SAN BEDA COLLEGE OF LAW, 2000-2001

MEMORY AID IN TAXATION LAW

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San Beda College of Law

2001 Centralized Bar Operations

Memory Aid
Taxation Law
TABLE OF CONTENTS

I. GENERAL PRINCIPLES .....................................................................2

A. Power of Taxation.............................................................................2
B. Situs of Taxation...............................................................................4
C. Limitations on the Power of Taxation...............................................4
D. Double Taxation...............................................................................6
E. Forms of Escape from Taxation.......................................................6
F. Tax Enforcement and Administration................................................7
II. NATIONAL TAXATION........................................................................9
A. Income Tax......................................................................................9
B. Transfer Taxes..............................................................................14
C. Expanded Value Added Tax..........................................................17
III. LOCAL TAXATION...........................................................................19
IV. REAL PROPERTY TAXATION........................................................19
V. TARIFF AND CUSTOMS LAWS.......................................................20
VI. TAX REMEDIES...............................................................................22
A. Under the National Internal Revenue Code..................................22
B. Under the Local Government Code..............................................29
C. Under the Tariff and Customs Code.............................................30
VII. COURT OF TAX APPEALS............................................................33
VIII. ANNEX A: COMPARATIVE TABLE OF TAX REMEDIES............A-1
IX. ANNEX B: INCOME TAX TABLES...............................................B-1
 limits except those expressly stated in
the Constitution.
I.GENERAL PRINCIPLES Marshall and Holmes Dictums Reconciled:
Although the power to tax is almost
unlimited, it must not be exercised in an arbitrary
manner. We have courts to which people may
 THE POWER OF TAXATION seek redress in case of irregularities.

 Definitions: 3. Benefits-Protection Theory

1. Taxation: Power by which the sovereign There exist reciprocal duties of
raises revenue to defray the necessary protection and support between State and its
expenses of the government from among inhabitants. Inhabitants pay taxes and in return
those who in some measure are privileged receive benefits and protection from the State.
to enjoy its benefits and must bear its
burden.  Importance of Taxes
2. Taxes: Enforced proportional contribution Taxes are the lifeblood of the
from properties and persons levied by the government and so should be calculated
State by virtue of its sovereignty for the without unnecessary hindrance; therefore, their
support of government and for public prompt and imperious availability is an
needs. imperious need.

 Characteristics of Taxes:  General Rule: Taxes are personal to the

1. forced charge; taxpayer. Illustrations:
2. generally payable in money; 1. Corporation’s tax delinquency cannot be
3. levied by the legislature; enforced against the stockholder (Corporate
4. assessed with some reasonable rule of Entity Doctrine). Exception: Stockholders
apportionment; may be held liable for unpaid taxes of a
5. imposed by the State within its jurisdiction; dissolved corporation if the corporate assets
6. levied for public purpose. have passed into their hands.
2. Transfer tax on the estate cannot be
assessed against the heirs. Exception: Heirs
 Theories or bases of taxation: may be held liable for the transfer tax on the
estate, if prior to the payment of the same,
1. Lifeblood Theory the properties of the decedent have been
Taxes are the lifeblood of the nation. distributed to the heirs.
Without revenue raised from taxation, the
government will not survive, resulting in  Nature of the Taxing Power
detriment to society. Without taxes, the 1. attribute of sovereignty and emanates from
government would be paralyzed for lack of necessity, relinquishment of which is never
motive power to activate and operate it. (CIR vs presumed;
Algue, Inc., et. al.) 2. legislative in character; and
3. subject to inherent and constitutional
Illustrations of Lifeblood Theory: limitations.
a. Collection of taxes may not be enjoined
by injunction.
b. Taxes could not be the subject of  Purpose and Objectives of Taxation:
compensation and set-off. 1. Revenue
c. A valid tax may result in destruction of 2. Non-Revenue (still a tax but imposed under
the taxpayer's property. its non-revenue objective) KEY: PR2EP
a. Regulation;
2. Necessity Theory b. Promotion of general welfare;
Existence of a government is a c. Reduction of social inequity;
necessity and cannot continue without any d. Encouragement of economic growth;
means to pay for expenses. and
e. Protectionism.
a. Marshall Dictum
“ Power to tax is the power to  Scope of legislative taxing power (MS
destroy” – describes the unlimitedness SAPAK):
of the power and the degree of vigor 1. Subject to be taxed, provided it is within its
with which the taxing power may be jurisdiction;
employed in order to raise revenue. 2. Amount or rate of the tax;
3. Purposes for its levy, provided it be for
b. Oliver Wendell Holmes Dictum public purpose;
“Power to tax is not the power to 4. Kind of tax to be collected;
destroy while this court (US Supreme 5. Apportionment of the tax;
Court) sits” – power to tax knows no 6. Situs of taxation; and
7. Method of collection. TAXATION POLICE EMINENT
POWER DOMAIN
 Aspects of Taxation: right of State private
1. Levy or imposition of the tax; and and of public property
2. Enforcement or tax administration to self-
protection and
 Basic Principles of a sound tax system: self-
A sound tax system must be: preservation
1. sufficient to meet governmental
expenditures (fiscal adequacy);
2. capable of being effectively enforced  Impositions not strictly considered as
(administrative feasibility); and taxes:
3. based on the taxpayer’s ability to pay 1. Toll – amount charged for the cost and
(theoretical justice). maintenance of property used;
2. Compromise penalty – amount collected in
 TAXATION, POLICE POWER AND lieu of criminal prosecution in cases of tax
EMINENT DOMAIN DISTINGUISHED violations;
TAXATION POLICE EMINENT 3. Special assessment – levied only on land
POWER DOMAIN based wholly on the benefit accruing
thereon as a result of improvements or
 Purpose:
To promote To facilitate public works undertaken by government
To raise
public welfare the State’s within the vicinity;
revenue
through need of 4. License fee – regulatory imposition in the
regulations property for exercise of the police power of the State;
public use 5. Margin fee – exaction designed to stabilize
the currency;
 Amount of 6. Custom duties and fees – duties charged
exaction: upon commodities on their being imported
Not limited Limited No exaction; into or exported from a country;
just 7. Debt – a tax is not a debt but is an
compensation obligation imposed by law.
is paid by the
Government
 Benefits:  LICENSE FEE VS. TAX
No special or No direct Direct benefits
direct benefits are result in the LICENSE FEE TAX
benefits are received; form of just
compensation  Basis:
received by damnum Power of taxation.
Police power
the taxpayer absque injuria
is attained  Purpose:
To regulate To raise revenue.

 Non-  Limitation:
Limited to costs of (1) Inherent and
impairment constitutional
of contracts: issuing the license;
and (2) necessary limitations.
Contracts
may not be inspection or police
Contracts may Contracts may surveillance
impaired
be impaired be impaired
 Effect of non-
 Effect of payment:
transfer: Makes the business Does not make the
Taxes paid No transfer Property is illegal. business illegal.
become part but only taken by the
of the public restrain on the State upon
funds exercise of payment of  Classification of Taxes:
property rights just
As to subject matter
compensation
1. Personal tax – also known as capitalization
 Scope: or poll tax.
It affects all It affects all It affects only 2. Property tax – assessed on property of a
persons, persons, the particular certain class.
property, and property, property 3. Excise tax – imposed on the exercise of a
excises privileges, and compre- privilege.
even rights hended 4. Custom duties – duties charged upon
 Basis: commodities on being imported into or
Public Public Necessity of exported from a country;
necessity necessity and the public for
5. Local taxes – taxes levied by local 11. Tax on corporations and other judicial
government units pursuant to validly entities – law of incorporation.
delegated power to tax;
As to burden  Intangible properties deemed with a situs
1. Direct tax – incidence and impact of in the Philippines:
taxation fall to one person and cannot be 1. franchise which must be exercised in the
shifted to another. Philippines;
2. Indirect tax – incidence and liability for the
2. shares, obligations or bonds issued by a
tax fall to one person but the burden thereof
corporation organized and constituted in the
can be passed on to another.
Philippines in accordance with its laws;
As to purpose
1. General taxes – taxes levied for ordinary or
3. shares, obligations or bonds issued by a
general purpose of the government. foreign corporation 85% of its business is
2. Special taxes – levied for a special located in the Philippines;
purpose. 4. shares, obligations or bonds issued by a
As to measure of application foreign corporation if such shares,
1. Specific tax- tax imposed by the head or obligations or bonds have acquired a
number or by some standard of weight or business situs in the Philippines; and
measurement. 5. shares or rights in any partnership, business
2. Ad valorem tax – tax imposed upon the or industry established in the Philippines.
value of the article. (Sec. 104, R.A. 8424 or the CTRP)
As to rate:
1. Progressive taxes – rate increases as the
tax base increases.
2. Regressive taxes – rate increases as tax LIMITATIONS ON THE POWER TO TAX
base decreases.
A. Inherent Limitations

 SITUS OF TAXATION  The following are the inherent limitations

on the power to tax (SPINE):
Situs of Taxation - an inherent mandate that 1. Public Purpose of taxes;
taxation shall only be exercised on persons, 2. Non-delegability of the taxing power;
properties and excises within the territory of the 3. Territoriality or situs of taxation;
taxing power. 4. Tax exemption of government;
5. International comity
 Factors that determine the situs of
taxation:  Test in Determining Public Purpose
1. Nature of the tax; 1. whether the thing to be furthered by the
2. Subject matter of the tax; appropriation of public revenue is something
3. Citizenship of the taxpayer; which is the duty of the state, as a
4. Residence of the taxpayer; and government, to provide
5. Source of income 2. whether the proceeds of the tax will directly
promote the welfare of the community in
 Application of Situs of Taxation: equal measure.
1. Tax on persons – residence of the
taxpayer;  Non-delegability of the taxing power:
2. Community tax – residence or domicile of - The power of taxation is peculiarly and
the person taxed; exclusively legislative. Consequently, the
3. Business tax – where business is taxing power as a general rule may not be
conducted; delegated.
4. Privilege or occupation tax – where
occupation is pursued;  Non-delegable Legislative Power:
5. Sales tax – where transaction takes place; 1. selection of property to be taxed;
6. Real property tax – where property is 2. determination of the purposes for which
located; taxes shall be levied;
7. Personal property tax – tangible; where it 3. fixing of the rate of taxation;
is physically located; intangible: subject to 4. rules of taxation in general
Sec. 104 of CTRP and principle of mobilia
sequuntur personam;
 Delegable Legislative Power:
8. Income – where income is earned or
1. Authority of the President to fix tariff rates,
residence or citizenship of the taxpayer;
import and export quotas (Art. VI, Sec.
9. Transfer tax – residence or citizenship of
28[2], 1987 Constitution).
the taxpayer or location of the property;
2. Power of local government units to tax
10. Franchise tax – State which granted the
subject to limitations as may be provided by
franchise;
Local Government Code (Art. X, Sec. 5,
1987 Constitution).
 Situs of taxation as a limitation on the 4. Non-impairment of Contracts (Art. III,
power to tax: (See the subheading on Situs of Sec. 10 of the Constitution)
Taxation, supra.)
5. Non-imprisonment for Non-payment
 Exemption of the Government from Taxes of Poll Tax(Art. III, Sec. 20 of the
As a matter of public policy, property of Constitution)
the State or any of its political subdivisions
devoted to government uses and purposes are 6. Origin of Appropriation, Revenue,
generally exempt from taxation. and Tariff Bills (Art. VI, Sec. 24 of the
Constitution; Tolentino vs. Sec. of Finance).
B. Constitutional Limitations 7. Non-infringement of Religious
Freedom and Worship (Art. III, Sec. 24
of the Constitution)
1. Due Process of Law (Sec.1, Art. III of the
Constitution)
 American Bible Society vs. City of Manila
and Tolentino vs. Sec. of Finance rulings
 Requisites:
reconciled:
a. The interests of the public generally
The imposition in the former is a license
as distinguished from those of a
tax which is intended to regulate the exercise of
particular class require the
freedom of religion while in the latter is a
intervention of the State; and
revenue tax. With respect to revenue tax,
b. The means employed must be
Congress can choose anyone who will be taxed.
reasonably necessary to the
Its imposition is a political question.
accomplishment of the purpose and
not unduly oppressive.
8. Delegation of Legislative Authority to
the President to Fix Tariff Rates,
 In a string of cases, the SC held that in order
that due process of law will not be violated, the
Import and Export Quotas (Art. VIII,
imposition of the tax must not be done in an Sec. 28(2) of the Constitution)
arbitrary, despotic, capricious, or whimsical
manner. 9. Tax Exemption of Properties Actually,
Directly, and Exclusively Used for
Religious, Charitable and Educational
2. Equal Protection of the Law (Sec. 1, Purposes (See Art. VI, Sec. 28(3) of the
Art. III of the Constitution) Constitution; Lladoc vs. Commissioner;
Province of Abra vs. Hernando). This
 Requisites for a valid classification: provision refers only to property taxes.
a. Must not be arbitrary;
b. Must be based upon substantial 10. Majority Vote of all Members of
distinctions; Congress Required in Case of a
c. Must be germane to the purposes of Legislative Grant of Tax Exemptions
law; (Art. VI, Sec. 28 (4) of the Constitution)
d. Must not be limited to existing
conditions only; and 11. Non-impairment of the Supreme
e. Must apply equally to all members Court’s Jurisdiction in Tax Cases [Art.
of a class. VIII, Sec. 2(1) and Art. VIII, Sec.5(b) of the
Constitution]
3. Uniformity, Equitability, and
Progressivity of Taxation (Art. VI, Sec. 12. Tax Exemption of Revenues and
28 (1) of the Constitution) Assets of, including Grants,
Endowments, Donations, or
 Definitions: Contributions to, Educational
a. Uniformity: All taxable articles or kinds Institutions (Art. XIV, Secs. 4(3) and (4) of
of property of the same class shall be the Constitution)
taxed at the same rate. A tax is uniform
when it operates with the same force 13. Other Provisions of the Constitution
and effect in every place where the Which are Related to Taxation
subject of it is found. a. Power of the President to veto item or
b. Equitability: Taxation is said to be items in an Appropriation, Revenue, or
equitable when its burden falls to those Tariff Bill (Art. VI, Sec. 27 (2))
better able to pay. b. Necessity of an a Appropriation before
c. Progressivity: Rate increases as the Money may be paid out of the Public
tax base increases. Treasury (Art. VI, Sec. 29 (1))
 c. Non-appropriation of Public Money or
Property for the benefit of any Church,
Sect, or System of religion. (Art. VI,  FORMS OF ESCAPE FROM TAXATION
Sec. 29(2)
d. Treatment of Taxes Levied for a Special
Purpose.(Art.VI, Sec. 29 (3))  The following are the forms of escape from
e. Internal Revenue Allotments to Local taxation:
Government Units. (Art.X, Sec.6) 1. Shifting S
2. Capitalization C
3. Transformation T
4. Avoidance A
 DOUBLE TAXATION
5. Exemption E
6. evasion-unlawful E
 Definition: Taxing the same subject twice Key: ESCATE
when it should be taxed only once. Also known
as duplicate taxation. A. Shifting
 Is double taxation prohibited in the  Definition: Process by which tax burden is
Philippines? transferred from statutory taxpayer to another
No. There is no constitutional prohibition without violating the law.
against double taxation in the Philippines. It is
something not favored but permissible (Pepsi
Cola Bottling Co. v. City of Butuan, 1968).
 Impact of taxation– point on which tax is
originally imposed.
 Kinds of Double Taxation (DT)
 Incidents of taxation – point on which the tax
1. Direct duplicate taxation/obnoxious – DT burden finally rests or settles down.
in the objectionable or prohibited sense.
REASON: This constitutes a violation of B. Capitalization
substantive due process. The same property
is taxed twice when it should be taxed only  Definition: Reduction in the price of the taxed
once. object equal to the capitalized value of future
Requisites: taxes which the purchaser expects to be called
a. the same property is taxed twice when it upon to pay.
should only be taxed once;
b. both taxes are imposed on the same C. Transformation
property or subject matter for the same
purpose;  Definition: The manufacturer or producer
c. imposed by the same taxing authority; upon whom the tax has been imposed, fearing
d. within the same jurisdiction the loss of his market if he should add the tax to
e. during the same taxing period; and the price, pays the tax and endeavors to recoup
f. covering the same kind or character of himself by improving his process of production,
tax. thereby turning out his units at a lower cost.

2. Indirect double taxation: Not legally D. Tax Avoidance

objectionable. The absence of one or more of
the foregoing requisites of obnoxious DT makes
the DT indirect. Definition: exploitation by the taxpayer of
legally permissible alternative tax rates or
methods of assessing taxable property or
 Reliefs from Effects of Double Taxation income, in order to avoid or reduce tax liability.
1. Tax deductions
Example: Vanishing deductions in
E. Tax Evasion
transfer taxes.
2. Tax credits
An amount allowed as a reduction of the  Definition: Used by the taxpayer through
Phil. Income tax on account of income illegal or fraudulent means to defeat or lessen
tax(es) paid or incurred to foreign countries. the payment of the tax.
It is given to a taxpayer in order to provide a
relief from too onerous a burden of taxation  Indicia of Fraud in Tax Evasion:
in case where the same income is subject to 1. failure to declare for taxation purposes true
a foreign and Phil. Income tax. This may be and actual income derived from business for
claimed by (1) citizens of the Philippines and two consecutive years; or
(2) domestic corporations. 2. substantial underdeclaration of income tax
3. Exemptions returns of the taxpayer for four consecutive
4. Treaties with other states years coupled with intentional overstatement
5. Principle of reciprocity of deductions.
F. Tax exemption  Requisites of Tax Regulations
1. Reasonable
 Definition: A grant of immunity, express or 2. Within the authority conferred
implied, to particular persons or corporations 3. Not contrary to law
from the obligation to pay taxes. 4. Must be published

 Kinds of Tax Exemptions  Retroactivity of BIR Rulings:

As to basis: General Rule: Prospective.
1. Constitutional: Immunities from taxation Exceptions:
which originate from the constitution 1. Where no vested right will be impaired;
2. Statutory: Those which emanate from 2. Where the law allows retroactive application;
legislation and
As to form: 3. If there is bad faith on the part of the
1. Express: Expressly granted by organic or taxpayer.
statute law
2. Implied: When particular persons,  Agencies Involved in Tax Administration:
properties, or excises are deemed exempt 1. BIR
as they fall outside the scope of the taxing 2. Bureau of Customs
provision itself. 3. Provincial, city, and municipal assessors
As to extent: and treasurers
1. Total: Connotes absolute immunity.
2. Partial: One where a collection of a part of  Powers and Duties of the BIR (Sec. 2,
the tax is dispensed with. CTRP): (AGEE)
1. Assessment and collection of all national
 Principles Governing Tax Exemptions internal revenue taxes, fees, and charges
1. Exemptions from taxation are highly 2. Give effect to and administer the
disfavored in law. supervisory and police power conferred to
2. He who claims an exemption must be able it by the Tax Code or other laws
to justify his claim by the clearest grant of 3. Enforcement of all forfeitures, penalties
organic or statute law. If ambiguous, there and fines in connection therewith
is no tax exemption. Taxation is the rule, tax 4. Execution of judgments in all cases
exemption is the exception. decided in its favor by the Court of Tax
3. He who claims an exemption must justify Appeals and the ordinary courts
that the legislature intended to exempt
him by words too plain to be mistaken.  Assessment Defined:
4. He who claims exemption should It is a finding by the taxing agency that
convincingly prove that he is exempted. the taxpayer has not paid his correct taxes. It is
5. Tax exemption must be strictly construed. also a written notice to a taxpayer to the effect
6. Tax exemptions are not presumed. that the amount stated therein is due as a tax,
7. Constitutional grants of tax exemptions are and containing a demand for the payment
self-executing. thereof.
8. Tax exemptions are personal.
9. Deductions for income tax purposes  Burden of proof in pre-assessment
partake of the nature of tax exemptions; proceedings:
hence, they are also to be strictly construed There is a presumption of correctness
against the taxpayer. on the part of the CIR, thus the burden of proof
is on the taxpayer. Otherwise, the finding of the
CIR will be conclusive and the CIR will assess
TAX ENFORCEMENT AND the taxpayer. Such finding is conclusive even if
ADMINISTRATION CIR is wrong if the taxpayer does not controvert.

 Sources of Tax Laws  Principles Governing Tax Assessments:

(Key: SPEC2TRA BLT) (PADDD)
1. Statutes 1. Assessments are prima facie presumed
2. Presidential Decrees correct and made in good faith
3. Executive Orders 2. Assessments should be based on actual
4. Constitution facts
5. Court Decisions 3. Assessment is discretionary on the part of
6. Tax Codes the Commissioner
7. Revenue Regulations 4. The authority vested in the Commissioner
8. Administrative issuances to assess taxes may be delegated.
9. BIR Rulings 5. Assessments must be directed to the right
10. Local Tax Ordinances party.
11. Tax treaties and conventions with foreign
countries
 Means Employed in the Assessment of 2. when taxpayer requests a reinvestigation
Taxes (Sec. 6, CTRP): (BETI-PPEA) 3. to verify compliance with withholding tax
1. Examination of tax returns laws and regulations
2. Use of the best evidence obtainable 4. to verify capital gains tax liabilities
3. Inventory taking, surveillance and use of 5. upon order of the Commissioner
presumptive gross sales and receipts
4. Termination of taxable period  25% Surcharge on the Amount of the Tax
5. Prescription of real property values Due is imposed in the Following Cases:
6. Examination of bank deposits to determine 1. failure to file any return required under Tax
the correct amount of the gross estate Code or regulations on the date prescribed
7. Accreditation and registration of tax agents 2. filing a return with the wrong internal
8. Prescription of additional procedural or revenue officer
documentary requirements. 3. failure to pay the tax within the time
prescribed for its payment
 Examination of Income Tax Returns: 4. failure to pay the full amount of tax shown
General Rule: Income tax returns are on any return required to be filed under the
confidential. Tax Code or regulations or the full amount
Exceptions: of tax due for which no return is required to
Inspection of the return may be authorized: be filed, on or before the date prescribed
1. upon written order of the President of the for its payment
Philippines;
2. under Finance Regulations no. 33 of the
Secretary of Finance;
3. when the production of the tax return is
material evidence in a criminal case
wherein the Government is interested in
the result; II. NATIONAL TAXATION
4. by the taxpayer himself;

 Cases when Commissioner may Assess

Taxes on the Basis of the Best Evidence
INCOME TAX
Obtainable:
1. a person fails to file a return or other
document at the time prescribed by law  DEFINITIONS
2. he willfully or otherwise files a false or
fraudulent return or other document 1. Income Tax - tax on income, whether gross
or net. (27 Am. Jur. 308)
 Grounds for Termination of Taxable Period:
(CRIP) 2. Income - all wealth which flows into the
1. the taxpayer is retiring from business taxpayer other than as a mere return of capital.
subject to tax
2. he intends to leave the Philippines or 3. Capital - resource of person which can be
remove his property therefrom used in producing goods and services.
3. he hides or conceals his property
4. he performs any act tending to obstruct Requisites for Income to be Taxable:
the proceedings for the collection of the 1. gain or profit
tax for the past or current quarter or year 2. realized or received
or renders the same totally or partly 3. not excluded by law or treaty
ineffective unless such proceedings are
began immediately.  TESTS ON TAXABILITY OF INCOME

 Instances when the Commissioner may 1. Flow of Wealth Test - whether any gain or
inquire into Bank Deposits: the flow of wealth profit was derived from the
1. When determining the gross estate of a transaction.
decedent;
2. Where a taxpayer offers to compromise his 2. Realization Test - unless the income is
tax liability on the ground of financial deemed "realized," there is no taxable income.
inability in which case he must submit a
waiver. 3. Economic-Benefit Principle - flow of wealth
realized is taxable only to the extent that the
 Inspection and Examination of Books and taxpayer is economically benefited.
Records, When Made
General Rule: Shall be made once in a taxable
year.  CLASSIFICATION OF TAXPAYERS:
Exceptions:
1. in cases of fraud, irregularity, or mistakes a. Individuals
 1) citizens an aggregate period of more than 180 days
1 1.1. resident citizens (RC) during any calendar year shall be deemed a
2 1.2. non-resident citizens (NRC) non-resident alien doing business in the
1.3 OCW* Philippines Section 22(G) notwithstanding
2) aliens [Sec. 25(A)(1)]
I.1 resident aliens (RA)
I.2 non-resident aliens G. The term corporation shall include:
2.2.1.engaged in trade or business
within the Phils. (NRAETB) 1. Partnerships, no matter how formed or
3 2.2.2.Not engaged in trade or created, except (i) general professional
business within the Philippines partnerships and (ii) a joint venture or
(NRANETB) consortium formed for the purpose of
b. Corporations undertaking construction projects or
1) Domestic (DC) engaging in petroleum, coal, geothermal and
2) Foreign other energy operations pursuant to an
2.1 resident foreign corporation (RFC) operating or consortium agreement under a
2.2 non-resident foreign corporation service contract with the Government;
(NRFC) 2. joint-stock companies;
3. joint accounts (cuentas en participacion)
c. Estates 4. associations; or
d. Trusts 5. insurance companies [Sec. 22(B)].

H. A General Professional Partnership

 Under R.A. 8424 or the CTRP: means:
a) a partnership formed by persons for the
A. A non-resident citizen means, a Filipino sole purpose of exercising their common
citizen: profession; and
1. who establishes to the satisfaction of the b) no part of the income of which is derived
Commissioner the fact of their physical from engaging in any trade or business
presence abroad with a definite intention to [Sec. 22(B)].
reside therein; - if the requirements are met, it is exempt
2. who leave the Philippines during the from income taxation.
taxable year to reside abroad, either as an
immigrant or for employment on a I. Domestic Corporation –created or
permanent basis; organized in the Phils. or under its law [ Sec.
3. who work and derive income from 22(C)]
abroad and whose employment thereat
requires them to be physically present J. Foreign corporation – a corporation which
abroad most of the time during the taxable is not domestic [Sec. 22(D)]
year;
4. who are previously considered as a non- K. Resident Foreign Corporation – engaged
resident and who arrive in the Philippines at in trade or business within the Philippines
anytime during the taxable year to reside [Sec. 22(H)]
thereat permanently shall be considered
non-resident for the taxable year in which he L. Non-resident Foreign Corp. – not engaged
arrives in the Philippines with respect to his in trade or business within the Philippines
income derived from sources abroad until [Sec. 22(I)]
the date of his arrival (Sec.22e, CTRP.)
 The income of taxable estates and trusts shall
B. A resident alien means an individual whose be taxed in the same manner as any other
residence is within the Philippines and who individual taxpayer. [Sec. 60 (A)]
is not a citizen thereof. [Sec.22f]
 ONLY RESIDENT CITIZENS and DOMESTIC
C. A non-resident alien means an individual CORPORATIONS are taxable for income
whose residence is not within the Philippines derived from sources within and without the
and who is not a citizen thereof. [Sec.22G] Philippines. All other income taxpayers are
taxable only for income derived from
D. The term trade or business includes the sources within the Philippines.
performance of the functions of as a public
office. [Sec. 22S]
 KINDS OF INCOME TAXES UNDER
E. The term trade, business or profession R.A. 8424:
shall not include performance of services by
the taxpayer as an employee. [Sec. 22 CC]
(1) Net Income Tax
(2) Gross Income Tax
F. A non-resident alien individual who shall
(3) Final Income Tax
come to the Philippines and stay therein for
 (4) Preferential Rates or Special Rates of 1. those derived under R.A. 7641 (pertains to
Income Tax private firms without retirement trust fund);
(5) Improperly Accumulated Earnings Tax 2. those received by officials and employees of
(6) Minimum Corporate Income Tax private employers in accordance with a
(7) Optional corporate Income tax reasonable private benefit plan;
Requisites:
a) in the service of the same employer
 NET INCOME TAX for at least 10 years;
b) at least 50 years old;
 Definition: Means gross income less c) must be availed of only once
deductions and/or personal and additional d) plan approved by the BIR (R.R. 2-
exemptions (Sec. 31, RA 8424) 98);
3. separation pay because of death, sickness,
or other physical disability or for any cause
 NET INCOME TAX FORMULA beyond the control of the official or
employee;
Entire Income 4. social security benefits, retirement gratuities,
Less: Exclusions and Income subject to Final pensions and other similar benefits received
Tax(e.g. Passive Income) by citizens and aliens who come to reside
permanently here from foreign sources
Gross Income
private or public;
Less: Deductions (and/or add’l exemptions, if
applicable)
5. benefits due to residents under the laws of
the U.S. administered by the U.S. Veterans
Net Taxable Income Administration
X Tax Rates 6. SSS benefits; and
Net Income Tax Due 7. GSIS benefits.
Less: Tax Credit, if any
Tax Still due, if any
 Miscellaneous Items

1. Passive income derived by foreign

GROSS INCOME government in the Philippines;
2. Income derived from any public utility or
 Definition: Includes but not limited to the from the exercise of any governmental
following : function;
1. compensation; 3. Prizes and awards made primarily in
2. business income; recognition of religious, charitable, scientific,
3. gains form dealings in property; educational, artistic, literary, or civic
4. interests; achievement (C2LARES):
5. rents; Requisites:
6. royalties; a. recipient selected without any action on
7. dividends; his part;
8. annuities; b. recipient not required to render
9. prizes and winnings; substantial future services.
10. pensions; 4. Prizes and awards granted to athletes in
11. partner’s share in the net income sports competitions and sanctioned by their
of the general professional national sports association ;
partnership (Sec. 32, CTRP) 5. 13th month pay and other benefits up to
P30,000.00;
KEY: D BIG CAR²P³ 6. GSIS,SSS, Medicare and union dues of
individuals;
 Exclusions from Gross Income: 7. Gains derived from debt securities with a
1. proceeds of life insurance maturity of more than 5 years;
NOTE: if the proceeds are retained by the 8. Gains from redemption of shares in Mutual
insurer, the interest thereon is taxable; Fund
2. Return of premium;
3. Gift, bequest or devise;
NOTE: income therefrom is taxable  DEDUCTIONS
4. Compensation for injuries or sickness;
5. Income exempt under Treaty;  Definition: Items or amounts which the law
6. Retirement benefits, pension, gratuities, etc. allows to be deducted from gross income in
order to arrive at the taxable income.
7. Miscellaneous items

 Retirement Benefits, Pension, Gratuities,

 Kinds of Deductions:
Etc.:
 2. interest on transactions by related parties
1. Optional standard deductions –10% of the (transactions-at-arms-length):
gross income. 3. interest to purchase or carry tax-exempt
obligations;
2. Itemized deductions 4. dividend payments cannot be deducted as
(a) ordinary AND necessary expenses interest; and///….
(b) interests 5. interest paid in advance thru discount or
(c) taxes otherwise, EXCEPT that it is deductible in
(d) losses the year indebtedness is paid.
(e) bad debts
(f) depreciation of property;
(g) depletion of oil and gas wells and mines; c. TAXES:
(h) charitable and other contributions;
(i) research and development;  Requisites to be deductible:
(j) pension trust contributions of 1. must be in connection with taxpayer’s
employees; and business;
(k) premium payments on health and/or 2. tax must be imposed by law on , and
hospitalization insurance payable by, taxpayer; and
3. paid or incurred during the taxable year.
3. Personal and additional exemptions
 Exceptions:
4. Special deductions – applicable only to 1. income tax;
Insurance companies, whether domestic or 2. estate and donor’s tax;
foreign. (Sec. 37, CTRP). 3. special assessments;
4. excess electric consumption tax;
5. foreign income tax, war profits and excess
a. ORDINARY AND NECESSARY profits tax, if the taxpayer makes use of tax
EXPENSES: credit; and
6. final taxes, being in the nature of income tax.
 Necessary Expense - appropriate and helpful - Taxes allowed as deductions, when
in the development of taxpayer's business. refunded or credited, shall be included as
part of gross income in the year of receipt to
 Ordinary Expense - normal or usual in the the extent of the income tax benefit of said
/line of business. deduction (Tax Benefit Rule).
- For NRAETB and RFC, taxes paid or
 Requisites of Business Expense to be incurred are allowed as deductions only if
Deductible: and to the extent that they are connected
1. ordinary and necessary; from income within the Philippines.
2. paid or incurred w/in the taxable year;
3. paid or incurred in carrying on a trade or
business; d. LOSSES:
4. substantiated with official receipts or
other adequate records.  Requisites to be deductible:
1. actually sustained;
 Capital Expenditure: 2. connected with the business, trade or
An expenditure that benefits not only the profession; and
current period but also future periods. It is not 3. not compensated by insurance or otherwise.
deductible but depreciable, EXCEPT, if the
taxpayer is a non-profit proprietary educational The following losses are subject to special
institution which may elect either to deduct the rules under the CTRP (take note of the
capital expense or depreciate it. pertinent provisions):
1. Capital losses
2. Securities becoming worthless
b. INTEREST: 3. Wash sales
4. Wagering losses
5. Abandonment losses
 Requisites to be deductible:
6. Losses of mines other than oil and
1. debt belongs to the taxpayer;
gas wells
2. debt must be related to the business or
profession of the taxpayer;
3. interest should be legally due;
e. BAD DEBTS
4. interest paid or accrued during the
5. taxable year.
 Requisites to be deductible:
1. Valid and subsisting debt;
 Interest Payments not Deductible:
2. Debt must be actually ascertained to be
1. interest paid on indebtedness to finance
worthless and uncollectible;
petroleum explorations;
3. Obligation is not between related parties of self – support because of mental or
(Sec. 36 b CTRP); physical defect.
4. Debt is expensed within the year; and
5. Debt is connected with profession, trade or  Additional Exemption for Dependents:
business. P8,000 for each dependent not to
exceed 4.
 Equitable Doctrine of Tax Benefit
A recovery of bad debts previously  Qualifications of a dependent:
deducted from gross income constitutes taxable 1. legitimate, illegitimate or legally adopted
income if in the year the account was written child of the taxpayer
off, the deduction resulted in a tax benefit. 2. chiefly dependent upon and living with the
taxpayer
3. not more than 21 years old, unmarried AND
f. DEPRECIATION: not gainfully employed or where such
dependents regardless of age are incapable
 Requisites to be deductible: of self-support because of mental of physical
1. Must be reasonable; defect.
2. Must be on property used in the conduct of
the business;  Clarificatory Illustrations:
3. Must be expensed during the taxable year; 1. If only 19 years old but married, not qualified
as a dependent.
2. Even if 25 years old but physically
g. DEPLETION OF OIL AND GAS WELLS incapacitated, qualified as a dependent.
AND MINES 3. Dependent does not include the parents,
- same requisites as depreciation brothers and sisters of the taxpayer.
4. If there is any change of status at any time
during the taxable year, the law expressly
h. CHARITABLE AND OTHER favors the taxpayer.
CONTRIBUTIONS 5. For a NRAETB, only to the extent allowed
by his country to Filipinos not residing
 Partial Deduction: therein, but not to exceed the above
- not in excess of 5% of taxable income in amounts. Additionally, he must file a true
case of a corporation and accurate return of the total income
- not in excess of 10% of the taxable income received by such NRAETB from all sources
in case of an individual within the Philippines.

 Deductible in Full:
1. Donations to the government
2. Donation to certain foreign institutions or  OTHER INCOME TAXES AS DEFINED
international organizations.
3. Donations to certain accredited NGO’s . 1. Final Income Tax – is derived by
multiplying the tax rate on the particular
income subject to a final income tax. Thus,
 PERSONAL EXEMPTIONS the income subject to final income tax is no
longer subject to the net income tax;
 Amounts of Personal Exemptions (Sec. 35 otherwise, there would be a violation of
of CTRP): prohibited double taxation. Applicable to
1. Single individual or married individual passive income and from sources derived
judicially decreed as legally separated with from within the Philippines as determined
no qualified dependents: P20,000 under Sec. 42 of the CTRP. Deductions
2. Head of the family: P25,000 and/or personal and additional exemptions
3. Each married person: P32,000 are not allowed.

2. Income subject to Preferential or Special

 Head of the Family: Rates – here, the income derived by a
1. Unmarried or legally separated person with
particular individual or corporation belonging
one or both parents, or one or more brothers
to a class of income taxpayer is subject to
or sisters, or one or more legitimate,
either a preferential or special rate.
recognized natural or legally adopted
children living with and dependent upon the
3. Improperly Accumulated Earnings Tax –
taxpayer for their chief support; and
a tax equivalent to 10% of the improperly
2. Where such brother / sister or children are
accumulated taxable income of every
not more than 21 years of age, unmarried
corporation formed or availed of for the
and not gainfully employed, or where such
purpose of avoiding the income tax with
dependents regardless of age, are incapable
respect to its shareholders or the
shareholders of any other corporation, by
 permitting earnings and profits to rate of 5% for net capital gains not over
accumulate instead of being divided or P100T, and 10% in excess of P100T.
distributed.
 Tax Exempt Exchanges:
4. Minimum Corporate Income Tax – A tax at a. Exchange solely in kind in mergers and
the rate of 2% based on gross income consolidation;
imposed on domestic and resident foreign b. Exchange of property for stocks resulting in
corporations not covered by a special a change in corporate control
income tax system, beginning the 4th taxable
year in which such corporation commenced
its business operations. It is imposed  FILING OF TAX RETURN AND
whenever such corporation has (a) zero PAYMENT OF THE TAX
or negative net taxable income; or (b) the
amount of minimum corporate income tax is
greater than the normal income tax due from  Tax Return – It is the sole declaration of
such corporation. taxpayer that incorporates all the data/facts
necessary for government to determine the
5. Optional Corporate Income Tax - The amount of tax. There is pain of perjury if not
President, upon recommendation of the correct.
Secretary of Finance may, effective Jan. 1,
2000, allow corporations the option to be  Persons Required to File Income Tax
taxed at 15% of gross income subject to the Return:
following conditions:
1) A tax effort ratio of 20% of GNP; A. Individual
2) A ratio of 40% of income tax to total 1. Resident citizen;
tax revenue; 2. Non-resident citizen on income from
3) A VAT tax effort of 4% of GNP within the Phil.;
4) A O.9% ratio of Consolidated Public 3. Resident alien on income from within
Sector Financial Position to GNP. the Phil.;
N.B.: Available only to firms whose ratio of 4. NRAETB on income from within the Phil.
cost of sales to gross sales or receipts from 5. An individual (citizens / aliens) engaged
all sources does not exceed 55%. in business or practice of a profession
within the Phil. regardless of the amount
of gross income;
6. Individual deriving compensation
 INCOME TAX INCIDENCE income concurrently from two or more
ON SALES OR EXCHANGES OF employers at any time during the
PROPERTY taxable year;
7. Individual whose pure compensation
income derived from sources within the
 Sale on Exchange of Ordinary Assets Phil. exceeds P60,000.
General rules of income taxation apply B. Taxable Estate and Trust
to both as to the gain and as to the loss. C. General Professional Partnership
D. Corporation
 Transaction Resulting in Taxable Gains but 1. Not exempt from income tax;
Non-Recognition of Losses 2. Exempt from income tax under Sec. 30
a. Sale or exchange between related parties; of NIRC but has not shown proof of
b. Wash sales by non-dealers of securities and exemption.
when not subject to the stock transfer tax;
c. Exchanges not solely in kind in merger and  Individuals Exempt From Filing Income Tax
consolidation; and Return:
d. Sales or exchanges that are not at arms 1. Individual whose gross income does not
length. exceed total personal and additional
exemptions;
 Sale or Exchange of Real Property, and 2. Individual with respect to pure compensation
Shares of Stocks of Domestic Corporation income derived from sources within the
Held as Capital Assets Subject to Capital Phils., the income tax on which has been
Gains Tax correctly withheld;
As to individuals and domestic corporations 3. Individual whose sole income has been
1. On real property – each independent subjected to final withholding income tax;
transaction is subject to the final tax of 6% 4. Individual who is exempt from income tax.
on the gross selling price or the fair market
value at the time of sale, whichever is
higher, regardless of gain or loss TRANSFER TAXES
2. Shares of stock of domestic corporation not
traded thru a local exchange taxed at the
 TRANSFER TAX INCOME TAX by such institutions for administration
1. Tax on transfer of 1. Tax on income purposes.
property.
2. Rates are lower 2. Rates are higher  Value of Gross Estate:
--5% to 20% - -- 5% to 32% The gross estate shall be valued at its
estate tax fair market value at the time of death of the
-- 2% to 15 % - decedent.
donor’s tax
3. Lesser exemptions 3. More exemptions  Deductions from the Gross Estate

A. For resident aliens and citizens (ELIT,

 ESTATE TAX TVFSAM)
1. Expenses, losses, indebtedness, taxes,
 ESTATE TAX FORMULA etc. (ELIT-FJCCULT)
a. funeral expenses
Gross Estate (Sec. 85) b. judicial expenses
Less: (1) Deductions (Sec. 86) c. claims against the estate
(2) Net share of the SS in the CP d. claims against insolvent person
e. unpaid mortgages
Net Estate
f. taxes
Less: Exemptions (first P200,000 exemption,
g. losses
Sec. 84)
2. Transfer for public use
Net Taxable Estate 3. Vanishing deduction
X Tax rate (Sec. 84) 4. Family home
Estate Tax due 5. Standard deduction
Less: Tax Credit [if any] (Sec. 86[E] or 110[B] 6. Medical expenses
Estate Tax Due, if any 7. Amounts received by heirs under RA
4917 (Retirement Benefits)

 GROSS ESTATE (Sec. 85, CTRP) B. For non-resident aliens (ELIT-TV)

A. As to resident alien or Filipino decedent 1. Expenses, losses, indebtedness, taxes,
- all real, tangible personal, intangible etc. (FJCCULT)
personal property wherever 2. Transfer for public use
situated. 3. Vanishing deduction
B. As to non-resident alien decedent
- all real and tangible personal
property situated in the Phil. DEDUCTIONS ON
- Intangible personal property with a ESTATE TAX APPLICABLE TO
situs in the Phil. Unless exempted RESIDENT ALIENS AND CITIZENS:
on the basis of reciprocity.
 Funeral Expenses:
 Inclusions in the Gross Estate (Sec. 85, The amount deductible is the lowest among
CTRP): the following:
a. Decedent’s interest 1. actual funeral expenses
b. Transfer in contemplation of death 2. 5% of the gross estate
c. Revocable transfer 3. P200,000
d. Transfer under general power of
appointment  Claims against the Estate:
e. Proceeds of life insurance Requisites to be deductible:
f. Transfers for insufficient consideration 1. The debt instrument must be notarized
g. Prior interests 2. If loan was contracted within 3 years before
the death of the decedent, the administrator
 Exempt Transmissions (Sec. 87, CTRP): or executor shall submit a statement
1. The merger of usufruct in the owner of the showing the disposition of the proceeds of
naked title; the loan.
2. Fideicommisary substitution; N.B.: These requisites do not apply if the claim
3. The transmission from the first heir, legatee did not arise from contractual obligations.
or donee in favor of another beneficiary, in
accordance with the will of the predecessor;  Taxes:
and The following are not deductible:
4. All bequests, devices, legacies or transfers 1. income tax on income received after death
to social welfare, cultural and charitable 2. property taxes not accrued before death
institutions no part of the net income of 3. estate tax
which inures to the benefit of any individual;
Provided, that not more than 30% of the said  Losses:
bequests, legacies or transfers shall be used Requisites to be deductible:
1. arising from fire, storm, shipwreck, or other
casualty, robbery, theft or embezzlement;  Estate Tax Credit
2. Not compensated by insurance or otherwise;
3. Not claimed as deduction in an income tax FORMULA:
return of the taxable estate;
4. Occurring during the settlement of the a. One foreign country only:
estate; and 4 - The tax credit is whichever is lower
5. Occurring before the last day for the between:
payment of the estate tax (last day to pay:
six months after the decedent’s death). 1. Estate tax paid to the foreign country
2. NTE, foreign country X Phil. estate tax
 Transfer for Public Use: NTE, world
Requisites to be deductible: (NTE - Net Taxable Estate)
1. The disposition is in a last will and testament
2. To take effect after death b. More than one foreign country
3. In favor of the government of the Phil., or - The credit shall be that which is the lower
any political subdivision thereof amount between Limit A and Limit B
4. For exclusive public purposes.
Limit A. Whichever is lower between:
 Vanishing Deduction: 1. Estate tax paid to foreign country
Requisites to be deductible: 2. NTE, foreign country X Phil. estate tax
1. the present decedent died within 5 years NTE, world
from transfer of the property from a prior
decedent or donor. Limit B. Whichever is lower between:
2. The property must be located in the Phils. 1. total of estate taxes paid to all foreign
3. The property formed part of the taxable countries
estate of the prior decedent, or of the 2. NTE outside Phil. X Phil. estate tax
taxable gift of the donor. NTE, world
4. The estate tax or donor’s tax on the gift must
have been finally determined and paid.
5. The property must be identified as the one  DONOR’S TAX
received from the prior decedent, or
something acquired in exchange therefor.  Requisites: (ADIC)
6. No vanishing deduction on the property was 1. capacity of the donor
allowable to the estate of the prior decedent. 2. donative intent
3. delivery, whether actual or constructive, of
 Family Home: the subject gift
Requisites to be deductible: 4. acceptance by the donee
1. Said family home must have been the
decedent’s family home.  Stranger - a person who is not a brother,
2. Said fact must be certified to by the sister, spouse, ancestor and lineal descendant,
barangay captain of the locality where it is or of a relative by consanguinity in the collateral
located. within the 4th civil degree.
3. Maximum of P1,000,000

 Medical Expenses:  FORMULA:

Requisites to be deductible:
1. incurred within one year prior to his death a. On the 1st donation of a year:
2. Substantiated with receipts
3. Maximum of P500,000 Gross gifts xxx
Less: Deductions from gross gifts xxx
Net gifts xxx
DEDUCTIONS ON X Tax Rate xxx
ESTATE TAX APPLICABLE TO Donor’s tax on the net gifts
NON-RESIDENT ALIENS
b. On donation of a subsequent date during the
1. Expenses, losses, indebtedness and year:
taxes (ELIT)
Formula: Gross gifts made on this date xxx
Less: Deductions from gross gifts xxx
Phil. Gross Estate X World ELIT Net gifts xxx
World Gross Estate Add: All prior net gifts within the year xxx
Aggregate net gifts xxx
2. Transfer for public use. X Tax Rate xxx
3. Vanishing deduction on property in the Donor’s tax on aggregate net gifts xxx
Philippines.
 Less: Donor’s tax on all prior net gifts xxx
Donor’s tax on the net gifts on this date xxx NG situated in a foreign country X PDT
Entire net gifts
= Tax credit limit
 Exemption of certain gifts:
(NG - Net Gifts; PDT - Phil. Donor's Tax)
1. Gifts made by a resident
b. For donor’s taxes paid to two or more
a. dowries or gifts made on account of
foreign country
marriage and before its celebration or
within one year thereafter by parents to
NG outside the Phil. X PDT
each of their legitimate, illegitimate or
Entire net gifts
adopted children to the extent of the
=Tax credit limit
first P10,000.
b. Gifts made to or for the use of the
The allowable tax credit is the lower amount
National Government or any entity
between the tax credit limit under (a) and (b).
created by any of its agencies which is
not conducted for profit, or to any
political subdivision of the said
government.
c. Gifts in favor of educational, EXPANDED VALUE ADDED
charitable, religious, cultural or TAX
social welfare corporation,
institutions, foundations, trust or
philanthropic organization,  Persons liable to Pay the VAT: ( S B E
research institution or LSI)
organization, accredited non- 1. Any person whether natural of juridical who,
government organization (NGO). in the course of trade or business, sells,
Provided, that no more than 30% barters, exchanges, or leases goods or
of said gifts shall be used by such properties, or renders services;
donee for administration purposes. 2. Any person who imports goods whether for
business or non-business purpose; and
2. Gifts made by a non-resident not a citizen of provided, gross receipts is more than
the Phil. P550,000.00, otherwise,
a. same as (b)
b. same as (c) except accredited non-  more than P100T but less than P550T –3%
government organization (NGO) percentage tax
 less than P100T – no business tax liability
 Tax credit for donor’s taxes paid to a
foreign country:
1. Donor was a Filipino citizen or resident alien
2. At time of foreign donation
 Transactions Subject to VAT: (S I T S )
3. Donor’s taxes of any character and
description 1. every sale, barter, or exchange, leases
4. Are imposed and paid by the authority of a goods or properties made in the course of
foreign country. trade or business;
2. transactions deemed sale for VAT
purposes;
 Limitations on tax credit:
3. importation of goods; and
1. The amount of the credit in respect to the
4. every sale of service made in the course
tax paid to any country shall not exceed the
of trade or business other than services
same proportion of the tax against which
rendered by persons subject to “other
such credit is taken, which the decedent’s
percentage taxes”.
net gifts situated within such country taxable
under the NIRC bears to his entire net gift;
and  Elements of VAT :
2. The total amount of the credit shall not
exceed the same proportion of the tax 1. sale must be made in the Philippines;
against which such credit is taken, which the 2. sale must be of taxable goods, properties or
decedent’s net gift situated outside the services; and
Philippines taxable under the NIRC bears to 3. sale must be made by a taxable person in the
his entire net gift. course or furtherance of his business.

 FORMULA:  Rate Structure under the VAT System:

1 1. 0% rate for export sales and persons
a. For donor’s taxes paid to one foreign whose sales are effectively zero-rated and
country zero-rated sales of services; and
 2. 10% for all other articles and transactions sales for VAT- registration purposes
covered by the VAT. registration purposes.

 Registration
 Input Tax – tax on purchase price of goods requirement:
which is passed on or shifted to a buyer / Exempt person may
Zero-rated person may
purchaser /lessee by the supplier / seller / not register for VAT.
still register for VAT.
lessor. It is the VAT paid by a VAT-registered
person in the course of his trade or business.

 Output Tax-- VAT due on the sale of taxable

goods or services by any person registered or  Registration Requirements:
required to register for VAT purposes.
1. Mandatory – every person who in the
 Transitional Input Tax Credit – person who course of trade or business, sells, barters,
becomes liable to VAT or any person who elects exchanges, leases goods or services for
to be a VAT-registered person shall, subject to others, if the aggregate amount of actual or
the filing of an inventory of goods, material and expected gross sales and / or gross receipts
supplies equivalent to 8% of value of such exceeds P550T for any 12-month period.
inventory or the actual VAT paid on such goods,
materials and supplies, whichever is higher, 2. Optional -- any of the following persons
which shall be creditable against the output tax. may, at their option, apply for VAT
registration:
a. seller of goods or services whose
 Export Sales – sale and shipment or
taxable sale or gross receipts do not
exportation of goods from the Philippines to a
exceed P550T for any 12-month
foreign Country irrespective of any shipping
period;
arrangement that may be agreed upon which
b. seller of agricultural or marine food
may influence or determine the transfer of
products in their original state;
ownership of the goods so exported, or foreign-
c. seller of fertilizer, seeds, seedlings
currency denominated sales.
and fingerlings, fish live stock and
poultry feeds,
 Foreign Currency Denominated Sales – including ingredients whether locally
sales to non-residents of goods assembled or produced or imported, used in the
manufactured in the Philippines for delivery to manufacture
residents in the Philippines and paid for in of finished foods;
convertible foreign currency remitted through the d. seller of non-food agricultural,
banking system in the Philippines. marine and forest products in their
original state;
e. seller of cotton and cotton seeds in
 ZERO-RATED VS. EXEMPT the original state, and copra.
TRANSACTIONS ( 550 FANC )
ZERO-RATED EXEMPT
TRANSACTIONS N.B.: Items b to e, refer to export sales only
 Extent: Only removes the
All value added tax is  Transactions deemed sales for VAT
value added tax at purposes (Sec. 106B)
removed
the exempt stage 1. Transfer, use or consumption not in
the course of trade or business of
goods originally intended for sale
 Claim for refund: Taxpayer is not
or for use in the course of business;
Taxpayer can claim 2. Distribution or transfer to share-
entitled to credit or holders or investors as share in the
the refund of input
refund of the input tax profits of the VAT -registered
taxes passed on to
passed on to him by persons;
him by the supplier,
the supplier, etc. 3. Consignment of goods if actual sale is not
etc. or credit such
input taxes against his made within 60 days following the date of
liabilities for output consignment;
taxes on his other non- 4. Distribution or transfer to creditors in
zero rated transactions payment of debt;
5. Retirement from or cessation of business,
with respect to inventories of taxable goods
 Scope: Not taxable sales and existing as of such retirement or cessation.
Generally, taxable
therefore not taken into
sales, and taken into
account in determining
account in determining
turn-over or VAT-
turn-over or sales for
 located, the foregoing 70% shall be
III. LOCAL TAXATION subdivided as follows:
- 60% to the city or municipality
where the factory is located,
 Definition: - 40% to the city or municipality
The power of local government unit to where the plantation is located.
(1) create its own sources of revenue and (2) to
levy taxes, fees, and charges. (See Sec. 5, Art.  Fundamental Principles Governing
X, 1987 Constitution and Sec. 129, LGC)
Local Taxation:
1. Shall be uniform in each local sub-unit
 Nature of the Taxing Power of Local 2. Shall be equitable and based as much as
Governments possible on the taxpayer’s ability to pay
1. Not inherent; 3. Levied for public purposes
2. Exercised only if delegated to them by law 4. Shall not be unjust, excessive, oppressive,
or Constitution. or confiscatory
3. Not absolute; subject to limitations provided 5. Shall not be contrary to law, public policy,
by law. national economic policy, or in restraint of
trade
 Aspects of Local Taxing Power 6. Collection of local taxes and other
1. Local taxation, and impositions shall not be let to any person
2. Real property taxation 7. The revenues collected under the Code
N.B.: Both aspects are governed by the Local shall inure solely to the benefit of, and
Government Code (LGC). subject to disposition by, the LGU levying
the tax or other imposition unless otherwise
 Doctrine of preemption or exclusion specifically provided therein
Where the National Government elects 8. Each LGU shall, as far as practicable,
to tax a particular area, it impliedly withholds evolve a progressive system of taxation.
from the local government the delegated power
to tax the same field. This doctrine principally
rests upon the intention of Congress.

 Excluded impositions (pursuant to the

IV. REAL PROPERTY
doctrine of preemption): TAXATION
1. Taxes which are levied under the NIRC,
unless otherwise provided by LGC of 1991;
 Definitions:
2. Taxes, fees, etc. which are imposed under
1. Real Property Taxation: A direct tax on
the Tariffs and Customs Code;
ownership of lands and buildings or other
3. Taxes, fees, etc., the imposition of which
improvements thereon payable regardless of
contravenes existing governmental policies
whether the property is used or not.
or which violates the fundamental principles
2. Real property – subject to the definition
of taxation; and
given by Art. 415 of the Civil Code.
4. Taxes, fees and other charges imposed
3. Improvement – valuable addition made to a
under special law.
property or an amelioration in its condition
amounting to more than a mere replacement
 Situs of Municipal Taxation (Sec. 150, of parts.
1991 LGC)
 Characteristics:
1. Place of sale( with branch or sales outlet 1. Direct on ownership; O
therein): Municipality or city where the 2. ad valorem tax A
branch or outlet is located. 3. proportionate P
2. Place of sale (no branch or sales outlet): 4. creates a single indivisible obligation S
Municipality or city of principal office (not in 5. local tax L
the place of sale). Key: SAPOL
3. If manufacturer, assembler, contractor,
producer or exporter (MACPE) with factory,  Taxing Authorities:
project office, plant or plantation (FPPP):
1. Province, at the rate of not > 1% of
a. 30% of recorded sales in the principal
assessed value;
office: city or municipality where the
2. City at the rate of not > 2%; and
principal office is located;
3. Municipality within Metro Manila at the rate
b. 70% of recorded sales in the principal
of not > 2%.
office: city or municipality where the
FPPP is located (pro rata if FPPP are
located in different municipalities or  Extent of the power to levy:
cities). 1. Basic real property tax;
c. If plantation is located in some other 2. 1% additional real estate tax to finance the
place than that where the factory is Special Education Fund;
3. 5% additional tax on idle lands; and
4. Special levy or special assessments (may 1. Tariff: Customs duties, toll or tribute
be imposed even by municipalities outside payable upon merchandise to the Gov’t.
Metro Manila). 2. Custom Duties: Tax assessed upon
merchandise from or exported to, a foreign
 Fundamental Principles Governing country. (Garcia v. Executive Sec., 211
Real Property Taxation SCRA 227 [1992])
F 1. Real property shall be appraised at its
current and fair market value; N.B.: Customs and tariffs are synonymous with
U 2. Real property shall be classified for one another. They both refer to the taxes
assessment purposes on the basis of actual imposed on imported or exported wares,
use. articles, or merchandise.
U 3. Real property shall be assessed on
the basis of uniform classification
within each LGU  THE BUREAU OF CUSTOMS (BOC)
P 4. The appraisal, assessment, levy and
collection of RPTax shall not be let  Functions of the Bureau of Customs
to any private person. (ACE2S3):
E 5. The appraisal and assessment of real a. Assessment and collection of revenues
property shall be equitable. from imported articles and all other
Key: FEU-UP impositions under the tariff and customs
laws;
 Properties Exempt from Real Property b. Control smuggling and related frauds;
Tax (Sec. 193, 1991 LGC): c. Supervision and control over the
1. Real property owned by the government entrance and clearance of vessels and
except when the beneficial use thereof has aircraft engaged in foreign commerce;
been granted to a taxable person; d. Enforcement of TCC and related laws;
2. charitable institutions, churches, personages e. Supervision and control over the
or convents appurtenant thereto, mosques, handling of foreign mails arriving in the
non-profit or religious cemeteries and all Philippines;
lands, buildings and improvements actually, f. Supervise and control all import and
directly and exclusively used for religious, export cargoes for the protection of
charitable or educational purposes (Art. VI, government revenue;
Sec. 28, Constitution); g. Exclusive original jurisdiction over
3. machineries and equipment that are seizure and forfeiture cases under the
actually, directly and exclusively used by tariff and customs laws.
local water utilities and GOCC’s engaged in
the supply and distribution of water and/or  Jurisdiction of Collector of Customs over
electric power; importation of articles
4. real property owned by duly registered 1. Cause all articles for importation to be
cooperatives as provided for in RA 6938; entered in the customhouse,
and 2. Cause all such articles to be appraised and
5. machinery and equipment used for pollution classified,
control and environmental protection. 3. Assess and collect the duties, taxes and
other charges thereon, and
 Duty of Real Property Owners 4. Hold possession of all imported articles until
beginning 1991: the duties, taxes and other charges are paid
Real property owner must file with thereon. (Sec. 1206, TCC)
Assessor’s Office a sworn statement of real
property value whether exempt or non-exempt.  Territorial jurisdiction of the BOC:
Every buyer of real property must make 1. All seas within the jurisdiction of the
a new declaration thereof. (Failure to do so shall Philippines
make the assessment in the name of the 2. All coasts, ports, airports, harbors, bays,
previous owner binding). rivers and inland waters whether navigable
or not from the sea. (1st par, Sec. 603, TCC)

 When tariff and customs applied:

IV. TARIFF AND  Only after importation has begun but before
CUSTOMS CODE importation is terminated.
Importation begins:
a. when the conveying vessel or
aircraft
 DEFINITIONS: b. enters the jurisdiction of the Phil.
c. with intention to unload therein
 Importation is deemed terminated:  Drawback
a. (i) upon payment of the duties, taxes A device resorted to for enabling a
and other charges due upon the commodity affected by taxes to be exported and
articles. (ii) and legal permit for sold in foreign markets upon the same terms as
withdrawal shall have been granted. if it had not been taxed at all (Uy Chiaco Sons
b. In case the articles are free of vs. Collector of Customs, 24 Phil 562)
duties, taxes and other charges,
until they have legally left the
jurisdiction of the customs (Sec.  Import Entry
1202, TCC) It is a declaration to the BOC showing
particulars of the imported article that will enable
the customs authorities to determine the correct
 ARTICLES UNDER TCC duties. An importer is required to file an import
MAY EITHER BE: entry. It must be accomplished from
a. Subject to duty disembarking of last cargo from vessel.
b. Prohibited from being imported
(Prohibited importation)  Transaction value under RA 8181
c. Conditionally-free from tariff and It is the invoice value of the goods plus
customs duties (conditionally-free freight, insurance, costs, expenses and other
importation) necessary expenses. This replaces the Home
d. Free from TC duties (duty-free) Consumption Value as basis of valuation of
goods.
 Imported goods must be entered in a
customhouse at their port of entry otherwise  CLASSIFICATION OF CUSTOM
they shall be considered as contraband and the DUTIES:
importer is liable for smuggling (See Sec. 101,
TCC).
 Regular Duties:
1. Ad valorem duty: This is a duty based on
the value of the imported article.
 LIABILITY FOR CUSTOMS DUTIES 2. Specific duty: This is a duty based on the
dutiable weight of goods (either the gross
 General Rule: All importations / exportations of weight, legal weight, or net weight).
goods are subject to customs duties (Sec. 105, 3. Alternating duties: This is a duty which
TCC). alternates ad valorem and specific.
Exceptions: 4. Compound Duty: This is a duty consisting
a. Exemptions under the TCC; of ad valorem and specific duties.
b. Exemptions granted to gov’t agencies,
instrumentalities or GOCCs with existing  Special duties
contracts, commitments, agreements, or a. Dumping duty
obligations with foreign countries; b. Countervailing duty
c. Exemptions of international c. Marking duty
organizations pursuant to agreements or d. Discriminatory duty
special laws; and
d. Exemptions granted by the Pres. of the
Phil. upon recommendation of NEDA  Nature of special customs duties:
(Sec. 105, TCC). Special customs duties are additional
import duties imposed on specific kinds of
imported articles under certain conditions.
 Liability of importer for custom duties:
a. A personal debt which can be
discharged only by payment in full  Purpose of special customs duties:
thereof; The special customs duties are imposed
b. A lien upon the imported articles while for the protection of consumers and
they are in custody or subject to the manufacturers, as well as Phil. products from
control of the gov’t (Sec. 1204, TCC). undue competition posed by foreign-made
products.
 SPECIAL DUTIES COMPARED

DUMPING DUTY COUNTERVAILING MARKING DUTY DISCRIMINATORY

DUTY DUTY
 Imposed upon  Imposed upon  Imposed upon  Imposed upon
foreign products with foreign goods those not properly goods coming from
value lower than enjoying subsidy marked as to place countries that
NATURE their fair market thus allowing them of origin of the discriminates
value to the to sell at lower goods. against Philippine
detriment of local prices to the products.
products. detriment of local
products similarly
situated.
 Difference  Equivalent to the  5% ad valorem of  Any amount not
between the actual bounty, subsidy, or articles exceeding 100% ad
AMOUNT/
price and the normal subvention. valorem of the
RATE
value of the article. subject articles

IMPOS-
 Special  Sec. of Finance  Commissioner of  President of the
Committee on Anti- Customs Philippines
ING
Dumping (composed
AUTHO-
of the Sec. of
RITY
Finance as
Chairman;
Members: the Sec.
of DTI; and either
the Sec. of
Agriculture if article
in question is agri.
product or the Sec.
of Labor if non-agri.)
 Flexible Tariff Clause The tax, together with interests, penalties,
The President may fix tariff rates, import and costs that may accrue in addition thereto is
and export quotas, etc. under TCC (See Sec. a lien upon all property and rights to
28, Art. VI, Constitution and Sec. 401, TCC) property belonging to the taxpayer.
The lien shall not be valid against any
mortgagee, purchaser, or judgment creditor
until notice of such lien shall be filed by the
Commissioner of Internal Revenue in the Office
of the Register of Deeds of the province or city
V. TAX REMEDIES where the property of the taxpayer is situated or
located (Sec. 219, CTRP).

TAX REMEDIES
UNDER THE NATIONAL INTERNAL B. Compromise
REVENUE CODE
 Definition: A contract whereby the parties, by
reciprocal concessions, avoid a litigation or put
I. TAX REMEDIES OF THE an end to one already commenced (Art. 2028,
New Civil Code).
GOVERNMENT
 Requisites (TAO):
1. The taxpayer must have a tax liability.
 Importance 2. There must be an offer (by the taxpayer of
1. They enhance and support the an amount to be paid by the taxpayer)
government’s tax collection. 3. There must be an acceptance (by the
2. They are safeguards of taxpayer’s Commissioner or taxpayer as the case may
rights against arbitrary action. be) of the offer in the settlement of the
original claim.
 Tax collection cannot be restrained by
court injunction (Sec. 219, CTRP)  Officers authorized to compromise:
1. The Commissioner of Internal Revenue
 Justification: Lifeblood Theory. (CIR) is the only official vested with power
and discretion to compromise criminal and
 Exception: Injunction may be issued by the civil cases arising from violations of the Tax
CTA in aid of its appellate jurisdiction under RA Code (Secs. 7C and 204, CTRP).
1125 (see requisites thereof, under the 2. Subordinate officials may preliminarily
subheading “Court of Tax Appeals,” infra.). enter into a compromise. The effects are:
i. Acceptance of an offer of
compromise: not final and may be
 The following are generally the tax reviewed by the Commissioner.
ii. Rejection of an offer of
remedies of the government to effect
compromise: final and binding
collection of taxes: unless revoked or set aside by the
A. Tax Lien (Sec. 219) Commissioner. (Gibbs vs. Collector,
B. Compromise (Sec. 204) 17 Phil. 232)
C. Distraint (Actual and Constructive)
(Secs. 205-208)
D. Levy (Sec. 207B)  Commissioner may compromise any
E. Forfeiture of Property (Sec. 215) internal revenue tax when –
F. Civil Action (Sec. 220) 1. A reasonable doubt as to the validity of the
G. Criminal Action (Secs. 220, 221, and claim against the taxpayer exists; or
229) 2. The financial position of the taxpayer
H. Suspension of business operations in demonstrates a clear inability to pay the
violation of VAT (Sec. 115) assessed tax [Sec. 204(A), CTRP]. In such
I. Enforcement of Administrative Fine case, the taxpayer should waive the
confidentiality privilege on bank deposits
under RA 1405 (See Sec. 6F2, CTRP).
A. Tax Lien
 Minimum compromise rates (MCR) of any
 Definition: It is a legal claim or charge on tax liabilities:
property, either real or personal, established by
1. In case of financial incapacity: MCR = 10%
law as a security in default of the payment of
of the basic assessed tax
taxes (51 AmJur 881). Generally, it attaches to
2. Other cases: MCR = 40% of the basic
the property irrespective of ownership or transfer
assessed tax [Sec. 204(A), CTRP]
thereof.

 Extent and nature:

 Approval of the compromise by the  Two types of distraint:
Evaluation Board is required when: 1. Actual: there is taking of possession of the
1. the basic tax involved exceeds personal property from the taxpayer by the
P1,000,000.00, or government. Physical transfer of possession
2. the settlement offered is less than the is not always required. This is true in the
minimum compromise rates (MCR). case of intangible property such as stocks
and credits.
N.B.: The MCR may be less than the prescribed 2. Constructive: the owner is merely
rates of 10% or 40%, as the case may be, prohibited from disposing of his property.
provided it is approved by the Evaluation Board.

 Compromise of Criminal Violations  Requisites for the exercise of the remedy

General Rule: Criminal violations may be of distraint:
compromised. 1. The taxpayer must be delinquent (except in
Exceptions: constructive distraint) in the payment of tax;
1. Those already filed in court 2. There must be a subsequent demand for its
2. Those involving fraud [Sec. 204(A), CTRP]. payment (assessment);
3. The taxpayer must fail to pay the tax at the
 Extent of the Commissioner’s discretion to time required; and
compromise criminal violations: 4. The period within which to assess or collect
1. Before the complaint is filed with the the tax has not yet prescribed.
Prosecutor’s Office: The CIR has full
discretion to compromise except those  Nature of the warrant of distraint or levy
involving fraud. The warrant is a summary procedure
2. After the complaint is filed with the “forcing” the taxpayer to pay. The receipt of a
Prosecutor’s Office but before the warrant may or may not partake the character of
information is filed with the court: The CIR a final decision. If it is an indication of a final
can still compromise provided the decision, the taxpayer may appeal to the CTA
prosecutor must give consent. within 30 days from service of the warrant.
3. After information is filed with the court: The
CIR is no longer permitted to compromise  Duties of the officer serving the warrant of
with or without the consent of the Prosecutor distraint:
(People vs. Magdaluyo, April 20, 1961). 1. Make an account of the personal properties
distrained;
 Remedy in case the taxpayer refuses or 2. Sign the list of personal properties
fails to abide the tax compromise: distrained to which shall be added, a
1. Enforce the compromise statement of the sum demanded and note of
a. If it is a judicial compromise, it can be the time and place of sale;
enforced by mere execution. A judicial 3. Leave either with the owner or person from
compromise is one where a decision whose possession such personal properties
based on the compromise agreement is were taken, or at the dwelling or place of
rendered by the court on request of the business of such person with someone of
parties. suitable age and discretion (Sec. 208,
b. Any other compromise is extrajudicial CTRP)
and like any other contract can only be
enforced by court action.  Procedures for the actual distraint or
2. Regard it as rescinded and insist upon garnishment:
original demand (Art. 2041, Civil Code).
1. Personal Property
 Compromise Penalty
It is an amount of money which the I
taxpayer pays to compromise a tax violation. Service of
Service of the warrant of
This is paid in lieu of criminal prosecution. A Warrant of
distraint upon the person in
taxpayer cannot be compelled to pay a Distraint
possession of the taxpayer’s
compromise penalty. If he does not want to pay, property (Sec. 208, CTRP).
the CIR must institute a criminal action.
Posting of II
Notice Posting of notice in not less
C. Distraint than two (2) public places in the
municipality or city (Sec. 209,
 Definition: It is the seizure by the government CTRP)
of personal property, tangible or intangible, to
enforce the payment of taxes. The property may Notice of III
be offered in a public sale, if taxes are not Time and Notice to the taxpayer
voluntarily paid. It is a summary remedy. Place of specifying the time and place
Sale
 of sale and the articles (b) obligate himself to
distrained. 1. preserve the same intact
and unaltered and
2. not to dispose of the same
Disposition IV in any manner whatsoever
Disposition of proceeds of without the express
sale (Sec. 209, CTRP). authority of the
Commissioner of Internal
Revenue.
3. Stocks and other securities: By serving a
copy of the warrant of distraint upon the Remedy If the taxpayer or person in
a. taxpayer and when possession of the property
b. upon the president, manager, treasurer taxpayer refuses or fails to sign the
or other responsible officer of the didn’t sign receipt referred to, the revenue
corporation, company or association receipt officer effecting the constructive
which issued the said stock and distraint shall (a) proceed to
securities (Sec. 208, CTRP). prepare a list of such property
and (b) in the presence of two
(2) witnesses leave a copy
4. Bank accounts: They shall be garnished by thereof in the premises where
serving a warrant of distraint upon the the property distrained is
a. taxpayer and located, after wh9ch the said
b. upon the president, manager, treasurer, property shall be deemed to
or other responsible officer of the bank. have been placed under
NB: Upon receipt of the warrant of distraint, constructive distraint.
the bank shall turn over to the
Commissioner so much of the bank  ACTUAL VS. CONSTRUCTIVE
accounts as may be sufficient to satisfy the DISTRAINT
claim of the government (Sec. 208, CTRP). ACTUAL DISTRAINT CONSTRUCTIVE
DISTRAINT
5. Debts and credits: By serving a copy of the
warrant of distraint upon the
 Made only on the Made on the property
property of a of any taxpayer,
a. person owing the debts or
delinquent taxpayer whether delinquent or
b. having in his possession or under his
not
control such credits or
c. upon his agent. There is taking of The taxpayer is
NB: The warrant of distraint shall be possession merely prohibited
sufficient authority to the person owing the from disposing of his
debts or having in his possession or under property
his control any credits belonging to the Effected by leaving a Effected by requiring
taxpayer to pay to the Commissioner the list of distrained the taxpayer to sign a
amount of such debts or credits (Sec. 208, property or by service receipt of the property
CTRP). of a warrant of distraint or by the revenue
or garnishment officer preparing and
 The taxpayer’s property may be placed leaving a list of such
under constructive distraint when he: property
1. is retiring from any business An immediate step Not necessarily so
subject to tax; or for collection of taxes
2. is intending to – Both
a. leave the Philippines, or
b. remove his property therefrom, Are summary remedies for the collection of
or taxes;
c. hide or conceal his property, or Refer only to personal property; and
3. is performing any act tending to Cannot be availed of where the amount of the
obstruct the proceeding for tax involved is not more than P100
collecting the tax due or which may
be due from him (Sec. 206, NIRC).

 Procedure for the constructive distraint of D. Levy

personal property:
CIR shall require the taxpayer or
Taxpayer  Definition: It refers to the act of seizure of
any person having possession
must sign real property in order to enforce the payment of
or control of such property to (a)
receipt taxes. The property may be offered in a public
sign a receipt covering the
sale, if after seizure, the taxes are not voluntarily
property distrained and
paid.

Taxpayer’s
oblig. to
preserve
 Requisites for the exercise of the remedy property property
of levy: Same as in the remedy of distraint. Forfeiture by the Forfeiture is
government is not authorized
provided
 When may levy be effected? The taxpayer is not The right of
Real property may be levied upon given the right of redemption is granted
before, simultaneously, or after the distraint redemption with in case of real property
of personal property belonging to the delinquent respect to distrained levied upon and sold,
(Sec. 207B, CTRP); and the remedy by distraint personal property. or forfeited to the
and levy may be repeated if necessary until the government.
full amount, including all expenses, is collected Both
(Sec. 217, CTRP).
Are summary remedies for the collection of
taxes; and
 Procedure of levy on real property:
Cannot be availed of where the amount of the
Prepare I tax involved is not more than P100
Certificate Preparation of a duly
of Levy authenticated certificate
containing: (a) description of E. Forfeiture
the property levied (b) name of
the taxpayer, and (c) the  Definition: divestiture of property without
amounts of tax and penalty compensation, in consequence of a default or
due from him. This certificate offense.
shall operate with the force of a
legal execution throughout the
Philippines (Sec. 207B, CTRP).
 Enforcement of the remedy of forfeiture:
1. In case of personal property – The
forfeiture of chattels and removable fixtures
II
Service of of any sort is enforced by seizure and sale
Service of written notice to the
Notice or destruction of the specific forfeited
delinquent taxpayer or occupant
property.
of the property. The proper
2. In case of real property – The forfeiture of
Register of Deeds shall also be
real property is enforced by a judgment of
notified of the levy (Sec. 207B,
condemnation and sale in a legal action or
CTRP).
proceeding, civil or criminal, as the case
may require.
Time and III
Place of Advertisement of the time and
place of sale of the taxpayer’s  Effect of the forfeiture of property with
Sale
property or so much thereof as respect to title thereto: The effect is to transfer
may be necessary to satisfy the the title to the specific thing from the owner to
claim within 20 days after levy, the government.
and it shall cover a period of at
least 30 days (Sec. 213,
CTRP). F. Civil Actions

Sale IV  Definition: For tax remedy purposes, these

Sale at public auction to the are actions instituted by the government to
highest bidder (Sec. 213, collect internal revenue taxes. It includes filing
CTRP). by the government with the probate court claims
against the deceased taxpayer.
Disposition V
Disposition of proceeds of
 When resorted to?
sale. In case the proceeds of
1. When a tax is assessed but the assessment
the sale exceed the claim
becomes final and unappealable because
(taxes, penalties and interest)
the taxpayer fails to file an administrative
and cost of the sale, the excess
protest with the CIR within 30 days from
shall be turned over to the
receipt; or
owner of the property (Sec. 213,
2. When a protest against assessment is filed
CTRP).
and a decision of the CIR was rendered but
the said decision becomes final, executory,
and demandable for failure of the taxpayer
to appeal the decision to the CTA within
 DISTRAINT VS. LEVY 30 days from receipt of the decision.

DISTRAINT LEVY
Refers to personal Refers to real
 Where to file: Civil actions for the collection of extended period agreed upon can further be
delinquent taxes are filed in the regular courts extended by a subsequent written
and not before the CTA. agreement made before the expiration of the
extended period previously agreed upon
 Defenses which are precluded by final and (Sec. 222[b]).
executory assessments: 4. WRITTEN WAIVER or RENUNCIATION of
1. Invalidity or illegality of the assessment; and the original three (3) year limitation, signed
2. Prescription of the government’s right to by the taxpayer (Sambrano vs. CTA 101
assess. Phil. 1).

 Abatement  Prescriptive Period for the Collection of

Taxes:
 The Commissioner may abate or cancel a General Periods for the Collection of Taxes:
tax liability when: 5 years – from assessment or within
1. The tax or any portion thereof appears to be period for collection agreed upon in writing
unjustly or excessively assessed; or before expiration of the 5-year period (Sec. 222,
2. The administration and collection costs CTRP).
involved do not justify the collection of the 10 years – without assessment in case
amount due [Sec. 204(A), CTRP]. of false or fraudulent return with intent to evade
or failure to file return (Sec. 222, CTRP).

 Prescriptive Periods  Grounds for suspension of the running of

for the Assessment and the statute of limitations:
Collection of Taxes 1. When the CIR is prohibited from making
the assessment or beginning the distraint or
 Rationale of herein prescriptive periods: levy or a proceeding in court, and for sixty
Such periods are designated to secure (60) days thereafter;
the taxpayers against unreasonable 2. When the taxpayer requests for a
investigation after the lapse of the period reconsideration which is granted by the
prescribed. They are also beneficial to the CIR;
government because tax officers will be obliged 3. When the taxpayer cannot be located in
to act promptly. the address given by him in the return,
unless he informs the CIR of any change in
his address.
 Rules on Prescription:
4. When the warrant of distraint or levy is duly
1. When the tax law itself is silent on
served, and no property is located; and
prescription, the tax is imprescriptible;
5. When the taxpayer is out of the
2. When no return is required, tax is
Philippines (Sec. 223, CTRP).
imprescriptible; NB: Remedy of taxpayer is
to file a return.
3. Defense of prescription is waivable;  A tax return is considered FILED for
4. Provisions on prescription, being remedial in purposes of starting the running of the
nature, should be liberally interpreted to period of limitations if:
carry out its intent. 1. The return is valid – it has complied
substantially with the requirements of the
law; and
 Prescriptive Period for the assessment of
2. The return is appropriate – it is a
taxes:
return for the particular tax required by law.
General Rule:
THREE (3) YEARS after the date the A defective tax return is the same as if no
return is due or filed, whichever is later (Sec. return was filed at all.
203, CTRP).

Exceptions:
1. FAILURE TO FILE A RETURN: TEN (10) II. TAX REMEDIES OF THE TAXPAYER
YEARS from the date of the discovery of the
omission to file the return (Sec.222[a]);
2. FALSE OR FRADULENT RETURN with  General Remedies of a Taxpayer
INTENTION TO EVADE THE TAX: TEN
(10) YEARS from the date of the discovery  Administrative
of the falsity or fraud (Sec.222); 1. Before Payment –
3. AGREEMENT IN WRITING to the extension a. Protest – filing a petition for
(not reduction) of the period to assess reconsideration or reinvestigation within
between the CIR and the taxpayer before 30 days from receipt of assessment
the expiration of the 3-year period. NB: The (Sec. 228, CTRP); A protest is a vital
 document which is a formal declaration
of resistance of the taxpayer. It is a  Suspension of the Two-year Prescriptive
repository of all arguments. It can be Period:
used in court in case administrative 1. There is a pending litigation between the
remedies have been exhausted. It is Government and the taxpayer; and
also the formal act of the taxpayer 2. CIR in that litigated case agreed to abide by
questioning the official actuation of the the decision of the SC as to the collection of
CIR. This is equivalent to a pleading. taxes relative thereto (Panay Electric Co.
b. Entering into a compromise (Sec. vs. Collector, May 28, 1958).
204, CTRP).
2. After Payment –
Filing of claim for refund or tax credit Reglementary Periods in Income Tax
within 2 years from date of payment Imposed by Law upon the Taxpayer
regardless of any supervening cause (Sec.
229, CTRP).
(pursuant to Rev. Reg. No. 12-99, Sec.
228 of the CTRP, and Rules of Court)
 Judicial
1. Civil Action – BIR makes a tax assessment
a. Appeal to the Court of Tax Appeals – 
within 30 days from receipt of decision If taxpayer is not satisfied with the assessment
on the protest or from the lapse of 180 file a protest within 30 days from receipt thereof
days due to inaction of the 
Commissioner (Sec. 228, CTRP). Submit supporting documents within 60 days
b. Action to contest forfeiture of chattel from date of the filing of the protest
(Sec. 231, CTRP); and
c. Action for damages (Sec. 227, CTRP).

2. Criminal Action – If protest is denied, elevate the matter to the
a. Filing of criminal complaint against Commissioner of Internal Revenue (CIR) within
erring BIR officials and employees. 30 days from receipt of the decision of the CIR’s
b. Injunction – when the CTA in its duly authorized representative officer
opinion the collection by the BIR may 
jeopardize taxpayer. Appeal to the Court of Tax Appeals (CTA)
within 30 days from receipt of final decision of
CIR or his duly authorized representative (the
 Filing of claim for taxpayer has the option to appeal straight to the
Tax Refund or Tax Credit CTA upon receipt of the decision of the CIR’s
duly authorized representative)
 Grounds for filing a claim for tax refund or 
tax credit: If the CIR or his duly authorized representative
1. Tax is collected erroneously or illegally. fails to act on the protest within 180 days
2. Penalty is collected without authority. from date of submission by taxpayer, the latter
3. Sum collected is excessive. may appeal within 30 days from lapse of the
180 day period
 TAX REFUND VS. TAX CREDIT 
Appeal to the Court of Appeals (CA) within 15
TAX REFUND TAX CREDIT days from receipt of the CTA’s decision
 The taxpayer asks  The taxpayer asks 
for restitution of the that the money so paid Appeal to the Supreme Court within 15 days
money paid as tax be applied to his from receipt of the CA’s decision
existing tax liability
 Two-year period to  Two-year period  As a general rule, payment under protest is
file claim with the CIR starts from the date not required under the NIRC, except when
starts after the such credit was partial payment of uncontroverted taxes is
payment of the tax or allowed (in case credit required as provided under RR 12-99.
penalty is wrongly made).

 Requisites of Tax Refund or Tax Credit

1. Claim must be in writing; TAX REMEDIES
2. It must be filed with the CIR within TWO (2) UNDER THE LOCAL GOVERNMENT
YEARS after the payment of the tax or CODE (LGC)
penalty. Where the payment was made by
wrongly crediting a prior over payment, the
LOCAL TAXATION REMEDIES
two year period should start from the date
such credit was allowed.
3. Show proof of payment.
I. TAX REMEDIES OF THE LOCAL I. Administrative
GOVERNMENT UNITS
A. Protest – within 60 days from receipt of
assessment (Sec. 195 LGC). Payment
 The following are the Civil Remedies of
under protest not necessary
the Local Government Units (LGU) to B. Payment & subsequent refund or tax
effect collection of taxes: credit – within 2 yrs. from payment of tax
1. Tax Lien (Sec. 173, LGC) to local treasurer (Sec. 196 LGC) It is to
2. Distraint (Sec. 175, LGC) be noted that, unlike in internal revenue
3. Levy (Sec. 175, LGC) taxes, the supervening cause applies in
4. Civil Action (Sec. 183, LGC) local taxation because the period for the
5. Purchase of property by LGUs for want of filing of claims for refund or credit of local
bidder (Sec. 181, LGC); Property distrained taxes is counted not necessarily from the
not disposed within 120 days from date of date of payment but from the date the
distraint – considered sold to the LGU (Sec. taxpayer is entitled to a refund or credit.
175, LGC). C. Right of redemption – 1 yr. From the date
of sale or from the date of forfeiture (Sec.
 Jurisdiction of courts over local 181 LGC)
taxation cases:
1. The Court of Tax Appeals has no jurisdiction II. Judicial
over local taxation cases.
2. Regular judicial courts are not prohibited A. Appeal – any question on constitutionality
from enjoining the collection of local taxes, or legality of tax ordinance within 30 days
subject to Rule 58 (Preliminary Injunction) of from effectivity thereof to Secretary of
the Rules of Court. Justice (Sec. 187 LGC)
B. Court action – within 30 days after receipt
 Prescriptive Periods in the Assessment of decision or lapse of 60 days of
and Collection of Secretary of Justice’s inaction (Sec. 187
Local Taxes LGC)
- within 30 days from receipt when
protest of assessment is denied (Sec.
 Prescriptive Periods of Assessment 195 LGC)
1. Local taxes, fees, or charges – FIVE (5) - if no action is taken by the treasurer
YEARS from the date they became due. in refund cases and the two year period
(Sec. 194, LGC). is about to lapse (Sec. 195 LGC)
2. When there is fraud or intent to evade the - if remedies available does not provide
payment of taxes, fees or charges – TEN plain, speedy and adequate remedy.
(10) YEARS from discovery of the fraud or C. Action for declaratory relief
intent to evade the payment (Sec. 194, D. Injunction – if irreparable damage would
LGC). be caused to the taxpayer and no
adequate remedy is available.
 Prescriptive Period of Collection
Local taxes, fees, or charges may be
collected WITHIN FIVE (5) YEARS from the
date of assessment by administrative or judicial
action. No such action shall be instituted after REAL PROPERTY TAX REMEDIES
the expiration of such period (Sec. 194, LGC).
I. TAX REMEDIES OF THE LOCAL
 Grounds for the Suspension of the GOVERNMENT TO EFFECT
Running of the Prescriptive Periods: COLLECTION OF TAXES
1. The treasurer is legally prevented from the
1. Real Property tax lien (Secs. 246 and 251,
assessment or collection of the tax;
LGC);
2. The taxpayer requests for a reinvestigation
2. Distraint (Sec. 254, LGC);
and executes a waiver in writing before the
3. Levy (Sec. 254, LGC);
expiration of the period within which to
4. Civil Action – formal demand not required
assess or collect; and
(Sec. 266, LGC);
3. The taxpayer is out of the country or
5. Purchase of property by local treasurer for
otherwise cannot be located (Sec. 194,
want of bidder (Sec. 263, LGC).
LGC).
 “Property Discovered for the First Time”
II. TAX REMEDIES OF THE
Property that for so many years had not
TAXPAYER been declared and when discovered owner must
pay back taxes plus incremental penalties.
 The following are the remedies of the Assessed taxes shall cover not more than ten
taxpayer in local taxation: (10) years prior to the date of the initial
assessment.
 5. Seizure, Search, Arrest (Sec. 2205,
2210, 2211 TCC)/ forfeiture (Sec.
2530 TCC)
II. TAX REMEDIES OF THE TAXPAYER
 Remedies of the taxpayer:
I. Administrative
I. Administrative
A. Protest – payment under protest is required
within 30 days to provincial, city, or municipal A. Protest
treasurer a. Any importer or interested party if
B. Refund or tax credit – within 2 years from dissatisfied with published value within
the date the tax payer is entitled thereto (Sec. 15 days from date of publication
253 LGC) b. Taxpayer – within 15 days from
C. Redemption of real property (Sec. 261 assessment. Payment under protest is
LGC) necessary (Sec. 2308, 2210 TCC)
B. Refund – abatement or drawback (Sec.
II. Judicial 1701-1708 TCC)
C. Settlement of any seizure by payment
A. Appeal – within 60 days from assessment of fine or redemption – BUT this shall
of provincial, city or municipal assessor to not be allowed in any case where
LBAA (Sec. 226 LGC) importation is absolutely prohibited or
- within 30 days from receipt of decision the release would be contrary to law
of LBAA to CBAA (Sec. 230 LGC) (Sec. 2307 TCC)
- in case of denial of refund or credit, appeal
to BAA as in protest case (Sec. 253 II. Judicial
LGC) 2 A. Appeal – within 15 days to Commissioner
B. Court Action – appeal of CBAA’s decision 3 after notification by collector of his
to Supreme Court by certiorari. decision (Sec. 2313 TCC) within 30 days
C. Suit assailing validity of tax; recovery of from receipt of decision of the
refund of taxes paid (Sec. 64 PD 464). Commissioner or Secretary of Finance to
D. Suit to declare invalidity of tax due to the CTA (Sec. 2403 TCC, Sec. 7 RA
irregularity in assessment and collection 1125)
(Sec. 64 PD 464). B. Action to question the legality of seizure
E. Suit assailing the validity of tax sale (Sec. C. Abandonment (Sec. 1801 TCC)
83 PD 464)
 Two kinds of proceedings in the
Bureau of Customs (BOC):
1. Customs protest cases
 Condonation of Real Property Taxes 2. Customs seizure and forfeiture cases
a. Real property taxes may be condoned
wholly or partially in a given local A. Customs Protest Cases
government unit when
i. There is general failure of crops;
ii. There is substantial decrease in
 Definition: These are cases which deal solely
with liability for customs duties, fees, and other
the price of agricultural or
charges.
agribased products; or
iii. There is calamity.
b. By the President of the Philippines when  When customs protest applicable:
public interest so requires. The customs protest is required to be
filed only in case the liability of the taxpayer for
duties, taxes, fees and other charges is
TAX REMEDIES determined and the taxpayer disputes said
liability.
UNDER THE TARIFF AND CUSTOMS
CODE (TCC)  When Customs protest NOT required
Where there is no dispute, but the claim for
 Remedies of the Government to effect refund arises by reason of the happening of
collection of taxes: supervening events such as when the raw
1. Tax Lien (Sec. 1204 TCC) material imported is utilized in the production of
2. Reduction of customs finished products subsequently exported and a
duties/compromise – subject to duty drawback is claimed.
approval of Sec. of Finance (Sec.
709, 2316 TCC)  Requirements for making a protest:
3. Civil Action (Sec. 1204 TCC) a. must be in writing
4. Criminal Action b. must point out the particular decision or
ruling of the Collector of Customs to
 which exception is taken or objection B. Seizure and Forfeiture Cases
made;
c. must state the grounds relied upon for  Definition: These refer to matters involving
relief; smuggling. It is administrative and civil in nature
d. must be limited to the subject matter of and is directed against the res or imported
a single adjustment; articles and entails a determination of the
e. must be filed when the amount claimed legality of their importation. These are actions in
is paid or within 15 days after the rem.
payment;
f. protestant must furnish samples of  Smuggling
goods under protest when required.
A. An act of any person who shall:
4 1. Fraudulently import any article contrary to
 Procedure on Customs Protest Cases: 5 law, or
6 2. Assist in so doing, or
The Collector acting within his jurisdiction shall
7 3. Receive, conceal, buy, sell, facilitate,
cause the imported goods to be entered at the
customhouse 8 transport, conceal or sell such article
9 knowing its illegal importation (Sec. 3601,
 10 TCC)
The Collector shall assess, liquidate, and collect 4. Export contrary to law. (Sec. 3514, TCC)
the duties thereon, or detain the said goods if B. The Philippines is divided into various ports
the party liable does not pay the same of entry – entry other than port of entry, will
 be SMUGGLING.
The party adversely affected (the protestant)
may file a written protest on his foregoing liability  Evidence for conviction in smuggling
with the Collector within 15 days after paying the cases.
liquidated amount (the payment under protest Mere possession of the article in question -
rule applies) UNLESS defendant could explain that his
 possession is lawful to the satisfaction of the
Hearing within 15 days from receipt of the duly court (Sec. 3601, TCC). Payment of the tax due
presented protest. Upon termination of the after apprehension is not a valid defense
hearing, the Collector shall decide on the same (Rodriguez v. CA, 248 SCRA 288)
within 30 days
 Contraband: Articles of prohibited
importations or exportations. (Sec. 3514, TCC)
 
If decision is adverse If decision is adverse  Things subject to confiscation in
to the protestant to the Government smuggling cases:
Anything that was used for smuggling is
  subject to confiscation, like the vessel, plane,
Appeal with the Automatic review by
etc. (Llamado vs. Comm. of Customs, 1983).
Commissioner within Commissioner
EXCEPTION: Common carriers that are not
15 days from notice  privately chartered cannot be confiscated.
 Automatic review by
Appeal with the the Sec. of Finance  Right of customs officers to effect seizure
Court of Tax Appeals  & arrest
within 30 days from notice If decision of a. May seize any vessel, aircraft, cargo,
article, animal or other movable property
 Commissioner or when the same is subject to forfeiture or
Appeal with the Court of Sec. of Finance is liable for any time as imposed under
Appeals within 15 days adverse to the tariff and customs laws, rules &
from notice protestant, he may regulations
 appeal to the CTA, b. May exercise such powers only in
Appeal by certiorari with CA, and SC under conformity with the laws and provisions
the Supreme Court within the same procedure of the TCC (Sec. 2205)
15 days from notice on the left
 Doctrine of Hot Pursuit
 Reasons for the automatic review of Requisites:
decisions adverse to the Government 1. Over Vessels
1. To protect the interest of the Government a. An act is done in Phil. Waters which
2. A favorable decision will not be appealed by constitutes a violation of the tariff
the taxpayer and certainly a Collector will and customs laws
not appeal his own decision. b. a pursuit of such vessel began
3. Lifeblood Theory within the jurisdictional waters which
i. may continue beyond the
maritime zone, and
 ii.the vessel may be seized on the 
high seas. District collector renders his decisions
2. Over Imported Articles
a. There is a violation of the tariff and  
customs laws If decision is not If decision is not
b. As a consequence they may be favorable to the favorable to the
pursued in the Phils. aggrieved owner Government
c. With jurisdiction over them at any or importer 
place therein for the enforcement of  Automatic review by
the law. ( 2nd par. Sec. 603, TCC) Appeal by the aggrieved the Commissioner
owner or importer
 RTC vs. BOC
The RTCs do not have jurisdiction over  Requirements for customs forfeiture
seizure and forfeiture proceedings conducted by 1. The wrongful making by the owner,
the BOC and to interfere with these importer, exporter or consignee of any
proceedings. The Collector of Customs has declaration or affidavit, or the wrongful
exclusive jurisdiction over all questions touching making or delivery by the same persons of
on the seizure and forfeiture of dutiable goods. any invoice, letter or paper - all touching on
No petitions for certiorari, prohibition or the importation or exportation of
mandamus filed with the RTC will lie because merchandise.; and
these are in reality attempts to review the 2. That such declaration, affidavit, invoice,
Commissioner's actuations. Neither replevin filed letter or paper is false. (Farolan, Jr. v.
with the RTC will issue. Rationale: Doctrine of CTA, 217 SCRA 298)
Primary Jurisdiction.
 Places where searches & seizures may be
 Persons having police authority to enforce conducted:
the Tariff & Customs Laws and effect a. enclosures
searches, seizures and arrests: b. dwelling house (there must be search
a. officials of the BOC, district collectors, warrant issued by a judge)
police officers, agents, inspectors, and c. vessels or aircrafts and persons or
guests of the BOC; articles conveyed therein
b. officers of the Phil. Navy and other d. vehicles, beasts and persons
members of the AFP and national law e. persons arriving from foreign countries.
enforcement agencies when authorized
by the Commissioner of Customs
c. officials of the BIR on all cases falling
 Burden of proof in seizure or forfeiture:
within the regular performances of their claimant (Sec. 2535, TCC).
duties, when the payment of internal
taxes are involved;  Requirements for manifest
d. officers generally empowered by law to A manifest in coastwise trade for cargo
effect arrests and execute processes of and passengers transported from one place or
courts, when acting under the direction port in the Philippines to another is required
of the Collector. (Sec. 2203, TCC) when one or both of such places is a port of
entry (Sec. 906, TCC). Manifests are also
 Administrative and Judicial Procedures required of vessel from a foreign port (Sec.
relative to Customs Seizures and Forfeitures 1005, TCC).

Determination of probable cause and  Query: Is manifest required only for

issuance of warrant imported goods?
No. Articles subject to seizure do not
 have to be imported goods. Manifests are also
Actual seizure of the articles required for articles found on vessels or aircraft
 engaged in coastwise trade (Rigor vs. Rosales,
Listing of description, appraisal and 117 SCRA 780).
classification of seized property
  Unmanifested Cargo is subject to
Report of seizure to the Comm. of Customs Forfeiture whether the act of smuggling is
and the Chairman, Comm. on Audit established or not under the principle of res ipsa
 loquitur. It is enough that the cargo was
unmanifested and that there was no showing
Issuance by the Collector of a warrant of
that payment of duties thereon had been made
detention
for it to be subject to forfeiture.

Notification to owner or importer  Cargo, sea store, and provisions
 distinguished:
Formal hearing
1. Cargo: Article of value (including foreign exportation of mdse. greater than that
currencies), usually movables, other than legally due thereon. (Sec. 3602, TCC)
those as part of sea stores or provisions.
2. Sea Store: It is where the passengers can
buy their necessities.
3. Provisions: Those necessary for the
subsistence of the crew. VI. COURT OF TAX
 Settlement of Forfeiture Cases
APPEALS (RA 1125)
General Rule: Settlement of cases by payment
of fine or redemption of forfeited property is  Salient features of the CTA:
allowed. 1. It is a judicial body;
Exceptions: 2. It is a court of special jurisdiction;
1. the importation is absolutely prohibited or 3. It is not governed by technical rules of
2. the surrender of the property to the person evidence.
offering to redeem would be contrary to
law, or
3. when there is fraud. (Sec. 2307, TCC)
 Powers of the CTA:

 Acquittal in Criminal Charge NOT Res  The following are the powers of the CTA:
Judicata in Seizure or Forfeiture Proceedings 1. to administer oaths;
Reasons: 2. to receive evidence;
1. Criminal proceedings are actions in 3. to summon witnesses by subpoena;
personam while seizure or forfeiture 4. to require production or papers or
proceedings are actions in rem. documents by subpoena duces tecum;
2. Customs compromise does not extinguish 5. to punish contempt;
criminal liability (People vs. Desiderio, Nov. 6. to promulgate rules and regulations for
26, 1965). the conduct of its business;
7. to assess damage against appellant if
appeal to CTA is found to be frivolous or
 At any time prior to the sale, the delinquent
dilatory;
importer may settle his obligations with the
8. to suspend the collection of the tax
Bureau of Customs, in which case the aforesaid
pending appeal; and
articles may be delivered upon payment of the
9. to render decisions on cases brought
corresponding duties and taxes and compliance
before it.
with all other legal requirements (Sec. 1508,
TCC)
 Requisites for a Valid Suspension of
Collection of the Tax pending Appeal:
 Abatement
There must be a
The reduction or non-imposition of
1. Showing that collection of the tax may
customs duties on certain imported materials as
jeopardize the interest of the government
a result of:
and / or the taxpayer;
1. Damage incurred during voyage;
2. Deposit of the amount claimed or file a
2. Deficiency in contents packages
surety bond for not more than double the
3. Loss or destruction of articles after arrival
amount of tax with the Court when required;
4. Death or injury of animals
and
3. Showing by taxpayer that appeal is not
 Fraudulent Practices considered as frivolous nor dilatory.
Criminal Offenses against Customs Revenue
Laws:
 Jurisdiction of the CTA:
a. Unlawful importation;
b. Entry of imported or exported article by
means of any false or fraudulent  Exclusive appellate jurisdiction to review
practices, invoice, declaration, affidavit, on appeal:
or other documents; 1. decisions of CIR in –
c. Entry of goods at less than their true a. disputed assessments, refunds of internal
weights or measures or upon a revenue taxes, fees or other charges;
classification as to quality or value; penalties imposed in relation thereto; or
d. Payment of less than the amount due; b. other matters arising under the NIRC, or
e. Filing any false or fraudulent claim for other law or part of law administered by
the payment of drawback or refund of the BIR.
duties upon the exportation of 2. decision of Commissioner of Customs in –
merchandise; or a. cases involving liability from custom
f. Filing any affidavit, certificate or other duties, fees or other money charges;
document to secure to himself or others seizure, detention or release of property
the payment of any drawback, affected; fines, forfeitures or other
allowance or refund of duties on the penalties imposed in relation thereto; or
 b. other matters arising under the Customs
Law, or other law or part of law
administered by the Bureau of Customs

 “Other matters”
Those controversies which can be
considered within the scope of the
function of the BIR / BOC under
ejusdem generis rule (e.g. action for the
nullity of distraint and levy; questioning
the propriety of the assessment;
collection of compromise penalties).

 General Rule: New issues cannot be raised

for the first time on appeal.
Exceptions:
1. Defense of prescription
REASON: This is a statutory right (Visayan
Land Transportation vs Collector)
2. Errors of administrative officials
REASON: State can never be in estoppel
and lifeblood theory. (CIR vs Procter and
Gamble Phils. Mfg. Corp.)

 Simultaneous filing of an application for

refund or credit and institution of a case
before the CTA allowed
The law fixes the same period of two (2)
years for filing a claim for refund with the
Commissioner and for filing a case with the
CTA. The two-year period for both starts from
the date after the payment of the tax or penalty,
or from the approval of the application for credit.
Observation: If we are not going to
allow the taxpayer to file a refund before the
CTA and let him wait for the CIR’s decision, and
the latter failed to render a decision within the 2-
year period, the said taxpayer can no longer file
a refund before the CTA because his right to
appeal has prescribed.