Bar Star Notes - Domondon

8/10/2019 Bar Star Notes - Domondon

http://slidepdf.com/reader/full/bar-star-notes-domondon 1/96

“BAR STAR NOTES”

X ION

VER. 2010.06.12copyrighted 2010

Prepared by Pro. Abe!ardo T. "o#o$do$%AB %Eco$&' BS( %Acctg&' ))B' *A %Eco$&' ))*' "() %(a$d.&. )a+yer,(PA,(-to# Bro/er'

*a$age#e$t (o$-!ta$t' Proeor o )a+ a$d Pre,Bar Reie+er&

How to use the “BAR STAR NOTES.” The “BAR STAR NOTES” i$ the or# o -etio$ a$d

a$+er a +e!! a tet-a! dic-io$ +ere specially prepared by Prof. o!o"do" for the e#clusi$euse of Bar Re$iewees who atte"ded his %&'& (ectures o" TA)AT*ON he!d at the 3$ierity o thePhi!ippi$e. 4$c!-ded i$ the pree$tatio$ are doctri$e co$tai$ed i$ S-pre#e (o-rt deciio$ -p to Apri!

2010.

The p-rpoe o the 5BAR STAR NOTES” i to proide the Bar Reie+ee +ith a ha$dy reie+ #ateria!+hich ere a “#e#ory,ogger” or the Septe#ber 12' 2010 Bar Ea#i$atio$ i$ Taatio$. The a-thortrie to eco$d g-e +hat +o-!d be i$c!-ded i$ the Bar Ea# -i$g tatitica! a$a!yi. The act-a! Bar-etio$ #ay $ot be or#-!ated i$ the a#e #a$$er a the “BAR STAR NOTES”. 7o+eer' thedoctri$e teted i$ the Bar +o-!d i$ a!! probabi!ity be i$c!-ded i$ thee Note.

4 preed or ti#e' the a-thor -gget that the reader ho-!d oc- hi atte$tio$ o$ the o!!o+i$g8 Nice to /$o+ Sho-!d /$o+ *-t /$o+ a$d #ater 4t i -rther -ggeted that the reader ho-!d #ere!y bro+e thoe +itho-t tar.

+ARN*N,-

Thee #ateria! are copyrighted a$d9or baed o$ the +riter: boo/ o$ Taatio$ a$d -t-re reiio$. 4ti prohibited to reprod-ce a$y part o thee Note i$ a$y or# or a$y #ea$' e!ectro$ic or #echa$ica!'i$c!-di$g photocopyi$g +itho-t the +ritte$ per#iio$ o the a-thor. 3$a-thori;ed -er ha!! $ot beproec-ted b-t SHA(( BE SB/E0T TO THE (A+ O1 KARMA S0H THAT THE2 +*(( NE3ERPASS THE BAR OR +O( BE NHAPP2 *N (*1E or tea!i$g the i$te!!ect-a! property o the a-thor.

THE BEST O1 (04 AN A3AN0E

0ON,RAT(AT*ONS

X ION

,ENERA( PR*N0*P(ES O1 TA)AT*ON



TA)AT*ON5 *N ,ENERA(

'. State briefly a"d co"cisely the "ature of ta#atio". Alter"ati$ely5 defi"eta#atio".

S3<<ESTE" ANS=ER8 The i$here$t po+er o the oereig$ eercied thro-gh the !egi!at-re toi#poe b-rde$ -po$ -bect a$d obect +ithi$ it -ridictio$ or the p-rpoe o raii$g ree$-e to

carry o-t the !egiti#ate obect o goer$#e$t.

%. +hat is the "ature of the State6s power to ta# 7 E#plai" briefly. S3<<ESTE" ANS=ER8 The $at-re o the tate: po+er to ta i t+o,o!d. 4t i both a$ i$here$t po+era$d a !egi!atie po+er. 4t i i$here$t i$ $at-re bei$g a$ attrib-te o oereig$ty. Thi i o'beca-e +itho-t the tae' the tate: eite$ce +o-!d be i#peri!ed. There i th-' $o $eed or aco$tit-tio$a! gra$t or the tate to eercie thi po+er. 4t i a !egi!atie po+erbeca-e it i$o!e the pro#-!gatio$ o r-!e. Taatio$ i a et o r-!e' ho+ #-ch i the ta to be paid'+ho pay the ta' to +ho# it ho-!d be paid' a$d +he$ the ta ho-!d be paid.

8. +hat is the u"derlyi"9 theory of ta#atio" 7 E#plai" briefly. S3<<ESTE" ANS=ER8 Tae are the !ieb!ood o the $atio$. =itho-t ree$-e raied ro#taatio$' the goer$#e$t +i!! $ot -rie' re-!ti$g i$ detri#e$t to ociety. =itho-t tae' the goer$#e$t+o-!d be para!y;ed or !ac/ o #otie po+er to actiate a$d operate it. %Commissioner of Internal Revenue

v. Algue, Inc. et al., 1>? S(RA ?' 16,1@&

:. ;arshall said that5 “the power to ta# i"$ol$es the power to destroy.” O" theother ha"d5 Hol!es stated that “the power to ta# is "ot the power to destroy while the court sits.” Reco"cile the state!e"ts. *"the alter"ati$e5 what are the i!plicatio"s that flow fro! the abo$e state!e"ts 7

S3<<ESTE" ANS=ERS8 *arha!!: ie+ reer to a a!id ta +hi!e the 7o!#e: ie+ reer toa$ i$a!id ta. a. The i#poitio$ o a a!id ta co-!d $ot be -dicia!!y retrai$ed #ere!ybeca-e it +o-!d pre-dice tapayer: property. b. A$ i!!ega! ta co-!d be -dicia!!y dec!ared i$a!id a$d ho-!d $ot +or/ to pre-dice a tapayer: property.

<. iscuss briefly the basis=bases5 or ratio"ale of ta#atio".S3<<ESTE" ANS=ER8 a. Reciproca! d-tie o protectio$ a$d -pport bet+ee$ the tate a$d it citi;e$ a$d reide$t. A!o ca!!ed “y#biotic re!atio$” bet+ee$ the tate a$d it citi;e$.

b. -ridictio$ by the tate oer pero$ a$d property +ithi$ it territory.>. iscuss briefly but co!prehe"si$ely the ob?ecti$es or purposes of ta#atio".

S3<<ESTE" ANS=ER8 The p-rpoe or obectie o taatio$ are the o!!o+i$g8a. The pri#ary p-rpoe8 1& Ree$-e p-rpoe. b. The

eco$dary p-rpoe 1& S-#pt-ary or reg-!atory p-rpoe. 2&(o#pe$atory p-rpoe. & To i#p!e#e$t the po+er o e#i$e$t do#ai$.

@. isti"9uish a ta# fro! a lice"se fee. S3<<ESTE" ANS=ER8 The o!!o+i$g arethe diti$ctio$8 a. P-rpoe8 Ta i#poed or ree$-e +hi!e !ice$e ee or reg-!atio$. Ta orge$era! p-b!ic p-rpoe +hi!e !ice$e ee or reg-!atory p-rpoe o$!y. b. Bai8 Ta i#poed -$der po+er o taatio$ +hi!e !ice$e ee -$der po!ice po+er. c.

A#o-$t8 4$ taatio$' $o !i#it a to a#o-$t +hi!e !ice$e ee !i#ited to cot o the !ice$e a$d theepe$e o po!ice -rei!!a$ce a$d reg-!atio$. d. Ti#e o pay#e$t8 Tae

$or#a!!y paid ater co##e$ce#e$t o b-i$e +hi!e !ice$e ee beore. e. Eect o pay#e$t8 Cai!-re to pay a ta doe $ot #a/e the b-i$e i!!ega! +hi!e ai!-re to pay !ice$e ee #a/e b-i$ei!!ega!. . S-rre$der8 Tae' bei$g the !ieb!ood o the tate' ca$$ot be -rre$dered ecept or

!a+-! co$ideratio$ +hi!e a !ice$e ee #ay be -rre$dered +ith or +itho-t co$ideratio$. %(oo!ey o$

Taatio$' pp. 11@,11?D Pacific Commercial Company v. Romualdez, et al., F Phi!. F2&

. How !ay the power to ta# be utilied to carry out the social ?ustice pro9ra! of our 9o$er"!e"t 7 S3<<ESTE" ANS=ER8 The co#pe$atory p-rpoe o taatio$ i toi#p!e#e$t the ocia! -tice proiio$ o the co$tit-tio$ thro-gh the progreie yte# o taatio$'+hich +o-!d re-!t to e-a! ditrib-tio$ o +ea!th' etc.



Progreie i$co#e tae a!!eiate the #argi$ bet+ee$ rich a$d poor . %Southern Cross Cement

Corporation v. Cement Manufacturers Association of the Philippines, et al., <. R. No. 1>?>0' A-g-t ' 200>&

4$ rece$t year' the i$creai$g ocia! cha!!e$ge o the ti#e epa$ded the cope o the tate actiity'a$d taatio$ ha beco#e a too! to rea!i;e ocia! -tice a$d the e-itab!e ditrib-tio$ o +ea!th' eco$o#icprogre a$d the protectio$ o !oca! i$d-trie a +e!! a p-b!ic +e!are a$d i#i!ar obectie.

%Batangas Poer Corporation v. Batangas City, et al., <. R. No. 1>26@>' a$d co#pa$io$ cae' Apri! 2?' 200

citi$g !ational Poer Corporation v. City of Ca"anatuan, <. R. No. 1F110' Apri! F' 200&

C. E#plai" the su!ptuary purpose of ta#atio".S3<<ESTE" ANS=ER8 The -#pt-ary p-rpoe o taatio$ i to pro#ote the ge$era! +e!are a$d to

protect the hea!th' aety or #ora! o the i$habita$t. 4t i i$ the oi$t eercie o the po+er o taatio$a$d po!ice po+er +here reg-!atory tae are co!!ected. Taatio$ #ay be #ade the i#p!e#e$t o the tate: po!ice po+er. The #otiatio$ behi$d #a$y taatio$#ea-re i the i#p!e#e$tatio$ o po!ice po+er goa!. GSouthern Cross Cement Corporation v. Cement

Manufacturers Association of the Philippines, et al., <. R. No. 1>?>0' A-g-t ' 200>& The reader ho-!d $otethat the A-g-t ' 200> Southern Cross cae i the deciio$ o$ the #otio$ or reco$ideratio$ o the -!y?' 200 Southern Cross deciio$. The o,ca!!ed “i$ tae” o$ a!coho! a$d tobacco #a$-act-rer he!p di-ade the co$-#er ro#eceie i$ta/e o thee pote$tia!!y har#-! prod-ct. %Southern Cross Cement Corporation v. Cement

Manufacturers Association of the Philippines, et al., <. R. No. 1>?>0' A-g-t ' 200>&

'&. Ta#atio" disti"9uished fro! police power. Taatio$ i diti$g-ihab!e ro# po!icepo+er a to the #ea$ e#p!oyed to i#p!e#e$t thee p-b!ic goa!. Thoe doctri$e that are -$i-e totaatio$ aroe ro# pec-!iar co$ideratio$ -ch a thoe epecia!!y p-$itie eect %Southern CrossCement Corporation v. Cement Manufacturers Association of the Philippines, et al., <. R. No. 1>?>0'

A-g-t ' 200>& a the po+er to ta i$o!e the po+er to detroy a$d the be!ie that tae are !ieb!ood o the tate. %I"id.# t ae bei$g the !ieb!ood o the goer$#e$t' their pro#pt a$d certai$ aai!abi!ity i o theee$ce.”

Thee co$ideratio$ $eceitated the eo!-tio$ o taatio$ a a diti$ct !ega! co$cept ro# po!icepo+er. %I"id.&

''. How the power of ta#atio" !ay be used to i!ple!e"t power of e!i"e"t

do!ai". Ta #ea-re are b-t ”e$orced co$trib-tio$ eacted o$ pai$ o pe$a! a$ctio$” a$d “c!ear!yi#poed or p-b!ic p-rpoe.” 4$ #ot rece$t year' the po+er to ta ha i$deed beco#e a #ot eectietoo! to rea!i;e ocia! -tice' p-b!ic +e!are' a$d the e-itab!e ditrib-tio$ o +ea!th. %Commissioner ofInternal Revenue v. Central $uzon %rug Corporation, <.R. No. 1>F6@' Apri! 16' 200>&

Etab!ih#e$t gra$ti$g the 20H e$ior citi;e$ dico-$t #ay c!ai# the dico-$t gra$ted to e$iorciti;e$ as ta# deductio" baed o$ the $et cot o the good o!d or erice re$dered8 Provided ' Thatthe cot o the dico-$t ha!! be a!!o+ed a ded-ctio$ ro# gro i$co#e or the a#e taab!e year thatthe dico-$t i gra$ted. Provided, further, That the tota! a#o-$t o the c!ai#ed ta ded-ctio$ $et o a!-eadded ta i app!icab!e' ha!! be i$c!-ded i$ their gro a!e receipt or ta p-rpoe a$d ha!! be-bect to proper doc-#e$tatio$ a$d to the proiio$ o the Natio$a! 4$ter$a! Ree$-e (ode' aa#e$ded. GM.&. 'olding Corporation v. Court of Appeals, et al., <.R. No. 1601F' *arch ' 200? citi$g Epa$dedSe$ior (iti;e$ Act o 200' Sec. %a&I

'%. +hat are the three basic pri"ciples of a sou"d ta# syste!7 E#plai" eachbriefly. S3<<ESTE" ANS=ER8 The ca$o$ o a o-$d ta yte#' a!o /$o+$ a thecharacteritic or' pri$cip!e o a o-$d ta yte#' are -ed a a criteria i$ order to deter#i$e +hether ata yte# i ab!e to #eet the p-rpoe or obectie o taatio$. They are8 a. Cica! ade-acy.

b. Ad#i$itratie eaibi!ity.c. Theoretica! -tice.



'8. +hat are the ele!e"ts or characteristics of a ta# 7 S3<<ESTE" ANS=ER8a. E$orced co$trib-tio$.

b. <e$era!!y payab!e i$ #o$ey. c. Proportio$ate i$ character. d. )eied o$ pero$' property or eercie o a right or prii!ege. e. )eied by the tate hai$g -ridictio$.

. )eied by the !egi!at-re. g. )eied or a p-b!ic p-rpoe. h. Paid at reg-!ar period or i$tera!.

':. State the reDuisites of a $alid ta#. S3<<ESTE" ANS=ER8

a. A a!id ta ho-!d be +ithi$ the -ridictio$ o the tai$g a-thority.b. That the ae#e$t a$d co!!ectio$ o certai$ /i$d %The a#e a the i$here$t !i#itatio$ o

the po+er o taatio$& ho-!d be or a p-b!ic p-rpoe. c. The r-!e o taatio$ ho-!d be -$ior#. d. That either the pero$ or property o tae g-ara$tee agai$t i$-tice to i$diid-a!'epecia!!y by +ay or $otice a$d opport-$ity or heari$g be proided.

e. The ta #-t $ot i#pi$ge o$ the i$here$t a$d (o$tit-tio$a! !i#itatio$ o$ the po+er o

taatio$. '<. +hat are the classes or i"ds of ta#es

accordi"9 to the sub?ect !atter or ob?ect 7 S3<<ESTE" ANS=ER8a. Pero$a!' po!! or capita!i;atio$ J i#poed o$ a!! reide$t' +hether citi;e$ or $ot. Ea#p!e

J (o##-$ity Ta. b. Property , 4#poed o$ property. Ea#p!e J Rea! property ta.

c. Ecie J i#poed -po$ the peror#a$ce o a$ act' the e$oy#e$t o a prii!ege or the e$gagi$gi$ a$ occ-patio$. Ea#p!e J i$co#e ta' etate ta.

'>. +hat are the i"ds of ta#es classified as to who bears the burde" 7 E#plai"

each briefly. S3<<ESTE" ANS=ER8 Baed o$ the poibi!ity o hiti$g the i$cide$ce o

taatio$' or a to +ho ha!! bear the b-rde$ o taatio$' tae #ay be c!aiied i$to8 a. "irect tae. Thoe that are etracted ro# the ery pero$ +ho' it i i$te$ded or deired'

ho-!d pay the# %Commissioner of Internal Revenue v. Philippine $ong %istance (elephone Company, <. R. No.

1020' "ece#ber 1>' 200>&D they are i#poitio$ or +hich a tapayer i direct!y !iab!e o$ the tra$actio$or b-i$e he i e$gaged i$' %Commissioner of Internal Revenue v. Philippine $ong %istance (elephone

Company, supra& +hich !iabi!ity ca$$ot be hited or tra$erred to a$other. Ea#p!e J i$co#e ta' etateta' do$or: ta' etc. b. 4$direct tae are thoe that are de#a$ded i$ the irt i$ta$ce' ro#' or are paid by' o$e pero$i$ the epectatio$ a$d i$te$tio$ that he ca$ hit the b-rde$ to %Commissioner of Internal Revenue v.

Philippine $ong %istance (elephone Company, supra& to o#eo$e e!e $ot a a ta b-t a part o the p-rchae

price. %Commissioner, of Internal Revenue v. American &)press International, Inc. *Philippine Branch#, <.R. No. 1>260F' -$e 2F' 200> citi$g ario- cae a$d a-thoritie& Ea#p!e J a!-e added ta %VAT&'doc-#e$tary ta#p ta' ecie ta' perce$tage ta' etc.

'@. Silair FSi"9aporeG PTE5 (td.5 a" i"ter"atio"al carrier5 purchased a$iatio"9as fro! Petro" 0orporatio"5 which it uses for its operatio"s. *t "ow clai!s forrefu"d or ta# credit for the e#cise ta#es it paid clai!i"9 that it is e#e!pt fro! the

pay!e"t of e#cise ta#es u"der the pro$isio"s of Sec. '8< of the N*R0 of 'CC@ whichpro$ides that petroleu! products are e#e!pt fro! e#cise ta#es whe" sold to “Ee#pt

e$titie or age$cie coered by ta treatie' co$e$tio$' a$d other i$ter$atio$a! agree#e$t or their -e a$dco$-#ptio$8 Proided' ho+eer' That the co-$try o aid oreig$ i$ter$atio$a! carrier or ee#pt e$titie or age$cieee#pt ro# i#i!ar tae petro!e-# prod-ct o!d to Phi!ippi$e carrier' e$titie or age$cie”

Silair further a"chors its clai! o" Article :F%G of the Air Tra"sport A9ree!e"tbetwee" the ,o$er"!e"t of the Republic of the Philippi"es a"d the ,o$er"!e"t ofthe Republic of Si"9apore FAir Tra"sport A9ree!e"t betwee" RP a"d Si"9aporeGwhich reads- “C-e!' !-brica$t' pare part' reg-!ar e-ip#e$t a$d aircrat tore i$trod-ced i$to' or ta/e$ o$



board aircrat i$ the territory o o$e (o$tracti$g party by' or o$ beha! o' a deig$ated air!i$e o the other (o$tracti$gParty a$d i$te$ded o!e!y or -e i$ the operatio$ o the agreed erice ha!!' +ith the eceptio$ o chargecorrepo$di$g to the erice peror#ed' be ee#pt ro# the a#e c-to# d-tie' i$pectio$ ee a$d other d-tie ortae i#poed i$ the territorie o the irt (o$tracti$g Party ' ee$ +he$ thee -pp!ie are to be -ed o$ the part othe o-r$ey peror#ed oer the territory o the (o$tracti$g Party i$ +hich they are i$trod-ced i$to or ta/e$ o$ board. The #ateria! reerred to aboe #ay be re-ired to be /ept -$der c-to# -periio$ a$d co$tro!.”

Silair liewise ar9ues that it is e#e!pt fro! i"direct ta#es because the Air

Tra"sport A9ree!e"t betwee" RP a"d Si"9apore 9ra"ts e#e!ptio" “fro! the sa!ecusto!s duties5 i"spectio" fees a"d other duties or ta#es i!posed i" the territory ofthe first 0o"tracti"9 Party. *t i"$oes ;aceda $. ;acarai95 /r.5 ,.R. No. %C'5 ;ay 8'5'CC'5 'C@ S0RA @@'.which upheld the clai! for ta# credit or refu"d by the Natio"alPower 0orporatio" FNP0G o" the 9rou"d that the NP0 is e#e!pt e$e" fro! thepay!e"t of i"direct ta#es.

*s Silair e"titled to the ta# refu"d or credit it sees 7 Reaso" out your a"swer.S3<<ESTE" ANS=ER8 Si!/air i $ot e$tit!ed to ta re-$d or credit or the o!!o+i$g reao$8a. The ecie ta o$ aiatio$ -e! i a$ i$direct ta. The proper party to -etio$' or ee/ a re-$d o'

a$ i$direct ta i the tat-tory tapayer' the pero$ o$ +ho# the ta i i#poed by !a+ a$d +ho paid thea#e ee$ i he hit the b-rde$ thereo to a$other. %Philippine +eothermal, Inc. v. Commissioner of Internal

Revenue, <.R. No. 1>02?' -!y 2F' 200>' 6> S(RA 0?' 1@,1?& The N4R( proide that the ecie ta

ho-!d be paid by the #a$-act-rer or prod-cer beore re#oa! o do#etic prod-ct ro# p!ace oprod-ctio$. Th-' Petro$ (orporatio$' $ot Si!/air' i the tat-tory tapayer +hich i e$tit!ed to c!ai# are-$d baed o$ Sectio$ 1> o the N4R( o 1FF@ a$d Artic!e %2& o the Air Tra$port Agree#e$t bet+ee$RP a$d Si$gapore.

Ee$ i Petro$ (orporatio$ paed o$ to Si!/air the b-rde$ o the ta' the additio$a! a#o-$t bi!!edto Si!/air or et -e! i $ot a ta b-t part o the price +hich Si!/air had to pay a a p-rchaer. GPhilippine

Acetylene Co., Inc. v. Commissioner of Internal Revenue, 12@ Phi!. 61' @0 %1F6@&I

b. Si!/air co-!d $ot ee/ re-ge -$der Maceda v. Macaraig, r., <.R. No. ??2F1' *ay 1' 1FF1'1F@ S(RA @@1.+hich -phe!d the c!ai# or ta credit or re-$d by the Natio$a! Po+er (orporatio$ %NP(& o$the gro-$d that the NP( i ee#pt ee$ ro# the pay#e$t o i$direct tae.

4$ Commissioner of Internal Revenue v. Philippine $ong %istance (elephone Company ' <.R. No.1020' "ece#ber 1>' 200>' @? S(RA 61 the S-pre#e (o-rt c!ariied the r-!i$g i$ Maceda v. Macaraig,r., i;8 4t #ay be o that i$ Maceda vs. Macaraig, r.' the (o-rt he!d that a$ ee#ptio$ ro# “all ta#es”

gra$ted to the Natio$a! Po+er (orporatio$ %NP(& -$der it charter i$c!-de both direct a$d i$direct tae. A$ ee#ptio$ ro# “a!! tae” ec!-de i$direct tae' -$!e the ee#pti$g tat-te' !i/e NP(:charter' i o co-ched a to i$c!-de i$direct ta ro# the ee#ptio$. The a#e$d#e$t -$der Rep-b!ic ActNo. 6F> e$-#erated the detai! coered by NP(: ee#ptio$. S-be-e$t!y' P.". ?0' #ade ee$ #orepeciic the detai! o the ee#ptio$ o NP( to coer' a#o$g other' both direct a$d i$direct tae o$ a!!petro!e-# prod-ct -ed i$ it operatio$. Preide$tia! "ecree No. F? GNP(: a#e$ded charterI a#e$dedthe ta ee#ptio$ by i#p!iyi$g the a#e !a+ i$ ge$era! ter#. 4t -cci$ct!y ee#pt NP( ro# “a!! or#o tae' d-tie' eeK” The -e o the phrae “a!! or#” o tae de#o$trate the i$te$tio$ o the !a+ togie NP( a!! the ta ee#ptio$ it ha bee$ e$oyi$g beore.

The ee#ptio$ gra$ted -$der Sectio$ 1> %b& o the N4R( o 1FF@ a$d Artic!e %2& o the AirTra$port Agree#e$t bet+ee$ RP a$d Si$gapore ca$$ot' +itho-t a c!ear ho+i$g o !egi!atie i$te$t' beco$tr-ed a i$c!-di$g i$direct tae. Stat-te gra$ti$g ta ee#ptio$ #-t be co$tr-ed i$ trictii#i

-ri agai$t the tapayer a$d !ibera!!y i$ aor o the tai$g a-thority' a$d i a$ ee#ptio$ i o-$d to eit'it #-t $ot be e$!arged by co$tr-ctio$. %Sil-air *Singapore# P(&, $td., v. Commissioner of Internal Revenue,

<.R. No. 1@>F' Cebr-ary 6' 200?&

'. +hat are the differe"t i"ds of ta#es classified asto purpose 7 S3<<ESTE" ANS=ER8 a. <e$era!' ica! orree$-e J i#poed or the p-rpoe o raii$g p-b!ic -$d or the erice o the goer$#e$t.b. Specia! or reg-!atory J i#poed pri#ari!y or the reg-!atio$ o -e-! or $o$,-e-! occ-patio$ ore$terprie a$d eco$dari!y o$!y or the raii$g o p-b!ic -$d.

(*;*TAT*ONS OR RESTR*0T*ONS ON THE PO+ER



'. Purpose for the li!itatio"s o" the power of ta#atio".The i$here$t a$d co$tit-tio$a! !i#itatio$ to the power of ta#atio" are safe9uards +hich +o-!d pree$tab-e i$ the eercie o thi other+ie -$!i#ited a$d p!e$ary po+er. The !i#itatio$ a!o ere a a ta$dard to #ea-re the a!idity o a ta !a+ or the act o a tai$ga-thority. A io!atio$ o the !i#itatio$ ere to i$a!idate a ta !a+ or act i$ the eercie o the po+er to

ta.

*NHERENT (*;*TAT*ONS

'. +hat are the i"here"t li!itatio"s o" the power of ta#atio" 7 S3<<ESTE" ANS=ERS8

a. P-b!ic p-rpoe. The ree$-e co!!ected ro# taatio$ ho-!d be deoted to a p-b!ic p-rpoe. b. No i#proper de!egatio$ o !egi!atie a-thority to ta. O$!y the !egi!at-re ca$ eercie the po+er o tae -$!e the a#e i de!egated to o#e other goer$#e$ta! body by the co$tit-tio$ or thro-gh a!a+ +hich doe $ot io!ate a$y proiio$ o the co$tit-tio$. c. Territoria!ity. The tai$g po+er ho-!d be eercied o$!y +ithi$ territoria! bo-$darie o the tai$ga-thority. d. Recog$itio$ o goer$#e$t ee#ptio$D a$d

e. Obera$ce o the pri$cip!e o co#ity. (o#ity i the repect accorded by $atio$ to each otherbeca-e they are e-a!. O$ the other ha$d taatio$ i a$ act o oereig$. Th-' the po+er ho-!d bei#poed -po$ e-a! o-t o repect. So#e a-thoritie i$c!-de $o do-b!e taatio$.

%. +hat are the pri"ciples to co"sider i" the deter!i"atio" of whether ta#re$e"ues are de$oted for a public purpose 7

S3<<ESTE" ANS=ER8

a. The ta ree$-e are or a p-b!ic p-rpoe i -ti!i;ed or the be$eit o the co##-$ity i$ ge$era!. A$ a!ter$atie #ea$i$g i that ta proceed ho-!d be -ti!i;ed o$!y to attai$ the obectie ogoer$#e$t. b. 4$e-a!itie re-!ti$g ro# the i$g!i$g o-t o o$e partic-!ar c!a or taatio$ or ee#ptio$ i$ri$ge$o co$tit-tio$a! !i#itatio$.

REASON8 4t i i$here$t i$ the po+er to ta that the !egi!at-re i ree to e!ect the -bect otaatio$. BAS4S8 The !ieb!ood theory. c. A$ i$diid-a! tapayer $eed $ot derie direct be$eit ro# the ta.

REASON8 The para#o-$t co$ideratio$ i the +e!are o the greater portio$ o the pop-!atio$. d. A ta #ay be i#poed' $ot o #-ch or ree$-e p-rpoe' b-t -$der po!ice po+er or thege$era! +e!are o the co##-$ity. Thi +o-!d ti!! be or a p-b!ic p-rpoe. e. P-b!ic p-rpoe co$ti$-a!!y epa$di$g. Area or#er!y !et to priate i$itiatie $o+ !oe theirbo-$darie a$d #ay be -$derta/e$ by the goer$#e$t i it i to #eet the i$creai$g ocia! cha!!e$ge othe ti#e. . Ta ree$-e #-t $ot be -ed or p-re!y priate p-rpoe or or the ec!-ie be$eit opriate pero$. g. Priate pero$ #ay be be$eited b-t -ch be$eit ho-!d be #ere!y i$cide$ta! a it #ai$

obect i the be$eit o the co##-$ity i$ ge$era!. h. "eter#i$ed at the ti#e o e$act#e$t o ta !a+ a$d $ot at the ti#e o i#p!e#e$tatio$. i. There i a pre-#ptio$ o p-b!ic p-rpoe ee$ i the ta !a+ doe $ot peciica!!y proide orit p-rpoe. %Santos Co., v. Municipality of Meycauayan, et al .' F Phi!. 10@&

. P-b!ic -e i $o !o$ger co$i$ed to the traditio$a! $otio$ o -e by the p-b!ic b-t he!dy$o$y#o- +ith p-b!ic i$teret' p-b!ic be$eit' p-b!ic +e!are' a$d p-b!ic co$e$ie$ce. %Commissioner ofInternal Revenue v. Central $uzon %rug Corporation, <.R. No. 1>F6@' Apri! 16' 200>&

8. A law was e"acted i!posi"9 a ta# o" !a"ufacturers of coco"ut oil5 the



proceeds of which are to be used e#clusi$ely for the protectio" a"d pro!otio" of thecoco"ut i"dustry5 "a!ely5 to i!pro$e the wori"9 co"ditio"s i" coco"ut !ills a"d toco"duct research o" the use of coco"ut oil for !otor fuel. So!e of the!a"ufacturers of coco"ut oil challe"9e the $alidity of the law5 co"te"di"9 that the ta#is to be used for a pri$ate purpose5 a"d therefore5 the law $iolates the rule that publicre$e"ues shall "ot be appropriated for a"ythi"9 but a public purpose. ecide withreaso".

S3<<ESTE" ANS=ER8 The !ey i or a p-b!ic p-rpoe. 4t ca$$ot be de$ied that the coco$-ti$d-try i o$e o the #aor i$d-trie -pporti$g the $atio$a! eco$o#y. 4t i' thereore' the tate:co$cer$ to #a/e it a tro$g a$d ec-re o-rce $ot o$!y o the !ie!ihood o the ig$iica$t eg#e$t o thepop-!atio$' b-t a!o o eport ear$i$g' the -tai$ed gro+th o +hich i o$e o the i#peratie oeco$o#ic gro+th. %Philippine Coconut Producers /ederation, Inc. *Cocofed v. Presidential Commission on+ood +overnment, 1@? S(RA 26' 2>2&

:. ReDuisites for ta#payers5 co"cer"ed citie"s5 $oters or le9islators to ha$elocus standi to sue. a. 4$ ge$era!' the cae ho-!d i$o!e co$tit-tio$a! i-e. %%avid, et al., v. President +loria

Macapagal0Arroyo, etc., et al., <. R. No. 1@1F6' *ay ' 2006&

b. Cor tapayer' there #-t be a ho+i$g81& That ta #o$ey i “bei$g etracted a$d pe$t i$ io!atio$ o peciic co$tit-tio$a!

protectio$ agai$t ab-e o !egi!atie po+er.” %/last v. Cohen' F2 3.S. ?&

2& That p-b!ic #o$ey i bei$g de!ected to a$y i#proper p-rpoe %Pascual v. Secretary of

Pu"lic 1or-s' 110 Phi!. & or a c!ai# o i!!ega! dib-re#e$t o p-b!ic -$d or that the ta#ea-re i -$co$tit-tio$a!. %%avid, supra&

& A tapayer i a!!o+ed to -e +here there i a c!ai# that p-b!ic -$d are i!!ega!!y dib-red'or that p-b!ic #o$ey i bei$g de!ected to a$y i#proper p-rpoe' or that there i a +atage op-b!ic -$d thro-gh the e$orce#e$t o a$ i$a!id or -$co$tit-tio$a! !a+. % A"aya v. &"dane, <. R. No. 16@F1F' Cebr-ary 1' 200@D +arcia v. &nri2uez, r. <.R. No. 1126>> "ece#ber F' 1FF'*i$-te Reo!-tio$ # A tapayer: -it i proper!y bro-ght o$!y +he$ there i a$ eercie o the pe$di$g ortai$g po+er o (o$gre. % Automotive Industry 1or-ers Alliance *AI1A#,etc., et al., v. Romulo, etc. ,etal., <. R. No. 1>@>0F' a$-ary 1?' 200> citi$g +onzales v. !arvasa, <. R. No. 10?>' A-g-t 1' 2000'@ S(RA @' @1&

c. Cor oter' there #-t be a ho+i$g o obio- i$teret i$ the a!idity o the e!ectio$ !a+ i$-etio$. d. Cor co$cer$ed citi;e$' there #-t be a ho+i$g that the i-e raied are o tra$ce$de$ta!i#porta$ce +hich #-t be ett!ed ear!y. e. Cor !egi!ator' there #-t be a c!ai# that the oicia! actio$ co#p!ai$ed o i$ri$ge -po$ theirprerogatie a !egi!ator. %%avid, et al., v. President +loria Macapagal0Arroyo, etc., et al., <. R. No.1@1F6' *ay ' 2006&

<. O"ly those directly affected ha$e locus standi to i!pu9" the alle9ed

e"croach!e"t by the e#ecuti$e depart!e"t i"to the le9islati$e do!ai" of 0o"9ress. a. O$!y thoe +ho ha!! be direct!y aected by -ch eec-tie e$croach#e$t' -ch a or ea#p!ee#p!oyee +ho +o-!d i$d the#e!e -bect to dicip!i$ary po+er that #ay be i#poed -$der the-etio$ed Eec-tie Order a they hae a direct a$d peciic i$teret i$ raii$g the -bta$tie i-etherei$ *Automotive Industry 1or-ers Alliance *AI1A#,etc., et al., v. Romulo, etc. ,et al., <. R. No.1>@>0F' a$-ary 1?' 200>& or e#p!oyee +ho are goi$g to be de#oted' tra$erred or other+ie aectedby a$y pero$$e! actio$ -bect o the r-!e o$ eha-tio$ o ad#i$itratie re#edie.

b. *oreoer' a$d i at a!!' o$!y (o$gre' ca$ c!ai# a$y i$-ry ro# the a!!eged eec-tiee$croach#e$t o the !egi!atie -$ctio$ to a#e$d' #odiy a$d9or repea! !a+. % Automotive Industry1or-ers Alliance *AI1A#,etc., et al., supra, citi$g +onzales v. !arvasa, <. R. No. 10?>' A-g-t1'2000' @ S(RA @' @1&



>. Locus standi bei"9 !erely a !atter of procedure5 ha$e bee" wai$ed i" certai"

i"sta"ces where a party who is "ot perso"ally i"?ured !ay be allowed to bri"9 suit. The o!!o+i$g are ea#p!e o i$ta$ce +here -it hae bee$ bro-ght by partie +ho hae $ot haebee$ pero$a!!y i$-red by the operatio$ o a !a+ or a$y other goer$#e$t act b-t by co$cer$ed citi;e$'tapayer or oter +ho act-a!!y -e i$ the p-b!ic i$teret8 a. Tapayer: -it to -etio$ co$tract e$tered i$to by the $atio$a! goer$#e$t or goer$#e$t,

o+$ed or co$tro!!ed corporatio$ a!!eged!y i$ co$trae$tio$ o the !a+.b. A tapayer i a!!o+ed to -e +here there i a c!ai# that p-b!ic -$d are i!!ega!!y dib-red' or

that p-b!ic #o$ey i bei$g de!ected to a$y i#proper p-rpoe' or that there i a +atage o p-b!ic -$dthro-gh the e$orce#e$t o a$ i$a!id or -$co$tit-tio$a! !a+. % A"aya v. &"dane, <. R. No. 16@F1F'Cebr-ary 1' 200@&

@. The 3AT law pro$ides that5 the Preside"t5 upo" the reco!!e"datio" of theSecretary of 1i"a"ce5 shall5 effecti$e /a"uary '5 %&&>5 raise the rate of $alueaddedta# to twel$e perce"t F'%IG after a"y of the followi"9 co"ditio"s ha$e bee" satisfied.“FiG $alueadded ta# collectio" as a perce"ta9e of ,ross o!estic Product F,PG ofthe pre$ious year e#ceeds two a"d fourfifth perce"t F% :=<IG or FiiG "atio"al9o$er"!e"t deficit as a perce"ta9e of ,P of the pre$ious year e#ceeds o"e a"d

o"ehalf perce"t F' JIG.” +as there a" i"$alid dele9atio" of le9islati$e power 7 S3<<ESTE" ANS=ER8 No. There i $o -$d-e de!egatio$ o !egi!atie po+er b-t o$!y o thedicretio$ a to the eec-tio$ o the !a+. Thi i co$tit-tio$a!!y per#iib!e. (o$gre doe $ot abdicate it -$ctio$ or -$d-!y de!egate po+er +he$ it decribe +hat ob #-t bedo$e' +ho #-t do it' a$d +hat i the cope o hi a-thority. 4$ the aboe cae the Secretary o Ci$a$cebeco#e #ere!y the age$t o the !egi!atie depart#e$t' to deter#i$e a$d dec!are the ee$ -po$ +hichit epreed +i!! ta/e p!ace. The Preide$t ca$$ot et aide the i$di$g o the Secretary o Ci$a$ce'+ho i $ot -$der the co$ditio$ acti$g a the eec-te a!ter ego or -bordi$ate. . G A"a-ada +uro Party$ist *etc.# v. &rmita, etc., et al., <. R. No. 16?0>6' Septe#ber 1' 200> a$d co#pa$io$ cae citi$g ario-caeII

. *"sta"ces of proper dele9atio"- +he" ta#i"9 power could be dele9ated- E#ceptio"s to the rule o" "o"dele9atio"- a. "e!egatio$ o tari po+er by (o$gre to the Preide$t -$der the !eib!e tari c!a-e' Sectio$ 2?

%2&' Artic!e V4 o the (o$tit-tio$. b. "e!egatio$ o e#erge$cy po+er to the Preide$t -$der Sectio$ 2 %2& o Artic!e V4 o the(o$tit-tio$. c. The de!egatio$ to the Preide$t o the Phi!ippi$e to e$ter i$to eec-tie agree#e$t' a$d to ratiytreatie +hich #ay co$tai$ ta ee#ptio$ proiio$ -bect to the co$c-rre$ce by the Se$ate i$ theratiicatio$ #ade by the Preide$t. d. "e!egatio$ to the peop!e at !arge. e. "e!egatio$ to ad#i$itratie bodie G A"a-ada +uro Party $ist */ormerly AASS#, etc., v, &rmita, etal., <. R. No.16?0>6' Septe#ber 1' 200>I' +hich i reerred to a -bordi$ate !egi!atio$. 4$ thi i$ta$ce' there i a re-ire#e$t that the !a+ i co#p!ete i$ a!! apect o +hat i de!egated

i #ere!y the i#p!e#e$tatio$ o the !a+ or there eit -icie$t!y deter#i$ate ta$dard to g-ide thede!egate a$d pree$t a tota! tra$ere$ce o the tai$g po+er.

C. “Paradi9! shift” fro! e#clusi$e 0o"9ressio"al power to direct 9ra"t of ta#i"9power to local le9islati$e bodies. The po+er to ta i $o !o$ger eted ec!-ie!y o$ (o$greD!oca! !egi!atie bodie are $o+ gie$ direct a-thority to !ey tae' ee a$d other charge p-r-a$t to

Artic!e L' ectio$ > o the 1F?@ (o$tit-tio$. %Batangas Poer Corporation v. Batangas City, et al. <. R. No.1>26@>' a$d co#pa$io$ cae' Apri! 2?' 200 citi$g !ational Poer Corporation v. City of Ca"anatuan, <. R. No.1F110' Apri! F' 200&



)oca! goer$#e$t !egi!atio$' “i $ot regarded a a tra$er o ge$era! !egi!atie po+er' b-t rathera the gra$t o a-thority to precribe !oca! reg-!atio$' accordi$g to i##e#oria! practice' -bect' o

co-re' to the i$terpoitio$ o the -perior i$ cae o $eceity.” %People v. 3era' 6> Phi!. >6&

'&. Ta#i"9 power of the local 9o$er"!e"t is li!ited. The tai$g po+er o !oca!goer$#e$t i !i#ited i$ the e$e that (o$gre ca$ e$act !egi!atio$ gra$ti$g ta ee#ptio$.

=hi!e the yte# o !oca! goer$#e$t taatio$ ha cha$ged +ith the o$et o the 1F?@ (o$tit-tio$' thepo+er o !oca! goer$#e$t -$it to ta i ti!! !i#ited.

=hi!e the po+er to ta by !oca! goer$#e$t #ay be eercied by !oca! !egi!atie bodie' $o !o$ger#ere!y by irt-e o a a!id de!egatio$ a beore' b-t p-r-a$t to direct a-thority co$erred by Sectio$ >'

Artic!e L o the (o$tit-tio$' the baic doctri$e o$ !oca! taatio$ re#ai$ ee$tia!!y the a#e' 4the poer to ta) is 5still6 primarily vested in the Congress.7 %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <.R. No. 1660?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc.,<.R. No. 16201>' *arch 6' 2006' ? S(RA 16F i$ t-r$ reerri$g to Mactan Ce"u International Airport Authority, v.Marcos, <.R. No. 1200?2' Septe#ber 11' 1FF6' 261 S(RA 66@' 6?0 #

''. 1urther a!plificatio" by Ber"as of the local 9o$er"!e"t6s power to ta#. “=hati the eect o Sectio$ > o$ the ica! poitio$ o #-$icipa! corporatio$M Sectio$ > doe $ot cha$ge thedoctri$e that #-$icipa! corporatio$ do $ot poe i$here$t po+er o taatio$. =hat it doe i to co$er

#-$icipa! corporatio$ a ge$era! po+er to !ey tae a$d other+ie create o-rce o ree$-e. They $o!o$ger hae to +ait or a tat-tory gra$t o thee po+er. The po+er o the !egi!atie a-thority re!atie tothe ica! po+er o !oca! goer$#e$t ha bee$ red-ced to the a-thority to i#poe !i#itatio$ o$#-$icipa! po+er. *oreoer' thee !i#itatio$ #-t be “co$ite$t +ith the baic po!icy o !oca!a-to$o#y.” The i#porta$t !ega! eect o Sectio$ > i th- to reere the pri$cip!e that do-bt arereo!ed agai$t #-$icipa! corporatio$. 7e$ceorth' i$ i$terpreti$g tat-tory proiio$ o$ #-$icipa!ica! po+er' do-bt +i!! be reo!ed i$ aor o #-$icipa! corporatio$. 4t i -$dertood' ho+eer' thattae i#poed by !oca! goer$#e$t #-t be or a p-b!ic p-rpoe' -$ior# +ithi$ a !oca!ity' #-t $ot beco$icatory' a$d #-t be +ithi$ the -ridictio$ o the !oca! -$it to pa.” %8uezon City, et al., v. ABS0CB!Broadcasting Corporation' <. R. No. 1660?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan(elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' ? S(RA 16F&

'%. Reco"ciliatio" of the local 9o$er"!e"t6s authority to ta# a"d the

0o"9ressio"al 9e"eral ta#i"9 power. (o$gre ha the i$here$t po+er to ta' +hich i$c!-dethe po+er to gra$t ta ee#ptio$. O$ the other ha$d' the po+er o !oca! goer$#e$t' -ch aproi$ce a$d citie or ea#p!e -e;o$ (ity' to ta i precribed by Sectio$ 1>1 i$ re!atio$ to Sectio$1@ o the )<( +hich epre!y proide that $ot+ithta$di$g a$y ee#ptio$ gra$ted by a$y !a+ or otherpecia! !a+' the (ity or a proi$ce #ay i#poe a ra$chie ta. 4t #-t be $oted that Sectio$ 1@ o the)<( doe $ot prohibit gra$t o -t-re ee#ptio$.

The S-pre#e (o-rt i$ a erie o cae ha -tai$ed the po+er o (o$gre to gra$t ta ee#ptio$oer a$d aboe the po+er o the !oca! goer$#e$t: de!egated po+er to ta. %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 1660?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' ? S(RA 16&

“4$deed' the gra$t o tai$g po+er to !oca! goer$#e$t -$it -$der the (o$tit-tio$ a$d the )<( doe$ot aect the po+er o (o$gre to gra$t ee#ptio$ to certai$ pero$' p-r-a$t to a dec!ared $atio$a!po!icy. The !ega! eect o the co$tit-tio$a! gra$t to !oca! goer$#e$t i#p!y #ea$ that i$ i$terpreti$gtat-tory proiio$ o$ #-$icipa! tai$g po+er' do-bt #-t be reo!ed i$ aor o #-$icipa!corporatio$.” GI"id.' reerri$g to Philippine $ong %istance (elephone Company, Inc. *P$%(# vs. City of %avao6

'8. ,e"eral pri"ciples of i"co!e ta#atio" i" the Philippi"es or the sourcerule of i"co!e ta#atio" as pro$ided i" the N*R0 of 'CC@.

a. A citie" o the Phi!ippi$e residi"9 therei$ i taab!e o$ all i$co#e deried ro# o-rce withi"a$d without the Phi!ippi$eD b. A "o"reside"t citie" i taab!e o$!y o$ i"co!e deried ro# o-rce withi" the Phi!ippi$eD c. A$ i"di$idual citie" o the Phi!ippi$e +ho i +or/i$g a$d derii$g i$co#e abroad a a$



o$erseas co"tract worer i taab!e o$!y o$ i"co!e ro# o-rce withi" the Phi!ippi$e8 Proided'That a sea!a" +ho i a citi;e$ o the Phi!ippi$e a$d +ho receie co#pe$atio$ or erice re$deredabroad a a #e#ber o the co#p!e#e$t o a ee! e$gaged ec!-ie!y i$ i$ter$atio$a! trade ha!! betreated a a$ o$erseas co"tract worer D d. A$ alie" i"di$idual5 +hether a reside"t or "ot o the Phi!ippi$e' i taab!e o$!y o$ i"co!e deried ro# o-rce withi" the Phi!ippi$eD e. A do!estic corporatio" i taab!e o$ a!! i"co!e deried ro# o-rce withi" a$d without thePhi!ippi$eD a$d . A forei9" corporatio"' +hether e$gaged or $ot i$ trade or b-i$e i$ the Phi!ippi$e' i taab!eo$!y o$ i"co!e deried ro# o-rce withi" the Phi!ippi$e. %Sec. 2' N4R( o 1FF@' e#phai -pp!ied&

':. /ulia"e a "o"reside"t alie" appoi"ted as a co!!issio" a9e"t by a do!esticcorporatio" with a sales co!!issio" of '&I all sales actually co"cluded a"dcollected throu9h her efforts. The local co!pa"y withheld the a!ou"t of P'&@5&&&fro! her sales co!!issio" a"d re!itted the sa!e to the B*R. She filed a clai! for refu"d alle9i"9 that her sales co!!issio" is "ot ta#ablebecause the sa!e was a co!pe"satio" for her ser$ices re"dered i" ,er!a"y a"dtherefore co"sidered as i"co!e fro! sources outside the Philippi"es.

*s her co"te"tio" correct 7 S3<<ESTE" ANS=ER8 e. The i#porta$t actor +hich deter#i$e the o-rce o i$co#e opero$a! erice i $ot the reide$ce o the payor' or the p!ace +here the co$tract or erice i e$teredi$to' or the p!ace o pay#e$t' b-t the p!ace +here the erice +ere act-a!!y peror#ed.

Si$ce the actiity o ec-ri$g the a!e +ere i$ <er#a$y' the$ the i$co#e did $ot origi$ate ro#o-rce ro# +ithi$ the Phi!ippi$e. %Commissioner of Internal Revenue v. Baier0!ic-el, <. R. No. 1>@F'

A-g-t 2F' 2006&

'<. E"site5 (td.. is a 0a"adia" corporatio" "ot doi"9 busi"ess i" the Philippi"es. *t holds :&I of the shares of Philippi"e Sta!pi"9 Pla"t5 *"c.5.5 a Philippi"e co!pa"ywhile the >&I is ow"ed by 1red 0orporatio"5 a 1ilipi"oow"ed Philippi"e corporatio". E"site 0o. also ow"s '&&I of the shares of Susa"to 0o.5 a" *"do"esia" co!pa"ywhich has a duly lice"sed Philippi"e bra"ch. ue to worldwide restructuri"9 of the

E"site (td.5. 9roup5 E"site (td.5. decided to sell all its shares i" Philippi"e Sta!pi"9Pla"t5 *"c. a"d Susa"to 0o. The "e9otiatio"s for the buyout a"d the si9"i"9 of theA9ree!e"t of Sale were all do"e i" the Philippi"es. The A9ree!e"t pro$ides that thepurchase price will be paid to E"site (td6s ba" accou"t i" the .S. a"d that title tothe Philippi"e Sta!pi"9 Pla"t5 *"c. a"d Susa"to 0o. shall be tra"sferred to ,e"eral0o.5 i" Toro"to 0a"ada where stoc certificates will be deli$ered. ,e"eral 0o. seesyour ad$ice as to whether or "ot it will sub?ect the pay!e"ts of the purchase price towithholdi"9 ta#. E#plai" your ad$ice. S3<<ESTE" ANS=ER8 The pay#e$t o thep-rchae price +i!! be -bect to +ithho!di$g ta. (o$ideri$g that a!! the actiitie %a!e& occ-rred +ithi$the Phi!ippi$e' the i$co#e i co$idered a i$co#e ro# +ithi$' -bect to Phi!ippi$e i$co#e taatio$. E$ite' )td. bei$g a oreig$ corporatio$ i to be taed o$ it i$co#e deried ro# o-rce +ithi$ the

Phi!ippi$e. '>. E"site5 (td. is a

0a"adia" corporatio"5 which has a duly lice"sed Philippi"e bra"ch e"9a9e i" tradi"9acti$ities i" the Philippi"es. E"site5 (td.. also i"$ested directly i" :&I of the sharesof stoc of Philippi"e Sta!pi"9 Pla"t5 *"c..5 a Philippi"e corporatio". These sharesare booed i" the Head Office of E"site5 (td.. a"d are "ot reflected as assets of thePhilippi"e bra"ch. *" %&&C5 Philippi"e Sta!pi"9 Pla"t5 *"c.. declared di$ide"ds to itsstocholders. Before re!itti"9 the di$ide"ds to E"site (td.5.5 Philippi"e Sta!pi"9Pla"t5 *"c. 0o. sees your ad$ice as to whether it will sub?ect the re!itta"ce towithholdi"9 ta#. There is "o "eed to discuss +T rates5 if applicable. 1ocus your



discussio" o" what is the issue. S3<<ESTE" ANS=ER8 Phi!ippi$e Sta#pi$gP!a$t' 4$c.. ho-!d -bect the re#itta$ce to +ithho!di$g ta.. Si$ce Phi!ippi$e Sta#pi$g P!a$t. i aPhi!ippi$e corporatio$' it hare o toc/ hae obtai$ed a b-i$e it- i$ the Phi!ippi$e' he$ce thediide$d are co$idered a i$co#e ro# +ithi$. E$ite. )td.' bei$g a oreig$ corporatio$' ho-!d be-bect to ta o$ it i$co#e ro# +ithi$.

'@. Philippi"e Sta!pi"9 Pla"t5 *"c.5 a Philippi"e corporatio"5 has a" e#ecuti$e

(arry who is a 1ilipi"o citie". Philippi"e Sta!pi"9 Pla"t5 *"c5. has a subsidiary i";alaysia F4uala (u!pur ;a"ufacturi"95 *"c.G a"d will assi9" (arry for a" i"defi"iteperiod to wor full ti!e for 4uala (u!pur ;a"ufacturi"95 *"c.. (arry will bri"9 hisfa!ily to reside i" ;alaysia a"d will lease out his reside"ce i" the Philippi"es. Thesalary of (arry will be shouldered <&I by Philippi"e Sta!pi"9 Pla"t5 *"c.. while theother <&I plus housi"95 cost of li$i"9 a"d educatio"al allowa"ces of (arry6sdepe"de"ts will be shouldered by 4uala (u!pur ;a"ufacturi"95 *"c.. Philippi"eSta!pi"9 Pla"t5 *"c.. will credit the <&I of (arry6s salary to his Philippi"e ba"accou"t. (arry will si9" the co"tract of e!ploy!e"t i" the Philippi"es. He will alsobe recei$i"9 re"tal i"co!e for the lease of his Philippi"e reside"ce.

Are these salaries5 allowa"ces a"d re"tals sub?ect to Philippi"e i"co!e ta#7 E#plai" briefly. S3<<ESTE" ANS=ER8 The a!arie a$d a!!o+a$ce o )arry' bei$g

deried ro# !abor or pero$a! erice re$dered o-tide o the Phi!ippi$e i co$idered a i$co#e ro#+itho-t. Si$ce )arry i a$ O(=' the$ he i to be taed o$!y o$ hi i$co#e deried ro# +ithi$ thePhi!ippi$e -ch a the re$ta! o$ hi Phi!ippi$e reide$ce' a$d $ot o$ hi i$co#e ro# +itho-t.

'. Oba!a Airli"es5 *"c.5 a forei9" airli"e co!pa"y which does "ot !ai"tai" a"yfli9ht to a"d fro! the Philippi"es sold air ticets i" the Philippi"es5 throu9h a 9e"eralsales a9e"t5 relati"9 to the carria9e of passe"9ers a"d car9o betwee" two poi"ts5both outside the Philippi"es. a. *s Oba!a5 *"c.5 sub?ect to i"co!e ta#es o" the sale of the ticets 7 S3<<ESTE" ANS=ER8 e. The o-rce o i$co#e +hich i taab!e i that “actiity” +hich prod-cedthe i$co#e. The ”a!e o tic/et” i$ the Phi!ippi$e i the actiity that deter#i$e +hether -ch i$co#e itaab!e i$ the Phi!ippi$e. The tic/et echa$ged ha$d here a$d pay#e$t or are +ere a!o #ade here i$ Phi!ippi$e c-rre$cy.

The it- o the o-rce o pay#e$t i the Phi!ippi$e. the !o+ o +ea!th proceeded ro# a$d occ-rred'+ithi$ the Phi!ippi$e territory' e$oyi$g the protectio$ accorded by the Phi!ippi$e <oer$#e$t. 4$co$ideratio$ o -ch protectio$' the !o+ o +ea!th ho-!d hare the b-rde$ o -pporti$g thegoer$#e$t. GCommissioner of Internal Revenue v. British 9verseas Airays Corporation *B9AC#, 1FS(RA F> 6 O,!i$e air carrier hai$g ge$era! a!e age$t i$ the Phi!ippi$e are e$gaged i$ or doi$g b-i$e i$the Phi!ippi$e a$d their i$co#e ro# a!e o paage doc-#e$t here i i$co#e ro# +ithi$ thePhi!ippi$e. Th-' the o,!i$e air carrier !iab!e or the 2H %$o+ 0H& ta o$ it taab!e i$co#e. GSouth

African Airays v. Commissioner of Internal Revenue, <.R. No. 1?0>6' Cebr-ary 16' 2010 citi$g Commissioner ofInternal Revenue v. British 9verseas Airays Corporation %British 9verseas Airays&' No. ),6>@@,@' Apri! 0' 1F?@'1F S(RA F>I

b. Supposi"9 that Oba!a5 *"c.5 sells ticets outside of the Philippi"es forpasse"9ers it carry fro! ,old 0ity5 South Africa to the Philippi"es but retur"s to

South Africa without a"y car9o or passe"9ers. +ould it the" be sub?ect to a"yPhilippi"e ta# o" such sales 7 S3<<ESTE" ANS=ER8 4t +o-!d $ot be -bect to a$y ta. 4t i $ot -bect to a$y i$co#e tabeca-e the actiity +hich ge$erated the i$co#e %the a!e o the tic/et& +a peror#ed o-tide o thePhi!ippi$e.

4t i $ot -bect to the carrier: ta baed o$ gro Phi!ippi$e bi!!i$g beca-e there +ere $o !itthat origi$ated ro# the Phi!ippi$e. “<ro Phi!ippi$e Bi!!i$g” reer to the a#o-$t o gro ree$-ederied ro# carriage o pero$' ece baggage' cargo a$d #ai! origi$ati$g ro# the Phi!ippi$e i$ aco$ti$-o- a$d -$i$terr-pted !ight' irrepectie o the p!ace o a!e or i-e a$d the p!ace o pay#e$t othe tic/et or paage doc-#e$t.” GN4R( o 1FF@' Sec. 2?%A&%&%a&I



c. +ould your a"swer be the sa!e if Oba!a5 *"c. sold ticets outside of thePhilippi"es for tra$elers who are 9oi"9 to piced up by Oba!a5 *"c.5 pla"es fro! theiosdado ;acapa9al *"tl. Airport at 0lar5 A"9eles5 Pa!pa"9a5 bou"d for Nairobi54e"ya 7 Reaso" out your a"swer. S3<<ESTE" ANS=ER8 No #ore. Thi ti#e Oba#a' 4$c.' +o-!d be -bect to the carrier: ta baedo$ <ro Phi!ippi$e Bi!!i$g. %<PB&.

“<ro Phi!ippi$e Bi!!i$g” reer to the a#o-$t o gro ree$-e deried ro# carriage o pero$'ece baggage' cargo a$d #ai! origi$ati$g ro# the Phi!ippi$e i$ a co$ti$-o- a$d -$i$terr-pted !ight'irrepectie o the p!ace o a!e or i-e a$d the p!ace o pay#e$t o the tic/et or paage doc-#e$t.” GN4R( o 1FF@' Sec. 2?%A&%&%a&I

The p!ace o a!e i irre!ea$tD a !o$g a the -p!it o pae$ger a$d cargo occ-r ro# thePhi!ippi$e' i$co#e i i$c!-ded i$ <PB. %South African Airays v. Commissioner of Internal Revenue, <.R. No.1?0>6' Cebr-ary 16' 2010&

'C. No i!proper dele9atio" of le9islati$e authority to ta#. The po+er to ta i i$here$ti$ the State' -ch po+er bei$g i$here$t!y !egi!atie' baed o$ the pri$cip!e that tae are a gra$t o thepeop!e +ho are taed' a$d the gra$t #-t be #ade by the i##ediate repree$tatie o the peop!eD a$d+here the peop!e hae !aid the po+er' there it #-t re#ai$ a$d be eercied. %Commissioner of InternalRevenue v. /ortune (o"acco Corporation, <. R. No. 16@2@,@>' -!y 21' 200?&

0ONST*TT*ONA( (*;*TAT*ONS

'. 0o"stitutio"al li!itatio"s o" the power of ta#atio" . The ge$era! or i$directco$tit-tio$a! !i#itatio$ a +e!! a the peciic or direct co$tit-tio$a! !i#itatio$.

%. The 9e"eral or i"direct co"stitutio"al li!itatio"s o" the power of ta#atio" are-

a. "-e proce c!a-eD b. E-a! protectio$ c!a-eD c. Creedo# o the preD d. Re!igio- reedo#D

e. No ta/i$g o priate property +itho-t -t co#pe$atio$D . No$,i#pair#e$t c!a-eD g. )a+,#a/i$g proce8 1& Bi!! ho-!d e#brace o$!y o$e -bect epreed i$ the tit!e thereoD 2& Three %& readi$g o$ three eparate dayD & Pri$ted copie i$ i$a! or# ditrib-ted three %& day beore paage. h. Preide$tia! po+er to gra$t repriee' co##-tatio$ a$d pardo$ a$d re#itta! o i$e a$doreit-re ater co$ictio$ by i$a! -dg#e$t.

8. The specific or direct co"stitutio"al li!itatio".a. No i#prio$#e$t or $o$,pay#e$t o a po!! taD

b. Taatio$ ha!! be -$ior# a$d e-itab!eD c. (o$gre ha!! eo!e a progreie yte# o taatio$D

d. A!! appropriatio$' ree$-e or tari bi!! ha!! origi$ate ec!-ie!y i$ the 7o-e o Repree$tatie'b-t the Se$ate #ay propoe a$d co$c-r +ith a#e$d#e$tD e. The Preide$t ha!! hae the po+er to eto a$y partic-!ar ite# or ite# i$ a$ appropriatio$' ree$-e'or tari bi!!' b-t the eto ha!! $ot aect the ite# or ite# to +hich he doe $ot obectD . "e!egated po+er o the Preide$t to i#poe tari rate' i#port a$d eport -ota' to$$age a$d+harage d-e8 1& "e!egatio$ by (o$gre 2& thro-gh a !a+ & -bect to (o$greio$a! !i#it a$d retrictio$



& +ithi$ the ra#e+or/ o $atio$a! dee!op#e$t progra#. g. Ta ee#ptio$ o charitab!e i$tit-tio$' ch-rche' paro$age a$d co$e$t app-rte$a$t thereto'#o-e' a$d a!! !a$d' b-i!di$g a$d i#proe#e$t o a!! /i$d act-a!!y' direct!y a$d ec!-ie!y -ed orre!igio-' charitab!e or ed-catio$a! p-rpoeD h. No ta ee#ptio$ +itho-t the co$c-rre$ce o #aority ote o a!! #e#ber o (o$greD i. No -e o p-b!ic #o$ey or property or re!igio- p-rpoe ecept i priet i aig$ed to the ar#edorce' pe$a! i$tit-tio$' goer$#e$t orpha$age or !eproari-#D . *o$ey co!!ected o$ ta !eied or a pecia! p-rpoe to be -ed o$!y or -ch p-rpoe' ba!a$ce ia$y' to ge$era! -$dD /. The S-pre#e (o-rt po+er to reie+ -dg#e$t or order o !o+er co-rt i$ a!! cae i$o!i$gthe !ega!ity o a$y ta' i#poe' ae#e$t or to!! or the !ega!ity o a$y pe$a!ty i#poed i$ re!atio$ to theaboeD !. A-thority o !oca! goer$#e$t -$it to create their o+$ o-rce o ree$-e' to !ey tae' ee a$dother charge -bect to g-ide!i$e a$d !i#itatio$ i#poed by (o$gre co$ite$t +ith the baic po!icyo !oca! a-to$o#yD #. A-to#atic re!eae o !oca! goer$#e$t -t hare i$ $atio$a! taeD $. Ta ee#ptio$ o a!! ree$-e a$d aet o $o$,toc/' $o$,proit ed-catio$a! i$tit-tio$ -edact-a!!y' direct!y a$d ec!-ie!y or ed-catio$a! p-rpoeD o. Ta ee#ptio$ o a!! ree$-e a$d aet o proprietary or cooperatie ed-catio$a! i$tit-tio$-bect to !i#itatio$ proided by !a+ i$c!-di$g retrictio$ o$ diide$d a$d proiio$ or rei$et#e$t o

proitD p. Ta ee#ptio$ o gra$t' e$do+#e$t' do$atio$ or co$trib-tio$ -ed act-a!!y' direct!y a$dec!-ie!y or ed-catio$a! p-rpoe -bect to co$ditio$ precribed by !a+.

<. EDual protectio" of the law clause is sub?ect to reaso"able classificatio". 4the gro-pi$g are characteri;ed by -bta$tia! diti$ctio$ that #a/e rea! diere$ce' o$e c!a #ay betreated a$d reg-!ated diere$t!y ro# a$other. The c!aiicatio$ #-t a!o be ger#a$e to the p-rpoe othe !a+ a$d #-t app!y to a!! thoe be!o$gi$g to the a#e c!a. *(iu, et al., v. Court of Appeals, et al., <.R.No. 12@10' a$-ary 20' 1FFF&

>. ReDuisites for $alid classificatio". A!! that i re-ired o a a!id c!aiicatio$ i that it bereao$ab!e' +hich #ea$ that a. the c!aiicatio$ ho-!d be baed o$ -bta$tia! diti$ctio$ +hich#a/e or rea! diere$ce'

b. that it #-t be ger#a$e to the p-rpoe o the !a+Dc. that it #-t $ot be !i#ited to eiti$g co$ditio$ o$!yD a$dd. that it #-t app!y e-a!!y to each #e#ber o the c!a.The ta$dard i atiied i the c!aiicatio$ or diti$ctio$ i baed o$ a reao$ab!e o-$datio$ or

ratio$a! bai a$d i $ot pa!pab!y arbitrary. G ABA:A%A +uro Party $ist, etc., v. Purisima, etc., et a!.' <. R. No.166@1>' A-g-t 1' 200?I

@. EDual protectio" does "ot de!a"d absolute eDuality. 4t #ere!y re-ire that a!!pero$ ha!! be treated a!i/e' -$der !i/e circ-#ta$ce a$d co$ditio$' both a to the prii!egeco$erred a$d !iabi!itie e$orced. %Santos v. People, et al, <. R. No. 1@1@6' A-g-t 26' 200?&

4t i i#peratie to d-!y etab!ih that the o$e i$o/i$g e-a! protectio$ a$d the pero$ to +hich he ibei$g co#pared +ere i$deed i#i!ar!y it-ated' i.e.' that they co##itted ide$tica! act or +hich they +erecharged +ith the io!atio$ o the a#e proiio$ o the N4R(D a$d that they pree$ted i#i!ar arg-#e$ta$d eide$ce i$ their dee$e , yet' they +ere treated diere$t!y. *Santos, supra#

. Tests to deter!i"e $alidity of classificatio". The 3$ited State S-pre#e (o-rt haetab!ihed diere$t tet to deter#i$e the a!idity o a c!aiicatio$ a$d co#p!ia$ce +ith the e-a!protectio$ c!a-e. The recog$i;ed tet are8 a. The traditio$a! %or ratio$a! bai& tet. b. The trict cr-ti$y %or co#pe!!i$g i$teret& tet.

c. The i$ter#ediate !ee! o cr-ti$y %or -ai,-pect c!a& tet.

C. The traditio"al For ratio"al basisG test used i" order to deter!i"e the $alidity of



classificatio". The c!aiicatio$ i a!id i it i ratio$a!!y re!ated to a co$tit-tio$a!!y per#iib!e tatei$teret.

The co#p!ai$a$t #-t proe that the c!aiicatio$ i “i$ido-'” “+ho!!y arbitrary'” or ”capricio-'”other+ie the c!aiicatio$ i pre-#ed to be a!id. *$indsley v. !atural Car"oinic +as Co., 220 3.S. 61;Mc+oan v. Maryland, 66 3.S. 20; <nited States Railroad Retirement Board v. /ritz, F 3.S. 166 #

'&. The strict scruti"y For co!pelli"9 i"terestG test used i" order to deter!i"e the$alidity of the classificatio". <oer$#e$t reg-!atio$ that i$te$tio$a!!y dicri#i$ate agai$t a“-pect c!a” -ch a racia! or eth$ic #i$oritie' i -bect to trict cr-ti$y a$d co$idered to io!ate thee-a! protectio$ c!a-e -$!e o-$d $eceary to pro#ote a co#pe!!i$g tate i$teret.

A c!aiicatio$ i $eceary +he$ it i $arro+!y dra+$ o that $o a!ter$atie' !e b-rde$o#e #ea$i aai!ab!e to acco#p!ih the tate i$teret.

Th-' it +a he!d that de$ia! o ree p-b!ic ed-catio$ to the chi!dre$ o i!!ega! a!ie$ i#poe a$e$or#o- a$d !ati$g b-rde$ baed o$ a tat- oer +hich the chi!dre$ hae $o co$tro! i io!atie oe-a! protectio$ beca-e there i $o ho+i$g that -ch de$ia! -rther a “-bta$tia!” tate goa!. *Plyler v.%oe' >@ 3.S. 202 #

''. The i"ter!ediate le$el of scruti"y For Duasisuspect classG test used i" orderto deter!i"e the $alidity of he classificatio". (!aiicatio$ baed o$ ge$der or !egiti#acy are

$ot “-pect'” b-t $either are they -dged by the traditio$a! or ratio$a! bai tet.4$te$tio$a! dicri#i$atio$ agai$t #e#ber o a -ai,-pect c!a io!ate e-a! protectio$ -$!e

they are -bta$tia!!y re!ated to i#porta$t goer$#e$t obectie. *Craig v. Boren, 2F 3.S. 1F0 # Th-' a tate !a+ gra$ti$g a property ta ee#ptio$ to +ido+' b-t $ot +ido+er' ha bee$ he!d a!id

or it -rther the tate po!icy o c-hio$i$g the i$a$cia! i#pact o po-a! !o -po$ the e or +ho# that!o --a!!y i#poe a heaier b-rde$. *:ahn v. Shevin, 16 3.S. >1 #

'%. EDuality a"d u"ifor!ity of ta#atio" !ay !ea" the sa!e as eDual protectio". 4$ -ch a cae' the ter# +o-!d #ea$ that a!! -bect a$d obect o taatio$ +hich are i#i!ar!y it-atedha!! be -bect to the a#e b-rde$ a$d gra$ted the a#e prii!ege +itho-t a$y dicri#i$atio$+hatoeer.

'8. *t is i"here"t i" the power to ta# that the State be free to select the sub?ectsof ta#atio"5 a$d it ha bee$ repeated!y he!d that' Qi$e-a!itie +hich re-!t ro# a i$g!i$g o-t o o$e

partic-!ar c!a o taatio$' or ee#ptio$' i$ri$ge $o co$tit-tio$a! !i#itatio$.Q *Commissioner of InternalRevenue, et al., v. Santos, et al., 2@@ S(RA 61@&

C. Be"?ie is a lawabidi"9 citie" who pays his real estate ta#es pro!ptly. ue toa series of typhoo"s a"d ad$erse eco"o!ic co"ditio"s5 a" ordi"a"ce is passed bySoli!a" 0ity 9ra"ti"9 a <&I discou"t for pay!e"t of u"paid real estate ta#es for theprecedi"9 year a"d the co"do"atio" of all pe"alties o" fi"es resulti"9 fro! the latepay!e"t. Ar9ui"9 that the ordi"a"ce rewards deli"Due"t ta# payers a"d discri!i"atesa9ai"st pro!pt o"es5 Be"?ie de!a"ds that he be refu"ded a" a!ou"t eDui$ale"t too"ehalf of the real property ta#es he paid. The !u"icipal attor"ey re"dered a"

opi"io" that Be"?ie ca""ot be rei!bursed because the ordi"a"ce did "ot pro$ide forsuch rei!burse!e"t. Be"?ie files suit to declare the ordi"a"ce $oid o" the 9rou"dthat it is a class le9islatio". +ill his suit prosper 7 E#plai" your a"swer briefly.

S3<<ESTE" ANS=ER8 No. There i $o c!a !egi!atio$ beca-e there i $o io!atio$ o the e-a!protectio$ -it. There i a a!id c!aiicatio$ bet+ee$ thoe +ho a!ready paid their tae a$d thoe +hohae $ot. C-rther#ore' the tai$g a-thority ha the prerogatie to e!ect the -bect a$d obect otaatio$' i$c!-di$g gra$ti$g a >0H dico-$t i$ the pay#e$t o -$paid rea! etate tae' a$d theco$do$atio$ o a!! pe$a!tie o$ i$e re-!ti$g ro# !ate pay#e$t.



'&. The rewards law to ta# collectors does "ot $iolate eDual protectio". The e-a!protectio$ c!a-e recog$i;e a a!id c!aiicatio$' that i' a c!aiicatio$ that ha a reao$ab!eo-$datio$ or ratio$a! bai a$d $ot arbitrary. =ith repect to RA F>' it: epreed p-b!ic po!icy i theopti#i;atio$ o the ree$-e,ge$eratio$ capabi!ity a$d co!!ectio$ o the B4R a$d the BO(. Si$ce the-bect o the !a+ i the ree$-e, ge$eratio$ capabi!ity a$d co!!ectio$ o the B4R a$d the BO(' thei$ce$tie a$d9or a$ctio$ proided i$ the !a+ ho-!d !ogica!!y pertai$ to the aid age$cie. *oreoer'

the !a+ co$cer$ o$!y the B4R a$d the BO( beca-e they hae the co##o$ diti$ct pri#ary -$ctio$ oge$erati$g ree$-e or the $atio$a! goer$#e$t thro-gh the co!!ectio$ o tae' c-to# d-tie' ee a$dcharge. 4$d-bitab!y' -ch -bta$tia! diti$ctio$ i ger#a$e a$d i$ti#ate!y re!ated to the p-rpoe o the !a+.7e$ce' the c!aiicatio$ a$d treat#e$t accorded to the B4R a$d the BO( -$der RA F> -!!y atiy thede#a$d o e-a! protectio$. % ABA:A%A +uro Party $ist, etc., v. Purisima, etc., et a!.' <. R. No. 166@1>'

A-g-t 1' 200?&

''. The prosecutio" of o"e 9uilty perso" while others eDually 9uilty are "otprosecuted5 howe$er5 is "ot5 by itself5 a de"ial of the eDual protectio" of the laws. =here the oicia! actio$ p-rport to be i$ co$or#ity to the tat-tory c!aiicatio$' a$ erro$eo- or#ita/e$ peror#a$ce o the tat-tory d-ty' a!tho-gh a io!atio$ o the tat-te' i $ot +itho-t #ore ade$ia! o the e-a! protectio$ o the !a+.

The -$!a+-! ad#i$itratio$ by oicer o a tat-te air o$ it ace' re-!ti$g i$ it -$e-a! app!icatio$ tothoe +ho are e$tit!ed to be treated a!i/e' i $ot a de$ia! o e-a! protectio$ -$!e there i ho+$ to bepree$t i$ it a$ e!e#e$t o i$te$tio$a! or p-rpoe-! dicri#i$atio$. Thi #ay appear o$ the ace o theactio$ ta/e$ +ith repect to a partic-!ar c!a or pero$' or it #ay o$!y be ho+$ by etri$ic eide$ceho+i$g a dicri#i$atory deig$ oer a$other $ot to be i$erred ro# the actio$ ite!.%Santos v. People, et al, <. R. No. 1@1@6' A-g-t 26' 200?&

'%. EDual protectio" should "ot be used to protect co!!issio" of cri!e. =hi!e a!!pero$ acc-ed o cri#e are to be treated o$ a bai o e-a!ity beore the !a+' it doe $ot o!!o+ thatthey are to be protected i$ the co##iio$ o cri#e. 4t +o-!d be -$co$cio$ab!e' or i$ta$ce' to ec-e adee$da$t g-i!ty o #-rder beca-e other hae #-rdered +ith i#p-$ity. )i/e+ie' i the ai!-re o proec-tor to e$orce the cri#i$a! !a+ a to o#e pero$ ho-!d beco$erted i$to a dee$e or other charged +ith cri#e' the re-!t +o-!d be that the tria! o the ditrict

attor$ey or $o$eaa$ce +o-!d beco#e a$ i-e i$ the tria! o #a$y pero$ charged +ith hei$o-cri#e a$d the e$orce#e$t o !a+ +o-!d -er a co#p!ete brea/do+$. %Santos v. People, et al, <. R. No.1@1@6' A-g-t 26' 200?&

'8. *llustratio" of double ta#atio" i" local ta#atio". there i i$deed do-b!e taatio$ i(oca,(o!a i -bected to the tae -$der both Sectio$ 1 a$d 21 o Ta Ordi$a$ce No. @@F' i$cethee are bei$g i#poed8 %1& o$ the a#e -bect #atter J the prii!ege o doi$g b-i$e i$ the (ity o*a$i!aD %2& or the a#e p-rpoe J to #a/e pero$ co$d-cti$g b-i$e +ithi$ the (ity o *a$i!aco$trib-te to city ree$-eD %& by the a#e tai$g a-thority J (ity o *a$i!aD %& +ithi$ the a#e tai$g

-ridictio$ J +ithi$ the territoria! -ridictio$ o the (ity o *a$i!aD %>& or the a#e tai$g period J perca!e$dar yearD a$d %6& o the a#e /i$d or character J a !oca! b-i$e ta i#poed o$ gro a!e orreceipt o the b-i$e. %(he City of Manila, et al., v. Coca0Cola Bottlers Philippines, Inc., <. R. No. 1?1?>'

A-g-t ' 200F&

':. A lawful ta# o" a "ew sub?ect5 or a" i"creased ta# o" a" old o"e5 does "oti"terfere with a co"tract or i!pairs its obli9atio"' withi" the !ea"i"9 of theco"stitutio". *(olentino v. Secretary of /inance, et al., and companion cases, 2> S(RA 60&

'<. The withdrawal of a ta# e#e!ptio" should "ot be co"strued asprohibiti"9 future 9ra"ts of e#e!ptio" fro! all ta#es. *Philippine $ong %istance (elephone

Company, Inc., v. City of %avao, et al., etc., <. R. No. 1?6@' A-g-t 22' 2001&



'>. Ta# e#e!ptio"s i" fra"chises are always sub?ect to withdrawal. A !egi!atiera$chie i gra$ted +ith the epre co$ditio$ that it i -bect to a#e$d#e$t' a!teratio$' or repea!. %1F?@(o$tit-tio$' Art. L44' Sec. 11&

4t i e$o-gh to ay that the partie to a co$tract ca$$ot' thro-gh the eercie o prophetic dicer$#e$t'etter the eercie o the tai$g po+er o the State. Cor $ot o$!y are eiti$g !a+ read i$to co$tract i$order to i ob!igatio$ a bet+ee$ partie' b-t the reeratio$ o ee$tia! attrib-te o oereig$ po+er i

a!o read i$to co$tract a a baic pot-!ate o the !ega! order. The po!icy o protecti$g co$tract agai$ti#pair#e$t pre-ppoe the #ai$te$a$ce o a goer$#e$t +hich retai$ ade-ate a-thority to ec-rethe peace a$d good order o ociety. %Smart Communications, Inc. v. (he City of %avao, etc., et al .' <. R. No.1>>F1' Septe#ber 16' 200?&

NOTES AN" (O**ENTS8 Philippine $ong %istance (elephone Company, Inc., v. City of %avao, et al., etc., <.R. No. 1?6@' A-g-t 22' 2001 #ade the oberatio$ that i$ce S#art: ra$chie +a gra$ted ater the eectiity o the )oca! <oer$#e$t (ode that it ta ee#ptio$ prii!ege +a rei$tated. 7o+eer' Smart Communications, Inc. v.(he City of %avao, etc., et al .' <. R. No. 1>>F1' Septe#ber 16' 200? i ep!icit i$ it ho!di$g that S#art i $ote$tit!ed to a ta ee#ptio$.

'@. +he" withdrawal of a ta# e#e!ptio" i!pairs the obli9atio" of co"tracts. The(o$tract (!a-e ha $eer bee$ tho-ght a a !i#itatio$ o$ the eercie o the State: po+er o taatio$ae o$!y +here a ta ee#ptio$ ha bee$ gra$ted or a a!id co$ideratio$. %Smart Communications, Inc. v.(he City of %avao, etc., et al .' <. R. No. 1>>F1' Septe#ber 16' 200?& citi$g (olentino v. Secretary of /inance, <. R.

No. 11>>>' A-g-t 2>' 1FF' 2> S(RA 60' 6?>& The a-thor opi$e that i$ce practica!!y a!! ra$chiegra$ted to te!eco##-$icatio$ co#pa$ie are i#i!ar!y +orded that the aboe doctri$e i$d app!icatio$to the other&

'. The pri!ary reaso" for the withdrawal of ta# e#e!ptio" pri$ile9es 9ra"ted to

9o$er"!e"t ow"ed a"d co"trolled corporatio"s a$d a!! other -$it o goer$#e$t +a that-ch prii!ege re-!ted to erio- ta bae eroio$ a$d ditortio$ i$ the ta treat#e$t o i#i!ar!y it-atede$terprie' he$ce re-!ti$g i$ the $eed or thee e$titie to hare i$ the re-ire#e$t o dee!op#e$t'ica! or other+ie' by payi$g the tae a$d other charge d-e the#. %Philippine Ports Authority v. City ofIloilo, <. R. No. 10F@F1' -!y 1' 200&

'C. Natio"al Power 0orporatio" FNP0G is of the i"siste"ce that it is "ot sub?ect to

the pay!e"t of fra"chises ta#es i!posed by the Pro$i"ce of *sabela because all of itsshares are ow"ed by the Republic of the Philippi"es. *t is thus5 a" i"stru!e"tality ofthe Natio"al ,o$er"!e"t which is e#e!pt fro! local ta#atio". As such it is "ot apri$ate corporatio" e"9a9ed i" “busi"ess e"?oyi"9 fra"chise” *s such co"te"tio" !eritorious 7 S3<<ESTE" ANS=ER8 No. Philippine $ong %istance (elephone Company, Inc., v. City of %avao,et al., etc .' <. R. No. 1?6@' A-g-t 22' 2001' -phe!d the a-thority o the (ity o "aao' a !oca!goer$#e$t -$it' to i#poe a$d co!!ect a !oca! ra$chie ta beca-e the )oca! <oer$#e$t (ode ha+ithdra+$ a!! ta ee#ptio$ preio-!y e$oyed by a!! pero$ a$d a-thori;ed !oca! goer$#e$t -$it toi#poe a ta o$ b-i$e e$oyi$g a ra$chie ta $ot+ithta$di$g the gra$t o ta ee#ptio$ to the#.

%&. “*" lieu of all ta#es” i" the fra"chise of ABS0BN does "ot e#e!pt it fro!

local fra"chise ta#es. 4t doe $ot epre!y proide +hat /i$d o tae ABS,(BN i ee#pted ro#. 4t i $ot c!ear +hether the ee#ptio$ +o-!d i$c!-de both !oca!' +hether #-$icipa!' city or proi$cia!' a$d$atio$a! ta. =hether the “i$ !ie- o a!! tae proiio$” +o-!d i$c!-de ee#ptio$ ro# !oca! ta i $ot-$e-ioca!. The right to ee#ptio$ ro# !oca! ra$chie ta #-t be c!ear!y etab!ihed a$d ca$$ot be #ade o-t oi$ere$ce or i#p!icatio$ b-t #-t be !aid beyo$d reao$ab!e do-bt. Veri!y' the -$certai$ty i$ the “i$ !ie-o a!! tae” proiio$ ho-!d be co$tr-ed agai$t ABS,(BN. ABS,(BN ha the b-rde$ to proe that it ii$ act coered by the ee#ptio$ o c!ai#ed b-t ha ai!ed to do o . %8uezon City, et al., v. ABS0CB!Broadcasting Corporation' <. R. No. 1660?' October 6' 200?&

NOTES AN" (O**ENTS8 Thi i practica!!y the a#e ho!di$g i$ a$ ear!ier cae i$o!i$g a$other



te!eco##-$icatio$ co#pa$y Smart Communications, Inc. v. (he City of %avao, etc., et al., <. R. No. 1>>F1'Septe#ber 16' 200?. The a-thor opi$e that i$ce practica!!y a!! ra$chie gra$ted to te!eco##-$icatio$co#pa$ie are i#i!ar!y +orded that the aboe doctri$e i$d app!icatio$ to the other.&

%'. “*" lieu of all ta#es” refers to "atio"al i"ter"al re$e"ue ta#es a"d "ot to localta#es. The “i$ !ie- o a!! tae” c!a-e app!ie o$!y to $atio$a! i$ter$a! ree$-e tae a$d $ot to !oca!

tae. A appropriate!y poi$ted o-t i$ the eparate opi$io$ o -tice A$to$io T. (arpio i$ a i#i!ar caei$o!i$g a de#a$d or ee#ptio$ ro# !oca! ra$chie tae8 GTIhe Qi$ !ie- o a!! taeQ c!a-e i$ S#art ra$chie reer o$!y to tae' other tha$ i$co#e ta'i#poed -$der the Natio$a! 4$ter$a! Ree$-e (ode. The Qi$ !ie- o a!! taeQ c!a-e doe $ot app!y to!oca! tae. The proio i$ the irt paragraph o Sectio$ F o S#art ra$chie tate that the gra$teeha!! Qco$ti$-e to be !iab!e or i$co#e tae payab!e -$der Tit!e 44 o the Natio$a! 4$ter$a! Ree$-e (ode.Q

A!o' the eco$d paragraph o Sectio$ F pea/ o ta ret-r$ i!ed a$d tae paid to the Q(o##iio$ero 4$ter$a! Ree$-e or hi d-!y a-thori;ed repree$tatie i$ accorda$ce +ith the Natio$a! 4$ter$a!Ree$-e (ode.Q *oreoer' the a#e paragraph dec!are that the ta ret-r$ Qha!! be -bect to a-dit bythe B-rea- o 4$ter$a! Ree$-e.Q Nothi$g i #e$tio$ed i$ Sectio$ F abo-t !oca! tae. The c!ear i$te$t ior the Qi$ !ie- o a!! taeQ c!a-e to app!y o$!y to tae -$der the Natio$a! 4$ter$a! Ree$-e (ode a$d$ot to !oca! tae. Ee$ +ith repect to $atio$a! i$ter$a! ree$-e tae' the Qi$ !ie- o a!! taeQ c!a-edoe $ot app!y to i$co#e ta. 4 (o$gre i$te$ded the Qi$ !ie- o a!! taeQ c!a-e i$ S#art ra$chie to a!o app!y to !oca! tae'(o$gre +o-!d hae epre!y #e$tio$ed the ee#ptio$ ro# #-$icipa! a$d proi$cia! tae. (o$greco-!d hae -ed the !a$g-age i$ Sectio$ F%b& o (!aeci!!a o!d ra$chie' a o!!o+8 i$ !ie- o a$y a$d a!! tae o a$y /i$d' $at-re or decriptio$ !eied' etab!ihed or co!!ected bya$y a-thority +hatoeer' municipal, provincial or $atio$a!' ro# +hich the gra$tee i hereby epre!yee#pted' . %E#phai -pp!ied&.

7o+eer' (o$gre did $ot epre!y ee#pt S#art ro# !oca! tae. (o$gre -ed the Qi$ !ie- o a!!taeQ c!a-e o$!y i$ reere$ce to $atio$a! i$ter$a! ree$-e tae. The o$!y i$terpretatio$' -$der the r-!eo$ trict co$tr-ctio$ o ta ee#ptio$' i that the Qi$ !ie- o a!! taeQ c!a-e i$ S#art ra$chie reero$!y to $atio$a! a$d $ot to !oca! tae. GSmart Communications, Inc. v. (he City of %avao, etc., et al .' <. R. No.1>>F1' Septe#ber 16' 200? citi$g Philippine $ong %istance (elephone Company, Inc. v. City of %avao' @ Phi!.>@1' >F %200&I

NOTES AN" (O**ENTS8 The a-thor opi$e that the aboe i$d app!icatio$ to a!! te!eco##-$icatio$

co#pa$ie.

%%. The “i" lieu of all ta#es” clause i" the fra"chise of ABS0BN has beco!efu"ctus officio with the abolitio" of the fra"chise ta# o" broadcasti"9 co!pa"ies withyearly 9ross receipts e#ceedi"9 Te" ;illio" Pesos. The c!a-e “i$ !ie- o a!! tae” doe $otpertai$ to VAT or a$y other ta. 4t ca$$ot app!y +he$ +hat i paid i a ta other tha$ a ra$chie ta. Si$ce the ra$chie ta o$ the broadcati$g co#pa$ie +ith year!y gro receipt eceedi$g te$ #i!!io$peo ha bee$ abo!ihed' the “i$ !ie- o a!! tae” c!a-e ha $o+ beco#e functus officio' re$deredi$operatie. %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 1660?' October 6' 200?&

NOTES AN" (O**ENTS8 Thi i practica!!y the a#e ho!di$g i$ a$ ear!ier cae i$o!i$g a$otherte!eco##-$icatio$ co#pa$y. S#art (o##-$icatio$' 4$c. . The (ity o "aao' etc.' et a!.' <. R. No. 1>>F1'Septe#ber 16' 200?. The a-thor opi$e that i$ce practica!!y a!! ra$chie gra$ted to te!eco##-$icatio$co#pa$ie are i#i!ar!y +orded that the aboe doctri$e i$d app!icatio$ to the other.&

%8. ouble ta#atio" i" its 9e"eric se"se5 this !ea"s ta#i"9 the sa!e sub?ect or ob?ect twice duri"9 the sa!e ta#able period. 4$ it partic-!ar e$e' it #ay #ea$ directd-p!icate taatio$' +hich i prohibited -$der the co$tit-tio$ beca-e it io!ate the co$cept o e-a!protectio$' -$ior#ity a$d e-itab!e$e o taatio$. 4$direct d-p!icate taatio$ i $ot a$athe#ati;ed bythe aboe co$tit-tio$a! !i#itatio$.

%:. Ele!e"ts of direct duplicate ta#atio"- a. Sa#e 1& S-bect or obect i taed t+ice



2& by the a#e tai$g a-thority & or the a#e tai$g p-rpoe & d-ri$g the a#e taab!e period

b. Tai$g a!! o the -bect or obect or the irt ti#e +itho-t tai$g a!! o the# or the eco$dti#e.

4 a$y o the e!e#e$t are abe$t the$ there i i$direct d-p!icate taatio$ +hich i $ot prohibitedby the co$tit-tio$. NOTES AN" (O**ENTS8 a. Prese"ce of the %"d ele!e"t $iolates the eDual protectio" clause. 4 o$!y the 1t e!e#e$t i pree$t' tai$gthe a#e -bect or obect t+ice' by the a#e tai$g a-thority' etc.' there i $o io!atio$ o the e-a! protectio$ c!a-ebeca-e a!! -bect a$d obect that are i#i!ar!y it-ated are -bect to the a#e b-rde$ a$d gra$ted the a#eprii!ege +itho-t a$y dicri#i$atio$ +hatoeer' The pree$ce o the 2$d e!e#e$t' tai$g a!! o the -bect a$d obect or the irt ti#e' +itho-t tai$g a!! or theeco$d ti#e' re-!t to dicri#i$atio$ a#o$g -bect a$d obect that are i#i!ar!y it-ated' he$ce io!atie o thee-a! protectio$ c!a-e.

%<. ouble ta#atio" a $alid defe"se a9ai"st the le9ality of a ta# !easure if thedouble ta#atio" is direct duplicate ta#atio"' beca-e it +o-!d io!ate the e-a! protectio$ c!a-eo the co$tit-tio$.

%>. +he" a" ite! of i"co!e is ta#ed i" the Philippi"es a"d the sa!e i"co!e is

ta#ed i" a"other cou"try5 this would be "ow" as i"ter"atio"al ?uridical doubleta#atio" +hich i the i#poitio$ o co#parab!e tae i$ t+o or #ore tate o$ the a#e tapayer i$repect o the a#e -bect #atter a$d or ide$tica! gro-$d. *Commissioner of Internal Revenue v. S.C.ohnson and Son, Inc., et al., <.R. No. 12@10>' -$e 2>' 1FFF&

%@. ;ethods for a$oidi"9 double ta#atio" Fi"direct duplicate ta#atio"G. a. Ta treatie +hich ee#pt oreig$ $atio$a! ro# !oca! taatio$ a$d !oca! $atio$a! ro# oreig$taatio$ -$der the pri$cip!e o reciprocity. b. Ta credit +here oreig$ tae are a!!o+ed a ded-ctio$ ro# !oca! tae that are d-e to bepaid. c. A!!o+i$g oreig$ tae a a ded-ctio$ ro# gro i$co#e.

%. Ta# credit ge$era!!y reer to a$ a#o-$t that i -btracted direct!y ro# o$e: tota! ta !iabi!ity'a$ a!!o+a$ce agai$t the ta ite!' or a ded-ctio$ ro# +hat i o+$ed. A ta credit red-ce the ta d-e' i$c!-di$g J+he$eer app!icab!e J the i$co#e ta that i deter#i$edater app!yi$g the correpo$di$g ta rate to taab!e i$co#e. %Commissioner of Internal Revenue v. Central$uzon %rug Corporation, <. R. No. 1>F6@' Apri! 1>' 200>&

%C. A ta# deductio" i dei$ed a a -btractio$ ro i$co#e or ta p-rpoe' or a$ a#o-$t that ia!!o+ed by !a+ to red-ce i$co#e prior to the app!icatio$ o the ta rate to co#p-te the a#o-$t o ta+hich i d-e. A ta ded-ctio$ red-ce the i$co#e that i -bect to ta i$ order to arrie at taab!e i$co#e.%Commissioner of Internal Revenue v. Central $uzon %rug Corporation, <. R. No. 1>F6@' Apri! 1>' 200>&

8&. The petitio"ers alle9e that the R3AT law is co"stitutio"al because the

Bica!eral 0o"fere"ce 0o!!itted has e#ceeded its authority i" i"cludi"9 pro$isio"swhich were "e$er i"cluded i" the $ersio"s of both the House a"d Se"ate such asi"serti"9 the sta"dby authority to the Preside"t to i"crease the 3AT fro! '&I to'%IK deleti"9 e"tirely the "o passo" pro$isio"s fou"d i" both the House a"d Se"ateBillsK i"serti"9 the pro$isio" i!posi"9 a @&I li!it o" the a!ou"t of i"put ta# to becredited a9ai"st the output ta#K a"d i"cludi"9 the a!e"d!e"ts i"troduced o"ly bySe"ate Bill No. 'C<& re9ardi"9 other i"ds of ta#es i" additio" to the $alueadded ta#. Thus5 there was a $iolatio" of the co"stitutio"al !a"date that re$e"ue bills shall



ori9i"ate e#clusi$ely fro! the House of Represe"tati$es. Are the co"te"tio"s of such wei9ht as to co"stitute 9ra$e abuse of discretio"which !ay i"$alidate the law 7 E#plai" briefly. S3<<ESTE" ANS=ER8 No. There +a $o grae ab-e o dicretio$ beca-e a!! the cha$ge a$d#odiicatio$ #ade by the Bica#era! (o$ere$ce (o##ittee +ere ger#a$e to -bect o the proiio$reerred to it or reco$ci!iatio$.

The Bica#era! (o$ere$ce (o##ittee #ere!y eercied the -dicia!!y recog$i;ed !o$g,ta$di$g!egi!atie practice o gii$g aid co$ere$ce co##ittee a#p!e !atit-de or co#pro#ii$g diere$cebet+ee$ the Se$ate a$d the 7o-e. G A"a-ada +uro Party $ist *etc.# v. &rmita, etc., et al., <. R. No. 16?0>6'Septe#ber 1' 200> a$d co#pa$io$ caeI

8'. The 3AT while re9ressi$e is NOT $iolati$e of the !a"date to e$ol$e apro9ressi$e syste! of ta#atio". o you a9ree 7 The #a$date to (o$gre i $ot to precribeb-t to eo!e a progreie yte# o taatio$. Other+ie' a!e tae +hich perhap are the o!det or#o i$direct tae' +o-!d hae bee$ prohibited +ith the proc!a#atio$ o the co$tit-tio$a! proiio$. Sa!etae are a!o regreie. . G A"a-ada +uro Party $ist *etc.# v. &rmita, etc., et al., <. R. No. 16?0>6' Septe#ber 1'200> a$d co#pa$io$ cae citi$g (olentino v. Secretary of /inance, et al., <. R. No. 11>>>' A-g-t 2>' 1FF' 2>S(RA 60I

8%. All re$e"ues a"d assets of "o"stoc5 "o"profit educatio"al i"stitutio"s thatare actually5 directly a"d e#clusi$ely used for educatio"al purposes shall be e#e!ptfro! ta#atio".

88. Re$e"ues a"d assets of proprietary educatio"al i"stitutio"s5 i"cludi"9those which are cooperati$ely ow"ed5 !ay be e"titled to e#e!ptio"s sub?ect to

li!itatio"s pro$ided by law i"cludi"9 restrictio"s o" di$ide"ds a"d pro$isio"s forrei"$est!e"ts. There i $o !a+ at the pree$t +hich gra$t ee#ptio$' other the ee#ptio$ gra$tedto cooperatie.

OTHER 0ON0EPTS

'. isti"9uish ta# fro! debt. TAL "EBT

Basis baed o$ !a+ baed o$ co$tract or -dg#e$t

1ailure to Pay #ay re-!t i$ i#prio$#e$t $o i#prio$#e$t

;ode ofPay!e"t

ge$era!!y payab!e i$ #o$ey payab!e i$ #o$ey' property orerice

Assi9"ability $ot aig$ab!e aig$ab!e

Pay!e"t -$!e it beco#e a debt i $ot -bect toco#pe$atio$ or et,o

#ay be a -bect

*"terest doe $ot dra+ i$teret -$!e de!i$-e$t dra+ i$teret i tip-!ated orde!ayed

Authority i#poed by p-b!ic a-thority ca$ be i#poed by priatei$diid-a!

Prescriptio" Precriptie period or ta -$der N4R( debt -$der the (ii! (ode

+ARN*N,- o "ot use the abo$e arra"9e!e"t i" a"sweri"9 Bar Duestio"s.

%. 0o!pe"satio" ta/e p!ace by operatio$ o !a+' +here the !oca! goer$#e$t a$d the tapayer are i$ their o+$ right reciproca!!y debtor a$d creditor o each other' a$d that the debt are both d-e a$d



de#a$dab!e' i$ co$e-e$ce o Artic!e 12@? a$d 12@F o the (ii! (ode. *%omingo v. +arlitos, ? S(RA&

8. ;ay there be co!pe"satio" or setoff betwee" a "atio"al ta# a"d a debt 7 Reaso" out your a"swer. S3<<ESTE" ANS=ER8 A a ge$era! r-!e' there co-!d be $oco#pe$atio$ or et,o bet+ee$ a ta a$d a debt or the o!!o+i$g reao$8

a. )ieb!ood theory. b. Tae are $ot co$tract-a! ob!igatio$ b-t arie o-t o ad-ty to' a$d are the poitie act o goer$#e$t' to the #a/i$g a$d e$orci$g o +hich the pero$a!co$e$t o the i$diid-a! tapayer i $ot re-ired. *Repu"lic v. Mam"ulao $um"er Co., S(RA 622&

c. Tae ca$$ot be the -bect o co#pe$atio$ beca-e the goer$#e$t a$d tapayer are $ot#-t-a!!y creditor a$d debtor o each other a$d a c!ai# or tae i $ot -ch a debt' de#a$d' co$tract or

-dg#e$t a i a!!o+ed to be et,o.Th-' it i correct to ay that the oetti$g o a tapayer: ta re-$d +ith it a!!eged ta deicie$cy

i -$aai!i$g -$der Art. 12@F o the (ii! (ode. %South African Airays v. Commissioner of Internal Revenue,

<.R. No. 1?0>6' Cebr-ary 16' 2010 reiterati$g Calte) Philippines, Inc. v. Commission on Audit, +hich app!ied/rancia v. Intermediate Appellate Court &

:. E#ceptio"s- +he" setoff or co!pe"satio" allowed for local ta#es.a. =here both c!ai# a!ready beco#e oerd-e a$d de#a$dab!e a +e!! a -!!y !i-idated.

(o#pe$atio$ ta/e p!ace by operatio$ o !a+ -$der Art. 1200 i$ re!atio$ to Art. 12@F a$d 12F0 a!! o the(ii! (ode. %%omingo v. +arlitos' ? S(RA & b. (o#pe$atio$ ta/e p!ace by operatio$ o!a+' +here the goer$#e$t a$d the tapayer are i$ their o+$ right reciproca!!y debtor a$d creditor oeach other' a$d that the debt are both d-e a$d de#a$dab!e. Thi i i$ co$e-e$ce o Artic!e 12@? a$d

12@F o the (ii! (ode. %%omingo v. +arlitos, ? S(RA & c. ,The S-pre#e (o-rt-phe!d the a!idity o a et,o bet+ee$ the tapayer a$d the goer$#e$t. 4$ both cae' the c!ai# o thetapayer therei$ +ere certai$ a$d !i-idated. The c!ai# +ere certai$ i$ce there +ere $o do-bt ordip-te a to their re-$dabi!ity. 4$ act' the goer$#e$t ad#itted the act o oer,pay#e$t.

%Commissioner of Internal Revenue v. &sso Standard &astern, Inc., 1@2 S(RA 6& d. 4$ caeo a ta oerpay#e$t' the B4R: ob!igatio$ to re-$d or o,et arie ro# the #o#e$t the ta +a paid.

REASON8 Solutio inde"eti. %Commissioner of Internal Revenue v. &sso Standard &astern, Inc 1@2 S(RA 6& e. =hi!e -dg#e$t ho-!d be re$dered i$ aor o Rep-b!ic or -$paid

tae' -dg#e$t o-ght at the a#e ti#e to i-e or Sa#pag-ita Pict-re co##a$di$g pay#e$t to the

!atter by the Rep-b!ic o the a!-e o the bac/pay certiicate +hich the Rep-b!ic receied. %Repu"lic v.&ricta' 1@2 S(RA 62&

<. ,ilbert obtai"ed a ?ud9!e"t for a su! of !o"ey a9ai"st the !u"icipality of0a!ili"9. The ?ud9!e"t has beco!e fi"al althou9h e#ecutio" has "ot issued. po"recei$i"9 a" assess!e"t for !u"icipal sales ta#es fro! the ;u"icipal Treasurer5,ilbert e#ecuted a partial assi9"!e"t of his ?ud9!e"t sufficie"t to co$er theassess!e"t i" fa$or of the ;u"icipality. ;ay the ;u"icipal Treasurer $alidly acceptthe assi9"!e"t7 +hyM

S3<<ESTE" ANS=ER8 e. The partie i$ thi cae are #-t-a!!y debtor a$d creditor o eachother' a$d i$ce both o the c!ai# beca#e oerd-e' de#a$dab!e a$d -!!y !i-idated' co#pe$atio$ta/e p!ace by operatio$ o !a+. S-ch +a the ho!di$g i$ %omingo v. +arlitos, ? S(RA ' a caedecided by the S-pre#e (o-rt +hoe act-a! a$tecede$t are i#i!ar to the prob!e#.

>. *" case of doubt5 ta# laws !ust be co"strued strictlya9ai"st the State a"d liberally i" fa$or of the ta#payer beca-e tae' a b-rde$ +hich #-tbe e$d-red by the tapayer' ho-!d $ot be pre-#ed to go beyo$d +hat the !a+ epre!y a$d c!ear!ydec!are. *$incoln Philippine $ife Insurance Company, Inc., etc., v. Court of Appeals, et al., 2F S(RA F2' FF&

@. *"terpretatio" i" the i!positio" of ta#es5 is "ot the si!ilar doctri"e as thatapplied to ta# e#e!ptio"s. The r-!e i$ the i$terpretatio$ o ta !a+ i that a tat-te +i!! $ot beco$tr-ed a i#poi$g a ta -$!e it doe o c!ear!y' epre!y' a$d -$a#big-o-!y. A ta ca$$ot bei#poed +itho-t c!ear a$d epre +ord or that p-rpoe. Accordi$g!y' the ge$era! r-!e o re-iri$gadhere$ce to the !etter i$ co$tr-i$g tat-te app!ie +ith pec-!iar trict$e to ta !a+ a$d the



proiio$ o a tai$g act are $ot to be ete$ded by i#p!icatio$. 4$ a$+eri$g the -etio$ o +ho i-bect to ta tat-te' it i baic that i$ cae o do-bt' -ch tat-te are to be co$tr-ed #ot tro$g!yagai$t the goer$#e$t a$d i$ aor o the -bect or citi;e$ beca-e b-rde$ are $ot to be i#poed$or pre-#ed to be i#poed beyo$d +hat tat-te epre!y a$d c!ear!y i#port. GCommissioner of InternalRevenue v. /ortune (o"acco Corporation, <. R. No. 16@2@,@>' -!y 21' 200? citi$g CIR v. Court of Appeals' ?

Phi!. 22' 0,1 %1FF@&I A b-rde$' tae ho-!d $ot be -$d-!y eacted $or a-#ed beyo$d the p!ai$#ea$i$g o the ta !a+. %I"id., citi$g CIR v. Philippine American Accident Insurance Company, Inc., <.R. No.116>?' *arch 1?' 200>' > S(RA 66?&

. Strict i"terpretatio" of ta# e#e!ptio" laws. Tae are +hat cii!i;ed peop!e pay or

cii!i;ed ociety. They are the !ieb!ood o the $atio$. Th-' tat-te gra$ti$g ta ee#ptio$ areco$tr-ed stricissimi =uris agai$t the tapayer a$d !ibera!!y i$ aor o the tai$g a-thority. A c!ai# o taee#ptio$ #-t be c!ear!y ho+$ a$d baed o$ !a$g-age i$ !a+ too p!ai$ to be #ita/e$. Other+ietated' taatio$ i the r-!e' ee#ptio$ i the eceptio$. %8uezon City, et al., v. ABS0CB! BroadcastingCorporation' <. R. No. 1660?' October 6' 200? citi$g Mactan Ce"u International Airport Authority v. Marcos, <.R.

No. 1200?2' Septe#ber 11' 1FF6' 261 S(RA 66@' 6?0& The b-rde$ o proo ret -po$ the party c!ai#i$g theee#ptio$ to proe that it i i$ act coered by the ee#ptio$ o c!ai#ed. %8uezon City, supra citi$g Agpa!o'R.E.' Stat-tory (o$tr-ctio$' 200 ed.' p. 01&

C. Ratio"ale for strict i"terpretatio" of ta# e#e!ptio" laws. The bai or the r-!e o$trict co$tr-ctio$ to tat-tory proiio$ gra$ti$g ta ee#ptio$ or ded-ctio$ i to #i$i#i;e diere$tia!treat#e$t a$d oter i#partia!ity' air$e a$d e-a!ity o treat#e$t a#o$g tapayer. %8uezon City, et al., v.

ABS0CB! Broadcasting Corporation' <. R. No. 1660?' October 6' 200?& 7e +ho c!ai# a$ ee#ptio$ ro# hihare o co##o$ b-rde$ #-t -tiy hi c!ai# that the !egi!at-re i$te$ded to ee#pt hi# by-$#ita/ab!e ter#. Cor ee#ptio$ ro# taatio$ are $ot aored i$ !a+' $or are they pre-#ed. They#-t be epreed i$ the c!earet a$d #ot -$a#big-o- !a$g-age a$d $ot !et to #ere i#p!icatio$. 4tha bee$ he!d that “ee#ptio$ are $eer pre-#ed the b-rde$ i o$ the c!ai#a$t to etab!ih c!ear!y hiright to ee#ptio$ a$d ca$$ot be #ade o-t o i$ere$ce or i#p!icatio$ b-t #-t be !aid beyo$dreao$ab!e do-bt. 4$ other +ord' i$ce taatio$ i the r-!e a$d ee#ptio$ the eceptio$' the i$te$tio$ to#a/e a$ ee#ptio$ o-ght to be epreed i$ c!ear a$d -$a#big-o- ter#. %8uezon City, supra citi$g

Agpa!o' R.E.' Stat-tory (o$tr-ctio$' 200 ed.' p. 02&

'&. +hy are ta# e#e!ptio"s are strictly co"strued a9ai"st the ta#payer a"dliberally i" fa$or of the State 7 S3<<ESTE" ANS=ER8 Tae are $eceary or the co$ti$-ed eite$ce o the State.

''. *" case of a ta# o$erpay!e"t5 where the B*R6s obli9atio" to refu"d or setoffarises fro! the !o!e"t the ta# was paid u"der the pri"ciple of solutio indebeti . *Commissioner of Internal Revenue v. &sso Standard &astern, Inc, 1@2 SR(A 6&

'%. But "ote Nestle Phil. v. Court of Appeals, et al., ,.R. No. '8:'':5 /uly >5 %&&' +hich he!d that i$ order or the r-!e o$ solutio inde"eti to app!y it i a$ ee$tia! co$ditio$ that thepetitio$er #-t irt ho+ that it pay#e$t o the c-to# d-tie +a i$ ece o +hat +a re-ired bythe !a+ at the ti#e the -bect 16 i#portatio$ o #i!/ a$d #i!/ prod-ct +ere #ade. 3$!e ho+$other+ie' the dip-tab!e pre-#ptio$ o reg-!arity o peror#a$ce o d-ty !ie i$ aor o the (o!!ector o(-to#.

'8. Strict i"terpretatio" of a ta# refu"d that partaes of the "ature of a ta# does"ot apply to ta# refu"d based o" erro"eous pay!e"t or where there is "o law thatauthories collectio" of the ta#. There i parity bet+ee$ ta re-$d a$d ta ee#ptio$ o$!y +he$the or#er i baed either o$ a ta ee#ptio$ tat-te or a ta re-$d tat-te. %Commissioner of InternalRevenue v. /ortune (o"acco Corporation, <. R. No. 16@2@,@>' -!y 21' 200?&

Ta re-$d %or ta credit&' o$ the other ha$d' are $ot o-$ded pri$cipa!!y o$ !egi!atie grace b-t o$the !ega! pri$cip!e +hich -$der!ie a!! -ai,co$tract abhorri$g a pero$: -$-t e$rich#e$t at theepe$e o a$other. GCommissioner, supra citi$g Ramie (e)tiles, Inc. v. 'on. Mathay ' Sr.' 1@? Phi!. ?2 %1F@F&D



Puyat Sons v. City of Manila' et a!.' 11@ Phi!. F?> %1F6&I

The dy$a#ic o erro$eo- pay#e$t o ta it to a tee the prototypic -ai,co$tract' solutio inde"iti,+hich coer $ot o$!y #ita/e i$ act b-t a!o #ita/e i$ !a+. %Commissioner, supra citi$g (ii! (ode' Art.212' 21> a$d 21>>&

The <oer$#e$t i $ot ee#pt ro# the app!icatio$ o solutio inde"iti . %Commissioner, supra citi$gCommissioner of Internal Revenue v. /ireman>s /und Insurance Co.' <.R. No. ),06' F *arch 1F?@' 1? S(RA1>' 2,2>D Ramie (e)tiles, Inc. v. Mathay, supraD +onzales Puyat Sons v. City of Manila' supra&

4$deed' the tapayer epect air dea!i$g ro# the <oer$#e$t' a$d the !atter ha the d-ty tore-$d +itho-t a$y -$reao$ab!e de!ay +hat it ha erro$eo-!y co!!ected. %Commissioner, supra citi$g

Commissioner of Internal Revenue v. (o-yo Shipping Co., supra at ?& 4 the State epect it tapayer toobere air$e a$d ho$ety i$ payi$g their tae' it #-t ho!d ite! agai$t the a#e ta$dard i$re-$di$g ece %or erro$eo-& pay#e$t o -ch tae. 4t ho-!d $ot -$-t!y e$rich ite! at theepe$e o tapayer. GCommissioner, supra citi$g AB $easing and /inance Corporation v. Commissioner ofInternal Revenue' > Phi!. 2F@ i$ t-r$ citi$g BPI0/amily Savings Ban-, Inc. v. Court of Appeals ' 0 S(RA >0@' >10'

>1? %2000&I A$d o' gie$ it ee$ce' a c!ai# or ta re-$d $eceitate o$!y prepo$dera$ce o eide$ceor it approbatio$ !i/e i$ a$y other ordi$ary cii! cae. %Commissioner, supra&

':. Ta# refu"ds pre!ised upo" a ta# e#e!ptio" strictly co"strued5 Ta ee#ptio$ ia re-!t o !egi!atie grace. A$d he +ho c!ai# a$ ee#ptio$ ro# the b-rde$ o taatio$ #-t -tiy hic!ai# by ho+i$g that the !egi!at-re i$te$ded to ee#pt hi# by +ord too p!ai$ to be #ita/e$.

GCommissioner of Internal Revenue v. /ortune (o"acco Corporation, <. R. No. 16@2@,@>' -!y 21' 200? citi$gSurigao Consolidated Mining Co. Inc. v. Commissioner of Internal Revenue and Court of (a) Appeals' 11F Phi!. '@ %1F6&I

The r-!e i that ta ee#ptio$ #-t be trict!y co$tr-ed -ch that the ee#ptio$ +i!! $ot be he!d to beco$erred -$!e the ter# -$der +hich it i gra$ted c!ear!y a$d diti$ct!y ho+ that -ch +a thei$te$tio$. GCommissioner, supra citi$g Phil. Acetylene Co. v. Commission of Internal Revenue' et a!.' 12@ Phi!. 61'

@2 %1F6@&D Manila &lectric Company v. 3era' <.R. No. ),2FF?@' 22 October 1F@>' 6@ S(RA >1' >@,>?D SurigaoConsolidated Mining Co. Inc. v. Commissioner of Internal Revenue' supraI

A c!ai# or ta re-$d #ay be baed o$ tat-te gra$ti$g ta ee#ptio$ or ta re-$d. 4$ -ch cae'the r-!e o trict i$terpretatio$ agai$t the tapayer i app!icab!e a the c!ai# or re-$d parta/e o the$at-re o a$ ee#ptio$' a !egi!atie grace' +hich ca$$ot be a!!o+ed -$!e gra$ted i$ the #ot ep!icita$d categorica! !a$g-age. The tapayer #-t ho+ that the !egi!at-re i$te$ded to ee#pt hi# ro# theta by +ord too p!ai$ to be #ita/e$. GCommissioner, supra +ith a $ote to ee Surigao Consolidated Mining Co.Inc. v. CIR ' supra at @2,@D Phile) Mining Corp. v. Commissioner of Internal Revenue' 6> Phi!. >@2' >@F %1FFF&D

%avao +ulf $um"er Corp. v. Commissioner of Internal Revenue' > Phi!. ?F1,?F2 %1FF?&D . Commissioner of Internal Revenue v. (o-yo Shipping Co., $td .' 1 Phi!. 220' 22? %1FF>&I

'<. Effect of a B*R re$ersal of a pre$ious ruli"9 i"terpreti"9 a law as e#e!pti"9 ata#payer. A reera! o a B4R r-!i$g aorab!e to a tapayer +o-!d $ot $eceari!y create a perpet-a!ee#ptio$ i$ hi aor' or ater a!! the goer$#e$t i $eer etopped ro# co!!ecti$g tae beca-e o#ita/e or error o$ the part o it age$t. *$incoln Philippine $ife Insurance Company, Inc., etc., v. Court of

Appeals, et al., 2F S(RA F2' FF&

'>. A ta# a!"esty i a ge$era! pardo$ or i$te$tio$a! oer!oo/i$g by the State o it a-thority to

i#poe pe$a!tie o$ pero$ other+ie g-i!ty o eaio$ or io!atio$ o a ree$-e or a ta !a+.4t parta/e o a$ abo!-te +aier by the goer$#e$t o it right to co!!ect +hat i d-e it a$d to gie ta

eader +ho +ih to re!e$t a cha$ce to tart +ith a c!ea$ !ate. A ta a#$ety' #-ch !i/e a ta ee#ptio$'i $eer aored $or pre-#ed i$ !a+. The gra$t o a ta a#$ety' i#i!ar to a ta ee#ptio$' #-t beco$tr-ed trict!y agai$t the tapayer a$d !ibera!!y i$ aor o the tai$g a-thority. %Philippine Ban-ingCorporation, etc., v. Commissioner of Internal Revenue, <. R. No. 1@0>@' a$-ary 0' 200F&

'@. The purpose of ta# a!"esty i toa. gie ta eader +ho +ih to re!e$t a cha$ce to tart a c!ea$ !ate' a$d tob. gie the goer$#e$t a cha$ce to co!!ect -$co!!ected ta ro# ta eader +itho-t hai$g to go

thro-gh the tedio- proce o a ta cae. *Banas, r. v. Court of Appeals, et al., <.R. No. 102F6@'Cebr-ary 10' 2000 #



'. Ta# a!"esty disti"9uished fro! ta# e#e!ptio". a. Ta a#$ety i a$ i##-$ity ro# a!! cri#i$a!' cii! a$d ad#i$itratie !iabi!itie arii$g ro#$o$pay#e$t o tae %People v. Castaneda, <.R. No. ),6??1' Septe#ber 1>' 1F??& =74)E a taee#ptio$ i a$ i##-$ity ro# cii! !iabi!ity o$!y. 4t i a$ i##-$ity or prii!ege' a reedo# ro# a charge or b-rde$ to +hich other are -bected. */lorer v. Sheridan, ?@ Ind. , @D !& @DE#

b. Ta a#$ety app!ie o$!y to pat ta period' he$ce o retroactie app!icatio$ *Castaneda, supra&=74)E ta ee#ptio$ ha propectie app!icatio$.

'C. Ta# a$oida"ce i the -e o !ega!!y per#iib!e #ea$ to red-ce the ta +hi!e ta eaio$i the -e o i!!ega! #ea$ to ecape the pay#e$t o tae.

%&. Ta# e$asio" co""otes the i"te9ratio" of three factors- a. The e$d to be achieed' i.e.' the pay#e$t o !e tha$ that /$o+$ by the tapayer to be !ega!!yd-e' or the $o$,pay#e$t o ta +he$ it i ho+$ that a ta i d-eD

b. a$ acco#pa$yi$g tate o #i$d +hich i decribed a bei$g “ei!” o$ “bad aith'” “+i!!-!'” or”de!iberate a$d $ot accide$ta!”D a$d

c. a co-re o actio$ or ai!-re o actio$ +hich i -$!a+-!. %Commissioner of Internal Revenue v. (he

&state of Benigno P. (oda, r., , etc., <. R. No. 1@1??' Septe#ber 1' 200&

%'. Ta# a$oida"ce disti"9uished fro! ta# e$asio". a. Ta aoida$ce i !ega! +hi!e ta eaio$ i i!!ega!. b. The obectie o ta aoida$ce i$ #ot i$ta$ce i #ere!y to red-ce the ta that i d-e +hi!e ita eaio$ the obect i to e$tire!y ecape the pay#e$t o tae. c. Ta eaio$ +arra$t the i#poitio$ o cii!' ad#i$itratie a$d cri#i$a! pe$a!tie +hi!e taaoida$ce doe $ot.

%%. Ta# spari"9 i a proiio$ i$ o#e ta treatie +hich proide that the tate o reide$cea!!o+ a credit the a#o-$t that +o-!d hae bee$ paid' a i $o red-ctio$ ha bee$ #ade. %Voge!' !a- o$"o-b!e Taatio$ (o$e$tio$' Third Editio$' p.12>> cited i$ Segarra' Ve$ice 7' Ta Treatie8 Tric/ or treat M'Phi!ippi$e "ai!y 4$-irer' "ece#ber 6' 2002' p. (>&

There #ay be i$ta$ce +here a partic-!ar i$co#e i ee#pt ro# taatio$ i$ order to e$co-rage

oreig$ i$et#e$t +hich #ay !ead to eco$o#ic dee!op#e$t. 4 the ta credit #ethod i -ed' there+o-!d be $o #ore ta to credit i$ce there i $o #ore ta to credit a a re-!t o the ta ee#ptio$. (o$e-e$t!y' +he$ the ta #ethod credit #ethod i app!ied to thee ite# o i$co#e' -ch i$ce$tieare ipho$ed o i$ce' i$ eect' the ta be$eit are ca$ce!!ed o-t. *I"id.# Th-' the $eed or the tapari$g proiio$.

NAT*ONA( *NTERNA( RE3ENE 0OE

OR,AN*LAT*ON AN 1N0T*ONS O1 THE BREA O1 *NTERNA( RE3ENE

'. Rep. Act No. ':&<5 the Ba" eposits Secrecy (aw prohibits i"Duiry i"to ba"deposits. As e#ceptio"s to Rep. Act No. ':&<5 the 0o!!issio"er of *"ter"al Re$e"ueis o"ly authoried to i"Duire i"to the ba" deposits of- a. a decede$t to deter#i$e hi gro etateD a$d

b. a$y tapayer +ho ha i!ed a$ app!icatio$ or co#pro#ie o hi ta !iabi!ity by reao$ o i$a$cia!i$capacity to pay hi ta !iabi!ity. GSec. > %C&' N4R( o 1FF@I c. A tapayer +ho a-thori;e the (o##iio$er to i$-ire i$to hi ba$/ depoit.

%. Purpose of the N*R0 of 'CC@. Re$e"ue 9e"eratio" has u"doubtedly bee" a!a?or co"sideratio" i" the passa9e of the Ta# 0ode. %Commissioner of Internal Revenue v.

/ortune (o"acco Corporation, <. R. No. 16@2@,@>' -!y 21' 200?&



8. Purpose of shift fro! ad $alore! syste! to specific ta# syste! i" ta#atio" ofci9arettes. The hit ro# the ad valorem yte# to the peciic ta yte# i !i/e+ie #ea$t to pro#ote air co#petitio$ a#o$g the p!ayer i$ the i$d-trie co$cer$ed' to e$-re a$ e-itab!editrib-tio$ o the ta b-rde$ a$d to i#p!iy ta ad#i$itratio$ by c!aiyi$g cigarette' a#o$g other'i$to high' #edi-# a$d !o+,priced baed o$ their $et retai! price a$d accordi$g!y grad-ati$g ta rate. %Commissioner of Internal Revenue v. /ortune (o"acco Corporation, <. R. No. 16@2@,@>' -!y 21' 200?&

TA) ON *N0O;E

'. The Ta# 0ode has i"cluded u"der the ter! “corporatio"” part"erships5 "o!atter how created or orga$i;ed' oi$t,toc/ co#pa$ie' oi$t acco-$t %cuentas en participacion&'aociatio$' or i$-ra$ce co#pa$ie. GSec. 2 $o+ Sec. 2 %B& o the N4R( o 1FF@I

%. 4$ &vangelista v. Collector, 102 Phi!. 10, the S-pre#e (o-rt he!d citi$g *erte$ that the ter!part"ership i"cludes a y$dicate' gro-p' poo!' oi$t e$t-re or other -$i$corporated orga$i;atio$'thro-gh or by #ea$ o +hich a$y b-i$e' i$a$cia! operatio$' or e$t-re i carried o$.

8. 0ertai" busi"ess or9a"iatio"s do "ot fall u"der the cate9ory of

“corporatio"s” u"der the Ta# 0ode' a$d thereore $ot -bect to ta a corporatio$' i$c!-de8a. <e$era! proeio$a! part$erhipDb. oi$t e$t-re or co$orti-# or#ed or the p-rpoe o -$derta/i$g co$tr-ctio$ proect

e$gagi$g i$ petro!e-#' coa!' geother#a!' a$d other e$ergy operatio$' p-r-a$t to a$ operatio$ orco$orti-# agree#e$t -$der a erice co$tract +ith the <oer$#e$t. G1t e$te$ce' Sec. 22 %B&' B4R( o1FF@I

:. 0oheirs who ow" i"herited properties which produce i"co!e should "otauto!atically be co"sidered as part"ers of a" u"re9istered corporatio" sub?ect toi"co!e ta# for the followi"9 reaso"s-

a. The hari$g o gro ret-r$ doe $ot o ite! etab!ih a part$erhip' +hether or $ot thepero$ hari$g the# hae a oi$t or co##o$ right or i$teret i$ a$y property ro# +hich the ret-r$ arederied. There #-t be a$ -$#ita/ab!e i$te$tio$ to or# a part$erhip or oi$t e$t-re. *9"illos, r. v.

Commissioner of Internal Revenue, 1F S(RA 6&b. There i $o co$trib-tio$ or i$et#e$t o additio$a! capita! to i$creae or epa$d the

i$herited propertie' #ere!y co$ti$-i$g the dedicatio$ o the property to the -e to +hich it had bee$ p-tby their orebear. %I"id.&

c. Pero$ +ho co$trib-te property or -$d to a co##o$ e$terprie a$d agree to hare thegro ret-r$ o that e$terprie i$ proportio$ to their co$trib-tio$' b-t +ho eera!!y retai$ the tit!e to theirrepectie co$trib-tio$' are $ot thereby re$dered part$er. They hae $o co##o$ toc/ capita!' a$d $oco##-$ity o i$teret a pri$cipa! proprietor i$ the b-i$e ite! ro# +hich the proceed +ere deried. %E!e#e$t o the )a+ o Part$erhip by C!oyd R. *eche#' 2$d Ed.' Sec. ?' p. @ cited i$ Pascual v. Commissioner of Internal Revenue, 166 S(RA >60&

<. The co!!o" ow"ership of property does "ot itself create a part"ershipbetwee" the ow"ers' tho-gh they #ay -e it or p-rpoe o #a/i$g gai$' a$d they #ay' +itho-t

beco#i$g part$er' are a#o$g the#e!e a to the #a$age#e$t a$d -e o -ch property a$d theapp!icatio$ o the proceed therero#.. %Spurloc- v,. 1ilson, 12 S.=. 6' 160 !o. App. ?F' cited i$Pascual v. Commissioner of Internal Revenue, 166 S(RA >60&

>. The i"co!e fro! the re"tal of the house5 bou9ht fro! the ear"i"9s of coow"ed properties5 shall be treated as the i"co!e of a" u"re9istered part"ership to betaab!e a a corporatio$ beca-e o the c!ear i$te$tio$ o the brother to oi$ together i$ a e$t-re or#a/i$g #o$ey o-t o re$ta!.



@. *"co!e i gai$ deried a$d eered ro# capita!' ro# !abor or ro# both co#bi$ed. Corea#p!e' to ta a toc/ diide$d +o-!d be to ta a capita! i$creae rather tha$ the i$co#e.*Commissioner of Internal Revenue v. Court of Appeals, et al., +.R. !o. ?GED, anuary G, ?HHH#

. The ter# ta#able i"co!e #ea$ the perti$e$t ite# o gro i$co#e peciied i$ the Ta

(ode' !e the ded-ctio$ a$d9or pero$a! a$d additio$a! ee#ptio$' i a$y' a-thori;ed or -ch type oi$co#e by the Ta (ode or other pecia! !a+. %Sec. 1' N4R( o 1FF@&

C. The ca"cellatio" a"d for9i$e"ess of i"debted"ess #ay a#o-$t to %a& pay#e$t oi$co#eD %b& gitD or to a %c& capita! tra$actio$ depe$di$g -po$ the circ-#ta$ce.

'&. *f a" i"di$idual perfor!s ser$ices for a creditor who5 i" co"sideratio"thereof5 ca"cels the debt5 it is i"co!e to the ete$t o the a#o-$t rea!i;ed by the debtor aco#pe$atio$ or hi erice.

''. A" i"sol$e"t debtor does "ot realie ta#able i"co!e fro! the ca"cellatio" orfor9i$e"ess. *Commissioner v. Simmons +in Co., Cd 2@ ((A 10th&

'%. The i"sol$e"t debtor realies i"co!e resulti"9 fro! the ca"cellatio" orfor9i$e"ess of i"debted"ess whe" he beco!es sol$e"t. *$a-eland +rocery Co., v.Commissioner 6 BTA %C& 2?F&

'8. *f a creditor !erely desires to be"efit a debtor a"d without a"y co"sideratio"therefor ca"cels the a!ou"t of the debt it is a 9ift fro! the creditor to the debtor a"d"eed "ot be i"cluded i" the latter6s i"co!e.

':. *f a corporatio" to which a stocholder is i"debted for9i$es the debt5 thetra"sactio" has the effect of pay!e"t of a di$ide"d. %Sec. >0' Re. Reg. No. 2&

'<. ;e!bers of cooperati$es "ot sub?ect to ta# o" the i"terest ear"ed fro! theirdeposits with the cooperati$e. No !e tha$ o-r (o$tit-tio$ g-ara$tee the protectio$ ocooperatie. Sectio$ 1>' Artic!e L44 o the (o$tit-tio$ co$ider cooperatie a i$tr-#e$t or ocia!

-tice a$d eco$o#ic dee!op#e$t. At the a#e ti#e' Sectio$ 10 o Artic!e 44 o the (o$tit-tio$ dec!arethat it i a po!icy o the State to pro#ote ocia! -tice i$ a!! phae o $atio$a! dee!op#e$t. 4$ re!atio$thereto' Sectio$ 2 o Artic!e L444 o the (o$tit-tio$ tate that the pro#otio$ o ocia! -tice ha!! i$c!-dethe co##it#e$t to create eco$o#ic opport-$itie baed o$ reedo# o i$itiatie a$d e!,re!ia$ce. Beari$g i$ #i$d the oregoi$g proiio$' +e i$d that a$ i$terpretatio$ ee#pti$g the #e#ber ocooperatie ro# the i#poitio$ o the i$a! ta -$der Sectio$ 2%B&%1& o the N4R( %ta o$ i$teretear$ed by depoit& i #ore i$ /eepi$g +ith the !etter a$d pirit o o-r (o$tit-tio$. %%umaguete CathedralCredit Coopertive 5%CCC#6 etc., v. Commissioner of Internal Revenue, <. R. No. 1?2@22' a$-ary 22' 2010&

4$ c!oi$g' cooperatie' i$c!-di$g their #e#ber' deere a preere$tia! ta treat#e$t beca-e o theita! ro!e they p!ay i$ the attai$#e$t o eco$o#ic dee!op#e$t a$d ocia! -tice. Th-' a!tho-gh taeare the !ieb!ood o the goer$#e$t' the State: po+er to ta #-t gie +ay to oter the creatio$ a$dgro+th o cooperatie. To borro+ the +ord o -tice 4aga$i A. (r-;8 “The po+er o taatio$' +hi!ei$dipe$ab!e' i $ot abo!-te a$d #ay be -bordi$ated to the de#a$d o ocia! -tice.” %I"id., citi$gCommissioner of Internal Revenue v. American &)press International, Inc. *Philippine Branch#' >00 Phi!. >?6 %200>&.

'>. The ,lobal syste! of i"co!e ta#atio" i a yte# e#p!oyed +here the ta yte#ie+ i$diere$t!y the ta bae a$d ge$era!!y treat i$ co##o$ a!! categorie o taab!e i$co#e o thei$diid-a!. *(an v. del Rosario, r., 2@ S(RA 2' 1&



'@. The Schedular syste! of i"co!e ta#atio" i a yte# e#p!oyed +here the i$co#e tatreat#e$t arie a$d i #ade to depe$d o$ the /i$d or category o taab!e i$co#e o the tapayer. *(anv. del Rosario, r., @ SCRA @F, @@?#

'. "der the Natio"al *"ter"al Re$e"ue 0ode the 9lobal syste! is applicable tota#able corporatio"s a"d the schedular to i"di$iduals.

'C. 0o!pe"satio" i"co!e is co"sidered as ha$i"9 bee" ear"ed i" the placewhere the ser$ice was re"dered a$d $ot co$idered a o-rced ro# the p!ace o origi$ o the#o$ey.

%&. Pay!e"t for ser$ices5 other tha" co!pe"satio" i"co!e5 is co"sidered asha$i"9 bee" ear"ed at the place where the acti$ity or ser$ice was perfor!ed.

%'. A "o"reside"t alie"5 who has stayed i" the Philippi"es for a" a99re9ateperiod of !ore tha" '& days duri"9 a"y cale"dar year5 shall be co"sidered as a"o"reside"t alie" doi"9 busi"ess i" the Philippi"es. (o$e-e$t!y' he ha!! be -bect toi$co#e ta o$ hi i$co#e deried ro# o-rce ro# +ithi$ the Phi!ippi$e. GSec. 2> %A& %1&' N4R(I

7e i a!!o+ed to aai! o the ite#i;ed ded-ctio$ i$c!-di$g the pero$a! a$d additio$a! ee#ptio$-bect to the r-!e o$ reciprocity.

%%. +hat are co"sidered as de minimis be"efits "ot sub?ect to withholdi"9 ta#o" co!pe"satio" i"co!e of both !a"a9erial a"d ra" a"d file e!ployees 7 S3<<ESTE" ANS=ER8 a. *o$eti;ed -$-ed acatio$ !eae credit o e#p!oyee $ot eceedi$g te$ %10& day d-ri$g theyearD b. *edica! cah a!!o+a$ce to depe$de$t o e#p!oyee $ot eceedi$g P@>0.00 per e#p!oyee pere#eter or P12> per #o$thD c. Rice -bidy o P1'000.00 or o$e %1& ac/ o >0,/g. rice per #o$th a#o-$ti$g to $ot #ore tha$P1'000.00D d. 3$ior# a$d c!othi$g a!!o+a$ce $ot eceedi$g P'000.00 per a$$-#D e. Act-a! year!y #edica! be$eit $ot eceedi$g P10'000.00 per a$$-#D . )a-$dry a!!o+a$ce $ot eceedi$g P00 per #o$thD g. E#p!oyee achiee#e$t a+ard' e.g. or !e$gth o erice or aety achiee#e$t' +hich #-t bei$ the or# o a ta$gib!e pero$a property other tha$ cah or git certiicate' +ith a$ a$$-a! #o$etarya!-e $ot eceedi$g P10'000.00 receied by a$ e#p!oyee -$der a$ etab!ihed +ritte$ p!a$ +hich doe$ot dicri#i$ate i$ aor o high!y paid e#p!oyeeD h. <it gie$ d-ri$g (hrit#a a$d #aor a$$ierary ce!ebratio$ $ot eceedi$g P>'000 pere#p!oyee per a$$-#D i. C!o+er' r-it' boo/' or i#i!ar ite# gie$ to e#p!oyee -$der pecia! circ-#ta$ce' e.g. o$acco-$t o i!!$e' #arriage' birth o a baby' etc.D a$d . "ai!y #ea! a!!o+a$ce or oerti#e +or/ $ot eceedi$g t+e$ty ie perce$t %2>H& o the baic#i$i#-# +age. The a#o-$t o de minimis be$eit co$or#i$g to the cei!i$g herei$ precribed ha!! $ot be co$idered

i$ deter#i$i$g the P0'000 cei!i$g o “other be$eit” proided -$der Sectio$ 2 %B&%@&%e& o the (ode. 7o+eer' i the e#p!oyer pay #ore tha$ the cei!i$g precribed by thee reg-!atio$' the ece ha!! betaab!e to the e#p!oyee receii$g the be$eit o$!y i -ch ece i beyo$d the P0'000.00 cei!i$g'proided' -rther' that a$y a#o-$t gie$ by the e#p!oyer a be$eit to it e#p!oyee' +hether c!aiieda de minimis be$eit or ri$ge be$eit' ha!! co$tit-te a ded-ctib!e epe$e -po$ -ch e#p!oyer. GSec. 2.@?.1 %A& %&' Re. Reg. 2,F? a a#e$ded by Re. Reg. No. ?,2000I

%8. *"co!e sub?ect to “fi"al ta#” refers to a" i"co!e collected throu9h thewithholdi"9 ta# syste!. The payor o the i$co#e +ithho!d the ta a$d re#it it to the goer$#e$t



a a i$a! ett!e#e$t o the i$co#e ta a a i$a! ett!e#e$t o the i$co#e ta d-e o$ aid i$co#e. Therecipie$t i $o !o$ger re-ired to i$c!-de the i$co#e -bected to a i$a! ta a part o hi gro i$co#e i$hi i$co#e ta ret-r$.

%:. isti"9uish e#clusio"s fro! deductio"s. S3<<ESTE" ANS=ER8

a. Ec!-io$ ro# gro i$co#e reer to a !o+ o +ea!th to the tapayer +hich are $ot treated apart o gro i$co#e or p-rpoe o co#p-ti$g the tapayer: taab!e i$co#e' d-e to the o!!o+i$greao$8 %1& 4t i ee#pted by the -$da#e$ta! !a+D %2& 4t i ee#pted by tat-teD a$d %& 4t doe $otco#e +ithi$ the dei$itio$ o i$co#e %Sec. 61' Re. Reg. No. 2& =74)E ded-ctio$ are the a#o-$t+hich the !a+ a!!o+ to be -btracted ro# gro i$co#e i$ order to arrie at $et i$co#e. b. Ec!-io$ pertai$ to the co#p-tatio$ o gro i$co#e =74)E ded-ctio$ pertai$ to theco#p-tatio$ o $et i$co#e. c. Ec!-io$ are o#ethi$g receied or ear$ed by the tapayer +hich do $ot or# part o groi$co#e =74)E ded-ctio$ are o#ethi$g pe$t or paid i$ ear$i$g gro i$co#e. A$ ea#p!e o a$ ec!-io$ ro# gro i$co#e are !ie i$-ra$ce proceed' a$d a$ ea#p!e o aded-ctio$ are !oe.

%<. +hat are e#cluded fro! 9ross i"co!e 7

S3<<ESTE" ANS=ER8 a. Proceed o !ie i$-ra$ce po!icie paid to the heir or be$eiciarie -po$ the death o the i$-red+hether i$ a i$g!e -# or other+ie. b. A#o-$t receied by the i$-red a a ret-r$ o pre#i-# paid by hi# -$der !ie i$-ra$ce'e$do+#e$t or a$$-ity co$tract either d-ri$g the ter#' or at #at-rity o the ter# #e$tio$ed i$ theco$tract' or -po$ -rre$der o the co$tract. c. Va!-e o property ac-ired by git' be-et' deie' or dece$t. d. A#o-$t receied' thro-gh accide$t or hea!th i$-ra$ce or =or/#e$: (o#pe$atio$ Act aco#pe$atio$ or pero$a! i$-rie or ic/$e' p!- the a#o-$t o a$y da#age receied o$ +hether by-it or agree#e$t o$ acco-$t o -ch i$-rie or ic/$e. e. 4$co#e o a$y /i$d to the ete$t re-ired by a$y treaty ob!igatio$ bi$di$g -po$ the <oer$#e$to the Phi!ippi$e. . Retire#e$t be$eit receied -$der Rep-b!ic Act No. @61. Retire#e$t receied ro# reao$ab!e

priate be$eit p!a$ ater co#p!ia$ce +ith certai$ co$ditio$. A#o-$t receied or beyo$d co$tro!eparatio$. Coreig$ ocia! ec-rity' retire#e$t grat-itie' pe$io$' etc. 3SVA be$eit' SSS be$eit a$d<S4S be$eit.

%>. +hat are the co"ditio"s for e#cludi"9 retire!e"t be"efits fro! 9ross i"co!e5he"ce ta#e#e!pt 7 S3<<ESTE" ANS=ER8 a. Retire#e$t be$eit receied -$der Rep-b!ic Act No. @61 a$d thoe receied by oicia! a$de#p!oyee o priate ir#' +hether i$diid-a! or corporate' i$ accorda$ce +ith the e#p!oyer: reao$ab!epriate be$eit p!a$ approed by the B4R. b. Retiri$g oicia! or e#p!oyee

1& 4$ the erice o the a#e e#p!oyer or at !eat te$ %10& yearD 2& Not !e tha$ ity %>0& year o age at ti#e o retire#e$tD

& Aai!ed o the be$eit o ec!-io$ o$!y o$ce. GSec. 2 %B& %6& %a&' N4R( o 1FF@I Theretiri$g oicia! or e#p!oyee ho-!d $ot hae preio-!y aai!ed o the prii!ege -$der the retire#e$tp!a$ o the a#e or a$other e#p!oyer. G1t par.' Sec. 2.@? %B& %1&' Re. Reg. No. 2,F?I

%@. +hat i"d of separatio" Fretire!e"tG pay is e#cluded fro! 9ross i"co!e5he"ce ta#e#e!pt 7 S3<<ESTE" ANS=ER8

a. A$y a#o-$t receied by a$ oicia!' e#p!oyee or by hi heir' b. Cro# the e#p!oyer



c. A a co$e-e$ce o eparatio$ o -ch oicia! or e#p!oyee ro# the erice o the e#p!oyerbeca-e o

1& "eath' ic/$e or other phyica! diabi!ityD or 2& Cor a$y ca-e beyo$d the co$tro! o aid oicia! or e#p!oyee GSec. 2 %B& %6& %b&' N4R(o 1FF@I' -ch a retre$ch#e$t' red-$da$cy a$d ceatio$ o b-i$e. G1t par.' Sec. 2.@? %B&'%1& %b&' Re. Reg. No. 2,F?I

%. +hat are the *te!ied deductio"s fro! 9ross i"co!e a"d who !ay a$ailof the! 7

a. Ordi"ary a"d "ecessary trade' b-i$e or proeio$a! e#pe"ses.b. The a#o-$t o i"terest paid or i$c-rred +ithi$ a taab!e year o$ i$debted$e i$

co$$ectio$ +ith the tapayer: proeio$' trade or b-i$e.Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$ i$diid-a! +ho are e$gaged i$

trade a$d b-i$e' o$ their gro i$co#e other ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct theeepe$e. "o#etic corporatio$' etate a$d tr-t #ay a!o ded-ct thi epe$e. No$reide$t citi;e$a$d oreig$ corporatio$ o$ their gro i$co#e ro# +ithi$ #ay a!o ded-ct thi epe$e.

No$reide$t a!ie$ i$diid-a! $ot e$gaged i$ trade or b-i$e i$ the Phi!ippi$e are $ot a!!o+edto ded-ct thi epe$e.

c. Ta#es paid or i$c-rred +ithi$ the taab!e year i$ co$$ectio$ +ith the tapayer: proeio$.

Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$ i$diid-a! +ho are e$gaged i$trade a$d b-i$e' o$ their gro i$co#e other ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct theeepe$e. "o#etic corporatio$' etate a$d tr-t #ay a!o ded-ct thi epe$e. No$reide$t citi;e$a$d oreig$ corporatio$ o$ their gro i$co#e ro# +ithi$ #ay a!o ded-ct thi epe$e.


d. Ordi$ary losses' !oe ro# ca-a!ty' thet or e#be;;!e#e$tD a$d $et operati$g !oe.Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d $o$reide$t a!ie$ i$diid-a! +ho are e$gaged i$

trade a$d b-i$e' o$ their gro i$co#e other ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct theeepe$e. "o#etic corporatio$' etate a$d tr-t #ay a!o ded-ct thi epe$e. No$reide$t citi;e$a$d oreig$ corporatio$ o$ their gro i$co#e ro# +ithi$ #ay a!o ded-ct thi epe$e.


e. Bad debts d-e to the tapayer' act-a!!y acertai$ed to be +orth!e a$d charged o +ithi$the taab!e year' co$$ected +ith proeio$' trade or b-i$e' $ot -tai$ed bet+ee$ re!ated partie.



. epreciatio" or a reao$ab!e a!!o+a$ce or the eha-tio$' +ear a$d tear %i$c!-di$greao$ab!e a!!o+a$ce or obo!ece$ce& o property -ed i$ trade or b-i$e.



g. epletio" or ded-ctio$ arii$g ro# the eha-tio$ o a $o$,rep!aceab!e aet' --a!!y a$at-ra! reo-rce.





h. 0haritable a$d other co"tributio"s. Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d$o$reide$t a!ie$ i$diid-a! +ho are e$gaged i$ trade a$d b-i$e' o$ their gro i$co#e other ro#co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e. "o#etic corporatio$' etate a$d tr-t#ay a!o ded-ct thi epe$e. No$reide$t citi;e$ a$d oreig$ corporatio$ o$ their gro i$co#e ro#+ithi$ #ay a!o ded-ct thi epe$e.


i. Research a"d de$elop!e"t epe$dit-re treated a deerred epe$e paid or i$c-rred bythe tapayer i$ co$$ectio$ +ith hi trade' b-i$e or proeio$' $ot ded-cted a epe$e a$dchargeab!e to capita! acco-$t b-t $ot chargeab!e to property o a character +hich i -bect todepreciatio$ or dep!etio$.



. 0o"tributio"s to pe"sio" trusts. Reide$t citi;e$' reide$t a!ie$ i$diid-a! a$d

$o$reide$t a!ie$ i$diid-a! +ho are e$gaged i$ trade a$d b-i$e' o$ their gro i$co#e other ro#co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e. "o#etic corporatio$' etate a$d tr-t#ay a!o ded-ct thi epe$e. No$reide$t citi;e$ a$d oreig$ corporatio$ o$ their gro i$co#e ro#+ithi$ #ay a!o ded-ct thi epe$e.


/. *"sura"ce pre!iu!s or hea!th a$d hopita!i;atio$. Reide$t citi;e$' reide$t a!ie$i$diid-a! a$d $o$reide$t a!ie$ i$diid-a! +ho are e$gaged i$ trade a$d b-i$e' o$ their groi$co#e other ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee epe$e. No$reide$t citi;e$a$d $o$reide$t a!ie$ i$diid-a! e$gaged i$ trade or b-i$e i$ the Phi!ippi$e o$ their gro i$co#ero# +ithi$ #ay a!o ded-ct thee pre#i-#.

No$reide$t a!ie$ i$diid-a! $ot e$gaged i$ trade or b-i$e i$ the Phi!ippi$e are $ot a!!o+edto ded-ct thee pre#i-#.

!. Perso"al a"d additio"al e#e!ptio"s. Reide$t citi;e$' a$d reide$t a!ie$ o$ their groi$co#e a$d ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee pre#i-#. No$reide$t citi;e$ o$their gro i$co#e ro# +ithi$ #ay a!o ded-ct thi epe$e. No$reide$t a!ie$ i$diid-a! e$gaged i$trade or b-i$e i$ the Phi!ippi$e are a!!o+ed to ded-ct thee ee#ptio$ -$der reciprocity.


%C. isti"9uish ordi"ary e#pe"ses fro! capital e#pe"ditures.S3<<ESTE" ANS=ER8 Ordi$ary epe$e are thoe +hich are co##o$ to i$c-r i$ the trade

or b-i$e o the tapayer =74)E capita! epe$dit-re are thoe i$c-rred to i#proe aet a$d be$eitor #ore tha$ o$e taab!e year. Ordi$ary epe$e are --a!!y i$c-rred d-ri$g a taab!e year a$dbe$eit -ch taab!e year. Neceary epe$e are thoe +hich are appropriate or he!p-! to theb-i$e.

8&. +hat are the reDuisites for the deductibility of busi"ess e#pe"ses 7 S3<<ESTE" ANS=ER8 The o!!o+i$g are the re-iite or ded-ctibi!ity o b-i$e epe$e8 a. (o#p!ia$ce +ith the b-i$e tet8 1& *-t be ordi$ary a$d $ecearyD 2& *-t be paid or i$c-rred +ithi$ the taab!e yearD & *-t be paid or i$c-rred i$ carryi$g o$ a trade or b-i$e. & *-t $ot be bribe' /ic/bac/ or other i!!ega! epe$dit-re b. (o#p!ia$ce +ith the -bta$tiatio$ tet. Proo by eide$ce or record o the ded-ctio$ a!!o+ed by



!a+ i$c!-di$g co#p!ia$ce +ith the b-i$e tet.

8'. +hat are the reDuisites for the deductibility of ordi"ary a"d "ecessary trade5busi"ess5 or professio"al e#pe"ses5 lie e#pe"ses paid for le9al a"d auditi"9ser$ices 7 S3<<ESTE" ANS=ER8

a. the epe$e #-t be ordi$ary a$d $ecearyD b. it #-t hae bee$ paid or i$c-rred d-ri$g the taab!e year depe$de$t -po$ the #ethod oacco-$ti$g -po$ the bai o +hich the $et i$co#e i co#p-ted. c. it #-t be -pported by receipt' record or other perti$e$t paper. %Commissioner of InternalRevenue v, Isa"ela cultural Corporation, <. R. No. 1@221' Cebr-ary 12' 200@&

8%. T;, 0orporatio" is issui"9 the accrual !ethod of accou"ti"9. *" %&&< )2L

(aw 1ir! a"d AB0 Auditi"9 1ir! re"dered $arious ser$ices which were billed bythese fir!s o"ly duri"9 the followi"9 year %&&>. Si"ce the bills for le9al a"d auditi"9ser$ices were recei$ed o"ly i" %&&> a"d paid i" the sa!e year5 T;, deducted thesa!e fro! its %&&> 9ross i"co!e. The B*R disallowed the deductio" 7 +ho is correct5 T;, or B*R 7 E#plai". S3<<ESTE" ANS=ER8 The B4R i correct. T*< ho-!d hae ded-cted the proeio$a! a$d !ega!ee i$ the year they +ere i$c-rred i$ 200> a$d $ot i$ 2006 beca-e at the ti#e the erice +erere$dered i$ 200>' there +a a!ready a$ ob!igatio$ to pay the#. %Commissioner of Internal Revenue v,Isa"ela Cultural Corporation, <. R. No. 1@221' Cebr-ary 12' 200@& NOTES AN" (O**ENTS8 a. Accou"ti"9 !ethods or ta p-rpoe co#prie a et o r-!e or deter#i$i$g +he$ a$d ho+ toreport i$co#e a$d ded-ctio$. %Commissioner of Internal Revenue v, Isa"ela cultural Corporation, <. R.No. 1@221' Cebr-ary 12' 200@& The t+o %2& pri$cipa! acco-$ti$g #ethod or recog$itio$ o i$co#e are the %a& accr-a! #ethodD a$d the%b& cah #ethod. b. Reco9"itio" of i"co!e a"d e#pe"ses u"der the accrual !ethod of accou"ti"9. A#o-$t oi$co#e accr-e +here the right to receie the# beco#e ied' +here there i created a$ e$orceab!e!iabi!ity. )iabi!itie' are i$c-rred +he$ ied a$d deter#i$ab!e i$ $at-re +itho-t regard to i$deter#i$acy

#ere!y o ti#e o pay#e$t.. %Commissioner of Internal Revenue v, Isa"ela cultural Corporation, <. R. No.1@221' Cebr-ary 12' 200@& The accr-a! o i$co#e a$d epe$e i per#itted +he$ the a!!,ee$t tet ha bee$ #et. %I"id.& c. Alle$e"ts test. Thi tet re-ire8 1& ii$g o a right to i$co#e or !iabi!ity to payD a$d 2& the aai!abi!ity o the reao$ab!e acc-rate deter#i$atio$ o -ch i$co#e or !iabi!ity. The tet doe $ot de#a$d that the a#o-$t o -ch i$co#e or !iabi!ity be /$o+$ abo!-te!y' o$!y that atapayer ha at hi dipoa! the i$or#atio$ $eceary to co#p-te the a#o-$t +ith reao$ab!e acc-racy. The a!!,ee$t tet i atiied +here co#p-tatio$ re#ai$ -$certai$D i it bai i -$cha$geab!e' thetet i atiied +here a co#p-tatio$ #ay be -$/$o+$' b-t i $ot a #-ch a -$/$o+ab!e' +ithi$ thetaab!e year. The a#o-$t o !iabi!ity doe $ot hae to be deter#i$ed eact!y'D it #-t be deter#i$ed +ith“reao$ab!e acc-racy” i#p!ie o#ethi$g !e tha$ a$ eact or co#p!ete!y acc-rate a#o-$t. The propriety o a$ accr-a! #-t be -dged by the act that a tapayer /$e+' or co-!d reao$ab!y be

epected to hae /$o+$' at the c!oi$g o it boo/ or the taab!e year. Accr-a! #ethod o acco-$ti$gpree$t !arge!y a -etio$ o actD -ch that the tapayer bear the b-rde$ o proo o etab!ihi$g theaccr-a! o a$ ite# o i$co#e or ded-ctio$. %Commissioner of Internal Revenue v, Isa"ela culturalCorporation, <. R. No. 1@221' Cebr-ary 12' 200@&

d. 3$der the cash !ethod i$co#e i to be co$tr-ed a i$co#e or ta p-rpoe o$!y -po$act-a! receipt o the cah pay#e$t. 4t i a!o reerred to a the “cah receipt a$d dib-re#e$t #ethod”beca-e both the receipt a$d dib-re#e$t are co$idered. Th-' i$co#e i recog$i;ed o$!y -po$act-a! receipt o the cah pay#e$t b-t $o ded-ctio$ are a!!o+ed ro# the cah i$co#e -$!e act-a!!ydib-red thro-gh a$ act-a! pay#e$t i$ cah.



88. The fri"9e be"efits ta# i a i$a! +ithho!di$g ta i#poed o$ the groed,-p #o$etary a!-eo ri$ge be$eit -r$ihed' gra$ted or paid by the e#p!oyer to the e#p!oyee' ecept ra$/ a$d i!ee#p!oyee. G1t par.' Sec. 2. %A&' Re. Reg. No. ,F?I

8:. +hat is !ea"t by “fri"9e be"efit” for purposes of ta#atio" 7

S3<<ESTE" ANS=ER8 Cor p-rpoe o taatio$' ri$ge be$eit #ea$ a$y good' erice' or otherbe$eit -r$ihed or gra$ted i$ cah or i$ /i$d by a$ e#p!oyer to a$ i$diid-a! e#p!oyee %ecept ra$/ a$di!e e#p!oyee&' -ch a b-t $ot !i#ited to8 a. 7o-i$gD b. Epe$e acco-$tD c. Vehic!e o a$y /i$dD d. 7o-eho!d pero$$e!' -ch a #aid' drier a$d otherD e. 4$teret o$ !oa$ at !e tha$ #ar/et rate to the ete$t o the diere$ce bet+ee$ the #ar/et ratea$d act-a! rate gra$tedD . *e#berhip ee' d-e a$d other epe$e bor$e by the e#p!oyer or the e#p!oyee i$ ocia! a$dath!etic c!-b or other i#i!ar orga$i;atio$D g. Epe$e or oreig$ trae!D h. 7o!iday a$d acatio$ epe$eD

i. Ed-catio$a! aita$ce to the e#p!oyee or hi depe$de$tD a$d . )ie or hea!th i$-ra$ce a$d other $o$,!ie i$-ra$ce pre#i-# or i#i!ar a#o-$t i$ ece o+hat the !a+ a!!o+. GSec. %B&' N4R( o 1FF@D 1t par.' Sec. 2. %B&' Re. Reg. No. ,F?I

8<. 1ri"9e be"efits that are "ot sub?ect to the fri"9e be"efits ta#- a. =he$ the ri$ge be$eit i re-ired by the $at-re o' or $eceary to the trade' b-i$e orproeio$ o the e#p!oyerD or b. =he$ the ri$ge be$eit i or the co$e$ie$ce or ada$tage o the e#p!oyer. GSec. 2%A&' N4R(o 1FF@D 1t par.' Sec. 2. %A&' Re. Reg. No. ,F?I c. Cri$ge be$eit +hich are a-thori;ed a$d ee#pted ro# i$co#e ta -$der the Ta (ode or -$der a$y pecia! !a+D d. (o$trib-tio$ o the e#p!oyer or the be$eit o the e#p!oyee to retire#e$t' i$-ra$ce a$dhopita!i;atio$ be$eit p!a$D

e. Be$eit gie$ to the ra$/ a$d i!e e#p!oyee' +hether gra$ted -$der a co!!ectie bargai$i$gagree#e$t or $otD a$d . %e minimis be$eit a dei$ed i$ the r-!e a$d reg-!atio$ to be pro#-!gated by the Secretary oCi$a$ce -po$ reco##e$datio$ o the (o##iio$er o 4$ter$a! Ree$-e. G1t par.' Sec. 2 %(&' N4R( o1FF@D Sec. 2. %(&' Re. Reg. No. ,F?I

8>. De minimis be"efits are facilities a"d pri$ile9es %-ch a e$tertai$#e$t' #edica!erice' or o,ca!!ed “co-rtey dico-$t” o$ p-rchae&' -r$ihed or oered by a$ e#p!oyer to hie#p!oyee. They are $ot co$idered a co#pe$atio$ -bect to i$co#e ta a$d co$e-e$t!y to+ithho!di$g ta' i -ch aci!itie are oered or -r$ihed by the e#p!oyer #ere!y a a #ea$ o pro#oti$gthe hea!th' good+i!!' co$te$t#e$t' or eicie$cy o hi e#p!oyee. GSec. 2.@?'1 %A& %&' Re. Reg. 2,F? a

a#e$ded by Re. Reg. No. ?,2000I

8@. Preferred shares are co"sidered capital re9ardless of the co"ditio"s u"derwhich such shares are issued a"d di$ide"ds or “i"terests” paid thereo" are "otallowed as deductio"s fro! the 9ross i"co!e of corporatio"s. %Ree$-e *e#ora$d-#

(irc-!ar No. 1@,@1&

8. Bad debts are thoe +hich re-!t ro# the +orth!e$e or -$co!!ectibi!ity' i$ +ho!e or i$ part'o a#o-$t d-e the tapayer by other' arii$g ro# #o$ey !e$t or ro# -$co!!ectib!e a#o-$t o i$co#ero# good o!d or erice re$dered. %Sec. 2.a' Re. Reg. >,FF&



8C. +ho are related parties 7 S3<<ESTE" ANS=ER8 The o!!o+i$g are re!ated partie- a. *e#ber o the a#e a#i!y. The a#i!y o a$ i$diid-a! ha!! i$c!-de o$!y hi brother a$diter %+hether by the +ho!e or ha!,b!ood&' po-e' a$cetor' a$d !i$ea! dece$da$tD b. A$ i$diid-a! a$d a corporatio$ #ore tha$ ity perce$t %>0H& i$ a!-e o the o-tta$di$g toc/ o+hich i o+$ed' direct!y or i$direct!y' by or or -ch i$diid-a!D

c. T+o corporatio$ #ore tha$ ity perce$t %>0H& i$ a!-e o the o-tta$di$g toc/ o +hich io+$ed' direct!y or i$direct!y' by or or the a#e i$diid-a!D d. A gra$tor a$d a id-ciary o a$y tr-tD or e. The id-ciary o a tr-t a$d the id-ciary o a$other tr-t i the a#e pero$ i a gra$tor +ithrepect to each tr-tD or . A id-ciary o a tr-t a$d a be$eiciary o -ch. GSec. 6 %B&' N4R( o 1FF@I

:&. +hat are the reDuisites for $alid deductio" of bad debts fro! 9ross i"co!e 7 S3<<ESTE" ANS=ER8

a. There #-t be a$ eiti$g i$debted$e d-e to the tapayer +hich #-t be a!id a$d !ega!!yde#a$dab!eD b. The a#e #-t be co$$ected +ith the tapayer: trade' b-i$e or practice o proeio$D c. The a#e #-t $ot be -tai$ed i$ a tra$actio$ e$tered i$to bet+ee$ re!ated partieD

d. The a#e #-t be act-a!!y charged o the boo/ o acco-$t o the tapayer a o the e$d o thetaab!e yearD a$d e. The debt #-t be act-a!!y acertai$ed to be +orth!e a$d -$co!!ectib!e d-ri$g the taab!eyearD . The debt are -$co!!ectib!e depite di!ige$t eort eerted by the tapayer. GSec. %E& %1&' N4R(o 1FF@D Sec. ' Re. Reg. No. >,FF reiterated i$ Re. Reg. No. 2>,2002D Philippine RefiningCorporation v. Court of Appeals, et al., ED SCRA DD I g. *-t hae bee$ reported a receiab!e i$ the i$co#e ta ret-r$ o the c-rre$t or prior year. %Sec. 10' Re. Reg. No. 2&

8

:'. +hat is the “ta# be"efit” rule 7 S3<<ESTE" ANS=ER8 The “ta be$eit r-!e” poit that the recoery o bad debt preio-!ya!!o+ed a ded-ctio$ i$ the precedi$g year or year ha!! be i$c!-ded a part o the tapayer: gro

i$co#e i$ the year o -ch recoery to the ete$t o the i$co#e ta be$eit o aid ded-ctio$. NOTES AN" (O**ENTS8 a. 4 i$ the year the tapayer c!ai#ed ded-ctio$ o bad debt +ritte$,o' he rea!i;ed a red-ctio$ othe i$co#e ta d-e ro# hi# o$ acco-$t o the aid ded-ctio$' hi -be-e$t recoery thereo ro# hidebtor ha!! be treated a a receipt o rea!i;ed taab!e i$co#e. %Sec. ' Re. Reg. >,FF&

b. 4 the aid tapayer did $ot be$eit ro# the ded-ctio$ o the aid bad debt +ritte$,o beca-e itdid $ot re-!t to a$y red-ctio$ o hi i$co#e ta i$ the year o -ch ded-ctio$ %i.e. +here the re-!t o hib-i$e operatio$ +a a $et !o ee$ +itho-t ded-ctio$ o the bad debt +ritte$,o&' the$ hi-be-e$t recoery thereo ha!! be treated a a #ere recoery or a ret-r$ o capita!' he$ce' $ot treateda receipt o rea!i;ed taab!e i$co#e. %Sec. ' Re. Reg. >,FF&

:%. epreciatio" i the grad-a! di#i$-tio$ i$ the -e-! a!-e o ta$gib!e property re-!ti$g ro#ordi$ary +ear a$d tear a$d ro# $or#a! obo!ece$ce. The ter# i a!o app!ied to a#orti;atio$ o the

a!-e o i$ta$gib!e aet the -e o +hich i$ the trade or b-i$e i dei$ite!y !i#ited i$ d-ratio$.

:8. The !ethods of depreciatio" are the followi"9- a. Straight !i$e #ethodD b. "ec!i$i$g ba!a$ce #ethodD c. S-# o year digit #ethodD a$d d. A$y other #ethod precribed by the Secretary o Ci$a$ce -po$ the reco##e$datio$ o the(o##iio$er o 4$ter$a! Ree$-e8

1& Apportio$#e$t to -$it o prod-ctio$D 2& 7o-r o prod-ctie -eD



& Rea!-atio$ #ethodD a$d & Si$/i$g -$d #ethod.

::. +hat are perso"al a"d additio"al e#e!ptio"s 7 S3<<ESTE" ANS=ER8 Thee are the theoretica! pero$a' !ii$g a$d a#i!y epe$e o a$i$diid-a! a!!o+ed to be ded-cted ro# the gro or $et i$co#e o a$ i$diid-a! tapayer.

Thee are arbitrary a#o-$t +hich hae bee$ ca!c-!ated by o-r !a+#a/er to be ro-gh!y e-ia!e$t tothe #i$i#-# o -bite$ce' ta/i$g i$to acco-$t the pero$a! tat- a$d additio$a! -a!iied depe$de$to the tapayer. They are ied a#o-$t i$ the e$e that the a#o-$t hae bee$ predeter#i$ed by o-r!a+#a/er a$d -$ti! o-r !a+#a/er #a/e $e+ ad-t#e$t o$ thee pero$a! ee#ptio$' the a#o-$ta!!o+ed to be ded-cted by a tapayer are ied a predeter#i$ed by (o$gre. GPansacola v.Commissioner of Internal Revenue, <. R. No. 1>FFF1' Noe#ber 16' 2006 citi$g Madrigal and Paterno v. Raffertyand Concepcion, ? Phi!. 1' 1? %1F1?&I

:<. +hat is the a!ou"t allowed as basic perso"al e#e!ptio" 7 S3<<ESTE" ANS=ER8 There ha!! be a!!o+ed a baic pero$a! ee#ptio$ a#o-$ti$g to Citytho-a$d peo %P>0'000& or each i$diid-a! tapayer. 4$ the cae o #arried i$diid-a! +here o$!y o$e o the po-e i derii$g gro i$co#e' o$!y -chpo-e ha!! be a!!o+ed the pero$a! ee#ptio$. GSec. > %A&' N4R( o 1FF@ a a#e$ded by Rep. Act No.

F>0D Sec. 2.@F %4& %1& %a&' Re. Reg. No. 2,F? a a#e$ded by Re. Reg. No. 10,200?I NOTES AN" (O**ENTS8 4t i c!ear ro# Rep. Act No. F>0 that each o the po-e #ay c!ai# theP>0'000.00. Th-' the tota! a#i!ia! baic pero$a! ee#ptio$ or po-e i P100'000.00. C-rther#ore' the diti$ctio$ bet+ee$ the co$cept o i$g!e' #arried a$d head o the a#i!y orp-rpoe o aai!i$g o the baic pero$a! ee#ptio$ ha a!ready bee$ e!i#i$ated by Rep. Act No. F>0.

:<. +hat are the a!ou"ts of additio"al e#e!ptio"s 7 S3<<ESTE" ANS=ER8 “ A$ i$diid-a!'

a. +hether i$g!e or #arried'b. ha!! be a!!o+ed a$ additio$a! ee#ptio$ o T+e$ty,Cie Tho-a$d Peo %P2>'000.00&c. or each -a!iied depe$de$t chi!d'd. proided that the tota! $-#ber o depe$de$t or +hich additio$a! ee#ptio$ #ay be c!ai#ed

1& ha!! $ot eceed o-r %& depe$de$t.” G1t par.' Sec. 2.@F %4& %1& %b&' Re. Reg. No. 2,F? a a#e$ded

by Re. Reg. No. 10,200?' arra$ge#e$t a$d $-#beri$g -pp!iedD Sec. > %B&' N4R( o 1FF@ a a#e$ded byRep. Act No. F>0I

NOTES AN" (O**ENTS8a. 4t i c!ear that -$der the a#e$d#e$t' i$g!e i$diid-a! #ay $o+ c!ai# or the additio$a!

ee#ptio$. C-rther#ore' the co$cept o head o a a#i!y doe $ot i$d app!icatio$ a$y#ore. b. “A depe$de$t #ea$

a. a !egiti#ate' i!!egiti#ate or !ega!!y adopted chi!db. chie!y depe$de$t -po$ a$d !ii$g +ith the tapayerc. i -ch depe$de$t i

1& $ot #ore tha$ t+e$ty,o$e %21& year o age'2& -$#arried a$d& $ot gai$-!!y e#p!oyed or

d. i -ch depe$de$t'1& regard!e o age

2& i i$capab!e o e!,-pport& beca-e o #e$ta! or phyica! deect.” G2$d par.' Sec. 2.@F %4& %1& %b&' Re. Reg. No. 2,F? a a#e$ded

by Re. Reg. No. 10,200?' arra$ge#e$t a$d $-#beri$g -pp!iedD Sec. > %b&' N4R( o 1FF@' a a#e$ded byRep. Act No. F>0I

c. 4t i to be $oted that -$der the N4R( o 1FF@' a a#e$ded by Rep. Act No. F>0' o$!y -a!iieddepe$de$t chi!dre$ are co$idered or additio$a! ee#ptio$. <ra$dpare$t' pare$t' a +e!!' a brotheror iter' a$d other co!!atera! re!atie are $ot -a!iied depe$de$t to be c!ai#ed a additio$a!ee#ptio$. 7o+eer' i they are e$ior citi;e$ they #ay -a!iy a additio$a! ee#ptio$ -$der the “Se$ior(iti;e$ )a+” b-t $ot -$der the N4R( o 1FF@' a a#e$ded by Rep. Act No. F>0.



Se$ior citi;e$ ha!! be treated a depe$de$t proided or i$ the Natio$a! 4$ter$a! Ree$-e (ode' aa#e$ded' a$d a -ch' i$diid-a! tapayer cari$g or the#' be they re!atie or $ot ha!! be accordedthe prii!ege gra$ted by the (ode i$oar a hai$g depe$de$t are co$cer$ed. G!at par. Sec. > %a&' Rep.

Act No. @2' a a#e$ded by Rep. Act F2>@' “The Epa$ded Se$ior (iti;e$ Act o 200”I

:@. 0apital assets ha!! reer to a!! rea! propertie he!d by a tapayer' +hether or $ot co$$ected

+ith hi trade or b-i$e' a$d +hich are $ot i$c!-ded a#o$g the rea! propertie co$idered a ordi$aryaet. %Sec. 2.a' Re. Reg. No. @,200&

The ter# “capita! aet” #ea$ property he!d by the tapayer %+hether or $ot co$$ected +ith hitrade or b-i$e&' B3T "OES NOT 4N()3"E8 a. Stoc/ i$ trade o the tapayer' or b. Other property o a /i$d +hich +o-!d proper!y be i$c!-ded i$ the i$e$tory o the tapayer io$ ha$d at the c!oe o the taab!e year' or c. Property he!d by the tapayer pri#ari!y or a!e to c-to#er i$ the ordi$ary co-re o hitrade or b-i$e' or d. Property -ed i$ the trade or b-i$e' o a character +hich i -bect to the a!!o+a$ce ordepreciatio$D or rea! property -ed i$ the trade or b-i$e o the tapayer. GSec. F %A& %1&' N4R( o 1FF@'capita!i;ed +ord' $-#beri$g a$d arra$ge#e$t -pp!iedD Sec. 2.a' Re. Reg. No. @,200I

:. E#a!ples of capital assets- a. Stoc/ a$d ec-ritie he!d by tapayer other tha$ dea!er i$ ec-ritieD b. e+e!ry $ot -ed or trade a$d b-i$eD c. Reide$tia! ho-e a$d !a$d o+$ed a$d -ed a -chD d. A-to#obi!e $ot -ed i$ trade a$d b-i$eD e. Pai$ti$g' c-!pt-re' ta#p co!!ectio$' obect o art +hich are $ot -ed i$ trade or b-i$eD

. 4$herited !arge tract o agric-!t-ra! !a$d +hich +ere -bdiided p-r-a$t to the goer$#e$t#a$date -$der !a$d reor#' the$ o!d to te$a$t. *Ro)as v. Court of (a) Appeals, etc. $0EGF@, April D,?HD#

g. “Rea! property -ed by a$ ee#pt corporatio$ i$ it ee#pt operatio$' -ch a acorporatio$ i$c!-ded i$ the e$-#eratio$ o Sectio$ 0 o the (ode' ha!! $ot be co$idered -ed orb-i$e p-rpoe' a$d thereore co$idered a capita! aet.” %!at e$te$ce' rd par.' Sec. .b' Re.Reg. No. @,200&

h. “Rea! property' +hether i$g!e detached' to+$ho-e' or co$do#i$i-# -$it' $ot -ed i$ trade

or b-i$e a eide$ced by a certiicatio$ ro# the Bara$gay (hair#a$ or ro# the head oad#i$itratio$' i$ cae o co$do#i$i-# -$it' to+$ho-e or apart#e$t' a$d a a!idated ro# the eiti$gaai!ab!e record o the B-rea- o 4$ter$a! Ree$-e' o+$ed by a$ i$diid-a! e$gaged i$ b-i$e' ha!!be treated a capita! aet.” %!at par.' Sec. .b.' Re. Reg. No. @,200&

:C. Ordi"ary assets shall refer to all real properties specifically e#cluded fro! thedefi"itio" of capital assets5 $a#e!y8

a. Stoc/ i$ trade o a tapayer or other rea! property o a /i$d +hich +o-!d proper!y be i$c!-ded i$the i$e$tory o a tapayer i o$ ha$d at the c!oe o the taab!e yearD or b. Rea! property he!d by the tapayer pri#ari!y or a!e to c-to#er i$ the ordi$ary co-re o hitrade or b-i$eD or c. Rea! property -ed i$ trade or b-i$e %i.e. b-i!di$g a$d9or i#proe#e$t&' o a character+hich i -bect to the a!!o+a$ce or depreciatio$D or d. Rea! property -ed i$ trade or b-i$e o the tapayer. %Sec. 2. b' Re. Reg. No. @,200&

<&.. E#a!ples of ordi"ary assets he"ce "ot capital assets- a. The #achi$ery a$d e-ip#e$t o a #a$-act-ri$g co$cer$ -bect to depreciatio$D b. The tractor' trai!er a$d tr-c/ o a ha-!i$g co#pa$yD c. The co$do#i$i-# b-i!di$g o+$ed by a rea!ty co#pa$y the -$it o +hich are or re$t or or a!eD d. The +ood' pai$t' ar$ih' $ai!' g!-e' etc. +hich are the ra+ #ateria! o a -r$it-re actoryD e. 4$herited parce! o !a$d o -bta$tia! area !ocated i$ the heart o *etro *a$i!a' +hich +ere-bdiided i$to #a!!er !ot the$ o!d o$ i$ta!!#e$t bai ater i$trod-ci$g co#paratie!y a!-ab!e



i#proe#e$t $ot or the p-rpoe o i#p!y !i-idati$g the etate b-t to #a/e the# #ore a!eab!e D thee#p!oy#e$t o a$ attor$ey,i$,act or the p-rpoe o dee!opi$g' #a$agi$g' ad#i$iteri$g a$d e!!i$g the!otD a!e #ade +ith re-e$cy a$d co$ti$-ityD a$$-a! a!e i$co#e ro# the a!e +a co$iderab!eDa$d the heir +a $ot a tra$ger to the rea! etate b-i$e. *(uazon, r. v. $ingad, E SCRA ?G#

. 4$herited agric-!t-ra! property i#proed by i$trod-ctio$ o good road' co$crete g-tter'drai$age a$d !ighti$g yte# co$ert the property to a$ ordi$ary aet. The property or# part o thetoc/ i$ trade o the o+$er' he$ce a$ ordi$ary aet. Thi i o' a the o+$er i $o+ e$gaged i$ theb-i$e o -bdiidi$g rea! etate. %Calasanz v. Commissioner of Internal Revenue, 1 S(RA at p. 6@2&

<'. Ta# treat!e"t of real properties that ha$e bee" tra"sferred. Rea! propertiec!aiied a capita! or ordi$ary aet i$ the ha$d o the e!!er9tra$eror #ay cha$ge their character i$the ha$d o the b-yer9tra$eree. The c!aiicatio$ o -ch property i$ the ha$d o the b-yer9tra$ereeha!! be deter#i$ed i$ accorda$ce +ith the o!!o+i$g r-!e8

a. Rea! property tra$erred thro-gh -cceio$ or do$atio$ to the heir or do$ee +ho i $ote$gaged i$ the rea! etate b-i$e +ith repect to the rea! property i$herited or do$ated' a$d +ho doe$ot -be-e$t!y -e -ch property i$ trade or b-i$e' ha!! be co$idered a a capita! aet i$ theha$d o the heir or do$ee.

b. Rea! property receied a diide$d by toc/ho!der +ho are $ot e$gaged i$ the rea! etateb-i$e a$d +ho $ot -be-e$t!y -e -ch rea! property i$ trade or b-i$e ha!! be treated a capita!

aet i$ the ha$d o the recipie$t ee$ i the corporatio$ +hich dec!ared the rea! property diide$d ie$gaged i$ rea! etate b-i$e.c. The rea! property receied i$ a$ echa$ge ha!! be treated a ordi$ary aet i$ the ha$d o

the tra$eree i$ the cae o a ta,ree echa$ge by tapayer $ot e$gaged i$ rea! etate b-i$e to atapayer +ho i e$gaged i$ rea! etate b-i$e' or to a tapayer +ho' ee$ i $ot e$gaged i$ rea! etateb-i$e' +i!! -e i$ b-i$e the property receied i$ the echa$ge. %Sec. ..' Re. Reg. No. @,200&

<%. The ta# is “i!posed upo" capital 9ai"s presu!ed to ha$e bee" realied fro!the sale5 e#cha"9e5 or other dispositio" of real property located i" the Philippi"es5classified as capital assets.” GSec. 2 %"& %1&' N4R( o 1FF@I Ree$-e Reg-!atio$ No. @,200 hadei$ed rea! property a hai$g “the a#e #ea$i$g attrib-ted to that ter# -$der Artic!e 1> o Rep-b!ic

Act No. ?6' other+ie /$o+$ a the 5Civil Code of the Philippines.> %Sec. 2.c' Re. Reg. No. @,200&

<8. Tra"sactio"s co$ered by the presu!ed capital 9ai"s ta# o" real property- a. a!e' b. echa$ge' c. or other dipoitio$' i$c!-di$g pacto de retro a!e a$d other or# o co$ditio$a! a!e. GSec. 2 %"& %1&' N4R( o 1FF@' $-#beri$g a$d arra$ge#e$t -pp!iedI d. “ Sa!e' echa$ge' or other dipoitio$” i$c!-de ta/i$g by the goer$#e$t thro-gh co$de#$atio$proceedi$g. *+utierrez v. Court of (a) Appeals, et al., 101 Phi!. @1; +onzales v. Court of (a) Appeals, et al., 121Phi!. ?61&

<:. *" case the !ort9a9or e#ercises his ri9ht of rede!ptio" +ithi$ o$e %1& yearro# the i-a$ce o the certiicate o a!e' i$ a orec!o-re o #ortgage a!e o rea! property' $o capita!gai$ ta ha!! be i#poed beca-e $o capita! gai$ ha bee$ deried by the #ortgagor a$d $o a!e ortra$er o rea! property +a rea!i;ed. GSec. %1&' Re. Reg. No. ,FFI

<<. *" case of "o"rede!ptio" of the property sold -po$ a orec!o-re o #ortgage a!e'the pre-#ed capita! gai$ ta ha!! be i#poed' baed o$ the bid price o the highet bidder b-t o$!y-po$ the epiratio$ o the o$e year period o rede#ptio$ proided or -$der Sec. 6 o Act No. 1>' aa#e$ded by Act No. 11?' a$d ha!! be paid +ithi$ thirty %0& day ro# the epiratio$ o the aid o$e,year rede#ptio$ period. GSec. %2&' Re. Reg. No. ,FFI

<>. The basis for the fi"al presu!ed capital 9ai"s ta# of si# per ce"t F>IG i+hicheer i the higher o the



a. gro e!!i$g price' or b. the c-rre$t air #ar/et a!-e a deter#i$ed be!o+8

1& the air #ar/et a!-e or rea! propertie !ocated i$ each ;o$e or area a deter#i$ed bythe (o##iio$er o 4$ter$a! Ree$-e ater co$-!tatio$ +ith co#pete$t appraier both ro# thepriate a$d p-b!ic ectorD or

2& the air #ar/et a!-e a ho+$ i$ the ched-!e o a!-e o the Proi$cia! a$d (ity Aeor. GSec. 2 %"& %1& i$ re!atio$ to Sec. 6 %E&' both o the N4R( o 1FF@I

4t doe $ot #atter +hether there +a a$ act-a! gai$ or !o beca-e the ta i a “pre-#ed” capita!gai$ ta. 4t i the tra$actio$ that i taed $ot the gai$.

<@. Holdi"9 period "ot applied to the taatio$ o the pre-#ed capita! gai$ deried ro# thea!e o rea! property co$idered a capita! aet.

<. The ta# liability5 of i"di$idual ta#payers F"ot corporateG5 if a"y5 o" 9ai"s fro!sales or other dispositio"s of real property5 classified as capital assets5 to the9o$er"!e"t or a$y o it po!itica! -bdiiio$ or age$cie or to goer$#e$t o+$ed or co$tro!!edcorporatio$ ha!! be deter#i$ed' at the optio$ o the tapayer' by i$c!-di$g the proceed a part o groi$co#e to be -bected to the a!!o+ab!e ded-ctio$ a$d9or pero$a! a$d additio$a! ee#ptio$' the$ tothe ched-!ar ta GSec. 2 %"& %1&' i$ re!atio$ to Sec. 2 %A& %1&' both o the N4R( o 1FF@I or the i$a!

pre-#ed capita! gai$ ta o i perce$t %6H&. GSec. 2 %"& %1& i$ re!atio$ to Sec. 6 %E&' both o theN4R( o 1FF@I

<C. The seller of the real property5 classified as a capital asset5 pays thepresu!ed capital 9ai"s ta# +hether8 a. a$ i$diid-a! GSec. 2 %"& %1&' N4R( o 1FF@ID 1& (iti;e$' +hether reide$t or $ot GI"id.ID 2& Reide$t a!ie$ GI"id.ID

& No$reide$t a!ie$ e$gaged i$ trade or b-i$e i$ the Phi!ippi$e GSec. 2> %A& %& i$ re!atio$to Sec. 2 %"& %1&' both o the N4R( o 1FF@ID & No$reide$t a!ie$ $ot e$gaged i$ trade or b-i$e i$ the Phi!ippi$e GSec. 2> %B& i$re!atio$ to Sec. 2 %"& %1&' both o the N4R( o 1FF@ID

b. a$ etate or tr-t %I"id.&D

c. a do#etic corporatio$. GSec. 2@ %"& %>&' N4R( o 1FF@I

>&. E#cepted fro! the pay!e"t of the presu!ed capital 9ai"s ta# are thosepresu!ed to ha$e bee" realied fro! the dispositio" by "atural perso"s of theirpri"cipal place of reside"ce a. the proceed o +hich i -!!y -ti!i;ed i$ ac-iri$g or co$tr-cti$g a $e+ pri$cipa! reide$ceD b. +ithi$ eightee$ %1?& ca!e$dar #o$th ro# the date o a!e or dipoitio$ c. the B4R (o##iio$er ha!! hae bee$ d-!y $otiied by the tapayer +ithi$ thirty %0& day ro#the date o a!e or dipoitio$ thro-gh a precribed ret-r$ o hi i$te$tio$ to aai! o the ta ee#ptio$Da$d d. the aid ta ee#ptio$ ca$ o$!y be aai!ed o o$ce eery te$ %10& year. GSec. 2 %"& %2&' N4R( o 1FF@I

>'. ;B0 was i"corporated i" 'C>' a"d e"9a9ed i" co!!ercial ba"i"9operatio"s si"ce 'C@. O" ;ay %%5 'C@5 it ceased operatio"s that year by reaso" ofi"sol$e"cy a"d its assets a"d liabilities were placed u"der the char9e of a9o$er"!e"tappoi"ted recei$er. O" /u"e %85 'CCC5 the BSP authoried ;B0 tooperate as a thrift ba". *" %&&&5 *t filed its ta# retur" for the year 'CCC payi"9 the a!ou"t of P88 !illio"co!puted i" accorda"ce with the !i"i!u! corporate i"co!e ta# F;0*TG. *t sou9htthe B*R6s ruli"9 o" whether it is e"titled to the four F:G year 9race period for payi"9



o" the basis of ;0*T reco"ed fro! 'CCC. B*R the" ruled that cessatio" of busi"essacti$ities as a result of bei"9 placed u"der i"$olu"tary recei$ership !ay be a"eco"o!ic reaso" for suspe"di"9 the i!positio" of the ;0*T. As a result of the ruli"9 ;B0 filed a" applicatio" for refu"d of the P88 !illio". ueto the B*R6s i"actio"5 ;B0 filed a petitio" for re$iew with the 0TA. The 0TA de"ied the petitio" o" the 9rou"d that ;B0 is "ot a "ewly or9a"iedcorporatio". *" a $olte facie the B*R "ow !ai"tai"s that ;B0 should pay the ;0*Tbe9i""i"9 /a"uary '5 'CC as it did "ot close its busi"ess operatio"s i" 'C@ but!erely suspe"ded the sa!e. E$e" if placed u"der recei$ership5 the corporatee#iste"ce was "e$er affected. Thus5 it falls u"der the cate9ory of a" e#isti"9corporatio" reco!!e"ci"9 its ba"i"9 operatio"s. Should the refu"d be 9ra"ted 7 S3<<ESTE" ANS=ER8 e. The *(4T ha!! be i#poed begi$$i$g i$ the o-rth taab!e yeari##ediate!y o!!o+i$g the year i$ +hich the corporatio$ co##e$ced it b-i$e operatio$. GSec. 2@ %E&%1&' N4R( o 1FF@I The date o co##e$ce#e$t o operatio$ o a thrit ba$/ i the date it +a regitered +ith the SE( orthe date +he$ the (ertiicate o A-thority to Operate +a i-ed to it by the *o$etary Board' +hicheerco#e !ater. %Sec. 6' Re. Reg. No. ,F>&

(!ear!y the$. *B( i e$tit!ed to the grace period o o-r year ro# -$e 2' 1FFF +he$ it +aa-thori;ed by the BSP to operate a a thrit ba$/ beore the *(4T ho-!d be app!ied to it. %ManilaBan-ing Corporation v. Commissioner of Internal Revenue, <. R. No. 16?11?' A-g-t 26' 2006& NOTES AN" (O**ENTS8 a. The ;0*T a"d whe" should be i!posed a"d the four F:G year 9race period. “A #i$i#-#corporate i$co#e ta o t+o perce$t %2H& o the gro i$co#e a o the e$d o the taab!e year' adei$ed herei$' i hereby i#poed o$ a corporatio$ taab!e -$der thi Tit!e' begi$$i$g o$ the o-rthtaab!e year i##ediate!y o!!o+i$g the year i$ +hich -ch corporatio$ co##e$ced it b-i$eoperatio$' +he$ the #i$i#-# corporate i$co#e ta i greater tha$ the ta co#p-ted -$der S-bectio$%A& o thi ectio$ or the taab!e year.” GSec. 2@ %E& %1&' N4R( o 1FF@I b. Period whe" a corporatio" beco!es sub?ect to the ;0*T. “%>& Speciic r-!e or deter#i$i$gthe period +he$ a corporatio$ beco#e -bect to the *(4T %#i$i#-# corporate i$co#e ta& , Cor p-rpoe o the *(4T' the taab!e year i$ +hich b-i$e operatio$ co##e$ced ha!! be the year

i$ +hich the do#etic corporatio$ regitered +ith the B-rea- o 4$ter$a! Ree$-e %B4R&. Cir# +hich +ere regitered +ith B4R i$ 1FF a$d ear!ier year ha!! be coered by the *(4T begi$$i$ga$-ary 1' 1FF?. ” %Re. Reg. No. F,F?& Manila Ban-ing Corporation v. Commissioner of Internal Revenue, <. R. No. 16?11?' A-g-t 26' 2006did $ot app!y Re. Reg. No. F,F? beca-e Re. Reg. No. ,F> peciica!!y reer to thrit ba$/.& c. Purpose of the four F:G year 9race period. The i$te$t o (o$gre re!atie to the *(4T i togra$t a o-r %& J year -pe$io$ o ta pay#e$t to $e+!y orga$i;ed corporatio$. (orporatio$ ti!!tarti$g their b-i$e operatio$ hae to tabi!i;e their e$t-re i$ order to obtai$ a tro$gho!d i$ thei$d-try. 4t doe $ot co#e a a -rprie the$ +he$ #a$y co#pa$ie reported !oe i$ their i$itia! yearo operatio$. Th-' i$ order to a!!o+ $e+ corporatio$ to gro+ a$d dee!op at the i$itia! tage o their operatio$'the !a+#a/i$g body a+ the $eed to proide a grace period o o-r year ro# their regitratio$ beorethey pay their #i$i#-# corporate i$co#e ta. %Manila Ban-ing Corporation v. Commissioner of InternalRevenue, <. R. No. 16?11?' A-g-t 26' 2006&

ESTATE TA)ES

'. *" deter!i"i"9 the 9ross estate of a decede"t5 are his properties abroad tobe i"cluded5 a"d !ore particularly5 what co"stitutes 9ross estate 7

S3<<ESTE" ANS=ER8 e' i the decede$t i a Ci!ipi$o citi;e$ or a reide$t a!ie$.The gro etate o a Ci!ipi$o citi;e$ or a reide$t a!ie$ co#prie a!! hi rea! property' +hereer

it-atedD a!! hi pero$a! property' ta$gib!e' i$ta$gib!e or #ied' +hereer it-ated' to the ete$t o hi



i$teret eiti$g therei$ at the ti#e o hi death. The gro etate o a $o$,reide$t a!ie$ co#prie a!! hi rea! property' it-ated i$ the Phi!ippi$eD a!!hi pero$a! property' ta$gib!e' i$ta$gib!e or #ied' it-ated i$ the Phi!ippi$e' to the ete$t o hi i$tereteiti$g therei$ at the ti#e o hi death.

%. +illia! S!ith5 a" A!erica" citie"5 was a per!a"e"t reside"t of the

Philippi"es. He died i" Sa" 1ra"cisco5 0alifor"ia. He left '&5&&& shares of Sa";i9uel 0orporatio"5 a co"do!i"iu! u"it at the Twi" Towers Buildi"9 at Pasi95;etro ;a"ila a"d a house a"d lot i" ;ia!i5 1lorida. +hat assets shall be i"cluded i" the Estate Ta# Retur" to be filed with the B*R 7

S3<<ESTE" ANS=ER8 A!! o the aet ho-!d be i$c!-ded i$ the Etate Ta Ret-r$ to be i!ed +iththe B4R. S#ith' a$ A#erica$ citi;e$ a$d a per#a$e$t reide$t o the Phi!ippi$e i co$idered' or Phi!ippi$eetate ta p-rpoe' a reide$t a!ie$. (o$e-e$t!y' the aet to be i$c!-ded i$ the Etate Ta Ret-r$ tobe i!ed +ith the B4R ho-!d be a!! property' rea! or pero$a!' ta$gib!e' i$ta$gib!e or #ied' +hereerit-ated' to the ete$t o the i$teret that S#ith ha at the ti#e o hi death. Th-' a!! o the propertiee$-#erated i$ the prob!e# irrepectie o +here they are it-ated are i$c!-dib!e i$ the gro etate oS#ith.

8. Proceeds of life i"sura"ce i"cludible i" a decede"t6s 9ross estate.a. The decede$t ta/e the i$-ra$ce po!icy o$ hi o+$ !ie

1& The a#o-$t are receiab!e by a& the decede$t: etate' b& hi eec-tor' or c& ad#i$itrator irrepectie o +hether or $ot the i$-red retai$ed the po+er o reocatio$'

OR 2& The a#o-$t are receiab!e by a$y be$eiciary deig$ated i$ the po!icy o i$-ra$ce areocab!e be$eiciary. GSec. ?> %E&' N4R( o 1FF@I

b. O$e' other tha$ the decede$t ta/e the i$-ra$ce po!icy o$ the !ie o the decede$t 1& The a#o-$t are receiab!e by a& the decede$t: etate' b& hi eec-tor' or c& ad#i$itrator

2& irrepectie o +hether or $ot the i$-red retai$ed the po+er o reocatio$.

:. Proceeds of life i"sura"ce NOT i"cluded i" a decede"t6s 9ross estate. a. The decede$t ta/e the i$-ra$ce po!icy o$ hi o+$ !ie' a$d

b. the proceed are receiab!e by a be$eiciary deig$ated a irreocab!e. GSec. ?> %E&' N4R( o1FF@&

NOTES AN" (O**ENTS8 The be$eiciary #-t $ot be the decede$t: etate' eec-tor or ad#i$itrator'beca-e the proceed are i$c!-dib!e a part o gro etate +hether or $ot the decede$t retai$ed the po+er oreocatio$. %I"id .&

c. =here the i$-ra$ce +a NOT ta/e$ by the decede$t -po$ hi o+$ !ie a$d the be$eiciary i$ot the decede$t: etate' hi eec-tor or ad#i$itrator.

:. *te!s deductible fro! the 9ross estate of a reside"t or "o"reside"t 1ilipi"odecede"t or reside"t alie" decede"t- a. Epe$e' !oe' c!ai#' i$debted$e a$d taeD b. Property preio-!y taedD

c. Tra$er or p-b!ic -eD d. The Ca#i!y 7o#e -p to a a!-e $ot eceedi$g P1 #i!!io$D e. Sta$dard ded-ctio$ o P1 #i!!io$D . *edica! epe$e $ot eceedi$g P>00'000.00D g. A#o-$t o ee#pt retire#e$t receied by the heir -$der Rep. Act *o. F1@D



h. Net hare o the -rii$g po-e i$ the co$-ga! part$erhip.

<. There is "o tra"sfer i" co"te!platio" of death if there is "o showi"9 that thetra$eror “retai$ed or hi !ie or or a$y period +hich doe $ot i$ act e$d beore hi death8 %1& thepoeio$ or e$oy#e$t o' or the right to the i$co#e ro# the property' or %2& the right' either a!o$e or i$co$-$ctio$ +ith a$y pero$' to deig$ate the pero$ +ho ha!! poe or e$oy the property or the

i$co#e therero#.” GSec. ?> %B&' N4R( o 1FF@I

>. 3a"ishi"9 deductio" Fdeductio" for property pre$iously ta#edG5 defi"ed. The

ded-ctio$ a!!o+ed ro# the gro etate o citi;e$' reide$t a!ie$ a$d $o$reide$t etate orpropertie +hich +ere preio-!y -bect to do$or: or etate tae. The ded-ctio$ i ca!!ed a a$ihi$gded-ctio$ beca-e the ded-ctio$ a!!o+ed di#i$ihe oer a period o ie %>& year.

4t i a!o /$o+$ a a ded-ctio$ or property preio-!y taed.

@. 3a"ishi"9 deductio" Fproperty pre$iously ta#edG allowed as a deductio" fro!the 9ross estate of a 1ilipi"o citie"5 whether reside"t or "ot5 of a reside"t alie"decede"t5 or of a "o"reside"t alie" decede"t.

a. A$ a#o-$t e-a! to the a!-e peciied be!o+ o

b. A$y property or#i$g a part o the gro etate it-ated i$ the Phi!ippi$ec O a$y pero$ +ho died +ithi$ ie year prior to the death o the decede$t' or tra$erred

to the decede$t by git +ithi$ ie year prior to hi death'd. =here -ch property ca$ be ide$tiied a hai$g bee$ receied by the decede$t ro# the

do$or by git' or ro# -ch prior decede$t by git' be-et' deie' or i$herita$ce' ore. =hich ca$ be ide$tiied a hai$g bee$ ac-ired i$ echa$ge or property o receied8

100H o the a!-e i the prior decede$t died +ithi$ o$e year prior to the death o the decede$t' ori the property +a tra$erred to hi# by git +ithi$ the a#e period prior to hi deathD

?0H o the a!-e i the prior decede$t died #ore tha$ o$e year b-t $ot #ore tha$ t+o year prior tothe death o the decede$t' or i the property +a tra$erred to hi# by git +ithi$ the a#e period prior tohi deathD

60H o the a!-e i the prior decede$t died #ore tha$ t+o year b-t $ot #ore tha$ three year prior to the death o the decede$t' or i the property +a tra$erred to hi# by git +ithi$ the a#e period priorto hi deathD

0H o the a!-e i the prior decede$t died #ore tha$ three year b-t $ot #ore tha$ o-r yearprior to the death o the decede$t' or i the property +a tra$erred to hi# by git +ithi$ the a#e periodprior to hi deathD a$d

20H o the a!-e i the prior decede$t died #ore tha$ o-r year b-t $ot #ore tha$ ie year priorto the death o the decede$t' or i the property +a tra$erred to hi# by git +ithi$ the a#e period priorto hi death. GSec. ?6 %A& %2& a$d %B& %2&' N4R( o 1FF@' $-#beri$g' arra$ge#e$t a$d -$der!i$i$g -pp!iedI

. The appro$al of the court sitti"9 i" probate5 or as a settle!e"t tribu"al o$erthe estate of the deceased is "ot a !a"datory reDuire!e"t for the collectio" of theestate. The probate co-rt i deter#i$i$g i-e +hich are $ot agai$t the property o the decede$t' or ac!ai# agai$t the etate a -ch' b-t i agai$t the i$teret or property right +hich the heir' !egatee'deiee' etc. ha i$ the property or#er!y he!d by the decede$t.

The $otice o !ey +ere reg-!ar!y i-ed +ithi$ the precriptie period. The ta ae#e$t hai$g beco#e i$a!' eec-tory a$d e$orceab!e' the a#e ca$ $o !o$ger beco$teted by #ea$ o a dig-ied protet. *Marcos, II v. Court of Appeals, et al .' 2@ S(RA @&

ONOR6S TA)ES

'. +hat is the do"or6s ta# rate if the do"ee is a stra"9er 7S3<<ESTE" ANS=ER8 =he$ the do$ee or be$eiciary i a tra$ger' the ta payab!e by the do$or

ha!! be 0H o the $et git.



%. 1or purposes of the do"or6s ta# who is a stra"9er 7 S3<<ESTE" ANS=ER8 A tra$ger i a i pero$ +ho i $ot a8 a. Brother' iter %+hether by +ho!e or ha!,b!ood&' po-e' a$cetor a$d !i$ea! dece$da$tD or b. Re!atie by co$a$g-i$ity i$ the co!!atera! !i$e +ithi$ the o-rth degree o re!atio$hip.” GSec. FF %B&'N4R( o 1FF@I

NOTES AN" (O**ENTS8 A!! re!atie by ai$ity' irrepectie o the degree' are co$idered atra$ger.

8. +hat is the ta# base for do"atio"s 7 S3<<ESTE" ANS=ER8 The $et git #ade d-ri$g the ca!e$dar year. GSec. FF %A&' N4R( o 1FF@I

:. 1or purposes of the do"or6s ta#5 what is !ea"t by “"et 9ifts 7” S3<<ESTE" ANS=ER8 The $et eco$o#ic be$eit ro# the tra$er that accr-e to the do$ee. Accordi$g!y' i a #ortgaged property i tra$erred a a git' b-t i#poi$g -po$ the do$ee the ob!igatio$to pay the #ortgage !iabi!ity' the$ the $et git i #ea-red by ded-cti$g ro# the air #ar/et a!-e o theproperty the a#o-$t o the #ortgage a-#ed. %!at par.' Sec. 11' Re. Reg.No.2,200&

<. How are 9ifts of perso"al property to be $alued for do"or6s ta# purposes 7S3<<ESTE" ANS=ER8 The #ar/et a!-e o the pero$a! property at the ti#e o the git ha!! be

co$idered the a#o-$t o the git. %Sec. 102' N4R( o 1FF@&

>. +hat is the $aluatio" of do"ated real property for do"or6s ta# purposes 7 S3<<ESTE" ANS=ER8 The rea! property ha!! be appraied at it air #ar/et a!-e a o the ti#e othe git.

7o+eer' the appraied a!-e o the rea! property at the ti#e o the git ha!! be +hicheer i the highero8 a. the air #ar/et a!-e a deter#i$ed by the (o##iio$er o 4$ter$a! Ree$-e %;o$a! a!-atio$& or b. the air #ar/et a!-e a ho+$ i$ the ched-!e o a!-e ied by the Proi$cia! a$d (ity

Aeor. GSec. 102' i$ re!atio$ to Sec. ?? %B& both o the N4R( o 1FF@I

@. A died lea$i"9 as his o"ly heirs5 his sur$i$i"9 spouse B5 a"d three !i"orchildre"5 )5 2 a"d L. Si"ce B does "ot wa"t to participate i" the distributio" of theestate5 she re"ou"ced her hereditary share i" the estate.

a. *s the re"u"ciatio" sub?ect to do"or6s ta# 7 E#plai". S3<<ESTE" ANS=ER8 No. The ge$era! re$-$ciatio$ by a$ heir' i$c!-di$g the -rii$g po-e'a i$ the cae B' o her hare i$ the hereditary etate !et by the decede$t i $ot -bect to do$or: ta. % th

par.' Sec. 11' Re. Reg. No. 2,200& Thi i o beca-e the ge$era! re$-$ciatio$ by B +a $ot peciica!!y a$d categorica!!y do$e i$ aoro ide$tiied heir9 to the ec!-io$ or diada$tage o the other co,heir i$ the hereditary etate.

b. Supposi"9 that i"stead of a 9e"eral re"u"ciatio"5 B re"ou"ced herhereditary share i" A6s estate to ) who is a special child5 would your a"swer be thesa!e 7 E#plai".

S3<<ESTE" ANS=ER8 *y a$+er +o-!d be diere$t. The re$-$ciatio$ i$ aor o L +o-!d be-bect to do$or: ta. Thi i o beca-e the re$-$ciatio$ +a peciica!!y a$d categorica!!y do$e i$ aor o L a$dide$tiied heir to the ec!-io$ or diada$tage o a$d ' the other co,heir i$ the hereditary etate. %th par.' Sec. 11' Re. Reg. No. 2,200&

. ,i$e so!e do"atio"s that are e#e!pt fro! do"or6s ta#. S3<<ESTE" ANS=ER8 a. The irt P100'000.00 $et do$atio$ d-ri$g a ca!e$dar year i ee#pt ro# do$or: ta GSec. FF%A&' N4R( o 1FF@I #ade by a reide$t or $o$ reide$tD



b. The do$atio$ by a reide$t or $o$,reide$t o a pri;e to a$ ath!ete i$ a$ i$ter$atio$a! portto-r$a#e$t he!d abroad a$d a$ctio$ed by the $atio$a! port aociatio$ i ee#pt ro# do$or: ta %Sec. 1' Rep. Act No. @>F& c. Po!itica! co$trib-tio$ #ade by a reide$t or $o$,reide$t i$diid-a! i regitered +ith the(O*E)E( irrepectie o +hether do$ated to a po!itica! party or i$diid-a!. 7o+eer' the (orporatio$ (ode prohibit corporatio$ ro# #a/i$g po!itica! co$trib-tio$. %(orp. (ode'Tit!e 4V' Sec. 6.F& d. "o+rie or git #ade o$ acco-$t o #arriage a$d beore it ce!ebratio$ or +ithi$ o$e yearthereater by reide$t +ho are pare$t to each o their !egiti#ate' recog$i;ed $at-ra!' or adopted chi!dre$to the ete$t o the irt te$ tho-a$d peo %P10'000.00&D e. <it #ade by reide$t or $o$,reide$t to or or the -e o the Natio$a! <oer$#e$t or a$y

e$tity created by a$y o it age$cie +hich i $ot co$d-cted or proit' or to a$y po!itica!-bdiiio$ o the aid <oer$#e$tD

. <it #ade by reide$t or $o$ reide$t i$ aor o a$ ed-catio$a! a$d9or charitab!e' re!igio-'c-!t-ra! or ocia! +e!are corporatio$' i$tit-tio$' o-$datio$' tr-t or phi!a$thropic orga$i;atio$ or reearchi$tit-tio$ or orga$i;atio$8 Proided' ho+eer' That $ot #ore tha$ thirty perce$t %0H& o aid git ha!!be -ed by -ch do$ee or ad#i$itratio$ p-rpoe. GSec. 101 %A&' N4R( o 1FF@' $-#beri$g a$darra$ge#e$t -pp!iedI g. <it #ade by $o$,reide$t a!ie$ o-tide o the Phi!ippi$e to Phi!ippi$e reide$t are ee#ptro# do$or: tae beca-e taatio$ i baica!!y territoria!. The tra$actio$' +hich ho-!d hae bee$-bect to ta +a #ade by $o$,reide$t a!ie$ a$d too/ p!ace o-tide o the Phi!ippi$e.

C. +hat is the co"cept of do"atio" or 9ift splitti"9 7 *llustrate. S3<<ESTE" ANS=ER8 "o$atio$ or git p!itti$g i preadi$g the git oer $-#ero- ca!e$dar yeari$ order to aai! o !o+er do$or: tae. 4$ 200? )eo$ +a thi$/i$g o do$ati$g a P200'000.00 to *i/!o' hi irt co-i$. The P200'000.00 i thetota!ity o the $et git or 200?. 4 he do$ated the P200'000.00 i$ 200? the irt P100'000 +o-!d beee#pt a$d the re#ai$i$g P>0'000.00 +o-!d be -bect to do$or: ta

4 )eo$ pread the P200'000 do$atio$ oer t+o %2& ca!e$dar year' do$ati$g P100'000.00 o$"ece#ber 0' 200? a$d the re#ai$i$g P100'000.00 o$ a$-ary 1' 200F the tra$actio$ +o-!d be ee#ptro# do$or: ta. Thi i o ee$ i the do$atio$ i eparated o$!y by t+o day beca-e the bai i theca!e$dar year. )eo$ +o-!d be e$oyi$g the ee#ptio$ or the irt P100'000.00 $et git or each ca!e$dar year.

'&. A5 who is e"9a9ed i" the car “buy a"d sell” busi"ess sold to B P@!illio" /a9uar for o"ly P: !illio". The proper 3AT o" the sale was paid. *f you arethe B*R e#a!i"er assi9"ed to re$iew the sale5 would you issue a ta# assess!e"t o"the tra"sactio" 7 E#plai" your a"swer briefly.

S3<<ESTE" ANS=ER8 "o$or: tae +o-!d be d-e o$ the i$-icie$cy o co$ideratio$.=here property' other tha$ rea! property that ha bee$ -bected to the i$a! capita! gai$ ta' i

tra$erred or !e tha$ a$ ade-ate a$d -!! co$ideratio$ i$ #o$ey or #o$ey: +orth' the$ the a#o-$tby +hich the air #ar/et a!-e o the property at the ti#e o the eec-tio$ o the (o$tract to Se!! oreec-tio$ o the "eed o Sa!e +hich i $ot preceded by a (o$tract to Se!! eceeded the a!-e o theagreed or act-a! co$ideratio$ or e!!i$g price ha!! be dee#ed a git' a$d ha!! be i$c!-ded i$ co#p-ti$gthe a#o-$t o git #ade d-ri$g the ca!e$dar year. %>th par.' Sec. 11' Re. Reg. No. 2,200&

3A(EAE TA)ES F3ATG

+ARN*N, MMM Approi#ate!y 10H o the tota! -etio$ a/ed i$ the Bar Ea#i$atio$ are o-rcedro# VAT a$d it co$cept. Thi area i probab!y the #ot diic-!t area to orecat beca-e there are $otatitica!!y perceied patter$. The a-thor ha retai$ed the “Star Syte#” or VAT. (o$ideri$g the!i#ited period o ti#e' the reader i adied to oc- o$ area #ar/ed +ith tar a$d -t bro+e the-$#ar/ed area.



'. 3alueadded ta# F3ATG i a ta +hich i i#poed o$!y o$ the i$creae i$ the +orth' #erit ori#porta$ce o good' propertie or erice' a$d $ot o$ the tota! a!-e o the good or erice bei$g o!dor re$dered.

%. Nature of 3AT. VAT i a$ i$direct ta that #ay be hited or paed o$ to the b-yer'

tra$eree or !eee o the good' propertie or erice. A -ch' it ho-!d be -$dertood $ot i$ theco$tet o the pero$ or e$tity that i pri#ari!y' direct!y !iab!e or it pay#e$t' b-t i$ ter# o it $at-re a ata o$ co$-#ptio$. GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#, <. R. No. 1>?66'Cebr-ary 11' 200> citi$g ario- a-thoritieU

VAT i a perce$tage ta i#poed o$ a$y pero$ +hether or $ot a ra$chie gra$tee' +ho i$ the co-reo trade or b-i$e' e!!' barter' echa$ge' !eae' good or propertie' re$der erice. 4t i a!o!eied o$ eery i#portatio$ o good +hether or $ot i$ the co-re o trade or b-i$e. The ta bae othe VAT i !i#ited o$!y to the a!-e added to -ch good' propertie' or erice by the e!!er' tra$eroror !eor. C-rther' the VAT i a$ i$direct ta a$d ca$ be paed o$ to the b-yer. %8uezon City, et al., v.

ABS0CB! Broadcasting Corporation' <. R. No. 1660?' October 6' 200?&

8. Effect of e#e!ptio"s fro! 3AT which is a" i"direct ta#. 4 a pecia! !a+ #ere!yee#pt a party a a e!!er ro# it direct !iabi!ity or pay#e$t o the VAT' b-t doe $ot re!iee the a#e

party a a p-rchaer ro# it i$direct b-rde$ o the VAT hited to it by it VAT,regitered -pp!ier' thep-rchae tra$actio$ i $ot ee#pt. REASON8 The VAT i a ta o$ co$-#ptio$' the a#o-$t o +hich #ay be hited or paed o$ by thee!!er to the p-rchaer o the good' propertie or erice. GCommissioner of Internal Revenue v. Seagate(echnology *Philippines#, <. R. No. 1>?66' Cebr-ary 11' 200>&

:. *llustratio" of effects of e#e!ptio"s fro! 3AT which is a" i"direct ta#. A VATee#pt e!!er e!! to a $o$,VAT ee#pt p-rchaer. The p-rchaer i -bect to VAT beca-e the VAT i#ere!y added a part o the p-rchae price a$d $ot a a ta beca-e the b-rde$ i #ere!y hited. The

e!!er i ti!! ee#pt beca-e it co-!d pa o$ the b-rde$ o payi$g the ta to the p-rchaer .

<. The 3AT is a ta# o" co"su!ptio". ;ea"i"9 of co"su!ptio" as used u"der the

3AT syste!. (o$-#ptio$ i Qthe -e o a thi$g i$ a +ay that thereby eha-t it.Q App!ied to erice' the ter# #ea$ the peror#a$ce or Q-cce-! co#p!etio$ o a co$tract-a! d-ty'--a!!y re-!ti$g i$ the peror#er re!eae ro# a$y pat or -t-re !iabi!ity Q 3$!i/e good' ericeca$$ot be phyica!!y -ed i$ or bo-$d or a peciic p!ace +he$ their deti$atio$ i deter#i$ed. 4$tead'there ca$ o$!y be a Qpredeter#i$ed e$d o a co-reQ +he$ deter#i$i$g the erice Q!ocatio$ or poitio$ or !ega! p-rpoe.Q GCommissioner of Internal Revenue v. Placer %ome (echnical Services *Phils.#, Inc. <. R.No. 166>' -$e ?' 200@I

>. *llustratio" of the !ea"i"9 of co"su!ptio" as used u"der the 3AT syste!. Corea#p!e the erice re$dered by a !oca! ir# to it oreig$ c!ie$t are peror#ed or -cce-!!y co#p!eted-po$ it e$di$g to a oreig$ c!ie$t the drat a$d bi!! it ha gathered ro# erice etab!ih#e$t here.4t erice' hai$g bee$ peror#ed i$ the Phi!ippi$e' are thereore a!o co$-#ed i$ the Phi!ippi$e. S-ch aci!itatio$ erice ha $o phyica! eite$ce' yet ta/e p!ace -po$ re$ditio$' a$d thereore -po$

co$-#ptio$' i$ the Phi!ippi$e.

GCommissioner of Internal Revenue v. Placer %ome (echnical Services *Phils.#,Inc. <. R. No. 166>' -$e ?' 200@I

@. +ho are liable for the $alueadded ta#.a. A$y pero$ +ho' i$ the co-re o hi trade or b-i$e'

1& Se!!' barter' echa$ge or !eae good or propertie' or 2& re$der erice' a$d

b. a$y pero$ +ho i#port good 7o+eer' i$ the cae o i#portatio$ o taab!e good' the i#porter' +hether a$ i$diid-a! orcorporatio$ a$d +hether or $ot #ade i$ the co-re o hi trade or b-i$e' ha!! be !iab!e to VAT .



%Re. Reg. No. 16,200>'Sec. .10>,1' paraphrai$g -pp!ied&

. 3arious 3AT !ethods a"d syste!s.

a. 0ost deductio" !ethod. Thi i a i$g!e,tage ta +hich i payab!e o$!y by the origi$a! e!!er.% A"a-ada +uro Party $ist *etc.# v. &rmita, etc., et al., <. R. No. 16?0>6' Septe#ber 1' 200> a$d co#pa$io$ cae&

Thi +a -be-e$t!y #odiied a$d a #it-re o “cot ded-ctio$ #ethod” a$d “ta credit #ethod” +a

-ed to deter#i$e the a!-e,added ta payab!e. %I"id.& b. Ta# credit !ethod. Thi #ethod re!ie o$ i$oice' a$ e$tity ca$ credit agai$t or -btract ro# the VAT charged o$ it a!e or o-tp-t the VAT paid o$ it p-rchae' i$p-t a$d i#port. GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#, <. R. No. 1>?66' Cebr-ary 11'200>I

4 at the e$d o a taab!e period' the o-tp-t tae charged by a e!!er are e-a! to the i$p-t taepaed o$ by the -pp!ier' $o pay#e$t i re-ired. 4t i +he$ the o-tp-t tae eceed the i$p-t taethat the ece ha to be paid.

4 ho+eer' the i$p-t tae eceed the o-tp-t tae' the ece ha!! be carried oer to the -cceedi$g-arter or -arter. Sho-!d the i$p-t tae re-!t ro# ;ero,rated or eectie!y ;ero,rated tra$actio$ orro# ac-iitio$ o capita! good' a$y ece oer the o-tp-t tae ha!! i$tead be re-$ded to thetapayer or credited agai$t other i$ter$a! ree$-e tae. %I"id.&

C. How the 3AT is i!posed o" the i"crease i" worth5 !erit or i!pro$e!e"t of the9oods or ser$ices. The VAT -ti!i;e the co$cept o the o-tp-t a$d i$p-t tae. O-tp-t VAT !e 4$p-t VAT VAT d-e o$ the i$creae i$ +orth' #erit or i#proe#e$t the good orerice.

'&. The ri9ht to credit the i"put ta# be li!ited by le9islatio" because it is a !erecreatio" of law. Prior to the e$act#e$t o #-!ti,tage a!e taatio$' the a!e tae paid at eery !ee!o ditrib-tio$ are $ot recoerab!e ro# the tae payab!e. =ith the ade$t o Eec-tie Order No. 2@i#poi$g a 10H #-!ti,tage ta o$ a!! a!e' it +a o$!y the$ that the crediti$g o the i$p-t ta paid o$p-rchae or i#portatio$ o good a$d erice by VAT,regitered pero$ agai$t the o-tp-t ta +aetab!ihed. Thico$ti$-ed +ith the Epa$ded VAT )a+ %R.A. No. @@16&' a$d The Ta Reor# Act o 1FF@%R.A. No. ?2&. The right to credit i$p-t ta a agai$t the o-tp-t ta i c!ear!y a prii!ege created by !a+'a prii!ege that a!o the !a+ ca$ !i#it. 4t ho-!d be treed that a pero$ ha $o eted right i$ tat-tory

prii!ege. *ABA:A%A +uro Party $ist, etc. et al. vs. &rmita, <.R. No. 16?20@' October 1>' 200>' a$d co#pa$io$cae' o$ the #otio$ or reco$ideratio$&

''. Output ta# i the a!-e,added ta d-e o$ the a!e or !eae or taab!e good' propertie orerice by a$y VAT,regitered pero$.

'%. *"put ta# i the a!-e,added ta d-e o$ or paid by a VAT,regitered pero$ o$ i#portatio$ ogood or !oca! p-rchae o good or erice' i$c!-di$g !eae or -e o propertie' i$ the co-re o hitrade or b-i$e. %Re. Reg. No. .110,1' 1t par.&

'8. *"cluded i" the i"put ta#.a. the tra$itio$a! i$p-t ta a$d

b. the pre-#ptie i$p-t ta .4t i$c!-de

c. i$p-t tae +hich ca$ be direct!y attrib-ted to tra$actio$ -bect to the VAT p!- a ratab!e portio$o a$y i$p-t ta +hich ca$$ot be direct!y attrib-ted to either the taab!e or ee#pt actiity. %Re. Reg.No. .110,1' 1t par.' 2$d e$te$ce'. A$d 2$d par.' paraphrai$g' arra$ge#e$t a$d $-#beri$g -pp!ied &

':. 0o"cept of tra"sitio"al i"put ta# credits o" be9i""i"9 i"$e"tories. Tapayer

+ho beco#e VAT,regitered pero$ -po$ eceedi$g the #i$i#-# t-r$oer o P1'>00'000.00 i$ a$y 12,#o$th period' or +ho o!-$tari!y regiter ee$ i their t-r$oer doe $ot eceed P1'>00'000.00 %eceptra$chie gra$tee o radio a$d te!eiio$ broadcati$g +hoe threho!d i P10'000'000.00& ha!! be



e$tit!ed to a tra$itio$a! i$p-t ta o$ the i$e$tory o$ ha$d a o the eectiity o their VAT regitratio$' o$the o!!o+i$g8 a. good p-rchaed or rea!e i$ their pree$t co$ditio$D b. #ateria! p-rchaed or -rther procei$g' b-t +hich hae $ot yet -$dergo$e procei$gD c. good +hich hae bee$ #a$-act-red by the tapayerD d. good i$ proce or a!eD or

e. good a$d -pp!ie or -e i$ the co-re o the tapayer: trade or b-i$e a a VAT,regitered pero$. GRe. Reg. No. 16,200>' Sec..111,1' %a&' 1t par.' arra$ge#e$t a$d $-#beri$g -pp!iedI

'<. 0o"cept of presu!pti$e i"put ta# credits. Pero$ or ir# e$gaged i$ the

procei$g o ardi$e' #ac/ere!' a$d #i!/' a$d i$ #a$-act-ri$g rei$ed -gar' coo/i$g oi! a$d pac/ed$ood!e,baed i$ta$t #ea!' ha!! be a!!o+ed a pre-#ptie i$p-t ta' creditab!e agai$t the o-tp-t ta'e-ia!e$t to o-r perce$t %H& o the gro a!-e i$ #o$ey o their p-rchae o pri#ary agric-!t-ra!prod-ct +hich are -ed a i$p-t to their prod-ctio$. A -ed i$ thi paragraph' the ter# procei$g ha!! #ea$ pate-ri;atio$' ca$$i$g a$d actiitie+hich thro-gh phyica! or che#ica! proce a!ter the eterior tet-re or or# or i$$er -bta$ce o aprod-ct i$ -ch a #a$$er a to prepare it or pecia! -e to +hich it co-!d $ot hae bee$ p-t i$ it origi$a!or# or co$ditio$. GRe. Reg. No. 16,200>' Sec..111,1' %b&I

'>. The 3AT re9istratio" fee does NOT $iolate reli9ious freedo!. The VATregitratio$ ee i#poed o$ $o$,VAT e$terprie +hich i$c!-de a#o$g other' re!igio- ect +hich e!!a$d ditrib-te re!igio- !iterat-re i $ot io!atie o re!igio- reedo#' a!tho-gh a ied a#o-$t i $oti#poed or the eercie o a prii!ege b-t o$!y or the p-rpoe o derayi$g part o the cot o regitratio$. The regitratio$ ee i th- #ore o a$ ad#i$itratie ee' o$e $ot i#poed o$ the eercie o aprii!ege' #-ch !e a co$tit-tio$a! right. *(olentino v. Secretary of /inance, et al., and companion cases, 2>S(RA 60&

'@. *"terpretatio" of the ter! “*" the 0ourse of Trade or Busi"ess” as used i" the

3AT syste!. The ter# Qdoi$g b-i$eQ or “co-re o b-i$e” co$ey the idea o b-i$e bei$g

do$e' $ot ro# ti#e to ti#e' b-t a!! the ti#e. 4t doe $ot i$c!-de io!ated tra$actio$. %Commissioner of

Internal Revenue v. Magsaysay $ines, Inc., et al., <. R. No. 16F?' -!y 2?' 2006&

'. Pursua"t to a 9o$er"!e"t pro9ra! of pri$atiatio"5 N05 a 3ATre9isterede"tity created for the purpose of selli"9 real property5 decided to sell to pri$atee"terprise all of its shares i" its whollyow"ed subsidiary the Natio"al ;ari"e0orporatio" FN;0G. The N0 decided to sell i" o"e lot its N;0 shares a"d fi$e F<G ofits ships5 which are 85@&& +T Twee"ecer5 4loec"er type $essels. The $esselswere co"structed for the N0 betwee" 'C' a"d 'C:5 the" i"itially leased to (uo"Ste$edori"9 0o!pa"y5 also its whollyow"ed subsidiary. SubseDue"tly5 the $esselswere tra"sferred a"d leased5 o" a bareboat basis5 to the N;0. The N;0 shares a"dthe $essels were offered for public biddi"9. A!o"9 the stipulated ter!s a"dco"ditio"s for the public auctio" was that the wi""i"9 bidder was to pay a $alueadded ta# of '&I o" the $alue of the $essels. ;a9saysay (i"es5 *"c.5 offered to buythe shares a"d the $essels for P'>5&&&5&&&.&&. The bid was !ade by ;a9saysay

(i"es5 purportedly for a "ew co!pa"y still to be for!ed co!posed of itself5 Baliwa9Na$i9atio"5 *"c.5 a"d 1*; (i!ited of the ;arde" ,roup based i" Ho"9o"9 . The bidwas appro$ed by the 0o!!ittee o" Pri$atiatio"5 a"d a Notice of Award was issuedto ;a9saysay (i"es. *s the sale sub?ect to 3AT 7 S3<<ESTE" ANS=ER8 No. The ter# Qcarryi$g o$ b-i$eQ doe $ot #ea$ the peror#a$ce o ai$g!e dico$$ected act' b-t #ea$ co$d-cti$g' proec-ti$g a$d co$ti$-i$g b-i$e by peror#i$gprogreie!y a!! the act $or#a!!y i$cide$t thereoD +hi!e Qdoi"9 busi"essQ co$ey the idea o b-i$ebei$g do$e' $ot ro# ti#e to ti#e' b-t a!! the ti#e. Q0ourse of busi"essQ i +hat i --a!!y do$e i$ the#a$age#e$t o trade or b-i$e. Q(o-re o b-i$eQ or Qdoi$g b-i$eQ co$$ote reg-!arity o



actiity. 4$ the i$ta$t cae' the a!e +a a$ io!ated tra$actio$. The a!e +hich+a i$o!-$tary a$d #ade p-r-a$t to the dec!ared po!icy o <oer$#e$t or priati;atio$ co-!d $o !o$ger be repeated or carried o$ +ith reg-!arity. 4t ho-!d be e#phai;ed that the $or#a! VAT,regitered actiityo N"( i !eai$g pero$a! property. Thi i$di$g i co$ir#ed by the Reied (harter o the N"(+hich bear $o i$dicatio$ that the N"( +a created or the pri#ary p-rpoe o e!!i$g rea! property. %Commissioner of Internal Revenue v. Magsaysay $ines, Inc., et al., <. R. No. 16F?' -!y 2?' 2006&

'C. "der the 3alue Added Ta# F3ATG5 the ta# is i!posed o" sales5 barter5 ore#cha"9e or 9oods a"d ser$ices. The 3AT is also i!posed o" certai" tra"sactio"s“dee!ed sales” which i"clude- a. Tra$er' -e or co$-#ptio$ $oti$ the co-re o b-i$e or propertie origi$a!!y i$te$ded or a!e or or -e i$ the co-re o b-i$e. b. "itrib-tio$ or tra$er to8 1& Shareho!der or i$etor a hare i$ the proit o the VAT, regitered pero$D or 2& (reditor i$ pay#e$t o debt or ob!igatio$ c. (o$ig$#e$t o good i act-a! a!e i $ot #ade +ithi$ ity %60& day o!!o+i$g the date -chgood +ere co$ig$ed. (o$ig$ed good ret-r$ed by the co$ig$ee +ithi$ the 60,day period are $otdee#ed o!d. d. Retire#e$t ro# or ceatio$ o b-i$e' +ith repect to a!! good o$ ha$d'

1& +hether capita! good' toc/,i$,trade' -pp!ie or #ateria! a o the date o -ch retire#e$t'

or ceatio$'2& +hether or $ot the b-i$e i co$ti$-ed by the $e+ o+$er or -cceor. GRe. Reg. No.16,200>' Sec. .106,@' paraphrai$g' arra$ge#e$t a$d $-#beri$g -pp!iedI

%&. Tra"sactio"s co"sidered retire!e"t or cessatio" of busi"ess “dee!ed sale”sub?ect to 3AT.

a. (ha$ge o o+$erhip o the b-i$e. There i cha$ge i$ the o+$erhip o the b-i$e+here a i$g!e proprietorhip i$corporateD or

1& the proprietor o a i$g!e proprietorhip e!! hi e$tire b-i$e. b. "io!-tio$ o a part$erhip a$d creatio$ o a $e+ part$erhip +hich ta/e oer the b-i$e. GRe. Reg. No. 16,200>' Sec. .106,@ %a&' %& paraphrai$g' arra$ge#e$t a$d $-#beri$g -pp!iedI

%'. Sale of or lease of real properties sub?ect to 3AT. Sa!e o rea! propertie pri#ari!y or

a!e to c-to#er or he!d or !eae i$ the ordi$ary co-re o trade or b-i$e o the e!!er ha!! be-bect to VAT. %Re. Reg. No. 16,200>' Sec. .106,' 1t par.&

Th-' capita! tra$actio$ o i$diid-a! are $ot -bect to VAT. O$!y rea! etate dea!er are -bect toVAT.

%%. O" Septe!ber :5 %&&C5 )2L5 *"c.5 a do!esticcorporatio" e"9a9ed i" the real estate busi"ess5 sold a buildi"9 for P'&5&&&5&&&.&&. *s the sale sub?ect to the $alueadded ta# F3ATG7 *f so5 how !uch7 E#plai".

S3<<ESTE" ANS=ER8 e. 12H o$ the gro e!!i$g price beca-e the a!e +a #ade i$ theordi$ary co-re o trade o b-i$e o L' a do#etic corporatio$ e$gaged i$ the rea! etate b-i$e.

%8. The followi"9 sales of real properties are e#e!pt fro! 3AT5 "a!ely-a. Sa!e o rea! propertie $ot pri#ari!y he!d or a!e to c-to#er or he!d or !eae i$ the ordi$ary

co-re o trade or b-i$eD b. Sa!e o rea! propertie -ti!i;ed or !o+,cot ho-i$g a dei$ed by RA No. @2@F' other+ie/$o+$ a the “3rba$ a$d "ee!op#e$t 7o-i$g Act o 1FF2” a$d other re!ated !a+' -ch a RA No.@?> a$d RA No. ?@6.

c. Sa!e o rea! propertie -ti!i;ed or ocia!i;ed ho-i$g a dei$ed -$der RA No. @2@F' a$d otherre!ated !a+ +herei$ the price cei!i$g per -$it i P22>'000.00 or a #ay ro# ti#e to ti#e be deter#i$edby the 73"(( a$d the NE"A a$d other re!ated !a+.



d. Sa!e o reide$tia! !ot a!-ed at O$e *i!!io$ Cie 7-$dred Tho-a$d Peo %P1'>00'000.00& a$dbe!o+' or ho-e W !ot a$d other reide$tia! d+e!!i$g a!-ed at T+o *i!!io$ <ie 7-$dred Tho-a$d Peo%P2'>00'000.00& a$d be!o+ +here the i$tr-#e$t o a!e9tra$er9dipoitio$ +a eec-ted o$ or aterNoe#ber 1' 200>' proided' That $ot !ater tha$ a$-ary 1' 200F a$d eery three %& year thereater'the a#o-$t tated herei$ ha!! be ad-ted to it pree$t a!-e -i$g the (o$-#er Price 4$de' ap-b!ihed by the Natio$a! Statitic Oice %NSO&D proided' -rther' that -ch ad-t#e$t ha!! bep-b!ihed thro-gh ree$-e reg-!atio$ to be i-ed $ot !ater tha$ *arch 1 o each year.

4 t+o or #ore adace$t reide$tia! !ot are o!d or dipoed i$ aor o o$e b-yer' or the p-rpoe o-ti!i;i$g the !ot a o$e reide$tia! !ot' the a!e ha!! be ee#pt ro# VAT o$!y i the aggregate a!-e o the!ot do $ot eceed P1'>00'000.00. Adace$t reide$tia! !ot' a!tho-gh coered by eparate tit!e a$d9oreparate ta dec!aratio$' +he$ o!d or dipoed o to o$e a$d the a#e b-yer' +hether coered by o$eor eparate "eed o (o$eya$ce' ha!! be pre-#ed a a a!e o o$e reide$tia! !ot. GRe. Reg. No..10F,1 %B&' %p&' paraphrai$g a$d $-#beri$g -pp!iedI

%:. 3AT o" ser$ices a"d lease of properties. a. There ha!! be !eied' aeed' a$d co!!ected'

b. a a!-e,added ta e-ia!e$t to t+e!e perce$t %12H& o gro receiptc. deried ro# the a!e or echa$ge o erice'

1& i$c!-di$g the -e or !eae o propertie. GN4R( o 1FF@' Sec. 10? %A&' a a#e$ded by R.A. No.

F@' arra$ge#e$t a$d $-#beri$g -pp!iedI

%<. “Sale or e#cha"9e of ser$ices”5 defi"ed. The ter# “a!e or echa$ge o erice”#ea$ the peror#a$ce o a!! /i$d o erice i$ the Phi!ippi$e or other or a ee' re#-$eratio$ orco$ideratio$' +hether i$ /i$d or i$ cah' i$c!-di$g thoe peror#ed or re$dered by the o!!o+i$g8

a. co$tr-ctio$ a$d erice co$tractorD b. toc/' rea! etate'co##ercia!' c-to# a$d i##igratio$ bro/erD c. !eor o property'+hether pero$a! or rea!D d. pero$ e$gaged i$ +areho-i$g erice e.!eor or ditrib-tor o ci$e#atographic i!#D . pero$ e$gaged i$ #i!!i$g' procei$g'#a$-act-ri$g or repac/i$g good or otherD g. proprietor' operator or/eeper o hote!' #ote!' ret,ho-e' pe$io$ ho-e' i$$' reortD theater' a$d #oie ho-eDh. proprietor or operator o reta-ra$t' rereh#e$t par!or' cae a$d other eati$g p!ace' i$c!-di$gc!-b a$d catererD i. dea!er i$ ec-ritieD . !e$di$g i$etorD

/. tra$portatio$ co$tractor o$ their tra$port o good or cargoe' i$c!-di$g pero$+ho tra$port good or cargoe or hire a$d other do#etic co##o$ carrier by !a$d re!atie to theirtra$port o good or cargoeD !. co##o$ carrier by air a$d ea re!atie totheir tra$port o pae$ger' good or cargoe ro# o$e p!ace i$ the Phi!ippi$e to a$other p!ace i$ thePhi!ippi$eD #. a!e o e!ectricity by ge$eratio$ co#pa$ie' tra$#iio$'a$d9or ditrib-tio$ co#pa$ieD $. ra$chie gra$tee o e!ectric -ti!itie'te!epho$e a$d te!egraph' radio a$d te!eiio$ broadcati$g a$d a!! other ra$chie gra$tee eceptra$chie gra$tee o radio a$d9or te!eiio$ broadcati$g +hoe a$$-a! gro receipt o the precedi$gyear do $ot eceed Te$ *i!!io$ Peo %P10'000'000.00&' a$d ra$chie gra$tee o ga a$d +ater-ti!itieD o. $o$,!ie i$-ra$ce co#pa$ie %ecept their crop i$-ra$ce&'i$c!-di$g -rety' ide!ity' i$de#$ity a$d bo$di$g co#pa$ieD a$dp. i#i!ar erice regard!e o +hether or $ot the peror#a$ce thereo ca!! or the eercie or -e othe phyica! or #e$ta! ac-!tie. GN4R( o 1FF@' Sec. 10? %A&' a a#e$ded by R.A. No. F@D Re. Reg. No. 16,200>' Sec. '10?,2' 1t par.' arra$ge#e$t a$d $-#beri$g -pp!iedI

%>. Also i"cluded i" the phrase “sale or e#cha"9e of ser$ices.

a. The !eae or the -e o or the right or prii!ege to -e a$y copyright' pate$t' deig$ or #ode!'

p!a$' ecret or#-!a or proce' good+i!!' trade#ar/' trade bra$d or other !i/e property or rightD b. The !eae or the -e o' or the right to -e a$y i$d-tria!' co##ercia! or cie$tiic e-ip#e$tD c. The -pp!y o cie$tiic' tech$ica!' i$d-tria! or co##ercia! /$o+!edge or i$or#atio$D d. The -pp!y o a$y aita$ce that i a$ci!!ary a$d -bidiary to a$d i -r$ihed a a #ea$ oe$ab!i$g the app!icatio$ or e$oy#e$t o a$y -ch property' or right a i #e$tio$ed i$ -bparagraph %2&hereo or a$y -ch /$o+!edge or i$or#atio$ a i #e$tio$ed i$ -bparagraph %& hereoD or



e. The -pp!y o erice by a $o$,reide$t pero$ or hi e#p!oyee i$ co$$ectio$ +ith the -e oproperty or right be!o$gi$g to' or the i$ta!!atio$ or operatio$ o a$y bra$d' #achi$ery or other apparat-p-rchaed ro# -ch $o$,reide$t pero$D . The -pp!y o tech$ica! adice' aita$ce or erice re$dered i$ co$$ectio$ +ith tech$ica!#a$age#e$t or ad#i$itratio$ o a$y cie$tiic' i$d-tria! or co##ercia! -$derta/i$g' e$t-re' proect oche#eD g. The !eae o #otio$ pict-re i!#' i!# tape a$d dicD h. The !eae or the -e o or the right to -e radio' te!eiio$' ate!!ite tra$#iio$ a$d cab!ete!eiio$ ti#e. %Re. Reg. No. 16,200>' Sec. .10?,2' 2$d par.&

%@. Lerorated Sales of ,oods or Properties. A ;ero,rated a!e o good or propertie by a

a!e by a VAT,regitered pero$ i a taab!e tra$actio$ or VAT p-rpoe b-t the a!e doe $ot re-!t i$a$y o-tp-t ta.

7o+eer' the i$p-t ta o$ the p-rchae o good' propertie or erice re!ated to -ch ;ero,rateda!e ha!! be aai!ab!e a ta credit or re-$d i$ accorda$ce +ith Re. Reg-!atio$ No. 16,200>. %Re.

Reg. No. 16,200>' 1t par.&

%. 0o"cept of 3AT erorati"9. The ta rate i et at ;ero. =he$ app!ied to the ta bae'

-ch rate obio-!y re-!t i$ $o ta chargeab!e agai$t the p-rchaer. The e!!er o -ch tra$actio$

charge $o o-tp-t ta' b-t ca$ c!ai# a re-$d or a ta credit certiicate or the VAT preio-!y charged by-pp!ier. GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#, <. R. No. 1>?66'Cebr-ary 11' 200>I 3$der a ;ero,rati$g che#e' the a!e or echa$ge o a partic-!ar erice i co#p!ete!y reed ro# theVAT' beca-e the e!!er i e$tit!ed to recoer' by +ay o a re-$d or a a$ i$p-t ta credit' the ta that ii$c!-ded i$ the cot o p-rchae attrib-tab!e to the a!e or echa$ge. The ta paid or +ithhe!d i $otded-cted ro# the ta bae. %Commissioner, of Internal Revenue v. American &)press International, Inc.*Philippine Branch#, <. R. No. 1>260F' -$e 2F' 200> citi$g ario- cae&

%C. Situs of ta#atio" of erorated 3AT ser$ices such as facilitati"9 thecollectio" of recei$ables fro! credit card !e!bers situated i" the Philippi"es a"d

pay!e"t to ser$ice establish!e"ts i" the Philippi"es. The p!ace +here the erice ire$dered deter#i$e the -ridictio$ to i#poe the VAT

Peror#ed i$ the Phi!ippi$e' the erice i $eceari!y -bect to it -ridictio$ or the State$eceari!y ha to hae a “-bta$tia! co$$ectio$” to it i$ order to e$orce a ;ero rate. The p!ace opay#e$t i i##ateria! #-ch !e i the p!ace +here the o-tp-t o the erice +i!! be -rther or -!ti#ate!y-ed. Thi i o beca-e the !a+ $either #a/e a -a!iicatio$ $or add a co$ditio$ i$ deter#i$i$g the tait- o a ;ero,rated erice. %Commissioner of Internal Revenue v. American &)press International, Inc.*Philipppine Branch#, <. R. No. 1>260F' -$e 2F' 200>&

8&. esti"atio" pri"ciple u"der the 3AT Syste!. A a ge$era! r-!e' the VAT yte#-e the deti$atio$ pri$cip!e a a bai or the -ridictio$a! reach o the ta.

<ood a$d erice are taed o$!y i$ the co-$try +here they are co$-#ed. Th-' eport are;ero,rated' +hi!e i#port are taed.

Thi i a!o /$o+$ a the “(ro Border "octri$e.”

8'. E#ceptio" to the desti"atio" pri"ciple. The !a+ c!ear!y proide or a$ eceptio$to the deti$atio$ pri$cip!eD that i' or a ;ero perce$t VAT rate or erice that are peror#ed i$ thePhi!ippi$e' Qpaid or i$ acceptab!e oreig$ c-rre$cy a$d acco-$ted or i$ accorda$ce +ith the r-!e a$dreg-!atio$ o the GBSPI.Q

8%. Ratio"ale for erorati"9 of e#ports. The Phi!ippi$e VAT yte# adhere to the (ro

Border "octri$e' accordi$g to +hich' $o VAT ha!! be i#poed to or# part o the cot o good deti$edor co$-#ptio$ o-tide o the territoria! border o the tai$g a-thority. GCommissioner of Internal Revenue v.



(oshi"a Information &2uipment *Phils.#, Inc., <. R.. No. 1>01>' A-g-t F' 200>I The “(ro Border "octri$e” ia!o /$o+$ a the deti$atio$ pri$cip!e. 7e$ce' act-a! or co$tr-ctie eport o gooda$d erice ro# the Phi!ippi$e to a oreig$ co-$try #-t be ;ero,rated or VATD +hi!e' thoe deti$edor -e or co$-#ptio$ +ithi$ the Phi!ippi$e ha!! be i#poed the t+e!e perce$t %12H& VAT.

88. Lerorated sale disti"9uished fro! e#e!pt tra"sactio"s-

a. A ;ero,rated a!e i a taab!e tra$actio$ b-t doe $ot re-!t i$ a$ o-tp-t ta =74)E a$ ee#pttra$actio$ i $ot -bect to the o-tp-t ta. b. The i$p-t ta o$ the p-rchae o a VAT regitered pero$ +ho ha ;ero,rated a!e #ay bea!!o+ed a ta credit or re-$ded =74)E the e!!er i$ a$ ee#pt tra$actio$ i $ot e$tit!ed to a$y i$p-tta o$ hi p-rchae depite the i-a$ce o a VAT i$oice or receipt. c. Pero$ e$gaged i$ tra$actio$ +hich are ;ero rated bei$g -bect to VAT are re-ired toregiter =74)E regitratio$ i optio$a! or VAT,ee#pt pero$.

8:. Lerorated sales by 3ATre9istered perso"s. The o!!o+i$g a!e by VAT,regitered

pero$ ha!! be -bect to ;ero perce$t %0H& rate8 a. Eport a!eD

b. (o$idered eport a!e -$der Eec-tie Order No. 22D c. Coreig$ c-rre$cy de$o#i$ated a!eD a$d

d. Sa!e to pero$ or e$titie dee#ed ta,ee#pt -$der pecia! !a+ or i$ter$atio$a! agree#e$t. %Re. Reg. No. 16,200>' Sec. .106,>' 2$d par.' paraphrai$g -pp!ied&

8<. Sale of 9old to the 0e"tral Ba" co"sidered as e#port sales. A eport a!e' thea!e o go!d to the (e$tra! Ba$/ i ;ero,rated' he$ce' $o ta i chargeab!e to it a p-rchaer. ero rati$gi pri#ari!y i$te$ded to be e$oyed by the e!!er' +hich charge $o o-tp-t VAT b-t ca$ c!ai# a re-$d oor a ta credit certiicate or the i$p-t VAT preio-!y charged to it by -pp!ier. %Commissioner of InternalRevenue v. Manila Mining Corporation, <.R. No. 1>20' A-g-t 1' 200>&

8>. Sales to ecoo"e5 such as PELA5 co"sidered e#portsale. Notab!y' +hi!e a$

eco;o$e i geographica!!y +ithi$ the Phi!ippi$e' it i dee#ed a eparate c-to# territory a$d iregarded i$ !a+ a oreig$ oi!. Sa!e by -pp!ier ro# o-tide the border o the eco;o$e to thieparate c-to# territory are dee#ed a eport a$d treated a eport a!e. Thee a!e are ;ero,rated or -bect to a ta rate o ;ero perce$t. %Commissioner of Internal Revenue v. Se-isui ushi Philippines,

Inc., <. R. No. 1F6@1' -!y 21' 2006 citi$g ario- a-thoritie&

8@. “Ecoo"e”5 defi"ed. A$ E(OONE or a Specia! Eco$o#ic o$e ha bee$ decribed a

J GSIe!ected area +ith high!y dee!oped or +hich hae the pote$tia! to be dee!oped i$to agro,i$d-tria!' i$d-tria!' to-rit' recreatio$a!' co##ercia!' ba$/i$g' i$et#e$t a$d i$a$cia! ce$ter +hoe#ete a$d bo-$d are ied or de!i#ited by Preide$tia! Proc!a#atio$. A$ E(OONE #ay co$tai$ a$yor a!! o the o!!o+i$g8 i$d-tria! etate %4E&' eport procei$g ;o$e %EP&' ree trade ;o$e a$dto-rit9recreatio$a! ce$ter. The $atio$a! territory o the Phi!ippi$e o-tide o the proc!ai#ed border o the E(OONE ha!! be reerred to a the (-to# Territory. GCommissioner of Internal Revenue v. (oshi"aInformation &2uipment *Phils.#, Inc., <. R.. No. 1>01>' A-g-t F' 200>I

8. Lerorated sale of ser$ice5 defi"ed. A ;ero,rated a!e o erice %by a VAT,regiteredpero$& i a taab!e tra$actio$ or VAT p-rpoe' b-t ha!! $ot re-!t i$ a$y o-tp-t ta. 7o+eer' thei$p-t ta o$ p-rchae o good' propertie or erice re!ated to -ch ;ero,rated a!e ha!! be aai!ab!ea ta credit or re-$d i$ accorda$ce +ith Rev. Regs. !o. ?D0GGE. GRe. Reg. No. 16,200>' Sec. Sec..10?,> %a&' +ord i$ ita!ic -pp!ied&

8C. Ser$ice perfor!ed by A!erica" E#press i" facilitati"9 the collectio" ofrecei$ables fro! credit card !e!bers situated i" the Philippi"es a"d pay!e"t toser$ice establish!e"ts i" the Philippi"es i" behalf of its Ho"94o"9 based clie"t issub?ect to 3AT but erorated. Thi i o beca-e it #eet a!! the re-ire#e$t or VAT i#poitio$'



a o!!o+8 a. 4t reg-!ar!y re$der i$ the Phi!ippi$e the erice o aci!itati$g the co!!ectio$ a$d pay#e$t oreceiab!e be!o$gi$g to a oreig$ co#pa$y that i a c!ear!y eparate a$d diti$ct e$tity. b. S-ch erice i co##ercia! i$ $at-reD carried o$ oer a -tai$ed period o ti#eD o$ a ig$iica$tca!e +ith a reao$ab!e degree o re-e$cyD a$d $ot at ra$do#' ort-ito-' or atte$-ated. c. Cor thi erice' it dei$ite!y receie co$ideratio$ i$ oreig$ c-rre$cy that i acco-$ted or i$co$or#ity +ith !a+. d. 4t i $ot a$ e$tity ee#pt -$der a$y o o-r !a+ or i$ter$atio$a! agree#e$t. %Commissioner, ofInternal Revenue v. American &)press International, Inc. *Philippine Branch#, <. R. No. 1>260F' -$e 2F' 200>&

:&. +hile the ser$ice perfor!ed by A!erica" E#press is sub?ect to 3AT it is erorated5 a"d B*R Re$e"ue Re9ulatio"s that alter the le9al reDuire!e"ts for erorati"9are ultra vires a"d i"$alid. The VAT yte# -e the deti$atio$ pri$cip!e +hich poit that thegood a$d erice are taed o$!y i$ the co-$try +here they are co$-#ed' 7o+eer' the !a+ ite! proide or c!ear eceptio$ -$der +hich the -pp!y o erice ha!! be ;ero,rated' a#o$g +hich are the o!!o+i$g8 a. The erice i peror#ed i$ the Phi!ippi$eD b. The erice are +ithi$ the categorie proided or -$der the Ta (odeD a$d c. 4t i paid or i$ acceptab!e oreig$ c-rre$cy o the Ba$g/o Se$tra! $g Pi!ipi$a.

A#erica$ Epre re$der aita$ce to it oreig$ c!ie$t by receii$g the bi!! o ericeetab!ih#e$t !ocated i$ the co-$try a$d or+ardi$g the# to their c!ie$t abroad. The erice areperor#ed or -cce-!!y co#p!eted -po$ e$d to it oreig$ c!ie$t the drat a$d bi!! it ha gatheredro# erice etab!ih#e$t here' 4t erice' hai$g bee$ peror#ed i$ the Phi!ippi$e are thereorea!o co$-#ed i$ the Phi!ippi$e. Th-' it erice are ee#pt ro# the deti$atio$ pri$cip!e a$d are;ero,rated.

The B4R co-!d $ot cha$ge the !a+. GCommissioner, of Internal Revenue v. American &)press International,

Inc. *Philippine Branch#, <. R. No. 1>260F' -$e 2F' 200>I

:'. A forei9" 0o"sortiu! co!posed of B+S0e"!ar5 ;itsui E"9i"eeri"9 a"dShipbuildi"9 (td.5 a"d ;itsui a"d 0o.5 (td.5 which e"tered i"to a co"tract withNAPO0OR for the operatio" a"d !ai"te"a"ce of two power bar9es appoi"ted B+S0e"!ar as its coordi"atio" !a"a9er. B+S0;* was established as the

subco"tractor to perfor! the actual wor i" the Philippi"es. The 0o"sortiu! paidB+S0;* i" acceptable forei9" e#cha"9e a"d accou"ted for i" accorda"ce with therules a"d re9ulatio"s of the BSP. Throu9h a 1ebruary ':5 'CC< ruli"9 the B*R declared that B+S0;* !ay choose tore9ister as a 3AT perso"s sub?ect to 3AT at ero rate. 1or 'CC>5 it filed the proper3AT retur"s showi"9 ero rati"9. O" ece!ber %C5 'CC@5 belie$i"9 that it is co$eredby Re$. Re9s. <C>5 dated 1ebruary %&5 'CC>5 B+S0;* paid '&I output 3AT for theperiod Aprilece!ber 'CC>5 throu9h the 3olu"tary Assess!e"t Pro9ra! F3APG. O" /a"uary @5 'CCC5 B+S0;* was able to obtai" a Ruli"9 fro! the B*Rreco"fir!i"9 that it is sub?ect to 3AT at erorati"9. O" this basis5 B+S0;* appliedfor a refu"d of the output 3AT it paid.

a. *s B+S0;* sub?ect to the '&I 3AT or is it ero rated 7 S3<<ESTE" ANS=ER8 e. B=S(*4 i $ot ;ero rated a$d i -bect to the 10H VAT. 4t ire$deri$g erice or the (o$orti-# +hich i $ot doi$g b-i$e i$ the Phi!ippi$e. ero,rati$g i$dapp!icatio$ o$!y +here the recipie$t o the erice are other pero$ doi$g b-i$e o-tide o thePhi!ippi$e. B=S(*4 proide erice to the (o$orti-# +hich by irt-e o it co$tract +ith NAPO(ORi doi$g b-i$e +ithi$ the Phi!ippi$e. %Commissioner of Internal Revenue v. Burmeister and 1ain

Scandinavian Contractor Mindanao, Inc., <. R. No. 1>20>' a$-ary 22' 200@&

b. 0ould it obtai" a refu"d of the 3AT it paid throu9h the 3AP 7 E#plai". S3<<ESTE" ANS=ER8 e. B=S(*4 i e$tit!ed to re-$d o the 10H o-tp-t VAT it paid the baed



o$ the $o$,retroactiity o the pre-dicia! reocatio$ o the B4R R-!i$g +hich he!d that it: erice are-bect to 0H VAT a$d +hich B=S(*4 i$o/ed i$ app!yi$g or re-$d o the o-tp-t VAT. %Commissionerof Internal Revenue v. Burmeister and 1ain Scandinavian Contractor Mindanao, Inc., supra&

NOTES AN" (O**ENTS8 a. o "ot co"fuse the B+S0;* case with the A!erica" E#press case. A#erica$Epre 4$ter$atio$a!' 4$c. %Phi!ippi$e Bra$ch&I i a VAT,regitered pero$ that aci!itate the co!!ectio$

a$d pay#e$t o receiab!e be!o$gi$g to it "o"reside"t forei9" clie"t GA#erica$ Epre4$ter$atio$a!' 4$c. %7o$g/o$g Bra$ch&I' or +hich it get paid i$ acceptab!e oreig$ c-rre$cy i$+ard!y

re#itted a$d acco-$ted or i$ accorda$ce +ith BSP r-!e a$d reg-!atio$. %Commissioner of InternalRevenue v. Burmeister and 1ain Scandinavian Contractor Mindanao, Inc., <. R. No. 1>20>' a$-ary 22'200@&

:%. +hat are 3ATE#e!pt tra"sactio"s 7 S3<<ESTE" ANS=ER8 The a!e o good orpropertie a$d9or erice a$d the -e or !eae o propertie that i

b. $ot -bect to VAT %o-tp-t ta& a$d c. the e!!er i $ot a!!o+ed a$y ta credit o$ VAT %i$p-t ta& p-rchae. The pero$ #a/i$g the ee#pt a!e o good' propertie or erice ha!! $ot bi!! a$y o-tp-t ta tohi c-to#er beca-e the aid tra$actio$ i $ot -bect to VAT. GRe. Reg. No. 16,200>' Sec. .10F,1 %A&'arra$ge#e$t a$d $-#beri$g -pp!iedI

:8. 3ATe#e!pt tra"sactio"s disti"9uished fro! 3ATe#e!pt e"tities.a. A$ ee#pt tra$actio$' o$ the o$e ha$d' i$o!e good or erice +hich' by

their $at-re' are peciica!!y !ited i$ a$d epre!y ee#pted ro# the VAT -$der the Ta (ode' +itho-tregard to the ta tat- J VAT,ee#pt or $ot J o the party to the tra$actio$. A$ ee#pt party'o$ the other ha$d' i a pero$ or e$tity gra$ted VAT ee#ptio$ -$der the Ta (ode' a pecia! !a+ or a$i$ter$atio$a! agree#e$t to +hich the Phi!ippi$e i a ig$atory' a$d by irt-e o +hich it taab!etra$actio$ beco#e ee#pt ro# VAT. G(o##iio$er o 4$ter$a! Ree$-e . Tohiba 4$or#atio$ E-ip#e$t%Phi!.&' 4$c.' <. R. No. 1>01>' A-g-t F' 200>I

b. A$ ee#pt tra$actio$ ha!! $ot be the -bect o a$y bi!!i$g or o-tp-t VAT b-t it ha!! $ot a!obe a!!o+ed a$y i$p-t ta credit =74)E a$ ee#pt party bei$g ;ero,rated i a!!o+ed to c!ai# i$p-t tacredit.

::. Tra"sactio"s are e#e!pt fro! 3AT. %S-bect to the e!ectio$ by a VAT,regitered pero$ $ot

to be -bect to the a!-e,added ta )#, the o!!o+i$g ha!! be ee#pt ro# VAT8 %A& Sa!e or i#portatio$ o agric-!t-ra! a$d #ari$e ood prod-ct i$ their origi$a! tate' !ietoc/ a$d po-!try

o a /i$d ge$era!!y -ed a' or yie!di$g or prod-ci$g ood or h-#a$ co$-#ptio$D a$d breedi$g toc/a$d ge$etic #ateria! thereor.

)ietoc/ ha!! i$c!-de co+' b-!! a$d ca!e' pig' heep' goat a$d rabbit. Po-!try ha!! i$c!-de o+!'d-c/' geee a$d t-r/ey' )ietoc/ or po-!try doe $ot i$c!-de ighti$g coc/' race hore' ;oo a$i#a!a$d other a$i#a! ge$era!!y co$idered a pet.

*ari$e ood prod-ct ha!! i$c!-de ih a$d cr-tacea$' -ch a' b-t $ot !i#ited to' ee!' tro-t' !obter'hri#p' pra+$' oyter' #-e! a$d c!a#.

*eat' r-it' ih' egetab!e a$d other agric-!t-ra! a$d #ari$e ood Prod-ct c!aiied -$der thiparagraph ha!! be co$idered i$ their origi$a! tate ee$ i they hae -$dergo$e the i#p!e procee opreparatio$ or preeratio$ or the #ar/et' -ch a ree;i$g' dryi$g' a!ti$g' broi!i$g' roati$g' #o/i$g ortrippi$g' i$c!-di$g thoe -i$g ada$ced tech$o!ogica! #ea$ o pac/agi$g' -ch a hri$/ +rappi$g i$

p!atic' ac--# pac/i$g' tetra,pac/' a$d other i#i!ar pac/agi$g #ethod. Po!ihed a$d9or h-/ed rice'cor$ grit' ra+ ca$e -gar a$d #o!ae' ordi$ary a!t' a$d copra ha!! be co$idered i$ their origi$a!tate.

S-gar +hoe co$te$t o -croe by +eight' i$ the dry tate' ha a po!ari#eter readi$g o FF.>o a$d aboeare pre-#ed to be rei$ed -gar.

(a$e -gar prod-ced ro# the o!!o+i$g ha!! be pre-#ed' or i$ter$a! ree$-e p-rpoe' to be rei$ed-gar8

1. prod-ct o a rei$i$g proce'



2. prod-ct o a -gar rei$ery' or

%& prod-ct o a prod-ctio$ !i$e o a -gar #i!! accredited by the B4R to be prod-ci$g -gar+ith po!ari#eter readi$g o FF.>o a$d aboe' a$d or +hich the -eda$i-ed thereor' a$d eriied by theS-gar Reg-!atory Ad#i$itratio$' ide$tiie the a#e to be o a po!ari#eter readi$g o FF.>o a$d aboe. Bagae i $ot i$c!-ded i$ the ee#ptio$ proided or -$der thi ectio$.

%B& Sa!e or i#portatio$ o erti!i;erD eed' eed!i$g a$d i$ger!i$gD ih' pra+$' !ietoc/ a$dpo-!try eed' i$c!-di$g i$gredie$t' +hether !oca!!y prod-ced or i#ported' -ed i$ the #a$-act-re oi$ihed eed %ecept pecia!ty eed or race hore' ighti$g coc/' a-ari-# ih' ;oo a$i#a! a$dother a$i#a! ge$era!!y co$idered a pet&D “Specia!ty eed” reer to $o$,agric-!t-ra! eed or ood or race hore' ighti$g coc/' a-ari-#ih' ;oo a$i#a! a$d other a$i#a! ge$era!!y co$idered a pet. %(& 4#portatio$ o pero$a! a$d ho-eho!d eect be!o$gi$g to the reide$t o the Phi!ippi$eret-r$i$g ro# abroad a$d $o$reide$t citi;e$ co#i$g to reett!e i$ the Phi!ippi$e8 Proided' That -chgood are ee#pt ro# c-to# d-tie -$der the Tari a$d (-to# (ode o the Phi!ippi$eD %"& 4#portatio$ o proeio$a! i$tr-#e$t a$d i#p!e#e$t' +eari$g appare!' do#etic a$i#a!'a$d pero$a! ho-eho!d eect %ecept a$y ehic!e' ee!' aircrat' #achi$ery' other good or -e i$ the#a$-act-re a$d #ercha$die o a$y /i$d i$ co##ercia! -a$tity& be!o$gi$g to pero$ co#i$g to ett!ei$ the Phi!ippi$e' or their o+$ -e a$d $ot or a!e' barter or echa$ge' acco#pa$yi$g -ch pero$' orarrii$g +ithi$ $i$ety %F0& day beore or ater their arria!' -po$ the prod-ctio$ o eide$ce atiactory tothe (o##iio$er o 4$ter$a! Ree$-e' that -ch pero$ are act-a!!y co#i$g to ett!e i$ the Phi!ippi$ea$d that the cha$ge o reide$ce i bo$a ideD %E& Serice -bect to perce$tage ta -$der Tit!e V o the Ta (ode' a e$-#erated be!o+8 %1& Sa!e or !eae o good or propertie or the peror#a$ce o erice o $o$,VAT,regitered

pero$' other tha$ the tra$actio$ #e$tio$ed i$ paragraph %A& to %3& o Sec. 10F %1& o the Ta(ode' the a$$-a! a!e a$d9or receipt o +hich doe $ot eceed the a#o-$t o O$e *i!!io$ Cie7-$dred tho-a$d Peo %P1'>00'000.00&' Proided' That $ot !ater tha$ a$-ary 1' 200F a$deery three %& year thereater' the a#o-$t herei$ tated ha!! be ad-ted to it pree$t a!-e-i$g the (o$-#er Price 4$de' a p-b!ihed by the Natio$a! Statitic Oice %NSO&. %Sec. 116'Ta (ode&

%2& Serice re$dered by do#etic co##o$ carrier by !a$d or the tra$port o pae$ger a$d/eeper o garage. %Sec. 11@&

%& Serice re$dered by i$ter$atio$a! air9hippi$g carrier. %Sec. 11?&

%& Serice re$dered by ra$chie gra$tee o radio a$d9or te!eiio$ broadcati$g +hoe a$$-a!gro receipt o the precedi$g year do $ot eceed Te$ *i!!io$ Peo %P10'000'000.00& a$d byra$chie o ga a$d +ater -ti!itie. %Sec. 11F&

%>& Serice re$dered or oerea dipatch #eage or co$eratio$ origi$ati$g ro# thePhi!ippi$e. %Sc. 120&

%6& Serice re$dered by a$y pero$' co#pa$y or corporatio$ %ecept p-re!y cooperatieco#pa$ie or aociatio$ & doi$g !ie i$-ra$ce b-i$e o a$y ort i$ the Phi!ippi$e. %Sec.12&

%@& Serice re$dered by ire' #ari$e or #ice!!a$eo- i$-ra$ce age$t o oreig$ i$-ra$ceco#pa$ie. %Sec. 12&

%?& Serice o proprietor' !eee or operator o coc/pit' cabaret' $ight or day c!-b' boi$gehibitio$ proeio$a! ba/etba!! ga#e' ai,A!ai a$d race trac/. %Sec. 12>&. a$d

%F& Receipt o$ a!e' barter or echa$ge o hare o toc/ !ited a$d traded thro-gh the !oca!

toc/ echa$ge or thro-gh i$itia! p-b!ic oeri$g. %Sec. 12@& %C& Serice by agric-!t-ra! co$tract gro+er a$d #i!!i$g or other o pa!ay i$to rice' cor$ i$to grita$d -gar ca$e i$to ra+ -garD “Agric-!t-ra! co$tract gro+er” reer to thoe pero$ prod-ci$g or other po-!try' !ietoc/ or other agric-!t-ra! a$d #ari$e ood prod-ct i$ their origi$a! tate. %<& *edica!' de$ta!' hopita! a$d eteri$ary erice ecept thoe re$dered by proeio$a!D )aboratory erice are ee#pted. 4 the hopita! or c!i$ic operate a phar#acy or dr-g tore' thea!e o dr-g a$d #edici$e i -bect to VAT. %7& Ed-catio$a! erice re$dered by priate ed-catio$a! i$tit-tio$' d-!y accredited by the"epart#e$t o Ed-catio$ %"EPE"&' the (o##iio$ o$ 7igher Ed-catio$ %(7E"&' the Tech$ica!

http://www.bir.gov.ph/

http://www.deped.gov.ph/

http://www.ched.gov.ph/

http://www.tesda.gov.ph/

http://www.deped.gov.ph/

http://www.ched.gov.ph/


http://www.bir.gov.ph/



Ed-catio$ A$d S/i!! "ee!op#e$t A-thority %TES"A& a$d thoe re$dered by goer$#e$t ed-catio$a!i$tit-tio$D “Ed-catio$a! erice” ha!! reer to acade#ic' tech$ica! or ocatio$a! ed-catio$ proided by priateed-catio$a! i$tit-tio$ d-!y accredited by the "epE"' the (7E" a$d TES"A a$d thoe re$dered bygoer$#e$t ed-catio$a! i$tit-tio$ a$d it doe $ot i$c!-de e#i$ar' i$,erice trai$i$g' reie+ c!aea$d other i#i!ar erice re$dered by pero$ +ho are $ot accredited by the "epE"' the (7E" a$d9orthe TES"A. %4& Serice re$dered by i$diid-a! p-r-a$t to a$ e#p!oyer,e#p!oyee re!atio$hipD %& Serice re$dered by regio$a! or area head-arter etab!ihed i$ the Phi!ippi$e by#-!ti$atio$a! corporatio$ +hich act a -periory' co##-$icatio$ a$d coordi$ati$g ce$ter or theirai!iate' -bidiarie or bra$che i$ the Aia,Paciic Regio$ a$d do $ot ear$ or derie i$co#e ro# thePhi!ippi$eD %& Tra$actio$ +hich are ee#pt -$der i$ter$atio$a! agree#e$t to +hich the Phi!ippi$e i aig$atory or -$der pecia! !a+' ecept thoe -$der Preide$tia! "ecree No. >2F J Petro!e-# Ep!oratio$(o$ceio$aire -$der the Petro!e-# Act o 1FFD a$dD %)& Sa!e by agric-!t-ra! cooperatie d-!y regitered +ith the (ooperatie "ee!op#e$t A-thority %("A& to their #e#ber a +e!! a a!e o their prod-ce' +hether i$ it origi$a! tate or proceed or#'to $o$,#e#berD their i#portatio$ o direct ar# i$p-t' #achi$erie a$d e-ip#e$t' i$c!-di$g pare partthereo' to be -ed direct!y a$d ec!-ie!y i$ the prod-ctio$ a$d9or procei$g o their prod-ceD

%*& <ro receipt ro# !e$di$g actiitie by credit or #-!ti,p-rpoe cooperatie d-!y regitered

a$d i$ good ta$di$g +ith the (ooperatie "ee!op#e$t A-thorityD %N& Sa!e by $o$,agric-!t-ra!' $o$,e!ectric a$d $o$,credit cooperatie d-!y regitered +ith the(ooperatie "ee!op#e$t A-thority8 Proided' That the hare capita! co$trib-tio$ o each #e#ber doe$ot eceed Citee$ tho-a$d peo %P1>'000& a$d regard!e o the aggregate capita! a$d $et -rp!-ratab!y ditrib-ted a#o$g the #e#berD

4#portatio$ by $o$,agric-!t-ra!' $o$,e!ectric a$d $o$,credit cooperatie o #achi$erie a$de-ip#e$t' i$c!-di$g pare part thereo' to be -ed by the# are -bect to VAT. %O& Eport a!e by pero$ +ho are $ot VAT,regiteredD %P& Sa!e o rea! propertie $ot pri#ari!y he!d or a!e to c-to#er or he!d or !eae i$ the ordi$aryco-re o trade or b-i$e' or rea! property -ti!i;ed or !o+,cot a$d ocia!i;ed ho-i$g a dei$ed byRep-b!ic Act No. @2@F' other+ie /$o+$ a the 3rba$ "ee!op#e$t a$d 7o-i$g Act o 1FF2' a$d otherre!ated !a+' -ch a RA No. @?> a$d RA No. ?@6>' reide$tia! !ot a!-ed at O$e #i!!io$ ie h-$dredtho-a$d peo %P 1'>00'000& a$d be!o+' ho-e a$d !ot' a$d other reide$tia! d+e!!i$g a!-ed at T+o

#i!!io$ ie h-$dred tho-a$d peo %P 2'>00'000& a$d be!o+8 Proided' That $ot !ater tha$ a$-ary 1' 200F a$d eery three %& year thereater' the a#o-$t herei$ tated ha!! be ad-ted to their pree$ta!-e -i$g the (o$-#er Price 4$de' a p-b!ihed by the Natio$a! Statitic Oice %NSO&D

%& )eae o a reide$tia! -$it +ith a #o$th!y re$ta! $ot eceedi$g Te$ tho-a$d peo %P 10'000&Proided' That $ot !ater tha$ a$-ary 1' 200F a$d eery three %& year thereater' the a#o-$t herei$tated ha!! be ad-ted to it pree$t a!-e -i$g the (o$-#er Price 4$de a p-b!ihed by the Natio$a!Statitic Oice %NSO&D %R& Sa!e' i#portatio$' pri$ti$g or p-b!icatio$ o boo/ a$d a$y $e+paper' #aga;i$e' reie+ orb-!!eti$ +hich appear at reg-!ar i$tera! +ith ied price or -bcriptio$ a$d a!e a$d +hich i $otdeoted pri$cipa!!y to the p-b!icatio$ o paid adertie#e$tD %S& Sa!e' i#portatio$ or !eae o pae$ger or cargo ee! a$d aircrat' i$c!-di$g e$gi$e'e-ip#e$t a$d pare part thereo or do#etic or i$ter$atio$a! tra$port operatio$D Proided' that theee#ptio$ ro# VAT o$ the i#portatio$ a$d !oca! p-rchae o pae$ger a$d9or cargo ee! ha!! be

!i#ited to thoe o o$e h-$dred ity %1>0& to$ a$d aboe' i$c!-di$g e$gi$e a$d pare part o aidee!D Proided' -rther' that the ee! be i#ported ha!! co#p!y +ith the age !i#it re-ire#e$t' at theti#e o ac-iitio$ co-$ted ro# the date o the ee!: origi$a! co##iio$i$g' a o!!o+8 %i& orpae$ger a$d9or cargo ee!' the age !i#it i itee$ year %1>& year o!d' %ii& or ta$/er' the age !i#iti te$ %10& year o!d' a$d %iii& Cor high,peed pae$ger car' the age !i#it i ie %>& year o!d' Proided'i$a!!y' that ee#ptio$ ha!! be -bect to the proiio$ o ectio$ o Rep-b!ic Act No. F2F>' other+ie/$o+$ a “The "o#etic Shippi$g "ee!op#e$t Act o 200.” %T& 4#portatio$ o -e!' good a$d -pp!ie by pero$ e$gaged i$ i$ter$atio$a! hippi$g or airtra$port operatio$D Proided' that the aid -e!' good a$d -pp!ie ha!! be -ed ec!-ie!y or ha!!pertai$ to the tra$port o good a$d9or pae$ger ro# a port i$ the Phi!ippi$e direct!y to a oreig$ port


http://www.cda.gov.ph/



http://www.census.gov.ph/












+itho-t toppi$g at a$y other port i$ the Phi!ippi$eD proided' -rther' that i a$y portio$ o -ch -e!'good or -pp!ie i -ed or p-rpoe other tha$ that #e$tio$ed i$ thi paragraph' -ch portio$ o -e!'good a$d -pp!ie ha!! be -bect to 10H VAT %$o+ 12H&D

%3& Serice o ba$/' $o$,ba$/ i$a$cia! i$ter#ediarie peror#i$g -ai,ba$/i$g -$ctio$' a$dother $o$,ba$/ i$a$cia! i$ter#ediarieD a$d

%V& Sa!e or !eae o good or propertie or the peror#a$ce o erice other tha$ the

tra$actio$ #e$tio$ed i$ the precedi$g paragraph' the gro a$$-a! a!e a$d9or receipt do $oteceed the a#o-$t o O$e #i!!io$ ie h-$dred tho-a$d peo %P1'>00'000&8 Proided' That $ot !atertha$ a$-ary 1' 200F a$d eery three %& year thereater' the a#o-$t herei$ tated ha!! be ad-ted toit pree$t a!-e -i$g the (o$-#er Price 4$de a p-b!ihed by the Natio$a! Statitic Oice %NSO&. Cor p-rpoe o the threho!d o P1'>00'000.00' the h-ba$d a$d +ie ha!! be c$idered eparatetapayer. 7o+eer' the aggregatio$ r-!e or each tapayer ha!! app!y. Cor i$ta$ce' i a proeio$a!'aide ro# the practice ohi proeio$' a!o derie ree$-e ro# other !i$e o b-i$e +hich areother+ie -bect to VAT' the a#e ha!! be co#bi$ed or p-rpoe o deter#i$i$g +hether the threho!dha bee$ eceeded. Th-' the VAT,ee#pt a!e ha!! to be ic!-ded i$ deter#i$i$g the threho!d. GN4R(o 1FF@' Sec. 10F %1&' a a#e$ded by R. A. No. F@D +ord i$ ita!ic ro# Re. Reg. No. 16,200>' Sec. .10F,1 %B&'+ord i$ pare$thee -pp!iedI

:<. Ta# to be paid by perso"s e#e!pt fro! 3AT.

a. A$y pero$' +hoe a!e or receipt are ee#pt -$der Sec. 10F %1& %V& o the Ta (ode'%V& Sa!e or !eae o good or propertie or the peror#a$ce o erice other tha$ the

tra$actio$ #e$tio$ed i$ the precedi$g paragraph' the gro a$$-a! a!e a$d9or receipt do$ot eceed the a#o-$t o O$e #i!!io$ ie h-$dred tho-a$d peo %P1'>00'000&8 Proided' That$ot !ater tha$ a$-ary 1' 200F a$d eery three %& year thereater' the a#o-$t herei$ tated ha!! be ad-ted to it pree$t a!-e -i$g the (o$-#er Price 4$de a p-b!ihed by theNatio$a! Statitic Oice %NSO&' ro# the pay#e$t o VAT a$d

b. +ho i $ot a VAT,regitered pero$c. ha!! pay a ta e-ia!e$t to three perce$t %H& o hi gro #o$th!y a!e or receiptDProided' that cooperatie ha!! be ee#pt ro# the three %H& gro receipt ta herei$ i#poed.

%Re. Reg. No. 16,200>' Sec. .116,1' arra$ge#e$t' $-#beri$g a$d +ord i$ ita!ic -pp!ied&

RETRNS AN +*THHO(*N,

'. *"co!e ta# retur"s bei"9 public docu!e"ts' -$ti! co$troerted by co#pete$t eide$ce'are co#pete$t eide$ce' are prima facie correct +ith repect to the e$trie therei$. *Ropali (rading v.!$RC, et al., 2F6 S(RA 0F' 1@&

%. *"di$iduals reDuired to file a" i"co!e ta# retur". a. Eery Ci!ipi$o citi;e$ reidi$g i$ the Phi!ippi$eD b. Eery Ci!ipi$o citi;e$ reidi$g o-tide the Phi!ippi$e o$ hi i$co#e ro# o-rce +ithi$ thePhi!ippi$eD c. Eery a!ie$ reidi$g i$ the Phi!ippi$e o$ i$co#e deried ro# o-rce +ithi$ the Phi!ippi$eD a$d d. Eery $o$reide$t a!ie$ e$gaged i$ trade or b-i$e or i$ the eercie o proeio$ i$ thePhi!ippi$e. GSec. >1 %A& %1&' N4R( o 1FF@I

8. ;arried i"di$iduals who are ear"i"9 purely co!pe"satio" i"co!e allowed tofile separate retur"s.

:. ;arried i"di$iduals5 whether citie"s5 reside"t or "o"reside"t alie"s5 who do"ot deri$e i"co!e purely fro! co!pe"satio" shall file a co"solidated retur" for theta#able year to i"clude the i"co!e of both spouses5 b-t +here it i i#practicab!e or thepo-e to i!e o$e ret-r$' each po-e #ay i!e a eparate ret-r$ o i$co#e b-t the ret-r$ o i!ed ha!!be co$o!idated by the B-rea- or p-rpoe o eriicatio$.” GSectio$ >1 %"& o the N4R( o 1FF@I








<. 0o!putatio" of i"co!e ta# for !arried i"di$iduals whether citie"s5 reside"tor "o"reside"t alie"s5 who do "ot deri$e i"co!e purely fro! co!pe"satio" reDuiredfile a co"solidated retur" for the ta#able year but could "ot do so. Cor #arriedi$diid-a!' the h-ba$d a$d +ie' -bect to $o. 2' supra,' ha!! co#p-te eparate!y their i$diid-a!i$co#e ta baed o$ their repectie tota! taab!e i$co#e8 Provided ' that i a$y i$co#e ca$$ot be

dei$ite!y attrib-ted to or ide$tiied a i$co#e ec!-ie!y ear$ed or rea!i;ed by either o the po-e' thea#e ha!! be diided e-a!!y bet+ee$ the po-e or the p-rpoe o deter#i$i$g their repectietaab!e i$co#e. G2$d to the !at par.' Sec. 2 %A& %2&' N4R( o 1FF@ a a#e$ded by Rep. Act No. F>0I

>. *"di$iduals who are "ot reDuired to file a" i"co!e ta# retur". a. A$ i$diid-a! +hoe gro i$co#e doe $ot eceed hi tota! pero$a! a$d additio$a! ee#ptio$or depe$de$t' Provided, That a citi;e$ o the Phi!ippi$e a$d a$y a!ie$ i$diid-a! e$gaged i$ b-i$eor practice o proeio$ +ithi$ the Phi!ippi$e ha!! i!e a$ i$co#e ta ret-r$ regard!e o the a#o-$t ogro i$co#e GSec. >1 %A& %2&' N4R( o 1FF@I

b. A$ i$diid-a! +ith repect to p-re co#pe$atio$ i$co#e' deried ro# -ch o-rce +ithi$ thePhi!ippi$e' the i$co#e ta o$ +hich ha bee$ correct!y +ithhe!d8 Provided ' That a$ i$diid-a! derii$gco#pe$atio$ co$c-rre$t!y ro# t+o or #ore e#p!oyer at a$y ti#e d-ri$g the taab!e year ha!! i!e a$i$co#e ta ret-r$ GSec. >1 %A& %2&' N4R( o 1FF@' a a#e$ded by Rep. Act No. F>0' paraphrai$g -pp!iedI

c. A$ i$diid-a! +hoe o!e i$co#e ha bee$ -bect to i$a! +ithho!di$g taD d. A #i$i#-# +age ear$er %i a +or/er i$ the priate ector paid the tat-tory #i$i#-# +age' or ia$ e#p!oyee i$ the p-b!ic ector +ith co#pe$atio$ i$co#e o $ot #ore tha$ the tat-tory #i$i#-# +agei$ the $o$,agric-!t-ra! ector +here he9he i aig$ed&' a$ i$diid-a! +ho i ee#pt ro# i$co#e tap-r-a$t to the proiio$ o the Ta (ode a$d other !a+' ge$era! or pecia!. GSec. >1 %A& %2&' N4R( o1FF@ i$ re!atio$ to Sec. 22 %77&' both a a#e$ded by Rep. Act. F>0I

@. ;i"i!u! wa9e ear"ers are e#e!pt fro! i"co!e ta#atio". That #i$i#-# +ageear$er %i a +or/er i$ the priate ector paid the tat-tory #i$i#-# +age' or i a$ e#p!oyee i$ thep-b!ic ector +ith co#pe$atio$ i$co#e o $ot #ore tha$ the tat-tory #i$i#-# +age i$ the $o$,agric-!t-ra! ector +here he9he i aig$ed& ha!! be ee#pt ro# the pay#e$t o i$co#e ta o$ theirtaab!e i$co#e8 Provided ' further ' That the ho!iday pay' oerti#e pay' $ight hit diere$tia! pay a$dha;ard pay receied by -ch #i$i#-# +age ear$er ha!! !i/e+ie be ee#pt ro# i$co#e ta. GSec. >1

%A& %2&' N4R( o 1FF@ i$ re!atio$ to Sec. 22 %77&' both a a#e$ded by Rep. Act. F>0I

. A" i"di$idual who is "ot reDuired to file a" i"co!e ta# retur" !ay"e$ertheless be reDuired to file a" i"for!atio" retur". GSec. >1 %A& %&' N4R( o 1FF@I

C. A corporatio" files its i"co!e ta# retur" a"d pays its i"co!e ta# four F:G ti!esduri"9 a si"9le ta#able year. -arter!y ret-r$ are re-ired to be i!ed or the irt three -arter'the$ a i$a! ad-t#e$t ret-r$ i i!ed coeri$g the tota! taab!e i$co#e or the +ho!e taab!e year' be it ca!e$dar or ica!.

'&. A" i"di$idual ear"i"9 fro! the practice of his professio" or who e"9a9es i"trade or busi"ess files his i"co!e ta# retur" a"d pays his i"co!e ta# four F:G ti!es

duri"9 a si"9le ta#able year . -arter!y ret-r$ are re-ired to be i!ed or the irt three -arter'the$ a$ a$$-a! i$co#e ta ret-r$ i i!ed coeri$g the tota! taab!e i$co#e or the +ho!e o the preio-ca!e$dar year.

''. The purpose of the abo$e four F:G ti!es a year reDuire!e"t is to !aea$ailable sufficie"t fu"ds to !eet the bud9etary reDuire!e"ts5 o$ a -arter!y bai therebyi$creai$g goer$#e$t !i-idity. 4t a!o eae hardhip o$ the part o i$diid-a! +ho are re-ired to#a/e thi o-r ti#e ret-r$. Th-' the tapayer doe $ot hae to raie !arge -# o #o$ey i$ order to paythe ta.



'%. A" i"di$idual ear"i"9 purely co!pe"satio" i"co!e files o"ly o"e a""uali"co!e ta# retur" coeri$g the tota! taab!e co#pe$atio$ i$co#e or the +ho!e o the preio-ca!e$dar year.

'8. "der the withholdi"9 ta# syste!5 ta#es i!posed or prescribed by the N*R0of 'CC@ are to be deducted a"d withheld by the payors fro! pay!e"ts !ade topayees for the for!er to pay directly to the Bureau of *"ter"al Re$e"ue. 4t i a!o /$o+$a co!!ectio$ o the ta at o-rce.

':. A withholdi"9 a9e"t is e#plicitly !ade perso"ally liable u"der the Ta# 0odefor the pay!e"t of the ta# reDuired to be withheld5 i$ order to co#pe! the +ithho!di$g age$t to+ithho!d the ta -$der a$y a$d a!! circ-#ta$ce. 4$ eect' the repo$ibi!ity or the co!!ectio$ o the taa +e!! a the pay#e$t thereo i co$ce$trated -po$ the pero$ oer +ho# the <oer$#e$t ha

-ridictio$. %/ilipinas Synthetic /i"er Corporation v. Court of Appeals, et al., <.R. No. 11?F? W 12@@' October

12' 1FFF& The yte# aci!itate ta co!!ectio$ a$d red-ce ta eaio$.

'<. The two F%G types of withholdi"9 at source are the 'G fi"al withholdi"9 ta#K

a"d %G creditable withholdi"9 ta#.

'>. "der the fi"al withholdi"9 ta# syste! the a!ou"t of i"co!e ta# withheld bythe withholdi"9 a9e"t is co"stituted as a full a"d fi"al pay!e"t of the i"co!e duefro! the payee o" the said i"co!e. G1t e$te$ce' 1t par.' Sec. 2.>@ %A&' Re. Reg. No. 2,F?I

The !iabi!ity or pay#e$t o the ta ret pri#ari!y o$ the payor or the +ithho!di$g age$t.. Th-' i$ caeo hi ai!-re to +ithho!d the ta or i$ cae o -$der +ithho!di$g' the deicie$cy ta ha!! be co!!ected ro#the payor +ithho!di$g age$t. The payee i $ot re-ired to i!e a$ i$co#e ta ret-r$ or the partic-!ari$co#e.

'@. "der the creditable withholdi"9 ta# syste!5 ta#es withheld o" certai"i"co!e pay!e"ts are i"te"ded to eDual or at least appro#i!ate the ta# due fro! the

payee o" the said i"co!e. The i$co#e recipie$t i ti!! re-ired to i!e a$ i$co#e ta ret-r$ a$d9orpay the diere$ce bet+ee$ the ta +ithhe!d a$d the ta d-e o$ the i$co#e. G1t a$d 2$d e$te$ce' Sec.2>@%B&' Re. Reg. No. 2,F?I

'. The two i"ds of creditable withholdi"9 ta#es are %a& tae +ithhe!d o$ i$co#epay#e$t coered by the epa$ded +ithho!di$g taD a$d %b& tae +ithhe!d o$ co#pe$atio$ i$co#e.

'C. Pay!e"ts to the followi"9 are e#e!pt fro! the reDuire!e"t of withholdi"9 or whe" "o withholdi"9 ta#es reDuired-

a. Natio$a! <oer$#e$t a$d it i$tr-#e$ta!itie i$c!-di$g proi$cia!' city' or #-$icipa! goer$#e$tD b. Pero$ e$oyi$g ee#ptio$ ro# pay#e$t o i$co#e tae p-r-a$t to the proiio$ o a$y !a+'ge$era! or pecia!' -ch a b-t $ot !i#ited to the o!!o+i$g8

1& Sa!e o rea! property by a corporatio$ +hich i regitered +ith a$d certiied by the 7)3RB or 73"(( a e$gaged i$ ocia!i;ed ho-i$g proect +here the e!!i$g price o the ho-e a$d !ot oro$!y the !ot doe $ot eceed P1?0'000.00 i$ *etro *a$i!a a$d other high!y -rba$i;ed area a$dP1>0'000.00 i$ other area or -ch ad-ted a#o-$t o e!!i$g price or ocia!i;ed ho-i$g a #ay!ater be deter#i$ed a$d adopted by the 7)3RBD 2& (orporatio$ regitered +ith the Board o 4$et#e$t a$d e$oyi$g ee#ptio$ ro# i$co#e-$der the O#$ib- 4$et#e$t (ode o 1FF@D & (orporatio$ ee#pt ro# i$co#e ta -$der Sec. 0' o the Ta (ode' !i/e the SSS' <S4S'the P(SO' etc. 7o+eer' i$co#e pay#e$t arii$g ro# a$y actiity +hich i co$d-cted or proit



or i$co#e deried ro# rea! or pero$a! property ha!! be -bect to a +ithho!di$g ta. %Sec. >@.>'Re. Reg. No. 2,F?&

%&. 1or ta# a!"esty purposes5 the withholdi"9 a9e"t is "ot a ta#payer . 7e i #adeto pay the ta +here he ai! to +ithho!d a a pe$a!ty a$d $ot beca-e the ta i d-e ro# hi#. %Commissioner of Internal Revenue v. Court of Appeals, et al .' <.R. No. 10?>@6' a$-ary 20' 1FFF' the Anscor case#

PENA(T*ES5 *NTERESTS AN SR0HAR,ES

'. S-rtae or -rcharge' a!o /$o+$ a the cii! pe$a!tie' are the a#o-$t i#poed i$ additio$ tothe ta re-ired. They are i$ the $at-re o pe$a!tie a$d ha!! be co!!ected at the a#e ti#e' i$ the a#e #a$$er' a$d apart o the ta. GSec.2? %A&' N4R( o 1FF@I

%. +hat are the two F%G i"ds of ci$il pe"alties 7 S3<<ESTE" ANS=ER8 a. the 2>H -rcharge or !ate i!i$g or !ate pay#e$t GSec. 2? %A&' N4R( o 1FF@I %a!o /$o+$ a thede!i$-e$cy -rcharge&' a$d

b. the >0H +i!!-! $eg!ect or ra-d -rcharge. GSec. 2? %B&' I"id.I

8. efi"e deficie"cy i"co!e ta#. S3<<ESTE" ANS=ER8 "eicie$cy i$co#e ta i the a#o-$t by +hich the ta i#poed -$der theN4R( o 1FF@ eceed the a#o-$t ho+$ a the ta d-e by the tapayer -po$ hi ret-r$. GSec. >6 %B&%1&' N4R( o 1FF@I

:. eficie"cy i"terest5 defi"ed. The i$teret aeed a$d co!!ected o$ a$y -$paid a#o-$to ta at the rate o 20H per a$$-# or -ch higher rate a #ay be precribed by reg-!atio$' ro# thedate precribed or pay#e$t -$ti! the a#o-$t i -!!y paid. GSec. 2F %A& %B&' N4R( o 1FF@I

<. eli"Due"cy i"terest5 defi"ed. The i$teret aeed a$d co!!ected o$ the -$paida#o-$t -$ti! -!!y paid +here there i ai!-re o$ the part o the tapayer to pay the a#o-$t die o$ a$yret-r$ re-ired to be i!edD or the a#o-$t o the ta d-e or +hich $o ret-r$ i re-iredD or a deicie$cy ta'or a$y -rcharge or i$teret thereo$' o$ the date appeari$g i$ the $otice a$d de#a$d by the(o##iio$er o 4$ter$a! Ree$-e. GSec.2F %c&' N4R( o 1FF@I

>. After resol$i"9 the issues the B*R 0o!!issio"er reduced the assess!e"t. +as it proper to i!pose deli"Due"cy i"terest despite the reductio" of theassess!e"t 7 +hy 7 S3<<ESTE" ANS=ER8 e. The i$te$tio$ o the !a+ i to dico-rage de!ay i$ the pay#e$t o taed-e to the State a$d i$ thi e$e the -rcharge a$d i$teret charged are $ot pe$a! b-t co#pe$atory i$$at-re J they are co#pe$atio$ to the State or the de!ay i$ pay#e$t' or or the co$co#ita$t t-e o the-$d by the tapayer beyo$d the date he i -ppoed to hae paid the# to the State. %Ban- of thePhilippine Islands v. Commissioner of Internal Revenue, <. R. No. 1@002' -!y 2@' 2006&

@. 0o!pro!ise pe"alty i the a#o-$t agreed -po$ bet+ee$ the tapayer a$d the<oer$#e$t to be paid a a pe$a!ty i$ cae o a co#pro#ie.

. As a result of di$er9e"t ruli"9s o" whether it is sub?ect to ta# or "ot5 theta#payer was "ot able to pay his ta#es o" ti!e. *!posed surchar9es a"d i"terestsfor such delay5 the ta#payer "ot i"$oes 9ood faith with the B*R cou"teri"9 by sayi"9that 9ood faith is "ot a $alid defe"se for $iolatio" of a special law. 1urther!ore5 theB*R further raises the defe"se that the 9o$er"!e"t is "ot bou"d by the errors of its



a9e"ts. +ho is correct 7 S3<<ESTE" ANS=ER8 The tapayer i correct. The ett!ed r-!e i that good aith a$d ho$et be!iethat o$e i $ot -bect to ta o$ the bai o preio- i$terpretatio$ o goer$#e$t age$cie ta/ed toi#p!e#e$t the ta' are -icie$t -tiicatio$ to de!ete the i#poitio$ o -rcharge. %Michel . $huillierPanshop, Inc. v. Commissioner of Internal Revenue, <. R. No. 166@?6' Septe#ber 11' 2006&

REPB(*0 A0T NO. ''%<5 0REAT*N, THE 0ORT O1 TA)APPEA(S *N0(*N, /R*S*0T*ON O1 THE 0TA5 AS A;ENE

0ORT O1 TA) APPEA(S5 *N ,ENERA(

'. iscuss the role of the ?udiciary i" ta#atio". S3<<ESTE" ANS=ER8 The ro!e o the -diciary i to be the y#pathetic or igi!a$t co-rt +hich +o-!d chec/ i$-tice or ab-e o the !egi!atiea$d ad#i$itratie age$t o the State i$ their eercie o the po+er o taatio$.

%. +hat is the "ature a"d co!positio" of the 0ourt of Ta# Appeals 7S3<<ESTE" ANS=ER8 The (o-rt o Ta Appea! i the pecia! ta co-rt created -$der Rep-b!ic

Act No. 112>' a a#e$ded' a$d i co#poed o a Preidi$g -tice a$d eight %?& Aociate -tice'orga$i;ed i$to three %& diiio$.

8. +hat are the purposes for the creatio" of the 0ourt of Ta# Appeals 7S3<<ESTE" ANS=ER8

a. To pree$t de!ay i$ the dipoitio$ o ta cae by the the$ (o-rt o Cirt 4$ta$ce %$o+ RT(&' i$ie+ o the bac/!og o cii!' cri#i$a!' a$d cadatra! cae acc-#-!ati$g i$ the doc/et o -ch co-rtD a$d b. To hae a body +ith pecia! /$o+!edge +hich ordi$ary -dge o the the$ (o-rt o Cirt 4$ta$ce%$o+ RT(&' are $ot !i/e!y to poe' th- proidi$g or a$ ade-ate re#edy or a peedy deter#i$atio$o ta cae. %<rsal v. Court of (a) Appeals, et al., 101 Phi!. 20F&

:. /urisdictio" of the 0ourt of Ta# Appeals. “a. E#clusi$e appellate ?urisdictio" to re$iew by appeal5 as herei" pro$ided- 1. "eciio$ o the (o##iio$er o 4$ter$a! Ree$-e i$ cae i$o!i$g dip-ted ae#e$t'

re-$d o i$ter$a! ree$-e tae' ee or other charge' pe$a!tie' i$ re!atio$ thereto' or other #atterarii$g -$der the Natio$a! 4$ter$a! Ree$-e (ode or other !a+ ad#i$itered by the B-rea- o 4$ter$a!Ree$-e:D %"4V4S4ON& 2. 4$actio$ by the (o##iio$er o 4$ter$a! Ree$-e i$ cae i$o!i$g dip-ted ae#e$t're-$d or i$ter$a! ree$-e tae' ee or other charge' pe$a!tie i$ re!atio$ thereto' or other #atterarii$g -$der the Natio$a! 4$ter$a! Ree$-e (ode or other !a+ ad#i$itered by the B-rea- o 4$ter$a!Ree$-e' +here the Natio$a! 4$ter$a! Ree$-e (ode proide a peciic period o actio$' i$ +hich caethe i$actio$ ha!! be dee#ed a de$ia!D %The i$actio$ o$ re-$d i$ t+o year ro# the ti#e ta +a paid. Th-' i the precriptie period o t+o year i abo-t to epire' the tapayer ho-!d i$terpoe a petitio$ or reie+ +ith the (TA J "4V4S4ON& . "eciio$' order or reo!-tio$ o the Regio$a! Tria! (o-rt i$ !oca! ta cae origi$a!!y decided or reo!ed by the# i$ the eercie o their origi$a! or appe!!ate -ridictio$D %4 origi$a! "4V4S4OND iappe!!ate &! BA!C & . "eciio$ o the (o##iio$er o (-to# i$ cae i$o!i$g !iabi!ity or c-to# d-tie' ee orother #o$ey charge' ei;-re' dete$tio$ or re!eae o property aected' i$e' oreit-re or otherpe$a!tie i$ re!atio$ thereto' or other #atter arii$g -$der the (-to# )a+ or other !a+ ad#i$iteredby the B-rea- o (-to#D %"4V4S4ON& >. "eciio$ o the (e$tra! Board o Ae#e$t Appea! i$ the eercie o it appe!!ate -ridictio$oer cae i$o!i$g the ae#e$t a$d taatio$ o rea! property origi$a!!y decided by the proi$cia! orcity board o ae#e$t appea!D %&! BA!C & 6. "eciio$ o the Secretary o Ci$a$ce o$ c-to# cae e!eated to hi# a-to#atica!!y or reie+ro# deciio$ o the (o##iio$er o (-to# +hich are adere to the <oer$#e$t -$der Sectio$21> o the Tari a$d (-to# (odeD %Thi ha reere$ce to oreit-re cae +here the deciio$ i to



re!eae the ei;ed artic!e J "4V4S4ON& @. "eciio$ o the Secretary o Trade a$d 4$d-try' i$ cae o $o$agric-!t-ra! prod-ct' co##odity orartic!e' a$d the Secretary o Agric-!t-re i$ the cae o agric-!t-ra! prod-ct' co##odity or artic!e' i$o!i$gd-#pi$g a$d co-$terai!i$g d-tie -$der Sectio$ 01 a$d 02' repectie!y' o the Tari a$d (-to#(ode' a$d aeg-ard #ea-re -$der Rep-b!ic Act No. ??00' +here either party #ay appea! the deciio$to i#poe or $ot to i#poe aid d-tie. %"4V4S4ON& b. /urisdictio" o$er cases i"$ol$i"9 cri!i"al offe"ses as herei" pro$ided- 1. E#clusi$e ori9i"al ?urisdictio" o$er all cri!i"al cases arii$g ro# io!atio$ o the Natio$a!4$ter$a! Ree$-e (ode or Tari a$d (-to# (ode a$d other !a+ ad#i$itered by the B-rea- o 4$ter$a!Ree$-e or the B-rea- o (-to#8 Provided, hoever, That oe$e or e!o$ie #e$tio$ed i$ thiparagraph +here the pri$cipa! a#o-$t o tae a$d ee' ec!-ie o charge a$d pe$a!tie c!ai#ed' i!e tha$ O$e #i!!io$ peo %P1'000'000.00& or +here there i $o peciied a#o-$t c!ai#ed ha!! be triedby the reg-!ar (o-rt a$d the -ridictio$ o the (TA ha!! be appe!!ate. A$y proiio$ o !a+ or the R-!eo (o-rt to the co$trary $ot+ithta$di$g' the cri#i$a! actio$ a$d the correpo$di$g cii! actio$ or therecoery o cii! !iabi!ity or tae a$d pe$a!tie ha!! at a!! ti#e be i#-!ta$eo-!y i$tit-ted +ith' a$d

oi$t!y deter#i$ed i$ the a#e proceedi$g by the (TA' the i!i$g o the cri#i$a! actio$ bei$g dee#ed to$eceari!y carry +ith it the i!i$g o the cii! actio$' a$d $o right to reere the i!i$g o -ch cii! actio$eparate!y ro# the cii! actio$ +i!! be recog$i;ed. 2. E#clusi$e appellate ?urisdictio" i" cri!i"al offe"ses- a& Oer appea! ro# the -dg#e$t' reo!-tio$ or order o the Regio$a! Tria! (o-rt i$ ta

cae origi$a!!y decided by the#' i$ their repectie territoria! -ridictio$. b& Oer petitio$ or reie+ o the -dg#e$t' reo!-tio$ or order o the Regio$a! Tria! (o-rti$ the eercie o their appe!!ate -ridictio$ oer ta cae origi$a!!y decided by the *etropo!ita$ Tria! (o-rt' *-$icipa! Tria! (o-rt a$d *-$icipa! (irc-it Tria! (o-rt i$ their repectie -ridictio$. c. /urisdictio" o$er ta# collectio" cases- 1. Ec!-ie origi$a! -ridictio$ i$ ta co!!ectio$ cae i$o!i$g i$a! a$d eec-tory ae#e$t ortae' ee' charge a$d pe$a!tie8 Provided, hoever, That co!!ectio$ cae +here the pri$cipa! a#o-$to tae a$d ee' ec!-ie o charge a$d pe$a!tie' c!ai#ed i !e tha$ O$e #i!!io$ peo%P1'000'000& ha!! be tried by the proper *-$icipa! Tria! (o-rt' *etropo!ita$ Tria! (o-rt a$d Regio$a! Tria!(o-rt. 2. Ec!-ie appe!!ate -ridictio$ i$ ta co!!ectio$ cae8 a& Oer appea! ro# -dg#e$t' reo!-tio$' or order o the Regio$a! Tria! (o-rt i$ taco!!ectio$ cae origi$a!!y decided by the#' i$ their repectie territoria! -ridictio$.

b& Oer petitio$ or reie+ o the -dg#e$t' reo!-tio$ or order o the Regio$a! Tria! (o-rti$ the eercie o their appe!!ate -ridictio$ oer ta co!!ectio$ cae origi$a!!y decided by the*etropo!ita$ Tria! (o-rt' *-$icipa! Tria! (o-rt a$d *-$icipa! (irc-it Tria! (o-rt' i$ their repectie

-ridictio$.” %Sec. @' R. A. No. 112>' a a#e$ded by R. A. No. F2?2' e#phai a$d +ord i$ pare$thee-pp!ied&

The petitio" for re$iew to be filed with the 0TA en banc as the !ode for appeali"9 adecisio"5 resolutio"5 or order of the 0TA i$isio"5 u"der Sectio" ' of Republic ActNo. ''%<5 as a!e"ded5 is "ot a totally "ew re!edy5 u"iDue to the 0TA5 with a specialapplicatio" or use therei". To the co$trary' the (TA #ere!y adopt the proced-re or petitio$ orreie+ a$d appea! !o$g etab!ihed a$d practiced i$ other Phi!ippi$e co-rt. Accordi$g!y' doctri$e'pri$cip!e' r-!e' a$d precede$t !aid do+$ i$ -ripr-de$ce by thi (o-rt a regard petitio$ or reie+a$d appea! i$ co-rt o ge$era! -ridictio$ ho-!d !i/e+ie bi$d the (TA' a$d it ca$$ot depart therero#. %Santos v. People, et al, <. R. No. 1@1@6' A-g-t 26' 200?&

<. *t is the Re9io"al Trial 0ourt that has ?urisdictio" to rule upo" theco"stitutio"ality of a ta# law or a re9ulatio" issued by the ta#i"9 authorities. =here+hat i aai!ed i the a!idity or co$tit-tio$a!ity o a !a+' or a r-!e or reg-!atio$ i-ed by thead#i$itratie age$cy i$ the peror#a$ce o it -ai,!egi!atie -$ctio$' the reg-!ar co-rt hae

-ridictio$ to pa -po$ the a#e. The deter#i$atio$ o +hether a peciic r-!e or et o r-!e i-ed bya$ ad#i$itratie age$cy co$trae$e the !a+ or the co$tit-tio$ i +ithi$ the -ridictio$ o the reg-!arco-rt.



4$deed' the (o$tit-tio$ et the po+er o -dicia! reie+ or the po+er to dec!are a !a+' treaty'i$ter$atio$a! or eec-tie agree#e$t' preide$tia! decree' order' i$tr-ctio$' ordi$a$ce' or reg-!atio$ i$the co-rt' i$c!-di$g the regio$a! tria! co-rt. Thi i +ithi$ the cope o -dicia! po+er' +hich i$c!-de thea-thority o the co-rt to deter#i$e i$ a$ appropriate actio$ the a!idity o the act o the po!itica!depart#e$t. -dicia! po+er i$c!-de the d-ty o the co-rt o -tice to ett!e act-a! co$troeriei$o!i$g right +hich are !ega!!y de#a$dab!e a$d e$orceab!e' a$d to deter#i$e +hether or $ot there habee$ a grae ab-e o dicretio$ a#o-$ti$g to !ac/ or ece o -ridictio$ o$ the part o a$y bra$ch ori$tr-#e$ta!ity o the <oer$#e$t. %British American (o"acco v. Camacho et al.' <. R. No. 16>?' A-g-t 20'200? +ith a$ i$tere$or&

NOTES AN" (O**ENTS8 The aboe doctri$e -perede Asia International Auctioneers, Inc., etc et al., .v. Parayno, r., etc.,, et al., <. R. No. 10>' "ece#ber 1?' 200@ +hich r-!ed that it i the (o-rt oTa Appea! that ha -ridictio$ re!atie to #atter i$o!i$g the co$tit-tio$a!ity o reg-!atio$ i-ed bythe B4R. The reao$ +a that thi a!! -$der the co$cept o deciio$ o the B4R (o##iio$er o$ “other #atter” arii$g -$der the proiio$ o !a+ ad#i$itered by the (o##iio$. 4-a$ce o ree$-ereg-!atio$ are a-thori;ed -$der the N4R(. British American (o"acco reered Asia International Auctioneers -po$ the co$cept o the -diciary:“epa$ded po+er.”

>. *"sta"ces where the 0ourt of Ta# Appeals would ha$e ?urisdictio" e$e" if

there is "o decisio" of the 0o!!issio"er of 0usto!s8 a. "eciio$ o the Secretary o Trade a$d 4$d-try or the Secretary o Agric-!t-re i$ a$ti,d-#pi$ga$d co-$terai!i$g d-ty cae are appea!ab!e to the (o-rt o Ta Appea! +ithi$ thirty %0& day ro#receipt o -ch deciio$.

b. 4$ cae o a-to#atic reie+ by the Secretary o Ci$a$ce i$ ei;-re or oreit-re cae +herethe a!-e o the i#portatio$ eceed P> #i!!io$ or +here the deciio$ o the (o!!ector o (-to# +hich-!!y or partia!!y re!eae the hip#e$t ei;ed i air#ed by the (o##iio$er o (-to#. c. 4$ cae o a-to#atic reie+ by the Secretary o Ci$a$ce o a deciio$ o a (o!!ector o (-to#acti$g aorab!y -po$ a c-to# protet.

ASSESS;ENT O1 *NTERNA( RE3ENE TA)ES

'. Outli"e of ta# re!edies of a ta#payer a"d the 9o$er"!e"t relati$e to

ASSESS;ENT of i"ter"al re$e"ue ta#es.a. The tapayer i!e hi ta ret-r$.b. A )etter o A-thority i i-ed a-thori;i$g B4R ea#i$er to a-dit or ea#i$e the ta ret-r$

a$d deter#i$e +hether the -!! a$d co#p!ete tae hae bee$ paid. c. 4 the ea#i$er i atiied that the ta ret-r$ i tr-!y re!ectie o the taab!e tra$actio$ a$d

a!! tae hae bee$ paid' the proce e$d. 7o+eer' i the ea#i$er i $ot atiied that the ta ret-r$ itr-!y re!ectie o the taab!e tra$actio$ a$d that the tae hae $ot bee$ -!!y paid' a Notice o 4$or#a!(o$ere$ce i i-ed i$iti$g the tapayer to ep!ai$ +hy he ho-!d $ot be -bect to additio$a! tae.

d. 4 the tapayer atte$d the i$or#a! co$ere$ce a$d the ea#i$er i atiied +ith theep!a$atio$ o the tapayer' the proce i agai$ e$ded.

4 the tapayer ig$ore the i$itatio$ to the i$or#a! co$ere$ce' or i the ea#i$er i $ot atiied+ith tapayer: ep!a$atio$'' a$d he be!iee that proper tae ho-!d be aeed' the (o##iio$er o4$ter$a! Ree$-e or hi d-!y a-thori;ed repree$tatie ha!! the$ $otiy the tapayer o the i$di$g i$ the

or# o a pre,ae#e$t $otice. The pre,ae#e$t $otice re-ire the tapayer to ep!ai$ +ithi$itee$ %1>& day ro# receipt +hy $o $otice o ae#e$t a$d !etter o de#a$d or additio$a! taeho-!d be directed to hi#.

e. 4 the (o##iio$er i atiied +ith the ep!a$atio$ o the tapayer' the$ the proce iagai$ e$ded.

4 the tapayer ig$ore the pre,ae#e$t $otice by $ot repo$di$g or hi ep!a$atio$ are $otaccepted by the (o##iio$er' the$ a $otice o ae#e$t a$d a !etter o de#a$d i i-ed.

The $otice o ae#e$t #-t be i-ed by the (o##iio$er to the tapayer +ithi$ a period othree %& year ro# the ti#e the ta ret-r$ +a i!ed or ho-!d hae bee$ i!ed +hicheer i the !ater othe t+o ee$t. =here the tapayer did $ot i!e a ta ret-r$ or +here the ta ret-r$ i!ed i a!e or



ra-d-!e$t' the$ the (o##iio$er ha a period o te$ %10& year ro# dicoery o the ai!-re to i!e a taret-r$ or ro# dicoery o the ra-d +ithi$ +hich to i-e a$ ae#e$t $otice. The r-$$i$g o theaboe precriptie period #ay ho+eer be -pe$ded -$der certai$ i$ta$ce.

The $otice o ae#e$t #-t be i-ed +ithi$ the precriptie period a$d #-t co$tai$ theact' !a+ a$d -ripr-de$ce re!ied -po$ by the (o##iio$er. Other+ie it +o-!d $ot be a!id.

. The tapayer ho-!d the$ i!e a$ ad#i$itratie protet by i!i$g a re-et or reco$ideratio$or rei$etigatio$ +ithi$ thirty %0& day ro# receipt o the ae#e$t $otice.

The tapayer co-!d $ot i##ediate!y i$terpoe a$ appea! to the (o-rt o Ta Appea! beca-ethere i $o deciio$ yet o the (o##iio$er that co-!d be the -bect o a reie+.

To be a!id the ad#i$itratie protet #-t be i!ed +ithi$ the precriptie period' #-t ho+ theerror o the B-rea- o 4$ter$a! Ree$-e a$d the correct co#p-tatio$ -pported by a tate#e$t o act'a$d the !a+ a$d -ripr-de$ce re!ied -po$ by the tapayer. There i $o $eed to pay -$der protet. 4 theprotet +a $ot eao$ab!y i!ed the ae#e$t beco#e i$a! a$d co!!ectib!e a$d the B-rea- o 4$ter$a!Ree$-e co-!d -e it ad#i$itratie a$d -dicia! re#edie i$ co!!ecti$g the ta.

g. =ithi$ ity %60& day ro# i!i$g o the protet' a!! re!ea$t -pporti$g doc-#e$t ha!! be-b#itted' other+ie the ae#e$t ha!! beco#e i$a! a$d co!!ectib!e a$d the B4R co-!d -e itad#i$itratie a$d -dicia! re#edie to co!!ect the ta.

O$ce a$ ae#e$t ha beco#e i$a! a$d co!!ectib!e' $ot ee$ the B4R (o##iio$er co-!dcha$ge the a#e. Th-' the tapayer co-!d $ot pay the ta' the$ app!y or a re-$d' a$d i de$ied appea!the a#e to the (o-rt o Ta Appea!.

h. 4 the protet i de$ied i$ +ho!e or i$ part' or i $ot acted -po$ +ithi$ o$e h-$dred eighty%1?0& day ro# the -b#iio$ o doc-#e$t' the tapayer adere!y aected by the deciio$ or i$actio$#ay appea! to the (o-rt o Ta Appea! +ithi$ thirty %0& day ro# receipt o the adere deciio$' orro# the !ape o the o$e h-$dred eighty %1?0,& day period' +ith a$ app!icatio$ or the i-a$ce o a +rito pre!i#i$ary i$-$ctio$ to e$oi$ the B4R ro# co!!ecti$g the ta -bect o the appea!.

4 the tapayer ai! to o appea!' the de$ia! o the (o##iio$er or the i$actio$ o the(o##iio$er +o-!d re-!t to the $otice o ae#e$t beco#i$g i$a! a$d co!!ectib!e a$d the B4R co-!dthe$ -ti!i;e it ad#i$itratie a$d -dicia! re#edie to co!!ect the ta.

i. A deciio$ o a diiio$ o the (o-rt o Ta Appea! adere to the tapayer or thegoer$#e$t #ay be the -bect o a #otio$ or reco$ideratio$ or $e+ tria!' a de$ia! o +hich i appea!ab!e to the (o-rt o Ta Appea! en "anc by #ea$ o a petitio$ or reie+.

The (o-rt o Ta Appea!' ha a period o t+e!e %12& #o$th ro# -b#iio$ o the cae ordeciio$ +ithi$ +hich to decide.

. 4 the deciio$ o the (o-rt o Ta Appea! en "anc air# the de$ia! o the protet by the(o##iio$er or the ae#e$t i$ cae o ai!-re by the (o##iio$er to decide the tapayer #-t i!ea petitio$ or reie+ o$ certiorari +ith the S-pre#e (o-rt +ithi$ itee$ %1>& day ro# $otice o the

-dg#e$t o$ -etio$ o !a+. A$ ete$io$ o thirty %0& day #ay or -tiiab!e reao$ be gra$ted. 4the tapayer doe $ot o appea!' the deciio$ o the (o-rt o Ta Appea! +o-!d beco#e i$a! a$d thiha the eect o #a/i$g the ae#e$t a!o i$a! a$d co!!ectib!e. The B4R co-!d the$ -e itad#i$itratie a$d -dicia! re#edie to co!!ect the ta.

%. The word assess!e"t whe" used i" co""ectio" with ta#atio"5 !ay ha$e !oretha" o"e !ea"i"9. *ore co##o$!y the +ord “ae#e$t” #ea$ the oicia! a!-atio$ o atapayer: property or p-rpoe o taatio$. The aboe dei$itio$ o ae#e$t i$d app!icatio$ -$der tari a$d c-to# taatio$ a +e!! a !oca! goer$#e$t taatio$. Cor real property ta#atio"5 there !ay be a special !ea"i"9 to the burde"s that are i!posed

upo" real properties that ha$e bee" be"efited by a public wors e#pe"diture of a local9o$er"!e"t. 4t i o#eti#e ca!!ed a pecia! ae#e$t or a pecia! !ey. *Commissioner of InternalRevenue v. Pascor Realty and %evelopment Corporation, et al., <.R. No. 12?1>' -$e 2F' 1FFF&

1or i"ter"al re$e"ue ta#atio" assess!e"t as layi"9 a ta#. The -!ti#ate p-rpoe o a$ ae#e$tto -ch a co$$ectio$ i to acertai$ the a#o-$t that each tapayer i to pay. %I"id.&

8. A" assess!e"t is a "otice duly se"t to the ta#payer which is dee!ed !adeo"ly whe" the B*R releases5 !ails or se"ds such "otice to the ta#payer . *Commissioner of

Internal Revenue v. Pascor Realty and %evelopment Corporation, et al., <.R. No. 12?1>' -$e 2F' 1FFF&



:. Selfassessed ta#5 defi"ed. A ta that the tapayer hi#e! aee or co#p-te a$d payto the tai$g a-thority. 4t i a ta that e!,aeed by the tapayer +itho-t the i$tere$tio$ o a$ae#e$t by the ta a-thority to create the ta !iabi!ity. The Ta (ode o!!o+ the pay,a,yo-,i!e yte# o taatio$ -$der +hich the tapayer co#p-te hio+$ ta !iabi!ity' prepare the ret-r$' a$d pay the ta a he i!e the ret-r$. The pay,a,yo-,i!e yte# i

a e!,aei$g ta ret-r$. 4$ter$a! ree$-e tae are e!,aei$g. %"ie$t o . (arpio i$ Philippine !ational 9il Company v. Courtof Appeals, et al., <. R. No. 10FF@6' Apri! 26' 200> a$d co#pa$io$ cae&

A c!ear ea#p!e o a e!,aeed ta i the a$$-a! i$co#e ta' +hich the tapayer hi#e! co#p-tea$d pay +itho-t the i$tere$tio$ o a$y ae#e$t by the B4R. The a$$-a! i$co#e ta beco#e d-ea$d payab!e +itho-t $eed o a$y prior ae#e$t by the B4R. The B4R #ay or #ay $ot i$etigate ora-dit the a$$-a! i$co#e ta ret-r$ i!ed by the tapayer. The tapayer: !iabi!ity or the i$co#e ta doe$ot depe$d o$ +hether or $ot the B4R co$d-ct -ch -be-e$t i$etigatio$ or a-dit. 7o+eer' i the tai$g a-thority i irt re-ired to i$etigate' a$d ater -ch i$etigatio$ to i-e theta ae#e$t that create the ta !iabi!ity' the$ the ta i $o !o$ger e!,aeed. %I"id.&

<. Sec. > FBG of the N*R0 of 'CC@ allows the B*R to !ae or a!e"d a ta# retur"fro! his ow" "owled9e or obtai"ed throu9h testi!o"y or otherwise . Th-' the

(o##iio$er o 4$ter$a! Ree$-e i$etigate ”a$y circ-#ta$ce +hich !ed hi# to be!iee that thetapayer had taab!e i$co#e !arger tha$ that reported. Neceari!y' thi i$-iry +o-!d hae to be o-tideo the boo/ beca-e they -pported the ret-r$ a i!ed. 7e #ay ta/e the +or$ teti#o$y o thetapayer' he #ay ta/e the teti#o$y o third partieD he #ay ea#i$e a$d -bpoe$a' i $eceary'trader: a$d bro/er: acco-$t a$d boo/ a$d the tapayer: boo/ o acco-$t. The (o##iio$er i$ot bo-$d to o!!o+ a$y et o patter$. The eite$ce o -$reported i$co#e #ay be ho+$ by a$ypartic-!ar proo that i aai!ab!e i$ the circ-#ta$ce o the partic-!ar it-atio$. %Commissioner of InternalRevenue v. 'ante) (rading Co., Inc. <. R. No. 16F@>' *arch 1' 200>&

>. ,e"eral rule- +he" the 0o!!issio"er of *"ter"al Re$e"ue !ay rely o"esti!ates. “The r-!e i that i$ the abe$ce o acco-$ti$g record o a tapayer' hi ta !iabi!ity #ay bedeter#i$ed by eti#atio$. The petitio$er %(o##iio$er o 4$ter$a! Ree$-e& i $ot re-ired to co#p-te-ch ta !iabi!itie +ith #athe#atica! eact$e. Approi#atio$ i$ the ca!c-!atio$ o tae d-e i -tiied.

To ho!d other+ie +o-!d be ta$ta#o-$t to ho!di$g that /i!!-! co$cea!#e$t i a$ i$i$cib!e barrier toproo.” %Commissioner of Internal Revenue v. 'ante) (rading Co., Inc. <. R. No. 16F@>' *arch 1' 200>&

“7o+eer' the r-!e doe $ot app!y +here the eti#atio$ i arried at arbitrari!y a$d capricio-!y.” %I"id.&

@. ;ea"i"9 of best e$ide"ce obtai"ableQ -$der Sec. 6 %B&' N4R( o 1FF@. Thi #ea$ that the origi$a! doc-#e$t #-t be prod-ced. 4 it co-!d $ot be prod-ced' eco$daryeide$ce #-t be add-ced. %'ante) (rading Co., Inc. v. Commissioner of Internal Revenue ' (A , <.R. SP No.@1@2' Septe#ber 0' 1FF?&

. The o!!o+i$g are the 9e"eral !ethods de$eloped by the Bureau of *"ter"alRe$e"ue for reco"structi"9 a ta#payer6s i"co!e +here the record do $ot ho+ the tr-ei$co#e or +here $o ret-r$ +a i!ed or +hat +a i!ed +a a a!e a$d ra-d-!e$t ret-r$

%a& Perce$tage #ethodD%b& Net +orth #ethod.D%c& Ba$/ depoit #ethodD%d& (ah epe$dit-re #ethodD%e& 3$it a$d a!-e #ethodD%& Third party i$or#atio$ or acce to record #ethodD%g& S-rei!!a$ce a$d ae#e$t #ethod. %(hapter L444. 4$direct Approach to 4$etigatio$'

7a$dboo/ o$ A-dit Proced-re a$d Tech$i-e J Vo!-#e 4' pp. 6?,@&



C. Third party i"for!atio" or access to records !ethod. The B4R #ay re-ire thirdpartie' p-b!ic or priate to -pp!y i$or#atio$ to the B4R' a$d th-' “obtai$ o$ a reg-!ar bai ro# a$ypero$ other tha$ the pero$ +hoe i$ter$a! ree$-e ta !iabi!ity i -bect to a-dit or i$etigatio$' orro# a$y oice or oicer o the $atio$a! a$d !oca! goer$#e$t' goer$#e$t age$cie a$di$tr-#e$ta!itie i$c!-di$g the Ba$g/o Se$tra! $g Pi!ipi$a a$d goer$#e$t,o+$ed or Jco$tro!!ed

corporatio$' a$y i$or#atio$ -ch a' b-t $ot !i#ited to' cot a$d o!-#e o prod-ctio$' receipt ora!e a$d gro i$co#e o tapayer' a$d the $a#e ' addree' a$d i$a$cia! tate#e$t ocorporatio$' #-t-a! -$d co#pa$ie' i$-ra$ce co#pa$ie' regio$a! operati$g head-arter or#-!ti$atio$a! co#pa$ie' oi$t acco-$t' aociatio$' oi$t e$t-re or co$ortia a$d regiteredpart$erhip' a$d their #e#berD ” GSec. > %B&' N4R( o 1FF@&

'&. A preassess!e"t "otice i a !etter e$t by the B-rea- o 4$ter$a! Ree$-e to a tapayer a/i$g hi# to ep!ai$ +ithi$ a period o itee$ %1>& day ro# receipt +hy he ho-!d $ot be the -bect oa$ ae#e$t $otice. 4t i part o the d-e proce right o a tapayer. A a ge$era! r-!e' the B4R co-!d $ot i-e a$ ae#e$t $otice +itho-t irt i-i$g a pre,ae#e$t$otice beca-e it i part o the d-e proce right o a tapayer to be gie$ $otice i$ the or# o a pre,ae#e$t $otice' a$d or hi# to ep!ai$ +hy he ho-!d $ot be the -bect o a$ ae#e$t $otice.

''. *"sta"ces where a preassess!e"t "otice is "ot reDuired before a "otice ofassess!e"t is se"t to the ta#payer. a. =he$ the i$di$g or a$y deicie$cy ta i the re-!t o #athe#atica! error i$ the co#p-tatio$ o theta a appeari$g o$ the ace o the ret-r$D or b. =he$ a dicrepa$cy ha bee$ deter#i$ed bet+ee$ the ta +ithhe!d a$d the a#o-$t act-a!!yre#itted by the +ithho!di$g age$tD or c. =he$ a tapayer opted to c!ai# a re-$d or ta credit o ece creditab!e +ithho!di$g ta or ataab!e period +a deter#i$ed to hae carried oer a$d a-to#atica!!y app!ied the a#e a#o-$t c!ai#edagai$t the eti#ated ta !iabi!itie or the taab!e -arter or -arter o the -cceedi$g tab!e yearD or d. =he$ the ece ta d-e o$ eciab!e artic!e ha $ot bee$ paidD or e. =he$ a$ artic!e !oca!!y p-rchaed or i#ported by a$ ee#pt pero$' -ch a' b-t $ot !i#ited toehic!e' capita! e-ip#e$t' #achi$erie a$d pare part' ha bee$ o!d' trade or tra$erred to $o$,ee#pt pero$. %Sec. 22?' N4R( o 1FF@&

'%. Prescripti$e periods for !ai"9 assess!e"ts of i"ter"al re$e"ue ta#es.

a. Three %& year ro# the !at day +ithi$ +hich to i!e a ret-r$ or +he$ the ret-r$ +aact-a!!y i!ed' +hicheer i !ater %Sec. 20' N4R( o 1FF@&. The (4R ha three %& year ro# the date oact-a! i!i$g o the ta ret-r$ to ae a $atio$a! i$ter$a! ree$-e ta or to co##e$ce co-rt proceedi$gor the co!!ectio$ thereo +itho-t a$ ae#e$t. GBan- of Philippine Islands */ormerly /ar &ast Ban- and (rust Company# v. Commissioner of Internal Revenue, <. R. No. 1@F2' *arch @' 200?I

b. te$ year ro# dicoery o the ai!-re to i!e the ta ret-r$ or dicoery o a!ity or ra-d i$the ret-r$ GSec. 222 %a&' N4R( o 1FF@G D or

c. +ithi$ the period agreed -po$ bet+ee$ the goer$#e$t a$d the tapayer +here there i a+aier o the precriptie period or ae#e$t %Sec. 222 %b&' N4R( o 1FF@&.

'8. Purpose of period of li!itatio"s i" ta#atio". Cor the p-rpoe o aeg-ardi$g

tapayer ro# a$y -$reao$ab!e ea#i$atio$' i$etigatio$ or ae#e$t' o-r ta !a+ proide a tat-teo !i#itatio$ i$ the co!!ectio$ o tae. GCommissioner of Internal Revenue v. B./. +oodrich Phils, Inc., %no Sime%ar"y International (ire Co., Inc.&, et al., <.R. No. 101@1' Cebr-ary 2' 1FFF' 0 S(RA >6D Philippine ournalists,

Inc. v. Commissioner of Internal Revenue, <. R. No. 162?>2' "ece#ber 16' 200I' a +e!! a their ae#e$t.The !a+ precribi$g a !i#itatio$ o actio$ or the co!!ectio$ o the i$co#e ta i be$eicia! both to the

<oer$#e$t a$d to it citi;e$D to the <oer$#e$t beca-e ta oicer +o-!d be ob!iged to act pro#pt!y i$the #a/i$g o ae#e$t' a$d to citi;e$ beca-e ater the !ape o the period o precriptio$ citi;e$+o-!d hae a ee!i$g o ec-rity agai$t -$cr-p-!o- ta age$t +ho +i!! a!+ay i$d a$ ec-e to i$pectthe boo/ o tapayer' $ot to deter#i$e the !atter: rea! !iabi!ity' b-t to ta/e ada$tage o eery opport-$ity



to #o!et peace-!' !a+,abidi$g citi;e$. =itho-t -ch a !ega! dee$e tapayer +o-!d -rther#ore be-$der ob!igatio$ to a!+ay /eep their boo/ a$d /eep the# ope$ or i$pectio$ -bect to hara#e$t by-$cr-p-!o- ta age$t. The !a+ o$ precriptio$ bei$g a re#edia! #ea-re ho-!d be i$terpreted i$ a +ayco$d-cie to bri$gi$g abo-t the be$eice$t p-rpoe o aordi$g protectio$ to the tapayer +ithi$ theco$te#p!atio$ o the (o##iio$ +hich reco##e$d the approa! o the !a+. GBan- of Philippine Islands*/ormerly /ar &ast Ban- and (rust Company# v. Commissioner of Internal Revenue, <. R. No. 1@F2' *arch @' 200?I

Thi #a$date goer$ the -etio$ o precriptio$ o the goer$#e$t: right to ae i$ter$a! ree$-etae pri#ari!y to aeg-ard the i$teret o tapayer ro# -$reao$ab!e i$etigatio$. Accordi$g!y' thegoer$#e$t #-t ae i$ter$a! ree$-e tae o$ ti#e o a $ot to ete$d i$dei$ite!y the period oae#e$t a$d deprie the tapayer o the a-ra$ce that it +i!! $o !o$ger be -bected to -rther

i$etigatio$ or tae ater the epiratio$ o reao$ab!e period o ti#e. %Commissioner of Internal Revenue

v. /M/ %evelopment Corporation, <. R. No. 16@@6>' -$e 0' 200? citi$g Philippine ournalists, Inc. v.Commissioner of Internal Revenue <.R. No. 162?>2' "ece#ber 16' 200' @ S(RA 21' 22>&

':. "reaso"able i"$esti9atio" co"te!plates cases where the period forassess!e"t e#te"ds i"defi"itely beca-e thi deprie the tapayer o the a-ra$ce that it +i!!$ot !o$ger be -bected to -rther i$etigatio$ or tae ater the epiratio$ o a reao$ab!e period oti#e. %Philippine ournalists, Inc. v. Commissioner of Internal Revenue, <. R. No. 162?>2' "ece#ber 16' 200 +ith$ote to ee Repu"lic v. A"laza, 10? Phi!. 110>. 110?&

)a+ o$ precriptio$ ho-!d be !ibera!!y co$tr-ed i$ aor o the tapayer. Reao$8 or the p-rpoe o aeg-ardi$g tapayer ro# a$ -$reao$ab!e ea#i$atio$' i$etigatio$ or ae#e$t' o-r ta !a+proide a tat-te o !i#itatio$ o$ the co!!ectio$ o tae. Th-' the !a+ o$ precriptio$' bei$g a re#edia!#ea-re' ho-!d be !ibera!!y co$tr-ed i$ order to aord -ch protectio$' A a coro!!ary' the eceptio$ tothe !a+ o$ precriptio$ ho-!d perorce be trict!y co$tr-ed. GPhilippine ournalists, Inc. v. Commissioner ofInternal Revenue, <. R. No. 162?>2' "ece#ber 16' 200 citi$g Commissioner of Internal Revenue v. B./. +oodrichPhils, Inc *no Sime %ar"y International (ire Co., Inc.#,., et al., <.R. No. 101@1' Cebr-ary 2' 1FFF' 0 S(RA >6I

The precriptie period +a precie!y i$te$ded to gie the tapayer peace o #i$d.*Commissioner of Internal Revenue v. B./. +oodrich Phils., Inc., et al .' <.R. No. 101@1' Cebr-ary 2' 1FFF&

'<. A “?eopardy assess!e"t” i a de!i$-e$cy ta ae#e$t +hich +a aeed+itho-t the be$eit o co#p!ete or partia! a-dit by a$ a-thori;ed ree$-e oicer' +ho ha reao$ tobe!iee that the ae#e$t a$d co!!ectio$ o a deicie$cy ta +i!! be eopardi;ed by de!ay beca-e o the

tapayer: ai!-re to co#p!y +ith the a-dit a$d i$etigatio$ re-ire#e$t to pree$t hi boo/ oacco-$t a$d9or perti$e$t record' or to -bta$tiate a!! or a$y o the ded-ctio$' ee#ptio$' or creditc!ai#ed i$ hi ret-r$. GSec. .1 %a&' Re. Reg. No. 6,2000& eopardy ae#e$t i a$ i$dicatio$ o the do-bt-! a!idity o the ae#e$t' he$ce it #ay be-bect to a co#pro#ie. GSec. .1 %a&' Re. Reg. No. 6,2000I

'>. ReDuisites for 1or!al (etter of e!a"d a"d Assess!e"t Notice. Theor#a! !etter o de#a$d a$d ae#e$t $otice ha!! be i-ed by the (o##iio$er or hi d-!ya-thori;ed repree$tatie. The !etter o de#a$d ca!!i$g or pay#e$t o the tapayer: deicie$cy ta ortae ha!! tate the act' the !a+' r-!e a$d reg-!atio$' or -ripr-de$ce o$ +hich the ae#e$t ibaed' other+ie' the or#a! !etter o de#a$d a$d ae#e$t $otice ha!! be oid. The a#e ha!! bee$t to the tapayer o$!y by regitered #ai! or by pero$a! de!iery.

'@. +hat are the reDuire!e"ts for the $alidity of a for!al letter of de!a"d a"d

assess!e"t "otice 7S3<<ESTE" ANS=ER8

a. There #-t hae bee$ preio-!y i-ed a pre,ae#e$t $otice -$ti! eceptedDb. 4t #-t hae bee$ i-ed prior to the precriptie periodD a$dc. The !etter o de#a$d ca!!i$g or pay#e$t o the tapayer: deicie$cy ta or tae ha!! tate

the act' the !a+' r-!e a$d reg-!atio$' or -ripr-de$ce o$ +hich the ae#e$t i baed' other+ie'the or#a! !etter o de#a$d a$d ae#e$t $otice ha!! be oid. %Sec. .1.' Re. Reg. No. 12,FF&



'. +hat are the reaso"s for presu!ptio" of correct"ess of assess!e"ts 7 S3<<ESTE" ANS=ER8

a. )ieb!ood theory b. Pre-#ptio$ o reg-!arity %Commissioner of Internal Revenue v. 'ante) (rading Co., Inc., <' R. No.

16F@>' *arch 1' 200>& i$ the peror#a$ce o p-b!ic -$ctio$. %Commissioner of Internal Revenue v. (uazon,Inc., 1@ S(RA F@&

c. The !i/e!ihood that the tapayer +i!! hae acce to the re!ea$t i$or#atio$GCommissioner of

Internal Revenue, supra citi$g <nited States v. Re)ach, ?2 C.2d 10 %1F@&. The certiorari +a de$ied by the 3$itedState S-pre#e (o-rt o$ Noe#ber 1F' 1F@I

d. The deirabi!ity o bo!teri$g the record,/eepi$g re-ire#e$t o the N4R(. %I"id.&

'C. ,i$e i"sta"ces where pri!a facie correct"ess of a ta# assess!e"t does "otapply. S3<<ESTE" ANS=ER8 The “ prima facie correct$e o a ta ae#e$t doe $ot app!y -po$ proothat a$ ae#e$t i -tter!y +itho-t o-$datio$' #ea$i$g it i arbitrary a$d capricio-. =here the B4Rha co#e o-t +ith a “$a/ed ae#e$t” i.e.' +itho-t a$y o-$datio$ character' the deter#i$atio$ o theta d-e i +itho-t ratio$a! bai.” GCommissioner of Internal Revenue v. 'ante) (rading Co., Inc., <' R. No.

16F@>' *arch 1' 200> citi$g <nited States v. anis, F ). Ed. 2d 106 %1F@6&D 2? 3S %1F@6&I 4$ -ch ait-atio$' “the deter#i$atio$ o the (o##iio$er co$tai$ed i$ a deicie$cy $otice diappear.”GCommissioner of Internal Revenue, supra citi$g a 3.S. (o-rt o Appea! r-!i$g' i$ Clar- and Clar- v. Commissioner

of Internal Revenue, 266 C. 2d 6F? %1F>F&I “7e$ce' the deter#i$atio$ by the (TA #-t ret o$ a!! theeide$ce i$trod-ced a$d it -!ti#ate deter#i$atio$ #-t i$d -pport i$ credib!e eide$ce.” GCommissioner

of Internal Revenue, supraI

%&. +hat are the i"sta"ces that suspe"ds the ru""i"9 of the prescripti$eperiods FStatute of (i!itatio"sG withi" which to !ae a" assess!e"t a"d thebe9i""i"9 of distrai"t or le$y or of a proceedi"9 i" court for the collectio"5 i" respectof a"y ta# deficie"cies7 S3<<ESTE" ANS=ER8 a. =he$ the (o##iio$er i prohibited ro# #a/i$g the ae#e$t' or begi$$i$g ditrai$t' or !eyor proceedi$g i$ co-rt a$d or ity %60& day thereaterD b. =he$ the tapayer re-et or a$d i gra$ted a rei$etigatio$ by the co##iio$erD

c. =he$ the tapayer co-!d $ot be !ocated i$ the addre gie$ by hi# i$ the ret-r$ i!ed -po$ +hichthe ta i bei$g aeed or co!!ectedD d. =he$ the +arra$t o ditrai$t a$d !ey i d-!y ered -po$ the tapayer' hi a-thori;edrepree$tatie' or a #e#ber o hi ho-eho!d +ith -icie$t dicretio$' a$d $o property co-!d be !ocatedDa$d e. =he$ the tapayer i o-t o the Phi!ippi$e. NOTES AN" (O**ENTS8 The ho!di$g i$ Commissioner of Internal Revenue v. Court of Appeals, et al., <.R. No. 11>@12'Cebr-ary 2>' 1FFF %(ar$atio$ cae& that the +aier o the period or ae#e$t #-t be i$ +riti$g a$dhae the +ritte$ co$e$t o the B4R (o##iio$er i ti!! doctri$a! beca-e o the proiio$ o Sec. 22'N4R( o 1FF@ +hich proide or the -pe$io$ o the precriptie period8

%'. "der R;O No. %&C&5 which i!ple!e"ts Sectio"s %&8 a"d %%% FbG5 the

followi"9 procedures should be followed for a $alid wai$er of the prescripti$e periodfor a" assess!e"t8 a. The +aier #-t be i$ the proper or#Db. The +aier ha!! be ig$ed by the tapayer hi#e! or hi d-!y a-thori;ed repree$tatie. 4$ thecae o a corporatio$' the +aier #-t be ig$ed by a$y o it repo$ib!e oicia!. Soo$ aterthe +aier i ig$ed by the tapayer' the (o##iio$er o 4$ter$a! Ree$-e or the ree$-e oicia!a-thori;ed by hi#' a herei$ater proided' ha!! ig$ the +aier i$dicati$g that the B-rea- ha accepteda$d agreed to the +aier. The date of such accepta"ce by the Bureau should be i"dicated. Both thedate o eec-tio$ by the tapayer a$d date o accepta$ce by the B-rea- ho-!d be beore the epiratio$o the period o precriptio$ or beore the !ape o the period agreed -po$ i$ cae a -be-e$t





repree$tatie i$ repo$e to the re-et or rei$etigatio$. GBan- of Philippine Islands */ormerly /ar &astBan- and (rust Company# v. Commissioner of Internal Revenue, <. R. No. 1@F2' *arch @' 200?I

PROTEST*N, *NTERNA( RE3ENE TA) ASSESS;ENTS

'. +hat is the presu!ptio" that flows fro! a ta#payer6s failure to protest a"

assess!e"t 7 S3<<ESTE" ANS=ER8 “Ta ae#e$t by ta ea#i$er are pre-#ed correct a$d #ade i$

good aith. The tapayer ha the d-ty to proe other+ie. 4$ the abe$ce o proo o a$y irreg-!aritie i$the peror#a$ce o d-tie' a$ ae#e$t d-!y #ade by a B-rea- o 4$ter$a! Ree$-e ea#i$er a$dapproed by hi -perior oicer +i!! $ot be dit-rbed. A!! pre-#ptio$ are i$ aor o the correct$e ota ae#e$t.” %Commissioner of Internal Revenue v. Ban- of Philippine Islands., <' R. No. 1062' Apri! 1@'200@ citi$g Sy Po v. Court of Appeals, <. R. No. ),?16' 1? A-g-t 1F??' 16 S(RA >2' >0' citatio$ o#itted&

%. +hat are the two ways of protesti"9 a" assess!e"t "otice for a" i"ter"alre$e"ue ta# 7 Alter"ati$ely5 what are the two types of protests 7 E#plai" briefly. S3<<ESTE" ANS=ER8 a. Re-et or reco$ideratio$ +hich reer to a p!ea or re,ea!-atio$ o a$ ae#e$t o$ the baio eiti$g record +itho-t $eed o additio$a! eide$ce. 4t #ay i$o!e both a -etio$ o act or o !a+ or

both. b. Re-et or rei$etigatio$ +hich reer to a p!ea or re,ea!-atio$ o a$ ae#e$t o$ the baio $e+!y,dicoered eide$ce or additio$a! eide$ce that a tapayer i$te$d to pree$t i$ thei$etigatio$. 4t #ay a!o i$o!e a -etio$ o act or !a+ or both. %Commissioner of Internal Revenue v.Philippine +lo"al Communication, Inc., <. R. No. 16@16' October 1' 2006 citi$g Re. Reg. No. 12,?>&

8. +hat is that type of protest that suspe"ds the ru""i"9 of the statute ofli!itatio"s for the be9i""i"9 of distrai"t or le$y or a proceedi"9 i" court for collectio"7 +hy 7 S3<<ESTE" ANS=ER8 4t i that type o protet “+he$ the tapayer re-et or a rei$etigatio$+hich i gra$ted by the (o##iio$er” %Sec. 22' N4R( o 1FF@&' that -pe$d the r-$$i$g o thetat-te o !i#itatio$ or co!!ectio$ o the ta. %Commissioner of Internal Revenue v. Philippine +lo"al

Communication, Inc., <. R. No. 16@16' October 1' 2006 citi$g Sec. 2@1' $o+ Sec. 22' N4R( o 1FF@& =he$ atapayer de#a$d a rei$etigatio$' the ti#e e#p!oyed i$ rei$etigatio$ ho-!d be ded-cted ro# thetota! period o !i#itatio$. GCommissioner of Internal Revenue, supra citi$g Repu"lic v. $opez, 11@ Phi!. >@>' >@?D @S(RA >66' >6?,>6F %1F6&I

3$do-bted!y' a rei$etigatio$' +hich e$tai! the receptio$ a$d ea!-atio$ o additio$a! eide$ce' +i!!ta/e #ore ti#e tha$ a reco$ideratio$ o a ta ae#e$t +hich +i!! be !i#ited to the eide$ce a!ready atha$dD thi -tiie +hy the or#er ca$ -pe$d the r-$$i$g o the tat-te o !i#itatio$ o$ co!!ectio$ o theaeed ta' +hi!e the !atter ca$$ot. %Commissioner of Internal Revenue v. Philippine +lo"al Communication,Inc., <. R. No. 16@16' October 1' 2006 citi$g Ban- of Philippine Islands v. Commissioner of Internal Revenue, <.R. No. 1F@6' 1@ October 200>' @ S(RA 20>' 20,21&

:. +hat are the reDuire!e"ts for the $alidity of a ta#payer6s protest 7 S3<<ESTE" ANS=ER8 a. 4t #-t be i!ed +ithi$ the reg!e#e$tary period o thirty %0& day ro# receipt o the $otice o

ae#e$t. b. The tapayer #-t $ot o$!y ho+ the error o the B-rea- o 4$ter$a! Ree$-e b-t a!o thecorrect co#p-tatio$ thro-gh

1& A tate#e$t o the act' the app!icab!e !a+' r-!e a$d reg-!atio$' or -ripr-de$ce o$+hich the tapayer: protet i baed'

2& 4 there are eera! i-e i$o!ed i$ the dip-ted ae#e$t a$d the tapayer ai! totate the act' the app!icab!e !a+' r-!e a$d reg-!atio$' or -ripr-de$ce i$ -pport o hi protetagai$t o#e o the eera! i-e o$ +hich the ae#e$t i baed' the a#e ha!! be



co$idered -$dip-ted i-e or i-e' i$ +hich cae' the tapayer ha!! be re-ired to pay thecorrepo$di$g deicie$cy ta or tae attrib-tab!e thereto. %Sec. .1.>' Re. Reg. 12,FF&

c. =ithi$ ity %60& day ro# i!i$g o the protet' the tapayer ha!! -b#it a!! re!ea$t -pporti$gdoc-#e$t. Gth par.' Sec. 22? %e&' N4R( o 1FF@I

<. “Rele$a"t supporti"9 docu!e"ts5” defi"ed. The ter# “re!ea$t -pporti$g doc-#e$t”

ho-!d be -$dertood a thoe doc-#e$t $eceary to -pport the !ega! bai i$ dip-ti$g a taae#e$t a deter#i$ed by the tapayer. The B4R ca$ o$!y i$or# the tapayer to -b#it additio$a!doc-#e$t.

The B4R ca$$ot de#a$d +hat type o -pporti$g doc-#e$t ho-!d be -b#itted. Other+ie' atapayer +i!! be at the #ercy o the B4R' +hich #ay re-ire the prod-ctio$ o doc-#e$t that a tapayerca$$ot -b#it. %Commissioner of Internal Revenue v. /irst &)press Panshop Company, Inc., <. R. 1@20>,6'-$e 16' 200F&

/*0*A( RE;E*ES *N3O(3*N, PROTESTE ASSESS;ENTS

'. Acts of B*R 0o!!issio"er that !ay be co"sidered as de"ial of a protest whichser$e as basis for appeal to the 0ourt of Ta# Appeals. a. Ci!i$g by the B4R o a cii! -it or co!!ectio$ o the deicie$cy ta i co$idered a de$ia! o there-et or reco$ideratio$. %Commissioner of Internal Revenue v. <nion Shipping Corporation, 1?> S(RA >@&

b. A$ i$dicatio$ to the tapayer by the (o##iio$er “i$ c!ear a$d -$e-ioca! !a$g-age” o hi i$a!de$ia! $ot the i-a$ce o the +arra$t o ditrai$t a$d !ey. =hat i the -bect o the appea! i the i$a!deciio$ $ot the +arra$t o ditrai$t. *I"id.#

c. A B4R de#a$d !etter e$t to the tapayer ater hi protet o the ae#e$t $otice i co$idereda the i$a! deciio$ o the (o##iio$er o$ the protet. *Surigao &lectric Co., Inc. v. Court of (a) Appeals, etal., >@ S(RA >2&

d. A !etter o the B4R (o##iio$er reiterati$g to a tapayer hi preio- de#a$d to pay a$ae#e$t i co$idered a de$ia! o the re-et or reco$ideratio$ or protet a$d i appea!ab!e to the(o-rt o Ta Appea!. *Commissioner v. Ayala Securities Corporation, @0 S(RA 20&

e. Ci$a! $otice beore ei;-re co$idered a co##iio$er: deciio$ o tapayer: re-et orreco$ideratio$ +ho receied $o other repo$e. Commissioner of Internal Revenue v. Isa"ela CulturalCorporation' <.R. No. 1>210' -!y 11' 2001 he!d that $ot o$!y i the Notice the o$!y repo$e receied8

it co$te$t a$d te$or -pport the theory that it +a the (4R: i$a! act regardi$g the re-et orreco$ideratio$. The ery tit!e epre!y i$dicated that it +a a final $otice prior to ei;-re o property. The !etter ite! c!ear!y tated that the tapayer +a bei$g gie$ “thi )AST OPPORT3N4T” to payDother+ie' it propertie +o-!d be -bected to ditrai$t a$d !ey.

%. The ta#payer seaso"ably protested the assess!e"t issued by the0o!!issio"er of *"ter"al Re$e"ue. uri"9 the pe"de"cy of the protest the 0*Rissued a warra"t of distrai"t a"d le$y to collect the ta#es sub?ect of the protest.

As cou"sel what ad$ice shall you 9i$e the ta#payer. E#plai" briefly your a"swer. S3<<ESTE" ANS=ER8 The tapayer ho-!d appea!' by +ay o a petitio$ or reie+' to the (o-rt oTa Appea! $ot o$ the gro-$d o the de$ia! o the protet b-t o$ other #atter arii$g -$der the proiio$o the Natio$a! 4$ter$a! Ree$-e (ode. The act-a! i-a$ce o a +arra$t o ditrai$t a$d !ey i$ certai$cae ca$$ot be co$idered a i$a! deciio$ o$ a dip-ted ae#e$t.

To be a a!id deciio$ o$ a dip-ted ae#e$t' the deciio$ o the (o##iio$er or hi d-!ya-thori;ed repree$tatie ha!! %a& tate the act' the app!icab!e !a+' r-!e a$d reg-!atio$' or

-ripr-de$ce o$ +hich -ch deciio$ i baed' other+ie' the deciio$ ha!! be oid' i$ +hich cae thea#e ha!! $ot be co$idered a deciio$ o$ the dip-ted ae#e$tD a$d %b& that the a#e i hi i$a!deciio$. %Sec. .1.6' Re. Reg. 12,FF& Thee co$ditio$ are $ot co#p!ied +ith by the #ere i-a$ce o a +arra$t o ditrai$t a$d !ey. *Commissioner of Internal Revenue v. <nion Shipping Corp., 1?> S(RA >@ #

C-rther#ore' a #otio$ or the -pe$io$ o the co!!ectio$ o the ta #ay be i!ed together +ith thepetitio$ or reie+ %Sec. ' R-!e 10' RR(TA eectie "ece#ber 1>' 200>& beca-e the co!!ectio$ o the ta #ay

eopardi;e the i$teret o the tapayer.



8. As a 9e"eral rule5 there !ust always be a decisio" of the 0o!!issio"er of*"ter"al Re$e"ue or 0o!!issio"er of 0usto!s before the 0ourt of Ta# Appeals5would ha$e ?urisdictio". 4 there i $o -ch deciio$' the petitio$ +o-!d be di#ied or !ac/ o

-ridictio$ -$!e the cae a!! -$der a$y o the o!!o+i$g eceptio$.

:. *"sta"ces where the 0ourt of Ta# Appeals would ha$e ?urisdictio" e$e" ifthere is "o decisio" yet by the 0o!!issio"er of *"ter"al Re$e"ue-

a. =here the (o##iio$er ha $ot acted o$ the dip-ted ae#e$t ater a period o 1?0day ro# -b#iio$ o co#p!ete -pporti$g doc-#e$t' the tapayer ha a period o 0 day ro# theepiratio$ o the 1?0 day period +ithi$ +hich to appea! to the (o-rt o Ta Appea!. %!at par.' Sec. 22? %e&'N4R( o 1FF@; Commissioner of Internal Revenue v. Isa"ela Cultural Corporation, <.R. No. 1>210' -!y 11' 2001&

b. =here the (o##iio$er ha $ot acted o$ a$ app!icatio$ or re-$d or credit a$d the t+o yearperiod ro# the ti#e o pay#e$t i abo-t to epire' the tapayer ha to i!e hi appea! +ith the (o-rt oTa Appea! beore the epiratio$ o t+o year ro# the ti#e the ta +a paid.

4t i dihearte$i$g e$o-gh to a tapayer to be /ept +aiti$g or a$ i$dei$ite period or the r-!i$g'. 4t +o-!d #a/e #atter #ore eaperati$g or the tapayer i the door o -tice +o-!d be c!oed or -cha re!ie -$ti! ater the (o##iio$er' +o-!d hae' at hi pero$a! co$e$ie$ce' gie$ hi go ig$a!. *Commissioner of Customs, et al, v. Court of (a) Appeals, et al., <.R. No. ?261?' *arch 16' 1F?F' -$rep.&

<. The characteristic of a B*R de"ial of a protest such as would e"able theta#payer to appeal the sa!e to the 0ourt of Ta# Appeals. The (o##iio$er o 4$ter$a!Ree$-e ho-!d a!+ay i$dicate to the tapayer i$ c!ear a$d -$e-ioca! !a$g-age +he$eer hi actio$o$ a$ ae#e$t -etio$ed by a tapayer co$tit-te hi i$a! deter#i$atio$ o$ the dip-tedae#e$t.

O$ the bai o hi tate#e$t i$d-bitab!y ho+i$g that the (o##iio$er: co##-$icated actio$ i hii$a! deciio$ o$ the co$teted ae#e$t' the aggrieed tapayer +o-!d the$ be ab!e to ta/e reco-reto the ta co-rt at the opport-$e ti#e. =itho-t $eed!e diic-!ty' the tapayer +o-!d be ab!e todeter#i$e +he$ hi right to appea! to the ta co-rt accr-e. %Commissioner of Internal Revenue v. Ban- of thePhilippines Islands, <. R. No. 1062' Apri! 1@' 200@&

0O((E0T*ON O1 *NTERNA( RE3ENE TA)ES

'. ,e"eral rule- 0ollectio" of ta#es is i!prescriptible. =hi!e thi #ay be o' tat-te#ay proide or period o precriptio$'

%. +hy is the collectio" of ta#es i!prescriptible 7 S3<<ESTE" ANS=ER8 a. A a ge$era! r-!e' ree$-e !a+ are $ot i$te$ded to be !ibera!!y co$tr-ed' a$d ee#ptio$ are $otgie$ retroactie app!icatio$' co$ideri$g that tae are the !ieb!ood o the goer$#e$t a$d i$ 7o!#e:#e#orab!e #etaphor' the price +e pay or cii!i;atio$' ta !a+ #-t be aith-!!y a$d trict!yi#p!e#e$ted. %Commissioner of Internal Revenue v. Acosta, etc.,<. R. No. 1>06?' A-g-t ' 200@& 7o+eer'

tat-te #ay proide or precriptie period or the co!!ectio$ o partic-!ar /i$d o tae. b. Ta !a+' -$!i/e re#edia! !a+' are $ot to be app!ied retroactie!y. Ree$-e !a+ are -bta$tie

!a+ a$d their app!icatio$ #-t $ot be e-ated +ith re#edia! !a+. % Acosta, supra#

8. +hat is the prescripti$e period for collecti"9 i"ter"al re$e"ue ta#es 7 S3<<ESTE" ANS=ER8 There are o-r %& precriptie period or the co!!ectio$ o a$ i$ter$a!ree$-e ta8 a. (o!!ectio$ -po$ a a!e or ra-d-!e$t ret-r$ or $o ret-r$ +itho-t ae#e$t. 4$ cae o a a!e orra-d-!e$t ret-r$ +ith the i$te$t to eade ta or o ai!-re to i!e a ret-r$' “a proceedi$g i$ co-rt or theco!!ectio$ o -ch ta #ay be i!ed +itho-t ae#e$t' at a$y ti#e +ithi$ te$ %10& year ater thedicoery o the a!ity' ra-d or o#iio$.” GSec. 222 %a&' N4R( o 1FF@I



b. (o!!ectio$ -po$ a a!e or ra-d-!e$t ret-r$ or $o ret-r$ +ith ae#e$t. A$y i$ter$a! ree$-e ta+hich ha bee$ aeed %beca-e the ret-r$ i a!e or ra-d-!e$t +ith i$te$t to eade ta or o ai!-re toai! a ret-r$&' +ithi$ a period o te$ %10& year ro# dicoery o the a!ity' ra-d or o#iio$ “!ay becollected by distrai"t or le$y or by a proceedi"9 i" court withi" fi$e F<G years followi"9 theassess!e"t of the ta#.” GSec. 222 %c&' i$ re!atio$ to Sec. 222 %a& N4R( o 1FF@' e#phai -pp!iedI

c. (o!!ectio$ -po$ a$ ete$ded ae#e$t. =here a ta ha bee$ aeed +ith the period agreed-po$ bet+ee$ the (o##iio$er a$d the tapayer i$ +riti$g %+hich ho-!d i$itia!!y be +ithi$ three %&year ro# the ti#e the ret-r$ +a i!ed or ho-!d hae bee$ i!ed&' or a$y ete$io$ beore theepiratio$ o the period agreed -po$' the ta# “!ay be collected by distrai"t or le$y or by aproceedi"9 i" court withi" the period a9reed upo" i" writi"9 before the e#piratio" of the fi$e F<Gyear period. The period o agreed -po$ #ay be ete$ded by -be-e$t +ritte$ agree#e$t #adebeore the epiratio$ o the period preio-!y agreed -po$.” GSec. 222 %d&' i$ re!atio$ to Sec. 222 %b& a$d 20'N4R( o 1FF@' e#phai -pp!iedI

d. (o!!ectio$ -po$ a ret-r$ that i $ot a!e or ra-d-!e$t' or +here the ae#e$t i $ot a$ ete$dedae#e$t. “Ecept a proided i$ Sectio$ 222' i$ter$a! ree$-e tae ha!! be aeed +ithi$ three%& year ater the !at day precribed by !a+ or the i!i$g o the ret-r$' a$d "o proceedi"9 i" courtwithout assess!e"t for the collectio" of such ta#es shall be be9u" after the e#piratio" of suchperiodD Proided' That i$ cae +here a ret-r$ i i!ed beyo$d the period precribed by !a+' the three %&year period ha!! be co#p-ted ro# the day the ret-r$ +a i!ed. Cor p-rpoe o thi Sectio$' a ret-r$i!ed beore the !at day precribed by !a+ or the i!i$g thereo ha!! be co$idered i!ed o$ -ch !at day.”

%Sec. 20' N4R( o 1FF@' e#phai -pp!ied& =he$ the B4R a!id!y i-e a$ ae#e$t +ithi$ the three %&,year period' it ha a$other three %&year +ithi$ +hich to co!!ect the ta d-e by ditrai$t' !ey' or co-rt proceedi$g. The ae#e$t o the tai dee#ed #ade a$d the three %&,year period or co!!ectio$ o the aeed ta begi$ to r-$ o$ the datethe ae#e$t $otice had bee$ re!eaed' #ai!ed or e$t to the tapayer. GBan- of Philippine Islands

*/ormerly /ar &ast Ban- and (rust Company# v. Commissioner of Internal Revenue, <. R. No. 1@F2' *arch @'200? citi$g BPI v. Commissioner of Internal Revenue' <.R. No. 1F@6' 1@ October 200>' @ S(RA 20>' 222,22I

NOTES AN" (O**ENTS8 a. Both the for!er Sec. %>C5 N*R0 of 'C@@ a"d Sec.%%% of N*R0 of 'CC@ do "ot refer to a“re9ular retur".” 4t i c!ear that i$ e$acti$g Sec. 222' e$tit!ed “Eceptio$ a to the period o !i#itatio$ o ae#e$t a$d co!!ectio$ o tae'” the N4R( o 1FF@ ha e!i#i$ated -b,paragraph c o the or#erSec. 26F o the N4R(' a!o e$tit!ed “Eceptio$ a to the period o !i#itatio$ o ae#e$t a$d co!!ectio$o tae.” Said Sec. 26F %c&' read “A$y i$ter$a! ree$-e ta +hich ha bee$ aeed +ithi$ the period

o !i#itatio$ aboe,precribed #ay be co!!ected by ditrai$t or !ey or by a proceedi$g i$ co-rt +ithi$ threeyear o!!o+i$g the ae#e$t o the ta.” A per-a! o Sec. 222 o the N4R( i c!ear that it coer o$!y three ce$ario o$!y. 1& No ae#e$t

+a #ade -po$ a a!e or ra-d-!e$t ret-r$ or o#iio$ to i!e a ret-r$D 2& a$ ae#e$t +a #ade-po$ a a!e or ra-d-!e$t ret-r$ or o#iio$ to i!e a ret-r$D a$d & a$ ete$ded ae#e$t i-ed+ithi$ a period agreed -po$ by the (o##iio$er a$d the tapayer. The a#e ce$ario are thoe reerred to i$ the or#er Sec. 26F +hich proided or a precriptie period or co!!ectio$ o three %& year. 4t i c!ear thereore that $either Sec. 222 $or the or#er Sec. 26F proide or a$ i$ta$ce +here theae#e$t +a #ade -po$ a “reg-!ar ret-r$” or o$e that i $ot a!e or ra-d-!e$t' or that there +a a$agree#e$t to ete$d the period or ae#e$t. Reort ho-!d thereore be #ade to the three %& year period reerred to i$ Sec. 20 o the N4R( o1FF@ +hich read' “Ecept a proided i$ Sectio$ 222' i$ter$a! ree$-e tae ha!! be aeed +ithi$three %& year ater the !at day precribed by !a+ or the i!i$g o the ret-r$' a$d "o proceedi"9 i" courtwithout assess!e"t for the collectio" of such ta#es “ %paraphrai$g a$d e#phai -pp!ied&

:. +hat is a co!pro!ise 7 S3<<ESTE" ANS=ER8 A co#pro#ie i a co$tract +hereby the partie' by #a/i$g reciproca!co$ceio$' aoid a !itigatio$ or p-t a$ e$d to o$e a!ready co##e$ced. %Art. 202?' (ii! (ode&

A co#pro#ie pe$a!ty co-!d $ot be i#poed by the B4R' i the tapayer did $ot agree. Aco#pro#ie bei$g' by it $at-re' #-t-a! i$ ee$ce re-ire agree#e$t. The pay#e$t #ade -$derprotet co-!d o$!y ig$iy that there +a $o agree#e$t that had eectie!y bee$ reached bet+ee$ thepartie. %3da. de San Agustin, et al., v. Commissioner of Internal Revenue, <. R. No. 1??>' Septe#ber 10' 2001&



<. +hat ta# cases !ay be the sub?ect of a co!pro!ise 7S3<<ESTE" ANS=ER8 The o!!o+i$g cae #ay' -po$ tapayer: co#p!ia$ce +ith the bai

or co#pro#ie' be the -bect #atter o co#pro#ie ett!e#e$t8a. "e!i$-e$t acco-$tD

b. (ae -$der ad#i$itratie protet ater i-a$ce o the Ci$a! Ae#e$t Notice to the

tapayer +hich are ti!! pe$di$g i$ the Regio$a! Oice' Ree$-e "itrict Oice' )ega! Serice' )argeTapayer Serice %)TS&' (o!!ectio$ Serice' E$orce#e$t Serice a$d other oice i$ the Natio$a! OiceD c. (ii! ta cae bei$g dip-ted beore the co-rtD d. (o!!ectio$ cae i!ed i$ co-rtD

e. (ri#i$a! io!atio$' other tha$ thoe a!ready i!ed i$ co-rt' or thoe i$o!i$g cri#i$a! ta ra-d. %Sec. 2' Re. Reg. No. 0,2002&

>. +hat ta# cases could "ot be the sub?ect of co!pro!ise 7S3<<ESTE" ANS=ER8a. =ithho!di$g ta cae -$!e the app!ica$t,tapayer i$o/e proiio$ o !a+ that cat

do-bt o$ the tapayer: ob!igatio$ to +ithho!d.Db. (ri#i$a! ta ra-d cae' co$ir#ed a -ch by the (o##iio$er o 4$ter$a! Ree$-e or hi

d-!y a-thori;ed repree$tatieD

c. (ri#i$a! io!atio$ a!ready i!ed i$ co-rtDd. "e!i$-e$t acco-$t +ith d-!y approed ched-!e o i$ta!!#e$t pay#e$tDe. (ae +here i$a! report o rei$etigatio$ or reco$ideratio$ hae bee$ i-ed re-!ti$g

to red-ctio$ i$ the origi$a! ae#e$t a$d the tapayer i agreeab!e to -ch deciio$ by ig$i$g there-ired agree#e$t or# or the p-rpoe. O$ the other ha$d' other proteted cae ha!! be ha$d!ed bythe Regio$a! Ea!-atio$ Board %REB& or the Natio$a! Ea!-atio$ Board %NEB& o$ a cae to cae baiD

. (ae +hich beco#e i$a! a$d eec-tory ater i$a! -dg#e$t o a co-rt +here co#pro#iei re-eted o$ the gro-$d o do-bt-! a!idity o the ae#e$tD a$d

g. Etate ta cae +here co#pro#ie i re-eted o$ the gro-$d o i$a$cia! i$capacity othe tapayer. %Sec. 2' Re. Reg. No. 0,2002&

@. +he" !ay the 0o!!issio"er of *"ter"al Re$e"ue co!pro!ise the pay!e"tof a"y i"ter"al re$e"ue ta# 7 Alter"ati$ely5 what are the 9rou"ds for a co!pro!ise5

a"d what are the a!ou"ts for which a co!pro!ise !ay be e"tered i"to 7S3<<ESTE" ANS=ER8a. A reao$ab!e do-bt a to the a!idity o the c!ai# agai$t the tapayer eit proided that

the #i$i#-# co#pro#ie e$tered i$to i e-ia!e$t to orty perce$t %0H& o the baic taD or b. The i$a$cia! poitio$ o the tapayer de#o$trate a c!ear i$abi!ity to pay the aeed ta

proided that the #i$i#-# co#pro#ie e$tered i$to i e-ia!e$t to te$ perce$t %10H& o the baicaeed ta 4$ the aboe i$ta$ce the (o##iio$er i a!!o+ed to e$ter i$to a co#pro#ie o$!y i the baic tai$o!ed doe $ot eceed O$e #i!!io$ peo %P1'000'000.00&' a$d the ett!e#e$t oered i $ot !e tha$the precribed perce$tage. GSec. 20 %A&' N4R( o 1FF@I

4$ i$ta$ce +here the (o##iio$er i $ot a-thori;ed' the co#pro#ie ha!! be -bect to theapproa! o the Ea!-atio$ Board co#poed o the (o##iio$er a$d the o-r %& "ep-ty(o##iio$er.

. +he" is the 0o!!issio"er of *"ter"al Re$e"ue authoried to abate or ca"cel ata# liability 78 S3<<ESTE" ANS=ER8 a. The ta or a$y portio$ thereo appear to be -$-t!y or eceie!y aeedD or b. The ad#i$itratio$ a$d co!!ectio$ cot i$o!ed do $ot -tiy the co!!ectio$ o the a#o-$t d-e. GSec.20 %B&' N4R( o 1FF@I

C. The collectio" of a ta# !ay "ot be suspe"ded. O$!y the (o-rt o Ta Appea! #ay



i-e a$ order -pe$di$g the co!!ectio$ o a ta.

'&. As a 9e"eral rule5 “No court shall ha$e the authority to 9ra"t a" i"?u"ctio" torestrai" the collectio" of a"y "atio"al i"ter"al re$e"ue ta#5 fee or char9e.” %Sec. 21?'

N4R(&

“No appea! ta/e$ to the (TA ro# the deciio$ o the (o##iio$er o 4$ter$a! Ree$-e or the

(o##iio$er o (-to# or the Regio$a! Tria! (o-rt' proi$cia!' city or #-$icipa! trea-rer or theSecretary o Ci$a$ce' the Secretary o Trade a$d 4$d-try a$d Secretary o Agric-!t-re' a the cae #aybe ha!! -pe$d the pay#e$t' !ey' ditrai$t' a$d9or a!e o a$y property o the tapayer or theatiactio$ o hi ta !iabi!ity a proided by eiti$g !a+8 Proided' ho+eer' That +he$ i$ the opi$io$ othe (o-rt the co!!ectio$ by the aore#e$tio$ed goer$#e$t age$cie #ay eopardi;e the i$teret o the<oer$#e$t a$d9or the tapayer the (o-rt at a$y tage o the proceedi$g #ay -pe$d the aid co!!ectio$ a$d re-ire the tapayer either to depoit the a#o-$t c!ai#ed or to i!e a -rety bo$d or $ot#ore tha$ do-b!e the a#o-$t +ith the (o-rt.” %Sec. 11' Rep. Act No. 112>' a a#e$ded by Sec. F' Rep. Act No.F2?2 &

The S-pre#e (o-rt #ay e$oi$ the co!!ectio$ o tae -$der it ge$era! -dicia! po+er b-t it ho-!d beappare$t that the o-rce o the po+er i $ot tat-tory b-t co$tit-tio$a!.

''. +hat is the procedure for suspe"sio" of collectio" of ta#es 7

S3<<ESTE" ANS=ER8 =here the co!!ectio$ o the a#o-$t o the tapayer: !iabi!ity' o-ght by#ea$ o a de#a$d or pay#e$t' by !ey' ditrai$t or a!e o property o the tapayer' or by +hateer#ea$' a proided -$der eiti$g !a+' #ay eopardi;e the i$teret o the goer$#e$t or the tapayer'a$ i$tereted party #ay i!e a #otio$ or the -pe$io$ o the co!!ectio$ o the ta !iabi!ity %Sec. 1' R-!e 10'

RR(TA eectie "ece#ber 1>' 200>& +ith the (o-rt o Ta Appea!.The #otio$ or -pe$io$ o the co!!ectio$ o the ta #ay be i!ed together +ith the petitio$ or reie+

or +ith the a$+er' or i$ a eparate #otio$ i!ed by the i$tereted party at a$y tage o the proceedi$g. %Sec. ' R-!e 10' RR(TA eectie "ece#ber 1>' 200>&

RE1N O1 *NTERNA( RE3ENE TA)ES

'. +hat are the 9rou"ds for refu"d or credit of i"ter"al re$e"ue ta#es 7 S3<<ESTE" ANS=ER8 The gro-$d or re-$d or credit or i$ter$a! ree$-e tae are the o!!o+i$g8

a. The ta +a i!!ega!!y co!!ected. There i $o !a+ that a-thori;e the co!!ectio$ o the ta. b. The ta +a eceie!y co!!ected. There i a !a+ that a-thori;e the co!!ectio$ o a ta b-t the taco!!ected +a #ore tha$ +hat the !a+ a!!o+. c. The ta +a paid thro-gh a #ita/e$ be!ie that the tapayer ho-!d pay the ta %solution inde"eti &

%. +hat are the three F8G co"ditio"s for the 9ra"t of a clai! for refu"d ofcreditable withholdi"9 ta# 7 S3<<ESTE" ANS=ER8

a. The c!ai# i i!ed +ith the (o##iio$er o 4$ter$a! Ree$-e +ithi$ the t+o,year period ro# thedate o the pay#e$t o the ta. b. 4t i ho+$ o$ the ret-r$ o the recipie$t that the i$co#e pay#e$t receied +a dec!ared a part othe gro i$co#eD a$d c. The act o +ithho!di$g i etab!ihed by a copy o a tate#e$t d-!y i-ed by the payee ho+i$gthe a#o-$t paid a$d the a#o-$t o ta +ithhe!d therero#. %Banco /ilipino Savings and Mortgage Ban- v.Court of Appeals, et al., <. R. No. 1>>6?2' *arch 2@' 200@&

NOTES AN" (O**ENTS8 a. Proof of fact of withholdi"9. “Sec. 10. Claim for ta) credit or refund. %a& (!ai# or Ta (reditor Re-$d o 4$co#e ta ded-cted a$d +ithhe!d o$ i$co#e pay#e$t ha!! be gie$ d-e co-re o$!y+he$ it i ho+$ o$ the ret-r$ that the i$co#e pay#e$t receied ha bee$ dec!ared a part o the groi$co#e a$d the act o +ithho!di$g i etab!ihed by a copy o the =ithho!di$g Ta State#e$t d-!y i-edby the payor to the payee ho+i$g the a#o-$t paid a$d the a#o-$t o the ta +ithhe!d therero# )))7 %Re. Reg. No. 6,?>' a a#e$ded&



The doc-#e$t +hich #ay be accepted a eide$ce o the third co$ditio$' that i' the act o+ithho!di$g' #-t e#a$ate ro# the payor ite!' a$d $ot #ere!y ro# the payee' a$d #-t i$dicate the$a#e o the payor' the i$co#e pay#e$t bai o the ta +ithhe!d' the a#o-$t o the ta +ithhe!d a$d the$at-re o the ta paid. %Banco /ilipino Savings and Mortgage Ban- v. Court of Appeals, et al., <. R. No. 1>>6?2'*arch 2@' 200@&

8. +hat should be established by a ta#payer for the 9ra"t of a ta# refu"d 7 +hy 7 S3<<ESTE" ANS=ER8 A tapayer $eed to etab!ih $ot o$!y that the re-$d i -tiied -$der the!a+' b-t a!o the correct a#o-$t that ho-!d be re-$ded. 4 the !atter re-iite ca$$ot be acertai$ed +ith partic-!arity' there i ca-e to de$y the re-$d' or a!!o+it o$!y to the ete$t o the -# that i act-a!!y proe$ a d-e. Ta re-$d parta/e o the $at-re o ta ee#ptio$ a$d are th- co$tr-ed strictissimi =uris agai$t thepero$ c!ai#i$g the ee#ptio$. The b-rde$ i$ proi$g the c!ai# or re-$d $eceari!y a!! o$ thetapayer. %/ar &ast Ban- (rust and Company, etc., v. Commissioner of Internal Revenue , et al., <. R. No. 1?F1F'*ay 2' 2006&

:. +hat is The le9al re!edy u"der the N*R0 of 'CC@ at the ?udicial le$el withrespect to refu"d or reco$ery of ta# erro"eously or ille9ally collected 7

S3<<ESTE" ANS=ER8 Ci!i$g o a -it or proceedi$g +ith the (o-rt o Ta Appea! a. beore the epiratio$ o t+o %2& year ro# the date o pay#e$t o the ta regard!e o a$y-pere$i$g ca-e that #ay arie ater pay#e$t %2$d par.' Sec. 22F' N4R( o 1FF@&' or

b. +ithi$ thirty %0& day ro# receipt o the de$ia! by the (o##iio$er o the app!icatio$ or re-$dor credit. %Sec. 11' R.A. No. 112>&

<. The two F%G year period a"d the thirty F8&G day period should be applied o" awhiche$er co!es first basis. Th-' i the 0 day i +ithi$ the 2 year' the 0 day app!ie' i the 2year period i abo-t to !ape b-t there i $o deciio$ yet by the (o##iio$er +hich +o-!d trigger the 0,day period' the tapayer ho-!d i!e a$ appea!' depite the abe$ce o a deciio$. *Commissioners, etc. v.Court of (a) Appeals, et al., <. R. No. ?261?' *arch 16' 1F?F' -$rep.&

>. +here the ta#payer is a corporatio" the two year prescripti$e period fro!“date of pay!e"t” for refu"d of i"co!e ta#es should be the date whe" thecorporatio" filed its fi"al ad?ust!e"t retur" $ot o$ the date +he$ the tae +ere paid o$ a-arter!y bai. *Philippine Ban- of Communications v. Commissioner of Internal Revenue, et al., <.R. No. 11202'a$-ary 2?' 1FFF&

4t i o$!y +he$ the ret-r$' coeri$g the +ho!e year' i i!ed that the tapayer +i!! be ab!e toacertai$ +hether a ta i ti!! d-e or re-$d ca$ be c!ai#ed baed o$ the ad-ted a$d a-dited ig-re.*Ban- of the Philippine Islands v. Commissioner of Internal Revenue, <.R. No. 16>' A-g-t 2?' 2001&

@. +hat is solutio i"debeti as applied to ta# cases 7 S3<<ESTE" ANS=ER8 3$der the pri$cip!e o solutio inde"iti proided i$ Art. 21>' (ii! (ode' “4o#ethi$g i receied +he$ there i $o right to de#a$d it' a$d it +a -$d-!y de!iered thro-gh #ita/e'the ob!igatio$ to ret-r$ it arie.” The B4R receied o#ethi$g “+he$ there G+aI $o right to de#a$d it'”

a$d th-' it ha the ob!igatio$ to ret-r$ it. GState $and Investment Corporation v. Commissioner ofInternal Revenue, <. R. No. 1@1F>6' a$-ary 1?' 200?citing Citi"an-, !. A. v. Court of Appeals andCommissioner of Internal Revenue' <.R. No. 10@' October 10' 1FF@' 2?0 S(RA >F' i$ t-r$ citi$gRamie (e)tiles, Inc. v. Mathay, Sr.' ?F S(RA >?6 %1F@F&I. 4t i a$ a$cie$t pri$cip!e that $o o$e' $ot ee$the tate' ha!! e$rich o$ee! at the epe$e o a$other. 4$deed' i#p!e -tice re-ire the peedyre-$d o the +ro$g!y he!d tae. %I"id.&

<>. +hat are the reaso"s for reDuiri"9

the fili"9 of a" ad!i"istrati$e applicatio" for refu"d or credit with the BS3<<ESTE" .

+hy is it "ecessary to file a" ad!i"istrati$e clai! for refu"d with the B*R5 before



fili"9 a case with the 0ourt of Ta# Appeals 7 a. a. To aord the (o##iio$er a$

opport-$ity to correct hi error or that o -bordi$ate oicer. *+onzales v. Court of (a) Appeals, et al., 1

S(RA@F&

b. To $otiy the <oer$#e$t that -ch tae hae bee$ -etio$ed a$d the $oticeho-!d be bor$e i$ #i$d i$ eti#ati$g the ree$-e aai!ab!e or epe$dit-re.

C. As a 9e"eralrule the fili"9 of a" applicatio" for refu"d or credit with the Bureau of *"ter"alRe$e"ue is a" ad!i"istrati$e preco"ditio" before a suit !ay be filed with the 0ourt of Ta# Appeals 7 S3<<ESTE" ANS=ER8

S3<<ESTE" ANS=ER8 e. The ai!-re to irt i!e a +ritte$ c!ai# or re-$d or credit i $ot ata! to apetitio$ or reie+ i$o!i$g a dip-ted ae#e$t +here a$ ae#e$t +a dip-ted b-t the protet+a

de$ied by the B-rea- o 4$ter$a! Ree$-e. To ho!d that the tapayer ha $o+ !ot the right to appea!ro# the r-!i$g o$ the dip-ted ae#e$t a$d re-ire hi# to i!e a c!ai# or a re-$d o the tae paid aa co$ditio$ precede$t to hi right to appea!' +o-!d i$ eect re-ire o hi# to go thro-gh a -e!e a$d$eed!e cere#o$y that +o-!d o$!y de!ay the dipoitio$ o the cae' or the (o##iio$er +o-!d

certai$!y dia!!o+ the c!ai# or re-$d i$ the a#e +ay a he dia!!o+ed the protet agai$t theae#e$t. The !a+' ho-!d $ot be i$terpreted a to re-!t i$ ab-rditie. *vda. de San Agustin., etc., v.Commissioner of Internal Revenue, <.R. No. 1??>' Septe#ber 10' 2001 citi$g Roman Catholic Arch"ishop of

Ce"u v. Collector of Internal Revenue, F SCRA H# NOTE8 Reco"ciliatio" betwee" abo$e two "u!bers Fa"d CG. A$ app!icatio$ or re-$d or credit -$der Sec. 22F o the N4R( o 1FF@ i re-ired +here the caei!ed beore the (TA i a re-$d cae' +hich i $ot pre#ied -po$ a dip-ted ae#e$t. There i $o$eed or a prior app!icatio$ or re-$d or credit' i the re-$d i #ere!y a co$e-e$ce o the reo!-tio$ o

the B4R: de$ia! o a proteted ae#e$t. +ho could applyfor a ta# refu"d or credit 7

'&. +ho could apply for a refu"d or credit 7S3<<ESTE" ANS=ER8 The pero$ +ho paid the ta #ay app!y or a re-$d or credit.

A +ithho!di$g ta age$t #ay a!o app!y or a re-$d. 4$ a e$e' he i a!o a tapayer beca-ethe ta #ay be co!!ected ro# hi# i he doe $ot +ithho!d.

''. +hat is the "ature of the ta#payer6s re!edy of either to as for a refu"d ofe#cess ta# pay!e"ts or to apply the sa!e i" pay!e"t of succeedi"9 ta#able periods6ta#es 7

S3<<ESTE" ANS=ER8 Sec. 6F o the 1F@@ N4R( %$o+ Sec. @6 o the N4R( o 1FF@& proidethat a$y ece o the tota! -arter!y pay#e$t oer the act-a! i$co#e ta co#p-ted i$ the ad-t#e$t ori$a! corporate i$co#e ta ret-r$' ha!! either %a& be re-$ded to the corporatio$' or %b& #ay be creditedagai$t the eti#ated -arter!y i$co#e ta !iabi!itie or the -arter o the -cceedi$g taab!e year. Toeae the ad#i$itratio$ o ta co!!ectio$' thee re#edie are i$ the a!ter$atie a$d the choice o o$eprec!-de the other. Si$ce the Ba$/ ha choe$ the ta credit approach it ca$$ot a$y#ore aai! o theta re-$d. *Philippine Ban- of Communications v. Commissioner of Internal Revenue, et al., <.R. No.11202' a$-ary 2?' 1FFF& NOTES AN" (O**ENTS8 a. The choice5 is 9i$e" to the ta#payer5 whether to clai! for refu"d u"der Sec. @> or ha$e itse#cess tae app!ied a ta credit or the -cceedi$g taab!e year' -ch e!ectio$ i $ot i$a!. Prioreriicatio$ a$d approa! by the (o##iio$er o 4$ter$a! Ree$-e i re-ired. The aai!#e$t o there#edy o ta credit i $ot abo!-te a$d #a$datory. 4t doe $ot co$er a$ abo!-te right o$ the part o thetapayer to aai! o the ta credit che#e i it o chooe. Neither doe it i#poe a d-ty o$ the part o thegoer$#e$t to it bac/ a$d a!!o+ a$ i#porta$t acet o ta co!!ectio$ to be at the o!e co$tro! a$ddicretio$ o the tapayer. %Paseo Realty %evelopment Corporation v. Court of Appeals, et al., <. R. No.11F2?6' October 1' 200&



'%. +hat is the “irre$ocability rule” i" clai!s for refu"d a"d what is the ratio"alebehi"d this 7

S3<<ESTE" ANS=ER8 A corporatio$ e$tit!ed to a ta credit or re-$d o the ece eti#ated-arter!y i$co#e tae paid ha t+o optio$8 %1& to carry oer the ece credit or %2& to app!y or thei-a$ce o a ta credit certiicate or to c!ai# a cah re-$d. 4 the optio$ to carry oer the ece credit ieercied' the a#e ha!! be irreocab!e or that taab!e period.

4$ eercii$g it optio$' the corporatio$ #-t ig$iy i$ it a$$-a! corporate ad-t#e$t ret-r$ %by#ar/i$g the optio$ bo proided i$ the B4R or#& it i$te$tio$ either to carry oer the ece credit or toc!ai# a re-$d. To aci!itate ta co!!ectio$' thee re#edie are i$ the a!ter$atie a$d the choice o o$eprec!-de the other. GSystra Philippines, Inc., v. Commissioner of Internal Revenue, <. R. No. 1@62F0' Septe#ber21' 200@ citi$g Philippine Ban- of Communications v. Commissioner of Internal Revenue' 61 Phi!. F16 %1FFF&I

Thi i /$o+$ a the irreocabi!ity r-!e a$d i e#bodied i$ the !at e$te$ce o Sectio$ @6 o theTa (ode. The phrae “-ch optio$ ha!! be co$idered irreocab!e or that taab!e period” #ea$ that theoptio$ to carry oer the ece ta credit o a partic-!ar taab!e year ca$ $o !o$ger be reo/ed.

The r-!e pree$t a tapayer ro# c!ai#i$g t+ice the ece -arter!y tae paid8 %1& a a-to#aticcredit agai$t tae or the taab!e -arter o the -cceedi$g year or +hich $o ta credit certiicate habee$ i-ed a$d %2& a a ta credit either or +hich a ta credit certiicate +i!! be i-ed or +hich +i!! bec!ai#ed or cah re-$d. %Systra Philippines, Inc., supra citi$g "e )eo$' 7ector' The Natio$a! 4$ter$a! Ree$-e(ode' See$th Editio$' 2000' p. 0&

'8. *" the year %&&& Systra deri$ed e#cess ta# credits a"d e#ercised theoptio" to carry the! o$er as ta# credits for the "e#t ta#able year. Howe$er5 the ta#due for the "e#t ta#able year is lower tha" e#cess ta# credits. *t "ow applies for arefu"d of the u"applied ta# credits. ;ay its refu"d be 9ra"ted 7 *f the refu"d isde"ied5 does Systra lose the u"applied ta# credits 7 E#plai" briefly your a"swer.

S3<<ESTE" ANS=ER8 Sytra: c!ai# or re-$d ho-!d be de$ied. O$ce the carry oer optio$+a #ade' act-a!!y or co$tr-ctie!y' it beca#e oreer irreocab!e regard!e o +hether the ece tacredit +ere act-a!!y or -!!y -ti!i;ed 3$der Sectio$ @6 o the Ta (ode' a c!ai# or re-$d o -ch ececredit ca$ $o !o$ger be #ade. The ece credit +i!! o$!y be app!ied “agai$t i$co#e ta d-e or thetaab!e -arter o the -cceedi$g taab!e year.” "epite the de$ia! o it c!ai# or re-$d' Sytra doe $ot !oe the -$app!ied ta credit. The a#o-$t+i!! $ot be oreited i$ aor o the goer$#e$t b-t +i!! re#ai$ i$ the tapayer: acco-$t. Petitio$er #ay

c!ai# a$d carry it oer i$ the -cceedi$g taab!e year' creditab!e agai$t -t-re i$co#e ta !iabi!itie -$ti!-!!y -ti!i;ed. %Systra Philippines, Inc., v. Commissioner of Internal Revenue, <. R. No. 1@62F0' Septe#ber 21' 200@citi$g Philam Asset Management, Inc. v. Commissioner of Internal Revenue' <.R. No. 1>66@916200' 1"ece#ber 200>' @@ S(RA @61&

Supposi"9 i" the abo$e proble! that Systra per!a"e"t ceased operatio"s5 what happe"s to theu"applied credits 7 S3<<ESTE" ANS=ER8 =here' the corporatio$ per#a$e$t!y ceae it operatio$ beore -!!-ti!i;atio$ o the ta credit it opted to carry oer' it #ay the$ be a!!o+ed to c!ai# the re-$d o there#ai$i$g ta credit. 4$ -ch a cae' the re#ai$i$g ta credit ca$ $o !o$ger be carried oer a$d theirreocabi!ity r-!e ceae to app!y. Cessante ratione legis, cessat ipse le) . %Coot$ote $o. 2' SystraPhilippines, Inc., v. Commissioner of Internal Revenue, <. R. No. 1@62F0' Septe#ber 21' 200@& NOTES AN" (O**ENTS8 The ho!di$g i$ State $and Investment Corporation v. Commissioner ofInternal Revenue, <. R. No. 1@1F>6' a$-ary 1?' 200? that the tapayer i e$tit!ed to a re-$d beca-ed-ri$g the -cceedi$g year there +a $o ta d-e agai$t +hich the ece ta credit #ay be app!ied i$ot doctri$a!. Thi i o beca-e it i$terpreted the proiio$ o the$ Sec. 6F o the N4R(' +hich did $otproide or the “irreocabi!ity r-!e” $o+ co$tai$ed i$ Sec. @6 o the N4R( o 1FF@.

':. A si!ulta"eous fili"9 of the applicatio" with the B*R for refu"d=credit a"d thei"stitutio" of the court suit with the 0TA is allowed. There i $o $eed to +ait or a B4R de$ia!.REASONS8

a. The poitie re-ire#e$t o Sectio$ 20 N4R( %$o+ Sec. 22F' N4R( o 1FF@&Db. The doctri$e that de!ay o the (o##iio$er i$ re$deri$g deciio$ doe $ot ete$d the

pere#ptory period ied by the tat-teD



c. The !a+ ied the a#e period t+o year or i!i$g a c!ai# or re-$d +ith the (o##iio$er-$der Sec. 20' par. ' N4R( %$o+ Sec. 20 G(I' N4R( o 1FF@&' a$d or i!i$g -it i$ co-rt -$der Sec.20' N4R( %$o+ Sec. 22F' N4R( o 1FF@&' -$!i/e i$ protet o ae#e$t -$der Sec. 22F %$o+ Sec.22?' N4R( o 1FF@&' +hich ied the period %thirty day ro# receipt o deciio$& or appea!i$g to the co-rt'th- c!ear!y i#p!yi$g that the prior deciio$ o the (o##iio$er i $eceary to ta/e cog$i;a$ce o thecae. *Commissioner of Internal Revenue v. Ban- of Philippine Islands, etc. et al .' (A,<.R. SP No. 102'Septe#ber F' 1FFD +i""s v. Collector of Internal Revenue, et al., 10@ Phi!' 2; ohnston $um"er Co. v. C(A, 101Phi!. 1>1&

'<. The 9ra"t of a refu"d is fou"ded o" the assu!ptio" that the ta# retur" is$alid5 i.e. that the act tated therei$ are tr-e a$d correct. %Commissioner of Internal Revenue v. Courtof (a) Appeals, <. R. No. 106611' -!y 21' 1FF' 2 S(RA ?& =itho-t the ta ret-r$ it +o-!d beirt-a!!y i#poib!e to deter#i$e +hether the proper tae hae bee$ aeed a$d paid. Ater a!!' it iaio#atic that a c!ai#a$t ha the b-rde$ o proo to etab!ih the act-a! bai o hi or her c!ai# or tacredit or re-$d. Ta re-$d' !i/e ta ee#ptio$' are co$tr-ed trict!y agai$t the tapayer. %PaseoRealty %evelopment Corporation v. Court of Appeals, et al., <. R. No. 11F2?6' October 1' 200&

7o+eer' i$ BPI0/amily Savings Ban- v. Court of Appeals' ?6 Phi!. @1FD 26 S(RA 61 %2000&' re-$d+a gra$ted' depite the ai!-re to pree$t the ta ret-r$' beca-e other eide$ce +a pree$ted toproe that the oerpaid tae +ere $ot app!ied. %I"id.&

'>. iscuss the differe"ce betwee" ta# refu"d a"d ta# credit.. S3<<ESTE" ANS=ER8 There are -$#ita/ab!e or#a! a$d practica! diere$ce bet+ee$ the

t+o #ode. Cor#a!!y' a ta re-$d re-ire a phyica! ret-r$ o the -# erro$eo-!y paid by the tapayer'+hi!e a ta credit i$o!e the app!icatio$ o the rei#b-rab!e a#o-$t agai$t a$y -# that #ay be d-ea$d co!!ectib!e ro# the tapayer. O$ the practica! ide' the tapayer to +ho# the ta i re-$ded +o-!d hae the optio$' a#o$g other'to i$et or proit the ret-r$ed -#' a$ optio$ $ot proi#ate!y aai!ab!e i the tapayer chooe i$teadto receie a ta credit. %Commissioner of Customs v. Philippine Phosphate /ertilizer Corporation, <. R. No.10' Septe#ber 1' 200&

NOTES AN" (O**ENTS8 4t #ay be that there i $o ee$tia! diere$ce bet+ee$ a ta re-$d a$d ata credit i$ce both are #oe o recoeri$g tae erro$eo-!y or i!!ega!!y paid to the goer$#e$t. %Commissioner of Customs v. Philippine Phosphate /ertilizer Corporation, <. R. No. 10' Septe#ber 1' 200&

'@. A ba"trustee of e!ployee trusts filed a" applicatio" for the refu"d of ta#eswithheld o" the i"terest i"co!es of the i"$est!e"ts !ade of the fu"ds of thee!ployees6 trusts. *"stead of prese"ti"9 separate accou"ts for i"terest i"co!es!ade of these i"$est!e"ts5 the ba"trustee i"stead prese"ted wit"ess to establishthat it would "e#t to i!possible to si"9le out the specific tra"sactio"s i"$ol$i"9 thee!ployees6 trust fu"ds fro! the totality of all i"terest i"co!e fro! its totali"$est!e"ts. O" the abo$e basis will the applicatio" for refu"d prosper 7 S3<<ESTE" ANS=ER8 No. The app!icatio$ or re-$d +i!! $ot proper. The ba$/,tr-tee $eed to etab!ih $ot o$!y that the re-$d i -tiied -$der the !a+ %+hich i obeca-e i$co#e o e#p!oyee: tr-t are ta ee#pt&' b-t a!o the correct a#o-$t that ho-!d bere-$ded.

Ta re-$d parta/e o the $at-re o ta ee#ptio$ a$d are th- co$tr-ed strictissimi =uris agai$t thepero$ or e$tity c!ai#i$g the ee#ptio$. The b-rde$ i$ proi$g the a#o-$t to be re-$ded $eceari!ya!! o$ the ba$/,tr-tee' a$d there i a$ appare$t ai!-re to do o.

A $eceary co$e-e$ce o the pecia! ee#ptio$ e$oyed a!o$e by e#p!oyee: tr-t +o-!d be a$eceary egregatio$ i$ the acco-$ti$g o -ch i$co#e' i$teret or other+ie' ear$ed ro# thoe tr-tro# that ear$ed by the other c!ie$t o the ba$/,tr-tee. %/ar &ast Ban- and (rust Company, etc., v.Commissioner, etc., et al., <.R. No. 1?F1F' *ay 2' 2006& The a#o-$t that are the ee#pt ear$i$g othe e#p!oyee: tr-t ha $ot bee$ ho+$ a they hae bee$ co##i$g!ed +ith the i$teret i$co#e o theother c!ie$t o the ba$/,tr-tee.



'. 0TA 0ircular No. 'C< clearly reDuires that photocopies of the receipts ori"$oices !ust be pre!ared a"d sub!itted to the 0TA to $erify the correct"ess ofthe su!!ary listi"9 a"d the 0PA certificatio". (TA (irc-!ar No. 1,F>' i-ed o$ 2> a$-ary1FF>' read8

“1. The party +ho deire to i$trod-ce a eide$ce -ch o!-#i$o- doc-#e$t #-t pree$t8 %a&S-##ary co$tai$i$g the tota! a#o-$t9 o the ta acco-$t or ta paid or the period i$o!ed a$d a

chro$o!ogica! or $-#erica! !it o the $-#ber' date a$d a#o-$t coered by the i$oice or receiptDa$d %b& a (ertiicatio$ o a$ i$depe$de$t (ertiied P-b!ic Acco-$ta$t atteti$g to the correct$e o theco$te$t o the -##ary ater #a/i$g a$ ea#i$atio$ a$d ea!-atio$ o the o!-#i$o- receipt a$di$oice. S-ch -##ary a$d certiicatio$ #-t proper!y be ide$tiied by a co#pete$t +it$e ro# theacco-$ti$g ir#. 2. The #ethod o i$diid-a! pree$tatio$ o each a$d eery receipt or i$oice or other doc-#e$t or#ar/i$g' ide$tiicatio$ a$d co#pario$ +ith the origi$a! thereo $eed $ot be do$e beore the (o-rt or the(o##iio$er a$y#ore ater the i$trod-ctio$ o the -##ary a$d (PA certiicatio$. 4t i e$o-gh that thereceipts5 i"$oices a"d other docu!e"ts co$eri"9 the said accou"ts or pay!e"ts !ust be pre!ared by the party co"cer"ed a"d sub!itted to the 0ourt i" order to be !ade accessible to thead$erse party whe"e$er he=she desires to chec a"d $erify the correct"ess of the su!!ary a"d0PA certificatio". 7o+eer' the origi$a! o the aid receipt' i$oice or doc-#e$t ho-!d be ready oreriicatio$ a$d co#pario$ i$ cae do-bt o$ the a-the$ticity o the partic-!ar doc-#e$t pree$ted i

raied d-ri$g the heari$g o the cae.” %E#phai -pp!ied&

'C. ;a"ila Electric 0o!pa"y a 9ra"tee of a le9islati$e fra"chise u"der Act No.::5 as a!e"ded by Republic Act No. :'<C a"d Preside"tial ecree No. <<'5 8Q hadbee" payi"9 a %I fra"chise ta# based o" its 9ross receipts5 i" lieu of all other ta#esa"d assess!e"ts of whate$er "ature. po" the effecti$ity of E#ecuti$e Order No. @%o" 1ebruary '&5 'C@5 howe$er5 respo"de"t beca!e sub?ect to the pay!e"t of re9ular corporate i"co!e ta#. 1or the last Duarter e"di"9 ece!ber 8'5 'C@5 respo"de"t filed o" April '<5 'Cits te"tati$e i"co!e ta# reflecti"9 a refu"dable a!ou"t of P'&'5C@5@:'5 but o"lyP@@5C8'5'% was applied as ta# credit for the succeedi"9 ta#able year 'C.

Acti"9 o" a yearly routi"ary (etter of Authority No. &&'&>: NA dated /u"e %@5

'C issued by petitio"er5 directi"9 the i"$esti9atio" of ta# liabilities of respo"de"tfor ta#able year 'C@5 a" i"$esti9atio" was co"ducted by Re$e"ue Officer 1rederic0apita" which showed that respo"de"t was liable for “'. deficie"cy i"co!e ta# i" thea!ou"t of P%58:&5C&%.<%K a"d %. deficie"cy fra"chise ta# i" the a!ou"t ofP%58588<.:.” O" April '@5 'CC5 respo"de"t filed a" a!e"ded fi"al corporate *"co!e Ta# Retur"e"di"9 ece!ber 8'5 'C reflecti"9 a refu"dable a!ou"t of P'&@5>:C5@%C. Respo"de"t thus filed o" ;arch 8&5 'CC& a letterclai! for refu"d or credit i" thea!ou"t of P'&@5>:C5@%C represe"ti"9 o$erpaid i"co!e ta#es for the years 'C@ a"d'C.

Petitio"er "ot ha$i"9 acted o" its reDuest5 respo"de"t filed o" April >5 'CC& a

?udicial clai! for refu"d or credit with the 0ourt of Ta# Appeals. *t is 9athered that respo"de"t paid the deficie"cy fra"chise ta# i" the a!ou"t ofP%58588<.:. *t protested the pay!e"t of the alle9ed deficie"cy i"co!e ta# a"dclai!ed as a" alter"ati$e re!edy the deductio" thereof fro! its clai! for refu"d orcredit. The 0ourt of Ta# Appeals 9ra"ted the P'&@5>:C5@%C clai! for refu"d5 or i" thealter"ati$e for the B*R to issue a ta# credit. *s the 0ourt of Ta# Appeals correct 7 S3<<ESTE" ANS=ER8 e. Sectio$ 6F o the Natio$a! 4$ter$a! Ree$-e (ode o 1F?6' $o+ Sec.@6 proide' i the -# o the -arter!y ta pay#e$t #ade d-ri$g a taab!e year i $ot e-a! to the tota!



ta d-e o$ the e$tire taab!e i$co#e o that year a ho+$ i$ it i$a! ad-t#e$t ret-r$' the corporatio$ha the optio$ to either8 %a& pay the ece ta ti!! d-e' or %b& be re-$ded the ece a#o-$t paid. Theret-r$ -b#itted are “#ere!y pre,a-dited +hich co$it #ai$!y o chec/i$g #athe#atica! acc-racy o theig-re i$ the ret-r$.” Ater -ch chec/i$g' the p-rpoe o +hich bei$g to “i$-re pro#pt actio$ o$corporate a$$-a! i$co#e ta ret-r$ ho+i$g re-$dab!e a#o-$t arii$g ro# oerpaid -arter!y i$co#etae'” %Ree$-e *e#ora$d-# Order No. 2,@6 dated -$e 11' 1F@6& the re-$d or ta credit i gra$ted. %Commissioner of Internal Revenue v. Manila &lectric Company, <. R. No. 121666' October 10' 200@&

TAR*11 AN 0STO;S (A+S

OR,AN*LAT*ON AN 1N0T*ONS O1 THE BREA O1 *NTERNA( RE3ENE

TAR*11 AN 0STO;S 0OE

'. +he" does i!portatio" be9i"5 a"d why is it i!porta"t to "ow whetheri!portatio" has already be9u" or "ot 7 S3<<ESTE" ANS=ER8 4#portatio$ begi$ +he$ the co$eyi$g ee! or aircrat e$ter the

-ridictio$ o the Phi!ippi$e +ith i$te$tio$ to -$!ade therei$. %Sec. 1202' T((P&

The -ridictio$ o the B-rea- o (-to# to e$orce the proiio$ o the T((P i$c!-di$g ei;-re a$doreit-re a!o begi$ ro# the begi$$i$g o i#portatio$. Th-' the B-rea- o (-to# obtai$ -ridictio$oer i#ported artic!e o$!y ater i#portatio$ ha beg-$.

%. +he" is i!portatio" dee!ed ter!i"ated a"d why is it i!porta"t to "owwhether i!portatio" has already e"ded7 S3<<ESTE" ANS=ER8 4#portatio$ i dee#ed ter#i$ated -po$ pay#e$t o the d-tie' tae a$dother charge d-e -po$ the age$cie' or ec-red to be paid' at the port o e$try a$d the !ega! per#it or+ithdra+a! ha!! hae bee$ gra$ted.

4$ cae the artic!e are ree o d-tie' tae a$d other charge' -$ti! they hae !ega!!y !et the -ridictio$ o the c-to#. %Sec. 1202' T((P& The B-rea- o (-to# !oe -ridictio$ to e$orce theT((P a$d to #a/e ei;-re a$d oreit-re ater i#portatio$ i dee#ed ter#i$ated.

8. The fle#ible tariff clause is a pro$isio" i" the Tariff a"d 0usto!s 0ode' +hichi#p!e#e$t the co$tit-tio$a!!y de!egated po+er to the (o$gre to -rther de!egate to the Preide$t othe Phi!ippi$e' i$ the i$teret o $atio$a! eco$o#y' ge$era! +e!are a$d9or $atio$a! ec-rity -po$reco##e$datio$ o the NE"A %a& to i$creae' red-ce or re#oe eiti$g protectie rate o i#port d-ty'proided that' the i$creae ho-!d $ot be higher tha$ 100H ad a!ore#D %b& to etab!ih i#port -ota or toba$ i#port o a$y co##odity' a$d %c& to i#poe additio$a! d-ty o$ a!! i#port $ot eceedi$g 10H ada!ore#' a#o$g other.

:. 0usto!s duties defi"ed. (-to# d-tie i the $a#e gie$ to tae o$ the i#portatio$a$d eportatio$ o co##oditie' the tari or ta aeed -po$ #ercha$die i#ported ro#' or eportedto' a oreig$ co-$try. %!estle Phils. v. Court of Appeals, et al., <.R. No. 111' -!y 6' 2001&

<. Special custo!s duties are additio"al i!port duties i!posed o" specific i"dsof i!ported articles u"der certai" co"ditio"s. The pecia! c-to# d-tie -$der the Tari a$d(-to# (ode %T((P& are the a$ti,d-#pi$g d-ty' the co-$terai!i$g d-ty' the dicri#i$atory d-ty' a$d the#ar/i$g d-ty' a$d -$der the Saeg-ard *ea-re Act %S*A& additio$a! tari a aeg-ard #ea-re.

>. The special custo!s duties are i!posed for the protectio" of co"su!ers a"d!a"ufacturers5 as well as Philippi"e products.



@. u!pi"9 duty is a" additio"al special duty a!ou"ti"9 to the differe"cebetwee" the e#port price a"d the "or!al $alue of such product5 co!!odity or article %Sec. 01 %& %1&' T((' a a#e$ded by Rep. Act No. ?@>2' “A$ti,"-#pi$g Act o 1FFF.”& i#poed o$ thei#portatio$ o a prod-ct' co##odity or artic!e o co##erce i$to the Phi!ippi$e at !e tha$ it $or#a!a!-e +he$ deti$ed or do#etic co$-#ptio$ i$ the eporti$g co-$try +hich i ca-i$g or i threate$i$gto ca-e #ateria! i$-ry to a do#etic i$d-try' or #ateria!!y retardi$g the etab!ih#e$t o a do#etic

i$d-try prod-ci$g the !i/e prod-ct. GSec. 01 %& %>&' T((' a a#e$ded by Rep. Act No. ?@>2' “A$ti,"-#pi$g Act o 1FFF”I

. +he" is the a"tidu!pi"9 duty i!posed 7S3<<ESTE" ANS=ER8 The a$ti,d-#pi$g d-ty i i#poed a. =here a prod-ct' co##odity or artic!e o co##erce i eported i$to the Phi!ippi$e at a price !e

tha$ it $or#a! a!-e +he$ deti$ed or do#etic co$-#ptio$ i$ the eporti$g co-$try' b. a$d -ch eportatio$ i ca-i$g or i threate$i$g to ca-e #ateria! i$-ry to a do#etic i$d-try' or#ateria!!y retard the etab!ih#e$t o a do#etic i$d-try prod-ci$g the !i/e prod-ct. GSec. 01 %a&' T(('a a#e$ded by Rep. Act No. ?@>2' “A$ti,"-#pi$g Act o 1FFF”I

C. Nor!al $alue for purposes of i!posi"9 the a"tidu!pi"9 duty i the co#parab!eprice at the date o a!e o !i/e prod-ct' co##odity' or artic!e i$ the ordi$ary co-re o trade +he$

deti$ed or co$-#ptio$ i$ the co-$try o eport. GSec. 01 %& % &' T((' a a#e$ded by Rep. Act No.?@>2' “A$ti,"-#pi$g Act o 1FFF”I

'&. The i!posi"9 authority for the a"tidu!pi"9 duty is the Secretary of Tradea"d *"dustry i" the case of "o"a9ricultural product5 co!!odity5 or article or theSecretary of A9riculture5 i" the case of a9ricultural product5 co!!odity or article 5 ater or#a! i$etigatio$ a$d air#atie i$di$g o the Tari (o##iio$ . GSec. 01 %a&' T((' a a#e$ded by Rep.

Act No. ?@>2' “A$ti,"-#pi$g Act o 1FFF”I

''. E$e" whe" all the reDuire!e"ts for the i!positio" ha$e bee" fulfilled5 thedecisio" o" whether or "ot to i!pose a defi"iti$e a"tidu!pi"9 duty re!ai"s theprero9ati$e of the Tariff 0o!!issio". GSec. 01 %a&' T((' a a#e$ded by Rep. Act No. ?@>2' “A$ti,

"-#pi$g Act o 1FFF”I Th-' the cabi$et ecretarie co-!d $ot co$trae$e the reco##e$datio$ o the Tari (o##iio$. They co-!d $ot i#poe the a$ti,d-#pi$g d-ty or a$y pecia! c-to# d-ty +itho-t theaorab!e reco##e$datio$ o the Tari (o##iio$.

'%. *" the deter!i"atio" of whether to i!pose the a"tidu!pi"9 duty5 the Tariff0o!!issio"5 !ay co"sider a!o"9 others5 the effect of i!posi"9 a" a"tidu!pi"9duty o" the welfare of the co"su!ers a"d=or the 9e"eral public5 a"d other relatedlocal i"dustries. %Sec. 01 %a&' T((' a a#e$ded by Rep. Act No. ?@>2' “A$ti,"-#pi$g Act o 1FFF”&

'8. The a!ou"t of a"tidu!pi"9 duty that !ay be i!posed is the differe"cebetwee" the e#port price a"d the "or!al $alue of such product5 co!!odity or article. %Sec. 01 %& %1&' T((' a a#e$ded by Rep. Act No. ?@>2' “A$ti,"-#pi$g Act o 1FFF”&

The a$ti,d-#pi$g d-ty ha!! be e-a! to the #argi$ o d-#pi$g o$ -ch prod-ct' co##odity or artic!ethereater i#ported to the Phi!ippi$e -$der i#i!ar circ-#ta$ce' i$ additio$ to ordi$ary d-tie' taea$d charge i#poed by !a+ o$ the i#ported prod-ct' co##odity or artic!e.

':. +hat are cou"ter$aili"9 duties a"d whe" are they i!posed 7 S3<<ESTE" ANS=ER8 (o-$terai!i$g d-tie are additio$a! c-to# d-tie i#poed o$ a$y prod-ct'co##odity or artic!e o co##erce +hich i gra$ted direct!y or i$direct!y by the goer$#e$t i$ the co-$tryo origi$ or eportatio$' a$y /i$d or or# o peciic -bidy -po$ the prod-ctio$' #a$-act-re oreportatio$ o -ch prod-ct co##odity or artic!e' a$d the i#portatio$ o -ch -bidi;ed prod-ct'



co##odity' or artic!e ha ca-ed or threate$ to ca-e #ateria! i$-ry to a do#etic i$d-try or ha#ateria!!y retarded the gro+th or pree$t the etab!ih#e$t o a do#etic i$d-try. %Sec. 02' T((P aa#e$ded by Sectio$ 1' R.A. No. ?@>1&

'<. The i!posi"9 authority for the cou"ter$aili"9 duties is the Secretary of Tradea"d *"dustry i" the case of "o"a9ricultural product5 co!!odity5 or article or the

Secretary of A9riculture5 i" the case of a9ricultural product5 co!!odity or article 5 ater or#a! i$etigatio$ a$d air#atie i$di$g o the Tari (o##iio$. Ee$ +he$ a!! the re-ire#e$t or the i#poitio$ hae bee$ -!i!!ed' the deciio$ o$ +hether or $ot toi#poe a dei$itie a$ti,d-#pi$g d-ty re#ai$ the prerogatie o the Tari (o##iio$. %Sec. 01 %a&'T((' a a#e$ded by Rep. Act No. ?@>2' “A$ti,"-#pi$g Act o 1FFF”&

'>. The cou"ter$aili"9 duty is eDui$ale"t to the $alue of the specific subsidy.

'@. ;ari"9 duties are the additio$a! c-to# d-tie i#poed o$ oreig$ artic!e %or itco$tai$er i the artic!e ite! ca$$ot be #ar/ed&' $ot #ar/ed i$ a$y oicia! !a$g-age i$ the Phi!ippi$e' i$a co$pic-o- p!ace a !egib!y' i$de!ib!y a$d per#a$e$t!y i$ -ch #a$$er a to i$dicate to a$ -!ti#atep-rchaer i$ the Phi!ippi$e the $a#e o the co-$try o origi$.

'. The 0o!!issio"er of 0usto!s i!poses the !ari"9 duty.

'C. The !ari"9 duty is eDui$ale"t to fi$e perce"t F<IG ad $alore!.

%&. A discri!i"atory duty i a $e+ a$d additio$a! c-to# d-ty i#poed -po$ artic!e +ho!!y ori$ part the gro+th or prod-ct o' or i#ported i$ a ee!' o a$y oreig$ co-$try +hich i#poe' direct!y ori$direct!y' -po$ the dipoitio$ or tra$portatio$ i$ tra$it thro-gh or re,eportatio$ ro# -ch co-$try oa$y artic!e +ho!!y or i$ part the gro+th or prod-ct o the Phi!ippi$e' a$y -$reao$ab!e charge' eactio$'reg-!atio$ or !i#itatio$ +hich i $ot e-a!!y e$orced -po$ !i/e artic!e o eery oreig$ co-$try' ordicri#i$ate agai$t the co##erce o the Phi!ippi$e' direct!y or i$direct!y' by !a+ or ad#i$itratiereg-!atio$ or practice' by or i$ repect to a$y c-to#' to$$age' or port d-ty' ee' charge' eactio$'c!aiicatio$' reg-!atio$' co$ditio$' retrictio$ or prohibitio$' i$ -ch #a$$er a to p!ace the co##erce o

the Phi!ippi$e at a diada$tage co#pared +ith the co##erce o a$y oreig$ co-$try.

%'. The Preside"t of the Philippi"es i!poses the discri!i"atory duties.

%%. Safe9uard !easures are e#erge$cy #ea-re' i$c!-di$g tari' to protect do#etici$d-trie a$d prod-cer ro# i$creaed i#port +hich i$!ict or co-!d i$!ict erio- i$-ry o$ the#. The (TA i eted +ith -ridictio$ to reie+ deciio$ o the Secretary o Trade a$d 4$d-try i#poi$gaeg-ard #ea-re a proided -$der Rep. Act No. ??00 the Saeg-ard *ea-re Act %S*A&. %Southern

Cross Cement Corporation v. (he Philippine Cement Manufacturers Corp., et al., <. R. No. 1>?>0' -!y ?' 200&

The "T4 Secretary ca$$ot i#poe the aeg-ard #ea-re i the Tari (o##iio$ doe $ot aorab!yreco##e$d it i#poitio$.

%8. *!posi"9 authority for safe9uard !easures. The i!posi"9 authority for thecou"ter$aili"9 duties is the Secretary of Trade a"d *"dustry i" the case of "o"a9ricultural product5 co!!odity5 or article or the Secretary of A9riculture5 i" the caseof a9ricultural product5 co!!odity or article5 ater or#a! i$etigatio$ a$d air#atie i$di$go the Tari (o##iio$.

%:. Safe9uards !easures that !ay be i!posed. Additio$a! tari' i#port -ota orba$$i$g o i#port.



%<. The basis of dutiable $alue of !ercha"dise that is sub?ect to ad $alore!custo!s duties is the tra"sactio" $alue' +hich ha!! be the price act-a!!y paid or payab!e or thegood +he$ o!d or eport to the Phi!ippi$e' ad-ted by addi$g certai$ cot e!e#e$t to the ete$t thatthey are i$c-rred by the b-yer b-t are $ot i$c!-ded i$ the price act-a!!y paid or payab!e or the i#portedgood' a$d #ay i$c!-de the o!!o+i$g8 a. (ot o co$tai$er a$d pac/i$g'

b. 4$-ra$ce' a$d c. Creight. %Sec. 201' T(( a a#e$ded by Sec. 1' Rep. Act No. F1>&

%>. The abo$e tra"sactio" $alue is the pri!ary !ethod of deter!i"i"9 dutiable$alue. *f the tra"sactio" $alue of the i!ported article could "ot be deter!i"ed usi"9the abo$e5 the followi"9 alter"ati$e !ethods should be used o"e after the other- a. Tra$actio$ a!-e o ide$tica! good b. Tra$actio$ a!-e o i#i!ar good c. "ed-ctie #ethod d. (o#p-ted #ethod e. Ca!!bac/ #ethod

%@. How a"d to who! should clai!s for refu"d of custo!s duties be !ade 7S3<<ESTE" ANS=ER8 A!! c!ai# or re-$d o d-tie ha!! be #ade i$ +riti$g a$d or+arded to the

(o!!ector o (-to# to +ho# -ch d-tie are paid' +ho -po$ receipt o -ch c!ai#' ha!! eriy the a#eby the record o hi Oice' a$d i o-$d to be correct a$d i$ accorda$ce +ith !a+' ha!! certiy the a#e tothe (o##iio$er o (-to# +ith hi reco##e$datio$ together +ith a!! $eceary paper a$ddoc-#e$t. 3po$ receipt by the (o##iio$er o -ch certiied c!ai# he ha!! ca-e the a#e to be paidi o-$d correct. %Sec. 1@0?' T((&

%. +hat is !ea" by the ter! “e"try” i" 0usto!s (aw 7 S3<<ESTE" ANS=ER8 4t ha a trip!e #ea$i$g. a. the doc-#e$t i!ed at the (-to# ho-eD b. the -b#iio$ a$d accepta$ce o the doc-#e$tD a$d c. (-to# dec!aratio$ or# or c-to# e$try or# re-ired to be acco#p!ihed by pae$ger oi$co#i$g ee! or pae$ger p!a$e a e$iaged -$der Sec. 2>0> o the T((P %Cai!-re to dec!arebaggage&. %ardeleza v. People, <.R. No. 16>26>' Cebr-ary 6' 2006&

%C. A fli9ht stewardess arri$ed fro! Si"9apore. po" her arri$al she was asedwhether she has a"ythi"9 to declare. She a"swered "o"e5 a"d she sub!itted her“0usto!s Ba99a9e eclaratio" 1or!” which she acco!plished a"d si9"ed with"othi"9 or writte" o" the space for ite!s to be declared. +he" her ha"9er ba9 wase#a!i"ed so!e pieces of ?ewelry were fou"d co"cealed withi" the li"i"9 of said ba9. She was the" co"$icted of $iolati"9 of Sec. 8>&' of the Tariff a"d 0usto!s 0odefor u"lawful i!portatio" which pe"alies a"y perso" who shall fraudule"tly i!port or bri"9 i"to the Philippi"es a"y article co"trary to law.

She "ow appeals clai!i"9 that lower court erred " co"$icti"9 her u"der Sec. 8>&'

whe" the facts alle9ed both i" the i"for!atio" a"d those show" by the prosecutio"co"stitute the offe"se u"der Sec. %<&< “1ailure to eclare Ba99a9e5” of which shewas acDuitted. *s she correct 7 S3<<ESTE" ANS=ER8 No. Sec. 601 doe $ot dei$e a cri#e. 4t #ere!y proide' inter alia, thead#i$itratie re#edie +hich ca$ be reorted to by the B-rea- o (-to# +he$ ei;i$g d-tiab!eartic!e o-$d the baggage o a$y pero$ arrii$g i$ the Phi!ippi$e +hich i $ot i$c!-ded i$ theacco#p!ihed baggage dec!aratio$ -b#itted to the c-to# a-thoritie' a$d the ad#i$itratie pe$a!tiethat -ch pero$ #-t pay or the re!eae o -ch good i $ot i#ported co$trary to !a+. S-ch ad#i$itratie pe$a!tie are i$depe$de$t o the cri#i$a! !iabi!ity or #-gg!i$g that #ay be



i#poed -$der Sec. 601' a$d other proiio$ o the T(( +hich ca$ o$!y be deter#i$ed ater theappropriate cri#i$a! proceedi$g' preci$di$g ro# the o-tco#e i$ a$y ad#i$itratie cae that #ay haebee$ i!ed a$d dipoed o by the c-to# a-thoritie.

4$deed the eco$d paragraph o Sec. 2>0> proide that $othi$g ha!! pree$t the bri$gi$g o a cri#i$a!actio$ agai$t the oe$der or #-gg!i$g -$der Sectio$ 601. %ardeleza v. People, <. R. No. 16>26>'Cebr-ary 6' 2006&

8&. Pay!e"t is "ot a defe"se i" s!u99li"9. “=he$ -po$ tria! or io!atio$ o thi ectio$' thedee$da$t i ho+$ to hae poeio$ o the artic!e i$ -etio$' poeio$ ha!! be dee#ed -icie$teide$ce to a-thori;e co$ictio$' -$!e the dee$da$t ha!! ep!ai$ the poeio$ to the atiactio$ othe co-rt8 Proided' ho+eer' That pay#e$t o the ta d-e ater apprehe$io$ ha!! $ot co$tit-te a a!iddee$e i$ a$y proec-tio$ -$der thi ectio$.” %!at par.' Sec. 601' T((&

8'. Ho is smu!!lin! committed " S3<<ESTE" ANS=ER8 S#-gg!i$g i co##itted by a$y pero$ +ho8 a. ra-d-!e$t!y i#port or bri$g i$to the co-$try a$y artic!e co$trary to !a+D b. ait i$ o doi$g a$y artic!e co$trary to !a+D or c. receie' co$cea!' b-y' e!! or i$ a$y #a$$er aci!itate the tra$portatio$' co$cea!#e$t or a!eo -ch good ater i#portatio$' /$o+i$g the a#e to hae bee$ i#ported co$trary to !a+. %ardeleza v.

People, <.R. No. 16>26>' Cebr-ary 6' 2006 citi$g Rodriguez v. Court of Appeals, <. R. No. 11>21?'Septe#ber 1?' 1FF>' 2? S(RA 2??' 2F6& NOTES AN" (O**ENTS8 a. *!portatio" co$it o bri$gi$g a$ artic!e i$to the co-$try ro# the o-tide. 4#portatio$ begi$+he$ the co$eyi$g ee! or aircrat e$ter the -ridictio$ o the Phi!ippi$e +ith i$te$tio$ to -$!oadtherei$. b. +he" u"lawful i!portatio" is co!plete. 4$ the abe$ce o a bo$a ide i$te$t to #a/e e$try a$dpay d-tie +he$ the prohibited artic!e e$ter the Phi!ippi$e territory. 4#portatio$ i co#p!ete +he$ thetaab!e' d-tiab!e co##odity i bro-ght +ithi$ the !i#it o the port o e$try. E$try thro-gh a c-to# ho-ei $ot the ee$ce o the act. %ardeleza v. People, <.R. No. 16>26>' Cebr-ary 6' 2006&

8%. The 0ollector of 0usto!s sitti"9 i" seiure a"d forfeiture proceedi"9s hase#clusi$e ?urisdictio" to hear a"d deter!i"e all Duestio"s touchi"9 o" the seiure

a"d forfeiture of dutiable 9oods. RT0s are precluded fro! assu!i"9 co9"ia"ceo$er such !atters e$e" throu9h petitio"s of certiorari5 prohibitio" or !a"da!us. *(he Bureau of Customs, et al., v. 9gario, et al., <.R. No. 1?0?1' *arch 20' 2000&

+hat is the ratio"ale for this doctri"e 7 S3<<ESTE" ANS=ER8 a. Regio$a! Tria! (o-rt hae $o -ridictio$ to rep!ei$ a property +hich i -bect to ei;-re a$doreit-re proceedi$g or io!atio$ o the Tari a$d (-to# (ode other+ie' actio$ or oreit-re oproperty or io!atio$ o the (-to# !a+ co-!d eai!y be -$der#i$ed by the i#p!e deice o rep!ei$. %%e la /uente v. %e 3eyra, et al., 120 S(RA >>& b. The doctri$e o ec!-ie c-to# -ridictio$ oer c-to# cae to the ec!-io$ o the RT( ia$chored -po$ the po!icy o p!aci$g $o -$$eceary hi$dra$ce o$ the goer$#e$t: drie' $ot o$!y topree$t #-gg!i$g a$d other ra-d -po$ (-to#'

c. b-t #ore i#porta$t!y' to re$der eectie a$d eicie$t the co!!ectio$ o i#port a$d eport d-tie d-e

the State' +hich e$ab!e the goer$#e$t to carry o-t the -$ctio$ it ha bee$ i$tit-ted to peror#. *ao,et al., v. Court of Appeals, et al., and companion case, 2F S(RA >' & d. The i-a$ce by reg-!ar co-rt o +rit o pre!i#i$ary i$-$ctio$ i$ ei;-re a$d oreit-reproceedi$g beore the B-rea- o (-to# #ay aro-e -picio$ that the i-a$ce or gra$t +a orco$ideratio$ other tha$ the trict #erit o the cae. %Juno v. Ca"redo, 02 S(RA @> G200I& e. 3$der the doctri$e o pri#ary -ridictio$' the B-rea- o (-to# ha ec!-ie ad#i$itratie

-ridictio$ to co$d-ct earche' ei;-re a$d oreit-re o co$traba$d +itho-t i$terere$ce ro# theco-rt. 4t co-!d co$d-ct earche a$d ei;-re +itho-t $eed o a -dicia! +arra$t ecept i the earch i tobe co$d-cted i$ a d+e!!i$g p!ace.



=here a$ ad#i$itratie oice ha obtai$ed a tech$ica! epertie i$ a peciic -bect' ee$ the co-rt#-t deer to thi epertie. NOTES AN" (O**ENTS8 The B-rea- o (-to# co-!d earch a$d ei;e artic!e +itho-t $eed o a

-dicia! +arra$t -$!e the p!ace to be earched i a d+e!!i$g p!ace. 4$ -ch a cae c-to# re-ire a -dicia! +arra$t.

88. “A” clai!i"9 to be the ow"er of a $essel which is the sub?ect of custo!swarra"t of seiure a"d dete"tio" sou9ht the i"tercessio" of the RT0 to restrai" theBureau of 0usto!s fro! i"terferi"9 with his property ri9hts o$er the $essel. +ouldthe suit prosper7 S3<<ESTE" ANS=ER8 No. 7i re#edy +a $ot +ith the RT( b-t +ith the (TA' a i-e oo+$erhip o good i$ the c-tody o c-to# oicia! are +ithi$ the po+er o the (TA to deter#i$e. The (o!!ector o (-to# ha ec!-ie -ridictio$ oer ei;-re a$d oreit-re proceedi$g a$d tria!co-rt are prec!-ded ro# a-#i$g cog$i;a$ce oer -ch #atter ee$ thro-gh petitio$ or certiorari'prohibitio$ or #a$da#-. %Commissioner of Customs v. Court of Appeals, et al., <. R. No. 111202,0>'a$-ary 1' 2006&

8:. The custo!s authorities do "ot ha$e to pro$e to the satisfactio" of the courtthat the articles o" board a $essel were i!ported fro! abroad or are i"te"ded to beshipped abroad before they !ay e#ercise the power to effect custo!s searches5seiures5 or arrests pro$ided by law a"d co"ti"ue with the ad!i"istrati$e heari"9s. *(he Bureau of Customs, et al., v. 9gario, et al .' <.R. No. 1?0?1' *arch 20' 2000&

8<. The Tari a$d (-to# (ode a!!o+ the B-rea- o (-to# to reort to thead!i"istrati$e re!edy of seiure5 such as by e"forci"9 the ta# lie" o" the i!portedarticle whe" the i!ported articles could be fou"d a"d be sub?ect to seiure a"dforfeiture.

8>. The Tari a$d (-to# (ode a!!o+ the B-rea- o (-to# to reort to the ?udicialre!edy of fili"9 a" actio" i" court whe" the i!ported articles could "ot a"y!ore be

fou"d.

8@. Sectio" %8&' of the T00P states that seied articles !ay "ot be released u"der bo"d if there is prima facie e$ide"ce of fraud i" their i!portatio". Commissioner ofCustoms v. Court of (a) Appeals, et al., <. R. No. 1@1>16,1@' Cebr-ary 1' 200F Sectio$ 201. 1arrant for %etention of Property0Cash Bond. J 3po$ #a/i$g a$y ei;-re' the(o##iio$er ha!! i-e a +arra$t or the dete$tio$ o the propertyD a$d i the o+$er or i#porter deireto ec-re the re!eae o the property or !egiti#ate -e' the (o!!ector ha!!' +ith the approa! o the(o##iio$er o (-to#' -rre$der it -po$ the i!i$g o a cah bo$d' i$ a$ a#o-$t ied by hi#'co$ditio$ed -po$ the pay#e$t o the appraied a!-e o the artic!e a$d9or a$y i$e' epe$e a$d cot+hich #ay be ad-dged i$ the cae8 Provided, That such i!portatio" shall "ot be released u"der a"ybo"d whe" there is prima facie e$ide"ce of fraud i" the i!portatio" of the articleK Provided, -rther'That artic!e the i#portatio$ o +hich i prohibited by !a+ ha!! $ot be re!eaed -$der a$y circ-#ta$ce

+hatoeer K Provided ' i$a!!y' That $othi$g i$ thi ectio$ ha!! be co$tr-ed a re!iei$g the o+$er ori#porter ro# a$y cri#i$a! !iabi!ity +hich #ay arie ro# a$y io!atio$ o !a+ co##itted i$ co$$ectio$ +iththe i#portatio$ o the artic!e. %e#phai -pp!ied&

8. *"sta"ces where there is "o ri9ht of rede!ptio" of seied a"d forfeitedarticles- a. There i ra-dD b. The i#portatio$ i abo!-te!y prohibited' or c. The re!eae o the property +o-!d be co$trary to !a+. *(ransglo"e International, Inc. v. Court of



Appeals, et al., <.R. No. 1266' a$-ary 2>' 1FFF&

8C. 4$ Aznar v. Court of (a) Appeals, E SCRA E?H' reiterated i$ /arolan, r. v. Court of (a)

appeals, et al., ? SCRA H ' the S-pre#e (o-rt c!ariied that the fraud co"te!plated by law!ust be actual a"d "ot co"structi$e. 4t #-t be i$te$tio$a!' co$iti$g o deceptio$' +i!!-!!y a$dde!iberate!y do$e or reorted to i$ order to i$d-ce a$other to gie -p o#e right.

:&. ReDuisites for forfeiture of i!ported 9oods-

a. =ro$g-! #a/i$g by the o+$er' i#porter' eporter or co$ig$ee o a$y dec!aratio$ or aidait' orthe +ro$g-! #a/i$g or de!iery by the a#e pero$ o a$y i$oice' !etter or paper J a!! to-chi$g o$ thei#portatio$ or eportatio$ o #ercha$die. b. the a!ity o -ch dec!aratio$' aidait' i$oice' !etter or paperD a$d c. a$ i$te$tio$ o$ the part o the i#porter9co$ig$ee to eade the pay#e$t o the d-tie d-e.*Repu"lic, etc., v. (he Court of Appeals, et al .' <.R. No. 1F0>0' October 2' 2001&

:'. O" /a"uary @5 'CC5 the $essel ;=3 ”Star Ace5 ”co!i"9 fro! Si"9apore lade"with car9o5 e"tered the Port of Sa" 1er"a"do5 (a "io" for "eeded repairs. +he" theBureau of 0usto!s later beca!e suspicious that the $essel6s real purpose i" doci"9

was to s!u99le car9o i"to the cou"try5 seiure proceedi"9s were i"stituted a"dsubseDue"tly two +arra"ts of Seiure a"d ete"tio" were issued for the $essel a"dits car9o. 0esar does "ot ow" the $essel or a"y of its car9o but clai!ed a preferred !ariti!elie". 0esar the" brou9ht se$eral cases i" the RT0 to e"force his lie". +ould thesesuits prosper 7 S3<<ESTE" ANS=ER8 No. The B-rea- o (-to# hai$g irt obtai$ed poeio$ o the ee!a$d it good ha obtai$ed -ridictio$ to the ec!-io$ o the tria! co-rt. =he$ (ear ha i#p!eaded the ee! a a dee$da$t to e$orce hi a!!eged #ariti#e !ie$' i$ the RT('he bro-ght a$ actio$ in rem -$der the (ode o (o##erce -$der +hich the ee! #ay be attached a$do!d. 7o+eer' the baic operatie act i the act-a! or co$tr-ctie poeio$ o the res by the trib-$a!e#po+ered by !a+ to co$d-ct the proceedi$g. Thi #ea$ that to ac-ire -ridictio$ oer the ee!'

a a dee$da$t' the tria! co-rt #-t hae obtai$ed either act-a! or co$tr-ctie poeio$ oer it. Neither +a acco#p!ihed by the RT( a the ee! +a a!ready i$ the poeio$ o the B-rea- o (-to#. %Commissioner of Customs v. Court of Appeals, et al., <. R. No. 111202,0>' a$-ary 1' 2006& NOTES AN" (O**ENTS8 a. 1orfeiture of seied 9oods i" the Bureau of 0usto!s is i" the "ature of a proceedi"9 inrem5 i.e. directed agai$t the res or i#ported good a$d e$tai! a deter#i$atio$ o the !ega!ity o theiri#portatio$. 4$ thi proceedi$g' it i i$ !ega! co$te#p!atio$ the property ite! +hich co##it the io!atio$a$d i treated a the oe$der' +itho-t reere$ce +hatoeer to the character or co$d-ct o the o+$er. The i-e i !i#ited to +hether the i#ported good ho-!d be oreited a$d dipoed o i$ accorda$ce+ith !a+ or io!atio$ o the Tari a$d (-to# (ode. .*(ransglo"e International, Inc. v. Court of Appeals,et al .' <.R. No. 1266' a$-ary 2>' 1FFF&

Coreit-re o ei;ed good i$ the B-rea- o (-to# i a proceedi$g agai$t the good a$d $ot agai$tthe o+$er. % Asian (erminals, Inc. v. Bautista0Ricafort, < .R. No. 166F01' October 2@' 2006 citi$g

(ransglo"e#

:%. The 0ollector of 0usto!s upo" probable cause that the articles are i!ported or e#ported5 or are atte!pted to be i!ported or e#ported5 i" $iolatio" of the tariff a"dcusto!s laws shall issue a warra"t of seiure. %Sec. 6' Tit!e 444' (AO No. F,F& 4 the earch a$d ei;-re i to be co$d-cted i$ a d+e!!i$g p!ace' the$ a earch +arra$t ho-!d bei-ed by the reg-!ar co-rt $ot the B-rea- o (-to#. There #ay be i$ta$ce +here $o +arra$t i-ed by the B-rea- o (-to# or the reg-!ar co-rt ire-ired' a i$ earch a$d ei;-re o #otor ehic!e a$d ee!.



:8. S!u99led 9oods seied by $irtue of a court warra"t should be surre"dered tothe court that issued the warra"t a"d "ot to the Bureau of 0usto!s beca-e the goodare i$ custodia legis.

::. ecisio"s of the 0o!!issio"er of 0usto!s “i" cases i"$ol$i"9 liability forcusto!s duties5 fees or other !o"ey char9es” that !ust be appealed to the 0ourt ofTa# Appeals i$isio" withi" thirty F8&G days fro! receipt peciica!!y reer to hi deciio$ o$administrative ta) protest cases' a tated i$ Sectio$ 202 o the Tari a$d (-to# (ode o thePhi!ippi$e %(CCP &8

Sectio$ 202. Revie "y Court of (a) Appeals. J The party a99rie$ed by aruli"9 of the 0o!!issio"er i" a"y !atter brou9ht before hi! upo" protest or by hiactio$ or r-!i$g i$ a$y cae o ei;-re !ay appeal to the 0ourt of Ta# Appeals ' i$ the#a$$er a$d +ithi$ the period precribed by !a+ a$d reg-!atio$.

3$!e a$ appea! i #ade to the (o-rt o Ta Appea! i$ the #a$$er a$d +ithi$ the periodprecribed by !a+ a$d reg-!atio$' the actio$ or r-!i$g o the (o##iio$er ha!! be i$a! a$d

co$c!-ie. GE#phai -pp!ied.I %Pilipinas Shell Petroleum Corporation v. Commissioner of Customs, <. R. No.1@6?0' -$e 1?' 200F&

:<. Ad!i"istrati$e ta# protest u"der the Tariff a"d 0usto!s 0ode FT00PG. A ta

protet cae' -$der the T((P' i$o!e a protet o the !i-idatio$ o i#port e$trie. %Pilipinas ShellPetroleum Corporation v. Commissioner of Customs, <. R. No. 1@6?0' -$e 1?' 200F&

:>. (iDuidatio"5 defi"ed. A !i-idatio$ i the i$a! co#p-tatio$ a$d acertai$#e$t by the

co!!ector o the d-tie o$ i#ported #ercha$die' baed o$ oicia! report a to the -a$tity' character'a$d a!-e thereo' a$d the co!!ector: o+$ i$di$g a to the app!icab!e rate o d-tyD it i a/i$ to a$ae#e$t o i$ter$a! ree$-e tae -$der the Natio$a! 4$ter$a! Ree$-e (ode +here the ta !iabi!ity othe tapayer i dei$ite!y deter#i$ed. %Pilipinas Shell Petroleum Corporation v. Commissioner of Customs, <. R.No. 1@6?0' -$e 1?' 200F&

:@. The followi"9 letters of de!a"d ca" "ot be co"sidered as a liDuidatio" or a"assess!e"t of Shell6s i!port ta# liabilities that ca" be the sub?ect of a"ad!i"istrati$e ta# protest proceedi"9 before the 0o!!issio"er of 0usto!s whosedecisio" is appealable to the 0ourt of Ta# Appeals8

a. the O$e Stop Shop 4$ter,Age$cy Ta (redit a$d "-ty "ra+bac/ (e$ter *the Center# Noe#ber !etter' ig$ed by the Secretary o Ci$a$ce' i$or#i$g it o the ca$ce!!atio$ o the Ta (redit (ertiicate%T((&D b. the (o##iio$er o (-to#: Noe#ber 1F !etter re-iri$g She!! to rep!ace the a#o-$te-ia!e$t to the a#o-$t o the ca$ce!!ed T(( -ed by She!!D a$d c. the (o##iio$er o (-to#: co!!ectio$ !etter' i-ed thro-gh "ep-ty (o##iio$er Atty. Va!era'or#a!!y de#a$di$g the a#o-$t coered by the ca$ce!!ed T((.

No$e o thee !etter' ho+eer' ca$ be co$idered a a !i-idatio$ or a$ ae#e$t o She!!: i#portta !iabi!itie that ca$ be the -bect o a$ ad#i$itratie ta protet proceedi$g beore the repo$de$t+hoe deciio$ i appea!ab!e to the (TA. She!!: i#port ta !iabi!itie had !o$g bee$ co#p-ted a$dacertai$ed i$ the origi$a! ae#e$t' a$d She!! paid thee !iabi!itie -i$g the T(( tra$erred to it apay#e$t.

4t i ee$ a$ error to co$ider the !etter a a “reae#e$t” beca-e they reer to the a#e ta!iabi!itie o$ the a#e i#portatio$ coered by the origi$a! ae#e$t. The !etter #ere!y rei-ed theorigi$a! ae#e$t that +ere preio-!y ett!ed by She!! +ith the -e o the T((. 7o+eer' o$acco-$t o the ca$ce!!atio$ o the T((' the ta !iabi!itie o She!! -$der the origi$a! ae#e$t +ereco$idered -$paidD he$ce' the !etter a$d the actio$ or co!!ectio$.



=he$ She!! +e$t to the (TA' the i-e it raied i$ it petitio$ +ere a!! re!ated to the fact a$d eicacy o the pay#e$t #ade' peciica!!y the ge$-i$e$e o the T((D the abe$ce o d-e proce i$ thee$orce#e$t o the deciio$ to ca$ce! the T((D the act -rro-$di$g the ra-d i$ origi$a!!y ec-ri$g theT((D a$d the app!icatio$ o etoppe!. Thee are pay#e$t a$d co!!ectio$ i-e' $ot ta protet i-e+ithi$ the (TA: -ridictio$ to r-!e -po$.

She!! $eer proteted the origi$a! ae#e$t o it ta !iabi!itie a$d i$ act ett!ed the# -i$gthe T((. Thee origi$a! ae#e$t' thereore' hae beco#e i$a!' i$co$tetab!e' a$d beyo$d a$y-be-e$t protet proceedi$g' ad#i$itratie or -dicia!' to r-!e -po$.

To be ery precie' She!!: petitio$ beore the (TA pri$cipa!!y -etio$ed the a!idity o theca$ce!!atio$ o the T(( J a deciio$ that +a #ade $ot by the (o##iio$er o (-to#' b-t by the(e$ter. A the (TA ha $o -ridictio$ oer deciio$ o the (e$ter' She!!: re#edy agai$t theca$ce!!atio$ ho-!d hae bee$ a certiorari petitio$ beore the reg-!ar co-rt' $ot a ta protet cae beorethe (TA. Record do $ot ho+ that She!! eer aai!ed o thi re#edy.

A!ter$atie!y' a he!d i$ Shell v. Repu"lic of the Philippines, <.R. No. 161F>' *arch 6' 200?' >@S(RA @01' the appropriate or-# or She!! -$der the circ-#ta$ce o thi cae ho-!d be at theco!!ectio$ cae beore the RT( +here She!! ca$ p-t -p the act o it pay#e$t a a dee$e. %PilipinasShell Petroleum Corporation v. Commissioner of Customs, <. R. No. 1@6?0' -$e 1?' 200F&

:. A case beco!es ripe for fili"9 with the Re9io"al Trial 0ourt FRT0G5 as a

collectio" !atter after the fi"ality of the 0o!!issio"er of 0usto!s assess!e"t. %Pilipinas Shell Petroleum Corporation v. Commissioner of Customs, <. R. No. 1@6?0' -$e 1?' 200F citi$g Shell v.

Repu"lic of the Philippines, <.R. No. 161F>' *arch 6' 200?' >@ S(RA @01&

The ae#e$t ha !o$g bee$ i$a!' a$d thi recognition o i$a!ity re#oe a!! perceied hi$dra$ce'baed o$ thi cae' to the co$ti$-atio$ o the co!!ectio$ -it.

A -it or the co!!ectio$ o i$ter$a! ree$-e tae' +here the ae#e$t ha a!ready beco#e i$a! a$deec-tory' the actio$ to co!!ect i a/i$ to a$ actio$ to e$orce the -dg#e$t. No i$-iry ca$ be #adetherei$ a to the #erit o the

4$ !ight o the co$c!-io$ that the pree$t cae doe $ot i$o!e a deciio$ o the (o##iio$er o (-to# o$ a #atter bro-ght to hi# a a ta protet' Atty. Va!era: !ac/ o a-thority to i-e the co!!ectio$!etter a$d to i$tit-te the co!!ectio$ -it i irre!ea$t. Cor thi a#e reao$' the i$-$ctio$ agai$t Atty.Va!era ca$$ot be i$o/ed to e$oi$ the co!!ectio$ o -$paid tae d-e ro# She!!. %Pilipinas ShellPetroleum Corporation v. Commissioner of Customs, supra&

(O0A( ,O3ERN;ENT TA)AT*ON

'. The fu"da!e"tal pri"ciples of local ta#atio" are8 a. 3$ior#ityD b. Tae' ee' charge a$d other i#poitio$ ha!! be e-itab!e a$d baed o$ abi!ity to pay' orp-b!ic p-rpoe' $ot -$-t' eceie' oppreie or co$icatory' $ot co$trary to !a+' p-b!ic po!icy'$atio$a! eco$o#ic po!icy or i$ retrai$t o tradeD c. The !ey a$d co!!ectio$ ha!! $ot be !et to a$y priate pero$D d. 4$-re o!e!y to the !oca! goer$#e$t -$it !eyi$g the taD e. The progreiity pri$cip!e #-t be obered.

%. A law which depri$es local 9o$er"!e"t u"its of their power to ta# would beu"co"stitutio"al. The co$tit-tio$ ha de!egated to !oca! goer$#e$t the po+er to !ey tae' eea$d other charge. Thi co$tit-tio$a! de!egatio$ #ay o$!y be re#oed by a co$tit-tio$a! a#e$d#e$t.

8. "der the "ow pre$aili"9 0o"stitutio"5 where there is "either a 9ra"t "orprohibitio" by statute5 the ta#i"9 power of local 9o$er"!e"ts !ust be dee!ed toe#ist althou9h 0o"9ress !ay pro$ide statutory li!itatio"s a"d 9uideli"es i$ order toaeg-ard the iabi!ity a$d e!,-icie$cy o !oca! goer$#e$t -$it by direct!y gra$ti$g the# ge$era!a$d broad ta po+er. %City +overnment of San Pa"lo, $aguna, et al., v. Reyes, et al., <.R. No. 12@@0?'



*arch 2>' 1FFF&

:. The (ocal ,o$er"!e"t 0ode e#plicitly authories pro$i"ces a"d cities5"otwithsta"di"9 “a"y e#e!ptio" 9ra"ted by a"y law or other special law” to i!posea ta# o" busi"esses e"?oyi"9 a fra"chise. 4$dicatie o the !egi!atie i$te$t to carry o-t theco$tit-tio$a! #a$date o eti$g broad ta po+er to !oca! goer$#e$t -$it' the )oca! <oer$#e$t

(ode ha +ithdra+$ ta ee#ptio$ or i$ce$tie theretoore e$oyed by certai$ e$titie. *City+overnment of San Pa"lo, $aguna, et al., v. Reyes, et al., <.R. No. 12@@0?' *arch 2>' 1FFF&

<. Philippine Lon! Distance #elephone Compan$, %nc., v. Cit$ of Davao, et al.,etc., ,. R. No. ':8>@5 Au9ust %%5 %&&'5 -phe!d the a-thority o the (ity o "aao' a !oca!goer$#e$t -$it' to i#poe a$d co!!ect a !oca! ra$chie ta beca-e the )oca! <oer$#e$t ha+ithdra+$ a!! ta ee#ptio$ preio-!y e$oyed by a!! pero$ a$d a-thori;ed !oca! goer$#e$t -$it toi#poe a ta o$ b-i$e e$oyi$g a ra$chie ta $ot+ithta$di$g the gra$t o ta ee#ptio$ to the#.

>. E#plai" the co"cept of the “paradi9! shift” i" local 9o$er"!e"t ta#atio". S3<<ESTE" ANS=ER8 “Paradig# hit” ro# ec!-ie (o$greio$a! po+er to direct gra$t o tai$g

po+er to !oca! !egi!atie bodie. The po+er to ta i $o !o$ger eted ec!-ie!y o$ (o$greD !oca!

!egi!atie bodie are $o+ gie$ direct a-thority to !ey tae' ee a$d other charge p-r-a$t to Artic!eL' ectio$ > o the 1F?@ (o$tit-tio$. %Batangas Poer Corporation v. Batangas City, et al. <. R. No.1>26@>' a$d co#pa$io$ cae' Apri! 2?' 200 citi$g !ational Poer Corporation v. City of Ca"anatuan, <.R. No. 1F110' Apri! F' 200&

@. The fu"da!e"tal law did "ot i"te"d the direct 9ra"t to local 9o$er"!e"t u"its tobe absolute a"d u"co"ditio"al' the co$tit-tio$a! obectie obio-!y i to e$-re that' +hi!e !oca!goer$#e$t -$it are bei$g tre$gthe$ed a$d #ade #ore a-to$o#o-' the !egi!at-re #-t ti!! ee to itthat8 a. the tapayer +i!! $ot be oer,b-rde$ed or add!ed +ith #-!tip!e a$d -$reao$ab!e i#poitio$D b. each !oca! goer$#e$t -$it +i!! hae it air hare o aai!ab!e reo-rceD c. the reo-rce o the $atio$a! goer$#e$t +i!! be -$d-!y dit-rbedD a$d d. !oca! taatio$ +i!! be air' -$ior# a$d -t. %Manila &lectric Company v. Province of $aguna, et al.,

<.R. No. 11>F' *ay >' 1FFF&

. Ta#i"9 power of the local 9o$er"!e"t is li!ited. The tai$g po+er o !oca!goer$#e$t i !i#ited i$ the e$e that (o$gre ca$ e$act !egi!atio$ gra$ti$g ta ee#ptio$. =hi!e the yte# o !oca! goer$#e$t taatio$ ha cha$ged +ith the o$et o the 1F?@ (o$tit-tio$' thepo+er o !oca! goer$#e$t -$it to ta i ti!! !i#ited.

=hi!e the po+er to ta by !oca! goer$#e$t #ay be eercied by !oca! !egi!atie bodie' $o !o$ger#ere!y be irt-e o a a!id de!egatio$ a beore' b-t p-r-a$t to direct a-thority co$erred by Sectio$ >'

Artic!e L o the (o$tit-tio$' the baic doctri$e o$ !oca! taatio$ re#ai$ ee$tia!!y the a#e' 4the poer to ta) is 5still6 primarily vested in the Congress.7 %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <.

R. No. 1660?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc.,<.R. No. 16201>' *arch 6' 2006' ? S(RA 16F i$ t-r$ reerri$g to Mactan Ce"u International Airport Authority, v.Marcos, <.R. No. 1200?2' Septe#ber 11' 1FF6' 261 S(RA 66@' 6?0 #

C. 1urther a!plificatio" by Ber"as of the local 9o$er"!e"t6s power to ta#.

“=hat ithe eect o Sectio$ > o$ the ica! poitio$ o #-$icipa! corporatio$M Sectio$ > doe $ot cha$ge thedoctri$e that #-$icipa! corporatio$ do $ot poe i$here$t po+er o taatio$. =hat it doe i to co$er #-$icipa! corporatio$ a ge$era! po+er to !ey tae a$d other+ie create o-rce o ree$-e. They $o!o$ger hae to +ait or a tat-tory gra$t o thee po+er. The po+er o the !egi!atie a-thority re!atie tothe ica! po+er o !oca! goer$#e$t ha bee$ red-ced to the a-thority to i#poe !i#itatio$ o$#-$icipa! po+er. *oreoer' thee !i#itatio$ #-t be “co$ite$t +ith the baic po!icy o !oca!a-to$o#y.” The i#porta$t !ega! eect o Sectio$ > i th- to reere the pri$cip!e that do-bt are



reo!ed agai$t #-$icipa! corporatio$. 7e$ceorth' i$ i$terpreti$g tat-tory proiio$ o$ #-$icipa!ica! po+er' do-bt +i!! be reo!ed i$ aor o #-$icipa! corporatio$. 4t i -$dertood' ho+eer' thattae i#poed by !oca! goer$#e$t #-t be or a p-b!ic p-rpoe' -$ior# +ithi$ a !oca!ity' #-t $ot beco$icatory' a$d #-t be +ithi$ the -ridictio$ o the !oca! -$it to pa.” %8uezon City, et al., v. ABS0CB!Broadcasting Corporation' <. R. No. 1660?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan(elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' ? S(RA 16F&

'&. Reco"ciliatio" of the local 9o$er"!e"t6s authority to ta# a"d the0o"9ressio"al 9e"eral ta#i"9 power. (o$gre ha the i$here$t po+er to ta' +hich i$c!-de the

po+er to gra$t ta ee#ptio$. O$ the other ha$d' the po+er o !oca! goer$#e$t' -ch a proi$ce a$d citie orea#p!e -e;o$ (ity' to ta i precribed by Sectio$ 1>1 i$ re!atio$ to Sectio$ 1@ o the )<( +hich epre!yproide that $ot+ithta$di$g a$y ee#ptio$ gra$ted by a$y !a+ or other pecia! !a+' the (ity or a proi$ce #ayi#poe a ra$chie ta. 4t #-t be $oted that Sectio$ 1@ o the )<( doe $ot prohibit gra$t o -t-re ee#ptio$.

The S-pre#e (o-rt i$ a erie o cae ha -tai$ed the po+er o (o$gre to gra$t ta ee#ptio$oer a$d aboe the po+er o the !oca! goer$#e$t: de!egated po+er to ta. %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 1660?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' ? S(RA 16&

“4$deed' the gra$t o tai$g po+er to !oca! goer$#e$t -$it -$der the (o$tit-tio$ a$d the )<( doe$ot aect the po+er o (o$gre to gra$t ee#ptio$ to certai$ pero$' p-r-a$t to a dec!ared $atio$a!po!icy. The !ega! eect o the co$tit-tio$a! gra$t to !oca! goer$#e$t i#p!y #ea$ that i$ i$terpreti$g

tat-tory proiio$ o$ #-$icipa! tai$g po+er' do-bt #-t be reo!ed i$ aor o #-$icipa!corporatio$.” GI"id.' reerri$g to Philippine $ong %istance (elephone Company, Inc. *P$%(# vs. City of%avao6

''. Professio"al ta# !ay be i!posed by a pro$i"ce or city but "ot by a!u"icipality or bara"9ay.

a. Tra$actio$ taed8 Eercie or practice o proeio$ re-iri$g goer$#e$t !ice$-reea#i$atio$. b. Ta rate8 4$ Accorda$ce +ith a tai$g ordi$a$ce +hich ho-!d $ot eceed P00.00. c. Ta bae8 Reao$ab!e c!aiicatio$ by the a$gg-$ia$. d. Eceptio$8 Pay#e$t to o$e proi$ce or city $o !o$ger -bect to a$y other $atio$a! or !oca! ta'!ice$e or ee or the practice o -ch proeio$ i$ a$y part o the Phi!ippi$e proeio$a! ec!-ie!ye#p!oyed i$ the goer$#e$t.

e. "ate o pay#e$t8 or o$ beore a$-ary 1 or e$gagi$g i$ the proeio$.. P!ace o pay#e$t8 Proi$ce or city +here the proeio$a! practice hi proeio$ or +here he

#ai$tai$ hi pri$cipa! oice i$ cae he practice hi proeio$ i$ eera! p!ace.

'%. ReDuire!e"ts- A$y i$diid-a! or corporatio$ e#p!oyi$g a pero$ -bect to proeio$a! taha!! re-ire pay#e$t by that pero$ o the ta o$ hi proeio$ beore e#p!oy#e$t a$d a$$-a!!ythereater. A$y pero$ -bect to the proeio$a! ta ha!! +rite i$ deed' receipt' precriptio$' report'boo/ o acco-$t' p!a$ a$d deig$' -rey a$d #ap' a the cae #ay be' the $-#ber o the oicia!receipt i-ed to hi#.

Ee#ptio$8 Proeio$a! ec!-ie!y e#p!oyed i$ the goer$#e$t ha!! be ee#pt ro# pay#e$t. %Sec. 1F' )<(& NOTE8 Cor the p-rpoe o co!!ecti$g the ta' the proi$cia! or city trea-rer or hi d-!y a-thori;ed

repree$tatie ha!! re-ire ro# -ch proeio$a! their c-rre$t a$$-a! regitratio$ card i-ed byco#pete$t a-thority beore accepti$g pay#e$t o their proeio$a! ta or the c-rre$t year. The PR(ha!! !i/e+ie re-ire the proeio$a! pree$tatio$ o proo o pay#e$t beore regitratio$ oproeio$a! or re$e+a! o their !ice$e. %!at par.' Art. 22?' R-!e a$d Reg-!atio$ 4#p!e#e$ti$g the)oca! <oer$#e$t (ode o 1FF1&

'8. +ho are the professio"als who5 if they are i" practice of their professio"5 aresub?ect to professio"al ta# 7 S3<<ESTE" ANS=ER8 The proeio$a! -bect to the proeio$a! ta are o$!y thoe +ho hae



paed the bar ea#i$atio$' or a$y board or other ea#i$atio$ co$d-cted by the Proeio$a!Reg-!atio$ (o##iio$ %PR(&. or ea#p!e' a !a+yer +ho i a!o a (ertiied P-b!ic Acco-$ta$t %(PA&#-t pay the proeio$a! ta i#poed o$ !a+yer a$d that ied or (PA' i he i to practice bothproeio$. GSec. 2? %&' R-!e LLL' R-!e a$d Reg-!atio$ 4#p!e#e$ti$g the )oca! <oer$#e$t (odeo 1FF1I

':. ) 0ity issued a "otice of assess!e"t a9ai"st AB0 0o"do!i"iu! 0orporatio"for u"paid busi"ess ta#es. The 0o"do!i"iu! 0orporatio" is a duly co"stitutedco"do!i"iu! corporatio" i" accorda"ce with the 0o"do!i"iu! Act which ow"s a"dholds title to the co!!o" a"d li!ited co!!o" areas of the co"do!i"iu!. *ts!e!bership co!prises the u"it ow"ers a"d is authoried u"der its By(aws tocollect re9ular assess!e"ts fro! its !e!bers for operati"9 e#pe"ses5 capitale#pe"ditures o" the co!!o" areas a"d other special assess!e"ts as pro$ided for i"the ;aster eed with 7eclaratio" of Restrictio"s of the 0o"do!i"iu!. AB0 0o"do!i"iu! 0orporatio" i"sists that the ) 0ity Re$e"ue 0ode a"d the (ocal,o$er"!e"t 0ode do "ot co"tai" pro$isio"s upo" which the assess!e"t could bebased. Resol$e the co"tro$ersy. S3<<ESTE" ANS=ER8 AB( i correct. (o$do#i$i-# corporatio$ are ge$era!!y ee#pt ro# !oca!

b-i$e taatio$ -$der the )oca! <oer$#e$t (ode' irrepectie o a$y !oca! ordi$a$ce that ee/ todec!are other+ie. L (ity' i a-thori;ed -$der the )oca! <oer$#e$t (ode' to i#poe a ta o$ b-i$e' +hich i dei$ed-$der the (ode a ”trade or co##ercia! actiity reg-!ar!y e$gaged i$ a a #ea$ o !ie!ihood or +ith aie+ to proit.” By it ery $at-re a co$do#i$i-# corporatio$ i $ot e$gaged i$ b-i$e' a$d a$y proitthat it derie i #ere!y i$cide$ta!' he$ce it #ay $ot be -bect to b-i$e tae. %Lamane , etc. v. BA$epanto Condominium Corporation, <. R. No. 1>FF' October 2>' 200>&

'<. Authority of (ocal ,o$er"!e"t "its F(,sG such as the 0ity of ;a"ila to

i!pose busi"ess ta#es. Sectio$ 1 o the )<(' i the ery o-rce o the po+er o #-$icipa!itie

a$d citie to i#poe a !oca! b-i$e ta' a$d to +hich a$y !oca! b-i$e ta i#poed by citie or#-$icipa!itie -ch a the (ity o *a$i!a #-t co$or#. 4t i appare$t ro# a per-a! thereo that +he$ a

#-$icipa!ity or city ha a!ready i#poed a b-i$e ta o$ #a$-act-rer' etc. o !i-or' diti!!ed pirit'+i$e' a$d a$y other artic!e o co##erce' p-r-a$t to Sectio$ 1%a& o the )<(' aid #-$icipa!ity or city#ay $o !o$ger -bect the a#e #a$-act-rer' etc. to a b-i$e ta -$der Sectio$ 1%h& o the a#e(ode. Sectio$ 1%h& #ay be i#poed o$!y o$ b-i$ee that are -bect to ecie ta' VAT' orperce$tage ta -$der the N4R(' a$d that are “"ot otherwise specified i" precedi"9 para9raphs.” 4$the a#e +ay' b-i$ee -ch a repo$de$t:' a!ready -bect to a !oca! b-i$e ta -$der Sectio$ 1o Ta Ordi$a$ce No. @@F G+hich i baed o$ Sectio$ 1%a& o the )<(I' ca$ $o !o$ger be #ade !iab!eor !oca! b-i$e ta -$der Sectio$ 21 o the a#e Ta Ordi$a$ce G+hich i baed o$ Sectio$ 1%h& othe )<(I. %(he City of Manila, et al., v. Coca0Cola Bottlers Philippines, Inc., <. R. No. 1?1?>' A-g-t '200F&

REA( PROPERT2 TA)AT*ON

'. The fu"da!e"tal pri"ciples of real property ta#atio" are- a. Appraia! at c-rre$t a$d air #ar/et a!-eD b. (!aiicatio$ or ae#e$t o$ the bai o act-a! -eD c. Ae#e$t o$ the bai o -$ior# c!aiicatio$D d. Appraia!' ae#e$t' !ey a$d co!!ectio$ ha!! $ot be !et to a priate pero$D e. Appraia! a$d ae#e$t ha!! be e-itab!e. NOTES AN" (O**ENTS8 Rea! propertie ha!! be appraied at the c-rre$t a$d air #ar/et a!-epreai!i$g i$ the !oca!ity +here the property i it-ated a$d c!aiied or ae#e$t p-rpoe o$ the



bai o it act-a! -e. % Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R. No. 1>126'October 11' 200>&

%. The reaso"able !aret $alue is deter!i"ed by the assessor i" the for! of aschedule of fair !aret $alues.

The ched-!e i the$ e$acted by the !oca! sanggunian.

8. 1air !aret $alue is the price at which a property !ay be sold by a seller whois "ot co!pelled to sell a"d bou9ht by a buyer who is "ot co!pelled to buy5 ta/i$g i$toco$ideratio$ a!! -e to +hich the property i adopted a$d #ight i$ reao$ be app!ied.

The criterio$ etab!ihed by the tat-te co$te#p!ate a hypothetica! a!e. 7e$ce' the b-yer $eed $otbe act-a! a$d eiti$g p-rchaer. % Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al.,<. R. No. 1>126' October 11' 200> & NOTES AN" (O**ENTS8 4$ ii$g the a!-e o rea! property' aeor hae to co$ider a!! thecirc-#ta$ce a$d e!e#e$t o a!-e a$d #-t eercie pr-de$t dicretio$ i$ reachi$g co$c!-io$. % Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R. No. 1>126' October 11'200>& Preparatio" of fair !aret $alues- a. The city or #-$icipa! aeor ha!! prepare a ched-!e o air #ar/et a!-e or the diere$t

c!ae o rea! property it-ated i$ their repectie )oca! <oer$#e$t 3$it or the e$act#e$t o a$ordi$a$ce by the sanggunian co$cer$edD a$d b. The ched-!e o air #ar/et a!-e ha!! be p-b!ihed i$ a $e+paper o ge$era! circ-!atio$ i$ theproi$ce' city or #-$icipa!ity co$cer$ed or the poti$g i$ the proi$cia! capito! or other p!ace a re-iredby !a+. *$opez v. City of Manila, et al., <.R. No. 12@1F' Cebr-ary 1F' 1FFF& Proposed fair !aret $alues of real property i" a local 9o$er"!e"t u"it as well as the ordi"a"ceco"tai"i"9 the schedule !ust be published i" full or three %& co$ec-tie day i$ a $e+paper o!oca! circ-!atio$' +here aai!ab!e' +ithi$ te$ %10& day o it approa!' a$d poted i$ at !eae t+o %2&pro#i$e$t p!ace i$ the proi$cia! capito!' city' #-$icipa! or "arangay ha!! or a #i$i#-# o three %&co$ec-tie +ee/. */iguerres v. Court of Appeals, et al,. <.R. No. 11F1@2' *arch 2>' 1FFF&

:. Approaches i" esti!ati"9 the fair !aret $alue of real property for realproperty ta# purposes 7 a. Sa!e A$a!yi Approach. The a!e price paid i$ act-a! #ar/et tra$actio$ i co$idered byta/i$g i$to acco-$t a!id a!e data acc-#-!ated ro# a#o$g the Regitrar o "eed' $otarie p-b!ic'appraier' bro/er' dea!er' ba$/ oicia!' a$d ario- o-rce tated -$der the )oca! <oer$#e$t(ode. b. 4$co#e (apita!i;atio$ Approach. The a!-e o a$ i$co#e,prod-ci$g property i $o #ore tha$ theret-r$ deried ro# it. A$ a$a!yi o the i$co#e prod-ced i $eceary i$ order to eti#ate the -#+hich #ight be i$eted i$ the p-rchae o the property. c. Reprod-ctio$ cot approach i a or#a! approach -ed ec!-ie!y $ appraii$g #a$,#adei#proe#e$t -ch a b-i!di$g a$d other tr-ct-re' baed o$ -ch data a #ateria! a$d !abor cot toreprod-ce a $e+ rep!ica o the i#proe#e$t. The aeor -e a$y or a!! o thee approache i$ a$a!y;i$g the data gathered to arrie at theeti#ated air #ar/et a!-e to be i$c!-ded i$ the ordi$a$ce co$tai$i$g the ched-!e o air #ar/et a!-e. % Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R. No. 1>126' October 11' 200>

citi$g )oca! Ae#e$t Reg-!atio$ No. 1,F2&

<. A" ordi"a"ce whereby the “parcels of la"d sold5 ceded5 tra"sferred a"dco"$eyed for re!u"eratory co"sideratio" after the effecti$ity of this re$isio" shall besub?ect to real estate ta# based o" the actual a!ou"t reflected i" the deed ofco"$eya"ce or the curre"t appro$ed o"al $aluatio" of the Bureau of *"ter"alRe$e"ue pre$aili"9 at the ti!e of sale5 cessio"5 tra"sfer a"d co"$eya"ce5 whiche$eris hi9her5 as e$ide"ced by the certificate of pay!e"t of the capital 9ai"s ta# issued



therefore” is *N3A(* bei$g co$trary to p-b!ic po!icy a$d or retrai$i$g trade or the o!!o+i$greao$8 a. 4t #a$date a$ ec!-ie r-!e i$ deter#i$i$g the air #ar/et a!-e a$d depart ro# the etab!ihedproced-re -ch a the a!e a$a!yi approach' the i$co#e capita!i;atio$ approach a$d the reprod-ctio$approach proided -$der the r-!e i#p!e#e$ti$g the tat-te. 4t -$d-!y i$terere +ith the d-tie tat-tori!yp!aced -po$ the !oca! aeor by co#p!ete!y dipe$i$g +ith hi a$a!yi a$d dicretio$ +hich the )oca!

<oer$#e$t (ode a$d the reg-!atio$ re-ire to be eercied. A$ ordi$a$ce that co$trae$e a$ytat-te i ultra vires a$d oid. b. The “co$ideratio$ approach” i$ the ordi$a$ce i i!!ega! i$ce “the appraia!' ae#e$t' !ey a$dco!!ectio$ o rea! property ta ha!! $ot be !et to a$y priate pero$”' it +i!! a!o co#p!ete!y detroy the-$da#e$ta! pri$cip!e i$ rea! property taatio$ J that rea! property ha!! be c!aiied' a!-ed a$daeed o$ the bai o it act-a! -e regard!e o +here !ocated' +hoeer o+$ it' a$d +hoeer -eit. A!!o+i$g the partie to a priate a!e to dictate the air #ar/et a!-e o the property +i!! dipe$e +iththe diti$ctio$ o act-a! -e tated i$ the )oca! <oer$#e$t (ode a$d i$ the reg-!atio$. c. The i$a!idity i $ot c-red by the prhae “+hicheer i higher” beca-e a$ i$tegra! part o thatyte# ti!! per#it a!-i$g rea! property i$ diregard o it “act-a! -e.” d. The ordi$a$ce +o-!d re-!t to rea! property ae#e$t #ore tha$ o$ce eery three %& yeara$d that i $ot the co$greio$a! i$te$t a ho+$ i$ the proiio$ o the )oca! <oer$#e$t (ode a$d thereg-!atio$. (o$e-e$t!y' the rea! property ta b-rde$ ho-!d $ot be i$terpreted to i$c!-de thoe beyo$d+hat the (ode or the reg-!atio$ epre!y c!ear!y tate. e. The proio +o-!d proide a chi!!i$g eect o$ rea! property o+$er or ad#i$itrator to e$ter ree!yi$to co$tract re!ecti$g the i$creai$g a!-e o rea! propertie i$ accorda$ce +ith preai!i$g #ar/etco$ditio$. =hi!e the )oca! <oer$#e$t (ode proide that the ae#e$t o rea! property ha!! $ot be i$creaedo$ce eery three %& year' the -etio$ed proio -bect the property to a higher ae#e$t eeryti#e a a!e tra$actio$ i #ade. Rea! property o+$er +o-!d thereore potpo$e a!e -$ti! ater the!ape o the three %& year period' or i they do o +ithi$ the aid period they ha!! be co#pe!!ed todipoe o the property at a price $ot eceedi$g the !at prior co$eya$ce i$ order to aoid a higher taae#e$t. 4$ the aboe t+o ce$ario rea! property o+$er are eectie!y pree$ted ro# obtai$i$g the bet pricepoib!e or their propertie a$d -$d-!y ha#per the e-itab!e ditrib-tio$ o +ea!th. % Allied Ban-ingCorporation, etc., v. 8uezon City +overnment, et al., <. R. No. 1>126' October 11' 200>&

>. E#a!ples of perso"al property u"der the ci$il law that !ay be co"sidered asreal property for purposes of ta#es. Pero$a! property -$der the cii! !a+ #ay be co$idered area! property or p-rpoe o tae +here the property i ee$tia! to the co$d-ct o the b-i$e.

a. 3$dergro-$d ta$/ are ee$tia! to the co$d-ct o the b-i$e o a gao!i$e tatio$ +itho-t +hichit +o-!d $ot be operatio$a!. %Calte) Phils., Inc. v. Central Board of Assessment Appeals, et al., 11 S(RA 2F6&

b. )ight Rai! Tra$it %)RT& i#proe#e$t -ch a b-i!di$g' carriage+ay' pae$ger ter#i$a!tatio$' a$d i#i!ar tr-ct-re do $ot or# part o the p-b!ic road i$ce the or#er are co$tr-cted oerthe !atter i$ -ch a +ay that the !o+ o ehic-!ar traic +o-!d $ot be i#paired. The carriage+ay a$dter#i$a! ere a -$ctio$ diere$t ro# the p-b!ic road. C-rther#ore' they are $ot ope$ to -e by thege$era! p-b!ic he$ce $ot ee#pt ro# rea! property tae. Ee$ gra$ti$g that the $atio$a! goer$#e$to+$ the carriage+ay a$d ter#i$a! tatio$' the property i $ot ee#pt beca-e their be$eicia! -e habee$ gra$ted to )RTA a taab!e e$tity. *$ight Rail (ransit Authority v. Central Board of Assessment Appeals, etal., <. R. No. 12@16' October 12' 2000&

c. Barge o$ +hich +ere #o-$ted ga t-rbi$e po+er p!a$t deig$ated to ge$erate e!ectrica! po+er'the -e! oi! barge +hich -pp!ied -e! oi! to the po+er p!a$t barge' a$d the acceory e-ip#e$t#o-$ted o$ the barge +ere -bect to rea! property tae. *oreoer' Artic!e 1>%F& o the (ii! (ode proide that “GdIoc/ a$d tr-ct-re +hich' tho-gh !oati$g'are i$te$ded by their $at-re a$d obect to re#ai$ at a ied p!ace o$ a rier' !a/e or coat” are co$ideredi##oab!e property by deti$atio$ bei$g i$te$ded by the o+$er or a$ i$d-try or +or/ +hich #ay becarried o$ i$ a b-i!di$g or o$ a piece o !a$d a$d +hich te$d direct!y to #eet the $eed o aid i$d-try or+or/. %/&$S &nergy, Inc., v. Province of Batangas, <. R. No. 16?>>@' Cebr-ary 16' 200@ a$d co#pa$io$ cae&



@. "paid realty ta#es attach to the property a"d is char9eable a9ai"st the perso"who had actual or be"eficial use a"d possessio" of it re9ardless of whether or "ot heis the ow"er. To i#poe the rea! property ta o$ the -be-e$t o+$er +hich +a $either the o+$er$ot the be$eicia! -er o the property d-ri$g the deig$ated period +o-!d $ot o$!y be co$trary to !a+ b-ta!o -$-t.

(o$e-e$t!y' *ERA)(O the or#er o+$er9-er o the property +a re-ired to pay the ta

i$tead o the $e+ o+$er NAPO(OR. *Manila &lectric Company v. Barlis, <.R. No. 1121' *ay 1?' 2001&NOTES AN" (O**ENTS8 The aboe *ay 1?' 2001 deciio$ +a et aide by the S-pre#e

(o-rt +he$ it gra$ted the petitio$er: eco$d #otio$ or reco$ideratio$ o$ -$e 2F' 200. The a-thor-b#it that the aboe r-!i$g i$ the *ay 1?' 2001 deciio$ i ti!! a!id' $ot o$ the bai o the *ay 1?'2001 deciio$ b-t i$ the !ight o pro$o-$ce#e$t o the S-pre#e (o-rt i$ other cae. Th-' do $ot citethe doctri$e a e#a$ati$g ro# the *ay 1?' 2001 deciio$.

. Secretary of /ustice ca" tae co9"ia"ce of a case i"$ol$i"9 theco"stitutio"ality or le9ality of ta# ordi"a"ces where there are factual issues i"$ol$ed.*/iguerres v. Court of Appeals, et al., <.R. No. 11F1@2' *arch 2>' 1FFF&

Ta#payer files appeal to the Secretary of /ustice5 withi" 8& days fro! effecti$itythereof. 4$ cae the Secretary decide the appea!' a period a!o o 0 day i a!!o+ed or a$ aggrieedparty to go to co-rt. B-t i the Secretary doe $ot act thereo$' ater the !ape o 60 day' a party co-!d

a!ready ee/ re!ie i$ co-rt +ithi$ 0 day ro# the !ape o the 60 day period. Thee three eparate period are c!ear!y gie$ or co#p!ia$ce a a prere-iite beore ee/i$g redrei$ a co#pete$t co-rt. S-ch tat-tory period are et to pree$t de!ay a +e!! a e$ha$ce the order!y a$dpeedy dicharge o -dicia! -$ctio$. Cor thi reao$ the co-rt co$tr-e thee proiio$ o tat-te a#a$datory. *Reyes, et al., v. Court of Appeals, et al .' <.R. No. 11?2' "ece#ber 10' 1FFF&

C. Public heari"9s are !a"datory prior to appro$al of ta# ordi"a"ce' b-t thi ti!!re-ire the tapayer to add-ce eide$ce to ho+ that $o p-b!ic heari$g eer too/ p!ace. *Reyes, et al., v.

Court of Appeals, et al., <.R. No. 11?2' "ece#ber 10' 1FFF& P-b!ic heari$g are re-ired to be co$d-ctedprior to the e$act#e$t o a$ ordi$a$ce i#poi$g rea! property tae. %/iguerres v. Court of Appeals, et al.,<.R. No. 11F1@2' *arch 2>' 1FFF&

'&. The co"curre"t a"d si!ulta"eous re!edies afforded local 9o$er"!e"t u"itsi" e"forci"9 collectio" of real property ta#es- a. "itrai$t o pero$a! propertyD b. Sa!e o de!i$-e$t rea! property' a$d c. (o!!ectio$ o rea! property ta thro-gh ordi$ary co-rt actio$.

''. Notice a"d publicatio"5 as well as the le9al reDuire!e"ts for a ta#deli"Due"cy sale5 are !a"datory' a$d the ai!-re to co#p!y there+ith ca$ i$a!idate the a!e. Theprecribed $otice #-t be e$t to co#p!y +ith the re-ire#e$t o d-e proce. *%e :necht, et al,. v. Court

of Appeals; %e :necht, et al., v. 'onora"le Sayo, 2F0 S(RA 22'26&

'%. The reaso" behi"d the "otice reDuire!e"t is that ta# sales are ad!i"istrati$eproceedi"9s which are in personam i" "ature. *Puzon v. A"ellera, 16F S(RA @?F' @F>; %e Asis v.

I.A.C., 16F S(RA 1&

'8. 1E(S E"er9y5 *"c.5 had a co"tract to supply NP0 with the electricity 9e"erated by 1E(S6 power bar9es. The co"tract also stated that NP0 shall berespo"sible for all real estate ta#es a"d assess!e"ts. 1E(S the" recei$ed a"assess!e"t of real property ta#es o" its power bar9es fro! the Pro$i"cial Assessorof Bata"9as. *f filed a !otio" for reco"sideratio" with the Pro$i"cial Assessor.



a. po" de"ial5 1E(S ele$ated the !atter to the (ocal Board of Assess!e"tAppeals F(BAAG5 where it raised the followi"9 issues- 'G Si"ce NP0 is ta#e#e!pt the" 1E(6s should also be ta#e#e!pt because of

its co"tract with NP0. %G The power bar9es are "ot real property sub?ect to real property ta#es. b. po" the other ha"d the (ocal Treasurer i"sists that the assess!e"t hasattai"ed a state of fi"ality he"ce the appeal to the (BAA should be dis!issed. Rule o" the co"flicti"9 co"te"tio"s. S3<<ESTE" ANS=ER8

a. A!! the co$te$tio$ o CE)S are +itho-t #erit8 1& NP( i $ot the o+$er o the po+er barge $or the operator o the po+er barge. The ta

ee#ptio$ prii!ege gra$ted to NP( ca$$ot be ete$ded to CE)S. the coe$a$t i bet+ee$ NP(a$d CE) a$d doe $ot bi$d a third pero$ $ot priy to the co$tract -ch a the Proi$ce oBata$ga.

2& The S-pre#e (o-rt o Ne+ or/ i$ Consolidated &dison Company of !e Lor-, Inc., et al., v. (he City of !e Lor-, et al., ?0 *ic. 2d 106> %1F@>& cited i$ /&$S &nergy, Inc., v. Province ofBatangas, <. R. No. 16?>>@' Cebr-ary 16' 200@ a$d co#pa$io$ cae' he!d that barge o$ +hich+ere #o-$ted ga t-rbi$e po+er p!a$t deig$ated to ge$erate e!ectrica! po+er' the -e! oi! barge+hich -pp!ied -e! oi! to the po+er p!a$t barge' a$d the acceory e-ip#e$t #o-$ted o$ thebarge +ere -bect to rea! property tae. *oreoer' Artic!e 1>%F& o the (ii! (ode proide that “GdIoc/ a$d tr-ct-re +hich' tho-gh!oati$g' are i$te$ded by their $at-re a$d obect to re#ai$ at a ied p!ace o$ a rier' !a/e or coat”are co$idered i##oab!e property by deti$atio$ bei$g i$te$ded by the o+$er or a$ i$d-try or +or/ +hich #ay be carried o$ i$ a b-i!di$g or o$ a piece o !a$d a$d +hich te$d direct!y to #eetthe $eed o aid i$d-try or +or/.

b. The Trea-rer i correct. The proced-re do $ot a!!o+ a #otio$ or reco$ideratio$ to be i!ed +iththe Proi$cia! Aeor. To a!!o+ the proced-re +o-!d i$deed i$ite corr-ptio$ i$ the yte# o appraia! a$d ae#e$t. itco$e$ie$t!y co-rt a grat,pro$e it-atio$ +here a!-e o rea! property ay be i$itia!!y et -$reao$ab!yhigh' a$d the$ -be-e$t!y red-ced -po$ the re-et o a property o+$er. 4$ the !atter i$ta$ce'a!!-io$ o poib!e coer' i!!icit trade,o ca$$ot be aoided' a$d i$ act ca$ co$e$ie$t!y ta/e p!ace. S-ch occaio$ or #ichie #-t be pree$ted a$d ecied ro# o-r yte#. %/&$S &nergy, Inc., v.

Province of Batangas, <. R. No. 16?>>@' Cebr-ary 16' 200@ a$d co#pa$io$ cae&

':. A special le$y or special assess!e"t is a" i!positio" by a pro$i"ce5 a city5 a!u"icipality withi" the ;etropolita" ;a"ila Area5 a !u"icipality or a bara"9ay -po$rea! property pecia!!y be$eited by a p-b!ic +or/ epe$dit-re o the )<3 to recoer $ot #ore tha$ 60Ho -ch epe$dit-re.

'<. *f the 9rou"d for the protest is $alidity of the real property ta# ordi"a"ce a$d $otthe -$reao$ab!e$e o the a#o-$t co!!ected the ta #-t be paid -$der protet' a$d the i-e o!ega!ity #ay be raied to the proper co-rt o$ certiorari +itho-t $eed o eha-ti$g ad#i$itratiere#edie.

'>. *f the 9rou"d for the protest is u"reaso"able"ess of the a!ou"ts collectedthere is "eed to pay u"der protest a$d ad#i$itratie re#edie #-t be reorted to beorereco-re to the proper co-rt.

'@. Procedure for refu"d of real property ta#es based o" u"reaso"able"ess ore#cessi$e"ess of a!ou"ts collected. a. Pay#e$t -$der protet at the ti#e o pay#e$t or +ithi$ thirty %0& day thereater' protet bei$g!odged to the proi$cia!' city or i$ the cae o a #-$icipa!ity +ithi$ the *etro *a$i!a Area the #-$icipa!trea-rer.



b. The trea-rer ha a period o ity %60& day ro# receipt o the protet +ithi$ to decide. c. =ithi$ thirty %0& day ro# receipt o trea-rer: deciio$ or i the trea-rer doe $ot decide' +ithi$thirty %0& day ro# the epiratio$ o the ity %60& period or the trea-rer to decide' the tapayer ho-!di!e a$ appea! +ith the )oca! Board o Ae#e$t Appea!. d. The )oca! Board o Ae#e$t Appea! ha 120 day ro# receipt o the appea! +ithi$ +hich todecide. e. The adere deciio$ o the )oca! Board o Ae#e$t Appea! ho-!d be appea!ed +ithi$ thirty%0& day ro# receipt to the (e$tra! Board o Ae#e$t Appea!. . The adere deciio$ o the (e$tra! Board o Ae#e$t Appea! ha!! be appea!ed to the (o-rto Ta Appea! %&n Banc & by #ea$ o a petitio$ or reie+ +ithi$ thirty %0& day ro# receipt o theadere deciio$. g. The deciio$ o the (TA #ay be the -bect o a #otio$ or reco$ideratio$ or $e+ tria! ater +hicha$ appea! #ay be i$terpoed by #ea$ o a petitio$ or reie+ o$ certiorari directed to the S-pre#e (o-rto$ p-re -etio$ o !a+ +ithi$ a period o itee$ %1>& day ro# receipt ete$dib!e or a period o thirty%0& day.

'. The e"title!e"t to a ta# refu"d does "ot "ecessarily call for the auto!aticpay!e"t of the su! clai!ed. The a#o-$t o the c!ai# bei$g a act-a! #atter' it #-t ti!! beproe$ i$ the $or#a! co-re a$d i$ accorda$ce +ith the ad#i$itratie proced-re or obtai$i$g a re-$d o

rea! property tae' a proided -$der the )oca! <oer$#e$t (ode. % Allied Ban-ing Corporation, etc., v.8uezon City +overnment, et al., <. R. No. 1>126' Septe#ber 1>' 2006&

NOTES AN" (O**ENTS8 4$ the aboe Allied Ban-ing cae' the S-pre#e (o-rt proided or thetarti$g date o co#p-ti$g the t+o,year precriptie period +ithi$ +hich to i!e the c!ai# +ith theTrea-rer' +hich i ro# i$a!ity o the "eciio$. The proced-re to be o!!o+ed i that ho+$ be!o+.

'C. Procedure for refu"d of real property ta#es based o" $alidity of the ta#!easure or solutio indebeti. a. Pay#e$t -$der protet $ot re-ired' c!ai# #-t be directed to the !oca! trea-rer' +ithi$ t+o %2&year ro# the date the tapayer i e$tit!ed to -ch red-ctio$ or read-t#e$t' +ho #-t decide +ithi$ity %60& day ro# receipt. b. The de$ia! by the !oca! trea-rer o the protet +o-!d a!! +ithi$ the Regio$a! Tria! (o-rt: origi$a!

-ridictio$' the reie+ bei$g the i$itia! -dicia! cog$i;a$ce o the #atter. "epite the !a$g-age o Sectio$

1F> o the )oca! <oer$#e$t (ode +hich tate that the re#edy o the tapayer +hoe protet i de$iedby the !oca! trea-rer i “to appea! +ith the co-rt o co#pete$t -ridictio$'” !abe!i$g the aid reie+ a a$eercie o appe!!ate -ridictio$ i i$appropriate i$ce the de$ia! o the protet i $ot the -dg#e$t ororder o a !o+er co-rt' b-t o a !oca! goer$#e$t oicia!. %Lamane , etc. v. BA $epanto CondominiumCorporation, <. R. No. 1>FF' October 2>' 200>& c. The deciio$ o the Regio$a! Tria! (o-rt ho-!d be appea!ed by #ea$ o a petitio$ or reie+directed to the (o-rt o Ta Appea! %"iiio$&. d. The deciio$ o the (o-rt o Ta Appea! %"iiio$& #ay be the -bect o a reie+ by the (o-rt oTa Appea! %en "anc &. e. The deciio$ o the (o-rt o Ta Appea! %en "anc & #ay be the -bect o a petitio$ or reie+ o$certiorari o$ p-re -etio$ o !a+ directed to the S-pre#e (o-rt.

%&. 0haritable i"stitutio"s5 churches a"d parso"a9es or co"$e"ts appurte"a"t

thereto5 !osDues5 "o"profit ce!eteries5 a"d all la"ds5 buildi"9s a"d i!pro$e!e"tsthat are actually5 directly a"d e#clusi$ely used for reli9ious5 charitable or educatio"alpurposes are e#e!pt fro! ta#atio". GSec.2? %& Artic!e V4' 1F?@ (o$tit-tio$I

%'. The co"stitutio"al ta# e#e!ptio"s refer o"ly to real property that are act-a!!y'direct!y a$d ec!-ie!y -ed or re!igio-' charitab!e or ed-catio$a! p-rpoe' a$d that the o$!yco$tit-tio$a!!y recog$i;ed ee#ptio$ ro# taatio$ o ree$-e are thoe ear$ed by $o$,proit' $o$,toc/ed-catio$a! i$tit-tio$ +hich are act-a!!y' direct!y a$d ec!-ie!y -ed or ed-catio$a! p-rpoe.*Commissioner of Internal Revenue v. Court of Appeals, et al., 2F? S(RA ?&



The co$tit-tio$a! ta ee#ptio$ coer property tae o$!y. =hat i ee#pted i $ot the i$tit-tio$ite!' thoe ee#pted ro# rea! etate tae are !a$d' b-i!di$g a$d i#proe#e$t act-a!!y' direct!y a$dec!-ie!y -ed or re!igio-' charitab!e or ed-catio$a! p-rpoe. %$ung Center of the Philippines v.8uezon City, et al., etc., <. R. No. 110' -$e 2F' 200&

%%. The 'C8< 0o"stitutio" stated that the la"ds5 buildi"9s5 a"d i!pro$e!e"ts are

“used e#clusi$ely” but the prese"t 0o"stitutio" reDuires that the la"ds5 buildi"9s a"di!pro$e!e"ts are “actually5 directly a"d e#clusi$ely used.” The cha$ge ho-!d $ot beig$ored. Re!ia$ce o$ pat deciio$ +o-!d hae -iced +ere the +ord “act-a!!y” a +e!! a 8direct!y”are $ot added. There #-t be proo thereore o the act-a! a$d direct -e to be ee#pt ro# taatio$. %$ung Center of the Philippines v. 8uezon City, et al., etc., <. R. No. 110' -$e 2F' 200&

%8. The “actual5 direct a"d e#clusi$e use” of the property for charitable purposesis the direct a"d i!!ediate a"d actual applicatio" of the property itself to the p-rpoeor +hich the charitab!e i$tit-tio$ i orga$i;ed. 4t i $ot the -e o the i$co#e ro# the rea! property thati deter#i$atie o +hether the property i -ed or ta,ee#pt p-rpoe. 4 rea! property i -ed or o$e or #ore co##ercia! p-rpoe' it i $ot ec!-ie!y -ed or theee#pted p-rpoe b-t i -bect to taatio$'. The +ord “do#i$a$t -e” or “pri$cipa! -e” ca$$ot be-btit-ted or the +ord “-ed ec!-ie!y” +itho-t doi$g io!e$ce to the (o$tit-tio$ a$d the !a+. So!e!yi y$o$y#o- +ith ec!-ie!y. %$ung Center of the Philippines v. 8uezon City, et al., etc., <. R. No. 110'-$e 2F' 200&

%:. Portio"s of the la"d of a charitable i"stitutio"5 such as a hospital5 leased topri$ate e"tities as well as those parts of the hospital leased to pri$ate i"di$iduals are"ot e#e!pt fro! real property ta#es. O$ the other ha$d' the portio$ o the !a$d occ-pied by thehopita! a$d portio$ o the hopita! -ed or it patie$t' +hether payi$g or $o$,payi$g' are ee#pt ro#rea! property tae. %$ung Center of the Philippines v. 8uezon City, et al., etc., <. R. No. 110' -$e2F' 200&

%<. As a 9e"eral pri"ciple5 a charitable i"stitutio" does "ot lose its character assuch a"d its e#e!ptio" fro! ta#es si!ply because it deri$es i"co!e fro! payi"9

patie"ts5 whether outpatie"t5 or co"fi"ed i" the hospital5 or recei$es subsidies fro!the 9o$er"!e"t. So !o$g a the #o$ey receied i deoted or -ed a!together to the charitab!e obect+hich it i i$te$ded to achieeD a$d $o #o$ey i$-re to the priate be$eit o the pero$ #a$agi$g oroperati$g the i$tit-tio$. %$ung Center of the Philippines v. 8uezon City, et al., etc., <. R. No. 110' -$e 2F'200&

%>. Property that are e#e!pt fro! the pay!e"t of real property ta# u"der the(ocal ,o$er"!e"t 0ode. a. Rea! property o+$ed by the Rep-b!ic o the Phi!ippi$e or a$y o it po!itica! -bdiiio$ ecept+he$ the be$eicia! -e thereo ha bee$ gra$ted to a taab!e pero$ or a co$ideratio$ or other+ieD b. (haritab!e i$tit-tio$' ch-rche' paro$age or co$e$t app-rte$a$t thereto' #o-e' $o$,proit or re!igio- ce#eterie' a$d a!! !a$d' b-i!di$g a$d i#proe#e$t act-a!!y' direct!y a$d ec!-ie!y-ed or re!igio-' charitab!e a$d ed-catio$a! p-rpoeD c. *achi$erie a$d e-ip#e$t' act-a!!y' direct!y a$d ec!-ie!y -ed by !oca! +ater ditrictD a$dgoer$#e$t o+$ed a$d co$tro!!ed corporatio$ e$gaged i$ the -pp!y a$d ditrib-tio$ o +ater a$dge$eratio$ a$d tra$#iio$ o e!ectric po+erD d. Rea! property o+$ed by d-!y regitered cooperatieD e. *achi$ery a$d e-ip#e$t -ed or po!!-tio$ co$tro! a$d e$iro$#e$ta! protectio$.

%@. ;a"ila *"ter"atio"al Airport Authority F;*AAG it is "ot a 9o$er"!e"t ow"edor co"trolled corporatio" but a" i"stru!e"tality of the 9o$er"!e"t that is e#e!pt



fro! ta#atio". 4t i $ot a toc/ corporatio$ beca-e it capita! i $ot diided i$to hare' $either i it a $o$,toc/corporatio$ beca-e there are $o #e#ber. 4t i i$tead a$ i$tr-#e$ta!ity o the goer$#e$t -po$+hich the !oca! goer$#e$t are $ot a!!o+ed to !ey tae' ee or other charge.

A$ i$tr-#e$ta!ity “reer to a$y age$cy o the Natio$a! <oer$#e$t' $ot i$tegrated +ithi$ thedepart#e$t ra#e+or/ eted +ith pecia! -$ctio$ or -ridictio$ by !a+' e$do+ed +ith o#e i $ot a!!

corporate po+er' ad#i$iteri$g pecia! -$d' a$d e$oyi$g operatio$a! a-to$o#y' --a!!y thro-gh acharter. Thi ter# i$c!-de reg-!atory age$cie chartered i$tit-tio$ a$d goer$#e$t,o+$ed orco$tro!!ed corporatio$.” GSec. 2 %10&' 4$trod-ctory Proiio$' Ad#i$itratie (ode o 1F?@I 4t i a$i$tr-#e$ta!ity eercii$g $ot o$!y goer$#e$ta! b-t a!o corporate po+er. 4t eercie goer$#e$ta!po+er o e#i$e$t do#ai$' po!ice po+er a-thority' a$d !eyi$g o ee a$d charge. Ci$a!!y' the airport !a$d a$d b-i!di$g are property o+$ed by the goer$#e$t that are deoted to p-b!ic-e a$d are propertie o the p-b!ic do#ai$. %Manila International Airport Authority v. City of Pasay, et al., <. R.No. 160@2' Apri! 2' 200F&

%. A teleco!!u"icatio"s co!pa"y was 9ra"ted by 0o"9ress o" /uly %&5'CC%5 after the effecti$ity of the (ocal ,o$er"!e"t 0ode o" /a"uary '5 'CC%5 ale9islati$e fra"chise with ta# e#e!ptio" pri$ile9es which partly reads5 “The 9ra"tee5its successors or assi9"s shall be liable to pay the sa!e ta#es o" their real estate5

buildi"9s a"d perso"al property' ec!-ie o thi ra$chie' as other perso"s orcorporatio"s are "ow or hereafter !ay be reDuired by law to pay.” This pro$isio"e#isted i" the co!pa"y6s fra"chise prior to the effecti$ity of the (ocal ,o$er"!e"t0ode. A 0ity the" e"acted a" ordi"a"ce i" 'CC8 i!posi"9 a real property o" all realproperties located withi" the city li!its5 a"d withdrawi"9 all ta# e#e!ptio"spre$iously 9ra"ted. A!o"9 properties co$ered are those ow"ed by the co!pa"yfro! which the 0ity is "ow collecti"9 P:8 !illio". The properties of the co!pa"ywere the" scheduled by the 0ity for sale at public auctio". The co!pa"y the" filed a petitio" for the issua"ce of a writ of prohibitio" clai!i"9

e#e!ptio" u"der its le9islati$e fra"chise. The 0ity defe"ded its positio" raisi"9 the

followi"9-

a. There was "o e#haustio" of ad!i"istrati$e re!edies because the !attershould ha$e first bee" filed before the (ocal Board of Assess!e"t AppealsK

b. The co!pa"y6s properties are e#e!pt fro! ta# u"der its fra"chise.

Resol$e the issues raised.

S3<<ESTE" ANS=ERS8

a. There i $o $eed to eha-t ad#i$itratie re#edie a the appea! to the )BAA i $ot a peedy

a$d ade-ate re#edy +ithi$ the !a+. Thi i o beca-e the propertie are a!ready ched-!ed or a-ctio$

a!e.

C-rther#ore o$e o the recog$i;ed eceptio$ to the r-!e o$ eha-tio$ i that i the i-e i p-re!y

!ega! i$ character +hich i o i$ thi cae.

b. The propertie are ee#pt ro# taatio$. The gra$t o tai$g po+er to !oca! goer$#e$t -$der

the (o$tit-tio$ a$d the )oca! <oer$#e$t (ode doe $ot aect the po+er o (o$gre to gra$t taee#ptio$.

The ter# “ec!-ie o thi ra$chie” i i$terpreted to #ea$ propertie act-a!!y' direct!y a$d ec!-ie!y

-ed i$ the radio or te!eco##-$icatio$ b-i$e. The -be-e$t piece o !egi!atio$ +hich reiterated

the phrae “ec!-ie o thi ra$chie” o-$d i$ the preio- ta ee#ptio$ gra$t to the co#pa$y i a$

epre a$d rea! i$te$tio$ o$ the part o (o$gre to o$ce agai$t re#oe ro# the )<(: de!egated

tai$g po+er' a!! o the co#pa$y: propertie that are act-a!!y' direct!y a$d ec!-ie!y -ed i$ the p-r-it

o it ra$chie. %(he City +overnment of 8uezon City, et al., v. Bayan (elecommunications, Inc., <. R.

No. 16201>' *arch 6' 2006&



%C. The ow"er operator of a BOT a"d "ot the ulti!ate ow"er is sub?ect to real

property ta#es. (o$ite$t +ith the BOT co$cept a$d a i#p!e#e$ted' BPP( J the o+$er,#a$ager,

operator o the proect J i the act-a! -er o it #achi$erie a$d e-ip#e$t. BPP(: o+$erhip a$d -e

o the #achi$erie a$d e-ip#e$t are act-a!' direct' a$d i##ediate' +hi!e NAPO(OR: i co$ti$ge$t

a$d' at thi tage o the BOT Agree#e$t' $ot -icie$t to -pport it c!ai# or ta ee#ptio$. %!ationalPoer Corporation v. Central Board of Assessment Appeals, et al., <' R. No. 1@1@0' a$-ary 0' 200F&

ADVANCE CONGRATULATIONS AND SEE YOU IN

COURT

Documents

Bar Star Notes - Domondon