INCOME TAX-Sources

of Law(a-d)
 Sources of Law on Income Taxation
• Philippine Constitution
• Statutes
• Regulations
• Administrative rulings
• Court decisions

2
 Sources of Law on Income
Taxation, cont’d
• CONSTITUTIONAL PROVISIONS ON TAXATION

ARTICLE VI

SECTION 28. (1) The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
xxx xxx xxx.
(3) Charitable institutions, churches and parsonages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly, and exclusively used for
religious, charitable, or educational purposes shall be exempt from taxation.

(4) No law granting any tax exemption shall be passed without the
concurrence of a majority of all the Members of the Congress.

3
 Sources of Law on Income
Taxation, cont’d
SECTION 29. (1) No money shall be paid out of the
Treasury except in pursuance of an appropriation made
by law.

xxx xxx xxx.

(3) All money collected on any tax levied for a special

purpose shall be treated as a special fund and paid out
for such purpose only. If the purpose for which a special
fund was created has been fulfilled or abandoned, the
balance, if any, shall be transferred to the general funds
of the Government.

4
 Sources of Law on Income
Taxation, cont’d

ARTICLE VI, Section 28

(2) The Congress may, by law, authorize the

President to fix within specified limits, and subject
to such limitations and restrictions as it may
impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or
imposts within the framework of the national
development program of the Government.

5
 Sources of Law on Income
Taxation, cont’d
Constitutional Limitations:
• Due process of Law
• Equal protection of law
• Rule of uniformity and equity
• Non-impairment of contracts
• President’s power to veto separate items in
revenue or tariff bills

6
 Sources of Law on Income
Taxation, cont’d
• Constitutional limitations cont’d:

• Exemption from property taxation of religious,

charitable or educational entities, nonprofit
cemeteries, churches and convents apartment
• No public money shall be appropriated for
religious purposes
• Majority of all the members of the congress
required granting tax exemption

7
 Sources of Law on Income
Taxation, cont’d
• Constitutional limitations, cont’d

• The Congress may not deprive the Supreme Court of

its jurisdiction in all cases involving the legality of any
tax, impost or assessment or toll or any penalty
imposed in relation to tax.

• No imprisonment for nonpayment of poll tax

• Tax collection shall generally be treated as general

funds of the government.

8
 Sources of Law on Income
Taxation, cont’d
• STATUTES:

A. National Internal Revenue Code ( Tax Code)

B. Special Laws

9
 Sources of Law on Income
Taxation, cont’d
• REGULATIONS:

A. Revenue Regulations Issued by the BIR

B. Revenue Regulations (RR) are issuances signed by

the Secretary of Finance, upon recommendation of
the Commissioner of Internal Revenue, that specify,
prescribe or define rules and regulations for the
effective enforcement of the provisions of the
National Internal Revenue Code (NIRC) and related
statutes.
10
 Sources of Law on Income
Taxation, cont’d
• BIR RULINGS ( Administrative rulings):

BIR Rulings are issued by the Bureau of

Internal Revenue (BIR) representing its
position on an issue or on a transaction,
and/or its interpretation of the law as it is
applied to a particular transaction.

11
 Sources of Law on Income
Taxation, cont’d
• REVENUE MEMORANDUM CIRCULARS –not a
source of law

• Revenue Memorandum Circular (RMCs) are

issuances that publish pertinent and
applicable portions, as well as amplifications,
of laws, rules, regulations and precedents
issued by the BIR and other agencies/offices.

12
 Sources of Law on Income
Taxation, cont’d
• COURT DECISIONS

Major part or jurisprudence on taxation

consist of the decisions of the Court of Tax
Appeals (CTA) and the Supreme Court.

13
 Sources of Law on Income
Taxation, cont’d
• SHORT HISTORY OF THE CTA:

• The Court of Tax Appeals (CTA) was created

on June 16, 1954, through the enactment of
Republic Act No. 1125 (R.A. 1125).
Considering its limited jurisdiction then, it had
only three (3) Judges.

14
 Sources of Law on Income
Taxation, cont’d

• Under R.A. 1125, CTA has exclusive appellate

jurisdiction to review on appeal, the decisions
of the Commissioner of Internal Revenue (CIR)
on disputed assessments, refunds of taxes,
fees or other charges, penalties imposed in
relation thereto, and the decisions of the
Commissioner of Customs .

15
 Sources of Law on Income
Taxation, cont’d
• April 23, 2004- Republic Act No. 9282 was
passed into law.

• The CTA became an appellate Court, equal in

rank to the Court of Appeals.

• The composition of the Court increased to six

(6) Justices with one (1) Presiding Justice and
five (5) Associate Justices
16
 Sources of Law on Income
Taxation, cont’d

• It shall sit En Banc, or in two (2) Divisions

with three (3) Justices each. A decision of a
division of the CTA may be appealed to the
CTA En Banc.

• The decision of the CTA En Banc may further

be appealed by verified petition for certiorari
to the Supreme Court.
17
 Sources of Law on Income
Taxation, cont’d
• June 12, 2008- Republic Act No. 9503 was
enacted. This law took effect on July 5, 2008.

• This law enlarged the organizational structure

of the CTA. A Third Division was created
providing for three (3) additional Justices.

18
 Sources of Law on Income
Taxation, cont’d
• The CTA is now composed of one (1) Presiding
Justice and eight (8) Associate Justices. The
CTA may sit en banc or in three (3) divisions
with each division consisting of three (3)
Justices. The CTA, as one of the Courts
comprising the Philippine Judiciary, is under
the supervision of the Supreme Court.

19
 FEATURES OF THE PHILIPPINE
INCOME TAX LAW

1. Income Tax is a direct tax- the tax is borne by

the income recipient or income earner.

2. It is a progressive tax- based on the “ability to

pay” principle

3. Comprehensive system of imposing tax- uses

several criteria for taxation-citizenship,
residence, source

20
 FEATURES OF THE PHILIPPINE
INCOME TAX LAW, cont’d

4. Semi-schedular or semi-global-

• Schedular tax rates apply to income in general.

• There are types of income subjected to final taxes.

• There are income subjected to preferential tax

rates.

21
 FEATURES OF THE PHILIPPINE
INCOME TAX LAW, cont’d

5. The Philippine income tax law is a law of

American origin. Hence the decisions of the US
courts have force and persuasive effect in the
Philippines.

The Tax Code was patterned after the US 1939

and 1954 US Internal Revenue Code.

22
 BASIS OR CRITERIA FOR THE
IMPOSITION OF INCOME TAX

1. Citizenship or nationality

2. Residence or domicile

3. Source of income

23
 ADMINISTRATION OF THE
INCOME TAX LAW cont’d
The administration of tax laws is lodged with the
Bureau of Internal Revenue (BIR).

Powers and duties of the BIR:

Section 2 of the Tax Code provides for the
following powers and duties of the BIR:

24
 ADMINISTRATION OF THE
INCOME TAX LAW cont’d

a. assessment and collection of all national

internal revenue taxes, fees, and charges, and
the enforcement of all forfeitures, penalties, and
fines connected therewith;

b. execution of judgments in all cases decided in

its favor by the Court of Tax Appeals and the
ordinary courts
25
 ADMINISTRATION OF THE
INCOME TAX LAW cont’d

c. give effect to and administer the

supervisory and police powers conferred to it
by the Code or other laws.

26
 ADMINISTRATION OF THE
INCOME TAX LAW cont’d
Powers and duties of the Commissioner of
Internal Revenue (CIR):

1. To interpret tax laws and to decide tax cases-

under the exclusive and original jurisdiction of
the CIR, subject to review by the DOF Secretary
(Section4)

27
 ADMINISTRATION OF THE
INCOME TAX LAW cont’d

2. To obtain information, and to summon,

examine, and take testimony of persons; this shall
be construed as granting the Commissioner the
authority to inquire into bank deposits other than
as provided for in Section 6(F) of the Code (Section
5)

3. To make assessments and prescribe additional

requirements for tax administration and
enforcement (Section 6)
28
 ADMINISTRATION OF THE
INCOME TAX LAW cont’d
• 4. Authority of the Commissioner to delegate
power; BUT the following CANNOT be
delegated:
a. power to recommend to the DOF secretary ,
the promulgation of rules and regulations;
b. power to compromise and abate any tax
liability ;
c. power to assign or reassign internal revenue
officers.
29
 ADMINISTRATION OF THE
INCOME TAX LAW cont’d

5. Duty to ensure the provision and distribution

of forms, receipts, certificates, and appliances,
and the acknowledgment of payment of taxes

30
 ADMINISTRATION OF THE
INCOME TAX LAW cont’d

ROLE OF THE SECRETARY OF FINANCE:

THE DOF Secretary has direct control, direction

and supervision of the BIR.

31
 ADMINISTRATION OF THE
INCOME TAX LAW cont’d
• RULES OF CONSTRUCTION

“Statutes levying taxes or duties are to be construed strongly against

the Government and in favor of the subject or citizens, because
burdens are not to be imposed or presumed to be imposed beyond
what statutes expressly and clearly declare.” No person or property is
subject to taxation unless they fall within the terms or plain import of
a taxing statute. (Commissioner of Internal Revenue vs. Fireman's Fund
Insurance Company, et al., 148 SCRA 315 (1987) cited in
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF
APPEALS and ATLAS CONSOLIDATED MINING AND DEVELOPMENT
CORPORATION, respondents. G.R. No. 86785. November 21, 1991.)

32