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Saint Louis University


COLLEGE OF LAW
Baguio City

OUTLINE IN TAXATION LAW

GENERAL PRINCIPLES OF TAXATION

A. Taxation : Its general concepts


a. Taxation as a power
1. Nature of the power of taxation
Inherent Power
Supreme, Plenary, Unlimited, Comprehensive
Power to destroy vis-à-vis Power to Build
a. Sison v. Ancheta, 130 SCRA 654**
b. Philippine Health Care Providers, Inc. v. CIR, 18 September
2009
2. Importance of taxation and the Lifeblood Doctrine
a. Commissioner v. Algue, 17 February 1988**
3. Justifications for the exercise of the taxing power
a. Benefits Received Theory
b. Necessity Theory
c. Symbiotic Theory
4. Objectives of taxation
a. Revenue
b. Non-revenue
i. Regulation
1. PAL v. Edu, 15 August 1988
2. Tio v. Videogram, 151 SCRA 208
ii. General Welfare
1. Lutz v. Araneta, 98 Phil 148**
iii. Reduction of Social Inequity
iv. Protectionism (re Special Duties under the
Tariff and Customs Code; See also RA 8800
re Safeguard Measures Act)
b. Taxation as a process
1. Stages in the tax process
a. Levy/imposition
b. Collection
2. Principles of a sound tax system
a. Fiscal Adequacy
b. Administrative Feasibility
c. Theoretical Justice
i. Article VI, Section 28, Constitution
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B. The concept and characteristics of taxes


a. Enforced
b. Proportionate Contribution
c. Levied by law-making body
d. Having territorial jurisdiction
e. Personal in nature
f. Purpose—raising money and other public needs
C. Limitations on the exercise of the taxing power
a. Inherent Limitations
1. Public Purpose
a. Pascual v. Secretary of Public Works, 110 Phil 331**
b. Lutz v. Araneta, supra
c. Gomez v. Palomar, 25 SCRA 827**
2. Inherently legislative
a. Coverage, Object, Nature, Extent, Situs
i. Pepsi v. Municipality of Tanauan, 69 SCRA 460
ii. Pepsi v. City of Butuan, 24 SCRA 789
b. Exceptions to non-delegation
i. LGUs
ii. Allowed by the Constitution
iii. Purely Administrative Functions
3. Territoriality
4. International Comity
5. Tax exemption of the government
a. LRTA v. CBAA, 12 October 2000
b. MCIAA v. Marcos, 11 September 1996**
c. MIAA v. Paranaque, GR No. 155650, 20 July 2006**;
MIAA v. Pasay City (2009)
b. Constitutional Limitations
1. Due Process Clause
a. CREBA v. Exec. Sec. Romulo, March 9, 2010
b. Villegas v. Hiu Chiong Tsai Pao Ho, 10 November 1978*
c. City of Baguio v. De Leon, 25 SCRA 938
d. Sison v. Ancheta, supra
e. CIR v. CA and Fortune, GR No. 119761, 29 August 1996
f. CIR v. M.J. Lhuiller Pawnshop, Inc. G.R. No. 150947, July
15, 2003*
2. Equal Protection Clause and the Rule on Uniformity of
Taxation**
a. ABAKADA Guro Party List v. Purisima, 14 October
2008
b. Association of Customs Brokers v. Manila, 93 Phil 107
c. Shell v. Vano, 94 Phil 387
d. Kapatiran v. Tan, 30 June 1988
e. Tan v. Del Rosario, 3 October 1994
f. Tio v. Videogram, supra
g. Ormoc Sugar Central v. Ormoc Treasurer, 17 February 1968
h. Philreca v. DILG, 10 June 2003
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i. Judy Anne Santos v. People, GR No. 173176, 26 August


2008
3. Freedom of Religion
a. Free Exercise Clause
i. American Bible Society v. City of Manila, 101 Phil
386**
ii. Tolentino v. Secretary of Finance
b. Non-establishment Clause
4. Uniformity, Equitability and Progressivity of Taxation
a. Tolentino v. Secretary of Finance, 25 August 1994
b. City of Baguio v. De Leon, 25 SCRA 398
5. Non-imprisonment for non-payment of poll taxes
6. Non-impairment clause
a. Casanova v. Hord, 8 Phil 125
b. Cagayan Power and Light Co. v. CIR, GR No. 60126,
September 25, 1985
c. MERALCO v. Province of Laguna, G.R. No. 131359, May
5, 1999**
d. RCPI v. Provincial Assessor of South Cotabato, GR No.
144486, 13 April 2005
e. City Government of Quezon City v. Bayantel, G.R. No.
162015, March 6, 2006
f. Compare: Smart Communications v. City of Davao, 16
September 2008 and Quezon City v. ABS-CBN
Broadcasting, 6 October 2008
7. Tax exemption of traditional exemptees
a. Lladoc v. CIR, 14 Phil 292
b. Abra Valley College v. Aquino, 15 June 1988
c. Herrera v. QC Board of Assessment Appeals, 30 September
1961
d. Bishop of Nueva Segovia v. Provincial Board of Ilocos Norte,
51 Phil 352
e. Lung Center of the Philippines v. QC, 29 June 2004**
8. Tax exemption of non-stock, non-profit educational
institutions
a. Department of Finance Order No. 137-87, dated Dec. 16, 1987
b. CIR v. CA, 14 October 1998 (YMCA)
9. Origin of Revenue, Appropriation and Tariff Bills
a. ABAKADA Guro Party List, et al., v. The Honorable
Executive Secretary Eduardo Ermita, et al., G.R. No. 168056,
1 September 2005**
10. Flexible Tariff Clause
a. ABAKADA Guro Party List, et al., v. The Honorable
Executive Secretary Eduardo Ermita, et al., G.R. No. 168056,
1 September 2005
11. Non-impairment of SC’s Jurisdiction
12. Taxation by LGUs
13. Voting Requirement re: Grant of Tax Exemptions
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c. The Doctrine of Judicial Non-interference


d. Taxpayer’s Suit
D. Forms of Escape from Taxation
a. Resulting to Losses government’s revenue
1. Tax Evasion
2. Tax Avoidance
3. Tax Exemption
b. Not Resulting to Losses
1. Shifting
2. Capitalization
3. Transformation
c. Illustrative Cases:
1. Republic v. Heirs of Cesar Jalandoni, 20 Sept 1965
2. CIR v. Yutivo and Sons (1961)
3. CIR v. Norton and Harrison, 31 August 1964**
4. Philippine Acetylene v. CIR, 17 August 1967**
5. CIR v. American Rubber, 29 November 1966**
6. CIR v. John Gotamco and Sons, 27 February 1987**
7. Maceda v. Macaraig, 31 May 1991, 8 June 1993
8. CIR v. PLDT, GR 140230, 15 December 2005
9. Silkair Singapore v. CIR, GR No. 173594, 6 February 2008
10. Contex v. CIR, G.R. No. 151135, July 2, 2004**
11. CIR v. Seagate Technology (Phils.), GR No. 153866, 11 February
2005**
12. CIR v. Estate of Benigno Toda Jr., G.R. No. 147188. September 14,
2004**
13. John Hay Peoples Alternative Coalition v. Lim, et al., G.R. No.
119775, October 24, 2003
E. Rules of Construction of Tax Laws
a. CIR v. CA and Ateneo, 18 April 1997
F. The Concept of Tax Laws
a. Nature
b. Sources
 Constitution
 Statutes
 Issuances by the Secretary of Finance
 Administrative Issuance by the BIR
1. CIR v. CA and Fortune, GR No. 119761, 29 August 1996
2. PB Com v. CIR, 28 January 1999
 Tax Ordinances
 Tax Treaties
1. CIR v. SC Johnson and Son, 26 June 1999
c. Some principles involving taxation
 Prospectivity
1. CIR v. Acosta, GR154068, 3 August 2007
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Saint Louis University


COLLEGE OF LAW
Baguio City

OUTLINE IN TAXATION LAW

INCOME TAXATION

BASIC CONCEPTS OF PHILIPPINE INCOME TAXATION

 The Concept of Income


1. Income, defined
a. Conwi v. CIR, 213 SCRA 83
2. Capital, defined
3. Income v. Capital
a. Madrigal v. Rafferty, 38 Phil 414
 Tests Applied in Determining the Existence of Income
1. Severance Test/Realization Test
2. Tax Benefit Rule and the Economic Benefit Test
3. Claim of Right Doctrine
4. Income from Whatever Source
 Requisites for the Taxability of an Income
1. Existence of a Gain
2. Realization of a Gain
a. Actual
b. Constructive (e.g. Sec 26)
c. Presumptive (e.g. Sec 24 d)
3. Gain must not be excluded (Section 32B)
 The Philippine Income Tax System
1. Types of Income Tax Systems
a. Schedular System v. Global System
i. Sison v. Ancheta, GR No. L-59431, 25 July 1984
b. Schedular Rates of Taxes v. Schedular System
2. The Philippine Income Tax System as a Semi-Global/Mixed
System
 Criteria in Imposing Philippine Income Taxes
1. Place Where Income was Earned
2. Residency
3. Citizenship
 The Income Taxpayers and the General Principles of their Taxability (Tax Situs for Income
Tax Purposes)
1. Section 23 of the NIRC
2. Individual Taxpayers (Sections 24-26)
3. Corporations (Sections 27 to 30)
a. Please see RA 9337
4. Estates and Trusts (Sections 60-66)
5. Definition of Terms Under Section 22
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 Source of Income (Section 42)


1. Services
a. CIR v. Marubeni Corp., GR No. 137377, 18 December 2001
2. Interest Income
a. NDC v. CIR, 151 SCRA 472
3. Dividends
4. Rent and Royalties
a. Royalty v. Compensation for Services
5. Sale of Property
a. Real Property
b. Personal Property—“passage of title” test
c. Tax treatment of properties produced within but sold
without or produced without but sold within
d. Special Rules Re Software: RMC 44-2005; BIRRuling
DA-ITAD 13-08 dated February 26, 2008.

DETERMINATION OF GROSS INCOME AND THE RULES


ON INCLUSION AND EXCLUSION FROM GROSS INCOME
A. The Concept of Gross Income
a. Gross Income, definition
b. Gross Income v. Gross Sales/Receipts
B. The General Rules on Inclusion and Exclusion of Income Items (Sections 31, 32A and
32B)
C. The Rules as Applied to Compensation Income and Other Benefits
a. Taxability of Compensation Income and the Application of the Employer’s
Convenience Rule
i. Henderson v. Collector, 1 SCRA 649
b. Retirement Payments, Pensions and Gratuities
i. RA 7641, RA 4917, Section 60B
c. Separation Payments
d. Leave Benefits
e. 13th Month Pay and other bonuses
f. SSS/GSIS Benefits
g. SSS/GSIS/PhilHealth/Pag-ibig/Union Dues
h. Fringe Benefits (Section 33, Rev. Regs. 3-98 and 10-2000)
D. The Rules as Applied to Trade/Business or Professional Income
E. The Rules as Applied to Passive Income
a. Royalties, prizes and winnings
b. Interest Income from bank deposits and deposit substitutes
i. On Philippine Currency
ii. On Foreign Currency
iii. Long-term investments
c. Dividends
i. CIR v. CA and ANSCOR, G.R. No. 108576, January 20, 1999
ii. Section 73B
d. Sale of Real Property classified as capital asset
i. Forced sales
ii. Sale of principal residence
iii. Alternative taxation in case of sale to government
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e. Sale of shares of stocks not listed or traded in the stock exchange


F. The Rules as Applied to Other Sources of Income
a. Cancellation of Indebtedness
b. Income from Lease and Leasehold Improvements
c. Income from Installment Transactions
i. Banas v. CA, G.R. No. 102967. February 10, 2000
d. Income from Long-Term Construction Projects
G. Exclusions by reason of special laws

DEDUCTIONS FROM GROSS INCOME


A. The Concept of Allowable Deductions
a. Deductions, defined
b. Deductions v. Exclusions
c. Deductions v. Cost
d. Deductions, when allowed
e. Deductions v. Tax Credit
i. CIR v. Central Luzon Drug Corp., GR No. 159647, 15 April 2005
ii. CIR v. Central Luzon Drug Corp., GR No. 148512, 26 June 2006 and Bicolandia
Drug Corp. v. CIR, GR No. 142299, 22 June 2006 (See also: CIR v. Central
Luzon Drug Corp., GR No. 159610, June 2008, in relation to RA9257)
B. Kinds of Allowable Deductions
C. The Optional Standard Deduction (RA9504)
D. Itemized Deductions: Concepts, Kinds, Rules and Requisites
a. General Business Expenses
i. The All-Events Test
1. CIR v. Isabela Cultural Corporation, 2007
ii. Capital Expenditure v. Ordinary Expenditure
iii. Rule re: Proprietary Educational Institutions
iv. Reasonableness Test
1. CIR v. General Foods, Inc., G.R. No. 143672. April 24, 2003
2. CM Hoskins v. CIR, GR No. L-24059, 28 November 1969
v. Representation Expenses, Rev. Regs. 10-2002
vi. Substantiation Rule and the Cohan Rule
1. Gancayco v. Collector, 1 SCRA 980
b. Bad Debts
i. Tax Benefit Rule
c. Interests
i. Requisites for Deductibility
ii. Tax Arbitrage Scheme
1. Rev. Regs. 13-2000
iii. On Capital Expenditure
iv. Rules re: deductibility
v. Interest on tax delinquencies
1. CIR v. Itogon Suyoc Mines, GR No. L-25399, 29 July 1969
d. Taxes
i. Requisites for Deductibility
ii. Deductible Taxes
iii. Non-deductible taxes
e. Depreciation
i. Properties subject to depreciation
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ii. Allowable modes of depreciation


f. Depletion
g. Losses
i. Ordinary Losses
ii. Capital Losses
iii. Special Losses
iv. Other Kinds of Losses
v. NOLCO
1. Rev. Regs. 14-2001
2. PICOP v. CIR, GR No. L-106949, 1 December 1995
3. 75% interest retention rule
vi. Casualty Losses
1. RMO 31-2009, 16 October 2009
vii. Requisites for Deductibility of each kind of loss
h. Charitable Contributions
i. With Limitation
ii. Deductible in Full
i. Pension Trusts
j. Research and Development Costs
E. Other Forms of Deductions

SPECIAL INCOME TAX TREATMENT OF GAINS AND LOSSES FROM


DEALINGS IN PROPERTY
A. Background of the Special Rules
B. Ordinary Assets v. Capital Assets
a. China Banking Corporation v. Court of Appeals, G.R. No. 125508. July 19, 2000
C. Rules on Ordinary Gains and Losses
D. Special Rules on Capital Transactions (Capital Gains and Losses)
a. Rules on Real Property classified as capital asset
b. Rules on gains/losses from sale of shares of stocks not listed or traded in the stock
exchange by non-dealers in securities
c. Rules regarding other capital assets
i. Loss Limitation Rule
ii. Holding Period Rule
iii. Net Capital Loss Carry-Over (NCLCO) Rule
E. Special Capital Transactions
F. Wash Sales
G. Installment Sales v. Deferred Sales
a. Banas v. CA, G.R. No. 102967. February 10, 2000
H. Instances when gains are taxable but losses are non-deductible
I. Instances when gains and losses are not recognized for tax purposes

TAXATION OF INCOME OF INDIVIDUAL TAXPAYERS


A. Classification of Individual Income Taxpayers and the Factors Affecting Their Taxability
B. Rules Applicable to Returnable Income
C. Rules Applicable to Passive Income
D. Personal Exemptions (Please see RA 9504)
a. Basic Personal Exemptions
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b. Additional Exemptions
c. Change of Status
E. Taxation of Married Individuals
F. Taxation of Minors
G. Tax Returns and Other Administrative Requirements

TAXATION OF INCOME OF CORPORATE TAXPAYERS


A. Definition of a Corporation
B. Tests in Determining the Existence of a Corporate Taxpayer
C. The Tests Applied to Partnerships, Co-ownerships and Estates
a. Ona v. CIR, 45 SCRA 74
b. Pascual and Dragon v. CIR, 166 SCRA 560
c. Obillos v. CIR, 139 SCRA 436
d. Afisco Insurance Corp. v. CIR, 1999
e. Evangelista v. CIR, 102 Phil 140
D. Kinds of Corporations
H. Rules Applicable to Returnable Income
a. Please See R.A. 9337
I. Rules Applicable to Passive Income
a. Tax Sparing Rule
i. CIR v. Proctor and Gamble, 204 SCRA 378
E. Taxes Peculiar to Corporations
a. Minimum Corporate Income Tax
b. Optional Corporate Income Tax
c. Improperly Accumulated Earnings Tax
i. Cyanamid Phils. v. CA, G.R. No. 108067, January 20, 2000
F. Special Corporations
a. Exempt Organizations and Corporations
b. Corporations enjoying preferential tax rates
i. Domestic
ii. Foreign
1. Branch Profit Remittance Tax
2. Gross Philippine Billings
a. British Overseas Airways Corp. v. CIR, 149 SCRA 395 vis-à-vis
Section 23 A (3) (b) and Rev. Regs. 15-2002
G. Tax Returns and Other Administrative Requirements
a. Paseo Realty and Development Corp. v. CA, G.R. No. 119286, October 13, 2004

TAXATION OF ESTATES AND TRUSTS


A. Taxation of Income of Estates
B. Taxation of Income of Trusts
C. Tax Returns and Other Administrative Requirements

TRANSFER TAXATION
A. Transfer Taxation: Its general concepts
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B. Kinds of transfer taxes


C. Kinds of transfers subject to transfer taxes

ESTATE TAXATION

A. Nature of estate tax


B. Reasons/doctrines supporting the imposition of estate tax
a. Benefits-received principle
b. Ability to pay principle
c. State partnership principle
d. Redistribution of wealth principle
e. “Back-tax” theory
C. The Gross Estate
a. What comprise the gross estate? (Section 85, NIRC)
b. Kinds of decedent for estate tax purposes
c. Inclusions in the gross estate
i. Decedent’s Interest
ii. Transfers in contemplation of death
iii. Revocable transfers
iv. Property passing under a general power of appointment
v. Proceeds of life insurance
vi. Prior interest
vii. Transfers for insufficient consideration
d. Exclusions in the gross estate
i. The merger of usufruct in the owner of the naked title
ii. The transmission or delivery of the inheritance or legacy by the fiduciary
heir or legatee to the fideicommissary
iii. The transmission from the first heir, legatee or donee in favor of another
beneficiary, in accordance with the desire of the predecessor
iv. Transfers to social welfare, cultural and charitable institutions
D. The Net Estate and the Deductions from the Gross Estate (Section 86)
a. Expenses, Losses, Indebtedness, Taxes
i. Funeral Expenses
ii. Judicial Expenses
1. CIR v. CA and Pajonar, GR No. 123206, 22 March 2000
iii. Claims against the estate
iv. Claims against insolvent persons
v. Unpaid mortgage indebtedness
1. Accommodated loans
b. Vanishing deductions
c. Transfers for public use
d. Family Home
e. Standard deduction
f. Medical expenses
g. Amount received by heirs under Republic Act No. 4917
h. Tax treatment of share in conjugal or community property
i. Tax credits
E. Valuation
F. Administrative provisions
a. Filing of notice of death
b. Filing of estate tax return
c. Payment of tax
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G. Provisions safeguarding the interest of the government in the collection of estate tax
(Sections 94-97)
a. Relevant cases:
i. Marcos II v. CA, G.R. No. 120880, June 5, 1997
ii. CIR v. Pineda, G.R. No. L-22734, September 15, 1967
iii. Lorenzo v. Posadas, G.R. No. 43082, June 18, 1937

GIFT TAXATION

H. Nature of gift tax


I. Concept of “gifts” subject to gift taxes (Section 98)
a. Direct gifts
b. Indirect gifts
i. Condonation of indebtedness
ii. Transfers for insufficient consideration
iii. Waivers
iv. Renunciation of Inheritance
J. Factors that affect liability for gift taxes
a. Relationship of the donor and the donee (Section 99)
K. Deductions/Exemptions from the gift tax (Section 101)
L. Tax treatment of properties transferred for less than full or adequate consideration (Section
100)
a. In general
b. Real properties classified as capital asset
M. Tax treatment of political contributions
a. Case in point: Abello, et al. v. CIR, GR No. 120721, 23 February 2005
b. Rev. Regs 8-2009, 22 October 2009 re Creditable Withholding Tax
N. Valuation
O. Administrative provisions
a. Filing of notice of donation
b. Filing of donor’s tax return
c. Payment of tax

VALUE ADDED TAXATION

P. Nature of Value Added Tax


a. Kapatiran v. Tan, G.R. No. L-81311, June 30, 1988
b. Tolentino v. Secretary of Finance, G.R. No. 115455, August 25, 1994 (Original
Decision) and G.R. No. 115455, October 30, 1995 (Motion for Reconsideration)
c. ABAKADA Guro Party List v. Ermita G.R. No. 168056, 1 September 2005
Q. VAT as an indirect tax
a. Distinctions between direct and indirect taxes
b. Specific characteristics of an indirect tax
i. Imposed on the seller/lessor/importer/service provider
1. CIR v. Magsaysay Lines, GR No. 146984, 28 July 2006
ii. Not a tax on the buyer/lessee/service availer
1. Cases in point:
a. Philippine Acetylene v. CIR, 17 August 1967
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b. CIR v. American Rubber, 29 November 1966


c. CIR v. John Gotamco and Sons, 27 February 1987
R. Specific characteristics of Value Added Tax
a. Consumption based tax
i. Destination Principle
ii. Cross-border Doctrine
b. Tax Credit Mechanism
i. Input Tax
ii. Output VAT
S. Transactions subject to VAT
T. Rates of VAT
a. Ordinary
b. Exempt Transactions
c. Zero-Rated Transactions
d. Effectively Zero-Rated Transactions
i. Cases in Point
1. Contex v. CIR, G.R. No. 151135, July 2, 2004
2. CIR v. Seagate Technology (Phils.), GR No. 153866, 11 February
2005
3. CIR v. Acesite Hotel Corporation, 16 February 2007
U. Transactions Deemed Sale
i. CIR v. Magsaysay Lines, GR No. 146984, 28 July 2006
V. Transitional Input Tax
 Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue, GR
Nos. 158885 & 170680, dated April 2, 2009
W. Presumptive Input Tax
X. Compliance Requirements

INTERNAL REVENUE TAX ADMINISTRATION,


ENFORCEMENT & REMEDIES

D. Tax Administration: Its general concepts


E. Government agencies involved in tax administration
F. Extent of Congress’ Power re Tax Administration
a. ABAKADA Guro Party List v. Purisima, GR166715, 14 August 2008
b. British American Tobacco v. Camacho, GR163583, 20 August 2008
G. The Bureau of Internal Revenue
a. Composition and Functions (Section 3, NIRC)
b. Powers and Duties
i. In General (Section 2)
ii. Specific
1. Interpret tax laws and decide cases (Sec 4)
a. BIR Issuances and the rules relevant thereto
i. Section 246, NIRC
ii. CIR v. Burroughs, 19 June 1986
iii. CIR v. CA and Fortune, 29 August 1996
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iv. PB Com v. CIR, 28 January 1999


b. Cases that may be decided by the CIR
i. CIR v. Leal, 18 November 2002
2. Examination of books of accounts, etc. (Sec 5)
a. Requirement of issuance of a letter of authority
b. Third-party verification rule
c. Inquiry into bank deposits (Sec 6 F)
d. Summon persons, take testimony
3. Power to assess and prescribe requirements for tax
administration
a. Power to examine returns (Sec 6A)
i. Amendment of returns
ii. Rule on confidentiality of tax returns and the
exceptions thereto (Sections 71 and 270)
1. BIR v. Ombudsman, 11 April 2002
b. Power to make a return (Sec 6B)
i. Best evidence obtainable rule
1. CIR v. Hantex Trading, GR No. 136975,
31 March 2005
2. CIR v. Embroidery and Garment
Industries, GR No. 96262, 22 March
1999
c. Power to conduct inventory taking, surveillance, and
to issue presumptive gross sales/receipts (Sec 6C)
d. Termination of tax period (Sec 6D)
e. Fixing of real property values (Sec 6E)
f. Accredit tax agents (Sec 6G)
g. Power to prescribe procedural/documentary
requirements
i. E.g. E-Filing, Substituted Filing
ii. Net Worth Method
h. Power to delegate (Sec 7)
i. Non-delegable powers in relation to Section
16
1. Republic v. Hizon, 13 December 1999
i. Enforcement of police powers (Sec 15)
j. Authority to Abate and Compromise Tax Liabilities
(Sec 6F (2), 204 in relation to Rev. Regs. 30-2002 as
amended by RR No. 8-2004);
1. PNOC v. Court of Appeals, G.R. No.
109976, April 26, 2005*
2. People v. Tan, GR No. 152532, 16
August 2005
H. The rule on estoppel in relation to tax administration
a. Against the government
b. Against the taxpayer
I. Assessments and its governing principles
a. Definition
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b. What constitutes an assessment


i. CIR v. Enron Subic Power Corporation, GR No. 166387, 19 January 2009
ii. CIR v. Pascor Realty, 29 June 1999
iii. CIR v. Reyes, G.R. No. 159694, January 27, 2006
c. Kinds of Assessment
d. Statute of Limitation on Assessment of Internal Revenue Taxes (Sections
203, 222, NIRC)
i. RMO 20-90, Philippine Journalists Inc., v. CIR, GR No. 162852, 16
December 2004
ii. CIR v. CA and Carnation, GR No. 115712, 25 February 1999, 303
SCRA 614
e. Instances where the running of the prescriptive period is suspended (Section
223)
i. Republic v. Hizon, 13 December 1999
ii. BPI v. CIR, GR No. 139736, 17 October 2005
iii. BPI v. CIR, G.R. No. 174942, 7 March 2008
f. Procedure in the process of assessment (Section 228)
i. Estate of the Late Juliana Diez Vda. De Gabriel v. CIR, G.R. No. 155541,
January 27, 2004
ii. CIR v. Reyes, G.R. No. 159694, January 27, 2006
iii. PNOC v. Court of Appeals, G.R. No. 109976, April 26, 2005*
iv. CIR v. Menguito, GR No. 16750, 17 September 2008
g. Instances when pre-assessment is not required (Section 228)
h. Governing principles concerning assessment
i. When do we reckon the period when assessment was made?
j. Is assessment necessary before a taxpayer could be prosecuted for violation
of the NIRC?
i. Ungab v. Cusi, May 30, 1980
ii. CIR v. CA, GR No. 119322, 4 June 1996
iii. CIR v. Pascor Realty, 29 June 1999
k. Are the procedures outlined in Section 228 of the NIRC retroactive?
i. CIR v. Reyes, G.R. No. 159694, January 27, 2006

TAX REMEDIES PROPER

A. Tax Remedies: Its general concepts


d. Importance
e. Classification (Overview)
1. Remedies in favor of the taxpayer
2. Remedies available to the government
f. Applicability of the Doctrine of Exhaustion of Administrative Remedies

B. Remedies available to taxpayers


a. Before Payment
1. Protest (Section 228, NIRC)
a. Requirements of a valid protest—Rev. Regs. 12-85
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b. Effect of a protest on the period to collect deficiency


taxes—Cases: CIR v. Wyeth Suaco Laboratories, GR No.
76281, 30 September 1991 and CIR v. Atlas Consolidated
Mining, GR Nos. 31230-32, 14 February 2000
c. Failure of the BIR to act within the 180-day period—
See the following: Lascona v. CIR, CTA Case 5777, 4
January 2000 vis-à-vis Section 7 (2), RA 9282 and the
Revised Rules of Procedure of the CTA, AM No. 05-11-07-
CTA
d. Administrative actions taken during the 180-day
period—Compare: CIR v. Union Shipping, GR No.
66160, 21 May 1990, 185 SCRA 548 and CIR v. Isabela
Cultural Corporation, GR No. 135210, 11 July 2001
e. Effect of a protest filed out of time—Protector’s Services
v. CA, GR No. 118176, 12 April 2000
f. Remedies from a denial of the protest
i. Motion for Reconsideration (BIR Appellate
Division)
ii. Appeal to the Court of Tax Appeals (RA
1125, as amended by RA9282)
2. Compromise (See Part 1 for details)
b. After Payment
1. Refund (Section 229, NIRC)
a. Must be strictly construed against the taxpayer—Case:
Citibank, NA v. Court of Appeals, GR No. 107434, 10
October 1997, 280 SCRA 459; FEBTC v. CIR, GR No.
138919, 02 May 2006
b. Grounds for filing a claim for refund (See Section 229,
See also: Engtek Phils v. CIR, CTA Case No. 6644, 26
January 2005)
c. Period within which to file a claim for refund
i. General rule is two years from the date of
payment—Cases: ACCRA Investments
Corporation v. Court of Appeals, GR No. 96322,
20 December 1991; CIR v. TMX Sales, 15
January 1992; CIR v. PhilAm Life, 29 May 1995;
CIR v. CA and BPI, GR No. 117254, 21 January
1999; CIR v. PNB, GR No. 161997, 25 October
2005 (exception to the 2-year period); CIR v.
Primetown Property Group, GR No. 162155, 28
August 2007).
ii. In case of amended returns
iii. In case of taxpayers contemplating
dissolution—Case: BPI v. CIR, 28 August
2001; See also: Sections 52(c) and 56(a)
d. Who has the personality to file a claim for refund?
Cases—CIR v. Procter and Gamble, GR No. 66838, 2
16

December 1991; CIR v. CA, 20 January 1999; Silkair v.


CIR, GR Nos. 171383 & 172379, 14 November 2008
e. Is setting-off of taxes against a pending claim for
refund allowed?—The doctrine of equitable recoupment--
Case: Philex Mining Corp. v. CIR, GR No. 125704, 28
August 1998
f. Is automatic application of excess tax credits allowed?
(Sec. 76)—Please see Calamba Steel v. CIR, GR No.
151857, 28 April 2005; Systra Philippines v. CIR, GR
No. 176290, 21 September 2007; CIR v. BPI, GR No.
178490, 07 July 2009 (Irrevocability Rule)***
g. Effect of existing tax liability on a pending claim for
refund—Case: CIR v. CA and Citytrust, GR No.
106611, 21 July 1994
h. Period of validity of a tax refund/credit (Sec. 230,
NIRC)
i. Returns are not actionable documents for
purposes of the rules on civil procedure and
evidence (See: Aguilar v. CIR, CA Case dated 30
March 1990)
i. Refund and Protest are mutually exclusive remedies—
Case: Vda. De San Agustin v. CIR, 10 September 2001
j. Is the taxpayer entitled to claim interest on the
refunded tax? (Sec. 79 (c) 2, NIRC)
c. Other Remedies
1. Action to Contest Forfeiture of Chattel (Sec. 231)
2. Redemption of Property Sold (Sec. 214)

C. Remedies available to the government


a. No injunction to restrain collection of taxes (Sec. 218, NIRC)
b. Period within which the government could collect (Sections 203, 222, NIRC)
Case: Republic v. Hizon, GR No. 130430, 13 December 1999; CIR v. Javier Jr., GR
No. 78953, 31 July 1991 (199 SCRA 825); PNOC v. CA, GR No. 109976, 26
April 2005; BPI v. CIR, GR No. 174942, 7 March 2008
c. Overview of Remedies (Section 205)
1. Tax Lien (Section 219, NIRC)
a. CIR v. NLRC, GR No. 74965, 9 November 1994
2. Compromise
3. Distraint and/or Levy
4. Civil Action
5. Criminal Action
6. Forfeiture
7. Suspension of business operations
8. Enforcement of administrative fines
d. Administrative Remedies in Detail (Sections 206-217, NIRC)
1. Distraint
a. Actual
b. Constructive
17

2. Levy
3. Garnishment
e. Judicial Remedies in Detail (Section 220, NIRC)
1. Period within which the action may be filed
a. Civil Cases (Sections 203, 222, NIRC)
b. Criminal Cases (See: Title X, NIRC; Section 281,
NIRC)
2. Where should these cases be filed?
a. Criminal Cases (See the imposable penalty vis-à-vis
the jurisdiction of courts)
b. Civil Cases (Consider the amount of tax sought to be
collected vis-à-vis the jurisdiction of courts, together
with the provisions of RA9282)
3. Cases:
a. Republic v. Hizon, GR No. 130430, 13 December
1999 (re approval of filing of civil and criminal action)
b. CIR v. La Suerte Cigar, G.R. No. 144942, 4 July 2002
(Re participation of the Office of the Solicitor General)
c. PNOC v. Court of Appeals, G.R. No. 109976, April 26,
2005*
d. Lim v. CA, GR Nos. 48134-37, 18 October 1990, 190
SCRA 616 (re prescription of criminal actions, Section 281,
NIRC)
e. Marcos II v. CA, GR No. 120880, 5 June 1997 (re
enforcement of tax liability during pendency of probate
proceedings)
f. Judy Anne Santos v. People, GR No. 173176, 26 August
2008
f. Effects of failure to pay the tax on time: Additions to the tax (Chapter I, Title X,
NIRC)
1. Surcharges
a. Ordinary (Section 248A, NIRC)
i. Failure to pay tax on time as required by the
tax code or the regulations
ii. Failure to pay the deficiency tax within the
time fixed in the notice
iii. Filing of the return with the wrong office
b. Fraud Penalty (Section 248B, NIRC)
i. CIR v. Javier Jr., GR No. 78953, 31 July 1991
(199 SCRA 825)
c. Cases:
i. Imposition of Surcharge is mandatory
2. Interest (Section 249, NIRC)
a. In General
b. Deficiency Interest
c. Delinquency Interest
d. On Extended Payments
3. Compromise Penalties
18

4. Effect of failure to file information returns (Section 250,


NIRC)

LOCAL TAXATION

A. Local Taxation : Its general concepts


a. Nature of the local taxing power
1. Constitutional provision (Section 5, Article X)
2. A delegated power?
a. City of San Pablo, Laguna v. Reyes, 25 March 1999
b. Meralco v. Province of Laguna, 5 May 1999
c. Mactan Cebu International Airport Authority v. Marcos, 11
September 1996
d. NAPOCOR v. City of Cabanatuan, 9 April 2003
3. Extent of the power of Congress in local taxation
a. City Government of Quezon City v. Bayantel, G.R. No.
162015, March 6, 2006
4. Residual power to tax (Section 186, LGC)
b. Fundamental principles on the exercise of the local taxing power (Section
130, LGC)
c. Exercise of local taxing power

B. Common Limitations on the exercise of the local taxing power and the principle of
preemption/exclusionary rule (Section 133, LGC)
a. The principle of preemption
b. Cases:
1. Province of Bulacan v. Court of Appeals, 27 November 1998
2. First Philippine Industrial Corporation v. CA, G.R. No. 125948,
December 29, 1998 (Section 133j; Local Tax on Common Carriers)
3. Palma Development Corporation v. Municipality of Malangas, GR
No. 152492, 16 October 2003 (Section 133e)
4. Batangas Power Corporation v. Batangas City, GR No. 152675, 28
April 2004 (Section 133g)
5. MIAA v. CA and Paranaque, GR No. 155650, 20 July 2006
(Section 133 o)
6. LTO v. City of Butuan, 20 January 2000 (re Section 133 (l))
7. Philreca v. DILG, 10 June 2003 (re Section 133 n)
8. Petron Corporation v. Tiangco, GR No. 158881, 16 April 2008
(Petroleum Products)

C. Specific Taxing Powers of Local Government Units


a. Provinces
1. Scope of the taxing power (Section 134 vis-à-vis Sections 142
and 186, LGC)
19

2. Taxes that may be levied by provinces (Sections 135-141,


LGC) Cases: Province of Bulacan v. Court of Appeals, 27 November
1998; PBA v. CA, 8 August 2000
b. Municipalities
1. Scope of the taxing power (Section 142 vis-à-vis Sections 134
and 186, LGC)
2. Taxes that may be levied by municipalities (Sections 143-149,
LGC)
a. Yamane v. BA Lepanto Condominium Corporation, G.R.
No. 154993, 25 October 2005 re taxes on businesses
b. Ericson Telecommunications v. City of Pasig, GR No.
176667, 22 November 2007
3. Situs of the tax (Section 150, LGC)
c. Cities (Section 151, NIRC)
d. Barangays (Section 152, NIRC)
e. Common revenue raising powers
f. Community Tax

D. Remedies in Local Taxation


a. Remedies of the Government
i. Administrative
1. Local government’s lien
2. Assessment by local treasurer (Section 194, LGC)
3. Distraint (Section 175, LGC)
4. Levy (Section 176, LGC)
a. Properties exempt from distraint and levy
ii. Judicial
1. Period within which to collect (Section 194, LGC)
iii. Other Provisions
1. Accrual of the tax (Section 166, LGC)
2. Time of Payment (Section 167, LGC)
3. Surcharges, Interests and Penalties
b. Remedies of the Taxpayer
i. Administrative
1. Appeal to the Secretary of Justice re newly enacted tax
ordinance (Section 187, LGC)
a. Drilon v. Lim, 4 August 1994
b. Jardine Davies v. Judge Aliposa, 27 February 2003
2. Protest of the Assessment (Section 195, LGC)
a. Yamane v. BA Lepanto Condominium Corporation, G.R.
No. 154993, 25 October 2005 re denial of protest
3. Claim for refund (Section 196, LGC)
4. Remedies from a denial of the protest and refund
ii. Judicial

E. Grant of tax exemption by local government units (Section 282 (b), IRR)
a. Tax Exemption v. Tax Incentive
20

REAL PROPERTY TAXATION

A. Governing Law
B. Nature of Real Property Taxes—National or Local?
C. Fundamental Principles (Section 198, LGC)
D. Properties Covered
a. Article 415, et seq, Civil Code
b. Caltex v. CBAA, 31 May 1982
E. Properties Exempt
a. Section 234, LGC
b. Section 238, LGC
c. Constitutional Exemptions
d. Cases
i. MIAA v. Paranaque, GR No. 155650, 20 July 2006; MIAA v. Pasay GR
No. 163072, April 2, 2009
ii. Lung Center of the Philippines v. QC, 29 June 2004
iii. LRTA v. CBAA, 12 October 2000
F. May LGUs grant exemption?
G. Who are liable for the Real Property Taxes
a. Ownership v. Use
b. Testate Estate of Concordia Lim v. Manila, 21 February 2000
H. Procedure in Real Property Taxation
a. Lopez v. City of Manila, 19 February 1999
b. Declaration of real properties—whose duty?
c. Valuation by Assessors
Callanta v. Ombudsman, 30 January 1998
d. Preparation of Schedule of Fair Market Values
e. Enactment of a Real Property Tax Ordinance
i. Levy annual ad valorem tax
1. Scope of the LGU’s taxing power (Sec. 232, LGC)
a. Provinces—1%; Cities, Municipalities in MM—2%
b. SEF—1%; Idle land tax—5%; Special Assessments
ii. Fix assessment levels
iii. Provide for appropriations
iv. Adopt Schedule of Fair Market Values
1. Fair Market Value and Assessed Value—What’s the difference?
I. Remedies in Local Taxation
a. Remedies of the Government
i. Administrative
1. Contents of Assessment
a. Meralco v. Barlis, 2 February 2002
2. Who is entitled to the notice of assessment?
a. Talusan v. Tayag, G.R. No. 133698, 4 April 2001
ii. Judicial
1. Period within which to collect
iii. Other Provisions
21

1. Accrual of the tax


2. Time of Payment
3. Surcharges, Interests and Penalties
b. Remedies of the Taxpayer
i. Administrative
1. Appeal to the Secretary of Justice re newly enacted tax
ordinance (Section 187, LGC)
a. Drilon v. Lim, 4 August 1994
b. Reyes v. Court of Appeals, 1999
c. Hagonoy Market Vendors Association v. Municipality of
Hagonoy, Bulacan, G.R. No. 137621. February 6, 2002
d. Ty v. Trampe, 1 December 1995
2. Appeal to the Board of Assessment Appeals, (Section 226,
252, LGC)
a. Systems Plus Computer College v. Caloocan City, G.R. No.
146382, August 7, 2003
b. Olivares v. Marquez, G.R. No. 155591, September 22, 2004
3. Protest of the Assessment (Section 226, 252, LGC)
a. Cagayan Robina v. Court of Appeals, 12 October 2000
b. Meralco v. Barlis, 18 May 2001
c. Meralco v. Barlis, 2 February 2002
d. Meralco v. Barlis,
4. Claim for refund (Section 253, LGC)
a. Period
5. Remedies from a denial of the protest and refund
ii. Judicial
1. Questioning tax sale: Aquino v. QC, GR No. 137534, 3 August
2006; NHA v. Iloilo City, GR No. 172267, 20 August 2008

TARIFF AND CUSTOMS LAWS

A. Scope of Tariff and Customs Laws


B. Meaning of Tariff and Customs Duties
C. Governing Laws
D. Agency tasked with enforcement of Tariff and Customs Laws
a. Powers and Functions of the Bureau of Customs
E. What may be the subject of customs duties
F. Concept & Relevance of Importation
a. When does importation begin
b. When does importation end
G. Classification of Goods for Importation Purposes
i. Dutiable v. Duty-Free
ii. Prohibited
iii. Conditionally Free
H. Kinds of Customs Duties
a. Regular
22

b. Special
I. Valuation of Goods
a. Home Consumption Value
b. Transaction Value
J. Flexible Tariff
K. Cases that may be decided by the Bureau of Customs
a. Customs Protest Cases
i. Procedure
ii. Case: Nestle Philippines v. Court of Appeals, G.R. No. 134114. July 6,
2001
iii. Concept of Automatic Review
b. Seizure and Forfeiture Cases
i. Proceeding In Rem
ii. Primary Jurisdiction
iii. Search of Dwelling House
iv. Some Illustrative Cases: Mison v. Natividad, GR No. 82526, 11 September
1992; Provident Tree Farms v. Batario, GR No. 92285, 28 March 1994;
Zuno v. Cabredo, A.M. No. RTJ-03-1779. April 30, 2003

END OF OUTLINE