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The document discusses various taxation law topics and principles. It provides explanations for common questions from bar examinations regarding the nature of taxation powers, classification of taxes, and taxability of certain awards and dividends. Key points addressed include why taxation is an inherent power of sovereign states, what constitutes direct and indirect taxes, and that damages awarded for personal injuries are exempt from income tax.
The document discusses various taxation law topics and principles. It provides explanations for common questions from bar examinations regarding the nature of taxation powers, classification of taxes, and taxability of certain awards and dividends. Key points addressed include why taxation is an inherent power of sovereign states, what constitutes direct and indirect taxes, and that damages awarded for personal injuries are exempt from income tax.
The document discusses various taxation law topics and principles. It provides explanations for common questions from bar examinations regarding the nature of taxation powers, classification of taxes, and taxability of certain awards and dividends. Key points addressed include why taxation is an inherent power of sovereign states, what constitutes direct and indirect taxes, and that damages awarded for personal injuries are exempt from income tax.
MOST FREQUENTLY ASKED TOPICS Source: UP Law Center General Principles 1. Why is the power to tax considered inherent in a sovereign State? [2003 Bar Exams] It is considered inherent in a soverein State !eca"se it is a necessar# attri!"te o$ sovereint#% &itho"t this 'o(er no soverein State can e)ist or end"re% The 'o(er to ta) 'roceeds "'on the theor# that the e)istence o$ a overn*ent is a necessit# and this 'o(er is an essentia+ and inherent attri!"te o$ sovereint#, !e+onin as a *atter o$ riht to ever# inde'endent state or overn*ent% No soverein State can contin"e to e)ist (itho"t *eans to 'a# its e)'enses- and that $or those *eans, it has the riht to co*'e+ a++ citi.ens and 'ro'ert# (ithin its +i*its to contri!"te, hence, the e*erence o$ the 'o(er to ta)% /01 A*% 2"r%, Ta)ation 345 2. he !ity o" #ani$a% in order to so$ve the tra""ic pro&$em in its &'siness districts% decided to impose a tax% to &e paid &y the driver% on a$$ private cars entering the city d'ring pea( ho'rs "rom )*00 a.m. to +*00 a.m. "rom #ondays to ,ridays% &'t exempts those cars carrying more than two occ'pants% exc$'ding the driver. -s the ordinance va$id? [2003 Bar Exams] The ordinance is in vio+ation o$ the R"+e o$ Uni$or*it# and E6"a+it#, (hich re6"ires that a++ s"!7ects or o!7ects o$ ta)ation, si*i+ar+# sit"ated *"st !e treated a+i8e in e6"a+ $ootin and *"st not c+assi$# the s"!7ects in an ar!itrar# *anner% In the case at !ar, the ordinance e)e*'ts cars carr#in *ore than t(o occ"'ants $ro* coverae o$ the said ordinance% F"rther*ore, the ordinance on+# i*'oses the ta) on 'rivate cars, and e)e*'ts '"!+ic vehic+es $ro* the i*'osition o$ the ta), a+tho"h !oth contri!"te to the tra$$ic 'ro!+e*% There e)ists no s"!stantia+ standard "sed in the c+assi$ication !# the Cit# o$ Mani+a% Another iss"e is the $act that the ta) is i*'osed on the driver o$ the vehic+e and not on the reistered o(ner o$ the sa*e% The ta) does not on+# vio+ate the re6"ire*ent o$ "ni$or*it#, !"t the sa*e is a+so "n7"st !eca"se it '+aces the !"rden on so*eone (ho has no contro+ over the ro"te o$ the vehic+e. 3. !ongress% a"ter m'ch p'&$ic hearing and cons'$tations with vario's sectors o" society% came to the conc$'sion that it wi$$ &e good "or the co'ntry to have on$y one system o" taxation &y centra$i.ing the imposition and co$$ection o" taxes in the nationa$ government. /ccording$y% it is thin(ing o" passing a $aw that wo'$d a&o$ish the taxing power o" a$$ $oca$ government 'nits. -n yo'r opinion% wo'$d s'ch a $aw &e va$id 'nder the present !onstit'tion? Exp$ain yo'r answer. [2001 Bar Exams] No% The +a( centra+i.in the i*'osition and co++ection o$ a++ ta)es in the nationa+ overn*ent (o"+d contravene the Constit"tion (hich *andates that9 :;;%Each +oca+ overn*ent "nit sha++ have the 'o(er to create their o(n so"rces o$ reven"e and to +ev# ta)es, $ees and chares s"!7ect to s"ch "ide+ines and +i*itations as Conress *a# 'rovide consistent (ith the !asic 'o+ic# o$ +oca+ a"tono*#%< It is c+ear that Conress can on+# ive the "ide+ines and +i*itations on the e)ercise !# the +oca+ overn*ents o$ the 'o(er to ta) !"t (hat (as ranted !# the $"nda*enta+ +a( cannot !e (ithdra(n !# the Conress% 0. /mong the taxes imposed &y the B'rea' o" -nterna$ 1even'e are income tax% estate and donor2s tax% va$'e added tax% excise tax% other percentage taxes% and doc'mentary stamp tax. !$assi"y these taxes into direct and indirect taxes% and di""erentiate direct "rom indirect taxes. [2000 Bar Exams] Inco*e ta), estate ta) and donor=s ta) are considered as direct ta)es% On the other hand, va+"e added ta), e)cise ta), other 'ercentae ta)es, and doc"*entar# sta*' ta) are indirect ta)es% Direct ta)es are de*anded $ro* the ver# 'erson (ho, as intended, sho"+d 'a# the ta) (hich he cannot shi$t to another- (hi+e an indirect ta) is de*anded in the $irst instance
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L a ( >? San Beda College of Law T A X A T I O N L A W $ro* one 'erson (ith the e)'ectation that he can shi$t the !"rden to so*eone e+se, not as a ta) !"t as a 'art o$ the '"rchase 'rice% 3. /n Exec'tive 4rder was iss'ed p'rs'ant to $aw% granting tax and d'ty incentives on$y to &'sinesses and residents within the 5sec'red area6 o" the S'&ic Economic Specia$ 7one% and denying said incentives to those who $ive within the 7one &'t o'tside s'ch 5sec'red area6. -s the constit'tiona$ right to e8'a$ protection o" the $aw vio$ated &y the Exec'tive 4rder? Exp$ain. [2000 Bar Exams] No% E6"a+ 'rotection o$ the +a( c+a"se is s"!7ect to reasona!+e c+assi$ication% C+assi$ications, to !e va+id, *"st /15 rest on s"!stantia+ distinctions, /@5 !e er*ane to the '"r'ose o$ the +a(, />5 not !e +i*ited to e)istin conditions on+#, /35 e6"a++# to a++ *e*!ers o$ the sa*e c+ass% There are s"!stantia+ di$$erences !et(een !i investors !ein enticed to the :sec"red area< and the !"siness o'erators o"tside that are in accord (ith the e6"a+ 'rotection c+a"se that does not re6"ire territoria+ "ni$or*it# o$ +a(s% The c+assi$ication a''+ies e6"a++# to a++ resident individ"a+s and !"sinesses (ithin the :sec"red area<% The residents, !ein in +i8e circ"*stances to contri!"tin direct+# to the achieve*ent o$ the end '"r'ose o$ the +a(, are not cateori.ed $"rther% Instead, the# are si*i+ar+# treated, !oth in 'rivi+ees and o!+iations re6"ired. (Tiu, et al. vs. Court of Appeals. GR No. 1!"1#. $anuar% #, 1&&&' 9. : is the owner o" a residentia$ $ot sit'ated at ;'rino /ven'e% <asay !ity. he $ot has an area o" 300 s8'are meters. 4n ='ne 1% 1++0% 100 s8'are meters o" said $ot owner &y : was expropriated &y the government to &e 'sed in the widening o" ;'irino /ven'e% "or <hp300%000 representing the estimated assessed va$'e o" said portion. ,orm 1++1 to 1++3% :% who is a &'sinessman% has not &een paying his income taxes. : is now &eing assessed "or the 'npaid income taxes in the tota$ amo'nt o" <hp130%000. : c$aims the income tax $ia&i$ity has a$ready &een compensated &y the amo'nt o" <hp300%000 which the government owes him "or the expropriation o" his property. >ecide. [1++9 Bar Exams] The inco*e ta) +ia!i+it# o$ A can not !e co*'ensated (ith the a*o"nt o(ed !# the Bovern*ent as co*'ensation $or his 'ro'ert# e)'ro'riated% Ta)es are o$ distinct 8ind, essence and nat"re than ordinar# o!+iations% Ta)es and de!ts cannot !e the s"!7ect o$ co*'ensation !eca"se the Bovern*ent and A are not *"t"a++# creditors and de!tors o$ each other and a c+ai* $or ta)es is not a de!t, de*and, contract, or 7"d*ent as is a++o(a!+e to !e setCo$$. ((rancia vs. )AC. GR No. !*!"&. $une +, 1&++' ?. :% a $essor o" a property% pays rea$ estate taxes on the premises% a rea$ estate dea$er2s tax &ased on renta$ receipts and income tax on the renta$s. : c$aims that this is do'&$e taxation. >ecide. [1++9 Bar Exams] There is no do"!+e ta)ation% Do"!+e ta)ation *eans ta)in $or the sa*e ta) 'eriod the sa*e thin or activit# t(ice, (hen it sho"+d !e ta)ed !"t once, !# the sa*e ta)in a"thorit# $or the sa*e '"r'ose and (ith the sa*e 8ind and character o$ ta)% The rea+ estate ta) is a ta) on 'ro'ert#- the rea+ estate dea+er=s ta) is a ta) on the 'rivi+ee to enae in !"siness- (hi+e the inco*e ta) is a ta) on the 'rivi+ee to earn an inco*e% The ta)es are i*'osed !# di$$erent ta)in a"thorities and are essentia++# o$ di$$erent 8ind and character% (,illanueva vs. Cit% of )loilo. * SCRA -!+' )nco.e Ta/ation ). :% whi$e driving home "rom his o""ice% was serio's$y in@'red when his a'tomo&i$e was &'mped "rom &ehind &y a &'s driven &y a rec($ess driver. /s% a res'$t% he had to pay <200%000 to his doctor and <100%000 to the hospita$ where he was con"ined "or treatment. Ae "i$ed a s'it against the &'s driver and the &'s company and was awarded and paid act'a$ damages o"
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS <300%000 &y way o" mora$ damages and <30%000"or what he had to pay his attorney "or &ringing his case to co'rt. Which% i" any% o" the "oregoing awards are taxa&$e income to : and which are not? Exp$ain. [2003 Bar Exams] Nothin is ta)a!+e% Under the Ta) Code, an# a*o"nt received as co*'ensation $or 'ersona+ in7"ries or sic8ness, '+"s the a*o"nts $or an# da*aes received (hether !# s"it or aree*ent, on acco"nt o$ s"ch in7"ries or sic8ness sha++ !e e)c+"ded $ro* ross inco*e% Since the entire a*o"nt o$ P304,444 received are a(ards o$ da*aes o$ the in7"ries s"stained, a++ sha++ !e e)c+"ded $ro* his ross inco*e% O!vio"s+#, these da*aes are considered !# +a( as *ere ret"rn o$ ca'ita+ /Sec%>@ /E5/35, 1FF? Ta) Code5% +. 4n 03 =an'ary 1++)% :% a ,i$ipino citi.en residing in the <hi$ippines% p'rchased one h'ndred B100C shares in the capita$ stoc( o" D !orporation% a domestic company. 4n 03 =an'ary 2000% D !orp. dec$ared% o't o" the pro"its o" the company earned a"ter 01 =an'ary 1++)% a h'ndred percent B100EC stoc( dividends on a$$ stoc(ho$ders o" record as o" 31 >ecem&er 1+++ as a res'$t o" which : ho$ding in D !orp. &ecame two h'ndred B200C shares. /re the stoc( dividends received &y : s'&@ect to income tax? Exp$ain. [2003 Bar Exams] NO% Stoc8 dividends are not rea+i.ed inco*e% Accordin+#, the di$$erent 'rovisions o$ the Ta) Code i*'osin a ta) on dividend inco*e on+# inc+"des (ithin its '"rvie( cash and 'ro'ert# dividends *a8in stoc8 dividends e)e*'t $ro* inco*e ta)% Go(ever, i$ the distri!"tion o$ stoc8 dividends is the e6"iva+ent o$ cash or 'ro'ert#, as (hen the distri!"tion res"+ts in a chane o$ o(nershi' interest o$ the shareho+ders, the stoc8 dividends (i++ !e s"!7ect to inco*e ta)% 3Section " (0' ('4 Section - (A'5(0'4 Section + (0'(-'(6', 1&&! Ta/ Co1e7 10. :D7 ,o'ndation is a nonFstoc(% nonFpro"it association d'$y accredited "or re$igio's% charita&$e and socia$ we$"are p'rposes. Gast =an'ary 3% 2000 it so$d a portion o" its $ot 'sed "or re$igio's p'rposes and 'ti$i.ed the entire proceeds "or the constr'ction o" a &'i$ding to ho'se its "ree >ay and Hight !are !enter "or chi$dren o" sing$e parents. -n order to s'&sidi.e the expenses o" the !enter and to s'pport its re$igio's% charita&$e and socia$ we$"are pro@ects% the ,o'ndation $eased the 300Fs8'are meter area o" the second and third "$oors o" the &'i$ding "or 'se as a &oarding ho'se. he ,o'ndation a$so operates a canteen and a gi"t shop within the premises% a$$ the income "rom which is 'sed act'a$$y% direct$y% and exc$'sive$y "or the p'rposes "or which the ,o'ndation was organi.ed. a. !onsidering the !onstit'tiona$ provision granting tax exemption to nonFstoc( corporations s'ch as those "ormed exc$'sive$y "or re$igio's% charita&$e and socia$ we$"are p'rposes% exp$ain the meaning o" the $ast paragraph o" said Sec.30 o" the 1++? ax !ode which states that 5income o" whatever (ind and character o" the "oregoing organi.ations "rom any o" their properties% rea$ or persona$% or "rom any o" their activities cond'cted "or pro"it regard$ess o" the disposition made o" s'ch income sha$$ &e s'&@ect to tax 'nder this !ode6. [2003 Bar Exams] The e)e*'tion conte*'+ated in the Constit"tion covers rea+ estate ta) on rea+ 'ro'erties act"a++#, direct+# and e)c+"sive+# "sed $or re+iio"s, charita!+e and socia+ (e+$are '"r'oses% It does not cover e)e*'tion $ro* the i*'osition o$ the inco*e ta), (hich is (ithin the conte)t o$ Sec%>4 o$ the Ta) Code% As a r"+e, nonCstoc8, nonC'ro$it cor'orations orani.ed $or re+iio"s, charita!+e or socia+ (e+$are '"r'oses are e)e*'t $ro* inco*e ta) on their inco*e receive !# the* as s"ch% Go(ever, i$ these re+iio"s, charita!+e and socia+ (e+$are cor'orations derived inco*e $ro* their 'ro'erties or an# o$ their activities cond"cted $or 'ro$it, the inco*e ta) sha++ !e i*'osed on said ite*s o$ inco*e irres'ective o$ their dis'osition% (Sec.8#, N)RC4 C)R vs. 9:CA. G.R. No. 1"#"8. 31&&+7' &. -s the income derived &y :D7 ,o'ndation "rom the sa$e o" a portion o" its $ot% renta$s "rom its &oarding ho'se and the operation o" its canteen and the gi"t shop s'&@ect to tax? Exp$ain. Yes% The inco*e derived $ro* the sa+e o$ +ot and renta+s $ro* its !oardin ho"se are considered as inco*e $ro* 'ro'erties (hich are s"!7ect to ta)% Li8e(ise the inco*e $ro*
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L a ( >? San Beda College of Law T A X A T I O N L A W the o'erations o$ the canteen and the i$t sho' are inco*e $ro* its activities cond"cted $or 'ro$it that are s"!7ect to ta)% The inco*e attaches irres'ective o$ the dis'osition o$ these inco*es% (Sec.8#, N)RC4 C)R vs. 9:CA. G.R. No. 1"#"8. 31&&+7' 11. / 5"ringe &ene"it6 is de"ined as &eing any good% service or other &ene"it "'rnished or granted in cash or in (ind &y an emp$oyer to an individ'a$ emp$oyee. Wo'$d it &e the emp$oyer or the emp$oyee who is $ega$$y re8'ired to pay an income tax on it? [2003 Bar Exams] It is the e*'+o#er (ho is +ea++# re6"ired to 'a# an inco*e ta) on the $rine !ene$it% The $rine !ene$it ta) is i*'osed as a $ina+ (ithho+din ta) '+acin the +ea+ o!+iation to re*it the ta) on the e*'+o#er, s"ch that, i$ the ta) is not 'aid the +ea+ reco"rse o$ the EIR is to o to a$ter the e*'+o#er% An# a*o"nt or va+"e received !# the e*'+o#ee as a $rine !ene$it is considered ta) 'aid hence, net o$ the inco*e ta) d"e thereon% The 'erson (ho is +ea++# re6"ired to 'a# /sa*e as stat"tor# incidence as distin"ished $ro* econo*ic incidence5 is that 'erson (ho, in case o$ nonC'a#*ent, can !e +ea++# de*anded to 'a# the ta)% 12. aC Aow o"ten does a domestic corporation "i$e income tax ret'rn "or income earned d'ring a sing$e taxa&$e year? Exp$ain the process. [2001 Bar Exams] A do*estic cor'oration is re6"ired to $i+e an inco*e ta) ret"rns $o"r /35 ti*es $or inco*e earned d"rin a sin+e ta)a!+e #ear% Q"arter+# ret"rns are re6"ired to !e $i+ed $or the $irst three 6"arters (here the cor'oration sha++ dec+are its 6"arter+# s"**ar# o$ ross inco*e and ded"ctions on a c"*"+ative !asis% (Sec. !-, N)RC'% Then a $ina+ ad7"st*ent ret"rn is re6"ired to !e $i+ed coverin the tota+ ta)a!+e inco*e $or the entire #ear, ca+endar or $isca+% (Sec. !*, N)RC' &C What is the reason "or s'ch proced're? The reason $or s"ch 'roced"re is to ens"re the ti*e+iness o$ co++ection to *eet the !"detar# needs o$ the overn*ent% Li8e(ise, it is desined to ease the !"rden on the ta)'a#er !# 'rovidin it (ith an insta++*ent 'a#*ent sche*e, rather than re6"irin the 'a#*ent o$ the ta) on a +"*'Cs"* !asis a$ter the end o$ the #ear% It is a+so to i*'rove the +i6"idit# o$ the overn*ent% 13. /% doctor &y pro"ession% so$d in the year 2000 a parce$ o" $and which he &o'ght as a "orm o" investment in 1++0 "or <hp 1 mi$$ion. he $and was so$d to B% his co$$eag'e% at a time when the rea$ estate prices had gone down and so the $and was so$d on$y "or <hp)00%000 which was then the "air mar(et va$'e o" the $and. Ae 'sed the proceeds to "inance his trip to the Inited States. Ae c$aims that he sho'$d not &e made to pay the 9E "ina$ tax &eca'se he did not have any act'a$ gain on the sa$e. -s his contention correct? Why? [2001 Bar Exams] No% The DH ca'ita+ ains ta) on sa+e o$ a rea+ 'ro'ert# he+d as ca'ita+ asset is i*'osed on the inco*e 'res"*ed to have !een rea+i.ed $ro* the sa+e (hich is the $air *ar8et va+"e or se++in 'rice thereo$, (hichever is hiher% /Section ";, N)RC' Act"a+ ain is not re6"ired $or the i*'osition o$ the ta) !"t it is the ain !# $iction o$ +a( (hich is ta)a!+e% 10. >isting'ish /$$owa&$e >ed'ctions "rom <ersona$ Exemptions. Jive an examp$e o" an a$$owa&$e ded'ction and another examp$e "or persona$ exemption. [2001 Bar Exams] The distinctions are as $o++o(s9 a5 As to a*o"nt I A++o(a!+e ded"ctions enera++# re$er to act"a+ e)'enses inc"rred in the '"rs"it o$ trade, !"siness or 'ractice o$ 'ro$ession (hi+e 'ersona+- e)e*'tions are ar!itrar# a*o"nts a++o(ed !# +a(% !5 As to nat"re I A++o(a!+e ded"ctions constit"te !"siness e)'enses (hi+e 'ersona+ e)e*'tions 'ertain to 'ersona+ e)'enses%
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS c5 As to '"r'ose I Ded"ctions are a++o(ed to ena!+e the ta)'a#er to reco"' his cost o$ doin !"siness (hi+e 'ersona+ e)e*'tions are a++o(ed to cover 'ersona+, $a*i+# and +ivin e)'enses% d5 As to c+ai*ants I A++o(a!+e ded"ctions can !e c+ai*ed !# a++ ta)'a#ers, cor'orate or other(ise, (hi+e 'ersona+ e)e*'tions can !e c+ai*ed on+# !# individ"a+ ta)'a#ers% 13. -n order to "aci$itate the processing o" its app$ication "or a $icense "rom a government o""ice% !orporation / "o'nd it necessary to pay the amo'nt o" <hp100%000 as a &ri&e to the approving o""icia$. -s the <hp100%000 ded'cti&$e "orm the gross income o" !orporation /? 4n the other hand% is the <hp100%000 taxa&$e income o" the approving o""icia$? Exp$ain yo'r answers. [2001 Bar Exams] Since the a*o"nt o$ Ph'144,444 constit"tes a !ri!e, it is not a++o(ed as a ded"ction $or* ross inco*e o$ Cor'oration A% (Section 8"(A'(1'(c', N)RC'. Go(ever, to the reci'ient overn*ent o$$icia+, the sa*e constit"tes a ta)a!+e inco*e% A++ inco*e $ro* +ea+ or i++ea+ so"rces are ta)a!+e a!sent an# c+ear 'rovision o$ +a( e)e*'tin the sa*e% This is the reason (h# ross inco*e had !een de$ined to inc+"de inco*e $ro* (hatever so"rce derived% (Section 8(A', N)RC'. I++ea++# ac6"ired inco*e constit"tes rea+i.ed inco*e "nder the c+ai* o$ riht doctrine. (Rut<in vs. US. 8"8 US 18#' 19. -s a nonFresident a$ien who is not engaged in trade or &'siness or in the exercise o" pro"ession in the <hi$ippines &'t who derived renta$ income "rom the <hi$ippines re8'ired to "i$e an income tax ret'rn on /pri$ o" the year "o$$owing his receipt o" said income? -" not% why not? Exp$ain yo'r answer. [2001 Bar Exams] No% The inco*e ta) on a++ inco*e derived $ro* Phi+i''ine so"rces !# a nonCresident a+ien (ho is not enaed in trade or !"siness in the Phi+i''ines is (ithhe+d !# the +essee as a Fina+ &ithho+din Ta)% (Section -!(A', N)RC'. The overn*ent can not re6"ire 'ersons o"tside o$ its territoria+ 7"risdiction to $i+e a ret"rn- $or this reason, the inco*e ta) on inco*e derived $ro* (ithin *"st !e co++ected thro"h the (ithho+din ta) s#ste* and th"s, re+ieve the reci'ient o$ the inco*e the d"t# to $i+e inco*e ta) ret"rns% (Section -1, N)RC' 1?. #r. =avier is a nonFresident senior citi.en. Ae receives a month$y pension "orm the JS-S% which he deposits with the <HBF#a(ati Branch. -s he exempt "rom income tax and there"ore not re8'ired to "i$e an income tax ret'rn? [2000 Bar Exams] Mr% 2avier is e)e*'t $ro* inco*e ta) on his *onth+# BSIS 'ension (Sec. 8(0'(*'(f', N)RC' !"t not on the interest inco*e that *iht accr"e on the 'ensions de'osited (ith PNE (hich are s"!7ect to $ina+ (ithho+din ta)% Conse6"ent+#, since Mr% 2avier=s so+e ta)a!+e inco*e (o"+d have !een s"!7ected to a $ina+ (ithho+din ta), he is not re6"ired an#*ore to $i+e an inco*e ta) ret"rn. (Sec. -1(A' ('(c', N)RC' 1). / !o.% a <hi$ippine corporation% has an exec'tive B<C who is a ,i$ipino citi.en. / !o. has a s'&sidiary in Aong Kong BAK !o.C and wi$$ assign < "or an inde"inite period to wor( "'$$ time "or AK !o. < wi$$ &ring his "ami$y to reside in AK and wi$$ $ease o't his residence in the <hi$ippines. he sa$ary o" < wi$$ &e sho'$dered 30E &y / !o. whi$e the other 30E p$'s ho'sing% cost o" $iving and ed'cationa$ a$$owances o" <2s dependents wi$$ &e sho'$dered &y AK !o. / !o. wi$$ credit the 30E o" <2s sa$ary to <2s <hi$ippine &an( acco'nt. < wi$$ a$so &e receiving renta$ income "or the $ease o" his <hi$ippine residence. /re these sa$aries% a$$owances and renta$s s'&@ect to the <hi$ippine income tax? [1+++ Bar Exams] The sa+aries and a++o(ances received !# P are not s"!7ect to Phi+i''ine inco*e ta)% P 6"a+i$ies as a nonCresident citi.en !eca"se he +eaves the Phi+i''ines $or e*'+o#*ent re6"irin hi* to !e 'h#sica++# 'resent a!road *ost o$ the ti*e d"rin the ta)a!+e #ear% (Section (=', N)RC'. A nonCresident citi.en is ta)a!+e on+# on inco*e derived $ro* Phi+i''ine so"rces% /Section @>, NIRC5% The sa+aries and a++o(ances received $ro* !ein
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L a ( >? San Beda College of Law T A X A T I O N L A W e*'+o#ed a!road are inco*e $ro* (itho"t !eca"se these are co*'ensation $or services rendered o"tside o$ the Phi+i''ines% (Section ", N)RC' Go(ever, P is ta)a!+e on renta+ inco*e $or the +ease o$ his Phi+i''ine residence !eca"se this is an inco*e derived $ro* (ithin, the +eased 'ro'ert# !ein +ocated in the Phi+i''ines% (Section ", N)RC' 1+. /rno$d% who is sing$e% coha&its with Li$ma% who is $ega$$y married to 7achary. /rno$d and Li$ma have six minor chi$dren who $ive and depend 'pon /rno$d "or their chie" s'pport. he chi$dren are not married and not gain"'$$y emp$oyed. [1++) Bar Exams] aC ,or income tax p'rposes% may /rno$d &e considered as 5head o" a "ami$y?6 Yes% An "n*arried *an (ho has i++eiti*ate *inor chi+dren (ho +ive (ith hi* and de'end "'on hi* $or their chie$ s"''ort is considered as :head o$ the $a*i+#%< (RR No. > &+ i.ple.entin2 Section 8-, N)RC' &C -s /rno$d entit$ed to ded'ct "rom his gross income% an additiona$ exemption "or each o" his i$$egitimate chi$d? No% Arno+d is on+# entit+ed to ded"ct additiona+ 'ersona+ e)e*'tion $or $o"r /35 o"t o$ the si) /D5 i++eiti*ate chi+dren% The *a)i*"* n"*!er o$ de'endents $or '"r'oses o$ the additiona+ 'ersona+ e)e*'tion is $o"r% (Section 8-, N)RC' 20. BaC >isc'ss the meaning o" the J$o&a$ and Sched'$ar systems o" taxation. [1++? Bar Exams] A +o!a+ s#ste* o$ ta)ation is one (here the ta)'a#er is re6"ired to +"*' "' a++ ite*s o$ inco*e earned d"rin a ta)a!+e 'eriod and 'a# "nder a sin+e set o$ inco*e ta) r"+es on these di$$erent ite*s o$ inco*e% A sched"+ar s#ste* o$ ta)ation 'rovides $or a di$$erent ta) treat*ent o$ di$$erent t#'es o$ inco*e so that a se'arate ta) ret"rn is re6"ired to !e $i+ed $or each t#'e o$ inco*e and the ta) is co*'"ted on a 'er ret"rn or 'er sched"+e !asis% C B&C o which system wo'$d yo' say that the method o" taxation 'nder the Hationa$ -nterna$ 1even'e !ode &e$ongs? [1++? Bar Exams] The *ethod o$ ta)ation "nder the NIRC is a co*!ination o$ !oth s#ste*s, th"s 'art+# sched"+ar and 'art+# +o!a+% 21. #r. Santos died intestate in 1+)+ $eaving his spo'se and "ive chi$dren as the on$y heirs. he estate consisted o" a "ami$y home and a "o'rFdoor apartment which was &eing rented to tenants. Within the year% an extra@'dicia$ sett$ement o" the estate was exec'ted &y the heirs% each o" them receiving hisMher d'e share. he s'rviving spo'se ass'med administration o" the property. Each year% the net income "rom the renta$ property was distri&'ted to a$$% proportionate$y% on which they paid respective$y% the corresponding income tax. -n 1++0% the income tax ret'rns o" the heirs were examined and de"iciency income tax assessments were iss'ed against each o" them "or the years 1+)+ to 1++3% inc$'sive% as having entered into an 'nregistered partnership. Were the assessments @'sti"ied? [1++? Bar Exams] Yes, the assess*ents (ere 7"sti$ied !eca"se $or inco*e ta) '"r'oses, the coCo(nershi' o$ inherited 'ro'ert# is a"to*atica++# converted into an "nreistered 'artnershi' $ro* the *o*ent the said 'ro'erties are "sed as co**on $"nd (ith intent to 'rod"ce 'ro$its $or the heirs in 'ro'ortion to their shares in the inheritance% Fro* the *o*ent o$ s"ch 'artition, the heirs are entit+ed a+read# to their res'ective de$inite shares o$ the estate and the inco*e thereo$, $or each o$ the* to *anae and dis'ose o$ as e)c+"sive+# his o(n (itho"t the intervention o$ the other heirs, and, accordin+#, he !eco*es +ia!+e individ"a++# $or a++ ta)es in connection there(ith% I$ a$ter s"ch 'artition, he a++o(s his shares to !e he+d in co**on (ith his coCheir "nder a sin+e *anae*ent to !e "sed (ith the intent o$ *a8in 'ro$it there!# in 'ro'ortion to his share, there can !e no do"!t that, even i$ no doc"*ent or instr"*ent (ere e)ec"ted $or the
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS '"r'ose, $or ta) '"r'oses, at +east an "nreistered 'artnershi' is $or*ed% (?@a vs. C)R, "- SCRA !"' 22. >isg'ised dividends in income taxation? Jive an examp$e. [1++0 Bar Exams] Dis"ised dividends are those inco*e 'a#*ents *ade !# a do*estic cor'oration, (hich is a s"!sidiar# o$ a nonCresident $orein cor'oration, to the +atter ostensi!+# $or services rendered !# the +atter to the $or*er, !"t (hich 'a#*ents are dis'ro'ortionate+# +arer than the act"a+ va+"e o$ the services rendered% In s"ch case, the a*o"nt over and a!ove the tr"e va+"e o$ the service rendered sha++ !e treated as a dividend and sha++ !e s"!7ected to the corres'ondin ta) o$ >@H on Phi+i''ine so"rce ross inco*e or s"ch other 're$erentia+ rate as *a# !e 'rovided "nder a corres'ondin Ta) Treat#% Note: ;ivi1en1s receive1 6% a 1o.estic corporation for. anotAer 1o.estic corporation sAall not 6e su6Bect to ta/. 3Sec. ! (;' ("', N)RC7 =state Ta/ an1 ;onorCs Ta/ 23. 4n the "irst anniversary o" the death o" D% his heirs hosted a s'mpt'o's dinner "or his doctors% n'rses and others who attended to D d'ring his $ast i$$ness. he cost o" the dinner amo'nted to <hp30%000. !ompared to his gross estate% the <hp30%000 did not exceed "ive percent o" the estate. -s the said cost o" the dinner to commemorate his one year death anniversary ded'cti&$e "rom his gross estate? Exp$ain yo'r answer. [2001 Bar Exams] No% This e)'ense (i++ not $a++ "nder an# o$ the a++o(a!+e ded"ctions $ro* ross estate% &hether vie(ed in the conte)t o$ either $"nera+ e)'enses or *edica+ e)'enses, the sa*e (i++ not 6"a+i$# as a ded"ction% E)'enses inc"rred a$ter the intern*ent, s"ch as 'ra#ers, *asses, entertain*ent, or the +i8e are not ded"cti!+e% An# 'ortion o$ the $"nera+ and !"ria+ e)'enses !orne or de$ra#ed !# re+atives and $riends o$ the deceased are not ded"cti!+e% J3 th 'ar%, Sec% D /A5 /15 Rev% Res% No% @C@44>K% Medica+ e)'enses, on the other hand, are a++o(ed on+# i$ inc"rred !# the decedent (ithin one #ear 'rior to his death% 3Section +* (A'(*', N)RC7 Note: Dowever, pursuant to Rev. Re2s. No. E##8, .e1ical e/penses as of tAe last illness will not for. part of funeral e/penses 6ut sAoul1 6e clai.e1 as .e1ical e/penses incurre1 witAin one (1' %ear 6efore tAe 1eatA of tAe 1ece1ent. 20. What conditions m'st occ'r in order that a$$ grants% donations and contri&'tions to nonF stoc(% nonFpro"it private ed'cationa$ instit'tions may &e exempt "rom the donor2s tax 'nder Sec. 101 BaC o" the ax !ode? [2000 Bar Exams] The $o++o(in are the conditions9 15 Not *ore than thirt# />4H5 o$ said i$ts sha++ !e "sed !# s"ch donee $or ad*inistration '"r'oses- 2) The ed"cationa+ instit"tions is incor'orated as a nonCstoc8 entit#, 'a#in no dividends, overned !# tr"stees (ho receive no co*'ensation, and devotin a++ its inco*e, (hether st"dents= $ees or i$ts, donations, s"!sidies or other $or*s o$ 'hi+anthro'#, to the acco*'+ish*ent and 'ro*otion o$ '"r'oses en"*erated in its Artic+es o$ Incor'oration% (Sec. 1#1 (A' (8' N)RC of 1&&!' 23% >isc'ss the r'$e on sit's o" taxation with respect to the imposition o" the estate tax on property $e"t &ehind &y a nonFresident decedent. [2000 Bar Exams] The va+"e o$ the ross estate o$ a nonCresident decedent (ho is a Fi+i'ino citi.en at the ti*e o$ his death sha++ !e deter*ined !# inc+"din the va+"e at the ti*e o$ his death o$ a++ 'ro'ert#, rea+ or 'ersona+, tani!+e or intani!+e, (herever sit"ated to the e)tent o$ the interest therein o$ the decedent at the ti*e o$ his death Jsec% L0 /A5, NIRC o$ 1FF?K% These
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L a ( >? San Beda College of Law T A X A T I O N L A W 'ro'erties sha++ have a sit"s o$ ta)ation in the Phi+i''ines hence s"!7ect to Phi+i''ine estate ta)es% On the other hand, in the case o$ a nonCresident decedent (ho at the ti*e o$ his death (as not a citi.en o$ the Phi+i''ines, on+# that 'art o$ the entire ross estate (hich is sit"ated in the Phi+i''ines to the e)tent o$ the interest therein o$ the decedent at the ti*e o$ his death sha++ !e inc+"ded in his ta)a!+e estate% Provided, that, (ith res'ect to intani!+e 'ersona+ 'ro'ert#, (e a''+# the r"+e o$ reci'rocit#% ()6i1' 29. /% an individ'a$% so$d to B% his &rotherFinF$aw% his $ot with a mar(et va$'e o" <hp 4ne mi$$ion "or <hp900%000. /2s cost in the $ot is <hp100%000. B is "inancia$$y capa&$e o" &'ying the $ot. / a$so owns : !o.% which has a "ast growing &'siness. / so$d some o" his shares o" stoc( in : !o. to his (ey exec'tives in : !o. hese exec'tives are not re$ated to /. he se$$ing price is <hp 3 mi$$ion% which is the &oo( va$'e o" the shares so$d &'t with a mar(et va$'e o" <hp 3 mi$$ion. /2s cost in the shares so$d is <hp 1 mi$$ion. he p'rpose o" / in se$$ing the shares is to ena&$e his (ey exec'tives to ac8'ire a propriety o" / in se$$ing the shares is to ena&$e his (ey exec'tives to ac8'ire a propriety interest in the &'siness and have a persona$ sta(e in its &'siness. Exp$ain i" the a&ove transactions are s'&@ect to donor2s tax. [1+++ Bar Exams] The $irst transaction (here a +ot (as so+d !# A to his !rotherCinC+a( $or a 'rice !e+o( its $air *ar8et va+"e (i++ not !e s"!7ect to donor=s ta) i$ the +ot 6"a+i$ies as a ca'ita+ asset% The trans$er $or +ess than an ade6"ate and $"++ consideration, (hich ives rise to a dee*ed i$t, does not a''+# to a sa+e o$ 'ro'ert# s"!7ect to ca'ita+ ains ta)% (Section 1##, N)RC'. Go(ever, i$ the +ot so+d is an ordinar# asset, the e)cess o$ the $air *ar8et va+"e over the consideration received sha++ !e considered as a i$t s"!7ect to the donor=s ta)% The sa+e o$ shares o$ stoc8 !e+o( the $air *ar8et va+"e thereo$ is s"!7ect to the donor=s ta) '"rs"ant to the 'rovisions o$ Section 144 o$ the Ta) Code% The e)cess o$ the $air *ar8et va+"e over the se++in 'rice is a dee*ed i$t% 2?. / died% s'rvived &y his wi"e and three chi$dren. he estate tax was proper$y paid and the estate sett$ed and divided and distri&'ted among the "o'r heirs. Gater% the B-1 "o'nd o't that the estate "ai$ed to report the income received &y the estate d'ring administration. he B-1 iss'ed a de"iciency income tax assessment p$'s interest% s'rcharges and pena$ties. Since the three chi$dren are residing a&road% the B-1 so'ght to co$$ect the "'$$ tax de"iciency on$y against the widow. -s the B-1 correct? [1+++ Bar Exams] Yes, the EIR is correct% In a case (here the estate ta) has !een distri!"ted to the heirs, the co++ection re*edies avai+a!+e to the EIR in co++ectin ta) +ia!i+ities o$ an estate *a# either /15 s"e a++ the heirs and co++ect $ro* each o$ the* the a*o"nt o$ ta) 'ro'ortionate to the inheritance received or /@5 !# virt"e o$ the +ien created "nder Section @1F, s"e on+# one heir and s"!7ect the 'ro'ert# he received $ro* the estate to the 'a#*ent o$ the estate ta)% The EIR, there$ore, is correct in '"rs"in the second re*ed# a+tho"h this (i++ ive rise to the riht o$ the heir (ho 'a#s to see8 rei*!"rse*ent $ro* the other heirs% (C)R vs. Pine1a. 1 SCRA 1#-'. In no case, ho(ever, can the EIR en$orce the ta) +ia!i+it# in e)cess o$ the share o$ the (ido( in the inheritance% 2). -s the B-1 a'thori.ed to co$$ect estate tax de"iciencies &y the s'mmary remedy o" $evy 'pon and sa$e o" rea$ properties o" the decedent witho't "irst sec'ring the a'thority o" the co'rt sitting in pro&ate over the s'pposed wi$$ o" the decedent? [1++) Bar Exams] Yes% The EIR is a"thori.ed to co++ect estate ta) de$icienc# thro"h the s"**ar# re*ed# o$ +ev#in "'on and sa+e o$ rea+ 'ro'erties o$ a decedent, (itho"t the conition and a"thorit# o$ the co"rt sittin in 'ro!ate over the s"''osed (i++ o$ the deceased% As s"ch the estate ta) is e)e*'t, it is e)e*'ted $ro* the a''+ication o$ the stat"te o$ nonCc+ai*s, and this is 7"sti$ied !# the necessit# o$ overn*ent $"ndin, i**orta+i.ed in the *a)i* that ta)es are the +i$e!+ood o$ the overn*ent% (:arcos vs. C)R. GR No. 1#++#. $une -, 1&&!'
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS 2+. /re contri&'tions to a candidate in an e$ection s'&@ect to donor2s tax? 4n the part o" the contri&'tor% is it a$$owa&$e as a ded'ction "rom gross income? [1++) Bar Exams] a5 No, 'rovided the reci'ient candidate had co*'+ied (ith the re6"ire*ent $or $i+in o$ ret"rns o$ contri!"tions (ith the Co**ission on E+ections as re6"ired "nder the O*ni!"s E+ection Code% b) The contri!"tor is not a++o(ed to ded"ct the contri!"tions !eca"se the said e)'ense is not direct+# attri!"ta!+e to, the deve+o'*ent, *anae*ent, o'eration andMor cond"ct o$ a trade, !"siness or 'ro$ession (Section 8"(A'(1'(a', N)RC'. F"rther*ore, i$ the candidate is an inc"*!ent overn*ent o$$icia+ or e*'+o#ee, it *a# even !e considered as a !ri!e or 8ic8!ac8% (Section 8"(A'(1'(a', N)RC' Note: )n tAe recent case of A6ello vs. C)R, GR. No. 1#!1, (e6ruar% 8, ##-, tAe Supre.e Court Ael1 tAat politicalFelectoral contri6utions 1ul% reporte1 to tAe Co..ission on =lections .a1e after tAe passa2e of RA No. !1**, as provi1e1 in Section 18 tAereof, are not su6Bect to tAe pa%.ent of an% 2ift ta/. As sucA political contri6utions .a1e 6efore RA No. !1**, are su6Bect to tAe pa%.ent of 2ift ta/es, an1 RA No. !1** provi1es no retroactive effect on tAis point. Ta/ A1.inistration 30. #r. <asc'a$2s income "rom $easing his property reaches the maxim'm rate o" tax 'nder the $aw. Ae donated oneFha$" o" his said property to a nonFstoc(% nonFpro"it ed'cationa$ instit'tion whose income and assets are act'a$$y% direct$y and exc$'sive$y 'sed "or ed'cationa$ p'rposes% and there"ore 8'a$i"ied "or tax exemption 'nder /rtic$e :-L% Section 0B3C o" the !onstit'tion and Section 30BAC o" the ax !ode. Aaving th's trans"erred a portion o" his said asset% #r. <asc'a$ s'cceeded in paying a $esser tax on the renta$ income derived "rom his property. -s there tax avoidance or tax evasion? Exp$ain. [2000 Bar Exams] There is ta) avoidance% Mr% Pasc"a+ has e)'+oited a +ea++# 'er*issive a+ternative *ethod to red"ce his inco*e ta) !# trans$errin 'art o$ his renta+ inco*e to a ta)Ce)e*'t entit# thro"h a donation o$ oneCha+$ o$ the inco*e 'rod"cin 'ro'ert#% The donation is +i8e(ise e)e*'t $ro* the donor=s ta)% The donation is the +ea+ *eans e*'+o#ed to trans$er the incidence o$ inco*e ta) on the renta+ inco*e% 31. / taxpayer is s'spected not to have dec$ared his correct gross income in his ret'rn "i$ed "or 1++?. he examiner re8'ested the !ommissioner to a'thori.e him to in8'ire into the &an( deposits o" the taxpayer so that he co'$d proceed with the net worth method o" investigation to esta&$ish "ra'd. #ay the examiner &e a$$owed to $oo( into the taxpayer2s &an( deposits? -n what cases may the !ommissioner or his d'$y a'thori.ed representative &e a$$owed to in8'ire or $oo( into the &an( deposits o" a taxpayer? [2000 Bar Exams] No, as this (o"+d !e vio+ative o$ Re'"!+ic Act No% 1340, the Ean8s De'osits Secrec# La(% The Co**issioner o$ Interna+ Reven"e or his d"+# a"thori.ed re'resentative *a# !e a++o(ed to in6"ire or +oo8 into the !an8 de'osits o$ a ta)'a#er in the $o++o(in cases9 a5 For the '"r'ose o$ deter*inin the ross estate o$ a decedent- b) &here the ta)'a#er has $i+ed an a''+ication $or co*'ro*ise o$ his ta) +ia!i+it# !# reason o$ $inancia+ inca'acit# to 'a# s"ch ta) +ia!i+it#% (Section *(f', N)RC' c5 &here the ta)'a#er has sined a (aiver a"thori.in the Co**issioner or his d"+# a"thori.ed re'resentatives to in6"ire into the !an8 de'osits% 32. / !o.% a <hi$ippine corporation% is a &ig man'"act'rer o" cons'mer goods and has severa$ s'pp$iers o" raw materia$s. he B-1 s'spects that some o" the s'pp$iers are not proper$y reporting their income on their sa$es to / !o. he !-1 there"ore* a. -ss'ed an access $etter to / !o. to "'rnish the B-1 in"ormation on sa$es and payment to its s'pp$iers.
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L a ( >? San Beda College of Law T A X A T I O N L A W &. -ss'ed an access $etter to a &an( B: Ban(C to "'rnish the B-1 on deposits o" some s'pp$iers o" / !o. on the a$$eged gro'nd that the s'pp$iers are committing tax evasion. / !o.% : Ban( and the s'pp$iers have not &een iss'ed &y the B-1 $etter o" a'thority to examine. / !o. and : Ban( &e$ieve that the B-1 is on a 5"ishing expedition6 and come to yo' "or co'nse$. What is yo'r advice. [1+++ Bar Exams] I (i++ advise A Co% and A Ean8 that the EIR is 7"sti$ied on+# in ettin in$or*ation $ro* the $or*er !"t not $ro* the +atter% The EIR is a"thori.ed to o!tain in$or*ation $ro* other 'ersons other than those (hose interna+ reven"e ta) +ia!i+it# is s"!7ect to a"dit or investiation% Go(ever this 'o(er sha++ not !e constr"ed as rantin the Co**issioner the a"thorit# to in6"ire into !an8 de'osits% 33. #ay the !ommissioner o" the -nterna$ 1even'e compromise the payment o" the withho$ding tax Btax ded'cted and withhe$d at so'rceC where the "inancia$ position o" the taxpayer demonstrates a c$ear ina&i$ity to pay the assessed tax? [1++) Bar Exams] No% A ta)'a#er (ho is constit"ted as (ithho+din aent (ho has ded"cted and (ithhe+d at so"rce the ta) on the inco*e 'a#*ent *ade !# hi* ho+ds the ta)es as tr"st $"nds $or the overn*ent (Section -+(;', N)RC' and is o!+iated to re*it the* to the EIR% The s"!se6"ent ina!i+it# o$ the (ithho+din aent to 'a#Mre*it the ta) (ithhe+d is not a ro"nd $or co*'ro*ise !eca"se the (ithho+din ta) is not a ta) "'on the (ithho+din aent !"t it is on+# a 'roced"re $or the co++ection o$ a ta)% 30. he Secretary o" ,inance% 'pon recommendation o" the !ommissioner o" -nterna$ 1even'e% iss'ed a 1even'e 1eg'$ation 'sing gross income as the tax &ase "or corporations doing &'siness in the <hi$ippines. -s the 1even'e 1eg'$ation va$id? [1++0 Bar Exams] The re"+ation esta!+ishin ross inco*e as the ta) !ase $or cor'orations doin !"siness in the Phi+i''ines /do*estic as (e++ as resident $orein5 is not va+id% This is no +oner i*'+e*entation o$ the +a( !"t act"a++# it constit"tes +eis+ation !eca"se a*on the 'o(ers that are e)c+"sive+# (ithin the +eis+ative a"thorit# to ta) is the 'o(er to deter*ine the a*o"nt o$ the ta). (see 1 Coole% 1!*E1+"'% Certain+#, i$ the ta) is +i*ited to ross inco*e (itho"t ded"ctions o$ these cor'orations, this is chanin the a*o"nt o$ the ta) as said a*o"nt "+ti*ate+# de'ends on the ta)a!+e !ase% Note: TAe Presi1ent, Aowever, upon tAe reco..en1ation of tAe Secretar% of (inance, .a% effective $anuar% 1, ###, allow corporations tAe option to 6e ta/e1 at (1-G of 2ross inco.e, after tAe followin2 con1itions Aave 6een satisfie1: 1. A ta/ effort ration of twent% percent (#G' of Gross National Pro1uct (GNP'4 . A ration of fort% percent ("#G' of inco.e ta/ collection to total ta/ revenues4 8. A ,AT ta/ effort of four percent ("G' GNP4 an1 ". A #.& percent (#.&G ratio of tAe Consoli1ate1 Pu6lic Sector (inancial Position (CPS(P' to GNP. Ta/ Re.e1ies un1er tAe N)RC 35. -n the investigation o" the withho$ding tax ret'rns o" AZ Medina Security Agency (AZ Medina) "or the taxa&$e years 1++? and 1++)% a discrepancy &etween the taxes withhe$d "rom its emp$oyees and the amo'nts act'a$$y remitted to the government was "o'nd. /ccording$y% &e"ore the period o" prescription commenced to r'n% the B-1 iss'ed an assessment and a demand $etter ca$$ing "or the immediate payment o" the de"iciency withho$ding taxes in the tota$ amo'nt o" <230%000.00. !o'nse$ "or AZ Medina protested the assessment "or &eing n'$$ and void on the gro'nd that no preFassessment notice had &een iss'ed. Aowever% the
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS protest was denied. !o'nse$ then "i$ed a petition "or prohi&ition with the !o'rt o" ax /ppea$s to restrain the co$$ection o" the tax. [2002 Bar Exams] /. -s the contention o" the co'nse$ tena&$e? Exp$ain. No, the contention o$ the co"nse+ is "ntena!+e% Section @@L o$ the Ta) Code e)'ress+# 'rovides that no 'reCassess*ent notice is re6"ired (hen a discre'anc# has !een deter*ined !et(een the ta) (ithhe+d and the a*o"nt act"a++# re*itted !# the (ithho+din aent% Since the a*o"nt assessed re+ates to de$icienc# (ithho+din ta)es, the EIR is correct in iss"in the assess*ent and de*and +etter ca++in $or the i**ediate 'a#*ent o$ the de$icienc# (ithho+din ta)es% (Sec. +, N)RC' B. Wi$$ the specia$ civi$ action "or prohi&ition &ro'ght &e"ore the !/ 'nder Sec.11 o" 1./. Ho. 1123 prosper? >isc'ss yo'r answer. The S'ecia+ Civi+ action $or 'rohi!ition (i++ not 'ros'er, !eca"se the CTA has no 7"risdiction to entertain the sa*e% The 'o(er to iss"e (rit o$ in7"nction 'rovided $or "nder Sec% 11 o$ R%A% 11@0 is on+# anci++ar# to its a''e++ate 7"risdiction to iss"e (rits o$ 'rohi!ition or in7"nction inde'endent+# o$ and a'art $ro* an a''ea+ed case% The re*ed# is to a''ea+ the decision o$ the EIR% /Collector v. 9useco. 8 SCRA 818 31&*17' 39. #r. !astro inherited "rom his "ather% who died on ='ne 10% 1++0% severa$ pieces o" rea$ property in #etro #ani$a. he estate tax ret'rn was "i$ed and the estate tax d'e in the amo'nt o" <230%000.00 was paid on >ecem&er 9% 1++0. he ax ,ra'd >ivision o" the B-1 investigated the case on the &asis o" con"identia$ in"ormation given &y #r. Santos on =an'ary 9% 1++) that the ret'rn "i$ed &y #r. !astro was "ra'd'$ent and that he "ai$ed to dec$are a$$ properties $e"t &y his "ather with intent to evade payment o" the correct tax. /s a res'$t% a de"iciency estate tax assessment "or <1%230%000.00% inc$'sive o" 30E s'rcharge "or "ra'd% interest and pena$ty% was iss'ed against him on =an'ary 10% 2001. #r. !astro protested the assessment% on the gro'nd o" prescription. [2002 Bar Exams] aC >ecide #r. !astroNs protest. The 'rotest sho"+ d !e reso+ved aainst Mr% Castro% &hat (as $i+ed is a $ra"d"+ent ret"rn *a8in the 'rescri'tive 'eriod $or assess*ent ten #ears /145 $ro* discover# o$ the $ra"d (Section , N)RC'% Accordin+#, the assess*ent (as iss"ed (ithin the 'rescri'tive 'eriod to *a8e an assess*ent !ased on a $ra"d"+ent ret"rn% &C What $ega$ re8'irements m'st #r. Santos comp$y with so that he can c$aim his reward? Exp$ain. The +ea+ re6"ire*ents that *"st !e co*'+ied !# Mr% Santos to entit+e hi* to re(ard are as $o++o(s9 Ge sho"+d vo+"ntari+# $i+e a con$identia+ in$or*ation "nder oath (ith the La( Division o$ the E"rea" o$ Interna+ Reven"e a++ein therein the s'eci$ic vio+ations constit"tin $ra"d- The in$or*ation *"st not #et !e in the 'ossession o$ the E"rea" o$ Interna+ Reven"e, or re$er to a case a+read# 'endin or 'revio"s+# investiated !# the E"rea" o$ Interna+ Reven"e- Mr% Santos sho"+d not !e a overn*ent e*'+o#ee or a re+ative o$ a overn*ent e*'+o#ee (ithin the si)th deree o$ consan"init#- and The in$or*ation *"st res"+t to co++ections o$ reven"es andMor $ines and 'ena+ties (Sec. +, N)RC'% Note: TAe tAirt% percent (8#G' rule un1er Sec. "+ (0' of tAe N)RC, tAat is, tAe failure to report sales, receipts or inco.e in an a.ount e/cee1in2 tAirt% percent (8#G' of tAat 1eclare1 per return, an1 a clai. of 1e1uctions in an a.ount e/cee1in2 tAirt% percent (8#G' of actual 1e1uctions, sAall ren1er tAe ta/pa%er lia6le for su6stantial un1er1eclaration of sales, receipts or inco.e or for overstate.ent of 1e1uctions, applies
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L a ( >? San Beda College of Law T A X A T I O N L A W onl% for purposes of i.posin2 tAe surcAar2e, i.e. twent% five percent (-G' versus fift% percent (-#G'. (or purposes of prescription, i.e., tAe tAree (8' %ear prescriptive perio1 (Sec. #8, N)RC' versus tAe ten (1#' %ear perio1 in case of false or frau1ulent return (Sec. , N)RC', tAe 8# G rule 1oes not appl%4 intent to 1efrau1 .ust still 6e esta6lisAe1. 3?. Inder what conditions may the !ommissioner o" -nterna$ 1even'e &e a'thori.ed to* a.C !ompromise the payment o" any interna$ reven'e tax? [2000 Bar Exams] The Co**issioner o$ Interna+ Reven"e *a# !e a"thori.ed to co*'ro*ise the 'a#*ent o$ an# interna+ reven"e ta) (here9 1% A reasona!+e do"!t as to the va+idit# o$ the c+ai* aainst the ta)'a#er e)ist- or 2. The $inancia+ 'osition o$ the ta)'a#er de*onstrates a c+ear ina!i+it# to 'a# the assessed ta)% /Revenue Re2ulation No. 8#E#' &.C /&ate or cance$ a tax $ia&i$ity? The Co**issioner o$ Interna+ Reven"e *a# a!ate or cance+ a ta) +ia!i+it# (hen9 1% The ta) or an# 'ortion thereo$ a''ears to !e "n7"st+# or e)cessive+# assessed- or 2. The ad*inistration and co++ection costs invo+ved do not 7"sti$# the co++ection o$ the a*o"nt d"e% 3Sec. #" (0', N)RC of 1&&!7 3). #r. 1eyes% a ,i$ipino citi.en engaged in the rea$ estate &'siness% "i$ed his 1++0 income tax ret'rn on #arch 20% 1++3. 4n >ecem&er 13% 1++3% he $e"t the <hi$ippines as an immigrant to @oin his "ami$y in !anada. /"ter the investigation o" said ret'rn% the B-1 iss'ed a notice o" de"iciency income tax assessment on /pri$ 13% 1++). #r. 1eyes ret'rned to the <hi$ippines as a &a$i(&ayan on >ecem&er )% 1++). ,inding his name to &e in the $ist o" de$in8'ent taxpayers% he "i$ed a protest against the assessment on the gro'nd that he did not receive the notice o" assessment and that the assessment had prescri&ed. Wi$$ the protest prosper? Exp$ain. [2000 Bar Exams] No% Prescri'tion has not set in !eca"se the 'eriod o$ +i*itations $or the E"rea" o$ Interna+ reven"e to iss"e an assess*ent (as s"s'ended d"rin the ti*e that Mr% Re#es (as o"t o$ the Phi+i''ines or $ro* the 'eriod Dece*!er 10, 1FF0 "' to Dece*!er L, 1FFL% (Section 8 in relation to Section #8, N)RC' 3+. / !o.% a <hi$ippine !orporation% "i$ed its 1++3 -ncome ax 1et'rn B-1C on /pri$ 13% 1++9 showing a net $oss. 4n Hovem&er 10% 1++9% it amended its 1++3 -1 to show more $osses. /"ter a tax investigation% the B-1 disa$$owed certain ded'ctions c$aimed &y / !o.% p'tting / !o. in a net income position. /s a res'$t% on /'g'st 3% 1+++% the B-1 iss'ed a de"iciency income assessment against / !o. / !o. protested the assessment on the gro'nd that it has prescri&ed. >ecide. [1+++ Bar Exams] The riht o$ the EIR to assess the ta) has not 'rescri!ed% The r"+e is that interna+ Reven"e ta)es sha++ !e assessed (ithin three #ears a$ter the +ast da# 'rescri!ed !# +a( $or the $i+in o$ the ret"rn% (Section #8, N)RC'. Go(ever, i$ the ret"rn oriina++# $i+ed is a*ended s"!stantia++#, the co"ntin o$ the three #ear 'eriod starts $ro* the date the a*ended ret"rn (as $i+ed. (C)R vs. PAoeni/ Assurance Co., 1" SCRA -'. There is s"!stantia+ a*end*ent in this case !eca"se a ne( ret"rn (as $i+ed dec+arin *ore +osses, (hich can on+# !e done either /15 in red"cin ross inco*e or /@5 in increasin the ite*s o$ ded"ctions, c+ai*ed% 00. / !o.% a <hi$ippine corporation% received an income tax de"iciency assessment "rom the B-1 on #ay 3% 1++3. 4n #ay 31% 1++3% / !o. "i$ed its protest with the B-1. 4n ='$y 30% 1++3% / !o. s'&mitted to the B-1 a$$ re$evant s'pporting doc'ments. he !-1 did not "orma$$y r'$e on the protest &'t on =an'ary 23% 1++9% / !o. was served a s'mmons and a copy o" the comp$aint "or co$$ection o" the tax de"iciency "i$ed &y the B-1 with the 1egiona$ ria$ !o'rt B1!C. 4n
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS ,e&r'ary 20% 1++9% / !o. &ro'ght a <etition "or review &e"ore the !/. he B-1 contended that the <etition is premat're since there was no "orma$ denia$ o" the protest o" / !o. and sho'$d there"ore &e dismissed. [1+++ Bar Exams] aC >oes the !/ have @'risdiction over the case? Yes, the CTA has 7"risdiction over the case !eca"se this 6"a+i$ies as an a''ea+ $ro* the Co**issioner=s decision on dis'"ted assess*ent% &hen the Co**issioner decided to co++ect the ta) assessed (itho"t $irst decidin on the ta)'a#er=s 'rotest, the e$$ect o$ the Co**issioner=s action o$ $i+in a 7"dicia+ action $or co++ection is a decision o$ denia+ o$ the 'rotest, in (hich event the ta)'a#er *a# $i+e an a''ea+ (ith the CTA% (Repu6lic vs. Li. Tian Ten2 5 Sons, )nc. 1* SCRA -+"4 ;a%rit vs. CruH. LE8&&1#. Sept. *, 1&&+' &C >oes the 1! have @'risdiction over the co$$ection case "i$ed &y the B-1? Exp$ain. The RTC has no 7"risdiction over the co++ection case $i+ed !# the EIR% The $i+in o$ an a''ea+ (ith the CTA has the e$$ect o$ divestin the RTC o$ 7"risdiction over the co++ection case% At the *o*ent the ta)'a#er a''ea+s the case to the CTA in vie( o$ the Co**issioner=s $i+in o$ the co++ection case (ith the RTC (hich (as considered as a decision o$ denia+, it ives a 7"sti$ia!+e !asis $or the ta)'a#er to *ove $or dis*issa+ in the RTC o$ the Bovern*ent=s action to co++ect the ta) +ia!i+it# "nder dis'"te% (9a6es vs. (loBo. 1- SCRA !+4 San $uan vs. ,asIueH. 8 SCRA &'% There is no $ina+, e)ec"tor# and de*anda!+e assess*ent (hich can !e en$orced !# the EIR, once a ti*e+# a''ea+ is $i+ed% 01. / !o.% a <hi$ippine corporation received an income tax de"iciency assessment "rom the B-1 on Hovem&er 23% 1++9. 4n >ecem&er 10% 1++9% / !o. "i$ed its protest with the B-1. 4n #ay 20% 1++?% the B-1 iss'ed a warrant o" distraint to en"orce the assessment. his warrant was served on / !o. on #ay 23% 1++?. -n a $etter dated ='ne 0% 1++? and received &y / !o. "ive days $ater% the !-1 "orma$$y denied / !o.2s protest stating that it constit'tes his "ina$ decision on the matter. 4n ='$y 9% 1++?% / !o. "i$ed a <etition "or 1eview with !/. he B-1 moved to dismiss the <etition on the gro'nd that the !/ has no @'risdiction over the case. >ecide. [1+++ Bar Exams] The CTA has 7"risdiction over the case% The a''ea+a!+e decision is the one (hich cateorica++# stated that the Co**issioner=s action on the dis'"ted assess*ent is $ina+ and, there$ore, the rec8onin o$ the >4 da# 'eriod to a''ea+ (as on 2"ne F, 1FF?% The $i+in o$ the 'etition $or revie( (ith the CTA (as ti*e+# *ade% The S"'re*e Co"rt has r"+ed that the CIR *"st cateorica++# state that his action on a dis'"ted assess*ent is $ina+- other(ise, the 'eriod to a''ea+ (i++ not co**ence to r"n% That $ina+ action cannot !e i*'+ied $ro* the *ere iss"ance o$ a (arrant o$ distraint and +ev#% (C)R vs. Union SAippin2 Corp. 1+- SCRA -"!' 02. / !o. is the who$$y owned s'&sidiary o" B !o.% a nonFresident Jerman company. / !o. has a trademar( $icensing agreement with B !o. 4n ,e&. 10% 1++3% / !o. remitted to B !o. roya$ties o" <hp 10 mi$$ion% which / !o. s'&@ected to a W o" 23E or <hp 2%300%000. Ipon advice o" co'nse$% / !o. rea$i.ed that the proper W rate is 10E. 4n #arch 20% 1++9% / !o. "i$ed a c$aim "or re"'nd o" <2% 300% 000 with the B-1. he B-1 denied the c$aim on Hov. 13% 1++9. 4n Hov. 2)% 1++9% / !o. "i$ed a <etition "or 1eview with the !/. he B-1 attac(ed the capacity o" / !o.% as agent% to &ring the re"'nd case. >ecide the iss'e. [1+++ Bar Exams] A Co%, the (ithho+din aent o$ the nonCresident $orein cor'oration is entit+ed to c+ai* $or re$"nd o$ e)cess (ithho+din ta) 'aid on the inco*e o$ said cor'oration in the Phi+i''ines% Eein a (ithho+din aent, it is the one he+d +ia!+e $or an# vio+ation o$ the (ithho+din ta) +a( sho"+d s"ch a vio+ation occ"r% In the sa*e vein, it sho"+d !e a++o(ed to c+ai* a re$"nd in case o$ over(ithho+din% (C)R vs. Jan1er PAils. 1*# SCRA -!84 C)R vs. Procter an1 Ga.6le P:C. #" SCRA 8!!' 03. -s assessment necessary &e"ore a taxpayer may &e prosec'ted "or wi$$"'$$y attempting in any manner to evade or de"eat any tax imposed &y the -nterna$ 1even'e !ode? [1++) Bar Exams]
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L a ( >? San Beda College of Law T A X A T I O N L A W No% Assess*ent is not necessar# !e$ore a ta)'a#er *a#!e 'rosec"ted i$ there is a 'ri*a $acie sho(in o$ a (i++$"+ atte*'t to evade ta)es as in the ta)'a#er=s $ai+"re to dec+are a s'eci$ic ite* o$ ta)a!+e inco*e in his inco*e ta) ret"rns. (Un2a6 vs. Cusi. &! SCRA +!!'. On the contrar#, i$ the ta)es a++eed to have !een evaded is co*'"ted !ased on re'orts a''roved !# the EIR there is a 'res"*'tion o$ re"+arit# o$ the 'revio"s 'a#*ent o$ ta)es, so that "n+ess and "nti+ the EIR has *ade a $ina+ deter*ination o$ (hat is s"''osed to !e the correct ta)es, the ta)'a#er sho"+d not !e '+aced in the cr"ci!+e o$ cri*ina+ 'rosec"tion. (C)R vs. (ortune To6acco Corp. GR No. 11&8. $une ", 1&&*' 00. / corporation "i$es its income tax ret'rn on a ca$endar year &asis. ,or the "irst 8'arter o" 1++3% it paid on 30 #ay 1++3 its 8'arter$y income tax in the amo'nt o" <hp 3 mi$$ion. 4n 20 /'g'st 1++3% it paid the second 8'arter$y income tax o" <hp 0.3 mi$$ion. he third 8'arter res'$ted in a net $oss% and no tax was paid. ,or the "o'rth and "ina$ ret'rn "or 1++3% the company reported a net $oss "or the year% and the taxpayer indicated in the income tax ret'rn that it opted to c$aim a re"'nd o" the 8'arter$y tax payments. 4n 10 =an'ary 1++0% the corporation "i$ed with the B-1 a written c$aim "or the re"'nd o" <hp 3.3 mi$$ion. B-1 "ai$ed to act on the c$aim "or re"'ndO hence% on 02 #arch 1++9% the corporation "i$ed a petition "or review with the !/ on its c$aim "or re"'nd o" the overpayment o" its 1++3 8'arter$y income tax. B-1% in its answer to the petition% a$$eged that the c$aim "or re"'nd was "i$ed &eyond the reg$ementary period. >id the c$aim "or re"'nd prescri&e? [1++? Bar Exams] The c+ai* $or re$"nd has 'rescri!ed% The co"ntin o$ the t(o #ear 'rescri'tive 'eriod $or $i+in a c+ai* $or re$"nd is co"nted not $ro* the date (hen the 6"arter+# inco*e ta)es (ere 'aid !"t on the date (hen the $ina+ ad7"st*ent ret"rn (as $i+ed% (C)R vs. T:K Sales, )nc. GR No. +8!8*. $an. 1-, 1&&4 C)R vs. PAilA. Life )nsurance Co., )nc.. GR No. 1#-#+. :a% &, 1&&-'% It is o!vio"s that the ann"a+ inco*e ta) ret"rn (as $i+ed !e$ore 2an"ar# 14, 1FF3 !eca"se the (ritten c+ai* $or re$"nd (as $i+ed (ith the EIR on 2an"ar# 14, 1FF3% Since the t(o #ear 'rescri'tive 'eriod is not on+# a +i*itation o$ action $or !rinin the case to the 7"dicia+ stae, the 'etition $or revie( $i+ed (ith the CTA on March 4@, 1FFD is !e#ond the re+e*entar# 'eriod% Note: (or ,AT refun1s, tAe countin2 of tAe two %ear prescriptive perio1 is counte1 fro. tAe close of tAe ta/a6le Iuarter (Sec. 11, N)RC' 03. / taxpayer received% on 13 =an'ary 1++9% an assessment "or an interna$ reven'e tax de"iciency. 4n 10 ,e&r'ary 1++9% the taxpayer "orthwith "i$ed a petition "or review with the !/. !o'$d the ax !o'rt entertain the petition? [1++? Bar Exams] No% Ee$ore a ta)'a#er can avai+ o$ 7"dicia+ re*ed# he *"st $irst e)ha"st ad*inistrative re*edies !# $i+in a 'rotest (ithin >4 da#s $ro* recei't o$ the assess*ent% It is the Co**issioner=s decision on the 'rotest that ive the Ta) Co"rt 7"risdiction over the case 'rovided that the a''ea+ is $i+ed (ithin >4 da#s $ro* recei't o$ the Co**issioner=s decision% An assess*ent !# the EIR is not the Co**issioner=s decision $ro* (hich a 'etition $or revie( *a# !e $i+ed (ith the CTA% Rather, it is the action ta8en !# the Co**issioner in res'onse to the ta)'a#er=s 'rotest on the assess*ent that (o"+d constit"te the a''ea+a!+e decision% (Section !, RA No. 11-' Local Govern.ent Co1e 09. :% a taxpayer who &e$ieves that an ordinance passed &y the !ity !o'nci$ o" <asay is 'nconstit'tiona$ "or &eing discriminatory against him% wants to (now "rom yo'% his tax $awyer% whether or not he can "i$e an appea$. -n the a""irmative% he as(s yo' where s'ch appea$ sho'$d &e made* the Secretary o" ,inance% or the Secretary o" ='stice% or the !o'rt o" ax /ppea$s% or the reg'$ar co'rts. What wo'$d yo'r advice &e to yo'r c$ient% :? [2003 Bar Exams]
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS The a''ea+ sho"+d !e *ade (ith the Secretar# o$ 2"stice% An# 6"estion on the constit"tiona+it# or +ea+it# o$ a ta) ordinance *a# !e raised on a''ea+ (ith the Secretar# o$ 2"stice (ithin >4 da#s $ro* the e$$ectivit# thereo$% (Section 1+!, LGC4 Da2ono% :ar<et ,en1or Association vs. :unicipalit% of Da2ono%. 8!* SCRA 8!*' 0?. Inder /rt. 013 o" the !ivi$ !ode% in order "or machinery and e8'ipment to &e considered rea$ property% they m'st &e p$aced &y the owner o" the $and and in addition% m'st tend to direct$y meet the needs o" the ind'stry or wor(s carried on the owner. 4i$ companies s'ch as !a$tex and She$$% insta$$ 'ndergro'nd tan(s in the gaso$ine station $ocated on $and $eased &y these companies "rom others. /re those 'ndergro'nd tan(s which were not p$aced &y the owner o" the $and &'t were instead p$aced there &y the $essee o" the $and% considered rea$ property "or p'rposes o" rea$ property taxation 'nder the GJ!? Exp$ain. [2001 P 2003 Bar Exams] Yes% The "nderro"nd tan8s a+tho"h insta++ed !# the +essee, She++ and Ca+te), are considered rea+ 'ro'ert# $or '"r'oses o$ the i*'osition o$ the rea+ 'ro'ert# ta)es% It is on+# $or '"r'oses o$ e)ec"tin a $ina+ 7"d*ent that these *achiner# and e6"i'*ent, insta++ed !# the +essee on a +eased +and, (o"+d not !e considered as rea+ 'ro'ert#% E"t in the i*'osition o$ the rea+ 'ro'ert# ta), the "nderro"nd tan8s are ta)a!+e as necessar# $i)t"res o$ the aso+ine station (itho"t (hich the aso+ine station (o"+d not !e o'erationa+% /Calte/ PAils. )nc. vs C0AA. 11" SCRA &*5 0). he rea$ property o" #r. and #rs. /nge$es% sit'ated in a commercia$ area in "ront o" the p'&$ic #ar(et% was dec$ared in their ax >ec$aration as residentia$ &eca'se it had &een 'sed &y them as their "ami$y residence "rom the time o" its constr'ction in 1++0. Aowever% since =an'ary 1++?% when the spo'ses $e"t "or the Inited States to stay there permanent$y with their chi$dren% the property has &een rented to a sing$e proprietor engaged in the sa$e o" app$iances and agriFprod'cts. he <rovincia$ /ssessor rec$assi"ied the property as commercia$ "or tax p'rposes starting =an'ary 1++). #r. and #rs. /nge$es appea$ed to the Goca$ Board o" /ssessment /ppea$s contending that the ax >ec$aration previo's$y c$assi"ying their property as residentia$ is &inding. Aow sho'$d the appea$ &e decided? [2002 Bar Exams] The a''ea+ sho"+d !e decided aainst Mr% and Mrs% Ane+es% The +a( $oc"ses on the act"a+ "se o$ the 'ro'ert# $or c+assi$ication, va+"ation and assess*ent '"r'oses reard+ess o$ o(nershi'% Section @1? o$ the Loca+ Bovern*ent Code 'rovides that Nrea+ 'ro'ert#, sha++ !e c+assi$ied, va+"ed, and assessed on the !asis o$ its act"a+ "se reard+ess o$ (here +ocated, (hoever o(ns it, and (hoever "ses itN% 0+. /side "rom the &asic rea$ estate tax% give three other taxes that may&e imposed &y provincia$ and city government as we$$ as &y m'nicipa$ities in the #etro #ani$a area? [2002 Bar Exams] The $o++o(in rea+ 'ro'ert# ta)es area aside $ro* the !asic rea+ 'ro'ert# ta), *a# !e i*'osed !# 'rovincia+ and cit# overn*ent as (e++ as !# *"nici'a+ities in the Metro Mani+a area9 a% Additiona+ +ev# on rea+ 'ro'ert# $or the S'ecia+ Ed"cation F"nd /Sec%@>0, LBC5- !% Additiona+ AdCva+ore* ta) on id+e +ands /Sec%@>D, LBC5- c% S'ecia+ Lev# /SEC%@345% A+ternative Ans(er9 A% The $o++o(in ta)es, aside $ro* the !asic rea+ estate ta) *a# !e i*'osed !#9 1% Cit#MProvincia+ Bovern*ent a5 Printer=s or '"!+isher=s ta) !5 Franchise ta) c5 Pro$essiona+ ta) @% M"nici'a+ities in the Metro Mani+a area a5 Ann"a+ $i)ed ta) on *an"$act"rers, asse*!+ers, re'ac8ers, 'rocessors, !re(ers, disti++ers, recti$iers, and co*'o"nders o$ +i6"ors,
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L a ( >? San Beda College of Law T A X A T I O N L A W disti++ed s'irits and (ines or *an"$act"re o$ an# artic+e o$ co**erce o$ (hatever 8ind or nat"re- !5 Ann"a+ $i)ed ta) on (ho+esa+ers, distri!"tors, or dea+ers in an# artic+e o$ co**erce o$ (hatever 8ind or nat"re- c5 Percentae ta) on retai+ers% 30. / !o.% a <hi$ippine corporation% is the owner o" machinery% e8'ipment and "ixt'res $ocated at its p$ant in #'ntin$'pa !ity. he !ity /ssessor characteri.ed a$$ these properties as rea$ properties s'&@ect to the rea$ property tax. / !o. appea$ed the matter to the #'ntin$'pa Board o" /ssessment /ppea$s. he Board r'$ed in "avor o" the !ity. -n accordance with 1/ Ho. 1123% / !o. &ro'ght a petition "or review &e"ore the !/ to appea$ the decision o" the !ity Board o" /ssessment /ppea$s. -s the <etition "or 1eview proper? Exp$ain. [1+++ Bar Exams] No% The CTA is devoid o$ 7"risdiction to entertain a''ea+s $ro* the decision o$ the Cit# Eoard o$ Assess*ent A''ea+s% Said decision is instead a''ea+a!+e to the Centra+ Eoard o$ Assess*ent A''ea+s, (hich "nder the Loca+ Bovern*ent Code, has a''e++ate 7"risdiction over decisions o$ Loca+ Eoard o$ Assess*ent A''ea+s% (Calte/ PAils. )nc. vs. Central 0oar1 of Assess.ent Appeals. LE-#"**. :a% 81, 1&+' Note: Un1er tAe new CTA law, RA No. &+ wAicA a.en1e1 RA No. 11-, 1ecisions of tAe Central 0oar1 of Assess.ent Appeals are now appeala6le to tAe Court of Ta/ Appeals an1 no lon2er to tAe Court of Appeals. 31. he #'nicipa$ity o" #a$o$os passed an ordinance imposing a tax on any sa$e or trans"er o" rea$ property $ocated within the m'nicipa$ity at a rate o" oneF"o'rth B1M0C o" one percent'm B1EC o" the tota$ consideration o" s'ch transaction. : so$d a parce$ o" $and in #a$o$os which he inherited "rom his deceased parents and re"'sed to pay the a"oresaid tax. Ae instead "i$ed appropriate case as(ing that the ordinance &e dec$ared n'$$ and void since s'ch a tax can on$y &e co$$ected &y the nationa$ government% as in "act he has paid B-1 the re8'ired capita$ gains tax. he m'nicipa$ity co'ntered that 'nder the constit'tion% each $oca$ government is vested with the power to create its own so'rces o" reven'e and to $evy taxes% and it imposed the s'&@ect tax in the exercise o" said constit'tiona$ a'thority. 1eso$ve the controversy. [1++2 Bar Exams] The ordinance 'assed !# the M"nici'a+it# o$ Ma+o+os i*'osin a ta) on the sa+e or trans$er o$ rea+ 'ro'ert# is void% The Loca+ Ta) Code on+# a++o(s 'rovinces and cities to i*'ose Ta) on the trans$er o$ o(nershi' o$ rea+ 'ro'ert#% (Sec ! an1 8, Local Ta/ Co1e'% M"nici'a+ities are 'rohi!ited $ro* i*'osin said ta) that 'rovinces are s'eci$ica++# a"thori.ed to +ev# (Sec. , Local Ta/ Co1e' &hi+e it is tr"e that the Constit"tion has iven !road 'o(ers o$ ta)ation to +oca+ overn*ent "nits, this de+eation ho(ever, is s"!7ect to s"ch +i*itations as *a# !e 'rovided !# +a(% (Sec -, Art K, 1&+! Constitution' Tariff an1 Custo.s Co1e 32. : and his wi"e% D% ,i$ipinos $iving in the <hi$ippines% went on a threeFmonth p$eas're trip aro'nd the wor$d d'ring the months o" ='ne% ='$y and /'g'st 2002. -n the co'rse o" their trip% they acc'm'$ated some persona$ e""ects which were necessary% appropriate and norma$$y 'sed in $eis're trips% as we$$ as so'venirs in nonFcommercia$ 8'antities. /re they 5ret'rning residents6 "or p'rposes o" Section 103 o" the ari"" and !'stoms !ode? Exp$ain. [2003 Bar Exams] No% The ter* :ret"rnin residents< re$ers to nationa+s (ho have sta#ed in a $orein co"ntr# $or a 'eriod o$ at +east si) /D5 *onths% /Section 140/$5 o$ the Tari$$ and C"sto*s Code5% D"e to their +i*ited d"ration o$ sta# a!road A and Y are not considered as :ret"rnin residents< !"t the# are *ere+# considered as trave+ers or to"rists (ho en7o# the !ene$it o$ conditiona++# $ree i*'ortation%
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS JNote9 Credit *"st +i8e(ise !e iven i$ the ans(ers is in the a$$ir*ative, considerin that trave+ers or to"rists are iven the sa*e ta) treat*ent as that o$ ret"rnin residents, treatin their 'ersona+ e$$ects, not in co**ercia+ 6"antities, as conditiona++# $ree i*'ortation%K 33. Whenever the decision o" the !o$$ector o" !'stoms is adverse to the government% it is a'tomatica$$y e$evated to the !ommissioner "or review% and i" it is a""irmed &y him% it is a'tomatica$$y e$evated to the Secretary o" ,inance "or review. What is the &asis o" the a'tomatic review proced're in the B'rea' o" !'stoms? Exp$ain. [2002 Bar Exams] A"to*atic revie( is intended to 'rotect the interest o$ the Bovern*ent in the co++ection o$ ta)es and c"sto*s d"ties in sei."re and 'rotest cases% &itho"t s"ch a"to*atic revie(, neither the Co**issioner o$ C"sto*s nor the Secretar# o$ Finance (o"+d 8no( a!o"t the decision +aid do(n !# the Co++ector $avorin the ta)'a#er% The 'o(er to decide sei."re and 'rotest cases *a# !e a!"sed i$ no chec8s are instit"ted% A"to*atic revie( is necessar# !eca"se no!od# is e)'ected to a''ea+ the decision o$ the Co++ector (hich is $avora!+e to the ta)'a#er and adverse to the Bovern*ent% This is the reason (h# (henever the decision o$ the Co++ector is adverse to the Bovern*ent, the said decision is a"to*atica++# e+evated to the Co**issioner $or revie(- and i$ s"ch decision is a$$ir*ed !# the Co**issioner, the sa*e sha++ !e a"to*atica++# e+evated to and !e $ina++# revie(ed !# the Secretar# o$ Finance /9ao<asin vs. Co..issioner of Custo.s. 1+# SCRA -&1. 1&+&5 30. 4n the &asis o" a warrant o" sei.'re and detention iss'ed &y the !o$$ector o" !'stoms "or the p'rpose o" en"orcing the ari"" and !'stoms Gaws% assorted &rands o" cigarettes said to have &een i$$ega$$y imported into the <hi$ippines were sei.ed "rom a store where they were open$y o""ered "or sa$e. >issatis"ied with the decision rendered a"ter hearing &y the !o$$ector o" !'stoms on the con"iscation o" the artic$es% the importer "i$ed a petition "or review with the !o'rt o" ax /ppea$s. he !o$$ector moved to dismiss the petition "or $ac( o" @'risdiction. 1'$e on the motion. [2000 Bar Exams] Motion ranted% The Co"rt o$ Ta) A''ea+s has 7"risdiction on+# over decisions o$ the Co**issioner o$ C"sto*s in cases invo+vin sei."res, detention or re+ease o$ 'ro'ert# a$$ected% (Section !, RA No. 11-'. There is no decision #et o$ the Co**issioner (hich is s"!7ect to revie( !# the Co"rt o$ Ta) A''ea+s% 33. Inder the same "acts a&ove% co'$d the importer "i$e an action in the 1egiona$ ria$ !o'rt "or rep$evin on the gro'nd that the artic$es are &eing wrong"'$$y detained &y the !o$$ector o" !'stoms since the importation was not i$$ega$ and there"ore exempt "rom sei.'re? [2000 Bar Exams] No% The +eis+ators intended to divest the Reiona+ Tria+ Co"rts o$ the 7"risdiction to re'+evin a 'ro'ert# (hich is a s"!7ect o$ sei."re and $or$eit"re 'roceedins $or vio+ation o$ the Tari$$ and C"sto*s Code other(ise, actions $or $or$eit"re o$ 'ro'ert# $or vio+ation o$ the C"sto*s +a(s co"+d easi+# !e "nder*ined !# the si*'+e device o$ re'+evin% (;e La (uente vs. ;e ,e%ra, et al. 1# SCRA "--' There sho"+d !e no "nnecessar# hindrance on the overn*ent=s drive to 'revent s*"+in and other $ra"ds "'on the C"sto*s% F"rther*ore, the Reiona+ Tria+ Co"rt do not have 7"risdiction in order to render e$$ective and e$$icient the co++ection o$ i*'ort and e)'ort d"ties d"e the State, (hich ena!+es the overn*ent to carr# o"t the $"nctions it has !een instit"ted to 'er$or*% ($ao, et al vs. Court of Appeals, et al., an1 co.panion case. "& SCRA 8-, "8' Note: TAe Secretar% of tAe ;epart.ent of Tra1e an1 )n1ustr% in case of nonE a2ricultural pro1ucts or tAe Secretar% of tAe ;epart.ent of A2riculture in tAe case of a2ricultural pro1ucts sAall appl% a 2eneral safe2uar1 .easure upon a positive final 1eter.ination of tAe Tariff Co..ission tAat a pro1uct is 6ein2 i.porte1 into tAe countr% in increase1 Iuantities, wAetAer a6solute or relative to tAe 1o.estic pro1uction, as to 6e a su6stantial cause of serious inBur% or tAreat tAereof to tAe 1o.estic in1ustr%. TAe
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L a ( >? San Beda College of Law T A X A T I O N L A W li.itation .a% ta<e in tAe for. of an% a11itional 1ut% wAicA .a% 6e specific an1For a1 valore., or a Iuantitative restriction. (RA No. ++##, Safe2uar1 :easures Act' 39. -n sm'gg$ing a shipment o" gar$ic% the sm'gg$ers 'sed an eightFwhee$er tr'c( which they hired "or the p'rpose o" ta(ing o't the shipment "rom the c'stoms .one. >anny% the tr'c( owner% did not have a certi"icate o" p'&$ic convenience to operate his tr'c(ing &'siness. >anny did not (now that the shipment o" gar$ic was i$$ega$$y imported. !an the co$$ector o" c'stoms o" the port sei.e and "or"eit the tr'c( as an instr'ment in the sm'gg$ing? [1++0 Bar Exams] Yes, the Co++ector o$ C"sto*s o$ the 'ort can sei.e and $or$eit the tr"c8 as an instr"*ent in the s*"+in activit#, since the sa*e (as "sed "n+a($"++# in the i*'ortation o$ s*"+ed artic+es% The *ere carr#in o$ s"ch artic+es on !oard the tr"c8 /in co**ercia+ 6"antities5 sha++ s"!7ect the tr"c8 to $or$eit"re, since it (as not !ein "sed as a d"+# a"thori.ed co**on carrier, (hich (as chartered or +eased as s"ch% /Sec. -8# 3a7 TCC' Moreover, a+tho"h $or$eit"re o$ the vehic+e (i++ not !e e$$ected i$ it is esta!+ished that the o(ner thereo$ had no 8no(+ede o$ or 'artici'ation in the "n+a($"+ acts, there arises a 'ri*a $acie 'res"*'tion o$ 8no(+ede or 'artici'ation i$ the o(ner is not in the !"siness $or (hich the conve#ance is enera++# "sed% Th"s, not havin a certi$icate o$ '"!+ic convenience to o'erate a tr"c8in !"siness, he is +ea++# dee*ed not to have !een enaed in the tr"c8in !"siness% /Sec -81, Tariff an1 Custo.s Co1e' EAR TYPE QUESTIONS I% he Sangg'niang Bayan o" #a(ati enacted #'nicipa$% 4rdinance Ho. +2F0?2 which provides% inter a$ia% "or the sched'$e o" rea$ estate% &'siness and "ranchise taxes in the #'nicipa$ity o" #a(ati. herea"ter% the >epartment o" ='stice came o't with a reso$'tion a"ter an appea$ "rom a taxpayer% dec$aring Qn'$$ and void and witho't $ega$ e""ectQ the said ordinance "or having &een enacted in contravention o" Section 1)? o" the Goca$ Jovernment !ode o" 1++1. #a(ati there&y "i$e a petition with the 1! o" #a(ati. -n the meantime% #a(ati contin'ed to imp$ement the ordinance. =ardine >avies -ns'rance Bro(ers% -nc.% a d'$yForgani.ed corporation% was assessed and &i$$ed &y #a(ati an amo'nt "or taxes% "ees and charges. <etitioner did not protest the assessment &'t in "act% paid the said amo'nts witho't any protest. he 1! rendered @'dgment dec$aring the ordinance va$id. =ardine >avies% re$ying on the reso$'tion o" the >4=% "i$ed a comp$aint with the 1! o" #a(ati against #a(ati and its /cting #'nicipa$ reas'rer "or a re"'nd or tax credit. he de"endants "i$ed a motion to dismiss the comp$aint on the gro'nd o" premat'rity.
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS -s =ardine >avies proscri&ed "rom "i$ing its comp$aint with the 1! "or a re"'nd o" the a$$eged payment witho't any protest o" the taxes d'e and witho't any appea$ with the Secretary o" ='stice as to $ega$ity or constit'tiona$ity o" the ordinance? YES% As a enera+ 'rece't, a ta)'a#er *a# $i+e a co*'+aint assai+in the va+idit# o$ the ordinance and 'ra#in $or a re$"nd o$ its 'erceived over'a#*ents (itho"t $irst $i+in a 'rotest to the 'a#*ent o$ ta)es d"e "nder the ordinance% As he+d in the case o$ Re%es vs. Court of Appeals />@4 SCRA 3LD% 1FFF5, :C+ear+#, the +a( re6"ires that the dissatis$ied ta)'a#er (ho 6"estions the va+idit# or +ea+it# o$ a ta) ordinance *"st $i+e his a''ea+ to the Secretar# o$ 2"stice, (ithin >4 da#s $ro* e$$ectivit# thereo$% In case the Secretar# decides the a''ea+, a 'eriod a+so o$ >4 da#s is a++o(ed $or an arieved 'art# to o to co"rt% E"t i$ the Secretar# does not act thereon, a$ter the +a'se o$ D4 da#s, a 'art# co"+d a+read# 'roceed to see8 re+ie$ in co"rt% These three se'arate 'eriods are c+ear+# iven $or co*'+iance as a 'rere6"isite !e$ore see8in redress in a co*'etent co"rt% S"ch stat"tor# 'eriods are set to 'revent de+a#s as (e++ as enhance the order+# and s'eed# dischare o$ 7"dicia+ $"nctions% For this reason the co"rts constr"e these 'rovisions o$ stat"tes as *andator#%< In the instant case, the $ai+"re o$ 2ardine Davies to a''ea+ to the Secretar# o$ 2"stice (ithin >4 da#s as re6"ired !# Sec% 1L? o$ R%A% ?1D4 is $ata+ to their ca"se% Moreover, 2ardine Davies even 'aid (itho"t an# 'rotest the a*o"nts o$ ta)es assessed !# res'ondents Ma8ati and Actin Treas"rer as 'rovided $or in the ordinance% /$ar1ine ;avies )nsurance 0ro<ers, )nc. vs. Aliposa. G.R. No. 11+&##4 (e6ruar% !, ##85 II% G'ng !enter o" the <hi$ippines is a nonFpro"it and nonFstoc( corporation which was organi.ed "or the we$"are and &ene"it o" the ,i$ipino peop$e principa$$y to he$p com&at the high incidence o" $'ng and p'$monary diseases in the <hi$ippines. -ts medica$ services are to &e rendered to the p'&$ic in genera$. -t accepts paying and nonFpaying patients% inc$'ding o'tFpatients. -t a$so receives ann'a$ s'&sidies "rom the government. -t owns o" a parce$ o" $and with a hospita$ in the midd$e% $ocated at ;'e.on !ity. / &ig space at the gro'nd "$oor is &eing $eased to private parties% "or canteen and sma$$ store spaces% and to medica$ or pro"essiona$ practitioners who 'se the same as their private c$inics. / &ig portion o" the $and is &eing $eased "or commercia$ p'rposes to a private enterprise. Both the $and and the hospita$ &'i$ding were assessed "or rea$ property taxes. here&y the entity "i$ed a !$aim "or Exemption "rom rea$ property taxes with the !ity /ssessor% predicated on its c$aim that it is a charita&$e instit'tion. 1. -s the G'ng !enter o" the <hi$ippines a charita&$e instit'tion? 2. /re its rea$ properties exempt "rom rea$ property taxes? 1% YES% As a enera+ 'rinci'+e, a charita!+e instit"tion does not +ose its character as s"ch and its e)e*'tion $ro* ta)es si*'+# !eca"se it derives inco*e $ro* 'a#in 'atients, (hether o"tC'atient, or con$ined in the hos'ita+, or receives s"!sidies $ro* the overn*ent, so +on as the *one# received is devoted or "sed a+toether to the charita!+e o!7ect (hich it is intended to achieve- and no *one# in"res to the 'rivate !ene$it o$ the 'ersons *anain or o'eratin the instit"tion% The $"nda*enta+ ro"nd "'on (hich a++ e)e*'tions in $avor o$ charita!+e instit"tions are !ased is the !ene$it con$erred "'on the '"!+ic !# the*, and a conse6"ent re+ie$, to so*e e)tent, o$ the !"rden "'on the state to care $or and advance the interests o$ its citi.ens% @% NO% Even tho"h the 'etitioner is a charita!+e instit"tion, those 'ortions o$ its rea+ 'ro'ert# that are +eased to 'rivate entities are not e)e*'t $ro* rea+ 'ro'ert# ta)es as these are not act"a++#, direct+# and e)c+"sive+# "sed $or charita!+e '"r'oses% The sett+ed r"+e in this 7"risdiction is that +a(s rantin e)e*'tion $ro* ta) are constr"ed strictissi.i Buris aainst the ta)'a#er and +i!era++# in $avor o$ the ta)in 'o(er% Ta)ation is the r"+e and e)e*'tion is the e)ce'tion% The ta) e)e*'tion "nder Section @L/>5, Artic+e OI o$ the 1FL? Phi+i''ine Constit"tion covers 'ro'ert# ta)es on+#% &hat is e)e*'ted is not the instit"tion itse+$- those e)e*'ted $ro* rea+ estate ta)es are +ands, !"i+dins and i*'rove*ents act"a++#, direct+# and e)c+"sive+# "sed $or re+iio"s, charita!+e or ed"cationa+ '"r'oses%
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L a ( >? San Beda College of Law T A X A T I O N L A W Under the 1F?> and 1FL? Constit"tions and Re'% Act No% ?1D4 in order to !e entit+ed to the e)e*'tion, the 'etitioner is !"rdened to 'rove, !# c+ear and "ne6"ivoca+ 'roo$, that /a5 it is a charita!+e instit"tion- and /!5 its rea+ 'ro'erties are ACTUALLY, DIRECTLY and EACLUSIOELY "sed $or charita!+e '"r'oses% I$ rea+ 'ro'ert# is "sed $or one or *ore co**ercia+ '"r'oses, it is not e)c+"sive+# "sed $or the e)e*'ted '"r'oses !"t is s"!7ect to ta)ation% The (ords Ndo*inant "seN or N'rinci'a+ "seN cannot !e s"!stit"ted $or the (ords N"sed e)c+"sive+#N (itho"t doin vio+ence to the Constit"tions and the +a(% /Lun2 Center of tAe PAilippines vs. LueHon Cit% an1 Rosas. G.R. No. 1""1#". $une &, ##"%5 III% #E1/G!4 "i$ed its tax dec$arations covering its S'cat power p$ants% inc$'ding the &'i$dings thereon as we$$ as the machineries and e8'ipment. ,rom 1++3 to 1++)% #E1/G!4 paid the rea$ property taxes on the said properties on the &asis o" their assessed va$'e as stated in its tax dec$arations. herea"ter% #E1/G!4 so$d a$$ the powerFgenerating p$ants inc$'ding the $andsite to the H/<4!41. -n 2003% the #'nicipa$ /ssessor o" #'ntin$'pa discovered that #E1/G!4% "or the years 1++9F 1++)% misdec$ared andMor "ai$ed to dec$are "or taxation p'rposes a n'm&er o" rea$ properties consisting o" severa$ e8'ipment and machineries "o'nd in the said power p$ants. herea"ter% the #'nicipa$ reas'rer o" #'ntin$'pa iss'ed three notices to #E1/G!4% re8'esting it to pay the "'$$ amo'nt o" the c$aimed de"iciency with a warning that its properties co'$d &e so$d at p'&$ic a'ction 'n$ess the tax d'e was paid. Sti$$% #E1/G!4 did not pay% nor ta(e other steps. #E1/G!4 "i$ed &e"ore the 1! o" #a(ati a <etition "or <rohi&ition en@oining the #'nicipa$ reas'rer o" #'ntin$'pa "rom en"orcing the warrants o" garnishment. he #'nicipa$ reas'rer "i$ed a #otion to >ismiss on gro'nd o" $ac( o" @'risdiction. 1. -s #E1/G!4 $ia&$e "or the de"iciency in rea$ property taxes "or the years 1++9F1++)? 2. /re the $etters sent to the #E1/G!4 &y the m'nicipa$ treas'rer mere co$$ection $etters or notices o" assessment? 3. Wi$$ the #otion to >ismiss prosper? 1% YES% The $act that NAPOCOR is the 'resent o(ner o$ the S"cat 'o(er '+ant *achineries and e6"i'*ent does not constit"te a +ea+ !arrier to the co++ection o$ de+in6"ent ta)es $ro* the 'revio"s o(ner, MERALCO, (ho has de$a"+ted in its 'a#*ent% In Testate =state of Concor1ia T. Li. vs. Cit% of :anila, the Co"rt he+d that the "n'aid ta) attaches to the 'ro'ert# and is charea!+e aainst the 'erson (ho had act"a+ or !ene$icia+ "se and 'ossession o$ it reard+ess o$ (hether or not he is the o(ner% To i*'ose the rea+ 'ro'ert# ta) on the s"!se6"ent o(ner that (as neither the o(ner nor the !ene$icia+ "ser o$ the 'ro'ert# d"rin the desinated 'eriods (o"+d not on+# !e contrar# to +a( !"t a+so "n7"st% @% NO% The +etters cannot 6"a+i$# as notices o$ ta) assess*ent% A notice o$ assess*ent as 'rovided $or in the Rea+ Pro'ert# Ta) Code sho"+d e$$ective+# in$or* the ta)'a#er o$ the va+"e o$ a s'eci$ic 'ro'ert#, or 'ro'ortion thereo$ s"!7ect to ta), inc+"din the discover#, +istin, c+assi$ication, and a''raisa+ o$ 'ro'erties% The notices do not contain the essentia+ in$or*ation that a notice o$ assess*ent *"st s'eci$#, na*e+#, the va+"e o$ a s'eci$ic 'ro'ert# or 'ro'ortion thereo$ (hich is !ein ta)ed, nor does it state the discover#, +istin, c+assi$ication and a''raisa+ o$ the 'ro'ert# s"!7ect to ta)ation% In $act, the tenor o$ the notices !es'ea8s an intention to co++ect "n'aid ta)es, th"s the re*inder to the ta)'a#er that the $ai+"re to 'a# the ta)es sha++ a"thori.e the overn*ent to a"ction o$$ the 'ro'erties s"!7ect to ta)es% >% YES% The Motion to Dis*iss (i++ 'ros'er since the tria+ co"rt is (itho"t a"thorit# to address the a++eed irre"+arit# in the iss"ance o$ the notices o$ assess*ent (itho"t 'rior ta) 'a#*ent, "nder 'rotest, !# 'etitioner% Section D3 o$ the RPTC, 'rohi!its co"rts $ro* dec+arin an# ta) inva+id !# reason o$ irre"+arities or in$or*a+ities in the 'roceedins o$ the o$$icers chared (ith the assess*ent or co++ection o$ ta)es e)ce't "'on the condition that the ta)'a#er 'a#s the 7"st a*o"nt o$ the ta), as deter*ined !# the co"rt in the 'endin 'roceedin% As MERALCO $ai+ed to *a8e a 'rotest 'a#*ent o$ the ta) assessed, an# ar"*ent reardin the 'roced"re o!served in the 're'aration o$ the notice o$ assess*ent and co++ection is $"ti+e as the tria+ co"rt in s"ch a scenario cannot ass"*e 7"risdiction over the *atter% /:=RALC? vs. 0arlis. G.R. No. 11"81. $une &, ##"5
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS IO% 1aw materia$s consigned to 11! #an'"acting arrived in the wareho'se o" !G ,reight -nc. he B'rea' o" !'stoms treated the raw materia$s as s'&@ect to ordinary import taxes. he consignee "ai$ed to "i$e the re8'isite import entry o" cargo and to c$aim the cargo immediate$y. h's% the >istrict !o$$ector o" !'stoms initiated an a&andonment proceedings over said cargo and iss'ed a notice to the 11! #an'"act'ring giving them "i"teen B13C days "rom notice thereo" to "i$e entry o" the cargoesO otherwise% the cargoes wo'$d &e deemed a&andoned and so$d at p'&$ic a'ction. he dec$aration o" a&andonment &ecame "ina$ and exec'tory. 11! #an'"act'ring "i$ed a comp$aint "or damages &e"ore the 1! against !G ,reight -nc. he $atter contends that the 1! has no @'risdiction to review and n'$$i"y the dec$aration &y the !o$$ector o" !'stoms. -s the contention o" !G ,reight -nc. tena&$e? YES% The tria+ co"rt has no 7"risdiction% The RTC is devoid o$ an# co*'etence to 'ass "'on the va+idit# or re"+arit# o$ sei."re and $or$eit"re 'roceedins cond"cted !# the E"rea" o$ C"sto*s, and to en7oin or other(ise inter$ere (ith the said 'roceedins even i$ the sei."re (as i++ea+% S"ch act does not de'rive the E"rea" o$ C"sto*s o$ 7"risdiction thereon% The Co++ector o$ C"sto*s sittin in sei."re and $or$eit"re 'roceedins has e)c+"sive 7"risdiction to hear and deter*ine a++ 6"estions to"chin on the sei."re and $or$eit"re o$ d"tia!+e oods% The Reiona+ Tria+ Co"rts are 'rec+"ded $ro* ass"*in coni.ance over s"ch *atters even thro"h 'etitions o$ certiorari, 'rohi!ition or *anda*"s% /R.,. :arHan (rei2At, )nc. vs Court of Appeals. G.R. No. 1+#*". :arcA ", ##"5
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L a ( >? San Beda College of Law T A X A T I O N L A W @443 EAR EAAM QUESTIONS P SUBBESTED ANS&ERS QUESTION NO% I axes are assessed "or the p'rpose o" generating reven'e to &e 'sed "or p'&$ic needs. axation itse$" is the power &y which the State raises reven'e to de"ray the expenses o" government. / @'rist said that a tax is what we pay "or civi$i.ation. /. -n o'r @'risdiction% which o" the "o$$owing statements may &e erroneo's* 1. axes are pec'niary in nat're. 2. axes are en"orced charges and contri&'tions. 3. axes are imposed on persons and property within the territoria$ @'risdiction o" a State. 0. axes are $evied &y the exec'tive &ranch o" the government. 3. axes are assessed according to a reasona&$e r'$e o" apportionment. ='sti"y yo'r answer or choice &rie"$y. The state*ent that ta)es are +evied !# the e)ec"tive !ranch o$ the overn*ent *a# !e erroneo"s% One characteristic or attri!"te o$ ta)es is that it is +evied !# the +eis+ative !od# o$ the state !eca"se the ta)in 'o(er is 'ec"+iar+# and e)c+"sive+# +eis+ative in character% As a enera+ r"+e, the 'o(er to ta) is '"re+# +eis+ative and (hich the +eis+ative !od# cannot de+eate either to the e)ec"tive or 7"dicia+ de'art*ent o$ the overn*ent (itho"t in$rinin "'on the theor# o$ se'aration o$ 'o(ers (PepsiECola 0ottlin2 Co.pan% of tAe PAilippines vs. :unicipalit% of Tanauan, Le%te4 NPC vs. Al6a%, 1+* SCRA 1&+'. B. Which o" the "o$$owing propositions may now &e 'ntena&$e* 1. he co'rt sho'$d constr'e a $aw granting tax exemption strict$y against the taxpayer. 2. he co'rt sho'$d constr'e a $aw granting a m'nicipa$ corporation the power to tax most strict$y. 3. he !o'rt o" ax /ppea$s has @'risdiction over decisions o" the !'stoms !ommissioner in cases invo$ving $ia&i$ity "or c'stoms d'ties. 0. he !o'rt o" /ppea$s has @'risdiction to review decisions o" the !o'rt o" ax /ppea$s. 3. he S'preme !o'rt has @'risdiction to review decisions o" the !o'rt o" /ppea$s. The 'ro'osition that the co"rt sho"+d constr"e a +a( rantin a *"nici'a+ cor'oration the 'o(er to ta) *ost strict+# *a# no( !e "ntena!+e% The 'o(er to ta) is 'ri*ari+# vested in Conress- ho(ever, in o"r 7"risdiction, it *a# !e e)ercised !# +oca+ +eis+ative !odies, no +oner !# virt"e o$ a va+id de+eation as !e$ore !"t '"rs"ant to direct a"thorit# con$erred !# Section 0, Artic+e A o$ the Constit"tion% /:actan Ce6u )nternational Airport vs. :arcos. GR No. 1##+, Septe.6er 11, 1&&*5% The !asic rationa+e $or the rant o$ ta) 'o(er to +oca+ overn*ent "nits is to sa$e"ard their via!i+it# and se+$Cs"$$icienc# !# direct+# rantin the* enera+ and !road ta) 'o(ers% /Mani+a E+ectric Co% vs% Province o$ La"na, >4D SCRA ?04, J1FFFK5 Accordin+#, inas*"ch as the 'o(er to ta) *a# !e e)ercised !# +oca+ +eis+ative !odies no +oner !# va+id de+eation o$ said 'o(er !# Conress, !"t !# direct a"thorit# con$erred !# the Constit"tion, in inter'retin stat"tor# 'rovisions on *"nici'a+ $isca+ 'o(ers, do"!ts (i++ have to !e reso+ved in $avor o$ *"nici'a+ cor'orations% /Cit% Govern.ent of San Pa6lo, La2una vs. Re%es. GR No. 1!!#+. :arcA -, 1&&&' Note: TAe proposition tAat tAe Court of Appeals Aas Buris1iction to review 1ecisions of tAe Court of Ta/ Appeals is also untena6le, consi1erin2 tAat tAe present CTA Act (R.A.&+' Aas .a1e tAe CTA a coEeIual Bu1icial 6o1% of tAe Court of Appeals. R.A.&+ was passe1 on :arcA 8#, ##".
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS QUESTION II /. 1! is $awFa&iding citi.en who pays his rea$ estate taxes prompt$y. >'e to a series o" typhoons and adverse economic conditions% an ordinance is passed &y ## !ity granting a 30E disco'nt "or payment o" 'npaid rea$ estate taxes "or the preceding year and the condonation o" a$$ pena$ties on "ines res'$ting "rom the $ate payment. /rg'ing that the ordinance rewards de$in8'ent taxpayers and discriminates against prompt ones% 1! demands that he &e re"'nded an amo'nt e8'iva$ent to oneFha$" o" the rea$ taxes he paid. he m'nicipa$ attorney rendered an opinion that 1! cannot &e reim&'rsed &eca'se the ordinance did not provide "or s'ch reim&'rsement. 1! "i$es s'it to dec$are the ordinance void on the gro'nd that it is a c$ass $egis$ation. Wi$$ his s'it prosper? Exp$ain yo'r answer &rie"$y.
The s"it (i++ not 'ros'er% The re*ission or condonation o$ ta)es d"e and 'a#a!+e to the e)c+"sion o$ ta)es a+read# co++ected does not constit"te "n$air discri*ination% Each set o$ ta)es is a c+ass !# itse+$ and the +a( (o"+d !e o'en to attac8 as c+ass +eis+ation on+# i$ a++ ta)'a#ers !e+onin to one c+ass (ere not treated a+i8e /2"an L"na S"!division, inc% vs% Sar*iento, F1 Phi+% >?1 J1F0@K5% B. / $aw was passed granting tax exemption to certain ind'stries and investments "or a period o" "ive years. B't three years $ater% the $aw was repea$ed. With the repea$% the exemptions were considered revo(ed &y the B-1% which assessed the investing companies "or 'npaid taxes e""ective on the date o" the repea$ o" the $aw. H<! and K1 companies 8'estioned the assessments on the gro'nd that% having made their investments in "'$$ re$iance with the period o" exemption granted &y the $aw% its repea$ vio$ated their constit'tiona$ right against the impairment o" the o&$igations o" contract. -s the contention o" the companies tena&$e or not? 1eason &rie"$y. The contention o$ the co*'anies is not tena!+e% The +a( 'rovidin $or ta) e)e*'tion is ranted "ni+atera++# and rat"ito"s+# !# Conress in the e)ercise o$ its ta)in 'o(er% Since ta)ation is the r"+e and ta) e)e*'tion, the e)ce'tion, an# ta) e)e*'tion "ni+atera++# ranted can !e (ithdra(n at the '+eas"re o$ the ta)in a"thorit# (itho"t vio+atin the Constit"tion (:actan Ce6u )nternational Airport vs. :arcos. G.R. No. 1##+. Septe.6er 11, 1&&*' &hat constit"tes an i*'air*ent o$ the o!+iation o$ contracts is the revocation o$ an e)e*'tion (hich is $o"nded on a va+"a!+e consideration !eca"se it ta8es the $or* and essence o$ a contract /Casanova vs. Dor1, + PAil. 1- 31&#!7'. QUESTION NO% III /. :D7 !o$$eges is a nonFstoc(% nonFpro"it ed'cationa$ instit'tion r'n &y the /rchdiocese o" B< !ity. -t co$$ected and received the "o$$owing* Which o" these a&ovecited income and donation wo'$d not &e exempt "rom taxation? Exp$ain &rie"$y. a. 'ition "ees &. >ormitory "ees c. 1enta$ "rom canteen concessionaires d. -nterest "rom moneyFmar(et p$acements o" the t'ition "ees. e. >onation o" a $ot and &'i$ding &y schoo$ a$'mni A++ o$ the inco*e derived !# the nonCstoc8, nonC'ro$it ed"cationa+ instit"tion (i++ !e e)e*'t $ro* ta)ation 'rovided the# are "sed act"a++#, direct+# and e)c+"sive+# $or ed"cationa+ '"r'oses% The Constit"tion 'rovides that a++ reven"es and assets o$ nonCstoc8, nonC'ro$it ed"cationa+ instit"tion (hich are act"a++#, direct+# and e)c+"sive+# "sed $or ed"cationa+ '"r'oses are e)e*'t $ro* ta)ation (Sec. ", par 8, Art. K),, 1&+! Constitution' The donation is, +i8e(ise, e)e*'t $ro* the donor=s ta) i$ act"a++#, direct+# and e)c+"sive+# "sed $or ed"cationa+ '"r'oses, 'rovided not *ore than >4H o$ the donation is "sed !# the donee $or ad*inistration '"r'oses% The donee, !ein a nonCstoc8, nonC'ro$it ed"cationa+ instit"tion, is a 6"a+i$ied entit# to receive an e)e*'t donation s"!7ect to conditions 'rescri!ed !# +a( JSec. ", par ", Art. K),, 1&+! Constitution, in relation to Sec. 1#1 (A' (8', N)RC7 Accordin+#, none o$ the cited inco*e and donation co++ected and received !# the nonC stoc8, nonC'ro$it ed"cationa+ instit"tion (o"+d not !e e)e*'t $ro* ta)ation%
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L a ( >? San Beda College of Law T A X A T I O N L A W ALTERNATIOE ANS&ER9 The $o++o(in recei'ts !# the nonCstoc8, nonC'ro$it ed"cationa+ instit"tion are not e)e*'t $ro* ta)ation9 c% Renta+s $ro* canteen concessionaires% Renta+ inco*e is considered as "nre+ated to the schoo+ o'erations, hence, ta)a!+e /DOF Order No%1>?CL?, Dec%1D, 1FL?5% d% Interest $ro* *one#C*ar8et '+ace*ents o$ the t"ition $ees% The interest on the '+ace*ent is ta)a!+e /DOF Order No%1>?CL?5% I$ ho(ever, the said interest is "sed act"a++#, direct+# and e)c+"sive+# $or ed"cationa+ '"r'oses as 'roven !# s"!stantia+ evidence, the sa*e (i++ !e e)e*'t $ro* ta)ation /CIR vs% CA, @FL SCRA L> J1FFLK5% The other ite*s o$ inco*e (hich (ere a++ derived $ro* schoo+Cre+ated activities (i++ !e e)e*'t $ro* ta)ation in the hands o$ the reci'ient i$ "sed act"a++#, direct+# and e)c+"sive+# $or ed"cationa+ '"r'oses /Sec%3 'ar%>, Art% AIO, 1FL? Constit"tion5% The donation to a nonCstoc8, nonC'ro$it ed"cationa+ instit"tion (i++ !e e)e*'t $ro* the donor=s ta) i$ "sed act"a++#, direct+# and e)c+"sive+# $or ed"cationa+ '"r'oses and 'rovided, that, not *ore than >4H o$ the donation is "sed $or ad*inistration '"r'oses /Sec,3, 'ar%3, Art% AIO, 1FL? Constit"tion, in re+ation to Sec% 141 /A5/>5, NIRC5% Note: Revenues 1erive1 fro. assets use1 in tAe operation of cafeteriasFcanteens an1 6oo<stores are e/e.pt fro. ta/ation provi1e1 tAe% are owne1 an1 operate1 6% tAe e1ucational institution as ancillar% activities an1 tAe sa.e are locate1 witAin tAe scAool pre.ises. Dowever, tAe% sAall 6e su6Bect to internal revenue ta/es on inco.e fro. tra1e, 6usiness or otAer activit%, tAe con1uct of wAicA is not relate1 to tAe e/ercise or perfor.ance 6% sucA e1ucational institutions of tAeir e1ucational purposes or functions (i.e. rental pa%.ent fro. tAeir 6uil1in2Fpre.ises'. TAeir interest inco.e fro. currenc% 6an< 1eposits an1 %iel1 fro. 1eposit su6stitutes instru.ents use1 actuall%, 1irectl% an1 e/clusivel% in pursuance of tAeir purposes as an e1ucational institution are e/e.pt fro. tAe #G final ta/ an1 ! MG ta/ on interest inco.e un1er tAe e/pan1e1 forei2n currenc% 1eposit s%ste. upon co.pliance of certain con1itions. (Revenue :e.oran1u. Circular No. !* > #8' B. S'ppose that :D7 !o$$eges is a proprietary ed'cationa$ instit'tion owned &y the /rch&ishop2s "ami$y% rather than the /rchdiocese% which o" those a&ovecited income and donation wo'$d &e exempt "rom taxation? Exp$ain &rie"$y. I$ AYQ Co++ees is a 'ro'rietar# ed"cationa+ instit"tion, a++ o$ its inco*e $ro* schoo+ re+ated and nonCschoo+ re+ated activities (o"+d !e s"!7ect to the inco*e ta) !ased on its areate net inco*e derived $ro* !oth activities% &ith reard to +etters /a5 to /d5, it sha++ !e s"!7ect to a 14H ta), 'rovided, that i$ the ross inco*e $ro* "nre+ated trade, !"siness or other activit# e)ceeds 04H o$ the ross inco*e derived !# said schoo+, it sha++ !e s"!7ect to the nor*a+ cor'orate inco*e ta)% (Sec. !307, N)RC' The donation o$ +ot and !"i+din (i++ +i8e(ise !e s"!7ect to the donor=s ta) !eca"se a donation to an ed"cationa+ instit"tion is e)e*'t on+# i$ the schoo+ is incor'orated as a nonC stoc8 entit# 'a#in no dividends% Since the donee is a 'ro'rietar# ed"cationa+ instit"tion, the donation is ta)a!+e (Section 1#1 (A' (8', N)RC'% QUESTION NO% IO /. !iting Section 10% /rtic$e L--- o" the 1+)? !onstit'tion which provides that sa$aries o" @'dges sha$$ &e "ixed &y $aw and that d'ring their contin'ance in o""ice their sa$ary sha$$ not &e decreased% a @'dge o" ## 1egiona$ ria$ !o'rt 8'estioned the ded'ction o" withho$ding taxes "rom his sa$ary since it res'$ts into a net ded'ction o" his pay. -s the contention o" the @'dge correct? 1eason &rie"$y.
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS NO% The sa+aries o$ 7"dicia+ o$$icers are not ta)Ce)e*'t and their ta)a!i+it# is not contrar# to the 'rovisions o$ Sec% 14, Art% OIII o$ the 1FL? Constit"tion on the nonCdi*in"tion o$ the sa+aries o$ *e*!ers o$ the 2"diciar# d"rin their contin"ance in o$$ice% The c+ear intent o$ the Constit"tiona+ Co**ission that $ra*ed the Constit"tion is to s"!7ect their sa+aries to ta) as in the case o$ a++ ta)'a#ers% Gence, the ded"ction o$ (ithho+din ta)es, !ein a *anner o$ co++ectin the inco*e ta) on their sa+ar#, is not a di*in"tion conte*'+ated !# the $"nda*enta+ +a( (Nitafan vs. C)R, 1- SCRA +" 31&+!7'. B. / m'nicipa$ity% BB% has an ordinance which re8'ires that a$$ stores% resta'rants% and other esta&$ishments se$$ing $i8'or sho'$d pay a "ixed ann'a$ "ee o" <20%000.00. S'&se8'ent$y% the m'nicipa$ &oard proposed an ordinance imposing a sa$es tax e8'iva$ent to 3E o" the amo'nt paid "or the p'rchase or cons'mption o" $i8'or in stores% resta'rants and other esta&$ishments. he m'nicipa$ mayor% !!% re"'sed to sign the ordinance on the gro'nd that it wo'$d constit'te do'&$e taxation. -s the re"'sa$ o" the mayor @'sti"ied? 1eason &rie"$y. B3EC No, The re$"sa+ o$ the *a#or is not 7"sti$ied% The i*'ositions are o$ di$$erent nat"re and character% The $i)ed ann"a+ $ee is in the nat"re o$ a +icense $ee i*'osed thro"h the e)ercise o$ 'o+ice 'o(er (hi+e the 0H ta) on '"rchase or cons"*'tion is a +oca+ ta) i*'osed thro"h the e)ercise o$ ta)in 'o(ers% Eoth a +icense $ee and a ta) *a# !e i*'osed on the sa*e !"siness or occ"'ation, or $or se++in the sa*e artic+e and this is not in vio+ation o$ the r"+e aainst do"!+e ta)ation (Co.pania General 1e Ta6acos 1e (ilipinas vs. Cit% of :anila, + SCRA 8*! 31&*874 San :i2uel 0rewer%, )nc. vs. Cit% of Ce6u, lE#81, (e6ruar% *, 1&!' QUESTION NO% O
/. >'e to an 'ncertainty whether or not a new tax $aw is app$ica&$e to printing companies% >E, <rinters s'&mitted a $ega$ 8'ery to the B'rea' o" -nterna$ 1even'e on that iss'e. he B-1 iss'ed a r'$ing that printing companies are not covered &y the new $aw. 1e$ying on this r'$ing% >E, <rinters did not pay said tax. S'&se8'ent$y% however% the B-1 reversed the r'$ing and iss'ed a new one stating that the tax covers printing companies. !o'$d the B-1 now assess >E, <rinters "or &ac( taxes corresponding to the years &e"ore the new r'$ing? 1eason &rie"$y. NO% The EIR cannot assess DEF Printers $or !ac8 ta)es corres'ondin to the #ears !e$ore the ne( r"+in !eca"se it (o"+d !e vio+ative o$ the 'rinci'+e o$ nonCretroactivit# o$ r"+ins and doin% &e++ sett+ed is the r"+e that r"+ins and circ"+ars, r"+es and re"+ations 'ro*"+ated !# the Co**issioner o$ Interna+ Reven"e (o"+d have no retroactive a''+ication i$ to so a''+# the* (o"+d !e 're7"dicia+ to the ta)'a#ers% This is !eca"se Section @3D o$ the NIRC 'rovides that an# revocation, *odi$ication, or reversa+ o$ an# o$ the r"+es and re"+ations 'ro*"+ated !# the Co**issioner sha++ not !e iven retroactive a''+ication i$ the revocation, *odi$ication, or reversa+ (i++ !e 're7"dicia+ to the ta)'a#er (C)R vs. Court of Appeals an1 AlAa.6ra )n1ustries. GR No. 11!&+. (e6ruar% *, 1&&!' B. <;1 !orp. c$aimed as a ded'ction in its tax ret'rns the amo'nt o" <1%000%000 as &ad de&ts. he corporation was assessed &y the !ommissioner o" -nterna$ 1even'e "or de"iciency taxes on the gro'nd that the de&ts cannot &e considered as 5worth$ess%6 hence they do not 8'a$i"y as &ad de&ts. he company as(s "or yo'r advice on 5What "actors wi$$ he$p in determining whether or not the de&ts are &ad de&ts?6 /nswer and exp$ain &rie"$y. The ascertain*ent o$ (orth+essness o$ !ad de!ts re6"ires 'roo$ o$ t(o $acts9 /15 that the ta)'a#er did in $act ascertain the de!t to !e (orth+ess in the #ear the ded"ction is so"ht- and /@5 in so doin, he acted in ood $aith% Bood $aith is not eno"h% The ta)'a#er sho"+d esta!+ish that d"rin the #ear $or (hich the ded"ction is so"ht, a sit"ation deve+o'ed as a res"+t o$ (hich it !eca*e evident in the e)ercise o$ so"nd, o!7ective !"siness 7"d*ent that there re*ained no 'ractica+, !"t on+# va"e+# theoretica+, 'ros'ect that the de!t (o"+d ever !e 'aid% (Collector vs. Goo1ricA )nternational Ru66er, GR No. LE*-, ;ec. , 1&*!' Re6"isites $or va+id ded"ction o$ !ad de!ts $ro* ross inco*e9
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L a ( >? San Beda College of Law T A X A T I O N L A W 1% There *"st !e an e)istin inde!tedness d"e to the ta)'a#er (hich *"st !e va+id and +ea++# de*anda!+e- @% The sa*e *"st !e connected (ith the ta)'a#er=s trade, !"siness or 'ractice o$ 'ro$ession- >% The sa*e *"st not !e s"stained in a transaction entered into !et(een re+ated 'arties en"*erated "nder Sec% >D/E5 o$ the Ta) Code o$ 1FF?- 3% The sa*e *"st !e act"a++# chared o$$ the !oo8s o$ acco"nts o$ the ta)'a#er as o$ the end o$ the ta)a!+e #ear- and 0% The sa*e *"st !e act"a++# ascertained to !e (orth+ess and "nco++ecti!+e as o$ the end o$ the ta)a!+e #ear% /RR No% @0C@44@5 QUESTION NO% OI /s an incentive "or investors% a $aw was passed giving new$y esta&$ished companies in certain economic .ones exemption "rom a$$ taxes% d'ties% "ees% imposts and other charges "or a period o" three years. /B! !orp. was organi.ed and was granted s'ch incentive. -n the co'rse o" &'siness% /B! !orp. p'rchased mechanica$ e8'ipment "rom :D7 -nc. Horma$$y% the sa$e is s'&@ect to a sa$es tax. /. :D7 -nc. c$aims% however% that since it so$d the e8'ipment to /B! !orp. which is tax exempt% :D7 sho'$d not &e $ia&$e to pay the sa$es tax. -s this c$aim tena&$e? NO% The c+ai* o$ AYQ, Inc% is not tena!+e% E)e*'tion $ro* ta)es is 'ersona+ in nat"re and covers on+# ta)es $or (hich the ta)'a#erCrantee is direct+# +ia!+e% The sa+es ta) is a ta) on the se++er (ho is not e)e*'t $ro* ta)es% Since AYQ Inc% is direct+# +ia!+e $or the sa+es ta) and no ta) e)e*'tion 'rivi+ee is ever iven to hi*, there$ore, its c+ai* that the sa+e is ta) e)e*'t is not tena!+e% A ta) e)e*'tion is constr"ed in strictissi*i 7"ris and it can not !e 'er*itted to e)ist "'on va"e i*'+ications (Asiatic Petroleu. Co., LT1. vs. Llanes, "& PAil "** 31&*7'. B. /ss'me arguendo that :D7 had to and did pay the sa$es tax. /B! !orp. $ater "o'nd o't% however% that :D7 mere$y shi"ted or passed on to /B! the amo'nt o" the sa$es tax &y increasing the p'rchase price. /B! !orp. now c$aims "or a re"'nd "rom the B'rea' o" -nterna$ 1even'e in an amo'nt corresponding to the tax passed on to it since it is tax exempt. -s the c$aim o" /B! !orp. meritorio's? No% The c+ai* o$ AEC Cor'% is not *eritorio"s% A+tho"h the ta) (as shi$ted to AEC Cor'% !# the se++er, (hat is 'aid !# it is not a ta) !"t 'art o$ the cost it has ass"*ed% Since, AEC Cor'% is not a ta)'a#er, it has no ca'acit# to $i+e a c+ai* $or re$"nd% The ta)'a#er (ho can $i+e a c+ai* $or re$"nd is the 'erson stat"tori+# +ia!+e $or the 'a#*ent o$ the ta)% QUESTION NO% OII /. ,or "ai$'re to comp$y with certain corporate re8'irements% the stoc(ho$ders o" /B! !orp. were noti"ied &y the Sec'rities and Exchange !ommission that the corporation wo'$d &e s'&@ect to invo$'ntary disso$'tion. he stoc(ho$ders did not do anything to comp$y with the re8'irements% and the corporation was disso$ved. !an the stoc(ho$ders &e he$d persona$$y $ia&$e "or the 'npaid taxes o" the disso$ved corporation? Exp$ain &rie"$y. NO% Ta)es are 'ersona+ to the ta)'a#er% A cor'oration=s ta) de+in6"enc# cannot, $or instance !e en$orced aainst its stoc8ho+ders !eca"se not on+# (o"+d this r"n co"nter to the 'rinci'+e that ta)es are 'ersona+, !"t it (o"+d a+so not !e in accord (ith the r"+e that a cor'oration is vested !# +a( (ith a 'ersona+it# that is se'arate and distinct $ro* those o$ the 'ersons co*'osin it, as (e++ as $ro* that o$ an# other +ea+ entit# to (hich it *a# !e re+ated (Sunio vs. NLRC. G.R. No. -!!*!. $anuar% 81, 1&+"' Go(ever, stoc8ho+ders *a# !e he+d +ia!+e $or the "n'aid ta)es o$ a disso+ved cor'oration i$ it a''ears that the cor'orate assets have 'assed into their hands (Tan Tion2 0io vs. C)R. LE1-!!+'% A+so a stoc8ho+ders (ho has "n'aid s"!scri'tion is +ia!+e $or the de!ts o$ the
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS cor'oration since the "n'aid de!t o$ the stoc8ho+der $or the '"rchase 'rice o$ the s"!scri!ed shares re'resents an asset o$ the cor'oration in the hands o$ the stoc8ho+ders%
B. /"ter the tax assessment had &ecome "ina$ and 'nappea$a&$e% the !ommissioner o" -nterna$ 1even'e initiated the "i$ing o" a civi$ action to co$$ect the tax d'e "rom H:. /"ter severa$ years% a decision was rendered &y the co'rt ordering H: to pay the tax d'e p$'s pena$ties and s'rcharges. he @'dgment &ecame "ina$ and exec'tory% &'t attempts to exec'te the @'dgment award were "'ti$e. S'&se8'ent$y% H: o""ered the !ommissioner a compromise sett$ement o" 30E o" the @'dgment award% representing that this amo'nt is a$$ he co'$d rea$$y a""ord. >oes the !ommissioner have the power to accept the compromise o""er? -s it $ega$ and ethica$? Exp$ain &rie"$y. YES% Under Sec% @43 JAK o$ the 1FF? NIRC the Co**issioner *a# co*'ro*ise an# interna+ reven"e ta) (hen9 /15 A Reasona!+e do"!t as to the va+idit# o$ the c+ai* aainst the ta)'a#er e)ist- or /@5 The $inancia+ 'osition o$ the ta)'a#er de*onstrates a c+ear ina!i+it# to 'a# the assessed ta)% As re'resented !# NA in his o$$er, on+# 04H o$ the 7"d*ent a(ard is a++ he co"+d rea++# a$$ord% This is an o$$er $or co*'ro*ise !ased on $inancia+ inca'acit# (hich the Co**issioner sha++ not acce't "n+ess acco*'anied !# a (aiver o$ the secrec# o$ !an8 de'osits /Section D/F5, Nirc5% The (aiver (i++ ena!+e the Co**issioner to ascertain the $inancia+ 'osition o$ the ta)'a#er, a+tho"h the in6"ir# need not !e +i*ited on+# to the !an8 de'osits o$ the ta)'a#er !"t a+so to his $inancia+ 'osition as re$+ected in his $inancia+ state*ents or other records "'on (hich his 'ro'ert# ho+dins can !e ascertained% I$ indeed the $inancia+ 'osition o$ NA as deter*ined !# the Co**issioner de*onstrates a c+ear ina!i+it# to 'a# the ta), the acce'tance o$ the o$$er is +ea+ and ethica+ !eca"se the ro"nd "'on (hich the co*'ro*ise (as anchored is (ithin the conte)t o$ the +a( and the rate o$ co*'ro*ise is (e++ (ithin and $ar e)ceeds the *ini*"* 'rescri!ed !# +a( (hich is on+# 14H o$ the !asic ta) assessed% QUESTION NO% OIII
/. 1/# got married to G-S/ $ast =an'ary 2003. 4n Hovem&er 30% 2003% Gisa gave &irth to twins. In"ort'nate$y% however% Gisa died in the co'rse o" her de$ivery. >'e to comp$ications% one o" the twins a$so died on >ecem&er 13% 2003. -n preparing his -ncome ax 1et'rn B-1C "or the year 2003% what sho'$d 1/# indicate in the -1 as his civi$ stat's* BaC sing$eO B&C marriedO BcC head o" the "ami$y BdC widowerO BeC none o" the a&ove? Why? 1eason. RAM sho"+d indicate :/!5 *arried< as his civi+ stat"s in 're'arin his Inco*e Ta) Ret"rn $or the #ear @44> and c+ai* the P>@,444 'ersona+ e)e*'tion $or *arried individ"a+ and the P1D,444 additiona+ e)e*'tion $or his t(ins, that is, PL,444 additiona+ e)e*'tion 'er de'endent% The death o$ his (i$e d"rin the #ear (i++ not chane his stat"s !eca"se "nder Section >0 /C5 o$ the NIRC, sho"+d the s'o"se die d"rin the ta)a!+e #ear, the ta)'a#er *a# sti++ c+ai* the e)e*'tions /that o$ !ein *arried5 as i$ the s'o"se or de'endent died at the c+ose o$ s"ch #ear%
B. 4:D is the president and chie" exec'tive o""icer o" />> !omp'ters% -nc. When 4:D was as(ed to @oin the government service as director o" a &'rea' 'nder the >epartment o" rade P -nd'stry% he too( a $eave o" a&sence "rom />>. Be$ieving that its &'siness o't$oo(% goodwi$$ and opport'nities improved with 4:D in the government% />> proposed to o&tain a po$icy o" ins'rance on his $i"e. 4n ethica$ gro'nds% 4:D o&@ected to the ins'rance p'rchase &'t />> p'rchased the po$icy anyway. -ts ann'a$ premi'm amo'nted to <100%000. -s said premi'm ded'cti&$e &y />> !omp'ters% -nc.? 1eason. No% The 're*i"* is not ded"cti!+e !eca"se it is not an ordinar# !"siness e)'ense% The ter* Rordinar#= is "sed in the inco*e ta) +a( in its co**on sini$icance and it has the connotation o$ !ein nor*a+, "s"a+ or c"sto*ar#% Pa#in 're*i"*s $or the ins"rance o$ a 'erson not connected to the co*'an# is not nor*a+, "s"a+ or c"sto*ar#%
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L a ( >? San Beda College of Law T A X A T I O N L A W Another reason $or its nonCded"cti!i+it# is the $act that it can !e considered as an i++ea+ co*'ensation *ade to a overn*ent e*'+o#ee% This is so !eca"se i$ the ins"red, his estate or heirs (ere *ade as the !ene$iciar# /!eca"se o$ the re6"ire*ent o$ ins"ra!+e interest5, the 'a#*ent o$ 're*i"* (i++ constit"te !ri!es, (hich are not a++o(ed as ded"ction $ro* ross inco*e (Sec. 8" 3A73173c7, N)RC'. On the other hand, i$ the co*'an# (as *ade the !ene$iciar#, (hether direct+# or indirect+#, the 're*i"* is not a++o(ed as a ded"ction $ro* ross inco*e (Section 8* (A' ("', N)RC'.
QUESTION NO% IA
/. L!! is the administrator o" the estate o" his "ather HJ!% in the estate proceedings pending &e"ore the ## 1egiona$ ria$ !o'rt. Gast year% he received "rom the !ommissioner o" -nterna$ 1even'e a de"iciency tax assessment "or the estate in the amo'nt o" <1%000%000. B't he ignored the notice. Gast month% the B-1 e""ected a $evy on the rea$ properties o" the estate to pay the de$in8'ent tax. L!! "i$ed a motion with the pro&ate co'rt to stop the en"orcement and co$$ection o" the tax on the gro'nd that the B-1 sho'$d have sec'red "irst the approva$ o" the pro&ate co'rt% which had @'risdiction over the estate% &e"ore $evying on its rea$ properties. -s L!!2s contention correct? NO% OCC=s contention is not correct% The en$orce*ent and co++ection o$ estate ta) is e)ec"tive in character and tas8 is s'eci$ica++# ascri!ed to the EIR% There is nothin in the Ta) Code and in the 'ertinent re*edia+ +a( that i*'+ies the necessit# o$ the 'ro!ate co"rt or estate sett+e*ent o$ co"rt=s a''rova+ o$ the State=s c+ai* $or estate ta)es !e$ore the sa*e can !e en$orced and co++ected !# the EIR% On the contrar#, "nder Section F3 o$ the 1FF? NIRC, it is the 'ro!ate or sett+e*ent co"rt, (hich is 'rohi!ited $ro* a"thori.in the de+iver# o$ the distri!"tive share to an# interested 'art# (itho"t a certi$ication $ro* the CIR sho(in the 'a#*ent o$ the estate ta)% (:arcos )) vs. Court of Appeals, !8 SCRA "!, $une -, 1&&!' B. 11 disp'ted a de"iciency tax assessment and 'pon receipt o" an adverse decision &y the !ommissioner o" -nterna$ 1even'e% "i$ed an appea$ with the !o'rt o" ax /ppea$s. Whi$e the appea$ is pending% the B-1 served a warrant o" $evy on the rea$ properties o" 11 to en"orce the co$$ection o" the disp'ted tax. Jranting arguendo that the B-1 can $ega$$y $evy on the properties% what co'$d 11 do to stop the process? Exp$ain &rie"$y. RR can $i+e a *otion $or in7"nction (ith the Co"rt o$ Ta) A''ea+s to sto' the ad*inistrative co++ection 'rocess% An a''ea+ to the CTA sha++ not s"s'end the en$orce*ent o$ the ta) +ia!i+it#, "n+ess a *otion to that e$$ect sha++ have !een 'resented in co"rt and ranted !# it on the !asis that s"ch co++ection (i++ 7eo'ardi.e the interest o$ the ta)'a#er o$ the Bovern*ent (Pirovano vs. C)R, 1" SCRA +8, 1&*-'. The CTA is e*'o(ered to s"s'end the co++ection o$ interna+ reven"e ta)es and c"sto*s d"ties in cases 'endin a''ea+ on+# (hen9 /15 in the o'inion o$ the co"rt the co++ection !# the EIR (i++ 7eo'ardi.e the interest o$ the Bovern*ent andMor the ta)'a#er- and /@5 the ta)'a#er is (i++in to de'osit the a*o"nt !ein co++ected or to $i+e a s"ret# !ond $or not *ore than do"!+e the a*o"nt o$ the ta) to !e $i)ed !# the Co"rt /Sec% 11, RA No% 11@0, as a*ended !# RA No% F@L@5% QUESTION NO% A
/. 4n #arch 12% 2001% 1EH paid his taxes. en months $ater% he rea$i.ed that he had overpaid and so he immediate$y "i$ed a c$aim "or re"'nd with the !ommissioner o" -nterna$ 1even'e. 4n ,e&r'ary 2?% 2003% he received the decision o" the !ommissioner denying 1EH2s c$aim "or re"'nd. 4n #arch 20% 2003% 1EH "i$ed an appea$ with the !o'rt o" ax /ppea$s. Was his appea$ "i$ed on time or not? 1eason. NO% The a''ea+ *ade !# REN (as not $i+ed on ti*e% A+tho"h A $i+ed his c+ai* $or re$"nd (ith the EIR (ithin t(o #ears $ro* the date o$ 'a#*ent, he did not instit"te his action
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS $or recover# (ithin the sa*e 'eriod o$ t(o /@5 #ears (ith the CTA% The t(oC#ear 'eriod o$ +i*itation $or $i+in a c+ai* $or re$"nd is not on+# a +i*itation $or '"rs"in the c+ai* at the ad*inistrative +eve+ !"t a+so a +i*itation $or a''ea+in the case to the Co"rt o$ Ta) A''ea+s% The +a( 'rovides that :no s"it or 'roceedin sha++ !e $i+ed a$ter the e)'iration o$ t(o #ears $ro* the date o$ the 'a#*ent o$ the ta) or 'ena+t# reard+ess o$ an# s"'ervenin ca"se that *a# arise a$ter 'a#*ent /Section @@F, NIRC5% Since the a''ea+ (as on+# *ade on March @3, @44>, *ore than t(o #ears had a+read# e+a'sed $ro* the ti*e the ta)es (ere 'aid on March 1@, @44>% Accordin+#, REN had +ost his 7"dicia+ re*ed# !eca"se o$ 'rescri'tion% 33. / $aw was passed exempting doctors and $awyers "rom the operation o" the va$'e added tax. 4ther pro"essiona$s comp$ained and "i$ed s'it 8'estioning the $aw "or &eing discriminatory and vio$ative o" the e8'a$ protection c$a'se o" the !onstit'tion since comp$ainants were not given the same exemption. -s the s'it meritorio's or not? 1eason &rie"$y. Yes, the s"it is *eritorio"s% The OAT is desined $or econo*ic e$$icienc#- hence sho"+d !e ne"tra+ to those (ho !e+on to the sa*e c+ass% Pro$essiona+s ARE a c+ass o$ ta)'a#ers !# the*se+ves (ho, in co*'+iance (ith the r"+e o$ e6"a+it# o$ ta)ation, *"st !e treated a+i8e $or ta) '"r'oses% E)e*'tin +a(#ers and doctors $ro* a !"rden to (hich other 'ro$essiona+s re s"!7ected (i++ *a8e the +a( discri*inator# and vio+ative o$ the e6"a+ 'rotection c+a"se o$ the Constit"tion% &hi+e sin+in o"t a c+ass $or ta)ation '"r'oses (i++ not in$rine "'on this constit"tiona+ +i*itation /SAell vs. ,a@o, &" PAil 8+&, 1&-"', sin+in o"t a ta)'a#er $ro* a c+ass (i++ no do"!t transress the constit"tiona+ +i*itation (?r.oc Su2ar Co., )nc. vs. Treasurer of ?r.oc Cit%, SCRA *#8, 1&*+'. Treatin doctors and +a(#ers as a di$$erent c+ass o$ 'ro$essiona+s (i++ not co*'+# (ith the re6"ire*ent o$ a reasona!+e, hence va+id c+assi$ication, !eca"se the c+assi$ication is not !ased "'on s"!stantia+ distinction (hich *a8es rea+ di$$erences% The c+assi$ication does not co*'+# (ith the re6"ire*ent that it sho"+d !e er*ane to the '"r'ose o$ the +a( either% (Pepsi Cola 0ottlin2 Co., )nc. vs. Cit% of 0utuan, " SCRA !+&, 1&*+' ANOTGER ANS&ER9 The s"it is not *eritorio"s% The +a( does not vio+ate the e6"a+ 'rotection c+a"se o$ the constit"tion% The e6"a+ 'rotection c+a"se o$ the Constit"tion *ere+# re6"ires that a++ 'ersons s"!7ected to +eis+ation sha++ !e treated a+i8e, "nder the circ"*stances and conditions, !oth in the 'rivi+ees con$erred and in the +ia!i+ities i*'osed% The e6"a+it# in ta)ation r"+e is not vio+ated i$ c+assi$ications or distinctions are *ade as +on as the sa*e are !ased on reasona!+e and s"!stantia+ di$$erences% (Pepsi Cola 0ottlin2 Co., )nc. vs. Cit% of 0utuan, " SCRA !+&, 1&*+' In the instant case, the 'ro$essions o$ doctors and +a(#ers are not 'rinci'a++# ai*ed at earnin *one# !"t $or the service o$ the 'eo'+e% The e)e*'tion ranted to doctors and +a(#ers $ro* the o'eration o$ the OAT is 7"sti$ied, as it is not discri*inator# aainst the other 'ro$essiona+s !eca"se the# have reasona!+e and s"!stantia+ di$$erences in the cond"ct o$ their 'ro$essions%
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L a ( >? San Beda College of Law T A X A T I O N L A W IMPORTANT TOPICS BENERAL PRINCIPLES LIMITATIONS ON TGE TAAINB PO&ER A. )nAerent Li.itations 1. <'&$ic <'rpose o" axes 2. HonF>e$ega&i$ity o" the axing <ower 3. erritoria$ity or Sit's o" axation 0. ax Exemption o" the Jovernment 3. -nternationa$ !omity 0. Constitutional Li.itations 1. >'e process c$a'se 2. E8'a$ protection c$a'se 3. ,reedom o" speech and o" the press 0. HonFin"ringement o" re$igio's "reedom and worship 3. HonFimpairment o" contracts 9. HonFimprisonment "or de&t or nonFpayment o" po$$ tax ?. 1'$e re8'iring that appropriations% reven'e and tari"" &i$$s sha$$ originate exc$'sive$y "rom the Ao'se o" 1epresentatives ). Ini"ormity% e8'ita&i$ity and progressivity o" taxation +. Gimitations on the congressiona$ power to de$egate to the <resident the a'thority to "ix tari"" rates% import and export 8'otas% etc. 10. ax exemption o" properties act'a$$y% direct$y and exc$'sive$y 'sed "or re$igio's% charita&$e and ed'cationa$ p'rposes. 11. Loting re8'irement in connection with the $egis$ative grant o" tax exemption 12. HonFimpairment o" the @'risdiction o" the S'preme !o'rt in tax cases 13. Exemption "rom taxes o" the reven'es and assets o" ed'cationa$ instit'tions% inc$'ding grants% endowments% donations and contri&'tions. INCOME TAAATION Cor'orations $or inco*e ta) '"r'oses, a% Inc+"des9 1. <artnerships% no matter how created or organi.ed 2. =oint stoc( companies 3. =oint acco'nts Bc'entas en participationC 0. /ssociations or ins'rance companies !% Does not inc+"de 1. Jenera$ <ro"essiona$ partnerships 2. =oint vent're or consorti'm "ormed i. "or p'rpose o" 'nderta(ing constr'ction pro@ects engaging in <etro$e'm% !oa$% Jeotherma$% and other energy operations% ii. <'rs'ant to an operation or consorti'm agreement 'nder a service contract with the Jovernment. (Section 22 (B), NIRCC Note: TAe .ain cAaracteristic of a Boint venture is tAat tAe Boint control .ust 6e containe1 in a contractual a2ree.ent. Example o unregi!tered partner!"ip taxa#le a! a corporation /"ter an extra@'dicia$ sett$ement% the coFheirs 'sed the inheritance or the incomes derived there"rom as a common "'nd to prod'ce pro"its "or themse$ves. ($na %!& CIR, '( SCRA )') Example o co*o+ner!"ip not deemed unregi!tered partner!"ip taxa#le a! corporation
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS !oFheirs who inherited properties which prod'ce income sho'$d not a'tomatica$$y &e considered as partners o" an 'nregistered partnership or corporation s'&@ect to income tax. Sharing o" gross ret'rns does not &y itse$" esta&$ish a partnership% there m'st &e an 'nmista(a&$e intention to "orm a partnership or @oint vent're. ($#illo!, ,r& %!& CIR, -./ SCRA '.0) E)c+"sions $ro* ross inco*e "nder the NIRC 1. Gi"e -ns'rance proceeds 2. /mo'nt received &y ins'red as ret'rn o" premi'm 3. Ji"ts% &e8'est and devices 0. !ompensation "or in@'ries or sic(ness 3. -ncome exempt 'nder treaty 9. 1etirement &ene"its% pensions% grat'ities% etc. ?. #isce$$aneo's items. BSec. 32 BBC% H-1! o" 1++?C C+asses o$ Ded"ctions Individ"a+s a. with gross compensation income "rom emp$oyerFemp$oyee re$ationship on$y B1C premi'm payments on hea$th andMor hospita$i.ation ins'rance B2C persona$ additiona$ exemptions &. gross income "rom &'siness or practice o" pro"ession B1C 4ptiona$ Standard >ed'ction B4S>C B2C -temi.ed ded'ctions B3C premi'm payments on hea$th andMor hospita$i.ation ins'rance B0C persona$ additiona$ exemptions @% Cor'orations -temi.ed >ed'ctions Ite*i.ed ded"ctions a. ordinary and necessary expenses &. interests c. taxes d. $osses e. &ad de&ts ". depreciation o" propertyO g. dep$etion o" oi$ and gas we$$s and mines h. charita&$e and other contri&'tions i. research and deve$opment j. pension tr'st contri&'tions o" emp$oyees k. premi'm payments on hea$th andMor hospita$i.ation ins'rance. Specia$ >ed'ctions "or <rivate Ed'cationa$ -nstit'tions / private ed'cationa$ instit'tions may at its option e$ect either* BaC to ded'ct expendit'res otherwise considered as capita$ o't$ays o" deprecia&$e assets inc'rred d'ring the taxa&$e year "or the expansion o" schoo$ "aci$ities% or (b) to ded'ct a$$owance "or depreciation thereo" (Sec& .' (A) (2), NIRC) E)e*'tions $or Senior Citi.ens Senior citi.ens sha$$ &e treated as dependents provided "or in the H-1! and as s'ch individ'a$ taxpayers caring "or them% &e they re$atives or not sha$$ &e accorded the privi$eges granted &y the !ode inso"ar as having dependents are concerned. (Sec& ((a) RA No& )'.21 Bay#ay %!& CIR, C2A Ca!e No& (234, 5ecem#er 24, -//0) -n determining persona$ exemptions a$$owa&$e to individ'a$s 'nder Section 33 o" the H-1! as amended &y 1/ H4. )020% a senior citi.en may &e treated as dependent. ,or this p'rpose% the de"inition o" the term 5head o" a "ami$y6 'nder the said section sha$$ &e deemed amended to re"er to the de"inition 'nder /rt. 3 o" this imp$ementing r'$es and reg'$ations. (Rule 0, Implementing Rule! and Regulation! o RA No& )'.2)
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L a ( >? San Beda College of Law T A X A T I O N L A W he twenty percent B20EC disco'nt re8'ired &y $aw to &e given to senior citi.ens is a tax credit% not mere$y a tax ded'ction "rom the gross income or gross sa$e o" the esta&$ishment concerned. / tax credit is 'sed &y a private esta&$ishment on$y a"ter the tax has &een comp'tedO a tax ded'ction% &e"ore the tax is comp'ted. 1/ Ho. ?032 'nconditiona$$y grants a tax credit to a$$ covered entities. (CIR %!& Central 6u7on 5rug Corp& 8R No& -(/0'), April -(, 244() Character o$ &ithho+din Aent he withho$ding agent is not the payor &'t a separate entity acting no more than an agent o" the government "or the co$$ection o" the tax in order to ens're its payments. he payor o" the tax is the taxpayer% he is the person s'&@ect to tax imposed &y $awO and the payee is the taxing a'thority. he agent is not $ia&$e "or the tax as no wea$th "$owed into him% he earned no income. he tax !ode on$y ma(es the agent persona$$y $ia&$e "or the tax arising "rom the &reach o" its $ega$ d'ty to withho$d as disting'ished "rom its d'ty to pay tax% since the government2s ca'se o" action against the withho$ding agent is not "or the co$$ection o" income tax &'t "or the en"orcement o" the withho$ding provisions o" the ax !ode% comp$iance with which is imposed on the withho$ding agent. (CIR %!& Court o Appeal!, 8R N& -43()0, ,anuary 24, -///) TAA ENFORCEMENT AND ADMINISTRATION EIR ORBANIQATIONAL STRUCTURE Aeaded &y a !ommissioner o" -nterna$ 1even'e and "o'r B0C >ep'ty !ommissioners. Each >ep'ty heads the 4perations Jro'p% Gega$ and -nspection Jro'p% 1eso'rce and #anagement Jro'p% and -n"ormation Systems Jro'p. wo more >ep'ty !ommissioners were appointed in 2003 as head o" the <rosec'tion Jro'p and the Specia$ !oncerns Jro'p. Note9 2"e!e deputy commi!!ioner! are tec"nically, not deputy commi!!ioner! +it"in Section . o t"e -//) NIRC& he !ommissioner and six B9C >ep'ty !ommissioners% together with thirteen B13C /ssistant !ommissioners "or the di""erent services% comprise t"e !enior le%el o admini!trati%e aut"ority& S'pporting them are the nineteen B1+C 1egiona$ >irectors% one h'ndred "i"teen B113C 1even'e >istrict 4""icers% and tho'sands o" reven'e o""icers cond'cting the a'dit o" taxpayers2 &oo(s o" acco'nts and acco'nting records. ABENTS OF TGE CIR9 a. !ommissioner o" !'stoms with respect to taxes on imported goods &. Aead o" the appropriate government o""ice with respect to energy tax c. Ban(s d'$y accredited &y the !-1. (Sec& -2, -//) NIRC) PO&ERS AND DUTIES OF TGE EIR 1. o assess and co$$ect nationa$ interna$ reven'e taxes% "ees% and chargesO 2. o en"orce a$$ "or"eit'res% pena$ties and "ines connected therewithO 3. o exec'te @'dgments in a$$ cases decided in its "avor &y the !/ and the ordinary co'rtsO and 4. o e""ect and administer the s'pervisory and po$ice powers con"erred 'pon it &y the ax !ode or other specia$ $aws (Sec& 2, NIRC) PO&ERS OF TGE CIR 1. <ower to interpret tax $aws s'&@ect to review &y the Secretary o" ,inance 2. <ower to decide tax cases s'&@ect to review &y the !o'rt o" ax /ppea$s 3. <ower to examine &oo(s and other acco'nting records and o&tain in"ormation 0. <ower to in8'ire into &an( deposits o" taxpayers R Hotwithstanding 1./. 1003 BBan( Secrecy GawC the !ommissioner is a'thori.ed to in8'ire into the Ban( deposits o"* a. a decedent to determine his gross estate &. a taxpayer who has "i$ed an app$ication to compromise payment o" tax $ia&i$ity &y reason o" "inancia$ incapacity
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS Note9 2"e taxpayer:! application or compromi!e !"all not #e con!idered unle!! "e +ai%e! in +riting "i! pri%ilege under RA -'4( and ot"er general or !pecial la+!& Suc" +ai%er !"all aut"ori7e t"e Commi!!ioner to in;uire into "i! #an< depo!it!& 3. <ower to assess and co$$ect the correct amo'nt o" tax TAA REMEDIES OF TGE BOOERNMENT TAA REMEDIES UNDER TGE 1FF? TAA CODE 1. S'mmary R remedies at the administrative $eve$ or reg'$ation that are exec'ted witho't ceremony or de$ayO short or conciseO 2. S'&stantive R remedies provided "or &y $aw or reg'$ationO an essentia$ part or constit'ent or re$ating to what is essentia$O 3. <roced'ra$ R remedies invo$ving $aw o" p$eading% evidence% @'risdiction% etc. 0. /dministrative R remedies avai$a&$e at the administration BB-1C $eve$O 3. ='dicia$ R remedies that are en"orced thro'gh @'dicia$ action% which may &e civi$ or crimina$ SUESTANTIOE REMEDIES 1. -mposition o" withho$ding tax on certain income payments =Sec& ()(B), NIRC> 2. -ss'ance o" reven'e reg'$ations &y administrative agency =Sec& 2''* 2'(, NIRC> 3. ,ai$'re to o&ey s'mmons =Sec& 200, NIRC> 4. >ec$aration 'nder pena$ties o" per@'ry =Sec& 20), NIRC> A1.inistrative interpretations sAoul1 6e respecte1 he interpretation given &y the administrative o""icer charged &y reason o" his o""ice to carry o't the provisions o" a stat'te sho'$d &e respected whenever s'ch interpretation is assai$ed &y someone who a$$eges no reasons o" weight to contradict or wea(en it& (Commi!!ioner %!& 6ede!ma& .- SCRA /() Principle of Le2islative Approval 6% Reenact.ent he princip$e o" $egis$ative approva$ o" administrative interpretation o" a stat'te is to the e""ect that the reenactment o" a stat'te s'&stantia$$y 'nchanged is pers'asive indication o" the adoption &y !ongress o" a prior exec'tive constr'ction& (ABS*CBN Broadca!ting Corp& %!& C2A and Commi!!ioner& -43 SCRA -'2) ADMINISTRATIOE REMEDIES OF TGE BOOERNMENT Power to Assess <res'mption o" !orrectness o" the assessments made &y the !ommissioner /ssessment <rocess 1. Examination o" &oo(s o" acco'nts and other acco'nting records o" taxpayers &y reven'e o""icers to determine his correct tax $ia&i$ity 2. <reparation o" tentative "indings and ho$ding o" in"orma$ con"erence 3. -ss'ance o" <re$iminary /ssessment Hotice B</HC 0. -ss'ance o" ,orma$ /ssessment Hotice B,/HC and $etter o" demand Power to Collect ;eficienc% or ;elinIuent Ta/es 1. ,i$ing o" administrative protest &y the taxpayer against the assessment B30Fday periodC 2. S'&mission o" doc'mentary evidence B90Fday periodC Hote* S'&mission o" doc'ments within the 90 day period is optional to t"e taxpayer. (Standard C"artered Ban< %!& CIR, C2A Ca!e No& (0/0, Augu!t -0, 244-) 3. >enia$ o" protest &y the !ommissioner or his a'thori.ed representative 0. /ppea$ &y the taxpayer o" the "ina$ decision o" the !ommissioner or his a'thori.ed representative on the disp'ted assessment to the !/ Bwithin 30 days "rom the receipt o" the decision% or in case o" inaction "rom the $apse o" the 1)0 day periodC
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L a ( >? San Beda College of Law T A X A T I O N L A W Admini!trati%e Remedie! o t"e 8o%ernment 1. ax Gien 2. >istraint o" persona$ property% or $evy o" rea$ property% or garnishment o" &an( deposits 3. Sa$e o" property o" a de$in8'ent taxpayer 0. ,or"eit're 3. !ompromise and a&atement 9. <ena$ties and "ines ?. S'spension o" &'siness operations Note9 2"e ollo+ing are t"e ca!e! +"ic" may #e compromi!ed9 -& 5elin;uent account!1 2& Ca!e! under admini!trati%e prote!t ater i!!uance o t"e ?inal A!!e!!ment Notice to t"e taxpayer +"ic" are !till pending in t"e Regional $ice!, Re%enue 5i!trict $ice!, 6egal Ser%ice, 6arge 2axpayer Ser%ice (62S), Collection Ser%ice, Enorcement Ser%ice and ot"er oice! in t"e National $ice1 .& Ci%il tax ca!e! #eing di!puted #eore t"e court!1 '& Collection ca!e! iled in court!1 (& Criminal %iolation!, ot"er t"an t"o!e already iled in court or t"o!e in%ol%ing criminal tax raud& (Re%enue Regulation No& .4*42) 2UDICIAL REMEDIES OF TGE BOOERNMENT 1% Civi+ Action a. By "i$ing a civi$ case "or the co$$ection o" a s'm o" money with the proper reg'$ar co'rt !o$$ecti&i$ity arises* B1C Se$"Fassessed tax shown in the ret'rn was not paid within the date prescri&ed &y $aw B2C ,ina$ assessment is not protested administrative$y within 30 days "rom date o" receipt B3C HonFcomp$iance with the condition $aid in the approva$ o" the protest B0C ,ai$'re to "i$e a time$y appea$ to the !/ on the "ina$ decision o" the !ommissioner or his a'thori.ed representative on the disp'ted assessment &. By "i$ing an answer to the petition "or review "i$ed &y the taxpayer with the !/ @% Cri*ina+ Action a. /ttempt to evade or de"eat tax (Sec& 2(', NIRC) b. ,ai$'re to "i$e ret'rn% s'pp$y correct and acc'rate in"ormation% pay tax% withho$d and remit tax and re"'nd excess taxes withhe$d on compensation (Sec& 2((, NIRC) TAA REMEDIES OF TGE TAAPAYER REMEDIES OF TAAPAYERS A1.inistrative Re.e1ies 1. Be"ore payment o" the de"iciency tax assessment R "i$e a written protest within 30 days "rom date o" receipt (Sec& 223, NIRC) 2. /"ter payment o" the de"iciency tax assessment R "i$e a written c$aim "or re"'nd or tax credit with the appropriate government agency Bthe B-1 or the >epartment o" ,inance 4ne Stop Shop !enterC =Sec!& 24' (C) and 22/, NIRC> $u1icial Re.e1ies -" the protest is denied in who$e or in part% or is not acted 'pon% within 1)0 days "rom s'&mission o" doc'ments% the taxpayer adverse$y a""ected &y the decision or inaction may appea$ to the !/ within 30 days "rom receipt o" the said decision% or "rom the $apse o" the 1)0 day periodO otherwise% the decision sha$$ &ecome "ina$% exec'tory and demanda&$e. (Sec& 223, NIRC)
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS Note9 It "a! #een "eld #y t"e Court o 2ax Appeal! t"at@ In ca!e! o inaction, Section 223 o t"e 2ax Code merely ga%e t"e taxpayer an option9 ir!t, "e may appeal to t"e Court o 2ax Appeal! +it"in t"irty (.4) day! rom t"e lap!e o t"e one "undred eig"ty (-34) day period pro%ided or under t"e !aid !ection, or !econd, "e may +ait until t"e Commi!!ioner decide! on "i! prote!t #eore "e ele%ate! "i! ca!e& 2"e taxpayer +a! gi%en t"i! option !o t"at in ca!e "i! prote!t i! not acted upon +it"in t"e -34*day period, "e may #e a#le to !ee< immediate relie and need not +ait or an indeinite period o time or t"e Commi!!ioner to decide& But i "e c"oo!e! to +ait or a po!iti%e action on t"e part o t"e Commi!!ioner, t"en t"e !ame could not re!ult in t"e a!!e!!ment #ecoming inal, executory and demanda#le&@ (Lascona Lan1 Co., )nc. vs. C)R, CTA Case No. -!!!. $anuar% ", ###7 Su6stantive Re.e1ies 1. ;'estioning the constit'tiona$ity or va$idity o" tax stat'tes or reg'$ations 2. HonFretroactivity o" r'$ings (Sec& 2'0, NIRC) 3. ,ai$'re to in"orm the taxpayer in writing o" the $ega$ and "act'a$ &ases o" assessment ma(es it void (Sec& 223, NIRC) 4. <reservation o" &oo(s o" acco'nts and onceFaFyear examination "or income tax p'rposes (Sec& 2.(, NIRC) 5. <'&$ication o" 1#! and 1#4 R Whi$e the r'$eFma(ing a'thority o" the !-1 is not do'&ted% $i(e any other government agency% the !ommissioner may not disregard $ega$ re8'irements or app$ica&$e princip$es in the exercise o" 8'asiF$egis$ative powers. he d'e o&servance o" the re8'irements o" notice% hearing and p'&$ication sho'$d not have &een ignored& (CIR %!& Mic"el 6"uillier Aa+n!"op& 8R No& -(4/')& ,uly -(, 244.) Proce1ural Re.e1ies (Revenue Re2ulations No. 1E&&' 1. Hotice "or -n"orma$ !on"erence Re%enue $icer a. /'dits the taxpayer2s records &. States in his report whether or not the taxpayer agrees with his "indings that the taxpayer is $ia&$e "or de"iciency tax or taxes. 2. -n"orma$ !on"erence Getter Re%enue 5i!trict $ice or Special In%e!tigation 5i%i!ion or C"ie o 5i%i!ion concerned (in ca!e o BIR National $ice) a. -n"orms the taxpayer in writing% in case the taxpayer is not amena&$e% o" the discrepancy or discrepancies in the taxpayer2s payment o" his interna$ reven'e taxes "or the p'rpose o" 5-n"orma$ !on"erence6 1C axpayer respondsO or i" 2C axpayer "ai$s to respond within "i"teen B13C days "rom date or receipt o" notice o" in"orma$ con"erence% he sha$$ &e considered in de"a'$t. &. Endorses the case% in case o" de"a'$t or taxpayer2s response is not accepta&$e% to the /ssessment >ivision o" the 1even'e 1egiona$ 4""ice or to the !ommissioner or his d'$y a'thori.ed representative 3. <re$iminary /ssessment Hotice B</HC A!!e!!ment 5i%i!ion or t"e Commi!!ion or "i! duly aut"ori7ed repre!entati%e a. 1eviews and eva$'ates. -" there exists s'""icient &asis to assess the taxpayer "or any de"iciency tax or taxes% the said 4""ice sha$$ iss'e to the taxpayer a </H "or the proposed assessment. 1C axpayer responds within "i"teen B13C days "rom date o" receipt o" the </H 2C -" the taxpayer "ai$s to respond within 13 days "rom receipt o" </H% he sha$$ &e considered in de"a'$t. &. -ss'es a "orma$ $etter o" demand and assessment notice% in case o" de"a'$t or taxpayer2s response is not accepta&$e% ca$$ing "or the payment o" the taxpayer2s de"iciency tax $ia&i$ity. Aowever% a preFassessment notice sha$$ not &e re8'ired in the "o$$owing cases% in which case% a "orma$ assessment notice sha$$ &e s'""icient* B1C When the "inding "or any de"iciency tax is the res'$t o" mathematica$ error in the comp'tation o" the tax as appearing on the "ace o" the ret'rnO or
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L a ( >? San Beda College of Law T A X A T I O N L A W B2C When a discrepancy has &een determined &etween the tax withhe$d and the amo'nt act'a$$y remitted &y the withho$ding agentO or B3C When a taxpayer who opted to c$aim a re"'nd or tax credit o" excess credita&$e withho$ding tax "or a taxa&$e period was determined to have carried over and a'tomatica$$y app$ied the same amo'nt c$aimed against the estimated tax $ia&i$ities "or the taxa&$e 8'arter or 8'arters o" the s'cceeding taxa&$e yearO or B0C When the excise tax d'e on excisa&$e artic$es has not &een paidO B3C When an artic$e $oca$$y p'rchased or imported &y an exempt person% s'ch as% &'t not $imited to% vehic$es% capita$ e8'ipment% machineries and spare parts% has &een so$d% traded or trans"erred to nonFexempt persons. 0. ,orma$ Getter o" >emand and /ssessment Hotice Commi!!ioner or "i! duly aut"ori7ed repre!entati%e iss'es the "orma$ $etter o" demand and assessment notice which sha$$ state the "acts% the $aw% r'$es and reg'$ations% or @'rispr'dence on which the assessment is &asedO otherwise% it sha$$ &e void. 3. >isp'ted /ssessments 2axpayer a. <rotests administrative$y against the "orma$ $etter o" demand and assessment notice within thirty B30C days "rom receipt thereo". 4therwise% the assessment sha$$ &ecome "ina$% exec'tory and demanda&$e. &. S'&mits re8'ired s'pporting doc'ments within sixty B90C days "rom the date o" "i$ing his $etter o" protest% otherwise% the assessment sha$$ &ecome "ina$% exec'tory and demanda&$e. c. /ppea$s to the !o'rt o" ax /ppea$s% i" protest is denied in who$e or in part &y the !ommissioner% within thirty B30C days "rom date o" receipt o" decisionO otherwise% the assessment sha$$ &ecome "ina$% exec'tory and demanda&$e. -" the !ommissioner "ai$s to act on the taxpayer2s protest within one h'ndred eighty days B1)0C days "rom date o" s'&mission o" re8'ired s'pporting doc'ments% the taxpayer may appea$ to the !o'rt o" ax /ppea$s within thirty B30C days "rom the $apse o" the 1)0Fday periodO otherwise% the assessment sha$$ &ecome "ina$% exec'tory and demanda&$e. Con!tructi%e Ser%ice o Notice here sha$$ &e constr'ctive service o" notice in the "o$$owing cases* 1. -" the notice to the taxpayer is served &y registered mai$% and no response is received "rom the taxpayer within the prescri&ed period 2. -" the notice is persona$$y served on the taxpayer or his d'$y a'thori.ed representative% who% however% re"'se to ac(now$edge receipt thereo" 3. By $eaving the notice in the premises o" the taxpayer and this "act o" service is attested to% witnessed and signed &y at $east two B2C reven'e o""icers other than the reven'e o""icer who constr'ctive$y served the same. (Sec& .&-&), Re%& Reg!& No& -2*//) ASSESSMENT AND PROTEST A!!e!!ment he genera$ r'$e is that taxes are se$"Fassessing and th's% do not re8'ire the iss'ance o" an assessment notice in order to esta&$ish the tax $ia&i$ity o" a taxpayer. he exceptions are* 1. ax period o" a taxpayer is terminated =Sec& 0(5), NIRC> 2. >e"iciency tax $ia&i$ity arising "rom a tax a'dit cond'cted &y the BIR =Sec& (0(B), NIRC> 3. ax $ien =Sec& 2-/, NIRC> 4. >isso$ving corporation =Sec& (2(c), NIRC> Signiicance o A!!e!!ment9 a. -n the proper p'rs'it o" @'dicia$ and extra@'dicia$ remedies to en"orce taxpayer $ia&i$ities and certain matters that re$ate to it% s'ch as the imposition o" s'rcharges and interests%
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS &. -n the app$ication o" stat'te o" $imitations% c. -n the esta&$ishment o" tax $iens% and d. -n estimating the reven'es that may &e co$$ected &y government in the coming year. Arote!t 1. >irect denia$ o" protest Admini!trati%e deci!ion on a di!puted a!!e!!ment R he decision o" the !ommissioner or his d'$y a'thori.ed representative sha$$ BaC state the "acts% the app$ica&$e $aw% r'$es% and reg'$ations% or @'rispr'dence on which s'ch decision is &asedO otherwise% the decision sha$$ &e void% in which case% the same sha$$ not &e considered a decision on a disp'ted assessment% and B&C that the same is his "ina$ decision. (Sec& .&-&(, Re%& Reg!& No& -2 B //) 2. -ndirect denia$ o" protest B='rispr'denceC a. !ommissioner did not r'$e on the taxpayer2s motion "or reconsideration o" the assessment R -t was on$y when respondent received the s'mmons on the civi$ action "or the co$$ection o" de"iciency income tax that the period to appea$ commenced to r'n. (Commi!!ioner %!& Cnion S"ipping Corp& -3( SCRA (')) b. 1e"erra$ &y the !ommissioner o" re8'est "or reinvestigation to the So$icitor Jenera$ (Repu#lic %!& 6im 2ian 2eng Son!) c. 1eiterating the demand "or immediate payment o" the de"iciency tax d'e to taxpayer2s contin'ed re"'sa$ to exec'te waiver (Commi!!ioner %!& Ayala Securitie! Corp& )4 SCRA 24') PRESCRIPTIOE PERIODS UNDER TGE TAA CODE 1% Period to assess the ta) 8eneral Rule9 A1EE B3C DE/1S a"ter the date the ret'rn is d'e or "i$ed% whichever is $ater (Sec& 24., -//) NIRC)& Exception!9 1. ,/-GI1E 4 ,-GE / 1EI1H* EH B10C DE/1S "rom the date o" the discovery o" the omission to "i$e the ret'rn (Sec&222=A>)1 2. ,/GSE 41 ,1/>IGEH 1EI1H with -HEH-4H 4 EL/>E AE /:* EH B10C DE/1S "rom the date o" the discovery o" the "a$sity or "ra'd (Sec&222 =A> @% Period to co++ect the assessed ta) a. ,-LE B3C DE/1S R "rom assessment or within period "or co$$ection agreed 'pon in writing &e"ore expiration o" the 3Fyear period (Sec& 222, -//) NIRC)& &. EH B10C DE/1S R witho't assessment in case o" "a$se or "ra'd'$ent ret'rn with intent to evade or "ai$'re to "i$e ret'rn (Sec& 222, -//) NIRC)& >% Period to $i+e cri*ina+ action ,-LE B3C DE/1S "rom* (1) day o" the commi!!ion o t"e %iolation o" the $aw% and (2) -" the same &e not (nown, rom di!co%ery t"ereo and t"e in!titution o t"e Dudicial proceeding! "or its investigation and p'nishment. FALSE RETURN M FRAUDULENT RETURN he distinction &etween a al!e return and a raudulent return is that the "irst mere$y imp$ies a deviation "rom the tr'th or "act whether intentiona$ or not% whereas the second is intentiona$ and deceit"'$ with the so$e aim o" evading the correct tax d'e. here is "ra'd in the "o$$owing decided cases* 1. ,ra'd m'st &e the prod'ct o" a de$i&erate intent to evade taxes (,alandoni %!& Repu#lic& -( SCRA (-) 2. Simp$e statement that ret'rn "i$ed was not "ra'd'$ent does not disprove existence o" "ra'd (2ayengco %!& Collector& C2A Ca!e No& (-& ,uly .-, -/0') 3. S'&stantia$ 'nderFdec$arations o" income "or six consec'tive "ive years demonstrate "ra'd'$ence o" ret'rn (Aere7 %!& C2A& 6*-4(4)& May .4, -/(3)
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L a ( >? San Beda College of Law T A X A T I O N L A W 4. <resence o" "ictitio's expenses% with no evidence presented% proves existence o" "ra'd (2an 8uan %!& Commi!!ioner) Aowever% the co'rts did not consider the tax ret'rns "i$ed as "a$se or "ra'd'$ent with intent to evade the payment o" tax in the "o$$owing cases* 1. #ere 'nderstatement in the tax ret'rn wi$$ not necessari$y imp$y "ra'd (,alandoni %!& Repu#lic) 2. Sa$e o" rea$ property "or a price $ess than its "air mar(et va$'e is not necessari$y a "a$se ret'rn (Commi!!ioner %!& B&?& 8oodric" A"il!&) 3. ,ra'd is a 8'estion o" "act and the circ'mstances constit'ting "ra'd m'st &e a$$eged and proved in the tria$ co'rt (Commi!!ioner %!& Ayala Securitie!& )4 SCRA 24') 4. ,ra'd is never imp'ted and the co'rts never s'stain "indings o" "ra'd 'pon circ'mstances that on$y create s'spicion (Commi!!ioner %!& ,a%ier& -// SCRA 32') 5. #ista(es o" reven'e o""icers on three di""erent occasions remove e$ement o" "ra'd (A7nar %!& C2A and Collector) CIOIL PENALTIES CIOIL PENALTY M SURCGARBE 1% @0H s"rchare B1C ,ai$'re to "i$e any ret'rn and pay the tax d'e thereon as re8'ired 'nder the provisions o" this !ode or r'$es and reg'$ations on the date prescri&edO or B2C In$ess otherwise a'thori.ed &y the !ommissioner% "i$ing a ret'rn with an interna$ reven'e o""icer other than those with whom the ret'rn is re8'ired to &e "i$edO or B3C ,ai$'re to pay the de"iciency tax within the time prescri&ed "or its payment in the notice o" assessmentO or (4) ,ai$'re to pay the "'$$ or part o" the amo'nt o" tax shown on any ret'rn re8'ired to &e "i$ed 'nder the provisions o" this !ode or r'$es and reg'$ations% or the "'$$ amo'nt o" tax d'e "or which no ret'rn is re8'ired to &e "i$ed% on or &e"ore the date prescri&ed "or its payment& (Sec& 2'3, NIRC1 Sec& '&-, Re%& Reg!& No& -2*//) @% 04H s"rchare B1C in case o" wi$$"'$ neg$ect to "i$e the ret'rn within the period prescri&ed &y the !ode% or wi$$ not app$y in case a taxpayer% witho't notice "rom the !ommissioner% or his d'$y a'thori.ed representative% vo$'ntari$y "i$es the said ret'rn Bon$y 23E sha$$ &e imposedC 30E s'rcharge sha$$ &e imposed in case the taxpayer "i$es the ret'rn on$y a"ter prior notice in writing "rom the !ommissioner or his d'$y a'thori.ed representative (Sec& '&2, Re%& Reg& -2*//) B2C in case a "a$se or "ra'd'$ent ret'rn is wi$$"'$$y made <rima ,acie evidence s'&stantia$ 'nderdec$aration (exceeding .4E o t"at declared) o" taxa&$e sa$es% receipts or income% or s'&stantia$ overstatement (exceeding .4E o actual deduction!) o" ded'ctions BSec. 20)C Note9 / taxpayer may modi"y% change or amend his tax ret'rn within three B3C years "rom the date o" s'ch "i$ing% provided however that no notice "or a'dit or investigation o" s'ch ret'rn% statement or dec$aration has% in the meantime &een act'a$$y served 'pon the taxpayer. (Sec& 0 (A), NIRC)& h's i" the amended ret'rn has &een "i$ed on$y a"ter the iss'ance o" the Getter o" /'thority "or the investigation or in the co'rse o" said investigation% the 30E civi$ pena$ty sha$$ &e app$ied. (Sec& '&2&2, Re%& Reg!& No& -2*//)
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS COURT OF TAA APPEALS Under RA NO% F@L@ /A''roved March >4, @4435 he ran( was e$evated to the $eve$ o" a co$$egiate co'rt with specia$ @'risdiction% and a new division was created. Same $eve$ as the !o'rt o" /ppea$s% possessing a$$ the inherent powers o" a !o'rt o" ='stice !onsists o" a <residing ='stice and "ive B3C /ssociate ='stices #ay sit en #anc or in two B2C >ivisions% each division consisting o" three B3C ='stices. ,o'r B0C ='stices sha$$ constit'te a 8'or'm "or sessions en #anc and two B2C ='stices "or sessions o" a >ivision. he a""irmative votes o" "o'r B0C mem&ers o" the !o'rt en #anc or two B2C mem&ers o" a >ivision% as the case may &e% sha$$ &e necessary "or the rendition o" a decision or reso$'tion. E)'anded 2"risdiction E)c+"sive a''e++ate 7"risdiction to revie( !# a''ea+ (a) >ecisions o" the Commi!!ioner o Internal Re%enue B1C in cases invo$ving disp'ted assessments% re"'nds o" interna$ reven'e taxes% "ees or other charges% pena$ties in re$ation thereto% B2C or other matters arising 'nder the H-1! or other $aws administered &y the B-1O (b) -naction &y the Commi!!ioner o Internal Re%enue B1C in cases invo$ving disp'ted assessments% re"'nds o" interna$ reven'e taxes% "ees or other charges% pena$ties in re$ation thereto% B2C or other matters arising 'nder the H-1! or other $aws administered &y the B-1% where the H-1! provides a speci"ic period "or action% in which case the inaction sha$$ &e deemed a denia$O (c) >ecisions% orders or reso$'tions o" the R2C R in $oca$ tax cases origina$$y decided or reso$ved &y them in the exercise o" their origina$ or appe$$ate @'risdictionO (d) >ecisions o" the Commi!!ioner o Cu!tom! B1C in cases invo$ving $ia&i$ity "or c'stoms d'ties% "ees or other money charges% sei.'re% detention or re$ease o" property a""ected% "ines% "or"eit'res or other pena$ties in re$ation thereto% B2C or other matters arising 'nder the !'stoms Gaw or other $aws administered &y the B'rea' o" !'stomsO (e) >ecisions o" the Central Board o A!!e!!ment Appeal! R in the exercise o" its appe$$ate @'risdiction over cases invo$ving the assessment and taxation o" rea$ property origina$$y decided &y the provincia$ or city &oard o" assessment appea$sO (f) >ecisions o" the Secretary o ?inance R on c'stoms cases e$evated to him a'tomatica$$y "or review "rom decisions o" the !ommissioner o" !'stoms which are adverse to the Jovernment 'nder Section 2313 o" the ari"" and !'stoms !odeO (g) >ecisions o" the Secretary o 2rade and Indu!try in the case o" nonagric'$t'ra$ prod'ct% commodity or artic$e% and the Secretary o Agriculture in the case o" agric'$t'ra$ prod'ct% commodity or artic$e% R invo$ving d'mping and co'ntervai$ing d'ties 'nder Secs. 301and 302% respective$y% o" the ari"" and !'stoms !ode% and sa"eg'ard meas'res 'nder 1/ Ho% ))00% where either party may appea$ the decision to impose or not to impose said d'ties.
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L a ( >? San Beda College of Law T A X A T I O N L A W 2"risdiction over cases invo+vin cri*ina+ cases (a) Exclu!i%e original @'risdiction over a$$ crimina$ cases arising "rom vio$ations o" the H-1! or ari"" and !'stoms !ode and other $aws administered &y the B-1 or the B'rea' o" !'stoms Where the principa$ amo'nt o" taxes and "ees% exc$'sive o" charges and pena$ties c$aimed is $ess than one mi$$ion pesos B<1%000%000.00C or where there is no speci"ied amo'nt c$aimed R the o""enses or pena$ties sha$$ &e tried &y the regular court! and the @'risdiction o" the !/ sha$$ &e appe$$ate. /ny provision o" $aw or the 1'$es o" !o'rt to the contrary notwithstanding% the crimina$ action and the corresponding civi$ action "or the recovery o" civi$ $ia&i$ity "or taxes and pena$ties sha$$ at a$$ times &e sim'$taneo's$y instit'ted with% and @oint$y determined in the same proceeding &y the !/% the "i$ing o" the crimina$ action &eing deemed to necessari$y carry with it the "i$ing o" the civi$ action% and no right to reserve the "i$ing o" s'ch civi$ action separate$y "rom the crimina$ action wi$$ &e recogni.ed. (b) Exclu!i%e appellate @'risdiction in crimina$ o""enses B1C 4ver appea$s "rom the @'dgments% reso$'tions or orders o" the 1! in tax cases origina$$y decided &y them% in their respective territoria$ @'risdiction. B2C 4ver petitions "or review o" the @'dgments% reso$'tions% or orders o" the 1! in the exercise o" their appe$$ate @'risdiction over tax cases origina$$y decided &y the #etropo$itan ria$ !o'rts% #'nicipa$ ria$ !o'rts% and #'nicipa$ !irc'it ria$ !o'rts in their respective @'risdiction. 2"risdiction over ta) co++ection cases (a) Exclu!i%e original @'risdiction in tax co$$ection cases invo$ving "ina$ and exec'tory assessments "or taxes% "ees% charges and pena$ties. -n co$$ection cases where the principa$ amo'nt o" taxes and "ees% exc$'sive o" charges and pena$ties% c$aimed is $ess than one mi$$ion pesos B<1%000%000.00C R sha$$ &e tried &y the proper Municipal 2rial Court% Metropolitan 2rial Court% and Regional 2rial Court. (b) Exclu!i%e appellate @'risdiction in tax co$$ection cases B1C 4ver appea$s "rom the @'dgments% reso$'tions or orders o" 1! in tax co$$ection cases origina$$y decided &y them% in their respective territoria$ @'risdiction. B2C 4ver petitions "or review o" the @'dgements% reso$'tions or orders o" the 1! in the exercise o" their appe$$ate @'risdiction over tax co$$ection cases origina$$y decided &y the #etropo$itan ria$ !o'rts% #'nicipa$ ria$ !o'rts and #'nicipa$ !irc'it ria$ !o'rts% in their respective @'risdiction. FFF in crimina$ and co$$ection cases% the Jovernment may direct$y "i$e the said cases with the !/ covering amo'nts within its exc$'sive and origina$ @'risdiction. Modes o$ A''ea+ B1C By "i$ing a petition "or review 'nder a proced're ana$ogo's to that provided "or 'nder 1'$e 02 o" 1++? 1'$es on !ivi$ <roced're decision% r'$ing% or inaction o" the Commi!!ioner o Internal Re%enue% Commi!!ioner o Cu!tom!% the Secretary o ?inance% the Secretary o 2rade and Indu!try or the Secretary o Agriculture or the Regional 2rial Court! this appea$ sha$$ &e heard &y a >ivision o" the !/ B2C By "i$ing a petition "or review 'nder a proced're ana$ogo's to that provided "or 'nder 1'$e 03 o" 1++? 1'$es on !ivi$ <roced're decisions or r'$ings o" the Central Board o A!!e!!ment! Appeal! and the Regional 2rial Court! in the exercise o" its appellate @'risdiction this appea$ sha$$ &e heard &y the !/ en &anc. Proced"re9
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L a w >D T A X A T I O N L A W 2005 CENTRALIZED BAR OPERATIONS 1. he appea$ sha$$ &e "i$ed with the !/ within thirty B30C days a"ter the receipt o" s'ch decision or r'$ing or a"ter the expiration o" the period "ixed &y $aw "or s'ch action. 2. / party adverse$y a""ected &y a r'$ing% order or decision o" a >ivision o" the !/ may "i$e a motion "or reconsideration or new tria$ &e"ore the same >ivision within 13 days "rom notice. 3. / party adverse$y a""ected &y a reso$'tion o" a >ivision o" the !/ on a motion "or reconsideration or new tria$ may "i$e a petition "or review with the !/ en &anc. 0. / party adverse$y a""ected &y a decision or r'$ing o" the !/ en &anc may "i$e with the S'preme !o'rt a veri"ied petition "or review on certiorari p'rs'ant to 1'$e 03 o" the 1++? 1'$es on !ivi$ <roced're. -n cases where the B-1 have not decided on the protest a"ter 1)0 days and an appea$ has &een "i$ed with the !/% the B-1 can not $ater decide on the protest since 'nder 1'$es 02 and 03 o" the 1'$es o" !o'rt% the B-1 has on$y resid'a$ @'risdiction over the case a"ter the appea$ has &een made. E$$ect o$ A''ea+ Ho appea$ ta(en to the !/ sha$$ s'spend the payment% $evy% distraint% andMor sa$e o" any property o" the taxpayer "or the satis"action o" his tax $ia&i$ity as provided &y existing $aw. Go(ever, when in its opinion the co$$ection may @eopardi.e the interest o" the government andMor the taxpayer% the !/ may s'spend the said co$$ection and re8'ire the taxpayer either to deposit the amo'nt c$aimed or to "i$e a s'rety &ond "or not more than do'&$e the amo'nt with the !o'rt.