Tax 2

Contents:
Transfer Taxes (Estate, Donors)

Excise Tax
Documentary Stamp Tax
Remedies
Local Taxation
Real Property Taxation
Tariff and Customs Code
TRANSFER TAXES
Transfer taxes are excise taxes imposed upon
the privilege of gratuitously transmitting ones
property to another. There are two types of
transfer taxes: donors tax and estate tax.
Donors Tax Estate Tax
Imposed upon the
privilege to give
Imposed upon the privilege
to transmit property to
heirs
Transfer is between the
living
Transfer is from the
deceased, through his/her
estate, to the living
Transfer may take place
between natural and
uridical persons
Transfer takes place only
between natural persons
I
Estate Tax
PRINCIPLES
Definition
It is a graduated tax imposed upon the privilege
of the decedent to transmit property at death
and is based on the entire net estate. It is not a
direct tax on the property transmitted or
transferred although its amount is based
thereon.
Applicable Law
It is a well!settled rule that estate taxation is
governed by the statute in force at the time of
the death of the decedent. The estate tax
accrues as of the death of the decedent and the
accrual of the tax is distinct from the obligation
to pay the same. "pon the death of the
decedent, succession takes place and the right of
the #tate to tax the privilege to transmit the
estate vests instantly upon death. $#ection %, &&
'!'((%)
Transfers Affected
! Transfers Mortis Causa - *ratuitous
transfers mortis causa or after death are the
usual obects of the estate tax. #uch
transfers are either testate or intestate.
"! Transfers Inter Vivos - *enerally,
gratuitous transfers inter vivos attract
donors tax. +owever, certain transfers inter
vivos are treated as testamentary
dispositions and are accordingly included in
the computation of the gross estate in order
to arrive at the proper estate tax liability.
These transfers are the following:
a. Transfers in conte#plation of deat$
$#ec. ,-.)
The term /in contemplation of death0
does not refer to the general expectation
of death which all entertain. The
transfers referred to are those impelled
by the thought of death $i.e., the
motivating factor or controlling motive is
the thought of death), regardless of
whether the transferor was near the
possibility of death or not. In
ascertaining such intent, the following
are considered:
o The age of the decedent at the
time the transfers were made1
o The decedents health, as he
knew it, at or before the time of
the transfers1
o The interval between the
transfers and the decedents
death1
o The amount of the property
transferred in proportion to the
amount of property retained1
o The nature and disposition of
the decedent, e.g., whether
peaceful or gloomy, sanguine or
morbid, optimistic or
pessimistic1
o The existence of a general
testamentary scheme of which
the transfers were part1
o The relationship of the donee or
donees to the decedent, i.e.
whether they were the natural
obects of their bounty1
o The existence of a desire on the
part of the decedent to escape
23orybeth4.aldrias.$ead5 26ayna47alayang.dep%t&5 2&hud84&aymundo.secretariat5 29ionne4#anche8.acads5
2:am4:acob.design5 .obbie4#ta7aria.printing5 2&osanne47ede8.$r5
2:apee49e3eon.poli'law5 2;scheia4<umul.re#'law5 2=aul4#orino/:udy4&ipol.civ'law5 2+ya4&afael/7ac47acapagal.cri#'law5
2>ivian4Tan/:ustin47endo8a.labor'law5 27iguel49e:esus.legal'et$ics5 23ianne4*ervasio.co##'law5
2?es4#icangco/&owena4&omero.tax'law5
1
the burden of managing
property by transferring the
property to others1
o The existence of a long
established gift!making policy
on the part of the decedent1
o The existence of a desire on the
part of the decedent to
vicariously enoy the enoyment
of the donees of the property
transferred1 and
o The existence of the desire by
the decedent of avoiding estate
taxes by means of making inter
vivos transfers of property.
(Source: Nolledo, The NIRC
Annotated)
b. Transfer wit$ retention or
reservation of certain rig$ts $#ec.
,-.)
This contemplates those cases where the
owner transfers his property during life
but still retains the economic benefits @
the possession or enoyment of the
property, or the power to designate the
persons who may exercise such rights.
.y reason of the restriction or
encumbrance, the transferee is
incapable of freely enoying or disposing
of the property until the transferors
death, that the transfer may be
regarded as having been intended to
take effect in possession or enoyment
at the transferors death.
I33"#T&;TIA6:
B transfers his property
to < in naked ownership
and to C in usufruct
throughout Cs lifetime
subect to the condition
that if C predeceases B,
the property shall
return to B. If B dies
during Cs life, the value
of the reversionary
interest of B at death is
includible in his gross
estate $see ;rticles
D-E!D-D of the ?ivil
?ode). The transfer is
taxable as intended to
take effect at or after
death because the
possibility of reversion
to B makes Cs interest
conditional as long as B
lives.
6ATF: Transfer with retention or
reservation of certain rights is grouped
by the Tax ?ode under transfer in
contemplation of death.
c. Revocable transfers $#ec. ,-?)
; revocable transfer is one where the
transferor has reserved the right to
alter, amend or revoke such transfer,
regardless of whether or not the power
is actually exercised during his lifetime,
and whether or not the power should be
exercised by him alone or in conunction
with someone else. The power to alter,
amend or revoke shall be considered to
exist on the date of the decedents death
F>F6 T+A"*+:
the exercise of the power is
subect to a precedent
giving of notice, or
the alteration, amendment
or revocation takes effect
only on the expiration of a
stated period after the
exercise of the power,
whether or not on or before the date of
the decedents death notice has been
given or the power has been exercised.
d. Transfers of propert& arising %nder
a general power of appoint#ent
$#ec. ,-9)
The rule is that the gross estate shall
include any property passing or
transferred under a general power of
appointment exercised by the decedent:
by will, or
by deed executed in
contemplation of, or
intended to take effect in
possession or enoyment at,
or after his death, or
by deed under which he has
retained for his life or any
period not ascertainable
without reference to his
death or for any period
which does not in fact end
before his death
o the possession or
enoyment of, or
the right to the
income from, the
property, or
2
o the right, either
alone or in
conunction with
any person, to
designate the
persons who shall
possess or enoy
the property or the
income therefrom
() *$at is a power of
appoint#ent+
It is the power or right to
designate by will or by deed the
person$s) who shall succeed to,
possess or enoy the property,
or the income therefrom,
received from the estate of the
prior decedent. It involves the
person creating the power
$donor) and the person to whom
is given the right to exercise the
power $donee). The two kinds of
appointment and their effects
are as follows:
,ind of
Appoint#ent
Nat%re Tax
I#plications
Effects
-eneral 9A6FF has
power to
appoint
any person
he chooses
who shall
possess or
enoy the
property
without
restriction
7akes
appointed
property, for
all legal
intents, the
property of
the 9A6FF
$includible in
his estate)
9A6FF
holds the
appointed
property
with all
the
attributes
of
ownership,
under the
concept of
owner
Special 9A6FF
must
appoint
successor
to the
property
only within
a limited
group or
class of
persons
6ot includible
in the gross
estate of the
9A6FF when
he dies
9A6FF
holds the
appointed
property in
trust, or
under the
concept of
trustee
e. Transfers for ins%fficient
consideration $#ec. ,-*)
These are transfers that are not bona
fide sales of property for an adeGuate
and full consideration in money or
moneys worth. The following rules
apply:
If bona fide sale @ no value
shall be included in the
gross estate
If not a bona fide sale ! the
excess of the fair market
value at the time of death
over the value of the
consideration received by
the decedent shall form part
of his gross estate.
If inter vivos transfer is
proven fictitious @ total
value of the property at the
time of death included in
the gross estate1 e.g.
Case A Case . Case C
H7>, transfer I,-(( ',((( ',-((
H7>, death ',((( ',-(( ',(((
?onsideration
&eceived
,(( ',((( (
/al%e
Incl%ded in
t$e -ross
Estate
0"11 1 "0111
Transfers Exe#pted and Properties
Excl%ded
I. ;cGuisitions and transfers expressly declared
as exempt: $#ec. ,D)
a. 7erger of the usufruct in the owner
of the naked title
b. Transmission or delivery of the
inheritance or legacy by the
fiduciary heirs or legatee to the
fiduciary
c. Transmission from the first heirs,
legatees or donees in favor of
another beneficiary in accordance
with the desire of the testator
d. ;ll beGuests, devises, legacies or
transfers to social welfare, cultural
and charitable institutions, no part
of the income of which inures to the
benefit of any individual, provided
that not more than %(J of the said
beGuests, devises, legacies or
transfers shall be used for
administrative purposes
'. =roceeds of:
an insurance policy taken out
by the decedent upon his own
life, when beneficiary is AT+F&
T+;6 the estate, executor or
3
administrator, and designation
is I&&F>A?;.3F $#ec. ,-F)
Thus, proceeds are
I6?3"9F9 in the gross
estate:
Khen beneficiary
is the estate,
executor or
administrator,
whether
designation is
revocable or
irrevocable
Khen beneficiary
is other than the
estate, executor
or administrator,
and designation is
&F>A?;.3F
6ATF: ;ccording to the
Insurance ?ode, the
designation is presumed to
be revocable, in case the
designation of the
beneficiary is not clear.
a group life insurance policy
taken out by a company for its
employees, because the law
speaks of policies /taken out by
the decedent upon his own life0
life insurance policies issued by
the *#I# to government
officials or employees, as they
are exempt by law from taxes
of all kinds $=9 IILE, as
amended)

%. 9eath benefits received from the ###,
accruing by reason of death $&; IIEI, as
amended)
L. ;mounts received from the =hilippine and
the ".#. *overnments from the damages
suffered during the last war $&; ''D)
-. .enefits received by beneficiaries residing in
the =hilippines under laws administered by
the ".#. >eterans ;dministration $&; %E()
E. =roperties held in trust by the decedent
D. Transfers by way of bona fide sales
,. #eparate or exclusive property of the
surviving spouse is not deemed part of the
gross estate of the decedent spouse. $#ec.
,-, 6I&?)
M. 6et estates which are not in excess of
='((,((( are exempt from estate tax. $#ec.
,L, 6I&?)
-R2SS ESTATE
Co#position
The gross estate of a decedent shall be
composed of the following properties and interest
therein at the time of his death:
?iti8ens and &esident ;liens @ all
properties, real or personal, tangible or
intangible, wherever situated
6on!resident ;liens @ only properties
situated in the =hilippines provided that,
with respect to intangible personal
property, its inclusion in the gross estate
is subect to the rule of reciprocity
provided for under #ection I(L of the
6I&?
() *$at is 3residence4 for estate tax
p%rposes+
The term /residence0 and /domicile0 are
synonymous and are used interchangeably
without distinction. $?ollector v. 3ara, I(' =hil
,I%1 >elilla v. =osadas, E' =hil E'L). Hor
purposes of estate taxation, /residence0 refers to
the permanent home, the place to which
whenever absent, for business or pleasure, one
intends to return, and depends on facts and
circumstances, in the sense that they disclose
intent. $?orre v. Tan ?orre, I(( =hil %'I) It is,
therefore, not necessarily the actual place of
residence.
() *$at is t$e situs of intangible personal
propert&+
The general rule is that the situs is at the
domicile or residence of the owner. The principle,
however, is not controlling when:
It is inconsistent with the express
provisions of statute, or
:ustice does not demand that it should
be, as where the property has in fact a
situs elsewhere.
?;#F 3;K: ?ollector v. 3ara, I(' =hil ,I% @ ;s a
rule, personal property is taxable at the domicile
of the owner under the doctrine of mobilia
sequuntur ersonam1 nevertheless, when he,
during his lifetime, extended his activities with
respect to his interests so as to avail himself of
the protection and benefits of the laws of the
=hilippines, in such a way as to bring his person
or property within the reach of the =hilippines,
the reason for a single place of taxation no
4
longer obtains. +is property in the =hilippines
enoys the protection of the government so that
the right to collect the estate tax cannot be
Guestioned.
() *$at are t$e intangible properties w$ic$
are considered b& law as sit%ated in t$e
P$ilippines+
Hranchise which must be exercised in the
=hilippines
Abligations or bonds issued by any
corporation or sociedad anonima
organi8ed or constituted in the
=hilippines
#hares, obligations or bonds issued by
any foreign corporation ,-J of the
business of which is located in the
=hilippines
any foreign corporation if such shares,
obligations or bonds have acGuired a
business situs in the =hilippines
#hares or rights in any partnership,
business or industry established in the
=hilippines
() *$at is t$e reciprocit& r%le+ $#ec. I(L,
6I&?)
There is reciprocity if the foreign country of
which the decedent was a citi8en and resident at
the time of his death:
did not impose a transfer tax of any
character, in respect of intangible
personal property of citi8ens of the
=hilippines not residing in that foreign
country1 or
allowed a similar exemption from
transfer tax in respect of intangible
personal property owned by citi8ens of
the =hilippines not residing in that
country
6ATF:
Hor the reciprocity rule to apply, there
must be TAT;3 reciprocity. If any of the
two states collects or imposes and does
not exempt any transfer, death, legacy,
or succession tax of any character,
reciprocity does not work. 2Hor
instance,5 in the =hilippines, both estate
and inheritance taxes are imposed on
the estate while in ?alifornia only
inheritance tax is imposed. The
reciprocity rule may not, therefore, be
availed of. There cannot be partial
reciprocity. It has to be total or none at
all. $?I& v. Hisher, II( =hil E,E)
&eciprocity in exemption does not
reGuire the /foreign country0 to possess
international personality in the
traditional sense $i.e., compliance with
the reGuisites of statehood). Thus,
Tangier, 7orroco $?ollector v. ?ampos!
&ueda, L' #?&; '%) and ?alifornia, a
state in the ;merican "nion $?ollector v.
de 3ara, I(' =hil ,I%) were held to be
foreign countries within the meaning of
#ection I(L.
/al%ation of t$e -ross Estate
$N,, of the 6I&? and N- of && '!'((%)
-ENERAL R5LE) The properties comprising the
gross estate shall be valued based on H;I&
7;&OFT >;3"F $H7>) as of the time of death.
Real propert& 6 H7> shall be the H7>
as determined by the ?ommissioner A&
the H7> as shown in the schedule of
values fixed by the provincial and city
assessors, whichever is +I*+F&.
S$ares of Stoc7
o Listed s$ares 6 H7> shall be
the arithmetic mean between
the highest and lowest Guotation
at a date of death, A& the date
nearest the date of death, if
none is available on the date of
death itself
o 5nlisted s$ares 8 ?A77A6
shares are valued based on
.AAO >;3"F1 while =&FHF&&F9
shares are valued at =;& >;3"F
Rig$t to %s%fr%ct0 %se or $abitation0
as well as t$at of ann%it& 8 there shall
be taken into account the probable life of
the beneficiary in accordance with the
latest basic standard mortality table, to
be approved by the #ecretary of
Hinance, upon recommendation of the
Insurance ?ommissioner.
Decedents interest >alue to be included
in the gross estate is the extent of the interest
therein of the decedent at the time of his death
DED5CTI2NS
! Expenses0 losses0 indebtedness and
taxes
a. 9%neral expenses $N,E!;I)
The allowable deduction may either be
the actual funeral expenses $whether
paid or unpaid) up to the time of
5
interment, or an amount eGual to -J of
the gross estate, whichever is lower, but
in no case to exceed ='((,(((.
6ATF: The unpaid portion of the
funeral expenses incurred which
is in excess of the ='((,(((
threshold is 6AT allowed to be
claimed as a deduction under
/claims against the estate0 $see
I$c) below). $#ection E$;)$I) of
&& ('!'((%)
() *$at are exa#ples of
f%neral expenses+ $&& '!
'((%, #ec. E!;I)
o The 7A"&6I6*
;==;&F3 of the
surviving spouse and
unmarried minor
children of the
deceased, bought and
used on the occasion of
the burial
o Fxpenses for the
deceaseds wake,
including food and
drinks
o =".3I?;TIA6 ?+;&*F#
for death notices
o TF3F?A77"6I?;TIA6#
FB=F6#F# incurred in
informing relatives of
the deceased
o ?ost of ."&I;3 =3AT,
TA7.#TA6F#,
7A6"7F6T or
7;"#A3F"7 but not
their upkeep. In case
the deceased owns a
family estate or several
burial lots, only the
value corresponding to
the plot where he is
buried is deductible
o I6TF&7F6T and/or
?&F7;TIA6 HFF# and
?+;&*F#
o ;ll other expenses
incurred for the
performance of the
&ITF# and
?F&F7A6IF# incident
to interment
() *$at are N2T ded%ctible
as f%neral expenses+
o Fxpenses incurred
;HTF& I6TF&7F6T,
such as for prayers,
masses, entertainment,
or the like
o ;ny portion of the
funeral and burial
expenses .A&6F or
9FH&;<F9 by
&F3;TI>F# and
H&IF69# of the
deceased
I33"#T&;TIA6#:
o If five percent $-J) of
the gross estate is
=D(,((( and the
amount actually
incurred is =-(,(((,
only =-(,((( will be
allowed as deduction1
o If the expenses actually
incurred amount to
=M(,((( and five
percent $-J) of the
gross estate is =D(,(((,
only =D(,((( will be
allowed as deduction1
the gross estate is
=''(,((( and the
amount actually
incurred is ='I-,(((,
the maximum amount
that may be deducted is
only ='((,(((1
the gross estate is =
I((,((( and the total
amount incurred is
=I-(,((( where
='(,((( thereof is still
unpaid, the only
amount that can be
claimed as deduction
for funeral expenses is
=I((,(((. The entire
=-(,((( excess amount
consisting of =%(,(((
paid amount and
='(,((( unpaid amount
can no longer be
claimed as H"6F&;3
FB=F6#F#. 6either can
the ='(,((( unpaid
portion be deducted
from the gross estate as
?3;I7# ;*;I6#T T+F
F#T;TF.
b) :%dicial expenses of testamentary and
intestate proceedings $N,E!;I)
6
Fxpenses allowed as a deduction under
this heading are those incurred in the
inventory!taking of the assets
comprising the gross estate, their
administration, the payment of debts of
the estate, as well as the distribution of
the estate among the heirs. These
deductible items are expenses incurred
9"&I6* T+F #FTT3F7F6T AH T+F
F#T;TF ."T 6AT .F<A69 T+F 3;#T
9;< =&F#?&I.F9 .< 3;K, or the
extension thereof, HA& T+F HI3I6* AH
T+F F#T;TF T;B &FT"&6 $&& '!'((%,
#ec. E!;')
() *$at are exa#ples of
;%dicial expenses+
o Hees of executor or
administrator
o ;ttorneys fees
o ?ourt fees
o ;ccountants fees
o ;ppraisers fees
o ?lerk hire
o ?osts of preserving and
distributing the estate
o ?osts of storing or
maintaining property of
the estate
o .rokerage fees for
selling property of the
estate
?;#F 3;K: ?ommissioner v.
?ourt of ;ppeals, %', #?&; EEE @
o Fxpenses incurred in
the extraudicial
settlement of the estate
should be allowed as a
deduction from the
gross estate. It is
sufficient that the
expense be a necessary
contribution toward the
settlement of the case.
The notarial fee paid for
the extraudicial
settlement is deductible
since such settlement
effected a distribution
of 2=aonars5 estate to
his lawful heirs.
o ;ttorneys fees to be
deductible from the
gross estate must be
essential to the
collection of assets,
payment of debts or the
distribution of property
to the persons entitled
to it.
c) Clai#s against t$e estate $N,E!;I)
Clai#s 6 debts or demands of a
pecuniary nature which could have been
enforced against the deceased in his
lifetime and could have been reduced to
simple money udgments. These may
arise out of contract, tort or operation of
law.
Re<%isites for ded%ctibilit&
$&& '!'((%, #ec. E!;%))
I) must be a =F&#A6;3
A.3I*;TIA6 of the
deceased existing at
the time of his death
$except unpaid funeral
expenses and unpaid
medical expenses,
which are classified into
their own separate
categories)
') liability must have been
contracted in *AA9
H;IT+ and for adeGuate
and full consideration in
money or moneys
worth
%) the claim must be a
debt or claim which is
>;3I9 I6 3;K and
F6HA&?F;.3F I6
?A"&T
L) indebtedness must 6AT
have been ?A69A6F9
by the creditor or the
action to collect from
the decedent must not
have prescribed.
() *$at are t$e
s%bstantiation
re<%ire#ents+
I) The duly!notari8ed debt
instrument, If the claim
arose out of a debt
instrument
') ; statement showing
the disposition of the
proceeds of the loan, if
the indebtedness was
incurred within % years
before the death of the
decedent.

d) Clai#s against insolvent persons
$N,E!;I)
7
These shall be deductible from the gross
estate, provided that the value of the
decedents interest in the claim is
included in the value of the gross estate.
e) 5npaid #ortgages0 losses and
taxes$N,E!;I and && '!'((%, #ec. E!
;-)
5NPAID =2RT-A-ES 6 shall
be deductible from gross estate,
subect to the following
conditions:
o That the value of the
decedents interest in
the property which was
encumbered by such
mortgage or
indebtedness is
included in the value of
the gross estate
o That the deduction shall
be limited to the extent
that they were
contracted bona fide
and for an adeGuate
and full consideration in
money or moneys
worth, if such unpaid
mortgages or
indebtedness were
founded upon a
promise or an
agreement.
L2SSES 6 deductible from the
gross estate if ;33 of the
following conditions are
satisfied:
o The losses were
I6?"&&F9 9"&I6* the
#FTT3F7F6T of the
estate
o The losses arose from
HI&F#, #TA&7#,
#+I=K&F?O or AT+F&
?;#";3TIF#, or from
&A..F&<, T+FHT or
F7.FCC3F7F6T
o The losses are 6AT
?A7=F6#;TF9 .<
I6#"&;6?F or
otherwise
o The losses are not
claimed as a deduction
for income tax
purposes in an income
tax return
o The losses were
incurred 6AT 3;TF&
T+;6 T+F 3;#T 9;<
HA& =;<7F6T AH T+F
F#T;TF T;B
TA>ES 6 shall be deductible
from the gross estate if:
o They have accrued as
of the death of the
decedent
o They were unpaid as of
the time of death
6ATF: This
deduction 9AF# 6AT
include income tax
upon income received
after death, or property
taxes not accrued
before his death, or the
estate tax due from the
transmission of his
estate.
"! Propert& previo%sl& taxed ?vanis$ing
ded%ctions@ $N,E!;')
>anishing deduction or deduction of property
previously taxed is a deduction allowed on the
property left behind by the decedent which he
had acGuired previously by inheritance or
donation. =reviously, a transfer tax had already
been imposed on the property, either the estate
tax if the property was acGuired by inheritance or
the donors tax if the same was acGuired by
donation. 6ow that the recipient of the
inheritance or donation has died, the same
property will again be subected to a transfer
tax, the estate tax. Thus, to minimi8e the
effects of a double tax on the same property
within a short period of time, i.e. five $-) years,
the law allows a deduction to be claimed on the
said property.
!"amle: 7r. ; died in 9ecember
'((%. In 7arch '((%, 7r. . $7r.
;s father) died and left 7r. ; some
properties as inheritance. 7ay
vanishing deductions be claimed as
deductions in computing 7r. ;s net
taxable estateP
<F#, vanishing deductions
shall be allowed if the
following conditions are met
$&FQ"I#ITF# HA&
9F9"?TI.I3IT<):
I) #eath $ the present
decedent $7r. ;) died
within five years from
the receipt of the
property from a prior
8
decedent $7r. .) or
donor1
') Identit% of the roert%
$ The property with
respect to which
deduction is sought can
be identified as the one
received from the prior
decedent or the donor,
or as the property
acGuired in exchange
for the original
property so received.
%) Inclusion of the
roert% $ The
property must have
formed part of the
gross estate situated in
the =hilippines of the
prior decedent, or the
total amount of the
gifts of the donor
L) &revious ta"ation of
the roert% $ the
donorRs tax on the gift
or estate tax on the
prior succession $7r.
.s succession) was
finally determined and
paid
-) No vanishin' deduction
on the roert% (as
allo(ed to the estate of
the rior decedent.
(Illustration of ho( this
requirement ma% N)T
be met: In the
example above, if 7r.
. received the same
properties as a
donation from 7r. ? in
:uly '((', a vanishing
deduction on the
properties was claimed
with respect to 7r. .s
estate. Thus, no more
vanishing deduction
may be claimed by 7r.
;s estate)
() Aow s$all t$e a#o%nt of
vanis$ing ded%ction be
co#p%ted+
"sing the facts above, assume
that 7r. ; inherited a car and a
house from his father 7r. ..
The H7> of the car was
=I'(,((( and the H7> of the
house was =,((,((( at the time
of 7r. .s death. ;t the time
7r. ; inherited the land, it was
subect to a mortgage of
=,(,(((. 7r. ; paid =D(,((( of
the mortgage during his lifetime
$leaving a balance of =I(,((().
The H7> of the properties at the
time of 7r. ;s death were
=,-(,((( for the land and
=D(,((( for the car. 7r. ;s
gross estate amounted to
=%,'((,((( while total
deductions $excluding medical
expenses, standard deductions,
family home) amounted to
=E((,(((.
I) Hirst, compare the
values of the property
at the time of the prior
decedents death and at
the time of the present
decedents death. The
lower amount shall be
the initial basis.
in the e"amle, the
initial basis shall be
&*++,+++ for the
land and &,+,+++
for the car, for a
total of &*,+,+++
6ATF: The value used
as initial basis is
significant onl% for
uroses of comutin'
the amount of
vanishin' deduction-
The value included in
the decedents gross
estate is ;3K;<# the
fair market value at the
time of his death.
') Then, the value in $I)
shall be reduced by any
payment made by the
present decedent on
any mortgage or lien on
the property
.r- A aid &,+,+++
of the mort'a'e-
Thus, &*,+,+++
less ,+,+++ is
&*++,+++
%) The value as reduced in
$') shall be further
reduced by an amount
eGual to:
9
>alue as reduced in $') B Total amount of deductions
S

*ross Fstate
S excluding family
home, medical
expenses, standard
deduction and amounts
received under &; LMID
*++/01++ "
2++,+++ equals
34+,+++- This (ill
be deducted from
&*++,+++, (hich
'ives a balance of
&24+,+++
L) Hinally, the remaining
balance shall be
multiplied by the
corresponding
percentage:
J
If received by inheritance or
gift:
I((J
within one $I) year prior to the
death of the present decedent
,(J
7ore than one year but not
more than two years prior to the
death of the decedent
E(J
7ore than two years but not
more than three years prior to
the death of the decedent
L(J
7ore than three years but not
more than four years prior to
the death of the decedent
'(J
7ore than four years but not
more than five years prior to the
death of the decedent
Since .r- A
received the
inheritance in
.arch 1++0 ((ithin
3 %ear from his
death in #ecember
1++0), the balance
of &24+,+++ shall
be multilied b%
3++5- Thus, the
allo(able vanishin'
deduction is
&24+,+++
B! Transfers for p%blic p%rpose
The amount of all the .FQ"F#T#, 3F*;?IF#,
9F>I#F# or T&;6#HF&# to or for the use of the
*overnment of the &epublic of the =hilippines, or
any political subdivision thereof, for exclusively
public purposes shall be deductible from gross
estate. The whole amount or value of the
property is deductible provided such amount or
value had been included in the gross estate.
C! 9a#il& $o#e
() *$at is a fa#il& $o#e+
It is the dwelling house, including
the land on which it is situated,
where the husband and wife, or a
head or the family, and members of
their family reside, as certified to by
the .arangay ?aptain of the locality.
The family home is deemed to be
constituted on the house and lot
from the time it is actually occupied
as s family residence and considered
as such for as long as any of its
beneficiaries actually resides
therein. $;rts. I-' and I-%, Hamily
?ode) +owever, actual occupancy of
the house or house and lot as the
family residence shall not be
considered interrupted or abandoned
in such cases as the temporary
absence from the constituted family
home due to travel or studies or
work abroad, etc. In other words,
the family home is generally
characteri8ed by permanency, that
is, the place to which, whenever
absent for business or pleasure, one
still intends to return. $&& '!'((%,
#ec. E9)
() *$at are t$e conditions for
t$e allowance of fa#il& $o#e as
ded%ction fro# t$e gross
estate+
I) The family home must be
the actual residential home
of the decedent and his
family at the time of his
death, as certified by the
barangay captain of the
locality.
') The total value of the family
home must be included as
part of the gross estate of
the decedent
%) ;llowable deduction must
be in an amount eGuivalent
to the current H7> of the
family home as declared or
included in the gross estate
but in no case shall the
deduction exceed
=I,(((,(((
D! Standard ded%ction $N,E!;-)
10
;n amount eGuivalent to Ane million pesos
$=I,(((,((() shall be deducted from the gross
estate without need of substantiation.
E! =edical expenses $N,E!;E)
;ll medical expenses $cost of medicine, hospital
bills, doctors fees, etc.) incurred $whether paid
or unpaid) shall be allowed as a deduction
against gross estate, subect to the following
conditions:
The expenses were incurred by the
decedent within one $I) year prior
to his death
The expenses are duly substantiated
with receipts
=&A>I9F9, that in no case shall the deductible
medical expenses exceed Hive +undred Thousand
=esos $=-((,((().
;ny amount of medical expenses incurred within

one year from death in excess of =-((,(((
?;66AT be claimed as a deduction under
/?laims against the estate0. (&& '!'((%, #ec. E!
H)
F! A#o%nts received b& $eirs %nder R!A!
CGF $N,E!;D)
;ny amount received by the heirs from the
decedents employer as a conseGuence of the
death of the decedent!employee in accordance
with &epublic ;ct 6o. LMID
=&A>I9F9 that such amount is
included in the gross estate of the
decedent.
QUICK GLANCE:
Resident or citiHen
decedent
Non8resident alien
decedent
*&A## F#T;TF @ all
property at the time of
death, wherever
situated
*&A## F#T;TF @ includes
only that part of gross estate
located in the =hilippines
9F9"?TIA6#
funeral
expenses
udicial
expenses
claims against
the estate
claims against
insolvents
unpaid
mortgage and
debt
taxes and
losses
transfers for
public use
9F9"?TIA6#
funeral expenses
udicial expenses
claims against the
estate
claims against
insolvents
unpaid mortgage
and debt
taxes and losses
transfers for public
use
vanishing
deductions
share in conugal
property
vanishing
deductions
famil% home
standard
deduction
medical
e"enses
amounts
received under
R-A- 673,
share in
conugal
property
6ATF: To compute for total
allowable deductions of the
first six items above, this
formula is used:
*ross estate, =hils B
*ross estate, world
Korld
expenses,
losses,
indebtedness
, taxes etc.
6ATF: 6o deduction shall be allowed in the case
of a non!resident decedent not a citi8en of the
=hilippines, unless the executor, administrator,
or anyone of the heirs, as the case may be,
includes in the return reGuired to be filed under
#ection M( of the ?ode the value at the time of
the decedents death of that part of his gross
estate not situated in the =hilippines. $#ection
,E, 6I&?)
Tax Rates Applicable)
If the net estate is:
Tax Credit for Estate Taxes ?IJE8E@
() *$at is a tax credit+
It is a remedy against international double
taxation. To minimi8e the onerous effect of
taxing the same property twice, tax credit
against =hilippine estate tax is allowed for estate
taxes paid to foreign countries.
() *$o #a& avail of tax credit+
Anly the estate of a decedent who was a citi8en
or a resident of the =hilippines at the time of his
death can claim tax credit for any estate tax paid
to a foreign country.
() *$at is t$e a#o%nt allowable as tax
credit+
-ENERAL R5LE: The estate tax imposed by the
=hilippines shall be credited with the amounts of
any estate tax imposed by the authority of a
foreign country.
2/ER
.5T N2T
2/ER
TAE TA>
SAALL .E
PL5S
29 TAE
E>CESS
2/ER
= '((,((( Fxempt
= '((,((( -((,((( ( -J = '((,(((
-((,((( ',(((,((( = I-,((( ,J -((,(((
',(((,((( -,(((,((( I%-,((( IIJ ',(((,(((
-,(((,((( I(,(((,((( LE-,((( I-J -,(((,(((
I(,(((,((
(
;nd Aver I,'I-,((( '(J I(,(((,(((
11
LI=ITATI2NS: The amount of the
credit taken shall be subect to each
of the following limitations:
a. The amount of the credit in
respect to the tax paid to
any country shall not
exceed the same proportion
of the tax against which
such credit is taken, which
the decedentRs net estate
situated within such country
taxable under the 6I&?
bears to his entire net
estate1 $=F& ?A"6T&<
.;#I#) and
b. The total amount of the
credit shall not exceed the
same proportion of the tax
against which such credit is
taken, which the decedentRs
net estate situated outside
the =hilippines taxable
under the 6I&? bears to his
entire net estate. $A>F&;33
.;#I#)
I33"#T&;TIA6:
;ssume:
6et Fstate @ =hilippines $reduced
by all allowable deductions,
except standard deduction)
= I,(-(,(((
?ountry * 6et Fstate %((,(((
?ountry + 6et Fstate I-(,(((
Tax paid/incurred: =hilippines
?ountry *
?ountry +
I-,(((
-,(((
I,L((
6et taxable estate is =-((,(((
$I,(-(,((( T %((,((( T I-(,((( @
I,(((,((( standard deduction). The
=hilippine estate tax on =-((,((( is
=I-,(((
Sol%tion 6 Li#itation A)
To get tax credit per country under
3imitation ;, this formula is followed:
6et Fstate in a =articular ?ountry x =hil. estate tax U Tax credit
6et Fstate @ Korldwide
The result after applying the formula
above is compared to the tax actually
paid for each foreign country. The lower
of the two amounts for each foreign
country will be added to get the total
tax credit allowed under 3imitation ;.
A#o%nt
Allowed
?*$ic$ever
is Lower@
Countr% 8 $%((/I-(( x I-,((()
;ctually paid to ?ountry *
= %,(((
-,((( = %,(((
Countr% 9 $I-(/I-(( x I-,((()
;ctually paid to ?ountry +
= I,-((
I,L(( I,L((
Tax credit allowed %nder
Li#itation A
P C0C11
Sol%tion 6 Li#itation .)
6et estate in all foreign countries. x =hil. estate tax U Tax credit
6et Fstate @ Korldwide
The result after applying the formula
above is compared to the tax actually
paid in total to foreign countries. The
lower of the two amounts will be added
to get the total tax credit allowed under
3imitation ..
A#o%nt
Allowed
?*$ic$ever
is Lower@
L-(/I-(( x I-,((( = L,-((
Total foreign income
taxes paid
E,L((
Tax credit allowed
%nder Li#itation .
P C0D11
?ompare the tax credit allowed under 3imitation
; and 3imitation .. The lower of the two
amounts is the final allowable tax credit. In this
case, the amount computed under 3imitation ;
$L,L(() is lower, thus it becomes the final
allowable tax credit.
If there is only one foreign country involved,
both 3imitations will yield the same answer. To
get the tax credit allowable, use the formula in
3imitation ;. The resulting amount will be
compared to the actual tax paid to the foreign
country. The lower amount will be the final
allowable tax credit.
(Source: Re%es, Income Ta" :a( and
Accountin')
C2=PLIANCE RE(5IRE=ENTS
Person Liable for Pa&#ent of Estate Tax
() *$o is liable to pa& t$e estate tax+
The estate, through the executor or
administrator, shall have the pri#ar&
obligation to pay the estate tax. #uch payment
shall be made before the delivery of the
distributive share in the inheritance to any heir
or beneficiary. Khere there are two or more
executors or administrators, all of them are
12
severally liable for the payment of the tax. The
estate tax clearance issued by the ?ommissioner
or the &evenue 9istrict Afficer $&9A) having
urisdiction over the estate, will serve as the
authority to distribute the
remaining/distributable properties/share in the
inheritance to the heir or beneficiary.
A2*E/ER, the heirs or
beneficiaries have s%bsidiar&
liabilit& for the payment of that
portion of the estate which his
distributive share bears to the value
of the total net estate. The extent
of his liability, however, shall in no
case exceed the value of his share
in the inheritance.
Notice Re<%ire#ent and 9iling of Estate Tax
Ret%rn
() *$en #%st notice of deat$ be filed+
6otice of 9eath must be given to the .I& within
two $') months after the death of the decedent
or within a period after the executor or
administrator or executor Gualifies as such:
I. In all cases of transfers subect to tax1
or
'. Khere, though exempt from tax, the
gross value of the estate exceeds
='(,(((.
() *$en is an estate tax ret%rn re<%ired to
be filed+
I. Khen the estate is subect to estate tax,
A&
'. Khen, though exempt from tax, the
gross value of the estate exceeds Two
hundred thousand pesos $='((,(((), A&
%. &egardless of the gross value of the
estate, when the said estate consists of
registered or registrable property such
as real property, motor vehicle, shares
of stock or other similar property for
which a clearance from the .ureau of
Internal &evenue is reGuired as a
condition precedent for the transfer of
ownership thereof in the name of the
transferee,
() *$at are t$e contents of t$e estate tax
ret%rn+
The executor, or the administrator, or any of the
legal heirs, as the case may be, shall file a return
under oath in duplicate, setting forth:
I. The value of the gross estate of the
decedent at the time of his death, or in
case of a nonresident, not a citi8en of
the =hilippines, of that part of his gross
estate situated in the =hilippines1
'. The deductions allowed from gross
estate in determining the net taxable
estate1 and
%. #uch part of such information as may at
the time be ascertainable and such
supplemental data as may be necessary
to establish the correct taxes.
4. 9or estate tax ret%rns s$owing a
gross val%e exceeding Two #illion
pesos ?P"01110111@ there must be a
statement duly certified to by a ?ertified
=ublic ;ccountant containing the
following:
Itemi8ed assets of the decedent
with their corresponding gross value
at the time of his death, or in the
case of a nonresident, not a citi8en
of the =hilippines, of that part of his
gross estate situated in the
=hilippines1
Itemi8ed deductions from gross
estate allowed in #ection ,E1 and
The amount of tax due whether paid
or still due and outstanding.
() *$en #%st t$e re<%ired estate tax
ret%rn be filed+
The estate tax return shall be filed within six $E)
months from the decedentRs death. +owever, the
?ommissioner shall have authority to grant, in
meritorious cases, a reasonable extension not
exceeding thirty $%() days for filing the return
() *$ere #%st t$e estate tax ret%rn be
filed+
Fxcept in cases where the ?ommissioner
otherwise permits, the return shall be filed with:
an authori8ed agent bank,
or &evenue 9istrict Afficer,
?ollection Afficer, or
duly authori8ed Treasurer of
the city or municipality in which
the decedent was domiciled at
the time of his death, or
if there be no legal residence in
the =hilippines, with the Affice
of the ?ommissioner.
Pa&#ent of Estate Tax
() *$en #%st estate tax be paid+
The estate tax shall be paid at the time the
return is filed by the executor, administrator or
the heirs.
() Can t$e pa&#ent of estate tax be
extended+
The ?ommissioner may allow an extension of
payment, if he finds that the payment on the due
date of the estate tax or of any part thereof
13
would impose undue hardship upon the estate or
any of the heirs
extension not to exceed five $-)
years, in case the estate is settled through
the courts,
or two $') years in case the estate
is settled extraudicially
Khere the taxes are assessed by reason of
negligence, intentional disregard of rules and
regulations, or fraud on the part of the taxpayer,
no extension will be granted by the
?ommissioner.
If an extension is granted, the
?ommissioner may reGuire the
executor, or administrator, or
beneficiary, as the case may be, to
furnish a .A69 in such amount, not
exceeding 9A".3F the amount of
the tax and with such sureties as
the ?ommissioner deems necessary,
conditioned upon the payment of
the said tax in accordance with the
terms of the extension.
() *$at are t$e effects of granting an
extension+
The amount in respect of which the
extension is granted shall be paid
on or before the date of the
expiration of the period of the
extension, and the running of the
statute of limitations for deficiency
assessment shall be suspended for
the period of any such extension.
;ny amount paid after the statutory
due date of the tax, but within the
extension period, shall be subect to
interest but not to surcharge.
() Can estate tax be paid in install#ents+
<es. In case the available cash of the estate is
not sufficient to pay its total estate tax liability,
the estate may be allowed to pay the tax by
installment and a clearance shall be released
only with respect to the property the
corresponding/computed tax on which has been
paid.
() *$at are t$e wa&s b& w$ic$ t$e
govern#ent can collect an& %npaid tax d%e
fro# t$e estate of a deceased person+
The government has two $') ways of collecting
any unpaid tax due from the estate of a
deceased person:
I. ;ilin' of Action $ Hirst, by filing an action
against all the heirs for the collection
from each one of them the amount of
the tax proportionate to the inheritance
received. #uch action rests on the
concept that hereditary property consists
only of that part which remains after the
settlement of all lawful claims against
the estate for the settlement of which
the entire estate is first liable. It
achieves thereby two results: first,
payment of the tax1 and second,
adustment of the shares of each heir in
the distributed estate as lessened by the
tax.
'. !nforcement of Ta" :ien $ ;nother
remedy, pursuant to the lien created by
#ection 'IM of the Tax ?ode upon all
property and rights to property
belonging to the taxpayer, is by
subecting said property of the estate
which is in the hands of an heir or
transferee to the payment of the tax due
on the estate. This remedy seeks only
one obective: payment of the tax. ;s a
holder of property belonging to the
estate, an heir is liable for the tax up to
the amount of the property in his hands.
;s an heir, he is individually answerable
for the part of the tax proportionate to
the share he received from the
inheritance. +is liability, however,
cannot exceed the amount of his share.
;fter payment of the tax, he will have a
right of contribution from his co!heirs, to
achieve an adustment of the proper
share of each heir in the distributable
estate. $?ommissioner v. =ineda, 'I
#?&; I(-)
2.LI-ATI2NS 29 E>EC5T2R0
AD=INISTRAT2R0 299ICERS0 2TAERS
! Exec%tor or Ad#inistrator
Khen the gross estate is more than
='(,(((, the executor,
administrator or any of the legal
heirs shall:
b) give a written notice of death to
the .I& within two months after
the decedents death A& after
the executor or administrator
shall have Gualified
c) file the estate tax return within
the time prescribed by law
d) pay the estate tax within the
time prescribed by law
If the executor or administrator
makes a written application to the
?ommissioner for determination of
the amount of estate tax and
discharge from personal liability
therfor, the ?ommissioner shall
14
notify the executor or administrator
of the amount of the tax. "pon
payment of the tax, the executor or
administrator shall be 9I#?+;&*F9
from =F&#A6;3 3I;.I3IT< for any
deficiency in the tax thereafter
found to be due, and shall be
entitled to a receipt or writing
showing such discharge. $NM')
"! :%dge
6o udge shall authori8e the executor or
administrator to deliver a distributive
share to any party interested in the
estate, unless a certification from the
.I& that the estate tax has been paid is
shown. $NML)
B! Register of Deeds
The &egister of deeds shall not register
in the registry of property any transfer
of real property or real rights therein, or
any mortgage, by way of donation or
mortis causa or inheritance, without a
certification from the .I& of payment of
the estate tax, and they shall
immediately notify the .I& of non!
payment of tax discovered by them.
$NM-)
C! .an7
If a bank has knowledge of the death of
a person who maintained a oint account
or deposit ointly with another, it shall
not allow any withdrawal by a surviving
depositor from the said oint account
unless the ?ommissioner has certified
that the estate tax has been paid.
FB?F=TIA6: the administrator
or any heir may, with the
authori8ation of the
?ommissioner, withdraw an
amount 6AT FB?FF9I6*
='(,(((. $NM-)
D! Law&er0 Notar& P%blic or an&
-overn#ent 2fficer
;ny lawyer, notary public, or any
government officer who, by reason of his
official duties, intervenes in the
preparation or acknowledgment of
documents regarding partition or
disposal of donations mortis causa,
legacy or inheritance, shall furnish the
.I& with copies of such documents and
any information whatsoever which may
facilitate the collection of estate tax.
$NM-)
E! Debtor
; debtor shall not pay his debts to the
heirs, legatees, executor or
administrator of his creditor!decedent
without a certification from the .I& that
the estate tax has been paid.
FB?F=TIA6: if the credit is
included in the inventory of
estate of the decedent. $NM-)
F! Corporate Secretar& of ot$er
responsible officer
6o transfer to any new owner in the
books of any corporation, sociedad
anonima, partnership, business or
industry organi8ed or established in the
=hilippines, of any shares, obligations,
bonds or rights by way of donations
mortis causa, legacy or inheritance shall
be made, "63F## a certification from
the .I& that the estate tax has been
paid is shown. $NMD)
ILL5STRATI2NS
o 9ecedent is an unmarried head of a
family
a. &eal and personal properties =-,(((,(((
Hamily home ',(((,(((
-ross estate PF01110111
Less) Ded%ctions
)rdinar% deductions
Huneral expenses = '((,(((
Ather deductions I,%((,(((
$I,-((,((()
Secial deductions
Hamily +ome
=I,(((,(((
#tandard deduction I,(((,(((
7edical expenses -((,(((
$',-((,((()
Net taxable estate PB01110111
6ATF:
;lthough the family home is valued
at =' million, the maximum
allowable deduction for the family
home is =Imillion only.
7edical expenses are not included in
the deductions referred under
#ection ,E$;)$I) of the ?ode but
are treated as a special item of
deduction under #ection ,E$;)$E) of
the same ?ode.
b) &eal and personal properties =-,(((,(((
Hamily home ,((,(((
15
-ross estate PD0J110111
Less) Ded%ctions
)rdinar% deductions
$I,-((,((()
Secial deductions
Hamily +ome = ,((,(((
$',%((,((()
Net taxable estate P"01110111
6ATF: 9eduction for family home is
allowed for =,((,((( only $declared
value of the family home).
o 9ecedent is a married man with a
surviving spouse
Hamily home is exclusive property
Con<u'al roerties
&eal and personal properties =-,(((,(((
!"clusive roerties
Hamily home =',(((,(((
Ather exclusive properties ',-((,(((
L,-((,(((
-ross estate PG0D110111
Less) Ded%ctions
)rdinar% deductions
Con<u'al deductions
$I,-((,((()
Secial deductions
Hamily +ome =I,(((,(((
$',-((,((()

Net estate PD0D110111
Less) S$are of S%rviving Spo%se
V of net conugal estate
$$-,(((,((( @ I,-((,((()/')
$I,D-(,((()
6et taxable estate =%,D-(,(((
Hamily home is conugal or
community property
Con<u'al roerties
Hamily home =',(((,(((
Ather real properties -,(((,(((
=D,(((,(((
!"clusive roerties ',(((,(((
-ross estate PG01110111
Less) Ded%ctions
)rdinar% deductions
Con<u'al deductions
$I,-((,((()
Secial deductions
Hamily +ome =I,(((,(((
$',-((,((()

Net estate PD01110111
$$D,(((,((( @ I,-((,((()/')
$',D-(,((()
6et taxable estate =','-(,(((
Hamily home is conugal property,
valued at =I-(((((
Con<u'al roerties
Hamily home =I,-((,(((
Ather real properties -,(((,(((
=E,-((,(((
!"clusive roerties ',(((,(((
-ross estate PJ0D110111
Less) Ded%ctions
)rdinar% deductions
Con<u'al deductions
$I,-((,((()
Secial deductions
Hamily +ome = D-(,(((
$','-(,((()

Net estate PC0FD10111
$$E,-((,((( @ I,-((,((()/')
$',-((,((()
Net taxable estate P"0"D10111
6ATF: Anly D-(,((( is allowed as a
deduction for the family home,
considering that it was conugal property
valued at =I,-((,(((. This value is
subdivided into =D-(,(((, which
belonged to the decedent, and
=D-(,(((, which belonged to the
surviving spouse. The part owned by the
decedent $=D-(,((() is compared with
the =I,(((,((( maximum deduction, the
lower of the two amounts being the
allowable deduction.
PR2.LE=S
I. B received an inheritance from his
deceased father in the form of a
residential lot on :anuary -, IMMM. ;t
this time, the fair market value was
=I,(((,(((. This land was previously
mortgaged by Bs father for =-((,(((.
B was able to pay only =%((,((( before
he died on :anuary I(, '((L. ;t this
date, the fair market value of the lot was
already =',(((,(((. Khat deduction/s
may be claimed for estate tax purposesP
Answer: Bs estate may claim the
unpaid mortgage as a deduction from his
gross estate in the amount of ='((,(((,
provided the value of the property which
is =',(((,((( is reported as part of the
gross estate, undiminished by the
mortgage. >anishing deduction may no
longer be claimed since the interval
between the time of death of the present
decedent and the death of the prior
decedent is more than five $-) years.
16
'. An the first anniversary of the death of
<, his heirs hosted a sumptuous dinner
for his doctors, nurses, and others who
attended to < during his last illness. The
cost of the dinner amounted to =hp
-(,(((. ?ompared to his gross estate,
the =hp -(,((( did not exceed five
percent of the estate. Is the said cost of
the dinner to commemorate his one!year
death anniversary deductible from his
gross estateP $'((I .ar)
Answer) 6A. This expense will not fall
under any of the allowable deductions
from gross estate. Khether viewed in
the context of either funeral expenses or
medical expenses, the same will not
Gualify as a deduction because:
funeral expenses may include
medical expenses of the last
illness ."T 6AT expenses
incurred after burial nor
expenses incurred to
commemorate death
anniversary $9e *u8man v. 9e
*u8man, ,% #?&; '-E)
medical expenses are allowed
only if incurred by the decedent
within one year =&IA& to his
death. $N,E!;E)
%. 7r. Helix dela ?ru8, a bachelor resident
citi8en, suffered from a heart attack
while on a business trip to the "#;. +e
died intestate on I- :une '((( in 6ew
<ork ?ity, leaving behind real properties
as follows:
real properties in 6ew <ork
family home in >alle >erde,
=asig ?ity
an office condo in 7akati ?ity
shares of stock in #an 7iguel
?orp.
cash in bank
personal belongings
The decedent is heavily insured with
Insular 3ife. +e had no known debts at
the time of his death. ;s the sole heir
and appointed ;dministrator, how would
you determine the gross estate of the
decedentP Khat deductions may be
claimed by the estate and when and
where shall the return be filed and
estate tax paidP $'((( .ar)
Answer) ;ll the properties
enumerated above shall be included in
the gross estate, because dela ?ru8 is a
resident citi8en. $N,-;) The amount
includible with respect to the life
insurance proceeds would be to the
extent of the amount receivable by the
estate, executor or administrator, under
policies taken out by the decedent upon
his own life, irrespective of whether or
not the insured retained the power of
revocation, A& the amount receivable by
any beneficiary designated in the
insurance policy, except when the
designation of the beneficiary is
irrevocable. $N,-F)
The deductions that may be claimed
are:
funeral expenses
udicial expenses in intestate
proceedings
value of the family home in an
amount not exceeding =I7
standard deduction of =I7
medical expenses incurred
within one year prior to death in an
amount not exceeding =-((,(((
The estate tax return shall be filed within
six months from the decedents death
$except if the ?ommissioner has granted
an extension in meritorious cases). The
return shall be filed with an authori8ed
agent bank, &evenue 9istrict Afficer,
?ollection Afficer or duly authori8ed
Treasurer of =asig ?ity, the city in which
dela ?ru8 was domiciled at the time of
his death. $NM(9)
L. ?liff &obertson, an ;merican citi8en, was
a permanent resident of the =hilippines.
+e died in 7iami, Hlorida. +e left I(,(((
shares of 7eralco, a condominium unit
at the Twin Towers .uilding in =asig,
7etro 7anila, and a house and lot in 3os
;ngeles, ?alifornia. Khat assets shall be
included in the Fstate Tax &eturn to be
filed with the .I&P $IMML .ar)
Answer) ;ll of 7r. &obertsons assets
are taxable. The properties of a resident
alien decedent like 7r. &obertson are
taxable wherever situated.
-. ; died, survived by his wife and three
children. The estate tax was properly
paid and the estate settled and divided
and distributed among the four heirs.
3ater, the .I& found out that the estate
failed to report the income received by
the estate during administration. The
17
.I& issued a deficiency tax assessment
plus interest, surcharges and penalties.
#ince the three children are residing
abroad, the .I& sought to collect the full
tax deficiency only against the widow. Is
the .I& correctP $IMMM .ar)
Answer) <F#, the .I& is correct. In a
case where the estate has been
distributed to the heirs, the collection
remedies available to the .I& in
collecting tax liabilities of an estate may
either be I) sue all heirs and collect from
each of them the amount of tax
proportionate to the inheritance
received, or ') by virtue of the lien
created under #ection 'IM, sue only one
heir and subect the property he
received from the estate to the payment
of the estate tax. The .I& therefore is
correct in pursuing the second remedy
although this will give rise to the right of
the heir who pays to seek
reimbursement from the other heirs.
$?ollector v. =ineda, 'I #?&; I(-) In no
case, however, can the .I& enforce the
tax liability in excess of the share of the
widow in the inheritance.
II
Donors Tax
PRINCIPLES
Definition
The Tax &eform ;ct of IMMD does not provide a
definition of donors tax. It simply subects a
/gift0 to donors tax. ;ccording to ;rticle D'- of
the ?ivil ?ode, a gift or donation is /an act of
liberality whereby a person disposes gratuitously
of a thing or right in favor of another who
accepts it.0 Thus, before being subected to the
donors tax, a gift or donation must first satisfy
the following RE(5ISITES:
I. The donor must have CAPACITK
'. There must be an INTENT T2 D2NATE
%. There must be DELI/ERK, either actual
or constructive
L. The donee must ACCEPT the donation
() *$at are t$e 7inds of donations+
I. 9onations inter vivos @ a donation made
between living persons, which is
perfected the moment the donor knows
of the acceptance of the gift by the
donee
I
1 subect to donors tax
'. 9onations mortis causa @ a donation
which takes effect upon the death of the
donor1 subect to estate tax
() *$at are considered donations for tax
p%rposes+
I. #ales, exchanges and other transfers of
property for less than an adeGuate and full
consideration in money or moneys worth
'. ?ondonation or remission of debt where the
debtor did not render service in favor of the
creditor
6oteworthy, the element of donative
intent is conclusively presumed in transfers
of property for less than an adeGuate or full
consideration in money or moneys worth.
In this case, the difference between the fair
market value of the gift or donation and the
actual value received shall constitute the
gift. +owever, real property considered
capital assets under the Tax ?ode are
excepted from this rule. $#ection I(( in
relation to #ection 'L$d)) In other words,
the difference between fair market value and
actual value received in transfers of real
property considered capital assets for less
than an adeGuate or full consideration in
money or moneys worth shall not be subect
to donors tax. This is because under
#ection 'L$d), the fair market value itself, if
higher than the gross selling price, is the
base for computing the capital gains tax
imposed upon the sale of such capital assets.
Thus, what the seller avoids in the payment
of the donors tax, it pays for in the capital
gains tax.
III!
() *$at is t$e applicable law+
The law in force at the time of the
perfection/completion of the donation shall
govern the imposition of the donors tax.
$#ection II, && '!'((%)
1
In the case of donations of immovable property, they
mst be made in a pblic docment specifyin! therein
the property donated" #he acceptance may be made in
the same $eed of $onation or in a separate pblic
docment, bt it shall not ta%e effect nless it is done
drin! the lifetime of the donor" If the acceptance is
made in a separate instrment, the donor shall be
notified thereof in an athentic form, and this step shall
be noted in both instrments"
18
6ATF: ;ny contribution in cash or in kind to any
candidate, political party or coalition of parties
for campaign purposes shall be governed by the
Flection ?ode, as amended. $#ec. MM$?), 6I&?)
PR2PERTIES INCL5DED
() *$at are t$e classes of donors and w$at
is t$eir gross gift+
I. ?iti8ens or &esidents of the =hilippines @
all properties located not only within the
=hilippines but also in foreign countries
'. 6onresident ;lien @ all real and tangible
properties within the =hilippines, and
intangible personal property, unless
there is reciprocity, in which case it is
not taxable
() *$at are t$e intangible properties w$ic$
are considered b& law as sit%ated in t$e
P$ilippines+
I. Hranchise which must be exercised in the
=hilippines
'. Abligations or bonds issued by any
=hilippines
%. #hares, obligations or bonds issued by
=hilippines
L. #hares, obligations or bonds issued by
-. #hares or rights in any partnership,
=hilippines
() *$at is t$e r%le on reciprocit&+ ?Section
1C0 NIRC@
There is reciprocity if the foreign country of
which the decedent was a citi8en and resident at
the time of his death:
I. did not impose a transfer tax of any
character, in respect of intangible
personal property of citi8ens of the
=hilippines not residing in that foreign
country1 or
'. allowed a similar exemption from
transfer tax in respect of intangible
personal property owned by citi8ens of
the =hilippines not residing in that
country
This rule applies to the transmission by gift of
intangible personal property located or with a
situs within the =hilippines of a nonresident alien.
$See a'e 6 for the relevant notes on
recirocit%)
E>E=PTI2NS
Fxemptions are not to be treated as exclusions
from the gross gifts of the donor. They partake
the nature of deductions and are, therefore,
deductible from gross gifts in order to arrive at
the taxable net gifts. The following donations are
exempt from donors tax:
I. 9owries or donations made on account
of marriage before its celebration
or within one year thereafter by parents
to each of their legitimate, recogni8ed
natural, or adopted children to the
extent of the first =I(,(((. +owever,
this exemption may not be availed of by
a non!resident not a citi8en of the
=hilippines.
() Can bot$ parents #a7ing
a donation to a c$ild in
consideration of #arriage
avail of t$e P10111
ded%ction+
<es. If both spouses made the
gift, then the gift is taxable one!
half to each donor spouse1 in
other words, the gift is
considered as having been made
one!half by the husband and
one!half by the wife. There is a
necessity for filing separate
donors tax returns, considering
that husband and wife are
considered as separate and
distinct taxpayers for purposes
of donors tax. $#ection I', &&
'!'((%) +owever, where there
is failure to prove that the
donation was actually made by
both spouses, the donation is
taxable as an exclusive act of
the husband $Tang +o v. .T;,
MD =hil ,M(), without preudice
to the right of the wife to
Guestion the validity of the
donation without her consent
pursuant to the provisions of the
?ivil ?ode and the Hamily ?ode.
$#ection I', supra)
19
'. *ifts made to or for the use of the
6ational *overnment or any entity
created by any of its agencies which is
not conducted for profit, or to any
political subdivision of the said
*overnment
%. *ifts in favor of an educational and/or
charitable, religious, cultural or social
welfare corporation, institution,
accredited non!government
organi8ation, trust or philanthropic
organi8ation or research institution or
organi8ation, provided not more than
%(J of said gifts will be used by such
donee for administration purposes
() *$at is a non8profit
ed%cational andLor
c$aritable corporation0 etc+
It is a school, college or
university and/or charitable
corporation, accredited 6*A,
trust or philanthropic
organi8ation and/or research
institution or organi8ation:
Incorporated as a
non!stock entity,
=aying no
dividends,
*overned by
trustees who
receive no
compensation, and
9evoting all its
income, whether
students fees or
gifts, donations,
subsidies or other
forms of
philanthropy, to the
accomplishment
and promotion of
the purposes
enumerated in its
;rticles of
Incorporation
L. Fncumbrances on the property donated
if assumed by the donee in the deed of
donation
-. 9onations made to entities exempted
under special laws, e.g.:
o ;Guaculture 9epartment of the
#outheast ;sian Hisheries
9evelopment ?enter of the
=hilippines
o 9evelopment ;cademy of the
=hilippines
o Integrated .ar of the =hilippines
o International &ice &esearch
Institute
o 6ational 7useum
o 6ational 3ibrary
o 6ational #ocial ;ction ?ouncil
o &amon 7agsaysay Houndation
o =hilippine Inventors
?ommission
o =hilippine ;merican ?ultural
Houndation
o Task Horce on +uman
#ettlement on the donation of
eGuipment, materials and
services
E. 9onations to persons not strangers
where the total of such net gifts for the
calendar year is not more than
=I((,(((.((
() *$at is t$e #eaning of 3net gifts4+
/6et *ift0 shall mean the net economic benefit
from the transfer that accrues to the donee.
;ccordingly, if a mortgaged property is
transferred as a gift, but imposing upon the
donee the obligation to pay the mortgage
liability, then the net gift is measured by
deducting from the fair market value of the
property the amount of the mortgage assumed.
$#ection II, && '!'((%)
C2=P5TATI2N
Aow is donors tax co#p%ted+
This general formula shall be followed:
*ross gifts made
3ess: 9eductions from the gross
gifts
6et gifts made
7ultiplied by applicable rate
9onors tax on the net gifts
If there were several gifts made during the year,
this formula is followed:
*ross gifts made on this date
3ess: 9eductions from the gross
gifts
6et gifts made on this date
;dd: all prior net gifts during the
year
20
;ggregate net gifts
7ultiplied by applicable rate
9onors tax on the aggregate net
gifts
3ess: donors tax paid on prior net
gifts
9onors tax due on the net gifts to
date
I/!
/!
RATES 29 TA>
There are two sets of donors tax rates. The
applicable donors tax rate is dependent upon the
relationship between the donor and the donee,
more specifically:
I. If the donee is a stranger to t$e donor,
the tax rate is eGuivalent to B1 M of the net
gifts.
() *$o is a stranger for p%rposes of
t$e donors tax+
a. a person who is not a brother,
sister $whether by whole or half!
blood), spouse, ancestor or
lineal descendant, or
b. a person who is not a relative by
consanguinity in the collateral
line within the fourth degree of
relationship. $#ec. MM$.))
6ote that donations made
between business organi8ations and
those made between an individual
and a business organi8ation shall be
considered as donations made to a
stranger.
'. If the donee is not a stranger to t$e
donor, the tax for each calendar year shall
be computed on the basis of the total net
gifts made during the calendar year:
2ver .%t not
2ver
T$e Tax
S$all .e
Pl%s 2f t$e
Excess 2ver
( I((,((( Fxempt
I((,((( '((,((( ',((( 'J I((,(((
'((,((( -((,((( IL,((( LJ '((,(((
-((,((( I,(((,((( LL,((( EJ -((,(((
I,(((,((( -,(((,((( '(L,((( ,J I,(((,(((
-,(((,((( I(,(((,((( L(L,((( I(J -,(((,(((
I(,(((,((( I,((L,((( I'J I(,(((,(((
6ote: ; legally adopted child is
entitled to all the rights and obligations
provided by law to legitimate children,
and therefore, a donation to him shall
not be considered as a donation made to
a stranger.
2.:ECT 29 TA>ATI2N
The donors tax shall be imposed whether the
transfer is in trust or otherwise, whether the gift
is direct or indirect and whether the property is
real or personal, tangible or intangible. The
computation of the donors tax is on a
cumulative basis over a period of one calendar
year
Ill%strations)
I. 9onation to son by parents on account
of marriage $=I((,((():
+usband
6et Taxable *ift U
=-(,((( @ I(,((( U
=L(,(((
Tax 9ue U 6one, since
=L(,((( is below the
=I((,((( threshold
Kife @ same as above
'. 9onation to son and daughter!in!law by
parents on account of marriage
$=I((,((():
+usband
o *ift pertaining to the
son
6et Taxable *ift U
='-,((( @ I(,((( U
=I-,(((
Tax 9ue U 6one,
since =I-,((( is
below the =I((,(((
threshold
o *ift pertaining to the
daughter!in!law
6et Taxable *ift U
='-,(((
Tax 9ue U ='-,(((
x %(J U =D,-((
Kife @ same as above
%. 9onations to donees not considered
strangers for tax purposes were made
on:
:anuary %(, '((' @ = ',(((,(((
7arch %(, '((' !! I,(((,(((
;ugust I-, '((' !! -((,(((
21
/AL5ATI2N
If the gift is made in property, the fair
#ar7et val%e at t$at ti#e will be
considered the amount of gift.
In case of real property, the taxable base is
the fair market value as determined by the
?ommissioner of Internal &evenue $Conal
>alue) or fair market value as shown in the
latest schedule of values of the provincial
and city assessor $7arket >alue per Tax
9eclaration), whichever is higher. If there is
no 8onal value, the taxable base is the fair
market value that appears in the latest tax
declaration
If there is an improvement, the value of
improvement is the construction cost per
building permit and/or occupancy permit
plus I(J per year after year of construction,
or the market value per latest tax
declaration.
TA> CREDIT
; situation may arise when the property given as
a gift is located in a foreign country and the
donor may be subect to donors tax twice on the
same property: first, by the =hilippine
government and second, by the foreign
government where the property is situated. The
remedy of claiming a tax credit is, therefore,
aimed at minimi8ing the burdensome effect of
double taxation by allowing the taxpayer to
deduct his foreign tax from his =hilippine tax,
subect to the limitations provided by law.
() *$o #a& clai# tax credit+
Tax credit for donors tax may be claimed only
by a resident citi8en, non!resident citi8en and
resident alien.
() *$at are t$e li#itations on t$e tax
credit+
I.
6FT *IHT $foreign country) B =+I3I==I6F 9A6A&# T;B
F6TI&F 6FT *IHT#
'.
6FT *IHT $all foreign countries)B =+I3I==I6F 9A6A&# T;B
F6TI&F 6FT *IHT#
6ATF: The computation of the donors tax credit
is the same as the computation for estate tax
credit. =lease refer to the illustration in page ,.
C2=PLIANCE RE(5IRE=ENTS
() *$o are re<%ired to file t$e Donors Tax
Ret%rn+
Fvery person, whether natural or uridical,
resident or non!resident, who transfers or causes
to transfer property by gift, whether in trust or
otherwise, whether the gift is direct or indirect
and whether the property is real or personal,
tangible or intangible.
() *$at are t$e contents of t$e Donors Tax
Ret%rn+
1. Fach gift made during the calendar year
which is to be included in computing net
gifts1
2. The deductions claimed and allowable1
3. ;ny previous net gifts made during the
same calendar year1
4. The name of the donee1
5. &elationship of the donor to the donee1
and
6. #uch further information as the
?ommissioner may reGuire.
() *$en and w$ere s$o%ld t$e Donors Tax
Ret%rn be filed+
The donors tax return shall be filed within thirty
$%() days after the date the gift is made or
completed and the tax due thereon shall be paid
at the same time that the return is filed. "nless
the ?ommissioner otherwise permits, the return
shall be filed and the tax paid to an authori8ed
agent bank, the &evenue 9istrict Afficer,
&evenue ?ollection Afficer or duly authori8ed
Treasurer of the city or municipality where the
donor was domiciled at the time of the transfer,
or if there be no legal residence in the
=hilippines, with the Affice of the ?ommissioner.
In the case of gifts made by a non!resident, the
return may be filed with the =hilippine Fmbassy
or ?onsulate in the country where he is domiciled
at the time of the transfer, or directly with the
After t$e
first
donation
After t$e second donation After t$e t$ird donation
6et
Taxable
*ift
= ',(((,((( :anuary 9onation ! =',(((,(((
7arch 9onation ! I,(((,(((
Total PB01110111
:anuary 9onation ! =',(((,(((
7arch 9onation ! I,(((,(((
;ugust 9onation ! -((,(((
Total PB0D110111
?orrespo
nding
9onors
Tax $refer
to
schedule)
=I'L,((( = '(L,((( ='-L,(((
Tax 9ue /
=ayable
=I'L,((( 9onors Tax = '(L,(((
3ess: Tax =reviously
=aid I'L,(((
Tax D%e P J10111
9onors Tax = '-L,(((
3ess: Tax =reviously
=aid $I'L,((( T
,(,((() '(L,(((
Tax D%e P D10111
22
Affice of the ?ommissioner. Hor this purpose, the
term 3299ICE 29 TAE C2==ISSI2NER4 shall
refer to the &evenue 9istrict Affice $&9A) having
urisdiction over the .I&!6ational Affice .uilding
which houses the Affice of the ?ommissioner, or
presently, to the &evenue 9istrict Affice 6o. %M @
#outh Que8on ?ity.
PR2.LE=S
I. <our bachelor client, a Hilipino residing in
Que8on ?ity, wants to give his sister a gift of
='((,(((. +e seeks your advice for purposes of
reducing, if not eliminating, the donors tax on
the gift: whether it is better for him to give all of
the ='((,((( on ?hristmas '((I, or to give
=I((,((( on ?hristmas '((I and the other
=I((,((( on :anuary I, '(('. =lease explain
your advice. $'((I .ar)
Answer) I would advise him to split the
donation. *iving the ='((,((( as a one!time
donation would mean that it will be subect to a
higher tax bracket under the graduated tax
structure, thereby necessitating the payment of
donors tax. An the other hand, splitting the
donation into two eGual amounts of =I((,(((
given on two different years will totally relieve
the donor from donors tax because the first
=I((,((( donation in the graduated tax brackets
is exempt. Khile the donors tax is computed on
the cumulative donations, the aggregation of all
donations made by a donor is allowed only over
one calendar year.
'. 7r. .ill 7organ, a ?anadian citi8en and a
resident of Antario, sends a gift check of
W'(,((( to his future Hilipina daughter!in!law,
who is to be married to his only son. Is the
donation of 7r. 7organ subect to taxP $IMM'
.ar)
Answer) <es. Khile the gift has been made on
account of marriage, to Gualify for the exemption
to the extent of the first =I(,((( of the value
thereof, such gift should have been given to a
legitimate, recogni8ed natural, or adopted child
of the donor.
%. B owned idle land not used in connection with
his business. ;t the insistence of a close friend,
B sold the land to him at a friendly price of
=E((,(((, although its fair market value at that
time was =I,(((,(((. The .I& assessed B for
payment of donors tax on the difference of
=L((,((( on the ground that the sale is a
transfer for less than an adeGuate consideration
in money or moneys worth. Is the .I& correct
on the assessmentP
Answer: 6o, the .I& is not correct. The land is
properly classified as a capital asset, being real
property not used in connection with trade or
business. ;s such, the sale is instead subect to
a EJ capital gains tax based on the gross selling
price or fair market value, whichever is higher.
L. B donated mortgaged property with a fair
market value of =I,(((,((( to < subect to the
condition that < shall undertake the mortgage
liability worth =L((,(((. Khat is the base for
computing the donors taxP
Answer: The base shall be the net gift which is
=E((,((( or the difference between the fair
market value of the mortgaged property and the
mortgage liability.
-. <, the surviving spouse, renounces her share
in the conugal partnership after the dissolution
of her marriage. Is she liable to pay donors taxP
Answer: It depends. If < renounces her share
in favor of other heirs or any other person, she is
liable to pay donors tax based on her share.
+owever, if < makes a general renunciation of
her share, she is not liable to pay donors tax.
E. Khen is a franchise considered as intangible
personal property within the =hilippinesP
Answer: Hranchise is an intangible within if the
same is exercised within the =hilippines.
Atherwise, it shall be considered an intangible
without.
D. Khen is a share of stock, obligation or bond
considered as intangible personal property
withinP
Answer:
Abligations or bonds issued by any
=hilippines
=hilippines
23
#hares or rights in any partnership,
=hilippines
,. An E 9ecember '((I, 3>6 ?orporation
donated a piece of vacant lot situated in
7andaluyong ?ity to an accredited and duly
registered non!stock, non!profit educational
institution to be used by the latter in building a
sports complex for students. In order that
donations to non!stock, non!profit educational
institutions may be exempt from donors tax,
what conditions must be met by the 9A6FFP
$'((' .ar)
Answer) The condition is that not more than
thirty percent $%(J) of the said donation for the
taxable year shall be used by the accredited non!
stock, non!profit corporation/6*A institution
$Gualified!donee institution) for administration
purposes pursuant to the provisions of #ection
I(I$;)$%) and $.)$') of the 6ational Internal
&evenue ?ode. $&& '!'((%, #ec. I%$?))
M. ;, aged M( years and suffering from incurable
cancer, on I ;ugust '((I wrote a will and on the
same day, made several inter!vivos gifts to his
children. +e died ten days later. In your
opinion, are the gifts considered transfers in
contemplation of death for purposes of
determining properties to be included in the
gross estateP Fxplain your answer. $'((I .ar)
Answer: <F#. Khen the donor makes his will
within a short time of, or simultaneously with the
making of the gifts, the gifts are considered as
having been made in contemplation of death
$&oces v. =osadas -, =hil I(,). Abviously, the
intention of the donor in making the gifts is to
avoid the imposition of the estate tax and since
the donees are likewise his forced heirs who are
called upon to inherit, it will create a
presumption <uris tantum that said donations
were made mortis causa, hence the properties
donated shall be included as part of ;s gross
estate.
I(. ;re contributions to a candidate in an
election subect to donors taxP $IMM, .ar)
Answer) 6A, provided the recipient candidate
had complied with the reGuirement of filing of
returns of contributions with the ?A7F3F? as
reGuired under the Amnibus Flection ?ode.
NMM? of the 6I&? states that the taxability of this
type of donations is governed by the Flection
code. $7amalateo)
Alternative Answer) <F#, because there are no
provisions under the Tax ?ode that grant any
exemption. $9omondon)
II. ;, an individual, sold to ., his brother!in!
law, his lot with a market value of =I7 for
=E((,(((. ;s cost of the lot is =I((,(((. . is
financially capable of buying the lot. ; also owns
B ?o, which has a fast growing business. ; sold
some of his shares of stock in B ?o. to his key
executives in B ?o. These executives are not
related to ;. The selling price is =%7, which is
the book value of the shares sold but with a
market value of =-7. ;s cost in the shares sold
is =I7. The purpose of ; in selling the shares is
to enable his key executives to acGuire a
proprietary interest in the business and have a
personal stake in its business. Fxplain if the
transactions above are subect to donors tax.
Answer) The first transaction where a lot was
sold by ; to his brother!in!law for a price below
its H7> will not be subect to donors tax if the
lot Gualifies as a capital asset. The transfer for
less than adeGuate and full consideration, which
gives rise to a deemed gift, does not apply to the
sale of property subect to capital gains tax
$#ection I((, 6I&?). +owever, if the lot sold is
an ordinary asset, the excess of the H7> over
the consideration received shall be considered a
gift subect to the donors tax.
The sale of shares of stock below the H7>
thereof is subect to the donors tax pursuant to
the provisions of #ection I(( of the 6I&?. The
excess of the H7> over the selling price is a
deemed gift.
Alternative Answer: 6o donors tax, because
in determining the gain from the transfer 2for
purposes of computing the capital gains tax on
the sale of shares not listed nor traded in a local
stock exchange5, the basis is either the actual
selling price or the H7> of the stocks transferred,
whichever is higher. $#ec. 'L$?), 6I&? and && '!
,') In which case, the reason for imposing a
donors tax on sales for inadeGuate consideration
does not exist.

EXCISE TAX
24
-oods S%b;ect to Excise Tax
$#ec. I'M, 6I&?)
*oods manufactured or produced in the
=hilippines for domestic sale or
consumption or other disposition
Things imported
6ATF:
Fxcise tax is imposed in addition to >;T.
The tax attaches even on articles illicitly
made, or the production of which is
prohibited or punished by law.
Two Classifications of Excise Tax)
Secific ta"! tax is based on weight or
volume capacity or other physical unit of
measurement
Ad valorem ta" ! tax is based on selling
price or other specified value of the good
P%rpose and ;%stification of excise taxes)
1" To curtail consumtion of certain
commodities, excessive or indiscriminate
use of which is considered harmful to the
individual or community. Taxes of this
kind are sumptuary in nature and are
exemplified by the taxes on alcoholic
beverages and tobacco products
2" To rotect a domestic industr% the
products of which face competition from
similar imported articles
3" To distribute the ta" burden in
proportion to the benefit derived from a
particular government service. Fxamples
are the excise taxes on gasoline,
lubricating oils and denatured alcohol for
motive power, and
4. To raise revenue
*$en Excise Taxes Accr%e
As to domestic roducts $ They accrue
or attach as soon as the articles are
produced, or come into existence as in
the case of distilled spirits $#ec. ILI)
and manufactured and other fuel oils
$#ec. IL,)
As to imorted articles $ They accrue as
soon as the articles are brought into the
=hilippine urisdiction with the intention
to unload them here.
9iling of Ret%rn and Pa&#ent of Excise Tax
on D2=ESTIC Prod%cts $#ec. I%()
$;) &ersons liable to file a return, filin' of return
on removal and a%ment of ta"
I. &erson :iable to ;ile a Return
! such person shall file a separate
return for each place of production
setting forth, among others:
o 9escription and Guantity or
volume of products removed
o ;pplicable tax base
o Tax due
- in the case of indigenous petroleum,
natural gas or liGuefied natural gas
excise tax shall be paid by first
buyer, purchaser or transferee
for local sale, barter or transfer
- export products
excise tax shall be paid by
owner, lessee, concessionaire
or operator of the mining claim
- should domestic products be
removed from the place of
production without the payment of
tax, the owner or possessor shall be
liable for the tax due
'. Time of ;ilin' of Return and &a%ment of
Ta"
- *F6F&;33<: return shall be filed
and excise tax shall be paid by the
manufacturer or producer before
removal of the domestic products
from place of production unless
otherwise specifically allowed
- +AKF>F&, I6 ?;#F AH:
nonmetallic mineral or
mineral products and
Guarry sources due and
payable upon removal of
such products from
locality where mined and
extracted
locally produced or
extracted metallic mineral
or mineral products:
o file return and
pay tax within
I- days after
end of the
calendar
Guarter when
such products
were removed
subect to
conditions
prescribed by
rules and
25
regulations to
be
promulgated
by #ecretary of
Hinance, upon
recommendatio
n of the
?ommissioner
o taxpayer shall
file bond X
amount of
excise tax due
I7=A&TF9 mineral or
mineral products, whether
metallic or nonmetallic
paid before their removal
from customs duty
%. &lace of ;ilin' of Return and &a%ment of
Ta" $*F6F&;3 &"3F)
any authori8ed agent bank or
&evenue ?ollector Afficer, or
duly authori8ed ?ity or 7unicipal
Treasurer
L. !"cetions (T) 8!N!RA: R=:! S!T )=T
A>)?!)
- I6 *F6F&;3: #ec of Hinance, upon
recommendation of ?ommissioner,
may by rules and regulations
prescribe:
a. time of filing the return at
intervals for a particular
class or classes of taxpayer
b. manner and time of
payment under a tax
prepayment, advance
deposit and other similar
schemes
- I6 T+F #=F?IHI? ?;#F# of:
minerals, mineral
products or Guarry
resources where the place
of extraction is different
from the place of
processing or production,
or
metallic minerals
processed abroad,
file and pay at the
&evenue 9istrict
Affice having
urisdiction in the
locality where it was
mined, extracted or
Guarried
$.) #etermination of 8ross Sellin' &rice of
8oods Sub<ect to Ad ?alorem Ta"
-ross Selling PriceN Price 8 /AT
where =rice is:
- That at which the goods are sold at
wholesale in the place of production
or through their sales agents to the
public
- If the goods are sold in another
establishment where the
manufacturer is the owner or in the
profits of which he has an interest,
wholesale price there
6ATF: if price Y cost of manufacture T
expenses incurred until the goods are finally
sold a proportionate margin of the profit
$which is not less than I(J of such
manufacturing costs T expenses) shall be
added to the *#=
$?) .anufacturer@s or &roducer@s S(orn
Statement
It shall show:
- different goods and products
manufactured or produced,
- their corresponding *#= or market
value
- ?osts of manufacture or production
T expenses incurred or to be
incurred until goods are sold
$9) Credit for !"cise Ta" on 8oods Actuall%
!"orted
In case goods produced or manufactured are
removed and actually exported without
returning to the =hilippines:
- *F6F&;3 &"3F any excise tax
paid shall be credited or refunded
upon submission of proof of actual
exportation and upon receipt of the
foreign exchange payment
- FB?F=TIA6 $i-e-, N)T credible):
mineral products
o FB?F=TIA6 TA
FB?F=TIA6: coal and
coke

Pa&#ent of Excise Tax on I=P2RTED
Articles $#ec. I%I)
$;) &ersons :iable
- =aid by:
owner or importer to the
?ustoms Afficers before release
from the customhouse, A&
person found in possession of
articles which are exempt from
excise taxes other than those
legally entitled to exemption
26
- In case tax!free articles brought in by
exempted persons or entities or agencies
are subseGuently sold, transferred or
exchanged in the =hilippines purchaser
or recipients shall be considered importers
and shall be liable for duty and internal
revenue tax due
- Importation of cigar, cigarettes, distilled
spirits and wines even if destined to tax
and duty!free shops shall be subect to all
applicable taxes, FB?F=T:
I. such are brought directly into #ubic
#pecial Fconomic and Hreeport
Cone1 ?agayan #pecial Fconomic
Cone and Hreeport1 Camboanga ?ity
#pecial Fconomic Cone and not
transshipped to any other port in
the =hilippines
'. importation done by government!
owned and operated duty free shop
like 9H=, =&A>I9F9 such products
are labeled Ztax and duty free and
Znot for resale
if such products are eventually
introduced to =hilippine customs
territory, then such articles shall be
deemed imported into =hil and be
subect to all import and excise taxes
+AKF>F&, removal and
transfer from one Hreeport to
another Hreeport shall not be
deemed an introduction to =hil
territory.
- cigar, cigarettes, distilled spirits and wines
in duty free shops which are 6AT 3;.F3F9
;# &FQ"I&F9, as well as
those articles obtained from duty free
shops and subseGuently HA"69 I6 6A6 9"T<
H&FF #+A=# HA& &F#;3F
confiscated and perpetrator punished
tax due on any such goods,
products, machinery, eGuipment
and other similar articles shall
constitute a lien on the article
itself which shall be superior to
all other liens
$.) Rate and >asis of the !"cise Ta" on
Imorted Articles
"nless otherwise specified, imported articles
shall be subect to the same rate and basis
of excise taxes applicable to locally
manufactured articles
Exe#ption L Conditional Tax89ree Re#oval
of Certain Articles
a. denatured wine/spirits for treatment of
tobacco leaf
b. domestic denatured alcohol rendered
unfit for oral intake, but >;T should be
paid
c. petroleum products sold to:
international carriers $=hilippine
or foreign carriers) on their use
or consumption outside the
=hilippines, provided there is
reciprocity
exempt entities covered by tax
treaties, conventions,
international agreements,
provided there is reciprocity
entities which are by law
exempted from direct [ indirect
taxes
d. removal of spirits under bond for
rectification
e. removal of fermented liGuors to bonded
warehouse
f. removal of damaged liGuors
g. removal of tobacco products entirely
unfit for chewing/smoking
Tax on Alco$ol Prod%cts
- 9efinition
a. distilled spirits @ substance
known as ethyl alcohol, ethanol
or spirits of wine including
whiskey, brandy, rum, gin and
vodka, from whatever source,
by whatever process produced
b. wines @ all alcoholic beverages
produced by fermentation
without distillation from the
uice of any kind of fruit1 and
fortified beverages
c. fermented liGuor @ alcoholic
beverages produced by
fermentation without distillation
of grain or malt $beer, lager,
ale, porter)
#ec. ILI Distilled Spirits $&ates of tax as
per && %!'((E)
=II.E-/ produced from sap of nipa,
proof liter coconut, cassava, camote buri palm
or
uice, syrup or sugar cane
provided, materials are produced
commercially in the country where
they are processed
=L.L,/ produced in a pot still or similar
proof liter primary distilling apparatus
27
distiller not producing \I((3/day,
containing Y-(J alcohol

if produced from raw materials other than
those above, tax is in accordance with the net
retail price $6&=) $excluding >;T T excise tax)
per D-( ml bottle:
=I'E.((/ 6&= Y ='-(
proof liter
='-'.((/ 6&=: ='-( @ =ED-
proof liter
=-(L.((/ 6&= \=ED-
proof liter
- 7edicinal preparations, flavoring
extracts, other preparations except toilet
preparations, wherein distilled products
form chief ingredient
same tax as chief ingredient
tax shall proportionally increase
for any strength of spirit taxed over
proof spirits.
- Tax shall attach as soon as it is in
existence whether it is subseGuently
separated as pure or impure spirits or
transformed into any other substance
either in the process of original
production or by any subseGuent
process.
Sec! C" *ines $&ates of tax as per && %!
'((E)
=IL-.E(
sparkling wines/champagne regardless of proof
if 6&= Y=-((/bottle
=L%E.,(
sparkling wines/champagne regardless of proof if
6&= \=-((
=ID.LD
still wines ILJ of alcohol by vol or less
=%L.ML
still wines ILJ ! '-J of alcohol by vol
;ortified (ines
- containing more than '-J of alcohol by
volume
- natural wines to which distilled spirits are
added to increase their alcoholic strength
- taxed as distilled spirits
Sec! CB 9er#ented Li<%or $&ates of tax
as per && %!'((E)
>eer, la'er beer, ale- &orter and other fermented
liquor
e"cet tuba, basi, tau% and similar domestic
fermented liquors
=,.'D/3 6&= Y=IL.-(
=I'.%(/3 6&= =IL.-( @ =''
=IE.%%/3 6&= \=''
=IE.%%/3 those brewed and sold at micro!
breweries or micro brew pubs
&!NA: &R)?ISI)NS:
- .rewer or importer who knowingly
misdeclares or misrepresents in his sworn
statement any pertinent data or
information
summary cancellation or
withdrawal of his permit.
- ?orporation, association or partnership
fined treble the amount of
deficiency taxes T surcharges T interest
- person liable for acts or omissions
prohibited under this section
criminally liable and
penali8ed under #ec '-L
- those who willfully abet or aid in the
commission of such act or omission
liable same as principal
- offender not citi8en of =hil
deported after service of
sentence
Tax on Tobacco Prod%cts
- 9efinition
a. cigar @ all rolls of tobacco or any
substitute wrapped in leaf
tobacco
b. cigarette @ all rolls of finely!cut
leaf tobacco or any substitute
wrapped in paper or any other
material
Sec! CC Tobacco Prod%cts $&ates of tax
as per && %!'((E)
28
&1"00'%!
- tobacco t(isted by hand or redced into a condition to
be consmed in any manner other than the ordinary
mode of dryin! and crlin!
- those prepared or partially prepared (ith or (ithot se
of any machine or instrments or (ithot bein! pressed
or s(eetened
- fine)ct shorts and refsed, scraps, clippin!s, cttin!,
stems and s(eepin!s of tobacco
&0"79'%!
specially prepared for che(in! so as to be nsitable for se in
any other manner
Sec! CD Cigars and Cigarettes $&ates of tax
as per && %!'((E)
&!NA: &R)?ISI)NS:
- .rewer or importer who knowingly
misdeclares or misrepresents in his sworn
statement any pertinent data or
information
summary cancellation or
withdrawal of his permit.
- ?orporation, association or partnership
fined treble the amount of
deficiency taxes T surcharges T interest
- person liable for acts or omissions
prohibited under this section
criminally liable and
penali8ed under #ec '-L
- those who willfully abet or aid in the
commission of such act or omission
liable same as principal
- offender not citi8en of =hil
deported after service of
sentence
Tax on Petrole%# Prod%cts
Sec! CJ =an%fact%red 2ils and ot$er
9%els $&ates of tax IMMD 6I&?, as amended
by &; M%%D 2'((-5)
=L.-(/Og or 3 3ubricating oil and greases $kg),
and additives for lubricating oil and greases $3)
=(.(-/3 =rocessed *as
=%.-(/kg waxes and petrolatum
=(.-(/3 denatured alcohol for motive
power
=L.%-/3 naphtha, regular gasoline and
other similar products of
distillation
=(.((/3 naphtha, used either as raw
material in the production of
petrochemical products or as
replacement fuel for
natural!gas!fired!combined
cycle power plant

=-.%-/3 leaded premium gasoline
=L.%-/3 unleaded premium gas
=%.ED/3 aviation turbo et fuel
=(.((/3 kerosene
=%.ED/3 kerosene used as aviation fuel
=(.((/3 diesel fuel oil and similar oils
with same generating power
29
10* of +,& ci!ars
+,& -e.cldin! e.cise ta. and /0#1 2 &500
&50 3 15* of ci!ars
+,& in e.cess +,& -e.cldin! e.cise ta. and /0#1 4 &500
of &500
&2"00'pac% ci!arettes pac%ed by hand
&25"00'pac% ci!arettes pac%ed by machine
+,& 4&10
+,& &6"50 5 &10
+,& &5 5 &6"50
+,& 2&5
20* based on (holesale price or vale of importation
of6
1" 7e(elry, real or imitation
2" pearls, precios and semi precios stones
and imitations thereof
3" !oods made of or ornamented, monted or
fitted (ith precios metals or imitations, or
ivory 89:8&#6
) sr!ical and dental instrments
) silver plated (ares
) frames or montin! for frames or spectacles
) sed in fillin!, montin! or fittin! of the teeth
4" perfmes and toilet (aters
5" yachts and other vessels intended for
pleasre
=(.((/3 liGuefied petroleum gas
=(.-E/kg asphalt
=(.((/3 bunker fuel oil and similar oils
with same generating power
Tax on =iscellaneo%s Articles
On Automobiles (Sec !"# o$ t%e NI&C' as
amen(e( b) &A *++",
6;T"&F: Ad valorem tax on automobiles based
on manufacturers or importers selling price $net
excise tax and >;T)
6FT #F33I6* =&I?F &;TF
"p to =E((T 'J

=E((T @ =I.I7 =I',((( T 'J in
excess of =E((T
=I.I7 @ ='.I 7 =II'T T L(J in
excess of =I.I7
over ='.I7 =-I'T T E(J in
excess of ='.I7
6ATF:
imported cars 6AT for sale, tax shall be
based on total landed value T
transaction value T customs duty T
other charges
cars used exclusively in Hreeport 8ones
are exempt
Sec !-. Non Essential Goo(s
Tax on =ineral Prod%cts
Sec! D =ineral Prod%cts
=I(/ metric ton
coal and coke
'J 7>
non metallic minerals and Guarry resources
'J
locally extracted natural gas and liGuefied natural
gas
'J 7>
gold and chromite
copper and other metallic minerals:
IJ 7> I
st
% years after effectivity of
&; DD'M
I VJ 7> L
th
!-
th
years
'J E
th
year and thereafter
indigenous petroleum:
%J of fair international market price on the first
taxable sale, barter, exchange or similar
transaction to be paid by buyer before removal
from place of production
DOCUMENTARY STAMP
TAX
-eneral Principles
9FHI6ITIA6: Tax on documents,
instruments and papers evidencing the
acceptance, assignment, sale or transfer
of an obligation, right or property
thereto
6;T"&F: It is an excise or privilege tax
because it is imposed on the privilege to
enter into the transaction rather than
the document. It is only paid once.
The amount of 9#T depends on the
nature of the document and the value
appearing upon its face.
If the transaction is subseGuently
annulled or invalidated, the tax may be
refunded since the law presupposes a
valid transaction.
() *$o are re<%ired to file t$e
Doc%#entar& Sta#p Tax Declaration
Ret%rn+
a) In case of constructive affixture of
documentary stamps, by the persons
making, signing, issuing, accepting or
transferring documents, instruments, loan
agreements and papers, acceptances,
assignments, sales and conveyances of the
obligation, right or property incident thereto
wherever the document is made, signed,
issued, accepted or transferred when the
obligation or right arises from =hilippine
sources or the property is situated in the
=hilippines at the same time such act is done
or transaction had1
30
b) .y metering machine user who imprints the
9ocumentary #tamp Tax due on the taxable
documents1 and
c) .y &evenue ?ollection ;gent, for remittance
of sold loose documentary stamps.
6ATF: Kherever one party to the taxable
document enoys exemption from the tax
imposed, the other party who is not exempt will
be the one directly liable to file 9ocumentary
#tamp Tax 9eclaration and pay the applicable
stamp tax.
() *$at are t$e i#plications of fail%re to
sta#p taxable doc%#ents+
The untaxed document will not be recorded,
nor will it or any copy thereof or any record
of transfer of the same be admitted or used
in evidence in court until the reGuisite stamp
or stamps have been affixed thereto and
cancelled
6o notary public or other officer authori8ed
to administer oaths will add his urat or
acknowledgment to any document subect to
9ocumentary #tamp Tax unless the proper
documentary stamps are affixed thereto and
cancelled
TA> RATES APPLICA.LE $IMMD 6I&?, as amended by &; M'L% 2'((L5)
Doc%#ent Taxable 5nit
Tax D%e Per
5nit
Taxable .ase
9ebentures and
?ertificates of
Indebtedness
9F3FTF9 by &; M'L%
Ariginal Issue of
#hares of #tock with
par value
'
Ariginal Issue of
#hares of #tock
without par value
#tock 9ividends
='((.(( or
fraction thereof
='((.(( or
fraction thereof
='((.(( or
fraction thereof
I.((
I.((
I.((
=ar value of shares of stocks
actual consideration for the
issuance of shares of stocks
;ctual value represented by
each share
#ales, ;greements to
#ell, 7emoranda of
#ales, 9eliveries or
Transfer of 9ue!bills,
?ertificate of
Abligation, or #hares
or ?ertificates of
#tock
%
='((.(( or
fraction thereof
(.D-
'-J of the 9#T
=ar value of such due!bills,
certificate of obligation or stocks
2
When are shares considered issued? ;pon the ac<isition of the stoc%holder of the attribtes of o(nership
over the shares -the ri!ht to vote, the ri!ht to receive dividends, the ri!ht to dispose, etc", not(ithstandin! that
restrictions on the e.ercise of any of these ri!hts may be imposed by the :orporation=s 0rticles and'or by)la(s, the
>8:, stoc%holder a!reement, cort order, etc"1 (hich ac<isition of sch attribtes of o(nership shall be manifested
by the acceptance by the :orporation of the stoc%holder=s sbscription to its shares of stoc%" #he delivery of the
certificates of stoc% to the stoc%holders is +?# essential for the $># to accre" @,, 13)2004A
What is the basis of DST? #he entire shares of stoc% sbscribed are considered issed for prposes of $>#,
even if not flly paid" @,, 13)2004A
3
When is a sale or exchange of shares taxable? #here mst be actal or constrctive transfer of beneficial
o(nership of shares of stoc% from one person to another" #his may be manifested by6
a1 the clear e.ercise of attribtes of o(nership over sch stoc%s by the transferee, or
31
In the case of stocks
without par value
paid upon the
original issue of
said stock
.onds, 9ebentures,
?ertificate of #tock or
Indebtedness issued in
foreign ?ountries
='((.(( or
fraction thereof
I.-( =ar value of such bonds,
debentures or ?ertificate of
#tocks
?ertificate of =rofits or
Interest in =roperty or
;ccumulation
='((.(( or
fraction thereof
(.-( Hace value of such certificate /
memorandum
.ank ?hecks, 9rafts,
?ertificate of 9eposit
not bearing interest
and other Instruments
An each
9ocument
I.-(
Ariginal issue of debt
instruments
Hor such debt
instruments with terms
of less than one year
='((.(( or
fraction thereof
I.((
#hall be of a
proportional
amount in
accordance
with the ration
of its term in
number of days
to %E- days
Issue price of any such debt
instrument
.ills of exchange
$between points within
the =hilippines) and
drafts
='((.(( or
fraction thereof
.%( Hace value of the bill of
exchange or draft
.ills of Fxchange or
order drawn in foreign
country but payable in
the =hilippines
='((.(( or
fraction thereof
.%( Hace value of such bill of
exchange or order or the
eGuivalent of such value, if
expressed in foreign currency
Horeign .ills of
Fxchange and 3etter of
?redit
='((.(( or
fraction thereof
.%( Hace value of such bill of
exchange or order or the
eGuivalent of such value, if
expressed in foreign currency
3ife Insurance =olicies ='((.(( or
fraction thereof
.-( ;mount of premium collected
=olicies Af Insurance
upon =roperty
=L.(( premium or
fraction thereof
.-( =remium charged
Hidelity .onds and
other Insurance
=olicies
=L.(( premium or
fraction thereof
.-( =remium charged
=olicies of ;nnuities,
;nnuity or other
instruments
='((.(( or
fraction thereof
(.-( ;mount of premium or
installment payment of contract
price collected
=re!6eed =lans ='((.(( or
fraction thereof
.'( =remium or contribution
collected
Indemnity .onds =L.(( or fraction
thereof
.%( =remium charged
?ertificates of 9amage
or otherwise and
?ertificate or
document issued by
Fach ?ertificate I-.((
b1 by an actal entry of a chan!e in the name appearin! in the certificate of stoc% or in the stoc% and transfer
boo% of the corporation or by any entry indicatin! transfer of beneficial o(nership in any form of re!istry
incldin! those of a dly athoriBed scripless re!istry, sch as those maintained for or by the &hilippine
>toc% 8.chan!e" @,, 13)2004A
32
any customs officers,
marine surveyor,
notary public and
certificate reGuired by
law or by rules and
regulations of a public
office
Karehouse &eceipts
$except if value does
not exceed ='((.(()
Fach &eceipt I-.((
:ai!alai, +orse &ace
Tickets, lotto or Ather
;uthori8ed 6umber
*ames
=I.(( cost of
ticket and
;dditional =(.I(
on every =I.(( or
fraction thereof if
cost of ticket
exceeds =I.((
.I( ?ost of the ticket
.ills of 3ading or
&eceipts
$except charter party)
\=I(( not \
=I(((
\=I(((
I.((
I(.((

=roxies Fach =roxy I-.((
=owers of ;ttorney Fach 9ocument -.((
3ease and other +iring
agreements of
memorandum or
contract for hire, use
or rent of any land or
tenements or portions
thereof
Hirst ',(((
Hor every =I,(((
or fractional part
thereof in excess
of the first =',(((
for each year of
the term of the
contract or
agreement
%.((
I.((

7ortgages =ledges of
lands, estate, or
property and 9eeds of
Trust
Hirst -,(((
An each =-,(((
or fractional part
thereof in excess
of -,(((
'(.((
I(.((
;mount #ecured
;mount #ecured
9eed of #ale,
instrument or writing
and ?onveyances of
&eal =roperty $except
grants, patents or
original certificate of
the government)
Hirst I,(((
Hor each
additional =I,(((
or fractional part
thereof in excess
of =I,(((
I-.((
I-.((
?onsideration or Hair 7arket
>alue, whichever is higher $if
government is a party, basis
shall be the consideration)
?harter parties and
#imilar Instruments
I,((( tons and
below

I,((I to I(,(((
tons
=-((.(( for the
first E months
=lus=-( each
month or
fraction thereof
in excess of E
months
=I,((( for the
first E months
=lus =I(( each
month or
fraction thereof
in excess of E
Tonnage and duration of the
contract
33
Aver I(,((( tons
months
=I,-(( for the
first E months
=lus =I-( each
month or
fraction thereof
in excess of E
months
;ssignment or transfer
of any mortgage, lease
or policy of insurance
&enewal of any
agreement/ contract
;t the same
rate as that
imposed on the
original
instrument

Doc%#ents and Papers Not S%b;ect to
Sta#p Tax
a" =olicies of insurance or annuities made
or granted by a fraternal or beneficiary
society, order, association or cooperative
company, operated on the lodge system
or local cooperation plan and organi8ed
and conducted solely by the members
thereof for the exclusive benefit of each
member and not for profit.
b" ?ertificates of oaths administered to any
government official in his official
capacity or of acknowledgment by any
government official in the performance
of his official duties, written appearance
in any court by any government official,
in his official capacity1 certificates of the
administration of oaths to any person as
to the authenticity of any paper reGuired
to be filed in court by any person or
party thereto, whether the proceedings
be civil or criminal1 papers and
documents filed in courts by or for the
national, provincial, city or municipal
governments1 affidavits of poor persons
for the purpose of proving poverty1
statements and other compulsory
information reGuired of persons or
corporations by the rules and regulations
of the national, provincial, city or
municipal governments exclusively for
statistical purposes and which are wholly
for the use of the bureau or office in
which they are filed, and not at the
instance or for the use or benefit of the
person filing them1 certified copies and
other certificates placed upon
documents, instruments and papers for
the national, provincial, city or municipal
governments, made at the instance and
for the sole use of some other branch of
the national, provincial, city or municipal
governments1 and certificates of the
assessed value of lands, not exceeding
Two hundred pesos $='(() in value
assessed, furnished by the provincial,
city or municipal Treasurer to applicants
for registration of title to land.
c" .orrowing and lending of securities
executed under the #ecurities .orrowing
and lending =rogram of a registered
exchange, or in accordance with
regulations prescribed by the
appropriate regulatory authority:
&rovided, ho(ever, That any borrowing
or lending of securities agreement as
contemplated hereof shall be duly
covered by a master securities
borrowing and lending agreement
acceptable to the appropriate regulatory
authority, and which agreements is duly
registered and approved by the .ureau
of Internal &evenue. $.I&).
d" 3oan agreements or promissory notes,
the aggregate of which does not exceed
Two hundred fifty thousand pesos
$='-(,(((), or any such amount as may
be determined by he #ecretary of
Hinance, executed by an individual for
his purchase on installment for his
personal use or that of his family and
not for business or resale, barter or hire
of a house, lot, motor vehicle, appliance
or furniture: &rovided, ho(ever, That
the amount to be set by the #ecretary of
Hinance shall be in accordance with a
relevant price index but not to exceed
ten percent $I(J) of the current
amount and shall remain in force at least
for three $%) years.
34
e" #ale, barter or exchange of shares of
stock listed and traded through the local
stock exchange for a period of five $-)
years from the effectivity of this ;ct.
f" ;ssignment or transfer of any mortgage,
lease or policy of insurance, or the
renewal or continuance of any
agreement, contract, charter, or any
evidence of obligation or indebtedness, if
there is no change in the maturity date
or remaining period of coverage from
that of the original instrument.
!" Hixed income and other securities traded
in the secondary market or through an
exchange.
h" 9erivatives: &rovided, That for purposes
of this exemption, repurchase
agreements and reverse repurchase
agreements shall be treated similarly as
derivatives.
i" Interbranch or interdepartmental
advances within the same legal entity.
7" ;ll forebearances arising from sales or
service contracts including credit card
and trade receivables: &rovided, That
the exemption be limited to those
executed by the seller or service
provider itself.
%" .ank deposit accounts without a fixed
term or maturity.
l" ;ll contracts, deeds, documents and
transactions related to the conduct of
business of the .anko #entral ng
=ilipinas.
m" Transfer of property pursuant to #ection
L($c)$') of the 6ational Internal
&evenue ?ode of IMMD, as amended.
n" Interbank call loans with maturity of not
more than seven $D) days to cover
deficiency in reserves against deposit
liabilities, including those between or
among banks and Guasibanks.
2ne8Transaction R%le)
Khere only one instrument was prepared, made
signed and executed to cover a loan
agreement/promissory note, pledge/mortgage,
the documentary stamp tax shall be paid and
computed on the full amount of the loan or credit
granted. In this regard, the instrument shall be
treated as covering only one taxable transaction,
subect to the higher documentary stamp tax.
$&& M!ML, #ec. ,)
Pa&#ent of Doc%#entar& Sta#p Tax
$#ec '(()
*AERE: filed and paid at
authori8ed agent bank within territorial
urisdiction of &evenue 9istrict Afficer
which had urisdiction over residence or
principal place of business of taxpayer
&evenue 9istrict Afficer, collection
agent, duly authori8ed treasurer of
municipality or city where the taxpayer
has his residence or principal place of
business
E>CEPTI2N:
Tax may be paid thru purchase and actual
affixture or imprinting the stamp thru
documentary stamp metering machine as
prescribed by the pertinent rules and
regulations.
*AEN)
- days after close of the month when the taxable
document was made, signed issued, transferred
or accepted. $&& E!(I) 26ote: I(!day rule
provided in #ec. '(($.) of the 6I&? no longer
applicable)
Applicabilit& of DST Law on Electronic
Doc%#ents)
The 9#T rates shall be applicable on all
documents not otherwise expressly exempted by
the law, notwithstanding that they are in
electronic form. ;s provided for in &; ,DM'
$Flectronic ?ommerce ;ct), electronic documents
are the functional eGuivalent of a written
document under existing laws, and the issuance
thereof is therefore tantamount to the issuance
of a written document, and therefore subect to
9#T. $&& I%!(L, #ec. I()
REMEDIES
STA-ES IN .IR A5DIT E>A=INATI2N
?9ra#ewor7 of disc%ssion@

;udit #tage/Issuance of 3etter of ;uthority

35
=re!;ssessment #tage
Hormal ;ssessment #tage
?ollection 3etter/Karrants
?ompromise and ;batement

I! A5DIT STA-E ?Iss%ance of Letter of
A%t$orit&@

A! Powers of t$e Co##issioner
Relative to t$e A%dit Process
1. ;uthority to FB;7I6F &FT"&6# and
9FTF&7I6F T;B 9"F $N-) the
?ommissioner may authori8e the
examination of any taxpayer and
the assessment of the correct
amount of tax, KA6 a return has
been filed by such taxpayer.
N2TE) ;ny return filed with the
?ommissioner shall not be
withdrawn, ."T the taxpayer may
7A9IH<, ?+;6*F or ;7F69 such
return wit$in t$ree ?B@ &ears
from the date of filing, provided
that no notice for audit or
investigation of such return has
been actually served on the
taxpayer.
2. ;uthority to conduct I6>F6TA&<!
T;OI6*, #"&>FI33;6?F and to
prescribe presumptive gross sales
and receipts $NE?) Inventor&8
ta7ing may be conducted at any
time during the taxable year, for
the purpose of determining the
correct tax liabilities. S%rveillance
is done if there is reason to believe
that the taxpayer is not declaring
his correct income, sales or receipts
for tax purposes. The
?ommissioner may prescribe
pres%#ptive gross sales and
receipts if:
It is found that the
taxpayer has failed to issue
receipts and invoices, or
Khen there is reason to
believe that the books of
accounts or other records
do not correctly reflect the
declarations made by the
taxpayer
3. ;uthority to terminate T;B;.3F
=F&IA9 $NE9) The ?ommissioner
may terminate taxable period and
order the immediate payment of the
tax for the terminated period and
any remaining tax that is unpaid,
under the following circumstances:
Khen a taxpayer is retiring
from business subect to
tax, or
Khen the taxpayer is
intending to leave the
=hilippines or to remove his
property therefrom or to
hide or conceal his
property
Khen the taxpayer is
performing any act tending
to obstruct the proceedings
for the collection of the tax
for the past or current
Guarter or year or to
render the same totally or
partially ineffective unless
such proceedings are
begun immediately
4. ;uthority to prescribe &F;3
=&A=F&T< >;3"F# $NEF) The
?ommissioner is authori8ed to
divide the =hilippines into different
8ones or areas, and shall determine
the H7> of real properties in each
8one or area, upon consultation
with competent appraisers from
private and public sectors. Hor the
purpose of computing any internal
revenue tax, the value of the
property shall be K+I?+F>F& I#
+I*+F& AH:
The fair market value as
determined by the
?ommissioner, or
The fair market value as
shown in the schedule of
values of the provincial and
city assessors
5. ;uthority to inGuire into .;6O
9F=A#IT ;??A"6T# $NEH)
6otwithstanding any contrary
provision of &.;. IL(- $.ank
#ecrecy 3aw) and other general or
special laws, the ?ommissioner is
authori8ed to inGuire into bank
deposits of:
; decedent to determine
his gross estate, and
;ny taxpayer who has filed
an application for
36
compromise of tax liability
by reason of financial
incapacity the taxpayer
must waive in writing his
privilege under &.;. IL(-
and other relevant laws,
before the ?ommissioner
may inGuire into his bank
accounts
6. ;uthority to accredit and register
T;B ;*F6T# $NE*) The
?ommissioner shall accredit and
register tax agents $may be
individuals or general professional
partnerships) based on the
following criteria:
=rofessional competence
Integrity
7oral fitness
7. ;uthority to prescribe additional
=&A?F9"&;3 A& 9A?"7F6T;&<
&FQ"I&F7F6T# $NE+) in relation
to the manner of compliance of any
reGuirement in connection with the
submission or preparation of
financial statements accompanying
the tax returns.
8. ;??F## 3FTTF& $N-.) The
?ommissioner may obtain on a
regular basis, from any person
2TAER TAAN t$e person w$ose
tax liabilit& is s%b;ect to a%dit or
investigation, or from any office or
officer of the national and local
governments, government agencies
or instrumentalities, including .#=
and *A??s, an& infor#ation such
as, but not limited to, costs and
vol%#es of prod%ction0 receipts
or sales and gross inco#es of
taxpa&ers, and the names
addresses, and financial statements
of corporations, mutual fund
companies, insurance companies
etc.
N2TE) This is known as the Third
=arty Information &ule.
9. =ower to I6TF&=&FT T;B 3;K# and
to 9F?I9F T;B ?;#F# $NL) shall
be under the exclusive and original
urisdiction of the ?ommissioner,
subect to review by the #ecretary
of Hinance.
&MC ""/.!
; ruling by the .I& ?ommissioner
shall be presumed >;3I9 unless
modified, reversed or superseded
by the #ecretary of Hinance.
; taxpayer who receives an adverse
ruling from the ?ommissioner may,
wit$in t$irt& ?B1@ da&s from the
date of receipt of such ruling, seek
its review by the #ecretary of
Hinance, either by himself/itself or
though his/its duly authori8ed
representative.
; reversal or modification of the .I&
ruling shall terminate its effectivity
upon the receipt by the taxpayer or
the .I& of written notice of reversal
or modification, whichever came
earlier.
Section +"0' NI&C: Non/
retroactivit) o$ &ulin1s
;ny revocation, modification or
reversal of]any of the rulings or
circulars promulgated by the
?ommissioner shall not be given
retroactive application if the
revocation, modification or reversal
will be pre;%dicial to t$e
taxpa&ers, E>CEPT in the
following cases:
a) Khere the taxpayer deliberately
misstates or omits material
facts from his return or any
document reGuired of him the
.I&1
b) Khere the facts subseGuently
gathered by the .I& are
materially different from the
facts on which the ruling is
based1 or
c) Khere the taxpayer acted in
bad faith.

.! Letter of A%t$orit&

() *$at is a letter of a%t$orit&+
The 3etter of ;uthority is an official
document that empowers a &evenue
Afficer to examine and scrutini8e a
taxpayers books of accounts and other
accounting records, in order to
determine the taxpayers correct internal
revenue tax liabilities.
() *$o iss%es t$e Letter of
A%t$orit&+
37
?ommissioner for those units
reporting directly to him
&egional directors for
taxpayers covered by his
particular region. If the
?ommissioner has already
issued an 3; to investigate a
particular taxpayer, the &egional
director shall desist from issuing
another 3; for the same
taxpayer.
() *$at are t$e cases w$ic$ need
not be covered b& a valid LA+
?ases involving civil/criminal tax
fraud which fall under the
urisdiction of the tax fraud
division of the Fnforcement
#ervices, and
=olicy cases under audit by the
special teams in national offices
II! PRE8ASSESS=ENT STA-E
A! Step ) Iss%ance of Notice of
Infor#al Conference
2%at is a notice o$ in$ormal
con$erence3
; notice of infor#al conference is a
written notice informing a taxpayer that
the findings of the audit conducted on
his books of accounts and accounting
records indicate that additional taxes or
deficiency assessments have to be paid.
If, after the culmination of an audit, a
&evenue Afficer recommends the
imposition of deficiency tax
assessments, this recommendation is
communicated by the .ureau to the
taxpayer concerned during an informal
conference called for this purpose. The
taxpayer shall then have fifteen $I-)
days from the date of his receipt of the
6otice for Informal ?onference to
explain his side.
.! Step ") Infor#al Conference
2%at matters are ta4en u5 (urin1
t%e in$ormal con$erence3
I.
9iscussion on the merits of the
assessment
'.
;ttempt of taxpayer to convince the
examiner to conduct a re!
investigation and/or re!examination
3.
Fvaluate if submission of the waiver of
the statute of limitations is
necessary because evaluation
may extend beyond three years
L.
Taxpayer to advise the examiner if
position paper will be submitted
2%at is a 6eo5ar() assessment3
; eopardy assessment is a tax
assessment made by an authori8ed
&evenue Afficer without the benefit of
complete or partial audit, in light of the
&As belief that the assessment and
collection of the deficiency tax will be
eopardi8ed by delay caused by the
taxpayers failure to:
i. ?omply with audit and
investigation reGuirements to
present his books of accounts
and/or pertinent records
ii. #ubstantiate all or any of the
deductions, exemptions or
credits claimed in his return.
It is usually issued when statutory
prescriptive periods for the assessment
or collection of taxes are about to lapse
due principally to the taxpayers fault.
C! Step B) Iss%ance of Pre8Assess#ent
Notice
2%at is a 5re/assessment notice
(7AN,3
The =re!;ssessment 6otice is a
communication issued by the &egional
;ssessment 9ivision or any other
concerned .I& office, informing a
taxpayer who has been audited of the
findings of the &evenue Afficer,
following the review of these findings.
The assessment shall be in writing, and
should inform the taxpayer of the law
and the facts on which the assessment
is made1 otherwise, the assessment
shall be void. $#ec. '',)
If the taxpayer disagrees with the
findings in the =;6, he has fifteen $I-)
days from his receipt of the =;6 to file a
written reply contesting the proposed
assessment.
Un(er 8%at circumstances is a 7AN
no lon1er re9uire(3
$a) Khen the finding for any
deficiency tax is the result of
7;T+F7;TI?;3 F&&A& in the
computation of the tax as
38
appearing on the face of the
return1 or
$b) Khen a 9I#?&F=;6?< has
been determined between the
T;B KIT++F39 and the amount
;?T";33< &F7ITTF9 by the
withholding agent1 or
$c) Khen a taxpayer who opted to
claim a refund or tax credit of
excess creditable withholding
tax for a taxable period was
determined to have carried
over and automatically applied
the same amount claimed
against the estimated tax
liabilities for the taxable Guarter
or Guarters of the succeeding
taxable year1 A&
$d) Khen the FB?I#F T;B due on
excisable articles has not been
paid1 or
$e) Khen an article locally
purchased or imported by an
exempt person, such as, but
not limited to, vehicles, capital
eGuipment, machineries and
spare parts, has been sold,
traded or transferred to a non!
exempt person. $N'',)
III! 92R=AL ASSESS=ENT STA-E
2%at is a Notice o$ Assessment (or
:ormal Letter o$ ;eman(,3
; notice of assessment is a declaration of
deficiency taxes issued to a taxpayer who
fails to respond to a pre!assessment notice
within the prescribed period of time, or
whose reply to the =;6 was found to be
without merit. This is commonly known as
the Hinal ;ssessment 6otice $H;6). ;n
assessment contains not only a computation
of tax liabilities, but also a demand for
payment within a prescribed period. The
ultimate purpose of assessment is to
ascertain the amount that each taxpayer is
to pay. ;n assessment is a notice to the
effect that the amount therein stated is due
as tax and a demand for payment thereof.
$Tupa8 v. "lep, IMMM)
The formal letter of demand shall be issued
by the ?ommissioner or his duly authori8ed
representative. The letter of demand calling
for the payment of the taxpayers deficiency
taxes shall state the H;?T#, the 3;K, &"3F#
and &F*"3;TIA6# or :"&I#=&"9F6?F on
which the assessment is based,
AT+F&KI#F, the formal letter of demand or
assessment notice shall be >AI9. $&& I'!
MM)
N2TE)
; follow8%p letter is considered a
notice of assessment. 2&F=".3I? vs.
?; and 6IF3#A6 [ ?A. $;pril %(,
IM,D)5
Khere the taxpayer is appealing on
the ground that the assessment is
erroneous, it is incumbent upon him
to prove what is the correct and ust
liability by a full and fair disclosure
of all pertinent data. Tax
assessments by tax examiners are
presumed correct and made in good
faith. The taxpayer has the duty to
prove otherwise. 2.onifacio #y =o v.
?T;5
2it%in 8%at time ma) t%e
Commissioner issue a notice o$
assessment3
If t$e taxpa&er filed a ret%rn
internal revenue taxes shall be
assessed wit$in t$ree &ears after
the last day prescribed by law for
the filing of the return. If a return is
filed beyond the period prescribed
by law, the three!year period shall
be counted from the day the return
was filed. ; return filed before the
last day prescribed by law for filing
shall be considered as filed on the
last day. $N'(%)
I33"#T&;TIA6:
The income tax return of an
individual shall be filed on or
before the fifteenth day of ;pril
of each year covering income of
the previous taxable year. If B
files his '((% income tax return
on I ;pril '((L, what is the last
day for issuing a notice of
assessmentP
;6#KF&: IE ;pril
'((D. The three!year
period is counted from
I- ;pril '((L, since B
filed his return earlier
than the date
prescribed by law.
6ATF: In short, the period
for assessment is within three
years from the time the return
is filed or from the time the
return is due, K+I?+F>F& I#
3;TF&.
39
If t$e taxpa&er DID N2T file a
ret%rn internal revenue taxes
shall be assessed wit$in ten &ears
after the discovery of the failure to
file the return $N'''a)
If t$e taxpa&er filed a false or
fra%d%lent ret%rn wit$ intent to
evade tax internal revenue taxes
shall be assessed wit$in ten &ears
after the discovery of the falsity or
fraud $N'''a)
o Hraud or falsity on the
return with intent to evade
payment of tax is a
Guestion of fact and the
circumstances constituting
fraud must be alleged and
proved in the court below.
The finding of the trial court
as to its existence and non!
existence is final and cannot
be reviewed by the
#upreme ?ourt unless
clearly shown to be
erroneous. 2?I& >. ;yala
#ecurities $IMDE)5
o () Are t$ere tax ret%rns
w$ic$ are false b%t not
fra%d%lent+ <F#. There
must be a distinction
between false returns $due
to mistakes, carelessness or
ignorance) and fraudulent
returns $with intent to
evade taxes). The fraud
contemplated by law is
actual and not constructive,
and must amount to
intentional wrongdoing with
the sole obect of avoiding
the tax. 2;8nar v. ?T;
$IMDL)5
o () *$at constit%tes
5rima $acie evidence of a
false or fra%d%lent
ret%rn+ substantial
underdeclaration of taxable
sales, receipts or income,
A& a substantial
overstatement of
deductions $N'L,b)
() In t%rn0 w$at
circ%#stances
constit%te
s%bstantial
%nderdeclaration
of sales0 receipts
or inco#e0 and
overstate#ent of
ded%ctions0
respectivel&+
failure to report
sales, receipts or
income in an
amount exceeding
thirty percent
$%(J) of that
declared per return,
and a claim of
deductions in an
amount exceeding
$%(J) of actual
deductions $N'L,b)
N2TE) The taxpayer and the ?ommissioner
may agree in writing to extend the period of
assessment $N'''b)
() *$at is t$e nat%re of prescription on
t$e rig$t to assess+
The law on prescription, being a remedial
measure, should be 3I.F&;33< ?A6#T&"F9
in order to afford protection. ;s a corollary,
the exceptions to the law on prescription
should be clearly construed. +ence,
negligence or oversight on the part of the
.I& cannot preudice taxpayers, considering
that the prescriptive period was precisely
intended to give them peace of mind. 2?I& v.
*oodrich =hilippines $IMMM)5
R=C No! CJ8G1 Co%nting of t$e Prescriptive
Periods (A5ril +<' !**.,
Khen the period covers a leap year, it shall be
understood that years are of %E- days each as
provided in ;rticle I% of the 6ew ?ivil ?ode.
?onseGuently, a %!year prescriptive period for
assessment or collection purposes shall have an
aggregate number of I,(M- days $%E- days B %
years) reckoned from the date of filing of the return
$in case of assessment) or from the issuance of the
assessment $in case of collection). In other words,
the %!year prescriptive period expires on the I,(M-
th

day, notwithstanding the fact that within the period,
there is a leap year which is of %EE days. T$is
principle applies to ALL prescriptive periods
%nder t$e Code!
2%en is an assessment (eeme( ma(e3
;n assessment is deemed made when the
demand letter or notice is &F3F;#F9,
7;I3F9 A& #F6T by the .I& to the
taxpayer. The law does not reGuire that the
taxpayer receive the notice within the three!
year or ten!year period. 2?I& vs. .;"TI#T;
$7ay 'D, IM-M)5 #o, even if the taxpayer
actually received the assessment after the
expiration of the prescriptive period,
provided the release thereof was effected
40
before prescription sets in, the assessment is
deemed made on time.
I$ t%e ta=5a)er (oes not a1ree 8it% t%e
assessment' 8%at is %is &EME;>3
The taxpayer has the right to contest an
assessment, and he may do so by filing a
letter of PR2TEST stating in detail his
reasons for contesting the assessment.
Khen no protest is seasonably made by the
taxpayer, the assessment shall become final
and unappealable, and thus the tax shall be
collectible.
() *$at is t$e nat%re of an assess#ent
w$en it is final and exec%tor&+
It is in the nature of an enforcement
udgment such that no inGuiry can be
made thereon on the merits of the
original case.
2it%in 8%at time ma) t%e ta=5a)er
5rotest t%e assessment3
;n assessment may be protested
administratively by filing a reGuest for
reconsideration or reinvestigation wit$in
t$irt& ?B1@ da&s from receipt of the
assessment. *it$in sixt& ?E1@ da&s from
filing of the protest, all relevant supporting
documents must be submitted, otherwise
the assessment shall become final. $N'',)
2%at is t%e (i$$erence bet8een a
reconsi(eration an( reinvesti1ation3
REC2NSIDERATI2N @ refers to a
plea of re!evaluation of the
assessment on the basis of existing
records KIT+A"T 6FF9 AH
;99ITIA6;3 F>I9F6?F. It may
involve both Guestion of fact or of
law or both
REIN/ESTI-ATI2N @ refers to a
plea of re!evaluation of an
assessment on the basis of 6FK3<!
9I#?A>F&F9 F>I9F6?F that a
taxpayer intends to present in the
reinvestigation. It may also involve
a Guestion of fact or law or both.
2%at are t%e c%aracteristics o$ a vali(
5rotest3
; protest is considered validly made if it
satisfies the following conditions:
I) it is made in writing, and addressed to
the ?ommissioner of Internal &evenue
') it contains the information the following
information (from RR 31-*4):
name of the taxpayer and address
for the immediate past three
taxable years
nature of reGuest whether
reinvestigation or reconsideration
specifying newly!discovered
evidence he intends to present if it
is a reGuest for reinvestigation
the taxable periods covered
assessment number
date of receipt of assessment notice
or letter of demand
itemi8ed statement of the findings
to which the taxpayer agrees as a
basis for computing the tax due,
which amount should be paid
immediately upon the filing of the
protest. Hor this purpose, the
protest shall not be deemed validly
filed unless payment of the agreed
portion of the tax is paid first
the itemi8ed schedule of the
adustments with which the
taxpayer does not agree
a statement of facts and/or law in
support of the protest.
%) It states the H;?T#, applicable 3;K,
&"3F# and &F*"3;TIA6# or
:"&I#=&"9F6?F on which his protest is
based, otherwise the protest shall be
considered void and without force and
effect.
L) It is filed within the period prescribed by
law
2%at s%oul( t%e ta=5a)er (o i$ %is
5rotest is (enie( or is not acte( u5on b)
t%e Commissioner3
Sit%ation ) If the ?ommissioner
DENIES TAE PR2TEST filed by the
taxpayer the taxpayer may
appeal to the ?ourt of Tax ;ppeals
within thirty days from receipt of the
decision denying the protest $N'',)
Sit%ation ") If the ?ommissioner
did N2T ACT 5P2N TAE PR2TEST
wit$in one $%ndred and eig$t&
da&s fro# t$e ti#e t$e
doc%#ents were s%b#itted the
taxpayer may either:
o ;ppeal to the ?T; within
thirty days from the lapse
of the I,(!day period A&
o Kait until the ?ommissioner
decides before he elevates
the case to the ?T;
41
N2TE) If #ituation I occurs and the
taxpayer does not file a protest within the
prescribed period, the assessment becomes
HI6;3, FBF?"TA&< and 9F7;69;.3F. .ut
if the #ituation ' occurs and the taxpayer
does not file a protest within the prescribed
period, the assessment 9AF# 6AT become
HI6;3, FBF?"TA&< and 9F7;69;.3F. In
cases of inaction by the ?ommissioner,
#ection '', of the Tax ?ode merely gave
the taxpayer an 2PTI2N : first, he may
appeal to the ?ourt of Tax ;ppeals within
thirty days from the lapse of the I,(!day
period, or second, he may wait until the
?ommissioner decides on his protest before
he elevates his case. The taxpayer was given
this option so that in case his protest is not
acted upon within I,( days, he may be able
to seek immediate relief and need not wait
for an indefinite period of time for the
?ommissioner to decide. .ut if he chooses to
wait for a positive action on the part of the
?ommissioner, then the same could not
result in the assessment becoming final,
executory and demandable. 23;#?A6; 3;69
?o vs. ?I& $:anuary L, '((()5
2%en (oes t%e <./(a) 5erio( to a55eal
in Situation ! commence to run3
The %(!day period starts when the taxpayer
receives the decision of the ?ommissioner
denying the protest. The decision of the
?ommissioner must categorically state that
$is action on t$e disp%ted assess#ent is
final, otherwise period to appeal will not
commence to run. The appealable decision
is the decision of the ?ommissioner denying
the protest, 6AT the warrants of distraint or
levy. 2;9>F&TI#I6* ;##A?I;TF# vs. ?;
$9ecember 'E, IM,L)5
N2TE)
Kithin the %(!day period to
appeal, the taxpayer may file
several motions for
reconsideration with the
?ommissioner instead of at once
filing his petition for review
before the ?T;. The
subseGuent motion for
reconsideration tolls the running
of the prescriptive period. The
prescriptive period begins to run
again when the taxpayer
receives the letter denying its
reGuest/motion for
reconsideration. +e then onl&
$as t$e re#ainder of the
original %(!day period to appeal
to the ?T;. 2#"&I*;A
F3F?T&I? ?A. vs. ?; $:une ',,
IMDL)5
; 9ivision of the ?T; shall hear
the appeal. $#ec. II, &; II'-
as amended by &; M','
2'((L5)
I$ t%e ta=5a)er is not satis$ie( 8it% t%e
C?A ;ivision@s rulin1' 8%at is %is
&EME;>3
HI&#T, he may file a motion for
reconsideration before the same
9ivision of the ?T; within fifteen
$I-) days from notice thereof. $#ec.
II, &; II'- as amended by &;
M',' 2'((L5)
T+F6, a party adversely affected by
a resolution of a 9ivision of the ?T;
on a motion for reconsideration may
file a petition for review with the
CTA en banc. $#ec. I,, &; II'- as
amended by &; M',' 2'((L5)
I$ t%e ta=5a)er is not satis$ie( 8it% t%e
(ecision o$ t%e C?A en banc' 8%at is %is
&EME;>3
; party adversely affected by a decision or
ruling of the ?T; en banc may file with the
S%pre#e Co%rt a verified petition for
review on certiorari pursuant to &ule L- of
the IMMD &ules of ?ourt. $#ec. IM, &; II'-
as amended by &; M',' 2'((L5)
L
E99ECTS 29 RA G"J" 2N TAE CTAS
:5RISDICTI2N)
The ?T; shall exercise:
a. E>CL5SI/E APPELLATE
:5RISDICTI2N to review by appeal:
I. 9ecisions of the ?ommissioner
of Internal &evenue in cases
involving disputed
assessments, refunds of
internal revenue taxes, fees or
other charges, penalties in
relation thereto, or other
matters arising under the
6ational Internal &evenue or
other laws administered by
the .ureau of Internal
&evenue1
4
,0 9282, (hich amended ,0 1125, e.panded the
7risdiction of the :#0 and elevated it to the level of
the :ort of 0ppeals"
Q: Is the :#0 a special cort or a re!lar cortC It
is a re!lar cort (ith special 7risdiction"
42
'. Inaction by the ?ommissioner
of Internal &evenue in cases
involving disputed
assessments, refunds of
internal revenue taxes, fees or
other charges, penalties in
relations thereto, or other
6ational Internal &evenue
?ode or other laws
administered by the .ureau of
Internal &evenue, where the
6ational Internal &evenue
?ode provides a specific
period of action, in which case
the inaction shall be deemed a
denial1
%. 9ecisions, orders or
resolutions of the &egional
Trial ?ourts in local tax cases
originally decided or resolved
by them in the exercise of
their original or appellate
urisdiction1
L. 9ecisions of the ?ommissioner
of ?ustoms in cases involving
liability for customs duties,
fees or other money charges,
sei8ure, detention or release
of property affected, fines,
forfeitures or other penalties
in relation thereto, or other
?ustoms 3aw or other laws
administered by the .ureau of
?ustoms1
-. 9ecisions of the ?entral .oard
of ;ssessment ;ppeals in the
exercise of its appellate
urisdiction over cases
involving the assessment and
taxation of real property
originally decided by the
provincial or city board of
assessment appeals1
E. 9ecisions of the #ecretary of
Hinance on customs cases
elevated to him automatically
for review from decisions of
the ?ommissioner of ?ustoms
which are adverse to the
*overnment under #ection
'%I- of the Tariff and
?ustoms ?ode1
D. 9ecisions of the #ecretary of
Trade and Industry, in the
case of nonagricultural
product, commodity or article,
and the #ecretary of
;griculture in the case of
agricultural product,
commodity or article,
involving dumping and
countervailing duties under
#ection %(I and %(',
respectively, of the Tariff and
?ustoms ?ode, and safeguard
measures under &epublic ;ct
6o. ,,((, where either party
may appeal the decision to
impose or not to impose said
duties.
b. :urisdiction over cases involving
CRI=INAL 299ENSES:
I. E>CL5SI/E 2RI-INAL
:5RISDICTI2N over all
criminal offenses arising from
violations of the 6ational
Internal &evenue ?ode or
Tariff and ?ustoms ?ode and
other laws administered by
the .ureau of Internal
&evenue or the .ureau of
?ustoms:
E>CEPTI2N)
That offenses or
felonies where
the principal
amount of taxes
and fees,
exclusive of
charges and
penalties, claimed
is less t$an 2ne
#illion pesos
?P01110111!11
@ or where there
is no specified
a#o%nt clai#ed
shall be tried b&
t$e reg%lar
Co%rts and t$e
;%risdiction of
t$e CTA s$all be
appellate.
N2TE) ;ny
provision of law
or the &ules of
?ourt to the
contrary
notwithstanding,
the criminal
action and the
corresponding
civil action for the
43
recovery of civil
liability for taxes
and penalties
shall at all times
be simultaneously
instituted with,
and ointly
determined in the
same proceeding
by the ?T;, the
filing of the
criminal action
being deemed to
necessarily carry
with it the filing
of the civil action,
and no right to
reserve the filling
of such civil
action separately
from the criminal
action will be
recogni8ed.
'. E>CL5SI/E APPELLATE
:5RISDICTI2N in criminal
offenses:
a) Aver appeals from
the udgments,
resolutions or
orders of the
&egional Trial
?ourts in tax cases
originally decided
by them, in their
respected territorial
urisdiction.
b) Aver petitions for
review of the
udgments,
resolutions or
orders of the
&egional Trial
?ourts in the
exercise of their
appellate
urisdiction over tax
cases originally
decided by the
7etropolitan Trial
?ourts, 7unicipal
Trial ?ourts and
7unicipal ?ircuit
Trial ?ourts in their
respective
urisdiction.
c. :urisdiction over TA> C2LLECTI2N
CASES:
I. E>CL5SI/E 2RI-INAL
:5RISDICTI2N in tax
collection cases involving final
and executory assessments
for taxes, fees, charges and
penalties.
E>
CEPTI2N)
?ollection cases
where the principal
amount of taxes
and fees, exclusive
of charges and
penalties, claimed
is less t$an 2ne
#illion pesos
?P01110111!11@
shall be tried by the
proper =%nicipal
Trial Co%rt0
=etropolitan Trial
Co%rt and
Regional Trial
Co%rt.
'. E>CL5SI/E APPELLATE
:5RISDICTI2N in tax
collection cases:
a. Aver appeals from
the udgments,
resolutions or
orders of the
&egional Trial
?ourts in tax
collection cases
originally decided
by them, in their
respective territorial
urisdiction.
b. Aver petitions for
review of the
udgments,
resolutions or
orders of the
&egional Trial
?ourts in the
Fxercise of their
appellate
urisdiction over tax
collection cases
originally decided
by the 7etropolitan
Trial ?ourts,
7unicipal Trial
?ourts and
7unicipal ?ircuit
44
Trial ?ourts, in their
respective
urisdiction.
I/! C2LLECTI2N LETTERL*ARRANTS
A! Collection of Deficienc& Taxes
2it%in 8%at time 5erio( must
collection o$ internal revenue ta=es
be ma(e3
Ret%rn filed was N2T
false or fra%d%lent
No ret%rn filed0 or t$e
ret%rn was false or
fra%d%lent!
?ollection with =&IA&
;##F##7F6T ! should
be made wit$in five
&ears from the date of
assessment of the tax
$based on N'''c)
by distraint or levy, or
by udicial proceedings
?ollection with =&IA&
;##F##7F6T ! should
be made wit$in five
assessment $based on
N'''c)
by distraint or levy, or
by udicial proceedings
?ollection KIT+A"T
=&IA& ;##F##7F6T @
should be made wit$in
t$ree &ears from the
date of filing of return or
date return is due,
whichever is 3;TF&
$based on N'(%)
by udicial
proceedings
?ollection KIT+A"T
=&IA& ;##F##7F6T @
should be made wit$in
ten &ears after the
discovery of the falsity,
fraud or omission to file
a return.
by udicial
proceedings
2%en s%all t%e 5erio( $or assessment or
collection o$ ta=es be sus5en(e(3
The running of the statute of limitations
provided in N'(% and N''' shall be
suspended for the period:

9uring which the commissioner is
=&A+I.ITF9 from making the
assessment or beginning distraint or
levy or a proceeding in court, and
for sixty $E() days thereafter
Khen the taxpayer reGuests for a
&FI6>F#TI*;TIA6 which is granted
by the ?ommissioner
o ?;#F 3;K: ?I& vs. K<FT+
$#eptember %(, IMMI)
The prescriptive period
provided by law is
interrupted once the
taxpayer reGuests for a
reinvestigation or
reconsideration of the
assessment. The statutory
period of limitation for
collection may be
interrupted when, by the
taxpayers repeated
reGuests or positive acts,
the government has been,
for good reasons,
persuaded to postpone
collection to make him feel
the demand was not
unreasonable or that no
harassment or inustice was
meant by government.
Khen the taxpayer ?;66AT .F
3A?;TF9 I6 T+F ;99&F## given
by him in the return filed upon
which a tax is being assessed or
collected, but if the taxpayer
informs the ?ommissioner of any
change in address, the running of
the statute of limitations shall not
be suspended
Khen the warrant of distraint or
levy is duly served upon the
taxpayer, his authori8ed
representative, or a member of his
household with sufficient discretion,
and 6A =&A=F&T< is located
Khen the taxpayer is A"T AH T+F
=+I3I==I6F# $N''%)
.! Re#edies of t$e taxpa&er against a
tax erroneo%sl& or illegall& paid
2%en ma) ta=es be re$un(e( or
cre(ite(3
Taxes may be refunded or credited in
the following cases:
Taxes erroneously or illegally
assessed or collected
=enalties imposed without authority
>alue of internal revenue stamps
when they are returned in good
condition by the purchaser
"nused stamps that have been
rendered unfit for use
$?ommissioner may redeem,
change or refund their value upon
proof of destruction)
;ny sum alleged to have been
excessively or in any manner
wrongfully collected
() *$at is t$e nat%re of a clai#
for ref%nd+
It partakes of the nature of an
exemption and is strictly construed
against the claimant. The burden of
proof is on the taxpayer claiming
the refund that he is entitled to the
45
same. 2?I& v. Tokyo #hipping
$IMM-)5
() *$en are t$ere erroneo%sl&
paid0 or illegall& assessed or
collected taxes+
Taxes are erroneously paid when a
taxpayer pays under a mistake of
fact, such as, he is not aware of an
existing exemption in his favor at
the time that payment is made.
Taxes are illegally collected when
payments are made under duress.
() *$at is t$e difference
between a tax credit and
ref%nd+
They are essentially modes of
recovering taxes that have been
either erroneously or illegally paid
to the government. &FH"69 takes
place when there is actual
reimbursement. T;B ?&F9IT takes
place upon the issuance of a tax
certificate or tax credit memo,
which can be applied against any
sum that may be due and collected
from the taxpayer.
() Is pa&#ent %nder protest
necessar& in clai#s for ref%nd+
6o. #ection ''M of the 6I&? is
specific on this point when it
provides that a suit or proceeding
for tax refund may be maintained
/whether or not such tax, penalty or
sum has been paid under protest or
duress.0
2%at is t%e 5roce(ure $or obtainin1
a re$un( or ta= cre(it3
Hirst, the taxpayer must file a clai# for
ref%nd before the ?ommissioner wit$in
two &ears from the date of payment.
$N''M) O-ENERAL R5LEP
o E>CEPTI2NS to t$e r%le
re<%iring a clai# for
ref%nd) Khen on the
face of the return upon
which payment was made,
such payment appears
clearly to have been
erroneously paid $e.g.
mathematical errors), the
?ommissioner may refund
or credit the tax even
(ithout a (ritten claim
therefor.
o N2TE) ; return filed
showing an overpayment
shall be considered as a
written claim for credit or
refund. $N'(L?)
>ut ho( shall the date of a%ment
be determinedP
i. If the inco#e tax is
wit$$eld at so%rce the
taxpayer is deemed to have
paid his tax liability at the
end of t$e taxable &ear.
o ?;#F 3;K: *I..#
vs. ?A77I##IA6F&
$6ovember 'M,
IME-) ;
taxpayer who
contributes to the
withholding tax
system, does so
not really to deposit
an amount to ?I&,
but, in truth, to
perform and
extinguish his tax
obligation for the
year concerned.
+e is paying his tax
liabilities for that
year. ?onseGuently,
a taxpayer whose
income is withheld
at the source will
be deemed to have
paid his tax liability
(hen the same
falls due at the end
of the ta" %ear. It
is from this latter
date then, or when
the tax liability falls
due, that the '!
year prescriptive
period starts to run
with respect to
payments effected
thru the
withholding tax
system.
ii. If the inco#e is paid on a
<%arterl& basis the
two!year period is counted
fro# t$e ti#e of filing
t$e final ad;%st#ent
ret%rn.
o ?;#F 3;K: ?I& vs.
T7B #;3F#
$:anuary IE, IMM')
Khen a tax is
46
paid in
installments, the
prescriptive period
should be counted
from the date of
final payment or
the last
installment. This
rule proceeds from
the theory that
there is no
a%ment until the
entire ta" liabilit%
is comletel% aid.
Hurther, it is only
upon the filing of
the Hinal
;dustment &eturn
would the taxpayer
be able to ascertain
if he still has to pay
additional income
tax or if he is
entitled to a
refund. The filing
and payment of
Guarterly income
tax should only be
considered as
mere installments
of the annual ta"
due- It should be
treated as
advances or
portions of the
annual tax due.
2%at s%oul( t%e ta=5a)er (o i$ %is
claim $or re$un( is (enie( or is not
acte( u5on b) t%e Commissioner3
o SIT5ATI2N ) T$e
Co##issioner denies t$e
clai# for ref%nd the
taxpayer may appeal to the
?T; wit$in t$irt& ?B1@
da&s from the receipt of
the ?ommissioners
decision ;69 wit$in two
payment. $Note that A117
states that Bno such suit or
roceedin' shall be filed
after the e"iration of the
1-%ear eriod re'ardless of
an% suervenin' cause that
ma% arise after a%ment@)
o SIT5ATI2N ") T$e
Co##issioner does not
act on t$e clai#0 and t$e
two8&ear period is abo%t
to lapse the taxpayer
must file a claim before the
?T; before t$e "8&ear
period lapses, otherwise
he may no longer file a
claim before the ?T; in
case the ?ommissioner
renders an adverse decision
beyond the '!year period.
N2TE A2*E/ERQ Is t$e
two8&ear period
;%risdictional wit$ respect to
t$e CTA+
6A. Fven if the two!year period
had already lapsed, the same is
not a urisdictional defect which,
upon grounds of ustice and
eGuity, may be set aside by the
court. 2$?A77I##IA6F& vs.
=+I3;73IHF $7ay 'M, IMM-)5
I$ t%e Commissioner 1rants t%e re$un('
8it%in 8%at time must it be claime(3
; refund check or warrant must be
claimed or cashed wit$in five &ears
from the date such warrant or check was
mailed or delivered, otherwise it shall be
forfeited in favor of the government and
the amount thereof shall revert to the
general fund.
2%at can be (one 8it% a ?a= Cre(it
Certi$icate3
Tax credit certificates $T??s) can be
applied against all internal revenue
taxes, excluding withholding tax.
T??s which re#ain %n%tiliHed
after five &ears from the date of
issue shall be considered as invalid,
unless revalidated. If not
revalidated, the amount covered by
the T?? shall revert to the general
fund
C! Re#edies of t$e State for Collection
of Taxes
-ENERALLK0 the remedies of distraint,
levy or civil or criminal action may be
pursued #I7"3T;6FA"#3<. $N'(-)
&emedies of distraint and levy may be
repeated if necessary until the full
amount due, including all expenses, is
collected. $N'ID)
o A2*E/ER0 the remedies of
distraint and levy shall not be
available where the amount of
the tax involved is not more
than Ane hundred pesos.
47
o () *$en #a& t$e
govern#ent avail of t$e
re#edies of collection+
Khen the assessment shall have
become final, executory and
demandable.
N2TE) ; court 7;< 6AT *&;6T ;6
I6:"6?TIA6 to restrain the collection of
any national internal revenue tax, fee or
charge imposed under the 6I&?. $N'I,)
o E>CEPTI2N) "nder #ection II
of &; II'-, as amended by &;
M',', suspension is allowed
when the following conditions
concur:
I. it is an appeal to
the ?T; from a
decision of the
?ommissioner of
Internal &evenue or
?ommissioner of
?ustoms or the
&egional Trial
?ourt, provincial,
city or municipal
treasurer or the
#ecretary of
Hinance, the
#ecretary of Trade
and Industry and
#ecretary of
;griculture, as the
case may be, and
'. in the opinion of the
?ourt of Tax
;ppeals, the
collection may
eopardi8e the
interest of the
*overnment and/or
the taxpayer.
Q: In case of
suspension, what may
the taxpayer be
reGuired to doP
Fither to deosit the
amount claimed or to
file a suret% bond for
not more than double
the amount with the
?ourt.
() *$at are tax liens+ $#ec. 'IM,
6I&?)
Khen a taxpayer neglects or refuses to
pay his internal revenue tax liability after
demand, the amount so demanded shall
be a lien in favor of the government
from the time the assessment was made
by the ?I& until paid with interest,
penalties, and costs that may accrue in
addition thereto upon ;33 =&A=F&T<
;69 &I*+T# TA =&A=F&T< .F3A6*I6*
to the taxpayer.
o A2*E/ER0 the lien shall not be
valid against any mortgagee,
purchaser or udgment creditor
until 6ATI?F of such lien shall
be filed by the ?ommissioner in
the Affice of the &egister of
9eeds of the province or city
where the property of the
taxpayer is situated or located.
o () *$at is t$e difference
between seiH%re %nder
forfeit%re an a seiH%re to
enforce a tax lien+ There is
a great difference between a
sei8ure under forfeiture and a
sei8ure to enforce a tax lien. In
the former all the proceeds
derived from the sale of the
thing forfeited are turned over
to the ?ollector of Internal
&evenue1 in the latter, the
residue of such proceeds over
and above what is reGuired to
pay the tax sought to be
reali8ed, including expenses, is
returned to the owner of the
property. 2.=I v. Trinidad5
AD=INISTRATI/E RE=EDIES
I. Distraint
2%at is (istraint o$ 5ersonal
5ro5ert)3
9istraint involves the #FIC"&F by
the *overnment of =F&#A6;3
=&A=F&T<, tangible or intangible, to
enforce the payment of taxes1
followed by the =".3I? #;3F of
such property, if the taxpayer fails
to pay the taxes voluntarily.
2%at are t%e 4in(s o$ (istraint3
I. Actual #istraint @
resorted to when there
is ;?T";3 delinGuency
in tax payment
48
'. Constructive #istraint $
is a preventive remedy
which aims at
forestalling a possible
dissipation of the
taxpayers assets when
delinGuency sets in.
+ence, no actual
delinGuency in payment
is necessary.
Ao8 is AC?UAL (istraint o$
5ersonal 5ro5ert) e$$ecte(3
Khen the taxpayer fails to pay
the delinGuent tax at the time
reGuired, the proper officer
shall #FICF and 9I#T&;I6T any
*AA9#, ?+;TTF3#, or
FHHF?T#, and the =F&#A6;3
=&A=F&T<, including #TA?O#
and other #F?"&ITIF#, 9F.T#,
?&F9IT#, .;6O ;??A"6T#
and I6TF&F#T# in and &I*+T#
to personal property of the
taxpayer in sufficient Guantity
to satisfy the tax, expenses of
distraint and the cost of the
subseGuent sale.
Cho is the roer officer
authoriDed to issue the (arrant
of distraintE
?ommissioner or his duly
authori8ed
representative @ if the
amount involved is in
FB?F## of Ane million
pesos $=I,(((,((()
&evenue 9istrict Afficer @
if the amount involved is
Ane million pesos
$=I,(((,((() or 3F##.
$N'(D;)
The officer serving the warrant
of distraint shall make an
account of the goods, chattels,
effects or other personal
property distrained. ; copy
shall be left with the person
from whom the goods were
taken, or at the dwelling or
place of business of such
person with someone of
suitable age and discretion.
The account shall also contain a
statement of the sum
demanded and the time and
place of sale of the distrained
property. $N'(,)
Ao8 are (i$$erent 4in(s o$
5ersonal 5ro5ert) (istraine(3
Stoc7s and ot$er sec%rities
by serving a copy of the
warrants of distraint on the
taxpayer, ;69 upon the
president, manager, treasurer
or other responsible officer of
the corporation, company or
association which issued the
stocks or securities.
Debts and credits by
leaving with the person owing
the debts or having in his
possession or under his control
such credits, or with his agent, a
copy of the warrant of distraint.
The person owing the debts
shall then pay the ?ommissioner
instead of his creditor
$taxpayer) on the strength of
such warrant.
.an7 acco%nts by serving a
warrant of garnishment upon
the taxpayer ;69 upon the
president, manager, treasurer
or other responsible officer of
the bank. The bank shall then
turn over to the ?ommissioner
so much of the bank accounts
as may be sufficient to satisfy
the claim of the *overnment.
$N2TE) distraint of bank
accounts is called
-ARNISA=ENT)
2%at is t%e reme() o$ t%e
ta=5a)er once t%e
Commissioner or ot%er 5ro5er
o$$icer issues t%e 8arrant o$
(istraint3
The taxpayer may reGuest that the
warrant be lifted. The
commissioner may, in his discretion,
allow the lifting of the order of
distraint. +e may ask for a bond as
a condition for the cancellation of
the warrant. $N'(D)
I$ t%e ta=5a)er (oes not as4 $or
t%e li$tin1 o$ t%e 8arrant' 8%at
s%all be (one 8it% t%e seiBe(
5ro5erties3
The properties will be #A39 in a
=".3I? #;3F, and the procedure
shall be as follows:
49
$I) The &evenue 9istrict Afficer or
his duly authori8ed
representative $not the officer
who served the warrant), shall
cause a notification of the
public sale to be posted in not
less than two $') public places
in the municipality or city $one
of which is the Affice of the
7ayor) where the distraint was
made. The notice shall specify
the time and place of the sale.
The time of sale shall not be
less than twenty $'() days
after notice to the owner and
the publication or posting of
such notice.
$') ;t the time of the public sale,
the revenue officer shall sell the
goods, chattels, or effects, or
other personal property,
including stocks and other
securities so distrained at a
=".3I? ;"?TIA6, to the
+I*+F#T .I99F& for ?;#+ or
with the approval of the
?ommissioner, through a 9"3<
3I?F6#F9 ?A77A9IT< or
#TA?O FB?+;6*F#.
$%) ;ny residue over and above
what is reGuired to pay the
entire claim, including expenses
of sale and distraint, shall be
&FT"&6F9 to the owner of the
property sold. Fxpenses shall
be limited to actual expenses of
#FIC"&F and =&F#F&>;TIA6
of the property pending the
sale, no charge shall be
imposed for the services of the
local internal revenue officer or
his deputy. $N'(M)
$L) If the amount offered by the
highest bidder is not eGual to
the amount of the tax or is very
much less than the actual
market value of the articles
offered for sale, the
?ommissioner or his deputy
may purchase the same in
behalf of the 6ational
*overnment for the amount of
taxes, penalties and costs due
thereon. The property so
purchased may thereafter be
resold by the ?ommissioner or
his deputy. $N'I')
$-) If the proceeds from the sale of
the distrained properties is not
sufficient to satisfy the tax
delinGuency, the ?ommissioner
or his duly authori8ed
representative shall within
thirty $%() days after execution
of the distraint, proceed with
the levy on the taxpayers real
property. $N'(D.)
Ma) t%e ta=5a)er recover %is
5ro5ert) 5rior to consummation
o$ t%e sale3
<F#. If at any time prior to the
consummation of the sale all proper
charges are paid to the officer
conducting the sale, the goods or
effects distrained shall be restored
to the owner. $N'I()
Ao8 is CONS?&UC?IVE (istraint
e$$ecte(3
?onstructive distraint is effected by
reGuiring a taxpayer or any person
in possession or control of such
property to #I*6 a &F?FI=T
covering the property distrained and
obligate himself to =&F#F&>F T+F
#;7F I6T;?T and "6;3TF&F9 and
6AT TA 9I#=A#F of the same in
any manner whatever, without the
?ommissioners authority. If the
taxpayer or person in possession or
control refuses to sign the receipt,
the revenue officer shall prepare a
list of the property and leave a copy
of such list in the premises where
the properties are located, in the
presence of two $') witnesses.
() *$en #a& propert& of t$e
taxpa&er be placed in
constr%ctive distraint+
The property of a taxpayer may be
placed in constructive distraint, if in
the ?ommissioners opinion:
the taxpayer is
retiring from any
business subect to
tax
the taxpayer is
intending to leave
the =hilippines
the taxpayer is
intending to remove
his property from
the =hilippines or to
hide or conceal his
property
50
the taxpayer is
planning to perform
any act tending to
obstruct the
proceedings for
collecting the tax
due or which may
be due from him
$N'(E)
N2TE) In constructive distraint,
the property is not actually
confiscated or sei8ed by the
revenue officer
"! Lev&
2%at is Lev) o$ &eal 7ro5ert)3
3evy of real property refers to the
same act of sei8ure as in distraint,
but in this case, of real property, an
interest in or rights to such property
in order to enforce the payment of
taxes. The real property under levy
shall be sold in a public sale, if the
taxes involved are not voluntarily
paid following such levy.
Ao8 is lev) o$ real 5ro5ert)
e$$ecte(3
I) ;fter the expiration of time
reGuired to pay the delinGuent
tax, real property may be
levied upon, .FHA&F,
#I7"3T;6FA"#3< or ;HTF& the
distraint of personal property
belonging to the delinGuent.
The I& officer designated by the
?ommissioner or his duly
authori8ed representative shall
prepare a 9"3<
;"T+F6TI?;TF9 ?F&TIHI?;TF
showing the name of the
taxpayer and the amounts of
tax and penalty due from him.
This certificate shall operate
with the force of 3F*;3
FBF?"TIA6 throughout the
=hilippines.
') The certificate shall contain a
description of the property
upon which levy is made. ;t
the same time, written notice of
the levy shall be mailed to or
served upon the &egister of
9eeds of the province or city
where the property is located
and upon the taxpayer $if he is
absent from the =hilippines, to
his agent or manager of
business in respect to which the
liability arose or to the
occupant of the property in
Guestion)
%) Kithin twenty $'() days after
the levy, the officer conducting
the proceedings shall proceed
to advertise for #;3F the
property or a portion thereof as
may be necessary to satisfy the
claim and costs of sale. #uch
advertisement shall cover a
period of at least thirty $%()
days. The notice shall be
posted at the main entrance of
the city or municipal all ;69 in
a public and conspicuous place
in the barrio or district where
the real property lies. The
notice must also be published
in a newspaper of general
circulation in the place where
the property is located, once a
week for three $%) weeks.
?A6TF6T# of notice:
statement of amount
of taxes, and
penalties due, time
and place of sale,
name of taxpayer,
short description of
property.
L) The sale shall be held either at
the main entrance of the
municipal or city hall or on the
premises to be sold. =roperty
will be awarded to the highest
bidder. In case the proceeds of
the sale exceeds the claim and
costs of sale, the excess shall
be turned over to the owner of
the property. $N'I%)
-) If there is no bidder for the real
property A& if the highest bid is
not sufficient to pay the taxes,
penalties and costs, the I&
Afficer conducting the sale shall
declare the property
HA&HFITF9 to the
*A>F&67F6T in satisfaction of
the claim. $N'I-) The
?ommissioner may resell the
property at a public auction
after the giving of not less than
twenty $'() days notice.
$N'IE)
51
5ro5ert) 5rior to consummation
o$ t%e sale3
<F#. ;t any time before the day
fixed for the sale, the taxpayer may
discontinue all proceeding by paying
the taxes, penalties and interest.
$N'I%)
5ro5ert) a$ter t%e
consummation o$ t%e sale3
<F#. *it$in one ?@ &ear from
the date of sale, the taxpayer or
anyone for him, may pay to the
&evenue 9istrict Afficer the total
amount of the following:
public taxes
penalties
interest from the date of
delinGuency to the date of
sale
interest on said purchase
price at the rate of fifteen
percent $I-J) per annum
from the date of sale to the
date of redemption.
$N2TE) if the property
was forfeited in favor of the
government, the
redemption price shall
include only the taxes,
penalties and interest plus
costs of sale @ no interest
on urchase rice since the
8ov@t did not FurchaseG
the roert% an%(a%, it
(as forfeited - .!:)
N2TE) The taxpayer!owner shall
not be deprived of possession of the
said property and shall be entitled
to rents and other income until the
expiration of the period for
redemption
:5DICIAL PR2CEEDIN-S
?ivil and criminal action and proceedings
instituted in behalf of the *overnment
under the authority of this ?ode or other
law enforced by the .I&
shall be .&A"*+T I6 T+F 6;7F
AH T+F *A>F&67F6T of the
=hilippines
shall be ?A69"?TF9 .< 3F*;3
AHHI?F&# AH T+F .I&
6o civil or criminal action for the
recovery of taxes or the enforcement of
any fine, penalty or forfeiture under the
6I&? shall be filed in court without the
;==&A>;3 AH T+F ?A77I##IA6F&
approval of the ?ommissioner. $N''()
() Aow is a cri#inal action a
collection re#ed&+
The udgment in the criminal case shall
not only impose the penalty but shall
also order payment of the taxes subect
of the criminal case as finally decided by
the ?ommissioner. $N'(-)
() Is an assess#ent necessar&
before filing a cri#inal c$arge for
tax evasion+
6o, an assessment is not necessary
before a criminal charge can be filed.
The criminal charge need only be proved
by a rima facie showing of a willful
attempt to file taxes, such as failure to
file a reGuired tax return. 2?I& v. =ascor
&ealty $:une 'M, IMMM)5
/! C2=PR2=ISE AND A.ATE=ENT
I. Co#pro#ise $to reduce the amount of
tax payable)
On 8%at 1roun(s ma) t%e
commissioner com5romise t%e
5a)ment o$ internal revenue ta=
(civil com5romise,3
The ?ommissioner may compromise the
payment of any internal revenue tax in
the following cases:
I) ; &F;#A6;.3F 9A".T as
to the validity of the claim
against the taxpayer
exists1 or
') The financial position of
the taxpayer
demonstrates a clear
inability to pay the
assessed tax. $HI6;6?I;3
I6?;=;?IT<)
2%at are t%e limits o$ t%e
Commissioner@s 5o8er to
com5romise3
Hor cases of financial
incapacity a minimum
compromise rate eGuivalent to
ten percent ?1M@ of the
basic assessed tax
Hor other cases a minimum
compromise rate eGuivalent to
fort& percent ?C1M@ of the
basic assessed tax
52
N2TE) Khen the basic tax
involved exceeds Ane 7illion =esos
$=I,(((,(((), or where the
settlement offered is less than the
prescribed minimum rates, the
compromise must be approved by
the Fvaluation .oard $composed of
the ?ommissioner and L deputy
commissioners)
Ma) t%e Commissioner com5romise
cases o$ criminal violations3
*enerally, ;33 ?&I7I6;3
>IA3;TIA6# may be compromised,
FB?F=T:
a) those cases already
filed in court
b) those involving fraud
'. Abate#ent $to cancel the entire
amount of tax payable)
2%en ma) t%e Commissioner abate
or cancel a ta= liabilit)3
The ?ommissioner may abate or
cancel a tax liability when:
I) the tax or any portion
thereof appears to be
"6:"#T3< or
FB?F##I>F3< ;##F##F91
or
') the ;97I6I#T&;TIA6 and
?A33F?TIA6 ?A#T# do
not ustify the collection
of the amount due. $costs
of collection \ amount of
tax due)
/I! STAT5T2RK 299ENSES AND
PENALTIES
A! Additions to t$e Tax
I.
Civil Penalties
Surc%ar1e' (e$ine( #urcharge
is a civil penalty imposed by law as
an addition to the main tax reGuired
to be paid. It is not a criminal
penalty but a civil administrative
sanction provided primarily as a
safeguard for the protection of the
#tate revenue and to reimburse the
government for the expenses of
investigation and the loss resulting
from the taxpayers fraud. ;
surcharge added to the main tax is
subect to interest.
&ates o$ Surc%ar1e:
There shall be imposed a penalty
eGuivalent to twent&8five percent
?"DM@ of the amount due, in the
following cases:
H;I3"&F TA HI3F ;6<
&FT"&6 and =;< T+F T;B
9"F T+F&FA6 on the
date prescribed1 or
Hiling a return with an
internal revenue officer
than those with whom the
return is reGuired to be
filed $except when
authori8ed by the
?ommissioner)1 or
H;I3"&F TA =;< T+F
9FHI?IF6?< T;B within
the time prescribed for its
payment in the notice of
assessment
H;I3"&F TA =;< T+F
H"33 A& =;&T of the
amount of tax shown on
any return reGuired to be
filed, or the full amount of
tax due for which no
return is reGuired to be
filed, on or before the
date prescribed for its
payment. $N'L,;)
The penalty shall be fift& percent
?D1M@ of the tax or of the
deficiency tax, in the following
cases:
KI33H"3 6F*3F?T to HI3F
T+F &FT"&6 within the
period prescribed
; H;3#F A& H&;"9"3F6T
&FT"&6 is willfully made
$N'L,.)
&rima-facie evidence of false
or fraudulent return:
substantial
underdeclaration of taxable
sales, receipts or income
$failure to report sales,
receipts or income in an
amount exceeding %(J of
that declared per return)
substantial overstatement
of deductions $a claim of
deduction in an amount
exceeding %(J of actual
deductions)
"! Interest
There shall be assessed and
53
collected an interest at "1M per
ann%# on any unpaid amount of
tax or higher rate prescribed by
rules and regulations from the date
prescribed for payment until the
amount is fully paid.
Deficienc& interest 6 the term
Zdeficiency means the amount
by which the taxed imposed
under the ?ode exceeds the
amount shown on the return
filed $N'LM.)
Delin<%enc& Interest- - In case
of failure to pay:
tax due on any return
reGuired to be filed, or
tax due for which no return
is reGuired, or
a deficiency tax, or any
surcharge or interest
thereon on the due date
appearing in the notice and
demand of the
?ommissioner, there shall
be assessed and collected
on the unpaid amount,
interest at the rate
prescribed until the amount
is fully paid, which interest
shall form part of the tax.
$N'LM?)
.! Cri#es0 2t$er 2ffenses and
9orfeit%res
I.
-eneral Provisions
;ny person convicted of a crime
under the ?ode shall, in
addition to being liable for the
payment of the tax, be subect
to the penalties imposed under
the ?ode. =ayment of the tax
due after a case has been filed
shall not constitute a valid
defense in any prosecution for
violation of the provisions
under the ?ode.
;ny person who willfully aids or
abets in the commission of a
crime penali8ed under the ?ode
or who causes the commission
of any such offense by another
shall be liable in the same
manner as the principal.
If the offender is not a citiHen
of the =hilippines, he shall be
deported immediately after
serving the sentence. If the
offender is a p%blic officer or
e#plo&ee, the maximum
penalty prescribed for the
offense shall be imposed on
him, and he shall be dismissed
from public office, and
perpetually disGualified from
holding any public office, to
vote and to participate in any
election. If the offender is a
?=;, his license shall be
automatically revoked or
cancelled once he is convicted.
In cases of corporations,
associations, partnerships etc.
the penalty shall be imposed on
the partner, president, general
manager, branch manager,
treasurer, officer!in!charge and
employees responsible for the
violation.
The fines imposed for any
violation of the ?ode shall not
be lower than the fines imposed
herein or twice the amount of
taxes, interests and surcharges
due from the taxpayer,
whichever is higher. $N'-%)
;ll violations of any provision of
the ?ode s$all prescribe after
five ?D@ &ears.
'.
Cri#inal 2ffenses
Tax
Code
Section
2ffense *$o is liable Penalt&
"DC Killful attempt
to evade or
defeat tax.
;ny person who
willfully attempts in
any manner to
evade or defeat any
tax or the payment
thereof.
Hine ! =%(,((( or
I((,(((1 and
Imprisonment ! ' to L
years1 =lus other
penalties
"DD Hailure to Hile
&eturn, #upply
?orrect and
;ccurate
Information, =ay
Tax, Kithhold
and &emit Tax
and &efund
Fxcess Taxes
Kithheld on
?ompensation
;ny person reGuired
to pay any tax,
make a return, keep
any record, or
supply correct and
accurate information
Hine ! =I(,((( or more1
and Imprisonment ! I
to I( years1 =lus other
penalties
;ny person who
attempts to make it
appear for any
reason that he or
another has in fact
filed a return or
statement, or
actually files a
return or statement
and subseGuently
withdraws the same
return or statement
Hine ! =I(,((( !
'(,(((1 and
Imprisonment ! I to %
years1 =lus other
penalties
"DF 7aking false
entries, records,
or reports, or
using falsified or
fake accountable
forms.
;ny financial officer
or Independent
?ertified =ublic
;ccountant engaged
to examine and
audit books of
accounts of
taxpayers under
#ec.'%' $;) and any
person under his
direction.
Hine ! =-(,((( !
I((,(((1 and
Imprisonment ! ' to E
years
54
"DJ "nlawful pursuit
of business
;ny person who
carries on any
business for which in
annual registration
fee is imposed
without paying the
tax as reGuired by
law.
Hine ! =-,((( ! '(,(((1
and Imprisonment ! E
months to ' years
; person engaged in
the business of
distilling, rectifying,
repacking,
compounding or
manufacturing any
article subect to
excise tax.
Hine ! =%(,((( !
-(,(((1 and
Imprisonment ! I to '
years
"DG Illegal ?ollection
of Horeign
=ayments
;ny person who
knowingly
undertakes the
collection of foreign
payments under
#ec. ED without a
license or without
complying with the
implementing rules
and regulations.
Hine ! ='(,((( !
-(,(((1 and
Imprisonment ! I to '
years
"E1 "nlawful
=ossession of
?igarette =aper
in .obbins or
&olls, Ftc.
;ny person,
manufacturer or
importer of cigar or
cigarettes
Hine ! ='(,((( !
I((,(((1 and
Imprisonment ! E years
I day to I' years
"E "nlawful "se of
9enatured
;lcohol
;ny person who for
the purpose of
manufacturing any
beverage, uses
denatured alcohol or
alcohol specially
denatured to be
used for motive
power or withdrawn
under bond for
industrial uses or
alcohol knowingly
misrepresented to
be denatured to be
unfit for oral intake
or who knowingly
sells or offers for
sale such
preparations
containing as an
ingredient such
alcohol.
;ny person who
unlawfully recovers
or attempt to
recover by
distillation or other
process any
denatured alcohol or
who knowingly sells
or offers for sale,
conceals or
otherwise disposes
of alcohol as
recovered or
redistilled
Hine ! ='(,((( !
I((,(((1 and
I day to I' years
"E" #hipment or
&emoval of
3iGuor or
Tobacco
=roducts under
Halse 6ame or
.rand or as an
Imitation of any
Fxisting or
Atherwise
Onown =roduct
6ame or .rand
;ny person who
ships, transports or
removes
Hine ! ='(,((( !
I((,(((1 and
I day to I' years
"EB "nlawful
=ossession or
&emoval of
;rticles #ubect
to Fxcise Tax
Kithout
=ayment of the
Tax
;ny person who
owns or is found in
possession of these
articles
>alue of goods not \
=I,(((: Hine @ not Y
than =I,((( not \
=',(((, imprisonment
of not Y E( days, not \
I(( days
>alue of goods \
=I,(((, not \ than
=-(,(((: Hine @ not Y
than =I(,((( not \
='(,(((, imprisonment
of not Y ' yrs, not \ L
years
>alue of goods \
=-(,(((, not \ than
=I-(,(((: Hine @ not Y
than =%(,((( not \
=E(,(((, imprisonment
of not Y L yrs, not \ E
years
>alue of goods \
=I-(,(((: Hine @ not Y
than =-(,((( not \
=I((,(((,
imprisonment of not Y
I( yrs, not \ I' years
"EC Hailure or
&efusal to Issue
&eceipts or #ales
or ?ommercial
Invoices,
>iolations
&elated to the
=rinting of #uch
&eceipts or
Invoices and
Ather >iolations
;ny person who,
being reGuired under
#ection '%D to issue
receipts or sales or
commercial invoices
Hine ! = I,((( ! -(,(((1
and Imprisonment ! '
to L years
"ED Affenses
&elating to
#tamps
Hine ! = '(,((( !
-(,(((1 and
Imprisonment ! L to ,
yrs
"EE Hailure to Abey
#ummons
;ny person who
being duly
summoned to
appear to testify, or
to appear and
produce books of
accounts, records,
memoranda or other
papers, or to furnish
info. as reGuired
under the pertinent
provisions of this
?ode.
Hine ! = -,((( ! I(,(((1
and Imprisonment ! I
to ' yrs
"EF 9eclaration
under =enalties
of =erury
;ny person who
willfully files a
declaration, return
or statement
containing
information which is
not true and correct
as to every material
matter
=erury under the
&evised =enal ?ode
"EJ 7isdeclaration or
7isrepresentatio
n of
7anufacturers
#ubect to Fxcise
Tax
;ny manufacturer
subect to excise tax
#ummary cancellation
or withdrawal of the
permit to engage in
business as a
manufacturer of articles
subect to excise tax
Horfeiture of
=roperty "sed in
"nlicensed
.usiness or 9ies
"sed for =rinting
Halse #tamps,
Ftc.
;ny person who
conducts an
unlicensed business
Horfeiture
Horfeiture of
*oods Illegally
#tored or
&emoved
;ny person subect
to excise tax who
fails to store the
goods in proper
place, or removes
goods without
payment of excise
tax
Horfeiture
"FC =enalty for
#econd and
#ubseGuent
Affenses
7aximum of the penalty
prescribed for the
offense
"FD >iolation of
Ather =rovisions
of the Tax ?ode
or &ules or
&egulations in
*eneral
;ny person who
violates any
provision of this
?ode or any rule or
regulation
promulgated by the
9epartment of
Hinance for which no
specific penalty is
provided by law
Hine: not more than =
I,((( or Imprisonment:
not more than E
months, or both
"FE =enalty for
#elling,
Transferring,
Fncumbering or
in any way
disposing of
property =laced
under
?onstructive
9istraint
;ny taxpayer, whose
property has been
placed under
constructive distraint
Hine: not less than twice
the value of the
property but not less
than = -,((( or
Imprisonment: ' yrs I
day ! L yrs or both
"FF Hailure to
#urrender
=roperty =laced
under 9istraint
and 3evy
;ny person having
in his possession or
under his control
any property or
rights to property,
upon which a
warrant of
constructive distraint
or actual distraint
and levy has been
issued
Hine: = -,((( or more
or Imprisonment: E
months I day ! ' years,
or both
55
"FJ =rocuring
"nlawful
9ivulgence of
Trade #ecrets
;ny person who
causes or procures
an officer or
employee of the
.ureau of Internal
&evenue to divulge
any confidential
information
regarding the
business, income or
inheritance of any
taxpayer, knowledge
of which was
acGuired by him in
the discharge of his
official duties, and
which it is unlawful
for him to reveal,
and any person who
publishes or prints in
any manner
whatever, not
provided by law, any
income, profit, loss
or expenditure
appearing in any
income tax return
Hine: not more than =
',((( or Imprisonment:
E months ! - years, or
both
%.
Penalties I#posed on P%blic
2fficers
The law imposes a fine of not less
than =-(,((( nor more than
=I((,((( or imprisonment for not
less than I( years nor more than
fifteen years on every official, agent
or employee of the .I& or of any
agency or employee of the
*overnment charged with the
enforcement of the Tax ?ode, who
shall:
a) extort or willfully oppress
under color of law1
b) knowingly demand other or
greater sums than are
authori8ed by law or receive
any fee, compensation or
reward, except as by law
prescribed, for the
performance of any duty1
c) willfully neglect to give
receipts, as by law reGuired,
for any sums collected in
the performance of duty, or
who willfully neglect to
perform any of the duties
enoined by law1
d) conspire or collude with
another or others to defraud
the revenues or otherwise
violate the law1
e) willfully make opportunity
for any person to defraud
the revenues, or who do or
omit to do any act with
intent to enable any other
person to defraud the
revenues1
f) negligently or by design
permit the violation of the
law by any other person1
g) make or sign any false
certificate or return in any
case where the law reGuires
the making by them of such
entry, certificate or return1
h) having knowledge or
information of a violation of
any provision of the ?ode or
of any fraud committed on
the revenues collectible by
the .I&, fail to report such
knowledge or information to
their superior officer, or to
report as otherwise reGuired
by law1 or
i) without the authority of law,
demand or accept or
attempt to collect, directly
or indirectly, as payment or
otherwise, any sum of
money or other thing of
value for the compromise,
adustment or settlement of
any charge or complaint for
any violation or alleged
violation of law. $N'%-)
/II! C2=PLIANCE RE(5IRE=ENTS
2%at recor(s are re9uire( to be 4e5t b)
ta=5a)ers3
(1) taxpayers with gross Guarterly sales,
earnings, receipts or output of =-(,(((
or less a simplified form of
bookkeeping records duly authori8ed by
the #ecretary of Hinance, wherein all
transactions and results of operations
are shown and from which all taxes due
may be readily and accurately
ascertained and determined at ant time
of the year. $N'%')
earnings, receipts or output exceeding
=-(,((( but not more than =I-(,(((
a ournal and ledger or their eGuivalent.
$N'%')
56
earnings, receipts or output exceeding
=I-(,((( books of accounts,
examined and audited by an
independent ?=; and their income tax
return shall be accompanied by
certified balance sheets
profit and loss statements
list of income!producing
properties and other relevant
data $N'%')
N2TES)
Taxpayers may also keep other
subsidiary books at their option, as the
needs of their business may reGuire. If
subsidiary books are kept, they shall
form part of the accounting system of
the taxpayer. $N'%%)
.ooks or records shall be kept in a
native language, Fnglish or #panish.
The keeping of books and records in any
language other than the three
mentioned is prohibited, unless the
taxpayer makes a true and complete
translation of all the entries in the said
books and records. $N'%L)
;ll the books and records shall be kept
by the taxpayer until the period for
making an assessment under #ections
'(% and ''' have prescribed. $N'%-)
Fxamination and inspection of all books
and records shall be made only once in
a taxable year, FB?F=T in these cases:
Hraud,
irregularity or mistakes, as
determined by the ?ommissioner
The taxpayer
reGuests reinvestigation
>erification of
compliance with withholding tax
laws and regulations
>erification of
capital gains tax liabilities
In the exercise
of the ?ommissioners power to
issue an access letter. $N'%-)
2%o are re9uire( to re1ister 8it% t%e
CI&3
Fvery person subect to any internal revenue
tax shall register once with the appropriate
&evenue 9istrict Afficer:
Kithin ten $I()
days from date of employment, or
An or before the
commencement of business, or
.efore payment of
any tax due, or
"pon filing of a
return, statement or declaration as
reGuired under the ?ode $N'%E)
2%at s%all t%e CI& (o a$ter t%e
ta=5a)er re1isters3
The .I& shall assign a Taxpayer
Identification 6umber $TI6) which the
taxpayer shall indicate in every return,
statement or document filed with the .I&.
Anly one TI6 shall be given a person. ;ny
person who secures more than one TI6 shall
be criminally liable. $N'%E)
>III. IN92R=ERS RE*ARD $#ec. ',' of the
6I&?)
To w$o# given persons
instrumental in the discovery of
violations of the 6I&? and in discovery
and sei8ure of smuggled goods.
Conditions to Gualify for the reward:
I.=erson is not an internal
revenue official or employee,
public official, or employee or
relative within E th degree of
consanguinity
'.>oluntarily gives definite and
sworn information:
a) 6ot yet in the
possession of .I&
b) 3eading to discovery
of frauds
c) &esulting in:
i. the recovery
of revenues,
surcharges
and fees
and/or
ii. conviction of
the guilty
party.
d) 6ot refer to a case
already pending or
previously
investigated or
examined by the
?ommissioner or his
agents or the #AH or
his agents.
A#o%nt of reward) I(J of the
revenues, surcharges or fees
recovered and/or fine/penalty
imposed, or =I,(((,(((, whichever is
3AKF&.
The same amount shall be
given if the offender offered
to compromise and such
57
offer has been accepted and
collected by the
?ommissioner.
If no revenue, surcharge or
fees be actually collected,
such person is not entitled
to a reward
Hor discovery and sei8ure of
#7"**3F9 *AA9# The
cash reward is I(J of the
H7> of the smuggled and
confiscated goods, or
=I,(((,(((, whichever is
3AKF&.
The cash rewards shall be subect to
income T;B at the rate of I(J.
R%le of constr%ction #tatutes
offering rewards must be liberally
construed in favor of informers and
with regard to the purpose for which
they are intended, with mere
technicality yielding to the substantive
purpose of the law. 2=enid v. >irata5
I>! PR2.LE=S
I. 7r. #ebastian is a Hilipino seaman
employed by a 6orwegian company
which is engaged exclusively in
international shipping. +e and his wife,
who manages their business, filed a oint
income tax return for IMMD on I- 7arch
IMM,. ;fter an audit of the return, the
.I& issued on '( ;pril '((I a deficiency
income tax assessment for the sum of
='-(,((( inclusive of interest and
penalties. Hor failure of the couple to
pay the tax within the period stated in
the notice of assessment, the .I& issued
on IM ;ugust '((I a warrant of distraint
and levy to enforce collection of the tax.
If you are the lawyer of the couple, what
possible defense or defenses will you
raise in behalf of your clients against the
action of the .I& in enforcing collection
of the tax by the summary remedies of
warrants of distraint and levyP Fxplain
your answer. $'((' .ar)
Answer) I will raise the defense of
prescription. The right of the .I& to
assess prescribes after three years from
the last day prescribed by law for filing
the return. The last day for filing the
IMMD IT& is on I- ;pril IMM,. #ince '(
;pril '((I is more than % years from
that date, .I&s right to assess had
already prescribed.
'. T< ?orporation filed its final adusted IT
return for IMM% on I' ;pril IMML
showing a net loss from operations.
;fter investigation, the .I& issued a pre!
assessment notice on %( 7arch IMME. ;
final notice and demand letter dated I-
;pril IMMD was issued, personally
delivered to and received by the
companys chief accountant. Hor willful
refusal and failure of T< ?orporation to
pay the tax, warrants of distraint and
levy on its properties issued and served
upon it. An I( :anuary '((', a criminal
charge for violation of the Tax ?ode was
instituted in the &T? with the approval of
the ?ommissioner. The company moved
to dismiss the complaint on the ground
that an act for violation of any provision
of the Tax ?ode prescribes after five
years and in this case, the period
commenced to run on %( 7arch IMME
when the =;6 was issued. +ow will you
resolve the motionP $'((' .ar)
Answer) The 7T9 should not be
granted. It is only when the assessment
has become final and unappealable that
the -!year period to file a criminal action
commences to run. The =;6 is not a
final assessment which is enforceable by
the .I&. IT is the issuance of the final
notice and demand letter dated I- ;pril
IMMD and the failure of the taxpayer to
protest within %( days from receipt that
made the assessment final and
unappealable. The earliest date that the
assessment has become final is IE 7ay
IMMD, and since the criminal charge was
instituted on I( :anuary '((', the same
was timely filed.
%. In the investigation of the withholding
tax returns of ;C 7edina #ecurity
;gency for the taxable years IMMD and
IMM,, a discrepancy between the taxes
withheld from its employees and the
amounts actually remitted to the
government was found. ;ccordingly,
before the period of prescription
commenced to run, the .I& issued an
assessment and a demand letter calling
for the immediate payment of the
deficiency withholding taxes in the total
amount of ='-(,(((. ?ounsel for ;C
7edina protested the assessment for
being null and void on the ground that
no =;6 had been issued. +owever, the
protest was denied. ?ounsel then filed a
petition for prohibition with the ?T; to
restrain the collection of the tax. Is the
58
contention of the counsel tenableP Kill
the special civil action for prohibition
brought before the ?T; under #ec. II of
&; II'- prosperP 9iscuss your answer.
$'((' .ar)
Answer) 6o, the contention of the
counsel is untenable. #ection '', of the
Tax ?ode expressly provides that no =;6
shall be reGuired when a discrepancy
has been determined between the tax
withheld and the amount actually
remitted by the withholding agent.
#ince the amount assessed relates to
deficiency withholding taxes, the .I& is
correct in issuing the assessment and
demand letter calling for the immediate
payment of the deficiency withholding
taxes. 7oreover, the special civil action
for prohibition will not prosper, because
the ?T; has no urisdiction to entertain
the same. The power to issue writ of
inunction provided for under #ection II
of &; II'- is only ancillary to its
appellate urisdiction. The ?T; is not
vested with original urisdiction to issue
writs of prohibition or inunction
independently of and apart from an
appealed case. The remedy is to appeal
the decision of the .I& $?ollector vs.
<useco % #?&; %I%)
L. 7r. ?han, a manufacturer of garments,
was investigated for failure to file tax
returns and to pay taxes for the taxable
year IMMD. 9espite subpoena duces
tecum issued to him, he refused to
present and submit his books of
accounts and allied records.
Investigators, therefore, raided his
factory and sei8ed several bundles of
manufactured garments, supplies and
unpaid imported textile materials. ;fter
his apprehension and based on the
testimony of a former employee,
deficiency income and business taxes
were assessed against 7r. ?han on ;pril
I-, '(((. It was then that he paid the
taxes. ?riminal action was nonetheless
instituted against him in the &T? for
violation of the Tax ?ode. 7r. ?han
moved to dismiss the criminal case on
the ground that he had already paid the
taxes assessed against him. +e also
demanded the return of the garments
and materials sei8ed from his factory.
+ow will you resolve 7r. ?hans motionP
$'((' .ar)
Answer: The 7T9 should be denied.
The satisfaction of the civil liability is not
one of the grounds for the extinction of
criminal action. 3ikewise, the payment
of the tax due after apprehension shall
not constitute a valid defense in any
prosecution for violation of any provision
of the Tax ?ode $#ec. '-%a). +owever,
the garments and materials sei8ed from
the factory should be ordered returned
because the payment of the tax had
released them from any lien that the
*overnment has over them.
-. ; taxpayer is suspected not to have
declared his correct income in the return
filed for IMMD. The examiner reGuested
the ?ommissioner to authori8e him to
inGuire into the bank deposits of the
taxpayer so that he could proceed with
the net worth method of investigation to
establish fraud. 7ay the examiner be
allowed to look into the taxpayers bank
depositsP $'((( .ar)
Answer) 6A, as this would be violative
of &; IL(-, the .ank #ecrecy 3aw. The
?ommissioner or his representative is
allowed to inGuire into the bank deposits
of a taxpayer only in these three cases:
) Hor the purpose of determining
the gross estate of a decedent
) Khere the taxpayer has filed an
application for compromise of his
tax liability on the ground of
financial incapacity
) Khere the taxpayer has signed a
waiver authori8ing the
?ommissioner to inGuire into his
bank deposits
E. ; ?o. a =hilippine corporation, is a big
manufacturer of consumer goods and
has several suppliers of raw materials.
The .I& suspects that some of the
suppliers are not properly reporting their
income on sales to ; ?o. The ?I&
therefore:
) Issued an access letter to ; ?o. to
furnish the .I& with information
on sales and payments to its
suppliers
) Issued an access letter to B bank
to furnish the .I& on deposits of
some suppliers of ; ?. on the
alleged ground that the suppliers
are committing tax evasion.
; ?o., B .ank and the suppliers have not
been issued by the .I& letter of
59
authority to examine. ; ?o. and B .ank
believe that the .I& is on a fishing
expedition and come to you for counsel.
Khat is your adviceP $'((( .ar)
Answer) I will advise ; ?o. and B .ank
that the .I& is ustified only in getting
information from the former but not
from the latter. The .I& is authori8ed to
obtain information from other persons
other than those whose tax liability is
subect to audit or investigation.
+owever, this power shall not be
construed as granting the ?ommissioner
the authority to inGuire into bank
deposits. $#ection -, 6I&?)
LOCAL TAXATION
I. .ASIC C2NCEPTS
A. Local -overn#ent 5nit ) 1987
:?+>#I, 0,# 9, >8:#I?+ 1"
The territorial and political subdivisions
of the &epublic of the =hilippines are the
provinces, cities, municipalities, and
barangays. There shall be autonomous
regions in 7uslim 7indanao and the
?ordilleras as hereinafter provided.
B. Scope of Local Taxation 5 #he
provisions in DE: shall !overn the
e.ercise by &,?/I+:8>, :I#I8>,
F;+I:I&0DI#I8>, and G0,0+E0H>
of their ta.in! and other revene)
raisin! po(ers" ->ec 128 DE:1
C. Power to Create So%rces of Reven%e
!! Fach local government unit shall
exercise its power to create its own
sources of revenue and to levy taxes,
fees, and charges subect to the
provisions herein, consistent with the
basic policy of local autonomy. #uch
taxes, fees, and charges shall accrue
excl%sivel& to the local !overnment
nits" ->8:" 129, DE:1
D. 9%nda#ental Principles !! The
following fundamental principles shall
govern the exercise of the taxing and
other revenue!raising powers of local
government units:
(a) Taxation shall be %nifor# in
each local !overnment nitI
N2TE: the uniformity reGuired is
onl& wit$in t$e territorial
;%risdiction of an L-5! $I&&)
(b) Taxes, fees, charges and other
impositions shall:
(1)be e<%itable and based as far
as practicable on the
ta.payerJs ability to payI
$') be levied and collected only
for public purposesI
(3)not be n7st, e.cessive,
oppressive, or confiscatoryI
(4)not be contrary to law, public
policy, national economic
policy, or in the restraint of
trade1
(c) The collection of local taxes,
fees, charges and other impositions
shall in no case be let to an&
private person1
(d) The revenue collected pursuant
to the provisions of this ?ode shall
in%re solel& to t$e benefit of0
and be s%b;ect to t$e disposition
b&0 t$e local govern#ent %nit
levying the tax, fee, charge or other
imposition unless otherwise
specifically provided herein1 and,
(e) Fach local government unit
shall, as far as practicable, evolve a
progressive s&ste# of taxation"
->8:" 130, DE:1
E. Local Taxing A%t$orit&! ) shall be
e.ercised by the SANGGUNAN of the
local go!ern"ent unit concerned
thro!h an appropriate ordinance"
->8:" 132, DE:1
A2*E/ER0 the local chief
e.ective of the DE;s
-e.cept the pnon!
baran!ay1 possesses veto
po(ers, as laid ot in >ec"
55 of the DE:6
>8:" 55" /eto &o(er
of the Docal :hief
8.ective" 5
60
$a) The local chief
executive may veto any
ordinance of the
sangguniang
panlalawigan,
sangguniang
panlungsod, or
sangguniang bayan on
the ground that it is
ltra vires or pre7dicial
to the pblic (elfare,
statin! his reasons
therefor in (ritin!"
$b) The local chief
executive, except the
punong barangay, shall
have the power to veto
any particular item or
items of an
appropriations
ordinance, an ordinance
or resolution adopting a
local development plan
and public investment
program, or an
ordinance directing the
payment of money or
creating liability. In
such a case, the veto
shall not affect the item
or items which are not
obected to. The vetoed
item or items shall not
take effect unless the
sanggunian overrides
the veto in the manner
herein provided1
otherwise, the item or
items in the
appropriations
ordinance of the
previous year
corresponding to those
vetoed, if any, shall be
deemed reenacted.
$c) The local chief
executive may veto an
ordinance or resolution
only once. The
sanggunian may
override the veto of the
local chief executive
concerned by two!thirds
$'/%) vote of all its
members, thereby
ma%in! the ordinance
effective even (ithot
the approval of the
local chief e.ective
concerned"
II. Co##on Li#itations on t$e
Taxing Powers of Local -overn#ent
5nits $#ec I%%)
"nless otherwise provided, the exercise of
the taxing powers of provinces, cities,
municipalities, and barangays s$all N2T
E>TEND to the levy of the follo(in!6
$a) Income ta., e.cept (hen levied on
ban%s and other financial
instittionsI
(b)9ocumentary stamp tax1
(c)Taxes on estates, inheritance, gifts,
legacies and other acGuisitions
mortis causa, except as otherwise
provided herein1
(d)?ustoms duties, registration fees of
vessel and wharfage on wharves,
tonnage dues, and all other kinds of
customs fees, charges and dues
e.cept (harfa!e on (harves
constrcted and maintained by the
DE; concernedI
(e)Taxes, fees, and charges and other
impositions upon goods carried
into or out of, or passin! thro!h,
the territorial 7risdictions of local
!overnment nits in the !ise of
char!es for (harfa!e, tolls for
brid!es or other(ise, or other
ta.es, fees, or char!es in any form
(hatsoever pon sch !oods or
merchandiseI
(f)Taxes, fees or charges on
agricultural and aGuatic products
(hen sold by mar!inal farmers or
fishermenI
(g)Taxes on business enterprises
certified to by the .oard of
Investments as pioneer or non!
pioneer for a period of six $E) and
four $L) years, respectively from the
date of registration1
61
(h)Excise taxes on articles
enmerated nder the +I,:, as
amended, and ta.es, fees or
char!es on petrolem prodctsI
(i)Percentage or /AT on sales,
barters or e.chan!es or similar
transactions on !oods or services
e.cept as other(ise provided
hereinI
(j)Taxes on the gross receipts of
transportation contractors and
persons engaged in the
transportation of passengers or
freight by hire and common carriers
by air, land or water, except as
provided in this ?ode1
(k)Taxes on premiums paid by way or
reinsurance or retrocession1
(l)Taxes, fees or charges for the
registration of motor vehicles and
for the issuance of all kinds of
licenses or permits for the driving
thereof, except tricyclesI
(m)Taxes, fees, or other charges on
#hilippine products actually
exported, e.cept as other(ise
provided hereinI
(n)Taxes, fees, or charges, on
?ountryside and .arangay .usiness
Fnterprises and cooperatives duly
registered under the ^?ooperative
?ode of the =hilippines^1 and
(o)Taxes0 fees or c$arges of an&
7ind on t$e National
-overn#ent0 its agencies and
instr%#entalities0 and local
govern#ent %nits"
III. Specific Provisions on t$e Taxing
and 2t$er Reven%e8Raising Powers of
L-5s
TA> TA> RATE AND TA>
.ASE
A$ #%&'N()S
Tax on Transfer of %eal
#roperty &*nership
! tax on sale, donation or
on any other mode of
6ot more than fifty percent
$-(J) of the one percent
$IJ) of the total
consideration
transferring ownership
N2TE:
sale, transfer or
other disposition
pursuant to &;
EE-D shall be
FBF7=T from this
tax.
the &egister of
9eeds shall reGuire
the presentation of
evidence of
payment of this
tax, .FHA&F
registering any
deed.
the =rovincial
;ssessor shall also
make the same
reGuirement
.FHA&F cancelling
an old tax
declaration and
issuing a new one.
it shall be the
D5TK of t$e
seller0
donor0transferor0
exec%torLad#ini
s8trator to pa&
t$e tax herein
imposed wit$in E1
da&s fro# t$e
date of exec%tion
of t$e deed or
fro# t$e date of
decedents deat$.
in!ol!ed in the
ac+uisition of the
property or of the
fair "ar,et !alue in
case the "onetary
consideration
in!ol!ed in the
transfer is not
substantial-
*hiche!er is higher
N2TE: the KF/ sed
here shall be that
reflected in the
prevailin! schedle of
KF/s enacted by the
san!!nian
concerned" -I,,1
Tax on .usiness of #rinting
and #ublication
! imposed on business of
persons engaged in the
printing and/or publication
of books, cards, posters,
leaflets, handbills,
certificates, receipts,
pamphlets, and others of
similar nature
! In the case of a newly
started business
and
! In the succeeding
calendar year, re1ar(less
o$ 8%en t%e business
starte( to o5erate
N2TE: receipts from the
printing and/or publishing
of books or other reading
materials prescribed b&
DECS as sc$ool texts or
references shall be
FBF7=T from this tax.
6ot exceeding fifty percent
$-(J) of one percent $IJ)
of the gross ann%al
receipts for the
precedin! calendar
year
+ot e.ceed one)
t(entieth -1'201 of
one percent -1*1 of
the capital
in!est"ent
.ased on the gross
receipts for the
precedin! calendar
year, or any fraction
thereof
/ranchise Tax
! imposed on businesses
en6o)in1 a $ranc%ise
$notwithstanding any
exemption granted by any
of the gross ann%al
62
law or other special law)
/business en6o)in1 a
$ranc%ise0 @ shall not
include holders of
certificates of ublic
convenience for the
oeration of ublic utilit%
vehicles for reason that
such certificates are 6AT
considered as franchises.
$I&&)
! In the case of a newly
started business
and
! In the succeeding
calendar year, re1ar(less
o$ 8%en t%e business
starte( to o5erate
receipts for the preceding
calendar year based on the
incoming receipt, or
reali8ed, within its
territorial urisdiction
6ot exceed one!twentieth
$I/'() of one percent $IJ)
of the capital invest#ent
.ased on the gross
receipts for the
precedin! calendar
year, or any fraction
thereon
Tax on Sand- Gra!el and
&ther Quarry %esources
N2TE: The per#it to
extract sand, gravel and
other Guarry resources
shall be issued
FB?3"#I>F3< by the
5rovincial 1overnor'
5ursuant to t%e
or(inance o$ t%e
san11unian1
5anlala8i1an"
+ot more than ten
percent -10*1 of
/0' in the locality
per cubic "eter of
ordinary stones,
sand, !ravel, earth,
and other <arry
resorces, extracted
fro" public lands or
from the beds of
seas, la%es, rivers,
streams, cree%s, and
other public *aters
(ithin its territorial
7risdiction
#rofessional Tax
! on each person engaged
in the exercise or practice
of his profession reGuiring
government examination
$ie bar or any board exam
conducted by =&?)
N2TE)
Khere to pay the
taxP
a.) where he
practices his
profession1
or
b.) where he
maintains
his principal
office in case
he practices
in several
places
=&A>I9F9, that
such person who
has paid the
professional tax
0t sch amont and
reasonable
classification as the
san!!nian!
panlala(i!an may
deter"ine but shall
in no case exceed
Three hundred
pesos 1#233$334
shall be entitled to
practice his
profession in any
part of the =hil
without being
subected to any
other national or
local tax, license,
or fee for the
practice of such
profession.
;ny employer
employing a person
subect to this tax
shall reGuire such
payment .FHA&F
the employment
and annually
thereafter.
; line of
profession does
6AT become
exempt even if
conducted with
some other
profession for
which the tax has
been paid.
Professionals
E>CL5SI/ELK
e#plo&ed in t$e
govern#ent s$all
be E>E=PT"
A"use"ent Tax
! collected from the
proprietors, lessees, or
operators of theaters,
cinemas, concert halls,
circuses, boxing stadia,
and other places of
amusement
N2TE)
In case of
theaters or
cinemas, the tax
shall first be
deducted and
withheld by their
proprietors, lessees
or operators and
paid to the
provincial treasurer
.FHA&F the gross
receipts are divided
between said
proprietors,
lessees, or
operators, and
distributors of
cinematographic
films.
The holding of
oeras, concerts,
dramas, recitals,
aintin' and art
e"hibitions, flo(er
sho(s, musical
ro'rams, literar%
and oratorical
resentations,
at a rate of not more
than thirty percent
-30*1 of the gross
receipts from
admission fees"
63
FB?F=T pop, rock
or similar concerts
shall be
898F&# from
this ta."
Annual /ixed Tax /or )!ery
Deli!ery Truc, or 'an of
0anufacturers or #roducers-
Wholesalers of- Dealers- or
%etailers in- (ertain
#roducts
! for every truck, van or
any vehicle used by
manufacturers, producers,
wholesalers, dealers or
retailers in the delivery or
distribution of distilled
spirits, fermented liGuors,
soft drinks, cigars and
cigarettes, and other
products as may be
determined by the
sangguniang panlalawigan,
to sales outlets, or
consumers, *hether
directly or
indirectly, (ithin the
province
N2TE: the manufacturers,
producers, wholesalers,
dealers and retailers
referred above shall be
FBF7=T from the tax on
peddlers described
else(here in DE:"
in an amont not
e.ceedin! Kive
hndred pesos
-&500"001
.$ 0UN(#A5T)S
#?A=F ! #%nicipalities
#a& lev& taxes0 fees0
and c$arges not
ot%er8ise levie( b)
5rovinces" ->8:"
142,DE:1
Tax on .%siness
1" ?n manfactrers,
assemblers,
repac%ers,
processors, bre(ers,
distillers, rectifiers,
and componders of
li<ors, distilled
spirits, and (ines or
manfactrers of any
article of co""erce
of *hate!er ,ind or
nature, in
accordance (ith the
schedle (refer to
Sec 143)
N2TE: the rates in #ec
IL% $a) shall appl& 2NLK
to a#o%nt of D2=ESTIC
sales. $I&&)
6ot exceeding one!half $V)
of the rates prescribed
under subsection $a), $b)
and $d) of #ec IL%
'. An wholesalers,
distributors, or dealers in
an& article of co##erce
of w$atever 7ind or
nat%re in accordance with
the schedule (Sec 360
a'ain)
%. An exporters, and on
manufacturers , millers,
producers, wholesalers,
distributors, dealers or
retailers of essential
co##odities !! such as:
$I) &ice and corn1
$') Kheat or cassava
flour, meat, dairy
products, locally
manufactured,
processed or
preserved food,
sugar, salt and other
agricultural, marine,
and fresh water
products, whether in
their original state or
not1
$%) ?ooking oil and
cooking gas1
$L) 3aundry soap,
detergents, and
medicine1
$-) ;gricultural
implements.
eGuipment and post!
harvest facilities,
fertili8ers, pesticides,
insecticides,
herbicides and other
farm inputs1
$E) =oultry feeds and
other animal feeds1
$D) #chool supplies1 and
$,) ?ement.
L. An retailers:
Kith gross sales or
receipts for the
preceedin! :H of6
&400,000 or
less
Fore than
&400,000
&rovided, however, That
baranga&s shall have the
excl%sive power to lev&
taxes0 as provided under
#ection I-' hereof, on
'ross sales or receits of
the recedin' calendar
%ear of &4+,+++ or less, in
the case of cities, and
&0+,+++ or less, in the
case of municialities"
5" ?n contractors and
other independent
contractors
per annum
'J
IJ
in accordance with the
schedule $#ec IL%)
on the gross receipts of
the preceding calendar
year derived fro#
interest0 co##issions
and disco%nts fro#
lending activities0
inco#e fro# financial
leasing0 dividends0
rentals on propert& and
profit fro# exc$ange or
sale of propert&0
ins%rance pre#i%#.
6ot exceeding Hifty pesos
$=-(.(() per peddler
ann%all&"
64
6" ?n ban%s and
other financial
instittions
N2TE6 all other income and
receipts of ban%s and financial
intittions +?# other(ise
enmerated -L) shall be
E>CL5DED fro# t$e
taxing a%t$orit& of t$e
L-5.$I&&)
D. An peddlers engaged in
the sale of an&
#erc$andise or article
of co##erce
,. An any business, not
otherwise specified in the
preceding paragraphs,
w$ic$ t$e sangg%nian
concerned #a& dee#
proper to tax: &rovided,
That on any business
subect to the excise,
value!added or percentage
tax under the 6I&?, as
amended, the rate of tax
shall not exceed two
percent ?"M@ of gross
sales or receipts of the
preceding calendar year.
(this is the catch-all
rovision)
N2TE: The sanggunian concerned may
prescribe a schedule of graduated tax rates but
in no case to e"ceed the rates rescribed in the
:8C"
Rates of Tax wit$in t$e =etropolitan =anila
Area
The municialities within the 7etropolitan 7anila
;rea may levy taxes at rates which shall not
exceed b& fift& percent ?D1M@ t$e
#axi#%# rates prescribed in >ec 143" ->8:"
144, DE:1
Retire#ent of .%siness
; business subect to tax pursuant to #ec IL%
shall, uon termination thereof, submit a sworn
state#ent of its gross sales or receipts for the
current year. If the tax paid during the year be
3F## T+;6 the tax due on said gross sales or
receipts of the current year, the difference shall
be paid before the bsiness is considered
officially retired" ->ec 1451
Pa&#ent of .%siness Taxes
The taxes imposed in sec IL% shall be
payable for F>F&< #F=;&;TF A&
9I#TI6?T F#T;.3I#+7F6T or =3;?F
where business subect to tax is
conducted.
Ane line of businees does 6AT become
exempt by being conducted with some
other businesses for which such tax has
been paid.
The tax on a business must be paid by
the person conducting the same.
In cases where a person conducts or
operates ' or more businesses
mentioned in #ec IL% @
a.) which are subect to T+F #;7F
tax rate L tax shall be computed on
the ?A7.I6F9 TAT;3 *&A##
#;3F#/&F?FI=T#
b.) which are subect to 9IHHF&F6T
tax rates L the gross
sales/receipts shall be
#F=;&;TF3< &F=A&TF9 for
the computation of taxes.
9ees and C$arges
*F6F&;3:
The municialit% may impose and collect such
reasonable fees and charges on business and
occupation and on the practice of any profession
or calling, co##ens%rate wit$ t$e cost of
reg%lation0 inspection and licensing
G8K?,8 any person may en!a!e in sch
bsiness or occpation, or practice sch
profession or callin!"
>&8:IKI:6
I. Hor #ealing and 3icensing of Keights and
7easures.
at sch reasonable rates as shall be
prescribed by the san!!nian! bayan"
'. Kishery ,entals, Kees and :har!es"
.unicialities shall have the excl%sive
a%t$orit& to grant fis$er& privileges in t$e
#%nicipal waters and i#pose rentals0 fees
or c$arges thereon"
#he san!!nian! bayan may6
$I) *rant fishery privileges to erect fish
corrals, oysters, mussels or other
aGuatic beds or bangus fry areas,
within a definite 8one of the municipal
waters, as determined by it
$') *rant the privilege to gather, take or
catch bangus fry, prawn fry or kawag!
kawag or fry of other species and fish
65
from the municipal waters by nets,
traps or other fishing gears to
marginal fishermen free of any rental,
fee, charge or any other imposition
whatsoever.
$%) Issue licenses for the operation of
fishing vessels of three 124 tons or
less
&rovided, ho(ever, #hat the san!!nian
concerned shall, by appropriate ordinance,
penaliBe the se of e.plosives, no.ios or
poisonos sbstances, electricity, mro)ami,
and other deleterios methods of fishin! and
prescribe a criminal penalty therefor in
accordance (ith the provisions of the DE:
&rovided, finally, #hat the san!!nian
concerned shall have the athority to prosecte
any violation of the provisions of applicable
fishery la(s"
C! CITIES
SC2PE !!! Fxcept as otherwise provided in this
?ode, the cit%, #a& lev& t$e taxes0 fees0 and
c$arges w$ic$ t$e province or #%nicipalit&
#a& i#pose: &rovided, ho(ever, #hat the
ta.es, fees and char!es levied and collected by
hi!hly rbaniBed and independent component
cities shall accre to them and distribted in
accordance (ith the provisions of DE:"
N2TE: The rates of taxes that the city may levy
#a& exceed t$e #axi#%# rates allowed for
t$e province or #%nicipalit& b) not more
t%an $i$t) 5ercent (-.D, except the rates of
professional and amusement taxes"
IRR6
#he city may levy and collect a
percentage tax on AN6 business
N&T other*ise specified in the DE:
or the I,,, at rates N&T exceeding
27 of the gross sales or receipts of
the precedin! calendar year"
The rates of the following taxes shall be
unifor" for the city and the pro!ince6
a. Professional tax 5 shall not
e.ceed &300
b. A#%se#ent tax 5 the rate
shall not be more than 30*
of the !ross receipts from
admission fees
The proceeds of the tax on sand, gravel,
and other Guarry resources in highly!
urbanised cities shall be distributed as
follows:
highly urbanised city 60*
baran!ay (here the sand, !ravel, etc are
e.tracted 40*
D! .ARAN-AKS
SC2PE ))) #he baran!ays may levy ta.es, fees,
and char!es, as provided in this 0rticle, (hich
shall exclusi!ely accre to them6
$a) Taxes ! An stores or retailers wit$
fixed b%siness establis$#ents at a
rate not exceeding one percent $IJ) on
such gross sales or receipts.
I6 ?;#F AH ?ITIF# !! with gross
sales or receipts of the preceding
calendar year of Hifty thousand
pesos ?PD10111!11@ or less
I+ :0>8 ?K F;+I:I&0DI#I8> 5
(ith gross sales or receipts of
#hirty thosand pesos
1#23-333$334 or less
$b) Ser!ice /ees or (harges ) .arangays
may collect reasonable fees or
char!es for services rendered in
connection (ith the re!lations or the
se of baran!ay)o(ned properties or
service facilities sch as palay, copra,
or tobacco dryers"
$c) .arangay (learance ) +o city or
municipality may isse any license or
permit for any bsiness or activity
nless a clearance is first obtained from
the baran!ay (here sch bsiness or
activity is located or condcted" Kor
sch clearance, the san!!nian!
baran!ay may impose a reasonable
fee"
$d) 2t$er fees and C$arges! ) #he
baran!ay may levy reasonable fees
and char!es6
-11 ?n commercial breedin! of fi!htin!
coc%s, coc%fi!hts and coc%pitsI
-21 ?n places of recreation (hich
char!e admission feesI and
N2TE: 3places of recreation4 5
inclde places of amsement (here
one see%s admission to entertain
66
himself by seein! or vie(in! the
sho( or performance or those (here
one amses himself by direct
participation"
-31 ?n billboards, si!nboards, neon
si!ns, and otdoor advertisements"
QUICK GLANCE
TKPE 29 TA> PR2/INCE =5NICIPALITK CITK .ARAN-AK
>ec" 135 5 #a. on
#ransfer of ,eal
&roperty ?(nership
9 9
>ec" 136 5 #a. on
Gsiness of &rintin!
and &blication
9 9
#ec. I%D @
Hranchise Tax
- 9 9
#ec. I%, @ Tax on
#and, *ravel and
Ather Quarry
&esources
E

9 9
>ec" 139 5
&rofessional #a.
9 9
>ec" 140 5
0msement #a.
9 9
>ec" 141 50nnal
Ki.ed #a. Kor 8very
$elivery #rc% or /an
of Fanfactrers or
&rodcers,
Mholesalers of,
$ealers, or ,etailers
in, :ertain &rodcts
9 9
>ec" 143 5 #a. on
Gsiness
9 9
>ec" 147 5 Kees and
char!es on
re!lation'licensin! of
bsiness and
occpation -e.cept
professional ta.es1
9 9
>ec" 148 5 Kees for
>ealin! and Dicensin!
of Mei!hts and
Feasres
9 9
>ec" 149 5 Kishery
,entals, Kees and
:har!es
9 9
5
#he franchise ta. provided in >ec" 137 is intended
to be in addition to the franchise ta. imposed by the
+ational Eovernment" -de Deon, p" 4631
6
+ote that nder >ec" 138, the proceeds of this ta.
are allocated as follo(s6
-11 &rovince ) #hirty percent -30*1I
-21 :omponent city or mnicipality (here
the sand, !ravel, and other <arry
resorces are e.tracted ) #hirty percent
-30*1I and
-31 baran!ay (here the sand, !ravel, and
other <arry resorces are e.tracted ) Korty
percent -40*1"
>ec" 156 5
:ommnity #a.
9 9
>ec" 152-a1 5 #a. on
Eross >ales or
,eceipts of >mall)
>cale
>tores',etailers
9
>ec" 152-b1 5 >ervice
Kees on the se of
Garan!ay)o(ned
properties
9
>ec" 152-c1 5
Garan!ay :learance
9
>ec" 152-d1 5 ?ther
Kees and :har!es
-on commercial
breedin! of fi!htin!
coc%s, coc%fi!hts,
coc%pitsI places of
recreation (hich
char!e admission
feesI otside ads1
9
>ec" 153 5 >ervice
Kees and :har!es
9 9 9 9
#ec. I-L @ =ublic
"tility ?harges
D 9 9 9 9
#ec. I-- @ Toll
Hees or ?harges
, 9 9 9 9
>ec" 232 5 ,eal
&roperty #a.
9 99 9
:e'end6
9 L ;uthori8ed to impose the tax
BB L Anly if the municipality is within the
7etro 7anila ;rea
IV. SIT5S 29 TA>
R5LE : In case of persons
maintainin'/oeratin' a branch or sales outlet
maHin' the sale or transaction, the tax shall be
recorded in said branc$ or sales o%tlet and
paid to t$e #%nicipalit&Lcit& w$ere t$e
branc$ or sales o%tlet is located"
R5LE ": Khere there is N) branch or sales
outlet in the cit%/municialit% (here the sale is
made, the sale shall be recorded in t$e
principal office and the ta. shall be paid to
sch city'mnicipality"
R5LE B6 In the case of manfactrers,
contractors, prodcers, and e.porters having
factories, project offices, plants, and
plantations, the ff sales allocation shall be
observed6
7
0pplies to pblic tilities operated and maintained
by them (ithin their 7risdiction"
8
0pplies to the se of any pblic road, pier, (harf,
(ater(ay, brid!e, ferry or telecommnication system
fnded and constrcted by the local !overnment nit
concerned" 8.emptions6 -11 officers and enlisted
men of the 0rmed Korces of the &hilippines and
members of the &hilippine +ational &olice on
mission, -21 post office personnel deliverin! mail, -31
physically)handicapped, and -41 disabled citiBens
(ho are si.ty)five -651 years or older"
67
B1M of sales recorded in the principal
office shall be made ta.able by the
city'mnicipality *here the principal
office is located
F1M shall be ta.able by the
city'mnicipality *here the factory-
pro8ect office- plant- or plantation is
located
Illustration of &ule I to %:
=rincipal office is in 7andaluyong, while sales
office is in #ta &osa
sales made in #ta &osa, will be
recorded in #ta &osa
sales made in 3os .a_os, ?alamba
or ?abuyao $ie delivered to
customers located in those places),
will be recorded in 7andaluyong
aside from sales made in #ta &osa,
#ta &osa also gets D(J of sales
recorded in 7andaluyong, prsant
to ,le 3
R5LE C6 In case the plantation is located in a
place other than the place where the factory is
located, the 937 portion in %ule 2 *ill be
di!ided as follo(s6
E1M to the city'mnicipality
(here the factory is located
C1M to the city'mnicipality
(here the plantation is located
R5LE D) In case of 1 or more factories,
lantations, etc in different localities, the F1M
s$all be prorated a#ong t$e localities where
the factories, plantations, etc are located in
proportion to t$eir respective vol%#e of
prod%ction"
N&T)6 In case of manfactrers or
prodcers (hich engage the services
of an independent contractor to
prodce or manfactre some of their
prodcts, these rles shall apply e.cept
that the factory or plant and warehouse
of the contractor utilised for the
production and storage of the
manufacturers products shall e
considered as the factory or plant and
warehouse of the manufacturer" -I,,1
N2TE6 #he city or unicipality
!here the port of loading is located
shall not levy and collect the
reasonable fees unless the e.porter
maintains in said city or municipality its
principal office, a ranch, sales office,
or warehouse, factory, plant or
plantation in (hich case, the rle on the
matter shall apply accordin!ly" -I,,1
V. C2==2N RE/EN5E8RAISIN-
P2*ERS
A. Service $ees an( c%ar1es )) DE;s
may impose sch reasonable fees and
char!es for services rendered"
B. 7ublic Utilit) c%ar1es 5 DE;s may fi.
the rates for the operation of pblic
tilities o(ned, operated and
maintained by them (ithin their
7risdiction"
C. ?oll $ees or c%ar1es @ 3*"s, thru their
sanggunian concerned, may fix the rates
for the imposition of toll fees or charges
for the use of any public road, pier, or
wharf, waterway, bridge, ferry or
telecommunication system f%nded and
constr%cted b& t$e L-5"
&,?/I$8$, that no sch toll fees or
char!es shall be collected from -11
officers and enlisted men of 0K& and
members of &+& on mission, -21 post
office personnel deliverin! mail, -31
physically)handicapped, and disabled
citiBens (ho are 65 years or older"
Mhen pblic safety and (elfare so
re<ires, the san!!nian concerned
may discontine the collection of the
tolls, and thereafter the said facility
shall be free and open for pblic se"
VI. C2==5NITK TA>
A. *$o #a& lev&
Cities or munici5alities may levy
a commnity ta.
N2TE6 Kor prposes of
enactment of a local ta.
ordinance levyin! a commnity
ta., the condct of a pblic
hearin! shall +? lon!er be
re<ired"
68
B. *$o are liable
! Individ%als !! every inhabitant of
the =hilippines eighteen $I,) years
of age or over
Kho has been regularly employed
on a wage or salary basis for at
least thirty $%() consecutive
working days during any calendar
year, A&
Kho is engaged in business or
occupation, A&
Kho owns real property with an
aggregate assessed value of
=I,((( or more, A&
Kho is reGuired by law to file an
income tax return
o shall pay
an annual co##%nit&
tax of Hive pesos
$=-.(() AND
an annual additional
tax of Ane peso $=I.(()
for every Ane thousand
pesos $=I,(((.(() of
income re'ardless of
(hether from business,
e"ercise of rofession
or from roert% which
in no case s$all
exceed 9ive t$o%sand
pesos ?PD0111!111"
N2TE) In the case of husband and
wife, F;?+ shall pay the basic tax of
=-.((1 but the additional tax herein
imposed shall be based upon the total
roert% o(ned b% them and the total
'ross receits or earnin's derived b%
them"
"! :%ridical Persons 88 every
corporation no matter ho( created
or or'aniDed, (hether domestic or
resident forei'n, engaged in or
doing business in the =hilippines
shall pay
o an annual co##%nit& tax
of Hive hundred pesos
$=-((.(() AND
o an annal additional tax,
(hich- in no case- shall
exceed Ten thousand
pesos 1#:3-333$334 in
accordance (ith the
follo(in! schedle6
$I) Hor every &5,000 (orth of
real property in the
&hilippines o(ned by it
drin! the precedin! year
based on the valation
sed for the payment of
real property ta. nder
e.istin! la(s, fond in the
assessment rolls of the city
or mnicipality (here the
real property is sitated 5
&2I AND
$') Hor every =-,(((.(( of gross
receipts or earnings derived
by it from its business in the
=hilippines during the
preceding year @ ='.((
N2TE: The dividends
received by a corporation
from another corporation
however shall, for the
purpose of the additional
tax, be considered as part
of t$e gross receipts or
earnings of said
corporation"
C. *$o are exe#pted
$I) 9iplomatic and consular
representatives1 and
$') Transient visitors when their stay in
the =hilippines does not e.ceed 3 months
D. =anner of Pa&#ent
=3;?F AH =;<7F6T !!
community tax shall be paid in the
place of residence of the
indi!idual, or in the place *here
the principal office of the
8uridical entity is located"
TI7F AH =;<7F6T @ community
tax shall accr%e on t$e
st
da& of
:an%ar& of eac$ &ear which shall
be paid not later t$an t$e last
da& of 9ebr%ar& of eac$ &ear
if a person reaches 3*
or loses the benefit of
e"emtion
o ?+ ?, G8K?,8
the D0># $0H ?K N;+8 L
liable for the tax on t$e
da& $e reac$es J or
loses exe#ption"
69
o ?+ ?, G8K?,8
the D0># $0H ?K F0,:O L
he shall have '( days to
pay the community tax
without becoming
delinGuent
persons who ecome
resident of !hil or reaches 1" or
loses e#emption ?+ ?, 0K#8, the
1
>#
$0H ?K N;DH L shall 6AT be
subect to community tax for
that year.
corporations established
and organised
o A6 A& .FHA&F the 3;#T
9;< AH :"6F L shall be
liable for the tax for that
year
o A6 A& .FHA&F the 3;#T
9;< AH 7;&?+ L shall
have '( days to pay the
tax without becoming
delinGuent
o A6 A& ;HTF& the I
>#
$0H ?K N;DH L shall
6AT be subect to
community tax for that
year
N2TE6 if the ta. is not paid (ithin
the prescribed period, there shall
be added to the npaid amont an
interest of 24* per annm from the
de dte ntil it is paid"
VII. C2LLECTI2N 29 TA>ES
A. Tax Period !! unless otherwise provided
in this ?ode, the tax period of all local
taxes, fees and charges shall be the
calendar &ear"
B. =anner of Pa&#ent !! #uch taxes,
fees and charges #a& be paid in
<%arterl& install#ents"
C. Accr%al of Tax !! ;ll local taxes, fees,
and charges shall accr%e on t$e first
?st@ da& of :an%ar& of eac$ &ear.
+owever, new taxes, fees or charges, or
changes in the rates thereof, shall
accr%e on t$e first ?st@ da& of t$e
<%arter next following t$e effectivit&
of t$e ordinance imposin! sch ne(
levies or rates"
D. Ti#e of Pa&#ent !! ;ll local taxes,
fees, and charges shall be paid within
the first twenty $'() days of :anuary or
of each subseGuent Guarter, as the case
may be. ?:an "10 Apr "10 :%l& "10 and
2ct "1@! The sanggunian concerned
may, for a ustifiable reason or cause,
extend the time for payment of such
taxes, fees, or charges without
surcharges or penalties, but onl% for a
eriod not e"ceedin' si" (2) months"
E. S%rc$arges and Penalties
25* srchar!e on ta.es, fees
or char!es +?# paid on time,
AND
interest at the rate +?#
e.ceedin! 2* per month of the
npaid ta.es, fees or char!es
I+:D;$I+E srchar!es, ntil
the amont is flly paid
N2TE: in no case s$all t$e
total interest exceed BE
#ont$s"
F. Collecting A%t$orit& @ ;ll local taxes,
fees and charges shall be collected by
the rovincial, cit%, municial, or
baran'a% treasurer, or their dul%
authorised deuties"
G. Exa#ination of .oo7s 5 #he local
treasrer or his depty dly athorised
in (ritin!, may e.amine the boo%s,
acconts and other pertinent records of
any person, partnership, corporation, or
association in order to ascertain,
assess and collect the correct amont
of ta." >ch e.amination shall be
made during the regular business
hours, &N56 &N() for e!ery tax
period, and shall be certified to by the
e.aminin! official"
VIII. Civil Re#edies ?bot$ L-5 and
taxpa&er@
A. Personal Propert& Exe#pt fro#
Distraint or Lev& 6 t$e following
propert& s$all be FBF7=T from
distraint or levy for delinGuency in the
payment of any L2CAL tax, fee or
charge:
tools and implements
necessarily used by the
70
deliGuent taxpayer in his trade
or employment
one horse, cow, carabao, or
other beast of burden, such as
the delinGuent taxpayer may
select and necessarily used by
him in his ordinary occupatin
his necessary clothing, and that
of all his family
househld furniture and utensils
necessary for housekeeping and
used for that purpose by the
delinGuent taxpayer, such as he
may select, of a value not
exceeding =I(,(((
provisions, including crops,
actually provided for individual
or family use sufficient for L
months
the professional libraries of
doctors, engineers, (ehem)
la(yers and 7d!es
one fishin! boat and net, not
e.ceedin! the total vale of
&10,000 by the la(fl se of
(hich a fisherman earns his
livelihood
any material or article formin!
part of a hose or improvement
of any real property
B. Periods of Assess#ent and
Collection of L2CAL Taxes
-EN R5LE6 Assessent shall be
made *ithin ; years fro" the date
they beco"e due, and collection shall
be made *ithin ; years fro" the date
of assess"ent by administrative or
7dicial action"
E>CEPTI2N) In case of H&;"9, or
I6TF6T TA F>;9F =;<7F6T AH T;B, the
same may be assessed wit$in 1
&ears fro# discover& of fra%d or
intent to evade pa&#ent"
C. *$en R%nning of Prescription of
Above Periods is S%spended 5 #he
rnnin! of the periods of prescription
above shall be sspended for the time
drin! (hich6
the treasrer is le!ally
prevented from ma%in! the
assessment or collection
the ta.payer re<ests for a
reinvesti!ation and e.ectes a
(aiver in (ritin! before
e.piration of the period (ithin
(hich to assess or collect
the ta.payer is ot of the
contry or other(ise cannot be
located
D. Protest of Assess#ent
STEP 6 Mhen the local treasrer finds
that the correct ta. has +?#
been paid, he shall isse a
+?#I:8 ?K 0>>8>>F8+#
statin! the natre of ta., the
amont of deficiency, the
srchar!e and interest"
STEP ") Within <3 days fro" the
receipt of the notice of
assess"ent, the ta.payer may
file a M,I##8+ &,?#8># (ith
the local treasrerI other*ise-
the assess"ent shall
beco"e final and executory"
STEP B6 #he local treasrer shall
decide the protest *ithin <3
days fro" the ti"e of filing"
STEP C6 #he local treasrer shall isse
a +?#I:8 either denyin! the
protest or cancellin! (holly or
partially the assessment"
STEP D: The taxpayer shall have B1
da&s fro# t$e receipt of
notice0 or fro# t$e lapse of
E18da& period to appeal with
the court of competent
urisdiction $regular courts)1
ot$erwise0 t$e assess#ent
beco#es concl%sive and
%nappealable"
E. Clai# for Ref%nd or Tax Credit
6o case or proceeding shall be
maintained in any court for the
recovery of any tax, fee, or charge
erroneously or illegally collected
%ntil a *RITTEN CLAI= for
ref%nd or credit $as been filed
wit$ t$e local treas%rer.
6o case or proceeding shall be
entertained in any court A9TER t$e
expiration of " &ears fro# t$e
date of pa&#ent of s%c$ tax0 or
71
fro# t$e date t$e taxpa&er is
entitled to a ref%nd or credit"
F. Re#ed& for Illegal or
5nconstit%tional Tax 2rdinance ?Sec
JF@
STEP 6 0ny <estion on the
constitutionality or legality of ta.
ordinances or revene measres may
be raised on appeal *ithin 23 days
fro" the effecti!ity thereof to the Sec
of =ustice"
STEP "6 #he >ec of Nstice shall
decide *ithin <3 days fro" the date
of receipt of the appeal" Oo(ever, this
appeal shall not have the effect of
sspendin! the effectivity of the
ordinance and the accral and payment
of the ta. levied therein"
STEP B: *it$in B1 da&s after receipt
of t$e decision or t$e lapse of t$e
E18da& period wit$o%t t$e Sec of
:%stice acting %pon t$e appeal, the
a!!rieved party may file appropriate
proceedin!s (ith a cort of competent
7risdiction"
IX. =iscellaneo%s Provisions
A. Power to Lev& Taxes0 9ees or
C$arges
-EN R5LE6 DE; may e.ercise the
po(er to levy ta.es, fees
or char!es on AN6 .AS)
&% SU.=)(T not
other(ise specifically
enmerated in DE: or
+I,:"
E>CEPTI2N6 It mst +?# be n7st,
e.cessive, oppressive,
confiscatory or contrary to
declared national policy"
B. Re<%ire#ents for a /alid Tax
2rdinance
1. the ordinance shall only be
enacted if there is a prior
p%blic $earing conducted for
the purpose
2. within I( days after the
approval of the ordinance, it
must be p%blis$ed in full for %
consecutive days in a
newspaper of local circulation,
or if no such newspaper, it must
be posted in at least 2
conspicos and pblicly
accessible places"
C. A%t$orit& to Ad;%st Rates @ 3*" shall
have the authority to adust the tax
rates prescribed in 3*? N2T oftener
t$an once ever& D &ears, but in no
case s$all s%c$ ad;%st#ent exceed
1M of t$e rates fixed"
D. A%t$orit& to -rant Exe#ption 5 DE;
may, thro!h ordinances, !rant ta.
e.emptions, incentives or reliefs nder
sch terms and conditions as they may
deem necessary"
>! Proble#s
I. ; municipality passed an ordinance
imposing a tax of IJ on the
consideration of all sales or other
transfers of title of real property located
within its boundaries. ;s a property
owner affected by the tax, comment on
its legality or illegality, and if you
disagree with it, what are your
remedies, administrative and udicialP
Answer) $9omondon) The tax is illegal
because only provinces and cities may
impose a tax on transfer of real property
ownership. 7y first administrative
remedy would be to Guestion the legality
of the ordinance within thirty $%() days
from effectivity by appealing to the
#ecretary of :ustice. If the #ecretary
reects my appeal, I have thirty $%()
days from receipt of the denial within
which to file appropriate proceedings
before a competent court. If the
#ecretary of :ustice does not act within
sixty $E() days, I would have thirty $%()
days from the lapse of the E(!day time
period during which the #ecretary of
:ustice has to decide the case, within
which to file suit with the appropriate
court.
'. Khat is the nature of local taxationP
Answer) 9istinguished from the
taxation power of the #tate, local
taxation is not an inherent power @ it is
72
granted by the ?onstitution or statute.
2.asco v. =;*?A& $IMMI)5
%. Khat is the preemption or exclusionary
ruleP
Answer) It refers to the instance
wherein the 6ational *overnment elects
to tax a particular area, impliedly
withholding from the 3*" the delegated
power to tax the same field.
L. 9o 3*"s have the authority to grant tax
exemptionsP
Answer) <es, through an ordinance, by
express provision of law in #ection IM',
3*?.
-. Khat are the limitations on the 3*"s
power to taxP
Answer)
I. 3*"s cannot levy taxes that are
unust, excessive, oppressive,
confiscatory or contrary to
declared national policy. $#ec.
I,E, 3*?)
'. The 3*? enumerates those that
cannot be taxed by 3*"s, as
follows:
#ec. I%% ! "nless otherwise
provided, the exercise of the
taxing powers of provinces,
cities, municipalities, and
barangays s$all N2T E>TEND
to the levy of the following:
a. Income tax,
except when
levied on banks
and other
financial
institutions1
b. 9ocumentary
stamp tax1
c. Taxes on
estates,
inheritance,
gifts, legacies
and other
acGuisitions
mortis causa,
except as
otherwise
provided
herein1
d. ?ustoms
duties,
registration
fees of vessel
and wharfage
on wharves,
tonnage dues,
and all other
kinds of
customs fees,
charges and
dues except
wharfage on
wharves
constructed and
maintained by
the 3*"
concerned1
e. Taxes, fees,
and charges
and other
impositions
upon goods
carried into or
out of, or
passin!
thro!h, the
territorial
7risdictions of
local
!overnment
nits in the
!ise of
char!es for
(harfa!e, tolls
for brid!es or
other(ise, or
other ta.es,
fees, or
char!es in any
form
(hatsoever
pon sch
!oods or
merchandiseI
f. #a.es, fees or
char!es on
a!ricltral and
a<atic
prodcts (hen
sold by
mar!inal
farmers or
fishermenI
g. #a.es on
bsiness
enterprises
73
certified to by
the Goard of
Investments as
pioneer or non)
pioneer for a
period of si.
-61 and for -41
years,
respectively
from the date
of re!istrationI
h. Fxcise taxes on
articles
enmerated
nder the
+I,:, as
amended, and
ta.es, fees or
char!es on
petrolem
prodctsI
i. =ercentage or
>;T on sales,
barters or
exchanges or
similar
transactions on
goods or
services except
as otherwise
provided
herein1
j. Taxes on the
gross receipts
of
transportation
contractors and
persons
engaged in the
transportation
of passengers
or freight by
hire and
common
carriers by air,
land or water,
except as
provided in this
?ode1
k. Taxes on
premiums paid
by way or
reinsurance or
retrocession1
l. Taxes, fees or
charges for the
registration of
motor vehicles
and for the
issuance of all
kinds of
licenses or
permits for the
driving thereof,
e"cet
tric%cles1
m. Taxes, fees, or
other charges
on =hilippine
products
actually
exported,
e.cept as
other(ise
provided
hereinI
n. #a.es, fees, or
char!es, on
:ontryside
and Garan!ay
Gsiness
8nterprises
and
cooperatives
dly re!istered
nder the
P:ooperative
:ode of the
&hilippinesPI
and
o. Taxes, fees or
charges of any
kind on the
6ational
*overnment,
its agencies
and
instrumentalitie
s, and local
government
units"
REAL PROPERTY
TAXATION
I! ,inds of Real Propert& Tax and Special
Levies
.asic real property tax
;dditional levy on real property
for the #pecial Fducation Hund
74
;dditional ad valorem tax on
idle lands
#pecial levy by local
government units
II! .asic Concepts
Definition)
&eal property tax has been defined as /a direct
tax on the ownership of lands and buildings or
other improvements thereon not specially
exempted, and is payable regardless of whether
the property is used or not, although the value
may vary in accordance with such factor.0
It has also been defined as: an annual ad
valorem tax imposed by local government units
$provinces, cities, and 7etro 7anila
municipalities) on real property within their
urisdiction, determined on the basis of a fixed
proportion of the value of the property. $de 3eon,
p. -(M)
N2TE) &eal property tax is a fixed
proportion of the assessed value of
the property being taxed and
reGuires, therefore, the intervention
of assessors.
C$aracteristics of real propert& tax
It is a direct tax on the
ownership or use of real
property.
It is an ad valorem tax. >alue is
the tax base.
It is proportionate because the
tax is calculated on the basis of
a certain percentage of the
value assessed.
It creates a single, indivisible
obligation.
It attaches on the property $i.e.,
a lien) and is enforceable
against it.
() Is real propert& tax a national or
local tax+
The authorities are not in agreement.
7amalateo $&eviewer on Taxation, p.
LL%) states that since the real property
tax is /enforced through $sic) the
=hilippines and not in a particular
political subdivision,0 it is a national tax
even though /the bulk of the proceeds
accrue to the various local government
units where the property is located.0
;ban $p. L%E), on the other hand, claims
that since #ection '%' of the 3ocal
*overnment ?ode gives the 3*"s the
power to levy real property taxes, the
&=T is /veritably a local tax.0
Nat%re and scope of power to i#pose realt&
tax
The taxing power of local governments in real
property taxation is a delegated power.
9%nda#ental principles governing real
propert& taxation
I. &eal property shall be appraised
at its current and fair market
value.
'. &eal property shall be classified
for assessment purposes on the
basis of its actual use.
%. &eal property shall be assessed
on the basis of a uniform
classification within each local
government unit.
L. The appraisal, assessment, levy
and collection of real property
tax shall not be let to any
private person.
-. The appraisal and assessment of
real property shall be eGuitable.
2#ection IMD, 3ocal *overnment
?ode5
Real properties s%b;ect to tax
*enerally, &eal =roperty Tax is imposed on
lands, buildings, machineries and other
improvements. The 3ocal *overnment ?ode
contains no definition of /real property01
however, the following terms are defined:
I#prove#ent It is a valuable addition
made to a property or an amelioration in its
condition amounting to more than a repair or
replacement of parts involving capital
expenditures and labor which is intended to
enhance its value, beauty, or utility or to
adopt it for new or further purposes.
2#ection IMM$m), 3ocal *overnment ?ode5
=ac$iner& 7achinery embraces
machines, eGuipment, mechanical
contrivances, instruments, appliances or
apparatus, which may or may not be
attached, permanently or temporarily, to the
real property. It includes the physical
facilities for production, the installations and
appurtenant service facilities, those which
are mobile, self!powered or self!propelled,
and those not permanently attached to the
real property which are actually, directly,
and exclusively used to meet the needs of
the particular industry, business or activity
and which by their very nature and purpose
are designed for, or necessary to its
manufacturing, mining, logging, commercial,
industrial or agricultural purposes. 2#ection
IMM$o), 3ocal *overnment ?ode5
75
6ATF: this definition of
machinery is too all!
encompassing and broad in
that everything that is used
even indirectly for the needs
of the industry can be
classifies as machinery
which is &F;3 property,
which in turn means that it
is subect to &=T1 example
would be a #?&FK9&I>F&
being used in an office @
since this is used by the
office and indirectly
contributes the to smooth
functioning of the general
business then this can be
treated as real property
This was solved by the 3*?
I&& sec 'M( $o) that now
limits and Gualifies this: this
is known as the GENE&AL
7U&7OSE &ULE This
rule states that if it used in
line or for the general
purpose of the business but
only indirectly, then it is
N2T to be treated as real
property. This means that a
typewriter being used in the
main office of a firm that
manufactures cars is 6AT
real property as the
typewriter is 6AT used to
actually make the car which
is the main purpose of the
company.
*enerally the #? has held that ;rt LI- ?? $which
enumerates the kinds of real property) is an exclusive list
as to what constitutes real property. ."T HA& T;B
="&=A#F# A63<, it is common that certain properties be
classified as real property even if according to the general
principles of the ??, they would only be classified as
personal property. 3F##A6: the 6I&? and the 3*? code
prevail in classifying property for tax purposes.
Properties E>E=PT fro# real propert& taxes
I. &eal property owned by the &epublic of
the =hilippines or any of its political
subdivisions except when the beneficial
use thereof has been granted for
consideration or otherwise to a taxable
person.
() Are -2CCs covered b&
t$e exe#ption+ 6o. The tax
exemption of /property owned
by the &epublic of the
=hilippines0 refers to properties
owned by the government and
by its agencies which do not
have separate and distinct
personalities, as distinguished
from *A??s which have
separate and distinct
personalities. 26ational
9evelopment ?ompany v. ?ebu
?ity5
() *$at is t$e scope of
t$e exe#ption+ The
exemption from tax of property
owned by the government
obtains even as to properties
owned in a private, proprietary
or patrimonial character. The
law makes no distinction
between property held in
governmental capacity and
those possessed in a proprietary
capacity. 2.oard of ;ssessment
;ppeals of 3aguna v. ?T;5
'. ?haritable institutions, churches,
parsonages, or convents appurtenant
thereto, mosGues, non!profit or religious
cemeteries, and all lands, buildings, and
improvements actually, directly and
exclusively used for religious, charitable,
or educational purposes.
%. ;ll machineries and eGuipment that are
actually, directly and exclusively used by
local water utilities and government!
owned or controlled corporations
engaged in the supply and distribution of
water and/or generation and
transmission of electric power.
L. ;ll real property owned by duly
registered cooperatives as provided for
under &epublic ;ct 6o. EM%,.
-. 7achinery and eGuipment used for
pollution control and environmental
protection. 2#ection '%L, 3ocal
*overnment ?ode5
N2TE) ; taxpayer claiming exemption must
submit sufficient documentary evidence to the
local assessor within thirty $%() days from the
date of the declaration of real property1
otherwise, it shall be listed as taxable in the
;ssessment &oll.
III! Rates of lev&
76
2.ASIC RPT5 ; province or city or a municipality
within the 7etro 7anila area shall fix a uniform
rate of basic real property tax applicable to their
respective localities as follows:
I. In the case of a province, at the rate
not exceeding IJ of the assessed
value of real property1 and
'. In the case of a city or a
municipality within the 7etro 7anila
area, at the rate not exceeding 'J
of the assessed value of real
property. 2#ection '%%, 3ocal
*overnment ?ode5
EA;;I?IONAL LEV> ON &EAL 7&O7E&?>
:O& ?AE S7ECIAL E;UCA?ION :UN;F A
rovince, cit% or a municialit% (ithin the .etro
.anila area ma% lev% and collect an annual ta"
of one ercent (35) on the assessed value of
real roert% (hich shall be in addition to the
basic real roert% ta"- The roceeds thereof
shall e"clusivel% accrue to the Secial !ducation
;und created under Reublic Act No- 466,-
ISection 104, :ocal 8overnment CodeJ
OADDITI2NAL A; VALO&EM TA> 2N IDLE
LANDSP ; province or city or a municipality
within the 7etro 7anila area may levy an annual
tax on idle lands at the rate not exceeding five
percent $-J) of the assessed value of the
property which shall be in addition to the basic
real property tax. 2#ection '%E, 3ocal
*overnment ?ode5
Khat are considered idle landsP
Sec "BF! Idle Lands0 Coverage!
`idle lands shall include:
$a) ;gricultural lands
more than one $I) hectare
in area
suitable for cultivation,
dairying, inland fishery, and
other agricultural uses
one!half $I/') of which
remain uncultivated or
unimproved by the owner or
person having legal
interest.
;gricultural lands planted to
permanent or perennial crops
with at least fifty $-() trees to a
hectare shall 6AT be considered
idle lands. 3ands actually used
for gra8ing purposes shall
likewise 6AT be considered idle
lands
$b) 3ands other than agricultural
located in a city or
municipality
more than one thousand
$I,((() sGuare meters in
area
one!half $I/') of which
remain unutili8ed or
unimproved by the owner or
person having legal
interest.
&egardless of land area, this #ection
shall applies to residential lots in
subdivisions duly, ownership of
which has been transferred to
individual owners, who shall be
liable for the additional tax:
=rovided, however, That individual
lots of such subdivisions, ownership
of which has not been transferred to
the buyer shall be considered as
part of the subdivision, and shall be
subect to the additional tax payable
by subdivision owner or operator.
E>E=PTI2N fro# idle lands tax)
Fxemptions are given due to:
a. force ma<eure1
b. civil disturbance1
c. natural calamity1 or
d. any cause or
circumstance which
physically or legally
prevents the owner
or person having
legal interest from
improving, utili8ing
or cultivating the
same.
OSPECIAL LE/K .K L2CAL -2/ERN=ENT
5NITSP ; province, city or municipality may
impose a special levy on the lands comprised
within its territorial urisdiction specially
benefited by public works proects or
improvements by the 3*" concerned. The special
levy shall not exceed E(J of the actual cost of
such proects and improvements, including the
costs of acGuiring land and such other real
property in connection therewith.
It shall not apply to lands exempt from
basic real property tax and the
remainder of the land, portions of which
have been donated to the 3*"
concerned for the construction of such
proects or improvements.
6eed for public hearing and publication
before enactment of ordinance imposing
special levy.
77
#pecial levy accrues on the first day of
the Guarter next following the effectivity
of the ordinance imposing the levy.
2#ection 'L(, 3ocal *overnment ?ode5
I/! 2t$er I#portant Provisions
A77&AISAL AN; ASSESSMEN? O: &EAL
7&O7E&?>
Sec "1! Appraisal of Real Propert&! ` ;ll
real property, whether taxable or exempt,
appraised at the c%rrent and fair #ar7et
val%e prevailing in t$e localit& w$ere t$e
propert& is sit%ated
Sec "1"! Declaration of real Propert& b& t$e
2wner or Ad#inistrator! ` shall be the duty
of all persons $natural or uridical) or their duly
authori8ed representative
owning or administering real property,
including the improvements therein
to prepare and file with assessor, a sworn
statement declaring the true value of their
property, whether previously declared or
undeclared, taxable or exempt, which
s$all be t$e c%rrent and fair #ar7et
val%e of t$e propert&0 as deter#ined
b& t$e declarant
The sworn declaration of real property herein
referred to shall be filed with the assessor
concerned once every three $%) years
during the period from :anuary first $Ist)
to :une thirtieth $%(th) commencing with
the calendar year IMM'.
Sec "1B! D%t& of Person Ac<%iring Real
Propert& or =a7ing I#prove#ent
T$ereon! ` duty of any person, or his
authori8ed representative
acGuiring at any time real property in any
municipality or city
or making any improvement on real
property,
to prepare and file with the a sworn
statement declaring the true value of
subect property
within sixty $E() days after the acGuisition of
such property or upon completion or
occupancy of the improvement, whichever
comes earlier.
Sec "1C! Declaration of Real Propert& b& t$e
Assessor! ` any person, by whom real
property is reGuired to be declared under
#ection '('
refuses or fails for any reason to make such
declaration within the time prescribed
assessor shall himself declare the property in
the name of the defaulting owner, if
known, or against an unknown owner, as
the case may be, and shall assess the
property for taxation
Sec "1D! Listing of Real Propert& in t$e
Assess#ent Rolls!
In every province and city, municipalities
within the 7etropolitan 7anila ;rea, there
shall be prepared and maintained by the
assessor
an assessment roll wherein shall be listed all
real property, whether taxable or exempt,
located within the local government unit1
property shall be listed, valued and
assessed in the name of the owner or
administrator, or anyone having legal
interest in the property.
undivided real property of a deceased person
may be listed, valued and assessed in the
name of the estate or of the heirs and
devisees without designating them
individually
."T undivided real property other
than that owned by a deceased may
be listed, valued and assessed in the
name of one or more co!owners:
=rovided, however, That such heir,
devisee, or co!owner shall be liable
severally and proportionately for all
obligations imposed by this Title and
the payment of the real property tax
with respect to the undivided property.
real property of a corporation, partnership,
or association shall be listed, valued and
assessed in the same manner as that of
an individual.
&eal property owned by the &epublic of the
=hilippines, its instrumentalities and
political subdivisions, the beneficial use of
which has been granted, for consideration
or otherwise, to a taxable person, shall be
listed, valued and assessed in the name of
the possessor, grantee or of the public
entity if such property has been acGuired
or held for resale or lease.
Sec "1E! Proof of Exe#ption of Real
Propert& fro# Taxation!
Fvery person who shall claim tax exemption
for such property
shall file with assessor within thirty $%()
days from the date of the declaration of
real property sufficient documentary
evidence in support of such claim]like
corporate charters, contracts, titles,
articles of incorporation etc]
If the reGuired evidence is 6AT submitted
within the period prescribed, the property
shall be listed as taxable in the
assessment roll. +owever, if the property
78
shall be proven to be tax exempt, shall be
dropped from the assessment roll.
Sec "1J! Notification of Transfer of Real
Propert& 2wners$ip!
;ny person who shall T&;6#HF& real
property AK6F&#+I= to another
shall notify the assessor concerned within
sixty $E() days from the date of such
transfer
The notification shall include the mode of
transfer, the description of the property
alienated, the name and address of the
transferee.
Sec "1G! D%t& of Registrar of Deeds to
Appraise Assessor of Real Propert& Listed
in Registr&!
duty of the &egistrar of 9eeds to reGuire
every person who shall present for
registration a document of transfer,
alienation, or encumbrance of real
property to accompany the same with a
certificate to the effect that the real
property subect has been fully paid of all
real property taxes due. Hailure to provide
such certificate shall be a valid cause for
the refusal of the registration of the
document.
Sec ""! Preparation of Sc$ed%le of 9air
=ar7et /al%es! ` .efore any general revision
of property assessment is made
there shall be prepared a schedule of fair
market values by the assessor of the
provinces, cities and municipalities wit$in
t$e =etropolitan =anila Area for the
different classes of real property situated
in their respective local government units
for enactment by ordinance of the
sanggunian
schedule of fair market values shall be
p%blis$ed in a newspaper of general
circulation in the province, city or
municipality1 in the absence thereof, shall
be posted in the provincial capitol, city or
municipal hall and in two other
conspicuous public places
Sec "C! A#end#ent of Sc$ed%le of 9air
=ar7et /al%es!
assessor may recommend to the sanggunian
amendments to correct errors in valuation
in the schedule of fair market values
sanggunian shall, by ordinance, act upon the
recommendation within ninety $M() days
from receipt
Sec "D! Classes of Real Propert& for
Assess#ent P%rposes! ` Hor purposes of
assessment, real property shall be classified:
I.residential
'.agricultural
%.commercial
L.industrial
-.mineral
E.timberland
D.special ! Sec"E! Special Classes of Real
Propert&! `lands, buildings, and other
improvements thereon
actually, directly and exclusively used
for hospitals, cultural, or scientific
purposes
those owned and used by local water
districts
government!owned or controlled
corporations rendering essential public
services in the supply and distribution
of water and/or generation and
transmission of electric power shall be
classified as special.

SThe city or municipality within the
7etropolitan 7anila ;rea, through their
respective sanggunian, shall have the power to
classify lands as residential, agricultural,
commercial, industrial, mineral, timberland, or
special in accordance with their 8oning
ordinances.
Sec "F! Act%al 5se of Real Propert& as
.asis for Assess#ent! ` &eal property shall
be classified0 val%ed and assessed on the
basis of its act%al %se
regardless of where located
regardless whoever owns it
regardless whoever uses it
Sec ""1! /al%ation of Real Propert&! ` In
cases where:
$a) real property is declared and listed for
taxation purposes for the first time
$b) there is an ongoing general revision of
property classification and assessment
$c) a reGuest is made by the person in whose
name the property is declared
assessor shall make a classification,
appraisal and assessment or
taxpayerRs valuation
=rovided, however, That the
assessment of real property shall 6AT
be increased oftener than once every
three $%) years
FB?F=T in case of new
improvements substantially
increasing the value of said
property or of any change in its
actual use.
79
Sec ""! Date of Effectivit& of Assess#ent
or Reassess#ent!
;ll assessments/ reassessments made after
t$e first ?st@ da& of :an%ar& of an&
&ear shall ta7e effect on t$e first ?st@
da& of :an%ar& of t$e s%cceeding &ear
=rovided, the reassessment of real property
shall be made within ninety $M() days from
the date if any such cause or causes
occurred, and shall take effect at the
beginning of the Guarter next following the
reassessment due to its:
partial or total destruction
maor change in its actual use
great and sudden inflation or deflation
of real property values
gross illegality of the assessment
any other abnormal cause
Sec """! Assess#ent of Propert& S%b;ect to
.ac7 Taxes! ` &eal property declared for the
9IRST TI=E shall be assessed for taxes $back
taxes) for the period during which it wo%ld
$ave been liable but in no case of #ore
t$an ten ?1@ &ears prior to t$e date of
initial assess#ent
=rovided, however, That such taxes shall be
computed on the basis of the applicable
schedule of values in force during the
corresponding period.
If such taxes are paid on or before the end
of the Guarter following the date the notice
of assessment was received by the owner
@ 6A interest for delinGuency shall be
imposed thereon1 otherwise, taxes shall be
subect interest at the rate of two percent
$'J) per month or a fraction thereof from
the date of the receipt of the assessment
until such taxes are fully paid.
Sec ""C! Appraisal and Assess#ent of
=ac$iner&! `
$a) The fair #ar7et val%e of brand8new
machinery shall be ac<%isition cost
In all other cases, the fair market
value shall be determined by
dividing the remaining economic life
of the machinery by its estimated
economic life and multiplied by the
replacement or reproduction cost.
$b) If machinery i#ported, the acGuisition
cost incl%des freig$t0 ins%rance0
ban7 and ot$er c$arges0 bro7erage0
arrastre and $andling0 d%ties and
taxes0 pl%s c$arges at t$e present
site
Sec""D! Depreciation Allowance for
=ac$iner&! `depreciation allowance shall be
made for machinery at a rate N2T exceeding
five percent ?DM@ of its original cost or its
replace#ent or reprod%ction cost, as the
case may be, for each year of use
=rovided, the remaining value for all kinds of
machinery shall be fixed at 6AT less than
twenty percent $'(J) of such original,
replacement, or reproduction cost for so
long as the machinery is useful and in
operation.
ASSESSMEN? A77EALS
Sec ""E! Local .oard of Assess#ent
Appeals! ` ;ny owner or person having legal
interest in the property 6AT satisfied with the
action of the assessor in the assessment of his
property
7ay within sixty $E() days from the date of
receipt of the written notice of assessment
appeal to the .oard of ;ssessment ;ppeals
of the provincial or city
by filing a petition under oath in the form
prescribed for the purpose, together with
copies of the tax declarations and such
affidavits or documents submitted in
support of the appeal.
Sec ""G! Action b& t$e Local .oard of
Assess#ent Appeals! `
$a) .oard shall decide t$e appeal wit$in
one $%ndred twent& ?"1@ da&s fro#
t$e date of receipt of such appeal. The
.oard, after hearing, render its decision
based on substantial evidence
$b) In the exercise of its appellate urisdiction,
the .oard shall have the power to
summon witnesses, administer oaths,
conduct ocular inspection, take
depositions, and issue subpoena and
subpoena duces tecum. The proceedings
of the .oard shall be conducted S2LELK
for t$e p%rpose of ascertaining t$e
facts without necessarily adhering to
technical rules applicable in udicial
proceedings.
$c) secretary of the .oard shall furnish the
owner of the property or the person
having legal interest therein and the
assessor with a copy of the decision of the
.oard. In case the provincial or city
assessor concurs in the revision or the
assessment, it shall be his duty to notify
the owner or the person having legal
interest of such fact using the form
prescribed.
80
$d) The owner, the person having legal
interest or the assessor who is 6AT
satisfied with the decision of the .oard,
7ay within thirty $%() days after
receipt of the decision of said .oard
appeal to the Central .oard of
Assess#ent Appeals ! decision of
the ?entral .oard shall be final and
exec%tor&
Sec "B! Effect of Appeal on t$e Pa&#ent of
Real Propert& Tax! ` ;ppeal on assessments
of real property shall, in N2 case0 s%spend t$e
collection of the corresponding realty taxes on
the property involved as assessed @ but wit$o%t
pre;%dice to subseGuent adustment
depending %pon t$e final o%tco#e of t$e
appeal.
S7ECIAL LEV> C> LGUs
Sec "C! 2rdinance I#posing a Special
Lev&! ` ; tax ordinance imposing a special levy
shall:
describe with reasonable accuracy the
nature, extent, and location of the
public works proects or
improvements to be undertaken
state the estimated cost
specify the metes and bounds by
monuments and lines
number of annual installments for the
payment of the special levy which in
no case shall be less than five $-) nor
more than ten $I() years
SThe sanggunian shall 6AT be obliged, in the
apportionment and computation of the special
levy, to establish a uniform percentage of all
lands subect to the payment of the tax for the
entire district. 7ay fix different rates for different
parts or sections thereof, depending on whether
such land is more or less benefited by proposed
work.
Sec "C"! P%blication of Proposed 2rdinance
I#posing a Special Lev&! ` .efore the
enactment of an ordinance imposing a
special levy, the sanggunian concerned
shall:
conduct a public hearing
notify in writing the owners to be
affected or the persons having legal
interest as to the date and place
thereof and afford the latter the
opportunity to express their
positions or obections relative to
the proposed ordinance.
Sec "CC! Taxpa&erRs Re#edies Against
Special Lev&! ` ;ny owner of real property
affected by a special levy or any person having a
legal interest therein may, upon receipt of the
written notice of assessment of the special levy,
avail of the remedies provided for in ?hapter %,
Title Two, .ook II of this ?ode.
Sec"CD! Accr%al of Special Lev&! ` The
special levy shall accr%e on the first da& of
t$e <%arter next following t$e
effectivit& of t$e ordinance imposing such
levy.

COLLEC?ION O: &EAL 7&O7E&?> ?AG
Sec "CE! Date of Accr%al of Tax! ` real
property tax for any year shall accr%e on the
first da& of :an%ar&
from that date it shall constitute a lien on
the property
superior to any other lien, mortgage, or
encumbrance of any kind whatsoever
extinguished only upon the payment of the
delinGuent tax.
Sec "CF! Collection of Tax! ` The collection of
the real property tax with interest thereon and
related expenses, and the enforcement of the
remedies U responsibility of the city or
municipal treasurer.
treasurer may deputi8e the barangay
treasurer to collect all taxes on real
property located in the barangay:
=rovided, the barangay treasurer is
properly bonded for the purpose
=rovided, further, That the premium
on the bond shall be paid by the city
or municipal government concerned.
Sec "CG! Notice of Ti#e for Collection of
Tax! ` treasurer shall post the notice of the
dates when the tax may be paid without
interest publicly accessible place at the city or
municipal hall T notice shall likewise be
published in a newspaper of general circulation
in the locality once a week for two $')
consecutive weeks.
on or before the thirty!first $%Ist) day of
:anuary each year in the case of the basic
real property tax and the additional tax for
the #pecial Fducation Hund $#FH)
or any other date to be prescribed by the
sanggunian concerned in the case of any
other tax levied under this title
Sec "D1! Pa&#ent of Real Propert& Taxes in
Install#ents! ` The owner or the person
having legal interest may pay the basic real
property tax and the additional tax for #pecial
Fducation Hund $#FH) due without interest:
in four $L) eGual installments1
81
the first installment to be due and
payable on or before 7arch Thirty!first
$%Ist)
the second installment, on or before
:une Thirty $%()
the third installment, on or before
#eptember Thirty $%()
and the last installment on or before
9ecember Thirty!first $%Ist)
Sexcept the special levy the payment of which
shall be governed by ordinance of the
sanggunian concerned.
SThe date for the payment of any other tax
imposed under this Title without interest shall be
prescribed by the sanggunian concerned.
S=ayments of real property taxes shall first be
applied to prior &ears delin<%encies0
interests0 and penalties, if any, and only after
said delin<%encies are settled #a& tax
pa&#ents be credited for t$e c%rrent
period.
Sec "D! Tax Disco%nt for Advanced Pro#pt
Pa&#ent! ` If the basic real property tax and
the additional tax accruing to the #pecial
Fducation Hund $#FH) are paid in advance as
provided under #ection '-(
sanggunian may grant a discount 6AT
exceeding twenty percent $'(J) of the
annual tax due.
Sec "D"! Pa&#ent 5nder Protest!
$a) No protest s$all be entertained %nless
t$e taxpa&er first pa&s t$e tax.
There shall be annotated on the tax
receipts the words ^paid under
protest^
The protest in writing must be filed
within thirty $%() days from payment
of the tax to treasurer who shall
decide the protest within sixty $E()
days from receipt.
$b) The tax or a portion paid under protest,
shall be $eld in tr%st by the treasurer
concerned.
$c) In the event that the protest is finally
decided in favor of the taxpayer, the
amount or portion of the tax protested
shall be refunded to the protestant, or
applied as tax credit against his existing or
future tax liability.
$d) In the event that the protest is denied or
upon the lapse of t$e sixt& da& period
prescribed in s%bparagrap$ ?a@0 the
taxpayer may avail of the remedies as
provided for in ?hapter %, Title II, .ook II
of this ?ode.
Sec "DB! Repa&#ent of Excessive
Collections! ` Khen an assessment of real
property tax or any other tax under this Title
found to be illegal or erroneous and the tax is
accordingly reduced or adusted
the taxpayer may file a written clai# for
ref%nd or credit for taxes and interests
with the treasurer within two ?"@ &ears
from the date the taxpayer is entitled to
such reduction or adustment.
The provincial or city treasurer shall decide
the claim for tax refund or credit within
sixty $E() days from receipt thereof
In case the claim for tax refund or credit is
denied, the taxpayer may avail of the
remedies as provided in ?hapter %, Title II,
.ook II of this ?ode.
Sec "DC! Notice of Delin<%enc& in t$e
Pa&#ent of t$e Real Propert& Tax! `
$a) Khen real property tax or other tax
imposed under this Title becomes
delinGuent, treasurer shall immediately
cause a notice of the delinGuency to be
posted at the main hall and in a publicly
accessible and conspicuous place in each
barangay of the local government unit
concerned T notice of delinGuency shall
also be published once a week for two $')
consecutive weeks, in a newspaper of
general circulation in the province, city, or
municipality.
$b) notice shall specify:
the date upon which the tax became
delinGuent
shall state that personal property may
be distrained to effect payment
state that any time before the
distraint of personal property,
payment of the tax with surcharges,
interests and penalties may be made
in accordance with the next following
#ection
and unless the tax, surcharges and
penalties are paid before the
expiration of the year for which the
tax is due except when the notice of
assessment or special levy is
contested administratively or udicially
pursuant to the provisions of ?hapter
%, Title II, .ook II of this ?ode, the
delinGuent real property will be S2LD
at public auction, and the title to the
property will be vested in the
purchaser, subect, however, to the
right of the delinGuent owner of the
property or any person having legal
interest therein to redeem the
82
property within one $I) year from the
date of sale.
Sec "DD! Interests on 5npaid Real Propert&
Tax! ` for failure to pay the basic real
property tax or any other tax levied under this
Title upon the expiration of the periods when
due
subect the taxpayer to the payment of
interest at the rate of two percent ?"M@
per #ont$ on the %npaid a#o%nt until
the delinGuent tax shall have been fully
paid
=rovided, in N2 case shall the total interest
on the unpaid tax or portion thereof
exceed t$irt&8six ?BE@ #ont$s.
Sec "DE! Re#edies 9or T$e Collection 2f
Real Propert& Tax! ` Hor collection of the
real property tax and other tax levied under
this Title, the local government unit concerned
may avail of the remedies:
administrative action thru levy on real
property
or by udicial action.
Sec "DF! Local -overn#ents Lien! `real
property tax and any other tax levied under
this Title constitute a lien on the property
subect to tax
superior to all liens, charges or
encumbrances in favor of any person
irrespective of the owner or possessor
thereof
enforceable by administrative or udicial
action
and may only be extinguished upon payment
of the tax and the related interests and
expenses.
Sec "DJ! Lev& on Real Propert&! ` ;fter the
expiration of the time reGuired to pay real
property tax or any other tax levied under this
Title, real property subect to such tax may be
levied through the issuance of a warrant
on or before, or si#%ltaneo%sl& with, the
instit%tion of t$e civil action for t$e
collection of t$e delin<%ent tax.
The warrant shall operate with the force of a
legal execution throughout the province,
city or a municipality, within the
7etropolitan 7anila ;rea.
The warrant shall be mailed to or served
upon:
the delinGuent owner or person having
legal interest ! in case he is out of the
country or cannot be located, the
administrator or occupant of the
property.
;t the same time, written notice of the
levy with the attached warrant shall be
mailed to or served upon the assessor
who shall annotate it on the tax
declaration
;69 the &egistrar of 9eeds of the
province, city or municipality within
the 7etropolitan 7anila ;rea where
the property is located who shall
annotate the levy on the certificate of
title of the property
Sec "E1! Advertise#ent and Sale! ` Kithin
thirty $%() days after service of the warrant of
levy, the local treasurer shall proceed to
publicly advertise for sale or auction the
property or a usable portion thereof as may be
necessary to satisfy the tax delinGuency and
expenses of sale
The advertisement shall be by posting a
notice at the main entrance of the
provincial, city or municipal building, and
in a publicly conspicuous place in the
barangay where the real property is
located T by publication once a week for
two $') weeks in a newspaper of general
circulation in the province, city or
municipality where the property is located.
advertisement shall specify:
the amount of the delinGuent tax
interest due thereon
expenses of sale
the date and place of sale
name of the owner of the or person
having legal interest
description of the property to be sold.
S;t any time before the date fixed for the sale,
the owner or person having legal interest may
stay the proceedings by paying the delinGuent
tax T interest due T expenses of sale.
S=roceeds of the sale in excess of the delinGuent
tax, the interest due thereon, and the expenses
of sale shall be remitted to the owner of the real
property or person having legal interest therein.
Sec "E! Rede#ption of Propert& Sold! `
Kithin one $I) year from the date of sale, the
owner of the delinGuent real property or
person having legal interest or their
representatives shall have the right to redeem
the property upon payment to treasurer of the:
amount of the delinGuent tax
interest due
expenses of sale ! from the date of
delinGuency to the date of sale
plus interest of not more than two percent
$'J) per month on the purchase price !
from the date of sale to the date of
redemption
S payment shall invalidate the certificate of sale
issued to the purchaser and the owner of the
delinGuent real property or person having legal
83
interest shall be entitled to a certificate of
redemption
SHrom date of sale until the expiration of the
period of redemption, the delinGuent real
property shall remain in possession of the owner
or person having legal interest therein who shall
be entitled to the income and other fruits
Sthe property shall be free fro# lien of s%c$
delin<%ent tax0 interest d%e t$ereon and
expenses of sale.
Sec "E"! 9inal Deed to P%rc$aser! ` In case
the owner or person having legal interest fails
to redee# the delinGuent property, the
treasurer shall execute a deed conve&ing to
t$e p%rc$aser said property, free from lien of
the delinGuent tax, interest due thereon and
expenses of sale
Sec "EB! P%rc$ase of Propert& .& t$e Local
-overn#ent 5nits for *ant of .idder! `
In case there is N2 bidder for the real
property, the real property tax and the related
interest and costs of sale
the treasurer conducting the sale shall
p%rc$ase t$e propert& in be$alf of t$e
local govern#ent %nit concerned to
satisf& t$e clai#
shall be the duty of the &egistrar of 9eeds to
transfer the title of the forfeited property
to the local government unit concerned
wit$o%t t$e necessit& of an order fro#
a co#petent co%rt.
SKithin one $I) year from the date of such
forfeiture, the taxpayer or any of his
representative, may redeem the property by
paying to the treasurer the full amount of the
real property tax and the related interest and the
costs of sale. If the property is not redeemed as
provided herein, absolute ownership thereof shall
be vested on the local government unit
concerned.
Sec "EC! Resale of Real Estate Ta7en for
Taxes0 9ees0 or C$arges! ` The sanggunian
sell and dispose of the real property acGuired
under the preceding section at public auction1
proceeds of the sale shall accrue to the general
fund of the local government unit.
may by ordinance
upon notice of not less than twenty $'()
days
Sec "ED! 9%rt$er Distraint or Lev&! ` Lev&
#a& be repeated if necessar& %ntil t$e f%ll
a#o%nt d%e, including all expenses, is
collected.
Sec "EE! Collection of Real Propert& Tax
T$ro%g$ t$e Co%rts! ` The local government
unit concerned may enforce the collection of
the basic real property tax or any other tax
levied under this Title
by civil action in any court of competent
urisdiction ! civil action shall be filed by
the treasurer within the period prescribed
in #ection 'D( of this ?ode.
Sec "EF! Action Assailing /alidit& of Tax
Sale! ` No co%rt shall entertain any action
assailing t$e validit& or an& sale at p%blic
a%ction of real property or rights until:
taxpayer shall have deposited with the
court the a#o%nt for w$ic$ t$e real
propert& was sold, together with
interest of two percent ?"M@ per
month from the date of sale to the time of
the institution of the action
amount so deposited shall be:
paid to the purchaser at the auction
sale if the deed is declared invalid
shall be returned to the depositor if
the action fails.
S6either shall any court declare a sale at public
auction invalid by reason or irregularities or
informalities in the proceedings ! unless the
substantive rights of the delinGuent owner of the
real property or the person having legal interest
have been impaired.
Sec "EJ! Pa&#ent of Delin<%ent Taxes on
Propert& S%b;ect of Controvers&! ` In any
action involving the ownership or possession
of, or succession to, real property, the court
may, motu propio or upon representation of
the treasurer ! award such ownership,
possession, or succession to any party to the
action
upon payment to the court of the taxes with
interest due on the property and all other
costs that may have accrued
subect to the final outcome of the
action.
Sec "F1! Periods *it$in *$ic$ To Collect
Real Propert& Taxes! ` The basic real
property tax and any other tax levied under
this Title shall be:
collected within five $-) years from the date
they become due
6o action for the collection of the tax,
whether administrative or udicial, shall be
instituted after the expiration of such
period
In case of fraud or intent to evade
payment of the tax, such action may
be instituted for the collection of the
same within ten $I() years from the
discovery of such fraud or intent to
evade payment.
84
The period of prescription within which to
collect shall be s%spended for the time during
which:

$I) The local treasurer is legally prevented
from collecting the tax1
$') The owner of the property or the person
having legal interest therein reGuests for
reinvestigation and executes a waiver in
writing before the expiration of the
period within which to collect1 and
$%) The owner of the property or the person
having legal interest therein is out of the
country or otherwise cannot be located.
;IS7OSI?ION O: 7&OCEE;S
Sec "F! Distrib%tion of Proceeds! `
proceeds of real property tax, including
interest thereon T proceeds from the use,
lease or disposition, sale or redemption of
property acGuired at a public auction shall be
distributed as follows:
?a@ In the case of provinces:
$I) Province ` Thirty!five percent $%-J)
shall accrue to the general fund1
$') =%nicipalit& ` Horty percent $L(J)
to the general fund of the municipality
where the property is located1 and
$%) .aranga& ` Twenty!five percent
$'-J) shall accrue to the barangay
where the property is located.
?b@ In the case of cities:
$I) Cit& ` #eventy percent $D(J) shall
accrue to the general fund of the city1
and
$') Thirty percent $%(J) shall be
distributed among the component
baranga&s of the cities where the
property is located in the following
manner:
$i) Hifty percent $-(J) shall accrue
to the barangay where the
property is located1
$ii) Hifty percent $-(J) shall accrue
eGually to all component
barangays of the city1 and
?c@ In the case of a #%nicipalit& within the
7etropolitan 7anila ;rea:
$I) =etropolitan =anila A%t$orit& `
Thirty!five percent $%-J) shall accrue
to the general fund of the authority1
$') =%nicipalit& ` Thirty!five percent
$%-J shall accrue to the general fund
of the municipality where the property
is located1
$%) .aranga&s ` Thirty percent $%(J)
shall be distributed among the
component barangays of the
municipality where the property is
located in the following manner:
$i) Hifty percent $-(J) shall accrue
to the barangay where the
property is located1
$ii) Hifty percent $-(J) shall accrue
eGually to all component
barangays of the municipality.
?d@ The share of each baranga& shall be
released, without need of any further
action, directly to the barangay treasurer
on a Guarterly basis within five $-) days
after the end of each Guarter and shall not
be subect to any lien or holdback for
whatever purpose.
Sec "F"! Application of Proceeds of t$e
Additional 2ne Percent SE9 Tax! ` The
proceeds from the additional one percent $IJ)
tax on real property accruing to the #pecial
Fducation Hund $#FH):
shall be automatically released to the local
school boards
=rovided, in case of provinces, the
proceeds shall be divided eGually
between the provincial and municipal
school boards
the proceeds shall be allocated for the:
operation and maintenance of public
schools
construction and repair of school
buildings, facilities and eGuipment
educational research
purchase of books and periodicals
sports development as determined and
approved by the 3ocal #chool .oard.
Sec"FB! Proceeds of t$e Tax on Idle
Lands! `proceeds of the additional real
property tax on idle lands shall accrue to the:
respective general f%nd of t$e province
or cit& w$ere t$e land is located
In the case of a #%nicipalit& within the
7etropolitan 7anila ;rea, the proceeds
shall accrue e<%all& to t$e =etropolitan
=anila A%t$orit& and t$e #%nicipalit&
w$ere t$e land is located.
Sec"FC! Proceeds of t$e Special Lev&!
` The proceeds of the special levy on lands
benefited by public works, proects and other
improvements shall accrue to the general
f%nd of t$e local govern#ent %nit w$ic$
financed such public works, proects or other
improvements.
85
S7ECIAL 7&OVISIONS
Sec"FE! Condonation or Red%ction of Real
Propert& Tax and Interest! `sanggunian by
ordinance passed prior to the first $Ist) day of
:anuary of any year T upon recommendation
of the 3ocal 9isaster ?oordinating ?ouncil, may
condone or red%ce0 w$oll& or partiall&0
t$e taxes and interest thereon for the
succeeding year or years in the city or
municipality affected by the calamity in cases
of:
general failure of crops
substantial decrease in the price of
agricultural or agribased products
calamity in any province, city or municipality
Sec"FF! Condonation or Red%ction of
Tax b& t$e President of t$e P$ilippines! `
President may, when p%blic interest so
re<%ires, condone or reduce the real property
tax and interest for any year in any province or
city or a municipality within the 7etropolitan
7anila ;rea.
>. Proble#s
I. ;n Ardinance was passed by the
=rovincial .oard of a =rovince in the
6orth, increasing the rate of basic real
property tax from (.((EJ to IJ of the
assessed value of the real property
effective I :anuary '(((. &esidents of
the municipalities of the said province
protested the Ardinance on the ground
that no public hearing was conducted
and, therefore, any increase in the rate
of real property tax is void. Is there
merit in the protestP Fxplain.
Answer: The protest is devoid of merit.
6o public hearing is reGuired before the
enactment of a local tax ordinance
levying the basic real property tax $;rt.
%'L, 3*? &egulations)
Alternative Answer: <es,
there is merit in the protest
provided that sufficient proof
could be introduced for the non!
observance of public hearing.
.y implication, the #? has
recogni8ed that public hearings
are reGuired to be conducted
prior to the enactment of an
ordinance imposing real
property taxes. ;lthough it was
concluded by the #? that the
presumption of validity of a tax
ordinance can not be overcome
by bare assertions of procedural
defects on its enactment, it
would seem that if the taxpayer
had presented evidence to
support the allegation that no
public hearing was held, the
?ourt should have ruled that the
tax ordinance is invalid
$Higuerres v. ?;, 7arch '-,
IMMM)
'. The real property of 7r. and 7rs.
;ngeles, situated in a commercial area
in front of the public market, was
declared in their tax declaration as
residential because it had been used by
them as their family residence from the
time of its construction in IMM(.
+owever, since :anuary IMMD, when the
spouses left for the "# to stay there
permanently with their children, the
property has been rented to a single
proprietor engaged in the sale of
appliances and agri!products. The
=rovincial ;ssessor reclassified the
property as commercial for tax purposes
starting :anuary IMM,. 7r. and 7rs.
;ngeles appealed to the 3ocal .oard of
;ssessment ;ppeals, contending that
the tax declaration previously classifying
their property as residential is binding.
+ow should the appeal be decidedP
$'((' .ar)
Answer) The appeal should be decided
against 7r. and 7rs. ;ngeles. The law
focuses on the actual use of the property
for classification, valuation and
assessment purposes regardless of
ownership. #ection 'ID of the 3*?
provides that /real property shall be
classified, valued, and assessed on the
basis of its actual use regardless of
where located, whoever owns it, and
whoever uses it.0
%. ; ?o, a =hilippine corporation, is the
owner of machinery, eGuipment and
fixtures located at its plant in 7untinlupa
city. The ?ity ;ssessor characteri8ed all
these properties subect to the real
property tax. ; ?o. appealed the
matter to the 7untinlupa .oard of
;ssessment ;ppeals. The .oard ruled in
favor of the city. In accordance with &;
II'-, ; ?o. brought a petition for review
before the ?T; to appeal the decision of
86
the ?ity .oard of ;ssessment ;ppeals.
Is the =etition for &eview properP
Fxplain. $IMMM .ar)
Answer) 6o. The ?T; is devoid of
urisdiction to entertain appeals from the
decision of the ?.;;. #aid decision is
instead appealable to the ?.;;, which
under the 3*?, has appellate urisdiction
over decisions of the 3.;;.
TARIFF AND
CUSTOMS CODE
I! ARTICLES S5.:ECT T2 D5TK
A! Export ?s%spended except on logs@
and i#port d%ties
.! =eaning of i#portation
Sec- 31+3
;ll articles imported into the =hilippines,
whether subect to duty or not, shall be
entered through the customhouse at a
port of entry
Sec- 31+1
Importation .F*I6#:
vessel or aircraft enters the
urisdiction of =hilippines with intention
to unlade
TF&7I6;TF9:
I) payment of duties, taxes and other
charges
') secured to be paid and legal permit
for withdrawal has been granted
%) articles have legally left the
urisdiction of customs
C! Classes of i#portation
! D%tiable i#portation
;ll articles, when imported from any
foreign country into the =hilippines,
shall be subect to duty upon each
importation, even though previously
exported from the =hilippines,
except as otherwise specifically
provided for in this ?ode or in other
laws. $NI(()
"! Pro$ibited i#portations
Sec- 3+3
a. 9ynamite, gunpowder,
ammunitions and other
explosives, firearm and
weapons of war, and detached
parts thereof, except when
authori8ed by law.
b. Kritten or printed article in any
form containing:
I) any matter advocating or
inciting treason, rebellion,
insurrection or sedition
against the *overnment of
the =hilippines
') forcible resistance to any
law of the =hilippines
%) containing any threat to
take the life of or inflict
bodily harm upon any
person in the =hilippines.
c. Kritten or printed articles,
photographs, engravings,
lithographs, obects, paintings,
drawings or other
representation of an obscene or
immoral character.
d. ;rticles, instruments, drugs and
substances designed, intended
or adapted for preventing
human conception or producing
unlawful abortion, or any
printed matter which advertises
or describes or gives directly or
indirectly information where,
how or by whom human
conception is prevented or
unlawful abortion produced.
e. &oulette wheels, gambling
outfits, loaded dice, marked
cards, machines, apparatus or
mechanical devices used in
gambling, or in the distribution
of money, cigars, cigarettes or
other articles when such
distribution is dependent upon
chance, including ackpot and
pinball machines or similar
contrivances.
f. 3ottery and sweepstakes
tickets, advertisements thereof
and lists of drawings therein.
except those authori8ed by
the =hilippine *overnment
87
g. ;ny article manufactured in
whole or in part of gold silver or
other precious metal, or alloys
thereof, the stamps brands or
marks of which do not indicate
the actual fineness or Guality of
said metals or alloys.
h. ;ny adulterated or misbranded
article of food or any
adulterated or misbranded drug
in violation of the provisions of
the ^Hood and 9rugs ;ct.^
i. 7ariuana, opium poppies, coca
leaves, or any other narcotics
or synthetic drugs which are or
may hereafter be declared habit
forming by the =resident of the
=hilippines, any compound,
manufactured salt, derivative,
or preparation thereof,
except when imported by the
*overnment of the =hilippines
or any person duly authori8ed
by the ?ollector of Internal
&evenue for medicinal purposes
only.
. Apium pipes and parts thereof,
of whatever material.
k. ;ll other articles the
importation of which is
prohibited by law.
Sec- 31+,
It is the duty of the ?ollector to
exercise urisdiction to
! prevent importation $prohibited
importation) or
! secure compliance with legal
reGuirements $articles that may be
imported subect to conditions)
B! Conditionall&8free i#portation
ARTICLE C2NDITI2NS
;Guatic products ) ?aught, gathered and imported by
fishing vessels of =hil registry
) 6ot have landed in foreign territory, or
if landed, solely for transshipment
FGuipment used
for the salvage
of vessels or
aircraft not
available locally
) bond U I V x of ascertained duties,
taxes and charges
) must be exported within E months
?osts of repair
made in foreign
country of =hil
vessels aircrafts
) =hil must not have adeGuate facilities
to make repair
) >essel was compelled by weather or
casualty to go to foreign port for repair
) Fxcludes value of article used for repair
;rticles brought
into =hil for
) to be re!exported
) bond U I V x of ascertained duties,
repair,
processing or
reconditioning
taxes and charges
) must be exported within E months
Trophies, pri8es
$medals,
badges, cups)
Those received
as honorary
distinction
=ersonal and
household
effects of
returning =hil
residents
) formally declared and listed before
departure
) including those purchased abroad
necessary and appropriate and used for
comfort and convenience
) must have been using item abroad for
more than E mos
) must accompany them or arrive within
reasonable time
) not in commercial Guantities
) total 9> not exceed =',(((
in excess of =',((( -(J ad
valorem
) returning resident has not previously
availed of this benefit within I year
) if resident was abroad for less than E
mos -(J ad valorem $9> Y='T)
Fffects of
travelers, tourist
$wearing
apparel,
personal
adornment,
toiletries,
portable tools
and instruments,
costumes)
) arrive with or at a reasonable
time
) necessary and appropriate for
wear and use according to
nature of ourney, comfort and
convenience
) articles 6AT for hire, sale,
barter
) ?ollector may reGuire: written
commitment or bond
=ersonal and
household
effects, vehicles
of foreign
consultants and
experts hired or
rendering
service to govt
! including staff
and families
! accompany them or arrive at a
reasonable time
! in Guantities and kind necessary and
suitable to the profession, rank or
position
! for their own use, 6AT for sale, barter,
hire
! ?ollector may reGuire: written
commitment or bond
=rofessional
instruments
Tools of trade
Kearing apparel
9omestic
animals
=ersonal and
household
effects
belong to $I)
persons coming
to settle in =hil
and $') overseas
Hilipinos
) in Guantities and kind necessary and
suitable to the profession, rank or
position
) for their own use, 6AT for sale, barter,
hire
) change of residence is bona fide
) privilege of free entry was never
granted to them before or Gualifies
under 3AI I(-, IE%, 'I(
;rticles used
exclusively for
public
entertainment1
display in public
expos1
exhibition or
competition for
pri8es1 devices
for proecting
picture
) must file bond $I V B)
) exported within E mos
) not exhibited for profit
) otherwise, confiscationT penalty
.rought by
foreign film
producers for
making or
recording motion
pictures on
location in =hil
=hotographic
and
cinematographic
films,
undeveloped,
exposed outside
) must file bond $I V B)
) exported within E mos $unless
extended by ?ollector for another E
mos)
) principal actors are Hilipinos
) affidavit by importer that the exposed
films are same films previously
exported
88
=hil by resident
Hilipinos or =hil
producing
companies
Importations
used by foreign
embassies,
legations,
agencies of
foreign govt
) &eciprocity: such foreign country must
grant same privilege to =hil agencies
;rticles for
personal or
family use of
members and
attaches of
foreign
embassies,
legations,
consular officers
and other reps of
foreign govt
) such privileges must be accorded in a
special agreement between =hil and
the foreign country
) privilege may be granted only upon
specific instructions of #ec of Hinance
which will be given only upon reGuest
of 9H;
;rticles donated
to or for account
of relief
organi8ation
) org not for profit
) for free distribution to the needy
?ontainers,
holders and
similar
receptacles
) except those that are reusable for
shipment or transportation of goods
#upplies of
vessel or aircraft
) for use or consumption of passengers
on board
) any surplus or excess shall be dutiable
;rticles and
salvage after '
years from filing
protest
) vessels must have been wrecked or
abandoned in =hil waters
?offins or urns
containing
human remains,
bones ashes
=ersonal and
household
effects of
deceased
FB?F=T vehicles
) not exceed =I(,(((
#amples
!
unsaleable
! no
appreciable
commercial
value
! 7odels not for
practical use
#ample
medicines
?ommercial
samples
) marked /sample sale punishable by
law0
) for purpose of introducing new product
) imported by person duly registered and
identified to be engaged in that trade
) importations authori8ed by #ec of
Hinance
) authori8ed by 9A+
) not available in =hil
) not exceed =I(,(((
in excess of =I(,(((, it may be
entered in bond or for consumption
) bond $'x) conditioned on exportation
within E mos
;nimals and
plants
for scientific,
experimental,
propagation,
botanical,
breeding
8oological and
defense
purposes
Fconomic,
technical,
vocational,
scientific,
philosophical,
historical and
cultural books
and publications
=hil articles
previously
exported and
returned without
increasing value
or improved
condition
Horeign articles
previously
exported when
returned after
having been
exported and
loaned for use
temporarily
abroad solely for
exhibition
Horeign
container used in
packing exported
=hil products
6ote that if a drawback or bounty was
allowed to any =hil article under this
subsection, upon re!importation article shall
be subect to duty eGual to the bounty or
drawback
;rticles and
supplies
imported by and
for use of
scheduled
airlines
operating under
congressional
franchise
$;ircraft,
eGuipment and
machinery,
spare parts
commissary and
catering
supplies,
aviation gas, fuel
and oil)
) such articles are not available locally in
reasonable Guantity, Guality and price
) necessary or incidental to proper
operations
machineries,
eGuipment, tools
for production,
plants to convert
mineral ores into
saleable form,
spare parts,
supplies,
materials,
accessories,
explosive,
chemicals,
transpo and
communication
facilities
imported by and
used by new
mines and old
mines
aircrafts
imported by agro
industrial
companies,
spare parts and
accessories
) such articles are not available locally
inn reasonable Guantity, Guality and
price
) necessary or incidental to proper
operations
) used in their agri and industrial
operations
#pare parts of
vessels or
aircrafts of
foreign registry
engaged in
foreign trade
) brought to =hil as replacement or for
emergency repair
) spare parts utili8ed to secure safety,
seaworthiness or airworthiness, enable
it to continue voyage or flight
;rticles of easy
identification
exported from
=hil for repair
and
subseGuently
reimported
) cannot be repaired locally
) cost of repair made on article shall pay
%(J ad valorem
Trailer chassis
imported by
shipping
) bond $I V x) to cover I year
) must be properly identified and
registered with 3TA
89
companies for
handling
containeri8ed
cargo
) subect to customs supervision fee
) deposited in ?ustoms 8one when not in
use
) upon expiration of period $I yr or as
extended by ?ommissioner) duties and
taxes shall be paid
=ersonal and
household
effects $including
one car)
) officer/ Fe of
9H;, attacha,
staff assigned to
=hil diplomatic
mission abroad
) personnel of
&eparations
7ission in Tokyo
) ;H= military
personnel in
#F;TA
) ;H= military
personnel
accorded
diplomatic rank
on duty abroad
returning from
regular
assignment
reassignment
dies
resigns
retires
) ?ar must have been purchased or
ordered before the mission or
consulate received his order of recall
) the value of personal and household
effects shall not exceed %(J of his
total salary
II! RATES 29 D5TK
A! -eneral R%les
Sec- 3+6
There shall be levied, collected and paid
upon all imported articles the rates of
duty indicated.
7ax rate: 6AT exceed I((J ad
valorem
&ates of duty shall apply to ;33
products whether imported directly or
indirectly of all foreign products which
do not discriminate against =hilippine
products
If foreign country discriminates
additional I((J across!the!
board duty on their products
&ates of duty shall be subect to periodic
investigation by Tariff ?ommission and
may be revised by =resident upon
recommendation of 6F9;.
Sec 3+2
9&;K.;?O# ! in the nature of refund or
tax credit
a) Huel used for =ropulsion of >essels
engaged in trade with foreign
countries or coastwide trade
refund or credit not exceeding
MMJ of duty imposed by law on
such fuel
b) petroleum oils and oils from
bituminous minerals, crude oils
imported by non electric utilities
and then sold to electric utilities for
generation of electric power
refund or credit not exceeding
-(J of duty imposed by law
c) exportation of articles manufactured
or produced in =hil $including
packing T covering T
marking/labeling) of imported
materials for which duties have
been paid
?A69ITIA6#:
I. imported material was actually used
in the production of article to be
exported
'. refund or credit shall not exceed
I((J of duties paid on the
imported material
%. no determination by 6F9; of the
reGuirement for certification on non
availability of locally produced or
manufactured competitive
substitutes for the imported
material
$I think this means there are no
local substitutes for the material..)
L. exportation must be made I year
after importation of material claim
for refund or credit must be made E
months from exportation
-. when ' or more result from the
used of same imported material,
apportionment shall be made
every application for drawback must
pay =-(( filing, processing and
supervision fees
claims shall be paid by .ureau of
?ustoms within E( days after
receipt of properly accomplished
claims
.! .asis of D%t&
Sec- 1+3 >asis of #utiable ?alue (note:
RA *3*3 amended this section)
90
The 9> shall be the Transaction >alue
which is the price actually paid or
payable for the goods when sold for
export to the =hil, adusted by:
a. commissions and brokerage fees
costs of containers
costs of packing
b. value of materials, components,
parts and item incorporated in the
imported good1
tools, dies, moulds used I the
production1
materials consumed in the
production1
engineering, development, artwork,
design, plans and sketches
undertaken not in =hil
such goods and services were
supplied by buyer to seller free of
charge or at a reduced rate to the
extent that value was not included
in the price paid
c. royalties and license fees that buyer
paid
d. any part of the proceeds of a
subseGuent resale, disposal or use
of good that accrues to the seller
e. transportation cost from port of
export to port of entry in =hil
f. loading, unloading and handling
charges $arrastre)
g. insurance
;lternative 7ethods
M
:
I. T> of identical goods sold for
export in =hil at or about the same
time as good being valued
'. T> of similar goods sold for export
in =hil at or about the same time as
good being valued
if 9> still cannot be determined using
through the successive application of
the methods above, the order of
succession of the ff may be reversed
upon reGuest of the importer:
%. unit price at which the imported or
similar or identical good is sold
domestically
9
Fethods are applied sccessively" 0lternative
methods are sed (hen vale cannot be determined
thro!h sccessive application of previos methods"
same condition as when imported
to persons not related to seller at or
about the same time of the
importation of the goods being
valued

?A7="TF9 >;3"F U
cost of raw materials T profit and
general expenses T freight T
insurance fees T transpo expenses
L. using other means consistent with
accepted principles of *;TT
values shall be ascertained by
?ommissioner from reports of
revenue and commercial attaches
values shall be published in at least
I newspaper of general circulation
party dissatisfied with the values
can file protest I- days from date of
publication
if it becomes necessary to delay the
final determination of 9>, release
of imported goods may be had by
filing cash bond $imposable duties
and taxes T '-J thereof)
/&easonable 9oubt0 refers to any
condition that creates a probable
cause to make the ?ommissioner of
?ustoms believe in the inaccuracy
of the invoice value of imported
goods as declared by importer.
It may include the following
situations:
I. if sale price is subect to some
consideration which value
cannot be determined such as:
a. seller fixes price on
condition that buyer will
also buy other goods in
specified Guantities
b. price of imported goods is
dependent upon price at
which buyer sells other
goods to seller
c. price is established on the
basis of a form of payment
extraneous to the Imported
goods
'. part of proceeds of subseGuent
resale , disposal or use of
goods will accrue to the seller
91
%. buyer and seller are related to
one another and relationship
affected the price. They are
related if:
) officers or directors of one
anothers business
) legally recogni8ed partners
in business
) Fr!Fe (removed in RA
*3*3, but included in CA 1-
77)
) ;ny person owns, controls
or holds -J or more of the
outstanding voting stocks
of both of them
) Ane of them directly or
indirectly controls the other
) .oth directly or indirectly
controlled by third person
) members of same family
including brothers and
sisters $whether full or
half), spouse, ancestors
and lineal descendants
(note chan'e in CA 1-77)
/identical *oods0 @ same in all
respects including physical
characteristics, Guality and
reputation.
/#imilar *oods0 @ although not alike
in all respects, have like
characteristics and component
materials which enable them to
perform the same functions and be
commercially interchangeable
Sec- 1+1 >ases of #utiable Cei'ht
a) gross weight: weight of article T
weight of all containers, packages,
holders and packing where articles
were contained during importation
b) legal weight: weight of article T
weight of immediate containers,
holders where such articles are
usually contained at the time of
their sale to the public in retail
Guantities
c) net weight: only the actual weight
of article
d) articles affixed to cardboard, cards,
paper, wood shall be dutiable
together with weight of such
holders
e) when a single package contains
articles dutiable according to
different weights, the common
exterior of the receptacle shall be
prorated.
Sec- 1+0 Rate of !"chan'e
>alue Guoted in foreign currency shall
be converted into =hil currency at the
exchange rate published by ?entral
.ank
Sec- 1+6 !ffective #ate of Rates of
Imort #ut%
Imported articles shall be subect to
rates of import duty existing at the time
of entry or withdrawal from warehouse
Hor articles abandoned, forfeited or
sei8ed by government and sold at public
auction, the rate of duty shall be the
rates in force at the time of auction
9uty based on weight, volume and
Guantity shall be levied and collected on
the weight, volume and Guantity at time
of entry into warehouse or date of
abandonment/forfeiture/sei8ure.
Sec- 1+4
Imported article deemed /entered0 in
=hil for consumption when:
) entry form is properly filed and
accepted together with related
documents
) duties, taxes, fees and other
charges are paid or secured to be
paid imported article
deemed to be /withdrawn0 from
warehouse in the =hil for consumption
when:
) entry form is properly filed and
accepted together with related
documents
) duties, taxes, fees and other
charges are paid or secured to be
paid
Sec- 30+*
?ontents of ?ommercial Invoice
a. place, date, person by whom and
the person to whom articles are sold
If imported other than in a
purchase, place from which
shipped, date when the person to
whom and by whom they are
shipped
b. port of entry
c. detailed description of the articles
$sufficient for tariff classification and
statistical purposes)
d. Guantities
e. if articles bought in pursuance to
purchase, purchase price in the
currency of purchase and the unit of
92
Guantity in which the articles were
bought
f. if articles shipped otherwise than
purchase, value of each article in
unit which the article is usually
bought and sold and in the currency
they are usually transacted
A& price in the currency
manufacturer would receive if sold
in ordinary course of trade in usual
wholesale Guantities
g. all charges
h. discounts, rebates, drawbacks,
bounties
i. current home consumption value or
price
. other facts necessary for proper
examination, appraisement and
classification of the articles
Sec- 30+7 Certificate of Invoice
?ommercial invoice must be presented
to the consular officer of the =hil for
certification at the time or before or
immediately after the shipment of article
?onsular invoice shall be certified in
consular district where articles were
manufactured or purchased or shippers.
In the absence of =hil consul, the
invoice may be certified by consular
officer in the district nearest the place of
exportation or person designated by
9H;
Sec- 303+
;ll importations exceeding =I(, ((( in
9> shall be entered only
I. upon presentation of consular invoice
under penalties of falsification, perury.
;ll importations exceeding =I(, ((( in
9> shall be entered only upon
presentation of consular invoice under
penalties of falsification, perury A&
'. ;ffidavit showing cause why it is not
possible to produce invoice T bond
Fxempt from consular invoice
reGuirement:
a. conditionally free importations
b. tax free importations
c. importations of government
agencies and instrumentalities
d. importations on consignment basis
under &; %I%D and &; EI%- for re
export
Sec- 3030 Information ;urnished on
Classification and ?alue
?lassification:
Khen article not specifically classified in
code, the interested party, importer or
foreign exporter may submit a sample
with full description of component
materials in a written reGuest.
>alue:
"pon written application, ?ollector shall
furnish importer within %( days the
latest information s to the 9> of articles
to be imported.
Importer must present all pertinent
papers and documents, act in good faith
and unable to obtain information due to
unusual conditions
Information given is not an appraisal nor
is it binding upon the ?ollectors right of
appraisal.
Customs A(ministrative Or(er H +/
*0
?A7=A6F6T# AH 9"TI;.3F >;3"F
?A#T T I6#"&;6?F =&F7I"7 T H&FI*+T
I. ?A#T
a. =rimary cost
! export value $at time of
export or date nearest
exportation) at which the same,
identical or similar article is
freely offered for sale in the
principal export market of the
exporting country in the usual
wholesale Guantities and in
ordinary course of trade

! including: value of
containers, coverings, packing
other expenses, costs and
charges incident to shipping
article to =hil
b. ;lternate ?ost
! to be used if value cannot be
ascertained thru the procedure
given above or reasonable
doubt exists as to the fairness
of the value determined thru
that process
Cost at Countr% of .anufacture
or )ri'in
if such country is not the
country of exportation
93

Third Countr% Cost
! export value of the article
from a country with the same
stage of economic
development as the country
of exportation
#omestic Cholesale Sellin'
&rice
! domestic selling price in
7etro 7anila or other
principal market in =hilippines
7I6"#
'-J selling price $for
expenses and profits)
duties and taxes paid
c. Identical and #imilar goods
Identical 8oods @ same in all
respects $physical
reputation)
minor differences in
appearance shall not preclude it
from being regarded as
identical
Similar 8oods @ not alike in all
respects
) like characteristics and
component materials
) perform same functions
) commercially
interchangeable
factors to determine KA6
similar: Guality, reputation and
trademark
d. &elationship of Fxport >alue and
Invoice >alue
export value b importers
invoice or transaction value
Q may be obtained from
identical or similar articles of
other transaction or source of
information
2. I6#"&;6?F =&F7I"7 covering
transportation to port of entry to
=hil
3. H&FI*+T covering transportation
to port of entry to =hil
&A #!#! (3772)
CASIS O: ;U?IACLE VALUE O:
IM7O&?E; A&?ICLES' AMEN;ING
7; !"0" (?A&I:: AN; CUS?OMS
CO;E,
The 9> of an imported article shall be
the transaction price, which shall be the
price actually paid or payable for the
goods when sold for export to the =hil,
adusted by adding the ff to the extent
that they are incurred by the buyer but
not included in the price paid:
a. commissions and brokerage fees
costs of containers
costs of packing
b. value of materials, components,
parts and item incorporated in the
imported good1
tools, dies, moulds used in the
production1
materials consumed in the
production1
design, plans and sketches
undertaken not in =hil
such goods and services were
supplied by buyer to seller free of
charge or at a reduced rate to the
extent that value was not included
in the price paid
c. royalties and license fees that buyer
paid
d. any part of the proceeds of a
subseGuent resale, disposal or use
of good that accrues to the seller
e. transportation cost from port of
export to port of entry in =hil
f. loading, unloading and handling
charges $arrastre)
g. insurance
;lternative 7ethods:
I. Transaction >alue of identical goods
sold or export to the =hil at or about
the date of exportation of the good
being valued
if 9> still cannot be determined
using through the successive
application of the ' methods above,
the order of succession of the ff
may be reversed upon reGuest of
the importer:
'. unit price at which the imported or
similar or identical good is sold
domestically
94
same condition as when imported
to persons not related to seller at or
about the same time of the
importation of the goods being
valued subect to applicable
deductions provided under *;TT
?A7="TF9 >;3"F U
cost of raw materials T profit and
general expenses T freight T
insurance fees T transpo expenses
%. using other means consistent with
accepted principles of *;TT
values shall be ascertained by
?ommissioner from reports of
revenue and commercial
attaches
values shall be published in at
least I newspaper of general
circulation
party dissatisfied with the
values can file protest I- days
from date of publication
if it becomes necessary to delay
the final determination of 9>,
release of imported goods may
be had by filing cash bond
$imposable duties and taxes T
'-J thereof)
Z&easonable shall refer to any condition
that creates a probable cause to make
the ?ommissioner believe in the
accuracy of the invoice value of
imported goods as declared by importer.
#uch conditions may include, but not
limited to:
I. if sale price is subect to some
consideration which value
cannot be determined such as:
) seller fixes price on
condition that buyer will
also buy other goods in
specified Guantities
) price of imported goods is
dependent upon price at
which buyer sells other
goods to seller
) price is established on the
basis of a form of payment
extraneous to the Imported
goods
'. part of proceeds of subseGuent
resale , disposal or use of goods
will accrue to the seller
%. buyer and seller are related to
one another and relationship
affected the price. They are
related if:
) officers or directors of one
anothers business
) legally recogni8ed partners
in business
) ;ny person owns, controls
or holds -J or more of the
outstanding voting stocks
of both of them
) Ane of them directly or
indirectly controls the other
) .oth directly or indirectly
controlled by third person
) members of same family
including brothers and
sisters $whether full or
half), spouse, ancestors
and lineal descendants
/identical *oods0 @ same in all respects
including physical characteristics, Guality
and reputation.
/#imilar *oods0 @ although not alike in
all respects, have like characteristics
and component materials which enable
them to perform the same functions and
be commercially interchangeable
Customs A(ministrative Or(er H +/
**
(effective Kan 3, 3777)
#!T!R.INATI)N ); #=TIA>:! ?A:=!
9utiable >alue $9>) shall be determined
using one of the E methods of valuation.
T$ese #et$ods #%st be applied in
se<%ence. +owever, method L and -
may be reversed at reGuest of
importer$unless there shall be difficulty
in using method - in which case
?ommissioner shall reect reGuest)
=et$od S
TRANSACTI2N /AL5E
=rice actually paid or payable for goods
when sold for export to =hil
T commissions [ brokerage fees
T cost of containers
T cost of packing $labor, materials)
T assists $value of goods and services
supplied by the buyer free of charge or
at a reduced price for use in connection
95
with the production and sale for export
of the good)
T royalties [ license fees
T value of any part of the proceeds of
subseGuent resale, disposal or use of
imported goods that accrue directly or
indirectly to seller
T cost of transport
T loading, unloading, handling
T insurance
9> must 6AT include:
) charges for construction, erection,
assembly maintenance or technical
assistance undertaken after
importation
) cost of transport after importation
) duties and taxes of =hil
) other permissible deduction under
KTA >aluation ;greement
?A69ITIA6# so the Transaction >alue
shall be the 9>
I. sale for export to =hil
'. no restrictions as to the disposition
or use of goods by buyer except:
) those imposed by law or =hil
authorities
) limit the geographical area
where goods may be resold
) do not substantially affect the
value of the goods
%. not be subect to some condition or
consideration for which value
cannot be determined
L. no part of the proceeds of any
subseGuent disposal shall accrue to
the seller
-. buyer and seller are not related or if
they are, relationship did not affect
the price
9FF7F9 &F3;TF9 IH:
) officers or directors of one anothers
business
) legally recogni8ed partners in
business
) Fr!Fe
) ;ny person owns, controls or holds
-J or more of the outstanding
voting stocks of both of them
) Ane of them directly or indirectly
controls the other
) .oth directly or indirectly controlled
by third person
) Together they directly or indirectly
control a third person
) &elated by affinity or consanguinity
up to L
th
civil degree
IH &F3;TF9, "#F AH T> ;??F=T;.3F
IH:
I. circumstances surrounding
transaction show that relationship
did not influence the price
'. T> closely approximates:
) T> of unrelated buyers of
identical or similar goods
) 9eductive value of identical or
similar goods determined
according to method cL
) ?omputed value of identical or
similar goods determined
according to method c-
=et$od S "
TRANSACTI2N /AL5E 29
IDENTICAL -22DS
The 9> shall be the transaction value of
identical goods sold for export to the
=hil and exported at or about the same
time as the goods being valued.
Identical goods must be same
commercial level and substantially same
Guantity as the goods being valued.
Identical 'oods
) #ame in all respects $physical
reputation)
) =roduced in the same country as
the goods being valued
) =roduced by producer of the goods
being valued
excludes imported goods for which
design work, plans and sketches is
undertaken in the =hil and provided by
the buyer to the producer free of charge
or at a reduced rate
Khen no identical goods produced
by the same person
identical goods produced by
different producer in the same
country
If 6A identical goods at same
commercial level and same
Guantity,
T> of identical goods at a
different commercial level and
different Guantity may be
utili8ed
T> shall be adusted upward or
downward to account for the
difference
=et$od SB
96
TRANSACTI2N /AL5E 29 SI=ILAR
-22DS
The 9> shall be the transaction value of
similar goods sold for export to the =hil
and exported at or about the same time
as the goods being valued.
#imilar goods must be same commercial
level and substantially same Guantity as
the goods being valued.
Similar 'oods:
) like characteristics and like
component materials
) capable of performing same
functions
) commercially interchangeable
) produced in same country
) produced by dame producer
excludes imported goods for which
design work, plans and sketches is
undertaken in the =hil and provided by
the buyer to the producer free of charge
or at a reduced rate
Khen no similar goods produced by
the same person
similar goods produced by
different producer in the same
country
If 6A similar goods at same
commercial level and same
Guantity,
T> of similar goods at a different
commercial level and different
Guantity may be utili8ed
T> shall be adusted upward or
downward to account for the
difference
=et$od S C
TAE DED5CTI/E /AL5E
9> is determined on the basis of sales in
the =hil of goods being valued of
identical or similar imported goods less
certain expenses resulting from
importation and sale of goods.
9eductive >alue is determined by
making a deduction from the established
price per unit for the aggregate of the ff
elements:
a. ?ommissions A&
b. additions made in connection with
profit and general expenses ;69
c. transport, insurance and associated
costs
d. customs duties and other national
taxes
=&I?F ! ?A77I#IA6#/;99ITIA6# ! ?A#T# ! 9"TIF#/T;BF#
U 9F9"?TI>F >;3"F
?A69ITIA6#:
I. sold in the =hil in the same
condition as imported
'. sales taken place at or about the
same time of importation of good
being valued
%. if no sale took place at or about the
time of importation
use sales at the earliest date
after importation $of the similar or
identical good) but before expiration
of M( days
L. if no sale meet the above
conditions, importer may choose
the use of sales of goods being
valued after further processing
/at or about the same time0
L- days prior to and L- days after
importation
=et$od S D
TAE C2=P5TED /AL5E
9> is determined on the basis of cost of
production T profit T general expenses
reflected in sales from exporting country
to the =hil of goods of same class or
kind
9> is calculated by:
determine aggregate of relevant costs,
c$arges and expenses or value of $I)
materials and $') production or
processing costs
T costs $containers, packing, assists,
engineering, artwork, plans and
sketches undertaken in =hil and charged
to producer
T profits and general expenses
T cost of transport, ins%rance and
c$arges to the port or place of
importation
=et$od S E
TAE 9ALL.AC, /AL5E
) 9> cannot be determined using any
of the above methods
) "se other reasonable means
consistent with principles and
general provisions of *;TT
C! Special D%ties
Sec- 0+3 #umin' #ut%
Khen #ec of Hinance receives a petition
or has reason to believe that a specific
97
foreign article is being imported into, or
sold/ likely to be sold in =hil, at a price
less than its normal value
within '( days, must determine
prima facie case for dumping
Sec- 0+1 Countervailin' #ut%
Khen an article is granted any bounty,
subsidy or subvention upon its
production, manufacture or exportation
in the country of origin and importation
of which is likely to inure an established
industry or retard the establishment of
industry in =hil
countervailing duty U ascertained or
estimated amount of bounty, subsidy or
subvention
Inury criterion shall be applied only
on imports from countries which
adhere to *;TT
If article was allowed a drawback,
only the excess of the amount of
drawback over the total duties and
taxes shall constitute bounty,
subsidy, subvention
Khen the conditions which
necessitated the imposition of
countervailing duties have ceased
must discontinue imposition
Sec- 0+0 .arHin'
a. marking of articles
marked in official language of =hil
and in conspicuous places to
indicate to the ultimate purchaser
the name of country of origin
b. marking of containers
failure to mark -J ad valorem
failure or refusal to mark within %( days
from date of notice shall constitute act o
abandonment.
no imported article shall be delivered
until it has been inspected, examined or
appraised
Sec- 0+6 #iscrimination b% ;orei'n
Countries
The president may proclaim new and
additional duties in an amount not
exceeding I((J ad valorem on articles
from country where:
I. imposes an unreasonable charge,
exaction not eGually enforceable in
other laws
'. discriminate against the commerce
of =hil in such a way that it places
=hil commerce at a disadvantage
D! 9lexible Tariff Rates
Sec-6+3
=res is empowered to:
I. increase, reduce or remove existing
rates
'. establish Guota or ban import of any
commodity
%. impose an additional duty not
exceeding I(J ad valorem
the pres power to increase or decrease
rates of import duty shall include
authority to modify the form of duty
any order of =res shall take effect %(
days after promulgation
except if the imposition of additional
duty is less than I(J, it shall take
effect upon the discretion of the
=resident.
III! I=P2SITI2N 29 D5TIES
A! Persons liable
9eemed Awner of Imported ;rticles:
I. consignee
'. holder of bill of lading
%. if consigned to order, the consignor
L. underwriters of abandoned articles
and salvors of articles saved at a
wreck
the liability of importer for the
duties, taxes, fees and other
charges constitute a personal debt
due to the government which may
be discharged only upon full
payment. It also constitutes a lien
upon the articles imported while
articles are in custody or subect to
control of government
all importations by the government,
its branches, instrumentalities,
*A??s, agencies or
instrumentalities owned or
controlled by government are
subect to similar duties, taxes and
fees except for those provided in
#ec. I(- $conditionally free
imports)
.! Declaration
98
imported articles must be entered in
customhouse at the port of entry
within %( days from date of
discharge by:
I. importer, being holder of . of 3
'. customs broker
%. agent
Import entries:
I. Informal entry
) articles of commercial nature
intended for sale, barter or hire
the 9> is =',((( or less
) personal and household effects,
not in commercial Guantity, for
personal use
'. Hormal entry
) may be for immediate
consumption, or under
irrevocable domestic letter of
credit, bank guarantee or bond
for:
a. placing article in customs
bonded warehouse
b. constructive warehousing
and immediate
transportation to other =hil
ports upon proper
examination and appraisal
c. constructive warehousing
and immediate exportation
Kritten 9eclaration of Import Fntry
must contain statements that declare:
I. full account of value or price
'. the invoice and entry contains ust
and faithful account of the value or
price of articles1 nothing has been
omitted or concealed
%. to the best of knowledge of
declaring, all the invoices and . of 3
are the only ones in exiting in
relation to the importation in
Guestion
L. the invoices, entries and . of 3 are
genuine and true
signed by importer, consignee or
holder of bill, manager of corporation,
firm or association, licensed customs
broker
Horm of Import Fntry:
) shall be signed by person making
entries
) have reGuired c of copies as
prescribed by &&
?ontents:
) name of importing vessel or aircraft
) c and marks of packages,
) Guantity
) description of article
) value set in the invoice
?. Exa#ination0 Appraisal and
Classification $NIL(-!(,)
=rocedure:
I. appraisers shall ascertain, estimate,
determine the value or price of
articles
file action within I year
'. examiners shall render a report
%. appraisers shall describe all articles
on the face of entry in tariff
I- days
;n appraisal, fully passed upon and
approved by ?ollector, may not be
altered or modified except:
I. statement of error
'. reGuest for reappraisal and/or
classification
if duty assessed amount is lower than
the entered value
D! Assess#ent of Taxes
F. Li<%idation $NIE(I!(%)
3iGuidation shall be made on the face of
entry showing the particulars
9aily record of entries liGuidated shall
be posted ion the public corridor of
customs house
Tentative 3iGuidation
!if to determine the exact amount due
some future action is reGuired,
liGuidation is deemed tentative as to
items affected and shall be subect to
future and final adustment and
settlement within E months
Hinality of 3iGuidation:
;fter expiration of I year from date of
final payment of duties
In the absence of protest, final and
conclusive between the parties unless
liGuidation was tentative
I/! RE=EDIES 29 TAE -2/ERN=ENT
A! Extra;%dicial
99
! Enforce#ent of Tax Lien
Sec- 34+*
Khen an importer has an
outstanding and demandable
account with the .ureau of
?ustoms,
) ?ollector shall hold the delivery
of the article
) "pon notice, he may sell such
importation or a portion of it to
satisfy the obligation
importer may settle his obligation
anytime before the sale
"! SeiH%re and 9orfeit%re
Sec 11+4
K+A: customs official
Hisheries ?ommissions
=hilippine ?oast *uard
to make sei8ure of any vessel,
aircraft, cargo, animal or any
movable property when the same is
subect to forfeiture or liable for any
fine under the tariff and customs
law
A#.INISTRATI?! &R)C!!#IN8S
(Secs 10+3 $ 1032)
Khen sei8ure is made:
I. ?ollector shall issue a warrant
for t$e detention of t$e
propert&
Cas$ bond
) if importer wishes to secure
release of article for
legitimate use
) amount fixed by ?ollector
) conditioned on payment of
appraised value of article
and/or fine, expenses,
costs
article will 6AT be released
if:
) prima facie evidence of
fraud in the importation5
) article is prohibited by law
'. Report to ?ommissioner and
?hairman of ?ommission of
;udit
%. written notice to owner or
importer
he shall he given opportunity
to be heard
6otification to an unknown
owner
) posting for I- days in the
public corridor of
customhouse
) publication in newspaper
) other means ?ollector
considers desirable
L. ?ollector shall make a list and
particular description and
classification of the sei8ed
property, appraisal based on
local wholesale values by
) at least ' appraising
officials
) absent such, ' competent
disinterested citi8ens
If within I- days from
notification, no owner or agent
is found or appears before
?ollector
property forfeited to
*overnment and sold at auction
SETTLE=ENT
Khile case is pending, ?ollector
may accept settlement of any
sei8ure case
) upon approval of
?ommissioner
) payment of fine $ '-J !
,(J of the landed cost of
the article)
In case of forfeiture, should
pay the domestic market
value of the sei8ed article
#ettlement 6AT allowed:
Hraud in importation
importation prohibited by law
release would be contrary to
law
PR2TEST
) written protest
) payment before protest is
necessary $amount due T
docket fee)
Khen: at the time payment of
the amount claimed to be due
is made within I- days
thereafter
Horm: filed according to &&1
point out the particular decision
or ruling grounds used as basis
for the protest
100
#cope: limited to the subect
matter of a single adustment
$refers to the entire content of
one liGuidation including duties,
fees, surcharges and fines) or
other independent transaction
failure to protest will render
the action of the ?ollector final
and conclusive except for
manifest error
upon demand of ?ollector,
the importer shall furnish
samples of the articles which
are the subect of the protest
+F;&I6*: I- days after filing
of protest
9F?I#IA6: within %( days
&F>IFK .< ?A77I#IA6F&: I-
days after notification in writing
of ?ollectors decision
if decision of ?ollector is
adverse to government
automatic review
9F?I#IA6 AH ?A77I#IA6F&:
within %( days
notice to party who brought
case $ if sei8ure case, personal
service if practicable)
&F>IFK .< #F?&FT;&< AH
HI6;6?F
if decision of ?ollector is
adverse to government
automatic review
ddd Inaction of ?ommissioner
or #ecretary for %( days from
receipt of records of the case
decision under review
becomes final and executory
;==F;3 TA ?T;: within %( days
from receipt of copy of decision
C2=PR2=ISE
?ommissioner may compromise
any case subect to approval by
#ecretary
.! :%dicial
/! RE=EDIES 29 TAE TA>PAKER
;. Ref%nd $NID(D!(,)
Khen:
I. manifest clerical error made in
invoice or entry
'. error in return of weight, measure
and gauge
) certified, under penalties of
falsification or perury, by
examining official
>8IR;,8
M,I##8+ +?#I:8 #? IF&?,#8,' ?M+8,
>8##D8F8+# &,?#8>#
O80,I+E
$8:I>I?+
,evie( by
:ommissioner
$8:I>I?+
>ecretary of
Kinance
0ppeal to :#0
15 days
30 days
15 days
30 days
30 days
If !ov=t, atomatic
revie(
101
%. error in the distribution of charges
on invoices
) not involving any Guestion of
law
) certified, under penalties of
falsification or perury, by
examining official
?onditions
I. errors discovered before payment
A& discovered within I year after
the final liGuidation
'. written reGuest and notice from
importer A& statement of error
certified by the ?ollector
+ow:
I. ?laim made in writing
'. ?ollector shall verify with the
records in his office
%. certify claim to ?ommissioner with
his recommendation and necessary
papers
L. ?ommissioner shall then cause the
claim to be paid if found correct
If the result of the refund would
result to a corresponding refund of
the internal revenue taxes on the
same importation, ?ollector shall
certify to ?ommissioner who shall
cause the said excess to be paid,
refunded or credited in favor of the
importer
.. Protest $N'%(,!(M. '%I')

) written protest
) payment before protest is necessary
$amount due T docket fee)
Khen: at the time payment of the
amount claimed to be due is made
within I- days thereafter
Horm: filed according to && point out
the particular decision or ruling ground
used as basis for the protest
#cope: limited to the subect matter of
a single adustment $refers to the entire
content of one liGuidation including
duties, fees, surcharges and fines) or
other independent transaction
failure to protest will render the
action of the ?ollector final and
conclusive except for manifest error
upon demand of ?ollector, the
importer shall furnish samples of
the articles which are the subect of
the protest
?. Abandon#ent $NI,(I!(%)
;rticle is deemed abandoned when:
I. owner, importer or consignee
expressly signifies in writing to
?ollector his intention to abandon
'. after due notice, fails to file an
entry within %( days from date of
discharge of last package from
vessel or aircraft
%. after filing entry, fails to claim his
importation I- days from date of
posting of the notice to claim such
importation
Fffect:
) deemed to have renounced his
interest and property rights
) ipso facto deemed property of the
*overnment
any official or employee who:
) had knowledge of the existence
of abandoned article
) custody or charge of such article
fails to report within 'L hours from
time article deemed abandoned shall be
punished accdg to sec. %E(L $ fine:
=-((( @ =-(,(((mprisonment: I yr @
I( yrs perpetual disGualification to hold
public office, vote and participate in
election)
/I! Proble#s
I. Khenever the decision of the ?ollector
of ?ustoms is adverse to the
government, it is automatically
elevated to the ?ommissioner for
review and, if it is affirmed by him, it
is automatically elevated to the
secretary of Hinance for review. Khat
is the basis of the automatic review
procedure in the .ureau of ?ustomsP
Fxplain. $'((' .ar)
Answer) ;utomatic review is intended
to protect the interest of the
*overnment in the collection of taxes
and customs duties in sei8ure and
protest cases. Kithout such automatic
review, neither the ?ommissioner of
?ustoms nor the #ecretary of Hinance
would know about the decision laid
down by the ?ollector favoring the
taxpayer. The power to decide sei8ure
and protest cases may be abused if no
102
checks are instituted. ;utomatic
review is necessary because nobody is
expected to appeal the decision of the
?ollector which is favorable to the
taxpayer and adverse to the
*overnment. $<aokasin v.
?ommissioner I,( #?T; -MI
'. The ?ollector of ?ustoms of the =ort of
?ebu issued warrants of sei8ure and
detention against the importation of
machineries and eGuipment by 339
Import and Fxport ?o. for alleged
nonpayment of tax and customs duties
in violation of customs laws. 339 was
notified of the sei8ure, but before it
could be heard, the ?ollector of
?ustoms issued a notice of sale of the
articles. In order to restrain the
?ollector from carrying out the order
to sell, 339 filed with the ?T; a
petition for review with application for
issuance of a writ of prohibition. It
also filed with the ?T; an appeal for
refund of overpaid taxes on its other
importations of raw materials which
has been pending with the ?ollector of
?ustoms. The .ureau of ?ustoms
moved to dismiss this case for lack of
urisdiction of the ?T;. $'((' .ar)
;. 9oes the ?T; have urisdiction
over the petition for review
and writ of prohibitionP
Fxplain.
.. Kill an appeal to the ?T; for a
tax refund be possibleP
Fxplain.
Answer:
;. 6o, because there is no decision as
yet by the ?ommissioner of ?ustoms
which can be appealed to the ?T;.
6either would the remedy of
prohibition lie because the ?T; has
not acGuired any appellate
urisdiction over the sei8ure case.
The writ of prohibition being merely
ancillary to the appellate
urisdiction, the ?T; has no
urisdiction over it until it has
acGuired urisdiction on the petition
for review.
.. 6o, because the ?ommissioner of
?ustoms has not yet rendered a
decision on the claim for refund.
The urisdiction of the ?ommissioner
and the ?T; are not concurrent in so
far as claims for refund are
concerned. The only exception is
when the ?ollector has not acted on
the protested payment for a long
time, the continued inaction of the
?ollector or ?ommissioner should
not be allowed to preudice the
taxpayer $6estle v. ?;, :uly E,
'((I)
%. An the basis of a warrant of sei8ure
and detention issued by the ?ollector
of ?ustoms for the purpose of
enforcing the Tariff and ?ustoms laws,
assorted brands of cigarettes said to
have been illegally imported into the
=hilippines were sei8ed from a store
where they were openly offered for
sale. 9issatisfied with the decision
rendered after hearing by the ?ollector
of ?ustoms on the confiscation of the
articles, the importer filed a petition
for review with the ?T;. The ?ollector
moved to dismiss the petition for lack
of urisdiction. &ule on the motion.
$'((( .ar)
Answer: 6o. The legislators
intended to divest the &T?s of the
urisdiction to replevin a property
which is subect of sei8ure and
forfeiture proceedings for violation of
the Tariff and ?ustoms ?ode
otherwise, actions for forfeiture of
property for violation of the ?ustoms
laws could easily be undermined by
the simple device of replevin. $9ela
Huente v. 9e >eyra, I'( #?&; L--)
L. Khat do you understand by the term
/flexible tariff clause0 as used in the
Tariff and ?ustoms ?odeP $'((I .ar)
Answer) The term /flexible tariff
clause0 refers to the authority given to
the =resident to adust the tariff rates
under #ection L(I of the Tariff and
?ustoms ?ode, which is the enabling
law that made effective the delegation
of the taxing power to the =resident
under the ?onstitution.
Credits)
?'((- Tax' &eviewer 2and 7ario 7acadaeg for
being the conduit 5
3ocal Taxation 7emory ;id by :an ;liling
"= .arops '((% Taxation &eviewer
103

Tax 2

Cargado por

Información del documento

Descripción original:

Título original

Derechos de autor

Formatos disponibles

Compartir este documento

Compartir o incrustar documentos

Opciones para compartir

¿Le pareció útil este documento?

¿Este contenido es inapropiado?

Copyright:

Formatos disponibles

Tax 2

Cargado por

Copyright:

Formatos disponibles

Contents:

Transfer Taxes (Estate, Donors)

;ny amount of medical expenses incurred within

23orybeth4.aldrias.$ead5 26ayna47alayang.dep%t&5 2&hud84&aymundo.secretariat5 29ionne4#anche8.acads5

Hormal ;ssessment #tage

?ompromise and ;batement

También podría gustarte