03.23.

2017 Barlis Taxation 

Answers to Exams

HK corporation has a duly licensed Philippine branch engaged in trading business in the Philippines. HK co
invested directly in A corp., domestic corporation.
Declaration of dividend by A domestic corporation. Recipient is HK corporation, non-resident foreign
Resident foreign - exempt, inter corporate dividends. 
Head office is transacting, directly invested. Single entity concept is not applicable. Thus, it is a transaction
between domestic corporation and non-resident foreign corporation
Fringe benefit tax
A. Subject to final tax - managerial employee
B. Creditable withholding tax - rank and file employee
C. Not subject to tax: exempt by special law, employers convenience rule, de minimis benefit
D. FB basis is subject only to a certain extent. Some benefits are favoring both the employer, employee. The
percentage is a recognition favoring employer but up to a certain extent it also favors employee. 
Henderson vs. Collector - housing privileges were granted to an employee because he was asked to entertain
the guests of the employer. Somehow the benefit is still benefiting Henderson and the employer, the taxability
is up to a certain degree. Not to a certain amount. Rate remains to be the same but the gross up monetary value
is the one that changes. 
A's brother B is indebted to C. A rendered services to C. C paid 100,000 and cancelled the debt of B. Discuss tax
consequences.
Discuss it from the various parties involved.
Did B earn a taxable income? There is none. His indebtedness was cancelled and did not render any services.
A - he earned 100,000. What A actually earned is 300,000. He received 100,000 and 200,000 was condoned
in favor of B. 
Who pays the donor's tax? A should be held liable. 
C - did not condone a debt out of love, liberality or perfection. 
Parish priest and contract between panic at the disco
Panic at the disco earned 5M, non-resident alien engaged in trade or business - liable for income tax regardless
of how they were characterized.
parish priest - earned 2M. Subject to income tax. 
Donor's tax made in favor of the church, can possibly lead to donor's tax - church repairs, no liability for
donor's tax because it was given to the church wholly.
Idle lot along rimando road, for purposes of flyover. Expropriation. Withheld 6% CGT based on the 1,300,000.
1M value of the land
300,000 interest - annual interest
Barlis - Because expropriation is actually sale made in favor of the government, there is alternative taxation.
Either CGT or paying income. When the government withholds, it makes a choice for the taxpayer. SC probably
forgot about alternative taxation. 
A. SCR: republic vs. Soriano - court said that it was proper for the government to withhold tax. Expropriation is
an involuntary sale can lead to liability for CGT.  Basis is 1.3M. 
Consideration or fair market value whichever is higher. 
Consideration is the total amount received.
B. City deducted interest income. City is not a bank. It's not a bank deposit nor a deposit substitute. 

A is indebted to B in the amount of 100,000. B accepted property thru Dacion en Pago 30,000 and 70,000
cash. 
A - liable for income. There is income if there is exchange and the price is higher than the value of the property.
B - donor's tax, 70,000 was given out of liberality. Transfer for insufficient consideration can give rise to
donor's tax. 
Alternative answer: No donor's tax because it is not out of love, liberality of affection. 

What if condonation was by virtue of A's insolvency?

The 70,000 difference will be taxable. It is still a gain. There is no special tax consequence for an insolvent. 
However, with the donor's side. The one who cancelled the debt - Cancellor - lol. He will not be liable for
donor's tax by reason of law. The indebtedness is condoned out of insolvency. It highlights the non-taxability or
exemption of the transaction. 
Left behind properties. Opposed probate of the will because of preterition. 
Estate under judicial settlement, is a taxpayer in its own right. Not a corporate entity. 
As per agreement by the heirs - would that not give right to a taxable entity? No. The estate is until probate. 

Lawyers are forming general professional partnership not liable as a corporate entity. Lawyers are liable for
receipt income, actual or constructive. 

University of Bakakeng
03.24.2017 Barlis Taxation

Answers to Exams
Minimize corruption tax system
1st phase: changing of the present BIR structure. Present BIR will be scrapped. Congress can always change the
internal revenue administrators. New body which will function as a corporation, still a government body. 

Accredit corporations to become tax agents, assessment and collection. Collection of taxes cannot be given to
private. It must be exercised by Congress cannot be delegated to private entities. 

Tax agents' actions are subject to review of the CEO. Not able to meet target, accreditation can be revoked.
Inherently connected with delegating the power of assessment and collection which is not allowed.

2nd phase: Changing the present system of taxation 

Gross systems of taxation. Valid, depends upon the congress of tax base whether gross or net.
Whether or not engaged in business or not - valid. depends on congress to fix tax base. Even for taxpayers who
are engaged in business, granting of deductions is still by legislative grace. 

divide into 15 revenue regions, body will have the authority to levy all kinds of taxes. Invalid. Removes taxing
power of LGU which cannot be done.

Facts: massive effects of the loss of Meralco, government to take over. Paid taxes except for electric posts and  
Should it pay taxes? Yes. No automatic exemption, even if the properties are for public use. public utility is
considered a business.

Lecture proper
Period to pay the capital gains tax with involuntary forms of sale. 

In a foreclosure sale, after sheriff or notary public has caused the public auction of the sale, sheriff will issue a
certificate of sale, confirmed by the executive judge. It can now be registered with the RD. Significance of the
registration is the reckoning period  the one year period of redemption.

If no redemption, there would be consolidation of ownership thru a sheriff's final certificate of sale. Mere
affidavit of the highest bidder is sufficient.
When do we start counting that? From the moment that there is lapse of the period of redemption. It should be
paid. That is concerning extra judicial foreclosure.

Distinction: period of redemption. Rule 68, judicial foreclosure, no period of redemption, mere equity of
redemption prior to the registration of the certificate of sale. If you are the mortgagor, redeem it before
registration. Once registration takes place, no more right of redemption. When do you pay CGT? Within 30
days from the sale. When you pay, go to the RD together with the title and public auction sale which will cause
transfer from mortgagor to highest bidder. 

Judicial foreclosure.
No redemption period. These discussions we have will be affected by periods of redemption as modified
concerning lands
Section 47 banking act - extrajudicial foreclosure, mortgagee bank. Mortgagor is a juridical person - law
actually speaks of right of redemption
It's not actually of a right but more of an equity. Usually, if there is exercised Right of redemption within the
time frame, it is exercised as a matter of right. 

Equity because it is prior to the registration of the certificate but should not be more than 3 months. Not a
right, cause you have to habol that time. Mortgagee may pay the BIR of CGT, gets the certificate then register it
with the RD. 
When should the CGT be paid? UCPB vs. CIR 
SC: count the 30 day period from the lapse of the 3 month period.

When is a sale of a real property not classified as a capital asset not subject it CGT?
If the real property is not located in the Philippines. 
If the sale is involving sale of a principal residence. 
Principal residence - get a certification from the barangay
Purpose is to purchase or construct a new principal residence
Make the new residence within the 18 month period. Not used should be taxed. 
Notice, 30 day period, apply for exemption instead of paying tax.
Not oftener than Once in every 10 years. 

18 months, how will the government ensure? Open escrow amount except if there is prior clearance. Bear this
in mind, face clients who will ask you to execute deed of sale, if client is seller.

Sale of real property in favor of the government

Alternative taxation

CGT - 30 days from the moment of sale. Aside from the CGT, there is another internal revenue tax to be paid.
DST 1.5%
20th day of month dapat.
19th day ka nagbayad. There is a penalty for the non payment of the DST. DST should be paid within the 10th
day following the month of transaction. Settle it on or before the 10th Month of the following month. 
It's very difficult to explain to clients that there are penalties because you were not able to monitor the
deadline. 

Know what documentary requirements are needed in order to pay CGT and eventually have the title of the
vendor be cancelled in favor of the vendee. RMC-15-2003 one time taxpayer or transaction. ONETT

CGT on the sale of shares of stocks

If what has been sold are shares which are not listed or traded in the stock exchange. CGT is based on the
actual gain 
5% 100,000
10% in excess of 100,000

Listed and traded thru stock exchange

1/2 of 1% of the selling price. Percentage tax 
no income tax

Listed, not sold thru stock exchange 

SM sold to GSIS shares of MERALCO for 270 but the fair market value is 300
SMC bought that from GSIS, 3 years ago for 90.00. But sold it now for 270. The gain should be subject to 5% or
10% rates.
Listed but dealt not thru stock exchange 

Net income
Deductions

03.29.2017 Barlis Taxation

For every income, there are only three approaches 
G.R. Gross income. 
if subject to final tax, there must be a law. 
Unless exempted by law

Composition of gross income

1. Compensation
2. Trade, business
3. Passive sources are not subject to final tax
4. Dealings with properties 
5. Income from all other sources 

Certain types of income, specialized tax approaches

1. Long-term construction projects - percentage of completion method
how do we treat the income?
Building to be constructed for a period of 3 years. Contractor' profit at 30%. Earned within a period of 3 years.
What is allowed under the tax code. 

Based on the percentage of completion method. 100M*30%= 30M

1st year - 40% - 12M
2nd year - 30% - 9M
3rd year 30%     - 9M 

One time recognition is no longer allowed. 

2. Instalment recognition of income - 

Can you declare an income for instalment basis?
DP 300,000 or 30% - deferred payment scheme = this is essentially, a cash basis transaction. 
Balance to be paid in 3 years. 

In the first place, is it an installment transaction? No. For tax law, not an installment. A transaction to be
considered an installment, the initial payment does not exceed 25% of the contract price. 

The DP is not the only thing considered as an initial payment.

Initial payment refers to the totality of all payments received during the year of transaction. 

For a contract price of 1M

DP 200,000 - 06.2017
Balance will be paid 10,000 per month beginning 07.2017
If the parties comply with the obligation, 200,000+60,000 = 260,000 exceeds 25% of the contact price, not an
installment transaction. 

3. Income from leasing activities

If the lessor demands a deposit, as a security - not income, lessor is obligated to return.
Advance payment of rentals - income during the year of receipt regardless when that will pertain. 
Rental - all other arrangement in connection to leasing may be considered income. Lessee and lessor
agreement, on top of usual rent, 5% of gross sales would be part of rentals, it will still constitute income. 

X owns this lot. Y leased the lot for nothing. Y must construct a building, agree on a period, use property, rent
free for 10 years, turn the building to me without any payment.
X and Y agreed that it shall have a cost of 20M. It should have an estimated useful life of 20 years. The building
was completed in 2017. 10 year period will not start until the building has been completed. 

Should X recognize an income from this setup? Yes, there is flow of wealth. 
How will X recognize the income? 
1. Outright method - recognize income during the year of completion of improvement. The FMV will be
recognized as the income during the year it was completed. 
2. Spread out method - get the estimated value  of the improvement at the end of the lease term. The
estimated value is what we are going to spread out during the duration of the lease. 
How much is the value of the improvement. 
Straight line, 20M/ 20 useful life = 1Mx10 years = 10M, this is what we will spread out. 10M/ 10 years = 1M
income.

What's better? Consider all relevant circumstances. What if X sustained losses 2017 by reason of casualty loss
in the amount of 50M. If it's outright 20M is absorbable by the 50M loss.

X is winning taxpayer. Use spread out, tax base will be lessened. 

Once you adopted a scheme, you cannot shift, I.e.: spread out  to outright.

Recognition of income, finish na. 😀

All receipts, remove all items of exclusion. Remove items exempt from taxation. Remove returns of capital to
determine gross income.
Gross income will be the tax base if purely compensation income

If based on business, trade or profession. Remove allowable deductions. Granted by mere legislative grace.
Congress right now has given us the following deductions 
General classifications: 
1. Itemized
2. Optional standard deduction
3. Special - can be itemized or optional 

By default taxpayers availing of tax deduction, itemized. if you wish to choose OSD, invoke the same.
Itemized, there must be substantiation. Evidence by competent proof, such as official receipts. For expenses,
competent proof is receipt of expenses. 
Not keeping receipts? It might not be wise for you to claim itemized. 
If you don't have much deductions at all. 

Start with the practice of profession. Hold office at home. No secretary. no deductions, do not claim itemized.
Claim OSD
OSD - standard because there is a definite rate 
Individuals 40% of gross sales
Corporation 40% of the gross income

OSD, substantiation is not relevant. Dependent on the income. If availing OSD, make sure you indicate it in the
return. Otherwise, by default itemized.

Itemized deductions, section 34.

BITEDeDeLossCPR
1. Bad Debts
2. Interest
3. Taxes
4. Expenses
5. Depletion
6. Depreciation 
7. Loss 
8. Charitable contributions
9. Pension
10. Research and development 

Deduction should be in connection with the trade, business or profession

It should be reasonable

For those deductions where the law requires withholding, there must be withholding that must be done by the
TP. Regulations require certain forms of payment to be subject to holding tax.
There is a list of items subject to withholding tax. The idea here is before payor makes payment, certain amount
should be withheld by way of a withholding tax. 
Client has a problem which is business related. You may consult a Land geodetic engineer for boundary
disputes or if Accounting problems, CPA

No arrangement as to the client. You engaged the services of a profession. When you make payment, withhold
the tax in the income of accountant.
1. Engaging the services of professional 
2. Paying the rent 
If you don't claim for deduction, it might be disallowed. Make sure that you advise clients to withhold certain
taxes if required by regulations. 

In itemized, claim for deduction must be substantiated. If not, denied. What if there are no proofs or
substantiation, can you claim certain deductions? Yes. Cohan principle -actor in the US. He was not able to
keep his receipts but it is obvious he had an expenses. US Court, estimate deduction but suffer the
consequences of his inexactitude. The idea is the BIR or the IRS will estimate, but the client will suffer his
inexactitude. 
If there is compliance with the requirements such as withholding. 

Know the elements of deductibility. 

ORDINARY AND NECESSARY BUSINESS EXPENSES
Ordinary - reasonable expected to be incurred in connection with the business. Not necessarily habitually
incurred.
What are these? If engaged in selling, salary of sales people, delivery expenses, rentals for sale outlet. 
If in the business of selling, 20 years. Not sued but on the 20th year, you were sued. The litigation expense is
not habitual but reasonably expected

Necessary - Tendency of increasing income or reducing losses or expenses 

Advertising expenses - necessary, has the tendency of increasing income. 
General foods vs. CIR - advertising expenses, Tang juice. Ung inumin. General foods spent heavily for that
product, majority of the income went to advertising expense. BIR disallowed the claim for deduction on the
ground that it is unreasonable. 
SCR: ordinary form of advertisement - ordinary necessary expenses.
If it creates goodwill which will be for several years, it must be capitalized, there should be a ratable portion. 

Right now, you are renting an office space, for you not to rent anymore. Constructed own office building which
costs 20M. Is the 20M cost of constructing a business expense? No, because the benefit will be felt by you by
one taxable year. You don't treat it as an expense. It is an asset, capitalize it, capital expenditure. A capital
expenditure regarded as an asset and not as an expense. 

Later on, can that asset be considered as deduction? Yes. If you have an asset. You depreciate it. The
depreciation is the deduction. Not an outright deduction.

Proprietary educational institution is allowed to declare their capital expenditure as outright business expense
if it is a school for expansion. 
School expects to earn 100M. Even if it can avail of 10% preferential rate. 10M be given to the government. To
avoid that, construct a building which will cost 50M. From the 100M, deduct 50M multiply by 10%, 5M na
Lang. Instead of giving the 5M to the government

Capital expenditure not treated  as an expense.

How do you draw the line? If the benefit of that expense will last for more than one taxable year, capital
expenditure. If it can be felt for several taxable years, capital expenditure

Office equipment, furniture fixture, delivery trucks, capitalize them. Don't treat as business expense. Be
reasonable when capitalizing, do not be literal about it such as with the stapler. 

Distinguish cost and expense

Cost is part of capital
All receipts
Less: exclusion or exempted or capital
Gross income
Less: allowable deductions
Net income

Manufacturing wood tables. 

Purchase woods, cost. 
Paint blue, cost
Sandpaper, cost 
Delivery expense - cost 
Insurance of raw materials - cost
Hired the services of carpenter, salaries - cost
In most textbooks salaries and employees are expense. Hindi lahat. Directly doing it.
Janitor working in the factory - cost, indirect labor. Part of overhead
Cost - light and water, utility part of factory overhead

How do you draw the line?

Anything which has something to do to put in existence the product, whether directly or indirectly. 

Paid sales people - expense. Product is already existing.

Administrators - expense 
Insurance for delivery - expense 

4.5.2017 lis Taxation

BAD DEBTS EXPENSE
-worthless accounts. If it can be shown that despite reasonable efforts of collection, there is no payment made. 

Tax treatment of bad debt = allowable deduction, lessen tax base.

Sending of a series of demand letters by utility companies - Part of substantiation, account is already
worthless. 
What if it was written off? 
5M, he did not pay. Creditor decided to write off the account. Few years later, creditor met debtor. Will that
have any income tax consequence? When there is recovery of a previously written off bad debt, should the
creditor who receive a previously written bad debt declare an income? It depends upon the circumstances
surrounding the case.

2017
Gross income 10M
Allowable deduction (15+5)
Net loss (10)
There is mere receipt of capital. 

2017
Gross income 20M
Allowable deduction 10M
Net income 10
Less: BDE 5
Taxable income 5

Tax benefit rule in relation to written off debts.

The recovery of a bad debt that was previously written off, must be declared as an income but only to the extent
of a benefit. 

INTEREST EXPENSE
The one who is paying, interest expense 
If all requisites has been complied with: know all.
Basic requisite: should have been used in furtherance of business. If for non-business related, not deductible.
Section 34(b)
Whatever is the actual interest expense may not necessarily be fully deductible. 
X corporation obtained a loan for 100M. 10% interest per annum
Actual interest expense shall be 10M annually. 
Can we deduct the whole 10M? Section 34(b) mentions certain adjustments.

Actual interest expense will be reduced by 33% of the interest income subject to final tax. Original provision of
tax code: not 33%

Let's say, X corporation has bank deposit of 100M earning interest income 10M per annum. 
Actual interest expense 10M
Less: (33% of 10M interest income) 3.3M
Allowable interest to be deducted: 6.7 million instead of the 10M

What if the 10M is not from a bank deposit. Will you adjust this? No. Because the adjustment will take place
only if the interest income is subject to final tax. 
Tax arbitrage scheme: tax payer is taking advantage of the difference of the tax treatment between an interest
income and an interest expense to have net tax savings. 

Dati kasi: X corp borrowed money from A bank 100M, 10M interest expense. 
Actual interest expense 10M*30%=3M Tax Savings
X corp deposited it to B bank, 100m, 10M interest income.
Tax collected by the government only 2M, 20%*10M
Net tax savings of 1M

Tax avoidance: when congress notices it, they amend the laws so that the loophole is plugged.

Ngayon:
Actual interest expense 10M
Subject to adjustment 3.3M
Allowable deduction 6.7
Tax rate: 30%
Taxable income: 2.01M vs. 2M
There is an equal tax playing field. Finally, the loophole has been plugged. 

Peculiarities of interest expense

Tax treatment of capital expenditure, where the benefit will be felt in more than one taxable year. 
As a taxpayer, you have the choice; You can capitalize the interest or outright business expense.

Interest deducted in advance

You borrowed 100,000 but they only gave you 80, 000
10,000 per annum. But they already deducted 20,000 instead of 10,000 per annum. 

When are you supposed to recognize the expenses? In proportion to the amount of principal paid. If during the
first year, you paid 50,000 1/2 of the loan, then 10,000 or 1/2 of the interest expense should be declared in the
first year. After the 2 year period, entire 20,000 will be recognized. 

TAX EXPENSES
Incurred in connection with trade, business practice or profession except special assessment, income, estate,
donor.
Any form of income tax is non-deductible.

Taxpayer is an estate under judicial settlement, paid the estate tax. Estate tax cannot be declared as a
deduction. 
Special assessment, where the local government finances an infrastructure project, non-deductible.

Know the distinction between taxes as deductions and tax credits. Credit is removed from the tax liability that
will be paid to the government
Gross income
Less allowable deduction 
Net income 
Multiply by tax rate
Taxable income
Less tax credit  

Senior citizens deduction vs. credit 

Engaged in the practice of profession and at the same time employed as teacher. Employer with Salaries less
withholding tax. Withholding tax is creditable, reduce tax liability at the end of the year. When the client pays
you, they will withhold taxes. Get the necessary withholding tax forms. For every peso removed by client,
remove it from your own tax liability. 10,000 but client paid 9,000. BIR Form 2307

Create that niche :)

DEPRECIATION EXPENSES
Depreciation estimated cost or amount of normal wear and tear of an asset. 
Deductions need not be established with absolute certainty. You just make an estimate. When you make an
estimate, it must be allowed by law and reasonable, within the means recognized by law

Cost less salvage value = depreciable value divided by UL - straight line method
Sum of the years digits method
Simple, Double, 150% declining method

Amortization, a manner by which intangibles assets are depreciated. General foods vs. CIR regarding
advertising expense. Goodwill should have been amortized

DEPLETION
- when natural resources are taken away from businesses which are considered wasting asset
Deposits of oil, asset of the business. Depleting the asset or the deposit. When you take them away, it would not
be replenished. 

04.06.2017 Barlis Taxation

LOSS
Bar 1999 - they were asked what are the requisites for deductibility of losses?
There are so many kinds of losses under the Tax code:
1. Ordinary losses 
2. Operating loss
3. Net operating loss carry over NOLCO
4. Capital losses
5. Net capital loss carry over 
6. Casualty loss
7. Wagering loss

ORDINARY LOSS
-if you dealt with an ordinary asset for a price less than the its cost. Consideration is lower than the cost. 
Issue: knowing when is an asset ordinary?
It must fall within the exclusive list 
1. Stocks in trade
2. Properties included for sale
3. Real property used in business
4. Property subject to depreciation used in the business
Selling on an account basis, there are receivables arising from being engaged in business. Receivables
accumulated or outstanding are 10M. To get cash, you sold the receivables (technically, assigning it) for 9M. Is
the loss an ordinary loss? It's a capital loss. Receivables are capital assets. 

Tax treatment of ordinary loss - part of allowable deduction

OPERATING LOSS
If the accumulated allowable deductions exceed gross income.
Gross income from business 10
Less: allowable deductions 20
Operating Loss 10

Tax treatment, normally not subject to income tax insofar as the business is concerned. E.R.: even if
corporation suffers a loss, liable for MCIT.
2017
Gross income from business 10
Less: allowable deductions 15
Net loss 5
What happens to the 5M? You can use it as a deduction for the next three succeeding taxable years. NOLCO

2018, 2019, 2020

If in 2018
Gross income 30
Less 15
Net income 15
NOLCO 5
Net income 10
If you do not earn any in the next succeeding years 2020, you can no longer utilize the 5M. 

W corporation vs. L corporation

L is always losing, it has a lot of NOL in its operating books. 
Merger between W and L
Section 36, 75% interest retention rule. It means that there should be no substantial change in the ownership
that is holding the Net operating losses in its books. 
Substantial change 75% retained the ownership. Owners of L will maintain 75% interest, then there can be
carry over. If they have common SH, there is a possibility of claiming NOLCO. 
NOLCO prohibition, if there is no such rule, the winning corporation will just simply look for corporations in
order to minimize tax liability. Losing corporation will be tempted to peddle its losses.

CASUALTY LOSS
loss arising from theft, robbery, embezzlement, calamity such as fire, earthquake, s, s and other form of
unexpected sudden occurrences 

If there is a casualty, and you sustained losses arising from casualty, report the loss to the government. 
Client should document the loss. So that If BIR investigates, there is ample substantiation of casualty loss. You
must notify the government, based on regulations, it should not be less than 60 but not more than 90 days.
Rule is within 45 days. Don't rush to BIR and say nag collapse po iyong building ko.

WAGERING LOSS
Gambling loss, deductible only to the extent of gambling gains. 
More often than not, gambling loss is higher than gambling gains. 

During a lecture in tax, you got bored because everything they were talking about is known to you. Played lucky
9 using codal. At the end of class, you loss about 100.
What is the tax treatment, the one who won should declare it as an income. 
As for you who loss, what you did was an illegal form of gambling, not recognized as deduction. To be
considered as a deduction, it should be legal. 

CAPITAL GAINS AND LOSSES

Capital asset is a real property - CGT on the sale of real property 6% of selling price or market value whichever
is higher, located in the Philippines.
Capital gains tax on the sale of shares not traded or not listed in the stock exchange:
5%
10% in excess of 100,000 

Personal car?
Jewelry?
For all other assets, there are certain rules that we apply:
1. Loss limitation rule
2. Holding period rule
3. Net capital loss carry over rule

LOSS LIMITATION RULE

Capital losses are deductible only from capital gains. Therefore, you cannot deduct a capital loss from an
ordinary income. 
For example:
During the year 2017, Tp has the following transactions:
GI from business 15M
Allowable deduction 10M
Operating income 5M, taxable income. 

Sold a ring with the cost of 3M for 2M. Capital loss of 1M. Can these affect ordinary income? No becaue of loss
limitation rule.

Sold a ring with the cost of 2M for 3M.

Capital gain is 1M, part of gross income. Income from dealings with properties. It's like this:
Gross income 16
Less allowable deductions of 10
Operating income 6

Gross income 10+10

Less allowable deductions of 15
Operating loss 5
Sold a ring with the cost of 20M for 30M. Capital gain of 10M. 
Taxable income for the year 5M. 
Why is it that the operating loss affected the capital gain? The law does not say that operating losses cannot be
deducted from capital gains. Because, technically, it is part of the gross income. 

04.07.2017 Barlis Taxation

Holding period rule
-Length of time of holding of an asset will have an effect as to the recognition of gains or losses. 
Two kinds
1. Short term - period not exceeding one year. 100%
2. Long term -  anything exceeding one year. 50%

Recognition of the gain or loss shall be 100%

Net capital loss carry over rule NCLCO

Whatever is the net capital loss of a taxpayer which cannot be removed by ordinary income because of the loss
limitation rule, can be carried over as a deduction against the capital gains of the next succeeding taxable year
In an amount not to exceed the taxable income during the year the loss was sustained.  
2017 
Gross income 15M
Allowable deduction 14M
Operating income 1M

Capital transactions. Short term capital gain 10M. Long term capital loss 30M. How much is the taxable
income for this year? 1M

Short term capital gain, 100% - 10M

long term 50% - 15M
Net capital loss of 5M. It will not affect operating income because of the loss limitation rule.

2018
Gross income 20M
Allowable deduction 10M
Operating income 10M

Short term capital gain 20M -- 20M

Long term 28 -- 14M
Capital gain -- 6M
Less capital loss of 2017 not the whole 5M but only 1M which is the taxable income during the year loss was
sustained. There is a ceiling. But in NOLCO, three years, no ceiling. 
Net capital 5M 

So add operating income and net capital 15M :) perfect!

Three rules: loss limitation, holding period, NCLCO

-Applies only if not real property or shares of stocks. 
-Applies to individuals also but only loss limitation rules apply to corporations. 

Charitable contributions 
Qualified organization, claim it as an allowable deduction. Act is not really part of the business but recent trend
in business is that it's already part of corporate social responsibility. Give incentives to those who give to
charitable organizations.
Contribution is deductible only if donation is in favor of charitable organization or the government. 

Qualified corporations 
Look for PCNC not under the tax Code but regulations 

2-2003 consolidated regulation for transfer taxes both estate and donor's 
Anyone who will donate to a charitable group and purpose is to claim deduction, tax payer who Donates should
give notice of donation to the BIR. 

Used for tax minimization, set up a foundation. Broadcasting company creates foundation. They claim
deductions for tax purposes, at the same time, claim goodwill or reputation.
There is a ceiling, for individuals, 10% of the taxable income prior to the charitable contribution. For
corporation, 5%

Pension trusts
Employees grow old. Some will retire. If they reach retirement age, employer is obliged to give pension or
retirement pay. When you set up the retirement fund, it will entail a lot of cost. Some people can actually
compute how much do you need thru actuarial computation.

Entail a lot of cost, you cannot recognize it outright, what you have to do is amortize. Set up pension fund,
annually, regularly you will contribute certain amount, annual contribution is way can b declared as an outright
deduction, part of necessary business expense. When you set it up, capitalize ad amortize it within a period of
10 years. 
Research and development
Ways on how to improve the business. 
Not spending on the products you are producing now. Can you treat that as a deduction for the products you
are selling now? No. 
Matching right, match income with expense 
The law requires that it should be capitalized. Debut it only when you are able to have commercial utilization of
the research and development cost. The period of amortization is five years or sixty months. 

There is need of allowable deduction, special because it departs from the ordinary deductions
Premium payment for health and hospitalization insurance. Purely compensation income earners can claim
such deduction. G.R.: only those who   Practice profession, trade or business, can claim deductions. How
much? 200/month or 2400.00. Claim deduction only if combined family income does not exceed 250,00.
Allowed only for the premiums for the payment of health and hospitalization insurance.

What may be non-deductible? Section 36

1. Personal living and family expenses
2. Capital expenditures
3. Anything that is illegal such as facilitation fees, padulas or kickbacks
Income from kidnapping, report income. But in the process of earning, your get away car has been damaged,
you cannot declare it as a loss. 
1. Premium payment considering the insurance takes covering the life of the employee, where the
employer designates himself directly or indirectly as the beneficiary 
2. Those losses as well as interest expenses concerning related taxpayer. 
Brother vs. brother, loan transaction. Brother earned income, declare it for tax purpose
Paid the interest, you cannot claim it as a deduction. 

Gross income
Less Allowable deductions
Net income

Net income, Tax approach with respect to individual and corporations.

After net income of an individual, what else should be done?

RA 9504 - exemptions 
Personal/ Basic 50,000 - granted by reasons of a TP's status. No more distinction whether single, married,
head of family. It is an arbitrary amount, roughly equivalent or for the purpose of a person's minimum
subsistence annually. 
 -even estates under judicial settlement and irrevocable trust are entitled to  20,000 basic exemption

Additional - 25,000 per qualified dependent child

Granted to a qualified dependent child, maximum of 4 at a given time. 
1. Not married 
2. Child living with you dependent upon you for chief support 
3. Not over 21 years old. 
Can be over 21 but is not capable of self-support
4. Not gainfully employed 

Supporting Senior citizen is your child. Will not entitle you to additional tax exemptions. Some people say you
can. 

What if there is change of status or qualification? 

A child was born, qualified even if born on December 31 during the year born. Died on the beginning of the
year. Child turned 21 years old. Got married during the year. Became gainfully employed
-All changes favorable immediately consider them. All change adverse will not be immediately considered
during the year of the changed. Consider in the year following. 
-but this contemplates only those under section 35c
Residence of the dependent permanently. At the end of the year, no longer living. Is the child qualified? No.
During the year there is a change in the person giving chief support, no longer considered qualified. The status
at the end of the year is the one which will prevail 

H married to W. children 1 and 2. Obtained legal separation, in the decree of legal separation, court awarded 1
to H and 2 to W. court H to support child 2 while W to support child 1. 
Can H and W claim additional exemptions? No. The one living with the taxpayer is not dependent on them for
chief support. 

Additional exemption qualified children. What about married individuals who have 8 children? Can they split
the claim? No. Only one spouse can claim the additional exemption. By default, it is the husband who claims.
Unless husband waives or husbands income is exempt or if the lady married a no income, no job no asset. 
The child need not be legitimate. The law did not distinguish. 

Net income
Less: personal exemptions. Discuss both basic and additional.
Taxable income
Check the rates found on section 24. Determine the Tax.
Whatever is the tax computed can be reduced by tax credits.
Tax credits can come from various sources.

Practice law profession, teaching and there are clients.

Tax credit arising from withholding tax on wages. BIR form 2316. 
Withheld taxes for services rendered, retained lawyers. 
10% will be withheld. 

Sample charging client 10,000. Only 9,000 received. 1,000 represents withholding which is 10%. Demand from
the client issuance of a tax form. 2307. For every amount indicated there, reduce tax liability by that much.
1,000*12=12,000.
If tax liability is 112,000. Deduct the 12,000. Pay 100,000 na Lang.

File income tax return.

If not engaged in business, purely from compensation, no need to file income tax return. Employer will be the
one to do it for you. 

If you are purely compensation earner, multiple employers, file item tax return. Consolidate income. 

I am engaged in business or practice of law profession. File income tax return, 4x in a year for the first three
returns. Quarterly returns 1701Q
April 15
August 15
November 15
Annual income tax return April 15 of the following year. 
There are other returns. 

Computed tax liability, which exceeds 2,000. Apply for installment payment of taxes. 1st half will be when the
AITR will be paid. On or before April 15. Beat deadline before July 15.

04.07.2017 Barlis Taxation

Tax liability as a corporation
Net income
Multiply by:30%
Tax
Less tax credits

30% ordinary corporate income tax, normal tax.

Minimum corporate income tax? For which a corporation can be held liable. 
2% of the gross income. 
CREBA vs. Romulo - valid imposition 
It can happen that the taxpayer can sustain losses but will become liable for MCIT. 
Taxpayer had breakeven operation but will become liable for MCIT. 
Earns income but minimal, liability will be MCIT if its higher.

Compare the MCIT with the normal corporate income tax, whichever is higher, that's the tax that will be paid. 
Prior to the 1997 Tax Code, no MCIT. 

Always declaring losses annually. Yet it continues to do business. There is tax evasion, provide a mechanism
that if its suffers a loss, there would still be liability for taxes, MCIT 
Is it a new and additional imposition by the Tax Code? Only a modification of the manner by which the
government collect taxes. Not an additional burden. 

Carry forward of excess MCIT

Whatever is the excess of MCIT over the normal tax can be carried forward as a credit or deduction against the
normal tax of the next three succeeding taxable years. 

How does this illustrate us that it is not an additional imposition.

2017
Normal 100
MCIT 150
Tax to be paid 150

Excess MCIT 50M, carried over as a credit against the normal tax for 2018, 2019, 2020
2018 
Normal 100
MCIT 150
Tax to be paid 160
Excess MCIT 40M, 2019, 2020, 2021

2019
Normal 130
MCIT 180
Tax to be paid 180
Excess MCIT 50, 2020, 2021, 2022

2020
Normal 150
MCIT 140
Tax to be paid: 150-(50+40+50)= 10M 

You cannot go lower than the minimum of 140. Once the normal goes up high, then you can forget MCIT. 

If we don't have the MCIT, how do we compute the tax of taxpayer

Noon normal tax
2017-2020 500
Ngayon 
Tax to be paid 500
Equal din Lang.

It is used to address where corporations are always declaring losses fraudulently. 

50M last year to be used 2020
What if in 2020
Normal 150
MCIT 151
Normal 139
MCIT 140

If there is a deadline, your goal should be to increase the normal tax so that it's higher that MCIT and you can
use the carry forward. So what you have to do is to not recognize some or reduce deductions? No law requiring
taxpayers to include all deductions.

MCIT is compared to the normal. Significance: if you compare it with normal, you do not compare it with
preferential taxes. A taxpayer who is enjoying preferential tax cannot be held liable for MCIT. 
MCIT is imposed only if the corporation is in its 4th year of existence. No tax consequences for the three years.
Ways by which you can seek relief from the MCIT? Yes. Because MCIT is supposed to address where taxpayers
are fraudulently declaring taxes. Possibly, you can seek relief but identity grounds allowed by the tax Code.
1. Cause of the loss is force majeur, calamity or casualty. Substantiate your claim
2. Cause of the loss is prolonged labor dispute. Determined to be 6 months
3. Legitimate business reverses 
4. Anything where a taxpayer can show that the loss is not contrived. 

if I'm in fear, I'm not in peace. I pray for peace of mind. 

Optional corporate income tax.

15% at gross income
-forget about it. It's not a real kind of tax but it's in the tax code. Conditions set forth by congress has not been
fulfilled, tax effort and vat effort ratio. Section 27

Improperly accumulated earnings tax. Surtax

It's tax on the improperly accumulated earnings of the corporation. If corporations simply accumulate
earnings, they can be liable for surtax.
Power to declare dividends. 
Allows accumulate earnings, expansion or for payment of loan or preparing for contingencies 

Unrestricted relished earnings will be restricted. If the corporation will accumulate for a legitimate business
reason. 
Reasonableness test? Are the amounts being retained reasonable, question of fact. For the immediate needs. 
Why should our laws still impose on the accumulation of earnings? Power to declare dividends, purely
discretionary power on the part of the board. The accumulation of earnings is done by not declaring dividends.
There are taxes that can be collected by the government, depriving the government of collecting dividends tax. 

Right of the government does not prescribe because there is no form required. The main consideration is
reasonableness of the amount being maintained. Tax officials are given discretion that is why the tax code gave
a guide, if corporation has URE beyond 100% of paid up capital. 
No corporation should ever be subjected to this kind of tax. URE is nearing paid up capital, advise clients
accordingly. Declare dividends or restrict the URE for legitimate business reasons.

30% is a normal tax

Exempt by reason of special law, constitution NSNPEI, or by Section 30 of NIRC, tax exempt corporation, go
through the list and remember the last paragraph. Any income arising from an activity conducted for profit or
use of their property like renting out spaces, they shall be liable for income tax.
For those corporations, whatever they have received consistent for the purpose for which they were established
shall be free from taxes
Labor organizations
Charitable organizations 

In relation to section 30e, charitable institution, remember St. Luke's vs. CIR - the query was is it a charitable
hospital or non-profit hospital? Non-profit, tax is found in section 27 where it provides that 10% of taxable
income.
If charitable income, tax exempt section 30e
Created as non-stock non-profit but the operation is not a charitable entity. For it to be charitable, it must not
only be created but operated as a charitable entity. Hospital earning billions is not engaged in charity.  

Corporations which enjoy preferential rates if taxes

Non-profit hospital 10%
Proprietary educational institution 10% 
Foreign corporations, resident - 30% based on net income, within the Philippines except for some foreign
corporations subjected to other rates of taxes

Airline carriers, with landing rights in the Philippines - 2 1/2 of their gross Philippines billings. What will
comprise?
Korean airlines. 
Selling tickets sold in Korea for flights coming from 
Korea to Manila - yes
Manila to Korea, sold in Korea - yes. 
Sold in Manila, Manila to Korea, yes
Sold in Manila, Korea to Manila - no
 Flights originating from the Philippines. Regardless of the place of sale of tickets or the issuance of travel
documents. Even if the transaction is done in Korea for as long as the flight originates from the Philippines.
Gross Philippines billings apply only if the corporation has landing rights. 

No landing rights, but selling airline tickets in the Philippines. 

BOAC what is being taxed is the activity that produces income, sale of the tickets. That's the activity produces
income, it takes place in the Philippines. The corporation is doing business it must be liable for taxes. BOAC
was decided in 80s.

2010 - South African airways, if airline carrier has no landing rights, it is considered to be doing business,
resident foreign corporation, normal tax, 30% sourced from within. For flights not originating in the Philippine
Regardless where the flight is to be rendered as long as activity is sourced within the Philippines

Branch profit remittance tax

Resident foreign corporation, branch of a head office, branch earns income, tax imposed is 15% applied for or
earmarked to be remitted. X Philippines branch earned income amounting to 100M. 
X USA
X Philippines
Gross income 500M
Less: allowable deductions 200M
Net income 300M
Tax 90M (30%)
Net income after tax 210M
Less 15%
For X USA, 85M

Non-resident foreign corporations, there income is subject to final tax of 30%. 

Administrative matters for corporate income tax:

Filing of tax returns:
Quarterly following 60 days after the the close of taxable austere
Final adjustment return, filed before on or before 15th following close of taxable year
Exempt corporations 1702 EX
Check the forms :)

Corporations to file on a cumulative basis. 

1st quarter 
2nd quarter - 1st and 2nd
3rd
Final adjustment return
Additional returns of filing apart from income tax returns.
No longer cover taxes of income of trusts and estates

04.07.2017 Barlis Taxation 

Transfer taxes 
-tax on the right to transfer properties gratuitously. 
Right to transfer properties onerously income tax or business tax

Two kinds of transfer:

Those transfers takings effect during the lifetime of a person or moment of death

Gift taxes:
Donor's tax
Donee's tax - no more

Death tax:
Estate tax
Inheritance tax - no more

Donor's tax and excise tax are both excise taxes, right to transfer properties gratuitously

Estate tax
Back tax theory - it is supposed to answer whatever back taxes he may have not paid during his lifetime. 

Resident or citizen decedent - all of their properties, within or without shall be part of the gross estate. 
Non-resident alien decedent, only those properties within the Philippines

What are those properties considered to have acquired or attained business situs? Section 103
Shares and obligations of Domestic Corporation located in the Philippines of which 85% of the business is done
in the Philippines 

What do you mean by all? Properties actually owned by the decedent or constructively owned. Inclusions in the
gross estate.
What are these things?
1. Transfer in contemplation of death 
Properties transferred by a person during his lifetime but the reason for the transfer is the thought of death.
Motive to transfer is death, in contemplation of death, look at the state of the mind of the person. 
Age of the person at the time he effected the transfer. Of advanced age, it can lead to the conclusion that it is
transfer in contemplation of death
Status of health 
In favor of children 

In relation to this, transfer with retention of rights

If there is a transfer with a transfer of certain rights and the right ends at the moment of death, inclusion in the
estate. 
X gave to Y a house. X requested that he us the same until his death

2. Revocable transfers
Any property that is effected or transferee by a person during his lifetime, he retains the right to revoke. It is
considered his property for purposes of estate tax. 
I can take the ring back when i want to. X died without taking back the ring. The value of the ring will be
included in the gross estate? Reference point, felt the full effects of the transfer upon death. 

3. Properties passing under a General power of appointment  

X in his will said that property will be given to Y at the time of my death. Y cannot dispose of the property
during his lifetime but before he dies, choose successor, choose any one.
If X dies, will that be part of his gross estate? Yes, because it is a property he owns. 
If y dies, will it be part of the gross estate? Yes, because it is a property passing under a general power of
appointment

X in his will, property give to Y. Y can choose anyone provided that anyone is any of the children of Z. 
X yes
Y no, because the property is passing under a general power of appointment. Whose will are we following when
y to z? X

Life insurance proceeds

Revocable - estate 
Irrevocable - not part of the gross estate unless the beneficiary is estate, e or a 

X took insurance covering his life. Only heir, Y. He designates Y as the irrevocable beneficiary. Will that be part
of the gross estate of X?  Excluded. He identified a definite person as the irrevocable beneficiary.

H married W. they have separate properties. Husband has car, yacht, resort, hotel and jet. Wife has jitney,
truck, bus, ship, 
Conjugal communal property 
Husband dies ahead. In determining gross estate of husband, what will be included or excluded?
Included - capital properties exclude paraphernal poetries.
Conjugal or communal - if it is gross estate, entire. 

Gross estate, the basis of tax? Section 88.

There are deductions. 
Ordinary or ELIT taxes, indebtedness, losses, expenses 
1. Funeral expenses - actual or 5% of the gross estate or 200,000 whichever is lowest
For as long as the amount is spent in connection with the interment or burial, deductible. Critical point:
shouldered by the estate. If donated, non deductible. 
shouldered by a pre-need company - not deductible, not shouldered by the estate 
Burial and interment, no reference to cremation - can be deducted. 
For the Filipino tradition, forty days, not included

2. Judicial expense - amount that is spent for purposes of settling an estate. Whether the settlement be
judicial or extra judicial. It has nothing to do with courts. Lawyer charged for making the extra judicial
settlement estate
No ceiling, ask lawyer necessary receipt for settlement of estate 

3. Claims against the estate 

If a person dies and there are claims against the estate. Those can have the effect of diminishing the value of the
estate, serve as deductions. 
There must be a duly notarized evidence of indebtedness 
If the loan was obtained three years prior to death, an accounting for the proceeds of the loan. - fictitious
promissory note, Obligation as tax examiner, whether the loan is existing, authentic.  

Loan was granted by Y. Discussed the matters with the heirs of X. X's estate was settled, 10M was a claim
against the estate. After filing estate tax, the creditor and heirs agreed to settle the amount to 5M. BIR is
running after deficiency estate taxes. Are the heirs liable? Is the estate liable? No, because the settlement
agreement between the heirs of X and creditor Y is a post debt development. It will not affect liability for estate
tax.
Estate tax liability is based on the factual circumstances at the moment of death.  
 
4. Claims against an insolvent person. 
Diminishes the value of the estate. Can be declared as a deduction, but must first be included in the gross
estate. Include then deduct later. Required to include it in the gross estate because it is an asset. Practical
purpose, if not included, you are unduly diminishing the ceiling of funeral expense to be enjoyed by the estate.
The funeral expense may either be 5% of the gross estate. 
 5. Unpaid mortgage indebtedness
Among the properties left behind by a decedent, subjected to a mortgage, may claim a deduction unpaid
mortgage indebtedness

X died. Left a building with a value of 10M. Used as a collateral subject of a real estate mortgage. The value is
two million .
Include ten million as gross estate less deduction of two million.

X wants to borrow money from Y. Two million. Collateral, I have a friend who owns a property, I'll convince Z
to execute R.E.M. Property is worth ten million. Due date, X did not pay. Z died. 
In the gross estate of Z, in determining tax liability, can the estate claim unpaid mortgage indebtedness? Yes.
How? Estate declare as ten million as an inclusion plus two million worth of receivables. If a persons property
is used as a collateral and used to pay an obligation, there is a right of reimbursement. In the gross estate, ten
million house plus receivable two million so there can be unpaid mortgage indebtedness to be declared.

04.07.2017 Barlis Taxation

Vanishing deduction, property previously taxed, alternating deductions
Why is it called ppt? Because of the requirement that the property included in the present estate should have
been subject to a previous tax?
one kind of deduction the law recognize the harsh effects of indirect double taxation. 

X owns property at the time of his death. The property was inherited by Y. Y died. The Same property which
was just passed on is source of multiple tax liabilities.

X donated the house to Y. There was payment of donor's tax. After Y has accepted, with much elation, he died.
Included in his estate. 

Property included in the present estate sound have been subjected to a previous transfer tax that was paid.
Property should be directly identifiable. Same property that was donated. 

X inherited something and sold it. After that, X died. There can be vanishing deduction because you can still
identify the money was a result of the Property sold. 

Why is it considered vanishing deduction? Because of the requirement that the death in the previous and
present estate, should take place within a limited period of 5 years. 
Donation and death. Date of donation, and date of donee should take place within the limited period of 5 year. 

Alternating, in case of death and death, previous estate should have not claimed vanishing deduction. 
Illustration:
X bought a house 2001. After two years, 2003 X died. Can the estate of X claim vanishing deduction? No
previous transfer tax. 

Y inherited it. Y died in 2005. Can the estate of Y claim vanishing deduction? Yes. 

When Y died, inherited by Z. Z died in 2007. Can the estate of Z claim vanishing deduction? No. There was a
previous vanishing deduction claimed by the previous estate.

Z died, A inherited the property. He died 2009. Can the estate of A claim vanishing deduction even if A died six
years after the death Y?yes. 

B did not accept the property to be inherited from A. 

Bar: X died, left behind a property with a value of 1.2 million. A return was filed, gross estate 1.2 standard
deduction 1M. Net estate 200,000. In section 88, no estate tax liability because it is exempt. 
Y, the one who inherited property. Y died 3 years after. Can the estate of Y claim ppt? Yes. 
Was there a previous transfer tax that was paid? Yes. Payment is deemed to have been made at the time of
filing of return. Mere filing is equivalent to return

Standard deduction 1M
An amount allowed to be claimed as deduction worth 1M. On top of other deductions.

Family home
If a person dies leaving behind a property that is a family home. Ceiling is 1M. 
Conjugal property? It's ok if the value is 2M. Ceiling is 1M.
What if the value is 1.5? Half.

Decedent resident, died at Trinidad 

File it at the place where the decedent is a resident of. To maximize  deduction, certify that family home is in
Baguio. Wrong because if it's filed in Trinidad, 25% surcharge.

Medical expense
500,000 amount spent for the purposes of hospitalization within 1 year prior to deadline
Can the unpaid 500,000 be as a claim against the estate? No it is Unduly circumventing the ceiling the
unallowable medical expense. 

Net estate, check the provision of section 84 with the rate that is applicable.
RMC 15-2003 checklist for onett 

Safeguards provided by law to ensure correct settlement of estate taxes

1. If the estate is under judicial settlement, the judge should not allow any withdrawal from the estate
unless there is proof of payment of estate taxes. 
Special proceedings administrator or executor must submit an inventory, incumbent upon the court if the
properties have been subjected to estate taxes. 
2. Register of Deeds should not allow any transfer of properties from the name of registered owner who
died to the heirs unless there is proof of payment of taxes. BIR issues certificate of registration. 
3. Banks should not allow withdrawal from the deposit with the knowledge of death of depositor as long as
estate taxes should have been paid. 
True even if joint deposit whether or or and/or. Section 97 is very clear. Source of requirement for banks,
withdrawal slip should contain that they are certifying that the co depositor is alive. 
You did not know about the requirement, ATM, you will be able to withdraw. Do you incur liability? Yes. Aside
from tax liability, criminal liability for perjury. Section 97 and 267. Whoever will withdraw certifies that co
depositor is alive. The one who violates certification is guilty of committing perjury. If the estate is not
contested, no one will complain about it. Perjury is an offense punishable not in the NIRC but also RPC. It's a
felony. Intent is essential. No intent to commit such particular act. 

Prohibition concerning withdrawals. 

4. If a creditor dies and heirs of debtor will demand payment. Make sure that the estate tax has been paid. 
SPA?  Did you pay estate tax?  Is the claim against you declared? Duty as a debtor. Comply with that duty.
Required to pay indebtedness even if there is no payment of estate taxes is when if it is settled judicially. 

For administrative purposes, when a person dies, leaves behind properties, there must be filing of a notice of
death. Within thirty days.
File estate tax return within a period of six months. Pay as you file system. Can you ask an extension to file a
return? Thirty days. Don't count on extensions it might not be granted, beat the six month deadline.

Are there instances where you can ask for extension to pay?
Undue hardship on the payment of the estate taxes. Non liquid assets.
Maximum, judicial manner - 5 years
Extra judicial manner - 2 years
Even if allowed to pay on extension basis. Subject to interest still. 
File the returns on time. A mere delay of one day can be equivalent to 25% surcharge. 
04.12.2017 Barlis Taxation
Donor's tax
Right to transfer property gratuitously, takes effect during lifetime of a person. 

Gifts, can be of two kinds:

1. Direct Gift - one where from all appearances, indication, legal consequences, there is a Gift. For
example, assume that I own this pen, I gave it to you, that's a gift. 
2. Indirect Gift - appearance is not a gift, but the totality of the situation is a gift.

How do we know if what has been done results to a Gift?

Abello vs. CIR - SC there is a Gift if there is an increase in the wealth or patrimony of a person brought about by
the decrease of wealth or patrimony of another. Not arising out of any consideration, but simply out of love,
liberality or affection. 

Law partners of senator angara - gave contributions to the campaign funds of senator angara. They contributed
800,000 per partner. Is the contribution considered donation? SC: it is a donation. It's a gift, liable for donor's
tax. Now, for political funds used to campaign, it must comply with the omnibus election code to be free from
donor's tax. 

Indirect Gift, example

1. Cancellation of indebtedness without any consideration at all not because of service. There was
forgiveness of indebtedness. 
2. Transfers for insufficient consideration.
X owns the ring, valued at 5M. Y bought it at 1M. There was a sale but it was for an insufficient consideration. It
is as if X donated 4M to Y. 
It is among one of the inclusion in gross estate. If the reason for the transfer was the thought of death, it will be
subject to estate tax

X sold an Idle land valued at 5M, sold for 1M. Section 100 - transfers for insufficient consideration, possible
source of donor's tax however not applicable if the real property is classified as capital asset. This is because the
capital asset will be subject to CGT

For one who renounces his share in the inheritance not to be liable for donor's tax, renounce it in general and
not in favor of a particular person. 

X is a filthy rich man. He left behind three heirs. Businessman, lawyer, doctor.
Businessman - does not like to share in the properties, does not like to pay
Lawyer - deed of extra judicial settlement, waiver of the share of businessman in favor of the lawyer. in that
case, businessman will be liable for donor's tax. 
-deed of extra judicial settlement with renunciation of rights, renounces in favor of lawyer. in that case,
businessman will be liable for donor's tax. Even if document made use of the word renunciation, the same is in
favor of a particular heir, directly proportional to his share. (1/3+1/3) 2/3 for lawyer and 1/3 for businessman 
-deed of extra judicial settlement with renunciation. no donor's tax liability. There was no Gift. No decrease in
the wealth of businessman, nothing to give, nothing to receive. It is not in favor of anyone. 
Doctor -  wala Lang

Husband and wife one child. One tip to save on taxes:

Husband dies. Wife and child, successor. If wife is already of advanced age. Property will be given to child.
Consider the wife to renounce the inheritance but not in favor of heir child. Just renounce it in general. . 

Existence of gifts 
If there is a Gift, then there can be liability for donor's tax. Greatly dependent on the relationship between the
parties. 

Donation In favor of relatives or strangers. 

Who are your Relatives? SADBroSC4th
-lineal ascendant and descendants, regardless of degree. Spouse, brothers and sisters whether full blood or half
blood, collateral line within the fourth civil degree of consanguinity. 
Child of 1st degree cousin - stranger, 5th civil degree

If donation is in favor of an in-law - stranger.

If you donate in favor of relatives, schedular rate of taxes will be imposed ranging from 2% to 15% based on the
aggregate net gift made during a calendar year.
Aggregate - all of the gifts made during a year. When it comes to administrative requirements, settle donor's tax
liability, within a period of 30 days from the completion of the Gift.
January 3 - X donated 400,000 to mother. 30 days after January 3, pay donor's tax
February 7 - X donated 500,000 to father, tax base would be 900,000 cumulative basis during the calendar
year
March 10 - X donated 300,000 to brother. 1,200,000 Cumulative less donor's taxes paid. Tax base increases,
tax rate increases
X became broke.

Net Gift 
Are there deductions allowed? Deduction is mainly concerning dowry deduction. These are Gifts on account of
marriage by a child. 
The one who should get married should be a child. If you donate to your parents, no dowry deduction. It should
be mom and dad giving to me. It amounts to 10,000.

H❤️W = A ❤️B. H and W donated 1M

H 500,000 as if 250,000 for A - 10,000 = 240,000, schedular rates 
250,000 for B, donation is made in favor of a stranger subject to 30% 

W 500,000 as if 250,000 for A - 10,000 = 240,000, schedular rates 

250,000 for B, donation is made in favor of a stranger subject to 30% 

Donate in favor of a stranger, huge tax consequences. Do not give daughter- or son-in law. 

For donations made in favor of stranger, 30%

Issues in connection with donor's tax

Filing of return 
Return should be filed 30 days after completion of every donation, when you give and it was accepted. If there
are formalities, it should be complied with. 

Transfer for insufficient consideration 

Insufficiency arose by reason of competitive bidding scheme - asset valued at 3M, sold thru competitive
bidding. No ceiling price. Winning bidder submitted 1M only, will there be liability for donor's tax? 
SCR: yes because there was sale of insufficient consideration. Law does not distinguish the source of sale. 
Corporation's defenses - no donative intent. Court said it is not essential in imposing donor' tax. For as long as
there is transfer for insufficient consideration, there is a liability for donor's tax. 

04.19.2017 Barlis Taxation

Value Added Tax
INDIRECT TYPE OF TAX. 
you can only pass the economic burden of tax and not the tax itself
Further consequence, taxpayer does not change despite shifting, whoever is the statutory tax payer is the one
liable 

Buyer who is a consumer is not the taxpayer. Seller shifting the burden to the buyer, buyer pays the purchase
price. The one who bought it is a consumer. If not a consumer, then things will be different. 

TAX IMPOSED ON IMPORTATION RELATED TO BUSINESS, SALE, BARTER, OR LEASE IF

DONE IN THE REGULAR COURSE OF THE BUSINESS. 
ISaBEL

TAX IMPOSED ON ALL LEVELS OF THE PRODUCTION OR DISTRIBUTION PROCESS 

If you refer to the old system of sales taxation, sales tax was imposed only on original sale. One time imposition
on original sale. In VAT, every process, from manufacturer to distributor to wholesaler to retailer 1, 2, 3, VAT
can be imposed

IMPOSED ONLY ON THE VALUE ADDED

VAT crediting mechanism
Manufacturer who is a VAT registered tax payer sold goods to W, also VAT registered taxpayer. Selling price 1M
at VAT 12%. W will pay 1,120,000.00 
In the perspective of M, he received 1,120,000. In the eyes of W, 1,000,000 as purchase price.
M 1,000,00 Because he is not a consumer. If he is a consumer then
output vat 120,000  1,120,000. He is also a VAT registered payer, he paid a
Output VAT - vat due ON the transaction. 12% of the purchase price of 1,000,000 but he also paid 120,000.
gross selling price or gross receipt   What is the 120,000? Input VAT. It is the VAT due
Is the 120,000 the amount of tax  to be paid by the FROM or paid by a VAT registered taxpayer provided
seller? Not yet because we have the VAT crediting he is also transacting with a VAT registered taxpayer. 
mechanism. Output less input VAT.
If the one who sold to you is not VAT registered, then
What if M has no input VAT? Then the whole 120,000 you cannot have input tax. 
will be the amount to be paid to the government. 
Input tax can be credited to an output VAT by W.
When will there be a VAT liability? When he sells,
because he is not a consumer. He can use input tax as
a credit.

What if W decides to sell it to a R, retailer, VAT register tax payer. W sells the goods for a new selling price of
2M.
W will shift the burden to R, W must collect from R Perspective of R. Paid 2,240,000
2,240,000. Purchase price 2M
W received selling price 2,000,000 240,000 - represents his input VAT. 
240,000 - out put VAT When will R have an output VAT? When he decides to
How much will be paid to government? 240,000- sell. He decides to sell to C consumer for 3M
120,000=120,000

M to W 1M VAT 120
W to R 2M VAT 120

R to C
R received 3,360,000 or 3M lang??? I think it should In the eyes of C
be 3M Purchase price 3M
Selling price 3M VAT is a consumption based tax. It only means that
360,000 - output VAT the consumer is ultimately shouldering all the VAT tax
Less input vat 240,000 accruing.
VAT payable 120,000 M to W 120,000
W to R 120,000
The added 1M from 2M to 3M, 1M*12=120,000 R to C 120,000
Where is the 360,000? It all became part of the
purchase price 3M of the consumer.

That's the most basic concept of VAT. 

VAT is a consumption based tax. - has a lot of uses. For VAT to be imposed, necessarily consumption should
take place in the country. Goods designed to be consumed outside of the country, no VAT is to be imposed
section 109(o) - export sales by non-VAT registered persons are VAT exempt. Because goods are destined to be
consumed outside the country
106(a) 2(a) - zero rated transactions, export sales by VAT registered persons are zero rated. VAT is to be
imposed at 0%.
Importation is subject to VAT whether or not related to business, presume that you will consume it here. That
is even if you are not engaged in business.

VAT is imposed on all levels. But only on whatever value was added. Output tax and input tax credits. 

Output VAT - due on the transaction on the gross selling price or gross receipt. 

Gross selling price - persons grants discounts, will you consider the original selling price or discounted price? If
discount is granted at the moment of transaction and is not subject to any future conditions, make use of the
discounted price. If discount is dependent on future compliance of condition, use original selling price.

Goods sold for one million, 5% discount if you pay within 10 days. Dependent on compliance of condition in the
future, original.

Cash, given 5% discount, discounted price. Given at the moment of transaction without any future conditions.

Gross selling price for those who are engaged in the selling of goods
Gross receipts for services 

Input tax - general source is when a person transacts with another who is VAT registered. Both should be VAT
registered. If the buyer is not VAT registered, then there is no input tax. If the seller is not, but the buyer is VAT
registered, no input tax. It's just only one of the sources of input tax credits

Other sources of input tax credits: 

1. Presumptive input tax - law presumes the existence of VAT
Allowed only for manufacturers of sardines, mackerel, milk, cooking oil, refined sugar, and packed noodle
based instant meals 
Why? Bakit sila?
109 - tax exempt, VAT exempt transactions, sale of agricultural or marine food products in their original state
Fish, VAT exempt regardless of the volume. 
Sell sardines, subject to VAT. It's no longer in its original state. 

Primary raw materials are 🐟 fish. When you buy the fish, you don't have input tax because it is tax exempt.
Subject to a 12% VAT and no input tax credit. 
Presumptive input tax 4% - based on primary agricultural or marine food raw materials used in the production

Take a look at the character of those goods. Usually needed. 

If you are selling arranged flowers 🌺 - will you be subject to VAT? Possibly. Agricultural but not food 🥘.

Simple processing that will prolong its life will not negate the fact that it is in its original state
Smoked fish, 
Sushi or sashimi - bought it from a restaurant, sale of service. Subject to VAT

04.20.2017 Barlis Taxation

Output vat fixed at 12%
if the transaction falls under the VATable transaction, ISaBEL, is it possible that the transaction will not be
subject to a 12% VAT? Yes, it is a possible situation.
Transactions that are VAT exempt 109
Zero-rated
Effectively zero-rated

VAT EXEMPT
There is no corresponding VAT liability. Go through that list.
1. Sale of agricultural or marine food products in their original state. 
Simple process of prolonging the life will not negate the fact that it is in its original state. 
Tinapa, tapa 
Boiling, broiling, grilling..

2. Gross sales or gross receipts would not exceed 1,919,500.00 annually

Not subject to VAT. But if he makes sales more than that amount, such as fishball, liable for VAT.
Annual receipts will not exceed such amount, no VAT liability. It will be subject to percentage tax 3%. 
Later on, when you practice your profession, initial years of practice, you will not be able to get that amount.
Person is subject to percentage tax, no longer liable for VAT. VAT and OPT is mutually exclusive. 
Check provisions regarding those subject to OPT.
Admission in cinemas - OPT

3. Services rendered under an employer-employee relationship

Employed in a multi national corporation, annual salary is 3M, not liable for VAT. If services were retained, as
a retained counsel, salary exceeds threshold amount, subject to VAT 

4. Educational services - not subject to VAT

5. Medical services are not subject to VAT except if rendered by professionals. For the medical services
rendered by a doctor. X was hospitalized, main bulk of payment is composed of hospital fee and
doctor's fee. In so far as the hospital fee is concerned, no VAT. The one rendered by the doctor, there is
VAT.

These transactions are exempt from VAT, there is no liability that will attach. 
Is exempt the same as zero-rating? No.

In exemption, there is no liability for VAT. In zero-rated, there is no liability for VAT also because the VAT rate
is at 0%. 

Contex vs. CIR - VAT Exemption

Firm operating within the SBMA area, entitled to VAT exemption. It availed of VAT exemption. Suppliers
supply goods to Contex. Suppliers are shifting the VAT to Contex which the latter shoulders. Contex claims that
those are export sales and since it shouldered VAT, it should be refunded. Should it be refunded? No. Because
when Contex bought those goods and agreed to shoulder the burden of tax, it is deemed a part
of purchase price. Taxpayer is not even a taxpayer with respect to that amount.

CIR vs. Seagate - 

Operates within PEZA, entitled to avail itself of VAT exemption. What did Seagate do? It did not avail of VAT
exemption. Registered itself as a VAT taxpayer. It has suppliers located outside PEZA and the suppliers shift
the burden. Sale by Seagate, a VAT registered person thru export sale is zero-rated. The output VAT is 0.
Seagate has Input tax because it is a VAT registered tax payer and deals with a VAT registered tax payer. The
input tax credit was unutilized, Seagate filed for a refund. SCR: granted the claim for refund. 

In exemption, no VAT liability no input tax credit. In zero rating,there is input tax 

ZERO RATED
1. Foreign currency denominated sales 106A 2(b)
2. Export sales actual or constructive export, when goods are physically bought outside.

Constructive 
Transfer of goods to inside PEZA then transfer of goods to those outside PEZA. Those in the PEZA separate
customs territory, not part of the Philippines. But geographically, it is within the Philippine territory. 

Sale made by X domestic to Y domestic is also zero-rated, as long as products of Y are primarily for export
purposes, that is, at least 70% is for actual exports. Y domestic, zero rated iyong export sales.

3. Sale of gold to BSP is considered an export sale. It is zero-rated. It must be sale of gold. 
Sale of silver to BSP, VAT transaction. 
 4. Zero rated sale of services
Service should be rendered in favor of a non-resident, paid in foreign currency, duly accounted for in
accordance with the BSP rules. 

X corp, domestic corporation, call center

A corporation, two clients
international hotel group A - pays foreign currency, zero rated
B domestic hotel group - pays in domestic local currency, subject to 12% VAT

Be careful with the choice of terms regarding zero-rating. If you will be asked, is the transaction subject to tax?
And it is an export sale by a VAT registered person. Yes, but at the rate of 0%.

Is there VAT liability? None. Because the rate is zero. 

Determine which one is subject to VAT. And when you find zero-rated, they are subject to VAT but rate is
pegged at 0%

For zero-rating to be present and allowed

The taxpayer should plainly stamp on the face of the receipt, zero-rated, failure to place the same, is fatal to
zero-rating

Stamped it in the sales invoice - sale of goods 

official receipt - Sale of service

EFFECTIVE ZERO-RATING: you can't see me

Basis of 0 rating is not the Tax code, either by:
1. special law
2. international agreements 106A 2(c)
Don't look for them in the tax code. You will not see them, Gift. 

In special law, it is actually termed as "exemption" not effective zero-rating. But exemption is not the same as
zero-rating. Exemption or effective, how will you know that?
Special law, CIR vs. Acesite Hotel - portion of the hotel is used by PAGCOR, Acesite as the lessor is subject to
VAT who wanted to shift the VAT to PAGCOR. Lessor was constrained to pay the VAT. After paying, it studied
the chapter of PAGCOR, it discovered that PAGCOR shall be free from all taxes in connection with its casino
operation. Anyone who may have a dealing with PAGCOR regarding casino operations will be free from tax.
Acesite was claiming for refund. Government relied on Philippine acetylene which say that notwithstanding
any exemption being enjoyed by the buyer, seller remains to be liable is the statutory tax payer. Since tax is
imposed on the seller. 

Should the claim for refund be granted? Yes. SCR: because the nature of the exemption is not a simple
exemption, it is effective zero-rating. Who is actually freed from the tax? PAGCOR. Including anyone who may
have a dealing with PAGCOR. Entire casino operations itself is freed from tax. 

PAGCOR has been removed in the list of tax exemption. Ruling is still valid. PAGCOR has been removed from
income tax exemption but this case is about VAT liability

CIR vs. john Gotamco and Sons, international agreement

Construction of WHO regional office shall not be subject to any domestic tax. When WHO called for bid, it says
that any winning bidder shall not be imposed tax. 
Let's say contractors will be liable for VAT as BIR contends relying on Philippine acetylene that john gotamco
shall be liable. SCR: No liability that will arise, under our present tax system, it is effective zero-rated. Entire
construction of the WHO regional office. Enjoy benefits of exemption. 

Exempt, No VAT liability, no input tax credit. 

In zero, there is no VAT liability but there is input tax credit
In effective zero, no VAT liability so if someone shoulders it, that should be refunded. 
VAT payable, credit input against the output tax liability. If you cannot utilize the input tax credit, it can be a
subject for the claim of refund. 

Ordinary internal revenue tax refund vs. refund of unutilized input tax
Section 229
Proper subject for a claim of Refund - OIEP
1. when there is an overpayment
2. when there is an erroneous payment
3. Illegal payment in the sense that the government insists on collecting without any basis.
4. Payment of penalties not authorized by Tax code

Procedure for claim of refund

File a written claim for refund. No need for a claim, when on its face, there is a clear overpayment. 

Period to file for claim of refund?

2 years from date of payment, regardless if there are supervening events

Section 229
2016 ITR of X corporation CIR vs. TMX sales
Filed final adjustment return 04.03.2017. Supposed it overpaid the tax. Overpayment is coming from a
quarterly return which was filed on the second quarter of the year. (April-June)
-Starts to run from the filing of final adjusted return. Payment is presumed to be made at the time of filing of
return. 

If X corporation will file for a claim of refund for the taxable year 2016. When does it end? April 03, 2019. 

Return filed late. April 29, 2017 to April 29, 2019. Payment is made at the time of filing of return. 

Reckoning period 04.03.2017, AITR 2016 --> 04.03.2019

1. 180 day period lapsed
On April 3, 2018. Is this within the time? Filed for a claim for refund before the BIR. 180 days lapsed. There is
no action on the claim for refund. Can the inaction be treated as an implied denial of the BIR and appeal the
same to the CTA? 
Answer: No. Because the 180 day period is a period to rule on protest. And not a period to rule on the refund.
Section 228 ung 180 days

2. 120 day period lapsed

What if after filing of written claim for refund, 120 days lapse, there is no action on the claim for refund, can
the taxpayer treat the inaction as an implied denial? 
Answer: No. Because 120 day period is to rule on the refund of an unutilized input tax credit. 120 days under
Section 112.

3. April 3, 2018. On October 1, 2018, there was a decision to deny the claim for refund. Recourse is appeal
to CTA Division. Period to appeal is 30 days from receipt of the adverse decision, that is on or before
October 31, 2018. Mode of appeal is petition for review rule 42. 

What if CTA Division dismissed petition? MR before CTA Division within a period of 15 days. Filing of MR is a
precondition for further appellate recourse. 

What If MR is denied, appeal to CTA en Banc within a period of 15 days, mode of appeal is petition for review
rule 43. 

What if CTA en banc dismissed appeal, you may file a MR. If you don't like to file MR, appeal to SC thru
petition for review on certiorari Rule 45 within 15 day.
Administrative to judicial mode. After denial by the CIR. That ends the administrative remedy. No appeal to
SOF. Please don't file a MR before the office of the commissioner. Next recourse is before the courts

4. Decision came out on April 1, 2019. Decision is deny claim for refund. What is the Remedy of the
taxpayer when the Appeal to CTA Division is until April 3, 2019 only. The two year period will expire by
April 3, 2019.
What's the point we're establishing? Mere filing for written claim for refund does not toll the running of the 2
year prescriptive period. It continues to run. Petition should reach the CTA before the lapse of two year period. 

File a written claim for refund if adverse, appeal within 30 days but if the 30 day period will go beyond two year
deadline, beat the 2 year dead line that is on or before April 3, 2019. Make sure that you will be able to file an
appeal before the CTA. 

5. April 2, 2019 file your claim for refund with the BIR. April 3, 2019 file it before the CTA. Because
inaction is a denial. 
6. Discover error in April 2, 2019. File it on April 3, 2019 go to BIR in the morning. In the afternoon go to
CTA. Mandatory requirement of filing a written claim for refund before BIR. And make sure that it
reaches the CTA before two year deadline. 

Refund of 112 REFUND OF UNUTILIZED INPUT VAT

When is it applicable? If taxpayer is filing for a claim of refund, unutilized input tax credit arising from zero
rated or effectively zero rated transactions. X corporation sold to Y corporation. Both VAT registered. Sale took
place on January 4, 2017. Y sold the goods on export basis to Z corporation, May 4, 2017. What's the
consequence of an export sale of a VAT registered Tax payer? It is zero rated. Output tax is 0. There is an input
tax credit of Y but it cannot utilize the same as credit against the output tax which is 0. Input tax can be the
subject of a claim for refund. Y should claim for refund. 

What is the period? Two years from the close of the taxable quarter when the relevant sale was made.  
What is the sale referred to above? Between Y and Z. May 4, 2017. Y is the one claiming for refund. From the
perspective of Y, the transaction between X and Y is purchase and not sale. 

Period to claim for filing a refund? From Second quarter June 30, 2017 up to June 30, 2019. 

Assumptions:
1. 180 days lapsed there is no action for the claim of refund, cannot consider it as an implied denial. 180
days deciding for protest. 
Taxpayer cannot wait further. The denial is already final. Section 112 the government has a period of 120 days
to act. If the government acts and the decision is to deny the claim. Remedy is appeal to CTA Division within a
period of 30 days.

2. 120+30 day rule 

What if during the 120 day period, there is no inaction, it is deemed to be a denial, appeal to CTA Division
within a period of 30 days from the lapse of 120 day. If there is no action, appeal the inaction. 

With action, Deny within the 120 day - appeal within 30 days from denial to the CTA Division
No action - appeal within 30 days from the lapse of 120

3. Taxpayer filed a written claim for refund on June 1, 2019. Almost June 30, 2019, no decision yet.
Should the taxpayer appeal on or before June 30, 2019? No. Premature. You should give the
government a period of 120 days. If within the 120 day period, the two year period will expire. Let it
lapse. 
Section 229, there is no definite act of the government, that's why you have to monitor the deadline. 
It should not be filed on or before June 30, 2019 - allow the government to have a period of 120 days

In connection with the sale of goods. Not limited to an actual sale. There are also transactions which are
deemed sale. They are not in reality sales transaction, law will treat them as sales transactions. 
 1. Consumption of goods which are held for sale in the ordinary course of business. Gift owns Department
store, you are supposed to go to a party. You get clothes from the department store. Law will treat it as if
you sold it to your own self. Deemed sale transaction. You consumed the goods, you have become the
consumer. 
When you purchase that, VAT registered tax payer bought it from a VAT registered tax payer. There is no
output tax but you are claiming an input tax, government will be prejudiced. Thus, law will consider it as a
deemed sale. 

2. Instead of paying using money, you paid creditors using property. Indebted to X for 1M, X get ka na
lang appliances until you reach 1M. Considered as if it is a sales transaction. 
3. Instead of declaring cash dividends, declare property dividends. Inventory of appliances will be
declared as dividends. Considered as a sales transaction
4. Consignment of goods if no actual sale takes place but goods are to be returned within the prescribed
time. 
5. Retirement or cessation from business is one source of transaction deemed sale. You have inventory of
goods at the moment of retirement, it will be considered as if it were sold. 
Decided to discontinue business. Ceased operating business will be subject to VAT, presumed that you will be
consuming the products.

Sole proprietor has a flourished business. He wants to convert business into a corporate entity. Chances are you
will discontinue business as sole proprietor, it is cessation of business, inventory at that time shall be subject to
VAT. Continue selling without making any purchases, inventory level is diminished, decide to close business. 

Sole proprietor died. There are inventories. BIR was insisting on VAT liability. BIR claims that the client retired
from business. No cessation from business, because son is continuing it. Compromise na lang, reasonable
doubt. 

Input tax
1. From purchases 

There are other sources:

2. Presumptive input tax
law presumes the existence of VAT
Allowed only for manufacturers of sardines, mackerel, milk, cooking oil, refined sugar, and packed noodle
based instant meals 

Uses agricultural or marine products in its original state, these are VAT exempt raw materials. You don't have
input tax from purchases, what happens to your VAT payable which is output tax at 12% of the selling price,
input tax is 0, there will be greater liability. 

3. Transitional input tax

Input tax credit which is allowed for taxpayers who will be liable for VAT for the first time. Such as when there
is shift from Non VAT to VAT
Why?
January 1 to December 31
During June 30, 2017 did not yet reach 1,919,500. The taxpayer is not yet required to be VAT liable. So
taxpayer from Jan to June can be non-VAT, no input tax from purchases. On June 30, reached the 1,919,5000.
Immediately shift to VAT. What if he does not register? Still liable because he reached the amount of 1,919,500
but he cannot avail of input tax credit. He can also be exposed to percentage tax because it is registered as non-
VAT

Shift it from non-VAT to VAT. There will be an output tax liability. What if the taxpayer is selling those
purchases he made at the time he is non-VAT? He has an output VAT but no input tax credit from the
purchases.
Taxpayer transitioning from non VAT to VAT. Whatever is the actual amount of the VAT shouldered from their
purchases or 2% of their beginning inventory, whichever is higher. 
04.28.2017 Barlis Taxation

Percentage Tax, Basic

Go through the list of transactions that is subject to percentage tax. 

Excise Tax
Can be subject to excise tax and VAT. Basis of the tax is different
Excise because if production of certain goods or extraction of natural resources, If you decide to sell and
reached the threshold amount, subject to VAT
-the moment you create or produce, there can be liability for excise tax.

Remedies available concerning internal revenue

1. To the government
2. To the taxpayer

Summary remedies, extrajudicial remedies, judicial in nature 

If the taxpayer is the one availing itself of a remedy, there must be compliance with the doctrine of exhaustion
of administrative remedies. If the one who is availing of the remedy is the government, there is no need to
comply with DEAR. Government can exercise administrative judicial remedies simultaneously for as long as it
will not collect more than the value of the tax due. 

Remedies available to taxpayer prior to payment of taxes

Remedies available to taxpayer after paying taxes
How do we exercise these remedies? 
Taxpayers conduct self-assessment - taxpayer determines his own tax liability. Law presumes that you know
your tax laws. Submit necessary forms or the returns. Government assess properly taxpayers liability, verify by
exercising powers such as to examine returns, conduct inventory, taking surveillance. 

Audit investigation - notified thru a letter of Authority 

Finding that the taxpayer is probably liable - very common
no liability - very remote

If there is a finding of liability, there is due process. Given a chance to explain. 

There will be an issuance of preliminary assessment notice PAN
Dati, we used to have a notice of informal conference when there is a finding of probable liability. Now, issue
PAN

What if BIR does not issue PAN?

What if there was an immediate assessment issued?  
CIR vs. metro star superama 2010 - PAN is part of due process, if government will deprive taxpayer of due
process, then the assessment is void. Although two years earlier, PAN was considered not part of due process 

Instances where PAN is not required section 228 (5)

1. Purely mathematical error
2. goods subject to excise tax are the subject of assessment, there would be immediate tax liability.
Considering the mobile nature of an excise tax, once government sees that there is no proper amount of
excise tax, there can be immediate tax liability
3. Discrepancy between taxes withheld and remitted to the government
4. Automatic crediting of taxpayers claim for refund and taxpayer's liability for the current year
Taxes cannot be the subject of set off. 
5. Where there is transfer of goods from a tax exempt person to tax liable person and the taxes have not
been paid. 
SLU imported machineries for its use, it disposed of the machineries, sold it and bought by a NSNPEI,
government will subject it to excise tax. Because the goods are taxable
explain orally or in writing. If you have make an explanation but unsatisfactory, you will be receiving an
assessment. 
Assessment loose term, official name, formal assessment notice, final assessment notice FAN, formal demand
to pay 

Assessment is basically understood in two concepts, as a process and as a document 

Process of determining liability of taxpayer, self-assessment 
Document, FAN per se. Notice to the taxpayer of the fact that he has a liability and a demand for the taxpayer
to PGA the tax, mere notice will not suffice. Statement of facts and the law upon which the assessment is based,
otherwise it is void.
Example: affidavit complaint is not tax assessment because there is no demand to pay.

CIR vs Enron submit corporation - it was subject of an audit investigation, pan was issued. In the FAN, there is
a statement that he was liable, no statement of facts and the law because it was already incorporated in the
PAN. CIR alleges that it has already been notified. Law is clear the assessment itself should contain the facts
and law upon which it is based. Otherwise, it is void. 

CIR vs. Samar I

Audit investigation, taxpayer during the audit investigation already complained regarding the findings of the
BIR. During the PAN, client also explained. In FAN, no statement as to the facts and law.
SCR: valid assessment. The client will be notified of the basis of the assessment. Factual and legal basis.
Repeatedly has been informed of the assessment. Taxpayer actively participated in the proceedings, duly
notified. 

Court distinguish it from Enron, in Samar I, taxpayer was repeatedly notified. 

What if the assessment was valid. Check whether your client is really liable. Advice client to pay. 

Protest
Can come in two forms; Specify what is the nature of the protest
1. Request for reconsideration 
2. Reinvestigation

Reconsideration
You don't submit additional pieces of evidence, re-evaluation of the evidence at hand

Reinvestigation RR 12-85
Submit additional evidence
It matters with respect to the period of government to collect taxes. 

Request for reconsideration: will it stop the period of the government to collect taxes? No.
Reinvestigation - it will not suspend the period of the government to collect. They're the same except where
reinvestigation has been granted. It suspends the period of the government to collect.

Request for reinvestigation for it to be granted. When we speak of granted request, request is given due course.
When you file the protest, you have to specify what are the findings you disagree with and the findings you
agreed because if there are findings you agree with the BIR, it is a requirement that you pay it. You pay with
respect to those you agree. 

Do you need to pay the tax under protest? No. Only if you agree. Protest without payment. If later on you lose,
be ready to pay the consequences as to the interest. 

Local tax, do you need to pay the tax under protest? No. You can protest without paying. 195, LGC

Real property tax, do you need to pay the tax under protest? Yes. 252 LGC

Tax tip: pay in so far as matters that you agree. 

Period to file protest: 30 days from receipt of FAN. After filing protest, to submit necessary documents in
support of protest within a period of 60 days from the filing of the protest. If documents are not submitted,
then the assessment shall be final. If you do not file any protest, assessment will lapse into finality. 

What happens? Amount becomes conclusive. You can no longer question the amount indicated in the
assessment. 

Can you still question the legality of the assessment? Yes. 

No documents because protest need not require documents or question is legal in nature. Go to the next stage:
wait for 180 days

Most ideal thing that happens within the 180 days: decision, denial
Remedy of taxpayer: appeal to CTA Division within 30 days from receipt of denial petition for review rule 42

Decision was handed by the CIR, Can you file a MR? No. From a denial of the CIR, appeal it to the CTA
Division. 

Regional director decides for the BIR, valid delegation, can you appeal decision of the RD who is acing as an
authorized representative of the commissioner? Yes. Appeal CTA for as long as acting as authorized
representative of the CIR.

No appeal to CTA immediately, can you appeal the decision of the RD to the commissioner? Yes. 12-99 

If the RD is acting for the commissioner, you can appeal to CTA Division or CIR. From the CIR, appeal to CTA
Division. No MR.

CTA Division, MR 15 days

CTA en banc within 15 days
SC within 15 days, rule 45 petition for review on certiorari

After CIR's decision, once it goes to CTA, remedy becomes judicial 

180 lapsed, no decision. PAASA

Treat the inaction as implied denied. Appeal to CTA within 30 days from the lapse of 180 day period. 
What if you forgot to appeal? 228 last paragraph, if the protest is denied in whole or in part or is not acted upon
180 days, taxpayer who is adversely affected by the decision or inaction may appeal within 30 days from the
receipt of adverse decision or lapse of the 180 day, otherwise decision becomes final, executory and
demandable. Unappealed decision which results into finality. 

Is there an effect regarding the inaction? None. Wait further. Wait wait wait wait. 

Tax tip: if there is an inaction, wait. Specially if the nature of my request is a reconsideration. 

04.28.2017 Barlis Taxation 

Regular class
Waiting for a decision, no decision, when BIR is not exactly silent. BIR moves to collect the tax notwithstanding
the pendency of a protest

CIR vs. union shipping (prior to 1997 code, modified facts)

Has a protest, while it is pending, it received the warrant for distraint or levy, ignored the warrant. No decision
came, collection case was filed. Warrant was not enforced. Union shipping Treated the receipt of the summons
of the collection case as denial and appealed to CTA. In the collection case, moved for its dismissal. Tax payer
claimed that the Jurisdiction concerning appeals from denial is lodged with the CTA and not RTC. BIR claimed
that if ever there was denial, it must be reckoned from the receipt of the warrant of distraint or levy because
there can be no warrant if it is not denied 
Should CTA take cognizance of the case? Yes. The implied denial is when the taxpayer received the summons in
the collection suit. We cannot infer a denial of the protest simply by issuing of warrant of distraint or levy.
When taxpayer files a protest, deserves to receive an action on the protest which should be indicated by the BIR
as the final action, otherwise, We cannot  fault the taxpayer into believing that it is not yet the final action.
Resolve protest and indicate that it is the final decision on the matter. That is why after this case, BIR started
issuing Final decision on the disputed assessment 

11 years later 
CIR vs. isabela cultural corporation 2001 - notice before warrant
During pendency of protest, taxpayer received a final notice before seizure. Final chance to pay. Appeal is
premature, in union shipping the court already said that the BIR should issue a final decision indicating it is
the final decision 
SCR: CTA should take cognizance of the case because the final notice before seizure is considered a denial. The
notice is final. We cannot  fault the taxpayer into believing that it is the final action because we have already
admonished BIR to issue final decision 

Now, if there is a collection case, you can rely on either case. You may treat the same as the final action as
applied in Isabela. Or treat the same as not the final action as applied in union shipping. It can be harmonized. 
Resolve protest, if not, don't fault the taxpayer when he thinks that it is or it is not yet the final decision of the
BIR. 

Remedy before payment: protest 

Remedy after payment: filing a claim for refund

Warrant was issued within the reglementary period, BIR can still look for properties...

Remedy of protest and refund are mutually exclusive remedies. 

Assessment was issued. Taxpayer protested, denied with finality. Tp made payments. Thereafter, TP files for a
claim of refund on the ground of protest. Not allowed

Assessment was issued. No protest was filed within the reglementary period, paid tax then claimed for refund.
Arguments in the refund were those arguments that should have been raised in a protest. Not allowed, the
remedy of refund cannot be entertained, unprotested assessment amount becomes conclusive. 

Assessment was issued. Did not protest within the time. It paid within the period available for protest. Claim
for refund. 
Two theories 
1. Allowed because it is not violative of the principal that protest and refund are mutually exclusive. When
taxpayer consciously paid, it prevented the amount from being conclusive (personal opinion of dean
Barlis)
2. Not entertained, when taxpayer paid, admission of liability. How can there be wrongful payment when
there is admission of liability?

2001 case CIR vs. vda. De San Agustin

X died. Estate tax was paid. BIR found deficiencies in the payment of estate tax (basic) and payment of interest,
surcharge and penalty. Estate filed a motion to set aside the deficiency estate tax together with the surcharges,
interest and penalty. During pendency of motion, estate pay basic estate tax but not the surcharges, etc. BIR
accepted payments without prejudice to the turn out of the motion. Eventually, motion to set aside was denied,
taxpayer appealed to the CTA, taxpayer questioned the issuance of denial and asked for the refund of the tax
paid. BIR argues that There should have been a claim for written refund. Since there is none. It should be
dismissed.

Should CTA take cognizance of the case? Yes. Court reasoned that it it does not involve a claim for refund but
for protesting an assessment. Even if we were to treat it as a claim for refund, refund will be anchored on the
same arguments in the motion to set aside. Claim for refund would be to undergo useless circuitous process.
What don't you see? Decision in September 2001
This question came out in the bar of 2000. CTA should dismiss the case because the claim for refund is a
mandatory requirement 

05.03.2017 Barlis Taxation 

General period to assess
203 - three years
Reckoning period: beginning the last day prescribed by law for the filing of return if the return was filed on
time
Actual filing of return pag late 

ITR 2016
April 15, 2017 and count three years. April 2020

Refund, April 1, 2017 two year period will start on April 1, 2017 to April 1, 2019

What if there was an amended return? When is the right of the government to assess begin to run? Depends on
the nature of the amendment 
Formal: from original
Substantial: from the filing of the amended return 

Exceptional period for Assessment

1. 10 years - false or fraudulent return, failure to file a return
Commencement period: discovery of fraud or falsity. Discovery of the omission to file the return. 

Take note principles in connection with fraud.

Any other period?

2. A period agreed upon in writing between taxpayer and the government 
Section 222
Can they agree on shorter than three years?  No. The same is a void agreement, you cannot fix a period shorter
than three years. Unless you agree on a greater period which is beyond three years. 
If shorter than three years acting against the interest of the government, it is a graft.

In practice, we refer to agreements in writing as more of waiver. Take note of some rules regarding waivers:
I am the subject of an audit. What did I do? The period to assess me is about to prescribe by April 15, 2017. It's
now April 1, 2017, the examiner told me I am not yet done with the audit, can you pls sign this waiver? 
The first thing you have to do is do you really have to sign? Why in the first place would you be willing to sign
the waiver? 

Full or partial audit

Right of the government has already prescribed. Never filled it up.

Prescribed - waivers cannot be left hanging, it cannot be left for an indefinite period. There must be a definite
period of extension
Philippine journalist case waiver of statue of limitation under 203 is something that should be interpreted
strictly against the government because it is in derogation of he taxpayers right to be assessed within a three
year period. That is why it cannot be left hanging. 

Requirements 
RMO-20
Duly authorized person must sign it on both sides for the government, CIR. CIR can delegate if the period of
the government to collect is about to prescribe. Or if the tax liability does not exceed 1M. For the taxpayer, duly
authorized representative, comptroller - court said not duly authorized.

Willing to be assessed in December 1. Taxpayer Signed and notarized. 

Did it already prescribe? Yes. Not a valid waiver. What is required by law is an agreement in writing. The same
is a mere offer. 
Law requires the agreement to be in writing. Acceptance of the offer should also be in writing. 

Accepted and signed. CIR issued an assessment on December 1? Yes. The acceptance of the offer must be
communicated to the offerer. Give copy to the BIR. Have it received. 

 Any assessment is a timely assessment. Am not saying it is not valid. If it was issued out of time, it is time
barred. It is void. It could not be the basis of any collection proceedings.

If there is an assessment, next thing that would happen is collection unless there is protest. 
Ultimate goal of the government is to collect. Government can exercise administrative liability. 
Another mode of collection is judicial, filing of cases. 

Basic rule section 218 nirc 

No injunction - when the government collects, no court is allowed to enjoin the BIR from collecting internal
revenue taxes. 
SC can enjoin collection of taxes as well as the CTA provided requisites have been met:
1. There is a pending case before the CTA. Filed protest, while it is pending, the government collects.
Taxpayers remedy is considered an implied denial and file for a petition for review and ask for
injunction. Injunction is an ancillary remedy to the  main petition. 
2. Prove that the collection of tax shall be prejudicial either to the interest of the government or taxpayer 
3. Willing to post a bond, the bond should be fixed by the CTA but it shall not be less than the amount of
the tax collected but not more than double. 

The prohibition on tax injunction concerning collection is applicable to national taxes but it does not apply to
local tax. RTC can issue injunction regarding collection of local taxes. 

General period for the government to collect? General principle, the right of the government is Imprescriptible.
It can prescribe if there is a definite provision of law that provides prescription. 

General period: 3 years. 

When it comes to collection of internal revenue tax? General period is 3 years. A lot of reviewers would say it's
5 years. Dean Barlis thinks it's 3 years. 
5 year period to collect can only be seen in one provision of the tax code 222 (c) and (d). Exceptions as to the
statute of limitations.  

section 222(c) government makes an assessment pursuant to a 10 year period to assessment. Government has a
period of 5 years to collect. Within the the year period, government can assess or government can collect
without assessment

Section 222(d)  assessment made pursuant to an agreement in writing, collection should be made within five
years.
 
Section 203 general. You don't see any period of collection. Statute of limitation for assessment and collection.
Title is clear. 

For purposes of examination, use the three year period.

If you think it's five, use it during the bar. 

Three year period should be counted from? From assessment. What does that mean? From the issuance of
assessment
You don't count it from the receipt, receipt of taxpayer is not critical for purposes of collection. Once it has been
released, there can already be collection. 

When will it stop? 

When you file a motion for reinvestigation and it's granted
When you file a petition  with the CTA 

It's not finality of the assessment. Even if a taxpayer has a pending protest, there is a possibility that the BIR
will collect. Treat is an implied denial of protest. When you file a petition with the CTA, file an injunction so
that the government will not collect.  

RMO 14-2016
Notwithstanding the RMO 14-2016, it is still required because the same is provided by tax  code. 

Collection 3 years
Any other period for the government to collect? 10 years. False or fraudulent return or failure to file a return.
Collect without an assessment other option is to asses within 10 years, collection 5 years. 

Any other period? Meron pa. Imprescriptible. Surplus tax. 

If the government will collect, what will it collect? Money. 

Basic tax, determine basic tax 
Surcharges - two kinds: ordinary surcharge vs. fraud penalty 
1. Failure to pay tax on time, 25% of 1M 
2. Failure to pay tax on time on the notice given by the BIR. Received the assessment, 30 days, 30th day,
same taxi. Surcharge, 25%
3. Filed the return in the wrong office 25%
Interest 20% per annum 
Penalty 
Compromise penalty depends on the regulations. Taxpayer should be willing to pay it, if unwilling he cannot be
compelled to pay. Most of the tax violations are criminal in nature, if compromise penalty will be paid, it will be
in lieu of future prosecution. 

05.04.2017 Barlis Taxation

Local Tax
When it comes to power of the LGU to tax 
Not just merely delegated, but directly granted, conferred, guaranteed by the Constitution. Section 5 of article
X. Extent of power of congress is simply to provide guidelines and limitation. 

Book II, LGC, taxation

Tax liabilities are sourced from respective tax ordinances.
Provision of the LGC does not impose particular rates of tax, it provides for allowable framework such as the
ceiling of the tax. 

If a tax is imposed by the national government is it constitutionally prohibited for the local government to
impose that same tax? No.

Concept of direct duplicate taxation, which is in violation of the due process clause, where two taxes is imposed
by the same authority. In this case, two taxes but not imposed by the same taxing authority, national and local,
constitutionally allowed.

Pre-emption or exclusionary rule in taxation

 Different from law of evidence and political law.  
 If a tax is imposed by the national government, it is impliedly withholding
 Impliedly withholding from the local government the power to tax such subject. If there is a national tax
imposed on that particular subject, local government is prohibited from imposing same tax. 
 Philippines adhere to principle of pre-emption. Section 133 of the LGC, common limitations in the
exercise of the local taxing power:
Except as otherwise provided in this Code, power of LGC to impose fees, tax 
charges shall not extend to the levy of the following:
Check the long list 
1. Those imposed by the NIRC can no longer be imposed by the LGU unless allowed by the LGC 
Income, estate, donors, VAT, percentage tax, excise tax, DST 
1. Those that are already levied by the tariff and customs code. 
Cannot impose import and export taxes. 
For example, city of la Trinidad imposes strawberry tax, that if you bring out strawberry from la Trinidad, it
would be imposed locally as an export tax. 

Strawberry inspection fee - goes out of la Trinidad should be inspected for quality as police power measure,
whatever is collected is enough for the police measure not for revenue purposes. Cannot be imposed by LgU
2. Levied in the national setting
MV registration fee, 
Permits for the driving thereof - already covered by the road users tac which is the MV registration fee. This is
already national in collection. Baguio city cannot collect it anymore EXCEPT tricycles. 

If not required to register in the LTO, LGU has the power to tax it. 

LTO vs. city of butuan - who has the authority to issue to permit to drive tricycles? No legislative intention of
devolving this function to LGU. This is to maintain a centralized national government agency. So that it will be
able to prevent situation where one municipality can confiscate permit then the person will just get in another
municipality to circumvent the law.

What does it mean except tricycles?

If you will operate the tricycles as a utility vehicle, get it from the LGU not from LTFRB
3. Cannot impose taxes upon business which are enjoying certain preferential treatments by reason of
some laws. 
Local taxes cannot be imposed upon business enjoying business holidays pursuant of omnibus investment code
Cooperatives registered under CDA but not electric cooperatives registered with the NEA
barangay micro-business enterprise 
Local taxation cannot reach the national government, agencies or instrumentalities and other LGU
1. Province cannot tax a barangay
2. City cannot tax a barangay
3. Province cannot tax republic of the Philippines  

Cannot impose by the LGU unless the code expressly allow it

Province of Bulacan vs. CA - issue: can a province levy sand and gravel tax?
Provision of NIRC, sand and gravel taxes are levied by way of percentage tax. In reality, if you look at the
character, it's actually an excise tax but the imposition in the NIRC is percentage tax. 
LGC, 138 - allows imposition of sand and gravel tax by the province only for quarrying done in public lands or
bodies of water. If the quarrying is done in private properties, no sand and gravel tax because it is already pre-
empted 

Illustration: City of Baguio passed an ordinance, engaged in business selling, get business permit after paying
business tax of a certain percentage, 1% based on the gross sales of the preceding calendar year.
Invalid. It is a percentage tax. Section 143 of LGC, regarding imposition on tax of business, you will notice that
the amount of tax is not based on percentage but based on brackets. 

Gross sale or receipt exceeds 6.5M, possibility of percentage tax is 37 1/2 of 1% of gross sales based on the
preceding year. 

LCMCo vs. Ambanloc

Engaged in mining, it has to move earth materials. Gets the seething materials and use them. Provincial
treasurer of Benguet represented by Ambanloc said that lepanto you are engaged in quarrying, pay sand and
gravel tax. Lepanto countered that quarrying is incidental to the business of mining. Benguet said the law does
not distinguish whether it be main or incidental activity 
SCR: province won. The law does not distinguish, 
Benguet is correct if what was involved is two business tax.
In this case, it was between business tax and excise tax. This, province can impose, different nature. 
05.06.2017 Barlis Taxation
Local government
Province of Benguet enacted ordinance that would levy taxes for mining companies
Not valid, because it is an excise tax. 

But what if the tenor of a local tax ordinance is that the municipality of Tuba enacted a tax on all businesses
engaged in mining in the municipality. Tax on the business and not the minerals extracts 

Ordinance that will levy taxes in all business engaged in mining at 2% of the gross value of all the minerals
extracted - excise tax. The better reason is it is an excise tax because the basis of the tax is the minerals
extracted, directly in proportion to the minerals extracted. 

Real character of the levy is it is an excise tax. Not valid to impose on excises tax but valid in imposing business
tax in the business engaged in the production 

Perron vs. Tiangco 

Can there be local taxes levied in petroleum products? No, it is in the nature of an excise tax. Is it valid in
imposing local taxes on the business of refining petroleum products? No. Section 133(h) of LGC. 

Prohibits imposition of excise tax and taxes, fees and charges on petroleum products. LGC prohibits imposition
of excise tax. 

Would it be valid to impose tax on petroleum products? No. Because it would still be in the nature of excise tax.
Even if the taxes, fees, and charges are not included there can still be imposition of an excise tax.
Taxes, fees, and charges refer to the business itself. That's why in Tiangco court prohibits the collection of said
tax. 

Except if the LGC expressly allows the imposition such as in mining. Incumbent upon the LGC to prove 

Pre-emption

Residual power to tax 186 LGC

LGU may impose a tax even if it is not expressly authorized to do so. Provided, that there is no express
prohibition. In the residual power, it can be Tax for as long as there is no prohibition. 

Local government imposes the residual power. Section 133 explicit prohibition 
Provinces
May levy only t,f and charges identified in this article 134:
1. Tax on the transfer of real property ownership
Gratuitous forms of transfer when nirc, donors and estate tax
Under LGC, both onerous and gratuitous
1/2 of 1% of the selling price or market value 

When you sell a lot and there is transfer.

Capital gains tax at 6%
DST 1.5%
Local transfer tax 1/2 of 1%
Local transfer fee before the register of Deeds

Baguio city - 3/4 of 1%, a city can impose a local tax 50% higher than what may be imposed by a province.  

1. Tax on printing and publication 

2. Franchise tax
 Not imposed on business enjoying business platform of franchising
 It is imposed on business enjoying special governmental franchise for them to operate those kind of
business, telecom, public utility
  Does it cover all forms of franchise tax? No. 
3. Sand and gravel tax
4. Professional tax 
 Those that are undergoing licensure examination coming from the government, prc or SC.
 In the pleading filed, indicate PTR number. 
 In multiple local government, there is principal, office in Baguio. But you have one in la Trinidad.
Secure it from Baguio city
 multiple profession, one for each profession you are practicing. The receipt itself would indicate what
kind of profession. 
 
In one Bar problem, city enacts an ordinance all professionals residing in that area. 

5. Amusement - not exceeding 10% in the gross admission fees in theaters, cinema, circus, concert hall,
boxing stadia and other places of amusement 
Peliz Loy realty vs. province of benguet
Peliz Loy operates palm grove in Asin. LGU imposed Amusements tax on resort operations and tourist spots.
Advise was do not pay to the client. VP's contention was that it was not included in the list, it is imposed on the
gross entrance fees. 
Common element in the previous enumeration, you seek to enjoy by watching or viewing a show or
performance
SCR: and other places of amusement - it is one where a person seeks to enjoy by viewing a performance. The
more visual engagement would not warrant the imposition of the amusement tax. Seek enjoyment by watching
a show or performance. 

Operation of family entertainment center

Quantum, 

6. Fix tax on delivery trucks

Municipality
Section 142

142 and 134

Notice the differences
Municipality may levy t, f and c not otherwise levied by provinces. 
Province, levy only those identified plus the exercise of residual power of tax, it is still a LGU. 
Municipality? Can levy those that are not levied by province. But the collection of local business tax is reserved
on municipality. 

Local business tax normally based on gross sale or receipt of the taxpayer for the preceding calendar year.
Before you can get a business permit, pay business tax.

Gross sale (goods) or receipt (services)

Ericson telecom vs. pasig
Court distinguish gross sale and gross receipt. How?
Gross sale refers to all sales whether collected or not.

Sale on account basis part of gross sale but not part of gross receipt. Gross receipt refers to collection. 
For persons engaged in the sale of goods, 

Income tax purposes by corporation or juridical entity can be made thru fiscal year. But for local tax, calendar
year. Others, they based it on capitalization.

Notable issue, where do you pay your business tax? Before the local treasurer.
What if you have principal office in Baguio, but there are sales outside Baguio. Where do you pay local business
tax? In all areas where you have sale outlet.
Principal office Baguio. Sells in other are without having sales outlet outside, what if you have a truck? 150, for
those sales that are made in areas where persons has no sales outlet, recorded as if they were sales of the
principal office. Thus, principal office

Sales outlet - capable of accepting the order and delivering the goods 

City
Local tax
Can impose taxes that may be levied by provinces or municipality 
At a rate of 50% higher that's what may be imposed by municipality or provinces except in professional tax and
amusement 

Would it matter if its component, charter, independent, etc. it would really matter. Charter vs. LGC, charter
governs

Taxpayer does not pay correctly his tax, what do you need to do?
These remedies can be administrative or judicial
If the taxpayer availing remedy, apply dear. 
Government can simultaneously avail of the remedy, judicial or extra judicial as long as no over collection

187, LGC
Appeal to secretary of justice concerning a newly enacted ordinance 
Within 30 days from effectivity, appeal to SOJ 
Similar to any initiatory pleading, in a form of petition 
Republic of the Philippines
Department of justice
Manila

In the matter of...

Secretary of Justice may act or not, don't expect an action, but the law allows the secretary to act within a
period of 60 days. Treat it as denial if no action or if there is denial, next course, Appeal to court of competent
jurisdiction

Appeal is not really an appeal, file an initiatory pleading with the RTC having jurisdiction of the local
government concerned
Question of constitutionality or legality, declaratory relief petition. Petition before secretary of justice is part of
the exhaustion of administrative remedies.

Local government will move to dismiss the case. Declaratory relief petition will no longer be a remedy.
Argument would be a tax liability is a continuing obligation there is no breach yet in so far as future taxes are
concerned. 

Mere question of law - rule 45 Supreme Court

Mixed question of facts and laws - CA, mere notice of appeal indicating appeal to ca. 

Remedy before paying the tax

Remedy is to protest the assessment, before the local treasurer 
sixty days from receipt of such assessments local treasurer has sixty days to decide. If the local treasurer denies

You don't have to pay under protest a local tax. 

Municipal treasurer --> RTC regardless of the amount, not to recover an amount, question on the legality being
taken by the treasurer, incapable of pecuniary estimation.--> CTA Division (assessment eh, tax experts) 

if RTC acting in its original - RTC division 

RTC appellate, RTC en banc 
Yamane vs. BA Lepanto condominium - SC said that when a local trasehder denies a protest and an appeal is
filed with the RTC. It is not performing an appellate process. For it to be appellate, it must be from the MTC.
RTC acting in its original. 

Remedy after payment

Refund is made 
Over paid or erroneously paid. 
Period is 2 years from payment. What if there are supervening events? Two years from payment or from the
entitlement thereto. 

What do you do?

File a written claim for refund addressed to the local treasurer 196, no period for the treasurer to act. Does that
mean you can wait for the treasurer forever? No, Still bound by the two year period. 

Wait for the decision and if no decision, two year period is about to expire, file a case in court. 
If treasurer denies, file a case in court of the refund of local tax. 
It depends on the amount, ultimate objective is to get money. Make use of the jurisdictional amounts for
purposes of determining the proper court

Locals tax refund 250,000 file a written claim with the treasurer. Then MTC or RTC. 
MTC to RTC, notice of appeal --> CTA En Banc, petition for review rule 43

On the side of the government 

The could be the administrative remedy of distraint and levy
Filing a case in court for collection of local tax, five years.
Wilful non-payment of local tax is 10 years. 

Differences, due date of tax. Mainly on assessment and collection of local tax - 5 years in a general sense then
10 years exceptional situation

LGU against right of taxpayers, there can be possibility of an injunction which can be issued by the RTC. 

05.06.2017 Barlis Taxation

Regular class
Real property tax
Imposition of taxes on real properties
Real property - any property that has the character of permanence. 
Not just those identified in article 415, as long as it has the carjacker of permanence

Caltex vs. CBAA

Gas station on lease property was constructed. It will be removed after the expiration of lease term, not
immobilized by intention.  For real property tax purposes, it is considered real property. 

Even machineries attached to the grind, real properties, pipelines,tower posts

Real property is reels rpoerty subecjt to tax except if exempted. By the constitution such as ADE for RCE
Exempted by special laws, properties of GSIS
Exempted by Local government code, section 234: 
1. Properties of national government, political subdivisions, exempted from property tax
If the use is given to a taxable person, property becomes taxable. Who shall be liable? Beneficial user.
Normally, ownership is determinative of liability. Except if the owner is exempt. Owner cannot be held liable.
Beneficial user is liable. 

Use determines exemption. Is it for an exempt purposes?

2. 234(c) - ADE used by government corporations for power generation. 

NAPOCOR cases
Common facts enters into an agreement with a private entity wherein the latter will built operate transfer
scheme, run by private corporation after said expiration, transferred to NAPOCOR but in the meantime,
NAPOCOR wil shoulder all tax consequences. 
SCR: it is not covered by 234(c) it requires that it must be the government corporation which should ADE use
the power facility. 

In one case, there is a joint venture which run the power facility. 234(c) does not cover it. 

If the property is not exempted, then it is covered by the real property system. How will it be imposed?
Fundamental principles governing RPT, Section 198
Property should be valued at their current fair market value. It shall be tax based on the actual use

What is the fair market value? Owner or declarant. If you own a real property, required to declare property for
taxation purposes. 
Sworn declaration of real property ownership, state value of real property, because the value declared will have
no impact on how much will be the tax, it is obvious that the value will be under declared. The value declared
shall be subject to valuation, assessor ultimately decides. 

Tax declaration
 value is that proof that property was declared for taxation purposes
 It can help in establishing claim for ownership, not conclusive
presumption

Declared property at 1M. It is fair market value. 

How will we consider actual use? Adjust it by what is known as the assessment level, per use there is taxable
percentage.
Residential - taxable percentage is up to 20%
Agricultural
Commercials
Industrial
Special
Timberland
Minerals 

From the fair market value of 1M, 20% is the ceiling, it depends on the  ordinance, it cannot be higher 20. What
if it was 20? Result of which is the assessed value. (Concerning real actions)
FMV 1M
Assessment level 20%
Assessed value 200,000 - jurisdictional value
Multiply by 2%
Basic RPT 4,000 can be paid on installments, yearly

Assessed value is also known as the taxable value. From the tax base, multiply by the tax rate, LGU is province,
1%
If city 2%
Municipality no real property taxing authority except those in the metro Manila area, 2%

Aside from the basic real property tax:

Additional levy
Special educational fund tax, 1% of the assessed value - to augment the budget of the local school board, public
school. 
Idle land tax - purpose of LGC to promote use of properties, 5% of the assessed value. Agricultural at least one
hectare in are and at least one half is not utilized.
Non-agricultural, at least 1,000 meters is unutilized
Prevent idle land tax!
Specials levy on real property, special assessment, local government finances and infrastructure project and
wants to recover, 60% can be recovered. Section 240. 

Remedies available
Section 187
Appeal to SOJ

owner declared property for taxation purposes, 2M. assessor evaluates, property is worth 10M. Can they owner
asked for a reconsideration of the evaluation? Different use, residential vs. commercial

Callanta vs. ombudsman

Once assessor comes up with an assessment, loses jurisdiction, no right to entertain motions for
reconsideration. 
Appeal to the LBAA 
Ex officio capacity - they have a period of 120 days to decide. 
Appeal to CBAA 
If you lose, CTA en banc 

Local tax case, decided by the RTC in its appellate jurisdiction CTA en banc
Labs to cbaa to CTA en banc

Received a real property tax assessment coming from the treasurer. What is your remedy if you disagree?
Protest, pay under protest. 
You pay under protest a RPT assessment, in an ordinary assessment of internal revenue tax there is notice,
then there is statement of facts and law. 

MERALCO vs. Barlis, city treasurer of makati 2001

2002 MR 
2004 clarificatory  
Mere notices are not enough, there must be a description of property, location, listing, date when it was
discovered, declared for taxation purposes. 

Meralco received a notice from the treasurer which goes this way:
Meralco was questioning that. Treasurer tried to garnished the accounts. Meralco filed a case of prohibition.
Court said that there was no payment under protest, it cannot entertain the case. 
SCR no payment of protest if the assessment is illegal. 
You only pay if you received an assessment

Treasurer acting independently, without any authority from law issues an assessment. Remedy is appeal to the
LBAA - CBAA - CTA en banc - SC

Remedy after payment of tax

Refund, two years from payment or from entitlement 
File refund with the Local treasurer - LBAA - CBAA - CTA en banc - SC

For the government

Administrative thru levy. No distraint 256-257
Judicial action

Prescription 5 years except for will non Symantec of tax or operates declared for the first time. Property has
been declared for the first time, there can be recovery ten years

Tariff and customs code

Tariff book of rate
Customs import taxes, duties
It is the law which determines the tax rates on imported srticles. 
Importation
There is entry of a vessel, air craft or sea craft containing imported article with the intention of unloading the
same in the Philippines. 

Entry with intent to unload.

Mere entry is not enough. It must have entered because of refueling. The entry should be coupled with intent to
unload. Mere intent will suffice, no need for actual unloading. 

All imported articles should passed thru customs houses. ConSmuggled subject to confiscation, seizure and
forfeiture proceedings. 

1. Dutiable subject to duties

2. conditional free, if conditions are fulfilled, becomes duty free. 
3. Prohibited, absolutely or relatively. 
Absolutely subject to destruction, pirated DVDs 
Relative no special permits obtained, firearms, drugs. Don't destroy them,subject it to forfeiture proceedings.
Properties of the government. 

Previous administration which caused the destruction of some vehicles. 

If dutiable, what are the duties to be imposed?

Regular or special
1. Regular - ad valorem based on the value and specific 
Ad valorem - the transaction value. Determine what is a transition value, (6)
2. Special - when are they used

Duties have been computed 

If you pay, issued a permit. Sells the goods. That ends importation process. 

If there is deficient in the payment of duties,can the government still run after you if the importation process
has ended? Yes. But only thru judicial means. No more seizure or forfeiture. 

Importation processes has not yet ended. Goods were release thru connivance with officials. Bureau of customs
would like to get the deficiency by getting the vehicle, can be, importation process has not yet ended. 
Administrative can include seizure 

If you disagree with the determination of the duties, file a customs protest case. Where to you protest? Bureau
of customs, collector (highest ranking bureau official) can grant or deny. 
If granted, There will be an automatic review by the commissioner of customs. If collector denies, appeal to the
commissioner. 

Commissioner can grant or deny. Automatic review by the secretary of finance, can grant or deny. If granted,
End of protest. You own already 
If secretary denies, appeal to CTA Division

Commissioner denies, appeal to CTA Division. No need to go to secretary. Customs protest involves legal forms
of importation. You go thru a legal process, importation in the Philippines may not be always legal. 

If the importation is illegal, seizure and forfeiture proceedings. It's the collector. When the collector acts in a
seizure and forfeiture case, he has the primary jurisdiction. No court can interfere with the collector. 

If a RTC receives a complaint of injunction, prayer is to enjoin collector from proceeding in a forfeiture case.
RTC should dismiss it.

Zulio vs. judge Cabrero - issued the writ of injunction

SC: dismissed the judge for gross ignorance of the law. 
In a seizure and forfeiture case, in rem, binds the whole world. If for example, imported goods placed in the
warehouse of Victoria. Seizure proceedings were against Victoria. Can the owner of the goods interfere? Yes,
because you have an interest in it.