Succession Chart

Taxation Law 1 Reviewer 2011
3. Constitutional Limitations
a. Due Process of Law

b. Equal Protection of the Laws
c. Rule of Uniformity and Equity in Taxation
4. Prohibition against imprisonment for non-payment of poll tax
5. Prohibition against impairment of obligations of contracts
6. Prohibition against appropriation of proceeds
7. Prohibition against taxation of religious, charitable and educational entities
8. Prohibition against taxation of non-stock, non-profit educational institutions
Others Grant of tax exemption
Veto of appropriation, revenue or tariff bills
Non-impairment of the jurisdiction of the Supreme Court
Revenue bills shall orginate from the House of Representative
Infringement of Press Freedom
Grant of Franchise
a. Due process of law
 There must be a valid law

 Tax measure should not be unconscionable and unjust as to amount to confiscation of property
 Tax statute must not be arbitrary as to find no support in the Constitution
When does the power of taxation impinge the due process clause?
The due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the
Constitution, as where it can be shown to amount to a confiscation of property, [Reyes v. Almanzor, 196 SCRA 322].
Sec. 1, Art. III, 1987 Constitution

No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be
denied equal protection of the laws.
REQUIREMENTS OF DUE PROCESS IN TAXATION

1) Tax must be for a Public purpose
2) Imposed within the Territorial jurisdiction
3) No arbitrariness or oppression in
A) assessment, and
B) collection
DUE PROCESS IN TAXATION DOES NOT REQUIRE

1) Determination through judicial inquiry of
A) property subject to tax
B) amount of tax to be imposed
2) Notice of hearing as to:
A) amount of the tax
B) manner of apportionment
Tan v. del Rosario, supra.

The due process clause may correctly be invoked only when there is a clear contravention of inherent or
constitutional limitations in the exercise of tax power.
Sison v. Ancheta, supra.

It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it
finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of
property. That would be a clear abuse of power. It then becomes the duty of this Court that such an arbitrary act
UNOR-SCHOOL OF LAW
1
e
amounted to the exercise of an authority not conferred. That property calls for the application of the Holmes
dictum “The power to tax is not the power to destroy while this Court sits.
It has been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not for a
public purpose, or in case a retroactive statute is so harsh an unreasonable , it is subject to attack on due process
grounds.
b. Equal protection of the laws

No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied
equal protection of the laws. Sec. 1, Art. III, 1987 Constitution
Sison v. Ancheta, supra.
The taxing power has the authority to make reasonable and natural classification for purposes of taxation,
but the government’s act must not be prompted by spirit of hostility, or at the very least discrimination that finds
no support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions not being different both in
privileges conferred and liabilities imposed, [Sison v. Ancheta, 130 SCRA 654].
Villegas vs, Hiu Chiong Tsai Pao HoGR L-29646, 10 November 1978
Facts: The Municipal Board of Manila enacted Ordinance 6537 requiring aliens (except those employed in
the diplomatic and consular missions of foreign countries, in technical assistance programs of the government and
another country, and members of religious orders or congregations) to procure the requisite mayor’s permit so as
to be employed or engage in trade in the City of Manila. The permit fee is P50, and the penalty for the violation of
the ordinance is 3 to 6 months imprisonment or a fine of P100 to P200, or both.
Issue: Whether the ordinance imposes a regulatory fee or a tax.
Held: The ordinance’s purpose is clearly to raise money under the guise of regulation by exacting P50 from aliens
who have been cleared for employment. The amount is unreasonable and excessive because it fails to consider
difference in situation among aliens required to pay it, i.e. being casual, permanent, part-time, rank and-file or
executive.
[ The Ordinance was declared invalid as it is arbitrary, oppressive and unreasonable, being applied only to aliens
who are thus deprived of their rights to life, liberty and property and therefore violates the due process and equal
protection clauses of the Constitution. Further, the ordinance does not lay down any criterion or standard to guide
the Mayor in the exercise of his discretion, thus conferring upon the mayor arbitrary and unrestricted powers. ]

The court cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative
judgment. Of course, where a tax measure becomes so unconscionable and unjust as to amount to confiscation of
property, courts will not hesitate to strike it down, for, despite all its plenitude, the power to tax cannot override
constitutional proscriptions.
The legislative intent to increasingly shift the income tax system towards the schedular approach in the
income taxation of individual taxpayers and to maintain, by and large, the present global treatment on taxable
corporations, we certainly do not view this classification to be arbitrary and inappropriate.
CIR v. CA & Alhambra Ind., 267 SCRA 557 (1997)
Tiu v. CA, 301 SCRA 278 (1999)

The Constitutional right to equal protection of the law is not violated by an executive order, issued
pursuant to law, granting tax and duty incentives only to businesses within the “secured area” of the Subic Special
Economic Zone and denying them to those who live within the Zone but outside such “fenced in” territory. The
Constitution does not require absolute equality among residents. It is enough that all persons under like
circumstances or conditions are given the same privileges and required to follow the same obligations. In short, a
classification based on valid and reasonable standards does not violate the equal protection clause.
UNOR-SCHOOL OF LAW
2
e
We find real and substantial distinctions between the circumstances obtaining inside and those outside the
Subic Naval Base, thereby justifying a valid and reasonable classification.
c. Uniformity and equity in taxation
Sec. 28 c, Art. VI of the Constitution provides that “the rule of taxation shall be uniform and equitable”.
Uniformity in Taxation
The concept of uniformity in taxation implies that all taxable articles or properties of the same class shall be taxed
at the same rate. It requires the uniform application and operation, without discrimination, of the tax in every place
where the subject of the tax is found. It does not, however, require absolute identity or equality under all
circumstances, but subject to reasonable classification.
Equity in Taxation
The concept of equity in taxation requires that the apportionment of the tax burden be, more or less, just in the
light of the taxpayer’s ability to shoulder the tax burden and, if warranted, on the basis of the benefits received
from the government. Its cornerstone is the taxpayer’s ability to pay.
Classification of taxpayers, subject or items to be taxed
REQUISITES OF A VALID CLASSIFICATION (S A G E )

1. It must be based on substantial distinction.
2. Germane/relevant to the purpose of the law/ordinance.
3. Applies not only to the present condition, but also to future substantially identical conditions.
4. Equally applicable to all members of the same class.
Tolentino v. Sec. of Finance, supra., supra.

The constitution does not really prohibit the imposition of indirect taxes which like VAT are regressive.
What is simply provides is that the congress shall evolve a progressive system of taxation. Indeed, the mandate of
congress is not to prescribe, but to evolve a progressive tax system. Otherwise, sales taxes, which perhaps are the
oldest form indirect tax would have been prohibited.
Mla. Race Horse v. dela Fuente, 88 Phil 60 (1951)

Ordinance No. 3065-tax on license stables, license fees for boarding stable for race horses. Tax assessed on
the owners of the boarding stables for race horses is valid because there is equity and no arbitrary classification
even no such tax imposed on boarding stables for other types of horses.
The owners of the stables are class by themselves, and are appropriately taxed when other kinds are taxed
less or not at all, considering that equity in taxation is generally conceived in terms of liability In relation to the
benefits received by the tax payer. Race horses as devoted to gambling, their owners derive fat income, and such
demands heavy burden of resource from the government such as police supervision. Hence, taking into everything
into account, the differentiation against which the plaintiffs complain conform to the practical dictates of justice
and equity, and is not discriminatory within the meaning of the constitution.
Not valid or discriminatory when other boarding stables for race horses with the same number of horses
were made to pay less or not at all.
Eastern Theatrical v. Alfonso, 83 Phil 852 (1949)

An ordinance which imposes a fee on the price of every admission ticket sold by the cinema, theaters, and
boxing exhibitions is valid because same class, same rate.
Equality and uniformity in taxation means that all taxable articles or kinds or property of the same class
shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications
UNOR-SCHOOL OF LAW
3
e
for purposes of taxation, and the appellant can’t point out what places of amusement taxed by the ordinance do
not constitute a class by themselves and which can be confused with those not included in the ordinance.
Pepsi Cola v. City of Butuan, supra.

Valid classification of taxes are not full met by the city ordinance which imposes a tax upon the sale of
merchandise payable only by agent/consignee of any outside dealer of such merchandise while the sales of the local
dealers regardless of the amount would be exempt.
Shell v. Vano, Mun. Treas. of Cordova, Cebu, 94 Phil 389 (1954)

A municipal ordinance imposing an occupation tax on the profession or occupation of “ installation
manager” is valid even there is only one person with such occupation in the municipality. A person can’t challenge
the validity of an ordinance as being discriminatory since he is only one adversely effected because all other
installation managers who may come within the jurisdiction of the municipality would be subject to tax under the
ordinance.
What the ordinance tax is the occupation itself regardless who or how many exercise it. It will be
applicable to any person/firm who may come to exercise such calling.
City of Baguio v. de Leon, 25 SCRA 938 (1968)

Equality and uniformity of taxation, means that, all taxable articles or kinds of property of the same class
be taxed at the same rate. The taxing power has the authority to make reasonable and natural classification for
purposes of taxation. To satisfy this requirement, it is enough that the statute applies equally to all persons, forms
and corporations placed in similar situation.
Kapatiran v. Tan, supra.

VAT law does not discriminate unduly against custom brokers who are subject to said tax.
Villanueva v. City of Iloilo, supra.

An ordinance exacting tax on apartment owners/operators are violative of rule of uniformity of taxation
because (a) R.A. 2264 does not empower cities to impose apartment taxes, (b) it is oppressive and unreasonable
for it penalizes owners of tenement houses who fail to the pay tax, (c) it constitutes not only double taxation, but
treble at that, and (d) that it violates the rule of uniformity of taxation.
Asso. of Customs Brokers v. Mun. Board, supra.

An ordinance which imposes tax upon owners of vehicles operating inside Manila is an infringement of rule
of uniformity of taxation as ordained by the constitution because it does not distinguish the vehicle for hire or for
private use, neither does it distinguish vehicle registered in the City of Manila or outside.
The owners of vehicles residing outside Manila who also use the streets are not made to share the
corresponding burden. In this case, those owners of the vehicles which use the streets of Manila, regardless
whether they are citizen or not fall within the same class.
4.Prohibition against imprisonment for non-payment of poll tax
No person shall be imposed for debt or non-payment of poll tax. [Sec. 20, Art. III, Constitution]
 The non-imprisonment rule applies to non-payment of poll tax which is punishable only by a surcharge, but
not to other violations like falsification of community tax certificate and non-payment of other taxes.
Poll tax
 Poll tax is a tax of fixed amount imposed on residents within a specific territory regardless of citizenship,
business or profession. e.g. community tax
UNOR-SCHOOL OF LAW
4
e
community tax v. poll tax
Sec. 156-164, R. A. 7160

156. Community Tax-Cities or Municipalities may levy a community tax in accordance with the provisions of this
article.
157. Individual Liable to Community Tax-Every inhabitants of the Philippines 18 yrs or over that has been regularly
employed on a wage or salary base for at least 30 days....
158. Juridical Persons Liable to CT- Every Corp no matter how created or organize, domestic or foreign, engaged in
or doing business in the Phils.
159. Exemptions-1.Diplomatic and consular representatives, 2.Transient visitors staying not more than 3 months
5.Prohibition against impairment of obligation of contracts

“No law impairing the obligation of contracts shall be passed.”
The obligation of a contract is impaired when its terms or conditions are changed by law or by party without the
consent of the other, thereby weakening the position or rights of the latter.
An example of impairment by law is when a later taxing statute revokes a tax exemption based on a contract. But
this only applies when the tax exemption has been granted for a valid consideration.
A later statute may revoke exemption from taxation provided for in a franchise because the Constitution provides
that a franchise is subject to amendment, alteration or repeal.
Sec. 11, Art. XII, 1987 Constitution

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the laws of the
Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate,
or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or
right be GRANTED except under the condition that it shall be subject to amendment, alteration, or repeal by the
Congress when the common good so requires. The State shall encourage equity participation in public utilities by
the general public. The participation of foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive and managing officers of such
corporation or association must be citizens of the Philippines.
Tolentino v. Sec. of Finance, (1994) supra.

CREBA contends Imposition of the VAT on the sales and leases of real estate by virtue of contracts entered
into prior to the effectivity of the law. However, the Non-impairment of Contract Clause has never been thought as
limitation on the exercise of the State’s power of taxation save only where a tax exemption has been granted for a
valid consideration.
Oposa Vs. Factoran

Police power prevails over the non-impairment clause
La Insular Vs. Manchuca

A lawful tax on a new subject or an increased tax on an old one, does not interfere with a contract or impairs its
obligation.
 The non-impairment clause applies only to contracts and not to a franchise.

 The non-impairment clause applies to taxation but not to police power and eminent domain. Furthermore,
it applies only where one party is the government and the other, a private individual.
As a rule, the obligation to pay tax is based on law. But when, for instance, a taxpayer enters into a compromise
with the BIR, the obligation of the taxpayer becomes one based on contract
UNOR-SCHOOL OF LAW
5
e
The rule does not apply to public utility franchises. According to Sec 11, Art XI of the constitution, no public utility
franchise or right shall be granted except under the condition that it shall be granted that it is subject to
amendment, alteration or repeal by the Congress when the common good so requires.
Congress could impair the company’s legislative franchise by making it liable for income tax. The Constitution
provides that a franchise is subject to amendment, alteration or repeal by the Congress when the public interest so
requires.
When can a grant of tax-incentive be taken away by the government without violating the rule on non-
impairment of contracts?
It depends on whether the grant is unilaterally or bilaterally given by the government. If unilaterally given,
there is no impairment. It constitutes a mere revocation of a grant of privilege. If bilaterally given, there is
impairment (Art. III, Sec. 10, Constitution). Exception: In case of grant of franchise to public utilities when common
good so requires (Art. XII, Sec. 11, Constitution)
6.Prohibition against infringement of religious freedom

No law shall be made respecting an establishment of religion, or prohibiting the free exercises thereof.

“The free exercise and enjoyment of religious profession and worship, without discrimination or
preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political rights.”
Am. Bible Society v. City of Manila, 101 Phil 386 (1957)

The payment of license fees for the distribution and sale of bibles by a non-stock, non-profit, missionary
organization at minimal profit suppresses the constitutional right of free exercise of religion which is guaranteed by
the Constitution.
But a tax on the sale of religious materials is not unconstitutional because it is imposed after the activity
(sale) taxed is done.

The power to impose a license tax on the exercise of these freedoms is indeed as potent as the power of
censorship which this Court has repeatedly struck down
A tax on the income of one who engages in religious activities is different from a tax on property used or
employed in connection with those activities.
7. Prohibition against appropriation of proceeds of taxation

No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.
-taxes can only be levied for public purpose
Sec. 29, (2) Art. VI, 1987 Constitution

“No public money or property shall be appropriated, applied, paid, or employed directly or indirectly, for
the use, benefit, or support of any church, denomination, sectarian institution or system of religion, or of any priest,
preacher, minister or other religious teacher, or dignitary as such except when such priest, preacher, minister or
dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium.”
(Sec. 29 (3) ART VI) Use of tax levied for a special purpose
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.
-Separation of the Church and State
* If a President of the Philippines spent a special fund for a general purpose, he can be charged with
culpable violation of the Constitution.
UNOR-SCHOOL OF LAW
6
e
Osmena v. Orbos, supra.

OPSF as a special fund may be placed in a special trust.
8. Prohibition against taxation of religious, charitable and educational entities
Sec. 28 (3), Art. VI, 1987 Constitution

“Charitable institutions, churches and personages 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.”
 This is an exemption from real property tax only.
 Public Cemeteries are exempt from the payment of taxes.
The term exclusively used for religious purposes does not necessarily mean total or absolute use for religious,
charitable and educational purposes. Even is the property is incidentally used for said purposes, the tax exemption
will apply.
Abra Valley College v. Aquino, 162 SCRA 106 (1988)

The exemption in favor of property used exclusively for charitable or educational purpose is not limited to
property actually indispensable therefore, but extends to facilities which are incidental to and reasonably necessary
for the accomplishment of said purpose.
Province of Abra v. Hernando 107 SCRA 104

To be exempt from realty taxation, there must be proof of actual, direct and exclusive use of lands, buildings
and improvements for religious or charitable purposes.
Lung Center of the Philippines v. Quezon City G.R. 144104, June 29, 2004
Petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly, and
exclusively used for charitable purposes. Thus the court ruled that portions of the land leased to private interties as
well as those parts of the hospital leased to private individuals are not exempt from taxes.
To determine whether an enterprise is a charitable institution/entity or not, the elements which should be
considered include the statute creating the enterprise, its corporate purposes, its constitution and by-laws, the
methods of administration, the nature of the actual work performed, the character of the services rendered, the
indefiniteness of the beneficiaries, and the use and occupation of the properties. a charitable institution does not
lose its character as such and its exemption from taxes simply because it derives income from paying patients,
whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money
received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures
to the private benefit of the persons managing or operating the institution. (Lung Center of the Philippines v. QC,
GR 144104, 29 June 2004)
9. Prohibition against taxation of non-stock, non-profit educational institutions
Sec. 4 (3, 4), Art. XIV, 1987 Constitution

“All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and
exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of
the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law.”
Requisites For Exemption:
1) It must be a private educational institution

2) It must be non-stock and non-profit
3) It’s assets (property) and revenues (income) must be used actually, directly and exclusively for educational
purposes
RULES:
UNOR-SCHOOL OF LAW
7
e
1) If the first requisite is absent (meaning, it’s a government educational institution), it is nonetheless exempt from
income tax
2) If the second requirement is absent (meaning, it is stock and profit) as long as the third requirement is present, it
is nonetheless exempt from real estate tax
3) If the third requirement is absent, as long as it is non-stock and non-profit, it is nonetheless exempt from income
tax
4) If the third requirement is absent, but it is private and non-profit, it is subject to income tax, but at the
preferential rate of ten percent (10%)
 > Under the present tax code, for a private educational institution to be exempt from the payment of
income tax, all it has to be is non-stock and non-profit. However, a governmental educational institution is
exempt from income tax without any condition
EXEMPTION DOES NOT EXTEND TO:

1) Income derived by these educational institutions from their property, real or personal, and
2) From activities conducted by them for profit regardless of the disposition made on such income
Sec. 28 (3), Art. VI, Constitution

charitable, or educational purposes shall be exempt from taxation.” (Property Tax Exemption)
Sec. 27 (B) NIRC

(B) Proprietary Educational Institutions and Hospitals. - Proprietary educational institutions and hospitals which are
nonprofit shall pay a tax of ten percent (10%) on their taxable income except those covered by Subsection (D)
hereof: Provided, that if the gross income from unrelated trade, business or other activity exceeds fifty percent
(50%) of the total gross income derived by such educational institutions or hospitals from all sources, the tax
prescribed in Subsection (A) hereof shall be imposed on the entire taxable income. For purposes of this Subsection,
the term 'unrelated trade, business or other activity' means any trade, business or other activity, the conduct of
which is not substantially related to the exercise or performance by such educational institution or hospital of its
primary purpose or function. A 'Proprietary educational institution' is any private school maintained and
administered by private individuals or groups with an issued permit to operate from the Department of Education,
Culture and Sports (DECS), or the Commission on Higher Education (CHED), or the Technical Education and Skills
Development Authority (TESDA), as the case may be, in accordance with existing laws and regulations.
SEC. 30. Exemptions from Tax on Corporations. - The following organizations shall not be taxed under this Title in
respect to income received by them as such:….
(H) A nonstock and nonprofit educational institution;
 Note however the last paragraph of Sec. 30, which states: “Notwithstanding the provisions in the preceding
paragraphs, the income of whatever kind and character of the foregoing organizations form any of their
property, real or personal, or from any of their activities conducted for profit, regardless of the disposition
made of such income, shall be subject to tax imposed under this Code.”
Department of Finance Order 145-85

Non-stock, non-profit educational institutions are exempt from taxes on all their revenues and assets used
actually, directly and exclusively for educational purposes.
However, they shall be subject to internal revenue tax on income from trade, business or other activity, the
conduct of which is not related to the exercise or performance by such educational institutions of its educational
purposes or functions.
Interest income shall be exempt only when used directly and exclusively for educational purposes. To
substantiate this claim, the institution must submit annual information return and duly audited financial statement.
A certification of actual utilization and the Board resolution or the proposed project to be funded out of the money
deposited in banks shall also be submitted.
UNOR-SCHOOL OF LAW
8
e
Department of Finance Order 137-87
An educational institution means a non-stock, non-profit corporation or association duly registered under
Philippine law, and operated exclusively for educational purposes, maintained and administered by a private
individual or group offering formal education, and with an issued permit to operate by the DECS.
Revenues derived from and assets used in the operation of cafeteria/canteens, dormitories, and bookstores are
exempt from taxation provided they are owned and operated by the educational institution as ancillary activities
and the same are located within the school premises.
CIR v. CA, CTA and YMCA, 298 SCRA 83 (1998)

In this case, the SC held that the income derived by YMCA from leasing out a portion of its premises to
small shop owners, like restaurants and canteen operators, and from parking fees collected from non-members are
taxable income
CIR v. CA, CTA and Ateneo, 271 SCRA 605 (1997)

Petitioner asserted that Ateneo de Manila University in conducting researches and studies of social
organizations and cultural values thru one of its unit, the Institute for Philippines Culture thus subject to 3%
independent contractors tax under Sec. 205 of NIRC to wit:
Sec. 25: Contractors, proprietors or operators of dockyards and others—A contractor’s tax of 3% of the gross
receipts is hereby imposed on the following.
(16) Business agents and other independent contractors, except persons, associations and corporations under
contract for embroidery and apparel for export, as well as their agents and contractors, and except gross receipts
of or from a pioneer industry registered with the Board of Investments under provision of R.A. 5168
According to the CIR the contractor the term independent contractor is not specifically defined so as to de limit
its scope, so much that any person who renders physical and mental service for a fee, is now indubitably considered
as an independent contractor liable to 3% contractor’s tax. According to petitioner, Ateneo has the burden of proof
to show its exemption from the coverage of the law.
The court held that Ateneo is mandated by law to undertake research activities to maintain its university
status. In fact, the researches carried out by IPC is not on business or profit but on social sciences studies of
Philippine Society. Since the university can only finance limited number of IPC research projects, private
respondents occasionally accept sponsorships from international organizations, private foundations and
governmental agencies. These sponsorships are subject to the terms and conditions set by Ateneo such as no
proprietary or commercial purpose research is done, topic confined to university academic agenda, and the
absolute right to publish and ownership of the results conducted by IPC.
ARTICLE XIV AND ARTICLE VI COMPARED

Art. XIV, Sec. 4 (3) Art. VI Sec. 28(3)
Grantee Non-stock, non-profit, educational Religious, educational, charitable,

institution institutions
Taxes Covered Income tax
Custom Duties Property Tax
Property Tax
OTHER TAXES
TAX Exempted Institution Bases
Donor’s Tax Non-stock, non-profit educational All grants, endowments, donations,

Institution contributions used, actually,
exclusively, for educational
purposes shall be exempt from tax.
Art. XIV, Sec. 4 (4)
Only transfers to social welfare,
Estate Tax cultural and charitable institution Sec. 87 R.A. 8424
are exempt from estate tax.
UNOR-SCHOOL OF LAW
9
e
10. Others
i. Grant of tax exemption (more on this under D4)

“No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members
of the Congress.”
RULES ON VOTE REQUIREMENT

1) Law granting any tax exemption = (absolute majority)
2) Law withdrawing any tax exemption= (Relative majority)
* Tax exemption, amnesties, refunds are considered in the nature of tax exemptions.
* A law granting such needs approval of the absolute majority of the Congress
Chavez v. PCGG, supra.

PCGG a body created by the executive department cannot enter into agreement with the Marcos to
exempt the properties of the latter considered as ill-gotten wealth because it is only congress can do such.
ii. Veto of appropriation, revenue or tariff bills

The President shall have the power to veto any particular item or items in an appropriation, revenue, or
tariff bill, but the veto shall not affect the item or items to which he does not object, [Sec. 27(2), Art. VI,
Constitution].
Gonzales v. Macaraig, 191 SCRA 452 (1990)

An item in a bill refers to particulars, details, the distinct and severable parts of a bill. In budgetary
legislation, an item is an invalid sum of money dedicated to a stated purpose.
iii. Non-impairment of the jurisdiction of the Supreme Court
Sec. 5 (2b), Art. VIII, 1987 Constitution

“The Supreme Court shall have the power to review, revise, reverse, modify or affirm on appeal or certiorari, all
cases involving the legality of any tax imposed, assessment, or toll, or any penalty imposed in relation thereto.”
Congress cannot take away from the Supreme Court the power given to it by the Constitution as the final arbiter of
the tax cases.
The decisions of BIR are appealable to CTA. Court of Tax Appeals may be appealed to the Court of Appeals. Decision
rendered by the CA may be elevated to the Supreme Court.
CIR v. Santos, 277 SCRA 617 (1997)

Lower Courts (CFI) has the authority to decides questions of constitutionality of a law does not extend on
deciding questions which pertains to legislative policy.
San Miguel Corp. v. Avelino, 89 SCRA 69 (1979)

CFI judge has the authority to pass upon the validity of a city tax ordinance even after its validity ahd been
contested before the Secretary of Justice who rendered a decision thereon. The decision of Sec. Justice that the
ordinance in questions I of “doubtful validity” is not a declaration that it is unlawful.
iv. Revenue bills shall originate from the House of Representatives
Sec. 24, Art. VI, 1987 Constitution

“All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in the House of Representatives, but the Senate may
propose or concur with amendments.”
UNOR-SCHOOL OF LAW
10
e
 It is not the revenue law but the revenue bill which is required by the constitution to originate exclusively in
the House of Representative.
Tolentino v. Sec. of Finance, supra., supra.

The Constitution simply requires that there must be that initiative coming from the House of
Representatives relative to appropriation, revenue and tariff bills on the theory that, elected as they were from the
districts, the members of the House can be expected to be more sensitive to the local needs and problems.
It is not the law, but the revenue bill, which is required by the Constitution to originate exclusively in the
HR, because a bill originating in the House may undergo such extensive change in the Senate that result may be
rewriting of the whole, and a distinct bill may be produced. (amendment by substitution)
The Constitution does not also prohibit the filing in the Senate of a substitute bill in anticipation of its
receipt of the bill from the House, as long as action by the Senate is withheld until receipt of said bill
v. Infringement of press freedom

“No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the
people peaceably to assemble and petition the government for redress of grievances.”

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less
a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or
exchange of services and the lease of properties purely for revenue purposes. To subject the press to its payment is
not to burden the exercise of its right any more than to make the press pay income tax or subject it to general
regulation is not to violate its freedom under the Constitution. (PPI v. de Ocampo GR 115931, 30 October 1995)
vi. Grant of Franchise

Tax exemptions included in the grant of a franchise may be revoked by another law as it is specifically
provided in the Constitution that the grant of any franchise is always subject to amendment, alteration, or repeal by
the Congress when the common good so requires.
Sec. 11, Art. XII, 1987 Constitution

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the laws of the
Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate,
or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or
right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the
Congress when the common good so requires. The State shall encourage equity participation in public utilities by
the general public. The participation of foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive and managing officers of such
corporation or association must be citizens of the Philippines.

Congress may withdraw tax exemption granted to any corporations or GOCC’s such as PAL. The law could take
back the privilege anytime without offense to the constitution. By granting exemptions, the State does not forever
waive the exercise of its sovereign prerogative.
C. Situs of Taxation and Double Taxation
The power to tax is limited only to persons, property or businesses within the jurisdiction or territory of the
taxing power.
EXCEPT:
A) Where the tax laws operate outside territorial jurisdiction
UNOR-SCHOOL OF LAW
11
e
1) TAXATION of resident citizens on their incomes derived from abroad
B) Where tax laws do not operate within the territorial jurisdiction of the State
1) When exempted by treaty obligations
2) When exempted by international comity
1. Meaning of situs
Situs- place where a thing is considered for taxation. It is necessary for the exercise of dominion/authority of a state
over a subject matter.
 The determination of the situs of taxation depends on various factors including the:
1. Nature of the tax;
2. Subject matter thereof (e.g. persons, property, act or or activity);
3. Possible protection and benefit that may accrue both to the government and the taxpayer;
4. Residence or citizenship of the taxpayer; and
5. Source of income.
2. Situs of subjects of taxation

KIND OF TAX SITUS
Personal or Community Tax Residence or domicile of the taxpayer
Real Property Tax Location of the property

Personal Property Tax TANGIBLE: where it is physically located or permanently kept
(Lex Rei Sitae)
INTANGIBLE: Subject to Sec 104 of the NIRC * and the principle

of Mobilia Sequuntur Personam **
Business Tax Place of Business

Excise or Privilege Tax Where the act is performed or where occupation is pursued
Sales Tax Where the sale is consummated

Income Tax Consider: (1) citizenship, (2) residence,
(3) source of income (Sec 42, 23, NIRC of 1997)
Transfer Tax Residence or citizenship of the taxpayer

or location of the property
Donor’s Tax Location of the property
and the citizenship of the donor (Sec 98, NIRC 1997)
Estate Tax Location and citizenship of the decedent.(Sec 85, NIRC)
Franchise Tax state which granted the franchise
*Lex Rei Situs -where the property is located

* Mobilia Sequuntur Personam – “movables follow the person”. According to this maxim, the situs of personal
property is the domicile of the owner. This is a merely a fiction of law intended for convenience and not to be
controlling where justice does not demand it.
** the following intangible properties are considered as properties with a situs in the Philippines:
a. Franchise which must be exercised in the Philippines
b. Shares, obligations or bonds issued by any corporation or sociedad anonima organized or constituted in
the Philippines in accordance with its laws.
UNOR-SCHOOL OF LAW
12
e
c. Shares, obligations or bonds issued by any foreign corporation 85% of business which is located in the
Philippines
d. Shares, obligations, or bonds issued by any foreign corporation if such shares, obligations or bonds have
acquired a business situs in the Philippines; and
e. Shares or rights in any partnership business or industry established in the Philippines.
Sec. 42, 104
CIR v. British Overseas Airway Corp., supra.

Revenue derived by an of-line international carrier without any flight from the Philippines, from ticket sales
through its local agent are subject to tax on gross Philippine billings
CIR v. Japan Airlines, supra.

JAL made PAL its sales ticket agent in the Philippines. For the source of income to be considered coming
from the Philippines, it is sufficient that the income is derived from the activities within this country regardless of
the absence of flight operations within Philippine territory.
Wells Fargo Bank v. Collector, 70 Phil 325 (1940)

The shares of stock are subject to Philippine inheritance tax considering that the decedent was domiciled
in California

All subjects of taxation similarly situated are to be treated alike both in privileges confirmed and liabilities
imposed.
3. Multiplicity of Situs, Collector v. de Lara, 102 Phil 813 (1958)
CIR v. De Lara, 102 Phil 813

The Supreme Court did not subject to estate and inheritance taxes the shares of stock issued by Philippine
corporations which were left by a non-resident alien after his death. Considering that he is a resident of a foreign
country, his estate is entitled to exemption from inheritance tax on the intangible personal property found in the
Philippines. This exemption is granted to non-residents to reduce the burdens of multiple taxation, which otherwise
would subject a decedent’s intangible personal property to the inheritance tax both in his place of residence and
domicile and the place where those are found.
This is, therefore, an exception to the decision of the Supreme Court in Wells Fargo v. CIR. This has since
been incorporated in Sec. 104 of the NIRC.
Sec. 104, NIRC- No tax shall be collected for intangible personal property if the decedent at time of his death was
citizen and resident of a foreign country.
Multiplicity of suits
Multiplicity of situs, or the taxation of the same income or intangible subjects in several taxing jurisdictions, arises
from various factors:
1. The variance in the concept of domicile for tax purposes;
2. Multiple distinct relationships that may arise with respect to intangible personal property; or
3. The use to which the property may have been devoted all of which may receive the protection of
the laws of jurisdictions other than the domicile of the owner thereto.
The remedy to avoid or reduce the consequent burden in case of multiplicity of situs is either to:
1. Provide exemptions or allowance of deduction or tax credit for foreign taxes; or
2. Enter into tax treaties with other States.
4. Double Taxation
UNOR-SCHOOL OF LAW
13
e
Definition: Taxing the same person, property, business, object twice when it should only be taxed once.
Is Double Taxation Prohibited In The Phils?

 No, there is no Constitutional prohibition against double taxation. It is not favored but permissible.
(Pepsi Cola Bottling Co. v. City of Butuan, GR L-22814, 28 August 1968)
 Double taxation becomes obnoxious only when the taxpayer is taxed twice for the benefit of the same
government entity. (Commissioner vs. Lednicky (GR L-18169, L-18286, L-21434; 31 July 1964)
1. Kinds of Double Taxation

a. Direct Double or Duplicate Taxation – this is objectionable or prohibited because this constitutes a
violation of substantive due process.
ELEMENTS: (Villanueva v. City of Iloilo, supra)

 Taxing twice
 By the same taxing authority
 Within the same jurisdiction or taxing district
 For the same purpose
 In the same taxing period
 The same subject or object
 Of the same kind or character of tax.
b. Indirect Duplicate Taxation – not legally objectionable. The absence of one or more of the above-
mentioned elements makes the double taxation indirect.
EXAMPLES:
A) The taxpayers warehousing business although carried on in relation to the operation of its sugar central is
a distinct and separate taxable business.
B) A license tax may be levied upon a business or occupation although the land or property used in
connection therewith is subject to property tax.
C) Both a license fee and a tax may be imposed on the same business or occupation for selling the same
article and this is not in violation of the rules against double taxation.
D) When every bottle or container of intoxicating beverages is subject to local tax and at the same time the
business of selling such product is also subject to liquors license.
E) A tax imposed on both on the occupation of fishing and of the fishpond itself
c. Domestic – this arises when the taxes are imposed by the local or national government (within the same
state)
d. International – refers to the imposition of comparable taxes in two or more states on the same taxpayer in
respect of of the same subject matter for identical periods
a. Meaning
In its strict sense, referred to as direct duplicate taxation, double taxation means:
1. Taxing twice;
2. by the same taxing authority;
3. within the same jurisdiction or taxing district;
4. for the same purpose;
5. in the same year or taxing period;
6. same property in the territory.
CIR v. S.C. Johnson and Son, Inc., 309 SCRA 87 (1999)

Double Taxation—takes place when a person is resident of a contracting state and derives income from, or
owns capital in the other contracting state and both states impose tax on that income or capital.
b. Double taxation in its broad sense
UNOR-SCHOOL OF LAW
14
e
In its broad sense, referred to as indirect double taxation, double taxation is taxation other than direct duplicate
taxation. It extends to all cases in which there is a burden of two or more impositions.
Villanueva v. City of Iloilo, supra.

An ordinance imposing a municipal tax on tenement houses was challenged because the owners already
pay real estate taxes and also income taxes under the NIRC. The Supreme Court held that there was no double
taxation , so long as it does not violates any other constitutional provision. The same tax may be imposed by the
National Government as well as the local government. There is nothing inherently obnoxious in the exaction of
license fees or taxes with respect to the same occupation, calling or activity by both the state and a political
subdivision thereof. Further, a license tax may be levied upon a business or occupation although the land used in
connection therewith is subject to property tax.
b. Constitutionality of double taxation
City of Baguio v. de Leon, supra.

The argument against double taxation may not be invoked where one tax is imposed by the state and the
other imposed by the city, it being widely recognized that there is nothing inherently obnoxious in the requirement
that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and a
political subdivision thereof. And where the statute or ordinance in question applies equally to all persons, firms
and corporations placed in a similar situation, there is no infringement of the rule on equality.
Pepsi Cola Bottling v. City of Butuan, supra.

An ordinance imposing sales tax on agents/consignee selling merchandise from outside dealers does not
amount to double taxation. Double taxation, in general, is not forbidden by our fundamental law. However, the
ordinance is arbitrary to other member of the same taxable class hence the law violates the rule of uniformity in
taxation. There is no constitutional prohibition against double taxation in the Philippines. It is something not
favored but is permissible, provided that the other constitutional requirements is not thereby violated
Sanchez v. Collector, 97 Phil 687 (1955)

A license tax may be levied upon a business or occupation although the land or property used therein is
subject to property tax. The state may collect an ad volarem tax on property used in a calling, and at the same time
impose a license tax on the pursuit of that calling, the imposition of the later kind of tax that being no sense as
double tax.
City of Mla. v. Interisland Gas Service, 99 Phil 847 (1956)

The fees paid by the defendant under a city ordinance was a license fee, in the exercise of police power
and not under its inherent power of taxation, and double taxation is not prohibited in our constitution.
Cpa. General de Tabacos v. City of Mla., supra.

Both license fee and a tax may be imposed on the same business or occupation, or for selling the same article,
this is not being a violation of the rule against double taxation.
Doctrines On Double Taxation

1) Direct Double Taxation (DDT) is not allowed because it amounts to confiscation of property without due process
of law
2) You can question the validity of double taxation if there is a violation of the Equal protection clause or Equality or
Uniformity of Taxation
3) All doubts as to whether double taxation has been imposed should be resolved in favor of the taxpayer
D. Means of Avoiding and Minimizing the Burden of Taxation
1. Shifting of tax burden
SHIFTING
 Shifting is the transfer of the burden of a tax by the original payer or the one on whom the tax was
assessed or imposed to someone else.
UNOR-SCHOOL OF LAW
15
e
 Process by which such tax burden is transferred from statutory taxpayer to another without violating the
law.
a. Ways of shifting the tax burden
1) FORWARD SHIFTING
- When the burden of the tax is transferred from a factor of production through the factors of distribution
until it finally settles on the ultimate purchaser or consumer.
Example:
- Manufacturer or producer may shift tax assessed to wholesaler, who in turn shifts it to the retailer, who
also shifts it to the final purchaser or consumer
-
2) BACKWARD SHIFTING
- When the burden of the tax is transferred from the consumer or purchaser through the factors of
distribution to the factors of production.
Example:
- Consumer or purchaser may shift tax imposed on him to retailer by purchasing only after the price is
reduced, and from the latter to the wholesaler, or finally to the manufacturer or producer.
3)ONWARD SHIFTING
- When the tax is shifted two or more times either forward or backward
Example:
- Thus, a transfer from the seller to the purchaser involves one shift; from the producer to the wholesaler,
then to retailer, we have two shifts; and if the tax is transferred again to the purchaser by the retailer, we
have three shifts in all.
b. Taxes that can be shifted
Sec. 105-VAT
Only indirect taxes may be shifted: VAT, professional tax, amusement tax, customs duties
c. Meaning of impact and incidence of taxation
Impact of taxation is the point on which a tax is originally imposed. In so far as the law is concerned, the taxpayer is
the person who must pay the tax to the government. He is also termed as the statutory taxpayer-the one on whom
the tax is formally assessed. He is the subject of the tax.
Incidence of taxation is that point on which the tax burden finally rests or settle down. It takes place when shifting
has been effected from the statutory taxpayer to another.
Relationship between impact, shifting, and incidence of a tax

 The impact is the initial phenomenon, the shifting is the intermediate process, and the incidence is the
result. Thus, the impact in a sales tax (i.e. VAT) is on the seller (manufacturer) who shifts the burden to the
customer who finally bears the incidence of the tax.
 Impact is the imposition of the tax; shifting is the transfer of the tax; while incidence is the setting or
coming to rest of the tax.
2. Tax evasion
 It is also known as “tax dodging”

 It is punishable by law.
 Tax evasion is the use by the taxpayer of illegal or fraudulent means to defeat or lessen the payment of
tax.
Elements of tax evasion

 Tax evasion connotes the integration of three factors:
UNOR-SCHOOL OF LAW
16
e
1. The end to be achieved. Example: the payment of less than that known by the taxpayer to
be legally due, or in paying no tax when such is due.
2. An accompanying state of mind described as being “evil, in bad faith, willful, or deliberate
and not accidental.”
3. A course of action (or failure of action) which is unlawful.
INDICIA of FRAUD IN TAX EVASION

o Failure to declare for taxation purposes true and actual income derived from business for two (2)
consecutive years; or
o Substantial under-declaration of income tax returns of the taxpayer for four (4) consecutive years coupled
with unintentional overstatement of deductions
EVIDENCE TO PROVE TAX EVASION

 Since fraud is a state of mind, it need not be proved by direct evidence but may be proved from the
circumstances of the case.
Republic v. Gonzales, 13 SCRA 633 (1965)

The Supreme Court affirmed the assessment of a deficiency tax against Gonzales, a private concessionaire
engaged in the manufacture of furniture inside the Clark Air Base, for under-declaration of his income. SC held that
the failure of the taxpayer to declare for taxation purposes his true and actual income derived from his business for
two consecutive years is an indication of his fraudulent intent to cheat the government of taxes due to it.
Sec. 254-Attempt to Evade or Defeat Tax-Any person willfully attempts in any manner to evade or defeat any tax
imposed under this code of the payment thereon shall, in addition to other penalties provided by law, upon
conviction thereof, be punished by a fine of not less then Php 30,000.00 but not more than Php 100,000.00 and
suffer imprisonment of not less than 2 years but not more than 4 years. Provided, that the conviction or acquittal
obtained under this Section shall not be a bar to the filing of a civil suit for the collection of taxes.
3. Tax avoidance
Tax avoidance is the exploitation by the taxpayer of legally permissible alternative tax rates or methods of
assessing taxable property or income in order to avoid or reduce tax liability. It is politely called, “tax minimization”
and is not punishable by law
Ways of avoiding tax (minimizing or escaping tax)
1. Shifting
2. Capitalization
3. Evasion
4. Exemption
5. Transformation
6. Avoidance
Note: With the exception of evasion, all are legal means of avoiding taxes.
What is TRANSFORMATION?
The manufacturer in an effort to avoid losing his customers, maintains the same selling price and margin of
profit, not by shifting the tax burden to his customers, but by improving his method of production and cutting
down or other production cost, thereby transforming the tax into or earn through the medium of production.
Delpher Traders Corp. v. IAC, 157 SCRA 349 (1988)

The Supreme Court upheld the estate planning scheme resorted to by the Pacheco family in converting
their property to shares of stock in a corporation which they themselves owned and controlled. By virtue of the
deed of exchange, the Pacheco co-owners saved on inheritance taxes. The Supreme Court said the records do not
point to anything wrong and objectionable about this estate planning scheme resorted to. The legal right of the
UNOR-SCHOOL OF LAW
17
e
taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them by means which
the law permits cannot be doubted.
Yutivo v. CTA, 1 SCRA 160 (1961)

The intention to minimize taxes, when used in the context of fraud, must be proven by clear and
convincing evidence amounting to more than mere preponderance. Mere understatement of tax in itself does not
prove fraud.
4. Exemption from taxation
a. meaning of exemption from taxation
It is the grant of immunity to particular persons or corporations or to persons or corporations of a particular

class from a tax which persons and corporations generally within the same state or taxing district are obliged to
pay. It is an immunity or privilege; it is freedom from a financial charge or burden to which others are subjected.
1. Principle Governing Exemptions

 In the construction of tax statutes, exemptions are not favored and are construed strictissimi juris against
the taxpayer.
 One who claims exemption should prove by convincing proof that he is exempted.
 Taxation is the rule and exemption is the exemption
 Exemption is not presumed
 Constitutional grants of tax exemption are self executing
 Tax exemption are personal and cannot be delegated.
 Exemption generally covers direct tax, unless otherwise provided.
 Exemption is allowed only if there is a clear provision there for.
 It is not necessarily discriminatory as long as there is a reasonable foundation or rational basis.
 Exemptions are not presumed, but when public property is involved, exemption is the rule and taxation is
the exemption.
Greenfield v. Meer, 77 Phil 394 (1946)
PLDT v. City of Davao, 363 SCRA 522 (2001)

with the passing of LGC which grant taxing power to the Local Government, all exemptions granted to all
persons, whether natural or juridical, including those which in the future might be granted, are withdrawn unless
the law granting the exemption expressly states that the exemption also applies to local taxes.
PLDT v. City of Davao, G.R. 143867, March 25, 2003

Legal effect of the constitutional grant to local governments simply means that in interpreting statutory
provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations.
i. compared with tax remission, condonation

There is a tax condonation or remission when the State desists or refrains from exacting, inflicting or enforcing
something as well as to reduce what has already been taken. The condonation of a tax liability is equivalent to and
is in the nature of a tax exemption. Thus, it should be sustained only when expressed in the law.
Tax exemption, on the other hand, is the grant of immunity to particular persons or corporations of a particular
class from a tax of which persons and corporations generally within the same state or taxing district are obliged to
pay. Tax exemptions are not favored and are construed strictissimi juris against the taxpayer.
Juan Luna Subd. V. M. Sarmiento, 91 Phil 371 (1952)

The word “remit” means to desist or refrain from exacting, inflicting or enforcing something as well as to
restore what has already been taken. The remission of taxes due and payable to the exclusion of taxes already
collected does not constitute unfair discrimination. Such a set of taxes is a class by itself and the law would be open
to attack as class legislation only if all taxpayers belonging to one class were not treated alike.
UNOR-SCHOOL OF LAW
18
e
Surigao Corp. Min. v. Collector, 9 SCRA 728 (1963)
The condonation of a tax liability is equivalent to and is in the nature of a tax exemption. Thus, it should be
sustained only when expressly provided in the law.
 Condonation of taxes which are unpaid does not extend to refund of paid taxes.
 For refund of taxes, in the suit for recovery of the payment of taxes as having been illegally collected, the
burden is upon the taxpayer to establish the facts which show the illegality of the tax or that the
determination thereof is erroneous.
ii. tax amnesty
tax amnesty
Tax amnesty, being a general pardon or intentional overlooking by the State of its authority to impose
penalties on persons otherwise guilty of evasion or violation of a revenue to collect what otherwise would be due it
and, in this sense, prejudicial thereto. It is granted particularly to tax evaders who wish to relent and are willing to
reform, thus giving them a chance to do so and thereby become a part of the new society with a clean slate.
Note:
 Like tax exemption, tax amnesty is never favored nor presumed in law, and the terms of the tax amnesty
shall be strictly construed against the tax payer and liberally in favor of the government.
 Unlike tax exemption, tax amnesty has limited applicability as to cover a particular taxing period or
transaction only.
Commissioner v. CA and ROH Auto, 240 SCRA 368 (1995)
People v. Castaneda, 165 SCRA 327 (1988)

To be entitled to the extinction of liability under PD370, the claimant must have (1) voluntarily disclosed his
previously untaxed income or wealth and paid the required 15% tax on such previously untaxed income or wealth. In
this case, claimant is not entitled since the disclosure or previously untaxed income was not voluntarily but was a
result of tax cases already pending.
Pascual v. CIR, 166 SCRA 560 (1988)

2 isolated transactions is not a case of partnership, hence petitioners are not liable for corporate income
tax. As they have availed of the benefits of tax amnesty as individual taxpayers in these transactions, they are
relieved of any further tax liability arising therefrom.
Republic v. IAC, 196 SCRA 335 (1991)

Tax amnesty payments bar an action for recovery of deficiency income taxes under PD’s 23, 213, and 370.
Even the deficiency tax assessment against the spouses were correct, since the latter have already paid almost the
equivalent amount to the Government by way of amnesty taxes under P.D. 213, and were granted not merely an
exemption, but an amnesty, for their past tax failings, the Government is stopped from collecting the difference
between the deficiency tax assessment and the amount already paid by them as amnesty tax.
CIR v. Marubeni Corp., 372 SCRA 576 (2001)

He who claims exception (or an amnesty) from the common burden must justify his claim by the clearest
grant of organic or state law. It cannot be allowed to exist upon a vague implication. If a doubt arises as to the
intent of the legislature, that doubt must be resolved in favor of the state.
In this case, amnesty (EO 41) is given except (sec 4, b) those with income tax cases already filed in court as
of the effectivity thereof which is on August 22, 1986. Since the case against the corporation was filed on Sept. 26,
1986, it is not disqualified to avail the amnesty for income tax under EO 41.
iii. VAT zero-rating, Sec. 106 (A) (2)
R.A. 7716 (An act restructuring the value added tax (vat) system, widening its tax based and enhancing its
administration and for these purposes amending and repealing the relevant provisions of the national internal
revenue code, as amended, and for other purposes.)
UNOR-SCHOOL OF LAW
19
e
"(b) transactions subject to zero-rate. — The following services performed in the Philippines by VAT-registered
persons shall be subject to 0%:
"(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which
goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for
in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
"(2) Services other than those mentioned in the preceding sub-paragraph, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral
ng Pilipinas (BSP).
"(3) Services rendered to persons or entities whose exemption under special laws or international agreements to
which the Philippines is a signatory effectively subjects the supply of such services to zero rate.
"(4) Services rendered to vessels engaged exclusively in international shipping; and
"(5) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods
for an enterprise whose export sales exceed seventy percent (70%) of total annual production.
Sec. 106 (A)(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
(a) Export Sales. - The term "export sales" means:
(1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of
any shipping arrangement that may be agreed upon which may influence or determine the
transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its
equivalent in goods or services, and accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP);
(2) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local
export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the
Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
(3) Sale of raw materials or packaging materials to export-oriented enterprise whose export sales
exceed seventy percent (70%) of total annual production;
(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and
(5) Those considered export sales under Executive Order NO. 226, otherwise known as the Omnibus
Investment Code of 1987, and other special laws.
(b) Foreign Currency Denominated Sale. - The phrase "foreign currency denominated sale" means sale to a
nonresident of goods, except those mentioned in Sections 149 and 150, assembled or manufactured in the
Philippines for delivery to a resident in the Philippines, paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
(c) Sales to persons or entities whose exemption under special laws or international agreements to which the
Philippines is a signatory effectively subjects such sales to zero rate.
iv. exclusions, deductions, Sec. 32 (B), 34
EXCLUSION
 Exclusion refers to income received or earned but is not taxable as income because it is exempted by law
or by treaty. Such tax-free income is not to be included in the income tax return unless information
regarding it is specifically called for.
NIRC Sec. 32 (B) Exclusions from Gross Income. - The following items shall not be included in gross income and shall
be exempt from taxation under this title:
1. Proceeds from life insurance

2. Amount received by insured as return of premium
3. Gifts, bequests and devises
4. Compensation for injuries or sickness
UNOR-SCHOOL OF LAW
20
e
5. Income exempt under treaty
6. Retirement benefits, pensions, gratuities, etc.
7. Income derived by foreign government
8. Income derived by the Philippine Government or its political subdivisions
9. Prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic,
literary or civic achievement.
10. Prizes and awards in sports competitions sanctioned by the national sports associations
11. 13th month pay and other benefits not exceeding P30,000.00. Applies both to public and private
employees.
12. GSIS, SSS, Medicare and other contributions
13. Gains from the sale of bonds, debentures or other certificate of indebtedness. 5 eyars or more. If maturity
is less than 5 years, it is taxable.
14. Gains from redemption of shares in mutual fund. It must be emanate from the mutual fund.
DEDUCTIONS FROM GROSS INCOME

 Deductions are items or amounts which the law allows to be deducted under certain conditions from gross
income in order to arrive at taxable income.
NIRC SEC. 34. Deductions from Gross Income. - Except for taxpayers earning compensation income arising from
personal services rendered under an employer-employee relationship where no deductions shall be allowed under
this Section other than under subsection (M) hereof, in computing taxable income subject to income tax under
Sections 24 (A); 25 (A); 26; 27 (A), (B) and (C); and 28 (A) (1), there shall be allowed the following deductions from
gross income;
1. Expenses
2. Interest
3. Taxes
4. Losses
5. Bad debts
6. Depreciation
7. Depletion of oil and gas wells and mines
8. Charitable and other contributions
9. Research and development
10. Pension trusts
11. Premium payments on health and/or hospitalization insurance of an individual taxpayer
Deduction v. exemption
Deduction is an amount allowed by law to be subtracted from gross income to arrive at taxable income.
Exemption from taxation is the grant of immunity to particular persons or corporations or to persons or
corporations of a particular class from a tax which others generally within the same taxing district are obliged to
pay.
Deduction v. exclusion
Deduction is an amount allowed by law to be subtracted from gross income to arrive at taxable income.
Exclusion refers to income received or earned but is not taxable as income because exempted by law or by treaty.
Such tax-free income is not to be included in the income tax return unless information regarding it is specifically
called for. [Section 61, Revenue Regulation 2]
Basic principles governing deductions

1. The taxpayer seeking a deduction must point to some specific provisions of the statute authorizing the
deduction; and
2. He must be able to prove that he is entitled to the deduction authorized or allowed.
Kinds of deductions
1. Itemized deduction which is available to individual and corporate taxpayers
2. Optional standard deduction which is available to individual taxpayers only, except a non-resident alien.
UNOR-SCHOOL OF LAW
21
e
3. Special deductions which is available, in addition to the itemized deductions, to certain corporations, i.e.
insurance companies and propriety educational corporations.
Time within which to claim deduction

1. As a rule, if a taxpayer does not, within a year, deduct certain of his expenses, losses, interests, taxes, or
other charges, he cannot deduct them from the income of the next or any succeeding year.
2. If he keeps his books on the cash receipts basis, the expenses are deductible in the year they are paid.
3. If on the actual basis, then in the year they are incurred, whether paid or not.
Who may not avail of deductions form gross income?

1. Citizens and resident aliens whose income is purely compensation income.
* They are allowed personal and additional exemptions and deduction for premium payments on
health and hospitalization insurance.
2. Non-resident aliens not engaged in trade or business in the Philippines
3. Non-resident foreign corporations.
Some rules on deduction

 Itemized deduction may apply to corporate tax payer as well as individual taxpayer.
 A corporation may avail only of the deduction from (1) to (10): premium payments on health and/or
hospitalization insurance is deductible only by an individual taxpayer.
 A corporation may avail only of the itemized deductions: an individual, except a non-resident alien, may
elect the itemized deductions or the optional standard deduction.
 Thus, the optional standard deduction is not available to corporations.
 An individual earning purely compensation income is not allowed itemized deductions, except premium
payments on health and/or hospitalization insurance. In addition, he is also granted personal and
additional exemptions.
 An individual, who earns income other than purely compensation income, is allowed personal additional
exemptions in addition to the itemized deductions or the optional standard deductions.
Two kinds of deduction available to individuals, except a non-resident alien

1. Itemized deduction
2. Optional standard deduction
Note: Optional standard deduction is not available to corporations.
b. Kinds of tax exemption
Express or implied, total or partial
Kinds of Tax Exemption According to Manner of Creation

1) Express or affirmative exemption
When certain persons, property or transactions are, by express provision, exempted from all certain taxes,
either entirely or in part.
2) Implied exemption or exemption by omission
When a tax is levied on certain classes of persons, properties, or transactions without mentioning the
other classes.
3) Contractual
Agreed to by the taxing authority in contracts lawfully entered into them under enabling laws. (i.e.: treaty,
licensing ordinance)
Kinds of Tax Exemption According to Scope or Extent

1) TOTAL—when certain persons, property or transactions are exempted, expressly or impliedly from all taxes.
2) PARTIAL—when certain persons, property or transactions are exempted, expressly or impliedly from certain
taxes, either entirely or in part.
UNOR-SCHOOL OF LAW
22
e
Exemption from direct tax, from indirect tax
A law granting exemption from direct tax does not exempt the subject form indirect tax.
Does the provision in a statute granting exemption from all taxes include indirect taxes?
 No. As a general rule, indirect taxes are not included in the grant of such exemption unless it is expressly
stated.
Atlas Fertilizer v. Commissioner, 100 SCRA 556( 1980)

While the burden of proof is on the claimant to establish his right of exemption, there may be situations
when he need not to adduce further evidence to show that he is entitled to exemption.
Commissioner v. Phil. Ace Line, 25 SCRA 912 (1968)

Every tax exemption implies a waiver of the right to collect what otherwise would be due to the
government. The Constitution does not bar tax exemption. Purpose of tax exemption is some public benefit or
interest, which the lawmaking body considers sufficient to offset the monetary loss entailed in the grant of the
exemption.
Com. v. RTN Mining, 202 SCRA 137 (1991); 207 SCRA 549 (1992)
When obvious inconsistency between an earlier law and latter law granting an exemption, the court is
compelled to abide by the maxim that all doubts granting exemption must be resolved in favor of the taxing
authority. Tax exemptions must be strictly construed and can only be given force when the grant is clear and
categorical.
Caltex v. COA, supra.

 In claiming tax exemption, the burden of proof lies upon the claimant
 It cannot be created by mere implication
 It cannot be presumed that you are entitled to tax exemption
 You must prove it
c. Nature of the power to grant tax exemption
1. National government
The power to grant tax exemptions is an attribute of sovereignty for the power to prescribe who
or what persons or property shall be taxed implies the power to prescribe who or what persons or property
shall be taxed implies the power to prescribe who or what persons or property shall not be taxed.
2. Local governments
Municipal corporations are clothed with no inherent power to tax or to grant tax exemptions. But
the moment the power to impose a particular tax is granted, they also have the power to grant exemptions
therefrom unless forbidden by some provision of the Constitution or the law.
The legislature may delegate its power to grant tax exemptions to the same extent that it may
exercise the power to exempt.
Basco v. PAGCOR [196 SCRA 52] –

The power to tax of municipal corporations must always yield to a legislative act of Congress which is
superior, having been passed by the State itself. Municipal corporations are mere creatures of Congress which
has the power to create and abolish municipal corporations due to its general legislative powers. If Congress
can grant the power to tax, it can also provide for exemptions or even take back the power.
Maceda v. Macaraig, (1993) supra.

In the case of property owned by the state or a city or other public corporations, the express exception
should not be construed with the same degree of strictness that applies to exemptions contrary to the policy of the
state, since as to such property “exception is the rule and taxation the exception.”
d. Rationale for tax exemption
UNOR-SCHOOL OF LAW
23
e
Rationale for granting tax exemptions

 Its avowed purpose is some public benefit or interest which the lawmaking body considers sufficient to
offset the monetary loss entailed in the grant of the exemption.
 The theory behind the grant of tax exemptions is that such act will benefit the body of the people. It is not
based on the idea of lessening the burden of the individual owners of property.
Davao Light v. Com., 22 SCRA 122 (1972)

Facts: Davao Light is a grantee of a legislative franchise to install, operate and maintain an electric light, heat
and power plant in the city of Davao, for 50 years. On two occasions, it imported electrical supplies, materials
and equipment for installation in its power plant. The importations arrived in the port of Cebu City, where the
Collector imposed custom duties and taxes amounting to P9,928. Davao Light paid under protest, claiming it
is similarly tax-exempted as the National Power Corporation, which is allegedly posing as competition to
Davao Light in its business.
Issue: Whether Davao Light is similarly tax-exempt as Napocor.
Held: Davao Light’s purpose in securing a franchise to establish and operate an electric plant and power
stations was to engage in a business or profit-making venture, while Napocor was specifically created to
undertake the development of hydraulic power nationwide and the production of power from other sources,
for use of the government and the general public. In isolated sale of electric power to one government-owned
plant (National Development Co., in Davao) would not be enough to classify the Napocor as a “competing”
concern to Davao Light’s enterprise. Napocor’s tax exemption (RA 358) was granted in order to facilitate the
liquidation by said corporation of its liabilities, and the consequential release by the government itself from its
obligation in the transactions entered into by the President on behalf of Napocor. Davao Light is not entitled
to the same exemption privileges enjoyed by another operator without an express provision of the law to that
effect. Exemption from taxation is never presumed. For tax exemption to be recognized, the grant must be
clear and express. It cannot be made to rest on vague implications.
Tan Kim Kee v. CTA, 7 SCRA 670 (1963)
NPC v. RTC Presiding Judge, Cagayan de Oro, 190 SCRA 477 (1990)
When conflict between general and special law arises, the special law prevails. When the law does not
distinguished as to the kinds of tax exemptions withdrawn, the plain meaning is that all tax exemptions are
covered.
Chavez v. PCGG [GR No. 130716, Dec. 6, 1998]

In a compromise agreement between the Philippine Government, represented by the PCGG, and the
Marcos heirs, the PCGG granted tax exemptions to the assets which will be apportioned to the Marcos heirs. The
Supreme Court ruled that the PCGG has absolutely no power to grant tax exemptions, even under the cover of its
authority to compromise ill gotten wealth cases. The grant of tax exemptions is the exclusive prerogative of
Congress.
In fact, the Supreme Court even stated that Congress itself cannot grant tax exemptions in the case at bar
because it will violate the equal protection clause of the Constitution.
Davao Gulf v. CIR, 293 SCRA 76 (1998)

A tax cannot be imposed unless it is supported by the clear and express language of a statute; on the other
hand, once the tax is unquestionably imposed, “a claim of exemption from tax payments must be clearly shown
and based on language in the law too plain to be mistaken.” Since the partial refund authorized under Sec. 5, RA
1435, is in the nature of a tax exemption, it must be construed strictissimi juris against the grantee. Hence,
petitioner’s claim for refund based on specific taxes it actually paid must expressly be granted in a statute stated in
a language too clear to be mistaken.
UNOR-SCHOOL OF LAW
24
e
Tolentino v. Sec. of Finance,(1995) supra.

By granting exemptions, the State does not forever waive the exercise of its sovereign prerogative.
e. Nature of tax exemption
1) It is a mere personal privilege of the grantee.

2) It is generally revocable by the government unless the exemption is founded on a contract which is contract
which is protected from impairment.
3) It implies a waiver on the part of the government of its right to collect what otherwise would be due to it, and so
is prejudicial thereto.
4) It is not necessarily discriminatory so long as the exemption has a reasonable foundation or rational basis.
5) It is not transferable except if the law expressly provides so.
PLDT v. City of Davao, (2001) supra.

Applying the rule of strict construction to statutory provisions granting tax exemptions or deductions
would minimize differential treatment and foster fairness and equality of treatment among taxpayers.
Phil. Acetylene v. Commissioner, supra.

In the construction of tax statutes, exemptions are not favored and are construed stictissimi juris.
Wonder Mech v. CTA, 64 SCRA 555 (1975)

A tax exemption in the manufacture and sale of machines for making cigarettes paper does not include the
manufacture and sale of the products produced by these machines of the manufacture and sale of other types of
machines for cigarettes production.
Atlas Fertilizer v. Com., supra.

The Secretary of Finance was convinced that the equipment imported were not only needed for exclusive
use in the manufacture of fertilizer but the same were actually used therefore thus approving the application for
exemption without adducing evidence that he is entitled for exemption.
f. Laws granting tax exemption, incentives
i. Constitution
Sec. 28 (3), Art. VI and Sec. 4 (3, 4), Art. XIV, 1987 Constitution
Sec. 28 (3), Art. VI, Constitution .” (Property Tax Exemption).

charitable, or educational purposes shall be exempt from taxation
Sec. 4 (3, 4), Art. XIV, 1987 Constitution (Income tax, Property Tax, and Donor’s Tax exemption)
“All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and
exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of
the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law.” Sec.4,
(3)
“Subject to the conditions prescribed by law, all grants, endowments, donations or contributions used
actually, directly, and exclusively for educational purposes shall be exempt from tax. Sec. 4, (4)
Abra Valley v. Aquino, supra.
UNOR-SCHOOL OF LAW
25
e
The test of exemption from taxation is the use of the property for the purpose mentioned in the
Constitution. The term “exclusively uses” does not necessarily means total or absolute use for religious, charitable,
educational purposes. Even if the property is incidentally and necessarily used for the accomplishment of the said
purposes, tax exemption will apply.
Lung Center of the Philippines v Quezon City, G.R. 144104, 433, June 29, 2004 SCRA 119
When the property is used for one or more commercial purposes, it is subject to taxation. Portions of the
land leased to the private entities as well as those parts of the hospital leased to private individuals are not exempt
from taxes.
ii. tax statutes
Sec. 30, 32 (B), 106, 199 Exemption Granted by NIRC (R.A. 7716)
SEC. 30. Exemptions from Tax on Corporations. - The following organizations shall not be taxed under this Title in
respect to income received by them as such:
(A) Labor, agricultural or horticultural organization not organized principally for profit;
(B) Mutual savings bank not having a capital stock represented by shares, and cooperative bank without capital
stock organized and operated for mutual purposes and without profit;
(C) A beneficiary society, order or association, operating for the exclusive benefit of the members such as a
fraternal organization operating under the lodge system, or mutual aid association or a nonstock corporation
organized by employees providing for the payment of life, sickness, accident, or other benefits exclusively to the
members of such society, order, or association, or nonstock corporation or their dependents;
(D) Cemetery company owned and operated exclusively for the benefit of its members;
(E) Nonstock corporation or association organized and operated exclusively for religious, charitable, scientific,
athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong to
or inures to the benefit of any member, organizer, officer or any specific person;
(F) Business league chamber of commerce, or board of trade, not organized for profit and no part of the net
income of which inures to the benefit of any private stock-holder, or individual;
(G) Civic league or organization not organized for profit but operated exclusively for the promotion of social
welfare;
(H) A nonstock and nonprofit educational institution;
(I) Government educational institution;
(J) Farmers' or other mutual typhoon or fire insurance company, mutual ditch or irrigation company, mutual or
cooperative telephone company, or like organization of a purely local character, the income of which consists solely
of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses; and
(K) Farmers', fruit growers', or like association organized and operated as a sales agent for the purpose of
marketing the products of its members and turning back to them the proceeds of sales, less the necessary selling
expenses on the basis of the quantity of produce finished by them;
Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the
foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for
profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code.
NIRC Sec. 32 (B) Exclusions from Gross Income. - The following items shall not be included in gross income and shall
be exempt from taxation under this title:
1. Proceeds from life insurance

2. Amount received by insured as return of premium
3. Gifts, bequests and devises
4. Compensation for injuries or sickness
5. Income exempt under treaty
6. Retirement benefits, pensions, gratuities, etc.
7. Income derived by foreign government
8. Income derived by the Philippine Government or its political subdivisions
UNOR-SCHOOL OF LAW
26
e
9. Prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic,
literary or civic achievement.
10. Prizes and awards in sports competitions sanctioned by the national sports associations
11. 13th month pay and other benefits not exceeding P30,000.00. Applies both to public and private
employees.
12. GSIS, SSS, Medicare and other contributions
13. Gains from the sale of bonds, debentures or other certificate of indebtedness. 5 eyars or more. If maturity
is less than 5 years, it is taxable.
14. Gains from redemption of shares in mutual fund. It must be emanate from the mutual fund
Sec. 106 (A)(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
(a) Export Sales. - The term "export sales" means:
(b) Foreign Currency Denominated Sale. -
(c) Sales to persons or entities whose exemption under special laws or international agreements to which the
Philippines is a signatory effectively subjects such sales to zero rate.
NIRC SEC. 199. Documents and Papers Not Subject to Stamp Tax
(a) Policies of insurance or annuities made or granted by a fraternal or beneficiary society, order, association or
cooperative company, operated on the lodge system or local cooperation plan and organized and conducted solely
by the members thereof for the exclusive benefit of each member and not for profit.
(b) Certificates of oaths administered to any government official in his official capacity or of acknowledgment by
any government official in the performance of his official duties, written appearance in any court by any
government official, in his official capacity; certificates of the administration of oaths to any person as to the
authenticity of any paper required to be filed in court by any person or party thereto, whether the proceedings be
civil or criminal; papers and documents filed in courts by or for the national, provincial, city or municipal
governments; affidavits of poor persons for the purpose of proving poverty; statements and other compulsory
information required of persons or corporations by the rules and regulations of the national, provincial, city or
municipal governments exclusively for statistical purposes and which are wholly for the use of the bureau or office
in which they are filed, and not at the instance or for the use or benefit of the person filing them; certified copies
and other certificates placed upon documents, instruments and papers for the national, provincial, city, or
municipal governments, made at the instance and for the sole use of some other branch of the national, provincial,
city or municipal governments; and certificates of the assessed value of lands, not exceeding Two hundred pesos
(P200) in value assessed, furnished by the provincial, city or municipal Treasurer to applicants for registration of
title to land.
Sec. 159 and 234, R. A. 7160(Exemption Granted by the Local Taxing Authority)
Sec. 159, R.A. 7160. Community Tax Exemptions

SEC. 159. Exemptions. – The following are exempt from the community tax:
(1) Diplomatic and consular representatives; and
(2) Transient visitors when their stay in the Philippines does not exceed three (3) months
Real Property Tax Exemption R.A. 7160 (Local Government Code)

Section 234. Exemption From Real Property Tax
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when
the beneficial use thereof has been granted for consideration or otherwise to a taxable person.
(b) Charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques, non-profit or
religious cemeteries, and all lands, buildings, and improvements actually, directly and exclusively used for
religious, charitable, or educational purposes.
(c) All machineries and equipment that are actually, directly and exclusively use by local water utilities and
government-owned or controlled corporations engaged in supply and distribution of water and/or
generation and transmission of electric power.
(d) All real property owned by duly registered cooperatives as provided for under Republic Act No. 6938.
(e) Machinery and equipment used for pollution control and environmental protection.
UNOR-SCHOOL OF LAW
27
e
Sec. 105, Tariff and Customs Code (TCC)
iii. special laws
R. A. 7549- An act exempting all prizes and awards gained from local and international sports tournaments and
competitions from the payment of income and other forms of taxes and for other purposes
SECTION 1. All prizes and awards granted to athletes in local and international sports tournaments and
competitions held in the Philippines or abroad and sanctioned by their respective national sports associations shall
be exempt from income tax: provided, that such prizes and awards given to said athletes shall be deductible in full
from the gross income of the donor: provided, further, that the donors of said prizes and awards shall be exempt
from the payment of donor's tax.
The benefits herein provided shall cover the XVIth Southeast Asian Games (SEA Games) held in Manila from
November 25 to December 5, 1991.
Com. v. Phil Ace Line, supra.
Goods obtained by the respondent shall be subject to compensating tax since sec. 14 of R.A. 1789 exempts only
custom duties, consular fees and the special import tax.
R.A. 1789- An act prescribing the national policy in the procurement and utilization of reparations and development
loans from japan, creating a reparations commission to implement the policy, providing funds therefor, and for
other purposes.
Section 14. Exemption from Tax. All reparations goods obtained by the government shall be exempt from the
payment of all duties, fees and taxes. Reparations goods obtained by private parties shall be exempt only from the
payment of customs duties, consular fees and the special import tax.
iv. treaties
Tax treaty
 A tax treaty is one of the sources of our law on taxation. The Philippine government usually enters into tax
treaties in order to avoid or minimize the effects of double taxation. A treaty has the force and effect of
law.
RP-US Tax Treaty

RP-Germany Tax Treaty
Com. v. S. C. Johnson, supra.
Respondent was subjected to 25% withholding tax on royalty payments which he contested claiming that it is
entitled to “The Most Favored Nation” Tax Rate of 10% on royalties as provided in the RP-US Tax treaty in relation
to the RP-West Germany Tax Treaty.
According to petitioner, the taxes upon royalties under the RP-US Tax Treaty are not paid under circumstances
similar to those in the RP-West Germany Tax Treaty since there is no provision for a 20 percent matching credit in
the former convention and private respondent cannot invoke the concessional tax rate on the strength of the most
favored nation clause in the RP-US Tax Treaty. Petitioner's position is explained thus:
Under the foregoing provision of the RP-West Germany Tax Treaty, the Philippine tax paid on income from sources
within the Philippines is allowed as a credit against German income and corporation tax on the same income. In the
case of royalties for which the tax is reduced to 10 or 15 percent according to paragraph 2 of Article 12 of the RP-
West Germany Tax Treaty, the credit shall be 20% of the gross amount of such royalty. To illustrate, the royalty
income of a German resident from sources within the Philippines arising from the use of, or the right to use, any
patent, trade mark, design or model, plan, secret formula or process, is taxed at 10% of the gross amount of said
UNOR-SCHOOL OF LAW
28
e
royalty under certain conditions. The rate of 10% is imposed if credit against the German income and corporation tax
on said royalty is allowed in favor of the German resident. That means the rate of 10% is granted to the German
taxpayer if he is similarly granted a credit against the income and corporation tax of West Germany. The clear intent
of the "matching credit" is to soften the impact of double taxation by different jurisdictions.
The RP-US Tax Treaty contains no similar "matching credit" as that provided under the RP-West Germany Tax
Treaty. Hence, the tax on royalties under the RP-US Tax Treaty is not paid under similar circumstances as those
obtaining in the RP-West Germany Tax Treaty. Therefore, the "most favored nation" clause in the RP-West Germany
Tax Treaty cannot be availed of in interpreting the provisions of the RP-US Tax Treaty.5
Reagan v. CIR, 30 SCRA 968 (1969)
Com. v. PJ Kiener, 65 SCRA 142 (1975)
g. Construction of statutes granting tax exemption
1) Rule when legislative intent is clear

Tax statutes are to receive a reasonable construction with a view to carrying out their purpose and intent.
They should not be construed as to permit the taxpayer easily to evade the payment of taxes.
2) Rule when there is doubt

No person or property is subject to taxation unless within the terms or plain import of a taxing statute. In
every case of doubt, tax statutes are construed strictly against the government and liberally in favor of the
taxpayer. Taxes, being burdens, are not to be presumed beyond what the statute expressly and clearly declares.
3) Provisions granting tax exemptions

Such provisions are construed strictly against the taxpayer claiming tax exemption
i. general rule
 In the construction of tax statutes, exemptions are not favored and are construed strictissimi juris against
the taxpayer. The fundamental theory is that all taxable property should bear its share in the cost and
expense of the government.
 Taxation is the rule and exemption.
 He who claims exemption must be able to justify his claim or right thereto by a grant express in terms “too
plain to be mistaken and too categorical to be misinterpreted.” If not expressly mentioned in the law, it must
be at least within its purview by clear legislative intent.
PLDT v. City of Davao, (2001) supra.
Com. v. CA and YMCA, 298 SCRA 83 (1998)

Income derived from rentals of its real property leased out as restaurant and canteen are subject to
income tax. It is only exempt from property tax.
Misamis Oriental Assoc. v. DOF, 238 SCRA 63 (1994)

A law which gives exemption to coconut farmers and copra producers are not applicable to coconut
traders and copra traders. Sec. 103 of NIRC exempts from VAT the sale of agricultural products in their original state
if the ssale is made by their primary producer.
Com. of Customs v. Phil Acetylene Company, 39 SCRA 70 (1971)
Mla. Electric Co. v. Vera (Tabios), 67 SCRA 352 (1975)

Where a company is to pay for the property tax on its plant but not including poles, wires, transformers
and insulators forming part of the plant or installations, the exemptions does not included compensating tax for
the imports of poles, wires, transformers and insulators which is an excise or privilege tax.
UNOR-SCHOOL OF LAW
29
e
Benguet Corp. v. CBAA, supra.
Davao Gulf v. CIR, supra.
ii. exceptions
1. When the law itself expressly provides for a liberal construction thereof.
2. In cases of exemptions granted to religious, charitable and educational institutions or to the government
or its agencies or to public property because the general rule is that they are exempted from tax.
Maceda v. Macaraig, supra., supra.

Petitioner cannot invoke the rule of strictissimi juris with respect to the interpretation of statutes granting
tax exemptions to the NPC. The rule on strict interpretation does not apply in the case of exemptions in favor of a
political subdivision or instrumentality of the government.
grant to government and other entities

Strict interpretation does not apply to the government and its agencies. The rule here is exemption and the
exemption is taxation.
E. Sources, Application, Interpretation and Administration of Tax Laws
1. Sources of tax laws
The Constitution,
NIRC
TCC
LGC
tax ordinance/local tax codes, Tuzon v. CA, 212 SCRA 739 (1992)
treaties, Tanada v. Angara, supra.
special laws,
SC/CTA/CA decisions
revenue rules and regulations
rulings and opinions
tax ordinance/local tax codes, Tuzon v. CA, 212 SCRA 739 (1992)
If the resolution is to be considered as a tax ordinance, it must be shown to have been enacted in accordance with
the requirements of the Local Government Code. These would include the holding of a public hearing on the
measure and its subsequent approval by the Secretary of Finance, in addition to the usual requisites for publication
of ordinances in general.
revenue rules and regulations

The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate
needful rules and regulations for the effective enforcement of the provisions of the NIRC.
rulings and opinions

This is without prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in
connection with the implementation of the provisions of the Internal Revenue laws, including rulings on the
classification of articles for sales tax and similar purposes.
Rulings in the form of opinions are also given by the Secretary of Justice who is the Chief Legal Officer of the
Government.
Treaties
International Agreements must be performed in good faith. “A treaty engagement is not a mere moral obligation
but creates a legally binding obligation on the parties”. (Doctrine of Pacta sunt servanda)
UNOR-SCHOOL OF LAW
30
e
a. validity of revenue rules and regulations
Requisites for validity of rules and regulations

1. They must not be contrary to law and the Constitution.
2. They must be published in the Official Gazette or a newspaper of general circulation.
RMO 1-99
Com. v. CA, supra.
Umali v. Estanislao, 209 SCRA 446 (1992)
La Suerte v. Court of Tax Appleals, 134 SCRA 29 (1985)

When an administrative agency renders an opinion by means of a circular or memorandum, it merely
interprets existing law and no publication is therefore necessary for its validity. Construction by an executive
branch of the government of a particular law, although not binding upon courts, must be given weight as the
construction came from the branch of the government which is called upon to implement the law.
Com. v. CA, 261 SCRA 236 (1996)

The authority of the Minister of Finance, in conjunction with the Commissioner of Internal Revenue, to
promulgate rules and regulations for the effective enforcement of internal revenue rules cannot be converted.
Neither can it be disputed that such rules and regulations, as well as administrative opinions and rulings, ordinarily
should deserve weight and respect by the courts. Much more fundamental than either of the above, however, is
that all issuances must not override, but must remain consistent with, the law they seek to apply and implement.
Administrative rules and regulations are intended to carry out, neither to supplant nor to modify, the law.
b. effectivity of revenue rules and regulations

RMC 20-86
Revenue Memorandum Circular 20-86 was issued to govern the drafting, issuance and implementation of revenue
tax issuances including:
1. Revenue Regulations;
2. Revenue and Memorandum Orders; and
3. Revenue Memorandum Circulars and Revenue Memorandum Orders.
 Except when the law otherwise expressly provides, the aforesaid revenue tax issuances shall not begin to
be operative until after due notice thereof may be fairly assumed.
 Due notice of said issuances may be fairly presumed only after the following procedures have been taken:
1. Copies of tax issuance have been sent through registered mail to the following business and professional
organizations:
a. Philippine Institute of Certified Public Accountants;;
b. Integrated Bar of the Philippines;
c. Philippine Chamber of Commerce and Industry;
d. American Chamber of Commerce;
e. Federation of Filipino-Chinese Chamber of Commerce; and
f. Japanese Chamber of Commerce and Industry in the Philippines.
*however, other persons or entities may request a copy of the said issuances.
2. The Bureau of Internal Revenue shall issue a press release covering the highlights and features of the new
tax issuance in any newspaper of general circulation.
3. Effectivity date for enforcement of the new issuance shall take place thirty (30) days from the date the
issuance has been sent to the above-enumerated organizations.
UNOR-SCHOOL OF LAW
31
e
c. nature of rulings, effects of a void ruling
 Administrative rulings, known as BIR rulings, are the less general interpretation of tax laws being issued
from time to time by the Commissioner of Internal Revenue. They are usually rendered on request of
taxpayers to clarify certain provisions of a tax law. These rulings may be revoked by the Secretary of
Finance if the latter finds them not in accordance with the law.
 The Commissioner may revoke, repeal or abrogate the acts or previous rulings of his predecessors in office
because the construction of the statute by those administering it is not binding on their successors if,
thereafter, such successors are satisfied that a different construction of the law should be given.
 Rulings in the forms of opinion are also given by the Secretary of Justice who is the chief legal officer of the
Government.
Sec. 4, 244-246, NIRC
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The power to interpret the
provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner,
subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered
by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of
the Court of Tax Appeals.
SEC. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. - The Secretary of Finance, upon
recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective
enforcement of the provisions of this Code.
SEC. 245. Specific Provisions to be Contained in Rules and Regulations. - The rules and regulations of the Bureau of
Internal Revenue shall, among other things, contain provisions specifying, prescribing or defining:
(a) The time and manner in which Revenue Regional Director shall canvass their respective Revenue
Regions for the purpose of discovering persons and property liable to national internal revenue taxes,
and the manner in which their lists and records of taxable persons and taxable objects shall be made
and kept;
(b) The forms of labels, brands or marks to be required on goods subject to an excise tax, and the
manner in which the labelling, branding or marking shall be effected;
(c) The conditions under which and the manner in which goods intended for export, which if not
exported would be subject to an excise tax, shall be labelled, branded or marked;
(d) The conditions to be observed by revenue officers respecting the institutions and conduct of legal
actions and proceedings;
(e) The conditions under which goods intended for storage in bonded warehouses shall be conveyed
thither, their manner of storage and the method of keeping the entries and records in connection
therewith, also the books to be kept by Revenue Inspectors and the reports to be made by them in
connection with their supervision of such houses;
(f) The conditions under which denatured alcohol may be removed and dealt in, the character and
quantity of the denaturing material to be used, the manner in which the process of denaturing shall be
effected, so as to render the alcohol suitably denatured and unfit for oral intake, the bonds to be
given, the books and records to be kept, the entries to be made therein, the reports to be made to the
Commissioner, and the signs to be displayed in the business or by the person for whom such
denaturing is done or by whom, such alcohol is dealt in;
(g) The manner in which revenue shall be collected and paid, the instrument, document or object to
which revenue stamps shall be affixed, the mode of cancellation of the same, the manner in which the
proper books, records, invoices and other papers shall be kept and entries therein made by the person
UNOR-SCHOOL OF LAW
32
e
subject to the tax, as well as the manner in which licenses and stamps shall be gathered up and
returned after serving their purposes;
(h) The conditions to be observed by revenue officers respecting the enforcement of Title III imposing
a tax on estate of a decedent, and other transfers mortis causa, as well as on gifts and such other rules
and regulations which the Commissioner may consider suitable for the enforcement of the said Title
III;
(i) The manner in which tax returns, information and reports shall be prepared and reported and the
tax collected and paid, as well as the conditions under which evidence of payment shall be furnished
the taxpayer, and the preparation and publication of tax statistics;
(j) The manner in which internal revenue taxes, such as income tax, including withholding tax, estate
and donor's taxes, value-added tax, other percentage taxes, excise taxes and documentary stamp
taxes shall be paid through the collection officers of the Bureau of Internal Revenue or through duly
authorized agent banks which are hereby deputized to receive payments of such taxes and the
returns, papers and statements that may be filed by the taxpayers in connection with the payment of
the tax: Provided, however, That notwithstanding the other provisions of this Code prescribing the
place of filing of returns and payment of taxes, the Commissioner may, by rules and regulations,
require that the tax returns, papers and statements that may be filed by the taxpayers in connection
with the payment of the tax. Provided, however, That notwithstanding the other provisions of this
Code prescribing the place of filing of returns and payment of taxes, the Commissioner may, by rules
and regulations require that the tax returns, papers and statements and taxes of large taxpayers be
filed and paid, respectively, through collection officers or through duly authorized agent banks:
Provided, further, That the Commissioner can exercise this power within six (6) years from the
approval of Republic Act No. 7646 or the completion of its comprehensive computerization program,
whichever comes earlier: Provided, finally, That separate venues for the Luzon, Visayas and Mindanao
areas may be designated for the filing of tax returns and payment of taxes by said large taxpayers.
For the purpose of this Section, "large taxpayer" means a taxpayer who satisfies any of the following criteria;
(1) Value-Added Tax (VAT). - Business establishment with VAT paid or payable of at least One hundred thousand
pesos (P100,000) for any quarter of the preceding taxable year;
(2) Excise Tax. - Business establishment with excise tax paid or payable of at least One million pesos (P1,000,000)
for the preceding taxable year;
(3) Corporate Income Tax. - Business establishment with annual income tax paid or payable of at least One million
pesos (P1,000,000) for the preceding taxable year; and
(4) Withholding Tax. - Business establishment with withholding tax payment or remittance of at least One million
pesos (P1,000,000) for the preceding taxable year.
Provided, however, That the Secretary of Finance, upon recommendation of the Commissioner, may modify or add
to the above criteria for determining a large taxpayer after considering such factors as inflation, volume of
business, wage and employment levels, and similar economic factors.
The penalties prescribed under Section 248 of this Code shall be imposed on any violation of the rules and
regulations issued by the Secretary of Finance, upon recommendation of the Commissioner, prescribing the place
of filing of returns and payments of taxes by large taxpayers.
SEC. 246. Non-Retroactivity of Rulings. - Any revocation, modification or reversal of any of the rules and regulations
promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the
Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial
to the taxpayers, except in the following cases:
(a) Where the taxpayer deliberately misstates or omits material facts from his return or any document
required of him by the Bureau of Internal Revenue;
UNOR-SCHOOL OF LAW
33
e
(b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different
from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith.
Sec. 511 and 519, TCC
CIR v. CA, 267 SCRA 557 (1997)
Misamis Oriental v. DOF, supra.
2. Interpretation of Tax Laws
a. nature of internal revenue laws

Nature of Internal revenue laws
1) Internal revenue laws are not political in nature.
2) Tax laws are civil and not penal in nature.
Civil not penal in nature

Tax laws are civil and not penal in nature, although there are penalties provided for their violation.
The purpose of tax laws in imposing penalties for delinquencies is to compel the timely payment of taxes or to
punish evasion or neglect of duty in respect thereof.
Not political in nature

Internal revenue laws are not political in nature. They are deemed to be laws of the occupied territory and not of
the occupying enemy.
Thus, our tax laws continued in force during the Japanese occupation
Hilado v. Collector, 100 Phil 288 (1956)

It is well known that our internal revenue laws are not political in nature and, as such, continued in force
during the period of enemy occupation and in effect were actually enforced by the occupation government.
Income tax returns that were filed during that period and income tax payments made were considered valid and
legal. Such tax laws are deemed to be the laws of the occupied territory and not of the occupying enemy.
Republic v. Oasan, 99 Phil 934 (1956)

The war profits tax is not subject to the prohibition on ex post facto laws as the latter applies only to
criminal or penal matters. Tax laws are civil in nature.
Misamis Oriental v. DOF, supra
b. construction of tax laws
i. rule when legislative intent is clear
Rule when legislative intent is clear

Tax statutes are to receive a reasonable construction with a view to carrying out their purpose and intent.
They should not be construed as to permit the taxpayer easily to evade the payment of taxes.
Umali v. Estanislao, supra.

Lorenzo v. Posadas, supra.
ii. rule when there is doubt
Rule when there is doubt

No person or property is subject to taxation unless within the terms or plain import of a taxing statute. In
every case of doubt, tax statutes are construed strictly against the government and liberally in favor of the
taxpayer. Taxes, being burdens, are not to be presumed beyond what the statute expressly and clearly declares.
UNOR-SCHOOL OF LAW
34
e
Collector v. La Tondena, 5 SCRA 665 (1962)

iii. rule when language is plain
When the language of the law is plain, the word should be given its ordinary meaning
The rule of strict construction as against the government is not applicable where the language of the tax
statue is plain and there is no doubt as to the legislative intent. In such case, the words employees are to be given
their ordinary meaning.
c. application of tax laws, revenue regulations, rulings and the effects of repeal
i. application of tax laws
Application of tax laws
General rule: Tax laws are prospective in operation because the nature and amount to the tax could not be
foreseen and understood by the taxpayer at the time the transactions which the law seeks to tax was completed
Exception: While it is not favored, a statute may nevertheless operate retroactively provided it is expressly declared
or is clearly the legislative intent. But a tax law should not be given retroactive application when it would be harsh
and oppressive.
Art. 2, NCC
Umali v. Estanislao, supra.
Hijo Plantation v. CB, 164 SCRA 192 (1988)
CIR v. Filipinas Cia de Seguros, 107 Phil 1055 (1960)
Cebu Portland v. Collector, 25 SCRA 789 (1968)
Comm. v. RTN Mining, supra.
ii. application of revenue regulations, rulings
Revocation, modification of revenue of any rules and regulations promulgated by the Sec. of Finance or
CIR shall not have retroactive effect if it will be prejudicial to the taxpayer, except:
1. where the taxpayer deliberately misstates or omits material facts from his return or in any document
required of him by the BIR
2. where the facts subsequently gathered by the BIR are materially different from the facts on which the
ruling is based
3. where the taxpayer acted in bad faith
Sec. 246
Comm. v. CA, supra.
Comm. v. Mega General, 166 SCRA 166 (1988)
ABS-CBN v. CTA, 108 SCRA 142 (1981)
Comm. v. Telefunken, 249 SCRA 401 (1995)
d. mandatory and directory provisions
 Directory provisions are those designed merely for the information or direction of office or to secure
methodical and systematic modes of proceedings.
 Mandatory provisions are those intended for the security of the citizens or which are designed to ensure
equality of taxation or certainty as to the nature and amount of each person’s tax.
Roxas v. Rafferty, supra.
UNOR-SCHOOL OF LAW
35
e
The omission to follow mandatory provisions renders invalid the act or proceeding to which it relates while
the omission to follow directory provisions does not involve such consequence.
Aragon v. George, 85 Phil 246 (1949)

Tiongco v. PVB, 212 SCRA 176 (1992)
Pecson v. CA, 222 SCRA 580 (1993)
3. Enforcement, Administration of Tax Laws
AGENCIES INVOLVED IN TAX ADMINISTRATION

1. BIR
2. Bureau of Customs
3. Provincial, city, and municipal assessors and treasurers
POWERS AND DUTIES OF THE BIR

1. Assessment and collection of all national internal revenue taxes, fees and charges
2. Give effect to and administer the supervisory and police power conferred to it by the Tax Code or other laws
3. Enforcement of all forfeitures, penalties and fines in connection therewith
4. Execution of judgments in all cases decided in its favor by the Court of TaxAppeals and the ordinary courts
UNOR-SCHOOL OF LAW
36
e

Succession Chart

Uploaded by

Copyright:

Available Formats

Succession Chart

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Succession Chart

Uploaded by

Copyright:

Available Formats

Taxation Law 1 Reviewer 2011

a. Due Process of Law

a. Due process of law

 There must be a valid law

Sec. 1, Art. III, 1987 Constitution

REQUIREMENTS OF DUE PROCESS IN TAXATION

DUE PROCESS IN TAXATION DOES NOT REQUIRE

Tan v. del Rosario, supra.

Sison v. Ancheta, supra.

b. Equal protection of the laws

Sison v. Ancheta, supra.

Issue: Whether the ordinance imposes a regulatory fee or a tax.

Tan v. del Rosario, supra.

CIR v. CA & Alhambra Ind., 267 SCRA 557 (1997)

Tiu v. CA, 301 SCRA 278 (1999)

c. Uniformity and equity in taxation

Classification of taxpayers, subject or items to be taxed

REQUISITES OF A VALID CLASSIFICATION (S A G E )

Tolentino v. Sec. of Finance, supra., supra.

Mla. Race Horse v. dela Fuente, 88 Phil 60 (1951)

Eastern Theatrical v. Alfonso, 83 Phil 852 (1949)

Pepsi Cola v. City of Butuan, supra.

Shell v. Vano, Mun. Treas. of Cordova, Cebu, 94 Phil 389 (1954)

City of Baguio v. de Leon, 25 SCRA 938 (1968)

Kapatiran v. Tan, supra.

Villanueva v. City of Iloilo, supra.

Asso. of Customs Brokers v. Mun. Board, supra.

4.Prohibition against imprisonment for non-payment of poll tax

Sec. 20, Art. III, 1987 Constitution

Sec. 156-164, R. A. 7160

5.Prohibition against impairment of obligation of contracts

Sec. 10, Art. III, 1987 Constitution

Sec. 11, Art. XII, 1987 Constitution

Tolentino v. Sec. of Finance, (1994) supra.

Oposa Vs. Factoran

La Insular Vs. Manchuca

 The non-impairment clause applies only to contracts and not to a franchise.

6.Prohibition against infringement of religious freedom

Sec. 5, Art. III, 1987 Constitution

Am. Bible Society v. City of Manila, 101 Phil 386 (1957)

Tolentino v. Sec. of Finance, (1995) supra.

7. Prohibition against appropriation of proceeds of taxation

Sec. 29, (2) Art. VI, 1987 Constitution

Osmena v. Orbos, supra.

8. Prohibition against taxation of religious, charitable and educational entities

Sec. 28 (3), Art. VI, 1987 Constitution

Abra Valley College v. Aquino, 162 SCRA 106 (1988)

Province of Abra v. Hernando 107 SCRA 104

9. Prohibition against taxation of non-stock, non-profit educational institutions

Sec. 4 (3, 4), Art. XIV, 1987 Constitution

Requisites For Exemption:

1) It must be a private educational institution

EXEMPTION DOES NOT EXTEND TO:

Sec. 28 (3), Art. VI, Constitution

Sec. 27 (B) NIRC

Department of Finance Order 145-85

CIR v. CA, CTA and YMCA, 298 SCRA 83 (1998)

CIR v. CA, CTA and Ateneo, 271 SCRA 605 (1997)

ARTICLE XIV AND ARTICLE VI COMPARED