Taxation Law PDF

San Beda College of Law
MEMORYAI
DIN TAXATI
ON LAW
TAXATI
ONLAW
6. l
evi
edf
orapubl
i
cpur
pose.
I
.GENERALPRI
NCI
PLES
REQUI TESOFAVALI
SI DTAX
POWEROFTAXATI
ON 1. shoul dbef orapubl i
cpur pose
TAXATI ON – power by whi ch the 2. ther uleoft axat i
onshall beuni f
or m
sovereign thr
ough itslaw-
making body 3. thatei thert he person orpr oper t
y
rai
sesr ev
enuet o defr
aythenecessary taxedbewi t
hint hej
urisdi cti
onoft he
expenses ofgov ernmentfrom among taxingaut hori
ty
those who i n some measur e are 4. thatt heassessmentandcol lectionof
pri
vil
egedt oenjoyitsbenefi
tsandmust certai n kinds oft axes guar ant ees
bearitsburdens. against i nj
ust i
ce t o i ndividual s,
especi ally by way of not ice and
TwoFol dNat ureofthePowerof oppor t
unityf orhearingbepr ovided
Taxati
on 5. the t ax mustnoti mpi nge on t he
1.Iti
saninherentatt
ri
buteofsover
eignt
y inher ent and Const i
tutional
2. I ti
slegislati
veincharact
er li
mi tationsont hepoweroft axation
ExtentofTaxingPower THEORI ESANDBASESOFTAXATI ON

Subjectt
oconsti
tut
ionalandinher
ent 1. Li febloodTheor y
restri
cti
ons,the power of taxati
on is Taxesar ewhatwepayf orci v
il
ized
regarded as comprehensive,unli
mit
ed, society .Withoutt axes,t he gov ernment
plenaryandsupreme. woul dbepar al
yzedf orlackoft hemot iv
e
powert oact iv
ateandoper ateit.Hence,
SCOPEOFLEGI SLATIVETAXINGPOWER despite t he nat ural r eluct
ance t o
1. Amountorr ateoft ax surrender par t of one' s har d-earned
2. Appor ti
onmentoft hetax i
ncome t ot he taxing aut horit
ies,ev ery
3. Kindoft ax personwhoi sabl et omustcont ributehis
4. Met hodofcol l
ecti
on sharei nt her unni
ngoft hegov er nment .
5. Pur pose/sofi t
sl evy,pr
ovi
ded i
tis (CI
Rv .Algue, I
nc.
)
forpublicpur pose
6. Subj ectt o be taxed,provi
ded i
tis 2. Necessi t
yTheor y
withinitsjuri
sdicti
on Thepowert ot axisanat tr
ibuteof
7. Situsoft axati
on sover eigntyemanat i
ngfrom necessi t
y .It
i
s a necessar ybur den to preservet he
TAXES – enf or
ced pr opor
ti
onal State'ssov erei
gntyandameanst ogi v e
contri
butions fr
om t he persons and the ci ti
zenry an ar my t o resist an
propertylevi
edbyt helaw-
makingbodyof aggressi on,anav yt odefendi tsshor es
theSt atebyv i
rtueofi tssov
er ei
gntyi
n from inv asion,acor psofcivi
lser v
antst o
suppor tofgov ernmentand f orpubli
c serve,publ ici mprovement sdesignedf or
needs. theenj oymentoft hecit
izenryandt hose
whichcomewi thi
nt heSt ate'
st err
itory,
CHARACTERI CSOFTAXES
STI and f acil
it
ies and pr otecti
on whi ch a
1. forcedchar ge; gover nmenti ssupposedt oprov de.(
i Phi l
.
2. pecuni ar
ybur denpay ableinmoney ; Guar ant yCo., I
nc.v.CIR)
3. levi
edbyt hel egisl
atur
e;
4. assessedwi thsomer easonablerul
e 3. Benef i
ts-
Prot
ecti
on / Reci pr
ocity
of appor ti
onment ;( see theoret
ical Theor y
justi
ce) Taxati
onisdescribedasasymbi oti
c
5. imposed by t he State wi t
hin it
s rel
ati
onshipwherebyi nexchangeoft he
juri
sdicti
on; benefit
sandpr otect
ionthatthecit
izens
getfrom theGovernment,tax
esarepaid.
(CI
Rv .Algue,I
nc.
)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
neTorres ASST.CHAI
RPERSON:
RhohailCastr
o EDP:Rachel
leSaya SUBJECTHEADS:Jemi
naSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
res :MEMBERS:Mari
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
2
MEMORYAI
DIN TAXATI
ON LAW
Note: While taxes ar e intended for amountt o be raised ort he per sons,
general benefi
ts, special benefi
ts to pr
opertyorotherpr
iv i
legest
obet axed.
taxpayer
s ar e not r equi
red. The The court’
s power i nt axation is
Gov er
nment r enders no speci al or l
imit
ed onl y to t he applicati
on and
commensur atebenefittoanypar ti
cul
ar i
nter
pretat
ionofthel aw.
personorproperty
.
Note: The pri
ncipl
e of j
udi
cial non-
IS THE POWER TO TAX THE POWER TO i
nterf
erenceext
endstot
headminist
rat
ive
DESTROY? r
ealm.
1. “Power t o t ax is t he power t o
destroy
”( Mar shal
lDi ctum)– r efer
st o ASPECTSOFTAXATION
theunli
mi t
ednessandt hedegr eeorv i
gor 1. Levyori mposit
ion ofthe t
ax (t
ax
with which the t axi
ng powermay be legi
slati
on)
employedt oraiserevenue. 2. Enforcement or tax admini
str
ati
on
-thef i
nancialneedsoft heSt at emay (taxadminist
rat
ion)
outr
un any human cal cul
ation,so t he
powert omeett hoseneedsbyt axat
ion BASIC PRINCI PLESOFA SOUND TAX SYSTEM
mustnotbel imit
edev enthought axes (KEY:FAT)
becomebur densomeorconf iscatory. 1. Fi scalAdequacy – suf f
iciency to
meetgov er
nmentexpendi tures and
2. “Powertot axisnott hepowert o otherpubl i
cneeds.
destr
oywhiletheSupr emeCour tsits” 2. Admi nist r
ative Feasibi
lit
y/
(Hol
mes Dictum) – t he powert otax Conv eni ence – capabili
ty ofbei ng
knows no l
imitexceptt hose expr
essly effecti
v elyenforced.
stat
edint
heConstit
ution. 3. Theor eticalJust i
ce– basedont he
taxpay er’s abil
it
yt o pay;mustbe
Mar shallandHolmesDi ct
um Reconciled progressi ve.(Abil
it
ytoPayTheor y)
Al t
hought hepowert ot axisal most
unli
mi t
ed,i tmustnotbeexer cisedinan POLI
CE EMI
NENT
TAXATI
ON
arbi
trarymanner .I ft
heabuseissogr eat POWER DOMAIN
so as t o destroy the natur al and 1.Pur pose
fundament alr i
ghts ofpeople,itist he Torai
se Topr omot e Tof acili
tate
dutyoft hejudi
ciarytoholdsuchanact rev
enue public theSt ate’s
purpose needof
unconstituti
onal. through proper tyfor
regulati
ons publicuse
PURPOSESANDOBJECTI VESOFTAXATI ON 2. AmountofExact i
on
1. Rev enue– basi call
y,thepur poseof Nol
i
mit Limitedt o Noexact ion;
taxation i s to pr ovi
de f unds or thecostof butpr i
v ate
proper ty wi th whi ch the St at
e regulati
on, proper tyis
promot es the gener alwel fare and issuanceof t akenbyt he
thelicense Statef or
protect i
onofi t
sci t
izens. or public
2.Non- Rev enue(Key :PR2EP) surveil
lance pur pose
a. Pr omot i
onofgener alwelf are
b. Regul ati
on
c. Reduct ionofsoci ali
nequal it
y
d. Encour ageeconomi cgrowt h
3. Benef itsRecei
ved
e. Pr otecti
oni
sm
Nospeci al Nodi rect Adi r
ect
ordirect benef i
tis benefitresult
s
POWEROFJUDI ALREVI
CI N TAXATI
EW I ON benefitis received;a i
nt hef orm of
Asl ongast helegislature,inimposing receivedby heal thy j
ust
a t ax, does not v i
olate appl icabl
e thetaxpay er; economi c compensat ion
consti
tutionalli
mit
ationsorr estri
cti
ons,i
t mer el
y standardof t othe
general societyis property
i
snotwi thi
nt hepr
ov inceoft hecour t
sto benefitof attai
ned owner
i
nquirei ntothewisdom orpol i
cyoft he protecti
on
exacti
on,t he mot i
ves behi nd it
,t he
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
leSaya SUBJECTHEADS:
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
3
MEMORYAI
DIN TAXATI
ON LAW
t
heeffectt
hatmotorvehicl
eregist
rat
ion
4.Non-
impair
mentofContracts f
ees areregul
ator
y exacti
ons and not
Cont
racts Contr
acts Contracts r
evenuemeasur
es.
maynotbe maybe maybe
i
mpaired impai
red i
mpai red
b.The t aximposed on v i
deogram
5.TransferofPr oper
tyRights establi
shment si
snotonl yregul
atorybut
Taxespaid Not ransfer Tr ansferi
s
becomepar t butonl y effect
edin
ar evenuemeasur ebecausetheear ni
ngs
ofpubli
c restr
aintin favorofthe ofsuch est abli
shments have notbeen
funds it
sexer ci
se State subjecttotaxdepr ivi
ngthegov ernment
6.Scope ofanaddi t
ionalsourceofincome.( Ti
ov.
Allper sons, All persons, Onlyupona Videogram RegulatoryBoard,151SCRA
propert
yand pr opert
y , parti
cul
ar 208)
excises ri
ghts and pr opert
y
pri
vil
eges c.The“ coconutl evyf unds”wer eal l
rai
sedundert hestate’staxingandpol ice
SYSTEMSOFTAXATION power s.
Gl
obalSyst
em SchedularSy
stem Thest at
e’sconcer nt omakei ta
strongandsecur esour cenotonl yi
nt he
A system A sy stem empl oyed l
iveli
hoodoft hesi gnifi
cantsegmentof
empl oy ed wher e wheret hei ncomet ax
the popul ati
on, but al so of expor t
the t ax sy stem treat
mentv ariesandis
views i ndiff erent l
y madet odependont he
earnings,t hesust ai
nedgr owt hofwhi ch
the t ax base and kind or cat egory of i
soneoft hei mperati
vesoft heeconomi c
gener allyt reat si n taxabl
ei ncomeoft he growt ” Phi
h. li
ppine CoconutPr oducers
common al
l taxpayer. Feder at
ion,I nc.Cocof ed v .Pr esi
dential
categor ies of Commi ssiononGoodGov ernment(178
taxabl ei ncomeof SCRA236, 252)
theindi vidual .
A sy stem whi ch A sy st
em which CONSTRUCTI ONOFTAXL AWS
taxes al
l i
temizes the di
ff
erent 1. Publ icpur posei sal wayspr esumed.
categor ies of i
ncomesandpr ov i
des 2. Ift hel aw i scl ear,appl yt hel aw i n
i
ncome except forvari
edpercentages
accor dancet oi t
spl ain and si mpl e
certain passi ve oftaxes,tobeappl i
ed
i
ncomes and ther
eto.
tenor .
capitalgai ns. I t 3. A st atut ewi llnotbeconst rued as
prescr i
bes a imposi ng a t ax unl ess i tdoes so
unitary but clearly, expressl yandunambi guousl y
.
progr essive r at e 4. Incaseofdoubt ,itisconst ruedmost
for t he t axabl e strongl yagai nsttheGov ernment ,and
aggr egat e li
ber allyi nfav oroft het axpay er.
i
ncomes and f lat 5. Prov isionsofat axingactar enott o
rates f or cer tain
beext endedbyi mpl ication.
passi ve i ncomes
derived by
6. Tax l aws oper at e pr ospect i
vely
i
ndi viduals. unl esst hepur poseoft hel egislature
to gi v e r etrospect iv
e ef fect i s
EXAMPLES OF TAXES LEVI
ED WI
TH A expr essl ydecl aredormaybei mpl ied
REGULATORY PURPOSE, OR COMBI
NED from t hel anguageused.
EXERCI
SEOFPOLI
CEPOWERANDTHEPOWER 7. Taxl awsar especi allawsandpr ev ail
OFTAXATION. ov eragener al l
aw.
a.Motorvehicleregist
rati
onfeesar e NATUREOFTAXLAWS
now consi dered r evenue or t ax 1. Notpoli
ti
cali
ncharacter
measur (
es.Palv.Edu,G. R No.L-41383, 2. Civi
linnat
ure,notsubjectt
oexpost
August15,
1988) fact
olawprohibi
ti
ons
This case r ever
sed t he doct r
ine 3. Notpenali
ncharacter
prev
iousl
yheldi nRepubl icv.Phili
ppine
RabbitBusLines,Inc.,32SCRA 211,t o
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
4
MEMORYAI
DIN TAXATI
ON LAW
TAXESAREPERSONALTOTHETAXPAYER fal
ls on one per son but t he
1. A cor porati
on’s t ax del inquency burdent hereofcanbeshi ft
edor
cannot be enf orced agai nst its passedont oanot her .
stockholders. ( Corporate Ent it
y 3. Astopur pose:
Doct r
ine) a. Gener alTax – l ev ied f or t he
Except i
on:St ockholdersmaybehel d gener aloror di nar ypur posesof
li
ablef orunpaidtaxesofadi ssol
ved theGov er nment
corporation: b. SpecialTax– l eviedf orspeci al
a. ifi tappear st hatthecor por
ate purposes
assets hav e passed i ntot hei
r 4. Astomannerofcomput ation:
handsor a. Specif icTax– t hecomput ation
b. when t he st ockholders hav e ofthet axort her at esoft het ax
unpaid subscr i
pti
ons t o the i
sal r
eadypr ov idedf orbyl aw.
capitalofthecorporation b. AdVal orem Tax–t axupont he
val
ue of t he ar ticle or t hing
2. Estatet axes ar e obli
gations that subject t o t ax at ion; t he
mustbe pai d by the executoror i
ntervent i
on ofanot herpar tyi s
admi ni
stratoroutoft henetasset s needed f ort he comput ation of
andcannotbeassessedagai nstt he thetax.
heir
s. 5. Astotaxingaut hor ity :
Excepti
on:I fpri
ortothepay mentof a. NationalTax – l ev ied by t he
theestatet axdue,t hepropertiesof National Gov er nment
thedeceasedar edist
ri
butedt ot he b. LocalTax– l ev i
edbyt hel ocal
heir
s,t hen t he l
att
eri s subsidiary gover nment
l
iableforthepay mentofsuchpor ti
on 6. Astorate:
oftheest atetaxashi sdi str
ibutive a. Progressi ve Tax – r ate or
sharebear st othetotalvalueoft he amountoft axi ncr easesast he
netestate.( Sec.9,Rev.Regs.No.2- amountoft hei ncomeorear ning
2003;seeCI Rv s.Pi
nedaG. R.No.L- tobet axedi ncr eases.
22734.Sept ember15,1967) ) b. Regressi ve Tax – t ax r ate
decreases as t he amount of
CLASSI
FICATI ONOFTAXES i
ncomet obet axedi ncr eases.
1. Ast osubj ectmat t
er: c. Propor t i
onat eTax–basedona
a. Per sonalTax–t axesar eoff i
xed fi
xedpr opor tionoft hev alueof
amountupon al lper sons ofa thepr oper t
yassessed.
cer tain cl ass wi thi
n t he
jurisdict i
on wi thout r egard t o IMPOSI
TIONS NOT STRI CTLY CONSIDERED AS
pr oper ty,occupat i
onorbusi ness TAXES
inwhi cht heymaybeengaged. 1. Tol l–amountchar gedf ort hecost
b. Pr oper ty Tax – assessed on and mai ntenance of t he pr oper t
y
pr oper tyofacer tainclass used.
c. Exci se Tax – i mposed on t he 2. Penal ty – puni shment f or t he
exer ciseofapr ivil
ege commi ssionofacr i
me.
d. Cust oms Dut i
es – dut i
es 3. Compr omi se Penal t
y – amount
char ged upon t he commodi ti
es coll
ect ed i n l i
eu of cr iminal
on t heirbei ng i
mpor ted into or prosecut i
oni ncasesoft axv iolati
ons.
expor tedf r
om acount ry . 4. Speci alAssessment–l eviedonl yon
2. Ast obur den: l
and based whol ly on benef i
t
a. Di rectTax– bot hthei ncidence accr ui
ng t hereon as a r esult of
oforl iabil
it
yf orthepay mentof i
mpr ovement s or publ ic wor ks
thet axaswel last hei mpactor under takenbygov ernmentwi thint he
bur den oft he tax falls on the vi
cini t
y.
sameper son. 5. Li cense or Fee – r egul atory
b. I ndi rectTax-Thei nci
denceofor i
mposi ti
on int he exer cise oft he
liabilit
yf orthepay mentoft hetax policepower .
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
5
MEMORYAI
DIN TAXATI
ON LAW
6. Mar gi nFee– exact iondesi gnedt o unl

i
mit
ed tothe costof( 1)
stabilizethecur rency . i
ssui
ngt helicense,
7. Debt– asum ofmoneydueupon and (
2)i nspecti
on
cont ractoronewhi chi sev idenced andsurvei
ll
ance
byjudgment .
Normall
ypaidaf
ter Normal l
y pai
d
8. Subsi dy – a l egislati
ve gr ant of the start of a bef ore
moneyi nai dofapr i
vateent erprise busi
ness commencementof
deemed t o pr omot e the publ i
c business
welfar e.
9. Cust omsdut iesandf ees– dut ies Taxes, bei ng the Li
censefeemaybe
char geduponcommodi ti
esont heir l
ifeblood of t he wi
th or wi thout
being t r
anspor t
ed i nto orexpor ted State, cannot be consider
ati
on
fr
om acount r
y. surrenderedexcept
10.Rev enue – a br oad t erm t hat for lawful
considerati
on
i
ncludes t axes and i ncome f rom
othersour cesaswel l. Non-paymentdoes Non- payment
11.Impost– i ni t
s gener alsense,i t not make t he makes the
signifiesanyt ax, t
ri
but eordut y.Inits businessil
legalbut busi
nessi
l
legal
l
imi ted sense,i tmeans a dut yon may beagr oundfor
i
mpor tedgoodsandmer chandise. cri
mi nal
prosecuti
on
Tax Speci
al
Assessment TESTI
N DETERMI
NING I
FTHEI
MPOSI
TION I
SA
TAXORALI
CENSEFEE
Imposed on Lev
iedonl
yonl
and Ifthepur posei sprimar
ilyrev
enueor
per
sons, propert
y i
frev enuei s,atleast,oneoft herealand
andexci
ses substant i
alpurposes, t
hentheexact i
onis
at ax. I ft he purpose isr egul
atoryin
Personal l
iabi
lit
y Cannotbe made a
att
aches on t he personalli
abil
it
y of
nature,iti
sal icense.(PALv .Edu)
person assessed in thepersonassessed
case of non- Tax Debt
payment
An obl
igat
ion Cr
eat
edbycont
ract
Not based on any Based whol
l
y on i
mposedbylaw
speci
al or di r
ect benef
it
benef
it Due to t
he Maybeduet othe
gover
nment ini ts government butin
Levi
ed and pai
d Except
ionalbothas sov
ereigncapaci
ty its cor
por
ate
annual
l
y toti
meandl ocal
i
ty
capacit
y
Exemption granted Exempt i
on does Pay
abl
einmoney Payabl
ei n money ,
i
s applicable( Art
. notapply. proper
tyorser
vices
VI,Sec.28(3)1987 N.B.I fpropert
yis
Consti
tuti
on) exemptf rom Real
Does not dr aw Dr awsi nt
erest if
PropertyTax ,i
tis
i
nterest except in sti
pulat
ed or
also exemptf rom
case of delay
ed
Special
deli
nquency
Assessment .
Notassi
gnabl
e Assi
gnabl
e
Tax Li
censeFee
Not subject to Subj
ect to
Basedont hepower Emanat
es f
rom compensat
ion or compensat
ion or
oftaxat
ion pol
i
cepower set
-of
f set
-of
f
To gener
ate Regul
ator
y Non-pay ment i s Noimpri
sonmenti
n
rev
enue punished by case of non-
i
mpr isonment payment (Ar
t.II
I,
Amount i
s Amounti
sli
mit
ed exceptinpoll
tax Sec. 20 1987
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
6
MEMORYAI
DIN TAXATI
ON LAW
Const
it
uti
on) Except i
on: When bot h obligati
ons are
due and demandabl e as wel las f
ul l
y
I
mposed onl
y by Canbei mposedby l
iquidatedandalltherequisit
esforaval i
d
publ
i
caut
hori
ty pr
ivat
eindi
vi
dual compensat ionar
epr esent,compensation
TESTI
N DETERMI
NING I
FTHEI
MPOSI
TION I
SA takes pl ace by oper ati
on of l aw.
TAXORALI
CENSEFEE
(Domi ngov.Garl
it
os)
I
fthepur poseispr i
maril
yr ev
enueor
i
frev enueis,atleast
,oneoft herealand
DOCTRINE OF E QUITABLE RECOUPMENT NOT
substanti
alpurposes,thentheexact i
onis
FOLLOWEDI NTHEPHI LI
PPINES
at ax. Ift he purpose isr egul
atoryin
A t ax pr esent l
y bei ng assessed
nature,i
tisalicense.(PALv .Edu)
againstat axpay erwhi chhaspr escri
bed
maynotber ecoupedorset -
offagainst
Tax Debt
anov erpaidt axt her efundofwhi chi s
al
sobar redbypr escript
ion.Itisagainst
An obl
igat
ion Cr
eat
edbycont
ract
i
mposedbylaw publi
cpol i
cysi ncebot hparti
esaregui l
ty
ofnegligence.
Due to t
he Maybeduet ot he
gover
nment ini ts government butin Tax Tol
l
sov
ereigncapaci
ty its cor
porate
capacit
y Enforced Asum ofmoneyf ort
he
proporti
onal use of somet hi
ng,a
Pay
abl
einmoney Payablein money, contri
butions considerati
onwhi chis
propert
y or fr
om per sonsand paidf ortheuseofa
servi
ces property propertywhi chisofa
publi
cnat ure;e.
g.road,
bri
dge
Does not dr aw Dr awsi nt
erest if
i
nterest except in sti
pulat
ed or
A demand of A demand of
case of delay
ed sov
erei
gnt
y pr
opr
iet
orshi
p
deli
nquency
Noli
mitastothe Amountoft ol
ldepends
Notassi
gnabl
e Assi
gnabl
e amountoft
ax upon t he cost of
constructi
on or
Not subject to Subj
ect to maintenance of t he
compensat
ion or compensat
ion or publi
c i mprovement
set
-of
f set
-of
f used
Non-pay ment i s No i mpr

isonment I
mposed onl
y by Maybeimposedby:
punished by i
n case of non- t
heStat
e (
1) Government
i
mpr isonment payment (Ar
t.III
, (
2) Pri
vate
exceptinpoll
tax Sec. 20 1987 i
ndivi
dual
s or
Const
it
uti
on) enti
ti
es
I
mposed onl
y by Canbeimposedby Tax Penal
ty
publ
i
caut
hori
ty pr
ivat
eindi
vi
dual
Enforced Sancti
on i mposed
proporti
onal asapuni shmentf or
COMPENSATI
ONORSET- OFF
contri
butions f
rom vi
olat
ion of a l aw
General Rul
e: Taxes cannot be t he persons and or act s deemed
subj
ectofcompensat ionorset-
off. property i
njuri
ous; v iol
ati
on
Reasons: of tax l aws may
1. li
febl
oodt heory gi
ve rise to
2. taxes ar e not cont r
actual i
mposi t
ion of
obli
gati
onbutar i
seoutofdutyt o penalt
y
thegovernment
3. thegovernmentandt hetaxpayer I
ntended t
o r
aise Designed to
r
evenue regul
ateconduct
are notmut uall
y cr
edit
ors and
debtor
sofeachot her.(
Franciav. May be imposed Maybei
mposedby:
IAC) onl
y by the (1)Gov
ernment
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
7
MEMORYAI
DIN TAXATI
ON LAW
gov
ernment (2)Pr
ivat
eindi
vi
dual
s
orent
iti
es (2)NON- DELEGABI LITY OF THE TAXI NG
POWER
Tax Tar
if
f GeneralRul e:Thepoweroft axationi s
peculi
ar l
y and excl usively exercised by
Allembracingter
m Akindoft ax thelegislatur e.( SeeScopeofLegi slat
ive
toincl
udev ari
ous i
mposedonar ti
cles Taxi
ngPower , supr a)
kindsofenforced whicharet r
aded -ref
erst ot axl egislati
on
contri
buti
onsupon i
nternat
ionall
y Except i
onst oNon- delegabilit
y :
personsforthe
1. Flexi bleTar iffClause:Aut hori
tyoft he
attai
nmentof
publi
cpurposes Pr esidentt of ixt arif
fr ates,impor t
and expor t quot as, tonnage and
TAXPAYERS’SUIT
whar fagedues,andot herdut iesor
Acase wher et heactcompl ainedof impost s. ( Art.VI ,Sec. 28(2),1987
dir
ectl
yinvolvest hei l
l
egaldisbursement Const i
tution)
of publi
cf unds der i
vef rom t axati
on 2. Powerofl ocalgov ernmentuni tst o
(Just
iceMel o,di ssenti
ng i
nKi losbayan, lev yt axes, fees,andchar ges.( Ar t
.X,
I
ncv sGuingona, Jr.) Sec.5, 1987Const ituti
on)
3. Del egat iont oadmi nistr
ativeagenci es
TAXPAYERS AND PUBLI C OFFCI ALS HAVE
fori mpl ement ati
onandcol l
ection.
LOCUSSTANDI - mer elyr efer st otaxadmi nistr
at i
onor
REQUI TESFORTAXPAYERS’
SI SUIT
impl ement at i
on
a. Thet axmoneyi sbei ngext r
actedand
spent i n v iolation of speci fi
c (3)SI TUSORTERRI
TORI
ALITYOFTAXATION
const it
ut i
onal pr ot ections agai nst Thepowert otaxisl i
mitedonl yto
abusesofl egislati
vepower . persons,propertyorbusi nesses withi
n
b. Thatpubl icmoneyi sbei ngdef l
ected thej uri
sdi
cti
onort er
rit
oryoft hetaxing
toanyi mpr operpur pose( Pascualv s power .
Secr etaryofPubl icWor ks)
c. Thatt hepet i
tionerseekst or estr
ain FACTORSTHATDETERMI NETHESI TUS:
respondent s f r
om wast i
ng publ i
c a. Kindorcl assif
icationoft hetaxbei ng
fundst hrought heenf orcementofan levied
invalidorunconst i
tutionallaw b. Situsoft het hi
ngorpr opertytaxed
c. Citizenshipoft het axpayer
d. Resi denceoft het axpayer
LI
MITATI
ONSONTHETAXI
NG e. Sour ceoft heincomet axed
POWER f. Situsoft heexci se, pr
ivi
lege,business
oroccupat i
onbei ngt axed
A. I
NHERENTL IMI ONS(
TATI KEY:SPINE)
1. Terr
itori
ali
tyorSitusoft axati
on APPLI ONOFSI
CATI TUSOFTAXATI
ON
2. Publi
cpur poseoft axes Ki
ndofTax Sit
us
3. I
nternati
onal comity
4. Non- del
egabili
tyofthet axi
ngpower Per
sonal
or Residence or
5. TaxExempt i
onoft hegov ernment Communit
ytax domi ci
le of t
he
taxpayer
(1)TESTSIN DETERMI
NINGPUBLICPURPOSE
a. Dut yTest–whet herthet hi
ngt obe Real
proper
tyt
ax Locat
ionofproper
ty
fur
thered by the appropr i
ati
on of (Lexr
eisi
tae)
publi
cr evenueissomet hing,which
Personal pr
oper
ty -
t angible:whereitis
i
st he duty of the St ate,as a
tax phy sicall
y l ocated
government ,
toprovi
de. orper manentlykept
(Lexr eisit
ae)
b. PromotionofGeneralWelfareTest -
int angibl
e: subject
– whethertheproceedsoft hetax to Sec.104 oft he
wil
ldir
ectl
ypr omotethewelfareof NI RC and t he
thecommuni t
yinequalmeasure. pr i
ncipleofmobi li
a
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
8
MEMORYAI
DIN TAXATI
ON LAW
sequunt
urper
sonam bondshav eacquiredabusiness
sit
usi nthePhil
i
ppi nes;
and
(
5)shares or r ights i n any
Busi
nesst
ax Pl
aceofbusi
ness partnershi
p,businessorindustry
establi
shed int he Phil
i
ppines.
Exci
seorPr
ivi
l
ege Wher e the act i
s
(Sec.104,1997NI RC).
tax perfor
medorwher e
occupati
on i
s
pursued (4)EXEMPTIONOFTHEGOVERNMENT
Asamat terofpubli
cpoli
cy,property
Sal
est
ax Wherethe sal
eis of the St ate and of its muni cipal
consummat
ed subdi
visionsdevot
edt ogov
ernmentuses
andpur posesisdeemedt obeexempt
I
ncomeTax Consider from t axati
on although no expr ess
(1)cit
izenship, provi
sioninthelawismadetherefor.
(2)residence,and
(3)sour ceof
ncome(
i Sec.42,
Gener
alRul e:The Governmenti
stax
1997NI RC) exempt.
-However,
itcanal
sotaxit
self
.
Tr
ansf
ert
ax Residenceor
cit
izenshi
poft he RULES:
taxpayerorlocat
ion 1. Admi nistrati
v eAgenci es
ofproperty a.Gov ernment al f unct i
on - t ax
exempt unl ess when t he l aw
Fr
anchi
seTax Stat
ewhichgrant
ed expr esslypr ov idesf ort ax. ( Sec.
thefr
anchi
se 32B7)
b. Pr opr i
etar yf unct i
on – t axabl e
SITUSOFTAXATI ONOFI NTANGI BLEPERSONAL
unl ess exempt ed byl aw.( Sec.
PROPERTY 27C)
Gener alRul e:Domi cile of t he owner 2. GOCCs
pursuantt ot hepr incipleoft hemobi li
a Gener alRul e:I ncome i st axabl e at
sequunt urper sonam ormov abl esf ol
low ther at ei mposeduponcor por ati
ons
theper son. orassoci at i
onsengagedi nasi mi l
ar
Except ions: business, indust ry, oract ivi
ty .
1. When t he pr opertyhas acqui red a Except i
on:GSI S,SSS,PHI C,PCSO
busi nesssi tusinanot herj urisdicti
on; andPAGCOR.( Sec.27( C) ,NI RC)
2. When an expr ess pr ov i
sion oft he 3. Gov ernmentEducat i
onal Inst itut i
ons
statutepr ov i
deforanot herr ule. a. Pr oper ty or r ealest atet ax –
Il
lust r
at i
on: Forpur posesofest ate pr oper ty act ual l
y, di rect ly and
and donor ’
s taxes, t he f oll
owi ng excl usivel yusedf oreducat i
onal
i
nt angi blepr operti
esar edeemedwi th pur poses– exemptbuti ncome
asi tusi nt hePhi l
i
ppi nes: ofwhat everki nd and char acter
(1)f r
anchi se whi ch must be from anyoft hei rpr oper ties,r eal
exer cisedi nthePhi li
ppi nes; orper sonal ,r egar dless oft he
(2)shar es, obl i
gations or bonds disposi t
ion,i st axabl e.( Sec.30,
issued by any cor poration lastpar .
, NIRC)
or gani zed orconst it
ut ed int he b. I ncomer eceivedbyt hem assuch
Phi li
ppi nesinaccor dancewi thits ar eexemptf rom t axes.Howev er,
laws; thei ri ncome f rom anyoft hei r
(3)shar es,obl i
gationsorbondsby act ivi
ties conduct ed f or pr ofit
any f or ei
gn cor por ation ei ght y- regar dlessoft hedi sposi tion,i s
f i
ve per cent ( 85%) of t he taxabl e.( Sec.30, lastpar .,NI RC)
busi nessofwhi chi sl ocat edi n 4. Incomeder i
v edf rom anypubl icut i
lity
thePhi l
ippi
nes; orfrom t heexer ciseofanyessent ial
(4)shar es, obl i
gations or bonds gover nment alf unct i
on accr ui ng t o
issuedbyanyf or ei
gncor poration theGov ernmentoft hePhi lippi nesor
if such shar es,obl igat ions or
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
9
MEMORYAI
DIN TAXATI
ON LAW
toanypol i
ticalsubdi visi ont her eofi s thatcapacit
y.Evenwhereoneenterst
he
noti ncl uded i n gr oss i ncome and terr
itoryofanother
,thereisanimpli
ed
exempt f rom taxat ion. ( Sec. under st
andi
ngthatthef or
merdoesnot
32(B) (
7) (b) ,NI RC) therebysubmiti
tsel
ftotheauthor
it
yand
5. Donat ionsi nf av orofgov ernment al j
urisdicti
onoft
heother.
i
nst i
tutionsar econsi der edasi ncome
ont hepar toft hedonee.Howev er,i t B. CONSTI ONALL
TUTI I
MITATI
ONS
snotconsi
i der edast ax abl ei ncome A.GENERALORI NDIRECT
becausei ti sanexcl usi onf rom t he CONSTITUTIONALLIMITATIONS
comput at i
on of gr oss i ncome.
(Sec.32( B) (3), NI RC) 1. DuePr ocessCl ause( Art.II
I,Sec.1,
6. Theamountofal lbequest s,legaci es, 1987Const i
tut
ion)
devisesort ransf er st oorf ort heuse Requi si
tes:
oft he Gov ernmentoranypol i
tical a.The i nterest
s of t he publ i
c as
subdi vi
si on f or excl usi v ely publ i
c di stinguished f rom t hose of a
purposes i s deduct ible f rom t he par ti
cular cl ass r equir
e t he
grossest at e.( Sec. 86( A) (3) ,NI RC) int ervention of t he St ate.
7. Gift
smadet oorf ort heuseoft he (Subst antiveli
mi t
ati
on)
NationalGov er nmentorany ent i
ty b.The means empl oy ed must be
createdbyanyofi tsagenci eswhi ch reasonabl y necessar y t o t he
snotconduct
i edf orpr of it,ort oany accompl i
shment of t he pur pose
poli
tical subdi visi on of t he sai d and not undul y oppr essive.
Gov ernmentar eexemptf rom donor ’
s (Pr ocedur all
imitat
ion)
tax.(Sec.101( A) ( 2),NI RC) Theconst i
tuti
onalit
yofal egislati
ve
8. Localgov ernmentuni t
sar eexpr essl y taxingactquest i
onedont hegr oundof
prohibitedbyt heLGC f rom l evying denial of due pr ocess r equires t he
tax upon Nat ionalGov er nment ,i ts existence of an act ual case or
agenci es,andi nst rument al i
ties,and cont rov ersy.
l
ocalgov er nmentuni ts.[ Sec.133( o) ,
LGC] 2. EqualPr otect
ionCl ause( Ar
t.II
I,Sec.
9. Unless ot her wi se pr ov ided i nt he 1,1987Const ituti
on
LocalGov er nmentCode ( LGC) ,t ax Requi sitesofaVal i
dCl assifi
cation:
exempt ions gr ant ed t o al lper sons, a. based upon substantial
whet hernat ur alorj uridical ,including distincti
ons
GOCC,exceptl ocalwat erdi str
ict s, b. ger manet ot hepur posesoft he
cooper at ives dul yr egi st ered under l
aw
RA No.6938,non- stock and non- c. notl imitedt oexisti
ngcondi t i
ons
profiti nst itutions, ar e wi thdrawn only
uponef fect ivityoft heLGC.( Sec.193, d. appl yequal l
yt o allmember sof
LGC) thecl ass
10.Realpr oper t
yownedbyt heRepubl i
c
of t he Phi lippi nes or any of i ts 3. Freedom Of Speech And Of The
poli
ticalsubdi v isions except when Press ( Art. III
, Sec. 4, 1987
thebenef icialuset her eofhasbeen Constituti
on)
granted, f or consi der at i
on or Therei s curt
ail
ment of pr ess
otherwi se,t oat axabl eper sonshal l fr
eedom andf reedom ofthoughtand
be exemptf rom pay mentofr eal expressionifat axisl
evi
edinor derto
proper tyt ax.( Sec.234, LGC) suppresst hisbasicri
ghtandi mpose
a pr ior r est
rai .(
nt Tol
entino v s.
(5)I ONALCOMI
NTERNATI TY SecretaryofFinance,GRNo.115455,
Thesepr i
ncipl
esli
mittheauthori
tyof August25, 1994)
the gov ernmentt o eff
ecti
vel
yi mpose
taxes on a sov erei
gn state and its 4. Non-Inf
ri
ngement Of Rel igi
ous
i
nst r
ument ali
ti
es, as well as on i ts Freedom AndWorshi
p(Ar
t.I
II
,Sec.5,
proper t
yheldandact i
vi
ti
esundertakenin 1987Constit
uti
on)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
10
MEMORYAI
DIN TAXATI
ON LAW
Alicensetaxorfeeconsti
tut
esa be gi ven
curt
ail
mentofr el
i
gious fr
eedom if i
ncaseof
i
mposed as a condi ti
on f or i
ts fai
l
ure t o
exer se.(
ci Ameri
canBibl
eSoci et
yvs. paytaxes
Cit
yofMani l
a,GRNo.L- 9637,Apri
l
30,1957) B.SPECIFI
CORDI RECT
CONSTITUTIONALLIMI
TATI
ONS
5. Non- Impai rmentOfCont ract
s(Art.II
I,
Sec.10, 1987Const i
tuti
on) 1.Non-
Impri
sonmentForDebtOrNon-
Nol awi mpairi
ngt heobl i
gati
onof PaymentOfPol Ar
lTax( t
.II
I,Sec.20,
cont ractshal lbepassed.( Sec.10, 1987Consti
tut
ion)
Art.III,
1987Const i
tution)
Ther ule,howev er,doesnotappl y 2.Rule Requiri
ng ThatAppr opri
ati
ons,
to publ ic uti
li
tyf r
anchi ses orright Revenue And Tar iff Bil
ls Shall
sincet heyar esubjectt oamendment , Ori
ginateExclusi
v el
yFrom TheHouse
alterati
onorr epealbyt heCongr ess OfRepr esentat
ives( Ar
t.VI,Sec.24,
whent hepubl icinterestsor equir
es. 1987Const i
tuti
on)
(Cagay anEl ectri
c&Li ghtCo.,Inc.v.
Commi ssi
oner, GR No. 60216, 3.Uniformit
y, Equit
abil
it
y And
Sept ember25, 1985) Progressiv
ityOfTaxation(Art.VI,Sec.
28(1),1987Const i
tuti
on)
RULES: Uniformit
y – al ltaxabl
e articl
es or
a. When t he exempt ion i s bil
aterall
y kindsofpr opertyoft hesamecl ass
agreed upon between the aretaxedatt hesamer at
e.
governmentand t he taxpay er– i t Equitabi
li
ty–t heburdenfall
st othose
cannot be wi t
hdr awn wi thout whoar emor ecapabletopay .
viol
ati
ngt henon- i
mpai rmentcl ause. Progressiv
ity–r ateincr
easesast he
b. Wheni suni
ti l
aterall
ygr antedbyl aw, taxbaseincreases.
andthesamei swi thdrawnbyv i
rtue
ofanotherlaw–nov i
olati
on. Q:Isat axl aw adopt i
ngar egressive
c. When t he exempt i
on i s gr anted system oftaxat ionv ali
d?
under a f ranchi
se – i t may be A:Yes.The Const i
tuti
on does not
wit
hdrawn atanyt imet hus,nota reall
ypr ohibitthei mposi t
ionofi ndir
ect
vi
olat
ion oft henon- impairmentof taxeswhi ch,liket heVAT,ar eregressi
v e.
contr
acts The Const it
utional pr ov i
si
on means
simply t hat i ndi r
ect taxes shal l be
6. Presi
denti
alpowertograntrepri
eves, mi ni
mized.Themandat et oCongr essi s
commut at
ions and par dons and not t o pr escr ibe, but t o ev olve, a
remitfines and f or
feit
ures after progressivet axsy stem.( EVATEnBanc
convi
cti
on( ART.VII,SEC.19,1987 Resoluti
on,Tol ent i
no,etalv sSecr et
ar y
CONSTITUTION) ofFinance, October30, 1995)
Due Equal
Unif
ormity 4. Limitati
ons On The Congr essi
onal
Process Pr otect
ion
Taxpay er Taxpay er
s Taxabl e PowerToDel egateToThePr esi
dent
may not shall be arti
cles, or The Aut hori
ty To Fi
x Tari
ffRat es,
be tr
eated al i
ke kinds of Impor tAndExpor tQuot
as,Etc.(Art.
deprived under li
ke proper t
y of VI,Sec.28(2),1987Const
it
ution)
of l ife, cir
cumst ances the same
l
iberty or andcondi t
ions class, shall 5. Tax Exempt ion Of Pr oper
ties
property both i n t he be t axed at
without pri
vil
eges the same
Actual
ly
, Di rectly And Exclusi
vely
due conferred and rate. Ther e Used ForRel i
gious,Chari
tableAnd
process l
iabil
it
ies shoul d Educati
onalPur poses.(Ar
t.VI,Sec.
of l aw. i
mposed. therefore,be 28(3)7,1987Const i
tut
ion)
Not i
ce no dir
ect The const it
uti
onal pr ovi
si
on
must , doubl e (
abov e cited) whi ch gr ant
s t ax
therefore, taxation
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
11
MEMORYAI
DIN TAXATI
ON LAW
exempt ionappl i
esonl yt opr oper tyor (Ar
t.VII
I,Sec.2And5(
2)(
B),1987
realt
y t ax es assessed on such Const
it
ution)
proper ties used act ual ly
, di rectly
exclusiv elyf or rel
igi
ous,char i
tabl e 8. Exemption From Taxes Of The
andeducat i
onal poses.(
pur Lladocv s. RevenuesAndAsset sOfEducat
ional
Commi ssioner ,GRNo.L- 19201,June I
nstit
uti
ons, I ncludi
ng Gr
ants,
16,1965) Endowment s, Donat ions And
Thepr esentConst i
t uti
onr equired Contri
butons.(
i Art
.XI V,Sec.4( 3)
thatf or t he exempt ion of “ l
ands, And(4),1987Consti
tuti
on)
buil
dings and i mprov ement s”,t hey
shouldnotonl ybe“ excl usively”but OTHER SPECI FIC TAX PROVI SI ONS I N
also“ act ual l
y”and“ dir
ect ly”usedf or THECONSTI TUTI ON
reli
gious and char it
abl e pur poses. 1. Poweroft hePr esidenttov etoany
(ProvinceofAbr avs.Her nando,GR par ticular i tem or i t
ems i n an
No.L- 49336, August31, 1981) appr opriati
on,r ev enue,ort ar iffbi l
l
.
The t est of exempt i
on f r
om (Ar tVI ,Sec.27( 2),1987Const ituti
on)
taxationi st heuseoft hepr oper tyf or 2. Necessi t
yofanappr opri
ationbef ore
the pur poses ment i
oned i n t he moneymaybepai doutoft hepubl i
c
Const itution.( AbraVal l
eyCol legeI nc. treasur y .( Ar t
.VI ,Sec.29( 1),1987
vs.Aqui no,GRNo.L- 39086,June15, Const it
ut i
on)
1988) 3. Non- appr opriati
onofpubl i
cmoneyor
proper tyf or t he use,benef it,or
EXCLUSI VEBUTNOTABSOLUTEUSE suppor t of any sect , chur ch, or
Thet erm “exclusi vel
yused”doesnot sy stem ofr eli
gion.( Art
.VI ,Sec.29
necessar il
ymeant ot alorabsol uteuse (2) ,1987Const i
tution)
forr el
igious,char i
tabl eandeducat i
onal 4. Tr eat ment of t axes lev i
ed f or a
purposes. I ft hepr opertyisi nci
dentall
y speci alpur pose.( Art.VI,Sec.29( 3),
used f or sai d pur poses, t he t ax 1987Const it
ution)
exempt ionmayst il
lsubsi st.(AbraValley 5. Inter nalr evenueal lotmentst ol ocal
CollegeI nc.v s.Aqui no,GrNo.L- 39086, gov er nmentuni ts.( Art
.X,Sec.6,
June15, 1988) 1987Const it
ution)
Corollar
ily
,i f a pr opert
y,al t
hough
actuall
yownedbyar eli
gious,chari
table
andeducat ionalinstituti
oni susedf ora DOUBLETAXATI
ON
non- exempt pur pose,t he exempt ion
from taxshal lnotattach DOUBLE TAXATI
ON – taxi
ng t
he same
proper
tytwicewhenitshoul
dbet axed
ART.XI
V, ART.VI
, butonce.
SEC4(3) SEC28(3)
Gr
ant
ee Non- st ock, Reli
gious, IS DOUBLE TAXATION PROHIBI
TED IN THE
non profi
t educati
onal, PHILI NES?
PPI
educational chari
table No. Ther e is no const i
tut
ional
i
nst i
tut
ion i
nstit
utions
prohibit
ionagainstdoubl
et axat
ion.I ti
s
Taxes Incomet ax Propertytax
notf avoredbutpermissi e.(
bl PepsiCola
cover
ed Cust om
Duties Bottli
ngCo.v .Cit
yofButuan,1968).
Property t ax
(DECS Or der KINDSOFDOUBLETAXATI ON
No.137- 187) (1)Di rect Dupl icat
e Taxat i
on /
Obnoxious– doubl etaxat
ioninthe
6. Voti
ng Requi r
ementI n Connecti
on objecti
onabl
eorprohibi
tedsense.
With The Legislat
ive GrantOfTax This constit
utes a v i
olat
ion of
Exemption (Art.VI,Sec.28(4)
,1987 substanti
vedueprocess.
Consti
tuti
on)
7. Non-I
mpai r
mentOfTheJur isdi
cti
on El
ement
s:
OfTheSupr emeCour tInTaxCases a. t
hesamepr
oper
tyorsubj
ectmat
ter
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
12
MEMORYAI
DIN TAXATI
ON LAW
i
staxedt wicewhenitshouldbetaxed benef iciari
esofest atesort r
usts( pro
onl
yonce. rata), as wel l as domest i
c
b. bot
ht axesarelevied forthesame cor porations.
pur
pose  At axcr editisgr ant edforest ate
c. i
mposedbyt hesamet axingaut
hori
ty taxespai dtoaf oreigncount ryont he
d. wit
hi nthesamejuri
sdi
ction estat eofci tizensandr esi
dental iens
e. dur
ingt hesametaxingper i
od subj ectt ocer t
ainlimitations.
f. coveringthesameki ndorchar act
er  Thedonor ’staxi mposedupona
oftax. cit
izenorar esi
dentshal lbecr edited
(Vi
llanuevavs.Ci
tyofIl
oilo) witht heamountofanydonor ’st ax
imposedbyt heaut horityofaf oreign
(
2)Indi
rectDuplicate Taxati
on – not
count ry,subjectt ocer tainli
mitatons.
i
l
egallyobj
ect
ionable.Theabsenceof
4. TaxExempt ions
oneormor eoft heabov e-
menti
oned
5. PrincipleofReci procity
elementsmakest hedoubletaxati
on
6. Treat i
eswi t
hot herst ates
i
ndirect
.
METHODSRESORTEDTOBYATAXTREATYI
N
(
3)Domest i
c-thisariseswhent hetaxes
ORDERTOELI NATEDOUBLETAXATI
MI ON
arei mposedbyt helocalornati
onal
gov ernment( withinthesamest ate)
FIRSTMETHOD:Thet axt reatyset sout
(
4)Internati
onal-referstotheimposition
ther espect iv
er i
ght stot axbyt hest ateof
ofcompar abl
et axesintwoormor e
sour ce orsi tus and by t he st ate of
statesont hesamet axpayerin
residencewi thr egar dt ocer taincl asses
respectoft hesamesubj ectmatter
ofi ncomeorcapi tal.Insomecases,an
andf oridenti
cal peri
ods.
exclusiver ightt ot axi sconf erredi none
oft he cont racting st ates;howev er,for
REMEDI ESOFDOUBLETAXATI ON
otheri temsofi ncome orcapi tal,both
1. TaxSpar ingRul e– samedi vi
dend
statesar egi v ent her ightt ot axal though
ear nedbyaNRFCwi t
hint hePhi l.is
theamountoft axt hatmaybei mposed
r educedbyi mposi ngal owerr at eof
byt hest ateofsour ceisl i
mi ted.
15% ( inl ieu oft he 35%) ,on t he
SECONDMETHOD:Thest ateofsour ceis
condi tiont hatt hecount ryt owhi ch
givenaf ullorl imitedr ighttot axt ogether
t heNRFCi sdomi l
icedshal lal l
ow a
witht hest ateofr esidence.I nt hiscase,
cr edi tagai nstt het axduef rom t he
thet reatymakesi tincumbentupont he
NRFC,t axesdeemedt ohav ebeen
stateofr esidencet oal l
ow r eli
efi norder
pai di nt hePhi l.(Sec. 28B5b)( CI Rv s
toav oiddoubl et axation.
Pr oct er& Gambl e)( GR No.66838,
Dec.2, 1991)
TWO METHODS OF RELI
EF ARE USED UNDER
2. Taxdeduct ions
THESECONDMETHOD:
Exampl e:v anishi ngdeduct ionunder
Sect ion86( A) (2),NI RC
1.Theexempt ionmet hod-t hei ncomeor
3. Taxcr edi t
s
capitalwhi chi st axablei nt hest at
eof
Inst ancesundert heNI RC:
sourceorsi tusi sexempt edi nt hest ate
 ForVAT pur poses,t he t ax on
ofresi dence,al t
houghi nsomei nstances
input s or i tems t hatgo i ntot he
i
t may be t aken i nto account i n
manuf acture of f i
nished pr oduct s
determi ningt her ateoft axappl i
cablet o
(whi char eev ent uallysol d)maybe
the t ax pay er’sr emai ning i ncome or
cr edi tedagai nstordeduct edf rom t he
capital.(
Thismaybedoneusi ngt het ax
out putt ax ort ax on t he f inished
deduct ionmet hodwhi chal lowsf oreign
pr oduct .
i
ncomet axest obededuct edf rom gr oss
 For ei
gn i ncome t axes may be i
ncome,i neffectexempt i
ngt hepay ment
cr edi tedagai nstt hePhi l.Incomet ax, from bei ngfur t
hert axed.)
subj ect t o cer tain l imitati
ons, by 2.The cr edi t met hod- al though t he
citizens, i ncl udi ng member s of i
ncomeorcapi talwhi chi staxedi nt he
gener alpr of essionalpar tnershi psor stateofsour ceisst i
llt
axabl ei nthest ate
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
13
MEMORYAI
DIN TAXATI
ON LAW
ofresidence.Thetaxpaidi
nt heformeris
credi
ted againstthe tax,levied i
nt he KI
NDSOFSHI
FTI
NG
l
atter
.(Commi ssi
onerofInternalRevenue a. For wardshi fti
ng-whenbur denoft ax
v.S.CJohnsonandSon,I nc.etal .,G.R i
s t ransferr
ed f rom a f actor of
No.127105, June25,1999) product i
on t hrough t he factor s of
distri
butionunt i
litf i
nal
lyset t
leson
Exempti
on theul ti
mat epur chaserorconsumer
Cr
edi
tMet
hod b. Backwar d shifting-when bur den i s
Method
Focus i
s on the Focusi
sont
het
ax transferred from consumert hr ough
i
ncome or capi
tal factorsofdi stri
but i
ontothef actors
i
tsel
f ofpr oduction
c. Onwar d shifting-when t he t ax is
NOTE: Comput at
ional ill
ust
rati
on shifted 2 or mor e t
imes ei t
her
bet
weenat
axdeduct
ionandat
axcredi
t: forwar dorbackwar d
Taxdeduct i
onmet hod (2)CAPI TALI
ZATION – ame r
ei ncreasei n
Gr ossincome thev alueoft hepr opertyi snoti ncome
Less:allowablededuct
ions but mer ely an unr eali
zed i ncrease i n
i
ncluding capital.Noi ncomeunt ilaftert heact ual
foreigntaxespai d saleorot herdispositionoft hepr opertyin
Incomesubj ecttotax excessofi tsorigi
nal cost .
Mul ti
pli
edbyr at
e EXCEPT:i fbyreasonofappr aisal,thecost
Incomet axdue basis of pr opertyi ncreased and t he
resultantbasisi susedast henew t ax
Taxcr editmet hod base f or purposes of comput i
ng t he
Grossi ncome all
owabl edepr eciati
onexpense,t henet
Less: allowablededucti
ons diff
erencebet weent heor i
ginal costbasi s
excludi ng and new basi si st axable under t he
foreignt axespaid economi c benef i
tpr i
nciple.( BIR Rul ing
Incomesubj ecttotax No.029, Mar ch19, 1998)
Mul tipliedbyr at
e
Incomet axdue (3)TRANSFORMATION – themanuf acturer
Less: foreigntaxespai
d orproduceruponwhom t hetaxhasbeen
Neti ncomet axdue i
mposed,f eari
ngthelossofhi smar ketif
heshouldaddt hetaxtot heprice,pay s
thetaxandendeav orstor ecouphimsel f
FORMSOFESCAPE FROM byimprov i
nghi sprocessofpr oduction,
TAXATI
ON ther
ebyt urni
ngouthi suni t
satal ower
cost.
(1)SHI NG –t
FTI heprocessbywhi chthe
tax burden i s tr
ansferr
ed from t he (4)TAX AVOI DANCE – t heexpl oitati
onby
stat
utorytaxpayer(
impactoftaxati
on)to the t axpay er of l egall
y per missi
ble
another (
incidentof taxati
on) wit
hout alter
nativ
e t ax r ates or met hods of
viol
ati
ngthelaw. assessingt axablepr oper t
yori ncome,i n
ordertoav oidorr educet axliabili
ty.
I
MPACTOFTAXATI
ON –poi
ntonwhi
cht
ax Exampl e:“ estatepl anni ng”( conv eyance
i
sori
ginal
l
yimposed. ofpr opertyt oaf ami lycor por ati
on for
shares)( DelpherTr ades Cor p.v s.IAC,
INCIDENCE OF TAXATI
ON – p oi
ntonwhich 157SCRA349)
the t ax burden fi
nall
yr ests orset
tl
es (5) TAXEVASI ON –u sebyt het axpay erof
down. i
llegalorf raudulentmeanst odef eator
I
llustrat
ion:Val ueaddedt ax.Theseller l
essent hepay mentoft het ax.
i
sr equired byl aw to paytax,butthe
burdeni sact ual
l
yshift
edorpassedont o FACTORSI
NTAXEVASI
ON
thebuy er. 1. theendtobeachiev
ed,i
.e.pay
ment
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
14
MEMORYAI
DIN TAXATI
ON LAW
oflessthanthatknownbyt hetaxpayerto Sec.234Local Gov er nmentCode

belegall
ydue,orpay i
ngnot axwheni tis Speci al Laws, such as t he
shownt hatthetaxisdue; Omni busI nvest mentCode of1987
2. an accompany ing st ate of mi nd (EO 226) , Phi lippi ne Ov erseas
whichisdescr i
bedasbei ngev il
,inbad Shippi ngAct( RA1407asamended) ,
fai
th, will
ful, or deliberate and not Fertil
izerI ndustryAct( RA 3050,as
coi
ncidental;and amended) , Mi ner al Resour ces
3. acour seofactionwhi chisunl awful
. Dev elopmentDecr eeof1974( PD463
as amended) ,Cot tage I ndustryAct
INDICIAOFF RAUDIN TAXE VASION (RA 318, as amended) and
1.Fai lure t o decl are f or taxation exempt ions i n “ Housi ng for Low
pur posest rueandact uali ncomeder ived Income Gr oup” ( PD 1205, as
from busi nessf or2 consecut i
vey ears amended)
(Republ icvsGonzal es,L-17962) c. Cont ractual-agr eed t o by t he
2.Subst ant i
al under -declar
ati
on of taxi ng aut hor ity i n cont racts
i
ncomet axr eturnsoft het axpayerfor4 lawf ully ent er ed i nto by t hem
consecut i
ve y ears coupl ed wi th underenabl ingl aws
i
nt entionalov erstat
ementofdeduct ions d. Tr eat y
(CIRv sRey es, 104PHI L1061) e. Li censi ngOr di nance
2. Ast of or m
TAX TAX (
1)Expr ess– expr essl ygrant edby
AVOIDANCE EVASI
ON organi corst atut el aw
(
2)I mpl i
ed – when par ticular
Val
i
dit
y Legal and not Il
l
egal and per sons,pr oper tyorexci sesar e
subject t
o subject to deemed exempt as t hey f al
l
cri
mi nal
penal
ty cri
mi nal
out sidet hescopeoft het axi ng
penalty
prov i
sionitsel f.
Ef
fect Mini
mizat
ion of Almost 3. Ast oext ent
t
axes always (1)Tot al–absol ut ei mmuni t
y
resul
ts i
n (2)Par tial–onewher eacol l
ect ion
absence of ofapar toft het axi sdispensed
taxpayment
s wi th
4. Ast oobj ect
(6) TAX EXEMPTI
ON – a gr ant of (1)Per sonal– gr ant ed di r
ect l
yi n
i
mmuni ty to par t
icul
ar persons or fav orofcer tainper sons
corpor
ati
onsfrom theobli
gati
ont opay (2)I mper sonal– gr ant eddirectlyi n
taxes. fav or of a cer tain class of
pr oper ty
S: No l
LEGAL BASI aw gr
ant
inganyt
ax
exempti
onshallbepassed wi t
houtthe PRI
NCIPLESGOVERNI NGTAXE XEMPTI ON
concur
rence of a majori
ty of allthe a. Exempt ionsf r
om t axati
onar ehighly
member sofCongress( .SEC 28(
ART VI 4) disfavored i n law and ar e not
OFTHE1987CONSTI ON)
TUTI presumed.
b. Hewhocl aimsasexempt ionmust
KI
NDSOFTAXE XEMPTI ON beabl et oj usti
fyhi scl aim byt he
1. Astosour ce clearestgrantofor ganicorst atute
a. Constituti
onal–i mmunit
iesfrom l
aw by wor ds t oo pl ain t o be
taxati
ont hatori
ginat
efrom t he mi st
aken.I fambi guous,t her eisno
consti
t ut
ion. exempt ion.
b. Statut
or y–t hosewhichemanat e c. He who cl aims exempt ion shoul d
from l
egislati
on provebyconv i
nci
ngpr oofthathei s
ExamplesofSt at
utoryExempti
ons exempt ed.
Sec.27, NIRC d. Taxat i
onist herule;taxexempt i
oni s
Sec.105 Tar i
ff and Customs theexcept i
on.
Code e. Tax exempt i
on must be st ri
ct l
y
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
15
MEMORYAI
DIN TAXATI
ON LAW
constr
uedagai nstthet axpayerand effected t hr
ough Const i
tuti
onal
l
iberal
l
y i n favor of t he t axi
ng amendmentonl y
author
ity. c. Wher ethet axexempt iongranti sin
f. Taxexempt i
onsarenotpr esumed. thef orm ofaspeci allawandnotbya
g. Consti
tuti
onal gr ants of t ax gener allaw eveni fthet ermsoft he
exemptionareself
-executing. gener alact ar e br oad enough t o
h. Taxexempt i
onsareper sonal. i
ncl udet hecodesi nt hegener all
aw
unless t herei s mani festintentt o
THE FOLLOWING PARTAKE THE NATURE OF repeal or al t
er t he speci al law
TAXEXEMPTION (Prov i
nce of Mi sami s Orientalv s
1. Deduct i
onsf orincomet axpurposes Cagay anEl ectr
icPowerandLi ghtCo.
2. Clai
msf orrefund Inc)
3. Taxamnest y
4. Condonat ionofunpai dtaxli
abil
it
ies NATUREOFTAXAMNESTY
NOTE:mustbest ri
ctlyconstr
uedagai nst 1.Gener alorintentionalov erl
ookingby
thet
axpay er thest at
eofi tsaut hor
it
yt oi mpose
penaltiesonper sonsot her wiseguil
ty
WHEN EXEMPTI ONS ARE CONSTRUED ofev asionorv i
olati
onofar evenueor
LI
BERALLYI NFAVOROFGRANTEE taxlaw.
1. Whent helaw sopr ovidesf orsuch 2.Partakesofanabsol uteforgivenessof
li
ber alconstructi
on. waiveroft hegov ernmentofi tsri
ght
2. Exempt i
ons f rom cer tain t axes, tocollect.
grant edunderspeci alcircumst ances 3.Togi vet axevaders, whowi sht orel
ent
tospeci alclassesofper sons. andar ewil
li
ngt or eform achancet o
3. Exempt i
ons i n f avor of t he doso.
gov ernment ,itspoliti
calsubdi vi
sions
orinst r
ument al
it
ies. RULESONTAXAMNESTY
4. Exempt i
onst ot radi
t i
onalexempt ees, 1.Taxamnest y
suchast hosei nf avorofr eli
gious a) l
ike t ax exempt ion,itis never
andchar i
tableinstit
ut i
ons. favorednorpr esumed
5. If exempt i
ons r efert ot he publ i
c b) construed str i
ctl
y agai nst the
proper ty taxpayer ( must show compl ete
compl iancewiththelaw)
Q:Mayat axexempt i
onber evoked?
A: Yes. I ti
sanactofl i
beral
itywhich 2.
Gov ernment not est opped f r
om
couldbet akenbackbyt hegov ernment quest ioni
ng t he tax liabil
it
y ev en if
unless there arer estr
ictions. Si nce amnest yt ax pay ments wer e already
taxati
on is t he rule and exempt i
on receiv ed.
theref
rom istheexcepti
on, theexempt i
on Reason: Er roneous appl icat
ion and
maybewi t
hdrawnbyt het axingauthori
ty. enfor cement of t he law by publ i
c
(Mactan Cebu I nter
nat i
onal Ai rport offi
cer s do not bl ock subsequent
Authori
tyvs.Marcos,261SCRA667) correctappl icati
onoft hest atute.The
gover nment i s never est opped by
RESTRI
CTIONS ON REVOCATI ON OF TAX mist akesorer ror
sofi t
sagent s.
EXEMPTIONS Basis:Li f
ebloodTheor y
a. Noni mpai rmentcl ause. Wher et he
exempt ion was gr ant ed to pri
vate 3.
Defenseoft axamnest y,l
i
kei nsani
ty,i
s
parties based on material aper sonaldefense.
consi derat ion of a mut ualnat ure, Reason:Rel at
est ot hecircumstances
whicht henbecomescont ract
ualand ofa par t
icul
araccused and nott he
is cov ered by t he non- impair
ment characteroft he act
schar ged inthe
clauseoft heConst i
tution. inf
ormat i
on.
b. Adher ence t o f orm- i ft he t ax
exempt ion i s gr anted by t he Taxamnest
y Taxexempt
ion
Const itution,itsr evocat i
on maybe
I
mmuni
tyf
rom al
l I
mmuni
tyf
rom ci
vi
l
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
16
MEMORYAI
DIN TAXATI
ON LAW
cri
minal
, civil andli
abi
l
ityonl
y fees or charges t he same may be
admini
str
ati
ve assessed wit
hint en ( 10) y earsf rom
l
iabi
li
ti
esari
singfrom discover
yofthef r
audori ntentt oev ade
nonpaymentoftaxes pay ment
.They shal lalso be col lected
eitherbyadmini
strati
veorj udicialaction
Appli
esonlytopast Prospect
ive
tax per
iods,hence appli
cati
on
within fi
ve (5) y ear
s f rom dat e of
ret
roact
ive assessment(Sec.194.LGC)
appli
cat
ion
TAXENFORCEMENTAND
DOCTRI NEOFI MPRESCRI PTIBILTY ADMINISTRATI
ON
Asar ule,taxesar ei mpr escr i
ptibleas
theyar et hel i
febl oodoft hegov ernment . SOURCES OF TAX LAWS ( Key:SPEC2TRA
Howev er ,t axst at utes maypr ovide f or BLT)
statuteofl imitations. 1. Statutes
Ther ulest hathav ebeenadopt edar e 2. President i
alDecrees
asf oll
ows: 3. Execut i
v eOrders
a.)Nat ionalI nternalRevenueCode 4. Const i
tution
The st atute of l imi tat i
on f or 5. Cour tDeci si
ons
assessmentoft axi far et urni sf il
edi s 6. TaxCodes
withint hr ee( 3)y earsf r
om t hel astday 7. RevenueRegul ati
ons
prescribed byl aw f ort hef i
lli
ng oft he 8. Admi nistrati
veIssuances
returnori ff i
ledaf terthel astday ,wi t
hin 9. BIRRul ings
threey ear sf rom dat eofact ualf il
ling.If 10.Local TaxOr dinance
nor etur nisf i
ledort her etur nf il
edi sf alse 11.TaxTr eat i
esandConv ent
ions
orf raudul ent,t he per i
od t o assess i s
withint en y earsf rom di scov eryoft he REQUI
SITESOFTAXREGULATI
ONS
omi ssion, fraudorf alsity. 1. Reasonable
The per i
od t o col lectt ax i s wi t
hin 2. Withintheaut
hori
tyconfer
red
threey ear sfrom dat eofassessment .In 3. Notcont r
aryt
olaw
thecase, howev er ,ofomi ssi ont of il
eori f 4. Mustbepubl i
shed
ther etur nf il
edi sf alseorf raudul ent ,the
periodt ocol lecti swi thint eny earsf rom NOTE: Admi nistr
ati
veregulat
ionsmust
discov erywi t
houtneedofanassessment . alwaysbeinhar monywit
ht heprovi
sions
oft he l
aw. I n case ofdiscrepancy
b.)Tar i
ffandcust omscode between t he basi c law and t he
It does not expr ess any gener al i
mpl ementi
ng r ul
e or r egul
ati
on, the
stat
uteofl i
mitati
on;itpr ovi
ded,howev er, formerprev
ail
s.
that ‘’whenar t
icleshav eent eredand
passedf r
eeofdut yorf inaladjustmentof NON- RETROACTI VITYOFBI RRULI
NGS
duti
es made,wi th subsequentdel ivery, Gener alRul e:Rul ingsarenotr et
roact
ive
suchent ryandpassagef r
eeofdut yor i
ft heyar e prejudici
alt othe taxpayer.
sett
lement of dut i
es wi ll, after the (Sec.246, NIRC)
expi
rationofone( 1)y ear,from thedat e Except ions:
ofthe f i
nalpay mentofdut i
es,i nt he 1. Wher e t he t axpayer deli
berat
el y
absenceoff raudorpr otest,bef i
naland mi sstates oromi t
s mat eri
alfact s
conclusiv
e upon al lpar ti
es,unl ess the from hi sr eturn orany document
l
iqui
dat i
on ofi mpor tent rywas mer ely requiredofhi m bytheBIR.
tent
ative.
”(Sec1603, TCC) 2. Wher e t he f acts subsequent ly
gat hered by t he BIRis mat eri
ally
)LocalGov
c. ernmentCode differentfrom t hefactsonwhi chthe
LocalTaxes,f
ees,orchargesshal
lbe ruli
ngi sbased.
assessedwi t
hinfi
ve( 5)yearsfr
om the 3. Wher ethet axpayeractedinbadfaith.
datetheybecamedue.I ncaseoffr
audor
i
ntentt o ev
ade the paymentoft axes, PRI PLE OF L
NCI EGI VE APPROVALOFAN
SLATI
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
17
MEMORYAI
DIN TAXATI
ON LAW
ADMI NISTRATIVE INTERPRETATION THROUGH ther

ewit h
REENACTMENT 2. Executionofj udgment
si nal
lcases
Wher east atut
ei ssuscept ibleoft he deci
dedi nit
sf avorbytheCourtof
meani ngpl aceduponi tbyar ulingoft he TaxAppeal s(CTA)andt heordinary
gover nment agency char ged wi th its courts
enforcement and t he l egisl
ature 3. Give effectto and admini
stert he
thereaf t
err eenactst heprovisionwi thout supervi
sor y and pol i
ce power s
subst anti
alchange,such act i
on ist o conferr
edt oitbyt heCodeorot her
someext entconf i
rmat or
yt hatt heruling l
aws
carri
esoutt helegislati
vepur pose.
ASSESSMENT – a f inding by the t axi
ng
RULE OF NO ESTOPPEL AGAI NST THE author itythatthetaxpay erhasnotpai d
GOVERNMENT thecor r
ecttaxes. I tisalso awr i
tt
en
Gener alRul e:The Gov ernmenti s not noticet oataxpayertot heeffectthatthe
estoppedbyt hemi stakesorer rorsofits amountst at
edthereinisdueasat axand
agents; er roneous appl icati
on and cont aining a demand f orthe pay ment
enforcementofl aw bypubl icof fi
cersdo thereof .
not bar t he subsequent cor rect Gener alr ul
e:Taxes ar e self-
assessing
appli
cat i
onofst at es.(
ut E.Rodr i
guez,Inc. andt hus,donotr equi r
et heissuanceof
vs.Col l
ector,L-23041, July31, 1969) an assessment not ice in or der t o
Except i
on: Int hei nterestofj usticeand establ ishthetaxl
iabil
ityofataxpay er.
fai
rpl ay,aswher einj
ust i
cewi llresul
tt o
Except
ions:
the taxpay .(
er seeCI Rv s.CA,GR No.
117982,Feb.6,1997;CI Rv s.CA,GRNo. 1. Tax per i
od of a t axpayer is
107135, Feb.3, 1999) terminated[Sec.6(D),NI
RC]
2. Defici
encyt axliabil
i
tyari
singfrom a
AGENCIESI NVOLVEDI N TAXADMI NISTRATION taxauditconduct edbyt heBIR[ Sec.
1. Bur eauofI nternal Rev enue 56(B),NIRC]
–i nternal r
ev enuet axes 3. Taxl en[
i Sec.219, NIRC]
Agent soft heCI R 4. Dissolvi
ng cor poraton [
i Sec.52(c),
a.Commi ssionerofCust oms wi t
h NIRC]
respectt otaxesoni mpor t
edgoods
b. head of t he appr opri
ate SI
GNI CANCEOFASSESSMENT
FI
gov ernmentof f
ice wi t
hr espectt o a. Int hepr operpursui tofj udicialand
ener gyt ax extr ajudicial remedi es t o enf orce
c.banksdul yaccr edi t
edbyt heCI R taxpay er l i
abil
it
ies and cer t
ain
(Sec.12, 1997NI RC) mat terst hatrelat
et oi t,suchast he
2. Bur eauofCust oms– cust omsl aw i
mposi tion of sur charges and
enf orcement i
nt er ests,
3. Prov incial, ci t
y and muni cipal b. In t he appl i
cati
on of st atute of
assessor sandt reasur ers–l ocaland l
imi tat i
ons,
real propert ytaxes c. Int heest abl
ishmentoft axliens, and
d. Inest imat i
ngt her evenuest hatmay
ORGANI ON ANDF
ZATI ON OFTHE
UNCTI be col lected bygov ernmenti nt he
BUREAUOFI NTERNALREVENUE(BI
R) comi ngy ear.(Mamal ateo,Vi ctori
no.
BIR shal
lbeunderthesuperv
isi
on Rev ieweronTaxat ion,2004)
andcont
roloftheDept nance(
.ofFi Sec.
2,NI
RC)
KI
NDS
POWERSANDDUTI ESOFTHEBIR 1. SELF-ASSESSMENT-onei nwhichthe
Assessmentand col l
ecti
on ofal l tax is assessed by t he t
axpayer
nati
onalinternalrevenuetaxes,f
ees,and himself
charges 2. DEFI ENCY ASSESSMENT-ma
CI debythe
1. Enf orcement of al l forf
eit
ures, tax assessorhi msel
fwhereby t
he
penalti
es, and f ines connected correct amount of t he tax i s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
18
MEMORYAI
DIN TAXATI
ON LAW
determi nedaf t
eranexami nat
ionor AuthorityofaRev enueOf f i
cer-pur suant
i
nv esti
gat i
on i s conduct ed. The to a Let t
erofAut hor i
tyi ssued byt he
l
iabili
tyi sdeterminedandassessed Regional Director
forthef oll
owingreason: a.To exami ne taxpay ers wi t
hint he
a.amountascer tai
nedexceedst hat j
urisdicti
onoft hedi str
ictinor der
whichi sshownast hetaxbyt he tocol l
ectt hecor r
ectamountoft ax;
t
axpay eri
nhi sret
urn b.Tor ecommendt heassessmentof
b.noamountoft axisshowni nthe anydef i
ciencyt axduei nt hesame
return mannert hatt he said act s coul d
c.taxpayerdidnotf i
leanyreturnat have been per f
ormed by t he
all Rev enueRegi onal Director.
3. I
LLEGALANDVOIDASSESSMENT- GeneralRul e:i ncome t ax r eturns ar e
assessmentwher ei
ntaxassessor confi
dent ial.
hasnopowert oassessatal l Exception:inqui ryi
ntoi ncomet axr eturns
4. ERRONEOUSASSESSMENT-assessorhas maybeaut hori
zed-
power to assess buter r
si nt he
exerci
sether
eof 1. i
nspect ionisauthori
zeduponwr i
tt
en
order of t he Pr esi
dent of t he
BURDEN OF PROOF I N PRE- ASSESSMENT Phili
ppines;
PROCEEDI NGS 2. i
nspect ion i s aut horized under
Ther e i s a pr esumpt ion of Fi
nance Regul ati
ons No.33 oft he
correctnessandgoodf aithont hepar tof SecretaryofFinance;
the CI R;t hus,t he bur den lies on t he 3. product i
on of t he tax r eturn is
taxpay er. Ot herwi se,thef indingoft he mat eri
alevidenceinacr i
mi nalcase
CIRwi l
lbeconcl usi veandhewi llassess wher ei
nt hegovernmenti si nterest
ed
thet axpayer.Thesamei str
ueev enifthe i
nt heresult;or
CIRi swr ong,i fthet axpayerdoesnot 4. product i
on orinspection ther eofis
contr over. (
t Cagay an Robi na Sugar authorizedbythetaxpay erhimsel f.
Mill
ingCo.v s.Cour tofAppeal s,GR.No.
122451, October12, 2000) Networ
th Met
hod-invent
orymet
hod of
Reasons:a.l i
f ebl
oodt heory i
ncometax v er
if
icat
ion.
b.pr esumpt i
on ofr egul ar
it
yi n
per f
ormance of publ i
c  Appl i
est heaccount ingpri
nciple:
funct i
ons asset s–l i
abili
ti
es= net wor t
h
NOTE:Assessment s by t he BI R must Condit
ionf oritsuse:
haveoni t
sf acet hel aw andf actsupon 1. taxpay er’
s books do not cl earl
y
whicht hepr esumpt i
oni smade. refl
ecthi sincomeort hetaxpay erhas
no books,ori fhe has books,he
PRI
NCIPLESGOVERNINGTAXASSESSMENTS refusest opr oducet hem;
1. Assessment s ar e pr i
ma f aci
e 2. therei sev i
denceofpossi bl
esour ce
presumedcor rectandmadei ngood orsour cesofi ncomet oaccountf or
fait
h. i
ncr easesi nnetwor th;
2. Itshouldbebasedonactual f
acts. 3. therei saf i
xed st ar
ti
ng poi ntor
3. Itisdiscret
ionaryonthepartoft he openi ngnet worth;and
Commi ssioner. 4. theremustbepr operadjustment sto
conf orm withthei ncomet axlaws.
POWERSANDDUTIESOFTHECOMMISSI
ONER
4. Theauthori
tyoftheCommi ssi
onerto I.SECTI
ON 4(powertointer
prettaxlaw
assess taxes may be del egat
ed, anddecidet
axcases)
except t
he power t o make f i
nal
assessments. 1.I
nterpr
etpr ovi
sions ofthi
s Code and
5. Itmustbedirect
edtother
ightpart
y. othertaxl awssubjecttorevi
ew ofthe
Secret
ar yofFinance
(Quasi
-legisl
ati
ve)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
19
MEMORYAI
DIN TAXATI
ON LAW
2.Deci
de:(
Quasi
-j
udi
cial
) concerned,underoat h as may be
a)disput edassessment rel
evanttotheinqui
ry
b)refunds ofi nt
ernalr evenue taxes, 5.to cause r evenue offi
cer
s and
feesandchar ges employeestomakeaCanv assofany
c)penalt i
esimposedi nrel
ationthereto rev
enuedi st
ri
ctorregi
on
d)othermat ter
sar i
singfrom thisCode
orot herl aws orpor t
ions thereof Nothing in Section 5 shal l be
admi nisteredbyt heBI Rsubj ectt o constr
uedasgr anti
ngtheCommi ssi
oner
the excl usiv
e appel l
atejurisdi
ction theauthori
tyt
oinquir
eintobankdeposits
oft heCTA( Sec.4) othert
hanaspr ovi
dedforundersec.6(F)
oftheCode.
I
I. SECTI
ON 5 ( power to obtai
n
i
nformati
on,summon,examineandt
ake I
II
.SECTION 6 ( power t o make
t
esti
monyofper sons) assessment
s, prescr
ibe addi
tional
requi
rement
sfort axadminist
rati
on
3. Fort
heCommi
ssi
onert
oascer
tai
n: andenfor
cement)
(
a)cor r
ectness ofanyretur
n orin
maki ngar et
urnwherenonehas 4. Examinat
ion of r et
urns and
beenmade deter
minati
onoftaxdue
(
b)liabil
ity ofany per
son forany A.Af terar et urnhasbeenf i
ledt he
i
nternal r ev
enue tax or i n Commi ssioner or hi
s
correcti
ngsuchli
abi
li
ty repr esent ativemayaut hor ize
(
c) taxcompl i
ance i
. t heExami nati
onofany
taxpay erand
TheCommi ssioneri saut hor ized: i
i. t heAssessmentoft he
1.toExami neanyr elevantBook,paper , cor r
ectamountoft ax;
recor dorot herdat a B.Fai l
ur et of i
lear eturnshal lnot
2.to Obt ain any i nformat ion ( costs, pr eventt he commi ssionerf r
om
volumeofpr oduct ion,r ecei pts,sales, aut hor izing t he exami nat i
on of
grossi ncome,et c),onar egularbasis anyt axpay er ;
from: * Anyt axordef i
ciencyt axso
i.anyper sonot hert hant heper son assessedshal lbepai dupon
underi nvest igat i
onor not iceanddemandf rom t he
ii
.any of fice or of ficer of t he Commi ssioner or hi
s
national /local gov ernment , gov ’t repr esent ative
agenci es and i nstr ument ali
ti
es * Any r eturn, st at ement or
(Bangko Sent ral,gov ’towned and decl ar ation f i
led i n any
cont rolledcor por ati
ons)( e.g.LTO, aut hor izedof fi
ceshal lnotbe
Regi sterofDeeds) wi thdr awn;but wi thint hree
3.toSummon year sf rom dat eoff ili
ng,t he
i.theper sonl i
abl ef ort axorr equi
red same may be modi fied,
tof ilear eturnor changedoramended; provided
ii
. anyof ficerorempl oy eeofsuch thatno not i
ce f oraudi tor
per sonor inv estigat ion ofsuch r eturn,
ii
i.any per son hav ing i n hi s has i nt he meant ime,been
possessi on/ cust ody /car e act ual l
y ser ved upon t he
--thebooksofaccount s, taxpay er .
--account i
ng r ecor ds ofent ri
es
relat i
ng t ot he busi ness oft he 5.
Fail
uret o submi
trequi
red r
etur
ns and
per sonl iablef ort axoranyot her otherdocument
s
per son I
faper son
--t opr oducesuchbooks, papers, i
.failstof i
l
ear equi
redr et
urnor
recor ds,andot herdat aandt ogive reportatt
het i
mepr escri
bedor
test imony i
i
.wi ll
ful
lyorotherwi
sef i
lesafal
se
4.tot aket heTest i
monyoft heper son orfraudul
entretur
n,
TheCommi ssi
onershallMakeor
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
20
MEMORYAI
DIN TAXATI
ON LAW
Amendther eturnfrom b) isint endingtoleavethePhils.or

i.hisownknowl edgeor c) tor emov ehisproper
tyt her
efrom
ii
.from suchi nformationashecan or
obtai
n t hrough t esti
mony or d) tohi deorconcealhi spr oper t
y
otherwisewhi chshallbepr i
ma or
faci
ecor rectandsuf f
ici
entfor e) i
sper f
orminganyactt endingt o
alll
egal purposes obst ructtheproceedingsfort he
collectionoftax
6.
Inv
entor
y-t
aki
ng, Sur
vei
ll
ance,
Pr
esumpti
veGrossSal
es 8. Pr
escr
ibeRealPr
oper
tyVal
ues
A.Commi ssionermay ,
atanyt i
me TheCommi ssionerisauthori
zedt o:
duri
ngt het axabley ear a.Divide t
he Phi l
s. i nto di
fferent
(a)ordert hei nventoryt aki
ng of zonesorar easand
goodsofanyt axpayeror b.Determi
net hefairmar ketval
ueof
(b)may pl ace t he busi ness realproper t
ies located in each
oper ati
ons of any per son zoneorar ea
(natural/j
ur i
dical) under
obser vati
onorSur veil
lance, Fortaxpurposes, t
hev al
ueoft he
iftherei sr easontobel i
eve pr
oper t
yshallbewhi cheverishigher
thatsuchi snotdecl aringhi s of
:
correct i ncome, sal es or a) Fairmarketv alueasdet er
mi ned
receiptsf ortaxpur poses. bytheCommi ssioner;
or
Thef indingsmaybeused b) Fairmar
ketv alueasshowni nt he
as basi sf or assessi ng t he schedul
e of v al
ues of t he
taxes and shal lbe deemed provi
nci
alandci tyassessors.
primaf aci ecor r
ect.
9. Aut
hor
it
ytoI
nqui
rei
ntoBankDeposi
t
B.Commi ssionermay pr escribe a NotwithstandingR. A.1405( Bank
Mini
mum amount of gr oss SecrecyLaw)t he Commi ssioneri s
r
eceipts,sal esand t axablebase authorized toi nquireintot he Bank
(
taki
ngi nt oaccountt hesal esand depositsof :
i
ncomeofot herper sonsengaged (a)adecedentt odet er
mi nehisgr oss
i
nsimilarbusi ness): estate
i
. Whenaper sonhasf ail
edt o (b)ataxpay erwhohasf il
edan
i
ssuer ecei ptsasr equiredby applicati
ont ocompr omise
sec.113( I
nvoicer equir
ement s paymentoft axliabi
li
tybyr eason
for VAT- r
egistered per sons) of f i
nancialincapacit
y
and Sec.237 ( Issuance of
Recei pts or Commer cial The t axpayer
’s appli
cation for
Inv
oi ces)or compr omiseshallnotbeconsi dered
i
i. Whent hebooksofaccount s unless he wai ves in wr it
ing his
orr ecor ds do notcor rectly pri
v i
lege underRA 1405 and ot her
ref
lectt hedecl arationsmade gener alorspeciallaws.Suchwai ver
orr equi red to bemadei na shallaut hor
izetheCommi ssionerto
ret
ur n, i
nqui reintohisbankdeposi
t s.
Such mi nimum amountshal l 10.Aut
hor
it
ytoRegi
stert
axagent
s
beconsi deredcor rect. (
a)TheCommi ssionershal laccr edit
7. Ter
minat
etaxabl
eper
iod and Regi ster ,i ndividuals and
Commi ssionershal ldecl ar
et het ax generalprofessi onalpar tner
shi ps
peri
odofat axpayerTermi natedandsend andtheirrep.whopr epareandf il
e
noti
cet ot he taxpay erofsuch taxr et
urns and ot herpaper s or
deci
sion wit har equestf ori mmedi ate whoappearbef or etheBI R
paymentoft hetaxwheni thascomet o (
b)The Commi ssioner shal lcr eate
theknowledgeoft heCommi ssioner: nati
onalandr egionalaccr edi
tat i
on
a) thatat axpayerisr eti
ri
ng from boards.
businesssubj ecttotaxor
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
21
MEMORYAI
DIN TAXATI
ON LAW
Those who ar e deni ed di

str
ictof
fi
cial
s
accredit
ati
onmayappealt hesamet o
theSec.OfFinancewhoshal lrul
eon Regional Ev aluati
on Boar d i s
the appeal withi
n 60 day sf rom composedof :
recei
ptofsuchappeal .Failuretodo i
. Regi onal DirectorasChai r
man
sowi thi
ntheprescri
bedper i
odshall i
i.Asst .Regional Di
rector
be deemed as appr oval f or i
ii
.Headsoft heLegal ,Assessment
accredit
ati
on. andCol lectionDiv .
i
v.Rev enue Di stri
ctOf fi
cerhav i
ng
11.Author
ity t
o Pr
escr
ibe Addi
ti
onal j
urisdicti
onov erthetaxpayer
Requir
ement
s
TheCommi ssi
onermaypr escri
be d) powert oAssignorreassi
gn
themannerofcompl i
ancewi t
hany i
nternalrevenue of
fi
cersto
document ar
y or procedural establi
shments where
Requirementfort he submi ssi
on or art
iclessubj
ecttoexci
setax
preparat
ion offinanci
alst atements arekept.
accompany i
ngtaxreturns.
V.SECTIONS 8 ,14,15,16,17 ( Ot
her
I ON 7 (
V.SECTI Aut
hor
it
y t
o Del
egat
e Powers)
Power) 13.Dutyt o ensurethe prov
isi
on and
12.TheCommissi
onermaydel
egat
ethe distr
ibution of f orms, recei
pts,
power
svest
edinhimt
o certi
ficates,andappl
i
ances,andthe
-subor dinateof fici
alswithr ank acknowl edgment of pay ment of
equiv alenttoDi vi
sionChi eforhi gher, taxes( Sec.8)
subject t o l imitations/rest
ri
ct i
ons
imposed under t he r ul
es and 14.Authori
tytoadmini
steroat
hsandt
o
regulat i
ons taketest
imony(
Sec.14)
EXCEPT,( the following power s
shallNOTbedel egated) 15.Aut
hori
ty to make ar
rest
s and
a) power t o Recommend t he sei es(
zur Sec.15)
pr omul gati
on of r ules and
regul ati
ons by t he Sec. of 16.Author i
ty to empl oy, assi
gn or
Fi nance reassign int
ernalr ev
enue of f
icers
b) powert oI ssue r uli
ngs off irst i
nv ol
ved in exci
set axfuncti
onst o
impr essionort oRev erse,revoke establi
shments wher e ar t
icles
modi fyanyexi sting rul
eoft he subjecttoexcisetaxareproducedor
BI R kept(Sec.16)
c) powert oCompr omi seorAbat e
anyt axli
abili
ty 17.Authority t
o assi gn or r eassi
gn
i
nternal r evenue of fi
cers and
empl oyees ofthe BIRt o otheror
specialduties connect
ed wi ththe
enforcementoradmi ni
str
ati
onoft he
revenuelaws(Sec.17)
provided howev er t hat t he ARELEGALOFFI CERSOFTHEBI RAUTHORIZED

regi
onalev aluati
on boar d may TO I NSTITUTE APPEAL PROCEEDI NGS
compr omi se: WITHOUT THE PARTI CI ON OF THE
PATI
1.assessment s i ssued by SOLI TORGENERAL?
CI
regi onal of fices i nvol
v i
ng NO. The insti
tuti
on or
def ici
encyt axesofP500, 000 commencementbef oreapr opercourtof
orl essand ci
v i
l and cr iminal act ions and
2.mi norcr i
minalv iolati
ons as proceedings ar i
sing under t he Tax
may be det ermined by t he Reform Actwhi chshal lbeconduct edby
rulesandr egulati
ons l
egalof f
icersoft heBIRi snoti ndisput
e.
3.di scov ered by r egionaland
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
22
MEMORYAI
DIN TAXATI
ON LAW
Anappealf rom suchcourt,howev er,is

nota mat terofr i
ght
. Iti s sti
llt he REQUI
SITESFORINCOMETOBETAXABLE
Soli
citorGener alwho has the primar y 1. Theremustbeagai norprofi
t.
responsibi
l
ity t o appear f or t he 2. Thegainmustber eali
zedorrecei
ved.
government i n appell
ate proceedings. 3. Thegainmustnotbeexcl udedbylaw
(Commi ssi
onerv s.LaSuerteCigarand ortreat
yfrom taxati
on.
Cigarett
eFact ory
,GRNo.144942,Jul y4,
2002) TESTSONTAXABI TYOFI
LI NCOME
1. Flow of Weal t
h Test – The
SOURCESOFREVENUE determining f actor f or t he
The f ollowing t axes, f ees and i
mposi t
ion of i ncome t ax i s
charges ar e deemed t o be nat i
onal whet her any gai n was der ived
i
nternal revenuet axes.( Sec.21,NIRC) fr
om t het r
ansaction.
1. Incomet ax 1. RealizationTest-unl esst heincome
2. Est ateanddonor '
st axes i
sdeemed" r
eali
zed, "therei sno
3. Val ue-addedt ax t
axabl eincome.
4. Ot herper cent agetaxes 1. Economi c-
Benef i
tPr i
nci pl
eTest
5. Exci set axes -flowofweal threalizedist axable
6. Document ar
yst ampt axes onl y to t he ext ent t hat t he
7. Suchot hert axesasar eorher eaf
ter taxpay er i
s economi call
y
maybei mposedandcol lectedbythe benef it
ed.
BureauofI nternalRev enue.
CRITERIAI NIMPOSI NGI NCOMETAX
1.Citizenshi pPr inciple–Aci t
izenoft he
Phili
ppines i s subj ect t o Phi li
ppine
I
I. NATI
ONALTAXATI
ON i
ncomet ax( a.)onhi swor l
dwi dei ncome,
i
fher esidesi nthePhi li
ppines, or(b. )only
A.I
NCOMETAXATI
ON onhi si ncomef rom sour ceswi thint he
Phili
ppines,i fhequal i
fiesasnonr esident
DEFI
NITI
ONS citi
zen.
I
NCOME TAX – t axon al lyearlyprofi
ts 2.Resi dencePr i
nci ple–r esidental ienis
ari
singfrom proper
ty,possessi
ons, l
iablet opayi ncomet axonhi sincome
tr
adeorbusi ness,orasat axona from sour ceswi thi
nt hePhi l
ippinesbut
person’
s i ncome, emol uments, exemptf rom t ax on hi si ncome f r
om
profi
tsandthelike(61CJS1559) sourcesout sidet hePhi l
ippines.
–taxonincome, whether 3.Sour cePr inciple–Anal ieni ssubj ect
grossornet.(27Am.Jur .308) to Phi l
ippi ne i ncome t ax because he
derivesi ncomef rom sour ceswi thint he
I
NCOME–a l
lwealt
h,whichfl
owsintothe Phili
ppines.Thus,anonr esidental i
eni s
t
axpayer ot
her than as a mere l
iablet opayPhi lippinei ncomet axonhi s
r
etur
nofcapital
. i
ncome f rom sour ces wi thi
n t he
Phili
ppines such as di vidend,i nt erest
,
CAPI
TAL–r esour
ceofperson,whichcan rent,orr oyal ty
,despi tet hef actt hathe
be used in pr
oduci
ng goods and hasnotsetf ootint hePhi l
ippines.
serv
ices. CLASSI
FICATI
ONOFTAXPAYERS
Income Capi
tal
I
ndi
vi
duals
All wealth, which Fund or propert
y a. cit
izens
fl
ows i nto t he whichcanbeused
(1)r esi
dentcit
izens( RC)
taxpayerotherthan i
npr oduci
nggoods
asamer eretur
nof orservi
ces
(2)non- r
esidentcit
izens( NRC)
capit
al. b. ali
ens
(1)r esi
dentaliens(RA)
Fl
owofWeal
th Fundorpr
oper
ty (2)non- r
esidentali
ens( NRA)
(a)engaged i n t rade or
Sour
ceofweal
th Weal
th businesswi thi
nthePhils.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
23
MEMORYAI
DIN TAXATI
ON LAW
(NRAETB) A seaman i sconsi dered asan

(
b)notengagedintradeor OCW provi
ded t he f ol
lowing
busi
ness wi t
hin t he requirement saremet:
Phil
i
ppines(
NRANETB) 1. r
ecei vescompensat i
onf orserv
ices
render edabroadasamemberof
Corporations thecompl ementofav essel
;and
a. Domest ic(DC) 2. suchv esseli
sengagedexcl usivel
y
b. For eign i
ni nternati
onalt
rade.
(1)r esi
dentforei
gncorpor
ati
on
(RFC) Based on t he abov e pr ov isions,
(2)non- resi
dentfor
eign therear et hr ee( 3)t ypesofnonr esident
corporat
ion(NRFC) cit
izens,namel y :( 1)i mmi gr
ant s;( 2)
Estates empl oy ees ofa f or eign ent ity on a
Trusts permanentbasi s; and
Partner
shi ps (3) ov er seas cont ract wor ker s.
Immi gr ant sandempl oy eesofaf or eign
A.I
NDI
VIDUALS entityonaper manentbasi sar et reat ed
asnonr esi dentci tizensf rom t het ime
WHOARETAXABLE? they depar tf rom t he Phi l
ippi nes.
1. Resi
dentCi tizen Howev er,ov erseas cont ractwor kers
2. Non-residentCi tizen must be phy sical ly pr esent abr oad
A non- r
esi dentci ti
zen means,a mostoft het imedur ingt hecal endar
Fi
li
pinoci ti
zen: yeart oqual if
yasnonr esi dentci tizens.
a. who est abl i
shes t o t he 3. Resi dental ien-meansani ndi vidual
sat i
sf act i
onoft heCommi ssioner whose r esi dence i s wi thin t he
thef actofhi sphy sicalpr esence Philippi nesandwhoi snotaci tizen
abr oadwi thadef init
ei ntent i
ont o thereof .[Sec. 22( F,NI RC) ]
residet her ein; 4. Non- residental ienengagedi nt rade
b. whol eav est hePhi l
ippi nesdur i
ng orbusi ness wi thi nt he Phi lippi nes.
thet axabl ey eartor esi deabr oad, (NRAETB)
eitheras an i mmi gr antorf or A non- resi dental i
en means an
empl oy ment on a per manent i
ndi vidualwhose r esidence i s not
basi s; wi t
hint hePhi lippi nesandwhoi snot
c. who wor ksand der ivesi ncome aci ti
zent her eof .[ Sec. 22( G)]
from abr oad and whose The t erm t rade or busi ness
empl oy mentt hereatr equir eshim i
ncl udes t he per formance of t he
to bephy si call
ypr esentabr oad funct ionsofapubl icof fice.[Sec.22
most of t he t i
me dur ing t he (S)]
taxabl ey ear ; The t erm t rade, busi ness or
d. whoi spr ev i
ousl yconsi deredasa prof essi on shal l not i ncl ude
non- resi dentandwhoar rivesi n perfor mance of ser vi
ces by t he
thePhi l
ippi nesatany timedur i
ng taxpay eras an empl oy ee.[ Sec.22
thet axabl ey eartor esi det hereat (CC) ]
per manent lyshal lbeconsi dered A non- r
esi dent al ien i ndi vidual
non- resi dentf ort het axabl ey ear who shal lcome t ot he Phi lippi nes
in whi ch he ar ri
v es i n t he and st ay t her ei nf oran aggr egat e
Phi l
ippi nes wi t
hr espectt o his periodofmor et han180day sdur i
ng
income der ived f r
om sour ces anycal endary earshal lbedeemeda
abr oadunt ilthedat eofhi sar rival non- resi dental iendoi ngbusi nessi n
[Sec. 22( E),NI RC] the Phi li
ppi nes Sect i
on 22( G)
notwi thst andi ng[ Sec.25( A)(
1) ]
NOTE:Anover seascontr
actworker 5. Non- residental i
en notengaged i n
(OCW)i st axable onl
y on i
ncome trade or busi ness wi t
hi n t he
deri
ved from sour ces wit
hin the Philippi nes.( NRANETB)
Phil
i
ppines.[
Sec.23( B)
(C)
]
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
24
MEMORYAI
DIN TAXATI
ON LAW
ONLY RESI DENT CI TIZENS aretaxable taxabl

e as any ot her corporat
ion
forincomeder iv
edf rom sourceswithin except:
and wi thoutt he Phili
ppines.Allother a. GSIS
i
ndividuali ncomet axpayersaretaxable b. SSS
onlyf ori ncome der i
ved from sources c. PHIC
wit
hint hePhi li
ppines. d. PCSO
e. PAGCOR[Sec.27( C)]
 TaxRat
es:Pl
easer
efert
oAnnexA. 3. RegionalorAreaHeadquartersunder
Sec.22( DD)–notsubjecttoincome
B.CORPORATI
ONS tax
WHOARETAXABLE? onaloper
Regi ati
ng headquar
ter
s
1. Domest i
cCor por at
ion– cr eatedor underSec.22(EE)shal
lpayat axof
organi zedi nt hePhi ls.orunderi t
s 10%oftheirt
axabl
eincome.
aw[
l Sec.22( C),NI RC]
2. Resident For eign Cor por ati
on – ONLY DOMESTI C CORPORATI ONS ar e
engagedi nt r
adeorbusi nesswi t
hin taxabl
eforincomeder iv
edf rom sour ces
thePhi l
ippines[Sec.22( H), NIRC] withi
n and withoutthe Phi l
ippines.All
3. Non- residentFor eignCor porati
on– othercorporat
ei ncome t axpay ers are
notengaged i nt r
ade orbusi ness taxabl
e onlyf orincome der i
ved from
wi t
hint he Phi lippines [ Sec.22( I
), sourceswit
hinthePhil
ippines.
NIRC]
ACor porat i
onI ncl
udes:  TaxRat
es:Pl
easer
efert
oAnnexB.
1. Par t
ner ships,nomat terhow cr eated
oror gani zed; C.ESTATESANDTRUSTS
2. Joint-stockcompani es;
3. Joint account s ( cuent as en ESTATE–ref
erstothemassofpr
oper
ti
es
participacion) l
eftbyadeceasedperson.
4. Associ at i
ons;or
5. Insurance compani es [ Sec. 22( B), RULESONTAXABI TYOFE
LI STATE
NIRC] . Whenaper sonwho ownspr operty
di
es,t he foll
owing taxes are pay able
Excl
udes: underthepr ovisi
onsoft he i
ncomet ax
1. General pr
ofessionalpar
tnerships; l
aw:
2. Jointv ent
ureorconsor t
ium f ormed 1. Incomet axf orindi
vidualunderSec.
for the pur pose of under taking 24 and 25 ( t
o cov er t
he per i
od
constructi
onpr oject
sorengagi ngi n beginni
ng Januar yt ot he time of
petrol
eum, coal , geot
hermal and death);
otherener gyoper at
ionspur suantt o 2. Estateincomet axunderSec.60i f
an oper ati
ng or consor t
ium theestateisunderadmi ni
strat
ionor
agreementunderaser vicecont ract judi
cialset
tlement.
withtheGov ernment.
CORPORATIONS E XEMPT F ROM I NCOME

TAXATI
ON (FOR INCOME REALI ZED AS SUCH) ESTATESUNDERJUDI CIALSETTLEMENT
UNDERNI RC A. During t he Pendency of t he
1. Thoseenumer atedunderSec.30. Settlement
Exemptcor porationsar esubject Gener alRule:Anest ateunderj udicial
toincomet axont heiri ncomef rom settl
ementi ssubj ecttoincomet axin
anyoft heirproper t
ies,real orpersonal, thesamemannerasi ndiv
iduals.Its
orfrom anyot heract i
viti
esconduct ed statusist hesameast hest atusof
forprofitr
,egardlessoft hedi sposit
ion thedecedentpr iortohisdeat h.
madeofsuchi ncome. Except i
ons:
2. Withr espectt oGOCCs,t hegener al 1. The ent i
tl
ement t o per sonal
rul
ei sthatt hese cor por at
ions are exempt i
on i s l i
mi t
ed onl y t o
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
25
MEMORYAI
DIN TAXATI
ON LAW
P20,000. property,ori ndustryt ot he est ate

2. No addi ti
onal exempt i
on i s witht he i ntenti
on of di vi
ding t he
all
owed. profi
ts bet ween/ among t hemsel ves,
3. The di st ri
bution t o the heir s an unr egi ster
ed par tnership i s
duringt het axabl ey earofestate created and t he est ate becomes
i
ncome i s deduct iblef r
om t he l
iablef ort hepay mentofcor porate
taxablei ncome of t he estate. i
ncomet ax; or
Such di stri
buted i ncome shal l 2. Ift he hei rs, wi t
hout cont r
ibuting
form par toft her espect i
veheirs’ money ,proper t
yori ndust r
yt ot he
taxableincome. estate,si
mpl ydivi
dethef ruit
st hereof
Wher e no such between/ among t hemsel ves,a co-
distri
butiont ot hehei rsismade owner shi
pi scr eatedandi ncomet ax
duringt het axabl ey earthatthe i
si mposedont heincomer eceivedby
i
ncome i s ear ned, and such each oft he heirs,pay ablei nt heir
i
ncome i s subj ect ed toincome separateandi ndi
v i
dualcapaci ty.
taxpay mentbyt he estate,the
subsequentdi stribution ther
eof TRUST –Ar ighttothepr
oper
ty,whet
her
i
snol ongert axabl eont hepartof realorpersonal,hel
dbyonepersonfor
ther eci
pient. thebenef
itofanother.
B. TERMINATI ON OF THE JUDI CIAL WHENTRUSTSARETAXABLEENTI TI

ES
SETTLEMENT ( WHERE THE HEI RS STI LL 1.Atrust
,thei ncomeofwhi chi stobe
DONOTDI VIDETHEPROPERTY) accumulated
1. I ft he hei rs cont ri
but et ot he 2.At r
ustinwhi chthef i
duci
arymay ,at
estate money , pr oper ty, or hi
s discreti
on, either di
str
ibut
e or
i
ndust r
ywi thi ntentiont odi vide accumulatetheincome.
the pr of i
ts bet ween/ among
themsel ves, an unr egister ed RULES ON TAXABI TY OFTHEI
LI NCOMEOFA
partner shi pi s created and t he TRUST
estate becomes l iablef ort he 1. The i ncome of t he t r
ust f or t he
paymentofcor poratei ncomet ax. taxabl ey earwhi chist obedi stributed
(Evangel ist av s.Collect or,GRNo. to t he benef iciares – f
i il
ing and
L-9996, Oct ober15, 1957; Oñav s. pay ment of t ax l i
e on t he
Commi ssi oner ,GR No.L- 19342, benef iciar ies.
May25, 1972) 2. Thei ncomeoft het rustwhi chi st obe
2. I fthehei rs,wi thoutcont r
ibut ing accumul at ed or hel d f or f uture
money ,pr oper ty ori ndust r
yt o distri
but i
on whet her consi sting of
i
mpr ovet heest ate,simpl ydi vide ordinar yi ncomeorgai nf rom t hesal e
the fruit
s ther eof ofasset si ncl udedi nt he" cor pus"of
between/ among t hemsel v es,a the est at e– f i
li
ng ofr etur n and
co-owner shi p i s cr eated, and pay mentoft axbecomet hebur denof
i
ndiv iduali ncomet axi si mposed thet rust eeorf iduciary.
ont hei ncomer eceivedbyeach Except i
ons:
of t he hei rs,pay abl ei nt hei r a. I nt hecaseofar evocabl et rust
,
separ ateandi ndivi
dualcapaci ty. thei ncomeoft het rustwi l
lbe
(Pascualv s.Commi ssioner ,GR ret urnedbyt hegr antor .
No.L- 78133,Oct ober18,1988; b. I n at rustwher et hei ncomei s
Obill
osv s.Commi ssioner ,GRNo. hel df ort hebenef itoft hegr antor
,
L-68118, Oct ober29, 1985) thei ncomeoft het rustbecomes
incomet ot hegr antor.
ESTATESNOTUNDERJUDI ALSETTLEMENT
CI
c. I nt hecaseoft rustadmi nistered
Pendi
ngtheextr
ajudici
alsettl
ement, inaf or eigncount ry,t hei ncome
ei
theroft he f
oll
owing situat
ions may oft het rust ;undi minishedbyany
ari
se: amount di str
ibuted t o t he
1. If the heirs cont ri
bute money , benef i
ci ariesshal lbet axedt othe
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
26
MEMORYAI
DIN TAXATI
ON LAW
t
rust
ee.
KI
NDS OF PARTNERSHI PF OR TAX PURPOSES
I
RREVOCABLE TRUSTS (
ir
rev
ocabl
ebot
has UNDERTHENI RC
t
ocor pusandast oincome)– 1. Gener al Pr of essi onal Par tner shi ps
(GPP)-f or medbyper sonsf or :
Trusti t
self,through t he t r
ustee or a. t hesol epur poseofexer cisinga
fi
duciary,i sl i
ablef ort he pay mentof commonpr of essi onand
i
ncomet ax.Taxedexact lyi nt hesame b. nopar toft hei ncomeofwhi chi s
wayasest atesunderj udicialsettlement der ived f r
om engagi ng i n any
andi tsstat usasani ndi
v i
duali st hatof trade orbusi ness.[ Sec.22( B) ,
thet r
ustor.I tisent i
tledt ot hemi nimum NI RC] .
personal exempt ion ( P20, 000) and 2. Taxabl eorBusi nessPar t
ner ship–
distr
ibuti
on oft rusti ncome dur ing the Al l ot her par tner shi ps except
taxable y ear t o t he benef ici
aries is gener alpr of essi onalpar t
ner shi psno
deduct i
ble f rom t he t rust’
s t axable mat t
er ,how cr eat edoror gani zed.I t
i
ncome. i
ncludes unr egi ster ed j ointv ent ur es
andbusi nesspar tner shi ps.
REVOCABLE TRUSTS – t
het rust
or,notthe Howev er ,joi ntv ent ur esar enot
tr
ustitself
,issubjecttot hepay mentof taxablesascor por at i
onswheni ti s; (a)
i
ncomet axonthetrustincome. under takingconst ruct ionpr oject s( b)
engagedi npet roleum,coalandot her
EXEMPTION OFE MPLOYEES’ TRUST energy oper ati
on under a ser v ice
Provi
ded: contractwi tht hegov er nment
1. theempl oyee’st rustmustbepar tof Gener alco- par tner shi ps ( GCP)
a pensi on,st ock bonus or pr ofi
t are par t
ner ships,whi ch ar e byl aw
sharingpl anoft heempl oyerf ort he assimi latedt obewi thi nt hecont ext
benef it of some or al l of hi s of,andso l egal l
ycont empl atedas,
empl oyees; corpor ations.Thepar t nershi pi t
sel fi s
2. cont r
ibuti
onsar emadet othet r
ustby subjectt o cor por at et axat ion.The
suchempl oy er,
orsuchempl oy ees,or indivi
dualpar tner s ar e consi der ed
both; stockhol der s and,t her efor e,pr of i
ts
3. suchcont ributi
onsar emadef ort he distr
ibut edt ot hem byt hepar tner shi p
purpose of di str
ibuting t o such aretaxabl easdi vidends.
empl oyees bot ht he ear nings and Thet axabl ei ncomef orat axabl e
pri
ncipaloft hef undaccumul atedby year,af t
erdeduct ing t he cor por at e
thet r
ust,and incomet axi mposedt herei n,shal lbe
4. thatt he t rusti nstrumentmakes i t deemed t o hav e been act ual l
y or
impossi blef oranypar toft het rust const ruct i
vely r ecei v ed by t he
corpusori ncomet obeusedf or,or partner si nthesamet axabl ey earand
divertedt o,pur posesot hert hant he shallbe t axed t o t hem i n t heir
exclusivebenef itofsuchempl oyees. indivi
dualcapaci ty whet heract ual l
y
(Sec.60B, NIRC) distr
ibut edornot .[Sec.73( D) ,NI RC]
Tax exempt ion isl i

kewi se t o be LI
ABI
LITYOFAPARTNERSHI P
enjoyed byt hei ncomeoft hepensi on 1. Gener alPr ofessionalPar t
nershi
p .-
trust; ot herwise, taxat
ion of t hose Theyar enotsubj ecttoi ncomet ax,
earningswoul dr esul
tinadi mi nutionof butar erequiredtof il
er eturnsoftheir
accumul at ed i ncome and r educe i
ncomef ort hepur poseoff ur
nishi
ng
what evert he tr
ustbenef i
ciaries woul d i
nf ormationast ot heshar eofeach
receive out of t he t rust f und. par t
nerinthenetgai norpr ofi
t,which
(Commi ssioner v s.Court of Appeal s, each par t
ner shal lincl ude i n his
Cour tofTaxAppeal sandGCLRet i
rement i
ndi vi
dualr eturn. The par t
nership
Plans,GRNo.95022, March23, 1992) shallactast hewi thholdingagent .
The net i ncome ( i
ncome f or
D.PARTNERSHI
PS distri
buti
on)shal lbecomput edinthe
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
27
MEMORYAI
DIN TAXATI
ON LAW
samemannerasacor poration.Dat e i
ncomeofat axableorbusi ness
off i
lingoft her etur
ni sApr i
l15of partnershi p( di vi
dend) shal lbe
eachy ear. subjectt oaf i
nal t
axasf ollows.
2. Taxabl e orBusi ness Par tnership-  Resi dent Ci t
izen, Non-
The i ncome t ax of t hi
st ype of residentCi ti
zenandResi dent
Partner shipis comput ed and t axed Alien ( 2000 and onwar d)–
l
iket hatofacor porati
on.Thi skindof 10%( Sec.24B2)
partner ship,l
ikear egularcor poration,  Non- residentAl i
en engaged
i
s al so r equired tof il
e a quar terl
y i
nt radeorbusi ness– 20%
corpor atei ncome t ax return.Fi l
ing (Sec.25A2)
and pay mentofquar terl
yr eturni s  Non- resident al ien not
within60day saf tertheendofeach engagedi ntradeorbusi ness
quarterwhi l
et heannualr eturni son –25%( Sec.25B)
orbef oreApr il15 oft hef oll
owi ng b. Shareofapar tnerinthel ossofa
year. taxable orbusi ness par tnership
may be t aken by t he i ndi v
idual
LI
ABI TYOFAPARTNER
LI partnerinhi sreturnofincome.
Rules: c. Pay ment smadet oapar tnerofa
1. Shar e of a par tner in gener al business ort axable par tnership
pr
ofessionalPar tnership forser vices r endered shal lbe
a. Each par tner shal lr eport as consider ed as compensat ion
grossi ncome( businessi ncome) i
ncomesubj ecttosec.24A.
hisdi str
ibutedshar eact ual
lyor
constructivelyreceivedint henet
i
ncomeoft hepar tnership.(Sec.
KI
NDSOFINCOMETAXES
26,NI RC)[Thesameshar e shall UNDERTHENI
RC
be subj ect t o cr editabl
e
withholdingt axof10%. ]Theyar e 1.NetIncomeTax
l
iable i n t heir separ ate and 2.Opti
onal CorporateIncometax
i
ndividualcapaci ty. 3.Minimum Cor porateIncomeTax
4.I
mpr oper l
y Accumul ated Earni
ngs
b. Shareofapartnerinthelossofa Tax
generalpr
ofessionalpartner
shi
p 5.PreferentialRatesorSpecialRat
esof
maybe t aken byt he i
ndivi
dual I
ncomeTax
part
nerinhisr
eturnofincome. 6.GrossI ncomeTax
7.Fi
nal IncomeTax
8.Fri
ngeBenef it
sTax
c. Each par tner i
n a gener al 9.CapitalGai nsTax
professional par
tnershi
p shal l
, (
1)NETI
NCOMETAX
report as gr oss income hi s
dist
ributed share in t he net DEFI
NITION:Me ans gr
oss i ncome less
i
ncomeoft heGPP,basedonhi s deducti
ons and/ or per sonal and
agreedr ati
o,whet
herhe,av ai
l
sof addi
tionalexemptons(
i Sec.31,NIRC)
i
temi zed or optional standar
d
deduct i
on. NETINCOMETAXF ORMULA
Entir
eIncome
d. Paymentsmadet oapar tnerofa Less: Excl usions and I
ncome
GPP forservicesrenderedshal l subject t o Final Tax (e.
g.
be consi dered as or dinar
y PassiveI ncome)
busi
nessincomesubj ecttoSec. GrossIncome
24A(Eff
ectiv
eJanuar y1,1982) Less: Deduct ions(and/oraddi
ti
onal
exempt ions,i
fappli
cabl
e)
2. Shar
e ofa partnerin Taxabl
e or NetTaxabl eIncome
Busi
nesspar
tner
ship Mul t
ipl
yby :TaxRat e(%)
a. Shar
e ofa partnerint he net NetI
ncomeTaxDue
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
28
MEMORYAI
DIN TAXATI
ON LAW
Less:TaxCredi
t,i
fany 66838,
December2,
1991)
TaxStil
ldue,i
fany
2. StockDi v i
dends
GROSSI
NCOME Gener alr ule: Not subj ect t o t ax
because i t does not const i
tute
DEFI
NITION:Me ans alli ncome der ived i
ncome;i tr epresent st ransfer of
fr
om what eversour ce,includingbutnot surplust ocapi talaccount .(Sec.73B,
l
imit
edt othef oll
owing(Sec.32) 1997NI RC)
a. Compensat i
on; Except i
ons:
b. Grossi ncomef rom pr ofession,trade a. Sec.73B, 1997NI RC
orbusi ness; (1)t here i s r edempt ion or
c. Gai nsfor m deal
ingsinpr oper t
y; cancel l
ation
d. Interests; (2)t he t ransact i
on i nvolves
e. Rent s; stockdi vidends, and
f. Roy alti
es; (3)t he“ t
imeandmanner ”oft he
g. Dividends; transact ion makes i
t
h. Annui ti
es; “essent ially equiv alentt oa
i
. Pr izesandwi nnings; distribution of t axable
j
. Pensi ons; div i
dends” . (see
k. Par tner’
sshar ei ntheneti ncomeof Commi ssi onerv s.Cour tof
thegener alprof
essional partnership Appeal s, Cour t of Tax
Appeal s& ANSCOR,GR No.
 SeeAnnexDf
ordet
ail
eddi
scussi
on 108576, Jan.30, 1999)
ofi
tems. b. t he reci pienti s othert han t he
sharehol der( Bachr achv s.Seifert,
KI
NDSOFDI VIDENDS
GRNo.L- 2659, October12, 1950)
1. CashandPr opertyDividends c. change i n t he st ockhol der ’
s
Indi
vi
dual Taxpay er equityr esul t
s by v ir
t ue oft he
a. From Domest i
cCor porat
ions stockdi v i
dendi ssuance.
 RC, NRC, RA–10%( Sec.24A)
3. Li
quidating Di vidends – When a
 NRAETB–20%( Sec.25A2)
corpor ationdi stri
butesallofi ts
 NRANETB – 25% on gr oss asset si ncompl eteli
quidati
onor
ncome(
i Sec.25B) dissolut i
on,t hegai nr eal
ized or
b. From For eignCor porati
ons l
osssust ainedbyt hestockhol der,
 RC,NRC,RA,NRAETB – 5- whet heri ndividualorcorporat i
on,
32%( Sec.24,25A1) i
st axabl ei ncomeordeduct i
ble
 NRANETB – 25% on gr oss l
oss,ast hecasemaybe.( Sec.
ncome(
i Sec.25B) 73A)
Al iquidatingdivi
dendi snota
Cor
por ateTaxpay er divi
dendi ncome.Thet r
ansact ion
a. ForeigntoDomest i
cCor p.–32% i
sconsi der edasal eorexchange
(Sec.32A) of pr operty bet ween t he
b. Domest ictoDomest icCor p.– corpor ationandt hestockholder .
Exempt ;int
ercorpor
at edi vidends
(Sec.27D) EXCLUSI
ONSF ROM GROSSI NCOME
c. Domest ictoForeignCor p.- NOTE:Un derthe1997TaxCode, t
heterm
 Resi dent Foreign Cor p. – “excl
usi
ons”r ef
er stoi temst hatarenot
Exempt( Sec.28[A]7d) i
ncluded int he det ermi nat
ion ofgr oss
 Nonr esidentForeignCor p.– i
ncomeei t
herbecause:
15% subjecttot hecondi ti
on (
a)theyr epresentr eturnofcapitalor
stat
ed i n Sec. 28 [ B] 5. arenotincome, gai norpr ofi
t;or
Otherwise,i
tshallbet axedat (
b)theyar esubj ecttoanot herki
ndof
32%.( SeeCommi ssionerv s. i
nternalrevenuet ax;or
ProcterandGambl e,GRNo. (
c)theyar eincome, gainorprofi
tthat
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
29
MEMORYAI
DIN TAXATI
ON LAW
areexpressl
yexemptf or
m incometax theoryf ort
hisi
st hatrecoupmenton
underthe consti
tut
ion,t
ax tr
eat
y,Tax accountofsuchl ossesisnotincome,
Code,orageneral
orspeci
all
aw. sincei tisnotder i
vedf rom capital
,
from labororf rom bothcombi ned.
1. Pr
oceedsofl
if
einsur
ancepai
d by And t he factthatt he paymentof
reasonoft hedeat hoft hei nsuredt o compensat ion for such loss was
his est ate or t o any benef i
ciary voluntarydoesnotchangei t
sexempt
(i
ndividual, par
tnership, or status.I twasinf actcompensat i
on
corporation,butnotat r
ansf ereefora foral oss,whi
chi mpair
edpetiti
oner’s
valuableconsi derati
on),directlyori n capital.
trust.
NOTE: i f t he pr oceeds ar e 5. I
ncomeexemptunderTr
eat
y;
retai
nedbyt hei nsurer,thei nt
erest
thereoni staxable; 6. Ret
ir
ement benef its, pensi on,
gr
atuiti
es, et c.
2. Ret
urnofi
nsur
ancepr
emi
um; a. those der i
v ed underR. A.7641
NOTE:i fsuchamount s( whenadded (pertai nst opr i
vat ef i
rmswi thout
to amount s alreadyr eceived bef or e reti
rementt rustf und) ;
thetaxabl ey earundersuchcont r
act s) b. those r ecei ved byof ficials and
exceed t he aggr egat e pr emi ums or empl oy eesofpr i
v ateempl oy ers
consi der ati
ons pai d( whetherornot i
naccor dancewi thar easonabl e
paiddur ingt het axabl ey ear),t hent he privatebenef itplan;
excessshal lbei ncludedi nt hegr oss Requi si tes:
i
ncome. Howev er ,int hecaseofa (1)i nt he ser vice oft he same
transf erf orav aluabl econsi der ation, empl oy er f or at l east 10
byassi gnmentorot herwise,ofal ife y ear s;
i
nsur ance, endowment or annui ty (2)atl east50y ear sol d;
contract ,oranyi nter estt herei n,onl y (3)mustbeav ailedofonl yonce
theact ualv alueofsuchconsi der at
ion (4)pl an appr oved by t he BI R
andt heamountoft hepr emi umsand (R. R. 2-98) ;
othersumssubsequent lypai dbyt he c. separ at ionpaybecauseofdeat h,
transf ereear eexemptf rom t axat i
on. sickness, or ot her phy sical
Nol ossi srealizedonsur renderofa disabi li
t yorf oranycausebey ond
l
ifei nsur ancepol icyf ori tssur render the cont r
olof t he of ficialor
value. empl oy ee ( e.g. r etrenchment ,
redundancy or cessat ion of
3. Gi
ft
,bequestordev
ise business) ;
Gi
fts, bequest s, and dev ises “for any cause bey ond t he
(whichar esubj ectt oest ateorgi f
t cont rol of sai d of fi
ci al or
taxes) ar e excluded,but not t he empl oy ee” – connot es
i
ncomef rom suchpr operty.I ft he i
nv olunt arinessont hepar toft he
amountr eceived is on accountof offi
ci alorempl oy ee;separ ation
servi
ces rendered, whether mustnotbeaskedori nitiatedby
consti
tuting a demandabl e debtor theof ficial orempl oy ee.
not,ort heuseoft heoppor tunit
yt o d. social secur i
ty benef its,
useofcapi t
al,ther eceiptisi ncome reti
rement gr atuities, pensi ons
(Pir
ovano v s. Commi ssioner, 14 and ot her si mi lar benef i
ts
SCRA832) receiv ed byci t
izens and al i
ens
whocomet or esi deper manent ly
4. Compensat
ion f
orper
sonali
njur
ies heref rom f oreignsour cespr iv
at e
or sickness,whether by sui t or orpubl ic;
agreement e. benef itsduet or esi dent sunder
NOTE:Thephr ase“personali
njur
ies” thel awsoft heU. S.admi nister ed
shouldbegivenarestr
icti
vemeani ng by the U.S. Vet erans
toreferonlytophy
sicalinj
uri
es.The Admi nist ration
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
30
MEMORYAI
DIN TAXATI
ON LAW
f. SSSbenef
it
s;and exempted bystat
ute;
g. GSI
Sbenefi
ts. (3) do not come
withi
nthedef
ini
ti
onof
i
ncome
7. Mi
scel
laneousi
tems
a. Passi vei ncome der i
ved i nt he
Per
tai
n to t
he Pert
ain t
o t
he
Philippi nesby : computat
ionofgr
oss computat
ion of t
he
(1)For eigngov er nment s; i
ncome neti
ncome
(2)Fi nanci ngi nst itut i
onsowned,
cont r olled or enj oy i
ng Something earned or Somethi
ng spentor
ref inanci ng f rom f oreign recei
ved by t he pai d i
n earni
ng of
gov er nment s taxpayerwhichdonot gr ossi
ncome
(3)I nt er nat ional or r egional form part of gross
financi al i
nst itutions i
ncome
est abl ished by f oreign
gov er nment s
b. Incomeder ivedf rom anypubl i
c DEDUCTI
ONS
util
ityorf rom t heexer ciseofany
gov er nment al funct i
on; DEFI
NI ON:I
TI t
emsoramount swhichthe
c. Prizes and awar ds made l
aw al l
owsto bededucted f
rom gr
oss
primar ily i n r ecogni ti
on of i
ncomei nor
dertoarr
iveatthetaxabl
e
reli
gi ous, char i
t abl e, sci entif
ic, i
ncome.
educat ional ,ar t i
st ic,l i
t erary,or
civicachi ev ement BASI
CPRI NCIPLESGOVERNI NGDEDUCTI ONS
Requi si tes: a. The t axpay erseeki ng a deduct ion
(1)r eci pi ent was sel ected must poi nt t o some speci fi
c
wi thoutanyact iononhi s prov i
sionsoft hest at
uteaut hor izing
par t;and thededuct i
on; and
(2)r eci pi enti snotr equi redt o b. Hemustbeabl et oprovet hathei s
render subst ant ial f uture ent i
tl
edt ot hededuct i
onaut hor ized
ser v ices. or al owed. (
l Atl
as Consol idat ed
d. Prizes and awar ds gr ant ed t o Mi ni
ng & Dev . Cor p. v s.
athlet es i n spor ts compet i
tions Commi ssioner, GR No. L- 26911,
andsanct ionedbyt hei rnat i
onal Januar y21, 1981)
spor tsassoci ation; c. Anyamountpai dorpay ablewhi chi s
e. 13thmont hpayandot herbenef it
s otherwi sededuct i
blefrom,ort aken
upt oP30, 000. 00; into account i n comput i
ng gr oss
f. GSI S,SSS,Medi car e and uni on incomeorf orwhi chdepr eci ationor
duesofi ndi vidual s; amor ti
zat i
onmaybeal l
owed, shal lbe
g. Gai ns der ived f rom debt all
owed as deduct ion onlyi fi ti s
secur itieswi thamat urityofmor e shown t hatt he tax required t o be
than5y ear s; deduct edandwi t
hheldtherefrom has
h. Gai nsf r om r edempt ionofshar es been pai dt ot he BIR.[ Sec.34( K),
i
nMut ual Fund. NIRC]
EXCLUSI
ONSVS.DEDUCTI
ONS NOTE: Deduct i
ons f or income t ax
purposes part
ake oft he nature oftax
Excl
usions Deduct
ions exemptions;hence,i
ftaxexempt ionsare
[
Sec.32(B)
] [
Sec.34] tobest r
ict
lyconstr
ued,theni tf ol
lows
thatdeduct i
ons mustal so be st ri
ctl
y
Ref er to flow of Refert
ot heamounts constr
ued.
weal thwhi
char enot whichthelaw all
ows
treated as part of to be subt ract
ed TAXPAYERS WHO CANNOT AVAI L OF
gross income fr
om grossincomein DEDUCTIONSFROM GROSSINCOME
because: ordert
oar ri
veatnet 1. Citi
zens and resi
dental i
ens whose
(1)exempt ed bythe i
ncome
income i s pur ely compensation
fundamentallaw;( 2)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
31
MEMORYAI
DIN TAXATI
ON LAW
i
ncome ( except f or pr emium exceed t
he amountal
l
owed i
n
payments on heal t
h and/ or NIRC.
hospi
tal
i
zati
oninsurance)
;
2. Non-r
esi
dentaliens notengaged i n Theper sonalexempt i
onshallbe
tr
adeorbusinessi nthePhili
ppines; equaltot hatallowedbyt heincome
and taxlaw ofhi scount r
ytoaci ti
zenof
3. Non-r
esi
dentforei
gncorporat
ion thePhil
ippinesnotr esi
dingtherei
n,or
the amountpr ovided int he NIRC,
CLASSESOFDEDUCTI ONS whicheverislower.
1. Indivi
dual s
a. wi t
hgr osscompensat ionincome Indi
vi
dual s not ent itl
ed to t hese
from empl oy er
-employ ee exemptions:
relat
ionshi ponly a. Non- r
esidentAl i
en notengaged
(1)pr emi um payment sonheal th intradeorbusi ness
and/ orhospital
ization b. Ali
en i ndivi
dual empl oyed by
insur ance RegionalorAr eaHeadquar tersof
(2)per sonal additi
onal Mul ti
nationalCompani es
exempt i
ons c. Ali
en i ndivi
dual empl oyed by
b. gr ossi ncomef r
om busi nessor OffshoreBanki ngUni t
s
practiceofpr ofessi
on d. Ali
en i ndivi
dual empl oyed by
(1)Opt i
onalSt andardDeduct ion Petroleum Ser vice Cont ract
or
(OSD) andSubcont ractor
(2)I temi zeddeduct ions
(3)pr emi um payment sonheal th c. It
emizeddeduct ions
and/ orhospital
ization a. ordinar y and necessary
insur ance expenses
(4)per sonal additi
onal b. i
nt erests
exempt i
ons c. taxes
2. Cor porations d. l
osses
 I t
emi zedDeduct i
ons e. baddebt s
f. depr eciati
onofpr opert
y;
g. deplet i
onofoi l
andgaswel lsand
KI
NDSOFDEDUCTI ONS mi nes;
a. Optionalst andar ddeduct i
ons( OSD) h. char i
tableandot her
–10%oft hegrossincome. cont ri
butions;
TheOSD maybeav ai
ledof i
. r esear chanddev elopment ;
only by i ndi
vidual
s ( except j
. pensi ont r
ustcont ri
buti
onsof
nonresidental ien)whoar enotpur el
y empl oy ees;and
compensat ionincomeear ners. k. premi um pay ment sonheal th
b. Personalandaddi t
ionalexempt ions and/ orhospi t
alizationi
nsurance.
Available onl y t o i ndivi
duals (Thisi stheonl ydeductionwhi ch
(businessi ncomeandcompensat ion acompensat ionincomeear ner
i
ncomeear ners). maycl aim asadeduct i
on.)
NRAETB may be ent it

led t o d. Specialdeduct i
ons
personal exempt ions(only)subjectto a. private pr opri
etar
y educat i
onal
reci
pr oci ty,i
.e., insti
tutionsandhospi tal
sthatare
a. t he count ry ofwhi ch he isa non- proft(
i Sec.34A, 2)
subj ectorci tizenhasani ncome b. insurancecompani es( Sec.37)
taxl aw; and c. estat esandt r
usts(Sec.61)
b. t hei ncomet axl awofhi scount r
y
allows per sonal exempt ion t o PERSONALEXEMPTI
ONS
citizens oft he Phil
ippi
nes not
resi ding t herein, but der i
ving A. Amounts of Per
sonalExempt
ions
i
ncome t herefrom and not t o [
Sec.35,
NIRC]
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
32
MEMORYAI
DIN TAXATI
ON LAW
1. P 20,
000 – Si ngleindiv
idualor 1. Husbandisunempl oyed
married indivi
dualjudi ciall
y 2. Husbandiswor kingabr oadlike
decreed l egall
y separ ated anOFW oraseaman
wit
houtqual i
fi
ed dependent 3. Husband expli
cit
ly wai ved his
chi
ldren. ri
ghtoftheexempt ioninfavorof
2. P25,000–Headoft hefami l
yor his wif
e i n the wi thhol
ding
married indivi
dualjudi ciall
y exempti
oncerti
fi
cat e.
decreed l egall
y separ ated
wit
h qual if
ied dependent ASeni orCi tizeni s:
chi
ldren. 1. any r esi dent ci tizen of t he
3. P 32,000 – For each l egal l
y Philippines
marriedi
ndi v
idual. 2. at l east si xty 60 y ears ol d,
i
ncl udingt hosewhohav er eti
red
Headoft heFami ly fr
om bot h gov er
nment of f
ices
1. Unmar r
ied orl egal ly separ ated andpr ivateent erpr
ises,and
personwi thoneorbot hpar ent s, 3. hasani ncomeofnotmor et han
oroneormor ebr ot hersorsi sters, Sixtyt housand pesos ( 60,000)
or one or mor e l egiti
mat e, perannum subj ectt other eview
recognized nat ur al or l egal l
y of t he Nat i
onal Economi c
adopt edchi ldrenl ivingwi thand Dev elopment Aut hor i
ty( NEDA)
dependentupont het axpayerf or ever ythr eey ears.
theirchiefsuppor t; and
“Chiefsuppor t
”meansmor et han Par ent
sanddependent squali
fy
one-halfoft her equi rement sf or the t axpayer
, to t he personal
suppor t
. exempt i
onofP25,000asheadoft he
2. Wher e such br other/si steror famiy but not t
l o the addi
ti
onal
chil
dren ar e notmor et han 21 exempt i
onofP8,000.
yearsofage,unmar ri
edandnot
gainfull
y empl oy ed, or wher e NOTE:NRAETBmaydeductper sonal
such dependent sr egardless of exempt i
on( notaddit
ionalexemption)
,
age,ar ei ncapabl e of sel f– butonlyt ot heextentall
owedbyhi s
suppor tbecause ofment alor country to Fi l
ipi
nos not r esi
ding
physical defect. ther
ein,and shal lnotexceed t he
afor
ement ionedamount s.NRANETB
Parents,brother
s,si
ster
sandseni or cannot cl aim any per sonal or
ci
tizenwi t
ht hetaxpayer
,whetherrel
ative addit
ionalexempt i
ons.
ornot ,mayqual if
ythetaxpayer,tothe
personalexempt i
onofP25,000ashead C.ChangeofSt atus[ Sec.35, NIRC]
oft hef amily butnottot headdi t
ional 1. Ifthet axpay ershoul dmar ryor
exempt ionofP8,000. should hav e addit
ional
dependent s dur i
ng t he t axable
B. Addi ti
onal Exempt ion for year, he may cl aim t he
Dependent s[Sec.35, NIRC] correspondi ngexempt ionsi nf ull
P8, 000– Foreachoft hequal i
fi
ed forsuchy ear.
dependent chi l
dren not 2. Ifthet axpay ershoul ddi edur ing
exceeding f our ( 4) i n thet axabley ear,hisest atemay
number . clai
m the correspondi ng
Theaddi ti
onalexempt i
onr efer
sonl y exempt i
onsasi fhedi edatt he
toqualifi
eddependentchi l
dr ensuchas closeofsuchy ear.
l
egiti
mat e, recognized natural, 3. Ifthespouseoranydependent
i
ll
egiti
mat eandl egall
yadopt ed. should di e or any dependent
Thepr opercl ai
mantoft headdi t
ional shouldmar ryorbecomet went y
-
exemptioni sthehusbandbei ngt hehead oney earsol ddur i
ngt hey ear,or
ofthef ami l
yexceptundert hefoll
owing should become gainfull
y
cases: empl oyed, t he t axpay er may
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
33
MEMORYAI
DIN TAXATI
ON LAW
clai
m t heexempt ionsasi ft he othersimil
arpayment,bei
ngagainstl
aw
spouseordependentdi edorasi f andpubl i
cpol
icyarenotdeduct
iblefr
om
suchdependentmar r
ied,became grossincome.(Subsec.A,
1,c)
twent yoney ear soldorbecame
gainfullyempl oy edatt hecl oseof CAPITAL E TURE – An e
XPENDI xpenditure
suchy ear. thatbenef it
snotonl ythecur rentperiod
4. Foranyot herev entandf orwhi ch but al so f utur
e per i
ods. I ti s not
there ar e no speci fic r ules deductibl
ebutdepr eci
able,except,i
ft he
applicable f rom t he abov e- taxpayer i s a non- profit propri
etary
ment ioned,t he st atus of t he educationali nst
it
uti
on whi ch mayel ect
taxpay eratt heendoft hey ear eit
hert odeductt hecapi t
alexpenseor
shalldet erminehi sexempt ions. depreciateit.
(str
ictly const r ued agai nst t he
taxpay er)  SeeAnnexE– Busi
nessExpenses
Exampl es:
 becamel egal l
ysepar ated –  SeeAnnexF–Cei li
ngon
canonl ycl ai m P20, 000 “Ent
ertai
nment,
Amusementand
 25 y ears ol d child became Recreati
onal
Expenses”
incapacitat ed–cannotcl aim
addi t
ional exempt i
on B.I
NTEREST
I
TEMI
ZEDDEDUCTI
ONS INTEREST –s hallr
efertothepay mentfor
theuseorf orbearanceordet enti
onof
A.ORDI
NARYANDNECESSARY money , regardlessofthenamei tiscal
l
ed
EXPENSES ordenomi nated.Itincl
udest heamount
paidf ort he borrower'
s use of,money
duringt het erm oftheloan,aswellasfor
NECESSARY EXPENSE – appr opri
ate and
hisdet entionofmoneyaf tert
heduedat e
helpfuli
nt hedev el
opmentoft axpayer'
s
foritsrepay ment .
businessandar eintendedt o mini
mize
l
ossesort oincreasepr of
it
s.Thesear e
REQUISITES F OR DEDUCTI BILITY ( REV.REG.
theday -
to-
dayexpenses.
NO.13- 2000)
ORDINARY EXPENSE – normalorusuali n
1. Ther emustbeani ndebt edness;
rel
ationt othet axpayer
’sbusinessand
2. Ther eshoul dbeani nter estexpense
thesurroundi
ngci r
cumstance.
pai d or i ncur red upon such
indebt edness;
REQUISITES OF BUSI NESS E XPENSE TO BE
3. The i ndebt ednessmustbe t hatof
DEDUCTI BLE
thet axpay er;
1. or dinar yandnecessar y;
4. Thei ndebt ednessmustbeconnect ed
2. pai dori ncurr
edw/ i
nt hetaxabley ear;
wi tht het axpay er'
st rade,busi nessor
3. pai dori ncurr
edi ncarryi
ngonat rade
exer ciseofpr ofession;
orbusi ness;
5. Thei nt erestex pensemusthav ebeen
4. subst ant i
atedwithof f
ici
alreceiptsor
pai d ori ncur red dur ing t he t axabl
e
ot heradequat erecords.
year ;
5. ifsubj ectt owithholdi
ngt axespr oof
6. The i nt erest must hav e been
ofpay mentt ot heBur eauofI nternal
stipulat edi nwr iti
ng;
Rev enuemustbeshown.
7. Thei nt erestmustbel egallydue;
6. must be r easonable ( when t he
8. Thei nt erestar rangementmustnot
expensei snotlavi
sh,ext r
avagantor
bebet weenr elatedt axpay ers;
excessi v eunderthecircumstances)
9. Thei nt er estmustnotbei ncurredto
7. mustnotbecont rarytol aw,publ i
c
financepet roleum oper at i
ons; and
pol i
cyormor al
s.
10.Incaseofi nteresti ncur redt oacqui r
e
pr oper tyusedi nt rade,busi nessor
NOTE:Whileill
egalincome wi l
lf or
m
exer ciseofpr ofession, thesame, was
par
tofi
ncomeoft hetaxpay
er,expenses
nott r
eat edasacapi tal expendi tur
e.
whi
ch const
it
ute bri
be,kickback and
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
34
MEMORYAI
DIN TAXATI
ON LAW
11.The int er
est is not expr essly amount i
ngtoP200,000onwhicht he
di
sal
lowed by law to be deduct
ed fi
nalt ax of P40, 000 has been
fr
om grossincomeofthet
axpayer. wit
hheld.
Assume t hatCompany X’s net
RULES ON DEDUCTI BI
LITY OF I NTEREST i
ncome bef ore t
he deduct
ion of
EXPENSE i
nterestexpensei
sP500,
000.
Gener alRul
e-I ngener al,theamountof
i
nt er
estexpensepaidori ncur redwi t
hina The deduct
ibl
e expense shal
l be
taxable y ear of i ndebt edness i n comput
edasf ol
l
ows:
connect i
on with the t axpay er'
s t rade
businessorexerciseofpr ofession,shall Year2000
be allowed as a deduct ion f rom t he
taxpayer'
sgrossincome. NetIncomebef ore
i
nterestexpense P500,
000
Limitati
on - The amount of i nt
erest Less:InterestExpense P120,000
expensepai dincurredbyat axpayeri n Less:38%ofi nt
erest
connection with hist r
ade,business or incomef r
om deposit
exerciseofapr ofessionfrom anexisting (38%xP200, 000) 76,000
i
ndebt edness shal lbe reduced by an DeductibleInterest
amountequalt hef oll
owingpercentages Expense 44,
000
ofi nterestincome ear ned whi ch had TaxableIncome P456,
000
been subj ected t o f i
nal withholding
dependingont hey earwhent hei nt
erest
i
ncomeear ned,viz: DeductibleI nterestExpense
38%-begi nningJanuar y1,2000and 1. Interestont axes,suchast hosepai d
t
hereafter fordef iciencyordel i
nquency ,since
taxes ar e consi dered i ndebt edness
Aim ofLi mi t
ation: To discourage so- (prov i
dedt hatt hetaxi sadeduct ibl
e
called “ back-to-back” loans wher e a tax, excepti nt hecaseofi ncomet ax).
taxpay ersecur es a loan fr
om a bank, Howev er, f ines, penal t
ies, and
turns ar ound and i nv
ests the l oan sur char gesonaccountoft axesar e
proceedsi nmoneymar ketplacement s. not deduct ible. The i nterest on
Byi mposi ngal i
mitast otheamountof unpai d busi ness t ax shal lnotbe
i
nt erestexpense t hatcan be deduct ed subj ected t o t he l i
mi tati
on on
from gr ossi ncome,t heprevi
ouspr acti
ce deduct i
on.
oft axar bitr
agewasabsol ut
elynull
i
fied. 2. Interestpai dbyacor porationonscr i
p
dividends
TaxAr bit
rage–i samet hodofbor rowing 3. Interest -on deposi ts pai d by
withoutent eri
ng into a debt or
/credit
or aut horized banks of t he Bangko
rel
ationshi
p,of ten tor esolvefinancing Sent r
alngPi li
pinast odeposi t
ors,if
andexchangecont rolproblems. Int ax i
ti s shown t hatt he t ax on such
cases,back-to-backl oanisusedt ot ake i
nt erestwaswi thheld.
advantageoft hel oweroft axoni nter
est 4. Interestpai dbyacor por atet axpayer
i
ncome and a hi gherr ate oft ax on whoi sl i
ableonamor tgageuponr eal
i
nterestexpensededuct i
on. proper tyofwhi chthesai dcor porati
on
i
st hel egalorequi tableowner ,even
Il
lustr
ation: thoughi tisnotdi rectl
yl iablef orthe
OnJune1, 2000CompanyXhas: i
ndebt edness.
1. Obt ainedal oanf r
om ABCFi nancing
Corporati
on in connecti
on witht he NON-
DEDUCTIBLEINTERESTE XPENSE
operati
on of i t
s business and its 1. An i ndivi
dual t axpay er reporti
ng
i
nterest expense on t he l oan incomeont hecashbasi si ncursan
amount edtoP120, 000. indebtednessonwhi chani nteresti
s
2. Deposi taccounti n DEF Bank and paidinadv ancet hroughdi scountor
deri
ved i nterest income t hereof otherwi se:
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
35
MEMORYAI
DIN TAXATI
ON LAW
 al l
owed as a deduct ion i nt he excess prof
it
st ax,ift he t
axpayer
yeart hei ndebtedne ssi spaid makesuseoft axcredi
t;and
i ft he i ndebt edness i s pay abl
e 6. fi
naltaxes,being inthe nature of
per i
odic amor t i
zation on, t he i
ncomet ax.
amount of i nt
er est whi ch
cor r
espondst ot heamountoft he NOTE: Taxes al lowed as deducti
ons,
principalamor tizedorpai ddur i
ng when refunded or credit
ed,shal lbe
the y ear shal lbe al lowed as i
ncludedaspar tofgrossincomei nt he
deduct ioni nsucht ax abley ear . yearof receipttot he extentof t he
2. Interest pai d on i ndebt edness i
ncome tax benefitofsai d deducti
on.
bet weenr elatedt axpay er TaxBenef
( i
tRule)
3. Ift he i ndebt edness i si ncur red to
financepet roleum expl orat i
on ForNRAETBandRFC,t axespaidor
4. Interestonpr efer r
edst ock,whi chin i
ncurr
edar eal
lowedasdeduct i
onsonlyif
realityisdi vidend andtot heext
entthattheyareconnect
ed
5. Interest on unpai d sal ari
es and fr
om incomewi t
hinthePhil
i
ppines.
bonuses
6. Interestcal culatedf orcostkeepi ng EXCEPTI ONS t or equirementt hatonly
on accountofcapi t
alorsur pl
us such per sons on whom t he tax is
i
nv est edi nbusi nesswhi chdoesnot i
mposed by l aw can cl aim deduct i
on
repr esent char ges ar ising under ther
eof :
i
nt erest -
bear ingobl igation. 1. Taxes of shar eholder upon hi s
7. Interest pai d when t her e i s no interestas such and pai d by the
stipulationf ort hepay mentt hereof . cor porat
ion withoutr eimbursement
from hi m,can be cl aimed by the
OPTIONALTREATMENTOFI NTERESTEXPENSE cor porat
ionasdeduct ion.
Att heopt i
onofthetaxpay er
,int
erest 2. Acor porat
ionpay ingt het axforthe
i
ncurredt oacquir
epropertyusedi ntr
ade holderi tsbondsorot herobl i
gati
on
or busi ness may be al l
owed as a cont ai
ningat ax-
freecov enantcl
ause
deducti
on or t r ed as capi
eat t
al cannot cl aim deduct ion for such
expenditure.[
Sec34(B)(
3),NIRC] taxes pai d by itpur suantt o such
cov enant.
C.TAXES
TAXCREDI
T
Taxes mean TAXES PROPER, and
ther
efor enodeducti
onsareall
owedf or
: DEFI
NI ON:
TI ri
ghtofani ncomet axpayerto
1. interest deductf rom i ncome t ax payablet he
2. sur charges for
eign incomet axhehaspai dt o his
3. penal ti
es or f i
nes incident to for
eigncount r
ysubjecttoli
mi t
ation.
delinquency(Sec.80,
Rev.Reg.2)
WHOCANCLAI M TAXCREDIT
REQUI TESF
SI ORDEDUCTIBILITY 1. resi
dentciti
zensofthePhili
ppines
1. mustbei nconnectionwi t
htaxpay er
’s 2. resi
dentaliensunderthepr i
ncipl
eof
busi ness; reci
procit
y
2. taxmustbei mposedbyl aw on,and 3. domest i
ccor por
ati
onswhi chincl
ude
pay ablebytaxpayer( dir
ecttax);and part
nerships except general
3. paid ori ncurr
ed dur ing the taxable prof
essionalpart
nership
year . 4. benefi
ciari
esofestatesandtrusts
5. member s ofbenef ici
ari
es ofl ocal
TAXESNOTDEDUCTIBLE part
nerships
1. incometax;
2. estat
eanddonor ’
stax; WHOARENOTENTI TLEDTOTAXCREDIT
3. special
assessments; 1. non-r
esidentciti
zens
4. excesselect
ri
cconsumpti
ontax; 2. resi
dentali
ens, i
fwit
houtr
ecipr
ocit
y
5. forei
gnincomet ax,warprof
it
sand 3. resi
dent ali
ens whose i ncome is
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
36
MEMORYAI
DIN TAXATI
ON LAW
deri
ved solel
yf r
om sour ces wi
thi
n LOSSES – r
efertosuchl osseswhi chdo
thePhil
i
ppines notcome undert he categor
y ofbad
4. for
eign corporat
ions (
residentand debts,i
nventorylosses,depreci
ati
on,etc.
,
non-r
esident) andwhi char i
seint axpayer'
sprofessi
on,
tr
adeorbusi ness.
FORMULAFORCOMPUTINGLI
MITATI
ON
1. Percount
ryl
imitati
on REQUISITESF ORDEDUCTI BILI
TY
Taxabl
e 1. Act uallysust ai
neddur ingthet axable
i
ncomefrom year
f
orei
gncountr
y X Phi
l
. = TaxCr
edi
t 2. Connect edwiththet rade,businessor
Taxabl
eincome incomet
ax Li
mit pr ofessi on
fr
om al
lsources 3. Ev idencedbyacl oseandcompl eted
transact i
on
2. Ov
er-
alll
imi
tat
ion 4. Notcompensat edf orbyi nsuranceor
Taxable ot herf orm ofindemni ty
incomef rom
outsidesources X Phil
. = TaxCredi
t
5. Notcl aimedasadeduct i
onf orestate
Taxableincome i ncometax Limit taxpur poses
from all
sources 6. Not i
ceofl ossmustbef il
edwi t
ht he
Bur eauofI nternalRev enuewi t
hin45
Theall
owabl
et axcr
edi
tisthe“
lower day sf rom thedat eofdi scoveryof
amount”bet
weenthetaxcr
edi
tcomputed the casual t
y or r obber y,t heft or
underNo.1andNo.2. embezzl ement.
WHENCREDI TFORTAXESMAYBETAKEN NOTE:Thet axpayer

’sfai
luretorecordin
The cr editf ort axes provi
ded by hi
sbookst heall
egedlosspr ov
esthatthe
Section30( C) (
3)t o(9)mayor di
naril
ybe l
osshadnotbeensuf fered,hence,not
takenei therint her eturnforthey earin deduct
i e.(
bl Cit
yLumberv s.Domingoand
whicht het axesaccr uedoronwhi cht he CourtofTaxAppeal s,GR No.L- 18611,
taxeswer epaid,dependentuponwhet her Januar
y30, 1964)
theaccount soft het axpayerarekeptand CATEGORYANDTYPESOFLOSSES
hisreturnsf i
ledupont heaccrualbasisor 1. ORDINARYLOSSES
upon cash r eceipts and disbur
sement s a. Incurr
edint radeorbusi ness,or
basis. pr
acti
ceofpr ofessi
on
 Net oper at
ing l oss carry-
over
LI
MITATIONSONCREDI TFORFOREI GNTAXES (
NOLCO)
1) Theamountofcr editinrespectt othe  Refer stot heexcessofal l
owabl e
taxespai doraccr uedt oanycount r
y deduct ionsov ergr ossi ncomeof
shal lnotexceedt hesamepr opor t
ion thebusi nessf oranyt axabley ear
,
oft het axagai nstwhi chsuchcr edi
tis whi ch had notbeen pr eviously
taken, whi ch t he t axpay er’s net offsetasdeduct ionf rom gr oss
income f rom sour ces wi t
hin such i
ncome.
count rytaxabl eunderTi tl
eI I( income  Can be car ri
ed ov er as a
Tax)bear st ohi sent i
reneti ncome deduct ionf rom gr ossi ncomef or
fort hesamet axabl ey ear;and the next 3 consecut i
vey ears
2) Thet otalamountoft hecr edi tshal l i
mmedi atelyfoll
owi ngt heyearof
notexceed t hesamepr opor t
ion of suchl oss.
thet axagai nstwhi chsuchcr editis  Formi nes,ot hert hatoi landgas
taken, whi ch t he t axpay er’s net well,netoper at
ingl ossi ncurred
income f rom sour ces wi t
hout t he i
nanyoft hef irstt eny earsof
Philippi nes t axabl e under Ti tl
e I I oper ati
onmaybecar riedov erfor
(IncomeTax)bear stohi sent irenet thenext5y ears.
incomef orthesamet axabley ear.
D.LOSSES  Requi
rements:
(1)Thetaxpay
erwasnotexempt
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
37
MEMORYAI
DIN TAXATI
ON LAW
from i ncomet axi nt hey ear

ofsuchnetoper at
ingl oss; 2. CAPI
TAL LOSSES ( LOSSES ARE
(
2)Thel osswasnoti ncurredin DEDUCTI
BLE ONLY TO THE E XTENT OF
at axabl ey ear dur i
ng t he CAPI
TALGAI NS)
taxpay erwas exemptf r
om a. Lossesf rom saleorexchangeof
i
ncomet ax ;
and capital
asset s
(
3)Ther e has been no b. Lossesr esulti
ngf rom secur i
ti
es
subst antial change i n the becomi ng wor t
hless and whi ch
owner shi poft hebusi nessor arecapi t
alassets.
enterpr i
se. c. Losses f r
om shor t sales of
Ther e i s no subst antial property.
changei nt heowner shipof d. Lossesduet ofailuretoexer ci
se
thebusi nesswhen: priv
il
egeoropt iont obuyorsel l
(a)not l ess t han 75% i n property.
nomi nal v alue of t he
out standing issued 3. SPECIALKINDSOFL OSSES
shar es is hel d byoron a. Wager inglosses-deductibleonl
yt o
behal f of t he same theext entofgainorwi nnings.[
Sec.
per sons; or 34( D)(6)]
;deemedt oapplyonlyt o
(b)notl esst han75% oft he i
ndividuals
pai dupcapi t
ali sheldby b. Lossesonwashsal esofst ocks-not
oronbehal foft hesame deductible because t hese ar e
per son. consideredtobearti
fici
all
oss.
NOTE: The 3 y earperi

od shall Wash sal es – a sal e or other
conti
nue to run notwit
hstanding dispositi
on of st ock or secur i
ti
es
thatthecorpor
ati
onpaidi t
st axes wher e subst
ant i
all
y i
dentical
underMCI T,orthattheindivi
dual securit
iesar eacqui r
edorpur chased
avail
edthe10%OSD. withi
n 61- day period,beginning 30
daysbef or
et hesal eandendi ng30
 SeeAnnexSf
ori
l
lust
rat
ion. daysaf tert
hesale.[Sec.38]
b. Ofpr oper tyconnect ed,wi tht he Gener alr ul e:Lossesf r

om washsal es
trade,busi nessorpr ofession,i f arenotdeduct i
ble.
thelossar i
sesf rom f i
res, storms, Except ion:Whent hesal ei smadebya
shipwr eckorot hercasual ties,or dealeri nst ockorsecur i
tiesandwi t
h
from robber y, t hef t
, or respectt oat r
ansact i
onmadei nt he
embezzl ement . ordinar y cour se oft he busi ness of
(1)Tot aldest ruction suchdeal er ,l
ossesf rom suchsal eis
Ther epl acementcostt o deduct ible.
restor et he pr oper tyt oi t
s Element sofWashSal es:
nor maloper ating condi tion, (1)Thesal eorot herdi sposi
tion of
but i n no case shal lt he stockr esul
tedt oal oss;
deduct i
blelossbemor et han (2)Ther e was an acqui sit
ion or
the netbook v al ue oft he contractoropt i
onf oracqui siti
on
proper t
y as a whol e, ofst ock orsecur iti
es wi thin 30
immedi atelybef or ecasual ty. day sbef orethesal eor30day s
(2)Par tialDest ruction aftert hesale;and
Theexcessov ert henet (3)Thest ockorsecur i
tiessol dwer e
book v alue i mmedi ately subst ant i
all
yt he same as t hose
bef oret he casual ty shoul d acqui redwi thi
nt he61- dayper iod.
be capi t
alized, subj ect t o
depr eciati
on ov er t he c.Abandonment losses i
n petrol
eum
remai ni
ng usef ull ife oft he oper
ati
onandproducingwel
l
.
proper t
y. (1)In case a contr
actarea wher
e
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
38
MEMORYAI
DIN TAXATI
ON LAW
petr
oleum operations are amounts due t he taxpayerby others,
undertaken is parti
allyorwhol l
y ari
sing from money l ent or f r
om
abandoned, al l accumul ated uncoll
ect
ible amounts ofi ncome fr
om
explorati
on and dev elopment goodssoldorser v
icesrendered.
expendi t
ures per t
aining t hereto
shallbeallowedasadeduct i
on. REQUI
SI TESF ORDEDUCTI BI
LITY
(
2)In case a pr oducing wel li s 1. Exi sti
ng indebt edness due t ot he
abandoned,t heunamor t
izedcost taxpay erwhi ch mustbe v al
id and
ther
eof , as wel l as t he l
egal lydemandabl e;
undepr eci
atedcostofequi pment 2. Connect edwitht het axpay er'
strade,
dir
ectly used t herein,shal l be busi nessorpr acticeofpr of
ession;
all
owedasdeduct ioni nt hey ear 3. Must not be sust ained i n a
thewel l
,equipmentorf aci
li
tyi s transact i
on ent ered i nto bet ween
abandoned. relatedpar t
ies;
4. Act uall
yascer tainedt obewor thl
ess
d.Lossesduet o vol
unt
aryremovalof anduncol l
ectibleasoft heendoft he
buil
ding incident to renewal or taxabl eyear.;
and
repl
acements - deducti
ble expense 5. Act uall
ychar gedof fi nt hebooksof
from gr
ossincome. account soft het axpay erasoft he
endoft hetaxabl eyear.
e.Lossofusef ulvalueofcapi t
alassets
duetochargesinbusi nessconditions- EQUITABLEDOCTRINEOFTAXBENEFI T
deducti
bleexpenseonl yt ot heextent Ar ecoveryofbad debt spr evi
ousl
y
of act ual loss sust ained ( aft
er deductedf rom grossincomeconst i
tut
es
adj
ustment for improvement , taxableincomei fintheyeartheaccount
depreci
ati
onandsal vagev alue) waswr i
ttenoff,t
hededuct i
onresult
edin
at axbenefit.(
TaxBenef i
tRule)
I
ll
ust
rat
ion:
.Lossesf
f r
om sal esorexchangesof CaseA CaseB CaseC
proper
tybetweenrelatedtaxpay
ers- Net
l
ossesofthisnatur
ei snotdeducti
ble i
ncome
(l
oss)
butgai
nsaretaxabl
e. before
wr i
teoff
g.Lossesoff ar
mers-i
fincurredi
nt he forbad P10,000 (
P9,
000) P5,
000
operat
ion of far
m business, i
ti s debts
Less:
deducti
ble. Account s
wr i
tt
enof f
h.Lossi nshrinkagei nvalueofst ock–i f asbad
the st ock oft he corporati
on becomes debts 3,000 2,
000 6,
000
FinalNet
wor t
hless, thecostorot herbasi smaybe I
ncome
deduct edbyt heowneri nthet axabl eyear (Loss) P7,000 (
P11,
000) (
P1,
000)
i
nwhi cht hest ockofitswor thlessnessi s Baddebt s
made.Anyamountcl aimedasal osson recovery
i
nasubse-
accountofshr inkageinv alueoft hestock quenty ear 3,000 2,
000 6,
000
through f l
uctuati
on i nt he mar ket or TAXABLE
otherwi se cannot be deduct ed f rom INCOME
grossi ncome. upont he
baddebt
recovery P3,000 P -0- P5,
000
E.BADDEBTS
ASCERTAINMENTOFWORTHLESSNESS
BAD DEBTS – shal
lref
ertot hosedebts  ProofofTwoFact s:
resul
ti
ng from t he wort
hlessness or 1. t axpayerdi
dinfactascertai
nt he
uncol
lect
ibi
li
ty,in whol
e ori n par
t,of debtt obeworthl
ess,inthey ear
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
39
MEMORYAI
DIN TAXATI
ON LAW
forwhi chdeduct i
onissought , Depar
tmentofFi nance,underanyoft he
2. t hati nsodoi ng,heact edingood fol
l
owingmet hods.
faith. ( Coll
ector vs. Goodr i
ch 1. Strai
ght-l
inemet hod
I
nt ernationalRubber ,GR No.L- 2. Decli
ning-balancemet hod
22265, Dec.22,1967) 3. Sum oft heyear s-digitmethod
 Dependsupont heparti
cularfactsand 4. Any ot hermet hod whi ch may be
theci r
cumst ancesofthecase. prescri
bed by t he Depar tment of
 Goodf ait
hdoesnotr equir
et hatthe Fi
nanceuponr ecommendat i
onofthe
taxpay erbean“ i
ncorri
gibleoptimist
” Commi ssionerofI nternalRevenue.
butont heot herhand,hemaynotbe
undul ypessi misti
c. METHODSOFDEPRECI
ATI
ON
Ki
nd Formula
F.DEPRECI
ATI
ON 1)
Str
aight
-l
ine cost-salv
agev al
ue
esti
mat edli
fe
2)Decli
ning cost–depr eci
ati
onxRat e
DEPRECI ON –t
ATI hegradualdi mi
nutionin balance esti
mat edli
fe
the servi
ce orusefulv al
ue oft angibl
e 3)Sum oftheyear
s nthperiodxcost -sal
vage
propertyduef r
om exhaustion,wearand digi
ts(SYD) SYD
tearandnor malobsol
escence.
Theterm al
soappli
estoamor tizati
on I
ll
ustrati
on:A machine is used i nthe
ofi nt
angibl
eassets,t
heuseofwhi chin manuf act
uring depar t
ment of
tradeorbusinessisofli
mitedduration. Corporati
onA,computet hedepr eci
ati
on
perannum wi t
hthef
oll
owi ngfact
s:
REQUI
SITESF ORDEDUCTI BILITY Cost=P15, 000 Salvage
1. Theal l
owancef ordepr eci
ati
onmust Value=P5,000
ber easonable.
2. I t must be f or pr opert
y use or
empl oymenti nt radeorbusi nessor
outofi tsnotbei ngusedt empor ar
il
y 1. Str
aightLineMet
hodwit
hest
imat
ed
duringthey ear. l
if
e=5y ears
3. Theal lowancemustbechar gedoff 15,
000–5, 000 =P2,
000
withinthetaxable, year. 5years
4. Schedul eont heal l
owancemustbe
attachedtot heret urn. 2. Decl
ini
ngbalancewit
hrat
eof200%
Year1:15,
000–0x200%=P6, 000
PROPERTY HELD BY ONE PERSON FOR LI
FE 5
WITH THEREMAINDERTOANOTHERPERSON Year2:
15,000–6,
000x200%=P3,600
Thededuct i
onshal lbecomput edas 5
i
fthel i
fetenantwast heabsoluteowner
ofthepropertyand,assucht heexpense 3. Sum oftheyearsdigi
ts
shal
laccruetohim. SYDfor5y ear
s=5+4+3+2+1or15
Year1:5/15x(15,000–5,
000)
PROPERTYHELDI N TRUST =P3, 333.33
Al
lowable deduct i
on shal l be Year2:4/15x(15,000–5,
000)
apporti
oned bet ween t he i ncome =P2, 666.67
benefi
ciari
es, and t he t rust
ees i n
accordancewi t
ht heper ti
nentprovisi
ons AGREEMENT AS TO USEFUL LI FE ON WHICH
of the instr
ument cr eati
ng or int he DEPRECIATION RATEI SBASED
absenceofsuchpr ov
isions,onthebasis TheBur eauofI nternalRev enueand
ofthetrusti
ncomeal l
owabl etoeach. thetaxpay ermayagr eei nwr i
ti
ngont he
useful life of t he pr operty t o be
METHODSOFDEPRECI ATION depreciated.The agr eed rate may be
The t er
m " reasonabl e al
lowance" modi f
ied i f j ustif
ied by f acts or
shallinclude (but not l i
mited to) an cir
cumst ances.Thechangeshal lnotbe
all
owancecomput edi naccordance,with eff
ectivebefor et hetaxabley earonwhich
the r egulat
ions pr escri
bed by t he noti
ce i n wr it
ing by cer ti
fi
ed mai lor
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
40
MEMORYAI
DIN TAXATI
ON LAW
regi
stered mai li s ser v ed byt he par t
y agreementf orwhi chincomei sderiv
ed,
i
niti
ati
ng. andr etur
nofcapi talexpect
ed,from the
SPECI
ALTYPESOFDEPRECI ATION extr
actionofmi ner
al.
1. Pet r
ol eum Oper ations Mere economi c or pecuni ary
 Depr eci ation of al l pr oper ti
es advantaget obeder i
vedbypr oduct
ion
di rect l
yr elatedt opr oduct i
onof byonewhohasnocapi tali
nvestmentin
pet r
ol eum shal lbeal l
owedunder themi neraldepositdoesnotamountt o
st raight -l
ine ( SL) or decl ining economi cint
erest.
bal ance( DB)met hod
 Mayshi ftfrom DBt oSLmet hod FEATURES
 Usef ul l
ife: 10y ear sorshor t
erl i
fe 1. I ntangi bl
eExpl orati
onand
asal lowedbyt heCommi ssioner dev elopment dri
ll
ingcosti n
 Usef ullifeofpr opertynotdi r ectl
y pet r
ol eum explorati
onshal l
be
rel ated t o pr oduct ion:5 y ears treatedei theras:
underst raightl inemet hod a. r ev enueexpendi tures;or
2. Mi ningOper at i
ons b. capi talexpenditures
 Depr eci ationonal lpr oper t
iesi n 2. The t ot
al amount deduct i
ble for
mi ning oper ations ot her t han explor ati
on and devel
opment
pet r
ol eum oper ati
ons at t he expendi t
uresshal lnotexceed50%of
nor mal r atei fexpect edlifeisl ess neti ncome f r
om mi ning operati
on.
than10y ear s. Theexcessshal lbecar ri
edf orward
 I fexpect edl i
fei smor et han10 tot he succeedi ng y earunt i
lf ul
ly
y ears,depr eci at i
onshal lbeany deduct ed.
numberofy ear sbet ween5y ears
andt heexpect edl i
fe. H.CHARI
TABLEANDOTHER
CONTRI
BUTI
ONS
3. Depr eciat
ion deducti
ble by non-
resident al i
ens engaged i n TAXTREATMENT
trade/business or non- r
esident
corporation A.Deduct
ibl
e B.Deducti
ble
a. Onl y when such pr opert
y i s I
nFull Subj
ectTo
locatedinthePhi
l
ippi
nes. Limi
tat
ion
G.DEPLETI
ONOFOI
LANDGAS 1) Reci
pienti s: 1) Reci
pientis:
(a)Gov ernment (
a) Gover nment
WELLSANDMI
NES
ofthe ofthe
Phili
ppi nes; Phil
ippi nes;
DEPLETI ON - e xhaust i
on of nat ural (b)Anyofi ts (
b)Anyofi ts
resour cesasi nmi nes,oil
,andgaswel ls. agenci esor agenci esor
Thenat uralresourcesar ecalled“wasti
ng poli
tical poli
tical
assets” . As t he phy sical units subdiv i
sions; subdiv i
sions
represent i
ng such r esources ar e or
extracted and sol d,such asset s move (c)Anyf ully- Foranon-pr i
ori
ty
towar dsexhaust ion. owned acti
vit
yinanyoft he
gover nment areasmentionedinA,
Knownascostofdepl eti
onal l
owance
corpor ati
on andexclusi
velyfora
formi nes,oi lgaswel l
sandot hernat
ural publi
cpurpose.
deposi tsstarti
ngcal endaryear1976and Forpriori
ty
fi
scal y earbeginningJul y1,1975 acti
vi
tyin:
1.Science;
2.Educat ion
TOWHOM ALLOWED 3.Cul tur
e
Only mi ning ent i
ti
es owni ng 4.Heal th
economici
nter
estinmi neraldeposi
ts. 5.Economi c
Development
Economi
ci nter
estmeansi nter
esti n
6.Human
mineral
sinplacei nvestmentt her
einor Settl
ement
secured by oper at
ing or cont ract
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
41
MEMORYAI
DIN TAXATI
ON LAW
7.Yout
handSport
s
Devel
opment (
a) Sci
ent i
fi
c; (
a)Sci
ent ifi
c
(
b) Educational; (
b)Educat i
onal;
2)Recipientisa 2)Non-
gover
nment (
c) Cult
ural; (
c)Cultural;
foreignor or
gani
zati
ons (
d) Character (
d)Yout handspor t
s
i
nternational bui
lding/youthand development
organization sportsdevelopment (
e)Char i
table
withan (
e) Charit
able (
f)Social welf
are
agreementwi t
h (
f) Socialwelfar
e g)Rel
( igious
thePhi l
ippine (
g) Health h)Rehabi
( l
itat
ionof
Gov ernmenton (
h) Research Veterans
deduct i
bil
ity,
or
i
naccor dance Andsat isfyi
ngt he Ift
hecondi ti
onsi nTable
withspeci al fol
lowi ngcondi tions: Aisnotcompl i
edwith:
l
aw. 1. Thedonat i
onmustbe
ut il
izednotl aterthan Subj
ecttol i
mi t
ation:
t he15thdayoft he3rd (a) Indivi
dual - 10%
3) Reci pienti
san 3) Recipientisan mont hfollowi ngthe taxablei ncomef rom
accreditednon- accredited cl oseofi tstaxabley ear
. trade busi ness or
government domest ic 2. Theadmi nistrati
ve profession bef or
e
organizati
on, corporationor expensemustnot cont r
ibution
organized/ association exceed30%oft ot
al (b) Cor poration - 5%
operatedf or organized/operate expenses. taxablei ncomef rom
(purposes): dfor( purposes): 3. Upondi ssol uti
on, trade busi ness or
asset smustbe profession bef or
e
di stributedt oanot her cont r
ibution
non- profitdomest i
c
cor por ationort ot he
st ate.
REQUI
SITESFORDEDUCTI BI
LITY
1. The cont r
ibution or gi f
t must be
actuallypaid.
2. Itmustbegi vent otheor ganizati
ons
specifi
edint hecode.
3. The neti ncome oft he insti
tuti
on
mustnoti nur et othebenef i
tofany
pri
v at
estockhol derorindi
v i
dual.
VALUATION
Charit
abl
e contri
but
ion of pr
opert
y
otherthanmoneyshal lbebasedont he
acquisi
tioncostofsai
dpropert
y.
I
. RESEARCHANDDEVELOPMENT
(R&D)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
42
MEMORYAI
DIN TAXATI
ON LAW
TAXTREATMENT 1. Theempl oyermusthav eestabl ished

Ei
theras: a pensi on or r eti
rement pl an t o
1. RevenueExpendi tures provide f or t he pay ment of
Requisit
es: reasonable pensi ons t o hi s
a. Pai d or i ncurred dur ing the empl oyees;
taxabl ey ear 2. Thepensi onpl anisr easonableand
b. Or dinaryandnecessar yexpenses actuari
allysound;
inconnect ionwi thtradebusiness 3. Itmustbef undedbyt heempl oy er;
orpr ofessi on 4. Theamountcont ri
butedmustbeno
c. Not char geable t o capi tal l
ongersubj ectt ot he cont roland
account disposi
t i
onoft heempl oyer;
2. DeferredExpenses 5. The pay ment has not y et been
Requisit
es: all
owedasadeduct i
on; and
a. Pai d ori ncurredinconnect i
on 6. Thededuct i
oni sappor ti
onedinequal
wi th t rade, busi ness, or partsov eraper iodof10consecut i
ve
prof ession years begi nning wi tht he y ear i n
b. Nott r
eat edasexpense which t he t r
ansferorpay menti s
c. Char geabl et ocapitalaccountbut made.
not char geable t o pr operty
subj ect t o depr eciat
ion or SUMMARY OF RULES ON RETI REMENT
depl eti
on. BENEFITSPLAN /PENSI ON TRUST
1. Exempt f rom I ncome Tax –
Amountdeduct
ibl
e: empl oyees’ t
rustunderSec.60( B)
Amountratabl
ydistr
ibutedovera 2. Excl usion f rom Gr oss I ncome –
peri
odof60mont hsbegi nni
ngwith amountr eceived by t he empl oyee
themont htaxpayerreal
izedbenefi
ts from t he fund upon compl iance of
from suchexpendi
tur
es. cer t
ai ncondi t
ionsunderSec.32( B)
(6)
3. Deduct ionfrom Gr ossI ncome–
EXCLUSI
ON FROM RESEARCH AND a. Amount s cont ri
but ed by t he
DEVELOPMENTEXPENDI TURES empl oyerdur i
ngt het axabley ear
1. Anyexpendi turefort heacquisi t
ionor int othepensi onpl ant ocov erthe
impr ovement of l and or f or the pensi on liabil
ityaccr uing dur ing
impr ovementofpr opertyt obeused they ear–consi deredasor dinary
in connect i
on wi th resear ch and and necessar y expenses under
dev elopmentsubj ectt odepr eciati
on Sec.34( A)(1)
anddepl etion. b. 1/ 10oft her easonabl eamount
2. Anyexpendi turepai dori ncur redfor pai d byt he empl oy ert o cov er
the pur pose of ascer tai
ning t he pensi onl i
abili
tyappl icablet ot he
existence,locat i
on,ext entorqual ity y earspr i
ort ot het axabl ey ear,or
ofanydeposi toforeorot hermi neral so pai dt o placet het rusti na
includingoilorgas. sound f i
nanci al basi s –
deduct i
bleunderSec.34( J)
J.PENSI
ONTRUST
CONTRI
BUTI
ONS K.PREMI UM PAYMENTS
ONHEALTHAND/ OR
PENSI
ON TRUST CONTRI ONS – a
BUTI HOSPITALI
ZATIONINSURANCE
deducti
onappli
cableonlytotheempl
oyer
onaccountofit
scont ri
buti
ontoapri
vate DEFI
NI ON: I
TI tisanamountofpr emium
pensi
on plan f or the benefi
t of i
ts onhealthand/ orhospital
izat
ionpaidby
employee. Thi
s deduct ion is pur
ely anindivi
dualtaxpayer(headoff amil
yor
busi
nessincharacter
. marri
ed),forhimselfandmember sofhi
s
famil
yduringthetaxableyear.
REQUI TESF
SI ORDEDUCTI
BILI
TY
REQUI
SITESFORDEDUCTI
BILI
TY 1. Insurance musthav e act
ual
l
ybeen
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
43
MEMORYAI
DIN TAXATI
ON LAW
taken businesscarriedonbyt het axpayer,

2. Theamountofpr emium deduct i
ble i
ndividualor cor por
ate,when t he
doesnotexceedP2, 400perfami l
yor taxpayeri s dir
ect
ly orindirect
lya
P200permont hduri
ngt het axable benefici
aryundersuchpol icy .[
Sec.
ear. 36]
3. Thatsaidf amil
yhasagr ossincome 5. Lossesf rom salesorexchangesof
ofnotmor ethanP250,000f orthe propertybetweenr el
atedtaxpay ers.
taxabl
ey ear. [Sec.36]
4. Incaseofmar r
iedi
ndiv
idual
,onlythe
spouse cl
aimi
ng addit
ional TRANSACTIONSBETWEEN RELATEDPARTI ES
exemption shallbe enti
tl
ed tot his 1. Betweenmember soft hef ami l
y;
¬deducti
on. “Fami ly”incl udes onl yt he
brot her s,sist
ers( whet herbyt he
WHOMAYAVAI LOFTHEDEDUCTI ON whol e or hal f bl ood) ,spouse,
1. Indiv i
dualtaxpayer s earning pur el
y ancest ors, and li
neal
compensat i
on ¬i ncome dur ing the descendant soft het axpay er.
year . 2. Excepti nt hecaseofdi str i
but ionsi n
2. Indiv i
dualtaxpayerear ningbusi ness li
quidation:
i
ncome or i n pr acti
ce of hi s a. bet ween an i ndi v i
dual and a
pr ofession whet her av ail
i
ng of corpor ati
on mor et han 50% i n
i
t emi zed or opt i
onal st andard valueoft heout standi ngst ockof
deduct i
onsduri
ngt heyear. whi ch i s owned, di r ectly or
3. Indiv i
dual taxpay er ear ning bot h i
ndi rect ly
, by or f or such
compensat i
on, and busi ness or i
ndi vidual ;
pr actice of profession dur ing the b. bet weent wocor por ationsmor e
year . than 50% i n v alue of t he
outst andi ng stock of each of
NON-
DEDUCTI
BLEEXPENSES whi ch i s owned, di r ectly or
i
ndi rect ly
,by orf ort he same
REASONSFORNON- DEDUCTI
BILITY i
ndi vidual ,ifeitheroneofsuch
1. Personal expenses corpor ati
ons,wi thr espectt ot he
2. Capitalexpenditur
es taxabl ey earoft he cor porati
on
3. Itemsnotnor mall
ysubj ecttoi
ncome precedi ngt hedat eoft hesal eof
taxandt herefor
ear enotdeductibl
e. exchangewasaper sonalhol di
ng
4. Items taken adv antage of by t he companyora f or eign per sonal
taxpayert oavoidpaymentofi ncome holdi ngcompany ; or
tax. 3. Betweent hegr antorandaf iduciary
ofanyt r ust ;
SPECI
FICITEMS( SECTION 3 6) 4. Betweent hef i
duciaryofat rustand
1. Personal ,
livi
ngorf amilyexpenses; thef iduci aryofanot hert rusti ft he
2. Amountpai doutf ornewbui l
dingsor same per son i s a gr ant or wi th
for per manent i mpr ovement s, or respectt oeacht r
ust ;
betterment made t oi ncrease t he 5. Betweenaf i
duciaryofat r ustanda
valueofanypr oper tyorestate, benef i
ciar yofsucht rust .
Exceptt hatintangi bl
edr i
ll
ingand
dev el
opment cost i ncurred i n TAXCONSEQUENCES
petroleum oper ati
onsar ededuct i
ble; Thefoll
owi ngarenotdeducti
ble:
3. Amount expended i n r est ori
ng 1. Int
erestexpense[ Sec.34(B)
(2)]
proper t
y or i n maki ng good t he 2. Baddebt s[Sec.34( E)
(1)]
exhaust i
on t hereof f or whi ch an 3. Lossesf rom salesorexchangesof
all
owancehasbeenmade; propery[
t Sec36( B) ]
4. Premi umspai donanyl if
einsur ance
policycov eri
ngt hel ifeofanyof fi
cer (
2)OPTIONALCORPORATE
or empl oyee, or of any per son I
NCOMETAX
fi
nanci al
lyinterestedi nanyt radeor SECTI
ON27(A)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
44
MEMORYAI
DIN TAXATI
ON LAW
due f rom such cor porat

ion
APPLI
ESTO: det
ermi
nedunderSect
ion27[
A].
1. Domesti
ccorpor
ati
ons(DC)
2. Resi
dentf
orei
gncorpor
ati
ons(
RFC) LI
MITATI
ONS
RATEOFTAXANDDATEOFEFFECTI
VITY 1. The MCI T shal l appl y onl y t o
15% oftheGrossI
ncomeef fect
ive domest i
c and r esident f or eign
Januar
y1,2000 corpor ati
ons subj ectt ot he nor mal
corpor atei ncome t ax (income t ax
CONDI ONSORREQUI
TI REMENTS ratesunderSec27[ A]oft heCTRP) .
1. At axeffortr
atioof20%ofGr oss 2. Inthecaseofadomest i
ccor por ation
Nat i
onalProduct whose oper ations oract iv
iti
es ar e
2. Ar ati
oof40%i ncomet axcol
lect
ion partlycov eredbyt her egularincome
tototaltaxrevenues taxsy st
em andpar tl
ycov eredunder
3. AVATt axeffortof4%ofGNP a speci ali ncome t ax sy stem,t he
4. A0. 9%ratioofConsol i
datedPubli
c MCI T shal l appl y on oper at i
ons
SectorFinancialPositi
on(CPSFP)to cov ered by t he r egular cor por ate
GNP i
ncomet axsy stem.
3. Incomput ingf ortheMCI Tduef r
om a
OTHERFEATURES residentf oreigncor porati
on,onl yt he
1. Av ai
labl
eonl
ytof
ir
mswhoser
ati
o gross i ncome f rom sour ces wi thin
of: the Phi l
ippines shal lbe consi der ed
forsuchpur pose.
Costofsal
es
<=55% WHENDOESACORPORATIONBECOME
Gr
osssal
esorrecei
ptsf
rom al
l LI
ABLEUNDERTHEMCI
T?
sour
ces
MCITisimposed beginning on
2.Theel
ecti
onshallbeir
revocabl
e
the four t
h taxabl
e year immedi ately
fort
hree(3)consecut
iveyears
fol
lowing t he year in which such
corporati
on commenced its busi ness.
MEANINGOFGROSSI NCOME
Thet axableyearinwhichthebusi ness
Generalconcept–
operati
onscommencedshal lbet hey ear
Grosssales
whent hecorpor
ati
onregi
sterswi tht he
Less:
BIR.
(
1)Sal esReturn;
(
2)Di scountandal l
owances
CARRY FORWARD OF THE EXCESS
(
3)Costofgoodssol d-means
MINI
MUM TAX
all busi ness expenses
dir
ectl
yi ncurred to produce
 AnyexcessofMCI Tov ert henormal
the mer chandise t o bring
i
ncomet axcanbecar r
iedf or
war don
them totheirpresentlocat
ion
anannual basi
s.
anduse.
 Theexcesscanbecr edi tedagai nst
thenormal i
ncomet axduei nthenext
(
3)MINIMUM CORPORATE 3i mmedi atel
y succeedi ng t axable
I
NCOMETAX( MCI T) years.
SECTI
ON27( E)  Any amountof t he excess MCI T
whichcannotbecr editedagai nstt he
WHOARECOVERED? normalincomet axduei nt henext3-
MCI Tisi mposed on domesticand yearperi
odshallbef or
feited.
resi
dentfor
eigncorporati
ons
1. Whenev ersuchcor por
ati
onhaszero
ornegativet
axableincome;or RELI
EFFROM MCI
T
2. Whenev erthe amountofMCI Tis
great
ert hanthenor malincometax The Secr
etar
y of Fi
nance i
s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
45
MEMORYAI
DIN TAXATI
ON LAW
authori
zedt osuspendt heimposi t
ionof wher et he goods
the MCI T on any cor por
ation which areact ual l
ysol d;
suffer
slossesbecauseof : 4.i
nsur ance whi l
e
a. prolongedlabordispute; the goods ar ei n
b. forcemajeure;or transi t.
c. l
egi t
imatebusinessrev er
ses. B.Manuf acturi
ng CostofSal es = Al l
GrossI ncome costofpr oduct i
onof
“Subst antiallossesf r
om apr olonged (Same) fi
nished goods,such
l
abordi sput e"meansl ossesar isingf r
om as
ast ri
kest agedbyt heempl oyeeswhi ch 1.rawmat erials
l
astedf ormor et hansix(6)mont hswi thin used;
ataxabl eper i
odandwhi chhascausedt he 2.directl abor ;
tempor ary shut down of busi ness 3.manuf actur ing
operat i
ons. ov erhead;
“For cemaj eure"meansacauseduet o 4.freightcost ;
anirresistiblef orceasby" ActofGod"l ike 5.i
nsur ance
l
ightning, ear t
hquake, stor
m, fl
oodandt he premi ums;
l
ike.Thi st erm shal lalsoincludear med 6.other costs
conflictslikewarandi nsurgency . i
ncur red t o br ing
“Legi timat ebusi nessr everses"shal l the r aw mat erial
s
i
ncludesubst antiall
ossessust ai neddue tot he f act ory or
tofire,r obber y,theft
,orembezzl ement , war ehouse.
or f or ot her economi c r eason as C.Services CostofSer vices=Al l
determi nedbyt heSecr et
aryofFi nance. GrossI ncome= dir
ectcost sand
Grossr eceiptsless expensesnecessar il
y
TAX RATE: 2% ofgr oss income or salesreturns, i
ncur r
edt opr ov i
de
taxabl
e base per ti
nent t o a all
owances, theser vicesr equi red
tradi
ng/mer
chandi
sing concern or a discountsand byt hecust omer sand
servi
ceenti
ty costsofser vices cli
ent sincl udi ng:
a.Sal ariesand
TAXBASE:Gr
ossI
ncome empl oy eebenef its
MEANINGOFGROSSINOME ofper sonnel ,
consul tantsand
Generalconcept-grossi ncomemeans: speci al i
stsdi r
ect l
y
Grosssales render i
ngt he
Less: ser vi
ce;
(
1)Sal esReturn; b.Costoff aci li
ti
es
(
2)Di scountandal l
owances direct lyutilizedin
(
3)Costofgoodssol d-means prov i
di ngt he
all busi ness expenses ser vi
ce.
dir
ectl
yi ncurred to produce Itshal lnot
the mer chandise t o bring i
ncludeint
erest
them totheirpresentlocat
ion expenseexceptfor
anduse. banksandot
her
fi
nanci
ali
nst
it
uti
ons.
KI
NDSOFBUSI
NESS
 Gross income excl udes passi v
e
A.TradingorMer chandi
singConcer n i
ncomesubj ectt
ofinalt
ax .
Gross I ncome = CostofSal es=  Other income and Ext r
aor
dinary
gross sales/ 1. I
nvoicecostoft he Incomear eincl
uded sinceRR 9-98
recei
ptsl esssal es goodssold; provi
des that gr
oss sal es i
ncl
ude
retur
ns, di scounts 2. i
mpor tduti
es; salescontri
but
orytoincomet axabl
e
andallowancesand 3. fr
eight i
n undertheregul
arcorpor
atetax.
costofgoodssol d tr
ansporti
ng t he
goodst otheplace  SeeAnnexTf
ori
nter
playofnor
mal
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
46
MEMORYAI
DIN TAXATI
ON LAW
tax,opt
ionalcor
por
atei
ncome t
ax paid/issuedfrom theappli
cabl
ey ear
’s
andMCIT. taxableincome
Amountr eser
v edforther
easonable
needsoft hebusinessasdefi
nedi nt
he
(
4)I
MPROPERLYACCUMULATED Regulat i
ons
EARNI
NGS( I
AE)TAX Taxbaseofi mpr operl
yaccumulated
earningst ax
SECTI
ON29
EXCLUSI
ONS
(
REVENUEREGULATI
ONSNO.2–2001)
 Forcor por
ationsusingthecalendar
DEFINITION: “ Improperl
y accumul at
ed basist heaccumulatedearni
ngst ax
earni
ngs ( IAE)” aret he profits of a shallnotapplyonI AEasofDec.31,
corporati
on t hat ar e per mitted t o 1997.
accumul ateinsteadofbei ngdi stri
but
ed  Forfiscalyearbasi
s,thet
axshallnot
byacor porati
ont oitssharehol dersfor applytothe12- monthper
iodoffi
scal
thepur poseofav oi
dingthei ncomet ax year1997-1998.
withrespectt oi tsshareholdersort he
shareholdersofanothercorporation. IAEasoftheendofacal
endaror
fi
scalyearper
iodonorafterDec.31,
TAX RATE: 10% of t he I mpr operl
y 1998shall
besubj
ecttot
he10%tax.
Accumul at edTaxabl eIncome( i
naddi ti
on
toot hert axes) . WHOARECOVERED?
Rat i
onal ebehi ndI AET
Ift he ear nings and pr ofit
s wer e GeneralRule:TheI AEt axshal lappl yt o
distri
but ed,t heshar eholder swoul dt hen everycor por ationf ormedorav ai l
ed
bel i
abl et oi ncomet axther eon,wher eas for the pur pose of av oiding t he
i
ft hedi stributionwer enotmadet othem, i
ncome t ax wi th r espect t o i t
s
theywoul dincurnot axinr espectt othe shareholder sort heshar ehol der sof
undistribut edear ningsandpr ofi
tsoft he anyot hercor por at ion,byper mi t
t i
ng
corpor ation.Thus, at axisbei ngimposed; earningsand pr ofitst o accumul ate
a. i nt henat ureofapenal tyt othe i
nsteadofbei ngdi videdordi stri
but ed.
cor porat i
on f or t he i mproper Thesear e:
accumul ationofi tsear nings,and 1. Domest i
c cor porations as
b.as a f or m ofdet errentt ot he defi
nedundert heTaxCode;
av oidance of t ax upon 2. Cor porat i
onswhi char ecl assif i
ed
shar ehol der swho ar esupposed asclosel y-hel dcor porat ions.
to pay di v i
dends t ax on t he • t hose cor porat i
ons atl east
ear ningsdi stri
buted t ot hem by fif
t yper cent( 50%)i nv alueof
thecor por ation. theout standi ngcapi talst ock
oratl eastf i
ftyper cent( 50%)
“I
MPROPERLY ACCUMULATED oft het otalcombi nedv ot i
ng
TAXABLEI
NCOME” powerofal lclassesofst ock
ent i
t l
ed t ov otei s owned
Taxabl
eincomef ort heyear direct lyori ndirectlybyorf or
Add: notmor et han t went y( 20)
Incomeexemptf rom tax; indiv i
dual s.
Incomeexcludedf r
om gr ossi ncome;  Domest ic cor porations not
Incomesubjecttofinaltax; falli
ng under t he af oresai d
Netoperat
inglosscar ry
-ov er(NOLCO) def initi
on ar e, t heref ore,
Total publ icly-hel dcor por ati
ons.
Less:
Incometaxpaid/pay abl
ef orthet axabl
e Except
ion:Thesaidtaxshallnotapplyto:
year 1. Publi
clyhel
dcorporat
ions( Sec.29)
Divi
dendsactual
lyorconst ructi
vely 2. Banksandot hernon-banksFi nanci
al
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
47
MEMORYAI
DIN TAXATI
ON LAW
i
nt ermedi aries( Sec.29) the t
ax upon i t
s sharehol
ders or
3. Insur ancecompani es( Sec.29) member sunlessthecorporat
ion,by
4. Taxabl e par t
ner ships ( deemed t o thecl
earpreponderanceofevi
dence,
hav e act ually or const ructively shal
lprovet
hecont r
ary.
recei ved the t axabl ei ncome under
Sec.73D) “Reasonabl eneedsoft hebusi ness”
5. Gener al pr ofessi onal par tnerships i
ncludes t he r easonabl yant icipat ed
(exempt ;taxabl eagai nstthepar tners) needsoft hebusi nesssuchas:
6. Non-t axablej ointv ent uresand a. Allowancef ort hei ncr easei nt he
7. Ent erprisesdul yr egi steredwi tht he accumul ati
onofear ni ngsupt o
Phi l
ippineEconomi cZoneAut hority 100%oft hepai d-upcapi taloft he
(PEZA) under R. A. 7916, and cor porat i
onasofBal anceSheet
ent erprisesr egisteredpur suanttot he dat e,incl usiv eofaccumul at i
ons
BasesConv ersi onandDev elopment takenf rom ot hery ear s;
Actof1992underR. A.7227,aswel l b. Ear nings r eser ved f or def i
nite
asot herent erpr i
sesdul yregistered cor porat eexpansi onpr oj ectsor
under speci al economi c zones progr ams as appr ov ed by t he
decl aredbyl awwhi chenj oypay ment Boar dofDi rector sorequi valent
ofspeci altaxr ateont heirr
egistered body ;
oper ationsoract i
viti
esi nli
euofot her c. Reser ved f orbui lding,pl ant sor
taxes, nat i
onal orl ocal . equi pment acqui sition as
8. For eigncor por ations[ RRNo.02- 2001] appr ov ed by t he Boar d of
Direct orsorequi valentbody ;
EVI
DENCE OF PURPOSE TO AVOI
D d. Reser ved f or compl i
ance wi th
I
NCOMETAX anyl oancov enantorpr e-exi sting
obligat i
on est ablished under a
1. The factthatanycor por
at i
on isa legitimat ebusi nessagr eement ;
mereholdingcompanyori nvest
ment e. Ear nings r equi red by l aw or
company shal l be pr i
ma f acie appl icable r egulat i
ons t o be
evi
denceofapur posetoav oi
dt he retainedbyt hecor por ationori n
tax upon i t
s shar eholders or respectofwhi ch t her ei sl egal
member s. prohi biti
onagai nsti t
sdi stribut i
on;
f. Int he case ofsubsi diar ies of
Inst
ances i ndi cati
ve ofpur pose t o foreign cor por ations i n t he
avoidi
ncomet axuponshar ehol ders: Phi l
ippines, al l undi stribut ed
a. Investment of subst antial ear ningsi ntendedorr eser v edf or
earnings and pr of
it
s of t he invest ment s wi t
hi n the
corpor ation i
n unr elated Phi l
ippinesascanbepr ov enby
business or i n st ock or cor porat e r
ecor ds and/ or
secur i
ties of unr elated relev antdocument ar yev idence.
business;
a. Investmenti nbondsandot her The cont roll
ing intenti
on of t he
l
ong- term secur i
ti
es; taxpayeri st hatwhi chismani f ed at
est
a. Accumul ati
on of ear nings i n the t i
me of accumul ation, not
excess of 100% of pai d-up subsequent l
ydecl aredintenti
ons,whi ch
capital,notot herwisei ntended aremer elythepr oductofafterthought
.A
forther easonableneedsoft he speculative and i ndefi
nit
e pur pose wil
l
business as def i
ned i nt hese notsuffice.
Regul ations. Defi
nitenessofpl an/scoupl edwith
acti
on/ s t
aken t
owar ds i
ts
2. Thefactt hattheearningsorpr ofi
ts consummat ioni sessenti
al.
ofa cor porat
ion are permitted to
accumulate beyond the reasonable PERIOD FOR PAYMENT OF DIVI
DEND/
needs of t he business shal l be PAYMENTOFI AET
deter
minativeofthepurposet oavoid Div
idendsmustbedecl
aredandpai
d
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
48
MEMORYAI
DIN TAXATI
ON LAW
or issued not l at
er than one y ear saidincome.
fol
lowingt hecl oseofthet axabl
ey ear
, 2. Thei ncomesubj ectedt ofinalincome
other
wi se,theIAET,i
fany,shouldbepaid taxisno l ongersubj ectt ot henet
withi
nf i
fteen(15)dayst
hereafter
. i
ncomet ax; otherwise, t
herewoul dbe
a v iolation of pr ohibit
ed doubl e
taxation.
(
5)I
NCOMESUBJECTTO 3. Thel iabilit
yf orthepay mentoft he
taxr estspr imaril
yont hepay oras
PREFERENTI
ALORSPECI
AL
withholdingagent .
RATES 4. Thepay eei snotr equiredt of i
lean
i
ncomet axr eturnf ort hepar t
icular
Pert
ainstoi ncomederi
vedbya i
ncomesubj ectedt oFWT. I tist he
parti
cul
ar i ndi
vidual or cor por
ation withholdingagentwhof il
est heret urn.
belongi
ngt oaclassofi ncometaxpayer 5. Ther ateoft hefinalt axismul t
iplied
thatissubjecttoeitherapref
erent
ialor to t he gr oss i ncome. Thus,
special
rate. deduct i
ons and/ or per sonal and
additional exempt i
ons ar e not
 TaxRat
es:
Pleaser
efert
oAnnexC. all
owed.
(
6)GROSSI
NCOMETAX(
GIT) (
8)FRI
NGEBENEFI
TTAX(
FBT)
GROSSI
NCOMETAX(
GIT)FORMULA FRINGEBENEFI TTAXisaf i
nalincome
tax on the empl
oyee whi
ch shallbe
Enti
reIncome wit
hheldandpaidbytheemployerona
Less:ExclusionsandIncomesubject quart
erl
ybasi
s.
toFinalTax(e.
g.Passive
Income) FRINGE BENEFI T means any good,
GrossIncome service,orot herbenef i
tf ur ni
shed or
Multi
plyby:TaxRates(%) grantedbyanempl oyer,i
ncashori nki nd,
i
n addi ti
on t o basi c sal aries,t o an
NetI
ncomeTaxDue i
ndiv i
dualempl oy ee( exceptr ankandf i
le
empl oy ees)suchas,butnotl i
mi t
edt o
GI
TAPPLI
ESTO thefollowi ng:
1. Housi ng
1. Non-
resi
dentali
en notengaged in 2. ExpenseAccount
t
radeorbusi
ness(25%)
;and 3. Vehi cleofanyki nd
2. Non-
resi
dent forei
gn corpor
ati
on. 4. Househol dper sonnel ,suchasmai d,
(
32%) driverandot hers
5. I nterestonl oanatl esst hanmar ket
 TaxRates:Pl
easer
efert
oAnnexA ratet ot heext entoft hedi ff
er ence
andB. bet weent hemar ketr ateandact ual
rategr ant ed.
(
7)FI
NALI
NCOMETAX 6. Member shipf ees,dues and ot her
expensesbor nebyt heempl oyerf or
GENERALPRI
NCI
PLES theempl oy eei nsoci alandat hletic
clubsandsi mi l
aror ganizations
1. I
ti sconst i
tuted asaf ulland fi
nal 7. Expensesf orf oreigntravel
paymentoft heincomet axduef r
om 8. Hol idayandv acationexpenses
the payee on a par ti
culartype of 9. Educat ional assi st
ance t o t he
i
ncomesubj ectt of i
nalwithhol
ding empl oy eeorhi sdependent s; and
tax(FWT) . 10.Li fe orheal thi nsurance and ot her
Thefinal
ityofthewithhol
dingtax non- lir
e i nsur ance pr emi ums or
i
sl i
mi t
edonl ytot hepayee’
sincome simi laramount sonexcessofwhat
taxl i
abi
li
tyanddoesnotext endt o thel awal lows.
othertaxest hatmaybei mposedon
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
49
MEMORYAI
DIN TAXATI
ON LAW
PERSONSLI
ABLE a. ifi ti sr equiredornecessar yt o
thebusi nessofempl oy er
TheEMPLOYER ( asawi thholding b. ifi tisf ort he conv enience or
agent)
,whet herindivi
dual,professional adv antageofempl oyer
part
nershiporacor poration,regardless 2. Fri
nge Benef itt hati s nott axabl e
ofwhet hert
hecor porat
ioni staxableor underSec.32( B)–Excl usionsf rom
not, or t he gov er
nment and i ts GrossI ncome
i
nstrumental
iti
es 3. Fri
ngebenef i
tsnott axabl eunderSec.
33FringeBenef i
tTax:
TAX RATE:32% ( fr
om Januar y1,2000 a. Fr i
nge Benef its whi ch ar e
onwards)oft he Grossed up Monet ar
y aut hor ized and exempt ed under
Value(GMV)off ri
ngebenefits. speci all aws,such as t he 13t h
I
nthecaseofal i
ens,t
het axr at
esto mont h Pay and Ot herBenef its
beappl i
edonf r
ingebenefitshal lbeas wi tht hecei l
ingofP30, 000.
fol
l
ows: b. Cont ri
but i
onsoft heempl oy erf or
1. NRANEBT25% the benef i
toft he empl oy ee t o
2. Ali
ensempl oyedbyr egionalHO ret i
rement , i nsurance and
15% hospi talizati
onbenef itplans;
3. Ali
ensempl oyedbyOBU15% c. Benef itsgi vent ot heRankand
4. Ali
ensempl oyedbyPet roleum FileEmpl oyees,whet hergr anted
Servi
ceCont r
actor
sand under a col lective bar gaining
Subcontr
actors15% agr eementornot ;and
d. The De mi ni mis benef its –
“GMV” OF THE FRI
NGE BENEFI
T benef its whi ch ar e r elatively
REPRESENTS smal li nv alue of f
er ed by t he
empl oy er as a means of
1. Thewhol eamountofi ncomer eal
ized pr omot inggoodwi ll,
cont ent ment ,
byt heempl oy
eewhi chi ncl
udest he ef fi
ciencyofEmpl oy ees
net amount of money or net The t erm “ Rank and Fi le
monet aryvalueofpropertywhichhas Empl oy ees” shal l mean al l
beenr eceiv
ed;plus empl oy ees who ar e hol ding
2. The amountoff r
inge benef i
tt ax nei ther manager ial nor
ther
eon ot herwi
se due f rom t he super visor yposi t
ionasdef i
nedi n
empl oyeebutpai dbyt heempl oyer theLaborCode
forandi nbehalfoftheempl oyee. Int hecaseofr ankandf ile
empl oy ees,f ri
ngebenef i
tsot her
“GMV”oft hef r
ingebenef
itshall thant hoseexcl udedf rom gr oss
bedet er
mi nedbydi vidingthemonet ar
y incomeundert heTaxCodeand
val
ueoft hef r
ingebenef i
tbytheGrossed ot herspeci all aws,ar et axabl e
updivisor.TheGr ossedupdi vi
soristhe undert he indi vidualnor malt ax
dif
fer
ence bet ween 100% and t he rat e.
appli
cablerates. DEDUCTI BILITY TO THE TAXABLE
INCOMEOFTHEEMPLOYER
GROSSEDUP
YEAR RATE Gener alRule:The amountoft axable
DI
VISOR
1998 66% 34%FWT fr
ingebenef i
tandt hef r
ingebenef it
st ax
1999 67% 33%FWT shall consti
tut
e al l
owabl e deduct i
ons
2000 fr
om gr ossi
ncomeoft heempl oyer.
68% 32%FWT
onwar
ds Except i
on:
I
ft hebasisforcomput ationoft he
FRI TS NOT SUBJECT TO
NGE BENEFI fr
inge benefit
st ax ist he depreciati
on
FBT value,thezonalvalueort hefairmar ket
value,onlytheactualf r
ingebenef it
st ax
1. Fr
inge benef
is not consi
t der
ed as paid shal l constit
ute a deduct i
ble
gr
ossincome– expensef ortheempl oy er.Thev alueof
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
50
MEMORYAI
DIN TAXATI
ON LAW
thefringebenef itshal lnotbededuct i

ble worknotexceedi
ng25%oft
hebasi
c
and shal lbe pr esumed t o hav e been mini
mum wage.
tacked on or act ually cl aimed as
depreciation expense byt he empl oyer. Time f orf i
li
ng ofquar t
erl
yr emitt
ance
Provided,howev er,thati ftheaf oresaid ret
ur noffinalincomet axeswi thheld
zonalv alueorf airmar ketv alueoft he Thetaxi mposedunderSec.33shal l
said pr opert
yi s gr eatert han i t
s cost bet reatedasaf i
nalincomet axont he
subject t o depr eci
at i
on, t he excess empl oyeethatshal lbewithheldandpai d
amountshal lbeal l
owedasadeduct i
on byt heempl oyer,whetheralarget axpayer
from t he empl oy er
's gr oss income as ornon- lar
get axpay ,onorbef
er orethe
fri
ngebenef itexpense.( Sec.2. 33[
D],Rev. 10th day of t he mont hf ollowing the
Reg.No.3- 98) calendar quar ter in which t he fri
nge
benef i
tsweregr anted(RR04-2002) .
EXAMPLE OF DE MI
NIMI
S BENEFITS
NOTSUBJECTTOFBT (RRNO.8-2000  For Addi
tional Rul
es on Fr
inge
AND10-2000) Benef
it
s,r
efertoAnnexH.
1. Monet i
zed unused v acat i
on l eav e (
9)CAPI
TALGAI
NSTAX
credi ts ofPRI VATE empl oy ees not
exceedi ng( 10)day sdur ingt hey ear SUMMARYOFTAXRATES
and t he monet ized v al ue ofl eav e
credi tspai dt ogov ernmentof fi
ci als 1. Indi
vi
duals
andempl oy ees a. Onsal eofsharesofst ockofa
2. Medi cal cash al lowance t o domest i
c cor
porat
ion notl i
sted
dependent s of empl oy ees not and traded t
hrual ocalst ock
exceedi ngP750. 00perempl oy eeper exchange,hel
dascapitalasset
semest erorP125permont h; OntheNetCapi
talGai
n
3. Ricesubsi dyofP1, 000. 00orone( 1) NotoverP100,
000 – FT
sack of 50kg. r ice per mont h of5%
amount ing t o not mor e t han AmountinexcessofP100,000– FT
P1, 000: 00, of10%
4. Uni form and cl ot hi
ng al l
owancenot b. On sal
eofr ealproper
tyint he
exceedi ngP3, 000perannum; Phi
l
ippi
nesheldascapit
alasset
5. Act ualy ear ly medi calbenef it
s not Onthegr osssel
li
ngprice,orthe
cur
rentfai
rmar ketval
ueatt heti
me
exceedi ngP10, 000perannum; ofsal
e,whicheveri
shigher – FT
6. Laundr y al lowance not exceedi ng of6%
P300permont h; 2. Cor
por at
ions
7. Empl oy eesachi ev ementawar dse.g. a. Onsal eofsharesofst ockofa
for l engt h of ser vice or saf ety domest i
c cor
porat
ion notl i
sted
achi ev ement ,whi chmustbei nt he and traded t
hrual ocalst ock
form ofat angi bl eper sonalpr oper ty exchange,hel
dascapitalasset
othert han cash orgi ftcer ti
fi
cat e, OntheNetCapi
talGai
n–
withanannualmonet aryv alueofnot NotoverP100,
000 – FTof5%
exceedi ng P10, 000 r ecei ved byt he Amountinexcess
empl oy ee under an est abli
shed ofP100,
000 –FTof10%
wr i
tt en pl an whi ch does not b. Onsaleofland/
bui
l
dinghel
das
discr imi nat einf av orpai dempl oyees; capi
tal
asset
8. Gifts gi v en dur ing Chr istmas and Onthegr osssel
li
ngprice,orthe
maj oranni v ersar y cel ebr ati
ons not cur
rentfai
rmar ketval
ueatt heti
me
exceedi ngP3,000perempl oy eeper ofsal
e,whicheveri
shigher – FT
of6%
annum;
(Rey
es,Virgi
l
io. I
ncome TaxLaw and
9. Flower s, fruits, booksorsi milaritems
Account
ing–ANewApproach,2002)
given t o empl oy ees underspeci al
circumst ances
10.Dai ly mealal l
owance f orov erti
me CAPI
TALGAI
NSANDLOSSES–
I
NGENERAL
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
51
MEMORYAI
DIN TAXATI
ON LAW
b. Wash sal es by non-deal

ers of
CONCEPTOFCAPI
TALASSETS securit
iesandwhennotsubj ect
tothest ocktransf
ertax;
Undert het axcode,therei
snodef i
nit
ion c. Exchangesnotsol elyinkindi n
forthet erm" capi
talasset
s".Whati
t mer gerandconsol i
dati
on;and
givesist hemeani ngofordinar
yassets: d. Salesorexchangest hatarenot
atarmsl ength.
a. Ordi
naryasset s(Sec.39,NIRC)
a. Stocki ntradeoft hetaxpay
eror
REQUISI
TES FOR RECOGNI
TION OF
otherpr opert
iesofaki ndwhich
CAPITALGAI
N/LOSS
woul dproperlybeincl
udedinthe
i
nv entor
yoft hetaxpayer
;
1. The t r
ansacti
on must i
nvol
ve
proper
ty classi
fi
ed as capi
tal
b. Propert
y held by the taxpayer
asset;
and
pri
mar i
l
yforsaletocustomer sin
theordi
narycourseofbusiness;
2. Thetransacti
onmustbeasaleor
exchangeoroneconsi der
ed as
c. Property used in t
rade or
equival
enttoasal
eorexchange.
business and subject t o
depreciat
ion;
and
RULES ON THE RECOGNITI
ON OF
CAPITALGAI
NSORLOSSES
d. Realproper
ty used i
ntr
ade or
busi
ness.
I
NDI
VIDUAL CORPORATI
ON
b. Capit
alAsset sinclude allpropert
y

hel
dbyt het axpayerwhet herornot
 Hol di
ngPer i
od Capi t
algainsand
connect
edi nt r
adeorbusi nessbut
Theper centagesof l
osses are
not incl
uding t hose enumer at
ed gainorl osst obetaken recognizedtot he
above(#1)asordinaryassets. i
nto accountshal lbe extentof100%.
thefoll
owi ng: (Thereisno
a.100%-i ft
hecapital holdingperi
od)
CAPI
TALGAI
N CAPI
TALLOSS assets has been
heldf or12mos.or
The gai n der
ived The l oss incur
red l
ess; and
fr
om t he sal
e or fr
om t he sale or b.50% -i fthecapital
exchangeofcapital exchangeofcapi tal asset has been
assets. assets. heldf ormor ethan
12mos.
 Non-deduct i
bili
ty  Capi tal losses
NETCAPITAL NETCAPITAL of Net Capi tal are allowed
GAI
N LOSS l
osses onlyt o ext ent
 Capitallossesar e of t he capi t
al
The excess oft he The excess oft he all
owed onl y t o gains; hence,
gains from sal es/ l
ossesf r
om salesor extent of t he thenetcapi t
al
exchangesofcapi tal exchangesofcapital capital gai
ns; loss i s not
assets ov er t he assets ov er t he hence, t he net deduct i
ble.
gains f rom such gains f r
om such capitallossisnot Except ion:I fany
sales/exchanges. salesorexchanges. deductible. domest icbankor
trustcompany ,a
subst antialpar tof
whosebusi nessi s
 TRANSACTI
ON RESULTI
NG IN TAXABLE the r ecei pt of
GAINSBUTNON-RECOGNI
TIONOFLOSSES deposi ts,sellsany
a. Saleorexchangebetweenr
elated bond, debent ur
e,
par
ti
es; noteorcer ti
ficate
orot herev i
dence
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
52
MEMORYAI
DIN TAXATI
ON LAW
of indebtedness
i
ssued by any 2. Transfertoacont roll
edcor poration
corporation – exchange ofpr opertyforst ocks
(i
ncludingonei ssued resul
tinginacquisit
ionofcor porate
byagov ernmentor
controlbyaperson,aloneort ogether
poli
ticalsubdivi
sion)
withothersnotexceedingfour.
 NetCapi t
alLoss  Notal
l
owed
“
Cont rol
” means owner shi p of
Carr
y–Ov er stocksinacor por
ationamount i
ngt o
 Al l
owed atleast51%oft hetotalvoti
ngpower
Thenetcapi t
alloss( i
n ofal lclassesofst ocksent it
led to
anamountnoti nexcess vote.
of the taxabl
ei ncome
before personal SALEOREXCHANGEOFORDI
NARYASSETS
exempt i
onforsuchy ear )
shallbe treat
ed int he
Gener
alr ul
es of i
ncome t
axat
ion
succeedingyear(butnot
beyond12mont hs)asa
appl
ytobothgainandl
oss.
deductionasshor t-t
erm
capitalloss (at 100%)  SeeAnnexD(GrossIncome–Gai
ns
fr
om t he net capi t al fr
om deal
i
ngsi
nproperty
)
gains.
SUMMARY OF TAX TREATMENT OF
GAINS/
LOSSES I
N THE EXCHANGE OF
 SeeAnnexUf
ori
l
lust
rat
ion. PROPERTI
ES
SALEOREXCHANGEOFCAPI
TALASSETS GeneralRule:Uponthesaleorexchange
ofproper
ty,theent
ir
egainorl oss,asthe
Thef ollowingar econsi der edassal e casemaybe,shal lber ecognized.[
Sec.
orexchangeofcapi tal asset s: 40(C,1)]
1. Ret irementofbonds
2. Shor tsal esofpr oper ty Excepti
ons:
3. Fai l
ur et oexer cisepr i
v i
legeoropt ion 1. Transact i
onswher egai nsandl osses
tobuyorsel lproper ty arenotr ecogni zed–
4. Secur iti
esbecomi ngwor thl
ess a. Exchange sol elyi n kind i n
5. Di stribution i n l iqui dation of l
egi ti
mat e mer gers and
corpor ations consol idati
on
6. Readj ust mentofi nter esti nagener al b. Tr ansf er t o a cont roll
ed
professi onal partner shi p. cor porati
on[ Sec.40( C,2)]
TAXFREEEXCHANGES 1. Transact i
ons wher e gai n i s
Salesorexchangesr esul ti
ngi nnon- recognizedbutnott heloss–
recognitionofgai nsorl osses: a. Tr ansact i
ons bet ween related
1. Exchangesol elyi nki ndi nl egi t
imate taxpay er s[Sec.36]
mer ger sandconsol idat ion; includes: b. Ill
egalt r
ansact i
ons [ Sec.96,
a. Bet weent hecor por ati
onswhi ch Rev .Reg.2]
ar e par ti
es t ot he mer ger or c. Exchanges of pr operty, not
consol i
dation ( pr oper ty f or sol elyinki nd,i npur suanceof
st ocks); cor porat e mergers and
b. Bet ween a st ockhol der of a consol idations[ Sec.40,(C, 3)
]
cor porationpar tyt oamer geror
consol i
dationandt heot herpar ty IMPORTANTDI STINCTI
ON
cor poration( stockf orst ock) ; I
fitisanordinar
yasset,t
heor di
nary
c. Bet ween a secur ityhol derofa gai
ns and l osses are considered in
cor porationpar tyt oamer geror determini
ngincomeorl ossf r
om t r
ade,
consol i
dationandt heot herpar ty businessorprof on.(
essi SeeSecs.32A,
cor poration ( secur i
ties f or 34D)
secur i
ti
es) I
fi tis a capit
alasset,determine
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
53
MEMORYAI
DIN TAXATI
ON LAW
fur
therwhet herornoti tisarealpr opert
y exchange.
l
ocatedi nt hePhi l
ippines.Ifiti s,theni
t  Forsharesnotli
stedi
ntheexchange,
i
ssubj ecttocapi talgainstax.( SeeSecs. the FMV shallbe the book val
ue
24D,27D5)( SeealsoSecs.24C, 27D2)If nearestt
hevaluat
iondat
e
not,the capi t
algai ns and l osses are
considered i n determining the t axabl
e Theabover ul
esshallbeusedin
ncome.(
i Sec.39) computingforthenetcapit
algai
n/l
oss
fordi
sposit
ionofshares.
CAPI
TALGAINSANDLOSSES–
SHARESOFSTOCK I
MPORTANTFEATURES
The taxat
ion of shares of stock 1. Saleofshar esofst ockofadomest i
c
whet
herornotl ist
edandt r
adedi nthe corpor ati
on l isted and t raded ina
st
ockexchangeissubj
ecttofinalt
ax. l
ocalst ock exchange and t hatof
i
niti
alpubl icof f
eringshal lbesubj ect
WHOARELI ABLETOTHETAX toPer centaget ax( Busi nessTax)
1. I
ndi vidualtaxpayer
, ci
ti
zenorali
en 2. Capitall ossessust ained during the
2. Cor porate t axpayer, domestic or year( notl i
stedandt radedi nal ocal
foreign stockexchange)shal lbeal l
owedas
3. Ot hertaxpay er
ssuchasest ate,tr
ust
, acapi t
allossdeduct ibleont hesame
trust f unds and pensi on among taxabl eyearonl y( nocar ry-
over)
other s. 3. Theent i
reamountofcapi talgainand
capitalloss( notl istedandt radedina
RATESOFTAX l
ocal st ock exchange) shal l be
consi dered wi thout t aki
ng i nto
1. Shar esofst ocknott r
adedt hrougha accounthol dingper iodi r
respectiv
eof
localst ockexchange– Netcapi t
al whoi st hetaxpay er( all100%)
gainsder i
veddur ingthet axabl eyear 4. Non- deduct i
bilit
yofl ossesonwash
from sal e,exchange,ort ransf ershal
l sales.
be t axed as f oll
ows ( on a per
transact i
onbasi s): FI
LINGANDPAYMENTOFTAX
Notov erP100, 000 -5%
Over P100, 000 -10% 1. Li
sted and Tr aded i n the Stock
2. Shar es ofst ock li
sted t hrough a Exchange-Thes t
ockbrokershallt
urn
localst ockexchange– ½ of1% of overthet axcollected t
ot heB.I.
R.
thegr osssel li
ngpr i
ceoft hest ock. wit nf
hi ive(5)bankingdaysf r
om the
EXCEPTIONSTOTHETAX dateofcoll
ecti
on.
1. Gainsder i
vedbydeal ersinsecur i
ti
es.
2. Allot hergai nswhi charespeci fi
call
y 2. Nott r
adedt hroughthestockexchange-
exempt f rom i ncome t ax under I
tshal lbepai dbyt hesell
eronaper
existing inv estmenti ncent i
ves and transaction basis upon fi
li
ng oft he
otherspeci al l
aws. required r eturn wi t n 30 day
hi s
foll
owi ngeachsaleorot herdi
sposit
ion
BASI
SFORCOMPUTI NORLOSS(
NGGAI BIR ofshar esofst ock.
RULI
NG146-98)
CAPI
TALGAINSANDLOSSES
 Thef airmar ketvalue(FMV)oft he
saleofshar esnottradedbutli
stedin
(
REALPROPERTY)
the st ock exchange isthe highest
closingpr iceont hedayt heshar es PERSONS LI
ABLE AND TRANSACTI
ONS
wer esol d,
transf
erredorexchanged. AFFECTED
 Whennosal eismadei nthest ock
1. Indivi
dual t
axpayer
s, est
ates and
exchange,t he FMV shallbe t he
trusts
highest sel li
ng price on the day
Sale or exchange or other
nearestt ot hedayofsale,tr
ansferor
disposit
ion of r eal propert
y
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
54
MEMORYAI
DIN TAXATI
ON LAW
consideredascapi tal
assets. capi
tal
gai
nst
ax.
Thesai dsal eshalli ude"
ncl pacto
der etr
osal e"andot herconditi
onal GROSSINCOMEFROM DIFFERENTSOURCES
sal
e. (SEC.42)
2. Domest icCorporation  Pleaseref
ertoAnnexI .
Saleorexchangeordi sposi
tion
oflandsand/ orbui l
ding which are ACCOUNTNG PERI
ODSANDMETHODSOF
notactuall
yusedi nbusinessandar e ACCOUNTI
NG
tr
eatedascapi talasset.
I
. ACCOUNTINGPERI ODS
 EXCEPTI
ONSTOTHETAX A. Gener alrule( Sec.43)
1.Gai
nsderi
vedbydeal
ersi
nreal
est
ate Taxabl ei ncome i s comput ed
upont hebasi soft axpay er ’
sannual
RATEANDBASI SOFTAX account ing per iod ( fiscal or
Afinaltaxof6% i sbased on the calendary ear)i naccor dancewi th
grossselli
ngpriceorfairmarketv
alueor the met hod of account i
ng
zonalvaluewhicheverishi
gher. empl oyed.
Note: Gain orl oss i
si mmat er
ial
, I f no met hod of account i
ng
therebeingaconcl usi
v epr
esumptionof empl oy ed ormet hod does not
gain. clearly r ef lect t he i ncome,
comput ati
on shal lbe made i n
 See Annex G – Gui del
i
nes i n accor dancew/suchmet hodas
Det
ermi
ningWhetheraRealPr oper
ty theopi nionoft heCommi ssioner
i
saCapit
aloranOrdinar
yAsset. clearlyrefl
ect st hei ncome.
Taxabl e i ncome i s comput ed
EXEMPTI
ON OF CERTAI
N INDI
VIDUALS FROM basedoncal endary eari f:
THE CAPITAL GAI
NS TAX ON THE SALE OR 1. account ing per i
od i s ot her
DI
SPOSI ONOFAPRI
TI NCIPALRESI
DENCE thanaf i
scal year
2. t axpay erhasno account i
ng
Conditi
ons: per i
od
a. Saleordi sposi tionoft heol dprincipal 3. t axpay er does not keep
residence; books
b. Bynat uralper sons-c i
ti
zensoral iens 4. t axpay eri sani ndi vidual
prov i
ded t hat t hey ar e r esident s Fi scaly ear:account ingper iodof
taxableunderSec.24 oft heCode 12mont hsendi ngont hel astday
(doesnoti ncl udeanest ateorat r
ust )
; of any mont h ot her t han
c. Thepr oceedsofwhi chi sf ull
yut i
li
zed December
i
n( a)acqui ri
ngor( b)const r
uct i
nga Cal endary ear :account ingper iod
new pr i
nci pal r esidence wi thin from Januar y1t oDecember31
eighteen( 18)cal endarmont hsf r
om
dateofsal eordi sposi ti
on; B. Peri
ods in whi ch i
tems ofgr oss
d. Not if
yt heCommi ssi onerwi thinthirty i
ncomei ncluded( Sec.44)
(30)day sf rom t hedat eofsal eor Amountofal litems ofgr oss
disposi ti
on t hr ough a pr escribed incomeshal lbei ncludedi nt he
returnofhi si ntent iont oav ailt
het ax grossincomef orthet axabley ear
exempt ion; inwhichr eceivedbyt het axpay er,
e. Canonl ybeav ailedofonl yonceev ery unless,anysuchamount sar et o
ten( 10)y ear s; be proper l
yaccount ed f orina
f. Thehi storicalcostoradj ustedbasi s diff
erentper iod undermet hods
ofhi sol dpr incipalr esidencesol d, ofaccount i
ngper mi t
ted
exchanged or di sposed shal l be In case ofdeat h oft axpay er:
carriedov ert ot hecostbasi sofhi s incl
ude f ort he taxabley eari n
newpr incipal resi dence whichf al
lsthedat eofhi sdeat h,
g. Ift her ei s no f ullut i
l
ization,t he allamount swhi chaccr uedupt o
port i
on oft he gai ns pr esumed t o the dat e of his deat h;i f not
hav ebeenr ealizedshal lbesubj ectt o
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
55
MEMORYAI
DIN TAXATI
ON LAW
otherwise pr
oper
lyincl
udi
blein wasmadeandt hef ollowing
respectofsuchperi
odorapr i
or December31
period Ifchangei sfrom cal endary earto
fiscal year :
C. Peri
od f orwhi ch deduct i
on and - separ atef inaloradj ust ment
cr
editstaken( Sec.45) retur nbemadef ort heper iod
Deduct ionspr ov i
dedi nthisTi tl
e betweent hecl oseoft helast
shallbet akenf orthetaxabl eyear calendarf orwhi chr et urnwas
in whi ch ‘ paid or i ncur red, made and t he dat e
dependentupon t hemet hod of desi gnated as t he cl ose of
account ing upon t he basi s of thef iscaly ear
which t he net i ncome i s Ifchangei sfrom onef iscaly ear
comput ed,unl ess,i n or der to toanot her :
refl
ectt he income,deduct i
ons - separ atef inaloradj ust ment
shouldbet akenasofadi ffer
ent retur nbemadef ort heper iod
period. between t he cl ose of t he
In case ofdeat h oft ax payer: former f i
scaly earandt he
deductions al lowed f or t he datedesi gnat edast hecl ose
taxableper iodi nwhi chf allsthe oft henewf iscaly ear
date of hi s deat h, amount s (
2)Income comput ed on basi s of
accrued up t ot he date ofhi s shor tper i
od
deat hifnotot herwise pr operly Inwhatcases?
all
owabl e in r espect of such a. Wher easepar atef inalor
periodorapr i
orper i
od. adj ustmentr etur ni smade
onaccountofachangei n
D. Change of account i
ng per iod account ingper iod
(Sec.46) b. I nal lothercaseswher ea
Ki ndsofchanges: separ atef inalor
-f r
om f i
scaly eart ocal endar adj ustmentr eturni s
year requi r
eorper mittedbyR&R
-f r
om cal endary eartof i
scal pr escri
bedbySec.of
year Finance.upon
-f r
om one f iscal y ear t o recommendat ionof
another Commi ssioner
Ef fectofchange: Neti ncome, Bot h shal l be made f or a
shall,witht he appr ovaloft he fract i
onal partofay ear .
Commi ssi
oner,becomput edon Theni ncomei scomput edont he
thebasi soft henew account ing basi s of t he shor t per iod for
period,subj
ecttoSec.47. whi ch separ ate f inal or
adj ustmentr etur nismade.
E. Finaloradj ust
mentr eturnsf ora
per i
odofl esst han12mont hs I
I.METHODSOFACCOUNTI
NG
(1) Ret ur ns f or shor t per iod
result
ing f rom change of A. Cashmet hod
account ingperiod Recogni
ti
on of i ncome
t axpayer i s ot her t han an andexpensedependentoninfl
ow
indivi
dual orout
fl
owofcash.
wi th t he appr oval of t he
Commi ssioner A. Accrualmethod
I fchangei sfrom f iscaly eart o Method under whi ch
calendary ear: i
ncome,gai ns and pr ofi
ts are
- separ atefinaloradj ustment i
ncluded i
n gr ossincomewhen
ret
ur nbemadef ortheper iod earnedwhet herreceiv
edornot ,
betweent hecl oseoft hel ast and expenses ar e all
owed as
fi
scaly earf orwhi ch r eturn deducti
ons when i ncur
red:
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
56
MEMORYAI
DIN TAXATI
ON LAW
alt
hough noty etpaid.Itist he property
ri
ghtt or
eceiveandnottheact ual Under r
ules and
receipt that determines t he regulati
onspr escribedbyt he
i
nclusionoft heamountingr oss Sec.of Fi nance,a per son
i
ncome who r egularly sel ls or
 Exampl es: otherwise di sposes of
1. i
nterestorr entincome personal pr operty on t he
earned but not y et i
nst all
mentpl an mayr et
urn
recei
ved asi ncomet her efrom inany
2. rent expense accr ued taxabley eart hatpr oporti
on
butnotyetpaid oft hei nstal
lmentpay ments
3. wages due t o worker s actuallyreceivedi nt hatyear,
butremaini
ngunpaid which t he gr oss pr ofit
reali
zed or t o be r eali
zed
A. Account ing for l ong- term whenpay menti scompl eted,
contracts bear stothecont r
actpr i
ce.
 Long- term cont racts:bui lding,
installat i
on or const ruct ion Exampl e:Salei
n2000
cont ract scov eri
ngaper iodi n Contractprice(CP)
excessof1y r (i
nstall
ment s
 Per sonswhosegr ossi ncome recei
vable) P200,000
isder ivedi nwhol eori npar t Cost 150,
000
from such cont racts shal l Grosspr ofi
t(GP) 50, 000
repor tsuchi ncomeupont he
basi s of per centage of Instal
lment s pay able i
n 2
compl et i
on equal annual i
nstall
ments
 Ther et urnisaccompani edby GP/ CPr at
io
a r et urn cer t
if
icat e of =50, 000/200,000=25%
ar chitects or engi neer s Collecti
ons in
showi ng t he per cent age of 2000=P100, 000
compl et i
on during the Incomef or2000
taxabl ey ear of t he ent i
re =P100, 000x25%=P25, 000
wor k per formed under t he
cont ract (
2)Sal
es ofr ealty and casual
 Deduct i
ons f rom gr oss sal
esofPer sonalty
income: al l expendi tur es  I ncasesof :
madedur ingt het axabl ey ear a. casualsal eorot her
onaccountoft hecont ract: casualdi sposit
ionof
accountbei ng t aken oft he personal pr oper ty
mat erial and suppl ies on (otherthani nvent or y
hand att he begi nning and on hand of t he
endoft het axabl eper i
odf or taxpayeratt hecl ose
use i n connect i
on wi t
ht he oft he taxabley ear )
wor kundert hecont ractbut forapr i
ce>P1, 000,
noty etsoappl i
ed. or
 Amended r et urn may be b. sale or ot her
per mi tted / requi r
ed by t he disposit
ion of r eal
Commi ssioner : i f upon property,i fin either
compl et i
on of cont ract, case t he i nitial
taxabl ei ncomehasnotbeen pay ments do not
clear l
y r eflect ed f or any exceed 25% oft he
year (s). selli
ngprice
 How may i ncome be
A. I
nst
all
mentbasi
s ret
urned: same as i n
(
1)Salesofdeal
ersi
nper
sonal sal
es of deal er i n
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
57
MEMORYAI
DIN TAXATI
ON LAW
personal pr
oper tyabove allocate gr oss i ncome or
 Init
ial pay ments: deduct i
ons bet ween or
pay ments r eceiv
ed i n among such or ganizat
ion,
cash or pr oper ty ot
her trade or busi ness, i f he
than evidences of det ermines that such
i
ndebt edness of t he distributi
on, appor t
ionment
purchaser dur ing t he oral l
ocati
oni snecessar yi n
taxable period in which ordert o preventev asion of
the sal e or ot her taxesort oclear l
yr efl
ectthe
disposit
ionismade. i
ncome of any such
organi zati
on, t rade or
(
3)Sales of r eal pr operty busi ness.
consi der
ed as capi talasset
byindi vi
dual
s FI
LINGOFTAXRETURNANDPAYMENTOFTAX
 I ndivi
dualwho sel l
s of
disposesofr ealpr operty, TAX RETURN – Thisisar epor tmadeby
considered as capi tal the taxpayert ot he BIR ofal lgr oss
assetand i s ot herwise i
ncomer ecei
veddur i
ngt het axabley ear
,
qualif
ied to r epor tt he the al l
owable deduct i
ons i ncluding
gainunder( 2)abov emay exempt i
ons,thenett axablei ncome,t he
payt hecapi t
algai nst ax i
ncomet axrate,theincomet axdue,t he
i
n i nst
allments under i
ncome t ax withhel
d,i f any ,and t he
rulesand r egulationst o i
ncomet axst
illt
obepai dorr efundable.
be pr omulgated by t he
Sec.ofFi nance.
(
4)Change from accr
ual t
o PERSONS REQUI
RED TO FI
LE I
NCOME TAX
i
nstal
lmentbasi
s RETURN
 taxpay ermustbeent itl

ed a. Indi
vidual
to benef i
ts under ( 1) 1. Resi dentci t i
zen;
hereofsal esofdeal ersin 2. Non- residentci ti
zen on i ncome
per sonal proper t
y from wi thint hePhi l
.;
 i
ncomput ingi ncomef or 3. Resi dental i
en on i ncome f r
om
they earofchangeorany wi thint hePhi l
.;
subsequent year: 4. NRAETB oni ncomef r
om wi thin
amount s actuall
y thePhi l.
recei veddur i
nganysuch 5. An i ndividual( citi
zens /al i
ens)
yearonaccountofsal es engagedi nbusi nessorpr actice
orot herdi sposit
ions of ofapr ofessi onwi thinthePhi l
.
proper t y made i n any regar dl
ess of t he amount of
priory earshal lnotbe gr ossi ncome;
excl uded. 6. Indi vidualder i
v i
ngcompensat i
on
incomeconcur rent l
yfrom twoor
A. Al
locat
ion of i ncome and mor e empl oy ers at any t i
me
deducti
ons dur ingt het axabl ey ear;
 Appl icablet o:casesof2or 7. Indi vidual whose pur e
moreor ganizati
ons, t
radesor compensat ion i ncome der i
ved
busi
nesses (
incorporated from sour ces wi thint he Phi l
.
and or ganized wi thin t he exceedsP60, 000.
Phil
ippines) owned or b. Taxabl eEst ateandTr ust
controll
eddi r
ectly/ i
ndir
ect l
y c. GeneralPr ofessi onalPar t
nership
bythesamei nter
est d. Corpor ation
 Commi ssioneri s authorized 1. Notexemptf rom i ncomet ax;
to di st
ribute,appor t
ion or 2. Exemptf rom i ncomet axunder
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
58
MEMORYAI
DIN TAXATI
ON LAW
Sec.30 ofNIRC buthas not oneemploy

erf
orthet
axableyear
shownpr
oofofexempt
ion. and whose tax withhel
d i s
equi
val
entt
ohi
staxdue.
I
NDI DUALS E
VI XEMPT FROM FI
LING I
NCOME
TAXRETURN SUBSTI
TUTEDFI
LINGOFINCOMETAXRETURNS
BY EMPLOYEES RECEI
VING PURELY
1. Indi
vidualwhosegr ossi ncomedoes COMPENSATI
ON INCOME.[SECTI
ON 4,RR3-
not exceed t otal per sonal and 2002;RMC01- 03]
addit
ionalexemptions;
2. Indi
vidual wi t
h r espect t o pur e Requisit
es:
compensat i
on income der ived f
rom 1. The empl oy ee r ecei
v es pur ely
sources withinthe Philippi
nes,t he compensat ioni ncome( regardlessof
i
ncome t ax on whi ch has been amount )duringt het axabl eyear.
corr
ectlywithhel
d; 2. The empl oy ee r eceives the income
3. Indi
vidualwhose sol ei ncome has onlyf rom oneempl oyerdur i
ng t he
been subjected t
of i
nalwi thhol
ding taxabley ear.
i
ncomet ax; 3. The amountoft ax due f rom t he
4. Indi
vidual who i s exempt f rom empl oyee att he end oft he y ear
i
ncomet ax. equalst heamountoft axwi thheldby
theempl oyer.
SUBSTI
TUTED FI
LING – i s when t he 4. The empl oyee' s spouse al so
employer ’
s annual r eturn may be compl ieswi thal lthree( 3)condi ti
ons
consi
der ed as t he “substit
ute”Income statedabov e.
TaxRet urn( I
TR)ofempl oyeeinasmuch 5. The empl oy er f il
es t he annual
astheinf or
mat i
onpr ovidedinhisincome informat i
on r et urn( BIR For m No.
tax r
eturn woul d exact l
ybe t he same 1604- CF)
i
nformationcont ai
nedi nt heempl oyer’
s 6. Theempl oyeri ssuesBI RFor m 2316
annualreturn. (Oct2002 ENCS)v er
sion t o each
empl oyee
HOW IS “SUBSTI
TUTED FI
LING”DI
FFERENT
FROM “
NON-FI
LING”? I
NDIVIDUALS NOT QUALI
FIED FOR
SUBSTITUTEDFI
LING(
STI
LLREQUIREDTOFLE)
I
 Substi
tut ed Fi l
ing – an i ndivi
dual
taxpay eral t
houghr equi r
edunder 1. Individuals der iving compensat i
on
the l aw t of i
l
e hi si ncome t ax from t wo or mor e empl oyer s
return,wi l
lno l ongerhav et o concur r
ent l
yorsuccessi velydur i
ng
per sonallyf il
e hi s own i ncome thet axabley ear .
taxr eturn. 2. Empl oyees der iving compensat i
on
– but i nstead t he i
ncome,r egar dless oft he amount ,
empl oy er’
s annual i nformation whet herf rom a si ngl e orsev er al
returnf il
ed i st he consi dered empl oyersdur i
ngt hecal endary ear ,
“subst it
ute”i ncomet axr etur
nof thei ncomet axofwhi chhasnotbeen
the empl oyee i nasmuch as t he wi t
hhel dcor r ectly( i.
e.t axduei snot
informat ion i n t he empl oyer’
s equalt othet axwi thheld)r esultingt o
return i s exact l
y t he same collectibleorr efundabl eretur n.
informat ion cont ained i n t he 3. Empl oyees whose mont hly gr oss
empl oy ee’sreturn. compensat i
on i ncome does not
exceed P5, 000 or t he st atut or y
 Non-f
il
ing – appl i
cablet o cer
tai
n mi nimum wage,whi chev eri shi gher ,
ty
pesofi ndi
vi
dualtaxpayerswho andopt edf ornon- withholdi ngoft ax
arenotrequi
redundert helawto onsai dincome.
fi
leanincometaxreturn. 4. Individuals der iving ot her non-
Example:employ eewhose busi ness, non- professi on-relat ed
purecompensationincomedoes i
ncomei naddi tiont ocompensat i
on
notexceedP60,000andhasonl y i
ncomenotot herwi sesubj ectt of inal
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
59
MEMORYAI
DIN TAXATI
ON LAW
tax. No.1700.
5. Indi
vidual s r
eceivi
ng pur ely
compensat ioni ncomef r
om asi ngle I
NDI DUALS REQUI
VI RED TO FI
LE AN
empl oy eralthought heincomet axof I
NFORMATION RETURN
which has been cor rectly wi
thhel d,
butwhosespousef all
sunder1t o4 Indivi
duals notr equired tof i
le an
abov e. i
ncomet axr eturnmaynev er
thelessbe
6. Non-r esidentaliensengagedi nt rade requir
ed t of i
l
e an i nformati
on r et
urn
orbusi nessi nthePhi l
ippinesderiv i
ng pursuant t o r ul
es and, r egulati
ons
purely compensat ion i ncome, or prescri
bed byt heSecretaryofFi nance
compensat ionincomeandot hernon- upon recommendat i
on of t he
business, non-profession-
related Commi ssioner.
i
ncome.
PLACEOFFI
LING
NOTE: Non- fi
li
ngofI TR,foremployees
whoarequal i
fi
edf ort
hesubsti
tutedfi
l
ing 1. Legalresi
dence -aut hori
zed agent
lbeOPTI
shal ONALf orthetaxableyear bank; Rev enue Di str
ict Of f
icer
;
2001,t
her eturnsforwhichshallbefi
led Coll
ecti
on agentordul yaut hor
ized
onorbef oreApr i
l15,2002. Thereaf
ter
, tr
easurer
subst
it
utedf il
i
ngwher eappl i
cableshal
l 2. Pri
nci
palplaceofbusi
ness
beMANDATORY.[ Sec5RR3- 2002) 3. WiththeOffi
ceoftheCommi ssi
oner
REQUI
REMENTOFBANKSFORSUBMI ON OF
SSI
AN ITR F OR LOAN OR CREDI
T CARD TI
MEFORFI
LING(
PAYASYOUFI
LESYSTEM)
APPLI
CATI
ONS
Apri
l15 – f orthose earning sol
e
Banksmayr equir
et hesubmissionof compensationi
ncomeorsol elybusiness,
BIR Form No.1700( forempl oyeesnot practi
ceofprofessi
onorcombi nat
ionof
enti
tl
ed to subst i
tuted fil
ing of ITR). businessandcompensation.
Howev er
,f or empl oy ees enti
t l
ed to
substi
tut
edf i
li
ngofI TR,t hesubmi ssi
on RETURN AND PAYMENT OF ESTI MATED
oftheJointCert
ifi
cati
onwi ll
suffi
ce. INCOMETAXBYI
NDI DUAL (
VI SELF-
EMPLOYED
ORPRACTI
CEOFPROFESSI
ON)
JOINT CERTI FICATI ON - Iti s a swor n
statementmade by t he empl oyerand 1.Fir
stquart
er-April15ofcur
rentyear
empl oyee,whi ch ser ve the f oll
owi ng 2.Secondquart
er-August15ofcurr
ent
purposes: year
1. I tcont ains t he empl oyee's consent 3.Thir
dquart
er–Nov ember15ofcur rent
thatBI RFor m No.1604¬CFmaybe year
consider edhi ssubst it
utedr eturn,in 4.Fi
nalquar
ter-Apri
l15ofthefol
lowing
li
euofBI RFor m No.1700,whi cht he year
.
empl oyeenol ongerf i
l
ed.
2. I t cont ains the empl oyer'
s Note: Whenthet axdueisinexcessofP2,
certi
ficationt hathehasr eportedt he 000-t hetaxpayermayelecttopayintwo
empl oyee' si ncome t ot he BI R and (2)equalinstal
l
ment s:
thathehasr emi t
tedthet axesont he 1sti
nstal
lment-April
15
empl oyee' si ncome,as i ndicated in 2ndi
nstal
lment-onorbef or
eJuly15
BIRFor m No.1604- CF.
3. I t ser ves as pr oof of f i
nanci al EXTENSI
ONOFTI
METOFLERETURN
I
capaci t
y i n case t he empl oyee
decidest oappl yforabankl oanora The Commi ssi
oner may on
credit-
car d,orf oranyot herpur pose, meri
tor
ious cases granta reasonable
asi fhehadi nf actfil
edaBI RFor m ext
ensi
onoft imef orf i
l
ingi
ncomet ax
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
60
MEMORYAI
DIN TAXATI
ON LAW
r
etur
nandmaysubj ecttheimposi
ti
onof ret
urn ofi t
si ncome (exceptt
hose
t
wenty(20)percenti nt
erestperannum i
ncomeexempt )
f
rom t
heori
ginalduedate.  Shall
setf or
th:
a. it
ems of gr oss income and
RETURNOFHUSBANDANDWI
FE deduct i
onsall
owed
b. namesofpar t
ners
 Fil
e one ( 1)r eturnf ort hetaxpay er c. TIN
yeariffoll
owi ngr equisit
escompl i
ed; d. address and shar e of each
a. Mar r
ied i ndividuals ( citi
zens, partner
r
esidentornonr esidentaliens)
b. Do notder i
ved income pur ely TAXRETURNOFACORPORATI ON
f
rom compensat ion. Thoser equiredtof i
le:
 Ifi
mpr acticabletof i
l
eoner et
urn:each 1. Cor poration subjectt ot ax having
spouse f il
e a separ ater eturn of existed dur i
ng t he t axable y ear
,
i
ncomebutt her eturnsof il
edshallbe whet herwi t
hi ncomeornot .
consolidated byt heBur eau forthe 2. Cor porati
on i n t he pr ocess of
purposesofv erifi
cationforthey ear. li
quidationorr ecei
vership.
3. Insurancecompanydoi ngbusi nessin
UNMARRI
EDMI
NOR the Phi li
ppines order iv
ing income
therein
 I
ncomeofunmarri
edminor
sderi
ved 4. Foreign cor porati
on hav ing income
f
rom pr
oper
tyr
ecei
vedbyt
heli
vi
ng from wi t
hinthePhi l
ippi
nes
par
entshal
lbei ncl
udedint
her et
urn FI
LINGOFRETURN (PAYASYOUFI LESYSTEM)
oft
heparent,except: Quart
erlyr
eturnsf orthefirstthree(3)
a. whendonor ’staxhasbeenpai d quartersonast ri
ctlysixt
y( 60)daybasi s
onsuchpr opert
y,or andt hefi
naloradjustedreturnont he15t h
b. whentransferofsuchpropert
yis dayoft hefour
th(4th)mont hf oll
owi ngthe
exemptfrom donor’
stax cl
oseofei hera-f
t iscal oncalendary ear.
PERSONSUNDERDI
SABI
LITY  SeeAnnexVf
orI
l
lust
rat
ion.
I
fat axpay erisunablet omakehi s WHOSHALLFI LE?
ownr etur
n, itmaybemadebyhi s The r et
ur n shallbe fi
led by t he
1. dulyaut hor i
zedagents; president
,v i
ce-pr
esident
,orot
herprinci
pal
2. represent ativ
e; offi
cer,and shal lbe swornt o bysuch
3. byguar dian; offi
cerandbyt het r
easur
erorassi st
ant
4. otherper sonchargedwi t
hthecar eof tr
easur er
.
hisper sonorpr operty
;
 whowi llassumet heresponsibi
li
tyof WI
THHOLDI
NGTAXES
maki ng t he return and i ncurr
ing
penalt i
es pr ov
ided for erroneous, WI NGTAXES
THHOLDI
falseorf r
audulentret
urn. Ki
nds:
1. Wit
hholdingTaxatSour ce:
RETURNOFESTATE,
TRUSTANDPARTNESHI
P a. FinalWi t
hhol
dingTax
b. Creditabl
e Wi thholding Tax
EstateandTrustwithgrossi ncome (Expandedwithholdi
ngt ax)
of P20,000 or more and par t
nershi
p 2. Wit
hholding Tax on Compensat i
on
(whetherprof
essi
onalorbusiness)shall (Wages)
fi
letheiri
ncomet axret
urnonorbef or
e 3. Wit
hholdingTaxonCr editabl
eVal
ue-
Apri
l15. AddedTax
4. Wit
hholdingofPercentageTax
TAX RETURNS OF GENERAL PROFESSI
ONAL
PARTNERSHI
PS(GPP)
 Each GPP shal lfil
ei n dupli
cate,a
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
61
MEMORYAI
DIN TAXATI
ON LAW
FI
NAL CREDI
TABLE WI NGTAXON COMPENSATI
THHOLDI ON
WI
THHOLDING WITHHOLDI
NG Ev
ery empl
oyer must withhold
TAXSYSTEM TAXSYSTEM from compensat i
on paid,an amount
comput ed in accordance wi th t he
Theamountof Taxeswi thheldon regulati
ons.
i
ncomet axwi thheld certaini
ncome
bythewithholding payment sare Excepti
on:
agenti
sconst ituted i
ntendedt oequal or Wher e such compensat i
on
asafullandf i
nal atleastappr oxi
mat e
i
ncomeofani ndivi
dual
:
paymentoft he thet axduef rom t
he
i
ncomeduef rom t he payeeont hesaid
1. Does not exceed t he stat
utor
y
payeeont hesai d i
ncome. minimum wages; or
i
ncome.[ Sec.2.57 2. Five t housand (P5,000) monthl
y
(a)
,Rev.Reg.2- 98] (P60,000ay ear)
 whi cheverishi
gher.
Thel i
abili
tyfor Thei ncomer eci
pient
paymentoft hetax i
sst i
llrequir
edtof i
le ELEMENTS OF WITHHOLDI
NG ON
restsprimar i
lyonthe anincomet axret
urn COMPENSATION
payorort he and/orpayt he
1. Theremustbeanempl oyer-
employee
withholdingagent. diff
erencebet ween
Thepay eei snot thetaxwi thhel
dand rel
ati
onship
requir
edt of i
lean thetaxdueont he 2. There must be pay ment of
i
ncomet axr etur
nfor i
ncome.[ Sec. compensat i
onorwagesf orservi
ces
theparticular 2.57(B),Rev.Regs.2- rendered
i
ncome. 98] 3. Th eremus tbeapa yr
ollperi
od.
COMPENSATION EXEMPTED
TI
METOWI
THHOLDTAXATSOURCE
1. Remuner ations r ecei
v ed as an
-ari
sesatt heti
meani ncomeispaid i
nci dentofempl oyment
orpay abl
e,whichev ercomesf ir
st. The 2. Remuner ations pai df oragr i
cult
ure
ter
m “ payabl
e”r eferst ot he datethe l
abor
obli
gati
onbecomesdue,demandabl eor 3. Remuner ations pai d f or domest i
c
l
egall
y enforceable. ( Sec.2.54.4 Rev
. ser vi
ces
Regs.2.98) 4. Remuner ationsf orcasualnoti nthe
cour se ofan empl oyer'
st rade or
NATUREOFWI THHOLDINGAGENT’SL I
ABILI
TY busi ness.
Thewi t
hholdingagenti sdirectl
y 5. Compensat i
on f or ser v
ices of a
andi ndependentlyliablefort hecor r
ect citi
zen, residentoft hePhili
ppines,for
amountoft hetaxthatshouldbewi t
hheld a f oreign gov ernment or an
from the di
vidend remitt
ance. i
nt ernat i
onal organizati
on
(Commi ssionerv s.Pr oct
erandGambl e, 6. Damages
GRNo.66838, December2, 1991) 7. Lifei nsurance
8. Amountr eceivedbyt hei nsuredas
CONSEQUENCESFORFAI LURETOWI THHOLD: returnofpr emi um
1. liableforsur char gesandpenal t
ies; 9. Compensat i
on f or i nj
ur i
es and
2. liableuponconv ict
iontoapenal ty sickness
equalt othet otalamountoft hetax 10.Incomeexemptundert reaty
notwi thheld,ornotaccount edf or 11.Thi r
teent h ( 13th) mont h pay and
andr emi t
ted.(Sec.251, 1997NI RC) otherbenef i
ts
3. any i ncome pay ment whi ch i s 12.GSI S; SSS; Phi lhealt
h and ot her
otherwise deduct ibl
e f rom t he cont ributions,
payor’sgr ossi ncomewi llnotbe
all
owed as a deduct i
on ifi ti s FREECOVENANTBOND[
TAX- SEC.57(
C)]
shownt hatthei ncomet axrequired
tobewi t
hheldisnotpai dtot heBI R. COVENANT BONDS – bonds,mort
gages,
(Sec.2.58.5,Rev .Reg.2- 98) deeds of t rust and other si
milar
obli
gat
ionsofdomest i
c/r
esi
dentf
orei
gn
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
62
MEMORYAI
DIN TAXATI
ON LAW
corporation, whi ch contain a --

5% t o 20% - -
-5%t
o32%
contract/ provision bywhi ch theobligor estat
etax
agrees; --2% to15% or
1. t opayanypor ti
onoft het aximposed 30% -donor ’s
tax
upont heobl igee;
2. t oreimbur set heobligeef orany Lesserexempt
ions Mor
eexempt
ions
portionoft het ax;or
3.t opayt hei nterestwithoutdeducti
on
foranyt axwhi cht heobligormaybe
required/ permi tt
edtopayort oret
ain (
1)ESTATETAXES
theref r
om.
DEFI
NI ON:a
TI nexci
set axont her i
ghtof
 Obligorshal ldeductandwi t
hhol da tr
ansmitti
ngpropert
yatthetimeofdeat h
tax=30% oft hei nterestandot her andont hepri
vil
egethatapersoni sgi
ven
payment swhet heri nterestorot her i
n controll
ing t
o a certai
n ext entthe
payment sarepay ableannual l
yorata di
spositi
onofhi sproper
tytot akeeff
ect
shor t
er per iod; whet her bonds, upondeath.
secur i
ties,obligationshadbeen/ wil
l
bei ssued/mar ket edandt heinterest ESTATETAXFORMULA
andot herpay ment spai dwi t
hinand
withoutt hePhi li
ppi nesi ftheinterest GrossEstate(Sec.85)
orot herpay menti spay abletoanon- Less: (1)Deduct ons(
i Sec.86)
residental i
enoraci tizenorr esident (2)
Netshar eoftheSSintheCPP
ofthePhi l
ippi
nes NetTaxableEst ate
I
NCOMEOFRECI PIENT[ SEC.58( D)
] Multi
plyby:Taxr ate(
Sec.84)
EstateTaxdue
 Incomewhi chanycr edi
tablet axis Less: TaxCr edit[i
fany](Sec.86[
E]or
requi red to be wi thheld atsour ce 110[B]
shal lbei ncl udedi nther eturnofi ts
recipient . EstateTaxDue, ifany
 The excess oft he amountoft ax
withhel d ov ert he tax due on hi s
return shal lbe r efunded t o him, GROSSESTATE
subj ectt o Sect i
on 204 (abat ement,
refund/ cr
edi ttaxes). ADECEDENT’ NCLUDES(
SGROSSESTATEI SEC.
 Ifamountwi thhel
datsour cei sless 85)
than t het axdueonhi sr eturn,the
differencei spai dinaccordancewi th RESIDENT&NON-
NON-
RESIDENT
Sect ion56( pay mentandassessment RESIDENTCITI
ZEN,
ALI
EN
ofincomet ax )
. RESIDENTALIEN
DECEDENT
DECEDENT
 Alltaxeswi thheldshallbeconsi dered
ast rustf undsandmai ntainedi na 1.Realpropert
y 1.Realproper
ty
separ at e account and not whereversi
tuat
ed si
tuatedinthe
commi ngledwi thanyot herf undsof Phil
i
ppines.
thewi thholdi ngagent.
2.Personalproper t
y 2.Per
sonal
B.TRANSFERTAXES whereversi
a) Tangibl
tuat
e,
ed
and
pr
oper
ty
a)Tangi ble
b) Intangible proper ty
situated
TRANSFERTAX I
NCOMETAX int he
Phi li
ppine
Tax on t r
ansf
er of Taxoni
ncome s
proper
ty. b) I
ntangi bl
e
per sonal
Rat
esar
elower Rat
esar
ehi
gher proper ty
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
63
MEMORYAI
DIN TAXATI
ON LAW
withasi t
us 2. the laws oft he f oreign countryof
i
nt he whicht hedecedentwasaci tizenand
Phili
ppines resi
dentatt hetimeofhi sdeat h
unless a. al low a simi l
arexempt ion from
exempt ed
transfertaxesordeat ht axesof
ont hebasis
of ev erycharacter
recipr
ocity
. b. inr espectofi ntangibleper sonal
proper t
yownedbyci ti
zensoft he
THELAW THAT GOVERNSTHEI
MPOSI
TION OF Phi l
ippi
nes notr esi
ding int hat
ESTATETAX foreigncount ry(Reciprocity)
.
Thestat
uteinf ce att
or hetimeof VALUATI
ONOFTHEGROSSESTATE
deathofthedecedentshal
lgover
nestat
e
taxati
on. Thepropert
iescompri
singt
hegross
est
ateshallbeval
uedbasedonthei
rfai
r
I
NTANGI
BLEPERSONAL PROPERTI
ES WI
TH A marketv
alueasoftheti
meofdeath.
SI NTHEPHI
TUSI L.(SEC.104,1997NIRC)
PROPERTY VALUATI
ON
1. Franchisewhi chmustbeexer cisedin
thePhi l
ippines; 1)Real
Proper
ty -f
airmarketv alue
2. Shares,obl igat i
onsorbondsi ssued a)asdet ermi nedbyt he
by any cor por ation or soci edad Commi ssioneror
b)as shown i n t he
anonimaor gani zedorconst i
t utedin
schedule of v alues
thePhi l
ippinesi naccor dancewi thit
s fixedbyt heprovincial
l
aws; andcityassessor s
onsorbondsi ssued WHI
CHEVERI
SHI
GHER
byanyf oreigncor porationeight y-
fi
ve
percent um ( 85%)oft hebusi nessof 2)Shar esofSt
ock
whichi slocat edi nt hePhi li
ppines; Unli
sted
onsorbondsi ssued Common -bookv alue
Shares -parv al
ue
byanyf oreign cor porati
on,i fsuch
Preferr
ed -arit
hmet i
cmean
shares,obl igations orbonds hav e Shar es bet weent hehighestand
acquired a busi ness si tus i nt he l
owestquot ati
onata
Phil
ippines; Li
sted dat enearestthedateof
5. Sharesorr ightsi nanypar tnership, deat h,i
fnonei savail
abl
e
business ori ndust ryest abli
shed i n ont hedat eofdeath
thePhi l
ippines. i
t self
.
3)Ri
ghtto -shall bet akeni nto
usufr
uct,useor accountt hepr obableli
fe
I
NTANGI
BLE PERSONAL PROPERTY,WITH A
habi
tati
on,aswell ofthebenef i
ciaryin
SI N THE PHI
TUS I LI NES,OF A DECEDENT
PPI
asthatofannui
ty accordancewi ththe
WHO I S A NON-RESI
DENT ALI
EN SHALL NOT l
atestbasi cst andard
FORM PART OF THE GROSS ESTATE I F
mor t
alitytabl e,tobe
(RECI
PROCITYCLAUSE)(SEC.104) approvedbyt he
SecretaryofFi nance,
1. thedecedentatt hetimeofhi sdeat h uponr ecommendat i
on
was a ci t
izen and r esident of a oftheI nsur ance
forei
gncount r
ywhi chatt het i
meof Commi ssioner .
hisdeat h
a. di dnoti mposeat ransfertaxor 4)Personal -whet hertangi
bleor
deat htaxofanyc haracter proper
ty i
nt angibl
e,apprai
sedat
FMV.“ Senti
mental
a. inr espectofi ntangi bl
eper sonal
value”ispracti
call
y
proper t
y of ci tizens of t he disregarded.
Philippines notr esiding int hat
foreigncount ry
;or
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
64
MEMORYAI
DIN TAXATI
ON LAW
I
NCLUSI NTHEGROSSE
ONSI STATE(
SEC.85) 2. bydeedexecut edi ncont empl at
ionof
hisdeath;or
1.DECEDENT’SINTEREST 3. bydeedunderwhi chhehasr etained
To the ext
ent of the i
nter
est i
n forhisl if
e orf orany per iod not
proper
tyofthedecedentatthetimeof ascert
ainablewi t
houtr eferencet ohis
hi
sdeath. deathorf oranyper i
odwhi chdoes
notinfactendbef orehi sdeat h:
2.TRANSFER IN CONTEMPLATI ON OF a. thepossessi onorenj oymentof ,
DEATH ort herightt ot hei ncomef rom
1. Atransf
ermotivat
edbyt hethought theproper ty;or
ofimpendi
ng death al
though death b. the r i
ght , either al one or i n
maynotbeimminent;or conjunctionwi thanyper son,t o
designatet heper sonswhoshal l
2. A transferby whi ch the decedent possessorenj oyt hepr oper t
yor
ret
ainedf orhisl i
feorf oranyper iod theincomet her efr
om.
whichdoesnoti nf actendbef orehis
death: Except
ion:bonafi
desalef
oranadequat
e
a. t hepossessi onorenj oy
mentof , and full consi
der
ati
on in money or
orther ightt othei ncomef r
om money’
swor th.
theproperty
, or
b. t he right, eit
her al one or i n 5.PROCEEDSOFLI FEI NSURANCE
conj
unct i
onwi thanyper son,to Proceedsofl i
feinsur ancet akenby
desi
gnat etheper sonwho shal l the decedenton hi s own l i
fe shallbe
possessorenj oythepr opertyor i
ncluded i n t he gr
oss est ate i ft he
thei
ncomet herefr
om. benefi
ciaryis:
a. the est ate of the decedent , his
Except
ion:bonafi
desalef
oranadequat
e execut ororadministr
at or(regardless
and full consi
der
ati
on in money or whet herthedesignationi sr evocable
money’
swor th. orirrevocable)
;or
b. at hirdpersonothert hant heest ate,
3.REVOCABLETRANSFER execut ororadmi nist
rat orwher et he
A transfer whereby the t erms of designat i
on of t he benef i
ciaryi s
enjoymentoft hepropertymaybeal t
ered, revocable.
amended,r evokedort erminated byt he
decedental oneorinconjunctionwi thany 6.TRANSFERSFORI NSUFFI CIENT
otherperson,orwher eanysuchpoweri s CONSI DERATION
rel
inquished i n contemplati
on of t he Thev aluet obeincl udedinthegr oss
decedent ’
sdeat h.Itisenought hatthe estatei st he excessoft hef ai
rmar ket
decedenthadt hepowert oal ter,amend valueoft hepr opert
yatt hetimeoft he
orrevoket houghhedidnotexer ci
sesuch decedent ’
sdeat hovert heconsiderati
on
power . received.Thisi sappl icableincasesof
transfer i n cont empl ati
on of deat h,
Except
ion:bonafi
desalef
oranadequat
e revocablet r
ansfer and t r
ansfer under
and full consi
der
ati
on in money or generalpowerofappoi ntmentmadef ora
money’
swor th. considerationbuti snotabonaf idesal e
foranadequat eandf ullconsi
derationi n
4.TRANSFERUNDERGENERALPOWER moneyormoney ’
swor th.
OFAPPOI NTMENT
Apowerofappointmentistheri
ghtto 7.PRIORI NTERESTS
designat
ethepersonorpersonswhowi l
l Alltransfers,
trusts,estates,i
nterest
s,
succeed tot he pr
oper
ty oft he pri
or ri
ghts,power s and r el
inquishment of
decedent. powersmade,cr eated,ar i
sing,existi
ng,
The generalpowerofappoi ntment exer
cisedorr eli
nquishedbef or
eoraf t
er
maybeexer ci
sedbythedecedent: theeffecti
vit
yoft heNI RC.
1. bywi l
l;
or
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
65
MEMORYAI
DIN TAXATI
ON LAW
PROPERTY RELATIONS BETWEEN HUSBAND

ANDWI FE 1.ORDI
NARYDEDUCTI
ONS
The pr oper
tyr el
ations between the
spousesshal lbegov erned bycontract A. FUNERALEXPENSES
(marr
iage set t
lement)execut ed before Theamountdeduct i
bleisthel
owest
themar r
iage. amongthef ol
lowing:
1. actualfuneralexpenses
Intheabsenceofsuchcont r act,orif 2. 5%oft hegr ossestate
t
hecontractisvoi
d: 3. P200,000.
Onmarri
agescont ractedbeforeAugust3,
1988, t he sy stem of conj ugal Iti
ncl udest hef oll
owi ng:
partnershipofgainsshal l
gov ern; 1. Mour ning appar eloft he sur vivi
ng
On marriages contracted on or af ter spouseandunmar ri
edmi norchi l
dr en
August3,1988 ( eff
ecti
vit
y oft he oft hedeceased,boughtandusedi n
Fami lyCodeoft hePhi li
ppines) ,t
he theoccasi onoft hebur ial.
system ofabsol ut e communi t
y of 2. Expensesoft hewakepr ecedi ngt he
proper t
yshallgovern. bur i
al includi ngf oodanddr inks.
3. Publ icationchar gesf ordeat hnot ices.
EXEMPTTRANSMI ONS(
SSI SEC.87) 4. Tel ecommuni cation expenses i n
1. Themer gerofusuf ructi nt heowner i
nf ormi ngr elativesoft hedeceased.
oft henakedt i
tl
e; 5. Cost of bur ialpl ot . Tombst one
2. Fi deicommi sar ysubst itution; monumentormausol eum butnot
3. Thet r
ansmi ssionf rom t hef irstheir
, theirupkeep.I ncasedeceasedowns
legateeordoneei nf av orofanot her af ami l
yest ateorsev eralbur i
all ot s,
benef i
ciary ,in accor dance wi tht he onlyt hev al uecor respondi ngt ot he
wi l
lofthepr edecessor ;and plotwher ehei sbur i
edi sdeduct ible.
All bequest s, dev ices, l egacies or 6. I ntermentf eesandchar ges.
transferst osoci alwel fare,cul turaland 7. Al lot herexpensesi ncur red f ort he
charitableinst it
ut i
onsnopar toft henet per formance of t he r itual and
i
ncomeofwhi chi nurest ot hebenef i
tof ceremoni esi ncidentt ot hei nterment .
anyi ndivi
dual ;Pr ovided,t hatnotmor e Expensesi ncur edaf
r t
ert hei nter ment ,
than30% oft hesai dbequest s,legacies such as f or pr ay ers, masses,
or t ransfers shal lbe used by such entertainment , or t he l i
ke ar e not
i
nst i
tutionsforadmi nistrati
onpur poses. deduct ible.
Anypor ti
onoft hef uner alandbur ial
DEDUCTI
ONSON GROSSE STATE expensesbor neordef r ay edbyr el ati
v es
APPLI
CABLETO and f riends oft he deceased ar e not
RESI
DENTALIENSANDCITIZENS deduct ible.
(
REVENUEREGULATI
ONS2-2003)
JUDICIAL EXPENSES OF THE
Thef oll
owingar ededuct i
blefr om the TESTAMENTARY OR I
NTESTATE
gr
oss est ate ofci tizens and r esident PROCEEDI NGS
al
i
ens: Expensesal lowedasdeduct i
onunder
1. Expenses, l osses, i ndebt edness, thi
scat egor yar ethose:
taxes,etc.(ordinar ydeducti
ons) 1. incur redi ntheinv entor
y -
takingof
2. Transferforpubl icuse asset s compr isi
ng t he gr oss
3. Vanishingdeduct ion estate,
4. Fami l
yhome 2. admi nistrati
on,
5. Standarddeduct ionequiv al
entt oone 3. pay mentofdebt soft heest ate,
mi l
l
ionpesos( P1, 000,
000) as wel las t he di
str i
buti
on oft he
6. Medi calexpenses estateamongt hehei rs.
7. Amount sr eceivedbyhei rsunderRA Inshor t,t hesededuct ibl
ei t
emsar e
4917( Retir
ementBenef i
ts) expensesi ncur r
eddur i
ngt heset tlement
8. Netshar eoft hesur v
ivi
ngspousei n oftheest at ebutnotbey ondt hel astday
theconjugal orcommuni t
ypr operty prescri
bed by l aw,or t he ext ension
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
66
MEMORYAI
DIN TAXATI
ON LAW
t
hereof,f
ort
hef
il
ing oft
heest
atet
ax UNPAI DMORTGAGE
r
eturn.  Incaseunpai dmor tgagepay ablei s
bei ng cl aimed by t he est ate,
CLAIMSAGAINSTTHEESTATE v erifi
cat i
onmustbemadeast owho
The wor d " cl
aims" is generall
y was t he benef i
ciary of t he l oan
construedtomeandebt sordemandsof pr oceeds.
apecuni ar
ynaturewhichcouldhavebeen  Ift hel oani sf oundt obemer el
yan
enforced agai
nstt he deceased in hi
s accommodat ionl oanwher ethel oan
l
ifet
imeandcoul dhavebeenr educedto proceedswentt oanot herper son,the
si
mpl emoneyj udgments. value oft he unpai dl oan mustbe
i
ncl udedasar ecei v
ableoft heest ate.
Cl
aims agai nst t he estat
e or  Ift herei sal egali mpedi mentt o
i
ndebtednessi nrespectofpr
opert
ymay recogni zet hesameasr ecei
v ableof
ar
iseoutof: the est ate,sai d unpaid obl igati
on/
1.Cont ract
; mor tgage pay abl e shal l not be
2.Tort;or allowed as a deduct i
on f r
om t he
3.Oper ati
onofLaw. grossest at e.
 In al li nst ances, t he mor tgaged
proper t
y,t o t he ext ent of t he
Requi
sit
es: decedent 'si nt erestt herein,shoul d
1. Thel i
abi li
tyrepresentsaper sonal alway s f or m par t of t he gr oss
obl igation of t he deceased taxabl eest ate.
exi sti
ngatt het i
meofhi sdeat h
except unpai d obli
gations TAXES
incur red i ncidentt o his deat h Taxeswhichhav eaccruedasofthe
suchasunpai dfuneralexpenses deat
hoft hedecedentwhichwereunpai
d
(i.e.,ex pensesi ncurredupt ot he asofthetimeofdeath.
time ofi nterment)and unpai d
medi cal expenses whi ch ar e Thefollowingarenotdeduct
ibl
e:
cl assified under a di f
ferent 1. i
ncomet axoni ncomer ecei
ved
cat egor yofdeduct i
ons; afterdeath
2. The l i
abi l
ity was cont ract
ed i n 2. property taxes not accr ued
goodf ait
handf oradequateand beforedeath
fullconsi der at
ion in money or 3. estatetax
money '
swor th;
3. Thecl aim mustbeadebtorcl ai
m LOSSES
whi ch i s v ali
d i n law and Requi
sites:
enf orceabl eincour t
; 1. Itshoul dar i
sef rom f ir
e,st or
m,
4. Thei ndebt ednessmustnothav e shipwr eck, or ot her casual ty
,
beencondonedbyt hecreditoror robber y,t
heftorembezzl ement;
the act i
on t o coll
ectf rom t he 2. Notcompensat ed byi nsurance
decedent must not hav e orot herwise;
prescr ibed. 3. Notcl aimedasdeduct i
oni nan
incomet axreturnoft het axable
CLAI
MSAGAI
NSTI
NSOLVENTPERSONS est at
e;
4. Occur ri
ng during theset tl
ement
Requisi
tes: oft heestate;and
1. Theamountt hereofhasbeenini
tial
l
y 5. Occur ri
ngbef oret helastdayf or
incl
udedaspar tofhisgrossest at
e the pay mentoft he est atet ax
(forotherwisetheywouldconst i
tut
e (lastdayt opay :sixmont hsafter
doublededuct i
onsi ft
heyweret obe thedecedent ’sdeat h).
deducted)
2. Thei ncapacit
yoft hedebtor
st opay 2.TRANSFERFORPUBLI
CUSE
thei
robligat
ionisproven.
Requi
sit
es:
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
67
MEMORYAI
DIN TAXATI
ON LAW
1. Thedispositi
onisi nal astwi
lland 1. Thef ami l
yhomemustbet heact ual
test
ament resident i
alhomeoft hedecedentand
2. Totakeef f
ectaft
erdeat h hisf ami l
yatt het imeofhi sdeath,as
3. I
nf avoroft he governmentoft he certifi
edbyt heBar angayCapt ainof
Phil
., or any pol i
ti
cal subdiv
isi
on thel ocalitywher et hefami lyhomei s
ther
eof sit
uat ed;
4. Forexclusi
vepublicpurposes. 2. Thet otalv al
ueoft hef ami lyhome
mustbei ncludedaspar toft hegross
Note:Thisshoul
dalsoincludebequest
s, estat eoft hedecedent ;
and
devi
ces,ort r
ansfer
st o soci
alwelfar
e, 3. Allowabl ededuct i
onmustbei nan
cul
tural
andchari
tabl
einsti
tuti
ons. amountequi valentto
 t hecur r
entf ai
rmar ketv al
ueof
3.VANI
SHI
NGDEDUCTI
ON thef ami l
yhomeasdecl ar
edor
includedi nt hegrossest ate,or
DEFI NI
TION:Th ededuct
ional l
owed fr
om  t heext entoft hedecedent '
s
thegr ossestatef
orproperti
esthatwere interest( whet her
subj ectt odonor’
sorest atetaxes.I
tis conj ugal /communi tyorexclusive
calledv ani
shi
ngdeductionbecauset he pr operty )
, whicheverislower,but
deduct i
on all
owed diminishes over a notexceedi ngP1, 000,000
periodoff i
veyear
s.Therateofdeducti
on 5.STANDARDDEDUCTI
ON
dependsont heperi
odf rom thedateof
transfert othedeathofthedecedent,as Adeducti
onint he amountof One
foll
ows: Mill
ion Pesos ( P1,000,
000) shall be
all
owed as an addi ti
onal deduct
ion
PERI
OD DEDUCTI
ON withoutneedofsubstanti
ati
on.
 1y
earorl
ess 100% ThefullamountofP1, 000,
000shall
 1y
ear–2y ear
s 80% beal l
owedasdeduct i
onforthebenefi
tof
 2y
ear
s–3y
ear
s 60% thedecedent.
 3y
ear
s–4y
ear
s 40%
20%
6.MEDI
CALEXPENSES
 4y
ear
s–5y
ear
s
Requisi
t es:  Any amountofmedi calexpenses
1. thepr esentdecedentdi ed within5 i
ncur redwithinoney earf rom deat h
yearsf rom t r
ansferoft hepr oper t
y i
nexcessofFi veHundr edThousand
from apr iordecedentordonor . Pesos( P500, 000)shallnol ongerbe
2. Thepr oper tymustbel ocat edint he allowed as a deduct ion undert his
Phils. subsection.
3. The pr oper tyf ormed par t of t he  Nei t
her can any unpai d amount
taxableest at eoft hepriordecedent , thereofi n excess oft he P500,000
oroft het axablegiftofthedonor . thresholdnoranyunpai damountf or
4. Theest atet axordonor ’st axont he medi calexpenses i ncur r
ed priort o
gift must hav e been f inall
y the one- y
earper i
od f rom dat e of
deter minedandpai d. death be al lowed t o be deduct ed
5. The pr oper tymustbe i denti
fi
ed as from t he gr oss est ate as cl aim
the one r eceived from t he pr i
or againsttheest ate.
decedent ,orsomet hi
ng acqui red in
exchanget herefor. 7.AMOUNTRECEI
VEDBY
6. No v anishi ng deduct ion on t he HEI
RSUNDERREPUBLI
CACT
proper tywasal l
owablet ot heest ate NO.4917
ofthepr iordecedent .
Any amountr ecei
ved by the hei
rs
4.FAMI
LYHOME fr
om t he decedent'
s employer as a
consequence of t he death of t he
Condi
ti
ons: decedent-
empl
oyee in accor
dance with
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
68
MEMORYAI
DIN TAXATI
ON LAW
Republ
icActNo.4917i sal l
owedasa NTE,
for
eigncount
ry X Phi
l.est
ate
deduct
ion prov
ided t
hattheamountof NTE,world Tax
theseparat
ionbenefi
tisi
ncludedaspar
t
ofthegrossestat
eofthedecedent
. (
NTE-NetTaxabl
eEst
ate)
8. NETSHAREOFTHE 2. Morethanonef or
eigncountr
y
SURVIVI
NGSPOUSEINTHE Thecr edi
tshallbethatwhichi
s
CONJUGALPARTNERSHI
POR theloweramountbet ween Li
mitA
COMMUNI
TYPROPERTY andLimitB.
Li
mi tA.Whi cheveri
slowerbetween:
Aft
er deduct i
ng t he al l
owable
 Est atet ax paid to af orei
gn
deductions( onl
ytheor dinarydeducti
ons)
country
appertaini
ng t o t he conj ugal or
 TaxCr editLi
mit=
communi t
y pr opert
ies included int he
NTE, forei
gncount ry X Phi
l
.estate
grossest ate,theshar eoft hesurvi
ving
NTE,wor ld Tax
spousemustber emov edtoensur ethat
onlythedecedent '
sinterestintheestate
Li
mitB.Whicheverislowerbetween:
i
st axed.
 Totalofest atetaxespaidt oal
l
f
orei
gncount r
ies
DEDUCTIONSON GROSS
 TaxCr editLi
mit=
ESTATEAPPLICABLETO NTEoutsi
dePhi l
.X Phi l.est
ate
NON- RESI
DENTALIENS NTE,wor l
d Tax
Thefol
lowi
ngarededuct
ibl
efr
om t
hegr
oss
est
ateofnon-
resi
dental
i
ens:
SETTLEMENTOFTHE
1. Expenses,losses,indebt
ednessand ESTATETAX
taxes( T)(
ELI ordinar
ydeducti
ons)
A.FI
LING
Formul
a:
Tax = Phil.Gross
Cr
edit Estate X Worl
d NOTI CEOFDEATH TOBEF ILED
Li
mit Wor ldGross ELI
T Inallcasesoft ransferssubjecttotax,
Estate orwher e,t houghexemptf rom tax,the
gross v alue of t he est ate exceeds
2. Tr
ansf
erf
orpubl
i
cuse P20, 000,t he execut or
,admi nistr
atoror
anyoft hel egalheirs,withi
nt womont hs
3. Vani
shi
ng deduct
ion on pr
oper
tyi
n afterthedecedent ’sdeat h,orwithi
nal ike
thePhi
l
ippi
nes. periodaf terqual i
fyi
ngassuchexecut or
or admi ni
st r
ator,shal lgiv e a wr i
tt
en
4. Conjugal shar
e of t
he sur
viv
ing noticether eoftotheCommi ssi
oner.(Sec.
spouse 89)
AN ESTATETAX RETURN IS REQUI

RED TO BE
ESTATETAXCREDI
T
FI
LED
1. whent heest ateissubj ecttoestate
At axcredi
tisgrant
edf orest
ate tax;or
taxespai dto af or
eigncount r
yont he 2. when the est ateis notsubj ectt o
estate ofciti
zens and residentali
ens estate tax but t he gr oss estate
subjecttothefol
lowi
nglimit
ations exceedsP200, 000;or
3. regardl
ess of t he amount of t he
1. Oneforei
gncountryonly grossestate,wher ethegr ossestate
The tax cr
editis whicheveris consist
sofr egist
eredorr egi
str
able
l
owerbetween: propert
y such as mot orv ehi
cle or
4.Est
atetaxpaidtothefor
eigncountr
y shares of st ock or ot her simil
ar
5.TaxCredi
tLimit=
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
69
MEMORYAI
DIN TAXATI
ON LAW
propert
yf orwhi chclear
ancefr
om t
he c. noexecutororadmini
str
ator
BIR i s r equir
ed as a condi ti
on - wi th the Of fi
ce of t he
precedent f or t he t r
ansf
er of Commi oner(
ssi Sec.9C,Rev.Reg.
ownershipt hereofinthenameofthe 2-2003)
tr
ansferee.
B.PAYMENT
TIMEFORF I
LINGOFTHEESTATETAXRETURN
Theestatetaxr et
urn shal
lbe fil
ed PAYMENTOFTHEESTATETAXDUE
withinsi
x( 6)months aft
erthedeat hof Theest atet axdueshal lpaidatt he
thedecedent . ti
mewhent heest atet axr eturnisf i
led.
When t he Commi ssi onerf inds that
Extension:TheBI R may,inmeri
tori
ous thepay mentoft heest atet axont hedue
cases, gr ant an ext on of not
ensi datewoul dimposeunduehar dshipsupon
exceedingt hi
rt
y(30)day
sforthef
il
ingof theestat eoranyhei r
:
theestatetaxretur
n. a. t he paymentoft he est atet ax
maybeext endedf oraper i
odnot
WHEN THE GROSS ESTATE EXCEEDS toexceedf iv
e( 5)year sifthereis
P2,000, 000, THE ESTATE TAX RETURN ajudici
al settl
ementoft heest ate;
SHALL BE ACCOMPANI ED BY A STATEMENT or
WHICH I S CERTI ED BY AN I
FI NDEPENDENT b. t he paymentoft he est atet ax
CERTIFIEDPUBLI CACCOUNTANTSTATI NG maybeext endedf oraper i
odnot
1. t hei temi zedasset soft hedecedent toexceedt wo( 2)year sifthereis
withi tscor respondinggr ossv alueat anext r
a-judicialset t
lementoft he
thet imeofhi sdeath,orint hecaseof estate.
a non- resident,notci tizen of t he NOTE:I ncaset heav ail
ablecashi snot
Philippines,t hatpar tofhi s gross suff
ici
ent t o pay i tst otalest atet ax
estat esituatedinthePhi li
ppines; l
iabi
lit
y,t heestatemaybeal l
owedt opay
2. t he i temi zed deductions f rom t he taxbyi nstall
ment .(Sec.9F,Rev .Reg.2-
grossest ate; 2003)
3. t heamountoft axdue,whet herpaid
orst il
ldueandout standing. LIABI
LITYFORPAYMENT
The est at
et axshal lbe pai d byt he
PLACE WHERE TO FI
LE THE ESTATE TAX execut ororadmi ni st
ratorbefor edel i
ver y
RETURN toanybenef i
ci
ar yofhi sdistr
ibutiveshar e
oftheest ate.
1. ResidentCiti
zen Suchbenef i
ciaryt ot heext entofhi s
-withtheAccr edi
tedAgentBank distr
ibut iveshar eoft heest ateshal lbe
(AAB), Rev enue Di str
ict Officer, subsidi aril
yl i
ablef orthepay mentofsuch
Coll
ecti
on Officerordulyauthorized porti
on of t he est ate t ax as hi s
Treasur
eroft heci tyormuni ci
palit
y distr
ibut iveshar ebear st othev al
ueof
wherethedecedentwasdomi cil
edat thetot alnetest ate.(Sec.9G,Rev .Reg.2-
theti
meofhi sdeath. 2003)
No j udge shal l aut horize t he
2. Non- resident(citizenoral i
en) distr
ibut ion of t he est ate unl ess a
a. has r egister
ed execut or or certi
ficat i
onf rom t heCommi ssionert hat
administr
at or taxhasbeenpai di sshown.( Sec.94)
-wi t
ht he Rev enue Di st
ri
ct Noshar esorot herf ormsofsecur ities
Office wher e such execut oror shallbet ransferredi nt hebooksofany
admi nistratori
sr egister
ed corpor ation, par tnershi p, business or
b. execut ororadmi nist
ratorisnot i
ndust ry or ganized i nt he Phi l
ippines,
registered unless a si mi l
ar cer ti
fi
cation by t he
-wi t
ht he Rev enue Di st
ri
ct Commi ssioneri sshown.( Sec.97)
Officehav i
ngjurisdict
ionov erthe Whenabankhasknowl edgeoft he
execut or’ or admi nist
rator’
s deathofaper sonwhomai ntainedaj oint
residence account ,itshallnotal l
owanywi thdrawal
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
70
MEMORYAI
DIN TAXATI
ON LAW
by the sur vivi

ng depositorwi thoutt he (Commissioner of I nter
nal
abovecer ti
ficati
on.(Sec.97) Revenue vs.Pineda,GR No.L
Provided: t hatt he administrat
orof –22734,September15,
1967)
theest ateoranyone( 1)oft hehei r
sof
thedecedentmay ,uponaut horizati
onby
theCommi ssioner
,wi t
hdraw anamount
notexceedi ng twent ythousand pesos
(P20,000)wi thoutthesaidcertif
icati
on.
(
2)DONOR’
STAXES
Ther eisnot hingi nt heTaxCodeand DEFI
NI ON:A t
TI ax on t
he pri
vi
lege of
i
nt heper t
inentr emedi allawt hatimplies tr
ansmitti
ng one’
s pr
opert
yorpr opert
y
the necessi ty oft he pr obat e courtor ri
ghts to another or ot
hers wit
hout
estateset tlementofcour t
’sappr ov alof adequateandfull
val
uabl
econsi
derat
ion.
theSt ate’scl aimf orest atet axesbef ore
thesamecanbeenf or
cedandcol lected COVERAGEOFTHETAX(
SEC.104)
by t he BI R. On t he cont rary,under
Sect i
on94, itisthepr obateorset tl
ement
RESI
DENT&NON-
cour twhichi sbi ddennott oaut hori
zet he
RESIDENT
deliveryoft hedi stri
butiveshar etoany NON-RESI
DENT
CI
TIZEN,
i
nt erested par ty wi t
houta cer ti
fi
cation ALIENDONOR
RESIDENTALIEN
from theCI Rshowi ngt hepay mentoft he
DONOR
estatet ax. ( Mar cos I Iv s.Cour tof
Appeal s,GRNo.120880, June5, 1997) 1.Real
proper
ty 1.Realpropert
y
wherev
ersit
uat
ed sit
uatedi nt
he
COLLECTION OFTAXF ROM THEHEI RS Phil
ippines.
Anest ateorinheritancetax,whether
assessedbef oreorafterthedeathoft he 2.Personalpropert
y 2.Personal propert
y
deceased, canbecol l
ect edfr
om theheirs whereversi
tuated a.Tangibl
epr opert
y
even af t
er t he di stri
buti
on of t he a. Tangibl
e, and sit
uatedi nthe
propert
iesoft hedecedent .(Palancav s. I
ntangibl
e Phil
ippines
b.I
ntangiblepersonal
Commi ssionerofI nternalRev enue,GR
propert
ywi tha
No.16661, January31,1962) sit
usint he
Phil
ippinesunless
The Gov ernmenthas t wo way s of exempt edont he
col
l
ecti
ngt axesduef rom theestate. basisof
a. Bygoi ngaf t
eral ltheheirsand reci
procity.
collecti
ngf r
om eachoneoft hem
the amount of t he t ax REQUI
SITES
propor ti
onat et ot heinheri
tance
received, or 1. Capacityoft hedonor
b. Pursuantt othel iencreatedby 2. Donati
veI ntent
Sect i
on 219 oft he Tax Code 3. Deli
very, whet her act ual or
upon al lpr opertyand r i
ghtst o constr
uctive, ofthesubj
ectgift
propert y bel onging t o t he 4. Acceptancebyt hedonee
taxpay erforunpai dincomet ax, is
bysubj ect i
ngsai dpropert
yoft he LAW THAT GOVERNS THE I
MPOSI
TION OF
estatewhi chisint hehandsofan DONOR’
STAX
heirort ransfereet othepay ment
of t he t ax due t he est ate. Thedonor
’st
axshal
lnotappl
yunl
ess
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
71
MEMORYAI
DIN TAXATI
ON LAW
andunt ilt
her eisacompl et
edgi ft.The organi
zat
ionshal
lbeconsi
der
edas
transferi s perfect
ed from themoment donati
onmadetoast
ranger
.
thedonorknowsoft heaccept anceby
thedonee;i tiscompl etedbyt hedeliv
er, VALUATI
ONOFGIFTSOFPROPERTY
eitheract uallyorconst r
uct
ively
,oft he Thef ai
rmarketval
ueoft hepr
opert
y
donat edpr opertytothedonee.Thus,t he giv
enatt heti
meoft hegi f
tshal
lbethe
l
aw i n for ce at t he t i
me of t he val
ueoft hegi
ft
.
per f
ection/compl et
ion of the donat i
on
shallgov ernt heimpositi
onoft hedonor’s
tax.
I
NTANGI
BLE PERSONAL PROPERTIES WITH A
Agi ftthati si ncompl etebecauseof SI
TUSI N THE PHIL.(
SAMEASI N ESTATETAX
r
eserved power s, becomes compl ete SUBJECT TO THE RECIPROCITY RULE)( SEC.
wheneither: 104)
1.thedonorr enouncest hepower ;or
2.hisr ightt o exer ci se t he reser v ed For
mula:(Onacumul ati
vebasi
sov
era
power ceases because of t he per
iodofonecal
endaryear)
happeni ng of some ev ent or
contingency or t he f ulfi
l
lment of he1stdonat
1. Ont ionofay
ear
somecondi tion,ot hert hanbecause
ofthedonor 'sdeat h. Grossgift
s xxx
 Renunci at i
on by t he sur vi
v ing Less:Deducti
onsfrom gross xxx
spouse ofhi s/ hershar ei nt he gi
fts
conjugalpar tner shi porabsol ut e Netgif
ts xxx
communi tyaf tert hedi ssolut ion Multi
plyby:TaxRat
e xxx
oft hemar r
iage i nf avoroft he Donor’
staxonthenetgi
fts xxx
heirsoft hedeceasedspouseor
anyot herper son/ si ssubj ectt o 2. On donati
on ofa subsequent
donor '
st ax. dat
eduringthey
ear
 Wher easgener alr enunciationby
an hei r,i ncludi ng t he sur vi
v ing Grossgiftsmadeont hi
sdat e XX
spouse,ofhi s/ hershar ei nt he Less:Deduct i
onsfr
om grossgif
ts XX
hereditary est at e l eft by t he Netgift
s XX
decedent i s not subj ect t o Add:Al lpriornetgif
tswi t
hinthe XX
donor '
st ax,unl ess speci fical ly year
andcat egor ical lydonei nfav orof Aggregatenetgift
s XX
identif
iedhei r/st ot heexcl usi on Multi
plyby :
TaxRate XX
ordi sadv ant ageoft heot herco-
Donor’
st axonaggregatenetgif
ts XX
heirsi nt he her editary est at e.
Less:Donor ’staxonal lpri
ornet XX
(Sec.11, Rev .Reg.2- 2003)
gif
ts
Donor’
st axont henetgift
sont hi
s XX
STRANGER-aper sonwhoi snotabr other,
date
sister, spouse, ancest or and l ineal
descendant , or of a r el
ative by
consangui nityint hecol
lateralwithinthe EXEMPTI
ONOFCERTAI
NGI
FTS
4thcivi
l degree.
 Al egal l
yadopt edchil
di sent i
tl
edt o 1. Gift
smadebyar esident
allther i
ghtsandobligati
onspr ovided a.Dowr ies or gi fts made on
by l aw t ol egi
ti
mate chi l
dren,and accountofmar riageandbef ore
therefore,donat i
ontohi m shal lnot it
scel ebrat
ionorwi thi
noney ear
beconsi deredasdonat i
onmadet o thereafterbyparent st oeachof
stranger . thei
rl egi
ti
mate,i llegi
timate or
adopt edchil
drent ot heextentof
 Donat ion made bet ween busi ness
thefirstP10,000.
organizations and t hose made
b.Gift
smadet oorf ortheuseof
betweenani ndi
vi
dualandabusi ness
theNat i
onalGov ernmentorany
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
72
MEMORYAI
DIN TAXATI
ON LAW
entity cr eat
ed by any of i ts thetaxpai dtoanycount ryshallnot
agenci eswhi chi snotconduct ed exceed t hesamepr oporti
on oft he
for pr ofit,or t o any pol it
ical taxagai nstwhichsuchcrediti
staken,
subdi visi
on of t he sai d which t he decedent’s net gi f
ts
gov ernment . sit
uat edwi t
hinsuchcount rytaxable
c.Gi ftsi nf av or of educat i
onal, undert heNI RCbearstohisentirenet
char i
table,r eligious,cul t
ur alor gift
;and
social wel fare cor poration, 2. Thet ot
alamountoft hecr edi
tshall
i
nst it
ut i
ons,f oundat ions,t rustor notexceed t hesamepr oport
ion of
philanthropic or ganization, thet axagai nstwhichsuchcr editis
resear ch insti
tution or taken,whi cht hedecedent’
snetgi f
t
organi zati
on, accr edited non- sit
uat ed out side the Phi li
ppines
gov ernmentor ganization( NGO) . taxableundert heNIRC bearstohi s
Prov i
ded,t hatnomor et han30% entir
enetgi ft.
ofsai d gift
s shal lbe used by
such donee f oradmi nistrati
on FORMULAOFTAXCREDI
TLI
MIT
purposes.
2. Gi ft
smadebyanon- residentnot 1. Fordonor
’st
axespai
dtoonef
orei
gn
aci tizenoft hePhi l. count
ry
a.sameas( b)
b.sameas( c)exceptaccr editednon NGsit
uat
ed Tax
-gov ernmentor gani zation( NGO) i
naforei
gncount
ry XPDT=Credi
t
Ent
ir
enetgi
ft Limi
t
A NON-PROFI
T ONAL AND/
EDUCATI OR
CHARITABLE CORPORATI ON, INSTI
TUTION, (
NG-NetGi
ft
s;PDT-Phi
l.Donor
'sTax)
ACCREDITEDNON- GOVERNMENTORGANI ON,
ZATI
TRUST OR PHI LANTROPHIC ORGANI
ZATION, 2. Fordonor
’staxes pai
dtot
wo or
RESEARCHI NSTI
TUTIONORORGANIZATI
ONI S moref
orei
gncountr
y
1. one i ncorporated as a non- stock NGoutsi

dethePhi
l
. XPDT=Tax
entit
y Ent
ir
enetgi
ft
s Credi
t
2. payingnodi vidends Li
mit
3. governedbyt rusteeswhor eceiveno
compensat ion, and The al
lowabl
etaxcredi
tist he
4. devoting al li ts income whet her l
oweramountbetweenthet
axcredi
tli
mit
students’f ees orgi f
ts,donat ions, under(
a)and(b).
subsidies or ot her for ms of
phil
ant r
ophyt ot heaccompl i
shment
and pr omotion of t he pur poses SETTLEMENTOFTHEDONOR’
STAX
enumer ated i n i ts Articles of
Incorporati
on. TIMEFORFI NGOFRETURNANDPAYMENTOF
LI
THEDONOR’STAX
TAX CREDI
T FOR DONOR’
S TAXES PAI
D TO A Thedonor ’st
axr eturnisfiledandt he
FOREI
GNCOUNTRY
donor’
staxduei spaidwi thi
nt hir
ty(30)
daysaft
erthedat ethegi f
tismade.
1. Donor was a Fi l
ipi
no citi
zen or
The return shallbe underoat hi n
resi
dentali
en
dupli
cat
eset t
ingforth:
2. Attimeofforei
gndonation
1. Eachgi ftmadedur ingt hecal endar
3. Donor’
st axesofanychar acterand
year which i st o be i ncluded in
descri
pti
on
comput i
ngnetgi ft
s;
4. Are imposed and pai d by t he
2. The deduct i
ons cl aimed and
author
it
yofaf or
eigncountry
.
all
owable;
3. Anypr eviousnetgi f
tsmadedur ing
LI
MITATI
ONSONTAXCREDI
T
thesamecal endary ear;
4. Thenameoft hedonee;
1. Theamountoft
hecr
edi
tinr
espectt
o
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
73
MEMORYAI
DIN TAXATI
ON LAW
5. Relat
ionship of the donor t
ot he TAX COLLECTI
ON CANNOT BE RESTRAI
NED BY
donee;and COURTINJUNCTION (
SEC.218,1997NI RC)
6. Suchf urt
herinfor
mationasmaybe
requi
red by r ul
es and regul
ati
ons Just
if
icat
ion:Li
febl
oodTheor
y
madepur suanttolaw.
Except
ion:I
njuncti
onmaybei ssuedby
NOTE:Thef il
ingofanoti
ceofdonat
ion theCTAinaidofi t
sappel
lat
ejuri
sdict
ion
snotr
i equir
ed,unl
ikei
nestat
etaxwhere underRA1125( asamendedbyRA9282) .
not
iceofdeathisr
equi
red.
Condi ti
ons f or the I ssuance of an
PLACEFOR FI
LING OF RETURN AND PAYMENT Injuncti
onbyt heCour tofTaxAppeal s
OFTHEDONOR’STAX The CTA may enj oin collect
ion of
taxes:
1. Resident a. I fi n its opi nion t he same may
Wi thanaut horizedagentbank,t he j
eopar dizethei nterestoft hegov er
nment
Rev enue Di strictOf f
icer,Revenue and/ orthetaxpay er.
Col l
ecti
onOf f
icerordul yauthorized b. I nthisinstance, thecour tmayr equi
re
Tr easureroft heci tyormuni ci
palit
y thet axpayerei t
hert odeposi ttheamount
wher et hedonorwasdomi cil
edat claimedorf i
leasur et ybondf ornotmor e
thet imeoft het r
ansf er,orifthere thandoubl et heamountwi ththecourt.
be no l egal r esidence i n t he
Phi l
ippi
nes,wi tht he Of fi
ceoft he * Bef ore enf orcement of r emedies,
Commi ssioner . assessmenti snecessar ytot r
iggerthe
2. Non- r
esident process. If no r et
urn is filed, t
he
Filedwi ththePhi lippineEmbassyor Commi ssioneri s empowered to obtai
n
Consul atei nt hecount rywher ehe i
nformat i
on,and t o summon/ examine,
is domi ci
l
ed att he time oft he and t ake t esti
mony of per sons to
transfer,ordi rectlywi tht heOf fi
ce determinetheamountoft axdue.(Sec.5,
oft heCommi ssi oner . 1997NI RC)
TAXRATE TAXREMEDI
ESUNDERTHE1997TAXCODE:
Ifthedoneeisastr ,t
anger herateof 1. Summar y – r emedi es at t he
taxshall
be30%ofthenetgif
ts. admi nistrati
v elev elorr egulati
ont hatare
I
fthedoneei
snotast r ,t
anger he execut ed wi thout cer emony or del ay
;
rat
eshal lbefr
om 2% t
o15% oft henet shortorconci se
gif
ts. 2.Subst ant i
v e–r emedi espr ov
idedf orby
l
aw orr egul ati
on;an essent ialpar tor
 SeeAnnexW -Donor
’sTax const i
tuent or r elating t o what i s
essent i
al
3.Pr ocedur al–r emedi esi nvol
v i
nglawof
C.TAXREMEDI
ES pleading, evidence, jurisdi cti
on,etc.
UNDERTHENI
RC 4.Admi nistrative–r emedi esav ail
ableat
theadmi nistrati
on( BI R)l evel
5. Judi cial–r emedi est hatareenf orced
I
. TAXREMEDIESOFTHE throughj udicialact ion,whichmaybe
GOVERNMENT civilorcr i
mi nal
TAX REMEDIES OF THE GOVERNMENT TO

I
MPORTANCE EFFECTCOLLECTI
ONOFTAXES
1. They enhance and suppor t the 1. Compr omise(Sec.204)

government’
st axcoll
ect
ion. 2. Distr
aint(Actualand Const
ruct
ive)
2. They are safeguards oftaxpayer’
s (Secs.205-208)
ri
ghtsagai
nstar bi
tr
aryacti
on. 3. Levy(Sec.207B)
4. TaxLien(Sec.219)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
74
MEMORYAI
DIN TAXATI
ON LAW
5. Ci
vi
lAction( Sec.221) j
ur i
sdict
ionov erthetaxpayer,
as
6. Cr
imi
nal Act on(
i Secs.221,and222) member s;
7. For fei
tureofPropery(
t Sec.224  on assessment si ssued by the
-225) regionalof f
ices i nvol
vi
ng basic
8. Suspensi on of busi ness taxes ofP500, 000 orl ess,and
oper ati
onsi nviol
ati
onofVAT mi norcr
iminal vi
olati
ons.
(Sec.115)
9. Enf orcementofAdmi ni
str
ati
ve CASESWHI
CHMAYBECOMPROMI
SED
Fine
1. Deli
nquentaccount s
Ther emediesofdi st
rai
ntandlevyas 2. Casesunderadmi nistr
ativ
epr otests
wellascol lect
ion byciviland cri
minal 3. Civi
ltaxcasesbei ngdisput edbef ore
acti
ons may ,inthe discret
ion ofthe thecour ts
Commi ssioner, be pursued singl
y or 4. Coll
ect i
oncasesf il
edincour t
s
i
ndependent l
y ofeach ot her
,oral lof 5. Cri
minalv i
olations,othert hant hose
them si
mul t
aneously. alr
eady f i
led i n cour t or t hose
i
nvolvingcr i
mi naltaxfraud;and,
6. Cases cover ed by pr e-assessment
(
1)COMPROMI
SE noti
cesbutt axpayeri snotagr eeable
tothef indingsoft heauditof f
iceas
DEFI
NITION:Acontractwherebyt
hepart
ies, confi
rmedbyt her eviewof f
ice.( Sec.2,
byreciprocalconcessi
ons,avoi
dli
ti
gat
ion Rev.Reg.7- 2001)
orputanendt ooneal r
eadycommenced
(Ar
t.2028, NewCi vi
lCode)
. EXCEPTI
ONS
REQUISI
TES 1. Wi thhol dingt axcases;
1. Thet axpayermusthav eataxliabi
li
ty. 2. Crimi nal taxf raudcases;
2. Ther e must be an of fer (by the 3. Crimi nalv iolations al ready fil
ed in
taxpay erofanamountt obepai dby cour t;
thet axpayer) 4. Del i
nquent account s wi th dul y
3. Ther emustbeanaccept ance( bythe appr ov ed schedul e of i nstall
ment
Commi ssi
oner or t
axpay er as the pay ment s;
case may be)oft he offeri nthe 5. Cases wher e f inal r eports of
settlementoft heor
iginalclai
m. reinv estigat ion or r econsiderati
on
hav e been i ssued r esult
ing t o
OFFI
CERSAUTHORI
ZEDTOCOMPROMI
SE reduct ioni nt heor iginalassessment
andt het axpay erisagr eeablet osuch
1. TheCommi ssionerofI nternalRev enue deci sion.
(CIR)wi threspectt ocr iminalandci vi
l 6. Caseswhi chbecomef i
naland
casesar isingf rom v i
olationsoft he execut or yaf t erf i
nal j
udgmentofa
TaxCode[ Secs.7( C)and204,1997 cour t,wher ecompr omi seis
NIRC] . Thi s poweroft he CI Ri s request edont hegr oundofdoubt f
ul
discreti
onar yandonceexer cisedby validityoft heassessment( RR.
him cannotber eviewedori nterf
ered 30–2002) ;
with by t he Cour ts. ( Koppel
, 7.Est at et axcaseswher ecompr omi se
Phili
ppinesv s.Commi ssioner ,GRNo. i
sr equest edont hegr oundof
L-1977, Sept ember21, 1950) fi
nanci alincapaci t
yoft hetaxpay er.
2. By t he Regi onalEv aluation Boar d (RR.30–2002)
composedof :
a.t heRegi onal DirectorasChai rman, COMMI
SSI
ONER MAY COMPROMI SE THE
b.Assi stantRegi onalDi rector , PAYMENT OF ANY I
NTERNAL REVENUE TAX
WHEN
theheadsoft heLegal ,
AssessmentandCol l
ect ion
1. Areasonabl
edoubtast
othev al
idi
ty
Divisions, and
ofthe clai
m agai
nstthe t
axpayer
c.theRev enueDi stri
ctOf ficerhav ing
exi
sts;
or
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
75
MEMORYAI
DIN TAXATI
ON LAW
a.Thedel i
nquentaccountordi sput ed thati
tisnotaut hentc.(
i RR.30–
assessment i s one r esul ti
ng 2002)
from aj eopar dyassessment . i
. Theassessmenti sbasedonan
b. The assessmentseems t o be i
ssuewher eacour tof
arbi t
rar yi nnat ur e,appear ingt o compet entjuri
sdicti
onmadean
bebasedonpr esumpt ions,and adversedeci si
onagai nstthe
ther ei sr easont obel i
ev et hati ts Bureau,butf orwhicht he
i
sl acki ngi nl egaland/ orf act ual SupremeCour thasnotdeci ded
basi s; or uponwi thfinali
ty.(RR.08-
c. The t axpay erf ai l
ed t of il
e an 2004).
admi nist rative pr ot est on
accountoft heal legedf ai l
ur et o 2. Thef inanci alposi tionoft het axpay er
recei venot iceofassessmentor demonst rat esacl eari nabi l
ityt opay
prelimi nar y assessment and theassessedt ax[ Sec.204( A) ,1997
ther ei sr easont obel i
ev et hati ts NIRC) .I n such case,t he t axpay er
i
sl acki ngi nl egaland/ orf act ual shoul d wai ve t he conf ident i
alit
y
basi s; or pri
vilegeonbankdeposi tsunderRA
d. Thet axpay erf ailedt of ilea No.1405[ Sec.6( F) (2),NI RC] .
requestf or Financi alIncapaci ty.—Theof fer
reinv est igat i
on/ r econsi der ation tocompr omi sebasedonf inanci al
wi t
hin30day sfrom r ecei ptof i
ncapaci tymaybeaccept edupon
fi
nal assessmentnot iceand showi ngt hat :
ther ei sr easont obel iev et hati ts a.Thecor porat i
onceasedoper ation
i
sl acki ngi nl egal and/ orf act ual ori sal readydi ssol ved.Pr ovided,
basi s; or thatt axl iabili
ti
escor r espondi ngt o
e. Thet axpay erf ailedt oel ev at et o the Subscr iption Recei vabl e or
theCTAanadv er sedeci sionof Asset sdi stri
but ed/ dist ri
but ablet o
the Commi ssi oner , or hi s the st ockhol der s r epresent ing
aut hor ized r epr esent at ive, i n return ofcapi talatt he t i
me of
some cases,wi thin 30 day s cessat ion of oper ati
on or
from r ecei ptt her eofandt her ei s dissolut i
onofbusi nessshal lnotbe
reason t o bel iev et hat i tsi s consi der edf orcompr omi se; or
l
acki ng i nl egaland/ orf act ual
basi s; or b.The t axpayer ,asr efl
ected i ni ts
f. Theassessmentwer ei ssuedon l
atestBal anceSheetsupposedt o
oraf terJan.1,1998,wher et he bef i
ledwi t
ht heBur eauofI nternal
demand not ice al legedl yf ail
ed Revenue,i ssuf feringfrom sur plus
to compl ywi tht he f or mal i
ties or ear ni
ngs def i
citr esulti
ng t o
prescr ibedunderSec.228oft he i
mpai rmenti nt heor iginalcapi tal
1997NI RC; or by at l east 50%,pr ov i
ded t hat
g. Assessment s made based on amount s pay able or due t o
the “ BestEv idence Obt ainabl e stockholdersot herthanbusi ness-
Rul e”and t her ei sr eason t o rel
ated t ransact ions whi ch ar e
believ et hatt he same can be properlyincl udiblei nt he r egular
disput ed by suf f
icient and "accountspay able"arebyf ictionof
compet entev idence. l
aw consi der edaspar tofcapi tal
h. The assessment was i ssued and not l iabili
ty, and pr ov i
ded
wi t
hint hepr escr ipt iv
eper i
odf or furt
hert hatt he taxpay erhas no
assessmentasext endedbyt he suffi
cientli
qui dassett osat isfyt he
taxpay er '
s execut ion ofWai ver taxli
abili
ty;or
oft heSt atut eofLi mi tationst he
validityoraut hent i
cityofwhi ch
i
sbei ngquest i
onedorati ssue
and t her ei s st rong r eason t o
believ e and ev idence t o pr ov e
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
76
MEMORYAI
DIN TAXATI
ON LAW
c.Thet axpay erissuf feringfrom a MI

NIMUM COMPROMI
SERATES(
MCR)OFANY
networ t h def icit( total l i
abil
iti
es TAXLI
ABI
LITY
exceedt otalasset s)comput edby a. I
ncaseoff i
nanciali
ncapaci
ty:
deduct ing t ot all iabili
ties (netof MCR=10%oft hebasicassessedtax
deferred cr edi ts and amount s b. Othercases:
payabl e t o st ockhol ders/ owner s MCR= 40% oft hebasicassessed
refl
ect ed as l iabili
ties, except tax[Sec.204(A),
1997NIRC]
business- r
elat ed transact i
ons)
from t ot alasset s( netofpr epaid APPROVAL OF THE COMPROMI SE BY THE
expenses,def err
ed char ges,pr e- EVALUATI
ON BOARDISREQUIREDWHEN
operat ing expenses,as wel las a. the basi c tax invol v
ed exceeds
appraisal i
ncr easesi nf i
xedasset s), P1,000,
000.00,or
taken f r
om t he l atest audi ted b. the set
tlementof f
ered isl essthan
fi
nanci alst atement s,pr ovi
dedt hat theMCR.
i
n t he case of an i ndivi
dual
taxpay er ,hehasnoot herl evi
abl e NOTE: TheMCRmaybel essthant he
proper tiesundert hel awot herthan prescr
ibedratesof10% or40%,ast he
his f ami y home; (
l Sec. 3,RR. casemaybe,pr ovidediti
sapprovedby
30–2002) . theEvaluat
ionBoar d(composedoft he
BIR Commi ssioner and the four BIR
c.The t axpayeris a compensat i
on DeputyCommi ssioners)
.
earnerwi t
h no othersour ce of
i
ncome and t he family’
s gr oss COMPROMISEOFCRI
MINALVIOLATI
ONS
mont hly compensation does not GeneralRule: Al lcri
mi nalv i
olat
ions
exceed ( P10,
500/mont hi fsingle; undertheCTRPmaybecompr omised.
P21,000/ monthi f mar r
ied),and
thatitappear sthatt het axpayer Except
ions:
possesses no ot her l eviabl
e/ 1. Thosealr
eadyfi
ledincour
t
dist
rainableassets,otherthanhi s 2. Those i
nvol
ving f
raud [
Sec.204(
B),
familyhome; or 1997NIRC].
d.
Thet axpay
erhasbeengr ant
edby EXTENTOFTHECOMMISSIONER’
SDI SCRETI
ON
the SEC or by any compet ent TOCOMPROMISECRI
MINALVIOLATI
ONS
tri
bunal a mor atori
um or
suspension of pay ment s t o 1. Beforet hecomplainti
sfi
ledwit
ht he
credi
tors,or other
wise declared Prosecut or
’sOffi
ce:TheCIRhasf ul
l
bankruptorinsol
vent.(Sec.3,RR. discr
etion t o compromise except
07-2001) thoseinv ol
vi
ngfraud.
The Congressional Ov ersi

ght 2. Afterthecomplainti
sf i
ledwi
ththe
Commi t
tee,underSect ion 290 oft he Prosecutor
’s Of
fi
ce butbefor
et he
1997NI RCi sempower edt orequir
et he i
nformation i
sfil
ed withthecour:
t
BIR: The CI R can st i
l
l compromise
1.
The submi ssion ofal lperti
nent provi
ded the pr
osecutormustgive
i
nf ormation,i ncl udi
ng but not consent.
l
imi ted t o i ndustry audi ts,
collecti
on per f ormance dat a, 3. Afteri nformation isf il
ed wi tht he
status r eports on cr i
minal cour t
:TheCI Ri snol ongerper mi t
ted
actionsiniti
atedagai nstpersons; to compr omi sewi t
horwi thoutt he
and consentoft hePr osecutor.( People
2. The submi ssion of t axpayer vs.Magdal uyo,GRNo.L- 16235,Apr i
l
returns. 20,1961)
Thisismor eso,whent hecour t
hasr ender edaf inaljudgment .Asa
mer eagentoft heGov ernment ,the
Commi ssioneri s notaut horized to
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
77
MEMORYAI
DIN TAXATI
ON LAW
acceptanything l
ess than whatis ABATEMENT
adjudi
cat
ed i n f avor of t he
Gov er
nment.Byv i
rtueofsuchf i
nal THECOMMI
SSI
ONERMAYABATEORCANCELA
j
udgment, t he Gov ernment has TAXLI
ABI
LITYWHEN
al
readyacquir
edav estedri
ght.

1. The t ax or any por tion t her eof
NATUREOFA COMPROMI NE
SEI XTRAJUDI
CIAL appear st obeunj ust lyorexcessi v ely
SETTLEMENT OF THE TAXPAYER’
S CRIMINAL assessed; [
Sec.204( B), 1997NI RC] .
LI
ABILI
TYFORHISVI OLATI
ON a.When t he f il
ing of t he
retur n/payment i s made at t he
Itisconsensualincharacter,hence, wrongv enue;
may notbe i mposed on t
he t axpayer b.When t he taxpay er ’
s mi stake i n
wit
houthi sconsent.TheBI R mayonl y pay ment of hi st ax i s due t o
suggestset t
lementofhi st ax liabi
lity erroneouswr ittenof ficialadv iceof
thr
oughacompr omise.Theextra-j
udicial ar ev enueof ficer ;
sett
lement and t he amount of t he c.Whent het axpay erf ail
st of i
let he
suggested compromise penalt
y shoul d retur nandpayt het axont i
medue
confor
m with t he schedul e of to subst ant ial l osses f rom
compromisepenalti
esprovi
dedundert he prol onged l abor di spute, f or ce
rel
evantBIRregul
ati
onsororders. maj eur e, l egi timat e busi ness
rever ses,pr ov ided,howev er ,t he
REMEDY I
N CASETHETAXPAYER REFUSES OR abat ement shal lonl y cov er t he
FAI
LSTOABI
DETHETAXCOMPROMI
SE sur char ge and t he compr omi se
penal t
y and not t he i nter est
1. Enforcet hecompr omi
se i
mposed underSec.249 oft he
a.Ifitisaj udici
alcompr omise,itcan Code;
beenf orcedbymer eexecut ion.A d.Whent heassessmenti sbr ought
judicial compromi seisonewher ea aboutort her esul toft axpay er ’
s
deci sionbasedont hecompr omi se non- compl i
ancewi tht hel aw due
agreementi srenderedbyt hecour t toadi ffi
cultint erpr etat i
onofsai d
onr equestoft hepar t
ies. l
aw.
b.Any ot her compr omise i s e.Whent het axpay erf ail
st of i
let he
extrajudi cialand l i
ke any ot her retur nandpayt hecor rectt axon
cont ractcanonl ybeenf orcedby ti
meduet oci rcumst ancesbey ond
cour tact ion. hiscont r
ol,pr ov i
ded,howev er ,t he
2. Regardi tas r esci
nded and i nsist abat ement shal lonl y cov er t he
upon or iginaldemand ( Art
.2041, sur char ge and t he compr omi se
Civi
lCode) . penal t
y and not t he i nter est
i
mposed underSec.249 oft he
COMPROMI
SEPENALTY Code;
f.Late pay mentoft he t ax under
I
ti san amountofmoneyt hatthe mer i
torious ci rcumst ances ( ex.
taxpay er payst o compromise a t ax Failur et obeatbankcut -offt ime,
viol
ation.Thisispai dinli
euofcr i
minal sur char ge er roneousl y i mposed,
prosecut i
on. A t axpayer cannot be etc.)( Sec.2, Rev .Reg.13- 2001)
compel l
edtopayacompr omisepenal
t y
.
Ifhedoesnotwantt opay,theCIRmust 2. The admi nistr
ation and collecti
on
i
nstituteacr i
minalact
ion. costsi nvol
v ed do notj usti
fyt he
coll
ecti
on oft heamountdue [ Sec.
COMPROMI
SEVS.ABATEMENT 204(B),1997NI RC].
a.Abatement of penal ti
es on
Compr omiseinvolv
esar educt
ionof assessment conf ir
med by t he
t
het axpayer’
sliabi
li
ty e abat
,whi
l ement l
owercour tbutappeal ed byt he
meanst hattheentiretaxl
iabi
li
tyofthe taxpayert
oahi ghercour
t
t
axpayeriscancell
ed. b.Abatement of penal ti
es on
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
78
MEMORYAI
DIN TAXATI
ON LAW
withhol dingt axassessmentunder such personalpropert

ies were
mer itori
ousci r
cumst ances taken,oratthedwell
ingorplace
c.Abat ementofpenal ti
esondel ayed ofbusinessofsuchper sonwith
i
nst allment pay ment under someone of suitabl
e age and
mer itori
ousci r
cumst ances discr
eti
on(Sec.208,CTRP)
d.Abat ement of penal ti
es on
assessment reduced aft
er TWOTYPESOFDI
STRAI
NT
rei
nv est i
gationbutt ax payeri
sst i
l
l
cont esting r educed assessment ; 1. Actual : t here i s t aking of
and possessi on of t he per sonal
e.Such ot herci r
cumst ances which proper t
yf r
om t het axpay erbythe
the Commi ssioner may deem government .Phy sicaltransferof
analogous t o t he enumer at
ion possessi on i s not al ways
abov e.( Sec.3, Rev .Reg.13-2001) required.Thi si strueint hecase
ofi ntangible pr operty such as
3. The Commi ssionermay al so,ev en stocksandcr edit
s.
withouta claim theref
or,refund or 2. Const ructive:theowneri smer ely
credi
tanyt axwher eont hef aceof prohibitedf rom disposi ngofhi s
theretur
nuponwhi chpaymentwas proper t
y .
madesuchpay mentappear scl earl
y
tohav ebeener roneousl
ypai d(Sec. ACTUALVS.CONSTRUCTI
VEDI
STRAI
NT
229,1997NI RC))
.
ACTUAL CONSTRUCTI
VE
DI
STRAINT DI
STRAI
NT
(
2)DI
STRAI
NT
Made onl y on the Madeont hepr opert
y
DEFINI
TION: I
ti s t he seizur
e by t he proper
ty of a of any t axpayer,
deli
nquentt
axpayer whetherdel
i
nquentor
governmentofper sonalpr
operty,t
angibl
e
not
orintangibl
e,toenf or
cethepay mentof
taxes.Thepr oper
tymaybeof f
eredi na There is t
aki
ng of The t axpayer i s
publicsale,iftaxesar e notv ol
untari
l
y possessi
on mer el
y prohi
bit
ed
paid.I
tisasummar yremedy . fr
om disposingofhis
propert
y
NATUREOFTHE WARRANT OF DI
STRAI
NT OR
LEVY Effectedbyleavi
nga Effectedbyr equi
ring
l
ist of di str
ained thetaxpayertosigna
Thewar rantisasummar ypr ocedure propertyorbyservi
ce receipt of the
of a war r
ant of property or by t he
“f
orcing”thetaxpayertopay.Ther ecei
pt
distr
aint or revenue offi
cer
ofawar r
antmayormaynotpar t
aket he garnishment preparingandleaving
characterofaf i
naldecisi
on.I fitisan alistofsuchproperty
i
ndicationofaf i
naldeci
sion,thetaxpayer
mayappealt ot heCTA wi thin30day s An i mmediat
e step Notnecessar
il
yso
fr
om ser vi
ceofthewar r
ant. forcoll
ect
ionoft
axes
Duti
es of t he offi
cer servi
ng the
war
rantofdist
raint:
1. Makeanaccountoft hepersonal
proper
tiesdistr
ained;
2. Si gn t he l ist of per sonal Both
proper
ties distr
ained to which Aresummar yremediesforthecoll
ecti
onof
shallbeadded,a st at
ementof taxes;
thesum demandedandnot eof NOTE:Referonl
ytopersonal
proper
ty;
and
theti
meandpl aceofsale; cannotbeavail
edofwheretheamountofthe
3. Leav e eitherwitht he owneror taxinv
olv
edisnotmor et
hanP100
person from whose possession
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
79
MEMORYAI
DIN TAXATI
ON LAW
REQUI
SITESFORTHEEXERCI
SEOFTHEREMEDY
OFDI
STRAI
NT
II
1. The t axpayer must be del inquent
Ser
viceofWarrantofDi
str
aint
(excepti n constructi
v e di
str
aint)in
(
Sec.208)
thepay mentoft ax;
2. Theremustbeasubsequentdemand
forit
spay ment( assessment );
Wi t
hr espectt o:
3. Thet axpayermustf ailtopaythet ax
1.Per sonal pr oper ty–
atthetimer equired;and
(a)upont heowneroft hegoods,
4. Theper iodwi t
hinwhi cht oassessor
chattels, orot herper sonal
coll
ectthetaxhasnoty etpr
escrbed.
i
proper t
y ;or
(b)upont heper sonf rom whose
PERSONS WHO SHALL SEI
ZE AND DI
STRAI
NT
possessi onsuchpr oper t
iesare
PERSONALPROPERTY(ACTUALDI NT)
STRAI
taken.
2.St ocksandot hersecur ities
1. Amountofdel i
nquentt ax i
s mor e
(a)upont het axpay er;and
thanP1,000,
000– Commi ssioneror
(b)upont hepr esident ,manager ,
hisdulyaut
hori
zedrepresent
at i
ves.
tr
easur erorot herr esponsi bl
e
2. Amount of del inquent t ax i s
offi
ceroft hecor porat ion,
P1,000,
000orless–Rev enueDi str
ict
companyorassoci at i
onwhi ch
Offi
cer.(
Sec.207(
A),1997NI RC)
i
ssuedt hesai dst ockand
securiti
es.
AUTHORI
TY OF THE COMMISSIONER TO
3.Bankaccount sshal lbegar nishedby
I
NQUIREI
NTOBANKDEPOSI
TACCOUNTS
servingawar rantof di st raint–
(a)upont het axpay er;and
Dist r
aint includes gar ni
shment of
(b)upont hepr esident ,manager ,
moneyev eni nbankdeposi t
sbecauseRA
tr
easur er ,orot herresponsi ble
1405 ( Bank Secr ecy Law)cov er s only
offi
ceroft hebank.
divulgingofi nformat i
onofdeposi ts.No
Note:Upon r eceiptoft he war rantof
i
nqui ryi smadeongar nishmentfori tonly
distr
ai nt,thebankshal ltur nov ertot he
earmar ksapor t
ionoft hedeposits.
Commi ssioner so much of t he bank
Not withstanding any cont r
ary
account sasmaybesuf fi
ci entt osat i
sfy
provisionofRA1405,t heCommi ssioner
thecl aim oft hegov ernment .
i
s aut hor ized t oi nquir
ei ntothe bank
4.Debt sandcr edi ts–
deposi tsof :
(a)per sons owi ng orhav ing in his
1.a decedentt o determine his gr oss
possessi ont hedebt s;
estate
(b)orunderhi scont rolsuchcr edits;
2.a t axpay erwho wai v
es hisr i
ghtby
or
reasonoff inancialincapacitytopayhi s
(c)uponhi sagent .
taxliabi l
it
y( Sec.5,NIRC)
Note:Thewar rantofdist
rai
ntshal lbe
suff
ici
entauthori
tytothepersonowi ng
PROCEDURESFORTHE ACTUALDI
STRAI
NTOR
thedebtsorhav i
nginhispossessionor
GARNISHMENT
underhiscontr
olanycr
edit
sbelongingt o
thetaxpayert
opayt ot
heCommi ssioner
I theamountofsuchdebtsorcredi
ts.
Commencementofdist
rai
nt
proceedi
ngs
Eit
herbytheCI Rorhisdul
yauthori
zed Taxpay
ermustsi
gn
repr
esent
ati
ve;orbyt
heRevenueDist
ri
ct recei
pt
Offi
cer
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
80
MEMORYAI
DIN TAXATI
ON LAW
2.nottodi sposeofthesameinany
mannerwhat soeverwit
houtthe
expressauthori
tyofthe
Commi ssi
onerof
II
I Int
ernal Revenue.
Posti
ngofNotice
(Sec.209,NI
RC)
Not i
ce specify
ing theti
me andpl aceof
Remedywhentaxpayerdi
dn’
tsi
gn
sale and the ar ti
clesdist
rained. The
receipt
post i
ngshallbemade i n notl ess t
han
two( 2)publicplacesinthecityormuni-
cipali
tywher ethedi st
rai
ntismade.One Ifthetaxpay erorper soni npossessi onof
placef orposti
ngofsuchnot iceisatthe thepr opertyr ef
usesorf ail
st osignt he
Of f
ice oft he May orofsuch ci t
y or receiptr ef
erred t o,the r evenue of f
icer
muni cipal
i
ty. effecti
ngt heconst r
ucti
vedi strai
ntshal l
(a)pr oceed t o pr epareal istofsuch
propertyand
(b)int hepr esenceoft wo( 2)wi tnesses
l
eav e a copy t hereofi nt he premi ses
IV wher et hepr opertydi st
rainedi slocat ed,
Sal
eofPr
opert
yDi
str
ained afterwhi ch t he said pr oper tyshal lbe
deemed t o hav e been pl aced under
const r
uctiv
edi straint.
THE TAXPAYER’
S PROPERTY MAY BE PLACED (
3)LEVY
UNDERCONSTRUCTI
VEDI
STRAI
NTWHENHE
DEFI
NITION:Itrefer
st ot heactofseizure
1. i
sr etir
ingfrom anybusi nesssubj ect
ofrealpr operyi
t nor derto enfor
cet he
totax;
paymentoft axes.Thepr oper
tymaybe
2. i
sint endingto–
off
eredi napubl i
csal e,ifaft
erseizure,
a.leavethePhili
ppines,
thetaxesar enotvoluntari
lypai
d.
b.remov ehispropertytherefrom,
c.hideorc oncealhisproper t
y,
REQUI
SITES FOR THE EXERCI
SE OF THE
3. i
s per f
orming any act t endi
ng t o
REMEDYOFLEVY
obstructtheproceedingf orcollect
ing
thetaxdueorwhi chmaybeduef r
om
Sameasi
nther
emedyofdi
str
aint
.
him( Sec.223,1997NI RC) .
PROCEDURE FOR THE CONSTRUCTI

VE
WHENMAYLEVYBEEFFECTED?
DI NTOFPERSONALPROPERTY
STRAI
Realpr oper t
y may be l ev
ied upon
Taxpay
er’
sobl
igat
iont
opr
eser
ve bef
or e, simultaneously, or af ter t he
di
straintofper sonalpr opert
ybel onging
tothedel i
nquent[ Sec.207(B)
,1997NI ;
RC]
CIR shal lrequirethe t
axpay erorany andt heremedybydi str
aintandl ev ymay
personhav i
ngpossessionorcont rolof be repeated ifnecessar yunt i
lt he f ul
l
suchpr opertyto amount ,i ncluding al l expenses, i s
(a)si gnar eceiptcover
ingt heproper
ty col
lected(Sec.217,1997NIRC).
dist
r ainedand
(b)obl igatehimselft
o PROCEDUREOFLEVYONREALPROPERTY
1.pr eservethesameintactand
unalt
eredand
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
81
MEMORYAI
DIN TAXATI
ON LAW
I b.by publ
icat
ion once a week for3
Pr
epar
eCer
ti
fi
cat
eofLev
y weeks in a newspaper of general
ci
rcul
ati
onint hemunici
pali
tyorci ty
I wherethe proper
tyislocated (Sec.
Preparat
ion of a dul y aut hen-t
icated 213,CTRP).
cert
ifi
cat
econt aini
ng:
(
a)descr ipti
onoft heproper t
yl ev
ied;
(
b)nameoft hetaxpayer,and
(
c)t heamount soft axandpenal tydue
from hi m. Thi s cer ti
fi
cate shal l
operate witht he force ofa l egal
execut i
onthroughoutt hePhi l
ippines I
V
(Sec.207B, 1997NI RC). Sal
e
DI NTVS.
STRAI LEVY
II DI
STRAI
NT LEVY
Ser
viceofNot
ice
Referstoper
sonal Referstor
eal
propert
y propert
y
Serviceofwr i
ttennoticet o:
(a)thedel i
nquenttaxpay er;or Forf
eitur
ebythe For
fei
tur
eis
(b)ifheisabsentf rom t hePhi l
ippines,t
o governmenti
snot aut
hori
zed
hisagentormanageroft hebusi nessin provi
ded
respecttowhi chtheliabilit
yarose; or
Thet axpayeri
snot Ther i
ghtof
c. t otheoccupantoft hepr operty.
giventherightof redempt i
onis
d. thepr operRegisterofDeedsshal l redempt i
onwi t
h grantedincaseof
alsobenot if
iedofthel evy( Sec.207B, respecttodistr
ained realpropert
ylevi
ed
1997NI RC). personalproperty. uponandsol d,or
forf
eitedtothe
government .
Both
Aresummar yremediesforthecol
lect
ionof
I
II t
axes;
and
Adv
ert
isementoftheTimeand Cannotbeav ai
ledofwher etheamountof
Pl
aceofSale t
hetaxinv
olv
edi snotmorethanP100
Theadv er
ti
sementshallcont
ain: REDEMPTI
ONOFPROPERTYSOLD
1. theamountoft axandpenalti
esdue;
2. nameoft het axpayeragainstwhom Within1y earfr
om t hedateofsal e,
taxesarel
evied; the propertymaybe r edeemed byt he
3. shortdescr
ipti
ont hepropertytobe del
inquentt axpayerorany onef r
om him,
sold. uponpay mentoft hetaxes,penalt
iesand
i
nterest t hereon f r
om t he dat e of
The adv erti
sement shal lbe made del
inquencyt ot hedat eofsale,toget
her
wit
hin 20 day s afterthe levy,and the wit
hi nterestonpur chasepr i
ceat15%
sameshal lbef oraper iodofatl east30 perannum f r
om t hedat eofsalet othe
days.I
tshall beeffectuatedby: dateofr edempt on.(
i Sec.214,NIRC).
a.post
inganot i
ceatt hemai nent r
ance
ofthemuni ci
palbui l
dingorci tyhal
l FORFEI
TURETOTHEGOVERNMENT
andi napubl icandconspi cuousplace
inthebar ri
oordi st
rictinwhi chthe Ift
her
eisnobi
dderi
nthepubli
csal
e
realpropertyli
es; and ori
ftheamountofthehighestbidi
s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
82
MEMORYAI
DIN TAXATI
ON LAW
i
nsuff
ici
entto paythe t
axes,penalt
ies
and cost
s,the realpr
operty shal
lbe Dir
ect
edagainst Neednotbe
for
fei
tedtot
heGov er
nment. thepr
opert
y dir
ectedagai
nstt
he
subj
ectt
othetax propert
ysubj
ectt
o
tax
FURTHERDI NTANDL
STRAI EVY
Regardl
essoft
he Propert
yseized
Ther emedyofdi str
aintandl evymay ownerofthe mustbeownedby
be r epeated i
fnecessar yunt ilthe ful
l propert
y thetaxpay
er
amount of t he t ax deli
nquency due
i
ncludi ngallexpensesi scollectedfrom
thet axpayer
.Ot herwi
se,aclevertaxpayer
(
5)CI
VILACTI
ONS
who i s abl
et o concealmostoft he
val
uabl e part of hi s property woul d
escape pay mentofhi st ax liabi
li
tyby DEFINI
TION: F ort ax remedy pur poses,
sacrifi
cingani nsigni
fi
cantpor t
ionofhi s these ar e actions inst i
tut
ed by t he
holdings. governmentt o coll
ecti nter
nalrevenue
taxes.Iti
ncludesfil
ingbyt hegovernment
withthepr obatecourtclaimsagainstthe
(
4)TAXLI
EN deceasedt axpayer.
DEFINITION:Iti
sal egalclai
m orchargeon WHENRESORTEDTO?
proper ty, eit
her r eal or per sonal,
establishedbyl awasasecur i
tyi
ndefaul
t 1. When a t ax is assessed butt he
ofthepay mentoft axes( 51AmJur881) . assessment becomes f inal and
Gener ally
,i tat t
aches t othe propert
y unappealable because the taxpay er
i
rrespect iv
e of owner ship or t
ransf
er fail
st ofil
eanadmi nist
rati
vepr otest
thereof. witht he CIR wi thi
n 30 day sf rom
receipt;
or
EXTENTANDNATURE 2. Whenapr otestagainstassessment
i
sf i
ledandadeci sionoftheCI Rwas
The tax, together wit
h int
erests, rendered but t he sai d deci sion
penalti
es,andcost st hatmayaccruein becomes f inal, executory, and
additi
ontheret
oi salienuponal
lpropert
y demandabl e f or fail
ure of t he
andr ight
st opropertybelongi
ngt othe taxpayert o appealt hedecision t o
taxpayer. theCTAwi t
hin30day sfr
om r eceipt
ofthedeci si
on.
Thel i
enshallnotbev ali
dagainstany
mor tgagee, pur chaser, or j udgment NOTE:Judi cialacti
onmayber esort
edt o
creditorunti
lnoticeofsuchl ienshal lbe even bef ore assessment al t
hough
fi
l
ed by t he Commi ssi
onerofI nternal i
mpr actical,asst atedi nSec.203,1997
Revenuei ntheOf ficeoftheRegi sterof NIRC,“ … and no pr oceeding in cour t
Deedsoft hepr ov i
nceorcitywher et he withoutassessmentf orthecol l
ecti
onof
proper t
yoft he taxpayerissituated or such t axes shal lbe begun af ter the
l
ocat ed(Sec.219, 1997NIRC). expirat
ionofsuch( 3y ear)period.
”
I
tshoul dbenot edt hatnociv i
lor
cri
mi nalact ionf ort her ecoveryoft axes
WHENDOESI
TATTACH? shallbef i
ledi ncour twi thouttheapprov al
oftheCommi ssi
oner .
Notonlyf r
om t he ser
vice oft
he
warrantofdi
str
aintbutfr
om thetimet
ax WHERETOFI
LE
becamedueandpay able.
1. CourtofTaxAppeal s– wher ethe
LI
ENVS.DI
STRAI
NT pri
ncipalamountoftaxesandf ees,
excl
usive ofchar
ges and penal
ti
es
LI
EN DI
STRAI
NT cl
aimed is One mil
l
ion pesos and
above.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
83
MEMORYAI
DIN TAXATI
ON LAW
2. RegionalTri
alCourt,Munici
palTrial Commi ssi
oner .(Sec.220,1997NI
RC)
Court,Met r
opoli
tan TrialCourt– 10.I
tshallbebr oughti nthenameofthe
wheret hepri
nci
palamountoft axes Gover
nmentandshal lbeconduct
ed
and fees,excl
usi
v eofchargesand byt
hel egalofficersoftheBIR.
penalt
iesclai
med isl essthan One
mil
li
onpesos.(Sec.7,RANo.9282) EFFECT OF ACQUI
TTAL OF THE
TAXPAYERI
NACRI
MINALACTI
ON
THE APPROVALOFTHE CIRI SE SSENTIALI
N
CI
VILCASES.Ho wever,underSec.7,1997 Itdoesnotnecessar il
yr esultinthe
NIRC,t he Commissionermaydel egat
e exoner at
ionofsai dt
axpay erfrom hi
sciv i
l
suchpowert oaRegionalDirector. l
iabili
tytopayt axes.
Rationale:Thedut ytopayt axi simposed
DEFENSES WHI
CH ARE PRECLUDED BY FI
NAL byst atut
epr i
ortoandi ndependentofany
ANDEXECUTORYASSESSMENTS att
emptont hepar toft het axpayerto
evade pay ment .Iti s not a mer e
1. Inv al
idi
ty or il
legal
i
ty of the consequence of t he f elonious acts
assessment ;and charged,nori si ta mer e ci vi
lli
abil
ity
2. Pr escri
pti
onofthegov er
nment’
s deri
v ed f r
om a cr ime. ( Republi
cv s.
righttoassess. Patanao, GRNo.L- 14142,May30, 1961)
(
6)CRI
MINALACTI
ONS EFFECT OF SUBSEQUENT
SATISFACTI
ONOFCI
VILLI
ABI
LITY
The j
udgmenti nt he cri
minalcase
shal
lnotonl yimpose the penalty but Thesubsequentsati
sfact
ionofci vi
l
shal
lalso orderthe paymentoft axes l
iabi
li
tybypay mentorprescr
ipt
iondoes
subj
ectoft he cr
iminalcase as finall
y notextingui
sh the t
axpayer
’s cr
iminal
deci
dedbyt heCommi ssioner(Sec.205, l
iabi
li
ty.
NIRC).
NOSUBSI
DIARYI
MPRI
SONMENT
WHERETOFI
LE
Incaseofi nsolv
encyont hepartof
1. Cour tofTaxAppeal s– oncr i
mi nal the taxpayer,subsi
diaryimpri
sonment
of f
enses ar i
si ng from v iolations of cannotbei mposed asregar
dst he tax
the NI RC orTCC and ot herl aws whichhei ssent
encedtopay.
admi nister
edbyt heBIRandt heBOC, Howev er,i
tmaybei mposedincases
wher et hepr incipalamountoft axes offail
uret opaythef i
neimposed.(Sec.
and f ees,excl usiveofchar gesand 280,1997NI RC)
penal ties cl aimed i s One mi l
lion
pesosandabov e.
2. Regi onalTr ialCour t,Muni cipalTr ial
Cour t,Met ropol itanTr ialCour t–on
criminal of fenses ar ising f rom
violations oft he NI RC orTCC and CRI
MINAL ACTION MAY BE FILED
otherl awsadmi nisteredbyt heBI R DURI
NG THE PENDENCY OF AN
and t he BOC,wher et he pr i
ncipal ADMINI
STRATI
VEPROTESTI
NTHEBIR
amountoft axesandf ees,excl usive
ofchar gesandpenal tiescl aimedi s I
ti s nota r equir
ementf ort he
l
esst hanOnemi lli
onpesosorwher e fi
ling thereoft hatt here be a precise
therei snospeci f
iedamountcl aimed. comput ati
onandassessmentoft hetax,
(Sec.7, RANo.9282) since whati si nv
ol v
ed int he cri
minal
act i
onisnott hecol l
ecti
onoft axbuta
I
MPORTANTCONSI
DERATI
ONS criminalpr osecut i
onf orthev i
olati
onof
theNI RC.Pr ov i
ded, however,
thatthereis
10.No cri
minalact
ion shal
lbe begun a pr ima f acie showi ng of a wi l
lf
ul
wi
thout t he approval of t he attemptt oev adet axes.(SeeUngabv s.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
84
MEMORYAI
DIN TAXATI
ON LAW
Cusi,GRNos.L-41919-24,May30,1980 Theef fecti st ot r

ansf erthet it
leto
i
nr elat
iontoCommi ssi
onervs.Courtof thespecifi
ct hingf rom theownert othe
Appeals,GRNo.119322,June4,1996) government .Al ltheproceedsi ncaseof
a sal e go t o t he cof fers of t he
(
7)FORFEI
TURE government( U.S.v s.Sur l
a,GRNo.6536,
September2,1911) .I nsei zuref orthe
DEFINITION: divest
it
ure of pr oper
ty enforcementofa t axl ien,ther esidue,
wit
houtcompensat i
on,i
nconsequenceof aft
er deduct i
ng t he t ax l i
abil
i
ty and
adefaultorof
fense. expenseswi llgot othet axpayer(Bankof
thePhil.I
slandv s.Trini
dad, GRNo.16014,
ENFORCEMENT OF THE REMEDY OF October4,1941) .
FORFEI
TURE
I
NFORMER’ SREWARD( Sec282)
a. Incaseofper sonalpr oper ty– The A.Forviolat ionsoft heNI RC,ar ewardof
forfei
tureofchat telsandr emov able 10% oft her evenues,sur charges,or
fi
xtures ofanysor tis enf or ced by feesr ecov er edand/ orf i
neorpenal t
y
seizureandsal eordest r
uct ionoft he imposedandcol lect edorP1M per
specificfor
feitedpr operty. case,whi chev erisl owershal lbegiven
b. In case of r ealpr oper t
y – The to:
forfei
tureofr ealpr opertyi senf orced 1.anyper son who v oluntaril
ygives
byaj udgmentofcondemnat ionand defini teandswor ni nf ormationnot
salei nal egalact i
onorpr oceedi ng, yeti nt hepossessi onoft heBI R
civi
lorcr iminal,as t he case may l
eadi ngt ot hedi scov eryoff raud
require. upon t he I nternalRev enue Laws
c. In case ofdi stil
led spirits,l iquor s, and/ oranyv i
olat i
onst hereof
cigars, ci garettes manuf act ured, 2.ani nf ormerwher etheof fenderhas
product soft obaccoandappar at us offer ed t o compr omi se t he
used f ort heirpr oduction – Upon vi
ol at i
on ofl aw comi i
ted byhim
forfei
ture,maybedest r
oy edbyor der and hi sof f
erhasbeenaccept ed
oft heCommi ssionerwher et hesal e andcol lected byt heCI R . This
maybei nj
urioust opubl icheal t hor excl udes an I nternal Rev enue
prejudici
altolawenf orcement . Officer /empl oy ee orot herpubl i
c
official/ empl oy ee,orhi sr el
ati
ve
withi nt hesi xthdegr ee
*Thisshal
lnotref
ertoacaseal
ready
pendi
ngorexami
nedbyt
heCI
R
B.For t he discov
ery and seizure of
smuggledgoods
- ar ewardof10%oft heFMVoft he
d. Otherar ticlessubjectt oexci set ax smuggled and conf
iscated goods
whi ch hav e been manuf actur ed or orP 1M percase,whi cheveris
remov ed i nv iol
ation oft he Code, l
ower ,shallbe gi
ven to persons
dies f or pr i
nti
ng or maki ng f ake i
nstrumentalinthediscoveryand
revenuest ampsandl abels– Upon sei
zureofsuchsmuggl edgoods.
forfei
turemaybesol dordestr oy edat
thedi screti
onoft heCommi ssi oner
. *Thisdoesnotapplyt
oal
l publ
i
cof f
icial
s
Forfeit
ed pr opert
y shal l not be whether incumbent or reti
red, who
dest r
oyedunt i
latleast20day sf r
om acqui
redtheinfor
mati
oninthecourseof
seizure. perf
ormanceoft hei
rdut
iesdur i
ngt hei
r
i
ncumbency .
EFFECT OF THE FORFEI
TURE OF
PROPERTY
PRESCRI
PTI
VEPERI
ODSFOR
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
85
MEMORYAI
DIN TAXATI
ON LAW
THEASSESSMENTAND i
nquiryinto any t
ax ret
urnfil
ed in
accordance withthe pr
ovisi
ons of
COLLECTI
ONOFTAXES anytaxamnest yl
awordecree.
 Fraud must be al l
eged and
RATI
ONALEOFPRESCRI
PTI
VEPERI
ODS provedasaf act.Itmustbet he
productofadel iberat
ei nt
entto
Such per i
ods ar e designat ed to evade t axes. I t may be
secure the t
axpayers agai
nst establishedbyt he:
unreasonable i nvesti
gati
on aft er the a. I ntenti
onal and subst ant
ial
l
apseoft heper i
odpr escri
bed.Theyar e understat ement of t ax
al
so benef ici
al t o t he gov ernment l
iabili
tybyt het axpayer;
becauset axoffi
cerswi l
lbeobli
gedt oact b. I ntenti
onal and subst ant
ial
prompt l
y. overstatementofdeduct i
ons
ofexempt ions;and/or
RULESONPRESCRI
PTI
ON c. Recur rence of t he abov e
cir
cumst ances
1. Whent het axl aw itselfissilent  Falsity const it
utes a dev i
ati
on
on prescri
ption, t he t ax i s fr
om t he truth due t o mistake,
i
mprescri
pti
ble; carelessnessori gnorance.
2. Whennor eturnisr equired,t
axi s
i
mprescri
pti
ble; Ther eisf r
audi nthef ollowi ngdeci ded
Note:Remedyoft axpay erist ofi
lea cases:
r
eturn. 1.Fraudmustbet hepr oductofa
3. Defense of pr escripti
on i s deliberat eintentt oev adet axes
wai
vable; (Jalandoniv s.Republ ic)
2.Simpl est at ementt hatr eturnfil
edwas
WHATCONSTI
TUTESASSESSMENT? notf raudul entdoesnotdi sprove
existenceoff raud( Tay engcov s.
Anassessmentcontai
nsnotonly Collector )
acomputat
ionoftaxli
abil
i
tiesbutal
soa 3.Subst ant i
al under-decl ar ati
onsof
demandforpaymentwithi
napr escr
ibed i
ncomef orsixconsecut ivefivey ears
per
iod. demonst ratefraudul enceofr eturn
(Perezv s.CTA)
4.Presenceoff i
cti
tiousexpenses, with
PRESCRI
PTIVE PERIOD FOR THE noev idencepr esent ed, proves
ASSESSMENTOFTAXES existenceoff raud( TanGuanv s.
Commi ssioner)
GeneralRule:
Three(3)year
saft
erthedat
ethe Howev er
, thecour tsdi dnotconsi der
r
eturnisdueorf i
led,whi
cheveri
slat
er t
het axr eturnsf i
ledasf alseorf raudulent
(
Sec.203, 1997NIRC). wi
t hintentt oev adepay mentoft axint he
f
ollowingcases:
Except
ions: a. Mer e under st
atementi nt he t ax
1. Failuret of il
ear eturn:t en( 10) return wi llnotnecessar il
yi mpl y
years f r
om t he dat e of t he fraud( Jal andoniv s.Republ i
c)
discov eryoft heomi ssiont of il
e b. Sal eofar ealpropertyf orapr ice
ther eturn(Sec.222[A]); l
esst hani tsfairmar ketv al
uei s
2. False orf raudulentr etur n with not necessar i
l
y a f alse retur n
intention to ev ade the t ax:t en (Commi ssi onerv s.AyalaSecur iti
es)
(10)y ear sf r
om t hedat eoft he c. Fr audi saquest ionoff actandt he
discov eryoft hef alsityorf raud circumst ances const i
tuting fraud
(Sec.222[ A]); mustbeal legedandpr ovedint he
Note:Not hinginSect i
on222( A)shal l tri
alcour t(Commi ssionerv s.Ay ala
be const rued t o aut hor i
ze t he Secur i
ties)
examinat i
on and i nvesti
gat ion or
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
86
MEMORYAI
DIN TAXATI
ON LAW
d. Fraud is neverimputed and t he i

ncome,
courts neversustainf i
ndings of b. ora subst ant
ialov
erst
atement
frauduponci r
cumstancesthatonly (exceedi
ng 30% ofdeducti
ons)
createsuspi on(
ci Commi ssionervs. (Sec.248)
Jav i
er)
e. Mi st
akes ofr ev
enue of f
icers on PRESCRIPTI
VE PERIOD FOR THE
three dif
fer
entoccasions r emove COLLECTIONOFTAXES
elementoff r
aud (Aznarv s.CTA
andCol l
ector) GeneralPer iods:
Fiv
e( 5)years–f rom assessment
3. Agreement i n wr i
t i
ng to t he orwi thin per i
od f orcol l
ecti
on agreed
extensionoft heperiodtoassess uponinwr it
ingbef oreexpi r
ati
onoft he5-
betweent heCI Randt hetaxpayer yearper od(
i Sec.222, 1997NI RC).
befor ethe expi r
ation oft he 3- Ten ( 10) y ears – wi t
hout
yearper i
od.NB:The ext ended assessmenti ncaseoff alseorfraudul
ent
period agr eed upon can f ur
ther ret
urnwi t
hintenttoev adeorf ail
uretofil
e
be ext ended by a subsequent ret
urn( Sec.222, 1997NI RC).
written agr eementmadebef ore
the ex pir
at ion oft he ext
ended WHAT IS THE PRESCRI
PTIVE PERIOD
period pr ev iousl
y agr eed upon WHERETHEGOVERNMENT’ SACTIONIS
(Sec.222[ b]). ON A BOND WHI CH THE TAXPAYER
4. Wr i
ttenwai verofr enunciati
onof EXECUTESIN ORDER TO SECURETHE
the or i
ginal t hr
ee ( 3) y ear PAYMENTOFHI STAXOBLIGATION?
l
imitation,si gnedbyt hetaxpayer
(Sambr ano v s. Cour t of Tax Ten(10)year
sunderAr t
.1144(1)
Appeal s,GR No.L- 8652,Mar ch oftheCi vi
lCodeandnott hree(3)years
30,1957) . under the NIRC. I nt his case,t he
Gov er
nmentproceedsbycour tacti
ont o
Not e: Not i
ce of t he assessment i s forf
eita bond.The act i
on isf ort he
released,mailedorsentt ot het axpayer enforcementofacont r
actualobli
gati
on.
alsowi thi
nt he3y earper i
od. I tisnot (Republi
cv s.Aranet
a,GR No.L- 14142,
requiredthatt henot i
ceber eceivedby May30, 1961)
thet axpayerwithi
nt heprescribedper i
od.
Butt hesendingoft henoticemustcl ear
ly GROUNDS FOR SUSPENSI
ON OF THE
be pr oven. ( Basi
lan Estate,I nc.v s. RUNNING OF THE STATUTE OF
Commi ssi
oner , GR No. L- 22492, LI
MITATI
ONS
Sept ember5, 1967)
a. Whent heCI Rispr ohi bit
edf rom
AMENDMENTOFRETURN maki ng t he assessment or
begi nningt hedi str
ai ntorl ev yor
I
f t he amended r eturn i s a pr oceedi ng i n cour t,and f or
substant i
al l
ydi fferentf rom t he or igi
nal sixty( 60)day st hereaf ter;
ret
urn,t he pr escripti
v e period shal lbe b. Whent het axpay err equest sf ora
countedf rom t hef i
li
ngoft heamended reconsi der ationwhi chi sgr ant ed
ret
urn.Butt hesai dper iodshal lrunf r
om byt heCI R;
thefi
lingoft heor i
ginalreturni fthesame c. When t he t axpay er cannotbe
s suf
i fi
ci ently compl etet o enabl et he l
ocat edi nt headdr essgi venby
Commi ssi oner t o make a pr oper him i nt he r et ur
n,unl ess he
assessment .( Commi ssionerv s.Phoeni x i
nf ormst heCI Rofanychangei n
AssuranceCo. ,GRNo.L- 19727,May20, hisaddr ess.
1965) d. Whent hewar rantofdi str
ai ntor
WhenSubst antive: l
ev y i s dul y ser v ed, and no
a. subst antial under decl ar
ation proper tyi slocat ed; and
(exceedi ng30%oft hatdecl ared) e. Whent het axpay eri soutoft he
of t axabl e sal es, r ecei pt
s or Philippines( Sec.223, 1997NI RC).
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
87
MEMORYAI
DIN TAXATI
ON LAW
A TAX RETURN I
S CONSI
DERED FI
LED GENERALREMEDI
ES
FOR PURPOSES OF STARTING THE
RUNNING OF THE PERI OD OF A.ADMINISTRATI VE
LI
MITATIONSIF Bef
orePay ment
a. Pr otest–f i
li
ngapet i
ti
onfor
a. Ther et
urnisv
ali
d–ithascompli
ed reconsi derati
on or
substant
ial
l
ywit
hther
equi
rement
sof reinvestigati
on wi thin 30
thelaw;and day s f rom receipt of
assessmentWi t
hin 60 days
b.Ther et
urnisappr
opri
ate –itisa from f il
ing of pr otest
,al l
ret
urnfort
hepart
icul
artaxr
equi
red relevant supporti
ng
bylaw. document sshouldhav ebeen
submi t
ted, ot herwise, the
Not
e: Adefect
ivet
axr
etur
nist
hesame assessment shal l become
asi
fnor
etur
nwasf i
l
edatal
l. fi
nal– cannotbe appeal ed
(Sec.228, 1997NIRC) .
PRESCRI
PTI
VE PERI OD FOR THE Note:Submissi
onofdocument
s
VI
OLATIONOFANYPROVI SI
ONOFTHE wit
hin the 60 day peri
od i
s
TAXCODE (
SEC.281,
1997NIRC) opt
ionaltot
hetaxpay
er.
1. Shoul dbef il
edwi t nf
hi i
ve(5)y ears "Thatt her elev antsuppor t
ing
fr
om t he( a)dayoft hecommi ssion document sment ionedi nt he
oft heviol
ationoft helaw,andi fthe l
aw r
efer s to such
same be notknown,f r
om the ( b) document s whi ch the
discoveryther eofandtheinsti
tution taxpay er f eel s woul d be
oft he j
udicialproceedi
ngs fori ts necessar y t o suppor t hi s
i
nv esti
gati
onandpuni shment. protest and not what t he
Commi ssionerf eels shoul d
2. Il
l
ustrati
v e case:( Lim v s.Cour tof be submi tt
ed, ot her wise,
AppealsGR Nos.48134- 37,Ocober taxpay erwoul dal way sbeat
18,1990) themer cyoft heBI R whi ch
a. char gei sf ai l
ureorr efusalt opay may r equi re pr oduct i
on of
def i
ciency i ncome t ax – such document s whi ch
commi ttedonl yaf tert hef i
nality taxpay ercoul dnotpr oduce. "
oft heassessmentcoupl edwi th (Standar dChar ter edBankv s.
the t axpay er ’
s wi l
l
f ulr efusalt o CIR,CTA Case No.5696,
payt het axeswi thint heal l
otted August16, 2001)
per i
od.( i.
e.cannotbecommi tted A pr ot est i sa v ital
uponf i
lingt her et urn) documentwhi chi saf ormal
b. char ge i s f il
ing of f alse or declarat i
on ofr esistance of
fraudul entr eturn wi thi ntentt o thetaxpay er.I tisar eposi t
or y
ev ade t he assessment – i n ofal lar gument s.I tcan be
addi ti
ont ot hef actofdi scov ery, used i n cour t i n case
there must be a j udicial admi nistrativer emedi eshav e
proceedi ng f ort hei nvest i
gation beenexhaust ed.I tisalsot he
and puni shment of t he t ax formalactoft he t axpay er
offense bef ore t he 5 y ear quest i
oni ng t he of fi
cial
prescr i
pt iveper iodbegi nst orun. actuationoft heCI R.Thi si s
equivalentt oapl eadi ng.
b. Enteringi ntoacompr omi se
I
I.TAXREMEDIESOFTHE (Sec.204, 1997NI RC) .
Af
terPayment
TAXPAYER Fil
ingofcl ai mf orrefundor
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
88
MEMORYAI
DIN TAXATI
ON LAW
tax cr
edi
twi thi
n2y ear
sf rom Generalr ul
e:Taxes ar e selfassessi ng
date ofpaymentr egar
dless of andt hus,donotr equirethei ssuanceof
anysuper
veningcause(Sec.229, an assessment not i
ce i n or der t o
1997NIRC). establi
sht hetaxl iabi
lit
yofat axpayer.
Exceptions:
B.JUDI CI AL 1. Tax per i
od of a t axpayer is
CivilAct i
on terminated( Sec.6(D),NIRC)
a.Appeal t o t he Cour t of Tax 2. Def ici
ency t ax li
abi l
ity ari
si
ng
Appeal s – wi t hin 30 day sf r
om from a t axaudi tconduct ed by
recei ptofdeci sionont hepr ot est theBIR( Sec.56( B)
,NI RC)
orf rom t hel apseof180day sdue 3. Taxl en(
i Sec.219,NI RC)
toi nact ion oft he Commi ssioner 4. Di ssolvi
ng Cor poration ( Sec.
(Sec.228, 1997NI RC) . 52(c),NIRC)
b.Act ion t o cont est f orfei
ture of
chat tel,atanyt imebef orethesal e  Pr ot
est
ordest ruct iont hereof ,tor ecov er 1.Directdeni alofpr otest
thesame,andupongi vingpr oper Admni strati
vedeci siononadi sputed
bond,enj oi nt hesal e;oraf tert he assessment - The deci sion of t he
sal e and wi thi n 6 mont hs,an Commi ssioner or hi s dul y author i
zed
act iont or ecov ert henetpr oceeds representativ
eshal l( a)st atet hef acts,
real i
zedatt hesal e(Sec.231,1997 theappl i
cablel aw,rulesandr egulati
onor
NI RC) ;
and j
urisprudenceonwhi chsuchdeci si
oni s
c.Act ion f or damages agai nst a based ot herwise,t he deci sion shallbe
rev enueof ficerbyr easonofany void,inwhi chcaset hesameshal lnotbe
actdone i nt he per f
ormance of considered a deci sion a di sputed
of f
ici aldut y( Sec.227, 1997NI RC) . assessmentand( b)t hatt hesamei shis
Cri
mi nalAct ion fi
naldeci sion( Sec.3. 1.5,Rev .Regs.No.
a.Fili
ng of cr i
mi nal compl aint 12-99)
agai nster ring BI R of fi
cials and
empl oyees. 2.I
ndir
ectdenialofpr ot
est
b.Injunct ion– whent heCTA i ni ts a.Commi ssionerdidnotrul
eont he
opi nion,t hecol lectionbyt heBI R taxpayer’
s moti
on f
or
mayj eopar dizet axpay er. reconsiderat
ion of the
assessment–i twasonl ywhen
Note: Witht heenact
mentoft henew respondent r
ecei
ved the
CTAlaw( RANo.9282)amendi ngRANo. summonson
1125,CTA now has j ur
isdi
cti
on over
cri
minalcases.(
SeeChapterVI-Courtof theci v i
lacti
onf ort hecol l
ect
ion
TaxAppeals.) ofdef iciencyi ncomet axt hatthe
periodt oappealcommencedt o
Substant iveRemedi es run ( Commi ssi oner v s. Uni on
1.Quest ioni
ng t he const it
ut i
onali
ty or Shippi ngCor p. )
validit
yoft axstatut
esorr egulati
ons b.Referralbyt heCommi ssionerof
2.Non- retr
oact i
vi
tyofr ul
ings ( Sec.
246, requestf orreinv estigationt othe
NIRC) Soli
ci tor Gener al ( Republ icv s
3.Failuret oinformthet axpay erinwrit
ing Lim Ti anTengSons)
oft he legaland f actualbases of c. Reiterating t he demand f or
assessmentmakesi tv oid( Sec.228, i
mmedi ate pay ment of t he
NI RC) deficiencyt axduet ot axpay er ’s
4.Preser vati
onofbooksofaccount sand cont i
nued r ef usal t o execut e
once a y earexami nation ( Sec.235, waiv er( Commi ssionerv s.Ay ala
NI RC) Secur iti
esCor p.)
d.Preli
mi nar ycol lection let termay
ASSESSMENTANDPROTEST serve as assessment not ice
 Assessment (UnitedI nternat ionalPi cturesv s.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
89
MEMORYAI
DIN TAXATI
ON LAW
Commi
ssi
oner
)
Two-y ear per
iod to Two-year peri
od
ACTS OF BI R COMMISSI
ONER fi
leclaim wi
ththeCIR start
sf r
om t hedate
CONSIDERED AS DENI
ALOFPROTEST star
ts af ter t he such cr edi
t was
paymentoft hetaxor al
lowed ( in case
WHICHSERVEASABASI SFORAPPEAL
penalty credi
t i s wr ongl
y
TOTHECOURTOFTAXAPPEALS made) .
1. fi
ling byt he BI R ofa ci vilsui tfor REQUI
SITES OF TAX REFUND OR TAX
collection of t he def iciency t ax CREDI
T
(Commi ssi oner v s.Uni on Shi ppi
ng
Cor por ation,GRNo.66160,May21, 1. Claim mustbei nwriti
ng;
1990) 2. It must be f il
ed wi t
h t he
2. i
ndi cation t ot he t axpay er by t he Commi ssionerwithint wo( 2)y ears
Commi ssi oner “ in cl ear and after the pay mentof t he tax or
unequi v ocall anguage”ofhi sf i
nal penalty.
deni al.( Commi ssioner v s. Uni on Not e:Nosui torproceedingshal lbe
Shi ppingCor porat i
on,GRNo.66160, begunaf tertheexpi r
ationoft hesaid
May21, 1990) two ( 2) y earsr egardless of any
3. BIR demand l etter reiterating hi s supervening cause t hatmay ar i
se
prev iousdemandt opay ,sentt othe afterpayment .
taxpay er af ter hi s prot est of t he 3. Showpr oofofpay ment .
assessment .(SurigaoEl ect r
icCo. ,I
nc.
vs.CTA,GR No.L- 25289,June28, COMMENCEMENT OF THE TWO (
2)
1974; Commi ssioner v s. Ay ala YEARPERI
OD(JURI
SPRUDENCE)
Secur i
ties Cor por ati
on,GR No.L-
29485, Mar ch31, 1976) 1. Taxsoughtt ober efundedi sil
legally
4. Theact uali ssuanceofawar rantof orer r
oneousl ycol l
ect ed
distraintand l ev yi n cer tain cases -f rom t hedat et het axwaspai d.
cannotbeconsi der edaf inaldeci si
on (Commi ssionerv s.Vi ct oriasMi ll
ing,
on a disput ed settl
ement . GRNo.L- 24108, Januar y31, 1968)
(Commi ssi oner v s.Uni on Shi ppi
ng 2. Taxi spai donl yi ni nst allmentsor
Cor por ation,GRNo.66160,May21, onlyinpar t
1990) -f r
om t he dat et he l astorf inal
i
nst al
lmentorpay mentbecausef or
tax pur poses,t her ei s no pay ment
untilthewhol eorent iret axliabil
it
yi s
FILI
NGOFCLAI
M FOR full
ypai d. ( Col l
ect orv s.Pr i
eto,GR
TAXREFUNDORTAXCREDI
T No.L- 11976, August29, 1961)
3. Taxpay ermer elymadeadeposi t
GROUNDS FOR FI
LING A CLAI
M FOR -count edf r
om t heconv er si
onoft he
TAXREFUNDORTAXCREDIT deposi tt opay ment( Uni onGar ment
vs.Col lector ,CTA Case No.416,
1. Tax is collect
ed er r
oneously or Nov ember17, 1958)
i
ll
egall
y. - Mer ely maki ng a deposi tis not
2. Penal
tyiscol
lect
edwithoutauthor
it
y. equivalent t o pay ment unt ilt he
3. Sum coll
ect
edisexcessi
ve. amounti s act ually appl i
ed t ot he
specif i
c pur pose f orwhi ch itwas
TAXREFUNDVS.TAXCREDI
T deposi ted.
4. Taxhasbeenwi thhel df rom sour ce
TAXREFUND TAXCREDI
T (thr
ought hewi thhol dingt axsy st
em)
-count edf rom t hedat ei tfall
sdueat
Thetaxpay
erasksfor The t axpay
er asks theendoft het axabl ey ear
rest
it
uti
on of t he that the money so -At axpay erwhocont ri
but est othe
moneypaidastax paidbeappliedtohis wi t
hhol ding t ax sy stem does not
exist
ingtaxl
iabi
l
ity really deposi t an amount t ot he
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
90
MEMORYAI
DIN TAXATI
ON LAW
gov ernment ,buti nt ruth,per forms notnecessaryinrefundf

orl
ocalt
axes.
and ext ingui sheshi st axobl igation (SeeSec.196,LGC)
.
fort he y earconcer ned.( Gi bbsv s.
Commi ssi oner , GR No. L- 17406, However
,paymentunderpr otestis
Nov ember29, 1965) necessaryin cl
aim forrefund forreal
5. Endoft axabl ey earv s.dat eoft he propert
ytaxes (
Sec.252,LGC)andf or
fil
ingoft hef inaladj ust edr etur n customsdutes(
i Sec.2308,TCC).
-f rom t he dat e when t he f inal
adjust edr etur nwasf il
ed. SUSPENSI
ON OF THE TWO-
YEAR
-t he r ational ei n comput ing t hi s PRESCRI
PTIVEPERI
OD
per i
odi st hef actt hati ti sonl yt hen
the cor porat ion can ascer tain 1. Thereisapendingl i
ti
gat i
onbet ween
whet heri tmadepr of i
tsori ncur red the Governmentand t he taxpay er
;
l
osses i ni ts busi ness oper at i
ons. and
(ACCRA I nv est ment sv s.Cour tof 2. CIRint hatli
ti
gatedcaseagr eedt o
Appeal s, GRNo.96322, December20, abidebythedecisionoft heSCast o
1991) thecoll
ecti
onoftaxesr el
ativ
et hereto
6. Dat ewhenquar terlyi ncomet axwas (PanayElectr
icCo.v s.Col l
ector,GR
paidv s.dat e when f inaladj ust ed No.L-10574,May28, 1958).
retur nwasf iled
-f rom t hedat ewhenf inaladj usted I
NTERESTONTAXREFUNDS
retur nwasf il
ed
-Thef il
ingoft hequar terlyi ncome GeneralRul e:
taxr etur n( Sec.68)andpay mentof Governmentcannotber equired
quar terlyi ncomet axshoul donl ybe topayi nterestont axesref
undedtot he
consi der edmer ei nst allment soft he taxpay
eri nt heabsenceofast at
utory
annualt ax due.( Commi ssi onerv s. provi
sioncl earl
yorexpr essl
ydir
ecti
ngor
TMXSal es, GRNo.83736, Januar y15, author
izing such payment.
1992) (Commi ssionerv s.Sweeney ,GR No.L-
7. Dat e when t he f inal adj ust ment 12178, August29, 1959)
retur nwasact ual l
yf iled( ex.Apr .2)
vs.Lastdaywhen t he adj ust ment
retur ncoul dst illbef i
led( ex.Apr .15) Excepti
ons:
-fr om t hedat et hef i
naladj ust ment 1. When t he CI R act ed with pat ent
retur n was actual ly fi
led. arbit
rari
ness. Arbitr
ariness
(Commi ssi onerv s.Cour tofAppeal s, presupposes inexcusable or
GRNo117254, Januar y21, 1999) obstinate di sregar d of l egal
8. Taxwasnoter r oneousl yori ll
egal ly provisi
ons. (
Commi ssi
oner v s.
paid but t he t axpay er became Victori
as Mi ll
ing,GR No.L- 19667,
ent it
led t o r ef und because of Nov .29,1966)
super veni ngci r cumst ances 2. UnderSec.79( C)(
2)wi thr espectt o
-from t hedat et het axpay erbecomes incomet axeswi t
hhel dont hewages
ent i
tledt or efundandnotf rom t he oftheempl oyees.
dat eofpay ment .( Commi ssi onerv s.
DonPedr oCent ralAzucar era,GRNo. TAXCREDI
TCERTI
FICATE
L-28467, Feb.28, 1973)
PAYMENT UNDER PROTEST I S NOT 1. Maybeappl iedagainstanyi nter
nal
NECESSARYUNDERNI RC revenuet axexceptwithholdingtaxes,
2. Or i
ginalcopyi ssur r
ender ed tot he
A sui
torpr oceedi
ngf ortaxref
und revenueof fi
ce,
maybemai ntai
ned“ whet
herornotsuch 3. Not axr efundwillbegi venr esult
ing
tax,penalt
yorsum hasbeenpai dunder from av ailmentofincentivesgr anted
prot ess”(
estordur Sec.229,NI
RC). byl awwher enoact ualpay mentwas
made( Sec.204C, 1997NI RC) .
Not
e:Si
mil
arl
y,pay
mentunderpr
otesti
s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
91
MEMORYAI
DIN TAXATI
ON LAW
FORFEI
TURE OF CASH REFUND/
TAX Divi
sion’
sdeci sionmayf i
l
eonemot ion
CREDIT forreconsideration/newtrialwi
thin15
day sfrom r
ecei ptofdecision.IftheMR
1. Forfeitur
eofr efundi nfavoroft he i
sdeni edfi
leapet i
tionforrevi
ewwi ththe
gov ernmentwhenar efundcheckor CTAenbanc
war rant r emai ns uncl ai
med or 
uncashedwi t hinfive(5)y earsfrom Appealtot
heSupremeCourtwi
thi
n15
dateofmai l
ingordel i
ver
y. day
sf r
om r
ecei
ptoftheCTAenbanc
2. Forfeitur
eofTaxCr edit–at axcr edi
t decisi
onunderRule45oft
heRul
esof
certifi
cate whi ch remains unutil
ized Court
afterfive(5)y earsfrom dateofissue,
shallbe i nv ali
d,unl ess reval
idated PRE-
ASSESSMENT NOTICE, WHEN NOT
(Sec.230, 1997NI RC). RED(
REQUI SEC.228,
NIRC)
1. When t he f i
ndi ng f or any
REGLEMENTARYPERI
ODS deficiency t ax i st he r esul tof
I
NINCOMETAXIMPOSED mat hemat i
cal er ror i n t he
BYLAW UPONTHETAXPAYER comput ati
on of t he t ax as
(
PURSUANTTOREV.REG.NO.12-
99, appear i
ng on t he f ace oft he
SEC.228OFTHE1997NI
RC,ANDRANO. return; or
1125ASAMENDEDBYRANO.9282) 2. When a di scr epancy has been
determi ned bet ween t he t ax
BI
Rmakesat
axassessment withhel dandt heamountact ual ly
remi tt
edbyt hewi t
hhol dingagent ;
 or
I
ftaxpayeri
snotsat i
sfi
edwi t
hthe 3. When at axpay erwho opt ed t o
assessmentfil
eapr otestwithi
n30days claim ar efund ort axcr edi tof
f
rom recei
ptthereof excesscr editabl ewi t hholdingt ax
 for a t axabl e per i
od was
Submitsupport
ingdocumentswithi
n60 determi nedt ohav ecar ri
edov er
daysf
rom dateofthefi
l
ingoftheprot
est and aut omat ically appl i
ed t he
 same amountcl aimed agai nst
I
fprotestisdenied,el
evat
et hemat tert
o the est i
mat ed t ax l iabil
ities f or
t
heCommi ssi
onerofInt
ernalRevenue thet axabl equar terorquar tersof
(CIR)within30day sfr
om receiptofthe thesucceedi ngt axabl ey ear ;or
deci
sionoft heCIR’
sdulyauthorized 4. When t he exci se t ax due on
represent
ati
veoffi
cer excisabl ear ticleshasnotbeen
paid;
 5. Whenanar ticlel ocal lypur chased
Appealtot heDi v
isionoft heCour tof orimpor t
edbyanexemptper son,
TaxAppeals( CTA)wi thin30day sfrom such as, but not l imited t o,
r
eceiptoff
inal decisi
onofCI Rorhi sdul y vehicles, capi tal equi pment ,
authori
zedr epresentative(thet axpay er machi neriesandspar epar t s,has
hast heoptiont oappeal straighttot he beensol d,t radedort r
ansf erred
CTAuponr eceiptoft hedeci sionoft he tonon- exemptper sons.
CIR’sdul
yaut hor
izedr epresent at
ive)
 Not
es:
I
ftheCIRorhi sdulyaut
horized  As a gener alr ul
e,pay ment
representat
ivefail
stoactont hepr otest underpr otestisnotr equi
red
within180day sfrom dateofsubmi ssion undert heNI RC,exceptwhen
byt axpayer
,thelatt
ermayappealwi thin parti
al pay
ment of
30day sfrom l
apseofthe uncontroverted t axes i s
180-dayperiodwiththeCTADi vision requir
edunderRR12- 99.The
 Commi ssioner may , ev en
ThePar
tyadv
ersel
yaf
fect
edbyt
heCTA without a wr i
tt
en cl ai
m
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
92
MEMORYAI
DIN TAXATI
ON LAW
therefor,r
efundorcr editany fi
le the r eturn wi t
hin t he
tax,wher eont hefaceoft he peri
od pr escri
bed by t he
return upon whi ch payment Code, or
was made, such pay ment  wi l
l notappl yincasea
appear sclear
lyt ohavebeen taxpay er ,wit
houtnot ice
erroneouslypaid. from t heCommi ssioner,
 In case of t he CIR’sf i
nal orhi sdul yaut hori
zed
denialofthecl ai
mf orrefund, repr esent at
ive,voluntaril
y
the30- dayper iod t
o appeal fi
lest hesai dr eturn(only
witht heCTAmustbewi thin 25%shal lbei mposed)
the2- yearperemptoryper i
od  50% sur charge shal lbe
forinsti
tuti
ngjudici
alacti
on. imposed i n case t he
taxpay erf i
l
est her eturn
 See Annex N – Assessment onl yaf terpr iornot i
cei n
ProcessandAppeal wr i
ting from the
Commi ssionerorhi sdul y
aut horized r epresenta-
ADDI
TIONSTOTHETAX ti
v e( Sec.4. 2,Rev .Reg.
(
SECS.247-
252NI
RC) 12- 99)
DEFINI
TION:incr ement st ot hebasi ct ax
i
ncident due t o t he t axpay er ’
s non-
compl i
ance wi t
h cer tai
n l
egal
b. i
n case a f alse orf r
audulent
requir
ement s.
r
eturniswi l
lfullymade
1. CI VILPENALTY/SURCHARGE
PrimaFaci eev i
dence
1. 25%sur char ge
 subst antialunder declarat
ion
a. Failuret of i
leanyr etur nand
(exceedi ng 30% of t hat
payt het axduet her eonas
declared) of t axabl
e sales,
requi redundert hepr ov i
sions
receipt sori ncome,
oft his Code orr ules and
regul ations on t he dat e  orasubst ant i
al
prescr ibed; or overst atement( exceeding
b. Unlessot herwi seaut horized 30%ofact ualdeductions)of
byt heCommi ssi oner ,f i
l
inga deduct i
ons( Sec.248)
retur n wi t
h an i nter nal
revenue of fi
cer ot her t han 2. I
NTEREST
thosewi thwhom t her etur n -20%perannum orsuchhi
gherrate
isrequi r
edt obef il
ed; or asmaybepr escri
bed byt
her ules
c. Failuret opayt hedef iciency andr
egul
ati
ons
taxwi thinthet i
mepr escr ibed
fori tspay menti nt henot ice a. Defici
encyi
nt est(
er Sec.249B)
ofassessment ;or b. Deli
nquencyint
erest(Sec.249C)
d. Failuret opayt hef ul lorpar t c. I
nterest on Extended Pay ment
oft heamountoft axshown (Sec.249D)
onanyr eturnr equi redt obe
fi
ledundert hepr ov i
si onsof 3. OTHER CI VI
L PENALTI
ES OR
this Code or r ules and ADMINI
STRATIVEFI
NES
regul ations, or t he f ul
l
amountoft axduef orwhi ch a. Fail
uretofil
ecertaininf
ormati
on
no r et urni sr equi red t o be ret
urns(Sec.250)
fi
led,onorbef oret hedat e b. Fail
ureofawi thholdi
ngagentto
prescr ibed f ori t
s pay ment . coll
ectandremittax(Sec.251)
(Sec.248) c. Fail
ureofawi thholdi
ngagentof
2. 50%sur char ge ref
und excess wi thhol
ding t
ax
a. i ncaseofwi l
l
f ulnegl ectt o (Sec.252)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
93
MEMORYAI
DIN TAXATI
ON LAW
FUNDAMENTALPRI NCIPLESGOVERNI NG LOCAL

TAXATI
ON (SEC.130, LGC)
I
II
. LOCALTAXATI
ON a. Shal
sub-
lbeuni
uni t
form i n each l ocal
b. Shal lbeequi t
ableandbasedas
POWERSANDLI
MITATI
ONS
much as possi ble on t he
taxpay er’sabi li
tytopay
NATURE AND SOURCE OF LOCAL c. Lev iedf orpubl icpur poses
TAXI
NG POWER (SEE.SEC 5,ART.X, d. Shal lnotbe unj ust,excessi ve,
1987 CONSTI
TUTI
ON AND SEC.129, oppr essi ve, orconf i
scat ory
LGC) e. Shal lnotbe cont raryt ol aw,
publ i
cpol i
cy ,nat i
onaleconomi c
The LocalGov ernment Uni
t has the pol icy ,ori nr estraintoft rade
power
: f. Col lect ion of l ocalt axes and
a. t
o createi t
s own sources of otheri mposi ti
onsshal lnotbel et
r
evenueand toanyper son
b. t
olevytaxes,f
eesandchar
ges. g. The r ev enues col l
ect ed under
theCodeshal linuresol el
ytot he
benef i
t of , and subj ect t o
disposi t
ionby ,theLGU l evying
the t ax or ot her i mposi t
ion
unl ess ot her wise speci f
icall
y
prov idedt herein
h. Each LGU shal l, as f ar as
Congr ess cannot enact l aws pract icable, ev olveapr ogressive
depriv
ing LGU f r
om exer ci
sing such sy stem oft axat i
on.
powert otaxbuti tmaysetguideli
nesand
l
imitati
onsf ortheexer
cise. LOCALTAXINGAUTHORITY(SEC.132,LGC)
Such t axes,fees,and charges Shallbeexerci
sedbyt heSanggunian
shal
laccr ue exclusi
velytot he local of the LGU concer ned t hrough an
governmentuni ts. appropr
iateor
dinance.
NATUREOFTHETAXI NGPOWER
POWER TO PRESCRI BE PENALTI ES FOR TAX
a. Noti nherent
; VIOLATIONSAND L I
MI ONSTHEREON (
TATI SEC.
b.Exer
cisedonl yifdelegat
edt othem 516, LGC)
bylaworConst i
tut
ion; 1. The Sangguni an i s aut horized t o
c. Not absol ute; subj ect t o pr escribefinesorot herpenal ti
esf or
li
mitationsprovidedforbylaw. v i
olat i
onsoft axor dinances.
a. i n no case shal lfines be less
Undert hepr esentconst it
ut i
onal than P1, 000 nor mor e than
rul
e,“ wheret herei snei t
heragr antnora P5,000
prohibiti
onbyst atute,thetaxpowermust b. norshal lt he impr isonmentbe
bedeemed t o exi stal t
houghCongr ess l
esst hanone( 1)mont hnormor e
may pr ovide st atutoryl i
mi t
ations and thansix(6)mont h.
guidelines.The basi cr at
ionalef ort he 2. Suchf i
neorot herpenal t
yshal lbe
currentr uleist osaf eguardt hev iabi l
ity imposed att he di scretion oft he
andsel f-
suffi
ciencyofl ocalgov ernment cour t.
unitsbydi r
ectlygr anting them gener al 3. The Sangguni ang Bar angay may
andbr oadt axpower s.”(Mani l
aEl ectri
c pr escribe a f ine ofnotl ess than
Co.v s.Pr ovince ofLaguna,G. R.No. P100normor et hanP1, 000.
131359)
POWER TO ADJUST LOCAL TAX RATE (
SEC.
ASPECTSOFLOCALTAXI NGPOWER
191, LGC)
a.l ocal t
axat i
on Adjust
ment of t he tax r at
es as
b. r ealproper tytaxati
on prescribedher
einshouldnotbeof t
ener
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
94
MEMORYAI
DIN TAXATI
ON LAW
thanonceeveryf
ive( 5)year
s,andinno c. Anyexempt ionorr eli
efgr ant edto
caseshallsuchadjustmentexceedten at ypeorki ndofbusi nessshal l
percent(
10%)oft
her atesfi
xedundert
he applyt o allbusi ness si mi l
arl
y
LGC. sit
uat ed.
d. Thesameshal lt akeef fectonl y
POWER TO GRANT LOCAL TAX EXEMPTI
ONS duringt henextcal endary earf ora
(SEC.192,LGC) periodnotexceedi ng12mont hs
Local gov er
nment uni t
s may , as may be pr ovided i n t he
throughor di
nancesdulyapproved,grant ordinance.
tax exempt ions,incent
ives or rel
iefs e. Int hecaseofshar edr ev enues,
undersucht ermsandcondi t
ions,ast
hey theexempt ionorr eliefshal lonly
maydeem necessar y
. extendt ot heLGUgr antingsuch
exempt ionorr eli
ef .
TAX EXEMPTI ONS E XI NG BEFORE THE
STI 2. Onthegr antoft axincent i
ves:
EFFECTIVITY OF THE L GC HAS BEEN a. Thesameshal lbegr ant edonl y
ABOLISHED( SEC.193, LGC) tonewi nvest ment sint hel ocalit
y

Unless ot herwise pr ovi
ded inthis andt heor dinanceshal lprescr i
be
Code, t ax exempt ions or i ncenti
ves the t erms and condi ti
ons
granted t o,orpr esentlyenjoyed byall theref ore.
persons,whet her nat ural or jur
idi
cal
, b. Thegr antshal lbef oradef i
nit
e
i
ncluding gov ernment -
owned or period of not exceedi ng 1
controll
ed cor porat i
ons ar e her eby calendary ear .
withdrawn upon t he effecti
vel
y oft he c. Thegr antshal lbebyor dinance
LGC passed pr iort ot he 1st day of
exceptt hef oll
owing: Januar yofanyy ear .
8. local wat erdistri
cts, d. Anygr antt oat ypeorki nd of
9. cooper ati
ves dul yregist
ered under busi ness shal l appl y t o al l
R.A.No.6938,non- st
ock and non- busi nessessi milarlysituated.
profi
thospi talsand
10.educat i
onal i
nst i
tuti
ons. LEVYINGOFLOCALTAXES( LOCALTAX
ORDINANCE)
Thepowert ograntt axexemptions, Requisit
es:
taxi ncent i
vesand t axreli
efsshallnot 1.The pr ocedur e appl i
cablet ol ocal
applyt or egulat
oryfeeswhi charel
ev i
ed gover nment or dinances i n gener al
undert hepol i
cepoweroft heLGU. shoul dbeobser ved( Sec.187, LGC)
Tax exempt i
ons shallbe conf
er r
ed 2. Pr ocedur aldet ais(
l Secs.54,55,and
through t he i ssuance of a non- 59,LGC) :
transferabletaxexempt i
oncerti
fi
cat
e. a. necessi tyofaquor um
b. submi ssionf orappr ovalbyt he
GUIDELINES FOR THE GRANTI NG OF TAX local chiefexecut i
ve
EXEMPTI ONS, TAX I VES AND TAX
NCENTI c. hemat terofv et oandov err
iding
RELIEFS ( ART. 282[ B], RULES AND thesame
REGULATI ONSIMPLEMENTINGTHELGC) d. t hepubl icationandaf fect
ivit
y
3. Publichear ingsar er equi red before
1. Ont hegr antoftaxexempt ionsort ax anyl ocalt axor dinance i s enact ed
rel
iefs: (Sec.187, LGC)
a. t he same may be gr anted in 4. Wi t
hin10 day saf tert heirappr oval,
casesofnat uralcalamiti
es,civ i
l publicationi nf ullf or3consecut ive
dist
ur bance,gener al f
ailure of daysi n a newspaper of gener al
crops, or adv er
se economi c cir
cul ati
on. I n absence of such
conditions such as subst antial newspaperi nt he pr ov i
nce,ci ty or
decreasei npricesofagr i
cultural muni cipalit
y, thent heor dinancesmay
oragr i-
basedproducts. bepost edi natl east2conspi cuous
b.The gr antshal lbe through an andpubl iclyaccessi blepl aces( Sec.
ordinance. 189, LGC)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
95
MEMORYAI
DIN TAXATI
ON LAW
CustomsCode;
RESI
DUAL TAXING POWERS OF THE L OCAL c. Taxes,fees,etc.
,t hei mposi
ti
on
GOVERNMENTUNI TS(SEC.186,LGC) of which cont r
av enes exi
sti
ng
Tolevytaxes,f eesorchar gesonany governmentalpolicies orwhich
baseorsubjectNOT: vi
olates t
he f
undamental
1. Specificall
yenumer atedinLGC pri
ncipl
esoftaxation;
2. Taxedundert heprov i
sionsofthe d. Taxes,fees and ot hercharges
NI
RC, asamended, and i
mposedunderspeci allaw.
3. Otherappl icabl
elaws
COMMON LI MI TATI ONS ON LOCAL
Condit
ions: TAXINGPOWER( SEC.133, LGC)
1.Thatthetaxes,fees,
orchargesshal
l Local gov ernmentuni tscannotl ev y:
notbeunjust ,
excessiv
e,oppr
essiv
e, 1. Incomet ax ,exceptonbanksand
confi
scatoryorcontraryt
odeclar
ed ot herf inanci al i
nst itutions;
nati
onalpolicy 2. Document arystampt ax;
3. Est ate t ax ,i nher itance, gi fts,
2.Theordi
nancel evyingsuchtaxes,f
ees legaci es and ot heracqui sitions
orchargesshal l
notbeenact ed mor ti
scausaexceptasot her wise
wit
houtanypr iorpubli
chearing pr ov ided
conductedforthepur pose. 4. Cust omsdut i
es,r egi strationf ees
of v essel s and whar fage on
whar ves,t onnage dues and al l
ot her ki nds of cust oms f ees,
LI
MITATI
ONSOFTHERESI DUALPOWER char ges and dues except
1. Constit
uti
onal l imitations on whar fage on whar ves
taxi
ngpower const ruct ed and mai ntained by
2. Commonl imit
ationspr escri
bed the l ocal gov er nment uni t
i
nSec.133oft heLGC concer ned;
3. Fundamental princi
ples 5. Taxes,f ees,char ges and ot her
governi
ng the exer cise oft he imposi tionsupongoodscar r i
ed
taxi
ng power of t he LGUs intooroutof ,orpassi ngt hrough,
prescri
bedunderSec.130oft he thet er ritorialj
ur i
sdi ctionsofl ocal
LGC gov er nmentuni tsi nt hegui seof
4. The or di
nance l evying such char ges f orwhar fage,t ol l
sf or
resi
dual taxes shal l not be br idgesorot herwi se.
enactedwithoutanypr iorpubl i
c 6. Taxes, f ees or char ges on
heari
ng conduct ed f or t he agr i
cul tur alandaquat i
cpr oduct s
purposeand whensol dbymar ginalf armer sor
5. Thepr i
nci
pleofpr eempt i
on. fisher men;
7. Taxes on busi ness ent er prises
PRI PLEOFPREEMPTI
NCI ON OREXCLUSI
ONARY cer t i
fied by t he Boar d of
DOCTRI
NE Inv est ment s as pi oneerornon
Where t he National Gov er
nment pioneerf oraper iodof6and4
el
ectstotaxaparti
culararea,i
timpli
edly year s,r espect ively ,f r
om t hedat e
wit
hholdsfrom t
helocalgov er
nmentthe ofr egi strat i
on;
del
egatedpowert otaxt hesamef i
eld. 8. Exci se t axes on ar ti
cles
This doct
ri
ne pri
nci
pallyr est
s on the enumer at edundert heNI RC,as
i
ntenti
onoftheCongress. amended,and t axes,f ees or
char gesonpet r
oleum pr oduct s;
Excl
uded imposit
ions (pur
suantt othe 9. Per cent age orv al ue added t ax
doct
ri
neofpr eemption)
: (VAT) on sal es, bar t
er s or
a. Taxeswhi charelevi
edunderthe exchanges or simi l
ar
NIRC,unlessotherwiseprovi
ded transact ions on goods or
byLGCof1991; ser v ices except as ot her wise
b. Taxes, fees, etc. which are pr ov idedher ein;
i
mposed undert he Tar
iff
s and
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
96
MEMORYAI
DIN TAXATI
ON LAW
10.Taxesont hegr ossr ecei ptsof 2. TaxonBusi nessofPr i

nti
ngand
transpor tat i
on cont ractors and Publicat i
on
persons engaged i n t he 3. Franchi seTax
transpor tat i
onofpassenger sor 4. TaxonSand, Gravelandot her
frei
ght by hi re and common QuarryResour cesextractedfrom
carriers by ai r,land orwat er, PublicLand
exceptaspr ov i
dedi ntheCode; 5. Professi onal Tax
11.Taxesonpr emi umspai dbyway 6. AmusementTax
ofRei nsur anceorr etr
ocessi on; 7. Annual FixedTaxf orevery
12.Taxes,f ees orchar ges fort he Deli
ver yTr uckorVanof
registration of mot or v ehicles Manuf actur ersorProducers,
andf ort hei ssuanceofal lki nds Whol esal ersof ,Deal
ers,or
ofl icenses orper mitsf ort he Retailersi n,certai
nproduct s
drivi
ngt her eof ,
exceptt r
icycle;
13.Taxes,f eesorot herchar geson  SeeAnnexJ f
ort
her
atesand
Phili
ppi ne pr oduct s act uall
y det
ail
s.
expor ted,except as ot her wise
prov i
dedi nt heCode;
14.Taxes, f ees or char ges on
Count rysi de and bar angay
business enterpri
ses and
cooper at ives dul y r egi stered
underR. A.6810andR. A.6938, (
B)MUNI CI
PALITI
ES
(Cooper atives Code of t he (
SEC.143,LGC)
Phili
ppi nes); and
15.Taxes,f ees orchar ges ofany 1. Muni ci
pal Taxes- t axes on t he
kindont heNat ionalGov ernment , businessesoft hef oll
owi ng:
i
tsagenci esandi nstrument aliti
es, a. Onmanuf act urers, assembl ers,
andl ocal gov ernmentuni ts. repacker s, pr ocessor s,br ewer s,
disti
ll
er s, rect ifi
ers, and
CLASSI FI
CATI ON OF COMMON compounder sofl iquor s,dist i
lled
LI
MI TATIONS spiri
ts,andwi nesor
1. Taxes whi ch ar el ev ied undert he manuf act ur ersofanyar t
icleof
NIRC unl ess ot herwi se pr ovided by commer ceofwhat everki ndor
theLGC b. Onwhol esal ers,di stri
but ors, or
 Number s1, 2,3, 8,9, 10 dealersi nanyar ticleof
2. Taxes,f ees,et c.whi char eimposed commer ceofwhat everki ndor
undert heTar if
fsandCust omsCode c. Onexpor ter s, andon
 Number4 manuf act ur ers, mi ll
ers, producer s,
3. Taxes,f eesandchar geswher ethe whol esal ers, distributor s,deal ers
imposition of whi ch cont r
avenes orretailer sofessent i
al
existi
ng gov ernment al pol i
cies or commodi ti
es
whi ch ar e v iolat i
ve of t he d. Onr etailer s
fundament al pri
nciplesoft axati
on e. Oncont ract or sandot her
 Number s5, 6,7, 11, 13, 14,15 i
ndependent
4. Taxes,f ees,and char ges imposed f. Onbanksandot herf i
nanci al
underspeci allaws. g. Onpeddl ersengagedi nt hesal e
 Number12 ofanymer chandi seorar ticleof
commer ce
h. Onanybusi ness, notot herwi se
TAXESANDOTHERIMPOSI
TIONSTHAT
specifiedi nt hepr ecedi ng
THELOCALGOVERNMENTMAYLEVY
paragraphs, whi cht he
sangguni anconcer nedmay
PROVINCES
deem pr opert ot ax.
(
SECS.134-141,
LGC)
1. TaxonTransf
erofRealPr
oper
ty
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
97
MEMORYAI
DIN TAXATI
ON LAW
2. Muni cipal non-revenue fees and CI

TIES
charges (
SEC.151,LGC)
Themuni cipal
it
ymayi mposeand
coll
ectsuchr easonablefeesandcharges  Theci t
ymayl evythetaxes,fees,and
on busi ness and occupat i
on except charges whi ch t he pr ov
ince or
professi
onal t
axesreservedforpr
ovi
nces. municipal
it
ymayi mpose.
(Sec.147.LGC)  Thet axratest hatt hecitymayl evy
may exceed t he maxi mum r ates
RATES OF TAX WI
THIN THE METROPOLI
TAN all
owed f or t he pr ovi
nce or
MANILAAREA(SEC.144,LGC) municipal
it
ybynotmor ethan 50%
exceptther atesofpr ofessi
onaland
-Not to exceed by 50% t
he amusementt axes.
maxi
mum r at
es pr escr
ibed in t
he
pr
ecedi
ngSecti
on. (
D)BARANGAYS
(
SEC.152,
LGC)
Barangaysmayl ev
yt hefol
lowingt
axes,
fees,and charges which shal
laccr
ue
exclusi
vel
ytothem:
a. Taxes – On st ores orr etailers

wi th f
ixed busi ness
PAYMENTOFBUSI NESSTAXES
est abl i
shment s wi t
ht he gr oss
a. I t shallbe pay abl ef or ev ery sales or r ecei pts f or t he
separat e or disti
nct precedi ng cal endar y ear of
establi
shment or pl ace wher e P50, 000orl ess( f
orbar angay si n
business subj ectt ot he t ax i s theci t
ies)and P30, 000 orl ess
conduct ed and one l ine of (forbar angay si nmuni cipal iti
es)
business does not become b. Rat e=notex ceedi ng1%ofsuch
exemptbybei ngconduct edwi th grosssal esorr ecei pts.
someot herbusi nessf orwhi ch c. Ser viceFeesorChar ges– For
sucht axhasbeenpai d.

ser vicesr ender edi nconnect ion
b. Thet axonabusi nessmustbe wi tht her egulationort heuseof
paid byt he per son conduct i
ng bar angay owned pr oper t
ies or
thesame. ser vice f acil
iti
essuch aspal ay,
c. I n cases wher e a per son copr aort obaccodr yers
conduct soroper at es2ormor e d. Bar angayCl ear ance–Noci tyor
oft hebusi nessesment i
onedi n muni cipality may i ssue any
Section143ofLGC l
icense orper mi tf ee f orany
-whichar esubj ectt othesame busi ness or act ivit
y unl ess a
rateoft ax,thet axshal lbecomput ed clear ancei sf irstobt ainedf rom
ont hecombi nedt otalgr osssal esor the bar angay wher e such
receiptsoft hesai d2ormor er elated busi nessoract ivi
tyi sl ocat edor
businesses. conduct ed.
-whi char esubj ectt odi f
ferent e. Ot herFeesandChar ges– The
rates of t ax,t he gr oss sal es or bar angay may l evyr easonabl e
receipts ofeach busi ness shal lbe feesandchar ges:
separ at
elyr epor tedf ort hepur pose 1. On Commer cialbr eedi ng of
ofcomput ingt het axduef r
om each fighting cocks, cockf i
ght s
business. andcockpi ts;
2. On pl aces of Recr eat ion
 SeeAnnexK f
ort
her
atesand whi chchar geadmi ssionf ees;
det
ail
s. and
3. On Bi ll
boar ds, si gnboar ds,
neon si gns and out door
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
98
MEMORYAI
DIN TAXATI
ON LAW
adv
ert
isement
s. office:cityormuni cipalitywher et he
principaloffi
cei slocated
SI
TUSOFLOCALTAXATI
ON 5. 70%ofr ecordedsal esi nt hepr i
ncipal
office:cityormuni cipalitywher et he
A.SitusAccordingt otheCases FPPPi slocated
Wit
hrespectt oexcisetax, t
hetax  pr or atai fFPPP ar el ocat edi n
i
s upon t he performance of an act , dif
ferentmuni ci
pal i
tiesorci t
ies
enjoymentofapr ivi
legeort heengagi ng i
npr oporti
ont ot heirr espective
i
nanoccupat i
on.Thepowert ol evysuch volumesofpr oduct i
on.
taxisnotdependentont hedomi ci
leof 6. Ifplantationislocatedi nsomeot her
thet axpayer
,butont heplacei nwhich placet hanwher ethef actor yis
theacti sperf
ormedort heoccupat i
onis l
ocat ed, t
hef oregoing70%shal lbe
engagedi n;notupont helocat i
onoft he subdi vi
dedasf oll
ows:
off
ice,butt hepl acewher et hesal eis  60% t ot he cityormuni cipalit
y
perfected.(All
i
edThr eadCo. ,Inc.v.Cit
y wher ethef actoryisl ocat ed
May orofMani l
a,L-40296)  40% t ot he cityormuni cipalit
y
wher ethepl antati
oni slocated.
Wi t
hr espectt o sale,i tisthe
placeoft heconsummat i
onoft hesale, COMMON REVENUE RAI SING POWERS
associatedwi t
hthedel i
veryoft hethi
ngs OFLGUs( SEC.153TO155)
which ar et he subjectmat t
er of the 1. Servicef eesandchar gesforser vices
contractthatdeterminest hesitusofthe render ed
contractforpurposesoft axat
ion,andnot 2. Publ i
c Ut il
it
y Char ges f or t he
mer el
yt heplaceoftheper f
ectionofthe oper ati
on ofpubl i
c ut i
li
ti
es owned,
contract Shel
.( lCo.,I
nc.v.Muni cipal
it
yof oper ated and mai ntained by LGUs
Sipocot,Camar i
nesSur105Phi l1263) withint heirjuri
sdicti
on.
3. Tollfeesorchar gesf ortheuseofany
B.Si
tusAccor
dingt
oSec.150,
LGC publicr oad,pi erorwhar f,water way ,
bri
dge,f erry or tel ecommuni cation
Branchorsal esoff
ice–af i
xedplacein system f unded and const ructed by
thelocal
it
ywhi chconduct
stheoperat
ion thelocal gov ernmentuni tconcer ned
ofthebusi nessasanext ensi
onoft he Except i
ons:
pri
ncipal
office
a.Of ficer sandenl istedmenoft he
AFPandPNP;
Principalof fi
ce-the head ort he main b.Postof f
ice per sonneldel ivering
offi
ce oft he busi
ness;t he cit
yort he mai l;and
muni cipali
tyspecif
icall
yment ionedinthe c.Phy sicall
y handi capped and
Articles of I ncorporation or of fi
cial disabl ed citi
zens who ar e si xt
y
registrat
ionpaper sasbei ngt heoffi
cial five(65)y earsorol der.
(Sec.152,
addr essofsai dpr i
ncipalofficeshallbe LGC)
consi deredthesit
ust hereof.
Whenpubl i
csaf et
yandwel f
areso
1. Pl aceofsal e(wi t
hbr anchorsal es requires,thesanggunianconcer
nedmay
outlettherein)
: discontinuethecoll
ecti
onofthetol
ls,
and
 Muni ci
pality orci ty wheret he thereafterthesaidf aci
li
tyshal
lbef ree
branchorout l
eti slocated. andopenf orpubl
icuse.
2. Placeofsal e(nobr anchorsal es
outlet)
: COMMUNITYTAX
 Muni cipal
ityorci tyofpr i
ncipal Ci
ti
esormunici
pal
i
tiesmayl
evya
of
fice(notint hepl aceofsal e) communi
tyt
ax.
3.I
fmanuf acturer,assembl er
,contractor
,
producer ,orexpor ter( MACPE)wi th Indi
vi
dualsLiable(Sec.157)
factory, pr oj
ect of f
ice, plant or a. every i nhabi
tant of the
plantati
on( FPPP) Phili
ppines;
4.30%ofr ecordedsal esi nthepr i
ncipal b. eighteen( 18)year
sofageor
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
99
MEMORYAI
DIN TAXATI
ON LAW
over; cor
por
ati
on.
c. under any of t he f oll
owi ng
i
nstances: THE FOLLOWI NG ARE EXEMPT FROM
d. who has been r egularl
y THECOMMUNI TYTAX( SEC.159)
employedonawageorsal ary 1. Dipl
omat i
c and consular
basi
sf oratl eastt hir
ty( 30) representati
ves;and
consecuti
ve wor king day s 2. Transientv i
sit
orswhent hei
rst ayi n
duri
nganycal endary ear;or thePhi l
ippi
nesdoesnotexceedt hr
ee
e. whoi sengagedi nbusi nessor (3)mont hs.
occupati
on;or
f. who ownsr ealpr opertywi th PLACEOFPAYMENT:pl aceofr esi
dence
anaggr egat
eassessed v alue oftheindi
vi
dual,
ori
nthepl
acewher ethe
ofP1,000ormor e;or pri
nci
palof f
iceoft
hejuri
dicalenti
tyis
g. whoi srequiredbyl aw t of il
e l
ocated.
an incomet axret urn
TIMEOFPAYMENT:accr uesont he1st
Tax Rat e = P5. 00 and an annual dayofJanuaryofeachy earwhichshall
additionalt ax of P1.00 f or ev er
y be paid notl
aterthan t
he lastdayof
P1,000 of i ncome r egardless of Februar
yofeachyear.
whet herf r
om busi ness,exer ci
seof
professionorf r
om proper t
ywhi chin PENALTIES FOR DELI NQUENCY: an
nocaseshal lexceedP5, 000. i
nterestof24% perannum f
rom thedue
Incaseofhusbandandwi fe, dateunti
liti
spaidshallbeaddedtothe
the addi ti
onalt ax her eini mposed amountdue.
shallbebasedupont het ot
al propert
y
ownedbyt hem andt het otalgr oss Acommuni tyt
axcerti
fi
catemayalso
receiptsorear ni
ngsder i
v edbyt hem. beissuedt oanypersonorcorporat
ion
notsubjecttothecommuni t
ytaxupon
B. Jur i
di sons(
calPer Sec.158) paymentofP1.00(
Sec.162,LGC).
Everycorpor
ationnomat t
erhow
created or or ganized, whet her PRESENTATI ON OF COMMUNI TY TAX
domest ic or r esi
dent f orei
gn, CERTIFICATEON CERTAI N OCCASIONS–( SEC.
engagedi nordoi ngbusinessi nthe 163)
Phili
ppines shall pay an annual A.Indi vi
dual
communi t
ytax. 1. Whenani ndivi
dualsubj ectt o
the communi ty tax
TaxRate=P500andanannualaddi tional acknowl edges any document
tax which i n no case shal l exceed befor eanot arypubl i
c;
P10,000inaccor dancewi ththefollowi ng 2. t akest heoat hofof fi
ceupon
schedul
e: elect i
onorappoi ntmentt oany
1. Forev er yP5,000 wor th ofr eal posi ti
on i n the gov ernment
propertyownedbyi tduringt he serv i
ce;
preceding y ear based on t he 3. r ecei ves any li
cense,
valuati
onusedf orthepay mentof certificateorper mi tfrom any
thereal proper
tyt ax P2.00; and publ icaut hor i
ty;pay sanyt ax
2. For ev ery P5, 000 of gr oss orf ee;
receipt
sorear ningsderi
v edbyi t 4. r ecei vesanymoneyf rom any
from i ts busi ness i n t he publ icf und;
Phili
ppinesdur ingt hepr ecedi ng 5. t ransact s other of fici
al
yearP2. 00. busi ness; or
6. r ecei ves anysal ar
yorwage
The di vi
dends r eceiv
ed by a from any per son or
corporati
onshall,f
orthepur poseofthe corpor ation.
additi
onaltax,beconsideredaspar tof Thepr esentat ionoft hecommuni t
yt ax
the gross r
eceipts orear
nings ofsaid cert
ifi
cat e shal l not be r equired i n
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
100
MEMORYAI
DIN TAXATI
ON LAW
connect
ionwi
tht
her
egi
str
ati
onofav
oter
. be.
May,forajusti
fi
ablereasonor
B. Cor porat ion cause, be ext ended wi t
hout
1. r eceiv esanyl i
cense,cer ti
fi
cate surchar
gesorpenal
ti
es,butonlyfora
or per mitf r
om any publ i
c perodnotexceedi
i ngsix(6)months.
aut hority;
2. pay sanyt axorf ee; Surchar ges and Penal ti
es on Unpai d
3. r ecei ves money f r
om publ i
c Taxes, FeesorChar ges–( Sec.168,LGC)
funds; or Sur char
genotexceedi ng25% of
4. t ransact s ot her off
icial theamountoft axes,feesorcharges
busi ness. i
ncludi ng sur charges, until such
The ci ty of muni cipal treasurer amounti sfull
ypaid.
deputizes t he bar angay t r
easur er to Buti n no case shallthe total
coll
ect t he communi t
y t ax in t heir i
nter eston t he unpai d amountor
respectiv
ej ur i
sdi cti
ons.(Sec.164,LCG) portiont her
eofexceedt hi
rt
ysix(36)
mont hs.
Thepr oceedsoft hecommuni t
yt ax
act
uall
yanddi rect
lycoll
ect
edbyt hecity I
nter
ests on OtherUnpaid Revenues –
ormuni ci
paltr
easurershal
laccr
ueentir
ely (
Sec.169,LGC)
to the gener al fund of the cit
y or An i
nterestther
eon atther ate
municipal
it
yconcer ned. notexceedi
ng2% permont hfrom t he
dateitisdueunt i
liti
spaid,buti nno
Pr oceeds of t he communi ty t ax
case shal
lt he tot
alint
ereston t he
col
lectedt hrought hebar angayt reasurers
unpaid amount or por t
ion t hereof
shallbeappor t
ionedasf ol
lows:
exceedthi
rt
ysi x(
36)months.
 50%accr uestot hegener alfundof
theci t
yormuni cipali
tyconcer ned; COLLECTI ON OF L OCAL REVENUES BY THE
and TREASURER– ( SEC.170LGC)
 50% accr ues t o t he bar angay Alllocalt axes,f eesand char ges
wher ethet axiscollected. shallbecol lectedbyt hepr ov i
ncial,ci t
y,
muni cipalorbar angayt r
easurer,ort heir
COLLECTI ON OFL OCALTAXES
dulyaut horizeddeput i
es.
The pr ovincial
,ci ty ormuni ci pal
TaxPeri
od and MannerofPay ment– treasurermay desi gnatet he bar angay
(
Sec.165, LGC) treasurerorhi sdeput yt o col l
ectl ocal
Unless other
wise prov
ided,the taxes, f
eesorchar ges.
t
axperi
odshal lbethecal
endaryear. Incaseabondi sr equiredf ort he
Such taxes,fees,and charges purpose,t hepr ov i
ncial
,cityormuni ci pal
maybepai di
nquar ter
lyi
nst
all
ments. gov ernment shal l pay t he pr emi ums
thereoni naddi tiont ot hepr emiumsof
AccrualofTax– ( Sec.166,LGC) thebondt hatmayber equir
edundert he
Unlessot herwiseprovided,shall Code.
accrueont hef i
rstdayofJanuar yof
eachy ear.
Howev er,new t axes,f ees or
charges,or changes i nt he r at
es LOCALTAXREMEDI
ES
thereof,shallaccrueont hef i
rstday UNDERTHELGC
of the quar ter nextf ol
lowing the
effecti
vit
yoft heor di
nancei mposing
suchnewl evi
esorr ates. 1.TAXREMEDIESOFTHE
LOCALGOVERNMENTUNI
TS(LGUs)
Ti
meofPay ment–(Sec.167,LGC)
Unl
essotherwi
sepr ovi
dedshal
l CI LREMEDI
VI ESOFTHEL OCALGOVERNMENT
bepai d wi
thi
nthef i
rsttwent
y(20) UNITS (
LGU)TO EFFECT COLLECTI
ON OF
days of Januar y or of each TAXES
subsequentquar
terasthecasemay
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
101
MEMORYAI
DIN TAXATI
ON LAW
(1)LocalGov er
nment ’
sLi en–Local 1. Localt axes,f
ees,orcharges–f i
ve
taxes, fees, char ges and ot her (5)yearsf r
om thedatetheybecame
revenuesconst i
tutealien,superiorto due.(Sec.194,LGC).
alll
iens,chargesorencumbr ancesi n 2. When t her
ei sfraud ori ntentto
favorofanyper son,enforceableby evadet hepaymentoft axes,feesor
any appr opriat
e admi ni
strati
ve or charges – t en ( 10) years fr
om
j
udicialacti
on. discovery ofthe f
raud orintentto
evadet hepayment(Sec.194,LGC).
(
2)Ci
vi
lRemedi
es
PRESCRI PTIVEPERI ODOFCOLLECTI ON
(
a)byadminist
rat
iveactionthrough Localt axes, fees, orchar gesmay
di
str
aintofpersonalpropertyand becollectedwi thinf i
v e(5)y earsf rom the
byl
evyuponr ealpropert
y dat
eofassessmentbyadmi ni
strativeor
j
udici
alact ion.Nosuchact ionshal lbe
(
b)byj
udi
cial
act
ion i
nstit
uted af t
ert he expi rati
on ofsuch
per
iod( Sec.194, LGC) .
GROUNDS FOR THE SUSPENSI ON OF
Ei
theroftheseremedi
esoral
lmaybe THE RUNNI NG OF THE PRESCRI PTIVE
pur
sued concurrent
lyorsimul
taneously PERIODS
att
hediscret
ionoftheLGUconcerned. a. The t reasurer i s l egall
y
prevent edf rom t heassessment
JURI
SDICTI
ONOFCOURTSOVERLOCAL orcol l
ect ionoft het ax;
TAXATI
ONCASES b. The t axpay er r equest sf or a
rei
nv estigation and execut es a
a. Wi
tht
heamendmentbr
oughtby waiver i n wr i
ting bef or e the
RA No.9282,t heCour tofTax expirati
on oft he per iod wi thi
n
Appeal s now has appel late whicht oassessorcol lect;and
j
urisdicti
on ov er l
ocalt axation c. The t axpay er i s out of t he
cases deci ded by t he Regi onal count r
yorot herwi secannotbe
Tri
alCour tint heexer ciseofi ts l
ocat ed( Sec.194, LGC) .
appellateoror igi
naljuri
sdi cti
on.
b. Regularj udicialcour ts ar e not 2.TAX REMEDIES OF THE
prohibit
ed f rom enj oining t he TAXPAYER
coll
ect i
onofl ocaltaxes,subj ect
toRul e58( Prelimi
nar yInjunction) REMEDI
ES OF THE TAXPAYER I
N LOCAL
oftheRul esofCour t. TAXATI
ON
Not e: Unl ike the NIRC,the LocalTax ADMI NISTRATIVE

Code does not cont ain any speci f
ic Bef
or eassessment
prov i
sion pr ohi
biti
ng cour ts f rom a. Appeal – any quest i
on on
enjoini
ng t he collecti
on ofl ocalt axes. const it
utional
it
y or l egal
i
ty of t ax
Suchst atutorylapseori ntentmayhav e ordinance wi thi
n 30 day s f rom
all
owedpr eliminaryinj
uncti
onwher elocal effectivi
tyt hereof to Secretar
y of
taxesar ei nv ol
ved.Buti tcannotnegat e Justice( Sec.187LGC)
the pr ocedur alrules and requirement s b. Decl aratory r
eli
ef whenev er
underRul e 58 oft he Rul
esofCour t
s. applicable.
(ValleyTradi ngCo.v s.CFIofI sabela,GR
No.49529, Mar ch31, 1989) Af
terassessment
a. Pr
otest–withi
n60daysfrom r
ecei
pt
of assessment (
Sec. 195 LGC).
PRESCRI VEPERI
PTI ODSFORTHE Payment under prot
est is not
ASSESSMENTANDCOLLECTI
ON necessar
y.
OFLOCALTAXES
PRESCRIPTIVE PERIODS OF b. Payment&subsequentr
efundortax
ASSESSMENT credi
t–wit
hin2y ear
sfr
om payment
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
102
MEMORYAI
DIN TAXATI
ON LAW
oft axt olocaltreasurer( Sec.196 st

ruct
uresandimprovement
son
LGC) .I tistobenot edthat ,unli
kei n i
t,i
ncl
udingmachi
neri
es.
i
nt ernal r evenue t axes, t he
super vening cause applies inl ocal REAL PROPERTY – subject to t
he
taxationbecauset heper iodf ort he defi
nit
iongi
venbyAr
t.415oft
he
fi
li
ngofcl ai
msf orrefundorcr editof Civ
ilCode.
l
ocal t axes i s count ed not
necessar il
yfrom thedateofpay ment I
MPROVEMENT – v al
uabl
e additi
on
butf r
om t he datet he t axpayeri s made t o a pr opert
y or
ent i
tl
edt oar ef
undorcr edi t
. amelior
ati
on in i ts condi
ti
on
amountingtomor ethanamer e
c. Ri
ghtofr edempt i
on– 1y earf
rom repl
acementof par tsinvol
vi
ng
thedateofsal eorf r
om t
hedat
eof capi
talexpendi
tur
esandlabor
.
for
fei
t e(
ur Sec.179,LGC)
.
B.JUDI CIAL
1. Cour tact i
on NATUREANDCLASSES
 wi t
hin 30 day s af terreceiptof
decisionorl apseof60day sof CHARACTERI STI CSOFREALPROPERTY
Secr etary of Just i
ce’si nacti
on TAX
(Sec.187LGC) 1. Direct t axont heOwner shipof
 wi t
hin30day sf rom receiptwhen realproper t
y
protestofassessmenti sdenied 2. Ad v alorem t ax. The v alue i
s
(Sec.195LGC) basedont het axbase.
 i f no act i
on i st aken by t he 3. Propor ti
onate – t he t ax is
treasur erinrefundcasesandt he calculated on t he basis of a
twoy earperiodi saboutt olapse certai
n per centageoft hev al
ue
(Sec.195LGC) assessed.
 i fr emedi es av ail
able does not 4. Indivi
siblesingleobli
gati
on
prov i
de pl ain, speedy and 5. Local tax

adequat eremedy .
2. Actionf ordecl ar
ator yreli
ef TAXI
NGAUTHORI
TIES(
SEC.233,
LGC)
3. Inj
unct i
on – i fi r
reparable damage
wouldbecausedt ot het axpayerand Rat
eofBasicReal
LGU
noadequat er emedyi sav ai
lable. Proper
tyTax
1.Pr
ovi
nce not exceedi
ng 1% of
assessedval
ue
I
V.REALPROPERTY
TAXATI
ON 2.Ci
ty notexceedi
ng 2%
3.Munici
pal
i
ty notexceedi
ng2%.
wi
thinMetr
o
DEFI
NI ONS:
TI
Manil
a
REALPROPERTYTAXATI ON – A dir
ect
taxon owner ship oflandsand
buil
dingsorot herimprovements
FUNDAMENTAL PRI NCIPLES
thereon pay abler egar
dless of
GOVERNI NG REAL PROPERTY
whet hert hepr opertyisusedor
TAXATION( SEC.198,LGC)
not,althought hev al
uemayv ary
1. Realpropertyshallbeappr ai
sedati t
s
i
naccor dancewi t
hsuchfactor
.
currentandFairmar ketvalue;
Undert heLGC,itcovers
2. Realpr opert
yshal lbecl assif
iedfor
the admi nist
r at
ion, apprai
sal
,
assessmentpur posesont hebasisof
assessment ,lev yand coll
ect
ion
actualUse.
ofRealPr opertyTax,i.
e.taxon
3. Realpr opert
yshal lbeassessedon
l
and and bui ldi
ng and ot her
the basis ofUni form classif
icati
on
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
103
MEMORYAI
DIN TAXATI
ON LAW
withi
neachLGU 2. Landsot herthanagr
icul
tur
allocat
ed
4. Theappr ai
sal,assessment,lev
yand i
naci t
yormuni ci
pal
it
ymorethanone
coll
ecti
onofRPTaxshal lnotbelet thousandsquar
emet si
er nareaonehalf
toanyPr i
vateperson of which remai
n unuti
li
zed or
5. Theappr ai
salandassessmentofreal uni
mpr
oved by t
he owner of t
he
propert
yshallbeEquitabl
e. pr
opert
y or per son hav
ing l
egal
i
nter
estther
ein.
EXTENTOFTHEPOWERTOLEVY
 Basi cr ealproper tyt ax; I SEC.
DLELANDSEXEMPTFROM TAX(
 1% addi tionalr ealest at et axt o 238,
LGC)
finance t he Speci al Educat i
on
Fund; (Sec.236) Byr
easonof :
 5% addi ti
onaladv alorem t axon 1. f orcemaj eure
Idlelands; (
Sec.236, LGC)and 1. ci vi
l disturbance
1. nat ur alcalamity
 Speci al l ev y or speci al
1. oranycausewhi chphysical
l
yor
assessment s( may be i mposed
l
egal lypr eventstheowneroft he
ev en by muni cipaliti
es out si
de
proper tyorper sonhavinglegal
Met r
o Mani l
a) on l ands
i
nter estt hereinfrom improvi
ng,
compr ised wi thi
n i tst errit
or i
al
uti
lizingorcul ti
vati
ngthesame.
jurisdicti
onspeci al l
ybenef i
tedby
publ i
c wor ks, pr oject s or
CLASSI
FI ON OF L
CATI ANDS FORPURPOSES
impr ov ement sf undedbyt hel ocal
OFASSESSMENTSEC.218( A)
gov ernmentuni tconcer ned.
Prov i
ded:
a. Commer cial
 Speci allev yshal lnotexceed
b. Agri
cul
tural
60% oft he act ualcostof
c. Resi
dential
such projects and
d. Miner
al
impr ovement s,i ncludi ng the
e. I
ndustr
ial
cost sofacqui r i
ngl andand
f. Ti
mberland
such ot herr ealpr oper tyi n
g. Speci
al
connect iont her ewith
 notappl yt ol ands exempt
SPECIALCLASSESOFREALPROPERTY
from basi cr ealpr oper tyt ax
(SEC.216,
LGC)
andt her emai nderoft hel and
hav e been donat ed t ot he
1. Hospitals
local gov ernment uni t
2. Cult
ural andScienti
fi
cpurposes
concer ned for t
he
3. ownedandusedbyLocal water
const ructionofsai dpr ojects.
dist
ri
cts
(Sec.240, LGC) .
4. GOCCs r enderi
ng essent i
al publi
c
servi
cesi nthesupplyanddistri
but
ion
FOR PURPOSES OF REAL PROPERTY
of wat er and/ or generati
on or
TAXATI ONI DLELANDSSHALLI NCLUDE:
tr
ansmi ssionofelectr
icpower.
(SEC.237, LGC)
1. Agricultural lands mor e than one
PROPERTIES EXEMPT FROM REAL
hectareinar eaonehal fofwhi chremain
PROPERTYTAX( SEC.234, LGC)
uncult
ivated or uni mpr oved by t he
Exempt
ionisl i
mi t
edonl ytot hefoll
owing:
owner of t he pr oper ty or per son
1. Real pr operty owned by t he
hav i
ngl egal i
nter estt her ei
n.
government except when t he
Agricultural l ands pl anted t o
beneficialuset her eofhasbeen
permanentorper enni alcropswi that
grantedt oataxableper son;
least50t reest oahect ar
eshal lnot
2. Charitableinsti
tutions,churches,
beconsi deredi dlel ands.
personages or convents
Landsact uallyusedf orgrazing
appurtenant t hereto, mosques,
purposes shal ll ikewi se not be
non-profitorreli
giouscemet er
ies
consider edidlel ands; and
and al ll ands, bui l
dings and
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
104
MEMORYAI
DIN TAXATI
ON LAW
i
mpr ov ement s act ually,directly WHAT:Swor nstatementcontai
ningthe
andexcl usiv
elyusedf orrel
igious, fai
rmar ketv al
ueanddescr i
pti
onoft he
charitable or educati
onal proper
ty.
purposes ( Art. VI, Sec. 28,  Fori mpr ovementonproperty
Const it
ut i
on); WHEN:Must f il
ewi t
hin60day supon
3. Machi ner i
esandequi pmentt hat completi
on or occupat ion (whichev
er
are act ually, di rectly and comesear l
ier)
exclusiv el
yused byl ocalwat er WHAT:Swor nstatementcontai
ningthe
uti
li
tiesandGOCC’ sengagedi n fai
rmar ketv al
ueanddescr i
pti
onoft he
the suppl y and di stri
buti
on of proper
ty.
waterand/ orelectr
icpower ;
4. Real pr operty owned by dul y DECLARATIONBYPROVI
NCIAL/CITY/
regi
st ered cooper ati
ves as MUNI PALASSESSOR(
CI SEC.204)
providedf orinRA6938; and
5. Machi ner yand equi pmentused WHEN:Onlywhent hepersonunderSec.
for pol lut
ion cont rol and 202ref
usesorfai
lstomakeadeclarat
ion
environment al prot
ect i
on. wit
hint
heprescri
bedti
me.
ACTUALUSEOFPROPERTY AS BASI
S Nooat
hbyt
heassessori
srequi
red.
SEC.217LGC)
FORASSESSMENT(
Notes: ProofofExempt ion ofReal
Real pr
operty shal
l be classif
ied, Pr
opertyf
rom Taxat
ion-(
Sec.206)
val
ued and assessed on the basi
s of
ualuser
act egar
dlessofwher elocated, WHO: Byanypersonorf
orwhom r
eal
whoeverownsit,
andwhoev erusesit
. pr
oper
tyi
sdecl
ared.
Unpai
dr eal
tyt axes at t
ach t ot he  Clai
m f orexempti
on mustbe f
il
ed
propertyand ischargeableagai nstt he with the assessor t
oget
her wit
h
personwhohadact ualorbenef icialuse suff
ici
entdocumentaryevi
dence t
o
and possession of i tr egar
dless of supportcl
aim
whet herornothe i st he owner . To
i
mpose t he r
ealpr opertyt ax on t he WHEN:wi t
hin30day sfr
om t
hedat
eof
subsequentownerwhi chwasnei therthe decl
arat
ionofproper
ty.
ownernort he beneficialuseroft he
propertyduri
ng the designated per i
ods IF PROPERTY I S DECLARED FOR THE FI
RST
woul dnotonl
ybecont rarytolawbutal so TIME–( SEC.222)
unjust.(
Estat
eofLi mv s.CityofMani la, I
fDecl ared f orthe fi
rsttime,r eal
GRNo.90639, February21,1990) propertyshal lbeassessedf orbacktaxes:
Fornotmor ethan10yearspri
ortodate
PROCEDURE ofiniti
al assessment
Taxesshal lbecomputedont hebasis
ofappl icableschedul eofv aluesinforce
STEP 1:DECLARATI
ON OF REAL duringthecor respondingperiod.
PROPERTY
STEP2:LISTI
NGOFREAL
DECLARATION BY OWNER OR ADMI NI
STRATOR
PROPERTYI
NTHEASSESSMENT
(SEC.202-203)
ROLLS(
SECS.205,
207)
 Fi le a swor n declarati
on witht he
assessor
-onceev ery3y earsduring
 Al
ldecl ar
ati
onsshal lbekeptand
fi
ledunderauni f
orm classi
fi
cat
ion
theperiodf rom January1
system to be establi
shed bythe
toJune30.
provinci
al, ci
ty or muni ci
pal
 Forne wlyacquir
edpr operty–
assessor.
WHEN:Mustf il
ewi t
ht heassessorwi t
hin
60day sfrom dateoftransfer
STEP3:APPRAI
SALAND
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
105
MEMORYAI
DIN TAXATI
ON LAW
VALUATI
ONOFREALPROPERTY 1.basicrealpropert
ytaxin4equal
(
SECS.212-
214,
224-
225) i
nstall
ments( March31,June30,
September30, December30)
DETERMINATION OF FAI
R MARKET VALUE 2. special levy – gov erned by
(FMV) ordinance
Forland
(
c)I
nter
estforLatePayment(Sec.255)
 As sessor of the pr ovi
nce/ci
ty or
1. twoper cent(2%)f
oreachmont h
municipali
ty may summon t he
on unpai d amount unt i
lt he
owners of t he properti
es to be
deli
nquentamountispaid
aff
ected and mayt akedeposi t
ions
2. provi
dedinnocaseshallthetotal
concerning t he pr opert
y , its
int
erest exceed thi
rt
y-si
x (36)
ownership,amount,natur
eandv alue
(
Sec.213,
LGC) mont hs.
 Assessorpr eparesaschedul eof
FMV f or differ
ent classes of (
d)ForAdv
anceandPr
omptPay
ment
1. Advance payment– discountnot
pr operti
es.
exceedi
ng 20% ofannualtax(Sec.
 Sangguni anenactsanor dinance 251,LCG)
 The schedul e of FMV i s 2. Prompt payment – discount not
published in a newspaper of exceedi
ng10%ofannualtaxdue(Art
gener al ci rcul
ation i n t he 342IRR)
pr ov
ince, city or muni cipalit
y
concer ned ori nt he absence COLLECTIONOFTAX( SEC.247)
thereof,shallbepost ed int he I
tshal lbetheresponsi bi
li
tyoft hecit
y
pr ov
incial capi tol, city or ormuni cipaltr
easur erconcerned.
muni cipalhallandi nt woot her Theci tyormuni cipaltreasurermay
conspi cuous publ ic pl aces deputizethebar angayt reasurertocoll
ect
therein(Sec.212,LGC) al
lt axesonr ealpr opertylocatedi nthe
barangay ; pr ovided, t he bar angay
Formachinery tr
easur erisproperlybonded.
1. ForBrandnewmachi ner
y:FMVi
sthe
acqui
sit
ioncost ODTOCOLLECT(
PERI SEC.270)
2. Inal
lothercases:FMV 1. withinfi
ve(
5)y earsf
rom t
hedat
e
=Remainingeco.l
ife X Replacement theybecomedue
Est
imatedEco.Li
fe Cost 2. within ten ( 10) year
s from
discover
yoff raud,i
ncasether
e
STEP4:DETERMINEASSESSEDVALUE i
sf raudori
ntenttoevade
(SEC.218)
SUSPENSI
ON OF PRESCRIPTI OD (
VE PERI SEC.
Det
ermineAssessedVal ue 270)
Pr
ocedure 1. l
ocal t reasurer i s l egall
y
1. TakethescheduleofFMV preventedtocol l
ecttax.
2. Assessed Value = FMV x 2. theownerorpr opert
yr equests
Assessmentlevel forreinvesti
gationandwr i
tesa
3. Tax=Assessedv al
uexTaxr
ate waiver bef ore expi r
ation of
peri
odt ocoll
ect.
3. theownerofpr opertyisoutof
STEP5:PAYMENTAND
thecountryorcannotbel ocated.
COLLECTI
ONOFTAX
(
a)Accr
ualofTax:Januaryofeveryy
ear
REALPROPERTYTAX
and such wil
lconst i
tut
e as a REMEDI
ESUNDERTHELGC
super
iorl
ien.(
Sec.246)
1.TAXREMEDIESOFTHELOCAL
(
b)Ti
meandMannerofPay :(
ment Sec. GOVERNMENTTOEFFECT
250)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
106
MEMORYAI
DIN TAXATI
ON LAW
COLLECTI
ONOFTAXES (
Sec.252LGC)
A.ADMI NISTRATI VE Cl
aimforTaxRef undorCr edit(
Sec.253)
1. Real Propertytaxlen(
i Secs.257,LGC) a) the taxpayermayf il
e a wri
tt
en
– super iort o al
ll i
ens,char ges or clai
mf orrefundorcr edi
twit
hthe
encumbr ances; provi
ncialorci t
ytreasur
erwithi
n
2. Distr
aint( Sec.254[B],
LGC) ; two y earsf rom t he dat
et he
3. Levy( Sec.254[A],258LGC) ; taxpayer is ent i
tl
ed t o such
4. Purchase of pr operty by l ocal reducti
onoradj ust
ment .
tr
easur erforwantofbi dder(Sec.263,
LGC) . b) i
n case ofdeni
alofref
und or
B.JUDI CIAL cr
edit
,appealto LBAA as in
Civ
ilAction(Sec.266, 270LGC) pr
otestcase.
PRESCRI
PTIVEPERI
ODSFORTHE Redempt
ion ofr
ealpr
oper
ty(
Sec.261
COLLECTI
ONOFREAL LGC)
PROPERTYTAXES
Remedyagai nstt
heAssessment /
Appeal
1st: wit
hi n 60 day s from not i
ce of
1. Basi
crealpr
oper
tyt
axandanyot
her assessment of pr ovinci
al,ci ty or
tax lev i
ed undert he ti
tle on Real muni cipalassessort o LBAA ( Sec.
Pr operty Taxati
on– f i
ve( 5)y ears 226LGC)
from thedat etheybecamedue.( Sec. 2nd: wit
hi n 30 day sf r
om r eceipt of
270, LGC) . decisionofLBAAt oCBAA( Sec.230
2. When t herei sf r
aud ori ntentt o LGC)
ev adet hepay mentoft axes– t en 3rd: wit
hi n 30 day sf r
om r eceipt of
(10) y earsf r
om di scovery of the decision ofCBAA t o Cour tofTax
fraudori ntenttoevadet hepayment Appeal senbanc
(Sec.270, LGC). 4th: wit
hi n 15 day sf r
om r eceipt of
decisionofCour tofTaxAppeal sen
GROUNDS FOR THE SUSPENSI
ON OF banct ot heSupr
emeCour t
THE RUNNI
NG OF THE PRESCRI
PTI
VE
PERI
ODS APPEALSINREALPROPERTY
TAXATI
ON
1. The t reasurer islegal
ly prevent
ed
from t heassessmentorcol lect
ionof
thet ax; PROVI
NCI
AL,CITYORMUNI
CIPAL
2. The t axpayer requests f or a ASSESSOR
reinvest igati
onandexecutesawai ver
i
nwr iti
ngbef or
etheexpir
ationofthe wi
thi
n60day
s
per i
od wi thi
n which to assess or Owner/Per
sonwithl
egali
nterest
collect; and mustfi
le:
3. Thet axpay erisoutofthecount r
yor 1)Wri
tt
enPetit
ionunderOath
other wise cannotbe l ocated (Sec. 2)Wit
hSupporti
ngDocuments
270, LGC) .
LOCALBOARDOFASSESSMENTAPPEALS
2.TAXREMEDIESOFTHE (LBAAshoul
ddeci
dewithi
n120day
sfr
om
TAXPAYER r
ecei
ptofpeti
ti
on)
A.ADMI
NISTRATI
VE wi
thi
n30day
s
Protest – pay ment under protest is

requir
edwi thi
n30day st
oprovincial
,ci
ty, CENTRALBOARDOFASSESSMENT
ormuni cipaltr
easur
er.Nopr otestshall APPEALS
beent er
tainedunl
essthetaxi
sf i
rstpaid.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
107
MEMORYAI
DIN TAXATI
ON LAW
wi
thi
n30day
s ref
ertothet
axesimposedonimport
edor
expor
tedwares,
art
icl
es,ormer
chandi
se.

COURTOFTAXAPPEALS(
ENBANC) OTHER TYPES OF FEES CHARGED BY THE
BUREAUOFCUSTOMS
wi
thi
n15day
s  Arrast
recharge
 Whar f
age due – count er
part of
l
icense,charged notfort
heuseof
SUPREMECOURT
any wharfbutf ora specialfund
knownast hePortWorksFund.
B.JUDI CIAL  Berthi
ngfee
1. Cour tAct ion – appealofCBAA’ s  Harborfee
decisiontoCour tofTaxAppeal sen  Tonnagedue
banc.
2. Suitassailingv al
idi
tyoft ax;r
ecover
y
MEANI NGANDSCOPEOFTHETARI FFAND
ofr efundoft axespai d(Sec.64PD
CUSTOMSLAWS
464) .
I
ncludenotonl yt hepr ovisi
onsoft he
3. Suittodecl areinvalidi
tyoftaxdueto
Tariff and Cust oms Code ( TCC) and
i
rregularit
y i n assessment and
regulati
onspur suantt hereto, butallot
her
coll
ect on(
i Sec.64PD464)
l
awsandr egulati
onst hatar esubjectto
4. Suitassai l
ingt hev ali
dit
yoft axsal
e
the Bur eau of Cust oms ( BOC) or
(Sec.83PD464)( Sec.267LGC)
otherwisewi thinitsjurisdiction.
Ast oi tsscope,t heref ore,tar
iffand
CONDONATI ONOFREALPROPERTYTAXES
customs l aws ext end notonl yt ot he
1. Byt heSangguni an
provisi
onsoft he TCC butt o al
lother
Real proper ty t axes may be
l
awsaswel l
,theenf orcementofwhi chis
condoned whol l
y orpar t
ial
l
yi na
entrustedtot heBOC.
gi
venl ocalgov ernmentuni twhen:
a. Ther eisgener al fail
ureofcrops;
b. Ther eissubst ant i
aldecreasein THEBUREAUOFCUSTOMS
thepr i
ceofagr icult
uraloragri
-
basedpr oducts; or FUNCTI
ONS OF THE BUREAU OF
c. Ther eiscalami ty. CUSTOMS
2. Byt hePr esi
dentoft hePhi l
ippi
nes
 whenpubl icinterestsor equir
es. 1. Assessment and col lecti
on of
revenuesf rom i mportedar ti
clesand
allot heri mposi t
ionsundert het arif
f
andcust omsl aws;
V. TARI
FFAND 2. Cont rolsmuggl i
ngandr el
atedf rauds;
CUSTOMSCODE 3. Super v i
sion and cont rol ov er t he
entrance and cl earance ofv essels
and ai rcraft engaged i n f orei
gn
DEFI
NITI
ONS commer ce;
TARIFF:Customsduti
es,tol
lortr
ibute 4. Enfor cementofTCCandr el
atedl aws;
payable upon merchandi
se to t he 5. Super v i
sion and cont rol ov er t he
Government. handl ingoff oreignmai l
sar ri
vingi n
thePhi l
ippines;
CUSTOM DUTI ES:Tax assessed upon 6. Super v i
seandcont r
olal limpor tand
merchandi
se from or expor t
ed to,a expor tcar goesf ort hepr otectionof
for
eigncount
ry.(Gar
ciav.Execut i
veSec.
, gov ernmentr evenue;
GRNo.101273, Jul
y3,1992)) 7. Exclusi ve or i
ginalj uri
sdicti
on ov er
seizur e and f orfei
ture cases under
Note: Customs and t ari
ffs ar e thet arif
fandcust omsl aws.
synonymouswithoneanot her.Theyboth
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
108
MEMORYAI
DIN TAXATI
ON LAW
JURISDICTION OF COLLECTOR OF Mayeitherbe:

CUSTOMS OVER I MPORTATI ON OF 1. Subj ectt odut y–
ARTICLES a. Live ani mal s and ani mal
1. Causeal larti
clesf orimpor tati
ont o product s;
beent eredint hecustomhouse, b. Veget abl epr oduct s;
2. Cause al l such ar ti
cles t o be c. Ani malorv eget abl ef at s; oilsand
appraisedandcl assi
fi
ed, theircl eav agepr oduct s; prepared
3. Assessandcol l
ectthedut i
es,taxes edibl ef at s;ani malorv eget able
andot herchar gesthereon, and waxes;
4. Hold possessi on of al li mpor ted d. Prepar edf oodst uf fs;bev erages,
arti
cles untilt he duti
es,t axes and spiritsandv inegar ;tobaccoand
otherchar gesar epaidt hereon.( Sec. manuf act ur edt obacco
1206, TCC) subst itutes;
e. Mi ner al pr oduct s;
TERRITORI AL JURI SDICTION OF THE f. Product sofchemi cal oral l
ied
BOC indust ries;
1. Allseaswi t
hint hejuri
sdictionoft he g. Plast icsandar ticlest her eof ;
Phil
ippines rubberandar ticlest her eof ;
2. Allcoast s,por t
s,airports,har bor s, h. Rawhi desandski ns; l
eat her ,etc.
;
bays, r iver
s and i nland wat ers i. Woodandar ticlesofwood, etc.;
whethernav igable ornotf r
om t he j. Pul pofwood, et c.;
sea.(1stpar,Sec.603, TCC) k. Text ilesandt ext ilear ticles;
l. Articlesofst one; plast er, cement ,
CUSTOMSDUTI
ES etc.;
m.Foot wear , headgear ,etc. ;
n. Nat ur al orcul tur edpear ls
WHENTARIFFANDCUSTOMSAPPLI ED
preci ous/ semi pr eci ousst ones;
Onl
yaf
terimpor
tati
onhasbegunbut
o. Basemet al sandar ti
cl esofbase
bef
orei
mport
ati
onister
minat
ed.
met als;
p. Machi ner yandmechani cal
I
mpor
tat
ionbegi ns:
appl iances; el ect ri
cequi pment ;
1) when t he conveyi
ng vesselor
soundr ecor der s, et c;
air
craft
q. Vehi cl es, ai rcr aft ,vessel sand
2) entersthejuri
sdi
cti
onofthePhil
.
associ at edt ranspor tequi pment ;
3) withint
ent i
ontounloadt
herei
n
r. Opt ical ,phot ogr aphi c, medi cal,
sur gical inst rument s, etc. ;
I
mpor
tat
ioni
sdeemedt
ermi
nat
ed:
s. Arms, ammuni ti
on, par tsand
accessor ies;
(a)uponpaymentoft
hedut
ies,t
axesand
t. Mi scel laneousmanuf act ured
otherchar
gesdueupont
hearti
cl
es.
articles; and
u. Wor ksofar t, col lect or'spi eces
(b)andlegalpermi
tforwi
thdr
awalshal
l
aridant ques(
i Sec.104, Title1,
havebeengrant
ed.
TCC) .
 Incaset hear ti
clesar efreeof
2. Prohibited f rom bei ng i mpor t
ed
duti
es,t
axesandot hercharges,unt
ilt
hey
(Prohibit
edi mpor tation)
havelegall
yleftthe juri
sdict
ion ofthe
a.Absol utely pr ohi bit
ed such as:
oms(
cust Sec.1202,TCC) weaponsofwar ;gambl i
ngdev i
ces;
narcot i
cs or pr ohibi
ted dr ugs;
INTENTIONTOUNLOAD
i
mmor al, obscene or i nsidious
Even ifnoty etunloaded,and t
herei s
art
icles; and t hose pr ohibit
ed
unmani f
estedcargo,for
fei
tur
emayt ake
underspeci al aws(
l Sec.
102, TCC) .
place because i
mportati
on has al
ready
b.Qual ifiedl
ypr ohibited
begun.
Wher esuchcondi ti
onsast o
war r
anta l awf uli mportati
on do
ARTI
CLESUNDERTCC
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
109
MEMORYAI
DIN TAXATI
ON LAW
notexi st,thelegaleff
ectsofthe of t
he Phi
l
. upon
i
mpor tati
on of quali
fi
edl
y recommendat
ionofNEDA (Sec.
prohibitedart
icl
esar et
hesameas 105,TCC).
those of absol ut
ely prohi
bit
ed LI
ABI
LITYOFI MPORTERFORCUSTOM DUTIES
arti
cles.(AuyongHi anvs.CTA,GR  A per sonaldebtwhi ch can be
No.L- 28782,September12,1974) discharged onlybypay menti n
fullther
eof;
3. Conditi
onally-f
ree f rom t ariff and  Al i
enupont heimportedar t
icl
es
cust
oms dut ies ( condit
ionally-f
ree whilet hey ar ei n custody or
i
mpor t
ation) subject tot he controlof t he
 Thosepr ovidedinSec.105, TCC; gov er .(
nment Sec.1204,TCC) .
 Those gr anted t o gov ernment
agencies, GOCCs with EXTENTOFI MPORTER’SLIABILI
TY
agreement s wi
th foreign The li
abili
ty ofan i mport
eri s
count r
ies; l
imi t
ed tot he v al
ue of t he imported
 Those gi v en t o internat i
onal mer chandi
se.Incaseoff orfei
tur
eoft he
i
nstituti
onsent i
tl
edt oexempt ion seized mat eri
al,t he maxi mum ci vi
l
by agr eementorspeci all aws; penaltyistheforfei
tureitself.(Mendoza
and vs.Dav i
d,GRNo.L- 9452, Mar ch27,1961)
 Thoset hatmaybegr antedbyt he
President upon NEDA’ s DRAWBACK
recommendat i
on. A dev
iceresort
edtoforenabl i
nga
commodi ty af
fect
ed by taxes t o be
4. Freefrom TCdut ies(duty-fr
ee) export
ed and soldi nfor
eign mar kets
Impor t
ed goods must be uponthesamet ermsasi
fithadnotbeen
enter
ed i n a customhouse att heir taxedatal.(
l UyChacoSonsv s.Coll
ector
portofent ryotherwiset heyshal lbe ofCust oms,GR No.7618,Mar ch 27,
considered as cont r
aband and t he 1913)
i
mpor terisliabl
ef orsmuggl ng(
i See
Sec.101, TCC). IMPORTE NTRY
Al larti
cleswheni mpor tedf rom I
tisadecl arationtotheBOCshowi ng
anycount ryintothePhi l
ippinesshal l parti
cularsofthei mpor t
edar t
icl
ethatwil
l
be subj ect t o dut y upon each enable t he cust oms aut hori
ti
es t o
i
mpor tati
on,ev en though pr eviously determinethecor r
ectdut i
es.Ani mport
er
exportedf r
om thePhi l
ippines,except i
sr equiredtof i
leani mpor tentr
y.Itmust
asotherwi sespecifi
call
ypr ov i
dedf or beaccompl ishedf r
om disembar kingof
i
nt heTCCorot herlaws. l
astcargof rom v essel.
LI
ABI TYFORCUSTOMSDUTI
LI ES TRANSACTIONVALUEUNDERRANO. 8181
General Rule: Al l importat
ions / Itist he i nvoi
ce value ofthe
export
ati
ons ofgoods ar e subjectt
o goods pl us freight,insurance,costs,
customsdutes(
i Sec.105,TCC). expensesandot hernecessaryexpenses.
Thisr epl
aces t he Home Consumpt i
on
Except
ions: Valueasbasisofv aluat
ionofgoods.
(1)Exempt ionsundertheTCC;
(2)Exempt ions granted t
o CLASSIFICATIONOFCUSTOM DUTI ES
gov ernment agencies, RegularDut ies – t hose whi
ch are
instrument al
it
iesorGOCCswi t
h i
mposedandcol lectedmer el
yasa
existingcont r
acts,commi t
ment s, sourceofr evenue.
agreement s,orobl igationswi t
h 1. Adv alor
em dut y:Thisisadut y
foreigncount r
ies; based on t he v al
ue of the
(3)Exempt ions of i nternational i
mpor tedar ti
cle.
organi zati
ons pur suant t o 2. Speci f
ic dut y:Thi sis a duty
agreement sorspecial laws; and basedont hedut iabl
eweightof
(4)Exempt ionsgrantedbyt hePr es. goods( eithert hegr ossweight,
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
110
MEMORYAI
DIN TAXATI
ON LAW
l
egalweight,ornetweight). 3. Marki
ngduty
3. Alt
ernat
ingdut i
es:Thisisadut y 4. Di
scri
minat
orydut
y
whichalt
ernatesadv alorem and
speci
fi
c. NATUREOFSPECI ALCUSTOMSDUTI ES
4. CompoundDut y:Thisi sadut y Special cust oms duties are
consi
sti
ng ofad v alorem and addit
ional impor t duti
es i
mposed on
speci
fi
cduties. speci
fickindsofi mpor t
edart
icl
esunder
cert
ainconditions.

B.Specialduties – those whi
ch are
i
mposedandcol lect
edinaddit
ionto PURPOSE OF SPECI AL CUSTOMS
theor di
narycustomsdut i
esusual
ly DUTIES
to protectlocalindust
ri
es agai
nst Thespeci alcustomsdutiesar
e
for
eigncompet i
ti
on. i
mposedf ortheprotect
ionofconsumer
s
and manuf act
urers,as well as Phi
l.
1. Dumpingduty product
sf rom unduecompet i
ti
onposed
2. Count
ervai
li
ngdut
y byforei
gn-madepr oducts.
SPECI
ALDUTI
ESCOMPARED
DI
SCRI
MINATORY
DUMPI
NGDUTY COUNTERVAI
LINGDUTY MARKI
NGDUTY
DUTY
1. Nat ure Imposed upon f or

eign Imposed upon Imposed upon
I
mposed upon goodsenj oyi
ngsubsidy those not goodscomi ngfrom
foreign pr oducts thus all
owing t
hem t o proper
lymarked countri
es that
with v al
ue l ower sellatlowerpr i
ces to as to pl
ace of discri
minate
than t hei
r f air the detr
imentofl ocal ori
gin of t he against Phili
ppine
mar ketval
uetot he products si
milarl
y goods. products.
detri
mentof l ocal sit
uated.
products.
2.Amount /Rate Equi

v al
ent t o the 5% ad valor
em Any amount not
Dif
fer
encebet ween bounty, subsi
dy, or ofar
ti
cles exceeding100% ad
theactualpri
ceand subventi
on. val
or em of t he
thenormalv al
ueof subjectar
ti
cles
theart
icle.
3. Imposi ngAut hori

t y Secr
etar
yofFi
nance Commissi
oner President of t
he
Speci al commi ttee ofCust
oms Phil
ippines
on Ant i-
Dumpi ng
(composed of t he
Secr etary of
Finance as
Chai rman;
Member s: the
Secr etary of DTI ,
and ei ther t he
Secr etary of
Agriculturei farti
cle
i
n quest ion i s
agriculturalpr oduct
ort heSecr et
aryof
l
abor i f non-
agriculturalproduct
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
111
MEMORYAI
DIN TAXATI
ON LAW
FLEXIBLETARI FFCLAUSE Insuchacaset hecorrespondi ng

The Pr esidentmay f i
xt ari
ffr at
es, adv alorem orspeci
fi
cequivalentsof
i
mpor tandexpor tquot as,et c.underTCC thedut ywi t
hrespecttothei mpor ts
(SeeSec.28, Ar t
.VI ,Const i
tuti
onandSec. from thepr i
nci
palcompetingf oreign
401,TCC) count r
y f or t he most r ecent
1. to i ncrease, r educe or r emov e representat
iveperi
odshal
lbeusedas
existing pr ot ectiver ates ofi mport bases( Sec.401,TCC).
dut y(includinganynecessar ychange
inclassi f
ication) .
The exi sting r ates may be
i
ncreasedordecr easedt oanyl evel
,
THETARI
FFCOMMI
SSI
ON(
TC)
ononeorsev eralst agesbuti nno
case shal lt he i ncreased r at
e of FUNCTIONS OF THE TARI FF
i
mpor t dut y be hi gher t han a COMMI SSI ON
maximum ofonehundr ed( 100%)per 1. Inv
est igat i
v ePower s( Sec.505, TCC)
centadv alorem a. the admi ni strat ion of and t he
2. toest ablishi mpor tquot aort oban fiscalandi ndust rialef f
ect soft he
impor t
sofanycommodi ty
, asmaybe tar i
f fand cust omsl awsoft his
necessar y;and count r
ynow i nf orce orwhi ch
3. toi mposeanaddi t
ionaldut yonal l mayher eaf terbeenact ed;
impor t
snotexceedi ngt en( 10%)per b. ther elationsbet weent her atesof
centadv alorem whenev ernecessar y: dut yon r aw mat erials and t he
finished or par tl
y f inished
LI
MITATI
ONS I MPOSED REGARDI
NG pr oduct s;
THEFLEXI
BLETARIFFCLAUSE c. the ef fect s ofad v alor em and
speci fi
c dut ies and of
a.Conductbyt heTar iffCommi ssi
onof com¬pound speci f
ic and ad
ani nv esti
gat ioninapubl ichear i
ng. val orem dut ies;
TheCommi ssionshal lalsohear d. all quest ions r el ative t o t he
thev iewsand r ecommendat i
onsof ar rangementofschedul es and
any gov ernmentof fi
ce,agency or classi f
icat ion ofar ticles i nt he
instrument alit
yconcer ned. sev eral schedul esoft het arif
fl aw;
The Commi ssion shal lsubmi t e. the t ariffr elations bet ween t he
theirf indingsandr ecommendat i
ons Phi lippinesandf or ei gncount ri
es,
tot heNEDA wi t
hint hir
ty( 30)day s commer cialt reat i
es,pr eferent ial
aftert he t ermination oft he publ i
c pr ov isi
ons,economi c al l
iances,
hear i
ngs. theef f
ectofexpor tbount i
esand
TheNEDAt hereaf tersubmi t
si t
s pr ef¬er ent ial transpor tat i
onr at es;
recommendat iontot hePresident. f. the v olume of i mpor tations,
a. The power of t he Pr esident t o compar ed wi th domest i
c
i
ncr ease ordecr ease t he r ates of pr o¬duct i
onandconsumpt ion;
i
mpor t duty within the g. condi ti
ons,causes,and ef f ects
abov ement ioned l i
mi tsf ixed int he relat ingt ocompet iti
onoff or ei
gn
Codeshal lincludet hemodi fi
cationin indust ri
es wi th t hose of t he
thef orm ofdut y. Phi lippines,i ncl ud¬i ng dumpi ng
andcostofpr oduct ion; and
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
neTorr
es ASST.CHAIRPERSON:Rhohai
lCastro EDP:Rachel
l
eSay a SUBJECTHEADS:
Jemi
naSy
,Casi
anoI
lagan,
Jr.
,
RyanCo,EdwinTor
res :
MEMBERS:
Mar
it
aLour desAzur ,
EdizerEnr
iquez,
Chri
sti
anCabrera,
Jhundee
Guil
l
ermo
112
MEMORYAI
DIN TAXATI
ON LAW
h. i
n gener al,t o inv estigate the cont raband. The
operat
ionofcust omsand t ar
iff compl ement aryi f collateral
l
aws,i ncluding theirr elati
on to useoft heCessnapl anef or
the national r ev ¬enues, t heir smuggl ing oper ati
on i s
eff
ectupon t he i ndust r
ies and suf f
icientf orittobedeemed
l
abor of t he count ry and t o to hav e been used i n
submitrepor t
sofi tsinvest i
gati
on smuggl ing. ( Ll
amado v s.
aspro¬vided. Commi ssioner of Cust oms,
GR No.L- 28809,May 16,
2. Administ
rat
ive Assi
stance t
o the 1983)
Presi
dentandCongress (Sec.506, 3. Reduction ofcust oms dut ies /
TCC) compr omi se
 subj ectt oappr ovalofSec.of
Finance ( Sec.709,2316TCC)
4. Seizur
e,Sear ch,Ar
rest (
Sec.
2205,2210,2211TCC)
TAXREMEDIESUNDERTHE
TARIFFANDCUSTOMSCODE B.JUDI
CI AL
(
TCC) 1. this r emedy i s nor mall
y
av ail
edofwhent hetaxli
en
TAX REMEDI
ES OF THE i
sl ostbyt hereleaseofthe
GOVERNMENT goods
 Ci vilActi
on ( Sec.1204,
A.ADMINISTRATI VE TCC)
1. TaxLi en( Sec.1204TCC)  Cr i
minalAct
ion
at taches on t he goods,
regar dlessofowner ship,whi l
e TAXREMEDI
ESOFTHETAXPAYER
stillint hecust odyorcont r
olof
theGov ernment A.ADMINISTRATI VE
av ailed of when the 1. Protest
i
mpor t
at ion is neither a. Any i mpor ter or i nterest ed
prohi bi tednori mpr oper lymade party i f di ssatisf
ied wi th
2. Admi nist rative Fines and published v alue wi thin 15
Forfeitur es daysf rom dat eofpubl icat i
on,
 appl i
edwhent hei mpor tation orwi thin 5 day sf r
om t he
i
sunl awf ul, datet hei mpor terisent itled
 andi tmaybeex ercisedev en to r ef und i f pay ment i s
wher et hear ticlesar enotor render eder r oneousori l
legal
no l onger i n Cust om’ s byev entsoccur ri
ngaf tert he
cust ody payment .
-unl ess t he i mpor tati
on i s b. Taxpay er– wi thin 15 day s
mer ely at tempt ed i n whi ch from assessment . Pay ment
casei tmaybeef f
ect edonl y underpr otesti s necessar y
.
whi le t he goods ar e st i
ll (Sec.2308, 2210TCC)
wi thin the Customs 2. Refund
j
ur isdi ctionori nt hehandsof a. A wr it
ten cl aim f orr efund
a per son who i s awar e may be submi tted by t he
ther eof( Sec.2531 & 2530, impor teri nabat ementcases
TCC) on missi ng packages,
 under Sec.2530( a)oft he deficiencies i nt he cont ent s
TCC, i n or der t o war rant of packages or shor tages
for feitur e,iti snotnecessar y beforear ri
valoft hegoodsi n
that t he v esselor ai r
craft the Phi li
ppi nes,ar t
icles l ost
must i tsel f car ry t he or dest royed af ter such
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
113
MEMORYAI
DIN TAXATI
ON LAW
arrival, dead or i njured

animal s,and f or mani f
est TWOKINDSOFPROCEEDI
NGSIN
cleri
cal error
s;and THEBUREAUOFCUSTOMS(BOC)
b. Drawback cases wher et he
goodsar ere-expored (
t Sec. A.CUSTOMSPROTESTCASES
1701- 1708TCC) .
3. Set
tlement of any sei zure by DEFINI
TION:Thesear ecaseswhichdeal
pay
mentoff ineorredempt ion solelywithliabi
li
tyf orcust
oms dut
ies,
 Butt hisshal lnotbeal lowed fees,andothercharges.
i
n any case wher e
i
mpor tation i s absol utel
y Note: Bef
orefi
li
ngapr ot
est,t
heremust
prohi bited, or t he r elease f
ir
stbeapay mentunderpr
otest.
woul dbecont rarytol aw,or
whent hereisanact ualand WHENCUSTOMSPROTESTAPPLI
CABLE
i
nt ent i
onalf raud (Sec.2307
TCC) . Thecustomspr otesti
sr equir
edt obe
fi
led onlyi n case the li
abi l
i
ty oft he
4. Appeal taxpayerforduti
es,taxes,feesandot her
 Wi t
hin 15 day s t o the chargesisdet ermi
nedandt het axpayer
Commi ssioner af
ter disputessai
dliabi
li
ty.
not
if
icati
on by Col lect
orof
hi
sdecision (Sec.2313TCC). WHENCUSTOMSPROTESTNOTREQUI
RED
B.JUDI
CIAL Wher etherei s no dispute,butt he
1. Appeal cl
aimf orrefundarisesbyr easonoft he
 Wi t
hin30day sf r
om r eceipt happeningofsuperveningev entssuchas
of deci sion of t he whent herawmat eri
alimpor tedisut
il
ized
Commi ssi oner or Secr etary i
nt he producti
on off i
nished products
ofFi nancet ot hedi vi
sionof subsequentl
y expor ted and a dut y
theCTA( Sec.2403TCC, Sec. drawbackisclai
med.
7RA 1125,asamendedby
Sec.9RA9282) REQUI
REMENTSFORMAKI
NGAPROTEST
 Si nceSec. 11ofRA 1125as
amended by RA 9282 1. Mustbei nwr i
ti
ng
empower st heTaxCour tto 2. Mustpoi ntouttheparticulardecisi
on
issue i njunct i
ons,i t woul d orruli
ngoft heCol l
ectorofCust oms
appeart hatani mportermay to whi ch except i
on i s t aken or
appealwi thoutf ir
stpay ing objecti
onmade;
thedut ies, suchasi nsei zure, 3. Mustst atethegr oundsr eli
edupon
butnoti npr ot estcases. forrel
ief;
2. Acti
ont oquest iont helegalityof 4. Mustbel i
mit
edt othesubj ectmat ter
sei
zure ofasi ngleadjustment;
3. Abandonment( Sec.1801TCC) 5. Must be f i
l
ed when t he amount
a. expressl y( Sec.1801TCC) clai
medi spaidorwi t
hin15day safter
b. impliedly– thepay ment ;
c. f ai
lur et of i
le an impor t 6. Protestantmustf urni
shsampl esof
entrywi thin30day sf r
om goodsunderpr otestwhenr equi
red.
thedi schar geofgoodsor
d. hav i
ngf iledanent ryf ail
s PROCEDURE I
N CUSTOMS PROTEST
to cl aim wi thin 15 day s CASES
buti tshal lnotbe so
effect i
v e unti
l so TheColl
ectoracti
ngwithinhi
sjuri
sdi
cti
on
decl aredbyt hecol l
ect or. shal
lcausetheimportedgoodstobe
(Sec.1801,asamended enteredatthecustomhouse
byRA7651) 
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
114
MEMORYAI
DIN TAXATI
ON LAW
TheCol l
ectorshal
lassess,li
qui
date,
and B.SEI
ZUREANDFORFEI
TURECASES
col
lecttheduti
esthereon,ordet
ainthe
sai
dgoodsi fthepart
yliabl
edoesnotpay DEFINITION: Th ese r efer t o mat ter s
thesame i
nv ol
v ng smuggl
i ing.Itisadmi ni
strative
 andci v i
linnat ur eandi sdi rectedagai nst
Thepart yadverselyaff
ect
ed( t
he ther esori mpor t
edar ti
clesandent ail
sa
protest
ant)mayf i
l
eawr i
tt
enproteston determi nat i
on of t he legal i
ty of t hei r
hi
sf or
egoingliabi
li
tywiththeColl
ector i
mpor tation.Thesear eact i
onsi nr em.
wit
hin15day saft
erpay i
ngtheli
quidated Thus,I tisofnodef enset hatt he
amount( t
hepay mentunderprotestrule owneroft hev esselsoughtt obef orf
eit ed
applies) hadnoact ualknowl edget hathispr oper ty
wasusedi llegal ly
.Theabsenceorl ackof
 actualknowl edge of such use i sa
Heari
ngwi t
hin15daysfrom r
ecei
ptofthe defenseper sonalt ot heownerhi msel f,
dulypresent
edprot
est.Uponterminat
ion which cannoti n any way absol vet he
oft
hehear i
ng,t
heColl
ectorshal
ldeci
de vesself r
om t he l i
abil
ity of f orf
eitur e.
onthesamewi t
hin30days (Commi ssi onerofCust oms v s.Mani l
a
Star Fer ry,I nc., GR Nos. 31776- 78,
  October21, 1993)
I
fdeci
sionisadver
set
o I
fdeci
si
onisadv
erset
o
theprotest
ant t
hegov
ernment SMUGGLING
1. Anactofanyper sonwhoshal l
:
  a. Fraudulent
lyi mpor tany arti
cle
Appeal
withthe Aut
omat
icRevi
ewby contrarytolaw, or
Commissi
onerwithi
n t
heCommissi
oner b. Assistinsodoi ng,or
15daysfrom not
ice  c. Receive, conceal , buy, sell
,
 Automati
crevi
ewby facil
it
ate,tr
anspor t,conceal or
t
heSecretar
yof sell such ar ticle knowingits
Appealwit
htheCourt
Fi
nance i
llegali mportation (Sec.3601,
ofTaxAppealsDi
visi
on
 TCC)
wi
thi
n30day sf
rom
noti
ce d. Export contraryt o law. (
Sec.
3514, TCC)
 I
fdecisionof
Appealwi t
hthe Commi ssioneror 2. ThePhili
ppi
nesisdi
videdint
ov ar
ious
CTAenbanc Secr
etary ofF i
nanceis port
sofentry–entryotherthanport
adverset ot he
 protestant,hemay
ofentr
y,wil
lbeSMUGGLI NG.
Appeal bycerti
orar
i appealtotheCTAand
wi
tht heSupremeCour t PORTOFENTRY
SCundert hesame A domestic portopen t o both
within15day sfr
om procedureont helef
t.
noti
ce for
eign and coast wise t r
ade i ncl
uding
“ai
rportofentry
”.(Sec.3514, TCC)
ALL art
icl
es impor ted intot he
Phil
ippineswhethersubjectt odut yornot
shallbeenteredthroughacust omshouse
REASONS FOR THE AUTOMATI
C REVI
EW OF
atapor tofentr
y.
DECI
SIONSADVERSETOTHEGOVERNMENT
ENTRY:i
nCust omsl awmeans-
1. the document sf il
ed att he
1. To pr otectthe i
nt erestoft he Customshouse
Government 2. the submi ssion and
2. A favorabledeci
sionwi l
lnotbe acceptance of the
appealed by the t axpayer and document s
cert
ainly a Collect or wil
l not 3. the procedur e of passi ng
appeal hisowndecision. goodst hrought hecust oms
3. Li
febloodTheory house (Rodriguezv s.Cour t
ofAppeal s,GRNo.115218,
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
115
MEMORYAI
DIN TAXATI
ON LAW
Sept
ember18,
1995) f
orf
eit
ure.
CONTRABAND: Ar t
icl
es of prohi
bit
ed PROPERTI ES NOT SUBJECT TO
i
mportat
ionsorexport
atons.(
i Sec.3514, FORFEI TURE I N THE ABSENCE OF
TCC) PRIMAFACI EEVI DENCE
Thef orfeitureoft hev ehicle,vesselor
air
craftshal lnotbe ef fected i fi tis
establishedt hatt heownert hereoforhi s
EVIDENCE FOR CONVI CTION I N agent i n char ge of t he means of
SMUGGLI NGCASES conv eyance used as af oresai d has no
Mer e possession oft he ar t
iclei n knowl edge of or par ticipation int he
queston-unl
i essdefendantcoul dexplain unlawf ulact:
that his possession isl awf ultot he Prov i
ded,howev er,thatapr imaf aci
e
sati
sfacti
onoft hecourt(Sec.3601, TCC). presumpt i
onshal l existagai nstthev essel,
Payment of t he t ax due af t
er vehicle or ai rcraf t under any of t he
apprehension is not a v ali
d def ense fol
lowi ngcircumst ances:
(Rodri
guezv s.Cour tofAppeal s,GRNo. 1. I ftheconv ey ancehasbeenused
115218,September18, 1995) for smuggl i
ng at l east t wice
before;
THINGSSUBJECTTOCONFI SCATI ONIN 2. I ftheowneri snoti nt hebusi ness
SMUGGLI NGCASES for whi ch t he conv eyance i s
Anyt
hing t hat was used f or gener allyused; and
smugglingissubjecttoconfiscat
ion,l
i
ke 3. I ftheowneri sf i
nanci all
ynoti na
the vessel
,pl ane,et c. (
Llamado v s. positi
ont oownsuchconv eyance.
Commi ssi
onerofCust oms,GR No.L-
28809,May16, 1983). DOCTRINEOFHOTPURSUI T
Requi
sit
es:
Excepti
on:Commoncar r
ier
sthatarenot 1. OverVessels
pri
vatel
ychar
ter
edcannotbeconfi
scat
ed. a. An acti s done in Phil
.Wat ers
whichconst i
tut
esav i
olati
onof
RIGHT OF CUSTOMS OFFI CERS TO thetari
ffandcustomsl aws
EFFECTSEI ZURE&ARREST( SEC.2205) b. apur suitofsuch v esselbegan
1. Maysei zeanyv essel
,air
craft,cargo, withi
nt he juri
sdicti
onalwat ers
arti
cle, animal or ot her mov abl
e which
propertywhent hesamei ssubjectto (i
) may cont i
nue bey ond t he
forf
eiture orliablef oranyt i
me as marit
imezone, and
imposed undert ari
ffand cust oms (i
i)thev esselmaybesei zedon
laws, r
ules&regul ati
ons t
hehighseas.
2. May exer cise such power s onlyin
conformi t
y wi th t he l aws and 2. OverI
mpor tedArticles
provi
sionsoft heTCC a. Thereisav iolati
onoft het ar
if
f
andcust omslaws
COMMONCARRI ERS; FORFEITURE b. Asaconsequencet heymaybe
1. Common car riers ar
e gener all
ynot pursuedinthePhi l.
subjectt of orfeit
urealthoughi ft he c. Withjuri
sdict
ionov erthem atany
ownerhasknowl edgeofi tsusei n pl
acet herei
nf ortheenforcement
smuggl ing and was a consent ing ofthelaw.(2ndpar.Sec.603,TCC)
party,i
tmayal sobef orf
eited.
2. Ifamot orv ehicl
ei shiredt o car r
y
smuggl ed goods but i t has no REGI
ONALTRI
ALCOURTS(RTC)
Certi
ficate of Publ i
c Conv enience VS.
(CPC), i
tisnotacommoncar ri
er.I
tis BUREAUOFCUSTOMS(
BOC)
thussubj ectt oforfei
tur
e,andl ackof
personalknowl edgeoft heowneror  The RTCs do nothav
ejur
isdict
ion
the car ri
er i s not a def ense t o over seizure and f
orfeit
ure
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
116
MEMORYAI
DIN TAXATI
ON LAW
proceedingsconduct ed byt heBOC 

and t o i nterfere wi th t hese For
mal
hear
ing
proceedings. The Col l
ector of
Cust oms has excl usivej urisdi
ction 
overal lquest i
ons t ouchi ng on t he Di
str
ictcol
lectorrender
shi
s
seizure and f orfeiture of dut i
able decisions
goods.
 Nopet iti
onsf orcer ti
orari
,pr ohibit
ion  
ormandamusf i
ledwi t
ht heRTCwi ll Ifdeci
sionisnot I
fdecisi
onisnot
l
ie because t hese ar e i n r ealit
y favorabletot
he favor
ablet
othe
attempt s t
o r
eview the aggri
evedowneror gov
ernment
Commi ssioner '
s act uati
ons.Nei t
her i
mpor t
er
replevi
nf il
edwi t
ht heRTCwi lli
ssue.  
Rat i
onale: Doct ri
ne of Pr i
mar y Appealbythe Aut
omati
cReview
Jurisdi
ction. aggr
ievedowneror bythe
 Eveni faCust omssei zurei si l
legal, import
er Commissi
oner
exclusive j urisdiction ( t
o t he
exclusion of r egul ar cour ts) st i
ll
belongst ot heBur eau ofCust oms PERSONS HAVI NG POLI CEAUTHORI TY
(Jao v .Cour tofAppeal s,GR No. TO ENFORCETHETARI FF&CUSTOMS
104604, Oct ober6, 1995) . LAWS AND EFFECT SEARCHES,
SEIZURES AND ARRESTS ( SEC.2203,
GOODS I N CUSTOM’ S CUSTODY TCC)
BEYONDREACHOFATTACHMENT 1) of fi
cial
soft heBOC, dist
ri
ctcol lectors,
Goodsi nthe custom’scust ody police officer s,agent s,inspector s,and
pendingpay mentofcust omsdutiesar e guest softheBOC;
beyondther eachofat t
achment.Asl ong 2) of fi
cersoft hePhi l
.Nav yandot her
as t he impor t
ati
on has not been member soft he AFP and nat ionall aw
ter
minated,the impor ted goodsr emain enforcementagenci es when aut hor i
zed
underthej urisdi
cti
on oft heBur eau of byt heCommi ssi onerofCustoms
Customs.( Viduyav s.Berdi
ago,GRNo.L- 3) of fi
cial
soft heBI Ronallcasesf al
li
ng
29218,October29, 1976) withint her egul arper f
ormancesoft heir
duties,when t he pay mentof i nt ernal
ADMINI
STRATIVE AND JUDI
CIAL taxesar einv olved;
PROCEDURES RELATI
VE TO CUSTOMS 4) of fi
cersgener all
yempower edbyl aw
SEI
ZURESANDFORFEITURES toef fectar rest sandexecut epr ocesses
ofcour ts,whenact i
ngundert hedi r ecti
on
Det
ermi
nati
onofprobabl
ecauseand oftheCol l
ect or.
i
ssuanceofwarr
ant
 REQUIREMENTS FOR CUSTOMS
Act
ual
sei
zur
eoft
hear
ti
cl
es FORFEITURE
1. Thewr ongf ulmaki ngbyt heowner ,
 i
mpor ter,expor terorconsi gnee of
Li
stingofdescr
ipt
ion,appr
aisal
and any decl ar ation oraf f
idav i
t,ort he
classi
fi
cati
onofseizedpropert
y wrongf ulmaki ng ordel i
verybyt he
 sameper sonsofanyi nvoice,letteror
Repor
tofsei
zur
etotheComm.of paper - al l t ouching on t he
CustomsandtheChai
rman,
Comm. i
mpor tati
on or expor tati
on of
onAudit mer chandi se. ;and
 2. That such decl arati
on, af f
idav i
t,
I
ssuancebyt
heColl
ectorofawar
rant i
nv oice,l etter or paper i s false.
ofdet
enti
on (Farolan, Jr.v s.Cour tofTaxAppeal s,
GRNo.42204, Januar y21,1993)

Not
if
icat
iont
oownerori
mpor
ter PLACESWHERESEARCHES&SEI
ZURES
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
117
MEMORYAI
DIN TAXATI
ON LAW
MAYBECONDUCTED
(a)enclosur es
(b)dwel l
i
ng house ( there mustbe
searchwar r
antissuedbyaj udge)
(c)vesselsorai r
craft
sandper sons ACQUITTALI N CRIMINALCHARGENOT
orarticlesconveyedt her
ein RES JUDI CATA I N SEI ZURE OR
(d)vehicl
es, beastsandper sons FORFEITUREPROCEEDI NGS
(e)persons ar r
ivi
ng f rom f orei
gn Reasons:
countries. 1) Cri
mi nalproceedingsar eact i
onsin
personam whi leseizureorf or
fei
tur
e
Note: Burden ofproofi
n sei
zure or proceedi ngsareactionsinrem.
for
fei
tur
eisontheclai .(
mant Sec.2535, 2) Cust oms compr omise does not
TCC) exti
ngui sh criminalliabi
l
ity.(Peopl
e
vs. Desi derio, GR No. L- 208005,
REQUI REMENTSFORMANI FEST Nov ember26, 1965)
Amani f
estincoastwiset r
adefor
cargoandpassenger stranspor t
edfrom Note: Atanyt i
mepr i
ort othesal e,the
onepl aceorpor tinthePhi l
ippi
nest o deli
nquent i mpor t
er may set tle his
anotherisrequi
redwhenoneorbot hof obli
gat ionswi t
ht heBur eauofCust oms,
suchpl acesisaportofent y(
r Sec.906, i
nwhi chcaset heaf or
esaidar ti
clesmay
TCC).Mani f
est
s are also required of be del iv
ered upon pay ment of t he
vesself r
om a forei
gn port( Sec.1005, correspondi ng duties and t axes and
TCC). compl iance wi th al l ot her l egal
requirement s(Sec.1508, TCC)
IS MANI FEST REQUI RED ONLY FOR
IMPORTEDGOODS? ABATEMENT
NO.Ar ti
clessubjecttosei
zuredo The reduct ion ornon- imposit
ion of
nothavetobei mportedgoods.Manifests cust
oms dut ies on cer tain i
mpor ted
are al
so required forar t
icl
esfound on materi
alsasar esultof
:
vessel
sorai rcraftengagedi ncoastwise 1) Damagei ncurr
eddur ingvoyage;
tade.(
r Rigorv s.Rosales,GRNo.L-33756, 2) Def i
ciencyi ncontentspackages
October23,1982) 3) Loss ordest ruct
ion ofar ti
cles
afterar ri
val
UNMANI FESTEDCARGOI SSUBJECTTO 4) Deat hori njur
yofani mals
FORFEI TURE whet her the act of
smuggl i
ngi sestabli
shedornotundert he FRAUDULENTPRACTI CESCONSI DERED
pri
ncipleofr esipsaloqui
tur.I
tisenough AS CRI MI NAL OFFENSES AGAI NST
thatthecar gowasunmani fest
edandt hat CUSTOMSREVENUELAWS
therewasnoshowi ngthatpay mentof 1) Unlawf uli
mpor tation;
duti
est hereonhadbeenmadef ori
ttobe 2) Entryofi mpor tedorexpor tedar ti
cle
subjecttoforfei
ture. bymeansofanyf alseorf raudulent
practi
ces, i nvoi ce, decl arati
on,
SETTLEMENTOFFORFEI TURECASES affi
davit,orotherdocument s;
GeneralRule:Sett
lementofcases by 3) Entryofgoodsatl esst hant heirtrue
payment of fine or r edempt
ion of weights or measur es or upon a
for
fei
tedpr
opert
yisall
owed. classif
icati
onast oqual ityorv alue;
4) Pay mentofl esst hant heamountdue;
Except
ions: 5) Fil
inganyf alseorf raudulentclaimf or
1. the impor t
ati
on i s absolut
ely thepay mentofdr awbackorr efundof
prohi
bit
edor duties upon t he expor tati
on of
2. thesurrenderoft hepropert
yt o mer chandise;or
the person off
eri
ng tor edeem 6) Fil
inganyaf fidavit,certi
ficateorot her
wouldbecont r
arytolaw,or documentt o secur et o himsel for
3. whent hereisfraud.(Sec.2307, otherst hepay mentofanydr awback,
TCC) all
owanceorr efundofdut i
esont he
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
118
MEMORYAI
DIN TAXATI
ON LAW
expor
tat
ionofmdse.gr
eatert
hanthat 6. to pr omulgate r ules and
l
egall
yduet eon.(
her Sec.3602,TCC) regulati
onsf ortheconductofi ts
business;
7. to assess damage agai nst
VI. COURTOF appellanti f appealt o CTA i s
foundt obef ri
volousordi lat
ory
;
TAXAPPEALS 8. tosuspendt hecol lectionoft he
(
RA1125asamended taxpendi ngappeal ;and
9. tor ender deci sions on cases
byRA9282) broughtbef oreit
10.to i ssue or der aut hori
zing
 SeeANNEXOforcompari
sonofCTA distr
aintofper sonalpr opert
yand
ascreat
edbyRA No.1125andthe l
ev yofr ealpr
oper t
y
amendment
smadebyRANo.9282.
DISTRAI NT OF PERSONAL PROPERTY
ANDLEVYOFREALPROPERTY
NATUREANDPOWERS Upont hei
ssuanceofanyr
uli
ng,or
der
ordeci si
onbyt heCTA favor
abletothe
ELEVATIONOFRANK nati
onalgov er
nment,theCTAshalli
ssue
shallbe ofthe same levelas t
he anor derauthori
zi
ngtheBIR,thr
oughthe
Court of Appeal
s,possessing allt
he Commi ssi
oner:
i
nherentpowersofaCourtofJusti
ce
1. to sei ze and di strai
ntany goods,
COMPOSI TI
ON chat t
els,oref fectsandt heper sonal
proper ty,includingst ocksandot her
 ConsistsofaPr esidingJusticeand
secur i
ties, debt s, cr edi
ts, bank
fi
ve(5)Associat
eJust ices
account s,andi nterestsinandr ights
 Maysi tenbancorint wo(2)Divisi
ons,
toper sonal proper t
yand/ or
eachDi vi
sionconsisti
ngoft hree( 3)
2. l
ev yther ealproper t
yofsuchper sons
Justi
ces. ThePr esidi
ngJusticeand
i
nsuf f
icientquant i
tytosati
sfythet ax
the mostSeni orAssoci ate Justi
ce
or char ge t ogether wi t
h any
shallserveaschai rmenoft het wo
i
ncr ement t hereto i nci
dent t o
div
isions
deli
nquency .
QUORUM
Thisr emedyshallnotbeexcl usive
 Four( 4)Just i
cesshal lconstit
ut ea and shal
lnotpr ecl
ude the Cour
tf rom
quorum f orsessionsENBANC. avai
l
ingofot hermeansundert heRul es
 Two ( 2)Just icesf orsessionsofa ofCourt.
DIVISION.
PROVI DED:i ncaset her equir
edquor um
cannot be had due t o any vacancy ,
JURI
SDI
CTI
ON
disqualif
icati
on,i nhibi
tion,disabili
ty,or
I
.EXCLUSI
VEAPPELLATE
any ot herl awfulcause,t he Pr esiding
JURISDI
CTI
ONTOREVIEW BYAPPEAL
Justice shalldesi gnate any Just i
ce of
other Di visi
ons of t he Cour tt o si t
(
a) Decisionsoft he Commi ssioner
tempor aril
ytherein.
ofInter nalRevenue
1. in cases i nv ol
vi
ng di sput ed
POWERS
assessment s, r efunds of
1. toadmi nisteroaths;
i
nt ernalr evenue t axes,f ees
2. toreceiveev idence;
orot herchar ges,penal t
iesi n
3. to summon wi tnesses by
relati
ont her eto,
subpoena;
2. or ot her mat ter
s ar ising
4. torequirepr oducti
onorpapersor
undert heNI RCorot herl aws
document s by subpoena duces
admi nisteredbyt heBIR;
tecum;
(
b) I
nact ionbyt heCommi ssionerof
5. topunishcont empt;
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
119
MEMORYAI
DIN TAXATI
ON LAW
Inter nalRevenue commodi tyorarti

cle,
1. i n cases i nv olv ing di sput ed –inv ol
vi
ng dumping and
assessment s, r efunds of counterv
ail
ingdut i
esunderSecs.
i
nt er nalr ev enue t axes,f ees 301and302,r espectively
,ofthe
orot herchar ges,penal ti
esi n Tarif
fand Cust oms Code,and
relat iont her eto, safeguardmeasur esunderRANo,
2. or ot her mat ter s ar i
sing 8800,wher e eit
her party may
undert heNI RCorot herl aws appealthedecisiontoi mposeor
admi nist er ed by t he BI R, nottoimposesai dduties.
wher et he NI RC pr ov ides a
speci ficper iodf oract ion,i n I
I. JURISDI
CTI
ON OVER CASES
whi chcaset hei nact ionshal l INVOLVI
NGCRIMI
NALCASES
bedeemedadeni al;
(
c) Deci si ons,or der sorr esol utions (
a)Exclusiveor i
gi nalj uri
sdi ctionov er
oft heRTC all crimi nal cases ar ising f rom
–i nl ocalt ax cases or igi nally vi
olat i
onsoft heNI RCorTar i
ffand
deci ded orr esol v ed byt hem i n Cust oms Code and ot her laws
theex erci seoft hei ror iginalor admi nistered by t he BI R ort he
appel latej urisdi ct ion; BureauofCust oms
(
d) Deci si onsoft he Commi ssi oner  Pr ov i
ded howev er, wher e t he
ofCust oms principalamountoft axes and
1. i ncasesi nv olv ingl iabilityf or fees,excl usi v e ofchar ges and
cust omsdut ies, feesorot her penal ti
es cl aimed i sl ess than
moneychar ges, sei zur e, onemi l
lionpesos( P1,000,000.
det ent i
onorr el easeof 00)orwher et herei snospeci fied
pr oper tyaf fect ed, fines, amountcl aimed- t heof f
enses
f or feitur esorot herpenal ti
es orpenal tiesshal lbet riedbyt he
inr elat iont her et o, regular cour ts and t he
2. or ot her mat t
er s ar i
sing j
ur i
sdict i
onoft heCTA shal lbe
undert he Cust omsLaw or appel l
at e.
ot herl aws admi ni ster ed by  Anypr ov i
si onofl awort heRul es
theBur eauofCust oms; of Cour t t o t he cont rar y
(
e) Deci si onsoft heCent ralBoar dof not withstandi ng, t he cr iminal
AssessmentAppeal s action and t he cor r espondi ng
–i nt heexer ciseofi tsappel l
ate civilact ion f ort he recov eryof
j
ur i
sdi ctionov ercasesi nv olv i
ng civil l i
abi li
t y f or t axes and
theassessmentandt axat i
onof penal ti
es shal latal lt i
mes be
realpr oper t
yor i
gi nal l
ydeci dedby simul taneousl y i nsti
tut ed wi th,
the pr ov inci alorci ty boar d of and j oi ntly det ermined i nt he
assessmentappeal s; samepr oceedi ngbyt heCTA, the
(
f) Deci si ons of t he Secr etar y of fi
li
ngoft hecr i
mi nalact ionbei ng
Finance deemedt onecessar i
lycar r
ywi th
–oncust omscasesel ev at edt o i
tt hef il
ingoft heci vi
lact i
on,and
him aut omat ical lyf orr ev iewf rom nor i
ghtt or eser vet hef il
ingof
deci sionsoft heCommi ssionerof suchci vilact i
onsepar atelyfrom
Cust oms whi ch ar e adv er se t o the cr imi nal act i
on wi ll be
the Gov ernmentunder Sect ion recogni zed.
2315oft heTar i
ffandCust oms
Code; (b)Exclusiveappellat
ej uri
sdi
ctionin
(
g) Deci si ons of t he Secr etar y of cri
minal offenses
TradeandI ndust r
yi nt hecaseof  Ov erappealsf r
om thejudgment s,
nonagr icul tur al pr oduct , resolutionsoror dersoft heRTC
commodi ty or ar t icle,and t he int axcasesor i
ginall
ydeci dedby
Secr et ar y ofAgr icul tur ei nt he them, i n t heir r especti
ve
case of agr icul tur al pr oduct , territ
orialj
uri
sdicti
on.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
120
MEMORYAI
DIN TAXATI
ON LAW
 Overpet i
tionsf orrev i
ew oft he
judgment s,r esoluti
ons,oror ders “OTHERMATTERS”
oftheRTCi nt heexer ci
seoft heir Those controversies which can be
appel l
ate j urisdict
ion ov er tax considered within t he scope of t he
casesor iginallydeci ded byt he functi
onoft heBI R/BOCunderej usdem
Met ropoli
tan Tri
al Cour ts, generisrul
e( e.
g.act ionforthenul l
it
yof
Muni cipal Tr ial Cour ts, and dist
raint and l evy; questioni
ng t he
Muni cipalCi rcuitTr i
alCourtsi n propri
etyoftheassessment ;coll
ecti
onof
theirrespect i
vej uri
sdicti
on. compr omisepenal t
ies).
I
II
.JURISDI CTI ON OVER TAX APPEAL
COLLECTI ONCASES
(
a)Excl usiveor i
ginalj ur
isdict
ion in WHEN
tax col lecti
on cases i nv ol
v i
ng Wit
hin 30 day
saf t
ertherecei
ptof
fi
nalandexecut or yassessment s such deci
sion or r
uli
ng or af
ter t
he
for t axes, f ees, charges and expi
rat
ionoftheperi
odf i
xedbylaw for
penal ti
es. acti
on.
 In col l
ection cases wher et he
pri
nci palamountoft axes and MODESOFAPPEAL
fees,excl usiv e ofchar ges and (
1)Byf il
ingapet iti
onf orr eview undera
penal ti
es,cl aimed i sless t han procedur eanal ogoust ot hatpr ov i
ded
onemi ll
ionpesos( P1,000,000. forunderRul e42of1997Rul eson
00)–shal lbet r
iedbyt hepr oper CivilProcedur e
Muni cipal Tr i
al Court,  deci sion,r uling,ori nact i
onoft he
Met ropolit
an Tr ial Cour t
, and Commi ssioner of I nt ernal
RegionalTr i
alCour t. Rev enue, Commi ssioner of
Cust oms, t he Secr etary of
(
b)Excl usiveappel lat ejur isdictionin Finance,t he Secr etaryofTr ade
taxcol l
ecti
oncases andI ndust r
yort heSecr etar yof
 Ov erappeal sfrom t hej udgment s, Agr i
cul ture ort he Regi onalTr i
al
resol uti
onsoror der sofRTC i n Cour ts
tax col l
ection cases or i
ginally  t hisappealshal lbehear dbya
deci ded by t hem, i n t heir Di v
isionoft heCTA
respect iveterr
itor i
al jurisdicti
on. (2)Byf il
ingapet itionf orr ev i
ewundera
 Ov erpet i
ti
onsf orr eview oft he procedur e anal ogous t o t hat
j
udgement s, r esol utions or providedf orunderRul e43of1997
order soft heRTCi nt heex erci
se RulesonCi vilProcedur e
oft heirappel l
atej urisdi cti
onov er  deci sionsorr uli
ngsoft heCent ral
tax col l
ection cases or i
ginally Boar d ofAssessment s Appeal s
deci dedbyt heMet r
opol it
anTr ial andt heRegi onalTr i
alCour tsin
Cour ts,Muni cipalTr i
alCour ts the exer cise of i ts appel l
ate
andMuni ci
pal CircuitTr ialCourts, juri
sdi ction
i
nt hei rrespectivej urisdi cti
on.  t hisappealshal lbehear dbyt he
CTAenbanc.
 I
ncr
imi
nalandcol
l
ect
ioncases,t
he
Gov er
nmentmaydi r
ect
lyfi
let
hesaid PROCEDURE
caseswi tht
heCTAcoveri
ngamounts A.Anypar t
yadv ersel
yaf f
ectedbyar uli
ng,
wit
hi n its excl
usi
ve and ori
ginal orderordeci sionofaDi vi
sionoft he
j
urisdict
ion. CTA may f il
e a mot ion f or
reconsider
ationornewt r
ialbefor
et he
 See ANNEX P – Compar at
ive same Di vi
sion wi t
hin 15 day sfrom
Diagr
amsonCTAj
uri
sdi
cti
on. notice
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
121
MEMORYAI
DIN TAXATI
ON LAW
forr
econsi
derat
ion.
B. Any par t
y adver
sely af fect
ed by a GENERALRULE:New i ssuescannotbe
resol
utionofaDivisionoft heCTAon r
aisedfort
hefi
rstti
meonappeal.
amot ionf orr
econsi derati
onornew
tri
almayf i
leapeti
tionf orrevi
ewwith EXCEPTI ONS:
theCTAenbanc. a. Defenseofpr escri
pti
on
Reason:Thi si s a statutoryright.
C. Any party adversely aff
ect
ed by a (Vi
say an Land Tr ansportati
on v s.
deci
sionorr ul
ingoft heCTAenbanc Collector)
mayf il
ewi tht heSupr emeCourta b. Err
or sofadmi ni
str
ativeoffi
cial
s
ver
ifi
ed pet i
ti
on f or r evi
ew on Reason: St ate can nev er be i n
cert
ior
aripursuantt oRule45oft he estoppel and l ifebl
ood t heory.
1997RulesonCi v
ilProcedur
e. (Commi ssi
oner v s. Pr octer and
Gambl e Phi ls.Mf g.Cor p,GR No.
THIRTY ( 30)DAY PRESCRI VE PERI
PTI OD FOR 66838, April15,1988)
APPEAL
St artst or un f rom t he dat et he NOTE:Howev er
,t his was r ev
ersed in
taxpay err ecei vestheappeal abledeci sion. Supreme Cour t’
s subsequentr esolut
ion
If t he t axpay er’
s r equest f or whereinitwashel dt hat“intheabsence
reconsi der ation(i.e.
,thepr otesti sdeni ed ofexpl i
citstatutory provisi
ons tot he
ortheor iginalassessmenti smai ntained, contrar
y,theGov ernmentmustf oll
owt he
theappeal abl edeci sioni st hedeci sion same r ules of pr ocedur
e whi ch bind
deny ingt her equestf orreconsi deration. pri
vate parti
es.” ( Commi ssi
oner v s.
Thesai dper i
odi sj uri
sdi ctionaland Procter and Gambl e,GR No. 66838,
non- extendi ble.Request sormot i
onsf or December2, 1991, Resolut
ion)
reconsi der ation, howev er, oper ate t o
suspend t he r unning oft he per iod t o TAX COLLECTI
ON NOT SUSPENDED DURI
NG
appeal . A pr o f orma r equest f or APPEAL
reconsi der ationoronewhi chi sdirect ed
tot he Secr etary ofFi nance does not GeneralRule: No appealt
aken tothe
suspend t he r unning of t he 30- day CTA shallsuspendthepayment,l
evyor
reglement ar yperiod. dist
rai
nt,and/orsal
eofanypr oper
tyof
thetaxpayer.
ONLY A FI
NAL DECI
SION I
S APPEALABLE TO
THECOURTOFTAXAPPEALS Excepti
on: TheCTA i sempower ed to
suspendthecollectionofi nternalrevenue
 Pr
eli
minar
y col
l
ect
ion l
ett
ers,post taxesandcustom dut iesonl ywhent here
reportingnot icesandpr e-assessment wasa–
noticesar enotappeal abl e,because c) showingt hatcol l
ect i
onoft het ax
theyar enott hefinaldeci si
onoft he mayj eopardizet hei nterestoft he
Commi ssioner . governmentand/ort het axpay er
;
 An assessmentcan be appeal ed if d) depositoft heamountcl ai
medor
taxpay er does not seek a fi
leasuretybondf ornotmor ethan
reconsi derat i
on. doubletheamountoft axwi ththe
 Att i
mes t her eis an exchange of Courtwhenr equired; and
communi cat i
ons bet ween t axpayer e) showingbyt axpayert hatappeali s
and Commi ssionerst ates t hathi s notfr
ivol
ousnordi latory.
actioni sf inal,then,periodf orappeal
beginst orun. CANTHECTAENJOI
N COLLECTI
ONOFTAXES?
 Commi ssionermustst at et hathi s
decisioni sf i
nal ,forperi
odofappeal  Sec.11ofRANo.1125asamended
torun. bySec.9ofRANo.9282gr ant
sCTA
 Finaldeci sioncannotbei mpl i
edf rom powertosuspendcol
lect
ionoft axif
i
ssuanceofwar rantofdi st
raintand such col
l
ecti
on works t o serious
l
ev y,unl essi tisissuedaf terar equest prej
udi
ce of either taxpayer or
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
122
MEMORYAI
DIN TAXATI
ON LAW
gov ernment. vs. Court of Appeal

s & At
las
 Howev er
,Sec.218oft heTaxCode Consol
idat
ed, GR No. 86785,
prov i
des no cour t may gr ant November21,1991)
i
njunct i
ont orestraincol
lect
ionofany
tax,f eeorchar gei mposed byTax
Code.
VI
I.
VALUE–ADDEDTAX
 Thepr ovisi
oni nTaxCoder efersto (VAT)
cour t
sot hert hantheCTA.( Blaquera TI
TLEIVOFNI RC
vs.Rodr i
guez, GRNo.L- 11295,Mar ch
29,1958) DEFINI ON:Th
TI ev al
ue-added tax is an
 Appeal t o t he CTA does not i
ndirectt axandt heamountoft axmaybe
automat ical
ly suspend col lecti
on shif
ted or passed on t o the buy er
,
unlessCTAi ssuessuspensionor der tr
ansf eree or l essee of t he goods,
atanyst ageofpr oceedi
ngs. proper t
ies orser v i
ces.Thisr ul
e shall
l
ikewi se appl yto existi
ng contr
acts of
SI
MULTANEOUSFI
LINGOFANAPPLI
CATI
ONFOR sale orl ease ofgoods,pr opert
ies or
REFUND OR CREDI
T AND I
NSTI
TUTI
ON OF A
servicesatt hetimeoft heeff
ecti
vityof
CASEBEFORETHECTAALLOWED
Republ i
cActNo.7716.
Thel awfi
xest hesameper iodof VATrepl
acedSalesTaxasi
mposedby
two( 2)y earsforfi
l
ingacl aimf orr efund pr
evi
ousTaxLaws.
witht heCommi ssionerandf orfilinga
casewi t
ht heCTA.Thet wo-yearper i
od HI
STORY:
forbot hst artsfr
om t hedat eaf tert he a. Execut
iveOrderNo.273
paymentoft hetaxorpenal t
y,orfrom t he b. Republ
icActNo.7716
approv aloftheappli
cationforcredi
t . c. Republ
icActNo.8241
d. Republ
ic Act No. 8424 (
took
Obser vat i
on:Ifwear enotgoi ngtoallow eff
ecton1January1998)
thet axpay ertof i
lear efundbef orethe
CTA and l et him wai tf or the CIR’
s TRANSACTIONSCOVEREDBYVAT:
decision,andt hel at
terfai
ledt orendera 1. Sal eofCommodi ti
esorGoods( in
decisionwi thi
nt he2-yearperi
od,thesaid thecourseoft radeorbusi ness
taxpay ercan no l ongerf il
ear ef
und only)
beforet he CTA because hi sr ightto 2. Sal eofServi
ces( i
nt hecourseof
appeal hasprescri
bed. tradeorbusi
nessonl y)
3. Expor tat
ion (
in the cour se of
WEI
GHTOFDECI
SIONOFCTA
tradeorbusi
nessonl y)
4. Impor tat
i whet
on ( herornoti n
 Decisions of Tax Cour t hav e thecourseoftr
adeorbusi ness)
persuasiv eef f
ectandmayser v eas
j
udicialgui des. They hav e mor e PERSONSLI ABLEF ORVAT
persuasiv ev aluet hanBI RRulings. Anyper son who,i nthe course of
 CTA’sf indingsoff actar eent i
tledt o trade or busi ness, sel
ls bar ters,
thehi ghestr espect .( Raymundov s. exchanges,l eases goodsorpr oper
ties,
deJoy a, GRNo.L- 27733, December3, renders serv i
ces,and any person who
1980) i
mpor ts goods shallbe subj
ectt ot he
 TheSupr emeCour twillnotsetasi de value-added t ax ( VAT) i
mposed i n
conclusions r eached by Tax Cour t Sections 106 t o 108 oft he Nat i
onal
which by t he v ery nature of i t s Inter
nal RevenueCode.
functi
on,i sdedi catedexcl usivelyt o
the consi der ation oft ax probl ems “I
N THE COURSE OF TRADE OR
andhasdev elopedanexper tiseon BUSINESS”
thesubj ect,unl esst herehasbeenan Theregul
arconductorpursuitofa
abuseorani mpr ovidentexer ciseof commer ci
al or an economic acti
v i
ty,
authorit
yoni t
spar t.(Commi ssi oner i
ncludingtr
ansact
ionsinci
dent
altheret
o,
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
123
MEMORYAI
DIN TAXATI
ON LAW
byanyper sonregardlessofwhet heror duti

esar edeterminedont hebasisof
nott hepersonengagedt herei
ni sanon- thequant it
yorv olumeoft hegoods,
stock, nonprofi
t pr i
v at
e or ganizat
ion thevalue-addedtaxshallbebasedon
(i
rrespecti
veoft hedisposit
ionofi tsnet thelandedcostpl usexcisetaxes,I
f
i
ncome and whet her or not i t sell
s any.customsdut ies.
exclusiv
elytomember sort heirguests),
orgov ernmententi
ty. B.Zer
o-r
ated(
0%)r
ateoft
ax
Theref
oreift
hedisposi
ti
onofgoods
1. Expor tSal esaspr ovi
dedi nSect i
on
orserv
icesisNOTinthecourseoftrade
106(A) (
2)(a)
orbusi
nesstheniti
snotsubjectt
oVAT;
2. Foreign Cur rencyDenomi nat
ed Sal e
wit
ht he except
ion of i
mportat
ion of
aspr ovi
dedi nSection106( A)
(2)(b)
cour
se.
3. Salet oper sonsorent iti
eswhi chi s
Ther uleofregular
ity
,t ot
hecontrar
y VAT exemptunderspeci allaws or
notwithstanding,servi
ces as defi
ned i
n i
nternational agreementst owhicht he
thi
sCoder enderedinthePhi l
ippi
nesby Phil
ippinesi sasi gnator
yaspr ovided
non-resident forei
gn persons shallbe i
nSect i
on106( A)(2)(
c)
consideredasbei ngcour seoft r
adeor 4. Transact i
ons subj ect to zero-rated
business. (0%)aspr ov i
dedinSection108( B)
I
mportati
onissubj
ecttoVATregar
dless
ofwhetherornotitisinthecour
seof REGISTRATION UNDER THE VAT
tr
adeorbusi
ness SYSTEM (SECTI
ON236OFTHENI
RC)
Ther easonf ort

herul
ei stopr otect Gener alRule:Fail
uret
oregi
steri
ssubj
ect
ourlocalordomest icgoodsorar t
icles to t empor ar
y cl osure of t he
andtor egulat
et heent
ryorintroducti
on establishmentf or5daysaspr ovi
dedin
offoreign art
icl
esto ourlocalmar ket. Section115( b).
Regulat
ion is one ofthe purposes of
Taxati
on. Exception: I
t does not appl yt o an
exporterwhof ail
stor egist
er.Theeffect
TaxRates: i
s,insteadoft reati
ngt hetransact
ionas
1. 10% - t he rate used in sal
e of zero-
rated(0%),iti
streatedasanexempt
commodi ties and goods,sale of tr
ansact i
on.
servi
ces,andimportat
ion.
2. Zero-
rated (0%)-t he rat
e used i
n Whatisthediff
er ence?Inzer
o-r
ated(0%)
export
ation. tr
ansacti
ons, tax cr edi
ti s av ai
l
abl
e.
Howev er
,in exempt t r
ansact
ions,tax
credi
tisnotav
ailable.
MANNEROFCOMPUTI
NGTHEVAT:
A.10%r
ateofTax
EXEMPTTRANSACTI ONS( SECTI ON
1. In saleofcommodi ti
esand goods, 109)
:
10% i s mul ti
plied witht he Gr oss 1. InSect i
on109( a)and( c) ,f
oodand
Sell
ingPr ice. non-food product s ar e VAT-exempt
2. Insal eofser vi
ces,10% i smul ti
plied asl ongast hesepr oduct sar einits
witht heGr ossReceipts. ori
ginalstate.Thesi mpl epr ocessof
3. Inimpor t
ation,10%i smul t
ipl
iedwi th preparati
on orpr eser v
ation fort he
the r ates used by t he Bur eau of mar ket such as f reezing, dryi
ng,
Cust oms i n imposi ng t ariff and salt
ing,broil
ing,roasting,smoki ng,or
customsdut i
espl uscust omsdut i
es, stri
pping does not r emov e t he
excise t axes, i f any , and ot her productf r
om i t
scat egoryofbei ngin
charges,sucht axtobepai dbyt he i
tsor i
ginalstate.
i
mpor terpr i
ortot hereleaseofsuch  Howev er,eveni fthepr oduct swer e
goods f rom cust oms cust ody: nol ongerini tsoriginalst at
e,itcan
Provided,Thatwher et he customs sti
llbe VAT- exemptunderSect ion
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
124
MEMORYAI
DIN TAXATI
ON LAW
109(r
), if sol d by agr icult
ur al entiti
esoragenci esexemptf rom t ax
cooperat
ives dul y r egistered by wher esuchgoodsar esubsequent l
y
Cooperati
veDev el
opmentAut hor i
ty. sold,transf err
edorexchangedi nt he
2. Under Sect i
on 109( m) , pr i
vate Phili
ppinest onon-exemptper sonsor
educati
onali nst
it
utions are exempt entiti
es,t hepur chasers,t r
ansf erees
fr
om VAT i fdulyaccreditedbyt he orr eci
pient sshallbeconsi deredt he
DECS orbyt he CHED.I n case of i
mpor t
erst hereof,whoshal lbel i
able
government educat i
onali nst i
tuti
on, foranyi nt ernalrevenuet axonsuch
noaccreditati
onisrequir
ed. i
mpor t
ation.The t ax due on such
i
mpor t
ationshal lconst i
tuteal ienon
3. Transactionsinthef i
eldofArtsare thegoodssuper i
ortoal lchar gesor
VAT- exempt only,as pr ovi
ded in l
iensont hegoods, i
rrespectiveoft he
Section 109(n),ifthe sel
leristhe possessort hereof.
arti
sthi mselforthearti
st’
sservi
ces
performedf ortheproduct
ionofsuch TRANSACTI
ONSDEEMEDSALE:
works.
Thefol
lowi
ng t
ransact
ionsshal
lbe
4. Secti
on 109(
p)makes Regionalor deemed sale ther
efor
e making them
AreaHeadquar
ter
sexemptf
rom VAT. coveredbyVAT:
5. UnderSect i
on109( w)inorderf ort
he (1)
Transf er,useorconsumpt ionnoti n
saleorl easeofr ealpropertyt obe the cour se of busi ness of goods or
exempt edfrom VAT,t hetransacti
on properti
esor i
ginallyintendedf orsaleor
must NOT be conduct ed i n t he foruseint hecour seofbusi ness;
ordi
narycour seoftradeorbusi ness. (2)
Distr
ibut ionort r
ansf ert
o:
Itcompl ementsSection106( A)(1)
(a) (a) Sharehol dersori nvestorsas
wher eitstatesthatinorderf orthe shareint hepr ofitsoft heVAT- regi
stered
saleorl easeofr ealpropertyt obe persons;or
coveredbyVAT,i tmustbemadei n (b) Creditorsinpay mentofdebt ;
the or di
nary course of t rade or (3)
Consignmentofgoodsi factualsaleis
business. notmadewi thi
nsi xty(60)day sf ol
lowing
thedatesuchgoodswer econsigned;and
6. RevenueRegulat
ionsNo.6-97addsa (4)
Retir
ement f rom or cessat i
on of
requi
rementinorderfort
hel easeof business,wi thr espectt oinventori
esof
resi
denti
aluni
tswithamont hl
yrental taxable goods exi sting as of such
of not mor e than P8,
000.00,as reti
rementorcessat i
on.
provi
dedinSecti
on109(x)
,tobeVAT
exempt,t hat the annual gr oss Howt odeterminet
heVAT:Thet axshal
l
recei
pts must not exceed be computed by mult
ipl
yi
ng the tot
al
P550,000.
00. amountindicat
edintheinvoi
cebyone-
el
eventh(
1/11).
7. Secti
on109( z)prov
idest hatthesal e
orleaseofgoodsorper formancesof Exampl e:thetotalamountindi
cat
ed i
n
servi
cesot herthant hosement i
oned theinvoiceisP110.P110/11=P10.P10
i
nt hepr ecedingparagraphsar eVAT i
st heamountofVAT.
exempti ftheGr ossAnnualRecei pts
donotexceedP550, 000.00.Howev er
, TAXCREDI
TANDREFUND
the li
mitati
on ofP550, 000.00 does
applyf ort hose transactions fr
om For
mul
aforTaxCredi
t:
Secti
on 109( a) to( y)
,except ( x) Output
becauseRev enueRegul ati
onsNo.6- Less:I
nput
97imposesaP550, 000.00l imi
tati
on. VATdue.
 I
n casesoft ax
-fr
ee i
mport
ati
on of  I
fInputisgreat
erthanOut
put
,Tax
goodsint
othePhil
i
ppi
nesbypersons, Cr
editi
savai
l
able.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
125
MEMORYAI
DIN TAXATI
ON LAW
reduced by the amountof cl ai

m f or
"INPUTTAX"meanst hev alue-addedt ax refundort axcredi
tf orval
ue-
addedt ax
due from orpai d by a VAT- register
ed andot heradj
ustments,suchaspurchase
person int he course ofhi st rade or returns or al
lowances and input tax
businessoni mport
ationofgoodsorl ocal attri
butabl
etoexemptsale.
purchaseofgoodsorser vices,i ncludi
ng
l
ease oruse ofpr opert y
,f rom a VAT- Theclai
mf ortaxcreditr
eferr
edtoin
regist
eredperson.I
tshal lalsoincl udethe theforegoi
ngpar agr
aphshallincl
udenot
transi
ti
onal input t ax det er
mi ned i n onlyt hose fi
led witht he Bureau of
accordancewi t
hSection111oft heNI RC. I
nternalRevenuebutalsothosef i
l
edwith
othergovernmentagencies,suchast he
"OUTPUT TAX"means t he val
ue-added BoardofI nvestmentsort heBur eauof
taxdueont hesaleorleaseoft axable Customs.
goodsorpr opert
iesorser vi
cesbyany
personregi
ster
edorr equir
edt oregist
er TheCommi ssi
onerwi thin120day s,
underSecti
on236oftheNI RC. i
n pr oper cases, f rom t he date of
submi ssi
on ofcompl et
e document sin
 Ifatt heendofanyt axabl equar ter suppor toftheappl icati
onshal lgranta
theout putt axexceedst hei nputt ax, refundori ssuet het axcreditcert
ifi
cat
e
theexcessshal lbepai dbyt heVAT- forcredit
ableinputtaxes.
registered per son.I fthe i nputt ax
exceedst heout putt ax,t heexcess
Remedy i n case off ull,orpartial
shall be car ri
ed ov er t o t he
denial,or f ail
ure on t he par t of the
succeedi ngquar terorquar ters.Any
Commi ssionertoactupont heapplicat
ion
i
nputt axat tri
butabletot hepur chase
fort ax cr editorr efund:t he t
axpayer
ofcapi t
algoods ort o zer o-r
ated
affectedmay ,wit
hint hir
ty( 30)daysf r
om
sales by a VAT- regi
stered per son
ther eceiptoft hedeci siondeny i
ngt he
may athi s option be r efunded or
claim oraf t
ertheexpi rati
onoft heone
credited agai nst ot her i nternal
hundr ed twent y day -
per i
od,appealt he
revenue t axes, subj ect t o t he
decisionort heunact ed cl aim wit
ht he
prov i
sionsofSect ion112.
Cour tofTaxAppeal s.
OPTIONSOFATAXPAYERASPROVI
DED RETURNANDPAYMENTOFVAT
INSECTION112:
1. t
oclaimfort
axcredi
t;or Ev erypersonl i
abletopayt hev alue-
2. t
oclaimforr
efund addedt axshal lfi
leaquar terlyreturnof
theamountofhi sgrosssal esorr eceipts
Thecl ai
m,whi chmustbei nwr i
ti
ng, within25day sf oll
owingthecl oseofeach
forbot h cases,mustbe f il
ed within2 taxable quar ter prescribed f or each
years af t
er the close of the taxable taxpay er:Provided,howev er,ThatVAT-
quarterwhent hesalesweremadef or:a) registered personsshal lpayt hev alue-
theissuanceofat axcr edi
tcert
if
icate;b) addedt axonamont hlybasis.
ref
undofcr edi
tabl
ei nputt
axdueorpai d
att
ri
but abl
et osuchsales. Anyper son,whoser egistr
ationhas
been cancel led in accor dance wi th
HOW TO DETERMI NE CREDI TABLE Section236, shallfi
l
ear et
urnandpayt he
INPUTTAX taxduet her eonwi t
hin25day sf rom the
The sum oft he excess i
nputt ax date of cancel lat
ion of r egistr
ati
on:
carr
iedov erfrom theprecedingmonthor Provided,That onl y one consol i
dated
quarterandt hei nputtaxcredit
abl
et oa ret
urnshal lbef i
l
edbyt hetaxpayerforhis
VAT-regi
steredper sondur i
ngthetaxable pri
ncipalplaceofbusi nessorheadof f
ice
mont horquar tershal
lbereduced andal lbr
anches.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
126
MEMORYAI
DIN TAXATI
ON LAW
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo

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San Beda College of Law

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Non-pay ment i s No i mpr

oflessthanthatknownbyt hetaxpayerto Sec.234Local Gov er nmentCode

ADMI NISTRATIVE INTERPRETATION THROUGH ther

Amendther eturnfrom b) isint endingtoleavethePhils.or

Those who ar e deni ed di

provided howev er t hat t he ARELEGALOFFI CERSOFTHEBI RAUTHORIZED

Anappealf rom suchcourt,howev er,is

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P20,000. property,ori ndustryt ot he est ate

B. TERMINATI ON OF THE JUDI CIAL WHENTRUSTSARETAXABLEENTI TI

Tax exempt ion isl i

NRAETB may be ent it

WHENCREDI TFORTAXESMAYBETAKEN NOTE:Thet axpayer

from i ncomet axi nt hey ear

NOTE: The 3 y earperi

b. Ofpr oper tyconnect ed,wi tht he Gener alr ul e:Lossesf r

TAXTREATMENT 1. Theempl oyermusthav eestabl ished

taken businesscarriedonbyt het axpayer,

due f rom such cor porat

thefringebenef itshal lnotbededuct i

b. Wash sal es by non-deal

 taxpay ermustbeent itl

Sec.30 ofNIRC buthas not oneemploy

corporation, whi ch contain a --

PROPERTY RELATIONS BETWEEN HUSBAND

AN ESTATETAX RETURN IS REQUI

by the sur vivi

1. one i ncorporated as a non- stock NGoutsi

TAX REMEDIES OF THE GOVERNMENT TO

1. They enhance and suppor t the 1. Compr omise(Sec.204)

c.Thet axpay erissuf feringfrom a MI

The Congressional Ov ersi

withhol dingt axassessmentunder such personalpropert

PROCEDURE FOR THE CONSTRUCTI

Cusi,GRNos.L-41919-24,May30,1980 Theef fecti st ot r

d. Fraud is neverimputed and t he i

gov ernment ,buti nt ruth,per forms notnecessaryinrefundf

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10.Taxesont hegr ossr ecei ptsof 2. TaxonBusi nessofPr i

2. Muni cipal non-revenue fees and CI

a. Taxes – On st ores orr etailers

Not e: Unl ike the NIRC,the LocalTax ADMI NISTRATIVE

oft axt olocaltreasurer( Sec.196 st

Protest – pay ment under protest is

JURISDICTION OF COLLECTOR OF Mayeitherbe:

1. Nat ure Imposed upon f or

2.Amount /Rate Equi

3. Imposi ngAut hori

FLEXIBLETARI FFCLAUSE Insuchacaset hecorrespondi ng

arrival, dead or i njured

proceedingsconduct ed byt heBOC 

Inter nalRevenue commodi tyorarti

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byanyper sonregardlessofwhet heror duti

Ther easonf ort

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