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TAXATION LAW

QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT
JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR
ATTY. PIERRE MARTIN D. REYES

This covers the significant and relevant Supreme
Court jurisprudence on taxation law and BIR
issuances from March 31, 2014 to March 31,
2015.
GENERAL PRINCIPLES
Q. What is a tax amnesty?
A. A tax amnesty is a general pardon or the
intentional overlooking by the State of its
authority to impose penalties on persons
otherwise guilty of violation of a tax law. It
partakes of an absolute waiver by the
government of its right to collect what is due
it and to give tax evaders who wish to relent
a chance to start with a clean slate. A tax
amnesty, much like a tax exemption, is never
favored or presumed in law. The grant of a
tax amnesty, similar to a tax exemption, must
be construed strictly against the taxpayer and
liberally in favor of the taxing authority. (LG

Electronics Philippines v. CIR, G.R. No.
165451, December 3, 2015)

Q. Can a claimant have personality to file a tax
refund even if it only bears the economic
burden of the tax?
A. Yes. The Supreme Court has held that the
propriety of a tax refund claim is hinged on
the kind of tax exemption upon which the
refund calim is based. If the law confers an
exemption from both direct or indirect taxes,
a claimant is entitled to a tax refund even if it
only bears the economic burden of the
applicable tax. On the other hand, if the
exemption conferred only applies to direct
taxes, then the statutory taxpayer is regarded
as the proper party to file the refund claim.
(CIR v. PAL, G.R. Nos. 212536-37, August
27, 2014)
Q. The City of Manila assessed and collected
taxes from certain taxpayers pursuant to
either Section 15 (Tax on Wholesalers,
Distributors, or Dealers) or Section 17 (Tax
on Retailers). The City imposed additional

taxes pursuant to Section 21 of the Revenue
Code. Section 21 imposes a tax on a person
who sold goods and services in the course of
trade or business based on a certain
percentage of his gross sales or receipts in the
preceding calendar year. The taxpayers
contend the imposition of the tax under
Section 21 constituted double taxation
because they were already paying local
business taxes pursuant to Section 15 or
Section 17. Is there double taxation?
A. Yes. Firstly, because Section 21 of the
Revenue Code of Manila imposed the tax on
a person who sold goods and services in the
course of trade or business based on a certain
percentage of his gross sales or receipts in the
preceding calendar year, while Section 15
and Section 17 likewise imposed the tax on a
person who sold goods and services in the
course of trade or business but only identified
such person with particularity, namely, the
wholesaler, distributor or dealer (Section
15), and the retailer (Section 17), all the
taxes – being imposed on the privilege of
doing business in the City of Manila in order
to make the taxpayers contribute to the city’s
revenues – were imposed on the same
subject matter and for the same purpose.
Secondly, the taxes were imposed by the
same taxing authority (the City of Manila)
and within the same jurisdiction in the same
taxing period (i.e., per calendar year).
Thirdly, the taxes were all in the nature of
local business taxes. (Nursery Care

Corporation v. Treasurer of Manila, G.R. No.
180651, July 30, 2014).
INCOME TAX

Q. What are deemed de minimis benefits?
A. As provided in RR No. 3-98, as last amended
by RR No. 1-2015, the following are
considered as de minimis benefits granted to
each employee:

Page 1 of 27
NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, and Tax Audit Primer.
No portion of the supplement may be copied or reproduced without the written permission of the author.
Possessors may reproduce and distribute this supplement provided the name of the author remains clearly
associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.

TAXATION LAW
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT
JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR
ATTY. PIERRE MARTIN D. REYES

a) Monetized unused vacation leave credits
of private employees not exceeding ten
(10) days during the year;
b) Monetized value of vacation and sick
leave credits paid to government officials
and employees;
c) Medical cash allowance to dependents of
employees, not exceeding Seven
Hundred Fifty Pesos (P750) per
employee per semester or One Hundred
Twenty Five (P125) per month;
d) Rice subsidy of One Thousand Five
Hundred (P1,500) or one (1) sack of 50
kg. rice per month amounting to not
more than P1,500;
e) Uniform and clothing allowance not
exceeding Five Thousand Pesos (P5,000)
per annum;
f) Actual medical assistance, e.g. medical
allowance to cover medical and
healthcare needs, annual medical checkup, maternity assistance, and routine
consultations, not exceeding Ten
Thousand Pesos (P10,000) per annum;
g) Laundry allowance not exceeding Three
Hundred Pesos (P300) per month;
h) Employees achievement awards, e.g. for
length of service or safety achievement,
with an annual monetary value not
exceeding
Ten
Thousand
Pesos
(P10,000);
i) Gifts given during Christmas and major
anniversary celebrations not exceeding
Five Thousand Pesos (P5,000) per
employee per annum;
j) Daily meal allowance for overtime work
and night/graveyard shift not exceeding
Twenty-Five Percent (25%) of the basic
minimum wage per region basis.
k) Benefits received by an employee by
virtue of a collective of a collective
bargaining agreement (CBA) and
productivity incentive schemes provided
that the total annual monetary value
received from both CBA and productivity
incentive schemes combined do not
exceed ten thousand pesos (P10,000) per
employee per taxable year.

Q. What is now the threshold amount of the 13th
month pay and other benefits excluded from
gross income pursuant to Section 32(B) of
the Tax Code?
A. RA No. 10653 increased the ceiling from
Thirty Thousand Pesos (P30,000) to Eighty
Two Thousand Pesos (P82,000).
RR 3-2015, which implements RA 10653,
clarifies that the threshold amount of
P82,000 shall only apply to the following;
1. Thirteenth-month pay equivalent to the
mandatory one month basic salary of
officials and employees of the
government, (whether national or local),
including government-owned or controlled corporations, and or private
offices received after the 12th-month pay;
and
2. Other benefits, such as Christmas bonus,
productivity-incentive bonus, loyalty
award, gifts in cash or in kind and other
benefits of similar nature actually
received by officials and employees of
both government and private offices.
Q. What are the conditions that must be met in
order to exempt interest income from longterm deposit or investments from income
taxes?
A. The following conditions must be met:
1. The depositor or investor is an individual
citizen (resident or non-resident) or
resident alien or non-resident alien
engaged in the trade or business in the
Philippines;
2. The long-term deposits or investment
certificates should be under the name of
the individual and not under the name of
the corporation or the bank or the trust
department/unit of the bank;
3. The long-term deposits or investments
must be in the form of savings, common
or individual trust funds, deposit
Page 2 of 27

NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, and Tax Audit Primer.
No portion of the supplement may be copied or reproduced without the written permission of the author.
Possessors may reproduce and distribute this supplement provided the name of the author remains clearly
associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.

2. 5. What is the income tax treatment of stock option plans? A. The investment of the individual investor in the common or individual trust fund or investment management account must be actually held/managed by the bank for the named individual at least five (5) years without interruption. substitutes. foreign exchange gain shall not be covered by income tax exemption. PIERRE MARTIN D. Here. to creditable withholding tax. 7-2015) Q. 12% or 20% on interest income earnings. No stamping is allowed. 2014 Bar Supplement. on the part of BCDA. The underlying investments of the common or individual trust account or investment management accounts must comply with the requirements of Section 22(FF) of the Tax Code. the transaction is not subject to income tax considering that the redeeming corporation does not realize any gain or loss on the redemption of its shares. natural or juridical. 3-2014 citing Section 9. as amended. The long-term deposit or investments must be issued by banks only and not by other entities or individuals. investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas (BSP). in case of corporations. the capital gain or capital loss derived upon redemption shall be recognized on the basis of the difference between the amount/value received at the time of redemption and the cost of the preferred shares. 7. The capital gain or capital loss shall be subject to the regular income tax rate under the Tax Code. any other income such as gains from trading. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. (RMC No. (RMC No. On the part of FBDC. 6. RR 62008) Q. For the interest income derived by individuals investing in common or individual trust funds or investment management accounts to be exempt from income tax. and Except those specifically exempted by law or regulations. The long-term deposits or investments must be in denominations of Ten Thousand Pesos (P10. The common or individual trust account or investment management account must hold on to such underlying investment in continuous and uninterrupted period for at least five (5) years. The long-term deposits or investments must have a maturity period of not less than five (5) years. A stock option is an option granted by a person. on individual taxpayers or to the corporate income tax rate under the Tax Code. in redemption of its preferred shares held by BCDA. REYES 4. When preferred shares are redeemed for retirement in accordance with its nature. What is the income tax treatment on the said redemption? A. as well as the requirements mentioned above. Fort Bonifacio Development Corporation (FBDC) transferred some of its real properties to the Bases Conversion and Development Authority (BCDA). The long-term deposits or investments should not be terminated by the original investor before the fifth (5th) year.000) and other denominations as may be prescribed by the BSP. and Tax Audit Primer. any gain realized by it on the redemption of shares by FBDC shall be subject to corporate income tax and consequently. 3. the following additional characteristics/conditions must all be present: 1. No portion of the supplement may be copied or reproduced without the written permission of the author. otherwise they shall be subjected to the graduated rates of 5%. which may or may not be the shares of stock Page 3 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. .TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. 8. to a person or entity entitling said person or entity to purchase shares of stock of a corporation. as amended.

The grant. If the option was granted due to an employer-employee relationship where the grantor is the employer and the grantee is the employee.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. 2. and Tax Audit Primer. at the time of the exercise of the stock option and the price fixed on the grant date. If the option was granted for a price. barter. Grant of Option a. REYES of the grantor itself. The basis shall be the fair market value of the option at the time of donation. an additional compensation equivalent to the difference of the book value/fair market value of the shares. Page 4 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. Thus. whichever is higher. whichever is higher. to withholding tax on compensation. sale. the grantor cannot claim deductions for the grant of the stock option. Exercise of option a. upon the exercise of the option by a rankand-file employee. 3. 1. 2014 Bar Supplement. or transfer of the option is subject to capital gains tax. b. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. whichever is higher. and shall be taxed as such. If the option was granted to a supplier of goods or services. transfer. No stamping is allowed. and shall be subject to the relevant withholding tax at source and other applicable taxes. In an equity-settlement option (where the grantee/subsequent owner pays iii. However. and no payment was received for the grant of said option. ii. at a specific price to be exercise at a specific date or a period. the difference of the book value/fair market value of the shares. b. The sale is treated as a sale. If the option was granted by an employer involving the employer’s own shares of stock or shares it owns. at the time of the exercise of the stock option and the price fixed on the grant date. If the option is transferred by the grantee/subsequent owner without any consideration. If the option was granted without consideration. or exchange of shares of stock not listed on the stock exchange. No portion of the supplement may be copied or reproduced without the written permission of the author. the same be shall treated as a donation of shares of stock subject to donor’s tax. on the year an option was granted. or exercise of a stock option may result to taxable events as follows: the exercise price to the grantor and the latter is obligated to deliver the stocks to the owner of the option. the tax treatment is as follows: i. any grant of an option for consideration. the difference of the book value/fair market value of the shares. the cost base of the option for purposes of computing the capital gains shall be zero. at the time of the exercise of the stock option and the price fixed on the grant date. shall be recognized and subject to income tax and consequently. c. if the employee occupies a supervisory or managerial position. the full price of the option shall be considered capital gains. shall be treated as fringe benefit subject to fringe benefit tax. . shall be recognized as additional consideration for the services rendered or goods supplied by said supplier. Sale or transfer of option a. Stock options are “shares of stock” as defined under the Tax Code and are taxable as such. PIERRE MARTIN D.

by way of MERALCO’s interest payments. and the difference if in a favorable direction is paid by the grantor to the holder of the option. MERALCO obtained a loan from Norddeutsche Landesbank Girozentrale (NORD/LB) Singapore Branch. Individuals are taxed on capital gains from sale of all real properties located in the Philippines and classified as capital assets. exempts from income tax income derived from investments in the Philippines in loans by financing institutions owned. and the sale of machineries and equipment. and Tax Audit Primer. or enjoying refinancing from foreign governments. November 12. in the nature of Capital Gains Tax and Documentary Stamp Tax. 175410. The income from the sale of petitioner’s machineries and equipment is subject to the provisions on normal corporate income tax. necessary for the transfer of the subject property are liabilities of the property owner Page 5 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. through the Department of Public Works and Highways (DPWH). G. 2014 Bar Supplement.R. the RTC likewise ordered DPWH to pay the property owner consequential damages. No portion of the supplement may be copied or reproduced without the written permission of the author. Instead. as MERALCO shall bear the obligation of paying and remitting to the BIR the final withholding tax. Differentiate between the tax treatment of capital gains of individuals and corporations from the sale of real properties. the same rules apply. G. a foreign government. Under the loan agreement. the market value. b. at exercise date. Section 32(B)(7)(a) of the Tax Code. (RMC 79-2014) Q. The National Internal Revenue Code of 1997 does not impose the 6% capital gains tax on the gains realized from the sale of machineries and equipment. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. A. shall be paid in full without deductions. 2014) Q. No. In addition to the order to pay just compensation. differently. The Republic. For corporations. . NORD/LB is owned. controlled or enjoying refinancing from the Federal Republic of Germany. Domestic corporations are imposed a 6% capital gains tax only on the presumed gain realized from the sale of lands and/or buildings. only the presumed gain from the sale of petitioner’s land and/or building may be subjected to the 6% capital gains tax. at the time of the exercise of the stock option and the price fixed on the grant date. 181459. filed a complaint for expropriation against a property owner before the RTC. 2014) Q. which is a foreign government-owned financing institution of Germany. Commissioner of Internal Revenue. (CIR v. In a cash-settlement option. (SMI-ED Philippines v. Is the income derived by NORD/LB subject to income tax? A. MERALCO paid and remitted to the BIR the corresponding final withholding taxes. whichever is higher. The only difference is that cash-settled options do not require actual delivery of the stocks. as amended. of the stock is compared to the exercise price.R. June 9. Capital gains of individuals and corporations from the sale of real properties are taxed differently.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. controlled. shall be considered a donation subject to donor’s tax. No stamping is allowed. the difference of the book value/fair market value of the shares. The Republic contends that the transfer taxes. PIERRE MARTIN D. the income received by NORD/LB. REYES iv. natural or juridical. If the option was granted to a person. who is not an employee. Meralco. the National Internal Revenue Code of 1997 treats the sale of land and buildings. or a supplier of goods or services to the grantor. No. which shall include the value of the transfer tax necessary for the transfer of the subject property from the name of the owner to that of the Republic. Therefore. No.

370-2011 is void because it completely disregarded the 20 or more lender rule. 2014 Bar Supplement. BIR Ruling No. endorsement. in 2011. capital gains tax due on the sale of real property is a liability for the account of the seller. No. for the purpose of relending or purchasing of receivables and other obligations. and Tax Audit Primer. The transactions executed for the sale of the PEACe Bonds are: (1) the issuance of the Bonds by the Bureau of Treasury to RCBC/CODE-NGO. the capital gains tax remains a liability of the seller since it is a tax on the seller's gain from the sale of the real estate. No stamping is allowed. or acceptance of debt instruments for the borrower’s own account. REYES and not the Republic.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. Is the Republic correct? A. G. the Secretary of Finance directed the Bureau of Treasury to withhold a 20% final tax from the face value of the PEACe Bonds upon their payment at maturity on October 18. the BIR issued BIR Ruling No. (Republic v. PIERRE MARTIN D. The net proceeds from the sale will be used to endow a permanent fund to finance meritorious activities and projects of accredited non-government organizations (NGOs) throughout the country. 370-2011 declaring that the PEACe Bonds being deposit substitutes are subject to the 20% final withholding tax. Pursuant to Sections 24(D) and 56(A)(3) of the 1997 National Internal Revenue Code. February 25. However. Page 6 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. The BIR issued BIR Ruling No. who generally would shoulder the tax.R. the Caucus of Development NGO Networks (CODE-NGO) with the assistance of its financial advisors. The term ‘deposit substitutes’ shall mean an alternative form of obtaining funds from the public other than deposits. Based on this definition. RBCB which participated on behalf of CODE-NGO was declared the winning bidder having tendered the lowest bids. 2015) Q. the number of lenders is determinative of whether a debt instrument should be considered a deposit substitute and consequently subject to the 20% final withholding tax. It has been held that since capital gains tax is a tax on passive income. requested an approval from the Department of Finance for the issuance by the Bureau of Treasury of 10year zero-coupon treasury bonds. During the auction. RCBC entered into an underwriting agreement with CODE-NGO whereby RBCB was appointed as the Issue Manager and Lead Underwriter for the offering of the PEACe Bonds. 2011. No. are exempt from all forms of taxation as confirmed by BIR Rulings. 020-2001 which confirmed that the PEACe Bonds would not be classified as deposit substitutes and would not be subject to the corresponding withholding tax. or financing their own needs or the needs of their agent or dealer. The said bonds would initially be purchased by a special purpose vehicle on behalf of CODENGO and then repackaged and sold at a premium to investors as Poverty Eradication and Alleviation Certificates or PEACe Bonds. As far as the government is concerned. Yes. it is the seller. RCBC then sold the government bonds in the secondary market. It may seem that there was only one lender — RCBC on behalf of CODE-NGO — to whom the PEACe Bonds were issued at the time of origination. Is the discount or interest income arising from the PEAce bonds subject to the 20% final withholding tax? A. In the agreement. Soriano. inclusive of premium on redemption and gains on the trading of the same. through the issuance. therefore. . In 2001. and (2) the sale and distribution by RCBC (underwriter) on behalfof CODE-NGO of the PEACe Bonds to undisclosed investors. This was reiterated in subsequent rulings. CODE- NGO represented that all income derived from the Bonds. No portion of the supplement may be copied or reproduced without the written permission of the author. 211666. Pursuant to this ruling. The term 'public' means borrowing from twenty (20) or more individual or corporate lenders at any one time). not the buyer. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made.

G. accompanied by supporting documents justifying the relief. Thus.R. the obligation to withhold the 20% final tax on the corresponding interest from the PEACe Bonds would likewise be required of any lender/investor had the latter turned around and sold said PEACe Bonds. October 18. acquisition costs. simultaneously to 20 or more lenders or investors. 1-2000 provides that any availment of the tax treaty relief shall be preceded by an application by filing BIR Form No. whether in whole or part. RMO No. etc. or any lender or investor if such be the case. Actual receipt by the accredited nonstock. No portion of the supplement may be copied or reproduced without the written permission of the author. and net book values of the properties donated as reflected in the financial statements of the donor. (Banco de Oro v. should the PEACe Bonds be found to be within the coverage of deposit substitutes. the acquisition cost of the said property. payment of dividends. that interest income received by individuals from longterm deposits or investments with a holding period of not less than five (5) years is exempt from the final tax. 2015) Q.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. (RMC No. whether real or personal. No stamping is allowed. if property. the PEACe Bonds are deemed deposit substitutes and RCBC Capital/CODE-NGO would have been obliged to pay the 20% final withholding tax on the interest or discount from the PEACe Bonds. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. and 2. if in cash. 1-2000 necessary before a Page 7 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. the entire borrowing received by the Bureau of Treasury in exchange for the PEACe Bonds was sourced directly from the undisclosed number of investors to whom RCBC Capital/CODE-NGO distributed the PEACe Bonds — all at the time of origination or issuance. non-profit corporation/NGO of the donation or contribution and date of receipt thereof. royalties. What are the substantiation requirements of donors claiming donations and contributions to accredited non-stock. .R. a reading of the underwriting agreement and RCBC term sheet reveals that the settlement dates for the sale and distribution by RCBC Capital (as underwriter for CODE-NGO) of the PEACe Bonds to various undisclosed investors would fall on the same day. No. RR No. 2014 Bar Supplement. therefore. as the withholding agents. when the PEACe Bonds were supposedly issued to CODE-NGO/RCBC. It must be noted. 862014 citing Section 8.e.. the number of investors to which the PEACe Bonds were sold to by RCBC is not known. 13-98) RMC 86-2014 now provides a Certificate of Donation (BIR Form 2322) which consists of two parts – a donee certification and a donor’s statement of values. The statement must be accompanied by deed of sale/bill of sale to prove the acquisition cost of the properties. Q. PIERRE MARTIN D. Should there have been a simultaneous sale to 20 or more lenders/investors. The first part is a certification by the donee that it has received on the date indicated the subject matter of the donation. Republic. G. The amount of the charitable donation or contribution. REYES However. Is the prior application for an ITAD ruling pursuant to RMO No. January 13. the proper procedure was for the Bureau of Treasury to pay the face value of the PEACe Bonds to the bondholders and for the Bureau of Internal Revenue to collect the unpaid final withholding tax directly from RCBC Capital/CODE-NGO. 0901 (Application for Relief from Double Taxation) with ITAD at least 15 days before the transaction i. No. and Tax Audit Primer. 2001. The second part requires the donor to execute a statement which provides descriptions. however. non-profit corporation/NGO as deductions from their taxable business income? A. In reality. 198756. The donors must submit Certificate/s of Donation indicating the following: 1. However. Further.

TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. and Tax Audit Primer. The time-honored international principle of pacta sunt servanda demands the performance in good faith of treaty obligations on the part of the states that enter into the agreement. What are considered “inurements” prohibited under Section 30 of the NIRC? A. This does not cover a society. It bears reiterating that the application for a tax treaty relief from the BIR should merely operate to confirm the entitlement of the taxpayer to the relief. No. January 15. (CBK Power Company Limited v. When upon dissolution and satisfaction of all liabilities. its remaining assets are distributed to its trustees. No portion of the supplement may be copied or reproduced without the written permission of the author. or any specific person. the same should be deemed substantial compliance with RMO No. or to the Philippine government for public purpose (RMC 512014) Q. In order for an entity to qualify as a non-stock and/or non-profit corporation/ association/ organization exempt from income tax under Section 30 of the Tax Code. Income tax is different from withholding tax. 4. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. The payment of exorbitant or unreasonable compensation to its employees. organizers. order. Not only is the requirement illogical. 12000. salaries. association. or fiduciaries has an interest. but it is also an imposition that is not found at all in the applicable tax treaties. its assets shall be distributed to one or more entities formed for the purpose/purposes similar to its own. officers. treaties have the force and effect of law. 3.R. .R. G. CIR. 2014 Bar Supplement. The purchase of goods or services for amounts in excess of the fair market value of such goods or value of such services from an entity in which one or more of its trustees. The following are considered “inurements” of such nature: 1. 2. accident. and other benefits exclusively to its members or their dependents. An organization is not exempt from income tax if its principal activity is to receive and manage funds associated with savings and investment programs. No. Page 8 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. its earnings or assets shall not inure to the benefit of any of its trustees. In this jurisdiction. The obligation to comply with a tax treaty must take precedence over the objective of RMO No. especially since said tax treaties do not provide for any prerequisite at all for the availment of the benefits under said agreements. 193383-84 and G. Accordingly. The provision of welfare aid and financial assistance to its members. A. Its assets must be dedicated to its exempt purpose. 2015) Q. Distinguish income tax from withholding tax. or honorarium to its trustees or organizers. PIERRE MARTIN D. sickness. No. The Philippine Constitution provides for adherence to the general principles of international law as part of the law of the land. members. as amended. its constitute documents must expressly provide that in the event of dissolution. officers. officers or members. or non-stock corporation under Section 30(C) of the Tax Code providing for the payment of life. No stamping is allowed. The BIR should not impose additional requirements that would negate the availment of the reliefs provided for under international agreements. including pension or retirement programs. The payment of compensation. Donation to any person or entity (exception donations made to other entities formed for the purpose/purposes similar to its own. So long as the taxpayer requests for confirmation before it filed its administrative claim for refund. and 6. REYES taxpayer can avail of the preferential tax rates under income tax treaties entered into by the Philippines with other countries? A. 5. 19340708. 1-2000. organizers.

No. No portion of the supplement may be copied or reproduced without the written permission of the author. Does the requirement to present tax exemption certificate or ruling pursuant to RMC No. 3-2012 sufficiently discussed that income payments made to a GPP in consideration of its professional services are not subject to income tax and consequently to withholding taxes. To divest itself of interests in the health maintenance organization industry. Obviously. (RMC No. Yes. emoluments. 1. 12-4-6-SC which approves the withholding and remittance of the correct amount of tax as required to be deducted and withheld from the Special Allowance for the Judiciary (SAJ) of officials and employees. and Tax Audit Primer. No. a separate entity. 8-2014 does not apply to general professional partnerships. professions. the withholding agent’s failure to withhold notwithstanding the lack of tax exemption certificate or ruling shall cause the imposition of penalties. G. as well as the withholding tax of the corresponding taxes from the following: 1.M. The additional allowance from the surplus of the SAJ Fund that may be authorized to be given to judiciary officials and employees who are not direct beneficiaries under RA 9227 (RMC 58-2014) DONOR’S TAX Q. “In the operation of the withholding tax system. or as a tax on a person’s income. On the other hand. What document shall withholding agents require from all individuals and entities claiming exemption from income taxes and consequently withholding taxes? A.R. The tax exemption certificate or ruling must explicitly recognize the grant of tax exemption. while the payor. The monthly SAJ of incumbent justices. 8-2014 apply to general professional partnerships? A. (LG Electronics Philippines v. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. Philamlife owns 498. Is the Philamlife correct? Page 9 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. In fact. the amount thereby used to settle the tax liability is deemed sourced from the proceeds constitutive of the tax base. 8-2014) Q. Philamlife sold the said shares to STI Investments at a price lower than their book value. PIERRE MARTIN D. The monthly special allowance in an amount equivalent to the SAJ being received by judiciary officials not included in item no. as well as the corresponding exemption from imposition of withholding tax. RMC No. Concerned withholding agents shall require all individuals and entities claiming such exemption to provide a copy of a valid. trades or offices. the Supreme Court issued A. 60-2014) Q. and 3. 2014 Bar Supplement.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. 2. (RMC No. On the other hand. . 165451. December 3.590 shares in Philam Care Health Systems. The BIR contends that donor’s tax became imposable on the price difference. withholding tax is a method of collecting income tax in advance. judges. REYES Income tax is the “tax on all yearly profits arising from property. Is the Special Allowance for the Judiciary (SAJ) of court officials and employees subject to income tax? A. profits and the like. the person on whom the tax is imposed. and judiciary officials with the equivalent rank of a Court of Appeals justice or Regional Trial Court judge. CIR. acts no more than an agent of the government for the collection of the tax in order to ensure its payment. 2015) Q. Philamlife argues that the same is not subject to donor’s tax as there was no donative intent. No. and subsisting tax exemption certificate or ruling. the payee is the taxpayer. No stamping is allowed. The requirement to present tax exemption certificate or ruling pursuant to RMC No. current. Failure on the part of the taxpayer to present said tax exemption certificate or ruling shall subject him to the payment of the appropriate taxes.

All taxpayers. is nevertheless subject to VAT the same being considered a transaction “deemed sale” under Section 106(B)(1) of the Tax Code (RMC No. Is the transfer of the subject real properties subject to VAT? A. 100 of the Tax Code categorically states that the amount by which the fair market value of the property exceeded the value of the consideration shall be deemed a gift.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. the sale of real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to VAT. v. No portion of the supplement may be copied or reproduced without the written permission of the author. Commissioner of Internal Revenue. in redemption of its preferred shares held by BCDA. Mindanao II Geothermal Partnership. The CIR has 120 days from the date of submission of complete documents in support of the administrative claim within which to decide whether to grant a refund or issue a tax credit certificate. June 4. The transfer of the real properties of FBDC to BCDA to redeem its shares although not occurring in the regular conduct or in the course of FBDC’s trade or business and is a transaction which is not done with regularity. G. What are the rules on the determination of the prescriptive period for filing a tax refund or credit of unutilized input VAT as provided in Section 112 of the 1997 Tax Code? A. March 11. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. (Miramar Fish Company Inc. The absence of donative intent. (Philippine American Life and General Insurance Company v. Nos. June 4. 3. REYES A. In Mindanao II Geothermal Partnership v. In general. 2013. the difference in price is considered a donation by fiction of law. G. G. The Secretary of Finance and Commissioner of Internal Revenue. DA-489. the Supreme Court provided the following rules on prescriptive periods involving VAT: 1. . 3-2014) Q.R.R. 193301 and 194637. the book value of the shares of stock as shown in the financial statements duly certified by an independent certified public accountant nearest to the date of sale shall be the fair market value. as an exception to the mandatory and jurisdictional 120+30 day periods. 210987. Yes. An administrative claim must be filed with the CIR within two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. does not exempt the sales of stock transaction from donor's tax since Sec. The 120day period may extend beyond the two-year period from the filing of the administrative claim if the claim is filed in the later part of the two-year period. Commissioner of Internal Revenue. 197525. No. “fair market value” shall be. however. even if there is no actual donation. Thus. 2014 Bar Supplement. June 18. CIR v. and Mindanao I Geothermal Partnership v. Pursuant to RR 6-2008. No. A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR’s decision denying the administrative claim or from the expiration of the 120-day period without any action from the CIR. 4. If the 120-day period expires without any decision from the CIR.R. 2014) VALUE-ADDED TAX Q. 185432. 2014.03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010. can rely on BIR Ruling No. CIR. No. Page 10 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. 2014.R. and Tax Audit Primer. then the administrative claim may be considered to be denied by inaction. The difference between the book value and the selling price in the sales transaction is taxable donation subject to donor’s tax. CIR. No stamping is allowed. No. G. 2014. No. G. if that be the case. PIERRE MARTIN D. Fort Bonifacio Development Corporation (FBDC) transferred some of its real properties to the Bases Conversion and Development Authority (BCDA). Visayas Geothermal Power Company v.R. November 24. 189440. 2. in the case of shares of stock not listed and traded in the local stock exchanges.

141104 & 148763. November 19. 2014. CIR v. No.R. January 21.. No. in Atlas Consolidated Mining v Commissioner of Internal Revenue. No.R. CIR. G. 2014 Bar Supplement. G.R.R. G.R. When the 120-day period lapses and there is inaction on the part of the CIR. 2014. No.R. the Supreme Court held that the two-year prescriptive period should be reckoned from the date of the return and payment of the tax due. Aichi.R. 2014. Nippon Express (Philippines) Corporation v. 205353. CIR. G. 2014. where the Supreme Court held that the two-year period should be reckoned from the close of the taxable Page 11 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. Inc. No. Q. 201195. CNK Power Company Limited v.R. San Roque Power Corporation v. CIR. September 17. 2014. The Atlas doctrine was abandoned in Commissioner of Internal Revenue v Mirant Pagbilao Corporation. Taganito Mining Corporation v. v.R. (Visayas Geothermal Power Company v. 2015. The CIR can still evaluate internally the claim but only for the purpose of intelligently opposing the taxpayer’s judicial claim. 2014. Burmeistor. G. 198928. 185115. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. 185666. 2015. 202066 and G. Previously. 183421. Panay Power Corporation v. 205543. PIERRE MARTIN D. 198076.R. No. Since the CIR’s inaction is a decision in itself. 172129. In a refund of unutilized input taxes. G.” However. Mindanao II Geothermal Partnership v. is the inaction of the Commissioner “deemed a denial” or a decision denying the claim? A. September 30. February 4. No. G. No. CIR v. 2015) Q. No. CIR. Cargill Philippines. No. 190021. Taganito Mining Corporation v. No. 2014) Note: Previously.R. G. (Rohm Apollo Semiconductor Philippines v Commissioner of Internal Revenue. G. Nos. AT&T Communications Services Phils. 204745. No. November 19. No portion of the supplement may be copied or reproduced without the written permission of the author. CIR. June 4. Inc. it was held as an “inaction is deemed a denial. G. 197525. November 19. 2014.R. the taxpayer must file his appeal within 30 days from the lapse of the 120-day period. No.R. No. CBK Power Company Limited v. REYES Taganito Mining Corporation v. No. the taxpayer must no longer wait for the CIR to decide. December 8. June 8. 203351. 2015. when the Atlas Doctrine was still in effect. No. 197591. 185969. Inc. G. 2008.R. CIR. March 11. G. 2014.R. 203774.. the Supreme Court has unequivocally stated that the CIR’s inaction within the 120-day period is a decision in itself. CIR. AT&T Communications Services Phils. G. October 22. v. December 3. This means that the taxpayer can no longer expect a decision from the BIR after the lapse of the 120-day period. CIR. 2014. Reckoning the two-year period from the date of payment of the output tax is allowed if the claim is filed between 8 June 2007 and 12 September 2008. G. CIR. CIR.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. June 18. No. No. v. CIR. and Tax Audit Primer. RMC 54-2014 also provides that in case the taxpayer has already filed a petition for review with the CTA. G. CE Luzon Geothermal Power Company. January 14. G. June 30. G. September 12.R. 2015) Note: The shift from “inaction deemed a denial” to “inaction as a decision of denial in itself” is significant. which should be made within twenty (20) days from the end of each quarter.R. November 26. February 18. CIR.R. The inaction is already a decision denying the refund claim. 2014. . the CIR loses jurisdiction over the administrative claim. CIR v. Northern Mindanao Power Corporation v. 2015. 190198. G.R. CIR. October 22. What is the exception to the rule that the twoyear prescriptive period within which the administrative claim must be filed should be counted from the close of the taxable quarter when the relevant sales were made? A. 2007. No stamping is allowed.R. No. G. Consequently. CIR. No. 168950.R. the BIR is barred from further processing the claim. 185969. 2014. G.

No portion of the supplement may be copied or reproduced without the written permission of the author. A taxpayer filed a claim for refund or tax credit of unutilized input VAT. Is the CIR’s contention correct? A. Where there are both zero-rated or effectively zero. .” If the taxpayer indeed failed to submit the complete documents in support of its application. a claim for refund or tax credit for unutilized input VAT may be allowed only if the following requisites concur. (CIR v. thus applying Section 112(A) in computing the two-year prescriptive period in claiming refund or credit of input VAT. and Page 12 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. If the taxpayer is not VAT-registered. 3.R. 2014) Note: RMC 54-2014 states that an application for VAT refund/tax credit must be accompanied by complete supporting documents as enumerated in Annex A provided in said circular. 5. The input taxes have not been applied against output taxes during and in the succeeding quarters. the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. RR 3-88 or RMO 53-98 itself that requires submission of the complete documents enumerated in RMO 53-98 for a grant of a refund or credit of input VAT. No. The Mirant ruling adopted the verbal legis rule. There is nothing in Section 112 of the NIRC. REYES quarter where the relevant sales were made. and Tax Audit Primer. even up to the present petition. The input taxes are not transitional input taxes. the CIR could have informed the taxpayer of its failure. The CIR’s reliance on RMO 53-98 is misplaced. shall issue a duly registered VAT invoice or official receipt. the input taxes shall be proportionately allocated on the basis of sales volume. it specifically states that some documents are required to be submitted by the taxpayer “if applicable. (Miramar Fish Company Inc. categorically provides that a VATregistered entity. 2014) Note: In claims for refund of unutilized input VAT. The input taxes are due or paid. v. 7.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. the CIR did not inform the taxpayer of the document it failed to submit. then the claim for refund will fail. namely: 1. PIERRE MARTIN D. CIR. No stamping is allowed. 205055. July 18.” Even assuming that RMO 53-98 applies. To recall. Section 113 of the NIRC of 1997. 4.rated sales and taxable or exempt sales. The taxpayer will now also have to execute a statement under oath attesting to the completeness of the submitted documents. Team Sual Corporation. The CIR argued that the 120-day period for her to decide has not yet commenced as the taxpayer failed to submit the complete documents as enumerated in RMO 53-98. For zero-rated sales under Section 106(A)(2)(1) and (2).” Noncompliance is fatal to the claim. G. The input taxes claimed are attributable to zero-rated or effectively zero-rated sales. No. The subject of RMO 53-98 states that it is a “Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities x x x. as amended. Q. it is required that the taxpayer prove that it is first and foremost a VAT-registered entity. The taxpayer is engaged in zero-rated or effectively zero-rated sales. like petitioner. 106(B). The taxpayer is VAT-registered. June 4. 2014 Bar Supplement. Q. In this case. which must contain “a statement that the seller is a VAT-registered person. 8.R. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. No. G. and 108(B)(1) and (2). 2. 185432. 6. What is the effect of the absence of the statement that the seller is a VAT-registered person to the claim for refund or tax credit of unutilized input VAT? A. and the input taxes cannot be directly and entirely attributable to any of these sales.

Northern Mindanao Power Corporation v. March 25.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY.R. No. 2014 Bar Supplement.R. No. 2015) Q. which would have resulted to no net output VAT liability (the transitional input taxes being higher). No stamping is allowed. now known as the Fort Bonifacio Global City. G. No. thus the claim must fail. Republic Act 7716 took effect. Realizing that the transitional input taxes were not applied against the output VAT. ABC Mining Corporation purchased and imported dump trucks. the VAT invoice is the seller's best proof of the sale of the goods or services to the buyer while the VAT receipt is the buyer's best evidence of the payment of goods or services received from the seller. February 18. treated as capital goods. and Tax Audit Primer. CIR. CIR. 185432. ABC started selling Global City lots in October 2006. 34(F) of the tax Code. The BIR argues that (1) transitional input tax is limited to improvements to real properties. 185115. G. On January 1. No. v. 1996. (Miramar Fish Company Inc. claiming that it is entitled to the transitional input tax credit on said inventories. 2014. ABC paid output taxes on the sale of lots after deducting input taxes. in the beginning Page 13 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. CIR. Is there a difference between an invoice and official receipt for purposes of substantiation? A. . barter or exchange o f goods or properties while a VAT official receipt properly pertains to ever. 2015. G.R. ABC filed a claim for refund of the full input VAT relating to its importation of said dump trucks. CIR. February 4. 2014) Note: Capital goods or properties refers to goods or properties with estimated useful life greater than 1 year and which are treated as depreciable assets under Sec. REYES 9. The claim is filed within two years after the close of the taxable quarter when such sales were made Q. ABC submitted to the BIR an inventory of all its real properties. In September 1996. barter or exchange of services.R. Eastern Telecommunications Philippines v. June 4. No. The absence or non-printing of the word “zero-rated” in the taxpayer’s invoices is fatal to its claim for the refund and/or tax credit representing its unutilized input VAT attributable to its zero-rated sales. rather than for an amortized amount. (Nippon Express (Philippines) Corporation v. ABC Corporation purchased from the government in 1995 portion of the Fort Bonifacio reservation. For the 1st quarter of 1997. Is the BIR correct? A. 183531. and (2) there should have been prior payment of taxes. 201195. which extended the coverage of the VAT to sale of real properties held primarily for sale to customers or held for lease in the ordinary course of business. No VAT on the sale of the land was passed on by the government to ABC. There is nothing in the law that prohibits the inclusion of real properties. No.R. CIR. Will ABC’s claim prosper? A. FBDC filed a claim for refund for the VAT payment. November 26. the claim for refund is for the full amount of the input VAT on the importation. (Taganito Mining Corporation v. In other words. used directly or indirectly in the production or sale of taxable goods or services. together with the improvements thereon. No portion of the supplement may be copied or reproduced without the written permission of the author. lease of goods or properties. No. The claim will not prosper because the law requires that the related input VAT be properly amortized over the estimated useful life of the capital goods in the taxpayer’s subsidiary ledger. PIERRE MARTIN D. G. What is the effect of the absence and nonprinting of the word “zero-rated” in the taxpayer’s invoices to the claim for refund or tax credit of unutilized input VAT? A. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. 2015) Q. Here. 185666. G. Q. A VAT invoice is necessary for every sale. and every sale.

5. The sale or importation of ingredients which may also be used for the production of food for human consumption shall be subject to VAT. 158885 and 170680. No.R. The BIR issued a Letter of Authority to examine the books of account and other accounting records of the taxpayer for income and withholding taxes for the period 1997 to 1999. Further. Fort Bonifacio Development Corporation v CIR. 2009. The BIR is not precluded from adding to the list which would necessitate the issuance of another RMC. and Tax Audit Primer. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. Inc. No stamping is allowed. 2. 6. No. October 2. 2014) Note: The same issues have been passed upon in Fort Bonifacio Development Corporation v CIR.. BIR then sent a Notice of Informal Conference. 173425. based on which inventory the transitional input tax credit is computed. the taxpayer received a PAN which contained the Page 14 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. Attached thereto is a Summary Report containing an explanation of the legal and factual bases for the deficiency assessment. (CIR v. 158885 and 170680. (Fort Bonifacio Development Corporation v CIR. there is nothing in the law that indicates that prior payment of taxes is necessary for the availment of the transitional input tax credit. and 181092. What is the value-added tax treatment of the sale or importation of livestock and poultry feeds or ingredients? A. G. 180035. Is the assessment valid? A. Section 228 of the Tax Code provides that the taxpayer shall be informed in writing of the law and the facts on which the assessment is made. No portion of the supplement may be copied or reproduced without the written permission of the author. 175707.R. The BIR issued a Final Assessment Notice against a taxpayer for deficiency expanded withholding tax for the taxable year 1994. 197515. PIERRE MARTIN D. The taxpayer requested for copies of working papers indicating how the deficiency withholding taxes were computed. Only livestock and poultry feeds or ingredients used in the manufacture of finished feeds are exempted from VAT.R. Thereafter. for the sale or importation of any of the following feed ingredients: 1. (RMC 55-2014 as amended by RMC No. 2009. Q. materials and supplies. G. January 22.R.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. G. No. Nos. 4. September 4. United Salvage and Towage (Phils. G. It merely contained a tabulation of the alleged deficiency taxes due. No. Fort Bonifacio Development Corporation v CIR. 2013. The BIR promptly responded in a letter-reply. 2014) Q. G. 66-2014) Note: The list of specific feed ingredients is exclusive as of the date of issuance of RMC No. (RMC No.R. 66-2014. the assessment is void. Whey powder Skimmed milk powder Lactose Buttermilk powder Whole milk powder Palm Olein and such other feed ingredients used in the manufacture of finished feeds which may hereinafter be determined by competent authority to have possible utilization for human consumption. Otherwise. November 19. 173425. July 2. All that is required is for the taxpayer to file a beginning inventory with the BIR. 3. 2012. there must be a showing the same is unfit for human consumption or that the ingredient cannot be used for the production of food for human consumption as certified by the Food and Drug Administration. 2014 Bar Supplement. Fort Bonifacio Development Corporation v CIR. . Thus. REYES inventory of goods. Nos.R. April 2. G.). Only the resulting interest. surcharge and penalty were provided with legal basis. 782014) TAX REMEDIES Q. Nos.

Thus. No. the taxpayer received a final assessment notice issued by the BIR. Inc. Q. beyond the three (3)-year prescriptive period. 197515. it must be emphasized that there are conflicting views on the proper prescriptive period for the collection of national internal revenue taxes in case a regular return is filed. finding the taxpayer liable for deficiency documentary stamp tax for the taxable year 1985. (Samar-I Electric Cooperative v. However.). No portion of the supplement may be copied or reproduced without the written permission of the author.. and 1998. and Tax Audit Primer. United Salvage and Towage (Phils. before collection was pursued by the BIR. Is the assessment valid? A. REYES computations of its deficiency income and withholding taxes. 1996. 2014) Q. when it validly issues an assessment within the three (3)-year period. G. CIR. five (5) long years had already lapsed. Attached to the PAN was the detailed explanation of the particular provision of law and revenue regulation violated. or court proceeding. Although the FAN and demand letter issued to the taxpayer were not accompanied by a written explanation of the legal and factual bases of the deficiency taxes assessed against the petitioner. Clearly. levy. Considering the foregoing exchange of correspondence and documents between the parties. 1996. it has another three (3) years within which to collect the tax due by distraint. On January 4. 700. The BIR had fully informed the taxpayer in writing of the factual and legal bases of the deficiency taxes assessment. On June 16. July 2. the requirement of Section 228 was substantially complied with. the records showed that the BIR in its letter responded to the taxpayer’s reply to the PAN. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. December 10. . unaccompanied by any written explanation of the legal and factual bases of the deficiency taxes assessed against the taxpayer. (CIR v. 1998. 2014 Bar Supplement. No stamping is allowed. The BIR argues that its right to collect the EWT for taxable year 1992 has not yet prescribed. No. mailed or sent to the taxpayer. The BIR denied the request for reconsideration on August 4. 193100. the BIR has three (3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to commence court proceedings for the collection thereof without an assessment. 1989. 2014) Note: It must be noted that in this case. The taxpayer replied to the PAN. the Preliminary Collection Letter was issued only on February 21.R.R. The statute of limitations on assessment and collection of national internal revenue taxes was shortened from five (5) years to three (3) years by virtue of Batas Pambansa Blg. 1989 requesting for reinvestigation and/or reconsideration. which enabled the latter to file an "effective" protest. 2002. On January 9. The BIR replied in a letter explaining the factual and legal bases of the deficiency assessment and denying the reply. The BIR issued a Preliminary Collection Letter for the deficiency EWT for the taxable year 1992 on February 21.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. No. no evidence was formally offered to prove when the taxpayer filed its returns and paid the corresponding EWT for taxable year 1992. despite the fact that the FAN was issued as early as January 9. G. 2002. Further. the BIR issued a Final Assessment Notice against the taxpayer for deficiency expanded withholding tax for the taxable year 1992. The taxpayer filed a protest on June 23. 1998. Is the BIR correct? A. the taxpayer filed its petition for review before the CTA. In this case. A FAN and demand letter were then issued. The assessment of the tax is deemed made and the three (3)-year period for collection of the assessed tax begins to run on the date the assessment notice had been released. 1994. explaining at length the factual and legal bases of the deficiency tax assessments. Some hold the view that the prescriptive period is five (5) years while others opine that it is three (3) years. PIERRE MARTIN D. Petitioner's right to due process was thus not violated. The taxpayer argued that the assessment may be Page 15 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer.

The CIR contended that the issue of prescription cannot be raised for the first time on appeal. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. PIERRE MARTIN D. G. 172509. 181836. 172509. the latest possible date that the BIR could have released. still. as amended. Under the then applicable Section 319(c) [now. 2014) Q. On December 6. the taxpayer filed its protest. to collect the tax. although there was no allegation as to when the assessment notice had been released. the records show that there was neither a warrant of distraint or levy served on the taxpayer’s properties nor a collection case filed in court by the BIR within the three-year period. In this case. In this case. Two things must concur: there must be a request for reinvestigation and the CIR must have granted it. 222(c)] of the National Internal Revenue Code (NIRC) of 1977. No. (BPI v. neither a warrant of distraint or levy was issued. Does a request for reinvestigation suspend the running of the prescriptive period to collect? A. Further. However. The assessment of the tax is deemed made and the three-year period for collection of the assessed tax begins to run on the date the assessment notice had been released. the BIR had three years to collect the assessed DST. mailed or sent the assessment notice was on the same date that the taxpayer received it. the protest letter interrupted the prescriptive period to collect. mailed or sent the assessment notice was on the date BPI received the same on 16 June 1989. the CIR alleged that even assuming that the issue of prescription can be raised. Section 319(c) states that the assessed tax must be collected by distraint or levy and/or court proceeding within the three-year period. mailed or sent by the BIR to the taxpayer. released or sent to the taxpayer. however. the court is mandated to dismiss the claim even if prescription is not raised as a defense. G. (China Banking Corporation v. 2001. 2015) Page 16 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. A request for reinvestigation alone will not suspend the statute of limitations. Is the taxpayer correct? A. the date the former received the assessment of the CIR. The taxpayer contends that the government had three years from 19 April 1989. the latest date that the BIR could have released. July 9. Counting the three. (China Banking Corporation v. 1989. February 4. No. any internal revenue tax which has been assessed within the period of limitation may be collected by distraint or levy. Nevertheless. 1989. Assuming therefore that 19 April 1989 is the reckoning date.year prescriptive period from 16 June 1989.R. Further. Yes. February 4. The Bureau of Internal Revenue (BIR) issued the assessment for deficiency DST on 19 April 1989. and Tax Audit Primer. The taxpayer elevated the same to the CTA arguing that the right of the BIR to collect the assessed DST is already barred by prescription. 2015) Q. On May 8.R.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. CIR. REYES invalidated because the statute of limitations on collection had already expired. No stamping is allowed. If the pleadings or the evidence on record show that the claim is barred by prescription. when the applicable rule was Section 319(c) of the National Internal Revenue Code of 1977. CIR.R. nor a collection case filed in court. In that provision. the records do not show when the assessment notice was mailed. No. Within that time frame. . mailed or sent to BPI. On April 19. and/or court proceeding within three years following the assessment of the tax. to be reckoned from the date when the BIR mails/releases/sends the assessment notice to the taxpayer. as amended. Is the CIR correct? A. No. No. the time limit for the government to collect the assessed tax is set at three years. 2014 Bar Supplement. G. the BIR issued a FAN finding the taxpayer liable for deficiency DST for the taxable years 1982 to 1986. the BIR had until 15 June 1992 to collect the assessed DST. 19 April 1989. CIR. the BIR rendered a decision denying the protest. No portion of the supplement may be copied or reproduced without the written permission of the author.

The taxpayer’s right to due process is violated when there is no valid notice of assessment sent to it. G. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made.R. In the case of a corporation.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. No. 2015) Q. Inc. . No portion of the supplement may be copied or reproduced without the written permission of the author. 2004) Q. as a rule. ABC sent a notice of dissolution to the BIR as well as an update of information contained in its BIR Certificate of Registration. (3) The waiver should be duly notarized. February 4. 2014. the court must dismiss the claim even if prescription is not raised as a defense. and Tax Audit Primer. 2014) Q. the CIR was aware of the new address and yet sent the assessment to the taxpayer’s former address. the failure to raise the defense of prescription at the administrative level prevents the taxpayer from raising it at the appeal stage. The fact of receipt by the taxpayer of his copy must be indicated in the original copy to show that the taxpayer was notified of the acceptance of the BIR and the perfection of the agreement. No. The Final Assessment Notice was sent via registered mail to ABC’s former address in Las Pinas City. As a consequence thereof. No. When the pleadings or the evidence on record show that the claim is barred by prescription.R. (4) The waiver shall be signed by the Commissioner of Internal Revenue or his duly authorized representative. (CIR v. Yes. The phrase “but not after “ which indicates the expiry date of the period agreed upon to assess/collect should be filled up. No. In tax assessment cases.). December 3. (Commissioner of Internal Revenue v BASF Coating + Inks Phils. (2) The waiver shall be signed by the taxpayer himself or his duly authorized representative. itis not absolute. No. the running of the three-year period was not suspended and had already prescribed. 2014 Bar Supplement. and thus. CIR. 187589. There should be no deviation from this form. The taxpayer must be furnished a copy of the waiver as accepted by the BIR. RMO No. What are the requirements of a valid waiver of defense of prescription or the statute of limitations? A. and the date of acceptance of the BIR should be indicated. ABC Corporation was dissolved by shortening its corporate term. Though the established rule in remedial law that the defense of prescription must be raised at the trial court has also been applied for tax cases. the waiver must be signed by any of its responsible officials. 162852. In case the authority is delegated by the taxpayer to a representative.. PIERRE MARTIN D. (5) Both the date of execution by the taxpayer and the date of acceptance by the BIR should be before the expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent agreement is executed.. No stamping is allowed. such delegation should be in writing and duly notarized. Here. citing Philippine Journalist v.R.. 198677. ABC was assessed for deficiency income taxes. the second copy for the taxpayer and the third copy for the Office accepting the waiver. December 16. G. G. REYES Q. the original copy to be attached to the docket of the case. As a result thereof. 20-90 provides the following requirements: (1) The waiver must be in the prescribed form. G. Is the assessment valid? A. CIR. November 26. 172509.R. (China Banking Corporation v. What is the expenditure method in proving tax fraud? Page 17 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer.. and (6) The waiver must be executed in three copies. can the defense of prescription be raised for the first time on appeal before the Supreme Court? A. ABC moved out of its address in Las Pinas City and transferred to Calamba Laguna. Stanley Works Sales (Phils. Inc.

PIERRE MARTIN D.R. G. 2. G. is merely confirmatory in nature. whether there are taxes that should have been paid in lieu of the taxes paid? A. April 2. What is the competent proof to establish the fact that the creditable taxes were withheld? A. 2014) Q. No. in a claim for refund of taxes allegedly erroneously paid.R. No. No. and not upon the discovery by the taxpayer of the erroneous or excessive payment of taxes. The issuance of the BIR of a Ruling declaring the tax-exempt status of a taxpayer. if at all. 2014) Q. May the Court of Tax Appeals determine. (CIR v. 175410. and 3. It is shown on the return of the recipient that the income payment received was declared as part of the gross income. What are the three essential conditions for the grant of a claim for refund of creditable withholding income tax? A. No stamping is allowed. The theory of this method is that when the amount of the money that a taxpayer spends during a given year exceeds his reported or declared income and the source of such money is unexplained. November 12. REYES A. the burden of evidence then shifts to the Commissioner of Internal Revenue to prove that (1) the certificate is Page 18 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. It is not necessary for the person who executed and prepared the certificate of creditable tax withheld at source to be presented and to testify personally to prove the authenticity of the certificates. The expenditure method is a method of reconstructing a taxpayer’s income by deducting the aggregate yearly expenditures from the declared yearly income. Determining the proper category of tax that should have been paid is not an assessment. and Tax Audit Primer. In an action for the refund of taxes allegedly erroneously paid. Commissioner of Internal Revenue. No portion of the supplement may be copied or reproduced without the written permission of the author. (BIR v. It must be noted that upon presentation of a withholding tax certificate complete in its relevant details and with a written statement that it was made under the penalties of perjury. (SMI-ED Philippines v. 2014) Q. The claim is filed with the Commissioner of Internal Revenue within the two-year period from the date of payment of the tax. Such ruling is not the operative act from which an entitlement of refund is determined. 2014 Bar Supplement. 181459. November 24. It is an incidental matter necessary for the resolution of the principal issue. 197590.R. Yes.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. the propriety thereof is determined by law (in this case. Can the date of issuance of a BIR Ruling confirming the tax-exemption status of a taxpayer be used as the reckoning point of the prescriptive period for recovery of erroneously or illegally assessed or collected internal revenue taxes? A. The three essential conditions are: 1.R. which is whether the taxpayer is entitled to the refund. . it may be inferred that such expenditures represent unreported or undeclared income. The claim for refund must be filed within two (2) years from the date of payment of the tax regardless of any supervening cause that may arise after payment. 2014) G. Meralco. (CIR v. Court of Appeals & Spouses Manly. The certificate of creditable tax withheld at source is the competent proof to establish the fact that taxes are withheld. No. While the prescriptive period of two (2) years commences to run from the time that the refund is ascertained. The fact of withholding is established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld therefrom. 179260. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. from the date of payment of tax). Team (Philippines) Operations Corporation. Q. No. June 9. G. the Court of Tax Appeals may determine whether there are taxes that should have been paid in lieu of the taxes paid.

CIR v. No stamping is allowed. 2014. G. 179260. Is proof of actual remittance of the withheld taxes required before the taxpayer may claim for a refund of creditable withholding tax? The taxpayer need not submit the quarterly returns to show that it did not carry-over the excess withholding tax to the succeeding quarter. September 29. 2014) competent. As it prepared for the consolidation of its ownership over the property. No. No. on the basis of which it could rebut the taxpayer’s claim that it did not carry over its unutilized and excess creditable withholding taxes for the immediately succeeding quarters. January 28. 2015) Q. No. No. G. Is the BIR correct? A. First.R. It is not a requirement for claiming a tax refund of creditable withholding taxes. No. duly issued by the payor to the payee. relevant and part of the records. Inc. a corporation engaged in the real estate business. 2014 Bar Supplement. A certificate of sale was issued in favor of PNB. (2) it is false. 206526. Thereafter. No portion of the supplement may be copied or reproduced without the written permission of the author. Any document. Gotesco defaulted on its loan obligations. considering that Gotesco is primarily engaged in the real estate business. The BIR contends that. other than quarterly ITRs may be used to establish that indeed the non-carry over clause has been complied with.R. PNB withheld and remitted to the BIR withholding taxes equivalent to 6% of the bid price. (CIR v. it is the BIR that should present rebuttal evidence to shift the burden of evidence back to the taxpayer. showing the amount paid and the income tax withheld from that amount. 2015) Q.R. PNB. REYES not complete. G. in a refund of excess creditable withholding taxes. and Tax Audit Primer. January 14. September 29. No. the CTA found that PNB failed to present evidence to prove that Gotesco did not utilize the withheld taxes to settle its tax Page 19 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. secured a loan from PNB with a six-hectare property as collateral. 2014) Q. The BIR's failure to present such vital document during the trial in order to bolster its contention against the taxpayer’s claim for the tax refund is fatal. Section 5 of RR 12-94. amending Section 10(a) of RR 6-85. provided that such is (Philippines) Energy Corporation. While PNB was able to establish the fact of tax withholding and the remittance thereof to the BIR. Second. Proof of actual remittance of the withheld taxes is not required before the taxpayer may claim for a tax refund/tax credit certificates. When the taxpayer is able to establish prima facie its right to the refund by testimonial and object evidence. 180290. (CIR v. April 2.. Proving that no carry-over has been made does not absolutely require the presentation of the quarterly ITRs. PNB foreclosed the mortgaged property. Requiring that the ITR or the FAR of the succeeding year be presented to the BIR in requesting a tax refund has no basis in law and jurisprudence. (Winebrenner & Inigo Insurance Brokers. Thus. or (3) it was not issued regularly. PNB explained that it it should have applied the five percent (5%) creditable withholding tax rate on the sale of ordinary asset. Section 76 of the Tax Code does not mandate it. (CIR v. and (2) when the fact of withholding is established by a copy of the withholding tax statement. Gotesco. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. Team A. the BIR ought to have its own copies of the taxpayer’s quarterly returns on file. G. merely provides that claims for refund of income taxes deducted and withheld from income payments shall be given due course only (1) when it is shown on the ITR that the income payment received is being declared part of the taxpayer’s gross income.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. Indeed.R. the taxpayer must present its quarterly returns because such quarterly returns would show that it did not carry-over the excess withholding tax to the succeeding quarter. PNB filed an administrative claim for the refund of excess withholding taxes. . 180290. 188016.R. Team (Philippines) Operations Corporation. No. G. PNB. PIERRE MARTIN D.

Section 21(B) of said Code imposed a local business tax on the gross receipts of keepers of garages. No portion of the supplement may be copied or reproduced without the written permission of the author. In 1993.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY.58. which would establish either utilization or non-utilization.3. 2015) Q. or percentage tax under the Tax Code). Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made. Common carriers assailed the validity of Section 21(B) of the Manila Revenue Code. The submission of BIR Forms 2307 is to prove the fact of withholding of the excess creditable withholding tax being claimed for refund. G. 2014 Bar Supplement. On Motion for Reconsideration. Section 133(j) of the LGC prevails over Section Page 20 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. G. The CTA denied the Motion for Reconsideration and insisted that. the same is not true for the LGUs to whom power must be delegated by Congress and must be exercise within the guidelines and limitation that Congress may provide. March 18. And among the common limitations on the taxing power of LGUs is Section 133(j) of the LGC. Although the power to tax is inherent in the State. is to establish only the fact of withholding of the claimed creditable withholding tax. Is the BIR Form 2307 necessary? A. CIR. There is nothing in BIR Form No. (CIR v. air.R. such as common carriers. to sufficiently prove that Gotesco did not utilize the creditable taxes withheld. the City Council of Manila enacted the Manila Revenue Code. (Philippine National Bank v. there is no basis in law or jurisprudence to say that BIR Form No. Section 21(B) of the Manila Revenue Code is null and void. or water. No. 2307 is the only evidence that may be adduced to prove such non-use. In the words of Section 2. . PNB eventually offered as evidence the Income Tax Return of Gotesco to show that the excess withholding tax payments were not used by Gotesco to settle its tax liabilities. RR 2-98. which clearly and unambiguously proscribes LGUs from imposing a tax on the gross receipts of transportation contractors and common carriers. 2307) issued to Gotesco in relation to the creditable taxes withheld reported in its tax returns. While perhaps it may be necessary to prove that the taxpayer did not use the claimed creditable withholding tax to pay for his/its tax liabilities. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. No. RR 2-98. of the creditable withholding tax. What is the irrevocability rule? A. Team (Philippines) Operations Corporation. as amended. and common carriers by land. as the case may be. PIERRE MARTIN D.” Hence. the probative value of BIR Form 2307. must fail. No.3. First. This is clear in the provision of Section 58. REYES liabilities. and Tax Audit Primer. value-added. which is basically a statement showing the amount paid for the subject transaction and the amount of tax withheld therefrom. “That the fact of withholding is established by a copy of a statement duly issued by the payor (withholding agent) to the payee showing the amount paid and the amount of tax withheld therefrom. the PNB should have likewise presented the Certificate of Creditable Tax Withheld at Source (BIR Forms No. citing Section 76. Is Section 21(B) valid? A. The contention of the City of Manila that Section 143(h) of the LGC has empowered it to impose local business tax on any business subject to excise. No stamping is allowed. transportation contractors. cars for rent or hire driven by the lessee. April 2. persons who transport passenger or freight for hire. 179260. 2307. Tax Code) LOCAL GOVERNMENT TAXATION Q. and in various rulings of the Court. 206019. such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor.R. 2014.

Section 5(b) of the LGC provides that any tax ordinance or revenue measure shall be strictly construed against the local government unit enacting it. No. City of Manila. REYES 143(h) of the LGC as the former is a specific provision that explicitly limits the LGUs’ power to tax while Section 143(h) defines a general power. whichever is appropriate. Instead of moving for the issuance of a writ of execution. or (2) to issue a tax credit certificate in the same amount which may be credited by the taxpayer from its future tax liabilities due to the local government unit. No stamping is allowed. which is to prevent the duplication of the so-called common carriers tax. which relieved NPC of its functions of generating and supplying electricity. 120051. April 21. The EPIRA transferred to the National Transmission Corporation (TRANSCO) the NPC’s electric transmission function. (City of Manila v Hon. PIERRE MARTIN D. The province cannot likewise levy on the transmission facilities to satisfy the assessment against NPC because the same is now owned by TRANSCO.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. Provincial Government of Bataan.R. 197561. Fourth. NPC replied that it had ceased to be liable after the enactment of Electric Power Industry Act (EPIRA). It is not the intention of the law to burden the taxpayer with going through the process of execution under the Rules of Civil Procedure before it may be allowed to avail its tax credit as affirmed by a court judgment. and Tax Audit Primer. The assessment is based on NPC’s sale of electricity that it generated from two power plants in Bataan. Second. Clearly. 2014) Q. but instead of TRANSCO. Must a writ of execution be issued before a taxpayer may be allowed to avail of its tax refund or tax credit of local taxes as affirmed by a court judgment which has become final and executory? A. the NPC ceased to operate said business in Bataan. April 7. The local government unit has two options: (1) to pay the taxpayer the amount as tax refund. exemption of transportation contractors and common carriers from local business tax is consistent with the intent of our laws. The EPIRA also created the Power Sector Assets and Liabilities Management Corporation (PSALM) and transferred to it all of the NPC’s generation assets. the taxpayer should merely request for the approval of the local government unit in implementing the tax refund or tax credit. No. such tax is not the liability of NPC. Since the local franchise tax is imposed on the privilege of operating a franchise. . Third. The province once again sent notices of tax due. 2014) Q. because the court judgment can neither be considered a judgment for a specific sum of money susceptible of execution by levy or garnishment under Section 9. The province proceeded to levy on the properties that NPC used to own. Consequently.R. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. such tax is collectible from PSALM. G. NPC had ceased running said business. No portion of the supplement may be copied or reproduced without the written permission of the author. which would include its unpaid liabilities for local franchise tax. Rule 39 thereof. the EPIRA transferred all existing liabilities of NPC to PSALM. 2014) Page 21 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. The issuance of a Writ of Execution is superfluous. (Coca-Cola Bottlers Philippines v. The National Power Corporation (NPC) received a notice of franchise tax delinquency from the Provincial Government of Bataan. (National Power Corporation v. 180654. G. Further. Rule 39 of the Rules of Court nor a special judgment under Section 11. G. December 10.R. No. 2014 Bar Supplement. which includes the plants in Bataan. No. No. such construction gives effect to both Section 133(j) and Section 143(h) of the LGC. Colet and Malaysian Air System. Thus. Specific provisions prevail over general ones. Is NPC liable for the franchise tax? A.

local government units have no power to levy taxes of any kind on the national government. Section 234 enumerates the persons and real property exempt from real property taxes. should the 25% surcharge be computed yearly based on the unpaid tax due for each particular year? A. whether natural or juridical. remain owned by the Republic of the Philippines.” The PEZA is an instrumentality of the national government. G. whereas the surcharge is not. which includes “real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted. An erroneous assessment “presupposes that the taxpayer is subject to the tax but is disputing the correctness of the amount assessed. no taxes. No. The surcharge is a civil penalty imposed once for late payment of a Contrast this with the succeeding provisions on interest. (NPC v. City of Cabanatuan. Specifically on real property taxes. fees. The PEZA is exempt from the payment of real property taxes. (City of Lapu-Lapu v. These PEZA-registered enterprises and entities. Further. and Tax Audit Primer. Is the Philippine Economic Zone Authority (PEZA) exempt from the payment of real property taxes? A. are not subject to real property taxes. PEZA. No. If the legislative intent was to make the 25% surcharge proportionate to the period of delay. clearly reveals the legislative intent for the different modes in their application. G. its agencies and instrumentalities and local government units. No. Under Section 24 of the Special Economic Zone Act of 1995.R. October 1. Yes. The PEZA may only lease its lands and buildings to PEZA-registered economic zone enterprises and entities. 177332. Q. the real properties under the PEZA’s title are owned by the Republic of the Philippines. whether local or national. 2014) REAL PROPERTY TAXATION Q. to a taxable person. or charges not paid on time. The fact that the interest charge is made proportionate to the period of delay. shall be imposed on all business establishments operating within the economic zones. In the imposition of the surcharge on local taxes due and unpaid. REYES Q. The general rule is that real properties are subject to real property taxes. for consideration or otherwise. Under Section 133(o). 2014 Bar Supplement. Properties of public dominion. No stamping is allowed. and the proper remedy of a taxpayer issued an assessment depends on whether the assessment was erroneous or illegal.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. Section 168 of the Local Government Code categorically provides that the local government unit may impose a surcharge not exceeding 25% of the amount of taxes. the law should have provided for the same in clear terms. which was imposable at the rate not exceeding 2% per month of the unpaid taxes until fully paid. Exceptions to the rule are however also provided in the Local Government Code. . 2014) Note: Even the PEZA’s lands and buildings whose beneficial use have been granted to other persons may not be taxed with real property taxes. PIERRE MARTIN D. An erroneous assessment is different from an illegal assessment. Distinguish between an illegal assessment and an erroneous assessment of real property taxes in terms of remedies to be taken? A. the PEZA cannot be taxed by local government units. November 26. 184203 & 187583.R. even if titled in the name of an instrumentality as in this case. the taxpayer claims that the local assessor Page 22 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. Being an instrumentality of the national government. No portion of the supplement may be copied or reproduced without the written permission of the author. This is true especially since the Local Government Code has withdrawn exemptions from real property taxes of all persons.” With an erroneous assessment. which operate within economic zones. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made.

February 17. a warrant was issued by the City Treasurer subjecting the property to levy. November 26. The appeal shall be filed within fifteen (15) days from notice of the trial court’s decision.” thus. 2014 Bar Supplement. . Should the taxpayer find the action on the protest unsatisfactory. cities. A public auction sale was conducted. The Court of Tax Appeals’ decision may then be appealed before the Supreme Court through a petition for review on certiorari under Rule 45 of the Rules of Court raising pure questions of law. may levy and collect an annual tax of one percent (1%) on the assessed value of real property which shall be in addition to the basic real property tax. Setting the rate of the additional levy for the special education fund at less than 1% is within the taxing power of local government units. (Demaala v. REYES erred in determining any of the items for computing the real property tax. In case of an erroneous assessment.R. COA. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. In case of an illegal assessment. the value of the real property or the portion thereof subject to tax and the proper assessment levels. 2014) Q.” There is no limiting qualifier to the articulated rate of 1% which unequivocally indicates that any and all special education fund collections must be at such rate. G. (City of Lapu-Lapu v. If the taxpayer is still unsatisfied after appealing with the Local Board of Assessment Appeals. The taxpayer shall file a complaint for injunction before the Regional Trial Court to enjoin the local government unit from collecting real property taxes. The taxpayer now questions the validity of the auction sale in that it violated the procedural requirements under the Local Government Code. the taxpayer may appeal with the Central Board of Assessment Appeals within 30 days from receipt of the Local Board’s decision. Yes. or a province have an additional levy on real property for the special education fund at the rate of less than 1%. On the other hand.” The operative phrase in Section 235’s grant to municipalities in Metro Manila. No. The taxpayer must first pay the real property tax under protest. PIERRE MARTIN D. 199752. The Court of Tax Appeals’ decision may then be appealed before the Supreme Court through a petition for review on certiorari under Rule 45 of the Rules of Court raising pure questions of law. “may levy and collect an annual tax of one percent (1%). The buyer argues that there is a presumption of regularity of an official act in a tax delinquency sale. and Tax Audit Primer. an assessment is illegal if it was made without authority under the law. a city. or a municipality within the Metropolitan Manila Area. the taxpayer may directly resort to judicial action without paying under protest the assessed tax and filing an appeal with the Local and Central Board of Assessment Appeals. As a result. before the Court of Tax Appeals. and provinces of the power to impose an additional levy for the special education fund is prefixed with “may. Section 235 of the Local Government Code provides that “a province or city. i. 2015) Q. No. G. PEZA. The party unsatisfied with the decision of the Regional Trial Court shall file an appeal. No portion of the supplement may be copied or reproduced without the written permission of the author.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. the taxpayer may appeal with the Local Board of Assessment Appeals within 60 days from receipt of the decision on the protest. No stamping is allowed.? A.R. a taxpayer was not able to pay its real property taxes. the taxpayer must exhaust the administrative remedies provided under the Local Government Code before resorting to judicial action. The decision of the Central Board of Assessment Appeals is appealable before the Court of Tax Appeals En Banc. the complaint being a local tax case decided by the Regional Trial Court. From 1994 to 1996. May a municipality within the Metropolitan Manila Area.. 184203 & 187583. The proceeds thereof shall exclusively accrue to the Special Education Fund (SEF). The taxpayer argues that no presumption of regularity is enjoyed Page 23 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer.e. not a petition for certiorari.

It is incumbent upon the buyer at an auction sale to prove the regularity of all proceedings leading to the sale for the buyer could not rely on the presumption of regularity accorded to ordinary administrative proceedings.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. city or municipality within the Metropolitan Manila Area where the property is located. who shall annotate the levy on the tax declaration and certificate of title of the property. respectively. Under Section 254 of the LGC. it is required that the notice of delinquency must be posted at the main hall and in a publicly accessible and conspicuous place in each barangay of the local government unit concerned. and by publication once a week for two (2) weeks in a newspaper of general circulation in the province. There is no presumption of the regularity of any administrative action which resulted in depriving a taxpayer of his property through a tax sale. and Tax Audit Primer. Under the rules of statutory construction. or municipality. At the same time. or in case he is out of the country or cannot be located. 2014 Bar Supplement. No. necessary to determine whether respondent has fulfilled his burden of proving compliance with the requirements for a valid tax delinquency sale. this general rule-making power gives way to the specific grant of power to promulgate rules and regulations on the practice of customs Page 24 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. In order to be valid. The burden to show that such steps were taken lies on the person claiming its validity. the steps required by law must be strictly followed. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. This is premised on the rule that a sale of land for tax delinquency is in derogation of property and due process rights of the registered owner. The burden to prove compliance with the validity of the proceedings leading up to the tax delinquency sale is incumbent upon the buyer or the winning bidder. 2014) TARIFF AND CUSTOMS TAXATION Q. The BOC Commissioner’s power under Section 608 of the Tariff and Customs Code (TCCP) is a general grant of power to promulgate rules and regulations necessary to enforce the provisions of the TCCP. It is. . thus. November 19. the administrator or occupant of the property. Does the Commissioner of Customs have the power to accredit customs brokers? A. Such advertisement shall be effected by posting a notice at the main entrance of the provincial. No portion of the supplement may be copied or reproduced without the written permission of the author. PIERRE MARTIN D. G. Section 258 of the LGC further requires that should the treasurer issue a warrant of levy. in a newspaper of general circulation in the province. city. city or municipal building. 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 delinquency and expenses of sale. the written notice of the levy with the attached warrant shall be mailed to or served upon the assessor and the Registrar of Deeds of the province. the same shall be mailed to or served upon the delinquent owner of the real property or person having legal interest therein. REYES by any administrative action which results in depriving a taxpayer of his property.R. Agojo. 208740. It shall also be published once a week for two (2) consecutive weeks. Section 260 of the LGC also mandates that within thirty (30) days after service of the warrant of levy. No. and in a publicly accessible and conspicuous place in the barangay where the real property is located. This is an exception to the rule that administrative proceedings are presumed to be regular. (Strategies Development Corporation & Prieto v. No stamping is allowed. city or municipality where the property is located. for the Court cannot allow mere presumption of regularity to take precedence over the right of a property owner to due process accorded no less than by the Constitution. Is the taxpayer correct? A. Yes.

and Tax Audit Primer. Unlike the BOC Commissioner whose power over customs brokers was – at the very least – implied and indirect. prohibition or mandamus. The Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings.R. No. 183664. Indeed. as amended. 2014) Q. the BIR Commissioner was given express and specific powers to accredit and register tax agents under Section 6(G) of the National Internal Revenue Code (NIRC). before any seizure proceeding can be formally initiated. 2014) Q. REYES brokers profession to the CSC Commissioner under Section 3409 of the TCCP. (COC v. No stamping is allowed. G. 2014 Bar Supplement. 163055. PIERRE MARTIN D. No portion of the supplement may be copied or reproduced without the written permission of the author. With the repeal of Section 3409 of the TCCP by RA 9280. 158150. for it must be proven first that fraud has been committed by or there was bad faith on the part of the importer/consignee to evade payment of the duties due and demandable. in relation to paragraph (f). the shipment shall be subject to automatic seizure. the shipment could not be deemed liable for seizure or even forfeiture on the ground of violation of Section 2530(f) of the TCCP. this specific rule-making power was transferred to the Professional Regulatory Board for Customs Brokers (PRBCB) to complement its supervisory and regulatory powers over customs brokers. G.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. Failure to comply with the foregoing procedural requirements would negate the propriety of having the subject shipment of the importer seized and forfeited in favor of the Government in all cases. Court of Appeals.R. The similarity in the functions and concerns of the BOC and the BIR does not support a grant of power to accredit customs brokers to the BOC Commissioner. (Airlift Asia Customs Brokerage. New Frontier Sugar Corporation. Is the BOC correct? A. 1-91. Regional trial courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere with these proceedings. G. July 28. and regular courts cannot interfere with his exercise thereof or stifle or put it at naught. and (2) that a written notice of such seizure must be served upon the owner or importer or his agent.R. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. The BOC asserts that pursuant to Joint Order No. June 11. 2014) JUDICIAL REMEDIES (COURT OF TAX APPEALS) Q. No. The following mandatory procedures must be observed in a seizure case: (1) that a WSD must first be issued upon making any seizure. the Board of Examiners (of which the BOC Commissioner serves as ex-officio chairman) was to perform only a recommendatory role. in the exercise of this specific power. Commissioner of Customs. v. A Warrant of Seizure and Detention (WSD) is a condition precedent. No. v. (Agriex Co. Who has jurisdiction to hear and determine questions involving the seizure and forfeiture of dutiable goods? A. 1-91. . Section 2530 of the Tariff and Customs Code (TCCP) for failure to subject the shipment to pre-shipment inspection and for lack of a Clean Report of Findings (CRF). New Frontier Sugar Corporation imported raw cane sugar from Thailand. Inc. Is an adverse ruling of the Secretary of Finance in the exercise of its power of review Page 25 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. The Bureau of Customs found that there was a violation of Joint Order No. Ltd. Regional trial courts are precluded from assuming cognizance over such matters even through petitions for certiorari. September 10. Further. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. No.

the filing of the petition on July 30. Page 26 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. No. Oilink International Corporation. as amended by RA 9282. on July 2. REYES under Section 4 of the NIRC appealable to the Court of Tax Appeals? A. As such. It is now within the power of the Court of Tax Appeals. 2014) G. 1999. because it was on the former date that the Commissioner of Customs denied the protest of Oilink. the date when URC received the final demand letter. 1999. through its power of certioriari. but also on the validity of the revenue regulation or revenue memorandum circular on which the assessment is based. Upon assumption of the new COC. 1999. The COC argues that the CTA does not have jurisdiction as the 30-day period within which to appeal has already lapsed. No.R. made a final demand upon URC and Oilink. (Philippine American Life and General Insurance Company v. 210987. and Tax Audit Primer. Review by the Secretary of Finance pursuant to Section 4 of the NIRC.R.R. The November 25. 2014 Bar Supplement. On July 30. the Commissioner of Customs (COC) issued a final assessment. 1998. seeking nullification of the assessment. another demand letter was sent to URC. 161759. URC and Oilink had interlocking directors and the latter was 100% owned by the former. 198756. 1999 by Oilink was well within its reglementary period to appeal. is unwarranted. The COC rejected the same and. Oilink formally protested the assessment arguing that it is not a party liable for the assessed taxes. albeit impliedly. 2014. to rule on the validity of a particular administrative rule or regulation so long as it is within its appellate jurisdiction. The Court of Tax Appeals can now rule not only on the propriety of an assessment or tax treatment of a certain transaction. Is the COC correct? A. of a BIR Ruling is appealable to the Court of Tax Appeals. as amended. Clearly. Republic. G. November 24.R. Yes. G. 2014) Q. On November 25. The Secretary of Finance and Commissioner of Internal Revenue. July 2. No stamping is allowed. Yes. No. 1998. (COC v. January 13. No. The Secretary of Finance and Commissioner of Internal Revenue. . Banco de Oro v. (Philippine American Life and General Insurance Company v. the COC wrote URC to pay the deficiency taxes but in a reduced amount. URC proposed to pay a lesser amount. of which the initial payment was to be taken from collectibles of Oilink from the National Power Corporation. No. 2015) Q. the final demand sent to URC did not bind Oilink unless the separate identities of the corporations were disregarded in order to consider them as one. November 24. No. with jurisdiction over the appeal from the Secretary of Finance’s review of rulings of the Commissioner of Internal Revenue as “other matters” arising under the NIRC or other laws administered by the BIR. not to Oilink. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. 1999.R. The insistence by the Commissioner of Customs on reckoning the reglementary period to appeal from November 25.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. The COC denied the protest on July 12. 1998. 1999. 210987. The Court opined that Section 7(a)(1) of RA 1125. Oilink appealed to the CTA. No portion of the supplement may be copied or reproduced without the written permission of the author. addresses the seeming gap in the law as it vests in the Court of Tax Appeals. G. The District Collector assessed URC for taxes due on its oil imports between 1991 and 1995. 1998 final demand letter of the BoC was addressed to URC. G. PIERRE MARTIN D. Does the CTA have jurisdiction relative to matters involving the validity of a rule or regulation issued by the Bureau of Internal Revenue? A. Union Refinery Corporation (URC) and Oilink International Corporation (Oilink) are engaged in the importation of oil products. On December 21. not July 2. The reckoning date for Oilink’s appeal was July 12.

Thereafter. and Tax Audit Primer. on motion for reconsideration. The CTA Division denied the Petition. (Duty Free Philippines v. RA 1125. The Court is without jurisdiction to review decisions rendered by a division of the CTA. The taxpayer then filed a Petition for Review with the CTA in Division. or for purposes that would defeat public convenience. The BIR issued several assessment notices to the taxpayer for deficiency income tax and VAT for the taxable years 1999 to 2002. No portion of the supplement may be copied or reproduced without the written permission of the author. but they were denied by the BIR. Q. file a petition for review with the CTA en banc. as amended by RA 9282. defend crime. No. October 8. the decision or ruling of the CTA en banc may be elevated to this Court.R. BIR. A party adversely affected by the resolution of the CTA division may. No stamping is allowed. protect fraud. The CTA Division likewise denied the Motion for Reconsideration. G. 2014 Bar Supplement. 2014) *** Nothing else follows *** Page 27 of 27 NOTICE This material supplements the author’s 2013 Bar Reviewer. perpetrate deception or otherwise circumvent the law. Possessors may reproduce and distribute this supplement provided the name of the author remains clearly associated with my work and no alterations in the form and content of this supplement are made. confuse legitimate legal or judicial issues. REYES Note: The Court also stated in the case that the doctrine of piercing the corporate veil has no application here because the COC did not establish that Oilink had been set up to avoid the payment of taxes or duties. no decision of the CTA division may be elevated to this Court under Rule 45 of the 1997 Rules of Civil Procedure without passing through the CTA en banc. No. exclusive appellate jurisdiction over which is vested in the CTA en banc. provides that the CTA en banc shall have exclusive jurisdiction over appeals from the decision of its divisions. PIERRE MARTIN D. The taxpayer then appealed directly to the Supreme Court. justify wrong.TAXATION LAW QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR ATTY. Simply stated. . Does the Supreme Court have jurisdiction? A. The taxpayer filed protests. 197228.