From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
The failure to await the decision of the Commissioner or the lapse of 120-day period prescribed in Section 112(C) amounted to a premature filing.
As an offline international carrier with no landing rights in the Philippines, it is not liable to tax on Gross Philippine Billings under Section 28(A) (3) of the 1997 National Internal Revenue Code. Under the foregoing provision, the tax attaches only when the carriage of persons, excess baggage, cargo, and mail originated from the Philippines in a continuous and uninterrupted flight, regardless of where the passage documents were sold. Not having flights to and from the Philippines, petitioner is clearly not liable for the Gross Philippine Billings tax. Petitioner, an offline carrier, is a resident foreign corporation for income tax purposes, thus, it may be subject to 30% tax on its taxable income.
Verily, the foregoing provisions explicitly provide that the CTA has exclusive appellate jurisdiction over tax collection cases originally decided by the RTC. In the instant case, the CA has no jurisdiction over respondent’s appeal; hence, it cannot perform any action on the same except to order its dismissal pursuant to Section 2, Rule 50 of the Rules of Court. Therefore, the act of the CA in referring respondent’s wrongful appeal before it to the CTA under the guise of furthering the interests of substantial justice is blatantly erroneous, and thus, stands to be corrected. In Anderson v. Ho, the Court held that the invocation of substantial justice is not a magic wand that would readily dispel the application of procedural rules
: At the outset, the period for petitioner to assess and collect an internal revenue tax is limited only to three years. However, one of the exceptions to the three-year prescriptive period on the assessment of taxes is that provided for under Section 222(b) of the NIRC of 1997, as amended, which states: “If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon.” It must be kept in mind that the very reason why the law provided for prescription is to give taxpayers peace of mind, that is, to safeguard them from unreasonable examination, investigation, or assessment. The law on prescription, being a remedial measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should perforce be strictly construed.
The petition for review was filed at the time when the jurisdiction of the CTA was defined and governed by Section 7 of Republic Act No. 1125. According to such provision of the law, the action of the Collector of Customs was appealable to the Commissioner of Customs, whose decision
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
was subject to the exclusive appellate jurisdiction jurisdiction of the CTA, whose decision was in turn appealable to the CA. Under Section 2530 (a) and (k) of the TCCP, the forfeiture of a vehicle, vessel or aircraft is anchored on its being used unlawfully in the transport of contraband or smuggled articles into or from any Philippine port. Thus, the determination of the legality of the forfeiture of the M/V Don Martin was necessarily contingent on whether the customs authorities had validly and properly seized the shipment of 6,500 sacks of rice on account of the rice being smuggled. Given this logical correlation, the CT A could not be divested of its jurisdiction to determine the legality of the forfeiture forfeiture of the rice.
In resolving the issue whether the rice shipment constituted smuggling or unlawful importation, and thus be subject to forfeiture, it must be proved that fraud has been committed by the consignee/importer to evade the payment of the duties due. To warrant forfeiture, Section 2530(a) and (f) of the TCCP requires that the importation must have been unlawful or prohibited. As to the issue of legality of forfeiture of the M/V Don Martin, there, was3 no sufficient basis to warrant such forfeiture. Under Section 902 of the TCCP, the right to engage in the Philippine coastwise trade was limited to vessels carrying a certificate of Philippine registry. In order for the vessel to legally engage in coastwise trade, the owner must further submit other documents, like the bill of lading and coastwise manifest.
The time limit for the government to collect the assessed tax is set at three years, to be reckoned from the date when
the BIR mails/releases/sends the assessment notice to the taxpayer. Further, the assessed tax must be collected by distraint or levy and/or court proceeding within the threeyear period. To determine prescription, what is essential only is that the facts demonstrating the lapse of the prescriptive period were sufficiently and satisfactorily apparent on the record either in the allegations of the plaintiff’s complaint, or otherwise established by the evidence. Under the then applicable Section 319(c) [now, 222(c)] of the National Internal Revenue Code (NIRC) of 1977, as amended, any internal revenue tax which has been assessed within the period of limitation may be collected by distraint or levy, and/or court proceeding within three years following the assessment of the tax. 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, mailed or sent by the BIR to the taxpayer.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day period, appeal the decision or the unacted claim with the Court of Tax Appeals. A claim for tax refund or credit, like a claim for tax refund exemption, is construed strictly against the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and jurisdictional periods. The prescriptive period for filing a tax refund or credit of unutilized input VAT as provided in Section 112 of the 1997 Tax Code, as follows: (1) An administrative claim must be filed with the CIR within two years after
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
the close of the taxable quarter when the zero-rated or effectively zerorated sales were made. (2) 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. 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. If the 120-day period expires without any decision from the CIR, then the administrative claim may be considered to be denied by inaction. (3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR’s decision denying denying the administrative claim or from the expiration of the 120-day period without any action from the CIR.
taxes describes the entities to whom the petroleum products must be sold in order to render the exemption operative. Section 135(c) should thus be construed as an exemption in favor of the petroleum products on which the excise tax was levied in the first place. The exemption cannot be granted to the buyers - that is, the entities that are by law exempt from direct and indirect taxes - because they are not under any legal duty to pay the excise tax. The payment of the excise taxes by Chevron upon its importation of petroleum products was deemed illegal and erroneous upon the sale of the petroleum products to CDC. Section 204 of the NIRC explicitly allowed Chevron as the statutory taxpayer to claim the refund or the credit of the excise taxes thereby paid, viz.: SEC 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may – may – xxxx
Under Sec. 129 of the NIRC, as amended, excise taxes are imposed on two kinds of goods, namely: (a) goods manufactured manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition; and (b) things imported. Undoubtedly, the excise tax imposed under Section 129 of the NIRC is a tax on property. Section 135 of the NIRC states: SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. - Petroleum products sold to the following are exempt from excise tax: xxxx (c) Entities which are by law exempt from direct and indirect taxes. (Emphasis supplied.) Pursuant to Section 135(c), supra, petroleum products sold to entities that are by law exempt from direct and indirect taxes are exempt from excise tax. The phrase which are by law exempt from direct and indirect
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after payment of the tax or penalty: Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit or refund. It must be noted that excise taxes are considered as a kind of indirect tax, the liability for the payment of which may fall on a person other than whoever actually bears the burden of the tax. Simply put, the statutory taxpayer may shift the economic burden of the excise tax payment to another - usually the buyer.
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
on the propriety of the assessment. In other words, in filing an action for injunction to restrain collection, petitioner was in effect also challenging the validity of the RPT assessment. The Court of Tax Appeals (CTA) has exclusive jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by the Regional Trial Court (RTC) in a local tax case. It is the CTA which has the power to rule on a Petition for Certiorari assailing an interlocutory order of the RTC relating to a local tax case. Jurisdiction over the subject matter is required for a court to act on any controversy. It is conferred by law and not by the consent or waiver upon a court. As such, if a court lacks jurisdiction over an action, it cannot decide the case on the merits and must dismiss it. With respect to the CTA, its jurisdiction jurisdiction was expanded and its rank elevated to that of a collegiate court with special jurisdiction by virtue of Republic Act No. 9282. This expanded jurisdiction of the CTA includes its exclusive appellate jurisdiction to review by appeal the decisions, orders or resolutions of the RTC in local tax cases originally decided or resolved by the RTC in the exercise of its original or appellate jurisdiction. jurisdiction. On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA includes that of determining whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within the exclusive appellate jurisdiction jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional mandate, is vested with jurisdiction to issue writs of certiorari in these cases.
The Court finds, that in praying to restrain the collection of RPT, petitioner also implicitly questions the propriety of the assessment of such RPT. This is because in ruling as to whether to restrain the collection, the RTC must first necessarily rule
MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. corporation. Neither is MIAA a governmentowned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale.
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
The word “zero“zero-rated” is required on the invoices or receipts issued by VATregistered taxpayers. An applicant for a claim for tax refund or tax credit must not only prove entitlement to the claim but also compliance with all the documentary and evidentiary requirements. If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer but it fails to comply with the invoicing requirements in the issuance of sales invoices (e.g. failure to indicate the TIN), its claim for tax credit/refund of VAT on its purchases shall be denied considering that the invoice it is issuing to its customers does not depict its being a VAT-registered taxpayer whose sales are classified as zero-rated sales.
The argument is not tenable. Though the statement of delinquency was not captioned as "Notice of Delinquency," its contents nonetheless sufficiently informed BRC of its deficiency in real property taxes and the penalty with a reminder to settle its tax obligation immediately in order to avoid legal inconvenience. Furthermore, aside from this statement of delinquency, the City Treasurer sent to BRC, through personal service, the Final Notice of Delinquency. In the said notice, BRC was again reminded of its unpaid realty taxes and penalties and was informed that the subject property was included in the list of delinquent real properties and was scheduled for auction. This final notice was followed by the Warrant of Levy. Levy.
Under Section 112(C) of the NIRC, respondent had 120 days from the date of submission of complete documents in support of the application within which to decide on the administrative claim. After that, the
taxpayer affected by the CIR’s decision or inaction may appeal to the CTA within 30 days from the receipt of the decision or from the expiration of the 120-day period. Compliance with both periods is jurisdictional. The period of 120 days is a prerequisite for the commencement of the 30-day period to appeal. The right to appeal is a mere statutory privilege that requires strict compliance with the conditions attached by the statute for its exercise.
The NIRC provides that the CIR has 120 days from the date of submission of complete documents to decide on the claim for tax credits. Upon inaction of the BIR after 120 days, the taxpayer may, within 30 days, appeal on the CTA. The BIR did not give notice to Total with regard to the documents submitted on August 2008. Thus the counting of the 120 day period should start from August 2008 or when Total made its submission of complete documents to support its application. The BIR had until December 2008 to decide. Because of the BIR's inaction, Total had until January 25, 2009 to file their judicial claim.
The burden of proof to establish entitlement to refund is on the claimant taxpayer. Being in the nature of a claim for exemption, refund is construed in strictissimi juris against the entity claiming the refund and in favor of the taxing power. This is the reason why a claimant must positively show compliance with the statutory requirements provided for under the NIRC in order to successfully pursue one’s claim. As implemented by the applicable rules and regulations and as interpreted in a vast array of decisions, a taxpayer who seeks a refund of excess and unutilized CWT must: 1) File the claim with the CIR within the two year period from the date of payment of the tax; 2) Show on the return that the income received was declared as part of the gross income; and
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega 3) Establish the fact of withholding by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld. There is no question that those who claim must not only prove its entitlement to the excess credits, but likewise must prove that no carry-over has been made in cases where refund is sought.
Allowing the refund or credit of unutilized input VAT finds its genesis in Executive Order No. 273 series of 1987, which is recognized as the “Original VAT Law.” Thereafter, it was amended through the passage of Republic Act No. (RA) 7716, RA 8424, and, finally by RA 9337, which took effect on November 1, 2005. Considering that Cargill’s claims for refund covered periods before the effectivity of RA 9337, Section 112 of the NIRC, as amended by RA 8424, should, therefore, be the governing law, the pertinent portions of which read: Section 112. Refunds or Tax Credits of Input Tax. –
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty dayperiod, appeal the decision or the unacted claim with the Court of Tax Appeals.
In claims for excess and unutilized creditable withholding tax, the submission of BIR Forms 2307 is to prove the fact of withholding of the excess creditable withholding tax being claimed for refund. This is clear in the provision of Section 58.3, RR 2-98, as amended, and in various rulings of the Court. In the words of Section 2.58.3, RR 2-98, "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."
A. Zero-rated or Effectively Zero-rated Sales. – any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: xxxx D. Period within which Refund or Tax Credit of Input Taxes shall be made. – In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty dayperiod, appeal the decision or the unacted claim with the Court of Tax Appeals. In the landmark case of Aichi, it was held that the observance of the 120-day period is a mandatory and jurisdictional requisite to the filing of a judicial claim for refund before the
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega CTA. As such, its non-observance would warrant the dismissal of the judicial claim for lack of jurisdiction. It was, withal, delineated in Aichi that the two (2)-year prescriptive period would only apply to administrative claims, and not to judicial claims.36 Accordingly, once the administrative claim is filed within the two (2)-year prescriptive period, the taxpayer-claimant must wait for the lapse of the 120-day period and, thereafter, he has a 30-day period within which to file his judicial claim before the CTA, even if said 120-day and 30-day periods would exceed the aforementioned two (2)-year prescriptive period.
ii.
iii.
Taxation is the inherent power of the sovereign exercised through the legislature to impose burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate objects of government. It is the power by which the sovereign raises revenue to defray the expenses of government. It is a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must bear its burden.
The power of taxation is inherent in sovereignty as an incident or attribute thereof, being essential to the existence of independent government. It is legislative in character. It is generally not delegated executive or judicial department.
to
When allowed by the Constitution [Sec. 28[2], Art. VI, 1987 Constitution];
When the delegation relates merely to administrative implementation that may call for some degree of discretionary powers under a set of sufficient standards expressed by law Cervantes v. Auditor General, [91 Phil. 359], or implied from the policy and purpose of the Act Maceda v. Macaraig, [197 SCRA 771]. It is subject to constitutional and inherent limitations.
The power to tax is an attribute of sovereignty emanating from necessity (Phil. Guaranty Co. Inc. Vs. Commissioner of Internal Revenue, G.R. No. L-22074 ). Taxation is described as a symbiotic relationship whereby in exchange of the benefits and protection that the citizens get from the government, taxes are paid (CIR vs. Algue, Inc., G.R. No. L-28896 ).
Essentially, this means that in the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. It has the authority to prescribe a certain tax at a specific rate for a particular public purpose on persons or things within its jurisdiction. In other words, the legislature wields the power to define what tax shall be imposed, why it should be imposed, how much tax shall be imposed, against whom (or what) it shall be imposed and where it shall be imposed (CREBA v. Romulo, 614 SCRA 605, 626).
Exceptions: i.
To LGUs in respect to matters of local concern to be exercised by the LG bodies thereof [Sec. 5, Art. X, 1987 Constitution];
A principal attribute of sovereignty, the exercise of taxing power derives its source from the very existence of the state whose
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega social contract with its citizens obliges it to promote public interest and common good. The theory behind the exercise of the power to tax emanates from necessity; without taxes, government cannot fulfil its mandate of promoting the general welfare and well-being of the people (CIR v. BPI, 521 SCRA 373, 387388).
In , the Supreme Court stressed that taxation is a destructive power which interferes with the personal and property rights of the people and takes from them a portion of their property for the support of the government. The power to tax includes the power to destroy if it is used validly as an implement of the police power in discouraging and in effect, ultimately prohibiting certain things or enterprises inimical to the public welfare xxx (Cruz, Constitutional Law , 2000 Ed., p. 87).
The power of taxation is the most absolute of all powers of the government (Sison v. Ancheta, 130 SCRA 654).It has the broadest scope of all the powers of government because in the absence of limitations, it is considered as unlimited, plenary, comprehensive and supreme. However, the power of taxation should be exercised with caution to minimize injury to the proprietary rights of the taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill “the hen that lays the golden egg” (Roxas v. CTA, 23 SCRA 276).
1.
By enforcing the tax lien, the BIR availed itself of the most expeditious way to collect the tax. Taxes are the lifeblood of the government and their prompt and certain availability is an imperious need (CIR v. Pineda, 21 SCRA 105).
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2. The government is not bound by the errors committed by its agents. In the performance of its government functions, the State cannot be estopped by the neglect of its agents and officers.
The errors of certain administrative officers should never be allowed to jeopardize the government’s financial position (CIR v. CTA, 234 SCRA 348). 3. The BIR is authorized to collect estate tax deficiency through the summary remedy of levying upon the sale of real properties of a decedent, without the cognition and authority of the court sitting in probate over the supposed will of the decedent, because the collection of the estate tax is executive in character. As such, the estate tax is exempted from the application of the statute of nonclaims, and this is justified by the necessity of government funding, immortalized in the maxim “Taxes are the lifeblood of the government and should be collected without unnecessary hindrance.” However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself (MARCOS II v. CA, 273 SCRA 47). 4. Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Philex’s claim that it had no obligation to pay the excise tax liabilities within the prescribed period since it still has pending claims for VAT input credit/refund with the BIR is UNTENABLE (Philex Mining Corporation v. CIR, 294 SCRA 687).
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega funds for their prosecution and attainment. Taxation may be made the implement of the State’s police power.” Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. Upon taxation depends the Government's ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affair. This should not hold true to government officials with respect to matters not of their own personal concern.
This doctrine is enunciated in the case of 158 SCRA 9, which states that: “Taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one’s hard-earned income to the taxing authorities, every person who is able to must contribute his share in the burden of running the government. The government, for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their material and moral values.”
1.
In the SC upheld the validity of the tax law increasing the existing tax on the manufacture of sugar. “The protection and promotion of the sugar industry is a matter of public concern; the legislature may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. If objective and methods alike are constitutionally valid, there is no reason why the state may not levy taxes to raise
2. In the levy of a 30% tax under PD 1987, was imposed primarily for answering the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic videotapes, and therefore VALID. While the direct beneficiary of the said decree is the movie industry, the citizens are held to be its indirect beneficiaries.
YES. The Supreme Court in the case of ., 456 SCRA 414, 445 held: “Tax measures are but “enforced contributions exacted on pain of penal sanctions” and “clearly imposed for a public purpose. In recent years, the power to tax has indeed become a most effective tool to realize social justice, public welfare, and the equitable distribution of wealth. While it is declared commitment under Section 1 of RA 7432, social justice “cannot be invoked to trample on the rights of property owners who under our Constitution and laws are also entitled to protection. The social justice consecrated in our [C]onstitution [is] not intended to take away rights from a person and give them to another who is not entitled thereto. For this reason, a just compensation for income that is taken away from respondent (Central Luzon Drug Corp.) becomes necessary. It is in the tax credit (now tax deduction) that our legislators find support to realize social justice, and no administrative body can alter that fact.”
i.
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– Basically, the purpose of taxation is to provide funds or property with which the State promotes the general welfare and protection of its citizens. (51 Am. Jur. 71-73) The conservative and
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega pivotal distinction between police power and power of taxation rests in the purpose for which the charge is made. If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax. (Gerochi v. DOE) While it is true that the power of taxation can be used as an implement of police power, the primary purpose of levy is revenue generation. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax (Planters Products, Inc. v. Fertiphil Corporation).
to grant incentives or exemptions in order to encourage investments and thereby promote the country’s economic growth. e. Protectionism
It requires that (a) each tax should be clear and plain to the taxpayers; (b) capable of enforcement by an adequate and well-trained staff of officials; (c) convenient as to time and manner of payment; and (d) not duly burdensome upon or discouraging to business activity.
ii. a. Regulation — Taxes may also be imposed for a regulatory purpose as, for instance, in the rehabilitation of a threatened industry which is affected with public interest, like the oil industry. (Caltex Phils. V. COA)
It requires that the sources of revenues must be adequate to meet government expenditures and their variations (Abakada Guro, et al. v. Ermita, 469 SCRA 1; Chavez vs Ongpin, 186 SCRA 331).
b. Promotion of General Welfare — Taxation may be used as an implement of the police power in order to promote the general welfare of the people. Thus, in the case of Lutz v. Araneta, the SC upheld the validity of the Sugar Adjustment Act, which imposed a tax on milled sugar since the purpose of the law was to strengthen an industry that is so undeniably vital to the economy – the sugar industry.
A good tax system must be based on the taxpayer’s ability to pay. This suggests that taxation must be progressive conformably with the constitutional mandate that Congress shall evolve a progressive system of taxation. (Sec. 28[1], Art. VI, 1987 Constitution) It holds that similarly situated taxpayers should pay equal taxes, while those who have more should pay more.
c.
Reduction of Social Inequality — This is made possible through the progressive system of taxation where the object is to prevent the undue concentration of wealth in the hands of a few individuals. Progressivity is keystoned on the principle that those who are able to pay should shoulder the bigger portion of the tax burden.
d. Encouragement of Economic Growth — Taxation does not only raise public revenue, but in the realm of tax exemptions and tax reliefs, for instance, the purpose is
1. The income tax liability of Francia cannot be compensated with the amount owed by the government as compensation for his expropriated property. A taxpayer may not set-off taxes due from claims he may have against the government. Taxes cannot be the subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such debt, demand, contract or judgment as is allowed to be setoff. The collection of a tax cannot await the results of a lawsuit against the government (Francia v. IAC, 162 SCRA 753).
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega 2. The claim of Philex for VAT refund is still pending litigation, and still has to be determined by the CTA. A fortiori, the liquidated debt of Philex to the government cannot, therefore, be set off against the unliquidated claim which Philex conceived as existing in its favor. Debts are due to the government in its corporate capacity, while taxes are due to the government in its sovereign capacity (Philex v. CIR, 294 SCRA 687).
Direct tax refers to one assessed upon the property, person, business income, etc., of whereas indirect tax includes those levied on commodities before they reach the consumer, and are paid by those upon whom they ultimately fall, , but as part of the market price of the commodity (Cooley, Tax. 61).
The term “public purpose” is not defined. It is an elastic concept that can be hammered to fit modern standards. Jurisprudence states that “public purpose” should be given a broad interpretation. It does not only pertain to those purposes which are traditionally viewed as essentially government functions, such as building roads and delivery of basic services, but also includes those purposes designed to promote social justice. Thus, public money may now be used for the relocation of illegal settlers, low-cost housing and urban or agrarian reform
In the case of 110 PHIL 331, the SC held that the appropriation for construction of feeder roads on land belonging to a private person is not valid, and donation to the government of the said land 5 months after the approval and effectivity of the Act for the purpose of giving a semblance of legality to the appropriation does not cure the basic defect. Incidental advantage to the public or to the State, which
results from the promotion of private enterprises, does not justify the use of public funds.
The SC held that the actual situs of the shares of stock left by non-resident alien decedent is in the Philippines. The owner residing in California has extended activities here with respect to her intangibles so as to avail herself of the protection and benefit of the Philippine laws. Accordingly, the Philippine government had the jurisdiction to tax the same (Wells Fargo Bank v. Collector, 70 Phil. 235).
The Constitution is silent on whether Congress is prohibited from taxing the properties of the agencies of the government. In MCIAA v. Marcos, 261 SCRA 667, the Supreme Court held that nothing can prevent Congress from decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax. Tax exemption of property owned by the Republic of the Philippines refers to property owned by the government and its agencies which to do not have separate and distinct personalities. “The government does not part with its title by reserving them, but simply gives notice to the world that it desires them for a certain purpose.” As its title remains with the Republic, the reserved land is clearly covered by tax exemption. However, the exemption does not extend to improvements on the public land. Consequently, the warehouse constructed on the reserved land by NDC should properly be assessed real estate tax as such improvement does not appear to belong to the public (NDC v. Cebu City, 215 SCRA 382).
YES. In Manila International Airport Authority v. Court of Appeals (495 SCRA 591, 615), the Supreme Court held that the real
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units.
managed as a separate customs territory from the rest of the Philippines and, thus, for tax purposes, are effectively considered as foreign territory. For this reason, sales by persons from the Philippine customs territory to those inside the export processing zones are already taxed as exports (Atlas Consolidated Mining and Development Corporation v. CIR, 524 SCRA 73, 103).
This has been echoed in the recent case of Philippine Fisheries Development Authority v. The Municipality of Navotas, 534 SCRA 490, wherein the Supreme Court ruled that PFDA, being an instrumentality of the national government, is exempt from real property tax but the exemption does not extend to the portions of the Navotas Fishing Port Complex (NFPC) that were leased to taxable or private persons and entities for their beneficial use.
Tax may be distinguished from license fee as follows:
YES. It is exempt from real property tax. First. PRA is not a government-owned or controlled corporation but an of the National Government vested with corporate powers and performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. Second. Real properties of PRA are owned by the Republic of the Philippines. Section 234(a) of the Local Government Code exempts from real estate tax any “[r]eal property owned by the Republic of the Philippines.” [Republic v. City of Parañaque, 677 SCRA 246 (2012) ]
According to the Destination Principle, goods and services are taxed only in the country where these are consumed. In connection with the said principle, the Cross Border Doctrine mandates that no VAT shall be imposed to form part of the cost of the goods destined for consumption outside the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT while those destined for use or consumption within the Philippines shall be imposed with 10% VAT (Now 12% under R.A. No. 9337). Export processing zones are to be
Levied for revenue
Involves exercise of taxing power Amount is generally not limited
Imposed on the right to exercise a privilege as well as to persons and property Enforced contribution assessed by sovereign authority to defray public expenses Failure to pay does not necessarily make the business illegal
Imposed for regulations Involves an exercise of police power Amount is usually limited to the necessary expenses of regulation Imposed on the right to exercise a privilege
Legal compensation or reward of an officer for public services Failure to pay makes the act or business illegal
A tax is imposed under the taxing power of the government principally for the purpose of raising revenues to fund public expenditures. Toll fees, on the other hand, are collected by private tollway operators as reimbursement for the costs and expenses incurred in the construction, maintenance and operation of the tollways, as well as to assure them a reasonable margin of income. Although toll fees are charged for the use of public facilities, therefore, they are not government exactions that can be properly treated as a tax. Taxes may be imposed only by the government under its sovereign authority, toll fees may be demanded by either the government or private individuals or entities, as an attribute of ownership (Renato V. Diaz,
Page 12 of 50
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega et al. vs. Sec. of Finance, et al., G.R. No. 193007 ).
The sources of tax law are: (a) Constitution; (b) statutes or laws; (c) presidential decrees; (d) revenue regulation; (e) administrative rulings and opinions; (f) judicial decisions; (g) provincial, city, municipal and barangay ordinances; and (h) treaties or international agreements.
Progressive taxation is built on the principle of the taxpayer’s ability to pay— taxation is progressive when its rate goes up depending on the resources of the person affected.
The due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution, as where it can be shown to amount to a confiscation of property (Reyes v. Almanzor, 196 SCRA 322). There is a need for proof of persuasive character as would lead to a violation thereof. Absent such a showing, the presumption of validity must prevail.
The taxing power has the authority to make reasonable and natural classification for purposes of taxation, but the government’s act must not be prompted by a spirit of hostility, or at the very least discrimination that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different both in the privileges conferred and the liabilities imposed (Sison v. Ancheta , 130 SCRA 654). The applies only to persons or things identically situated and does not bar a reasonable classification of
the subject of taxation, and a classification is reasonable where: (1) it is based on substantial distinctions which make real differences; (2) these are germane to the purposes of the law; (3) the classification applies not only to present conditions but also to future conditions; (4) the classification applies only to those who belong to the same class. In the case of , 22 SCRA 603, the SC held an ordinance unconstitutional for taxing only sugar produced and exported by the Ormoc Sugar Co., Inc.. The classification, to be reasonable, should be in terms applicable to future conditions as well. The taxing ordinance should not be singular and exclusive as to exclude any substantially established sugar central, of the same class as plaintiff, from the coverage of the tax. The equal protection clause does not require universal application of the laws on all persons or things without distinction. What the clause requires is equality among equals as determined according to a valid classification. By classification is meant the group of persons or things similar to each other in certain particulars and different from all others in these same particulars (Abakada Guro Party List v. Ermita, supra).
IT IS NOT DISCRIMINATORY. If the press is now required to pay VAT, it is not because it is being singled out but only because of the removal of the exemption previously granted by law. Further, the press is taxed on its transactions involving printing and publication, which are different from the transactions of broadcast media. There is a reasonable basis for the classification (Tolentino v. Secretary of Finance, 235 SCRA 630).
In the case of Lung Center of the Philippines v. Quezon City and Constantino P. Rosas, City Assessor of Quezon City, 433 SCRA 119, the prevailing rule on the application of tax exemption to properties incidentally used
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega for religious, charitable and educational purposes, as enunciated in the case of Herrera v. QC-BAA, 3 SCRA 187, has now been In resolving the issue of whether or not the portions of the real property of Lung Center that are leased to private entities are exempt from real property taxes, the Supreme Court reexamined the intent of the constitutional provision granting tax exemption of properties ACTUALLY, DIRECTLY AND EXCLUSIVELY USED FOR RELIGIOUS, CHARITABLE AND EDUCATIONAL PURPOSES. Thus, the records of the Constitutional Commission reveal that what is exempted is not the institution itself; those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes. Citing the case of St. Louis Young Men’s Christian Association v. Gehner, 47 S.W.2d 776 which held that if real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation, the Supreme Court explained that “What is meant by actual, direct and exclusive use of the property for charitable institutions is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized. It is not the use of the income from the real property that is determinative of whether the property is used for tax-exempt purposes.” In sum, the Court ruled that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are In the most recent case of CIR v. St. Luke's Medical Center, Inc., 682 SCRA 66, the Supreme Court held that St. Luke's is not automatically exempt from real property tax even if it meets the test of charity. To be exempt, Section 28(3), Article VI of the Constitution requires that a charitable institutions use the property “actually, directly and exclusively” for charitable purposes.
To be exempt from realty taxation, there must be proof of
of the lands, buildings and improvements for religious or charitable purposes (Province of Abra v. Hernando, 107 SCRA 104).
Double taxation means taxing the same thing or activity twice during the same tax period (Villanueva v. City of Iloilo, 26 SCRA 578). It takes place when a person is a resident of a contracting state and derives income from, or owns capital in, the other contracting state, and both states impose tax on that income or capital. Tax conventions such as the RP-US Tax Treaty are drafted with a view towards the elimination of international juridical double taxation. In 309 SCRA 87, however, it was held that since the RP-US Tax treaty does not give a matching credit of 20% for the taxes paid to the Philippines on royalties as allowed under the RP-West Germany Tax Treaty, S.C. Johnson (Phils.) is not entitled to the 10% rate granted under the latter treaty for the reason that there is no payment of taxes on royalties under similar circumstances. Moreover, double taxation, in general, is not forbidden by our fundamental law, so that double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or municipality (Pepsi-Cola Bottling Company of the Philippines v. Municipality of Tanauan, Leyte, 69 SCRA 460) .
It is the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical periods. (P. Baker, Double Taxation Conventions and International Law [1994], p. 11, citing the Committee on Fiscal Affairs of the Organization for Economic Cooperation and Development [OECD]).
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
The usual methods of avoiding the occurrence of double taxation are: 1.
Allowing reciprocal exemption either by law or by treaty 2. Allowance of tax credit for foreign taxes paid 3. Allowance of deduction for foreign taxes paid; and 4. Reduction of the Philippine tax rate
In case of failure to file a return, the tax may be assessed or a proceeding in court may be begun without an assessment. An assessment is not necessary before a taxpayer may be prosecuted if there is a prima facie showing of a willful and deliberate attempt to file a fraudulent return with the intent to evade and defeat tax. A criminal complaint is instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code (Ungab v. Cusi, 97 SCRA 877; CIR v. PASCOR Realty and Development Corp., supra).
Shifting of tax burden is the process by which the burden of a tax is transferred from the statutory taxpayer or the one whom the tax was assessed or imposed to another without violating the law.
1.
Forward shifting — when the burden of the tax is transferred from a factor of production through the factors of distribution until it finally settles on the ultimate purchaser or consumer.
2. Backward shifting — when the burden of the tax is transferred from the consumer or purchaser through the factors of distribution to the factors of production. 3. Onward shifting — when the tax is shifted two or more times either forward or backward.
An affidavit executed by revenue officers stating the tax liabilities of a taxpayer and attached to a criminal complaint for tax evasion, is not an assessment that can be questioned before the CTA. An assessment contains not only a computation of tax liabilities, but also a demand for payment within a prescribed period
It is an elementary rule in taxation that exemptions are strictly construed against the taxpayer and liberally in favor of the taxing authority. It is the taxpayer’s duty to justify the exemption by words too plain to be mistaken and too categorical to be misinterpreted (Radio Communications of the Phil. vs Provincial Assessor of South Cotabato, 456 SCRA 1 ). The basis for the rule on strict construction to statutory provisions granting tax exemptions or deductions is to minimize differential treatment and foster impartiality, fairness and equality of treatment among taxpayers (Quezon City vs. ABS-CBN Broadcasting Corporation) .
connotes fraud through the use of pretenses and forbidden devices to lessen or defeat taxes. On the other hand, is a legal means used by the taxpayer to reduce taxes (Benny v. Commr., 25 T.Cl.78). The intention to minimize taxes, when used in the context of fraud, must be proven by clear and convincing evidence amounting to more than mere preponderance. Mere understatement of tax in itself does not prove fraud (Yutivo Sons Hardware Co. v. CTA, 1 SCRA 160).
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega A taxpayer has the legal right to decrease the amount of what otherwise would be his taxes or altogether avoid them by means which the law permits. Therefore, a man may perform an act that he honestly believes to be sufficient to exempt him from taxes. He does not incur fraud thereby even if the act is thereafter found to be insufficient
Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e., the payment of less than that known by taxpayer to be legally due, or the nonpayment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being “evil”, in “bad faith”, “willful”, or “deliberate and not accidental”; and (3) a course of action or failure of action which is unlawful (Commissioner of Internal Revenue v. The Estate of Benigno P. Toda, Jr., G.R. No. 147188, September 14, 2004, 438 SCRA 290).
A requires illegal expenditure of taxpayers’ money. Jurisprudence dictates that a taxpayer may be allowed to sue where there is a claim that public funds are illegally disbursed or that public money is being deflected to any improper purpose, or that public funds are wasted through the enforcement of an invalid or unconstitutional law or ordinance.
YES. In the recent case of Abaya v. Ebdane, Jr. (515 SCRA 720, 757-758), the Supreme Court stressed that the prevailing doctrine in the taxpayer’s suits is to allow taxpayers to question contracts entered into by the national government or governmentowned and controlled corporations allegedly in contravention of law. A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or that public money is being deflected to any improper purpose, or that there is a wastage of public funds through the enforcement of an invalid or unconditional law. Significantly, a taxpayer need not be a party to the contract to challenge its validity.
The plaintiff in a taxpayer’s suit is in a different category from the plaintiff in a citizen’s suit— in the former, the plaintiff is affected by the expenditure of public funds, while in the latter, he is but the mere instrument of the public concern (David vs. Macapagal-Arroyo, 489 SCRA 160 ).
In Maceda v. Macaraig, 197 SCRA 771, the SC sustained the right of Sen. Maceda as taxpayer to file a petition questioning the legality of the tax refund to NPC by way of tax credit certificates, and the use of tax certificates by oil companies to pay for their tax and duty liabilities to the BIR and Bureau of Customs. However, in Gonzales v. Marcos , 65 SCRA 624, the SC held that the taxpayer had no legal personality to assail the validity of E.O. 30 creating the Cultural Center of the Philippines as the assailed order does not involve the use of public funds. The funds came by way of donations and contributions, not by taxation.
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The case before the Court is not a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which enforcement and administration of the increase rate under the law is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual maters outside of the control of the executive.
Its use in a statute denotes an imperative obligation and is inconsistent with the idea of discretion. Where the law is clear and unambiguous, it must be taken to mean
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega exactly what it says, and courts have no choice but to see to it that the mandate is obeyed. Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress. This is a duty which cannot be evaded by the President. Inasmuch as the law specifically uses the word shall , the exercise of discretion by the President does not come into play. It is a clear directive to impose the 12% VAT rate when the specified conditions are present. The time of taking into effect of the 12% VAT rate is based on the happening of a certain specified contingency, or upon the ascertainment of certain facts or conditions by a person or body other than the legislature itself.
Uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. Different articles may be taxed at different amounts provided that the rate is uniform on the same class everywhere with all people at all times. In this case, the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods and services. Section 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and properties, importation of goods, and sale of services and use or lease of properties. These same sections also provide for a 0% rate on certain sales and transaction. Neither does the law make any distinction as to the type of industry or trade that will bear the 5-year amortization of input tax paid on purchase of capital goods or the 5% final withholding tax by the government. It must be stressed that the rule of uniform taxation does not deprive Congress of the power to classify subjects of taxation, and only demands uniformity within the particular class.
In making his recommendation to the President on the existence of either of the two conditions, in the present case, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. In such instance, he is not subject to the power of control and direction of the President.
The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented, considering that he possesses all the facilities to gather data and information and has a much broader perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent information and verify if any of the two conditions laid out by Congress is present. His personality in such instance is in reality but a projection of that of Congress. Thus, being the agent of Congress and not of the President, the President cannot alter or modify or nullify, or set aside the findings of the Secretary of Finance and to substitute the judgment of the former for that of the latter.
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0% or 10% (or 12%) does not apply to sales of goods or services with gross annual sales or receipts not exceeding P1, 500,000.00. Also, basic marine and agricultural food products in their original state are still not subject to the tax, thus ensuring that prices at the grassroots level will remain accessible.
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The input tax is not a property or a property right within the constitutional purview of the due process clause. A VATregistered person’s entitlement to the creditable input tax is a mere statutory privilege. The distinction between statutory privileges and vested rights must be borne in mind for persons have no vested rights in statutory privileges. The state may change or take away rights, which were created by the law of the
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega state, although it may not take away property, which was vested by virtue of such rights. Under the previous system of single-stage taxation, taxes paid at every level of distribution are not recoverable from the taxes payable, although it becomes part of the cost, which is deductible from the gross revenue. x x x It is worth mentioning that Congress admitted that the spread-out of the creditable input tax in this case amounts to a 4-year interest-free loan to the government. In the same breath, Congress also justified its move by saying that the provision was designed to raise an annual revenue of 22.6 billion. The legislature also dispelled the fear that the provision will fend off foreign investments, saying that foreign investors have other tax incentives provided by law, and citing the case of China, where despite a 17.5% noncreditable VAT, foreign investments were not deterred. Again, for whatever is the purpose of the 60-month amortization, this involves executive economic policy and legislative wisdom in which the Court cannot intervene.
With regard to the 5% creditable withholding tax imposed on payments made by the government for taxable transactions, Section 12 of R.A. No. 9337, which amended Section 114 of the NIRC, reads: ***Section 114(C) merely provides a method of collection, or as stated by respondents, a more simplified VAT withholding system. The government in this case is constituted as a withholding agent with respect to their payments for goods and services. x x x The Court observes, however, that the law used the word final. In tax usage, final, as opposed to creditable, means full. Thus, it is provided in Section 114(C): “final valueadded tax at the rate of five percent (5%)”.
The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The principle of progressive taxation has no relation with the VAT system inasmuch as the VAT paid by the consumer or business for every goods bought or services
enjoyed is the same regardless of income. In other words, the VAT paid eats the same portion of an income, whether big or small. The disparity lies in the income earned by a person or profit margin marked by a business, such that the higher the income or profit margin, the smaller the portion of the income or profit that is eaten by VAT. A converso, the lower the income or profit margin, the bigger the part that the VAT eats away. At the end of the day, it is really the lower income group or businesses with low-profit margins that is always hardest hit.
The Constitution does not really prohibit the imposition of indirect taxes, like the VAT. What it simply provides is that Congress shall “evolve a progressive system of taxation.” The Court stated in the Tolentino case, thus: The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall ‘evolve a progressive system of taxation.’ The constitutional provision has been interpreted to mean simply that ‘direct taxes are … to be preferred [and] as much as possible, indirect taxes should be minimized.’ (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 [Second ed. 1977]) Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VII, §17 (1) of the 1973 Constitution from which the present Art. VI, §28 (1) was taken. Sales taxes are also regressive. Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers’ ability to pay. In the case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No. 7716, §3, amending §102 (b) of the NIRC), while granting exemptions to other transactions.
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega tax because of his residence in the Philippines. A resident alien is liable to pay Philippine income tax only from his income from Philippine sources but is tax exempt from foreign-source income.
A of taxation is one where the taxpayer is required to report all income earned during a taxable period in one income tax return, which income shall be taxed under the same rule of income taxation. The requires a separate return for each type of income and the tax is computed on a per return or per schedule basis. Schedular system provides for different tax treatment of different types of income.
3.
– An alien is subject to Philippine income tax because he derives income from sources within the Philippines. Thus, a non-resident alien or non-resident foreign corporation is liable to pay Philippine income tax on income from sources within the Philippines.
The NIRC adopted a tax system.
The features are as follows: 1.
Income tax is a because the burden is borne by the income recipient upon whom the tax is imposed.
2. Income tax is a since the tax base increases as the tax rate increases. 3. The Philippines has adopted the by adopting the citizenship principle, resident principle and the source principle. 4. The Philippines follows the of income taxation
The types of Income tax under Title II of the NIRC are: 1. Graduated income tax on individuals 2. Normal corporate income tax on corporations 3. Minimum corporate income tax on corporations 4. Special income tax on certain corporations (e.g. private educational institutions, FCDUs, and international carriers) 5. Capital gains tax on sale or exchange of unlisted shares of stock of a domestic corporation classified as a capital asset 6. Capital gains tax on sale or exchange of real property located in the Philippines and classified as a capital asset 7. Final withholding tax on certain passive investment incomes 8. Fringe benefit tax 9. Branch profit remittance tax; and 10. Tax on improperly accumulated earnings.
The criteria are: 1.
2.
– A citizen of the Philippines is subject to Philippine income tax (a) on his worldwide income, if he resides in the Philippines (b) only on his Philippine source income, if he qualifies as a nonresident citizen where his foreignsource income shall be tax-exempt. – An alien is subject to Philippine income
Income refers to “an amount of money coming to a person within a specified time, whether as payment for services, interest or profit from investment.” It means cash or its equivalent. It is gain derived and severed from capital, from labor or from both combined. Stock dividends issued by the corporation are considered unrealized gains, and cannot be subjected to income tax until those gains have been realized. Before the
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega realization, stock dividends are nothing but a representation of an interest in the corporate properties. As capital, it is not yet subject to income tax. The determining factor for the imposition of income tax is whether any gain or profit was derived from a transaction (CIR v. CA, 301 SCRA 152).
For income to be taxable, the following requisites must exist: 1. There must be gain or profit; 2. That the gain or profit is realized or received, actually or constructively; 3. It is not exempted by law or treaty from income tax
The sources of income are: “the property, activity or service that produces the income. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines”
For income tax purposes, income is realized when the earning process is complete or virtually complete and an exchange has taken place.
In general, for the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from property, activity or service within the Philippines. In CIR vs. BOAC (1987), an off-line international carrier maintained a sales agent in the Philippines who sold tickets for flights flown outside the Philippines. The Supreme Court considered the sale of tickets in the Philippines as the activity that produced the income. The test of taxability is the “source”; and the source of an income is that activity which produced the income. Even if the BOAC
tickets sold covered the “transport of passengers and cargo to and from foreign cities”’ it cannot alter the fact that income from the sale of tickets was derived from the Philippines. Thus, BOAC was made liable for revenue derived from the sale of tickets.
Sec. 42(A) of the Tax Code enumerates the items of gross income from sources within the Philippines, namely: (1) Interests paid by residents of the Philippines, corporate or otherwise; (2) Dividends paid by domestic corporations; or foreign corporations at least 50% of their gross income in the last three taxable years coming from sources within the Philippines; (3) Compensation for services performed in the Philippines; (4) Rentals and royalties from properties located in the Philippines; (5) Gains from sale of real properties located in the Philippines; and (6) Gains from sale of personal properties, the sale taking place in the Philippines.
In general, the income taxpayers are classified into individual, estate, trust and corporation. (Sec. 22A, NIRC)
There is no dispute that St. Luke’s is organized as a non-stock and non-profit charitable institution. However, this does not automatically exempt St. Luke’s from paying taxes. This only refers to the organization of St. Luke’s. Even if St. Luke’s meets the test of charity, a charitable institution is not ipso facto tax exempt. To be exempt from income taxes, Section 30(E) of the NIRC requires that a charitable institution must be “organized and operated exclusively” for charitable purposes. Likewise, to be exempt from income taxes,
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega Section 30(G) of the NIRC requires that the institution be “operated exclusively” for social welfare. [Commissioner of Internal Revenue v. St. Luke's Medical Center, Inc., 682 SCRA 66 (26 September 2012)]
Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed (Commissioner v. Mitsubishi Metal Corp., 181 SCRA 215).
No. In the case of Re: Request of Atty. Bernardo Zialcita (Adm. Matter No. 90-6-015SC, October 18, 1990; 190 SCRA 851), the SC held that terminal leave pay is the cash value of an employee’s accumulated leave credits, hence, it cannot be considered compensation for services rendered; it cannot be viewed as salary. It falls within the enumerated exclusions from gross income, and is therefore not subject to tax.
The SC in Evangelista v. CIR, 102 Phil. 140, held that Sec. 24 [now Section 22(B)] covered unregistered partnerships and even associations or joint accounts which had no legal personalities apart from their individual members. xxx Accordingly, a pool of machinery insurers was a partnership taxable as a corporation
The children should not be treated as having formed an unregistered partnership and
taxed corporate income tax on their shares of the profits from the sale. Their original purpose was to divide the lots for residential purposes. If later on they found it not feasible to build their residences on the lots because of the high cost of construction, then they had no choice but to resell the same to dissolve the coownership. The division of the profit was merely incidental to the dissolution of the coownership which was in the nature of things in a temporary
YES. In CIR v. Procter and Gamble PMC , 204 SCRA 377, the SC held that a withholding agent is subject to and liable for deficiency assessments, surcharges and penalties should the amount of the tax withheld be finally found to be less than the amount that should have been withheld under the law. A “person liable for tax” has been held to be a “person subject to tax” and properly considered a “taxpayer” x x x By any reasonable standard, such a person should be regarded as a party in interest, or as a person having sufficient legal interest, to bring a suit for refund of taxes.
YES. There was no iota of documentary evidence (e.g. collection letters, reports from investigating fieldsman, police report/affidavit, etc.) to give support to the allegation of worthlessness. For debts to be considered “worthless,” and qualify as “bad debts” making them deductible, the taxpayer should show that: a. There is valid and subsisting debt; b. The debt must be actually ascertained to be worthless and uncollectible during the taxable year; c. The debt must be charged off during the taxable year; d. The debt must arise from the business or trade of the taxpayer; e. The taxpayer must also show that it is indeed uncollectible
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
f.
even in the future (PRC v. CA, 256 SCRA 667). It must not arise from transactions between related taxpayers (RR 5-99, RR 25- 2002).
It is not deductible as it does not represent a charge arising under an interest-bearing obligation (Sec. 79, Rev. Reg. No. 2, cited in the case of PICOP v. CA, 250 SCRA 434).
The assets of a taxpayer are classified for income tax purposes into ordinary and capital assets. However, there is no rigid rule or formula by which it can be determined with finality whether property sold by a taxpayer was held primarily for sale to costumers in the ordinary course of his trade or business or whether it was sold as a capital asset. A property initially classified as a capital asset may thereafter be treated as an ordinary asset if a combination of factors indubitably tend to show that the activity was in furtherance of or in the course of the taxpayer’s trade or business. Thus, a sale of inherited property usually gives capital gain or loss even though the property has to be subdivided or improved or both to make it saleable. However, if the inherited property is substantially improved or very actively sold or both, it may be treated as held primarily for sale to customers in the ordinary course of the heir’s business
resident alien (Sec.24A) and non-resident alien engaged in trade/business or exercise of profession in the Philippines (Sec 25A). EXCLUDE non-resident alien NOT engaged in trade/business or exercise of profession in the Philippines (Sec. 25A).
In general, individuals are taxed on the basis of their taxable income, that is, gross income less deduction and personal and additional exemption. This tax is referred to as ordinary income tax or regular income tax. (Sec. 24A and 25A in relation to Sec. 31 and Sec. 32A, NIRC ). By way of exception, final tax, instead of ordinary tax, shall be imposed on certain kinds of passive income. Subject to certain requisites, these are: a. Interests, royalties, prizes and winnings; b. Cash or property dividends; c. Capital gains derived from the sale of shares of stocks; and d. Capital gains derived from the sale of realty. (Sec. 24B1, 24B2, 24C, 24D1, 25A2 and 25A3, NIRC) b. Other incomes subject to final tax are: a. Fringe benefits (Sec. 33, NIRC) b. Inf ormer’s reward (Sec. 282, NIRC)
Ordinary tax and distinguished as follows:
final
tax
are
(a) In the former, the tax base is taxable income; in the latter, the tax base is the gross income; An equity investment is a capital, not ordinary, asset of the investor the sale or exchange of which results in either a capital gain or a capital loss. The gain or loss is ordinary when the property sold or exchanged is not a capital asset (China Banking Corporation v. CA, 336 SCRA 178).
(b) In the former, deductions and personal or additional exemptions are allowed; in the latter, no such deductions and personal or additional exemptions are allowed;
They are the resident citizen, nonresident citizen, OCW and seamen,
(c) The tax base of the former is computed on the basis of one taxable year; the tax base of the latter is usually computed on a per transaction basis;
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega tax return for the particular income.
(d) The former is paid at the end of the taxable year; the latter is paid at source; (e) In the former, liability for payment rests on the payee; in the latter, liability for payment rests on the payor; (f) In the former, the payee is required to file an income tax return; in the latter, the payee is no longer required to file the return since it is to be made by the payor; (g) Creditable withholding tax is, in certain cases, imposed on incomes subject to ordinary tax; final withholding tax is usually imposed on incomes subject to final tax.
The amount of income tax withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on the said income. The liability for payment of the tax rests primarily on the payor as a withholding agent.
The payee is not required to file an income
Taxes withheld on certain income payments are intended to equal or at least approximate the tax due of the payee on said income.
Payee of income is required to report the income and/or pay the difference between the tax withheld and the tax due on the income. The payee also has the right to ask for a refund if the tax withheld is more than the tax due. The income recipient is still required to file
an income tax return, as prescribed in Sec. 51 and Sec. 52 of the NIRC, as amended.
(Revenue Regulation 2-98, Sec. 2.57A; CREBA vs. Romulo, 9 March 2010)
It is income generated by the taxpayer’s assets. The BIR defines passive income by stating what it is not: “if the income is generated in the active pursuit and performance of the corporation’s primary purposes, the same is not passive income.” (CREBA vs. Romulo, 9 March 2010)
No. There are only certain kinds of passive income that are subject to final tax and, consequently, to final withholding tax. These are specifically enumerated in various provisions of the NIRC (see Sec. 57A, NIRC ). All others are generally considered part of gross income, and consequently, subject to ordinary tax wherein creditable withholding tax is, in particular cases, applicable. Under present regulations, creditable withholding tax is usually applied to income payments not involving passive income. NOTE: From the above, it is clear that not only passive incomes may be subject to withholding tax. Sec. 57 (A) of the NIRC expressly states that final tax can be imposed on certain kinds of income and enumerates these as passive income. On the other hand, Section 57 (B) provides that the Secretary (of Finance) can require a CWT on “income payable to natural or juridical persons, residing in the Philippines.” There is no requirement that this income be passive income. If that were the intent of Congress, it could have easily said so. (See CREBA vs. Romulo, supra)
Some notable income payments that are subject to CWT are (1) wages; (2) professional fees; (3) rentals of realty; (4) income payments to partners of GPPs and (5) income payment
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega to realtors for the sale of realty. (Sec. 78, NIRC and Sec. 2.57.2 of RR No. 2-98, as amended)
EXCLUSION, and hence, exempt from tax (Sec. 32B7c, NIRC)
As a rule, the interests earned by individuals shall be included in gross income and, thus, subject to regular income tax. This includes interest earned by a resident citizen from sources abroad.
(d) When the prize or award is won by an athlete in a local or international sports competition (i.e., the OLYMPICS) sanctioned by a recognized national sports association; This is considered an EXCLUSION and, hence exempt from tax (Sec. 32B7d, NIRC).
By way of exception, interest from bank deposit (or monetary benefits from deposit substitutes or similar arrangements) DERIVED FROM SOURCES WITHIN shall be subject to final tax and, correspondingly, final withholding tax. The rate of tax is 20% for Peso currency deposit account and 7.5% for any foreign currency deposit account.
(a) When derived from sources abroad (the bank is a non-resident), except those earned by resident citizens; (b) When earned by non-residents from foreign country deposit accounts; and (c) When earned from long-term deposit or investment.
(a) When earned from sources abroad, that is, when the competition or contest was held abroad; however, the prize or award received by a resident citizen form sources abroad is still included in gross income subject of ordinary income taxation; (b) When the amount does not exceed Php10,000.00, in which case, the amount is included in gross income and thus subject to ordinary tax (Sec. 24B1, Sec. 32A, NIRC); (c) When the prize or award is received primarily in recognition of religious, charitable, educational, artistic, literary, or civic achievement PROVIDED (1) the recipient was selected without any action on his part to enter the contest; and (2) he is not required to render substantial future services; This is considered an
The law defines capital asset in the negative, such that, any property not falling under the following enumeration (referred to as ordinary assets) is capital asset: (a) stock in trade or inventoriable asset; (b) property primarily held for sale to customers in the ordinary course of trade or business; (c) depreciable asset; and (d) real property used in trade or business. (Sec. 39A, NIRC) On the other hand, a capital gain is the gain, profit or income realized from a sale or disposition of capital asset.
Generally, a capital gain is included in gross income subject of ordinary income taxation (Sec. 32A, NIRC). By way of exceptions, the capital gains derived from the sale of shares of stock issued by a domestic corporation a sale of real property located in the Philippines are subject to final tax. (Sec. 24C, 24D1, 25A3, NIRC)
No. Gains are not to be presumed from sale or disposition of capital assets. However, in case of sale or other disposition of real property located in the Philippines and held as capital asset, the gain is presumed and such gain is equivalent to the amount of the zonal value or gross selling price, whichever is higher. (Sec. 24D1, Sec. 25A3, NIRC)
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
In general, the tax base of the income tax on capital gain is the net capital gain or net income, whereas, the tax rate is the graduated rate of 5%-32%. For capital gain derived from the sale of share of stock in a domestic corporation not traded through the local stock exchange, the tax base is NET CAPITAL GAIN and the tax rate is 5% for the first Php100, 000.00 and 10% on any amount in excess thereof. (NOTE: If sale is through the local stock exchange, the applicable tax is the percentage tax, also referred to as the stock transaction tax, under Sec. 127 of the NIRC. The basis is the GSP and the rate is ½ of 1%. The payment of this tax is in lieu of income tax .) For capital gain presumed to have been realized from the sale of realty, the tax base is FMV or GSP, whichever is higher, and the tax rate is 6%.
Neither. The 5%/10% capital gains tax is not applicable because he shares are NOT capital assets. Shares of stock, like other securities, would be ordinary assets to a dealer in securities or a person engaged in the purchase and sale of, or an active trader (for his own account) in, securities. (China Banking Corp. vs. CA, G.R. No. 125508, July 19, 2000). Likewise, he percentage tax, otherwise known as the stock transaction tax, is not applicable because the seller is a dealer in securities. In addition, the shares sold are unlisted shares. The percentage tax applies on sale, barter or exchange of shares of stock LISTED and TRADED through the local stock exchange OTHER THAN by a dealer in securities. (Sec. 127, NIRC, emphasis supplied .)
a) The sale is exempt from income tax but subject to the ½ of 1% stock transaction tax; b) The sale is subject to income tax computed at the graduated income tax rates of 5% to 32% on net taxable income; c) The sale is subject to the stock transaction tax and income tax; d) The sale is both exempt from the stock transaction tax and income tax. Explanation: Under Section 127 (D) of the NIRC, any gain derived from the sale, barter, exchange or other disposition of shares of stock subject to the percentage tax of ½ of 1% shall be exempt from the final tax and from the regular individual or corporate income tax.
Yes. The 6% capital gains tax may be legally avoided if the subject matter of the sale is the PRINCIPAL residence and the proceeds are to be used in acquiring or establishing a new principal residence within eighteen (18) calendar months from the date of sale. The seller must inform the Commissioner of his intention to avail of the exemption within 30 days from the date of sale. (Sec. 24D2, NIRC). Additionally, the revenue regulations require the 6% capital gains tax o be deposited in an escrow account with an authorized agent bank and shall only be released to the transferor if the proceeds of the sale/disposition have, in fact, been utilized in the acquisition or construction of a new principal residence. (RR No. 17-2003)
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a. when the real property is ordinary asset; b. when the real property, even though classified as capital asset, is not located in the Philippines;
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega c.
when the real property is a principal residence and the seller applies for exemption from the tax; d. When the real property is sold to the government and the seller exercises the option to be taxed for ordinary tax under Sec. 24A. (contained in the proviso of Sec.24D1, NIRC)
The importance lies on the application of the rules on holding period, loss limitation and carry-over of the net capital loss. These rules are relevant only to dealings in capital assets.
No. By express provision under the law, the holding period is inapplicable to a sale of real property where the 6% capital gains tax applies. In this case, the gain is presumed by law. The loss that may have been actually incurred, if there be any, is not recognized. Consequently, the rules on loss limitation and carry-over of net capital loss also find no application. (See the exception clause in Sec. 24D1, NIRC) NOTE: The holding period is also not applicable to a sale of shares of stock in a domestic corporation not traded through the local stock exchange. This is also by express exclusion under the law. (Sec. 24C and allied provisions, NIRC)
They are classified into domestic corporation (DC), resident foreign corporation (RFC) and non-resident foreign corporation (NRFC). Pursuant to the rule on holding period, only fifty percent (50%) of the capital gain, if any, is taxable; or only 50% of the capital loss, is deductible, where the property sold has been held for more than twelve (12) months. If held in the short-term (less than 12 months), one hundred percent (100%) of the gain or loss shall be taxable or deductible, as the case may be. This rule applies to individuals only. (Sec. 39B, NIRC). Under the loss limitation rule, the capital loss shall be deductible only to the extent of the capital gains derived within the taxable year. This rule applies to both individuals and corporations. (Sec. 39C in relation to Sec.34D4, NIRC). If during the taxable year, there is excess of capital losses over capital gains, the excess (net capital loss) may be carried over to and deducted from capital gains in the succeeding taxable year. The privilege of carryover of net capital loss is available only to individuals. (Sec. 39D, NIRC)
It is a foreign corporation engaged in the trade or business in the Philippines (Sec. 22H, NIRC). An example is one organized under the laws of a foreign country that engages in business in Makati City, Philippines.
In general, domestic corporations and resident foreign corporations are taxed on their taxable income, i.e. gross income less deductions; or in lieu thereof, the Minimum Corporate Income Tax (MCIT). By way of exceptions, final tax shall be imposed on certain kinds of passive income such as interest on bank deposits, royalties, capital gains form sale or disposition of land or building located in the Philippines. (Sec. 27D1, 27D2, 27D5; Sec. 28A7a, 28A7c) For non-resident corporations, their income from all sources within the Philippines are taxed via the final withholding tax. The rate applied is 30%, except interest on foreign loan (20%), dividend from domestic corporations (15%, subject to condition) and capital gain from sale of shares of stock in a domestic corporation (5% and 10%).
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega EXCLUDE Non-resident cinematographic film owner, lessor or distributor (Sec. 28B2, Non- resident owner or lessor of vessels chartered by Philippine nationals (Sec. 28B3), and Non- resident owner or lessor of aircraft machineries and other equipment (Sec. 28B4)
Under, Sec. 27 (C) of the NIRC, the following are absolutely exempted from income tax: (a) (b) (c) (d) (e)
SSS GSIS PHIC PCSO Local water districts (R.A. No. 10026)
public sector. (CREBA vs. Romulo, 9 March 2010)
As a tax on gross income, the MCIT prevents tax evasion and minimizes tax avoidance schemes achieved through sophisticated and artful manipulations of deductions and other stratagems. It is also simple and effective in addressing liquidity problems of the government. (See CREBA vs. Romulo, supra)
(a) Under Sec. 30 of the NIRC, certain kinds of non-stock and non-profit organizations are exempt from income tax in respect to income derived by them as such organizations. However, their income from property, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, are still taxable. But a non-stock and non-profit educational institution may be exempt from tax provided that its income, regardless of source, is used actually, directly, and exclusively for educational purposes. (See par. 3, Sec. 4, Art.XIV, 1987 Constitution) A proprietary educational institution or hospital is not exempted but it enjoys a preferential rate of tax at 10% based on taxable income PROVIDED not more than fifty (50%) of its income from unrelated trade, business or other activity exceeds its gross income. (Sec. 27B, NIRC)
The MCIT came about as a result o the perceived inadequacy of the self-assessment system in capturing the true income of corporations. It was devised as a relatively simple and effective revenue-raising instrument compared to the normal income tax which is more difficult to control and enforce. It is a means to ensure that everyone will make some minimum contribution to the support of the
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during the infant stages of the corporation; the tax shall apply only beginning the fourth taxable year immediately following the taxable year in which such corporation commenced its business operations;
(b) when by authority of the Secretary of Finance, the imposition of the MCIT is suspended upon submission of proof by the applicant corporation that the corporation sustained substantial losses (1) on account of a prolonged labor dispute; or (2) because of “force majeure”; or (3) because of legitimate business reverses; (c) when the corporation is not subject to normal income tax (tax based on taxable income at the normal rate of 30%), such as (1) a proprietary educational institution or hospital enjoying 10% tax on their taxable income; (2) an FCDU; (3) an OBU; (4) regional operating headquarter of a multinational company (ROH); (5) A firm that is taxed under a special tax regime like an enterprise registered with the PEZA Law (RA No. 7916) or Bases Conversion
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega Development Act (RA No. 7227).
The IAET equal to 10% of the improperly accumulated taxable income is imposed on corporations formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting the earnings and profits of the corporation to accumulate instead of dividing them among or distributing them to the shareholders. The rationale is that if the earnings and profits were distributed, the shareholders would then be liable to income tax thereon, whereas if the distribution were not made to them, they would incur no tax in respect to the undistributed earnings and profits of the corporation. (See Sec. 29, NIRC and Sec. 2, RR No. 2-2001)
The IAET shall not apply to the following corporations: a. Banks and other non-bank financial intermediaries; b. Insurance companies; c. Publicly-held corporations; d. Taxable partnerships; e. General professional partnerships; g. Non- taxable joint ventures; and h. Enterprises duly registered with the Philippine Economic Zone Authority (PEZA) under R.A. 7916, and enterprises registered pursuant to the Bases Conversion and Development Act of 1992 under R.A. 7227, as well as other enterprises duly registered under special economic zones declared by law which enjoy payment of special tax rate on their registered operations or activities in lieu of other taxes, national or local. (Sec. 29, NIRC and Sec. 4, RR No. 22001)
the business”, it means the immediate needs of the business, including reasonably anticipated needs. (Sec. 3, RR No. 2-2001)
The deductions are those found in Sec. 34 (items of deduction or optional standard deduction) and in Sec. 35 (personal and additional exemptions) of the NIRC. Special deductions are also provided for insurance companies under Sec. 37 of the NIRC.
Individuals and corporations subject to the regular income tax are entitled to claim deductions. Those who may avail of the deductions are usually engaged in trade/business or in the exercise of a profession. However, only individuals may claim personal and additional exemptions.
Yes, but only premium payments on health and/or hospitalization insurance not to exceed Php2, 400.00 per annum (or Php200.00 per month) may be claimed as deduction. All other items of deduction and the optional standard deduction are not available to pure compensation income earners. In addition, however, they may claim personal and additional exemptions under Sec. 35 of the NIRC.
It may be avoided if the corporation has accumulated income for the reasonable needs of the business. By “reasonable needs of
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They are: (a) Business expense; (b) Interest expense (c) Tax; (d) Loss (e) Bad debt; (f) Depreciation; (g) Depletion of oil and gas wells and mines; (h) Charitable contribution; (i) Research and development; and (j) Pension trust
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega reasonable accuracy. (CIR vs. Isabela Culutral Corp., G.R. No. 172231, February 12, 2007)
(a) A person who uses the cash method where vall sales have been fully paid by the buyers thereof;
The expense, which is recognized as deduction for tax purposes, may be disallowed if such was not subjected to withholding tax. However, a deduction may still be allowed despite non-withholding or under-withholding if at the time of the audit or investigation, the withholding tax is paid.
(b) A person who uses the instalment sales method, where the full amount of consideration is paid in full by the buyer thereof within the year of sale; (c) A person who uses the accrual method, whereby an expense is deductible for the taxable year in which all the events had occurred which determined the fact of the liability and the amount thereof could be determined with reasonable accuracy; (d) A person who uses the completed method, whereby the construction project has been completed during the year the contract was signed.
Yes, provided that the 5% expanded withholding tax is paid by the corporation during the audit.
At the option of the taxpayer, interest incurred to acquire property used in trade, business or exercise of a profession may be allowed as a deduction or treated as a capital expenditure. (Sec. 34B [B] [3], NIRC)
The accrual of income and expense is permitted when the ALL-EVENTS TEST has been met. This test requires: (1) fixing of a right to income or liability to pay; and (2) the availability of the reasonable accurate determination of such income or liability. The all-events test requires the right to income or liability be fixed, and the amount of such income or liability be determined with
The optional standard deduction is a privilege available to a citizen, resident alien or corporation subject to the normal income tax to deduct, in lieu of itemized deduction, forty percent (40%) of taxpayer’s gross sales or receipts (in the case of individual) or gross income (in the case of corporation) in the computation of taxable income. The OSD has its advantages. As an alternative to itemized deduction, it provides taxpayers with low itemizable expenses a higher amount of deduction and, thus, more tax savings. Also, its computation is relatively simple and, unlike itemized deduction, the OSD dispenses with the substantiation requirement. This relieves taxpayers of the difficulty of computation usually attendant to itemized deduction as well as the added burden of record-keeping.
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(a) The OSD is available only to citizens, resident aliens, and corporations subject to the regular income tax (DC
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega and RFC). Before the amendment in RA 9504, corporations were not entitled to OSD.
gross receipts (individual) or gross income (corporation). (3) The former is a deduction available to estates of citizens of the Philippines whereas the latter is a deduction available to income taxpayers [other than nonresident aliens not engaged in the trade or business of the Philippines (NRANETB) and nonresident foreign corporations (NRFC)] who are engaged in trade or business or exercise of profession.
(b) The standard deduction is optional. If the taxpayer does not elect OSD, he is considered as having availed of the itemized deduction. (c) The election for OSD shall be irrevocable for the year in which it is made. (d) Proof is not required. (e) The rate has been increased from 10% to 40% under the amendment in RA 9504.
Under Sec. 36 (A) (1) of the NIRC, personal, living and family expenses are nondeductible expenses. Exemptions under Sec. 35 are intended as substitutes for personal and living expenses. They are roughly equivalent to the minimum of subsistence (Madrigal vs. Rafferty, 7 August 1918). Under the prevailing law, the amount fixed for personal exemption is Php50,000.000, regardless of the status of the taxpayer (whether single, head of the family or married), and additional exemption in the amount of Php25,000.00 for each qualified dependent up to a maximum of four.
A dependent means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.
(1) The former is automatic whereas the latter is optional on the part of the taxpayer.
The OSD allowed to individual taxpayers shall be a maximum of forty percent (40%) of gross sales or gross receipts during the taxable year. It should be emphasized that the “cost of sales” in case of individual seller of goods, or the “cost of services” in the case of individual seller of services, is not allowed to be deducted for purposes of determining the basis of the OSD pursuant to this Section inasmuch as the law (RA 9504) is specific as to the basis thereof which states that for individuals, the basis of the 40% OSD shall be the “gross sales” or “gross receipts” and not “gross income” (Revenue Regulations No. 162008).
In the case of corporate taxpayers subject to tax under Sections 27(A) and 28(A)(1) of the Code, as amended, the OSD allowed shall be in an amount not exceeding forty percent (40%) of their gross income. For purposes of these Regulations, “ ” shall mean the gross sales less sales returns, discounts and allowances and cost of goods sold. “Gross sales” shall include only sales contributory to income taxable under Sec. 27(A) of the Code. “Cost of goods sold” shall include the purchase price or cost to produce the merchandise and all expenses directly incurred in bringing them to their present location and use
(2) The former is a fixed amount of Php1 million whereas the latter is fixed at 40% of the taxpayer’s gross sales or
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
Judicial expenses are expenses of administration. Administration expenses, as an allowable deduction from the gross estate of the decedent for purposes of arriving at the value of the net estate, have been construed by the federal and state courts of the United States to include all expenses “essential to the collection of the assets, payment of debts or the distribution of the property to the persons entitled to it.” In other words, the expenses must be essential to the proper settlement of the estate. (CIR vs. CA et al., G.R. No. 123206, March 22, 2000)
Expenditures incurred for the individual benefit of the heirs, devisees or legatees are not deductible. (CIR vs. CA et al., G.R. No. 123206, March 22, 2000)
Revenue Regulations No. 5-2011 further amended Revenue Regulation Nos. 52008, 5-2010, 10-2000 and 3-98, with respect to “De Minimis Benefits”. Rice subsidy of P1, 500 or one sack of 50 kg. rice per month amounting to not more than P1,500 and uniform and clothing allowance not exceeding P5,000 per annum (RR 8-2012) are considered as “de minimis” benefits, which are not subject to the fringe benefits tax (per Section 2.33(c) of Revenue Regulations No. 3-98) and Income Tax as well as withholding tax on corporation income of both managerial and rank and file employees (per Section 2.78.1 (A)(3)(c) and (d) of Revenue Regulations No. 298). Monetary value of fruits, flowers or books given on special occasions are deleted. Any other benefit not included in the enumeration shall not be considered “de minimis” benefits and are therefore subject to income tax and withholding tax on compensation income.
Minimum wage earner shall refer to a worker in the private sector paid the statutory minimum wage, or to an employee in the
public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned. He is not required to file an income tax return
Personal exemptions are the theoretical personal, living and family e xpenses of an individual allowed to be deducted from the gross or net income of an individual taxpayer. These are arbitrary amounts which have been calculated by our lawmakers to be roughly equivalent to the minimum of subsistence, taking into account the personal status and additional qualified dependents of the taxpayer. They are fixed amounts in the sense that the amounts have been predetermined by our lawmakers as provided under Section 35 (A) and (B). Unless and until our lawmakers make new adjustments on these personal exemptions, the amounts allowed to be deducted by a taxpayer are fixed as predetermined by Congress ).
There shall be allowed a basic personal exemption amounting to Fifty Thousand Pesos (P50, 000) for each individual taxpayer. In the case of married individual where only one of the spouses is deriving gross income, only such spouse shall be allowed the personal exemption (Sec. 4(A), R.A. No. 9504).
There shall be allowed an additional exemption of Twenty-Five Thousand Pesos (P25, 000) for each dependent not exceeding four (4). The additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals. In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children: Provided , that the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions.
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega A ‘dependent’ means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect (Sec. 4(B), R.A. No. 9504).
Two administrative remedies accorded to the taxpayer under the Tax Code: b. administrative protest, which is a protest against the assessment and is filed and, Claim for refund filed with the CIR
Advertising is generally of two kinds: (1) advertising to stimulate the current sale of merchandise or use of services and (2) advertising designed to stimulate the future sale of merchandise or use of services. The second type involves expenditures incurred, in whole or in part, to create or maintain some form of goodwill for the taxpayer's trade or business or for the industry or profession of which the taxpayer is a member. If the expenditures are for the advertising of the first kind, then, except as to the question of the reasonableness of amount, there is no doubt such expenditures are deductible as business expenses. If, however, the expenditures are for advertising of the second kind, then normally they should be spread out over a reasonable period of time.
The protection of branch franchise is analogous to the maintenance of goodwill or title to one's property. This is a capital expenditure which should be spread out over a reasonable period of time. Respondent Corporation’s venture to protect its brand franchise was tantamount to efforts to establish a reputation. This was akin to the acquisition of capital assets and therefore expenses related thereto were not to be considered as business expenses but as capital expenditures. [Commissioner of International Revenue v. General Foods
1.
Administrative Judicial) 2. Judicial
(Extra-
The use of the word “shall” in subsection 3.1.2 of Revenue Regulations 12-99 describes the mandatory nature of the service of a PAN. The persuasiveness of the right to due process reaches both substantial and procedural rights and the failure of the CIR to strictly comply with the requirements laid down by law and its own rules is a denial of Metro Star's right to due process. Thus, for its failure to send the PAN stating the facts and the law on which the assessment was made as required by Section 228 of R.A. No. 8424, the assessment made by the CIR is void. [Commissioner of Internal Revenue v. Metro Star Superama, Inc., 637 SCRA 633, (2010)]
In the context in which it is used in the NIRC, an assessment is a written notice and demand made by the BIR on the taxpayer for the settlement of a due tax liability that is there definitely set and fixed. A written communication containing a computation by a revenue officer of the tax liability of a taxpayer and giving him an opportunity to contest or disprove the BIR examiner's findings is not an assessment since it is yet indefinite. We rule that the recommendation letter of the Commissioner cannot be considered a formal
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega assessment. Even a cursory perusal of the said letter would reveal three key points: 1. It was not addressed to the taxpayers. 2. There was no demand made on the taxpayers to pay the tax liability, nor a period for payment set therein. 3. The letter was never mailed or sent to the taxpayers by the Commissioner. In fine, the said recommendation letter served merely as the prima facie basis for filing criminal informations that the taxpayers had violated Section 45 (a) and (d), and 110, in relation to Section 100, as penalized under Section 255, and for violation of Section 253, in relation to Section 252 9(b) and (d) of the Tax Code. [Adamson v. Court of Appeals, 588 SCRA 27 (2009)]
The prescriptive period of two years should commence to run only from the time that the refund is ascertained, which can only be determined after a final adjustment return is accomplished (CIR v. PHILAMLIFE Insurance Co., 244 SCRA 446). Therefore, the filing of quarterly income tax returns and payment of quarterly income tax should only be considered mere installments of the annual tax due. These quarterly tax payments should be treated as advances or portions of the annual income tax due, to be adjusted at the end of the calendar or fiscal year (CIR v. TMX Sales, Inc., supra ). In the case of a corporate dissolution, the two year prescriptive period should be counted 30 days after the approval by the SEC of its plan for dissolution (BPI v. CIR, supra)
In the case at bar, petitioner's administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by respondent and which petitioner received on August 4, 2005. Under the above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondent's denial of its protest to the CTA. Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file a petition for review before the CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time. For a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the CTA.
No. In the case of CIR v. Citytrust Banking Corporation, 499 SCRA 477, 482 , the Supreme Court accorded judicial imprimatur to the following ratiocination of the CTA:
The taxpayer may file a claim for refund or credit with the BIR within 2 years after payment of the tax, before any suit in the CTA is commenced. The 2-year prescriptive period should be computed from the time of filing of the Adjustment Return (or Annual Income Tax Return) and final payment of the tax for the year
The “date of payment” in ACCRAIN’s case was when its tax liability, if any, fell due upon its filing of its final adjustment return (ACCRA Investments Corporation v. CA, 204 SCRA 957).
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“[W]e refuse to take cognizance of petitioner's deficiency tax assessment because to do so would create utter confusion among taxpayers. It is of common knowledge that the laws or rules governing claims for refund are separate and distinct from those applicable to assessment appeals. For example, the period of time to appeal a refund case is within (2) years from the date of payment, while the filing of an assessment appeal requires the observance of thirty (30) days from the date of receipt of denial of protest. Using this example for illustration, let us take a taxpayer who has an erroneously paid capital gains tax in August 1992. Sometime in August 1994, an assessment was issued against him for deficiency income tax for the same taxable year. Supposing, he immediately protested the said assessment but
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega the BIR did not immediately act on his protest, will he still wait for the [BIR's] decision before he can go to [the CTA] to file his claim for refund? What about if the two-year period to appeal his refund is [nearing expiration], will he still wait indefinitely for the decision on his protest, so he can file both suits simultaneously with this Court? Of course, the answer will be No.
to appeal should be within the 2-year period. If, however, the CIR takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the CTA BEFORE the end of the two-year period without awaiting the decision of the CIR” (Gibbs v. CTA, 107 Phil 232).
Now, let us reverse the scenario. Supposing, the [BIR's] assessment came first but this time no protest was made by the taxpayer. [H]ence, the assessment became final and executory and so, the [BIR] filed a collection case in the regular trial court. During the pendency of the collection suit, taxpayer discovered that he made an erroneous payment of a different kind of tax. To avoid multiplicity of suits, will the [BIR] allow the taxpayer to ventilate his claim for refund in the same collection case? Of course, the [BIR] will object on the ground of jurisdiction.”
Tax refunds are not founded principally on legislative grace but on the legal principle which underlies all quasi-contracts abhorring a person’s unjust enrichment at the expense of another. The dynamic of erroneous payment of tax fits to a tee the prototypic quasi-contract, solutio indebiti, which covers not only mistake in fact but also mistake in law. Under the Tax Code itself, apparently in recognition of the pervasive quasi-contract principle, a claim for tax refund may be based on the following: (a) erroneously or illegally assessed or collected internal revenue taxes; (b) penalties imposed without authority; and (c) any sum alleged to have been excessive or in any manner wrongfully collected.
In claims for refund, it is necessary that the tax be paid in full, and that the claim for refund in the BIR as well as be commenced within two years counted from the payment of the tax.
“A taxpayer who has paid the tax, whether under protest or not, and who is claiming a refund of the same, must: file a written claim for refund with the CIR within 2 years from the date of his payment of the tax, (2) Appeal to the CTA within 30 days from receipt of the CIR’s decision or ruling denying his claim for refund (Sec. 11, RA 1125). The 30-day period
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal with the same subject matter — the computation of legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days is irrelevant. There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987,
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega being the more recent law, governs the computation of legal periods. Lex posteriori derogat priori
Excise taxes, which apply to articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported into the Philippines, is basically an indirect tax. While the tax is directly levied upon the manufacturer/importer upon removal of the taxable goods from its place of production or from the customs custody, the tax, in reality, is actually passed on to the end consumer as part of the transfer value or selling price of the goods, sold, bartered or exchanged. In early cases, we have ruled that for indirect taxes (such as valued-added tax or VAT), the proper party to question or seek a refund of the tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even when he shifts the burden thereof to another. Thus, in Contex Corporation v. Commissioner of Internal Revenue , we held that while it is true that petitioner corporation should not have been liable for the VAT inadvertently passed on to it by its supplier since their transaction is a zero-rated sale on the part of the supplier, the petitioner is not the proper party to claim such VAT refund. Rather, it is the petitioner’s suppliers who are the proper parties to claim the tax credit and accordingly refund the petitioner of the VAT erroneously passed on to the latter.
The CTA, citing Section 10 of Revenue Regulations 6-85 and Citibank, N.A. v. Court of Appeals, determined the requisites for a claim for refund, thus: 1) That the claim for refund was filed within the two (2) year period as prescribed under Section 230 of the National Internal Revenue Code; 2) That the income upon which the taxes were withheld were included in the return of the recipient; 3) That the fact of withholding is established by a copy of a statement (BIR Form 1743.1) duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom.
Section 76 offers two options: (1) filing for tax refund and (2) availing of tax credit. The two options are alternative and the choice of one precludes the other. However, in Philam Asset Management, Inc. v. Commissioner of Internal Revenue, 447 SCRA 772 (2005), the Court ruled that failure to indicate a choice, however, will not bar a valid request for a refund, should this option be chosen by the taxpayer later on. The requirement is only for the purpose of easing tax administration particularly the selfassessment and collection aspects.
A.
B.
Where the Commissioner has not acted on the taxpayer’s protest within a period of 180 days from submission of all relevant documents, then the taxpayer has a period of 30 days from the lapse of said 180 days within which to file a petition for review with the CTA. Should the Commissioner deny the taxpayer’s protest, then he has a period of 30 days from receipt of said denial within which to file a petition for review with the CTA.
The subject of a JUDICIAL REVIEW is the decision of the CIR on the protest against assessment, the assessment itself (CIR v. Villa , 22 SCRA 3).
Applying the two-year period to judicial claims would render nugatory Section 112(D) (now Section 112 (C)) of the NIRC, which already provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR. The second paragraph of Section 112(C) of the NIRC, as amended, envisions two scenarios: (1) when a decision is issued by the CIR before the lapse
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega of the 120-day period; and (2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. Indeed, the 120-day period is crucial in filing an appeal with the CTA. [See Commissioner of Internal Revenue v. AICHI Forging Company of Asia, Inc., 632 SCRA 422, (2010)]
1.
Section 112(C) provides that the Commissioner shall decide the application for refund or credit “within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A).” The reference in Section 112(C) of the submission of documents “in support of the application filed in accordance with Subsection (A)” means that the application in Section 112(A) is the administrative claim that the Commissioner must decide within the 120-day period. In short, the two-year prescriptive period in Section 112(A) refers to the period within which the taxpayer can file an administrative claim for tax refund or credit.
In the strict legal viewpoint, therefore, PNB’s claim for tax credit did not proceed from, or is a consequence of overpayment of tax erroneously or illegally collected. It is beyond cavil that respondent PNB issued to the BIR the check for P180 Million in the concept of tax payment in advance, thus eschewing the notion that there was error or illegality in the payment. What in effect transpired when PNB wrote its July 28, 1997 letter was that respondent sought the application of amounts advanced to the BIR to future annual income tax liabilities, in view of its inability to carry-over the remaining amount of such advance payment to the four (4) succeeding taxable years, not having incurred income tax liability during that period.
[Commissioner of Internal Revenue v. San Roque Power Corporation, 690 SCRA 336, (12 February 2013]
2. Section 76 provides that a taxpayer has the option to file a claim for refund or to carryover its excess income tax payments. The option to carry-over, however, is irrevocable. Thus, once a taxpayer opted to carry-over its excess income tax payments, it can no longer seek refund of the unutilized excess income tax payments. The taxpayer, however, may apply the unutilized excess income tax payments as a tax credit to the succeeding taxable years until such has been fully applied pursuant to Section 76 of the NIRC.
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Section 230 of the Tax Code (now Section 229), as couched, particularly its statute of limitations component, is, in context, intended to apply to suits for the recovery of internal revenue taxes or sums erroneously, excessively, illegally or wrongfully collected. Black defines the
In Commissioner v. Phil-Am Life, the Court ruled that an availment of a tax credit due for reasons other than the erroneous or wrongful collection of taxes may have a different prescriptive period.
Significantly, Commissioner v. Phil-Am Life is partly a reiteration of a previous holding that even if the two (2)-year prescriptive period, if applicable, had already lapsed, the same is not jurisdictional any may be suspended for reasons of equity and other special circumstances.
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
1.
2.
3. 4. 5. 6. 7.
Distraint of personal property such as goods, chattels, or effects, including stocks and other securities, debts, credits, bank accounts and interest in and rights to personal property [Sec. 207(A)] Levy or seizure of real properties and interest in or rights to real property (Sec. 207(B), NIRC) Tax Lien (Sec. 219, NIRC) Civil or Criminal action (Sec. 205, NIRC) Compromise (Sec. 204, NIRC) Forfeiture (Sec. 224, NIRC) Civil Penalties (Sec. 248, NIRC)
1.
Withholding tax cases, unless the
2.
Criminal tax fraud cases
3.
Criminal violation already filed in court; Delinquent accounts with duly approved schedule of installment payments; Cases where final reports of reinvestigation or reconsiderations have been issued resulting to reduction in the original assessment and the taxpayer is agreeable to such decision
4.
5.
The Commissioner has the power to approve the filing of tax collection cases
The BIR is authorized to issue a warrant of garnishment against the bank account of a taxpayer despite the pendency of a protest Nowhere in the Tax Code is the Commissioner required to rule first on the protest before he can institute collection proceedings on the tax assessed. The legislative policy is to give the Commissioner much latitude in the speedy and prompt collection of taxes because taxes are the lifeblood of the government
6.
On the other hand, other protested cases shall be handled by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB) on a case to case basis; Cases which become final and executory after final judgment of a court,
7.
).
In Marcos II v. CA, 273 SCRA 47, the SC ruled that the approval of the court sitting in probate is not a mandatory requirement in the collection of estate taxes.
The 3-year prescriptive period for assessment of the tax liability commences to run after the last day prescribed by law for the filing of the return; but if the return was , the period starts from the filing of the amended return
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1.
The “best evidence” envisaged in Section 16 of the 1977 NIRC (now Sec. 6) includes the corporate and accounting records of the taxpayer who is the subject of the assessment process, the accounting records of other taxpayers engaged in the same line of business, including their gross profit and net profit sales. Such evidence also includes data, record, paper, document or any evidence
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega gathered by internal revenue officers from other taxpayers who had personal transactions or from whom the subject taxpayer received any income; and record, data, document and information secured from government offices or agencies, such as the SEC, the Central Bank of the Philippines, the Bureau of Customs, and the Tariff and Customs Commission.
tax liability may be determined by estimation. The petitioner is not required to compute such tax liabilities with mathematical exactness. Approximation in the calculation of the taxes due is justified. To hold otherwise would be tantamount to holding that skillful concealment is an invincible barrier to proof. However, the rule does not apply where the estimation is arrived at arbitrarily and capriciously.
2. The best evidence obtainable may consist of hearsay evidence, such as the testimony of third parties or accounts or other records of other taxpayers similarly circumstanced as the taxpayer subject of the investigation, hence, inadmissible in a regular proceeding in the regular courts. Moreover, the general rule is that administrative agencies such as the BIR are not bound by the technical rules of evidence. It can accept documents which cannot be admitted in a judicial proceeding where the Rules of Court are strictly observed. It can choose to give weight or disregard such evidence, depending on its trustworthiness.
A valid waiver of the statute of limitations under paragraphs (b) and (d) of Section 224 of the Tax Code of 1977 (Sec. 223, NIRC as amended by RA 8424) , as amended, must be: (1) in writing; (2) agreed to by both the Commissioner and the taxpayer; (3) before the expiration of the ordinary prescriptive periods for assessment and collection; and (4) for a definite period beyond the ordinary prescriptive periods for assessment and collection. The period agreed upon can still be extended by subsequent written agreement, provided that it is executed prior to the expiration of the first period agreed upon (BPI v. CIR, 473 SCRA 205) .
With the issuance of RR No. 12-85 on 27 November 1985 providing the abovequoted distinctions between a request for reconsideration and a request for reinvestigation, the two types of protest can no longer be used interchangeably and their differences so lightly brushed aside. It bears to emphasize that under Section 224 of the Tax Code of 1977 (now Sec. 223) , the running of the prescriptive period for collection of taxes can only be suspended by a , not a request for reconsideration. Undoubtedly, a
The reason for this is that such copies are mere scraps of paper and are of no probative value as basis for any deficiency income or business taxes against a taxpayer.
4.
the
Section 229 (now 228) of the Tax Code mandates that a request for reconsideration must be made within 30 days from the taxpayer’s receipt of the tax deficiency assessment, otherwise the assessment becomes final, unappealable and therefore demandable
3.
The BIR, in making a preliminary and final tax deficiency assessment against a taxpayer, cannot anchor the said assessment on mere machine copies of records/documents.
PRESCRIPTION (Suspension of Statutory Period for Collection).
The rule is that in the absence of the accounting records of a taxpayer, his
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega reinvestigation, which entails the reception and evaluation of additional evidence, will take more time than a reconsideration of a tax assessment, which will be limited to the evidence already at hand; this justifies why the former can suspend the running of the statute of limitations on collection of the assessed tax, while the latter cannot.
1.
2.
3.
4.
Exclusive original jurisdiction over criminal cases arising from violations of the NIRC or the Tariff and Customs Code and other laws administered by the BIR and the BOC where the principal amount of taxes and penalties involved is P1 million or more and appellate jurisdiction in lieu of the Court of Appeals over decisions of the Regional Trial Court where the amount is less than P1 million; Exclusive original jurisdiction over tax collection cases where the principal amount of taxes and penalties involved is P1 million or more and the appellate jurisdiction over decisions of the Regional Trial Court where the amount is less than P1 million; Appellate jurisdiction over decisions of the Regional Trial Courts in local tax cases; and Appellate jurisdiction over decisions of the Central Board of Assessment Appeals over cases involving the assessment of taxation of real property.
The vesting of jurisdiction over both the civil and criminal aspects of a tax case in one court will likewise effectively enhance and maximize the development of jurisprudence and judicial precedence on tax matters which is of vital importance to revenue administration. The concentration of tax cases in one court will enhance the disposition of these cases since it will take them out of the jurisdiction of regular courts which, admittedly, do not have the expertise in the field of taxation.
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I.
in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the BIR
in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the BIR, where the NIRC provides a specific period for action, in which case the inaction shall be deemed a denial
in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction
in cases involving liability of customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs
in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega originally decided by the Provincial or City Board of Assessment Appeals
that provided for under Rule 42 of the 1997 Rules of Civil Procedure, within 30 days from the receipt of the decision or ruling or from the expiration of the period fixed by law for the official concerned to act in cases of inaction. A division of the CTA shall hear the appeal. All other cases involving rulings, orders or decisions filed with the CTA as provided for in Section 7 of RA 9282 shall be raffled to its divisions. A party adversely affected by a ruling, order or decision of a division of the CT A may file a motion for reconsideration or new trial before the same division.
in customs cases elevated to them automatically for review from decisions of the Commissioner of Customs which are adverse to the government under Section 2315 of the Tariff and Customs Code
in cases of non-agricultural product, commodity or article, and in cases of agricultural product, commodity or article involving dumping and countervailing duties under Sections 301 and 302 of the Tariff and Customs Code, respectively, and safeguard measures under RA. 8808, where either party may appeal the decision to impose or not to impose said duties
(2.) Appeals with respect to decisions or rulings of the Central Board of Assessment Appeals and the Regional Trial Court in the exercise of its appellate jurisdiction, may be made by filing a petition for review under a procedure analogous to that provided for under Rule 43 of the 1997 Rules of Civil Procedure with the CTA which shall hear the case en banc A party adversely affected by a resolution of a division of the CTA on a motion for reconsideration or new trial, may file a petition for review with the CTA en banc.
Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture or the Regional Trial Court, may file an appeal with the CTA:
(3.) A Petition for Review on Certiorari may be filed by a party adversely affected by a decision or ruling of the CTA en banc, through a verified petition before the Supreme Court pursuant to Rule 45 of the 1997 Rules of Civil Procedure.
(a.) within thirty (30) days after receipt of such decision or ruling; OR (b.) after the expiration of the period fixed by law for action referred to in Section 7 (a) (2) of RA. 9282, in which case the inaction shall be deemed a denial.
(1.) Appeal may be made by filing a petition for review before the CTA under a procedure analogous to
It is the decision of the CIR on the protest of the taxpayer against assessment, not the assessment itself, which is appealable to the CTA. A letter of the Commissioner reminding a taxpayer of his obligation to pay taxes which reiterates a previous demand for the settlement of an assessment is in effect a
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega decision on the disputed assessment. This letter is tantamount to a denial of the request for reconsideration or protest of the taxpayer
or the tenor of the letter being sent to the taxpayer. 2. We laid down the rule that the Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment, thus: . . . we deem it appropriate to state that the Commissioner of Internal Revenue should always indicate to the taxpayer in clear an unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final determination on the disputed assessment, as contemplated by Sections 7 and 11 of Republic Act No. 1125, as amended. On the basis of his statement indubitably showing that the Commissioner’s communicated action is his final decision on the contested assessment, the aggrieved taxpayer would then be able to take recourse to the tax court at the opportune time. Without needless difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues. 3. The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him under the National Internal Revenue Code (NIRC) enumerated in Section 7. 4. The authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same force and effect as that issued by the Commissioner himself, if not reviewed or revised by the latter such as in this case.
The findings and conclusions of the Court of Tax Appeals (CTA) are accorded the highest respect and will not be lightly set aside. The CTA, by the very nature of its functions, is dedicated exclusively to the resolution of tax problems and has accordingly developed an expertise on the subject unless there has been an abusive or improvident exercise of authority. Consequently, its conclusions will not be overturned unless there has been an abuse or improvident exercise of authority. Its findings can only be disturbed on appeal if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to the contrary, the Court must presume that the CTA rendered a decision which is valid in every respect. [Commissioner of Internal Revenue v. Team (Philippines) Operations Corporation (formerly Mirant Phils., Operation Corporation)]
The decision of the Commissioner or his duly authorized representative shall: (a) state the facts, the applicable law, rules and regulations, or jurisprudence on which such decision is based, , , in which case, the same shall not be considered a decision on a disputed assessment; and (b) that the same is his
1.
The determination on whether or not a demand letter is final is conditioned upon the language used
the Supreme Court held that a final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer the immediate payment of a tax deficiency assessment previously made, is tantamount to a denial of the taxpayer’s request for reconsideration. Such letter amounts to a final decision on a disputed assessment and is thus appealable to the Court of Tax Appeals.
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
Allied Banking Corporation received the Formal Letter of Demand with Assessment Notices, which partly reads: PNB sought the suspension of the proceedings in CTA Case No. 4249, after it contested the deficiency withholding tax assessment against it and the demand for payment thereof before the DOJ, pursuant to P.D. No. 242. The CTA, however, correctly sustained its jurisdiction and continued the proceedings in CTA Case No. 4249; and, in effect, rejected DOJ’s claim of jurisdiction to administratively settle or adjudicate BIR’s assessment against PNB. Sustained herein is the contention of private respondent Savellano that P.D. No. 242 is a general law that deals with administrative settlement or adjudication of disputes, claims and controversies between or among government offices, agencies and instrumentalities, including government-owned or controlled corporations. Its coverage is broad and sweeping, encompassing all disputes, claims and controversies. It has been incorporated as Chapter 14, Book IV of E.O. No. 292, otherwise known as the Revised Administrative Code of the Philippines. On the other hand, R.A. No. 1125 is a special law dealing with a specific subject matter the creation of the CTA, which shall exercise exclusive appellate jurisdiction over the tax disputes and controversies enumerated therein. Following the rule on statutory construction involving a general and a special law previously discussed, then P.D. No. 242 should not affect R.A. No. 1125, specifically Section 7 thereof on the jurisdiction of the CTA, constitutes an exception to P.D. No. 242. Disputes, claims and controversies falling under Section 7 of R.A. No. 1125, even though solely among government offices, agencies, and instrumentalities, including government-owned and controlled corporations, remain in the exclusive appellate jurisdiction of the CTA. Such a construction resolves the alleged inconsistency or conflict between the two statutes, and the fact that P.D. No. 242 is the more recent law is no longer significant
“It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to delinquency. This is our final decision based on investigation. If you disagree, you may appeal the final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax assessment shall become final, executory and demandable.” A careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree with Allied Banking Corporation that the instant case is an exception to the rule on exhaustion of administrative remedies, i.e., estoppel on the part of the administrative agency concerned.
In RCBC v. CIR , the Court has held that in case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: (1) file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision
The gifts referred to in Section 1540 of the Revised Administrative Code are those donations inter vivos that take effect immediately or during the lifetime of the donor but are made in consideration or in contemplation of death. Gifts inter vivos, the
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega transmission of which is not made in contemplation of the donor’s death, should not be included within the said legal provision for it would amount to imposing a direct tax on property and not on the transmission thereof. The law considers such transmissions in the form of gifts inter vivos, as advances on inheritance and nothing therein violates any constitutional provision, inasmuch as said legislation is within the power of the Legislature (Vidal de Roces v. Posadas , 58 Phil. 111, 113).
The term is not confined to its ordinary or usual meaning. They include: (a) The mourning apparel of the surviving spouse and unmarried minor children of the deceased bought and used on the occasion of the burial; (b) Expenses for the deceased’s wake, including food and drinks; (c) Publication charges for death notices; (d) Telecommunication expenses incurred in informing relatives of the deceased; (e) Cost of burial plot, tombstones, monument or mausoleum but not their upkeep. In case the deceased owns a family estate or several burial lots, only the value corresponding to the plot where he is buried is deductible; (f) Interment and/or cremation fees and charges; and (g) All other expenses incurred for the performance of the rites and ceremonies incident to interment. Expenses incurred after the interment, such as for prayers, masses, entertainment, or the like are not deductible. Any portion of the funeral and burial expenses borne or defrayed by relatives and friends of the deceased are not deductible.
Requisites for Deductibility of Claims against the Estate: (a) The liability represents a personal obligation of the deceased existing at the time of his death except unpaid obligations incurred incident to his death such as unpaid funeral expenses (i.e., expenses incurred up to the time of interment) and unpaid medical expenses which are classified under a different category of deductions pursuant to these Regulations; (b) The liability was contracted in good faith and for adequate and full consideration in money or money’s worth; (c) The claim must be a debt or claim which is valid in law and enforceable in court; (d) The indebtedness must not have been condoned by the creditor or the action to collect from the decedent must not have prescribed.
Conditions for the allowance of FAMILY HOME as deduction from the gross estate: 1. The family home must be the actual residential home of the decedent and his family at the time of his death, as certified by the Barangay Captain of the locality where the family home is situated; 2. The total value of the family home must be included as part of the gross estate of the decedent; and 3. Allowable deduction must be in an amount equivalent to the current fair market value of the family home as declared or included in the gross estate, or the extent of the decedent’s interest (whether conjugal/ community or exclusive property), whichever is lower, but not exceeding P1, 000,000.
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
Section 108(A) of the Code clearly states that services of all other franchise grantees are subject to VAT, except as may be provided under Section 119 of the Code. Tollway operators are not among the franchise grantees subject to franchise tax under the latter provision. Neither are their services among the VAT-exempt transactions under Section 109 of the Code. x x x The grant of tax exemption is a matter of legislative policy that is within the exclusive prerogative of Congress. The Court's role is to merely uphold this legislative policy, as reflected first and foremost in the language of the tax statute. Thus, any unwarranted burden that may be perceived to result from enforcing such policy must be properly referred to Congress. The Court has no discretion on the matter but simply applies the law. The VAT on franchise grantees has been in the statute books since 1994 when R.A. 7716 or the Expanded Value Added Tax law was passed. It is only now, however, that the executive has earnestly pursued the VAT imposition against tollway operators. The executive exercises exclusive discretion in matters pertaining to the implementation and execution of tax laws. Consequently, the executive is more properly suited to deal with the immediate and practical consequences of the VAT imposition. [Diaz v. Secretary of Finance, 654 SCRA 96, (2011)]
It is apparent that the transitional input tax credit operates to benefit newly VATregistered persons, whether or not they previously paid taxes in the acquisition of their beginning inventory of goods, materials and supplies. During that period of transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer. At the very beginning,
the VAT-registered taxpayer is obliged to remit a significant portion of the income it derived from its sales as output VAT. The transitional input tax credit mitigates this initial diminution of the taxpayer's income by affording the opportunity to offset the losses incurred through the remittance of the output VAT at a stage when the person is yet unable to credit input VAT payments. There is another point that weighs against the CTA's interpretation. Under Section 105 of the Old NIRC, the rate of the transitional input tax credit is “8% (now 2%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher.” If indeed the transitional input tax credit is premised on the previous payment of VAT, then it does not make sense to afford the taxpayer the benefit of such credit based on “8% (now 2%) of the value of such inventory” should the same prove higher than the actual VAT paid. This intent that the CTA alluded to could have been implemented with ease had the legislature shared such intent by providing the actual VAT paid as the sole basis for the rate of the transitional input tax credit.
A transitional input tax credit is not a tax refund per se but a tax credit. Logically, prior payment of taxes is not required before a taxpayer could avail of transitional input tax credit. It is settled that tax credit is not synonymous to tax refund. Tax refund is defined as the money that a taxpayer overpaid and is thus returned by the taxing authority. Tax credit, on the other hand, is an amount subtracted directly from one's total tax liability. It is any amount given to a taxpayer as a subsidy, a refund, or an incentive to encourage investment.
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Sale of residential lot from P1,500,000 to P1,919,500 (Selling Price)
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega
Sale of house and lot from P2,500,000 to P3,199,200 (Selling Price) Lease of residential unit from P10,000 to P12,800/month Sale or lease of goods or properties or performance of services from P1,500,000 to P1,919,500 (Gross Annual Sales or Receipts)
Local governments have no power to tax instrumentalities of the National Government. Settled is the rule that the states have no power by taxation or otherwise, to retard, impede, burden or any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government
In case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it and liberally in favor of the taxpayer. Any tax exemption, incentive or relief granted by any local government shall be construed strictly against the person claiming it (Sec. 5(b), RA 7160) .
PLDT is subject to franchise tax. The Supreme Court rejected PLDT’s contention that “in-lieu-of-all taxes” clause does not refer to “tax exemption” but to “tax exclusion” and hence, the strictissimi juris rule does not apply. The en banc explains that these two terms actually mean the same thing, such that the rule that tax exemption should be applied in strictissimi juris against the taxpayer and liberally in favor of the government applies equally to tax exclusions:
In interpreting statutory provisions on municipal taxing powers, doubts should be resolved in favor of municipal corporations (PLDT v. Province of Laguna, 467 SCRA 93). Section 193 of the Local Government Code buttresses the withdrawal of extant tax exemption privileges. The general rule is that tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons are withdrawn upon the effectivity of the LGC except with respect to those entities expressly enumerated. In the same vein, the express withdrawal upon effectivity of the LGC of all exemptions except only as provided therein, can no longer be invoked by MERALCO to disclaim liability for the local
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Indeed, both in their nature and in their effect there is no difference between tax exemption and tax exclusion. Exemption is an immunity or privilege; it is freedom from a charge or burden to which others are subjected. Exclusion, on the other hand, is the removal of otherwise taxable items from the reach of taxation, e.g., exclusions from gross income and allowable deductions. Exclusion is thus also an immunity or privilege which frees a taxpayer from a charge to which others are subjected. Consequently, the rule that tax exemption should be applied in strictissimi juris against the taxpayer and liberally in favor of the government applies equally
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega to tax exclusions. To construe otherwise the ‘in lieu of all taxes’ provision invoked is to be inconsistent with the theory that R.A. No. 7925, § 23 grants tax exemption because of a similar grant to Globe and Smart
metals, perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later reference to “taxes, fees and charges” pertains only to one class of articles of the many subjects of excise taxes, specifically, “petroleum products.” While local government units are authorized to burden all such other class of goods with “taxes, fees and charges,” excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products
Pre-emption in the matter of taxation simply refers to an instance where the national government elects to tax a particular area, impliedly withholding from the local government the delegated power to tax the same field. This doctrine rests upon the intention of Congress. Conversely, should Congress allow municipal corporations to cover fields of taxation it already occupies, then the doctrine of pre-emption will not apply
Section 133 prescribes the limitations on the capacity of local government units to exercise their taxing powers otherwise granted to them under the LGC. Apparently, paragraph (h) of the Section mentions two kinds of taxes which cannot be imposed by local government units, namely: “excise taxes on articles enumerated under the National Internal Revenue Code [(NIRC)], as amended”; and “taxes, fees or charges on petroleum products.” The language of Section 133(h) makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon, but all “taxes, fees and charges.” The earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of taxation: all articles already covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral products, automobiles, and such non-essential goods as jewelry, goods made of precious
We are not unaware of the doctrine that taxes are the lifeblood of the government, without which it cannot properly perform its functions; and that appeal shall not suspend the collection of realty taxes. However, there is an exception to the foregoing rule, i.e., where the taxpayer has shown a clear and unmistakable right to refuse or to hold in abeyance the payment of taxes. In this case we note that respondent contested the revised assessment on the following grounds: that the subject assessment pertained to properties that have been previously declared; that the assessment covered periods of more than 10 years which is not allowed under the LGC; that the fair market value or replacement cost used by petitioner included items which should be properly excluded; that prompt payments of discounts were not considered in determining the fair market value; and that the subject assessment should take effect a year after or on January 1, 2008. To our mind, the resolution of these issues would have a direct bearing on the assessment made by petitioner. Hence, it is necessary that the issues must first be passed upon before the properties of respondent are sold in public auction.
Clearly, the law requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case the Secretary decides the appeal, a period also of 30 days is allowed for an aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60 days, a party could already proceed to seek relief in court. These three separate periods are clearly given for compliance as a prerequisite before seeking redress in a competent court. Such statutory periods are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions. For this reason, the courts construe these provisions of statutes as mandatory.
A principle deeply embedded in our jurisprudence is that taxes being the lifeblood of the government should be collected promptly, without unnecessary hindrance or delay. In line with this principle, the National Internal Revenue Code of 1997 (NIRC) expressly provides that no court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the Code. An exception to this rule obtains only when in the opinion of the Court of Tax Appeals (CTA) the collection thereof may jeopardize the interest of the government and/or the taxpayer. Unlike the National Internal Revenue Code, the Local Tax Code does not contain any specific provision prohibiting courts from enjoining the collection of local taxes. Such statutory lapse or intent, however it may be viewed, may have allowed preliminary injunction where local taxes are involved but cannot negate the procedural rules and requirements under Rule 58. [
The imposition of local business tax based on gross revenue will inevitably result in the constitutionally proscribed double taxation — taxing of the same person twice by the same jurisdiction for the same thing — inasmuch as petitioner’s gross revenue or
income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid. Gross revenue covers money or its equivalent actually or constructively received, including the value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be received. This is in consonance with the International Financial Reporting Standards, which defines revenue as the gross inflow of economic benefits (cash, receivables, and other assets) arising from the ordinary operating activities of an enterprise (such as sales of goods, sales of services, interest, royalties, and dividends), which is measured at the fair value of the consideration or receivable
The stipulation between NPC and Mirant does not bind third persons who are not privy to the contract between these parties. There is no privity between the local government units and the NPC, even though both are public corporations. The tax due will not come from one pocket and go to another pocket of the same governmental entity. Only the parties to the agreement can exact and demand the enforcement of the rights and obligations it established — only Mirant can demand compliance from the NPC for the payment of the real property tax the NPC assumed to pay. The local government units cannot demand payment from the NPC. The government-owned or controlled corporation claiming exemption must be the entity actually, directly, and exclusively using the real properties, and the use must be devoted to the generation and transmission of electric power. Although the plant's machineries are devoted to the generation of electric power, by the NPC's own admission and as previously pointed out, Mirant — a private corporation — uses and operates them. That Mirant operates the machineries solely in
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From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega compliance with the will of the NPC only underscores the fact that NPC does not actually, directly, and exclusively use them.
Seizure and forfeiture proceedings are within the exclusive jurisdiction of the Collector of Customs to the exclusion of regular courts. Regional Trial Courts are devoid of competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings
1.
— those imposed and merely as a source of
collected revenue. a. Ad valorem Duty — Based on the value of imported article. b. Specific Duty — based on dutiable weight of goods. c. Alternating Duties — which alternates ad valorem and specific. d. Compound Duty — consisting of ad valorem and specific. 2.
The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs’ searches, seizures or arrests provided by law and continue with the administrative hearings. As held in Ponce v. Vinuya: “ The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction. It does not mean however that correspondingly a CFI (now RTC) is vested with competence when clearly in the light of the above decisions the law has not seen fit to do so. The proceeding before the Collector of Customs is not final. An appeal lies to the Commissioner of Customs and thereafter to the Court of Tax Appeals. It may even reach (the Supreme Court) through the appropriate petition for review. The proper ventilation of the legal issues raised is thus indicated. Certainly a CFI (now RTC) is not therein included. It is devoid of jurisdiction”
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those imposed in additional to the ordinary customs duties usually to protect local industries against foreign competition. a. — Imposed upon foreign products with value lower than their fair market value to the detriment of local products; it is the difference between the export price and the normal value of such product, commodity or article. — The Secretary of Trade and Industry (nonagricultural products) OR Secretary of Agriculture (agricultural products) after formal investigation and affirmative finding of the Tariff Commission. b. — Imposed upon foreign goods enjoying subsidy thus allowing them to sell at lower prices to the detriment of local products similarly situated; it is equivalent to the value of the subsidy. — Secretary of Trade and Industry (nonagricultural products); Secretary of Agriculture (agricultural products) after formal investigation and
From the notes of : Justice Japar B. Dimaampao and Atty. Noel M. Ortega affirmative finding of the Tariff Commission. d. — Imposed upon those not properly marked as to place of origin of the goods. — Commissioner of Customs. e. — Imposed upon goods coming from countries that discriminate against Philippine products. — President of the Philippines.
Any officer or employee returning from a regular assignment abroad for reassignment to the home office x x x shall be exempt from the payment of all duties and taxes on his personal and household effects, including one (1) used motor car duly registered in his name for at least six (6) months: Provided, however, That the exemption shall apply only to the value of the motor car and to the aggregate assessed value of said personal and household effects, the latter not to exceed fifty percent (50%) of the total amount received by such officer or employee in salary and allowances during his latest assignment abroad but not to exceed four (4) years: Provided, further, That this exception shall not be availed of more often than once every four (4) years
— the Congress may, by law, authorize the President to fix, within specified limits, and subject to such limitations and restrictions as it may impose: a.
b.
Tariff rates, imports and export quotas, tonnage and wharfage dues; Other duties or imposts within the framework of the national development program of the Government.
— in the interest of national economy, general welfare and/or national security, the President , upon recommendation by NEDA, is empowered: a.
b. c.
d.
To increase, reduce or remove existing protective rates of import duty, provided that the increase shall not be higher than 100% ad valorem ; To establish import quota or to ban imports to any commodity; To impose additional duty on all imports not exceeding 10% ad valorem ; To modify the forms of duty, whether ad valorem or specific.
An importer’s failure to file the required entries within a non-extendible period of 30 days from date of discharge of the last package from the carrying vessel constitutes implied abandonment of its importations. After the lapse of this 30-day period, the abandoned shipments become government property. Under the Tariff and Customs Code (TCC), imported articles must be entered within a non-extendible period of 30 days from the date of discharge of the last package from a vessel. Otherwise, the BOC will deem the imported goods impliedly abandoned in favor of the government. Chevron argued that the import entry declarations (IED) it filed within the 30-day period for some of its oil shipments is the entry contemplated by the TCC, and not the import entry and internal revenue declaration (IEIRD), which it failed to file within the same period. The SC disagreed, holding that both the IED and IEIRD should be filed within 30 days from the date of discharge of the last package from the vessel or aircraft
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