FAR EASTERN UNIVERSITY INSTITUTE OF LAW

TAXATION LAW LAST MINUTE TIPS | BAR EXAMINATIONS 2017

Tax License Fee

Elements of a Tax (EIL) Amount No limit Only necessary
1. Enforced proportional contribution imposed to carry out
2. Imposed by the State by virtue of its regulation
sovereignty; and
3. Levied for the support of the
Tax vs. Special Assessments
government (PCGG vs. Cojuangco)
Tax Special
Inherent Limitations of Taxation (PLITE) Assessments
1. Public purpose; Imposed Persons, Only on land
2. Legislative in nature; on property and
3. International Comity; privilege
4. Territoriality; and
Why No specific Public
5. Exemption of the Government
imposed reason improvement
Constitutional Limitations of Taxation inherent power benefits the land
(UP-VOTER-PUSSLE) of the state and increases its
1. Uniformity and equality of taxation; value
2. Prohibition against imprisonment for non- Purpose Support of the Contribution to
payment of Poll tax; government the cost of public
3. Veto power of the President;
improvement
4. Origin of revenue and tariff bills;
5. Grant by Congress of authority to the When Regularly Case to case
President to impose Tariff rates; imposed exacted basis as to time
6. Majority vote of Congress for grant of tax and locality
Exemption; Basis Necessity Benefits
7. Tax Exemption of Religious, charitable and obtained
educational entities;
8. Progressive system of taxation;
9. Prohibition on the Use of public money or Tax vs. Toll
property for religious purposes; Tax Toll
10. Special assessments; Imposed State Private persons
11. Non Impairment of Jurisdiction of the SC; by
12. Grant of power to Local Government Units Purpose Raise Reimbursement of
to create its own sources of revenue; and revenue cost of
13. Tax exemption of non-stock, non-profit
construction with
Educational institutions;
reasonable amount
Exemptions granted under Art. XIV, Sec. 4(3) of income
vs. under Art. VI, Sec. 28(3) of the 1987 Basis Sovereign Attribute of
Constitution power of the ownership
ART. XIV, ART. VI, state
Sec. 4(3) Sec. 28(3)
Grantee Non-stock, non- Religious, Impact vs. Incidence of taxation
profit educational, Impact of taxation is the point where the tax is
educational charitable originally imposed or formally assessed while
institution institutions incidence of taxation is the point on whom the
tax burden finally rests.
Taxes Income tax, Property tax
covered customs duties, What is Tax Pyramiding?
property tax and It is the practice of imposing a tax upon
donors tax (for another tax.
donations made
to them) Define Direct Double Taxation and Indirect
Subject of Property and Property only Double Taxation (2010, 2014, 2015, 2016 Bar)
exemption income Direct double taxation is double taxation in its
strict sense and is prohibited because of the
Tax vs. License Fee violation of the constitutional precepts of equal
Tax License Fee protection and uniformity in taxation.
Source Power of Police Power
Taxation In order for double taxation to occur, the
Purpose Raise revenue Regulation following requisites must be present: (SAME
Object Persons, Right to exercise SPA JPK)
property and a privilege 1. taxing same SUBJECT (person, property or
right) twice;
privilege
2. for the same PURPOSE;

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3. by the same taxing AUTHORITY; Tax Amnesty Tax

4. within the same JURISDICTION; Exemption
5. within the same taxable PERIOD; and application.
6. the tax must be of the same KIND or
Shall cover all
character (Nursery Care vs. Acevedo, G.R.
180651 dated July 30, 2014). national internal
revenue taxes
Indirect double taxation is double taxation in for the taxable
its broad sense and is permissible. This exists year 2005 and
when one or more of the abovementioned prior years.
requisite/s is/are not present. Presence Yes, there is None,
of actual revenue loss because there
Modes of Eliminating Double Taxation (CD- revenue since there were was no actual
RET) loss actual taxes due taxes due as
1. Tax Credits an amount deducted from tax but collection the person or
liability to arrive at the total tax liability (e.g., was waived by transaction is
foreign taxes paid); the government. protected by
2. Tax Deductions tax write-off or reduction
tax exemption
in the gross amount on which a tax is
calculated;
3. Reduction of the Philippine Income Tax Rate Tax Evasion vs. Tax Avoidance
an example is the Tax Sparing Rule; Tax Evasion Tax Avoidance
4. Tax Exemptions a grant of immunity from Other Also called Also called Tax
the obligation to pay taxes; Name Tax-dodging minimization
5. Tax Treaties agreement between two Means Uses illegal Uses legal
countries specifying what items of income means to forego means to
will be taxed by the authorities of the country
the liability and minimize the
where the income is earned.
payment of payment of
Origin of Tax Laws taxes. taxes.
All appropriation, revenue or tariff bills, bills Penalty Punishable by Not punishable
authorizing increase of the public debt, bills of law and may by law, as it only
local application, and private bills shall originate hold the aims to minimize
exclusively in the House of Representatives, but
taxpayer the liability of the
the Senate may propose or concur with
amendments. (Section 24, Article VI, 1987 criminally and taxpayer within
Constitution) civilly liable. the bounds of the
law.
Tax Amnesty vs. Tax Exemption Object To escape To minimize
Tax Amnesty Tax liability and payment of
Exemption payment of taxes within the
Scope of Immune from the Immunity from taxes through limits set by law.
immunity payments of civil liability the use of
taxes, as well as only deceptive and
additions thereto, illegal means.
and the
appurtenant No Injunction Rule
civil, criminal or NIRC expressly provides that no court shall have
administrative the authority to grant an injunction to restrain the
penalties under collection of any national internal revenue tax,
fee or charge imposed by the code. An exception
the NIRC
to this rule obtains only when in the opinion of the
Grantee General pardon To persons CTA the collection thereof may jeopardize the
given to all exempted by interest of the government and/or the taxpayer.
payers law. A
freedom from The situation, however, is different in the case of the
a change or collection of local taxes as there is no express
provision in the LGC prohibiting courts from issuing
burden to
an injunction to restrain local governments from
which others collecting taxes.
are subjected.
Application Applies only to Generally Q: What is the Doctrine of Equitable Recoupment?
past tax periods prospective A: A claim for refund barred by prescription may be
hence, in application allowed to offset unsettled tax liabilities arising from
retroactive the same transaction.

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General Rule: Taxes cannot be the subject of
compensation or set-off.
Rationale:
1. Lifeblood theory;
2. Taxes are not contractual obligations but
arise out of duty to the government; and
3. The government and the taxpayers are not
mutually creditors and debtors of each other.
INCOME TAXATION
compute the amount with reasonable
accuracy (CIR v. Isabela Cultural Corporation,
G.R. No. 172231, February 12, 2007).
Immediacy Test
If the corporation did not prove an immediate
need for the accumulation of the earnings and
profits, the accumulation was not for the
reasonable needs of the business, and the
penalty tax would apply. (The Manila Wine
Merchants vs CIR, GR No. L-26145, Feb. 20,
1984).

Requisites for Taxability of Income (PERC) Income vs. Capital

1. A gain or Profit is derived therefrom; Income Capital
2. There is no law Excluding it from
All wealth, which Fund or property
taxation;
3. The income, gain or profit is Received or flows into the which can be used in
realized during the taxable year; and taxpayer other than producing goods or
4. There must be a Closed or completed a mere return of services.
transaction; capital.
Flow of wealth Fund or property
Income Realization Doctrines:
Service of wealth Wealth
Claim of Right doctrine
Global vs. Schedular System of Taxation
A taxable gain is conditioned upon the presence
Global System of Schedular System of
of a claim of right to the alleged gain and the Taxation Taxation
absence of a definite unconditional obligation to One where the Provides for a different
return or repay that which would otherwise taxpayer is required tax treatment of
constitute a gain to lump all the different types of
items of income income so that a
Realization Test earned during a separate tax return is
There is no taxable income until there is a taxable period and required to be filed for
pay under a single each type of income and
separation from capital or something of set of income tax the tax is computed on a
exchangeable value thereby supplying the rules on these per return or per
realization or transmutation which would result in different types of schedule basis.
the receipt of income income.

Economic Benefit Principle Source Rules - Income Within the Philippines

That even without the sale or other Type of
Test of Source of Income
disposition if by reason of appraisal, the cost Income
Interest Residence of the Debtor
basis is used as the new tax base for purposes
Dividends From a domestic corporation; or
of computing the allowable depreciation From a foreign corporation
expense, the net difference between the original unless less than fifty percent
cost basis and new basis due to appraisal is (50%) of the gross income of
taxable. such foreign corporation for the
three-year period ending with
Severance Test the close of its taxable year
Income is not deemed earned until the fruit preceding the declaration of
such dividends or for such part
has been plucked from the tree. Income is
of such period as the
recognized when there is separation of corporation has been in
something which is of exchangeable value existence was derived from
sources within the Philippines
All Events Test Services or
Place of performance
Requires the right to income or liability be compensation
fixed, and the amount of such income or income
liability be determined with reasonable Rental
Location of property
income
accuracy before income shall be taxable and
Royalty
expense be deductible to income tax purposes. Place of use of intangible
income
Gain on sale
NOTE: However, the test does not demand that From sale of real property
of real
the amount of income or liability be known located within the Philippines
property
absolutely, only that the taxpayer has at his Gain on sale Place of market rule
disposal the information necessary to

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Type of employed in such country. (BIR Ruling 517-

Test of Source of Income
Income 2011)
of personal
property Rule on business profits on services rendered
Gain on sale within the Philippines of NRFCs
of shares of Derived entirely from sources General rule: Subject to Phil. income tax
stock of within the Philippines regardless Exception: If such income is exempt under
domestic of where the shares were sold
a Tax Treaty
corporation

Source Rules Partly Within or Partly Requisites for unregistered or unincorporated

Without the Philippines
This would include:
1. Income from services rendered partly
within or partly without;
2. Income from sale of personal property
produced (in whole or in part) within
and sold without the Philippines; and
3. Income from sale of personal property
produced (in whole or in part) without
and sold within the Philippines
Joint Venture undertaking construction projects
to be not taxable:
1. Undertakes a construction project;
2. Involves joining or pooling of resources by
local licensed contractors (licensed as
general contractor by the Philippine
Contractors Association Board or PCAB);
3. Local contractors are engaged in
construction business; and
4. JV must also be licensed as such by PCAB.

Taxation of Ordinary Income Constructive Receipt of Income

Kind of Source Tax Income must be credited to the taxpayer
Tax Rate
Taxpayers w/in w/out Base without any substantial limitation or
Individuals restriction as to the time or manner of payment
or condition upon which payment is to be made.
RC 5 32% Net
NRC 5 32% Net Q: When is a debt instrument considered a
RA 5 32% Net deposit substitute and consequently subject to
NRAETB 5 32% Net 20% FWT?
NRANETB 25% Gross A: The term deposit substitutes shall mean an
Corporations alternative form of obtaining funds from the
public (the term 'public' means borrowing
DC 30% Net from 20 or more individual or corporate
RFC 30% Net lenders at any one time) other than deposits,
NRFC 30% Gross through the issuance, endorsement, or
acceptance of debt instruments for the
Non-Resident Alien Individual: Engaged v. borrowers own account, for the purpose of
Not-Engaged relending or purchasing of receivables and other
A non-resident alien individual who shall come obligations, or financing their own needs or the
to the Philippines and stay therein for an needs of their agent or dealer. Hence, the
aggregate period of more than 180 days number of lenders is determinative of whether a
during any calendar year shall be deemed a debt instrument should be considered a deposit
non-resident alien doing business in the substitute and consequently subject to the 20%
Philippines, otherwise it will be considered FWT. Also the meaning of the phrase at any
NRANETB. one time was enlarged to include not only the
original issuance of the bonds but also
Tax Treatment of Income of OCW and OFW transactions within the secondary market.
OCWs and OFWs, including seamen or (BDO vs Republic, GR No. 198756, Jan. 13,
seafarers, are taxable only on their income 2015).
within the Philippines. Thus, an OCW or OFWs
income arising out of his overseas employment Exclusions from Gross Income Other Than
is exempt from income tax (RR No. 1-2011). Those Under Section 32(B) of the NIRC
Under the Constitution: Income and assets of
Q: Are employees of Philippine companies non-stock, non-profit educational institutions
temporarily assigned abroad and stays therein used ACTUALLY, DIRECTLY AND
for a period of 214 days considered non-resident EXCLUSIVELY for educational purposes (Sec.
citizens? 4[3] Art. XIV, 1987 Constitution);

A: No. These employees shall still be Under Special Laws:

considered as resident citizens since they still
remain on the Philippine payroll. In interpreting
the conditions to be qualified as non-resident
citizens, the BIR held that these employees
cannot qualify because the phrase employment
thereat [as used in paragraph (3) of Section
22(E)] means that the individual must be
1. Income earned from investments and
distributions upon death/retirement provided
that:
a. Beneficiary is at least 55 years of
age (inapplicable in case of death)
and

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 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
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b. With at least 5 years contribution.
(Personal Equity and Retirement
Account [PERA] Act of 2008);
2. Income from operations of Barangay Micro
Business Enterprise (BMBE Act of 2002);
3. Income of PEZA-registered entities (PEZA
Law);
4. Income of participants in socialized housing
(Urban Development Housing Act of 1992);
and
5. Income of duly registered cooperatives from
transactions with members (Cooperative
Code).
NOTE: PEZA-registered entities are subject to
preferential tax rates IN LIEU of ALL national
and local taxes.
Income Tax Exemption of Prizes and Awards
in Sports Competition
In order to be exempt from income tax, the
sports event must have been sanctioned by a
national sports association. The place where the
competition was held is irrelevant.
Compensation Income Exempt from Income
Tax
1. Exempt under various international
agreements; and
2. Compensation income falling within the
meaning of statutory minimum wage
under R.A. No. 9504
Requisites of a private retirement plan to be
excluded from gross income
a. Employee is at least 50 years old;
b. Has served for at least 10 years;
c. The benefit is availed of only once; and
d. Plan is approved by BIR.
Tax implications of condonation of debt
The cancellation and forgiveness of
indebtedness may amount to a payment of
income, to a gift, or to a capital transaction,
dependent upon the circumstances. If, for
example, an individual performs services for a
creditor, who, in consideration thereof cancels
the debt, income to that amount is realized by
the debtor as compensation for his services. If,
however, a creditor merely desires to benefit a
debtor and without any consideration therefor
cancels the debt, the amount of the debt is a gift
from the creditor to the debtor and need not be
included in the latter's gross income. If a
corporation to which a stockholder is indebted
forgives the debt, the transaction has the effect
of the payment of a dividend.
Personal and Additional Exemptions
Personal Exemption: P50,000
Additional Exemption: P25,000 per qualified
dependent child (maximum of 4 qualified
dependents)
Requisites of a Qualified Dependent Child
1. A legitimate child, legitimated, or tlegally
adopted child of the taxpayer;
2. Not more than 21 years of age;
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3. Living with the taxpayer. A child who is
away for his education is still considered
living with the taxpayer;
4. Dependent upon the taxpayer for chief
support;
5. Unmarried; and
6. Not gainfully employed.
Additional exemption for persons caring and
living with PWD
Those caring for and living with qualified PWD,
up to the fourth civil degree of consanguinity
or affinity, can claim an additional tax
exemption of P25,000 against their annual
income tax. Provided that the PWD is not
gainfully employed and is chiefly dependent
upon the taxpayer. The maximum number of
allowable dependents are 4 including the PWD,
if any.
Ordinary and Necessary Expenses
Ordinary connotes a payment which is normal
in relation to the business of the taxpayer and
the surrounding circumstances. On the other
hand, necessary connotes expenditure that is
appropriate or helpful in the development of the
taxpayers business or that the same is proper
for the purpose of realizing a profit or minimizing
a loss (General Electric vs Collector, CTA Case
No. 1117, July 14, 1963).
Tax Arbitrage
General Rule: Allowed as deduction from
taxpayers gross income
Exception: As a limitation on the general rule,
the amount of interest expense shall be reduced
by 33% of interest income earned which had
been subjected to final withholding tax.
Taxation of Fringe Benefits
General Rule: Taxable if received by non-rank
and file (NRF) employees.
Exceptions:
1. Required or necessary to the business or for
the convenience or advantage of employer;
2. Fringe benefits not taxable under Sec. 32
(B);
3. Fringe benefits authorized and exempted
under special laws;
4. Contributions of the employer for the benefit
of the employee to retirement, insurance
and hospitalization benefit plans (Labor
Code, Section 166);
5. Fringe benefits given to rank and file
employees
6. De minimis benefits
Benefits Required of Necessary to the
Business or for the Convenience or
Advantage of Employer (Convenience of the
Employer Rule)
The bureau exempted mobile phone allowance
granted to employees from fringe benefit tax and
tax on compensation on the basis that the
mobile allowance is deemed required by the
nature of the job of the employees and
deemed necessary to business. The ruling
 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
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recognized that there are now many businesses, difference between the 30% RCIT and the 15%
especially those on 24-hour operations that FWT) against the tax due in its home country.
require employees to be available for
consultation or assignment round the clock. (BIR Tax Treatment of Campaign Contributions
Ruling No. DA-233-07) General Rule: Not included in the taxable
income of the candidate
Benefits from CBA Included as De Minimis
Benefits Requisites for exemption:
Benefits received by an employee by virtue of a 1. must have been utilized to cover a
collective bargaining agreement (CBA) and candidates expenditures;
productivity incentive scheme provided that the 2. used for his/her electoral campaign;
total annual monetary value received from both 3. during the campaign period;
CBA and productivity incentive scheme 4. filed the Statement of Expenditures with the
combined do not exceed P10,000 per COMELEC.
employee, per taxable year. (RR No. 1-2015)
Exceptions:
Taxability of De Minimis Benefits Received in 1. Unulitized/ excess campaign funds subject
Excess of Ceiling to candidates taxable income.
The excess of the de minimis benefits over their 2. Failure to file Statement of Expenditures-
respective ceilings shall be considered as part of entire amount directly subject to income tax.
13th Month Pay and Other Benefits and will be
subject to tax only on the excess over the NOTE: Purchases of goods and services given
P82,000.00 ceiling (RR No. 10-2008 in relation as campaign contribution to political parties and
to RA No. 10653, March 2015). candidates- contributors and supporters are
subject to 5% withholding tax (RR No. 08-2009)
De Minimis Value in Relation with Balikbayan
Boxes Final Withholding Tax and Creditable
Under RA 10863, residents of the Philippines, Withholding Tax
OFWs or other Filipinos while residing abroad or Similarities:
upon their return to the Philippines shall be 1. Liability of the tax rests primarily on the
allowed to bring in or send to their families or payor as a withholding agent; and
relatives in the Philippines balikbayan boxes 2. Failure to withhold/ underwithholding,
which shall be exempt from applicable duties the deficiency tax shall be collected from
and taxes imposed under the NIRC of 1997, as the withholding agent.
amended:
Distinctions:
Provided, That balikbayan boxes shall contain Final Withholding Creditable
personal and household effects only and Tax Withholding Tax
shall neither be in commercial quantities nor The amount of income
intended for barter, sale or for hire and that the Taxes withheld on
tax withheld by the
FCA value of which shall not exceed one certain income
hundred fifty thousand pesos (150,000.00); withholding agent is
payments are intended
constituted as a full
to equal or, at least,
Provided, Further, That every three (3) years and final payment of
approximate the tax
after the effectivity of this Act, the Secretary of the income tax due
Finance shall adjust the amount herein stated to due of the payee on
from the payee of the
its present value using the CPI as published by said income.
said income.
the PSA;
The income recipient
Provided, Finally, That residents of the is still required to file
The payee is not
Philippines, OFWs or other Filipinos can only an ITR to report the
required to file an
avail of this privilege up to three (3) times in income and/or pay the
a calendar year. Any amount in excess of the income tax return for
difference between the
allowable non-dutiable value shall be subject to the particular income.
tax withheld and the
the applicable duties and taxes.
tax due on the income.
Tax Effect of De Minimis Benefits to
Employers When is the gain (or loss) from the transfer
De minimis benefits shall be treated as of property to a corporation in exchange for
deductible expense of the employer. shares NOT recognized under Section 40 (C)
on Tax-Free Exchange?
Tax Sparing Rule 1. Property (excludes cash and services)
The tax due of 30% which should otherwise be is transferred to a corporation;
imposed on dividends could be reduced to 15%, 2. In exchange for stock or unit of
subject to the condition that the country of participation in such corporation;
residence of the recipient of the dividends allows 3. Transferors (not more than five) gain
a credit of 15 percent (representing the control of the transferee corporation
(i.e., gain 51% of all classes of stock
entitled to vote)

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form part of gross income subject to tax

Is the failure to file a tax treaty relief on ordinary income; and
application negate the taxpayers entitlement 2. Prizes that exceed P10,000 shall be
to a preferential tax rate under a tax treaty? subject to final tax.
No. Taxpayers cannot be deprived of their
entitlement to the benefit of a treaty for failure to Taxability of a GPP
strictly comply with an administrative issuance A GPP is tax exempt; however, the individual
requiring the prior application for tax treaty relief. partners are liable to pay income tax in their
At most, the application for a tax treaty relief
individual capacity on their share in the net
from the BIR should merely operate to confirm
the entitlement of the taxpayer to the relief. The profits of the partnership whether distributed
denial of a tax relief based on a tax treaty due to or not.
the failure of a taxpayer to comply with a RMO
would impair the value of the tax treaty and the Q: How is Tax Benefit Rule applied?
States duty to comply in good faith with the tax
treaty. (Deutsche Bank AG Manila v CIR, G. R. A: If a tax when previously paid was not
No. 188550, 2003) considered as allowable deduction from gross
income (hence no tax benefit has been derived),
Ordinary assets pertain to: subsequent refund of the same tax shall not be
a. Stock in trade taxable.
Stock in trade of the taxpayer or other
property of a kind which would properly be Gross Income vs. Allowable Deductions vs.
included in the inventory of the taxpayer Tax Credit
Exclusions Tax Credit
if on hand at the close of the taxable year; Allowable
from Gross
Deductions
b. Inventory for sale Income
Property held by the taxpayer primarily for
sale to customers in the ordinary course of There is Amounts Amounts
his trade or business; income to the which the paid prior to
taxpayer but law allows incurring the
c. Depreciable properties is not to be tax liability
Property used in the trade or business, of a
included in subtracted and
character which is subject to the
computing from gross eventually
allowance for depreciation provided in
the taxable income in deducted
Section 34 (F) of the NIRC; or
income order to therefrom.
d. Land compute the
Real property used in trade or business of net income.
the taxpayer (Sec. 39[A][1], NIRC).
Something Something Something
Other assets not among the above definitions received or spent or paid to the
are Capital Assets. earned by the paid in tax
taxpayer earning authorities
Q: When is a rental security deposit considered
income? which do not gross without legal
form part of income. obligation to
gross do so.
A: If it is applied to the rental of the terminal income.
month or period of contract, it must be
recognized as income at the time it is applied. If
security deposit is given to ensure contract Q: What are the requisites in order for prizes or
awards to be exempt from income tax?
compliance, it is not recognized as income by
the lessor until the lessee violates any A:
provision of the contract. i. Prize or award must be in recognition of
religious, charitable, scientific,
educational, artistic, literary, or civic
Q: Is Liquidating Dividend subject to income
achievement;
tax?
ii. The recipient was selected without any
action on his part to enter the contest
A: General Rule: NO
or proceeding; and
Exception: If the amount received is greater
iii. The recipient is not required to render
than the cost of the share surrendered. Such
substantial future services as a
excess is considered taxable income.
condition to receiving the prize or award.
Tax Treatment of Prizes
Q: What is the Cohan Rule?
Taxation of prizes would depend on its amount: A: Under this rule, taxpayers may use estimates
when they can show that there is some factual
1. Prizes amounting to P10,000 or less shall

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foundation on which to base a reasonable Allowable

approximation of the expense, i.e., they can Requisites
Deduction
prove that they have made a deductible trade, profession or business;
expenditure but just cannot prove how much that 4. Evidenced in a closed and
expenditure was. completed transaction;
5. Arose from fires, storms,
Allowable shipwreck, or other
Requisites
Deduction casualties or from robbery,
1. Must be ordinary and theft, or embezzlement;
necessary; 6. Not claimed as deduction for
2. Paid or incurred during the estate tax purposes; and
taxable year; 7. In case of casualty losses,
3. Directly attributable to, the must be reported to the
development, management, BIR within 45 days from the
operation and/or conduct of occurrence of such loss.
the trade, business or 1. Valid and subsisting debt,
exercise of a profession; legally demandable;
Expenses 4. Supported by adequate 2. The taxpayer is the creditor;
invoices or receipts; 3. Debt is ascertained to be
5. Not contrary to law, public worthless and uncollectible
policy or morals; and as of the end of the taxable
6. The tax required to be year;
withheld on the expense 4. Charged-off or written-off
paid or payable is shown to Bad Debts during the taxable year;
have been remitted to the 5. Connected with taxpayers
BIR (Sec. 2.58.5, RR No. 2- profession, trade or business;
98). 6. NOT sustained in a
1. There must be an transaction entered into
indebtedness; between members of the
2. Indebtedness must be that of same family or related
the taxpayer; taxpayer enumerated in
3. Indebtedness must be Section 36(B) of the NIRC;
connected with the 1. There must be an
taxpayers trade, business or exhaustion, wear, and tear;
exercise of profession; 2. It must be reasonable;
4. Interest must be legally due; 3. It must be charged off during
5. Interest must not incurred to the year;
finance petroleum 4. The asset must be used in
operations; profession, trade or
6. Interest must be stipulated in Depreciation business;
Interest writing; 5. Not specifically disallowed by
7. In case of interest incurred to law (i.e., transportation
acquire property used in vehicle exceeding 2.4Million
trade, business, or exercise and yacht, vessels and
of profession, the same was aircrafts); and
not treated as a capital 6. The asset must have a
expenditure limited useful life.
8. Legal liability to pay interest; 1. There must be an
9. Not paid to related parties Depletion of exhaustion, wear, and tear;
or taxpayers; and 2. It must be reasonable;
Oil and Gas
10. Interest must have been paid 3. It must be charged off during
or incurred on such Wells and
the year; and
indebtedness during the Mines 4. Schedule of allowance must
taxable year. be attached to the return.
1. It must be paid or incurred 1. Contribution or gift must be
within the taxable year; actually paid or made within
2. Connected with taxpayers the taxable year;
Taxes profession, trade or business; 2. Given to entity or institution
and specified by law;
3. Imposed directly on the Charitable 3. Net income of the institution
taxpayer. must not inure to the benefit
and Other
1. Actually sustained by the of any private individual or
taxpayer during the taxable Contributions stockholder;
year; 4. Must be duly supported by
Losses 2. Not compensated by Certificate of Donation and if
insurance or other forms of amount is at least P50,000
indemnity; should also be supported
3. Incurred in connection with with Notice of Donation; and

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 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
TAXATION LAW LAST MINUTE TIPS | BAR EXAMINATIONS 2017
Allowable
Requisites
Deduction
5. Taxpayer making contribution
must be engaged in trade,
profession, or business.
Research 1. Paid or incurred during the
and taxable year; and
2. Connected with taxpayers
Development
profession, trade or business.
1. Employer must have
established a pension or
retirement plan registered
with the BIR;
2. Pension plan must be
Pension
reasonable and actuarially
Trusts sound;
3. Funded by the employer;
and
4. Amount contributed by the
employer must no longer be
subject to his control.
Q: Is an advertising expense for a single product
which is inordinately large in amount fully
deductible?
A: Advertising if generally of two kinds: (1)
advertising to stimulate the current sale of
merchandise or use of services and (2)
advertising designed to stimulate the future sale
of merchandise or use of services. The second
type involves expenditures incurred, in whole or
in part, to create or maintain some form of
goodwill for the taxpayers trade or business or
for the industry or profession of which the
taxpayer is a member. If the expenditures are for
the advertising of the first kind, then, except as
to the question of the reasonableness of
amount, there is no doubt such expenditures are
deductible as business expenses. If, however,
the expenditures are for advertising of the
second kind, then normally they should be
spread out over a reasonable period of time.
(The Tang Case Commissioner vs General
Foods, GR No. 143672, April 24, 2003)
Ceiling on entertainment, amusement and
recreation expenses under RR No. 10-2002
1. For taxpayers engaged in the sale of goods
or properties 0.50% of net sales (which
is gross sales less sales returns, allowances
and discounts); and
2. For taxpayers engaged in the sale of
services, exercise of profession or
use/lease of properties 1% of net
revenues (which is gross revenue less
discounts).
Requisites for valid deduction of political
campaign expenses:
1. the candidate, winning or losing, must have
filed a Statement of Expenditures with the
COMELEC; and
2. Purchase of goods/services must be
subject to 5% creditable withholding tax.
REMEMBER WHY YOU STARTED. REMEMBER WHO YOU ARE.
Q: Can a taxpayer claim losses attributable to
fire and theft without complying with BIR
Regulations?
A: No. To be entitled to claim a tax deduction,
the taxpayer must competently establish the
factual and documentary bases of its claim.
What was required for Tambunting is to submit
the sworn declaration of loss mandated by RRs
12-77. Its failure to do so was prejudicial to the
claim because the sworn declaration of loss was
necessary to forewarn the BIR that it had
suffered a loss whose extent it would be
claiming as a deduction of its tax liability, and
thus enable the BIR to conduct its own
investigation of the incident lseading to the loss.
(H. Tambunting Pawnshop, Inc. vs.
Commissioner, GR No. L-173373, July 29,
2013) Bersamin Case
Q: What is a Tax Arbitrage?
A: It is the practice of profiting from differences
between the ways transactions are treated for
tax purposes.
Q: What is the interest arbitrage rule?
A: The taxpayer's allowable deduction for
interest expense shall be reduced by 33% of the
interest income. Such limit was legislated
specifically to address the tax arbitrage arising
from the difference between the 20% final tax on
interest income and the 30% regular corporate
income tax rate (RCIT) under which interest
expense can be claimed as a deduction.
Q: What is a Net Operating Loss Carry-Over
(NOLCO)?
A: NOLCO is the excess of allowable deduction
over gross income of the business in a taxable
year which shall be carried over as a deduction
from gross income for the next 3 consecutive
taxable years immediately following the year
of such loss.
Tax Deduction vs. Personal Exemptions
Tax Deduction Personal Exemptions
Amount
Actual expenses Arbitrary amount
incurred in the pursuit allowed by law
of trade, business or
practice of profession
Nature
Constitute business Pertain to personal
expenses expenses
Purpose
Allowed to enable the Allowed to cover
taxpayer to recoup his personal, family and
cost of doing business living expenses
Claimants
Claimed by all Claimed only by
taxpayers (Individual individuals
or corporate)
 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
TAXATION LAW LAST MINUTE TIPS | BAR EXAMINATIONS 2017

Q: What is the basis of property acquired by Item of ELIT Requisites

gift? Expenses (whether paid or
A: At the same cost to the donor or the last unpaid) in connection
preceding owner by whom it was not acquired to burial or internment;
by gift 2. Incurred up to the time
of internment;
Q: What corporations are exempt from MCIT? 3. Duly supported; and
(OFFERRINN) 4. Amount deductible is
A: limited to the lowest
1. Offshore banking units; among:
2. Firms taxed under a special income tax a. the actual
regime (such as PEZA or other amount;
economic zones); b. 5% of GE; or
3. Foreign currency deposit units; c. P200,000
4. Proprietary Educational institutions; (limit).
5. Regional operating headquarters; Judicial 1. Incurred during the
6. Real estate investment trusts; and Expenses settlement of the
7. International carrier; estate;
8. Nonprofit hospitals; 2. Incurred not beyond
9. Nonresident foreign corporations the last day prescribed
by or the extension
Q: What is the Convenience of the Employer thereof, for the filing of
Rule? estate tax return;
3. Incurred for the benefit
A: When a fringe benefit is given to an of the estate; and
employee and it is required by the nature of, 4. Duly supported.
or necessary to the trade, business or Claims 1. Represents a personal
profession of the employer, or when the fringe Against the obligation of the
benefit is for the convenience or advantage of Estate deceased existing at
the employer, the fringe benefit is exempt from the time of his death
the FBT (Sec. 33[A], NIRC) except funeral and
medical expenses;
Q: Are de minimis benefits received by RF 2. In good faith and for
employees in excess of their respective ceilings adequate and full
for exemption automatically subject to income consideration in money
taxation? or moneys worth;
3. Valid in law and
A: No. The excess of the de minimis benefits enforceable in court;
over their respective ceilings shall be considered 4. Not condoned by
as part of the P82,000 13th Month Pay and creditor or action to
Other Benefits and the employee receiving it collect has not yet
will be subject to tax only on the excess over prescribed;
such P82,000 ceiling. (RR No. 10-2008 in 5. Debt instrument must
relation to Sec. 32[B][7][e], NIRC). be notarized; and
6. If the loan was
Q: When is the payor/employer obliged to contracted within 3
deduct and withhold the related withholding years before the death
taxes on accrued bonuses? of the decedent, the
administrator or
A: The obligation to withhold arises at the time executor shall submit a
the income was paid or accrued or recorded statement under oath
as expense, whichever comes first. (ING showing the disposition
Bank vs CIR, GR No. 167679, July 22, 2015). of the proceeds of the
loan.
Q: What is IAET? Claims 1. The amount of said
A: IAET is a penalty tax upon a corporate Against the claims has been
taxpayer for accumulating so much net income Insolvent initially included as
after tax beyond the reasonable needs of the Persons part of the GE; and
business. The NIRC imposes for each taxable 2. The incapacity of the
year an IAET of 10% of the improperly debtors to pay their
accumulated taxable income. obligations is proven,
not merely alleged.
ESTATE TAX Unpaid 1. The full FMV of the
Mortgage or mortgaged property is
Requisites for deductibility of Expenses, Indebtedness included in the GE;
Losses, Interest and Taxes and
Item of ELIT Requisites 2. The mortgage
Funeral 1. Actually incurred /indebtedness to be

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 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
TAXATION LAW LAST MINUTE TIPS | BAR EXAMINATIONS 2017
Item of ELIT Requisites
deducted shall be
limited to the extent
that they were
contracted in good faith
and for an adequate
and full consideration
in money/moneys
worth.
Taxes 1. The tax must have
accrued prior to or as
of the death of the
decedent; and
2. Such tax must be
unpaid as of the time of
death of the decedent;
Losses 1. Arose from fire, storm,
shipwreck, or other
casualty, robbery, theft
or embezzlement;
2. Incurred during the
settlement of the
estate, but before the
last day for the
payment of estate tax
(6 months after the
decedents death, or
the allowed extension);
3. Not compensated for
by insurance or
otherwise; and
4. Had not been claimed
as a deduction in ITR
of the estate.
Requisites of Special Deductions
Special
Requisites
Deductions
Family Home 1. Must be the actual
residential home of the
decedent and his family
at the time of his death,
as certified by
Barangay Captain of
the locality where it is
situated;
2. Value must have been
included in the GE;
3. Allowable deduction is
limited to the lowest
among:
a. FMV as
declared or
included in the
GE;
b. the extent of
the decedents
interest
(whether
conjugal or
community, or
exclusive
property); or
c. P1,000,000
(limit).
Medical 1. Medical expenses have
Expenses been incurred within 1
REMEMBER WHY YOU STARTED. REMEMBER WHO YOU ARE.
Special
Requisites
Deductions
year prior to decedents
death;
2. Duly substantiated; and
3. Does not exceed
P500,000.
Amount A certain amount was
Received by received by the heirs from
Heirs Under the decedents employer by
RA No. 4917 reason of the decedents
death in accordance with
R.A. 4917; and
Amount is included in the
GE.
DONORS TAX
Q: Must donative intent be proved in transfers of
shares for less than adequate or full
consideration?
A: No. The absence of donative intent does not
exempt the sales of stock transaction from
donor's tax since Sec. 100 of the Tax Code
categorically states that the amount by which the
FMV of the property exceeded the value of the
consideration shall be deemed a gift. (Philippine
American Life and General Insurance Company
v. The Secretary of Finance and CIR, G.R. No.
210987, November 24, 2014)
Q: What are the requisites of exempt donation of
dowries?
A:
i. Must be on account of marriage;
ii. Made before its celebration or within 1
year thereafter;
iii. The donor is a parent while the donee is
a legitimate, recognized natural or
adopted child; and
iv. Only to the extent of P10,000 (per
parent).
VALUE-ADDED TAX
Destination Principle
The destination of the goods determines
taxation or exemption from VAT. Goods and
services are taxed only in the country where
they are consumed. Thus, exports are zero
rated while imports are taxed.
Cross Border Doctrine
No VAT shall be imposed to form part of the cost
of goods destined for consumption outside of the
territorial border of the taxing authority. Hence,
actual export of goods and services from the
Philippines to a foreign country must be free of
VAT; while, those destined for use or
consumption within the Philippines shall be
imposed with VAT (CIR vs Toshiba, GR No.
150154, Aug. 9, 2005).
 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
TAXATION LAW LAST MINUTE TIPS | BAR EXAMINATIONS 2017

Case Law Zero-rated Sale VAT-Exempt Sale

VAT on export sales of goods are zero-rated as expense
transactions since they are destined to be Remedy for Excess Input Tax
used or consumed outside the Philippines. Taxpayer may apply No input tax is
For purposes of export sales, special for tax credit or recognized; Said
economic zones (like PEZA or SBMA) are refund amount shall form
considered as foreign territory by fiction of part of the goods,
law (CIR vs Toshiba, GR No. 150154, Aug. properties or
9, 2005). services purchased
and may be claimed
Q: Is VAT on toll fees considered as tax on tax as expense
and therefore invalid?
Tax Credit Method / Invoice Method
A: No. VAT on tollway operations cannot be The Tax Credit Method is a way of computing
deemed a tax on tax due to the nature of VAT as the VAT of a taxpayer. In this method, the input
an indirect tax. In indirect taxation, a distinction taxes shifted by the sellers to the buyer are
is made between the liability for the tax and the credited against the buyers output taxes when
burden of the tax. The seller who is liable for the he in turn sells the taxable goods, properties or
VAT may shift or pass upon the amount of VAT services.
it paid on goods, properties or services to the
buyer. Once shifted, the VAT ceases to be a tax Sec. 112(c) vs. Sec. 229 of the Tax Code
and simply becomes part of the cost that the Section 112(C) Section 229
buyer must pay in order to purchase the service. Prescriptive period
(Diaz v. Secretary of Finance, G.R. No. 193007, 2 years 2 years
July 19, 2011) Reckoning period
From the close of From the date of
the taxable quarter payment of the tax or
Q: Is the sale of a fully depreciated company when the sales were penalty regardless of
vehicle (which is said to be an isolated made any supervening
transaction) subject to VAT? cause
Tax involved
A: Yes. It does not follow that an isolated Excess input tax Erroneously/illegally
transaction cannot be an incidental transaction collected tax
for purposes of VAT liability. Indeed, a reading Prescription of Judicial Action
of Section 105 of the Tax Code would show that
within 30 days from Within the 2 year
a transaction "in the course of trade or business"
denial or expiration prescriptive period
includes "transactions incidental thereto."
of 120 day period for
(Mindanao II Geothermal vs CIR, GR No.
BIR to act on the
193301, March 11, 2013)
claim regardless of
whether it is within or
Transactions Deemed Sale
outside the 2 year
Such transactions include:
prescriptive period
1. Transfer, use or consumption not in the
course of trade or business;
Q: What are the rules on the determination of
2. Transfer as share in profit or payment of
the prescriptive period for filing a tax refund or
debts;
credit of unutilized input VAT?
3. Consignment of goods (if there is no actual
sale within 60 days); and
A:
4. Transfer of inventories due to retirement or
1. An administrative claim must be filed with
cessation of business.
the CIR within 2 years after the close of the
taxable quarter when the zero-rated or
VAT Zero-Rated Sale vs. VAT-Exempt Sale
effectively zero-rated sales were made;
Zero-rated Sale VAT-Exempt Sale 2. The CIR has 120 days from the date of
Scope submission of complete documents in
Partial relief from support of the administrative claim within
Total relief from VAT
VAT which to decide whether to grant a refund or
Output Tax issue a TCC. The 120- day period may
No tax liability due to No tax liability extend beyond the two-year period from the
subjecting the sale because of filing of the administrative claim if the claim
to 0% rate exemption is filed in the later part of the two-year
Recognition of Input Tax period. If the 120-day period expires without
Taxpayer must No input tax is any decision from the CIR, then the
recognize input recognized; Said administrative claim may be considered to
taxes on purchases amount shall form be denied by inaction;
made in relation to part of the goods, 3. A judicial claim must be filed with the CTA
zero-rated sales properties or within 30 days from the receipt of the CIRs
services purchased decision denying the administrative claim or
and may be claimed

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 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
TAXATION LAW LAST MINUTE TIPS | BAR EXAMINATIONS 2017
from the expiration of the 120-day period
without any action from the CIR; and
4. All taxpayers, however, can rely on BIR
Ruling No. DA-489-03 from the time of its
issuance on 10 December 2003 up to its
reversal by the Court in Aichi on 6 October
2010, as an exception to the mandatory and
jurisdictional 120+30 day periods.
(Mindanao II Geothermal Partnership v. CIR,
and Mindanao I Geothermal Partnership v.
CIR, G.R. Nos. 193301 and 194637, March
11, 2013)
Proof of Input VAT claim
1. VAT invoice for purchase of goods or
properties
2. VAT official receipts for exchange of
services.
Case Law
The failure to indicate the words zero-rated
on the invoices and receipts issued by a
taxpayer would result in the denial of the
claim for refund or tax credit. (Eastern
Telecom Phils. vs. CIR, G.R. No. 183531
dated March 25, 2015)
DOCUMENTARY STAMP TAX
Q: Who is liable to pay DST?
A: Either party to the transaction may be liable
for the DST. If one party is exempt, the other
party who is not exempt shall be directly liable
for the DST. (Sec. 173, NIRC; Sec. 2, RR 9-00)
Q: Are instructional letters and vouchers subject
to DST?
A: Yes. Instructional letters as well as the
journal vouchers evidencing advances extended
to affiliates qualify as loan agreements upon
which DST may be imposed. (CIR vs. Filinvest,
G.R. No. 163653, July 19, 2011)
LOCAL BUSINESS TAX
Situs of Business Taxes
The place where the sales would be recognized
and the tax would be paid shall depend on
whether or not the business maintains a branch
or sales outlet:
Sales recorded/tax paid at
With a branch or Record the sale in the
sales outlet branch or sales outlet
making the sale or
transaction, and the tax
thereon shall accrue and
shall be paid to the
municipality where such
branch or sales outlet is
located
Without a branch Recorded in the principal
or sales outlet office and the taxes due
REMEMBER WHY YOU STARTED. REMEMBER WHO YOU ARE.
shall accrue and shall be
paid to such city or
municipality
If the business has factories, project offices,
plants, and plantations, the following sales
allocations shall be made:
1. If the factory and plantation is located in the
same city or municipality:
30% recorded where the principal
office is located; and
70% recorded where the factory,
project office, plant, or plantation is
located.
2. If the factory and plantation is located in
different cities or municipalities:
30% recorded where the principal
office is located; and
70% shall be divided as follows:
o 60% where the factory is located;
and
o 40% where the plantation is located
3. If the business has 2 or more factories,
project offices, plants, and plantations
located in different localities:
30% recorded where the principal
office is located; and
70% shall be prorated among the
localities where the factories, project
offices, plants, and plantations are
located in proportion to their respective
volumes of production
NOTE: The foregoing sales allocation shall be
applied irrespective of whether or not sales are
made in the locality where the factory, project
office, plant, or plantation is located.
REAL PROPERTY TAXATION
Real Property Taxes for Properties Owned by
the Government
General Rule: Real property owned by the
Republic of the Philippines or any of its political
subdivisions is exempt from payment of real
property tax.
Exception: When the beneficial use thereof has
been granted, for consideration or otherwise, to
a taxable person. (Sec. 234[a], LGC)
Actual use is defined as the purpose for
which the property is principally or
predominantly utilized by the person in
possession thereof (Sec. 199[b], LGC). It is the
basis for assessment regardless of where
located, whoever owns it, and whoever uses it
(Sec. 217, LGC).
Q: Is the Mactan Cebu International Airport
Authority (MCIAA) a GOCC liable for RPT under
the LGC?
 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
TAXATION LAW LAST MINUTE TIPS | BAR EXAMINATIONS 2017

A: No. The MCIAA is an instrumentality of the when: (a) the declared

government, thus, its properties actually, solely value fails to disclose in frill
and exclusively for public purposes, consisting the price actually paid or
of the airport terminal building, airfield, runway, payable or any dutiable
taxiway and the lots on which they are situated, adjustment to the price
are not subject to RPT. actually paid or payable; or
(b) when an incorrect
TARIFF AND CUSTOMS CODE valuation method is used or
the valuation rules are not
Tariff Powers of the President properly observed. (Section
The Congress may, by law, authorize the 1400, CMTA)
President to fix within specified limits, and
subject to such limitations and restrictions as it Special duties include:
may impose, tariff rates, import and export a. Dumping Duty
quotas, tonnage and wharfage dues, and other b. Countervailing Duty
duties or imposts within the framework of the c. Marking Duty
national development program of the d. Discriminatory Duty
Government. (Art. VI, Sec. 27[2], 1987 e. Safeguard Duty
Constitution)
Formal vs. Informal Entry
Outright Smuggling vs. Technical Smuggling Informal entries
Unlawful Required for:
Importation Fraudulent Practices 1. articles of commercial nature intended for
(Outright (Technical Smuggling) sale, barter or hire the DV is P2,000 or less;
Smuggling) and
Goods and articles Goods and articles 2. personal and household effects, not in
of commerce are are brought into the commercial quantity, for personal use
brought into the country through
country without the fraudulent, falsified Formal entries
required importation or erroneous Required for imported items for immediate
documents, or are declarations, to consumption, or under irrevocable domestic
disposed of in the substantially reduce, letter of credit, bank guarantee or bond for:
local market without if not totally avoid, 1. placing article in customs bonded
having been cleared the payment of warehouse;
by the BOC or other correct taxes, duties 2. constructive warehousing and immediate
authorized and other charges. transportation to other Philippine ports upon
government Such goods and proper examination and appraisal; and
agencies, to evade articles pass through 3. constructive warehousing and immediate
the payment of the BOC, but the exportation.
correct taxes, duties processing and
and other charges. clearing procedures EXCISE TAX
Such goods and are attended by
articles do not fraudulent acts in Traditional definition of Excise Tax vs.
undergo the order to evade the Excise Tax under the NIRC
processing and payment of correct Traditional definition Excise Tax under the
clearing procedures taxes, duties, and other NIRC
at the BOC, and are charges. Often Refers to tax on the Refers to taxes
not declared through committed by means
exercise of a privilege applicable to certain
submission of import of misclassification
documents, such as of the nature, quality or a right. specified or selected
the import entry and or value of goods and goods or articles
internal revenue articles, manufactured or
declaration. undervaluation in produced in the
terms of their price, Philippines for
quality or weight, domestic sale or
and misdeclaration
of their kind. consumption or for any
other disposition and
Misdeclaration vs. Misclassification vs. to things imported into
Undervaluation the Philippines.
Misdeclaration Wrong declaration of
quantity, quality, TAX REMEDIES - NIRC
description, weight, or
measurement of the goods. Tax Deficiency vs. Tax Delinquency
Misclassification Insufficient or wrong Tax Deficiency Tax Delinquency
description of the goods or
There is deficiency There is delinquency
use of wrong tariff heading
when: when:
Undervaluation There is undervaluation

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 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
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Tax Deficiency Tax Delinquency supporting

1. the amount by 1. the self-assessed documents
which the tax tax was not paid or Reckoning From date of From date of
imposed was only partially
of the 180- filing of the submission of
exceeds the paid; or
amount shown 2. the deficiency tax day period protest the required
as the tax by the assessed by the to appeal relevant
taxpayer upon BIR became final to CTA supporting
his return; or and executory. documents
2. If no amount is
shown as the tax Proper Party to File Refund
by the taxpayer General Rule: The proper party to seek a refund
upon his return, is the statutory taxpayer. (Silkair v. CIR, G.R.
or if no return is No. 173594, 2008)
made by the
taxpayer, then Exception: If the law confers exemption from
the amount by both direct or indirect taxes, claimant is entitled
which the tax to a refund if claimant in not the statutory
exceeds the taxpayer but only bears the economic burden of
amounts the tax. (Philippine Airlines v. CIR, G.R. No.
previously 198759, 2103)
assessed (or
collected without Although PNB was not able to submit Gotescos
assessment) is a BIR Form No. 2307, the Court is persuaded and
deficiency (Sec. so declares that PNB submitted evidence
56[B], NIRC). sufficiently showing Gotescos non-utilization of
the taxes withheld subject of the refund. There is
Requisites of Valid Final Assessment Notice no need for PNB to present Gotescos BIR Form
1. It must be made within the prescriptive No. 2307, as insisted by the First Division,
period; because the information contained in the said
2. It is preceded by a preliminary form may be very well gathered from other
assessment; documents already presented by PNB. Thus, the
3. It must state the facts that transpired presentation of BIR Form No. 2307 would be in
during the preliminary assessment, the the final analysis a superfluity, of little or no
applicable law, rules and regulations or value. (PNB v. CIR, G.R. No. 206019, March 18,
jurisprudence on which the assessment 2015)
is based.
Claim for Tax Refund/Credit of Excess Input
Q: What is a Jeopardy Assessment: Tax Filed Beyond the Period Provided by
Law
A: It is an assessment made by an authorized The claim for refund or credit had already
RO without the benefit of complete or partial prescribed. The prescriptive period commences
audit, in the light of the ROs belief that the from the close of the taxable quarter when the
sales were made and not from the time the input
assessment and collection of a deficiency tax
VAT was paid nor from the time the official
will be jeopardized by delay caused by the receipt was issued. Secs. 204(C) and 229 of the
taxpayers failure to: NIRC where the claim for refund must be filed
a. comply with the audit and investigation within two years after the payment of the tax are
requirements to present his books of also inapplicable. They only apply to instances
accounts and/or pertinent records; or of erroneous payment or illegal collection for
b. substantiate all or any of the deductions, internal revenue taxes, and not tax refund for
exemptions or credits claimed in his return. creditable input VAT on zero-rated sales. (CIR v.
Mirant Pagbilao Corp., G.R. No. 172129.
Motion for Reconsideration vs. Motion for September 12, 2008).
Reinvestigation
Motion for Motion for Taxpayers Suit vs. Citizens Suit
Reconsiderati Reinvestigati Taxpayers Suit Citizens Suit
on on Plaintiff is affected by Plaintiff is but the mere
Basis Based on Based on the expenditure of instrument of the
existing newly- public funds public concern.
records discovered or The right of a citizen In matter of mere
additional and a taxpayer to public right, however
evidence maintain an action in the people are the real
Additional No additional With additional courts to restrain the parties. It is at least
period period period of 60 unlawful use of public the right, if not the
days to submit funds to his injury duty, of every citizen to

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 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
TAXATION LAW LAST MINUTE TIPS | BAR EXAMINATIONS 2017

Taxpayers Suit Citizens Suit tax. collection of

cannot be denied. interfere and see that the amount
(Biraogo vs The a public offense be due.
Limitations 1. For cases All criminal
Philippine Truth properly pursued and
of financial violations may
Commission, G.R. No. punished, and that a incapacity: be
192935, Dec. 7, 2010) public grievance be a minimum
compromised
remedied corporate
equivalent except:
Requisites of a Valid Waiver to 10% of 1. those
1. The Waiver of the Statute of Limitations the basic already filed
under Section 222 (b) and (d) shall be tax; and in court, or
executed before the expiration of the 2. For other 2. those
period to assess or to collect taxes. The cases: a involving
date of execution shall be specifically minimum fraud.
indicated in the waiver. compromis
2. The waiver shall be signed by the e rate
taxpayer himself or his duly authorized equivalent
representative. ln the case of a to 40% of
corporation, the waiver must be signed the basic
by any of its responsible officials; assessed
3. The expiry date of the period agreed tax.
upon to assess/collect the tax after the
regular three-year period of prescription Deficiency Interest vs. Delinquency Interest
should be indicated. Deficiency Interest Delinquency Interest
Rate of 20% per Rate of 20% per
Q: Can a waiver which does not comply with annum of the unpaid annum of the unpaid
RMO No. 20-90 and RDAO No. 01-05 become
amount amount
valid?
Imposed on any Imposed on the
A: Yes. The general rule is that when a waiver unpaid amount of tax following instances:
does not comply with the requisites for its from the date of 1. Failure to pay
validity specified under RMO No. 20-90 and payment prescribed tax due on any
RDAO 01-05, it is invalid and ineffective. until the amount is fully return required
However when there are peculiar to be filed;
paid.
circumstances, the waiver may be valid. In this 2. Failure to pay
case, First, the parties are in pari delicto or in tax due for
equal fault. Second, the Court has repeatedly which no
pronounced that parties must come to court with return is
clean hands. Following the foregoing principle, required; or
respondent should not be allowed to benefit 3. Failure to pay
from the flaws in its own Waivers and a deficiency
successfully insist on their invalidity in order to tax, or any
evade its responsibility to pay taxes. Finally, the surcharge or
Court cannot tolerate this highly suspicious interest
situation. (CIR vs. Next Mobile Inc., G.R. No. thereon on the
212825 dated December 7, 2015) due date
appearing in
Compromise vs. Abatement the notice and
Compromise Abatement demand of the
When 1. when a 1. When the Commissioner
available reasonable tax or any of Internal
doubt as to portion Revenue.
the validity thereof
of the claim appears to Power of the CIR to inquire into bank
against the be unjustly deposits
taxpayer or The CIR has the authority to inquire into bank
exists; or excessively deposit accounts and other related information
2. the assessed; held by financial institutions. The authority
financial or extends ONLY to information of:
position of 2. The a. a decedent to determine his GE;
the administrati b. any taxpayer applying for compromise on
taxpayer on and the ground of financial incapacity; and
demonstrat collection c. taxpayer/s upon request from a foreign tax
es a clear costs authority pursuant to an international
inability to involved do agreement;
pay the not justify
assessed the

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 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
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Authority of Revenue Officer to audit limited proceeding shall be entertained in court after the
to years indicated in the LOA expiration of the 2 year period.
Based on Sec. 30 of the Tax Code, there must
be a grant of authority before any revenue TAX REMEDIES RPT
officer can conduct an examination or
assessment. Equally important is that the Erroneous Assessment vs. Illegal
revenue officer so authorized must not go Assessment of RPT
beyond the authority given. In the absence of Erroneous Illegal Assessment
such an authority, the assessment or
Assessment
examination is a nullity. (CIR vs. Sony, G.R. No.
178697 dated Nov. 17, 2010) Presupposes that the An assessment is
taxpayer is subject to illegal if it was made
Remedy to Question the Adverse Ruling of the tax but is disputing without authority under
the Secretary of Finance in the Exercise of the correctness of the the law.
its Power of Review Under Section 4 amount assessed. The
There is no provision in law that expressly taxpayer claims that
provides where exactly the ruling of the
the local assessor
Secretary of Finance under the adverted NIRC
provision is appealable to. However, We find erred in determining
that Sec. 7(a)(1) of RA 1125, as amended, any of the items for
addresses the seeming gap in the law as it vests computing the real
the CTA, albeit impliedly, with jurisdiction over property tax.
the CA petition as other matters arising under The taxpayer must The taxpayer may
the NIRC or other laws administered by the BIR. directly resort to
exhaust the
Accordingly, reviews by the Secretary of judicial action without
Finance pursuant to Sec. 4 of the NIRC are administrative
paying under protest
appealable to the CTA. (Philippine American Life remedies provided
the assessed tax and
and Gen. Insurance vs. SOF and CIR, GR under the LGC before filing an appeal with
No.210987, November 24, 2014) resorting to judicial the Local and Central
action. The taxpayer Board of Assessment
Case Law must first pay the real Appeals. The taxpayer
A "decision" differs from an "assessment" property tax under shall file a complaint
protest. Should the for injunction before
and failure of the FDDA to state the facts
the RTC to enjoin the
and law on which it is based renders the taxpayer find the
LGU from collecting
decision void - but not necessarily the action on the protest real property taxes.
assessment. RR No. 12-99 where it is stated unsatisfactory, the The party unsatisfied
that failure of the FDDA to reflect the facts taxpayer may appeal with the decision of the
and law on which it is based will make the with the LBAA within RTC shall file an
decision void does not extend to the 60 days from receipt of appeal, not a petition
the decision on the for certiorari, before
nullification of the entire assessment. Tax
the CTA, the complaint
laws may not be extended by implication protest. If the taxpayer being a local tax case
beyond the clear import of their language, is still unsatisfied after decided by the RTC.
nor their operation enlarged so as to appealing with the The appeal shall be
embrace matters not specifically provided. LBAA the taxpayer filed within fifteen (15)
(CIR vs. Liquigaz Philippines, G.R. No. may appeal with the days from notice of the
215534 dated April 18, 2016) CBAA within 30 days trial courts decision.
The CTAs decision
from receipt of the
may then be appealed
TAX REMEDIES LOCAL TAXATION Local Boards before the SC through
decision. The decision a petition for review on
Payment Under Protest of the CBAAis certiorari under Rule
Payment under protest is applicable only if the appealable before the 45 of the Rules of
issue is anchored on the correctness, CTA En Banc. The Court raising pure
reasonableness or excessiveness of an questions of law.
CTAs decision may
assessment. It is not applicable nor required
when the taxpayer is questioning the very then be appealed
authority and power of the assessor to impose before the SCthrough
the assessment and the treasurer to collect the a petition for review on
tax. certiorari under Rule
45 of the Rules of
Claim for Tax Refund/Credit Court raising pure
A taxpayer must file a written claim within 2
questions of law.
years from the date of the payment of the tax
with the local treasurer or from the date the
taxpayer is entitled to refund. No case or Remedy to Question the Legality or Validity
of Assessment

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If the only issue is the legality or validity of the
assessment a question of law direct
recourse to the RTC is warranted. In the case at
bar, the claim of petitioner essentially questions
the very authority and power of the Municipal
Assessor to impose the assessment and of the
Municipal Treasurer to collect the real property
tax with respect to the machineries and
equipment. Certainly, it does not pertain to the
correctness of the amounts assessed but
attacks the validity of the assessment of the
taxes itself. (Napocor v. Municipal Government
Of Navotas, et al, G.R. No. 192300. November
24, 2014)
TAX REMEDIES TARIFF AND CUSTOMS
Automatic Review
Decisions of the Collector of Customs in seizure
and protest cases are subject to review by the
Commissioner upon appeal as provided under
existing laws; provided, however, that where a
decision of the Collector Customs in such
seizure and protest cases is adverse to the
government, it shall automatically be reviewed
by the Commissioner of Customs. (CMO No. 20-
87)
Returning residents
Refer to nationals who have stayed in a foreign
country for a period of at least 6 months.
Conditions for exemptions from tax and
duties
Returning residents shall have tax and duty
exemption on personal and household effects.
Provided, that:
(1) It shall not be in commercial quantities;
(2) It is not intended for barter, sale or for hire;
and
(3) It does not exceed the FCA or FOB value
limit of:
a. P350,000 those who stayed in a
foreign country for at least 10 years
and not availed of this privilege
within 10 years prior to returning
residents arrival.
b. P250,000 those who stayed in a
foreign country for at least 5 but not
more than 10 years and not availed
of this privilege within 5 years prior
to returning residents arrival.
c. P150,000 those who stayed in the
foreign country for less than 5 years
and not availed of this privilege
within 6 months prior to returning
residents arrival.
Balikbayan box
Refers to a corrugated box or other container or
receptacle up to a maximum volume of 200,000
cubic centimeters without regard as to shape or
receptacle.
For purposes of duty tax and exemption, the
Balikbayan box should contain only personal
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and household effects that shall neither be in
commercial quantities nor intended for barter,
sale or for hire sent by Qualified Filipino While
Abroad (QFWA) and shall not exceed P150,000.
QFWA can send to their families or relatives in
the Philippines balikbayan boxes which shall be
exempt from payment of duties and taxes, up to
3 times in a calendar year
CTA JURISDICTION
Jurisdiction of CTA Division
(1) Exclusive original or appellate jurisdiction to
review
a. Decisions of
i. CIR on matters arising under NIRC
ii. RTC in the exercise of their original
jurisdiction (Note: Decisions of RTC in the
exercise of their appellate jurisdiction are
appealable to CTA en banc)
iii. COC on matters arising under customs
laws
iv. SOF on customs cases elevated to him
for review from decisions of the COC
v. Secretary of Trade and Industry in
case of non-agricultural product
vi. Secretary of Agriculture in case of
agricultural product
b. Inaction of CIR on assessments and
refunds
(2) Exclusive original jurisdiction over
a. Criminal offenses arising from violations
of the NIRC or TCC where principal amount
claimed (exclusive of charges and penalties is
P1,000,000 or more
b. Tax collection cases on final and
executory assessments where principal amount
claimed (exclusive of charges and penalties) is
P1,000,000 or more;
(3) Exclusive appellate jurisdiction over appeals
from the judgments of the RTC in their original
jurisdiction
a. Criminal offenses arising from violations
of the NIRC or TCC where principal amount
claimed (exclusive of charges and penalties) is
less than P1,000,000 or where there is no
specified amount claimed;
b. Tax collection cases within its territorial
jurisdiction (less than P1,000,000 or where
there is no specified amount claimed)
Jurisdiction of CTA En Banc
Exclusive appellate jurisdiction to review the
decisions, resolutions or orders of
(1) CTA Division in the exercise of its
appellate jurisdiction (on MR/MNT)
over:
i. Decisions of BIR, BOC, DOF, DTI,
DA;
ii. Local tax cases decided by the
RTC in the exercise of their original
jurisdiction; and
 FAR EASTERN UNIVERSITY INSTITUTE OF LAW
TAXATION LAW LAST MINUTE TIPS | BAR EXAMINATIONS 2017

iii. Tax collection cases decided by

the RTC in the exercise of their original
jurisdiction involving final and executory
assessments where the principal
amount claimed is less than
P1,000,000;
iv. Criminal offenses arising from
violations of the NIRC or TCC

(2) CTA Division in the exercise of its

original jurisdiction over
i. Tax collection cases (P1,000,000 or
more);
ii. Criminal offenses arising from
violations of NIRC or the TCC
(1,000,000 or more)

(3) RTC in the exercise of their

appellate jurisdiction over (Note:
Decisions of RTC in the exercise of their
original jurisdiction are appealable to
CTA Division)
i. local tax cases
ii. tax collection cases decided by
them
iii. Criminal offenses arising from
violations of the NIRC or TCC

(4) CBAA in the exercise of its

appellate jurisdiction over real property
tax cases

Conditions for CTA to suspend the collection

of NIRC taxes
Case Law
The CTA may order the suspension of the
collection of taxes provided that the taxpayer
either: (1) deposits the amount claimed; or
(2) files a surety bond for not more than
double the amount. (Tridharma Marketing
Corp. vs. CTA and CIR, G.R. No. 215950
dated June 20, 2016) Bersamin case

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