul~r three-
Y/Jar of prAsc::riptton,. should be filled
· J'P..i.:.-.JL· \...:_ . · .
subst?nt1al und~r deql,ratrofl,,:'~,>,lljl'<,omer;~X k:~ 2A''ifri.~· . ~:~l:ISt be §1g~e~-by t~.e taxp~y~r.
resuttlnq from h.,s own c~._,~uiatf9%~nd1"~'.1 Pf hi . as duly autho.r:1zecfrepr~~entat.1v~.
. y. Mere understatement of gr~ss,e'arrv.Agsdoes ~ In the .case of a corporation, the waiver must
not of itself prove fraud (YutNqi8on~l- ~oi.Jrt 1,\.:;:-;.--:r,;i be signed by any of its responsible officials.
of T.ax Appeals, ~.R. No. L-1_S129$/ilanual}'_,./·:'!.:i;:':/:.(·t:":1L'1,):ase the authonty i~ .delegated by the
28, 1961). · a representative,such delegation.
<;( · · · 4:~~"'..:.<1""'-',:.~..;,._;.;_,<.lt,',taxifayerto
: tiW
l ·1 ·· should b~ in writing and duly.notarized;
FalsE1 Return v. Fraudulent R~ttir,i,i.'. 3) The waiver should be duly ,tfotflrizod;
· ·· · ·.....:·--- 4) Th~ SIR or·the revenue official authorized by
:'.1 .•
t: · .....
se
'°Fal1 Retu'r~; I : i' .1 .. Frauduleht,Return-~
: .. ' .. ':~·:···· -· :·l·
. '. ,.··- •.. ': ..• him must sign the waiver indicating that the
·P.',··· . • .' :• ,..• ,:.: .( :·~' N~ture BIR has ~ccepted and agreed to the waiver.
• • - ' · - • ·' , ' ·• ' · The date of such acceptance by the BIR
Merely implies a deviation Intentional or deceitful thould be indicated. However, before sig.ning
from the truth or fact entry with inte.nt to the waiver, the CIR or the revenua official
whether intentional or not .evade the taxes due 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 Ilate of ~xecution. by the taxpayer
and Qate of. ~cceptance. by the Bureau .
should be qefore the ·expiration cif the period
.of prescription or before the lapse of the
period agreed upon in case -a subsequent
agreement is exE;Cuted; •· ·
6) The waiver must b!:l executed in.~ copies, the
Taxpayer may be
original copy to be attached to the docket of
s•,1bject to criminal
the case, the second copy for the taxpayer
penalty.
and the third COP.Y for the Office accepting the
(2-C DOMONDON. supra at 243) waiver. The fact of receipt by the taxpayer of·

2019 SAN BEDA LAW CF.NTRAI.IZED BAR OPERATl,•Nf, I ?.77

 ,,,,
.,
: REM·ED·I ES.. '.1
OP.ERATIONS~ ME~ORY AID WJ9 .
SAN BE:DA LAVjCENTflALIZfefBAII l
,.,Wifl!l~~L"!m~llll,I... ISll~lmil!llll.. llllllllllilall..lBl~. .. Bl~[:im:.. llli... lG!l'!Jillla!ll~--l!l!Ei!Enm:IIIIZll!!aiilDll~li!llll:ll!IZ!tim~ : ··'1
his/her file copy must. be indicated. in the" . ii)· The· expiry date of the period the · \
original copyto show that the taxpayer '!'J8$ taxpayer waives . the statute of . )
· · .. notified of the acceptance of the BIR and the limitations .(R.M.:Q>No. 14-20,16). ·,
. . perfection ·of the agreement. (Commissioner
. pf lnte.rna/Revenu.ev.. Systems "Fechnology Note: Before. the expiration .. of the period .set
_ . ln$.litu.ie, inc; G.R. · No: . 2-20?35, ·July. 26, · o.r( th~ previously executed waiver, the period
- 2017.)." . . ... . . ; ·. · · . ·. . ·· · earlier- set may. be· extended by subsequent .
written w.aiver made· :in ·accordance 'with this·
N,ote: ~hese·reqyirem~pt~ a·re mandetoryand. · .. · ·.-_:Qrder.(R:M.O. No. 14-20,16);.
· · must strictly. be . foJloWed. ThEf. Court 'di'a· -not · ··· . . .. ·. · · · : ·
'hesjta'te lo strike.'down w~i_verswhich failed .to ' · .' Gr~unds. for ·S.usp~nsion.'of ·the. ~unning. of·
. . . :stricRy comply-with the provisions RtylO -20-90. . of . the Statute. 'of L:imitatioris to . Assess and . ·
·· · .·. '· .and: RDAQ 05-01 .' (Oommissibner:.of tnteme: ·... Coilet:t:· (PRC-D.c>) . · .. · ". . .: · ... .
- . . ·: 'Revenue' v: Systems Technology institute,'.tnc., · ·• · a.' Wh~n the. GIR is ..e_rotiibited from making .the
. .' G .R .. No: -~20835, _J~Ji2f?,' 7),:-. · ·~0! .. · assessment or begin'r}ihg the ·.dfstrain,t"c>r l~v.y
· · · or -~ proceedlnq in- court, and .fof .' 60 days-
. ·: ~-.:W;iiVer may_n'of-be' r,;' the form p;~scrl°b~ by.
thereaft~r: _- . . . . . . . . ·: . . .
· .. .R:M;o:.~o. 20-~0 . :. . '. .. . .. · .. ·. · . , · . . ·", ·, ! . : ·,.· .. :·· . . ...
. ·.. Trne,,i,yaiver. may be, but not necessarily, in. tj)~llh.1$tratloi:i: When· a case is on appeal to. the
.. . forrn' prescribedby ~.M.O. No. ?0-90 ·o~~efiuel·· ) · j ~~the CIR is_pr.ev~nted from filing an; cirdinc;!ry
. DeJegation.Auth?ri~y O_rder..(R.D.AR.;!~?·~,.\tO~ .. :._. . \t1c;9?ai.>le.(9..0Jle~t _the. taxi~ th~ regular cou~s; for
.. The l\"IXP~Y~('S fa1!u're to· follOZf' -t-ije, ~f~r-e~~"=. .,~,:l .. lf'll~ 1,WJJ:~~tso,- collect19n-1n t!'le·re~ular ~ourts
: .. forms does ·no.t invali_date't~e-~~c.ute~,.w~i~for ·. . . :: w©~d'l'u?,io~tjter.to the judi~ial policy of avoiding
· · . as J9ng as the fc~l_lowing ar~t'9.m~)tl~~t).~-6~~.J!!Plipi'{.. ;or \~\~s a~d, th~ "rule.of ps pendens. ;
. · · :a)· The Waive~ ott~eJ~t~t1:.1\e':p'fL!rn!tatio~: "· ~f. · ··.· \ .. ~:,t1:Y\ '.. . . ·. ··. · · :. ·
.. : .· und~r ;Section· n~ (b')i.Jfo (df shall.:~ J& Th~s 1111ay'~r(appe~,when. there ,s ·a pen'dmg
. . ·:ex~cutep beforf the e,cpiratJeln.:.C;t·the. . petiti~n _for'\e~~f~:~ tht3. CTA from t~e .~~cisjon
· · . · pe[16d to.asses.i &;J~~do!lectt~es.. e , . on · e µrotefted.:::i~essment,the t1hng ot .suet,..
.- . ·, .. : · d~te ·of· exe_c~t1qt("-sti..fi1· b~ ;.i1_ ecitican 9
~t.t"IJE;tifi n·inter~1,V,ftst~ r_unnJn~ o(ttie· prescriptive .
= indicate9 in ~e~~~v~ ~. ..· .f!, ., ,; .:irilperio(jJor.c9f~.dio .~Tne interruptioh,is ..from.the
. : b). Tlie wahte:r · sil~:(~~l siw,e..\ :·by .thlf._.,S:. ·titntf!i'9] op c9I -fantllc'd_ In the: ~'ti\ until It&
. taxp_ayer h1msS\('.,Prth{\·du)y;a~. pn~e I lli"' te.JP,}l~J10111 •. it:.r~(S'uprer;neC~w:t-shoµld there be·
., .n:~prese~tative.. 't,~~~':fh~f. -c~~~~'0f ~ .:~~§11)"/~fi!l?ea.1.to.a }i1'9$er court (Republic ,v. Ker & ·
.. , . _corpor?tr<;>.n, tl'J..e , a1~_er-~u~~ ·8~tUs Qt:1ef15L. -~}~~¢1=l,flfct_.,fG.R. /7fo., ~-21.60~. Septemb_e: 2~,-.
. ,by any of Its respo ,s1ble officra_ls, .. -~/9 B"~):'.j'.' ;A\. . . · . · .
c). The e~piry=:dqte.ot\the ,-peti~. ·@~ I ~\~ ':,./": . . /.·· .... :-~ . . ·. ·.. . . . .
. · upon to assesstc9llec\!he·-~~-:c~~- f:f' , El"-1 ·\ lji~l~,.JJ.~pj~lis wh~.r)· the CT(>, suspends, th·e
.. r.egular.11:rree:year perioE!..o~p~)..f~P.ti~....=--:-__...-,"~1~\tigp pf the tax.. liability of ·the · taxpayer. ·.
.. . . · s~oµI~· -~~ ·. indicate.? JR~~~" -~J/14:- ~.·Jf_ A.:.'j_f::4-'ffAff;><,s[Jpra.af.~88}, ..,· _ · ·· , : . . · . .
.. -.·.?01.6).,. ,~v.1..0-- . .~·. . .. : .. : .... · . ·. , . .
··:·· •·· .·· ..• "
·. .. . .. ... ' ~ .. ·: ; · . · , , · . . . , -~.· : Wf5~rY. tne . ·taxpayer , ·. .8_eqµest$ . fcir ·. , a
· · : .: ·, .-: N~te:+fow.~ver~·in tt)e.case of,commis:stoner'. ... \ · · ·: 'R¢inve.stigatioi1 wt:iich is gran.ted .by· th~ CIR;:
.'. . . ·... oflnlern'al..Rev.ehuf}V$. Systems Te<;hnolog.y . · ·. ·. · ... · . ',. · · · · -,;:.. · · :
. , .. · ,fn~titu'te,.'liic,:, . GR, "No. ·~20835,;oateEf' July . ' · ·. :· ........ Re.quisites:.. ·; . , ..
· .. , ,26, 2.0-1.7, the ~up'reme Court·iule·a-H:iat th~ ··· ,.. ·.: .' 'i: · i.t.,eire · mu.st .'be·. ··request for·
: . . .... requiren:ients laid. out by RM,0, .20-.90 al'.ld. · · re!hvestigafibn and -not· a j-°equest . for ·
, ·. . ··. R.D.}\.:o.·. ·o.q-01 at~ ·mandator,/ ai,td. ·fnust . . ·.. · ·, r..e.cqnside(atio·n. .· (Commissionet··. of
$trictly ·be' .followed; .which is in 'i::Qnflict ·with. ·.. : ·;.: ... ·.. ·... ·:Internal Re~venue . ~:. Philip_pfr::ie· 'Globtil,._ '.
'the liberality and· rj;lfaxed· 'guidelines of-,RMO . . ,•' . C.ommi)nfcations, G.R.·· ,No... · .1971.4.6,
· ... No:·14-201'6,:The· Couit inJhe aforesaid case . . . ·.·. Octop_er ~1, -20Q6) fs~e disr;ussion,of
·. ~.did riqdouch.:upon .R.M:o/No.-\4:_2016 rior.'.' · .. . . · · . foirris··of protest ·under Rem'edies of the
.. . mentl.oned.. ttie: _same ·to~ tftis: R.M:O,. ''flas : . ',_,_· ... Ta~p,ayer}:'-aricl..,: .: : ;· .· ·,'. ::·:·, ..... .. :
. . .rajs.e<;I by neith~r_pafty:: ·.:· .. ... . .. : · · · ii.· Tt)e· .t'equest for reinvestigation must be
· . . · . · . .. ·. , . . . granted or'-l:iciecf-.i,ipoo bY !i:ie,. c·1R (Sank
.i
·: ... ,.,The · 'inaterial . elate·~· ·th~·t ~e.ed. to .. ~a' · :·. : :. '.q( ·· · the· . Pmlippin_~.·· . .- ·ts/ands ·. · v...
:':· -present b~ the.waiver are;· . .. Commissforiero,f lnt.;r.na/Rev'en.l)e;·G.R.
i) .. The date of execution-. of · the · .No,}74942, March 7,° 2908) .. · :· . · .:.
w.aiver · · t?y the·.. t~xpayer' o'r · its
·:authqrized repr~~entative;'arid :..
..__ .·

. ~78. 1. 2~19 SAN BEDA .LAW CENTRALIZED BAR OPEAATlbNS .

 ·REM.EDfES
• SAN BEDA LAW (:fNT8~LIZEO-B,4R
MW HM
Note: l'he burden of proof that 'the taxpayers.
request tor reinvestiqation had been' actually·
·grc!nted shall be.on th9 CIR. Th~ grant may
be expressed- In communications with the
: taxpayer or implied· froiri't_he· ·actions -of ihe
·CIR or his authorized BIR representatives in
. response ·to the request for reinY~.~tig_ation
. (B~nk ·.of . the · Phil1pp/n.e ·_Islands ·v~
· · Cominissioner9fJnt~inalRevenue, G.R. No.
139"(36, .6ctobei17; eoos; · . · . ·. . /," 3.1.6). ·· .
·.c.': ~V.Vh~n-·th~-ta.xpa;~; .Q~rin~t be.. to.ca.te~ in the
. · ·. address giveo·by him in-the' return,-unless'he
· : · informs".the CIR of-any-change ln hi~ addr.ess;-·
. d. When the warrant .of Distraint or.levy ls-ouly
.<served 1,JP6.ri th.e taxpayer; '._his. authorizeC,
representative, .- -or . ·.a. member. of ."hi_s:·,
· "household wifu sufficleutdiscretion, and no
. : property ;~ Jocated; a!ld ··· . . ·. · . , · ·· .
· ._·e .. -V\/_tien· the ~ax_payer-js:Qu_t.of the ·".'l:l_ilippine~/,")
. .· ~ _(fj.!RC,:_Sec._ -~23). . .. , . . .. .!,.".{.';-)J
. (
f "3:: .A~SEJ,SM_.ENTAND PROTE~T ·. . '"'. :;:~:;.·:;i;:)
·_.
>\';. -.0.ssessrnent -- . : . . .. . .;f
'f · It is -an official action of an administrative offic~r!·in·... ,.-;_;;~·:r~,,.,,.__. f.a~sessrnent· js made. by" "the ·CIR or ·his
f .. det_ermiili_ng fhe a~OUnt ~f tax due .fro~ a(,'t~p;y_ein;_:/
di· or. 1t m~y b~ ~ ·nrJt1ce .tQ· lh~ effect ~h~!Jlie -,~m?u.9\:._ ~-
·~;.-. thereln...s!ated 1~.~ue from a t~xl?a_yer~f,,,?,ta~-.~1tljr._-, ·
!_.,: dFlf"!"lr3nQ ~or. payment of J!la tax·. or:/~PY~f-~1[,leflcy. ~ ·. ·
t · . stated: th~_rein {ABAN, law of B_!.sit~T.axa..yQ!J.;_.;.StJPra.. f~,~
-_r a,( 1.75)." · · ·.. . .. ·. . .. ·t.P/::. q:"" ·. · · '-"\
•~.·. · • -. . -. ·· · ..... :~'··<rr.?,.--~~ .~..;;_ .• -t1 ·.
, : · Requis_jtes_ fo_r"V~lid _A~seSS!1Jfl"!_:: "'.':°._.{~:
k·: : . a. Th_e: r'inal_ Ass~ssment Nott<;::.~~,$~},?<;>ntp1~~ ,:~f't - ·
. . the n_am~, addri;is~, and"f)tt"0~·tne-ta7<pay.~r, · ~•..
· the k1~d .~f_t~; p_~nod cover~d~a.:>,1,t;;,tax:a.nc;l . I~~~l;i;'\"-;> .. : ·affirma~ce_ . · of . ."said . . asse~smer:f
p~rialt.1es,,. s1gn~c:I by__ the-. ~t1_tJjQ!1Zed/,E}·l~~:!~....;~";;;~(Commrss1<:>ner
. . . ·. official, ··!:md: the_ ~.ate of P!:lYl"l:1~9~ _ofJ~e!,.UJx..
, · . _J)ie_. dei:n,anct· 'letter_ (DL),· -~q.-~1!\_0~~ .th~ · ··
· comput.i,Won·of tlie.,def.iciercy.Ja:xJ..tlj~fa~tual · ·..
~.ni:flegal bases "of.th"e a_ssessmer:,t; ~·nc! tt:i~·=·
.. d.em,all'CI- for payij1e!')t. bf .ihri." ~~x;. }hUS,. !he
· FAN and UL rritist"always go foge.ther (FJR:. .
.- .··:No.-·1iJ~2of3,:.Se6i3.1.3);. . .· ·a· . · .. ·,
. b. The FAN/- Dt. ·mustbe i#Lied'"on· accounhif
.· or cover~d by . a validly. "issued". letter of
·. · .author:ity: (F(M.C/ No.. 75~2.01"8j .'(M_edicard : .
,.; Pf.Ill Inc.. v. CIR, ·G.R. No.' 222743; April 5, .
. . ' .. ·i017); , . : . : . >"· < . · : . ,.
c.: - The· FAN/"DL mi.ist state the factual and legal .
. ·. ::·.1:>ases.:ofth~·assessrr1enfand·.juri~pru_dence."
·, . ·.·. 0. ·. wt.itch'. it - "is · r:iased; . otherwise; · the
·.···assessment" .. 'is. ·voicl° :(R.R. No, ·1a:.-zo13,
;,_
. ·: · .. :.sectfbrf . 3.1.3);'· · ...: . .·· .··... · · · ·· - · · ·
:, . · · d,- -The.· FANt Dl must >be·· sigl')ed by the·.
·'.. ··. _·· :commissionei < of "his. '=duly· .. ;;authorized
. . . . . : r~'p{esen~ative (~~R: No.": 18~2oi~;: Section · : .
. -·~.1:J);·~ . .
..
. ,
.. .
OP£RAi7.0NS - MEMOR.Y-AID 2019 . . .
ff i.'t:"'MPS 2K¥PM H4PN
•
e, The FAN/ DL . must . be issued within the
"original prescriptive perlodas validl/agreed
between the. BIR .and the taxpayer; and i
. · served by personal' delivery ~F t:>Y registered . .1
mail (R.R.. No: 1 B-2;013, Section 3. 1. 6) (Sec...
222 (b) and [d), NfRC); and ·. · . . · ·
. .'f. The FAN/ DL must be addressed and served . .
"to correct per-son in !"!is/its reqistered .or d4ly
notified address (R.R. "No-, 18-2013 Section
·Prin.c:iples Governl~g.Tax·A~sessmehts
i. Not all documents coming from the BIR·
·. : c;ontain"irig · a. computation of' ttie tax
liability can· be deemed assessments . .An.· .
.. ·. .··assess.men! -rrrust be: sent- - to . arid' ..
.. · received by a· taxpayer, . .and 'rriust
.. demand-payment of the taxes described
.. : therein" .<withirl a· · specific · . perlod
'(Commissioner ·of Internal Revenue v.
.: PascorRealty Development.Cor.p:, G.R ...
r» -~ No. ·128315, ju_ne 29.; 199~). ·.
·· .ii.· All presumP,tions :~:ire in favor o.f the
1; ••. 1.. -.,,;:., . ·i;:orrect:ness,of tax. asses'sment_s. V.Vher:i
1r--::'<"C~~:0_Ml,Y a~tho,rized agr,n.ts, _.the -san:e. is
''. .. W.f.~l.lmed, correqt. and· made in good
· . pi~'\ T_h~. taxpayer ,~as_the duty to prove
. . . .. ii- o\f e~tse. In the al;isen.ce of proof of any.
,·. //.. "irregul~"rities "in .. !IJe ·: performance· ,of'
~-"l tf · · .d~tles~!3_~· ~ss~ssmern tlu!y"f!lade· _by _a · .
~···fu?i'~1R~~~mera.fld ap-prov.ed by· t11s ..
6~-~ r",;'~ . ""-~!s\$.~~r.officers· will°'not. be <;listurbed.:
Verily; failur.e ·to pr:esent proo:f ()f errqr in .
_:_ . the. _assessment· .will J.;.istify ·judicial
et Internal Rev~n1:1e ,,V; ·.
:·. . . , . · Wyeth: :su~co. L.;ap·qratoi-{es,. ·1~~.,' .G.R.".
..... : :·. No. ·76281, -September ao, .1991{ ·· ·
· · · · . . .. · . . · · . .
- . :.··exce·ption;.~·he:prim~.fraci~~correctnes~:
:~f ,., . : .. a."tax· a_~S~S$m~(lt_ cio"es. not.apply-upon.
.. PfoOf ttr~t an a_s$~ssment ·. is utterly
•. wit1:ioutfo1,.mi:Jation, fneariing.it is atbitrary.".
.and.capricious. Where.the'BtR.tias"coine·
. out with a :n~ked .. a~sessmer.if. -i.e.;
- without '.ariy· foundation· cl")arader, ·the·
·. de}ermination·,of. the·'tax. due is Without .
: ration.al·basis (Com,:nissioner o; lntel1lal.
· Reven·ue. .v. · H_antex . Trading .Co.;·.. -G.f:?..
N9:_ 136975_,"·Marc~ ~1; 2005): · .,.,.. ·
... ·, ·
. :. . iii. Ass~!fame~ts ;·shoCJld ~-ot :·be . based. ~n
. . .. · ··presufnptic:.,hs.. no .mailer ~ow logical the ..
·>. ·... _pre,slimption l'nay_ be". to order" to. stand .
the · fest ··'of: ·ju~icial. . scrutiny,; the
assessment must. be. ba"sed on" actual
. . ·fact~ (Collector of tn"ternal Rev_enue v.
.-_ . : Benipayo, G.R. No. L-13656,.- January·
· ·~31, 1962) .
2019 SAN BrnA_ LAW :CENTRALIZED B.A:RO~ERA TIONS · 1 279
. ··---·---··- ------------------·
 •
.·REM.EDIES
SAN 'SEDA LA~ CEN"fRAL-IZED BAil OPERATIONS - MEM,QRY AID 2019

**' A !&fill
" waees
F* *' aw me
iv. Assessment ls -dlscretlonary on the part . 6). ·Jeopardy assessment - a tax assess.m~nt
' : . of the ·GIR: Mandamus will· not lie for :it . made by an i3.Uthorized Revenue.. Officer.
: wifi: constitute judicial · encroachment on . without the b~nefit of complete or partial audit, .
· . executive functions ·(Mera/co. Securities . . · in light of· the officer's · belief . that the
· · CQ(p. v:-.Saveflano; ~.R.' No. L-3_6'181, · . . . assess!l'lent and collection of a tl~ficl.ency ta)(
:· October.23, ·t 982}. · . · . · ~ii.I b_~.. j_eqpardized by .del~y .c~used, by° the:
taxpayer's·failure to: . .
. Exce·ption:· ·If in .the ·exercise ..of his a) _Comply with s3Udit ·and inVe$_tigation
discretion, ·. "tnere· is'· .. evidence of requirements tQ - prese•rit . his · b9oks ·of :·~
atbit,:ani·iess . and . g~a\! 0" . abuse of0
. acqolinl!i-a.ndfor pertirienfre:c()rds; or .
. ··di.~cretiOQ. .!'35 .. to . Q.O beyond staf~tory : .. 'ti) Su_bstaniiate. all· or any:of ttie deductio"ns·.
· : .authority'.- (Mera/co Seculities. Corp. v. . : ·exemptions··. or ·:credits· claimed. ·ifl his
S~vel/ario,. G:f~. ."No-; l.~36181., Octoper . .:- retum (R.R. No. 30-2002, Sec. 3(1)(a)). ...
·23,: 1'9_~2J. ·. . - .. , ; • . ·· ..
. ., A jeopardy.assessment is: one issued by- the." ..
v. Tt)e. authority to make. tax assessments Cornmlssloner · · .if · -he .. believes .. thaf . tbe ·
rri~y be. _delegated .to :'. s~bot"dinate' · . · . . collection. of. taxes is·'iri je9par.dy due. to delaY.
. . . , .. offlG~[s._ s_i;i1p -~~se~sme,:it. has the s~me .· :or -other.causes. It 'may be .Issued when i.he
,· force "':'~~ effect· as that :.~ssµed ~y t~~---,,;· . taxpayer is: (ReL-ReHiP) · .
Cqn:Jm1ss1on_er· (C?c':an,c . ~11.'eless:t-·.1 . .~~'"" . ·i). Retirfng'frorri business subject to tax:
·Network_._',(-· Co.mm,ss,oner_.pf· fr!.,.emal l.J j\": r
i ~it -lntendinq to: · .. · .. · .. · ·. · ·

.
. Revenue, G.R.
· · - : 9'. 20qp). · ·. . . .• /"
-,yo. ·z·
'-)?;:~.
48 E/O;~~eterrab__.;1,-"<'-:...~. ~- ./l
,,-r'.I'
f ,.:,~~s
-
beave the Philippines;
· . . ~~~ .,~,,~--~\ Remove_ his property therefrom;
.· .
.
. . Kniqs of
.
0 . A$S~~srri"ent
. "'<J''
(~J"-Ol~A·; ~~
1)· §_elf-~~sessmenl- ~s~1ess~p:~heJt~xpa¥P
~-----
. ~
·* X~-
J-. 4·-~. - >~.r. . .
··-,~~ '),," '). .. .
. . . . . ·. .
~-~Jo-,:iJ;tl~~:or conceal ~1~ ~rop,e_rty!_ :
··a •.
.

, h1~self,. reflected i.n~·e ret1:1gn fileP. by.ti!m, . ,~ . · . . m! \.,e.rf?,~\mg~· ..any .• act: t~n~mg .·~to ..
· • and pald on.the day Q Jil.iD.9 ·Qr the rew-1:0...(Rs.i. _ 'R.~s~l!~.~Qthe -proceedin~s .. lor.· ·ttie

·r~ . .:· f' - ~u

'!I· . . ·
· · as-you-file-system) t /~~I'ec:56(~);ABAN. . · •· · ·' qf?ll~~~~of th~ tax__ fqr ~he. pasJ or ..
.. sup,a-at.176).· . ·. ·t;-';!Jj;'? . . c~rrent_cjuarter Q~ ye;:ir or -tQ -render

.-:~Q~~i,}~~,v0. ~~l
:- b} .5st~tet% . . ..
. . ·. c)-.J!AT; ~ncl . · .. --~
.
1
,. . ~
:
i~~~~f~t.~f~;r~~tl?f;iJ.i:J~
(5).
. ~
1~
JL/jj,~.ij.: j :·. . .... ·. . .
__ :~s~~~entfroces_o/(LAIP•F_A) ... , . ·. ·
·· · d)· !n~ome tax. . . · \ . · ." . ~ . - . ~~ua'n~~1of a .b~ff~.~of_f'_ufhor:Jty (~); ·. · ·
. . ·. ·, · . . . · ·. . ·. '\. ·: :~x,: ·C.S'(:!~~1."~1.~x~lf.(81t ot l~est1g_at1on; ·. . . J . _.
. 2}. ~e.~ct?ncy::"asses~ment·..:.. ,~ade J>X~~a~µ.,..=--.(i;,craricl7'..W. ~~ti~e.for !nfor'!'al Co~feren?e; . .
. . · ~ssessor himself wh~re the <::~e~e':':9t~f~-4·)""T~~iiJ:l5~-Ql"f.r~ln:rnn<!ry·Ass~ssn:ie.nt Notice; . . ..
. . : .. ~~_ta~·j~ _oete.rmi~~d.after· an exatni~tf~m_.or·'l.,_ ·Jf $.:~ts~il~-~~o.f·.(?!"ffi~I. L~lter. cir-'D~rr,iai"ld/ Final··
mve~t!gat1on 1s conq~cte_d (NfR~~.J!;?,n 1V!..t'~e%sm~nt N_obce (FLO/f.AN); . ·.· _ ·. ·. ,.
· 56([3); ABAN,. supra.at '1/(5)... ·, ---. . ._.....,,,__:..-~1.. ~qmlnistrati.v~· · Actiori/Jnaction.. ·on Dis-puted
-.-. .. · ·. .. <. ·..' · · ..... : - . · . ·.·. . : · ·. Assessmenl · .• . .
3)', !llegal"and Vo"i~ as.seS.Smenf.. An as~e~~rne.nt ·:. · · ·. · · · · . - .
.•·: wherein the faic as·s~ssor has ·no power. tci act : .. · Plea~e see /1:nne'x for the..f/o~cn-ar{ : '. · :· · ·
. at all (VicforiasMillfngCo,, Irie. v. Court.of.Tax . · . · ·· · ·-·: ·.. · · · · · · ·•·· -
.. Appea/$;(3°.R: Aio;"i..-24213, 7March 13,:-1S68): ... 1 ) ~~µ~~~e·of ~· lett~r ~f":Aut~~rity·(i:.~~) .:.- .. : .
. ~~ . 0 •••

. . •:
'• . . . /.

4)·. _E'rrohe.ou_s .. -A_'sse~s~e.nt-'7 O~e. wher.e'in th

__·e.:; · · ·
-L.;!tter'of Au~hor!ty · . ·. · . ·. _·.· . . .. .. .
~s~essol'I h·as the :power lo. as~ess but etrs· in.-: · ._. The L~~ter of Al:Jthority gives·.npfii.e _t9. the taxpa"yer-
~he exercise: of such pow,er· (('.BAN,: supra 'at" . th<>t"·it· "is unde.r.·inves.t.igation ·for "'°'.ssib.le ,deflci_ency' .
f76J· ' .. • · '· .· •. .,.. ,.,..
. : · .·. 5)-: Qi~p~t~d. ~sse~srn~nt. ~ ··~ke~·-P.l~~a··whe·~ ~ - ... :~a~p~~=~s,;d~~:i:~a\~~--~=:~J~!ir;~~~-~t~~~~~n~~ ·
taxpaye( questions. an··asse.ss.merit arid. asks . ·.. verify, and~scru:tini.~e a t~xpaye(.s bboks·an,d.·.recor.ds·.
the Col!ector-to·reconsider ofe.ancel th~r:same · in'· :relation t<;> i11ternal reyenµe tax. liabilities. Jor· a.
because. h'e- believes ···that ·tie: is· not liable· particular pe119.d. (CommissioneroUnterrialReve(!ue:
. thereto( (St: .Sfepl)eh°'sAssociation··anc{St. · -v: LancasterPhilippif1.es, G.R. No:.183.408, Juiy ·tnc.,
. $tephen·'s .. Chtnf3se · Qir/s. · ·. SchooC -v. 12; 2017)-. · .. : . · · · · '· ... · .. · ·. : · ." ·
. Commissionerof Interns/Reven1:1e, G.~. No. .·· .
/.,.-11.2;38,.Augi:lst ~}: 19.58). '· ··

2ao. J .z01s ~N ·sEDA LAW CENTRALlzE°o BA8 0PERAT10·!'1~

 £~ir-------------------------------------
· 11• .•.
REMEOi·ES
alll
..
-la!lmll--Pm!i!:'l'..
lr:il'l!!c:.::::tzl=):';'-

!ll!l•SA11N111.811f•D.•,l.111!A•W.··111CE·N-=f·RA·i.·,z·E·O·B11~Rll·!l;oP.E11:RA•T•I01:N•S111:.•M11fM•O··
R·Y·A-/Dlll2i:101119-·

f Note; In the absence of. such. an -authqrity,. the of the· Revenue Officer to complete audit shall be
f- assessment or-examlnatlon is -a nullity. The Court subject- to 'the applicable administrative.sanction
~it cannot 'convert .. the. Letter Notice· .into ' the ·LOA. . (R.M;O. No. 44-2010). ."
t:,. .
. . ..
'1 . required · under the. law even. if .the same was issued
J. by the CIR himself (Medicard Philippines Inc. .v. CIR, 3) Issuance of Notice of Informal Conference
{NIC} :. . ·. . . . · •·.
·:;>_ C3;.R::No. 222743;April.5, 2017).
f~· . . .' . . . ... Tfie Revenue Officer. who.. audited the (axpaye['s
{(-' Electronic· Letter of Authority. {e LA). records shall, among others, state iri his .report
,?;.· ·$tarting August 16, 2010, only eLAs shal} be issued ·; wheiher or not the . taxpayer agrees with' his
?,: · b.Y the -Bureau for the .audit or inve!itigation of tax · findings .that.tha taxpayerls liable for def1.ci1,mcy
f: °liabilities, except estate .tax cases (R.M.0. No. 69-· ·· · tax or .taxes: · 11 the=taxpayer is not amenable,
'£: 2010),,: . · ·.: .: ·: ·,.· ··_:· ·. ,< _ · based -'on the said Officer's .submltted rep.prt ·or
·irivl;}stigation·, the taxpayer'sMII: be ·informed, ·i:n
Retjuisit~s.'ot'.a \talid eLA; (INC-30). . . . w.riting, b_y the -RevenueDistrict. Office'o(~Y ~he
a. · It' must 'be .!ssued by· the . proper approving Specialinvestiqation Division, as the case may
qfficial'. Theapprovinq official depends Oh the· be {in the· case.. of R~venu~ Region~! Offices) or'
. investi_gatir:ig-cif(ice: · .. · · · -by the C):lief ofDivision concerned ·(in the case of
i. · ·Regionarbirector (RD);.· . ... _the· BIR Natio.nal Qff!ce) .Qf tlie .dlscrepancy or
{f . ii.· Assistant Commissloner-Larqe Taxpayer '.\Cliscrepancies in the taxpayer's paymerrt of his· :
~.~).·'
.• ~.,::<·.·
.· Service (ACiR-Lrsj - LTS and: its /""\ lnternat revenue'. taxes. · for .the · -P:l!rp:ose of
~: Divisions; .· · . ,;;;ln)}( "lnform~I ConJerenve.:'. in order to afford. the
· · Ill. IJeputy. · Commissioner-Legal . l:~.n{C'~ . ta_xpay13r_with an .opportunity to ''present hi.s .side
i; . . /Inspection Group- Enforcement S~f.;r'J~e·~:i,W) of the c_a·se_(R.R. No. .7-201.8). . ·
i.'.,. . . and itS Divisions· and · l,°j /, },Hnf.. . · . - , • .· · . •.
ii.1 · iv ·DIR· or any· authorized official -/'Ta~~'?'~,.1.~~T,_h_e lnf9'.fmal Conference ·shall in no case extend
i · ~·
i,·:
· · -. • . .
· ·. 44-2010)· ·
,
· 1/:r,·
. .-;v
Force and Special :t earns Jf:?;ffil?b. · No\,- ~ : ·
,., J-1 ~i~-,.,"'~'""'~··,·NI d
fL~<Jj
f .· · ·
~"'~.!i!.t.:"'.lt ;:iys rom r.ec~1pt of the notice for
informal f~~nference. ·. If . it is .found: that . the
:?- .. · . b.' · .rt· 'must ,Not·. contain·. any rrl:~.b.1J(l1y.:writt~~-ll taxpaye} \f~till l!~bte. for deficiei:icy. tax or ~axes.
. . ...character notation or e'rasur~ (R/M,©'. Kio:
"·. 44~201-0):· ·. ,. · ·, · ,::t;~ ..... · ~J-~7
tji .
Vt . •: .
a~er pr:es~nu~~ his side; and the taxpayer IS not
amei{jhref U:i~\ Revenue District·.Ottic;er pr -the .
c: , · !f muit '&over·only 1_-,(~:(~_t>le'_y~al ?Xce_pti1i\: :~;;, · o!
Chlejof t~e 8.P'r_cial lnvestig_ation ~ivisior(_ !he. · .

: ..•. ·:-~:p:~go:~1:~i~~~1f!~~-~~~!\?li1;;
· ·. (~:M.0, 44~2010);.and. -~~!l~i\..: .. / ·.,·:.: ·.
~,~;1;r1b'J,f;~::·
.. ,tf.~....·: · t~:t~:it.~:;f
endorse toe -case_w1t~1.n 7. days:.f.r.omthe : · ...
b~y:;~.:
. . v ""-.\ \,l f~ . . . . . .· . .. . . . - . .
..,. t · Th. . · t' ·. ·f .. : . ·. . .·f\ .. ·. ,...):.J. . th ·· f ~11?r"·fGoncl.usion.,of. tbe Informal Conference t.o .fhe·
,,,o e .... e.prac_1c;:e;·.o 1;,su.mg,an.L'f~Cp'£il'mg e iV:~·-i.~~~~·-.· · 1;; U:'.r ··· f·th· R · '.R •· ·.,
at.idit.'of:"unverified· prior .years''_Is~j:i;;ohibite.d1:De'ak1#fl.:.,df~,.,.~,~.r.W .:n · .· IYISJOn O .• .. e . _?vem~_e. · _eg!ona·.
tei S · 11 V · · ·t l
... C !;.);:~,. • · • , ..,.•-.· f. · Office ., o~ to.. the· · C~m1m.1ss1qner · or his . duly

:f _.J~~;::::o~~ru~'.: :'fA
. . ·.. a ~ · mv~rst.Y,, nc .. ..V, .P'~' _. iss1ff!W c, ·

. · .. . . '·
.En,·Banc, ·.• ,i.JJ_9;.-6_71•.·
-. ' :. ' .
.. authorized:. represen{ii!tive }or -.issuance · of , a
. de!i~i.eticy_tax'assess~ent(R:~.:No;:7+20f8)..· ·
· No_t;, With the ~ft'.ecti\~ity of·R~R. No~.18-2013 .
· d. ,-l~·m·1;1st-be·~erved·t6 th~ t~>c'payer.V:,ithin tl:li~·.. :: · .. : on oe·cember·1.5; 2013, the,issuande of a.Notice
. : @J.) days (R.A.M.O .. N9i 1-200())... . .. -_. · for'·lnforinaf Confefence fof .audit investigations·: -
was aiscontinued_.untilit was reirist~ted by R.R. ·
: . : · ·Urid~r Sec: .6 .. (.A:X qt the. NJRC, therf:3 ·must be.
· ·. ,. gr;,mtof authority befor~·any_ r~vi:mue officer c'ari
a.· N.o: 7-201.8 which beCa'rrie'.effective.on March:'1
·2018. . ; . .. . '.·.: ·. - .. ;. : . . .
o,
\ . -. . . . ..
· .· ~o-nducf-examinatiqh or ·as.sessn,ent. · Equally
. . im'P.Qrtant is.that the revenue:officer so authorized ·. 4) ls;uance· ~f P;elimi~~ry A~s~·ss~enl.-Notice .
~!.-:
~:;.·-
> · . ~-u~t not ·go· peyond· the a~thority gi>)e·n.· 1n th.a .:
. absence. of such authority; .fue :assessment or .
. ·(PAN)'. . . · . · . .
PAN·js ISSl.led to the taxpayer informing hin{of

f>. · .. ~x~iTiination'.is a'.nullity(Comr.ri~ssioneiof lnte,:na~

· ·. Revenf.!~ v. Sony ff-IL, ·~nc.; G.~:·No. ·178697,
·:November 17, 2010).· . . · .
: -·the findings ofthe:Revenue Officer if a~er r~vie~
.. l;Jl)d evaJoatjon· of taxpayer's records; ihere'is ·a .
. suft'ident basis· to assess· ·the :ta~payer-for 1t1ny
't deficiency taxes.. (R:R No. 1'2-99, 'See. 3.'1.1, as.
!L .. 2) . Ta>t' Aadit•or investigatii:>n . .
Effect.of.F.ailure to. Compiete Aucfit within 1.20
amended by R.R. No: 18.261.$)'. ' .·. · .· . . :' ·

-Days · · · · Note: Pri6r to issuance of P.AN, the taxpayer.m~y ·.

Beginning ·Jun~· 1, ~O 10, then{ is· no nee.d · for . be allowed to . mak'a'. volur:ita_ry payments . of'
revalidation of the LA·;( the prescribecl.'audi( probable deficief!CY \axes and ·penarties ·(R.M: C ..
p~riod has·been exc;eeded. He>Weyer, the failure No. 1.1-2()14). ·. '. . '

2019 SAN SEDA LAW CENTRALIZED BAR OPERATIONS ·1 · 281

 .REM.E.DIES
5,6,N Bf DA LAW Cf.!"TRALIZEDfiA_R_OPERATIONS-. MEMORYAID 2019

Req!,llsites of a\talicf PAN (SAWI) -, . . ·. r·fote-: Taxpayer- can stifl file a protest" to FLD/FAN .
. ,a. ' .Must be §.erved. to the taxpayer personauy · · ·(NIRt;;, Sec." 228, Par. 4). . . . .
.. and j( not practicable, by· substituted. service
or ·by mail (~.R. No. 12-99, Sec .. 3.1.1, as· · · · ·5) Issuance of a Formal L.ett~r·o·f D~m~·nd and ·
amended by°R:R. N~.· .1-8-2013);· · ·. . · · FlnalAs saesment Notice (FLDIFAN)
· · b. · The. Assessrnenrwas- conducted within the . · · a, Requisites of a Valtd FLO/FAN . ··:
scope 'of .authority· give~. by a . ."v~lid.·LA '.b. Period to Issue.FLO/FAN
. (Commissioner of Internal R(#vehu"e 'v,: Sony: . c.: ·. When f AN Can be. Issued
_-PH;· tnc.; ·G.R. No. 1··78697, -November 17, · · d. \J\lhef.l FAN Deem.ed·Mad\'l · .
2010); · ' . · . : .. ·.. . . . e. ·. Three scenartos After lssuance of FLD/FAN:·
c. Must be in Writing and contain the factsand i. ·: l'axpayer·Pays Assessment; .
. · lti_e·1~w-on whlch theproposed assessment ir:· T'axpayerFails to File Protest; and>
is based (NIRC, Sec .. 228; Per. 2; R.R. No. "iii.. "Taxpayer Files. Protest; :
. ·12-99/Se¢: 3.1".1; as arilendi3d by-·R,R. No~·· · . · · 1) · ~eqlJisiies of a Valid.Protest; ..
. 18-2013); and, . . , . .. ·, · . .- ._2): Reply, to- .P.AN vs, Protest to FLq/
d. Must be· [ssued · bY. the .. :-QJR . or. his duly . · FAN; -", . . ' : ·
· authorized 'representative, · The, .duly. 3)- Pro-Forrna Protest; ·
· · . authorized 'representatlves are: . · 4). Defenses -of. Taxpayer; .
., ' . : . L .Revenue Re9.ional.Directpr~;.' . ~~="~ . ', _SL Rules:On· Payment' Wh_en Protest is
ii. -ACIR-LTS· and · .· .. ·: ~- -yJ· ~~ . . Filed· : . ." · · . .

. .Service- (R:-f!{ No. -.12~-~97sffc~·h1~~.;,.~.,,,~

1-
iii. ACIR-E1;1f~rc~rr;iiint • and/AdVocacy'~ .. '\{ } ...~"-•1-6J _F.omis of Protest; .
1
-i. lr;,),Wt'lenAssessment Begomes Final, .'
• •

· · emended t,y R.R.· N9 :l£t~~°O-J:!bR:M. C. . ~~ j,}',~ecutmy -. and Demahdable. · -

· . ·. · 'No, 11-2014).. °;j. V/~-~~~,'{_ 1:i- '· : ,. : . .·-_: .
. ·· . , ; .. · .,f,.CJA,.'/,· f-·, -i'P.l -;.f' ,,w-a.".'"jeq_l\11!\!lf~-·Ora·_·Valid fl~/FA.N .. (ParilS-
Three. Possible Sc~~ano~ ~erl)~1;1anci of PAN; 4~. L~ · .~eF5:1\.(- ... , · ··. . . · .
· .. Ta>e:p_ayer's. Remedtel:> (PRl)Z,~· · -;,r ·. . .f,,,}, "J ·.
. ·., · -Mu~~(of1~~!-led·aft13r issuance ·of a valid
·. ~: Taxp_ayei: may fa~ the 3115.~~rent;: '. :-v·-"'.'-=--'4(,P-1 ~~-! .· PAN:1.~~~tfo~ the instance·s. where a· .
.- . ~~:~:._ Taxpayer. fnaY: file_.a Be~l9;,:t\1~·: ., . ,·· .\. .· -~~,~
111. Taxpayer tnay Jgn0re.PtN,--.o:~ · ~\·
J~L~~ · -J. . ·
b 'illill.TIJJ.71'--=· ·.
PA_NM~~~{~g~~~ed(NI~~· $ec: 228,. . .
. . ~ · -iii · . : . · .. · ·.
. ·. . . --, . . . : ·: · ·. · n ~l./ . ·_ c.1-: \..· ~..:._/JfJ;JfrsJ.'°1 _;;rlJ~ 2; R.F?. No.__ 12-9_9;- .s_ec, .
. · ~cenario·f: Taxpayer Pay! tJ:lwJ\~se~~>.,nl . IB'I. ·t.1 :-r-, · " .) .. 1;/as.amehdedpyR.R,No.·18-2013);
If th_e taxpaye~, upon receipf1i! /-tt'te--'F.>~N..~.c ·e~~a~J11t-f2(~ / ~~ Mu§f ~e)~f1,1ed:by -!he _CIR o(bis duly -
· pays t~e ass1;1ss~~nt.•_ -a FLb7· ,4.N· _sfi~ll b.e~~ ~(63l ji ·"~/~' ·. aytn~:mze~l:~e:pr~sentat1v.~.. : The terrn
· "Jqrm~h:z;~ ~h~_ass!;!s·sm!3n!, ~n . Payr,ne\tFor (:! ~y/ . -: · ;&i1y aut~10~1zedreprese)'.}tative" refers ~o
.·• .. ~hall~ d~ly_~reP.ared, flled-and_'~!d to _a~~- o. l~gelE'G'.'\11?'·> .-,~1he sa~e_.pefson .who is·: authori~e.q to
. :and pro'l(lde·.1:;v1denGe 'for ·the:-set~lemen o. hi · i ·. ~/: ~~f~~AN·(R:R; _N.o•...·12-99,-.se·c. 3.1._3, .
·(~9o-:~'"'=<~r\\)i~~ended by _R.~_·.No .. 18.201~;.
. i;isse_ssme~HR,-~.O. No.2(>-2016).,
-.... S¢.enario-2f -T~~~~yer,Fll~~·..~-~~ply -~~{·
.. . .. The taxpc:15'er has 15 days from.th~ d~te,·of.r~~e1pt1$f~-:
-:Mf:~~ri~t~
..
· .· ·
~:v;~
0··. 4);to . _ihe .· ·:~clxpay~; .
· · pe.,r_sonally !=)ry~ · If not ._praot.1cable1• ·.by .. ,
. · f>AN to· .reply.. (R.R.·. Nft•. : 12:-99,··· .Sei::.. · 3:t.:1,· .as · . : ~yb~tiMetd service qr by m~il (R.R.· No:
... 8:me.nd~d by R.R. (\/_o. -tEJ..201.3), ... .. . .. ·.... · ·: · . : '12-9f}, Se-r;f,..-3._1.~, 8S··amend~d.byB:R.
. .. ' . . . · ·No:.'18-2013):. : .. · - .. : · · · . ·- · .
~equlsite~ of. a·Valid. ·Reply: : . · ~. :· :: · ·. ; ·. · · . -· Jv.. Must. be ·;servf:!d to Jh~ taxp?yer Betore
.. · 1: Must be mad°e-'Nithin .the said1$;day period·{R.R.:~ th.e· lapSft 9f the pr,escripti.i.(e -period·,for .
No. 12-9.9,: Sec. 3.1.1, as am'ef.ided by R.R .. No. .-: . : · maki.t;ig;~~se.ssme;nt(N/~G,.Sef,i. 2Q3); · · .
... ·18-W13);.and · · . · .. : . ·:, · ·. · ·.· .· · . . , ·· · .v,. _Must he· in wtitiog'.an.d <;:ontl:!iri_the facts
:·:. 2.. · Mu~t t;>~ . filed ·.by· .. the· ta.i<payer .. or···'his . duly . : ;:and_ ~h~ law· cin ~hich the a1~essme.nt i:=, ·
' .. · allthorizeci represt;!ritative, in p_erson.·or .furqu·gh . ·'. .. :pased··-(R.R, No .. 12-9Q, Seq~· ·3.1 .•3, .as
. ·.. registered m;;iil with return-ca.rd, y,,ith the qffi~e·of' · .. ·. . ame.nded py RR., /lfe. 18°20'/W;.and · ...
· · · · the.. d~ly authorized. fej:>re~.entative o( fh,e.. CIR ·. , · · · · · · ;. · · : ·.
. (Regional.·.· Dirf:!ctor, . ACIB"-1,.TS;: · ,l\C!R-·.· _. -·:Not~:Aia.~payer.m.L1stb~informe~-i~-.-~1iting
.. · ~Enforte;emerit Se,:Yfoe). whp· .sig_ned·. the ·.P.AN . of the ,l~g.a] and 'factual .bases pf -the tax
.: (R.M.t:·f\lo. 11.!2014; R:_M.c..-No. 3_9a2013}: . . ·a~sessment made :against .him, The·· use-.gf .
. · ··. · th~.. -Word "shall"· in :ttl~se Jeg·a1 prbv~ion.~
3:
Si:eria~io tax~~yer-lgn(ires PAN . .. . . ··•·· . indi.cates -th·~ mandatory ·Aalli_rEi· ·of.·."the
·.Taxpayer:·shall . .be ·cqnsidered in·. default-" ·and ·an·': . · requirements · -laid·· . down · . ·therein
FLO/FAN will be [ssued (NIRC, Sec.:228, far. 3). . :· (Commissicm~roit~ternc~.IRevenoe·.v. Enron.
. . . . ·. . . .~ . . . ... . ~ . .
 ,R.EMEDlES
.
SAN BEDAJ..!<WCENTRALIZEb. BAR OPERATIONS~ MEMORYAIO
. 2'0i9
. . ~. .
Subic Pow~r Corporation, G:R. No. 166387, equipment, rriachln~ri~s·.a.nd spare parts, .
Jar,u~ry 19; 2009). .. has been sold, traded or transferred 'to .·
·. ·· . non-exempt persons; or. . ..
However; fn the case of Semer-t £/ectric v. Whe.n ·a taxpayer- who opted·to claim ~ ·
9oopemtive V... Commlssioner of ln'ternal :Refund·ot tax credit of excesscraditabla
Revenue.' although ·the FAN· and· demand ·withholdfng tax for a taxabfe 'period. was
tetter issued. to petitioner were . nof determined to have carried over and'.
-accompanied by.a written· explani,ltion of the. . ·automatically.applied the same amount
. legal and, fat:tual.' bases .'of. the deflciency . · .: claimed ·against ·· the. estimated · tax
taxes assessed BQair-ist. t~e: pefitloner, 111~ liabilitles for the taxable ;qua.lier . or
.. records .showed that. respondent lrrits letter . , quartersof the succeedinq taxable year
dated .. Aprf 1.0,. ·. 200~' responded. to . (R.ff_.N6. 12799,.$ec:.,3.1.2, esemended
petltloner's. October 14; 20,02. letter-protest, . ·' by R.R.·No .. 18-2013). ,. .
-explalrrinq- at · lenqth the-factuat · and leqal ..
'bases ·of the deficiency tax assessments and .Not~: Th~. issuance of FAN !)efore thelapse
denying ··ihe: .. protest. · Considering: .: · the of the 15 day period for the taxpayer to. file ifs"
·toregdiflg. exchange of correspondence and reply to the. PAN inflicts 'no prejudice .oii'the ·
·. documents between.the parties, w.e.~tid {hat taxpayer as iong as··the taxpayer. is property' ·.
· the. .requirement . of S~ctiori · 228 was . servedthe fAN.~nd' i\ ls.ableto ·intelllgen.tly ·
.: · substantially complied with (Sai-nar-1Electric·>\ .:-· ·. · contest tt.,.e.FAN by filing· a protest within the
Coopera'fivf' v. .commissioner ~f · 1ntem,fji',1?( . . . · .period allowed by law-(!yfed(f3XCorporetionv.·
· Revenue, G·R: N~.· 1~3100, Deceinbe~,~:({{;_:::':-,. . , Commissioner· of lnterhaf Re,venue, CTA
·2014):··· · · · : . ·· . .,·:;:·1. . .
·, · f..'f"i~1 C~se No. 8508, Septembet.1', ?-014). . . .

.
vi. The assessment w~s conducted wit9.1r:il·1~.,.~/ ·~
tt-ie.§.cope-?.f.authority-g(ven tiy a V::Yfa
· (Cor:nf1!1s_~1orier of. l!7_le17Jal:.,~e~nue·.
. .·Sony· Ptj.'. · fn'c.,-. -~R. -(~6":, .1786~!,S. ·
·. : . N_ovember 17;. 201p).: ·. }~t'\-·· . ;/.,.,- f
~1·
tt:-'~rn'ji:;:~'.!a~tflt.a.'~PJl=
· - .:.-,. · · . · ·· · ·:. ·. ·
A .PAN· preparatory to th!3 issuance .
---of--rAN .is ·not, . legapy sp.eakil')g, a,n·...
.. assefer~b,e~tev~~!f.it,.c::ontains a computation
: of ~, _,X.
: . · .·

ltabtl!bes. of a ta~p.ayer· end ·.a .. _

. · .. , ... ·. _ .. ·:· · _; '..,p'~_..-.,,:.;;.P. . ~·~} . d~a~1d\or·l?aytT1ent of the computed.:t~· .
b: Period _to J.ssue F.LD/~~~ ~ !J~"'·. . :- ·
, :f':l:D/FA~'(shall b~ is~<J2f1q El.,;fys.-.frpm dafe\
e
~;l . ..
li~bili~ies ~~s macfe (Oa~o:oqManage'f!1.ent ·
.-$er.v1~es,, ll:lc:: v.. <:;omm,ss,~n~r.. of lnt~rnal ·
. :.of r~~E:1pt by 1he: tE1tP<!yeP°ov.19e~/.\~. i~!l. «.,{i~::Y-~~~··:·~lA Gase No.. 7989,. August ·8,
. ·whether the. sam~· ,wa;r pro~J~'(J qr.i~~t r,·~1-. · · · .
(RM.0..-No. 2fi-2()16). . ~J.-~~".'· ·
. .· ·. '.· ·~ ·> : . ,)' . .
2~ ,~·'i .. . .
.to:fE.).'.t...!if!l}iC
: . . . · ·
\;{.,,..,__,..,,Effect-when PAN is.not·issued before FAN.
· . ·.
. .
· .
· _ . : , .
· •
'.

. c. -Wtien FAN-can ·ije ~sued · ,.f;.;}?~::--' .· · . . ,n-r'~w·::!ltt~:

. General RI.ii~ F'AN·can be is~u.ed·onJ6fter~~--,--t~p~ on!y receive~ the latter;,,t 1~ tantamount,·
PAN. is not i~su.ecf.~~foret~~tAN af),d the·· .

~,'P~N· was issued;. _T!'lJs.ds{(.R~rtJ.QfY.1~.e ·· · .. · }o ·denial of·~~Efproce~s_. The. ta.xpa~er.~ust_ be

r~9~1rement~ of. ~u.e. p:r09e-ss,~~Jlure t~. ·
comply therewith · : would' render· · .the
a·ssessment·· ·veid .. ($VJ:, /nfotmation.·· v.
· · cornmis~iqn.er .of. 1nte,m.fii.. Revenue,. ·cTA .
.. Case.No. 8496, February 10; 2014).
· . . . ·· ; ·.. .. ·. :·..... : · ·.. : · .
· ... · Excepti~t;ts:· In ··::1fi~--·f9llowing:,..'_!r:isfan~·es:
. . . ·Wh~re ~AN.i~ no_fr(:lq~1ret1,.a FLD/FA~-:Sball
be i~u.edo(.itri.9ht:{METER). ·. · ·
· T.· . When the finding for any deficierjc;:y tax ·is
the· ~e·sult ·of Math;imcltical er.ror~ in. l.he. . ·
' .. · - cor'nputation · of the tax··.as ·~ppearing on
·· tfteface.otthe·retum;·. · .: ·
· ii: When. the ExciSe·tax ,due ·0~ ·excisable ·. :: need.for the ·issuahce Of ·a· FAN. Un the ·omer . ·
. .- articles has-riot.be·en paicJ; .
. : · ,iii: ... When . a: discrepancy . has· · peen
· · . · · · '· .deterrni.ned.: bet.ween:. the· iax_. withheld
. · and the amount actually remitted by the
. . witryholding. agent; . :. . ..
·. , :· · iv. Wh~n · .ail .· article · locally ·purchas.ed or ·
. i~ported _lly an gxempt person,.such as.
b.ut . n.ot · ·'limlteq to·, vehicles;·. capital
. infor,ned of.!!'e fa<:ts. an1 laws upon y.,h1ph ·the ..
. · ;:issE!ssm.Elnt 1s made_. It 1s nol mer.ely.a to.rrnaJ..-- .
· ·.. requiremerifb1,1t a substantive one. However, thEl. :
.1~~ ·recogni~¢s. sevet~f ~xceptions.~liti.reirfthe:,·.:
-P~N .·n~ed · rt~.t. ber ·issued '(Comm1ss1on:f!r:of.
lnterricilRevenue v. '-Metro StarSUpefanta,.'GR ..
ii
/Vo. ·1~53.7{ December 201'0):'·, . · ;.': ··_· . \ ,:
· . . ·. . .· ·· . . · = · . "· ·. ,.. · ,: · ! .
· The PAN is·· a part ·of d1,1e· process· 'as :j\ merely° .
.informs the .ta?<Ppyer'qt tl)e initial tindings:..of the· ·: .
0 -Bureau of Internal Revenue, lt gives . b.oth the· ·.
. tal(payer.and:the CIR th.e opportunity,to:settle the,
':. -case atthe .¢a:ruest possible.. titne'withourtt:ie. :
. .·. a
. hand, a FAN contc'iins ·_not 6nly1 computatfon .
a
.. · _- · · of tax liabilities but also 'demand for payment
.. witliin. a pres~rib~d pe~iod. As soon.: a.s }t · .i~
·seryed, an .~blJgatlon arises o_n th~ part of the .
- .. . taxpayer coricerned to pay,the·amount assessed
ar:id. demanded. H · also signals tt.ie; time when
. p~naltie~ and interests. begin to accrue ·against
·ttie ·tc!lxpayer·(comiil1sslohe'.of lnterna/Revenue

. · 201~ SAN SEDA t:AVf(:EN'rRALIZED BAR OPERATIONS I ;283

 -R·E.MEOIES .
-SAN BEPA LAW C~NTRALIZED OAR OPtll/fflf:JNS - MEM!?R~ AID 2<?1.9"

..
Optical Philippines, tnc., G,R: No.
v:. Trensitions · e·. • Tli_ree · Possible Scenarios. after rssuance of
227544, November 22, 2017). · · .: ·_..' · FLO/FAN ·
L . Taxpayer may pay the assessment;
d. Whe11.FAN deemed made . . ii. : taxP.ayer-fails to ftie protest; or
. The. assessment is deemed to. have been. made . : iii: · Taxpayer rnay.filea protest
on
the 'date. when the demand ietter or ..notice of
: -assessrnent is released; r'n~iled·.or s~nt,. even · Scenario 1 rTaxpayer Pays the ,Assessment."
"though. the:' same. is actually- received'. by the . Afte"r the· issuance: of .the. FAN/F.l:.D, the taxpayer
. · · -taxpayer after the expiration. of. the _pr~i;criptive accepts.and 'settles or pays th.e assessment in full,
· . · period · (Basflab_. · Esta(es · v... Commissioner ·or . · · -Payment Form "Oq05 shatrbe duly .prepared, filed and
.. lnternalRf;Jver11.ie,'G.R-No. L:2249.2, September . paid as evidenceof th¢ ~ettlenient cit the assessment· :
· · · ··.- '5,' 1967), . ·. . . . (R,.M.O. No. 26-..2016)"._: · '. . · · · . . · . · ··
.· . ·.. .
~ener~I _R,ulei When a·. ~~ii.' m~~er· ·is.:~enf b'y ... :sce.n~rlo 2:" ·Taipaye~Faiis to,File Pr~te~i . .
· · ..registered mail, there extsts.apresumption that It. '.· .. If the taxpayer failstofile a validerotest i;igain~t the
· .' .' was 'received .in·: the. ·regular .course of mall· . . FLD(FAN'within 30.days.'f~.orn date of.receipt thereof;
oi
:. :. · :(Republicy._· Court ~p'pepls, G.R:No. L-38540, · .. , }he·_ assessment. shall become flnal.. executory, ·an_c;I _.
· Apr/J.30, t987). · ~ -· . . · · . · . . ·. ; demandable. . No.· request for reconslderatlon or
. , •. · • r . . • · . '. · • ... · • . . ·• •.,.....~1.=~investig.atio11:sh!:1llbe gr~rited (R.R. No: 12:..9~,-S.ec..

· ·.for the presumption to apply~~the .fo116Wi.ng~u- - .· 3~s.o..im.en~ed by R.R. No. 18-~013): · · .

.facts must be. proven: . . . -, ~~ · I, ·J.\1 : /t. . ~~~";,. ·. · . ·. : · · . ·.
i. Letter .was properly d jjp~~ef wi~en(rio/(;Taxpayer.Protests.the FAN ,,
.. · ~ost~g·e l?re~ai~_.a·odff/';, . .,.,~?.P ·...~~~) ''Re~~it,;;-lf{aValid Protest;·(W~Ath.·:FiCo)
u ... Letter..__ was ma,le~f' {B~r~~(j"~~~xe~ 5'1.,.-, """'-~~- ""'~-.t'-), ~, · . _-.. :' ·· .. .
Seq.utit1es;lf1f V.· ft<;fj},mi,5:~10nerof ··-,.cr, · JJ:S . ~Q" a~us~s)oqJpanied by a, Wa)yer~f Stc1tute·
· · . ·. · . · . · /I .: ~/Y. . J .- ·: lr" -~t I.& 6[-.Uri1\~~~ns f@ank of the Phil{ppine Islands
. . · Jntem_al Rev!!n/~. G. ( No" '157064,. : ·~-.Comwt~fiqn~n:~flnt~rnal Revenue,. G.R..
: · . Augu~t 7, 2006)/ _t-;;P· 1 · A · · · · o. 139'(,_~_°d; October-17, 2,005);: • . . .
· · . ·,:. · · · :g~' · ··i '.~~- c.--:-'?]JW1 :., •.u~Lbell'i~ili,:19_/RR.·No .. 12-99, Sec.·
. _P.roofof Mal!!ng . It"~,,;?\ ·. . · .\ ... ~ • . ~ 1,:1.:,:4,,a.~~ptneno'"Jd·byR.R..Nb. 18-2013);._ ,
The reg!stry_.receipt i~sl:!e~ e .~\?§~r-:~~-- c} ,~l1..SJ)be~6~dr~~sed to the p1R, .or his,auly

. COL!ner . cqrnp,aqy. · CR· t?I tf\_g , .. !:t.C~n'f.:;gi .,,..,,,~ ~~. •. .4,-.asJamended by R.R. . No. 18- ?l'
. ·_·id_entifJable · de~a!ls-. "of ~e ·-~~\sa.c · .r'\'~;:11!3' ':..,;" · .•.i~J013);( l. ' ... _.:. .. ·. · ,.
. · co~st,tute. suffic,~n.t proof ot f!l.aihng~n_d !;la~~· · . . ~dvMu;?V,be su~J'rntted wittim . T_h,rty: (30) days
. .' .atta~hed_ tq _th.e _ca.Se _do.cl<, (R.R.:-'~r··,(f~~iEN"f\~ , !W~
r~~erpf..of _F;Lq/f:AN ·.(R.R. fi!q, 12~9~!
Sec.. 3:\6, a~ame_nPf!_t(~yR.R~N_o)g~/~.)Kf a~ amend~~ by -~·.R..·No._ 18-
'-B!R 'rep_ord j:>ook is D,of's~(fjc_i~nt (~ci~o~lx~s"1,,.
: ·Sf!cur,jies,-. Inc,: v.. C_ornrtuss,oner: of':'i:.1o.~al
~i i~~:fvly~ti-~·e. File<J b~ ·1~~- t~~P,a~er' ·.~r his .a~ly
J.v. 1'"~-~th_onzei:J .. r~presentat1ve; · ,n- · per~on qr
·. ' Reve,nµ_e,· G;·R. No .. 15Z0~_4, ;,.ugust_.7.; 20,06). ~~ :; . ·tnrough -reg_istered. m'ail With re"tum ~rd, With
·· ·. ; ... . .. . . ~ · :_ .· .. /· ·. ·. ·. . · .. . . · · ·. . · ... the. .. Office: · of:: _-the· · ~~ly · · -a4_thpri2;ed
f;x.~ept_(oni .When there is ~ diraqt ,deniaJ,6f the · :· . rej:>resent9tiv,e ofthe ._CIR.(Regi61:1al-Dlre¢t!)r,
· receipf.·Tije- t:>ur.;!en i~ ·st,iij~d to-the !31 R to proye · .. AClR:LTS, ACIR-Enfiircern.ent·Service} who
· .....~ _that.·ti)e .. fetter.·mailecj ·was recei:ved by ,the .-: sign~d the-.FLD/F.AN (R,.tvt.c.:.·No,' 11-201'4;
addressee.· fBarceton. · Roxaef .: S-ecurities . v,, ·... R.R. No. ·;39-201'3); .
. ' c;ommfs~klner. of .internal. Revenµe, · .G.R. /IJq. : · . :· . : -~,.' · ,. _. . . .. . .. ,.. ·.
·· · . ·· _..t-,57064~ August 7, .20.06).·: · · · · ·· ·
..:· · .· .: ... ·Note: .The· revenue·afficialS Whd retaiv.ed the
(. •, '. : .. • I ,', ; pr,o_te~is•sl:)ansubm1ta·~epbrt·on"ali'protests
if ·;t~~, ·t~pay~r·.· d.eriles - .ha~~n·g: ~e¢~i~ed an. .fil_ed to.th.a CIR The·Office qt.the. (GIR shall
·assessment from· the BIR, it ·then· becomes . . . ..then: create !;I '.da.tabase:·oJ-thepri;>tests, It ~hi
incumbent..up.on the·iatter.tp prove ..by competen.t . . protes_t fileq-.ls 'nqt .1ncJud..ed In. the. database,
evidence that such noti.ce was. indeea received the:sa~·e shall ~~:t:oi\sjder.e'd.as_no(officiall)
by the. addressee. "While:.i(.-is·.ttue-·that,'ari' · !iled, hence, without force,'ahd Eiffecl (R.R
assessment Is· made 'when the· 'notice i·s .·serit · ·,. No. 39-2013). ·:· '.: ·.'· ·. . . .
' : withit'l'.tli.e p·r.~_sc~bed-perio~.the release,'m'c:lfling, ~-. ' ' . ·.
or sendliig of _the same must still be· cJe'arly ~09. t).' ·. Mu·si ~~~afn ·the·follo.w~g: {N~2TA-Pl~F) · .
satisfactorily proved. (Con:,mtssioner·ot-. internal ·. · i} Name- of -~~e taxpayer an~. addre~s fo1
Revenue.v.-' GJMPHL"AAariufacturing, Inc .., G;R: . the:lmmediate past 3 't~xabJe Y.~ars;
No .. 202695, February-'29, 2016).. ·.

. .. . : ''· 284
•.. ~ . 2019
.....
SAN
.. SEDA.. tAW
. . CEN'rRALIZED
. BAR OPERATIONS
. .. ·.
 .. REMEDIES.·.
· 5.4N BED.A LAW C.ENTRAL(ZED BA(! OPERATIONS.
- MEMO!{Y-Al() 2019
. Mil ,¥5 61+···

· ii) N·ature· . of request whether (R.R. No. -12-1999) (.Commissione( of Internal·

. reinv.estlgatiori or·... reconslderatlorr Revenue y, Metro Star Superama, GR;:No. J 85371,
.. specifying- newly discov.ered evidence he. December 8, 2010) ·
·Intends. ti:> present· if It' Is a request tor· ·
relnvestlqation: . . . . 3) ·p,:o-Forina Protest .·
··iii)' Iaxable periods covered; A pro-formaprotest is .. not·valid. The alleged "protest
. iv} . hssessment number: . . . letteir". qasically informir,g CIR .that it had already ··
. vf .Qaie of receipt of assessment notice or written or answered lh"e PAl'fand that it.explained its
. ·, .. letter of demand and date. of assessment . posifion to th!;) tax 'assessmentis nej~her a req'uest for
·.notice·. · . · · reinvestig'a\i91,1 nor a reqµest for ~eco1!sideration. It
vi)' !terni:?~d statement (jf the firidjnqs. to must be· emphasl:ied that a protest 10 the PAN i!fnot
... ·which .the taxpayer pgr,ees as a basis for. the sarrie.~s· JI)~ .1;1.ro~e~trequired In q=iply to_.tbe FAN
: computing the tax .due.. which amount · · · ·. ($.ec1:1rity Bank ·,coip. v .. Commfssioner.r;,f Jnt~rnal ·
should' be paid -. irrimepiafoly 'upon the Reifeq_i.Je;·cTA y.ase
_No.: 6564; !'Jovempel 28, 2~(?6) .. ·
. . · -filing· of the.protest; ·. ·: · · . · . · ·
·: Vii) !lem!zed .. schedule ctthe adjustments '4,) Defenses·bfTaxpayer
with whlchthe taxpayer does not aqree: '. . a) Prescription . : ·. ·.
and ·. .. ·· · · · . . . · · . .. ·
_viii) Statement ·.~f .ttie· facts. arid.' law: i~ . .. .: A~-~LO/FAN-mu~t-~e ser:ied·tc;, the faxpay~r.
· support of the protest(R:R.. No. 12~$5J_/?' , wlthin the. prescnp~'.Ye penod to m~ke ~ valid
.', _: -Sec. :6;. R:R:. No._ 12-99,=Sec.' 3'.1.31,):~f?J(. assessrp_~nt (!IJl~C, Sec. ~0.3).. : ,.....
. amende,d by R.R. No. ·18-2013). . t , !', 1.r.~·\ -· · ...
. . .· · '. : . . ·. . _. · .: : · .· ·. ·: .· · ,:;c;:.~d(;.1 . . -~he oefens_e.may be ra_is~d even f?r the first
. 2) Reply·to·_PAN v, Protest
· · •
to FLD/F[l.N'..
· ·
\JJ"·'·~-~-:/._.
/?
7 ...,..../ · t1_rn~n .appeal when 1t is appare(lt-·_on
· _.,-,:>;;·~~:..:t..:'i?.M~.,W~~: that the assessment has .already
v=
f·. ~;1 . . .
l LJ . . :--,..:;pr.es~r~b~d ( Commtestoner .. pf · Internal·
-~e1]Q~ ·. ·. . . · . . . ·.
~.'. _1ey:dpyS from· receipt ·af 30 day~)W~J~~~tEfo:t °!;'\ . ¥·fi1· '&frhiden R'ealty~ lnc., CT,1EB No.
-;'
>!1
·th~.PAN..
•
theril'.i?;~ceJpt ~rob
FL5?4~-1N: · ~~"&,~
~ rtj,
·- v.t.?i
·. . 71s.· I!.11.?_u'77,
"__,/f .
2014).
. ·,-1.• • .. .
;·. ·. ,., -~ ::t'fh ·. ,_ · r~f
!)_)'t~~~q~J~~W'Factual .. B~a~es of Tax·.
· !f;i· . Asse.s.sment . ..
} ' Ta_xp~_yer· ..· ..gen~rally L!sually\··;~ttfci'~f~ a~d ·. f- .
Th:e·details in the asse:Ssm.~n~~otices-issu~_d
,r d.oes _not ·respond in·· an 9ompre~Etn~e )._0-t'expla1ri .. ;,, 7171! P' to t'1e taxp~yer ~1:Jst ~!:J:su.ffl.c~ent to allov_'-.tfie
t·· adequate m~nne~ tC?.th~ the leg:3~;.~~a-i!I f~~W~:t'.t'!d!:t.1.-':;z.~~a.;.,~ayer to .. 1ntel~1gently answer:. the_
specific find1ogs at· the bases · • '.;.$Y IV',me . · , . asst:s~_me.n_t · .a~ well. ~~- pr~parE;i the
reve_n~a ~fficer.. ·· · a_ssessme_nt·O~~~r'rect, .. : , _doclimE:~tary· ev_i~ence for its prate~~- If_ the
.. .: · and,certain a6·cum'entary . .. . · BIR merely stated tliat .per c,omputenzed
. . . evi~eince :hot' ·_pre~e~te~ . : imltc;hin~!,_. 'the··.·. taxpay~r.· ·has>.und.eclared
.· - , .durir:i.g Jhe: . .-PANi phase irnpor1:ation~, the . assess·m.eot.. ·is invalid
, an·d'... · . ·,jurispr'!,idence · ·. (Commi~sioryer_of Intern~( ·Revenue: BASF · · . v.
·: :.:- .. .-... .. ···. 'releVijl')t to the.f[lidrrigs of ··. .· ··- Pf-iL; Inc.;, CTA EB No. :812, September.12, :
·tlie. re.venue. officers are - 201.3). .. . . . . :. . . ..
subro)tted Qt:p'rese~ted . . .. . . .
· ·· · ' ·· : ,An ·asses~r.rien~based' oh ~ Su.mmqr.y1;.ist of ·
P·urc;:.haseSi· (SLP) .carrnot'be used as.the sole
:i~s~arice;"ot< FLD/FAf,t::Asses~m'en:t... b~comes· · - . · .. basis. The SLP is doubtful, inconclusive.. and
but ·· ho :11abllitY-·. ·. f.or fin~i;_ · · ex~tutory: · and . unreliable? The CIR rri~s(prove.the sou'rce of ..
. additional or deficiency ~eirna.ndat;,le. · ·.. . .. The . th~ infqrmation;.otherwise, ttiefassessm.entis
_: · . ·: tax· .arises fr9~ .such taxpqy~~ 'is 1t1en' liabJe: fo_ ·) inva!id. (bortimis.sionerot ln{einal f?eve11ue-v:
r. .faiime . . . ' . . pay the deficrency·taxes ..
....... · ·: .
Fax N' Parcei, Inc., - CTA :·'EB:. No. ··-a83, .
. · Febniary_14;·2013).. · · ·

' .

... . :

2019 SAN ~EDA'lAW CEN'fRALl?l::D BAR OPERATfONS 1. 285

 REMEDIES
· sAN_ BEDA' LAW Cft'TRAUZED.BAR' OPERATJONS - MfMqRY AID ;zo1;. ·. '.;
~l~-.:imm-.iilmlllmm 1111111.. mm1:111;1~:111111aaiml .. 1zmmm111B-.~,
. . .. i

.
5) .R~les·o·n Payment When.Protest Is Filed··
Ge.neral"'Rule: No prior payment of the assessed
. Reconaideration v, .Relrivestigation ', . '. :,
. . iriternal revenue 'tax ls.required when protested
· or disputed.' . ·. . · · . · · · ·. · ·
. . . . ·' : .

·. Ex'c.eptions;: '- · . ·. . . lm1olves re~evalliation: Involves· : presentation·

. a) If there are "several issues involved ·'in the . .bf assessment based newly : discovered
on ex_isting r~cords additional evidence
or.
· ·... · .. Fl,.D/FAN · but the taxpayer onl.y'-·protests
against the 'validlty' of. some · of the-. issues
.... raised.' the assessment attnbutable .to ·ui_e . . .
undisputed ·issue·s. shall' become '1'lhal,· Does .not toll :t.h~·Tqli~·: .. ~t)e'"'·:.~tatuJe . of
·. -executory, and -demandable. -The taxpayer .Statut~ of Limitations . limitations.-- because' a
to
shall' berequlred' pay. the deficiency taxes . . r . . . . .-··. : 'rein'vestigalion, : ·.) .which: .
.: attributable thereto .: (R.R .. No: 12-9'9,.- Sec: .· · . _en'taifs: · reception · arid·,·
· ·3.1.4/R.R, No. 1~201'$); and . . ·. evaluatton ., ·of .. 'additional
.Q). +f there are .severa·, issues iriv.~lved:-.in··.the.· :.· · evidence ·wm tak0.ITlOr~·ume
: ': . disputed, assessment and' the t~xp'aY,er·fc:1i1s ·. than . reconsfderatlon
. . · to ~~te-thefacts.andthe law in 'support of the : , . . _.- . ;(Comm~ssiqn.er . .¢!( lnter[ia} :
: ., protest against some of.the several l~1::1¢o;;IJ~ ~...:....~ -: _ . ; · : .Revenue :' v. .'. · Philipp.irie .
. . whlch the .. assrs?!!'ent ·is. -~~s~f."frl~~sa.~eU.. i\T. -;~ . . ·. . .G.ldba/ .. .: Comman_ic.efitiohs,. .
. . ~· . sh~II be considered. undi1>P.ti(~a:·1~s~-~.JD~. -. · 'J j -f ,, . .- '3'.R3. _N.o. 1;67t~6• .Oetober
··... ·\_'Jh1ch case the ass·essr'9,,ifpt·si)~UJ.B..e~q~e·. : ., ~V4~ , 31: ~00~) · --
final.. executory . an~.jclelT;lJi'pcffet1~~,;r.t;~~ · · . .
taxp:ayer: kshall.-- be · ~.9.~e.9~ffo.Jpay ~~13 · '\. . • .4 • • = •
!: :
defi~ie.~cy !axes. ettr}buf~·bJ~.i/the.rlito_(RJ!R,·
. No.. 12 _99, Sec. 3 .. 1/14,. as a.mend~ .by ~-R. {.:~, ·i ,,
jl:
·robt re'gu'tt~~...,.·~.; .. · ~ R~quired within ~ix!~ ··(60)
·' . . No 18-.2013) ·
'. .:: . . . ·
. I{ I"-;;;;,ll - t~-=--· · '·,.....
V. 0tfP ff ·_ i · ..,!1{1...t~,. _,_ . ~lf." ·
·
· J · · ..\ '·A\.M./).· : · ~days
; . .·from
· · · date.·. of fllmg
· · .·. ·of· .. -
.. · 6) F.~rms o(Prnt~st .--:;rl . . :\: · . ~":
K I"-: WY-. 1.
.ii.·.-
rotest
· .. : . ·.
.
. .... · ·
Whe.n a taxp~¥e(protesf;~J.4ssE:S:1~t~·
ha$~ · . ' •• •- •• • - !·
{!fsJlsfqd, ~~i.l~~i\
to: ·Ghot~.set·.:betw(INeG~nLESa:\ .. or.,.,· 1(~ ,I -t~· 1~rom.r,:e. 1ttr1gfcst,w;: I.Frcirn. the· Sl,!bmissioil of the i.
.• , _ i.~ 'c'ax"Ji,~. e. e(.> .ta~,-~. ~ r~-'g.t' ib"" .. ·-:·
r""· . -I· .(
. reinves 1ga 10() _ j ·crmplete· ' . . $upporting
: ... (2~7.a~,~: ~48) {ber._~maft~,1NGJ~l-.-,:. iJ) ...~~ _.! . ·oocu.m.~nl!$' ~- -· : _. .... : . :
· · ' · · " · ~ · ~· · :::t~---
;·, c!). :R~gue:St~or'R~consi~~~at.iQn·-~~~_le~,9(::ff~(~.ffi.'P.Q~DNOQN
~1 ·
fsupra·at-.3·7~371,374) : . · · ·.. · .' ···
· · ·
·
·

.re<ev_a!~a~1~11.of an a._s.s~s.. ent·o~~Jl'T~~:l~ 1? ~~ _~;"'~ >, . ·: ;_ ; .. : .

_ot_~x1.s1mg r~o.'.;qswit~_ou.t.~. ,1-6~)arc12n~·1~.<:-~~e:\"\~~~)di'~cti_on. ·.is essentia"i"'.,:b~ca1,1se· -the .
· · · · .ev1~er:i.~e,.wh1cn m. ay m~olye_ a~~est.g~ o! 1\~
p~~.i:i~of.-.the-,l?.!9riod .o~ly _occyrs ·:,vhen the,_
· fac.t 9r la:" or·!;>ot_h; anq, :, '.: ... _. .~~?Yll.r requests· forirelnve.~t1gatipn~nd 1s. granted
· · b) · Requ(;!st .for.: ReinvesUgafioa - a plea ".for · ·. "1>y the- °QI R..(/NGLES, supra at 448-}. · · ··
. : ' . ·. th~ .r~evaluatJoo ..of an: ass~ssrnenf:op 'th.e : .. · ... . . . . . . : : .... ' -. : ·. " .
basis· of·the newly~iseovere<:f,or additional . Submission of documents ~fter protest .. · '

.
·<· a
eivident:.e.1haf ·taxpay~r intend{to pf_esent-. .· For ,req.ue;;ts:·tot rejnvesti,gation,.-the.t.axpayer .shan
;• in'~he ...reinvestigc;!li.onwhfch may. also involve · · · sµbmit '311 relevant sup·pottlng doctiments iff~JJppoi't '• .
'< ·. ·. :, · · .. a quesfiori of law or ta.ct qi-,:bo.tlf(R.R. No>12~ · · · - . · . · ·· · -
· ' . 91il~.$ec:. 3.1..4;' as amended by R.F~: No; ·18~ . · qf.his. protElst'~!ttiin::so d~ys
from.:ffaie··oltiiing ~j
.. · 2013j: ... ·· · . . ·· · · ·· · ·. his ietter·of protest (R.R.: No: 18-2013, Se.c, .3 .. 1 A)..
- .. : . ' . . . . . . .. . - .. ..: . . : ~·.. . ~ ' . "', .....
.', ; . Fdf reqUElStS for 'reco~si.de·r~tlOfl,tt,e. 69-cfay: ~iipd
. · ....
·
.. ~ . . . .. ~ ... -·shall riot· .apply' (~.R; No..' "12-99, Sec. ,3_·1-.4, · 'as
· amende.iJ_by R.R..r:,Jp: 1S:.201sj,'' ·. ·. '. ~· · ·. . ·, .
. -. _
..
. .
.. . .
:·
. ~ .
: .... ·:'. . . ...
-
. · . · REllevanf Suppprtihg.Docume.rits · · ... : · · :·· · .. :
·. . . . Tt:iose documents rieces~ary to-.support the legal and: , .
. · . · .factual . bas·$s ·in -disputing a ·tax· assessmen~. a·s·
determined by· tne· ta~payer· (R.'li .. No. 12~99,. :Sec,
_3.1.4;.as amen.ded.by R.R. No. JB-~013).

286 ·I 2019SAN-BEDf,.LAW CENTRALIZED BAR OPERATIONS

 .REMEDIES \ ..
;); - EN s S:':.!OA_LAWa:~;,AALIZEDi,AR.:E::::f. - .ME.:.~RYA::::••.
~~,,: : . . . . ~
{ .Npte: The BIR can only inform the taxpayerto submit . '.) · F.ailure . of the 'taxpayer to receive. ., any
Ji additlo'nal'documents. The BJR•cannot demand what· assessment notices because it was· served in
f· type of s4pporting documents· should !le 'submitted the address :. Indicated In -:ttie Bl R's
i,- (Commissioner of internet-Revf3nue 'v, 'First {=xpress registration ·. database and, the- taxpayer
f. · pawnshop Compeny, ·Inc.· G.:
R. Nos... 172045-46, . transferred to a 'new address or closed or.
f. Jiine':16.'-2009).:,-.. · . . : _ · ·, . ceased .. operations . without updatinq' :and
¥·: . · transferrjrig,: -·or. cancelllng .its .. BIR
{:. Ftea.s.o.ri~ Taxpayer would be.placad at the.i:ni:ircy.~f. Ragistration .as the case may be. (R.M. 0: No. : .
\ . the B"IR whtch. r.nay·require productlonof documents 2q-2016). . . '. .. :· . .
·. .
i . which .: taxpayer coind · riot ·prnd.ue~ . .(Standard ·.
1::· ·chadered. Bank · v. Commissioner- of -intemet . 6) .: Admihlstrati.v·e . Acti~n or lnactlon on- the
'"t..: Revenue; CTA. Cas.e No: 5696, .August 16,: 2001),
. . . . . . · : Disputed A$sess~ent. ..
-...-: : .
:·' . ~·.
:'; . Effect of .Failu,:e ..to· Suboiit Documents .. Three Possibl~·Scen~rios.Affer Protest
,~: .. NontsubmiSsicfn · of /-.the·. doCumsn.ts~ ·reriders ·tt:10 · · · · . ·a .. Direct denial or Grarttof PrQtE~st; . ·
i~· a·sses·sment final '(R.R. . No. · 12°-99, Sffc: ~- 1.4; · as a
i'.. Requisites .of V~Ud F:DDA .
i:".amended by-R.R. No. ·18-2013). . . ·· :. : · .. ii:: Taxpayer's Remedies .
,;;_· . iir.. :Whar.Consthu!es:FinaJ.necisi.on
The phrase th~: 'essessment. shall. l.>eqom~ tlr,:a( · . · ·. · De.nyihg·.Protest ···
.ni~an~ that; the J=LD/FP.N: shall .. becerne .final '1?.Y.v:··~ · b. ·)~di_rect o'eni~I of P.ro_te·st;.or
(. . opera~1on at. law: The- ta.xpaxer.~h.all·. be. barred ·-~r-91J1/?~ .- . . !:· . Exarrtples : •
_,. -disputing the correctness of ·the· FLD/FAtf.'. b~-'·1~\ • •• 11. · Taxpayer's.Remedies. ·
~y int~o9uct\~n ..of ne~I/ .discove~ed or addiVt~~rtt:, . ·c .... lnactionby.~IR.pr, D.Uly.futho{i~ed
'./ ~v~de~c.13. ~eca\Jse. 1t. ts. ~.ee.~~d to hav~. lo1 /~.t,;.,,: _~.'......;r~ ~e~r.~~e~tabve, . . .. .. .
} JUns.d_1ct1on·,t_o pl'e~ent th1$. ~VJde~ce. :.:rri~·:~t,sti~l~,·r:'"~~f:,;.!:.,.,,~~,:t"!_ia/payer's Remedies . . ·
.~:-.. then deny.tne:request tor-r~rrwest1g.at101)..th_r,ooght.hs' , . · ~-::·'.;!:1)-t . · ·
, issuance · ··of · a . F.inal Decision· fei.ri·-·· Pispute.dl.,.,1 · Disputed A~~'essment .
'; ·' ":'ssess~ent (FOO~):fR.M: C. Np. 11-?.</;!>'f{ · . , ;v··.'.h . It is .w~_en·J,~h\~P.-:'IYer indiGat~s i~s. pro.~e.st agairi~t .
. ·.. · . ·.: · : ..· · . . _;-,j"';. }-~. · . 1,1.f.: -~~e_de~nqit,,e.~~a.s'ses~ment'?f th~ _Reve.n!Je Officer- .f~r
·?): Whe.n Assessm~nf ~~ecome~!:°:::.~FmaJ,. r~i' reconstperatio;i,~_ti\ough_a l~tter. After·th_e.request 1s i
·. · Ex.~.cuf~ry, and D~man~~-~!,~ t:~._ . -,., ~ . l~: filed .~4 ~~;'W!.Y,e~K.bythe· BIR,,the- ~sse_ssment
· .An assessme.nt shall b.e~~m.er-f!l'laj;:,.,;ft~e.c~ •.:. W· 1:>ecom,_~-.1~ ._t11~Jililf~,W~ssessme.nt (CIR ·v. lsabela
l•·.
. · an<t ~-~(h~ridabl~'.: due- to;1\~~l;l€Tfdl~1ers,~~j::I. t Cultu~at~el/tJ!~ii?m;G.'R.: No.. 135210, .. July~ 11,
:· ·foll9~in~19rounds; . · .··. '\"~~Y"\z· .... )'.. ~-f ·2.001). . /·. . . · . . · .
·.·a} F?il~re:of.'th.~:~axpe1y~rt~ fife ~·v~lit.f)pi:-ote~t. ·'!~:; . .~,i·. . _. :: ·... : . · . . · : ' : .
. · ... ':-'."tthm. 30 days ·frotn re1ce1pt of\,the. diilt.D/FA~l.!!;l·!'\W.~~i~s1b.le,ScE!narios _After .Pro~es1 , . ·
-. · (R:R; No. ·18-2013; Sec.' 3. 1.4);1t:'. ,1/'l~~,.....l:~Afterd.·mel!....tkp.ayer · ~4bmitted a protest ~nd. the
b) · Failure to' .submit ·al.I relevar:,_t~~pc_!Jll}tiii.<s. ifl_. · · ,rei~vanr.supi:,_ortfng_dpsum~_nts,.~s the·.cas.e·!11ay be,
. . ·:s~pport:_pf ~is ·,pr?t~st by W8;Y ot?.W.~$)sl._for f!ie.~C_I.R or ·h~s.. du!y authornzed rel?.r~seritat1ve· .mar ·
· re11:ivesbgat1on.w1ttJm 60 (fays frqm 1he i;fate exercise the·followmg: (Dl.-ln): . .· ·. -
~J..f\li~g..th.ereof (RjR: :°f.Jo., 1-2-99, ·~ec. ~- 1.1, . .a. . Q.if::c(9.rant br ··denial. 'of ·
pr~te.st ...:.'. ~E3n~ers·. a
. ·a$ aiJlende.d.by RR. No. .18-2.013); · · · · . dec~1on through. FDDA ~ranting or deny,ng)he
:c) •·· Faill!re of the tajcp·ayer·to-.·app~al t9 ·the CIR.. prot~st. wi~hil'l th(:} prescribed peri.oci to ai;:t- upon
. : . or 'fh~.· .G'FA. within: 30. d,ws ·frqm dafe of . . the · prote~~ (R.R... No. '12-.99, $~c. .;3: 1.5, a's
... · ·r.~ceipt·ofthe F.DDA is~ued. by the CIR'.s duly· :. · am~ddeq 1:>Y. R.R. No. 18-2913);··. :. ·. · . ·. ·. : :
- auihorlzed. representaOve (R.R: No. 1 EJ..:2013,· · ·. b. · !ridf~ect depiaf .of prates\ 2 .de11ies :1!')e ·ptotest ih ·
Sec: 3;1.. 4.); . · ... , . . . . . . · · ·•. · _ . · .,ariot})e(~ay -.yitho.~tr-e.pd~ring:a'Cleci!>.iort·. ·
· -.en. · Fail!,ire of ~he·t~~paye.r to .appeal ~o the c,::A'. UirO'ugl) F-QDA-."."'ith.in ~~e prescribed pe(iod:to. ac_t ·
,.. ; .within 30.~ays frail) _date of receJpt.o(·tlie yp9ritheJ?~otest;.9.r,. :-.-·· . · · ,_ . :· .. ·
F.DDA iss.l,l~d ·by th~ CIR ·(R.R; No. ·:18-20q,. · c. ·Jiiaction-:-...:.. not ~pt upon· tl:ie.,.pr~tesl .w!thin ths .. ·
-~ .. :· . · Se.c.:3,.1.4); · . ·:,:: ; . . . '.. : .· . ·pr~scri~f:!d.p·~r.iod'(R.R.:NO, 12-9_9, $ec.3.'J.'!, as
·~·-'. · . ,e) ·. Faflur13 of ttie-taxpayer to timely file a ·motion. {3men.ded.qy R.R No. 18-2013) .. , · . . . · · ·
:c . . . . for reconsideration· or.: new trial· b·efare the· . . . · . .' . :.
,.. . . or
·cTA Div!sibn; tai!ure to apj:>e·a1 _ta·th~. <;;-t A . rid
Peri ·!o Act ~pon\the. Prote~t 9r Ad~ln lstrative .·
. · Eri.. : Banc .. cJfld Supreme·. Cql:lrt based on.= Appeal . . . ..
I • .:- • • , , • •

· ':.existing Ruies·of Pioc~d4re.(RRCTA;RtJI~ 8, . ·1,· · By Cl':{·- in,case of protest, within 1aq day~ from·.
Sec, 3(b) aru;J.·(c));:or. · :: · · · · ·filing of protest (regardless of..th.erforin·Pfprotest).;.
. · .in .case. of adinlnistr.atiye appeal.-~thi.n 180" d_ay~
. . ': . . tronffiHng.of Hie.administrative. appeal. ·

201s s~.'sEoA LAw CENTRALIZED BAA OPERATIONs 1 287 .

 R·E-M-EDIES
, SAN BEDA LAW CENTRALIZEDBAR OPEffATIONS- MEM08YAID."2019
HIP Ni

· Administr.ative · Appec;ll - .. request . for because.· the taxpaye"r ·fail~d. to e~haust all
recpl'isideration ~led with the CIR .to· elevate the· administrative remedie.s (Allied·_Banking. Corp. -~-
deniat of protest. ma"de by" his ·duly. authorjzed . Commiss[oner. of Internal Revenue,· G.R. No.
representative (ING LES,. supra at 458). · 1750~7. Feprua.ty·s. 2!)10).

2. ·BY Duly Authorlaed _Re.presentatfve ·.. · · . '. . The F Lb reads: "This is our :fjnal decision based.' ..
0

. a. . R"eqi.Jest· for. relnvestlqatton - ··witf:lin .180 on investigatiOf'!. If you. dlsaqree, you may appeal· .
. days from . subrnlsslor, of· "the ... relevant this finc;1I· decislon within ·30 days from receipt
. . . documents: . ·,.. . . .. ·. .. . . • .hereof, otherwise said deficiency' tax assessment .
· b. Requ~st for reconslderatlon - 180 · days . shall become fin'al;.exeeutory and dernandable".
from 'filihg of protest (R.-.R:-No; t2-~9•. -Sec.' ', · · · · ltappearsfrom.the foreqolnqdernand lefter that·
3, 1.4,·a~ emended by RR . No. _1_8~2013). · · 'the CIR has already made aflnal.declslon onthe
: . . · ". . · . · . ·. . · ." . ·... , -, . . matter and th~t the · remedy ·or' pet~tipner· tsto.
F.inal Decisiol'.l en.Dlsputed Ass~~sment"(FODA) · : ·appeal·. the -final decislon lA(ithin 30 days. Th1i
It is the communication issued b.y·the·ClR or his .du IS:, · · .taxpayer cannot bebtamed tor not filing,a protest
. authorized representative ·cont_ai_~·ing the dedsi~rj· on c: . against the. FLO slncethe la!"lg'uageused and the
· ·the protestto the FAN,\vhether the taxpayer's protest · . : tenor of tlie demand· letter indicata'that it is the-
is accepted or denied partially oi.wl)olly·(R..AifQ. No. · fin~I decision of .. the Cl~ 'on 'the· matter (Allied
26-201_6).. . . · . · ... _ "7~.:.~f3_anki;y!!Corp., v. ·comm~s~~ohfJr · pf. -lntemel
. . . .. , ·. ~ l) .l~~,:we,.G,R. No.. 175097, February 5, W10) .
.Scenario 1: Direct Den.lal of Protest ~tri:oufi~
FODA), . ·· : .. ·. · /~
~ l v· ,,r~~ · . · · ', .·
! ;: ._~:. ~~p..fY.er{s·~\ru_edies in· case· of _denial .~f P_rotest · .
. ·. · . ·:
. Requisites· of a Valid.FDDA('.ISP).~ .-,;P:_ ·.-· -in-.:i"tJoJe cS'rirr:11~· · . . · . ·
·a. . M~st be. !~sued, by· tlitf '-c1~j~.d(:llr."jt:·i~D~~x?Dl~!~:Authprizecf Repres,entative· -
. · ~uthoriz~d, rep~es~nt~i~J,?tlJ°_tiffte~ ~dfilJ · :"'-P ~ ei_~r,_.,-..et)' · _-· . : · : · · .. ·.

persons. who. are attho!_i7:~4to' i sue PAN;' ~ . ---·· - ...

ane FLO/FAN (R.R. 5;-"J:'2i.99-, Se ..
· ,.amen<!_ed,by R.R._ 0~1-8-1013;.~M.G,1if!tr;;.·
rr.~~- t."~.
: ,.iP:Y!
· ~!
- , · ·. authorized repres~n\i1:ive""'t:~f.{rsto~tihes~dle ··. ~\.. Lt~ ·:1) Rile :Bli',(litnistr.~ive appea( to the Cl~ y.,i_thin
_dci_Y\ ftSJTU.~fc7ip_t o~ th~ fDDA through .
r quest ror r~~o.ns_1deratio_n {R.R. No. 12-99,.
-:s~c. ~.;ii~aj mended bY_ .R.R. __ ·No.· 18- ·
·2014)" ' ' ~ w ,° J ·.• b"i °d . °4013)" 0~ ~1 I• • •• •: •• •• " .• • ' • • •
b.. ~;;~f~~lJrc~~~~::,J>j\;~~21~,j~fe7Ji~11~ 11~:Nl~~,·; 1:, telnVe~ilgatlon~haifbe .
· or by. mail_."(-R.~. Nt1'. \1.12-~!ttSe~~-. 6; a · J!.::(!;lr'/ <aj)p'.iiei in'. a'cf _ ini~tratlve ·appeal and only
. amended by RR~ No~\1_8.~20'*?); : "'-l.,r·.-s._,;. -~~T?sue·~raised ithegecision of the CIR's duly·
'?· · Must be in wri~ng· ~nd:~ontain'lt)e E_. ~~~~ .. _.., · . ~ut~ri~~d ·Jr !epr~s~ntatfve . shall:. · .: . be
the· law o_n which :the; ~~~es~.m~~~~~,.~~j1°:).l\/ · e tertamedjiy th~ .CIR (R.R. No. 1?::99,. Sec,·
. (R_.R. No. 12-99, SE1c-:3.1~4; as-a~e1-1(l~cH1~ "3. f:-ef~:$'..Jfmendedby R.~ .. No. 1.8-2013). .
· '· R,R.No. 1~_W13);.and · · ~~ ,/Q·;~ : :::_i\)._·:J /. · ·. . ·.:· - . · ·. . .
d. ·· Mtist state th~f the)ame is Jiis,Ei~,~1ion.. _n, ·/(. J\~~;~fpl~t 0J_F:!l.ir19 _the _Ad~_l;i°lstrati~~ _App_e.al.~.
. . .'(R.R. No. 12-99, Sf!c;.!f_t._5,: as·amend;~.by.1V1f:\~:r~e a_dl1)1ry1.strative·appeal.filed w1tti the CI.R
... · R.R. No. 18:-2013), · · .. · . ' · · ........_,.,_=.....,..--""" : · w1111q1Uhe· 3Cµday perfod to-.appeal to the ·
·' · ·. · · · ·· · ·· CTA ·and ::the d~nial , ~f th~. admints_tr.ative·
• • # The FAN. rti~y .bf3··· C.p.nsidereci.as 'the. l:inal. ·.··· appeal or· th·e·ifiaction of·the CIR-thereon iS. #

Decisiori .of the. CIR .OJ'.I, .the ·Dispu_te(J
.. Asse~s:ment·-:When c~:R is in Es_t~ppe"I · ·. ·.
Th~ . CiR a~ well as · .his · duly authoriied
representative · m_ust indicat~ · · .. cl¢arl.y ar:id
:.: un~qt,iivocally to th.e."taxpayer whether cirqlCtion ·.
. . .constitutes ·a fii)~I.determination 9n ·a· .!;lispl.it!;ld .-
. . . ~ssessment."\/Vdrds_."must Qe c.ar.efully chosen in" . ~ ..
. . or~erto avoid-any corifusion1nar.oould advers.sly'
. · · · · -affect ,the. rights and interest" oftf:)e · taxpayer. A
· . · · c'areful reading of·the Formal L,etter. of Demand ..
.(FL.I:>,) with. Assessmiant Noti_c~s· ·stiow$.. that· an .. -.·
. ~XceptiOA . to·· "the· rule on exha°llStiOf'I ·.Of:· .
admiriislrativ.e. remedies "is ·the. estoppel ,on 1he __
· part· of the aatninistrative agency concerned: Ttle .
ClR:is.estopped.from clahilfF1g·thatthefiting.o.fthe · :
.. · -Petitibn for. Review (with the CTA) 'Nas ~remature :·
: ·i~e:.one .-appeaiaole.,·to ."the.· CTA.
. . , (Comi'qissio.ner or.: fn(~;nar. Rel,'.enue. v.'
··international· Phar.mac.et.iticals, .'inc., CT.A .
. .. EB. ~o:.608,. Octo.~e~~5,.2011). _-·:: :
·. ·_2)~·- Appe~; .to- th~ ·CTA within. '.30'· ,~e\ys: fro~·-.
.- ·: ·· receipt .of FDbA (R: R. No:.12~99,: Sec:· 3..1 A;
· : · as.amended by R.R."No.. 18-2013}; . :
·- . '\ . . "· .. : .. : . . .
·Effect.csf.Fallure t~ F!ie .t.h~\dmlnlstr~tive
· App~al·or Appea)to the CT·Awlttiin the 30-
day Pe_iiod; : . ··:·· . · · : : . ·. · ' · · .. · · . ·
The.· .ass.essm·ent . shali . be1::orn~ ·final,
· exequtory, ·and de.mahdable (R;R.. No.:.:18-
. 2013,·"sec. ~;.t.:4): · · · ·.

· .. ·
28.S I 2019 SAN:BEDA.LAW CENTRALIZED BAR Of.'ERATIONS
 .REM.EDI ES· .
SAN BEDA LAW CENT°iwlzEDBA.R.OPERA'.TJoNs.:.MEMORY AID 2or'9

FDDA. by CIR - either: · That final.deoislon is th·e letter of denial ~he~e the CIR
1.) File a motion for reconslderatlon with the. CIR not only. demanded payment of the amount
. (R.R. 18~2Q-1.3, Sec., 3.1_,4); or . .. assessecj 'but wherein 'he also gave the warnlnq
. . ; . . that fn the .event the -taxpayer failed to, 'p,ay the .
. Note: Tpe rrrotlon -for reconsideration of the· ·. · same, he·would b!? constrained to e°'f~rce the .
decision with the CIR. will '.N<;:).T toll the 30-day · collection thereof by. means of the remedies ·
per.iod to appeal to.the.CTA (RR.No, 12~99,.'Sec. prescribed bylaw (Reyf!S v. Commissioner ot lntemet
3.1.4; ·as.amend,~dby R.R. N?. 18-2013).· · Revenue, qTA.Cas~ No. 6124, :June 19, 200~);_

· ·2} : Appeal to -the CTA within 30 days . from Example:· ..

- . . receipt of FDDA (R.R. No. ·12-99, Sec. 3.'1.4,' : . Finai'Notice Before Seizure: The-very titre expressly
... _', as·. amerid~d
~ . . . by_R.~, No. ·18-;2013f ·. · ·
. . . .. ., ...
· . indicated. that it w.a.s finc!r notice prior. to selzure of
: . : property, .Tl;le letter . itsE)lf clearly: stated Jhat the
A
l;ff.ec;:t:of Faiiure. to '(\ppeal to the,cT within ..... taxpayer was being: giv:en· the :last o'ppor.funi,ty to·
. the_3o~·day Perlodr. ... .. .. . · . . . · .pay; otherwise; its propertieswould be subjectedto.
The assessment.shatl become fi~ai; executory, . . . . dlstraint andlevy (Commissioner oflliterna/Reveiwe ., .
.artddernendaoie (R.R_No. 12-99; 'Sep:, 3.1;4, as . Ii, lsabela· Cultural <:;;otp;, G.R:,'fvo.· 1~5210, July 11,,:
emended by.13:R. No'. rn~zo.13) .. ' · · ·2001r: . · · · -; ·

.. · F.DDA.by CIR·v. FbDA by Authorized · . · ,:~~ ··ene·~t of Void ~DDA:on Assessment: ·· · :.

.,, . . . · Repr.e.s_~ritative . .. }.j;/jiJ__t . The 'ass~ssm,ent rernalns'valld- notv,ri.t~sta~ding
··~ ·· {;~;1} ·the nu.ll~ty of, tl:l~. FOO.A. .. The 'assessment itself
;\/,./l differs from adecision on the disputed assessment.
/rl';;:(t~.f ·_FDDA )~\~i:i.?t.th_~.-?lllX ..means .that. the . fjna.l : tax · ..
tH1~ia.wJt~~·Of::,cl~·J~xp~ye(is flxed, which may. then be
. .. .., . ,J if'.:.appealear~y:t~e taxpayer. Under the raw. inaction on
1. Fih~ .. a,. motiori · 'for. 1.. ·FHe' . ~mfnistr9tiv~ ,.-,.:J thei.Part of t~ej'~(R.!11~>:' like~~-e _result in·: the. fi~ality
rec:orisiderc;jtionwith . : Appea.ijH.9;J_he C'!,.~ ' f~ of.·a taxpay~(~f~?<·hab1hty· as 1t 1s d~e11Jed:a denial of.
· .the. CIR; .<?r . .. '· .. · th~o3g_tl.J1:·r-1;:f,=P- . , ·· l~\ · _the prot_e~f:f11ffd 'l;by the latter, w~1c~. m~y ·also: be .
2, · ARpeal ·to the ~TA .· ;;§~esJ· · \r~--~ fo[;.JJ\. ,appe~l-~pef9re ~e CTA _(Comm1ss1or:er0f lotr:Jrnal ·
·: , . . (J»1_9on~J9~F,et1on,.or · ... -~ Re~enu:1..v-.l/,qwg~.~HL,_Gorp .. G.R.--NCJ .. 215534,..
. , · · . -· , 2. · ~~.f.'P,peal:t<t:Jl:i,ejCT~.• ·· . ~J. Apr1/~Y.~-q;fG)J,f~i;:1'!9'•. · · . · · . ·· · · . . ..
'""'"''•fl . . . . . ti~ : . -~~l~'fi~
.
i!J41!1B1f"Jil
. . . .J
~:r . . . .. . . ,·
. ·1 Sce.r,~rio2:-.indirect Denial of Protest.(wi~~ut ·
·;LF.DDA) . . ' . '. . . . . . ·. .
.

..
;.ir~t.$'11.~.l!i.h.~DdSriog ?·· Final·. Deci~iqn . dn,. Di.sput'ed. . .
;· ·: . .. · · ._. . . . :, , . . . ,~;ii!t'-:.• .rt:LAss¢$'.$m'eAf on the m¢rits of.the protest; the GJR o~ ..
~J!~ n~ttoll.. t~~: 30-9ay .Wil.l toJI the .ql,day.~~~od ' · . ~ii,' du.!y.. ·authorized. representative .neverttieless. .
:P~9?9 _tq appe~Uo.U1~ to:app~.aJto.t.,...t8·~ · . _exec.ut~9 admirf~trative ·a_qUons ·whjc:h· the Court
(;'fA · · .'.:. ·· . . · · >· . . · . · : ". . · ·. C()nsi_c,l~r.:3d as denial ?f prot~s!, ··

Examples:: : ·: .
The
. ·:a.. Civil collectior ins~tllted 'during i:i'endericy of
. . · ·. pn;,test '(Commis~(o(lerof Internal }'?evenue·
0

• A~sessment:sha,itbecome fitial; execut~ryi

.. . . . . . . ' .. and' dernanci,able . . ~. '
What· .·corstitutes .. F:ioal. pe.cision..· Denyir,g ihe
Prote'st (Tenor 'Of Finality ij~le). ', . . . . ..
If the tenor of lhE:l l~tter shows the firm ·stand of. the
· 'BIR .agait1st ·. the recohsi~erati(?n: oC tlil'!· disp.1:1te_d .
assessment, 'the letter should.be considerecl th.e'final ·.
i{. ciecisic;m of the BIR\m the taxpay~r's :adrriinistrative
\· 'pr6test or toe·FDDA (Cagayan Com Pr~ducts.'Coip.
{ . V.' Commissii:ineroilniernal Revenue, CTA Case. No. . .
f ·· 8491;. July 8, ·20.1.3): · · ·
~:_. ~:
".
· · .. ·: .'V.· Union.·Shfpping Corp., GR.· No. 6616,0,
. : ·. May21',Jf)90);. · ·... :· ; . .
.. J:>•.. Issuance of Warr;:int. of distraint ,and .l~v.y to .
.enfor~e coll~c;tion· (Cominis.$ionerqt lntewal' ·. ·
.. . . Revemje ·V, 'International, Pharmac~i.Jtieals,- ..
:)n9:., CTAE.B. No, 608; Qctbli~r25,.·2911r
:Note; tiOwe_vet,'Wh:en ti,1fe is asubsej:lu~nt-civil • · ·
:actfon ·for .¢ollecticin in$tituted after thE:l servic.e of
tne. warrant; · it ·is. the civil. i;lc,iqn al')d riot ttie··
se~ice _of warranNhaJ is· con!>iqered as denia.1 'of .
the protest (Commiss,one.'r-oflnterm:,JRevenuev.. . .
Union Shipping Corp.\ G.R. No. 66.160,;May 21; .
:.1990). . . . ..

.- .
'•

. 201s-sAN BEDA LAW cENi'AAL.1zEo BAR 0PE:RAT10Ns r 2a9 ·

 . ~

•MF . I AGO AWMIGI 4 MFSI HMNW&;l-i&t>hfJ

+ AM

c: ~eferral by .the c"IR · of · request tor
reinvestigation .. to; the . Solicitor · · General
v:
·. (Republic' Um.Tien Teng'.Sons. and co.,
. '. tnc., G.R. No, ~-21731,"March 31, 196_6).. -,
Taxpayer's Ramedles ·:Av~llab·j~ for.: Indirect
forms of Dental-of Protest. or· Adrnlntstratrve.:
Appeal (with.out FDDA) . . . .. . , . ,
The remedies available to the taxpayer iri'case of
. direct denial of·proJest ·.OJ .admini.strati_ve appeal"
. · by the CIR 'or his duly authorized representative
. throygh FDDA are a·ppliyabl~ to indirect forms of" ·
dental, _- . · , ·: ·.. · · .
· ··· ..".. ·
l:
Scenari~ lna,~tlon bf CIR.or·.D~ly Auth~ri.zed. .
Reprasentatlve · ·. . . . · · . . .". ,. . . ·. · . · · · · ··
Taxpayer's RQniedie~ ,·· ··
a. Inaction .by the. Cl~ - elther.. , .. .· ·
· Sl;!id d~cision, as dist~ssed,prev1ously ·(R..R. 12-99, ·
·Sec .. 3. 1.4, as amended by R..R. No. 18-2013)'.
. . .
Effecb:>f Failure to App·ealthe Inaction to.the CTA
within 30-day ~erlod: It.will riof'result in--the finality
c;>f ttie FLO/FAN·, as ·_the ·ta~p.ayer can. wait: {or the
decisi.on : (Ri?al Comrrier<;ial-· Banking . Corp. · v. 1
. ·commissioner of Internal Revenue;· G.R. · No.
168498; April'24, 2007). · . · · ·. · ." . .
· N.oj~! S~cti;n-2~9 'oi'the Tax Code; as .worded, only .. :
required that an admlnlstratlve' claim should first be
filed, The primary purpose of filing .arradrninlstrative .
claim-Was toserve ~s a. rioti~e qfwarning;to the. CIR .
'that -court action would follow unless . the tax. or.
. penalty'alie"geQ to have been coltected' erroneously or · ·
illegally.is.refl)nde(l. This ··does nbthowever mean·
· . . that the taxpayer must await-the final.resolution of. its .. ·.

expiration of the 180~day p"eriod;.o~ u· ~'~

i. .. Appeal fo}he .CTA wit~in 30 9ays_ from -~~-'"":""'--=d:J.£1,!]:i,nistra.tive.claim:or:refund; since <;foi!19 so would .
t~i'ftam.ou,:itto the taxpayer's forfeiture of its right
· ·. ii. · Await ttieMi.nal decision .of tn~,-celR:pA the .: ·!P.\}eefik ~p.~ici_al recourse · st.iould. the two-year
'-~ispµ~~d-.a~sessmen.~.-and' W1{~.~ir~q9!>-.. ~~R.t~tc.!fpti~~~~i':q· _expir_e .wi_thout. f.h~ ap~ropriaf~
'. fm_al declsion to_ tne -,:c:r.~~Y"'th1fl},{~ny.''"'°(30) . Ju91ciah,o£fa1m~1~,.~.9.filed, It bears stressing that
. . day:>-: a~er the r~ceipf;,;:~fa~~1~~,.sl#bh'-~,)'e$p-9-tW ...er-it1J'.d~'lA\"betau!te~ t~r-~esortin,g.to_·court.
·· · ~ec1s1on· (R.R.. ··.1~=~9.t("',,S.e~. 7f.
· ~11-·f; -~f .a~,tio~, ~-~.ns1~~.lf,l'.9.]~~.t_~hepres~n~t_,~e pe_rt?d 'stated
.:
· ·.
an:ie'!,dedRR. ,No; ·1.f!f~P~r·
. · · ·· ..
t_ ,..Jr
·. .
If: . . , .· · K. · ·.
-1.~.
Ri("'
tr.tbre,n·W!;lS .~15~Y.f~ eXl?ire ( ~.on:mJS~/Ofl_eroflntem~L
Revenuelv.s.· G..~@<f:W3~ Phihpp!nes, lqc., -G.R;. No.
> :-. :~:~ ~~t~~~;°~--b~:D~l.y:A~thcy~~~~re~t?'~~~~-'~,3.~~]UQUSt.f~~~\1~·-
.. · ~-- . ·. .· >. - .· _ ·. _ 1

.
. · 1. io.
~ppe.a! ·to -tbe ci:-At•itlJJl\ da~\afterdhtt;- . -1'1.itrat~n (1); ·(~~r:...1:9"9} . . . . .
· -,:.~xpiratioA ·Of.the .. 8~li~~ p~or.!~ca9~ntecr-~~
.. .
CQ,; a_~YJPPil))7· coip~rat!or:i, ~eceived·an in~ome.
..
i
t
I
I
. frQmtha date of~hn qfJ.h11.\l;lrot~ Niase:fi~. ,,.}~~f.!:l,UJ·Y!a/se.ssmfntfrom. the_BIR on· May 5,
are"ques.t_forreconsi_eratio~oo~,.l~fl:I~ Jt~~~~<Qit.' ayl1, ·201.1. -A ~o., fi.~~~·itl? prote~t,.with I.
· of :submission )?X.."taxp·ayer- Af:'th~<f~ tr~·"
: . 9ocum~.ht:> -withi~ '60\_d~ys' 'ft2m _}iliyi~:: o~
-x;;t~!;l..,!31~~ · p J.aly 30, 20:1"3,.. A co.! :submitted tp ·the
·"'~~~Yf'ele~htS_UpP.irtL':9. ~t::rcu,.ments.T~_e _Cl~ did ·.
I
I
· .P"i'?~est ... m: _case .. on~- a, ·J~yest.§~.['~"11..1:"'iot~m.aJly:tuJ.e¢MtlJ.e. l?rotest b~t-~p- Janu_ary. ~5.,
. , re1nves.t1gation-;·or , . · .. .j-~. ;"'.:.;:;:.:.,SL':L.~~E./.G~'v?~~s-(erved a summons.and a copy of
ii!. . hwai(the ·fi~al ·oecisi_on o:- t~e-~_}11¥!!t)k9q1~d~.:--"··,=otlre' ..cqFQPLajp~Jo(co11ectio.~of 1he t_ax. deficiency ·fl.led
: ·.:'r~r.re~n~at,ye on-_th~ drsputecl~~e.s~.2°1~n!·1\ if·~,~t;~fwiththe'.RT.G,:On·~~bruary 20, 2014, A.
. ..(RR. No_. 1~-99, Sw>- 3:1A, a.s .am'f!rui~ J.VlC~z;gr::otJghta.Petition ~m Review _befon~·_CTA.The .. :
·-..~. . , R.R. No.·18-201;3): .. · · · , . . ~!:3;1R..,to1_1t~nded)hfit.JI)~.' Petit!on ·is preU1at!Jre si_n?e
-~· the:re wgs·no f9rfnal dE111ial·of:the pfote~.fofA Qq. ;. and· · ·
..-Notei·-t11a.'·ta~payer·doe~no.tt1ave;.ttiepption.to· . · ·sti~i,iictthere,fote b'.~di~misse.d .. ·.,-". :'·. ·· ·. · .. · ·. · ,. . ·.
appeal"· ·.to .. ·the .- ¢1.R .)ri . case.: .··th!3' .. ·.Clfts. .
. re_presentatf','.e:does·riot ·a·ct.on-·ifre protest.The '' ·a.~ Ooes the C.TA have·jur:is'dictio~ QVe~ th~ '.
' taxpayer must choose"betwee.n the two .options. . . . ca~e."? . . . . : ' : ; . . . . . . - . . ':-
"',· (PAGCOR .J/ BJR: ,G:R;f;o. · ~08731·,'.Jariuary._2?, · -. Y~S. - because:-filing · of t,h~ ..suit d.u{ing :_the· .
' · · · 2016), · ·. · · · ·· · . ~ :· . . _ . . . riende.ri~y ·.of·. the· protest i~. co.nsiqereo· a
. ... . .. . . . . ·, · ·.-·· · ·_.. ·. ·_..: ···. · deriial.ofthe, Riote~t. · ·· ·
The opti~ns.are:·.:mutually- exclusive -and-resorfto. . . .. ·· .... : · · . . ":- ·.· .. , . ... . '-
·one bars·the:applicatlon of the other (R.R. Na. ·12-99-, ·· .. '. b.· Does .the. Rte have Jt:1r!sdictlon··over tne
.Bed.: 3.1;{ as .amended by"R.R. ·NQ.--18~2013; Rizal- .. ·,. c"plre~ticin:case .filed-by the.BIR?"·. · :·.·.:
. _: Corrimerc.ia/, f3anking Corp.. _v. .Commissi~n'er_:o( NO, .:beCBl.)S~ lhe petition' fqr. r¢view. was·
·· ln(erhal /Jeyenue,:,G.R·No. .. f6EJ498,:Aptif.24,.2007; sel;isonabTyfiletjWithth~ CTA wit~in ~ p~riod
Las·cona ', Land Co. v. · :Com(!lissio_ner bf lnt~'inal ... of ,30 ·:d8Yl?· .from r'~ceipt of summons' (4 ..
·Revenu.e, $.R. No. 171251,Man;h.5; 29.12).· . ' ' . . DOtytONP,PN,"~Tax Rem~dies.. (20.14X.,P· ·
. . . ... . 459); .. ·: · .
·lri
lf·th/t:~payer.opt~d ~alt ·the fl~~I- de~is;~ri.cifth·e.
. Cl~ or his duly. autf\oTJied· re·presentative, 'tie. ·may
later use· the ~eme~i~s available 'to him.in: contesting.

29.o· I 2~ll9 SAN"BEDA LAW CENTRAL.,IZl=D BAB OPERATl<?NS

 - ,.
. ~ ·...
. · ·_REM·E-DI ES
;/ :~
'::~~· . .
i_i Illustration (2): (Bar 2009) ·
.

..
'·'' ,· ..
. SAN sEoA LAW cENmAuzEo aAii·oPEFtAnoNs.: ME~onv i.,o 20,9

..•
- .
:·
.-·

4 .. COMPROMISE AND" ABATEMENT .

,:· ~A taxpayer received an assessment notice from the (Taxpay_er•s·.Remedies ~efore Payment)
~-: BIR on February 9, 201-3, The fotlowinq.day; hefiled ·
·i~ awotest, ih theform of a requestfor r~invesligation, Comprori1ise . ,. . ..
?; against _the, assessment and submitted all · relevant A-contract w.hereby the "parties, by making reciprocal
..;._.:docuhients in .support of the· protest On $~ptembet ··conceSSi0°f"lS, avoid" litigation Or pµt ·.al\ end "to One I
~-~· 11", -.2013, the taxpayer, apprehensive .because he · ·. alr~ady co"mmetic_ed· (C[.Vlt- CODE, Art: 2028)."_ In ..
st- /had not received ndtice:of. a tteqis1Qh qy the CIR~ti -, case of tax ·as"sessmerit. .it is a cdntract .b.etween" the
t.•I' ·· . his protest, ·sought your advice: ·· · ·g9'(e.rnrl'rent a,nd th!3 taxpaye(to se_ttle the.liability. ."
, • • ,• • '

f:.w·h.at ;e.~edy -or :reme~i:e~ :~re ··av~ila.bie. to" the

. ~ . . ,:·.. . . . . . .. ..
· .. . .comprqmi_se
.. v:- GomprQ._mise_P.erialty ·. ··
.. .. . . . . .. . .~. .
~-- "t;.ixpay~r?'. . . . . '· . . ' ·, . .. ' . . . ..
l:. · The rem_eoy ~~ailabt~ to the taxpayer is. to ·w~it for the
.,;1.: .de.clsion -of. the ."CIR. on .the protest he filed. lf'his · ·.
4> protest.is d{nied he.wouldhave a pejiod· erso days:
0

~- · from receipt of the aenfal. WiJhin which- to Interpose a

~ · petlUon:.for revi~v.i-w{P, .u;'e CTA (2-C DOMONDON, .. "Pirroun~ ofi);ione.y ·pai~ Ainou{lt sugge~ted in
Y. · supre at 388). ·. · . : !>Y ·the . ta·xp~y~(" to" settlement ': .ot . criminal
.. '[settle' his deficiency liability: (R..M.O.: No. 7-
t. <"i·
T~e
. • . • ., . •
CIR has:a:_period of.J80"day~_from 'submission
.
oy~· .· ·
taxes . : '· , . ·. 2015).· -· · ·
;. : the reJevant'doc,ument~on, Febru_ary 1 20_13 ory.o~rl)i( ', o. . . ._- . · . . Not.~: It may not th~refo.re
r ·:i-:: Au.gust 1, 201.3, :after which. the taxpayer h~?db~('·'?~ : , ·. , ...
1
OPT_lq_t>:J _of eithe_r filin_g a __pefi!ion fo~reyi.ew_wj~t':iUJ.e••./';~\jk ·.-- · . · _- . . be ·-impo,sed ~;-·exacled on
1 ·
,,: , c1:Aw1tt).m a p·enoc:t of 30, da~s· from th~· exp,rat~<l) .f'!f, -i.<;,~.- -;:".;_. ·
d or anh·1 Aag1,1st 31·;_ 201""-J·:r r tt;J~':f1~
.,;--· . the taxpayer., the violation
slial_l be referred to the. i'.
_the 1 ~<;>-t!ay·.p~no · ...
taxp.ayer col)ld choose .to wait for. the des;tsi~.on the!
· . · · ·. ·. : . · .- · : · .. · : · ;(tr,,,
It-
\l . . · · --- . :-:'--' i-._
;.L)1 ·
- " ~'Zi- -, ·

.
~f-t~).;.1~\
· h'i''" . .
appropriate 9ffice ·. · for
crim1na1 actron in the event .. ·
i;frotest. In_ case 9f. denial ·o~ his _ _pr~te}f!.11~taxeaxe(";.:j: . '. . ,,1-'lt \ that .a taxpayer· reful?.es·fo. :
· inay_file the petit.lon ror r.e~ie.w w1th .tt:i~~lf,~ithin a ht ·. / f · ., . . pay. "the .. suggested
period of ~'o d~ys. f"<':m rec.~ipt q~e'd~c~ib~Jd).~. l'.iM. ;·"'-·.. ·\( ··{: . · compromis~ · · penalty.
. . ._' . · ,- : ._(,'I:;.,.,,-· .d1;"';,, . : · ~~ :,:::-• ,. . .W . \ :. (R.M.O. No.·'/- .. ?01.5). · · :
. Taxpayer's Judicial R~m·~:qies1A~J~~).\.:::< t¥1•,
· ~-- . ~ppea! ~o·th~:<?TA;_·(fY~as~§lflfe<(q·'Cqlfr(<Jf ,t) , . . . , .
·
. . .. ·. Tax.Appe~15:chapt,;;i) . .' , ~~~--\'!\ j/ .... L~I F1xe,d:·~~rc;entage r~te Fixed' .amount.or b~sed'dn
,. ;·
:.b, --:_-Action- for. _ _-Q.af!lages .ag~n§t, ~}/~_venue t~·- _-,:d,Ejlp*endi!Jg ... ~n .·. -~e a.. · .gfadua·fe.ci··, tal:!fe. ·
·.. pfficer. by: rea~bn. 0f._ ariy ac~~·.d9f.Je' In'. t~~~:,!.~~it!i~~~1~~:~J;_.Co~promrs.e ~.ep,ending_:usually 01'.1 tf:le .
. . · · ·· p1:3rform_anc;;e of ·official dutyt·'1(.NfR(;,1~$~6:'->-'·• ........ •v.,nief.11"'-"-ts..;}__ comj:)uteci gros:s ·· : anriual sales, ·
. · .. ·.-~2.7); · · ·. _; .- · : :·· · . ·1:,'l ·. fl.:.! .': · ba_sed· ·on· .the basic_ ear_riirigs or receiµ,ts of the
f.!·· _c·. · !nJunction - _to.. be issued b~:~!heJ~-S:l'A-if assessed·t@·· · taxpayei'._(R.M.. O. · No. _.19s
t. . .. . : .:ci:>ll_~bti.oi:l iJ;ay" jeopa_i'4ize ~he fnJe~st of the·:. . . . 2007). ·.
~. · goveri:1nient· and/o( th·e" taxpayer, -subject- to"' · · - ...
S. · · · · · ·certain cc5nditions' . ·'. · ·· · · ' · · · ·
'::"{>. . . : ·.-d::·. By w~y _of .§peci~i,Ci:vil AcJion....: petitio.n·for .· ......
f:.·. - ' . : 'ce,tjo.rari, prohibition af)d mandamus to the .-
,,. : .. supr:en:ie'co~rt'in case&-otg1pve abuse o(its .1 .. Enforce the" institute a."·cr)(Tlitii:~I· action
~ di~cretion, ·'racJ<· of jurispJciion or: e~cess ··or· c.on:iprbm!'se; or . ,. (R.M.(). No: 19-2007).
2. Treat it.as resdnded. ·,. .
jurisdjctiori .(RULES ·.OF COLJR-t, Rule._'65); . and jn~ist_ "up·,;m the ' .
ar:,d:. . ,: · .. · · . . .
original · . demanq
e.. Action to ·e::ontest Forfeiture of Chattel, at
·· (C,V.ti." CODE,.. Art.
. . Joy:ti_rne befo're·the sali:i·Or destruc;~ion qf th~· :
;;_·': . _·. ,_·... : ..- pr~perty., bring··a'n action __.~g8:lnst.tl'IE! per~~n···: . . 20~1).,
~ . · · .. se1z1rig the.· _prop~rty or· haying poss_ess.1o_n-
il": · '_. · thereof, to recover. the same, arid upon giving ·
.-. : .. propercbono; enjoin tbe:_sale; or aft~r tlle-~sate . · Note: Compromise disouss~ he"rein is different from
- . an(! Within 6· months, an action· tb recoverthe · . compronjise pe_ilalty: Please refer to Compromise
.- . "net. proceeds.. mc;iy . b~_ .. realize9 · at. the sale Penalty ~nder Tax f>.dministratlon·-and·En(orcemf{:nt ..
· ·{N/RC, Sec. 231)', : . . ' . :. . . . : ··. . •, ·. ·.. . .

. ) .

~- . 1
·. 2019 SAN _BEDA (.AW CENTRAtlZED BAR OPERATIONS I 291
 F·

·REM.EDl·ES
· SAN'BEDALAW CENTRALIZ~DBAR OPERATIONS- MEMOR_YAID 2019

Approving Authorities in comprcmtse of Taxes : 8) - ~alidity qr authenticity, of Waiv!:)r of

a.. ·CIR -. get1eral. -power to.. compromise tax the Statute of Limitations· ls. at -issue
liability; .. · . .. · and there is ·Strong reas6h to believe
b .. · National EiV:aluatlon Board (~EB)·. .: the . and. evidence to prove tt:iat it is not
.baslc tax inv.olved'exceeds P1 m1llion OR the · . · . authentic· <:>r· .
settlement offered is fessthan the prescribed. 9) Assessm~nt- involves an issue
rhinimum rates; or · ·· · · · . . .where· :a q6urt made -an- adve'rse
c. · Region~I !=val1:1ation .. B.oard. (RE,B) .- with . · 'decfsion ag~rnst.the Bureau, but for.
.respect' ..to. -offers. 'of ·'. compromise of which . the SuprernE!'Court . has ·not . ._
,· . assessments. issued by ~h~: Regional Offices . decided upori wlth finaiity (R.R'. No.
·. i1wolvi_ng ba§ic deficiency taxes of P500;000 ·30-:_2092, Sifc~. 3,· ·as. amei1ded .:by'
· or: . tess or ·. minor · criminal violations . R.R. No. 08-2Q04).
. -dlscovered .1:>y°. the . Reg_iQnal . and District
·: Offices- (NIRC, Sites. _204MJ. end -7.(c); R:R. all
.. Ra~e~·)11 the above mentioned cas~~. ·
No. 3Q_-2Q02; ss«: 6.(2)). ·, ·. · ~ · · · · a.rnlnlmum.rate ·ouorty·~r~nt (40%) 9f·
· · · ··., · · ~a.s·ic taxasssssed.or'a-lower 'amount..
· · (;rounds'(DoFj)" .. . . . . • ... · subject ·. to.. the approval of · the NEB .
... · . I. Doubtful v~.li~ity....:·reasonable doubt as·· .. (Nl~C, Sec -. 204(A}(2))'.··. . .:· ·. _ . · .
· .to · the· yalidity of claltn aqalrtst .t!!~~""-~ · · . . · : : · .... _· .- . . . '
-taxpayer exists; and ·,
i_l. Fin·an~ial ·· ilJ~~-paci~, A~e.~ th~.t.
: -:,.?""" ·. ~ J )\ ":t>ff~ for Compromise based on 'Financial
.,t 1fn~ap~tl!y·.nli:IY be ·Accepted .upon ·showin_g.
. ··· ·. 'financial position : _qt ?"1:~~t~~-¥,.~~~~t: U.,? ,, · .... : - , . . . . . , ·. .. .: >.
. demonstrates .a clear~1f.tap1htyp,t~~pify the . ·. ·a-)~he ,9P~!at1on · ceased operation · or is
..... assessed tax (NJR<:;/sfi~~(A)l.~-~--~"""~~ ~1~f$!_Y·'jl~solved: . Pro~ided, · that_ .. !a~ . I

· .· · . : . · ff r~ .· •· '·(' .. 11:l) ir· . ~!?.' . \ab1lt~,~f~s~_ndmgto the S_ubs_cnpt1~m · . r.

lris~ric_!?.~·.·ot. 11{)ufi"ff~!?.Val_l~ity· a&q_ ~ L&. . flec~1~~le. ·"'\ · .. ,.or. : Assets :
. Co':'1~t?mise R'te:JD~F3-~2f A).;_, ·
1.) ·.Qehngue~t K ~~/;t orfc!ispii_!;CJ."~
it?~·
: : ·.
J _ ::_ .
~tstnb1:1t~f.f~.1Ji.~utablet~. the st9ckh.olders
r~pres?nhl)..~turn.o~ cap1tc:JI <'!t the .t!me of !
fls-..c,i_i·
. · as_~~ssi:n~r:iN ·resultin~~~-·, .e~ cts~a!m~.-~of ~o)er~~1~n: _or . d1s~olutr?n ,·of
I
l·
. . jeopardy ~~"sess.m n_~;, . ~\ . ·20 m';,m;?. .. :. t/.~smes tsl:l!=f]t~ -n9_t '.be .. ,cons1d~~d. for':
I

2) ··Assessm·entte"~qi . tofie]rqitrary i S,_r_,r .cffiimrom se; o~ · -·. · , · .

- natur~.a~c!.\i~rW'i:1.\ea~~l,.o"l"ieT1ev.1~w~
~.:,l~/
th~t .1t ·is_. .'.\~k~_ftg··,h.lega_l...~liQdl· .
~J'.ta?~ef _as refl':"le~ ;n it$•. la.test
la?C!;f:She~t 1s s~enng fro_~_surptu.~·or
factual basis;~- · \ · · ~1.P ~ '"' ~-<>ii'~'S' m11Jeffs defic;y re.~ultmgtq lmpa1rme1Jt 1n !f,e.
3) .Eaih.~{_e19· _me :rotest}~ 'a.p~h- '°'f... ., ~& ~- ~rig·t4i1 ca·pi1fl;>y at least 50o/o, pr~~i<'ted that'··
.. . . allege~ ..f.~1lur~ ~.f:9e~~ofic~~-[E't,..fr\~·· a· Qunts. 1?-:ayal;>I~- .~r ·due· ~6 .- stoc~~o_l~ers..
.a~s~ssm~nt·9n~~r,e.1~Et~to · · .,s, _t~ti~r th$1'il.· busmes_:;-reJat~d trarrsact1ons
· . ·.beli~ve : .'that . th.e_ · ·a~~ses~_~p}"'i~...~#,f-<\;~~-r h,;D~ . indudibl~ in' the ~eg_ular.~acco(mts .. 1·

·· · . : 19c~mg in· legal ana .factti_af.b~sj; · . · 1\.. /t A. :1:,\ )> ~-~le" ar~ · by fictlori qf laW,. con~Jdered as
!

·:: . 4) failure to· tilfi:.· a . pril!e~t"'wltlil:iQ. the l V!T'\: ...~..Ai~rt 9( -~l?ital .and not 'l\abi~ty. f,lnd pr.ovid~d.
.· . r.equired;3Q.:.day:p.er-iod ahd..ther~~ fu~er that. the ·.taxpayer- nas. no sufficient.
... ·-~re~son·... to believe. ' . tl1at .·. t~e .. :_. liqui~f asset. to ,sati~f.y the tax lial)ility; ·or. .
· ·, ·;.. · .•. ~ssess111ent)~: ·1ac1<ing _,i_n_]e~~J° a.rid.. . c) : .The !c!x~ar.e.r_ is· suttE1tin.g· fr.o_rn)1: net :wo~h
. ·.. . · · · · · .- .· factual ·basi~:· .-·· . · · ,- .. ., . . - cteficit computed. by deducting· total liabil.ities.
· · . .: .. · '5). 'f~l.lure:· to· eie\~qte to ·the.-CTA ~n .· ·. . from .total,, taken. fr9in. ~he. iates~· a1,1dited:. ·
· · · :;;1dverse...decisio11 of .tne ·Cl R or. his. ·· · , flhancl.~I: statements; prov.ided· ttiaf' iri :the -
• ··: ' authorized :represef")tative \yithi1i the . case ·.of ari. individual tax'payer, he. ·.has no_
required 30-day p~riod · and there· is other le.viable' properties under th.e.:1aw ott1er
-rea~oh . to ; .. believe· · tl}a) · .the .. : .· than11is famjly:h_om.~f.or.. . . ·. ·
·asseSSfl!e_nt ·j~ lacktO!'.]·in . .Jegal_:and. .' ct) -The~taxpayer i_s· ~- comper1satiOfl in·come
factual·basis; :. . . . · . . ·, . . earner w.ith no ot!,er ·s91,Jrce o~ ihcorrre and'·
6) ~ssessrnents:'that. faileq fo: comply . . ' :the -family's '·gr9s~ morithri c1;frnpens1:1tion .
with.th!:) formalities·of Sec.-2~8 of thlil income doe.~ not . exceed ·'th~ .. ·1evels . of·
·. . .- ~IRC;: . . . . , . . com,pensation:Jn¢oriie, it sir:igle, -is P10,500 ·
7) ~sessments· maqe. b:ase9 on .Best ... : or ..less; or·if niar_!"ied; whose-salary-together·.
· Ev.ide.nce .Obtainable and . the~e 0is .. . with hi~ spous.e is· P21,00.o··per montli, or·
:reason to believe'that th~· same ._can . less, and ·it appear~- that ·.t.fie .taxpayer'
be dispt:1!ed . by . s1.l.ffici.ent · .and · . possesses no other · levlable/distrainable .
.. ' - . comp_etent evidence; . . . assets, other.:lhan'his family )Jome·Qf these,:
. ·. . . Regulations;
~ and it.Sppecl(S
.. . . thatthe
. . taxpayer··
.

~9;2_ I ?OiS SAN B_~DA LAW. CENT~L;IZED.B.AR Oi;ERATIONS ·,

'
'
,:
ir..
r REMEDIES
SAN BEDA LAW'CENTRAJ.IZED BAR OPERATIONS - MEMORY AID 2019.

, ...,.
' I 1 • , ff 'I'' I • '1 , , f" ·~, .. ", " , ., , ,•·
possesses no other leviable or distrainable \ ·:- • .• ;,. 0 f. :·.'·
t :·,, - .. 1RatEf_Sas:ed ori l:S~sJ~{
assets. other than his family home; or ... ·' ~roupd) ,- . : • A$sessed Tax_·:•;::
e). The taxpayer has been declared by any J· , · • " .· ~' · ., I· --: : I ..... : ·· -· (minimum\
. ' . .J · • · · · (!I
competent
fribunalfauth_ority/body/government agency 4. Has no other leviable
as bankrupt or Insolvent. (R.R. No. 30-2002, properties other than
· Sec. 3(2)). · his family income
The taxpayer has been .20%
Financial Incapacity and Comprornise Rate declared . by · · any
..... , , .• •'" 1,,1 • •• • ' , ·:· ; J • competent· .
;·. , , ' ,. Rate Based on:Baslc rribunal/autho~ity/body/g
'. >- '.' . Gro~~dj _·,. ;_ · .: . Asse!;sed.1:ax overnment agency as
'. .t- .. • . : ... , , :·,,,. : ·' , r (mi,nimufll) • bankrupt or insolvent.
Corporation . ceased Dissolved; non-operatlnq (R.R. No. 30-2VQ2, Sec. 4)
operation or Is already ompanies for less than
dissolved. · three (3) years - 20% Note: Lower amount can be granted subject to the ·
approval of the National Evaluat'on Board (NEB) if
Non-operating assessments issued by the regional offices involving
companies for at least basic deficiencytaxes of PS00,000 or less, and minor . ·
three (3) years - 10% · ·~~ criminal ·violations, as may be determined by rules
·1 ;pai~-e-nt--i~--- the O% r;;2_f ~1\~,.
and regulations to be promulgated by the Secretary
.., _-::;:;;~~~-"(of finance, upon recommendatlor. of the I
;-: t ·' " · Commissioner, discovered by regional and district ;·
::r:~!
original capital by at
5~:lan~:S!~~h:e~
submitted to the B1R, ..,-1 ;,,,·.
J'. ,~ ·-

'if' f,J
. £!~¢JJ!~},, -~~) be. ~ompromised by a . regional
eval1:rat10'lil,,~rdwhich shall be composed of the
.#J:':J:fi-1!'· , ,,.. Regional . Djt~ttor as Chairman, the Assistant
p1r.Tovhiedeadmthoautn:ts
payable 'Wl:: "' f
~·"_j)l"'_t,_::.~_.),~-'~·" /, ,. ,·;~--~::As_ ·;:~·.sessrnept
..
""I
Regional _[j)1w~!or, the heads of _the Legal,,
'(ari~.· Collection Divisions . and the
or due to stockholders, .,.,., - --, Revenue,IDist~ict ©fficer having jurisdiction over the
~~ra~~dthat~a,~s~s~ii~~~: ~~. ~.,,! taxpa:;~{:,~,.~;~:~(N/RC,
Sec.7(C)).
'.I
aofre_
ccoa.np~1tia~lemadnads
:pnaortt .;_S_.:.~_.\, Ji:.-_:,:_J.:
·. RequJJ,lf~~.i.fp,r..-'the
Compromis~· of Taxes:.
,E' ,,~t ·-(LOAOf",_ . l
!-
liability; and t .' a. The taxpayer has a tax !:,iability (R.R. No. 30-
2.The taxpayer has n~ "ii:'17.\i~k.'.':'12002, Sec: 1); · .. . ·.. .
fiffi~:~!f;iqu;~eas;:; .1:~1rc:~!iid·:·,'.;A~"l:.li.~Je
must bear. Qffer(by the taxpayer or ·
i:,.,..,. ·"!°¥" Commissio;1er) of an amount to be paid by ·
1--l_la_b_ili_tv -+----""'·-\,~j~·
~-;,-.....
lit;,----1 'the taxpayer (R.R. No. 30-2002, Sec. 3).;
The taxpayer suffers .• Zero 11et wort11::Ji-zro% . c. A reasonable Qoubt. as to the validity of th€-
from a net worth deficit claim against the taxpayer exists; or, the
based on the latest Ne,gative net worth financial position of the taxpayer
audited financial 10% demonstrates a clear inability to pay the
statements, provided a:;sessed tax; (R.R. No. 30-2002, Sec. 3).
that in case of individual, anc
he has no other leviable d. There must be ~pproval (by the taxpayer·
properties under the law or Commissioner,as the case may be) of the
other tha11 his family offer in settlement of the original claim (R.R.
income. No. 30-2002; Sec. 6).
The ta~payer is: 10% Case~ that May 13'3 Compromised: (DAC3)
1. Compensation · I·. Qe.linquent accounts; ·
earner; . ii. Cases under Administrative protest after
2. With no other source . issuance of the FAN; ..
·income; iii. Qivil tax cases being disputed before the
3. Whose monthly court;,; .
income is P10,500 Or iv. Collection cases filed in courts;·and
les~ If single and if v. £riminal violations except those. already
married, combined filf!d in. court or those involving criminal
monthly income is tax fraud (R.R. No. 30-2002, Sec. 2).
~21,000 or less; and

2018 SAN 8EDA LAW CENTRALIZEDBAR OPERATIONS I 293

 · RE.·M-·EDIES
~.l\m---------m11111imm.. SAN BEOA.U\W'Cf.NTRALIZED BAR OPE~AT/01)15~ MEMQRY AID 2019· .

Note-: In crirnlnal pases,. other' than tnose:

_.11BD_._. ......
. ·.. ·' S_ome. !mpor.fa'nt 'Appllcatlon Requirements
!:lmll11m111121111!11Dii1a.· .

· invoiving 'tax fraud, the Cl R has full. discretion (PW) · . , · · · .. , .

. to corrrprornlse before . the ". information i) ,Eayment by the ·.taxpayer of· the full ·.
. (criminal complaint) is fjled'in,cot.irt: .. ·, ( amount of hi~ compromise "off.~t upon .
1) After t_t]e ···:._ca~e reaches' ... the filing theapplication: and
prosecutor's office,· the ·prosecutor .. .··. . ' .
. must give his· consent 'before he 'can otherwise;' his . applicatlon ·"fo~. compromise
enter into compromise. · .. _·· settlement shall notbe processed by the BIR
2) · Qrice ;ttie information is filed in court, (R.R... No_: 30-2002,. Sec; 2, as amende~ by.·
compromise [s no -lbnger.'.peim1tted . · ·" ... .R.R. No._9-2013). ,:. · · . .
with or without.. the· consent '·of the . .. .. . . . . ..
. . prosecutor °{Pe.qple. v... Magd,afuyo,. -. of
'. lri case d)~~pp;ov~i ·<'>! tli~· ~P-P.!i~atio~: ·th~·
. G.R_.. No. 'L-16_235, April- 4-0; 19.61). acnouat._paid· upon .fili_ng the application shall
·. .. '(' ' .be.deducted f~om the'taxpaye.r's outstanding
A compromise can never- be .e.nte_i:~d. into . tax .!iab!li,ie_s- {R."R. 'No •. 30-2002, ·sec.·:?-, ~s
. aft.er "final. judgment because by 'virtue of::·_, · amended'by R.R. No; 9-201~ic· ... ·· ·. ::-·
... ·. ·such Jin.al judgment, th~ G_ov~ri;lmenf had.", . . '"·:' . : .. . . .
· :.. already.. acquired -a vested .right (R.R: No.. ii) . Wa!yer. ln- writing of his p,riVilege of the- .
. . .30-2002, See. 2}, . .. ·_.; . . . . . . : . ,. . .,...~~~-- . . ~ecrecy of 9ank d.eposit.s.wlJEfn he en~ers
. ·. . . . . ·. . . '~:d~--- -"'ifu-1 · ·-:-·~-~-
· Cases: ~hat- .. are . NOT;;-S~bj~~..t'. tp ~ · \}
:·into,compro~ise.q_n the ground"of h_is
t'µ~anclat inqa·pa~ity (R R f:Jo. ~0-2002,
. ColJlpromJs~_: (WiF~-~z:~~J:."'P'p~~ ./( · . · -~b. 3):. . . -·. . · .. _
.a) ·w1thholdil'rg- ;,ax.~9.a'Sf;~,::Wiles; .. : ---~. 1 .-,:}~~-, .· . . . • : .. .

<. ·: ~~ ~"f:lplic~a ,'t_.1~(ei3y,eQi:.,'lokeS";J~"."-"'=Gj~~n~(:toF -~qr'i~I of. comprornise·based on.

·ty · . ·.: ~ ., .
· '. · ·prov1s1_on.~ o,t_.r~w;!l;,at c,rs!;doy,~t ~<,"' ':<i:"l." Ftna(lc•a,IJ{)c;~aJ1ty. . ' .. · . . ·
on the t~ pay~~ ql51Jga~on_1i!o •. !.~ 1) !\ \he'3~ayet,.. has a T~x Credit- Ce('li~cate,
.v.i.ithhold,f f..
. is'sued \~"flli\! NIRC; or · · .. _; . · .
... : ' b). Cri~i!')qf 1~-X_ff-~T{cl\.!'.. •teases- · ..• · nthhif.t~~P.~~(~~S:~'pendi_ng claim for tax:
..cqQfinne~s~'ocll by· re \J"~lfto~~W' 1·rftund9~~l;C.-°)e'.,1tt-w1th the BIR, Dep!3{1men~
. · _.his, ... ff ·. quly! · aµthori.£~· ,, , · ;;;th!\.. :.9f -~inan efx0Re~StoP,-,Shop Tax- qre.di~'qnd
. · · re~rE:se~~~~' , C1t\-·· . ·.,
. c) c,rym,~~ "(1)•~··~ ~··t~roon)"e
~l!i!~
~~l~t}~JJ, . {fi! ~tt7~~;x~~;;,
~ · . '· !@:))]>~? bad ~entt=:r (Ta;ic)~e1,1~nu.e·Group·
j{" ,J; Group),anij(o, the .

.. · ·, ·
. ·~) -~e::;e"t~
·· _a.P,p~oye(:I '\: .: §ctl~_liJe . ·
. . : ... inS,~~llme'ntparme_n,ts~ .. ·
a,
~r·~~
r ha·s·· ~~ ~~i~ti~g· .. ·.fi~alized_·
·<F ~JJ;g~i!'!men_to pro~pe_ct bf'fu\ure:ag~eement
_) ···wt~ ~ny.p~ ·. tt.~~t res":'_lt~d:or qould:r~_sult'to
···.. . . · e] · . ~ses~ '."'h_E:,r~~·fin~I ~l;)J:ts~~~n.,~~P3.afe; m _the .equity -~f. the· t~xpayer., pt
•r . ; re1.nyestigatr~n.. '.'(j:l.f.1 ~tl:l~~{\/1:ie t1rt.ei'of the .. offl~r-· f~r·.comprom1se. oq1t. ~
:·. reconsi9eration' .' ~v~VJeen .i
. : issued·. resultJng. ti;> r~@.!f in -l.
4 ~ ~.\
v~~~e·
\lM'nit'e:futuretime; or · .. · : · · · · · ·"'· ..
taxpayei:"·failed ·lo' e><~ute a-waiver of
. ·the' origirial asse~smerjt. ana)n~~ . . . ·.'··:his· privilege of the sectecy of bank' depoi;;rts ..
· t~xpayer ·is· ~greeable'.tq .such. · · . ,i.mder:R.epublic Act.No., 14.05 or·under'other .'
··.c!e.clsi91J °!JY ~ignin9:.th_{:i. require<;! . : .· ·g~n.er.al'or:spedal raw_s_(R.ffNo: 30.-2082}'.:
. :· agreement tonn; · ·, -~ · . · . · . · · :. : ·_: · · :· ··.·. · · . ---: , ·... .. :-
·. . ·. .- f) .. : Ca.~es_ whJ.ch be~hi_e'..Ei.Q.a~ a~d:.:. ·· App_rov.al qf_ 9ffei:_.~f C_o_m_prof!ll~e.· · . . . : .
.. · exe·cutory afterfmal J.udgment.of' Except" for offers ot .compromise· where the
.. : · ·cl court, ·where c.ompr,or.nise 'is· . . ap·provaf is delegated to·1t.ie REB pursi.fant to itie.
. . . .. r~gueste9: o.n . :-the. · grou.nd- _. of . . . . succeeping : parag~pt,,- all_ · ,i;;omp~cirpis~
... d'ou_l:Stfui · , -.~alidity '; . o! · the . , ·settlEi,:nE;lrits-'~i~hin th~ jOri~picti_6n·6fth'e National .
. ·as~_es~.men_!; ~op. ·. · . . . . ·. Office·(NO)·l?hall be approve~ by_a·rriajority of.all
'·g) · ·gstat'e ... : tax : : .ca.ses · _.. wher:e ··. . ·. ' th!=) · rilembers of the N!:,(3 compos~c;!.: ·of.. the.
·compromise is '.'(e'q!Jested on th.~ .. Coilimissio_ner ar:id th~ 4 Deputy_ Cornm.issiorlEfr~; .
: · · ·:j _gro!:Jn~: of finar:icia~ i_nc'c1pa·c;_ty_of· .All· decisi<;iris." ~f tr.,e· NEB:,· granti119, ~he ·reqi;ies_t_ of .
. . . !J1e taxp,,iyer ~R..R. No. 30~2002,. ·.. . ~he· t~xpa,yer;.. 9r · fav'?rable· to the. ta~pa_Yer; sh.~11.
·.Sec.~)-· : · ·. - bav_e..the concurrence of·the. Commissioner
· ' · , : '·. ·. · (R.R. N~,'-30-2002 ~s ?,_fT!en.cJedby.k.R. ·9~_2013).
. ·.. · .. '"" •' - . .· .· . . ·.. . '
.\, .

294 I ?019 S~ Bt:DA LA\,':{CENTRALIZ~D BAA OPERATIONS

.. ~ .
. '•
 .~REMEDIES;
SA~ 8£0~. LAW CENtRALIZf!)
. . BAR
. OPE~TIONS'.-MEMORYA/D"2019
. .

"corj,p~omJsf:'Offer Must .B~ P"aid..Upon ~iling
The comprernlse offer shall · be paiq by the
. taxpayer upon filing of the application for
ccrnpromise settlement... No ·applicat\ori. for
.. compromise settlement · shall · be: processed ·
without the.full settlement of the 6ffered amount
~-. . (R.R. No:·30-2002 esemended R.R.. No.' 9-.
1,.~.7·_:t-'.·
· · .. 20_1"3). . ·.... :· .: ." \ . ',. · ." - -. :·· .· · _: . '. •·· · · ·
ifr °' In· _ca~e of dlsapprovai of· the,:_appllcation for
,f_.,. ·· ·_·cc:>rnpr0n;iise_·settlerrtent, the amountpaid upon.
;·: · filing of the aforesaid .appficatlon.', shall' ". be
1"-""(.
· deducted trem tlii total.oufstandi09.tax 11abiliti~s
(R.R."'N<i 30-20cJ2_··as·amendeq byR.R. No. :.g:·
. 2013)._: . __ . · . · .. _. ·. ·. ' .: ·· ' · .: .
. · • ·' · ·· . .
.'.Ef!;ci :~i )~cii~ially A~p;~ved Compromise
. Agr·eement -· · · ·. · · ··
Wt-ie/1.-giv.en 'ju~icjal · approval, a. cornpromlse ·
.aqreement .becornes :·:more·, than a· contract,/\
. binding upon.·' tlie· -parties. Havfng b_ejil~it . •
s_anctioned. -bi th~- pour;t, .it.-·i~ ;.e.nte~ed
determination of a eontroversy and has the [9cc~., ,(,~ ·· · ·
'and ~ffect · of _a )\Jdgr(le~t. It is imm-Eid~t1Jyif.,if~~-+....:.:· 3) J:<!xpaye(s_ fail~re t<:r:fil~·.the return a~d
· executory ?nd not ~ppeala_ble, ex~ept for,1~~St9.~•(,fr~::'.!J~~---J~y
consent or forger.y. The nonfulfillm.ent~.1ts term1.;> r. .
· ,and Cqnditic?_l"")S justifies' the i~suar;rse"-!of.aWrit dt:'":j;
· ·, execution; in. s.uch -""an· instan;oe,.;,f}xec.yti~n-··"".'°}'{ · · . · ·
.... ·b~com~~ ·f:l. r.ninist~rial ·_~iity.. qf>t!j/.1.ccj~~-qMiftro. 1::1
. ME!n_i~a. $hopping_. Mace? Q,e,fJ::,,v., °(,qjfldo.rG.f;_?. .
... No,. 19_()818!:,Jl!"!Yerri.~er t_!if.:.~014"~~;f!=_RLAS'1 ~~~'\ .
. ExceptiQn: In -.~eri~orid!J·S·· instances: the CIR· may.
abate ·the interest- ·as well as basic tax assessed;
provided, tiowever; that cases for abatement . or
cancellafion- of tax.. penalties and/or interest by "the
, CIR shall be coursed· through .certainofflclals' (R.R:
No. 13-2001, Seq. 4).
by .
} · ·Gr9un(1sfo~ Abatement: (Ee;) .
· .i) The tax or any portion thereof appears to be
u"njustly or Exc.e,~sively assessed; or· ·
ii) · The. ·adminis~ratio~ ..arid."· £ollection. costs ·
· involved do not. just_ify· the collection · of the. ·
- am6_t,n:if~u~.(f:JI[?~;: Sec. ·204(8)).
,
: ln~tances·when.the. Penalties and/or lnterest"
· . lmposedorithe Taxpayer may:be Abated orr-
. the, Groond ..that·.U,e l_niposltion. Thereof is·'
Unj4st or Excessiv~: ('(VE•SIBLO) · . · · ·
. . 1) .'filing·of.th·e return/payment-of tax atthe :
Wrong-venu.e; ,
2) 'r~:xpayer's mistake·in_payment of tax is
fti~~: 1~-.,._. · · · · d.ue to !;rroneci.us written offlcial.a~_viceof
a Revenue Officer; . · · ·· . .. ·
the. ta):( 9n time IS d~e t~ §.ubstan~tal
· .---..~...'...{,19sses from proronged· ,lal::ior di~pute,
.. . . [hjbe . majeu"re,. . legitim~te . business
·:§i"~,P~rses such ·- as:· in · the following
r~ _
. · ·. :l.hl;~tatce$:':. .. · ·.. · .
,t1 . a.)J · L!R~r _strik~. fe>~ mor~ th~n ~ix .(6)
f__ ·_,t_." moe!~? . wl:11ch .·· h.as cau_sed the
. .

,,,.. . BER_N(J,BEJ.. . :. ·: \j1(·"7_;.··L;)) , v~:, .1~:J . ~~,.:.i!;.~tl',l'f'Wf~gParyshutd_own of pusi'ness;

· ·· ·.: ·. -- . - ·. . ~-'·f'~'r"\· -~~!- P:,·>( · . · ~'Q~blicturmoil; ." ·. ! .. " · .·
•;. ·. ·,. ·. Re~E:-die•s"iii-<:-~~:«:-.t."h.etaxpayj~~(f~~~-P or.. f : . ~:q . ·. . . c) "Nati.ir'al cala~ity su~ti _as: ii9htnir\g_, .
~, . ·. fc1il.~ to follow.th~eta>,e c~rnpromi~e }\- . . f".~~"- . . . earthqu~k7, · ~*>rm; flood. and th~ ·
{'.. . · .a)_..· .Enfprc~ the;. ~ompromi$e _(C1yi~i~oife,A~rt.j!(t~~:.-,f,,:T;_~ ··like;· ·. = .· . ··. · · · . ·-; .· .

·· _-2041) .... · ,·. -- ...

~r··. :·
1 /~.;!?'--~-~·-r ': n · cl) . J.\frn~d conf11~ts. suc~ .. ~s war. or
. :·:,·No~:-lfitisajµdicialc?r:riPrpll)f,s_e i~_;y~be · . · · ... · . ·· ...irist.ir:gen~y;_~ · .. ·. .:.·-- ..
. . · ~- enforFed.by:m"(;lre ~~e(:utio9 _(C,Mf2-2!J,e,A_rt:. · · . _ ... e.) · ~ubstanh~I- IQs~es ~\JS~~-lfl~d due,to
: 2037).:-.. . . , • : . . · . · . . .. . . .. . · ··. , fire,. tobbe_ry,.theft or em.bezzJemE;'!nl; ·
.bf ReQat"ct-: fr. a$ ·r~~"9111~ed -imd · t~sist upo·n f) .. Cont_inuoys_ t:,~a'O' los~es in_c/irfe_dby_.-:-
.,: .. · ·; . _o~!ginal ?em~nd (Civil Code,frl:· ~041) .. _.· ·:. · ."tl:le· t~xpaya~ .for 't.he· l~_sf_"tw¢_ (2) ;-
!;· , , • ~ ..
0 , • • ,. ~, r· •' . •
• , I , , ·• •. , ' yea~~j ', ' . •' • .• • ' -~
'j..!::. At>ata"ment • .
· . ·. - : . ;-_-. . · . . : =· < <. ·. ..••. ·•· . · ··
.
·. .g). .. Liquidity·
. .
problem of .th(:ita.xpayei- . .•..
for.;
i,: ·. Car:icellatlon of-the.entire ta~ liapi!ity of the ta)<payer ..· th~ last. three (.q) years;:or. ·.,. : ·
;, (NIRC •. $~·c: 204(8)) .. : . · · . -:·. · . . ... h). Such pther·ir.ista·nces which th.e CIR ·.
"·> : · · . . . · . . · . . : ·~ .- '/nay_ <;tesrn . anal~g6_1:1s .to the.
:r · . · Wh6· has the Authority.to Abate ·: _.. : ·. . r ' . · enumerc1tion _abo.v~. · . . . .,_
f.;; . _CIR. ha·~ thEn;ole.authority to abate or cancel internal.. · 4) . Assessment _-re~ulted from :taxp~yer's. ·
•\.. revali.1,Je_taxes, p~nalties an.d/or iriteresf/R.R,·,Vo•. "1_3- : m_>h.:c9mpliarrce 'A!ith.. ttie law doe ·to a.
1...\:. 2001·,. Sec. 4·ptfmuaf/ttO .Sec., 204 (8),. jn- reia.tien.to . · . difficult !nt~i;pretation"of said "faw; . - . ·
~.~.>·.·. 7(c_)...J_.. _·.·... ,: _· · :_· · ..-_,_·_- ·· ·.. :·. ·· .._. .- . 5). Taxpayer's :failur.e:to fil"e· the r~turn .al'ltl
. pay the corr.ec~ tax on .. time. due to·
·rt
- -
°C!)vera9.e of:.Abat~ment_ .
.

';; ·.... ~en~.r~I iju.J.~, The_CIR'.s,a.ut~pri.~yto·c9mpromis:e is

. ' . ..
. ... ,· ·.. . 9ircuni"stc1nce~:§.~yond b"is control;'
6) · .ba.te ·payment o.f ·tax urider merito(iot.is
·

'I:. :gei:i~rl:IIIY. ~pplicabl_e !O..S"Ul'.'~har.gE!"an(JCQmp~o.r:nls.e .. . . circumsta_nces suet:, .. as those provided ·.

, , ·penaltie~. only_(~_:fi,·.N_<?·.13~2001_', _$ec._ 4). ·... . .. ·. "hereunder: .. . . .
.. a) .Us~ of wrong lax. form bµt correct·
. . . amount of tax "was ref(lit\ed; . .

..:-:
-· · -:_·: ···:·./:~.-: :.,\t·r:: · ·
~-
 :,..
·.R.EMED·IES . ~
I,
SANSEDA 1:AWCENTRAilZED
·• '
BAR OPERATIONS- MEMORYArD zot»
• ' • •

. .
b) · . Filing . an amended· return· under. . application: b.y the taxpayer (R.R. No. · 13- ·
. meritorious circumstances; · . . · 200f,.Sec."·3).' · · ·. ·
·., q) .' $urchar1fe erroneously imoosec; ..
d)' Late filing of return . due. to
unresolved issue _o·n
·classiicatio.n/va·luation. of . real :
: property; ·. . . : . ·
e) .. Offsetting:of.taxe~ bf thesame kind; .:
· · · · ... l.e., overpayment ·. in· one
.. · · . quart.erlrn9rith · is. offset" against... · .
·-'. µndetpayment . in another .
. f) · ...,' ,qu£!rtei-lmontti;.
Automatic; :.... ::offsetting
.. . · . : . bf ·, ... . :·.
. . . overpayment. ·. '9( one .. kind . of : .
1111111m11mranm1111mm
.
. ·"· · ·. · withhoh;ling, ·.. tax.. against- ·.the· . · CIR, NE;B; and .R~-B~.gElm ·!).!.·

· ..· .. underpayrnerit in another. kil')d; · · ~

gJ- late _remittanCEi·of-withh9Jdirig tax . . :. '. . . .
= • .. .. . ·.. . . •

.. · .. .: orrcompensanorrof expatriates· for 1 .- Reasonable - · doubt 1. T~e -tax or any ··portion-

. services rendered in the Pbilippfn_E;_?~.~- ·. ··:·.as, _Jo · ·validity . of , th~reJ>f <appears · to_: be .
peri<;ling the Issuance b.Y t~~?'l~C-c,f:ff J . '. . ~:>l>.,_~~-m~~t;or , . · «.unJustly or _. excessively ·
:· the license to the Phi[ipJSf'n~·~!tnch \:~ _ ~ \IF1,r:1aric1~J incapacity assessed;_ o_r ...
. offi~e or sutisidiary/~~ [.' _:~.=-=,,,, . ._., Q[ta~p~er:.~ . . .. 2..The ~dm1_rnstr~t1_on and
~ ...'· .
_h) '!.'Jr6ng·u9e ofJ¥.fo.~E;d1\,G~i;t!ficate
.... · (TC:C) wh~re /Ta}<Qtl.;_iflt· .Jlil.~mtf" ~ , ~
'-=- ~':!2:
· r/~ . .
. '\, . . . .
'~~
~0111:1ct1on_ ~~ts._involved
do r;i.0t JU~t_1fy . the
· · . (TOM) was;·'tlt:eP,er.ty.aptmE;iaf@f.; ~'f'' · -. · ~ -~ 0 A\.: · colle_ctton. o.f th~ amount
. .and··. ·~ ':!yf· } ..
1f · ~t\. . :&. .· ·. . ·..er/· ·1, due. : · ·: ,
· 1) Other analdq_ous19,stances. ·· . t · · ' · _ : :~, ·l· ·
(j. ·· · . · -
. 7) · Oth~r. similar Pf 11anjlo~j':'(c~ses:J/~'.'R'.. ,"s:::_--.!A1<.f.EF.U '~J~,iiv;i~ CREDIT'. ·
·. No<f.3-2()_01,'S. ~a,s~am_endedby;~;'.!, C{IJ;.Taxp,ayei's_, emrae !~S after.Payment : . .
·No.4-2012). . . ·~ J, .. \ · f:fi ·- :). · 'I · · ·p,-. 11.· . · · ···. · .

·Not~; r~·.~;f·th~ a~o~=~{),iO~Q~,~~, t l~~-.:1 ;a ·!]~~~r;;:z1ti~~~:1!:i,~:~;nt:~f

abatement :shall eov,~fr..lsd~!harg(s;<~~t~re~, g,_,~· ~a){(ABjw; sawa·at-325).·.
~h~-.
· . ·
. ancf compromrse·pe11\1ty ~~J~pt ~~~~~l~ ... ~, ~' ~-~ C)i~dit.::.. tiHers·~~·lh'e·amount·of tax·due .
. ·, .. 5/·,6~b~!. 'an~: 6(g)
. abatement shall ".'Ot 1.n°bxd.e.
.:ir·.
whj~ll 'tj=l~~!i~-!;/:' . .. to-~>1~~p~y~r.~e~~l~n·g. from overpayment of
mt~.~{ (lf~lIDt\~ ,,
a;_ta~:hpbll!_\fo_r el'!~l')eous·payment·of·a tax·:·
fl!o. 13-2001,_S~c. 2),. · . 7: ~~ ~~u~f~l];>No,; 5~?000).:, · ;_. ·. .... ·.
.. . .. . .... £.a~~~.,.,'\,.\./,. . . . .
. !n~tan~e~ of Ab~t~~,o( :o~: ~r~~!tlhat.-i.
- ~t')\)"1~.9;E;~nm~·~t a
~-is~ue~· tax ·.credit certffi~ate .
r- .. . . . Coll~'ction Costs ·. · ar~ More :Tll1lllz~¥_"";;,.($9_~.r~r a ~ax cr~it m!3mo cov_ering t~.~·amount
· ~oughf: ·(AWARD)· · -.: ·· ·. . . · . . . ·. · · · "'~ · . · qeterr.r11n~d ·to be. ··reimbursable. af1er. proper.
· .- : . · . . 1): .Abiitemer.it · of penalties on' ass.essment . . . , verification a.ndJh'esame. may be applied agaihst
· . . .· ·.. · .. c~nfirrried . ~Y.. ."tre .. fowe_r : court.. b"uf .. · ... ·:any.~um.that maybe .du·~·and cqfJ~ctible.fr~m·t~e
_; ~ppealel:1-.byt~payer to c1 ·l'ligher pou_r.t;· .. ·. ·. . taxpayer·(@):?. No. S.:2t:J00). · :' . · · · ·. ·· ·.. · . · ·
:?) : Abatement of"J>enalties·· on.' Wjthholdir:19 ·.. • :' : . · . · . · ~ · . :·
. tax . ' ass,e,ssmer1t.' . ,under ~eritorious . All TCGs fssued· by the' BIR shail not b~ 'ailowed
circumstances; . . .. to .be transferred ·or:assig'ne"d to ..any pe'rs~n (R.R.
. $) ·.Other.~1:i°alog.ous in.stances;. . ·, . . . · .. ·· No. 14:-2011, .Sec.:2):. ·. · .' · ··
.4) Abate~ent "of.- p~naJti~s .on. as~essment:" . : ... ·. . . . . . '. .·,.. . . . . . :-_ ·, . . : . . ·- .·
. . .. ·r~duced . ·~fter :·_~B~invi;istigatiq·n ·: .;but' · .. : '. ·Note:·Thiroptiohs· qf:~~ refund or t~ credit'are
·ta;><payer js :· stilt· · contesting. ·retlu_ced .. : . ·. alternatfv~··and the· choice ·of one pre.eludes·the
. ; . asse'ssnient; .am;!. =: · , ·• -. . ·. • -- - . ·. • other. However, failure to l'ndicate a choice by the.·
. 5) -N>afemeht ?f.. p_en<!lties. 'or( ..Qelayed ·: : · · : taxpayer wlll nQl· bar a·.v~lid request't'or a. r~fund, · -
··: .. • . inst~nm·ent ·payinei'lt,.tmder·. meritorious · ... should. th.is option: be."chosen· later· on. The.: .
·. · · · . ·· .·citctimstl'!nces. (R.R •. No; 13-2001, Sec,. .· ir].dicatio!'l -'o( the. t;ho~en \iptioh js on'i'y for ·the .
. '· 3). ·· · . · · · . purpose· of tax·.:administratio:n ·. '(Phi/am· As$et'
Managemimt lr:ic;.. y.. Co,:nmi~sioner of fnterna{
.. : ·· N~te: · Fo~. · it~~s: ·.1 · and · :-~ · ab6ve/ th~·· .. ..·Revenue,., ·.G.R Nos; ·. H56637· ·&. ·162001, .
abatement otthe surcharge· and compromise . ,Decen'lber.14; 2005). · ·. · ·
pen.alty--s~~all be ·allowf:id o~tt upon ..wr,itten ./

. ~· . . .

?96 1: 2019.SAN BED~ lAW CE~TRALIZED BAR OPERATIONS.

 REMEblE.S
SAN SEDA LAW G~NTRALIZED BAR OPERAJ:IONS - MEMO~Y AID 2dHj
;;,
·!4€···· 3
WI + et ssw·EP
Troe ·Credit c·ertificate . . Ombudsman could not be accused of
A certification duly issued to tt)eJaxpayer.named unlawfully intruding into and intervening with
therein by' the.' GI R or ·his duly. authorized . the· BlR's exercise .. of · discretion
representative, reduced. in a BI.R Accountable · . (Commisstoner-ot Internal R~veriue v, Office · ·
Form' :jn -accordance. 'With···· the prescribed. of (he Ombudsm~n. G.R.: No, 115103; April
rormauttes, acknowledqlnq ·tha.~ the grantee-. : .11,:200?).' · .
· taxpayer-named therein is legally:entitl~d to a tax
creel it, the money value .of .which may be 'used- in Gr~~nds.fcir Fili"ng·a <:laim for T·ax·Refurid. or.
. payment .or in satisfaction ofany 'of. his'.. internal· Tax ¢redit: (EPS) ·. . . . . ·· . . ·
revenue tax liabtliJy (exceptthose .excleoed), Or · 1) Tax is. grro"rieou'sly. 'or illegally assessed or ·
may. be· converted as ·
a· cash refund, or, may, 'conected: : . ·. .
.:..
., otherwise be disposed 'of irr- the manner 'and in
. accordance with ttie· lirnitati~n~. if any; as. may be -::rhere'is erroneouspaymentof taxes when a .
prescribed .bY._.the. .provislonscof the Revenue . taxpayer pays under-a.mistake-of fact, where
. Re~u!ations _(~.R.-No:' 5-2000, Sec. 1.8). · · · he is not aware. of an e~is~i~g exemption iii .
his favor at the time the: payment was made '.
Authority of the CIR -: ·· ·. · . (51-Am<_Jur., 'ctied in":UST_Cor;,p~ra(ive· stor« .
·i: Credit ·or refund ta·xe"s··errorieo!-lsly or v .. City· of, Manila, .G.R. No, '.L-17133,
'. illegally received or .penatttes imposed . · December 31 .... 1fJ"65).
witnout.autho..rity;; ·. . :·. . ~ . - . ·::i.~.. . . . . . ·. . .; -:'. . . .
ii. Refund· th~ value of internal · r_eve,p~e~V;.{ . · An._"~rro~eous'qr ill_egal tax" ls defined <'\S one
'stamps when they are returned m 9'!'.0i:l',"., {::;
. conditlon py_the purchaser; and . !:1-il)(.,.. f,1 .
. . levied without statutory. authority, or upon
·P(Operty not 'subject to taxation or by some
,iii. .. In · his discretion, redeem :or ch~,h@e~./J;;~,-<""."".'"' • per-1.GW ~avi!1g !lo. authority t.o t~.vY:.the tax., cir
._unused_ stamps_ th~t have.been. r~e,der~4,~/;1..n:J' l~--1.~~pe~..y,r1ch1s some other similar. respect.is
. unfit for- ui,e ·and refund .theipt;aftie. upoi'..! f :. · "". .
illegaJi"(Commissionet of lntemal Reii,eiwe v.
. . . proofof dest~uctio1.1·'(N/Rq;;;pt§.204(C)!·>:\ .: · . · : · · PiliPifl:i~ She_il Petroleum ~orp., G.R. No. No ..
. ... . · . ·)· . . .. }>,,r.{ ~ ·,..~ k.,, 18~'A.r;f.•Apnl 25, 2012).
, N~te; ·i:ne- Nl~C .ve.~_ts.t1p9~;._t-f:le.JQ;l1R?oeing W] .' ./(. ·\ · .' . · · · .. . :
th~ head Qf.the. BIR, thr.ei~~orityffo:!cTedit 2,r t!~ 2) B,enal, y is\ollected Without authority; an~
. ref~nd ~axes wliic!') ar,E!1:r1on~oi;i~}Ycollecte_~ r.~ · ·.
f · l '~ ·. ·. . . (· . .
': ·by_ the government. -!~i,s ~:P.:e-c1f¢i}jtatbt.~.rY r;,1
:3)~JJ~:~w1,~~f-~Jllfisexcessjve or_ i_n _ahy manner
.mandat¢ · c·annot _r,-~"' .o~ey:f~,~en ~>'-.
1(1' · .WroQg_f(tlLy;·collected (NIRC· as an:t!nded by
· adve:->e ·:: ln!?rpre!a(1q.!1~r;~.aae'fthrou.gh.
mere _admln!$lr:~bve· 15:~u_ani,f~S,1~uqh· as.·
-if.!~.
1. .
TRAIN · -0 ~ $ec .. 22,9; Com1:r11ssioner. of.
Intern~/ Revenue: v. Fortune Tobacco Co.rp., .
RMC No: 4~.:99, whlch·.....c ~s,~r!J,l;l'.e~ -~Y.}~e /~='it)/td~ft· No~. 1!3-72.7'4-75, .fuly 21_, 2008). · .
· CIR -.. - 'shifts to: the -ex.ect{t4fl9 ager(c1es!i.-~f~~-'.!;dll •..-i1.!J · . · . ..· .
:· (pa"tticuiarly', -~_PC ln·t.hi~ case~,.he p,q.v-ilr-{o'_. · .. · · .Requisit~s· of Tax Refun~ or, Tax··ctedit: .
r~fund the.~ubject·tax~s. Th~s. lt~.1§ (~)"o_f . . .' {Grof-Cat-2P,:-0v_en). . . ,· · ·.
. . RMC f\ld. ·42-99, 'a.n: administ~ative issuance-· . a) rhere must .b.e a legal .Gro1md qr basi~
directing petitioner to_ claim the ·retund from .for ta?< r_ef_un~. 9r. tax .credit "(NIR,C as
. NP_C, c_a!'~orprevaii·qv~r ~e7tions 2~_4 ?n~J·:. ·,, ainende~ PY; TRAIN LAW, Sec. ~29); .
··.22~:)'of the ,NIRC, which provide that claims··
. for. refund 'of
erroneously. ·collected·. taxes .. ·· bj· ·There must.be a written .Claim for refund . ·
· .niust be filed with the CIR(Mitsubishi·Corp .. - .. · · · · ·or cr~dJt° filed ·.l;>y:the .taxpayer wfrh CIR ·_-.
Manila Brar,,:;h v;
Commi5;~ioner of Internal.' . · (NIRC as <?rn.endecf by Tf?AIN LAW,. ~ec.
Reve;,ue, G:.R:· No;_:17577~; Ju_n,:, 5, 2017, J. · · ··. · 229; Vda. d~ .Aguinaldo v., Commissioner ·.
PERLAS-B~RNABE). · .. · . . of-lry,ternal Revenue, G;R. No:· 'L-1.~9~7, ..
· _Febroary 26r 19.65); · ·
. '.: AOJho.rity ~fthe-Ombudsm~o- wh~n there
fs Su_~picion 'in ..th~. Gfant of Tax R~furid . : . · R.t;tas~n:The·clairriar:il must file a written · .
~ · · Tb~ determination.of whether to. grant a ta~ . cll!ilm ·before re~ortin~f. to: arf E!Ction· _in : ·
: 'refun·d·falls w.ithin 'the exclusive· e,spertise of·: · court to: ·.· .· .· · . · . . _
· '. ·the BIR. ·;Nonetheless,· when' th'ere Is • l). A_ffor.d the .. CIR .an :opportur.iitY... to :· ··
a
. suspici~ri ci.f «:iven Just 'tinge of· lrnprppriety: . · ·corfect- the action · of ·subordinate
. officers; and . ·. . .. .
· in ..th~ ·grarit· of the same,: the .dmt>udsh11:;1n. ·
·. could' . rightfully. ascertain whether- the ii)·. Notify ttie ·-government· 'that -'su.ch ·
determination was done. in accordance with · · · : ··t_axes.have been questioneJ:I, ~n~ the
law. a11d !den~lfy the persons who'rn'ay be held · notice should be borne iri mind in
· ·responsible ther.et?· In that sen_5.e, -the . estimating' the revenue "avalla.ble·for

. 2019 .SAN BEDA LAW CENTRAUZEo'eAROPERATIONS I ~97

--------~---~-------· ·- .... -
 :,
·REMEDIES.
s~ IJEDA LAW CENTRALIZEDBAR OPERATIONS.: MEMORYAID·2.019

. . . . .,,.· .. . . .
expenditure (NIRC as amended by · · 'ii) I~ is shown on the return.of the reciplerir that
TRAIN . LAW. . Sec. · 229; ·. the income payment received was declared
· Commissioner:of fnternal· Revenue· . as part of the gross 'income: and . .
· ·v. Acbsta,·.G.R.' No. 154068, ·August iii) The fact of withholding is established by a
3,··2007-j. · ·. . . copy of a-statement duly issued' by, the payer
· .' . to the payee. shov.>iog th·e amount paid and ·
exceptions: . . · .. · the -arnount. .of ..tli.e tax wit_hheld therefrom ·.
·, · i) · A·- "return filed s_hqwing . an" · -, ·. {Commissionerotlntemet Revenue v, Team ·.
' overpayment shall be. considered as ·. (Philippines) Operations · Corpora/ion· '.
. a. w.ritten· claim for .credit qr refund ·(formerly .Mir.ant ' Phils.,. 'Operetion
· . (N!RC as emendedbyTR!-,!N LAW, . 'Corporation), G.R. · .No. · 1,7~260 April- 2, .
. · "Sec. ·204 (C)); and, · ' · · . 201_4): · · . :,~ _- .: ..·: ·
·.ii). The .: CIR may, evet: 'wtthout the ·
. . . written claim · therefor, refund or Two.~;ear.P~esc;r.ipti~~···Preriocftor Refu:nd. .
. . · credit .any tax· where on the face· of Ge11era·1_Rul~: The_ tYJo~year prescriptive:petiod rims .
· the. return. ypo'n which the payment' from the payment of the tax (Nl~C,.$1c .. 229). ·· · .
· : .-. Was mode; -such payment' appears· . .: ,. . . . .-. · ·
. clearly ro neve : been erroneously . . Exceptions: . . . . . . .
paid (NIRC as emended PY TRAl.f>b,,.:~.1r Overpaid quarterly Income, taxes _. from the
. . L:A W, Sec . .229).
. . .:" ·•· · · ·
· · ,-,,$":;::1~
. -/?~ l):,, ~
1f J ·1\~~1 >1a~.tht? final. adjustment return is filed after the·
e]td-;:,:b( the _ta·xable· year (commisstoner ot
. c) The clalm rnust-b...ea Ca!,~ffe'a~d*~n\~~....,;.;~_.frtefhs~~en_ue v. Court of Appeals, G.R. No.
· -, fo~ reimbursement (f!f'i'r/lf!f~~C,J!l(ec!or.~ .. ~~'JJ;_Q'54~Japv.a,y21, 1999)_; .:: · : ·. _
. (ff Internal Reven 17: fu~;tef.'pe-~,:f:, ~
7f. ' · lP.. ; .
~\..'!,, ~- .. ·· . . : . : ,. ·
July-25,.195._0); ..·l/'J_r>; W 'i" R\aso~:Jt.i@athat pointwhere it can already
. - . . . . . . . ... y_/ . . ,r' 41.~ .
.8~ . . be·, detW.Q.liFleo. .whether. there . h1;1s I .been .
d).'Th_~ claim''fllith.ti,e CIR{and·.t e ~O-d_aY,r\¢'\ . -ov~rpa.ym~~(<f..bm17?issioner.·of: Internal
oen.od to a~peal I~~ CTA nyt ~~
: . 11~5._ S.f!G: ?) rl)JS'faeyfjl_ed:witti~-iY~!'S-·.-'-:"'~'9' I S ..
nps4,
...f,l'lt:t
m.!'enue ~v r;,f Appeals; G:R.. · No:
J.1rluq~ · 1, 1_99~)- . ·. ·.. · . .
.< • from. the d~te. ~· f l],~~e,nt'-of I e trufu min; "t_;; ;.:_. · .... ~ ;~ , .· · ·, •. • · ., .

· ·
pe~alty; ·an_d ·.. ...~ .ij .
.· , r ~-.
,:J.
\:>X
. . ":~':'-;.:~_) -~nl!~u._~,. f_i~~l i:idjiistme!l,t. ·return .was
f'L.-;·~lt.t.apyhJ'.iltf,,~e.rlre the. last day prescnb~d
~I.Ile:_ ·1 _he_ admi _\istf'~tl'1~ <-!~i(@~o~l b~ .. ,~~~" ~w roJtilin~/.
fro"!1 the date ~factual filing·
· filed w1_t!11n . th_~ said . ,~ye.~~3>e~~.:l'il 'Ii· . ~~{}jJ/ifnm_111;,s1qher 9,. · h_1t~mal·R~venue v. Court:ot_ .
., .. · .. r_e.gardl_ess of· any,.,.superv~~1ri1~~~~-/ j pp~alff.. G.R. 1J10·11:7.254; .J.an.uary·2;1, 1999)...
· - (N(RC'asamendecl~_TRAI~·~ -~i'£1',:r(· ,..: / ;/ · ·. · · . · .. _.:_·_ · .:.· .· .
·. · _22Q) ... · . .. . .,· . :.)", ~~- .... ..:...-.. -~~'l<~f ~'.f.9~.f·tp_ be: r~fande'~ .is ill_egaJly or :.
·e) . P.ti~r. payment of 'th~,t~~ ~ti1t~~~ -.rt_r~~~lJSly coll~cted. ...:,fror:rj.th·~.~ate.the t~x·
. Prq:'en: ;rnere !'ll~st be <'.l~'fu~{c~µe~fion1~ JI .l.\:_~~~~~~~XG_o:-11missio,;i.erInternal R_evenµe v:·. ·: ?f
. andTeqeJpt by__the...g9vem!)'lent.c5fd.tt~.;< .1.V~~.Jlu//or,~sMil/mg, G.R:_ No. J..-?.41Q8; .J;muary 3,··
·s9ught.t_o be-recovered and .tt-ils -requires"=---- · .1968). · . .' · · · .: , . .
···· ·.. · · factual proQf . (Collector "'of· Internal . . · ·
. • ·. Re'Vei(u~.ii. Li :Yao,.'·.G:R..' No. l,·11861, ·. ,: 1-f· ·,:_ax. is. pai_d. only ·1.n _install~_en_t;i·or.·b·~Jy in
· . December 2.1; 1963j:· · · :· · · . · , . _. ·.part - from the .date .ttu:1.fa~t or final i_ns't,illment
>: ;· .·. 1 · ·. ·
, : ·:._· • -~- •• :. : : ·~ • •• :· • :._ ·.~ • • •or payment: T.Col/ector v. "Prieto, G.R. No .. L- .
•

... R,easo.ri:·.Aclpit'n.for (~ft,1nd partake~ the nature of · · · :1.1f)76,'.August29, 19.61): . : ... ·' ·
>an.~exemption· w.hich can·not be. aliowed unless.' : .
: .. · gra~ted :in' the .mo-st, explidt.;and·. categorical ,.$) Taxpayer: mere1y ~ade a deposit - 'from the .
la.ngµage. (Commiss/oner..of internal- R_eyenue v.. ·.· -cqnversiori ·_oMb~ deposiJ ·ti:>· payinent · (Union
· .. S:C.'Johnson & Son~ Inc., GB. No.:127105, June . _Garment v: Col/ectot, 'CTA Case -No. · 416,. ·
. 25, . -1999).:··
. .
'>
.
.. .. '
:
· '·.· ... ·..
.
. .
. · · No.vemJier17,·195_8).: . ;. ·... · · · ·
,• : :·~
.E$sentia(. basic conditions· in order fbr. a , R~a~on:., Mereiy ··makin~-- /· d~~osit .(s' n~t··
-... taxpayer. to b,e-.entitted..'to·.a Refund .Claim or. .: . equivale'nt.. to·,.payment- until Jt:ie amourif. is .
· . · 1s_sua,-ice Qf.a Tax·CredifCl:irtificate . .' · · . . . · · act.ually· applied ~o. Hie. specific pu~pose. Jor
· .: i) The 'claim .is filed. with· the Commissi6ner of ·. ,. ..whic~ · it. was. deposited· ·(Union · Gari:nen~··v.
ll}ternc1i Reveriue· within the two-year'perfod yof!ector·of lnter,:,al Rf:!_venue;._CTA Cas(! (1/o; ·.
· frof!1 the .date .ofr,ayrri~11t.of. the t.:iX; 416,:Ndvemt,_er 17, ~958).·
.. ,\
l

:?98 ·, . 201~
. .SAN BEDA
. LAW CENTRALIZED
. BAR
. OPERATIONS
.
 · '. . RE.MEDIES ·. · -. ·
'}AN /JEDA LAW.CENTRALIZEDfJAR OP.ER(<TIONS-· M.EMORYAl~ 2019

. .
. . .
6) Tax t-i~s b~en ·w,t.hl_leid tro.rra ~ourc.e(through . v. Commissionerof Internal Revenue, G.R. Nos.
, · the withholding tc:ix. system) - frorri the date it · 171383 an<f17239, Novemb'er 14, 2008); ·
falls due at the. i.nd o.f the· taxable year (2-C,.
D_<.JMONDON, supra at 448): . . . · .. c) Wf)ere donor's ta; was ;:fss_ume.rJ by donee .
CTA held that where under the terms of.donation, ·
Prescriptive
. Period.
. ·..
the donor's fax was assµmed by· the ·donee 'but
said tax was· advanc;ed by the do.nor, the donee.
'prciper
0
was:, the. party . to claim. refund of. the
doni:>r's·: tax (2 DE LEON, NIRC Annotated
· Fi.nal '-'.Vithholding Tax From the 251h day after
(-2016),
. p'. 469-470J-[hf;,teinafter,
.
2. DE.LEON}
. ..
· · the close . .of ,. each
.carendarquarter · . Tax!payer.,s R~.rhedies Wt1en .No( Acted Upon
or Denied · · :' ·: · '. · . · ·. : . . . · , :· ·
C'teditable From. tJ?.e. .' Ja.~t day ot .. · .' i) ·.. Jt.' th~ C.IR takes· time '.i_n .deciding .the claim .
Wi:thholding Tax·. the month followlng'Jh.e . · and .th~ peribd of-2. ye'ars·isabout to end; the .
~· close of · the quarter . <sult or proceedtriq must bestartedin the· CTA'
~,. ·. duriilg. : which the· .· ·. · bef9re the end 6f the: two-year period .wilhout
Withholding .was made· . awaiting 'the:qedsion of 11ie CIR .(INGLES,
. · . .' (NIR.C. Sec. 58(a)). . . . · · Tax Mad~ L~ss: Tt!xiri9 (?018), p. 469); or ·
(Id:). ·.. · . ~ · · ·: . · . · ,,-./:;'). · ii) :If tlie claim. is denied by the ·cJR within the
·. . ·,. ;r~r.?Jt;; two-year. period, the taxpayer has ·30 ·gays
- ··Note: The final.withholq(ng taxes are consii~re'~\:t;i!\ from ..receipt of the denial within which to.
as. fulr and final.payment of the income tax·<ilugs ··~·i:1 • . · appeal tothe CTA..(R.A. No: 1125, Sec, 11) ..
. . and'thus, arenot :>~bject· to 'any··adjiJslmJnJ~.~:.:..\:;."(-.%-,,.· .. ,. ~· .. . ..... ·- '
. Thus, (he 2-ye.ar prescriptive·period.. COl1,l~~nces":1~r :_~.tt2µ!j.ry,llt!ii~IC:>n ~f. Documents: !n Support for'the
.. ~o· run from ~e·time·t~.e·~efuffd ist:<!~ ~rtaineq'.·v'I 9 ,:ax-R~rn~d:o.r:Tax.~redit. · <: • .· .• ·•
· · ,.. e .., t?e·~c;1te: such tax was .P·aid:;,~u14not·up.~N;;.-.
.the d1scov~ry ·b.y ..t~e· laxpayer oj1·tll~';~rrQ]J9Pi::iS
. or .excessive·. paym.ent .of :~~s-~\(f!1e,!'f5]!.olitan i(
t,\ . · · The. .s~ ·1~1s.s1on of complete" ..supporting
irl'f-',}~.
.doc;ut:rn _necessary to SUPl?O~ a claim for
· : re~u.nd orkfo~:i.s~ual'\ce:.of: ta_x- ?re~1t. Ho~ever, : .
Bank & Tn1st Co. v. Cn{llyw,8rc:mer~o'f!/nterfJ!1.}. L.. . fad.ur toa.sub.)n1t document:. .. m support. of .a
. R.ev6ri1;1e; G:R. No.. 18~'fPr2,.Apfiji:.t~i·20:JJ/j:·.-.. ~ taxp~f?r] ~!ai~.r~rund. at the administrative
~.. .. · . Fj'(=RL;AS-BERNABE) ..
z:~ . · · . · . '. · · . · . 'ef·~~?_> ~-- : ·iir;t'i : . le~f~~~~i?.J?ll~£.~vent_
p'!'21,v · , ,.,,) · ~~ · . .the.a~p.efilq:#)n-subm1ss1onof tlocuments 10 the
t~e ~TA from enterl~ining ·

~r . P~.rti~S Entitled to Tax Refund ~~"~tIDcic.:{~it.)! . ; {JI. . ad,:n.[oi~tratjve·Jey.el (s·i:iot f~tal ~o ~ jl.l,<l)ci~l,claim·
~· ~.eneral· Rule:-The perso·n entitlie;J,,t9. ask.for ·a ·t1~~o.rie.fur,d. The cases filect ~~{ore the CTA ar~··
f., ~efundl_~cr~it1s·tlie..taxpayerw~o p~id~prs~me;_;_..a..;.<.~~;;;;t;..fq1g~~ de,novo a~.d.P~r!Y liUgants·sh?uld P,fbliEf :
~· . a). Wnere tc1x has been shifte.d , ';z;· .. ,r,;:tl~~·~~\'.er-y~.m1nute asp~ct · ·.of. their . cases ·
..<;>n.·:who,:nthe tak,is im~o.se<J.:ps,'1aw·.. · . ·. . . (C~':11T1_issio~.er'?' lnlerm1l·.R_ev~pue . v.... : . . .
r :·(~ .. · .. ·:The )>'er;,.on
.and· who· paid· t~e sanie:ev~n if ·h~~.f.iififs.. the . ... · Pl7iltpprQfJB<;'n.~ofCommur,1c~t1ons_,: CTAEB No .
. : bWqerr- thereof t~· another. · Theref6re, .the. ·.. ·., 933·re; 9,TA.Case_No:-7.915,~qctobf:)_r7; 2013). ·
. ·st~tufbiy taxp·ayer is .the ··proper party wt:io · can · · ·· · · · · · ·
. claim lhf!.refund. The-tule ~pplies even if·tlie tax .. 'offsetti~g _61· tax. p·eflc;:iency· :antf. Claiin 61'
·· has.'been actually shifted by the tax.payer to his. Refund · . . . . . . ·, . '
,,: .. . customer~ and even. if the tax·t,as bee.,:,'billed 'as . '. ·om~etting ·Of t~xe.~; Is. all.oy.,e.<l o.nly whe:~ the
.r',, ... ·. a·separate item in the~jhcome. This is so becaus'e:. . q~termina~iqn ,Of·. th~ taxpayer's .. ·li.abiiity• i~ .:
~.·. ~ . : th~ 'tax is by ia.;v im'pose.ddi.rectly'ori ~he seli.edo.r:. . 'intertwined with the resolution of the claim lor tax .
or
~· · ·.
f~. · · selling .. (Si/kai( (Sil'}gapore).' P.te.. =t,.td. v:. · ·... . refun~·of erroneously, illegally collected tax·es
If;;• · ·. ·Commissiqner or Internal-Revenue;., G:R: No. .
··16($4821.January.25, 2012).- · · .: · ·
. · t,1.n9er Sect.ion..229 of th'ft>,NIRC-(Commissionerof
· ·: ' ~hter.nalRev~riuf?·V. T.ol~do. P(!wer Co./GR:No.

I · .· · ·. J .. . . . . ·
·:.. · b) · Wtrerf] claimant.·~xempteiJ.:,rom bqth direct and·
. . . ·. indirect taxes .··
· ...

: · .
. If. the ·.law -confers . exemption .. ·~nly from ':dire.ct
. .. 19($415,.D.ec::ember~•. 20.1.5)..
· ·. · · •
· ·Gove.rnmer;tt's Liability.for .Interest·
. Gene~! Rul~: .G.ovemment -cannot be .required
: · · .· .. .. . .

. ·. ; ta?(e!S, the-~tatufory ta·xpayer is· ttie proper party. . to p·ay.interest Ori taxes refunded to· the fa'xp.:iyer
.. . to file the cl~im for refurid/9redit: ·on -the· other · in ·the absence of a .statutpcy provision clearly or
{. . . . ....hand, !f the .exemption co.nferrecrapplles.to both expres$l5' pirecting or auth.¢Jjzing.such payment
:1 . , . · · direct and indirect taxes a· claimant is entitled. to (Comrr,issionerof lnternaJ Revenue v. Si.veeney,

.
:,ta~ re.fund/ .credit·even if the applicable(tax was G.R:.No. L-121-78, August21,"19(59). ·
· mereJy stJi~ed to· it (Silkai((Sing.appre) .Pte ... Ltd...
·~.. .
,.'·

I
.
. .
. .. 2bl9 SAN SEDA
. LAW
. CENTRALIZED
. . . I 2~9
BAR OPERATIONS

~·
 -.REMEDiES·
SAN"8£DA LAW CENTRALI-ZED
81\R OP.ERATIONS- M£MOR'(AID 2019 .

· j:~c.~ptions.: . . ·· ·-.{Commi~sio.ner. of -Intern~/. Rei.tenue'. v.

-1) When. the · CIR· acted with . patent ·. Concepcion, G. R. No. L-23912, March 15,
arbitrariness. Arbitrariness · presupposes · 1968): . . -, ·
. lnexcusable .or .obstinate disrega~d· of le_gal iii) ·. A ""'.ithh.oldirig agent has a legal· right to flle a
provisions- _:(Co,:nmissiof)<:Jr · of· intemst' claim for refund for the followin·g reasons: ·
_. Revenue v, -Amertcea RubberCo., G.R. No. 1 J · 1-:)e is considered a. "taxpayer" as he is
. L-19667, November ,29, ..1966); and . · . . . personally liable for the wi~hholding tax
·. · ·2) Refunds .and -credits .· of '·inc6rne taxes . _as well· as· for deficiency assessments, ..
witt:iheld.~on the '_wiiges·. qt the- 'empLoye_es ·sur~har.ges,. and· .perialtie~,- should the
· '(NIRC'as amen<;led·by TRAIN_L.(!+.W,,Sec. 79 .arnount of .the tax withheld be tinally '
(C)). ·· .. found to be less tlian' :the_· amount t)lat
. · ·. · · .should'..li.;ive been witf]he.ld under law; .
. . . ForfeiturEt of Tax ·Refund or Tax Cr.edit . . . arid ·.. : - . . . ·: ·· · :
. ..a)~ .l=orf~i,ure or refµnd :.;._ a·r.eturid check or:" . . ... 2f As anaqentof thetaxpeyer, t:ii.s authority.
warrant which remains: unclaimed or · · . toflle the ·ne~essary income- tax· return
' uncashed ·.withi.h ·5 years. from· dale .of and ·. to jemif. the lax . withlie Id to the .
. ·. mailing or deHvel'¥ shall be foiieited,"_i_n· ·, . government- Impliedly. ·includes . the
. . favor.of the g~vef!!tnef!fand the. amount . a
. ·-,~· ... ~ull:icirity tofile clalm for refund and·to•.
· thereof shall r.evert to· the _gei:ieral fu~g,_,~~~. . • an
". bring action for recovery of suchclaim .
. ·. _ {NIRC a~.. amended ~y TRAI~ ';fo:~Se~·-=u""· · }... ~""'. . ;,._: .(Commission~r. ?~ 1:1ter(!al" Reve~.ue · v. -:
.· 230(~)).... , · -·,. ·: .- ,41-,;:1· d~ · . .1\l / ~'Qmart Commumcat,on, ·tnc. ·.G.R. Nos.
b} Forfeiture of. ta>(cred!~~a':·~irwJ:ijch.---~-.j . )J'9{)45-46, Augl:Jst 25, 2010). -t .
· rem~i0s. µnutilized aJJ,~--~~.Y!t~C>rtl .... · •e,.~~.JJ,;. ·.A.~\/. . ·. ·-:: . ·'. · . .- ·· · ··
elate -of issue, _.sha11fi·p'Ui'\I~~~~valid~t~r-·d·r~-""i':-...:... r:J'QtCWl~'lethe withholding· agent has the
. I'd d h.I t .,.._/·,.-,, 1~-;.;p-;d
. . , be· ..mva I · a!! .• ~ J !(~OJ.~. · ·...- a. ~w.e -~s ·""'c
'it' · • , · ......,.._~gh't'.··'' ""'
t91A ·\· ~er . th·e '-taxes: • · ·
~rr~ri~9usly_ or'
.. payment for tnte~.cl'l'?e¥~· Ue t e~ a¥a it, ~ · l~~~a~·fOllectfd, [!e nev!3rth~les~·has. the :
the amount ~oy.i9red b, . tll~ (cer.tifieqte,,.c;-,,. . ·1· 0 _ligatiarit&".r.eqiit,the .$ame ·to the principal .
· ~halJ ~evert ~o t~~/g):.J)85al,fundj(N!R~a:si- ~ ·-- ff xpaye ~'a:!iwr.iJssi9ner of fn!emal !Jevenue ·
, ... :. ·... a'f!ended byTf.1f1~--Sec\2~f>t~,~ c"."~7'. . . · ·$ma_ .torq1unk;ation; 1(1,C:, G.~--:·.Nos.
Note: Un utilized ·.Tee:.'~' ay . ·\,riVE3rfe ~ "S 7904;5: M~~f'js{ !S· . 2.0.1 O, supra). ·. · . . ,
.- into.ca~~- re~und ~_q,ing)Jie va_
-~'P-~fieitt>~'-~. -lls ElCfdn~20H(A)_5!nd_Z:i9 (Par: 2)_pertaln .'
· th~ '.cc (R.8. ~o'.· ~{@Q)_. ~--. · Q\.~.i , J.(.~ · ~. t~· u,'je re~/d qf. ~-r:oneously. o~ ~ll~gal!Y
. B.urden of .Pro9,tor a·c1~i"1 ofRefon ~'\ . A . . ~.
.. c~Tected ifi.xes, ~~JI~ _se9t1Qt"!·1,J2(A)(~). ·.
·, ·T~.e ·burden .of pro?f to e~tabllsh_ ~itle~~~t~~' : f:Sf~rs 9WY_.to_ adrnm1strab~_e c~a.1':!1.~ with·
refur:id is· on the_ clair:nanna}~~x~r, l:l~iR._Qill;l(ll}J£1'.fT\~ ..) /th~ C~~m'.s_slo~e_r of Jn~emal. F.l~venu.e
~ · · nature of a: claim f9!. ·exen,8.!i<>JJJ'..feJuiJ~·~-// ·.' lfJ;ll'. eJ6"e~-}l)put VA! (Con;,m1s_sfar.,er_o(
.. construed ·in_ -~tri~tis~imi Nris aga(n'!L'tti~er.tity"'-~~·-..,.. "\W'fi'fp?'rial. ~evenufJ v:: Dash ~ngmeermg
· ... :clai_mirrg tlie refund· ~-d· ii:,_ f~vo!··~ti.V~1ng_1Vf A~ ~-~"PNL,_/nc., &~-- N.o.. 184/45~.
· pQ°wer. "This is:-the; r~aso_n-·why a:-cfaimatit~·m.U§~~~~.,_11,__ 2~~?)- .. ·. . . - · ... _- .... _-
Qecembe~
.
. . poslt!vely show·· ·compliance with _the sta\utor,y.. . . . · 4)._ ._Cla1f!l of.re:~nd_or t~x cr~d_1t.fmun_~tihzed:
. : _r~tjl!lremen~ ·p.rov(cte:d· for' ..unde( )h¢ Nl~C._ in. ·_., .... · : . _cred~table _mput VAT 1~ gover~ed _,by·.:
.. ordefr' to· s.1,1cc~ssfulJy:_purs·ua -one's :claim· - .· · · ". ~~c~on.~1'.?._{A} of-th!'!_NIRC. JP/ease
· ·. '( Winebrenoer & Hiigo '/nsi.irance· Broki!Jrs/ in.c. y.' · ·. , .. refe,rto VA_T·_ch.apt(!r);.._. . : : . _ _.·. · .. .- ·. ·
Commissioner ·.o_f. }n(ernar -J~even11e; .. 'tG.'R. ·, ·. 5) Se?:._22~ of µie NIR(;·.refers; t9._J14d1c1aL
No.2065~6, J§*nt.iary 2iJ.,..4ot5). -. ·. ·· .. · ,· .action fo~ the c.eq>y_e~y..of,-~ax,w~1le:S.ec.
· · ·· . · . · · ; · . -· ; .. _. . . . · .': 2.04 .app_l.tes_to ~drr11rnstra.t1ve.e!a1m~ filed .
.• ; .
. ·. ·other Consideration:;:.·.·:-~ · .- . ·· : ·. ·· · : with t~e BIR.(2 D_E·J,,~qN, supra at·554) .
. i) '· 'Ray(!lent uncNr -pcotes_t i1r;,J ·,eq.uired: - any.. .. . . ' ,. . . . .
. ,·
. suit qr pr_dpeedingfo( refund or·credlt rnayb_e. Carry-Ov~·r.Exc~s·~'lnc6rne·. ·
·m.aintained-whether or oo.t such t~x. penalty, . :: A_ -Corpqr~tioo. .. may·,. Carry·Qv.er.' ];xcess
. .or sum·has b~en,paid undeq>fCitest'or..duress' Income _Tax Payments in the -~ucc;:~eding' .
... JN(RC._.ii'S:-am~;,c;1ac1,.·by .TRAIN ·LAW,'. Sec. . taxab!e Y.~ars in lle!,J of ra?( Credit.or r~f4nc( .
. · : . "229),' . . . . . .. . .. . .. ·In ~se. of excess_·. incom¢_.tax 'payments, the. .
. . ii) .· Tl)e· r.ernec;fy 6f ta~ reflJnli cann~t b~: availed · : · : ·· 'cor}ioratioifi~ given an¢ther option asideJ,or:ri_tax··
· ofto reviv.e·the.right.to_contest"the va_iidity of · credit or.refund. ·$u~ti '.e~,:;ess.payments·may t>e··
an assessr.neiit once "the ·same has·been lost . carrfed-qver and.· credited against the estimate'd.
. not only by failur~rto appeal.but' by ~Ile IJip~e.-' quarter.ly·. income. _tax- -llabilities for the. t~xable .
· of the reglementary . period with.in which. . q1,1arters· pf .the· ~ucce.E!cllng taxable.-years. {NIRC
appeal ·· could · have ·been. taken· · as_ amendea by TRAIN_ LAW, -Sec. 76): ·
. . .... .. . .. · ·...

. .
300: I ·2019 SA·~ BEpA·LAW CENTRALIZED BAR OPER~TIONS.
 · RE·M.EblES .
-· SAN B_EDA LA.WCENTRALJZEDBAil OPEJlATJON&·_ MEMORYAID 2019

-·
The options. are mutually exclusive: .Once the
option to carry-over the excess payments is
made, such .shall be considered irrevocable for
Hie
&c&i~
.
when:! the sales ·.were made Thus, It ·is only the
.
after. the lapse -of-2 years from the taxable quarter

administrative claim that musi be filed within the two-.

that taxable period and no applicatiortfor "refund year prescriptive period; the -judicla!· _cla_im need _not-
or Issuance "of. a tax· credit certificate. shall be . fall within the two-year prescriptive) period (G/R. v.
allowed (NIR.Ca§ emended by TRAIN.tAW, Sec. Mindanao · Geothermal II Partnership; ··. G.R. No.
7~. . .. ,. ..
_ 191498, Jenuery "1?5, 2014). . ... · ~ ·

N_ote~ The lrrevocabllityrule (Sec. 76) is llmlted
only to the option .cif carry-over such · that
taxpayerla still free tochanqe its chelce after
·electing refund of its excess taxcredit. But.once
··it ppts-,o Garry over."su<;h.·excEiss creditable tax,·.
after -~ecting refund or.issuance of tax c~ed.it
.. c~rtificate, . the .• carry-ever -ootlon becomes
irrevocable."Accordi,-igly, the pr.evious choice of
avclalm for· .refund, even· ·lf .sobsequently"
-o:.. pursued, . niay ·. no· longer be :granted. xxx
UnderSection229, the. taxpayer need not wait for the
. .action of the CIR on the clalm.forrefund before taking
his 'claim ..to· the· CTA. Both the claim:for refund and
the appeal to the CTA·must. be done within the two-
year period.' Hence if the· period. is· about to explee,
. and the. _CIR. has not acted upon the. claim, the
taxpayer·may file and. appeal with, ttie CTA,: without
· wa"lling forthe CIR The. suit 'or "proce.edirig must be
. -started in the' -C::TA b·efore'the end of tne two-year :
. period without awaiting "the. decision .·of ·the. CIR· '. ·

t- · .
·,~ ·

,f/ .:
: · Se<;:tio.ns76 and 228, paragr~pif(c) of tlie NIRC,-
a~ amended, l,lr1!"Tlistakably·evince that choice of.r°"'
'. refund or (ax cr§dif certiftcate is-not irrev~91e\t(
· (INGLES,.S(!pra at 4~9);·
· ·, · ' · ·
· · ·

t.
,..
( Unilier.sity '.. Physicians Services,r ·. lnc/:)'t,:;,,:·)i.,_· .
· Marlagement; Inc.. v. Commis{Jioner of lnt.e(o~I··... -;e.~
C : ·'
. OLLECTI(lN ·
..
··
. · 1·
."("_ Revenue, G,R.·No_ .. 2Q5955, March 7_, 2018~; tf'i:~··I !'""'!'''!',,·,,..,...---,..c~,-...
,,....,..._...,. _..
.. · · ... . . ; . . . . :!' t~'.!'~tt<''!'"?.;::,;:::ij;,,~ k~,) ; . : . . .
Ji.: - . . P1easrr referto :1n'c~me. rax chapt(jr-:rpfiurtiief!1f 1 ... Pir*t~7ti~1811ect . ··
;· · · .. d,:s?.u~sion-., ·' ,: '. . . · ·:~;;,P_"· . ·. : . /L-~~ ·2._ Perio_d_<'t.Ylipiitati~n.on ~01.tection . .
.-, . ·· .· · . ·. . ·. . . .. ····)t£;,/i. ·· ,/J:t,',\·.1.. 3. Surt1ma,~,.P~('~mm1l:,trative-Remed1es
~-.: Excess ~npu~ VAT .(Se~: 1_12) ~E,x~~ssiv.~ly 1"~1 .. a. -1(axJlie_r'l!. · .. · : .· · ~
':' collected ~ax (Sec. 229~ . ,-•~.: · · ·1l{~ r;, 7•• .,, · . ·b.J)istf.ain1,ofpersonal property· ·
~~- · In a claim ~or ref1-1nd :or credf~~:exc'eg~i~nput_YA~·~!. _ <?.fLeviofrJaiJroperty- .. . · .
_ .- • 1,mder.. Se_cUon 110.(~). and S~~Jtfn...-:Jl;J$~r·the'll!~~t pt~ 4. J'G~r~~-B-e,m:~t~~v . . . ·. . .
- . VAT 1s . not ''exG~i,s1velyp collefjed .a·s\!.'ll'f.de~st"r:,p(j. 'f'",l . ?J.~Cj_~ · _ ·· ·
· ;·, , under Secti~h 229:: At !h_e.ti.me ~f·p~/it:e,f'khe.in9it (; ·. . b .. C:riminal , .
· · VAT . the a'!lount. paid. r.s .t~e. cp_rr.e,~. a~~:) proper . -~~.:.lr,:;lnJuncllon · ' . ··
;, arn,ount:·The person.legally liable for-!t.l~i,>ut VAT .J.~:~~/f';i,~n;;.,,·. ·.·. · .
cani:iof-claim
. . .
that he OV!3rpaicf.the
. . . .
in~!-1.~'VAT
I ...,,, ..
by-'!°tne=:u·J,~~'GWER
., .,( . .
TO ~OLLECT
ITl~re existence ·pf afl Mexpess"·:input. V.:..1:5;. T.Me~<term .C9llection . . . . .. . . . _ . ·, .
"eX~es:s"input YA:r-.$i'!'PIX mea~s ·that t~i~1,.@tVAT · : ll i!?_.the·means; proc~·ss, anctmetho.d-~fi~pl_~f:Tlenti.ng.
ava.1.lab.le-·as credit ex<::_eeds ..the output .V/\r. (Coc8"'. the ·tax. laV?- for the puFpose of ~~llsfy1ng ihe tax
Cp~a :aqttt~rs·, PhiNppines,· Irie.="".· Cc;immlssionet'of : . obli~at_ion, The actual ef!"prt·in obtaini_ni:i:payment of
· Internal Reyehue, G.R: No. 222428,-.-February .19, . the tax (1 D.OMONDON, 'supraat 190), ·. .
~01.?). ~ ·: . ,. · · · · ., · . · .._: . .-· ·.• . ... · ·.. . .. .". · ... · ·, · "-. .
·. · ··· Requisite$:. (AG.-NoWr.i·Pl'e-FLo-NoEn) ·· · ·
Fr~ the .plafn -text·of'~ec'ti~n229·, it"l~:clear. that ~ha.t Th~. follciWi~·are.the requisites. b~fore "taxpa"yer·may
ca.n . be_ refun~_ed pr'· .credite_d' _ls ._.i ·-hiix" "tl}at .I~· ,. ·-be required to";pay fl)e assesse~: · .. ·:· :'._... .
"erroneously,_ illegally, excessivelY. or in any manner. · a. There,. must be·, an. Al,sess.ment · that has
. -.v.roogfully col!ecJ~d-" In· .short, ·there· mu_~t, be a - . ·,.. become'final, eicecufory, and_co!lectible_;
~- :.. · Wro_i:1gful-payment becau~e "'!haf is p,iid,. or P.~rt _bf i~. .: : ~~ · · The ar.not.inf.being· ~oll.ected_must· be· par.t: of
t; · · i~.lega:l!Y due (C9Ca~C9(aBo_ttlers··Philippines,·:f[7c. v.. , · ·. ::.the§;qv,ernment's ac:;courits rec;~ivable; ...
S:.:, Comm.Jssioner ·.of. _Internal . :Rev.enue, ··. G_;f?." Np. c .. Th!3 ar'nounf being collecteq must" Not· have..
~-• 2-2?428,'Februa_ry-19,;2018)., · . . ·.. · been Writter:i"-off or-cancelled; . ::---:-: ·. .. . ,
~· d. : The right of ~i1e governri..erit to 'collect has. not·'"·
0.istlncilpn' be~eeo the appllcatiora·of the 2-Year .. yet ~scribed;. . · :· ··. . . . .
. pr'iscriptive p~rlod.unde'r Sec. 11·2 and Sec: 229· e. The:proper. pro.cedure foi..~llection--whether
Under. Sec,· 1,12," "the 2-year. prescriptive "period .: .. . atlminlstrative or judi~ic;il ate. followed; .
app!i_es orily:to the ;,idministratjye claim ·_before the. · f. The taxp~y~r can still. be Located; and
CIR and not-to judlcl~I claim before.the-CT A because . g: The government is. _.Not E.!!loined from
· .. tl)e taxpayer alwa~ ·has 30. d·aysfrom the decision of collecting the tax (2-C DOMONDON. supra at
the CIR qr from t.He lapse of.the: 12~ay P,ericid even 334).: ·
:-

2ois SAN BEDA LAW CENTRALIZED BAR OP5:RATION$ I 301

 · REM EDI.ES··
SAN BE:01- LAW CENTRALIZEDOAR OPERATIONS- .MEMORYAID 2019.

· 2 ... Pl;RIOD·OF-'L!ll,IIITATION ON COLLECT.ION If .the assessrpent h·as become final and

Gener.al ·.Rule:· 'fhe prescripfiv_e petioo to collect execut9ry,' the .. assessment is .. considered
the jaX~~· . dU!;! is 5· y~ars· from the :date of . correct which ._may be· enforced by sumi:nary or
· ;:1ssessme11~ (fVIRC, -Sec. 222 {C)).. . judicial remedie~ (R.R. No. 12-99, Se.c. 3.1.1, as
amended.by R;R.- fo.jo. ,18-2013, supra).
Exceptions.: . . .. . .. '
i. False or fraudulent return with-.intent to evade A taxpayer v,ilio fails .. to contest the . BIR
· 'ta·xe's: withi'n 10 years from discovery without·- . · a·ssessment in the C.TA.cannot contest ~h'e same
ne~J! tor prior asses_sn,ent ·The .govero.m~nt ·in· l;ln action to collect'(Basa v. Republic, G. R..
·m,ay ·me .a proceeqing ·;n ·court (NIRC; · Sec. No. L~45.277,- August:,S, 1~85), : . · . ·· . ··
. ~22 (a)).· .. · . . · .. · .
a
. · ii. .. Fa\Jur.e or omission .to fiie return: within 10 . Wh.en tax is deemed collected·· .
. years .. fiorn . discove.1)1 . .without need .. for . J) . ft collection. is· througt,-suml'l'lary renie.dies
·· ass.essm~nt.{t;JIR9;.~-~c.)22_°(a)). · :· ·. · _... · .. _. '(disttaint an~ levy) .~· when·. gm,eminent
· iii. Walyer ,n. wrjtinff:executed:J')'efor~ the _5~y~ar · · ·. · : avails of· .a . <;ll;,tral11( and ievy proc~ure ..
· ·period expfres;· peciQd ·agreed. up,on . (NIR.C, . · . pres·cribed i,mdet'the NIRC (ABA.N, sqpra at.
'Se~. ~-~2(d)).. ·.. _; '. .· .· : . · :· , .: . · 283-284)c .· .

. ·Assessment .n,eces.~ary,pefor'ecollection. . · ~""~- · Oistralnt and ·1;vy _pr9c~dings are yaHdly'

General Rule: Assessment p'rec!'ldes~~lte'~lJ-~, :_- ~_,,_)2e~un
.~r. f'~ · · ):\.
1J·· or commenced bX the Issuance of the

·. .' ' . ' . . · ./":{""r.:;.

.(NIRC, Sec. 203). · •. . .

Exc'ipti~n:When:tJ:il3 u~paid~-'if~s3-_:,..pa:¢p~r · ·
~r~nf and service thereor on the taxpayer
,.,:~~'l v.L (,13_~r,{it;t..~of..the · Philippine
· ~,,,,_t~omfpi~ioner
Islands v.
·of_ lntemal · R(!venue, G.R. ·
· return ·as in. case ofa ·s~lf-?~;>es~~;n~e>'la~i~ .. : "N~<!,_3!1i}6. O<,tober..17;2005). .
under-~he pay-a~-yo~-fil~)rffl'fym-,!f."."tlJCh·?a~~··.. .'\o/ .. ·~· \\7,(.)\.. · : · .. _ . ·.. · . . . ,,
.· collection. may ·.be· msti~}!ft~'~nqut1need )J.Qf , i
:./&,_ u) f:_ ~ol~~ftmnJs· thro~gh. judicial · remedies
assessment pursuant toJSeo. J6 o~pe l'IIRC. P-1" ~-1~, . . . ·., civil 01~ ttr.fn1ii'j1l) -:- When the government
.(DIMAAMPAO, .. Ta'){- Pjrff!iJ.!esJ:and. _e7ifedies·. f -: .
Wes th&.'e9.l!W~flnt with the proper regular·
·'. (201fj), p. 15B-1f?9) '[her,r;·n_afl<?HP!M . P'A1':-· .'. r,....,;~w-_
jria!: coljrt ~:ortwh~re . the assessment ··;s_
· .: ·. : • .r: · • ., , • • . -:. -~ », ~
·: • • • id -- · ...2rbi
• ·' -a·ppe~reillt(), e,c:rA; !:>y filjng-..an answer to
·_No'·· ·proceeding .. -~o \l. "'<!:cql~'cti\~ ~viitf\ou · · ·,. : l~,ax~y.er' .jPetmon, for,_·review wherein
assessment <' .. \\. ·ff.} ; . '\.?:. ~ > .:
lffi 't.<;1~~- ., ~~em!?f~~~1t~ ls prayed tor.,(f'hilippine

.. · General Rule-:: No ·proc·e,dip'g'cir:i co~.thou~!t ,(,tfa'i?."/ 1{.'ly.at1onal 011. Qp. I(, Coutt. .of.Appeals, G.R.
- . . . 1=1s~es.sment !or: the collei!Uo.n of.~~:~h··t" ~~~~· I · .-;;~~'yNol. 1 , 99]6,-Jprif:26. ~005). · . ·: · · . . . .
-._.. b~ comn,enced (N(RC, Sl:i~- 203). • . ~ y- ,.ff :_ : . . ~ .. ·. .
. . · . · ... ..:· , ..._ · · \ · · . . . Sr:-"lE"-~ l>$.)lsP,~ ·. sion . ·· of · Runn_iog · of· Statute . of
.. · Exception: A. proceeding}l.Q cou»t; f~n~~(i,nitattg~-/ ·. _.· . ; . · .. · . . · .:
· collection ..o~. tax. may ;b_e · file~ wJ~(;lt) 'l.r~~~~~i,~~~f to:,dis~u_ss~ons '!ric!f)r Assessment.)
· .. asse.~sn'le_nt m .ttie following c;ases:~~-VI 1:.. .A.' ·(A~~>:;,; · ·. · · · ·· . ;· . .
·:'-1) ·. Fals.~: orf~au~ulent.,r~_turn·wi~~ in~erittto-fvad_e·_~V~@. ~MJNl~!RATIVE~EII/IE~l~S. . .: . . . .
tax; or·.·. · ' ··".. . ;·.· .. ·~.,,."".'~-.a . .' -.Enforcementof Ta~ Lien
2) .Fail.ure.,o.-file.. r.J3turn· (NIRC,.,Sec.g22 (a)). · .. ··· Tax Lien· ... _. · · . -:. . .·
· .. · :_.· .. ' .. ·. ·. ·. . , .... · : .. ·. · .. :· Tax··iien .is: a .legai __ qaim cir.·:cha!'g_e· on
: Note: A:warrant, 9f .d.i~trai/it ·aQg/or le\i.y wit-ho~t. . . '. ·.. . · prciperty, re~l.or per:soriat,esl'abli_shed.by law
· :. iss_!Jari~~iqf'a FAN' is.vorp (G9/den.Hary~st.GJ6.ba_J· ·. · . '· · · .. : · . -as se.cu.rity in defa4lt. of th~ :payroE1nt ·ot taxes
Corp. ·v.. Com'missionerof.ln.t~ma_lRe.,i/enµe, CTA ·.·· : . : . -.{Hongkong·arid S_hang71_aiBankirJg.-Corp. v.
C~seNo. 7503,.'September.18;2009). ,· · .. . · · . · Rafferty, 'G.R. 'No.. iA~.1.8.8,. ryov.ember 15,
·' .· .. ,.. : .•.· .. ;-·.. . .. ·.·· .. 1918).'· ...... __ : .: . . ..
W~e.n.- .. : do~ .· a.~s-essed fi:IX ·.. be·come.s ·
·collectlb,1~; · . : . : : . ·: . .:· : .. :A tax-Ii~~ ~reatec(i~ f~vor'Of.the g~~er-~rn~~t
The · · gover'nment ·can. collest when . the . . is: ~uper-ior to._all other-claims or preferences
a's's·essm'erit'becomes final and executoiy tor: .. ·(OIMAA_MPJ:iO, .~l..!pra EJ(199) .. · ..
. : <!). ... Failure_.to protest_:F~DJ.i=~rf Within. me·
. ' : · pr~scri~~d period;·'·,,·.· ·· · . .... · :-.l'l!~ture an.ci'Ex.t.eot-~fTax Lier, '... , .
b): -Failure: .tq appeal· .F_DDA. .. witli1n the I!
a_ny_person, co~j:>qr.ation, partners~ip; joirit~
.. · ... presc;dbed:p~riod; or. . ·. : . . . . . ·ac;c;oont, asso.~iat(9n ·ot.instirance company
. c} Failure to appeal .an advers~ decision of . .liable to pay an-.ir:iterrial revenue tax; neglects
. · _'tlJe coilrt'withJn·!ne prescriped'_period.. · · . Of. refuse'sto. pay)he same after demand I the
~, ..... '. amount' shall· -be' ·a : lien in ·favor . of the
. ~o.vermnentof the.Philippines from tre _time
"'· ..

. .302 I 2019
.
SAN
. SEDA
. LAW
. ·.. . .. . ~
CENTRALIZED BAR OPERATIONS
. . .
 R'.EMEDIES
. SAN BEDA"t.f.W_cENTRALIZ~D11.A.R_ OPERJrrtONS- MEMORY.AID 2019_

' when the .assessment was· . made by the .Extinguishment of Tax Liens:.
C9mmissioner- -until paid," with interests, . Tax·liens may b.e ·extingufsh¢d as follows: (P2FD) .
. penalties, and costs. that. may 'accrue in . . · .1 )· ·sy ·~ayme.ntor rescis.sion of the· tax; ·
.addition theretoupon all.property al)d rights 2) By Erescriptio·nof the right of the government
· Jo· property· belonging to . the taxpayer:. : to assess. or collect (NJRC, Secs. 203 ·and
· Provided, ·rhat this lieri shall notbe valio ': 202);· . · ·. . .,· .. · ·
·-,against any mortgagee, .. purchaser or ~) By fail.ure to fil~ .notice·of lien in .tha office.of
'judgment : creditor . until notice :.of such lien _the Register of Deeds as·again.sfm9f1gag_ee·,
. shall be· filed. by the Comrnlsslorier in the · purchaser or judgment cre(!itor (NIRC;· Sec.
.office of .the .. Register of Deeds' ·of· the· 219);.oJ · ·. · ··
. . province ()~ city where the. property ·of. the ... 4~ .. By_Qestn:Jction of the.property subject of the
· · · taxpayer .is situated cir located· (NIRC, ·sec. · lien. · ·.. · · . · . . ·
.. '219) .. :·. ·. · . · . ·. ·
. . · · :'. N~te:-·ln casesof Nos . .-1.& 2;.there.1s no more tax
: . When ."d.oe"s ... ttie··_iien· in· favor. of the'. . : .liability; UnderNos. ~ &-4, ti:ie taxpayer is still ...
{: • ·. ·· Governmerit ariae: : . · · . . liable (2 DE'LEQN,"·S.i.Jpra.at498-499).. r- ', •
( i: · With".reipect to.personal property -' from · - ' · ,.· ·
.. the· · time the tax became · ·dile and· . b. · Qi~fraint:of,-Perso~al Property '. . ,
· · payable; arid. · · . ·. · ·· . Distraiht 'is a..··remedy Whereby the ·cciJlection of
ii: ·:·".'fith. resp~~ to :eal; l?.rop.er'ty- fr?m :the..('~~ defi_nqlient taxes _is enforced on the ~oods; chattels or
. trme of ·reg_1stration with the ~eg1ste~i5t7Jf· effects and other. personal. .property, of .whatever
Deeds : .. ((;onilJ?i~sioner· of _lnip.[f!./Jl·?-~ .9haracter of the taxpayer (NIRC, Sec. 205- (a)J; . ,_· ·.
1
. · . Revenue· v. Netionet', Labor. Rel~(~e.fJ~rr· ~,J,. ·· . . . , . . . ·. .·· ,. · ·
.. Commission,.. ··:·G..R. · No. · '14§}8~;·(t--;jt,Jf)n.~s of D(sJ_.1:aint;, ·.:
· · //" .t;A.1i"fE.'.:,£t!f:~t"~f;:Ctyat
. ·
Novembere, 1994).
. · ·
. : ·_Goverrymeot.~sClai~ Pred(fqt;f~· on T~f__.,.,!;,J.
/~,,.;Y_.. . ~ n .. · ""q/'~es6,t{ed·
Distraint . · . '. .· . .
to when· at the· time 'required for
· payn;(J~)t,a pe(son fails to pax hi$.deJinqueot.
. ..

·.. _Lien_ i~- -.~tip~rior .. to. Claj'}'l>,r,}~ed ,9:n~l·~ . tax,~qJigl1tion(NIRC, Sec: 207.(~)). It ·\s the·
· .- . Judsmen.t .. · :- · . , . ;,;r;1s-);rzn~. Xi . ac;tua'··. s~zure arid ta~ing, possessic:m of
: · It. is settled, !hat. the c_laJ~(the-gpvern~e~t ~-;;, . . : plf~o. ~I \ property _of : the· _taxpa¥er
· . ·' _pr~ica.t~ oo: a tax.r.ft~f{ii_~ ~j~E:_fiort~ ·"the\. y,~, .· {MA ~LA ~O, Reviewer,sup,:a at _5~3),... ·
. . 9la1m .of a prwate 1,~~an~"P'reg1~t~d'O);!·.,a . ~~ . ~Y'-~W!;~_i,J?~io/. . · . ..
. ju9gm.ent.'.!he·tax lien ,c1ti~ch~~.,,91:9nly,fr~Tt,,:_,: . .. ·ii. :-:e~oitt';.'.ctive Oistraint : · : .
· theservice~ofthewar~ant'°i~..§~ti:aillf;:\)utfr.9.1)1 1 1 '· ·, l~sue<;t--where.no actual'tax, q_elinq!Jency of.·.
. the ~irt1~ ...t~e tax beca.m~ ·du«;. aric:fi:;P.ayable · ~~:-=, . . . th~. taxpayer is:~ecessary before the·_same is· .
· ·(Co'!1m1ss1oner of _Jnfer:n~I t~.!,~-':1?1.fe_ v:,,1.~}l~.f~1il..~i1i~~~-orte~to.by tlie-government(Id.)_. . . ..
. Natiortal LaborFelat,ons.COtr;,ll)1SSJdr'/~,.4""":-.r£1t'•.·.,t Uf · . . .·
No.·j4965~_-,Yovember_9,1994/.{. ·._ ( (;7 .. ·. . It_-·~· a_ p~ev_en~iva ~E!medy to .forestall possible.
. . . . .. ·... ·. ·· . . · ·..- .. . ~~~ . d1~s1patior) . of · the· taxpayer's assets . When ·.
~ote:· T)1e power pf the .co.urt.in e;recl!Jion QT · · .. 'c:felinquency.-takes place (ABAN, supra at 23~);... . ...
-juqg:rri~nts . exten_ds . only , to. prcipertfes "' . ~. : .· . ·, . . . . . . ~ . . . ; . · .. : : . . . .
... : unquestieitipbly··-beloi:lging· to: the·.·ju_dgment. · ·. · .Not!;f:. Tt)e rerJ1edy. of dis!"faiO:t and levy·shall not .be .
;; · · . ·debtor.: ~xecution sales affect ·ttie rights of. · availed of.where·the arriou"nt" of the.tax 1nvolved is not .
·- . ; ; "the judgment debtor only,. ~ndthe purch~se"r". ·,. nior~ ti:ian ?100, (DIMAAMPAO,.supra a( 168). : .
. ·. ·. in ·ai:i auctipn "sale: acqu"ires only-su"cti right as-·· . . •! . . . . .. .

·. ·the judgment d~htc;,r:.h.ad at the tin:ie- o(sale . Pro"c.edur.efor: Actu.~1·Di~traint ..(CSR"NS)..· . . ·. : . . -·

.. (MAMA[ATEO;· ··:Re.vie"wer · .on ·.Taxation· . . 1) g_omm~ncen,enf ~f,distra,iilt prOCE!edings;·· .
. (2014),. p: 5.61) [hereinafter)v1AMALA.TEO, . 2)°· .'§er:vice·ot-wan:.ant of distraint;, · . _
..· .:Reviewer] : · . : · . · ·.. . , . 3) .BepoJt.ori"ttie-dist_raint;· ··. '' · ·. <:
f.: · ··' '> • • • · • ._".4). N_otice 9f.sa1e·of·distrained"properties; and··
.r . ·· '.' vani:iity.· ot a tax nen s>· --~a1e at public auction ·
., l:he 'lien ·sh'au:·. :be ·-vaud.- agair:ist·· .any : . . . . . . . ·. . ...;· .
· ,· -rnort a 1
9 9ee, ·. i>urchaset.or Judgment creditor-.· .. · · j ·.. c·Q..;,~ence~erit · ot·di~ttai~t. pr6~e,ed.1t19 .by: s·
. .. . onlY wli~n notice 'of sucli lien iihall be filed.. a) CIR .or his. duly authori:ieq r.epresenta"tiv.es;..
·. by the CIR in _the ·office of the ·~egis.t~r'of. · where· the amount involved is in: excess- of
Deeds of. the prq:,,ince or ·:City .Wbere the· P1M;·.or .
. · ·: prop.ertyof the taxpayer is sitLi~ted 9r loca.ted ti) Revenue [?istrict Officer -·. whe.r~. ~mount
(NIRC, Sec. 219). . .. '.' iiwqlyed
. is f>1.M. .Of.
. le_ss (NIRC, . -Seo. ..
207_ (A)).

:.,
:. 201~ SA~ SEDA LA~ CENT~LIZE.O BAR, OPERATIO~S .I 303
~~:-.=---~--..-~IIIIJllllll--~--~~-------~----~------
R.EM ED IE S " .
: t{

SAN ·BEDA"I.AWCENTRALIZEDBAR OPERATIONS·-h!E'MOAY A(Q 2019 : . . ...

.. :l'lilllall
~~llll&R ......
'• . : ·.
:imi::.1111~-a-
.. !l'Jlillllll~IIBI•• B,...........l!!ll;J.F•.[lllllilmlllilllll:lil::lllmllllllm!llllllllmMNIIIIIHillll
~): Service of warrant Qf dlstraint . sai-i~ccourits may be distralnea notwhhstandin9.
a)" Di~tralnt.of Tangible Propartlea. · the Bank Secrecy Acf (R.A.. 1405) which· prohibits
' : The officer "serving the warrant- of distraint ·Jriquiry irito. bank accounts; ·SlhCe· in .the·case Of
shall· make or· cause to be" made an account distraint, no. inquiry is. made. ·the . sut "simply.
.. of the . goods, chattels, effects or other. seizes sci much of the deposit a~r ,is. sufficient to
personal - property dlstrairred; a. copy of _ discharge th.e ...oqligatipn" wjtJ:)out having .to· know .
-which, 'signe_d.by hil:t):ielf, s~~II be left either how much the_ dep9sits.ar~- •. or where the money .·
wit_h the owner or person, from whose: .· or ·any part.ofit came from (Opinfon· of Sec. of.·
.: possesslon.sucrr goods, chattels.. or Elff~cts Ju.slice! No. 54, s. 1956):: .' · · · · . · _ · '
or other personal property were taken, or at ...
the. d~ellfng or . P.lac·e." 9f business of such 3) .· Repprt ·on the·_d.istr'aint , · ·: ·
person .arid with someone of suitable aqe . a). It shall besubmittedby the "cl_l$tralnirjg officer.
and discretion; to which. list shall be added a . to "the· Revenue District Otticer,: and 'to the
statement of-the sum. demanded and note of · Revenue }~egioi:iai" · Director. witnln :fo days
. 'the-time "and place.of sale (NIR~, .S~c .. 208). . .· from receipt ofwarrant. . :-· · .·. : . . .
. :- . . · .. ·b) .. The. CIR .. or .. his·. .duly, ~.authorized
.·b) Distraint: of_l~ta·ngibi'e Properties : ,. .. representativehas thepowerto lift the order
. . . i) · Stocks and other .securttles' - s'1all. be , ·. · . · · · of dlstralnt (NIRG,§ec. -207.(A)): · ,
.:_ -distrained. t>~- SE:i'ving .a_· copyv of J~~,,..;.~. · . · .,' . . · · , .. · . . ·.: · . ·
warrant .of .distraint upon the ·,,ta:x"f%ye1u 4) '.~i;ittf;~ of-sale of dlstrained'propertles
-~ncl ·upon-:". the ·, ·president-t:"m,'J'~_ager,l . r~.;))/No)k,.e shall sp_ecify the ·time and placeof sale :
. . ·t~easy!ef, · o~·-othe.rresp;fisil'il~ffii~~#-xa-=~~ ·. a~~~~rticlesdlstralned: ·.. · ·.. ·.. . .
. . the corpprat1oi:i.-corn1Ja~:;.~~EJ._Ss9pation, · · . -\j~he.-ti.Jtu;i\ifsale -shall not -~e. less_-than .-20
which··· i~sued · th~_f-s~>$~~·!c>r""'.'"]7"~~aai~~~~ti_c_eto the own.er ·or. possessbr
.. . securiti~s;.-. . ·. :··/ ~ ·:f?:.t· · .
11) , Debts ~nd ~~ed1!s .::~1)2!f b~ _1~~ra11:i:ea ~ .tN:.
·@ .. r. ·~r: ,f t~ ,p.r91Jfli·a_ndJ>osting· of_-_s.uthnotice; .
: ~d ~ (. ... .. . . · . . . .· . .
by .. leavmg .with jh~ pe~on o nmg the ,i,.) .. · c) ype po~itgfs))I be·mad~··rn not less-th<!n.2
1·~jg
.-_ debt_s o~. -l)ayin~ p~s~.fi=@~n ?r~mi · - • . pllb_li~P!~~!~~~-f e city or-m.t,inici_p"ality Wh?re
. ·. · · :·untie_r his co_~~Jc:m~_~qfr.credij_s,. of.l!Jil'S~lt t::-':la..,~ · J~e _d1std:liR_tis_ · ade._ ~n-~ p~~_c;e:.tor-· posting
. ·. · .. ~gent, a copy .oJ-~'rWf.!rrant ofl.d1strcfl.!}{mi;,rru~d. qf ·su_cl:l n~tice ~at the-.<:'.>ff1ce of-the Ntayor of :
... ·.. anq .... ·. · .. Q- -~ ~ · · . (Jl\__..~ _._. _·:,s~- ,c ,citribr muhtc.ij)ality in_ V{hicti.the-property
111)· Ban~ ~cqo1,1n_ts~,.,s~(\be_,1,~r~d:Oy0"1., t-~~::'\·. ~Ji :,.Qlstralil.Jiled~~lff?C,·.S~c.2~9): :. _.-· . ·_. _
· :.serving_ a _warra 1'.Qf 'ga:rn1sfl~1J..t\.upo~ ~t ;,,;; -:·/L{..Y··. ·'. · 'Ijf, · · .· ·. ·
·. the taxpayer an'. _up~h\the·'Wg~~S(!r, ~~ .i:'. il11~t·PJ licau/~ii:>n· .. :_:. · .. ··· ·· ,
. manager, trifa~ure ~r oth~:~t~sp3r.'S~~ . Si?le,:must~·held aJ the _time and_ place
. . . . ·. 6ffi¢er of th~· bank (- RC,. 9eo.:._,J()~CrE· "i'l-1'1'\~ ' stafed in th . no~ice (Nl"RC, Sec. 209);
. . . . : . . . . . :· ·.. .. . . . . ' ... . . j ~~~ . -< r ~- . . _}jAf°~¥_,,..bea ondycted :b,y,,th~'Revenue ~fficer
· .Gar~1~hment . '. ·.. · · .· . -1'_9~ - ...;, . - . -<f-Nhrg.d§ha· i:lu)y l!censed: ~mmod1ty or
. Refer~·to a w~rning io a pe~o'"! il1. ~~J~ai, 1',. Ap~~ 'sf~xc~ange.(Nl~C,_ Sec.· ~Q9); ·
. the· ~ffects.of aJJother i:ire ~ttac.hed, nc;,t tc,tpe~e. _l'.; .! \.~1'fj'!3' ~a_te 1s condu~ted: by officer,. otl]er than
· · •..

,:noney o~ de_liver.th1;1 prop~l'ty or :allow witflt!rawaf"':~'""~
Of· .deposit;;. of the·· defendant in·. his, hands . -
"(MAMALATEP, supra·at 564).- . ·
, ·'. :i ?. · . :t . . . ._ · . · . . _--- ·· .. ·
. · · Sy ··the -pr.ocess.' of · garnishment, the· plaintiff
. · virtually° Sl:ies .the ·garnishee' for a: debt-" due···to .
:. ·ae·f~nc:lant- The :tfe~for· :s1i-~u:ig~r· -become~:
. fQrced · · i!"'ferv~nor (Director of .. Bur_(:}au of
· Cor'Jlm.etce and industry- ·v, .;Pt;Jdro· Concepcion, ·
. G.R.:fiio_: L-90~1:, May_?i, 1922).: ln'othEir words,. . .
thro~gh"_tf!e ~ervice o.f tn~ writ of garnlshme.rit, the _ . ·
.· ,Q~rnishee: becorr,ei$ -~. '\llrtual, party" ~o._ q_r a .· . · ·
· ·. · .''forced intervenor" in, the·case ·13nd the- trial court . ·..
· thereby ci!CQllire~ 'jurisdiction. "t<?. · l:iir:i.d. hirl) 'to
· ·compl_lance. with all· orders -a.ncl processes_ of the
: trial" cour:t with a view.to the complete satisfact!on. ·
· of . the_- J ud9mJ11t'. of·· U,e.-, co~rt (Barf~ of- the. · ·
PJ1Hipp1ne · Islands. ii. Carlita l;.ee,· ·GR'. No.·
-1-9014'1,,August 7; 2012). . . .. · -~
. the officer serving··.the ·.w.arrant at ·a public, -
:. · . ·a°!-JCti,(?O'.and tlie'p(opert.y shal) ~ SOI.a to \he.
·· , :. . higfJest"b.1dc!er ..fo"n:ash (NiRC, S.ec. 209); · ." :
d) - If sale)s through ·a- licen.s~d. cqtni:ri9~,it}(.or
·. stoc.~ exc~·an9e,)\ _r:nu:st be w,it_h'the approval· .
· · of tt1e· CIR (NIRC, Sec: 209); · :. ·. : · . , ...
a'. : ·:e) Jn: tase ,of sioc~s: i,ind .other' "sec°lirities; the
. officer making .th~·sale·sha!I execute a bill of
.'. l>ale., which. ~h~II :be· ~~livered to t!°)e b.uyer.
.and·· to ...the. corporatron,;- · cpmpaby · or ...
. associ;:itiop:(CCA) '.Nhich·i~s1,1bd thii s_tockS"or-
otl)er. securities;, .Upon ·receipt' of the copy-of ·
· · (he"bil.l of sale, -~ri entry. oltransfer should be.
rn"a"de. In-_-·· the· q~A's. ·. !)ook ..:.and_· · a·
corresponding Q_artificate: -of. stdck shall be:
· iss1,1ed if required (fl/lRC, · $ec. · ~09) :· · , · ...
:f) · An'y".res!dua ove~.-a:nd·above wha~ ·is required ·.
to P~.Y the entir-e clair:n .includjng ~xpenses
sh.all be retutned:to·the.own~r of the pro.pei:ty .
~old; .. and · · · · ·

304 I~ :2019 SAN BEOA lAW. CENTRALIZED

.. BAR OPERATIONS
.
' ..
 ·REM EDI-Es··
SAN Bf:DA .LAW CENTRALIZEDBAR OPERATIONS:.. M£MORYJ'\IO2019

: N~t~; Exj:ienses· chargeable· upon s~lzure b) P~fhlshment In Case of Violation:

: shall include only those actual expenses of· ". Upon conviction, fine of. riot' less than
seizure and .. preservation of . the· property . - twice the value of the property so sold, ··
pending . the' sale and· does not include · encumbered or.disposed of but not less
services of the RO (NJRC, Sec. 209). . . · than PS,000, or suffer. imprisonme·nt of
not' less than 2 .ye,ars ar:-id 1. day but not ·
. g).: . The- officer making the sale shall make a . more than 4·years, or both (NIRC, Sec.
. written report of the proceedings to. the 'ciR 276). · it ·the taxpayer refuses, the officer. · r:
. within two (2) days after the sale '(NIRC, S.ec,· . .will prepare a llst of ;'·the properties .. •·
. · '211). . . . . . dis trained .and wm leave a. copy thereof .
. . ' irr the 'premises, 'in th~ 'presence of .2
Right of Pre-Emption. . . . :·. wi~·ess~~ (NIRC~ se·c: 206).· : . · :
. If at any time prior.to the consurnrnationot the ';· ·· ...
sale,' all proper charges are paid to the officer .. ·..-Act~al
· ·.· Disfrairil
.. .
.v. Construttiv~
. ··. . .. .Dlstriii~t
: .
·. conducttnq the sale; all ttie distrained properties .. . ·
shalt be. restored to theowner (NIRC, Sec. 270) .. ·

I·
i.

2019 SAN BEDA LA~ CENTRALl4ED BAR OPERATIONS ·1 305

 · REM·EDIES·
· SAN BEDA LAW CENTRALIZEDBAR OPERATIONS- MEMORYAIO 2019
~)'51 ' Efif AAWil&wii &Mtri

Wtuin 111ay levy be eff~9tild ·. 3) Advertisement of ~he Sale

After the expiration of the time required to .· The advertisement.shall contain: .(ANTS)
. _pay the . delihquent. tax .'_obligation, real: - a) ~rp<:>unt" of tax.and .Pe.nalti~s d_ue;
property . may .. l?e .. levied. ,upon ·befor-e,:. · .b) Narri"e. of the taxpayer ~gainst. whom taxes
simultaneously, ·or: after the "dlstraint of .are i~vied; . .. · ·
:pe.rsonal .. ;property ."b.elonging· . to:· "the · c) Iirne. aod place· of sale;· and
delinqu~11t. taxpayer. (NJRC,. ·Sec.: "207(8)); d) · §hart Desc:°rlp_tion of the p_r.?perty t~ be sold,
arid the remedy by, distrai"nl prid, levy may be
.r.~peated "jf ne.ce~sary ·Until th~ Juli; amount, . Th~ adver:tise..;,~mt·shallb.e mad.e within 20 days· ·
including. all expenses, _is ·col.lected .(N/AC, ·· .after,ttje levy, and the·same shalJ"!:>~:for a period
· $.ec. 217) .. · . _ . . ·of at lea.st.30 days (NfRC, Sec. ·213). · .

. in case the .warrant of ·ia~;· ts ._-n~t issued ·-Advertisement :stia1\ .. be . ettectuatec( oy:
·.. before Or sirnultaneouslywithjha warrant' of · . {PoPt:i) <·.· ~ ~- . . · · ·. . · -· ·
distraint and the personal. property ·of 'the. . · ·. i) _:E.Q.~ting a .notlce' at the·main entrance.of the
,· taxpayer Is not .slf(ficten(to s~tl~fy his tax- · . · . . .: muni~ipal bµllqing orclty h_all andin 'a publlc
· delinquency, the ,c1f{· _o"r. .. t)is·· 'authorized · . · · · and conspicuous place in the barrio or.district
.- r:~re~entatixe.shan~ ·wifh(n 3oA~·Y.S,atter t6e _ . -'./.· .· -in_w.ni_co. the real property.jles; and · . .:
. ·. executlon ofthe djstri:lin.t, 'proceed with.~=-=-, ii) . ·Pub)icatiC?n once a weekfor 3. consecutive
- .. r .. levy on taxpayer's, real property ('YJ_fflC-fSec.1u . }i~~eks in. a.·~ew~paper: of.general· cil'ctila~on .
. 207(8)). ·:, , . . . · ·.° ... ~:.... . ~~ 1.\/
. ' )!"fn~~IJOIClpahty or City where the property
. . . : .. . . . . .;,!?~ ..., f ~ ~ 1,IO!;ate,9... (NJRC, .. Sec. 21,3) '.
Procedure for ~e:vy (IS.Aj?~2F2);~ ~".#. . ·.. . . -..,V ,~~- .: . . .. . : :
. i. . [ssuance 9fWarrany'6(t~%.'-"·~·.-4t"4p.. eubl~~~te..o\ roperty under-Levy> .
.. ii. §eryice of the War,f.~}ot ~e~y;; .£ ·. .'l"' ~.f' Tax)aye~A,g~ ~theright otpre-arnptlon before
~ii... A~v~rti~ement ot;)the .$~. f4 , , f..v..· :
1v. fub_hc.Sale of P1~perty . qer l~vy_; . · .,('\t;;\
{!·
Jr L&. sale ¥-.Nl~6,~J.,.ec. 2\{3( . · ·: .. · .
· · l, ·"-· 'iS (j) v~ : ,· . .. ...
. :
· ·· .
.
·. v~·. Red~~ptio~:oU'fr?]~t_-;>bid; · ·.•.'...:. ~~11· ·.. · .~R~gn~: _Pf ~r~w~tr?_n:· .~he l~xpayE:r may
. v.~: t9rfe1ture !O 't_~e1Gov~~.f!lEmi; ~:lf':cJIJID.~ttrsc9fomue · ~I~' 'h{.t.roceec;Jmgs , by_. ~aymg_ the.
·"'."· -_J~es_ale_of ~_l;lal;\;l/-E!' ·ake.1)- f ·T!3~es~\lliillllP.:;,, ~axe/. penalti;e.s..-a. dJ!~nterest at. an¥. time b~fore .
am;J ,. .. . .. ·.... ..,._,-4 ·. ~- •.·. ~ .thefi~~~dJ!orth ;'SalfJ_(NIRC, Sec. 213),. ·
· . : viii. f lirthef Distrain a,19'' l'Y· ~~- ·. : !BY f I "'7 - ,7.J.::J/ :.ff'~! ·. . - , ·.: . · ·: .
·· · ·. ·. . .· \'.U!_- · . OA·~~1~!fh'3.11~es rxotexer&ise.1t, the sal~ shall proceed
J ). Js_s~.:1nceof.Warr.c;1_nfof levy. · --"'-·• :,.;.: · 9:-~1 : • •. /~~ . II , / ·· .· . . ... · . . .
.· Preparation'.of a duly:al,lt't\t~tic~~ c~~ . ~a~l_}~nira'}~ Qf. the _municipal -~uildil'.l~ ·or·
. ·. ~?~!~~~~~i~~N:rt~ prop~J}(levi~,~SCJ of
a~rr'\.~p1'.6~~~~l;;.~i$~. .ih~ "iro.~erty t~. be sold,
. ·b). -Nam~ of th.e._taxpayer;_a"nj:l :, ·~· Ocf~·-..~~~i~1~office~ con9"!cting the proceedings~
.. c:;~ . Amotfnt of__t~i;;i~d 'pen.~l~.due~:~~!J:jjq~ ·l'i.:,'! /}:\}i.~~n~1:<1ete:fnine:i:tn<t_j:l~:the n~ticefof sale.sl'iall .
. :. ·. · . . .' . . . .· · . : ·.. -~~§pepfY._(NIR(?,. $e9._ 213). · ·.· , · · . . . . .
The ce.rtificate. ~oi:it~iniiig-_DNA shall 9.p1::·rate.;yith ttie . . · . ·. . . :·. . ;__ _. · . · . · · : · . . .. · ·.
force of a legal execu.tiori throughoot the·Philippini:)s· · N9te,: A C.ertifjcate of·$ale sh,;111 be·delivered."to:
:(NIRC,=.$ed,.207(B));: .· .· . · · ... :·. ··,. . .·.. . ·· ·the purchaser .. lfthe.ptoceeds.6fthe;ii:il~ exeeed ·
. . . .. . ttie.clairn· and·i:ost o(sare;.the excess.-.stiall he.
2) Ser.vice of the .Warrariiof levy- . ., turned Civer to."the. ·owner. of-_t~e· pro.()eriy· (N~BC,.
Levy, shall be :effected· by writing up()n the),aid . --: S.f3_<;. 2-13). · · · ·. · · · · . :'. ·
.certificate·--a-··description. "of lhe . property .. upon. . . ·.. . : .. . . . ' . : . ( . ·. . . ,. .
·which levy is made,: .At the ~ame time, written · .. 5}. ~ec,temption ~f J='.r:OP,erty (NIR<:;.,_Sec0 '~14J-"
. riptfoe":of.ttie:levy·shall pe n:iail~.d or' sei:v~d·upon: · ., -
:. a} The Register of De~ds of the prov!nce or,city Perio.c,i:,Within ·1 · yeaFfro.~ th·~: d.ate .of sat~·.. :
"' . .. . .
· · · · .. · _ ·. wh~rEdh~· property is ·1oqated; arid .:· -_.-· . . ,
. ·. b) · Upon the- delfnquent t~payer; :.o.r.'if. he is' · \~cit~i,:,n to~
~_as~:or niltui-~.iper~o~;. p·~;p~~es.ot.
· · , absenMror:n. ·th~ ·Philippines, to .his :agent cir _· reckoning the one-year period. on·the "foreclosed
. ·.: th~· ma·nager . of lh.e businetis in . .respecf to .. r;1sset .of·. n&toral. 'pe~ons "and th~ ,ieiiod Y'ithin
·. which the liability arc::>se;' or if there "be none, _whicl')·, to -pay .Capit~l. Gains. :r.~x;'-.or Cre.ditable
. . to the 'O!,:Cupant of.ij,e property. in questio"n·:· Wi~hol.ding Tax i:irid po~-.,meAta·ry:Stamp ,:ax·on
. . . (NIRC,, . . Sec .. 207: (B)). :: ·.. : . · .• . . ... . tre· foreclosure .of ~eal .Estate Mortgage.,· the.
p~riod :sh~II bl}- reckoned.. ·from_ .. :the date 9f.
·registration.. of Jhe sale in the Office ·of the
Regi~ter of Deeds. 'Fm: juridical ·persons "in an ..

306 I· c?Ol~ SAN,BEDA_-LAW CENTRALl;z;EO.BAROPERATIONS

 ~ .

RE·M·Eot·E.s
SAN BE()A f..4Wf;ENTRAUZEDBAR OPER/ITIONS - MEMORY-AID 2019
) . dlifiSPI saw Mi •• > . Eli ·Wild WWiifG~

extrajudiclal foreclosure, Section . 47 of The The CIR may: .

General Banking: Law of zooo (R.-A. .. No. 8791) ·a) Sell and .dispose· of the same at a. public
.. provides thatits right of redemption shall be until,. auction upon giving "of not less ·11Jan 20 day
t.'" · · but" not' after,. the regrstration of ·the certificate of . notice; or . . . . .
}f, ·. -foreclosure sale with the applicable Register of· b) · Di~pose· of the same at a private sale with the_.

r:· .
~ · Deeds, which in no caseshall be more than three
months after Joreclosure, whichever is- earlier.
t . · · The right of redemptton shall, be· reckoned from
approval of the_ Secretary of Finance (NIRC,
S.ec. 216). · ·- · ·

,f-.' . . the date of approval py:"·the. executive ·judge . Not~: The rem~~ie~ of distraint and.levy as well
t~ ·
.
.(R.M_,G_. No:·55-2011).
,·
: ·· :·. . . : .... as collection by ·c_ivit_arid criminal action· may, m ·
:_t_he. discretion: ~f .t~e C_IR, be pursued sir.ig!y'cr' . ·
Who.~ay·redeem: ~he delinquenttaxpayer or. Independently ·· of each ·. other, . or .. arr. of them .
anyone onhis behalf: · · · · simult~neo.osly'(ABAN,.supra~t234/ .· . : .. ·· .. · .
.· ,·
• • _• I • •• • -..< .: • .: ' • -. • • • <" • ••' • • :. ~ • • • "• \ -::. ',~ "\ : ': : •"
'To who~· mader To the Revenue District Officer · . 8) · Further Distralnt and Levy·· · ) · · s: :·· ••
(RDO): Theremedy of distraint ~na_ levy may berepe'@t~d ..
if_ necessary ·µntil the full ambt,Jll( of- theJa,x .
... . t-io_w :made: '··l!pdn ·payment of 'the· t_i;ixes,. . delinqu(;lncy_···_ctue ::·ihc1uding :·. an expenses.· is ·
penaltte~.·arid· inte.re'sf thereon from the qate ·of . · . collected fr.om the taxpayer .({\JIRC; -Sec. 217.). . , . ·
deiinquency. to
ihe date of sale, together. with 11'-V ·. : , ' . . ·. '. -. i • - . • .
interest qn ·purchase. price. -at 15% PW. an9µrr{tk -Otherwise, ·a clever taxpayer Who -is able to·
. fro~ ~-~edat~ of s~le ·to if!e date ·of redemptli?,A/[i.·:.i:Jl:, conceat most of the valuable -part of hrs ·proper:ty
.. . .. . · ,;11}·~~ . -,,H . · would, es.cape j;;·aymen~ ·()f: .tiis i~x. liablFiy by
Note: T~e owne_r· shal_l '"!ot_ be· deprived. o!~lt19ll_-,:,c,r;{~-l'.i.a~rifi.¢iq~,an·in$ignifi~ant.portion his holdings . of
P<?Ssess1on of_sa1dproperty.and shall.be_!,!,P"titl~~;;-f111~!!:_1e ..<l~!i0.:1:~. Cof1ector 9f• fnternaf Revenue. L~ .
. ·. tp t~e ·.rehts ~nd ?the~- income.·_tn~rz,~A:lhtil~he'' .1.?.1J4fAp~I 2_6, .19.62). .·.. : '. If · _· .
. ·_exp1ra.!1on .ofthe llm_e__ allo~ed_ f~r(~~,.r~,demptl<;>~f. · _/;ri'~, ... , . . . ~ ' ·
·l:· ..
.. .
.(NIRG, ~ec .. 2.!-'}__}- · .· :·
. .
:
. _,;;-;,
.J:/}f"}~·
r! ,,p .
)-, t~(
J . ·~.\D•st~~mt_v! Levy •
~(
f, . Effects of Redemption of Prcfpejf~So,ck'-.h'... _ ·· }H.
r·· . .a). $q~h payment shalr-¢.'ii'fi'~~'fti~t;;i}payer .t~ .t~·
;\ . ·: . 'delivery (If jhe. ~certJ.§if-at~c::!iS~~~:-t&"jJj_e- ..r:?1
I . . . purch_aser.anda c~rtifi~Je fr'~'19...q t.hat{IJ3_: l:.i-~
t . . ·hc:1~_~ede.~rned.th~·-pre>p~~~~!l~.. ··~\ .-! . rY. . .. ~!rJiimilll!l'l.1~
W!_
i. .,b) . -Th!::, R~O s_hall p_ay the purc~.a.~erthr,,;,am.mm_t. )~-hr• ,P..e.r.so_nalproperty ..
{i. . , , by wh,ch sue;:~ .property has b~_eµ3edeefT!.~ .•J~;;P· }NJk.c;,20.$~(A)). .
r;· . and_.said property sball .b~ fr¥!fr?m li,~g;~.m,., .,u~.,J...:.,;.1:;a_. · .· -~fMllm1•
. suc;:h:t~es and penaltiE;s (NfR\i:~~ecf:'?.<1."'4). . .
... . . . . :· . ·. ' . ' . . ·\<'ti,t.ii·. -
· 6) · Forfeiture to t_he Gov_ernm~nt(/'f fR6, Sec. ,215) [)istrain.t ·is. -~fleeted ~Y J.. evy ~hall be effedec;f ljiy .. ·
•. • ~ . . •" • I • ."!- • •, • • _the : · seizure of · . the writing . upon ·the,·· duly
· Groun.ds:' · . . . . . .. . .. g_oods, .. 'chattels .Or. autheAfi.c~te.d cert~lc~te ; .
·, a): Np.,bidder for·
real property; oi: . ; . · · · .. effeG°ts. . .. -the . desc;;ripficin .. ·of ... the .
.·'·· b) .The: li1ghest bid__ is. for.an .amount irisqttitlent·. j:;rqper:ty uponA,vhich the
to 'paythe faxes! penaltiesxand costs'.:_ · l"evy -is 'made.··and. af the
.. . . ... ,.: . . same· time·, written notice
· .The' Reqlsterof Deeds s,li~u'transfer-, tifle to the.·- of the le.w:shali"be r:nailed
·, · Gov.ernment·upon ·registration· with· his. -offlce of . : to ·Or 'Served : upon . 1h.e
the d_ec_laratidn__of forfeiture (l)IIRC, ~ec:. 215). .. · · Register· of Deeds· . and
'iipon the "taxpayer. ' :
., . . '.·
· 1 ··year from forfeiture; \he taxpayer' may redeem · .
the . prope_r:ty. otherwise, , Jhe. "t.orfeiture<~shall · .
..
;o-
, •.
beco:rrie.absolute.(NfRC, 5.ec. 215). ·. .' The.:notice_. of. the· -sale Within 20 'days ·after the
'.·,
shall b.e exhibited ir.i--not l~vy, t)le re~I pmperi.y_will
7) Resai~ ofReal·E~tate Tak~n for Taxes . less.than 2 public places .be advertised: for sale for
Tlie·. CIR- slJali. have·.c.;harge of -an.y ·.real estale iri" the municipality or city ·a period_: of at lea.st · 30
. : ol;>tainedby_ ttie·Governi-n.ent in payine'rit of taxes, · where the distraint wa·s days." the advertisement
.. peqalties,. or· CQSts ·arising und~r the NtRC; ··or in . ri'lade. 1 · plate of- shall be. effected by
- · compromise or adjustment of any claim (NIRC, · ·po~ling· is the, Office . of ·posting a. notice at the
. · . .se·c. 216). · ··· · · · ·· . 1.he· Mayo_r. · · main entrance of the

. .
201_9 SAN SEDA LAW CENTRALIZED BAR OPERATIONS I 307
 . · ..
REME·D_IES
··SAN B£DA LAW CENTRAPZEDBAR OP£RATIOl>IS- MEMORY.AID2619·
I EMWSW- ¢ ACW LU
. . . .
b. Forfeiture'(of Confiscated Article)"
Forfeiture ·
Tl)e · divestiture· · of property without
. compensation, 'in consequence· of a · default" or"
.. municipal ·bu_il<;ling or city · · offense (Ballantine's Ujlw Dictfo:nary,_-p. 519). .
H~II and in a public and v :
I
conspicuous place in the Seizure v. Forfeiture·.· .. I

. · barrto o.r district in .which
'the ·real :estate -lies- and
p"i.1bl\~tio11 once every
week for 3 consecutive
Weeks ina newspaper of
:general clrcolation.
· ....
In .seizure for .the enforcement· of tax lien, the
· residue, .atter deductlng the tax lfability arid
· expenses, will· go· to-the taxpayer (Bank·iifthe
Phifippjrje Islands·v, Trinidad, GR. No. ·16Q14, ·.
Octobera, .1941). . . . : ,. .

;I.
i
i
i
1·

·w-t:i~n·ForfeitedGood~- .or
Article's .Se Sold or
. Destr9:ye~ ·(NIRC,. 'sec..
225) ." · · ·. ·, ... · . . . . . ·:
· . :i-.) ·.So1d - in case of forfeited chattels and removable
. fixtu~e.s,. so· far as practicable; .onder the same
.· .ccndltlons' as the publicnotlce and thejimeand
-.. manner. of sale as· are -prescribed for- sales of
. : Other Remedies ·· personal. property dlstralned. for non-payment of
_a_:....- Susperision·=o~ Buslnes~ ·.Operations taxes: .. . : .: , . .. . .. . .
_(Please.: reter .lo 'Tex · Administration and.
Enfqr:ce?7entchap~et.) . ·

_308 I 20i9 SAN.BEDA-LAWCENTRALIZED-BAR-OP~AATIONS

 REM'E'DIES
. .SA"! SEDA.LAWCENT,RALIZEIJ BAii OPERATIONS~ MEMo~'y Aio 2019 ,
IFSBM•&W&Eaum,wuaee iiiikA.NHWW&Mtc
. ~ ' . .
Destroyed·-· in. case 9.f distilled spirits, 1.iquors, · (Fernandez . Hermanos, Inc. v.
cigarettes, . other · manufactured · products of ... Commissionerof Internal Reverue;·G.R.
. tobacco anet all apparatus used in or abourthe No. L-21551; September3(i, 1969)..
illicit production of such articles, by the CIR when.
the · sale of ·ther same for consumption or use Can the.BIR file· a qivll action for coll~c::tion
would be lnjuriousto public health or prejudicial pending· decision Qf the· ~.dmlnlstrativ'e
.to. ttie enforcement.otIaw; and ,, ; . . ... protest? .: . . .
·Sold· or ·destroyed :..._ iri cases of ·all. other. ·~f!icfos YES:. The request for reinv.esligatio~ ·and
subject .. ·10: .. excise tax, Which. have been. · · recons.ideration 'Was lri effe.c~ ·.consid.ered
manufactured · or. removed in violation of. the· ~. ·denied by CIR.whe.D'the.latter fil.ed a civil suit
NIRC, .dies {or printi,:ig or. making . of· i~t~r("!a) for · colledio.n _of cWiclency income
revenue 'stamps and 'Iabels ·which .are in. imltation · · (Commissionerof ln,ternal Revenue v.. Union
of or purport to.be lawfulstamps, or labels; 1.n th~ . · · $hipping'.G.R.
. No. ~-6.61.60;May 2'1,"1990).
>i:~ · discretion of the-Commissioner. ·
Y . ~orm and !V!qde'of Procaedlnq (NOA}:·.
~· . · Not~: Forfeited property shall'NOT be destroyed until· 1') Ci\lil actionsehatl-be- brought 'ln the
;t. · at least twenty (20) days after seizure. (NIRC,. Sec. ·. · ~ame of the . Govern!11ent .of ··-:-1'1~
i'f_ 225). · · .. · - . · · Philippines.(i.'e,. Republi<?,ot the-Pnit.
· · versus.~ d,elinquent'texpeyer}: ·
r: ·.
t;;.;

f, .
· ·
ln'sfa~ce~ when Forfeiture is Ap~ro~riat~~'(LAOI)~;".:,,
.a) ,!,iquor or tobacco shipped under a false nam,~..6i:}\Y
· · ·
2). Jt shalt :'~e. conducted by. legar
·' Qffic~r:, of the:BIR. ·· ·.
'f;, brand (NIRC~ ~ec_.. 262);·. . '. .· .:. . . f;'.iiNJt:.,~~.. · 3) N~ civil or. ·crirr_i,inal action. for t~e
.I?), 811:chat~els, rna.c~me.ry,qn?r~mova.~le f1xt~\?~pf;.•1!,ti~ · · .. . re~ovei:x o.f .tax~s shall be· filed m ·
. . any sort, :used. m the. untlcenseo .Pr.od.uq!1o',9 '.0E~~~~:?! . ·.- : . =. ,n>:,. courtwltnout the· ~pproval _of Jhe CIR
. arucles (NIRC;,Sec. 268.(B)); and .. . · ,,ji b:}f;;J~~i'T.11;{;,·(NIRC, Sec. 220)~ but the la.tter may ·
t·· c): ~iE,:ls·used:fo,'::.th~~prin,tn9. or·n:~~i!}g~·of_an~ .[.'t· · .. ·. :~41-;1l cjelef:J.a!e. sucl'J... p~~er to· hi$·
· . . ~nt~rn.al re'l(enue stamp,· Jabel ·?r {tag-~h1ch ·1s )}i"'-~ · . . . · lW\i.1ub~r~m.ate.off1c1als : )ll. !h~ ·;· IE;:!~_al
.,_. 1m1tabonpfbf purports.to be a.law'fu}~.t.~.mp,)~~1~11\ . //!( \erv,ce .tlirough . adm1mstr~t1ve
. ()r tag: (lylR_C, Sec. 2q8 (B)); ~<:;!.';,, _tt~!,-:- · : · li.<( . . . -!;:f· . .15.s~a11ces· (NIRC, Sec.·?).' · .. · ·
d). Goods !l,les;1ally·Stoted.or J;~ovl;ld (~IR.e;--Se9._, y:,,
· 2$8 (e))'. · ' . ' , /,k-.-1 . .,:>;·n\
1. ·
: ~ •.1~ - ·
·,'. ~ ... \:·. . · . . .·.' .;'.'i ·
.·· -/l. Part1c1Rabon of the .Sohc1.tor ~en.er!'ll .
...
. · : .• · · · · .: ~-1-"6.,...))· . ~~ .
. · · . . i,::i;t". 't-?'. '.- · ~f~~tif.1f.~~~~,Phe. amendment.of Sec. 220 of. ·
4. .juoJCIAL REIV!E:D]ES . -v.-1..,...·, ~~:r~~· . ·~) . t::1 . . . -~~t.Ifi.(t,~lY~{.;, ·the writtel) conformity of the ,,
· ·. ·.. : Ki.hds· pf ,h.itlicjal·.Remedies~.......:,#-~\'!.;\·.' · }! F,1 ·. . . ' .... · · CIR (and no lon~er . uf the.' Solicitor ·
.a.: .Ci~il·~~ti·o.r1.
b. · Cnn:un.alaction
.
· · ·
'.~ .pt-. : ·
\'::'..-~i(i:i
:~~i;~., ·,:;<i· : · Gen_eral .-or t.h~· Go.11emment Cprpo~i3te.
/,,,·=,;,;,,l{,J:.~ . Counsel), should · be secured· (2 DE·
· · . . . : ,,: · · . . ·. : .. 'ti,-d.'', .. 1(!1;:::=--:..J.:.ifi:....·,•·-..,,.··.ci~LEON,·s.upi'a·at501) .... , ·
..· Note~_No '.~lvilor. criminal a¢li.on'f.9~f~ rf,_¢Gj.Very . . . · ·
of.~~? or th~ en.for~~erit·or a~y ·fl9A1,~f?.e.nalty. .Sec .. ·2~0. of th~· Ni Re m'ust not be ..
or forfe1rure Un,der the NIRC. shall be filei:l m. cqurt . . . understood.' ~s . ovefturriing : . the· long ...
without the·. approvai 0f the Commi$sion'er· of established. proqedur~. befor.e the SC fn .
,,· · Infernal Reyen.ufi,(NIRC,Sec. 2~0):. ·: . · · · . requiring · the · S'olicftor General to .
i:. . . · . · ·. · · . · · . . . ·; qt
represen~ the. inter-a.sf ·ih..e Republic::
a. : CivilAction:. . . . . . This ·court contiriues to m·aintain· that it 'is ·
When- Civil Action, ·.as. tax rem~dy; ls. ~:tne· Solidtor·:·GEm~ral. who has. primary
,' .res~.rfed: ...• '" . . . . . . .'· . . ' . r~sp.onslpility .. to app:Sar for: the .
. A civil action is. resQrted to when.a tax liability· · : 9ovemment iii·. pppeilate proc'e~dings.
:.become's· coll~'ctible, that'is; the assessrnent .. (Coinin1s~ioneiof. InternalRevenue La v.
. : becpme.s· fin.al. and .:unappeal~.ble, ·. ~r . ti:;e· Suer/~ Cigar(·G.R. No'. 144~42,. July 4;. ·
. ·,·decision of.commissioner has ·be.come-·trnal, .. 2002). · . _. . .•. · ·
;· '. .. executo'J·/ and ·deman~abl.e (DIMMMPAO,
supra·at· 200). . . . ·. · · . . .. JurJstUctios:i . . .
.\,
(Please. refer·to Court of Tax :Appeals
l:IOY,( Clvil ,'At;tion f<>.r.:_collectJo.n:o! Taxes chapter.) '. • . . .
··,Instituted .. :. · · . . ,. .. · ·
.. :i. . ·Eh•: fili.ng a· civil c;ase .for :collection of· a. ·~.· Cr.imlnal.Action .
. .' · sum Of money Witt) prop'e~ regular 9ourt .'The:rei:nedy .of"cril"fllnal action is resorted lo,
.(N,IRC; Sec. 222);or'_ · ,. ·. .· not only .for (?Ollection of taxes,' but also~fbr
·· ii. · By filing. E!n an,swer to tt,e pe)itiGn. for enfqrcement of statutory penalties of all .torts
review·. filed by ~axP.ayer .. wit~· .CTA. (DIMAAMPAo,·.supraat. 20:4). ·

...
2019 SAN BEDA LAW CENTRALIZED !;l,AR OPERATIONS I 309,
 REM·EDl'ES
SAN B.EDA LAW CENTRALIZEDBAR·OPERATIONS.- J.!EMORYAID .2019

. . .
Criminal Case~.- . . . . El~m'eiit_s·t~r conviction for failure to make or flle ·
All viol.ations of ariy., provision of ·~he ·NIRC shall 'a return under Section 2.5.5 of NIRC:· (RFW)
prescribe after'-5 y~ar~.(NIR9/Sec. 281). · · ·. .. i-J The accused Was.Eequlred to pay any tax, make
·' a.return keep any record, qr supply correct and.
When ..doe's th~ perio'd of presci:iption be_gin to accurate inforrnatlon, or' withhold or remit taxes
r.un, . ·. .. : withheld,'· or .refund excess taxes-withheld on
.. · ·1. From the day of the commission· of ttie compensation, 'at the' time or times required. by-
, vio.latlon of the la_w (NIRC, Sec. Z81); or. law ·or rules· and r~g~lations; . . ·. .· .. ·.. .. . ."
ii) ,. The accused failed ta pay the required tax, make
~ lri c~se .-Of willful failure to.':p~y deficlency a return or keep. the required· record, or supply the·
. tax; the 5-year 'prescriptive period .should . . . correctand accurate in'forinatlon;.and . .
, be reckoned · from
the: date -of the. final' · iii). The- accused :WiUfuily '. failed 'to pay such tax;
notice and .'d'emapd forrpaymant of the. . make· suchreturn; keep. such record, or supply
deflclency taxes. This is· because.prior to . such· 'correct : and accurate lnformatlon, Gr
the· receipt: of .:the letter-assessment, 'no withhold'.or rernlt'taxes'Withheid, er: refund· excess.
Violation. has .yet been committed ·b.y. the' taxes·'Withti'elcfon 'compensation, at 11:le-.timei ·6.r
'. taxpayers· (Lim, Sr.· v: ·court,·of Appeals,' times required .by law or rules· and· l'egulations
G.R:·ryos, L-481.34,-37,bctober.1f!, 199_0). · .(NIRC, Sec. 255). · · .
_.·., ·... ·.; .. · ·.. -,~~~--· .. ·.. , .. · .·.·. : . :
iL If: the ·same· be ·not -known at .tl)e,;time -11u,,WillJjJl::BlindnessDoctrine ·. .. · ... ·.'
. •. :·. · .'!ron:i' -~he · c:1i~co_v~ry . th~5~!:':'a11~{t~e._il.
· · •· . Instltutlon. ot-judlclal pr9,9ee:~r{'lgsJ.Jor;-,,i.U,~JJ:Br~lon
p\a/x'rl:;v"e;r:_iw
nb fri~_g~r-r~ise _th$ d~fe3nse·_th~(
~t:iewt~Xreturns are not therr responsibjlity
!~e
'. : . investigation arrs:f punis.(penl1[,Yl8.@·7'$ec. or ~~.Lti!i?'1¥\,Th\ult of 'the acco(Jr')tants they hir~d
' ·.' -281). :;. . J'.1~/')/?: ,,.,.J-~-,$:=f!N-Gt.ES~t1draat~1.3).· · . ,- .

'.· ·.·~~~n- ,C~imi~~I Acu{l'P:~~~~11P . ,4\.·· ifk.asJ~,';:~f~fl;~~· o~enie~ a~~: ket1a~;ies

In case ~f-falsity or. f~~ud.witfinte~ to ev:3de Aj.::J,!!'?...de_r:Tax Adril({l'ef~ti~raQd Enfqrcement for other
· · the tax, the right of t~~\l'ef rnmeriJ to conercr" · v,oratib.n,... . ~ . ~ l .. ; . . ·. . ·
th_roug_hd\minal.~c,10n-,is/1r1pre_sp}~pti~.1~Th!7> ·r::.--Jft<':· · . . . _. t ~ . ' 6 . ::. . . . . . '·. ·, ; ' .
~s.l?n~_as the 1:3~r~9"P_frqpa_ijhe drsc~t'~.ery~~muiJ'Jl!~r~al· act.ran ~rr:i·~Jieia~on of. the· ·NIRC. also
·. ~ns_tr}u~oo_ ·of·. jUclrcJ~~l;>.i;ppe{:liri1~\for .1!_~por:ist1tuJi~-: gol.~~c~w~· . met!iod . -bec·a~~e, the
'.. 1nyesttgat1on .and _p_t.f~,1;i~P.l~&1t, 11~~!,iff'llr!cn. :-t I
~Jli:lagl}'leyi~Jlh~·.CEl~'?!=i.Uca~e Shan ~ot only ,mp0s.e
. of the. infor_mation i~{det:irr,'' ttpes :'l$~);e!3 ~ .Jlt~&)yfQ.~l_but,,,:'shall.~ii? order. the· Rayment o~ the
, · · . 5 years (Lim,.. $r. v .. -~~w:t · o'W/c}f~l$·
! ..,.. '~.'-~~)jJ_ect.pf tj,e -<?rrlnm?I case.. ~~ finally dec1dec
Mos. -L~48134-37~~Oct<;;~er:··: 8, -. ~)>--.. r-.,. ·.::::::.~'!fif-.;5'e,-'.RJPTRC; S()l.: 205)•. · . ·. . . . _ . · ·
. . lnter-r'uJ?t.lon.orf?-r~~l!)tivep)no
The perro~. sh~)f be ,.nte~~e~)r?-~~t~C,s{i!:111,
~EN1'.J&~~"~¢~ri)1{ed
of;~_ cri'!1:e pena~~E;~ _by>)1E
lfl
flda1t1on.to b'erng liable tor tl'!e paymen
. 1) ' W~E:n proc~-~G11ogs.: -~~- 1~t1i,'fited :1\.jf g&tqe.Jix~~ubjectlothe p_enarties·imposed there Jr
:: : ·_agar,:ist·the-gurlty perso.ns;~~ •.;.· J..:.Vl.1.t!J!$G;Be_c. 25~ M}) ... :, . · . ·... .· ·
• > ' '• • '• 0 .. • 0 ' : • 0 - • oM •• ~~~.
• ·:~ 0 ~., ~ .. • • •. • • ', • • ·.- ·:· • • 0 •: 0 0 • .. •

' ',·, - ·. · N.cita·: Tbe.perioc!.,,shall begin to·r.u.n ·.Form and Mode.of Procet:idtng · . .. .
··. · · agaiii · _if the: proceedings... ar13. · ·.?,ar:ne·with civU'aqtiqn (NIRC,'.Sec. 220). : ·.
...:-· •
•, di.smissed ·· for · reasons ·not· . . .
· -CO~lstit~iing jeQpa(dy- (NIRC~- S'ec_.:
· · . . . ·· · · · · ..
JU_riSclict,on·· ,, . .
·
. .
· ,· · ··· .·. _. . ·
. . : . ::. . . ; ·
'· 281) ... · · · Please refer,. to Court
. . of Tax:Appeals
. chapter.
.
. ;).·: .W.he~ the offe~ct·er:ls c'jbsent'f~~~ th~· j~p~rfant·-~rj~·cipl¢~<;>n_Cr.lmiQ.~l·;.~tio~s .
~hili1?pines. (NIRC, S~c. ·281) .. : · · 1} -Assessment is 'hot _necessa.ry. p.~for·e filing ..
I ' . : .. . , . .. . · ._ c_riJYll.rial.action and .. ~rimfoal)lCli(?n· ·may ·be .ffJe,
I Two Common Crimes Punishable :· . . during ·the. pen.dency·of.an·.admlnistrative ·pr:otes
i· a).· Attempt to evade 9r defeat tax· · ·· in the BiR. · ·.: · · ·.. · ·
i .· .., · ; (NIRC, Sec.· 21$4); and :·· · . . _.: · . . · ·.. · .
i <
·b), Fail.ure. to·. file: retj.n'n, ·· supply . .. it is.not'a. req\:lirement for-the filihg there·o(thatther
I. . . CO~(e'ct.; . ,[3nd ·.accUrpte . l:)e'a precise COmP.Ulation and asse·ssment'ofthe ta?
i .. information·,.. pay tax, 'wi.thJ:ici1d · ·. since what is involved ii, the criminal adion'is rrot th
;.. ... and.remit IIDc and refund exi;eSs:.' .. collection· of-tax ,but -~,'crimfnal proseGUtion. f6.r 'th
I . · taxes withheld qn compensation violailori of the NIRC, proylded,.however, that the1
I · ·' . ·. (NIRC!: Sec._ 255). . ·'is a- prima facie·shqw.!ng _of a. willful. attempt to ~vac'
· taxes ·or failu~e. to. file. the required return (Ungab

310 I 2019 SAN BEDA LAW CENTRAl:.IZED BAR OPERATIONS

. . . . . :' ·. .. . ' . .·. .
 ~~·-------------..-.ii------~------~*--------..-~~~
!f:' .....

~.·: REM·EDI ES
·,1;ii....... . SAN DEOA f.AW.CfNTRAUZED'.BAROPERA.TIONS·-:.MEt,jORYAID 2019
M . FF AW fKJ!l.
f.;u~i, ,GR. Nos. L-41919:?.4, May 30, 1980 in r.elafi6n .. of ·the tax, 'shall be.. subject ·l~ the penalties·i~posea
~.: to Commissioner of Internal Revenue V-. Court of .berein. Payment ct the tax due after apprehension
~:,':Appeals, . G.R.. No. 11·9322, . June 4, · f~96; · shall not constitute a valid-defense in any prosecution
:;/ Commissioner of Internal Revenue v. Pascor Realty 'for violatlon' of any provision of this Code or irr any ·
Iii:,:, Deve/op·ment· 'Corp., "'G.R: No. 128315, June: 29, action for the forfeiture· of· untaxed. articles (NIRC,
y,(·1999). · · · -Sec. 253). ". , · ·. ·. · . . · ·. · · ·
-,t.; . . . . • . '.. . . '
ft;: Protesting· an .. assessment . cannot stop .crlminat 4} Effect .of. S~bsequen.t ~atlsfaction of .Civil
'f'·p~osecution underthe Nl~CJING!,.£S,supra.at413).· .LiabiUty_,. · · · .. '. · .. · · · . ·. : . . . .
, · · · · ·• · · . The· subsequent satlsfactlon . of civJI .. 1iab.illty· by.
!- ·~Exception~· Before thetax liabiilties of .Fortun,ii are. . · payrrisrit or prescrlption. does .not extingu,is~ the
~. first finally detarmlned, i~ cannqtbe correctly asserteci'. taxpayer's. criminal liability (People ·v .. Tierra, G.R.,
,:;·· that private respondents .have willfully·attempted to No~:L~17177~8o;December 28, 1964). '.
f. evade or: deteat.the.texessouqhtto· be col_lecteg from s-: '. .
W.. Fortun.e.·1.n plain words, before 01"!0 .I~, prosecuted fo~. · ., 5) ·,No.~ul;,s;°diary. lmp~isonment'. '". :·· . : . . .·
..~r · ·-willful attempt to evade ordefeat anY, tax under-Secs. In: case· o( ·insolverfoy. on the part of the taxpayer,
l' · 253.an·ci- 255. of ttie.NtRC,.th!> fact that atax istfue · · subsidi.aiy lmprlsonmant .cannot.' be Imposed as
,. · · must· first be proved .'(<:;omm(ss/oner Q( lntemet . ·. r~Qards the tax which ~e. is sentel'.lced to: pay (People
•. Revenue v: Court.of.Appeals, G.R .. No... 1.19322, ..J.uoe. v. ,Jean-Amault, G.R. No. L-4288,· November 20,
!'((' .. 4· 1996)' • . . · . 19521
~· '
, . ·.... ·.· ·
.
. '
·. .. . '.· ·.
.
·· · . ./:~
· ,/·
·
:
.
~
-1":fir
' .
.
'
•
· .
..
· . · · . ·
}' Reconclliation . ; • ' .. . . . ·. .. tfft!t,0:-.
How~ve~: it ~ay \)e i~posed i~·~ases offciilure P~Y to
; ·. Assess~ent.i~ ..not·.heq~ssary _b~fore ~..'taxpar!3~·iji:~~T.·.f-~l\ th.e fine !mposed .'(NIRC,.Sec. 28.0). . ... · ·
, '. · be pros~cuted 1f ther~ rs a pr,ma fac1e showmg\pf,.~,Jl·'J.l.....,.-.,.;..: · .. ·.;a . · · · · .
:·, wi.llfl!l attempUo .. evade taxe~· as·. i!) the taxpj9.ets.'·'\µ!._6,Y_.gnv,iif\1li~~tion m·~y l;>e.filed despite ·thEt·lapse

.{ tax~s ,
t·~ ·
\ ·t~ir~re.to. dec1arE;3 ~· specific item at.tax~q1e:.iflco.m~·.iN; o( th'ifR'i~o~r r.1e a c\'vil actrori for co11ect1on.ot
his .111come tax returns (Ungab v.. C'!~J, .. G':Ff. Nos. ·IP..;.-14. · ,#l's). : . ~ · · ·. · , . .

!
41919-24, May_ ~0,·1980). · .},~'>/{. ,)J.-,1,l 'When the.cjv.i(la·cUdn ari~ing out of a·tax delinquency
~· . . . · . · .' · .' · · : ·. · . ;;_/~) .i;:~. . · jct
,is ;extingyj~h~d.,~Y presc;:~ption, .· cqn$id.erinlJ_ that.
• · On th~· contrary, if. the tax, all~ea'!o.~Q'~~be~~·· '.';1 ·
un,der th~1aw,qthe'~9vernmenthas only 5 years froq1
~. evaded is .com1;>µte<1 bas·ed .<il~[i~port~~f:W!OV~d'55hc .. ~:-:l · tl'!e -cl~te1,of ~~~E:_S;\~ent of ~ax ~i~.in·which tO'·Golle.ct
:, th.e ~JR,. ther!:! 1s a. pres_u.mpt{?,fl'of"~ruiJa'f}tYof~,~..~ ·.fi.ci! th~ ·~~·~,.rs}U~;,&9.~)~e. for su<::_l'l ta:< to be c:;o_llec!ed
:-: prev,ous.paymE:lnt oHaxes,.so'ttiat t.y:11.~$.~•-f!l'.ld,CJ"r'.lt•! f:l:J by ~nm1na~~tip:r»-inasm.uchas_.act1ons <:>f th1s·kmd . i
\. the.BIR h~s ()'lade a final deter¥"fili.!,1Q.~\wha~Ji,·(jj'prescribed·qoly after the lapse·of'5 years coµntE!d.. I
~.. ·supposed to be correct taxes, the taxpayersf~buld no~ ~~.ft<?~ the. discoveryof-ftle' crime· .and: th~ ·instit1:1tibn ·ot. ·. · I
be 'placed-. in. tt:ie .cruci.ble · of '.~ri.miri~'h-·w.ogecµli~r.1·.,,J!'l-;';Pic1~t:t~~s· f~r its· iny~sUgation an? punisn,:nent . . 1·
~· (Comr:niss;oner :of ·_tnte.rn~I B~venuf;y.. Co,1.ffffe~-~~-(IJiRe'!ise.l;ft281),. . .· · · · · . .. ·
;,.~ . Appeals, (a.R. No.· 119322, June 4, 19t6): f:i\j, · . . · ;. . . . · . . .
'> · · · . · · . .-.. :.· ·· · . .· .. · ~~:::J ':. .,;.. . :f).:-Flling:of.'.a· criminal. actio!i iS: not an implle~.·.

I
<- · 2) Effect- ,of 'Acquittal· of .. the: Taxpay.er:·. in· a · :. asse~sment by.lhe G!R , r . · · •. . . · ._..:.
·: . Crimlr:ial Actiol"! .: · .... ~ .. · ·.. · ., · · · · · .An afftdavit; wtjJch·was !3Xe.cuted. l?y r~yenu~ officers
.; :. · rt does ·not 'necessarily. .r.esult in the· ex~r:ierat.ion 9f: statjng ti;le fax l_iabilities.ofa. taxpay~r, an9 attached to . ·
. . said. taxpayer from his civil liability.to pay taxes. · ·· · ·a crirninaf complaint for ':tax .evasion,. ·e::'3nriot ·. be
,,· ·. · · · ·· · · -_.. . : . ·· . ·. ·. · : . , def;'iiTiec:J,a~an·~siessmenf(Gommisstonef.of.Jnte,:,:1a(·
i·:- . .R~as!?n: Tre. <;tuty.,to p~y tax is imposed :by statute ·.. ·RtJveniJ~:·v. :.Pascor Re..ally,.G.-f( ~o_ .. )2831~, June
t,.· prior to an.d mdependentof ?nY attem'pton the part of .· 29,- 1_!:}9.9).· .. · · : .. · .... ·· • .. !
e. I the ta~payer.ti) ·evade_ p~ymen.t'. lt.il? ri~ither a..mere.'. ... ;· . ,
~· :· ,cons.eqUef"!c.e oHhe fel.oni'.~usacts ·charged no·r is it a : · the :recommetidatfon..lette:r. of .the Cl R. (addressed to
r '· rn!3.re civi.1 .liability. ~erived from·~ crime (RepQblic v. . poJ
. the. fbt 'th.e.fil.ilJ.!:l of ~ cri,:n.inal. complaint ~g~in.st'
'i.'. Pata~a91·G···.R.No.. L-14. 14.2; M~~ ~Q; ·19.61.).. ··. · · - . ·· the taxpayer) cannot be· considered a: fo'r-tnal •

':·, .
( . . , . · . \ .ass~SSJTlent. . A carsory peru.sal· pf t'1.e .said _'letter
1f. .The civil liability. to ·Pa.y-taxes ar-Jses not ·b~cause ~f.. · woulcf.reveal three key. pciin'ts:· :. . . .
f,, felony but upon .laxp'ayei:'s failure. to pi;_iy· taxes... :a·.· It was not adtlressed'to the taxpayers; ·-. . .
Jf· · c·nniinat liabiiity in taxation aris~s .as a·resulfofone's · b.'. There· wa~ no qe[n'and ni.ade on .~he ta:xpayli1ry:; to

fi .·
liabil.ity to pay tax~s (INGLE~.·supra at 412!· ·· .. pay the tax liability, nor a period for· paymenl'·set
.. · therein' ·and '· · · ·· ·
3) Effect · of Payment·.. of Tax Du.e After c.· The i~tter was 'never mailed ~r sent to the · ·.
Apprehension. . .. . . taxp~yers by ·the -CIR ·(Adamson· v.. Couri of.
Any person convif;:ted of a crime. penalized by the Appeals,. G:R. fJo. 1:20935,.'A,fay 21-, 2009).
~IRC. sh a.Ii. io ~d.dltion.t<> being liable for the .p~y1J1ent

l 201~ ~N· SEDA ·LAW CENTRALIZED.BAR OPl;RP.,TIONS I 311

 'REMEOlES
. SAN ~EDA LAW CENTRALIZED'~ OPEf!ATION~..: M_EMORY~ID 2019

In fin~.· tne-said rec'ommendatl~n leUer,serve<;l. merely

as the prime; facie basis forfilin.g criminal inforr:nation
. that the taxpayers tiad violated (penal provisions') of.
the NIRC. (Ada'rrison v. Court o/ Appeels; G.R. tyo.
·. 1io935, M~y-2°1,. 20,09).
Five (5) years from the I Five (5) years (rom ..
date of assessment . : the . ay . . of the
. ·. : commission of ·. the
violation of the- la,h or,
. tne· discovery .of the .
"Crime· . . ~

: ..-;
·. ·.· .

Assessment must· be . Assessment · is · .hot .. ...

.. · .. firtal andexecutory · : · . necessary .
..•\.. ·.· -: . . :
b'efore'· . . .: ·-, .:

. filin.9:~·c~il'riirFlf·action,. . :. . ~~· .
. · ...

.- ... ;

... ·.
.. ·, ...•

-. . SAN .
i12 ., ·201s sEoA:LAwCENTRAuiEoBAR. oPERATJOl'ls
. .
 r:

:I :
~.
;'
·.
'
'.
: .. T-4\.B'L~.:, O.F'C()MP.AR:ISON
~. . •. .
OF·REMEDIES.
. .
.

,. .·· ...

~-·
~-'. .
,i·.
..~
) .. :No··-:

1.'
·,. P'.tM
CIR-:--
If amount.of tax due is· more· than ·.Local Tre·a~~~er or his dep~ty (LGc:·.
. . · Sec.'. 175(a)J
.. .. • :. .. .· · . · ·· .' ·
2 .. Reve·nue District Officer - If- amount of
,· . tax,. clue is· P.1 M . qt. less . (NIRC, Sec .
. 207(AJ).· ... ·.·.•.
,,
·'
Notjflc~tion t~ 'be ·e~hibitE!d i~ not les~ tti~n· . Notification.to b~ ~x.hibjtec\ in ~ot less
: . ~o (2) : pu.b.1.ic ,pla~e.·s;:i~n. the ·city 'or -than · three (3) p·ub.lic; · · and·
•., .~urii~ipaljty ~her7 t!i~,t1tnMsrriade. nne·· :.. conspicuous i;,lace~.)n .~he-,territory.
i ....
11
place for p.o~tmg 1th~..~t~}-~~ of the ~ayer of ·~he· LGU where. dlstralnt ls made, · !
:of· the ··.c!.ty .or ':1\.lf\~!~~IJ!Y·:'!n which. the :on~ . ~l.<:3c.e -for the postinq of the
.. property 1s :d1s~r~d.{~IJPt-!9'.~:?f?.,!iJ).. f t.not1ce shall be at the office . of .the.
I
r:~ . ··-.o.;z-£L.
I
! .
. .. · . . . ;#> Y•~:J. l.cn.iefexec.1,1ti_v~of t~e LGV where the . !
· . .. . /'17' . ·. /t.Jl .: . . ..
1.-f~roperty .1s. d1str~tned -(LGC;- Sec.
t
!,. · . . · · 'rS,Jr · . 5>.,::it · · i { V/rc;).· ·. . · · · · ·
~-- withJ~if'c2t~, atter.uiif.s.a1e•. the offi(er · w'tt~infive d~ys .attei: the:.~a:ie. ~he. : _. : .<i>
r,,. ··..
1';::·

.f!J.~iing tti~,&~me.shal~ak.~:a r~port of(the : local tr~asµrer sh·an·ma~e ij report :of ·

is

r·.
.
J5{&~~~~~Jfl; writ{rJg'to _t~·~19J~ f>-~~-~.;,Jit~edin_g·s .clR~i,~11-,
in writir't~ t? .the local . '
~· .. hfm.t'erf r?-~~1;~ea~if~~Y o~such repoJ1.;'.~!',&9-&~f.:1J'exec!,lt1v':lconc,erned (LGC,
i.··. .:
~' . an-·offj~i~-l,f~~ (fv!R,t· S~~j ~11( . . ~ Sec. 175(e)). . ·. . - .·. ·. .
if'· .
t~:.
~·
ff.
,_,Not
.. tp ·t~e
l~s,1 ·~~J~'le~t;{iotk~J.Y~~~'1:_tic~. ·notice.
OYiJ'rf' O(· P!>.;;s,~s.s.o.fl.Pkl~OP~
No~ le'~s .than-~.t~~~fY.~20):.di;iy~after:· ·
to the, owner and pos.sessor, /.
~'· . and the: ·~~ng-.,~uehnotic.e (fl/lRC Sf;c. . and · th.e. p_ublication · or . posting·· of

rt
~~ .
·209): ·, · . ; '.~ k\ .·· ·
l : ••••
.· . · · ,
,·:,·• •.t:•.;1
.such notice (LGc;;,- Sf?G• .1'l.f>(c)V . ·
. . . . . :. .

'Tli~'GIR ·fuay ··purch~s~ the..s~.me on beh·aJf · . S.hould the ~rope-~ty'~jstr.a,i.n~d.b·e'not

. . . . . ,,, . . . \ •.

.
~.
~. ,·. . of the National Government if: · disposed · of .within .one··· 'hundred ·,
i ... . .. · . . :_ ..... · : ... · . . . . ·. · twerity (120)·d.iiys .fr.qm: ..the. 'date o( :
li!"
., - .t.. "I:he ·<;IIJ:IQUn~ of. ~id is n.pt equal . to ttie, distraint· . · tbe · same : shall . !:Se
Ii:: ; . am:ouot of. tt:i.e tax; _or- . - ·. ..: ·. c.cinside;ed' ~-s.. sold. 'td : . the'~ t.:G.U
f.' ' 2.. ·+he amount.o(bid- is very. n;i1icri ~ess ·~tian .concerned tor the amount ot th.e
f. . the~ at;:fual market value of .the .articles assessment: m.ade tt\ereori by· :the
r:
t. . of,ferecHor ~a_!e-'(:'iRC, 212>· ~ec.
. <?o0hiitt~~·(LG<;?(Sec ... t7.~(~)i '·.'
(,:: . -.., .
r,,. • ...::f : •• ,. ·:
i'... .f, •• "I~ •

t' .·
r: .
t· ~·. r ". .•

. .. ,

l . .... •,: ..... . :,

< . •
. ... ··
'·
 . .
.·.· .REM.EDI
SAN BEDA "LAW GENTRALIZE.DBAR"OPERIITIONS- ME.MOR·\' AID

.
.
.
Table 2:... Levy. upon
.. ' .. ··' .
'
ES.
)
.
Real Property
.
.
.

.
2019
llh,B A n

Within f-.yenty\20) daysafter \f)e levy; Uie·' w'ithin thirty ho) 'days ~fter the. levy: .
officer 'conducting; t.),e PfO.Ce.etli.ngs", shall t.he '1oca.l treasurer' shall proceed to
advertise th@ property.orausabte portion pub)Jc.ly advertise for .sale or.auction
.tnerect 13s." max:be -necessary to .satisfy the the property or 'a- usable portion .
. claim and the cost of sale (NIRC, Sec. -thereof .as: may 'be· .necessa_ry to
·.213j, . ·, . .. . . .. satjsfy the claim an_o_:the costot sale ..
. (L~C,· S.ec.. 178): . ·
. .. . .

Th'e Rev'enue.~oTis~!Qn. d i~~~j:i~uf)cfri .The locahreasu~~f.P'~Y. PY. ord\r:iatise .

: appreva] ·:qt. the RE_3v~tre~1strr~t. OfDc!:lr,, · :duly.. approved; advance a_n·.amo4iJt· ·.
'advance an ~rriOUflt sufficient to.defray the ·.:~ufficienr. to '·'defray _the.. costs iof.
. ;,. . costs, c;>f .collectton;by means _of. summary- · collection by_means bf 'the remedies . ·.
· rerri~Qies (NIRC~·.$e.c.. i·13).: '. · . . . . . .' ,provided in .the."lc;1~ cLGC, _:.Sec:-1rai ..
..Th,e Internal Revenue·.Offic'er shall declare". The iQc~I . treasurer- c&ndui:;tirig the .j.':
. theproperty forfelted to the ·Government in: sale shall purchase... the .".pro'p:erty. in 't .
j~tf~f~ction orjhe-ctatm if:, .. ·. .··· . ·.·. ~e.b~_lf.of_the lo'~! gover~rr.ien~.unit.:· .....
1 ... There is no. bidder: for real · property "1: If there is no .bldder ·for the 'real
i :. efcp,9sed.for ~ala( or: . ·, _.: , . · ·'· - .: . : :
property advertised for .~ale~-or : · ·
,:2 .. Th_e,: highest .bld ls tor a.r, · amount. 2.-. If t~e.highes.t"bid-is fo_r·a~ amount . ·
. . . i.n~u~cieht- to pay the t.axes, penalties .. ' .. insuffic;ient to pay-the taxe·s. fe'es,..
and costs. . .. . ' ·. . :. or 'charges. . . . . ... ·. .
. l_t:ihall·be th_e·duty.i;,f ihe'Register of . .Dl3a"cf~ . ·,t shall be the d\Jty,cif the··.R~·gi~ter. of .. '..
·conce"rned;·,upqn·:reg)stratiori with his office ·oeeds co'ncemeid, up'on'registratio,:r
of the· declarl:ltion offol'feiture to transfer.. with his 9ffjte of the declaration . of :
the tiUi:fof the prope-rty. to the G9vernment .. forfei~we to 'transf~r the ·utie. of ·the .
-without t-he nec_essity'of court prder:. (NIRC, . · property .to the· Go.vemment without · ·
. S~c. 215).. . · . . . ', · .. ,. ,· . · . .. tbe s;_iecessity of .court oraer·. (L_GC, .
. Sec. 181): · · . .· :
... ·

'314 l 2019 SAN .B.EDA LAW Ci=NTRAUZED

. . .·· . : . . ·. BAR
.
OPERATIONS
. . . .
 ·RE.:M ED.-1 Es·
SAN BEDA LAW CENTRALIZED BAR OPERATIONS -<illlEMORY AID .2019
. #k& .· I. .

Upon giving of notjess. than twenty (20). ·The s'a~{Jgunia~ concerned, by an

~ay notice. '. the CIR may sell and ordinance· duly. approved · and
' . .' dispose of the real property. · upon notice ofnot less than twenty ·
(20) days,' may sell and dispose of· _··
.2 . .'Sale maY: beat public auction or in a
the real property. . .
· private sal~.(Lipon approval'efthe SOF}:
3.' p~~ce~ds bnti~·s·ale shall ..be 'd~posited· 2. Sale is only_ by:publ(c auctlon. · ·
with .. the. National . Treasurer and. an 3. -The proceeds tlie . sale .shall of
accountlnq of : 'the .. same s_hal.l. be . . 'accrue to the gen~ral fund of the:
rendered -to._th~ Chairman of _the COA . LGU'e:oni::er~·~d (L.Gp. Sec.'·182}>, ·.
. (NIRC, 'Sec. 216). . . · · »:

t
. _.'-.···;.

'. ~- r-> ,.. ~ . .

... ·, \,
.
.

\, . .;··

.. : .": .~ ".

··,\

.... ·· ..
.::, . ·. ,_
.•
"~·
:·. ·:
.: .:. ..

:..

2019.SAN-BEDA LAV,V CENTRALIZED (;!AR OPERATION~ I 315

 REM.ED-I ES
~N BEDA I.AW CENTBA°LiZEO1JAR $PERATIONS--
0 MEMORY Al~ 2019

Tabl~ .3 - Period
,• .. .
of Collection
··. . ~ . . anci
. Assessment
. .. . . and
.
Suspanaion . There~f. ..
is· ·a as: ... that of the · Assessment , · in · · , real
taxing· · · ... property taxailon · means
. authority · · . that the the · act :·or · .proc.ess · ol
taxpayer has not paid his determir,ing the.V.alue. of the
. correct taxes. · The property · .subject to ta>
ultimate .purpose of (LG<;, see. 199(!)).
assessment ·. is
ascertain .. the amount
· to
_.;- ..
' .
that a taxpayer should. ·, ·_, · .. :;.
· pay: This i_!:l -the. context
in whfch·.·asiie'ssment. is ... . ·.··
! ·. '. "isaued .. · ,-tor' . in't¢r.nai.: . .
revenue taxation. · .
.! .
I . .
! . ·to
1 .
! .
· ... ·
I
l : ~

: .
--,
,. ..
. : :

l·.:
;· . ,·
! .
1''
·!
! ..

it .

i-·
. ! -: . . ~~- . .
. l ·~.. . .

I
i -: .. ;
! : . ·.
i ', ! > <.".
I,'
i
. I ..
'! . •'. .· .
'•

. i . Thls, is not' 'expressly 1'. Localtaxes. fee~~· or· · ·1; /Basic· real.. property. ti
·!' provided .fqr.· 'ln the charges. ,. rriaf ;,_ be ·: ·:shi;i'll .be- collected wi\1:1
l _-,. NfRc;: subjec] ·tc:>. the . . collected . within .. five· _: five· .(5). yep rs from ti
i opposing ·view: that the . : · (5) .. years from the. -date they become due
I .s-year . period' applies; date :o! · · assessment : 2:' In case' bf. fr,aud or irite
whether the." · . b'y. a'drriinistrallve · or · ... to evade payment, s(i•
assessment is· normal .judicial action · (LGC, · <'!Ction-;,nay be institut,
·:-or· ' otherwise. 'Fhe: · · · -Seo.-194(c)). · · · · .' · · for the collection. of ti
. prescriptive· period for 2._ :rn· case. of -fraud or 'same.' -wlthin · ten' (1
. couecuon · is": five ·-, (5) . Intent · · t9 ·,eyade · ye·ars from the· c;liscove
.years ·foJlowing the payment',,.: within teri· of such fral,id or Intent
assessmentof the tax: :- (10) · · years_'-. :trom .' ev.ade·· p~yment '(L'G
discove'r:y · of fraud · .Sec. 270). ·
. LGC 'Sec. 194 b .·

. 316 l 0c!Ol!;l $AN.HEDA LAW CENTRALIZED

. .. . . BAR~ OPERATIONS
'. I
 _'RE·M·.EDI ES·
SAN SEDA LAW CENTRAL/7,ED
·.•· . . - MEMORY AID. 2019"
.BAR OPERATIONS

.: :

In case -of
fraudulent return -· er
·non-filing of return, the
· BIR . may · file an
"ordinary action · to
. collect even without an-
assessment within', ten
(10). ~ ·years : from· the.
··date .of discovery" of
:, falsity orfraud or non-
· filing._ .. ·· · ·. ' . · ·

. In case .th~ ·taxpayec:has.

waived 'the Statute. of
. Llmitations, collection
shall be extended· within· ~.
•
• r
"I ~ •
> :.}' '
. the ·perjod ·agreed upon. ·. •I<,

. (NJRC, Sec. ·222) .. ·.. · , • -~· ...

.' . ·,. (.:.,,1 j' . ,
1. The CIR· is prohfbi1.E?'~;'(r:tie·.
. prescriptlve periods.' The period of 'prescrlption
from , n:1.aki_ng ;.;rjn~t 1J(t~r assessment .. and ' ' ~ilhin which to collect shau
assessment.' '!J ( .Qn· t~llection) s)all' . be be suspended for· the. time·
· be'gi!"ning :d_isJ.!JiDl~.i:~\'~A~~ltQ.Ui'lp4which: o~_rin!:J°whicti': · .·.. ..
l!3vyor aJ>re_9'.eedingm· {1.The tre'~sorJr~}.~legally 1.
.Jhe . treasurer. is · 1~_ally
. court fl'.l}M~r 60 days_r.1J prev~nted /h\_ from · prevented from: collecting
:· therea{t~j;,~ . )J)~-l1 maku::ig_ · J. H \\ .the . the tax;._. . . ·.
. 2::_Whe.pJ)thj)""~i<pay~r-.>'j ·~ss~ssi-nenl :.[ \ or .?:The owi:i~~of the property
... · regatists .~,:,•1;:y . for. t; coilectiorr;/ ,., \ · · or the pe(son·11aving:le9al· .
/~~nvEi$.trg;ii'ho·n: whfcb (2'' The· taxplify~r· t' que)ts · : ihte{est"therein' requests
'. ~Jl&':Qrant~;c;h~-th~~-l"i : ~t,fc,r retnv4\11~j'~iJ1~ef{ict,,.,.. for'. reiriv~stigation ·: .a~~r .
3:~hE:_1°\dJ'!efJ;, tax~fr,r /1;~~ ex.~~ute~~t'ffib,gr,,>tn.r. e~~~Ut:,? · a wa_iyef.' in· , '
.. -c@w~tie'\r~ated111') (>, wrJt1n~. before... the. wntmg ~ · qe[ore . . U:ie..
· .. !~e ~~d~fress1giiven".by·_ M~e,~p}/'.,atio~o~ tfie period · ~~pi~ation : _oJ Jhe p~riod:
: him m'.1~,<tLJ:.e..h,Jm.file9 ~;.!~,t~)~~)"~~~·tq asse.ss v,,ith1n · wh1c~ -to· colle9t;.
-· _upon .'1~!6h 'the1~~.,-iir mL.Qi!c:011eot;· ..afiiij.. · ' and ·. ·. · ;- :._ :..
. · belng ~ assess1eg'. or 3. The ,tc!xp·ayer .1s out of .. 3. The awn~r of'the property
·.. coilectelfl...'t~/1 '.· . . 'the: . counfry, ·. or · or.the person h~ving_l~Q~.
4. Wben th~'warranl of. . · otherwise · cannot be· . . ·interesnherein is .out of
. disliaint or._levy is dul.Y : located .. (LGC, _see. ·. Jhe country .or 'ot~erwise
·:. served· · upqi1 .· ·th~. 194,(d)): can.not be ..loca.ted (LGC,- -
· taxp~yet,·. . ·. . . his . .. . . Sec. ??O), ' .
· : authorized -~ · :,··' ·· ;:
.representative, ··or· . a .
· .. m.embe'r · · of · · his · · .. .
. :· ._:i:iouseho_ld . ·. wiih. . .
· sufficient · discretion :-: .. .·.
. ·:.arid iio property :could· · · ' · ·
:b~ located; -arid. ·... ··.. .: ..
5. When- th~ taxpayer is ·
· · •. o.lJ.f ()f tht{ Philippines·
'· ;(NIRC, Se(?. -223):'.
. ··. '·
i -,
··~.:
~:·. . ,:

!-·
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2019 SAN.,E;lEDA:~~ CEN~RAL.IZED BAR OPERATIONS I 31-7
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SAN SEDA LAW

REMEDIES .
. CENTRALIZED
·, . BAR.OPERAT16Ns
. ·-·MEl\10RY·AID
. . 2019
.. ·

. Taqle.i - Protest . ·.. ·

Rule: No.. . . Rul~:..Yes;' -, . .. ·. . .

~xceptlon·:-. If -the taxpayer E~¢~ption:.· · .W.J,~re ,· -th~;
. only 'di_s.pute.s. 'or. protests 'questlon. raised i,s" on .t,he·
aqalnst the validity cif some yery. authorlty and ·p,6w~r pf ·: ·
' of the'· 'issues '. raised, the the.assessor to impose the· ·
!.' .

.~.. . ·- .. ~
.. ·..
·. .. . ,; ...
.( '
.» :
...·.

... ·.· . -~ ..
·, .
.v, •.
. ··.:_.
. 2 . :
.... ··
.. ;
·.· ..
....'

r. . ..
•.'

·. ,•
~ ,. ·.

·i

··:-,
/ ..
 R·E:MEDl.ES
SAN BEDA uw CENTRAUZED BAR OPERATIONS_- MEMORY AID 2019

The . assessment · may· 'be Within · sixty (60) . The. protest must be filed
protested; by filing a request · days· from receipt of within thirty (30) days
for reconsideration . . . or· the· . nonce . of· .frorn payment of tc1x. ·
.. reinvestigation within thirty . assessment (Local
·.. (3Q) days from : receipt of. Government-. Code, ~ote: The protest may be.
.. the· · aasessment. lNIRC, s_e:c, {95). fifed at the time of payment . .
:Sec: 228): · · · · of the tax being protested
·.-:.. . '(toqc1/. Government code,
Sec: 25~(a)J). ·

Office of the duly authorized · · Local Treas.u~er cocal- · _Treasurer. '(Local

'representative of.·the- 'CLR' · (Local' -Govemment . Government.. Gode, 'Sec.
who signed the FLD/FAN. - 'Coce, Sec. f95) 252(a)) · ·
(Nlf:?C, -Sec. 228). . . . .· .t·

., .• ~ •"C/. -~·-,'l:'.,._ " 7NJRfi

(f·,;1.:,; . c~-riivisidn ;..·. .r ' -1.· ·cot!~. . . !I -.-·~·
=·,,..,..--,,· . .)9f-.,...) 1 ·. LBAA .fl::ocai Board
. . of
'\;y · -cse·c.,::Z~?) ~?-.. tl-'· · c,0f.t1pl:rtf1nt~ .,iii:\\,'. · Assessment Appeals)
:~. · {~:fp;--;'(£,i.;Ba~1} ti:~ Juri!idi~t.iodf~~J,<- . ·2. CBAA . (Centfal ~oard
.3~-~;s.ci:t>rem,K cpVrt. <t~ ·
._(L_(;lC, $ec. 195)' pf . f,siessment.
. . \~14$,:.S,et. 18) . .,{.;; ,,,.:~~(MTC· pr RT~:-· .. Appe_al$}..- . , .
. · .. t,,s?:--.J · .• ..,.~.,J1,W~t>~;1.i-"<j.l~"fl!:!9,c!rng on . 3.. CJA. En• Banc ,{A.M:
<'/t,· · . /·".',~,~--~""..!:: .:..r:.-·•'-jarisdlcfi<?nal. ., : No. 05:11-07-CTJ:1.) ·
t,:1_~
. · -~~
p_J'v ·
·
. , , . . am,~uat) .. .
2. Appeal to;
-4. Supreme.
.· ..
?o~rt
, · .
··
·· · t . -a.Rte·- .decislon. . : .- .
·.. of. MTG (A.M.. ·
· . No.. ... 05-11-07- .
CTAj;
-. ., : .. · b_,CJ:;~. .Dlvtstori-
· · decision of RTC ·:
3. ··CTA . En ' Btiric
.(A'.M. No: 05-11~
· 07-CTA) ...
· 4. ', Suwem~ Court .

·,
. '.

.
2019 SAN SEDA LAW
: . tENTRAllZED
~ . BAR OPERATIONS
. . I · 319
. .
 RE.M·EDl-"ES
SAN BEDA LAW €ENTTl!MZED~AR OPERATIONS - MEMORY AID 2019
tllil.. m!.IFIIIAHll!lila.....1.1111111ill!lmlll!IIIIIIIP~~m·:111•imi;a1am8ffl!lailmlll:ll~(~.a¥Wl!ll~.11111111111m+~
.. RMMll!llllDA~
..... lWilll!ll.. r:llll!ilaNl!mR¥6 .,,a
., •. .I . ·. . .. . . .. , . • .

. Table 5. ;. Assessment
. . . .• wiHl Government and
Process . . Taxpayar'a
. ... Remedies : .. ·

If taxpayer does not agree wllh· his

. · issuance .of Leiter.a( .' Tax A~diiJ ln~estigation by deflclency taxes and findings of thii • .
· · Authority . the Revenue Officer {RO)_ RO, a Notice ·of Informal Conference·
·. (NIC) shalt be issued for taxpayer to·
· present his si_de 'of the. case ·

. '
· After presenting his -side, taxpayer ts
· · still· liable for dE;fii::i~ncy taxes :
.. •'

.. ,-.-.-7"':-~-----:-:·:------7---,, - . ..
. : ·. If taxpayer isamenable for the .: .• .: t-:
I . deflclency taxes, t'ai<pay.1:r pays . . :
1 • amount·.... · ,
.\ . . , . . .".': _,
...... --.----:---·- .. -.·. · .. --~

~:_ -. - , . -- . ·.-· . ·,
: · Taxpayer pays · ,
r ...... amount . .:
~'. .

... :
'-! .

. ·. -

·.· ·.

..- ~
. lfthe decision lsln _ ... If duly'auth6riied·
'favor of ttie:·1axpaytir,' . . . . rE3p~esent_atixe ..
If CIR deni~·d is
. I( th.ere· lnacljo~ by.CIR
protest_(FOOA) '. · _· ·..· .or authorize~ ·' · · ·. ·
.~ . ', assessment is ... .: ) denledprotest' .
,, representative withino-1°8'0 .
: ·. dismissed. . ·(FDDA) . . ·c1~ys_ . . :·-
\ .

·..l. .'
,--'-----'-'----,,-___.l
f . . l. . ·I ··" ~-.. · . : ~.
.-
. . ~I~. - -.• -.. - -.··- ..:.T._
-
__ ..... -,·;..::".··.·.,.-,.:.-.
·., _·:Ad)liinistralive.. ·.·~ : :Appeal-~o~e. ~-,·.
. ·. Motiqn.for -~ :·
. .-
=: - :__..:_-· ... ~ ·.. , ~ - - -·- ~ - -. - -.. :.. .·
AppeaHothe·.
,· >-~---~-----~-
-~ : . .Waitforihe' -~
. . . . --~~-~-~--~
.. . . ..
· ·: .· appeal to. Cl~.. . : _ , .. CTA withi~ · : : · reconslderation . ·.1 l" . CTA witl:iin,39 . : :. ·. '_ declslon of • , .. ,
'·· . w.ithjn 30-pays . I ·,.. 30 dijyS • , · • ... with !fie CIR .. ·. d_ays . . 1r . the.CIR I!: ': .
·:· Noto:.Tflls·will.tolf .. 1·1 · ·•: No~o: This •-.yin·,, 1 1 Note:.For· ·· ·,., . authorized I
·. I' the·. _preS!,fipll.ve : . , . .· .,': 1 not loll the ·30-
·1 '.. p~riQd. to: appeal to · I : ,.. - '."'. - .':'° - - -:- , l
inaction after
day. pres·crJptive : : . -expiration Of th.a· I ,
'repr~sentaUve 1 ...
}
the.-·-:- I
·t -uie·CTA · · · .1 · ·· · · 1 period to appeal ,J · · 1 --.----..:. __ ..,
,- . , I totheCTA .. I( ·180-daY.perlod· ,;--.~---·---.--,._
,-_::.N·.:...o
. ..:.te-·.--:--·- - .;.... : \.:. - _ - - - - -. - .- .l' .,,. · ·. . · · . .;1 _, · If denie'd, Appeal ~
· ----------,- · 1 'totheCTAwilhln ·. 1
. - - .. - - - Taxpay.er's· Remedies
· ·
.· 1
1 ..
3'0 d f
ijysrom_ ·.,· I'
Government RE;lmedies: , ·receipt 'of such I
I . daclslqn . . . I
, __ . ------.--"
320 · 1 2019 SAN B~DA tf>,.WCENTRAL.12~0 BARdPERAJIONS
 '·

..
.
Procedure
. .
.

. for Dfstraint
:
"F~EM.EDlE.S:
~N BEDA LAW CENTRALIZED BAR OPERATIONS - .MEMORY AID 2019
.
and ·Levy
.
- NIRC
.
. -· -

·' ·. fr the delinquent tax is more ·tha·oP4M, .CI.R. seizes· sufficient p~rsor:ral property .
·b~li~quent taxpayer. fails . to satl$fy'the tax, charqe, and expenses of seizt;Jre...(NIRC. Sec: 207(A)). , ·. :
to pay tax on timi;i .:
~. ' . . . .
y .· If ·the delinquent tax -. is' not more than· P.,,'fM, Revenue District Officer seizes
~·, . .,·· . ... .. sufficient persona! property to i,atisfy the. tax. charges, .and expenses of seizure ..

If thebid is not equal -to the Report on dlstraint shalt, ~lthln 10 days from receiptot..warrant b.e submitte.d ta
amount of tax. or very much · ROO and R.evenue Regional Dlrector provided that. the Commissioner has the
. less· than" the· fc!ir market power tollft such order (NIRC, Sec, ·20.7(~)).. - . . .
. .. . . . .. .
value 'of goods ·distrained,
. \he '_CIR· may purchase. .. . . ·~:

i:
:. property for. the· National
:._Governmer:it.· The· property
· Toe di.straining officer accounts
· ·-r. · ·• · · ·
ror
the goocls ·dlstrained (NIRC,.Sec. 208).
. · · r. ·

ft . may be resold ·and the ·net .· .~D~ ~q~~s'.ooti~e·in ~-t le~s; iw~.(2). public·p/a~l:)S·i~ t~e ..rnuni~i~is!lityr~iywhere
t· · pro.ceeds .shall · be remitted · 14--:- )he dlstraint Ismade, Oneplace of pos_Un.g must be..atthe l'T'l.l:\YOr's office; Tlrrie .
;_
to' the Nati~,nai·:Treasui'y as- of sale shall not.be.less.than lwenty{20) days-atter thenotlce (N/Rc.:sec. 209).'- ·
-~-•· · internal re.ve(lue .. (NIRC;. · , ·· · · · . . · ..', · , . ·; ·· · ,. _. · . ·.
»Sec. 212).:. ' . · .. · .. Good~ shall be restored to owner .i.f 'charges are paid '(NJRC; Sec. 210).
If th,e bid. is. .j_asl ri~tit, the . ; ·_Otherwi~e. offlcer.eonducts ouhflc aucuon.: · . ,,
officer sells the goods to: the .. ·
hlg!ie~t". bidder· for· cash or, · . . · · · c.·· f)'( _ · · · ,. · · · · · · ·. · · · ·
...;,;..
·.wittl· . the CIR'S approval;
.thro.ugh ccimmodity/ stock
exch~ngeis:· (NIRG, Sec:
·. Excesa proc~El9~.:6~¢.i:,111eentire _claim shall be. returned tothe owner.No charqe
·. shall be. lmR~.,6.°1~.:.~~~,services of the of.f)cer· (~/RC,.
. l { I I. ? .
W9)' •, . ' 0

.
. . ~~c.
. 209)> . : . ~ Within tw~ t~1dJyi;f!~f·~~.!~Q~iers~~!l-re~rtt~·c1~(N~RC,$ec. 2(1). vyith.ln
, . . five (5) 9~}1s.aft~\ vi'ijrd1:;,tr-a1mJJsPi.![5.~!hallel'.)ter return.of proceed1r:igs 1n thl;I
Infernal· revenue :officer:· recor~of Revenu'e · oJlectlon Officer, ROO, and Revenue Regional Director
designated .by · tl')e . CIR; ·shan .. (.f/fRt,~Sac. 21,3)\-.,_,.1 . . . . . /fli\, .. . . .. . ·. .
Pfepar~ .. a ceFtifJcate v,ith ltl& ·· '"'1\ . l'J . ~ .,., lJ tt ~ .. . ~
1-1~
. fore.a.. of · a ·naUci!)Wide legal . : ·· · . ;.~~~'(,•-.· ~1 :,:r -· · · I tl l! ~ ·· ·. ··
··e:,,ecution (NIRC, Sec, 207(8)).. . "fr•f!.-' · A-· 4
y// · ~· · .. \t·· lI
· . ··· · • .
-·· ··
Levy sti,ill be effec!edby writing· · ,,,:, · ·w·'«,:.,..,- -· :,11 . · '! !I, . -~ · ·· . ·
~ ~i>on, said 6er:t!Rcate a .., <-;::,.'
1'.~7
.~~c!L
propert¥-q;iay;~?e _ le\!1ed t;i~fo(~.t_s.imu~tane9osly; or after the fa.~ .
il,esenption.. of . t~ "P~Operty. \.: ~ms-tr.~l'.lt 9fi>p.i!rsona];properw:(t''~~·;S'1f.,.s:2'Ffl;l)): . ·
· . Notice_. of the lev.y i,heill be -<". ·;.) ti .
"-" ·
!', ·' . --·~,.. µ,J.f}4/,.<.,..,.,,..., ·
·:·served upqrtthe Register of ~ ,,·:,;-:.:,, ···,y·, i;..:{.'. · ..-:-:·-" ..:.;::.- ·\ · .
c:ie~n,fs. ?'· L<3U ~ere.. tlie ~ .. · <jW.iifl~\t~r(10)i'claysJ~fterreceipt of the_ warr~r.it; levying officer shall ..rep.ort to·
pro~~-i:tYJ.Stoeated and upon)he. ,~i:J,e Cl~ 'who shall- ~ave...tbe authority to lift th.e warrant of ·levy (NJRC, Sec.
· '· owner (NIRC; S!')c. 207(8))., ·. 2.Q7(B)f·1 · ,°Jt.1. ~p;.,i\•.,..,.,,· . · ·. : .· . · .
Within to. days tro.m rec;eipt of.~ , ,C~f· · ,.,. .. ,.f?.--:;Z:..~:.-.t·'/&.'!~",,.;,!'"·l!...) ~-. · · · · · ·
.. warrant, · report must . be . · , ••,, . . /. ~·tt. ) d 'ft. ffi h · h
. · ~bmitted.to. the COriltni!!Sioner. . ·vl(•.~1n.tvvJ~f. ¥ (~~ ~ys a er le".}', -0 1ce~:s al 1 po?t notice a_t t ~ main entrance.
, or.. ti.is rep~sentalive, . '!he .· of~t.ftl.l:lFl,IC pality/01ty hall and 10-a pu.bhc pla~e ·~ ll:le barno/d1strl9_t whete th~
COOJmis!1ioner c;>i' his au!horiZ:ed: .. . . ' real ~sfatd lies for. at least ~O days and pubhsh 1t once a week for 3 weeks.··

, , . . · .rQ· · :
. ·representative . inay. llff .the .-owner.maY. prevent sal.e·by. paying ·all cha·rge (NIRC, Sec:.213). . . .
, warraAJS (NIRC~&c. 207(~)).; . . .· · .
·sal.e shall .tie· hEfld anhe ~ain. en'franee. of. the municlpality/ city Q.a1.1,0or On"th.e
: · · .:. . . -. · ·. · · pr~mises of tile pr.operty,(Nlf!C, S~c. 213J. · .. · . . '. . · · :· . :
.·· ... ./ ··.· ..
. -- : . . ~ .
.. ·.· ..
. . . .. : . . .,. ~
, .. If· ther~ Js ··no'- Jf.
J:~Jatlei' or the ~igl:lest, 1;1\d. is ,. . there is a b.idder a'Qd the- highest. b.id is sutti.cjeri.l, excess of
.insufficient,. the officer. cond4ctir,g:~sale. shall : proceed~ ofsalirnver clajm an'd cost'ofsale shall be,turnecfov.er .
. forfeit the property to 'the ·gov~rriment _W,i(tiin · to th~ owner. IJ'/ithi.n five (5) d;:1ys after sale, ·levyil')g officer shall·
: two. (2) days, he sha.11 ··make a. ren{m. of,.the ·. ·enter return of:the proceedings' upon the r!;!COrds of. the RCO,
: forfeiture. The Registrar of Deeds sha.11 transfer · ~DO, R.R.D:,.(NIRC, Sec. 21'3). Within on~· (1) -year. frQm sale-;
.· tltl~:to the.goveminent wi.thout need.of a·qourt owner·may.redeem by paying .to RD.O amount.of lhe. ta-x~s.
· order,· .i.lpon registratidn. or forfeiture·. :Withil"! : p~nalti'es, and i!:ileresffrom date of delinquency to· the date -of
.one·· (1) ye!;lr fron:i forfeiture, taxpaye~ may . ' · sale, and .15%. P.er annum.lnterei;;f on the plirch'ase price. from. ·
. r~deem said p-rc;5perty by paying full ·amount of . . . !!le date 9f p.urch_a.setq. d?\te of r¢demption., Qwner shall not be.
th:e. t~e.s and ~h.arges (NIRC,· Sec .. 2-15); CIR . depri.vea of possession and ·sha.li·&e·entitled to the fruit~·.until one
mat,. ·after twenty' (2_Q) clay notic~; sell ·property . (1) year·expi.r.es ({'JIRC, Sec. 214). · . ·
<!f public auction or- at a· private sale with.. . Levy ar:id dlstralnt may b~ repeated until th~ full amount due·and
approva(of sof:Proceeds shall oe. deposited all expe·nses are collected. (JYIRC,$ec;. 217). · . .

.
wlth·:ttie Nc!tional.Tre:as·ury .(NJRC, Sec. 216) .
'

20i9 SAN BEi;)A LAW CENT~IZ.ED_BAR Ol;>ERATIONS i 321

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 . .

COURT OF·TAX-APPE.ALS'
·~1 fiW
•
Fil ¥,
. .
. SAN.SEDA U\WCENTRALIZED BAR OPERATIONS·~ MEMORY AID 2019
.
4!491MilpSideWMJ&llihMM
,F¥1 .
.
A IN 5F€¥Miiti4Sit&M 6iiiti

COURT OF'TA-X ..f\.P:J?EALS

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' • • ' 'I '• ' ' : ." ~·· • ..·• '• \, ' • I • ' •• • • • ' • • • • .·,,: • " • • '• ' " ' • ~

EµCUfIVE·CQMMrITE.~ · ~UBJECf·.COMMlTI'E~;.' ~- . . j\1:EMB~_RS . · . . AJ?YJSERS ·; .. ·

MARY CTRIELL C. SUMANQUI · · MAIUA CARISSA C.,GUiN'TO • LIANNE MAE ·o. ENRIQUEZ;- JusticcJAPAl{B. DIMAAMPAO,
Over-all . ~~ai,pers~n;· ·. ERICA s~b)ett :.'·"·:¢_1tair. . . ·:.·SI:JENA ~ ·.ANJSl:IA. M,~ HAJ?JI HASSAN,:.· Atty,,NJ~~tO.C. ~IRO,"
MAE C: V1ST4 Chairperson for 'GI,ADD)'S I'. BAYLON Assista~t·. MAll.Y.. EVIBtYN· .N. MATEO,. CPA,·. and Atty. DANfE ,.0 .
. Academics.: .BEN: :.-REI E. · S.v.bJect." .Cliai;, :,l\NC~LICA:· M.A1UE. S~YDANE' -C•. : DELA CROZ, q.A, .. · .
· J3ARBER0 Chairpers't/nfor Hotel'· MARIB" · C: . MANUI:,L.':·sub}i:..ct -REYES; ALYSSA R'. -U\RRI\GA, .. . :". ' • ;- :.
Qper.ations. JHELSEA iourss s, . 'E/ecu_onlc Data. >Proces~i!lg,: TAGMA . . . .ESTHERi -. -v.. · .
. D~O }'Ice "<;hairj,~rsonfo.r ~INA'. G. 'PABREGAS."G~nera/ (~~~. ::· .. MAf!.EANE ....
· Smefarlllt, EARl,. JUS'fm :M, ' Prinl:ipleS: ,'\TIIEN.t\I-~CE!? M.ABELo A; C~VE~ _mWEL . ' ·... ·
. . YAMBAO. \rr~ ChairJ!C,:son for;': It, QUINTON and'J;ARI],)TA ~- . JOICE 9· DAYTIA,".~tA ...
.... · . Operations; MA. ANGELICA B, . VILI.AROMAN . In~ome rTax, S. MONES, .AND~A PATR:CClA '·.
. . D~ LEON Vice Chnirpets'on.for APOLLO"]UUOss:·STAMARIA" .D.' :DAQUIAL,'· All'RED~.....
. .Flnalic_e;. ARRA OLMAYA { ·. ·Trµns]er". Tax, .)'.Eu.YN . c .. FRANGIS P: GJ'J..LEQbs, JOY·.. . ·.· ''.
BADANGAN . Vfce Chairj,erso,i CLEMENTE· Yalue-Added,..Tax, CRISTEL '. . G: ·.: GAYONA, ." .
. . forAudit,.]O~ANN.G~VEZ MIGOIEL .A.· DE ALVA Tax. MARIO~·- . ·NiCOLE ;:P.,, .. '
, Vice 'Chairpersonfor EP.P,HANZ Adm inlstration, Enfor.c~ment; · B'u.GAfUN·,and ·KA'tRINA ANN · ·. ·. ·
. DARRYL D.TIU . · 'Vice and Remedfcs,.·and AT.HENAI S.PRADO, .
. · · Chairpersonfo~Logtsiics, and FR,A;NC]?S". R: QUiNT()N. "Real ·. . ·
.> ·
· DQHN ,'\LFRED E. AQUIµZAN Property and Local Tax · . · ·. .
~-a~~~-~ .
. Membership, ·
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·COURT O._P.TA·X:'.·APP.E:A.LS .
. SAN SEDA ~WCENTRAUZED BAR pPERATIONS.- M,E/110RY AiD 2019 ·. . . .. ·
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PP . &&Htt *. : .. ,w, &4WilitjM eu,,mj'
;_,''Division:· Concurrence. of 2: members of Division . Evidence can be-:taken qy a:
'~:.shall .be -necessary for the rendition _of declslon or · .. 1 . · J1Jstic~ of the ct A · . .
:; . r~solution ln Division level (R.A, No. 9'5031 Sec: 2). . It may· ~Ei1 . made '!1otu. prbpio or_ upon : proper
,.·,::·•. . . .: ;. . . niotidn, when:. · . . ·
.Vot~s Necess_a1 . · a.· T6e µeterrninaUon of a que~tion of fact ar.ises
at any -stage of the proceed.mgs; or ·
b. . The taking. o.f an ai:;couf!l is nec!3s~ary; or
c ... T.he defermioation of ·an issu~ otfact requires
·th'e exam.ination of a long account ·(RRCTA,
Rule 12., Sec:' 3). · ·.· : · ·
5 Affirmativ~ .... Majority of
Vo~es. ·· .justices l.Jpp:n c'Ol'T!Pl!?tiOn. -~f.' the. -~~~rfrrg the Ju~tice. '·
present .. . concerned shall· submit to the-Court a writte.h. report
th~reon,·statiog. the,.findings and.~oriclu.slpri (RR(;TA,
.Concurrence Ru/e g Sec. 3).. · ·. · ·.·· .· ·, . · · · ..
of 2 membe.rs · ·····
: .'2. · Court ~ffici~·j . .
ii · · · · · ' : · · · · · · . . · · · ·. ' :. . a. · ·clerk of Court:cif·
I,.' Wher(;), the necessary.msjonty vote can not. be nao, - . ' ,· b. ', Division ·Cleik Gburt;
1

.
;f ·. the petltlon sfiafl .be di:"miss~d:,-_in appealed caseS··.'.r."\ . C·•. Their asslstants- who are members of the
ftt ti')¢ .jud_g.r:nent:,br· or.de~ _appealed· from. shall: ·-~\~.~t:,W · P.hilipµ,ine. Bar~' and . . . ··. · . . · '
\:·· ··affirm.eo;)md·on all irtc19er1tal matters, the. pet1t!~P'·
: . ' . t' 'h' IL bed . d'(RRCTA Rule 2 Sec· 3\· , ...~ · >.t,r\ ·
Wl':,. · cf . Court attorney {RRC:rA; ftule. -121 Sec..:3):.
·
!;( 111010n.s a ·."' -, _eme.. '.' , ... :,• .. '.(7'-:fl~·.,t~.i'·, ... :· .. ·.... · ... -. : · -: · · ·
i', · · .. · . : . ·. ; · ·~ -, _ · _ . . · . \[ {~;~r,~:,i.f.:.\JfP.ose:_ '¥1.,1}~m_g co':lpanson with t~.e ?r.1~inal _and
~,,_: Wher'! the required quorum q~nnot.tie co_n!~;ut~<f..trji~:..!.iQenttfi.C:l;!!IQIJi!'l\·by··witnesses of. .. the . received
·~ When the required quorum cannot b~ ~?;1. s~ted . ~u~.J n · docume'Mtarflfyictence(~RCTA, Rule 1<1 Sec. :V· '
:t · to .a'r'iy vac;~ricy, disq.u~l,ification, irih1~!.tl9-PJ,~d!sab.1.h!Y.,:,_!,.,.fl . :Y~\ : · ·
·· - · · . ·
, ._·or:a.ny_otherlaveful ~use, ~he Pre~IQll)9_d.,lil~t1ce.s~$1J~ f:·~ .It .app_!ies·o~ly, _i~ defaultor ex parlf_or where the.
~. _des1~r1at~. any ~ust1ce. of· ot_her:~[?)_,IIJs1p'1Ji!PtO sit· .. f., .. p.arti~s ~~feln 'pfing. :he__c;ourt official· shall have·.
:: ~e~~Or'.3rily:th_er_e1n(R,A:·. ~o. ;~1fse'~!~ ~ ~~:;\ np:po~~I t\f 1~.~n·_:o~J~ctio~s (R~~TA, .R1:1/e _1.2;
,. . . . . . ~i·':ni7 ~-- '-.: .. ~ . '\ ~ Sec. ;J),l,_.lf:.1,..'"'it\,=. . : . -.
_·::· P.ower_foJ~ec~.i'i!e.'Evidenc~?< ·~ .b'j:). '\<..~"' · ~[-il" : -~;\fl-1;4~it'-~·i ,.:?. _ ·. . ' . :_ . ·': · ·
i . ·]J1e ~TA _may r~~~lve e:vl~enc;· tn,!!1:. .f.~f.~Y{Jf Q ~asff.. Jr~f c_TA . shall~ 0:F:·~ · ~oveme,d_ by_ th.e-.Te~-~ni.~al .:
·.c: (OG). ·.. · ··.; . : · . . . · . ~h~Y'\i-, . y, f~ Rules of .Ev1d.ei:1ce · . · : . · . . '.. . . ·.
!:,, rl. ·In _all_ cases f?ll.in~ '.""~~_hinme Qr_ig11Q_al J.~Jfd1cµon._ f'1:;:-:1ti'~.!~~crea_ling t~e _CTA specifically provides that ·
i:< · of-the ~ou~-m D1v1s10.!1 pu_rsuant t'!'.~~,.,3; ~~!;~-s'·l•/wr.oce-e~A-~before it-shall .not be gov.~m~d by· t~e
~- 4 of RRCTA (RRCTA,.Rule 12, S{fG(2);· anqt~~..,..---:-h'Lt\'ecnri1cai mies· of l3vide.nce. The .. '.paramourit.
!·: . 2.. In aj:)pe~ls.tri .b·~u, -Givil an~ bri~in~~t~,se:f1W.1J~r~. ·consideratio_n·.retTiains ~11.e:. asc_;~rta_in_p~.nt·__cit· Jrllt~.
-:.·_. . . . the .Co1,1rt· ~r-~nfs !:! 11ew-tr!al ·plJrl,uarf::!R~§ec. 2, · . Ve.rily, the quest fpr oi'der.ly. presentatl'on.?f_1.s.~ues 1s.
: Rule ,·53:-~nd::Sec:-: 12, ~ule. ·1'~4 ·Of 'the R!JJ~s· o(. . not ·ai'l ·,.absolute;. It ·snould: not': bat- ·coµf!~ .:.frQi:r,
CQurt.(RR<;,T-.iR(!le·12-, 'sec,. 2),. ·. · , · _; .·. :· c;bnsfd_ering~·undispt,ted _fa_cts. tb cfn:ive .. at' ..~·.' Ju~t.
. . ; . :. ·. · · .'. ' . · -, . . '· . ·: . · . determinatibn .of. controversy (2 Q1f).4AAMfAO, -::Tax
N_b~~=. 'the._·P~.w~r·. o~._th~·:?<?-!,frt,~'f .:.~..~- '/\ppea}~ I?- ·. . .Ptiriciple'$,ima·:RfJmeqles,(2018),:P:.27,4)jh~refn£J{!er .. ·
exercise .i~s appellate·-Ju.ns1:llct1ondoe~. not preclLJdett..... .. 2'DIMAAMPAOJ. . . · · · • . · .. · . :,. · ·
from considering-evidence th.at was riqt presented ·in. . . . . ·. ' . . .. ,, - .. . .. . .
the: administrat1ve ·q_laim·.:fr1 thrr .Bureau.· of .Internal· .. ·: c·TA.. is ·bou~q ·b{ th,{ ~ules 01'.l. :Dpc~m~·nta;,,
. Reven·u~: ·The ·cpurt o( Tax· Appea.ls ,is· a co.u.rt ·9f · :~yJ.«;ten~e .. ·· · •.. : .. · .. : ·-: ·. · · . · ·. ·: .. . . · · ·
,t • ·· .. record ·an.d it·. ~ay.:·_receive .new:··~nd additional.. . · u·nd~r Sec.·B··of RA 1125,;the CTA is:de~crit;>ec! as a ..
., , e•/idence.· Jjot. pre~ented'~at,. t~e ,.admini:Stratlve .·court· of record. As cases .fil.ed 'befor~ it ar~ liti'gated
K level: Pa'riie·$·areto·liµg~te ·an<;!. prove th.e~tcas~ anew . .. de. novo, party litigants _should prove ·'every ·miriµte:
\~ ·. before-the ··court .~n.cl. -toriJially offertheir.: ev.idel'lce . -~~pect oi th:eir·c~s~s (2_Dl~'IAAff~~o!. sµpra a(27?)- ·
~1. · (P-tiilippine.Airlines;·Inc: vs: C6,n,j,#si9nero( lri~erna/ ·· · . .. . . . . . .
Revenue; G.R. N,o'. 206.079-80, January .17, 2018), : ... ·Jcidubitably, n~ ·;evident{ary\,atue can be 'given .the' .. :
·. · . · ·' · · ·. : ·.. .-~ · :. · · · · · ' · · · piece·s_of eyidence"sub'mitted.bY.. the'BIR, ·n_otJ~rmall~
. · ,., ., . offered . as the rules -on · documentary· ev1denc_e ·
r.equire' tha.t these docurnei:its must be 'tortnally
' . · ·: offered before the· CTA (Dizon y, · Court of Tax·.
Appl3als, G.RJ\Jo_. 14~944; April J01 2008).

2019 SAN BEDALAW CE_NTRALIZED BAR OPERATIONS I :323.

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 C:OU·RT OF TAX .APPEALS .
. SAN BEDA LAWCENTRALIZED BAR Ofl:.nAT/OfJS - MEfy'(ORY AiD 2019
:ILA . . . ,.. Ai WM&IP !tA(

JURISDICTION.OF C_TA OVER CIVIL ¢ASES

JPRIS"DICTION° ·O·F/ THE
-co\riiT os TA:x APPEA.Ls . 1. . E~clusiv.e
Div.ision
Original · ·Jurisdictjon of CTA

The CT~ has ju.ri.sdi~tion. o~~r· b;th

civil and -~iminal . _Th.ose_involvirig·final and executory assessments
-for. taxes, fees;_-charges and penalties,. where the
aspects of a .tax case: The eoncentFation·of tax cases
}.r: one c,o.urt will enhaniefthE) disposition- ·at these principal amountof taxes andfees, excluslveof
··.ca_ses·~inc_e it w_ill tal.(e them QUt"ofthe jurisdiction-of charg9.s .and .penaltles, claimed: is pf' Million· or
regular c"ourts which,·. admittedly, dci" not .. have . ··mpr~ (f3RCT.A:,·.Rule 4, Sec: 3(c)(1)).·
experjise ·1n tli_e field of taxation .(2.DIMAA,MP/l,O:. ·
supr~ ·a,t ?74). _. ' lf._less tnan.Pt ly1.or no sp~cifie:d amount claimed
it . exercises exclusive 'app~li~te jurisdi~ti<:l~
. T_h_e law. Intends fh~ Co~rt of r-ax· J\ppeals to 1:!G\Ve (/NGLl;=S, Tax Made Less Taxing (2018), p. 477).
~Xclusiv~jurlsdiction-to resolve autax problems. With · ~
.respect _".to administrative tssuances. issued by the . . · · N_ote: ·. Collecjlon cases w.h·e"re.. the principal
·cornmfssjon~r under its power to !'J)ake "rulings .or . .. . '.3molint.of.taxe~ and fees, exclusive of charges
. .oplnlons in connection with the implementation- of the . . . and penalties claimed.is less than-P-1" Million shall
· pr~v..is.ior:is ~~·i.nterna(revenu~ laiNs,. Tc'!~ _ruli~~jlJ,epr..:··~~e :· tri.~~ · by the P.roper. MT_C, .~E;T~. 'or' RTC,
0~1~1al::·P.Os1tions of _the. Bur.eau_ of) -,m9.1<1!1'~~ · of.]"J- ·1\. iep.~!],~~ng on their res~ect1ve.Junsd_1ct!ori,_.The
· . .taxpay~rs, Hence,. the deterrnlnation),:>~Kl~al~y ·of ~ .{\J1.Jr'f-d1f~t9,_qof. the._.CTA in these cases shall be
the~e .1ss.~a,~ce~_qlearJy.-falls w.ith)' t~ a,xel_l;!.:W,0'~~;_,aJ.P.~llfte_;r~(I~ _No. -928.2, Sec .. 7(t)(1)) .. , .
appe.~late J~nsd1ct1o_r1:-.of the Cf:>lJrt~c:!f Tax,;.1:>p_ea1s: . .. ~~-~ ,,<_,'\.; . · ·· ·, .·
. under. Se~tion:·-7{!). of -~epubli~cf\~~/1J~&.-:~r""Jr--2.,_,,,_1;_~!~~tV1.! ,,AJit?.._~llate· Jurisdiction· of. GTA
$;T~~-
'i ' . · _, . . _ · . . . - .
· . am_":nded, s_uf>Ject to. pnor-rey1.~tb¥)he1ecret~!Y ~r 1'f;D1v1s10~~(~/ry- Rule 4, ~ecs:. 3(a), 3(b)(2)
. off)r:ia~ce!. as required under,Repub!}t:-A.ct!No'.84~4 . ·. · .,_it,. _an.d ~(c;)(2}ND!~Et~SS) . . .' · -~ ·.. ·
.. (C:Of!lfJll~SIOner 9fln~e(na~ R~ . eJs. Coyrt".of:ax- · ·.. · . ·! ··. :)J:f}
·. .-Appeal~ and Pe.tr_,qn:
_. F.ep.ruary.14,-._2018) ....
Cqrp9t· . <j.R: .No;':_207{343,
U'. -~ .!- '\~;
,' ... • .·.
.-- .?'.'.'~~c,.s.'oit.?-~)Jir
I:"'-.,~":'· at-Q1sp'Jt1e<J.as~_tssm
__ ents/ .'·. · .
.CIR frivolving: fDRO)" · ·
,
. , · . . . . . _.· -~ ~ . ,_.l, . c:: ~~-~ .. t _ In·.. cas~=}f~un~.tsputed as~essments;
·. .
. The Court expli_citly n.,led:· ?'1:'(thJi:!, C:t_~~:t.·tak~-:S.--£ ·- .:. j .· Jrm~ana!~on for th~· coUectiori of suin
_cognl~a~te :of._ <:;as~s.. ~di~e~tl~~~he_lt~)l~~ · th\~.-- 1.~;. .• ..f ~~f[l1~1)~¥.i,:the.·<?T~l)~sexqlu~iveo~igirial
. con~t1.~l,.!t1q~.al1ty_'.tP.y'al_1d.1fy.~f~'t~x"l~\v."re~~-~Q.~-9~ ~
... ;ad_m11;ustrat1ve issuance _-(su_cN· . a,s__.t~~nu~<.Ef~!~.·~~~-:":'j ; . -;;,,/
/~·
;s:..~
J
" ··.v. Jar_,~,uicttl?h_ over, . u.ri.~isputed
~~~ess!l:~wtswheri.:the amount.. 1n_volV!3d
. re.vei:iue mer:noran~u~ .circular · ··and n.ill~gs) ffi!lh(N,,,,./ (~7\.; · !?"P._1. m!IJJ,on:.9r.mor;e.: _(fi'.RCT~; Rqlft 4,
.. De_· .or_o, v. Repub/.!C, · ~._R. .!IJp. ·._.~875_6, )l{!f.J_iist>~'ft:....::...----.Nrf\t):-). ,-,i1SFC- 3(ftf1){ . . .·· - · •
. 2.0,1{?), .: . . . : .. • . . . .. ·.~'. . :.• f ~~".,~::. _ _.,Plf".\~;Ul),.dS Of mt~rnal r:filVE1n_',le .i'.'1X0S, f~eS
. . · . ·. , : . . . , .-,. . _. . · . , _,·~:Pf) -:"".'----=:::f~~~:;'.:\··'(\;,9.~.;S?th~r-. cl'larges, ;Penalties. · 1n rel~t1_on
ST~ ,bY: .<;:cmsti_tat,~,n:a1. _manda~e,.J~e:~J4\d1,i~.-1 ii ~it,.,.\ ):-·.,.-.~~l'.e~?;or ·· ·.. · , ·.. . ·. · . . .· ·. · · · · ·.. .·
: J!JJ'.'J?d,_ct~_on_.t~_ ,s~ue y,,~1ts.?>.f.certiorari ifi':eca,l?,S~. 1-VU~'~. .,.,.~ . Qther matters ~i:t?ing·un~_er t~e NIRC or
·. falling ~!thin 1~~-EtX(?IUs1ve·Jui:-is.dicti9.rl" . , -~- · .otl:Jer laws adm!rnsteted.by·t_he BIR·
· · TJie. pow~r of: the. CTA _includes tti:at.of. deteiminirig . ·, . 0 · · . · · · · . ·' · , · . . - .
. ·whet~er or, not. then~. has .been· -gr'ave · ·a~use· ·af · · - . . T~e term :other matters''. is limited ohly Qythe
discretion amqunting,to-lat:k or'excess.of jurisdiction·, ·. _ .q':)cj!lifyirig _phra.se. that- follows . it. Tlie
~n·. th~· pan: of ·the .RTC "_in ois~_uihg ·~m in_terlo.ctitory . -·... · · ·.. app_~ll~te·ju.ris~iction of th~· _CT A :_DfV;isi9ri j~
or<;le.r in cas_e~'fglfirig, wit_hin 'the exch;.11:,ive appellate . · not _limited. to ·Qase~whi_ch. i_nvolve decisions
jurisdictic:iri ·of thEr_tax ·.court: T~us; i(follo"w~ Jhat''lt!e ·. Of ~h~ CIR: .. on. ·m'att13rs. rel!:lting '. ·t\'.)
CTA,.. ·by .. constitutional . mandate, . is· vested . with -asses~ments· .or ·refunds; . 11 ·.covers·· other
. jurisdktion to iSSl!e )Nrits""c>fcerii.orar.i.in" these·Gases: cases" that arise ·out 'of "the N!R.C·. 6i-'.related
. Theig_rali! of:appellate jur_i_s~i¢.tion w,th ·-the ct A in· . _law_s a~fr!lniste~ed by 'the BIR·: The issu'<i bl
cas¢s fired anc:! detided.wi.th the RTC c.orries\viththe w_het_heror .not the BIR'.s rJghftb collect taxes
. ppwer·to _issue .writs of-"c~r1io.iari·Wh.en'"'.neci~1>ary:t<;:> •.• :ha? :a_lready prescrlbe"d _is _a $Ubj~ct matte,
_the e~ljlrc1s_eof ~ppellatejur.i,sdic::tion. (9ity pf._Mfnil.a.li. . . _·falling .. under_,:the :. N!RC ... ·1ri ·. connectJori
· G.re91,;1-<Ju~rdo, G.R. No. 17f5723-February4, -2014): · ·~· _ther~yv'.Jth, ·. ttie, NIRC.. a_lSb states tt,at the
. . . . ., . . .. . ·. collection of.taxes:is one of-the duties of the
. ·· P<;>w~r .to isi;;u~- writs ·o( prbhibiti~n and fnjunc,tion is. B! R: Jhus, fro,:h. the foregoing"," the i$SUe o1
supplef1?e~tary_· to ·. it~· . · )1pp1:;l_late· .. · jui:i_sdr9tipn pre.~~ripti_<;>nof the Bl R's r-igh~ to collecnaxes
( Comm1s§1_one,: of1n_ternal _Revenue v.- Yusf;co; · G;f?.. : · may be consid~red -as· covere.d'"by the t~rr'r
No.1:.-'125.18,-.Qctqber 28,-1·961), "ot~er- matters" over :which ·the ·cTA ha~
· ·· . · · . appellate jOrisdiciiOn·. (Gor,:,IT1ission.er· .. oi

324 _ ,. · ~019 sAN s~oA ·i.Aw c~NTRALtzEoBA~ OPERAT10Ns

 CO·U.RT:O:F.T).\X AP'PEALs·
sAr/BEDALAW CENT(MLl~ED
BAn OPE~TIDNS.: MEMOnY Aio.2019
g; 44 #4 Cii&RMicP& I 1 uoae ••. -· ; ..
v.
tniemel Revenue. ·Hambrecht& Qui;t PHL, · The CTA, sittin.g as Dlvlsion, has jurisdiction to review
tnc., G.R.-N<;>. 16!}225;November 17, · 201 O)._ l:>y appeal the decisions, rulings and resolutions of the
RTC over: local tax cases, which includes real
b. [riactlon by the CIR lnv.olvlng (ri"ROw) ·. . property taxes (National. Power 'Corp. v. NJ..unl~ipal ·.
· a. "Qisputed assessments; . . · .· · · Government- of N.ayotas; G.R. No. · 1!)2300,
· ·· b.. · · Refunds of ,internal revenue taxes, fees · · Noveml;)er.24, 2014)-. '~·
. 6r other charges and. penalties imposed
·thereto; . . Before the case. can b.e raised-on appeal IQ the CTA:
· : · c. Qther· rnalters an~1ng under NIRC or·· ·. · the action before the RTC rnustbem the nature of a
..other . laws. administered by the ·s1R, . tax case. If the case' lsessentlally onefor recovery of
···Where. the· NIRC provides a specific . . ownership- and · possesslon of the · proper.iy; · wi.ih .
for
: peeled actiol) (RRGiA, Ri.J!e 4; Sec: .. damages, .w~icii ·is notanchorad .ori' a ·ta,tlssu.e·, as·'
. 3(a)(2)Y::: · ·· ·. · . such; the RTC's ruling couldnet-becharacterized.~$.'.· .
. . : :· .. · · .. · : r ·- . . . . . a·, local tax .case over which:tfie.:.CTA·.~olll~ .have · ·;:
1. · . ~ate: The inactlon by the CIR within ~t:ie 180-day . properly assumed jurisdictlon 'on- app.eal (lgn;;icio. y;- ·· ..
penod under.Seo. 228.of the.NJRC is ·deemed a · · . ,Office of City Treasurer·of Qu~:t.on City, ,GR -. No .. · ·
denial tor.purposes o( allbwing ·the taxp~ye.r·.td. · · 221620, Seotembert t, 20.17). · i ·
.. appeaPwith.the CTA 'but itdoesnot necessarily. . · · · · ·
.cQns.titute the ClR's formal d.e~.ision· (RR.G1:A,. . ~ote: With: the passage of RA. ·N·a.. 9282, the
· Rule. 4, ~~c:. :J{a)/2))., _r,.t;) authority to exercise either ori.giMI or .appellate
· ·· . · .. . /tf.;.~:,;:-J ··jurisdic::tion···over local tax .cases depended· on: the
Ir) .case the CIR fa1(s· to. act on the .d1s~~1w~_.··, t'>- amount of-the claim (China Banking. Gorp.. v. C1ty.
assessm.en!Y.Jithinthe.18()...day period fror:tit~qlt\~j Tre.a~urer of M~nila, GR. fvo: 20'4117, July 1, 2015) ....
of. subm1~s1on 9f documents, a taxpayer.teal)·~ 1 .•• :·'....->:,-.. . · .,.-~ , . · · . .... · ..
. · · r/' ·V I -.11,, -1· .,,,,,.,, <·! .·l .
· · ~ith~r: · . . · ·.. ·... . -- · · ·. . · _. ,A')·: . -l~:fJf,-:--..:L.:.!..<,t!!?J?..~.~J9ns-of · th_e .Qommiss_!oner of.
·· -· 1, ··File a-·petitroo_ for rev1e~~-.,,mf..th~.CTJI. ,. . .. . ·- .Q.u_stwns inv.61ying (DuSe-FO) . ·· · : .. iI
· ·within,~~ .day~: after th~J~XP,Jration\?f':[:!l·. · . : .-. a. ;£if3\lity .for customs. Dutie_s, fee_s, ·~r
: .. -1!1e .1.80-d~yp~n~~(NIRC,~1$.f:!C122~)·,1~ V ·. · ·,,otet,money-charg_es; . . : . .
!
)i: ··Await the final dec1s10_'3RtJJ;iE;l9,lf.?"on\h~. ~'{... '. b.l S~[zi:l\es, qetention,. or teleas~ ·o~ other
· . ·'dlsput~d ·assessm7r;1J~d,eyonl"t~ 18p-: V:;.i . l ··pfopetty affeGted; · · . ·. · ..
. _ · .day · Mriod, . the (1<;i~i;>a¥el':fm..,.ayappe~~ 1,Jf. . · ,/!., F~_e5,.r,-'for;fe"rtures;'
such fin.al decisloii,-:io th'e~:C.XJ\.~RR~~·• t/:i~.. :
Rule 4, Sec. 3(a)(2&,~ .~·f.) <7)1 t~1 ·_. - ~,;~'·1#~ttw-i·~reto;
or qther penalties. ii')
or· . ·
d:t~Qtner"m.atters·arisingu~~~r·tt,e customs
· : :
I
i·
. .... . . . . ·. _·; · · :·:. : _,.·~v.¢:ii-0({,. if . I:;,.. -, . . . .. · _- law _or qther laws.-adm1mst~red by• ·the ..
$119h. taxp<!yer~..'l)!3Y.: appe~l-.!P. ,.the:)~{fA by fi}-r~_, . . ,1:'I • ·.. . BOC. . . . .
I
_petitlori fo_r, revr~w f!l.ed _w1th~n. ~p-3da'Y_~ a_~~./rJ,'IXli/l-'j';~~:i+,~,tfRRCTA~ Rule 4; Sec .. 3(a)(4)).. . ·....

f
,, · ·_rec~ip~ of a copy:pf.~uch:dec1s1qr,or .ruh~~er-:-~-.:.,..e.:~,:.:.;,~
e?<p_irat!qn. :a.f· the P.!mod·.foc~d.. byil~wior.(thei
Commissioner_of Internal Revenue tQ;~~n the · . ·
· : ...
·· ~· · ._. . . .·
e. _'De~lsion~ of.t1;1e §ecretary.-of.Fmance-._.:,-_
· . ·on ·Customs cases· e)evated fcir. automatic
' · :

I. ";·
/:. .
. dispute<:r assessrne·nts·. (Rf:WTA,· Rdle B; Sec. · .
;3(a)).' · : . : ._. · · ·. ·· :.. .
.Note; Thes.e·.9ptions are.-mutµally.'exc.lusiv~. a.nd .- ..
. •· . .· . .
·r~vievdrom decisions. of-the Com:rnissioner •
of. Customs ·whic·h. :are · adverse. ·to· the·
Governin~rit under. ·the.: GMT.A; (RRCTA;

I
!if
. · .. ~esort fo··ari~· b~rs \l\e applica~on .of_the ·atl)er .
: : · . ·(INGLES,:.supra at479). · ·. ·,:: · ·.· .... _ · . ·
,··.· .. ,. . . .. . . .
:. Ru_le·<s~c. 3(i/}(5)). .
. . . .
Reasc;>h and P~Fpose·ofAi.,t~inatic.~~view:-To·
:-c. :·oeclsl.ons,,:Resc;ilutions or_.Order!, ·.of ·the .., · · .- · prot~ct'_'the .Government .a·gl:lins_t. cor'ru.pt ~nd
f ... · ... :, -Rte .. · tn:-1.,.ocal Tax Gases d.ecld~d or. · .. conniving· customs oollector. The own.er.-of the
·.·.. . '. .. ·.' . .- ..
. , --. · .

t · .· .resolved by th.em iri .the· gxercfs~ Of· their goods cannot : be eXP.eCt.ed to app·~al :the
~ ·. .'.' .. ·O(igli}al Ju.risgictlo·n .;. . ..' . ..· colree::tor·~ deci~ion·when it is favora.t.:>I~ to hini (2
,,.,. , . · tRf?.CtA; Ruf~ 4, .Sec. 3(a)(3)) . . · · . DIMMMPAO, SVP[l! at ;77) . ·
ff .-· .~: .fhe term "~ocal taxes" In the aforer:nt?nfioned
p.r9vislon shou.ld be:~n~idered i~_lts general··; .· .·
· · · ' and compre'hensive sens.e. which· em_braces
·p1ea;~ '~ee·.also. Custom; .Mbder~i~~~ion:~nd Tariff.
· · Act cHapter.,oriurth~rdi$cussion~.. · ·
.:.·rec1l ... pr9peity t~x assessments, -in' line: with · · .· · · ·
. the."j:)re.cept 'What. is general.ly spoken· l>l:lc!II !~stances ·~here. decision; of the. $~cretary·· of
· ·: · be general1y·uh<;l~rsto69n {Salva v. Magpile,. ·Finan~e may be ttie subjec~ of .a!l appeal ·to the
. · G.R. No. 220440, Nqvemb~r a;. 2017) .. ·. ·-. - : · ·cTA in. D.ivislon · .. · · · · . ·. · . . . - .
'- , 1. De.c;,isioni,.of the Secretary.of Finar.1ce In forfeiture ·
. . 'ca'ses.automatically elevated f<:>r revl~w (CM.TA,
· ·sec. ·1127). '

2019 SAN BED-A LAW

. . CENTRALIZED
. . BAR OPERATIONS
. . . 325 ..
 couarorrxx
... SAN'BEDA LAW.CENTFy,LIZfD ~R OP~ATIONS - MEMOf!~.AID ~019 .
APP:EA·Ls·
.

~- .Declslons of the-Secretary of..Finance In: other . MTC, not the RTC. The RTC exercises appellate
· cases automatically elevated for review: wrrere, · · · 'jurisdiction "in . those· cases .(China·· Banking
.. the coc has" not rendered-adeclston ·yvithin the Corporstionv.· City Tre.asurer of Manila, G.R: No.
· prescribed 'period or when "any declsion rendered 20411\,July 1, 2015).. :
.· ·by_ . the · Cornmisaloner . .Js . adverse' to the· '
. government (CM.TA, Sec: 1128)... The. CTA has [urlsdictlori to determine if the warrant
ofdis"tr:~int-ahd levy Issuedby the BIR Is valid .and to
. . . . . . . : ... s .. . rule if the W?iVer. of $tatu_te ·of Ltrniiations was validly
-, Note:. -The decision .of fhe Secretary of Finance o._n effectecJ(P.hi/Jppine cloumellsts, .Jn,c. v. 'Commissioner
. disputed. assessments involvinq' customs duties 'and
. taxes" and other matters. related thereto shall. be
.oflntemel
.
Revenue, .G.R. No.. 162852,. D_.e·c·em·
b.er·16,.'
. subject to: the . exctuslve · jurfsdlctlon. ·of the ·CTA 2oo4).. :. . -' .
(C.MT~. Sec. 201). · '. '. · ., . · .·: .· .. ,_:... ' . .. · ... •
c. Decisions, .Resoiutron's." . or: . Orders . on .:
. f. .. -Dectstcns -of the §e.cr:~tary "bf Trade. and . Motions.for Reco'ns"lder~tlon or New:Trial ·.
ln"Cluitr-y ·. .: . _. , .· · . ·. · ,: · .. .-· . ·. · of th.e"_(:o.i..irtih Divlsf~n-lidhe·,E~eri::ise·of .
In . the case. of non-aqricuttural product, · -· i.ts'ExClu$i\'e,Orig1n~I J'uriSd'ictlOn. ·.· ..: .
commodity_ or 'articfe, and the §ecretary .of . , Ta·x· colleqfiQrl c;.ses Where. the ptir,cipai .
. Agriculture in. the· case· of ._agricultural.. .· : _'. . _9mou~t pf laxes· and fees; . exclusive of

~u- .
i ,

p~Odu~t,_ 'comrnodlty q{ article, i~vo~lvjR'g"'''"'''"''''~'''==-:;~ch~tge~ a~d __pen~ltiE:.s.-claimed. i~ f>1_ ~il~ion ·

durnplnq (R.A. .No .. 8752) A:'~ c_o~r:i-re¥w.allrn"9 ·A..: 'f ~r"';'{!.1_or~ IS_ ;_unde~. t.h~ ~xclusrve ongmal.
duties · (R.A. · No. .87{51) a,,rn~s~fe~r~:~-~ . ./..~j j.~t1fJ_Sch.QR,D.n.ofCJA._d1~1~1oni (R~CTA_, Rule 4,
measures _(R.A.. No ... B8g9£. ~~eili.l9J.t~r-~~~..._.
party !'llay·appeal the de91~t~lil, ..to·~se·-or_;;;...
_S,b/3(f},{.1)7-, .. · .= ...
. ,not to \mpose:said dutie~ ~\/,,,?'·~~-,j~!-~l:)~r~ng:Ci!2.\.1'11fti~~f~x rec·onsi~~:a!ion or new
0__
·
•
.
·:
·
'
.
,~/\.\~~ •• • •• •• • •• • • • • • I
i
·, · . . · . _ f ~';)./.. ·
f ·. ·. jr:l>~ J~_._ff),al_!>_ef~fe.ii).f(fF°A'\,D1vrsron I~ an .mdrsrensable
1.
.. 3. i;::xclush.~~- Appellate Jtisdicl:tr :~.· of.tCTA: In '/'}'
re~u,_rem~ntf'drt. f!Jln!;J·~·rl 8P,P~al bef?re the. CTA .f!n I
bane (RRCTA,.Rule 4, tj,e.'G·,•.2), · . J-.--.k).1-~~.ng.,_~{u_re td\fl(gsuct(lm~tron for_r~~o!1~1d~rat1on
·. · . · jl ,;,.P' i . , .. ·. ~ .. . __:,.~ l)!J. d¥1l·e_wtrrc\j·l rs c.;iu~e.~-Br4:lii,mrssal of the appeal before
a: :oecisio~s ~-i- _Res9f&ffop ?" ·Mdti~11s~jo~.'.Jl
'it)_&b,~- f?.·-~i:in~~ S!'Yfq(Mani(a v. Cos,:nos Bottting
. , . Reco_ns1.deratr<?,n-o~tifP"l/1.~l,.9.f..~~e~.o.f'~ill!lll'-tf6?1?oray~··R§

·. ;-_ ;Pi~i1!~~nJ;r;;i~j;~~i;'/l~!~;: .~!

~~~J~~i
.· . , .. ·. Gas.es_ ans,ng \tr9m·\.Ad ., if.st trv~~- -~~-".'~'e'f~ffii;;,Sect~~
<t19"668.1,Jumt 27, 2018.). ·· ..
~:~JJe·· ~A1,s_:.,.~~~~-,~e '.:~n :cas~ . ..of
3,:ij le.,14 _of.R_RC:r'A :?E:,.fi~es an
~~en~E:d. -:.
,.I··
:,. .: . a~encres .......:BIR, !3?~;p~,.D .. -~fl i::.~ . : :: a.~'Fl~.d1;;1~,?~ · cl ''.aRy actron ~~1fy1ng or
• ·· · · • 11. !:ocal -tax Ci?.se.s d~b1ded by\t.tie: ~'li~~v~ibgaf'dec.rs_rofl of. fl:i~ · Court en .bane or "in i
. -< the .exerci~e of. their~~igjn_al·:l'afisdii~JHhfBJ~1~JC:(r:i.tVAs~·.expl~1n$d. in C.f :luion,· G~ofh.e"rmal· · !
. .;. · and_ · .·· . · · .,_ . . ·.: " \ · ~.!"~~ ~~~~C.~;tj_r/lnc. v:: Com_m_(ssi9,:ier ?f· f?terna(_.
. · . .111.·. Iax .collec)19n, 9a~~.s... . ..@'~f'bj"itie . ·. ave11f(\.).!J,-Pa'men9ed· d~1sron . is El" different
.. : · ~,:c~. i~ -J~e· · ex~r~~se . of. t~ir'"~·i'©_i[lal'. ~if .. ~~6~*-Af thus:" i.s i;·proper: ~ul:?]ect of-l,i".~~~on ~or
· . J\.msdrcJion-m119lv!Y,19 flna) .aQd·exe'1:!t1i~~S1c!eral;ion (~s1a_tr:v.stp~vfilopm_entBank, Inc. v.
·. assessr:nents f0r. taxes,· {ees; charges . -Commissioner-·· of Internal Revenue, G.R. · No."·
.... and --'penciltr~.s;. i,v_~ere .. th.e··· prin.qipal_"" . · ·20153.0, "Aprii"19,""2017). ·::· ·.... .i . · .· . . .
amo.unt of taxes. ~n~ penalf)es.~1~·imed i~ ·. · · · .: , · · ·· ·· , · ·· ·
: . less than P.1 Millior:,· (RRCTA;~:Rl.Jle 4; , . d.:--.~~~isio·n~·~fthe CBAA"jr/the'E~er~i~~ of··,
.Sep, 2(a)J, · : :_ .. :.·. · ,! ·.,: · ·its :App~l!ate. -~h.frisdfotio'n . 'over.· c~ses. ·
.: :b. · becisi~~s, 'R~solutii:>lis -~/order~· ~f-t~~:. · ..
.,. '.; . iovblvjng th"e·assessme.nt and
taxation of reai' .
. .. ·. pi'ope~y oifo"inaiiv 'declde'd t;>y ~h-~ pr'ovinc;,i~I ·
·. : : ·.., :BTCs decided or.resqlv~d. by_ th.~m. In th,e • . .. ·or"··. city · boi:ircl'.. : of · aS$0S~m.ent : "app,eals ..
· . ·, E~erc_is~ ·of. their· Apj>"el_late ·: J uris~lct!!?" .. '.. _. . . ·. · .. (RRQTA. 'Rillf/ S~<(~(e)~-- ·.. 1,· ···'. ·
. ' -.oyer . . . ·."'···:, · · ·. . . · ·
· .. i. ·. L.ocal tax· ~a~~s (f;R9,_Ti?i, R~le· "'(,-:-Se_i; .
.. 2(b)).and· .. .- . ·. · · . · . ,:.,
. ·J~r\.sctl~ti.~nl:~; CTA.·o~~i;°Cr~mir..al-Ca~-e~ ._:···: ..
.. .. . . . . '. . . . . . .
1. · · Exclu~lve ·orfginal :J_urisdicfion of .'CTA ·
· ,. . . .
Ta~
·. ii.
Sffc. 2(c))"
colleiction-~ca~~s (RRCTA,-.R~le ·4,.
. ·· ·. · .· · . . : ·.· · ·
.· · Divisio11. ·. . .. ·· ... ~ . · · · :__ ._.:" · · · ·. · . ·
. .. .· ~. : . . . Tho~~_.arisibg vi;i~_tio'"ns ottlie'· NIRC"or: CMTA: "irom
Note; in' local.tax ·c~ifectioi:i. cases t~e amount of th~. . . ahd ·?ther_ laws :a_dml~istered b_y BIR ,or BOC, 'the.
· .. claim determines where. th_e cas~ sho.t.iJd. be fi~ed°. . · ·. wher~ :- th.~. principal . arJ:lbUnt_. ~f; taxes. :and .fees,-
. When tlie claim does not exceied P3QO, ooo '(or 400·.. . ·.. : e~c!usive ,(?f charges an~· p_enalhes, cla11y1ed JS p1 ·
009 in l'.1etro Manila), th.e ~ase ·should be filed t.o. · .. M.1)1ton or rrore (RRCrA, Rule 4, _Sec: 3(b).(1))., ..

.326 I ·2015L$AN-BEDA LAW CENTR.A.L14ED BAR OPERATIONS·

. \
(:-~---~------~~~~·--\ ~~~
r count or TAX AP'P-E.Ats· ·
. _SAN ·BEDA I.AW CENTRALIZEDBAR OP.ERAT/ONS .:·MEMORY AID·2019 . . .
iM!NiR · · ,,,,, w · ·, ass+s->Mit. w aie · ···wa~:f.
Regular courts shall have [urlsdlctlonln offe~ses c. . Decisions; R~solufions o't: Orders of ·the
'or felonies where: RTcs· in· the Exercise· of their Appellate·
· a. The prin,cippl .arnount of Jaxes .and fees,': . Jurisdiction over Criminal Offenses
exclusiveof charges and penalties claimed is mentioned ·in paraqraph A (RRCTA, Rule 4;
less than P1 Milllon pesos; 'or . . Sec. 2(hj). ' . .
. '.. b. 'No speclfledvamount is· _clair:ried (R.A. No.
_ 1125;· 'Sec. 7(b)(1)).

. InctusloncfCivitActlon In Criminal Action

The criminal action and the cerrespcndlnq civil acnon
I .·.r
'tor the recovery of civil liability f6t'taxes and penalties
' .
Supje.ct of Appeal. . · ' .
shall· be: deemed . Jointly lnstltuted in the . same ... Qnly· .a 'fin at. decision -i~ ·appealabl~ -to. the ·CTA. in ·
proceedinq,: The filing. of crimlnal., action shall..' Qivision (Corritnissioner.oflntefnaf.R.evenq~v. Bank
necessarily carry with it the -filing· of civil. action. No_' ·otthe'F'hilfppin_e islands, G.R. No: . :134062, April.1_7, .
right to.. reserve· . the· ttling: of. such civil -actlon · 2007), . ' .. · . ... . .
separately 'from the ciimir1al action .shall be allowed
or recogAiz-~d{R~CTA; Ru~e 9;_$.ee:. 't1f.: . . -, ii:i'e -word _"decis'ions". in.' ·RA. 9282 has been.
. . .. . ,- . ·. . . .. . . . Interoreted to rnean the decisionsof the CIR on the
2, . E~t:lusive Appellate ~uri!idictio~ · of . CT~-A ·· protest. of 'the· :t~~payer ._'against. the assessmentsi .
··D1y1_slon· ,(RR.CTA;· Rule .4, 'Secs. }(a); ~(b)Jfly)( _(Allied Banking_ Corporation v.. Cofrr1J1jssi01;ter·or
an~_3.(o}(2)) · · . ·, . ;.(<' •·::( /:/ !::\. Internal. Revenue, · (3.R. No. 1.75097, February 5,
.. ·,. ' 'ii-·'t''_:'.,·, (~'-iii.·-2010) · .. . . , . '
a. Appeals · from, . the Judgm~~f~;~:.; i. 1 · . . .. . · · .
. Resolutions, or .. Or(!ers. of the· !'ff~s {i.r:i,_~; ~-;~e'eisj91,i,.)s.~ppealablewhen it constitutes the final
. their 0-~iginal . Jurisdiction . in ...p_fifu-inat.J r.. -·- actk:irt'°ta~effltyhim ·or his: authorized deputies with
Offense~. . · .· -: · ,:(f!!,:Y . ;;,;··~~4: ~espect'~o.tliJir,xpayer's:ltability(_PAES):_ .". · .
. . T~o~e .a~1s1n_g .fro~ v1o_lahon~.,~>!-,;~f _Nl{~C ~:.:--:~· .1. _fr~11_mJti~l\:collection letters, P?st '.reportmg
CMJ-A and <:ther laws ad':1)!.r:'Jt~f~P:1:J?.Y .ttie r) .· not1qei a:rd'\pre-ass~ssr:rlent. notices are i:iot
·,. 131R o~ Bpc, wh~re the"'r.i;.if.iclpal~1cl£~\?}l~tpt f.. -t appe~1abl)li, ~[cause they . are not the final
taxes .an~- f~~s, e~cfu!~l;l ·.o~"<t~arg~~ _anti\ P'~ . de£W'ionof-tlie:~omr:ni.ssjoner. · . · ' ·
. penaJbes, cla1!fled__ 1s~E;.}~ t~~f:1J~1:~:f.v11lh~,Qor ~~--~j 2. -1'~h-~~\ipn1~.r)in by the Commissioner in_ >
, where. there 1s no ~P~,c1~ed,.,~Jl:1\9}1n.f<fl~ . t:!· _- . respi:irn&ttto!l1neJaxpayer's protest on .the

·. b:.
. (R_RCTA,.Rul'! 4, Se~,.. 3.'fh¥?J.LJ:J~_:,?., · _y· 1..:/ ..
Criminal ·ott~·nses '_ov~l{i_-~~.titi1i¥, for . ~~:;';.'P9_ecision.0• · ,
asse_ssrrient -would constitute.. an· appea.lable.
• , • '. • • •• • . •
I ·!
:,

, . · Review of the Judgments, Resoiiltion~orjl<_:~- ..~••,..,;,e.r;!~~';._hangeof oomrf1:~m.cat1on between the

. . o'rders of the RtCs in th~· ~x"e',Jse of . .
· · A· II t J 's·d· t·· n .. - ove'r.:ltaxlfc'., ses
_ppe a e. un .•-~._io ~ .\,-. ••A
. · · II' d ·, ·ded· b ·th'e MTcs·· 0:t,•·~cTCs·. .
origma Y e.c• · . Y· · .. ···~,--1v.,
'CR:A. . No.. : H ~5.,' as.' :.-amended, .S.ec.
· ·7.(b)(2)(b))., ·. "·'· · ·. ·
· .·
3. E;icclusiv.eAp.p~llstte:Jurisdiction of c:r En·
. S<lnc (R~C1A R!!le ?f:,. Sec. 2{f),(gJ'cind(h)J
~,:. Decisions, 'Res.olution's or . .Orders on
• -: Motiori.s forReccinsi.c!er.iitfon or New Trial
'of the.Court in Division ln'the.Exei'cise bf
.. its: ·1:xclusJ~e ·Original Jurisdlctloh .ov.~r
c<:ases:invoivi'n~{Crimin~f.Off•inses.at'jsing· ·,
from ·-violations ,.of the N'!F~C or CMTA and.
ot'her la.ws _ad_min.istered by the BIR <:fr BOC .
(RRC7:A~_Rule 4, Sec.· ~(f)J.. . . .
· · · b.. Decisions,- Res61.utions· · or ·orders .on·
Motions-for Reconsideration or-New Trial·
of the Court in Division iil the Exercise of
'its ·Exclusive Appellate Jurisdiction over
·Criminal.Offenses ,me_titioned,i_n paragr.aph
A '(RRCTA,.Rule 4, Sec, 2(g)) •..
t"'.EliF~-,~.::taxpa~er_ and the .<?<?m~1_s:>1oner,. and th: latter
. states that l:lls ac\1on_ 1s final., th.en, period· for
. l·b .. t (C . . . ·,·1 t I
. appea eg1ns o run_. omm1ss1oner o n em.a ..
·R - ·a· k ·tth ·ph·1·,., · I I · d. GR · ·
.. ._fwenu~ v. . c!n. _o . e 1/tJ_~me s an S, . . . '
, · No. 1.3~~?,2,Apnl._.17, 2_007). _: : ... . . : ..
4. Com,m1ss1on~r must ·:§.tate that ht:? dec1s1011 .1s
A finol for· period --of :appeal to run.-(Oy- Pa·c '& Co,,
.Inc. :v:-Coµ,:t of-Tax Appea.fs, c;·.R_:·No._,L-:-313.6ft,
Octob_er _18! 1_977).. · · '· · ·
In.stances w·t>en·,oecisioris are J:'irial:_,·: :· : , .
1, · · . A.demand Jetter for tax deficiency,tssued and .
: .. ·. sighed ~y_an'aathoitzed subordinateofficer with
. tht3-Warnin_g that. failure to i!ay:"'{OUl.d result to .
_: ·· is~uance pf a warrant of distraint and levy
· without fu'rther · notic:e (Oceanic . Wir{!le~s
." Network, lh.c/ v'.. · Cd.mmissjoner. of' ·1nten:iat·
. Revenue;.· G.R, . No. 148380, December . 9;
· 2005): • · ·. . . . · . .. . . . : . : . · · '
2. . A . letter,. of ~IR ¢0.mmissioner reiteratihQ
previous . -demand -to . pay an . 'asseissm.ent
· (Commis.sioner: of_. lnte;nal Revenue-. v. AyfJ/a.
Securilles Corp., G.R. No, L-29485, November
21,-1980).. · ' :' . .

2019 SAN SEDA LAW CENTRALIZED BAR OPERATIONS ·327

 counr . OF -TAX APPEALS
SAN.BEDA.tAW
iilihlfi
CENTR,,IJZ£D.BAR
MA.
OPE~TION_$ - MEMOR.Y Alf 2019
RH
. . iFZWij &MHswia ,,
~f
3. ·. T·he filing a [udrclal action for ·coilectiorr may b; · The authority· to. inake 'tax · assessments may be
· treated'by the "taxpayer as 'a dental of a protest .delegated to subordinate officers. Said assessment
. . . ·(Co,:rimiss(oner -ot Internal Revenue v," Union .has:t~e 'same torte ·and· effectasthat lssuedby the .
·. -, Shipp1ng,.G.:R. No. L-6£$160,MEtY 21, 199!)). .CornmiMi6ner·him$elf,. ifno.t reviewed or revised .by .
. 4. A,. _Formal Litter of .Dernand with .Assessment (he latter. Hence, · the same would -have been· a·
a
. (FAN) Issued by tbe·:BIR to taxpayer, allho.ugl;I proper subject tor .appeal to·.fhe Gour;\ .of Tax Appeals ..
.. ordinarily must first be. administratively protested (Ocearjlc".Wirele.ss· Network, 'tne.; v.. Commissioner of
··_'by the latte·r;.~urn appeaririq from the l~nguag·e... Intems! Revenue, G.R. -No. 148380,. December 9, ·
and the 'tenor.thereetthat thesame- is ttie final· 2005}: ·. .. . .' . . . . .
declslon of the CIR.qri'lhe matter (Alli~d Banf{ing. ·
.. . Corp. v.. Commis~idnerof1tJ{ernalRev.enue,·G:R.: _ N~w Issues Cannot·be·~~ised for the First Time
· .. No.: 1750.f!?,.February s, 2010). ". . . on Appeal· . . .· · . . .
5. :;renor of .fina.lity ·rule:··Wh.~re severat requests _ Ge.neral Rule: Ne'w issues: cannot be rais.eic(fo'r'the
for.· reconslderation ·· are .. filed with ·- the , ·. Jfr~Uime·-onappeat (Def- Rqsario v. Bonga, G'.R. No .
. Goll)missioner;· the=appealabte ci'ecii;ion:i.s:·that 13~308,. J.anuary2_3,: 2001).: . .. . . .
.. which affirms the .dlsputed assessment in terms... ~ . . .. . . . .
-whlch d~a'rty. indicate the fin.ality .of the .action Reaaorit. The. cc.iur( wl')ich..· js· 'supposed t6:·,revieiw
.. taken.bythe Comrrilsslerrer (Dy fac..&·Co., Inc. _.· _· would not review t,ut determine and decide for the ..
· · .·, · .. ·. ·.v./:.Cour:t of Tax Appeals;·· G.f1.. 'No_: L-,31_Mg_~,f!.!_st tin'ie....a questi6n i1o.traised·at-the·administrat1ve
.· Qctober.18, 1977): .· .. , · : . . ·
6.~ Trye: Cot'nmjssiC?ner did ~ot rule}m.i9e:faxi:!"a.i~r·s~
·:;t-"P-:- -iru· to/~"r-6{).gimissionerof.Internal Reven.ue ii'. Wander
. ·1f!..LUr}'c., J;;~~ ii.Jo:: t~6_837~,.Apri/ 15, 198[jJ).· - · .
. motion·for reconsideration of ~~a~~rp,er-iJ;J.t-:.: =,;.+J -d · l/ "'-~ · :· · · · ·. · · . · · · ··· · · i
. . _\".!aS·<;>nlY. when taxpayer receiyed· th~~4tnmons E)!:~'@t~~s ~ i's;,· : . ~· . ·. . '· - · i
i
on;.the civil a~tion fqr t~e c~U~~1id~.)>~-d~.fa;ieAer-~r""1·~~~ec:-ifcPr_f~C~iptioti,. . . : .• .. I
. l~cor:i,e·tax that _th~ p.eno~.~~·~2P~~~t:'omm.e~c~g,. ~l~ ~-ffSCnp11.olit~ c\f'l~t~~-6f defe"ns~;hence, the bur~en . !!.
. . td. ~un: (C_o(!l_m15.s1orJe,: oi mturffjf.R~tenua·lW. . .i~ ,~~'?n. tn.1 tax~ye~ tq~ prove t_hat the full per19d
. · . .Union Sh1ppmg Corp., dl.1.R.. {'./Of L~66f60, May J1m1~at1onJhas. '$..xp1ffejii;1\and: this requ[res him. to ·
1· .
21, ·19~Q), : -i
... f .
~'::,'""? J.--:--- . . pos'ilivelyfstabl1$,t(ih~c;:fatewhert"lhEi period started
:7.· ... Prelirriinar.y·. collection ,'lette.rfRm~y .ierve--2\ia:S. 41'.f;,nng, qnd "!_Vh$!1\;the-:fin'lewas fully accomplished.
. . i)SSl;lSSJTI(H)t hotice ·(Colurvftfaticture~ lnc.;{i~r¢l.ci.e!o.lvJ. Col~~c(~t,.,"eMpemal Revenue, (3.A. (\Jo. L-
... .' ~durt·.ofAppeals, $-Rt'Na~1,1.i31 '.;.;{) ~ust.28,"'-..:;1=9670,5,rJRfe.§/ri0.1962·'1· : : · ·. · . _ .
·. }Q96).· · ·.\-r
·:. :.. · ri-~· -% ,· · · ~1-J~ · 74"->J;_. !I"""<!
8.: IJ\!.hen,. ther~ is a requefl·-4of'\t~COl)~~c_~o'1~ l~Si'jJl_~ of a~min'IS~liative·~fficials
J1.. . · · •• ·.·. '::
. .-: .
· :· is~a-!~nce: of •warrai:it. of\<;!istraih\ an.~~t~ {'- 7X~
· ;· · et1.force collec_ti?~ of defictfncy· ~~ess~~~~i~,..k~so_. -.T~.f.'State ,i;;:in ·~_ever be m, 4?stoppel_ al}d
_f _·. · :f. ·. . ·. ·. -: .
. · ~ ·t~ritam?~nt !ei.'outrig~t:deriia\_of ·th~~1::1llst)tor.1:...-..:~- '1fp-lo d t!)_flO:Y:(4Dj>MOJ!D(}':f,_suprq .at !67-7(38).:
· · re90osLder~!!On which _1~. app~~?ble ~.1flt:i~~A-!::l.~ ~~·- )".!)-.,..; · · ..#' ·, : •· . :.' ·: · .: . . ·.
. · .. ,. ·.(2'. · ·qASASOL'A, • :NIR<; (;:01;a).,._~P.4t{%58~,!:h°!
. ·..
.- . .
:. {herf!tnafter 2. CASASOLA].·. . · : '... ,-;: L![-. · 11, ·1'·
· ·· . ,. , . , ·. · --~~
·~.c,~
J.Vl}.Vbife.1 _lf'ax1omati.c1hat the Government can never
~n
·~~VE!!ifl.W}irtt <;ah~9t. ra1s.e.. the ·issue. of
c~tt.~r the_ flr:st .t1tn..e ap ~,eal . . . . · .

. · ln~tcthc·~.s where. CTA .;_,.ou'id. have· .,iu.risdictio~~t:r(finestopp.el for tax pui-pos~s. it was held by the· SC.
everi if there is ·no ·decision: · · . ·· • .·. ·thgt the :BIR.··should ...oot be allow.ed· to defeat an ·
·· 1... ·If th.e Cl~ ha~ not acte.d in i:rtax.refun:d case and· . oth~rv1ise· .'vfilid · G)airri Jor re.f(-!nd.. by :raising ·.the.
•. ,•· . ·tne two-yE,iarp.rescr1ptive per_i.od·is..abouHo expire :· ··.questio·n:··of·in.capacity· fcfr.th~· firfit time ·oil. appeal.
(RRCTA;Rllfe8,·Sec.. 3(a)r_ ·. : · ·:.. : .. ·. · before lh~.SG, wh'ere .it was·n~v~r.'raised.in the
·.2: -If· ·the Commi.ssi.orier of ·Customs· has.'· riot ad.minis\rative IElvel a·nd· neither Wc1s.)t·.raised qefore
rer,dereci a de.ci'siori on pO application. for refur.,d the · CTA. · .·1n· .. ·fhe ~bsence , pf "·explicit·. 'statu.fory
of internal revenue ·1~xes ,ind the suit is ~tjoutfo pr.ovisions \o ·the· co,:itrary,:.the. Government: must."
>. ··.Pf0$C~ibe (RRCT-A;Rule:4, Sec. 3(a)(4)J::,· · _: . · fpJlo_~the:sam~·r~les of pr~.~~ure.~~ich . bjnd.·p~vate_ ·
3 .. Wh~rei'.tJ:ie·..cJR l:ia~ not act~. up.on .a 'Protested . f?.ar:l1es.(Comm1~s1oneroflnternalR(}venuev:Procter
.. :..asse~r'nent·.withil'l_:i8.Q d·ays·fr9rn:.submi~sionof- .. : ... and Gamble,. G.R. No.-L-668.38,.Pecember.2, ·1991,
· · .all: releva.~t ·documen.ts: S\.i'ppotting· ·tt,e ···prqtest' ..• R.esq!CJtior1).'. . . .. . .' ··. '
(~.R. !'Jo:__ 12-99; Sec, ;J.1.g(6)). · .... · · ·. · · · · · · · · '· ,. . ·. · · ·· · ··, ·· ·
·. ·. · · ·. Eh.ird.en o't-.T~lc'payers·9nAppe.al to' Cj A.... ·
Th~'.jurisdictic;m of th.e ·c-TA is' to revi~.:V..oy.. app~al • · · Jf is. the.bui-c!eri of taxpay.ers on app.eal to·· CT.A. ·to
. decisions of the .Cl R:on.disp.ut.ed assessments·. When·. : prove by a full disclos1,1re of. data 'tiri his possession
a ,t;:ixpay~r does not protest . sn. ~ssessmer::it: and ~ . that: (WP,.Cf .. · . · ·. · ·.. : ·. ·· · . ·
.appeals the a~!_,eSsrnen~itselt'to the· Cf A, ·h·i~ a'ppeal .. 1.: The. ~~X· ass.essment is·W~ong; .. ,', . .· ·
· is pr.ema~ure (Cof7!missloner:ohntf}r{Jal Revenue V. 2.: The t~~ assessment Is: "merely ·a fr~s'umptlon
· Viii~, G./?. No. L-23988, January 2, 1968): ; :· · ,, ~rid.not bas.ed Ori actual f~cts·; a'nd' :

. ~~8 .J, ·~019 SAN B~DA LAW CENJRAL.fZl:D. SA8 ;PERATIONS. '· .
 counr or TA.X.AP . PEALS
SAN BED.I.\ IAW.CENTRA(!Zf:,D BAR OPERATIONS·- MEMORY AID _201~

Th~ correct ~omputatlon 'ofliability; if any (Sy Quash (Judy· Anne Santos. v, People, G.R. No. ·
· Po v. Court of Tax Appeals, G.R:· No. 81'446. 173176,·August 26, 2008).
August 18,. 1988).".
· Given the dlifere·ric~s between a fin a) judgment and .
j:; Th~ .burden ·of proof is on the taxpayer contestinq the an.interlocutory order, there is no doubt that the CTA
{'·validity or correctness ofthe assessmentto prove not Order dated 'December · 23, 2011 granting private
.f. only that the one who rendered theassailed decision .. respondent's motion to declare petitioner as in default'
\;· ls wr.oi:ig 'but thatthe taxpayer-is rigt)t: .Proving that-' · · .· and allowinq respondent to present its evidence ex
t·· the assessment is wrong·· is · not.' enough . (H.· parte; is an ·in~erloc;;utciry order _as -lt did not finally
.:~' -'Tambimting P~_wns.hop,· Inc. v.... Commissioner ·.of . dlspose of the case.on the _merl_ts but. will proceed for
,r:.it /n~erria/.Revenue, CT/( C{JseNe; 623'8,.'0ct_ober.8, . the reception of theformer's evidence to determine
2004). . ·: · : . .« , its entitlement . to its . judicial claim ·for tax credit
· . certificates. Eve~ the _CTA's subsequent o~tfor~ .
f. However.' although· assessments · by. tax .exarniners · . 'denyinq petltloner's motion· tolift order-of default .a'nd
f( are presumed correct and made in goocl. faith, prirna, . . all
denying reconsideration thereof ar.e .loterloeutory. .
~:~ .,- facie correctness of .a tax assessment does riot apply orderssincethey pertain to the order of default. Since . ·
z IJPOn proof tliat 81) as.~essm~r)t· is utterly .wlthout .. 'the,PTA.Orders are 'merely~Lnferlbcuto~y; no apgeal: .
foundatlon; me_a.ning that it. is arbitrarily' · ·and · .. can. be.taken therefrom; Sedion 1; Rule. 41 of the ·
~ · capriciously made (Kean~burg Marketing Corp. \/'.S. . : 199!, Rules ,of ·civil' Procedure, as amended, which .'
i·' Commissioner of lnten1al Revenue, 'CTA Case No:~ . applies 'suppletorily to proceedlnqs before the Go~ri: .
f·, _9076,,Jan,. 5;2?18). . . .. ·,1t:::;{tl ..
. of Tax-Appeals (Co_mm1s~1onerof lnterlJa/_Revenue
{!. ~-- . :. ·· · ·. . . . , . . l.'\l.l:.zi:f.\.v._·.Cpu'! of Ta-x APP'?flS.and CBK Power C.ompany
,\. Re_asom .. . . . . ..~rJtt:j~.;~.:.-tA
. Limited, G.R. f'.!o. 2.or,3054, .July.29,.2915). · ..
f. 1. Th~ tax c~urt could ~ettl.e nothing, an~. · .. ); i,;t.:i1or-/J:,. •. .,.,·.,;~-., ;. . /''• · . ·. . , .·
i. 2. The way 1s ope_n· .for subseque;nt asseJ.~Jf.le~Jidf 'f{t'..l7..1~1J~.f.,;iM~ptof ~TA_n9t rev)~wa.ble · ·.
. qnd, appeals. :rhe.• roots of contrOVff~;~-must bEiJ -r1 The· Coort-·w~~not hghtly set aside-the conclus(ons'
{ . : cu,t ($y po':'· Court·of Appea!s, G.~J,'$Jo_.-: L-81,14ftr::J· r~ac~ed. by Jfif-'fTAwhi.~h, by the ver~ nature: of its.
f. August 18, 1988). , . . . t~f-1. : , ,,;r L- - func~1~m .off _oe~~g· d_ed1cated exclusively. to the
l .· . .· . · : · .. ·. &_(,,S t~~;:-$ ·, -~} reso_lutiO~f oft_ · t~x problems,. ha~. ·accordingly:·
~~ . Withdraw<!! of .an ·appeal· rengers t~if<assaili~ _-p:\ dev~topep anr;exp~rtise on ·the subject,'unless .there .
{' 'deci~ion fin~I a:n~ e~ecutor,~;;:
1~'
~':°' · · · ~- 1'j
By w1thdrawmg the,appeal, ~.,1t1on~fli.~<t,t:,em~Q;~t.~
--r,1;~ has ~fi;Jin~ a~~ab~~~,.or . improvident ·exe'rcise · of
allthor:tzy,";,K~9w'Ji,WflOT!er of· _lntemal Revenue v.
f_ .. have accepted th~ de.ci~ion of tn~s.;T ~~~~-clf~ince-::tp~e r:y To{edo ~o~MiiJ[ii;f('G.R. No. 183880, January 20,
.~TA·nad;_already qe~ie~:n~xpay~~ .. ~~tqoe:.~ttarwe. J'Jf..2014}. : : . -· . · . .
issuance· pf tax cr~d,t cert1ficat13 .fbt n;i~a~ffipency of IP~::.~i=· · . · .
. _e:,icl!31'lCe,.i_t may_ni:>.l?nge~ be Jnclude~~.ri,J~~;pay~r'!../f'.-~;;~~f!~WJ.,~P-dings made ~y· the. C.::TA: can· ~hly be
future . cla1m:s.·. ·petitioner · carinot- be)"' allow.e<:f';!e..,~~-drsttlKJe(l·~~n · i?Ppeal 1f. they. are · supplied. by
circurnvenf tlie. qenial :of its .recjl!e$,t'f6ftfox:4~di_tof .. ': : . · substanfial:·evidencef or: there· 'js a showing" of· gross
, :ag~nc:lonirig jts appeal arid filing. a newtfli!J~!~entral o.n
. ·. · · err".lr or· '?b,us~ th"fpart of the CTA. Ln the: absenc:::e:
*i · Luion Drug C0rp. v.. CominissiQner of-· tntemal . of ahy cJ.ear:and.cohv.incing proof to the contrary, th.e .·
f Revenue/G.R.;No.f81371;.March·2, 2011): :·· .. ·: .' .- . Cciuft·.m(Jst prestfrne. ·that the -CTA rendered .a ..
~ . · . decision · wtiicfi'. .. is.:. va.li9.. :in' every.. respect
t :. .
f,·.
intei:locu'tory·or~er. ~f CTA j,joi Appe,al abie.
It was rulet;I th;:it no appearis propedrorn.an·order of.'
, . :· (Commissionetqf InternalReveniw ii.. Toledo·Power_,
'. .Jno:.; _GR. _N9: 1'83880,.J.an_uary 20, 2014): ·
the· CTA req~iring;the ·flling of a bo!')d to-su),pend tax - ·.' · · · · · · : · : · ··· ·
,collection du.rin'g tt)e· .pendency of.the appeal -i.n .as . ' Principl~ ·.·of Nq:~~Exhaustion ·of Adrhi~istr~tive
, 1)1)..ICh as th~ _sai:ne· i$ interJocuto·ry (Repuf?lic v. ,!~a~, . -Remedi~!.i:Apply to ·CT.A. ·: _'. . . . · . ,
. G.R. No, L'-24740, Jµly 30;. 1979): : . . . · - · Befcm~·a party·'is allowed _to sel:ik the 'irJ~ervehtiqn of
·,; . - , .. ·. . .. : . .· . . . . the courts, 'it .is •a: pre~condition .that·he avail of.air
t: . . , Equali/ s.ettlecf i~ ·.the'. _(UJe· :that an order :d~i:iying. a . ,. ·· adminis{r~.ti~.e·ptocesse~ .affor~ed:him, :~ucti tha(if a
{'.:. . rnotion : fo · .. quash, · being : interlocutory, · is · ~or. . . ..r.emE:dy w,t.h!nJhe admm1strat1ve machinery. can . be
'!>- · imni~dlately appe_aliiible,. nor can ·it be ttie sul;>ject oL .. · resorted·t~ by giving -the administrative qfficf;l_r. every
a 'p~titior:i for ce,:tiorafC s11ch order- ·:may_ only· be· . opportunity lo de.cide on. a. matter tha.t _cqmes :within
·revfowed in ·tf:ie 9rdinary.'cours_ljl.Qf law by a1f appeal , · his juri~di~tion, then SLJCh rl:lmedy must be ~xhal..jsted· .
from the jadgm~nt'afte.rtrial. Hence, the CTA. e~ l?ahc · . · first before the.court•s·power of judici_al review can b_e ·
. herein· did .not err .in deriying .petitioner's .MotJ:bn for· sought, .Qthe,wise, the p_remature resort to_.the court
. Extension of Tirtie -to -Fiie Petition. for Review when· is fatal to .one's cause of action (Commissioner of
·:is
sucn. Petitiori for· Revi.ew the ~ong rem~dy to . .Internal.Rever,ue v.: Court of .fax Appef!{S, G.R: No.
ass~il. ari · interlocu.tory·orqer denying her· Motion· to·· _207843, July 15, 2015, J. PERLAS-B{=RNABE);.
' . . ' . . . . .

·• .
. · ?OlS SAN- BEQA LAW CENTRALIZED BAR QPERATIQNS · 329
 . . . .
·.-CQ,URT OF TAX APPEA·LS·
9

Exception to the. ·rule on . exhaustion of .

· ( r: ·
I
SAN oiDA LAW .·CENTRIILJZEDBAR oPEAA
eeea.p;
. r10Ns - MEMORYAtD 2cii'9
if
.
&¥W&i2~&2>W#f&41MF Si+tlf idi&fi1

· CTA· En 'Banc Carnot Annul Judgm~nt. ~f 'their

. administrative rernediesj-Estoppel . · , · .
the CIR rnust'Jndicate clearly and unequivocally to .
the . taxpayer. whether aA action constnutes a :ijrJal
determination on: a disputed 'assessment. he fact that
in the Formal· Letter. of Demand 'witti"·Assessmerit .
. Noticek,. CIR :,µsed the. ·w~rci '.'appeal" lnsteao -, :of
"protest", "reinvesligqtion".,, or . "reconsideration".
Allhough·there was no' dlrectreferencefor taxpayer
to.-'bring the ma(ter,di.rectly.to tfie.::cTA, it·cannot be
denied ·that Jne'· word :"appe!:11" under. prevailing·. tax
laws refers. tothe: tiling. ota Petitiorr'for Review with .
the· -. .CTA: , ': (Allied · ·'·Banking Ci:lrporat'iqrl,· v. ·
Commissioner of lnlemei' Revenue, . G.R: -No. .
. 1750,9];° Febr'tJary 5, ?010).:
.....
Divisions , . ' · . . .
SC, CA, and CTA en.benc cannot an.nu! iudgment
of their divisions. Annulment .of Judgment ·(Rule 47 of·
the Rules . of Court)· involves exercise 'or original .
jurisdiction and implles power by a .superlor COU,rt
L against .the final judgment;' .decisjon or ruling Qf an
. inferior court.based on the grounds ofextrinsic fratid
and lack of [urtsdictlorr.. The Dlvlslons ··are 'not
. separate and -distlnct courts .but are.dlvislons et. one
and the same court. ,Th.ere is .no hlerarchy bf courts
. within the ·sc, CA, and CTA,·for each remain ·as one
. dourt"notwfthstandfrigthattheyalso wo'rl<, lndlvlslons
( Commissioner ,of'/htet,f)al ..Relieh,qe v, J<-epc'o- 1/ijM ..
· ·· ~ ·:. '', -_: · · ·. .' Corporation, G.R~·Nq .. 1994.2i, -June 'zi, 201:B)'. .: .

. :tssu~~~:e: 'ot lnju,:iction or ;f eiJ'lpor.ary R~straining .. . . Plea~e see NJRC, Re;;.,edies. and .Local -Taxationfor .
orders .b'y· Courts· : . . . : · : . · · . . . ·· . . discussion on judicial actions (o.r.c~llection-of taxes.
Ni;>coyr.f~.hall.have the?.ut.horfty tp.gran~ ~n.'inj~.nc~~'l==:.;::::.=:,,_._ . · · .. ·.. ·. : .. · ·, . . ·..~. : · ·
t<;> .restrain th.e ~!l~Gt1_on of, .any· ..nati.on~l-i>'m~nal ll'' J . '\\ -~~, · · . · '·' 'c·· ·.. . . : , '., .
· ~even.µetax.Jee; or charge impo:sed b.Y--~·f.tc... ~way ,.; l ,.\/ ,,· . - '·~.. . ' · C... · .
. ·?.f::e~ceptio.nyursi,l~At,to:$ec-:.11 of~~~~~1. .!!:~c~S-~-:;=:,:,,:,- \ _..{AfP-'::~~ IN .. IVIL ... ASES_
·. ·amended,:1t 1s .only,the CTA that has-1unsdictlon to , :· .·. '-:t~ 11 .. .::-'\: ~·. · . . ,· . , · •·
. suspend, the··.coll~ctlon :Of .ta):(.~s':·~:ei).!.4r11~-~1,1r;i~,er;":'.'~~wRosE1i~~-,6N's ARE APPEALABLE ..... ',
·9ertain conditions th~t ""'.he.~.i~/9.J&i.q_~:}(f.e {olleqtiW. ':J.r · 1\'f.
.App~al tQ.'tl'i{)ctADivision' (R~CTA: ·Rule 8, .
. . · by the. -·BJR may. J~opa~d1~~' tl:'ie,-(_pte~e~~'.of tl'ie · ~ · 1·~·sec j, (a)/-'t:-t' ~ '1~.. : · · · ·, · • · -. · ·
· govEfmm-ent a.ndlo'r.~he taxp·~~e.ran9fwh1cl-y.case .the ,1.£(,r'\ . · · l · \ (1f J. \ .... · · • . · . ..
. . .CTA m':ws.usp_en~.the.colle9;ti6]:of!~e~ aw·a~recjPJte~Wil!!A~*:w;rtY,iadver;i· (.y,,,affJct~d by :a d~cis1on. or ruling
the .t.axp.a~e~e.(t~er.to.depo~ttffe.s3~qu.nt cta1rn~~_jq i~1>driactro~of:. ·· I. ·;i i.'- . · ·.·. . . .: : · .· · .
amo:u ..nt bem~.. as~e.sse.~
: .. :.-.· . . : · . '. .,
(R-it~tl;f· .~i-~~~L. I--~,:ci?f,~~~
. to file a s~ret~ bond for not ~~9rtextha~· d~u.b!e_..~~"mn~a JJ! e.. Com 1~~er of tnternaf Revenue;. · . ·. : ·

)~'], , 7
( f)i . · .~~'\- .. ~
~andamus·?.~ly l!es to en. ~ree tti!t_P~ ~{iRa,nc~l
·..2~~~o~ i:.~a~. ·~~sJ.?ri'e~of.Co~toi:ns; · . . · .
c.,., ',Re)8e~_.ei.~~1ojFtn:;Jnce, · •
Secretaryg,fTra~e.ao:d .Industry;: ·- . .'
. ·. . . · ·

. . of a m.ln,lster,al ~c.t or d.uty,.a,rd.n~qo c~~~:i · ..~ ~~h~ ~ifc:etary,{6~Agr1cult~r~; or, · . . :· .

, · p~ri9rm.anc_e.of a .d.i~c.r~ti:qna:_,ry"'~ow~rh~~:;·:l~°y'.:~f~~~Reg1onaj.ffn~I C,our_t 1n.the·exerc1se <;>f 1t.s .
. . . po'N~rto a_s~~ss,:· ;,: _·. ·· ·:\ · · . )~, :·Scr~rt\~
"'9tig!_na1z.·uri 'aicuo~. .·. · ··:. .· ··. ·: .
·... ·. P.!,Jrely adrrurnstr.afive and ~1~.cretio.r1%..ry.fu!):e::_liE>'r-l~;.m,}Y~·· ;.,~ .. · \~ · · . · . · .. · ·. · . .· _..... ·
· not be ir,itetfe_red·.by·t~e c~a.rts.. Dis~Ec,~o..d;i~in~·S".".:::;-..=:rrr~~~~~J;\-o,> he CTA. ~n Banp (RRCTA. ~ule 8;
. .-_. intarided, m~.~i:is·th~ P._o~e~,9~ n~rit cqnfEl!l;_ee'\!p~n 1\/!.f!i/§~'c'f;:)(6Jand(c)): ., . . · . ;. ·. · . · :- . ,
the·-0:ffice-by,:'laW of actu~g. c;;ffic1~lly,',un9ef~t;e.F.la)n l.. ~/ ~ : · ·: . ·. .. . .·: . , · : .\
'. . cfc¢umstances according to. the dictates of his owrr--""~Any· party ad\ters.ely affected- l;>y a"c;lecision or ruling
: ]Lidgi'l,ent, and, COrlSCierfce.'and not controlled·°by the·. . of: · . . . ,.. '. .. .. ·. .· "; • .'< . . . . · · ...
· judgrnenr·or:.con.science of others.'Man_darnus:may t.:._-.the CTA· in Dixisfori: .. rn:. a. ·mo~on' for
·";,. ' . not be resorted.to scfas ,lei Jrite'r.tere:'with tiuirilimn'er .... reconsiderationw new.',trial; ,,• : . .: ..
: .. ·· .·· ." in ·_which the ··discretio'n' 'Shalt be',exe"rcised .or"lo ·.2. -The, CBM; or· .. · . · .. ·: ;.'' . ',
..... ·infl.uer:1ce··.'or'' coerce· ,a 'particular determfnatiOA. 3': Tlie ,RTC iri 1he'• exercise .. of' i~s apP,elfat~·
. ' M.oreovesi-'sin¢e ihe. office·of th~· Coi:nmlssioner of, . · jurisdicOon; · ·. ·· . · · : · . .. . . .
. Infernal ~evehu.e· is ch.arg'ed with'th'e ·a'O.ininisfra~ion· : . . . · . · ·· · . . . . · ·. : ,'.' ·. . ..
of ~evenuef.laws, which is,the primij'rft~spon.sibili~yof .. PERIOD TO AP.PE:At/MODE OF APPEAL.
tj,1;3 -executjve br'anch,:of th~· govemm~ht,. rn~n.d€{mus 1. Appe.al .to the. CTA Division, ..
.'n:iay ·nofbe(ag~instth~ .co·mmissicfri~r.to·cotnpel 11im · . . . ., ·. . · · · , · .. · · . . -. .
to impose a tax'assessnient rioHoundiby'him)o be· ... · By ·~~tition fpr i:ev1~'"'. :,,,1thin 3.0 d.;:iys. a~er tl']e
'dtie· 6r. pr.aper' 'for tliat w,ould be ·:tantanmunt to
.a .. '. receipt ?-f th~ de~1slor'l; .r:uhn,g,or after the expira.llon.of
usurpation of eiecutive fun.ctlqns (Mera/co Se'9uri(ies ·. · t~e · penod. fixed by .I.aw for the..
CIR· t9 · ~9t .or:i:th~:
(f;otp. V.· Sa'(1ellanp, G.R. No.· L-36181;' October .2t. · ·dlSE,>tl~ed. ap~~ssme!l~ (Rf;CT,r:,! Rule,. 8,. Sec. ,3(a)) ..
1982J; ~· . . . '· . Jn·.cas~ .of di.~puted .a~s~ssment~.··the..ir{acli~n ~f tlJe'
CIR within··the 1°80-day period· sh'all .tie deemed a
derilai' for purpo&,es bf i:iJlciwfng 'the .taxpayer 'to:·.
appeal . t6 .· the Court .. anc( does. not · r:ie(?eS~arily .

330 I i:;!019 SAN .SEDA LA\N.CENTRAUZEDBAR OPERATIONS

 COURTOFiAXAPPEALS
LAW
· SAN BEDA CENTRALIZ.ED BAR OPERATIONS~ ME:MORY AID 2019 .
. ..
· +• "
••m111111..,11111i=-im1111111ea@Aili1a11111-m•211111
...a~.em1~illlll!IIIIN~WH1ii11:IIElllilllilil1.. uwW21rim-e111111a~ll8!r.il:l•MkllllllimC1WtlllilllG.•·11111111m11i!lllilii:.~1Ain,e:zrr..J. ·~ .

const'tutethe 'formal decision of the former on the' tax _RRC provided that the Petitio'n for Review.must be .
, . case.. The taxpayer may Instead .opt to await the filed wit~ the,,QA :Wi~hln: (1) the ori~inal· 1'5-day period· .
,~··:···decision of the ·CIR on the disputed assessment even . frqm receipt_ of the judgement or'. final orde.r; (2) .an.
{1' beyond the-180-day period. ln.this case, the Final extendf:ld peri.od' of 15. d9ys · from the lapse of the .
:';~ . Assessment Notice (FAN) will not become final and original p'eriod; and ;{3) only for thE:l most.compelling .
{i ..' executory. '1( the taxpayer'. Waits tor the decision, . reasons, another E;lXter:,ded'per.iod .not" tq. e~ceed 15.
,;~-. 1ti1J1ich turns· outtobe adverse to' him, 'only then rriust days from the lapse.of the first ext~nded·perioo ·(SM
l . he appeal such adverse declslon to the CTA within Land,· Inc: v. City; of Manila; .. G.R.'. No. ·197151,'
·t.. 30 days' from receipt th.ereof ·(RRC,TA, Rule 4, Sec. .October 22, 201;2). ·
( 3(a){2); .. R/za( .Commerciet. . B,;1nking -Cotp. v;
J commisstonei. of Internal Revenue, . G.R. No. . Following by. ·a~alo.gy, U1e 30-day i:>riginal 'period for ·
f. ··1984~8,:June 16, 2.006).· · . · ,. fili)')g a P.etition for Review with the, CTA, may-be -:
:· · ... · .~·. . . : · ;·> . ... . , ·exteridedfora·period.of-15d.ays.Nofurtherexten·si6n
:: ··-In case of inactl.6n. of the Commisslorier- of Internal· ·. · shall be allowed thereafter,' except only for themost
;. revenue on clc;1im_§. 'f~C refund of internai revenue: .·. compelling rei;ISOJ'.IS, ln.whlch' case, ·the extended
:l taxes erroneously oritleqally collected, the taxpayer... . period shallnotexceed 1·_5 d<1ys.(SM Land; Inc. v, City
,: must file a 'petition .tor review· within the two-year · ·. of Manila, G.R · No .: 1~7151; O.ctob·er. 22, 2'012).'
:··peri_~d prescribed by l~'W from 'payment or collection · · · ···· · · ·
i, . .' of the taxes,..(Rf?CTA, Rule .8, Sec. 3(a)). :IViod'e of Appear . ·.· .: .
~~- : . ·. ,,.. , · . · · · · .. · · · . ·: ;,-;:,,?\ Peijtion_ fbr Review under Rule °'1-2. of the· Rules of ·
::'.·: Note:. For .the ·C,::TA to-, have ··ju_risdiction, · the ~JR,:1){ Court (RfWTA, Rule e, 'Sec .. 4). · :
f·: 9on:in:i!ssi6ner·: ~.ust .. ~r~t ren~er ~is.: ~ec;:is.~?.[ir,~;;,\··... : _ .·. · . . -· ·.· . · ... · :
· o~h~rv.(1se,, there 1s nothing to rev1e'!'>' and Junsd~ctl.l:>~, ,·, , r-') 2: Appeat to th.e CTA 'E~ Banc ·(RRCTA; Rule ?,
Would
.
not''be· acquired .
(Commi~~ioner .
of
.
lnf'e'rr/aJ.';.,-il.'
_..,( ;,'•'· . Ir'
,_:_..._$ec.
. ~
jibL'and
. \:~;ti<~
'ell ·. .
I' 'JI . .
. ·. . . . .
Rev.enae v:· Takasago PHL, Inc., CTA EB No/8~.5;,.<r>i .,....:;;!.~ ..j?1:....;}.ll'I. ' .. :
October-15, ·2012). ·. · . · · .· /-:;:~. ""O ~f · · . a.ii!.'.:W.ftliia fifteen (15) days from r'eceipt'qf the
.. r .. : . ; .. ·'. ·. ·. . /''i).::>'' . . .A--1'} ' . que~ti~tied.. de~ision or ruling. ·Of CTA in
:;~~-· Thirty (3,Q)d~y Prescri'j'.>tive Period iqfj£'fpea_l~lJlf'..;..[.1 . .' ·. · · ·.·. Div.,ib\ on .a· motioh. for ce.considera.tio'n or'
·,· . the.OTA · . · J..,., l•,·.,-.:;c.l.·. . ·!~.b·· · n~~1 al. · · ·" ... · . · .·· ·.
·> < · · tiA -~ · · . ·
tr· · •
1 .. R~ns. from: the da~e t_he ta~payer_:r~ewe-s 112_~ ~;t,.
.;Q-r;r
· · ·. u..· · · .·: _i: · ·.'· · .· .•..• · .. • . : ·
·,{. : · appeala'bl~ decis_ion .o~ ~o,t~ysaft~j~e lapse of. · ,,., 1 :N.<>t~~ Th. ~~tl9n .f<?f R~.q~ns1derat1_orior Mption
.J., · : 180 . · <;Jays . (withiir. which~;~e 'B~R~"1,?,ul~ ~st).'. ~'.~ . · !GJJ;t~ii.'.ij~Y:\~.ri}~
: · condition. _Preq~dent. b.~fore
{ · ... · · ((NGLES, . .Tax· Ma_de Less·t_~xirJ,g::;_.f;J!.~e.view_~r r:~:o/ .. : · bnn~l99Jd.~a:.c~s.eto the.. CTA En §Jane (Ingles;
,·. · 1t1ith Codals ~net Cases, (201'8-);:~1:79),\ :-. -!'/ . ;a/ supra, at 4_86). =~e!ore-the .pT~)=.n Banc :_c~ul~
'(',.' ' · . .. . . , . \ , · \1•, ·' ./. · r' . .,-- take, . .cognizance of . the··. petition . for review
r. The'~o 'pe·riods a~e. mutually excluJf:y.~j~C~C. ~..,,{1Jk!.t!1i9fl,.Ce~nih~~ ~ase 'taUip~: und.ef _its. excl~~iye
t ·. Comn-,i~sfon.e.r. of· Internal · ~evemlit G.Rj."."M:?,---..:,.~ap15Ml":aTo
;, . .168498,. Jur:i..e H;, ?006). . : · ·. · · ~r ·!,//
Jur~sc!1cflon;the)1t1.9ant l'n1;1st sufficiently
show . t_hat 1t' sou~~t-. p~~r · reco1,1:iideration or .
f: · ... - ...... · _·, · . · ·. ·: '-*>-:--.. l~i. · . · .. moved ..for.q·n~wtna! with the'concerned CTA
'·!:. . Note: A motion· for recon.sideration9f the de~ of tiie: . . ·. · i::livision (.Commis,~i?n~r· of 'Cif.sfoms ;·v. ':'farina
'~·:.· ·. administr~tiver'p.rpte.s.tpoes not toll the'30-day period '.Sales; .l'!c., ·:.GR: .NQ.· 183868, November ;22,.
;;::. · to apµe_al to t'r)e CTA (Fish-«ealt/:1 :C<!rin1ng 'Corp. v. . 201,0). .·.
; · Commissioner · of - intern at · Revenue;· G. R. . No.· , ·· : · ·· · · · · ·
.. · .1793,43; ,!ai-iu~ry 2{
201.oj. Jbe thirty (30)-day period -They may ·be ret?~ed.only for .very ~xig~nt-·a~d.:
·10 appeal-.to-the ...CTA is-stiil reckoned frbm thl;l i:!ate· j)ersuasiye· r.easqn~ .t9 -relieve· a.; litiga(Jt of a.n
· the.: taxpayer:. is _notified of 1he.... denial of the· Cl R : injustiqe· not ccfrnmensurate ·to 'his· c·areless non- .
(JNG_t._ES,.'sup_rn at 1_'7-9). · ·: · _· · . · ,, . , ·. . _· · .... obse~an.ce· .... of ·.: the .. · pi-escril;ied ~ul.es.
(Cpmmiss/onerofCt.istom.,s:v. M'arlna·.Sales, Inc.,
i. The .. ,.30-'day period . ..:is ju'risdictkiri~I:. and···. ··. · sµpra)'. ·· · · • · .. . ·
··. · · : :mandatory.· Failure to comply ttwr-ewith ml:ly be
. -rais~d lh a ~6tion fo
dismiss (Commissioner of . Upon prope(rootiori and the.payment of the full .
Jn.ter,nal Rsyemie.' v., FirsU:ixpress P,awnshopCo.,. :/ · .. amourif of.the ,docket' and'.other lawfu·I fees. and·
J;'ic.; G.R.Nds. 1720~~46, Jqne 16, 20f)9f .. · ·. deposit: for emits before ti,~ 'e-xpiratLon·. cif the .
. . . reglementary' ·peiridd., the· CT.A. may grarit an.
additiona·1 period' not exceeding· fifteen 'days from .
.. . Tt'llrty-~ay·pe;,lod to· Appeal' Subj~ct of jl; jlA'otiori ·.
· · · . for E~ten~lon· Qf .Time . . · . f· _ · • · 'the ·expiration of the original period withlri·which.·
.': Sec.· 1.1 of R.A. Np, 9282 state that the Petition for· .. ·, to: file ~he _petiticm·for review (RRCTA/ Ru1e.· 8, .
:r· 'Review shall ~e:filed with the .CTA .following tli,e ·
Pi'6C:edure
· Se,c. 3(b)). ' ' .
ft:,' ·.
0

:a'nalogous 'to · Ri.Jle 42 of. th.e Revised

;" ·. Rules of Civil Procedure (RRC),- S~c. :t· of Rule 4,2 of
\,

2019 SAN. SEDA LAW.CENTRALIZED BAR OPERATI.ONS I .331

 ?!
COURT OF T Ax· AP.PEALS- --~~
.!<;
~N JJEDA LAWC:EN!RALIZEO BA.RpPERATIONS -.MEMOftY A!D 2019· : ; · ··=ti
-~
,,S
. I ,}

b. witfiin thirty .(30} days from receipt of the. 4, There is an Bppeal to the Cf A from P decision of. ~
questioned decision or ruling of the· CB~ the CIR; arid . . . · :;j
and 'RTC in the exercise of their appellate 5. Thar the appeal :is not frivolous or dilatory. · ·i
iurisdiction. ., ·
, . . . · Bond may be dispensed with under exceptional .
. Mode of Appeal: Petition for Review under ~u,le· .Caaea, viz: : . . . .' .
43 of the Rules of Court (RRCTA, Ru/e.8,,Sec .. :4) · 1. ··The -taxpayer need .not file a bond if the, method
· · .N,ote: ·1n . cases falling . under ~he exclusiye .employed'by the .c'ql_lec~o.rin the ·colleclion ·of the
· app~llate jurisdi~tion: of ·the Court en .bane, _the tax is. riot sanctioned -by the Jaw (Sps:. Pecquleo
petition-for review of a decision or resollltiol') of.
the Court in Division· must -be preceded by th~
I(., 'Court-otTexAppeets, G;R. tJo; 213394, April·. ii
6, 2016): · ., . · · _. . ,
filing of 9 timely motion for rEkonsideratiorr-or riew , · 2. .Ttie or.der · of the Collector...of.-lnternal-to effect .
trial with . . . Rule 8, Sec.1).
. the . Division_(RRCTA, . ,. • coJrectio'n' 'ot th~ .allege9 income taxes th_rougtr
: · Sl,!inmary · adminlstratiye proceedlnq .h.ad_:' b~n
Effec't1 of · Perfectio·;, of Appea]. (l\lo. lr\jtmct.\o~ · issuecr'well beyond:the 3-ye.<:1.rperiod· oflirpitatio~· -:
Rule).. . · .. , . · ·.·' .. :· ... _. .. -($ps. Pecquieo». Courl-ofT~~Appeals, supra).
General' Rule: No appeal taken to the. <;;our.t ·shall · · . · .- , .. ._. .-· . · · .. · · .
suspend :the _payment,'levy, dlstralnt; o'r sale 'of -any .. ·. ·. Purpose: To prevent ·the absurd .sftuation whereit.(_ ·_:
~ro~~rty of_ the, taxpayer _for .the satisfactlon ,.,1J~P"~t~~rt:woulr:J_ r:Je_cJa~e t~at the collection _by ~he ..;
liabllity (RRCTA, Rule JO, se« 1{ . P--~ D··
-, ~J:unyn~o:i~thod_so_f,~1Stra1nt an_d l_evy "."as v1_olat1ve
.- · :. . . . · · . _.._, ~. · !}}::\.. ·:- · ~f'\?w,fi:m~tl~~n·,In the_ same breath, req~,r~ the"
· .· Reas~n: Lifeblood theory :(.Ang.e/e~v~1~ ~pg~~~)¢R.~-/et_bep~t~r file..~ ~on? as a p'rerequis1!~ for
Ete·ctr(c Corp., G.R. No.·.?66134; ,f/'~/~'J;(!)J.· ., ·, .ttiei_s~u-a_nc~.,9f~~~ 1t·~f mJu.n_cllon (Sps. P_acqu1ao v.
.. · .' · ' · . ~ . · .. -'./.'~.' ·y,J!'".·J"":~7if.'-colJ/h'f)-f-.,l'a~'A,pp~.q . supra), · · _. ·
Thus, the- rei:nedy o.f '"J':'nct1irJti~"'l-~Y,av~ilaole1~.. } .. '\o/-\· . \ . "- ,""·. \ , · · . , . _. · ·
restrain collection (No lnJunc\1on ~tJ~(;}~,(t:JliRC, Sac .. .dr(~ .ffi.'l.. . . · 1:{ if· ·, ,). ·
21:8).
. .. .
.
.
· · . r
. . "ht'::?>'
=-- " ·.-'
/11 . , . . . .
l::-. ·,.· . . .· ~ .· - ,,
-::-A-ppi AL· ~
,J .A i - ·· _ _.
~,G-.:i.IMIN,AL·
. . .. . .
·CAS:ES.
. ..Exceptions: · W ,. .• ...,.="'"· ·. · . · '\v,11f.\\~,
-~ p· ,,..,. ..,..,~,... ·"'·"' • :-. .·. ti~ ,..· ·, 'if'· . · ·. . ·. . ·, . : ·. "
1. If in the opinion of the qir A,t'lll~ ·collec!ion· o.f d~tmm' . . , ·. · · ~- t-=-'1i . · · .· · ' ·,
·may prfjudic~. ~h~ inter~iD>~.t.-H,fG6v~i~~e.ni_or'~:;;;:::p~riod t, -~eaJ{~_ocfoof_Appe;;il . . .-· ·
'the taxpayer (R.A No_. 9-2(JQ;f~~- _9)~1ii.: · 'if>" ,t,'fl}~ln,/c mma!· 9~~ e_c1d~~ b_y the. !UC :IQ. the
2 .. ·J.f the taxpaye·r is. willing\tb"'dep.tsif rneJ iau~ ·. ~~~ . 9ie oJ ~s or, 91~a,1 · J_u~1sdlp~1ar:i . -:- file a
_.-· . . being -collected.·or to file\ suref\~·.boii t,~ )tc:{t!fa'_I·· ~qf~oe,of :appeal·-"6ur~~al')t to Sec~~m.s ~Ja} _~_nsJ_·
·· · · :
. · _more . an 0° e_ .. e ~mo
by the court_(R.A. No .. 1?_251
-~:s:·· ~~ .
th ·d bl th : · ·ei· t of ta to b 1~~!\~u!eJ22Qf the{Rul~s-ofC~utt w1t!1m 15 _days
if
.)CI . ,,.,_J_~·from ,receipf a G?'PY' ?f· t!J,~ d_edsi_on-or_,fin_al.
?-· 11)., ~: EN~ -~~efr'-~~~,,:~ui:twhich render~_d the .final
· ·· · . ·. · · ·· . · ·. · ,.·)'Or.. :~~~~!i!'ftie~ 9'1<rirder appeale~ frofn· (RRCTA, Rule
. When_to file the _m_otion ~o s4_spen' ~fe-~J~~::~-f ~Al'~,,. ·.·1$eci g:;8,J. · ... · . .,, · : · ·. _'
tax • · .. · · --~ .l: IV.:il..f"'- ~ "'" · · ·· ·
_M_ay,be::filed_ .togeth~r ittith u:ie :P!i:!tl.ti~~-:for revfew•or.-~~~~~~i:J·rt ir'i. :01.vi~i~n-_sha;l,act.
with. the ai:iswer, _or ma.separate m_otion.filed bY;_th~. · .(RRCT.ARule 9, Sec.. 9-'(a)). -· : ·.
~-n th~· _ap.peal·
_interested ·pa·r1y· at· any :stag·e···or.tf1e -prpceed1ng~, · · · .. . · · ,· ..
(RRCTA; Rule 1l), S~c. _3):":,-.: .. ·.. . , '· ..·. . ·. ,n :·
· 2.·.· cr:im,nal · cases:. decided by the: .Court .
. . ,..-'· D_iyjs.ion·- file·a-petlt.lon·foneview ~hder· Rule
Requi~ites:fo~ Susperision :of:-coi1e_ctlon.'of ·Tax:-'- ..
{DIVA-F} , . ·. ·· . ·. . ,.. . : ... · · .· . · . 43 of the Rules: .of Court: within 1"5 days f(om . .
·:· 1. Th~: taxp~yer inay · be. requir!?_d ~b Qeposit th~ . receipt. oFa copy .-of .the. dEJcls{on or- resotutiol'l· ..
. .- . : ·am:ount claimed. or fo file .a ·surety bond_.fpr. not. . ~ppealaMrorif(F,?R{i:TA,
. .
R_U~e 9,.Ses, 9(b)). '.-' .
. . · ··more than· double· .ihe arnounf wifh the· eoort_
. (R.A..No .. 112!{Sec .. 1'1);.: .. ··. ·:.
Note: .Th~ Court .En. Sar:u; -~h-Jll\i~t on· the': appe'al:.- .
·. Tim·~ for..fi1ing.c:if'the{peti~i9n, .fpr'good-cause, rn~y be
·z. In ·the. opinion· .of ·the CTA, ·the collec;tioo may . e?(tende.d (o~ ~i'l -add!li0ri~I p~rioq· not -ex<':eeding 15·
. jeppardize lt°le intere~t Of th~ ~oyerrimer,_r andfOF . da¥S (RRCTA,•Rale 9; 'Sf'C.:-?(b)):. ·, ... .-_ .. ·.
· · · ·. ·. . the'~axp_aye((RRCT.A.;Rute·-1-0, S!f!_c.-2);. :. .
. 3 . .' Toe'motion for the ·suspensiori of the coilection of ~- l'n· «a~es c:1e~ided by t~e :RTC i~· the.:ex~i:-i::ise
.. · · tax shall .be verified. and slia11 state .i::le.arty a·ni:l of. the.ir appellate 'jurisdiction'..: file a ..p·Eeftition
'distlncUy th·e.faqtS and. ttie groun~s re.lied ttpon· in .. . 'for review under Rule. 43 of the Rules of .Court
·_·· .·: withi~ · 15_·. day&. -from receip~ of ~ cc:ipy of the·
·... ·. . . ..
· · · support of the ·motion (RRCTA, Rule, fo,- $!3c.· 4);·· ·
. . .. . . . ~ ". . decision or final order appealed. from (RRCTA,
Rufe ~•. S(3c. 9(c)).. ;- . . .

332 I 2019 S~ '?EDA LAW.C!=NT.RALIZEP'!3~R<?P-ERATIONS

 •
COU._RT ·OF TAX .A·P·P.E.ALS.
OPE'}ATJONs··_."1EMO/lY AID 2·ot9.
SA/'I BEDA t.,AWCcN_TRALIZED_BAR_ .
,,-~
. '
. ;f Note: The ¢ourt E;n bane shall ·;ct on the appeal.· 111 : Effe~t ~f.Appealfile~ ;,.,,·Ith ~he Suprem~ c~urt: Th~ · .
[,·; criminal actions involving_violatio.ns of tl;ie NIRC and ·· pending motion for reconsideration or-for new trial In
'f ·otlier laws enforced by th..e BIR; arid CMTA and other: the- Court En Btinc shall be deemed abandoned
{ laws e~fo_rced_by_ t~e BOC, t~e ~I~ and .the COC, ·: (R~CTA, Rule 16, Sec: 2): ..
:;:. respectively must approve their fihng'{RRC1A; Rule · . . . ..
1,; ·9, Sec. 2): . . . . · W.hen· Motion. for reconalderatlon maybe flled
~~ ·. · ·. . : · .. . Any 8ggrie\!ed ..party mayseek ~ reconslderation or .....
.i,·-. Solicitor General as.counset for the Pe·ople ahd
> Government offlcra1s· sued . "in . their Official" ·
·-:.. Capacity.. · ·. . .. .. -· : · ·· ·
new trial- otany decision, ·resolution or order. of the ..
'Court. He 'shall file a motion for reconslderattorr or
. new tri~l within 15 days· from .the' date. he -received
I~ The Solicitor Gener.~, shall represent the People of · notice of the decision, resolutlon.or order'of the.Court
{._· the Philippln.es and .governm~nt.offi9\als.sued in th~lr · · in question ·(RRCTA;.Rvte' ·1-6; Sec. 1}. ·. · .. . .. .
t official capacity if!: all cases · broug),H6 the Court· in · · · · · · · ·
:C/ ·thE;l exercise. of its.vappejlate jurisdiction. He. may : .Gr9unds_of ii-fJfotion for.New Trial: ·' .
"!{ deputize le~al offlcers of th~; !3IR.. (cases brouqht . . ·1. fraud, . ~ccident, Mistake,· ·-.or' ·excusable
: under the 'Nl~C and: other -laws enforced by BIR) or ·, . ·. r:ie~Hgence (FAME)· which ordinary -Prt!cle~ce· .
_f .the legal. officer~ of BPC.(cases brollgb~ und.~.r.G'MTA ·. ·ce~ld ~o.t have·g~ardec:;I against andby reason of,· ·.
t' or 0th.er- laws. enfon:;ed·_i;,y:BOC); to.. appeaf in· !)"~half ~hie~ su~h ~gg_n~v~d party has prQbably. been.··
?- of ·tl')e offlci.als of said: ·agencies io thei( ·official· . .. . 1rripa1re~ m his. ng~ts.:·<?r . . : . . . .··
c~pacity: · Pr.ovided, the Sol.lcitor General shall ,have/~·. · 2. N~wly·d1sco>Jer~d :~v1den~e,_ wh1c~ he could not,
.direct contrpl and supervrsioo at all times· ove'r~1eJi/)- With reasonable d1h~E;inc~. liav~ d1~covered and
· (RRCtA, Ru(e ·g, Sec. 10).. · · ~·· · . . ._ .,)r"f-1.f:=:\ produced _a~ th~. tral.,: a~d- which . .Jf presenle~, ··
. . · · . ·. · '.'i(~:··;.;':~·,,· . would·probal;>ly alte.r the result (RRCTA, Rufi) 15,-
_Effect o(r~~tituti<?n o~ ~r.irnln~~:Action. :.
1 \1}?~·:f/S.~--~}ec.: 5). · ,· . ·. ·. • . . , . ·.: · .
,he lnst1tµt1on ,;,f the cnm1n.al action shall 1nterr.upt th~-r~r·r·.lwfief.t'itn.,;fd1s a clear. i, ·. of' t'tl1a·' ·. . t t
running of the period of p"resqripli~n (RR_.9[-fr_Rule
Sec 2(2)) . . . .,:cp-,
9,~:f
)' . , .
. ~efun;t'titftd~,-~.
. . , ·"I .
nical rules o-.ymbg". wa~n en:,~n ·tO
. s. may e 1ve so,.as <;>
. · ·. . · · · . . . · · . : · . . . 9), :1 . · j /-"'~i · - ~ll~w a new_1,tr .. ~yen .jf the iegufsite.s· <?r ground~ are: ·
·., ... . . · , · ... · · . f:~/':!-" *-.:f'.. ~ f~· ~o! ·.met, . ~fc1ally w~~re the fa!l~r~: to · pr_est:3nt
'C·.,. .• . · . _' 'ff~> . :. ~l .
. . . ·",4;~;.r-:. J;~~ cyide~cef'n fir:st. instance w~~- ade_q_uately.
-r.. PRO~EDVJlEc·-~A'I-,A~~~tJ~:A~·~q;: ~ 7 . ~j:· ~1:~1:f,t1;;1:;11~cte~!fh~:~~~i::ze~- ~:tpN~:
::::.. ·. -OF T~E . .. '· --~ V:.1.,$H:J:rii'I . ,"S't .' .,J:J '14'19i:3r_7il rpejiiii·"il1Jif5): ·. . ·
~t: ' , . . ·.· : . ·: . . .· •. ·---~.,-:k·;!.~ ~A~ ' ~';J ~ ·. ~:iii~· ··.'.· , .. . . . .
,,. . : . · . · · . · . · · -· · · . ., · · · ''t ·;-.,.rr' ~~ · · 11 . : r;';:/ .Motion for . Heconsideratlon a Requisit~ ro1: a
~,.: 'Ri,.tles:ofPr:o.c.edu!.e ·,· · :·._.. ·.>\·.,}. ··)~) . .. · .· .-f·_.-,,~.tt•Jion for· Review_ .~f .a Decision-.Qf a··ct,A
~~ P_ur-suant"!O.R..A. No.·9_ia2; tJ:ie decisioJi;'f?J;a"!diyi,~~-,~-:.:.::,~.wf.~~~. ·. · . · ... ··. ·. .-.·. · ... -
,.: of. CTA_:1&__ -00. longer. appeaJable \o!!Jl.1e. _Co.q.rJ,:,-of-A"~(n':'hrfleP'fo1%e C:T;t.. En Banc ~9 take cog~i:za:nce of .
/ Appeals l?utto CTA E.'! £3anc. ·. . \·tk f.('..s . :ah ap~al vi~·a p_etitipn_f~rreview,_ a tim_ely mot(on :for· .
. .· . . . : · . ·.: · · · :~W!-b- _recons1derat10~ or.. new. tnaJmu.st first be fi[ed -with the -
R~med1es ottne. party.affect~d.by:. · ·. . ·CTA .Division lhat iss·ued. the .assailed decision'or
: 1 _. A fliling,-ordl!r pr dec.ision."of a Di~_islo.n.ofth'e· . ·. . re·solution.: F.ailu"re tc( dQ so.. 'is. a:. grouhd for> the
· CTA :-'- file. a motiQn. f6r·re¢onsfderation o"r ·new. · - "dismissai:ot ~e. ·appeal :~s the werd ~·mu~tlndicates ·
trial before:u1~sa~e Divisiqn within 1!5.days .from.. . that -the mri,g o~ a. prior.motior1 is· manclatory, and not.
. _rpertilY direqtqry (Asiatr(!stpeve/opm_entiiank,Inc. v. . · .
r:otiee th"ereof:. Prov_i~ed,'1-1.ow~Ver,:that in ~rim.inal .
cas~sr.the ·_gerie_r<!I· r"ii_l.e. t:!P..P_litable :in regular .
cour:ts on matt~rs of ptosecution·and appe~l'Shc;ill'
··.(.;gm_missJone[-'. c,f· "fnti:ir.n~l
201530, April 19; ~01.7), ·..
-.Rev(f3alie
·
1 • ·G_.R ..
.. · ··
No..
.
Jikewfse'"app.ly(~.A f:l.o.. 1-125as·ainfiinded; Sec. · . · .. . ·. · · · · · · ·: .. · ; . · · · .. · ·
11}; ... : · . . . . · Effect ·of. Filing Motion ·for _Reqonsideration, or. .
.,2 ... ·The.resolution of the Division t>fthe CTA o.n a· . New Trial· : . .:·· . ·. · ·· · · · ·· ··
m"otlonfor.rec:onsicferation or 1'1-ew.h'j_al·- file a .. . .The .filing of a motion {or reconsfderationor new· trial. :
petitloii:"fcir. f£tYi~W '(iith" .. the CTA 1=·,i. Banc.. :shall"'suspendthe. rUfl('ling'·of...tHe'period "within "which .
. (RR_CTA, Rule 8,·.~ec .. 3(q))'. >' . ·. . .
an appeal.may be ·perf~cted:°(RR9tA·~ule 15, ~ec.
. 3. The decision or ruling.oMh~ CTA En Banc..,. . 4). ·. ·.· : ·. · : < · .. , . .. . ·
' file with. the:"suprenie, c-ourt .a v~rifi~(\I pejitfon, .. .. . . ' ' : . . .
fo_r," review on. certioraW within .1·5 dayi';·· from· ·.
Note:. Rule.. 37, Sec.·~ of th~ Rules..of Court· was·
receipt of.the decisiqri·or ruling pursuant to Rule adopted by the-RRC.TA io ·Rule 15·." Sec. 5. RRCTA.
45 of the ·Rules of Court (RRCTA, Rule 16, Sec. ·: has··· not" .includec;l" .the phrase·: ·.~motion for
· 1): · .. · ... _- . . . . . '. ·. · · .. . .. · .· · . · ·reconsideration.'! .ihus, ·for tax-' .matters Rule- 37
: applies only to "moiioris Jar new 1iiaf' (4 ·
DOM9NDON, ·su!j.ra··at 784).

2019 SAN BEDA LAW CENTRALIZED BAR OPERA'f.!ONS 333·

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 couar
'
OF-TAX·iAP.P.EA.LS·.·
. ii.N,BEOA LAW CENTRALIZEDBAR OPERATIONS - MEMORY AJ0.2019' .
PWf ~ ci . I ·-4a MAwi?F . 4 .. ;sic, ft ttff

Omnibus Motior{Ru1~ . _ i. sy filing· a civ.il 'case jor .conectlon 'of a.

A motion for new trial shall incJude all grounds then sum of money with the proper. r~gular
· available. and 'those· r.i.ot include9. shall bEl. deem~d -.court .(NIRC., · Secs. 2(?3 end . 2'22);
. ':"aived (RRCTA, Rule 15,,Sec. 5). : . .·. ·· . · '. (MA..MAL4 TEO, Reviewe» on Taxation
·. · ·(201.4), ·p.·57.6) or · , . . . ·
Oppositlon .to Moti.on for Re1:ohside·ratjon or N'ew ii. By''filir,ig an· answer to 'the petition for
Trial· . . . . . . :-_.· revlev.diled by. taxpayer with .CTA (id)';
th~-.advers~ ,party may flle van opposi!iQp -to the·· . - b.: .criminal action : · ·. · . - ..
n:i,otiorf ~or'i'econsideration-or new trlalwlthln ten days · [, · · Attempt· to' evade· qr defeat tax (NIRC; · ·
afte( his receipt ,·of · a copy of' the" motion - for ·. Sec. 254);··,o'r · . . .· . · ·
· reconslderatlon or new trial of a decision. ·resolution ii:· F:ailure-tb fil~ ·r.eturri,);upply -correct and
... qr.orderqftheCo.u'rt'.(RRctA, R,ule 15,'Sec. 2).. accurate information, pay·.tax,.wi~hhold
·. ' . 'and remit· tax .andrefund excess, 'laxes
.. , H(iaring of the Moiio.n ... : "' . . . . ,' ·. withhel~ eri compensatien (N/{fO;. Sec..
. .,:fi:e rri'otl6n'forreconsroeranerrcrnew frial, a~;:well as . ··2't55).. . .
... ,\he :d_pp~sJtion theretovshaf ·embody-all ·suppcirtfng .. . . . , _.: . .
, . · .' -·~rguments".and the 'rhovant ·shall set 'the same ·.for . NotecThe'[udqment in the crimjnal case shall not only
... : hearirig- onthe 'next 'availa.ble: motion. :da'y•. Upon the impose. the penalty but.shall also order the payment
r explraticnof Jhe period set forth .iri the next preq~d[n:9,:.:.=.ci!_.t~xessubject of-the.crlrnlnal case 'as finally decided
·r
section, without ·a·ny opposition having be~tilecfby"f. bXttr~BQJ:71mtssioner.(Nl~C.· $ec. 20q). · <° . . ·
···ttie. other party, th.e_niotiori.for rE!cqn~idetaJipn §~·new IL;. "'J. °'l }Y'·;~~ ·. · · · , · .· · · : . · ·, ·
. ··tr!?' .~tJ;'jll:' be, ·.c:on.~ide~ed .. _submit~ed,-lofref<P-1'1~~~~¥.. p~rs1~o~c~ecjof a. cri~e peria,lized_. ..bY the
. · µnl~~.s. th·e Court,. deem.~- 11 rn~ce.g{~ ~'q,.o.~r· th·e _ NIR~~lr, i_n.a~~_lwm. to being. ha~le ~or. the.payme~.t
. part1e_s on oral argument; m.wh.i9Jftn·~7~~1'n~01;1rf"'~-~tl'le.,_tax:~Q.?':'Jilii;,Kt,.{o,t~e penalt1es·1mp,?.sed herein,-,.
: . shaU I_SS!J~ th.e,proper or~er· (Rrf~[~ J}U(ellt5,Sft8,- ·
3). . · . · J,r .. v;fl .
'r
fl dtlt ~.
{~RC, ~~ec "2[q,,~ ,· ., . . . ·
'n· '. · ~ . · · · · · ·
· ' . ·' · · _ ·.'
· ·. .. . · ·.. ,tr.. ·; · . . · .A,,').-· Forman Mod~ i'r9?El'~ding: · : - . .
c\1~n.~ ac_tions _ . · . , .
. -
. Etteit. ~f noq.~.cp~pl~ance}J~:~~,.e
: . f~r· COnten.ts Qf mbtio~ r9:rt'tec,q,rs1deratfQQ~d';!l;
motion for n~w trial".,.. ~·
~,,;d
feqJi"~i~!siJT~:?ls-~m~fbrb.ottr W_rtmi,:i~I
. 1· . · {~' . ·
·
I. ~4 ,e.
)·I~ Sha!! br~agt\t If.I th~. ~~me of ·the , ·
<t,overn.n:wt\t-"9i e P.t,i,lippiMs. (i.'e., Republic
. ·. · · .· ··it shall b~ de·~.med pr.o form . -w~~~· ~~lf]p,ttoll th~~R:(~Phflippirre v: aelir,q.(lent·. taxpayer): . . . .
. regl~.mentary'··perio~. for.· ap · ~lt"fCFA~,~;} 1if
fi}~ 5/)J~~~ZJI
J.'71,;"t,., b~/c~d~cte~.. by legal officers of the
.
·
· Sec. 6). . - . . · .
· ·. . . · ... · .. · · ·
- ..
1~\J.
·,.\: ~\
, 'k . . ·\. · '"'01 .. JzL:I :
·jc';~s>?'
,%, .
~~,.,,..~;t~<?
~f"· .... · J .·
civFor.crin;unai a'ction for the r~cove.ry cit
. '
.N9 ~econd·.rnotioi;i,t~.r.recc;>nsfde,ra~~ o,r .. :r;n~~- . u~. -'. th~ t,- e~ ;sh,efri, oe file~ in. cciuri: wit.nQ'~t}he
trial .. ·· .:·: . .' · ... X ·. :,-
No party shall be allowed t~ file a s\cond 1}'10ti0n '·!'OF- _
~§'c"fE1<ft\.~~J'lrovaloqfieC1R.(N/RC,Sec. 2W),
~~;; h..;,. ·./ . · . . . , · ·.. · . . . '. · · · ·..
.
.
.r.econsitl~ration of a.deci~iori, 'fin·a1 res_p_[l,!ti~P-~.l.:~~i~::rb¥, · · ·; · . . , , .. ;· ·
order; 9r for .new·t(ial .(RR,CT:~,·1ule 1!,5;>S~J-- . :'f\Jf"ft1~~~¥ifr!c.emedmay enforc¢ ti'\~ ~oll~ction of •.
. . _. ·. ,: .. • . . . :,:. . ,·: ·, .' .. ~- &..\I Jl~l:IE!".IT'taxes, {e~s; qharg~s .afl!;f" oth~r f(;lYenu·es
Riili.119. · ,· . ·. · .· · - ,: . ·: ... · · · · .-~"'6y,ciyil _actio~:in (any_ cou~·of ..competenqtsrisdiction · .
. Ti:ie.' · Col.!rt ·. $'tiall resolve · ·, the . motion. · for · · · · (L GC, .Se.c;. 183).' · ·. · : . , · . • · ·-~. _ ,, · ·-
.. reco.nsideratiqqc.ir new trial withii1 3 rrt.onths fromthe . . - a:·.: Court action - Thc.,LGLi niay fiie an ordinary ·
'time ii js '~~em~ subni'itt~ij f~r· resoluti<:m(RRC'TA) , .. · . . · .· 'i.t:J1t_for the.¢ollectjon:·of·s1;1rii9f'.[!i.Qn,e.ybefore .. ·
· · Rvle 1·5, Seq, 'll) .. · · · -\ · ·- . the· ·MJC;· RTC .pr CTA. Divisioh depending-
.. . .. . . . .. . ·. ..,~ upon ·i~e jurisdic::tiorial amount . . . . ,• : ..
·: . · In cases fa.Hing· under th~ : exclusive . appellat~ . .. · ' ., b. .. De<,larator)1 relief . . . . . _. '
... jurisd.ictiol)_:'of' t~~: Court en 1:>Jir:i~. the. petition 'for . . . ·c.: ln)u.nqtion --. to :be· i?s.ued by :the· CTA if ..
. .reyi~w. of a dec.is.ioi:i o( re.sbluflcin.of the .. Court. i1;1 · · ·... . · c6llect.ioJ1· nulY jeopardize the ii:iii3rest. of the
·... Oivis'io'r)· inust. be· .prece.cl.ed't>f.the filin~:t>( a··timelY' - · .. ::. . .._ · gqvernment a~tl/o~ ~he ta'?(payer! subject to .
. motion for reconsideraUori. ,or. ri'ew· trial 'with the . . ·.. . ,. . certajn'.conditio.n's(R.A: No. ·9282', S~c: 9):
: Oivi~1on -(RRGTA, ']::?yfe r{ sfic ... 1)>· ,; :.' . . . . ~· . ... "• ' · . . • . - ,.. · . · .• ·. ' .
. . . ,, . . .•. . ; .. •.· ,·. . . Pr~scrip(lv~P~ri~~. ·.·:.' .. - -.·: ... ,: .
J.UDICIAL.PROCEDURES·FOR' COLLECTION OF ·Presc'i:iptiv~ J).eriod forJhe asses·srrienr'of ,Local
t-~~~ · .-· · · · · ·-·. · ·. . rax. : : .· _ . . :· · : .. ; _. · . .- ..
· The ass.~ssment_of-16.cal tax·~hall.-pr~scii.be.within?
· L lnterriaf R~veniJe T~xes.. .. . yea'rs'.from the' date faxes,.,feeif. or ctia'rges becom.e
The Governme.n't may enforce collection .of lntimiaf ·. dJ.JeJLG.C, Sec. ··1.94(a)).. However; in'fra4d ~r' intent
. revenue'taxe.s by: : ... ' . . . .;, . -: . ,..,.. . t.o evade' the .payment. of.(ax,es, fees, or charges, the
a. Civil action. , . · ''-

. 334 I ·2l:l19 SAN BEDA LAW C~NTRALiZED B~R'OP~RATIONS

.....

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 J
J':--· .cou
·.
RT" ·6.F TAX
SAN BEDA.LAW_~Ef>!fnALIZEDBAR D_PEAA'riONS- MEMORYAID 2019.
"APP EA.LS
·Tb& . +Mi iiii.4 161 . . 41 I 41. _ P~ *:4'M~i?&iSSM(

5amemay be a'ss~ssed-~ithin 10 years fromthe date. .

..'., 1
t_:_ · G . roun id.s f or
· the
· . ~uspension
. .. of the-Running of
~l'.of the dlscoverythereot (LGC, Sec. 194, P_ar. b)., · . . . ·. · : . .the Prescriptive Perlods : . . .
::;:._ ..... . . . ·. . v' •. • . ·.. •. ..' .

tCPrescriptive period .for the assessment .. of

,;;:: National .Tax . . . - .. ..
:Jt:~eneral Ruie: The period for assessment prescribes
,;-.<within 3 years; ·. · . · ; · . · . · .. · . 1. For · . the. · Period ·1 .. The Treasurer. is
-,f-'". a, After. the last -~ay prescribed by :.i.;iw. for the during which .: the · iegally . prevented.
.!)· filing o.f the retum..or · · . . · · . Commissioner· ··is · fror.n ttie
· 1<"· b.· . Af.ter:the day the return was filed, if the return prohibited . · :from · assessment _or .
.""".as _filed. beyondthe period presortbed by rn.a~ing .· . the· . collectlon ot 'the
. law, whichever is· later ~NIRC, Seo. 203f. . assessment or · tax;'
'}( -. . . be.ginnir;ig. 'dtstratnt ·2. The taxpayer
1'.i -Ex~eptions: .. · -. . · nr . l~vy' . · or ·. a: .l " ' · 'requests for-. a
't :· a. False, fraudulenj return with intent to ~vade . ·· : .proceedlng. in court · · reinvestiqation, arid
.executes- a. waiver .
.r·.
5': • • taxe_s~ with.in: 1q:y_e~rs_·from dateof discoyery . /.. . . ·. and "fqr. sixty· (60)
<,

of the falsity orfraud: and

b. Failure to file a return, at any fi_me·.witl')in· io. .
. _: days-thereafter;
~- Whe~ the .taxpayer
. in writing befor~· tne
· expiration of . the
years after. the discovery 'of the' omlsslon of . ' -requests . . . for. ' period within which .·
., • the return (NiRC, Sec, 222 ·(a)r.· . v, . ·A · _. ..
~~!nv~sligation to·assess or.collect; . · .
:rt 1 · . · . · :· ·. ·. . .,- . .· , . .. , ,v4;-7{· . which 1s g~a.nted .by. . and . · , . ·
if,: Note.: Bef<;>re· the expiration- of the 3-year pr.E'lscrij;>ti~'e'.:'~'f\ .. ..the Comm1s~ioner; · 3. The taxpayer is oul
Y · p!:lri6q, botb·the·commissfonedmd tlie taxpayefm_gfHtJ~h., :3 . .-When -~e.taxpayer · · of the coi.ml.ry or'
Jt . ~gree ir~ writinfl' to __e~tend the_ period~o(~~sess~rlf ~::·;j:!tl"-,... ," ·.
~a_nnot::_b~ located . otherwise cannot
J!· :rtie _penq~ so agr~eq 1JP_9n may be'furthe_r.~~Wo-~~1-f·iffY.!}1L.1if'.1p.;,~-- tf~t1 . ad_?~es~ · be located-,(L.,.GC,
?: _"bY ~~b~equent :wnt_ten_agreem~nt m.a95:}~J~fore_ttie+:""t~ . , _-.""!glv~f ~min .the . Sec: 1.[J4): ·
: ·:. exp1rat1on. ·of the pe~1od pr~v1oi;is1Y,4,s1greed LiP9~:,J.{. · · _ret~~~ l'!fiJ~~ • u~on '··
·,:.. (NJRC; Sec: 222 (b))· . . · )it':-,. /I. ~r~<,'il . .
wh1ch.-'.il·jta.* IS being.
f . , ·, · ·: . :···'·./,:C:' · . ·. · Jt)-u;;7
.<>/.. fa ..
::.asse.lsfitl.\.··. or·
f ·. · . t=or ti:,:ei · 1 O~yeqr presc.riptiye pe~i9.¢'fter;J:?pfb'.aire_,;f
j; fr~.ud; such must be proved ~1t~fact,h9."E3,IR(AB'AN,~·.
9.Ji· h; : , ·
coJ~yfte~;_·Efxcept _ if
·r:.;:, . : ·
:~JI . · --ti· .ta\p~yer.·
·:.- :s,uprf]_a_t·2_74)._.· ·.· - .· .. \ivf'.'.~?'7"r',~ :~t!,· .. }.•li" ". -~!3f~!.W~~m~~;:.~e
~
.\ .. · . . . .. . . . : . . . . , . .. )' ""~. . •.-,,~--fl'
....,'(~
. ~~~-;.. _.~ri
~.~<l.:. . . · .. .C.ommi~~!_P,net-Y
~-•) n··---
·ot
. .
} .· ·P~~s~rJJ)tiv~ f>_er~_od_fo~_!h_e c~er~~<>~\t1.Taxy._
_ _-: .. fl~~~:
=~~res~; ~~g~-. m
'.:i.. . . -}~(:::{;,'"~l~'{VIJent~,e. warrant .·
1· · . - $;~;.,:.,.,,_:: ~ .:.uof·r~~tramtgr l~vy
,:;. ... . . .. . ~ . . ~l' · . , .. ; is duly served· upon
t. An,-:;frg~_rna\ riWenue)ax· . c~ie~\~.f}-/ of · . .· tl;la· taxpayer, ...his
{. V<{hicJi tias beeri."assessed. local . · ta~~l>hi:111., · . . i:iutho"rized · ..
/ • may be_ co!l§)ct~d with.in'5, ·.. prescfibe. . ." within . ·:repre·seritative:or a
·t(.'. ·~:at·.· ftg<N,Jri;J' ·
,..
1~~0
~ Ssme O ·. ~X
·-!~':'e: csf~e:·rs·tr~
. / . ·. 9. . . . . a 0 • ..Q ·
1- .- . rnernb~t-.
· ." h6useh01d ·. . With.
his· ar· . ··--:-

) -_~ec.
222 (c))~:. '·, . . ,· .·;;\ssess.ir(ent\. (LGC, .. sufficient < · .
:f · · Sec.. 1.~4;: far. ,c):. · ··:·· .cliscr..etion,. ahd. no ··
'However;·:.':~riy." !internal· property·:coutd·:be.
'·revenue·:'.tax :whieh.: has ·... kieated; and: ·. . .
·.· been ~ aSS.esse~. mcfl~/:be.. · · · ."$; ·_whe}\ tt1e taxpayer. · ·:....
. -~cG11ec::tee:r: ·.'Within._ ~ the · r - •• is· . Out .. of ··the :
•

"" . · ·period '·agreed· .. upon." ·fn. · ., ' : · .··· · P.hilipP.ines· (NIRC;

r·' .
writing. before. : . "tti"e :""·· . . . .
, .expiration '.of the 5-year . .. ·. . ·' .·i s~~,i?3). .
~". period. ·· .,.The ··· 1,eriod ·
.agreed upon· "may · be
. -~xtendea·by subsequent· . . ..
.\-\'.fitlen. ~greemer.itif rnade .
before the .. expiration
.· P,reviously. agreed µpan
f~ .. · (N(RQ,."Sec.'-222 (d)).

,.·
,
';...

c_. '-.."
2019 SAN ,BEPA.Lf,.W CENTRALIZED BAR OPERATIQNS
• • • • • • • I. • • • • ~
335

}.
 j

.-co . URT OF.TAX·A·PPEALS

· ; _SAN BED.A~"." CENTAALIZED BAR OPE.RATIONS'.- MEMORY AID.2019 .
.• ·.~

•.:
-:~um;ary .of Jurisdiction _in J~qic.icl:1 Ta~ Cases
·'-;:

Acin°;ii,i;t~i;1tiVe, ceremonial.
. . .and non-adjudicative
. .. ·fun~ticins
.

.dvll Cas·es··. · . . :
·· .1. Oecislons .or rescluttons on motions for reconslderatton or new trial of the Court In
· ·. :· ..' · Dhiision :in the exercise of the fr appellate·Jurisdiction over: .(AL l') ·. .· : .. · · ·
a,. .Cases arisin·g from Administrative ·agencies - BIR, BOG·, DOF, DT1,-0A; ·· .·'
·_ 1t .bbql_l tax cases decide_dby the Ines ln the exercise ·of their· originaljurisdicilion;
. .and .. · .. · . . . . . . . . . .· . . .. · ·....
c.. !ax collection cases. decided by· the RTCs in the exercise of thel(.original
... ' .. · ~utistjicticin_·inv'ofvjng final a'nd executory assessments for taxes, f~·es; ,CharQE!S.
andpenalties.where.the prlncipal amount of taxesandpenalties claimed is less.
. 'Jt:ian:f'1, Mil.lion (RR.CTA, Ru~e 1, Sec. 4(a))._ · · ", · ·. · · · . · · .... ·
2..-· Declslorrs; resolutions or or!i~rs·ot the R'I'Cadecided or resolved 'by-,them in-the
.. ·e~ercise" of the~p-e7fi!te.jun~·ar~'°1!-G~~:· •I • •.. • • • , ' ..

· ·fl·.· Local tax,R:,s.e~;,(RRCJ.A,)R_u/e,,"f, ~~~)- · . · ·.... · , ·_ ·. :· , · ·_.. :

. b. Tax C.?)l~:~iol<l;CJ~es·~~~fil.~-:P.ri~cip,:'.ll1!Ylli>unt o{ taxes and fees, exch..isivEr of

• ·. 2(.df~r.,cl~} z
• . : . ch~~e~ a~g_9J'l~S claimed 1!°t->l{l~$ttf\a~~~,,Mllllon; ·(R_RGTl;I., f?u/e 4. Sec.
..,.,..-.,,.'~".j~_,c,..w.;,,.,. ~~ ..-'~ ''\ · '
3, · De9ije9~!-~~sc:iJtlJions.~r @!der..§iC>nrvl'Q.ti~rl}'fqvR:trqonsiderationor "!_El"~ Trial· of
· . · . ' <. _ .

. th,~!coo~_t Di'1;,ion iq}the+~er;,~1~e·of it~ ex~!ff"ife·J{igim;i1 jurisdicti_?~·; (R~CTI\ ·

. fjfile4, Sec. 2{</)) and ,.. ,7-,,. · · . ~ , \f ([)~ · .. . ·
A. , ~~~o·~ of th_,·~s-~_in·· . . · xer.cis"Er~t--~sapp"f.ll;a!.~,Lpilsdi9U6~(f!RCTA; RUie :4•
.. , ,~Va"
.
"2"r'·
~-·J
I· . ·
...
· , ~:~it'----.:
-,r ,.._,.:,n,,,-1. J,H
-..._;,r;v .\!. ,..
'a • 1\ . . .
~!'(·· .....
·, · .
. .
. ·
• ~
CrimiMl:Jcas.esr}\\
· .
·.. 1. ref~-,- . . -rr,,rlt:l.
:.. · ... "'<§rIJ{f!!I . .
..}. :. ' ·. t· · ·
/fJJ;:i·. f · · .! . .. . .
, Ii. ~ - · ··
. . :·. .. ..
.- , · --

1·: · me_gi~~~s •. ~~~ti~rt~n:rtpx{l~);:t5rtml>tip.n¥tor N~c-~i:i:siaeratian'or _a.1::w:·t,ria.,of ~he

. ~~t!irt: _ifl ~i"'.is)~~i&\the-Jiert~~-,9-!.J~·~,5§.,cl~si/e origi~a/juris~iction · over cases ·
, m\olY,!!1g ~m1r:i~z~~qses1ap~11:r~:Jt'.~I· YJqla~@t~ of thfNIRC or Cf\.:1_TA and·o\_her.
.. laws. admin_1~~re_~y~b~JftY.'.'.i!l~J~-. RCPA, Rule·;f, Ser;. 2(f)). .·.: _. · : . : '·
·· .2. Dec~Lors: ~.esoh.ltion~~i'i~g~\@~ f.l)IG_t(~.for re~~sid.~ration·or new·Uial\of the
· cou_rt'ij\diyis_iort"-in;..~e~fs~oUts ~.x€fu~1~~a, e/let~ ·ur:isdicfori pver _critriinat ·
: offenses*1r.f~qtie:t'i))i.~itl"pa.r.agr.a_plil:,Kr~~~)}'.,. ~ . e _4, Sec:'.?(g)).. :.- ·· ·· . · ..
3... O~c1sig_n~~~6l~J.il?}is ori?rgef~,f..l.h~~T . s Jn tr.~··e~ercise of t~etr· appella(f;!\ _.
. juri~d_icti9n·?;y.er~r,i~~l-of&lisgs"':b:le,.rJ.U.ened iri par_ag_rapti·A .(~~CTA, f!ul~ 4,. Sec.. ·
- ,: 2(t));· . . '--~-"=-..;&.;;,7~-..,,..~. . .. . '

·.,.

:c1v1i'ease: .•. :• . . .. . . . . ·., . ·..

. Tax· collection c:as1;1.s· involving fi_naJ. and exe·cutory assessnie.nts fof taxe"s. f~t:1s, .
ch9rges an_d· penalties, Where .th~· principc;il amount of taxes and 'fees, exclusive of.·
··c;harges a~d p_erialtfes, .claimed is P1 .Jl"1il_l.ion_ or- more;·.(ARCTA; R~le.'4;·Sec. "$(c)(1)) · .·
·and.".· -: .··.:.:: . . . . . . . -· .··:· ·.···.... . .
. Crlmlnar Case. . . . . . . . .
Crhnirial offenses· ari~l~g ·tr.oi:rf viol~ti~n_s ¢f t~~ NIRC'·oi- · CM'rA':.atid 9ther. lav,,s
administered ~Y the BIR· cir BOC, where th~ principal ..am9ui:it of ·taxe~_;ao~ fees,
:. · exclosive· of charges ·,and penal!ie~," claimed·. is ·P1- Million or 'more_-(RRCTA;, Rulf1_4;
. S.ec. 3(b)(1)). · · · ·

... ··3:36: j· 2di9 SAN SEDA LAW.C~N.1:RALIZED BAR OPERATIONS

 .COURT. O F··.T AX .APPEALS
~.N BEDA·LAW CENTRALIZEDBAR-0,~ERATIONS- MEMORYAJD:.201'9

CivlJ·Case (DIReCSS)
1. Qec':isions of the CIR involving:
a. Disputed assessments; ". · . .: .. .
· b. Refunds of internal revenuetaxes, 'fees or other charqes.ln relationthereto: or ·
. c. ·Other matters a~isi11g under the'NIRC'or,o!he'r tawsadrnlnistered by·the BIR
·(RRCTA, Rule 41 Sec.·3(c)(1)). . ·. .
2. [nactlorr by the CIR involving: ·
a. . Disputed Assessments; ·
b. . Refµnds of .lnternal, reve.111.,1e. taxes, !e·e.s ;or ottier ·~harges· and. penalties
.imposed thereto; and . . .
'c, . Other. matters arising· under ·NIRC or' other Jaws ...adminlstered ·by ttre BIR, .
. Wher~ the NIRC provides a 'specific pefiodfcrsacflort (R_R,GTA,Rule .4, ?~c...
· 3(;1)(2)).. , · . . ". . ·. . .· ..... -, · .. \ ,,; . : ...
3. Decisions, Resolutlons 'or Orders of the'.BTG . JnLocal .. Tax Casesdecided .or;
resolved by them .ln the .§xercise oftheir Origirn!i'I..Jurisdlction '(RRGTA, Rule ·4,
Sec. 3(a)(3)) . , · ~: · '·. · .·
·A. Declsions.of'tha f,ommissioner.of_g,ustorns:loyglving:. · .. , .·, ..
a', Liability for customs Duties, tees or. other frtdney charges ·.
b.. Seizures, detention or.release.ot other.property affected: . . . · .. ' · ,
c. · Ffr~e13, forfeitures-'9!~er'penalties ·In. relanon'thereto:'or. : · · .
: . d .. · Other. matters fa.tr-:1.!i!'f.W\.mdert!,e· cusf~ms. law· or .other laws· administered by
.. the BOC (RR<f;;f.-f\tf'Jtf!!~14, se·c. 3(q)(1)) · :. . . -, . · · . · . .
5. Decisions. of the . .§.~of~t§ii:-Y.!·ofFinance on Customs.caseselevated for automatic'
revte~_from def?isj.9n~}?t~~~ommission~jfpf Custom's which are adverse t~ the
. · Government llj)<jer tfie8¥.WA~fR~,Jf@fe 4, See: 3("!)(5)) .. . . : · ·.
6. [:)ecjsio~~r.0t{lhe§.eerepi'*2 .bf Trade anofr£8w~tryin .the case of non-agricultural·
producti,,<J;6mmo~lit5'J?f'·-~~icle,,.andthe .~~tita.ryof Agriculture .in the case of

. dufi~~/ri'd39.~g~ar~me~~r~s und'.er~/~· !I
- . J~CT:A;RuJe.#tS~a~?(11:l§J~.· . . .
oJsoo
-, ·agricultur.~I>m.~Mfti.,e6mfodity·or articl~,f i.1 vo.lving dumping ancr~ounter.:ailing
(S~fegµard M~asu.res Act);·
-, . . ~· . . : . . . . . . ... - . .. .
. · · e:;~v' ~ ;..~ · """ . · :-.~n . ~7~~ ·: · ~~;;_p. ·
· Cr,mma'F'Cas~s_ff. ~t~:·· t~!~. . · .': ~~.!":..,.,~~~
.· ·
·· · . · . · .· ·
.·
. 1 .. ApR~aJ.sf'fJ6fi'ttthe JD'ct~r'ne;JJlff, ,i:esolutiohs,.,.o?-<erders.of the RTes.in theii: p_rig_[nal
. jur!~t~lior'in\~rimin.al off~ses_ where.the pri.ncipal. ?imount, ~f :taxes .and .fees,
~xelus1vi:o'. .~]Wge.s·and~~s;l~!L~~.;gla1m~d 1s..lessJhaf1.f>1 M1H1on or.wtier.e there ...
JS'~?. ~Pe..~ts~cram~pJl!:,~[~fgJ~@1'.r§!!J~ 4, -S~c. 3(~)(2)).. . , . ', . . ...
· 2. C,tlmmaFtpffense,~~ver.pei1t1on~Mev!ewof theJud~ments, resolutions or orders ·.·
. of the'R:i,'·~lg_v~r.tax~s·es ·o-rigin~lly ~ecjded by the MTCs. or MCTCs;· (R.A: No..
. . amiiife.e.d
1125;. as . . (Sec. .7(b}(2)(b)).
. . . . .· . : . ~ · ., . . .· . ·
...

: Clvll· ease . . . . . .
.: .· .1. ·Tax.~ollec~on cases where the pri.ncipal amq.unt of,t~xes·.and.fees, ~xdu~jv.e .of·
· · ·charges an.d pet1altie~. · claimed ·rs 'less tha.n P,1 Million;'.(RRCTA, Rµ/e= 4, $ec..
· .2(-a)) .and · · ·-.. . .· : . · . - ·. · .. ·. · · · ·
.2. Lb<;:al .Tax Ca~es (RRCTA, R.u!e 4, Sec. 2(b)). ·. . .

· ·c.rlmjnal· Case .. . . .· . .
Cr:iminal. ciffer:i.s·es arising from .vi'olatiocis ·af. tn~. NIRC ·9r' CMTA .a'r:id other laws .
. adf'!lihistered··by. the.-BIR or. ·soc, ·y.,here Jhe principal art19unt of taxes ·and.fe.es, .. :
exclusiv~ of.'ch~rge.sand.penalties, cl.aim~d.is !e~s th~n P1 Million.or w'he~e-there is·.
· no sp-ecified amount clalmeq (RRCTA,Rule 4; Sec. 3(b)(2)).. · ·
·. . .. ..
. . "'; . . . . . ; .. ~

201s sAN si:oA·L:Aw cENTRA~.1~0 sAR.oPERATI9Ns r 337

. ·.·
 . )

.
COURT OFTAX··A.PPEAL_S- ·
. SAf:J BEDA -LAW CEN~AALl?EDBAR OPERATIONS. _·MEMORY.AID 2019 ·
4&-iiiH ·- e UENC.?A ;,,w, W&i MMN.

Procecfur~for Appeai ,: .
.. Civil Case. ·. · '

Decisions; rulings orlnaction o_f the: ·

/-..
.. ':. .
.
-~ '.
.
·. ' . .. . ' . . .
1 Petltlor» for Review· (Rule 42 of"the·ROC)
' .. : \.
·. · 1
;-1, Com'mi$Sione( ot"-lnternal Revenue : -with_ir\30:days after the receipt ofthedeclslon or'"ruling :' 1 ·
· -1 pr _after'th_e·lapse. of 1~0 days within which the f;}IR: · 1
· 2. Commissioner of Customs··
- . -----..,.., should act (RRf;TA, Rule 8, Secs. 3(a)"and 4) In case o( .r.
· 3.. Secret_ary of .Finance· -: Inaction ofthe CJR revenue on claims for refund J of · - .
I internal re:veriue taxes erroneously or illegally·collected •. ' · l'
5. ~e·c·retary-bf Agric;;ufture .
I . must file a'petition for reyi~w.wlthinthe 2-yi?ar:-perio~ · : l
. J prescribed by RR.CTA, Rule BJ Sec. 3(a))_. .. ·· . . . · ·. -1
. 6. RTC., i.h the exer.cfse their of/ginai . of :"\.::' ·. - ·-.· : - . · ,.__ . :. . ··: #:· . : ,; ~·.:· --~)
. .jurisdiction·{local tax c;1nd· t~x . .c;:ollectlcin
.·case?) ... · ·· · · ·.·. ··
·. ·,~ . I ·:>cTA01v1si.°,~.- ·: · -:J -, :.··. :·.
D~cis!ons or·. ·rulin.gs._ of· i~ !h~. ,· e: R"~c:·
/~-:---_,-,--~_--'-'-·--:-'_~,,....:.....-:..,.·:....:.:._~~--.-""':'-.,-·· ..
exercise of its appellate J4_1"1sd1chon.
involving tax cases .originally_ decided byv_ :ct:P~
the·MTCs, ·~e~Cs or' MC_T.C~ . · .·
. ~,,..,1~
ii
: .
J.
· · . ·.
I · -_M~J~on fof_~'7cons1derat!q~/New .T~1al. : 1
_4 -~~
~.~~jf\!WJl.1i~days.-fro~ r_e9e1_pt_~f d~~·~-1on
. . ·· 1 ·

':"
,. . . . 1:~~.
Decisions or rulings of the C~~l'l !H~ :· ..~--~~~~.../2~~
'jrv .·- - ~:s.---l_]LI~~-~~ .,.,
_:_.:..._..:..--,-!' _.
-1----~-·-. .'. -~-'---'- . . .
exercis~ of its appellate jur~~µ,~9.n)d'~r# . ":.··,'· ·~. ~~\. _"\ '\...·-:E:\~:-· . . . · · . ··. r ,
cases .involvinq -the assyssm~t~n·~.r . ·1P) 1r~. ;;f-Pet,ti.ontqr<. evie~ (Rufe :43 _of ~he RO.C) . I
taxation of real property If . . . n l ·
'.~· -~~ ~ithin ,~ daj_s f1<J1teceiptof resolution of the , i,
. · .. . . . ·. ·_ .-f ~/. · -~.;.. __.: ...
..f~~~:Oi'!li~iono~ne·:·rriJtion_for reconsideratlon or. _1
. ·· . . I ~ ,,·. · i ~~~"' -~!ii ,-,--f'"~).N tnal (RR1,J;k,=R~/e8, .Secs: 3(b).~nd ·4) . l
· .
..V.._ .;--".S1..urrm·@
. _J~ll~t,~!:-:....tf
. li . .: 1· ·. .
"'""~:....J...>.,;dnu
a ,-,,,.,"'H
__ _:._,:_i_:,...""'..:. __ ·.:... __-1
1.. --,------------:--:-t,~t- ~\t..:- ~:; . l ,,., . 'ff"~ J
= ,. ~ •· .. ,
li · · · , .
' ·, · ·
· r· P~tit!on
I
fo~· ~~~iew 0
W1th1n 30 days_f~o~ rece1p\of.re:'(ilutt91'1~{'\~~ ~
"(Ru_~~,4-~to)t'tt°e':
~i.1:1)-.:. .
,.,.(i;._,
,.r~- mi·
A.· ·~v ,'· . . . .: .
.,¥_CTA6N B,A,NC_ -_. : ·. ·
. . . . .. •
. Y
··.i'~"'-,;- . Ii
.¥

·,
I th.e CTA D1v1s1on on the'wJotlon\q~j,. ~s "'·
f .. , · · ~: . . ·.
. .
I•

J reconsi'cierati?n· or;-pew tri1;11J~F.~.TA,'.~~1~ B, ·, .· . ' . ~- . --:;, -::--i:-----:---:--,.....7:_:... :,.·

I .· . . · : · . Secs. 3(b) & _4) .·· ... ---~ I . L"'JEN~J\15,>l 01;! R,€consider~t~~n/New Trial . , . : . for
\
'-~--~~~~--:-~~-:~-:-~.-~-:-:_~ . ~-~~e-a1~z-.:J~~\~ff~¥~!·~~er~~~~e~.
· • · · · -;,, "''>t -1 · ~;<""\tli'nr\~:~.-;;i# f · t fd · ·
1Jec1~1on
I·
·-:. _.. ,

cz
· Legend: · .. _·. . , .: .. ,·· .. · · ~- . .<,l\4~..:-'-: -:-;.--:--'--:--::-:-r-..:. --::-·:--:-:.-:--~-~-"':"-7"., .. ·

·.·.,
l I·.
4,· · ~ ~iwb~i.(5ot
· · · ... ,·,,·
i o e
· .•
,. · • 77~}~:;~~:o~~;s;::~~:;~-~T>: .·1,·· · . . (Rule-45.oftJ:le.~OC) .,: ... · .. 1
._ · ~. ~ D~_c1s1ohs· of Lo.wer · .· 1 . · Within.1.~ day~ from rec;:efpti;i{ r,esplution·of tt\e CTA:'· · - J
------ .'. : . C<;'l,lr.tS',(?I'. quasHlidicial .,-_'. : .J -.J~r banc_'oi) tlie_ i;notion"for r~_consideration hew .trial .' -l ·. :o~
. . , agendes-su~jectto ... , .: . ·_-'-_-··(R~.c·?·:ROl~J6!··~,ec.~t_..-:".. l·
, ' .. _. appeal" .... '·.:, . . ·, .. . . -:-: · .. :. . ·.> .. .'.. . ..... J
I- - ~ ~ :=:-::.•.....;,,.: .- : . :· . ··. · .. · ,- . . ,. -: N'o.te: :The ·motiori for·re9onsidef~tion or for new .trial. ,
-- . · 1 1
· · \....:. ~.,.,..; .:. . J _ . . . _Mpti_.on fo fil..e .-~ · .. : : · · . . ·I ·. · fi!:d b!3~<?re~.e.,C_o.i.Jrt·sh~II' be. deert:ied abandoned if( .J
·· · · , .....• I· dun~gJts pendency,_the movant...$h.c,IUapp!:la.1 to the ~O. 1
. ':..
. , . · r. . . . . .. ·. (RRCTA;.Ru/e 16, Sec:-2) ·.: : : ·:·_.: ' ... I
• \
. ~-
,. .
-- . ~ .- .' .- < ..:..·;..._:...._~-~-~
.-----
. ..:.-.--.~~- ~:·/
---,-
.

SUPREME couin":
.....
. I
···\

. 338. I 2019 SAN ~EDA LAW CENTRALIZEp BAR OPERATJ9NS

 · colJRT:QF TAX-·APP.EALS
: SIJN BEDA:LAWCENT~ttzm B~ OPERATIO,NS - MEMORY.AID 2019.· . ,

Procedu're for Appeal

. Crin:iina1· Case ,
,,.. ..
" ·' . . .. . .. . . . . . :--' - ·. - ,'·"\
= . . : .,. ·. . •, . • - : ' I Notice of App~al (RULES OF COURT; Rule .122, Secs. I
,;. : In cases' ~ec1da.d_ -~Y an. ~T~: I~ tJie ~I 3(a) and 6) · · . . .-. ·.. .·· : _· .. . . L
exercise of its original [uriadictlon.. l
·. .Within 1 ~ days. from receipt of a copy of the 'decision or .1 · '.
----~------------,;"---""" . 1. final order appealed from to the 'same.courtand by serving 1 · ·
( a copy upon the adverse party._ .. · . · • · ·· · :.
·. : '~-~---.~ • ---· • - .' .· • --~-""'·:, 0 '·--.- '---~ .-.I I - •

l ~· .....
' CT A IN. Di'(JSI.O~ :
'·' ··:,.
,,.:.

i.
! .
i
i
I:

x~:.:.
'

~-?' •

' ".

i . . .
2018 'SAN SEDA LAW CENTRALIZED BAR OPERATIONS I 339
 LOCAL TAX
. SAN BED.AJ.Aw·c~N~L/Z(D BAR C!PE.RAT/O;NS~·M.010R.Y.AID 201°9

: I.... ....E__~_._E_RA_L_.
......._·..,..G · _P'!""'R_i_N_c_-1_.P_·
E_s_·
_ ___,,~..;...
.Li~ltations Imposed· upon Congress
Th~ Leg}slature in, : providing guidelinei, . and·
'llmltatlons.on the LGU',s power of taxation must still
'see that:' . . .
Local .Gover~ml!lnt Taxation · .. . ·.. . . 1. . The . taxpayer will· not be ·. overburdened or
. It ls· the power· cif-th.e Local Govemrnenf .Units · . . saddled: . _with multiple · an_d'·· unreasonable ·
(L:.GUs)" to ir:npose·. and collect taxes _ on 'ttieir .: ·. -, : · imposltlons; · · . . .
·cons~_tu·¢.~ts.. i_n;· order to
ralse reverrues ~<:) enable 2. · Each. LGU will. have its·fair share of available
them to perform the. fun9tions. for which they haye · · . ··r.esources; · . . ·.
: been organized· (V pQMONbON,. Taxation (2013). : - 3. · .The resources of the National (Sciv.ernment will .
.. ·.. . . .
p: 1) [hereinafter,
. . :. .
VDOf,AQNDON, Taxation].
_ .. ' .. . . · ...
. -.. ·. not be li°n&11y:disturbed; .arid . . . ..
4. :Loc~i taxation wiil be fair, ·unifprm,·:and just
. :~ran't,.ot-Cocai t~x:i~g ·f?~~:~r : , ·.: (Manilf.J Becl(ic co::.; .. Ptovince of /_aguna, G.R.
· 1. . Each local ·~1:>Vernm~nt unlt · shall have:·,_tti_e No. 131359,-, M.aY.~, .19ft9):- ·
.. · power ·to create .lts own sources-otrevenues . ·:
· . · .and to leyy taxes, fees, and charqes subject 'to . .. Nature of:the. TaxJri"g P.ow.er oH,.G.Us · . · :.
such guidelines and llmttaticns as. the Congress. · 1. ·. Not inherentbut a directgnihf:....;.The taxing power
mayprovlde.iccnststent witti jhe basic p·6Hcy. of· · · .. o(pr,qvince~,cities, municipalities and barangay, ·

·:./""' .,
ur ·1)\
.. local autonomyBuch taxes; fees and cha,gJ.e~oughnot lr:iherenl,·!~ .. not a mere delegation by
shall. :accn:1e . exclusively · to .t!J.e:,#f·'<;>cal :·1h~ai1?.(ative_bci.dy but 'a direct. grant_ from the
'. go~ernments (CQfvST -. Art:_)!, $e~5);"<~: . ~ . _;__ l :,;;'C9~sti,trn1~"R(CONST., Arl.)(, Sec. 5) •..
. ,.,.=-··~ ~ f,:."'~·. · .. , ... ·
... 2. . Each lo~al- govern me.~~-
uni~.~§!).,.;}~~ei~ts ·;,.~. ~Tff~i.4'<>':i~st)~"t~
I:, !'.lb ·ronge.r v~s~ed· ex~lusive.ly
p9wer to.cr'~ate i_ts ~wn so.\fces bf~~~lr-ue--a'rict-. '4.· ~~~&_'~~~~al: le~i~lati"'.e bodies· are now
to _le:'¥ tax_~s,: fe~~, :aod · q,-ia~~ ~d'b~eft:~e .tt," ·It.\ . Jr-
~.1,;,e - d_1r~ff j:il1tli(;>[tty_.~o levy-taxes, fee.~. -anq
_prov1s1Ms· herein,. cpns!sterit'~1Ji'.i.. t~e ·basic· othe .1~· ·
1ch·arge!}.Jkl::l(~uan.tto .Art, X; Sec, 5 of th~
policy of lo.ca! autonomyQ~q,h rr.xes, .. 'f;8..§.i.s!
d ·.-~-1..._:jJl..8~<l:ons,itlUJori;l{Batangas Power Cbrp. v,
. -:t·~~~~:~tu~ft~~i.t~~"~iv~r~lM~q~i~~~1ij
1
[1Jere1p~
P-~-
~1J~ta1g~s._Ci{f ~~- ?f675: Af?iil}~· -~~~4).
~-~Ull:?.1Jt, .Whe~bere~~]htra. grant.. !')or a proh1b1t1<;>n
· ··
·. . GQDE, Sec .. 1~9)
: ·.·
Nqte:· · Corigre~s .
. ·:· .. .
iGc

·cannot) .tf9lfih.; .\l~,\., 16caj

~··
_. t · :: l" ·:. ""J!.'. -:-- ·:-:.--:----- -:.....;b¥-11a~~.th taxi 18 poy.i,e(mus~. b~ deemed. to
f tf'}~--exiJ.~lt6011 . ··<{np;~ss. may ·provide' sta~utory.
I1 ·
gov~~~menfs pqwer to tax·~~s. it ~~Jlo\&~ro· ~~ ... ,~i~?~~ji~ns. nd .9Y.!?.~.li~~-s _(Film. Deve1op1:1ent ·
· whaUs expre~s·ly.. gra~ted · b~l~e funEj~rr'le. t!d~~~:-r_ / c:JfblJifo1I _th~· p
~R iltpfmf:JS· :,,-. Colon Henta,ge, I
The -c:mly, autho~1ty.-~onf.Elrre~ ~- Congress ~o..~R(alty~orpor~tin, ·~:R. No.. 2037-54,.Ju_ne 16,.
prov_ide tlie~gui~eline~ _and limhi:\~~ns o~b~'lr~aj'J~61,5)~ ·~·· , ·. ·. · . · . . · ~
: . gqy~mment s .!3~~rc1.S!3· . of. the·"po~p~~ . ~~ ~j . : . .. . . . · . .
· (DlfytA.IJ,MPAO, ·. T;;,x ... Principles a'h,g;;_ Be{1J;.dies.~-c-J\·'~€iltw;:..,P.To:
~afeguard th~ _viability: and· s~lf-

.
P:
-. ·(2?~B), 143),_'(here/~a(".er, _o~.M.~':4P~0J~-.....
·.· .
, .. :· . ·..... ···.~···.·
lv.1.i: -.~~~!)~~Y·
of ,_LG~~ <A1ani(a ~lectric· ~~-·. v...
.. ··· ..
. : EXECtr.r.JYE;COMMlTI'EE : .S:UBJECT 'COMM~ ·. ~ •' Ml,MB~RS. . . . . ' - ' ·. : ': ADviSERS .
. . ~y ¢~ e:·su~QUI · -~ -~S$A c.' G'UINT9 pANN'E' ·MAB.),). ~lUQVHZ.. Justice ·:. JAPNl B.
· • ·· Over'a/1 Chair.person,. ERI¢A .. Subject., . Chairj .. '. SHE~ ANl$HA. M. HADJf HASSAN,-.. DIMA,AMPAO, ·J\tty: NICASIO
•... ."MA:f- c.:y1.~4·Ch<;1_lrp,iso.'!for: GMDDYS •.. P ... .l3~:.<L9N .. MARY·E~YN. N. ~~O,: .C.CAB~O."CPA,an~·Atty ..
, .. .,4.caile.mjcs, B~ . ~I. : F.,. Assfstant· . Subject. Ch~!r, :·MARIE'·. SHERRYDANE •.C •. ·.D~·o.DELACRUZ,CPA,
1
~·BARBERO Cha(rper~nfor!:{01~( ANGELIC-A . MARIE · C: · ·REYES, ALYSSA-R..~GA, . . : · · ·· '· • ····'
. · .Qp¢rations; ..fHELSEA LOI.JIBE MANUEL Subject : Electronic.. TAGMA : '. ES'l1¢R ·. . V. ,: ·
. ll.plMAANOV/~e·Chalrperson· para· ,Propes~t11°&, 'REINA. G. · GARABILES, . :M,M.BANE_. ··· .. ·,. ··
f11r Secreta,;iat,EA1U:_~STIN ¥- ._.Ff\131,{EGAS Qener(ll l'r!nciples, . ~l;I'.. · A: CHAVEZ, )EWE!. .
. · ·. ··YAMBAO V!ce. Chaiipcrso~..for . A.T.HENAI .. _'F~~ .. · R. )OICEG.))A'f1'IA;.~-..
· . Operations,MA. :ANGELICA B. . Q"t:7.INl-ON ond CAfU,QTA N.. .S. . MONES, ·· :ANI:>REA .
DE LEON ·Vice Cbali'person for VIL1$oMAN :"Income Tax,· · PATRICIA. · D. ' .. DAQUIAL.
.... . Finance, A1iAA. Ci.MAYA·. J. APOi..to wuus. s.... SI:A ALFRm>.-FRANCrS :· . \ P.· . . . ..:
· · .BADANGAf.f V~'·G/Jalrpers.on. M.ARIA· iYansfer:·rax,]ELLYN .,.GALLEOOS; J9Y CRISTEL G,.,
.forA,idit,JORDANN. CHAVEZ C . .'CLEMENTE, ·Value-Ailded .:. GA'ION,A, ~ONE. NICOLB.. ·
Vice' Cha,frperson . , for . EDP, T.ax. l\11GuiEt;A. DE ALVA Tax· .'l>. BUG.t\!UN, .!lnd. KAUUNA
HANZ DARRYL D.Tiu' Vice · Adminl$tratio,:i, · £nfortement, . ANN S."l'R41)0; ·
. . CJ:iairp,;rsonfor Logistics, and. . ·. ·and Remeales, lllJd A'nIENAl . .
.001-lN'ALT-.R,EDE. AQl}ILJ.ZAN;·. FRAN.CBS R. QuIN'rON Real· ' - . ·· .
!>, . Vice. . -Chal~rson /(,r ·Properiyand LacaJ:Tax ..,. .. . . . . .
. M1mibersh1p, · ·

_i_ ~.
 L:OCALTAx·
~AN B£DA-l.,'\W qNTRALIZEI)"BAROPE:RA1'10NS- MEMORYAID W19

Province of Laguria, G.R .. No. 131359; May 5, c. · not be !!nj~st, excessive, oppressive, or
.;,•
n'I':. .. 19~9). · 1
tonfiscator:y; and .
~\ d.:. riot be contrary to .baw, public policy, national
f'2. Limited - it is." neither plenary nor absofute. The economic policy;:-or in restraint of trade; .
~;,. · authot,ity of . the .legislature· over· the . t~xing_ 3:.. Collection of local taxes and· other impositions .
·:~., . · authority of local goverr_,ments. is merely .to' limit . · · shall not be feft to any Private person; ·· ·
· · the exercise thereof (ABAN,·: Law of Basic · ... · ·4_ ·. 'Revenues collected under the LGC shall inure ..
·rax?J(ion · 10 the Phiffppirles (Revis.ed 2001 . . ... ·.sotely ·.. to the . gen"efit of, and subject .. to.
.,... -~dition), p." 39·1--392) [her~iriafter,ABAN]. · .. d_fsposition by the LGU levying the lax ·or other ..
~:- . ·. • '. . ~ • . • ••. . .." . . • • • • ,,-.I' ~ .. . ..
. .. ,imposition ' 'unless .. otherwise: ' specifically- .
'{ 3. · ,Legislativ.e .: It may be· e.~.erqi~ep by the _local. · provided tt1erein; and . · · . . .
i, · .. legislative : -bodles . i.e., .· · tl:ie.. S.angguni;}n . · ·.5. Each LGU shall, as far as practicable evolve a
Panlaiawiganor P_anlurigsod;'.1:1s the case may be: Pro'gres:siye system of . taxation.. (LGC~ . Sec. - '
,1 .., • (Mact;m C~bu. ln(ematiorj~I-Airport:A uth_i1(ityit. . 1~0):· · .. ·.. '... . . : · . . .. _·,
:;.: . -M~r.cos, et et., G.R. No. ·120082, ·september..·1J, ··
'°7 1(}96). : : ': ·. !,.Qtjal-Ta.xing·PQ.we~ .. and A~thority.· .
J': 4·. Te~rito~iai:.._. °It can orily, be ~exercis~d within the. . . The power. to imp?se e' tax; ~ee',· or oharge or to
r. territoriat jurisdiction of the .J.,GU (CONST.; Art. X, .. : .. g~~_er-.at_e ·_revenue under this Code shall . be
t. Set . . · ·. : · -, · ·. · · : · exercised b.y the Sanggunian of- . the . local
.t . e , •
5)
:: . : • • •• • : • . .. • • •• .• : .• /l4fi' . go~ernment' uriit co_ncerned through an _appropr\ate
;-' -Accruafof Tax: laxes, fees, 'and charges. collect~'d''l'/·J . ordinance (L~C, Sec. 1·32),_ · . .
,;J:' shall ace.rue ext:lusively·to. the .t;GU&.(LGC, ~~~!M'l :f-!-\1.
< _1?9): The Nati~nal. Go"'.~mment canr:,o.t sha·~e.n'f0):1/"?!~~:•._2. _ Sanf}gun.1.ang Pan/ungs~d·-.f<}l'Clti~s: . : ·
.i.':... the tax l~yled ·.oy:lhe:LGUs. H_owev.er, LGUs ha~~ ~lf:"·~~~:t~·::;/i~nggum~.,ng._PfJn;,bayan
Sar:iggun~ang_-Panlala_w19.arr-for_~r0yinees.. ,

- for municipalities,.
t:;. share frqm Nation~I .Governm~nt tax.esthroug~~eir-'.ti}V1~i!.....~fF~f!~-~Y~f 6uncil - for ·barangays or bar,:10s
t'. lnt~rnaLRevenu.~_Allotment (I_RA)"(l:'3._9,·~~~1.29). J_~ ..· .. (LG_C;--Sejw·~41 (b)). . .. . .
Y.'{ · <-j_4· '·i :. . , ii
t
,..~ • , l ' t \ •

S~o_pe of L:o·cafGo\fe'"!"me~~:r.a~ati(J~?:>-?.( · · , ,.)/~: .. v.. . · C.ompos_iti5fn ' \,~.e Sa'!gg~nian. ..

·';: _1; _l:.Ofal Tax~tlp.n -·l.mP<;ls1t1on;oh3~ee.g~~1'ra~~s, ~1 !· .s~ng9f'n~fng.Pa,:,/a/aw1gan.· .· . _ .
. . · . _fees, a:nc:J : oth~r: · !~i?P~!ffon~.-. ~n-~chn~ ... ;1 . · · . a. .VJce gove~_o~ as ~h.e pte~idmg officer;·. . .
~-- · ;c;omm.\.ml~· t.ax as·a. l')'lea~Jo·c~J~ its ·owr.~ iA .· b. -~ ! Saqgg_urran-memb~rs;··.. · · .
,;i sou~c.es.of'l'eve?.l!e (LG_C~ecfffr-.s..:~~-P)·-~~ .· ju: · · . c.~~ 1., ·~·~f·e,!9Jlieprov,inci~r ~~-~pter o! the · .
'-' . -~~.11) .. ~,}. (ll · l,g · mga parangay; . . , . · '-
; . · .
·2. Rea.I Property_ T3*ation· - :sysl~r:i;to.tv,-evy
.
op: {t · · ·
· rear p·~ope~~}tnposed on a·.~~ilt"i}":-Wid~ibas1s· )t\-~; · ·.·nf} tr_ga sangguniahg l:<f!b~tr1an;: · · ..
d.. Pr~siderit of Uie_ panla/awigangped~"rasyon

but .authonzmg :the local: g'OvernmJrnts?fovary -~ 1:if.1f..;~t'?.r:f!1!Pr~s1dentof- the prov1nc1al federation of

.. the rates of taxation,' to. a.: Hrrited~tPtent,-a'f;c!?::,·~~..:..a.!t ........all~an~g.uni9nmer:r,bers of municipalities, and
. within· ·certain·. P!3ra.m_eters· {t~C,~iS~s:ft1f1.-. · . · · compone_nfcities; an~.
·: 21)3).·' · - :· .. ~~>1:-~;v . . · < ·. f.. . Sec;toral representatives (LGC, ·. S~g. 467-
: ·· ... --;-r . . .(a)).·.· ..

.·· ·-.. ... . .

Lo . CAL T AXA Tl O.N ·.~-.
-1-- · ·
.·. _ . . ·,
2. Sang~cmt~ngPa.nrtin~~od- >,~.
ab. . R'I Y VICt:l ]!'~Y~.r as '3 presi mg 9 cer;
ffi
. .. . . · .. . · . · ·. . e-gular ~anggunian merrbers, , : · .. · .
) :-·, . . c: . President of'the ci1Y· chapter of. the liga. ng ·
~.. . Local Taxes . . . . . . . . .. . . ·.. .· . , . . mga_barangay, . . .. . . . . . ,.
t.- . Thes~· l;!re ta~es ·t!"lat.~re imposed-.~r,q coltected. by: · d~ Preside.ntof the panlungsod na pederasyon .
'
·11 ·. local government units.in.otder'to ral$$ revehue·s.to·· . h9 mga sangg1c1niang kflbataan;-an~I:. · ·
~ . :enabie the!'n' to p1;3iforiti tlie ~nc~ons'for.'.Nhich they , . '... a:. Sectoral represent?ti_ves (LGG_, 49.7 (a){·
~:·. . ·-~jv~-~,-~n.
;. , · P • .)
·~r.g_ani2,ed (_V 00¥.0ND_<?N, _TaxaU.on; . ·.
. .· ·
: 3... Sang_~u~-~a'!gf!ayan_ . . . . : . . .. ·.
· . a. Municipal _vice mr,1yor as presiding officer; .
~!·. . • · : • :: • • .-. · · · -. ... • ~ · .··: • b. Reg_ulc;1r Sanggunian members; . ·· · .
f.. . ....i;t'xatiori:·
F,1,1ndarn~ntal · ·Prl"nciples. · Govel'!ling .
(UE-pUL~PriB~Pro) · • · · ·.. •.
Local c: .:President"of the rtfunicipal cha_.,ler ot··me
,...
>- . 1 .. Taxation shall be Uniform in each LGU.;· · .. · : liga·ng inga barang~y, ··.· . . .
t·. 2; ·Taxes, Je~s;· .charges, and o~er impositi.ons· ·· d. president of the pambayanf;Ip~derasyon ng ..
~ shall: . . · .. :, . · . · · ·. ;ga sangguniang_kabataan; an.d · . . 446
:.:: . a . ."be Equltabie and base.d·as.m\rch as possible e. ec.t9ral representatives.(LGC, Sec. . .
',: .· . on th~ taxpayei:'s abi°li.ly'te.pl:jy; .. • ' .. . (a)). .
,{: · . b. : b.e levied ·an_d coilected !01,,eubHc.purposE:ls; , .· .
::,..
(·
:-,· 2019 ~N E!EDA LAW CENTRALIZED BAR_OPERATIONS .1 341
 L.o-cAL TA·x·
."· . SAN BEDA LAW Cc/l!TRALIZr:DBAR OPE(JATIONS- MEMORYAID 2019
. A I ~ H . w
Not~: ~h~~~
shail be ssectorat repre_sentatives: one ·. Procedure for Approval and Effectivity .Tax ~f
. from the· women, one .from .. the agricultvral or. Ordinance an"cJ Revenue--M~asure: ..
. ' in:dustria\.~orkers,'and one from any of the following . 1 .. · FIH11g of proposal (A.a: No.· 270, Arl. 27'.6
sectors: "the urban '.pt'>or', indigeno_y~ · cultural · (b)(1))-{bereinafter, !RR of LGCJ. · ·
comrnunitles, dis_ablecfperso"ns,Or anyother sector , I ,

as rnay. be? .' .determlned . by. the· ·sanggunian 2. Publication or posti.ng · · . .

concerned (l,.GC, Secs. 46! (b), 457_·(b) and 446 Within ten (1°0) days from:firtng the-same, it shall
·(b)): · · ·be'·po$te'd torthree (:3) consecutlvedays.in a·
. I · · . .. · .· · .. , . ·. ; .. · . . newspaperof local.clrculation or shall posted . be
The . ·regular members of- ·the Sanggunian_g simultaneously in atleast four .(4) conspicuous
· P.anlalaWigan, · Sangguniang. Penlungsod, . ;md ptaceswlthln. {he . territorial . [urisdlctlon of the
Sanggu_niang f:J.ayar,_ ~.h,all be elected·by district, as LGU where there .are no. newspapers of. local .
. ·-follows:. ·-.. ·. - .. · .. .. · . _ :· · - .. · · · . circulation '(!RR of L:Gc;;; Art. 216· (b)(t)J> ._ ,
. ··. l ·, First and .seccnd-class provinces.:-_10 · . ... : : _, . . ·· .
ii." Third .and fpurt!J·eJas.s provinces - 8 Note: The t<1_x o"r~in~mce wm'be -null 'an_~-void if
iii. Fifth' and .slxth class.provlnces .,,,_·6, · · ·. it . fails- .to comply witti. such publlcatlon
iv. 'rr:r provtnces having more' than 5 leqislative ~Elquiremerit (Coca,-_Cola v, City of.Mani/a, G.R .
. districts. . .: . -~actr . district 'shajl have 2 · · _ No. 1.5625..2, Jane 27, :2006).-.,·-: · · · ·
. -:"°. ~aog'gtirJ/ang p_an/alciV(iflfJli members. (L~c;_,.,.,...,""-:....,,•=,.. ,., ___ . -, . . ·. . . ...... · . · . . •. . .· .
·., · · .. · ~ec. _4-1. (b))...·: . - .. , . : _'. -~~.._.. 1f '-'-, _3~ ::lfotu!~~a!ion
· · . ·.. · · .: . ·. ·. , . ·.. : ·.
, · - :. : · · : . •.
4.· ·sanggt,1p_ia'?gBar;mgay · ,/'. ~ , £/..=::i.~"'~~g1ttef
_ ,. . ~. . 'i....:.J j ~fr.~r '1µ,J~gunia?.--.-st)all:ca.use ,fh_e. sen9ing of
_-..;io~l'<~s of tre. · p~opo~ed .or~inance
.a. Pvnong.Parangay a:, presjd)rig off~ew.·. - · . · , ei'lq!oslng -~(,OPY~-t9 interested . :o_r. · affected
b> The ~ _r~gular ~1;1n~g~rit'a..Q~1-Pr(.9,Pger"·-~;-,._,;.-f:l.~.tt~~i~r.a~n~i or__ ~o(ntfbu.sine·s_s~ithi:t. the
· .. · · n;i~mbers _elected at l~kg~nd.f: . {':_ . \ID .-.if. \w ter.r:1tP,nal\':J.~,E}~g);t1onof. ~e:LGl! ..,The notice(s)
_ · _c •. ·. Sangg_1..([1iaryg.· Kfjbatgan -~t./air.-rna~ (LqiCE, ij,.-- )~ shall}pecl~~~eg,\e(s)·~nd.venue~ofth~·pubH<i.

. ..
·'. . -~ec. 3_~0):__ . ~ _ -_._
,. :_ , · · ·.
t--.,.
~ ,- . i
f' l \J~-~ .
.h.ef,!n~g _(Co,i~-(fqJa:v._ City of fyfamla,.. e31f:-. No:
. , 'f.5_6'2lj?, ..J'!.nt:27~_q@6). _ ._ _ . . .
lll~str:_ation_:~(2003Bar Quesfl6n) . ~ : . I -~~:~- ~7'.· ·1 · · · :. · . j; - : . .- ... · ·.. · · · . · · ·
!n · .order .. .-_fo ,.f~ise,0 rev~n~e..,.;!?,I'~.. the·· ref}~ir a6~1\.0i~- Man,,dato!')'P, • li~'iear.ihg · . , · , ·
rn.aintenar:,ce· gf· the. newly·-~- _nst:Q.l~e~~~lVHall. of :S-----~-Th~:i:Ri.lB"i.t. h~anrig s~f:ili b_e ~eld no less ~an ten·
Manila, ·the- Sity_ ry,~ypr_- o_r_ ef:e,d1l:ie_~ !JJ~:c. oi:i O t3I. .. 'al'• ·r-p)~ ·ti:jf-lr:t~J.ime not!c~s wer~--~ent :Ol.i_t,,
.. ,...
...
--~1.00; 03llea. "~J~v~tor.ta></_-~ery\1me~~f, ~o~ ~~;.""}'·.
nd~~ .c!"Y·Of .. ti,e-~l~~a~or:S:,.'f\the_ ~~,ti~ ...~,-~- . . '.;/_/~\).:· · ,I · , J . · · . · .
!:-:~ ._·.orJrUbhstieo·(L_GC;_-.,Sef.·187) ....
.: - ·
. ,.. .-. _ ·~1~:vator tax" a valiA. rqipq~_,trone,..... ; '\.:· · : ~ ,._,.'->i~.r.<-"'5,;::R' _ cl_mf:J,;Of t~e ~f?P;o_sal · .. ·., _·. .. . .·
., ._·_ :· · '..::.-. .: -:·. ·. :_. ·. - .: ..- . · "- ,-- . : , s~E~r-r\~· tn;r~e~d,riQfi_:;ioec_~s~~ry-tor..an: orod111ance
ANS~ ..NO~_ The.1mp(?s1b~n of.a tax;'f~e;cbar~~Qf ~- r 1 . }i.Q1~ss~~Jqe{Jotherw,seby a m~j~Atyof_all._the
geoeratjoo .-of t.e'l?enue· sl)alJ.. _be extir~i~E!;f.)Yj ~=~ S(i\!Y9_yb[ap'fu~rril;lf:?rs· (!Rf? of.the LG<;;,:Arl. 107
; ,sa(!gguniah. Qf' the' ~qu: .l!'\t(?ug_h•._a~~-P-~te . 1'\ I[ 1)..~(o);}Jgyn(cip?lily _of_ F':_E1ran_a'9qey. V..M...Realty
. ordm~nce .(L~C, Sec; 13.2).: The city _mayoi'c-.a_\one ·l V.k..L 'h;.:§J'Jr-florat,on, G,'R. No.· 1~782(), July 20; 19~8).
. . could ·no.torder the colleclion'of tax .. :: ' : . '""-."""""'""""'""'>?-"':'' . . . . . . .: - . :. ..
. . . . , .· · . . . ·. . . 6 ... ·AJjproval·of <>rdinan~~s: · · ,. . -'. ;· ,
. ' .. Note/Thei.~.xe.reis~~fth~ pb~~~-.ti>·t~X.by.the.focal ... :.· a.: The· O(~_inanee· must be ·approVed by a
,. · · . .iegislative ·a'i,~einbly·1s:subje.ct.to·itle ve.tc;, p9wet of : . m~jority'of. the,mer:nbers .cif tHe Sangg.unian
. tt1~·1ocal, ·:· .chi'ef e~c_uti'!~
·. •. .
(l,,;G_C,'
.
Sec: 55).. . · ...'. . presl:).rit'pi:ovided_~that.
. . . ' ~tier~ is t1 -q~orurii;'
.
' :·
.. ·· . ~ . : . . . . . ... . .... .. . ·. ,: ,; ·', .
,.
.' . . : . ·· .. ...
. · L_oci T~x :o~dinan~~e-,1 . . · ._: • . . : . ··... -· ·· - '•

b. . It. ~h~I.I be. p_r,esent~d t9 Jh~. )..ocal Chief

Local SarJggunians·tiave .the auth·ority -to. enact the · Ex~cutlv(;l..{t"9E)w'10,JY1ay~itt)_e~-approveqr
· .. follbwing ta~:c;,r(!inance::·-: _. · ._ - : . . . . . : . : veto_~·e,pr?..{>9S~d:orc_lio_ance. l:he veto shall
'· ·, .1~ . )rnpoSIA.g ~axes, fees·.·or charg'el>'ot t!'.i -~i!3ri~'r-ate __ )._- _be·comm1,1nicated to thf{Sang~unic;Jf? within
. .· revenu~; . . : . '.': . : . ··: . fifteen·(15)·days {in ca.Se of'~ proviri(le) ari~
. . .2. prescribif'\!l . penalties· . for _ yioiation" ~f · tax· . · ... ten--(10)'·,days '(in·c:'a'se of."a :City or'·a
·.oi-cli"nance;. . . . . . . . . . muni.cipality); otl1erwise·,"_theord_in'ai')ceshc;1II
.· ··.3, ·Gr;anting:·.1~·cal. tax ex.e.mption.s·:·and:incentlyes; . be cfeemecl·apj:Ji:ove.r;!;·ahd'
. .. . . . •. . .. .. -~:~-.' ... ::.,.
: ·· .. and. ·.

· T-ax~tion,. ~!1.P!'a
·. - :: ... ·.
4. · . ·condoning tax_ d_ellnquencies (V DOMqND.ON,. ·
65)'.·a.t
· i.

· - · · .:
.. .

· ·
. .
Note: Th~· ~eJo
~ay:-be. ba~eq
that the propcis~d ordinance Is ultra .yires.Qr
6r
g~ound
' ... prejudicial -to .th~ _public· Y'.~l(are~ Tne· !-CE
·may-v~to. an ordinance .or re·soll!t_fonQnly
_o_nce.-· · · · ·· · ·

. · .~2.] 2019 SAN·BEDA. IAW

. . . CENTRALIZED BAR OPERATION$
. . . -~.
. - . -
. •',\" . ·.
 .f
. _.LOCAL TAx
SAN EJEDA LAW CENTR,M.IZED·BA'f/OPERATIONS-· MEMORY AID 2019·
. •.)

w WA
. iWMI
. .
''''*
c. The ~anggunian concerned rr:iay ov~rrfde
the veto· of the ·_LCE by 2/3 vote of all its
( members (/RR of the LGC; Art. 108 and
". 10~. . ' . .
{ . 7." · Review of the · Approved ~Ordin~nce by·
· High'er.Sanggu_nians· .
,.
a: . Sy fhe.SangguriiangPanlalawlga·n:· . ·
;.,>- ••
· .. i. Within three (3) days after approval, the·
' ·· secretary · · to . the · · sangguniang
panli.mgsod!bayan shall transmit to the
. ~ s;:mgguniang panlalawigan-for review,
"copies of approvedordinances. ·
.. ii. .. lf·.i')o. action has beer:i',taken· by the ... -.·
· t;angg1.miang panlalawiganwithirvt.hlrty--
.(~O) days.after subrnlsslcn.of.such an
. · ordinance, the same shall be presumed
:, ·,.-·.,. valid. . .: .
. . b. By Sanggtiniang Panlungsod!Baya,;. · · ·.
. · to wii\ch t~e ..sanggu_ola~· enac~i~g the
. · 0_rdinance·or..revenue measure belongs
.(/RR of the LGC; Sec. ·27·6 (a)J:
c. In the' case . of· highly urbanized .ano
'independent ·cotnponenf cittes.. the. maln
· .features.of the ordinance or resolution duly
-enacted·otadopted shall:".'
. · i: · be -, · posted in at' least .two (2}
· .. · . consplcuous ·an9 -publicly 'accessjble .· ·,
· ·IJ!aces· (IRR·of'the· LGC, sec. ·27.6 (a));
; . ,. ~nd . . .. . . .
· 1i. _be publishedones ln a Iocal.rtewspaper. : .
. ·of QJeneral .clrculationwtthln the 'city.
~ ·· · · · ··Note:. In the absence · thereof, the
·.ordirla.riee . or . resolution· ·shall 'be
.· ·•. publishecf lri any' newspaper of general
. _: circulation (LOG; ·$ec. _59). . .. .
T .. • • • • • • • •

· : . · .i, . Within ten (19).'d~ys after lts enactment. /ft>} ·9._. ·effectlvi~y·. · · . r- ·' • ••

·. tne sanggunia·ngbarangay :3haJL.forhi~l;l(/){ ... '. :·a:· Unless otherwise stated. in . Ihe ordinance,
· copies of_tlw approved ordinance to;ff1~;l;1.,;,,..:r. •. ·. · .. ·'-.the ~ame ·shall take -effect after ten (1~)
-sanggumang., panlungsodlbayarr_· \ ~<!le. .1}•}!!!) . . . · days from thEfdate a copy thereof is poste_d
.:r~v_iew:. .· . . · . ·· . \J-(.(}"f;:;~~1.,...,c.~··. · .in- ai,:~_llet!~b~ard at ~e: entrah?~· of-t.he·
·. (i. If th.e -sanggµmang pan/ungsodl/}.f!:.YatJ,-:;j~iwi~1J'.;1,f>~o/!!P.§'al· .
cap1~ol (?r city,· municipal,. or
f,;iils .. .to take action on._....,~1angay · -~l · · . ~b.,lr!Jn_g~y·hl:!JI,~s the c.'.!Se m'ay be, and in
ordi~ances -within thirty (~~}'a~y~ frorT}_{~.'J . . ' : _.at le~~\\.W<?(2). other c_6nspicu·ou;:,places in
·.: r.~c~1pt t~er.E!of, _the .saip~Qhall'. byYh· · .._ the),~~go"'.ernmentunit concerne_d.(LC:JC,.
. o~.emed ·approved (IRfJrf~"'J,.~'9_,-;;;Jfrts. r\ . . - · .-· $e.lf.--59);\ ~·· · .· . ·. . · · · · .
~- · : .. ·• . · 110-111J: _· \f':':!7"' ·
· ,' · ...4~··.. : Q.:, . lt;lt __b. · 1?J1cas~' th~,,i~ffe'ctiyityof ~ny tax 6rdinancie ,.
. · · · · If-.,,,, ·P-.1J.-.. . , · '\ f•1;{ ·: .. qr,rev~u~easuref!;llls on ahy dat~ other.
8 ... P~blic~ti~n. and 'P.osting:~9fita~:~Q1idiran~~!i.. !.i_i,,. . . ·~v~@P11PJJ~.ngofthe,quartE:r, ttie s_a'q,e.
. . an~ R~v~~ue Mea~u~es. '\.-.:._:A1.b · ~i) ·p;f• . s~a~~Bi.-:cons1der~d as . falling at _the
. a.. · W~m .ten (19) ?8Ys ~fte';'.'".!!:1W~ta,ewova!'l·. 1) ' _· . beg1rrnJl')g oMh~ pext ensuing quc;1,ter .a~d
~\(: ... · . 'certified true ·POPl!:1S of all ta~,'?rd1_nay.ces 0~ t~P. ·th'e taxe.s,-fe~S, or .Clii:lrges d_l:le ·shall begin·· ·
,_..... • • •
0
• :eyeiiue_me~sures shall _1:>e:· i~ji.d... . _.,r,i-iit_-i{-1!;..n_;r;Jflv~CGruetherefrom .(/Rff of the LG9, Se_c,. ·
'·· i_. p~phshe~. for ·three (3)~-:~nse~.ut.lie"~1J4,,r.;~~2'76!(a)J .. · · · . · · · .- · . .. · ·
: · ·~ays in a new~paper ·ot loc~!c[rcuJ~tijll1;1;· ·· . ,. ·. : . . ·· ·. : . . .. · · '· . ·,..,. -:-
·, . or ... -: . · · · · -~~l_j .: _. .. Requ1s1tes, f_o~ · hrip,0~1t1on of. _F.ee, or . T~x.
· ij.· · . pos.ted.. !n at,l~ast t~o ..(4). c~nspicu.ous:· · · Authorized bY.th~ L~C.: · ··
. _· and :P.Ub_licly t;l'qcessible places :.wh·ere ·. ·Tlje r_ate sl:)oujd be: . . . , . .•
, there·:~are .no newsp_aper.s· of ·-tocal. . 1. Within the,range ofr?te provide~ l;>y the LGC; ... ·
. circulation- (iRR of the LGC,· Sec: 276 2. · l)niform ._th(Ough'oyt the. rioliticaJ· subdivision;· .
. :{a)),·· ... ·, ... ,· . and... . : ..... ;--' ... .-~ ... ·.,, ·. ·...
. 3. fair. and reasonable :to. the ·taxpayers (V. · ·
-- b. If the tpX. oidinance o~·:reveriue· me~su.re :· DOMONDON; Taxafion,_·s-upra.. at 85)'..._. · .. : ......

·'. · ·. · .- contains pen.al -prbyisioris. as.· ~uthorizM Jn

··Art .. 280 °(Atlf!mp{ .to. Enforce ·Void .;or. ·. . Residua.1-"faxing:power
. . . . . · ·, · ·
. , . . .

i
/. ,·
. Suspended.Tax Ordinancesand· Rev~'nqe_: - . J.,GUS·may exercise the' power.tolev.ytaxes, fees, or- .
. ··. :.. ·.. : . Measures)'ot'I.RRof L-GC, the gist of.such ·..
. . . 'taxordina~CEI c?f revef!'Ue measureish.all b"e:
. . · . i, · .publis.hed ·. iri a newspaper. cif. general · :. ·
charges··on :any .base·.or .. subject ·riot ·other.wise·
. _spec;jfic'allyenumerated in the U3q ·or'taxed under· ·
the:_ provisiqns .ot the National Internal 'Revenue .: _.
·.• · .... , .. ~- 'c::irc~l_atlon · w_itl:liri tti'e province . wtiete Code, 8$. amended, or other applicable. iaws (LGC,.
: . . · s .. the saoggunian c.oncefnedoelongs. ... . see:. 186)'.. . · . . ·: : . : .· . . . . .. ·
·· .. ii. . In tl'Je · absence . of any newspaper ·of·
gen~ral circulation within 'the province, . Limi\atlbns o_flhe Resld~al Taxing Powet:
:·-' 'posting__ of :sucl)' 9rdi!iance 'or measure· · · 1. . Constitutional limitations ori taxing power; · ·.
shall. be made in .accessible. .and • 2:. Cori11:non·1imitations on.the taxing power oflo~I
·9<:>nspicuou's'_ pul?lic places · in all . · government units as prescribed. in Sec. ,33 of ·
municiJ)~lities arid citi'es of the.provinc~ . fueLGC~ ..

20is·sAN seoA LAW cENTRALIZE·o aAR·oPER.A.T10Ns .1 343_ ·

- . ~ '
 . ·LOCALTAX· .
. . . . · . · SAN DEDA.LAW CEN_TRALtZEDBAR OflERAnONS.~ _MEMORYAID.~aJ9
~~- :.- -.. ~11!11,1111!1111111--mD .
3. Fundamental principles go~erniilg the exercise.
of -the taxing power 'by local· governments as .COMMON LIMlTA;iONS ON
prescribed · under Sec, 130 .of .the · LGC, .
particularly the. _requirement that they must not· LocAL TAXING PO;w'ERS
. 'be "unjust; excessive, .oppressive, or '
.,..-· .
· -conflscatory": · . ·. . . ·
4. · The "requirement-prescribed in.
Sec 186. of the LGUs C,ANNOT levy the following: (IDEC-PAPi-· .·.
Ex-PeT-RMEB~). . . . ·. ··. .
. · LGC, .which directs thatthe, ordinance levying .
such resldual taxes shall not be.enacted without
any prior .publlc hearing :conducted .. for· thi.
1:
[ncometax,. except ·w.hen levied b~. b~nks and". ·
purpose; and . · · · ·· · · · · · · · · .. . other flnancla! lnstitutiona;: ·.. .:
. -~ote":. Cities. and M.uni~ipalitie~ ··m~y ·impos~·-
5, The- pftqciple .of pre-emption .. (.ABA/V,. supr« at. business taxes on ...banks arid other . financial .
396:-397)... ' .. :. .. . .:·· ., : · . . . . . . ·.
: . ·insliluti~:,ns (LGC, ~e~s. 143 (f).a.nd.151)." .·
Principl~· . of . Prl3~E.mptron '.:or., e<clusioni;t~ . : . . ·. . .. . . . . . . . . . .
Doctrine_ · ·. . . ·. . . ·. . ,· . . . . 2·.. Qo~4..rrientary_stamp tax; .·
Where the· National Government elects to: tax 'a . . . ' . . . .
particular'area, 'lt impliedly _wit!i~olds ··frpi;n. the lbcal· 3 ... Taxes 9n ~s!':'te, inheri~a~c~.gifts; legacies and
govern~ent _th~ deleqated -power.to tax ·ttie.;sam.~..,.-= -a.,L...--,_ other a~qu1~1~ons mort,s·<:au~a; . . . . .
field. This doctrine principally rests on the.j_g.fenfibn. -e- T . . ,. -~.. ._. . . . ·· ·. · ·· . · · · .
of_t~e Co_ngress. Conversely, should.·tb~~on~fess
allow_ m_unicip'al . ·corpor!3tions· to · ~g6U<ne1_as~of,..;.,'=._..,!CJcte
tJ
j'\}=Xf~~~~~n:_-_W.hen.otherwise provided. -~Y the ·
i{1;~t~ ?n. transfer pf rea!_prop,e.rty)"(LGC, , .
taxation 1t already oecuptesthen -t9.e..,aoct~:jil~f$1es· '. -.S\f $.35). ~~ever,transfers mape-eursuant to·
emp~i~n ""'.ill ~QT ~ppl~ (.Viotoriaf~'hliOJ}__9o ..,~~-~,k,N!Jf), 66~! . (Co"!prehe.,:,s!ve .A._grarian ·
Mu,:uc1pahty of _V1ctor,a_s_ Neg,~s;'!_f)€,CIentr -~.RQ) .,;i;f. ·•. = ~fo{~f."1~.J,f~all be _ei:c~.mP,l·Jrom ta~ c;m
N_o. L.-.21-183, ~e~te'!1:ber:27,l968),::f. .IL .. L. A_ ~
_tran,er. -~'(~~- -~ · . . . . . '
I·
No~e: Wp~n th_e advent of th'
f9,13-'i , b~stit~t1on; lfi~ . -~~9,ist~ms d~~,~p~"strationfee~ .of vessel~ arid .
taxing pow~r. ~f L<;;LJs is h w:-"~~i :ect gra,:it ·un~?, , t(~wtiaia~e·.on:fwi:m_rv~~; :tonnai:J~ -<Mes and . all .
Sec.;. 5,_ Art. ~-- .The lGG~. f..J~9- is. ·no fo_nge~ ~th~f.l<mdS·o~.~i:ps,fees,charges and.dues;
_delegation, but rather a· h 1taUq (Maclli\ Cebu~ · ..,r~. ~ '· · J J · ·· .. ·. · · . · · ·
. .lnternationat:Airp~ijAuthor#,r··i,r-_M rc~~er~-~;1:7.'-i~c'~py).n~·.
rd~[·. ·_ .. : .. . '. .
120082, September 11, 1:996)'<;.JI .,,,_. · "(<:)~. . -~ . JC?.~1.,o/5.6°!?f~.rf~e·~ hatv?S. ~oristruct~~ . ~.nd
· - ... . .. ·. : . . . "-. · ~ . . ~- .. ~<S" · _lfil ~- ~'ff.la~~t,n~~-bl the l?~l.go.vernr:nent' unit.

~~ti~~~I'n-~e·.of. s.·u.la~nje1~· a~~~~P t~:-",.' ~ ~

"\r,i,~· ,;;n~=~~~~~nse~_.-·jor .l~·e'-~~~~atio~ ·of .
. under Sec. 140 of t~e .. lJ;C, on 'fue ·cociw~ren~Effi t -~fish!~: v~ssel~ of. ·3. tqns or· less by·
· . . owne~ QY Ju~n· Ml.a-~~iii,·.a piiva~e'lhsjjvl.~dJ!tir~..,.,,:..:,f'~~~~tpalities. · (LG Ct· ·s~d: · 1_4f!. .(b)(3.j) _and 1 ·
.. · · qu~,sti.onl?the,authority oft11e·pro~i.l'.lce:to:iufebs~t_fhe
. amuser:n~~t tax 1:mder theJ:'tjn9ipl~·of Pre-em_~!if.?"n, ·. .J..0- ·~:
'M'
A..~\S1t~({GC,Sec. 151). . .
.· .. · . ' ·
: : .
i· 'c
· ...
- .
I

Is he co~rect? ·. . . · ··.·. . .. ~:VVfiar:f~ge -, 1t .-1.s .a fee ··as~~sse~ against -the ·

. ,. ·.·. ·:'· ·. . · 0::· :,s;ar9:o,·~f. .m.~,v.~ss~I ~ng~g:~d. in··. f9j-eign _or,· :
A,NS: YES. Proprietors· 9.f .coc;kplt~ ar_e,. subject t6 dor:nes~1c tr;:1d~.. : 5.a~e~f. ori" qu_antity, weigh.t -0r
1~% percentage 'iax ·uhder Seo., 125 o(th_e:·NIRC:" . me~s!Jr.e,. receiv¢d. antlfor .di~ch~rg·ed by ttie ·:·.::
The P~ir1ciple. bf·.Pre-Emption_.states that. when tti_0.-... vessel"-(LGC1se·c. 131 fy)).·. · . . ·· .. ··· ·
.!'l~tio~al ~ov~rnfoent etects:tcita~-.a p~rticl!lar .a.r.iia_.. ·.·. _·, . _.: . ; ·... . : . . . . . ,, . .·. ' .... · ... . . .. <..
. 1IJ!f1phedly ~1thhol_ds frotn _the local ·gqvernment the· -:,5,. ._rax~l?, · ~~e_s., · cha.r.ges. a_n:q other jmpositio.ns·
d~legated_. powe_r tc:i l~x ·.the: s_anie -fiel~ :.(VTctorias . . . · ,:!Jpon 9~:><J~i . .· '. ·.. . .
· · M11/i(lg_ Co:, /nc.. v.. Muriicjpa1ity'¢( Victorias Negios . . · · a. , G_ame9 tn~o;' ·
·oc'cidenta/; GR. ·No: t~~1183, ··-September. 27,. b.. Outof; ..or··. . .. _ ,. . ·: .. · ·' ,·,.
· 1~6.8). Hei1EI:?, the prjnci~ile._ofp_re~mptio13. pre~_ents. ~. fa~sing·thro~gh, t~~ fl:;lrrftorialjurl.spic;tion$·· .
LGUs _from. imposing·_taxes on subjects which are"· of LGtJs_.in.th~fguise of_thai"ges.{ot :.. · .·
-already subject to taxes l.lnder"the. .NIRC ... • . • --. whaifage, tolls for. br.idg°Eisor othe.iwise.... · · · ·
.. . :-. -:· ' . ·Note; .. i..G0;··~a/ ·:prescribe the ·.. te~;,,:s: ~nd
.. c9_ndlt_ions for··. ~hi_!!· impo.siti6n· ef · toll fees or .
charges for .the.use Qf ·any., publi.c 'road, pier .or.··
w~a(f. ·tunde_d .·~n~ . <:onstructett. by. · ther;n. A .
. . service fee imposed o_n yehicles ..u~ini;i municipal .
: 'roads lea.ding to ttie . "wharf . is· ·thus ..

344 .1 2~19 SAN·BEDA LAW CENT~.IZED° BAR OPERATIONS

'
 .
. LOCAL
SAN BE(?A LAW CENTRALIZED
. BAR OPER;)TiONS
. . - MEMORY-Alb
.
·rAX
2019
.
.
valid. Ho~~ver,:.9ec. 133 (e) of No:- 7t60. R.A. b .. Taxes, tees, or . charges· on . petroleum
prohibits the ·. imposition, ln · tlie · guise products= all kinds of taxes.are prohibited.
ofwha_rfage, of fees -;-.as ~elJ asall other taxes . Since 'the Iaw does not dlsflngulsh, ·LGUs
: or charges iri any form whatsoever .: goods · on· . are prohibited . from -:impo§jng not only.' .
. or merchandise, It is therefore irrelevan(if. the _ excise· taxes on petroleum products,· but all·
fees imposed are actually for police surveulance taxes, fees, 'and charges (Petron. Corp. v.
on toe ·.. goods,. because ariy: : other form of . . . Tiangco; G.R; No." 15.8881, ApriJ:16,..zoos: .
'lmpositlcri on· goods . p~ssing .through the
territorial' [urlsdlctlon ~f the municipality is clearly · · . · Th~, langU?ge·. qM~ec: ··133{h) -makes plain
prohlbltedby Sec. 133 (e) (Palma.QF)vetopf!1ent · . t_hat · .the · prohibition . with: . .respect · to ·
. Corp. v, Municipality ot- M.al;3ngas, G.R: No. p!:3troleum products extends nof :only to
-~52492?)ptob~r16, 2003). . · · . · .· · , excfse taxes thereon. but all "taxes,. fees,
an.d·charges.· Th~ earllerreferenceln Par.,.
6.' · Tai~s• .fe.es·, 'br c;:.harges or:i ._Agriculturai and (h) to exctse taxes comprehends a. wider
. 'aquatic productswt)en -solq by marginal farmers . range of -subjects of taxation: ·an articles .
. or:_ fishermen·;~ : :- · · . ·.... ·· · · .already.'cpver-ed byexclse taxation _u,jder
the NIRC, 'such 'as alcohol - products; .
· Margl_n~I Farm~r or Fist{er,rian - refers to an· tobacco · 'products, '.: mineral '. products;
iridlvldual engaged inthe' subsistence farming automobiles, and such non-essentlal goods .
· Or f!shing ·Which. Shali be i!mited _ -to the sale; ,.(:'" as jewelry, go_Od$ made Of prscious metals,
barter, ·or· exchanqe of agriculturar er mariaelf.·?1/. perfumes, and yachts -and: other -vessets ·
· prodqc!s ·:· pr9~~ced ·· by· · Himself_ and: tp,i~1i:i.~\j\ i~tended for pl~asur:e -,or 'sports (Pe_tron .· i
.lmrnedlate fa_mdy(~~~· Sec. 1_31 (P)) .. ,.. ~:1,..,._.,;.,_~..;.1.,J. ... Corp. v. Tiangc_9,_G.R.-N_Q. 158[}~1, Apri/_16, !
. ·... ·. ·- · . · . . . l! ,, r·f ..-···i.:~;;,-~ ,:.,-,::i:~--.
1 · 2008 1 ·
'~?:-, . . . • · · I
I
7. Taxes <?n business enteri:>rises ~hat are . .f"·.. l:~-( ·.~,:~.G~' - ,_::~P-T~~-~ · . . . : · , · · . · · . . . . I
-a. . C_ertified by th¢ Bdard of lnves.t'!)~iBOI) -Y_ [1 · . . ··-1n~·1::o~Jr.ast1 _the l~ter referenc~. !o ·"taxes,
I

t-
. as Pioneer or non.:.pioneer; a'?d,:., · .{~'n-!·~ . . · :tee.~if~~d ·charges"· pertains ·only··to one
b. F.or ~- pe~iod c:>f ~ and. <I-· years~.r~.§,1~veltP--':"1 ~ · .. clai} ff~arti~l.es_-of the many supj~cts· pf
v,.-. · .
· ... '
·; from ~h_e·c;Jate·of regis~ation.,;-~. 1-:~ ...~
.. .' . . · -· . .. .
1rf',?.'·
.. :. ·.. Howev.er, the grant 1(,9,f-JllE: ,l5lf.2C!\e · Tax~ .
· ··'i{~ ·.
~-

't:1 :-
. z•~' :·.
exp•sef 't xe&i. _specifical~y. "pet_r~leum ..
PJ;Od~ts". Wh1_I~ L~lJs_ are .auJ!ionzed .to· .. _
l}~rde all uch. other das.s of_ ~obds With ·.
i:
_.- · Holiday for·-:registeretli~r)'tepJ:S~te~ um;t~t
· · . E(?. Np. 226. (Oll)_hibuS"i~v.e~!£n~tl:t,Code::-o.,f
~)(
I . fll'f . .
-:;\;{WR.~-~:~J~~ · _and_ charg~s.~.. excepting .·.
~cise:"ia'ii - ,.s,. a· specj(ic prohibition. is
I:
.. ~9.87) 1s·~ubj~~t t~ the folle~iruJj!C,hf;: .. jl. f!1 . · ·:· _imposed ~ar;nng_.the levying .of'.an.y othec ·
· ·1: · _Ful!J( ex~mpt..• -_..-:f'?r \.6;_.;;rearJ,.\.-fr~~- . liln; .. ·. . ~pe of_ taxes with· _respe~t ~o -petroleum
l
I
. · ·commercial op~ratrcm for ~1one.et,fitms. · ....lf:a~.1~~.J..Qpucts(Petton Corp. v: T1a1Jgco,G.R. No. \.
· and fo~4 years·for non-pidtj,'i=!er:tirhJ.~(.~~~......:~.;.'''"~f-1'f:J8tlB1;April 16, 2008). . . . . - · ·
. ii. ·Rropoitionate"'"for a peri~of-3,.¥eiirs· .. >. · . . · · : . · ·. ·
. · . from· commerclai ·.o.pera,tion:;~'e~istered or
·g_ .. P.ercehtage value adped· tax CVAT-} oo safes, ...
·. . E!Xpanding "iirm~ ·s.ha·II-: be . entitled to . . bart~rs, or .exct:,anges O[ similar-tr-ansactions·on '
····· · :·.: _:· e~ern~tlon trom ·.income ·tax 1eVied by.. 1 go6ds ·qr Services; .. · .. ~ . · ·_ .
. -~-~- th.e· National -Govemm~nt proportionate · ·' · · · · · · ··
.. · . . . lo ·.u1eir expansion:. un'der ·such terms.· Excepti9!i: 'v\lhen · otherwise pr~vided .by -the
. -· . . .arid. conditions. as· the . -Board rrr,;1y. · Code; :such a~ .the following: . ..
· : · det~rtnii10 °{E:O.~226, _Title.Ill, Ait. 39 as ... · · · ·
. ·. · ai-r,erided_.by R.A 1>10: 7918)". '· · By Pr~vhi_ces/Clti~si .. .
.· . . • . .' · . a. Taxon Businessof Printingand Publication
8. ~xclseita~e·spn a~icles· en.umerated·l.J~dertne I • •• •·• ' •'· . • : . ; • ·: . · ... ,.

-.. NIRC, a& amended, c!nd. 4lxe~; fees; or.ch~rges· .Percentage Ta1< - ~hall not .exc~~d 50%. of · ·
. •. ·o·n petroleum.product&; · ·. · · 1% Cor o·.5%} of their·.gross rec!3ipts·or. in
, · · , :cas.e of newly ·starte<,t husine~s. the rate ·
This cover:.i/2distinct-limitations·:· . . . · shall..-r:iot exceed ·t/20 of 1 % of1he capital ·
a. : ·Excise "taxes on arlicles enum·erated. under investment. · : : ·. . . . . . . · ·. . ..
. , '(ha NfRC- only exci$e·Jaxes·afe.prohioit~ci. ·• ·
.. · There· .. should be- a mirror ·image between. ~- Amusement tax
·. the goods sough(to.. be ·taxed by ttre LGU.
·.· · -ari9· the goods either under ad va/ore_m tax . . ·.. Percentage.Tax ..:.. shall not e.iccee~ 10%. of
-or 'specific tax. . . : . . .gross :·r~ceipts frpm- ad.mission fee~· (l GC,
• < •
Secs. ~36 f!nd 140).

2019
. . . ~W-CE~TR,ALIZED_
SAN ~EDA . . 1 · 345'
BAR OPERATIONS
.
.· .
 LO·CAL TAX·
'. . SAN BEDA lAWCEN'ffi!,LIZED BAR OfJEflATION5 -. MEMORY i\/0:2019

. Exe:ep'tion: · Th~ holding bf operas.' : ·- motor vehicle "(First Ph11ippineIndustrialCorp, V .

· · · concerts, dramas, recifals,'.painting and art · · -counot ..Appeals,: G,.R: No.' 125948, December
· . exhibitfons, : flower · · . 'shows.. musical 29, ...
1998) .. ·.
· proqrarns.. · · Iiterary. ·.·and.. 'oratorical
presenjations .except pop; rock, ·qr similar' · ·11 .' Taxes Of) premiums paid by way,of Beinsurance
-concerts (LGc,· Secs. 136 and 14Q) .. · ( or re!r~ce~~ion; ·
.· . .
. .. .
-·By .Municipalities or Citi~s: Reinsurance .:.. 'one ·by. ·whicti . an · insurer
;a. Man·ufacturer. . . procures a third person to.insure .him against
'i; : ·.GrOS!? sales of f>6,5.0b,ooo: cir more· . · . . · loss. or. liabi'lity: by· reason · of such. 9rigii1al
. ii. · Percen~ageTax...;, not exceedJn·g 37 .5% . insurance (INSURANCE'CODE,Bee. 97).
. . ... . . . . . . .. ·. . .
· of· 1 %, . bc!sed on' the- preceding ·ye,ar~s ' ...
·sales.. · · Retroces.sjon·. '-:-.. 'tral')sacti.on: whereby one'
insurance entity' (retroc~ssionaire) agrees to
·-··:
b. : Wholesalers, distributors,dealers . . . . . indemnify another lnsurance'. entitY (the
·.i. Sale receipts-tor the· preceding calendar . . "rein~urer").agai~st all or part of the loss that the·
: . year· of P2,0PO,OO.O ·or more . .·· · · · latter. ,s.lj~tains under a policy or policies of·
·. ii: - ~ercentag·e Tax --, not exceedinff 50% .retnsurance 't.hat· it 'has ·issued (DIZON, The
. . . of..·1~o (or 0.5%) on. the gross sales. 9.&r:.~surance :Coi:Je·· of .the Philippines (20Q9J;· p.
!l'if.. '. ·.· /9.~e,pts . : • .~- :- ..... 4 ·.:u.J.J\z3t~?~~·: . . . . .' _i

I: C.: ?ontrattO~S - .. ·. ·'. ·. ·· . /<~\ t:

~;-'"i.g~~x:el {~e~Of· charges fO,f _th~;, .. '
·
·

·
-r,

: .· 1% (or· Q:5%)'
~ .. . h
.·: · · ·· . ··. ,r-~
tri:
Gross receipts of-P2Jl00:;00~pf ~ore

.r : . _
/., .. ~
. · ··:a~'>,:.Regist.i:~tb,n
. ii. . Perpentage tax .~ n9,feiC;t~,p'~~·of--T-""~:-t>._,.!~u~?

·. ·.. .(LGC, Sec.--143). · -+">ll· · . . Ji ._.t!~~-\ ./&.. ·

. .
·
of M6to,r vehicles; .and ...
g,f.tall kinds· of licenses or permits
'7( -vi. t:or1}1e~~~thereof; .. · ·· . · :·.. ·
· .~I · -\~
":.~,..a~~ ·
f~<L_!_~ tion.f&,Y~les (LGG, ~ec. 133 (i)).:
. .
If the gross sales 0~1reg_~Jpt¥ do no .exc;;eea . . · . · .. ,~ ~~, ·~ . . . .

p.r.:e~empted fro1;rr 1_ ~~Jf.(diany J>ef.,centa · ~ ttfe Depart eij

Transpprtat,on and .of
· : .. · t~x-(tGC, Sec .. 133:t6e~f1pri t.q:§Jl4~:!_4~:...~·.,.J!!J!(C9~~Wcaijpo- {0 TC, now two se~arate · 1 I
! .
.· . · . · · · · · · ·,. · t · e'"\i. ~~~~ffil·1 ·::,~ .e9,1-iJJE~.r--. :Oi>-'iJ.~1. t'1?.
10. Taxes on the Gross re.ce1~¢'or=,\ ·· ~ yr,~.~
· · ~· c1{.-@'-"
Do<? ·.respectively),.
pahbes; a,n cities._. can·. reguta~e the I
a. ·Transport~tio~ cont:a\tors; :i\-. · .-. ~q~ · '~~~_;,;-~~.(
tio~Jf~f .t,ricyil~s .and _'g~a~l fr~nchis~~ for·
: . b. Per~c?hs .engag.e.d 10 tf)e .trah)~rta ·~· -f~ · op~r-at1on ~ereof. w1th11:1 · the tr terr·1t9rial
. passengers:-0~freight-~o\tiire;,-ar:~-·.' •, SclEN;.n_}_Wl'is3Jeiion~L C, .. Secs, '447(3)(vi) and 45~
c. ··.common:carner.s ~y:.air;la~ .. or.j.aThr.,,,, · -.........~C:»(vi)).,'J.,. · · : . . ·. · .. · .
. .. . . . . ~,~ ·Q ~----· .
·~~~:Vt. ;.~71.
';,:'P""' ...,~ ·i. >- . . . . .'
.:. ·v~x~ep.tio~s::..· :·: .. · . .'.: · 1§~1le~~es·q~- 0th.er c~a.,ge~· ~n- ,~l)ilippine..
• . ·,< ':r,~~n otherwise p~o_v1de~.by t~~ffi.d~_cts~c~~-a)l~-~p;-~~d; ·_ .'· ·.· . , . , , . .
. . . . " " ' . .. . . I -. . . . . . . .
Ii .. orr:·the ;0peration.:and·fral'lchising of . Exception~·-Wheo otherwise. provided.by the· ..
tricycles '(/RR. pfLG.c;· Jl.rf.· 22·1 (j)).... . ~ ... C9(1e (i.e..i municipalitie~ may impose .iaxos on
-~. · · : '.- . :. : ,.· _:· '· . . . ·. .. ·. -. · . . (!Xj:)one'rs:· ·9r.,. e~_Sf!ntfal ·'commodfties}· : (J,..GC, .-·
. The· transport, of-· goods· Qr..· caTgo.es · by . · · · Secs.. 143(c).and 151). · · :. · ·
. •:· trc;1n1,porta.Uoh. . contract6rs1··-:•:persons. ;, Who ... : .. · · . . ·. ; ~· , ' . : . ." ·. : .
. .:lrariSport · for hire · o/ld common· ·~!=!rrie,:$ is . · .. 14.;Taxes, fe~s. cir charges on· .: ..
su.bject.to 12%·.VAT (NJRC, Sec.. 108.(N). · .. · .. : · . . a., CourJtr'yside·:. anq §arangay, _. b·usiness:
·- . ' . '': . : . _... . ._.,.. ·, ... ·. : . . . . : •, ·. . . •, .. : ... · .. erfferp.rise~;an~--.. . . . . . . . ..
·:'The .t(animort of. passengers·by.tran·sP,ortation· · b.' . C~pet~tiyes duly. re9rstered· under R.A. ·
contraGtors, ·persons wh_o tralisport·~oi:,h.ire and '·.· - No. 681.0 (Magna C.arta foiOountrysfde and·
com.n'-ro~.c;:irr,iers. is.·subject lo· ~o/o tax .on -~eir B~r'!ngay Busirj~ss.Erit~tprise's). and. R.A..
quarterly ·gross receipJs (NI.RC, Se'<i•. 1-1.7), . · · No_. :·.6J:~38·· (Coopera,tive._ . Code· of the ·.
" · · · · · · Philippines), ·· ·
No~~: Pip~line c~ri9esSi~rlaires ar~ -c·o~~id~r.ed. . .
. as·common ~arriers:The definitionof'•c·o.mm.on· '15.·T~es,. fees or charges .of a~y .kind on the·
.ca.rriers'.' in the Civil Code makes· no .di.stinction'., · · · N;:itional §ove,rnment,· j\s. agencies:. and·
· ·.as to the means of tr,;1nsport\ng, as long ·as -_it- is ·.: instrumeintalities, and local gov~rnment unit
by, larig, water or air. N.or,daes'ifprovi~i:ttha_tthe . · · . (LGC, Sec;: 133). · · ·
transportation. of the.p::isse_n.g,ers.'~r-goodsbe' by
.. •' (

346 i· 2019'SAN
. . . .
SEDA LAW'CENTRALIZED'BAROPERATJONS'
. . . ,· ...
 ,,'!."'
·:;;·
~r-: LOCALT·AX .
-~· . S,4N BEDA ,LAW C~NTRALIZED.BAR-OfERATIONS - ..MEf,1_0RYAID 2019 • .
\t,~~P. - . zl NS ""
' M •• i&Ma.,...,a. 2¥4W&

, t~h·e eJ'.lu·m~rat~d-common llmltatlons ~ay bp 4. Physlcatly handicapped and disabled cttlzens-

~> classified as follows: · .· : · .... who are 65 years or older (L;GC, Sec. 155, par.
,: 1. "Taxes which.are levied tinder-the N.IRC unless 1). . . . . . .. :
/. · .. otherwise provided by the. L·Gc (Nos, 1, ·2. 3., 8;
$_;;: 9, 10 above); . · ·. · . . . . . Not~: When public safety and welfare so requires,
"-?~:· .2. Taxes, fees; and charges .whicf.(are". imposed the Sahggunian concerned may discontinue the· ·
. under the Tariffs-arid Customs-Code (No. 4); collection of the .tolls, and thereafter the said facility
3.. Taxes, fees and charges .wtie~e the·imposition shall l:i.e free and· open for public 'use (f,.G.C, Sec .'
of whicb contravenes .existing' governmental 155, par .. 2}. ; .,: .
policies :_o'r which are. violative·, . of: the
· fundamental.principles of taxation ·(Nos. ·5;.6, 7, Spec!fic Powera of ·.!,..Gl)s to lmpose Tax
11., 1°3, 14, 1_5).; and- .. · . . . . . .. , ..
'raxes. ··fees;· and . charqes lrnposed uridsr 1 ·. Provinces . _.. .
-spectatlaws'(No, 12) (A.fJ~N. supr~:at 402-4{)6).-· • . ·A ·:,:~x on ·. Transfer .of Real Property
~{.. Ownership

fI r
••••,••I

·Sale, -~ona~ion,barter.or:.
A~iNc, P~WRRS ~F i:Gus · · 1 . any. other· niode :. · o(
transferring' . ownership
,!,., . . .. . ·.·'· : . A). or title 9.f re.arproperty .. ·
§~· Tile t~xing·p_9wer.s of LGus:m~'y be-classtfled a,~(1~)-~ -, · Not more :than· 56% o.t.
,'I· ·fOIJOWS: ' · . ,· . : • . · ./,·:·,(/ , ..,·•,
~~-. 1: . Commci~ 'j-eve11~~~rai~ing ·_P9wer's (LGC, .slaf/1.Y,.:"~~ 1% (0.5%).
:t . .' . , ..,. . . . . :'";} !~>;::((
1.5.3_-155); . .,,...·. . : . The · total . cqnside'rati_ori.
~- · 2; $pecificp~w~_rs.(LG'C,_Se<;~,·1.35-:14:J; 147iJ4.9~,·~('frJ'J: involved or. of · the. ·fair .
-. 151-152)··-'.
C·,,. 3.· . c6~rr.iunity·tax u.ac, Sec. 156.i;
·'f:.. 4: . Residual taxing'·pOVfers (L'GC,',Seq,:'1..8151. .
·. '; . · - · - . · ..
~ia>::-_9.:· . ·' ./~..:S~
1' ·o. r- · market value ~n case the .
monetary conslde'ration ..
. .. . : .·. ·,.,t-'/r~~· _.,¥41~
; •· involved ir-, the irai,-sfer is
not · · . : ·substantial,·· ·
~om~·~n- R~ve~ue-R~isi°ng Po~,<r;({s·~~tp . . ~~ : whi.chever .is' higher
1 .. REfasonable 'fees· ·and .c~~es ,,r-:--§ervice_t'\ r;~J . '
renp~·red (LGC; Sec. 1 t?3f't•i :<;"~. ,2.!-fl . ~:..._ · ·
2. P~b!ic;: .uiu_it:r-charge~·foi- th_e\>,periti~o.:1fp_ubli~·: '
,·•:j,~l Ttansfer . or dispositlon
p.L!rsuant · tp R..A. .··No. ·
· uti1~1es. qwne.d, 9perate}i,·_ gn:q;:,rTI31Jnt~!fl,e.d.bjl . ,-./. 6657: . (Comprehensive .
·Agrarian . · · .. Rf;!farm:.
LGU~ -within tt")eir jurisd.icti~n (WJ'f 15'.1); · ":C ·.se~~ Prb9.rcJ,_m) ."·. ·
-and · · · ,....,, ,,..,, · /.:'·."
. Toll, .feies or,. charges.for"the uset6f;-;f;y put51~<-·:~,·~ Seller'. ·donQr, tratisf~iror, .
roJp;. pier·()~ ~~~rt; }Nqt~rway,·. b[i~ge,;·,~rf.yJor executor-; ... ·. . 'or
...Jel~cqi1Jmun1cattqn . , s~stero ·. . funi)j~ll:Jii'c!lld . administrator. - · ,.;_ .
qonstructed by the l:..C:3U-conc.eroed .(L'GC, $ec. ·· .
_155) .. ,- . ·. · .. . . ,• . . .. WJthin .'60: dgys fr.om. the:.
~\ •• • •• • • • ~ ~ • • • ' ••• ,j .....
date of the execu'tion 'of, ...
".: . Toll - a feHimposei;I.olj goo_d;,.orpersons t(avf;llling· . ·.. · thi:~eed·or'from.the date__:, •'
~-. public fppds or. bridgei{ (V Dbll1,0N_DON, "Taxation, · · ·Of the ..d.ei;;ecjent's·~eath ·.:
·i . .supn:faf_ 159),: " . (~<?C.-:Sec .. 13$): ·;
'.;.,;:: . C:'1af~~S'-.:.:
'~:~pecw;1il3ry iiab.iljt;, ·as r~c:it~. qr.~fe~s ., · ' ..
· · · ag_ai[)st PE!fSOns ·or p,rppert_y(LGC, Sf]C, -f31 (g)). ·.
~.... . :Embassie.s,..CQnsulate"s, aAjj oth~r'dipt°Qrn~tic.offices ..
,. ·are. deei:neq part "of 'the. terriklry,:o(tl)e country"·they.
\.·.: ·F~~ ~--~:.charg~ fj~ed::by:'.1a~(or ciidin~n6e ·t~/°t~e . . represent.· and.. therefore, are· exempt fr9m·"ai1y .
,:_· .regulatlcm,or inspection ,Pf a<t:>u$iness or activity .· .national_'.or. local_ 'taxes· b~s~d· pn ·the··::g'enerally y·
'ii::,_ (L~C,' Sec,.1_31 (!)} . .It i.nctuqes· charges· fixed qy J_aw_ ··• . · accepted. pcii:1ciple that'the tax laws ·.pf _one. qountt.y"
•. ·. . or ~19.1:?flCY ior the .services of a ·public officer in- the. ' .. are·.. n9t applicable" .to' another. G9nseqti~hlly; ::the :
i. · . discharge of. his official· duties·· (!RR ··of LGC, .Arl. ·. · purcha:se"of property by.the ·Embassy of the.' Islamic·
l; 220(/)): · ·... · · Repul;>lic 9f Iran cit re~I proper:ty'in th'""e" Rep\.lblic of a
• · ·. ' the Philippl,:ies for official use as the ambassador's
Exceptions: . ,· ·r¢siderice. was .considere.d· as tax exempt .and 'the
. '.1 •. Officers :and enlisted m·en of the AFP; ·transfer faxes ·paid by the .buyer.' under: protest was ..
2. Members·otthe.:PNP.oh.misslon; . . ordered ·re.funded· (DOF 2~. lndorsement:·dated ···
3.. 'Po.~t office personneh:jelivering mail;:"ar:id .February 10, 1Q93.to th_e Trea~we(~fMakati).. · · · ..
. .

It.· ..
2019 SAN SEDA
·. .
LAW CENTRALIZED
. . . . BAR 0PEAATIONS
. . . ... . .
0 ,: 3_47-.·
.
 .LOC.ALTAX
... ~AN BEOA LAW CENTRAUZEDBAR OPERATJON:;:~.
MEMOR.YAID 2019

b. ·Tai : on Business: . of· . Printing : and R~ason: .. Franchise tax

PLlb.li.~atiQn '. '· · · shall be based on .gros·s·
receipts · ·. precisely.
Business of . ptinting because" it. is .a ·tax on.
arid/or· publication ... of buslness., rattler than o_n .
books, cards, .posters •.
etc'. ... ' . . persons or property:(City
of lriga v. CemetinesSur'
a. ··No{ rnore than SO°[o JI/ ·Electric Cooperetlve,
of 1,%; or 'inc.·· (CASURECO. Ill),
b.. in', oase.. of · ~ , newly G,R. . No. 192945,
'. .· .started business:' not Septemoer 5, ·2012;:
· more tha°ri 1 i'i.o of 1 %·

a. : . Not more than 50%' ·

·, ,.,. of·t%; or"
,, -- .-t): 16. "Gase· of a newly-
· · . started -business: not
· ./ more· than 1/20 . o( ·
·. '1%.
It is a fcanchiie to exist ; ·Jt -: is ·· 'a . franchise
. . as 'a.corpotatlon, . ·.: . coriferr-irig certain. rights
. . .. , . '• ·and'. f>rivileges . upon: ·.
. annual.
. .extstinq .corporations; .
· · · .recelpts .for . -· ttie · such asthe r'i~iht to use.
. prec.ed,ing year; .or.· . ' the streets : of a:
b.. lo ..case .of a 'n.ewly. · .. munlcipallty to lay· plpes ..
. . -started :. buslness:'
:capital lnvestrnent..
,of tracks, erect poles or ..
s:trfn~wires. ··

. .. · . . . ~ ..
~8 I .'2019 S~ BEDA·~W C:E_NTRALIZED BAR OPERATIONS : .
 . ,•. . -:·.~.: ~:.·.:: ·... · ... \•

. LOCAL. TAX. .
.SAN B~DA LAW CENTRA,tlZ~D BAR OPERATIONS - "/r1EMORY Al~2(!19 .•.

~hen· an ~ntlty h_as n~ franchise, LGU: caJ'lnot

· assess It with-franchise .tax .
·. Sec: 137.~fthe'Local Goyernmenl Code categorically
,t . It · is vested · in the It Is vested lrr' "the
· stat~s that. franchis.e tax ca~ only· pe imposed on
.;-;: · individuals.. who corporation. businesses efiJoying a franchise:. When- the·taxpayer
t -; compose .· the. . has nd frar:icl)ise, a iocal :governm'ent unit cannof
};..". corporation, not in the asse.ss.hfm with a:franchise tax:'Thus, local:franchlse
/i;} · corporation itself: tax is . jmp0~e.d: on "the{ p~jvileg'e of operatihg a
.·fran'chis¢·,_-._nQt. a tax on_· tr:,e .··9wners~ip. ·of ·the"
(( . transm.iSSi0fff~cjlities, it.is cle'ar'that StJCh. tax' is not 8
;i_~· lia.bility of the.,NP<;; (Nation~i Power: CQrpbrotio_ri v,
1 ,:· :It cannot _be conveyed .. It .. may . 6rdina"r1ly. b"~ ·. PfovincialGov~rnrpent 9f_Balf1"an, _G.R. No. 180654,
i~;;: April ~j; 2011). ··. . · . ' ·. . , . -
in the absence of· conveyed or. mortgaged . . .·. .
~>. legisl.atiye authority to under a· qenara! power
: . ·0.. 'T~·--o~··.;.s-ai:id •. Gr~vel and . ~ther ... Quarry_
~~- db SO.. . . wanted to a. corporation
¥]_ . · ·, to . dispose· of · its Rel?ourc~·s_ l;~traoted from.Public Land: ·
. ·:. • .• · .. re'. ·-~--CC-·-----~--
~:... . ·. . .
.
. . . . . : . . ·.
. property. ·
. . .
.
Extraction pf ordinary sto"rws:
f · (AQUINO, Philippine Co_rporate Law- compenaium gr~vel; s.and-, earth·.. a·nd. othe'r
:~/: (iot 8), P:.3_9).. : . : , .- . ,,.t~'i\ quarry r\:)Sbllrces as .
defined ..
~,·· ·. .. . •' - . . . . ~ / /J( und~dhe NLRC, from PUBLIC
~,i- . ·Requisites to be liable for lo~al· franctii~~;~;),· LANDS. or from the· beds. of
tax: . . . . n;th··,~l~,. . Se.as; dak~s, . iiye~s, streams,
i:-.."That one has a ~fra~chise;, i~ the sense iJ.K;(:~\~ er.eek&, and ot}Jer public.waters·
.: · seco~d~_ryor s~e_c,al tran_ch1se; and 11~-i -~'TI'!!l. 1:·:7. wittrih [fa ten:itorial.juri$dicifon
11. That. ·,t rs_ exerc1s1~g ,ts_ n~hts ·~:,.P!'1'reg~s ~' ltl' ._
: under t~rs franchise w1th1n H;l!;!,,J<=:mtory o~~d . · .N~(r;nore than 10%
. the pertinent local _govemment..-u_,.n;f.f City~o/;;'~"i..
lng_a . · v. Camarmes. · Suut-J111~ !li!ft~tnc
.- .. Cooperative,Inc. (CAS1.f§J2.eO 11/}_~i~No. ·. · \\'
l~f :. F~ir m~rket'val~e in the locality
.per cu_bic iri_eter of the subject
.~ . ·- . . ; ·. . .
· 1929-45; · ·Septembei(f!.c., ·201:2f ..-~ Nationa~ rI,1 ·
. Power Corp., v, City:•df.1~'eaba-rl'ataan, G;,q-.. i.~1· J~ued excJ~sively_by the"_'..· ..
";7 'iii ·""''-·).. f.!O:~.
·.. ,
• • • ,.~ f
No. 149110, April 9,-2003) .. !;:::::~{,,:,.. 17~,i.
•
·~II i,royincfa.l governor pu"rsu.:inr .-
· · · .. · · · ":i~~2r... ·,{. ,\/ · 1·. to the'or-din.ance of the . . .
.. : s_,tri~l_tan~ou~ lmposftlon of.Fr~niif.ilfe afi~J-o~.fi · ,
Business Tax.-. . . . . -. . . · t"~~, · _A'W
r.'f.' Sangguniang Pant~la.wigan .

While the.'city or business.tax' and trie :{raiichise;ta-~~.::....,.!:fi. a·, 'P.rovince-.30%

'{ _ . are_- ?qth_ based :on the gross. receipts
-~··· petrtrorer's _bu~rnes~. t_he. 2. tru.ces, · ho~e.x~.r.l·c;1re_-
s-~!~~7o( . · .. l~r-~ _tt Cot_T1ponent city:or:·· ..
. . ml!nicipality Where . · .
·~- . different in terms of their.nature pr chara~ter~(Sky. . · · resources,extracted-:30%.
· Cabl~_.. Co_rp. .-·v ... Quezorr. City,' CTA AC. No: 102, C'. -Barangay where resdurc~s
'Fe~rui,uy.1e,2014):; .. ." : .· ,_ ·. :. .• ·· ·· · · extract~q-.40% · · ·

· A>b~siri¢~s. t~x .. is: )mpos.~d _'o·n:· ih~ :_'prlvilege. :of: •, .·

. · eng~gl_ng in the .businel)>s o_f contra"Cting·a system·:o.(. .
co.mtnunica_tion_s, · whereas . a , fran~t,i~e . _tax·· is · . . f\l~te:: the.,~·uthorii~.to. i~p~se -t~x~s-. and: f~~s for
. ..lmposea for, .the -~xercise of enjoying .a' franchise ·. ·, . ·e)(!-_ractidQ.of.-~and .arid gr~vel 1:?elo1;1gs to·the provioce,
(Sky_Cable Corp:-.v. Qi.Jez.on City, CTA"AC N9.. ·-ro2, • _ -apd NOT, to the municipality where they ar~ .-fou6d .
(Munfcipplity·of.San Fernan.do. La ·Union· v. -Sta.
F,eb_~uary _10, 2014).
.: RtJmana,:G.R_. No: L-30159; Ma'r~h-31,.1987). · · .·
. de~Jly. whii~_,tl1e'ciiy tax. ~r:id ~r'an~hi~e t.~x ar'e'poth. . ·. ~rovinc~ ha'~.~~ ~uu;o;ity ·t~ i~~se,·i~~~~:.ci~- sto·n~;.
: ·.fmposed by ttie same taxing authority, cin ·the sami:3 ·
-subject - m~ttel" ·and for· the same taxing. pe.riod; the . sand, ·grav~t; earth; and. 0th.er" ,quarry :resou~ces.
·-;··. imposition. the.r:eof,. tibweyer, ·-.does not constitute extracted from PRJVATE "LANDS· because such- ta·x·
'.'.: . d_dub'le-"taxation·as--they ·ar~ .not of the. sam~ kind or . : IS-. a_ 'tax· t.ll?On. the. perfo.1111ance·, -·.c_arrying·. on, or .
.. .character (Sky _Cable ·corp. 'it. Quezon Clly,·CTA Ac·· exercise _of an activity,. hence :excise. ta">(upe>ri ar:i. an
Np, 102'; Febtu~ry-10,-?01'4). ;· · ·. _- · activity alre.ady beiRg -ta;>ced. under the 'NIRC:. The·.
,. .,. ·. common limlt<.:1tlons··protiibit the .LGU. from .lm:posing
·such t~x (V DQMONDON, .Ta.xation, supra at .1/.)3).
. . - , ,· .. . .

. ,I

,:
· 2019. SAN BED~ LAW
. : :
ceNT8ALIZED
·:.
eAR o~~AATIONS I ·34_9
. .
.. · ....
 ·,i.
LOCAL-TAX
SA('J_BEDA LAW CENTRALliEfiBAR OPER_ATIONS : MEMORYNB 2019 ·
a iiil ,I Ai!4'iAiiWCA& lsaa ZM1i

A gov.Eirror's· permit isa pre-requisite before one can Illustration; ·(20'Cl5 Bar ·a~estio.n)·: · ·
engage_ in a quarrying·· business if an ordinance is X is a: C PA-lawye(engagecl· in the practice qt
promulgated -Irnposinq _':a .requirement therewith. his two professions. He has hls' main office
· (Province of Cagayan v. Lara, G.R.1iJ.o. 1-88500,. July iri Makaf City and maintains a-branch office
24,;2013).'.. . . .. : : in. P,asig City: X; pays his professional tax as .
. · .·.a CPA in)ylakatl City arid his professional tax.
E. Professlonal'Tax'- _as a lawyer in Pasig City ..... · . · · ..
.. ·... ,.. .. . ·.' . ··---..:.....,---~-----,-,.-,
. '
Exercise .. or practice of i .. MayMakati City, where hehas.hls main.
professlon ,' ... re:quirir:i-g .office,'. require . :him . 16 ... pay his
go.v.ef!.n:mie'nt. · tlcensure _prof~ssiooal tax as· lawyer? . ·. a .
examination ·· . . • . • !

N<>t· to exceed ·p>30Q

Reasonable ·: · '.' -: ·.
classiflcatlon · · ·by.· · ihf.l ·

.Nqt 'more :U:iarf ·,10o/o · las

emended ·by:. R.A. No. · 9640'
(~n· Act Amendin(j. Sec. :'14b· ... ··
(A) Qf_the_{-Gq, May'21,_-2009) · .
Gros~:·_.: :· rec-~ir;>.ts. . 'from
. _a.<;lmiS$.iOn.fe.es .. · . _-. : : · ·· .,
Qp~ras, coi:icibrt;,. ,· dramas, ..
1,
recitali;. _. palntinq .and .art"
exhibitlons, . :-flower,,. shows, : ..
00
• •. I • ,.. • • •: • ·:' • , • , • • • _. , ' , ·.: • ~f :

f()~ example, a .lawyer who. I~ also a ';c.e.rtifie,d P.Ll~ljc . · . musical ·pl'bgrarris;" literary a~·cf ..
Accountant (CPA)·. must· pay the .professlonal tax· · or~toric!'ll presentation ·. · : · ....
imposed ·on law\iers:andthat fjx~d:for.Cl?As, if.l:Ye. ·is
to. practice both professions (l~R of. LGC, :Ar( ·i28: ·· . . E>:cc-e'pt '('r'a;abi.~}: Pop, 'rock,
_(f)):· · ... ·. r .:,
..
: ••• : . •• • • •• •• •
.
•• • •. • .: • • •••• • • or sir:nilar:conce,rts : _. . . ·, ·. :.r-

A.,:.person '. Who . }i~s· pa(d . ·.~e · ·dqrr~SJ?.Ol'!d!ri'9 ..... Tax shail l;>e shaf.~d equ~IIY. by .· .
'professional ts;1x· .SIJi=i.1~ be entitl_ed kl'. P.racti.ce. his ··· -the·. province· an.d munir;;ipality :
· . ·profession· in-any P.~rfpfthe· P~,ilippin~s _with9utbeir.19: wher~· - . suph: . amusement .
..,subje_ated to any,other · h.a,tion~I ·or loqal :tax,· license, ·plat~s are~o~ted . . .,
or f~e for the_ practice of-such prof!:!s.sion (L:GC, · $e~. (LGC; Sec .. 14_0)' ......
1Jf} (b)).. ; .. . .
l·

~.?o 2019 SAN. BEDA LAW cENTRAUZEDJ3AROP.ERA:r1:0Ns . . ..

·----------- ..• ·----

 I•

'LOCAL·.tAX· _..
SAN.Bf.DA LAW tf.NTRAUfED BAR·OPERATIQNS - MEMORY_'AIO 2019
;~:,
!;,

:f:. Afnuse~e~t is a pleasurable . diversion and ,G. 'J\nm;a~ fj_x~d tax. for .eve~·/~~li~ery' tr'u'ck or.
•;/· entertainment. It is .synonyrnous to -relaxation, . ·· van of. manufacturers or. producers, v,,hol.esalers
~\:.avoc;;ation, pastime-or fun.(LGC; Sec. :131 (b)). 'of, 'deaters, orretallers lri,·ceriain products ·
·t ·. . . . . . .' . . . -~· . ·,
\.':Amusement places include- . theaters, cinemas, Use .. l?Y.· manufacturer,
f. 'concerf haUs, ''circuses,. and ··other places: of producers, wholesalers,
f·. amuserr:ient where.one ·seeks admission lb entertain dealers,' · -r.etailers, . . of
'.,'.f.t, oneself, t?/·
seeing. or- viewing_. the· 'show· or truck, van,.v~hicle ln the
'if,\ performances: (LGC, Sec. 131:(9)).· ·· · · delivery cir,;:l,istribution of
~. distilled ·,... . · . ~pirits; ·
} a~slne's~es not subject to Amusement. fertriijhted. .·. : liciuors.;'
.~ ~ . ·.. Tax:· · ' . . · :softdiiflk·s;_.. cigar. arid ·
f>. ,.' . .'
ii?.
1; . Resorts," sw\m.rning . pools, bath
· · · . houses, hot spr.ings, · and . tourist
d9~re~t~·s. , ·ai:,d'.< other
products.ideterntlned 'by
:.. spots ._ cannot be considered ~ the'. . ·:·sanggiiniang . ': .
·· · . arl')orig . 'the ... ·.:other · .plaees • of .Panlalawigan',- to: sale'
. amusement" contemplated . by . Sec. outlets: or . ·.-cons.uh1ers,'.
· 1.40. pf the 'LG~ and which may'prcpeny. -w~et)1er'. .dire:ctiy_ ... "or ·. .,
· 'be subject to amusement tax (Prin'cip)_e . · indirectly,'. · with.in . the
· .... · ..-of tjtlsdem Ge.n~ris)".(PelizLoy -Realty /,·~. provin.ce;:_·. · :. ·' · ·. ·, ·1
··· _Co{_p3 Y: 'Provinceot.Benquet, G,R·,Y?(/~)( .. . .. .
.. ,. 183137,-.'April 10, :2013).' . · .. :Not·to·a~c.eej.P5.dO\·
1,::,-·:!,.r.•.,'.'·.
. ii_.· P.rofe~si~11al, ~a!!,.~etbail gari'ies,~ ~~;~t~j-;-.~ C:very: van;, or tn,J<:~·
. · · do ,not tall:.within thf3 meariing of "otizeFI:_;;;.;t vehicle . . . .
. places of amusement" ~nder· the· ~A"!~/ _'.·1.1:1·)?;..,rt:~EJ!;.S'-·~.j;~~./ )' • : · · •. "- .· · .
·category-as _theaters; cmer11atcf@'raphs,\:.? J .I' ~. ie-£,;. 'I\ · · · · · . . .. .
... concert · halls .. .- and.. cir9cise's· which /LJ;j. · · . .J;~ · · .· . · · . · . · · ' :
. · b ·-. b · , t · rt' xrb . C rms 0~,,, · Note: They ~ti~fl~be exeµipt from the tax on peddlers
, . i:J_s,ca11.Y' e 1 ong .0 -8·. -'-) -,~,,~. ,, ··,:, i'\ which mayh)el-imeosed.by, munlelpalities (LG.C;·Sec.
. .
~ntertamment, wh,1~. th,~,:J.0r~~p-eater.
s~ort~ · anq ga~JJ}!'.Y(Prifte1~I-~ _.oh ·t!\_ ·
.
141 (b)). /{ ·; . '.\. ·.
. n· \
r : · .... ·
f:
. ; . . . : ·. ~ : ·.
.

·. · ·. EJusdem . . Gef)tm~). e~'l{(!ht/Jppme ~ f;~ 2·. · M fi - · ,tt. · ',ll · ·_- · · . . .' ··

.. · , . · Basketbail,., Assdeiatfo~J:l1s1urf'<i_of . .;~i ~~f.~~~_.U!?~~.:t?.'7 ; ·. · . . · . ·-..·
· ·. A .. ''i G7R·
N ~Jt1912:2~U i.i.w=a:b . · r,•4 A :r:r,ur.uc1~w~~:..JVh:~vy
Of) those ~axe~,. fees, and

. ~gct
.'
2
s, . _· .. . o. ;~:06;._;,t~ . ·. ?~ t!f ch~rges, n_ot"~otti~rwi~~-l~v\ed b~- p~~vJnc~s' (L<;;C, .
. . . . , ._ ,~ . YA . . Y . 1'7 Sec. 142)... ~ . . . . . .. . . . . . . .
: · -~t i~ .· t_h~ i~teoi of· the -L~gi~-~t~pe:.-'ncit:~~di!lft1!1.k~arf.§iusT;p~s of. B_usl~es; · . : . · : : . · .
· . :thimpl?s~ VAT on_pt_e~~~~saTlrheaet~:fthov~~vt~~ A municipality may_ impo_se lax_es oh the following
. . . e .amusemen l:CIA. • u~,t l.' E;l /-~r~s . b . · ss· .. · · : · · ·. · , · ..· · · :· ·
,-: ... :. re~e(pt~--. d~r!ved _. b}'.' . ·_respori~~uj~r~mi
. : ·adm1ss1on 1.jckets · m:· --showing· .motlpn
.. u~,~~
. . .. · '.I · .. . · · -· ·
i~:.
·.manufa'ciu;~~; . ' asse~blers .. -r~--
! .. _· ... . ... ·.' .· . . .
·. · t • ·fil · · ·· ,. · ·b.. , 't t th _ . ,·. packers, -proc,~s<?r~, brewers,-.dt!i>~ll!ers, .
·.· · p1c _ures, I llJS- qr- ffl(?VISS .are ,SU, je(? O · e . . . _,, rectifi!3_r~, ~-tjd~ c:omp.ounders of liquors,
amusement - ta~ ... • and ·or
not/ VAT··_µnder
f ., 0 '
·the d"IS·t.ll
I e
·d ... · s p'ir·ts
I ,
· _.. _ and . ,. .w·in·es·. . or. .
. . - . . . (c
NIRC - ,O"}mtsSt(Jne: .. . .n ema r.\.eve.nuo. . .'·manufacture'r's:bf any artl_cle.o't. c9mrherce
·-v.- .SM Pr{me- _l:loldmgs, · lr1c;., G:R. _No.· , .· of whatever kind or nature.;. · · · · ·
·1B35p.5;-.Febrqary 26, 20_1_0), · . . ,: ·... . .. -,. · ·. . . .
. .. . ' . . Tax-Rate: Graduate'd.scale 6fP165:P24; 375
Please ·iee fu.rthiir discussion on VAT. . iJeriann'um or a' .rate ·not ~xeeeding ~7.5%of
·. · . . ·: ... _. ·: , . .- ... :·. ·. '. . , ~-1%-(LGC,' ~ec. 143 {<!)) ... : .
· Places · upon which ProvlncestCities , .. '····
cannot .. impose Amusement: . Ta~ ·. ·_'Tax .B~se'::Grqss &af~s· .or. 'r.ecei'pts for:' the
'(because· ·.the --~,nm~: a_lready '.Imposes. prec.eding calendar\,ear (L.GC, Se'c'..143 (~)).
Atnuseme'rifl"a~):. . .. '· . . ... . . '~ . . . ~ :.. . . . . ·_.._ ·. ..
.. t. Cci,ckpits·~. . .. , . b .. On wholesalers;dlsti:lbt,t\or_s;or deare.rs in
2 : C b :ets' . any:artl_cle of:c9mme~(?&·Of_ y.rhat_ever l<ind ..
3: '.
-~~h~:or'day ~lubs; . or nature; . .
4.- .!3oxing,exhibitipns; · .
Tax k~~~:.Grad~ated sc;a_l~ of P18 -P10, 000
. , ..5. Professional baJ?ketbaU games; ..
6. Jal-Alai; and . ·.. . . . . perannu.m or rate·not' exceE!dir;g 5Q% (?f 1 % ·
WhE:n the gross receipts exceed ¥>2, 000, 000
: -7,._ 'Racetracks _(N/fl.C, ':ec: ·125) ... (L(3C; Sec. 143 (b)). . ;

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( 201S SAN BEOA LA~ CENJ'RALIZEDBAR0PERATIQ_N$ ·I 3q_1 _

 LOCAL
ee«
Sl<N BEDA LAW CENT~LIZED
TAX
"()PERI.ITIONS.- t.1~0RY AID 2019

. Tax Base: Gross sales or receipts for· the' Retail·.:... a sale where the purchaser buys the.
preceding calendar year (LGC, Sec: ·143 commodity for . his . own ._consumption.
. (b)). . .·. . . . Irrespective of the quantity of thecommodity .
. . . sold (LGC,. Sec: 131 (w)).
· .Wboles·ale·.,.. Sate where 'the .. purchaser. ·.
buys or imports the commodltlesforresale e. · 'on ·cc;>ntr.actori, · and .. o~her· Jndependent
to . persons .. other . than the . end user ·· · :. contractors·;.. :· · ·
i:egardless of
tti"e quantity of the transactlon . • .· Tax ~ate:. Gr~~uatep s<;:ale o·f.P27 .50-P11,
· (LG,_C, Sec. 131.(z)), · ·· · ·. . .. ... /500-:pei anh.µm or rate· :not exceeding 50%.
· of 1 __% (t..G_C, $ec. 14--3 (e)). . . . .
Dealer-· Ori~ whose "i:ius,ne;s·is to. b~y and·
.sell merchandise, gooi:ls. and diaitels:as a : .· . ··tax B~~-~= Gr.oss sales ·or·. r~ceipts for _th~
. mercnant..He 'stands immeclately between · .· :-..,.. preceding calej,gar. year (LGC, Sec. 143- ·
. : (e))... ·· ... : .. . . ·- . . . . .
: .. the- producer .. or .. manufacturer. ·and . the · ·
· .consumer (LGC, -Sec. ·131 (k)). :· ".:.-.. .': ..•. - : .· Contract~r -··incl~d~·s pe~s~n~. natural or
· · ·: · · · · · • · · ··. · :· ·, ·· Juridical;_ -not : subject-tto professional tax
.. ~:-:. O~ ~x~orters, a~_d;, o~ manuf~cturer~, · · · . .: · 'under Sec. 1;39··af_the LGc;.whose·activity
. . >.· ~-•lle~s, . · .P.rpdusei:-s,_ · · -, 'IVhol~sa~.~rs; · . . · ·: . cdhsistl!l,issentiallyof Iha sale of.all Kin~s of ·
·· .. d1~trib1;1tors, d_~al_~:rs • or.. r~t~ilers ~~~ · ~ervic.es for a ·fee, regfl(dless of whether or ·
_essenti~l .~ommo~Ltl~~·.: .· · -~~- . ·. lf ·. J· } ,~'tl~.~e.performance .of the service calls for
·Tax. R_at~-.' Not E3X.G~-~c:lmg~1 /2 :. f ~ttw.f.!.atE!s U or·
..!, \ . / lfl'e e'x~ci~1;1 use of the physlcal'or mental.
pr~~cnbed_ under N~~,.:.1,. 2 -~1~G,C~~~~-~~--f~~yl\le~ofsuchcontractor or.his employees
.. ~43_.(cJJ... . : . : /, ~'< y,/:~_,,.,;..;.~ "V~?·{ffl,1/1.(hJJ: . . . - .. . . ·. :·
·~-~se~ua, c.~~tn~_ai~~~~w/@l'~s~>
· !:· Rtce and cor11, !/" ---vl.. . ·. . ~- r .
t.1-~) _w
.bi?~ ~
· :"~·
ra~P.~~tt~n ... contra~tor.~ are. : not
~
clui:Jed1tn tl\eiterm.~contract~r-".as defined
11.: .. Whea{ ·or. cassf_a_ fJQ • m~fit., ~try -r-:1} ~......!...; Se~\(~ 0flLGC. The taxmg power of
· ·:prod~cts. · ';_loi~'['i?..11 mantc.u__r~ •. ·. : ··~- , · JFl,l.s dofS...J!.Pt~xtend_ to taxes on the gross__
pr.oces.S_(?d Cr . f<=:SBl?Jif.ld ·. fo 'SU.~f.'7-Ji_:\,
ffi.;! . rice1pt~ (;)f tr~ASf<>rt;3~ton contra:ctc:irs.(LGC, ·
.., .. salt an_d qther. 11 nq~ll~ral, m.a ~e, ·a~~~ · ~c.:.. 1331(JJJ7:1ftJ.~.S!3s_ee furlhe_r discussion·
..... ~~;~,_;:1~~e~b~8rft16fh~@,'~~e1r-
__ .• --~~1 . ·.115~~~,P.~~WJ/a(i~n.s ... ·.... . , .. ·.. ·
. 111: .~0okmg 011 ijn~tie~inJ1gl3s;\()~:·~, ~f/f{;l-Jfanks'l. and oth~r fin_ani;lal
;·iv:, .bc!Ur'ldry · )oap~· ··aete~Ein~'~ah~:- ~-· ~~ifsfittions;· · . _- · ·· . · .. ·
: medicine;, : · · '~: .-- ·. \' . ~ . ' .. ~?
Tax·. ate: exce~ding 50% of 1 % (LGC,
·. ,v. ~~icul_tur:;,11 jmpl~n:i.ei:1~~· :~~iP.m~·rl:'l ..ff\~ . S .. 14_3·(0)· ._·. . · ·. · · · .· ·· . · ·
... ang _post- ~arve~~.f~ 1tr!=ls, ;.eni!i~~~ ~/. ·:y·~ /_·, . · · .. · ..
· p~st!cldes;•msectleide.s.. , er:l.fi~b°S>.~~ ~=;,-~.,......-'l>~.:J\"ia9.,,.se •. ~.ross sa_!es:.o~:rece1pt~ for ~he .
,·. ··other farm inputs;·.· . · ...··. ·u 1·· }\:-~\.~·
1\.-~ ;!) ~ eaing ·. calend~r;l ye~r :derived from ·
. ·:, :. ·._':'_i.,. ·f.oultryfE:_~<J_s·"and·9{her ?.nim~lt,~e,. { ·. -iV.LJ-:"'l,..__:.,,..,if'f.E!f~S~S,:~~':ljs·s_ionsand dlSCOUl1t~ fr~m . ·:
· vii, ·sGhool·supplies; an.d ... ·. · · ~~-:- · lending ·act1v1ties;·. income.· fr.om ,.ijnanc1al.
. ·. :viih~ein~nt (LG·c•.·sec·:143 (e}): ~_ _..' .·. .. ~ .. · ., · )E:as)ng. d)y.i"d~11~s. tental_~ ~r,i '.p·rope(ty an~'·
· · · · "· · .. -' .. . ... · ·profit_. ·from exchange. qr s.ale of .property,.
: d .. Qn° retailers;.. :· · . ·=·· · 'insur8ric&--p-re"tllti.Jm.(Lf3C, ··sec. ·14.3·(f))., ·
•.. ·Ta)(,Rate:: °i%·for P4"00, 000 "at. less; .1 %:tor-. . i . . . . . ; . .. . . . : . . . .. . . :
· . toe. ex~siioveir P4,d0, ciQO. (t~C, -$e9. -j-43' .. ·. .. No1e: ·All other i_nc_orne·and re_cE!lptsof banks .
. · ·(d)). . . . . · •. ·. · ' : · . . .. :and;_ financial . institutiQ!lS · not . other.wise · ·
---- . .: · . en1J'mej:ated above· shall be -~Xclucled "from .
· .. : . T~x· aas~:.. Gtoss. sales or"":rec.elpts· for the: ; · · . the taxing.authority .of the l.'.GU· (/RR 6fl:.GC,
· • prece-~in~._-carenda'ryear·(LG9i Sec:)43 (d)). :.: . ·. _-: . 'A~: 4~~ (f)):' · ... : . ·. .
:• . Not~:. Baravgay/shai( h;v~ the ·~xclusiv~. ·.. _: :·.. ·. ~- ·. =On··p~~dl~rs ,~nga~ed- _lri_·~~ ~al~· o~:~any
· ·. power fo• l~vy-the bUsir.iess tax on retailers as. _. . . .. :. me~ch_an~ise 9.~ai::tich~.o1 c~mm_erce, .and
.. : ·. · · . provided uhderSec.:152 of the lGG">if gross · · . . . .- . Tax .Rate.· N_ot .exc_eedir:ig P.~O per. peddler
· · · . ·. • · · · · .· annually (LGC Sec 143 (g)) ·
. sales oc receipts dq .not exceed. PSO",· 000 in .. . · · · · .' . . · · · . . .· · · .. · '
. case· o( cities .. or P30, 000 ··in: case . of. Pe·ddler--any person who; eit_her.tor'himsel(
· .: municipalitle~ "(LGC,.·~ec. ·1-43_ (d)). ·: or ·on coll)missiQn, _tra:vels· frprh place. ·to
_ ·place:ana.sells his goods or 9ffers to sell ancj ·.
. :·.·
:.i
_deliver the same (t,.GC, ·sec.· 131 (t)).
.. \"

352 · 1 2019 SAN SEDA LA~ <;:EN~8ALIZEO.B~ ~ERATIONS

 · -LOCAL TAX
. SAN BEDA.LAW_c~,:iTAALJ.ZED
~ OP.ERATl~NS - ME~ORYAiD ,;,019 ..
>·
. _,
h... on any bush1ess, not · otherwise. -.Busine.ss.Tax Distinguishecf from lnc;:ome
· sj:>ec"ifie·d-·in the:; pr~cedlng· paragr~p-hs·, . . . .. . . Tax
~t)i<;~ the Sangguniar, 'cc>ncerr:ied may
.. deem prop·~r~o.tax .. · ·. · · · . ; · .
... Bus.iriess taxes a
1:m:ome tax is fax on all
· :Gc:>nd.itions: . . imp'osed in. - the.- "yea:~1y profits ans1ng .
-L !;lusi.ness . not · .suqject to. VAT ·or from. property,.
exercise -of . polic~
· perce_ntage tax unp~r-.NIRG; or·..
. ·_. ii. If tbe; busine$s .is· subject to: VAT or
· · power · fcir regulatory· professions, trades or ·-·
'i

purpose~ are p~id ·for ·offices, or as ·tax on a '

percentage.tax ~rid_er)•.JIR9, the.tax_ r_ate the privilege· of- person's ·· income, .
sti~II not·· ~exc;:e~d · 2.% · of _..-_gross ca~ryin·g cm a business emoluments', -profits,.
sales/receipts · of the·:_. ·preceding_ in the y_e·ar-_the tax was . and: the ·iike. ". . '
calendar year (.L~C. Sec.. 143 (h))/ pald. ·
..
~
.,
. ·.
. . ~xcept!o.n: .""A~y.buslness: eng,3ged [n
the production, manufacture, ·refining,
Paid at. the beg_inning
·
O'ue on or befor~ th~ ·1_si~..
· . distribution cir sale of oil; gasoljpe·, and ._ · 9f. the- year as a fee to day of ·the·· 41h .. month
· ..... · .· other. petroleum products ··sh~II- not- be . ·allo~ 'the business, to followiAg the close ofthe
· ·:. · subject to anylocaltax (/RR of Lf3G",. : _operate-fix the rest of taxpayer'staxable ye~r
·Art. 232 (f?));.. . . . .. . . .r-~ the ye;a_r . . .. ..
·.. ··.· .. ·. .- . · -- ~ r,~.)"1·r ·-
. • ·• · · 1'/ · ,-')\.._ 'Prerequisite . to· · · ttie Dae when .the- taxpayer
:"I.hen_ admfrnjcipab_lity?r city has-alre~tl:1"t:f'::_,;;,-,_ · conduct of business • has earned income as a
. 1n;!P~se ·· ·a :: · usmess . tax · ~o;· ·..,·; N:· J - - resutt of the conduct Ot
·· • manufacturers, etc: of liquors, di~till~<f" •····i,~i ., · . · -· ..
spirits,_.wine.s, and.any ·o_~he~ ·artic~Ei~df\~i·_:,';fu'!,~~~~. .,. f; ~ , its b4.siness
. commerce p_ursuan~~o. ~ec.,;tjl(a) or·-·· r,! (Mobi{t='hillpPj_i!ies v. City Treasurer of Makat1, G.R.
Jhe LGC, ~ard m~unrs1pahtf~r·~1ty m.~¥/)·::•'!· No, 154092, ,fl~1J(_.14, 2005) -:
. t
.. ri~ . · long_er_ . subject . )~~J;J.1 sam,.~·v l\ _ £ ~- ·~,
: . manufacturers, etc. to;~_Jju~,n.~ssPtax . 1~1.-· Tax Base)>f·4pc~!_Business Tax . . . · · . . . .
. . ·.· ·
if.· } ·. · under1Sec. 143 (~)r.'?,0:tt1e ~a-~e'z:1:;;GC..,...._.._ 1~;,ij·Gross saws o.1red}wts,not gro;,s revenue (Ericsson .
i:' : · ·- . :. _Sec_. 143· (h)' ma¥,Pij1.i!TI~~~~f ol")l~,-:on ·• · k~-: v. City.. of Pasig ~ ..R. . No.>:
Telecom;gun}.,{f!f.f.orft

i .
t-.
.
.·

.
• .buslnesses that 8,!'.f.'St;Jl:?.le~,~~jexo,~E:). . li\'i 1766§t.{,N~f/m7iff··2Jf2po7J.·
tax, V/:<.T; _or percentage ~X:F-~Sf~r P'f1}"J•!f : - · : ~. ~~~,.;..0>' · · · ·
. · NIR~·:·,:.a~d that . _ar_e~ppot~r~i.sp.
sgectfied·in precedmg -p_ijr~grap't,f ~t.e·.,
_Sec!;. 143. (a) _to 14;3 (gJ(pf-JJf.e,-LG_C)
.f; ·
:. _ .
· .·
'Gross S~Jes:or Re~~i_pfs - inclu_~e t~e total ~mount ...
tihv.pt.rt19ney c;,r ti~ equivalent representing the contract ·
:./.::t~,. .
_ .-: . ·

i.P.tfc~1~-clDropen~ationo.r servic;:~.. fee, inqluding the ·_

· . .

lr · · . : · · .: .
"''
.-·
·:_

11;· = . · '
. : {City of. Manila V, Coca~O.r)..fa Bo/t/Ei't~~l.'.'an!.~ti"nt~cli'irge<;I

·
-:_·- PHf.!'.."~ric,;-~.k_. _No. _1.8184$[ ~,jgi/s"'t(4,
· _ ...,_ .. · .. 2009). ·. . . .. · .
· :. · .. · · ·
. : ~~;)
·. . . . . ·.
_
· . .
or materials.. suppfied with ·the ·
- ser\ii_o.esan~d_epos_it5:o~ ad~ance payments actua_lli
or_constructJ~ely received during th~·taxa_ble quarter
· for. the services performed or to bJi performed- for ...
N"ofo: rn.tt1.e case·of Super: <:,;ro·ce,j.!nc. ·. _- · ." anothet perso·n ,~xcluding .<;lisq~i,.ints·_if ~etermin~bl~
ti·. .·. · :v. · Mun_icipalily .6f.Sf}n· Pe.dr<;i-(.C_TA A<;, :· · · at 'the Jime · of ,s.a1e·s, ·sales.: return,. excise tax,· and
~:" : .. ·Nc;>.·_B6;'February· 25, _2p1~).-p~ti\id~~r. . YAT.(LGC,.Se_c'. 131·(n)), ·. · · · · ·
L · . challeng.ed ·· their : reclassification. from ·
r:1: ·... "retai!er.:of essential and lipn-ess~hti13I .: ·Gros~· Reven_ue -: i~cludes.- those. ahw.unts\vhich
~t'.· .. -ccinimqc;lities" to "ow.mfrso.r·6perat9~s·.cif · : have not actually peen received· yet. (INGLES,·· Tax
(· privateiy-owned.,· ·. , supefmarkets,· Made. Less Taxing· (2018), ·p. · 511) "[hereinatt_er
r , sl:iop·ping:c:;ehters 1r:icl\.ldlng m!nl-!Tlarts.." JNGLESJ;° · _: ._. · · · ·.
I' .The ClA . opinec!. :· thaC petitioner's.
'.(< • · ·. busines·s- . activ.ities . fan·· . under . 'the. . N~te: The itpposition of l~a-1 pllslness tax basea on :
t, . "' . classificatiori.·. as . ~etalier. :. of.': 'both petitioner's gross revenue will Inevitably re·sult i1:1 the··
t.t . ·. .• ~ssential . and· ·.non-essential" . good~. . a . consliiutfonally proscribed.double taxation inasmuch
uride"r Secs. 143,(c).and"(d.)°o(t_fre:_L,GC;: . · . _'.as .petitioner's revenue:·or income for a ta_x~b)e year
~ . . therefore,'its· r.e-classiflcatfon cann'ot be .. : . . . will . defi'nitely· include its. gross receipts. ali'e~dy· .
!(Cf'..·::. . . - allciw.ed : as it · v1qlafes the.· limitation ·. · ·. · reported durfng the previous y~a(~n<;l for Which" local.
~ pr_ovided un.der p~r'. ·(h) .of. Sec. -143. of.· business tax. t,as alrea.dy' .. been· paid (Ericsson.
~·. ' · · .the L,GC.... -· . · .. ·. · -Tefecommu.nication:· v.. C_ity. of. Pasig · G.R: No:
f: · · ·:· ·. · / .'t°l6667, November 22, 2007)." ,
f..

t
I-: . · ..
.2019 SAN BEOA LAw CE.NTRALIZEDBAR OPERATl(::iN:' I 353

·--------------------------------------- ·-··-------··-- - - ---------

 LOCAL.·T AX.:
SAN_ BEOA LAW C!'.NTRALIZEO BAil .OP.fRATIONS - MCM_ORY AID 2019

. Rates ·of. Tax in Munlcip~lities within Metro
Ma11ilaArea· ~ ·. . . . . -,
The municipalities within ·Metro ·Manila. may leyy
taxes at- 'rates which· shaff not exceed by 50o/q the..
maximum rates prescribed in . .Sec, 143 of the .LGC·
· tor other' fouiiic.:ip~l.ltje·s· «cc,
~ec. -~44).: - . _.
. Con_dt>miniliril .: Cor~or.atiO!"lS
· exempted frqm Iocal 'business- taxation under the
... LGC. 'irrespective of any local ordinance that seeks
to declare 6_tb.~rwise. .Jhey""are.prohibited from doing
activitles. for ·p~ofWun.der the Condominium Code,'
. hence 1fley._ are Rot ·..businesses" .. under the LG.C ·
3. In cases where a person conducts or operates 2:
or more of" the businesses. mentioned "in S~c.
143 qf LGC which are subject to: .
a. Same rate of tax -tile tax shall be computed
on the . combined total . gross . sales ·. qr
receipts of. 'the said 2·.. or more related
, · · businesses' (LGC;_·Sec. 146 (b-)}, . · · .
- . generaliy b .. Different"rates of··tax ...a,'·the gross sales, or
receipts . of · .. each . buslness · · shc:111 be
·. separ'ateiy. reported · for . the purpose . of
co.mpt,.rting the ·tax due from each "business··
([.GG, Sec. "146 (c)). · ··· · ·· ·
· ,_. e ••

'. (.Yamanev. BA Lepanti:J°Condominium Corp., G.R_. . Si~l,.IS ~f. B~_sines~; T~ : . .

No..·154993,0c;to'bsr25,·"20.05). .. · ' 1.· W.hen-there is a.branch or. sales··office· or
. .. . , .·.· . . · ., _·. . ·. ·.. ·: · .. · ., . . warehouse l_ri the city or- municipality where
. Ex.ceptlQQSi W hen ·unit owners of. a condominium . . th·~·s·ale.:.wai madl3:.:.'. tax· shall accrue and ·sh;ill .
. would b,andt~·ettier._to~ngage in activities. for profit . be.patd to. th~_-_rh1Jnicipality where such branch or '.
under the shelterof the condornlnlum corporatiof!J.h_-=.i,,.~r--_,.,,.·sates outlet 1~ ~ocated (LGC:....,$ec. 150 (~)). . · .
which, such. actiyity would be- prohibited t:.Q.der~the~ · 1 ·,.., """~""""-::. · . · , . · .. ·, · . · :
Condominium Act Even- -thouqh suctr«ac~ties \_) J\ Jlr~n~t:t,~~ffic~ - a fixed plaGe tn a locality w!11ch
V'OOld b~ -~ons'ider~d as .ijltra .vir~;,~~~e:'\6~y)£.~:~-=-_~;~ . ~G9fd~~tt~~r~ti~ns. of. th.e . bu~iness. a~. c;\n . :··
_engag!a)~ _ih. beyond :th~. Jeg_a.i~~P,.~Clo/!.?\O~the - . · .e~~!).,~On?,}Qe_pn~c1P,al~ffrce(IR_Rot.~he LG<:;
· c_on~orn_tm~m'~orp~ra,1.on:_th~. p;1_nci?1*•<?.fr~ppel~~f"'-""'.'.':_;',~;,.t~~:(~'\ ..· . . · .. : .. .
.. wo4ld pre_(?IUde_ ~-l;l c~rp.or~tlW1~fjSlf0ff~irs ?~J~ _'.""{ ~,7 Offiees··u\~"{:l~~y,s~isplay areas of the p~od"i,.1ct
member~ from __ m'l~kmg th,lf. vorel;,(.'at~~I o~ l'ES ~ L&
wh~re.. no -.'~9~~ar
items are stp_r,ed for sate.
un~ert~k·~~s.for profit as a ~ff,;~~:of(acqui,ng_1ts,,:lf qr~_.
.......alfu..~6g~· ol'd~J1;>,fer_·the. ,products :_may be-.·.
of tax;!1ab1llt_y (Ya0ane,v. ~'JJ;·eJ;,.~mtoCorJd.0'!1._,.f!!i:_((I"-,.
_co1p., G._~· N~. 1.q_19.93, O_oUe6er~J'·.~~05)f ~~
·j~r: .
,;)($Ge1y.e.~th~~fpli-ar~not branch or. ~al~s o~ca.s ..
~ ~as..J;1~r.e1n-?Owtemi:il~ted (lkR of' the .. ~G~, A~.
. · · · , .. ' · ·: · ·: i! ~~ M: . . ...:n\ ; ·. ··. · ·1"1 r'l}:9;
:243:f(~#ZJ)-1 Wai:".dhouse Whi_c.haccepts o~ders
l
. Paym~~t.of,~~sme~~ ,:'ax.~s · "4 ~ :. (.,A~\...,;._;,__d-:;-'"-. · ci!i;"ld1cif,'q~~ue,9 sates~invoices .inc!_ependent" of a
·1- ·Th~rt~.x~s~hall be_pay~~~,l<:.!f~eve(t,-J~l\arate tj~ ·brl ~;{vith.1l~;t.ic'eshall·b·e· considered as
J_z.,,_<ff,)f, "f_.)7,' · · · . '/" ·
ffice'rABAfi;upia at'4.l5),
o,r.... d1st1.nct : ystabll!;,hm~pt?' ?r-~lao.el¥~r
. bus,n~s~ .S!JbJec_t to the t~x- 1s c- ndu)i~}.~:q:-
o·n.e l~~.of.b~sirress."d?e~·~ot bee lQTe-e~e'"~~~.,.,;~~~
-:w~ · · · ' ·L exa_,
~- : · ·
7u{ete.is,1fi'o. brar\ch, sale~ ·office~.
, ·
,· . ·
~r
. ?"46 (a)}.. .: :
·.. ~ ·. · - .· · · ' .
." '-?9/'.)~,·. . :
, by be1p9. cond4cted ~1th .s.o~e.<:~e'r"~us1Q~e;l'ffi:°"l"f.\t,..,wareJiouse-·
. f~r.:wh1c~_.such Jax_ has_-been'Jilc\l~ (~~~q:~fb-~~pri\a'c;ipal
. ·..
' ,.. · ·.. ·
,,u,,...7.
t e .sale shall be duly r~corded in
offi~f an_d:}he .ta?(e_s·.d_u_e shall
acxe~./$.1_1) ·s~an: ...~e P.~id to such" ci~y or
~, L! · . 1\ fft. l~l'.IA1~ji;>'ality(L:.GC; Sec. 150 (fJ)).. . .
Th~'.ba~is f~r_tne con:1pu_{atiol},.qfpi.l_sinef&t~~l_v,~.t:-""'.,,..~... . ·. . .
.
.. · .:-"'; . . . -: •. -. · · ... : · .,
· the_ gr_oss,sales/rece1pls for .the.:prec~drr;igyear--"""--=: -Prm~lp~I offi(?e...,.. the head Qr mi:u_n ,office.oftlle: .
. . . : . ~!Jd. the iate;,t inQqrhe tax" retums·an,;:f fina_nci?iJ-.. . .:business 'appea~ing in . perti~ent: qocume'rits· ..
statements:·:.for ···purpose$ · of .ve,:ifying:· the · . ·. submilled to.the ~C and.specifically mentioned ·
. ··accuracy. oLth~ 'tl°e9l~ratio~s._ttia"t. they tiav~ ,_-·· : . . iri th<iAr.lic;les·of lncoiporatiqo:(fRf? of ttie:t.$C, ·.
. ,· .mad~.the previoUS'.year (LG_c,· Sec, ·146 (a)) .. ···. . . . Ai:t: 24~ (af(1}}: ,· ; . ; .·... , .
·. . ·. . _., : : ·. . ... ':" .: . . . . . ·3 ... :,If· th.ir.~ i~ na ·.bra~~~-- but'. ~h.~~e ·is -~:fa¢~~~;
'. Presumptive Income Lev'=!I Approach • , ·.· proj~i:;t_. offic,e,,P.!ar'it,:or J:>l~nta.tion ln·p:4r-si.itt
. 'Ass~i"ssinen~-.(PIL:AAt. . ·. . . .... .· .. ." of busines·s . .: . . . ' .. . . . ..
· ·· · <ThE;i· Pl.LAA:may.b~ u_secl"only if the· taxpayer ·-i~ · . · The foljowin·gsale·s.allocation. shall ~pply: i, ·. . . .. ·
· : .. u_nable to provide _·proof ~of it~- inc9nie_ ·_<First, . · · ~) 30% "of·afl. ·sales .re9orded· ~n tf}e principal
:. · .. f.'lanJe~· Pawnshop,"Inc.. ~-·.City treqsp~er pf . · :offiqe . .,-_tcpcable-.b.Y µ,~·city ~r mt.inicipamy ·
· ·. ·Pasay_ City, ·GTA . .EB:No. 501, _December.JO;_· . · ·where th.e_principal office is located· (IRR of.
· .. _.-.". ·2010). - ·· · . L.GC, Art. 243 (b)(3));:- ·. ·. · ·. .. .
b} · 70% of. a//· sal~s reborded in ifJe principfJI
: 2:. _Ttil;l tax on a olisin.es~ must be ·paid·. by the· · . of{iqe - taxabJ13· by". the "city or municipality
. person conducting· the sai!}e (l:GC, ·Sec. -146 · .: where the· f~cto~y. preje"ct· office; plarif, :">"r
. . ·(a)):" .. . . . . . .· . . . . . . ' . "pla_n~ation.. is 1.ocated "(/RR' of. LGC, Art.
. . . . ·. 2_43(bj{3)); 1f the plantation. _"ls J0<;ated . in- a
.lo_cality· other than where· the factory· is.
 .. ··. ·· -,
. . . . . LOCAL·.tAX' ·. _,._ .· . ..
SAN B£0A LAW-Ct;N'[RALiZEDBAR OP£RATIONS- M~MOBY.~1o·;zo1~

. :iocated, the 70% sales allocation shall be Under . :· the law, · manufacturers
divided asfollows: . . maintaining a -branch or .saies outlet
i, · 60%. ~ t::i{y' or
municipality wher.e . the· . ·. shall records the sale in ~he branch or ·
factory is tocated (IRR. o'fl.._GC,.Art. 24;3 sales. outlet' making· the sales and" pay
(b)(4)(i)); . · . the tax in the city 'or municlpality where·
ii. .40% :.-. city or· municipa_lity Vl!here the · 'the branch or sales outlet is· located..
plantation is' located (IRR. of LGC, · Ait. · . . Slrice ·F=· Inc, maintains one factory, the
243 (b)(4)(1i))- · ·' .' ,· sales 'recorded .in .. the principal office
. . . . shallbe allocated and 30% of said sales
Where there are two ·'or' more _:fa..ctcir.ie's,. are taxable, In the: place where the:
. project-offices, plants or.plantatlons, located . ··.principal office is located while 70% is ·
', in different· localities, the. 70% . : sates . . . .. · taxable "where.)he· factory . is ·located
allocation mentioned . above . shall .· be . . · .. -{Sec. :1.50, J.;_Gcj ..- . . . · · :-'· . : .: ·
.prorated among"_the localities . wJiere. the.'.· .. ~ . " '
. . factories, project' offlces, -plants- .. and · _: 4.-: W~~re S.ales · are
made .'·by·· Route. ·tr~~k;, .
:'° .. · ·. .plantations are. located in proportion to. thelr . · Vans ~>'r,VeJ1icles '; .. . · :: · . .:- .·
respective volumes of production during the · · .a, Sale made -tn .the . locality where
period fqr:which the tax isdue (!RR l.,GC, . of manufacturer; producer, wholesater.ireteller
· ·, Art. 243 ooo». . ·. . . . , 'or dealer h·a& a::. branch, sales offlee. or
... . .··· - ". "'"' . . warehouse, the':,$_i:jles are· recorded in- th~
· ·. Plarttation - a._ tract of. ag~t.ultural la9t9:f(ijf . . ·bran_c;;h,--sales-office or. warehouse - tax du,e
· whe_re trees or ':seedlings a.re ·PJ?n~~il'(/<"!!\ - - is,paid to LGU whete such .brarich; sales
whether·. fruit:· beartng or, n9t,: _unitorrj1¥/;i,-~;~!) : · .office or wareho_ll~e:J_s'loc?t_ed·(IRR of_LGC, ·
. sp.aced.or ~.eeded by broadcastfllelh?.dSj,Pf~-~-·.. ;;~il ~ )', ,
A,t. ,?t(3 (d)). . · · ·· - _· · . ·
· normanr ·arranged . _to allow_ '-'11.~.~e~g1;"·,1_4;-s~/~!E!'r-t'.~j3/~i·l!Jmad_e·in · Jlie. locality _ w,h~re
· production. Inland fishing ground_,.§jiall.be I,;:,!!;( ·. · · ~fmfunutacturer;producer', wholesaler, retailer
· .-.··considered as pfantati(:m_(IRft.~$tJ:G9;
243 (a)(4)),
. . ·
. · · ·\::"!:,
• . · .{,ti J. ··:?- '. . ..
tl '. .A'it;),~lt1. ·. . . o_r .d~t~r· _has no brani:;h: sales _o~ice. or:·
,,J.,f.. . : . · ·_· .wa.wtwu~e ~- Sales are recorded 1n. the·
· · .'br'.11:~·· ~ales. ·offi'ce· or warehouse from
111ustrat_io!1.:.,_<20}o· ~ar)3Y?S~ionfi~,.... ;~ · ..~ .- , . _ · w,r~r~~,.th\,. rot!te_.- tr-ucks. · ~it~a~aw ::~h~ir .
F;~ Inc_,. tna,ntams. ·1t.~;,-;:1~{m~11?~~~;(:)fflce1ff~ fit · , . ·:
P,rodugtsto~;;.aleand tax due 1~. to be_'!)aid to ...
Q~ezon City. It. ha~ l?[.~pc~~~~,i offi~~~- , ;· - . ·. Wl~~!fl~Y.iere"'su_chbr~mch, sale~. offic:e or_ ··
_an?
· in C_e?u Dav~o, _lfs~~ptory:1~1i~ate<J;~{l:! . -~ · · ·; _ ~aQ)b'filtS~f(loc~t~ :(!RB ?f L.G~;-A!f ..·243 · ,
Mankma City. _Its. pnncrpaJ:~~2}~":~:,'\ <?C. if . : · - · -.. (d)). · _.. . . : · .-.- :. ·. · ·. _ · · _ . _ ,
· · also a sales office. Sales ,pf "f.(rj11>hl;!(l._ · ! . · · . . . • . · . ·. . · .
. . . " "'00' ",, h . ·•p.....-<'";f,W} .
proct.ucts for- calend_ar -ye~r l<:c•·-;~j)n_,·.t. ~.:......../,.~tri"='/~.1t·-~.l!lustra_tlo'ns: .: . . .: ... · · .- : . _
·· _.;1mount·of P.10, 000, 000 wer~o;ra~ea~.,~~-OO.~~~i~U'.11M1. is a corpo~€ll1bn engage~ ·m t~e .
• , following lo~ations: i) Cebl! br'~~c'1 i . :- :~1~/o; · · tr~ding of books. It bolds of{ic.~ in_Pasig·/
. -:· ii)'l:)av~o .branch-15%; ar:id ii_i)_!~~~p,r.~nch.. · . . .. :: '· City; iNhete ~II tc~l")~actions .. a_re made ..
·-.' ,- ~0%. W.he,re shou!d_.t.h~ '.?PP)i~qle,·.loc,a.i__-.· - .. · ._:· · ·: in_cluding_t~e-_lssu.!1..~?e~f_.S?ile:3invoices...
taxes_ on the shoes be paid?: ·· .. However, 1J.also maintains a warehquse .
• • • • •4 • • • •• .:·. in Mandaluyong City which·s_erve-s as i.ts
.-.

AJ\fS: .... , · . .·· ;.. , . _ . . .... ·: . . -·stqrag'e area' .c!nd ."110 ti'ansac#ons ·ar~
:1.- . Jweniy~fi.ve--perce(lt.(25%)'of the to.tal ·. ·.;. •. made 'therein. Discus_s.the s'itus ot)o~I
· s:;iles .or',P2, 5.0Q;."000 s_hall':be.t~xed.,ir'I' ... _·, '-· taxation. ·

· ·.. :2 .. ~i~t~~;n,-.perce~t{15%)-'of. the.:total_sales·: . ; /ANS:' Mi:-~h:o-ul~- .be·.:a~ses~-e~ .at .t~e

. . . . ·or P1 j·50c:i, 000 shall 1
be taxed ln- Da:vao; ·
.. : . arid : .. • .. • · .
· 3.. The : remaining ·· sixty · pernent . (60%J ·
.. sales arnounting-_to P6, ooo. ·octo _whicn .
are recorded in ~~e··princip~f offi~e, is·
divided into' the fQllowing:· . .. .
. a. Thirty percent·(30o/~) t_hereof or- P~; . '
· 800, 000 is-.t~xable -i~ -(!luezon City
. where the·priricipal office i~ lbca!ed; · .
. and · ... . : -. ·.. ·
b: · Sevenfy. percent (70%) 'o.r P4/20Q;
ooo is·· taxable in. Marikiha · C;ity,:
. wher~ _the ~act~ry is loc'ated. . .
. gross $a'IJ:is.or" receipts 6f the p'receding..
• . :year. by. P'a_sig'. .City. Likewise',P.i:.!s}g qty._
may_ collect: the Mayor's · pertn.1t . ~n.o
· · ·. · ot~e;:.· regu_latory tees. -pn.· .the· _other ..
.· · · hand, Maridaluyong_. Cily, · wher~ tt1e· .
. ,·. . . ·. : warehouse:·. is loc.a.ted . oot. where . no ...
- transa9tions·are made,.may only collect·•· :
. . . the·
Mayor'.·s· permit( fee and. other ·
: .· ~ '. ·regulatory fees pro.yided for,. under· its
· · . .. . . · existing 'local tax ·ordina·nces (D,OF
·. · ·dated.: Marc/1 · 29,, 199.3 letter· to
· · )y1egastr_at,Inc.). ·
.· .· :-

2019.SAN BEQA lAW ci;NTRAUZED BAR OPERA!IONS I 3q5

. . . . . . - .· ....
..,/- .

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 · LOCA·L.·-TAX
~ Bf.J?A~w'i::W!RALIZE(?BAR Ol'ERAT,/Of?S.- !/JEM6RY~ID 2019

..
ii. MC is . a. subsidiary .of SMC:: lf is a . · Where the plantation The· 70%· above shall
manufacturer with· a-prfncipal office· In is located a~ a place : be divided as follows: .
· · · . Pasig City maintained for management other than the place ·i. 6Q% 'clty' or
and adminlstrative; purposes. ft; has a . where the factory is . municipality where ·
factoryand sates .office .in.Quezon City, .. located the ·. factory is
· where-said route trucks Withdraw their located}.
products-tor dellveryto the.customers in. ii.·. 40% city or i
Pasig Cfty. pisct1ss.· the situs· of focal_ municipa.lity .. where .' i'
taxation, · · the. · plantation is.' r:
', located (lGC, sec.:
1
· 150 (.c)J....

,• .··

I
i
I
I
t.

-, ....

. .
.
' 356. f
.·.. eois
. . .. ·. ..
SAN BEDA LAW CENTRALIZED BAR OPERATIONS
·.· ·. . . .
.,· ..
 LOCALTA)(.·
SAN:BEDA.LAWCENTof:!AlfZEI?BAR OPERATIONS- l\1t"MORYAID ;019 .
r·, .:.#.··

·t··111u.stratlon: ;. .· :·. · . . .· . . Municip_al F~es ~n'd Charges .

f ·, ffr·2012, Mobil'.s gross receipts were .P1, 000; 000. i. The-,municipality ·m~y lmi;,ose -arid collect s.uch
·;>>nie business tax rate imposed .by City of Makati is · .. ·reasonable fees ~mcf charges· on business ·and
"~?5%- On January 1._201~. Mobil pald.thelr business -occupation (LGC, Sec. 147)i
?~-: tax o.{.PSO, 000,. which was 'based on their gmss
·t:;-ecelpts of201·2;" However.-ln October 2013, M.dbir . E~~eptlon.: profession~! 'taxes : reserved ;for
f·L dedqed ·to close down their operations. Atthe end . provinces .on tHe practice of .any protesston or
·;, ·.of."Octqber 2013, ,their gross receipts .were P700, calling, ... commensurate with _t.he · cost of
k icioo. City of Makati assessed M·obil an additional of." regulation, inspection and llcsnsinq beforeany
tj>,p39, OQO .(5% of P700; 000) based' o°fi -2p1a gross · person may/ engag·e >in. such buslnass or
··:,:..,receipts: · · .. · · . . · . ' · · oecupatipn, · of · practice" such profession . or
·~:, . ·- . .. . . . . . .. .. . . calling. (b~C, Sec. 14!). . . . . : . ~- ·
:;i-. . a) .. I~ "the City_6f-Makati correct? · -; ·
·1 1;,: . ' .· . .
ii. . ··_Fee~ ·fbr' s.~alir:m· ano · lice_nsing Of ·Weights ·~u:id . .: :
· .. · · ·No. Payments made by Mobil in 2013 based on . mea~u(es·(LGc; Sec: 118); and : · -:.\ '
. 201i . grosf· receipts, are . not payments for .·
iii' ... Fishery rentals, fees: and" ch~r!;je·s (L-(3G, Sec.. .
,~,, ·. b(lsiness·. tax' incurred· in 2012 .. The 'business," . ·. 149). .· .. ·-' . . . . . .. . .
ii:..· · ·. taxes paid i~ the year 201-~:'is-for \he_ priv.ileg.e_of · ., . .
-~~•·.' . e,ngagi~g·lo"busi~es~.for th.~ Same year, arid·n?t .. · .. 3 .. ··Cities: . . . . . . . . ·, .·'. .
1,/ . for: having ~nga~e~. m business for 201?- l~-1s .. (;;)) . E_xcept _as_ othen.:v1se grovided In ,the. LGC,:~t'i"e_
· pa_1d _.at th~ b_eg1~l'.lmg of J~e y~~r ~s a fee }._of-1A ·. city rnay_l_ev.y the tax~~; fee~. a~d char_ges ~ti_1c.h ·
r·· .
\ '.

"f!.!i .
..-~11~~-!h~· busme_sslo"operate _for the _res; of!~t)-~~-,.7:.~. _the. prov~nce 9r_murnc1pa!ity may impos~
.Y~ar .... _· . . . . . . . . · · . _. · . . . , ii'}:.;;;1P~1:J . a .. :.T~e taxes, fe~s, ~nd c1Jarge~.-.1~v1e~_and
ti · ·. · . · .· . . . . . \( 1~;J·'4.1;'d····.,·:-... ~0117,Sl~(l .. by· . '.·!lighly .u.rbam~_ed c!Od
f._ ..
'j.. .
(:'_'·,.
.Th~-- amoun~ of . tax ..~omputed. ~as;,0/oii,:"fi"'~~.:1.i>•'~l~~-~B;p?ent
pet1t1oner's ·gross sales for 2013 1~.,~~y-"P35, '-"
OO""C(·since the amount paid· (P50~~0:0qJ)s morE;l;~-~1:
.fi . -' :-'!· ~fo~h~, c?mponent_-c1t1es s):i~II accr~e
.;in_d_ d1s!"1buted 1t1 accordance with
. · the)~·· ~[sion~ of the Code: :. .
· · . than . the.... am_qunt ·: computed_) [.~a~ed o_.g}---li1. · b. /Ji e'rate of taxes that th~ city may levy
. ~~titio~er's'??toal r;ir_os~ sal_e~_J~:_2.0'.f~.?_:t~ooil·
, upon· its· retireme~t · '!> ·no~)~le tori~d1bona~..• ,.J..l\.
/J '. .
.
.mt>' e 4c~d the maxii:n~m ~ates allowed for
t_tJ# p~~ym\e or· munic1pahty by· not. m~re
,:: . . .
<:.
. . taxes _(Mobfl PIJ!!tppines{:"f}:".r9ityilit'fflS'!re'.of~ t~- . . ·
.. Mak9f!, G_.R. No, 15:4092,,;Jp(y 1:.4~;<},.05J, . ~ •. 1,._ . ,, .~-f:~~,:!.-·(,..i-!.Y
)~a~ -~€).!~~f~· ?~c. 151). · _ . -~ · :
';'k. /
[!.-:-
..... · ·. ' . . • . ·.· .. · . <J~qj,,)i. J-"z°{,d · . r,;". . ·. · 'Ex~~n-:···Therates of pr.~fess1ona~- ?l{ld.
.· .. o.n ':the .·y.e·ar. a_n· ~s.t~bJi_sh~JttJJif~{lfe~ 9f.~
·.H. . . _. a.museo,ent taxes: _ . . - .. · . ·.
. .. . . . ·
:.. ·
f: . teri:n1.natesJt~ bu~1ness .w1~m trr4.t:?,1;1h1c'1~-hty,it_. t·d · 1~ ,....... • _. ,._. · •• • •• • • _ •· • .• _ • • • •• •
,f, .would ..b_~- tequi_red to ·pa"y-.the.c;liffe"):~9~111: the ;~.J~>~2J;(i}te.· _L~<?·
tt)~re are three ·t-¥pe_s of _.cities: .
..\ a~.o~nt"lf't_hijtax· c<;>llec~~d_. ba~e<f;~·n. pre"'.10]!~~~~-Q~-~i1J.an~1ties (?C~), _lndep~nden!. _{?omponent'.
year'.i:1.gross salei9 :or. receipts, 1s 1~,~s th~f~h~.. . : C.1t1es (19C~) and Highly Urbarii.ze_d_Cities (HUCs).-
. ,. ~C~l!al tax due:_pased. on the current y~.'~~~ros~ · . : ·l<;;Os.. ahc;l t-HJCs a.re· indepencfeht of the province
f .. · · ,.· sales· or: (receipts (Mobil .Philippine~-it: ·.City .. : .. ~(LGC, Secs.. 451-4q2).. .. : · · . . .
?.: .. :· ·. · '·1?easurer·ofMaka.ti, $.R No.. 154092, .:.J.u1y·1.4; ·.-· ·. . . ·. ... ·: . .
{ ·. :200.sJ.-!ri1he a~va:example, .fhe-·t~xpayer.wm: . ·.. This means thartaxes, fees and cii~rges·levied and··
?.ji: ·· . be·:el')titled JQ.. a. refund of P:15, ClOO" (~50, 000 :-:"" · ·c6Jl"ected by'ICC~ ~nd HU.cs·accrue solely to fhem
.;~:.. -. -·-p3_~;000) · .·. · · ·,. · _· .. ·.. . . . . . . (LGC,·Sec.1§_1).· ·. . . .
. -:•

b):.A.~·s1.11111i:,~ -~.t t~~- en~ bf-Q.rito~.r-::?013,:M~·bw; ·' '4 .. _Barangays ·.. . .

-;-gross_-rec;:~jpt$.amoonted to .P1; 200, 000. Are . · · · Baicingays· may .levy the following taxes, fees,
· "th~y req"i.!ired}o [iay c!dditio1;1al tax? ·. .", . · ·. . . · ·. · . ar.ld" ct:iarges. which.shall accroe·9xclus"ively to.
·.: .. : .: ~. ·~:··.' .. .• them: .. :· · · ·· · ·
. .:.-
.YES., tv,obil is r~quired, to pay· P10/ ·ooo, the· · ·
. ·:?iff~r:Eince_qf P60, 00.0 !~1_:. 2.00·.-000 /5~la.r:i~
. .

·raxes. . A:-:·
.
.
. .
-
: P50, .000. It.the tax paid 9url_ng the year be:less · .' Subject: ."~tor~s or ·retailers . with .fixed ,
:'; . "lh.<!Jl1.tfie fa~·du~ on:sa.id i;iros$ sales·or.receip~s. bu'siness "establ_ishments with . the gross
:;:- . · ·..: _.o~ t~e.euJr~i:,t ye~r. the_ differenc~·.shall _be pato·. s·ales or receipts fqr the j:,receding calendar
;··. ·. ·before the· ·business is . consrdered· officially · : .· ·. . · ye~r of P50, ·000 .9r ·1e~ .(to~· b.araniJ<:1YS in
· · r.eti)'"ed· (LGC; Sec. .1 if SJ. · ·· ·· cifie.s) and f>30,: OOQ. or JE?ss (for barangays
·in municipal~ti.es).: ·

201s s~ BEDA _LAvJ CENTRALIZED BAR 0PERAT1o~s I 357

 (. CJCA{.·. TAX

·. Tax Rate and Base: Not. ex.ceeq\ng.1:.% d(

Iii
. SAN BEDALAWCEf:/TflAU?El1BAR
M
PPERATIONS:

Comrr,unity ·Tax
MEMORY AID 2019
RMI?' EMIH-:4'iMFMCYWi ,,., ....
the gross sales or receipts (LGC; s_ec 152 a ~II or eapi't~.tion ia~ impas·ed :upon the
. - It i~· ·
(a)). • . . . . . . . . . resident;; of a city or municipality (V DOMONQON,
Taxation, ~1,1pi~ at_'161).
B. Service. F~e~ ·or Charges' . .. . . . . ~,--,~~~~~~~~~~~~
·Subject:·· Service rendered in. connection ·: Cities or. m't.inicipalities (LGC, ·
wit~ the regulation or use of : barangay~. · s_ec .. f$6)
owned properties or .service facilities s'lJch ·
· !;)~ palay, ·eopra or tobacco· dryers. · · ·· · i·1 .' lndivia~als
2. Ju.ridicaf Persons .
Tax :~ate: Reasonable .fe.es· anp. charpes'. 1: . Every :inhabitant . ·Of . the
(LGC, Sec 152 (b))._ · .. . ... .' . . · .. -
.: P,~ili~p\nes. (regar,dl~~s .of
. -~ . ('" . . .. . ·. _;, c1t1zenship); .. · ·· · · · .
C. Sarangay Clearance . · · . . · .: ...
·2. -Wr.o is 1:s years or· o.ver; and
This· is· a pre-requisltefor, the issuance ot :.:
license .or permit. to any activity: pity or . · No · ...
'. .
·.~· Has. .b.~en . regularly
. em ployed . 0.n a . :vvage · or
· rnuniclpality may.issue ('1!1Y license or j;,errt'lit · . salary pasi~ ·for. at ·,east. 30.
for ai:iy J>usin~s·s .. cir . activity.. unlese-. a . . . consecutive :·:working·. 'd.iiys
. · clearance · is first obtained · · from · t_.l).~-xw:,r-=r, ·. ~u~ing. any calendar yeai; or ·
. . ., . barangay Vfhere. such busine.~s...~r!a$,;U-v1ifyis. 1F: T ... b.. Is engaged in :business. or .
-, . _. ·· 'loca~e~_-orcon~uc~~/LGC, Se~2·~··· Q·:
f~Z ~J,.~~=---·.
. Qi:;~pation;.or : . .
· ... e·. Owns ·a 'real. propecty· with
. ·. Tax Rate: Reasonable
. . f' ·~.~ .,;;.ef"'.
"··~· an'aggregate·a·ssessed '-'.c1tue· ·
.. :Tl)~appli~tioh for.clei:<fa1ip~1:'.{ii"~~ ·. 1f'' ~ 't of f>j, 000 or more; -or.
:.) . l ts requif~d .by law to tile.an' . ·
. u~on· within- ~even (7)1~a·rRtr:i$}.fays/f r~n:i t!"ltf 4Jt~ : . -~~om.~tax return.· ·
!ihng t~e~.e~f. In. th.e ~~t:.!ltth~tJhE: ofearanq_a· 11~-:.
· 15.. not 1~~ue~,~w1thinth~-"§~'i'<fperio4;·t!iE;cily-WJ'ITT! €?Jii:Forpo~ation.. nq. matter' how ·
· -or m~rncipal!ty mfiyf.~t.[!e:J.1esaid l1,9er.is~0·· Createl!J'·dr . 9rganized,.' · whether ·
.. ( ·· perm1t'(LGC, Sec 1'~5,/RJ:)." \ ·-' Zr.~:_ jdomi~tic 6r · ..resident · foreign, .
~illWl
o.
.
Other F~es ·a_n~ .CH. ~9~;:\ . .\~~~ ·. · .·~~
. •. ~!,l~I' . ·~ -
. eng/gf.? i.~ or ?Oi!)9 busines~ in I
Subjects: · C!f .,,: i· "~\..,. ·'ff .1,.. . th~.P~thppines
~ . : ·. .
Abs~.fut~lyJLGC, S~c. 159):
· · :.. . ..· . .. . .
!.
r. com.mercia.1 bree~i~~:ot.\ghtin ~oo),s~· -~ 1 :-~1plq~t1c;.'.a~d. _ ... · .
t•
. . co9kfights and c?c~p1ts; .. ' · .~ 2:;Con~ulc1r. Repre:>entative~ .
. · .. IL . .Pla~s .· of recreanon wh1ch:,_.cita@e1t:'"}..r· E~~pt .to.r.t~e rest .ot- the
. admlssion.tees; and.'\.. · ·· ·:.:;,~:· .Cl"
. year... : · .. · ·.
: . iii. Billboards. si~~boar~.si-Ji.~n(,_sfw.S>;lla~,
, outdoor adyertisemer:its (LGQ_-;;_$fJ}:152· 1· f a::' 'T.ransienf visitors when th~ir:
(d)) : . ·. ·. · ': · ·~ . .£'11: '. · .~ita\{ in the·. Pb.flippines. does·
...... '.· ... · .• -. ·:
~~~ ~·.·:. .', .. n.ot ~l.(Ce.!=lif·3.rtjo~tli's (lGC..
·.. , ·, ~~c .. 1.59); . . · ·· . '·
. . . ~umn,ary Rules.on-Dlstrtbutlon of Tax Proceeds., ·
. · .. Between°LG~~ · .. ,.: .... : ·-·. ·: ... ,. . . '...... . b.. ·.. J:>e.r~o()s . who· come to·'
G¢neral Ru!e: Reve·mie.s.shall inure sole.ly
... b~n!=)fit of. the 'l.,.GU leyying. the. tax (LGC, ·sec. '13Q .. ; :_-. rHffalllll
tti~.. ·_. to . )eside·iii the•{=>fiilippines.:on.
.- .. _ ,.or·.·atter\ft.ily.1·:(LGC, Sec. ·
: .. (d)).· · .. , (.. ... .. . · .. •, : .... - .:-:-.. ' .. . .. 1.6.1); · .. . .· : · . . ..
. . . . : . _\. .. ·: ~.. . .. ... . ·' •' ·.9· .. Persons 'wbo become 18 ·
Exceptions:·{SAC).. . . .. ,. . .. ,. . : ..y~ar~.pf.age ..ori'or'afterJu.ly ·.
· · . } . · Ta~ ·.on· §~nct;.. gray~~ · . and ...othe_r,'. quarry. · · _-1 (L...~C, Sec.. 1.61); ·.
. d .. · Persoris who cease .. to.·: ·
· .reso):Jrces: 3.0%lo· the Provin.ce, 30% to the .
Compone.rit.. City. or. Munjcjpality,:;40·% t·o· the,.·. : : . .... b~long. to ,an exempt' clas~.·.
-c .barangay (b.(,,C,' Se.c: .1.38};' , · _ .. • · ·. . · ··. · . · : .. · ·. on or aft~r·July 1 (LGC, Sec.
.. ·2. ~rnuserri~ht Tax: ··snared .. :e(JU~IJ'y· ·by·-.-the · ... · .' · ·•·. · t6.1J; ~no.·· ;.. -· · ·· · ·
wo"'.(nce.a(:id rm,micipa!ity·(LGC;$ec. 140 _le)); · e. · c.orporaticins .~sJablisJ:iecl · · ·
:· . 'and orgar:iized: on: or after .
a~~ ·i· ·. :. . ·.· . . . • . . . .. ·' ,
· 3. · &omtnunityTax (in·casethe tax is colJe·cted.by · · July 1 (LGC., ·$ec:'181),. ·
. barangay treasurers): 50'}'~ to .the ml!nicipali.ty,
. 50%.to the.b~tangay (l,G~; Se.c. 164.(c)).
~ & • • • • • • • • • • •

'•,

. ~58 I :2019·.SAN E!EDA t)..w CENJ'RAUZED.a~ OPERATIONS .< .. ~

• •• ••• l • • • • • ., • • • • • :

~.
 . Lo'cAL.TAx.·
SAN BEDA LA.W <:;ENTRAfiZEDBAR Ol'ERA'"[IONS.. - MEMOflY Alp 201.9
,
'll!l!lmlmlilli1ll!.. IIIBllll!!ll .. lllllmllll!r.mlllllll,£1a1.+:Rl:iDHMWll'll&R•B~r•e~Mimmeaw11111W1;i;awm:s:a.s:..mL~:¥•-~Aa.t1,w~-nm-1111111i!m2naP21Mllil:l·~ur••illllmM~Y.m~C!l!:

PS.00 plus.P1 .'00 for every . Community Tax

f'1 ;; · 0()0. income .reqerdless. of
whether frornbuslness, exercise
ot: profession or from property .
(riotfo exceed P5.. 0,00) · _
· They shall. pay an · . Jt shall . pay an · annual
Note.: In . case of 'husbJnd. and . -annual cornrnunlty · · community .. tax .. of . five·
wife,' the additioriai'tax"- shallbe . tax of . five pe.sos · · hundred · pesos · (PSOO), ·
based on the totai property: grqss· (P5) and . ?n and an additional tax; in
receipts ot. earning:S. owned or additional . tax of . accordance ··with. . the
derived by them.·· one -peso (P1) for-. following: ..
every one thousand
.PSOQ; plus ·an.1')'ua1,'additi~rial tax . (P1 , 000) of income . 1. For. every '·.. fiv.e · · .._
(not' to. (;}XCeed f:'1 Or 000). •. . . . . regardless of . thousand (;)E:}SQS (P5: ..
l whether . from 000) · worth .:of .. real ' ".· ·
·Annual : '. additlonal' .. tax in ,, business'. exercise ... property . .. in. . • the"· :;' .
.accordance witi:, . the- following of profession · or . Philippines owned by.it' :,. ·.
schedule: :. . , · · . . from - ·. ·. property du.ring . ttie preceding ·
:1· .... for. eveiyf>s, .. QOO .worth of·.. . (LG6,. sec: 157). ·year based -. on :the
: real ·. .-proper:ty owned by_ . it. /l.>, valuation used for the
puring the prececliog · ye.9i:,., · hr' - Note: In case of payment · ..of . real
: pas~d.9:"'.the_ valu~tion.u~~~;·??·.-, hu~band_ ~l'!d wife. property :tax.: under
-, for ~he payment of the ~~~1;.l :,:.-.,1 •0\ the additional tax existingJaws, found in
pr(?PEi_it~·tax....:P2.0_Q; and \;l }! .. ~)'.:;-1} .:.h.eI_ein '. !~pos~d the. assessment roils of
.~: .. For _every PS, ooo of gr.es~.- J_,.,: •• n, st:!all""' ~S:•d;>ase:d ttie city"or.mun'idpallty
· receipts or-•eamjngs,,.,e1ri,ed~'./
·. ·~y _i~· fr?m its buil,Q.e~s-in ·the)
Ph1('PW~ei,.
;_~:rr! upon-~..:..:tl;i&--"'{total
property ov/.ri,~d· by
O,':!,qn.9.' · . tt"t~:_\::.>\, . · them ~nd l~ 'ptal.
where 'the ~eal property'
is situated ~ Two pesos.
· . (P2.00); and .
_ ·pre.c~dm~-:Y~~r:'~~~~~-.-'.'5'- ::"-. . ~) 1
g_ros~ . r ee1~ts'.~ or . 2. ~ For .... every· Fiye. '! .
R 'de · · . u~·'T. 1--,
d' "ct'.· 1::--·· ·1 ..- . 111·\ e~'rrnngs,_~eri;yed!by : · · thousand pesos. (P5, ,
.~st. tee ·0,-,t•e- '\~-Y~~/'~. ?! 1·. f~\- them ~If.Ge,.~ se1;_.. · 000) of gross rec~ipts · ·
the P a~e ~ E;,~:\·t~.ifpri.~c{~?/ (':·~ 15-l)it,{.~1'...:,:.. , _~r. :, .. _.or·earnings derived by
:o.tti_,ce _ ot .·rn~!YJt1rlEJi.,c~_v ,''rt1ty~_·s.,..;.. r./tt,, . ·,.:.,;,,., .·.•.;_···_.~,..~...-"·;:;"'
" .. - - •J' v~• ·''I' !t':fro.rn .]ts. _l::Jus(ness in·
located: . . . ·. ~.- ,!-,;:':.'{a°: . . -;; , .in;f . . ''"----,~.r~:'"""';r t}J_e Phili1:fpir,es during .
Accrues: on" : th~~ ~t ··'\1~y:. o · '
Ja1:w~.IY of each .yea~~W.t!.i9.IJshall: );·-~
rf · ?~r.: -,;;i._ . . the .. preceding·. year· :.. ·
Two· pes·o.s (P2.00)
be P,ald not later thaA*,V,:ie last,d~!--~!:."!~'..~.i11.u..~....:J ([ GC, Sec. 158).. ·
of _F¢bruary,-9f.ea~h-{~far:· /:;-<Y_. . .. , · . . ·.. .
. . . ' .. ~,.P . . . 'Note:: -The· divi~end~
Jfa,person readties.the ~ge"-(Sf 18 . .- receiv,ed by. a.corporation
yea.rs. or JOS$'~S t~e'.: beri~f_it_. of ' from another ·corporation .
exemption. 'on' p( before the:last . ... howevec shali; for' .'the,
·d~y qf. Marc:h; he- :st:iai(havfi.-.?O . pun>ose'·¢i the ·a~dit1onal
c;:fays: >;vithln ·,·Which to .p-ay. _-the: .tax, bE;l COri$idered ,as part
com~unity tax ·Y"i~holi't.be'.corning·.: . qf · th~' ·g(~SS "foceti,-fu-of
delJnq.uent.: .- · ·. . · ~ ·· :" ... · · earnin.gs_,,· ·.· · of ,.· · said.
·.... ~ . corporation . ((Ge; . Seq,
Corporations established anq '1.58): : . ', . . .
organized: on . or· before the. last .
day .of· March. shall have· 26 ·_days ,
within · · which . · to·.: - pay' :the :
community·ti;t~' wjtliolit becomi[lg·. . ··No· -case shall· No case s.hall exceecft~n
delir:t~fu~nt. · · exc~ed. five .thousancj pel?O~ (P:10;
.thousan<;I - pesos 000) (LGC; Sec. '158{
·Ar) ·inter~st of 24% .. p~r ~·~mirn. ·. (f>S, ·. 000) (LGC,
from U,e due ctate .until it is paid .. 'Sec. 157). !.
shalt. be. 'added
d~ J, .·
to ·.
the amount .•
. . .
·'·

·l
.
. ·. 20i9 SAN BEDA. LAW. 3·59 .
. . . .CEl'JTRAIJZED
. .
BAR. .OPERATIONS
, ~. .
'~....
,r-..

'
 LOCAL·:TAX-
SAN ~F:DA LAW CF:NTRALIZED BA.R OPF:RAT!ONS ~ MqAORY Air;, 2019

Tl:le following. 'are exempt. from community· Collet.tio·n of Taxes .· :

'tax: .·. ·. · · ·.. . · · ., .
i. Dipl_omatic· ·. and consular representatives; .Calendar y~ar, unless otherwise
·: .. and· . · · ·. . · ·_provided in the LGC · ·.. ..
· ·ii•.. Transient vlsitors wheri their stay in the May. t>~: paid ·)I'! -lump-sµni or
I
. Phiilp"'pines does not exceedthree (3) months qua_rterly _in_st?lftnents · - .
I·I
(L_<:;c. Sec .. 159). I
. Fir~t (1~1);day ~f January eac~ · pf
Com~unf~y Tax Certificate. ... . .
Jt is issued to'. every. person or corporation upon
year.- Howev.er, . new taxes, .
charge~ a,:id f~es i:ir. cha.hges.in.
I
payment of ttie 'cornmunlty tex. It may also be issued 'the rates·fhereof $h.<!ll ·aci::n.ie'on · !.
to· ~~y persol): o., ..corporation not subject. to the. the. 1 sf day . be. tl:le '~u.arter I
cornmunlty.tax ·upo.n -payment of' one peso ~P1 .00) t9it_ow[ng·· ·;the e_ffe~t_ivity ~ of . ."ihe. · .
· .. · · (LGC,Se9. 162):. · . . ordinance imposing, ·$Och . new ..
. . ·.. ·_... . . ... c,

levies. or. rates.

. . . . '. . .. . . . . . .
.C.ertain ·: occaslons... ·wh~n . Comm~nity Tax.
'within'.: tt.ie first. )o·. da"ys ·.6(.' .
. Cei:tificate is Raquired tc;> be Presented: .
1 ..• Pin-· ihajviclual, subject to .community· tax · . ·Januc/ry oi of-each Sl.)bseq·uenf·
quarter:as the cas~ may be. · ·.
. . AcknoWfe°dges · any doccment before a nota~== .
· publlc.. · .· . . · · . . . . . · _.,,::~ . lfLJ;.,. O"nly .fo·r a 'period not-ex~~-~ding:: . ·
2: Take~. _tl"\e Qath of ·o~i.?e . tipon ,..efefotii-:1\_ or l . , ·6 months forjustifiable're-asciii or .
. , ._app~mt:ment toanyposltion 1_n~M~ver~$'J~..r~:, ·paUS'3 · ·without· !i~l'chargl:lS.. or·
. . service: . . . p/ V,::r. · enalties·
... ~· · · · .

Jr
. . _ · 3·_. ~ Re~~.iy'e~ an:(~ic~ns_e, ce_rti.Y,e'ate.~~t.'p~lttrom'""·3~=,;. ··'·-1.. .. •' .• ·.. . .. · ••

r . . .any. pubtlc ·autnonty;_- f.,{2"'1 .//. fi;l) . X· ·~ur:ch¥.'~ge not exceeding _.25:,'o·
h~eamounl of taxes not p_a1d .
. : 4. Pays any Tax or fees: ri1, . ,-,,t,,f .tr ;, ··
. 5.. Receives any Mone_y fro
;any f:?fjblic f~nd; . .j_ · 0~1i\e . and a~ i~tere.~t _'at .the'.· .
6. - Transacts other-Offlclal] lJs'.iffes~; or r-,-~--.. r-ate :, ~~t. ~xceed1ng, . 2% .. per .
· 7. : :~ec_eives ~ny Salary ·~rq'N~~
f.tcim an\i per®.r17: . i'.1'1"onfh' of .the unA~id· taxes,
.. · ... ~r..co~l?qrat,cm (LGG, s,~Je)\l . . ·, \.. _: f.,\~ . i.AA.Ll,!~ii_lfs~.r~harges,· ~ntii su_ch
amou~t is:. fully .paicl ·but iri' no.
i.as~1~hair totah 3Ei' m'priths.. · ."'. · ;, .
Tt.le' presenla-tion,_ of_ the <?<>llnvwnjfy !·~1tr11ifcat~
. ·,":
shall not be.. required mlo0n~\!16~ ~,e ·1 .b. ShalJ{. be:- ·'collected. by : -the·.
r~~i~tratio~ .of a v.ot~r _(LGc;· s{c. 1_6~(a)(2~ ~~ .· ~ .p/ojn<;:~af, ciw,'. :i:n:ul')icipa(·· 6r:
.,. ·i1tystrati:on;, ·: _: .. · ·.i-'\-:;. ·. -,~. ~E~,0
,Ari~1··~0.q(Je C_orporati~_n is_ a. t'lo':1\stic CS)rPc~~:c'1t~?1~.:L.;.!::;L
,lj~pn~ax tr.~asµrl;r, ?r.;!heir_ duly:
JUt~.onzed ~- ,deputies., , The
,provi_ncii:jl; . city, ; or . ·municipal .
wti1.i;h · !)a~ . the . foll~wJng m9ome ~Qd,(ef1tie}tte'S'"=;«""'": ·
rec,~r?ed_as Qf)h~,e~~ o~ ~~e p~e-~_e.~1.t1g\~~t!: · .. wt t.rea'sarer ·:. may·. -de'sigpate -the . :
. bari;l'ngay . tre~si.Jrer·· as . hts
deputy .to. _-collect" local .. taxes·,.·':·
. .. :Gro~f receipts· in '.th.e.· .Philippine_s. •~1.0.'
boo; oo<r;'=· . · ·. · fee~. or eharges·.·. .·
total fair ..riiark~t, Value, of. :prol:)erties .owne<;I · and
·1oqated in t.ha.P.hiliP.pir:ies j~:P50', 090;,ooo. U,:id~r its· ·:r~e·:·fb~r. · .treasure~ .m~y; ·by.'·.
~a)('d.eclaratlon;' Hs 'prqperties .. ·a'ss!3SSed .value .is hims.elf: or· through. any-. rif·: his.. ·.
eq'uiv~feht to p20;: ooo, ·ooo".- . , ..- . ·: ,-: . d~p.u'*~s :: dµly . authorized : in··· .
~r:i~ing;- :. e:xa·min!i .. t_be ·'.books.· ·
The amo1:1nt of c~inmuriify.tax would.b.e: accounts,. and. ·o.tlier·. p~rtinent-
record~ !· ·of::. 'j:inY.. ·· . person, ·
. Ba~ic . . ~. . , , :- .· . P 500 ·partrier.s.hip; ,c·arporation·. ·. or ·. -
· : , .. Ag~i.ti~~.a(Commu@ftax .. ~ ·_. . .·:. 'ass<;iciatioh .· subje-ct": tc,· ·iocal . ~
'. ((1 o m111t0n· +20 :milli_9ri)IP9,000J~~~ . · t2:ooo taxes; fe'es·.cji:ld:char,ge~ 'in oi-der- .
.. Limit . . · 10;000 ·,tb ·a~certa'in; ass·~~s.and·. co.l)ect.
Tot~l"·conimu.njty . tax ·;._-.p~· ~Ei . corre~t amour:it of th.e "tax; . . . .
. . . f~e•. · .. or'. ·,·charge; .. ' ·such .
examinatipn. :s.lialJ'". t;,e" ·: ·made
·' '•
during regl!lar .ba:sirie~s hours, ·
only_ once f~r eve'ry tax J?e"rio~..
. \.,_;_ (LGC,
.
Secs
•. . ~
.. 165:-171)
' . . ..

360 I 2019 SAN ~EDA LAW·CE_NTRALIZED BAR OPERATIONS_' .

 t.- LOCA:L.-TAX ·
'
:t
~;i... .
} --------11:11111----------~---imlll--.;r.7)
111111· . .
· }'...Oth·er Powers. of tne· LGC . .
..
SAN BF:DA LAW CE,:'1T{IAL(ZEDBAR OPEBAT:IONS- "1EMQRY AID 2019

.
· :If: 1'. Power to· Prescribe Penalties for Tax Violations
. Local tax payable
Surcharge·: · P1 ,000 x
·p1,ooo
250
{' and Limitations thereon. 2$%.. . . -·
!{/ . .a. Limited as-to the amountot.lmposabte fine : Interest:· P1 ,000 x 2% · .. 120
:+. . as well as the length of· 'period . of x 5•
Ji:. :· imprisonment; . - Total iocal ·tax.liabili'tx : P 1,370
-t, b. The Sanggunian is authorized. toprescrloe:
?: ; finesor other penalties for violations 'of tax *The 6-rrionth .. period shall_ be. counted after
.,J,·. .
ordinances, .but in n~ case shall fin_es be\ january 20; ?0~3: ·
IF> less than Pt, 000 nor more than P.5, 000 nor
" shall th~ fmpriscnmentbe less them ~ month 4.. Power to. Grant..Local Tax f;=xemptions_·
. nor more than ·6 months;" . . - . . . Local · . govemr:nent ·· ; units . may; throuqh
c. Such fine. or other penalty.ior both, shall be _ ordinances .. dt.Jly··. ·approved, , . gra.r:it . · 'tax
Imposed at the disct:~tlo.nof the. court; a~~ exemptions, Incentives or. reliefs . under Such
d .. The Sangguniang Barangayrqay prescribe. . . terms. 'and conditions, .. as the.y . may· deem
a fine ofnot less.than P100 nor more. than . . .n~cessary(LGC, Sec. 19-2), ". ·: . · ·.: -
P1, 009" (f:GC,· Sec: 51 ~). . . .. . . · · · · ,
_ .. .. . . . . . ... The dt~tinctio~· between' local business 'tax and real
2 .. Power to Adjt.i:5t Lacet Tax Rete : · I : propertytaxes intermsof the power of the LGU to
Adjustment -ot. the tax rates sh?l;JI~ .~ot ~e/i?ef/·.gra·nf exemptions is· that: For· real, property ta~; the.
oftener than once every 5. years,' and 11'.l no. c.~~·~y:/:··\.LG Us cannot· add on the exemptions stated 111 the· .
. shall such -adjustrnent 10% of the rates.fif~~t;U):.;,i,~·LGC;·whereas forlocal buslnesstax.the LGUs are ·
under the LGC (LGC, Sec.· 191), · - · \,J }·:~.,::;it',Yfree to· grant ·exempti'ons (JNGL~S,. supre-ie; 532- ·.
· · · . : · · - · · ,Ji r;·!'·'.~:,;}n-t.fs),c,.,,:;..: ;~1.~ ·. ·· - . ·
.....Ltf!~!!)
Note: Sec. 19'1 of.the LGC presuppos~~ha'rl_;Jl'f'.'~~--.· . · · . · . . .· · ,·
the· following requirements are pr~sffe.irtor-.. it t~;L.)1 The·power: tQ'f. (ant tax. exemptions, tax 'incentlves
a·PJ:?1Y, to. ~i~: (i) there is. a ta.x_ ow).~~~?.eth_af?'~~y . ahd ~~x re~~f~\hall npt app~y to. regul.atory f~es
. alre~d_y imposes a ~ax- in a~c,o~qtp.~~~~!!t):~t!ie ~p
_w.hi~h a~e ir.viid l(!)der.the 120hee pow.er_of.t~e. L_GlJ .
prov1slons qf the LGC; an~ Wl1J?~re 1s';f~~-con~. · .1;~
(ABAN, s.t1Pr~f,!l 395). · ·· · .:
tax ordinance ~hat made, a_tlJt!f1'11E~}il,~i9.n·.the ta){-:;, l;J · ;.· L ll \. .. ; ·
. rate fixe.d by th~ first·~:' o(q~pan.ae~Jg;.t~~ c~~ei .' .• fi,I Tax ~r,>P\i_apI,f,~rjUfoate · · . . '
· ·-sec. 191 of the LG.C w,ir not·'~pply.g~0a1Usew1tli) · ,t.}f Tax· exemgi,r-Jm.s.;;stiall be conferred through the.
the a~sailecf ~ax ordinanc~. 'th'eJ~nc3:~{\uJ~igh)1. r1f sf ijssua_nc.e .of a . i:i~n·-tr..ansfera~le tax.: e~e~ption
· or urnlate~ar. mcrea~e of tax tO({SP;leak J'!\· J~,e · ,;',,-~ ,1cate.{IRR ofLGC; Ari.- 282). .
resulting increase in the , tax· ~t~\ro,r,Jeta1lers · ..,..J_..~"; . ·,;;,;4~~. ·• · · .
was iTierely . incidental. (Mindana91;ShoeP.irJfP--__,_~T'J:(t:;:xefuptionsExistii:tg be!ore the Effectivity of
~ De.stinationCotp. y; .·Quterte,. (3j~.~o.:21tfOJJ3,. '.. ·. ~~e LGC ha.s
be.e11 ~olished:.. . _
·:.June 6,.201.7) ... · ·· · "''Y'.~.\h,.: . · . . ·,Unless·. ·otherwise·--:provi.de.d · by the LGC,. tax.
' · · exemptions or incenli\(es. granted to, .o(:presently
3. .- Power to ;mp9se·:surcfi"arges.'a.r1d ,;,tirest .··enjoyed by·au pets!Jns:;.whettier natural or juridical, ..
Tha Saiiggunian may in;ipose a.surcharg"e 'n'ot - includin'g _ · · governrnent--owned, . 9r . son~rolled ·
·exceeding 25%. Of ·the taxes, charges, Or ff!!0S . - · qorporations.are wit_hdrawriupon thl;) eff~ctivity~ofthe..
not paid on time and·an interest rate of.not more ·.:· . t.G.C (!:.Ge,. Se~. 193).. : .:, .>: · ·.
than 2% per montti 6f th~ unpajd ta~. ·charge ·or. ,
. fee including· the. surct-iarg~ th.ereon, ·but ·in: no A ge.neral.1aw:cann.ot.be. ccinstn1ed. to have re.pe.~ied
case shall the same·total 3tf months (L.:GC,·sec. . JI. spectal.law I?~ m'E;ire. i_mpiic~ti6~ unles:s.'th.e.i~t~~t.to
· '"168).:. · . - . · · . ,. · · .,,. ', · rep_eal or ?lter 1.s. m;m1fest ~nd _!f must convincingly
demonstrate ihat the 2 laws· are so clearly repugnant'·
i11ustratiqn; ·. · . . ·. ·. . , .· . _ ·,: and paten:t1y'inconsistent that they c'arii:io(co-~xist._
Mr. A falletj to pay th.e,local. tax on·h\s business· Tf)e· · provisions· .Qf· Sec,.. 137 ··of· the. LGC. Which
. . . ,fo'r thE(year .2012 in a total amount of P1, 000. authorizes the 'province to .. impose.: franchise tax
. He was assessed by.the LGU on.June 20, 2013. "notwithsfandjng any .execution gran\ec1 ~.Y any law
TJ:ie $an_gguriJa.n imposes a 25% su.rcharge and or other .siie.cial 1.;iW~ ·is ~II encor.np,al?.sing and clear-
· ·a .2o/o ·interest per' month <':}S penalties .tor· late (City of Sa/1. Pablo Laguna v. .
Reyes, G.R. N.o ,
taxpayers. How much is .his total tax· liability 1V708; M~tch25,1999). .
including 'surcharges iir1d interests? . .
. \ . .

?019 SA~ B.EDA.LAW CENTRALIZED f?AR OPERATIONS- ·1.3P1.

 -,,, . EMMS

~OCA.L·TAX
SAN BEDA IAW C~TRALllED BAR CJ.PERA_TIONS,; MEMORY AID 2019,
~••1111ilillmsllli11111 .. 11111B1 ... !!ll'l'mo~.111i1.... ~w11m!llf:1aw~+m,~aa11m1nll!llm1~waeil'mn1m¥¥11rs1:111llill~iaaa.1111llP:lllmP!Bil
.. 1111111teae
Exceptions: · . wjth its fr.anchis~,: f~om .which taxei, dytJ~s :and ..
· The following ·is theexcluslve list of entitles which · · charges,_the. Grantee is her.eby e~pressly exe111pted" · _ ·
are stltr.exempted from local taxes: (WaCH-BOI- ·(National Grid. Coiporatiof) · of the _.Philippines v.
CoP) ... · ·. . . . . . Ofeliam -Oliva,· ·City '"fr.easurer of C.ebu, ' G.R. NQ.
1 .. · Local Water' ~istrjct~; . · ·. ·. ·. . . 21:{157, August 10, 2016).: · . ·· · · ·
2. ~oope(atives 'duly reqistered under RA· 693!3; .
3. .Non-stock · and : ncn-profit !:f~spitals ·. and N.ote: In case. of Real property Tax.es, the prope~y
. ·' educational institutions: .· ·. . musr1;>e·~sed. in.i::onnection.with. it~ fran.chise In order
4 .. Business enterprises ·.. certified ··bi .BOI: _as to.be exemp.t Properties ".excl.usiv.~of this frai:ichise",
pioneer or non-ploneer for a· per;loa ·of 6 and 4· c:;>r those held by .the.corporation· in a ··capacity that is·
years, respectively, from the dat!3.of_~egistiati.on;·. .. i not re rated. lo' the exerGise of· its· franchise. .shall bi'i.
s:· Bus{i)ess·· entity, association;" or cooperatives . .. as.sassed ~il~ .RPT.(Natiorial Grid- C.or.po.ra(iqn.of the· .
regl$tered \m<;J.er:-R,A. N~ •. 6810 .(COl,!ntrySide · .Pl1iiipplnes y.· oteliam. ()livaf City -Tieasurer ai Cebu, .
. . and Baj~ng.ayBusir,ess Enterprise;,}i·~nd : . . 'G:f~ ...:No:·213·1s7!AiJgu_s.f: 1b,'201.6)i_ . ~ .
6. · Printer: and/or · publisher . of books . or other
.. ·re~djn:g. materials· prescribed ·~y oscs 'as... '.Sm'artv.Cjty of Davao'. v,.·.-,;NGCP v ... O!lv~·
. . ·~. . . . . . ·. ·. . .. . ...
. 'schooltexts-bf references, jnsotar' as. receipts
jrorn the printing and/or. publishing thereof ·~re·· .
.cphc~me~ (!RR of LGC, 'Art 2!)3). . · · .. ~.;..=· ,~ : . , . ... . . . . .. -. . .
·
. . . . . . ·. . . . .· .: .'. . ,;~ \ "".t.:.:J ·,
Franchise. <:-r~nt~.? Affer-~ffecti~itypt;.\~(t,~ot
1_n7:liea.:··of- air· taxes"." ~in lieu· ofIncome- tax
a~lip~ ~::..\~ali _o~he.i: and .a~y and a!l 'taxes, ..
· Cover~'! by. t~e·~1thdrawa} :, _ ··/·'5. )
The· withdrawal ·.of tax exempt1»11~"'_Rr·:.µ:i_2~e~Hives ·
1-. _,';';,:,µ~= i~t~nial_- 1.re.v~li..tl!{t~es · · ... local o~ national"
and'n·- fb"lcic~l~t~tes· .· . . · . ·· -, '; ..
_pr~~ided in.the L~C ca,nonl~.~ffp?_t.ttfo~e ft~n<.bis~~~ . ........_. · · _ *!'~: · · · ~ . . >. . ·. · • . _- . i
g~a~_te<;I : p~~r. to.. t_he e~ecb~~!Y,{o~tp,~ ...~1:1~ Her~;,. '}·· . ranchi~e~'il~ \?t Franchise · · . .. .. · !
!
.pet1t1oner'_s.· franchise ~as. g~n~e1:f:1.~·m,c.;,n[t1.s~fte'r. · ~~ . :~t~Q~~ . ally '\$i(ignj'\\n ~tegori.ca.lly ; .. states . l·
Jhe effect~v1ty_of.the ~aid. I.aw;,{~ t1~u5.~ot,,covered. .,f(~ .~'.Wnrui, n. f.ro~{..l~c~I. tt)c=;it th.e tran~hlSf.l tax'
~!J!9· : .
j
by fu.? sa1<Jw1thdf!3~a1. HovJ.~,{V~~ ,tn ~~e.u ~~s ·. .\ \# ....1l · shall ·b~ in lieu pf ';,111 ,
. t~~es' flaus~ . applies · onfY. 'tO"'<f·}at1on?I~· 1r1t~r-r!lj3,_ · · ·
··-revenue.taxes an(! not-.tq:l~c;a!,Jax s. Furtt'1ermor.e,~17- .. ·. · · ·
.·. ~-(. ·· · . -· .. :_:{'l · t~es w~eth~r national ·..
l~i n- or local .. ·. ·. ·· · · ·.:· ·. I
the "in lieu. of all taxes"· c1;:il,i1R;J.C"'ii}_~: 72.94 ~r.-. : - _ r: · · · !! · r
e g¥/nt~
ff ·' ·. . · · ·
I
N.o.
readered m~ffe.c~ive;bYthe.-a:· ..~11~ 8lthe~~~w~·~.:i
(Sm_arl Commumcat,~rzs,.fnc,\.·C.itYo~paV:. Q1·~,
(kriOWIJ a_s S..M";RT's :leg/ ~a!il(.~<i.[ran~~~)., ·":Na~'ij- .. lt-.; ea~·~~-: .

1 ss.4~1, -September 1 ~· ~tli~1:.. : '\~. ·... . . . . . ~Jrv ~

;. 1 'p//$.~
1rgf 'R~ason: '-ttie. gtantor.
·~h.i~f .i~-. t~i~.· oft~~ ·Franc.hi_$.e,-.the.
~.a ~o}tti · GpJ.emme!Jf.jt·. Na.tional. Goverriment, ·
ur·
-~Qt pli iinpl!.e~{that .· 'ec:iterjori,cally state~ .
· · ·. · ·- · · . ~·· . . ·:· · ·. , · ,. ~CI.El . 1n~ eJ:1/G:f ·.:!II -Jax~s'. · that' the. francblse tax.
I
f
-·~~1d_e.f~om ~h~ na.ti.Qr'\al.f{'an?J)1s~ ~1~.e rr-?qc~~,.- · ·-·~- · ;,;;It!~~ t~i;eje'viedby. shall ,.be· 'in' lieu of.all !
. IS st1fl l!able to. pay ·me l~ca1. fr'anch1~e.i;.t~~~te:>§ .,~...._.,,,,,. IOGcil· go\te'f,:ir:i'fentsthat .. taxes ·national ·or local' ;,
. · ~is,expr.es~IY. ana:unequivo~ally. exemp1~d,J.[o.~._lt~~ .. },./ -~°'e\~~yii,the.grant .. · • ... .' .i ·.. (.
. payment th~ffeof.undef.·it$ legis,lative.f~c!f!Ch_ts~-.,.J,ne ~',__!~ · .. ;;tt-f'Ef.°franchfse. ' :; . . · . : • .. :. ·. .: .
"jn lieu !c>f all taxes.">clause ·1.0 .a legis)c!tive franc.his~-·- · · ... : · · · ·· : · ' · ·· ·
shoul9 categot'iec!IIY. ·~tate. .. thak)iie· .'e?(emption. ·· ... '(Smai-f Comrriunicatiqf)s,.·Jno:.v:.City of Da.vao, ·G.R.. · .:
app)ie·s..to poUi ·local and n<;1tlpnal taxes; olherwls~;· .: · . No... .1.5t)"j91;.'. ~eptembtir 16, 2008; National .Grid . ·
·tQe 'exemption·cra~rned shQuld. be .stri~Uy·co.ri~lr-L:Jed . Co[pciratiotf of.ttje_ P.hi/ippines_,v..' 0.(eliar'r.J'Oliva,. City ·
against: the taxpayer and '1iber'ally jn. fav,or:of the.. .. · Treasurer. of. Gt,bu, ·GR: No-··21315,7, August ) O;
:ta.i<irig a.uthority '(Smart Cdiiimunic#tlqns,tile.. v. City · ·· 2.0f6f.. . . .. . . . . "- . . . . . ,.
. ofDav_~o. ·c;.R...No. ·1.55491; $ep~ember 1tj;'2p08): .. . ..
. . . . .,... . . ,,' ·.. ·. .. . ·.:. . ... . . .. Guideiines'for Gr.anting'·Tax·Ex~mption.s,.Reliefs·., .
.· All realties · which . are . actually:; . dire.cily and. . and lnc·entl<res·. · ..: · . · · · · . ._.: · .,: ·· ~
exdi.J$iveiy. us'ed· in ·the· o·peration.of its fran.chis~ a~e -· . .. . .
· . ~.'ex\;impte.d'fr!)rn
. a~y proped/tai(City Gg_vefii'm~nt . ·. 1. :r~x· Exemptions :Cincl,ReUefs:··..... ' · ·
. of Quez~m. City v: Bayan TelecomrpuhiCf!tlons, ·f!J.C,·, ·. ,: ·a. ·.'Tax e)(emptions· should be con{erre€l via ·a
···. ~.R.. No.. 162015, March·6;·2.0<l6); . . ·. .. . .· · . tax Etxem.ptiqn certifiGate:.. · · ... ,
· : · ·· · · · ·. .. ·b. :.. M~y. be . gr~nt~d ~·in.: ..cas~.s . o.f . natural , .
· :rhi~.fr~nchi~a·ta?< i~· "in nea.-ot
in.com~ t~{~r:id·:~ay. . .. · ·cal~r:nitie~. c1vn,<;1isturbance..geo~rarta111.i.~e ...
. anq ·a°il taxes, duties, fees:and. <,;hal'ges qf ~ny ~ind, . . · . Of. crops or c!dVer$e .i:icor:ro:;ri1c coridl.tion.s
natLir«;i oi-description.leliied;~;i'stablis.hed or colle~ted.· .. such as: supstantial .de·creas~ in ·pr;ce~ ·qf
'l?Y any aut!lprity whatso~ver;·.local. o.r·national; on .. agricu!!ural o(agri-baseq pi'9~uds;
its'· franctiise,. r.ights, privileges; receipts, revenues . · c: · The g·rant shali be throu·g~.ah 9rdinance; ·
·. and· prcitits, and ·an properties l:l~.ed ·iri ~onnectiOn · '. ·
. . . . . ' :

.· . . ; .
362
. 1 · 2019 SAN. BEDALA.W CENTRALIZED
. . ·: BAR. OPEBATIONS·
. . . ·
 . . ·-LOCAL TAX- . . . ··
SAN SEDA I.AW "cEr,tTRAUZEDBAR OPERATIONS- }1EM~RY.AID·2·0;9

d, Any.exemption or relief granted to a typeor

kind of · .bustness . s)'iall . apply . to all
businesses similarly situated; . . .... ,. ··:
e. The-same may take e~ect o~ly- dwing the
calendar year notexceedmq 12·month.s. as R.e.medie"s-9:fthe lGU : ...
may be. provtdedln theordfnanca; ahd 1" .. Local Government•s·uen
.L · In· .case of shared 'revenues, the re"JJef or · · .·-2. Administrativeaction:
exemption'.shall onlY,. extend to the. lGU . a. ·Oistrafnt .
. <· . grantin_g such..(IRR'of{GC, Sec. '282.(b)(-1)).. . .. ·b_.: ·:Lev¥ ....
q,;:_, . . '. . . · ·. .· · ·3. -."Judicial_Aqtio.n
~f;'.. _2: Ta:i:c;1n_c.entiv_es; . · , ·. . · : .. . . .
'§... ~-· Shall be granted only-to new.investments IR Remedies of·th"EiTa"x·payer
;;z.: · . ;the locality and the ordinance. : shall' 1 .. ' Admini:stratiiJE( . :_ ·' .. · · ·.. . ,
f .. · ' :p_r.~scrib~. the · terms . and . oonditions :··· a. Before Assessment ·. · ·. · .
;:;';i. .. · therefore'; ·. .·.. . . . v , •• • : • • • • ••• •1) . 'Ouestlon : '!be. :Constitutionality.·· or
i'.i . . b., The. grc;int .shall bedor .a definite 'perio~ not" .·Legality of Tax' Ordinances or Revenue -
,r · · . . . . · .exceedlnq · 1. calendar year; . . · · ..·;,. · . Measi.ir'es'or:i.Appeal . ' .
·r.·-: . c... The _grant shall' be tbrol,lg~· an ordinance .. ·.· . _2) Declaratory F{elief _,
: ·.:. · ·. passedpnor-to ~be 1stday _OfJanuary'ot any· . · ·. b. .After Assessment · · · "
·· . year-; and . -.:. -· . · . .. · . · · . /·'.· , 1.J Protest. . · . .. .
· d.: }~.x.: incenthi~,.'.gra..nt~d.to a type or kir:i<! :?-1(~ ( :. · · : '. ·2). '. 91aim for. ~fund or Tax Credit
.b~s!~ess .. s~;:iJJ_ apply to all busines,s:~~,t-fi~~-~. 3) f3ed~':'p1,on .
· s1m1l_arly_ situated (/RR of the LGC, Seq.-~-~~,.;·,·;~,:;~ · · .c: 9om_prorn1.se . . .
. ,.
,• (b'(2') -
1 ' · .
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.
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11. !: , ·: • ·;r.2~J"d.icia~0
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. . --~~i·
. . · . ··
~~11..ti>" cticm . · . . ·.
~,ii . . . .
: . . ..... ,. . ~. ~·· , .. h: . ~ b. "Decli;l'.r.~toryRelie'f ··:
.' ,:PaESCRi_ ' .. . .
'·~'.i'"rv'.E.
•. , .
P:ER:1.
.
o{i· ,.J~OR
,fi .
,: ~11. ·.
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c. ln~utcliib\:·..... · .. :
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.· .... .. · .·. . :f- HE,
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A.sSESSME:~/r.tiN·~r~
' · ·· .· · ,r;;,Y.
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. '-·.'. .. .. CotLE~TJON o.~,,5Yi)
' ~f:/ =-"'Y ~t \.~i\ ' ::r/,(~·· »~_~:Ei>It:SOF
. . ' . TIIK I
~i
Is .·
." .· ,...,.___ . H - . . ~;~~iJW' . : . . .'
. · .. :. TAXES'·-, . ~./;,__,-. ~; .· .LocA~G':a-.vERNMEN.'f.UNITS. !.
i.· , . ":-:'. ·.· ·_:_:::. · ,· · :?-~ir:__"1'.1~. ·. /.:r:i~ · · ;:.· . :;· · ;-_ .··.--.: ·.·'. · ·.·:·, : _\ .· . _.· .. - .·;. ·. ;
);· . Prescr.11)t1yE!P.enoflS:for·~sS'7SSment..,._;,(!:;,'.. · · ·. t~JJ;'~i~~qw11.Go'vern!\'l.ent~s.lien .:. ·.. ·::·.· : : : ; ·. ·. ':':: ·-:
'\;;- . 1,: Loca_l-taxes:'fees, or<;~arges. ';-..5 ~~~rs·fr_on_;i}.!:le~-~~::..,.-¥_-:£'6'~~es. .fees! ~ha~ges,. an.d:ot~e-t;~~v.~9\J~~j ·. ·
./ ... ·: d?te~ey _be~me ~ue (lG_C, _Sec,~r} (a)J/r:·.. ·"'. :. constitute a henr.sup·er.i~rt~:~11~~~~~;:._c"'):i.~~"$'. -::"-/
.{ ·. 2. :· Wh~n.. ~here__ ,s fraqd
o.r: ~n\ent _to::-~~:~··tie:· . . . :en.cu_inbra.r:iqes.• · \n '.f~:,,'o.·r.,~'?f::<:-~11~>:~.·: ~;c:
, r, . . : . paymE:.nt..of_ .!axes,.fe.es O~/;~arges - · HJ'"'years . er:if(?r~ab.l~.'.bx. ~,l)Y· apw~}>r:,~le.~~I~~ .~: "'- ..lf
· . · ·fr:orn diSCOV~fJ pf the fraud or _intent.to evad~ t.he· or.judlcia]')=lft!q.n:(!;,GQi._$'.e_c_-. '/.·7~'-l,(·."'·?~?¢:;'!_,'·t{
·"' . p;;lyment.(l,.GC,-_S~c.-19.4 (b)).·. . · . .. _.. · ·.· ·. . ... .,. , .. · .. _.~ t.: -... > :1,':,,,·:'·/:,,,,~-;:~
··~~- .... . ·: ... · :··: '· ., . . ·.· · ~.... , · .How loeql.gc>Yernmen.t liene~tingu-iS'he'.d ·'f ··!·'·-:';-·;_
ft Pre~criptive Period of Collecti6n ·:. .. : . ;· ~ The lien' rj'lay or{1~,i.'be~xiinguish.ed'upo,nfull'pci-}1rb~~f·.:
\, ·. L~cal ta?.<~~. fees, ·.or. charges may be. coll.ected ot'the, gelin;(Juenf__l9cal _t~xes; f~e$_,. _ana S~~J9e$/
./ :: · wit~in: 5. ye.ai's from the .date: of. assessf'T'lent -bY. including· related. ·su'rc;:ha(ges· :ancj iote'l'E:iSt. (LGC;
~--, ;ildmil)istrative.6rjµd1ciaF~cti~n. .No s.u.9h·action s.halh . ·· .. Sec:· 173): .. ·· · :· :- - · · . . .. -. -
r ·. . !:le . .i.n~tituted. after·. the expir~tion .of ·such. period
2. Adm.lnistrative -A~tiqn :_
cf.: ' . (LGC;. se·¢:.1§~:4-(c)): ·..
~: ., • :,. .:· •
.• . · · · . ·-
.• • • • -
..
• •, •.
.· .... • I • '

f Grounds_.for.:_t~e Susp~nsion cifth~·-ifu~nlng ·of .. ; .

.,·, ·the· Pre~~ripli_ve E?er\ods;.(P.R'O) :. ·. ·· ·: . · ... · ·
ijy'
.
'Aci_in1riist'r.ativ~
Personal .·.
Prop·erty.
.Actio'n:
an~
• I
by
t1Jr9ugh ·. p·,sµai/1f_of
.. .
. Levy upon . Real •
Ftroperty , ··. ·. . .. ·. . : ·
;~~ .1. . Th0·. ~iea~urer. ·is legaJly ]~reV~nt~d ··from . the . ~ . : ..
. . .· .. ·as$essnieritor·ccillectipn'o(the tax; '. .' . - . .. a.·' Distrairi_t · of .' -~~y . ·p·~rsonal. ·. properyy.
J/ .. ·4. The taxpayer'requE:!sts.f9.r"a,Reir\vestlg'fltlon and:.' ... ' ... belongfr:ig.to'ttie taxpayecor' subjecno tt:ie
•; .. -~x~~te.s a _""'8iver in _writin.g.. ,l:)efo~e the . ·lier.i -(LGC, ~ec.:.175J:.
i-. . . ·e?(pitati,o~ of·the· pe~iod .withil'J·which t? a~se·ss.
,,; · . . . or co!lect, and . . ... · .· : · . Aia'ny tlm'e prior to the'consump,ation o"f-ih~
i:.. 3. The··~?xpayer'is Qi.Jt_of th.e.coun_try_or 6\herwfse . sale,· the 1axpayer may pay--.the ·p~o_per
i\ . · i ,.. canr.iq~ be Jocated (iGC~;Sec.· 194 (d)). · ·.-_. ~~a_rges.(L,.GC, Sec. 1_75 (d)). -·
•, ..
:£·
r·
Jr<·.:
&
,;,..
'•

·-------------------·---- ----·-·· -
 LO:CAL·TAX
SAN.B'EDALAW ccNTl{_AUZED.tfA~feeRA110Ns
- MEMonY Aif?-2019

When personal property. con~ldered 7)_ One fishing boat.andnet.jrot exceeding t~e total
: sold" to ·. LGu:· Should ·the property : value of P10, 000, by the lawful' use of which a.
'. · distralned be not disposed ·.of within one fisherman earns 'hts livelihood; .and'
hundred. tw.er')ly (120)-days·.. the same. shall
be considered as.' sold to· tbe. L:.GU (we; . 8) · Any material or artlcletormlnq part of a house or
. Sec:·175 (e)). . . . . r • improvement of any real property 'rLGC, Sec.
. 1$5). . ·.

3. .Judicla] 'Action .
. T.he LGU concerned may. enforce. the: collection of
. : }_eli_nque~t taxes, fees, charges or other revenues by
, c_iy,il action in any court. of · competent jurisdiction
witJiin·-5 years from the' date taxes, f.ees or charqes
.. ·_becorn~ due (L_GC; Secs. 1'?3-and.1_94) .
. Th.e .local QOVe.r~me_nt files an ordinary suit for t~El

i.

II'

!'.. :.·.

I··
!
l
!

Original . 'u prjn'd~al '.~movnt of taxes, 'fees.

- · exclusive :ot-c:11arges and penallies is .
' ·, . ·p1; . coo, .ooo .'or above ·. · ·' .. ·
. . \".

Appellate, ·.-.-· Qv~-r appeals from the·.j1:1d.9m~nts, ..

resolutions or orders of the RTCs in-
. tax 'colleqtiQf!· ' -cases .._ originally
. decided.by them in- their respective· ·
. · jurlsdlotlon · ·· · .. ·

'1: '-Oecisfol'ls . or ' resolutions' over

'petitions- for review· of. the GTA.
·'.N.ot~: Professional ilbrari~s arrd. ~quip,ment·~f Divisiqn ir): tne exercise of· its
··pr<;?fessionals ·are .exernpt,from execution not exclusive appellate jutisdiction
: e~·ce~dingP300, ooo (RULES OF COURT, Rule : over local 'taxes decideo by' the
. ....
· · · _·_39., $.ec.13 (g)). · · : . · . ·. ·...

364 I _2019 SAN·BEDA LAViCENTRAL}~EDBAR OP_l;:RATIONS, .

 .. :..... : ·,~-··• .. . t.:

~TC .in the "exer.cls~ of their "]' Sec, ·195, as· a taxpayer's remedy is separate, .
. or_igitial- [urlsdlction; and . distinct, and independent from. Sec. ~ 87. A
2, Over petltlons for review· of the taxpayer's failure to avail of-the remedy under.
judgments; resolutions or orders . $e·c. 187" (appeal to the SEi°cretary.of Justice);,.
1-:,· · · . ··at the · ·RTCs. In
1 ·th e· exercise
· o f. · does not necessarlty bar recourse' to Se.c, 195 )
·t'. · ·-the\r appellate jurisdiction. over · (appeal with the court of competent jurisdiction .
v tax . collection. cases . originally . when. the same is ·grou.nded" on the "ille·gality of
d id d b · th M. the · tax measure complained .of -(Michigan
),.. e<?I e.... y e . s'FCs, M.TGs; . Holdings, Inc. v, City• Treasurer of Maka'tJ, ·cTA-
JV. . . and MCT_Cs, In thelr respective ' . . .
t . --·territorial jurisdjctic5n:. · . · E_B No. ·-!093; April 13,.. 201.6).,_'. · · ··. · · ·
;;;.-: (B._P;Blg. 129, Secs. ·19 (8); 22, -33(1),· as amended seb .. 187 authortzes .the Secretary of Justice to·
. ·. byR;A 7691, -Seo: 5;" R.A. No., 1125 ., Sec. 7 .(b)(1).. review only the constftutioriality or fegality-o(the·
t .. an~'Se.c: _7 (p}(2)(p)/a.s:amendeq by R.A: No. 9282, .. , taxordinance arid, if warranted, to ·revoke-it on
_-:.: .Sec. 7; 'REVISEDRULES OF THE COURT OF TAX- · . either or both of. these grourids (Drilon v. Mayor._-· ·.
''·.. APPEALS ·-[hereinafter,· RRCTA];' RULE 4;-. Sec.
,,. L.im; "G . R . No. · 11 24 97, Aµgi,,st
-, , 4·, 1994
. ) . .H e· ·
. 2(a){2);.2(b) ar.td 3.(3)):' ' .·· . . cannot replace if.with his own· version ot what·-··
. . . . ;·.. . . the ordinance' should be, neither can he·deciare. :
Remedi~s Excl~slve Not .. such . ordinance-·· · 'as unfust, : excessive,
. Either of the. remedies through ·administrative action .·· · . oppressive. or ..co~fis.cato.r.y (INGLE$, . supra et
o~···J~d1eia!_adi~~ 9ran -ni~y b~·pur~u~d-coticurren!ir/0P . s37J · .. · · · ·
or ·!innultaneously at the discretion · of the lo.!=a!-.,,:<,· .. (. . · · .'
· go~ernmerit'.i:in,t"c,oncerned (LGO, Se_<;-. 174).· (/.jV'.·:.-,i;\ ;
Wt:ierr disp4ting an
~tdinance! there _i~ no need_.
I
I.
· . \1
{'//\,j · · for a written protest to. be made. !he writt1;3n
. . . . . . . ,,.:_/) (~··\;l;-i(';1.'?2]:?f.~~-~j~)?,nly needed wi:ien,·protestlng.against · I.
J

TA.X
. , ... , . . . :. :··
.REM_E"DIES OF J·I·11E-,, ..
· . : _.,-;;/.. \,;,·ti._ . . ar-i.:as.~§~Jrlent (l_d.): . . . .· . . .
~:.. . . ,1. : ·. 1.~4~ .
. .
. ·- . . . . .. . . .
!
. · .· . . · · ··· ~~-,T /? . , :.,, :.,..>r{ A ~~P<l,¥~f"!)1ay. file 113. corripla1n.t assallirJg· the . 1 ·
.·, ·. . . ._·TAXP AY.~~ ,4p'> ,1_.l__,..... ~ ~ ·· y1. ·val_1d1ty_,ff t~e\ord1nanq: .a~d pray_m~ for~ ref~nd ·
. · ."' · : · ..:· ,.:;. L ¥.-;_.r. 1 !'\ · . of 1ts p·erc~1ve~ .overpayments without f1rst..fihng . ·
... · :-·-:.:. .. · . ·. ".,jffi;~-- ~_'lf~-!=" . ·-c~ [~i, ·: a-p~9fo.s~ ~~ th~paym~nr9f.tax~s ~µ~ uncfor the
1.· Admlmstr'atiye_ ._ . _(;1.-~:'i? · ?·r--:,-.. ·. . 1-i~ Ot91f),a~ce,J(Jc3,/Jtn;e:pav1es
ln~uqmc?..Brok,er.s .v.
a. B_efore As~es~m~nt:~ ?...,).(!. . \~, !;'1-. : -~??: .Afip'o(a:•.f3,R\N6;,,'f18900, February 27, 2003) ..
.. i. · Q1;1est1on :,the . Co~stttvtm:if.a!Jty cot) Ji/ r . ~t,'...ie.:...,:.,"Y' . · . .. · · · · .
. · .. L~ali.ty_ of _-T~ ~<f.~n~)\s o;. · J:;.j Sue~ appeal. 5.half not ha_ve .. th,e .. effect. of.
·.: Reve~a~- Mea:~ures on..lP,pp~aki· · . t>"";r;r);uspending the·effe~tivity bf th~ ·ordinance arid.·
. :. 1 ). -W1t1hm tti1rty: .... (30) · \~c}f:1,'Jf;"t! fr<?,~~---A,...t1;l{.;;1~}lf.~'.,~CCJ;ualan·d pay_crient . .9f t'1E: tax ·(LGC, S~c .
.- ... · ·· : .effecti~ity_ t~ereof to, tjpf._Secr1~w-·. -.,.n..:d-~7~ .· ·. ·: · ·' ·. · . ·. . . · · : . ·.
. .· · . of Justice· · . · . :vl ./Jv ·· ··
. · _·. 2).: 'Th~· de_ci~i~n- by· S}~J1b- ?f the: Wh.en disputing ·ordinanc;e,..:appeal to·the.DOJ .. ·a-ti
.. Justice _m~st. be r~n·derea .. _within · is ma·ndatory .. ·lf no·app~al to>the DOJ is made;
· .. sixty_ (~O). qays from the da~e .ofJhe . · tne f3TC =wiii dism_iss ·the ·ca.se (Jl;irdfne· D~vies
. r-eceipt of tlie appea~ . · _ . .. Insurance. Brokers v. Altposa,. G.R. No. -118900,· ..
).: ...
_:3} · _Taxpayer. -mu:snile ·an appropriate February 27,' 2903/ ·... · · · : . · · .. . · · ..
~- . . action ·with· a ·court qt< cpmpete,nt_
~: . Ju'risdi.ctioM .within- 'thirty .. ·(30) days cas.~s· wher.e tn·
validity or legality _of a .ta?(· th~
1?.-. ·ordfnance .is questioned, the· rule·. {hat the tax
~- .. . . . · _f~orri: · · _. ·~ · : · . _ . ·· . · ··
.. m1,1st.first be paid before a"protest is lodg~d does.
k .· ,. : a).· . Th_~. receip_t .of ·the ~~_cisiorr .of
=',;··
;,· :. the. Secretary of Justice or . . 11ot apply. Taxpayers. must. first receive·· ar,
: . ' b} Th_e.tap,s~ qf'-t_he.60-c;!ay p~~iod ... · assessryient befqre this rule··is. ·triggered. Prior
-·· .__ fo decide (LGC,.Sec. 1'87). . · · . payment under_protest is not.required when the.
~ ~-·
.....
. . . . , taxpayer is questioning yery aoth9fity_ of the . tn~
. .' .Note:. Court ·ot :coinpetent-jurisdiction r~fers to ~ssessor t9' irpp<;>se·taxes (Aala v. ·uy, G.R. No..
. the RTC wheri· case is r~Solved to·det'ermine any . 2DV81, January ·10, ~017)_.· ·
·.· quesµon .or c_on~truc~on _or ·y~lidity of a ·tax· Jaw :mus_tr_atlorr(~003 Ei~r
ctµesti~i:i): ..
. and for the 'deqlaraiioli of the taxpay_er's· liability X, a taxpayer wno befieves that an ordJnance_
· thereunde~ (VITUG &· ACOSTA, Tax Law ·and - . pas~ed by the . City. Col:lric:il of Pasay · .. is .
. Jurl$prudence/. (2.014);_ p: ·490; R_UL~S OFF.' ·_unconstitutional for belf'!~i di~crirninatory _against ·
: COURT, Rule 63; Sec.-1.). . · . h.im, want to. know from: you, h_is tax. lawyer,
· ·whether or not he can file ari ap~al. In the
affirmative,: ·he asks you· where suqh _app~~I

201s ~AN-sEDA LAW CENTRALIZE~ BAR oPERATroNs I 365

:'· .
.. :.\t:~
 l&dlAA.

LOCAL TAX
SAN BEOA LAW CENTFJALIZED B~R OPERATiONS - MEA,10RY Al~ 20!9 :

. .,,
should be made: th.e. Secr~tary of Finance. or If no · protest fll~d: the assessment shall .
the Secretary of Justice, · or -the Court of Tax · 'become "final and executory (LGC, Sec.
App~als; er the regular courts. What wou1d,your · 195r .. · ··
advice;be to YO\J.r client, X?

... ·.

I.

',=.··; .

.Rig°t-1t Qtij.~ctert,p,t1on.'"" 1 · y~~r from the. · .

... .. . d.:!.te.,gf s~le (L~C; Sec. 179, par: 1) .. · . ·
. ,·: .· .·.' . . '

. '\ .. . ... The'· owner. shall .not_ be deprived 'of

.· ·. possesslon' and'. sbatl ·be- .entitled-' to .
·. ienta1:s/incon:,e: tliereq~ · ·un~il· , the ·
· . explratlorr ~f the tlrne .allowed .for .its
reqempti~n._(L~C,. Sec:.. 179.): ..... ·· .

. '·

. '·
. 366 2019 SAN BEDA L,AW CENTRALIZED BAR OPE~TIONS

'-----------------------------·-·· ·-··· ·--

 LOCAL.-TAx·· ·. . . , ...
°sAN eeo» I.AW ~'!'.i
c~:uzw BAA OPERA"-;-1iJt1s·- MEJ.10RY 0,;

c. Compromise . Pet.itioner cari.nbt seek. ihe issuance o! a writ .

The $angg'unian. concerned may authorize . of ·prohibition :to ei:ijciln . respondents from
the city or municipal .treasurer. to settle an coll_ec;;linQ 'ttie assessments .which . have
. . offense . not involving .the commtsston of · · become :final ·and. unappealable .on account
fraud before a case therefor is'file<;! in court; ' ·. · · . . .··. o( p,etitio'ner's.f~iiure. _to.. appeal . lhe ·. sc;1me
~1pon the payment of a compromise penalty . . · with the ~T.C within thirty (30) days from the·
of not less ·that_ P200 (LGC; Sec, 148 (b) in. . · denial · . of protest' · · .(Benguet.. _Electric
relation to SeF, 151). .- .. · · · .. ·:": ._. . · ·. ·--~ . · Cqoperative -v .. Municipality o( L,l;J 'Trinided,
. Benguet,
. CTA-
. E.B No.:1'fJ91;:
.
May~.
~ . 2P.16f.
..
WhE,m . given· .judicial·. ·'i!ppr9~~j:.. · · a
compromise. agreement · becomes · more . b. Action for·_beclaratory Rel_i~f.:,·. , .
than a . contract . bindii:Jg upon the . parties,' . . . .Please see the tunher. discussi'on on- the .
Haying been sanctioned by -the ' court., lt.ls .• : Reriiedia(L,;iw Memory Aid)Speifai Civil.
-entered as 'a .determi_nation·of a c';qntrQYersy .: . Actio·nsy ·. . ·· · ·· ·
·'· and· has the force and. effec~ of 'a judgment.
It · Js Immediately executorv and not . . ·c. · lnjunctlon . .· -: ·· . .. . .
appea·lable; except for. vices of consent or .'· -, . The _LGC does not' specifjca:1ry'.prohibit 'an
forgery.· The nontulflllrnent of its :terms and. : injunction enjoining· the· collection ·of taxes":
conditions justifies the tssuance of a wn( of: . ,(An_geies City v._- A_ngelf;J~ c;~ty Corp.; G.R. ··
exe<:.uticm;·_in_ S}J~h a:n_ instahc~:. execu.tibn_,,,!fh .··.·.· . Ni;,.:16(!1.34, J'!ne i9, 2(!10). .. ·
becomes !'I m1rnste.nal duty of the · cour;t··v( · ' . , ·
. . , .. . .
(A:fefro · Ma(lila Shoppinf/ ~ecc_a Corp.;1Y!.f~;-~~).. · . !f
. ~us~ be emph_as_ize?f~af ~ltt:iol:.lgh,.there..
LipertY, · Toledo _(Re_solut1on}; G.R: . Wiq)gs;~,,.' · ~s. -no . expre~s. proh_1b1t1on th~ · LGC,,. .
.190818, Nover,:iber_ 1 o; --~.O 1"4), · · · ·.· . )). f.;;;~_i lirf.,..,..~·;:,,,., ._ mJu?·~~ol'.)s1en10.1nmg_th.~ \:Ollect1?ri· :of- local .
m- .
~i .· ·• . , . · · · · : . · . -;,r..-~i.ii:f!f{;L.~~;Q>tf,~·~f*i!lre fr.~w~ed ypPn\_Courts therefore.-.
:·: ' 2: · Judicial. Remedies . · · .. · : ,.,.. ...._.-.,,,.. ·. ~.,;,_. >t· . · ~snemfafoxerc,se · · . ·. · . . . , ·.: ·.
. · a. . .~Qu·rt -~~tli>~i W.hen av~ilabl,¢:,~>;,..r-:·.. · ·:iJ~t · . · ·
extrE;jl3~~cauti'?-n in issuing soch ihjunctipn_s
· 1. . W1t~1~ thirty (30)_: day~ afJe'i:.,f~_ce.1P.! -~~~-. ,J., _· (A~-9etes;1_.. ._G1(y v. · ·Angeles. _Electnc
·.· dec1s.,_on o_r _la_p.s.e -of J'.x1tJ69)~_~a.y~·1r:i.
:c~se :of Se9retary_fJ-jJl:lstic_e,~~~l6actl?~- . -~;•:.
:.-lt . :, ·. C9.1p0·1~tJ\;
· .. ?lftO)U ~ · · .:
_-G.R. No. 166134, Ju;1.e
·· , . . . . •. '- ·
W, ·
(LGC;. Sec. -1.87) :./~etore.the--~TC;. ·· :~ : ~·-' ./!'· ! , , ·. .· .. . . ·
'ii. ~~~n p~t{Z~t·l~~~f;~;~}d~~~V- f;1.· 1.. _· ·-,
·o;;· ·. ·f • · )
or lapse. of. s_ixty: (6.0hcJ.~1ili_~t~se
~~fri~!tt.fhl~iti.~~i~~-;i~e::nj:~1~~1~~-.
collecii.9.,:i of ta_xes, with the sole ·exc~pt,o,:i : ·
:_

: lc;>car. treasure(s· _in~ctidrr"'-(tGj!~· Se9:: ·. ;.;t ,;... .-...~ · .of the C_TA(INGL~S,~upra _f:lf5~9)_.
195J ..:. befor~ th~ ·_MTC/ IR.~~-or CTA. , ..:'!~ ,;.,:;t~~:=.
. · . . ·. · '. ' · · · -, . : : ..
~-. Divisii",m t;lepeoding op. a~~uri.t :ot.,.1~~~~~~ir.1·•·!:°Y1 ·: ·.
d . . . \!'"1 . 1 .r · .
.. · an : · . . · .: ~.;1.-;._· 1,.(\1 · . . · · · '· · · .· · ·
.. ·: · .. .'iiL. I~ _rib_ a?.tion. is taken. by_ the__'l{~~.2~~5~r_(n ·. · · · ·. · · · ... , ·. · .... , ,,;.:·_··-:;,·:.· ·. :·.... '.. - ··
· · : :· refund·cases and,.th~ 2:ye~r per1ocf1s ·: . .. · · .. · ,.~.- ., .-::;,·.,·· .. · ..
· about to l;:ipse (~GC, · Sec. ·196) - b_efore . . .
MTG; RTC, o.r CTA .Pivision··peperjdln-g ·,1 ·· ., :_ : '(·
: on amount of tax: ...
....
. .. . . . . ·. . . . _·, ;".".
. ,'
> ·.·' .. . . . •I• 0'0,

,·. . ~ ·. :
... ··
'.·.. : ... · .. ~ .
-';
. · ....
:·
:
·: ·, /
...

.· .

. ·..

2019 SAN BE.DA LAW.CENTRALIZED.BAR OPE.RATIONS 367

 · LOCAL.TAX
sAN s~oA viw CENTRALJlED B_Mi'oriERATION~ ~ MEMORY AID io19

•,
:TABL.E. OF.TAXING Powans op LocAL·GovERNMENT
' .. '' :: • : • • • • • • • ' • • I
UN'rT·s·.
• • •

. . : ~
. P'ROV1N¢E~ .(Sections .13.4 .:.:...-:,41 'o(th~'LGC)
.I .: . •': •• .

·s·~le.'donatiori, barter, Or· Totai" 1% Transfer . u~der · . , the ·

'any ', other. mode of consideration . or . · · Comprehensive .·· Agradan ~·
·transferring : .ownership :fair market value · , Ref orin Program · ·
... : -.. . .
.or title•of·r~I property.. ·. in -case monetary.
··. .. · . · · : · · ·. ·conside.ration · ·is·
. not substantial.

. Gross .. annual Not . more· : Prinfinif of. OepEd (CHED J..

receipts. . for . the .t~ary 50~f of. rgsDA) · prescribed· ··texts ·
1% · .' : · · · .. or references,

·• '\ \ . ;,- ..

. :-:. ·.: . ... ... . . · .

...

or
Exerclse ,. practlce ot Reasonable . Not. · · to-. Prof~·isi<>'nals.. e~ciuslvely
. ,profession. . .. requiring:. .classfflcation by. exceed. · . 'employed · in the. ·
. g:dvf;lrnmerit · . llcensure · the Sanggunian ·. ~306 ·. governm~nt . .
exammanon, · · · · ·
.Ownership, ··"ieas·e · or Gross· receipts Not . more_, · Operas, , concerts.
·operation of theater's, -from -adtnlssion. · than 10% : dratnas.recitals, painting;~:
. dn'emas, concert. hafls, fees. ·: .. · .. : : . of ' gross ai:,d art exhibition~. fl9wer -

·1 · .·. . . . . •. . .· . . . .
. · 368
.~·... I· 2019-SAN
. : ·. _,..,.. BEOA,- [AW CENTRALIZED
..... . BAR OPERATIONS
.. · ..
 ·-
-LOCA·t· TAX . . .: 9
SAN B_EOA LAW.CENTf!ALiZED BAR OPERATION.S .-\1_EMORY AfD 201

circuses, boxing stadia, receipts . shows, . musical

: and other. places -of froin · . . ·programs, literary, . and
. amusement. · admissloil · . oratorical -pres.entation
. '... ·fees.. . except .- PPP, · rock, or·
'si.milar concerts .. · .

Use· by· manufacturer, Evety truck,· Not

. producers, . wholesalers, van.:_or vehtcle : 'exceedlnq No Exception.
dealers •.. retailers, of ~- . P.$00
tnJck,jian, \;~hicle "in the
. ~sliveryor distributioh of
distilled': spirits,
fermented . . : liquots..
softdrlnks; ·. cigar, and.·
.. ~ig·c=u'ettes . and . other .
. products, -deterrnined by"
the ... Sanggun1a(lg
Panla/aw;gan, · to sale
outlets or 'consurrrers•..
· whether ·.··directry ···or
ind i rectly; . .

Whql~salers,. , ·. . Gro;s · ., annual ·Graduated·· .. 'annual.

:distri~uto'rsor.dealers .in r~Ceipts· for the .. fi:xei:J ta~_:· . :... _. _ _-_··. '
any article ·of cqirimerce:·. ·P.i'ecedirig . . . . ·. · · · ·. . · . -
'of whatever.: kind. or '. calendar year· . If ·thlJ f1r_O_ss_sales_ or :
nature ' · . , . ·. . . : ·. ·.,_ .. . . . re~1pts . ~n:.ouflt_ to. ·.
·· · ' · · · ... . B2, 000, 000 or mor.e
for .. the ·, ·preceding ..
·:'.
, ,· caiendar year; . a.
-:, percentage tax· - not ' L
e~ce¢d1ng·SO%.of 1 % ·
of ·gross· r,eceipts ts · .
irnpqsed irist!:l,ad. .

Exporters and Gross. "sales or N"of exceediHg .one-

)nariufactur,ars•. mluers, .
.producere.vwholesalers,".
distributors; dealers qr .
retallers . of. essential
commodities.··
receipts for . the". half. of 'the . .f'ates.- tor
pr~cec;lirig. . .. · . .sates '. of . "articles.
.calenqar year mentioned . in'
paragraphs (a). (b)
·. and(~) of.-Sec. 143 of·
LGC .

2019·SAN
,·
BEDA
.· LAW CENTRALIZED
,
BAR...OPERATIONS I 369··

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 .L.OCAL TAX
:;A,N ~EdALAW C£NTRApZ£D BAR'OPERATIO~S - M~Ol'lY AID 2019

. ·1·

Retailers :Gross·. sales. or 1, If the gross sales qr· The · barangay .has
receipts for the recelpts for 'ihe · exclusive power to tax '.
preceding . " preceding calendar retailers 'If.. the gross
'catendar year.' year· is P400, 000 . receipts. donot exceed:
. . qr less s- 2%; and a.' PSO, 000 or Jess in· . ·
· .. 2.:. If the gross sates or cities; ·
· 'receipts for the Q. · P30, bQO or less in·
· preceding calendar . ·: . 'muntcipaljtles, ·
. year: rs 'more. than' · ·
..,, : . P4oo, coo - 1%·. .

Contractors. and. other Gr~~s receipts .for GradJ~ted' ,• .annual Transportatiori

:(ndep~l'l<:ie'nt.cootr~~toi-s ' ·.the .. preceding fixed tax ' . . Contractors · .
. calendar yea~. . '. ' ' ·\

-: .
. ..
'· ~ .. . .

. ..

~ •. ..

:. '. ·. ;R.a(e: not .' exc.eeding

.. '?5Q.. '•

-On: any 'business .: not ' :, .· The· ~· · sanggunian Any busin~ss." ermagec! :
.otherwise. .. . specified. · . ·. concerned · .. may .i.ri · ... the 'prqc.J.l:lcllqrt,-, · •
.. ..
above· . ' '
. .
.
.
. . : . '~ .. ::. .
-...·: ·"' ·.,
impose a.schedule of"' manufacture, ' refining,
gradualed tax' rates distribution .or .sate 'of
..Note:.. . .
lncldental . · ·but· ·i;,: no : cas.e . to oil, 'ga'~o!il')e';'.~nd QthEfr .
j\ctivities relativ.~ to 9-:iEi. .. .exceed . th'e . rates ·petroleum·· .. ;products·
.business ". are .. ' ' not . . ·. ' :. ' · prescrlbed ir{ Sec. (IR.R. o(L'G¢,-.Art, -232'
'taxabte · . ' · , · 14:~'of .L~C. · .. · · (h)). · ·. . . . .
.Muni6lpalitfes. r'naY, ·... iqipo~·e. aijd . collect· reasonable ·· fees · aritl :.c~arges . on business. ~nd .l
occupation and.' except in case _bt_pro~~ional tax.[~icti only· provinces & cities may ~evy], ·on .. '
the practice of. ar:,y. pro(essidn ..or.. caning com.mensur,ate .witf:i··th'e COl?I of regulation; :inspectibn·~
and licensirig .befor~ -aoy person i:nay engage in .such businesI;>, occupation, practice of such · .
profession, qr:callini(LG.C.\Sec. 147).. - .. . . ·, . ·.. .,.,

3to. r 201s sAN ·s!=QA LAw cENTRAuz~6 a.A.A 0PERAT1ol';ls

... -··.
 r
If:
~~ -~~111:11111.. lllillllfll..
.". SAf'J BEDA lAW
LOCAL TAX
7ENTRALIZED B~R OPERATIONS - M~MOl?YAID .i~19
1:111llili11111111~a-mswalll!l1111mmllll!ll,1lim1111DH11111m1mwaU&llillm1111111
·.•'.·.

.. .iilAM
.. E11'(i!mlEllia·aa1111:1.¥;+E~~·~11111 ,.....
". ·:·:,.

:1111~,1?ut

}: .
~I

I··•
!:'

~-~·
~!
('.
.Cities,,,.
ma/levy
. ·~he'. taxes-tees
. . .and. charges
. . .
which . tlie province
. .or the..munlcipality
. may.. impcse.
. . .. . ' . . .
The rates of. taxes that. ths clty may levy may .exceed the maximum rates .allowed for··11:1e· province or
municipality by not·lllo~e than fifty. R·ercent (q0%) except t_he rates ol.professfonal and amt:is·e~enttax~_s. · ·

.."'=·•. .. . .. • • • , .. ~, r ...... : •. , , •

Barangay-·T:.axes - On· 'stores. or retailers with fixed · . With · the . gross . sales or receipts..: fof '. the" . r:>
business establlsbments. · -, . : .... · . . . . ' . . preceding c;:.alendat year of P50,, ooq or less (for..'
· bara.ngays in .the' cities) anch.P3:o. OQO·.or less
(for barangay. in municiPaliti~s} .at.:a · rate .not .
exceedinp. 1 %. of.
. ,· .9r receipts.
such gross. sales
. , ;..,,~f). . ·- .
Se.rvice-f~e·s.or\:ti:arges· · ... ;· _ : .. . . /Jf ;t/ Such reasonable fees or charqes fot ,s.e_rv.ic~s·:
v . · ' -t • ., · I:.:r..~i{i,;' r ,f'... 'rendered in connection W.i~h the regulation- or
. ./ F ·;- ,-,,.~
t(f'.,,.'i.,''". ;;·.::{ . th e 11~P. of ...hFmmgay - . own~.d propertles or
'i-1· ~;,·~:.;,.-<L..-,s.~rv1ce f~c1htles .such as . palay, copra, or
.: ,../,r
. . ,. .. ,Y
b~'t.~·F~~~-!.Qlt~~i~,,#iJfe.
\."""' ~, . . . ~ .... ..iL~!'l.
J.... ..;. ·"' ..
-··

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·fl'
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..... :

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..
•

·2019.SAN SEDA LAWCENTRAl.JZEO BAR OPERATIONS ·1 371 .

. . : . . . . :· . ·, . .
 LOCAL TAX
SAN BcDA LAW CENTRALIZED ltAR OPERATIONS- MEMORYAID 2019 ·

:.·

Procedure
.
for Dlsfralnt
. of Personal
.
Prqp~rty-(LGC,
. . Sec,
..
175 (a~f))

Upon- failure of the person· owing any local tax. fee· or. ch'arge topay jhe .sarne at the time
requirad to P?IY; theLI' .or his 'deputy may," upon wrltterr notice; seize or -confisca~~.' any
personal property belonging to that person.: . ., · · . . .. ·. . ; · .. · · · ·

:, lJ.

., '... . .. · .a, Th·~ local treasurer 'or his deputy may, upon w'ritt~n notice; seizer·or <;onfiscate ·any-· t , • •
. .,· . . : _per~pnal property:belonglng·to that person or any personai;R(6perty_su.bje·ct to the'.llerr ln
. sufficient quantity-to satisfy l!Je tax.-· . .· . · ., · . . ..
. b. "The 15)Cal.treasurer orhis deputy shallissuea duly-authenticated certiflcate (serves.as a ..
·-.\varra.nt} showing the fact of c;leiJnquency and the amount? of the tax, fee, or ch.:arge and ..
· · ·.·penqlty due, · · · .. · ·· · ·· · · -

·. ~ .

.·.· .

to
Atany ,time prior tbeconsumrnanon. ofthe ~ale, ·ff:ie taxpayer .may pay the· prop~r.charges
·., 'to-the officer conduetlriq.the sa)e. However, .should me·p~op'erty'd°istrair:'l:fbe notdlsposed.of'.
· . . , within 120 days from'the date of distraint;ttie same shall be:considered as sold to the LGU
. : . . concerned, . . . . .. . . .. ~- .. . . : . : . . . . ". . .. . .' . . . . . :·

. :.· u.

.·' .Wit.h1n five (5)'days'afterttie ~ale,_the local freasurershaltrnake a repor.t'ofthe proceeding~· .

. · · in.w_riting to tl)e lo_cal chief exe_cutiv~_<:_qncemed. · ,_ · ·
. 'u

372 ,2019 ~AN:BEDA·LA\,\' C_ENT.RALIZEDBAR OPERATIONS·.

:. :
 LOCAL . TAX··
. SAN BEDA.IAW CE.NTRALJZEDBAR QPEMTl()Ni
. . .
-. MEMORY
. . AI0,;0,9
.

The proceeds of _tt,e·sare.shall beappllad to saiisf.y the tax, lncl~d1n~{the surcnarqes,int~rn;t,

and other penalties incldentto delinquency, and' the expenses of the distraint and.s?le.·The
-balanc.e,over andabove wha_t·is requlredto pay the entire claim shall .be returned'to the· owner·
of the
.. property sold:
. •. . . · .· . · . .: · · :· . . · . . . . · . . ..' . .. . . · . . : .
. '
for. Lev/Qt .Re~i Pro:p~rty (LG.C, S.ec,: 176, _178)'
..'Proc~dl.1°1'.e
. . . :..,' . : .. ;· . . ·... : · ..· : ,. ... . .

1. Notice of Delinquency (LGC,, .ss« ·.175 (a~f). ~(ii& olscusston above on notice of
; detinquency for distraint. . · : :. . ; ·: . ·.: :· · · . . ' .· "", ·· · · · -, "
2: · Le.vy on· Real Property.(LGC;,Sec. 176) ., After.the expiratlon' of t.he tirr,e required lo pay
the 1;felinquent.ta~; fee 'or charge, real property .maVbe levied· on before, slmultaneously,
. pr. ·l;l~er fhEf disfr~i.nt o_f person.al pro_pefty . · · ·. · ·· · · · · · ·· · ·
jJ

·I·

.. . ' : .J.¥ · ...c.:·~,, ~ CW.C' t<tC1 + .bll.l~..t.'-' , • ... , . ,

Advertisernent.ofsale throug_Q,ljlbsting·jindpublication of notice>- within 30 days after the levy ·
and shall COY.e.r. a perlodot ;=it'f~a.sutirrty (30} days. I~ st:1all be eff~cted by:__ · . . . . .. ·..
· ii: posting 'a notice _at'tf"\emai\r-eijtr1lnce·_ofthemun_icipal~uilding or city hall, and ifl a public. , ·
_and conspicuous' place lri the baranqay ·~i2ere_the. re~~ property is tocatedtand · ·. . ·
·C. .by publicatlon once-a Week··for·fhree· (3) Weeks .in a new.spap~r of general circulation in
· t!l~ province, cihf·or"i:nurif~ipa'rlty'where;th'eproperty is located. ·. . . · . :.,"· -
, Note: The ·~dvertisement shall 'contain th~ ·~mouf']t of taxes, fees or charqes..' and . ·
. . penalties. due thereon, and· the til"(!eand· place of sale, th!'} name of the taxpayer''again~t-.
. 'whom 'the. taxes, .fees, or ~harges are levied, :an.d.a short descripflon'of the propertyto ..
.... be sold: · · ·. · · · ·

.... :.
. ·:· u.. ·: . . · . \ ;, .

. At ·ahy time befor.~:tlle·dat~-ffxed·for the s~le;. the taxpayer may ~tay"they· pro~eedings· by.
payjng ·the taxes; •(ees, ·charges; penaities. and. interests. '!f he ·fails' tcl'_cfo so, ttie ·sa1e··_shall .
. proceed.-and· _sh~II .'be _h,eld either_ at the rnain .-entrance of the· provii'icial, :city -or.ll)Unicipal
building, or on 'the property to be sold; ·or·af any other. placa as determined. by th,e local
treasurer condu.cting'tl')e s~le. and ~pacified in 1h_~_notipe of_sale

·'

2019:SAN- Bl:DA .LAW CEt)ITRALIZEO_-BAR OPERATIONS I · 373

 · . ·LOCAL:T.AX
SAN DE.DA LAW CENTRALIZED B~ DPE~TIONS - MEMORr AID 2019
H
•••••

Any excess tn the proce~d$ o(tlJe sale over th~ claim and cost of sales .sh~ll be:tu_rned·av'er
jo ~e . 6w~er·of tl:le.'propert{ .... ·.. .- . · · . . · : . . . · ·, >' . · · ... · .: _'.· .... ·,
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'374 2019.SAN BE~A LAW CENTRA~IZED l;lA~ OPE~TIONS. .

,• • •w•
 ·(.o·_cAL:T AX.
SAN. SEDA
\ . . Aio
u,.w.Cfi,irt?A(1zt.i:JBAR.OPERATIO~~~ .MEMO/!Y . . 20,9·
·.·.

'r, AXP1YER~s ~~M.EP~Es. ~F: :t9c.Ai. TAxE~ .: ·_FRo~·.·~s:s~-~- ~MEN_T.

·. · . . . OTitER.Tl;IAN RE:A.,L.PROPERTYTAXES.
. . . . .. . . . · . . -
. ... ..
'
. . . . . . . . . . .
\ . . . .
. Local Treasurer (l T), assesses local. taxes·..within .
-·
. .....
·. five years froJJi·.date .they' become due or ten years
from discovery of. fraudor intent to evade 'payment .
·.ciq.;c..$_eq .. 194..(a}._f1.rid {b)): . .-: ·.-, · · · , : ·
... i· .
·", LT.is_su~s notice of'assessment (LGC, 'seq.·j_95)

-:·.:. .:. .., ·..

· r;:ixpayer~·r,i~~- · writte.ri protest---wi~· .the local
treasurer · wlthin · :60' · .d~ys · . ftom receip_t_:: of-: : · ·:
assessment fL.§E,,,.S~~f~)~~
,·

. :_ ~ .- .....
. ·· .. -.
. . . ·.· -~

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·.Ap~e~I
· :court,
to,_erA.~~ bane;~;~ R_ule.43·.~fttie R.~1.cis·of.".
if the decision··:·is frorri, an RTd exerdsin_g · ·
.. '

appellate Jurisdiction. (RRCTA Rule B, ·.Sec. 4 .(c)j'. ·. ·.,··-.

·, .._ • I • • :•. • • :.• • •
...,...
•. ' •
,........_..
:• '. •
'. ..
·. . ·~ .. . ..
.,•
..
.
' " . .. : ·.·

Appeal to ·set.. ~ia .

Rule . 45::· petitlo~" for review.
· · :(RRCTA;R/Jfe·16,
. . sec:
.. ~ . . . . . . . 1).· ~
\
• • '-"':' • • ·. I

. ··".'
. Please
. ·. see 'discussionon.jurisdiction
: . . of
. CTA.
..
•,
·. ,', I

-:. .

(.

. 2019 SAN SEDA LAW CENTRALIZED BAR.OPERATIONS

. ·. . . . . . . . ' ·.
I 375
. · ...
 LOCAL.TAX
. ~N BEPA 1:AW.CE!:17RALIZED~AR QP£RA TIONS.-:ME"(JORYAID 2019 .

. PRocEDuiE''it<}R~P.xsTRA1NT ANn Lsvv FoR T.HE .

. ·.P.URP'oirn:.'.oJi:.SaT.IS·~.YI.N.G Lo-CAL 'T AXES:
: ...... ~ .

· Tax 'constitutes a lien superior to ~II liens and may .

only bt'i extinquishedupon payrr.ier:it:.of the tax and
. the .r1:1Jated charqes (LGQ, _ Sec. 173):· ., .
. ,- . ..

:rim~"for P.ayrt,entp.t local taxes .

- ·· · ·expires.··
: ..
' ;

~· .

..: .

. i .•
. '•,. ·.. . .

·:At thf ti~ei:a~d p.J~~· flied: i.n·. ttie·:h'citice,:th~/~fficer·· ., ..

conductinq the sale shall. se!!,.the· ·gqods o~ e.ffects',so ' ... · ' .. · ... · : ..
distra'in'ed:at public·.. auction' 'to tt'le' highest. bidder for .. .. . .. ·, .
.cash. ·within fiv~·days; the CT shall report the· s~I~ ·tfi~ .. tq .. ~ ~.
LGU ·Chief· executive.. Excess' of proceeds : shall :be ·
. r~tur.nec;l to.the .. owner of the property sold"(LGC, Sec, ... .. ( .
1,75 (e)f ,· .·.· .. · · · '!

. If p;qperty di~train:~d is· n~.t dfsP.~S~d'v.ii~hin~·20".~a·;~. 'it '.

. shalt ·be 'considered sold. tothe LGU. for the' amount of
. : the assessment made ,.by'Jtie·committee.on ·.n.i>i>r~i.sa1.:
· (arid to thevextent : of- the -sarne amount); the ·true
. .· delinqu~ncies shall be .Pal)celled. '(LGC,_ $ec_.. 175. (&)).
. .If proceeds of ·.sate are insufflclent, other property in·ay.
be · dlstralned until f',JII. 'amount 'due, including . alt
expenses, is 'colle~t~~ (LGC, se.c. 175 (f)). . .

376 ·t · 2015! $AN BEDA 't..AW·CEN,:RALIZED:BAR OPERATIONS.

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 . . ··- . . . 1 .

REAL· PROPERTY· TAX.

SAN SEDA LAW CENTRALIZED BAR OPERATIONS "; ME(i•fORY AW. 2019

ft1--.-------- . . .--------------'
,:f,·:.
GEl•fERAL_-PRI'.NCIPLES. ,.
3.. Real ~roperty. !';h~II be·;~s·ess~d·on the ba·~is of:
a .· Unifdrm · classification .within each local
government unit; . : .
4. The appraisal, .a,sses~ment, le,vy, and collection
f Real pr~perty Taxes _ . . · of rea.l property tax shall' not be lef to anyJ~riliate
: .A .real 'estate tax is a direct tax on the ow.nership .of person; and ··.. . . . . ' . ·. .
f: lands and b.ulldings cir other
improvements· thereon, 5. · The appraisal'and as~ess.rn~·nt of r1;1a! p.ropElrty
.f -.not a~:p'e.e:lally exemP,te~•. a~d is payable reqardtess · shall b.e gquital;lle '(LGC, .S.ec: 19?).'· .. ·
f. :·,of whe,ther tbe property is used or not, although the
i;·:. 'value 'may ·vary . ln accordance' : .with such Fci~ taxation purpose.s;_·r~cil· property conslsts of.
~ f?ctor (V/lianueva·v. City;ofJ/oilo,.·G.R. No. L~26521, the·f9llowin9: . · '. :. · ·• '. ·
, "· '·'December 28, .t9.68). · .. 1. The immovables in..'Art. 415 .of the ·Civil. Code
f . ", which jnclude: . ·.: . . . .. . .
t,; N~tur~. ·or ··cfi.aracteri~tic~ ·~f· ~eal Pr~.~erfy 'rax: . a. Land, buildings, roads and'construbtions, of.
}f:·· (DIAL· Pro) . :. . · · · ·· , al! kind~ adheredto th1;1.iioif; · · ..
j:. ·:· 1.'· · _!2ir~ct t;3X on ..the ownership· 'Of .real property b. Trees. plants,' and 9:rowing.fruits; while ·V)ey.
JJ ·.. - where the. J.mp~·ct .a~d, .tnctdence .of taxation an
. ·are attachad to the- li:I~c! or form integraf
:1'· . devolves on the san:i_e- person: part of. an immovable; · . · ·
l - 2.. It creates-a sfngle, [ndlvisible .obligi:!.,tiqn; . . c. Everylhing attached-to .an immovable in a
{ 3 -. 8,a val<;>rern taxwhere tre valueof the property!:>:,;~)
f{: : · . tl)e tax base; · - · · · · · /\/.· y' J,;,_
.. fixed manner, in such ?. v:ay thaf it ca~not be.
. . separated therefrom y.,1thout, .breaking the
'IP. · . · . . ·.. · · . .: · . r./. ;, \ .
(.,, matericil or. deteriorat!dn of the object;
,r/·· N.ote: It i~ ~n :acf.valorern tax. be~u~~ It is a; teyy·· ,. "''.'• d. .Statues,". re!iefs, p-ai,ntings or· other oqjects
t> . . on real· property .determil')ed on. the ·basis ',<!>fr a · · ·' · l'_...~· for u,s~ er ornamentatio1T,'placecfiri buifdings
•:.:. .fixei:l ,proportio.n <;>f the value of the· prp'iie~f.if~,_,r,.,:.t2..,..:-0~.~Pfi;aiid!'l by.ttie.'owner of the.immovable.
q~· .(L:JCA~ GOVERf/Mij=fl!T COD_E, ~$e<fV~99(c)),:..,· IJ · ''·ih-st191\J=i .manner th~t'it reveals the intention
··.:: [he(eiilafter.LGC}. ,·. . .·. ·/"·?/· . /.!-::) . t.o .,a~~ch them·. ·permanently to ~he
:r;· · · .. -. .·- '. . · ··. · }:\.B.: · ,,/,....~ 1{ ten,&flieqt.s: ·· ·
ti', ·. 4 · .b~cal tax; a~~· . . · _. . . .,.,_,;-s, .'.~~-:;; f') e. fv1fthip.e?-.i!~ . receptacles, .instrum~nts or:
.t'.·. 5 It 1s Propo~1onate b~~us~!ti~.. t~x.1 li:e<il5il1!119ti<:t J-~}. 11pple,;p~n~ mt~nded by th~. owner ..of th!3.
;· . · .9.n the ba~.1s of a.certa,.~ .t>~rig;~ta~i·of_the_valuffi t;.\ :. · _,t.ii:i~~ent: f~( ah (ndl!~t!)' p~. works _w~ich:
1.:;·. asi,~ss,ed. (ABAN, ·~a~. o~i~~S/C:;>-183flt15mm--.tt.!.,e. r: d·. v . W.?IJWE3Jt~~onIn a· 5u1!dmg or on a. p1ece-
t .. P.bilippin~s. (200.1)! ..p .. '4$,~"43l):~fhWei11j3f(er [\'.l . .~efdm,E:~,w;id:wh!ch.ten.d.d.irE;Jctly to· mee.t the
• ' · ABAN, Basu:: Taxation]: · ~·-//·· ;\ Y 1.:/ . · needs. of the said Industry or WQrks; :· ....
~~: · . .. : .... /:· · ·. . . . . \f\ ·, \ \ ' . · ;-;( . f.. Anim?l .~ho'U~!3$/ pigepn-b<;ius~s; beehives,
t~:·.· F.~ndaine}1~al Principle~ Governing ~~~.,:~roperty _: };:;.'~;:~~hntish. 'po?ds qr ·br~ed.inQ .places' of. similar . ·
; ..~ !axatlon_:J~CUP.E} . .. ·. : .. </'. · · .,,<'::,::-.:;:,..-Hi:..::• ••• -,,f,·oa.Ture, ,n- case tb~,r ?wr:ie~ has p!aced the.m. ·
·i · · 1 ... ~eal ~ro~_r;t~ s.ball ·.be: 8,ppta1~edJ'~t· (l$ 6Yfrent . ·. . or preserve~ tt:rem with. the ln~~nt1qn·.to h.ave ..
:t. . . arr.o fair market.value:., .· · \:.,:S·~.J. l : · them permanen~y attached to the·.laodtand-
:; 2 .. : · Real· pr'OPE!rtY. shall be.'~las~ified. for'assJ-ssment . · . forming a 'pen'lial")ent part ofit;' the,,anim.al.s
i/ .. : ,p·urposes on the-basis ofJts actuaf us~; : .. ., ·.
. . . . . .
·in.ti:,e~e P,laces are.il;19J4ded;. · .'.: ,.· · .;
.. ·:
J' ·- ·'·
:;-. ·. BXECtrrfYE. coM,Mr:rrn.E · . · ·SVBJEci cQ~rrnm · MEMB1ms· , · .. ADVISERS · ..
} ·. MARY C~ C. SUMANQUI MARIA CARISSA C .. GUINTO . LIAf.lNE MAE D.. E~Q~;l •. Justice: . . ·. JAf'.AR · B.
.;/.. : Over-all, Cliairpernm; ERICA. · Subject... ·Chair, · ·. S{·JEN'~ .. ANJSHA. ·~. HADJI HA.SSAN,' DIMAAMPAO, Atty. NICASIO
j;{·. . l\1AE ..C. VJS1A:flfa1rperso11for·.. GLJ\DDYS. ·P,. BAYLON .MARY E.YIE.LYN N: ~TEO, ·G-.¢!ill~IR0,Gl'A,andAtiy.
i? . . . A,cad~mtcs,. : BEN. REI . E." Assi~tant· . Subject : . Chair, MARIE. · ·SHEJqlYDANE ... 9:. ·. DAN'.I'E O, DB!'.,A ~U?),CPA,.. ·
{. .. · ... »l).RBBRO:ChairpersonforHotel, AN.GEUCA . Mt\RIE .. C. RE".ffiS, AI:.YSSA R..ZARRAGA, · -·
~· ·operations;·]fIBLSEA- LOUISE :.MANUt:L Su/,ject E/ectro11ic ·. TAGMA. .:: .~R , v: . .
tf·-: )3 • .DJMAANO :Vice.(~hairperson Data Proces#ng; · RElllfA G. GARABil.ES · - MAllE.ANE.
,. · forS~cretarlat,EAJ.U.]USTINM. FABREGAS General.Principles;· MABEL.A 'cHAVEZ, JF;w:E!,
t·· );AMBAo··.v,ce Ch'airp'ersonjor ATI!l;NAI ·FRANCES · ·R )OICE G. DAYTIA, MII<l<Aiil:.A
Operation$, MA . .ANGI!LICA B. QUlNtON and··CARWTA N. S.. 'MONES, ANDREA
DB't.EG):'l'::V/u C~"'iYpuson'Jor·- VII.LARO~· Income Tax, PATRICIA· D.. DAQtJI4,. :··
Finance, · ~ . OUM.YA. J: · APOLLO. JUUUS: . S. STA : ~I;>-F~CIS ' · ..•. P. - '
. 'B"'1?Atl'G~. Vice ,Chairperson· ·. MARJA. Transfer-Tax,. ]ELLYN. 0,Aµ.EGOS,' JOY CRISTEL G. .
forAuq'./t,JORPANN..C~VEZ . C. CLEMENTE Val~e-Added · GAYONA, MARIO.NE.NICOLE:
, Viu Chatrperso11 . for EDP, Tax. MIGUIEL A, D~ Al,VA. Tax P. BUG~, and J<,ATRINA
HANZ .DARRYL . D.TIU Vice · Ai1~intstrotion; Enforcement; ANN S. PRApO, . · ·
Chai,:personfor Logistics-, .<pld a.nd R~meqtes, anil_'A'IHENAf
DOHN ALF~ :E: AQUllJZAN .FRANCES R QUJNTON Real
.~
··' :
. '{ice.· ·. Chairperson- · f<>r Pr~pµtyandLocal Tax ·' ...
IJ", M~mbership,·• · ·
 . '

REAL' PROPE·RTY·TA·X
SAN BEOA 1.AW"CENT8ALJZED BAR O~~T/Ofll~ - ME(VIORY AID 2019
AIM WR Mi aiMl~w a Mli+wM+
g.
"'"'
· fe~llizer actually used on a piece 'of land;- · ...;,l'jich tend directly. to meet. the needs of .sald
h. Min.es, quarries, ·and slag d\,Jmps; whife the industry <or work (FEl.S Energy; inc. v. The
> •• matter thereof forms part of the . bed; and Province · <?! · aatangas, --G.R. _- 'No. 168557,
waters eith~r ru_nriing or stagnant; · February 16; ~007f . .
i. . 0Qcks and structures: which, though floi:lting,
·· are ·intend~d · by their nature anct .obied to. I~ ~lassifylng M.f-!Chinery as. Real P.r~1:i'erty for i.
i
· remain at ·a· fixed place on a river, :I.aka, or· Rear· Property Tax., LGC prevails over· Art, !
: coast; and . . . .. . . . . . ~15(5) of O.ivil Code · . . · ·. . ·
j: · Contr~cts for public ...works, and servitudes The Supreme· :Court disagrees· on harmonizing
. "ari"d other .. real .. rights over immovable_
property. · ·· · · · · ·
.
Art_:. "415(~}. of ... Ci_vif 'Code and· the ·LGc·· for. this·
-would . necessarily mean . imposing... additional'
.. requlrernerits' -for ~Jassifying m,achiniry a~ real
I
I
I
2. ·Machinery.'asdefined under Sectfon 199(0) Pf.the · ·. · .. property: for rear .property- .tax .. purposes not !
/
LGC and clarified. by Department of Finance· 1ti . . provided . .for, ·-.o.r-eyen·in.direct" conflictwith, the
Lo¢al Finance Circular 091:.200.2. ·. . 'provlslons.iof the (Ge.. As. between the ~ivil
..•·,Code, · -a .ge.n~ral. law- g,overnjng -property :ao~
. _·Ma~hinery . . . : · properw·.relatiqns, ·and:the't..::G'C.'"a speciallaw
Embraces · machines, .equipment, .. · mechanical r . granting local goveti.iment .unlte .. the. power to
·· ,. _··co~trivarices, Instruments •. appliances or appar~J.Y.~,,,..;,~.;~po~e;-realproperty· _tax". the.ii ··the_ l"?tter sh~.11
· which may or may not be attached; perf'l}~r;tEfl'ffiy·_or.r 1 } .pre--V.q,__l!_(Mamfa Electric.Company: v..• The ·c1fy.
· --~empo_~~~ily, to. the real property, ll..J~cll,l_~~.Jhe U 1\jAs,'p-_es§(:)r~.'andCity. 'Treesiirer of Lucene .-Ciiy, .
physlcalfacjlities.for production;·th~tis~iia~o'p~AJ!J~~~(R, V/(Jo;,1'5·~0.2,Aug11.st 5, 2015): . . : ·.: ·
. · , .appurtenant service facilities, tho~f_Wh,icffip~i:f1obiTe, · · ~~ . -<~~ · . · . . . ,. · · , . .
· · self-powered .'6r:. · self:propel!E;,f.·'',li,(c,V,;.1'l~~~~·r1o_t""1~~~""':'lmQJ~'"\{~~"e. P.ertx.- by lncorporatlon · - 'J~f
. permanen~ly attached to tti.~ ~!'l.~~ro.~~-~ fhi<?~ ctf,9: 1,f-' ~f.r_n.ac;~tn?(){,P.E;f..!:tla\:.Jently a~tached:,
. . actuaUy, dirl;!ctly'. _and e.J:<.clus)ftely ~~ti t~_?.1~et.l l1e· ··}~. I.R,. Not~\. -~~-
needs o_f_the part1c.ular mdu~tr_y:_bu~(nessre.r. activ.1ty_£~--~·-:.:T~~••J>!Pelm 1.,~e,r. of·, Me(alyo .S~cunt1es 1s
and which by their v~ry. rf.afu,r;e;,-~n~· pulp_o~~ a~e 11!1 .
( · ·\ ·,. _· .

classv..1ed- a r.~--rnroperty_and . su~Ject to tax_

. d~s!gned • ro_r.,. or necess_aw~tt:J..~11~:·manl\,t9:ct(irp9?jfil[~~ca~se_-iti~_uKd»bjt~pJy_-a coi:,s~~tioti -a~hering _
· · .
. . ·,.
I
m1rnng;:J6~gmg, commerc1aii ;'.P..Qllsir1al-or J} · ncultaf~~~to th nso1l.:.lt.1i!atta_w~ijed ~o the._land m such a ~ciy · 1·
purf:!oses (L~C. Sec;.....1Q9(ol---l.1\'"· · -~~
. .,. . . :·.. . .' . .' : ~:
Mach1)'l~ry _also_ includes; c
· e;:::;;....
t ·or tr:\\\ '~- . . Im ~,- ~ di~~~)h':lg~·
· ·• tha' ~~nnot be s par~t.ed. therefrom__withouJ

':..f. _,,, \ · -~, -~,l":iJ~-{.~·!&~)Ii~p, ehne, 7 np does npt_ fall· .within .the
• \
-~:!Ji"e pip_~s w_hich-wer~.v.:.el?e~ to I
-1. · Immovable Prop~rty ·Ji by D'~stin fil:l _. · 21:-~ · ~- ~e.s. ·.J ·. _exei;p,pt: reah propeftx. (Meralcp
r
mach1f!ery essen_ti~I to thei¥~_sines\~· ·_. ~~ : ~ · . . Sf[d1.J__rit.i9's- ln"!1u~p-ial-porp. v. Central Board__ of I·
i
. · . . · . . . · '~· . ~~~ Sc'[]tf.r\i::,-¥s~smentAe,6eals, G.R. No. L-4?245;May.31, i
: · Requisites. tp ~e·:cl~~sifiett ;:i ~e~I g~e& .. ~.,g.l:U..!>~i9S.:i)· ,~~.:.· · .. · : . ·. . . : ,· · :· .
. a.·. Actually, directly,-· and· ex-el ~v~~~$e.d'~~~~ ~ ,_..\ '.:. ~ . . . . · . . ··
··.: . · . 'h,eet the· n!;)eds of the: p_artiqcill;\~d~try," 1Vl.J~l~~ rj r~iterate.stti'at- th'.e ma.cl;liriery subj~_ct"
. -b.us{ness, or activity;.and ·: · -··. · . ~~e~J'eal~property t.(lx under the LGC'"may or rnay
b,. By their _very i:,_att.ire ·. and · Pl!fPOSe. ··are _., ... ····not-be ·attached, pertnanently. or temporarily fp
· designed for, or.necessary--to manufact!in.ng, ·... ·· · . tM reat property" and·the phY.sical facilities· for·
J •• .... mining'; logging, -~omm_e.r_daJ;in<tus~ia!,.· '9~ _·. .produc~ip~; lns!a_lli1tioos, ~rid ap'purtel')ant_se_rvice
. · agricultural purposes (LGC, · $.e'c. .199(0)). · · . '. ._fai::ilities, those-~hi,cb··aremclbile·. 'self~po..veredp~
... .. . . -~ . ·... .. . se_Jf:.prope)led;or are ho.t perlT)an.eintly..attac_he'd_
Note: . . . . .. . . .. ,. . : fT-11.JSt (a) ~e. actually; _direc\ly;.. antj .exclusively
:· M..ovable ~quipiTI~n~. to ·be· ··imrncibilized ,. in . , ~sed.-to meet the n~eds ofthi3 paitic4lar in~tustry,
. ~orite_mplation c;ifth~ l~w must first pe. ~-e!?~~nfial·" : .. . , . . . business·. or a.ct\vjty; and {b) by_'thei_r very. nature.
·_.: and "principal. elements" 'of an industry "or wo~~s. ·, . ..· ... and '.purpose; b~ 'design~p fqr; or n~c.ess~ry for .
. without .whi.ch suet,. indvstry 9r_:works would 'be. maJ,ufaqturing',:-- 1T1ining;_. Jogging,, c·!:>mmerdal,
. : "un~ble (o ·function . or.· car.ry on. the·.. indus.tria.l. . : indtistr'1al/: or agr_icultural purposes'. (MaTJila
pur.pose fc'>( w~ich_:.it was· ~stablished":(MJn_danao · Electric .99mpany. v. The City Asses.sor ancJ. qty
Bus Co .. · v. City .Assessor;· G.R... No. t-:f7B70, . . ·Treasurer: ·of .L1:1ce(la. · _City,· G.R.. No;_ :1f).6102, _·
~(;Jptem'p~r.2!;}( f96~). :._ · · · : ..· · ·. · August5!. 2015)_; · · ' .·. · · · · · ·
....
· Power barges·:are categorized as. immovable ··in~strati_on: ·. . . . .. . . . . '
. "property by 'destiliatipn, bein_g •'in the !l'afure. of. Oil. 9omp,anies install undergro_und· tanks· in. _lhe·
_: machinery and other implements intended·by tt:ie gasoline sta~ions lo.cated ·on· land "leased by",th~ .o'il
owner' for." <;\rl in_dustry or: work . whic_h may b~ .. comp$ni,s f~oni .the ciwn~rs of the land whe~e the
ca-i;ried
. on in . .a building . or on. a pi~ce of land . and g·asoline stations a're loc_ated. Ar~ thOS'(;?·Cmder.groi..md
. . . . ·: •. ·..

378 I·. 2019 SAN SEDA.LAW CENT~LIZED BAR,OPE~TIONS

 ..fr/
,. DD!D lllli!z_lZIGl~
~~-

,f. REAL· PROPERTY TAX

-~·. iaa--MBI •" SAN B?DA !AW CEN:7,~:: ~:::.ER'Anor: - MEMi?,BY AJD,2019
r:·
:l,.
-tanks, which were not placed there by the 'owner of
the land but which _were instead placed there by tti~
comparison with locai business tax-ordinance whk;h
recuires _public hearing (lGC, Sec. 1(37). . ·
;f., · lessee of 'the land, consldered real ·property. for
f . purposes r~f real- property taxation under 'the LGC? Whil~ a 1.ocal gove"r_r:iment_·uryit ·is. authorized· urider
t· Explain. (2003 Bar Question) . , several laws· to .collect real estate tax on properties
•;t~._.; . . . . . . ~. - falli.ng .under its territorial jurisdictiori, it is· imperative
J" ANS: Yes, the u.nderg~ound tanks artii'o~gh installed by to first show that these properties are unquestionably · ·
tr: . the
the lessee,..ar~ conslderedreal property for purposes of ...
imposition of real property taxes. These machinery
within its geographicarb'oundaries(Sta. Lucia Realty
&-I;Jev't., Inc. v. City ofPasig, G.R: No. 16q83EJ,·June
/f and equipmentare taxableas iiece.ssary.fi~turesof the 15, 2011). . . .
- t ·. gasoline station without which," the . gasoline station
¥ would: be.useless ..However, .for.. purposes of executing:. mus(ratiom- r • • •• •• •• • •
. ;/:' a final judgment, the subject machinery. and· equipment· An Ordinance was passed by. the Provinclal Board of
~, . would· not pe considered as ·rear property (ceue« 'v, . a Province it) the North, increasing 'the rate of basic ·
{{ CehtratBoar'd of A.ssessrnenf ~ppeals, (':;.R. 'No. L- ... .realproperty tax from 0.006% to 1 % of the assessed · ·
,j:. 50466; May 31, 1982). ·, '. '.. . ,-.. valueofthereal·property:effective.Janu~ry1;2000 ..
it . . . . .. , . Residents of the' municipalities of the said province
Summary of Rules· on ·Mach_inery:' . · protested theordinance on the grot.incj thatno publlc
1. Jf permanently attached .: 'Subject to rear property : " hearing wasconducted and, therefore, any increase
.... tax .(RPT) .(Mera/co·Sec.uriti~!;i·tndustria/.C_oip.·.~->:~~·. _in',tl'le-rate or realproperty f$ void. lsthere me_rit in
Central Board: of Assessment ~ppeats,·· ~.R.
,t-!(J:/'? the protest? Explain. . : . ·. . , · . . . .
L-46245, May 31, 1~82); and · .' , · ·:: ~:\:ij,/''·'f} ·. · ·. : · ·. · · ·
2. If riot permanently attached: ·" .. (1,..;.~!H:"'.~~~ANS: No .. The protest is devoid of merit. ~o publlc
a: . ~ssenti_al . and· pr,iricipal' .:elemeht ·: o·tJ ·tn"~:::t:;. . .
f).~_w~ng_.is· refi~ired .before_the enactment of the local
. 1r:id~~try without whrc~-such ,n_du~try,}~9rk,,9f;_y'kt.i:1a~B{d1~.:W.S~i)ev~ing the real prop.arty tax (/RR of
·· act1v1ty cannot. function - subi~,fo RP1.: ~GC, 'A'tt~2'17\ }j .· , · ,
(Ma_nila Electric·. Company((ff:- Th.e · qtY,--.:t, . . .fi}l , · .. ·
Assessor and Gi(Y TreasLt,rer lj>.f•f;,Jffen_acpy;,:1-·i PROCED~f~ 't~ ,THE ADMl!"JIST~TION 9F
G.R. No. 1-§61(!2, Augu_st 5;,.2}¢1sp~rt:7 · ,· 1~ .REAL PRWP~Rlff TAX . .
b. -~ot ;;i_r.1 essential ~md P,i;i)ti'pa!"~lejie'l'!~ofr;ip,__ _J~°;\ · -, . ·. . jj l~ .\ . ' , · . · · - .;
industry, wo~. ,o.r a9J1:~Jo/ :-- ~~~:',.,.SUbJ~ct t0< ~:j
~!el? ..!3_,pe~l\rat1p~~f Real Property (LOG, Secs.
I.
_RPT, ·because ~ae:~1rnery:.r,::~f:li~~ .3:ra:~·-_rf.
general purpose shalr_not Jre:"'ft~rs1dl'.ir'~t1 \,.~J . · . ~-~Jg,tr
r,:1
2Q2 ar.iiff.<71.PJ(fi,,'ifi_'if'~·i':?. .· , · ·.: '
witllin'the d~finit)on'of ll'.11f~m..e~-~der.1~R f,t1 Step 2: Lis~ing · ·.ot· Real· Pr~perty in the..
· .· . · . .
I
. of LG~ (/RR-of I:.GC,.:Art -29.0\'r}):' )=~- . . . . d.:i·,J~!r~srnent~oils (LGC, Sec;s.. 205 and W7) . ·.
. . \:r~~,.....,., . . . . . --v-1"',,-(~. ;-.:,.;t.t)lt)~~-1-~ .. . ... - . . : . . ,
·. : ... ·, ~-(~i/'~. , Lt{{:,~---~Step:•.3';,Appraisal and Valuatio,n of Real Pr:operty
....,..,.;....-___;..- .....;_._~- . -.:..,.,.'
__ .....;..; - . ....;
__ --:,
,... _.;...~,~ • · :(LGC; Se.cs. ·z12.::21.4; 220
. ~..-,-......{?{~}~~'.!,,:-.~--
-. and·224~2.25)
. IMPOS'.ITION 01:<' RE~~3 .. -'• . - '.· .· ~ ·... ; ·i ... •, ..'· .... .'. . . - .• ·
. p'RO_P_E·,.· .1."--
»r~·TA:x .· ._~, ~.· .: Step'·4: Determining.Assessed Value:an.dthe:Tax···,
Q'Cie_ (L~GC!S~r;. 218) . . . . . . , . .
.......... ~~~~~--~---.-~ ........... --~ .......... """!"-:'"'~
. St~p 5: _payrri~nt a:nd' Co.ilection of 'fa/(LGC,·
LGUs tl:iat may' levy RPT (lrriposiqg,Au~hol'.ity}: Seps: 247; 24,9, 250, 251 and 252) · . . ·. · · ·
1. Province·;· .. ,. . .. . . ·.. · . , .. • .
. 2. ~C·ily; cin~~·- . . . .. ·. ; STEI? .1: -Deel.aratirin· of Real P~operty ·. ' : . · . · ..
3.- Municipality. witriir:i;.Metro Manila {~GC, Sec. . .· 1°. beclaration·by Owner.or Adntinlstrator'...,. All.
232). . ·- · . . ·. :. . ,
:_, perscm~.; . natural or juridical> . owning " ;or .
N~~e: .Piesent(y,: tbere .is only ·ooe municipality: ih · aqministering· ·:real.· prnper:ty,:. ·including,: the
Metro Manil;:i.,--th.e
: . . Municipality
.. ~ of Pa~e.ro.s,
.. , . i~provements therein,. ar,e requir.ect !o ,preJ>are:
·and ~re~.... · ··· · ·
.Extent of.' Tax.in9 . Power~.:,. Proyince_. 'city· or or
· · mi.micipality'. within· the Metro r,./lanil_,fAr:ea qo n_ot-on.ly ..
have tfi·e power 'to .fevy:·a·n annual ad Va/brem tl:P( Of! . ·sworn'stat~ment
. rea! property but th~y may a'iso 'fix uniform rate of a .Once eveFy° 3 . years during · the·
bas_ic rE1al property tax applicable to t!14;iir rE!$pecthie. period'from Jailu'ary ~ to,June.30,
_loc~litie.s (LGC, Secs .. 232~233). . .
Prov.incial/City/MunicipalAsses'scir.
No public 'he~ritig. s~all .be required bE!fore · the -(LGC, ·seci .. 202)
enactment-of a 'facial tax ordinance levying 'the 'basic
real ·property. tax
. . ;(/RR
. of LGc;
. Art. · 324) .in

~2019·SAN SEDA LAW,CENTRALIZED BAR OPERATIONS I 379

 ·.REAL ·PRClPERTY TAX
'. .. $AN BEDA.L,4W CENTRALIZEJ?.BAR.OPERATIONS- MEMORYAJD :ioi.9 .

· Contents,of the sworn statement: ·· .. assessment until such taxes are. fully paid (LGC,
· . a. True vatueIcurrent/talrmarketvalue) of thelr Sec. 222). . · . · . · -- · ~··
. ': property _whether previously declared or not,
. · · taxable or exempt; and ... · ' .
b. Dl;lsCriptionof the oroperty sufficientin detail
· for assessment purpose (LGC, Sec. 2.Q2). ·

.'""". .. ' .... . .. ~. _ .. :.. : :. .. . . ' . . . : .

· For.properties declared for the first time: Real ·
. .propsrty shall be assessed for- back taxes for-not..
.: more.. than: 10 years prior "to the date. of initial .
as·sessrj:lent·(LGC/Sec.222f . . . . . : · . · ·

: ·i.':~pplii::~bJe
j-~~~/.:s·~;i,schedule.ctvalues
: . ~e. -~;ni.~~t~d· :~in-~-forc~_q1,iring .o/.
- th-~ ~-bas;~ the·
.
. correspondinq ·period.(LGC,
. \
.Sec. 222).-. ·

. If s~ch ta~es a~~- p~-icl'cfr1or\>efo~~:the ~no··of the·

. quarter. fc;illowing the . <;iate. ·th~ '. ifoti'ce; of- ..
assessment ·was · received- by - the . owner,'· no .
. interest 'for delinquency· shall be · .. Imposed
thereon; otherwlse, taxes 'shall be· -.subje·cl to
-interest'at the- rate of 2% p"ei: montti.or.a fraction
. thereof
. from
. .·the date. of the. . . receipt pf'. th~

3f!O .I ~019 SAN BEDA.L:AW CE!\JTRALl?:Er;::>. BAR OPERATIONS

~·-:----mr:tmlli!l P..E_R__T_Y__.Tlllljll·:A-X...-.---....el!~~
·-·R_E_A_L...P..R~-oam·
11 . ·SAN SEDA LAW CENT.RALIZE.D.I!~ OPERATl<J_NS;-MEMOR'(A/Q·2oi9

If.•·
fl• . .
-b. Undivid~~ real propert; other tti:::at
owned by adeceased ~ in the name of one
Sanggunian ·shall act· by. ordinance with.in. ~O
· :days from receipt th.ereofJLGC; Sec: 214).
l, · · or more.co-owners: .. ,
j~ Provlded: Such -helr, devisee or co-owner 2.: For Machinery
}_:': shall· be li~ble. severally and proportionately a·. For brand: new machinery: FMV ls the
for all <;>bligations· Imposed oy the. LGC 'and · · acquisition cost (L.GC, Sec. 224(a)).
· the payment of realproperty tax with'respect ·· ·
to undivided property. . . . : If .the machinery ls imported: the acquisition
c.. Corporation, partnership, pnd: association . . -cost . includes fr-eighJ, insurance, bank and
· - same manner-as.that of an individual; arid . 'other .charges, brokerage, errestre. and
d. · Owned byth~·~e_pub.lic of.t~e Ph~lipplnes·; · 'handlinq, c:h,Jti~s·and taxes.phis cost bf inland
its lnstrurnentallties, political s1,1bdi~)sloh, ., . :!f.ansportation. ·:hand)ing, · and mstallation ·
. tho b_eneficial use· of which Js transferred . ". charges . at the present -site · (LGC, -Sec ..
. to ·a taxable .. person -·i·n thename .of the .• 224(b}): : · s•._:. ·• · · · ...
· possessor, gi"a~tee, or of the.pubjfc·.entity.it· · · ' · ··
. such property has been acquired or heldtor . Note: The · cost· .ir(-·forelgp · currency ·al
;. · .. · resale or Iease (LGC; Sec.·~05),. ·· :· ·imported 'machinery -shau' be converted. to
s, · 2 All· declarations shall be· kept and filed under a- .. peso· cost on the basis of foreign currency
If:. . '. unif6rtn· claisification system. to ·be established . · . exchange .rates as T1Xedtiy·'the Central Bank
,. by- .the. provinciat, city or municipal· ass~sso·r,.,1;') ·· (LGC,.Sec.}2';1(}:))).. . . ..: · · .
,.. ' ·. (LGC,:·Sec.207). · . ·. ·/';,rf...>)t . ·. ·,.··· . ·., '.
~~ _ . ·. . . ·. · . . . ·... · . , /,i.1£f.ft;.!":... b... in' al). other case.s,(LGC, .s~c.·224(a)):
'~··: STE.P. ~::~P~.raisal a.nd~V~\~atlon of ..Real ~ro!J1·!{Ll~~~~··
.. Fo,r:~a:.· . ·. _ _ · . . . ·.
. ~,,ef.Y \,·\: .%{t~~~~~ ~!~!Jli'iJ?1ng -~ . ·
( ~ Appraisal. · · · · · ·
'i: The · act or process . of determmmg the;;;:,value · of---
{.
0 ~J
ecor:tom1.clife . X
property' as of a·specific datf;). for·a sp.~ific purpo~p!:;:-~~· ·· · ·:,· E~tigi~t~~ .·.;. .
· Re lacement/
··R · p · : t·
c~f[.~quc ton
· .
· =· FMY ..

~f- JLGC, S,ec. 199.(e)).

,;_.· , . . : ..
_ .. . :.
: . .. . .
r~:,. .I\: ·. -~
,,r_ ·. ~\
.. ~::5 )~<"·· . . ·.
: econgmJC\!\fe
y~ .· ·. . . /! .~ ' .
_
. . . .. :
:
'
''
i
''
fi . -~~< . v-.:c..-:z• ~ !~\_ · .·.
Fair M~rket ValJre · · ·.
~ .· The ~ric~ at Vlhich. a pr,opertyfi.r~Jlqe ~.2.l~"by a -~·elle~
~ ..- whp-· !s. not ~ompeUed to sell ~Qcl b'op~l)P:q)f a l:i~·~f . ~~~,.
r~ ·. . . ..,t~r.e: ... , .. ·· · . '.. -
jf{.. ·E~Q~~~~}.2, L~f! -· ~stimated .peri<;>d. over
~~!fW.!•J~antJctpat~dthat a machtn~ry- or
· ..
I
/ who 1s not compelled to buy'{L"G,<;;.{·;....~_fiJc.IJ/J9.(l)~~.c:.-·~J r:l-t . · . ~'Q.\Jlfllfl~nt may· be pr.ofitably ut11tzed
:"' . .
~.:_ Determination of .Fair-Market V~lta.i~fMV);} .. : ...
'(>
. · · · ·· "\:? ..-¢' /f. f,:"J .
~..,-_.~ii, .
· . . . (LG.C, Sec. 199(1<)). ·· : ·
Re.mainin.g· Economlc'"Life .--:-· peribd. of.
. I·
l
·::. . t f . For .Land. · . ·· . . : · . , t~5. · _' :.. . -·~,,j~,1.1,.~;~~~tim·e ~xpressed iri ·years troll) the d~te ·-Of .
!
;

~:: . a_. . Assessor of tne, provmc~,. city~% f11Unt~}fl9lfly'-'·~.zJ~..:..:..,,.u.upapp~1sal t9.the dcite,WF'ien !he mac.hmery..
•~·- · · or his d~puty m.aysum.in(?n thf;)<9l1-'t?e,rt1qf.~e : ·. - . •.. · ~ecorn:es val~eless ·(L~C, s_er:.· 19~(r)). ·. ·. i.
1-i. · . properties_ to be affecteq .o.r. PE?'r~f'l§..Jt~~1!19.. · , ·. · · 111 .. · Replace.mept or·Reprod,uc~tQJl Cost.-
'.,. . legal ihterests.·.ttiei:ein. -81'),d ·. witnesses' al)d' . . . .- . . . . . . : cost .that-would l?e inp1:1rr~d .on the'tiasis
may .administer oattis and· take dep6siti9ns. · . · .. · ofcurrehrpiices,. iii acquiring a'n equally .
. conc~ming. _.the ·prope~y; ·'ifs ownership,·· · ·. · .. · .. desirable sul;istitl!te property, or the cost ...
. . ·amoui:it l")at~re(·a11c,l va.f~e (L~e, ~c.-·2p).: . . .: · .of. rl;lproducrng_. ~ ·.~ew :replic~ .-of )he
. b .. ·Ass~.ss·or. prepares a_ ~ch~dule ~f .f.MV fo.r. . . property-. 9r\ ·the 1;>as1s of ~urrent pnces
• .·. . · d.ifferElBt·¢1as,ses:of real propf!~ies situated in .. ·· .. witt:i the ~ame ·br closely.'similar m$te.r.ial
their ·respective . LGUs for enactment·. t:>y · .. (l..,GC, Sec. 199(t)). · · '· · · · ·
ordi.nance. of :·tti·~ . sanggunian.: ~oncerned · r-: : ·. ·. ·.' ·· . :·
(LG~, Sec. 212). .. . · ·. ·: .- ·.: c·_.-. D~pfeciatio'n allowance: .. . ..
c. . The.· .sc;he9-ule at_ F:MV. \s. · published in· a· -· For p4rposes·.'cif. asses.$ment,. a depreciation. ·
. n~wspap~(·Of. general .. ci~~Ul.atfon . in· ·the . ·. . allowar'\Ce ~hali.~(;i·rnade for mac~inery at a.: ..
prqvince,: cilY,.'Or mynicipality conce.med o.r i~ ·'. . '· :.i: , Rate not.exceeding 5% of original cost .
· ·the absence thereat .shall be··post~d in the · · OR replacement or. repr6dUction··cost:for
... provlt'iciar capi~QI, ):ity; or municipar hall .a.rid. . · ... each year·ofose~ and . . . . .
. . · ·. in. two. o.ther :·con$.pic.uous · publk: ·places · · i Remaining...vat~e' shall be fixed·:at not.
·. · there\ri.(L:~C,. Sec. ·,?12): .. . . . ... . ' less·· than- ·20% of· the. replacemEi'nt or. · .
. d.. Th~. proviiic.lal. city, or ~u-nicipal assessor. reptodl.Jctlqn Cb.st for :so 'long as the
·. : may .. rec:ornmerid.'.. fo:··. the · Sanggunlari ·m!'lchinery · remains · useful' ··and · ·In·
. i::oncemed ·amendments to correct errors in .. . operaUon·(LGC; .s.f)c:'225J>··
.
· valuation. . in· the. schedufe Qf: FMV. . ··The·

. . . SAN SEDA
2019 . LAW. CEITTRALIZED
. BAR OPERATION.S
'
I . 381 .
 REA.L PROP-E-.FtT·Y T·AX
SAN BEDA ./..Ay,t-tEN~RALIZED ~AR OPEfl1 TIONS - MEMORY AIO 2019

STEP 4": Determininq the As~essed-Value and "the Provincial Assessor reclassified the. property as
T~x Due (LGc;·-sec.·218) . ·· · · · .commerclat for. tax purposes starting January
• 1· 19~8. -ls. it proper for the. Provincial Assessor.to
.. Assessment . reclassify the property? · · ·
The act" or process· of determining· the value of i=i
property, or : proportion thereof. -subject . to .. tax, ANS: Yes, the reclasslflcation is proper. The law
_including : the . discovery, -listhi_9., olasslflcatlon, and focuses on the actual use of the property for
appraisalof properties (l.,.GC, -See. 199(f)).: . classiflcation, . valuation, . and assessment
'purposes re·ga~dless of ownership. · Sec. 2-17 of
Basis of Assessment 'of Real Pr~p-orty . .the LGC provides that "real property shall be
. ~en~ral Rule:, Real -property shall .be .cl1;1ssified, .. classlfied. valued, .and assessed on thebasls or
valued, andassessed on th.~ _ba.sis of lts actual use . its. actual .use regardless of where 1bcaled,··
. regardless of where .tocated, Who.ever. owns it,. and ... whoeverowns it, and .whoever us·e~ it". .
.whoever uses it.(LGG; Sec. ~{7}: · ··
. . .. · ;2. . On the taxable y.ear.of 20~ 1, Mr: ~ua:n dela Cruz" ·, ·
Actual 'use . · · incurred .real .property taxes .over his residential
Refers fo- the purpose tor-wtiich°)he pr9perfy is house and lot in Batangas."Ori january·3, 2012
pr1ncipaliy or. predominantly utilized b'y the person .ln . .. he sold the: said .housa and: lot to ·:Mr.: Pedro ·
possessiony1ereof(l.-GC1 Sec. 1,9f}(b)); . -~-~~=...;.--:-~ntos. Who i~ Ilable for the unpaid real pr9perty
. v. . · . / · .,
j

Excepbon: In ~ases . where there · a~_.Q;nxe~l~md

4,r-"'· . :1J· jt
~..
-Ja~~r the year 2011?
1, I -/;...,_ i;,.'"'·- · ·
,·
,
. .
•
uses, the _pr~dominan.ce ·rule 'ts ap~lt'eciC(L'$(}:,~~~-"":~~=,,,!_ANS:/~m- '3-~an dela. Cruz. Unpaid real property

· · · . ·,. · i"
217;,in relation-to Sec: 1.99(b)}. /,_('.!.· \,{,<· . ._,..,.,..,....~~ t~~;atta~h'l>~<\;heproperty and ~re'bh~r~eable
'\~}<¥.f>· ~·-
·F~r mixed )and· uses: · Fbr _I~ ~~pca!r'd infareas1~t
""" -~ag.~n5\tJte"!Jerf~>nwho had actual beneftcialuse .
··i.f' . ,W an~·~qs§~_s,s\9,:rJl~\it.~egardle~s of w~ether Or'!')Ot
mixed land uses, such a·s rest ent1al}<y1t11 cq'mr('ler-a1al. ~ a~ h.~ ,s;the o.wflieLfq impose-th~ real property tcJX
?r ind1,1stria1: the ~redci)TI_in~~f~e oftth.ela~~-!!l~!f\'l.~-·-.2.,i;!·.t..b..~ s1;1b~~~t'f)wn~r which Was 'neither.the
area shan govern the_.c1asw,trtiiri~1.t•. va111!'~0-~:-~~ ]OOi ,,.~·C!.wner nor -~1r..,,_,g__e.n1rfic1a1user ot the property i:
.. assessment thereof: lf. ttr~-pre°Jo_mif!~rh us~ 19. ·ffl ~ f;;-dlirin@the de,sfgna\ep · periods would not only be II.
·residential,.alt lan.ds in that cfr§..~~!;i·f11 be :J-skssed,.'f3~WffifJ~C0,01~fY..._ to··f~yj"t,utf41so,unjust'(£;_state of'Lim V..
resir:fential;_ if-th~ piedomin~n""N~i.is com%,-~al·or~~:..
industrial,._al).lan~s·in that a'~j,f:~i[?~'i~~~ed.a~ 1~ J
Cit)Jlf, ~ anga. G:R1 No. f)0639, February 21,
.·.1~9#~') . ·ft:,_.~ Q . ..< ·
such (Local Assessment we'gd(a'ti.on!~A,~,;f.-0~: I~~?/:;(~ · if ·. i' . . \j
_ (2004), p. 13'8):[h~reirtf}fterM~n.uatoXR,ea~ope-;J}.:2 f; ."1~sJ~s. ent J~evel . f . .: . ·. · I'
i.
. .Appra~saland A_ssessrnf!rit.Op°bs:tions~,. :'\.,~~,..,.,n~jyce~ge app~¢<:l to the fa!rm_~rketvalue of the
. .- .- . · · .· :, . ~ . ·· .. '--~ SCJr:; ~~'i's),r_?peHy to .,./det~rmine the... taxable ...value
For buildings used for-a purp6 -d1ff~re:i"ll~fr _m-.2Nla5:'l.,,~-¥sea v~J~e).j:lfthe property (L~C. Sec.. 199(g)) .
. that whi"cll -.the ia~,d _Is cla~sified: f:'-{9t(f$R.~-c~."'o~.., ..~ "'f\°'\v.'r 17/': .. . . . . , . · .
_!and classified arid -l;!pp(ai~e.d _as. coh:\mtfi:c,~I ·or ..11,, If ~s~s,~~~J}.~levelss~all b~ fixed by ordinanq_e of-~he
industrial occupied by. the l;j'tiilding ·1;Jsed~o~oth 1" J..kl~{~P.lllafe $anggu_man (L_GC, Sec. 218) .. ·. , ..
. . iesii;teritial arid·· cominer(::iar'.qr .industrial· purp.oses':"=~ . v . .. . ' -
,', •• • _:. •• •• •• •

· · sh.~11 ·be· i:issessed ·ori the ...basis·:.of. the. ptedcimin~nt: 1.. · .AJ;se~sment Levels f~r ~and :.
. . tJSe. pf th~ 'build Ing- c:Jf buildings, If· ~e-._pretJa°minant
. useof tt.ie build int:," ·is. resiqential, ·the ass.essm.ent ':
··l(;)VelfiX~O tnepjoA.forresiqen\ial·.lc:1nd shall be applied:
Ol'J the market y~lue of the lot. or.parce! deter;niined QA Residential 20% ·
.the. basis of the schedule:of base market-values; if. . . ----,....---~c......---1------..-'-~---<
· industrial or. commercial, tbe. assessment· 1e;,,er for· , ·'. 'P,;gricultur.al · .40%·
-ind.1.1strial or c.omniercial shall be applielc;f ori the b.asis ·1-C-·_o_m_m_e-rc-ia-l-.,-+ln_d_u_s~fr-ia_l_r1-'5_0_"A_o~.-_.-:,"".~--~
.of the. scheciul.e of the ·base' marl<.Ett.v~li.res. (Manual . -~: and Mineral ·
· :~ on ·Real Pi'op~rly Appraisal· · anit -Assessment" 1---'-------~-~-+----....,...;c........,_· ----<
._.
Operations,~supra ..atp. 138).' · , ·. · .. ' . · · . . . T:imberland · · ·28% ·
. . .. ,..·. , : ... . .... ,,, '· (iG(J,·S~c..·218(a)J:.. . •, ..
lllusJr.atie>ns. (2002.,13ar.Questfon): · .. :·. . · .: - ·
· '1. -the res/dentiar lot ofA is Jocated it'I a c0mniercial · ·Clcis~~s · ~f ·Rea.I·. P~ope·rtY, ·for · Assesslllent ·
... -area .in· front of-.the ·pub.lie market. ·on .1997, .A . Purposes~.(RACIM i'S) .. . .
. then left: for ·united States ~o stay ·.there· . · . a.·Residential iand.- land principally devoted
. · permanently, as ,a . coriseq1,1enc;;e, _lhe property~ · to habitation.(LGC, Sec. 199(u)). . .
. ' has been. rented .to a sing le proprietor engaged in b.': '~gricultural land ;-:land devbted·.principaliy;
· th~. sale of appliances· aod· agri-products.. The to the planting of trees, raising of i;rops,

382 I 2019 SAN BEl:>A LAW CENTRALl~D BAR OPERATIONS

 RE~_AL PROPERT.Y.TAX
SAN.SEDA LAW. CENTf/AL!lED BAR OPEllATIONS - MEMORY AtD·2019

• 1¥ A ¥ @tHCMffiiH\tll@w1;c, A
.
ff#
.. .
I.
livestock-and poultry, ·dairying, 'salt making, Wherieve~ . reat · · property 'has 'been ···divided into
fnlanq. flshirig 'and similar- aqua cultural condominium, each condominium. owned shall be
activities, and other· aqricultura] activities; separately .aesessed; f<,5r purposes 'of real property
and. i~,: not ·c:lassified as· mineral. timber, taxationand other tax purposes to the owner-thereof,
residential; commercial, or industrial land arid tax on each such.condorriiniurn shall constltutea
' (LGC;· Sec: 1!!_9(d)J: . .. . .. . '. lien solely ther_eof_(f?.A. No. 4726 as emended'by R.A.
Qor:nmer~ial land -:- land devoted principally · No: 7899-, Sec. 2.5) [hereinafterCondominiumAct].
forthe' object.of profitand Is not-classified as . . . . ·. . : . . ': .. . ·. ·.
agricultural,, tndustrtal;' mineral, timber, or:· · '3, .Assessment !. ..'evei~·for Machl.nerlE!S.
resloentlat land (LGCi ·Sec. 199(i)). -
· ·cf. Jndustria_l land. .:...Ja[id devoted' princlpatly to
.industrlal actlvityas.capttai investment and is
net classified as agric;:ultural, · commercial.
timber,' "mineral, -or residential' land (LG9,
_, Sed: .-.,_.~9(n)). . . : . . . .. . . Agricultural ·
e". .'niljneral' "land - 'land . .in. which minerals,. 1---.------~.---If:---,--.,... -~-'-'----=------l
· .: ": nietalHc-ior non-metallic, .. exists in. sufficient ':-:-C-::o-:·m=-·--=m=-e~r~ci-:a:--1
:--::&::-:·!..,,ncc'~""-.u_s,..tri_'a_l__.__
__ ,.....;..·_·_a_o_o/c...,~ ., "-·~-'---',...I
. . quantity- or- grade to justify the necessary. (LG:C, Sec. 218{6)) ·
.... expendltures to.extract vand utilize such : . . . . •' .. · ... ,. . . .' . . .·
: mat~ria_1~;(u~c:Sep.· 199(p)). . . . ..... /j>'l 4:. ~se~smenf [evel~ for 'speci~· .Class'es ':·of.
L !i~_berl~nct. - ·land id.e.ntiijea_. as ~~i:-e~,l~:1r/,<{. Real Property·. . . . . . I.'
. . reserved area by th~ gover.nment,_wn,_ctw:i:~w:',,,;.;::) . 'Lands: btiildil')gs, .and 'improvements.. actually,'.
· : .· or IJl~Y not be ~ranted to _a ~oncess_10~1Jif: w:\;•1 · c!irectiy, and 'excJµsi:vely used for -the following
. · .lic:eni,.ee, lessee, or permlttee. (M_anuaJ e_n· ,·~J1....
Rea! · Prbperty Apprai~al. an·d Ass~s:Sme~f._'/tP/.'.:
ur ioses: . .__ · · ·.·
••
.. · · · · I
'I
Operation$; supra at 10). ·.. .. · · ...,"?'/ · v ~f. , !
·. g Spec:ial- those: . . ,CY-;, . .)1..Jr .. ,~w~,s\,M
i!!' I
. [. lands, · ·b.uildings, ·\~g:f. ot!)~r"'-(L ·1-..----1-';-:~1+-jt14..,.f;,-a_l_, -,--'--,---1----~-~----;
._ . . . .. _imj;>r~~~!"°~t:Jf~_ . acttiall~j:'si~~~lyf'~md .
-~. . . : ·. : . ~x~l~~·y~ly_~sed ·f%-_t}-6sp-1ia1~:,;cuftaral,
(:1:.J . . J,~cJ nti\c
8L . 1-_---"--. ...,i;.:.....-H-11-. -•• .:;'Ila,-~·-- .. --,.--+--,,---'---'----~
~ 1 ~o/;
· · . ·. ... scientific pmpOSE;i~C,aod. $'.-;"":-;,., ~- .,>\ .. · k Ho~p1ta11 ·. ·;'~% . · ,
. ·. .ii.. tffo$e. o.wi:i~c;I an'ij_:>,!-i~e€1~1>Y,_?l~a!. W..<1t.er t\~
1-0-..c.w.;.;."n-=~.,,..·-"·~""'.;....,·s,.,.·e"'9-:
Q.,..·a:"'""'"~-~i:-;. ~,.i,';"o,.,.""·
y--Jo_ca __-, +-_--,-"-,---.,----,

. public ·s~rv1ces 1p, '..,ffi~ul?R'Y· and

i:14
... · .· dis.tr~cts ~nd ,GO<;;<?\!jn<;!,E!tj!lg:~ss.emt~I. iJ ,;;ate/d~tricf;L~ . ."." .. ' . ·.
: · _.. . : . .
. . ·10%"
., r
. '.d.istnbution ofwater ari'&.ewctriclty (LGC, -I:"-~ ,PWfl!;?d and. _use(! by GOCCs . -

. '. · Sec. 216) .- ·

.Th~ c1t¥:o,:- muq1c1p9-ht}'.-Wtth10 t~e-(,Metr~p~h~an.

: . . ~:r.
'· . . . · 1}.. ~...t_:.,; . : },:::-:· ft:{r;.i1J.ejir,m,~e~s·ential:· · p_ublic_. ..
/.'.~{p::..z._1.,t:"--:,:.s~~be~l'-lfl. "the. ·supply and': .··. . 11010 . · ;
d1stribut_1_on. Qf_ water: -~n.d/or : .
Manila".:·. Area;. ·:·through. ., their ·,~~esQective gel)erat,on. o.r tra11.sri11ss1on of .
. . . : -Sari°r)g~nian, shall h~ye 'the 'p.oweric5tlas,sify elec'tri.cpo·~;ter,:·.,.. . ..
:.. -lands·. ~s · re~id_e'nti_?I,.·.a~ri.cult~ral_. comm?rcj~I. (l_GC,·secir. 2"1.6·a_nd 21 B_(d)} ·. ·· _ .. · '-· .. : · · .. , . .
.intlustnc;11'; mineral; trl"(loorland, pr. sp.ec1al :''! · · · · ·· · · · · ·.
.accotd(mcewith "their·zoning ordinanpes(L,.Gi:;, . ~f
Revisi~n. R~al Pr6p~rt~ As~~s.sm·eht~ · · .·
Se~:~15). .. . .. . - . GEfn.eral Revil?tdn of.Re.al F>r.ope'rty Assassm.erits:'
· :. : ·· · · , · . t · T~~: proyin.cial,. cJty,. o~ ..·municip-al :.c!~se.ssor -~h~II'.
·: 2. ··Assessment lev~i"s for B'uilding$ and '~t(ler · unde'rtake ;a: gener~I · revision: of. 'real · pfopei1y'
. St~ctl.ires . . . . ·. . . . assess·mei'itswithln-.2 years ;:ifter the effectivity of the
.•. 'LGC an.d-eVer,Y._3 ye~'rs'th'ere'after·'(L:~C; se~.-?19).
~. ... . . . .... . . . .. \ . .. ·. ·. . :
Purpos~s of the .General ~evisioo: . .
.. ·a: . .Equahzes and u~datias valu.ati.ons;: '• ·.- '• .
· · b·.:: .Bnrigs. to ljg_ht or rediscovers many ptoperties
. that have been,"lost» from the"tax·roll; and:
carn_r.n·~~da1t .lndusti.ia( 3o:-so% · . ·c. -~nabl~s. Jhe· assessor:.. to purge. from hi?
. ritnberla~d' · ·;_ :45.,70%.:. - . .. assel:isment roil the douple assessment and
assessmenf··of properties· thaLhad· been
(LGC, ·se.c.. 218(b)) destroyei:t that 'has accumulated through the
) ..
years." (CABALUNA, : Jr.,· : Rea/. · Property
Taxation . (200i), . p. 1.46) . [f}ereinafter
CABAL:UNA,'Real Properly,T_axation]..

2019 SAN BE~A0,xW.CE~T~L!Z~D BAR OPERATIQNS I '383

 "REAL p·RoP-ERTY TAX
SAN
.·· BEDA
·. ,LAW
. . CENTRALIZED
. . 13AR OPERATIONS:.
. ME:M08Y
. AID . .2019

. Valuati~n·of R~al Property: .The provincial, '

Jariu"ary _1st o'f every year ·and
municipal •. or city 'assessor -or his duly.
such. will constitute as ·a lien
authorized representative .sh.all rnake .a
·s~pe.rlor t~ a!')y · othe_r·. lien;
-classification, appraisal; and assessment of
m_ortgage or . encumbr~rice. of
real.' -property irrespective· of. any previous .·
_any'l<ind (LGC, . . Sec . .246). .
assessment. or taxpayers' valuation: thereon
when.: . · . · · · 1·, Basi9. real property. iax arid
i. Real property is .declared andllsted for ': a~ditional tax· .for.." Special.
taxationforthe first time; . Education Fu~d in 4 equal
Ii, · There_ is· an q~gofng. qeneral' revision.of __ instt:illment!i .(on or' before
. property
. . . classification. and
. assessment:
. . · : Marc~ · 31/. Jun!:) .. 30/
m .· . .. ~ September"30/ Decembe'r31); ·
iii. A request is made by the person in- ·2.'o~her . spe"cial :_. , levies
whose name · the property is declared ·governed by o'rdinance-of the
{LGC; Sec. 420).· . S°a.nggunian:'coricemed -(LGC;-.
. 'I
. · Sec: 250). . ·
. Thei ~~sessmeht of real p.r9pert'{ ·_shal) not-. be' .' -
. increased oftener' than once every 9. years, 'e_xcep(in . .Tii~· .coiie.ctio.n.of . RPT shal~ be
. . _case 'of new improvements substantlally iri.cre_a~.fu.9=,,~ the. responsibility of ·th(;l_, city or
J
u~e (LGC; Sec. 220), .' .: · .. ~h'~~r~~~~--
the value' of sai~ property. or a~y·c_h:anget~~cf'~~,all

. When. real property is .assessed ~J.t.:~~i-ffeH~~· or.~

·municip~I treasurer conc~rned.
The city...o·r mJnicipal . treasurer :
may .. ~epu!ize t!w, bararigay
reasurer tq. c.91l_e.ct all t~~,e.i:; on .
:
I
_whe_n _:an . e~1~ting, 1;1.~se_s~!'Yl·e,rt-J~~JJ'l_p~as~df:or .$·. \~\ , propertx_ _located 1n .the _· t
dE:crea~e?, tl)e_ ~rovm~1;:il, :c.1t_yf~1:1n)?Palfs'sessw . l~ lal~ngay:- Proyided, · the_
shall ~1thm 30 days _give vmtte,nn~ie c,f1suc9 ~~\'.".. :~--.
·. orrevised assessment to tlie;'~!::50~.m ~hp~e-~T3""\~
(L:Gf:
. the property is,~eclare._d ,Se?:/f223)... i · . '.1IDff 1 .
b~(a",tigay ·treasurer'. IS · pr:.ope_rly ·
!Yon~[d..(LQC,_ Sec. -247r · . I·
·· ·. · . . · -· . ff~ H _.. i· ~~, . . ?Jllr{ ' 11. . · · .
~J.f~r ~~ch_ month on .~npaid .
.
. Date . 6f .. Effectiv:ity. ~ofe-~A's~~ssrn:(iiit.-~.:o~ · . ·,.. :., 1am'gunt
. \Jni!I · _ti')~ dehnq4~r,t
. Re_assess~ent· .... _ · J ~-\ - <l}. ~-·-~-:~ a'm~u'ht is pc:;iia· provided·.in · no
:R_ula:'.All'"as~essments;oue.~ssE'{~~e~\~fft.atie·~fte~.· 1 ·.

·J_a1JUE1ry_ r Of any year shall .t~~-eeffa:ct(:/ ~~ry ~ :-(

. . ·. of.~he-su_ecee~ing y~ar{LGCf~e0.2~ S:~·~
:·: : e'xc,eptio~::Reassessmertts _s.~!!. take' e'~ttctJ~,{~
~iit ~-~ _m~ntt\fLGC!_ :~c.
c~eJ.:s_half t~~ ··_tota_l -if"\te,rest .

,¢'is~ount nof'exceedi~~f20% bf
.. --~.e~mning · ,of t~e .. quarter next_ .:foll.9~1!~!'Ii.:·. '.;:innual tax _(L.G<p, .Sec. 261)._ .
·.. _. reasse~s·m~11tif made al!~_ to: _.(OUVl<il"'< ~t) ~:~ .,.. . ~- ..
,. , 1: Its.partial 011.to~al.Q.esfn:rntiol};.'.' -~ ,
2. · Major change in ,its actual.]J.se; · •
· . ..(. .....
. -~-......,.,,.,.. · · : -L
;,· M.;. •,

Dis~otint°-'not. ~xceedlng _ 10% of

annual'taxdue (IR~.ofLG_G,Art ..
3'. Gr~at and sudden. inflation (;>r 'deflatiori". oFreai'~' 342).. _: . . . ..
. property ~ahJ.es';. · .. -· . . . .·· .... : . ~·· :.. · .·
.... · 4. Gross !!legality of .the assessment; :and-,· .· . . _1'::To.· be ·'-posf~d.:by. tj1E!:._ cit{ or
5. Any other.abnor-mal ,Qause!"(.l,§C, -See, ?~1).. · · .·· municipal· .... treas.ureF a· ·. in
. . . . . . .
:. conspicuous, . an<;! : . publicly
STJ=p s:· .f:'ayme.nt'~nct·C~l~~-ctlon of'Ta:ic --~:: ·.... : . .. ac.cessible place. aftlJe city or
· .. : .... ·.. . .:. ·.. . . . ·. .· .. · ~Linicipitl_ h_ali:--: · . , . . .-· · :·
Procedu·~~for Detern:ii~ation of R,~ai Properfy Ta)!: · a._Fpr · ~?sic: .. R.PT, ... and
Due:· . , . .. · · ... · . · .·. -·. l-;d~itio_ha!tax.fat SE'F:. ori_-or'
. f. ·T.a.ke the s9hadule of·f.MV (!,aGC,' Sec.. 201); · . · ··.. before · January 31 · qf ·eacti
~ Take· the. as$essmer:it' .level by· determining t~e .. , ye_a·r;··and · . - ... '. · · · ·
·. · . · clas~ification of property (L,GQ, S.ec: 2f8k ·. ·._.. . .. b. For any.other tax ::-any other
3. · Multiply· the FMV by tt:,e assessment leve·I to ge_t .. . . .. date, : ~rovided in . :, the
the·assessed vaiue· (~GC, S~c. 199(h)); · · : ord_iriarice·(LGC. .Sec; 249).' .
-4 .. : Real .property-ta?(·-is com_p~ted. ~y·m~l!iplyi~!fthe_ 2. Publication ih'. a neWspaper·of
. _;. assessed value by the-RPT rate {LGC;_ Sec. 233).:· generai' ·. circulation · In the
a
)OC~\i!y 0nce week fOF ~O (?,).
· · consecutiv~.weeks.(LGC; Sec_.
249): ·.: . ·,..

,J ' I ~ _:,

384: 2019 SAN SEDA LAW ~E-NTRA.i.1?£:D'BAR"OPERATIONS

 if. .R~AL PROP·E:RTY T Ax
r· . . . .
1, • • SAN BE:01!. LAW i:ENTRAUZW.BAR.OP.ER/fflONS
- MEMORYAID 20'19

j . · payments of real property taxesshalt first. be applied 3. The owner of the· property or the person ha'ving·.
;1:. to prtor years' delinquenciesilnterests, and penalties, l~gar interest. therein is Out' of the country or
~'.. if any, 'and.only after· said delfnquehcles are settled · otherwise cannot
; :. may tax. payments be 'credited for fhe current perlod . be' located
. (LGC, Sec.
.
270).
..
f:· (LGC, Sec, "250). · ·. . . . · . ·.. .. . · Note: Tnes·e are the same· grounds for suspending
. ~·· · :Under the· Sec.' 247'. .of.the l.:.G.C, provincial treasurers · · a.ssessment an.d coll~~tion of local t;:ixes (LGC, Sec.
t;,. · are obv(ously relieved ?f theautnortty to collectreat 194 in reJation to Sec. 270). · ·
i( . .' property tax; however! ltappearsthat such omission . ·
,;:: . . is. only a typogtaphical error: . ·. . : . .
.~1· . 1. Sec. '170 of the LGC provides that altlocal taxes·
~j. . .· fees., and. .charges s_han,":be. collected bf._tti~.
),. provlncial, city,.:mul"licipal, or .barangay treasurer,
TY.P~~ -~F REAL P.iOP~RiY
,· 2. Sec. 470(d)(6)· of .the': LGC -provldes -that th'e · ·... TA~·-:.
~;' . 'pro.vjncial. treasurer ··shall, -exercise technical . ·.··.
t· -supervision- over. all' .c" treasury . offitials · .'of · · · · : '.:·
if· . component citiesarjd municlpalities.: . · · . . . 1'. Basic Real Property Tax (LGC; S11c. 233);'.and ', '·.
{ 3. Real property tax. is.-a 'sbared 'tax wtiereU.he· ·. 2·.·. Special Levf~~ · ... ··. · ·.· ... · · _: : .. : . ·. . ,. ·
.,,. . .proceeds-tnereofare di$ttibuted: . :. . .. . .. a. For _Special . Education Fund (LGC, ~ec.
2035)1d•
; a. 35% to the province which shall accrue to the. . ., b , I .. L d. (LGC. s· · . ,1• . • . •
% g~neral H.md; . . ·. . . . .. ; ~ .' . .. "';,,,:'!?, . . • n e an s . , .. ec.. 2361, and.
.: · b, 40%,to the general fund· bf the munici1;>{di!~·r:!f ·. ,<?- .. 8Y LGUs (L.G_C, .Sec. 240). . - . . .·
t, wtiere the pr.opeity ls located: arid · · ,iii;l..4JJ,\
3. lmpo~e9_by other1aws (e:g. RA. ~o. 7279, ~!so ·
i . c. -25%. to th~ _barangay where the propei,ly.,jsfij~~~ ·kno"Yn as Urban Development.an.~ Housln~ A.ct
~. located ' (CABALUNA, .. Rea/' : Prof?Phfr.:1.i1;.,._,......0f· 1992)_-_ . : ·. . :. .. : ,' . ..
t'.' · · . · Taxatio,:i, supra at 245-:246). . ·., · #_ .l-!~:·:·-t~':;:·_~'.Ji°::i"'1~;;-:.,.,.fi?\ · . ·
·"~. · 4.'. Prop'erty.ow.ners,. however, at thejf-;~fitio"i1 .~'j,lt,( '.'
~a~fi~_Property.~~x. l·
I
r,_ converii~n,~e. may pay their re~IPC9p~rtytaxe~~~~~, . . !.!ii11.M.
. '9!1:iil.SEP.llll!ll!llaam i
r: the prov1i:ic1al treasurer of the. prqv.r.!'J.Ci to. wh.).?rr' Ii
~-.
i:. . .-
f·,;.. · Personfs
·l0<;ated be_lon.~s (l_RR__ otL~~~.!~~~:· ~ ·.1
th~ rriunicipality where the, s~J~l~t~~r~i:re'ity. 'is.

' li~ble 1to -pay-. real·~P.i"Op-er-ty:J.~:.

. ~ ·. . ~\. . Ufl~d
l.
1·
. . . · -·'"·· 1-,-. .,....,°"""'.··""""""·i.,,..-==, 'Ii
~--.;....-.----,--'--0~f.
.;;;:"'·,,,,),.,~-..,ij'='7,.;.,,i;;_.s_,...__
~- . realty 4lxe~. att~ctied to·.the· pro"p£_r:tyiri:~rtJi'p~gffi!l?Jp. t~ ' ' ·. -....;GT~~"" Not . . ex?e~:drng 2% ~
f. · again~t the -~ers~:m.:~l:io,~as··~_<>tu~U,.n:lieri'~flc,_ial ·~$e . ~ . . . ·- · . . assessed value
t. an~. p_ossss~1onof;1t rega,:dless of yjllr,therJ?{ ~c;>t.he, ~1'~.
~~f.icipafjty wjthin. Not : exceeding -2% . of. I
~
l
is the owrie_r.. Ttr i~p?s~· L!ripai~:re_a,,,IJYffi.bi!on.,t~~-_yiii}~!lk:flM~,tp..1)11~n.ila
subsequent. owner Which was .ne1the~1~n.e own~t,pef'--·- (LGC :s · 233)
'. assessed value· I
!··
··:·. ,.
0•• • the ~enefil,ial.. !J.Ser .<;>f. the·. prop~rtx~'puri&w·the '' eq ..
f:_ designate<f 1forfogs·wo'uld.notq_nly._be.co\i!t~lft0·.l~~ . 'Note: The .LGC pr~scrib~s· ~h~ litn(ts. :th~' ~ctua!' !
K.: ,l;>l,lt also: unjust (Testate Es.fate• of 1.,i{J1 -v•. City of ,: . ,, . rates. ,, :a.re· . de\e'rr:r:,ined . l;>y.. the. .. Sangg1.11fian
f1. Manila; G.R. ('!o. .9(!6~9;.}=ebiuaty 21, 1990). ·. . .... Panlala.wigan. or.'Panlungs9(1 .as -the-case· (llciY. be
~.·... · ,. : . . · .:·· :. . . . ··(LGc,.··_.S.e_cs; 4/58_(?) __ (ii) a_nd 4_68 (2)(._ii))._· · .. : .· .· .;. . · -
• ··Pres·criptiori·of.C9llec'tion .. of TaJie~:· .
( 1 :- Basic real property·· tax.'and. any othe'r tax ...:· 5 ·. · Fo·rmula: ·· · ..
;,. : ·years from th.e date: they became ,dl!e .(LGC, _Sec. · . Markefvalue .' xxx" ': ..
;:_ · · . 270),· ,.' . . . . .. . . ··
~Muftiply by:·:A.sses~meht r~vel · · xo/o · ·
2:·· Wheri there·',._is. fraud ··or: intent' to evade· the
. :Assessed'vaiue .XJq<.·:
p~yment 'of' ..taxes·:--.1.0 years from dis.covery°<i .
the· fr.aud-or intent .to evade:the p.aymerit (LGC, ·. Mvltlp/y by. Rate of t~x. · · x%
r.
; . Sec: 270). ,: · · ·. :. :,. · . .. . : · ._Real prop_ei1ytax· · ·
._· ...
.. . :: .. ' ..
!I"
.. .' Grot:itJds·forthe S:~stren~lo~ 6fttie Rlint'li.ng of the Und~r fti'e.. principle:.of fiscal .a~to.riom;;-.ass~'.~sment
~- . ' Pr.escript~v.e·.Periods;'(PRO) . .· ·., . · ..... l,evels a11d. tax r,c1tes ·c~·n v.ary amo~g differerit LGU~
,,· 1; The .. local Jreas~rer ,is.;legally' ..Er:evented from as.Jong ·as t~ey are within the abov~ ceilin'gs (L~C. · ,·
~ .• :collecting tHe.tax; . . . ·.' ·. . . . . . . Sec: 129). · ·:· :: · .
( 2. 'fhe owner. Of th~ prope,rty.,O{' tf')e person. h~ving
[, . legal . :. ii:1t1:1rtlest . -therein ~equests ·. for·. .:a :Ass.ess~ciValue[f~~·ab!eyalue. :_ · ... '· ".. · ,· .·. ·
.. : · · B.einvestig·a. on.and !3X~cµtes.a waiver in writing The·fair. marke.t Value _:of the real prope,ty .mliltipli~d:
t . . ~efore.the expiration ofthe:penod·withil'l whiG)lto
'coli.Ei~t; and . - . . ..
_by thE; asse~smeht fev:el. (J.:.GC, Se~.1.99(/1)).. ·

. 2019 SAN SEDA LAW <;:ENTR,ALIZED BAR OPERATIONS I 385

 .. ,
-.REAL -P.RbPERT.Y·T.Ax·:
~N Bf;DA 1.'A.W Cf.NTRALI/.ED-BAR OPE_M!IONS - MEf,1<;)f.lY~10'2019
: ~-
· F<:1ir·Market Value :. . .· . .. Not Consldered·as Idle lands: .I
The price at Which a property maybesold by a seller 1),. A!;Jrlcult~~~I .. )ands . planted to
·who is'not eornpelled to sell and bought _by a.buyer permanent or perennial crops w_ith at.
'who lsnot compelled ta" buy"(LC?C, Sec: _199(1JJ. · . least 50.trees·,o a hectarerand
2.) .. -Lands _,.- ~ctua!)y used for· grazing
2. Spe.cl al.Levies.on Real Property":
0 . '..: : ··.purposes _(LGQ,·S~c. 237 (a)).

.. a. · Speciaf. "i:ducatlon ·Fund (SEF) .;... 1 o;~· qt LGU r.;.fay E>.<e~pt Idle ·l:.a'ods:from .
. assessed value.whlch shall be- i~ .addition. to. · AddlUonal Ley,y PY· Reason of: ·.
. .". ·. t.he baslc real · estate tax to fihanc·e :the:·:· . (t':C3) · · · · · .· .'·· · ·
· Special Education' Fund· (LG.C, Sec. ·235);",. . a)" . force rnajeure;
·. , · . b} .Qivif"dislurbance; ..
Art .. 272 of th~ LGC· provides that: . . . . ·... · . . . c) · .Naturai"·cal~mify; or ·. .
· i.' Tlie pr.6ceeds Q{ the additional 1 o/o "f~PT . cl) Any. Qause· wt)ich; physically .or
'acd;uiAg· · to· the :··SE-F shall be·.· . . ·_legallypreventst'1e.o.wnefof_t'1e
.autornatically .. ·r~l~·ased.. to.. the . -tocat . . . . . . . ::. pfbpeity or. person _na-;,ing legal ..
,... . . . school boards: . . . . . . interest. therein from; improving,
..._. .. n In -case .bf.pnivfr.ice~. ihe··.proce'eds of. · · '. . ·. utitizing. or.:pullivafing· the same:
· ·,. SEF:sha(l:be d1vkfed·equally betweegJbe~;..;:~ . . · · · .• · . {L(,,C; -Sec: 2$8). .. ' ·. · ·
., .
_: .PiC?vincial and··ri:!ui:licipaJ·s.ch.9ftl"'ffoards;"'tJ·:
. ·. and . . . _ · .... · . / · J)., · 1 · • :
- Av~,
1\v / · lr",> · . · .. .= ·.: :
R!:!_a~~n:tor. Imposing Ad _Va/orem
· .·. •

iii. ,:Said proceeds · shall.. ,ti.~ ~~at.e~...as.,,,.... ...:=~5 . 1 t/~ ~Iax!:!_i; 'on ~dre· Lands: · To. penalize
. ." det~rmined . and. ap!;>,f'A~£1 1:iy~1tJ?cfJ....:,_ ~--..:""
• ~p,l-~pertr(?INl')er~w~o do not't.ise.their ,

schoo} · board c9~~r;ne8v'._6J\1y;.Jo(:_'tfie ~{;. ~~,:,-~~ P;.2~{~Y: ·. ptod~cttv_ely, ; and . _-to

. followmg purpose;t~fb;r .I,.· ·. mi ir.
)"t'. . \ . ~f.)_GO'«age. _utllizat,on .· bf land
':1): qper~tio_n~nJi_mainff,tnancf of pu~lic · -4;~~. ~· .. ! · :· ~(E;,S9.!{"~es in_ or~.~r._to contribu~e· to
'·· ....

.
· .,
· .. s~hools;·· .. ,~;. f .
!
;,.'2) .·con~tnictio ~d !r~pajr ~~.f-:~9.gRciL·
..bui~ding's; t 011itf¢R.?.ric:1eq ipr:ne'.~; .:i.
·3). "E,ducatiC?na .r~~lcti; . , , ·..
f"s;,)1;;,. . . ··
i· , .
· ·.-.t)C).__ __ . ~ :, \\1,~.t~ol'lai. · development
I
·:...;A:,vjl" ~~.MQ,Df?N,supra at 25"1';258). .
. -.i\ •. 1.. 1 .. ·. ·. .
: filI!IlJ!):Ji c. ..w~1al tss:e:jS e11\s. (0! Spec1al._l.:.evy) .-
·.. · ,
(V

' . 4) ·Purchas~ o{" pot~~ti ,an~· r(.oitiaals.;?;---:=-~,- . , ·. '9:,~§fds~spe.c'.aW, ·benefited.by publiC. "\,York~,
··. · ·. ·. af!d ··.:- .\ ( f) . I
· .\;;_-- . ·fft1 1ft· ··. . r-01:cts11:~~!h,pr6v~rnentsfun_ded. by~·-lhe
· ,_ .. · .5> _spqrts ct~vet~pmeri .· . :~,,
. ·,· , .· ·. . ·· · \. .. 0~ .)~
··A ,~-
I ,,
~1~1-gq,'<t_emm~ntu_n1t shall not exceed_ so'l'.'o
N'o'f t~ ac_tuailcost ..of: such ,.projects. and
. b. ..Addltionat.~•1°d Valore'J'IJ·on.ld~Lan l~l ..'~ ~imP.r., vemenil,:-·. indudjng · the ' costs ·of.
: ... · ·. ·· · nbt ·exceeding t:?% of <tie'\ssess~~1~e£L'IEt.:.rt\~__.,- .::i • ciu_iria·~.J.a«ct and _sucti-9tt;ier-rea1 p_ropert~ ,in.
. . : .·. ·the .prp.perty (L_G"!J, -Se~, 2:io); · /a~·
~ ·. ~~· ~on?i~t1oif tl}~r~.w1th_ (LG(?, Sec.?10). · '. . ·. ·
. . . .
Lari~~-Coh~ider~d ld.re: ·'.·. ,· .. ~~~ .. ~
. ,~~n 1 .
M
:X'-~'-7 . . . . . . .
i\~~~tlo~_:·.ooe'ii·ndt:~~~ly_t~i._,._. .. · ... : .: ·. ·.:
.
· ··. ':: . ~gncu.ltura:l lands iyr~re .t~a.n_.t:ff~t~~: 1. ... _!:.ands. ·e~e'"!.lpt .from ·.ba~~c l'.eal_prop.ert}( .
· ·· .: _in area- if !TIOrethqO 1/2 of whJch :remain ·· · · .'.. . . tax; and · . . ! . · . · · ...
. \ . uncultivated 9r.uriim_proved by_:the own·e( . · ·. ; ii ... R~mainder of m~· land ..portfon~ donat~d-
. . pf ,the I property Of. person having .legal · • • •. • .. : • ":.. .-: to' the·. (peal gov.eFflri1Einl· li"nJt,.concemed
· .. · · interest therei11; · : . .. -- · . · . . ·fbr the· construction: qf · said· projects · ·
.. · ·. Ii .. ,Non-Agric_uitural lands·.. ·moi-e ·:th~.··· · .. : (LG(;, Se9.,.-210). ·:· · ·.. · ·
· ... :1,0.Q()_sq. m:
in are;:i.i(more•tha1:11l2 or ·, .·: . . •. · .. :"· . . .\;
. ·.which remain unutilized ar·unlmprove.d . : · : .. Not.e:, Mlinicipalitles·'.otitside Metro· Manila .
. . by.the owner of"_tha·~".OPe·r:_t.y ,qr-.:pers9n... ; I :-· . (riot ·O'nfy· lns_i~e) ·may,·. Impose :sp.ecicil ·.
· ·, · . .having legaHnterest U:ie.rein; an·d: : ·, ·: . . · . :·. ~ssess~er:,ts (LGC; Sec: 24.0). ·
.iii .. R~sidentiar"lpts.·iri:.~ul;)diyl~ioi:t; ciuly. :· ' ·. . . .
.•· ,•
. . ·approve.d· ... by° . proper . :·authoriti.~s ·.. :,L lri-iiiOSJ!,dby,oth.er law~·
:· · ·:"" regardl~~s·ohirea·.(LGC, Ser:;, 2.37J:.·.. . · ·· · ... · . . . · · ·· ·.. . '
·. . · · -· ·.· ·. · . Soc::ial!zed_,_Housing Ta.~. (Urbah Dev~lopm~n.t
:ls.
If ~w~~rshtp'· transferteg,. th.e
\nd~'Yiclual and-Hi;Jli_Sing Act 0( 1._"992). - L,.GUs are authorized
<:>wners. ·sha.lf ·b_e I.fable· f9r_·the .. ta~ __
other· h.and, if ownership 'Of individual lots· is·;
.the ·o~: to impose an·:additional pn~h;:itf percent.(0.5%)
. · of th~ 'asses.sea·value of- all lanc;l.s in 1,.1rban areas
.not transferred~ the :suQdivision. owner or : .·
in ex.cess of PSO,OOO; except-those lands Which
·· '· . operator' shall' be lia.b!e (/RR of. LGC;- Art. . · . are· exempf from the ."coverage 6~ R),:.N.o: 7'2._79.
3.28). . . · ··: .. ·. "': · · ·' ·
.. <

>·
3~6 ·I 2019 ,SAN SEDA t:AW. CENTRAl.JiEo BAR OPERAT19Ns .
~· . . .....

----------~----------------------·--·· ....
 REAL· P,R-OPERT)i TAX,
,·. ··-. . ~W BEDA.l:AWCENTMLIZEQ BAR..OP~RATIONS -. ME"'!C>RY

g: ·
- AID 2019

Philippines v, Ofeliam 0/i~a. G.R. No .. 213157,

August ,1 O, 20'16); .
!~te· Jands exempt from tax (LGC, Sec. 238); and
Basic R°PT: (LGc;. Sec. Province" · . ·. ,:- - · not h. ~ondonation or reduction of real property tax and
233) . exceedinq . . 1 % - . of ·. interest_:(LGC, Sec, 276) ·
assessed value
, .' ll· Re:al .property, owned ~y the· Be public of th~
City/Municipality·. in P-hilippines· . or. -any · of its · ·political
aubdtvlslons; · ·
· M·etro· ·Manilcl · - · not'
exceedinq , · · 2o/,;" · ot
. .assessed value .. Prppertlas exempted: Ail real properties (LGC· Sec
·234_(a)).. .. · · · · · ·· · ·. •·-. :
. .. .~. . . . - . . -- ,
SEF'(L.G9, Sf!C.· 23"5) Additio~al ·.:-1·% o{ _·the. .•
. ' assessed value · Exception:_ When: .the.".&e~efioi~l ·u~e-.ttiereof has·:·;
},.ciV~Jor~m . on Idle Not excee~ing 5%:~f.tlie
b~tm. ~ra.nteQ.for consideration; or
otherwise. to" a ..
taxable person (LGC, .Sec; i34: "(a)).; ~ • · . · .. · .
Lands:(LGC, Sec.
.236) . assessed value · . : . . . . .

Sp·ecia~ .. Assessment Not exceeding ~0% of the i°1~ustratio~: : : .

(LGC, Sec. :240) .. actual , .oost . :9f iS.UCh .-.. · Even gran_tih_Qthat the 'national ·goverrim~rit.owristhe
. projepts.: .. . . anq,;.u"t'i .c;;a~riageways·-and terminal stations of the LRT the
. . .improvements··.: · · · ·;t.f~:1r)'{ ·'.~:temption_;Wduld not· apply because their 'beneficial
Socialized Housing T.ax Additional : ·on'e';ti~\t..;;~;;~· u~;"e. h~s b~.en:_ grant~_d to.· the . L!ght' "Rail Transit
(R:A_. No. 7279, .Sec. 43) percent" .,(O.S%) of\itri~,.;;.,'!'; Authority, a ta~a.ble entity (Light R'a1I-Transit Autl]or~ty
assessed value · )J. ~ i• ,,vi;fll-'h.~7tr?-I -~I>~Wd of Assessment, ·Appeals, G.R. No.
._..,,.,~,,, . .:..:·~i:i·
'-:--s--:---~:---,-----'-.1._-~-~--'·~~:..,·,,.,.~-',:;/~
.. :,./P.·•'f--Ju:.~3;1.~.:0fJ,Q.8,er
-r·:if 12, 2000). . .

'·.
.

·
-, . . ·. ' . ~f·: . . .·r,
·
<(~~{r.
i,. -.
ti,'tc,,""\ . · : : .
~-~·-l'l . . . . •

~~rth_er~or, , . ~ike public roads which are open for

use by eve£>' )._ the LRT is accessible only to those
. · ·· . .. · . . . · . ~~·: (J~_i.'::::_·... ·: .·. tf,"_ w~9 P~~ t!r3- : . i!1,i[.ed_fare. 'Although Lfff is· a pub!iC:
.. .- .TA~ EX_EMr:E;:rONS ,I{:-;-·'_ . ~ · }iJ utility, ,t '?~~on1ethe.{;ssprofit-earning: It a~tually uses
CO.ND ON A:Ti ON S ~· ~F.DJ.1.~~.J NS ~. o ti?\
th?_s~_cc!Jf~?9'tl.,;,ay!~n2terminal stations in its public
· · .· '· · . · '-,r-..::..,. _ _...J>.~rj ''""'-%., . tf' . ut1h_ty'~~~~~f.~!1?ams m~m~.Y therefr9r.r, . (Light
. . · : . · -.;'?"- ;,t:·•'·'iiiQ· . '""ij !!:J
Rail Transll:4YJJJ_w,1ti} v. Central Board of Assessment
. rroperties E~e.mp!eclfr_om Real· ~)ptrty{i:f)C (_~t·: -~¥.:. ~ppeals.: G.R.· No:·"7 2731 o, Octob_er 12; 20_QO). .
,'? ·. WC:P. Fl,C) . . "",,, ]J. ,,. ·
,rftr~ · . · · ·· · ·'
J:·•; .· a. 'R..eal prope_q)' ownecL by· the' B~Mltc o~.~t~~...;,Jft·1[:"$.,,1;N?,~~~ .
,Phjlippin~s or any of its poli.ticai so~_ivisjqfi~~~~_,,.1.--~~'"a;>i'-"Gevemment:_owned
: . ,
. or
.
. controlled
t
r. b.... ·Qharitable.institu.tions, cli~rche_s;·pW,s,rii_~~~~,'_.or . ·.
conve~ts . appurtenar:,t tt,er.eto,. :rriosWs} 'lion- .
C(?~~rations·_are m>t exemp.te_c;l fr-oirf RPT.
. _Their.exemption ha_s been Withdrawnby'Sec.
l :·, r;itofit or religioµs cemeteries,· ·and. air··1arids:-. . . 1_93 ._exc_ept th_ose. granted to· ,o~al. wat~r ..
;:_· .". ~~ildings1·; ~-nit in,:proveme~t~ '_ac~aliy'. ~dire¢t~ .. '.: · ·: .. . dRi'sAtricNts_ •. ·co6.o9.p3e8ra(tives.duly_ ~egi$ter:ed tfoder
~.- . · and exc us,vefy·used for rehg1ou~.chantable, or ... , .-' ·: · _c::1, , . Copperat1ve Code of the
'.,~
. ~_~.·, .. · :Aed11uc;atibh}a_l_-~.Ofpqsd~s;- '.: : · .". :·: . : , :· :.··-.: . . · 'hPh_ifiJ:tPi!)~s),.d 1. .... _rido~-stt~~k... ~-~d: non;-pro,fit.
. c: · o: mac. !n~ne~ a.n . egu_1pnienqh~t are act!,Jally, . osp1_ a.,.s -~~ ·. _e. µ_ca 1~:ma1 _institutions; · and
i{i:_: ·.directly, and· exclusively :use,d ·by:.local:-Wate'r .·. · : util_ess_.othe~1s~_prqv1ded. m the·_LGC. The_-
if 'utilities·. ancl - gove!1Jmei1tsc:iwAed·'Or. c6nt.rolied . · . · fatter proviso.~c;iuld referto Sec: 234 (Mactan
corporat,ori$. l=)rlgaged in·. 'the. sl:lpply :_.and.. . Cebu: International Airport v. Marcos, G.R.
dis"tr~bution .or· -water.. and/or _:generation and • 111,0_. ·120082, Septemqer 11, 1_996). .·
· transmission of.electric.power; ·. ·.. '..: .·· · · ··
ct All_ ·real property ·own'.ed by-_duly .registered Sec. 234 ¢~riier~te~·t~~'prop~rt!es e'.xempt·:
.. £QQperatives. ·as· -provided for under. R.A No. '·· :from_realpr9perty.ta)!:. Butthelastparagraph·
;r,.: 6938·· and·' 1 :· . . .. . . of Section.234 fu~her qllalifies the· retention
;;, ,e:. Machinery arid equip"rri~ritused·.ior .Qolluti~n· · :ofthe._exerriptionin so t~cas the real property.
f· ·' . · .co·ntrol an~ envirol'l111ental.protecljon.(LGC: Sec. . taxes are coni;etned by limiting tl)e retention·
{:-..~-- -.. f . W~3h4};·. . .:l.. : ,, ·. :. . . ·.'.. . . onontly JGI _tlhd95ed. e_nu.mther~tedthere-in; ·all others
.: - , . . eri .a ·. ay1 gr~fn_t\ng:·a.: .Eranttiise. ·. expre·~sly - . inc u. e.. m e · enumeration···lost ··_the .
" st~tes·that it shall be 'in lieu of all taxes' national . · privilege u·pon . the ·. effe.ctivity ·of . the LGC
1', o( !ocal' . _ancf the real. p~9perly . : heid · by.· a.; (Mactan .. Ce.bu · 'International .. Airport V.:
.Jr~nchisee must be used in ·connectf6n with its .Marcot:}, .. G.R. No. 120()82, September 11,
.franchise (National G_rid" Corporatidn of the·.. 1996),'. . ,_ . .

2019 SAN BEDA _l:.AW C!;:NTRALlZJ=DB":"R OPERATIONS·I 387 .

·:; .
 . ·, .

·R.EAL.·PROPERTY.TAX
. ~N BEDA f!..WCF.N.T_RALl7ED BAR OPERATIONS.~ flil£MORY ND :io19

-b. Local ,governments have .no power to tax th.e . . only governrnentaf but also corporate powers
national'. government,.. -its·. agencies . and (Manila -Jntemetionel· Afjport. ~utho,:ity : v.
.. .instrurnentalittes, -except _as .otherwlse . Court-of ,4ppeals, G.R, No, 1.55650, July 20,
provided fn, the LGC pursuant to· the saving . 2006). .
~ 'clause in Sec. 13a°statinl:i"i..inle~s-ouierwise .
. provideq Ip this Code," "fhe .exceptlon to the· .. likewise·, wheq·th~ law 'makes a governm~ht
· exemption irr Sec. · 234(a) of· the · lGC · · instrumentality' opera.tionaliy autonorno.us;·
. subjects ·· real property owned . by the ; the· instrumentality ,remains part : of the"
Republic,:wbether titled in the name, of the · . ' ·. National' Government · mach,inety ·:·although·
. riationai gov~mm~nt, . its : agencies· .. or . riot ·iritegrat~d : with . the. : d~p.artment ·"
instrumentalities, to· real .estate tax if the framework (Manila · lnternatlotfal Airport '
beneficial 'use. of suc;:h. property· is .giyen. to a. Authority "'.·· Court of. Appears,' 'G.R. :No..
···.taxable ·.en(l~y (Manila·· tritemetionel- Aiiport 155650, July._ 20! ·2006)... · ' . . ..
: Authority,·v, Court . o,: Appeals;·. 'G:R,· ··No -,
. 155650,'./ulY-20, 2006). · · ·, '. ·. · . · Examples of : g~vernment instrumentalities
/ ', · · · ,· . vested with: corporate ·. · ppWe.r:s. · 9r ·. juridical · .
· '., (Piease, . se~ 'etso G!3nera(. Principles · .:.. . · . personality: . ·. . . : . .
.tnnererit Limitations· chap.fer for. further' · · . ·, i. .Sarigko Sentral ogJ'iliPi.nas.. .
<:ii~cussions.) ·: . ·. ·. . . · ·.:. · ·~ ..====.;, . ii. ·.Phflippin.e Rice Research Institute; ..
-. '·. . -' . . ·, · . · : . . X · .--u·1\\ . ·
· However, when t_h·~ . tax, e,sm~t~.on (~~th.~ I\.
.'.,""""""ii~ Laguna l'.a!<e Development Authority;, :
k'ivtl' ·~Jeh.efies Development Autho~ty; · . :
. property of th_e Republia orjts ifls;tru\i~ alitr.-,;::_==.~/! vif ,Sa)~ : . Conversion and , Development·
·. · :ce.a~es o·n. the g_round Jh'R.ff..~i\eijefa: l!~- · , · "'-s. . ~ .A~~..o~y · ;.: · . . : ... ·. . . · .
· thereefh~s been granted: forc\-,~orfsjp~~n·· ,gi~t:-- . . ~'!\~1hpJRF1f Ports Auth~nty;.. ·. . ~ ..·
. .or ot~erwise,_.to a ta~~~fys,pn·,t1e l:l!'lP~ . }t'"· . l~: ~~!ilcf.~n~e·Oro P.qrt ~~th.onty;
.:' _tc;ix· attaches . t_o.~, t e. pr9pei:tyK ahd is • . , . ~!"· Sa(lf_elJ;l~~doPo_rt.Aµth.o_nty;· ·· ,
· ·· ·· charge_c;i.ble ~gail'!5t . e...J.axa.bleP.1.r~A , .. -·-'l9: Ce_~~l')ct ,u~h.<;>.r1ty; . ' . . .; .
· .had· ac'tual or bane 1cia1~trsta.nd'poss~.sio.n ·:P.. · xl Ph1h~RJ~.,.t,J~tional Ra1l~ays; . .
; . · ·, of· it.rega_rdless ot.l.~e~· ~or.. n·~1i~1,3 1~h£. "~~~ xJ:. Uni.ve~_itY.jf~t~·~ PIJilip~!~~s; arid ',·.· ...
. own~r (Gove(nmdn.~f$ . _iq~-.- . ·s.uran~~r:,d · Jt1~act~~nifE,P~~1o_nal Air.pbr~ Authon.ty ~
. . ~ys(em 1t. City Tre·&sur~-r,apd.~JiAAfs.es.s.o~~-~1'k:J?iter,XationfJf/A1rport.Au_thority v. Court-of
· of Manila, G.R. No.ifBifz'4~.D'i:!2:$ ber 23~ ~r ~~ 'A~il f G/t.ife}N<:f.1}.1i55650, ',,!uly 29; 200(j). (ld,J.·
·. ,;,, .i.::JJ·-': ·>t. . ~ ~s· .. ~ ~,~~
• 2009
,, .
' /•. • • ' • ,>.· ~ ,:;;,.,,, la5a ..Jffe v .- . . A. 'I. ·.. - . .
' '
·.
. : · ·· .' ·. : ·. _.., . . ~ · . ~~ :· ~ · ~~ · j -~~ · e~~,. overy,ro~n.t.Jnstru.mentaljti~s·.exer<;ise .
. A fishing .port which is Eivotei:fl'3t:p1.1BJ1c ~~~~~rjte"powa"r#h1:1t.they .ar~ :not orga.oized ,as ·
·_a!')CI .falls.'wl~hin·.the !elm·~ rts"1~~elifixfEN1"\~tec~rnon-~lck_corporations as .~~:q(!ired. by
.· < the· .Repobhc. of th~ Phi in.~~,.·~O>ot~,.e~_o~~(..;1.~.,ofthe·lntroductory P~ov1s10:ns_ofthe ·
. I e~~mp_t.. frorn.:c"(eal ~state.•la~!,{fii~fin~~:.... , .•,/~;9rq1l~!?t~t1,ve q_oc1e of 198!.wh1ch.perta1,:is to,
,F1s_henes DevelqpmeJ?.t.Authon~'(,~.. C'({fltral J\µ·f\\G'.~'1e\Jl'rffent~Ow[led .. :· . ': an.d pontroll.ed..
Board of. A'$Sessm~l:lt Appeals, . ~·~~~·~i'.pprat,on~ ·-. (GOQCs) .. ·."!"h~se, .govemment
. 1.7fJf}30;,_D(!C~ml>er·15,:2010),,. ·. · · · ·· · m~trumen.tahties·are som~t.,.n:ies. l<;>osely _called .
\ · .". · · · ·: ··. · · . · .·.: .. governmerit.corporate entiUes~.HQWei/er,,they
t~
c. 'lnstrtim.entalj_ty .raters ·a'r1y·agenc;;Y. of th~ .are nQ.t2.0PG~ in,t.h1;rstri~fs9.n~e understood. as
. . .N_atic:inal Goye'r,i:irnent; not' int(igrated within . . . ,u·n.der ·.t.he· Administrative. ·.cope,· which. is· the
··t~e·: dapartment: framework;'. VeS~ecf'.,With. · . , , governing. faW,defi_ningtl;le,leg~l .refationship anc(
. · speciai-. func;tions. or. ju'r.is'tlictkin. ·by· "raw, . : -· ·s~a,tus : of ,gov~rnnient · entities· (Manila :
. · endowed. ·with' SOl'.f.l«t if· not :~11- corporate . . . lnt~r.n.a.tional· · AirP.of! . Authority . v., .. Cour( ·of
··:,. i)owersr administering-.'specia·I funds;···and . . Appeals, G.F;. No: 155650, July.20, 2006).. ·
. enjoying··. ·operational. autonomy, .' usually · · · · · · · · - ~ ·· ·
· ttirough,a char:ter (Ez.O. No:. ~92, Se.c. 2(10)). . ·._' .d . .'A~ i~~tallm~ri_t ~~r~h.aier·~ilat'ld'aridQu·U.ding
~· .J · • • • • • •• • • • • • • • • • w1th1n.i:l housing project .o.f.the.GSIS:is,liable
... ··,·~.ove~ni~~t .. 'i~trum1:ui;;litfe'~'.vested~.with' ,; to pay· reat estate 'ftlxes. Jrom 'the"tim1(
· , '.· COrppratE! powers or• 9\)Vefnmenf corporal~· . . .,pm;sesSIOfl,Of~.UGh'pfOp,erty Was.trans(erre!il-·
. · entities· arE3. exempted·fr.om: Rp'r: When the·.· to h.im, a!ti:,o.ugh pending· ful! payment of the
. : : · . : law· vests. i,:i. a ·government instr\Jrne'htality : · purchase :price; the·:sellenetain's own:er$.hip .
. . · corporate· powers,· the i_n~trymentality· does. and t[tl~· c;,vet Jhe property (C(ty. of ~agaio v. ·
-. not ··b~come · a . corporation. Unless 'the . Busuego, G:R..No: L-:-~9772;,September18, · ..
. gqvernm~nt.instrum~r:i!ality_is grg~rii~ed ·as a·. .1·98.0): · ·,
. · stocl< or .non~~tock ·c.orpor~tion, it remains a.
' goverr]nient fnsfrurnentality.' exercising .. nof.
.. ~- . . . . " .

. . .
3.68 I . 2019 SAN BEDA·~
. . LAW
. .CENTRALIZED
. . .BAR OPERATIONS
: .
 REAL. PRO·P.ERTY .TAX
SAN
. .
81:.DA LAW C£NT_RALIZEDBAfi "OPERATIONS - MEMORYAID 2019
. . . . .. ·.
.....~'=' :
hf 2.
'-.Charitable · O lnatltutloris; · churches.' The test of exemption fr~m
taxation is the use of the
" · · parsonages, or convents appurtenant property forpurposes mentioned in the Constitution·
thereto, mosques, non-profit or. religious (Commissioner. of ltyte.rnal Rev_13nue If· De La Salle
. cernetertes, . and ail lands, ·buildings; and University, Inc, GR. N0. 196p96, November 9, 2016) .
hnprovements actually,_ directly· and . Thu·s, . it does not matter Who.. the· 'owner of the
.. exclusively used .for religious, charitable," or . . property ls even if it is· not ~· tax-exempt entity, as long
... educational as Jt is being. used for religious,. charitable.' or
~: : ...
,. . purposes;'
•.
. .. '
educational purposes, . then it· is tax . exempt ()I
. :,::; :f.h.is LGC. provislon i$. ~imi!ar to Sec. °2.8(3), Art. VI .of. bOMONDQN, supra at 273). ··.. · .
::;.· the· Constitution: ... ": -, ·· · · , ,-
%: . . . . . . . What ·is meant by actual; direct and exclusive·use of.
'\::All revenues ~nd- .assets of non-stock, non-profit" the property fordiarit~ble-purpos~s"is'.thedir~cfand .
'. . educational .institutions used. -actually, directly, and . . Immediate anq 'aqtuarapp}icatio,il.of th~ 'prcperty itself .
'.l_ .ex~,usiv~Jy fa( educational purposes shall pe exempt to the purposes for ·whjch the charitable' !nstilutioil is
·f. from taxes anddutles (CONST.Art,.XIV, Sec. 4(3)). .. . ·organized: l(is not the use.ofthe income-fromthereal
~~- · · · ~.-: · · property that ls d0termj'iialiV0 of whetherthe property ·
l Note-: ... For ndr:'i-stock, non-profit educational .. · . is used fortax-exempt purposes (L,ung Center of the
.t. institutions; the..exemption covers "assets" (GON$T. · Philippines ·v. Cj11(t_zpn City,· G,R _No._-144~04, .ume
·if.'<Art. XI.V.. Sec. 4(3)) ·while. -for. property actually.. 29, 2004). . , .
}':;. directly/and._iilx;;lus1Velyu,sed for rellqious, ·chari!.able,.._/";I . '-·. . . . . . . . . . . .. .
)}i · or educational purposes; the 'exemption coyefsf.l( Th·e.exemption.in favor of property ·used exclusively
.'(. "iands'; building_s,:._ahd impr9veme.nt&" (c;qNST/A.lf:./;:f',). .for charitable or -educ~tioiial purpo:ses·is "not·l.imiteid
VI, Sec. ·28):
.
.
. .
.
..
·: .. ·]r.f'.f~:~~i:~~j iCl pro~erty,_ ac!~~lly in~ispensabl:~ !hereiote.-"_' but·
· ; f'.:;;~~"/..,.·-~J'(t!!t9dst~.,r;t.~c1ht1es ·which are _•i1n_c1dental to _and
lmp_rove~ent refers .to ~c!lu~blE: 8:dd1t~on rn_~P . !~~-Jh,J;.t!reas.QQ~%~~cessa~yfor" the accolTJpllsh~ent of ·
propert~ _or an ao:1-ehorat1on m: ~:-:;90fld1t1ont J1 said. purpose~~s~ch;_a~.iri·the case <?f hosp_1tals_~ "a
amou_ntmg to mme than a me~e repairp~replacem~q1~d'j ~chqol for trfi~o;ig·.nurses, a nurse.s' home, property
of _pa~s. )nvolving capital. exp~nditu"{i~;.J~dJ,abj>f;'-~l\ use~ ~6 pro~iqr ~ousing fac.ilities_for iriter11s, r~sident

utility _or _to ad~pfi~for· ne~ or fl;J~r. purp~ses~(L:.Gij_· ..

.. Sec. 199(m)).. · .. , .. · , , ... f.,(.,,,'l ~,1:.:. . ·
n\
wh1ch.-1s..mten.ded to enhance 1ts.y:V,11e,1~a1:1ty.- or iii\ doctors,!i})ennt~f!'.fents,and other members of the
for
ti_ospJt_al . tt,' a_n<l\fecrea~o11al..fadliti~s- ;,stude~t"
·· \ .. f!'!·t·.riurse.§.h!j;t!J.te s · artc!,_Jes1dents such as.. athl~t1c
.. . . : · -. ,.''( ·=-- :4"'11) _-~·:;,,. · r.:-~. fielcts:~,~e farm used for the-inm.ates.-of the ·
. Defiijiti_<>,n . of ' Actual, :. Dir~\. EJCCJ~h'°:e
!( .. · E:xc)u~!v~ly .Us~d: . . .
1:a'r . k · institutior:i~ . ' sesscir o_f Cebu v. ·Associati'?n .of
, : . y.-'::(9 '{;./.\.. 1~ . ~% Ben_evola _de· <;;ebu, G_.R. f'}o_._-152_9.04, .J.une 8,.2007).
j:; Act1:1aUyIS oppos~d _to spmetl')1ngmerr~YP~°'!stble, or r.;!.,.v.2"~·m. ·. . · . · .. . · . · . · . .
'1~ . fo sc:>tri..et~!ri~ v.hiqh · is ·pre~um_ptive ~,IQ-.S9ildtru$t~ej:!!tJJWhen a· rioil:sto_ck,- non-profit ~duc~tiona~ institi,iti9n..
:f . (Nat,ohal Power. Corporat1qn v. ·Cet,i.tr,af.. BoR(4.-oT...:.-~,~proves-that it uses its revenues actually,.d1rectjy, and
. - ~ss~ssment ~ppeais; et. al.,. - GR S:f.1~·· -{f1..470, . . exclu·s_iv:e.ly.fa~---- e,ducati6riaf: purposes•. it . sha!I _t>e
Janu_ary 35), ~-O<J9).. . . ~~~ · .!3:xernptea Jrom,.1n,~me tax; YA"T, and loc~l bu~mess ·
·· · ..tax·, On the.9t!)er.hand,when 1t also shows that .1t U$es ·
. orr~ctty ,s' · d·e_tihed -~s: tha.t · ·use witnotit...imything · ·its .assets-ici"ttle·torm or rea1 property tor educat1ona1
· intervening:..'proximqtely··-or. without . an int~rveni(lg . · pur.poses;· it· '.fa.hall· .. be exemp~ed from·· : RPT
agency or ,:pers~n . (National Power_ Corp·9ratibn y: · · (G.ommissioner ·of loferna/-Reveriue v. Df) La Salle
Central Bo.atr:J"of-Assessment l!,ppealr;~ et. al,, ·G.R: · f}nfversity, GiR, ./11.o. 19659~ No°yf)mfi'er 9; 2016). ' ._
:{";· N~. _1-71470;· Jf!t,:,u8ry·3p, ·2()(19).· ··.'. : . . ·· .. -.· -·r .· ·
if' · · · · lll~stfati9ri:-(201.1. Ba~ ·Qu~~tiqn)· . . . '... ·,, ·. .
·Exclusively· ~eans apart· from all others; ·without-·. . The head priesf-Qftfte religious·sect:.... Tres Personas .
. admission· of oth'ets Jo~participation; in a _mari11~r to.· Solo Dios, as lhe corporation's9le,'rented out-a 5,0Qo"
exclude · (Na(iona/·· Powf)r: Corporatfor:i. v-. · Central·•. sqm, lof registere.d in ·its:riaine fo~ use ;:is school .sit~:·
Boaid of..Assessmen(.Appi;als, · et. af.,. G.R"·No. ·of ~:H,Chool:arganized .for profit. The sect-used the·
·_171470, J,am)a,y 30; .200.9).~. · . . . rent.:11$·for the'si:lpport and\1pke°~P.of ifs-priests: ls1he
. : . . .. ,... . . rented lotsi.Jbject:to real· property ta~? .
. . ~ ~x~lµsiy~i·yused m_eans ·the_prim_c;1ry.or it!_hererit use.~- · · ·· '
r: : ·.. and ··does. ~ot preclude .l>u¢h.· in.Gidental..uses ~s are. · ANS: No. The l~t ·is exe-~ptfroin're.al·property taxes,
t· . directly . connec;:ted. with;.. esserjtial : toi arid, ii:, . sfnce it is actually, d1rectfy, ·:and exclu.siVely used .by.
-': furttierance- of .the: primary: use (Manual on Rea/. for
·.t}:te' school· educational. ·purpos.es. _Thµs,,. th~ .
P.rqp~rfY •·Apf/raisal ·and. Assessment· Operatio(ls, c.orporatlon.$Ole. is exempt from real property .tax
.supra ~t 2). · .. · : . . .- . . ·. : · · · .· ·. : . imcfer SeGtibn ~34(b )_-ot. ~e LGC'. .
. . ·· .

.201s-~AN BEDA ~~CENTRALl~~o

. :
sAR:oPERAi-ioNS
. . . .
.1 3_89
~ ... ~.
 '1:1i!lll;;;~~:=:::'!!!!ISE11 .. lll!IIIN11111 .... 1a111m.... ll!l!i... 1!11111m .... ~ ......... illllammm1111sa••MC1 .. B1m:iiB!lamB1:11miimB11cul!III .,

REAL ·PRO.-PERTY:.T AX._:

•. SJW'BtDALAW CF:NTRALIZED{JAR oP~t,o~s - MEMORYAJD .io~9
ll!:mfi,ilillfl:ll..
~awa,Bllinli$1~Panr-ws-w•' 1'.111.. l!lll ...... ~J--.. ll!III...... IIIIIIIIIIDFBlmil..l!El111t1.•¥mDl111iil,IJll1!1111~Pifflllll&al!lim'IUr:m&·
3. All machlnertee: and :··eq~ipment .'tt:ia~· are. government-owned. or controlled .. corporations, are
actually, dtrectty.. ·and ·exclusively· used ·by :neteby. withdrawn upon· the effectivity of\the i..GC
local Water utilities and ·.!;JPYerriinent-owned· . (LGC~sec; 234). · -.' . : · . . . :
or controlled corporations. engaged. In t,he
-supply . arid " distribution of. water "'ndlqr 6. Wher· .a-··law·· granting ·a Franchise expressly ..
( ...
. 9.erieratioh and transmission : of, · ~lect~ic . states that ·it shall. be 'ii)·· lieu all taxes.: or
powe_r; . natlcnal .or locaf• .and the .real property .held
<. by a franchlsee must be used' in connection
Requisites: . . .t · · . .... ·.Wl~h_its·franchlsa· {NatlonaH1ri~·corporatlon
a. -That the machineries.' 'and equipment are. of the Philippines·v. Ofellam 0/iv.a,· G,:R, 'No.. · ·
· .. actually, directly, 'and exclus.ivery.. u.sed··bY.-. .· 213157, A'ug,us.~ {o, 2016); . .. . . e-,
localwater districts and·GoCCs; and ·. / . . . · .. ' ·.. . ... . . ...
b. The locat water districts a:nd. GOC~. ci,aimir:ig : · This franchise tax is. "iii ·lieu: of income. tax and any
· e·xem.ptlon- must be· engaged· in ,the ·supply ... ; · and illl. taxes; duties.Tees: ·and· charges.of any kind,
I. . ?ncl . "distributlorr of ... 'water. and/~r · the . :. . J.li:Jture·, . o'r. descrlptton: levied,' . established, ·. or . ,
geA~r~tion and transmission .. 'of. e(~_Ctric. : collected ·_.by any. ·. authority . whatsoever, local 0(
.: ·po_wer :{Nstiona/ -power Corporetion , -v., nationai.on ltsfranchise,rights, privileges, receipts;
. "Central Board of A$sess_ment.Appe1l~,. ·e!. . ·. ·.. revenues.jand protits,:'an·d on properti~s· .used in.
!rom
.
. . .. · . . ·. · · ·
Pr9P9rti~s exe'mpted: ·M~chinerie~ l!9~qufti~entf,
• ·. : ~:::;:P:P .. lflJ,
al., G.R No:·171470,'Jan.ua_iy~O, ~.OO~J~~~Q.q{1..,.ec~ior1 with its f~anchise,

1.
_wh_ich-.-taxes, .
1utii,s~Q$!,fharges, the._Grantee. rs her-eby expres~ly ·
~~~~d :~-tcor. -the:. real pr.op~rtr·. h.eld ~y •a··
unl.y-(LGC, Sec. 234(c)). •· _d{r ~\)·· r.... ,....
~-.,.fi;~f;ij_se ~1)1>6~· _- exempted fr~m re~I property tax, it:.
· . · ~£/' . '• ~ : · . · ·. · musf~~ ·Y·sueh · _roperty · in .connection with its .
4. · All real pro pert}'. owned .,it)fy"~~t,p1iji~tere-~1:'Traf!~:\·se~~)tl,~ :-r.roperty. hel~ by:the ·fra~~hisee.
~ooperatives.. a~. provi~e,(21:tli\der · ~.A. Jli@; ~ :-; ·e~tlusiv of~~ f[~ifght~eor n'otin furtheran~e therE:<;>f .

·.
_6.938;. a_nd_ · .
. ·. _,.
·
_.·
. ./!. · -v,{_ ·
· . {I~ i1 . . 1·· · ~. _-
if' .'sri'all be .. ~bJe)~:.h
· i;,~A
pr~p~rty tax:{Nat1o_na/ Gnd.
Co;;e~r_at1Qn of..ti@1IIP.Pfne~ v.. Ofeflam Oflva, G.R.
: Properties e~mpt~d: All r~~~rorrti.es·.r .. ~ - -:, ·. o.,,'2~7,At:~µ*'J.U,\!016).. · · ... . ..
. ·_G .. ~-ichin~ry o~ci ?q~iJ,~~~·~;i~d ~i~ni:,~~~l~~~1.~~~e~cli~v~}1~hlsfra.r~h\s~~ ~~~ns. t~at.
. .. :
control and env1ronml_lf~_q>te.cl~/l~~
. · .. . · . -·. . ·. ( ·r.t.'~ .. · _'~\
Pollufion Control c1.n.d l!J!~a ~tr·tlcf4~eD vi~)~ -~ ~~~,~~i·
... -~-~al es-l:t~1fildi~ps;_~'\~-_P~rs_onarptope~y used In ·
: ._,i'fil ]: ciJ~~ E:~ .r~sfot- _me«f~nJhrs~a~e not SUbJee:t. to th_e .
.as /blher . 9?rpora.t1qns · (National :Gnd' ·
. Refers·. to lnfrasttucfwe, _rnachin_e~, : ~\!iPJ'A~~- ·:r, -};,'c:fl/:li). {a io~n oftrhe f'.hiljppines v. Ofefiam Oliva, .G.R .
. and/or 'imp~ovem.en~s-. u~:ed -f~~i~j:)Pt1i..c{lng·; ~iaftb~~-~6f.a:"' 157 ugilzf Q>lD1.6):: : · .. :· ·. ·. ·
or neu~rah21~g, ~r~c1p1t~ting, !-llt~~ng,..Gq~~~fl'.fg~~~) ,1/ ~ .' . · , ' · · . ·. .. ·.
. cl~an~mg mine. 1.ndustn.al w.aste·.a~. t~1lr9.!!j.5i'8~eT1~'i_gjeL~~d~E. empt from Ta:>;c (LGC; Seq. ?38);
a::. elin'lin.ating. '?r re_ducing .tJazarqou\~ffe~~iolid~-=~:"'"
__ pa~i.cle.s, ··chemicalsi liqui.d~, .?r-. 9U1er.~~-rl'f.!~ .'_by- :~;f' t('t'-"!-\};~- .
a~~SJ~/ . ·. . ·
. ·. .. _. · : . :
· · · ·: · ·. . · · . ·
.
, p_roducts .and g~ses· emjtt~d. fro_m. any facilitfu · r~d·.JY!fij!t,iAfer.to previous discussirms· on Type~ of, .
in mining operations-for their disposal (RA. NQ. 194.~=RealProperty:Tax. · · .. ·· ,.
known, as. the "Philippine'Mi'fii~g A_ct ·of 1995, S~~-,· ·.·.: : _: . . ·. · ... ·. . .. . . ·...... · · .
. 3(fJm)). . . · ·. · . . · · :,·: ·. , : · .. · •· ·.· .:. ; .·:: ·. · 8. C~mdonatton'p~ R~ductio!l'. of-Reaf Property
. · . . . . , . .. . . . · · · · Ta~ and !ntere~\ . . ·· , .... ·. · · .. · · . . . ·. .
. Pol!utti:m· c_onfrol:dE:vic~s acquired,. constructe:d,".:'9.[ . . . . ·. a.: By. ft:!e ·sanggunian.' upo·n r.ecomm~ndaticin :
. inst;:illed by ·cor:itractors .sn~II not. be _cpnsic;lered ·as:·:.·· ... : .. ·. of t_he .Local. Disaster.Coo(dinating Council:
· ir:r1provemerits·on the land or bu!ldi[lg.,where they are . . . : (F:AC)' . . . . · . · : .. · ... · ... : . · . · ...
. pface_dta.r:id. shan ·noL!)e subject to ~eal ptope,ny and··: . · ·· i. ;. tn pase cit a··general failure .of crops;
other.taxes.a~ a,ssessmenjs·(R.A:No_; 7942;.Sec.9.1-), . . ii.- ~u'bstan_t~l-_.decrease . in" the· ,price of
·· · ,· · · .... · . · ~gric!-;IJtu~I or·agri-ba~M.products; or
.Note: R.A; No. 7942, expa~ed. pol!U:tiq,~· control to '. iii: ~c1lamity in tbe. province, 'city; or
.include. i~fr.astructures a~ci.·. i_111_provem·e.nts. · ... :._. . ·. . . · . .muni~ipality (LGC, Sec./1.6). · · '
· b. By the 'f'resld~nt ·of ttie Philippine~ -. wh~n
. :- ·Properties .e><,emp~~d:·.'· Machinerjes, equiP.m.eFJt, . . . puolic.!11terest.s6 ·requires '(~qc,S~c. 277):
. .infrastructu~es, ana improvements. . . ·.. : .· . . . . . . •• 'I ',' ' • I

' . p~~of .oi'

· Exc~·pt a~: abo~·e p~rividedi i''.
. Ar:iY: exemption from payment ofr'ea(.prop~rty. tax ..
previously granted.· to, oi: .'present!y enj9yed by, all
pers9ns, whether natural o~ juridical, ·includin_g· all ··
.Tax Exem.ptio~~-· E'lery ~erso'A· o~- or for
. . Whom real' property ·is. decfar~q who:·s.hall cla'ir.n 'tfie
~~emption {>hall file·' with · th~ .. provlr:i~ial, · c;ity, · or
.municipal assessqr within. 30' days· fr.om date of
aectaration.·· of r~al . .p~opei:ty' sufficieh( documentary
·:,. ..

390 ( 2019 SAN SEDA I.AW CENTRALIZED BAR OJ:E~ TIONS

 -REAL ·pR-C)PE.RT'Y TAX
SAN B(DA ~~ CENTRflLI_Zf..D BAR op~RATIONs· - MEMORY Ato-20,9
\
lid m
• • • • • ,
·.. •·,
• •
'*:*»(eee
•
w ,u '!'flfr:m:T"'!'
rem:
1,··

.= evidence in- support of: $UCh claim {i.e., corporate- . ANS: .Yes. -The assessrrie.nt is proper: The land, ..
'/ charters, title of.ownershfp, articles of incorporation, . · although 'owned by- ttie ·Muuicipality, 'ts no] exempt .
{.·_'contracts, aft!_<!,a".'its,. etc.) _(LGC,-Sec:_ 206): from real property tax because _the beneficial use_ has
. · · .been granted ·to a taxable person· (LGC, Sec. 234
.;;: . · P,.oth~rity of LG Us to' Grant Tax .Exempti_oris ', (a)), · ·
t°· As. a gene;ral rule, the power totaxeicludes'the power
~: ... _fo exempt; Since. the power of local.qovernments to
\ levy taxes - is merE1I.Y _ a .delegated. power, then there - ·1 . - - . · , - . · :·.. - ~· - ,· ·
t must also b~ a specific delegatioh.10:~he LGL.Js to .· ·. -·n_.isT.RIB_UTI_.o_·N_·o,'pJ~R_ o~.- E.·*D:S·_·. .
. { · grant tax exemption :(V DOMONDON, supra at 266- . . . _
$( 267). . . _ ·. . _ . . . .
~- . .. . · .. : . .. . . · .. B~sic·RPT{LGC,-Sec. 271).. · . ·
;· "LGUs have .. a deleqated power toexempfffom loeal . .. · Theproceeds of the baslc real property tax, lndu1ding
fr.·· taxes, as provided under Sec.: 192- of:
thifl~C which lnteresrthereon.. and the .proceeds fr~IJl: the use,
f · provi~e~_.. th~ authori~ 'of _-L~Us- to g"r<}n_t tax lease or. disposition, sale, qr redemption of property
~;. exemptions, rn·centlves,_ or.rellets through- ordinances .acqulred at a public· auction shall be distributed' as,
.. duly, approved .:' 'However, there is ryo equivalent of. follows:·.- · · .. · · · · -· . · ' · , . · ·
1.~:-
', SElC, 192 under .~PT authoi"i~iog LGUs to exempt real . 1. Provinces! . . . . . -~ '.' . .
i prope_rty fron:i· taxatlo~. -~~c .. _2°76 of the.L~G provi(ies.. . . _.. a. · _Proyince .; 35% .shall_· accrue· to the
> .- for con<;lo~~llon.?r reduct,o~·~f 8PT ;?1nd.1ntere~t. ang__..,(.'.t)· .. ·genE:r?I f~nd
f:_, Sec. ·23$ prov,des. I.hat, a. prov1n~.e err. c1tY.~;5r.,..::.1 . ·b. · _Munic1p·a1ity where the property-is located
• . . · · ..

-~; .. munifipality. withi_r:, _Metr-0polit~n. · ~an,il~ Are_f3. h4~.,.'.,:;,;!\ . . · -

40% shal! accrue ~o ~he general ·funct · ·
,: · ·exempt idle la~_ds ft'?ITT -~h.e aclditi~nal levy. -~~ijo~!ff;~ . . c .. ..J.3arangay \.Vhere the proper;ty is. locate~.~·
there may ·be condonabon by the .~anggum81!1 ila:;;x1.:I -..;-..;.... · 25%,~1<111· ai;t:ru~ \u ll 1~ y~ner~I funct .
·e.i· cases of. Qenel"al -f~jlure:.of. crops, subslli'nff~J,--·Jr:«~'i'.:Zt1~-:~...,f;i:t* -. ._- .'· -· .·· .. ·. ·
.· ·. decreas~ in_ prfoe bf.agricult\Jtal or agri~b~~¢p/6duct~?' . ·2. :- 1. · Gfirls~(I,,. ' · : .· ·· -
f•, or·calarnity.- (Id.).· · · ·· · . . L!,&; .
\b, !-'
.?' · · · )-.~,-- ·. . ,a. CityA;k:t?,0% shall accrue to the general funt;! .-_. · · ..
H ,\ . . ..
t.-· . , ·., '._ · . . . . · .- . · · · . .. -~---·
ij,('. ·:- )-,.,-:_,;-~-' · .. ,b ... Ba,;;_n~ax_ ...._ :30%. which ·shall oe·dfstributed i() -:_ .
f : . While LG~~ ~r~ -~ulhonzed to ~-(•mJt~rry_g)~r:f"s only. 0). • f. )hffol _oWfg mannE:r:

. iw.50.fo to;Jh~_ ~arangay we're th~ property 1s ·

_ · . · .: . .
~~ · fro~ t~e. 1mpos,1t10A of_ the ad~~i2fia'~d ?Jilor.~m ·t~
·~:- ·ol'l idle:lands (but not exernpt1q1t,Jrorn:-tt,ie basic re.ii'•
f . . property a11d. :tl1e spel)ial e9J~~tib~-9Ji)':theY~Q}PY -~~-
I~-~
tr'~, - : ·loqflted;'(9nd f :
·,•rcy.;;,~{;11~~~.JWcc;:_rue equally to ·all component --
._. .. . · · ··

cond?ne _ th~ payment of.

_real p~p_e~~xes ur-icf~r -d~ . . .
:'-l.li.,.afa,;;.gays of th_e. city. . · · ·· ·. ·
certain c>.ond1~1oris· (Id.); · . · \!"'-/;:'~}, · · . )r t:;1. . . . , . · . ·. . . : . · . ·. · ..
. _· · ·· ·:-' . · . · :· . -~ · f\, _,.. }(:. ,.,.....,.,. . Th~ share· 9f each barangay shall be releaseq ._
All liabilfties. for R:PT. on·,.property, m1'9.3itieh. ~n.<!.,J:r.!!-~:,•:::~}=~.:w)!pout.rieed ot_any.furth~r action: directly: to· .. ·.
equipmeht;. including any_ special levie"s" accrvin'gil:0::-:-·..s:.u~-""'-...=th"e:i'Darangay tre·a·surer on ·a ·quart_erly. bc1sis·
1. . · the SEF, :actuallninq directly use_d -b~IJJ:!eftefloent · · with.in ?. days afterthe ~r1d cif. ea~h quarter am;I
-'; .. ~o:vve·r·, P"rod_ti~ers · tqr:
*e ··protj_1;1c!iort··:t,~_eJ'ictrf.oity . . snau ~~t ·be subject to. any, u_en 6r hol9back: ·.. ·,
f, ur:ider.BLiild~Op·erate-Trao~fer.~9r:il[actsv?ith•_GOCqs, ·.. _: '. ·. · .. · .... · :·, .. _, .':, ·_-: ,- . ·, ,.
.· for all years -up.-to.2014, ·1;1re -reduced to a!)·arnour:it" . 3. Muni_cipa!ity within MeJro M~(njla.:. : ·. .
:t· . equiyalerit to-:the. ta-x·d.ue· if-:computeq b·as~<:J..°qn ,an : . .· · · a. --M_~trb ·-Manila_· ~- 35%. :·snail .accrue. to Jhe ..
~-- ·'. a·ssessment. level c..if. fifteen 1§% <?! ti;)~ ·-tair m~r.l<et . · · ·. :. _- g~n':r?I f~Qd_ · .• _· · _· . . ·:. . . · · : . ·: . · · ·· .. · .,
vah1e. (FMV) .• pf- said prop~rty. · m~ctnnery, c;1nd . b. . M1.,m1G.1pahfy -.,iliere _the property ts .locat~d .- ·· · .. ·
. ~quipm_ent depr-ecJated \d thi:3 r~t~ibf 2%,per·ann1,1m, . · · . }5%-s_hal! accrue to. the. gen~ral fun . · .. · · · ,
.. less-any.amounts alteady ·paid,by"the IPPs .. All.fines;. . c. Bar~ngay_-_30% which shall"be distr.ibute~ in .
,··,.. ,. penalties; .. ~nd. · interest-· ori · such· defici~ncy. RPT . ·. · .the following m.?nner:· . .·
1,-:
. liabi_litfe$. are ?!so .condoned .. (RM.C. No: 6-201.5,. . L . ~0% to_ -,~e_barahgay where th.e_.p~operty-·
f· . S.e.q. 1). , ' . _: . · · 1s located; and ;_ · . . ...
·· . ii. 50% to aff component• barangays-of .the· ·
. . fllust~ti~n; (2!)1~_-Bai" Qu-~stj~n)1 _·. • - • , •• '·: • m_oriicip~lity,_ e_qual_l)'.·'. ·- . .
-~ :.- . · Mr-.. J\rnald(?. :1ea~ed a piec.s· of land .o.wned by the· , ·
'-; =.. ·Municipality 'o~ -(?-~_nagsabitari· ~.lid built_-.;i ·wa_re_house . _Sj:>eclai Ed4cation Fu.nd . . .
\' oh .the· .property fo( his. business ·operations. The- The pr.oceeds shall b.e aufomatic~lly relea·sed to the
f· · Municipal Assessor. "assessed. _-Mr. ,\ro.ah;Jo" who. local School boards (L.GC; Sec. 272j. .. · · · ·.... _..
· objected to the·· assessment .. con"tenqlng · that ·he
i · s'tioµld not oo asked. tq
i)ay .realty tc1xes·. bn·· the land
~- .. sin.SE! il is muniqipal property. Was·tha as~essment
i~-~~~
of pr.o,.;ii:tces, (ti~ pro~~e~s ~hall b~. divided .
.equally between the provincial· ani:J. municipar s·chool ·
proper? · · · · · · · . boards (LG<;;, Sec. 272). · · ·

· 2019.SAN BEDA LAW CENTRAUZ~D BAR QPERATIONS I 391

 . REA.L PR-OPE.RTY.TAX· .
. SAN B~DA .u:w-ciNTRAUZEQ!]AR OPEAA, noNs .: MEMORY AID ~o,? ..

· .Tax on Idle Lands· . -, · 'Note:: The L<S'C. does n~t p·~o:vld'~ for· a hiera~c~y .of
-. The proceeds ~hall accrue to the respective general . · remedies on what·-. should be firs~ exerdsed, the
fundof the-province or city wherethe.land is located. ·' .administrative or ju,c;ficicll . remedies, ~ubject· to the
In the case· of a municipality -"Yit!)in the Metropolitan · - · doctrine of exhausnonof administrative 'reinedies.(V
ManilaArea, ,the proceeds shall accrue 'equally to the· · QOMQNDON,.'supra·tit ;361). . . .. · ~-
. .; . . ·.
Metro,p~litan· Manila Authority and the .. municipality
wh~rE!l'ih~·land is located (L_G.C, Sec.273): 1." Lien. on :~'E~. pro~erty' s.ubJ.e,::t to 'tax . · · . .
to RPT as
A legal clalm, on th'e property .subject
. _. Sp.eelQI· Lev.y . . . . . . security for the payment . of tbe, tax obligation (V · ··
. l]:,e. proceeds of the 'speciat levyon iands benefited DOMONDQN, ~pc8· af'360--3.61). ·. . . .. . ..
. · by public works; projects; -and ''other 'lmprovernents · .. · . · . . .. , · .
shaJ! accrue . t<;> the 'gen1::rl:l!' -fund pf the local- . : · -It. is sor:ieri_o.r. to .al)' liens,' charqes or :encumb,rances.
government unit .wQich financed such public works, .. · ·ir.resj;>ective ofthe owner or possessor thereof and is
projects •. orother im~·r.miements.(l,.GC; Sec.. 274). · .: . · 'enfbrqe,'.'lble.by adrnini~f~tive. or Judicial acti~n·.. (t:.is
· · . extlnquished only upon payment of 'tax and· related
. . . .": :· · .. interests andexpenses (i.GC, Sf3_C; '257). · · .:. ~

. . -~~ED JES'. I1'l REAi· , · ·, .: ·. · - . . . · · i~-i~ consntcted'ontne pi~~e~y subject t~·the.ta~ ~Q~
.. .. PR o PE·RTY :t AXA l'ION· ( J::.G.U,)~ . · ~ti~g~-~et.h~· re_ar propecy _tax accrued whicti is on the .
.. · · . · · · : .· _ ; · ... • ~;:t<"". l'.J. Jfi~.t,~a~~Ja,:iu~ry(L~C, -~ec,.,24.6); .
. -, . ,·. . ~ .'f. ]r ;/°'~- . ·. .
. ~o.ti~e·of'Deiinq~enc::y· · · . .·· ·
· · When_the real.. prop~rty ~ax. bee~ e{cieJili..9cl!fnt,the · .,,~
.-Q ..
,,;:ii..:~~QmirJ?i~~~~e
a:~P~stt~~J-e!
..Acti~n,. ·. · ... : . . .
Pers~nal P~opetty · ·. ·
· local tr.easurer concern~d srall~"A1Je,!:lja~e!IY, e~.{c,· .. . -~ ~\.:<::; ~-·-~ · '. ·, . . :·· · · . · '. . :
.. nqti~e of the delinquency whf~fsh~~s)J>}cii'./~hed~-
. upon· which-' the tax t>ecame deliM!,fuent · and .. m~t -
~!{>~'"\
of'a~ }~2na1·.prop_erty.bel.ongmg. to .the
taxpay.er .or s.~J ct to ~e hen (LGC, .sec.· 175). · ; · · ·
. . personal'_ pro1:ferty rr(i=ty. hj.hii1it:~Kine~· to-effe.c.t..r:; ;itt-';_J ·\ ( f).l· · ·. · . .. . · · . , '
pa,yment of ·.the ·tax. ·surt,A,._!e{: 1otertsts,, i;IHU""{ l li l ·~~
~In}{! prlor,to~~nsummallo11 ur Lil~ ~ale, the
.. pen~Iti.~. Th.e notice ·of tt:,e ~efin uen~y sh~II b~~ ~- ~L~~ayer rpay .P, ·,. tfi'1 _irope~. char~~s. (L.GC, s.ec.
1: . Posted.· at the. ·-main r~~t
)Jd . \,U-ci\ put.,~->:..uliiW.P'':0
. . . acces.s1~IA .~nd COflSPJCUO~s\ pla~·rJQ-~clG ;-;;:.<--..,.:- .A .
rd!J-:·~ :_. . -,~
'JL....0/ · '.
' ·:.. . : ·. , . •.
._ . .
· - _,b;m;in'gay.. · of. _.the· 1~1J\ver\r¥~,.
u~lffl :· ff~~~i (ifj~nl ~~-.
1-:o.11s1dered~o~c! t? LGU:
.. .· conceri:ed;_ ~nd · · · ~- ·.. \ , ~-~~- -~ . ·~~~~~tti;,pro e~y 01 trained. b~ no~ d1sJ)osed 9f
II. ,Pu(?lisrep,pn~~ .a. W~ef< f9 2 ~ohSecuti~~~~ wit~.~~.da. , ~e Sa·, e Shall be.c~~Sldered as sold·
· ·.·, ·;JO; a:·newspaper of !1ene~ 1. cirplita,t[on·~#r~!a..~(m'\~~~G~,:·~e... 1-lp (e)).. ,: . . .

. · ·.··: . ~ro~1.nc;e,_~,ty'.? -~u·~.'~P~1:._. ~G~! _se~~J'r~.:~9i: ,he ·,~~al.· Ta~· ~od~ . does .~~t
. .Only \he r~gist~red ·qwner of tl:i~. pro)e:.~~i9J0ad~~rf\,.ari~'.tiS.Be-c:1fic_ prov1s10!1 proo1b1tin~ cou~s ·from
. : the ta~pay.er wl')O is entiUe,d_to a_ notice'~%~Jll;J4ul3~.GyM1r~t;i1~~l.~ollecl!"l)_'of local lc!.X.es. ~ucr. s!al~toey
· and othe.~ _proc~~.ings: rel.alive:· tc;>- tfle J~sal~~fit~ - . 1t1te~t ·.-n:iay. haye_ -allo~ed -pr~hm1nary,
· (Ll.!kban v. ·OpliirJ'ilf'!I Deyelbpm~nt.·Bao".k. .G,~ .. No. : . ·. ,.mN~ction_where,· .!ocal·.ta_xes ... are mvolveq, But .,~ .
.2Q57flt?; Jan'iiary"20, 20.1_6), Jiie l::ia_sic'.real.. property. _c;an~<;>tneg~te-the procedural rules a~ requirements· ·
tax'~od any ott:ierta'x-related lhf;')reto ~nstitlite a li!:)ll · · .. und~~- R!Jle'.58: of the R,ules of 901;1~ (Vs(ley. T,:ading · ·
on·.the property, subject to tax (LGG· Sec.. 257). .' · · · Co .. v. qFJ·ofJsabefa,, ·.G.,R. Nq; L-49529, March 31, ·
. · ·. - ·, .. · . •, . . ' · - --,"": .. )989\ .... ·. :' •', ... - ... : .... : .·: .. ·:.... · .• · ..... •, ·
. Rei:ne.dies'.:~f tl:i~'LqU!Pfot,.the c~lle¢tiQ~of .real.. .. · .
. '• property tax . . . . .. .· . . . . . . ·' . •" . . ~- :,Levy ':'.•\!re. R~,alPrope.rty s_ubject to· :T.ax,
, Th~ LGU. concern~· l'J'.lay' a~aii any '(o.t. ALL) of the. . . .. . . .-. ·
. . . following remedies: . . . ·. . .. .. . .. . ' . W.l:J~n levy.ls IT!ade . . .. . -
to
1.·-: Lien on property subje_ct, 'tax '{LGC, se'c. :2~7);. · . .'After the-· expfration of, ttie 'time requir.ed .to .
. ~.. 2: Administrative·actkm . ·. - · . · · . . pay the tax·levied, fi'ie real property s'ubject
. . \:1 .. Dislrain't .of' perso.~al proper:ty.. (LGC, .S,ec. : · .~o:the·.tax''may be·le'viec:l t,1pon {LGC, Sec:·.'·
. - . . . '-254(b))~, : ·. . ·.· . . . : .· : . ".. • . ·.· .' 258)>"' •, . . . . . ... . .. " . :
. b.' L~vy ory real 'property S\JOJec,:;t ~o tc;i1<' (L(3C;. .. . '. ·. . . . ·· · .. · .·... . ~· .
. Sec. 258-2,65); Qr": . , ·. . · . . . . .. . Levy.. : may, t;>·e ma~e. ·on:. or · before,· o~
·: 3'.. Judicial actiol"! (L.GC~·.Sec. 266 lri r~lation to Sec. . . . . simultaneously w[th,. tne in&titutiori of.the civil
. ·. · _2toJ.: · . . . . . . . .·.··.- · : . . · .·.. . ·. ·., · ... a~uon 'for·t~~· collection· ofthe. delinquent tax
, . . .· .. (l.GC, Sec.: 2.58J: .',-. · .. · · · · ·
·;.

392 t 2019 SAN BEDA LAW CEN;RALIZED BA~ OPERA'rlONS."

 ' . ,

R..EA_L· PRO·P.ERTY . TAX

~N BE.O,fiAw CENTF?,Htztp. BA,R.o_PEl!Ar10Ns_-M_EMbRY-AtD :2019

How levy is made· ·. . b) ·sale .

. i. · The provincial -or city treasurer, or a The sale shall be held either at the main entrance ·
treasurer of a rn1.micipality- within ·the· · of the provincial, city, or municipal building, or on
Metro "'1an.ila Area, as the case rnay be . ·.. tne:..property to be sold, or .at any other place as
shall Issue a warrarit of leyy and a duly: ' specified in 'fhe notice of the sale (LGC, Sec.
authenticated certificate showing ~ne: . 260).·.
1) · Name ofthe delinquent owner o( the ·
· _.· Property or :·Pf}rs,;m .having ··legal ... _Note: At any tlm~ before the date f\xed for the .
. · . interest therein; ··:· ·. . . . . ::;
sale, the 'owner otthe real property or .person
2) D.escrip_tiohof the property; and . ' . · .. : having. legal interest therein . may . 'stay-. the.
3.)_ Amount · of the.. tax d,ue and 'the· · · proceedings· by .: paying. the delinquent tax, the
interest thereon (L.GC,. Sec. 258). . . ·int~r'est. due thereon, · and the. expenses of sale
:c~Gc, sec. 26eJ: ... : . · . .. · ·
. ··ii.· The·war"rant.shall bemalled tcfqr.s.Eil"Ved : . . . .·· . . . . .
.. .. to: · · . . · • · ·. . · · [!lsposition. of proceeds: ·The proceeds of the ·
: 1) :delinquent•: owner ·of . the . real ··:sale in excess otthe delinquent tax.the interest
·· property . or. person _having·. legal'-' . . .· . -due
. . thereon,
. and the 'expenses of, sale shall . be
· - interest therein, or- in caseheis out. · · remitted 16 ..1he owner of the real property or
cit 'the ~ountry or- carmot be located, . · . person having. legal interest therein (LGC, Sec:
:, · to the.: adrhJ~istrator or occupant ~-f:~ · 26pj .. -.
. .. . the property, . . r: . ,11.f/·-1..-, .
·. . · 2} . Assessor; and . . · . · · :4_1,17Aff~)~· ·.Effe~t {f th~re "i's- no bidder, or if the fligh~st .
.· 3) .. Reqistrar of Deeds' . w_h~rer~jtl).!(il~#i· · bJ~· is .for, arramount in·sufficie~~ to pay_ th.~·
· property rs located-for ..an.nqtall~ntoff:_::l;'t,. · ..-.,..re~I prope~.·tax_and the related interest and .
th"e. Jevy•_ on th.e: tax decl.arsit(g,t,-?'aQ.9q~~.,2~i,~~J;:\ale (F9rfeiture. ·of Real Property): : .
>. • certificate of titll:l .. of . m~ropertf· ... ,i.: -. _THe-'-l~eaJ~treasurer ·con~ucting ttle -sale ... shall
, ., (LG9,-Sec. 258). · . -t:.;< 0•. •• • ~1-r.,'il. . . purctJ?s/fil~e _propE;rtY in behalf: o,f. the lo_cal: ..
··' · . . . . . · \:i)..;-:f. : /('"~-~. govemzei.11tl1,1nit concerned (LGC, Sec. 2fi3). _· · ·
. Toe.::_1ev.yia~ offi~r. shan su~m,tifo.,'reg,~~ ttre . _ ·ri . .· / · D_ ·\ . · ·. · . ·. · · . ·. ·. · · . · · ...
leyY to the. San!!gunian':°9-5$f.1ed-wi1W~'tim (18) It~··: _ If ~el ro~ertx'l~ no~ recle_etr)ij_dwithin_ 1 _year_from ·.:
days after 'rec~1pt of the ~~nt b~,\~e owner ol, i~I:· · Ip~ ;4gate of. fbrfe(lure, . ~he owners.hip _.pf the · ·
the, r:in;,perty _:·or ·person\~~virig·~fgg~~·i~tef~st_ /,'- · P~f..... J~~~s~edon the'local goyeniment·
1:'t- .. _l~-~rem (LG~,_sec. _458)~ .· :~-r..-:.?f\ ·:.-~~~ : ff · co_ .
urn~ _etj,(LGC,_Se~.- 2~3). . . .. . .. ·
f., · : Not~:·Lev~ maiibe.repeated ifn~;safy.\..inti~.fhe.· :: ' . Note.: .The term ."forfeiture!' in Section 263 of the
t'( . f~il. ·. arno1:1~t dt1e,.· including·· iiu ~~p~ii\es:. is y;;;;¥£~~e~.r~fers to the date whe"n th~ tax d~linq~ei,t
"'. : ··col_fectect·-rLGC,$ec .. 269).. · . · (,;tr·· . ,;!~~~~~p~s were·.solcl_ _at a. pubJ1q :auction. _The
.;:,-. . . · .·. : · . · . . ~\i · · rr.1 · '. :.
forf~1ture of tax...~elinqt1ent properties.transpires ..
ff .. Ad.vertlseme_~t-a~d Sale of L_ev:r~d R~a~,21;>erty ·. · · _ryo la.ter than .~he _purchase mc:1d~.. by t~e ·city due .
~:i. · . . r·:· •. . . : : ... · . .·. . .. · . to.lac_k.o~.a·b1dder from the.publ!C. This. happens·
'· · a)· Advertisement· · · : · .. · . · ·· : · on: :tlie date .:of the sale,· and· not upon: the
. . When: Witt,in 3Efdays,at;terservice.of the· \'.iarr-aiif. . ··i$SUanbe of th.e' declaration 'Qf fqrfei.ture (Qity of
· of :_levy.; ·the' foc;~l ··-t.reasurer ,shall pi:-ciceed. .: t9· · .. 'D~v?.o v. · fntesiate· .Estate of f)aJisay, G:R. . No. . . ·
: publicly advert{s~ for sale _or-auction' the subj~_st ·. · 2Q77.{i1, July_i'5, 201.!.5)'. · · · -
· . · .real property or }1.1;1sa~.te porti.ql'i tlierec;if .as may· . ' · ' · · · ··
. ·-be t.ie·cessaryto satisly the· tax .deJjnqLiency and.· . Res~le : of· :forfeited : Reai · .. Propifrty': .· Th.~ ,.
' expenses 9f sale (LGC, Sec. 260). · . · . . . ' . · ·. -Sanggu'nian cqj,cerned may,. by ordi~an·ce duly:
: . . . '. . . . . approved,.an·d vpon r:iotice of not-.les·s tban 20·
. It shc;1ll ·be ~ffede,d!?Y:· . · . ·. 0• ... • • : • • • days;- .se,11 and di"spose. of the. rea~ property
i. Posting a Jiotice· at tt'le main entrance of·· ·. 'acquire.d (l:.GC, Sec. 264)... · . ·· .· . . ' '' ..
· · lhe provincial, city, or.milnicip_al ~uilditig; ·, ,-· :·.· ·· · · ·
~·
(I·
. . . ,and . in. a ·. publiqjy. gcCE1SSibl!:3 and
· ·. conspici:Jiius .··pJa~e .·in. th~ t_Jarefmgay
c) ~epor-fof Sale . . .
· W.itliirf 30 days after the sale, the· local treasurer·
.

t·. . where.the real. property is located;·and· . . or)ii~_.deputy.°shali" tnake .reporf oft-lie. sal~ t~ a
r.· · .. ii. . By publication .onde ~ week for 2 weeks · the- Sanggunianconcerned ·(LGC; Sec.-260).: ·
~x. .
t.~· ...
. · in _the province, city, .. or _muni9i"pality ·
. wher~ the prop.arty iS.Jocat~d (LGG: Sec:
. .
. ·1ri·:case ·or-forfeiture of rear property; the local·
·
'. .. .· 260):.. . trec;1surer shall make :a report ..ofhis proceedings
.- within two (2) ·days fiom . .
ti.,e sati.sfaction of the.
.

. . . .
·2019 SAN BEDA LAW CENTRALIZED BAR opERATloNs· 1. 393. .
 . · . . REA_L· p:R_o:PERTY ·TAx
. , ~:B~DA .L:AWCE;f.lTRALIZ£D BAR O_PERATIONS ~ MEMORY Alf) 2019 '
.~

'~ .. .
claim which shall. be reflected upon the records Note: Frbl'T).the date of sale Ul)til .the'e~piraticin of the
of hlsotftce '(LG.C, .. Sec. '263).. · . . · .· period of redeimptiori, the ~dellnqu(;lrit r~·a1, property,
shall remain. in poss~ssion. of the .owne"r or perspn
. d) · .lssU:~n¢e of C::ertific-ata:of-Sale .having legal )rite rest the.rein Vyho sh.all pe, entitled'. to ·
. The jocar treasurer _shall -pfepa~e. and deliver to· · the income and othe·r- fruits thereC?f (L~C, $ec. 261) ..
the· purchaser acertlflcate of sale (L~C, ·se_<;i · ..
260J. . .. . Only a ·person· having "lega.i interest" _':·in:' the .:
.
.. . ·. i
property may ~ff.ect its redemption. · . · .· . ·
.. ·R~de'mptlc;mpf·Pr9perty . '; . "Legal interest;: is defined as interest in property ci,r a.
· Period .of
redernptron; \/\lithi.n. 1 .year from the date. '. claim 'coqnizable at law, equivalent to thatof a ·1egc!I .
. Qf sale· fLGC, ~ec:--'2q1)... .: : . · · ·· owner who has, legal title to tlie· property.. 11" must be
· ·· r. ,. :.; · : -, · · -" 0110 that is actual and material, direct and immediate,
Th~ period of redemption·of ta,td~il~q~e'nt propefties . · . not simply . contingent ·qr·. expectant., Mere. use Qr..
. shq_uld be counted not:t'r:om;thedateof registration of. . possession. of property. alone does not vest ,legal •
·· the c~rtific.~le of i:al~. as)>'revi()u·s1yp_ro.vi~d ~Y -~e~. ·'. ·. interest therein sufflclent to clothe the possessor- with:
· -78 ·of p.o. No. 464, but rather on Che date of sale _of . . the- legal personality 'to redeem it (Onstott v.. Upper .
. the.tax.delinquent 'property (the. City oiDeveo ·:.;'Tl)e . : .Tagpos NeighbQr,hood· Association, tnc., G,R. No.
Intestate. [=state: of- 'Am.acJb· s, Dalisay,. 'G.R. No.· . 22·1047, September 11, 2~16). .' '· ·
·2CJ!791;·July:·15,·'21J15),,.: · ·, :.... . =---:i:="-:::,=-~,. : ·. · .. . . . · . · .. ' ·
L:>i: JLJ j{{;t;\~;~f
t-

:-E~<;~·P,~i~n:... .1. :, : .~ .:·. . '.', . •• .

In -C,(y. Mayor v. RCB.G, the. sut:>JacpCi\fbrctihan~-~tla_e.1:1.Qldu#g

:t~i~:~J~t~~ ~;~-~linque~t,O~~~r.· .
Gf l~ tax sale despite .tt_rf;l absence of the ·
explicit!~ provides'that the. 1 :Ye~t~iim~Ji/9,i:i~od · . ·. requl'sit~(!ff~~~\.~~s tantamount to . a . yt!Jl~ti_o~_· of:
. 'stlbstq1;1t1l:f~rJ,9bf·*b. due P.fOCess. Not,~e. to ~he.
_stiould b:e c;;ovnted,_f!Orf.!the datrr~/i'it'f.)JJJJ'JQj§Jl(!)f'f~of"':'·5':,,
t_he·-sale of.th_e. prop~rty at th~,.pr,<(p~r"!Mistrr,
. · . . .. .
·. _'!ID·f ·.J,f>eJ!nque'pt-o~r:ielf~ '\\f.:qi.li~ed a_s a. pr~re_quisite.tq ~ .·
. . · . '. ·· ·. 'fl. ·..... "'i;f-, J . .Jr_, .ffe~ valid tax iale. ~fs is_prerrusedon the.-rule that a ·sal.e
T~e SC ruled :that ~i~ce it i~J~po)J_~~'?f ~.e l!,1~ .toi_. ". ,..£~an~ tax deJ_i(lffeen~~y_is·indero.?atio·n9f. property .'
aid ra_th~r-than·to:def~att~\3-9_~~i>'slflght,. r1ae~p~_lq_n . ~na].ue-J>roc~_:>&;q91;rt.s11otthe r~g1stere.d :olf\'.11er .. ·ln· :
_; .. shguld b~ looke<;I upon with Ia~Ol"~[dwher~ no 1111~~~ -t:~~.eqo ~e. vahd~tfie.·.steP.S·r.eqµired ~Y Jaw must _be ·
-· · · · wil_l Jollo~~ .a ·Hbe~! po~stru~~f:l,~ill;·b,~~T'.1.·t?·ro~fil. _;:~t'M€tly J9'~<:wed.ftFo~p~r~·te Strate~ies D~vel~pment.
. rede,npt100 law~. spe.c1ficall,y:&n ...tJi,'e e~bls~:uf: ttie-<::7---<::::~Corp, .eJ.4~"Jt;; . Apo1p, ·G!rR. No. 208.7-40, · Novf]mbe( .
:.. rig~t to ·red~el'T.); T<:> harmon'\r.t'!. t!:"~~rov~~of,th,, 'i·rJ'hfJ.'..,.2J/' < ~J. · ./; ;..,,,~::/ £ ·· : -. . : · :· ·. .:· .
. two_l~w~ ~C::1t~ Ordma~ce ana'S~~.:~_6_1_·5K~~~~(:~ •11\~//, ..~ c ·f/ . ·. II . . ·, :. . . . ·.· ..
.· a~d to mau:itam th,ep~11cy._~t tR~ 1aw·t~1d_·~'-~rt.~- ~. Qls. at1v~eroc~e5;1ngse~tab~1shect fo_rtt:i.e ~a1e_ l?t
· to ~efea~the. o~_n13rs-rt~tit t~ r\3~~~r,n-~1s~~.9p~~~A~e; l~nj,~ for ~9~-payme!'l.~ of .taxes ~.e1~g -~n
red~m,pt1on P!'!no.d sh~ll l)e-rec_ka~~d.1- Y.~~fr0~~J_ff::~~~~Wf!t·1,s ess?ntJ~It!'lat thE=:re b_~ actuat_not1te-~p
~ate _of.the·a~.~otatlon.·otth!} ~ale,~,UA~.f}~~~ . r · :ll:i.E\"'<J.!;>H!)qu:~rit ~tnerw1se the _s;:ile 15. n_~II ~nd-vo1d
~e prppeneg,~tr:y'(91,ty-Mayor. .v.-Rt~,t~,:nerc1m<·-~1~1~ol{gfl'\~n~cededby _proper advertisement ·or
·. Banking .. CorP_._, G.~ .. ':"o. _17,103~:·Augi:st~ .soy>), ·-·M··tilB~~~~~¥.lPuzon ._v._ Abe/fe,:a. _G_.R: -No.-;'75()82,
.. ·. ·_·.· · ....; .. .· · . . ·:: .•..... ·· · ·.· , ........
.· .,,its~.~~.._
· 1.~ ,..,fia~q_µpY ...... __ 31, 19,89). . ·
.. . ., . .
:
H~w effected: Upon:'.payment to. the..:loc'.i,il treasurer ~ote: -T~e personai notice.req·uired.is.the . .selil.ice·of
of ll'le a_nibunt ·.of. the. Pfllinquenf fqX, "ir:ic!.u.ding' the '
i~terest· due thereon: and :~~peris.e{of 's:al~ from. t('le . the:_w~rri'int of levy in l:!ccordanoe With. Sec:.-258. "f the
. . . .'.elate _of delinquency to:.t~e·dafe··pf .sale, P!US fntere~t ~GC (V DOMONDOf!; supra. a(3??):·· · ·:· _ . · · .
· · (L_GC, $ec'. ~61): ... ·. · • · . · · . :. · · .- · · ·· · · · · ·.. ·, · · · '· .. · .·· · · · ,· · ··
·, . '··· . . .. : . . · (Please. see .discussion on 'Remedy . of. Taxpayer:·
. Effect=of.re'd~n1pJio'n: 1t'wm invalidate the·'cei1ifi~te ·. · ·AS~ailing_the Vali~ity'oiAuctio~ Sa(~J- .. ·. ·.... '. ·
.of.saie~·nci'a·ce•rtificate ()~ re<;temptjo:n shall· be iss'ue9 · · . .. .. ..
by the-local tre.as·urer'or his deputy, i~ 'tl:i.e.owri~r of
the. delinquent real property ·cir. person having legal
~~=i~i~. ~~ncerneci ~~y enfci.rc.e.' the -~;i1ei!ti.~n~(the····
·interesfthere.in (LGC; Sec. 26.1):' . . ._. _· · · · · · ·.ba~iq:..real. propef\y .. tax :or -any other tax in ·'relation
. ,·: · ·· · · . - · :. . .. :lheretq _by· civil a~_ligh in. at:,Y. qourt· of.. comi:>~te.nt :
· .Effeei ~f· failure ·.to r~de.ero property: .. Th~. iocal jurisdiction (i.e. MTC·,-RTC) subject to· the ~rlod ·of
·treaiu.rer 'snail exi!cute ·a: de-~d :co·nveying. to' th,e
purchaser the sobject reaJ'prop~Fty,:free ·from lien of.
collection'.prescribed undertbe LGC:: ·.. · .-· · .. · ..
. . a. ·. Wi~in 5 yearii· from the date they:.becom_e -
,. . tt:ie d'efinqaent tax, interest .'due· thereon, , ~nd _ ... ~- fnu~~~~·of fr~.~~ ~r i~t~n~ ~o-·ev~~~- p-~~me~t ,:
·expe~s~~ of'sale· (LG,C,' Sec. ?62f·.·,:. .· . · . :·ot the tax, "'!ithin-10 years from the discovery
. . .: of such fraud or intent to evade payment .
. .(LG·c. Sec. 266
. .. ., .
in relation to $eq.
.
27()). · ·. · ·
.a I
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·. I

$94. I .2019 SAN. BEDA LAW CENTRALIZED_-BAR OPERA TIOh!S ·

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 R.EAL.P:R_O·P-ERTY
SAN._BEDA_LAW CENTRALIZEPBAR-OPf.RAT!QNS
-. MEMO~Y AID 2019
TAX
I,:
.;,·· REM EDIE$ lN REAL
.Nole, Court of competent jurlsdiction.refers to the
. Regional Trial Court (RTC)"whe_n case is resolved to
'>__;··,.:,_'.'.:._·_:· PROP.ERTY. TA.XAT·I-ON. o~termineany-question orcon~t~uctfionhor- validity ?f
,. a· tax law and .for the declaration ·o t e ·taxpayers ·
~'-, {TAXPAY~R) liabilitythereunder.{Y/tUG&ACOSTA; TexLew end ·
t,,:· · Jurisprudence (2014), p. 490; _RULES OF.COURT,
·· · . . · · ,.Rule 63, Sec. 1). · . · · ·· ·
{(: ·.The Taxpayer has 'the followirig . remedies in real · · '
'j/ property_ta>;<ation:. , . · .. . . . ·. .. ·· see. 'I 95, ·."as a taxpayer's remedy ·,is separate, .
'?;, { -Question legality of a tax ordinance and r-evenue aistinc(. and Independent · from. Sec. 187. A .
~, measures ..(tGe, -Sec. 187) · . taxpayer's failu~e to" avall ofthe remedy under Sec.
I· 2 .. Administrativeaction: . .. · .187 (appeal to.the Secretary of Justice),' does no]
J·' · 'a. Payment under Protest (LGC, s_ec. 252); ~ necessarily bar recourse to Sec.195.(app_e~l.with the
t _.":Claim for refund pr credit-(LGC, Sec. 253); or" court of .cornpetent""jl:iri~di~tion)'when--the· same rs ·
c.. · Remedy- ·against the· Assessment ·{LGC, .. ··grounded. on ·the illegality .of -th.e -tax measure
· . · Sec«. 226:EJ_nd 229). · · · . : complalrted; of -·(Mi<;higan _Holdings; .'Inc. - v. City
a~·- . Judicial action: · .. · . . . .. . . . . Treesurer of Makati; CTA EB No. ·1093, April 13,
· ·.a, Court c1clion.(REV/SEO RULES .OF TH_E· ·. ·2016).. · · · ·.
COURT .. OE TAX APPEAL, RUL,.E.S a·AND.... . . . .. . . . . .
16); Of '· . . . ·· . : · . · . . ./"'- . : S.edion··-ia7 authoriz~s. th.e Seo;etary -of Justice _to ,.
, '. b:··. Action as~ailing validity of the. tax sate (LW}f.;jf '. rey(ew only th~·:cons_tifutio.r:ii;lfityor Jeg'a:lityof !he fax
1 . 1 · -: Sec. 267)"_ . · · · ,· . · . /·:.Jl,,.f,,,A,; ordlnanceand, 1f warranted;to revoke·it on either or
?:'- :- , . - . -. . . . I . ["';\,..:: ,.:.·f'i;f~: both of these grounds(Drilonv. Mayor Um, q. R. No. -
1Z lri . di~putes_. involv_ihg_ real property. ta~ation,\j_~P·· 1~~:L.1:t?497;ALJ_g_ust. 4,. 1994). He can.not rl;lplace it. with
'f· gen~~~I ~u!~_,s,.to requ~re the taxp_ayer t<? first ,pi1dl'ft;·!'.~-~di~~lt~~~~~?,l'.I pf what ·the ord1~arce shm.iJd_ be,.·
t ·:,adm1~1stratlve rem.?dres ·an9 pay th.~"..:;!~t,· ~n- er,..,:, ~r · neitl').er":cari•:~,i d~"9lare· such_ or,~mance as ·unJust,
~: · · p_rotest before allowi_nQ ~_ny re.s?rt to ~,J,~1c1al actlo,f:J~,--~i e~cessive, t\l!i>}lressive; or conf1s?cltory (/NGLE;S,
:{ exc~pt. wh~n the ass~ssment 1_tself 1s,:.~~~edto
~, ·. illegal o_r1is mad~ w1!h~~t legal a1;1!Jtor!ty,,,.i9;!;!p1to/_ ·} ·
_p, ~]-, supra at 53/)-lJ.'t\-
. ·fl" 11_ \
.- ·
. _- · ._
:. . . .
· · . · . · · · .. ·
.
f · Wi(efess,.(nc, . I(., Provmc,al T~eg,.~tfr'e_r~ff~lf3'~;;,r19.:af,,:ti.._ When .di~putir,,9-a,,l\ord1nance,the_re 1s no nee~ for a, .
·:: G.R. No. 180110, May 30, 20J,g'f:, R;, .., . ~1 J·:t-\ written P,rot~lo_Oeifll~de.The wntten protest 1s only
1' · . _ .: . ·. . 1~.,·~-"' ~::--'.~;i\ · \::."'", fa~
f: · . For example, prior. resort to ad'!Jlir.iistre~"'.e.(actigr:ft~· . ''{id (!d.J.". ~..(.'tll.~t~..P'" :
needga~~~<l'7~if.~Tng · ·against · an assessm~nt
.. · · , .·
··.. required · when among the. is'sties:.rais~ii is ... ~.rn F:rf .· . ..· . . . . · :
'? . · · a11egediy. erron~oµs · a$S~ssm~n,((li~~ -~~,en ~-e ·f!t;A.. \~~payer ma·y fi!~ ~· compi~int assailing th~ _talid!ty
1 _reasqnabl_eness of ~~e amounf 1s chaJl~!}~El.: w~1le jiA;;(~f,,,ti'.l,r!fOrdln~nce·· and p[aymg for a refur:id o{ its
-: . : , di rec~ co~~ ~~tion is_ P.er?1itted when Of~~the 1~£J~~ty~~A'.li.l:i~lpetcfel~e'd'.."e_~erpayments -~thout first filing a l?rotest .
t . power, v,al1d1ty_?.r a_uthonty of·th9._.asse\~;1:ent;1}st,e1fis_. . to ttie pay'!lent:of t~~es ·du~ uc,der- the .ordinance, .·
-=~-- · in question;-.$tatedaifferently, .the ·gene;r.a~.r;ul~- of a. (Ja(!J.irie-Davies/ns11rance_'Bi:qke(s' v; Aliposa; G.R- ·
f, , · prerequisite recourse . to . ac;lrryini_str.a_!iv~remedies , Nq. U-8.906;F~bruary27, 2po3). · . ··. · · · ·
·~; . applies when questioh~LOf fact are. raised: -but_ ~e . . , . ' . ·
· exception. at. dire°qt_ .cour:t .action 1~ · auo."'{ed when. su~h .api,eal'Shai! not h_a_vett1e,erte9i o'fs.usp.enctin:g:
purely" questitms of I.aw . are involved· ffJapi.!9/- , · the _effectiyity of tfie.. ordin;mce and the accroa! and
Wireless, Inc. v. .Provincial Trea$.Urer of Batarigas, · ·paynjent of the t~x (LGC, Sec'. 187)> . : ·: ·-
G.R: No·. ·1861.t.O, 'i,AE!Y 30, ~2016). ... . . . . . .· . . · . .
. . . . · .When disp~ing ~i, qrdil1ance, app,ealJ~ t~~ DOJ is
1.· · Question· ·legality of a tax prdinance and m;maatory. If no appeal.lo ~e PO-! is made,. t~e ~J9
. · revenue measures:"(i..GC, Sec. 187) · . will ·ais.rniss. tne· case (-!ardine ,Davies. Insurance
·: . a: With.in 30 ·days fr'orn'effectivity thereC;>f.tp the· Br:okers·v.Aliposa, supra). . · · . . . · .. - .
. secreta"rf Justice;-ot · · ·· · . . : · · , '°'· ·· ·
b.· ·The. decision. ·by the . $ecretary-_-of Justice_ ... :In' cas~s wh~re tl:le valid_ity. _o~. legality of a. tax
must_ be' _ref1dered · within 60· d~ys from. the . ordina.n<;:e is questionea, the r.1:1le that the: _tax must .
. da'fe of.the reteipfof tt)efappia!; . . . . .· . firsf be. paid before a· protest. is "lodged. does· not .
c. Taxpayer-must file an appropriate _a9tion with. . · applf Taxpayers· must first r~ceive an assessment.· -
~:~·· .. :._ ·a -court of- competen_tJurisdfction within ·30 · before this rule· is "triggered. Prior payment undeir·:
-)· days. from; . . .. . . .. . . . ·.: ... · . protest. is .not. requir(!d." when. the taxpayer .is .
ct ·the re~eipt-ol' th~ _deci$ion of the ''Secretary · questioning tne. v,ery a~~ho.~ty ~f the as~esso! to · .
· ···,0f Justice; or.· . . imp.ose taxes.(Aa/a v. .µy;·G.R._No. io2781, January ·
e. T~e iaps·e··of the· <30-day period. to d~cide 10. 2017); · · ·
. -~ (LGC, Sec.. 187). · · .. · . . ' .
l.· .
2019 SAN B!=DA LAW CENTRALIZED BAR OPERATIONS 395
 R.EAL PROPERTY·TAX
!tAN BEDX LAW CENTRALIZED MR OP£RATIONS - MEMORY AID 2019
. . . . ·, .. . ·.

Illustration (2003 Bar Question): . . . Period td decide on· the protest

X, a taxpayer who believes that an.ordlnanca passed
by the City Council ·of Pasay ls unconstitutional .for
peing dlscriminatory against him; want,to know from .
. you.: his· tax lawyer, whether or n_~t he· can· ~le- an·
· appeal. ln the .affirmatiye',.·he_ asks you where such· .
appeal should be made: the Secretary. of Flnance, 'or. '
. the Secretary of Justice·, Qr the Court of Ta~ Appeals.'
_or.the regular courts. What would -you'r advice be to: ·
you,r client, X? . · · ·
·ANS: The appeal shouldbe made with'the··seeretary·
· . of Justice. Any. question -orrthe con.stitutiQnality._qr. .·.
· ·.legality ot a tax' ordinance may be ralsed O!'). appeal . ·
with the .SE:lcretary of tlustice within thirty (30) days
from the:effe.ctivitythere~f.-(l.GC, $ec.. tf37); ·
.· .
2. Administrative action· ... ·. · . . , ·.·
·The local treastirer. shall decide th_e protest
within 60 'days.from recE)ipl (LGC, -Sec. 252).
Effect.if the protest' is d~cided iil favor of
· th~ taxpay~r: 'The·- amount or portion -of the
tax . protested. ·shall. be. refunded .to the
protestan_t,or ,;ipplied ~s tax- credit agains_t his.
· exist1rig or future·tax liability (LGC,. Sec. 2{5_2)·: .
EffE:~f if th~· pr~test· is denied if the:~O~ .· ~r
-d_ay . period . expired: T~e
taxpayer·.. may· .
· appeal to· the· LBM · ~ithin 60 ·9ays from .
receipt_ of the· 1ocal treasurer's oEinial · or. the
expirattpn· ot' the 60~day period· (C. GO,. Sec.
?5~- in relation· to_ Sf!c .. 2.26)- ·
· N,ote:.T~eadl(erse . declsiori ofthe.LE?AAmay
. 'be appealed to the:C-BM·and to ttie·CTA En

· · and 256) ·. · · ... ·.· · · : .

· ·· . . . .
"z:·..-e: · · t··J . ),:,.
a.. Payment under•.Protest.(LG.c:·Secs.· :25~v=r....--;,.,. ·. · !=k'!nc, successively, .aslu the case of protest
}~a_g~i~stass~smE;!nt~ (L~C!.:$ec,: 229(c) in
. · ~. ·. [V · . >re]at1en toSec. 23Q). . . · ·_ · ·
When _reniedy avallabfe, ,p'_ ~..=;,~~ D I . !./' ,. . . . . . . . . . . .. . .
The p~ptest contemplat~~~~ec~~~-·o! _th,!.. ._. 1;5~-~.la~m{oj1~efurJ~. or «?r'edit ..(~G9, Seq .. 253)
LGC_,:1s. _neede~\ wh~~_.,whe~JtieJ;~-..iS"' _a_ ~~ · . -~"'*<,~J".1'1,..~n.:,9~essment of bas1.c.real property ..
question as. to the r~ct@"a~enels of-~- 1{ ][ ·
tr,c ~\c'~'{}y)ot~~i' tax· Jevied rs found to. be
: a~ount as7esse"d.· j.1ence(~-1f · a·l~axpay'er. .. .u ·ll. ·: .. : il~egalb~-!jll:l.. ·~u~ ~nq t~.e lax is E!_ccordin~IY:
disputes the rea~on:.b~e~t of -~~ease,, .i... . · .reducE;f(tt.6':;~dJ
..sted, the taxpayer may file a
. i_n ·.a_. real ·-~~ta_te. ia~as(essmert, ~e ·:'is,_ . ·., ,.. wtltte:n tJaJO.l:'.flo refy~d or. cred!t witti' t~e.
.required to _'first p~il,1'.tn'e~,t~x" ung r p.~,:.. ~.7 rlovintia11orci!r- reasurei:within 2·ye:a_r:s fr:om
O_the.rwise,.!he_city-~r·!})..i,:tl'l~ipa~tr-'
~ur.erlw'(~~ •.' $ ,;-d~teij tne""'~EI'pay~r is .entitled, to su~h
not act on his prot_esl ('rr111)'.Tra -~ N . • : ·;~ •· kf~p11o1~}?r!.9,J~stmel')t-(lGC1Sec. 25.~)._ ·'
.· ·;· _,117577, D_eeember
.. . ..
{;efi9}4- ..
-·. · \ . · ~- -~ · .. -·~ · ~
g : im· ,!):,~..
· .c.eenoq,o d.ec1 eon the claim
.~ . 1.
. ·
~~:
... • • • ·

. ijeq~isites to. file. prqtes,t • . . a) . ~

i ~ . .. . ..~r'.tie~ea~1.frer h.all· decide the ciai.rn w1tt:iin 60 !·
Tt:ie taxpaye.( ·sno_uld :1r¥.'st pa. '<i e. . :.~o~; · · . da~·fr9rri_ri eipf _1h.~reot:tri. ~~se of de~i~I,
cau_se the annota~1on on\~~;taxr~e1pl~IQ~JEN\1~ . tt)~ t~P.~ay r r!')ay appeai-to the._ LSAA (as m.

. ,.
.:
words_))a~~-U!:Jde~_pr_ote.sr~GG;.?¥1f,-t2~...,~'2~o~s:t:·
• • • : • • :·. ••
,-< 4:'th
S~c: '252. of-'tt:ie _LGC :p~ov1d~s ~_t\!!(~. No ,"}. J! f\J."'~ ~'P°-- _:_ ·.
0

_prot~~t. · shall·. _be · e·nfertained. u~S:aq~~~~;,--"'."'Effe.c(

~
,_.s·es)· and.t9 .. the CBAA, if ·LBAA
· "\~".\~\v...e:\.fal
·advers~-dec1;,1on (LGC, S~~- 253).·
, · · . ·.. · '. . . . . . . , ...
!f clajr:,:i for. i;-efund .-or· crf!di.t ._i!;,
, .· ·:taxpayer. fir:st pays th"e· t!=!X:. There.: shall b~·. · . · d~n~ed-c;>r if ~he !)0-day perlo.d explr~d: _The
· .. annotat~ on the tax receipts:thewor9s "paid ... taxpayer may ~ppeal Jo tt,e '_LBM ,within· 60
. . un.d.er- pro_fei;,t":The protest in ~riling mu~t b'e . . :tJays from•. receipt 'of. --th.e local; ~re.asur'er':S
. filed with,n thi_rtyJ39) ~?YS Jr'qm payment ~f • · denial'.br the _eXp!ralion.of tt,e .60-_day_P.~liod
. the··ta~. to··the provinci_al, citr.tr.~asure'r,"·or .. ·.. .. (LGC,'Secs. 226.and.252(<j)). · · ·, .·.: '
·. TT)u.nicipal treasurer,_ in . · t_he case •. <?f. a : . · ... · . . . " . . · : ' . ·. . '_;. · .
. . muni~f pality _within. Met_ropoiitc:Jn. 'Afea;· 'A'.qO, . . . Note: The ad\iers~ deCi!iiOn.ofthe LB,¥. may
· · sha!I de.cid~ the.prqtest Wi\hin sixty_(6.0):days .· · .. · ·. : , ·. be ·app~aleq, to t_he CBAA··and to'jfie CTA-/;..n
from ·.rec.~ipt:R Fallu_r:e: .to· comply . with: .ti,is . . · ... · ' ·• · . .' B~/1c,slicce'ssively, i:l:i'.iit the· case .ofp.rotest
· mand9torx ~equirement i~· -f~tal, .and· any·· .. : . ·. ·_.. again~, a_~'se~'.snient~-JLGC,5_f!c;. 2?9(c)J'. ...
;.· ;__ ~ppeal sfiall not-he enter:tanied·by the LBAA · · . ·· · · · ..
. '·(Nat/on.al . ·.Power Corpor-ation ·?,,.: _-·The ·c.
'. -~emedy.Agaiost..Ass~s~~erjt (tGC •. S~cs.
Provincial Trel?surfJr. of &!ngaet,: 'G.R, N,o:. . 22_6 <J.n<{229) . · .. : · · .. : · : .· . · · · · · ·· ·
209303, Noyemb!Jr 14, ~016J · . · · · .. .
• .... 4

Wh~n rem~dy availabl~ ·. . . ,.

When.to fil_e·prptes.t ·. .. . .• · . . > · . T.o questio'n the "ad" of the ·: -a·ssesso1
The protest .h writjng. must be tiled -witt:iin ;30 . . (ING_L~S.· Tax· Made_ Les~ Taxing-(2018)~, p.
. d'ays· from. paym~ht of the tax -to the 'local . 978)... · · .· · · · . : .. ,• . . .
·. treasurer conce~ed (L-GC,--~ec.· 2fi2). · :. .
·,

. , 396 I 2ois SAN SEDA u,.vy CENTR.l>.UZED B~ftOPERATIONS

--------------------·-- --
 REAL.·:PRQ.PERTY .TAX· .
. 5:6-N BE'DA l:AW CEtJ~flAOZE.p!JAR OPERATION.S.- ME~ORYAID ~019

EiamP,1.e_:_.Qu.estioning the very authority and . Where referral to the·-~BAA.·ls not required · : ·
power of · the assessor .. to impose ·Hie .._- In cases where an· appeal to the LEiAA 'is not .a
assessment and ·of the )reasurei' to' collect . speedy and adequate remedy and when only legal
· the tax. Theseare notquestions that merely issues are to be resolved, an appeal 'to the LBAA
amounts to the increase in the tax but attacks . is not necessary (City.Governmentof Quezon 9ity.
of.any
q_n the very validi.ty lnerease, · v. 13ayan -Tetecommunicetkms, tnc., .i:§R: No. ·
·· · · ·· . 162015, March 6,' 2006j.
· · .. Sec'. · 2~6; . in:. declaring "that. ary ow11e~ or · ·.
'person ·t)aving leg~I· mterestln the.property .-·. Note: . . .. · . :. •
· .who: is not· satisfied-wtth the action of the . · In the 'case of City Government of Cusezor: City v. · .
· provincial,city, .cir ·murilcipal assesaor-in the . Bayan Teleoommunicetions,.. /8C. '(G.R., . Np.
. assessment -of his· property may appeal: to' ·. 1 !52015,'. MfJrch ·t;,. 2006},. the Supreme -Court
.. · ~he-.Li;:IAA shoutd.be read ln.conjunctlon .with · ·· agrees with. Bayantel that an appeal to the LBAA
· . . -~ec:. ~52(d), which states that.in the event ·. rs not''a speedyand adequate'. remedy ·withfn the .
." ~ha~. the· protest is denied, th·e taxpayer may· · .coritext of. Section ·.2· of Rule 65 .ot Rules otCourt
. · avall of_)he remedies. as provided .forjn· . .(Petition ..for Prohibition}, y.iith ." the . reality that ..
··Chapter· 3,: iitl13 11, -Book JI of" the LGC.. Bayantel's real properties .were already ·1evied .
·{Ch~pter 3 r.~fers·,to- Assessment. Appeals, upon on account of its nonpayment ~f·re?)I estate.
,Which Includes-Sectlons i26-·to 231"]:· ·. ·. -taxesthereon. Moreover. one .of the recognized
. . ' . . . . exceptions to the exhausticn-of-adminlstrative
. Th~·~ction ~ef~;,:edto in See:.226.0fthe LG6~:;; ... : ·remed_ies rulelswhen, as here, o~ly. legai· issues
as.protest of .real property tax assess6eri{ft:;•~ . are-to.be_ reso~ved. In f,fc~! tt-ie·. C?Urt, .cognizant.of.
r.~fe.rs._to the lpyefassess6(s·a~fo,f.de.9~11jg?f'=j.~ .. the n_ature[~f the q,u_e~t,~n·s pie~~ntly involved'. .
. .. the · prqtest filed pursuant' ,to .'Sec. '-25'2li~(:f.:t·:1J. · .. ·gave.due co~rse to tt,e instant petition. . . . .
1
_.:·w~n9unhe:act1~n.-~f the.1_0.cat'a~iiess~f tWJ i1~~"etrt(j~pea1·~ · . ·. ·.- .. - . · . . ·.
. . . .. ..:=3ppelrate· a~th9nty of ..the ~BAA . .~annot b1" ff Tl')~ppeatirhail _l::ie. made -~itrin 60 days fro.~ the
;r,; J- .·
. . invoked (Af!f'.N, .. B,as,?:. Tax~/f
> > ,d't~ f 1t
supra -.1!~-;;:-·
112i .· . • . •
dale: of r~€-11:lt of the written notice of assessment
i . ·.
~a:~ .
.... 465) .• ·• '. (LG~:

. · ;~\~~~~~!~;:r~on~a~r.ftf!::a.~ypJ)t;;n t~; kfli · . -~~;;1-;p,h~{i"(e;~!~~:::pee~; ~thi~ ~20

. pro~er.tY. wlio 1S.t1!)t s.atiSfi~_~fWlth0t.r:i~a~tJon.e'f-Jtle ~µ1·· ~ fr~tf1~-'_.as1tW1(l;&leiptP_fsµch appeal.(l:.GC, Sec ...
prov1ncia(,· city, ?r·. r:nuniciP,cU. a~se~,s'or iriP-.tlfl;l ·ii':: .. - 229'(16;i~v.. , . ..= . · . . . · .. ··

· · · assess~ent of his .property~y~:;{pµ.~~t;to· ¢.e. ~,:. : .. · . ·· · . , . .' . .• . ·· . · . . ..

. L9c.c!r.-~.oa~~-of ~~ses:>mei'\t Appe~I~ (~\l}AA) by lf}r- ~er-i,od to ~ppec;1_l ~e~1~1~n -of ,t~e LE3AA . . · ..
· filing a petition under oa~h·togetheSVi~J;l.icbpies·of -l;;:,410.~~owr;ie_rof the ~roperty ·~r _th~·person h.~lll!J,9 .
_· y,e .. tax. ~e~la!'9tiqns · and such/~ffidali.j\-s}o7-t'°-t.1'?~~~r~st~er~in: ~r _the ass~ss?r: who_ 1s_-l)?t,.
. . . docum~nts :submitted. jn ~UPP.Ort
· (LGG_; Sec;. 226)_:· ·. -....
if~).__~"!:;,
. :· -: ...
~tne~'ppeal .
. . .
·· satasfi~o wit~ th_e drc;:1s10~ oflfle L.BAA rnay, Y"ttun_
3'0_.9ays aft~n:.ece,pt.ofthe decJ~10.n of.the LBM,
.::f:· .. · · . · . · """' .appeat· to the .Centr.a1 Board of -Assessment.·
:t;.- .· ·. '-Note; ·."·i,.·. ·person .'leg.ally ··6~~den~d with . the; .· Appeals··(CBM}-(l,.GC, .Sec. 229 (c)). -- .
. ' 'obligation to pay .for' lhe 'ti:ix :imp_osed . on a . . , . . . .. . . . . .. . .. .
. . . . . . · .. Ar)y , party adversely· affect~c,l .by a. dec1sfon or ·
. · P,rOp~rty·has leg~J.i~~re.~t i.n !11.eproperty·and. the-:.. .. rµling qf the ,CBAA mt1y file ·a·Petition tor· Review· .
persqnality. to. ·protest.~ ta:x assessment· on. the · -. {~lll~ 43) to the ·cTA En Bam:rwitnin 30 days_.from ..
· · ~r0perty (V ~OMONDOf'!.;~upra.~t 463( · · .' · · : ., · r,e9eip,tpf the gu~stlo~~ decis!on·.-ar rulinf orttte- ·
CBM ·.(REVISED ~ULES QF THE -COURT OF .
· No-motion_for"re'conslde~ati~:n.of thi/adv~rse · .. · ·TAX,_APP_f=ALS,'_Rule _$; s~_CS; 3(c) ~nd 41- ·. ." .
· d~cisl9n ,c;>f:thE(loca] a'ss·~~st>r/tt°easQrer;. the··: .
remedy ls-to appf:!al to the 'l.BAA.,·.. ' . Effect of.Appeal. on._the Payrrie'nt ~f RPT . . .
The . .la~t &,Cli.on. of : the· 1.ocal a·$sessor .. on·_- a Appeal· Ori ·ass·e!'lsments. of r.eal prbperty 'shall,. In
'pi:irticular, ·a~ses~ment. .shalf". ·be the. notice of ,1')0 cas.e, ,• suspend :tlie. coliectloh of ."the
asses~m!3n~;:it i~ this last actiqn which gives the·: .... •·. correspol')ding- ··really. taxes· on -Uie . property.
. . own~r of the· property the right to appeal tc{ \he ·.-.· · inVqlVe~. (LG'?•· ~ec.
2$1).. · . .
: . -LBAA.: The procedµ're likewise does· not permit · . 3. ··.·Judicial' Action
·., the propertY.owner. the ren,edy of ~lfJ')g a inotjon . a .. ·coj.itt Action . . . ·· -:· · ,:. · ...
. tor .re.conside~atlon :before ·.t~.e · IOC?I: asses~or ·i.. · ~ppeal to the C?urt 9,t"Tax AppealsJ:n
(F!=,LS Energy, ln.c. -v. The Province qf Batangas," Ban_c within 30 days from re9eipl.i~ case .
G.'1 No. 16.{i557;February.16; 2007); ·· of :ad.verse ·dec.ision, by.·. the · CBAA·. ·
· . · ·. ' . · . (REV.ISEQ RULES OF THE CO.LJR,T OF
TAX
. APPEAL$,
. . . . 8, Sec.
'RU/;.._E . 4(c)).
·-...
. . 2019 SAN .SEDA t.AJ/=C_ENT-RALiZED B~R OPERATIONS I 397
 I aa.

.
· · REAL P.RO.PERTY·
SN/.BE:OA 1:AW CENTRALl?EDBAR o~m,j:r10Ns - MEM08Y.AID il019
TAX
·· ei;a. 44 e4, · · · e· ·, ea+ese a·ww
. ... . . I : ' '

ii. . Appeal·.b.y pf:!tition forreview on certiorer! · Term of· Office: Co-terminus.: with their· term as
. . ·to .. the Supreme . Court within 15 days. .Registrar of Deeds, Prosecu1or, · 9.r . Provir,.ciaf/City
. .from receipt of adverse decision -cr the E;ngin.ee:r. .· . · · · · • · . · · · · ·
denial of the motion. for reconsideration
or f.leW trial, as provided in Rule 45 of the . . -Meetings,; The .Bcj~rd·of. LBAA shall ·meet once a
. Rules. of Coli rt (REVISED RULES OF mcinth.. ano as ·often···:as necessary for· prompt
.THECOVRT.OF TAXAPPEALS, RULE disposition ·of .appealed° c~ses.'(LGC,: S~c. 228).
.· 16, Sec. 1). ·
· · ·· . ·. · · . ·. . . . ·• · .. ···· · · : Per:d/ems Entitl~~~nt: N0 .rn'emb~r. c:i.t.'the Board
· b. .A:ction Assailing the·Validity
~~··· .
.of
.
theTax · shall be entitled to' per' dlernsor travehnqexpenses
.
.. . . .11 . · · :· · .. . .. .. . · .. forhls attendance i!"1· B9_~r.d .. n'feeting_s,. except when ·
... No cou,. _shaU_ent~.~~!n any a~t.ion.as~adiog_. ·ecfndLictihgan.ocular lnspectlonin conhecfion wltha ·
....... the. validity of any ~ale. at publ!c auc_t~on _9f . · . ·caie under appeal (l:GC ..Seo. 228). · .·
. · . · real property :or· nghts t!,er-E!m unt1r .. the : · - · . ·r, . s, .• .: •·
. . . tr;1xpay'!'!r shall have, deposited with the .co.urt . . .• . . . . .
.. ·: ... the· amountfor which the reat. property· was . . Oentral Board of Asseasmeht Appeals (CBAA)
·· .. sold: together:w.itfi interest- of 2% per month ·CompositiQn:· .. · · : . ·. · ~ . .
. ·. from .date of sale to the time ot'institutic;:ltl of .. On~ (1) ~hf1rpian andtwo.(4) rri!;)m6ers appointed \:>Y
. .--.=-=-.
: . action (,Lf?C, S~c. 267). .
.. , T~e· ·d~~o~it .of the a~o~nt fo,i:#W~~
... ·

". P~<?Prr:tY :-va~·sol.d·~lus .i_nter,~~qlliv4'Wii)tt~L

r
u
t.h~ Pres!9ent (LGC,· Sec. 230). . . . . .
~~f.~f_fj~e: 7 years ·~(tho~! reap.~intm!:)ht (L6G,
~1 -2,0~,.__ ~-- .. .: ·. . . .. ' .: - ·. . -r ,

2Yo per month-required ung~~Se~~E?J?otttle -~.!> },,>";···~'' .. . . ·" ..

. LGC is a jur1sdictfo.naFre1i:Jrr~n;ip~Jfthe.n,ot1......d!~qu_i~e~er~~fpr<..CBAA C~-~1rtnan and Members:
... .,_ ...payment qf whic~. -..y.a~~t~~~t'dis~I~.f c:jf'> 1; ~ih~in~Ctti~er:1\. • • , • : • • •

·the.action (Spouses ;Wqn'g,111.( Cit_» o( 110{0, Ji~ . ~,

At l\as_\t~wea~ 1 old a_t the time of t~eir
.·_.·.

.
G.R: No; 16'1748,
·· · /·.·
J;/j,a,
2~·9). ff. '
·· !
.. ·
,.. :.·> f · . . i~~~t0 ~~~t:rs·.
appo\ntme~f?i~, :.
1
.li., ·. : .· · .. ,·
_9f.....Lth.e... B~r ,or_ Certi!~d ~ublic
The purchaser:at·aij ~o. sale tf. sa~$,fo,,-a mii .,..,,~cco~ntants\\f9&;,,at Veast 1Q years immediately
. ·

: · · · ·tax, deli~que~cy. haf. th~ .I:). rden of ·woofl~_:.~t~

·Spre_c,~.i.ngthii\Jimq.ln~n:ient (!-GC,__ Sec. 230).. .
. .. . . ?-how,~hat. there:~aff ·~.J::'~1ia_n?~l{lt,b.all
· '. ·".. , · pres<?nbec;I re_q~1.s1tei f~~A\ax \a!~~\fer-e-im·
'ifi.~'N!1J!!! : . · ·
l~ · ,.! .· · :~ -~ ··:.; · : .. ·:. ··.. · ·
... ~Salaf'y'./]b~c;:ticy~!!l~/<j!f·
·...
.t~~. B?a.r_d·_of. As~es.s_ment
· · ·_no . p~e,sur_nption., ·.'i<.Ureg~lc1.n_t:,·. ~~··.
a.nt.1J: }..~~~¥ft~a~l-h ~e·fP'iq jjalarY grad~_eq4ilialerit_to the.
. · . adm!f!~st~a.t~v.e action · "."h(<ih ~ ,· ~ ~gif~(~li:~.~!o.111:~rider the}>a(~r'.y St~nd~,ir~_ization
· . depr~vi~g·a t~~J?B}'e,f-~f hi~ prb~ert .. ~r,~ . . : lza~~?P(U;ilV _ol allqv.fances an.d·qth~r·e.molU!Tl~fllS,
· ~-.tax sal.e.·_Th1$_ i_~·~c!u~~an exc~~-o~~tla..~Tt1~ mem~~ 9-f ·t!,.l Board sh~IJ have .U:,e salary
rule. that .. ~dm1nistrat1y~\..P~o.9e.e<ii~~~~£~Ef~q\Jivali:Hi!J,c:f ,thtra.n~ o~_:91r~ctor II un9er :tl)e
. pr~s1,1me? .to be .. r~gl:i~c;!~ · :(fi1.a~c,,~§.al_my-t~~!1~~-'tati9i:i_ -Law e~cl?'s1ye of ~Jlowances.
tnterrJ1ed1~t'! AppeNa/e_ .Couft~~~<f· L- ·~ \ ·,1 -W1~ti~ffn.~l~rnents.. The '?oard · shall hav~ .
. ·6.!p4.~~. .June .?.~; 1~"£$8).:..; :: .. , ...,__-::~ · ... r-/11ri,p~l~~!-lflSd1_ctior:,, over au_- .a_s·s~ssr:nent·,cases·
·. · ... · . .. · ... > .· . .. · -~~e~1~d·.by. th'=l Local_ Bo.ard As~essrr,.ent Appeals.
·· . . . . (LG_C;·.~e.c: 230). . .. -:- .. . . -

_:- . : ildA~~_.·pr.4s's:ESS_;:~-~!·· : ., ·. · ··: .··-.H~ari;~~~~~e:·~·;_,.:.~ppoint.e_d.brc"E3¥. ~h~y-~ill

. ·. · - APPEALS . . .· . :. . hold office m:
· , · . · ··. . · · · · ··. ·
. . ., ··. .· ~· .. , ... ···. . ·1. :Luzoi{.:...·Mani1a·:· .. ·; ··.·:· ..
·· · · ' · · · ·· · · ··.2. Vi'~yas - Cebu City ·.. :. .. ..
.. . ·.lQcat B~ard of Assessment Ap·p·eal~ (LBAA) . . . . . . .
.
Compositlo~,· · : .. : . ·. ' .. /. .. .
· ?- Mj_n9c;ih_ao·._ C.a9!1Y.8n Pe. Oro·__..c_
2.,0)
.. ity f~.Gc_., Sec.-

. 1: ~egi.strar of D~ds· as. CY;iairn'lail; . ·. ·• · . ·: : / .: i . _-:·-'· . -··: .. ·: . . .. . . . . ,

· 2. - . Proviridal' or. .City f;'ros~.cutor,·a·s member; .: , ~ . Teri!! <?f. Qffi~e: 6 y.ears without reappointment (LGC,
3. ··. P,rovirr.cial or Cjty-engineer,.as member;:ai:id··.. · ,· Bee.· 230j: ·. · .: , ... · ·
.. . . . . No.te:, Tbey st,a.1! ·serv~. ·in an e~·'officio ·~p9city . \ . . : .. . .
. . ·.: . : :.,without. additjonal .. compensation. (LGC/ Sec. Qu_al!f]catiof!::s~ryie.qu~llfie&ti~rs cJSjudg·~,of.Ml:C
·. · · ::. 227(a)).·. ·:, .··: -. . ·· . · · : : · .. :: ·. · (LG(;; Sec.'230). · · · ·· · ·
. 4 .. ..!h_ tt)e absence of nos .. 1 ·~o 3,. the· '.persons . . '-· . .. . · . . . .. · . . · ...
, . ·. performing ·.\heir --Cluli~s.: whether ·in an acting ... ·:S.alary:· The Heating offi~e·rs sha!I· eacti .. have :the
·. · : capic1ty·or as duly designated offic~r-lri-charge,. . salaiy gr~9e e.q~hialent to the fan!< gf.pirector1 und~r .
. · ...: i,hall .automatlcally b~corne the Chairman and , .:. th.e Salary· $tarida.rdiiatio'rf ·1,.aw exclusi.ve · of .
. r:nemb~rs (lGC,.Sec,,247).·'. · ·.· · · · allowa_nces and.q!her-e~o1u·m.ents (LGC,·Sec:230).

398 I 2019
. . . SAN·BEDA LAW. CENTRALIZED
. BAR...OPERATIONS·
.. . . , .
 . REA.L .PROPERTY· TAX·
. . · . 'SA"! Bf.DA I.AW C,Et:n:Rf\L/ZE_DBAR ?PEliAilON$ :. M~OR_Y AID 2019 .. ·
mwaA I / WMi 2.i.y

Lo.CAL TAx~TION v. '.REAL P1foP.~RTY TAXATION·.

Provinces, .' C,itles, Municipalities;' and Provinces·,. Cities, and Mtmicipalities. in

:-.Barangays (LGC, Secs. 134, 142:151 .. Metro Manila_ Area (LG.C, Sec, 232).
.and152), · :.. ·. :· : · ·.. · ' .. . .~ .
Nb 'power to .granf tax exemptions.' ·
Local gover11ment untts-may, .through · ·Ex~mptioris ·f~om · granted. under ·. .. RPT
· ordlnances ·dU!Y .approved, .g·rant tax'. S'ec.•. 234 of. 'tt,e : LG¢ granted ·. by· ·
exemptions, incentives, ..or.r:elief.s under · pon.gress.. · .. · · · · · ·
such f~mis:~rnd .conditlons ,as they may·
deemnecessary (LGG; Se_c. ·192),' . ···•
. . . . . .. . .. . . .. . . . .. . . .· \ · ..
Ll!'lle.s.s·.otherwise provided in the L.GC,: "Onthe .tst day of January (LGC;Sec.
· all local taxes, tees; . cfr. charqes ·shall· -, ' 246). : : ·. . . · . . . .
accrue on-the .1 st'day.ofJanuary of each · ·
. year; however! . ne"." ·tax_e.~;.,~foes;or
··charg.e.s, or changes. 1n;.1:if~~.t'?,s thereof, : . ,
.. shall. accrue on··"l~e1~;t§f<~~~\?~ the . .!
quarter next foll?'.!Vtng1~tf-l~1~fte9t1v1ty of ·
.the ordinance imp'osin9Js.uet;i,p~}w..1~v1es·, iC'::I ..
or-rates
. (LGc;, Sec. ,ri:"'61,9:.~·1 :.~_~t~t:>:
~.'I,.,.,,. ~ ,;.,.h::•,.( . .
.. May be. paj_<t:H:i>q~arter~}J~~tallm~nts. . Ma~;~~ paid: in. four. equal lnstallments .:'
(LGCt-.Sec:-1,6P)£{..:. · · -~?°~ . . · (!.JJ, ~ec.· 250). . . . · . ·. .

1·
!
i.

: -~~.-loca1 ta):C~~f$M,or oh!r9~.f-1~s)., ·.~ -express' provlslon",on prescriptive .: ·~

.. , years fr.oFi'l".theda\~1lJ~~~bec?a•Afei<lUel u.permd of' assessment. . :
. (LGC, Set;:{194(~}}/ .. •· . , . . · .
. b. v\'~~n there~f~c;forintent toevade . ' -
the paymerirqftaxes,fees or charqes.. · . , · .
. -:-: fen ('fO)' years from discovery qt the
fraud orintent.to' evade th¢' payment .
(LGC,'·Sec. 194(b)). · :·: '. ,. . ·· ·
· ·wiihin .5 ·yea-rs from ·.th~. ·date ~f, ·within·· s·
years .from the\ ·:date. Jhey·
.":·as.sessm~nf by ?dminist~atiVE}Of'.jUdiciaf . becpmet q1,1e; wifh\n 10, ye_ar$. froljl the·,
action; · ~within. 10 · year.s· · from : the .. di~c.over.y ·of _fra1,.1d · or intent. to ·ev~de
'discovery.of·.fr-au·d or infent.to evade paym~nt. (LGC,.See. 270).
p_ayment:(LGC, Sec, '.191(c)).. . . . . . . ·· . . -.
. :1: Local. :Gpvernr'ner:it's i'ie~ (LGC, $ec. : .1 .. Lien on 'th•e .Prciperty- subi'ect'
tax to
.. 173}: ·.-. . · · .. ·· ·: .. ·. -: . ·. · (LGC, Sec: 257);· .
· . . ·
-2: .Adrrii~istr,Wve.action: ·. . : . 2 .. Ad.mini·stratite action : Administ_rative .
; ..
. ·a. Distraint.of personal property; . . . . action .. ;_ . . .
~.. . b .. Levy·. upon· real .. property (LGC, :a. Distraint of pers9nal property (LGC·;:
,..
, ' : .. S~c. 174); ·.: . ·· · · · · :. · Sec_ 254(t,,));D)stra\n1· o.f perso.nal .
· 3. · Judiciafaction (LGC;-Sec: J74)> · · .. P,i"operty (LGC, $ec. 254(b}); · · . ·
f · · ·. · · ·· ··
.·
. b. ~evy'on ·real property subject to tax

,f-.:'. ·. . ·.' .(LG.c,.sec. 258~265)Lien . on

property subject tQ.tax (LGC, Sec.

I ..
' .·

~·· .
·. 201~ ~N.BE()A LAW CENT.RALIZEDBA~ OPERATIONS I 399 .
 ·REAL .p:ROPER:Tv
SAN SEDA .I.AW CENTRIILIZE'OOAR OPERATIONS
- MEMORY
TAX.-·
. . ~ AID
. . 2019.

·257); Le~y on real 'property (LGC,

Art 258-265);'or. .. -
·3. Judic1al action (LGc; s·ecs. 2.66 in · . · ·
· relation to ·270) : , ·

1 ... · Question· legality of a taxordlnance ·.

arid, revenue measures (LGC,' Sec: · l·.
·1a·7J. · ·. ·. · · ·.. · •
· 2. . Administrative: . . . .
r
a.: Payment · under Protest (LGC, I
· · Sec. 252);. · ·
b. Cl.aim for
,
refund. or credit· (LGC, ~
I·
· · :. Sec. 253); or · .: · . ·. .',: ··:. .: ·. ·
c. Remedy aqainsttheAssessment :·
(LGC, S~C!;,. 226. ancf229) . ..
· .Judicial:. · . . ·: · .. .: .· '.. : :
.a.· 9eiurt,action .. (R~VJSED 8ULES
· 6F THE . COl,JRT --·OF· . .TAX

pro[es(··is ... ·fl(:fCt';l>S~·ry.· .

. . . . ,• .-

·-· ... ~-. ,· ..

;,_.· ..< :. . : · .. :
. ~- ...
• • I I • • : • • .~ ..

,•. :•:. .... J .• i

. ..... -. : ·- . - ... .. l
i·
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. . . .. .-:- l

. :
. ~ . . ·. .~
·....
.· -;

• > • ~- ·••
. '.

. .... •, : .. ·,· ._..

,·:.
.. ·.... .: .. . ~ ... :
· :
... ... ,:
. ..... . ·.. · . ......

· .. : .
..
. ·.
:- ...
·.·· _-:
. ••'(
. ...

. .•

· · .400 1. 2019 SAN SEDA LAW

. CENTRALIZED
.. . .. BAR. OPERATIONS
. .

-------------------------------·----·
 If·r~
· .·~--------.-~--- . . .......
. ----~~~
t
["
·REAL- PRO·PERT·Y- TAX
SAN ~EDA LAW C£NTflALIZED BAR·OPERATIONS - MEMORY AID ~0!9 .

It~ .
r·· .
r..··

t' . . .
PROC.EDURE 'OF AssESS'MENT OF LAND.VALU~ FO~ R:EAL PROP.Ell'i'Y.
., .·: . ·.: . .'. : . . . : . . ·. TAX . . ·. ·. . . .' . ·. . . :-_· .
t· ..
r,. ~
a..----~-- ..... ----""'.""-,-----------"--------- ...... ------~-- ---·

f-'.· . (.. · Owner declares rei(property one's START ir·owner. qr_.admin~tri3tor rejusas o; fails' to·
t;"
s..
ieve'ry 3 _years (LGC,' Seq. 202). declarereal. property, ..the assessor will
declare-lherea] property (LGC,~ec. 204)
f,.: :. .·::
~)ts Sworn.statement - No oath shall be· r uired
~-. Once evfiry · 3 years Wh~n owner )efui;es, 6r
e' ..

r·,.i,~·
during. the period rrom: . falls.. · to make. such
__ January 1 to June 30 declaratlon · within . the
.· .. time· rescribed. ·
· · · (LGC.. Sec. 202)

f·
t: .···.·
f ·: ·.
i·if: ·. i
I
f:' . I
I

tt\.'. . I·
I
t> ..:..- :

it ,·.

'·.
r

Ovm.er may. appeal .to the Central Board _of: ·.

~sessrnent Appeals (GBAA)·within ·30 days from
receipt of. notice if.LBM rejects protest (LGC, ·
.

Sec..'22!!)'. ... · : ··
:.The real····
propelfy shall. . : OWner niay.:?PP.fliil to·the CTA eh banc~it~·in30
bellsted'es
taxable in the; ~·
~. ·• . days from receipt of decision if C13'AA .rej"ects . ·.
protest (REVISED R.ULES bi=-T_HE COURT. OF .
. assessment :,1----..J · TA)!.A~Pf=A!-S, RULE 8; $ec. "4(c)). . . : · .'
roll(LGC, ·
Sec.. ?06). Appeafto the Sopi'eme Gourt
within ~ 5 days .. .:
· The real propt?rty s~all be . . (REV~$EDRULES.9F.THE .COURT'OF TAX· .
'dropped from the assessment ·: . APff:A~S. RUL_E 16,_ S!?C. '·1),. ·· . ''
r~IJ JLGC;·Sec, :206f ·. , .. : · ·

-.. END

aois SAN SEDA.LAW CENTRALIZED a~R OPERATIONS: I 4_01 ..

. • • • • : • • < . ···:,
 +MY i&bM ISMI WSift ~I M&evs&AIA ii&WffA

REA.
. . . L. ·. P·RO·P. .ERT·Y. TAX
. . \ .
SAN BEDA' LAW CENTRAL1ZED BAR OPERATIONS c MEMORY AID ;2019
&&it 'FF¢f* · t ,&,., www aiewieea,· W1*PNO•natidt;,i,-ww;m

TAXPAYE~;=s R'E~.EDIEs':iNvoi,vtNG Cor.r.acrrox: or REAL

' ..
·. . .· · ... ·... .. . . PROPER.T
. . . . .
Y TA:x' :- . ... .,,,. ·. . ~'...... . .
. Start ISSUE

.·, . ', ·,.

:Assessor prepares .and. s.ubm.its:
assessment roll t9 localtreasurer,
. Taxpayer question . · Taxpayer question
.. · . . · on or before· the .31o1 day of
the-reasonableness- · · . ·. ·
December each .y_ear {LGc;I ~~·:. t!le'legality, 'pow~r.
?18), . - : ;- , .. • · or. correctness. of validity or authority
. amount .ass~sed· . ~f an assessment

. · Owner.paysthe·tax:: . · The proper: 0 remedy. far· .the :

and writt~'l protest· taxpayer _is to fila·,d,rectly In ihe'· ...
· regular'. courts· the necessary . :

j.

: Denial of the..
protest or
. Inaction of the
· local treasurer
I,

. :: The. a·~punt or pb~ion ..... , · Taxpayer' 'may,·aji'peal 'to'·.

'r ··of tlie tax protested will . I ·.• •.• '.:: .; : ,• ttiE;l ~B.AA""' . : ;_. .'
. be' applied as iaxcredlt.. · ,. : · · a .. ,·wjtt:iin· .60 ·dqys:.frol"(l
N:0 ..Yl;S; · · ···or .r;efund.ed (L°GC,-Sec. .; .- ·. the. r'e'delpf'·of notice
25'2(e)}. . ·: '· . . :, . . of denial; pr· . . ..
. ; ... ,. . .... · · b. -upon explr~li.on. of \tie-·
. 60-d.ay-.period for. the·
»r ••••• •, •. lccaltreasuier to-act.
. · 'on s:.appea1,. ·rie,c,
·LGU . -.. ~.ec.·25.2.'inr.eiation'fo .
· collected . ·. · Next p~g.e --------< ,· · Se'I?, 226). .
real p,rop~fiy. '-------_..;..;.J .... : .. ·., .
tax.;END · .

402. 2019 SAN B.EDA·LAW CENTRALIZED.BAR.OPERATION$.

 '*"
REA'L ·PROPEiiTv'Tix'
. . ...
~N SEDA LAW CENTRAttiE:D flAR (:)PfRATIONS ·-.·M~ORY AJD·20)9 •I•.

·contint1ation
\ .

·'
Th_e amount or portion .· .~
t
. Taxpayer inay.·· appeal to ·
. the LBAA .
of the tax protested Will· . a. within 60 -da.ys from .
·Qe applled tax credlt as the· receipt -of. notlce
. or _r~ft,1ncled '(LGC, :Sec. of_der,iial; or . ·.: ·.
· :29~(c)). ·
'/ .
.... . :. } .. b. upon expiratlorrof the
. 60:day p~_rio"d tor\tie"
[o~~l.freasµref.ti) _aql., ..
· Returfrfor tax credit .. •'
:'··:on··, appe._al,·.-'::(LGC,'·: ;_
' · _must b~ cio:!irned\•Jith · Si!J.c. 252_."in relstion to
: the "local treasurer . . . ,.~ec .. -~26)>, , · · · :· :.~ · _· :._-, ·. ·
. : .wi_thin-2 years from the,
· date taxpayer-Is entitled
. to_,SUCl'\.(LGC, s~_q. . .
:l ::. .-: '.' ~ ·.···.:
. ·,
-.

~253) . . . .:· . .. ··. . LBAA must decide within ,::

: .. · 120.days fr'orn'.r~ceipt-of . ·.·
.. appeal (LGC," Se_c. :22{J): , r- ' ••
.. . . -- . . .
:· . .· .: · !·· ·
..
··.' .. If LBM rejects·prot¢~t-9r .
· ~ · · ·.ref~rld,"owne~:~aY. ~Pfrea_1··.
. · to'the OBAA within 30 .
: •:
: days.rrorn receipt pf·.: :
. : · nolice·(LGC;Sec.229).

.-l'' . . -. . ..
' • • I ~ ' ' .• . •, :

.
,.
. ·,

. .

·:Granted.
·. the .clalrn'
ror refund ·.
I
I·
'(

...
: ,· .
i
·
. .'

'. . ....
, ; .. .., ....... '· .. . -~ ..
: .Taxpayer- is .: -: ... ..,..
_
Appear· to :
the Supr~rn·e .
happy. !;NO , · .. :: .,• ... r: . ··90,urt·' -~_ith'in·:.-, .15 ... cj'a"y"s'
. •..
.. .: .. ~ .·, . .... . (REVISED· . RULES .. ' OF
. THE couer . Of "'TAX .
. APPE;AL, :.twUE 16, Se.c: '
. '1):.: . .. . .·

-: · · .: .·._ . .r= . _
.. 1·
. . .~ :.
••• 1"
..
• •••
.. ", , ...
·:1 ·
.. .·,:·.
, ..
....
.... • .. ·
. ··,.. ·.· ..

. . .~
(
.,
· ...

2019 SAN
. SEDA LAW CENTRALIZED
. . BAR OPERATIONS
. '
I 4()3
 . ·' rw- •
. :F{EA.L :PROPERTY
· . ~N·8£DA '!AW
tAi(
'. . CENTF?AL°t?£P BAR QP£RA1:,0NS·
. . - ,t;,c(>:fO~Y·AID
. .. .'lOt9

: 'PROCEDURE_F.OR LEVY. Fo·R· PURPOSES o:F-SA'i'is.FYING REAL-

. ·, . . -· : . '. . ' . . . . PROPERTY. TAXES
. . : .
. . . . . .. ·. , . · . ·. : . .
·. . .
,_...... ..

'Tax constitute~·a lien-~·the · Time for p~ynient W~rra'nty pf Levy issued.

· PFORerty superior to" all_ liehs · . ' ·of-the real p~~perty r . by · the Local Treasurer
& may only be e~insuished · · taxes· expires . ·(LT); ~ich has the force
. upon ·J:iay_ment ofthe.tax,and .. af .legal execution · in the
charges (LGC, Se~:.257). · , LqU ·concerned fLGC;
... ·. .Sec258) .
.. .:.
. .. ...
.. . ·.

W.a.rranty Is.
mailed. to- or
"served 'upon th!!
Qeliriquen~.
0

owner
(Sec.258j
. . .· .
,.-a··~

... _..

'.'
'
!:
i.

... :...• .
..:·

·~···

. :. ·....
.
,i:
: ... , ....
. .... ·.-
· .. -YES

,·
~ .· . . :
.... ... ... '···
. With.in tn'irty (~Q): (fays after tl)a· Sc!!e. Local. ,:rea.s1,.1r~r sti~II purchase the pr~perty" in .
. the LT orhfs deputy shallmake a report· . l?ehalfof the tou (LGC, °$ec 263). . . . . .. .
'Qf . t~e ..
sale ··to· ···ttie. ·sanggunia.r:i Note: l)' m.~y purcfiase lf"UJe.reIs no bidder or it
· concerned (lGC, Se<:·. ~~O). · · · . · the hlg~EiSt· bid is irjsufficieilt in cases Of-1!:!yY for
· unpaid
. . .
local taxes (LGC, Sec:
. .. f81).
·.. .
·
....

Nex_t.l)age .
. .. -

0PE~T!ONS
0

404 '. i: ·2019 ~ SEDA LAW ~NTAA~ZED BAA

.. ·-·---·--------------'
 . .... . ·
...
Within thirty (:30) . day,s after ,the sale; Local Treasurer shall purchase the property In
the LT or.'his deputy shall malc:e a report -beha!f o"f the L:GU (LGC, Sec 263)_. . .
of the. sale to '. the sanggunfao ·· Note: L:T may purchaseif there is no bldderor if · .
concerned {L-GC, Sec. ·260), .. ·.. : · the t;iighest bid is Insufficient in'.:cases of levy for .
,unpaid local taxes (LGC,:$ec. 1~1)_. ·
,1..
. LT. . shall
· _pce1;1a.re. and deliver to . . . .
purchaser the certificate otsate (LGC · ..
_Sec. 2~0). .: · .c- '
R.!';gJster of" Deeds shall transfer the tit~ of the · ·
forfeited property. ta: the LGU concerned without .
• need of a court order °(LG{;, Sec, 253) '
Pl'oc·eeds···.·or· sale In excess : of ·, .
'dalinquent tax, interest'·&. expenses 0f:
'sale remitted to the owner (LGC, Sec
260! ·. .
Wi°thi~ 1 y~ar,from .forfeiiure,.. the ·:owner ...m.c!Y.
redeem the property tiy paying . to .lhe· local' '. .
· treasurer the· full amount of tax -and' related
· Wi_thi~ ore y~ar.fr~·sale; owner.st:rall .. ''. · -~· ; . . interest and tiie costs of ·sale .otne1Wise. th·e ·
:have th~ righ_t .to redeem the property . • t:J.Yl?· · ownership·stiall be vested onthe LGL.i concerned
j.
. ~j:)on payment of ~e ~~116wi~g_: ~-~1}/'/:_i:,.. (LGC, Sec, 263j · · ·
1. Delfnquent tax, · .
.2, lnt~rest due thereon.. .
. _ .· r ,t!.~~?1#.~ _. . '--:-----'---..:._...:....,_...,._.....___ ~--'-..:....:'----'
. : . . . ·. . '.,f~~·:,;J:f.:iifitn. . · . .
~.:-. ~xp~~ses .of s_~l_e from date of. ) JJ1~-t.<i:f~~;:s... · . t:'.;) ·.
..
. . : . ._ · .
Ii..
delmq'!7-ncy:to the·aat~ of sete: and ,< f!.-:
l·,ir\fr..lJ,::....~.~:,oe ·'irt':.'J'.. ~ . . . . .. ." ' ·
4_ Additionatjnterest of not rQOre\!;!~~ '. ,,,/ ~; · · · · ,..:r,t:,13 .. Sa.qggunlan concerned may, by ordinance I!.
2% J>~r month.on the purtj,~~-&':;prlce _' · · - .!f-:J - duly afo,'pf_ovedand upon .noirce of not less .than I.
· from.. date .. _of -$ale to the \fi!~te~of.· · -)iJ}.E.,_ twe~~y ~2R) day~, sel.l and dispose of the. real
. _,·_redem!'liorJ:fLG.C. ;Sec. 261))(!:.tl..w.~-.'- .-~- ·pro~~rt,¥ afquired u~der Sec, 253· of.LGC_ at
·.. · : .. ·· .,effo: . ltt~ . ~, · .
pµlf11c.iuc;:tibn (LGC, Sec.264). , · . ,.
. from";:·the,. _date·' ?f ;,!ale 'urittl ttliEf:<. · ~-·ii~-- . ff M . \ . . : ·
e.xpir_at~6n-of_th.~j:lerJ¥J>f.rede'ffipJ_l?r;i, · ... •·· 1 . · e-· ...J/,..._._._-11 : _'f·· ,.,
th.e ·. ·. delfnquent ,---~~eF:'~'
l?ossessicin of t~e prope'hy !3n<!;ti:l~Jf9!]t.
!Q_ ttie Income .and·.other:1'"rtll~~et~;<{. .· · : f.
~y';l,- · -~~l.·-?· ·.
~l;j,!gs "'~~. ··. -~~~""Y',lt'{7lii,'¥_,.•y'·
·
..
~..Ult!ZSiP..,, ·t
.{Seq.:261), · . . ·. ~ .. · . ."'£'{ . . · · . -~. · . .· .. .. . . ...
: .,. ' . . -~ . ·•y. :I~~): ....
. .
J.' , . ·.. . -:~;,
5~#: ·.·. · · . -~W(~~.,.1utl;·~
. . . Ji.~~"-i'-#--..,il,r,;· -
.· ·: < •• ••• ~- ...
.~ocal ; Treasurer_'· -~13lurrj_s : i<i.f. Jhe/\f,: · · · i., ,.
·P.Urchas~r/pid,der We pric_e.. paf~W-t.c.!~ · ,,
.interest. cif ·2.% per- month (LGC, S11~fi: .. :
··-::
v-·.·
.. · :261) . .· · --·:.:" .· .-.· .' .,··.~: --
'.

i~-- . .....
.... I .-

· .fii~ l~e~Ureasurershalf exeC1Jte a deed·

~/: conv.eyance. tb' . the ·p4rchaser·~ if· •, ..
property .is· riot redeerm,cf:.{LGc,: ·Sec:· .
. 21?2)_. .. .

.. ~ ..
: · . L~yy. ~ay .be r~P.eJ~ed uritii the. ruif . •,•

'-'----'-----""'·
M. amount d-C1e, incluc;lfng all exr,,~nses;· "------'
I~ co11i3Cied (t.~C. Sec:.'265J. · ...·
·. ·. . ·1.
- lEND l ·;
 M PS4+fflN6fi ·ew A tic
•• fl asa,
TARIF·F A-N·D'.:C·'UST.OMS.
SAN llEQ.A LAW:CENTRAltZED BAR OPERATIONS - MEMORY. AIO 2019

.. ·
Note: This subjecl isexctudea from. ihecovereqe ot. 11.' Administrative remedy of .distrain·t,:of. personal
,_. the
. 2019'Bar
.. Examinations:-
. :
.
. .. · .,. property and l~vy OA real property ·(Sec. 1134);.
<r ·12. 'steeper penalties for crimes. and other offenses ·
(Secs.. 1400-1430); and .. · ·. . .
13. New · treatment. for Authorized Economic. .
Operators (AEO.~}: .:

0raritt arid·c:u~toms Laws Include: . Tariff . . ., ,

1. ·Provisions 'of. the· Customs Modernization and. Tariff is a li~t.or ~cl')e'dul.e.of ar:tlcle~·:on·w~lch aduty
_Tari:ff -Act (CMTf',) .. (R:A.. .No, r ·10863) . and .. is imposed upon the importation into thecountry, with'
: reg_ulatio11s issued pursuant thereto; and · the: rates at .which they .. are · severally taxed; ·
.··. 2.· Other" laws · and: regu'latipns .· subject to- the Derivatively, it refers to the system of imposing duties :
~nforceinent-~ytti~-B~_reai.i, c;,f Cusforns-.(B<?C)or . . or.taxes on the importation of foreign merchandise
-otherwise within· itsjurisdi~tiqn (R.A:''No. ·10863, '. , . (Biack'~ Law Dic(io'?ary.6'h Editfon).. ·:·, :' : e , ·
Sec. 204)_: · . . .
. . .. · . . - .... ·. . .. · . · ·.. · T13ritt can·· also. mean the- duties. impo~~'<( ~n -the
, . P_olicy·~efo~n:is µnder_R.~. No_. _10863, · · . · ·. · · .. ·' articles which -~~i're' .P.?Y.able tq ,the.· Q,overn_n'lent. ·
. .1,. Apphac!tl~n. ofJnformatlon and- Commurncat,ons_ (INGL~S; Tax Made Less Ta~ing: A Re.viewer with
". :T~c~nology.(Se9._·'1:<?~); · ·,· .· . ·.·. · . , ·-_,~......==-.C..9.dals :ar,d Gases· (2Qt.B),· · p.. · 587J. .'lhereinafter
2. Types of lrT)portatronJSecs. 11;5-120); ,;.,..~--- ,[ JJW..G"f;Esj:.;. _ . · · · -, · · ,· · I•
· 3.·· Oqods ... :declarati_on ·. for consu1J1pt1pn"· ·and l; .1 !'\,/ 7t· ~~-, · · · · . . : . .. , . i
· · .. ·: . pr~vi~i_o~.a~goads ~~cl~ratiol)_ (~2.¢~~(4@~16$)5,;:-_;.'.;;.~,:,,.~lJirJ.st'of f.~~ · ·. . . ; ~·. · : .· . . · . · ·.:
.4: .,.NorH'?_tru~1v_~ e~.~rp·~~tron of. g~QC;ls (~~¥1-20); .. _ 1. ~p~~ T~r1Jf.-e... tariff.bc!~ed ..on the- g~?ss .free-on-
5... Jn_crease ,~-de fnm1m1s.y~l1..1e,je P~?~\?}'lJ.o.w,=·r.-·":b.q.~?..:~t=-,QB). 1~u~· . at . th~ ·~re~~ihn~ · r~te. ·of.
lI·
. ·(Sec_,~?~) •.. , · . · .. /..1,, ~ .,f' . ! . r~i, -.r. )w... excti~ng ,:'itti1'.be~,.t!rTJe of- sJ,rpm'e_nt ,s lev1.ed, . I

Ji i,,
· .. _an~ . .hous~hold.e~ect~
.. 000 (S~c.. 800_(9), .
1~·1?ik·, .' ... · ·. ~I.
6.. Relu.r~mg Of_~s ~ay:b~yig:1n~17rson,r,I eff~<ds
-FC'}"valt;1l~: ~-1~~· ,.i:~L~·
L!°K._a~se~ed ~Qd ,coll_ect~d .on··ttaditfoni:ll export
Ji!:..clts
2;,,.,.'.lrl]PO~_.Tan
fP:iC§aL~.30);,~r,d.. : ·.. . ·. · .
-:,;,.94~,l.ev1ed.µpo.!1 ~rt1cles .wl)eo
1·

r
,7 •. ·· ln_creas~ Of ta~_,exemp~i@.f.t£O!}; ";J~f!<b_a}ran ~~5;':. ru.t.'(" .J?!.rmpo~ed. 'fr.~ . {i~y-. 'countfy :upon . each.
~Ith FCA,,vatue.of .~15,~•. ?OO,.i ,P !O 3 ~1;1f:,S Jf\J~~rbJa.J'Bimpof'!~on,· ,, y~t~eug~_ Pfeviously expo~ed .
· · : .calendar. year f<:>r ~f~~n~l:~ij r,o_u~eiwJt:~c!s;.:,_.-'::::. tro.nf.)~'E}-· _·PJ).,h~p~es,. except as _ ot~e1"V11se
I:
orly (~e~·- 800 (!1)~. . ( ·;"\.~• , . \~ .. -~ . "-~ ;;i') spif9~cafly·.Jjlr:M1._de~ to,:: µnd.e.( the ..t~r1ff ,~net
,-effects; i~cluding 1 m_ot~r·; r.ofD'~A.e~t~Y~~J.m·. ~-'· sr.-C'l 04):/· ·, · ·, ·
g~g;i,
8. C~md1tionally ~xempt~ P~.~.on~ltr.an~:®~!\hol~ , '.Ji~l.t.\r"~:,· ·code or'sQ~ctai· taws (R.A.:No. ·.108133;
.· ..··. · .. · .: · --· ·.· .·.
:rf1.emoers··.of ·phiJippi!').e.· diRJomatic· .~~si.Qr,ls,: ·. · "":" : ·f' · :J. ·. · : · . ,_ . · .. . ·
in~~uqing· .civ!l':or .. _rnilitary ~'ft.<;1.ches ~'\~nt:lc·· .--; ,· ~!,.om~D~lies /. .· . ·. · .·. . .. .. : ...
. · m1htary pe~~onnel:(~.!:?C· ~00,J~~p; ·fi:·,~l'-f~~ai:ne~~~1)/l~.. t~xes '_on_.t,IJe· irqp()~a\ion and
9.. · G,ros~ neghgenc~ .. ,s ,.no: longE:r'(\;co~ _t~a...-~s-=,:,r-exQ~rta{(&.ri ..P!.;,c,.6rnmodities;\tie ;~~~fqr.tax·. assessed
__ degree .of c~T_pa,b'.·".ty· only,_neghgeite,~i@!jaud-~ 1,1·: i.f,Rrl?i\.ier9.pandis~_irnRor:ted tmn\. !?f; (;)X~rte,d:.tQ, ~.
· fS.E!c: !00~~!·· · . . . .. ·,:· · · ·. ·.. ~ ...,I.Vi lore1g~~untry (N,eWePHL v. Court'of'App~als, G.R.
-1 o. : Admm1st.rati\/e remedy of ,ssua.n.ce of alert ora~~o:··.134114, July 6,.. 20·0.1J : :.. .: · · ·
· (~.ec.111.1); . ·: · . · ··. _:; : : . . · . · ; ._.. . . · ,.·. . . .. . ,._;.. . , . . .'

. > . . - ruci°ct:Tin1; COMM~.'-: .. slJliJECT co.~ . ·. · ,M£.~ERS·:.' .. ·: · -;;::. :, . · ... 'ADV,!~l,mi .··,: ·.. ·... ·
.. · : .. ~ MARY·C~~C.. 'ST,JMJ\NQ.Ul · MARIA. CtuU~ -~. QUINJ'O : LIANNE' .MAE· l}:, Em,il.~UEZ•.. ).usticcJAP/\R.B.·[)!MMMP~O;
...... · Qver-a/l.. <;hair-jierson, .JilU~.' Subje_ct .f:hgir,: SHEN.I\' .. ANISH.t\\M· ~JI,_HASsAN;, Atty .. N;ICASIO C:CABANEIRO,_
. · MAE'e .. VI~A, C/io,ir,Ji=on for · GI.ApDYS P:Bi\YLON ,1.ssistant ~MAR)'. EVJEIJt~ N. MATEQ, ·.~PA,· ;ind Atty. })ANTE 0.
- .. : · . ·Academics; ·Bj!N' , RE~., E. . Subject · 'Cf.air,.: ~GEL!~ '.~ .'·SHERR.YD~ <;.···.DELACRUZ, (;PJ\, :
' . ·. BARBERO Chai~rstJn..for·Hotel' MJ).RlE ··~;·. ~L' Subj~ct R],,YES, ALYSSA R. ZARRt\GA, ·
OptrarJons.~ LOUISE B •. : .: E(e~tro11{c. !)a.ta Jtoc:essing; • . T.AGMA · ,. · ~ . . V.'
· DIMAANQYicl' q.·a.Irperionfot. :.REINA,.
q.: FABREG~ ·Gen.era{ :·9,~~iy;s. · · · .. ~ANE. ··· · '· ·:. :,
Sec;ctariat, ~ JU~ M. J?.rin.clpfes, ATIIEN~ l'nA,NCES, . .'MABEL. A· .C~YEZ .. JEWJ;L ·
.YAMBAO Vke..Clµiirperson for:·.. R. QUINTON and C_A~OTA.N.. . JOIC;E G. DAfTIA. MII<KAELA .:.' . ·
. Qpera?io,u,_'J,4A. .ANG.EUCA B. . VILJ.,AROMAN . 'Tncoine_. T'ax,' S. MQ!'.:ffiS, ANDREA·P~TRic;~ . ,
. . . ·DE ~ON Vice,. Chairpl'rso_n-for· .'APOLLOJULIUS S. s:TAMARI!\ ... p ... ·. DAQUIAL, ALFRED- · . •·
• .Fihance,. ~· ·oLMAYA J.. : Tr'<;in.,sfer . Tax,··. ]ELLYN· ._c;:,, ·. ffiANCIS' P. GALLl;GOS, JOY
BAD:ANGAN °f(a.·Chalrperson · CLEMENTE. Value-Added Tax,. 9filSTE~ , c;.. ·, GAYONA,
fotAudtt.JORD~N:C}iAVEZ ... MIGUIBL A. DE .i!J,,VA Tax MARIONE· ·NICOLE' . -1',
. ~ii:e Chairpers()n forED_~ Hf.N:Z · -:A.dministra~i(!n, Enforcem.ent, BUGARIN, and-KATRINA~
. DARRYL· . · D.TIU . Vice anil Remedies, and A'IHEN./\I S. PRADO,
Chair¢=nfo",. Eogl;tics, a!id •. '.FRANCI;.S'· R; QQINTON, Re'ai . .'
DOHN ALFRED:£.. AQUIUZAN . · ProJ>!rly anti L9Cdl Tax
· Viu · Chairperson ·.. · for ·
Metnb~rship,'.

-- .. ·----· ··--- ···-·---------------·----------------~---'

 r-
-~~-·IIIIB:IIIII----IIWl'.m~~~~~~.;..~~----..~·
-~-.-,~-·
·· · ~~-
f.>. TARIFF AN·p:.CWSl~d,MS_. ,
:~,( .. . . . • ~N B~DA LAW CENTRALIZED _BAR OPERATIONS - MEMORYA(D 2Q·,~.
¥, :·Jl:"a:+~M#IHAPl:*fthiMA8tj&A#3?4d 9\$¥ I 4!'PJ 4 JAW. - . .- ·

~;· Free.Zones - . ·. . · . · : : . termJgai_ fa9iliti'~;:,-includin~container yards and

.,&:--··speciai economlc zones registered with -tha PEZA, . freight st9_ttpnsfor.the protection of government.
it dtjly.chartered 0~ leqislated Special economic zones . revenue and prevention of entry Of contraband;
't~· and freeports, and -such other freeports .as 9. Conduct . of compensation .. studies; and
,; : established or. may b·e created by law . (R.A. No. .. development an·d recommendation to . the .
~· 10863, S_ec. 102 (W)). · . · . President o.f a .cornpetitive compensation and
)-; . . .. rernurieratlon sy.stem·to attract andretain highly
t>:~riless otherwise provided by l_~w. 9?0ds .adrnttted .ciu~lified·.'·per-sor:iriel,.·while 'er,slfring tliat the
v·· into. a free zone shall-not be subject to duty andtax . . .: . Bureau · .· remains · ·ffii~ncially · sound · and
~'i_>,.(R.A .. No.·10863, Sec. 815).. •.. · . . 'sust~inab.Je·;. . , . ;.·: . .
·~.-- 10.:Exe.rci~e "of exclusive original .' jurisoi~tior{ over
}F-'P1,1rposeof lmposltlon: . . .·. · . ..forf9iture ..casesunder CMTA;_and.· . . . ·
t· 1· .. ·.Customs duties- ..::i.re imposed for both.revenue-: : ·-1~. l;nforce~~rirofCMT1Pnd:a11·other:·1a~s; rules
\ .. .' · raising. and -for 'requlatory purposes (INGLES, · . . .·_ani:l'regµlations related to.customs adminlstration
/' . t : supra <!t'587); · . -, · · ·. ,. . · · ··(R.A. No. 10$6$; S.ec. ~02): . · . .. . . .
t · 2. ··,he.levying of customs dutieson imported g_oods ~. ·. . · · '· · · · ·
.:i; .. may 'have in some measure the -effect of -Powers and Functions of thEfCommissloner:
~· .· . protecting : local industries ~ · where · such local. 1 .... f;:xclusive and odginal jurisdiction 'to- interpret the
·. -industries actually · exist and . are· pro_ducing : p~ovisions: <;>f, RA: ·.No, 1-0~63, in 'fOl_l9bon,ition
· 'comparable .: g9ods (Garcia -v, ·.Executive...,',;.~· · .with other r~l_evantgovernment agencies,.subject· .
. Secretary, GR. No. 101273,··July 3, ·1992).·· .,;/:;.r·M to revi~w by th~·secr.etary.of Finance; .... ·.
'. · . , · : . . . . . · , . · · . · · . /\:.Zr<.~\-~. .
·.• .•. .. ·• .. . .- · .. 1,.,,,.:-· ••,-.'.'·',_,g,,
Ejcer~i~~. ~:oy cus~.o~s .power, -dufo,~s·; and :
functions, directly ormd,rectly; ...
. . -~ · . · ,· · ·. . . . ·- . . · . ·. i) (-' ''.·'\(.-rrF3~~Re~ieW.,_af.lyaction or. decision of any customs
..J\Dl\lI~~ST~TION t;
O·F. TA-R_.,I,;.~ ·:·:/E--i;z;~!.9C,,~~P,~r.for.m.ed p~rsuant:t_o'...the .p.rovisions of.·
·. ···· AND CUSTOtV.iS LAW,SS:-'' · . ·~ 31 . . R.~~l'-Jo·::)~86~;· ·. ., . · . .. · · · ... ·.. . .
. : . . .· . · . ,,:· _/· · . . .' ."'.'Jj: 4. Rev,_~w/,~~ .dec,ae. dlsp4ted assessments ,
. . ,· · v;A.. ·. : .,.~..~~. . ant-9t!je1 ~attE!r~ '/e1a~e.d, thereto, sut:>)ect .Jo
BureaJJof Customs '(BOC) · .
i:5· Chief Officials:'(Gr;>C) . ..-rrf/ .. ~kt..~. -~·
-rr ·.
,-.-Q? · )"''.~.-::::;?. · .
ii' · ·.
revlE;iWft>Y.:!he1~e~reta_ryof F:Jl']ar:ice.a,nd exc;lus1ve
appeJJ~fejli.r!s,jction·of;CTA.: · . · ·. • · ... · iI
i. · 1. Custor'ns·.Qor'nmissioner;f~/·~· _§,.\:-.. · · ·~ .-~ _1j .5 ... P.;l~2!t':.lhe_~"._Y!~s.ves.t~d uoder·C~TA ~o.any_ ,.
·;l · · 2; . : At le~st · 4'· . put. · .not ·m.~j"e-"ftiar.iv ;9) QePl:1!¥ .f."'j · ._. c~.,~'Jl~'~'~:!19~f!'.':"'t~ ·.the. rc;1nk equ,vale~t . to l
2. :· . c:am~i~siorie!~;-and ·. ·'~~·-·pn,1. Y:J · .
~i'l:"f'. ?_,v,s,&'nt.i.llilei'?~~,_gh~r: exceptror-the tonowm9
,. . 3, 17.Di~Jnct £ollector~(0'.A. No\tp.8(5-3,''S~cs. 2]10
~:· ··: ancf·206)·,.
·;'< · ·· ... . ·. . .
· . · · : ·. ~· ,~ ..
•. · · , ·
JJ . . · : r;, . ." :_powers _an~fu~ctions.. .' ·..
ir,.;i~a,. _Proi1iul~c;1bon .of rul_7~ an~;l'r~g~la~1ons: .
• \Y~~ _.. · · _,P :t.-,11,-"';i,_.~t1{j~~l/,_an.~e
. . .. · ·,

•. revocat1oh '.· pr . mod1ficatlpf1. <;>f·

ye_.
... Fu.ncti'ons
. . ofthe'BOC:
. .. : .. ··<>. · ,, .., ·.r1~ ........,.~c!..:.:~Ft11iAgs;·anct
. /;!,•, . . . . ·. . · .·. .. . • . . .-
y. 1. ~~ses~m~ntand·col(ec::tion ofcust~~-r~?i.er.fu_es . c ... ,c;;o~pr_omise_ or- abate!'!}e!)_t c~~toms_
{ • ·: S fi'on~ "irnp.o.rtE:3d: goods. and_ ott)er.'.'1~-~)r~kfee~.·. .· ... ;?qhga~ons;_- .. . • ... • . : .. . (
t .. ,.· charges; fmes ·and. pemP.lties··.accruing under f:i •. A~s1!:)nqi~nt _.or· reass_1gni:nent,. any_. cu~toms
··:·.. CMTA; · · · ·· , · ·. . · · . officElr ·subjectto the approval of the $ec.(B1ciryo_f. ·
· Slmpil6catlon · arid· hari:noniz~tion. of. c.t,1$torris · ·. F.i~ance;- ·_PrC!l(ided; T~l',lt·_ ~istrlct C.olle.c~ors-·.an.c!..
·procedure·s·tQ faciljtatf? m_'ove'ment of .goods iri. .. . _oth_~r.CU$loms _officers ~at:p~rform a·ssQ_~$me.nt .
. international trade,.: · . . . . . ·.. " . f~nctl0ns -shaU ·no~ .remain in_. the _same c1rea ._of. .
-3. Border ·control fo .prevent entri ot. smugglecl · . . . . .~$s!gnm,enHormar~ than, 3·.years; and_· ... · ·. ·i ·.
·.gq9ds; . · .. ·... : · . :· . . ·.. . . ,_ ·. . ·. : · . . . · . ~: · Pe!'fo~m all .othe.r.d!,..lties...~~d f~nctions a.s: mc1Y:oe: .
.... ·- 4, Prevention.and suppression,of.,srn·uggling anq . ":! -necessas:y for_the_effecll~e-1rt:_1plemer1,at1on of
. .. . · · othei'-customs frat1d:. · · . · .... -· ·' ·. R.A. N~: .~0~63-and .Qttier. cus\o_tns- rel<;1te,;f !aws
/- ~r
5, ·facilltati,on',and:~sl!lcurity. .ihter:nati0n~I JradE! ., ·· ,. (R.A: No. 10863;-Sec. 201) •... :. . . .
.,·: ...... ,_and ..commerce through an ·informed~·coniphance .~ · · ··. ·. · :
( .. · ·.· . program; . . . . .. . . . _Duties ofOist'~lct..·CoMclob(E,PCE.:.. ADSO)
t .. 6. S!JpE!rvisfo,n and ·control over the. eritra~t~. and . 1., Ensure §.ntry · of-· ?II "·imported : goods · at ·tt:ie ·
);" . · . °l'.:le~ram;;e of yessels ·a_nd ain;:ra.tt :engag~d in.. : customs offic13; . · . · ".
~'.· . ; · --foreigci comme.rce;' . . . . . . . 2.·· ·ereve.n.t'· : li'np~rtation. .:and: expo.rtation. ,·c:ir.,
.,'·_ ·. 7. Supervision and control over .the hand)ing 'of. . · prohit!ite.d go<>ds;·· · · · · .· :,
·;;: ... · .·.: toi'eign mails.. arrivin~ in -the PtiiJippines -(or:· the 3.. ·.-. E·l'.)sure legal Qcimpli_ance ·of regulated good$
I· ·p.urpose .of collecting revenues· c,1nd preventing . . an,df.acilitat~'the flow·oflegitimate tr'aae; ·
. ··th e ..entry of con · t rc:1· ban · d ; ·. .., ·. · . . . 4·, ·_Examine __., _blassif:v-a.
'J
rid. value imported good_s·,· .
?;·: .. 8. :· Supervision and ·controf on all import and:!;lxport . 5. · As'sess and collect- duties,· taxes and other
< .:. . car~oes, landed or. $tared in pier;>;· airports, charges on lf'!lported 900,ds; . .. .
\ ·'

2019 SAN SEDA LAW CENTRALIZED

. .. BAR OPERATIONS
... ,,
I 4!)7
 ....
'1IIJl~='ll~Alm..-ml!lm
... -------.----------------llml------------....mn:-.
· TARlFF·AN"t) C·USTOMS·
$AN 8EDA·LAW CENrRA.LIZED BAR OPERATIONS -·Mf.hlORY AID 2019 ·
u:;...=~,..,:...,..~~~--·~m:!1
..llll'lllll!'.millm m:ms· iam.. ·IIB·lilll mlllS· ~LmEIElllimii~lt~f.PIIBIIIIIIB
: ·.. ..llll.. ~-l1ill!ll'IIIIIIII

Assessment -'- the. process of.deter.mini~g the Authority toRequlreAseistanceand lnfor.mation

arriount of b&T and other· charges -du~ ·on
imported ane exported ~~~s .. (R.A. No. 10863,
Sec. 102-(f)). · ·. .· . · · · .. : · ·
6. Hold and Qispqs~ im~rte:d·m)ods.;
7.-. Prevent . .§n:iuggllng and other. cus~orris ,ffaud; .
. and .... ·. . ,:- . ·.. :. ·.
8. Perform· Qther· !n~Gessary ciut.ies tha(rriay be:.
. Any-person exercising·pol!ce authority may demand
· the assislam;e- of and request information from -ths
PhlllppineNatlonal p61i.ce (PNP), the AfP·and.other ·
. n_atior:i_anawenforcement agencies, when necessary,
. ·.t<:>· E?f:fect·any -searcn, seizure·c;,(arrest:lt shall be the
· ·duty. .of any, police.. officer and other national )aw··.
enforcers to give such lawful assistance (R.f",° No ..
. .10863," Sec.2-18), r• , •• • • '· • •

· .. assignl;!d py. the Commi$sioner;(R.A'.' N,o. 10863, · .... . ....

. Sec: 210).. . ... ·.. · . .- · .. , .· . ·'.· . .. . . Authority to Enter _j:,ropertles _.. . .. .
I . .
. -:· ., . The authority, a.t any time, to entt3t, pass through.at.)d .
Exerc_ise·ot Police Atilhority ·:;:_· . ... . .. . . _- sear.ch .· a.1w: Jarid, . e"i:"1c;losure: . warehouse, ·st<;>re." .
Pe.rs_pns.Exerclsin·g. Police '.Autho~i~y. . ·· · ', . buildin·g:or ~tructure.not principally"used as a dwelling,.
The following persons ·are 'authorlzedvto -effecf hou'i?e·(R._A.'No."1086~, ~ec.-·219). :· .
search, seizure and arrest: -. . . .
·1: Offtclals' orthe,_BOC.: Dlstrlct ·.ccinec;:~r.s. :-o~pu·ty A1.J,tiority to 'seat.ch· . ·.
. District "9ollecto~. · police: officers, 'agents, · 1. ::owe.Uing House - A dwellir:ig .house 'may be
· · .. :in&~ectors.. arid guarc,I~ of t_he BO<:;;·· . · . . . ~:.-==-'-~~:~Jer.ec;t.ari~ searched onlyupon warrant issued
. 2. . .Officers· and members ·. of the . ¥,)1>:;~~n,ur· . T ~ fV'-~Judge,. of a competent .court, :··the sworn .
autborlzed bylhe Comtnissioner;:~p·cr -.. ~- · ~ · ./\F!PPli~lj~n . · sh,owing probable 'cause "and ..
3. Officiais of the_-~IR on all-cas:e~ialll~i!Df~;.!!1~~...~J?~frtic§l;::iJ;l.~g.~scribing,the -plaee to be searched
. reqular performance of ti)}..i9'j~~~~en. ·. .. . .a~( g~~Cl.t;;~ sefze <:t{R.A.!'{9. 108l?3, Sec.·. '·
.,.,l~ . . · . -, .' . . ·- .
1

. _ pa~~erit of internal rev._~n4~ fa·XreJJ

(R:'A. No•. 10863,.Sec_. 2·14J(_,(}..-..,· r: .
. . . · . . .· · .' ·. /! ~; . . .
·r . .
·~i-~w.;,lved''"'3E~~~~~-<.."t
i~»-
.
·_"'j_f': 2.7. :Ves,els~O,Ji~.!,CC~fftS and perso.ns qr g~~ds
l( · J$.5.· ~~ conv.eye9~\~erell1_· ·-. A_ny · person. exercising
· Note: All officers autho~ized~y t~e-~omn:ifsioner t9 /!';,), .: polic~_aythOr:~.ay .board,:i~spect; __ se~r"t:h. and·
' eXE1rcise P.Olice auth()rity sh~WaJ~!lWrnes .. o'.9rclmale"1Jlli-- examre a ~e~s~t,01aircratt:an<;l_ any ·contc!iner,
. wlth-.the' Comrj'lissi~ner ~~T~i~·-' -~rpos._1t·.:.rnls~9~_Jn(---~u.u_nk,~~<:1<a~9:bof wr e~Velope ff)Und·_?n board,_
_Qrd_e.r_s .' shall .cl~a,rly. md1C9!~~-tfl · spec1rlc- na~~· , · ?:j ~nd.fi;P.hy~Jcally,,sear4r and ~xamme any· per.SO~

out (R.A.. No.· 10863,Sec. 2\4~

, . ·' . · · · ... ·. ·
r,\ . \~ ~, . ; f~~ ;<-£~/.
Garrying out.the m1ss1on. anr(me..Jask,o~··l;:

· ·\YJ .:, .\ . 1: ~J-

·carr!e~. -....; · th~. rJ!J,R.A1 ij:vo:
1q.~_63,:.Sec. 22:1)...
1 Jl;7iT"Sfi,los, otpe..,,.,('""'•p~r~ohs •nd a.m~~ls
~p'reaefonable,tause,a.ny person exercising_.' ·
· .

Any per.son exe_rcising· poli~e \U~orit~~a.5 .. _. ~1' ~el -~iiYA~i~eau~l'it~._m5ty _ open .and ex~mlne ahy box, .: ·.
and -clutY. to ·sejze: any- ve:?seJ, ~ircr.aft;~rgo, ~~6~-·~ /..!"~. nk; . ~envelop,1f or·.. .other :· . <=:ontainer":. for
anjm~! or any"othf:~1'.!lovable_pr.o'h.erty-whe·~~s@rl~·~~d~t~w.!(Eli~g;·· t~e. . _preser:ic:;e · of . duti'.'1ble or. ·
· . !~ -s~bJe.ct '.o foife1ture .or when· th~Y.- are s,ll.9j-ec~~~jon1b1ti4p~s (R:A, f'!o. 108_63;-~e9. ;22~). ·:·
.. · .. fine imposed (R.A. N_o.. 108_(33,- Sec,~~(~~~"'.'"4~P.et!ons.#.arrivlng Jr~.m ·.foreign co~,:it~1_es -
.·. ·. · . : ·. ·_- · ··. _·.· :: :_:',\./J.7· -·:\_:(.-.t- ...~~o~~a:>onab_le·cau&e; tra"'.elers arriving from
.. Th~re. )s• n9 .·_cQnf]iot betwee~ th_e. pr~v_isip_nS<..Q!...,!~e;!. v_lr:,.,gF.eig~- cou~t~es tnay b!3 _sul:>Je.ct~ fo _se~rcJrnhd.
· . T~nff a·nd 8usl61T1S qode and -R:-~. N,o. 6975 (D1.E~"':2""~_ .detentro.n ·by .f.he custon:is offl~ers · (R-1?-· No.
'At:f of :·1Mo)...-as·a·msnded. The ju"risdicQon·of _the . •/ ·'1086J, Sec.·223).·. : ..: .
Commissioner Qf Customs. is. clearly'vyith ;regard ·to .
customs.duties. Should the·PN.P suspEict ahything,'.it Visitoj'ia!,P(?:wer· . . .
should · coordinate· ·_with the B_OC and· q_bta]f!. ',\(1"1~en~ ' The · power of · tt:ie· soc· to demand evidence of
authority.from th~ Collector of ·CuS.tonis Jrf order to' p"iiyrnei::its ·of duties. and_ taxes oii. imported products·
. conduct. ,Se.arches; .sei~res .· and .. arrests ·°(Bqac. V. . dpelily for sale Ot' kept in· stoi'ag~. -In cas~ of fa.irtfreto .
Pe..opie/G;R. No. 189597;.Nove;r,fe.rf,·2008).. · '. ,'.' presenl ~vi<,lenq~'within :15 days, th'e:go.ods may.be ·
·· · ·· · · .. · · · ·.; · · ·· ..seiz.ed:.aFld -stibjectetfto,for:f13jture_proce.edlngs (R.A. .
P!~c~. Wher~ A~~hor-_i~Mai~e·Ejc~~c,is~d .· .·. ... . . No. 10863,, Se.c.-·224).... .' . · · ·: . · . ·. . ,
AU: persoris exerelsing·· pqlice: a_uthority shall only.·. . J • I
..,. . . .

. e~ercls~ po.wars within·.cysfoms pre.i:riisi3s·ar'ictwithiri- . Who :m.ay. Ex~rc:"ise· Jh~ V~sitorlal ·p~_wer of-·the· ..
the· llrnits>- of·· _the· aut!Jority ;··gr~nted: ··by· ·.:the · .. BO.C: {CpmCot~pf) .· · _ · · ·
.Commlss1dner.(R:A: f,Jo. 10863, 'Sec. 215). :·. :· ':·. ' .1.· The·Comn,.issionerofCustom&;
· · • ·· · · . 2":- Th·e Collector of-C.ustoms; and ·
N_~te·: ·!h~··BQ~ .;tiall for -C\JStoms,ptirpos·es hav~ .· · ~- · ·Any::'oth .er :' custo'ms·. Offic~rs w1th prior
exelusive. Control,- .direction: an~ management'.-of ' authorization' ·issu-e<;i· by the. co·mmissioner of
·custqms offices;-· fadllties;.· Warehouses, ·. portit :. · . Customs (Customs)vfemorancfrirri Order.No-. 10-c.
_airports, wharve·s, infriisff~cture ai:id· 0th.er pr~mi;:;es ·. 2006! $ec. ·3) [h°iJreiqafter.G.f..1 ..0:J. . :. · · .
. ir:i the Customs- Districts.(R.A.-.Nc;i. 108~3, Sec. 303) .. · , ··

·40a j. .2ois SAN sEbA

. .
•'.
LAW cENTR~1zEo
. .
aiR·oPERAT10Ns ..
'· ..
 · ·. T ARfFF: AND ·cLi.STOMS : .
SAN-B_EDAt:AW"CENfRALJZED BAR OPERATIONS_.~ME!rlORYAIQ 2oi~
a 12m+aERFK a · eaascwisas
. . .
!'laces Where:VlsitQ.rlatP~wer May·be Exercised: ·. 2. When-the warrant orseizure has been Issuedbut
(01<) ·. · · . · · · ·. · · · . · ·. · · · . · . . subsequent · documents. presented . evidencing
1. Any place where _foreign articles are Qp~nly. proper payment are found to be authentlc and in .
offered-for sale; or · · ... · . · · : . . . order;·the: District Collector-shall, ·withi~ 1 ?. days
,:.ny -place. where fo,reigr( articles- are _!Sepl jn 'from the r~celp~. of the motlon to -quashor; recall
storage 'but' a valid search warrant isneeded in . ." the warrant, s.hall cause the immediate release of
case of dwelli"ng house· {C.M.O. :No. 10-2006, · the goods,:SeJzed: . ,· . ·
. Sec. 4J: . . . · · ·. : · · ... · . . . · a. · Sl.ib.ject-t9 clearance by ·the Commissioner
-. · · · · ·. b.. Provided, the release thereof shall riot. be
,f. ·M~r:mer oi:t;:xercise of.visito.r[~I F>ow.er:_·. . · contrary to law (R.A No. "1()863, Seq. 224)': ·
~f·· (IVl-°C'IDGA) ". ·. · . :-· ·. ·. ··.. ·. · . . . . ·. · .' ' . · ...
/ 1. [ssuance oraJ.e~er·ofAuth_9rity {LOA};sighed b5'- · ··Jurisdiction ·of the-Bureau of-CustQn'fs:: · ·. ·..
{I{.· . the-Corntnis~i9ner of Customs himself; :_
1:.-· : . . . . . ·: .. . . . - r,
· · The soc ·.·$1)a!i have· ..H:1~·- right··
oi.."su·pe~ls.ion and
police. .authori.tyover: . . .. ·.· . : .. ·.. .· .. . . .. - . .
-N~te/ Th~ . LOA·:·. i.s ..
not _".required: .. if th~ 1. Alf seas vvithi~ ·the' juris_~iction. ot'~e. 'Philippines .
.. , . · Cominissioner"ofCustoms hlmseff exercises the · (RA No. 1_0863, ~e.c. 300);;" · · . · ·. ,..:·
,r?· · .. vlsitorlal power,' ·· . . ·. .· . . ,., . . . a.-. Te_rritorial sea .-:-:. 12 nautical· mijes from · the
%- . , . . -; · . · · ·. :~. · ·~: · . · . : : · · baseline (UNCLOS, Aft*' 3); and ..
·. . . ··". 2.· .!.h~· · Y:isiting · ..Offlcer shall· en~er the _·premises·· ·. '· ·b .. · Contigl.iOus. zo.rie ·_ 8dditiohal .·12 n8Utical ·
w~ere the smuggl~d_goods'.ai-e suspected t?·be~,,"·, .- · · · m·iles beyond the teuitorial sea· (UNCLOS,"
· stored. in the, presel")~e .of:.{LA·2BR2) .- _-1/,y.\:-· . · Art: 33 (~)).· .:__- . i · . .- . . : . · ·'. . : .
~-." . .Tt,~.bawf1,!l"_occ.upant; qr . .. ·· .. /..:'9.r,/i~;;"'>i;,2. _E~ciusiye Economic Zo_ne {E~Z)-'":" 200 .n,~ut,cal ·
'b-.. ~nY:P.?rson ih pos~essi(?.fl ~fth~ prem_is~~~qr,-~,}-~~~·, ~rules from tt,e bc;1se!ine (UNCtOS, "Art~ pl); an,~··
e. In their absence, any. i. wltne.sses-WhOljaf~!'': :?."/p3•. ·AJI. CC?a~~· p<?rts; ~1rpo.rts, _barbof!>, baY,s.; rivers
. · _re~~~e.nts o( _tt\e ;:;::ime locality. ~-r .§jtsi'hg~}jJ1:!~~;.t~!}~iR.~1-~~~kwateFs .. whethe:r r.iav1gabJ~ or-noHrom
. o~c,~ls ,qr·· An_y ,Bep,re.~~ntat~~~j.\~Om.·~t,e· : ~ . . tlie~s~a~{~,['· ['lo.: 19.8_6~. Sec. 300): · . ·
. pu1ldmg·o.r other.Bes~ons1blet9.Vic~.r~ ... '. ·.Ji~-t ·. . . . . · l~\\: . ·· ..·. · ·. . · · ·. ·. .
3. fnyentory takrng - . - If tl)e ownerv.oc6'upant·,pr.·· H T.he··treatmen\ o~he· SUb1c Bay "Freeport:-(SBF) as a·
, j,e~~9.~.1~ _P.os~eision: ..tf~ni(R(,ff~(~m:~~~ot. -.-i-\i -~eparate <;Jst~~.\ te~fory,cannot ~bmp,letelyadfyes,( :. ·
,,__.. ··. ·.·_~h9w_ evid~n.o~_-ofpaym_e.nt.~t,.1Ju~es;'itie;.Vf$1boi · !:i\ the. ~ove1nm,rnt- ~f .-,ts r1gpt to ··.mter.vene:_ In· _th~
r· .
Qttic::er sh~II cc5nduct';:in iG~~i;itorY,'t5f.,.t_hefor$igh, ~{,"\-"operatioris aril;t ma~~age~el'.lt ·Of .the· .~BFJ. E;lSJ.l~Cii'!l(y

f.··_:· . . .· - ~t~~=i~i;i~~~~r~-~~~~v:s~at~~tJ.t~-~. !r::.Jr1· :~~e;:i~1~1,r~~~i;i~;:;~;t~~~~~i;~;::.: .·

;;. · 4. ,:he· ¢wr:ier. of:the gt:>.ods- or··n.l~::r:~pr~se~tat1;Ve. e?(clus1ve·ongmal JUr!sd1cfion 1.n _th~ soc·ov.E;r seizure
S _ . . ~~al.I_ ~~ec_ute:a-g,E!_r:tlfiqa_tio~:ifs~-!fie d:}Ud:uc(ot J,:cot?·~iforf~itli~eca~es· in. the -'eriton;:e_ment'.c:>f-~e.: .tariff
'· ·. t~e .. mventQty 'Of the_ ·goc;i~s .and tos~l:)q#-:prpof of ).ltf'~f)p,;1tl~}.?~s·laws·.(Agr,ex Co._- L~d~ v. _CommJSSt~ner
·- ·ownersliip of the' same; .. . .. _.- ..
· ·5. -The !nventory·,Rep.ort shall;pe-fo"¥!arded1,ta'th.e.
:i:--·: ·.
1 ,;,At~1{:_:.,,,eFQu~o~G_.R.No. 15815(!f_September 1:0, _2.0J.4),
. ·. ' . . . · ·.. : .. . .' · .,
. \Cpll.~ctor~ofCustortisJl:ir~ugh.~h~ Lav(g_iYJ~~n.fe>r .. :1:hE{ex~_Tu~iVe-juris~i-~t(<?~ of the-soll~oter, ~( Gu~tQr,:is .
· the 1~suance.:9fWar1pnt of:Se1z4re and· O~tent1on · . ' Qannot be mterfered.w.1th b.Y regul~r courts even l.lpon
·. . {VY.SD); : . ' · · . : .. . .. .. . . . . • · · ,t~!3 <---alleg~~\:>I) · of "9wfiersliip .. (Conjin~ssioijer of
6. Tl)e- vi~iting officer _shall witn~i~.tl:le Qel.ivery- as. . CU$lQms ~· Ccjurt ofA'pp~a/s,··G:R: -No·s. ·-111202,-05,
· : the-. circumstanees warra"nt;. of:the-' things seized '· . . Jar)uary ·:11, '20.06)'. . . . . - . . .
,. . . . into.the,custody qf·the".c;ollectoi-·.cif_clist9rtis", .which .· . .. . . -· ··. ·, ; . _ / ·-. ·.
:, · . has "juii.$dicti6ti pver th.e:plac.e;· .. · ..· · · . , .. Oritf~ir)_e': ~(. ·:Hot Pirrsi:ii( . - · in Custqms ..
°f. 1, .• J=or. goods-where wso: is. not issy~ on_· acco1Jn! _ ·.Administration·. · .·.. , ·- · .. · · . -: ·
.... ·· 9f yolunfary pffer.by t~e own.~r to·pay-:the duties; . The ..Bur~au stiall 'pursue imported· go'Ods; s·ubJec:;t to'·
· the .. yisi~ng· Officer. .snail. £oinpute .the .c.jllti~ble ' seizure during.its transport by land, water a.nd air and· ·
.. :: va)ue_.,qf ,the ..gix>:\:Js. arid- :al:isess .. the du~es· and· · S:hall exerci,sej~risdictioh ~s t)'.l~Y.b~ ·l')~~~ssaryfor -~e
·. _. ,taxes· payable ,the"reon; and · · · '. . .. : · · ~ffective enforcement of CMTA (R.A No; 1.08p3,Sec.
·a. ··.l'n"e Vfsiting· bm_6er·i_s d.i.ity· bbl.ind to. ~dopt all -300). · . . : .. .- . . . ...- ,-. · · ,: . .
·. · re.~isonable ·measures necetssaty to implement · · ·' ·· ·· ·· · ·
o. .
.. · .. the LOA.(C,-M. Ne'>. 10-2006; .Sec. 5)..· . ,. . .N9t/\!Vhen a· {;essel ,(;)/aircraft be,con:ies sli.bject'. to
. · .:: · · ' . · · .·. ,... . · : ·· · . . . . selzure., a .p_ursuit of .~uch ve.~sel cir: ;:i\r~raft" which
. ·Pr<>:ceedlrigs:When.Goods Seized.in the· Exercise.-· .· begai'):.y.,ithilf tn~·t~.rrit9rial·w~t~rs_.or ~ir SP.ace may.
· of P9wer ti:> lns·p~ct arid Visit ,.. · 'c.~tim.~e..be~nd .the same, ·and. the.vessel or·alrcraft
1. During the pr9ceedjngs th·e interested- party s~all · .. may be seiz:ed · in the :high seas or _interna"tional air
be given the opportunity: to prove or show the . · space (R.A.. No .. 10863,- Sec. 300). ·
sourc;e of the goods an~ the "payment.of d~ties
and taxes_thereon;

~01e SA~ s~DA't..:0.w CENTRA~~Eb .BAR oP~RATIONS_ I 4_0_~~- .,_..

<:·\~i~~

----· ··-· ·--· ...... ·- - - -·- - .. --·-- ···--- ..... --·---·-- ·---· -----------------·
 TARl-"f F ·A:N.D
SAN BED;\ lAW <iNTRAllZEDBAR OPEf!ATiONS
·cusTO·M·S.
.: MEMQRY Al,O.2019.
eet11 .e
·TARIFF COMMISSION. · Fu.ncti_on~ of· the Co_ngressiona.l Oversight
Officials: . -, .Committee, in aid·o~ L~islatiort: (MRI)
·. ·· 1. . Chairperson; and .
2. · Two .(2)-·Commissioners ·(R.A.' No. 10863, Sec.
:I. ,Mo.nito! and.ensure
R.k Nq. 10863; ·.
*e
proper implementation .of
. . .
1600).· 2. Review thecotlectton.pertormance ·of the BOC·
· and ·· · ··· :· · , . · ' · •·
Note: , All. officials ·of. the Tariff- Commission 'are . 3.: . Review· the Jmple(Tlentatio-nof the proqrams of
appolnted b.y .the President (R.A. No:• 10863 'sec. · the _soc; (~-A No. 1-0863,.Sec. ·_1100). ·
1600) .. ; · . · ·. ·. .·. · ·. . .. · , .. ·
·· .. ·
.· .Qualifications: . .. . .. . ,
. 1. · M~s, :be'a na:ti,Jr~n:iorrfcit_i~erfo{ th~ Philipplnes'
' .

. 2 .. _ Of good moral. ch~ri3C,terand ·provei;i if1tc:;9r1ty ; · · ,

· 3. Possess· .the necessary quallflqatlons requisite · ·
.·Goons·- ·
·· ··
.I
·. for. d.evel0P.ingexpert kllowledge if tar[ff'and trade . <;:poeept of Goo_ds.tor Customs.Duty .. . , .
. · related matters py. · · ·. Goods r.efer.to articles, _wares, merchandiseand' any.
:· a ... _Experiencei and . . · other ifems_- which .. .are subject 'of importation or
.... ' 1:>: ·A~ademic "training (R.A.·· No.. ·10863 · sec. .' .exportatiq'n (R.A. No. 10863,".Sea. 102 (X)):°
. ·. (eo». . .- ·: · · · . . · · ~:. · , _~,:;...,-~-~~~~,· · .. · ·. '. · · · ... · · . - .
.· · - . · : ,./ ~- 11 T Gx.a..J11@.e~ · . · . . . ,. ,. , .
Fun~~i-ons ~d~~ T~ri~ Commissi~k~\.f~.- . U ·,1-\~i'bpi~r~;}~)f~it~i~ t~e' rneaninq of the term
.(ASAR-PA~·CoD} · ·. . .. · . ,Jr/" \\..-:'; ~~......,~~~<rbaM~e . (Com_'!}1~si'?ner_ of Customs v.
. 1._ ,Adjud!cate cases on . a p116atlo.l'l;1ctf:8 r,acl~:'.ii:"~a'?,~~~_,·fil~-No: L_._1~0-75, ~Jun~ ·30, .1960);
: 'rernedies-against imports· -,1.,.·\...,;, Y/' ·., ' ·. ·.•l["1)
. . ' • ·'.~: /!~(. • I //
. c":;p:, /.~.
· · .:i.~~ ;\'
~{ . -J ]\. ,;._ ' . . ,,.z.\. :\~ ·· ·
. . · ·
.·- . .
2: §tudy/~El:·impact ofJ~-~jffNpoh~~J'~l)Q I rogral[IJS 1ti-~.. }t~ · .:· . ·. :... '"l(."'K .\\ . · '. . ' · . . . :. • . .
No.te•. PJ'.i ~1p_p!n~ pell3·v.111~ <,ome· within the .concept
· on ,i;iat1qn~I compellllv.ei::iessj<ln~ '°,(;onsumer /-
welfare· . : · · - .. [1'l:=;;p./{:-. .
_ 3_.· -~dmini~ter .. the:.Philipp{ ~f;t;ff s~h~ u"!el;ft~ricp..
·r":-' . . · of-meiehi;ind1set""as"fh1$ te~m is understood in Sec
--~~jJ~)t the r-~~isi"·:c·Ad?1inj~tr.citlve_ Th~ .coo~;
·· tariff:nomenclatures; . -'.,:.,..---A-~-- · _: ·. ·.· ~:- _, ,.~•~Pm_fpes~.b~I~~ e .-attempt~d-~q_be e_~ported;
4.: !ssu·e· advance .Bu!ings oii"'furi~ cla~fi<!tion·ot':,_;.;..~, -:li<'ID~P.
m ~se:_· :i~"_l:>e..deei:n_~~-to haye ~ee11.
· ·. rm~~~?- good~ an~ re . derfibl~,:r_!;ls\i,~· \Puf l,,Jt~~j~cl-~~e~~·~1r,culatJ_?n ~s leg~I tender a~~
.. ,over _ta_n_f!cfa~s~ca~on.o\~&'dstt: __ · -~&i'-.:,,, -. JC'(~Jrx~. ;z 9m,.,od,ty,(,ltomm1ss1oner.of Custor{ls v.
5... ~rovrde th~ .. ~res~de~t'\:~;d . ~:i:i.ngt ~· -.~fc.lil A.12f!Jr. ~o,_ °Jf!.·No~_IJ.11075,..Junf:!30, 1960). .
. independent analysis, fnf0c~ation \~t~~l\iR&i-,...., ..,.,,.., · ·. · : ,k_ : . · 1 · · .. · · .. . ~ ' · ·
. _ -support; · .. , , · · · .. ·. . · : ..• ,_..~,(')~ . . ~f e~~ an_d ~~-eyorders_are inctuqed within the
-: ~- .~al¥z.e the natu~e ahd ·'co·m. sit~;;.fl ~--f~:£B-~-e;J?.!Jr~le\'~~enen,~!anythi_ng that. may__ be·- the
._class!fic:_a,uon.of goo:c!s;< ·.. · . X-_-¥n-,·. ""~ ..;,.;_s1,1b1. ,e.}:>~JJT1portat1onpr·.export_ation~.c~astiga v. · .
7;,. ·_Bevi~~_tneJr~~e ~groo.~~n.fk-for_n~got.i;;i.!J..6!'1: 1,1.AJf'!:~fllJSS/O?Cr"-·of
a_n1;f Ou_s_tqms~. G.~ ...: No; L~24[111, ..
· tr:a(!(;l. agr~~m.entsel)tered irit9 -~ythe _Phil.ippiti.e~~:~:~~eto~er ~4.1_ :lf!lf)).·. ·· .... · . .- . : _ . . . · -.· : · ·:. . :
. . .. a.net m!Jke r.~cqll!mendatit?n.s,_if-necessary; , .. -·· · · · ·
-B._. ·cotiduct·. pl:ib~ic. · :c9risulta)ions.:_ i;ind .. fiubi(c·· _ Kinds of·Goods ·
· hearings; and .. - · : ; . : _-: ·. · ,, · . · ·.-; ·:,··.. { :~<>o·d~-f.Subjecf :·to .. Outy: . or· :.Dutiabie
-~f .g~pvti2:e.. ,or. :~~leg~t~· ·it~..f~n:cti~n:·\,t·~~{?q~rin9::.. . ·.Jrripdttations: ... '- . . .. · ·. . . .
·rulmgs. on .4isputes··over- tariff.classificati.on :0f. ,_ -· Al} g~ods, .wf:r~n-.'.imp~rted .into the ·Philippi_nes,
_Jjdpds ·(R.A.No: 1Qli63;_Sec.·:1i;o3.); _· ::.··. · ._,,." · ·· .. ;.: ~hal_l··.. be · ~.!,lbject-. ;to :duty upon -importat)or:,,
. .. . . . ·· . · · . , · · : · .. : .- · ·. : . . . . . . . ·:.-· .. ·. .. .,. . _.m·c;tudmg-··goods ·previously· exp·orted · froni the
:the Compositi~n ot°c:ongres~i'onalCttstoms:and ·. · .. Pliilip_pi~es, exceP.t 'as·, otherwise. speqitically_
Tariff.Oversig'1tCpmmittee: ... -. ·· · .. .- .- . :" ·. · t,rovi.d~d for in·R;A. No.: 1-oasa·oi- in·other laws
. · 1_; cn,airpers0i:t~,;-of Jtie, Cororriiftee ·'on. -W_;ys. an_d· .-. (R.A~. No: ;10863,. $ec.· 104). _. . :-_: '·
. ·: M~ans. ·_of·.: :the· ·se·nate ·-.and.· .. House·. ·of .. ·· -: . . ·. ·~- . . . . .
... Repre~'entative~;'a.nd ·. · · . , · ·.. · . . . ... : . . '.'\ . . Not«iThey be_Conjedl:itf~bl~iomthe e~try of the ·.
2: · 4 additiohat members. fron1 each· House; to' be ve~f- or ·aircrfiitt: into the·'-r:?fiilippine 'Ju rlsdiction
0

desi_gna~ed by -the. ~enate: P.resident .and the,, · <:with-_th~)nte·ntibn to unload :(INGLE:~; supra at . ·
Sp~~l_<er.of th':' .Ho~se. of Representati_ve::i"-.(R.A.. ' . · p98): . ·.. ·. . .:.. · .. ::: · .. · . · ·. ·· .· . . . : <.
. No.10863;
. . Sec ..
-~·
1700)-·
. . · ·
(.

. 410 I 2019_SAN.BEDA LAWCENTRALl~DBAROPERATfO~ ... ·

 .TARl'FF A'N·O CUSTO:M.-S
SAN BEDA f-AW rENTRALIZE~ BAR Of'ERATIQNS .-. M~MORY AID :io·,9

.2. Prohibited ll'r1port~tiq~~/Exp~rtatiims , . / •.

·· Good~. wtiose.,importation and .exportatlon are

... sttjclly t>rohipi~ed(R~A)Vo .. 10863;.$ec::. ·f1iJJ ..
."3. ·Rf.!stric.ted .!mportations/Exp_ortatlohs· . . ·
Goods whose· importation .and e~pc;>rtation are
. · prohibited except when ...~uthorizetl 'by·· 1aw or .
. , . tegi.ilati~n (R.k·No. _ 1086.3, S~c. 119)_. . .

Note:.the·r:~'i~ a p~esuril~tl,o~ tl,~t an· ~oods·rfi~y"· :·· · .

. be 'imported into" or' e~ported.from th.e "PhilippiiJ~S
-without the _-(ieed .. .tor "import. or export permits,.
·. clearances "!)r licenses unless otherwise provided..
for ii) laws and r~gulatioils.{R.A. No. 10863, Sec ..
. . 1.16)., · -, . L

4. · De Mini,;,i~lrrip~'rtati~~ · ·. .: .
This pertains
. . •
to an
.
:im.P9rtation
..
tt\.e
• .
'dutiable,
. I . . ,
value .. ·'. ·
ot which does not-exeeedP'to,OQO. There.will be· · .
. . 'no 'dutles and taxes that will be. colle'ctible bf the "''- . •. · .. · . .
BOC.forde.minimis importations, 'This thres)).,9li':.f1 {f- . . . .
'value is subject. to. review by 'tho .f:inongo}:~~ .
Secretary every 3-.years (Customs i\dmihist(;lfiol,e;~;:,~d~ · ··
. .ft. CA 0,1 .. · ,,:-~ ,,t~·""·-1,/"•1
Or,.d.er N o. 0·2-.20'16:I [h ereme ·
1 · er ; ..... . .')f ,~.,.t1';-l-!..~··
1. . ~
.. ~
· ·
-
· .
.
'~,U~•!""!0 ,. •.---,-~.,.__-... -~{
/.F
/y . l\; ·'{ ft);f.U:.,.o.~~.. ot:~-=.,;,,,,,.
. 5. Con<:1itio"!ally,Free·. · . and . . ~.~}Ex~inp\>."If
;, ·:--·-.:!~\.
Importations · .
/ · · ·"
~oods· whic_h,: are exempt -fr?~ _t~e,,,~~~pt,;6f'h1~.
·~r
·· · ·-=---···i
.L..!..:..J.(
1
..
,..ytt,i
r; I i
//. i{ i
. import duties , .UP.?:~ compl'~-'?~~),i.'1Xllfiv__,the
_ , t·~ . . .J , ,J..
. formallt'esprescrlbed m tt:i~,~~labon~"JA°f'A. Na-> r,••·,:\1·, · · j ,i .\'

10863,· $ec. 800).

· ·. . · .. ~t.·-r:-.a •. R-~ · · fr
..,.!'- ....-1~-,_:_.,,\.,,., "ft \'. ·
. .
·
. tllY
.-~ll
,p- ~ ·.
:= ~!.· .. '
·'fl
~< .... ,,. . . . ·~:-,!!.
·
· '\n f.!·1
~~~~- -
'i!;..',.;;,_;,.,~Y._.:,/
'<~~··-·.··'j-~>' .
6. Regulated lmportations/E.xpqrtatlo"rlst ·· tA\f. . ,..;-1_ : . .~Iii~~:':!:"'
Goods. su_bj,,ict . to regulatlo~f Zwtijcti\~rau · Jfo. : ~J..: . . . . .
imported .or exJ)'orted.: ohly ·aMrt~~c~~n9.· th~
),;: ;i.;E).
. necessary de~laratio_n_s_~clearance,~~?tEfrise~t1&-~!(;~.;,1.,,1~l".."
1:~.:. _;, · · · .. ~
·_.any. other requirements (R.A. N<fp.11.086~~$-e'c. .: · ·:
f17). . ·. . . . .. . .. -· \\} ··1:2 ~ .· . . - ·.
. ~.11~~) . . ~...
·:._ ·..: \ .... ·. \ . . : ·· ...
.,

> '.•
.. ·.
·... ,·
\:

. '. ..
2019 SAN .BEDA LAW CENTRALIZEDBAR 0PERATIONS 41_1 ·
 TA.R-1 FF :A.ND -CUSTO'M·s
. SANBEDA J.!.WCENTRALJZ~DBAR OPERA_Tl~NS.
- MEMORY(!ID 2019

.. ~
T"'bl~ 1 ~ Kin(ts of Goods.orArtleles :· ..
'- . . ~ ~-

' ·"1_ -.Wrl.ttEin or printed g09ds in any Except when-authorlzed by -!aw ·or · 1. Tho~e. provided under the ·
'form i.ncitir,ig_!reason, rebellion, -regulation, the importation and . · ··· ::CMT.~.- · . .·. .· :
. insurrection, sedition, or Ihreat exportation ;o.f the to"llov.(ing . 2: .Thoie'§ra~tetJ tb .gover~meQt
to takeJlfeof.. lrifli~tbQd.ily·injury r.est_rrcte~ goods are-prohibited: . .' .· age,-icies,"GOCCs with . · .
.. ·upon any person:'. ... _,. . ·.· . '.· ·. agreerneintsWitli°.foreign: .
. 2: · obS<::enEr.oT.irllriloralarticles; - 1_. · Gambling devices.or .the : .. · ·. · countries: · · ... ·. ': · ! •

3 . .- ·· ~Y. good$ rnanufactured In · · · . distribution of. money, ciqars.. . ·3. Those given to !nternational
: ._. wh,ole or i~·par.t 0.fgo_ld, sllvercr ciqarettes-orother go~d!; : · ,; _.iiistit~tj<;>ns-~'n\itle:d to_··. : :.
. . . . other precious· lllle.tals or alloys when such distributiqh is .... exemption b~ agr.eem:ent or-:
· . :t~ereof, °ttit(stam'ps, brands· or · . dependent on chance, . . . · ··Speci.af,.Jaws; and
. · marks qf )Nt'Ji~.h' do not _indicate ._. · incl~ding:j~¢~~ot and pinball .·-'4.__- Those that may be granted by .
:·. ihe actual fineness of quality of · macninesor simila~~ ·. . . the freside_nt upon NEDA's ·
. s.iiid 'metals"oralloys: ' L contrh(ar_icesi or parts thereofi:· .r~_Cf:)mmend°at;on (R.'k No: : .
." 4: Artlcl!3S 4sed f?r pro~ucing . /,$ .~~'.file'13s.~~fo,ia! o({~fff:~·· ~ 1'0_863'.0Sec. "'800).. . '
unlawful ~bortior:1; · ·. . · . -~ ·~_.,br-Jptirtsthereof; ·-:-:, #··: · · . · · . · , ·. . ·
· ·· · .5: ._Any_Adulterat~d·o_r·Misbra_Q,le'ot;,. 3:·.~t;:.3;Jj;!1¥.,.an~1weep~t§l~e'si~- ~ ~- , .. , · . ·
-food oi-..~rui:fia:v.iolatiohof/fJ;i~, 1"'if ,,tickets,..adv~ftis~fents"'\_ ' . ·-.~ \ .. · · ..
. . .PfQVisions of th.~. "F.,ood afid~ , . t'th~reo}?'anJ . t~f dra~!rlQS. " . f ,~\ · ·..
· Dru-gs .Act" or any other/ . fj · . therein; -. . , '. lf· g') ~ · · ·· · ,
· . relev9~t .laws ~nd regufa~-012~-;J • 4. ~pfom·p_fp ·nu·p:a.rtrl. . \ v \ . .. : . -
i
6 .. · !t1vfnging_:'Goods.as ~~fti-re~§ . ·.. ~he1:~{l'fy-~ 1~~~~r.;r.natiri~_I~ ) ~ , ... · ·. . ·. . .
. : . underthe lhtellectuaf· Fl(rol?~J!~ . . 5. '+-Any._Oth·flr..: ods-~hbs~L . ~I . . · :· · - · ·
1;
_; · c;;ode; ai:id.. : · ·: · ~ ~-"l \\ . . r.J(l.(llPOrtaf1~~]Wexporta.11pLJ'\f.. ·,. . ) , . · . .. . . . .
7. . All ·Other goods of pa~f "tr:·\'!. 'r.;;§~r.._e'.'.fest®tad·;~l)-~~-;f ,t."''f' . _. ~ ·. '
· .. ·. thereof, which importatii[anb\ ~lt-fOtiQ@1k-aie.wf~i;;:
· e_xp~rt~tiori a(e:_e~piicitly,~ · - . : '.:· :· "(~""ci~Fi;n •~P,,~t{ff,". · · .. :.... jf ·.
I , ·""; ._. ..

. . p_f..Oht~l!ed Qy lav,t O'r, l'l!feS\~l)d_ . \. : · a.J-"!1 (S~~~-~~t, .the A .. ' . f . ·

. · regulations 1ss~e~ oy . _. '\· , {Pfll 1 • 1?:IJ1'tsfa.( . -;f-_ ,- 'if~· ·
· ·, : ·competent ·1:1.uthp~1ty,(R._~.-No'\:. . ;~b~~~p.~P-~.:.-~~·: ·,. · /.. · . .
.. .· .10~63,. ~e.~. 11_8),.: ·. . . . , ..fy 1f.i£Jtt"!0~~.J).y.:tlii_e-c;-:\ · · ·
-: . . ... ~· . !!s~d. doth1~g ~~d rags (R.A. . yD.lin~e~a~srD11J"gs,.1t.~~~ , :
· . . .. · · . Nq.· 4JJ53);.: · · · ; . . ·. · ·· .. ~h med1.i31f1at,5ltg,,_g~Et!f"· · ·· · ·
9. IOY fire~rrrisand .e~plosiV~s- · ~ on1~(R*A~No~-t'0863, ·s1;1c .
.. . (Letters.of./nst(uciionsN.o.: · . . · '.· ..... -119). . . ': :·._,
... . ·:1264}' · ' ... . · · ·. . ·. · .. .:_
· 10:·_Haza;dous Y_lastes:(R:/-N~.'· .... _!'fot~: The.restriction.to \niport or·'.
_ ·• . . 69"69); , ~ . ·. · . . . : . expo"rt,of th~..>8bove :stc;1~ed goods· · · · .
.11'. folychlorinated· ~iphe11yls · · · shall include. -fhe' re:Strictto·n.on· their' ·
· . (DEfYR.ltO. Nq~ O~f; · · .- . transit (R:A: N_o.'·1.oB63"Sec, 119).·..
14. All used motorcycl~ parts;· · ·:
. . except eng1ne·{E. 0: _No. 15_6);
0

A 3: -.Bight !)and drive· vel)_icles ·m.A.

_; -No/85()6); ..... ·.: . .. .· .... ... · ..'
14.· live'.f.iranha· (FisheriesAO ..
. . No/126):' .. : . · . · · ·, . . ··
.15. Live .§hi:imps an(j prawns of all
· stages (Fis'heries.A.0,No.. · .
20!).· .. · .· ·.. ·... · . ···· .

. 412 2Ql9 SAN B.EDA LAW C_ENTRAU_Z_ED-BAR.

OPERA TJONS

-· . ·--- ·-- ··--------------------------'

 1

· TA.RI-FF( AN o·._c:.us-ro·M·s
.· SAN"BEDA tAW CENTRAt.lZEDBAR OPERATIONS- MEM08YAl&
2019
0

Ii
•
• •• J, ••

Table 2 • Specific Articles

-
• • • • •

und~r Conditiqnally. Fr!;!e Importatlcns

... ·- ••• •

·1. Aquatic· products ca.ught by 1: · ·They ·are imported in ·su~h .vessels.. ··. N/A
;;} . P.hili ppin ·e_~registe. red vessels 2 .' They have not beenlanded ·in 'any ,.
'f" F.
t.~:~· :·
· . fote.fgn terrltoryor.rff SO. ll':i'nded; that'
.. they-have Ifeen landed .s~leily·for .. .
· · transshipment wittiout-ti·aving.t:>een: ·
_adv.i;in~~d·in condition.' ·· . . . · .. / .
. ,, "' . . .. .
2 .. Equipment for use i~- the .. 1 . Not available locally.; · . : . •· 6 .rnonths date of.- from ·u,e
. salvage of vessels aircrafts or 2.' Certificate of ltleriti_~c·ationi .. · ·· ·· - acceptance: c;>f the .goods :· ··
· 3 ... Re-exportBond; and" · declaration, ex_tend,lple for
4.' To be re-expof1ed·.within the . another 6 months . · .·
· . prescrib.ed._per.i1;1_d (not- expee<;li'ng .6 .
months fr,.on'fJf'\e'ex~iratJon bf the . .
. oiiginaLP'e,rfodiA'-
. ,. ,.,. ',,~ ... .-· ..... ~ ...
•,
. ~·

. :4. Gq6cis brOL!Qhl into the: 1 ;4:~J?.ff~e~P.OrtEl~--~-P.~n·'~cim.P,leti9nof ·s months .fr~~. aeca"pfahce°c>f .. '·..
. Phillppfnes for repa;r,. :. . . . . '. tlie.~f!.Pa,r, pro.ce.ssmg__ qr . ·. ·. . .. ·. . ,goods:d~cl~r~tigo.:-~on_.. . ..
. proc.esslng or ·. . . reconditioning . - . . - .. ·. - . ei<:t~~dibl~ ' .. '··· .. · ..
. : recondi(ioning · . · . 2: R·e~x-portBond' . .
1
· 5. -Medats:b~dges, clips, and · MLJst bErb~stowea,a·s tcophie~or:prizes. · NIA·_:·· .• .. ... ,
·· ·..other small .go.Ods· · ·. . .· . l. 0r those received or· acceptedas .. -·
· ·. · honorary, distinc;tion. : . · · · · - ·
: ... . ::·: .,-:.

t. . : .. ·-:. ,• ..
t~·.·
•! .

f ..
:-·· . ,..- .. ...: '
;~..
•· : .
. . . · ...
.· .
\~.=:

. . ·'
·.
•\

,.

2019 SAN-SEDA LAW CENTRALIZED BAR_Q!=>ERATIONS ·I 4-1~. ·:

. , ·_ .·. :.:~-. ·.· ·. ·:~<·. :. :: ·<:· .:-~':~~~1~il

 TARI FF 'ANI). CU.STO·MS.'
~.AN SEDA LAW CENT(?ALIZ~D BAR pPEnATIONS '-.MEMORY AID 2019
~~llllll!
.... lllm.. ~lllllllllill.. DllllDmlmll ...........lllilS,lllmllllllnll!ID~:mz!BII.. Sllllllllll.. BIIDIB31.'!1

. . ..
, ·B. a. Personal .artdhcusebold ' :1. ·:certificate of.Identification
effectsbelonqinq.to ·.. 2: Luxury.ltems-areexcluded'suctras
:
returhi·n:~ residents .. .: ··•motor vefliGles·;watercrafts; animals,
aircrafts. etc;'. . -~ . .
Returning .re.slp.~11t~~ .. <a.
Jhe pi:irsorial and household effects
.natlonals who .have stayed. in : mli$i accompany the returning _.
a)oreigri·country for,a period . resldent.on th~ir- return or within '§
of at least-~ months (RA · , months.after·the·owner's return; ..
. ,Yo. ·10863, Sec. BOOJ;,. ·'. .4. 'rt must not be commercial in
-. . quantities' . . . .; ·. <"'
5:·, It must nof be intended for barter, ·
,. · sale, or hire; '· . . . . · · ·.
. "l. 6, Limited to FOB/FCAvalue ot;: .
·:·. >P350k- affeast·10-yr.stay irf.a ·
fQreigb. ·country' . . . ·. . . . ;
. ; . >~2;i0k-_ al le~sf5-yr s~ay in a ·.·
,;. : · . . . fqrej~n;~ntcy.,<r""~·~- e , • , •

· · . , . _ , . >J.?.!,50k:-.l~s.s.',~1lrr~Yf."s~<;l¥.Jra ·. -
-r , • • ~ffr~unW J:V·t i~,-
1,.~~xc~~~;;:;;~~o~~tiaJ)t~'
··

.
., · , , ·: ' -~Vl5J7c~;Qfi'~Se£>:ncJilY~'(iu es·a~Q;~ ,;_/\
·
. · . ·
. /ff "'· , tl=!~es[" · -.' )ID . '1[' _ · ~o/-· · ·. . "- 'lf').2 · ~
· · , tl - f . · ·.ir : ~· .!B,.. · · : ~ i . . \
b. Home appliances·a~9. '. · ~ 1., li~ited to o,ie(of·~~ery Kind; . 'M 1) 'ti
other ?urables of g ?-.i. ·2. ·. O~ce !!:i/},.9~1·:1cal~_!J,~~f
.Y~ r; . · .::\ ~
returning OF.Ws
· · ... a --d~
f·
w, ti: ~i
!:
3 ... _ A4eempo/liviA - €m~A:the!. return 1 ~
01;,\':'ithinl.6• ,E
,8rb!ftei!-theirfr..eturh; t:
!
ff · · ,.:
·(

. . . . . , % ~~f~ . 41-~{l.E~~,;. ,~tlgifof ~!l,~q "]al , . . '.,, II. · :-:

· · \ .,- Ti).' · . .. ~it.
lp_qr).of e. 1.. !I -~ 11 · .

'
·: \ v ·. \ Q, _E(~~~~!
\ .
O
. ,15.Q.(<J~r;i
1J~w1J
'c.eedirig )
. :--:;,- ~,y.. ,/·
J \
/·
. ' . . .~xcess-. ~sa . el\!:tf'. -r: ' ;r •
"'. . ~ . _a~~o'~f'!tf,r.f~ii~< .·. -},·
1.· Bali~ba~a_n,box_es.of. 9i=ws .·1.i5_~}'1~taiQ..Q~9P.ai•a_p:i\,, ,-. ,-."/ NlA ·,..
. . >lJ~~~pl_d ~ff11.ct~ og~~~Yt,:~
.. · ·.. · ··
.Balil(baya~ Eh>X ::" Shall . . 2'. · bt·jJ!~mm~9f~iq"'u~htitLes;;r,·..
. ·;
:.;ref~r tq
a corrugafed box::6r ·3; Not inteni'Jea.f.or.·ba·rt~leor for
· · ·9thercqntc!iO:et recepti3cle or --, .-hire;.-·.:. -.':: .... ·· · · .·
up to..
a ma~iinum. yqll,!me'·of -:!,. Limited to FCA value· __not exc¢edir:,g
: · 20~.000.gros~ cubic _.-~ . ·- ?1.!.5Pk-; · . : · . .- · :_. . ·; · .- · _· ·.
· · cef:'\timete'rs (C:!1,.0:No. 01- . ·5., Ca_n on1y:be.availed, up.to three 3,
'· .. ' '2018, S~c. 3~ 1). · · , _.. • . · :·: :. .. times in.<:! calendar y~ar; .
·- · · , . · · · · · 6. ·. Exce~s.·shali _be stibje.ctto'·· · .
_. OFW - H.ola'ers o(valid· .. . appropriate duties and taxes. · ..
pa~sports,issueo by ttie DFA · ·. · . .. . . . " . ' · · · ·... ·.:
.and.certified hy-_the .. D0LEor ·Note: Balikbayapboxes of.OFWs ~hf;ll_l
the POEA fpr o\ierse·as . . · not t;>e sal;ljectto random.01:arbi.trary . · . ·
· employi:n_ent purposes: Ttiey .· · physica·1.i_ris~ciio11, Instead;· tb€y s°F1all ·
·. i:;ovel' all Filipinos;\yorking.in undergo mandatory x~_Ray scanning'
a·fore·ign.couritO'..under_·. · ·.- >(C.M:0.No. 27-~Q15, Sec;. 3:1). · ·
employrner:it ·cpntracls.' . . . . . . .
. r.eg~roles$·of.their·"· ·
p·rofessions,.sl<ills or
employment s~atus :in a, .} .
. foreigr:, couhtry •..
. '.· .,

. 414 .12019 SAN BEDAL.A'yV'CE_NTRt,1,LIZED BAR OPERATIONS

 ·TARl·FF·::AN-D· CliSTC)M.S· .
. SAf;I El.EDA LAW:.CENTRAJ.IZED BAR PP.ERA nONS - MEMOnY AID 2019 .
M .: . . . . ·'· . . ie, . Ni
'
8. a. Articles-of tourisis·and 1 -. -Must'banecessary and .appropriate . · 3· months f;OTTI the date ~f.
. trav.elers . , forthe, w~ar ar~ useotsuch.persons . acceptance of the goods
. accordinq.to-tha nature of the . declaration; extendible for·
.. ·. [oumey, their comfoct and . ·.· . -another 3· rnqn'th~ . · . •:.·
". · ·convenience;: . .. : ·
:2: '. Shall not ~ip'piy to goods intended fdr
. . ' other persons . :'
. • ..
3.",Net.inte'rided for barter, saie or hire'
: 4. Writtei) Cornmltment or Re-e?(pOrt
· · Bondtand: · · . ·.. · .. · ·
s -~e'~e~p6rtatiofJ,' , · .·
:. .. .· . . . -. ' ' . . . 3 months from the expiratio'n' · . . .
· . b. Personal anti ·tlousehold. . 1;. :·writte~- ~:0.m,miin,e.nf_or_Re:~,spo.rt:.,,. .-· of termor CQritrapt.,..ext~nd)bJe .
.. .· 'effects ar:id Nehi~les . . . . .' : Bond; . · · ... - · · · · · . . . . -for another 3· mpritl)s ..
· . b~lon9!rig to for~ign . . 2: Necessary and suitabte to the . . ·.. . . :.'.:· > ·. " . . · .
consultants arid-experts . . . . : profess[pn,. rankor positlori qf. .the.,: . '. : .
hired by, cir renderinq: · ". · : : . person injporting said· ttems.. · ·· · · · · · ."
service to, 'the ,9ov~rn!T)ei],ti 3- For their owrrnsei' . . . ::: . .
. : ..
.arid th.~iF'Staff:or personnel. 4 .. Nofferbarter,_Aale·ot"hire; arid · . · ·
;,.· .. ·: · ahd fa,i:r:iilies accomp~nying. - 5. ~- ~~st ~~~?~iany:su'ctfpe,r~o.ns'.'or .·;

"/. . . · ·. ·therrt · . . .. · ... ·. : . · arnv1now[h:s10c:.o;...;:·a:;..;\:;.,cre::...!l~.s:,.:;o:..:.n.;;:ac;;bc,:.l e::..·-=t1"-'m.:.;e::.:._,_,

-1--...,....:. .. ,._.
·..,:_'. .:...·"'''--,'---,,~..:....:'--~.,----1
t,. ·g_·· Prc;,.f~s~iorii:11 lnstruments v" 1~ ln·.qu~~!J,~~st~1,~:of.lh.e·c!i:i~~~ltab,le
?;.' . and. imptements and other · · to the ~rofE!sS!9fl.~)r;;ink' otpqs1t19n of • ,'j. ·.:
·} . .. . . art!gl~~ of pef~?.~s ~omil')g t~. . . · th':l PE;Wb~~1~8~1i.n~t~~!d it~~.{ .
;,:; . · . - settl~ rn the· Ph1hp1:1me~ ·:: 2 .. ~,?.!1A~1r ~w.p,~~;":~t1·~?~':k ·. · . . .. , .
J ·~ · · ·' ·. : · ~1;;~i :c~~~!f
=~e~~:p~rlipos.'2~\ .. > ·
0
. .' ..
; .. ., _...,
{~~w~~~lthin:ij~':1.a?C>J1ab!etidfei ~,·· ..
. -,:~~5: ·up~~:1ter:ns..are..nofcov.1;3teg:::c!rjfl. . . . . .·
· ''/.V.. ·~ -~futi$faclp'f%e~itlhneettiat siJctq . · ... .
·. ·{1 ~;;?
.,,~~iifo~.~re\1dt~11y.cp~~-t9.i's~11~
. . ~~ · ... '\-:1.~2[fhe -PJ'.~!~pint~,all~ tlia~ff.{e1 ~~!~v · .· · .
·~:
~;w .: .
. , · .. · . '\~~~ar.~b,rou~p.ttro~fl'!e1r,formE:r.~a·?e . - ..
. .·,. , . . 1,, · ofat>ode, ' .. ,:.t·: • ....... -:.' ~.· ' ' •
. 10.. Goods:used.'.exdus'ivel¥for. : 'l}...~t';~JfiC'ci1e.-ot~~1~~fiot),.:. ~- ·.· 3 m?nths.ff?m·ttie.date·of __· ·.·.· .
• · :, :p.t,1.blic:f;!A~ertalr'f111~~t.d!splay ~;,\iR~.-.ex~'t!i.-~ct.r,i'lf';t!~Z~ acceeta~.ceof the· ~~ds . ; ..·. . . · .
. · ; .in p(lblic;: expo~ition.s;._ .. . ~t~'Re~e{!Jljrt· ... -- · .· declaration. e~te~d1ble for .. :· .
· <. e~hjbitioh;·¢ofn~titio_l'l·f~r..,.
·- pnzes,..ai:id.~l;)v1ces for .·. ,.,
.
· .
~~'k,,( .
, .
: . ·. ·
~n.o~h.e,r-:3-m~~th!i. :.·,:-. ,
. : .. ,_.
: . ·. ·proje¢ting:i>~tures· ' ·. . ... . . - ... : ., .
:. ..
· ·Te~niileal.1;1~·d s~ie~tifi~ fil~~ ·., ,/ ·Mu~t b~ imperteci'by tectmi~I. . ;··, " . NIA . :. ·,·. . ,. .": · '
-,

' ..
. ·. :. ··~ .. : ·'.'·. .. . :·· . :' . : cultural·a.r:ic;J §c;i~ntifr~ instituti.or,is· . • . .... - .. :.
· · · · · · .. · 2.: Not to be·exhibit'ed fo1•pi:ofrt· ·· · ·: J ' ..
. :· i. 3. ' If .e~jbjted:tqr profi( t.h'i'i :. ., . . .
prpc_eeds-s_lj~I!·b~ cqnfi~~~t~d in_' .. . . . : · . .. · .' ,
~ddition to'. P.ther pe.nalJles· under the '. · · .. . . ... · '
~ . . :... ; CMTA : . . . ·; .. · .. . . . .
u;,a,·Articl~s·brought !:lY f6r-eign' · .1'. Must.be directly and ex~lusiv~ly' .3 _monthsfrorri':thedat~(of" .. · : ·. ·
film p~oduc.ers. :.: · · . used fqr:111akin9 otfecqrditlg.r0,Qtion ·. .acq.eplanc.e ofth_~·g~s-' ·· ·..... · ·
· , ... ·:· ·.. · · .... ··pitture·ftlms.onJocation in the· . .· · ~eclaration, exten~ible'tor
· · · · · · .. : . P.liifippines; . . . · .· · anothet<J ·molJ\hs : . .
.· :·,.. . 2.: Certifi.cat~·bf ldentificatien; · .. · ·
. . . :·.3.· R~expor:t Elond;:arid·,:. · ·. :. :·.:.
4·.. Re:ex~lt. · · ..
. '
b; Photograp.hic and· · : 1. ·Affidavit.by the ·importer that such. · NII\
cinematographic fiims, . e?(pOs·e~films cir~ the same films
underdeveloped; exposed . previously' exported from·the ,
outside the Philiooines.bv. Ph11iooiries · · ·

2019 ~AN'BED~ tAW CENTRALIZED.BAA OPERATIONS I .4~ 5

••• "!'
 Ii .

. TARIFF A-No·c,USTOMS
-SAN BED~·iAW CENTRAitZED. BAR OPERATIONS -··1,:1£MoRY AJD-2oitj
4Afi
. '. . - . +MYmict.
2 .. Certiticate of ldentiflcatioh ·.

· lriternatlonal
. : . R~ciprpcfty_
.. -N/A

. ·'. ~
-N/A
.. -.·

·14_. Containers; holders 'and· ·5 months from the date! of

.. othersimllar receptacles ... . .accepjance ·of.the good.s

.-

.' : ... ·.· ·.

-. : • ..
• a- • • • • •

•r , 1

~ -; . ... ··
. ·~

: ·.
· .....
:- .· ·:. ..
. . . :;." .- .. ,.
..
..
. l .•.
•,
·· ..
:
..
_.
·.. ··
.. .,. :-'· .
. b, Cqmroer¢ial samples ·1. :[imlted"to.FC~;Value·n~t-e'xceeding ·3 months i~~ni the date of ·
(ttx¢~pt those thatare.not · .. · . . -~.OI<; ... ·' . . ·. . . ; .. · .acceptance of the·goods · :
"readily and easily jdentiflable · 2: R~-exp0rt Bond; ·. · ,. dectaratlon, non-exteridible · .
.. as in the .~s~ of precious-, . . 3. : R!a!-exp9rt.: . . ·. . ·:·: ..
and semi.-preclousstones, ·· ·· · ·
... ;-· .. . ... :
cut.oruncut; and j~welry s~t: . : .:', .· .: " ..
With precious or semi- . .·.·· ..
reclous stones ..

. 416 I 2019 SAN BEDA 1.AW CENTRALIZED BAR OPl:RATIONS

 TARIFF.·AND
:_:sAN'BEDA LAW. CENTR_ALJZEDBAR -01/~RATIPNS - MEMORY AID :1019
aa
··1.9. Animals, except race horses,
. . and plants-for scientific,
.. experimental propaqatlon or
breeding, and for'other ·
botantcat, zoological and
ri~tio,n13i detensEi purposes
20. Economic, techntcei,
. vocatlonal,'scientiffc;.
· philosophlcal, hlstorical and,' ·
. : cultural..book.s:or-.._ ·
· · · _pub_licatiQns;~nd. religloJ.Js
books like Bibles, missals. · .
cusroxs
~ . . n,,ew,Ai-1;.r
1 ·. · tmport Permit from Bureau of. Anim~I . NIA-
. Industry (BAI) Qr Bureau of Plant. .
Industry, as the case may be;
2 .. Certlflcate of Pedigree from BAI
.: submitted to·the oc .. together with
the affidavit ofthe owner qr importer
that.such.anlrnalis the animal .
.> · descrtbed.ln ssild certlflcete of record
· ancf:pet{igree; · · ·
. .3. -9ertlficatipn by·Nl;DA thatsuch
··.animals/plants are necessary for
eeonornlc devetooment., · .
. DepED certlflcation · ·
. . { . . NIA .
--
.. •' . ·1
I'••

prayer books, the Koran, .

Ahadith and other relig.ious '~
. . . books .of similar nature,and. · ·'
: '. extracts therefrom, hymna.l . . ..
. and.hyn,ri~for-~eligiou_suses .

N/A

22. Aircraft; equipf!1.ent.ari~f~J· _!J:l~ot !o~;:tlT~ ~vi~t;lf,.bll:l. in r~~-~Q.'}~b~P,,.:tW,IA

:. machinery, spare parts.~.r " -~ ?~~r'1,~i~~ualit¥J.{lndprlce.t1 ·~9.~%;~:l'! >f;
. commissary and_,C?teri.ng '-~· ,~~~E?"ssaio.r iP;e)c;l~n~al !~ ffie1proper-~ .
. suppli_es, avlatlon gas, fufl :\'.~~' ?~J;Btfo1n:iftt\~s~h~duieo·~irline · ·
. and 011, wh~th~_!'..crude:or . . • 1. f~2<!>_rtingthe,s~;~ · . . . ..
_. 'refined except when directly .,.,..~dfit.,~-i;i;JJ.~ .. ··
')'.,f)>·c;,.; '.
. or indi(ect!Y used (or .. · .. · · {!( · . ;;{./; .· . . ' ·: __.~ . -~ . r: · .
domestic operations-end · -: '1~
. su.c:¥ other:_g_o_odscir sup~l.ief ... ·•. ...{!J{;
r:I~. - .: · -. . .
•./. . ". , . . . .. . . . .
·
imported by and for tha.use : : . · ..•
. . . . ofscheduled airlines· . ·' .. . . .
. . . _.. op~r,:;tihg: under . . .
.:conqressjonal frar:ichise_-.,
· ·2·3.' Machineries,·equipment'. _- . _'1 -, ·oEN.R Certlflcation;". r.: . .. •· N/A
.. . tools·tor production, pla.r1s:t~ •. ~.:"No_t.focaUy_-_av~ilabtei!') reasonable . ·
.. conv'3rt'miJ"!eral ores into. ; .. - .... Ql.la~t1ty; qua!ilY ~n.d price-and·Glr.e . .
. saleable form; spare parts.:.·: :rieces~~ry or: inclde_rjta!'.iri the proper
- supplies,' materials.- . . . . ' ; ·operatic:m c;,f.th~-tnine;~ar.d airqrafts
- · ... ·. ac~e~;:;orles_;explo?ives,' .. · · · ., ,: .J.rripoi:te~.·-~y.a~ro-ln~ustrial ·. · ,..
;, . chemical&, and.. . . . ; _companies; ard'. , . . · .
\~:"... : · franspqr.tf,1'tionan_d · . . 3. ·to b!:! used.by ttwm in their_... .' .
-~( · · .'. · . comrriunic,atfciris·:facilltles.. . ~g_rtc·uJturea_nd ·h1d_ustrial operations
}; . · , . impdrted by an'd for the use · . or _actiyities,.spare _i:;arts and_. .·
?,., . · · of n_ew ·mintis and"ol.d mines· : . acc.essories th~reof, WhE:n c;ertified
~;... · which ·rl3sume operat_ions, . · · to ·a.~.~uch by the ~ecretary of the
:t-_ · -· · · · .T~ep~tf!pe_ntof Agriculturt: (PA) 'O'r.
;-: ·. . · the-SecfEif~ry of.the Department of ·
tl'ade ·and Industry (DTI), ·~s tlie ·
. case mav··be. .

. 2019 ~N. SEDA LAW CENTRALIZED BAR OPERATlONS I :417 ·

 k&b +s aim

TA·RIFF ANb:CUSTOM'S·
·. SAN 8/;DA 1.:AW CENTRALIZ.ED BAR OPERATIONS.- MEMOR'( AID 20>9
.. SJJNP¥WifiWMH w aw IM'fil·tb!~eil7f1P-WMEPINWi &Ail ia,w . a iffMI I RAS & I ,WI

. 24.- Sp~.reparts of vessels o~·- Proof satisfactory tothe District. NIA

aircrattof for~ign reqistry 9gllecto.r that such spare parts shall be
engage.d in foreign trade'. utilized secure fh.e safety, to
when brought lnto the · · . · seaworthiness 1:ir airworthiness of the ·
Phllippines exclusively as· · vessel or aircraft, to enable itto · ·. • :J
\. :
reptecementsor for the · . . continue its voyage or flight·. . :-·
emer9.e,rlc.yrepair. · ··
·. . . . .. . .
25; Good:iexported fr.om the 1. Have not substantlany advanced In . · NIA
: ~ Phlllpplnesfor repair,· : value: · . er ..
· PfQ.C8S$'fngor. - 2. Subs~i:11..1ent1y reimported in its.; : .
... recondltionjng ·.original form and in the same.state; .··· .
. . -_ ... \ .
· 3. IF\ case it advanced in value, ·the·:·
· additional valueshall be subject to· . ·,
..... ..
, ...
.. .. . . . ·tne appropriate
.,· ...... - ..
.d(!ties 'and taxes,
• l ~ ..

26. Trailer.chassis.when.
·impq(te:d by sh.ippin·g
. companies for their .
._ excluslve' use in handling
· · 'contalnarlzed
, . . carpo.. . ·
.. ~

.........

';.7: Persom~I ahd ~ouseh~~d·_ Ji"\·~ 1.\1'.}i,:~~~~rr.:~ttI:avli7Jf~4{

. , e_ff~cts,.mcl.udmg 1_ .mbti{wt ' , .. er~~d'or pjr'9~${EJ.P.f1£~r}. ff,>' the
· 1' t~ .N IJ!!-: ·
J .· '\t .
1 .' ·
. ··· c:ifDFAem'Jllqyees, ·. ·\ . -~~r~~.t~fl,j~_rptss)~·t<'.W;;iulaJe. ·,.i · .. · .... · -,.., ..
·· members' of P.h_ilipplnf!l· of tl'\.if0r~~·qf.~f' ~~ . ~ /·..·. '. · .,., ·. '. · ·. ·.. ·
·. diplomatic ·mis~i'oi;is· ·\ ~-· e'n{9t~1(1;i:!1::.¥1.11;1,t.P.~,J~9is,fed i,r·. f_ . · .
. · iriclvdi!)g civi1.ormmta~.·· ,, .. ttPn~e~~a<!~~o:ernp~~I ·. • ·· .
. . ~tta_che~_or·ar:iyAFP·m1hta_ry;~~~-.:f'~x.e_mpt10.n,.§.t:lall.·a_pR.lY~e.?l~<;>?... : · .:;
. · personnel . · . ·· , . · .-~~-.. {~~~alue;gf,!_h¢lrrte.tw\c111:;i.and.- ,, :
·. -· ·..... ·,. :., .. . . :. . .. ··.'. . .. b:-"'~ aggr@aht'a!~sett:'v.~lue... .
· . . · .. ·. · .· · · . · . oftne-'J)~t-sor:iat"anclhous.el)ol.d· · ·
· ·· · .._'.. effects.not e'><ceedir{g 30%: o.f ttie
. ·.. ·· ' · · total .amount·receivEid by t.he · : · · ·
~ . . offiCe_r oi-.er:nplo}lee in salai-y ·an~~-. ·· · ·· ··· ".·, .. '
. a.llowl;IF).Ces.dliring·ttr~ la~~sf ::: . . . :. . '·: . ·..
.. ' · ·. ·._ . ~assignment at;,fOad·n.Qt-=·. ..:- 1
•

. . : ·exceedihg ,if years;:. ~ :_·. . . ·.: ..· ...

'>.·.
4. · it shall oot t;,e·.:av.aile,d' of ·more than.
'· ,. .... . .pITc·e··~very4 years;·.arid; . · .. . ., . ·.::·-··
:.· . ..- . ( .. ,.: . . ·~ .
~- ·. Ttie:afficer'or er:nploy1:1e' must hav.e·
·... se~_ed for not le~ {han z yea'rs.: :· . . .
' . . ~ .. .....

·." ..
,;
: .. ~ :

..
418 I .2019 S.AN BED.A
. ·LAW CENTRAUZED·
' - BAR. OPERATIONS
. .
 "fARlFF AND CUSTQ·.MS
SAN.BEDA LAW CENTRALIZED BA" ORERA1'10NS - ME/;)0/jYAiD ~0'11,1 ·
mstiaww,.,MGfi,,wcv;>&UIMffl:FWI . ···-····· ,·a ,...... ·+NMIW&f±W

'·f. Revenue v, · Pilipinas Shell Petroleum, G.R.

. 188~97; February 1f!1 2014).

Weights niay elther be: . . .

No .

. .
& .·. Classifi~atlon 6fCusto.m$ Duties ' 1. ·Gross ., ~eigtit., of :tl:ie same, together with· the
.1:. · 1. Regular Duties: ·- 'weight of all containers, packages, holders-and .' .:
,~ -. a .. Ad va/or~m; packing; of any, klnd, in. which .said'.articles are
J·
'f<. b-. · . · Sp~cific; .. eentalned. .held or " packed . at the. ·. time of
•· · 2 :Speciai Dutie~: (A-CoMapS): . importation CR.A. Nq, 19~7, Sec: ~02 (A)); ,
Ji-. '. a.. An.ti-dumpi'ng quties; · . · 2. Legal.~ weight of'. the .same, together with the ·
·• -b: .. Counteryi;!iling duties; ·w~ighf .. of. ~e immediate -confatners,'. holders ·..
·. · c... ·Marking duties; · · ·· . and/or-paqkir:,g in. whichsuch articles are usually · ·
. d:. Qiscriminatory dµtles'; or. / contained, ,,.;held . or-·. packed : at. . the . tima::,:of ': .
~· ..~afeguci,rp measurEis. ... ·. ' -· .Importatlon and/or;· when- lrriported ...Jo. retail
. . -, packages, at the lime· ·of- their: ~ale td :fhE:l 'p1,1bli.c
1. Regular Duties. , .. . . usual; retail quantities, . prov_ided, ", thaf y.,het,
T.,;1xes th,i;!t. are: . imposed. Qr 'assessed upon ." articles· are: packed in a ·sin'gle container; the .
.r:.-. merchandise from, or exported to. a f9reign country · w~ight of th.e latter ,shall be Included irrthe legal.
,·· tor.-'the _purpose 'of raising r~venu.e: (N_e$~1e PH~: .v.._.. . . weii:J~t (R:A. Ne. 193?,' Sec. 202 (B)); or
4. · · 'Gi;_urt of Appeels, . !3.R No: .86,73(l .. N'ove?'b~r .13,/;.';;,;. 3: ;N~t-~ a~tuai weighl."?fU;ie: articles _at-the. time of
f 1991).. · .. . , .·, · · . . ·"··"f}~t_ . lrnportatlon, · excluding the we1gJ1t of ..the.
{ , . · ·· · . · . . . · ·: · /~·/~/,.,·, ~-l~,· immediate and Jill Other containers•. holders or
, .:. a. Ad ;v;alorem DutY. - computed .b~~ed_ 01-plti;~'ti.~·lt.·!· ·. p'a~king (R,A N?· 1937, Sec. 202.(C)).. · ..
specified v_alue . of.. t~~ . goods· (Comm1ssJOf!e11, Pf':'i.~.4.:.-~.. .7 ..i',;--. :·. .. .. . . , .
Internal Rev,r1nue .v. P1flpmas·Shelf Pe~rofe~,1'G.8~_·1(1~J..!!?~~'.c~~iJ;~'?if~~\D.~ties . . .-: .. : . . :
No._ 188497,-Febr:uary .19, 2014). · .-,,,:<,.Y· · · . ?"·r, .A9d1tlonal'1mi;>C:'!rt duties.imposed· on specific kinds of ·
.. · · · · ·. ·.. ·. ....', (i~?...;,.. A•n:-· I..
· inipbrtli3d a~J~l~ ~nc;lE:r. 9e.rtain,co~diti_ons: (N.~tio?,al•
Cr.[ter:la.for the Determinatlpn of the..,\.~R~~~~e _,)-~1.~. Tax R.~se1f11 ~fnter. (2~16); G111de to Ph1/ippme-
Val~e . . . . . · . . .. /b ?M·< r,
. . ·. Ta;ce~-.R~Jfie'1f3f!:fto,:n .http.l/www.nfrc.g_ov,pf?). . . , .
1fY1ported gooc;l~ shall. b~ value~.t.t11>c'i~.or.!1a~:c.e. "'."igt · h?\ ·. J \\
· . :. JI·.· . . . . ·. ·
th'=! provisions·of Sec: 7q_1·ot~~s~· NP.t1:PB.6;3;(t,e.;-. ~-~-~ a . .-.An!{:@u(!lJilng~y · · · .
Tr.ansacfi<;m·. Value)·. when~i~~- ~:-.1he:.v.E9nd_~t!~ris·.
prescnp.~d therein ~re .fulfill_ed_·(R.~.:fte~~~?~63,.
:!';~/ A _sp~~\\~Hl~{~!t,'IP,,0Sed on· the im'part9~i.onof a
.$~~- · . ~.· ..pr~~ue~,;·c0mmooi1f.9r. arti~1e· of-comrnerc;e mto, the
700 (1)). . .. · ~::"-·~/"<-i./>.... .Y 'f'. F?.h.1h~pmes · at les;:i .thart its normal, value when
. ·. . · ·. · · .·,.:_r: ·.: t)·. ·_. ·, , -~r~<l~s!j{'ec:1for..domesti.c.con~':lmi:>tiorrin·th~ expo.rting
_Wher~ the cq~t?':1~ valu.e· c~nnot l::if,':'·~~rm~~ei;.:,,.?"ftHf,9-'"(!~~:f.J:l,ifh. is the .tUffer~nce·.between t~.e,.e~port
under.. the· prov1s1omr of Sec .. 701(•·,~f 1s .Jq,d>e--:--.!~prite~·and- lhe·· norm~J. value of.such product,.
deter~1ine~ ~y proceedi,n!;J s~qu.entialiY~t~ttj~~tle·... com,nc:>dity'or'a.rt.icle''(R.A.:N~. 8752, Sec. 3 (S)('.f)). •'
folf~"';ln!;J meth9ds under ·w.1')1~h the .;:o~tqw,:i valu.e . · · · · · · ·
c.a'l'J ):>e determined (/Vt No. 108.63; !3ec:, 700 .(2)). · · · ~ ·D~rt:iping.-: ci.cCQrS whe~' for.ejg'!"I producer~.sell'their.
· · · · · · · .- · · .· · ·· · · produc.ts ·to. ·an. ii'npo~er i~·th~~ dqmeStic niarket at
1: . Meth~d 1: Tran~a~tion\talue. · . ::· . . .'. · prices lower.t.han.in .thein>wn.~eitionalrriark~ts·, or at
2.'·. fy.tethod_·2: .Transactio.n \/~Ille bf Identical .Goo.ds ,, . P.rides·.: P.Eil<;>w- · co~t qf ·. pr~uction; .. :the .. sale 9r--
. 3 Methq~ _3: Transaction vc1!ue of Sln:iil~r Go~s · . · . :.· :·importati911~qf:whic;:h i,:ijures or threater.,is to _inJ~r~ a
4 Method .4; D~duct!ve Va.Jue ·. . · .· · . qqmestic indu~tr.y · produc.ing. like or cc;,mparable
5 .. ty1ethbd 5: r;;oinputed'Value· ·.. . , .· : ... ·. , products or ;retards ,the estab.,ish.m~nt·of, a potential
t: :· : 6. Method..6: Fallback·V.alu~ (R.A. ,No. 1.0863, Ser;s. ... : . indu'stry (R:A.- No.. 8752, Sec.. 3 (S)}. · .. · . . . . · ·
.l' . . · ... 701-70.f?). · . . . . . .· - ·. '.. . . ..
.:;, . · . R~quisites·.f~r 'th~ 1ipo~itlon ·.of·· Aritt..cfl..lf!'lpl~g· ...
<.
~· · Exc~p.t as p~qvid~d in s.ec. 704-~p~ R..·A,: No.: 1 Oi)63, it. . Duty: {EL.:DIR} . : ·: .. : · ·. . . ·. · .. ·: · ·
?. · is only when the customs .value cannot be <;1etemiined . . 1, . Wtiere a· prbduct·, .. commodity or . article of ·
f..... uiider-.the 'provisions. of a particular· method that the . . . commerce?' . - . ·. ·. . . . . ·- . .
;· . provisi.oris ofthe.Sec. 701 in'th·e,.ssquerice·. can__
be · ... _..:.. ·.·:·a .. Is . §xported.. ·:or· introduced il')to.. Jhe
,,. used.(R'.A,_'~o. 10863, se·c.?OO)... Philippines;· ".' · .· ... · ·
., b. ·. At an ex.port price hess than its normal.value-·
'.r ·: · b.-. Sp~dfic Duty ...:..conip~te~ based:on'.tt'!~d~tiaple ·· ... · . _iri the. ordinary course.bf trade;· and - ... · .
~: · ·:. weigtitof.gqods'(R.A. No. f~37,Sec;202): It Js base!;I'... ' c: · · WMn Destined for consumpti6n in.exporting

f. . . . . ...
• on the weigh~ c;>r vofume· capacity"and o.ther physical.
unit· of measurement (Commissioher of Internal-.
country; an'd . . . . .

[ 2019 sAN SEDA LAW CENTRAI..IZED BAR OPERATiONS I 419.

. . ··-· --------------·
 TA-RI.FF· ANO -CUSTOM:s
SAN BEDA :~w c"E:JirRALtzio BAR OPERATIONS.- ·MEMORY AID 20,9 .

2. .' Such exportation: Actioriab.le -S4bsidies - · Subsidies wh'ich ·have

a.. ls. causing or is threatenlnq to.cause material. adverse effect to the .. interests of·othe·r .. States· (i.e ..
a
!njury·to domestic industry; or· · . · · inj_!,!r:y to their dornestfo industry) · (At;reement on·
b. · Materially .Retards. the· establlshrnent of .a Subsidies_.andCountervailing.Me.aswefls;'Part II, Art. ·
. domesticindustry producinq thelike product 3.(1)). · ·
(R.A:· No. 87.52,· Sec. 3_.(A))'. · : . ' ·
.Non-acti.cfnable Subsidies . .: . Refers t~. subsidies ·
· ,No~e; T_h_t;?. provisions of RA. No·. 87~2, otherwise ·protected from counter,:ailing action· eith~r·because
known .as the "Anti~Dumpirig Act 'of. 1999",: are .: " they areconsldered to 'be 9f-p13itl'cula.r va~O.e .ah_d° hot
. . . adopted..by" R.A. No. to8.63. (f?.A. No. ·10863, ·Sec: ' . ·. · to be discouraged or be<?aliseth~y -are considered to
7f1). · · · :.· · · · _have no, ()r atmost m1'ri1m<'.3l, trade-dlstortinq effects
, .. ' or productioneffects (J.A.'0:-No: 02-.00; Sec:2 (K)).
AmounJof.Duty: '·. ·. . . . . . ' .. : . . . _._: ... : . ··.. · ... '. ··.:,: :,
A!lti.'clurhpfng puty·=·Nor,-nal Yalu~ - f:;xport Price. · .. · Pr~hibi_ted.s.ub~idies·_:.:. Ex~ept as provided _iri th~.
· (R.f>,. No. 8752,.Si:ic. ·3 (A)):: . · . .·· · · · . :. -, '~greemeilt· of _·AgriclJlture, the _foll6wir:ig subsidies
.· · · · · , · · ·· · · -·.. . · ·. ·- · shall be pr.ohibited: . ·· . ·- · ..
·· The , amount. of' the ·anti-damping'.,cluty. s~all not . 1.'_.-Subsidies :co.ntinge~'t-upon export performance:
exceed the margin -of ~unip!ng. However, .ltmay be· · · and . , ·.. ,. · · · · ·: · . .' · . ." · · . · · · . · · · .
·· less . t~an .the margin if: such lesser- ?.u.ty :_.w~~!3'"-=--""',s,Q~~u~_si_d_ies
adequate. t~· ~e!lloy·e the. injury. to. t_he4Jomeshq TU }..,
.. cor:i~ingen_t ·_llpo~ the _use .of .do,:i:i~~ti~. .
''?~l:¥U,P.Orted'goqd;.(Awe~ment :'?'! ~1:1_bs1d1es
p\,..,-,......=-,,,-~:4
·
.industry (R.f'., 'NG. 87.52, Sec. 3 (A)). ~
· · - .. · ...
l.;,po~i_ng:Auth_ority: ·_ ·:: '. </,,r:.\
· ·' ·
·

...
. -~~- ':-'<\
Y/,.:;<
1,,
.,,_;..~_:Kln~~o(ii1~ifi,~\~ubsidy:'(B_S2} -. , ~.
Ir >-,. · · · · · ·
J.:\,.,fm.(I·Or/iln{erva,h,:rgMeasures, Part·J/, Arl.-3 (1)).

•• . ,
· ·
1 .. Secretary . ·of · Trad~ · an_1>1~~_,s'i.w'·,l'".,,..'ffon-:- ~t· "f."'~C:l\ln_{y~ ..2c~~l;:~wardp~id to an. e?(porter or
. . agricultural prod~cts;_ or ..... I~{) ,~.-j · .. ID) ·. ~ r:rianV.act\J,"t=:ff-..:i~\ ·:. ·.. ·., . . · '·. · ..
2 .. se·~retary.of ~g~1cul\uw{ag.ricult6ral_p.fod1;1cts::· . : 2"fi: ~ubsJ~Y -:>,~~;~~a:I,
1.ricer.it1v_es.not in ,h~ form of
3. _T~nff_ Co~r:n1ss10,:i -· T~E1Jp~&.i~ifn of .vt!J.e.tb:~ ''-~~-r~ast€!_ward.\toenoour~ge manufacturecs ·.:
.. nQt . to impose _antr-tl1,uppiap · dutyt is_~,,&iq~ .· .. o_r:_ex~rters;1a,p..~ t . . ,· · , .· ·
. prer.Qgativ,e of tht:f-rari~-_'~~ission'.wh~n<\f'~~\· t'..~ub'{e_n~!Oil arw~·_as_sist13nc~; ,~the(_ t_~a1:i' ~ ·.·' n-;_ i.
. found t"1at: · :.. : . ~ <::~:~ h\- ·.... '..I ~~bouQW~ s_u!!>~1ay1ghV~n:~Y tpe ,goveroi:nei:it f9r.-. ·. 11
a. ·.Th~: _pric~ of _·the\ i~~rte<l\.,...p.l'_lr~Le.s.;;..J-:>---~. · J!:L~~ef.~a-~1ti.re. ~rtor·exportat1dn:·of ~ri °'l.rtic::le ·. 11··
{fl9/.~J:
. cfehbe:atel_Y or con!i.Q~YJf\f~cf"~e~~
. the _f~1r. market val_y~_or·cost o~J3
·... • ac:id·. ..0
·.
, •• • • _- •• · '- ..•
t~a~
• ••• \.
i,~~~
•· •
~*~'§
_,.,~f'l'.4(~~~
°"'""
(( -~~
14J!~v. 30~}- . ·. : . . .. . · ·. ·.- . .
· · /,!. . . ·
.J,~!I f ...
> . . :. · ..
o~ D"'uty:Eq~1valent 1!) th!;l boul)ty,- su,bs1dy · .
· -: .·· ..
t
. : . . b:· "1"'1~ l~J)ortati~n· wruJ_d°'~i~us.~)>~lk~ly.'Cal:l,~__;J?.f,iS~; ent~n. (P.f?. 110.
1464; Sec. 302).·_ --~ ·:. ·, .•
: .· :_an ·lnJUr_y·to lo?~I, l~du_~~e~ ·engag(~(i~f.J.:Ftn~._r-,<',.,;!7- ·.' ·. i.'- . : ; . i ,· _· .. ·..
. : · _.rpanufacture, or: ·p~oduct1o~of.~~r'¥'"m~or-~e.9,V•~1~s~7-~~or.the lh'lJ>.?~!t)on "'Of·. · tt_,e.
· · · ·. : ·: -.. si~i)ar. al'licl.es ·;or_-· · · p~¥/nf6",ll th~::cit~n\e~~~~uty: {LI) . , ·., ·,.' ·· · .. · .
· · · · .. · ·. :esy;1b!ishm~1Jt.(R:JJ.. No. 87~7, s~-o~(A?).·. },/fJ\~Vti':t¥a-vy_.ol'c:n :excis_e_·_or Inland. tax .Qh· lo~I...
. · · , .· .- . .<.: .· ~- ·. :: . · _ .. :· .'.. ~""-. . _.--=-~"-~0'??50f\he_sa.~eor..s1m1lar·~l?ssasthe~qic!!;ls
.. b. l;ou_nterva1hngJJuty · · ·.. · . :· . · · imported q( the .grant _of subsidy to the foreign·
._A sp_e~far··~uti·'imJ?OSe~-.whe.oev~·r'.~'nY.'arti~I~ 'of_.·.:.,· -expo1~r"l?y_hi~·g?~~r~inent;a_nd ,, .•. : · ...
· .commerce· ·~·.gra!,lte_d·: dsrec~fy o.r.:1.hdirectly _'by_:th.e... -2.. The. 1~~:o.rt~t)on. 1s_. .-h~~IY, ._to .!nJure_ mat~nallit
. gqver~tl'}EmrIll th~·- coun_try .of or_1gm :o_r: ~XPOfl.~tiO!l,.· ·. est~bl!shed. :local -_i_nd~stnes. _or .. prey~nt · th_e1,r· .
any kind_. or. f9rm of ,·specific .subsidy· up.ci'n t!;l:e·:' · .. establishment (P.D.- (Vp. _1464, Sec-:3P2)s,". ·. _- ..
. production, .mariu"tacture or.'. "exp.ort~tioh :of such ' ' : ·: . : ... '.·.. . ·., . . . . . . ... . -' ,
· · proi:fuct, com'moditY. or articlEdind·the,·imporfation· of · : · lmposJrig Autllorrty:: · '. . . .
' suet, _sub~idized·-product or· artlcle·has caused-·_'6i" ·· ··1.· .S~_cretary- of Trade·: and. lndystry. - ·n~fri-.-:
·.threatens to. caus.e,1)1ateriaJ:injL1ry"to.,:a.domestlc:: .· .·.~Qri~u_Jt_ural_propucts;or :: . '... · ' ' .
· industr:y ·. or has ·materially .'r~farc!'ed . the- grci','i,th ·or.' .... · 2: ·
$!::)cretary 9f:A.9ricu_lture\:~gricultural _pt9ducts. . .'
prevents ·the. e~tablish·ment· of a.-:dor,:i,estic -in_dustry .. · 3; · T~iff Commissjo~ ~.Th~. cj_ecisioo of: wti~ther_.o~ ·
··r~.A. No. -87,51, Sec. 1) .. · , :. · · ... :: .. . . ·not· ·_to .. :impose'·· ant~qn'lping . duty. i.s .'1he
· · · · · pferogafi_v_e,..-oftJ:le Tariff ~qcnm'is_i:;ipn (R.A. No..
.' . ·s'ub~id~.· - 'any. Spe~ific assistance (e.g., financial :. · . · · .. 8751';:_Sec. 1). . . ... ·
co_nt~if;)u_tion:·· (ncom~ "6( piicft . sypport sch~mM) · . . ,- ... '· . . :· . .
. dire9~Jy or. indJrectly provided .oy the gciv.erri_ment ·9( · : . D~ratio.n ,, ~~cl. _·Re.v.ie~. :.~f ··_c_ounfen;.~iii~g :Dµty ·
tf:le c~:iui:1try·-.6f ex'port · or ori.9in in respect. of the : General Rul_e; Any ir'np-ositio!lof .c;ounteryailin"i,J duty' : ..
· product.. l_n:iported· into ' the · Philip_pim:!°s ·'(Joint . s.hall. remain.in f<:>rc~ only,as.10119·:as ~na· t9 t~e ·e::dent'
_Apmlnistra(ive .Order No.: 02-00, Sec. ·2- '(SJ)' necessary·'(~.A. No._8751,.Sec. ·1 (P)). , ·. · ··
fher.einafterJ.A. D_J. · · · · ·· · ' ·· · · ·

420 I 2019 SAN-BEDP,~W

. . CENTRALIZED-BAR
. OPERA~IONS
. ..
 ... ·· e, '•.
.,. •. • .. :·

-TA.RlFF AN-D.CUSTOtwi·S· .:
{[<. . . ~5 . . If ... SAN 8£0.A-tAWtEN;i:tZED BA::ERATIONS _. M:O~.y ~ID .t9;9, . . . W-Tfl'll".

'( However,.the need .:of its continued imposition may be 5.

ihe: mar.king .of the. contaiher of such article will
''r r~viewed -by the Commlsslon when warranted, motu reasonably indicate m·e Qngin of such article~ · ·
l': piopriq or upon dlrectlon of. the· .Secretary. Aoy · .. e.
Such article is to be Processed In the Philippines .
~{ :interes!ed. party mav also. petltionthe Secretaryfor i3 by the importe~ or forhis own account and not for
1~,--·review_. (?f the ·. continued . imposition of . the the ourpose of conceallnq · the -orlqirr 'of 'such
t :counteniailihg duty, ·p~m,:ided,that at least 6 months article; . ~ ·' · ·. · ·· . · · · ·
i;:. · h.ave · elapsed · since .the · lmposltion- · and upon 7.. Sucharticle Is for tt)e.!J.~e ofihe lrnporter and not
•,~:"- subrnleslori of'posltive lnforrriation_st:.1bstantia~ng the Intended for sale in its imported or other form;
~;}:: rie.ed for a review (fM. No:··8751, Sec. 1 (P)). · 8. . Th-~ ultihlale pi.'irchaser;· by. the 'character of -the
;t . .. . ·. . · ." . :: . . .: :· . . . . . . . :
artlcle, __ must 'necessarily "Know :the ,coun~l'y of
f. Exception; Any . countervallinq · duty shall. be origin of such article; . · . · . . · ..
-t- termin_ated on a.date' riot laterthan 5;years'from the· 9. Such article cannot be marked ~fler'irr'lportation
,,, date .of its lmpcsltlon (or from. t~e date of. the· most ."except at an expense _ecoriomlcally proh:ibifoie,
i. ·:recenf revi~y.r. · if .that review has · covered· both. · · .and: the· ·failure· .fo .mark the· article before
/-. : subsidization and · material inj!Jry), unless · the . iri)portation w;:is not' due to eny· p\.frpo~e 'o.f the.
( .. Coi:rmil~S_ionh;:is i;letennined, in. a rE:iview :·initi<!ted <ill. , im_porter, · proclucer, s_eller-,' pr shipper · to avc;iid .
if.:. _least~ mq-riths prior to the.termination date.uppn the . ,compliance; and · · . · . .- . . _. · · ·
,~· dir~ction .. of t_he. Sf}cretary or !Jpon : a· . duly 10: ·such article was produced more than 20 yea.rs·.
substantiated:request _by:Or ~n behalf of.the dome;;'~lc.· · , prior to its fmpor:tati6ri intci the' Phjlippines (R.A. ·.
iridl,JStfy, that the,.termins'ition- ·or the·· countervailirg;/;.;) ·}:,.Jo: 1-08?3, Sec. 7.10·.(A)(3)). . ·
d~.tywill'°likely _lead to the .continuation or-.recurren¢.e,/~{- ·. . . ..
in
'i:·• of· the_ -~ubs°klization.-a~d m·ateri'al Jury·. {R:A./tl~·(t.ti:1-\ 1!1· .lhese ·sit~ati~ns, the imm·e<;ljate·co"rit~iner ?r such
.\ . 8151,.Se.c. 1 (!?)). : . . . . .:. 1!'.\'"/rf!:;..l'i3oth~r contame~(s.).of. the article .Shan be .the one
i:· . · · · ·. : . . . _-. · . . . · .. · --· . . . .. ) /, ~};
w. c. M,arRlngDuty · .
:::::~~~~J'i~-~
J1
to m.~~~11')9 (R.A.~o.-1086.3;~e.c. 710 (q}). .
· ·. · . .':9' l.-;,·. µ.,-,..r..,__ctr,;,;,~,.l}!1 ·~ . : · ,
"!:. · Additi¢_nal-customsduties.imposed on for.eigiVarticles-: f.1 . d. · ·Di~criini_9\toryDuty .: : · ·· : · ·
t (or· its container if. tr,_e arti~l.e.itselfcan~9fti~marke,~~---1t A .duty impcij~ upori articles of a foreign country I
\

)' · not mar.ked i_nany officiaHahguag~.of fie.;P.hilipP.injs-:-t\ - which·_discrjf!lifat~~-again.st Philippine. c_ommerce in .

:(- · ;3nd ·in '.a con~picuous. p!a~e· ~s :1~~l~~-.•;1~P,1.)i~(9:"an~. 'H·
·sue~.· a..,:~':':TI~r\to . place· it. at _- a .disadvan_t~ge · l·.
~: permaqentJy· 1n .such -~qnner,.~.$".~to· md1<;afe.:io ·<;!? . f"."'l comparefw,tt t~~- co_mm~r~·-·of· ano~.er 1?re1gn· · ..
1· ... t.Jltin'late p_ur?h_aser.in' t~e.· PJ(1WP9in~s~1,Q~~ n·arve of. f~';l
COf:'0~'{.JN~~li:J.:..~,J!Pra af'996)-. .·. . . . : . . . . .. .·.
{. - ·.COl,mtry of 0Jl911) 0f.the art1cJ.e·~.A:"-N'(?. .$~~~63,..Se.x· .· -r,r~ ' · ·., ···;;.~. l'~,_;~t~.1·:,.r"f(. . .,.- .... · .
~-'>., :
r .· _:P~~~~~~~- .T~:
!.; :~- 710). ,. ·.

~: (JNG'-cES,'supra at·5~4J..
· . : '.

· ., · . ·· ; · ·: • · · · · ·. · · ·· ·
.
· ~

p-~~~e~_t-~e~~pti~~-1~~;:d1\~~t~·;··
. ~,.-;f..Y.
. · <ii(.
0
:-•~u ·· ~·:J lmpi:>sitrdil~.Ut!',:t:w-"". ·. · ·.

_....,._.
·iit~~;~jd~~/~!~Zi1
. ·.- : .
_fi;~.t~s·: ;ait~~i.~~~h~:tunn~;(c1ri~e
--H~~'t,:-:Jtt!.P:fW.~~·· ·d1rec~ly -br ··mcJirectly,, upon- · an'y
;.;_~?."'_.. . . . ., ..~~-'~~-Ptirbpplf'ie---· product. ~nrei3-sooable · · c:har.ge, ·
·
,.·
!·

J·. . ~C?Utlt of Out~:-Five·(5%) ad valbiem~~\ttlefc\!1fcles. . ·... : ~xa1::U!Jn;· Jegul~tio_r:i,"or, li~itatio~· whic~ is: ne1t ·
-which shall'be deemecfto have accrued a,t{!t:l.!!Jme of · · . eq1,1ally ei:iforced uponc- hke. articles of- 9ther
impbrtatlon (R.A. No. 10863; Sec: 710 (C)).~· . . . · .fpre.jgn:~ountries; o.i' ·:· . . . .· ·. :·.. . . '
. . . - . . . . . . . ·.. ·· . · :2. 'QJscrimin'at~l?in fact against the commerceof the
Ttie failur.EfOT r-efusal of the"owner.or imµor:t~rto'mark.. .: . .Philip'piri-es! .. as ·.to, pll:ice· "the·. Philippirji:is ,at· a ·.
·. the· article·s··as hereiri reqllir.ed within a period of'30 . ·. · · disadvantage compar-ed-. with the .c.or:nrr1er~e .of:
·days J;tfter .~ue.-n~ti~ ·stfa'II con.stitClte·as· an act of . ·. . · , ~riy .fore1gn couritr.y (~.A. ·_No.. 1 QB(/$. Sec . .,714 · .
. abandonment'
... . . .· .
of said articles
.
.. (R.A
r
No. ·10863,
..
.Sec., : · ~ . . {A)).. . .. ~ ..
.
71.0. (E)Jt . . .... ". . : . ~ .~ ·.
-Am~unt of_ [,).ijty: .f\!ot ex<;ee_ding 1'00% ad:11alorem
.;· .. lmpos(ng .. Aut~o'r-ity: Co~-~i~sio~_eir··.o{ Customs. ; _upo!') !Ae g~C>Qs.(R.A. No. ·1.q863;.Sec: 714 (A)):. ·
-~: ·
. . ··,. .
t; .(R.A.:No
. . ·. .... 10,863,
. .Sec.
. 7_40 . (A)).
. . :. : . · .· · . ·
. . ·. ·. · · ·
. .inipo$ing .. Aut1~~rity: · 1'.he_. President thro~·gh ·a.
\'_ . .- Except_fons t~ Marking-Duly_:·(Pi~CQ-PUKA2of : , . :propla.rnatio"n
.
(R:A. No. . 1Q86$):·:·
. .
·. . . . .. ·. ·. . .·
~< .' . 1. . The ·ar;ticl_e·caf!not be marked friar to importation .·::. . ·,;· .: . ·. . .
·f . . to ·the .Philippin~s· . except at an·· . expense. Any.. prpclamation. is$ue_d· under Sec. 7H. b(R,A:'No.
·: e·conomically:prohibitiv~fof its Jmpo_rtatjon;·.' .... _ . 108p3_may,-subjecf to the discretion of the Preside~l•..
ot
·2. . The·:articl.e is !ncap1;1bl¢ bEiing marked; . ·, . . . · extend to~- ·. . . ,. · · · · · . · :
·3 .. -The-article caJ:iiibt be·mar:l(ed.priorfo importation· .{. . · T.he whole .6f any foreigri country; or . · . . . ,·
: to the Philippf/iis without"Injury;·.. :.·.' . . . . . ·2:· Any subpivisiql"!(s) the_r:eof (R.A. No., 10863, Sec.
4 .. Tbe_a.rticl~ i_s bl a:gruqe subst,in.ce;-~. 7141C)). . ..

.:

· .. ·

..... -·-------------------------·
 .TARI FF. "AN o·:. .c:US.TO MS.
· SAN BEDA. LAW CENTRALIZED BAR OPERAT/ONS.- MEMORYAID 2019 .. ·
·,,~er .. '• .. ri a~, # . . ±hili!MMPfiiiiEO\I #'±:*
.,r. after the imposition of discriminatory duties, the. · · d. One .or more. appropriate ·, adjustment
foreign -. · country maintained .' .or. increased · lts. .' . measure, including Into 'the provision or"
dlscrlrnlnation. against commerce of .the Philippines. .. _tr_ad~; and . . .· .
the President is· authorized to exclude the product -Of · e. ·.·Any combination- pf action· described in
· such country from importation into the, Philippines- py· .. ·· subparaqraph {a) to {d) (R.A.· No. 8800, Sec.
virtue of-a further proclamation (R.A.'No. 10863,-Sec. · .... 13). ,·: . .
~14 (B)). .. . . '. . .
._"fmposing Autho'ri~{ ·
Arlicles.i~ported in·v1ol~tion of this provislonshall be ·1'.: ·secretary · of Trade.. and 'lnoustry non-
forfeit~~ 'in _fa.vqr o( th'e .Government (R.A. No.-JO!J.63, ·. · · aqricultural product; or . ·
Sec: 714·(0))".. · ·. · · · ·. 2. Secretary -of. Agricultu.r.e .: agricultural ·p~oduct
. ·.
", (R.-A. fl_lo. 8800, Sec -. 4.(fl!)).. . . . .
~- . ~-~feguar~.Duty . . . . . .
. Safeg.uarc;1: .r.,easµres - .trade remedy measures · · $pecial_ "'. Saf.e·g.uard Me.asure for · Agricultural -- ·
· ~dppted,. by· the government , to provide affected · . ·. Producta: · ·
·.do_me·S.fi.Ci.n~us~iesre_li~f against imports. (R(A.. No. It ·.is,·a'· duty imposed" on: an~.agticultural product:
8860, ·se~. 2). . : · . · .· ... · . · , . ·. · '. ·.. .conslstent .: with . Ptiilippine. international treaty
. . . . obligations, when: · . · · .. .
~enerat' Sa_fegu~rd .Measures. - lmposed ~gaj!l§!~ ..=f ··cumu!atiye fmport .. volume. in a. 'glv~n · year
in:iports,.ifttre products at iss:ueare bei!)g.jmpO"rfed inlJ.,.·· ~~crs, its: trigger v9_l_um·e· subject to the
such inc'r~aS.·e9qua_nti~es,.either abso),_l}te-'or:~~tive . .. ~ '1corj'ditf9h~~tatedin" S_ec. ·23_ of R.A. Nq. 8800,_ or
to-domestic pro~tuct1on,.and under SyP~~1t1'bn_~'!:=r--=~t6:.1'.lQt 9-0.nci,irrently;and ·. ·. . . :.. · ·
to cause _or. threaten to t;:aus~:sirf9t1s l?.ij.1:1hv·to_the.· . · · 2. Aeb._J~~§-P~!'~i.Jra'nc~. freJght_{Clf) imp9rt pric-e- ·
domestic. ind':J_Stry_-(R.~."No\ 880,J,), Se~5)~,~'"'."'~r.. _-=--i~~~~~gn:;_f~ ·_t.i'i1;:,ger'. price subje-?t- .to the'
· , . . . ·. . · . 1f ;:j~ ~~ ./ . TI;.') (·.- · 'o/-"'. cona1tion~·ft~!J;ld\ tn Sec. _24 .. of -:R:A. ·No. 8~00
~_pecial:-_·~~fe_guard. M~_asu-~''s.~i.~pose~ _aga·i,r,i.st ~ L-"1\: (R,A.\fVo:'88Q(J,· Sfi.,q. 21). . . · . · . . .
1mportat!ons . of.. agr1cu1ty al ypr-oouctsj :y..,ho.seri-).{;j. · ... · ~ · . ~~ (Jf}~ ' .· . ·
qua_ntitativ_e.. i~port '. rest.r.i_ciS°p~· fe~fJ:,
~ori?.~Tf¥:-J~r·11'1JP. .. ~~m.g .
Au_t%q!J!Y:~-~ Se~retary. of_ Agriculture
(ta~ffled) . 1nt_o.~· ordrn~ry- :·ff.i%_s~o~~ · d1,1~~-s .~cl?__jl
Gt1i{~.ugh·~e :.See{,et~ry..,<f·Finance (R,:Y,. No. 8_800,
aQrf9ylturaf prb~.u~ts ·-desigpatfP) ~with ·thn syo11J~~~- 21)/fl .... K ~.......-'."j·-~ .. · · · · _.· · ·· .
· "SSG'' · in_ tf]e·.GATT Schei:l~f!ot,.pon s~}>~s (R.A ·· --... . . -:_j J1Z3'> fl . · ~ 11 -· · · · · . .
No.._8~00,_Seo .. _21). . ·\~- CJ)"\··, '2)~~-
. ·.[4· Jr:~~Y/~;."1?7.:}~'{
·. ·.· . _._· I:
.. _PUl".J?~S~:~f Im.position··._. .. ·.... · . ·._' • \ ~~~~- I ~ ~x~~-··fpi1·:x1:g LE- 1 CLAUS-~ L
·. :ro, 1>,r?mpte.· the, cqmpetiti ~mesl. ~,i -1. I1 -
industn~s:·~n~ prodoe.ers· bas~q\~n SO!Jn(i;Jni:IR_sJte
.·arJd the efficien~µ~e of.hli('f'!ah, na~a1·a~~Ie-~tm.tca1.{.
rpe]_tc~/,
-ru~ . - "1 . / ·:. _ :' P_ . ·
h , . :. .
i . ~~~;,>'Tl)e~~~F~ss
, .I:· . :
: . :.
..
·may;. by. l~w. authori~e_._V,e
.
. ..
..

· fesourc~s ('1.A: _No. 880Q, Sec. 2)-. ; "{' J}/'-) ·-=-~""""'...-~Prfs1.GtEt[1~"~~1!J._~,w1~hm spe_~,fi~? l!m •t~'. arid _s"i.~bJect-to.
. · ·. : · ·, ... : : ·· .. ·. '.. . . .. . · . · ·V .{ .
. . Tw~ Types.Qf s_afe_guardDuti~s-. . . . -S~
1 M
... _.
s\J_c1'f:,Jlp11t,tie>,:is.
Eiflff;_foltes,
al_ld restn_.chons a_s ,t mc;1y. :1mpose,..
.. irtlJ:?Ort .a_nd_ .expo~ quoJas, tonn.~g: anf:l ..
.1..- · General safegu!3rd !'Tle~sure . · ·. · . .. ·_:=~w~rfaged!JeS, and ottier_tluti~~,or imposts w1thm the ..
'2:·. Speci9J'safeguard:m_easure. ·: .• :·: :. . . frame\V-Ork of tp~ natlonal.,deve!opm,ent.j>rogram.~f.
.. .. · · _. : .. ,.. . . · · - . . . . · :. . ·. .. .::-. . · ·. the Government (CONST.,;l\rt. vr,: S~c. 28, Par.-2).
_Jiefl~r.a.l~.afegu.ard~e~_~t:ir~(~.'A.Nq; 8800 known . . ·.. : _ . . . . . . , . ·.. . . .. : ·. .
as Safeguard·Measures Act of 20001 ~~c: 5)' . . • .. · . Under the Flexrt?le Giause, .. the President is
. . ,' . . '. . . enipow.ered to: . . . . . . . . .
· All'lt>unt ofOuty: · : . ... .1 :· lhct13i'3_se; reduce.- 9r ·remove, existir1g_ protective
·1 .. firov.islor,a_l.Duty:-.Jhe,tatiffincr.ease,either ad.. . : . r~tes..of·import; dutie~ including._t_he ~ecessary.
or
vflforerri specific, qr. _both, to be pc;iid through-a · .. ·• .. chang·es in the cra~siOcatjon; : · ··
Ca$ll:'bcin_~J;etat:a fe_vel.:s_uffi~lenppredr4;1ss· or. ·. · .·. :· .···: . ; ; ··· :·J. · ' . _ . . . : . . . ..
:"·~ .. :=. .Pr~'!e.r.1t injuryt~ the ·dorn~~t~c _ih~~stry. (R.1r· Np_. . ~ ·. ·con~1t1on_! The! 1ncreas.e9_.rate shaJI .not exceed
. . .. . . ct8oo;. Sec. 8): . . · ·. · . . · · .· . · ·. t00% ·aa va_torem.: : ··_..
:·.: · ·2 ... D~flnltive·:outy- .. ·.· · · ~ . . · . · :-'-:- .· --
. _. ',:"".~·:· p.nincrease in, o'r imposition of.
·qny duty.on ... 2 .. "Establish fmport qu_ota 'Qr. llan. inip()_rt of any·
: .. ' · .... the'·imported product; . . : '. . . . .· . : . . . commodity ~_frenever necessary;. and
. b. A decrease in .or.fue·i.mposition of tariff;ra.te a
··.' . quota.orl'!he product;· . ' . · · 3.' 1r:iJo~e adc:1itipna1·:c1uty_ pn ·M 1~P.Qrts.;whene~er.
c .. A mowfi~th;>n or .. inip6sitiOiJ .. of_. any. · · ·n~C_es~_ary (~-~· NP_. 1086~, Sf3C. 1~08 (A)).
qtiantita~fve· restriction on ~he importation of
the product in.to.the Philipp_in~_s;·

422 i. ?019 SAN BEDA LAW<:ENTRALIZED BAR.OPERATIONS

 HA

·.TA.RIFF AN.o~Cus~OMs .· . ~~Jl~,1~1~~:

. -SAN BEDA LA\_¥CENTRALIZED,DAR OPEllATIONS - MEMORY AID 2019·
. · ·. · . -. , ~. ,., . \
. , . w+21cw>tjWe1 Rf . sL«WiZfl;!E'*"!+ttt;;sem,,wctttsw•,r~~ :J • : "

:, ..Co.,:tditloli:.Additional duty shall not exceed 10%

ad
. valorfl"!. . .(R.A
. .
N,o... 108.63,.
.
Sec.
.· . .
1Q08.(A)).
. . ·· .
~~. . .
f~ Re.qui.sites. for· _th·~ E~ercise:=of !he: '.Pow~~: (IR-
~-: CPR) . .. · ., . . . · . . · , .· ~ · ·
'' 1. In the [nterest of ·general -welfare, and natlonal · ·.
security· and . . . . . : . . : ... : . '
?·· --~ecom~end~tl9~:of NEDA , · _: . .
3.. Eietor-e subrnlsslon ·.of ttie · recommendation of =

. .' NEPA,. the T~irlf(Comrnission shall .~onduct an

.-'. .. investigation." . ,. -.. ··.. . .
. .•
_f: 4. f.t:iblic·h~~ring·bythe,Tar_iffCo.mmission-st)all be· ... .. :, ... ·,·.·
-. held, wherein interested. parties shall be'. aff.orded ·; -:· ·. :· :·: :_ .
.reasonable oppor.1unitY: to-be present, produce
" : e\ijct·ence;,and be heard. . -,. . ·. . . . . : .
I, .s·.·,·;Th~ Report of the ;co.mmissioh shall be submitted ·
{~· . ;___ to NEDA wit_hin. 31:'.l"dayi;' after the. termlnatlon.of'
. ·, · 't.~e public hearing (R.A. No: 1-C:J863, 'sec: .1698
•.. '"(8))·"· ... ' . . . ' . . . . ·.. :..
f .. ·· ... · . . . . ... ·. ·; ·. •,. ·... /'"\ j,
{:"- · . ~~~ptiop: · '.R.ec~mmend~tio~-,.: of NEDA .. is
' required h1 -the. imposltlon of' additional
;~4"%t~1.
du_ty,::_1:10,(.:,.,.,, .
.-.,-.: r
exceeding 10-% acf .Val~jem (R:A. No. 1086.3;l$ilc:·"' 1,, .. ,'JJ' ~ · . ·

t_· 1~?~<~)r>:, . .
t,· ._Eff~cti.vlty_of Order lss·ued.,b)'the
\·;- .. _ :i .". ·.- .: >'J(~?\r~t~;2~~(;~
.Pr~~!~r··. .f l . · ·;·"';--·:>?;~
'C, f. For a~. ~ncrease,_ re~u9t!on, ?r· re_msE>J~l-Qf e:c1st1Q,9;;_iJ.J, . J'W~,
rprotective- rates ·and)_he: 1rnpos~!~l'J{1~~---•mP,pt:t h. II .!'i_ \_
' . quot~~-_qr ban_.;_ 30 ~ays.after. p,r.~_r;:i~!.~tlt1n!and . 1:~ // .u! . \•
~· · Imposition .of additionap,1u)~f.l'6t ia~Ce@~ifi~ 10~
. _ad -valor!J_m"'-. at the ~1s~eu,q.r.r ofl!Ji"'e,pre~lden~_. ~~.>\ : . : .. ,;.,....JL_;;j\_ ..
c:~. . :-:&
l . 11 _- \ . •. · ... ..

. (R.A.· N9. 1-0863, $ec,. 1608.' (CJ)?""' ..t,,.~ ~"~ h°'J . ·_. <;;,;:-.,.. va.~#?•c.,,A,,f1P · ·
: .· .. - · · .. ....--i_ :~-- .pf.\. t"t~ · ~..!:!";'.'r,ut~:-<.s.Y ,. ·· ..

; . ;.:-: . . . . :_.. : ~:~~,..--- -·--·<p. . <~. _· ·tiL~~- . .-.--~· ··.·

.• ..
" .
. l • .,Ii·"/, · -- .
.. • -~ ""·'!Jjp-'
1,··~,. .... __
· I _;.....(41-1,"1-, .':., 't,'~~~i '\-..-..,.~··
·
: .. :. · ,it:~; ... ,;u.:.i,£2:...u:••..a ..i.±Q
, · /~-'t.-~~..,
: ),"ri' /,r''. . . ·.·
\:1 " . Ji,( . · .. ·.. . . : . .. . . ..; ... ~--. •,

~..:-"2~? ..J•o1i . .
.~-- ., •' ~I \

••• '!'" ••
.-

.·· .. ·· .. ~
.... ··.
;{.
"·.•::. ··: ..

,•' ...
.'
,,

. :~ .

·':·
.'···'
2019 I . 423
·. .
SAN 81:=DA LAW CENTRAU~!;Q. t;3AR 9PE~ TIONS
. . ~ . . . ~
 TARIFF AND.C.USTOMS-
SAN BEDA I.AW CENT_RALl:tEDBAR OPERATION~~ MEMORYAID 2019

•• ftq
'
WIN &W&IM. & 1!I

·. ·Ta'ble 3 - Comparlaon _(if ~l!st~rns _Dutie~· :·

.· .. :·

lm°i'>orted.·..
·goods sold .. subsidy in the .
below its- · · exportinq country
'normal · ·
value:·'··
.... .
.. ·.·

...~ - '
....

.· '

. ··:
.. ·/

.. ,.:.

Exp(!rt· . -_.> A~ount

prlce'-, ._· · . .subsidy
-Normai · ·
.prlce

., -.

.. ·.,.
-.:- s :

.. ·,.
• !'· .

Note: See
discussi6rrs · _..
....
abQ.VEI. _'. L
: . . ·:
,,•',
,• · ... -:»
·. -, ,"

· ~~ . :.
.. ·.:

-- 1,·.

,'

\
424 ?019 SAN. BEO'A-.tA~;S:ENTRALIZED_. BAR Ol?ERA"flONS.
 TARtFF·AND. CUSTdM·s·
.SAN B£DA LAW°C£NTR11VZ£D BAR OPERAT/0,NS·- MEMORY AID 2019
. \ .

!;iecretary of Trade;and i. · .Gen'er,:1{ -

.
·1nc1~stry, Secretary·qt ·. · . .. Secretary of . .
Agricul\ure;
. .
Tariff Cornmisslon
. . ·:
·· Trade.arid . •
.:. ln'ct'ustry; .. .
.- s·ecretary 'ot •,.,
.. Agriculture
2 .. ~pecial.:... .
..
-;: ~
.· · .. / ~";~

... "
·'
-, .. · . Sec.ret~:ny of · •'•: . .
::

.··
· . . .. A.9ric~l°tu~~ ·:.-. : ..
'
·,

·An,y Any •interested. NonE! Any)l"!ter'est~d . . . None-

interested party who-is party whots.
·pa'rty who adversely· ·adversely . . . •) .
f ..
ts -. . . affectedby-the .... ,-<). ,. . . affecteci"b~th.e .
.adversely department order .,ll ~~;;1:~ · ·. ruling. of the ·
affected·by of the Secr!3to:1ry . . . 1,·.li/if:." ·· . . : Secretai::y in.
. I .. . .th . . ·1· . ... j,i,l•,L;:·i;•)><, . . . ti lth
a· fma · on e imposmon .: .•. ,·.,.,,p~·~.; ... ,~ . .. . . connec on w,t.
· · \t ·:,;;.~.1:!'t, . . - · · the· imposition
,.. ,vling. ·· of t.he· ·
. AT {' • ~.,,~r_..:.-)..,""- 1-.J: - ·.
of
·
'
imposinq , . 9ount~rvailin~
an ah!J- . ': duty-may file with. ,.,..
dumping the CTAa.
. - .. /r

. · , ,.;,,,,-- ·
_,.,_.f'Y. .:
,~....... -~ .
:~r ;{'
!f1,":;~·,;.:r.~·ui~~~-~; a.. ~?.feguard · · :
111J~;.;.,-
,f:e~sure may file
,/ 1«1th the.CTA, a
d_uty ~~y ·.. pe.ti.ti<?ntor .review, ::~1~{ · .... ),>··h. . 13-{iti~iorJ for. review. · - . /; '
m~ ,With thl;l~ of s~~t:i._orcter . _:..{ !.~: 11_.;r:,.~ .: . . . t;,/, . . ,·' . o~~~ch ruh~g ..
._CTA,·a. w1~,n 30 d,¥~P'." . 'Yr·'-: ; , ·_ ~f w,t)\jn.30 day.s . . . ..
.P~titio~:for fron:i· ~is_ r~&.1!E?.t . ·. , . ;;). . . · ,,.. (~}.1 .
!h.e-review of nob~e tt(E!~~of.
·
":t~\. \~~ ~!J . .
r.:o(t'~W:,1l
fr~r_rf",j{'eceipt · .
;th.e .
'J : .~. i~r~aJJBut
withln 30 · ~':!~ such P.°eil!!!On: ~..,.~rt~, t,""(_; . r~ . · ""'t..~fsl 1111 gi"of such ·
~- .d~_Ys: tro:n·. for review wit~'.{~-:;:;;:~~·~ _
· h,.s· receipt .the CTA·shall no:, · · . \~\ · ,, ·. (f ·
JX Ji/
p~titio~ for. re~iev.i.:
· .. with-:the CTA ..
. _. .
)

~·
.
of notice :of .stop:or su~p'end : . ~,# . ' g.~r;:I.0!J;,;,.~,;. . . :,nan
n.ot. in any:.
_t_lje · . .. . . .. th~ ~n:ip¢>si~ion' of .. 7. . ·-;;:.~-p;:~_:.,:t.....ittL~~- ~ay stop,· ...
_a~s?1~ed ,Jhe.~ut¥, _. · . ,z~ •. -/t;J .· . ·. .- . . .
.$usp~~d-or. ....
dec~?'10~.
B~ suc.h
· .. · · .. · ·.. ·
· · -
~~3 · -.· . , .· :·.
. ..
. : .·
pthe~10s~ toll th~
· , · ·. ·1mpo~1tion or. . · · ·
· petition for · - .. collection ·of. the·.
review with. . ·. : ·<;1p,propricjte tariff ..
the CTA- · ·. · - . . · , duties or. th~ · . .
sh~ti· nOt . · .. .. ·· .. . · .a~OpuOrrc;>t.oth~r .·
. stop ..or · .. --;· . ap'pr°opriate . .
s~sp:erid ,...:-, -~a.{eguard. . ..
the .. · . . .. · . measures, as the
imposition" '·ca~e.ma~ b.e.. :.
of.tne' «;lut_y.. . . . ·. - . ..
... \ ...
(R.A:No.:10863;'R.f'.. No; (3752; R.A ..NQ.. 8.BQO; R.A.'No.. 8151) ·.·· .... ·.
~.,. • • • • ' ... 4' • • ' • • •' • • .': I~ _: '. • ' • ~ ;. : 4' ' • • ~: •: • •• •

... · ..

; . .. , ....

.-. . .
 . . eai2wp 914.fiiil± NH •

.
TARI-FF _AND· CUSTO:MS
BAR OPERAT(ONS
SAN B~DA-tAW CENTRALIZED.
(16iff

-
··-··

MEMORY AID ::1019

''"' bf&Z!W&Wi&MFMW ii'Yt5184¥f5h4¥>H+fWOW14i

. .
. A&b

·. · determined ~ith- respect . to the· good~ beiog

.. :METJIO.D:S OF DETERMINiNG .. valued;
·.. ·P_tJTIA)l°'.LE VAL'{J~ . . 3. P_ait of the proceeds of. a_ny .subsequent resale,
disposal or use of the ·goo,;ls by the buyer. will
\·. . ·. ·.. · -accrue directly ,or indirecu~: to the seller,.. unless'
Dutiable Valu·e.-· · an 'appropriate adjustment can be rnadej.and' .:
.The' proper valuation. bf imported goods upon which 4·. The buyer-and seller are related to oneanother, ·
custciims:o'uty.is . arid such relationship influertcedthe price.ef the
. theappropriate
. ,/. ·.. . .
imposed . .....•. .
· goods (C.;tO: No: 0~2004, Sec.1/.(B)).
··'Meth~ds of Determining Duti'abie V~l1..Je:· . ·
· Method 1 ,· TransactionValue:· · . · -Persons Deemed to' tie Related if, (OREO-l-BTF:)
, Mett16d 2: Transaction Value ofIdentical.Goods. 1, . They :ar'e Qffice'rs qr directors _qf cine anohier's .
:Method 3: Transaction value of Similar.Goods.· . . business; . . . .
· . -Method'd: Dedut:tive Value ... -. _·. 2 .: They are legally.:. Recognized ;~art~ers_.· in
M~thocf5:''computed.Value!''. · ;· : .. - .. - ·.. business; .- . ·. . -. ·:- .
-Meth9.(J 6: FaJJb?ck _V,~lue. (R.A. Noi- :1oa62, Sec. . · 3·. T-hE:lY are in gmployer~employ~e relationship; · ..
700).· . · ,.- .. · , ·:,. ·.· . . · · .. .. : . : 4 . .' .A,ny person directly;or indirectly'Qwns, .. qor;,trc:ils. .
.: . or holds 5% ·ormare.ofthe.ol!tstanding'voting• .
Sequential. Rule: ~he _ab~v~~~e_l')tioned ~et_!}.Ods=~~,/tpc~or shares or_~tli of.t~e ~e.1.ler ~rid buyer;",
are-sequentially applied. · . .. . _- . .,,p::,,~ 1u- f ~\ 91i-l~~-pf !hem directfy or. md1~ectly c~:mlr.ol~ the_
· · · . . -<,rr · -~\. ., i.. ..,,.Jitl}.~r.,,"'"'·· . . , . ··'.
~!
_EXf~ptioh:-Me.thoi:ls 4 'and·5 ~~y' ~~fe\e~)l_J;'~)tie~·:.-~4./~t~ Jp"e~ ar~ _direc_t)y or indire9tly c?ot~olled,
request of the 1i:np9rter unless tf'1~~9,..mm1~1oner of. ·. . . ~Y,~_ti!iif~,~e,i:~~· .·. · .. .. . :
customs deems· tliat ·· he wJff. Eixg..e~,ieihce,,.,.,re'af~·7o:-...;L~!]etl:l~tr,ey ,di.[ectly or 1_nd1rectly coot~9J a t~ird ·
~ifficulties in the _use o~ Meth~t~t~·9rii;nr:tiis_sio11§°r '')[ ~ .. p~rs-~~ -,.,;{.) '\' · · · ·. · · · ·
may reject-the request (C.A.WJ. No'!s()ff.--20d4,Secl!7-t ff:-t~ fil\~ They~c:!re ~e~oer~ff-_the same family (R.A. No.-
·(D)(4)). . '- . '. i/lf~._··/. ·. L . §~~__!_~~f· Se<\fJ?f\( , _, .. . .- .. . ... : .··
. ·.· . : . : .· .· . . .. . ~~ k . " I . ~~~iv·- lri!ti C-Rt;~~.o.nfp_r.lh~\!$e·:MI~an~acli~n Vaiue:. : . ·.
METHOPO~E_.,,Traos~ct,o. ~~,r Syste[ . 7.r<"_'.jj~comP.iY. -wi~l:1.. Jh,~..j;}li~ipf?jne·treaty commitments
'The transa~hon. ~alue uses ,~~P.Q~ac~w pal ~o~~.u.:1.in~e( .• ;Wtfd !lTrad~ U·· Organization ,,Valuation
payable_ for tlie goods y.,he ~Id for-·!expp\t.J.oth~:--~greel'!jl'eilM"· Mio -N.,cy.l"6~.2010)" ' . · .. ·. · · . ·
Philip~ines· at arm's- ler'lgtli. ~'j'?J.
:ion'j'~~1~9: t_h~(f I~-- '~ 45,. . ; ~ft:/ .. . . ·. . . - .. · . . .-
following~... . .·. . · l'-. · '·. ~ . \'.::~~ '\.
1. ::ro ttie ~xt~~t. 1{1curr~~ :ttY.. the_.t1uye ,J;ili ll~
;J.f1 ~f9.ay. . WG,: ' ; rah
J-~~-Jfrj!~~-#- , . · :/ < : · · . · ·. · · · '· -...action Valu~. of_ !den.tical

.. meluded myr(c~ .~ctu~ll}iJ?a,t?: ·., :"'\.~_- . ~tre"~~tiabl~alue.~~11-be the _transaqfi~m-.value of.

·. a_. _.Comm1ss1on. i;lnd _brok~rqg7 fe~s~ ~SCIE!'\'1.~ti~J.4?,~~s~old'. fot_ ?XP9~ to. t~e Ph1l!Pl?mes.and._
b. Cost ?f C<,m~mer,_ .·. . · '\.., · . · ,l'Q ~ ~ . . ei.m.or-t~,Q(at\,~r":JrfuUttfie same t11TI~ JJS_ .the goods
.· •. 1 c, ,_co_s~of pac_k1J1!;1;. . ·"~~J//")1 ·· =~el~lJ':.val~~dj,(R.A .. ('Jo. 10863, S~c.'7{)2).' · · ;. ·
d .. Ass1st6; and.,' · :·. ·. -"~v..{ . '\ i~ ·A:.\.,~~-<{?"· · .· · .. · . . " '
. e,;. i~pyaltie.sand)i~r\S0 f¢e~.--- :.. -~~~~ 1}:i 1.1':!~tie'afG.oo_ci~. . . ·, . . : . . . , . .. . . ·:-
. ?- . Valu_e or the.'-P.r'6t::eeds o!'~riy sobsequerit~esal~"':"'== ·1: . ·Tne same in·. all : r~spects ;in~llldi11g. physiC!3I
disp9sal . or u~re ·ar the·. iiTIRorted- ._goods that '.charncteds.tics; quali~y.; ~nd replifation;.. : : · ·;
· · accrues.direc;_Uy.or indirectly·fo tbe sell¢~;' ·. . . .. - 2: Prod_uc.ed in tne·samEf c,:oun.try as tt:ie goods b'~ipg
3.· · Tratisportatiori·_cG>.sl~ . . .. . . valued; arid . . . ·. . :,.. · . : .. ·.. <. ,~· \· .
. 4 .. Loading, unloading.an~ ha'r:idlingcti~rges;_and_·<. 3. ·P.roduced by the. prooi,tcer oftfie.gpod~·.t;>eing
. .: .. 5. Cost of insurance (R.(\.·No. 1'0863, Sec. 701}, . v:aJl_led {CA.b. No. 04400-.4; _Sec.:·11 (Q)).' · ·- .. ·:

. M~t~oi:I1 s'1'ai1 .not be· u~·ed ·lri ~etermining · the_. .The- ~e(l'Tl.
"id.en~i~~i-good:,.:.d<;>es· riot inch:Jde,; ~~.th:~ ..
'dutiable .value of.imported goods'if: . . . . : case· maybe,, ,960ds "i,yhieh ii:icorporate ··or· refl~ct '. .
1-. :there are r~strit;:tions as to the.disposjtion'9r use'-:.· .. Eirigif.leerin'g, developri:i~n.t;·-artwork, design wor~._;:ii)d
.... ot' the goods. by'°the buyer ottier than restric\1omL' · .plans an9 sketches f9r.wni~h:-no.adjustment nas been .·'
which:.. . . : . ; . . . : . . .. . . . . made becaUSE)SUCh eiemerits were 'undertaken-ht.he .
a.- Ne-'imposeci or. re.quired· by law or by''the. · ~ _Pt,iliP.pines_ ·and_. is ·:provided by 'th~ b~yer 'to the
. .P.hilippirie.AuthoriJies; . . . . . ; producer otJli'e goods.free of charge.or a'reduced . at
b. Limit the geographical · are.!! :in wl;lich the . . cost: (R.A' f:Jo .. · 1 ()8~3; Sec.102).. .". . , . . .
· 9oods·maY. be sold; or · ·. . : ·. : ..: : · · · · · · · · · ·
c ... Do.· not substantially .~ffect- th~ value of the If -r:nore than'.one 'tr~n·s·action·v;:iilJe ofj<;!e~ti~~I g'ood~ :-
gQOds: . .. . . . . . are· found, the' lowest value _shall. be used 'to ..
...... 2. Th~ .sale or price'is subj?ct :to so.me·COflditi~'n or determin~ ·th'e customs: va!ue (R.A. No. 10863, S~c.-, ·
consideration for which a value ·c·c:!nnot be 702), J • • •

42~ _ I 2019'SAN. SEDA LAW c;ENTR,?-UZED BAR OP_ERATJONS.

 :I?~ if w !!&Rd

.;1< .
.{::.. TA·RIFF.A.ND.CUSTO-'MS.·
':;":-,
s. ..
"f"': ..
,. S/\N BEOALAW.CENTRALIZEDBAR OPERA_TIDNS- MEMORYAID ,201~
IQ IMS WHMI M•iMS¥4ihjhifii4SHt a t
.)·. ·Minor differen·ce~ ln appearances s1:ia1i· noi preclude ·3. · The· usu.a! costs of'fransport· and insurance and
:~'.: goods .otherwise -contorminq to the definition from. Associated ¢osts incurred.within tt:1e Philippines;
\·· being regarded. as· identical (C.AO. No. 0.4-2004; · ·and ·. · ·
J1,.:.-.$ec. II (C)(2)).. _ . . · . · . · 4. Customs ·duties and other national· Taxes
~";,:. ... . . : . . : · paya_ble .i.n · t!ie .Philfppines by reason. of the
''-':' · METHOD THREE: Transaction 'Value Qf Similar importation -~r.s.:1le of the· good5 (R.A. .No. 10863,
f -". Goods · · · : . ·· · . $ec. 704)..
8 rh-e c,.1:1tiab1e v~1i:1~ · sna11 be the transaction value 6(
y ,. simJJar goods sold for e~po.rt to the Phlllpplnas-and · .·. The te~·i·~nit price at which tha.·i~ported ~~ods are
.f ,expqrted .at or · about ·tt:ie .same time as the goods . sold in the: greiHest ,agg,regatl':l· QU<:1ntity" means the
ii·
~. beir19 valued (R.A. No.· {0863,.Sec. 703). · · ·· · · price.·at which the gr_eates:f number.of uhits is sold in
~'. ..
;{' . · Slinil~r Goods.. .
.
. .
.
-··.
~
.
. ..
sales' to persons who ·are'.,1ot relatsci'to the. persons
from :whom··:they ·bl,ly. ·$UCh ·. go.0ds .. at.-'the· first
{:- (3oods whlch, althouqh.notallke inall resp.e:c.ts: commetcial level after.'1mport.ati6n at which . sud1.'
.;(' 1. Hav13 · Hke characteristics and· like component.
0 ·.sales ·take place '(CL_EMENT Kl=Y, 'i'r:,inciples .of .
,.: · · materials:' . · ·· Valuation: .~x.port an<j /rr(port,p.:.30).' . ·. ·. · , ·
,(. . 2:: .A.re.'~apable.:o(p.erformjng 'th~ same. functi;ns as ·
t .· . .fl:le_goods being valued;' :· ·. ·. : . . · .. : ·. ·.. . . Example 1 : . . .
.,;_: . ·3:· .. Ar~ corrim!=li"ci.al.ly interchangeable with-the g6ods ·: Tw6.(2) ..sales occur, In ~he·1s1 sale; 500. untts-are sold
.r,: .. b~i.~.9 V~llled.; . ·... · ... _:· . . . .. · . . : . ·.•,..-:<i . a~· a-price of.~95: each: IR. the ·2nd sa~e, 40_Q·U!1its are
.» 4. Ar~.proouced .m ·the·s~me eountr~:.of the .gq~;!.'!~ .. sold ·at. a pnc~; o.f P~~ each, In t~1s ~?Campi~, th.e
·being valued; and. : · ·· - · ,,. (:.' ·'"/,<.;:\ greatest number of units sold at a particular price is:
: 5. A~e·pr.oduced.by the ..producer cf.~ th.e'QOf:lds' ~eifif .'.,.{-~j.5.00; therefqr~,': t.~e u~_it . Jirit:e · 'in .. the greatest
va!u.ed (C.A. 0 .. No .. 04-20.04, Sec.: fl. (D).(?JJ-)} j.- :·.:;S/·}gg;.eg;it~.i~~nt1ty 1s P.95._ . ,_ · ·
· . . · . : .· - ... · .£, V··t! ,.;,~:~--i"fi::~;-P.~ . · . . .·
ln'·.applying . this· ·me.th.od, the transacgpr-i··:~arue of';',([ ·.exampl'e:'2f"'?\· ·.· · · - . .. . . . · . .
., ~.irnfla( goods in ·9. sale at th·e. ·same· ~~mtrcial lev.e't,~-,J .. Goods·. :<!re /~9~d from a· price· .list whlc;h grants
it an~ .in sub~fantfally..th~.· s~.".1:e· quantity;ji~1}1e:9,?.9,.~J-·:-)~· f~vor~~le.. upi~ p~ice~ for pu(~ha.ses. m~d.e ·: In . larger
_;:·.: · b.e.111~ val.u.e.d~.~all·be use~. to d!3leJ,~!1~ !'t-le~lit1a~le . Vi.
quanti11esA .· ·. i, .t\ · · ·. · · · ·
-; . · ... v~lu.e: Wh~f~'(no Sl!Ch ~le is fPs(Ad, .1h~"~1{1t'l"SJ~cti9Q rJ , :' ' If ' .,
~: . value· of.simil~r. go9(f~'~o!d avt~!ff~~e,_1';;ff!11m.ercia!. 1Lt'·.
)!.(' .. ; lev~1· an~/_or 1n . the ··~1ffer~nt ~yanlltres;j:app.ist~:Q-.,\o: r-"~J.
f· . take.acc;oui:itof.diff1:?r'enpes:attrlt>µ,t~b1~1:0~9g,rtierci?i
t· . . h3V!')! ah~/or lo··q\;J.ahtity, shall. ~e "use:~;p'fo~!d.e!;i,l~~t ~[.:!°
t,
\ : ~ucli adJLJStments <;ari bE:1 made.~l),:ithe :i~,a~il? of .. )il:;7.
demonstr9ted·eyide.nce't,'.hicti clearl9. ~:t~_b'li~E;isth~ ..;,cl'.):,, _ , ;
reasonableness and. accuracy· qf · . tt{er-adjustr(.ent-;"-'-rt!~(l.-..-r.o.:..IJ~:;;J. .j 00 . ' . '1 ci safes:ofs. ·.
.. · ·. !,lr:jits: ·.: · · · .·
whe.tne{:the _adjustment leads :to a'n'\i1'creaitf.~ora ·
.. decreasE;t . in. . value .:(WTO . Agrefl._~~'!fJ· .. on. .s·sales of 3
./inpfeme_nta(ion . of Articfe Yfl". of thf/1~~. Genera/. i.uilti: · ·
Aiir:et:Jf1J.ent on Tariffs.'imdTrad~,1994, Art. 3), . . . .. · · t1~2s unit~. 95.. .. . S:sales·.of 11' · 55
r:: . M~TH~D ~o~~i:pe·~~ctl,,..e·~~lue: .· : .· ··.:. ..... .. ' . . .'. .· : : . ' .. unit~·. ·: ... ·.'
:;f· . T~e oeduc;tive ·vah.i~ shai(be .bas1d ot{1he· unit price. . Over 25- :. : 90 ._. 1 sale·o130 . 80.: : ..
it. . at.which'the imported .goods <fr identical or si_rriilar. . units.· 1.1nits
:~·:. . irriporte<;J .goods: are sold in the:· P.hilippih·e·s,· in tl'le · · ·1 ·sale of so- · . ":• '.
;f · ~same.. conditipn .~S· when ·imported,. in 'ttie greatest .. : .units· .
:., . ·agg'regaie quanlity,. ~t. or about the. tlme .of.
the
,i;:· ir111fortation 0f \tie.goo.d~.being·valued, ..to P:eri,om, noC
,related ·~o the persons · u-om ·w:11.orn t_he'y. buy ,such
. ·,METHOD FIVE: Computed·Value ·. . . .
::. rj,~ computet1 va'tye !s the amount or.price.wt)en all
r :-~.
f: .
,
gOOc{s, si.Jbj~~tto deductiqns:·for',th~.followir)g.:(C2AT)
.Either,the·gommissjo'ns usually jJ~id:pr.agreed.to
.'. b.e paid .or·the additions ,usually, m;:ide· 'fi:>1'.~pi-ofit
· the comporients.'of the article are added up (R.A. ·No.
. 1 ~863; s'eb..7asJ. · · ··
.·· ·.. ,.
:, . : .:a'n~ general exp~nses·fn.con'ne~tiohwiths'a!es-in
1·
·,
·.
s,uc1:i.·cou'i:1tryof lnipo~e~fgoods p'f the·satrie dass ·
. or. kind· . . . ·.: . ' . '· .
. The··d.utl<ibl1;3 yalu~ urid~r this ·methop·s.t1a1i-'be t~e
sur:r,,·of: (C2A2F). . . . . . .. . . . · ·.
1 · 1. · The Cost or the .value of materials and.fabric'ation
.. ' '·. 2, · The us~al ~osts of ti'ansp·q.rt, loadi~~. unloading: ·.
.f. . : a'ri9- handling charg'es, and '?.ost of ir,,sl,lrance; .
or. other: proces~ir')g .employee! In -prod~ci('ig the
. .imported goods; . . . ·. . . :
,•

2019 SAN SEDA LAW CENTRALl~·EDBAR OPERA:r.JONS 427

 TA,R.IFF ·AND .C:·USTOMS
. 51,,N BEDA LAW CENTRALiz£b 8AROPERATIONS-··MEMORYAJDio,9
0

,.. It + I . . -~E
D·MHHMM . . !Pd EBB

Note: The "cost or value" referred in this method is to

be deterrnlned on .th.e: basis of.information relatinq to
tn'e production of the· goods being valued supplied by
·or. ori 'behalf ofthe producer, It is to· be based upon
.· i- · IMP0RTATioNrn GENE~L . I
.. the commerciat accounts -of 1he, producer, provided lmportatlon ~
that .such accounts are consistent with the Generally R~fers. to the. act ofbririging in of goods from a foreign
·Ac~epte<,i Accounting Principles· (GAAP.) applied in -temtory into Phlllpplne' . territory, whether tor
the country- where the ·goods ·are produced. (WTO ·. consumption, warehousing .or adrnlsslon (RA: ·No.
Agreement' on Implementation of-Article VII of the: . ·· 1(!,863, .sec. 1_02 (z)). .· . . .
GfiTT 1.994; Notes tp_Att~cie6): · ·
..,_ , · . ~hen lmportatlon, Beg.ins
2·. The, ~ost ot'
containers' ~~d- pa9~i~g/ if .their. .lmpo.rtation b,egins ··wnerr the carrYlng· · vessel or
values are o~t-iJ1cludep. under No. 1 hereof; . :· . · aircraft ··enters tpe· -Philipplne. territory. with the ·
3. Th~:·~~unt for. pr.ofit.'ar;i:d. general -expenses: intention tq· .unload therein ,(R.A. No; 108f53; -sec.
equal to that usually reflected in the·sale of.goods . . 103): · · · · · ·. · ·
• ofthe same . class .. or ~ir)d·as 'the .gQPdJ;belng. H • • n , • ·• · • , :, · •..
. valued whic~.. are· made , by producers in :'the Intent,- be1r,g a state .of rnlnd, rs rarely susceptible of.
country of : exportation. f~r · · export ·... to : the-. direct proof, ·but must ordin~rily· be inferred from the:
. . Philij:>pi~e§; . . · ..... . ·. · .. · .. .' . . ·. ·~:,.._.:....•.,..J~cts and.theretore can only be 'proved by unguarded,

.
4 •. "Any.~sist, jf'.i~s-·valu~. is ..not lncluded ur;id~~-li.
1 hereof; ~nd · ·.. ·.' . · · ?-. ·~ ... : L
·r· ~F~~~. . ~s •. co~duct.· and. cir~umstances; generally
-·,<r.l/f.de7tf1J!~([lat1onal line~· Court ofApP.eals, G.R.
~· . .T~e ·freight, · rnsurance·. f~~ ,{aritl .l.o~§~-=~~!1'2~2( f..![?}y~1., 1991 ). · · .· .
.• . trarisporta.tion expense.s.forth~·!.r:ngolt$1tfoJJ::-d'(ttie . · · '",..,.,_.,_,,.)/.,,/"·~.· · · . . ·· · ·
.
: ' .· ·. ._. . , .. • · l<~..
· METHOD·SIX: Fallback Valu~ ~~>/ ·...
1fJ"·,; . •
·.goods (R.A. No, ·10863, .Sepf7':f5)v.// ~:,,~VV.b~~J'."J?O~~ii&n:,j.r-Deemed.Termin~ted: . :

. . fr:D
I .. -••,.,,.. :\....,; h ~as~~kf.}~a~le··qoods ·~

· ]{.dutie\. ta'*,esJancf~1gther.charges .due upon. the

upqn paxment Of ..

bl
The dutiable value, sh.all ·deter#\lne<:i by .using
reaso.nal;ile rr:i~ari~ 'colisiste~~~JtM,tleprin ·}pl~s~]'icl 1
_. , · ·. artrclt%s or ~.e9ur,e'd.lJ,oqe· paid·at ~.port 'of. enti:y,
1:~, ~nd-tre.·leg~r,--1?'..~i-tfor withdrawal sh'all hav(;!
· ger.i.eral proy1s10ns of the ·Agreemiht-.on ariffs~~· ·m ;:;,"""'J.11t°9£!e.ni9rany~d.'6r, _ k· .. . l ..
·,:rade of.19~4·.and of Article~lj ofl~A-rr__of~994 «frl'~~'<'~ln ca.se.?f ~':It,· -:reer~ pods -,until they h1;1v,e legally
-91:J. ·th~. basis of· (lat~ .ayaUao~1t1. ~e ~9\clntry . d~ ... left~. {~~Jl!>~Jt:tro.ri~o!the BOC (R.A. No. 108q3, ·
.,
importation(R.A.No.·10~63A~e1ipl-06).·~~~ · ~
. · -· . tUI.,. \·;.. ~'\:~
·1,~.~~';--r~·
·~· ·r,,;.··~"'·/ 0/ · · 7
.Jtt-~JJ.
>t
. : . : .
. · ' ·
,
· ·1t 'th~ irrip9rter ~d .req·u~sts; i\e · shal)'.-:~e·in~~~iffJ!,i'1~~'-~iiff ~IJ.dpustofji.s law&. are applied only: a~er
.writing ~~ ·th.a. dutia~I~. va!J'\ detE!r~in.~~~..J,..,·~1rr(~~}lfon·· Dij~ begAtjn but..~efore it is' .terrT]iriated
-Meth.od six an9 the.me~od u~e~ to determine..._l@~FJ,r~n,\~"f' . ;p .. 1J9'3.:, ~ecv1202).
1.:;,.·t,·.y.:·No
1 · ... ' . . ·.
v~Jue ..(R.A.Ne .. 1086~, .Sf!C, -706)~ . ··:·· · )'-..."~~..,,,~· ,~~·.:,,/ ... · _ . , · . ·. ·. · · .
. · .· : · . . · ·. ·. ,. .· · X, ;.!_9~~~s_<:lo.Qg'-e~ 10~1mportat1on h~s-.. not,bee,n t.errn1nated
· .. ·pr~hil;)ited Pw!etho~ ,of Val~ati.<>1\U·n~.NJ~hbd .Ji,.· I{ q:te'\iqf~9.n(w·QCJOdSx~main uri.der the Jurisd'!ction~ of-
.Six.· · . ·. :·:···: . .·.. . . ·, ,.;,.... :· PI.Uli1t,BQ,9,-(~apa~ Mago, G.R. Jl!o;.L-27360, February
. Np.,dutiable :valu~.shalt~ det~rmiried under Metlicid"'"~8;i:.T968). · · · '
·. 'f3.~m,th~ baiis.of:'{Sesy:)>.rl.Co-PriMA) · · ·. ·.· .· . · · ·
·1 .... · The ,.Se!ling ...pri~e.: i~ _th~ PhiliP.pin~s of· go~s. Persons Wh~ Ma~(Act as. De~l~r~~t ·. ; '. . ·.. ·.
prc,i9uc~9 in the F?hilippir.tes; :. .. . . '. . · ·. : A decla.rant·hlay b~.a 90.rislg~ee .or a ·person who·has
· :2. ; A .~sten:, ,that· provideS··{qr 'the· .aci;:eptance:iot :. · .the right to dispc;:>se oHhe gpcids., · : . ··
. · custom~ purp·ose~.o(the ·i.,igher of two aftern·atiye ·. .. The· d~daran~ s~hall lodge a·· goods declaration. with
· values· ·, ·· . : ·' > : . ·.. · · .. ·. · · · . · t})e·~lJrea4 ..aricj may b~: '.· . . .
3. :. Tli.e ectce.'of ~60.<fa·.J°n the domestic niarket,of the . ..1.: . The ill)poiter; .being ~he hqlder of the b.iU-o.f lading;·
· . · country .of e.xportatiqr.i; ·. . : . : , .. · · . .. . · . · · ~-' Th~ ~xporter, ~eing .th.e.. owner of the .goods to .be
. .4. ·. The·. Cost ,Of production; .otn1,3r. than .corm:iut~d · . · .. s.hipped ·out; · . .. . . · .. · .. ; . -· · : .
. . ·values, tflat.have.been•aeteriniiied for idertticai d·. . . 3. ·. A. CU!ltoms t;,roker aciin~:j' unde~ the' :a~thority of
....;. ~imilai-: ~oo~s. jo accord~i:ice ·wit~··Metryo~·;Five. the importer or from a holder. of llie bill· or ·
hereof· .· · ·. ·· · . · ' •. . . 4.. A pf,lrson duiy_ .. emP,owe.red to act· as' agent -or
a
5: .. The: P;ice .of goods f6!' export. t~ country.oth~)' . atto,:ney-in-fact for ·ea.ch l:iol~er (R.A. No. · 10863 .
. . ~ . ·than ttie· .Philippines; . . ·. - . ... . ,. ·· Sec. 1_D6); · . ,. · . . · ·.. . . . . .: · . . '
6, .Minimum customs va·lues; ·or.. . . ...
.7.. ·Arbitr?ry :or fi~tious ·values· {R.A: No.. 1<J863, . ...
:. Sec. ·wfJ).. : . . · ' .· · . · ·.. . .;
.\

..

428 I · 2919 SAN.

. BE;DA
. LAW CENTRALIZED·
. .. . BAR
. OPERATIONS
 Ila
"•
f?· ·TARIFFA.ND·:CUSTOMs· :·
\·. . SAN B"EDA l..t\W C~NTRALIZED BAR OPERA.TIONS .~ MEMORY.AID 201·51 . .
,, .
~-
ar M
:
•fP . th& ·ee 11¥6ifidiAikd.M93ift¥G+R+

JI · Note:. in. case the consignee. or the person wlio has · cOmmissioner of Customs,· G.R·. · No. 178759,
i . th.e_right to dlspose of-the 'good~ is.a juridical person, . August 11, 2008). ·
-~? · it may authorize a responsible offlcet of the company
·,_. , to. sign the· goods declaration as declarant on its. Port" of Entry> domestic port open to foreig·n 'anq ·
<. behalf (R.A_. No: 10863,"'.Sec. 106).. · . · · · coastwise trade: The term includes: · ·. . · ··
*~ .
~·· owrie,r oilmpo.rted. A.~icles: ·(CH~US} .
. . 1. · ~tincipal P.o~ of Entry~ thechief port ofentry ·
of the collection. district wherein "it is-situated and
~: . 1. Consignee; : . . · ·. ;. . · is the 'permanent station of the' c·ol_ledor of such.
~; 2. Holder. of the: bill of lading .duly :endoFsed by the port; and . . . . ..
consignee named thereinf '. .· . 2. ~µb~ports· of. Entry t: .under the adrninlstratlve
s; . .!::!o.lder'of th·e bill of laqing, if .consigned to order, jurisdiction· of the .Cellector. ofthe .Princjp·a1 port ot
~-: .. endorsed b°y tt\e ·coosignor; ..~ ~ ... · · . entry of the district'.(R:A. Nb. 10863; ·-sec., 102), · -·
-~ · _. .4. ·Ttie Untlel'\\'Titers of aband,oned artlcles; and: · . . . ·· . , · . . .. · . ·.
\· 5.. Salvers (R:A. No. 1()863, Sec. 404). . . ." ·.. Note: -Wheneve(th.e 'term ·~ort Qf-,en~ is.. used, it..
'!·• ', · -; . '; .. . ., .... ; . . . · : . . , ·.. . shall include "airport o(en'try""{R:A:=·N.o.-."10863, Sec._-.
-~eqtiirem~ntto lssue Proof.of·Pa~ment ·. 102 (hh)). · · , .. ·· ::.. · · · .: -. ·
. !.i°pon-paymenfofthe duties, taxes.and otl)er._charge~; . :, . :. -,
i,'. · the Bureau shall issue· the necessary receipt or j •• '· • ~ ,·. ••• •

. document aifproofof.Su~li.pa;yment:(!?.k.No. 10863, · . ··· ·· · ·· · ",

Se~. 1()1). _-· · · · /c/·) · ···IMPOl~.T CLEAAAN9:~ .AN'l),-. . . ,:~ .-. ;,.:
~:·· .. ,. ·~ . . · ftl:-7(;)·\ · Fo.Ri\tlALt1i~s·· . ·:··· ~:·.
t Note,: Under current "regul~tion, BOC ·j~sties,¢..!i.:',,_,· .· · · . ·. . , .. ·, ·.. · .,. ·.· ··:
!·· .• ~ ~p~

:;.... Statement ~f · Settlem~rit ...of ·Duties .. arid. !@?<--~~;P;~;j : . .. . .. · . .. . . . : .·. . . . .;

! (_SSD.T) as proof o~ p~yment (R.M._O,._No. 025~1~J.{, ;·,::~J~9pl_lgationf·.'9:ffhe lmporte·r: · ... ' ·. ·.. · ·
f-.· · ··.. . · · . · . · ·. ·. · · . ·. · · /,?· &L,fl;pm ..TI\e.'.~ig~ttqnt of.the impo"rt_er are.the fol!owirig: ·. ·
·, Applicab!e R~te of D~ty. . .· .. ;.2::(/'~· ;-'I H .· 1 .. Preparatfi\h of the·cargo-manifest;_:: ..... · .
"" lmp9rted goods shall be subject to tfi~;·import dut.y:· .. Jj · 2: · Preparaticb'n':i,of Import entry; . --
k rates . und~r .tna·· a~·pn_cabie. t~r\ff. h~f:iq~:
-~h~- ire' . 'Yl
3-. · Declar~tiq~ '~f ~orre<'.:t·wei~ht or. value;.
~ · effective at·th.e <;late of ,mportc;1t1ory .Ci~ffe.,eai!:e:..O:fgoods i'1 4. Payrr)~ht Qf d~ties; ··and ' ·.' ,.::.. :· ·
. entere·d· fc,>r warefJ.ouSif!Q,. ~P.01),.~~tid(aw~~b.l'nt~~
. warchouee for con_surnpt1?t1 r{R,;fA· ~9.Rn.1, Sec._. kl- · ·
E\
5, Kee~;ng·cfrecprds, . . ... . '. . . .· ... ·...
~:....IL.~-,L._); . .. ·_ ,· . · ·
/. ·.

1051 · · -. · · · .. ,,·· !))'. ·"'-:,,- G,.,,)~ · \'<...~ .... ,n Cargo'Manifestn•fiW· · · . · ·

.. _A~;;ica.~1.e:~at~ .~f ~~~ fo~\~:~~~~~p~~r tf. b~;ii}:t:;~;~rj;~:~~~~t;~-~~~~~:-~?;~. · ·. :

·tro~ F=ree ~one·. fo~ _ lntrodu~!i<:>n f.' t_o :.. G~ston:is . Ht::'7:~-~9.,~$.· _such · .q.~. traf)SP_9rt do_gument nul"!'~ers,
.Te~r,tory ,. .. ·. . . _,. . . . ·v\,.y/.,/:f: . ...,-~·-!:·'.{ !:,o.ci.stm19.rs, con$1gnee_s,. marks. ·and. numbers· and
' . - D_uty rat~ at the time 61.wi_t_h.drawalsh~!i'g"e.app)i~,151~~':""=;.d.l<ind.,oPp.{.c~ages,weigtit, de~cr\ptions, qu~ntities of
t· ?.n_-t~e ~~od$ ·<?.rigin_c'!IIY cidmitt~d, .....1:iet~~r, w.iV!l-cl(a~n.· . the g·o9ds _and ·destination .(C.M. Q. No:, 06~?018)...
t :,_ .1;~~.~?g,n_alo~. a~vanc~l;I form.. (R_:f, :~o:~~@1Sec..
~ ·· . Import Entry · . ... · .
·.. · . .. : ·
., . .. · . .-· .
',. - · ~ .·· ' . .. ·· ·: . · It is."a declaration t9 the.Bureaci of;Customs Showing.·.
} . ·: .. Rat~,~. df. Diity for. G.09d~.S61~f ~t:Cu.sfoms . .Pubiic . . ·p1:1rticu la.rs of-th~: imported articles .th_at~ilferable-the·. .
1,\ · Audfon · ... · ·• . : . . . . .. · ..: · :~.: : . :·. · . .' :· customs· autnorities to determine.Ute correct dutie.s
[;; ·. ln-:case..of goods .s.old ·at .cust9ms pubHc··auctfon~ t~e . - 'and i~ternai" revenue. tijxes du~ on._the· i~p6ttatiori. It
~.. , . · duty" rates Eit th&-'date of -ttie atictior .sh~II apply for. . . . is_ a1$0 k_nown as _lmpo_rt.Ent.,Y ai;id 1riierna.l·R~ven,ue_-
. . . purpo.ses. of ·1i:npfem~ntihg_: Sec.'· 114.3 : (/?.A.. -No.- . Declar~tion OERD) (C.M.O. No: ()1~199_6). ' ·. . · ·
;.,·.- ."10S~31 _s~c. 109), : .· .. ·. ' 0:. · . : :·.- ·. • : . : . • • ·. • .. :·.-: •
''... . . . .. . . . .. . · . . . : Go~!i~ Declaratlory . : ·. '.: ·. . · . . . ,.
., · ·. l::ntry_~t Ct!~t9.mh.ou_se-· .. · ~- · ·. . · Statement made in ·the· ·mann~r p·re.scribed. by, the
(. · All :articles. Im.ported ·into. the .PhilipP.ines, _wheither · _-· Blireau ai:,d ottier appropriate ·ager'icjes;.bywhich the·
/ -'subject to -outy or· nQi. _sha!I be· en~~red ~hro_ugh ·a· . persons. con9erned 1ntjicate the· prc°ced!-)r~··10 'be
:,.;· . ·customhou,se ~t-a--~rt of er:ttry (R..A. No._ 10863, $ec, observei:Un ttie applicat.to.nfor the entry·or ac(mission •··
i,,._. 400J:.~ ~,.. . . . . . ·of linported goo<;ls."ancHhe.part.ic~lars.-af whb::h .the.
,: · 'custom·s adminfsfration shall.require (R.A.; fvo. 10863, .
$"° · , · "Entry_-af;.Cus,oi:i,hci.use:• _riie-~ns:· (FSP) .. ··· ·sec:· 1_02 (Y)). . .
,. · 1·.. The documents Filed at the-customhouse;· · · · · ·. · · · · .
J, 2: .The< . §ubmisslon ·.. and .. acceptan~e-- of . the .lrr:ip.ortatioo~· Subject to G.o<;>d~·oecla~-at_ion ·.. . .
._ cfosunients; 9r · . · . · · . · · 'All imported gi;>ods shall pe S.l!!?Ject.fo the l~_gment
3. The f.roceduie. of· passing ..goods t.hrp\Jgh th~· . of a goods declaration, unless otherwise provided. A
· customhouse (Chfivron PHL, .. ·' Inc. v. . gopds deciaratiqn may be for:. (CWAC-CuT) ·,
 ,, 1-W MM ••a Mi& AN.8

TA·RIFF-A-·N-D CUSTOMS
sA.".! BWA LJ\W,cENTRAUZED BAR oi>~RA nous -: MEMORY AID 2019 ·
·,wwF&Mf&:"A*·HWW±liWii H .,,. AWl&ilfll&d 6# AWIM"7+11·= A P&WF#dii .

.1. ~onsumption; . I . General Rule: All goods dectaration for consumptlon

2. Warehousing ....,. for . goods .intended for · shall· be Cleared Ahroug~ ·a formal entry-. process
.warehousing.' in .customs-bonded warehouses {R.A: No: 10863, Sec. 402). · · ·
(CBWs); . . ·: . '. · ·
G:. · Admission - refers to the act of tjringing imported · · N9t&: Ali° importatiorrs entered ttjro~_gh ~ formal entry .
goods directly _or through transit into a free zone; · process !;.,_ha!) be covered: · :· · .
4: . ~onditional . importation .a. goodi,; · conditionally . ·- 1. · When there is' sale: '-- a letter of credit. or any
... relieved, -totally or . partially. ·from payment. of. . . vei:ifiable · comrnerci~I . document evidencing
. import duties and taxes; such goods. must be · ·· payment; or ·
Jmported far a specitlc-purpose. 'and must QB · ·2.: ·_-When <there.. is· no'. -sale.'. for export :.._·~my
irilended· for re-exportation within· a .. specified . . comrnerclal'documentindlcatlnq th'e cornrnercial
period- and . without-. -having · undergone any, .· v~iue of the goods,(R.A.l;Jo. 108~3,_Sec .. 402).
·,-sub~tantial change except · due to: normal - . '"' ., ' '
.depreclation; and . · · · . '. Except.ion:.-_E;~c~pt for. th~\following .goods· Whicti,
5 .. Custo_ms Iransit ,... goo~s •. which ·in its original - shallbe clearedthrouqhan informal eritry process:
form; are transported under. customs ·cor:itro1:from · · 1."· · Gogds,··~f · a -comim~r~ial nature with Free · ori
one· customs offlce.to another, or to 'a frei:i zone . Board (FbB).or Free Carrier. At (FCA) less than
(R.A. No:_.108'63; Sec. 401). . · . . : .. f?-50, :900; ~i.uL . . . .. .. .
.· ·., .·.
Provlstonal Goods Qeclaration
.
. ,,,.-::p"~
T):ie kind ofdecl~ratfo>n u~ed when ~he 9-p_~lar~rfi.~oest·
.· '.ff J
.,=-=_,.~i~.~fersonal.and·-ho~SetibJd effects or gorn;fs; not in
tl ,99iJ.!r;r.iercial qt.ian.tit,i:, imported ·in passenger's
j:·\paefm~'?r mail (R.~, No. ·10'863, :Sec'. 402):
not have a.II t_he information or SURP9.r.'t!rt9 a"o.p!f,m'e!~--..:'-{ Q ;,.. ~\ . ·.: : ,: · , ,_.
required to com.pl~te the· g·o'odsdepiaratidn..,(R,;K?vo.. .-"':;, ¥orm~l;_ntryv·,· 1nforrrial -Entry· .
· 10863 Sec 403'' · : # ..-'!;_.,.}'· ' -:,,,,, ......,...,.-~-· '~ · · /---., ~ ' · ,· · · · · • ·. ·
.'
I I.,,,.... .
. /· (/ . 'l,.:;/J,<,', ---- '-· .!\.,
. ''/."' v.1,- ..:i(~
·.. . : il~~;~ ~I • -~!P.J: K
Requisites: ·· . . · ,7 '"'\"<"'./, .. · ·,1, · . .• . ~-;"l. •
1; ~uch ~eclar~ii?~ c~~,~ins /,h·e · ~ec·ess~rfj~\1 . . . ·- ,· ~
1
• • •

· informat19n_raq1,11rad by µ,ia:J:}:er(au; an~ . ··mJI[ ~I i~,JPor!tations:,e~l'-~ 1 THere is. no such - .. ·

2._ !h~ . de?lara_nt. _un~e-rtfKe.s-:\1>· _coni~l-~te~".tfi~~~ ':· ;~('iugh;Ja'fonncil::::itl)!·t -requi(~·me.ntin an· ..
mfo~rnat1o_n or submit ttie. ~u.pp1pr.tmgd~q..1.~eJilt~J.&::17. ptbcessJ~~l.beR .·--""'.']' ~ inf?rmat entry proJess:
.... w,thm 45 qays from th~,. rlh~9( ~f t~~~~tsronal'-::1
goods declatation, -~x.t~11p1~l~Vor (~~-~e~
days (R__,A. No. 10~63, S\c":''4e~'j\. ~\
41
...
~ ·
..::'.:'.."- cove~~f.fzy let(~r-of 1] • ·
J .1 • '.~red\t,'0~9~veJif~tll9
i~'¥~,ial
f · :·. . . . ·. · . - .
·d~u,:neri~,t . . . · ·
.. _- _ · · .. ·

:
Notes:
. ·_ ., . . . · ·
. . . ·.. '
··: '\\ ·..
"'\). . ,,
~- · · ~) .. ~
y~
.
1~ ev.1~~1ns- ~mer:it f . ;~
i =:@ci~es ~ere the;,-: is' ·
1. __ T.he · duty treat_mer)t. of ."-~e gobds· ~~l . "f)_Q".. ijle for expo~t:ly· .
.' p~ovisional g_ooc;ls. ~e~laratib~..,_·· shaJl~Rf?.._t,~~~ .;J¥<><P6..~m~cjaJ.f'.. · ..
. different.from.thos? :,y1tH complet~.p_Ef<?!,~Jjl~P-9-~-~. :,.dqi?._tit'r\-eht,ih9Jcat)n!J
~- ., Goqds under_ prov1s1o~al goods _deql~_r,~ttof!Jn~y \Jt"' f!i~~~rciafvalue
· _ ·. , . be re[eas-ed upon posting _o( any requir~~9i!.[1~ l. r. 91Jbe{;io®s.. · ·
.
.. · equival~nt to the am·ount of the applicable'dutfes=~'.ll'~·
. .c1nd taxes .(R.A: No. f..0863, Sec.' 403), - ~· ·· . : ..
· · -lll!JI 1
j
·.::~·-, .. ·,·.. ·, .. '· -·. •. -.. · : .. ·: .·. ·•·· ·:.i.· ··-:--:.-·· ~s·a_ruie;:~n:go_~s .:,:-·Appli~~:.-on1.ytotoe·
. Contel"!t~.of Goods q.,.=u:l~r:ation.. {V~JD <:~ ) tlec(aration for · · · following·:.··· · .... ·
· 1 •. Yalu.e c:is s,e' fo~.m .a proper invoice;···.! . . :::. . . consuhiption-shai~be a. Goods .of a·
2.. Such Qthe~.mform<;1~1_ona_s. f{l~Y t;,e :'e~~i;~a_ry;· · . _-de~re'dthrough_:_a· . ·' commeu'cial nah,i_ri
3.. Names of th~ !mp~rtm~ ves~el or arr~~a!l, :. . formarentry process.· · with.Free.on Soa'rd or
4. Nat~re ar:i_d corre.ct cqmmod1~y Qes~r.1ptionof the · · • ·· · ·· · . Free Can;ier . · ·.,
.. · .: . article·s-containe.d)her~in_;_ . · · _- . . · ,Arrangern~rit(FCA)
5; : Names. pftMJ:~.onsignee; · . : -:-- · · · . . .. . · value of Jess fhari ·.
6; ·.eQrLof.Qep;,irt'ure,·pprt'ofpestlnation <ind dat~ of·.·. ~o. 000; Or'
· arrival; .and ·· · · : · ·· · .. · · · ··. · ·· b. · Personal cir. househol<;I
7 .. Numbers and-rn~r~s oftackages or:·u:ie.quantity, · · , , effects.or goods;_nqt
.if in f;Jul~-{R.A.:"No._.10~?-3, .Sec,411)... . .. : .. .jn ·commercial· . ~ ,-.
.: qua"i:1tjty;)mpoiteq in- . ·
· Kinds of Import Entry: (Fl)·. · · .... . . .passenger's .bagg~ge ·
1. formal. Entry; c)nd · .. or m'ait . . ..
.2. . Informal
. . En~ry,
. ..
. .(RA ,Vo. 10863, Sei( 40~).. · .. ·

':':.

. 430 I· 2019 SAN SEDA LAW-CENTRALIZEDBAR OP~TIONS

----------------------------------------··-- ·--··· ···-··

 .I

TAJt'I FF ·-AN.·D>CUSTCiM-:s·
SAN 8_E&A 1.AWCENT,RA~.(ZE.p
BAR.OPE~ATl<!N_S- M~ORYAID iP!9:
. me# AIMEE i&WRIM &Wf:Ea s saa · w. et
Preparation of.the l'mport)::n'try , ~elief c'pnsign'ment ·
The.lERD shallbebasedonself~assessment. .. , .·· .. Goods.' such as food,. medicine, equipment and
.. - materials> 'for . shelter, donated or leased to
The·-irnporter- and the customs· broker shall make a.. government· insututlons · and 'accredited . private .
complete and correctdeclaration of the speciticatlons entities for free disttlbutton to, or use of· vlettrns .ot · ·
and/or particulars of theirriportation on the JERD and· . caiamitfes shall · be treated and entered relief. .is
ihe Supptemeniar b.eclaration :ori Valuation (SDV) · .co)'isighment..lJpon.declaration of a· state of.calarnity,
~- .. Form, which declaration- shall be -under oath .and the i;:l~arancEfofst.i~n-goods will be a matter of priority
)· subscribed· by the lmporter and the customs bi:oker · ·. · (R.Ai No'. 10863, $ec. 120). · · ·
:, before a· notary publlc 'or a cusfomsofflcer.authorized . . . . : . . . -; . . - . :
• .to .admlnister suofi oath underffre pain.of prosecution. T~x tr~at~ent: Reliet'corisignn;ient:impo'rtect during
f; . forperjury (C.J'v1.<J. No.·37-2001, Sec. /V·(A)(2}).. , a state- .of. calamity arid· intended tor'- a. _specific.
~ · ,.· . · ·· · · ·· :. --~~I amity :~r~l:l for 'ther'use df tH~ .c;:il~rriitY. vi~tlms ..
1. In thecase of ~.D\(, the.customs tm:iKer's~al!.sign, to. iherein,'shalf.~e,~xempt(rorrq:1u.tli'!.s:and_fax~s (R:A..
1,;. attest to , the authenticity. _of.th'e. signature, <;1f·'.the·. . No 10~63,-'S~c. 121). ·. ·. .. ·. ·... ·
<, ·
f importer (C.M.O, No,·37~2.001,. Sec.JV (A).(2))'. - ·... .
· . . . , · · · . .. · ·. · ··,
· · ' ' · ..· · ..
Decia~atiP.!} .Of C.orrect.We19.h.to.r.\(atue ..
,·
i· ·
:.~- Wher~ lmiort ~ntry 'Fi;~,d ·b~--P:erson oi~·~,. ilia~ -~ .. f!ltJBSf!. (efer t?,. t~e. d~sc;fi~~lf:n·'<jn.'.. meihods . of.-
the lmportei: · · ... ·· :· · · ,, : . .. . .. _aetecmmt()g dut1af?lf:!. value- of t(TJportedJ;oods above.
The Importer. shall himself be ~eqklired.' ~o-. d~clarJ,/~.~. -f~r-P~yment -'-U.abllit~
Di,ltie~! _· ·_ .. ',:_··,. . : . · .· ~f
un~er .o~th and un~ei' the pe~ai\t~.s Pf .talsificat1.~.a;?,f((,~-.. ,:~·. _. It <>9nstitute~· as· a perscm~I de.bi due from th.a.
perJu7 . t~at . ihe : .de.clar_at1ons and .. ~tate~!qf~,;-'f.(!1. . _· · lmponer- ·fo · the :. government · which ·ban . l:)e .
eont<Jm8:d m the en.~:a_re._!I4e a[ld ,cosrect (R.A.~N~:.~ti!.tr-.. ·_dis~hargef only·
'by ;paym·~nt'..ieJul\·o(afl dtiije~; .
•
:,,: .
. 10863, $ec. 107). ·. ·:·.
.. . . .
. . .-
. : ...
The'.declarant shall. b.~ respon_s)ble t9rj~~:,:.ic'9~~acf
·. . . .;'J• r~·.-. ~~-1;~r.·.' ;·_~2:.-ki!i:a'"Qr..#'.·
· . . .. · -~ i:,,"·;.;r_r!-,P,';-;taxes, te"~fand .ottier .charges·1egally :a.ccruing;·
.1'·,, -: : . . .
H~~~hl'J~s- ;s ~
- '· . . . . .. ·. . :· .... ; -( . . .. ·.
lien upoh tbe
~~icl~s .im.p0ft4;l~
f. of t.he good~ dec!a.r~t10.n. an~ for._.ther~,f"Y.m~nt t>f p_('~~ ,. . wtiic;:h lT).iJ. !.J.e . Einforc~d.wnile ~uch article$·are. in .

r. -~:;:.;~-~~~l;;_~;.::~~~~!~~~~t~!!~~;i~~~~;_:~ ~~'it :··. ···..·

:' .
_dlJt1es,. taxe~ and..othe~- aharg~s due 0]1,tl')~~_e~r~"if

but sho.11 no! be·resP,ons1bte.~q1~~P~~J.1-0t

·cuslodf_· @r'\subject_. t~ the· · conti;ol _ ..9f · ihi3
'~.~~,~~t:(F,~t;·,No_,.
pf ~i1tles~ . , ,:, · The ~p.Qrl~J.J:;;~th~.,_Qerso.n pnman_ly liable _f~r· the,
108~?':s7~- ~~5('._: . . . -.: ~
i,;:: taxes and- other charges uue'~Jf l!1e=fri1Bb~fd 9~9.s _ .t. paynilf _.,a1i~!)~ on th~ irripbrt.~d-.goodfi or:.
t ·, (R.A: No.. 10863,. Se(!, 1.07). · :-,~_; ?!=':;;!._, . ·-~ · t! : arti~l~s. · · r~ore;''.his liability constifute's a Hen ori. .
~~: . .· ···. · · ·. · _.. ·,. : .. · ·. . ' ·{,~~~.. ·...I .· ~.'."- ..the· ·art_tc1e·.which. the. go~emment may .choose to
k _Not~: .!he depl~ranf _sh,all.s1~n1he go_og~dejar~~1on, . if>~~e).i,!9r,ce·while, the ·111:rpo.rted a~Jcl.~s: are eith~r. in_- its
f ~ ev~.n :wher_:ass!st~d ..~y a llcenS!:!d. C~J!~.IJI~~bro~ec,....~1.t,eei~t~y.i_qr.~nderits control (Piliplria'!';_ ~.helf P.etroleum·.

:. .
~ · : · yv~o ·s.hall hkew1s~- s1gr:i ·the· goods aeft~n:itioQ,(~fW.: . tJ2Le1'rp;-~~R_e'fJl.iblic,G.R.' f)J.o. 1619!53,.'M.arch_· 6, ~008)_;·.
~;. . No. ·10863, Sec. 1<Jl),.. . · ".J. , \~;.", Plfi
~.~J.<·. . · .
...
'·
· · .. -. .---.. · ·: · · · ·

I
Lodg.. e.m·e:nt of Go'"'ds De·c.la..ra.,tlo .. ·_._ ..~~~. lmportatioh~-' (except condi.lionally .tqX ~nd/or· duty- .. ·.
v . exempt import~tion) by .the-, go~ernn:ieht ·for its· :own.. ,.
, · L~gement refers: to, the :re·gistEatioi:{pf
0.·
a'goo_ds use.. :or '.that. of; ',its subordinate . ~ra1;fct}es or .
:'· deciaration With. jhe_. ..Bvre~u-.-(R)(' No, 1086,3,~_.Seq: instnim~nfa!ifi~·s;. dr, · corp,bra.tions;,·.a·gencies: ·. or · ·
;:.-· · 1-02 (de/)).. ·.. · . · .... · ... . .. · ·. :· ··\. :·. · ·. ,· ·. iristn,1me~tatl_ities.. 'oWried .or ..i;:ontrolle~ ':by .. the.-'
,• . : . . . . . : .:. -~· . .. ; . ·. .. ·gov~rn:men· ,. ;.hall·.he',sllbject.lo 'the_ cluties; taxes;
f P~rlod for· loi;tg'ine'r)t:·.·~qods1. dec_l<1r<!tion., !1)\;lst be·: . . . fe_es .and pther: ct)arges.prescribed .(R.A.. No,,. 10863, ..
~ .. · lodged vilithin' 1.5 di;lys.from'the :d,at~.of <;iisctiarge.of · ·. Sec. 406). · · ,. '·, · · ··> ·
::, .... the iast.p,a.ckage _from.'t~e vessel ..or a.ir,!'.<raft:(R:A No. . · ·. · · · ,. ·, · · .- · · ·
,:" ·.-10863';_ec.·
•· .. : · · ·..
S 407'1,,. ·· ..
· · ,· : .
·
..
· ,i=a.'irure: to,.. :P~y 'eor,r~c;t_ but. :_··a_nd.: 'r_.ilx_~~ .:on
lmpo~ed·Good~.. · . : ·. ._. · . ..
le~
. · ·}'!ote.: The p.erfod to file the. goods'decla'r~tion m'ay, ·· _ . Aft~r·~ pe!ng .subjected:° !O _.pos~~enfi:}<;_ ·audit' 1=1nd
upon request, be '..e~tended .. on, valid· ..gl'Q,u·od~ for ... _ei:cai:nl_n'.3.t1on, r3ny.:. pe~s«?n .~.Ho, 1~_:foun~ to .h~ve. _·,
anolher 1 _5. days. Provided, ·that the reque.st_ls -mad.a . · fncurre_d ,defic1~nq1~s 'fl c!1.1.t1.es,.al)~· _taxes. p·a_1~, for ··
·befor~ :the'.expir~tion ot:_ttif;i. original .-pe.riod Within_ imported g_oods;. ~h~~H>e. penahz~.d ac~ording· to the . ·
whicli . to·· ... ·.·.di.le .- · .. 'the·..... .. ·. goods .. 2 d~grees .of-.cu{pa_b11tiy·(R.A.. N?, .1086_~. Sep, 100_!)):·.:
declaration. Provided, howev_er; U,~t t~e. period pf th·~- . . Two ·b~g~ee~· of.
c·~lpability: ·..... -. . . . . .
lodgment of the "goods d.eclarat1011 may be adjusted. .
by·tlie commissfoner.(R.A._ No.·:10863; .$ec_,.407). , . 1-. · .~eglig~hce :-- when :a-deficiency results from an·
. , : offehder's failure, thrm:1gh'·.ai, act(s).:of omis~ion
·· . or ·coml'l'lission~to ~xercis~· reasonable care. and
.. cornpet~nce to· erisu!e·thc:it'~ statement mad~ Is
"!( •••
,, . · correct (R.A: No .. 1086_3, Sec. 100~- (A)). . .
~ ·.
- 2.019 $AN :SEDA LAW CENTRALIZEDBAR ()PERATIONS· 1 431
.· . .
 . TARI.FF AN·o CUSTO·MS
-SAN BEDA°'LAW CENTRALIZED.BAR. Of'ERAT(ONS'~.MEMORY AID 2019·

·Pe.i:ialty:. Flne equtvalent]o 1'25o/~ qftti~-reli'enue loss .. Legal tnterest on Unpafd Duties and Taxes .
.(R:A. No. t0863, sec: 1.005 (A)). . . Unpaid duties, ·taxes and other .charqes, shall incur
. legal interest of.-29% per annum ..computed: from' the
. :i · Fr.~u~ • ~h;n.·~~- ~ater;al f~_lse;statement ~f.. act ·. date of fina.l assessment when payment' becomes
in connection with,the .transactlon was committed , .. due anddernandable (R.A. N.o. 10863, Sec, 104): ·
or. . · or:nitteci .· ·k11owirj.91y, vonrntartly . and . . . ~ . . . ·... . .. . . . . .
intentionally, "8$·. established :.bY ···cle.ar. and. . ·. ~ote: The legal interest sh~II lik~wi~·_e'accrue on any
convlnctnqevldence (R.A No.' 1Q863, Sec. 10.05
. , (B)): . . fine
. . . or'penaity.imj:Josed··(R.A
. . No. 10863,
. . ' ~ 'Sec.
. 1'04), ;.·:

.' Surcharg~ forFallure to Pay.··, . . .

. Penalty::: .. · ·.... . . ·. . . ' .. .. . .· Forfailure to.,pay duties and taxes ofanassessment
. · a., Fine.'equivalent t~ (5 of tne.rsvenue loss; and within 15-da~ from. the· dale of final assessment, a.
z- b.: ·injp'risonment.ofnot fess !_han 2.'years but not ' .: . surcharge ot 1'6% of the total assessed amount or
.. · · more' 'tha'n"8.. years (R.A. No; 10863, .$e-c. · - balance thereof shall be.added l;l.bd collected.rwhlch ·
. 1.00!5/.. . .. · .. ·. ~,. . · · : ' . surcharg-e.shall increase Jo '25°/o .if .ttie delinquency· ..
lasts: for ·more than··1 -, year (R.A. No: 10863, Sec.
. Ass.es.sment'~nd. Pay:m~nt c;>f Outl~s iin'd Truce's . ·' 1.425). . . . . . .
· Assessment refersto the. process,of determining·the . .
: . amountof.duties. and truces-~ind other charges due 0.2=:=~.-;.§~~mary · of . the. .Assesement ;a~d Cle·~ranc·e
imported and exported gqods (R.A. No: 108/r:r,~c -: -.
10? .(F)).-.: .'-·'. : . · .. · ..~ · ,·: ·. .:·' ~ · h ·... \
J ~locedu~.· ·· .: . ·. ·.. : -, · ·· ··.
..(\1Wrt~ir:j.:~aysfrom t_he date of discharg_e.of th~ .
-:.' ·.: · .·

,. · ·. · ·:.· . ·':'. ,_ .. - .· . .£' 0··r----..:~~.. :1. alt

it~~,$
~a~atie .frc.m tt'e ves~el_ or aircr~ft. -t~e _
Whe!'l Asse~s~ent O_een'ied_Te!Y~t~v.~ V/~ . : .. ~s~rant p,'~wo_dgethe goods ~e.cla~t,on ':"1th ._.
Assessm.e~~;s~_~II be. de_eme«;I t~1:itati.~)J!f~td1:1tre$4~1l$;._ go~{~ }'~lue-f.dded · · Seii:v_,ce Pr.05!.1der ·. .
~nd._ taxes· 1ni~1~1iy ·assessed titel. _by: tt;iB T '\VT(VA~.f).r~rf.<;t{'f\O; .18-2.019)._ ..... '. .. . · ... ;
1mporter-·(R.A N(). _108.63, Se~: 429){., · · ·. .. . lt . !fa, ·~~ · . \ . -~ ( ,;,.·\~ ·. . · . · ·. ,. . .· . . ·
.. . '. . . '. . ...... - . j ~,_:_ . · . . . , : · · . __ rf : . N~e~ T~f:: P.~~~)it;,the lodgement of the goods ...
· No_te: ·Jhe ass~ssment sh~lylle · pleted.1,1P9'nJinal· ·~cla1at1qn ij_a.~.• ~,t 1;>ee11 shortene.d.to· 7 ·days.
. ·. readj~stm~nt .b_ased·.-oQ. th~ ,t ~ift. u,liiig . i~- -~"s~y:, 1-:::-"~i'tim:J.heorig~'_al · 1f..;day p~riod put~u~nf. t9 ..~h~ ' .
,·. ·. · ·clas~1fi7a!1on ~hspute, 9r. th~Ji. al re~oJut~I' of .. ~[IJJl.),~~p9wr ofthe 'omFJJ1.ts1oner to ~d)~St su<,h p~nod .
.· ,prot~st case..in_vo_lying.v~l1.1a~on . e~. {1.m~in, and·- J~~
·- .... ·.und .c. TA "JFJ.A No; :_~()86.~, Se(?. -~07; · ·
. . . .. _other cust~_ms._,~sue~ (R.A_.
0 Qf
F.v°(Je~r;. ~- ..,,~. ·:f[J.{ ~~ ·. jfi-:~Q;;t'l' _ . · · . ·. . · . · ·. . . _ . ,. .
~--'fl~·
. .: ... Whe·~ A:;s~~~-~en~ D_~fy\'es;Th\~ 'th~t~-~ ·,~ ~~totft_of t~;iGo~ds'de~l~r~,i~n,'(pres~-~t:ly'.· .
. (Declarec()-Vah:ie oOhe·Gqocf\_._ _.-·. ·\: -:/~~""' ~~~&'c ~d · JJ\'port -~ntry·: an.d lnter_nal.. R~vel'!i.Je ·
.. Duty_n,ay b~ assessed.upo.n an ·~otmt les~ tli~rtlh~lE. ),.·Yr £>:O. <:i~ra:u~~)_m)J~t be· filed with th~ soc;_ toge th.er
· entereg. v~Ju~: ··. · - . . , , · ~ .. . ;,,-.~~~ w)!tfsuJi>p_cirt1Dtf(frn,:umeots:such"·as cqmm~rc,al .
1. • 1n ·c9ses ~hen the. impojier certifl~ af§~itiJU):M~--~i:i{~i~.et~tt1;t,: ot . cre~i~•. pa:cking. list,·· proof_. of-
. : · ent~ . that. t.t:1e ~ntei:e.dya!uef. I~ .hig.h,~ tb.ar/.the ·t.. 1r:~'i. '\f'~~~i(;;~les,. ~on.tract~·imp'cirt'.permit,. import .
. . . dubable vatue·and ·.thatlh!,!:gbpds _a~e.so"'~~red .lV:lI'\1.-9-earance, e~~'· (R.:A. f\'.o. 1_0[}63). ·.. .· · 1 · ....
::- . · · ir.i order to rneet~ncreaseS·made ~Y the ·appra~~ .. · .. · . ,. . : · ,., ... · . ·: · .·· · ·~
... ifl/Simjlar cases then·. per:i_ding .re-~pfaise·m~[lt;_ . . . .: . ,:_Note;' The .·deciai'ant :m_ay ·arneryd .thi:(·91;)0.ds. ·.
· . . ·· · . and ·: . : , ... . :··. . , .· · · ..· · · '· - · .... · .., : · · cfeciaratlon that ·has. _already be.en· i.ddgeq:- .If,. at···
2·.·· Tl)e. lower -~sses:>merit shall. l:)e ··allow,ed only_ : ... ·. the: ·time ,of impcirtat!ori;, an jm·p,~r;t1;3r· does rjot .
: when tf:'le :importer's, conter.ltion:rs sustained 'by:a : . .have al• the ·infoi:matlon of supporting documents .
to
. : : . fim,i'f decision .anq ·~hafl ap~·ar' that such action:·of '.. . . r'e<ii.Jire·c1.. ·.complete. a·. gciods declaration, ti,~ '
· th~· irtir:>¢rier was· taken iri · good ,faith after·due··. ·.. ..CMiAaJlows the lodging :9f a.P.rovisiorial Goods ·
diligence.'and fnquiry (l{A. ·No.:'1Q863, ..Sf?c; 428)•. · . . Declaration (PGD):; ·. ·: .. ··. ·· ·.. ' ..... · ... '.
. .- . . . . . . . . . . .: . . . -~ .. . .. ...: . . :. . . . .
. When Assess'rne:ntD~emed 'Final·~; ... '· .. '. ·.. · . 3. ,: .Fa·;. of
~urp~ses- assessing ·quties ·.a~d ta~~s::·on. .
· Assessm.ent. shafl· be.· deeme.~ final -1'5.. dc;1ys. after ' :. • imported goods,· ... the · customs:... officer shall
receipt of the notice ofassesstnehtpy.the importer'or . . ·. . ... Classrfy, 'lalu·e;_. a·nd. determine ·.th~. duties· .and -'
·c·ons1gne'e·(R:A'. No. :10863;.Se'c.··42~j .. , ....... -. · .. . "t~·xes ·to''be paid after 'its examination,>f)e:sha.11·
·. . · . ~· . · . · . · · ·. ·· .. _.·. issue.an· A.s·~essru~nt Noti~e (R.A. No. 10863}".'.
···~-~~·te: ln'"th8 .~bsehce oif~aud· ~~d·wH~n 'ih~ g.bods :·:· · · · · · · · · ·· - · ·. ·. · ·· ·
.have .. been.. finally · assessed.' and re.le~s1;1d, . 'the . ,_: ': ·. Tl)~_irri~o-rtethas'~ p~·r\odof 15~days frOTIJ··i'eJ~~ipt. ·.
asse.ssrtlel'lt:shall 'be C9h.clusiv.e upon ·au .parties 3 · ·of. As.sessment Notice 'with.in. whk:h to:. pay the . ·
. yews trom:tp~.date .or. final'p~ymenU>f..ctuties. .:and'' .. ·· ~rresponding eludes an:<J. tax!;ls: through ifs
.. tax.~s.q'r upon c9mpietjon ol the post-cle~r~nce al!dit AtJthorized Agent l:)anl_<· (AAS). ..In .'eff~c.t, ttils is·
(R.A. No.
~ 10863;Seo. 430)..
.
. . . . · . : · also the ·period "".'ithl~· wJ:iich the im~ortei' may
 i.
f
-----~---111!1m•-•-111!1•-----------·-•:i;mm1-
):,..·.

TARIFF ANO:.CUSTOMS-:
..1111--amraii==~~m
l .
(:!{
SAN BEDA LA-V>'. CENTRA_Ll!EQB~R OPERP..Tl9N5.~ MEM,ORYAID ·2~19, . .

!r
?'-
... ·contest the assessment: issued . by· the. soc. . Ele~e.nts .of Smuggl.\ri~: (CRK) . . . . . .
f. otberwlse, the assessment \Nill be deemed final°- 1.. "Themerchandise must have been fraudulently or
,i.' after the lapse of the- 15-day period, (R.A. No. knowingly imported ~ontrary tb law; . · -
{ · 1-0863, Sec:·429). . · · · 2. 'The defendant, if he is n.ot the importer hlmselt,

t. · Note:·
·:::
,,
Tti:e failure to pay duties and taxes within
the'.15-day period shall result in-the imposition of·
·
· .. must have f!ec'eiv..ed, coneeated, bought, sold or
iri ai')y_ manner. facilitated the.' transportatlon, ·
· . concealment or-sale of the merchandise: and·
~~- interest. from· the 'date of final assessment .and 3. ,-The · defendant' · must · .be · shown . to. have
. ,t>
}';.: surcharge based. orrthe totalassessed amount .
or balance thereon, : . .'
·~nowtedgs that .the .merchandise. had been
·~~~~1i~1ro;;~, i~:~biJ} Sr . .v: People! G.R. .
s: 4. .After ·.pa-yment.of duties .and.taxes;: the importer . . . '
,;~. will then have a rion~extendible period of 30 days· Jf the_ d~f~nc;iant:. tiow~ve'r is .. showr.i to hive ha·d
f .
t'?.·daii:rl/the. goods from.customs.custody (RA. possession-·ofthe·illegally lrnportedmerchandlse...

.,;-_ ·
:, · No. 1-0863). · .· > ·. - . · .· . ·. . wittio.u.t · . aatisfactory · ~xplanatjon,', · ·:. · such

f:t : .
;,,. .
Noies.:
. .. .. : ' .
. . . .
.
·. .
a. For' tentative 'assessment... (assessments
r .
-..
146481, April 3.0;,2003).
. ·possessior(· . shall . be ·.. sufficient to,' authorize
. convic~o~. '(Rimdrir.i; Sr. '{. :· P.eople, G.R> No:
' '. -'· '; ... -~-.:.
w~1ch are: contested· _by. the .. importer), i:he . . . .
pist{ict Coll.ector:may alfow th~ reJ~~s_eotyh_7,1./" . :·outr_i~.ht __sr:ri.ug~ling: . ·. .

I
I .· · . , . . · . · . .
,mpo~e~..goods,upo~ th_e ~-sting of s~ffi9•~-~~;«, An. act of any person who shall 1mpqrt good.smto· the
·.-·. secl;l.nty to cc>Ver tlw apphcaq_le· dut1e~1tc3!)fh..-1;~~)..co_u_n.try.:·. .' . . : .. . ·. ·. : · . · · ~ . ·
. .taxes equivalent•: to . the .. ar~ount Jh~ft'J~;.:.-'r:;1\~J_1 ! . yv,thout :· .. , · complete . .-customs : prescmbed.
.: . . dlsp1.1ted . (Propose_d G1.11delme __ ·01 · tfntw...:':>ii.
--r.~tm_por_tat(£?!;1~~u1;nerits: pr . . .. : . · :· · . .
'· ,
:".
. Locfgemenf and C"!r!fo: Clearan_ce.4._!(2)1' ·.ll;<~Jt-,~~k).:..~~ltW~ui§;p~ing
b: · Goo~s,under, Pr~>Vtsional_ G~o,~~~e.cla~a_t1?-'l\,,
.pleared _ bt-. cu~toJ!)S· or othe(
r,f . ·:
r~ulf,!to~. go_vemrnent age!lc1es_ (R.:A_~ ._No.
ft." n'lc!Y be_ Teleased upon P.PSll~yor~ S~CU'J!.k-f' . :· 10863,.~,-102 (ff))'. ·. . . . .. . . · .

f:' ·
[r'!
__ -_'._·._......
· fh~i~;;~~~e~~;ufi:S~~~;;;l~i!J~~·it:~~~pti~e ~ni.u~giing::i/? '~v~~e-th~
Gw(i~lm~ on Entry )C?fJJe'rn~nf~11<1+ear!l.g · l;ii paym_ent ,ot- Jpr~s{<n~ed tax~s.· qut1es and. ofher
ft·
1
~.J\ig_tJt,
.··' · Clearance 4.10). -~ . .f., -w .5Ji~ ,, · .~ ~i~·· gover~.".J~ c;:~e.\!~'A.No. 10863,·.sec. 102,~ff)).·
~-. . ' ." \·~-. =;&{\ ~ f.,~ ' ' . ~~~~ij(i.\»z.fi¥ . .' . .. ·. .
lf. ·Keeping of Records · . \:.. . (-t'S:,,,I~ ·· P.,J. · f\iJ ·Technjcal,Sllli{gg~,ng; : ·-· ·. .
1, · ~I · imp_orters . c;ire_ required ._t<Z:,';±<~ep_f£1e1~v,nt ·. t'f-
t:,n act _of. irnpqrfin~'.goods into t~e c?untry by, ~ea·ns
f.. 1mp?rtab9n docarr:ients,-.at, _their prmxipal )~lace_ ·of· J-+r-P:}~~a1Jdt.tler:it,·fals_,fi~d or er:o.neous .dec,Jar?it~on of.
ft' business, for. a penod. of 3 years from t~e,d;tte of:final .. '.~....irgo9.c;ts1tQ.1ts na.ture, kind, quahty, quantity or weight to
( . · payment. of duti~s. and '.taxes o~ cvst9'._ii,scle~~n,,ce..¥.~~.au:i-;,~du~~~;a:a]oid .Pay11Jent. of prescri.b.e.tjta)(e~; duties
L ~$- th.e·_ c.as.e_-.may ·be. ·1;conp~1c- zp~~~~~a~irs1are . . ·<:'1nd oth.~r cn~r.ges (R.:A.J>Jo., 1?863; Sec. ·1Q2-(pp)); ·
r,::· hkew1sereq1,:11~ed to keep records of 'IT!P~._,,i'J!=!Es::9~0d~. · · . . · .. · ·.. · . : , ~· ·
L. 'withdrawn. from. tb.e ·zones . ~n.d: brought' into the . ·. T~pes;of..Tei::hnicai.Smt,1ggiing'
t·· customs·-i~r:ritory(R.A.Nq. _1Q863, Se'c. 100$).: · .. . . ·1. ·Misd¢dar~ti9n · .. · . .'. .
r:· . .. _. Mlsdec"raration- is ~mmiijed · when- . the ·
~- .discrepancy . pertains . .fo q·uantity, . (ltJality,
( ·1 · .. . · . · · · ·. · · . . . ·: f' .
descri_ptiori; • weight; · or _ rneaslirement.: o.f the.· .
[_'_:.· ·. . c~~~E~
•
~4~.D ~1:HE~··o~F~N.. SES:
. ·. 2. · · Miscl~ssifjcation · · .
.r~.- . · . ·:
impo~~d g~ds -(RA.N_o .. 1_0863~· Sec. 1400): .... !
· .. . :, .·. . ·.· · .
. Misclassification exists. when insufficient· or
~-: .Smuggling . . . ·. . . . . , wrdrtg description 6f the.\ioods or U!;.C;l° .c;jf wrong
Ar:i act of ariy person w~c;,·_shall: (f:AR!) . . .. t.ariff ·. ~eading-, ·.wa.s-·. cfeei~r.ed . r,esulting": in . a
· · 1·. fra_i.id_uler:itly itn?.9rt or export or bring iota or . · • di$crep~mc°}i"'(RA. No::108'63, Sec: 1400).-:. · .
. outside o(the ~.hilippines any goo,;ls contrary tq .. 3. Undervaluation (FiV.f · .. , ' · · : · · ...
raw·· . . . ·Undenialuation·-is.committed )Nhen: .
. 2. As~ist iti so.doing; . . . . . . :a.· The ctedaredvalue tails to.disc16~e·ili f)..11rthe"'.
· 3. ,.g~ceive; conceal, buy, ~en; :cir
.in .imy n'iann·er , ·: price a.ctua.llyp~icf or pa,y~ble or ,any dutiable
· · · facilitate the' transportation; concealrrient·or ~ale. . adjustment to ;th~ P.rice; o.r . . .
. of su'ch goods after importation; or· . . . ..
b... -An Incorrect valuation:metho'd·is. used; c;,r
4: · Commit Iechnical smuggling (R.A. .Ne.· 10863; . c. - Th;,; Valuation-· rules are ... not properly
.S~c. 102 {nn)r . . .. . obs·erved (R:A ·f;olo. _: 10$6;{ Sec. ·1.400)"' . ·

2019 SAN. B~D;<i.: LAW. (;:E~TRAU.ZED BAR ~PERATIONS. 1 ... ~3t :,:,:,.'
• ' . . •. .• , " " ·,.-: 1 r.·,~~:::~ti~t~

---------------- ·-- ..
 ·TARIFF.AND
. SAN BEDA .LAW.CfNTRALIZED
BAR '()f/ERATIONS· ~ MEMORY·AID 2019
CU·S·TClM:s .
g IWA+EEM Nill
..... . .~ " tl
. Imposition of ~urch~rge . . , ·. : Payment of. tbe. tax dlle after apprehensi~il is not a
1. In c;;ase of misdeclaration·andmisclassification- valid def.ense (Rodriguezv. Court of Appeals~ G.R
. Surcharge·of ~50% of the. duty ~nd tax d·u~.
I • ""'· tf' ' • -
No. 1f52.18, September 18, ·t 99.5). . .
. .
Note:.".l'Jo ~ur«tiarge shallbe imposed when: Th.ings Subject. to. Confiscation .in. Smuggling:
a ... discrepancy in duty is less than ·10%.; or. · · · cases: .
b.. · . the declared tariff heatling ·i~i rejected- Jn, a· 1. Any article which Is removed contrary to law.from
formal customs dispute se.ttlerrient' process; ... · ·. · · ariy public or- private warehouse under customs
.or.· · · · . , · . . ', · . . supervision· or released Irregularly from. customs ·
c. fhe tariff classlflcatten declaratiori.relied on · .
ah official government ruling. '.. . . .
.· custody . (G:arrara M.arble.. PHL, · Inc. v; ..
Commissione.r9f Customs, · G.R.· No. · 129680;
..
, ->, . • · Sef!tember 1, ·1999). . . .
· • ·• •• ':- . . .. : ·...
• • •

·2:. · ln·case:ot und~~al~ation·--: !?Llrcharge·of 250% a.: ·. . .

oftrie.d.utyand Yax,due.·· · ..: .. . .. - .~·-: ., .: ·· · 2... ·A~yth1~9· thatwas used f~r s.muggling.~ subj:eci
. ' . . . .' . .. :· to· ". conflscation, like the vessel, . pian·e•. etc...
. . Note: No.surcha(ge. shall he.irnposed.when:-. . (/JamaiJo.v. Com.missioner-orcustoms,G-.R. No ..
. . .a .. discrepancy in.duty is less than: 1.0%; or. . .. .: L-28809,·May' 1.6, 1983}. . ,~
. . . b.'. the· declared value is rejected-as a-result of. . . . . . . . . .· ·... .
. . art officia( ruling · or:{ decision· under t~~~~~ ·. Common carriers' that . are not· privately
' ·,,, .c.usJoms.. dispu.te .se~eme9t p~~r~s-:7RA.-u·-r. c.~arJ;eFe.~c~nnot.be confiscated (R.A. ... No. 10863,
. . . No.. 10863, Sec ... 1400). .. . .,£ .~, . S'&ci 11?1:J;.(k):J. · . .
. .¢-'-<°""~ .r·:::. ,.;r.~=··~.~.: v.( K '
. .. :. . .. . . .
Effe.~t·. o~: int~~.i~n.a1ii=ra.~du1.euis~i!;i(ati:n,.:..:_'-: -~GA'\.
Mis,cla~~1J'!cat1(?n,or \.!nderval~atiol~)~J· · ~':'_.,,.~-=--~.. ,. ~'\.:.),, 'I,;.·.
.. . . .
Mi$cieclaration,·misclassificati9({§'1r~uo;tfrva(uatior\'w.· · , ··w · '\ "':'!"~) '~~
. intentional or fraudulent whei)r ·.· '¥.;.. ·. · Jr.. r .,_.,:., \ ' · 1 :: · ·. .!&. . ·
J1
t . '"
·\ (Jl )
1 'b . · ' · ,~-='.\ ~i.
1. -A false .or f'llleted docum.~fl!.!.~s 6m1tt t:or- ._ ·,
2. ·A false ·st.atetnent or-inf~~!Pati17n ar,~ i.nqwJ~Q!¥···. » I
·.:-.made (R.A.·No.10~63,'S~~:1,~0)•. · : . ~J~ .t:::;1~·J_. · . · .,;_=1'
Ii~
Not~:.'A··di.s~r~pancy i~ .J[~t;~~fl'~~:·:i~~~ . : . X.0: '.• ,'f' t : . l j
. !>9twe~n wl:ia~ is. legally a~ter~;:\~ ·)i1;s};l~s ~14.i J~ · .. ,; J:) . // '-< ~ ~~~.t·
.. de~.la~ed amou~Mg.: to_ rJo~~·;titan: -~&.l~th~ ~~gt/.;.:~.. ,·· ',f;
. constitute a Prt(!la faai~:: J)l1~enc~ ·ot . ~ci~. T ":% . . ~ / .. /
3

·s·urch:<Jrge $hal1 l?e itupos~ eq~i?alent~~OQ ~.6fi~~ . ·/

duty anct,tax.aus. and.that.the goq~s s.han.~su@f~Y:EN1'\~~ · · .·
.·,.

.'
. ~~sc::~i~~~.~rtirir:~ru~r~~~j~~(p~~f~··&~~~~~\:v]';,i_'
-lvf A..\""'>:: ·. ·. . . · .
~n~s Qr pebaltt~S for unlawful,1mf)!)rtat.,<?~Y.air,~th~
. importer ·and 9.ther person or· persons .wtio"'\Y~llf.\Mt}' · ·0 ~- • • • • • • • •

p~.rtfcipated \n. the. fr~l,U'di.llent.act (R.A· No: 1086~~~~ · . · .) :\

Sec. 1.400).' . · ·. .. . . ,: : . .
·.. · . .. . . ; . .. .·..i ,.C.... •• :. \, •

Confraba~d ·:- . . · . . .· . . . . . ·,
Gobds·. of prohibited·. importations. or exportatiqns·· .. ·_.
(k.A. No. 1086:i,. 'st1.c:·· 1401). :ri·:mayj:ilso .refer to' ...
. articles··.imported'or.exported in violation of. ~ariff· and
c~ston'l.S:·l~ws (P.D.,No. 93 (1)). C!:>'ntra~an~.:i(also .. ·
-.·. ··Xnownas smuggled.goods (R.A !:,lo. ·1.0863, Sec; ..101 .
(n,:,)J; . . ~--. ·: .· ... ·, : .... , . . . . . .. : ....
: ~-. ·•
Evidence .·~or ·.c~nY:~cti~n:··,in ·S'1ldggli~~:·cl!.~e~. ·:.: 1_: •..
, · Mer~ posse~ion.. of the ·arti.cle)n ·que$tlon, unless · ·
. defendant could ex.plain'that his:posse~sion is lawful
to ttie ·satisf.action .of the'.courf(Rddtigue~\i.·court of
·-Appeals,·.G.R. No. 115218>-Septem.ber..1'8,f99p).. .
. .· . . ·. : . . . : ,.

. :··

· .434 I ·2019 SAN BED.a,'LAW CENTRALIZED BAR.OPERATIONS

 TARrFF AND:c_USTOMS
~-smA t:A.WCF;NTRALJZEDBAR OPEflATIONS .-·MEMORYAID"2019
.......... mi lllllil Bl!lllll:.!llll
llm.illlmmlll~~-- :amimi'.llm.

. Table 4 ..:._ Cr..Jmes and Other Offe~ses ·

1 . .Misdecfaration, 1. Departureof vessel, seacraft, or aircraft :) . Technical ~nd outright .

· · . · mtsctassltlcauon, and before undergoing customs formalities smuggling ($ec. '1401);.
. :underval~_atiortin goods: (Sec. 1405); . ·2.· Eritry of imported'or '-;,
. ' .-·declar'at.lon (Si:Jc.· 1400);· 2. Obstruction of·boarding officer ($ec. . . exported article.by\ -,
, . .2;, Failure: or Refusal.of party. : . ,-..1406); . mec;1ns 'ot.anyfalse or.
:to gi~e evldence. or submit. · 3. · Unlawful boarding or leaving· ofvessel qr·· · .... .fraudutent-docurnent,
· documents for ·. . ·. _ · ;aircraft.(Sec. 1.407}; . · statement or: P.ractl.ce
_ ·.a~se.ssm.ent (Sec. 14P2)J·.· A. · l:Jnload~ng of c·a.rgo before arr:ival_at port of. . · ''-(S€ic, 1403);··" ·, '. ,-·· ..
· a ... Failure to Declare . entry (Sec. 1408); · ·. . . ·3 .• Filing·~n.y tal.~Ei or, :
·b~ggage (S.ec. 1404),: · ,· .5.. Unloadiflg of cargo at lmpropertlme-or · .'.· .·.frauc;!ule.nt·claim for the.
4. ·Unauthorize4 withdrawal · . · place after arrival (Sec. 1409); · .· . · payment.of drawbac~ or'
. -:·of impo"rte~ .g9qds from · · -, ·: ~- · Failure to Exhibit or deposit documents .. . . refundof dlities'(Se~.- · .
·,
....~ ·. bended-warehouse _(Sec. . · · (See, ·1410);· ". : · . · . · . _ . .. t.403); · . . · · ·. ·
· 142.2); . ·. ·, 7.-· . Bringing of unm~r.iifested Arms, explosives _4 .. failure !o report fraud .
·5.-. f~il~re'to Pay dlJties., .. : . o,:.~ar equ~~ntW~t(sec.:141~'1); _ '. ... ': . . . (S:ec .. 1416}; . · . . ,.
·.'. . taxesandother «harges. 8.. Fai11:re·to l\JHP.!~ ~~yc;1nce and requisite . . 5. Affixing .se~i~ _purporting
: (Sf3c. 1425);-an~- . · . · · . m_anifest 1~1e,gr.:1~f.:?J;·• . . · · . · . tobe .a customsseal to. , ·
· 6:- B.re<!cn Qf -s~cunty (Sec. . ~:. :01sappea.rc,1.nf~o(,!11,s3..!)1f~~~ed_ goo.c!~ (Sec.> , . any. vessefaircratt,'· .
. _:,.'1426) .. ·.. · :.. . 4
1413); t;~·:'vf.~j:~::.)_;,,:--:;;~."t} · · vehicle, weretiouseor. ·
.. ·. ~. . . · · 10. Discr-epancy·betWeeil actuai'-ani,f:.i:l~dared •.. ·pacl{age (S~o.'.1418); ·
· . .. · ~~igflt of ina9t~~1~d goods (Sec; J.#~4); · · 6, Removing·or ~epackiii'9 ;
· 11. pf_~~~panci_~ith)t,e Mastel'.'sor_,.Pi!~i{Zs-in-: .' ·of goods lry warehouse
... ,. ·· ... · · · :_.. ,~.ortt~;an·dr!;!port:fSec. 1_415)~ ff. ft ,\. . (SecA423);·. · . , . ,, i
: ~~~Fal~,,~~~atem~!1t·df.-~essel'sor iirc~ft's\ , t.' .Rer:n~ving goods from,. . I

··.·
. -f.:i. .... r.417);.
·-·~x~M:=tti~!'.(§E1c. _._!( ~.:.:__;~3,~ _·,. fUS~O~._custo,ciy(~~c.
.. · ·,.\~ 1~....-:1!3r.~,a~~ng.aJi.~,eal1:.1.~ced b~!!,\t~$.·1~_lf~\ · 14~3),._ ..· :._ , _.: •• . ; ·.
i
i·
. : ~~- · ..Wf9~r~ (Sf:1?11141~1-J · ·'Sf~·- ·8. Fa1fu(e to ~eep . · .. I
. . • ,t~~-~~~g9f. ~~k &/iasteni_ngiplaceqby;- . . . Jmpo_rtf:tti?~ recbrqs ~nd .,· i.
· .. '\.!: <?,t1storp.s._0fficersJ'§,tff_.:,J_g_20J;. · . · . , :. • ·. .~II access. to qustoms ..
·15: ~~~~I! 1?_~eakc!g~,!i'1,'.1Jl;,~_!fll~-of. · :: o.fficers.-(Sfi:;;·142~).;_~-~a.· .. ·
)·· · · ~rks (S,.~f.¢'4"1?--,1J;•a1:1cia=-~ . ·. 9; Co_nc_ealme.ntor . ·. : . , . . ..
16, ~trier ,o!f,e'rjs_es by. the· owner,!'.'r- 'opei:atcir of: . · dest,:uction· of eyjde·nce ·.. ;
. · a){}.e'sseii·aircraft or train: · . · ·. . : ·) of.'fraud.(Sec: 1428).
.. ··. · a:- 1=6'nt~chonn9 at'an/dock, -pier; whc·irt., -. · . · . · ·.-, · . -'· · ·: · :.·:.'.-- · . ·
.. · ·: quc!y; or:.bulkhead oth~r.than.a porf of .-' . ." _,,...
. · . E;miry; 7 . • ,- . i · ." r . ' .-· . : ·.. ·.
..
·r, ,.: · b.- .For dumping of garbage or-slops b.ver . ·-.··
. · . . the side_s of.the vessehvithin 3 miles
.··· : · from fhe nearest <;:ciastline; ·
.. c. :iror dumping·or·ca'using .td spread 1..._.· ·-: .
.•.:. ,•,

.· . : . crudEfOil, .keros·ene·,·or gas.oline· ii") the...

. ... .. . bay or at the piers withi_ri 3_ ll)iles from · ·
~ ...
:- the nea.rest coastline; . .. . - . ·. . . ··: '
d: -F:or·loadil'.19 gaso_line or.any.other·
.. . . petroleum.products -at ~ place oth_er . .. . ' . ..
.· . . . than thi:it design~ted by ~he regul.ations;
. e. ·Forai1.ising the- emission anct·sJ!lread:of
. ha~ful gas, furn~s.aj,d.c!)e'miepls; an.d. ·.
.,,' .· ·f. · For transporting hazardous was_t~. ' .
. ·.. ·radioactive waste and other foxfo .
substances (Sec: ·1429), · · • '.
. (R:A_. N_o. -108 .. 3). · .··
r ·~ .
•!.

. 2019 SAN SEDA

. . .· LAW CENTRALIZED -BAR·. OPERATIONS
.. I •·
4~9

--------------------------------··--· -·
 TAR.I FF AN Cl CUSTOMS
SAN BEOA I.AW f:£/'llRALIZEDBAR OPERATIONS.:..MEMORY,AID2019
.~'Wlli~--.iii·... .,._.._ ~-----·....... 111!81__
· ., . · of ~~rt
.I
Effect oftssuance O~d-ers:. . r, •

. · TAX-~EME'D~-~S · .1 .. -susp_enslon of the processing of the _goods

declaration: t,ind. . · '. · , ·· . ·.
2. · Conduct of physical or non-lntruslve-Inspection of·
1· . T~x-·Reniedles·of the Government ·- -tlie'.·goc:xis· within-forty-eight .(48) hours from. tbe
. : a; A~mlnist.rative·Retned\es: (<;~SDt;.e) .. · ..: 'Issuence of. .the o·rde"r-(R.f\:. No.. 10863, Sec.
. I.· .. £o!Tlpulso.ry acquisition; . · . · 111:"f). · ··. .
lL Redudion bf custom duties/comprorruee.. . . ..
' .iii. .~lerf,Ordeis;_ . . . Action after Examltiatlon· . .:
. iv: · .§elzur.e 'a.hd Fprfeiture; , . Within48 hours· or, In thecase of perishable goods,
'-· . v. Distraiht of Personal P.ro·perty; and ."within..24 hours from [nspection:· .... : . ·. . .
· yi •. ."b!ivy·qf.Real Property, ·. · . : 1. The -aierting .. officer. shall · recommend" the
. . , . ·> .. . centinuance pf p.r<;>c~~sjrig qf.gootls.in"case .Qf.a ·..
2.-·. ·Jtidlcla·I..Re"medie.l:i: . .. . . .. . negative finding;- or' -, . . . : ..; ·· _;" . . ·
... · a. : Civil·actiofr and" :.:2. Issuance-of a warrant of seizure and detention if
. ti. Crimiiia1 action, · · a · discrepancy · be_twee_r.i- the .: declaration and
... ,~ . . . . .. . , . . -, · · actual· .. goods. -is f<;>unif "(R."A. · No. .1"0863, . Sec.
Administrative ·Remedies (ACAS~oq·.. . 1111),· . · · · · ·· , · ·. .
c·om~ul~ory ~c~ui;,ition . . . . . . ·. .·: ..c •.,.;~ .... "'~.. . . • :. . :'· : : • '. . :· . . .
The Comrnjssloner may, motu propr.10 Qr,~on'itiei.r I B,asJC~~~sad~ra.tlonso.n Alert Orders: . . : . -, · .
. · .. recommen~aticin of- th~ Dis_lriGf Coli~~·~r. ~~u_ir~t. ..I J;.,;.Jr~_,e· 4:t,~miss1ph~r shall '.~e no.t~fied ._of. ·the
in:iport~d :gPQds _under _que~ttc;>n f9r a"P,.rj~eb~J"'t<:.~-~""~~:'~(c9r!r:n~n~fltiof1. by 'th~ alerting offi~er ~1~hin .24 · ·
,. ·, their decla~ed cus.tolJ)s value plus,1,'ity"doi~S,.Jll~aay_.. ·. · . ~b1:1.~4ro2ftg"~!$~oanceof the ~lert order ....
paid on. th~ _gQods, p~y~e11t fo~ ,y.ihibt(s~~~~d~~""'~A.l!:lr:t'or.d~S: b_e dated ·an_d assigne~ a_ unique ~':ii~
within 1.0 .. ?Jor~if'.l.9. .d?ys .. from )S.~El,sUJc.~ofa:"':"':3fr1rtr;lt =r... -wr _refeJ.~n~ qu~e\ in -s~i'_ie~ whic~. ~~a~l'_ be the
signed ~Y the 9ommis;,ione!,lfor~gefacqfs1,1~nl'tlf -.u~
if~. basi~·!or_\~o~in~ .to and· mor:ut9fJ_':l~l by the ..
. such goods (R.A. No. ·1_0863;fpec.:~(j9). · ~ · . · · ... ·. ' ~-. qom~1ss1o~e'{J~'~l).eS.e~r~tary of Ft~ance. .
,. . . ·: ·; ·.- .. /{?""i/1 · ·· , .. · ~~e ;ureau_~~~w~ate a·cen~ral cleanng_~ouse
.. -P~rpose:.Tq J)rotect 9?Ve~meo,t ,fev(;lnu&s·_~~~~'.0""-st;\. -~"""$lor_:·al£~Ordeis..an1_s~all~J.Jbmtt reports quarterly .
, un,dei::,i~luaiJonof goos.ls (RJ?i~ 7.,. ,._,_.11086~, S(c. rjj}j{'5lon e !>t~tusf..ttter"'.t'~~- · , · ' ·· -· · .: . . . .-
. · ·: : · . · · : · . ·. · · '·. . - . · ~ -~ t·: · r'Jl.\ . . ;::,...~;4. ·. Th~ . II'; :t ~ol!e_cto# sh~II cause .the prepa19tion ..
J •

Note:· An_imp?_rt_er 111ay,-w.it~p~.~P:'Y\~~·~~;9-a.~~.a:tt1~: ot

· C:rP.: 1_z,•s.t}.n,d£pl:ut~al~r.descrip!ion; cla~ific~.li?n,
. receipt :ot nqt1ce- o.f th~ d~c1s1i:>.o:.of ·We .Oi ~~~10 ;; g, · 0\l~.. .f.Y.'Jt9J~-. l~aU_9'n· of..~~# go?ds se!zed and V<olluc;iUon
_ appeal \o,thEf SOF, Therea~~r, 1f st1lt-,.._d1ss. ~N~.;! . . ~ ~-~~~i.. nti9~F-or .snfilar. _9bf:'d::;. (R.A. t,jo.. 10863,_ ..
th~. ~TA Wn~~e··~o ~ppeal IS ~~a1.e,bY,1!1;I . ,7~~~9 ·, 11t>f). ;· --f-. . ... ·.: :_.-· : . . . - ..
. or upo_n reaffirmation of the Com~,s~1oner:,s decilWR·~ ·, rr\"~.) . / . · . . _- . · . , . . ·. . . . .
the acq~lr~d goop_s ~hall be sold_ p.~t~uant.~~~)ib_g(l;.'}.!..:-Wh)t};!ma~~"· co11sidered . as D_erogatory
. l~ws al')d regl!lationJ:, (R.~. No. ·1 qa~; s,{s)J@=""-~~~'-'l!f(or.qr@~~~7. ·. ·. ·· ... · ·. . . . . . ·.
·. ·. · · . · ·.·. ·. · .,_-.. · · ·,. · · , . · ' . ~ .U] . · 1t·f ]!lle;"f~lfo~ifg:-~·q~II· .not be cons1,derecl d.erogatory ..
. ~ed.lJ.c~io.n.?n.::us~om~_Dut1e~/§.o~prom1s.e...;;;~.:.__lVLm~atfcin:(qMIU~} .· · ·. .. . . . , .
,. - . SubjecUo·approval of"!:?OF, the. Co.'!lmissione_r-m.~~ General. ;:illegaJi9ns "of. O:ver-qL,J.anttty. without·.
. cornprt>mise- ~ny adminis~~tiv.e case jn\lolvir:ig -the ·jndiciiting. the 'source of information ·supporting.·
imposition· 6f. "Jl.ne~; ~urcharges .. .c~hd .. sur-cliarQe~. . . . ·the:.allegation; ·. · ·: ·. . . . . :· .
. including those arising· from "the~tontluc\ of a post . _.. 2. General alleg_atloris pf Misdec;;laration In the entry·
., :'. : . cleararice."-audit, unless. qthenyi~e .spe.cifled .'.by ..faw . : .. : · · without inoic:citing··thEd~spected actuc1I content:;·
. (R.f'.i.No. {()B(;J3, ·Sec. "1.131). ·. . .· : · , . .., .. "th.ere<;>f;. ·· .' · . · . . · · '·
.. .. . :· · .. .- ·· · : ' ·· . -'-' . . . ·' · ..- ·. · "3. . General allegations ·.of !iliport~tions ,contrary to
"!: Exc~ption:. Qases .involving forfeitu.r~ -proceedings .. ·· ... law Wiihot.it inc:licating the.~p-ecific law or rule to
. sh.all ~_ot_ pe -~u.bject -~o c1ny con:jprbmi_s~ .(RJA. No.·_ .. . .- . be .viol!3t_e~;. . . . . . . ··. . . . - .
· .. 10863; S~c. 1131):. , . ·· ·.: 4·__ :General.~l!egatjons.ofY.nc;le,:vajuatl_on; and .. ,.
. . · ', ·. . . · .... . · . :.5, ·-.General .a.ll~g31ions ·of- Mfse:la~sifiC<\lt_ion: wilho~t
· Aler\Orc;tei:::;'. ·. . · '· ·, . · .. · · ... ·.·· . . . · . . . . providing the. approprfate t.1:1~.h~ad!ng ~nd .duty
Writt.en · order.s. lss1Jed . ·by · cpstor(ls.·: gfficers·:· _a~·· of-the shipment to be alerted. {R.A. No:. 1-0863;
authorized' by .the G6mmisslone't. on, the· basis <?f . · sec;·: 111-1). · · ·
. der.o.gato!'Y Information _regarding pos,sible ·f,onT· ·: ·. · · ··
·corttplia.nte with RA No. 10863 (R:A. _No. 1()863; ln-cas~,of underv~lllation, alert·order·sh.all be issued
Sec. 1.111). . · ' · · · only · if· said · undervalu,ation is"· ~used. by '\he ·
· : · ·· ~ subnii$Sion ,o .custom~ of.forged 9r sp~rJous iiivpl~ .. ·
.. . or. other commercial· ·documents (R.A.. No. 10863,
Sec. 11"11).. ·· · · .· ·
.. \.

436 201!3 sAN SEDA· L.AW CENTRALIZf=lD.B~ OPERA T_IS)NS

 ,:~ ·----------=~--!S9!------llllll!l--
. ................ lm!B... ~-- ... ----~~~~~ -
f" .TARlFF.:A.N·D·CU.ST.O:MS
SAN fJEOA LAW CENTRAUZEq BAR OPERATIGJNS - MEMORY ).10·2019
f RlilPRMMI09!R05 it i t . . •
~ I p I

f;. . An. aterfor.der may. be issue.d i:mly' ~fter :19c1gment·~f
~ · the goqds declaration and prior to -the release of
\: · goods from: customs custody, (R..A.. · No. 108631':sec.
,; 1-11-1). . .
~-
~ , Under. no 'circuinst~nc.es· shall the -suspenslon qftfie
f . procasslnq of goods 'declaration D~· allqwed except . .I . a. '.\Jllithout going through ·.a· .costoms office,
,., 'through an alert order 'Issued ·bY: an. authortzed. -
f'° customsofficer' (R.)\:·No. '10863, Sec. 1111).·''. <>,
~(
;· Seizure and Forfeiture · . -frorn abroad and undeclared by such person;
SeicZure. refers to the actual 'or .con:;t~cti'-!etaking or'-
bringing into custody the goo_ds; things erchattels by
virtue ·of .a Warr~nt. of Seizure···and Detention issued
t ,· by. the Collector ·of Customs for violatlon' 9f the CMT,t,..
(C:A.0. No: 04-20.04,. Sec;.'3 (3.20)f. -. . ·.: .
. . . '. .' . . . . .
; ... · Forfeiture · refers · to . th~ permBfle~t... · tiansfei- Of .
ownership ot seized it~ms fr9m· the. imp9rte.r of ?wner ·. ·.
to the government .f<?r ·,al'! ~stabhshed violation of·A
9. Boxes, :· cases, trunks., envelopes, a~'a . other
·containers of whatever character i used as·
Receptacle. or as. ·d.e'{i<;:e to co nceal goods which
are subject to fotfeit'ure or which are so designed
· · , as to con.ceal· the character .of such 'g~ods; ·. ·: ·
·10. Goods souqhtto be [rnported or ·exported:
.. 'whether 'the act, was consummated
. frustrated, or attempted; .. : ·. .· "'"
· ., ,. b. i=our,d in the baggage. of a person. arriving
· . · 1::: .: Through a . false .declaration or ~ffidavit
· • .. ', . executed by, the· owner.Importer, exporte(,· or .
· · · . conslqnea coneernlnq the. ·fmp9rtations of .'
.. · ·.. · ·. such goods; or . · · · · · • · · .. . . · . · · ·
:: . · . d. ·. On. 'the strength. of ~'..fa!S:e);J9ice· or.:«;i.ther ·,
. ·:. : ..... document e~~CU!~~· bY·. the;._ew.rie!,:imp·o'rte(? .
. : . :-:~xpCilner,. :_ or c9nsignee .··c?n~t:ernf(i.g: ·tb~. ··;
irpp«;>rtatip~. o~ ·expo~ati~h 'of sli~~·;S<'><?~s::-·/. . .
1·1. Gqods, _the 1mi;iortatioh.or ~xpottatiQ('l;ofwhich 0 \·
• .'

CMTA (C.A. o.' No.. 04-~0b~;: Sec. 3, (:J. 1_0)J':.. · 'A!fi~1l .· . ?·~
l=lre effeele<;!.·. a_ttem)?~B?,.co~tra:ry to;fa~,:ct any .. ·. :
· . · . . .· . · ·. · · : !.jf: ·;.f~1.~l';.: . ·g~9ds of froh1b1ted 1mpo~at1911.ano· exporfatl0n ... ·:
Property· Subjectfo.Seizure and _forfeitµre: (~.~~~~f.!-'.jifl. . anc! an ·ot~er·goods which have·been us'ed,·a~~::Q(~.: :.. :
SC3RIPT) . . · . ... , . 1;, 1,,,1'.'1-~,tl.,~--:-)!lere enJ~r~ to· _be usf;)~. as. Instruments in-the : . :
1 .. Y.n"rria11ifested: goods found ·ori ·any yes~~l ~-@i:7:U"..~lltiW,r;t1!1fiop:
· .. airci;aft if manifest is reguired; · - ?,i('rf"·.;. .:r~ . b(tti'e:expo·rtafjorrof'tl'ie for.rtiif:. ari<:I . ·.,: .·
12. Tfi.r?ugh~$,?.Y·otherpra~tic~ ·or. d~v!c.e~onfrary t9 - ..
2. An.Y part of t.h!:! cargo,<stores o~(l?_upphes-of·,~~,.,...J . · 1aw:·bY {i'}~ians.of'wh1ch .. such goods enter.ad ;··
VE:l~Sel_..or,.airc:afl'.'arriving. fr?m ~1/9.(eig_ri' .p_9Ff"-·h ;-· ··'through.(a-1,ctl,sto~~Office to th~ prejudic~.of the .
·which ,is Y:n.loa~ed be.fore· amv?J)t> l_9.~.Efs.sel'.,s .·~~ go:vert}fTiefiltJtny. ve.ss.el '.or a1~1::raft.=ir:ito. ".Jhicli
· or air~raft's.· .port ·.of de~tiqsilictri · a"'~dtt.V!'{l~ho!,lt.. Jr'\. · ".s~all te:.·Ifans~rredcatgo t.inlci13ded'c~ntr~ry to
authC?ri!Y frpm· the .custc;:>f$.,9ffiCer.-;,~n/~ss· th~. ~- · .: ·.: law~tnor. t~. the1@rrival 'et.111~. importin~.'vessel.or .
. unloadtng was·~u.e:to a·~c1dJ0f, -str-e~§~OJ}'-'f~a~~-lr. ·~,11 · · .arr~~;,?~tf'i~··~f~t desti~atlon-.(R:,:4. 'No. ,19fJ~3, ·
. .9r other.necessity and IS SU~~!394~n11,:5.';.app,:0Vlet: · ~t!1 , Sec.'1);,f,).fl,~Y . ·. . '· · · . . · ,.•
by the Djstript.Coll!;!Ctor;.. · · ··-~·~tl·\i . ·.... !/ · t!J. .. , · . ' · · . .·,· · ·
:-a.. Any vehicle, ·vesser _c?r aircraft;~inRlr,.,d.it91cafg_O',.. {f~J1~ BOC acquires. ·exc)Osive. -junijdiction ._over·· ..
whlcb shal\'?e used uhla¥\JIIY..i~ t~~ij}lpei/~ati~n:_:...1,ff.'.t,t~B"~~<.!,,9POd~,far· th~ purposes of enf~ftetnei:it of ·
or· exportation. of goods .o.r· In < conv~y1f1'!,)4;or~.ahtf.te~l:l~tc5m~
0 raws·;frol"n the mohi€)nt ttie, goods are .
99
. · ·traf!sportin9 ·:§mu 1ed goods i~ c;;omiiielcia.l · .· · : actl!i=llty.. ifl. iis :possession.Ar ·contfo1•. e~en.Jf.. no.·. ·
· · qu~htities·: lntq . ·or fi:pl'(l .:any:' Phi!ippj_i:1"¢@rt :or·· ; : · ·.. wa.rrant tit s'ei,z\;ire · or '.d.etention'flad ·pfevioosJy been .
place; .. ·. , · ·. · ;_. .. , · ·.·· ... ..:... '\ '°'"'· ... · ." ,:. 'is~ued b.y·the.Co.llectO~(?fCustom_s in co.hnection.with ·
4. 'Any P.acl<age ·of.import~~· goo9s wni~h. i.s.:founi;I.. · : s-ei:.z:ure and forfeiture pr<:>te~dings (Repµbllc.v, 'C_oilf1: ·
upo_n .§xamination to: por:itain g90d~not:specified - . . of .. First· ··Jhstance: of. Man/la, .G.R. · ..No... 43.74,7,
in the .. invoic;e or go_qcfs.~eclara.tion;·. ,· : • · ... :- . ·.. se'pteJ~ber 2,'·1992).. - .;
s: '.§ea stores· oi: aircraft.stores· adj1,1dge(f. by· tne · ' · . _: . ··. .. . . . .
Distr1ct· Col!ector· tO' .. b~ · ~xceSS'ive,· ·when, th~ : · · ..: Th$.·:Cqlle.cfor' of.,Cu~toms wben si~ing in.forf~1ture '· ·,;
·:dutie$... and truce$ asses;,;~d . py';_ th.Ef 'District. · ·: 'pro-cee.ciings Cons_iitufe a tri.b1,mafui;i6nW.hictl.tiie 'la~· .
. Collectqr:are.'not pa'id or seemed forthwith:up.on·. •. expressly confers jurisdicti91j' to hear'.and ·d'e.ter.niine .. :
assessme~t"'ofttie·same;.:. : ... ·.· . •.•, .... ·· ': . all. questions' . touchi11cg· 'foi'f~iture . and . furttiet .
6. Any_ ves.sel ·.engag.irig.·in .GoastwiseJrad~ haviryg. ·· ... dispqsiti6n of tl:le sy~ject J'!)att~r:.of:s.uch· proceeding . ·
on board good& of .foreign·.,g-rowth,·produce·: or·. · (Jao v ... Coutt·of Appea.ts, G.R.'No:· 1046.04;..Oc'tob~r: :
'rrianufadurejri exq'ess of the 'amount:necesi;;ary . 6; 19Q5J: · .... :, : ·.. '·. ,> .' · . ....
fpr. sea,l?tOr~s;·_'. .:· ,. . . . . . . · · · : ·. · · · · : ' · ..
7. Goi:>dS..Which. are frau~ul!,:?'ntly...g,oriceale'd in .or,. . RTCs a·r:e'devoid of 'any 'co~pl:l.tence' to·.i>a~s-:upon· .
· re.moved co.ntrary to ..law from ·.any public or the validity o,r _.regularity. of. ·seizure.· t:md·.f9rfeiture · : ·
private:."'!arehotise; . cqntainer ·y~rd; ··on_'conta)ner pr-oceedings co.riduct~dby ·the EIOC a·nd 'to' enjoin-Qr ·
0

. . freighfstatio.i:runder cus~oms .superyision;. . . . otherwise inler;fera,witn 'lhe'se_procpedings. RT<;:;s are .

8. · Any' Qo.nveyance actu_?lly us~d for the !ranspo~ precl(!ded irom · as.sl.irhi,ng · cognizatice .: ovet · sl!c;:!!_.
. ·of gObds subjecf to. forfeitti,re;with it~. e.qj.Jipage or. . m'atters . eyen .· ''th.~ough · petitions:· for· f;erliqr_ari,
trappings,· ."·and any vehicle -similarly used,.. .. prohibition· or mandEJmus (Subia. Bay Mltfropolttan
-together.with it$ equipment and" a'ppurtenances; . '.
. . . ·. .... . . . . .

201s ·sAN ·~EDA ~w <:E~TRALl~E~ eAR ·OPE.RA,:;?N~ I ·4~7.~/ :'j

. . . . .>/,~if' ·:.~
 TAR·i FF ·AN D_:C·USTO··M·S
SAN BEDA LAW CENTRALIZED~A(! qPERATIONS- MEMORYAl~ 2019

Aµthority- v, Rodriguez, -~G.R. No. -160270, April 23,
:2010). ·. . .· . :. . . .
Even- if the. customs. seizure is illegal; exclusive
jurisdiction Jto tlie exclusion of regular courts) still
belongs to the BOC (JfJo·v .. Cour: ·or Appeals,. ·G.R.
:_ · No: '1.0460-!I; Octob~r 6; :19!J5), ·
3,. '. In the possession.or custody of o~ .subject to the
:. . .· .. .: control .of persons· who shall· receive; 'conceal~··
. buy, sell ·.or transport or a.id In· such acts, with
knowledge that'the goods_Were imported, or were
.the subject· of an attempt at' importatlon · or
. ·. exportation contrary -to ·baw. (R.A; No; . 10863, ·
Sec .. 1115).·.·

· The exclusive· original jurisdiction- over seizure .c!lid Jurisdiction_. :' · ·., . . .
d_etention p"foce~din_gsofth.e (;olle~tor pert~ins:on!y · . Requisttes (or Customs Fo~eitl;Jre:.(WFI) ..
to the.qoodsselzed pursuant. tothe authority uncer: , 1. Th:e- Wrongful ma!{ing by .th~:·Qwner, i_rTlporter,..
. . the TCCP ('Jeo v, Cqurt of Appeals'. G. k. No. 1 ()4604, exporter· or. .conslqnee . of. any declaratlon or
. · Oc_t6bf3r: .6,.1995). ··. . ·. :.affida"'.it;.or,the w_rong_fulfi,aklng·or delivery.by the ·
,,. · ... · · . · ·.· · ··· · .sarne persons of any.Involce, ratter or paper- ~!I,
-Re~sons . for'· Exclu~-i~e. Jurisdiction . upo·n·:. t~e touchlnq . on the lmportanon .- or exportatton. pf
. .Collector·of Cus~oms: : : . . ·. . .. . : . . ·· merchandise '{Fwola,ri,· Jr.;·.~- 'q_ourt'. of- Tax
. . . 1: '. N.o.\m,nece.ssaryhindrance on th~ government's . _Appeals; G.R. No: 42204, January.21, 1993); .
. . driy.e to p_rft,Yent:Smuggling;and otfi'erfrauds upori ·-, ~-. That 'such cjec.larattori;"affldavlt, lrivqiGe,; letter or
· -the .C.lJlltoms; and· ·.:. · ·' ·.·. · - . ·., . . -~=~paper is .E_al~e- (Far.olai1,'iJr: v. Court of Tax
'2.R,e:hder- eff!:!Ctlye an,d .. efflcient the ·collpemion oflu J\ ·=Appe.als, G.R. No. 42204, January.:2.1,1993); and
·.... i,nport. an:d ~exp~>rt d~ties. du~ t~e..:$~-'te· V.. . .':ft~ .i ~-
~frntpMi_O,~,OCI. ~he part of'~he 1mpo~er/eXpo.rt~r·"'
. : .Cotfrl ~f/wpeals, -(;.R:_~a; 1f!J.~ : ... t:· gp~~,..:~·"":~ev~1~;t.fl~~aym_E:mt ofth~_~ubes due (Repub_//~
... · 1995~. , ;,74.. :-- ~-:f/~~ · .
. · ... ~ ·: v. G;q_fiit-c!~At}'he_a1s,,G.R:· No. 139050; Qctoper 2, .
·' · . ,· ,. ;, : .· ·. ·
,,f '·,)-,0 .. · ----T··"-200~{_7 '."-\ . ., : ··: ·:
. Natu"re. o.f Forfeiture Pr:o'~~e.d,~'s~(A~R)i,::. ·.·ID) 7[ ~7 ·. ~- ·>~ ~b\ · -. . . . ;· 1
-'.: •• ... . •

'1. ..Jt i~ AdtninistraJive· andJCivil~iJJfhatu

e and1trs 1{~ Atiticl~; s~bje~tef seiz\e do- not. lJa_ye to be impo_rted ·
. di~ecte,d·,,against th'e ,~~t1g.'it~~lf ·(R publ[c v. i!'l\)~,goods·from fore,\9.nfo)u~try (Rigor v.. Rosa/e_s. G.R. ·
Sandig~n~fJYf:I~· G.lj?. fb:;;;tsJ.15_4, ~~6~!:.._, -~m~3:'3~5~'. O:{P~~· 19[!_~):. . . . _
... 18,:2003), ··. . . . ~,Y r-t.!~ if·. t. -""'ir>·
. 2:··. It is· :t_h.e.. froperty.. ,it~~l!;,:--wtit.c.h· ·coi~.p,i1$ lffl~wll~an1fpsted
iii!L~~...,. i - ·. i·.- ,.· 1l • ·· · · • · · : ·:
ca ge•is s,pbject foJ<:>rfeiture whether
. ··

, . . .Viblatlo_n·-an~--is .treated.!a~~l\~Pff~~!"(without.::!•.:.1A~ a_ct-~&~ugg_.,1?9. i . ~~-!abli~b~d-9r- ~?~.u~der t~e,

- · --~~tereri~swtjatsoev!=lr.to'!,tQe1~~,racl~}i~:~ndµ't{i ..:. r::~•f])ej_~fes)P.S~~f!wlur: IHs eno~gh ,U'!at tlie. ·
. ·. or:tpe .owner .(Transglo~e--·V1feF(?af1o'f?_<=!k, c~ ~1 .t~ ~ ~t·,~;t .u.~!ji.ao1fostM. and that. there .1fw'.as no ..
·.. . · Court of ApM.als,; G.R .... ~- -1266~; Jtj 'i£8,Y, fr..-"..L· '-s )e_)'l)flg,Jthat_pa}1.nentf.ot, du.ti~s·tt)ere(?n.. tiad·.been· ·
.. ·, _ t~9W; a11d__ . ·.-. :·_·-c ··:· -\ .. : · -~~/·· :. · _: ~/~:aff'e.?'4?.r itd&· be idbiect1~- (ortei_ti.Jre.(~lem~ny.a: ·
· 3. Forfeit.ure.• ptbce,~.dinQS.ar~~:i_fl the '~~ r~(O,[p~P!!Jflf!J,!J.?i'. .Tradirig· _-CoffJ; .. y: · Commissioner. _of_.
. · . prqce_e.9in_gs[n [1_ef!1.·~nd are <T~e:ctedpjieiQ!\"tli~ - ifstq_inJ10.1i4-C,pse.No .. 4389; Februa,y6, -1·995) ..
· . · . res. .(Com_f'(-lissfoner:_ of Cf.!sto_ms_'-~.:_~£!:!Ji,/of 7J1x=-~~1,-i., '\: · !.,/. . · ·.: ... : . . . · . . . . .'; ·
:·... _. . ·Appe.als, G-R.. ·No:. L--q1733, ·Sepf...e__.f!'b.Jf 20, ·"j\ /! _ fp1.e!\u~f'Common.(:arrl!.t ' . _ · · ... · · ·
.. · _.. UJB!??: ·. :''· ·. . . :·. ·... · .-.-~~ ~ · . ., .~.-~G'1~.r.al"_Rule: .QQm!Tion.~mer~ ~re not_ ~ubJ~ct tO:.
. .. . . . . _ .. ·. ., ·.. . .. · . . . . . . . , ... · ~rfe1ture(R.A. No .. 10863, Sec.. 1113 (k)). . ..
. . Not~: . Private ·.resj56ndent'"s·.defense-1hat he '.t\as no·. . . ·· · . • . ,. · , ··. ·· '. · · : :·· · · : ·
. . : actual~knQwledge lhat'the yesse'I Wi;}S. used illeGal£y_is... . Ex~~ptioi:i:. 1i"'u1·t:l. o~er -h~i.knq~l~d~~ ~f 1\s:.USt:l. in .
· p.e'rson;3I_to llil'T!. but caitnqt absolve-.the··vessef fron,·. . ~rnuggling ar:iq wa~ -~ . cons.~n~ing,'p_4r1,y_·.(Rj,.,: No.
liaoility ·.'of ,forf~itute, (Commissioner of. Customs,v.~-'. · . _1"0$63,"Sea, 1114);. · .· . , · ·. ,·· · .. · ·
CotJrt of.. Tax Appeals;:·G.R. No-. l.-31'i33, September . .. . . ,., . · · . ·. .·. · · · ·. . . .. · ·
?O, 1'9$5); and' .. _ ... ,.· . . . . .. Prima .. Facie.Pl'.e~un:iptJoh ot°·l:(nowle~g·e. by ttie.
. .. .. . • .. : · Owner of the Commori-Carrier·(SBF) , ;, . : . ·
4;.; .CIJs,toms·· :qompro.rhi~e: . doe.s. ~dt exting,ui$h.. . j. · If. ih~- ·comieyance , was. ·.used.. : to·r ·Smuggling ·
·.- ·_acriniil')al liab!lity-(Peopfe\r,;·Desiderio,G.R. No: L-. · , . . before; · . ·. ·: .' ·:.: ._. ... · · :"' -·· ·· .. - ·. · · ' ..
. 4()80.5, NPvembet 29,.1965).: ·. • . · .. :. ··:·. ··. ·... · 2, .··.If U,e_qw_ne_r·is-h~t (n the !!usin~s's toqvhic~_lhe ....
· · · .. · · · : · : · · : _. . · conveyance is generally used;·-or .. : . · ·. ·. · .
. . ·.Wh~-n.F6rfe1t~~e-can be. E;ffect~d:·cj¢.1,.). . . . : .. ·· : . .. 3 ... )f:the.owneris..Ei~ancially noi in.:a posjtjc;ii, t<_> QWr:J
. 1. . Or>!Y w,he,;- and wh,ile;lhe_gpqds are ir:t'tt)~ custody:· · 1 . · · ·-suptfcoriv~yan~ (R.A: ,Vo'. .1-0~~3, -Sec,_ 1.114)._·
.or within the:Jurisdiction ofthe·customs officer.;; . · .• · , ·.
. 2. . in ~h·e pos~e~sion·oc-··cµstody of .or.._subject·i9'the ·. ·
_. ~ontro1- of ·il]'.lporter,. exporter, original owr:ier,. . ·'
consignee; agerifof an.other.person effecting the ..
... . imp<;>rtation;.(;l11tiy
. . .or exportation;
. . or. . ..

43.8 I ;;019 SAN. BEDA .LAw CENTRALIZED BAR ·oPERA TJON_s· ·.

.. '

---------------------------- --- ·-· ...

 TA.Rl·FF AND . ClJSTO.M:s
:. S/JN BEDA·LAWtENTRALIZEDBAR OPf.RAT/oNS -.MEMO~YA!0-2019 .

. .
0,. Burden Qf · Proof in .. ~elzure·· and Forfeiture l.Distralnt .9f Personal Prc;,p~rty-
. ·, Proceediogs . .· . . . .. · . 'Distraint· of .goods, ,chattels. or affeats and other
l:>1n all. proceedlnqs for the forfeiture.. of any vehicle, ·persona! property belonging'.to the Importer (R.A. No.
) ' vessel, aircreft, or. goods under this Aat, the burden· 1_0868, Sec. 1'132 (a)) .. · · : . .·
:~· of proof shall' be borne.by the claimant (RA. No.' '
,.
t ·10863, Sec. 1123). . . . Procedure fo'r Ois~.raint: {De.SeW~R) · .. I
~'. · ; 1. Delinqu1;mcy ..,. The· importer failed to pay any I
'
Before forfeiture.· proceedings are. instituted, the. law ·. dellnquentduty, tax, and other charges at the
requires the presence of probable,cause whicl:1 rests :
on the petitioner who ordered 'the. for.feitl.Jre of -the .
tim,e,:required;, . .
2. · Seizure and Distraint - The Commissioner shall
" .. . I
shipmer:it of· rice' ar'ld· its. carrying vessel. . Once.
established, the. burden o1 proof is shifted to. the··
. -: . selze a:ny personal. property· belonqing, to. the
. importer io s.u!f!tle,nt,quantity. to satisfy the duty, .
l
I
!
. claimant (Commissionerot Customs v, Sinqson, G:R, tax. (?f other· ·charge ··.and ttfe expense of the · '
No. 1 B:f007; Novem!).er.21 ;. 2()16). · · · ,, · dlstralnt and V,.e cost of the .suosequent .sale; .·.: .
· ·· ... · · 3~ serviceof:Warraiitof, Di_Straint::--·. . .· - . ; . I
Summary of Seizure arid:·F~rfeiture.Pro.ceedings . 'a. . D_istrai~9f Chattels .
G,'o'()ds; · ~fle'cts:-- or.
I
I
l
1: Warrant ofSeizurEi:(WS)-·tM·Distric~ Collector. . · . O~er Personal.P.roperty·~·TheWbo shah
a w«
,sh;illl. issue. upon 'determlnatlon' of 'the . . be served either with the owner or pOS$essor> I
exlstence.of probable cause that violatlonof the . ·~r -personal 'property or at the. dw~·ll~g or .
II
CMTA Wj:IS .commltted (R.A. ·No: 10~63, Sea·,/,) . , . ot_J,er .:place of bi.isii:iess of·s~ch·_pe:son· ~nd·
1117). . ·· .. ·-': _; ': · ,:· '..11,:.(2,~;- ... .: . with someone of'.su1tabte,age·and discretion;
• • • • •• • • • • • • • v , •• /}~'tf.4~~'{~, · ·. ~-. ms_traJnttif$tocks~and0th.er Sec':'ri.ties -
2 .. · Servic.e·of.WS - upon.the owner or.1~port~l'.:.9f~}-):t\:~ · , The·.WOO. shart b,e;served.qpon'the importer
I·
i
I
th~ , goods· .or the·. a.uthorized .represent~it~\\~~~-t/..;.1!?:... ;a·nc1~~n .the presi.oE:n't.'n:!anage_r,. tre~surer, . l
I
ther~f