ESTATE TAX he has retained for his life or for any period which does
not in fact end before his death (1) the possession or
Formula: Gross Estate
Less: Deduction
Net Estate
Gross Estate
Sec. 85. Gross Estate The value of the gross estate of the
decedent shall be determined by including the value at the time of
death of all property, real or personal, tangible or intangible
wherever situated.
Property includes interest less than fee simple; the right to
dispose of something, jus disponendi, ownership of which is in
another.
Money received as damages for the death of decedent.
Test of inclusion is:
Whether the decedent had such property interest at the time of
death, that such interest has value or is capable of valuation and
that it passed from the decedent or was transmitted on account of
death. (Knowlton vs. Moore)
Subject to Gross Estate
1. Decedent Interest.
2. Transfer in contemplation of death.
3. Revocable transfer.
4. Property passing under the general power of appointment.
5. Proceeds from life insurance.
6. Transfer for insufficient consideration.
Classification of Gross estate
I. Properties which the decedent own during lifetime and at the
time of death.
II. Properties which he no longer owns at the time of death;
1. Properties transferred previously but in contemplation of
death.
2. Properties which have been transferred but subject to
revocation (Revocable transfer.)
3. Properties which have been transferred but retained some
interest the right to possess
Note: The right to enjoy and the right to possess must be
present at the time of death.
III. Properties which he never own.
1. Properties coming under the general power of appointment
2. Proceeds of life insurance.
The beneficiary being his estate or a name beneficiary but
revocable (if irrevocable not part of the estate).
Transfer in Contemplation Death
To the extent of any interest therein of which the decedent
has at any time made a transfer, by trust or otherwise, in
contemplation of or intended to take effect in possession
or enjoyment at or after death, or of which he has at any
time made a transfer, by trust or otherwise, under which
enjoyment of, or the right to the income from the property,
or (2) the right either alone or in conjunction with any
person to designate the person who shall possess or
enjoy the property or the income therefrom; except in case
of a bona fide sale for a an adequate and full consideration
in money or moneys worth.
A. Transfer ownership of the property in contemplation of
death. (example)
B. He transferred ownership (sale or donation) but retain
during his lifetime until death any of the following:
1. The possession or enjoyment of the property
2. The right to the income from the property, or
3. The right, either alone or in conjunction with any
person, to designate the person who shall possess or
enjoy the property or the income therefrom.
Example:
o Pedro transfer donated his property with condition
that he will retain enjoyment or possession, over
the property while he is still living. If he dies with
such right, the property shall be included.
o In the same manner, if he donated the property
subject to the condition that he will have the right
to choose at any time while he is still living who
can enjoy or possess the property. If he dies with
such right, the property will be included.
Revocable transfer:
To the extent of any interest therein, of which the
decedent has at any time made a transfer (except in case
of a bonafide sale for an adequate and full consideration
in money or moneys worth) by trust or otherwise, where
the enjoyment thereof was subject at the date of his death
to any change through the exercise of power (in whatever
capacity exercisable) by the decedent alone or by the
decedent in conjunction with any other person (without
regard to when or from what source the decedent
acquired such power), to alter, amend, revoke, or
terminate or where any such power is relinquished in
contemplation of decedents death.
For the purpose of this subsection, the power to alter,
amend or revoke shall be considered to exist on the date
of the decedents death even though the exercise of the
power is subject to a precedent giving of notice or even
though the alteration, amendment or revocation takes
effect only on the expiration of a stated period after the
exercise of power, whether or not on or before the date of
the decedents death notice has been given or the power
has been exercised.
Revoke
1. A person donate his property but reserved the right to
revoke until his death. He died with his right to revoke
hence property subject is included. Though he did not
revoke the donation.
 2. If the right to enjoy, revoke, exist at the time of death,
included.
3. Hence, if prior to death, he waive such right, but even
if it does not exist because it expired prior to his death,
it is included.
a. Example: I will retain the right to revoke
subject to the condition that it will take effect
only after notice.
b. I retain the right to possess until 5 days from
my death.
Property passing under the General Power of Attorney
To the extent of any property passing under a general
power of appointment exercised by the decedent:
(1) By will
(2) By deed executed in contemplation of, or intended to
take effect in possession or enjoyment at, or after his
death
(3) By deed under which he has retained for his life or
any period not ascertainable without reference to his
death or for any period which does not in fact end
before his death (a) the possession or enjoyment of,
or the right to the income from the property or (b) the
right, either alone or in conjunction with any person,
to designate the persons who shall possess or enjoy
the property or the income therefrom; except in case
of a bona fide sale for an adequate and full
consideration in money or moneys worth.
What is the general power of appointment?
o Juan wrote a will and said my property to Pedro,
to be enjoyed for life upon the death of Pedro,
Petra may appoint the next owner.
Juan estate property is included.
Pedro dies property is not included.
Petra dies property is included / not
included depend: if he has power to
choose herself and her creditor
(included) but if the appointment he can
appoint anyone except herself and her
creditor.
Proceeds of Life insurance
To the extent of the amount receivable by the estate of the
deceased, executor, administrator, whether revocable or
not.
By a beneficiary provided it is revocable if irrevocable, not
taxable.
Example:
o If beneficiary has estate, executor administrator
included.
o If my child is beneficiary depend if not revocable
not included, if revocable included.
o Premium insurance beneficiary.
Transfers of Insufficient Consideration.
If anyone of the transfers, trusts, interests, rights or
powers enumerated and described in Subsections (B), (C)
and (D) of this Section is made, created, exercised or
relinquished for a consideration in money or moneys
worth, but is not a bonafide sale for an adequate and full
consideration in money or moneys worth, there shall be
included in the gross estate only the excess of the fair
market value, at the time of death, of the property
otherwise to be included on account of such transaction.
Over the value of the consideration received therefore by
decedent.
No donor tax was paid estate tax will be paid.
Deduction
1. Expenses
Actual funeral expenses or equal to 5% of the gross
estate, which ever lower, but in no case to exceed
P200,000.00 (two-tiered limitation)
Judicial expenses of the testamentary or intestate
proceeding.
2. Claim against the estate
Unsecured debt - debt instrument must be notarized , if
loan within 3 years, submit disposition of the proceeds of
the loan)
Secured Debt - Indebtedness secured the specific property
of the decedent (provided the whole value of the property
is included in the gross estate.
Claim of the decedent against insolvent provided the
receivable is included in the gross estate.
Losses incurred after death but before last day of filing of
estate tax; not compensated by insurance. (Fire, storm,
shipwreck, other casualties or robbery, theft,
embezzlement.)
Property Previously Taxed
Of property situated in the Philippines of property subject
to donors or estate tax within five years
Deduction:
VALUE PERIOD
100% If prior decedent died within one (1) year.
80% If more than one year but not more than 2 years.
60% If more than 2 years but not more than 3 years.
40% If more than 3 years but not more than 4 years.
20% More than 4 years but not more than 5 years.
Transfer for Public Use
All bequest devises, legacies in favor of the government of
Phil. Or political subdivision for public use.
Family home current fair market of the family home but
not more than one million excess subject to estate tax
Standard deduction 1 million
 Medical expenses expenses within one year from death
not more than P500,000.00
Amount received by heir from employer because of death
(provided the amount is included in the gross income) in
accordance with R.A 4917.
Share in the conjugal property.
gross value of the estate exceeds Twenty thousand pesos
(P20,000), the executor, administrator or any of the legal heirs, as
the case may be, within two (2) months after the decedent's death,
or within a like period after qualifying as such executor or
administrator, shall give a written notice thereof to the
Commissioner.

REPUBLIC ACT No. 4917 Time for Payment

Return to be filed within 6 months extendible to 30 days.
AN ACT PROVIDING THAT RETIREMENT BENEFITS OF EMPLOYEES OF
PRIVATE FIRMS SHALL NOT BE SUBJECT TO ATTACHMENT, LEVY,
Payment at the time of filing of return may be extended to 5
EXECUTION, OR ANY TAX WHATSOEVER. years if by court.
2 years if extra judicial settlement.
Section 1. Any provision of law to the contrary notwithstanding, the retirement
benefits received by officials and employees of private firms, whether If the net estate is:
individual or corporate, in accordance with a reasonable private benefit plan
maintained by the employer shall be exempt from all taxes and shall not be
liable to attachment, garnishment, levy or seizure by or under any legal or Over But Not Over The Tax shall be Plus Of the Excess
Over
equitable process whatsoever except to pay a debt of the official or employee
concerned to the private benefit plan or that arising from liability imposed in a P 200,000 Exempt
criminal action: Provided, That the retiring official or employee has been in the
service of the same employer for at least ten (10) years and is not less than P 200,000 550,000 0 5% P 200,000

fifty years of age at the time of his retirement: Provided, further, That the
500,000 2,000,000 P 15,000 8% 500,000
benefits granted under this Act shall be availed of by an official or employee
only once: Provided, finally, That in case of separation of an official or 2,000,000 5,000,000 135,000 11% 2,000,000
employee from the service of the employer due to death, sickness or other
5,000,000 10,000,000 465,000 15% 5,000,000
physical disability or for any cause beyond the control of the said official or
employee, any amount received by him or by his heirs from the employer as 10,000,000 And Over 1,215,000 20% 10,000,000
a consequence of such separation shall likewise be exempt as hereinabove
provided.

As used in this Act, the term "reasonable private benefit plan" means a
pension, gratuity, stock bonus or profit sharing plan maintained by an
employer for the benefit of some or all of his officials and employees, wherein
contributions are made by such employer or officials and employees, or both,
for the purpose of distributing to such officials and employees the earnings
and principal of the fund thus accumulated, and wherein it is provided in said
plan that at no time shall any part of the corpus or income of the fund be used
for, or be diverted to, any purpose other than for the exclusive benefit of the
said officials and employees.

Non-Taxable Transfer
Merger of usufruct in the owner of the naked title.
Transmission by the fiduciary heir to the fideicommisary
Transmission from the first heir to another beneficiary
All bequest to devices to social welfare, cultural and
charitable institution.

Non-Resident
Sec. 85. Gross Estate The value of the gross estate of the
decedent shall be determined by including the value at the time of
death of all property, real or personal, tangible or intangible
wherever situated: Provided, however, that in the case of a non-
resident decedent who at the time of his death was not a citizen of
the Philippines, only that part of the entire gross estate which is
situated in the Philippines shall be included in his taxable estate.

Notice of Death
SECTION 89. Notice of Death to be Filed. - In all cases of
transfers subject to tax, or where, though exempt from tax, the
 DONORS TAX
The Tax Of the Excess
Donors Tax Net Gift Over But not Over
Shall be
Plus
Over
Tax on gratuitous transfer (completed transaction).
o Discuss concept of tax of transfer 100,000.00 exempt
Gift to a stranger = 30% of the net gift.
100,000.00 200,000.00 0 2% 100,000.00
If not stranger = 0 to 15%.
Those not strangers: brother, sister ( or not), spouse, 200,000.00 500,000.00 P 2,000.00 4% 200,000.00
ancestor, lineal descendant, relative by consanguinity within
500,000.00 1,000,000.00 14,000.00 6% 500,000.00
4th degree.
Contribution to candidate govern by election code 1,000,000.00 3,000,000.00 44,000.00 8% 1,000,000.00
Tax on a completed gift. If the gift is subject to suspensive
condition, if ownership will revert back to owner, no gift tax; if 3,000,000.00 5,000,000.00 204,000.00 10% 3,000,000.00
enjoyment, use is retained, no gift tax. For donors tax to apply 5,000,000.00 10,000,000.00 404,000.00 12% 5,000,000.00
title, enjoyment, possession, and disposition must completely
be transferred. 10,000,000.00 and over 1,004,000.00 15% 10,000,000.00
If a property which is a capital asset was transferred less than
consideration, is this subject to donors tax? No.

Exempt Gift /Exempt from Donors Tax

Gift by made by parent to legitimate, adopted, recognized
natural reason of marriage before celebration. If after, must be
within one year - not to exceed P10000.
o Dowries or gifts made on account of marriage and before its
celebration or within one year thereafter by parents to each of
their legitimate, recognized natural, or adopted children to the
extent of the first Ten thousand pesos.
Gift to national government or any of its agency not created for
profit.
Gift to charitable, educational, religious, cultural or social
welfare org.9 not more than 30% to be used for administration.
o Test: no dividend, governed by trustees receiving no
compensation, devote all income to its purpose as state in article
of incorporation.
o Gifts in favor of an educational and/or charitable, religious cultural
or social welfare corporation, institution, accredited non-
government organization, trust or philanthropic organization or
research institution or organization: Provided, however, that not
more than thirty percent (30%) of said gifts shall be used by such
done for administration purposes.
o For the purpose of this exemption, a non-profit educational and/or
charitable corporation, institution, accredited non-government
organization, trust or philanthropic organization and/or research
institution or organization, incorporated as a non-stock entity,
paying no dividends, governed by trustees who receive no
compensation, and devoting all its income, whether students fees
or gifts, donations, subsidies or other forms of philanthropy, to the
accomplishment and promotion of the purposes enumerated in its
Articles of Incorporation.

When to File and Pay

File and pay: Within 30 days, after the date of gift.
Where donor domiciled.
No domicile - Office of the commissioner.
Outside Phil. Embassy
Gift tax is computed on an annual basis. (Sec 99(A) on the
net gift)
 VALUE ADDED TAX
Nature of VAT
It is a destination consumption tax.
It is intended to tax the consumption of goods and services
destined to be consumed in the Philippines.
Hence, importation is subject to VAT while exportation is zero-
rated.
Key Provision
Sec. 99. Persons Liable. Any person who, in the course of trade
or business, sells, barters, exchanges, leases goods or properties,
renders services, and any person who imports goods shall be liable
to the value-added tax (VAT) imposed in Sections 100 to 102 of
this Code.
The phrase in the course of trade or business means the
regular conduct or pursuit of a commercial or an economic
activity, including transactions incidental thereto, by any
person, regardless of whether or not the person engaged
therein is a nonstick, nonprofit private organization
(irrespective of the disposition of its net income and whether or
not it sells exclusively to members or their guests), or
government entity.
Example: in the course of business // An insurance company
sells scrap vehicle, this is not subject to VAT, but the card
dealer is subject to VAT.
Parties in VAT Collection System
Government, person in trade or business as the private
collectors and the consumer as the ultimate person subject
to VAT.
Who is liable to collect the VAT Tax? Any person who, in the
course of trade or business, sells goods and sell services.
VAT on SERVICE
The phrase sale or exchange of services means the
performance of all kinds of services in the Philippines for others
for a fee, remuneration or consideration.
Also lease and use (rent) of properties.
Construction business.
Construction contractor and other services.
Brokerage business.
Brokers: Stocks, real estate, commercial, customs and
immigration, dealer of securities.
Non-life insurance surety, fidelity, indemnity and bonding
companies.
Money market business.
Lending investor which is not a bank.
Dealers of securities.
Lessor of property real/personal/film
Warehousing services.
Manufacturing / processing.
Persons engaged in milling, processing, manufacturing or
repacking goods for others.
Grantee of Franchise
Electric Company sales of electricity by generation
companies, transmission and distribution companies; services
of franchise grantees of electric utilities.
Telephone, TV, Radio broadcasting company, except
o Where gross receipt does not exceed
P10,000,000
o All other grantee of franchise except water and
gas utilities where gross receipt does not exceed
P10,000,0000
Similar services regardless whether or not the performance thereof
calls from the exercise or use of physical or mental faculties.
Transport Business VAT on SERVICE
Common carriers by LAND, transportation contractors, person
who transport goods and cargoes (within the Philippine).
Transport of passenger by land is 3% under section 115 except
Kalesa.
"Sec. 115. Percentage tax on carriers and keepers of
garages. Keepers of garages, and common carriers by
land, air or water for the transport of passengers, except
owners of bancas, and owners of animal-drawn two-
wheeled vehicles, shall pay a tax equivalent to three per
centum (3%) of their quarterly gross receipts.
Common carrier by AIR and SEA transporting a passenger,
goods and cargoes from one place in the Philippines to another
place within the country.
Sec. 3. Section 102 of the National Internal Revenue Code, as amended,
is hereby further amended to read as follows:
"Sec. 102. Value-added tax on sale of services and use or lease of
properties. (a) Rate and base of tax. There shall be levied,
assessed and collected, a value-added tax equivalent to 10% of gross
receipts derived from the sale or exchange of services, including the use
or lease of properties.
"The phrase 'sale or exchange of services' means the performance of all
kinds of services in the Philippines for others for a fee, remuneration or
consideration, including those performed or rendered by construction
and service contractors; stock, real estate, commercial, customs and
immigration brokers; lessors of property, whether personal or real;
warehousing services; lessors or distributors of cinematographic films;
persons engaged in milling, processing, manufacturing or repacking
goods for others; proprietors, operators or keepers of hotels, models, rest
houses, pension houses, inns, resorts; proprietors or operators of
restaurants, refreshment parlors, cafes and other eating places, including
clubs and caterers; dealers in securities; landing investors; operators of
taxicabs; utility cars for rent or hire driven by the lessees (rent-a-car
companies), tourist buses; and other common carriers by land, air, and
sea relative to their transport of goods or cargoes; services of franchise
grantees of telephone and telegraph, radio and television broadcasting
and all other franchise grantees except those under Section 117 of this
Code; services of banks, non-bank financial intermediaries and finance
companies; and non-life insurance companies (except their crop
insurances) including surety, fidelity and indemnity and bonding
companies; and similar services regardless of whether or not the
performance thereof calls for the exercise or use of the physical or mental
faculties. The phrase `sale or exchange of services' shall likewise
include:
 "(1) The lease or the use of or the right privilege to use any copyright,
patent, design or model, plan, secret formula or process, goodwill,
trademark, trade brand or other like property or right;
"(2) The lease or the use of, or the right to use of any industrial,
commercial or scientific equipment;
"(3) The supply of scientific, technical, industrial or commercial
knowledge or information;
"(4) The supply of any assistance that is ancillary and subsidiary to and
is furnished as a means of enabling the application or enjoyment of any
such property, or right as is mentioned in subparagraph (2) or any such
knowledge or information as is mentioned in subparagraph (3); or
"(5) The supply of services by a nonresident person or his employee in
connection with the use of property or rights belonging to, or the
installation or operation of any brand, machinery, or other apparatus
purchased from such nonresident person;
"(6) The supply of technical advice, assistance or services rendered in
connection with technical management or administration of any scientific,
industrial or commercial undertaking, venture, project or scheme;
"(7) The lease of motion picture films, films, tapes and discs; and
"(8) The lease or the use of or the right to use radio, television, satellite
transmission and cable television time.
"Lease of properties shall be subject to the tax herein imposed
irrespective of the place where the contract of lease or licensing
agreement was executed if the property is leased or used in the
"The term 'gross receipts' means the total amount of money or its
equivalent representing the contract price compensation, service fee,
rentals or royalty, including the amount charged for materials supplied
with the services and deposits and advanced payments actually or
constructively received during the taxable quarter for the services
performed or to be performed for another person, excluding value-added
tax.
Sale or Lease of Rights
1. Intellectual Property Right
The lease or the use of or the right or privilege to use any
copyright, patent, design or model plan, secret formula or
process, goodwill, trademark, trade brand or other like property
or right.
Even if not registered.
2. The supply of knowledge or information of scientific,
technical, industrial or commercial.
3. Right to use any industrial, commercial or scientific
equipment.
VAT on Sales of Goods or Property
Sec. 2. Section 100 of the National Internal Revenue Code, as
amended, is hereby further amended to read as follows:
"Sec. 100. Value-added-tax on sale of goods or properties. (a)
Rate and base of tax. There shall be levied, assessed and
collected on every sale, barter or exchange of goods or properties,
a value-added tax equivalent to 12% of the gross selling price or
gross value in money of the goods, or properties sold, bartered or
exchanged, such tax to be paid by the seller or transferor.
"(1) The term 'goods or properties' shall mean all tangible and
intangible objects which are capable of pecuniary estimation and
shall include:
"(A) Real properties held primarily for sale to customers or
held for lease in the ordinary course of trade or business;
"(B) The right or privilege to use patent, copyright, design
or model, plan, secret formula or process, goodwill,
trademark, trade brand or other like property or right;
"(C) The right or the privilege to use in the Philippines of
any industrial, commercial or scientific equipment;
"(D) The right or the privilege to use motion picture films,
films, tapes and discs; and
"(E) Radio, television, satellite transmission and cable
television time.
Exempt from VAT
Agricultural food for human consumption
Animals for food
Plant for food
Fish for food
Thus specialty animals for pet are not exempt.
And their meat / plant product in their original state
o Tobacco is not exempt from VAT, but if it is sold from a
cooperative, yes it is exempted.
o Original state means the products classified under this
paragraph shall be considered in their original state
even if they have undergone the simple processes of
preparation or preservation for the market, such as
freezing, drying, salting, broiling, roasting, smoking or
stripping (meat).
Polished and / or husked rice, corn grits, raw cane
sugar and molasses, ordinary salt, and copra shall be
considered in their original state.
Feeds
Feeds for livestocks, fish and the ingredient for the
manufacture of feed.
Fertilizer for plants (Pesticide not exempt)
Genetic material:
o Plants: seeds and seedlings.
o Fish and animals: breeding stock and
fingerlings and genetic materials (importation
of farm machineries must be done by agri-
cooperatives to be exempt.)
Importation of personal effects of returning and
resettling and coming to settle persons.
Duty Free importation by (returning) resident and
(resettling) non-resident citizen.
Coming to settle (1st time) no need to be duty-free.
Coming back to the Philippines duty free to be
exempt from VAT.
Coming to settle personal household effects +
professional instruments and implements + domestic
animals. VAT exempt.
VAT-Exempt Services
Services subject to percentage tax under Title V;
Services by agricultural contract growers and milling for
others of palay into rice, corn into grits and sugar cane into
raw sugar;
Medical, dental, hospital and veterinary services except
those rendered by professionals;
Educational services rendered by private educational
institutions, duly accredited by the Department of Education
 Culture and Sports, and those rendered by government
educational institutions;
o English Korean School Not Exempt.
o Educational services rendered private and public
accredited by CHED, DepEd, TESDA.
o Seminars Not Exempt.
Services rendered by regional hub without income.
o Services rendered by regional or area headquarters
established in the Philippines by multinational corporations
which act as supervisory, communications and coordinating
centers for their affiliates, subsidiaries or branches in the Asia-
Pacific Region and do not earn or derive income from the
Philippines.
Agricultural cooperatives duly registered with the
Cooperative Development Authority (CDA) to their
members, as well as sale of their produce, whether in its
original state or processed form, to non-members; their
importation of direct farm inputs, machineries and
equipment, including spare parts thereof, to be used directly
and exclusively in the production and/or processing of their
produce;
Gross receipts from lending activities by credit or multi-
purpose cooperatives duly registered with the CDA;
Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with the CDA; Provided, That
the share capital contribution of each member does not
exceed P15,000 and regardless of the aggregate capital
and net surplus ratably distributed among the members;
Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of trade
or business or real property utilized for low-cost and
socialized housing
o Residential lot valued at P1,919,500 or below.
o House and lot, and other residential dwellings valued at
P3,199,200 and below.
o If sale of real property being leased in the ordinary course of
business subject to VAT
Lease of a residential unit with a monthly rental not
exceeding P10,000; -NOW at 12,800 pesos.
Sale, importation, printing or publication of books and any
newspaper, magazine, review, or bulletin which appears at
regular intervals with fixed prices for subscription and sale
and which is not devoted principally to the publication of
paid advertisements;
o Importation of Books No VAT
o Sales of Books No VAT
o Publishing Books are VAT Exempt.
o The business of printing is subject to VAT but not
printing of book.
o The business of publishing is subject to VAT
except publishing newspaper, magazine, review
or bulletin which appears at regular intervals with
fixed prices for subscription and sale.
o Publishing for paid advertising is subject to VAT.
Sale, importation or lease of passenger or cargo vessels
and aircraft, including engine, equipment and spare parts
thereof for domestic or international transport operations;
Fuel, goods and supplies by persons engaged in
international shipping or air transport operations.
Sec. 4. Section 103 of the National Internal Revenue Code, as
amended, is hereby further amended to read as follows:
"Sec. 103. Exempt transactions. The following shall be exempt
from the value-added tax:
"(a) Sale of nonfood agricultural products; marine and forest
products in their original state by the primary producer or the owner
of the land where the same are produced;
"(b) Sale of cotton and cotton seeds in their original state; and copra;
"(c) Sale or importation of agricultural and marine food products in
their original state, except importation of meat, livestock and poultry
of a kind generally used as, or yielding or producing foods for human
consumption; and breeding stock and genetic materials therefor.
"Products classified under this paragraph and paragraph (a) shall be
considered in their original state even if they have undergone the
simple processes of preparation or preservation for the market, such
as freezing, drying, salting, smoking or stripping. Polished and/or
husked rice, corn grits, locally produced raw cane sugar and ordinary
salt shall be considered in their original state:
"(d) State or importation of fertilizers, seeds, seedlings and
fingerlings; fish, prawn, livestock and poultry feeds, including
ingredients, whether locally produced or imported, used in the
manufacture of finished feeds (except specialty foods for race
horses, fighting cocks, aquarium fish, zoo animals and other animals
generally considered as pets);
"(e) Sale or importation of petroleum products (except lubricating oil,
processed gas, grease wax, and petrolatum) subject to excise tax
imposed under Title VI;
"(f) Sale or importation of raw materials to be used by the buyer or
importer himself in the manufacture of petroleum products subject to
excise tax, except lubricating oil, processed gas, grease, wax, and
petrolatum.
"(g) Importation of passenger and/or cargo vessels of more than five
thousand tons, whether coastwise or ocean-going, including engine
and spare parts of said vessel to be used by the importer himself as
operator thereof;
"(h) Importation of personal and household effects belonging to the
residents of the Philippines returning from abroad and nonresident
citizens coming to resettle in the Philippines: Provided, That such
goods are exempt from customs duties under the Tariff and Customs
Code of the Philippines;
"(i) Importation of professional instruments and implements, wearing
apparel, domestic animals, and personal household effects (except
any vehicle, vessels, aircraft, machinery, other goods for use in the
manufacture and merchandise of any kind in commercial quantity)
belonging to persons coming to settle in the Philippines, for their own
use and not for sale, barter or exchange, accompanying such
persons, or arriving within ninety (90) days before or after their
arrival, upon the production of evidence satisfactory to the
Commissioner of Internal Revenue, that such persons are actually
coming to settle in the Philippines and that the change of residence
is bona fide;
"(j) Services subject to percentage tax under Title V;
"(k) Services by agricultural contract growers and milling for others
of palay into rice, corn into grits and sugar cane into raw sugar;
"(l) Medical, dental, hospital and veterinary services except those
rendered by professionals;
"(m) Educational services rendered by private educational
institutions, duly accredited by the Department of Education Culture
and Sports, and those rendered by government educational
institutions;
"(n) Sale by the artist himself of his works of art, literary works,
musical compositions and similar creations, or his services
performed for the production of such works;
"(o) Services rendered by individual pursuant to an employer-
employee relationship;
"(p) Services rendered by regional or area headquarters established
in the Philippines by multinational corporations which act as
supervisory, communications and coordinating centers for their
affiliates, subsidiaries or branches in the Asia-Pacific Region and do
not earn or derive income from the Philippines
"(q) Transactions which are exempt under special laws, except those
granted under Presidential Decree Nos. 66, 529, 972, 1491, and
1950, and non-electric cooperatives under Republic Act No. 6938,
or international agreements to which the Philippines is a signatory;
"(r) Export sales by persons who are not VAT-registered;
"(s) Sale of real properties are primarily held for sale to customers or
held for lease in the ordinary course of trade or business or real
property utilized for low-cost and socialized housing as defined by
Republic Act No. 7279, otherwise known as the Urban Development
and Housing Act of 1992, and other related laws;
"(t) Sale or lease of goods or properties or the performance of services
other than the transactions mentioned in the preceding paragraphs, the
gross annual sales and/or receipts do not exceed the amount
prescribed in regulation to be promulgated by the President upon the
recommendation by the Secretary of Finance which shall not be less
than Four hundred eighty thousand pesos (P480,000.00) or more than
Seven hundred twenty thousand pesos (P720,000.00) subject to tax
under Section 112 of this Code.
Remember <<baka magtaka kayo, ito talaga title ng slide ni Sir ah>>
Transport business
(land, sea, air, passengers, cargoes)
Common carrier by LAND, transportation contractors,
person who transport goods and cargoes within the
Philippines) With VAT
Transport of passenger by land is 3% except kalesa
Common carrier by AIR and SEA, transporting
passenger, goods and cargoes from one place to
another place in the Philippines With VAT
If the Philippines to other country, international carrier
(Sea and Air) shall pay 3% on transport of CARGOES
not passenger (Sec. 118 tax code as amended)
Transport of passenger Exempt from VAT and
Percentage Tax (used to be covered by the latter)
On importation of vehicle/aircraft/vessel
o Land vehicle with VAT
o Air and sea aircraft or vessel including spare
parts No VAT whether domestic or
international.
On importation of food and supplies
o International carrier No VAT
o Local carrier With VAT
Zero-rated
Export sales of goods.
Actual shipment of goods to foreign country and paid
for in acceptable foreign currency.
Shipment to Locals
Raw materials packaging material for use in the
Philippines Must be sold to non-resident and paid
for in acceptable foreign currency.
If not sold to non-resident to export-oriented enterprise
(70% of annual production are exported)
Sales of supplies to international carriers.
Sale of raw materials or packaging materials to export-
oriented enterprise whose export sales exceed
seventy percent (70%) of total annual production
Sale of gold to the Bangko Sentral ng Pilipinas (BSP);
Those considered export sales under Executive Order
NO. 226, otherwise known as the Omnibus Investment
Code of 1987, and other special laws.
sale of goods supply fuel to international carrier
Common concept: Must be ship out and paid in foreign
currency. If not ship out, then must be contracted by
non-resident and paid for in acceptable foreign
currency, export to export-oriented (non-resident) or
an export-oriented company.
Foreign Currency denominated Sale
The phrase `foreign currency denominated sale' means sale
to a nonresident of goods, except those mentioned in
Sections 149 and 150, assembled or manufactured in the
Philippines for delivery to a resident in the Philippines, paid
for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP).
Zero Rated Services
The following services performed in the Philippines by VAT
registered persons shall be subject to zero percent (0%) rate:
1. Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which
goods are subsequently exported, where the services are
paid for in acceptable foreign currency and accounted for
in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP).
2. Services other than those mentioned in the preceding sub-
paragraph, the consideration for which is paid for in
acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP).
3. Services rendered to persons or entities whose exemption
under special laws or international agreements to which
the Philippines is a signatory effectively subjects the
supply of such services to zero rate.
4. Services rendered to vessels engaged exclusively in
international shipping; and
 5. Services performed by subcontractors and/or contractors
in processing, converting, or manufacturing goods for an
enterprise whose export sales exceed seventy percent
(70%) of total annual production.

Transaction Deemed Sale

a. Transfer, use or consumption, not in the course of business, of
goods or properties originally intended for sale or for use in the
course of business
b. Distribution or transfer to: Shareholders or investors as share
in the profits of the VAT-registered person; or Creditors in
payment of debt
c. Consignment of goods if actual sale is not made within sixty
(60) days following the date such goods were consigned
d. Retirement from or cessation of business, with respect to
inventories of taxable goods existing as of such retirement or
cessation.
 TAX REMEDIES
General Rule
No assessment No collection.
Except: Fraud by the taxpayer or no return is filed Sec. 222.
What is an assessment?
It is a written notice and demand made by the Bureau on the
taxpayer for the settlement of a due tax liability that is there
definitely a set and fixed.
Valid Assessment
As to content.
As time prescriptive period.
Issued by proper authority.
Observance of due process.
What must assessment contain?
An assessment contains not only a computation of tax
liabilities, but also a demand for payment within a
prescribed period.
The demand for payment of the taxpayers deficiency tax
or taxes shall state the facts, the law, rules and regulations,
or jurisprudence on which the assessment is based;
otherwise, the assessment shall be void.
Who may issue the assessment?
The Commissioner of Internal Revenue
His duly authorized representative. (NIRC Sec. 228)
o The term duly authorized representative of the
Commissioner of Internal Revenue (CIR) who may issue the
Preliminary Assessment Notice (PAN), Formal Letter of
Demand/Final Assessment Notice (FLD/FAN) and Final
Decision on Disputed Assessment (FDDA) refers to the
Revenue Regional Directors, Assistant Commissioner-Large
Taxpayers Service, and Assistant Commissioner-
Enforcement and Advocacy Service.
o Revenue Memorandum Circular No. 11-2014 dated 18
February 2014.
When must be issued?
Assessment must be made within 3 years after the last day for
filing of the return.
If return is filed beyond the period for filling, then 3 years from
the date when the return is filed.
Issued after Due Process
1. Examination of the records upon presentation of a letter of
authority.
2. If they found error call you on a preliminary conference to
explain.
3. If not satisfied, they will issue a PAN, which you must respond
in 30 days in writing
4. Not satisfied, they will now issue an ASSESSMENT.
5. ASSESSMENT must contain FACTS and LAW.
6. Collection must be made within 5 years from assessment. Or 10
years from date of discovery of fraud.
7. Collection is commence upon distraint and levy or the filing of
an answer in CTA (toll the period)
8. Assessment is made from the date the notice is sent by mail or
mailed to the taxpayer (Rep. vs. Limaco). But period will not run
if taxpayer gave the wrong address. That means the
prescriptive period for collection will not start to run, but the
running for period for assessment has been tolled.
9. Prescriptive period is suspended when the addressee cannot
found in the address given in the return form 223.
When Assessment is Final
ASSESSMENT is like a DECISION.
If no PROTEST via reconsideration or re-investigation in 30
days from receipt of assessment - Final
within 60 days from filing of protest you must file the
supporting documents- if not Final
180 days from the submission of the document the
commissioner must decide if there is a decision and it
adverse appeal to CTA in 30 days if not final
No decision in 180 days, within 30 days from the lapse of 180
appeal to CTA if final.
What if no record or record is false?
Get the facts from Best evidence obtainable under the
circumstance
1. obtain information from other source than the taxpayer under audit
2. summon any other person to produce documents in their
possession and give testimony
Take inventory of your property or goods
Place the business under surveillance and make presumptive
gross sale for other month
Or simply getting the sales report of similar business.
Authority to inquire into bank account
Only for:
1. Determination of DECEDENT gross estate
2. Taxpayer filed an application for compromise base on financial
incapacity to pay.