Tax II Review (Gading)

7/21/2019 Tax II Review (Gading)

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ESTATE TAX

Q: What is an Estate Tax?A: An estate tax is a tax on the privilege oftransmitting property at death which is measuredby the value of the property at the time of the

death of the decedent.

Estate tax is the tax on the right to transmitproperty at death and on certain transfers by thedecedent during his lifetime which are made bylaw the euivalent of testamentary dispositions.!"e #eon$

Q: When does the estate tax accrue?A: %t accrues at the time of death irrespective ofwhether the heirs too& possession or en'oymentof the property.

Q: What does Estate Tax include?A: property transmitted at death and lifetimetransfers bur regarded as testamentarydispositions.

Q: (uppose )* a decedent died* leaving + heirs!A* ,* -$. ) had + apartments !* /* 0$. Eachof his heirs inherited at least one of thedecedent1s apartments !i.e.* A too& apartment*, too& /2$ %s the estate tax payable by A* ,*and -?A: /o. Estate tax is a transfer of a net estate tothe heirs but not a transfer of the net estate to aspecific heir.

Q: 3ow does the net estate complement incometaxation?A: Estates are also taxpayers. What is not caughtin life shall be caught in death.

Q: What is the concept of gross estate?A: %t includes all properties of the decedent* realor personal* tangible or intangible !when residentor citi4en$. ,ut in case of non resident alien* itincludes all those within and if the situs is here inthe 5hils.

Q: %s it accurate to say that only the assets ownedby the decedent at the time of his death wouldform the gross estate that assets or interests of +rd

parties would not form the gross estate?A: /o. 6ross estate includes not only assets ofdecedent at the time of his death but also lifetimetransfers !such as transfers in contemplation ofdeath* revocable transfers$.

Q: Who pays the estate tax?

A: The administrator is the taxpayer of the estatetax. %n the case of Estate of 7uliana de 6abriel*(- ruled that when an estate is underadministration* notice must be sent to theadministrator of the estate* since it is the saidadministrator who has the legal obligation to

pay and discharge the debts of the estate and toperform the orders of the court.%n the first place* the administrator pays usingthe funds of the estate.

Q: What if the estate administrator has beengranted a clearance as the estate has already beendistributed* who pays?A: The heirs are liable to estate tax* even if theestate has already been distributed.

Decedents Interest

Q: What is the decedent1s interest?

A: (ec. 89 !A$ "ecedent1s %nterest. To theextent of the interest therein of the decedent atthe time of his death.

Q: %f the decedent was entitled to a year endbonus paid on "ecember but he died on 7uly.The bonus was paid on "ecember. Would thebonus be part of the gross estate?A: /o* because it did not accrue at the time ofthe decedent1s death. ,ut it is an income of anestate but not a part of the gross estate.

Q: (uppose decedent is a contractor. 3e has a

building contract. 3e did a flyover. Thecontractor is to be paid in two years by ;installments but before the payment of the + rd

installment* he died. What would be part of hisestate?A: The payment for the +rdand ;thinstallment didnot accrue at the time of the death but after thedeath. %t will not form part of the gross estatebecause the law says the value at the time ofdeath* the property at the time of death. %t wouldform part of the estate not for estate taxpurposes. It goes to the estate as income of theestate subject to income tax, not part of the

estate for estate tax purposes.

Q: ) is a consultant of a corporation. 3e waspaid on a monthly basis. 3e gets his salaryregardless of services actually rendered. 3e diedin ay but the salary was paid in 7uly. Would itform part of the estate?A:

Alf Bambi Carlos Deli Jonah Ron Rybi She TR

Special Acknowledgment to: Alf, rika, Jo!it, "aki, Ron, She


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Q: ) told = that he may die soon so he left avery expensive car to =. %s this considered atransfer in contemplation of death?A: =es* because there is a thought of death.

Q: What is the transfer was made without thedecedent &nowing that he is ill* is it a transfer incontemplation of death?A: /o* the decedent should have &nowledge ofhis ill condition.

Q: A* D years old and suffering from cancer* hasa real property having a fair mar&et value of5


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%t is special when he can appoint only among arestricted or designated class of persons otherthan himself. !"e #eon$

Q: Are properties transferring under a specialpower of appointment part of the gross estate?A: /o. because the decedent is restricted to aspecific or special class of persons* which meansthat he cannot even appoint himself.

Proceeds of Life Insurance

Q: Are proceeds of life insurance part of grossestate?A: =es* but* as provided in (ec 89 !E$* only tothe extent of the amount receivable by the estateof the deceased * his executor* or administrator.

Q: (uppose A got an insurance policy where =

was designated as a revocable beneficiary* but Adied. %s the proceeds part of the estate?A: The proceeds do not belong to the estate* butto =.However, the mere fact of revocability onlymakes it part of the Estate, there it is taxable.Tobe irrevocable* it must be expressly stated.

Transfers for Insufficient Consideration

Q: %n a transfer for insufficient consideration*suppose A transferred a property worth 5


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Q: (uppose A was designated by the probatecourt as an administrator of the decedent1s estate.3owever* as a condition for the office* theprobate court reuired A to post a bond having apremium amount worth 5+&* is this amountdeductible to the estate?A: /o. This is not for the settlement of the estatebut in the nature of a ualification for office.

Q: (uppose an heir hired a lawyer to protect hisinterest in the estate. 3e spend 5


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deduction for income tax purposes in a incometax return* and provided that such losses wereincurred not later than the last day for thepayment of the estate tax.

/ An0 Indebtedness

Ta#

Q: Are taxes deductible to the estate?A: =es* (ec. 8H 2 !e$ provides for any unpaidmortgages upon* or any indebtedness.%ndebtedness includes tax.

Q: What taxes are deductible?A: Taxes accruing before the death. (ec 8H 2!e$ x x x but not including any income taxupon income received after the death of thedecedent* or property taxes not accrued beforehis death* or any estate tax.

,npaid &ubscriptions

Q: "uring the lifetime of the decedent* hesubscribed to a corporation. Worth 5


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Q: What if the family home was bought bycon'ugal funds* is it deductible?A: =es* the one>half share of the survivingspouse in the family home is deducted from thegross estate to arrive at the net estate.

Q: 3ow about the share of the surviving spousein the con'ugal funds* is it deductible?A: =es. The surviving spouse exclusive propertyis not included in the decedent spouse1s estate.(ec. 89 !3$ -apital of the (urviving (pouse The capital of the surviving spouse of a decedentshall not be deemed a part of his or her grossestate.

11 -edical "#penses

(ec. 8H !A$ !H$ edical expenses incurred bythe decedent within one year prior to his deathwhich shall be duly substantiated with receipts:

5rovided* that in no case shall the deductiblemedical expenses exceed !"",""".

Q: What if the medical expenses amounts to5


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Q: (uppose )* an alien* lived in the 5hilippines.) acuired a car* 5#"T shares* %, shares*savings !+ years$* account in 5/, anila*savings in 5/, !/ew =or&$. Then he left for B(and acuired similar properties. 3e lived anddied there. What forms part of his estate?A:

Q: (ame uestion* at the time of his death* is hea resident or a non>resident?A:

Q: (ame uestion but assuming that he died as anon resident alien* what are included in the grossestate?A: %, shares are not included unless 89I of itsbusiness is located in the 5hilippines.

Q: (uppose a non resident alien decent hasshares in A0# which have a


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income of which inures to the benefit ofany individual: 5rovided* however* Thatnot more than +I of the said beuests*devises* legacies* or transfers shall beused by such institutions for administration purposes.

Q: What is the basis for the exemption in (ec. 8D!A$ to !-$?A: %t is premised on the fact that in all thetransfers mentioned* there is really onetransmission of property* !i.e.> from the testator to the owner of the na&ed titleM or from thetestator to the fideicommissary 3ence* theexemption from the tax because the property waspreviously sub'ect thereto. !"e #eon$

Q: %n the merger of the usufruct and the na&edtitle* what if the usufruct die which results to themerger of the usufruct and the na&ed title* would

the transmission be taxable?A: /o* it is not taxable because the right of theusufruct is included in the gross estate of thedecedent.

Q: (uppose A transfers property to trust. Thisproperty would be en'oyed by , but the title isgiven to -. A dies* would the property be part ofthe estate?A: %f it is a revocable trust* it would be a part ofA1s estate.

Q: (ame uestion* but what if , dies?

A: The value of the usufruct is included in thegross estate of ,. (ee (ec. 88. !A$.

Q: (ame uestion* but what if , dies ahead of A?A: (ec. 88 !A$ also applies.

DONORS TAX

Q: What is a donor1s tax?A: The donor1s tax is imposed on donations intervivos or those made between living persons tota&e effect during the lifetime of the donor.!"e #eon$

Q: 3ow are donations mortis causa taxed?A: "onations mortis causa or those which are tota&e effect upon the death of the donor parta&ethe nature of testamentary dispositions* aresub'ect to estate tax. They are consideredtransfers in contemplation of death. !"e #eon$

Q: What is the concept of the gift tax?

A: The concept of the gift tax is on the right totransmit. %t is imposed on the privileged totransfer property.

Q: What are the differences between Estate Taxand "onor1s Tax?A: Tax rates. And also:%n estate tax.


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intent$. ,ut for a gift to be an item of exclusion*there must be disinterested generosity.

Q: What property is contemplated in donor1stax?A: real* personal* tangible* intangible.

Q: Would donor1s tax include conceptual orcontingent property?A: %t could be a conceptual or contingentproperty as long as you can value it* because ifyou cannot value it* it cannot be considered asproperty. !it could be a thing but not a property$

Q: Would donor1s tax include something thatcould not be valued? !i.e.* blood of Lris Auino$

A: %t is not sub'ect to gift tax because it can1t bevalued.

Q: When is there a taxable gift?A: There must be cessation of control by thedonor over the property given.

Q: (uppose ) gave = a chec& dated 7une +*C;. 0n 7uly 8* ) died* but = had not encashedthe chec&. %s there a gift?A: /o. there was no cessation of control anddominion on the part of the donor over theproperty transferred.

The -ourt in ,urnett vs. 6uggenheim:Taxation is not so much concerned with the

reuirements of title as it is with actual commandover the property taxed.

Q: ) would give his ,ulacan land as a gift to =provided that = would give his #aguna land to )as a gift. %s there a taxable gift?A: /o. There is no gift because the transfer waswith consideration. %t is a taxable exchange ofproperty. %f it is a capital asset* it is an exchangesub'ect to (ec. C; !"$.

Q: "ad owns shares worth 5D per share. (on isengaged in trading securities. "ad told (on to

sell his shares for 5


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Q: A tells , that A will give , money if , woulddo something.A tells - that A will give - money if , will notdo anything., did not do anything. A gave the money to -.Who made the gift?A: , gave the gift. , had control on whether ornot the conditions would be fulfilled. %t would bethe same effect as if , received the money then, gave it to -. , was an indirect donor.

"#emption of Certain Gifts

1 Dowries

(ec.


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blood$* spouse* ancestor and linealdescendant

C. Jelative by consanguinity in thecollateral line within the fourth degreeof relationship

+. Any contribution in cash or in &ind toany candidate* political party orcoalition of parties for campaignpurposes shall be governed by theElection -ode as amended.

Q: Who pays the gift tax?A: donor1s liability* but the donee can assume theliability.

Q: (uppose A donated a property to , but , isobliged to pay the donor1s tax. Would it still be agift?A: =es* there is a gift as long as the burden to

pay the tax is less than the value of the property.

Q: A corporation donates to )* ) donates to thecorporation* is there a difference in the taxconseuence?A: /o difference* stranger rule applies in bothcases.

Gifts to8b0 Aliens

Q: (uppose a non>resident gives a gift to aresident. When will it be a taxable gift?A: /on resident is sub'ect to pay donor1s tax if

the property is located in the 5hilippines.

Q: (uppose B( corporation has a subsidiary inJ5* B( corporation donated its shares of stoc& tothe employees of J5 subsidiary* is the donationsub'ect to donor1s tax?A: %t is not sub'ect to tax because the shares ofstoc& pertains to B( corporation that is not doingbusiness in the 5hilippines. !(ee (ec.


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A: The following are liable:


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+. Withdrawn within H days notransaction

Q: %n a partnership engaged in selling goods*what if one of the partners die* would there beany tax conseuence?A: when one of the partners die* there is aretirement or cessation of business* it is sub'ectto KAT as a transaction deemed sale.

Q: (ame uestion* what would be sub'ect toKAT?A: the inventory of the retired firm would bedeemed sold for KAT purposes.

Importation

Q: What are the reuisites of importation to besub'ect to KAT?A:

Q: %n the case of 599* threshold reuirement*does this apply to importation?A:

Q: %s there a necessity that the importation be inthe course of business?A: /o. When you tal& of importation* (ec.


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Q: (uppose you wor& for A* but you did notcharge anything* would that be sub'ect to KAT?A: /o* because there is no consideration.

Q: (uppose you own a motor shop. =our car wasrepaired in your shop. Would that be sub'ect totax?A: /o* because law says service for others.

Q: (ame uestion but the spare parts weresupplied by Toyota* what would be sub'ect toKAT?A: KAT here only applies to the sale of the spareparts.

Q: (uppose = entered into a contract of lease ofcontainer vans* would that be sub'ect to KAT?A: =es under the provisions of (ec. outputtells us that it is not up isthe one sub'ect to tax.




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Q: 5#"T sells services sub'ect to KAT. Whatwould be the input tax credit?A: To credit input tax credit* it should be relatedto the services rendered for purposes of claiming.(o in this case 5#"T may claim the euipmentbought as input tax credit as it is related to theservices rendered.

Q: (uppose A is a KAT registered person whorents his house to ,. , used the house partly forbusiness and partly for residential purposes.What may , claim as input tax credit?A: , may only claim the portion that he used inthe business for input tax credit. %t must berelated to the transaction in order to claim inputtax credit. =ou cannot claim input KAT forpersonal purposes.

Q: (ame case* but A did not issue an invoice*may , claim input tax credit?

A: /o. %t is important that there must be aninvoice* without it there can be no input>output.

Q: What are tax credit certificates?A: %t is the certificate applied to claim the inputtax credit. With this certificate* a taxpayer maysettle his other tax deficiencies exceptwithholding tax* but he must use it within the 9year period.

OTHER PERCENTAGE TAXES

Q: What is a percentage tax?

A: A percentage tax is a business tax which isbased on a given ratio between the gross sales orreceipts and the burden imposed upon thetaxpayer. !"e #eon$

Q: Who are sub'ect to percentage tax?A: (ec.


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A: (ec.


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DOCUMENTARY STAMP TAX

Q: What is the documentary stamp tax?A: "ocumentary stamp tax is a tax ondocuments* instruments and papers evidencing

the acceptance* assignment* sale* or transfer ofan obligation* right* or property incident thereto.!"e #eon$

Q: %s this tax really imposed on the document?A: %t is really imposed on the transaction ratherthan on the document. !"e #eon$

Q: Who pays the documentary stamp tax?A: The tax is imposed against the person ma&ing*signing* issuing* accepting* or transferring thedocument or facility evidencing the transaction.!"e #eon$

Q: Who pays the documentary stamp tax if theone who is suppose to pay is exempted?A: the other party (ec.


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Q: What is the effect of non>payment of this tax?A: (ec. C< An instrument x x x without beingstamped shall

*. not be recorded+. nor shall it or any copy thereof or any

record of transfer of the same beadmitted or used in evidence in anycourt

. /o notary public or other officerauthori4ed to administer oaths shall addhis 'urat or ac&nowledgment

Q: What is the remedy for non>payment?A: Jeuire them to pay. "ocuments are non>admissible until paid. (ec. C< x x x until thereuisite stamp or stamps shall have been affixedthereto and cancelled.

GOVERNMENTS TAX REMEDIES

The Commissioner of Internal Revenue

Q: What are the some of the powers and dutiesof the -ommissioner of %nternal Jevenue !-%J$?A: (ec. ; The power to interpret the tax x x x.The power to decide disputed assessments*refunds of internal revenue taxes* fee* penalties xx x other matters arising under the /%J-.

Q: -an the ,%J be compelled to ma&e anassessment?A: /o* as a general rule. A tax assessment is

discretionary upon the -%J. =ou cannot compelit since it is discretionary.

Q: %s there an instance where the ,%J may becompelled to ma&e an assessment?A: =es* if there is grave abuse of discretion* suchas when the ,%J found that there was basis toassess and yet it refused to ma&e assessment.

Q: (upposing that there is a uestion of law* andthe ,%J as&ed "07 for its opinion* can "071sopinion be binding upon the ,%J?A: /o* because (ec. ; provides that the power to

interpret tax laws shall be under the exclusiveand original 'urisdiction of the -%J.

Q: What is the remedy against ,%J1sinterpretation?A: (ec. ; sub'ect to review by the (ecretary ofinance.

Q: What is the difference between the appeal orreview with the (ecretary of inance and theappeal with the -ourt of Tax Appeals !-TA$?A: Appeal to (ecretary of inance interpretation of tax laws.Appeal to -TA disputed assessments* refunds*other matters arising under the Tax -ode.!(ee (ec. ;$

Remed0 of Assessment

Q: What are the tax remedies available to thegovernment?A: The remedies available to the government areto assess and collect.

Q: What is an assessment?A: Assessment is a written notice to a taxpayer tothe effect that the amount stated therein is due asa tax* and containing a demand for the payment

thereof. !"e #eon$

Q: What is the importance of an assessment?A: Assessment is necessary for theadministrative remedies of the government toapply !such as distraint and levy$. %f there is noassessment* government can only avail 'udicialremedies.

Q: Who generally assesses the tax?A: The taxpayer. Taxes are generally self>assessing because they do not need a letter ofdemand or assessment notice. The taxpayer is

supposed to &now how much he should pay astax and when and where he should pay.!"e #eon$

Q: (o when may the government resort toassessment?A: %n case of deficiency taxes for failure to file areturn* or for filing a false or fraudulent returnMand in cases when the tax period is terminated.!"e #eon$

Q: (uppose a taxpayer issued a chec& to pay hisdebt. The chec& bounced* so the ,%J sent him a

notice to ma&e good the chec&. %s that notice anassessment?A: =es. Any notice sent to the taxpayerdemanding payment of tax liability is anassessment. %t need not be in the standard form.A letter form may be an assessment.!,ar 0ps (tenographic /otes$

Q: What is the legal basis of the power to assess?




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A: ,%J has the power to examine and assesstaxes after the filing of the tax return. The lawalso gives ,%J certain powers in aid>of>assessment. -%J can get any information fromanybody for purposes of ascertaining the liabilityof the taxpayer.

Q: What is the government1s right to assess?A: This right exclusively belongs to the ,%J*especially the -%J.. %t is the right to examine theboo&s of the taxpayer to determine his taxliability.

Q: -an the -%J disregard the return and ma&ehis own personal assessment?A: =es* but with con'unction with otherinformation* especially documents from thesupplier.

:ther *asis of Assessment

1 *est "vidence :btainable

Q: What is the best evidence obtainable?A: -%J can resort to gathering any evidence thatwill assist him in ma&ing a proper assessment onthe tax liability of the taxpayer if the taxpayerrefuses to submit a tax report or any report hesubmits is inaccurate.

(ec H !,$ Cndpar. the -%J shall ma&e or amendthe return from his own knowledge and from

such information as he can obtain throughtestimony or otherwise.

Q: When would the -%J resort to the bestevidence obtainable?A: (ec. H !,$ provides


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A: =es. The results of the surveillance can bemade a basis of assessment for the currenttaxable year and the prior taxable year.

(ec. H !-$ x x x The findings may be used asthe basis for assessing the taxes for the othermonths or uarters of the same or differenttaxable years

' Presumptive Gross Receipts

Q: What is the presumptive gross receipts?A: (ec. H !-$ par. C x x x when there is reasonto believe that the boo&s of accounts or otherrecords do not correctly reflect the declarationsmade* -%J* after ta&ing into account the sales*receipts* income* or other taxable base of otherpersons engaged in similar businesses undersimilar situations or circumstances or afterconsidering other relevant information* may

prescribe a minimum amount of such grossreceipts.

Q: When may the ,%J resort to the fixing of thepresumptive gross receipt?A: %f a certain taxpayer was not reporting theproper sales tax transaction.Q: ay the -%J based its assessment onpresumption?A: /o* only on actual facts.

Q: (uppose a "epartment (tore files a return of

5h59* sales a month but earns millions*how do you prove the fraudulent act of thistaxpayer?A: =ou could do a comparative review. Jeviewthe same taxpayer under similar circumstances toarrive at the minimum gross receipts. (ec. H !-$par. C after taking into account the sales,receipts, income, or other taxable base of other

persons engaged in similar businesses under

similar situations or circumstances3ere it is not based on assumption but on actualfacts.

) In;uir0 into *an< Deposit Accounts

Q: -an the ,%J see the ban& accounts of thetaxpayer?A: /o* as a general rule. 3owever* (ec. H !$authori4es the -%J to inuire into the ban&deposits of:


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;


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!raud Assessment

Q: ay the ,%J ma&e an assessment anytimeeven if the year C+ as long as the ,%J saysthere is fraud?A: /o. ,%J must prove fraud. %f it cannot provefraud* ,%J is limited to the + year period.!,ar 0ps (tenographic /otes$

Q: What fraud must the ,%J prove?A: "eliberate* actual fraud. An example wouldbe in the case of A4nar vs. -%J. This case givesyou the badges of fraud you have consistentunder declaration of income* over claiming ofdeductions that would be a badge of fraud. %twas the failure to declare a substantial portion ofthe income with intention to deceive.!,ar 0ps (tenographic /otes$

Q: (upposing*

;


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shall constitute prima facie evidence of a falseand fraudulent return.

The badges of fraud !substantial underdeclaration of taxables sales or substantialoverstatement of deductions$ are also made toapply to false returns.

!ailure to !ile a Return

Q: When is there a failure to file a return?A: there is a failure to file a return if* on the basisof the returned file* the ,%J cannot ma&e acomputation or assessment of tax liability.%n short* when you have a return filed which isincomplete to the point that the ,%J cannot ma&ea valid assessment* that amounts to a failure tofile a return.!,ar 0ps (tenographic /otes$

Q: /ow supposing the ,%J assesses after


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A: /o. The government can avail of eitheradministrative or 'udicial remedy* eitheralternatively or simultaneously.

(ec. C9 x x x Either of these remedies or bothsimultaneously may be pursued in the discretionof the authorities charged with the collection ofsuch tax.

1 &uspension of the Prescriptive Period

Q: When may the prescriptive period besuspended?A: As provided in (ec. CC+:


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any day thereafter* would this be construed as acompliance with the notice reuirement?A: /o* it should be a definite date. There shouldbe a strict compliance* or else the tax payerwould be deprived of his property. Thepresumption of regularity does not apply.

!also applicable with regard the name of thetaxpayer* the place and time of the sale* theamount advertised as against the amount due$

(ec. CF par. C At the time and place fixed insuch notice x x x.

' Lev0

Q: What is a levy?A: #evy* as a summary administrative remedy*refers to the act of sei4ure of real property inorder to enforce the payment of taxes. !"e #eon$

Q: Taxpayer has a tax liability worth 59.3owever* he has real properties* to wit:

orbes 5+

-orinthian 5C

airview 5D

,ulacan 5


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A: %n actual distraint There is ta&ing ofpossession of personal property.%n constructive distraint the owner is merelyprohibited from disposing of his properties.!"e #eon$%n constructive distraint* there is no previousassessment and the government does not ta&epossession.

(ec CH par. C The constructive distraint ofpersonal property x x x obligate himself!taxpayer$ to preserve the same intact andunaltered and not to dispose of the samex x x.

Q: When may the ,%J resort to constructiverestraint?A: (ec. CH provides:


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failure to file the tax return* there should first bean assessment.

Q: (upposing the taxpayer was acuitted in thetax evasion case* would the acuittal have theeffect of having the tax liability extinguished?A: /o* criminal liability is premised on anotherstatutory basis. Tax liability is a matter of legalduty* arising from another statutory basis. (othere are two different things based on twodifferent premises. The extinction of one wouldnot extinguish the other.!,ar 0ps (tenographic /otes$

Q: When does a criminal action prescribe?A: =ou can file a criminal action or a violation ofthe criminal provision of the /#J- within 9years from the date of the commission of theviolation. %f the commission is not &nown* then itis rec&oned from the discovery and institution of

judicial proceedings for the investigation andpunishment. !(ec. C8


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A 6otice for informal conference ? Therevenue officer who audited the taxpayer1srecords shall state in his report whether thetaxpayer agrees in his findings that he is liablefor deficiency tax.

When adiscrepancy has been determined between the taxwithheld and the amount actually remitted by the

withholding agent.+. reu$%e% !r )re%ie% u %e%u)e% When ataxpayer who opted to claim a refund or taxcredit of excess creditable withholding tax for ataxable period was determined to have carriedover and automatically applied the same amountclaimed against the estimated tax liabilities forthe taxable uarter or uarters of the succeedingtaxable year

;. u$#ai% e+)i"e a+ When the excise tax dueon excisable articles has not been paid9. "ale !r i'#!re% * e+e'# u "!l% ! $!$-e+e'# When an article locally purchased orimported by an exempt person* such as* but notlimited to* vehicles* capital euipment*machineries* and spare parts* has been sold*traded* or transferred to non>exempt persons.

The notice for informal conference and thepreliminary assessment notice shall not bereuired in these cases. !"e #eon$

PROCEDURE

1 Issuance of Preliminar0 Assessment 6otice

Q: When would the ,%J issue 5A/?A: (ec. CC8 When the -ommissioner or hisduly authori4ed representative finds that propertaxes should be assessed x x x.

Q: What must the 5A/ contain?A: the facts and the law

(ec. CC8 par !C$ The taxpayer shall beinformed in writing of the law and the facts onwhich the assessment is madeM otherwise* theassessment shall be void.

Q: What if the 5A/ does not contain thenecessary statements therein?A: ailure to state the facts and law* the 5A/ isvoid* but the ,%J may issue another 5A/.

Q: "oes the reuirement of stating the @facts andlawG apply only to 5A/?A: Jeading (ec. CC8 closely* it seems that thisreuirement only pertains to the 5A/. A demandof payment suffices in the formal assessmentnotice.

3owever* 'urisprudence and tax regulations saidthat there must be statements of facts and law inboth the 5A/ and final assessment notice.

Q: %f the assessment is void for lac& of facts and

law* can it still assess?A: /o* but the ,%J may issue another 5A/.

$ Respondin( to the PA6

Q: What happens after the 5A/?A: (ec. CC8 par. !+$ x x x the taxpayer shall bereuired to respond to the said notice.

Q: (upposing:



CF


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+


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Q: (uppose that within the


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April C+ appeal to -TA

Whether the warrant of distraint functioned as animplied decision and that it has become final andexecutory?A: /o. %n this case* after ; days from the receiptof the assessment* the taxpayer filed a protest

based on strong legal considerations. ,ecause itwas based on strong legal considerations* theissuance of the warrant was premature. Thewarrant could not be served.

The warrant did not became final and executorybecause it became effective as an implieddecision when the protest was denied* but thetaxpayer seasonably filed an appeal* hence it wasnot yet final and executory. !-%J vs. Algue$

!ilin( of Criminal Action

Q: 5ending resolution of a protest* a criminalaction was filed. ay the criminal actionproceed?A: =es. %n Bngab vs. -usi* (- ruled that there isno reuirement for the precise computation andassessment of the tax before there can be acriminal prosecution under the -ode. This is sobecause in that case* there is a prima facieshowing that there was willful evasion of taxes.

Q: Whether a criminal case may prosper pendingthe resolution of the assessment absence primafacie evidence of intent to defraud thegovernment?

A: /o. ,efore one is prosecuted for willfulattempt to evade or defeat any tax* the fact that atax is due must be proved. The tax liabilities ofthe taxpayer should first be determined beforethe -%J may assert that the taxpayer havewillfully attempted to evade or defeat the taxessought to be collected. !-%J vs. -A* ortuneTobacco$

Q: Was the Bngab -ase overruled by the ortuneTobacco -ase !#ucio Tan$?A: /o* the Bngab -ase was not overruledbecause in that case* there is a prima facie

showing of a willful attempt to evade taxes. ,utin the ortune Tobacco -ase* its registeredwholesale price was approved by the ,%J. (inceit was approved by the ,%J* it is presumed to bethe actual wholesale price* therefore* notfraudulent. !-%J vs. -A* ortune Tobacco$

Q: -an the taxpayer consider the filing of a civilor criminal case against him as an implieddecision to his protest appealable to the -TA?

A: A criminal action is not an implied decision.A civil action is an implied decision because itspurpose is to collect.

Commissioners !inal Decision

Q: %f the taxpayer filed a protest based on stronglegal considerations* does the warrant of distraintand levy serves as an implied decision* re'ectingoutright the protest?A: /o. The -ommissioner should alwaysindicate to the taxpayer in clear and uneuivocallanguage what constitutes his final determinationof the disputed assessment. 0n the basis of thisstatement indubitably showing that the-ommissioner1s communicated action is his finaldecision on the contested assessment* theaggrieved taxpayer would then be able to ta&erecourse to the tax court as the opportune time.Without needless difficulty* the taxpayer would

be able to determine when his right to appeal tothe tax court accrues. This would encourage the-ommissioner to conduct a careful and thoroughstudy of every uestioned assessment and rendera correct and definite decision. This would alsodeter the -ommissioner from unfairly ma&ingthe taxpayer grope in the dar& and speculate as towhich action constitutes the decision appealableto the tax court. !-%J vs. Bnion (hipping$

Q: (upposing that the ,%J issued a inal /otice,efore (ei4ure to the taxpayer. %t states that it isthe taxpayer1s last opportunity to settle the

assessment and that should he fail* the ,%Jwould pursue collection remedies. -an the ,%Jargue that this is not the decision appealable tothe -TA?A: /o* because its content and tenor supportedthe theory that it was the -%J1s final actregarding the protest. The very title indicatedthat it as a final notice. %t is the -%J1s final actwhen it demanded the taxpayer to pay* gave awarning that in event of failure to pay* the -%Jwould be constrained to enforce collection.

Although prior to the decision of a disputed

assessment* there may still be exchangesbetween the -%J and the taxpayer. ,ut when the-%J indicated his position regarding the disputedassessment* he has made a decision that isproperly appealable to the -TA for review.!-%J vs. %sabela -ultural -orporation$

Appeal to the CTA



+C


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Q: (upposing a criminal case was filed* can thetaxpayer argue that this is an implied decisionsaying that the ,%J can collect by filing a civil orcriminal case?A: /o* because the protest is not deemeddecided.

Q: ,ut how about (ection C9 of the /%J- thatstates that the criminal case is a collectionremedy* does this mean that the filing of thecriminal case is an implied decision appealableto the -TA?A: /o. %t is not an implied decision because itspurpose is to penali4e the offender and not tocollect* although it is a collection remedy in asense that the 'udgment must contain an order topay the tax. Ta&e note that (ec. C;9 of the /%J-states that the acuittal of the delinuenttaxpayer does not bar the ,%J from filing a civilaction.

"ffect of Protest to Collection

Q: "oes the protest have the effect of suspendingthe period of collection?A: %t depends.%f the protest if filed on time* then it maysuspend the collection of taxes.,ut if the protest is filed beyond the +>dayperiod* it does not suspend the running of theprescriptive period. !"e #eon* -iting Jepublicvs. 3i4on$

Q: (upposing that the ,%J assessed the taxpayer.The taxpayer made a protest. %t was denied andso he appealed* and &ept on appealing until hereached the (-. ,efore the (-* can the taxpayerargue that the collection remedy has prescribedassuming that it too& him years to reach the (-?A: /o. (ec. CC+ The running of the (tatute of#imitations x x x on a proceeding in court forcollection x x x* shall be suspended for a periodduring which the -ommissioner is prohibitedfrom ma&ing the assessment or beginningdistraint or levy or a proceeding in court for sixtydays thereafter x x x. The pendency of the

taxpayer1s appeal in the -TA and in the (- hadthe effect of temporarily staying the hands of the-ommissioner. %f the taxpayer1s stand that thependency of the appeal did not stop the runningof the period* taxpayers would be encouraged todelay the payment in the hope of ultimatelyavoiding the same. !5rotector1s (ervices vs. -A$

. REFUND

Q: What are the reuirements for claim forrefund?A: According to -ebu 5ortland vs. -%J


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Q: When can you claim refund before the ,%Jand the courts?A: The claim for refund should be filed with the,%J within C years from the date of payment.7udicial action can be had by appealing to the-TA within C years from the date of payment.

Q: What if the ,%J ta&es time in deciding theclaim for refund and the C year period is about toend* what may the taxpayer do?A: The suit or the proceeding must be started inthe -TA before the end of the two>year periodwithout awaiting the decision of the ,%J. 3ere*there is no decision to appeal from* much less isthere an appeal. !"e #eon$

Q: (upposing:

arch


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0ct


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Q: (upposing that there was an excessivewithholding tax* can the withholding agent filean action for refund?A: =es* because the withholding agent is also ataxpayer liable to pay the tax.

COURT OF TAX APPEALS%urisdiction

Q: According to JA FC8C* (ec. D !a$* what is theexclusive appellate 'urisdiction of the -TA?A: (ec. D!a$:


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deprived of his right to protest the newassessment with the ,%J under section CC8$?A: /o* because he can still dispute theassessment at the -TA level and preventmultiplicity of suit and needless procedure.

Q: ,ut supposing that instead of increasing* the,%J lowered the assessment from +L to


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A party adversely affected by a decision or rulingof the -TA en banc may file with the (- averified petition for review on certiorari.

Q: (upposing a taxpayer filed a motion forreconsideration with the -ourt of Tax Appeals enbanc* is it an unfair rule that even those 'usticeswho decided in the case in the division levelwould also participate in the resolution of theappealed case?A: =es* sabi ni (ir.

Q: (uppose that a taxpayer was ordered by the-TA en banc to pay the tax* can the ,%J nowsei4e the taxpayer1s property upon the issuanceof its order?A: =es* but the -TA has to issue an orderallowing the sei4ure. ,%J must file a motion forsei4ure.

(ec.


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The customs officials may resort to sei4ure ifthere is reasonable ground to suspect or believethat there is an illegal importation* even if thereis no provision in the -ustoms law which allowsthe sei4ure of a vessel which have not yetentered the 5hilippine 'urisdiction.

Customs &earch

Q: (ection CC8 does not say that the searchshould be without warrant. 3ow come thatsearched under (ection CC8 are withoutwarrant?A: ,ecause in (ection CCF* it expressly statethat it is reuired. Therefore* it impliedly allowsa search without a warrant for searches otherthan a dwelling house. !(ee 5apa v ago$%n the first place* under (ec. H+* it states that the,ureau of -ustoms has territorial 'urisdiction*that violators may be #ur"ue% i$ (eir

ra$"#!rai!$ * la$%.

Q: %f a goods were sold to a buyer* can he arguethat he is an innocent purchaser for value if thegoods were released without satisfyingimportation dues?A: /o. 3e cannot invo&e that he is an innocentpurchaser for value because the goods are stillsub'ect to the payment of customs duties. Also*(ec. H+ x x x imported articles which may besub'ect to sei4ure for violation of the tariff andcustoms laws may be pursued in theirtransportation in the 5hilippines by land x x x.

The government may collect the importer if thegoods have already been sold to a third person.

Q: (uppose a customs officer went to a storewhere imported goods are sold* the customsofficer as&ed the store owner whether customsduties were paid* but the latter can not producethe evidence of payment of customs duties* canthe customs officer sei4e the goods?A: The customs officer 'u" (a2e a #ri!r,rie$ au(!ri4ai!$ by the -ommissionerbefore he may sei4e he goods.

(ec. C9+H The -ommissioner and -ollectorandor any other customs officer* ,i( (e #ri!rau(!ri4ai!$ i$ ,rii$0by the -ommissioner*may demand evidence of payment x x x and if nosuch evidence can be produced* such articlesmay be sei4ed x x x.

3owever* if the person sei4ing is the-ommissioner or the -ollector* no writtenauthority is needed.

Q: (uppose a customs officer saw a truc& gettingout of the customs house. Ater 9 minutes* hepursue the vehicle. Are their actions 'ustifiable*that they can search the vehicle without awarrant?A: =es* if it is based on reasonable ground tosuspect. /o warrant is needed when movingvehicles are stopped and searched. %t would beimpractical to search without a warrant.

Q: A person carried 9 reams of blue sealedcigarettes. 3e boarded a passenger 'eepney. Acustoms officer saw this guy. -an he sei4e thecigarettes?A:

&earch of Dwellin( 5ouse

Q: (uppose a compound has a residential house.3owever* in the same compound* there arewarehouses. At its gate* it states @residentialarea.G -an the ,- search it?A: =es* regardless of whether or not thecompound is residential or not because the lawstates that the ,ureau of -ustoms can enter anyland enclosure* except a dwelling house. %n thiscase* it is a dwelling compound not a dwellinghouse. They may search the compound withoutwarrant* but to search the dwelling house inside

the compound* a warrant is needed.

(ec. CC8 or the more effective discharge ofhis official duties* any person exercising thepowers herein conferred* may at any time enter*pass through* or search any land or i$)l!"ureorany warehouse* store or other building* not beinga dwelling house.

Q: or purposes of (ec. CCF search* when canyou say that it is a dwelling or warehouse?A: The law does not 'udge it by the appearanceof a dwelling house but the uestion is whether

the purpose is to store imported goods.

Q: Bpon entry into the compound* the customsofficials saw a building. This structure loo&s li&ea warehouse* but it is a residence. The customsofficials want to search it* but the ownerdemands a search warrant. -an they enter thebuilding without a warrant?A: They have to determine whether or not thestructure is a dwelling house.



+F


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A: /o* the (upreme -ourt held in 5atero& vs.,ureau of -ustoms that the redemption offorfeited property shall not be allowed in anycase where the importation is absolutelyprohibited or where the surrender of the propertyto the person offering to redeem the same wouldbe contrary to law.

Q: Why is it impossible to redeem contrabandarticles?A: The use of the contraband cannot be allowedas that would set at naught the purpose of thelaw. oreover* there is nothing in the -ode thatauthori4es the -ollector to release the contrabandin favor of an importer. The code !(ec. CHF$ isclear that the thing may be disposed by saleunder restrictions as will insure its use forlegitimate purpose. !5atero& vs. ,ureau of-ustoms$

' ualified Prohibited Importation

Q: What is a ualified prohibited importation?A: (ec.


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Q: What is a specific duty?A: %t is a duty imposed on goods based on some&ind of measurement without any assessment onthe value of the goods. !,ar 0ps (tenographic/otes$

Q: Who imposes the "umping and-ountervailing "uties?A: (ecretary of "T% non>agricultural products(ecretary of "A agricultural products

Q: Where may a taxpayer appeal the decision ofthe (ecretary of "T% or "A?A: To the -TA.

Dumpin( Dut0

(ec. +< Whenever any product* commodity*or article of commerce imported into the5hilippines a a$ e+#!r #ri)e le"" (a$ i"

$!r'al 2alue in the ordinary course of trade forthe li&e product* commodity* or article destinedfor consumption in the exporting country is)au"i$0 'aerial i$5uru ! a %!'e"i)

i$%u"r** or materially retarding theestablishment of a domestic industry x x x shallcause the imposition of a$ a$i-%u'#i$0 %u*e6ual ! (e 'ar0i$ ! %u'#i$0 !$ "u)(

#r!%u)* commodity* or article x x x. H!,e2er/(e a$i-%u'#i$0 %u* 'a* e le"" (a$ (e

'ar0i$ i "u)( le""er %u* ,ill e a%e6uae !

re'!2e (e i$5ur* ! (e %!'e"i) i$%u"r*. xx x.

Q: What goods are sub'ect to dumping duty?A: 6oods sold here at a cost lower than fairmar&et value or cost of production.These goods are dumped into the country.

Q: When are goods dumped?A: When the price of the goods is less than itscost of production. ,ut there must be a materialin'ury to the local industry.

Q: 3ow much is the dumping duty?A: %t is euivalent to the underpricing. 0r the

difference between the K and the actual costbeing sold here.!,ar 0ps (tenographic /otes$

Countervailin( Dut0

(ec. +C Whenever any product* commodity*or article of commerce is 0ra$e% %ire)l* !ri$%ire)l*by the government in the country ororigin or exportation* a$* 7i$% !r !r' !

"#e)ii) "u"i%* upon the production*manufacture or exportation of such product*commodity* or article* and the importation ofsuch subsidi4ed product* commodity* or article(a" )au"e% !r (reae$" ! )au"e 'aerial

i$5ur* ! a %!'e"i) #r!%u)or has materiallyretarded the growth or prevents the establishmentof a domestic industry x x x issue a)!u$er2aili$0 %u* e6ual ! (e a")erai$e%

a'!u$ ! (e "u"i%*. !Amended by JA 8D9


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!


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which can be discharged only by payment in fullof all duties x x x legally accruing. I al"!)!$"iue" a lie$ upon the articles importedwhich 'a* e e$!r)e% ,(ile "u)( ari)le" arei$ )u"!%* !r "u5e) ! (e )!$r!l ! (e

0!2er$'e$.

Q:What if the goods are imported fraudulently*what is the government1s remedy?A: Enforcement of tax lien applies only to lawfulimportation. Tax lien does not apply tofraudulent or contraband importation. (ei4ureand forfeiture are the proper remedies.

Q: 3ow do you enforce the tax lien?A: ,- can only enforce the tax lien while it isstill within customs 'urisdiction. The goods maybe sold to satisfy the unpaid customs duties. Thetax lien represents the customs liability of thetaxpayer. !,ar 0ps (tenographic /otes$

Q: %s this tax lien similar to the tax lien enforcedunder the /%J-?A: /o* The tax lien under the /%J- attaches toall properties of the taxpayer* while the tax lienenforced by the ,- attaches to the importedarticles only. !,ar 0ps (tenographic /otes$

Prescriptive Period

Q: What if the imported goods are not prohibitedarticles or not imported fraudulently* and that

there was a deficiency importation in C


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corresponding duties and taxes and compliancewith all other legal reuirements.

Q: When can the ,ureau of -ustoms hold thedelivery and release of shipments of theimporter?A: %f there is still an outstanding customsliability of the importer. %ncoming shipments willbe held* delivery will be withheld and thoseshipments may even be sold after notice to theimporter for purposes of satisfying anoutstanding customs liability.

+ Criminal Action

Q: "oes the ,- have the power to collect bycriminal action?A: The -ommissioner can authori4e collectionbe criminal action.

(ec. C;< x x x criminal actions andproceedings instituted in behalf of thegovernment under the authority of this -ode x xx but no )ri'i$al a)i!$ !r (e re)!2er* !%uie"x x x shall be filed in court without theapproval of the -ommissioner.

(ir said that the criminal action filed under (ec.C;< is different from smuggling. This provisiontal&s of violations of the customs law.(ir said that criminal actions filed under theTariffs and -ustoms -ode does not have anyprescriptive period.

. &earch and &eiEure

Q: What is the nature of the sei4ure proceedings?A: %t is a civil proceeding. Which means there isno conviction. %t is in rem against the res. Aforfeiture penalty is a civil penalty. 0nceforfeited* that is the end of customs liabilitybecause forfeiture is the maximum penalty. Theoffender is the property itself and not the person.!,ar 0ps (tenographic /otes$

Q: What is the procedure in sei4ure proceedings?

A: The procedure is first* customs issues awarrant of sei4ure and detention !W("$. Afterthe W(" is issued* notice is sent to the importer*and then a hearing is conducted. After thehearing* the collector gives a decision* in mostcases* a forfeiture penalty. rom a decision offorfeiture* a taxpayer can appeal the decision ofthe collector of customs to the commissionerwithin


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C. the falsity of such declaration* affidavit*invoice* letter* or paper

+. an intention on the part of theimporterconsignee to evade thepayment of the duties due.

!Jepublic vs. -TA* A63A$

Q: (upposing the goods were sei4ed* can thegovernment ran after the importer?A: /o longer because forfeiture is the highestpenalty. The action is against the goods and notthe owner* but the criminal charges can be had.

Q: %s it proper to effect sei4ure and forfeitureafter the sale at public auction if the forfeitedarticles are found in the possession of a thirdparty?A: =es* if the goods were found in the possessionof a third party* this means that the articles wereremoved contrary to law from any public or

private warehouse under customs custody. Evenif the government has already been paid byvirtue of the public auction* it can still effectforfeiture if the goods were removed contrary tolaw. T(e !reiure ! (e "u5e) 'a)(i$erie"/(!,e2er/ i" $! %e#e$%e$ !$ ,(e(er !r $!

(e i'#!rai!$ ,a" er'i$ae%: ra(er i i"

#re'i"e% !$ (e ille0al ,i(%ra,al ! 0!!%"

r!' Cu"!'" )u"!%*. !-arrara arble vs.-ommissioner$

(ec. C9+ Any xxx cargo xxx shall be sub'ectto forfeiture xxx !e$ any article which is

fraudulently concealed !r re'!2e% contrary tolaw from any public or private warehouse* xxxunder customs supervision.

Jegardless of the termination of importation* ifthe goods were removed contrary to law* it stillbelongs to the government. This is so becauseforfeiture ta&es effect immediately upon thecommission of the offense. The forfeiture of thesub'ect machineries* therefore* retroacted to thedate they were illegally withdrawn from-ustoms custody. !-arrara$

*urden of Proof

Q: Who has the burden of proof?A: (ec. C9+9 %n all proceedings ta&en for thesei4ure andor forfeiture of any vessel* vehicle* xx x* (e ur%e$ ! #r!! "(all lie u#!$ (e)lai'a$: 5rovided* that probable cause shallfirst shown for the institution of suchproceedings and that sei4ure andor forfeiture

was made under the circumstances and in themanner described x x x.

Q: %n the prosecution of illegal importation* is itnecessary that the (tate presents the goodsbefore the court in order to prove illegalimportation?A: /o* even a single witness1 uncorroboratedtestimony* if credible* may suffice to prove it*there is no need to present the goods. !Jimorinvs. 5eople$ The fact of the commission of thecrime may be established by the testimonies ofthe witnesses.

Q: (upposing that the defendant was shown tohave possessed the illegally imported goods*does the government has the burden that it wasimported illegally?A: /o* if the defendant is shown to have hadpossession of the illegally imported merchandise*

without satisfactory explanation* such possessionshall be deemed sufficient to authori4econviction. !Jimorin vs. 5eople$

(ec. +H< par !+$ When upon trial for violationof this section* the defendant is shown to havehad possession of the article in uestion*possession shall be deemed sufficient evidenceto authori4e conviction unless the defendant shallexplain the possession to the satisfaction of thecourt x x x.

DEFENSES AVAILA3LE

a Commercial uantit0

Q: What is the commercial uantityreuirement?A: (ec. C9+ !a$ any vehicle x x x includingcargo* which shall be used unlawfully in theimportation of x x x contraband or smuggledarticles i$ )!''er)ial 6ua$iie" x x x. Themere carrying or holding on board of contrabandor smuggled articles in commercial uantitiesshall sub'ect such vehicle x x x to forfeiture.

Q: (uppose that 5A# came from 3L with 3L

residents. When 5A# disembar&ed* the 3Lresidents were apprehended by the ,- becausethey possess highly dutiable items. Will thearticles be forfeited?A: /o* because there is no importation incommercial uantities.

b Domestic Carrier



;H


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Q: (ame uestion* but would the aircraft besub'ect to forfeiture?A: /o* because it is a common carrier.

(ec C9+ Any vehicle x x x shall x x x besub'ect to forfeiture:!a$ Any vehicle x x x 5rovided* that the vessel*or aircraft or any other craft is not used as dulyauthori4ed )!''!$ )arrierx x x.

Q: (uppose a family rode a chartered aircraftwith contraband articles in commercialuantities. -an the aircraft be forfeited?A: =es. (ec C9+ Any vehicle x x x shall x x xbe sub'ect to forfeiture:!a$ Any vehicle x x x 5rovided* that the vessel*or aircraft or any other craft is not used as dulyauthori4ed common carrier and as such a )arrieri i" $! )(arere% !r lea"e%:

c nowled(e of the :wner

Q: %s the &nowledge of the vessel owner adefense in forfeiture proceedings?A: 6enerally* it is not a defense in forfeitureproceedings because forfeiture proceedings aredirected against the property and not the owner.

Q: %f the &nowledge of the owner is not adefense* why does (ec. C9+< states that theforfeiture of the vehicle x x x shall not beeffected if it is established that the owner x x xhas no &nowledge of or participation in the

unlawful act x x x?A: %f you have unlawful importation* it simplymeans it will be sub'ect to forfeitureproceedings. The fact that the vessel owner hasno &nowledge of the unlawful importation willnot ta&e it out of the forfeiture proceedings./ow* whether or not forfeiture as a penalty willbe imposed* it depends on the &nowledge or non>&nowledge of the owner. %f there is no&nowledge* under (ec. C9+


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with there proceedings. The -ollector of-ustoms sitting in sei4ure and forfeitureproceedings has exclusive 'urisdiction to hearand determine all uestions touching on thesei4ure and forfeiture of dutiable goods. TheJT-s are precluded from assuming cogni4anceover such matters even through petitions ofcertiorari* prohibition* or mandamus. !,ureau of-ustoms vs. 0gario$

Q: -an the JT- exercise 'urisdiction if the W("is illegal?A: /o. Even if it be assumed that in the exerciseof such exclusive competence a taint of illegalitymay be correctly imputed* the most that can besaid is that under the circumstances the graveabuse of discretion conferred may oust it of such'urisdiction. %t does not mean however thatcorrespondingly the JT- is vested withcompetence whe clearly x x x the law has not

seen fit to do so. x x x An appeal lies to thecommissioner of customs and thereafter to the-TA. !ison vs. /atividad$

Q: (uppose the goods were under custodia legisby virtue of a JT- proceeding. (ubseuently*sei4ure proceedings were instituted with the ,-.Whether the JT- or the ,- would have custodyover the goods?A: ,-. ,ecause* the sei4ure proceedings areagainst the goods and not the individual.

Q: What if the goods were earlier sei4ed by a

warrant issued by the JT-* may the ,- sei4edthis goods pursuant to a W("?A: =es. When the goods have been broughtunder the legal control of the JT-* this factserves to deprive any other court or tribunal*e+)e# !$e (a2i$0 "u#er2i"!r* )!$r!l !r

"u#eri!r 5uri"%i)i!$ x x x. The -ollector is notprecluded by law or legal principle fromassuming 'urisdiction over the goods.!-ommissioner of -ustoms vs. a&asiar$

Q: (upposing an officer applied for a searchwarrant to search and sei4e the smuggled

articles* but instead of bringing the sei4ed goodsto the court* the officer turned it over to the ,-.%s it proper for the officer who secured andexecuted the search warrant to turn it over to the,-?A: /o. When the officers secured the warrant*they are aware that they have the duty to turnover the goods to the court. %ndisputably* the-ollector of -ustoms has exclusive original'urisdiction over sei4ure and detention

proceedings and that the regular courts cannotinterfere with nor deprive him of such'urisdiction. 3owever* the exclusive original'urisdiction of the -ollector pertains only to suchgoods sei4ed pursuant to the authority under the-ustoms -ode. !Tenorio vs. -A$

REMEDIES OF THE TAXPAYER

1 Protest

(ec. C+8 When a ruling or decision of the-ollector is made whereby liability for duties x xx are determined x x x the party adverselyaffected may protest such ruling or decision bypresenting to the -ollector at the time whenpayment of the amount claimed to be due to thegovernment is made or within


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(ec. C+F x x x shall ma&e a protest* otherwisethe action of the -ollector shall be final andconclusive against him x x x.

Q: What if the -ollector ruled that the importershould pay an amount lower than the assessment*what results?A: (ec. C+


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settlement of any sei4ure case provided that theowner x x x shall offer to pay to the collector afine imposed by him upon the property x x x.

Q: Whether the taxpayer may redeem theforfeited property?A: =es. (ec. C+D x x x in case of forfeiture*the owner x x x shall offer to pay for thedomestic mar&et value of the sei4ed article x x x.

Q: What are the exceptions to the remedy ofsettlement and redemption?A: These are:


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A: /o.

) %udicial Remedies

Q: What are the 'udicial remedies of thetaxpayer?A: appeal to the -TA.

Q: -an the taxpayer have 'udicial remedieswithout going to the administrative remedies?A: /o. 7udicial remedies are always tied toadministrative remedy.

Ta#pa0er of Customs Duties

Q: -an the importer be held liable even if he nolonger have dominion over the property* or evenif the property have already been transferred?A: =es. As between the importer and the buyer* itis the importer who has the obligation to pay

taxes to the ,%J and the ,-. The importer wouldbe un'ustly enriched if the buyer should pay thetax and denied reimbursement by the importer.%mposing the tax burden on the buyer would onlyencourage the proliferation of smugglers whoscheme to evade taxes by passing on their taxobligations to their unsuspecting buyers.!3arrison otors -orporation vs. /avarro$

CTA %urisdiction in Customs Cases

Q: What is the 'urisdiction of the -TA incustoms cases?

A: %n (ec. D of JA FC8C* -TA has exclusiveappellate 'urisdiction to


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Q: unicipality A imposes a tax on a businessbut the same business is exempted byunicipality ,. %s the tax levied by A valid?A: =E(* because uniformity is reuired onlywithin the geographical limits of the taxingauthority. The #6- provides @in each 234,Gmeaning it levies for its own purposes within its'urisdiction* regardless of other #6Bs. As longas its uniform within the 'urisdiction of thetaxing #6B then its valid.

C. )axes, fees, charges 5 other impositionsshall6

a. E&uitable based on ability to pay

This is the same principle with

national taxation. /ote however that #6- covers

taxes, fees !i.e.* par&ing fees*garbage fees$, charges, 5 otherimpositions.

(%J: Apply the same rate

JE6AJ"#E(( !meaning: withoutany standard$

b. (nly for ublic urpose 5roceeds of taxation are used to

support the existence of the #6B orthe pursuit of its governmentalob'ectives.

The #6B taxes for its own benefit

and therefore can determine its ownpublic purpose.

c. 'ot unjust, excessive, oppressive or

confiscatory

Q: A tax rate is contested to be un'ust Rexcessive. What must the -ourt establish toarrive at such a conclusion that said tax isreally un'ust* excessive2?A: the -ourt must loo& at the circumstancesof the case because of the presumption ofreasonableness in favor of the #6B. Also*the #6Bs are given a wide latitude in fixingthe tax rates. Thus* absence any showingthat its un'ust* excessive2* the -ourt would

be slow in writing off an ordinance. 0ee7agna case

d. 'ot contrary to law, public policy,

national economic policy or in restraintof trade

+. )he collection of local taxes, fees, charges,5 other impositions shall in no case be let

to any private person. The collection cannot be assigned even

to a /60. %t must be collected by the#6B itself.

Q: An ordinance is passed authori4ing a /60!0rg of (treet (weepers$ to manage the fundscollected from garbage and sanitation fees.Kalid?A: /0* because #6- also provides that revenuecollected shall be sub'ect to the disposition bythe #6B levying the same.

;. )he revenue collected shall inure solely tothe benefit of and subject to disposition of

the 234 levying the local taxes, fees,

charges, 5 other impositions. The #6B taxes for its own benefit and

therefore revenues collected would onlybe shared when it is expressly providedin the -ode.

%t is valid as long as the sharing is

between or among #6Bs and would notinvolve sharing it with the /ational6overnment.

Q: -ongress passes a law that amusement taxesimposed by #6Bs would be shared with5A6-0J. Kalid?A: /0 because this is against the -onstiprovision that tax proceeds accrue exclusively to

the #6B concerned.

9. Each 234 shall evolve a progressive systemof taxation.

EA/%/6: more income* more taxes

This is manifested in local government

taxation through business taxes. /0TE: (ir thin&s this is not really a

progressive tax since its based on aprevious year plus the fact that there is afixed annual rate. Therefore* noelement of progressivity.

III. COMMON LIMITATIONS

This refers to taxes that an #6B cannot

impose. #6Bs cannot impose income taxes.

The code* however* provides anexception as to ban&s and otherfinancial institutions. (ir believes thatthis is really not an exception but rather



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this refers to the tax on the grossreceipts of such institutions.

Q: -ity of ,atangas passes an ordinance whichimposes a 59 tax on every balisong shipped outand to be sold in anila. Kalid?A: /0 because the balisong is @carried outG andtherefore within thepassing through limitationinthe -ode.

Q: What if the next town enacted an ordinancewhich imposes a 59 tax on every balisongcoming from ,atangas -ity to be sold in anila.Kalid?A: /0 still within the passing throughlimitationin the -ode.

Q: What if tax imposed on the vehicle for usingthe bridge connecting the C cities. Kalid?A: "epends. 3ave to loo& at the circumstances

of the case. %f it1s a tax on the vehicle* then itwould be valid since it could be consideredunder toll fees or charges !(


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A: %t is based on the admission fees only. (ec


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recorded in 5asig and the DI recorded inKalen4uela.

VI. COMMON REVENUE-RAISING

PO


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Q: What if the delinuent taxpayer has parcelsof land situated in other municipalities canthese be levied upon by the treasurer?A: =E(* the treasurer would only send notices tothe Jegister of "eeds concerned for theannotation of the fact that the said property isbeing levied.

Q: What if ) has a 59& local tax liability buthis present properties were only worth 5+&.3owever* the following year* ) acuired realproperties. The treasurer wants to levy on thenew real properties of ). ) goes to court toen'oin the same. -an the said real properties belevied?A: =E(* the remedy of further levy is alsoavailable to #6Bs until the tax due is paid.5rovided that it is made within the 9 yearcollection period.

Q: (ame facts. -an an in'unction be had?A: =E(. Actually ) wants to en'oin thecollection and not the assessment. %t should benoted that there has already been a priorcollection made by the treasurer. urther* the#6- does not contain a @no in'unction ruleGunli&e in the /%J-. This means that the -odedoes not prohibit in'unction orders.

Q: ) is assessed by the treasurer. ) contests theassessment as the tax is based on an ordinance heclaims to be invalid. What is the remedy of )?A: (ince ) failed to contestappeal the validity

of the ordinance with the (ecretary of 7ustice*then such ordinance is already binding andeffective upon him. Therefore* the remedy of )is to protest the same. 3owever* he cannot usethe defense that ordinance is invalid since he didnot appeal the same with the (ec of 7ustice. 0ee

7ardine case !the -ourt mentioned here the +mandatory periods: + day period* decisionperiod R appeal periodM also the Doctrine ofExhaustion of 1dmin emedies$ (ee also 0ystems lus case !re "octrine of

exhaustion: cannot raise a purely legal issue soas to s&irt the doctrine of exhaustion.$

Q: What is the procedure for distraint?A:

(E%PBJE S upon failure of the

taxpayer to pay his tax liability at thetime reuired* the treasurer or hisdeputy may sei4e or confiscate anypersonal property sub'ect to the tax lienin sufficient uantity.

1ccounting (f Distrained 3oods

5B,#%-AT%0/ S the notice shall be

exhibited in + public places in theterritory of the #6B where the distraintis made. %t should specify the time Rplace of sale and the articles distrained.5eriod: it should be not less than C

days after notice to the owner orpossessor of the property.

Jelease of distrained property upon

payment prior to the sale.

rocedure of sale Awithin 9 days after

the sale* the treasurer shall ma&e areport of the proceedings in writing tothe chief executive.

Q: What is the procedure for levy?A: Written notice of the levy shall be mailed orserved upon assessor or the J".

5B,#%-AT%0/ S within + days after

the levy* the local treasurer shallpublicly advertise the auction sale.osting of the notice is made at themain entrance of the hall* and in thebarangay where the prop is located.

(TA= 0 (A#E S At any time before

the date fixed for the sale* the taxpayermay stay the proceedings by paying thetaxes* fees* charges* penalties andinterest.

(A#E S %f the taxpayer fails to settle

the delinuency on time* the sale shallproceed and shall be held either at the

main entrance of theprovincemunicity.

J%63T 0 JE"E5T%0/ S within

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Tax II Review (Gading)