prof domondon tax notes

8/9/2019 prof domondon tax notes

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d. Ti#e o pay#e$t8 Tae $or#a!!ypaid ater co##e$ce#e$t o b-i$e +hi!e !ice$e ee beore. e. Eecto pay#e$t8 Cai!-re to pay a ta doe $ot #a/e the b-i$e i!!ega! +hi!e ai!-re to pay !ice$eee #a/e b- i$e i !! ega! . . S-r re$der8 Tae' bei$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 +ithor +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! ofour 9o$er"!e"t 7 S3&

Etab!ih#e$t gra$ti$g the 20H e$ior citi;e$ dico-$t #ay c!ai# the dico-$t to e$ior citi;e$ as ta# deductio"baed o$ the $et cot o the good o!d or erice reProvided' That the cot o the dico-$t ha!! be a!!o+ed a ded-ctio$ ro# gro i$co#e a#e taab!e year that the dico-$t i gra$ted. Provided, further, That the tota! a#o-$c!ai#ed ta ded-ctio$ $et o a!-e added ta i app!icab!e' ha!! be i$c!-ded i$ their groreceipt or ta p-rpoe a$d ha!! be -bect to proper doc-#e$tatio$ a$d to the proiio$Natio$a! 4$ter$a! Ree$-e (ode' a a#e$ded. GM.&. 'olding Corporation v. Court of Appeal


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'>. +hat are the i"ds of ta#es classified as to who bears the burde" 7 E#plai"each briefly. S3&D they are i#poitio$ or +hich atapayer i direct!y !iab!e o$ the tra$actio$ or b-i$e he i e$gaged i$' % Commissioner ofInternal Revenue v. Philippine $ong %istance (elephone Company, supra & +hich !iabi!ity ca$$otbe hited or tra$erred to a$other. Ea#p!e J i$co#e ta' etate ta' do$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 ofInternal Revenue v. Philippine $ong %istance (elephone Company, supra& to o#eo$e e!e $ot a ata b-t a part o the p-rchae price. %Commissioner, of Internal Revenue v. American &)pressInternational, Inc. *Philippine Branch#, 260F' -$e 2F' 200> citi$g ario- cae a$da-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$iatio"9as fro! Petro" 0orporatio"5 which it uses for its operatio"s. *t "ow clai!s for refu"d or ta#credit for the e#cise ta#es it paid clai!i"9 that it is e#e!pt fro! the pay!e"t of e#cise ta#esu"der the pro$isio"s of Sec. '8< of the N*R0 of 'CC@ which pro$ides that petroleu! productsare e#e!pt fro! e#cise ta#es whe" sold to Ee#pt e$titie or age$cie coered by tatreatie' co$e$tio$' a$d other i$ter$atio$a! agree#e$t or their -e a$d co$-#ptio$8Proided' ho+eer' That the co-$try o aid oreig$ i$ter$atio$a! carrier or ee#pt e$titie orage$cie ee#pt ro# i#i!ar tae petro!e-# prod-ct o!d to Phi!ippi$e carrier' e$titie orage$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 of theRepublic of Si"9apore FAir Tra"sport A9ree!e"t betwee" RP a"d Si"9aporeG which 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 theother (o$tracti$g Party a$d i$te$ded o!e!y or -e i$ the operatio$ o the agreed erice ha!!'+ith the eceptio$ o charge correpo$di$g to the erice peror#ed' be ee#pt ro# the a#ec-to# d-tie' i$pectio$ ee a$d other d-tie or tae i#poed i$ the territorie o the irt(o$tracti$g Party ' ee$ +he$ thee -pp!ie are to be -ed o$ the part o the o-r$ey peror#edoer the territory o the (o$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"sportA9ree!e"t betwee" RP a"d Si"9apore 9ra"ts e#e!ptio" fro! the sa!e custo!s duties5i"spectio" fees a"d other duties or ta#es i!posed i" the territory of the first 0o"tracti"9Party. *t i"$oes ;aceda $. ;acarai95 /r.5 ,.R. No. %C'5 ;ay 8'5 'CC'5 'C@ S0RA @@'.whichupheld the clai! for ta# credit or refu"d by the Natio"al Power 0orporatio" FNP0G o" the9rou"d that the NP0 is e#e!pt e$e" fro! the pay!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' 200>' @? S(RA 61 the S-pre#e (o-rt c!ariied the Maceda v. Macaraig, r., i;8 4t #ay be o that i$ Maceda vs. Macaraig, r.' the (o-rt he!dee#ptio$ ro# all ta#es gra$ted to the Natio$a! Po+er (orporatio$ %NP(& -$der iti$c!-de both direct a$d i$direct tae.

A$ ee#ptio$ ro# a!! tae ec!-de i$direct tae' -$!e the ee#pti$g tatNP(: charter' i o co-ched a to i$c!-de i$direct ta ro# the ee#ptio$. The a#e$d#eRep-b!ic Act No. 6F> e$-#erated the detai! coered by NP(: ee#ptio$. S-be-e$?0' #ade ee$ #ore peciic the detai! o the ee#ptio$ o NP( to coer' a#o$g othedirect a$d i$direct tae o$ a!! petro!e-# prod-ct -ed i$ it operatio$. Preide$tia! "eF? GNP(: a#e$ded charterI a#e$ded the ta ee#ptio$ by i#p!iyi$g the a#e !a+ i$ter#. 4t -cci$ct!y ee#pt NP( ro# a!! or# o tae' d-tie' eeK The -e o the phor# o tae de#o$trate the i$te$tio$ o the !a+ to gie NP( a!! the ta ee#ptio$ it he$oyi$g beore.

The ee#ptio$ gra$ted -$der Sectio$ 1> %b& o the N4R( o 1FF@ a$d Artic!e %Air Tra$port Agree#e$t bet+ee$ RP a$d Si$gapore ca$$ot' +itho-t a c!ear ho+i$g o !e

i$te$t' be co$tr-ed a i$c!-di$g i$direct tae. Stat-te gra$ti$g ta ee#ptio$ #co$tr-ed i$ trictii#i -ri agai$t the tapayer a$d !ibera!!y i$ aor o the tai$g a-thorita$ ee#ptio$ i o-$d to eit' it #-t $ot be e$!arged by co$tr-ctio$. %Sil-air *Singapo$td., v. Commissioner of Internal Revenue, F' Cebr-ary 6' 200?&

'+hat are the differe"t i"ds of ta#es classified as to purpose 7

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>. Locus standibei"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. Theo!!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$edciti;e$' 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 orgoer$#e$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 -$d are i!!ega!!ydib-red' or that p-b!ic #o$ey i bei$g de!ected to a$y i#proper p-rpoe' or that there i a+atage o p-b!ic -$d thro-gh the e$orce#e$t o a$ i$a!id or -$co$tit-tio$a! !a+. %A"aya v.

&"dane, 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$dardto g-ide the de!egate a$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$d other charge p-r-a$tto Artic!e L' ectio$ > o the 1F?@ (o$tit-tio$. %Batangas Poer Corporation v. Batangas City, et al.

26@>' a$d co#pa$io$ cae' Apri! 2?' 200 citi$g !ational Poer Corporation v.Ca"anatuan, 6&

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

=hi!e the yte# o !oca! goer$#e$t taatio$ ha cha$ged +ith the o$et o th(o$tit-tio$' the po+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 $o !o$ger #ere!y by irt-e o a a!id de!egatio$ a beore' b-t p-r-a$t to direct a-thority coby Sectio$ >' Artic!e L o the (o$tit-tio$' the baic doctri$e o$ !oca! taatio$ re#ai$ ethe a#e' 4the poer to ta) is 5still6 primarily vested in the Congress.7 %8uezon City, et al., CB! Broadcasting Corporation' 1 i$ re!Sectio$ 1@ o the )


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#ea$ that i$ i$terpreti$g tat-tory proiio$ o$ #-$icipa! tai$g po+er' do-bt #-t bereo!ed i$ aor o #-$icipa! corporatio$. GI"id.' reerri$g to Philippine $ong %istance (elephoneCompany, Inc. *P$%(# vs. City of %avao6

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

a. A citie"o the Phi!ippi$e residi"9therei$ i taab!e o$ alli$co#e deried ro# o-rcewithi" a$d withoutthe Phi!ippi$eD

b. A "o"reside"t citie"i taab!e o$!y o$ i"co!ederied ro# o-rce withi"thePhi!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$erseas co"tract woreri taab!e o$!y o$ i"co!ero# o-rce withi"the Phi!ippi$e8Proided' That a sea!a"+ho i a citi;e$ o the Phi!ippi$e a$d +ho receie co#pe$atio$ orerice re$dered abroad a a #e#ber o the co#p!e#e$t o a ee! e$gaged ec!-ie!y i$i$ter$atio$a! trade ha!! be treated a a$ o$erseas co"tract worerD d. A$ alie" i"di$idual5 +hether a reside"t or "oto the Phi!ippi$e' i taab!e o$!y o$i"co!ederied 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$dwithout the Phi!ippi$eD a$d . A forei9" corporatio"' +hether e$gaged or $ot i$ trade or b-i$e i$ the Phi!ippi$e' itaab!e o$!y o$ i"co!ederied 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 ado!estic corporatio" 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! hersales 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#able becausethe sa!e was a co!pe"satio" for her ser$ices re"dered i" ,er!a"y a"d thereforeco"sidered as i"co!e fro! sources outside the Philippi"es.

*s her co"te"tio" correct 7S3&I is ow"ed by 1red 0orporatio"5 a 1ilipi"oow"ed Philippi"ecorporatio". E"site 0o. also ow"s '&&I of the shares of Susa"to 0o.5 a" *"do"esia"co!pa"y which has a duly lice"sed Philippi"e bra"ch. ue to worldwide restructuri"9 ofthe E"site (td.5. 9roup5 E"site (td.5. decided to sell all its shares i" Philippi"e Sta!pi"9

Pla"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$ides that thepurchase price will be paid to E"site (td6s ba" accou"t i" the .S. a"d that title to thePhilippi"e Sta!pi"9 Pla"t5 *"c. a"d Susa"to 0o. shall be tra"sferred to ,e"eral 0o.5 i"Toro"to 0a"ada where stoc certificates will be deli$ered. ,e"eral 0o. sees your ad$iceas to whether or "ot it will sub?ect the pay!e"ts of the purchase price to withholdi"9 ta#.E#plai" your ad$ice. S3


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O,!i$e air carrier hai$g ge$era! a!e age$t i$ the Phi!ippi$e are e$gaged i$ or doi$gb-i$e i$ the Phi!ippi$e a$d their i$co#e ro# a!e o paage doc-#e$t here i i$co#ero# +ithi$ the Phi!ippi$e. Th-' the o,!i$e air carrier !iab!e or the 2H %$o+ 0H& ta o$ ittaab!e i$co#e. GSouth African Airays v. Commissioner of Internal Revenue, 6'Cebr-ary 16' 2010 citi$g Commissioner of Internal Revenue v. British 9verseas AiraysCorporation %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 Africawithout a"y car9o or passe"9ers. +ould it the" be sub?ect to a"y Philippi"e ta# o" suchsales 7

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>.ReDuisites for $alid classificatio". A!! that i re-ired o a a!id c!aiicatio$ ithat it be reao$ab!e' +hich #ea$ 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. GABA:A%A +uro Party $ist, etc., v.Purisima, etc., et a!.' ' 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, 1#

'%. EDuality a"d u"ifor!ity of ta#atio" !ay !ea" the sa!e as eDual protect-ch a cae' the ter# +o-!d #ea$ that a!! -bect a$d obect o taatio$ +hich are it-ated ha!! be -bect to the a#e b-rde$ a$d gra$ted the a#e prii!ege +ithdicri#i$atio$ +hatoeer.

'8. *t is i"here"t i" the power to ta# that the State be free to select the sub?ta#atio"5a$d it ha bee$ repeated!y he!d that' Qi$e-a!itie +hich re-!t ro# a i$g!i$g o-tpartic-!ar c!a o taatio$' or ee#ptio$' i$ri$ge $o co$tit-tio$a! !i#itatio$.Q *Commiss

Internal Revenue, 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. a series of typhoo"s a"d ad$erse eco"o!ic co"ditio"s5 a" ordi"a"ce is passed by S0ity 9ra"ti"9 a 0H dico-$t i$ the pay#e$t o -$paetate tae' a$d the co$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 $iolate eDual protectio". Thprotectio$ c!a-e recog$i;e a a!id c!aiicatio$' that i' a c!aiicatio$ that ha a reao-$datio$ or ratio$a! bai a$d $ot arbitrary. =ith repect to RA F>' it: epreed p-b!ici the opti#i;atio$ o the ree$-e,ge$eratio$ capabi!ity a$d co!!ectio$ o the B4R a$d theSi$ce the -bect o the !a+ i the ree$-e, ge$eratio$ capabi!ity a$d co!!ectio$ o the B4R aBO(' the i$ce$tie a$d9or a$ctio$ proided i$ the !a+ ho-!d !ogica!!y pertai$ to thage$cie. *oreoer' the !a+ co$cer$ o$!y the B4R a$d the BO( beca-e they hae the cditi$ct pri#ary -$ctio$ o ge$erati$g ree$-e or the $atio$a! goer$#e$t thro-gh the coo tae' c-to# d-tie' ee a$d charge.

4$d-bitab!y' -ch -bta$tia! diti$ctio$ i ger#a$e a$d i$ti#ate!y re!ated to the p-rthe !a+. 7e$ce' the c!aiicatio$ a$d treat#e$t accorded to the B4R a$d the BO( -$der R-!!y atiy the de#a$d o e-a! protectio$. %ABA:A%A +uro Party $ist, etc., v. Purisima,a!.' ' A-g-t 1' 200?&

''. The prosecutio" of o"e 9uilty perso" while others eDually 9uilty a

prosecuted5 howe$er5 is "ot5 by itself5 a de"ial of the eDual protectio" of the laws. =hoicia! actio$ p-rport to be i$ co$or#ity to the tat-tory c!aiicatio$' a$ erro$eo- or #peror#a$ce o the tat-tory d-ty' a!tho-gh a io!atio$ o the tat-te' i $ot +itho-t #ore ao the e-a! protectio$ o the !a+. The -$!a+-! ad#i$itratio$ by oicer o a tat-te air o$ it ace' re-!ti$g i$ it -app!icatio$ to thoe +ho are e$tit!ed to be treated a!i/e' i $ot a de$ia! o e-a! protectio$there i ho+$ to be pree$t i$ it a$ e!e#e$t o i$te$tio$a! or p-rpoe-! dicri#i$atio$. T

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appear o$ the ace o the actio$ ta/e$ +ith repect to a partic-!ar c!a or pero$' or it #ay o$!ybe ho+$ by etri$ic eide$ce ho+i$g a dicri#i$atory deig$ oer a$other $ot to be i$erredro# the actio$ ite!.%Santos v. People, et al, F1' Septe#ber 16' 200?&

NOTES AN" (O**ENTS8 Philippine $ong %istance (elephone Company, Inc., v. City of

%avao, et al., etc., F1' Septe#ber 16citi$g (olentino v. Secretary of /inance, >>' A-g-t 2>' 1FF' 2> S(RA 6The a-thor opi$e that i$ce practica!!y a!! ra$chie gra$ted to te!eco##-$icatio$ co#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$ile9es 9ra9o$er"!e"t ow"ed a"d co"trolled corporatio"sa$d a!! other -$it o goer$#e$t +a thprii!ege re-!ted to erio- ta bae eroio$ a$d ditortio$ i$ the ta treat#e$t o i#i!ar!y

e$terprie' he$ce re-!ti$g i$ the $eed or thee e$titie to hare i$ the re-ire#dee!op#e$t' ica! or other+ie' by payi$g the tae a$d other charge d-e the#. % PhilippinAuthority v. City of Iloilo, F1' Septe#ber 16' 200?. The a-thor opi$e that i$ce practica!!y a!! ragra$ted to te!eco##-$icatio$ co#pa$ie are i#i!ar!y +orded that the aboe doctri$app!icatio$ to the other.&

%'. *" lieu of all ta#es refers to "atio"al i"ter"al re$e"ue ta#es a"d "ot tta#es. The i$ !ie- o a!! tae c!a-e app!ie o$!y to $atio$a! i$ter$a! ree$-e tae a$d!oca! tae. A appropriate!y poi$ted o-t i$ the eparate opi$io$ o -tice A$to$io T. (arpi#i!ar cae i$o!i$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$ ta' i#poed -$der the Natio$a! 4$ter$a! Ree$-e (ode. The Qi$ !ie- o a!! taeQ c!a-e do

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app!y to !oca! tae. The proio i$ the irt paragraph o Sectio$ F o S#art ra$chie tate thatthe gra$tee ha!! 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$dtae paid to the Q(o##iio$er o 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!arethat the ta ret-r$ Qha!! be -bect to a-dit by the 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 i or the Qi$ !ie- o a!! taeQ c!a-e toapp!y o$!y to tae -$der the Natio$a! 4$ter$a! Ree$-e (ode a$d $ot to !oca! tae. Ee$ +ithrepect to $atio$a! i$ter$a! ree$-e tae' the Qi$ !ie- o a!! taeQ c!a-e doe $ot app!y to i$co#eta.

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# #-$icipa! a$dproi$cia! tae. (o$gre co-!d hae -ed the !a$g-age i$ Sectio$ F%b& o (!aeci!!a o!dra$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 orco!!ected by a$y a-thority +hatoeer' municipal, provincialor $atio$a!' ro# +hich the gra$tee ihereby epre!y ee#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$terpretatio$'-$der the r-!e o$ trict co$tr-ctio$ o ta ee#ptio$' i that the Qi$ !ie- o a!! taeQ c!a-e i$S#art ra$chie reer o$!y to $atio$a! a$d $ot to !oca! tae. GSmart Communications, Inc. v.(he City of %avao, etc., et al.' >F1' Septe#ber 16' 200? citi$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 with

yearly 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$chieta. Si$ce the ra$chie ta o$ the broadcati$g co#pa$ie +ith year!y gro receipt eceedi$gte$ #i!!io$ peo ha bee$ abo!ihed' the i$ !ie- o a!! tae c!a-e ha $o+ beco#e functusofficio' re$dered i$operatie. %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' ' 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! $

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

to be paid.c. A!!o+i$g oreig$ tae a a ded-ctio$ ro# gro i$co#e.

% . Ta# creditge$era!!y reer to a$ a#o-$t that i -btracted direct!y ro# o$e: !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 tadeter#i$ed ater app!yi$g the correpo$di$g ta rate to taab!e i$co#e. %Commissioner of Revenue v. Central $uzon %rug Corporation, F6@' Apri! 1>' 200>&

%C. A ta# deductio" i dei$ed a a -btractio$ ro i$co#e or ta p-rpoe' or a$ that i a!!o+ed by !a+ to red-ce i$co#e prior to the app!icatio$ o the ta rate to co#p-te the 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%Commissioner of Internal Revenue v. Central $uzon %rug Corporation, F6@' A200>&

8&. The petitio"ers alle9e that the R3AT law is co"stitutio"al becauBica!eral 0o"fere"ce 0o!!itted has e#ceeded its authority i" i"cludi"9 pro$isio"swere "e$er i"cluded i" the $ersio"s of both the House a"d Se"ate such as i"sertista"dby authority to the Preside"t to i"crease the 3AT fro! '&I to '%IK deleti"9 e"ti"o passo" pro$isio"s fou"d i" both the House a"d Se"ate BillsK i"serti"9 the pri!posi"9 a @&I li!it o" the a!ou"t of i"put ta# to be credited a9ai"st the output tai"cludi"9 the a!e"d!e"ts i"troduced o"ly by Se"ate Bill No. 'C


11/55

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 a$d co#pa$io$ caeI

8'. The 3AT while re9ressi$e is NOT $iolati$e of the !a"date to e$ol$e a pro9ressi$esyste! of ta#atio". o you a9ree 7 The #a$date to (o$gre i $ot to precribe b-t to eo!e aprogreie yte# o taatio$. Other+ie' a!e tae +hich perhap are the o!det or# o i$directtae' +o-!d hae bee$ prohibited +ith the proc!a#atio$ o the co$tit-tio$a! proiio$. Sa!e taeare a!o regreie. . GA"a-ada +uro Party $ist *etc.# v. &rmita, etc., et al., 6'Septe#ber 1' 200> a$d co#pa$io$ cae citi$g (olentino v. Secretary of /inance, et al., >>' 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!pt fro!ta#atio".

88. Re$e"ues a"d assets of proprietary educatio"al i"stitutio"s5 i"cludi"9 thosewhich are cooperati$ely ow"ed5 !ay be e"titled to e#e!ptio"s sub?ect to li!itatio"s pro$idedby law i"cludi"9 restrictio"s o" di$ide"ds a"d pro$isio"s for rei"$est!e"ts. There i $o !a+ atthe pree$t +hich gra$t ee#ptio$' other the ee#ptio$ gra$ted to 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 or erice

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

Pay!e"t -$!e it beco#e adebt 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 itip-!ated or de!ayed

Authority i#poed by p-b!ic ca$ be i#poed by

a-thority priate i$diid-a!

Prescriptio" Precriptie period orta -$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 atapayer are i$ their o+$ right reciproca!!y debtor a$d creditor o each other' a$d that the deboth 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. *%om+arlitos, ? S(RA &

8. ;ay there be co!pe"satio" or setoff betwee" a "atio"al ta# a"d a Reaso" out your a"swer. S3


12/55

'> S(RA 66?&

. Strict i"terpretatio" of ta# e#e!ptio" laws. Tae are +hat cii!i;ed peop!e payor cii!i;ed ociety. They are the !ieb!ood o the $atio$. Th-' tat-te gra$ti$g ta ee#ptio$are co$tr-ed stricissimi =uris agai$t the tapayer a$d !ibera!!y i$ aor o the tai$g a-thority. Ac!ai# o ta ee#ptio$ #-t be c!ear!y ho+$ a$d baed o$ !a$g-age i$ !a+ too p!ai$ to be#ita/e$. Other+ie tated' taatio$ i the r-!e' ee#ptio$ i the eceptio$. %8uezon City, et al., v.ABS0CB! Broadcasting Corporation' s /und Insurance Co.' ' 2,2>D Ramie (e)tiles, Inc. v. Mathay, supra D +Puyat Sons v. City of Manila' supra&

4$deed' the tapayer epect air dea!i$g ro# the 0@' >10' >1? %2000&I A$d o' gie$ it ee$ce' or ta re-$d $eceitate o$!y prepo$dera$ce o eide$ce or it approbatio$ !i/e i$ a$

ordi$ary cii! cae. %Commissioner, supra&

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


13/55

16@2@,@>' -!y 21' 200? citi$g Surigao Consolidated Mining Co. Inc. v. Commissioner of InternalRevenue 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!! $otbe he!d to be co$erred -$!e the ter# -$der +hich it i gra$ted c!ear!y a$d diti$ct!y ho+ that-ch +a the i$te$tio$. GCommissioner, supra citi$g Phil. Acetylene Co. v. Commission of InternalRevenue' et a!.' 12@ Phi!. 61' @2 %1F6@&D Manila &lectric Company v. 3era' 1' >@,>?D Surigao Consolidated Mining Co. Inc. v. Commissioner ofInternal 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$t the tapayer i app!icab!e a the c!ai# or re-$dparta/e o the $at-re o a$ ee#ptio$' a !egi!atie grace' +hich ca$$ot be a!!o+ed -$!egra$ted i$ the #ot ep!icit a$d categorica! !a$g-age. The tapayer #-t ho+ that the !egi!at-rei$te$ded to ee#pt hi# ro# the ta by +ord too p!ai$ to be #ita/e$. G Commissioner, supra +itha $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 Revenuev. (o-yo Shipping Co., $td.' 1 Phi!. 220' 22? %1FF>&I

'' 1F??& =74)E ata ee#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 taeaio$ 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 tap

be !ega!!y d-e' or the $o$,pay#e$t o ta +he$ it i ho+$ that a ta i d-eDb. a$ acco#pa$yi$g tate o #i$d +hich i decribed a bei$g ei! o$ ba

+i!!-!' or de!iberate a$d $ot accide$ta!D a$dc. a co-re o actio$ or ai!-re o actio$ +hich i -$!a+-!. %Commissioner of

Revenue v. (he &state of Benigno P. (oda, r., , etc., > cited i$ SVe$ice 7' Ta Treatie8 Tric/ or treat M' Phi!ippi$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$ oe$co-rage oreig$ i$et#e$t +hich #ay !ead to eco$o#ic dee!op#e$t. 4 the ta credit i -ed' there +o-!d be $o #ore ta to credit i$ce there i $o #ore ta to credit a a re-!ta ee#ptio$. (o$e-e$t!y' +he$ the ta #ethod credit #ethod i app!ied to thee iti$co#e' -ch i$ce$tie are ipho$ed o i$ce' i$ eect' the ta be$eit are ca$ce!!ed o-t.Th-' the $eed or the ta pari$g proiio$.

NAT*ONA( *NTERNA( RE3ENE 0OE

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

'. Rep. Act No. ':&


14/55

'. The Ta# 0ode has i"cluded u"der the ter! corporatio" part"erships5 "o!atter how createdor 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$g *erte$ thatthe ter! part"ership i"cludes a y$dicate' gro-p' poo!' oi$t e$t-re or other -$i$corporatedorga$i;atio$' thro-gh or by #ea$ o +hich a$y b-i$e' i$a$cia! operatio$' or e$t-re i carriedo$.

8. 0ertai" busi"ess or9a"iatio"s do "ot fall u"der the cate9ory of corporatio"su"der the Ta# 0ode' a$d thereore $ot -bect to ta a corporatio$' i$c!-de8

a. 0' Re. Reg. No. 2&

'00 Phi!. >?6 %

'>. The ,lobal syste! of i"co!e ta#atio"i a yte# e#p!oyed +here the ta

ie+ i$diere$t!y the ta bae a$d ge$era!!y treat i$ co##o$ a!! categorie o taab!e i$co#i$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$ctreat#e$t arie a$d i #ade to depe$d o$ the /i$d or category o taab!e i$co#e o the ta*(an v. del Rosario, r., @ SCRA @F, @@?#

14


15/55

'. "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$i"9 bee" ear"ed i" the place wherethe ser$ice was re"dereda$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" a99re9ate periodof !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 to i$co#e ta o$ hi i$co#ederied ro# o-rce ro# +ithi$ 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 minimisbe"efits "ot sub?ect to withholdi"9ta# o" co!pe"satio" i"co!e of both !a"a9erial a"d ra" a"d file e!ployees 7

S3H& o thebaic #i$i#-# +age.

The a#o-$t o de minimis be$eit co$or#i$g to the cei!i$g herei$ precribed ha!! $ot beco$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!! be taab!e to the e#p!oyee receii$g the be$eit o$!y i -ch ece i beyo$d theP0'000.00 cei!i$g' proided' -rther' that a$y a#o-$t gie$ by the e#p!oyer a be$eit to ite#p!oyee' +hether c!aiied a de minimisbe$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$#e$ta 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.

The recipie$t i $o !o$ger re-ired to i$c!-de the i$co#e -bected to a i$a! ta a part o hii$co#e i$ hi i$co#e ta ret-r$.

%:. isti"9uishe#clusio"s fro! deductio"s.S3


16/55

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

S3


17/55

No$reide$t a!ie$ i$diid-a! $ot e$gaged i$ trade or b-i$e i$ the Phi!ippi$e are $ota!!o+ed to 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$ theirgro i$co#e a$d ro# co#pe$atio$ i$co#e are a!!o+ed to ded-ct thee pre#i-#. No$reide$tciti;e$ 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.

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

%C. isti"9uish ordi"ary e#pe"ses fro! capital e#pe"ditures.S3


18/55

h. 7o!iday a$d acatio$ epe$eDi. Ed-catio$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 1tpar.' Sec. 2. %B&' Re. Reg. No. ,F?I

8,FF&

:%. epreciatio" i the grad-a! di#i$-tio$ i$ the -e-! a!-e o ta$gib!e pre-!ti$g ro# ordi$ary +ear a$d tear a$d ro# $or#a! obo!ece$ce. The ter# i a!o apa#orti;atio$ o the a!-e o i$ta$gib!e aet the -e o +hich i$ the trade or b-i$e i de!i#ited i$ d-ratio$.

:8. The !ethods of depreciatio" are the followi"9-a. Straight !i$e #ethodDb. "ec!i$i$g ba!a$ce #ethodDc. S-# o year digit #ethodD a$dd. A$y other #ethod precribed by the Secretary o Ci$a$ce -po$ the reco##e$d

the (o##iio$er o 4$ter$a! Ree$-e81& Apportio$#e$t to -$it o prod-ctio$D2& 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 7S3


19/55

-a!iied depe$de$t o the tapayer. They are ied a#o-$t i$ the e$e that the a#o-$t haebee$ 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$ theepero$a! ee#ptio$' the a#o-$t a!!o+ed to be ded-cted by a tapayer are ied a predeter#i$edby (o$gre. GPansacola v. Commissioner of Internal Revenue, FFF1' Noe#ber 16'2006 citi$g Madrigal and Paterno v. Rafferty and Concepcion, ? Phi!. 1' 1? %1F1?&I

: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$!y -ch po-e ha!! be a!!o+ed the pero$a! ee#ptio$. GSec. > %A&' N4R( o 1FF@ aa#e$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?INOTES AN" (O**ENTS8 4t i c!ear ro# Rep. Act No. F>0 that each o the po-e

#ay c!ai# the P>0'000.00. Th-' the tota! a#i!ia! baic pero$a! ee#ptio$ or po-e iP100'000.00.

C-rther#ore' the diti$ctio$ bet+ee$ the co$cept o i$g!e' #arried a$d head o thea#i!y or p-rpoe o aai!i$g o the baic pero$a! ee#ptio$ ha a!ready bee$ e!i#i$ated by Rep.Act No. F>0.

:'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$ded by Rep. Act No. F>0INOTES AN" (O**ENTS8a. 4t i c!ear that -$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& rega rd !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 by Rep. Act No. F>0Ic. 4t i to be $oted that -$der the N4R( o 1FF@' a a#e$ded by Rep. Act No. F>0'

o$!y -a!iied depe$de$t chi!dre$ are co$idered or additio$a! ee#ptio$. 0.

Se$ior citi;e$ ha!! be treated a depe$de$t proided or i$ the Natio$a! 4$ter$a! R(ode' a a#e$ded' a$d a -ch' i$diid-a! tapayer cari$g or the#' be they re!atie or $be accorded the prii!ege gra$ted by the (ode i$oar a hai$g depe$de$t are co$cer$epar. Sec. > %a&' Rep. Act No. @2' a a#e$ded by Rep. Act F2>@' The Epa$ded Se$ior (Act o 200I

:@. 0apital assetsha!! reer to a!! rea! propertie he!d by a tapayer' +hetherco$$ected +ith hi trade or b-i$e' a$d +hich are $ot i$c!-ded a#o$g the rea! pr

co$idered a ordi$ary aet. %Sec. 2.a' Re. Reg. No. @,200&The ter# capita! aet #ea$ property he!d by the tapayer %+hether or $ot co$$ec

hi trade or b-i$e&' B3T "OES NOT 4N()3"E8a. Stoc/ i$ 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 tao$ 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$ary co-rtrade or b-i$e' ord. Property -ed i$ the trade or b-i$e' o a character +hich i -bect to the a!!o+adepreciatio$D or rea! property -ed i$ the trade or b-i$e o the tapayer. GSec. F %A& %1&' N1FF@' capita!i;ed +ord' $-#beri$g a$d arra$ge#e$t -pp!iedD Sec. 2.a' Re. Reg. No. @,20

:. 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$d b-i$eDe. Pai$ti$g' c-!pt-re' ta#p co!!ectio$' obect o art +hich are $ot -ed i$

b-i$eD. 4$herited !arge tract o agric-!t-ra! !a$d +hich +ere -bdiided p-r-a$t

goer$#e$t #a$date -$der !a$d reor#' the$ o!d to te$a$t. *Ro)as v. Court of (a) Appe$0EGF@, April D, ?HD#

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

h. Rea! property' +hether i$g!e detached' to+$ho-e' or co$do#i$i-# -$it' $ottrade or b-i$e a eide$ced by a certiicatio$ ro# the Bara$gay (hair#a$ or ro# the had#i$itratio$' i$ cae o co$do#i$i-# -$it' to+$ho-e or apart#e$t' a$d a a!idated reiti$g aai!ab!e record o the B-rea- o 4$ter$a! Ree$-e' o+$ed by a$ i$diid-a! e$gab-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 frodefi"itio" of capital assets5$a#e!y8

a. Stoc/ i$ trade o a tapayer or other rea! property o a /i$d +hich +o-!d propi$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$ary cohi trade or b-i$eD or

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c. Rea! property -ed i$ trade or b-i$e %i.e. b-i!di$g a$d9or i#proe#e$t&' o acharacter +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&

%Sec. 2.c' Re. Reg. No. @,200&


21/55

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 those

presu!ed to ha$e bee" realied fro! the dispositio" by "atural perso"s of their pri"cipalplace 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 taee#ptio$D a$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"9 operatio"ssi"ce 'C@. O" ;ay %%5 'C@5 it ceased operatio"s that year by reaso" of i"sol$e"cy a"d itsassets a"d liabilities were placed u"der the char9e of a 9o$er"!e"tappoi"ted recei$er. O"/u"e %85 'CCC5 the BSP authoried ;B0 to operate 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 sou9ht the B*R6sruli"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"ess acti$ities as a result ofbei"9 placed u"der i"$olu"tary recei$ership !ay be a" eco"o!ic reaso" for suspe"di"9 thei!positio" of the ;0*T.

As a result of the ruli"9 ;B0 filed a" applicatio" for refu"d of the P88 !illio". ue tothe 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"ied

corporatio". *" a $olte facie the B*R "ow !ai"tai"s that ;B0 should pay the ;0*T be9i""i"9/a"uary '5 'CC as it did "ot close its busi"ess operatio"s i" 'C@ but !erely suspe"ded thesa!e. E$e" if placed u"der recei$ership5 the corporate e#iste"ce was "e$er affected. Thus5it falls u"der the cate9ory of a" e#isti"9 corporatio" reco!!e"ci"9 its ba"i"9 operatio"s.

Should the refu"d be 9ra"ted 7S3


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c& ad#i$itrator irrepectie o +hether or $ot the i$-red retai$ed thepo+er o reocatio$' OR

2& The a#o-$t are receiab!e by a$y be$eiciary deig$ated i$the po!icy o i$-ra$ce a reocab!e be$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$t: e tate'b& hi eec-tor' or c& ad#i$itrator

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

:. 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( o 1FF@&

NOTES AN" (O**ENTS8 The be$eiciary #-t $ot be the decede$t: etate' eec-tor orad#i$itrator' beca-e the proceed are i$c!-dib!e a part o gro etate +hether or $ot thedecede$t retai$ed the po+er o reocatio$. %I"id.& c. =here the i$-ra$ce +a NOT ta/e$ by the decede$t -po$ hi o+$ !ie a$d thebe$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 taeDb. Property preio-!y taedDc. Tra$er or p-b!ic -eDd. 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>00'000.00Dg. A#o-$t o ee#pt retire#e$t receied by the heir -$der Rep. Act *o. F1@Dh. Net hare o the -rii$g po-e i$ the co$-ga! part$erhip.


23/55

S3F&

c. Po!itica! co$trib-tio$ #ade by a reide$t or $o$,reide$t i$diid-a! i regitered +iththe (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$ oo$e year thereater by reide$t +ho are pare$t to each o their !egiti#ate' recog$i;ed $atadopted chi!dre$ to the ete$t o the irt te$ tho-a$d peo %P10'000.00&D e. 0'000.00 +o-!d be -bect to do$or: t 4 )eo$ pread the P200'000 do$atio$ oer t+o %2& ca!e$dar year' do$ati$g P100o$ "ece#ber 0' 200? a$d the re#ai$i$g P100'000.00 o$ a$-ary 1' 200F the tra$actio$be ee#pt ro# do$or: ta. Thi i o ee$ i the do$atio$ i eparated o$!y by t+beca-e the bai i the ca!e$dar year. )eo$ +o-!d be e$oyi$g the ee#ptio$ or tP100'000.00 $et git or each ca!e$dar year.

'&. A5 who is e"9a9ed i" the car buy a"d sell busi"ess sold to

!illio" /a9uar for o"ly P: !illio". The proper 3AT o" the sale was paid. *f you are te#a!i"er assi9"ed to re$iew the sale5 would you issue a ta# assess!e"t o" the tra"saE#plai" your a"swer briefly.

S3


24/55

%. Nature of 3AT. VAT i a$ i$direct ta that #ay be hited or paed o$ to theb-yer' tra$eree or !eee o the good' propertie or erice. A -ch' it ho-!d be -$dertood$ot i$ the co$tet o the pero$ or e$tity that i pri#ari!y' direct!y !iab!e or it pay#e$t' b-t i$ ter#o it $at-re a a ta o$ co$-#ptio$. GCommissioner of Internal Revenue v. Seagate (echnology*Philippines#, ?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-re o trade or b-i$e' e!!' barter' echa$ge' !eae' good or propertie' re$dererice. 4t i a!o !eied o$ eery i#portatio$ o good +hether or $ot i$ the co-re o trade orb-i$e. The ta bae o the VAT i !i#ited o$!y to the a!-e added to -ch good' propertie' orerice by the e!!er' tra$eror or !eor. C-rther' the VAT i a$ i$direct ta a$d ca$ be paedo$ to the b-yer. %8uezon City, et al., v. ABS0CB! Broadcasting Corporation ' ' a$d co#pa$io$ cae' o$ theor reco$ideratio$&

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

'%. *"put ta# i the a!-e,added ta d-e o$ or paid by a VAT,regiteredo$ i#portatio$ o good or !oca! p-rchae o good or erice' i$c!-di$g !eae or propertie' i$ the co-re o hi trade or b-i$e. %Re. Reg. No. .110,1' 1tpar.&

'8. *"cluded i" the i"put ta#.a. the tra$it io$a! i$p-t ta a$db. the pre-#ptie i$p-t ta .4t i$c!-de

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c. i$p-t tae +hich ca$ be direct!y attrib-ted to tra$actio$ -bect to the VAT p!- aratab!e portio$ o a$y i$p-t ta +hich ca$$ot be direct!y attrib-ted to either the taab!e or ee#ptactiity. %Re. Reg. No. .110,1' 1tpar.' 2$de$te$ce'. A$d 2$dpar.' paraphrai$g' arra$ge#e$ta$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 $ot eceedP1'>00'000.00 %ecept ra$chie gra$tee o radio a$d te!eiio$ broadcati$g +hoe threho!d iP10'000'000.00& ha!! be e$tit!ed to a tra$itio$a! i$p-t ta o$ the i$e$tory o$ ha$d a o theeectiity o their VAT regitratio$' o$ the o!!o+i$g8

a. good p-rchaed or rea!e i$ their pree$t co$ditio$Db. #ateria! p-rchaed or -rther procei$g' b-t +hich hae $ot yet -$dergo$e

procei$gDc. good +hich hae bee$ #a$-act-red by the tapayerDd. good i$ 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

'. 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 $ot io!atie o re!igio- reedo#' a!tho-gh a ieda#o-$t i $ot i#poed or the eercie o a prii!ege b-t o$!y or the p-rpoe o derayi$g part othe cot o regitratio$.

The regitratio$ ee i th- #ore o a$ ad#i$itratie ee' o$e $ot i#poed o$ the eercieo a prii!ege' #-ch !e a co$tit-tio$a! right. *(olentino v. Secretary of /inance, et al., andcompanion cases, 2> S(RA 60&

'@. *"terpretatio" of the ter! *" the 0ourse of Trade or Busi"ess as used i" the3AT syste!. The ter# Qdoi$g b-i$eQ or co-re o b-i$e co$ey the idea o b-i$ebei$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.,


26/55

%'. Sale of or lease of real properties sub?ect to 3AT. Sa!e o rea! propertie pri#ari!yor 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,' 1tpar.&

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

%%. O"Septe!ber :5 %&&C5 )2L5 *"c.5 a do!estic corporatio" e"9a9ed i" the real estate busi"ess5sold a buildi"9 for P'&5&&&5&&&.&&. *s the sale sub?ect to the $alueadded ta# F3ATG7 *f so5how !uch7 E#plai".

S3'000.00 or a #ay ro# ti#e toti#e be deter#i$ed by the 73"(( a$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$d be!o+' or ho-e W !ot a$d other reide$tia! d+e!!i$g a!-ed at T+o *i!!io$


27/55

h. The !eae or the -e o or the right to -e radio' te!eiio$' ate!!ite tra$#iio$a$d cab!e te!eiio$ ti#e. %Re. Reg. No. 16,200>' Sec. .10?,2' 2$dpar.&

%@. Lerorated Sales of ,oods or Properties. A ;ero,rated a!e o good orpropertie by a a!e by a VAT,regitered pero$ i a taab!e tra$actio$ or VAT p-rpoe b-t thea!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,rated a!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>' 1tpar.&

%. 0o"cept of 3AT erorati"9. The ta rate i et at ;ero. =he$ app!ied tothe 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 theVAT preio-!y charged by -pp!ier. GCommissioner of Internal Revenue v. Seagate (echnology*Philippines#, ?66' Cebr-ary 11' 200>I

3$der a ;ero,rati$g che#e' the a!e or echa$ge o a partic-!ar erice i co#p!ete!y reedro# the VAT' beca-e the e!!er i e$tit!ed to recoer' by +ay o a re-$d or a a$ i$p-t ta credit'the ta that i i$c!-ded i$ the cot o p-rchae attrib-tab!e to the a!e or echa$ge. The ta paidor +ithhe!d i $ot ded-cted ro# the ta bae. %Commissioner, of Internal Revenue v. American&)press International, Inc. *Philippine Branch#, 260F' -$e 2F' 200> citi$g ario-cae&

%C. Situs of ta#atio" of erorated 3AT ser$ices such as facilitati"9 the collectio"of recei$ables fro! credit card !e!bers situated i" the Philippi"es a"d pay!e"t to ser$iceestablish!e"ts i" the Philippi"es. The p!ace +here the erice i re$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 theState $eceari!y ha to hae a -bta$tia! co$$ectio$ to it i$ order to e$orce a ;ero rate. The

p!ace o pay#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 ta it- o a ;ero,rated erice. %Commissioner of Internal Revenue v. American&)press International, Inc. *Philipppine Branch#, 260F' -$e 2F' 200>&

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

' 2$dpar.' paraphrai$g -pp!ied&

8' A-g-t F' 200>I

8. Lerorated sale of ser$ice5 defi"ed. A ;ero,rated a!e o erice %byregitered pero$& i a taab!e tra$actio$ or VAT p-rpoe' b-t ha!! $ot re-!t i$ a$y o-t7o+eer' the i$p-t ta o$ p-rchae o good' propertie or erice re!ated to -ch ;ea!e ha!! be aai!ab!e a ta credit or re-$d i$ accorda$ce +ith Rev. Regs. !o. ?D0GGReg. No. 16,200>' Sec. Sec. .10?,> %a&' +ord i$ ita!ic -pp!ied&

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*eat' r-it' ih' egetab!e a$d other agric-!t-ra! a$d #ari$e ood Prod-ct c!aiied-$der thi paragraph ha!! be co$idered i$ their origi$a! tate ee$ i they hae -$dergo$e thei#p!e procee o preparatio$ or preeratio$ or the #ar/et' -ch a ree;i$g' dryi$g' a!ti$g'broi!i$g' roati$g' #o/i$g or trippi$g' i$c!-di$g thoe -i$g ada$ced tech$o!ogica! #ea$ opac/agi$g' -ch a hri$/ +rappi$g i$ p!atic' ac--# pac/i$g' tetra,pac/' a$d other i#i!arpac/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$g oFF.>o a$d aboe are 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 re i$i$g proce'

%2& prod-ct o a -gar re i$ery' or %& prod-ct o a prod-ctio$ !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$deriied by the S-gar Reg-!atory Ad#i$itratio$' ide$tiie the a#e to be o a po!ari#eter readi$go FF.>o a$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$d po-!try eed' i$c!-di$g i$gredie$t' +hether !oca!!y prod-ced or i#ported' -ed i$the #a$-act-re o i$ihed eed %ecept pecia!ty eed 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&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$t o thePhi!ippi$e ret-r$i$g ro# abroad a$d $o$reide$t citi;e$ co#i$g to reett!e i$ the Phi!ippi$e8Proided' That -ch good are ee#pt ro# c-to# d-tie -$der the Tari a$d (-to# (ode othe Phi!ippi$eD

%"& 4#portatio$ o proeio$a! i$tr-#e$t a$d i#p!e#e$t' +eari$g appare!' do#etica$i#a!' a$d pero$a! ho-eho!d eect %ecept a$y ehic!e' ee!' aircrat' #achi$ery' othergood or -e i$ the #a$-act-re a$d #ercha$die o a$y /i$d i$ co##ercia! -a$tity& be!o$gi$gto pero$ co#i$g to ett!e i$ the Phi!ippi$e' or their o+$ -e a$d $ot or a!e' barter orecha$ge' acco#pa$yi$g -ch pero$' or arrii$g +ithi$ $i$ety %F0& day beore or ater theirarria!' -po$ the prod-ctio$ o eide$ce atiactory to the (o##iio$ero 4$ter$a! Ree$-e' that-ch pero$ are act-a!!y co#i$g to ett!e i$ the Phi!ippi$e a$d that the cha$ge o reide$ce ibo$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& oSec. 10F %1& o the Ta (ode' the a$$-a! a!e a$d9or receipt o +hich doe $ot eceedthe a#o-$t o O$e *i!!io$ Cie 7-$dred tho-a$d Peo %P1'>00'000.00&' Proided'That $ot !ater tha$ a$-ary 1' 200F a$d eery three %& year thereater' the a#o-$therei$ tated 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&. %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 by ra$chie o ga a$d +ater -ti!itie. %Sec. 11F&

%>& Serice re$dered or oerea dipatch #eage or co$eratio$ oriro# the Phi!ippi$e. %Sc. 120&

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

%@& Serice re$dered by ire' #ari$e or #ice!!a$eo- i$-ra$ce agoreig$ i$-ra$ce co#pa$ie. %Sec. 12&

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

%F& Receipt o$ a!e' barter or echa$ge o hare o toc/ !ited a$dthro-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$g or other o pa!ay i$cor$ i$to grit a$d -gar ca$e i$to ra+ -garD

Agric-!t-ra! co$tract gro+er reer to thoe pero$ prod-ci$g or other !ietoc/ or other agric-!t-ra! a$d #ari$e ood prod-ct i$ their origi$a! tate.

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%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$ary co-re o trade or b-i$e' or rea! property -ti!i;ed or !o+,cot a$d ocia!i;edho-i$g a dei$ed by Rep-b!ic Act No. @2@F' other+ie /$o+$ a the 3rba$ "ee!op#e$t a$d7o-i$g Act o 1FF2' a$d other re!ated !a+' -ch a RA No. @?> a$d RA No. ?@6>' reide$tia! !ota!-ed at O$e #i!!io$ ie h-$dred tho-a$d peo %P 1'>00'000& a$d be!o+' ho-e a$d !ot' a$dother reide$tia! d+e!!i$g a!-ed at T+o #i!!io$ ie h-$dred tho-a$d peo %P 2'>00'000& a$dbe!o+8 Proided' That $ot !ater tha$ a$-ary 1'200F a$d eery three %& year thereater' thea#o-$t herei$ tated ha!! be ad-ted to their pree$t a!-e -i$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' thea#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+ or b-!!eti$ +hich appear at reg-!ar i$tera! +ith ied price or -bcriptio$ a$d a!e a$d+hich i $ot deoted pri$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$c!-di$ge$gi$e' e-ip#e$t a$d pare part thereo or do#etic or i$ter$atio$a! tra$port operatio$DProided' that the ee#ptio$ ro# VAT o$ the i#portatio$ a$d !oca! p-rchae o pae$ger a$d9orcargo ee! ha!! be !i#ited to thoe o o$e h-$dred ity %1>0& to$ a$d aboe' i$c!-di$g e$gi$ea$d pare part o aid ee!D Proided' -rther' that the ee! be i#ported ha!! co#p!y +iththe age !i#it re-ire#e$t' at the ti#e o ac-iitio$ co-$ted ro# the date o the ee!: origi$a!co##iio$i$g ' a o!!o+8 %i& or pae$ger a$d9or cargo ee!' the age !i#it i itee$ year%1>& year o!d' %ii& or ta$/er' the age !i#it i te$ %10& year o!d' a$d %iii& Cor high,peedpae$ger car' the age !i#it i ie %>& year o!d' Proided' i$a!!y' that ee#ptio$ ha!! be -bectto the proiio$ o ectio$ o Rep-b!ic Act No. F2F>' other+ie /$o+$ a The "o#eticShippi$g "ee!op#e$t Act o 200.

%T& 4#portatio$ o -e!' good a$d -pp!ie by pero$ e$gaged i$ i$ter$atio$a! hippi$gor air tra$port operatio$D Proided' that the aid -e!' good a$d -pp!ie ha!! be -edec!-ie!y or ha!! pertai$ to the tra$port o good a$d9or pae$ger ro# a port i$ thePhi!ippi$e direct!y to a oreig$ port +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$' a$d other $o$,ba$/ i$a$cia! i$ter#ediarieD a$d

%V& Sa!e or !eae o good or propertie or the peror#a$ce o erice othertha$ the tra$actio$ #e$tio$ed i$ the precedi$g paragraph' the gro a$$-a! a!e a$d9orreceipt do $ot eceed the a#o-$t o O$e #i!!io$ ie h-$dred tho-a$d peo %P1'>00'000&8Proided' That $ot !ater tha$ a$-ary 1'200F a$d eery three %& year thereater' the a#o-$therei$ tatedha!! be ad-ted to it pree$t a!-e -i$g the (o$-#er Price 4$de a p-b!ihedby theNatio$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$ideredeparate tapayer. 7o+eer' the aggregatio$ r-!e or each tapayer ha!! app!y. Cor i$ta$ce' i aproeio$a!' aide ro# the practice ohi proeio$' a!o derie ree$-e ro# other !i$e o

b-i$e +hich are other+ie -bect to VAT' the a#e ha!! be co#bi$ed or p-rpoe odeter#i$i$g +hether the threho!d ha bee$ eceeded. Th-' the VAT,ee#pt a!e ha!! to beic!-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

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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$e or practice o proeio$ +ithi$ the Phi!ippi$e ha!! i!e a$ i$co#e ta ret-r$regard!e o the a#o-$t o gro i$co#e GSec. >1 %A& %2&' N4R( o 1FF@I

b. A$ i$diid-a! +ith repect to p-re co#pe$atio$ i$co#e' deried ro# -ch o-rce+ithi$ the Phi!ippi$e' the i$co#e ta o$ +hich ha bee$ correct!y +ithhe!d8 Provided' That a$i$diid-a! derii$g co#pe$atio$ co$c-rre$t!y ro# t+o or #ore e#p!oyer at a$y ti#e d-ri$g thetaab!e year ha!! i!e a$ i$co#e ta ret-r$ GSec. >1 %A& %2&' N4R( o 1FF@' a a#e$ded by Rep. ActNo. F>0' paraphrai$g -pp!iedI

c. A$ i$diid-a! +hoe o!e i$co#e ha bee$ -bect to i$a! +ithho!di$g taDd. A #i$i#-# +age ear$er %i a +or/er i$ the priate ector paid the tat-tory

#i$i#-# +age' or i a$ e#p!oyee i$ the p-b!ic ector +ith co#pe$atio$ i$co#e o $ot #ore tha$

the tat-tory #i$i#-# +age i$ the $o$,agric-!t-ra! ector +here he9he i aig$ed&' a$ i$diid-a!+ho i ee#pt ro# i$co#e ta p-r-a$t to the proiio$ o the Ta (ode a$d other !a+' ge$era!or pecia!. GSec. >1 %A& %2&' N4R( o 1FF@ 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$the p-b!ic ector +ith co#pe$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$co#e tao$ their taab!e i$co#e8 Provided' further' That the ho!iday pay' oerti#e pay' $ight hit diere$tia!pay a$d ha;ard pay receied by -ch #i$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$idual who is "ot reDuired to file a" i"co!e ta# retur" !ay "e$erthelessbe 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' beit ca!e$dar or ica!.

'&. A" i"di$idual ear"i"9 fro! the practice of his professio" or who e"9a9es i"trade or busi"ess files his i"co!e ta# retur" a"d pays his i"co!e ta# four F:G ti!es duri"9 asi"9le ta#able year. -arter!y ret-r$ 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$e four F:G ti!es a year reDuire!e"t is to !ae a$ailablesufficie"t fu"ds to !eet the bud9etary reDuire!e"ts5 o$ a -arter!y bai thereby i$creai$ggoer$#e$t !i-idity. 4t a!o eae hardhip o$ the part o i$diid-a! +ho are re-ired to #a/e thio-r ti#e ret-r$. Th-' the tapayer doe $ot hae to raie !arge -# o #o$ey i$ order to pay theta.

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

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

':. A withholdi"9 a9e"t is e#plicitly !ade perso"ally liable u"der the Ta# 0the pay!e"t of the ta# reDuired to be withheld5 i$ order to co#pe! the +ithho!di$g a+ithho!d the ta -$der a$y a$d a!! circ-#ta$ce. 4$ eect' the repo$ibi!ity or the co!!ectiota a +e!! a the pay#e$t thereo i co$ce$trated -po$ the pero$ oer +ho# the . "der the fi"al withholdi"9 ta# syste! the a!ou"t of i"co!e ta# withheldwithholdi"9 a9e"t is co"stituted as a full a"d fi"al pay!e"t of the i"co!e due fro! theo" the said i"co!e. G1te$te$ce' 1tpar.' 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$g Th-' i$ cae o hi ai!-re to +ithho!d the ta or i$ cae o -$der +ithho!di$g' the deicie$cy tbe co!!ected ro# the payor +ithho!di$g age$t. The payee i $ot re-ired to i!e a$ i$co#e taor the partic-!ar i$co#e.

'@. "der the creditable withholdi"9 ta# syste!5 ta#es withheld o" certai" pay!e"ts are i"te"ded to eDual or at least appro#i!ate the ta# due fro! the payeesaid i"co!e. The i$co#e recipie$t i ti!! re-ired to i!e a$ i$co#e ta ret-r$ a$d9or diere$ce bet+ee$ the ta +ithhe!d a$d the ta d-e o$ the i$co#e. G1ta$d 2$de$te$ce2>@%B&' Re. Reg. No. 2,F?I

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

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

a. Natio$a!


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%&. 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 $ot beca-e the ta i d-e ro# hi#.%Commissioner of Internal Revenue v. Court of Appeals, et al.' @6' a$-ary 20' 1FFF'theAnscor 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$additio$ to the 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 a part o the ta. GSec.2? %A&' N4R( o 1FF@I

%. +hat are the two F%G i"ds of ci$il pe"alties 7S3


33/55

>. "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$a!!y decided bythe proi$cia! or city 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!!yor reie+ ro# deciio$ o the (o##iio$er o (-to# +hich are adere to the o the Tari a$d (-to# (odeD %Thi ha reere$ce to oreit-re cae +here thedeciio$ 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 or artic!e' a$d the Secretary o Agric-!t-re i$ the cae o agric-!t-ra! prod-ct' co##odityor artic!e' i$o!i$g d-#pi$g a$d co-$terai!i$g d-tie -$der Sectio$ 01 a$d 02' repectie!y' o theTari a$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 theNatio$a! 4$ter$a! Ree$-e (ode or Tari a$d (-to# (ode a$d other !a+ ad#i$itered by theB-rea- o 4$ter$a! Ree$-e or the B-rea- o (-to#8 Provided, hoever, That oe$e or e!o$ie#e$tio$ed i$ thi paragraph +here the pri$cipa! a#o-$t o tae a$d ee' ec!-ie o charge a$dpe$a!tie c!ai#ed' i !e tha$ O$e #i!!io$ peo %P1'000'000.00& or +here there i $o peciieda#o-$t c!ai#ed ha!! be tried by the reg-!ar (o-rt a$d the -ridictio$ o the (TA ha!! be appe!!ate.A$y proiio$ o !a+ or the R-!e o (o-rt to the co$trary $ot+ithta$di$g' the cri#i$a! actio$ a$d thecorrepo$di$g cii! actio$ or the recoery o cii! !iabi!ity or tae a$d pe$a!tie ha!! at a!! ti#e bei#-!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 othe cri#i$a! actio$ bei$g dee#ed to $eceari!y carry +ith it the i!i$g o the cii! actio$' a$d $o rightto reere the i!i$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$a! Tria! (o-rt i$ the eercie o their appe!!ate -ridictio$ oer ta cae origi$a!!ydecided by the *etropo!ita$ Tria! (o-rt' *-$icipa! Tria! (o-rt a$d *-$icipa! (irc-it Tria! (o-rti$ 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$t or tae' ee' charge a$d pe$a!tie8 Provided, hoever, That co!!ectio$ cae +herethe 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& ha!! be tried by the proper *-$icipa! Tria! (o-rt' *etropo!ita$ Tria! (o-rta$d Regio$a! Tria! (o-rt.

2. Ec!-ie appe!!ate -ridictio$ i$ ta co!!ectio$ cae8a& Oer appea! ro# -dg#e$t' reo!-tio$' or order o the Regio$a! Tria!

(o-rt i$ ta co!!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$a! Tria! (o-rt i$ the eercie o their appe!!ate -ridictio$ oer ta co!!ectio$ caeorigi$a!!y decided by the *etropo!ita$ 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 Act No.''%


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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 $otatiied +ith tapayer: ep!a$atio$'' a$d he be!iee that proper tae ho-!d be aeed' the(o##iio$er o 4$ter$a! Ree$-e or hi d-!y a-thori;ed repree$tatie ha!! the$ $otiy the tapayero the i$di$g i$ the or# o a pre,ae#e$t $otice. The pre,ae#e$t $otice re-ire thetapayer to ep!ai$ +ithi$ itee$ %1>& day ro# receipt +hy $o $otice o ae#e$t a$d !etter ode#a$d or additio$a! tae ho-!d be directed to h i#.

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

4 the tapayer ig$ore the pre,ae#e$t $otice by $ot repo$di$g or hi ep!a$atio$ are$ot accepted by the (o##iio$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 o three %& year ro# the ti#e the ta ret-r$ +a i!ed or ho-!d hae bee$ i!ed +hicheer ithe !ater o the t+o ee$t. =here the tapayer did $ot i!e a ta ret-r$ or +here the ta ret-r$ i!ed ia!e or ra-d-!e$t' the$ the (o##iio$er ha a period o te$ %10& year ro# dicoery o the ai!-reto i!e a ta ret-r$ or ro# dicoery o the ra-d +ithi$ +hich to i-e a$ ae#e$t $otice. Ther-$$i$g o the aboe precriptie period #ay ho+eer be -pe$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$the act' !a+ a$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 orreco$ideratio$ 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-e there 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+the error o the B-rea- o 4$ter$a! Ree$-e a$d the correct co#p-tatio$ -pported by a tate#e$to act' a$d the !a+ a$d -ripr-de$ce re!ied -po$ by the tapayer. There i $o $eed to pay -$derprotet. 4 the protet +a $ot eao$ab!y i!ed the ae#e$t beco#e i$a! a$d co!!ectib!e a$d theB-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$erco-!d cha$ge the a#e. Th-' the tapayer co-!d $ot pay the ta' the$ app!y or a re-$d' a$d ide$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$e h-$dredeighty %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 aderedeciio$' or ro# the !ape o the o$e h-$dred eighty %1?0,& day period' +ith a$ app!icatio$ or thei-a$ce o a +rit o pre!i#i$ary i$-$ctio$ to e$oi$ the B4R ro# co!!ecti$g the ta -bect o theappea!.

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-!d the$ -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 the

goer$#e$t #ay be the -bect o a #otio$ or reco$ideratio$ or $e+ tria!' a de$ia! o +hich iappea!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 caeor deciio$ +ithi$ +hich to decide.

. 4 the deciio$ o the (o-rt o Ta Appea! en "ancair# the de$ia! o the prthe (o##iio$er or the ae#e$t i$ cae o ai!-re by the (o##iio$er to decide the ta#-t i!e a petitio$ or reie+ o$ certiorari +ith the S-pre#e (o-rt +ithi$ itee$ %1>& day ro#o the -dg#e$t o$ -etio$ o !a+. A$ ete$io$ o thirty %0& day #ay or -tiiab!e reagra$ted. 4 the tapayer doe $ot o appea!' the deciio$ o the (o-rt o Ta Appea! +o-!d i$a! a$d thi ha the eect o #a/i$g the ae#e$t a!o i$a! a$d co!!ectib!e. The B4R co-e it ad#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$tha" o"e !ea"i"9. *ore co##o$!y the +ord ae#e$t #ea$ the oicia! a!-atitapayer: property or p-rpoe o taatio$. The aboe dei$itio$ o ae#e$t i$d app-$der tari a$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 ti!posed upo" real properties that ha$e bee" be"efited by a public wors e#pe"ditulocal 9o$er"!e"t. 4t i o#eti#e ca!!ed a pecia! ae#e$t or a pecia! !ey. *CommissInternal Revenue v. Pascor Realty and %evelopment Corporation, et al., ' 1FFF&

1or i"ter"al re$e"ue ta#atio" assess!e"t as layi"9 a ta#. The -!ti#ate p-rpoae#e$t to -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 !awhe" the B*R releases5 !ails or se"ds such "otice to the ta#payer. *Commissioner of Revenue v. Pascor Realty and %evelopment Corporation, et al., ' -$e 2F' 1F

:. Selfassessed ta#5 defi"ed. A ta that the tapayer hi#e! aee or coa$d pay to the tai$g a-thority. 4t i a ta that e!,aeed by the tapayer +itho-t the i$teo a$ 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$ -$der +hich the taco#p-te hi o+$ ta !iabi!ity' prepare the ret-r$' a$d pay the ta a he i!e the ret-r$. Ta,yo-,i!e yte# i a e!,aei$g ta ret-r$.

4$ter$a! ree$-e tae are e!,aei$g. %"ie$t o . (arpio i$ Philippine !atiCompany v. Court of Appeals, et al., a$d co#pa$io$ cae&

A c!ear ea#p!e o a e!,aeed ta i the a$$-a! i$co#e ta' +hich the tapayerco#p-te a$d pay +itho-t the i$tere$tio$ o a$y ae#e$t by the B4R. The a$$-a! i$cbeco#e d-e a$d payab!e +itho-t $eed o a$y prior ae#e$t by the B4R. The B4R #ay$ot i$etigate or a-dit the a$$-a! i$co#e ta ret-r$ i!ed by the tapayer. The tapayer: !iathe i$co#e ta doe $ot depe$d o$ +hether or $ot the B4R co$d-ct -ch -be-e$t i$eor a-dit.

7o+eer' i the tai$g a-thority i irt re-ired to i$etigate' a$d ater -ch i$etigi-e the ta ae#e$t that create the ta !iabi!ity' the$ the ta i $o !o$ger e!,aeed.

FBG of the N*R0 of 'CC@ allows the B*R to !ae or a!e"d a ta#fro! his ow" "owled9e or obtai"ed throu9h testi!o"y or otherwise . Th-' the (o##o 4$ter$a! Ree$-e i$etigate a$y circ-#ta$ce +hich !ed hi# to be!iee that the tapataab!e i$co#e !arger tha$ that reported. Neceari!y' thi i$-iry +o-!d hae to be o-tide

boo/ beca-e they -pported the ret-r$ a i!ed. 7e #ay ta/e the +or$ teti#o$y o the tahe #ay ta/e the teti#o$y o third partieD he #ay ea#i$e a$d -bpoe$a' i $eceary' tradbro/er: acco-$t a$d boo/ a$d the tapayer: boo/ o acco-$t. The (o##iio$er i $oto o!!o+ a$y et o patter$. The eite$ce o -$reported i$co#e #ay be ho+$ by a$y paproo that i aai!ab!e i$ the circ-#ta$ce o the partic-!ar it-atio$. %Commissioner of Revenue v. 'ante) (rading Co., Inc. ' *arch 1' 200>&

b =he$ a dicrepa$cy ha bee$ deter#i$ed bet+ee$ the ta +ithhe!d a$d the35


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>. ,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 $ot re-ired toco#p-te -ch ta !iabi!itie +ith #athe#atica! eact$e. Approi#atio$ i$ the ca!c-!atio$ o taed-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 to proo. %Commissioner of Internal Revenue v. 'ante) (rading Co., Inc. ' *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$ide"ce obtai"able Q -$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 ,6D Philippine ournalists, Inc. v. Commissioner of Internal Revenue,


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':. "reaso"able i"$esti9atio" co"te!plates cases where the period forassess!e"t e#te"ds i"defi"itelybeca-e thi deprie the tapayer o the a-ra$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, 2' "ece#ber16' 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$8 or thep-rpoe o aeg-ardi$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$' A acoro!!ary' the eceptio$ to the !a+ o$ precriptio$ ho-!d perorce be trict!y co$tr-ed . GPhilippineournalists, Inc. v. Commissioner of Internal Revenue, 2' "ece#ber 16' 200 citi$gCommissioner of Internal Revenue v. B./. +oodrich Phils, Inc *no Sime %ar"y International (ire Co.,Inc.#,., et al.,' *arch 1' 200> citi$g


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epiratio$ o the period o precriptio$ or beore the !ape o the period agreed -po$ i$ cae a-be-e$t agree#e$t i eec-ted. c. The o!!o+i$g ree$-e oicia! area-thori;ed to ig$ the +aier.

A. 4$ the Natio$a! Oice .

0o!!issio"er 1or ta#cases i"$ol$i"9 !ore tha" P'; B. 4$ the Regio$a! Oice

1. The Ree$-e "itrict Oicer +ith repect to tacae ti!! pe$di$g i$etigatio$ a$d the period to ae i abo-t to

precribe regard!e o a#o-$t. d. The wai$er !ust be e#ecuted i" three F8G copies ' the

origi$a! copy to be attached to the doc/et o the cae' the seco"d copy for the ta#payera$d thethird copy or the Oice accepti$g the +aier. The fact of receipt by the ta#payer of his=her filecopy shall be i"dicated i" the ori9i"al copy.

d. The fore9oi"9 procedures shall be strictly followed. A$y ree$-e oicia! o-$d$ot to hae co#p!ied +ith thi Order re-!ti$g i$ precriptio$ o the right to ae9co!!ect ha!! bead#i$itratie!y dea!t +ith. %Re$-#beri$g a$d e#phai -pp!ied.&

4 the aboe are $ot o!!o+ed there i $o a!id +aier a$d precriptio$ +o-!d r-$.%Commissioner of Internal Revenue v. /M/ %evelopment Corporation, ' -$e 0'200? citi$g Philippine ournalists, Inc. v. Commissioner of Internal Revenue 2'"ece#ber 16' 200' @ S(RA 21' 22?,22F&

%%. The procedures i" R;O No. %&C& are NOT !erely directory a"d that thee#ecutio" of a wai$er is a re"u"ciatio" of a ta#payer6s ri9ht to i"$oe prescriptio". R;O No.%&C& !ust be strictly followed. A +aier o the tat-te o !i#itatio$ -$der the N4R(' to a certai$ete$t bei$g a derogatio$ o the tapayer: right to ec-rity agai$t pro!o$ged a$d -$cr-p-!o-i$etigatio$' #-t be care-!!y a$d trict!y co$tr-ed. The +aier o the tat-te o !i#itatio$ doe$ot #ea$ that the tapayer re!i$-ihe the right to i$o/e precriptio$ -$e-ioca!!y' partic-!ar!y+here the !a$g-age o the doc-#e$t i e-ioca!.

Th- a +aier beco#e -$!i#ited i$ ti#e' a$d i$a!id' beca-e it did $ot peciy a dei$itedate' agreed -po$ bet+ee$ the B4R a$d the tapayer' +ithi$ +hich the or#er #ay ae a$d co!!ecttae. 4t a!o +o-!d hae $o bi$di$g eect o$ the tapayer i there +a $o co$e$t by the(o##iio$er. O$ thi bai' $o i#p!ied co$e$t ca$ be pre-#ed' $or ca$ it be co$te$ded that theco$c-rre$ce to -ch +aier i a #ere or#a!ity. %Commissioner of Internal Revenue v. /M/%evelopment Corporation, ' -$e 0' 200? citi$g Philippine ournalists, Inc. v.Commissioner of Internal Revenue2' "ece#ber 16' 200' @ S(RA 21' 22F i$t-r$ citi$g 4d. at 22F' citi$g Commissioner of Internal Revenue v. Court of Appeals' @12' Cebr-ary 2>' 1FFF' 0 S(RA 61' 620,622.&

%8. B*R ca""ot rely o" its i"$ocatio" of the rule that the 9o$er"!e"t ca""ot beestopped by the !istaes of its re$e"ue officers i" the e"force!e"t of R;O No. %&C& beca-ethe !a+ o$ precriptio$ ho-!d be i$terpreted i$ a +ay co$d-cie to bri$gi$g abo-t the be$eice$tp-rpoe o aordi$g protectio$ to the tapayer +ithi$ the co$te#p!atio$ o the (o##iio$ +hichreco##e$ded the approa! o the !a+. To the ' 110? %1F60&I

%:. The si9"atures of both the 0o!!issio"er a"d the ta#payer5 are refor a wai$er of the prescripti$e period' th- a -$i!atera! +aier o$ the part o the tapayer d-pe$d the precriptie period. GCommissioner of Internal Revenue v. Court of Appeals, et aNo. 11>@12' Cebr-ary 2>' 1FFF %(ar$atio$ cae&I

:@. The act of reDuesti"9 a rei"$esti9atio" alo"e does "ot suspe"d the ru"the prescripti$e period. The reDuest for rei"$esti9atio" !ust be 9ra"ted by the 0*S-pre#e (o-rt dec!ared that the b-rde$ o proo that the re-et or rei$etigatio$ haact-a!!y gra$ted ha!! be o$ the (o##iio$er o 4$ter$a! Ree$-e. S-ch gra$t #ay be ei$ it co##-$icatio$ +ith the tapayer or i#p!ied ro# the actio$ o the (o##iio$era-thori;ed repree$tatie i$ repo$e to the re-et or rei$etigatio$. GBan- of Philippine*/ormerly /ar &ast Ban- and (rust Company# v. Commissioner of Internal Revenue, 0' citatio$ o#itted&

%.+hat are the two ways of protesti"9 a" assess!e"t "otice for a" ire$e"ue ta# 7 Alter"ati$ely5 what are the two types of protests 7 E#plai" briefly.

S3@>' >@?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 adeide$ce' +i!! ta/e #ore ti#e tha$ a reco$ideratio$ o a ta ae#e$t +hich +i!! be !i#ite

eide$ce a!ready at ha$dD thi -tiie +hy the or#er ca$ -pe$d the r-$$i$g o the tat-te o repo$e receied8 it co$te$t a$d te$or -pport the theory that it +a the (4R: i$a! act re38


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y D y p g!i#itatio$ o$ co!!ectio$ o the aeed ta' +hi!e the !atter ca$$ot. %Commissioner of InternalRevenue v. Philippine +lo"al Communication, Inc., ' 20,21&

:.+hat are the reDuire!e"ts for the $alidity of a ta#payer6s protest 7S3@&

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$d !ey. =hat i the -becto the appea! i the i$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 $otice ico$idered a the i$a! deciio$ o the (o##iio$er o$ the protet. *Surigao &lectric Co., Inc. v.Court of (a) Appeals, et al., >@ S(RA >2&

d. A !etter o the B4R (o##iio$er reiterati$g to a tapayer hi preio- de#a$d to paya$ ae#e$t i co$idered a de$ia! o the re-et or reco$ideratio$ or protet a$d i appea!ab!eto 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 or reco$ideratio$ +ho receied $o other repo$e. Commissioner of Internal Revenue v.Isa"ela Cultural Corporation' 210' -!y 11' 2001he!d that $ot o$!y i the Notice the o$!y

p pp ythe re-et or reco$ideratio$. The ery tit!e epre!y i$dicated that it +a a final $otice ei;-re o property. The !etter ite! c!ear!y tated that the tapayer +a bei$g gie$ thiOPPORT3N4T to payD other+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 the 0o!!issi*"ter"al Re$e"ue. uri"9 the pe"de"cy of the protest the 0*R issued a warra"t of da"d le$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"swerS3' 200>& becaco!!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*"ter"al Re$e"ue or 0o!!issio"er of 0usto!s before the 0ourt of Ta# Appeals5 woul?urisdictio". 4 there i $o -ch deciio$' the petitio$ +o-!d be di#ied or !ac/ o -ri-$!e the cae a!! -$der a$y o the o!!o+i$g eceptio$.

:. *"sta"ces where the 0ourt of Ta# Appeals would ha$e ?urisdictio" e$e" 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$t ater a p1?0 day ro# -b#iio$ o co#p!ete -pporti$g doc-#e$t' the tapayer ha a period o ro# the epiratio$ o the 1?0 day period +ithi$ +hich to appea! to the (o-rt o Ta Appea!par.' Sec. 22? %e&' N4R( o 1FF@ ; Commissioner of Internal Revenue v. Isa"ela Cultural Corp210' -!y 11' 2001&

b. =here the (o##iio$er ha $ot acted o$ a$ app!icatio$ or re-$d or credit t+o year period ro# the ti#e o pay#e$t i abo-t to epire' the tapayer ha to i!e hi appethe (o-rt o Ta 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 r-!i$g'. 4t +o-!d #a/e #atter #ore eaperati$g or the tapayer i the door o -tice +c!oed or -ch a re!ie -$ti! ater the (o##iio$er' +o-!d hae' at hi pero$a! co$e$ie$chi go ig$a!. *Commissioner of Customs, et al, v. Court of (a) Appeals, et al.,


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+o-!d be ab!e to deter#i$e +he$ hi right to appea! to the ta co-rt accr-e. %Commissioner ofInternal Revenue v. Ban- of the Philippines Islands, . +hat ta# cases could "ot be the sub?ect of co!pro!ise 7S3


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S3' 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 7S36?2' *arch 2@' 200@&

NOTES AN" (O**ENTS8a. Proof of fact of withholdi"9. Sec. 10. Claim for ta) credit or refund. %a&

or Ta (redit or Re-$d o 4$co#e ta ded-cted a$d +ithhe!d o$ i$co#e pay#e$t ha!! bed-e co-re o$!y +he$ it i ho+$ o$ the ret-r$ that the i$co#e pay#e$t rece

prof domondon tax notes

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