This research guide summarizes the sources of Philippine tax law.

Tax law in the Philippines covers national and local taxes. National taxes refer to national internal revenue taxes
imposed and collected by the national government through the Bureau of Internal Revenue (BIR) and local taxes
refer to those imposed and collected by the local government. The Tax Code of 1997, Revenue Issuances and BIR
Rulings pertaining to national taxes are posted at the BIR website.
National Tax Law
I. 1987 Constitution
The 1987 Philippine Constitution sets limitations on the exercise of the power to tax.
The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.
(Article VI, Section 28, paragraph 1)
All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such
purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if
any, shall be transferred to the general funds of the Government. (Article VI, Section 29, paragraph 3)
The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and
restriction as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development program of the Government (Article VI, Section 28,
paragraph 2) The President shall have the power to veto any particular item or items in an appropriation, revenue or
tariff bill, but the veto shall not affect the item or items to which he does not object. (Article VI, Section 27, second
paragraph)
The Supreme Court shall have the power to review, revise, reverse, modify or affirm on appeal or certiorari, as the
law or the Rules of Court may provide, final judgments and orders of lower courts in x x x all cases involving the
legality of any tax, impost, assessment, or toll or any penalty imposed in relation thereto. (Article VIII, Section 5,
paragraph)
Tax exemptions are limited to those granted by law. However, no law granting any tax exemption shall be passed
without the concurrence of a majority of all the members of the Congress. (Article VI, Section 28, par. 4). The
Constitution expressly grants tax exemption on certain entities/institutions such as (1) charitable institutions,
churches, parsonages or convents appurtenant thereto, mosques, and nonprofit cemeteries and all lands, buildings
and improvements actually, directly and exclusively used for religious, charitable or educational purposes (Article VI,
Section 28, paragraph 3); (2) non-stock non-profit educational institutions used actually, directly and exclusively for
educational purposes. (Article XVI, Section 4(3))
In addition to national taxes, the Constitution provides for local government taxation. (Article X, Section 5) (Article X,
Section 6) Parenthetically, the Local Government Code provides that all local government units are granted general
tax powers, as well as other revenue-raising powers like the imposition of service fees and charges, in addition to
those specifically granted to each of the local government units. But no such taxes, fees and charges shall be
imposed without a public hearing having been held prior to the enactment of the ordinance. The levy must not be
unjust excessive, oppressive, confiscatory or contrary to a declared national economic policy (Section 186 and 187)
Further, there are common limitations to the grant of the power to tax to the local government, such that taxes like
income tax, documentary stamp tax, etc. cannot be imposed by the local government.
II. Laws
The basic source of Philippine tax law is the National Internal Revenue Law, which codifies all tax provisions, the
latest of which is embodied in Republic Act No. 8424 (The Tax Reform Act of 1997). It amended previous national
internal revenue codes, which was approved on December 11, 1997. A copy of the Tax Reform Act of 1997, which
took effect on January 1, 1998, can be found here.
Local taxation is treated separately in this Guide. There are, however, special laws that separately provide special
tax treatment in certain situations. (See attached matrix on special laws)

III. Treaties
The Philippines has entered into several tax treaties for the avoidance of double taxation and prevention of fiscal
evasion with respect to income taxes. At present, there are 31 Philippine Tax Treaties in force. Copies are available
at the BIR Library and the International Tax Affairs Division of the BIR, which is under the Deputy Commissioner for
Legal and Inspection Group.
The Philippine Treaty Series, edited and annotated by Haydee Yorac and published by Law Publishing House,
University of the Philippines, is available in seven (7) volumes, covering the years 1944 to 1978 . The Philippine
Treaty Index, by Benjamin Domingo, covers the years 1978 to 1982. A copy of the Philippine Treaty Index is available
in the Department of Foreign Affairs (DFA) Library. These publications contain treaties entered into by the
Philippines. Tax privileges and exemptions granted under treaties to which the Philippines is a signatory are
recognized under Philippine tax law. Copies of treaties entered into by the Philippines with other countries and/or
international organizations, from 1983 up to the present, are available at the DFA Library.
IV.

Administrative Material

The Secretary of Finance, upon the recommendation of the Commissioner, promulgates needful rules and
regulations for the effective enforcement of the provisions of the Tax Code (Section 244, Tax Code of 1997). The
Commissioner of Internal Revenue, however, has the exclusive and original power to interpret the provisions of the
Tax Code, but subject to review by the Secretary of Finance.
Administrative issuances which may be relied upon in interpreting the provisions of the Tax Code, which are signed
by the Secretary of Finance, or the Commissioner of Internal Revenue, or his duly authorized representative, come in
the form of Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings, Revenue
Memorandum Circulars, Revenue Memorandum Rulings, and BIR Rulings.
Revenue Regulations (RRs) are issuances signed by the Secretary of Finance, upon recommendation of the
Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective
enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes.
Revenue Memorandum Orders (RMOs) are issuances that provide directives or instructions; prescribe guidelines;
and outline processes, operations, activities, workflows, methods and procedures necessary in the implementation of
stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing.
Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the Commissioner of Internal
Revenue with respect to the provisions of the Tax Code and other tax laws, as applied to a specific set of facts, with
or without established precedents, and which the Commissioner may issue from time to time for the purpose of
providing taxpayers guidance on the tax consequences in specific situations. BIR Rulings, therefore, cannot
contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio.
Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as
amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices.
BIR Rulings are the official position of the Bureau to queries raised by taxpayers and other stakeholders relative to
clarification and interpretation of tax laws.
Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings, Revenue Memorandum
Circulars, Revenue Memorandum Rulings, and BIR Rulings are found here.
V. Case Law
In the Philippines, Supreme Court decisions form part of the law of the land. As such, decisions by the Supreme
Court (sc.judiciary.gov.ph) in the exercise of its power to review, revise, reverse, modify or affirm on appeal or
certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower courts cases involving
the legality of any tax, impost, assessment, or toll or any penalty imposed in relation thereto are adhered to and
recognized as binding interpretations of Philippine tax law. Court of Appeals and Court of Tax Appeals decisions
which have become final and executory are also recognized interpretations of Philippine tax law.

VI. Treatises and other books

There are no Philippine treatises exclusively devoted to Philippine Tax law but various Philippine authors have come
up with annotated versions of the Tax Code. These books can be purchased from Rex Bookstore and Central Law
Publishing, Inc.
VII. Periodicals
Periodicals on Philippine tax law are the:
(1) Philippine Revenue Service (copies available in the BIR Library), published by the BIR from 1969-1980;
(2) Philippine Revenue Journal (copies available in the BIR Library) which was both published by the Bureau of
Internal Revenue from 1969 to 2000; and
(3) the Tax Monthly, published by the National Tax Research Center (NTRC) (copies available in the BIR Library and
the NTRC).
VIII. Local Government Tax Law
Local government taxation in the Philippines is based on the constitutional grant of the power to tax to the local
governments.
Local taxes may be imposed, as the Constitution grants, to each local government unit, the power to create its own
sources of revenues and to levy taxes, fees, and charges which shall accrue to the local governments (Article X,
Section 5). With respect to national taxes, local Government units shall have a just share, as determined by law, in
the national taxes which shall be automatically released to them (Article X, Section 6).
However, certain taxes, such as the following, may not be imposed by local government units: (Section 133, Local
Government Code and Tax Law and Jurisprudence by Vitug & Acosta, copyright 2000)
(1) Income tax, except when levied on banks and other financial institutions;
(2) Documentary stamp tax;
(3) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided in
the Local Government Code (Code) (except taxes levied on the transfer of real property ownership under Section
135, and Section 151 of the Code);
(4) Customs duties, registration fees of vessels (except license fees imposed under Section 149, and Section 151 of
the Code), wharfage on wharves, tonnage dues and all other kinds of customs fees, charges and dues except
wharfage on wharves constructed and maintained by the local government unit concerned;
(5) Taxes, fees, charges and other impositions upon goods carried into or out of, or passing through, the territorial
jurisdictions of local governments in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes in
any form whatever upon such goods or merchandise;
(6) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;
(7) Taxes on business enterprises certified by the Board of Investments as pioneer or non-pioneer for a period of six
and four years, respectively, from the date of registration;
(8) Excise taxes on articles enumerated under the National Internal Revenue Code and taxes, fees, or charges on
petroleum products, but not a tax on the business of importing, manufacturing or producing said products (Patron vs.
Pililla, 198 SCRA 82);

(9) Percentage tax or value-added tax on sales, barters or exchanges of goods or services or similar transactions
thereon (but not fixed graduated taxes on gross sales or on volume of production);
(10) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air, land or water except as provided by the Code;
(11) Taxes on premiums paid for reinsurance or retrocession;
(12) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or
permits for the driving thereof, except tricycles;
(13) Taxes, fees, or other charges on Philippine products actually exported except as provided by the Code (the
prohibition applies to any local export tax, fee, or levy on Philippine export products but not to any local tax, fee, or
levy that may be imposed on the business of exporting said products);
(14) Taxes, fees or charges on duly organized and registered Countryside and Barangay Business Enterprises (R.A.
No. 6810) and on cooperatives (R.A. No. 6938); and
(15) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local
government units (Section 133, LGC)
The Local Government Code (www.comelec.gov.ph) or (www.dilg.gov.ph/) contains provisions on the scope and
limitation on the exercise of local government taxing power.
IX. National Tax Research Center (NTRC)
Constituted under Presidential Decree 74, the NTRC is mandated to conduct continuing research in taxation to
restructure the tax system and raise the level of tax consciousness among the Filipinos, to achieve a faster rate of
economic growth and to bring about a more equitable distribution of wealth and income. Specifically, the NTRC
performs the following functions:
1. Undertake comprehensive studies on the need for additional revenue for accelerated national development and
the sources from which this might most equitably be derived;
2. Re-examine the existing tax system and tax policy structure;
3. Conduct researches on taxation for the purpose of improving the tax system and tax policy;
4. Pass upon all tax measures and revenue proposal;
5. Recommend of such reforms and revisions as may be necessary to improve revenue collection and to formulate
sound tax policy and a more efficient tax structure.
Limitations on The Power of Taxation
The power of taxation, is however, subject to constitutional and inherent limitations.

Constitutional limitations are those provided for in the constitution or implied from its provisions, while inherent
limitations are restrictions to the power to tax attached to its nature.

The following are the inherent limitations.

1.

Purpose. Taxes may be levied only for public purpose;

2.

Territoriality. The State may tax persons and properties under its jurisdiction;

3.

International Comity. the property of a foreign State may not be taxed by another.

4.

Exemption. Government agencies performing governmental functions are exempt from taxation

5.

Non-delegation. The power to tax being legislative in nature may not be delegated. (subject to exceptions)

Constitutional limitations.

1.

Observance of due process of law and equal protection of the laws. (sec, 1, Art. 3) Any deprivation of life , liberty
or property is with due process if it is done under the authority of a valid law and after compliance with fair and
reasonable methods or procedure prescribed. The power to tax, can be exercised only for a constitutionally valid
public purpose and the subject of taxation must be within the taxing jurisdiction of the state. The government
may not utilize any form of assessment or review which is arbitrary, unjust and which denies the taxpayer a fair
opportunity to assert his rights before a competent tribunal. All persons subject to legislation shall be treated
alike under like circumstances and conditions, both in the privileges conferred in liabilities imposed. Persons
and properties to be taxed shall be group, and all the same class shall be subject to the same rate and the tax
shall be administered impartially upon them.

2.

Rule of uniformity and equity in taxation (sec 28(1)Art VI) All taxable articles or properties of the same class
shall be taxed at the same rate. Uniformity implies equality in burden not in amount. Equity requires that the
apportionment of the tax burden be more or less just in the light of the taxpayers ability to bear the tax burden.

3.

No imprisonment for non-payment of poll tax (sec. 20, Art III) A person cannot be imprisoned for non-payment
of community tax, but may be imprisoned for other violations of the community tax law, such as falsification of
the community tax certificate, or for failure to pay other taxes.

4.

Non-impairment of obligations and contracts, sec 10, Art III . the obligation of a contract is impaired when its
terms and conditions are changed by law or by a party without the consent of the other, thereby weakening the
position or the rights of the latter. IF a tax exemption granted by law and of the nature of a contract between the
taxpayer and the government is revoked by a later taxing law, the said law shall not be valid, because it will
impair the obligation of contract.

5.

Prohibition against infringement of religious freedom Sec 5, Art III, it has been said that the constitutional
guarantee of the free exercise and enjoyment of religious profession and worship, which carries the right to
disseminate religious belief and information, is violated by the imposition of a license fee on the distribution and
sale of bibles and other religious literatures not for profit by a non-stock, non-profit religious corporation.

6.

Prohibition against appropriations for religious purposes, sec 29, (2) Art. VI, Congress cannot appropriate funds
for a private purpose, or for the benefit of any priest, preacher or minister or for the support of any sect, church

except when such priest, preacher, is assigned to the armed forces or to any penal institutions, orphanage or
leprosarium.
7.

exemption of all revenues and assets of non-stock, non-profit educational institutions used actually, directly, and
exclusively for educational purposes from income, property and donors taxes and custom duties (sec. 4 (3 and
4) art. XIV.

8.

Concurrence by a majority of all members of Congress in the passage of a law granting tax exemptions. Sec. 28
(4) Art. VI.

9.

Congress may not deprive the Supreme Court of its jurisdiction to review, revise, reverse, modify or affirm on
appeal or certiorari, final judgments and orders of lower courts in all cases involving the legality of any tax,
impost, assessment or any penalty imposed in the relation thereto.

Situs of Taxationa
SITUS OF TAXATION- literally means the place of taxation, or the country that has jurisdiction to levy
a particular tax on persons, property, rights or business.
Basis: Symbiotic relationship. The jurisdiction, state or political unit that gives protection has the right
to demand support.
The situs of taxation is determined by a number of factors
a. Subject matter- or what is being taxed. He may be a person or it may be a property, an act or
activity;
b. Nature of tax- or which tax to impose. It may be an income tax, an import duty or a real
property tax;
c. Citizenship of the taxpayer
d. Residence of the taxpayer.

SITUS OF PERSONS
1. Residence tax- place where the person resides
2. Income Taxa. citizenship, or the country of which he is a citizen

b. legal residence
c. place where the income is derived.
3. Estate Tax- residence of the decedent at the time of his death
4. Donors Tax- residence of the donor at the time of donation
5. Business/occupation tax- where the business is done or the occupation is engaged in;
SITUS OF TAXATION OF PROPERTY
1. Real Property- location of the property
2. Tangible personal property- location of the property
3. Intangible personal property- domicile or residence of the owner

FORMS OF ESCAPE FROM TAXATION/ EXEMPTION FROM

TAXATION
FORMS OF ESCAPE FROM TAXATION
1. Shifting
2. Capitalization
3. Transformation
4. Avoidance
5. Exemption
6. Evasion
Shifting- process by which tax burden is transferred from statutory taxpayer to
another without violating the law.
Kinds of Shifting
1. Forward shifting- when burden of tax is transferred from a factor of production
through the factors of distribution until it finally settles on the ultimate purchaser or
consumer
2. Backward shifting when the burden is transferred from consumer through factors
of distribution to the factors of production;

3. Onward shifting- when the tax is shifted 2 or more times either forward or backward.
Capitalization- is the reduction in the price of the taxed object equal to the capitalized
value of the future taxes which the purchaser expects to be called upon to pay.
Transformation- the manufacturer or producer upon whom the tax has been imposed,
fearing the loss of his market if he should add the tax to the price, pays the tax and
endeavors to recoup himself by improving his process of production thereby turning out
his units at a lower cost.
Tax avoidance- exploitation by the taxpayer of legally permissible alternative tax rates
or methods of assessing taxable property or income, in order to avoid or reduce tax
liability.
Tax Exemption- grant of immunity to particular persons or corporations of a particular
class from a tax which persons and corporations generally within the same state or
taxing district are obliged to pay.
Basic Principles Regarding Tax Exemptions
1. Exemptions are highly disfavored by law and he who claims an exemption must be
able to justify his claim by the clearest grant of law.
2. He who claims tax exemption should prove by convincing proofs that he is exempted
3. Tax exemptions should be strictly construed against the person claiming it.
4. Taxation is the rule and exemption Is the exception
5. Constitutional grant of tax exemptions are self-executing
6. In the same way that taxes are personal, tax exemptions are also personal
7. Deductions for income tax purposes partake of the nature of tax exemptions,
therefore deductions should also be construed strictly against the taxpayer.

Tax evasion- use of taxpayer of illegal or fraudulent means to defeat or lessen the
payment of tax.
Indicia of Fraud in tax evasion
1. Failure to declare for taxation purposes true and actual income derived from business
for 2 consecutive years;
2. Substantial under declaration of income tax returns of the tax payer for 4
consecutive years coupled with intentional overstatement of deductions.