Sec 84-201

TITLE III
Estate and Donor's Taxes

CHAPTER I
Estate Tax
SECTION 84. Rates of Estate Tax. There shall e le!"ed# assessed#
$olle$ted and %a"d &%on the transfer of the net estate as deter'"ned "n a$$ordan$e
("th Se$t"ons 8) and 8* of e!er+ de$edent# (hether res"dent or nonres"dent of the
Ph"l"%%"nes# a tax ased on the !al&e of s&$h net estate# as $o'%&ted "n a$$ordan$e
("th the follo("n, s$hed&le-
If the net estate "s-
O!er .&t Not O!er The Tax Shall .e Pl&s Of the Ex$ess O!er
P/00#000 Exe'%t
P/00#000 )00#000 0 )1 P/00#000
)00#000 /#000#000 P2)#000 81 )00#000
/#000#000 )#000#000 23)#000 221 /#000#000
)#000#000 20#000#000 4*)#000 2)1 )#000#000
20#000#000 And O!er 2#/2)#000 /01 20#000#000
SECTION 8). 4ross Estate. The !al&e of the ,ross estate of the de$edent
shall e deter'"ned + "n$l&d"n, the !al&e at the t"'e of h"s death of all %ro%ert+#
real or %ersonal# tan,"le or "ntan,"le# (here!er s"t&ated- Pro!"ded# ho(e!er# That
"n the $ase of a nonres"dent de$edent (ho at the t"'e of h"s death (as not a $"t"5en
of the Ph"l"%%"nes# onl+ that %art of the ent"re ,ross estate (h"$h "s s"t&ated "n the
Ph"l"%%"nes shall e "n$l&ded "n h"s taxale estate.
MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as
Regional ire!tor, Revenue Region No. "#, $ureau of Internal Revenue, %etitioners, vs.
&'N. J'SE (. (ERNANE), Judge of t*e Court of (irst Instan!e of Negros '!!idental,
$ran!* V, and (RANCIS A. T'N+',, Administrator of t*e Estate of t*e late L-IS .
T'N+',, res%ondents. .+.R. No. L/0"01# Mar!* 02, "343.5
S,N'PSIS
In t*e !ourse of t*e intestate %ro!eedings of t*e estate of t*e late Luis . Tongo6, t*e !ourt
dismissed, and later refused to re!onsider its dismissal of, t*e Motion for Allo7an!e of
Claim and (or An 'rder of Pa6ment of Ta8es 96 t*e +overnment of t*e Re%u9li! of t*e
P*ili%%ines in t*e su9:e!t estate for defi!ien!6 in!ome ta8es on t*e ground t*at t*e !laim 7as
filed 9e6ond t*e %eriod %rovided in Se!tion ;, and 7as alread6 9arred under Se!tion < of
Rule =1 of t*e Rules of Court. &en!e, t*is a%%eal.
T*e Su%reme Court reversed t*e assailed orders and ruled t*at t*e invo>ed Rule ma>es no
mention of !laims for monetar6 o9ligations of t*e de!edent !reated 96 la7? su!* as ta8es
7*i!* is entirel6 of different !*ara!ter from t*e !laims e8%ressl6 enumerated t*erein, t*us
ne!essaril6 and im%li!ation e8!luding t*e same from its o%eration and effe!t? t*at !laims for
ta8es against a de!edent@s estate, as 7ell as t*e matter of %res!ri%tion t*ereof are governed
96 t*e %rovisions of t*e National Internal Revenue Code? and t*at 9efore t*e in*eritan!e *as
%assed to t*e *eirs, t*e un%aid ta8es due t*e government ma6 9e !olle!ted even 7it*out its
*aving 9een %resented under Se!tion ;, Rule =1 of t*e Rules of Court.
S,LLA$-S
". STAT-T'R, C'NSTR-CTI'N? PRINCIPLE '( EAPRESSI' -NI-S EST
EACL-SI' ALTERI-S APPLIE T' SECTI'N <, R-LE =1, R-LES '( C'-RT. B Sin!e
Se!tion <, Rule =1 of t*e Rules of Court ma>es no mention of !laims for monetar6
o9ligations of t*e de!edent !reated 96 la7, su!* as ta8es 7*i!* is entirel6 of different
!*ara!ter from t*e !laims e8%ressl6 enumerated t*erein, su!* asC Dall !laims for mone6
against t*e de!edent arising from !ontra!t, e8%ress or im%lied, 7*et*er t*e same 9e due, not
due or !ontingent, all !laims for funeral e8%enses and e8%enses for t*e last si!>ness of t*e
de!edent and :udgment for mone6 against t*e de!edent,D it ne!essaril6, and 96 im%li!ation
e8!ludes t*e same from its o%eration and effe!t, under t*e familiar rule of statutor6
!onstru!tion of e8%ressio unius e8!lusio alterius.
;. TAAATI'N? +'VERNIN+ R-LES. B T*e assessment, !olle!tion and re!over6 of
ta8es, as 7ell as t*e matter of %res!ri%tion t*ereof are governed 96 t*e %rovisions of t*e
National Internal Revenue Code and not 96 ot*er %rovisions of la7.
0. I.? CLAIMS ('R TAAES A+AINST ECEENT@S ESTATE ARE LIENS IN (AV'R
'( T&E +'VERNMENT B Claims for ta8es against a de!edent@s estate are liens in favor of
t*e +overnment of t*e P*ili%%ines from t*e time t*e assessment 7as made 96 t*e
Commissioner of Internal Revenue until %aid 7it* interests, %enalties, et!. $6 virtue of su!*
lien, t*e %ro%ert6 of t*e estate alread6 in t*e *ands of an *eir or transferee ma6 9e su9:e!t to
t*e %a6ment of t*e ta8 due t*e estate. A fortiori, 9efore t*e in*eritan!e *as %assed to t*e
*eirs, t*e un%aid ta8es due from t*e de!edent ma6 9e !olle!ted, even 7it*out its *aving 9een
%resented under Se!tion ;, Rule =1 of t*e Rules of Court.
#. I.? I.? REAS'N ('R EACEPTI'N (R'M APPLICA$ILIT, '( STAT-TE '(
N'N/CLAIMS B T*e reason for t*e more li9eral treatment of !laims for ta8es against a
de!edent@s estate in t*e form of e8!e%tion from t*e a%%li!ation of t*e statute of non/!laims, is
not *ard to find. Ta8es are t*e liveli*ood of t*e +overnment and t*eir %rom%t and !ertain
availa9ilit6 are im%erious need. -%on ta8ation de%ends t*e +overnment a9ilit6 to serve t*e
%eo%le for 7*ose 9enefit ta8es are !olle!ted. To safeguard su!* interest, negle!t or omission
of government offi!ials entrusted 7it* t*e !olle!tion of ta8es s*ould not 9e allo7ed to 9ring
*arm or detriment to t*e %eo%le in t*e same manner as %rivate %ersons ma6 9e made to
suffer individuall6 on a!!ount of *is o7n negligen!e, t*e %resum%tion 9eing t*at t*e6 ta>e
good !are of t*eir %ersonal affairs. T*is s*ould not *old true to government offi!ials 7it*
res%e!t to matters not of t*eir o7n %ersonal !on!ern. T*is is t*e %*iloso%*6 9e*ind t*e
+overnment@s e8!e%tion, as a general rule, from t*e o%eration of t*e %rin!i%le of esto%%el.
E C I S I ' N
A%%eal from t7o orders of t*e Court of (irst Instan!e of Negros '!!idental, $ran!* V in
S%e!ial Pro!eedings No. 443#, entitledC DIntestate Estate of Luis . Tongo6,D t*e first dated
Jul6 ;3, "313 dismissing t*e Motion for Allo7an!e of Claim and for an 'rder of Pa6ment of
Ta8es 96 t*e +overnment of t*e Re%u9li! of t*e P*ili%%ines against t*e Estate of t*e late
Luis . Tongo6, for defi!ien!6 in!ome ta8es for t*e 6ears "310 and "31# of t*e de!edent in
t*e total amount of P0,;<#.=2, in!lusive <E sur!*arge, "E mont*l6 interest and !om%romise
%enalties, and t*e se!ond, dated '!to9er 4, "313, den6ing t*e Motion for re!onsideration of
t*e 'rder of dismissal.
T*e Motion for allo7an!e of !laim and for %a6ment of ta8es dated Ma6 ;=, "313 7as filed
on June 0, "313 in t*e a9ovementioned s%e!ial %ro!eedings, F%ar. 0, Anne8 A, Petition, %%.
"3/;2, RolloG. T*e !laim re%resents t*e inde9tedness to t*e +overnment of t*e late Luis .
Tongo6 for defi!ien!6 in!ome ta8es in t*e total sum of P0,;<#.=2 as a9ove stated, !overed 96
Assessment Noti!es Nos. ""/<2/;3/"/""21"/;"/10 and ""/<2/;3/"/""2=4</1#, to 7*i!*
motion 7as atta!*ed Proof of Claim FAnne8 $, Petition, %%. ;"/;;, RolloG. T*e Administrator
o%%osed t*e motion solel6 on t*e ground t*at t*e !laim 7as 9arred under Se!tion <, Rule =1
of t*e Rules of Court F%ar. #, '%%osition to Motion for Allo7an!e of Claim, %%. ;0/;#,
RolloG. (inding t*e o%%osition 7ell/founded, t*e res%ondent Judge, Jose (. (ernandeH,
dismissed t*e motion for allo7an!e of !laim filed 96 *erein %etitioner, Regional ire!tor of
t*e $ureau of Internal Revenue, in an order dated Jul6 ;3, "313 FAnne8 , Petition %. ;1,
RolloG. 'n Se%tem9er "=, "313, a motion for re!onsideration 7as filed, of t*e 'rder of Jul6
;3, "313, 9ut 7as denied in an 'rder dated '!to9er 4, "313.
&en!e, t*is a%%eal on !ertiorari, %etitioner assigning t*e follo7ing errorsC
D". T*e lo7er !ourt erred in *olding t*at t*e !laim for ta8es 96 t*e government against
t*e estate of Luis . Tongo6 7as filed 9e6ond t*e %eriod %rovided in Se!tion ;, Rule =1 of t*e
Rules of Court.
;. T*e lo7er !ourt erred in *olding t*at t*e !laim for ta8es of t*e government 7as
alread6 9arred under Se!tion <, Rule =1 of t*e Rules of Court.D
7*i!* raise t*e sole issue of 7*et*er or not t*e statute of non/!laims, Se!tion <, Rule =1 of
t*e Ne7 Rule of Court, 9ars !laim of t*e government for un%aid ta8es, still 7it*in t*e %eriod
of limitation %res!ri9ed in Se!tion 00" and 00; of t*e National Internal Revenue Code.
Se!tion <, Rule =1, as invo>ed 96 t*e res%ondent Administrator in *is '%%osition to t*e
Motion for Allo7an!e of Claim, et!. of t*e %etitioners reads as follo7sC
DAll !laims for mone6 against t*e de!edent, arising from !ontra!ts, e8%ress or im%lied,
7*et*er t*e same 9e due, not due, or !ontingent, all !laims for funeral e8%enses and
e8%enses for t*e last si!>ness of t*e de!edent, and :udgment for mone6 against t*e de!edent,
must 9e filed 7it*in t*e time limited in t*e noti!eC ot*er7ise t*e6 are 9arred forever, e8!e%t
t*at t*e6 ma6 9e set fort* as !ounter!laims in an6 a!tion t*at t*e e8e!utor or administrator
ma6 9ring against t*e !laimants. I*ere an e8e!utor or administrator !ommen!e an a!tion,
or %rose!utes an a!tion alread6 !ommen!ed 96 t*e de!eased in *is lifetime, t*e de9tor ma6
set fort* 96 ans7er t*e !laims *e *as against t*e de!edent, instead of %resenting t*em
inde%endentl6 to t*e !ourt *as *erein %rovided, and mutual !laims ma6 9e set off against
ea!* ot*er in su!* a!tion? and if final :udgment is rendered in favor of t*e defendant, t*e
amount so determined s*all 9e !onsidered t*e true 9alan!e against t*e estate, as t*oug* t*e
!laim *ad 9een %resented dire!tl6 9efore t*e !ourt in t*e administration %ro!eedings. Claims
not 6et due, or !ontingent ma6 9e a%%roved at t*eir %resent value.D
A %erusal of t*e aforeJuoted %rovisions s*o7s t*at it ma>es no mention of !laims for
monetar6 o9ligations of t*e de!edent !reated 96 la7, su!* as ta8es 7*i!* is entirel6 of
different !*ara!ter from t*e !laims e8%ressl6 enumerated t*erein, su!* asC Dall !laims for
mone6 against t*e de!edent arising from !ontra!t, e8%ress or im%lied, 7*et*er t*e same 9e
due, not due or !ontingent, all !laims for funeral e8%enses and e8%enses for t*e last si!>ness
of t*e de!edent and :udgment for mone6 against t*e de!edent.D -nder t*e familiar rule of
statutor6 !onstru!tion of e8%ressio unius est e8!lusio alterius, t*e mention of one t*ing
im%lies t*e e8!lusion of anot*er t*ing not mentioned. T*us, if a statute enumerates t*e t*ings
u%on 7*i!* it is to o%erate, ever6t*ing else must ne!essaril6, and 96 im%li!ation 9e e8!luded
from its o%eration and effe!t FCra7ford, Statutor6 Constru!tion, %%. 00#/00<G.
In t*e !ase of Commissioner of Internal Revenue vs. Ilagan Ele!tri! K I!e Plant, et al., +.R.
No. L/;02=", e!em9er 02, "313, it 7as *eld t*at t*e assessment, !olle!tion and re!over6 of
ta8es, as 7ell as t*e matter of %res!ri%tion t*ereof are governed 96 t*e %rovisions of t*e
National Internal Revenue Code, %arti!ularl6 Se!tions 00" and 00; t*ereof, and not 96 ot*er
%rovisions of la7. FSee also Lim Tio, 6 &eng and ee Jue vs. Court of Ta8 A%%eals K
Colle!tor of Internal Revenue, +. R. No. L/"21=", Mar!* ;3, "3<=G. Even 7it*out 9eing
s%e!ifi!all6 mentioned, t*e %rovisions of Se!tion ; of Rule =1 of t*e Rules of Court ma6
reasona9l6 9e %resumed to *ave 9een also in t*e mind of t*e Court as not affe!ting t*e
afore!ited Se!tion of t*e National Internal Revenue Code.
In t*e !ase of Pineda vs. C(I of Ta6a9as, <; P*il. =20, it 7as even more %ointedl6 *eld t*at
Dta8es assessed against t*e estate of a de!eased %erson . . . need not 9e su9mitted to t*e
!ommittee on !laims in t*e ordinar6 !ourse of administration. In t*e e8er!ise of its !ontrol
over t*e administrator, t*e !ourt ma6 dire!t t*e %a6ment of su!* ta8es u%on motion s*o7ing
t*at t*e ta8es *ave 9een assessed against t*e estate.D T*e a9olition of t*e Committee on
Claims does not alter t*e 9asi! ruling laid do7n giving e8!e%tion to t*e !laim for ta8es from
9eing filed as t*e ot*er !laims mentioned in t*e Rule s*ould 9e filed 9efore t*e Court.
Claims for ta8es ma6 9e !olle!ted even after t*e distri9ution of t*e de!edent@s estate among
*is *eirs 7*o s*all 9e lia9le t*erefor in %ro%ortion of t*eir s*are in t*e in*eritan!e.
F+overnment of t*e P*ili%%ines vs. Pamintuan, << P*il. "0G.
T*e reason for t*e more li9eral treatment of !laims for ta8es against a de!edent@s estate in
t*e form of e8!e%tion from t*e a%%li!ation of t*e statute of non/!laims, is not *ard to find.
Ta8es are t*e life9lood of t*e +overnment and t*eir %rom%t and !ertain availa9ilit6 are
im%erious need. FCommissioner of Internal Revenue vs. Pineda, +. R. No. L/;;40#,
Se%tem9er "<, "314, ;" SCRA "2<G. -%on ta8ation de%ends t*e +overnment a9ilit6 to serve
t*e %eo%le for 7*ose 9enefit ta8es are !olle!ted. To safeguard su!* interest, negle!t or
omission of government offi!ials entrusted 7it* t*e !olle!tion of ta8es s*ould not 9e allo7ed
to 9ring *arm or detriment to t*e %eo%le, in t*e same manner as %rivate %ersons ma6 9e
made to suffer individuall6 on a!!ount of *is o7n negligen!e, t*e %resum%tion 9eing t*at
t*e6 ta>e good !are of t*eir %ersonal affairs. T*is s*ould not *old true to government
offi!ials 7it* res%e!t to matters not of t*eir o7n %ersonal !on!ern. T*is is t*e %*iloso%*6
9e*ind t*e government@s e8!e%tion, as a general rule, from t*e o%eration of t*e %rin!i%le of
esto%%el. FRe%u9li! vs. Ca9allero, L/;4#04, Se%tem9er 02, "344, 43 SCRA "44C Manila
Lodge No. 41", $enevolent and Prote!tive 'rder of t*e El>s, In!. vs. Court of A%%eals, L/
#"22", Se%tem9er 02, "341, 40 SCRA "1;? S6 vs. Central $an> of t*e P*ili%%ines, L/#"#=2,
A%ril 02, "341, 42 SCRA <4"? $alma!eda vs. Corominas K Co., In!., 11 SCRA <<0? Au6ong
&ian vs. Court of Ta8 A%%eals, <3 SCRA ""2, Re%u9li! vs. P*ili%%ine Ra99it $us Lines, In!.,
11 SCRA <<0? Re%u9li! vs. P*ili%%ine Long istan!e Tele%*one Com%an6, L/"==#",
Januar6 ;4, "313, ;1 SCRA 1;2? )amora vs. Court of Ta8 A%%eals, L/;0;4;, Novem9er ;1,
"342, 01 SCRA 44? E. RodrigueH, In!. vs. Colle!tor of Internal Revenue, L/;02#", Jul6 0",
"313, ;= SCRA ""3.G As alread6 s*o7n, ta8es ma6 9e !olle!ted even after t*e distri9ution of
t*e estate of t*e de!edent among *is *eirs F+overnment of t*e P*ili%%ines vs. Pamintuan,
su%ra? Pineda vs. C(I of Ta6a9as, su%ra? Clara iluang!o Palan!a vs. Commissioner of
Internal Revenue, +. R. No. L/"111", Januar6 0", "31;G.
(urt*ermore, as *eld in Commissioner of Internal Revenue vs. Pineda, su%ra, !iting t*e last
%aragra%* of Se!tion 0"< of t*e Ta8 Code %a6ment of in!ome ta8 s*all 9e a lien in favor of
t*e +overnment of t*e P*ili%%ines from t*e time t*e assessment 7as made 96 t*e
Commissioner of Internal Revenue until %aid 7it* interests, %enalties, et!. $6 virtue of su!*
lien, t*is Court *eld t*at t*e %ro%ert6 of t*e estate alread6 in t*e *ands of an *eir or
transferee ma6 9e su9:e!t to t*e %a6ment of t*e ta8 due t*e estate. A fortiori, 9efore t*e
in*eritan!e *as %assed to t*e *eirs, t*e un%aid ta8es due to t*e de!edent ma6 9e !olle!ted,
even 7it*out its *aving 9een %resented under Se!tion ; of Rule =1 of t*e Rules of Court. It
ma6 trul6 9e said t*at until t*e %ro%ert6 of t*e estate of t*e de!edent *as vested in t*e *eirs,
t*e de!edent, re%resented 96 *is estate, !ontinues as if *e 7ere still alive, su9:e!t to t*e
%a6ment of su!* ta8es as 7ould 9e !olle!ti9le from t*e estate even after *is deat*. T*us in
t*e !ase a9ove!ited, t*e in!ome ta8es soug*t to 9e !olle!ted 7ere due from t*e estate, for t*e
t*ree 6ears "3#1, "3#4 and "3#= follo7ing *is deat* in Ma6, "3#<.
Even assuming arguendo t*at !laims for ta8es *ave to 9e filed 7it*in t*e time %res!ri9ed in
Se!tion ;, Rule =1 of t*e Rules of Court, t*e !laim in Juestion ma6 9e filed even after t*e
e8%iration of t*e time originall6 fi8ed t*erein, as ma6 9e gleaned from t*e itali!iHed %ortion
of t*e Rule *erein !ited 7*i!* readsC
DSe!tion ;. Time 7it*in 7*i!* !laims s*all 9e filed. B In t*e noti!e %rovided in t*e
%re!eding se!tion, t*e !ourt s*all state t*e time for t*e filing of !laims against t*e estate,
7*i!* s*all not 9e more t*an t7elve F";G nor less t*an si8 F1G mont*s after t*e date of t*e
first %u9li!ation of t*e noti!e. &o7ever, at an6 time 9efore an order of distri9ution is entered,
on a%%li!ation of a !reditor 7*o *as failed to file *is !laim 7it*in t*e time %reviousl6
limited, t*e !ourt ma6, for !ause s*o7n and on su!* terms as are eJuita9le, allo7 su!* !laim
to 9e filed 7it*in a time not e8!eeding one F"G mont*.D Fem%*asis su%%liedG
In t*e instant !ase, %etitioners filed an a%%li!ation FMotion for Allo7an!e of Claim and for
an 'rder of Pa6ment of Ta8esG 7*i!*, t*oug* filed after t*e e8%iration of t*e time %reviousl6
limited 9ut 9efore an order of t*e distri9ution is entered, s*ould *ave 9een granted 96 t*e
res%ondent !ourt, in t*e a9sen!e of an6 valid ground, as none 7as s*o7n, :ustif6ing denial of
t*e motion, s%e!iall6 !onsidering t*at it 7as for allo7an!e of !laim for ta8es due from t*e
estate, 7*i!* in effe!t re%resents a !laim of t*e %eo%le at large, t*e onl6 reason given for t*e
denial t*at t*e !laim 7as filed out of t*e %reviousl6 limited %eriod, sustaining t*ere96 %rivate
res%ondents@ !ontention, erroneousl6 as *as 9een demonstrated.
I&ERE('RE, t*e order a%%ealed from is reversed. Sin!e t*e Ta8 Commissioner@s
assessment in t*e total amount of P0,;<#.=2 7it* <E sur!*arge and "E mont*l6 interest as
%rovided in t*e Ta8 Code is a final one and t*e res%ondent estate@s sole defense of
%res!ri%tion *as 9een *erein overruled, t*e Motion for Allo7an!e of Claim is *erein granted
and res%ondent estate is ordered to %a6 and dis!*arge t*e same, su9:e!t onl6 to t*e
limitation of t*e interest !olle!ti9le t*ereon as %rovided 96 t*e Ta8 Code. No %ronoun!ement
as to !osts.
S' 'RERE.
Ta8 is 9ased on t*e value of %ro%ert6 transmitted at t*e time of %rede!essor@s deat*.
A transmission 96 in*eritan!e is ta8a9le at t*e time of t*e %rede!essor@s deat*,
not7it*standing t*e %ost%onement of t*e a!tual %ossession or en:o6ment of t*e estate 96
t*e 9enefi!iar6, and t*e ta8 measured 96 t*e value of t*e %ro%ert6 transmitted at t*at time
regardless of its a%%re!iation or de%re!iation.
Pa9lo LorenHo vs. Juan Posadas, Jr., +.R. No. #02=;, June "=, "304
6A7 De$edent's Interest. To the extent of the "nterest there"n of the de$edent at
the t"'e of h"s death8
6.7 Transfer "n Conte'%lat"on of Death. To the extent of an+ "nterest there"n of
(h"$h the de$edent has at an+ t"'e 'ade a transfer# + tr&st or other("se# "n
$onte'%lat"on of or "ntended to ta9e effe$t "n %ossess"on or en:o+'ent at or after
death# or of (h"$h he has at an+ t"'e 'ade a transfer# + tr&st or other("se# &nder
(h"$h he has reta"ned for h"s l"fe or for an+ %er"od (h"$h does not "n fa$t end
efore h"s death
627 the %ossess"on or en:o+'ent of# or the r",ht to the "n$o'e fro' the %ro%ert+# or
6/7 the r",ht# e"ther alone or "n $on:&n$t"on ("th an+ %erson# to des",nate the %erson
(ho shall %ossess or en:o+ the %ro%ert+ or the "n$o'e therefro'8 ex$e%t "n $ase of
a ona f"de sale for an ade;&ate and f&ll $ons"derat"on "n 'one+ or 'one+'s (orth.
6C7 Re!o$ale Transfer.
627 To the extent of an+ "nterest there"n# of (h"$h the de$edent has at an+ t"'e
'ade a transfer 6ex$e%t "n $ase of ona f"de sale for an ade;&ate and f&ll
$ons"derat"on "n 'one+ or 'one+'s (orth7 + tr&st or other("se# (here the
en:o+'ent thereof (as s&:e$t at the date of h"s death to an+ $han,e thro&,h the
exer$"se of a %o(er 6"n (hate!er $a%a$"t+ exer$"sale7 + the de$edent alone or +
the de$edent "n $on:&n$t"on ("th an+ other %erson 6("tho&t re,ard to (hen or fro'
(hat so&r$e the de$edent a$;&"red s&$h %o(er7# to alter# a'end# re!o9e or
ter'"nate# or (here an+ s&$h %o(er "s rel"n;&"shed "n $onte'%lat"on of the
de$edent's death.
6/7 <or the %&r%ose of th"s S&se$t"on# the %o(er to alter# a'end or re!o9e shall e
$ons"dered to ex"st on the date of the de$edent's death e!en tho&,h the exer$"se of
the %o(er "s s&:e$t to a %re$edent ,"!"n, of not"$e or e!en tho&,h the alterat"on#
a'end'ent or re!o$at"on ta9es effe$t onl+ on the ex%"rat"on of a stated %er"od after
the exer$"se of the %o(er# (hether or not on or efore the date of the de$edent's
death not"$e has een ,"!en or the %o(er has een exer$"sed.
In s&$h $ases# %ro%er ad:&st'ent shall e 'ade re%resent"n, the "nterests (h"$h
(o&ld ha!e een ex$l&ded fro' the %o(er "f the de$edent had l"!ed# and for s&$h
%&r%ose "f the not"$e has not een ,"!en or the %o(er has not een exer$"sed on or
efore the date of h"s death# s&$h not"$e shall e $ons"dered to ha!e een ,"!en# or
the %o(er exer$"sed# on the date of h"s death.
6D7 Pro%ert+ Pass"n, =nder 4eneral Po(er of A%%o"nt'ent. To the extent of
an+ %ro%ert+ %ass"n, &nder a ,eneral %o(er of a%%o"nt'ent exer$"sed + the
de$edent-
627 + ("ll# or
6/7 + deed exe$&ted "n $onte'%lat"on of# or "ntended to ta9e effe$t "n %ossess"on
or en:o+'ent at# or after h"s death# or
637 + deed &nder (h"$h he has reta"ned for h"s l"fe or an+ %er"od not as$erta"nale
("tho&t referen$e to h"s death or for an+ %er"od (h"$h does not "n fa$t end efore
h"s death
6a7 the %ossess"on or en:o+'ent of# or the r",ht to the "n$o'e fro'# the %ro%ert+# or
67 the r",ht# e"ther alone or "n $on:&n$t"on ("th an+ %erson# to des",nate the
%ersons (ho shall %ossess or en:o+ the %ro%ert+ or the "n$o'e therefro'8 ex$e%t "n
$ase of a ona f"de sale for an ade;&ate and f&ll $ons"derat"on "n 'one+ or 'one+'s
(orth.
6E7 Pro$eeds of L"fe Ins&ran$e. To the extent of the a'o&nt re$e"!ale + the
estate of the de$eased# h"s exe$&tor# or ad'"n"strator# as "ns&ran$e &nder %ol"$"es
ta9en o&t + the de$edent &%on h"s o(n l"fe# "rres%e$t"!e of (hether or not the
"ns&red reta"ned the %o(er of re!o$at"on# or to the extent of the a'o&nt re$e"!ale
+ an+ enef"$"ar+ des",nated "n the %ol"$+ of "ns&ran$e# ex$e%t (hen "t "s
ex%ressl+ st"%&lated that the des",nat"on of the enef"$"ar+ "s "rre!o$ale.
6<7 Pr"or Interests. Ex$e%t as other("se s%e$"f"$all+ %ro!"ded there"n#
S&se$t"ons 6.7# 6C7 and 6E7 of th"s Se$t"on shall a%%l+ to the transfers# tr&sts#
estates# "nterests# r",hts# %o(ers and rel"n;&"sh'ent of %o(ers# as se!erall+
en&'erated and des$r"ed there"n# (hether 'ade# $reated# ar"s"n,# ex"st"n,#
exer$"sed or rel"n;&"shed efore or after the effe$t"!"t+ of th"s Code.
647 Transfers for Ins&ff"$"ent Cons"derat"on. If an+ one of the transfers# tr&sts#
"nterests# r",hts or %o(ers en&'erated and des$r"ed "n S&se$t"ons 6.7# 6C7 and
6D7 of th"s Se$t"on "s 'ade# $reated# exer$"sed or rel"n;&"shed for a $ons"derat"on
"n 'one+ or 'one+'s (orth# &t "s not a ona f"de sale for an ade;&ate and f&ll
$ons"derat"on "n 'one+ or 'one+'s (orth# there shall e "n$l&ded "n the ,ross
estate onl+ the ex$ess of the fa"r 'ar9et !al&e# at the t"'e of death# of the %ro%ert+
other("se to e "n$l&ded on a$$o&nt of s&$h transa$t"on# o!er the !al&e of the
$ons"derat"on re$e"!ed therefor + the de$edent.
6H7 Ca%"tal of the S&r!"!"n, S%o&se. The $a%"tal of the s&r!"!"n, s%o&se of a
de$edent shall not# for the %&r%ose of th"s Cha%ter# e dee'ed a %art of h"s or her
,ross estate.
SECTION 8*. Co'%&tat"on of Net Estate. <or the %&r%ose of the tax
"'%osed "n th"s Cha%ter# the !al&e of the net estate shall e deter'"ned-
6A7 Ded&$t"ons Allo(ed to the Estate of a C"t"5en or a Res"dent. In the $ase of
a $"t"5en or res"dent of the Ph"l"%%"nes# + ded&$t"n, fro' the !al&e of the ,ross
estate
627 Ex%enses# Losses# Indetedness# and Taxes. S&$h a'o&nts
6a7 <or a$t&al f&neral ex%enses or "n an a'o&nt e;&al to f"!e %er$ent 6)17 of the
,ross estate# (h"$he!er "s lo(er# &t "n no $ase to ex$eed T(o h&ndred tho&sand
%esos 6P/00#00078
67 <or :&d"$"al ex%enses of the testa'entar+ or "ntestate %ro$eed"n,s8
E8%enditures in!urred for t*e individual 9enefit of t*e *eirs, devisees or legatees are not
dedu!ti9le
Judi!ial e8%enses are e8%enses of administration. Administration e8%enses, as an
allo7a9le dedu!tion from t*e gross estate of t*e de!edent for %ur%oses of arriving at t*e
value of t*e net estate, *ave 9een !onstrued 96 t*e federal and state !ourts of t*e -nited
States to in!lude all e8%enses Dessential to t*e !olle!tion of t*e assets, %a6ment of de9ts
or t*e distri9ution of t*e %ro%ert6 to t*e %ersons entitled to it.D In ot*er 7ords, t*e
e8%enses must 9e essential to t*e %ro%er settlement of t*e estate. E8%enditures in!urred
for t*e individual 9enefit of t*e *eirs, devisees or legatees are not dedu!ti9le.
Commissioner of Internal Revenue vs. Court of A%%eals, et al., +.R. No. ";0;21, Mar!*
;;, ;222
PA$L' L'REN)', as trustee of t*e estate of T*omas &anle6, de!eased, %laintiff/a%%ellant,
vs. J-AN P'SAAS, JR., Colle!tor of Internal Revenue, defendant/a%%ellant.
.+.R. No. #02=;. June "=, "304.5
S,LLA$-S
". IN&ERITANCE TAA? ACCR-AL '(, ISTINCT (R'M T&E '$LI+ATI'N T' PA,
IT. B T*e a!!rual of t*e in*eritan!e ta8 is distin!t from t*e o9ligation to %a6 t*e same.
Se!tion "<01 as amended, of t*e Administrative Code, im%oses t*e ta8 u%on Dever6
transmission 96 virtue of in*eritan!e, devise, 9eJuest, gift mortis !ausa, or advan!e in
anti!i%ation of in*eritan!e, devise, or 9eJuest.D T*e ta8 t*erefore is u%on transmission or t*e
transfer or devolution of %ro%ert6 of a de!edent, made effe!tive 96 *is deat*. F1" C. J., %.
"<3;.G
;. I.? MEAS-RE '(, $, VAL-E '( ESTATE. B If deat* is t*e generating sour!e
from 7*i!* t*e %o7er of t*e state to im%ose in*eritan!e ta8es ta>es its 9eing and if, u%on t*e
deat* of t*e de!edent, su!!ession ta>es %la!e and t*e rig*t of t*e state to ta8 vests instantl6,
t*e ta8 s*ould 9e measured 96 t*e value of t*e estate as it stood at t*e time of t*e de!edent@s
deat*, regardless of an6 su9seJuent !ontingen!6 affe!ting value of an6 su9seJuent in!rease
or de!rease in value. F1" C. J., %%. "13;, "130? ;1 R. C. L., ;0;? $la>emore and $an!roft ,
In*eritan!e Ta8es, %. "04. See also Lno7lton vs. Moore, "4= -. S. #"? ;2 Su%. Ct. Re%., 4#4?
## La7.ed., 31=.G
0. I.? I. B DT*e rig*t of t*e state to a in*eritan!e ta8 a!!rues at t*e moment of deat*,
and *en!e is ordinaril6 measured as to an6 9enefi!iar6 96 t*e value at t*at time of su!*
%ro%ert6 as %asses to *im. Su9seJuent a%%re!iation or de%re!iation is immaterial.D FRoss,
In*eritan!e Ta8ation, %. 4;.G
#. I.? I. B I*atever ma6 9e t*e rule in ot*er :urisdi!tion, 7e *old t*at a
transmission 96 in*eritan!e is ta8a9le at t*e time of t*e %rede!essor@s deat*, not7it*standing
t*e %ost%onement of t*e a!tual %ossession or en:o6ment of t*e estate 96 t*e 9enefi!iar6, and
t*e ta8 measured 96 t*e value of t*e %ro%ert6 transmitted at t*at time regardless of its
a%%re!iation or de%re!iation.
<. I.? TR-STS AN TR-STEES. B A trustee, no dou9t, is entitled to re!eived a fair
!om%ensation for *is servi!es. F$arne6 vs. Saunders, "1 &o7., <0<? "# La7. ed., "2#4.G $ut
from t*is it does not follo7 t*at t*e !om%ensation due *im ma6 la7full6 9e dedu!ted in
arriving at t*e net value of t*e estate su9:e!t to ta8. T*ere is no statute in t*e P*ili%%ines
7*i!* reJuires trustees !ommission to 9e dedu!ted in determining t*e net value of t*e estate
su9:e!t to in*eritan!e ta8 F1" C. J., %. "42<.G (urt*ermore, t*oug* a testamentar6 trust *as
9een !reated, it does not a%%ear t*at t*e testator intended t*at t*e duties of *is e8e!utors and
trustees s*ould 9e se%arated. FI9id.? In re Vanne!>@s Estate, "1" N. ,. Su%%., =30? "4< A%%.
iv., 010 In re Collard@s Estate, "1" N. ,. Su%%., #<<.G
1. I.? I.? AMINISTRATI'N EAPENSES. B Judi!ial e8%enses are e8%enses of
administration F1" C. J., P. "42<G 9ut, in State vs. &enne%in Count6 Pro9ate Court F""; N.
I., =4=? "2" Minn., #=<G, it 7as saidC D. . . t*e !om%ensation of a trustee, earned, not in t*e
administration of t*e estate, 9ut in t*e management t*ereof for t*e 9enefit of t*e legatees or
devisees, does not !ome %ro%erl6 7it*in t*e !lass or reason for e8em%ting administration
e8%enses. . . Servi!es rendered in t*at 9e*alf *ave no referen!e to !losing t*e estate for t*e
%ur%ose of a distri9ution t*ereof to t*ose entitled to it, and are not reJuired or essential to
t*e %erfe!tion of t*e rig*ts of t*e *eirs or legatees. . . . Trusts . . . of t*e !*ara!ter of t*at
*ere 9efore t*e !ourt, are !reated for t*e 9enefit of t*ose to 7*om t*e %ro%ert6 ultimatel6
%asses, are of voluntar6 !reation, and intended for t*e %reservation of t*e estate. No sound
reason is given to su%%ort t*e !ontention t*at su!* e8%enses s*ould 9e ta>en into
!onsideration in fi8ing t*e value of t*e estate for t*e %ur%ose of t*is ta8.
4. I.? RETR'ACTIVE LE+ISLATI'N. B It is 7ell/settled t*at in*eritan!e ta8ation is
governed 96 t*e statute in for!e at t*e time of t*e deat* of t*e de!edent F;1 R. C. L., %. ;21?
# Coole6 on Ta8ation, #t* ed., %. 0#1"G. T*e ta8%a6er !annot foresee and oug*t not to 9e
reJuired to guess t*e out!ome of %ending measures. 'f !ourse, a ta8 statute ma6 9e made
retroa!tive in its o%eration. Lia9ilit6 for ta8es under retroa!tive legislation *as 9een Done of
t*e in!idents of so!ial life.D FSeattle vs. Lelle*er, "3< -. S. 0<". 012? #3 La7. ed., ;0;? ;<
Su%. Ct. Re%., ##.G
=. I.? I. B $ut legislative intent t*at a ta8 statute s*ould o%erate retroa!tivel6 s*ould
9e %erfe!tl6 !lear. FS!7a9 vs. o6le, #; Su%. Ct. Re%., #3"? Smietan>a vs. (irst Trust K
Savings $an>, ;<4 -. S. 12;? Sto!>dale vs. Insuran!e Co., ;2 Iall., 0;0? Lun!* vs. Turris*,
;#4 -. S., ;;".G DA statute s*ould 9e !onsidered as %ros%e!tive in its o%eration, 7*et*er it
ena!ts, amends, or re%eals an in*eritan!e ta8, unless t*e language of t*e statute !learl6
demands or e8%resses t*at it s*all *ave a retroa!tive effe!t, . . .D F1" C. J., "12;.G
3. I.? I. B T*oug* t*e last %aragra%* of se!tion < of Regulations No. 1< of t*e
e%artment of (inan!e ma>es se!tion 0 of A!t No. 0121, amending se!tion "<## of t*e
Revised Administrative Code, a%%li!a9le to all estates t*e in*eritan!e ta8es due from 7*i!*
*ave not 9een %aid, A!t No. 0121 itself !ontains no %rovisions indi!ating legislative intent to
give it retroa!tive effe!t. No su!* effe!t !an 9e given t*e statute 96 t*is !ourt.
"2. I.? I.? PENAL STAT-TES. B Pro%erl6 s%ea>ing, a statute is %enal 7*en it
im%oses %unis*ment for an offense !ommitted against t*e state 7*i!*, under t*e
Constitution, t*e e8e!utive *as t*e %o7er to %ardon. In !ommon use, *o7ever, t*is sense *as
9een enlarged to in!lude 7it*in t*e term D%enal statutesD all statutes 7*i!* !ommand or
%ro*i9it !ertain a!ts, and esta9lis* %enalties for t*eir violation, and even t*ose 7*i!*
7it*out e8%ressl6 %ro*i9iting !ertain a!ts, im%ose a %enalt6 u%on t*eir !ommission. F<3 C.
J., P. """2.G
"". I.? I.? REVEN-E LAI. B Revenue la7s, generall6, 7*i!* im%ose ta8es !olle!ted
96 t*e means ordinaril6 resorted to for t*e !olle!tion of ta8es are not !lassed as %enal la7s,
alt*oug* t*ere are aut*orities to t*e !ontrar6. FSee Sut*erland, Statutor6 Constru!tion, 01"?
T7ine Co. vs. Iort*ington, "#" -. S. #1=? "; Su%. Ct., << Ri!e vs. -. S., # C. C. A., "2#? <0
(ed., 3"2? Com. vs. Standard 'il Co., "2" Pa. St., "<2? State vs. I*eeler, ## P., #02? ;<
Nev., "#0.G Arti!le ;; of t*e Revised Penal Code is not a%%li!a9le to t*e !ase of 9ar, and in
t*e a9sen!e of !lear legislative intent, 7e !annot give A!t No. 0121 a retroa!tive effe!t.
";. I.? TR-STS AN TR-STEES. B T*e 7ord DtrustD is not mentioned or used in t*e
7ill 9ut t*e intention to !reate one is !lear. No %arti!ular or te!*ni!al 7ords are reJuired to
!reate a testamentar6 trust. F13 C. J., %. 4"".G T*e 7ords DtrustD and DtrusteeD, t*oug* a%t for
t*e %ur%ose, are not ne!essar6. In fa!t, t*e use of t*ese t7o 7ords is not !on!lusive on t*e
Juestion t*at a trust is !reated. F13 C. J., %. 4"#.G
"0. I.? I. B T*ere is no dou9t t*at t*e testator intended to !reate a trust. &e ordered in
*is 7ill t*at !ertain of *is %ro%erties 9e >e%t toget*er undis%osed during a fi8ed %eriod, for a
stated %ur%ose. T*e %ro9ate !ourt !ertainl6 e8er!ised sound :udgment in a%%ointing a trustee
to !arr6 into effe!t t*e %rovision of t*e 7ill. FSee se!. <=;, Code of Civil Pro!edure.G
"#. I.? I.? ERR'R IN EN+LIS& VERSI'N '( S-$SECTI'N F$G, SECTI'N "<#0,
REVISE AMINISTRATIVE C'E. B T*e 7ord DtrusteeD, a%%earing in su9se!tion F9G of
se!tion "<#0, s*ould read Dfidei/!ommissar6D or D!estui Jue trust.D T*ere 7as an o9vious
mista>e in translation from t*e S%anis* to t*e Englis* version.
E C I S I ' N
'n '!to9er #, "30;, t*e %laintiff, Pa9lo LorenHo, in *is !a%a!it6 as trustee of t*e estate of
T*omas &anle6, de!eased, 9roug*t t*is a!tion in t*e Court of (irst Instan!e of )am9oanga
against t*e defendant, Juan Posadas, Jr., t*en t*e Colle!tor of Internal Revenue, for t*e
refund of t*e amount of P;,2<;.4#, %aid 96 t*e %laintiff as in*eritan!e ta8 on t*e estate of t*e
de!eased, and for t*e !olle!tion of interest t*ereon at t*e rate of 1 %er !ent %er annum,
!om%uted from Se%tem9er "<, "30;, t*e date 7*en t*e aforesaid ta8 7as %aid under %rotest.
T*e defendant set u% a !ounter!laim for P","3".;4 alleged to 9e interest due on t*e ta8 in
Juestion and 7*i!* 7as not in!luded in t*e original assessment. (rom t*e de!ision of t*e
Court of (irst Instan!e of )am9oanga dismissing 9ot* t*e %laintiff@s !om%laint and t*e
defendant@s !ounter!laim, 9ot* %arties a%%ealed to t*is !ourt.
It a%%ears t*at on Ma6 ;4, "3;;, one T*omas &anle6 died in )am9oanga, )am9oanga,
leaving a 7ill FE8*i9it <G and !onsidera9le amount of real and %ersonal %ro%erties. 'n June
"#, "3;;, %ro!eedings for t*e %ro9ate of *is 7ill and t*e settlement and distri9ution of *is
estate 7ere 9egun in t*e Court of (irst Instan!e of )am9oanga. T*e 7ill 7as admitted to
%ro9ate. Said 7ill %rovides among ot*er t*ings, as follo7sC
D#. I dire!t t*at an6 mone6 left 96 me 9e given to m6 ne%*e7 Matt*e7 &anle6.
D<. I dire!t t*at all real estate o7ned 96 me at t*e time of m6 deat* 9e not sold or
ot*er7ise dis%osed of for a %eriod of ten F"2G 6ears after m6 deat*, and t*at t*e same 9e
*andled and managed 96 m6 e8e!utors, and %ro!eeds t*ereof to 9e given to m6 ne%*e7,
Matt*e7 &anle6, at Castlemore, $allag*aderine, Count6 of Rose!ommon, Ireland, and t*at
*e 9e dire!ted t*at t*e same 9e used onl6 for t*e edu!ation of m6 9rot*er@s !*ildren and t*eir
des!endants.
D1. I dire!t t*at ten F"2G 6ears after m6 deat* m6 %ro%ert6 9e given to t*e a9ove/
mentioned Matt*e7 &anle6 to 9e dis%osed of in t*e 7a6 *e t*in>s most advantageous.
888 888 888
D=. I state t*at at t*is time I *ave one 9rot*er living named Mala!*i &anle6, and t*at m6
ne%*e7, Matt*e7 &anle6, is a son of m6 9rot*er, Mala!*i &anle6.D
T*e Court of (irst Instan!e of )am9oanga !onsidered it %ro%er for t*e 9est interests of t*e
estate to a%%oint a trustee to administer t*e real %ro%erties 7*i!*, under t*e 7ill, 7ere to
%ass to Matt*e7 &anle6 ten 6ears after t*e testator@s deat*. A!!ordingl6, P. J. M. Moore, one
of t*e t7o e8e!utors named in t*e 7ill, 7as, on Mar!* =, "3;#, a%%ointed trustee. Moore
too> *is oat* of offi!e and gave 9ond on Mar!* "2, "3;#. &e a!ted as trustee until (e9ruar6
;3, "30;, 7*en *e resigned and t*e %laintiff *erein 7as a%%ointed in *is stead.
uring t*e in!um9en!6 of t*e %laintiff as trustee, t*e defendant Colle!tor of Internal
Revenue, alleging t*at t*e estate left 96 t*e de!eased at t*e time of *is deat* !onsisted of
realt6 valued at P;4,3;2 and %ersonalit6 valued at P",#1<, and allo7ing a dedu!tion of
P#=2.=", assessed against t*e estate an in*eritan!e ta8 in t*e amount of P",#0#.;# 7*i!*,
toget*er 7it* t*e %enalties for delinJuen!6 in %a6ment !onsisting of a " %er !ent mont*l6
interest from Jul6 ", "30" to t*e date of %a6ment and a sur!*arge of ;< %er !ent on t*e ta8,
amounted to P;,2<;.4#. 'n mar!* "<, "30;, t*e defendant filed a motion in t*e testamentar6
%ro!eedings %ending 9efore t*e Court of (irst Instan!e of )am9oanga FS%e!ial %ro!eedings
No. 02;G %ra6ing t*at t*e trustee, %laintiff *erein, 9e ordered to %a6 to t*e +overnment t*e
said sum of P;,2<;.4#. T*e motion 7as granted. 'n Se%tem9er "<, "30;, t*e %laintiff %aid
t*is amount under %rotest, notif6ing t*e defendant at t*e same time t*at unless t*e amount
7as %rom%tl6 refunded suit 7ould 9e 9roug*t for its re!over6. T*e defendant overruled t*e
%laintiff@s %rotest and refused to refund t*e said amount or an6 %art t*ereof. &is
administrative remedies e8*austed, %laintiff 7ent to !ourt 7it* t*e result *erein a9ove
indi!ated.
In *is a%%eal, %laintiff !ontends t*at t*e lo7er !ourt erredC
DI. In *olding t*at t*e real %ro%ert6 of T*omas &anle6, de!eased, %assed to *is instituted
*eir, Matt*e7 &anle6, from t*e moment of t*e deat* of t*e former, and t*at from t*at time,
t*e latter 9e!ame t*e o7ner t*ereof.
DII. In *olding, in effe!t, t*at t*ere 7as delinJuen!6 in t*e %a6ment of in*eritan!e ta8 due
on t*e estate of said de!eased.
DIII. In *olding t*at t*e in*eritan!e ta8 in Juestion 9e 9ased u%on t*e value of t*e estate
u%on t*e deat* of t*e testator, and not, as it s*ould *ave 9een *eld, u%on t*e value t*ereof at
t*e e8%iration of t*e %eriod of ten 6ears after 7*i!*, a!!ording to t*e testator@s 7ill, t*e
%ro%ert6 !ould 9e and 7as to 9e delivered to t*e instituted *eir.
DIV. In not allo7ing as la7ful dedu!tions, in t*e determination of t*e net amount of t*e
estate su9:e!t to said ta8, t*e amounts allo7ed 96 t*e !ourt as !om%ensation to t*e DtrusteeD
and %aid to t*em from t*e de!edent@s estate.
DV. In not rendering :udgment in favor of t*e %laintiff and in den6ing *is motion for ne7
trial.D
T*e defendant/a%%ellant !ontradi!ts t*e t*eories of t*e %laintiff and assigns t*e follo7ing
error 9esidesC
DT*e lo7er !ourt erred in not ordering t*e %laintiff to %a6 to t*e defendant t*e sum of
P","3".;4, re%resenting %art of t*e interest at t*e rate of " %er !ent %er mont* from A%ril "2,
"3;#, to June 02, "30", 7*i!* t*e %laintiff *ad failed to %a6 on t*e in*eritan!e ta8 assessed
96 t*e defendant against t*e estate of T*omas &anle6.D
T*e follo7ing are t*e %rin!i%al Juestions to 9e de!ided 96 t*is !ourt in t*is a%%ealC FaG I*en
does t*e in*eritan!e ta8 a!!rue and 7*en must it 9e satisfiedM F9G S*ould t*e in*eritan!e ta8
9e !om%uted on t*e 9asis of t*e value of t*e estate at t*e time of t*e testator@s deat*, or on its
value ten 6ears laterM F!G In determining t*e net value of t*e estate su9:e!t to ta8, is it %ro%er
to dedu!t t*e !om%ensation due to trusteesM FdG I*at la7 governs t*e !ase at 9arM S*ould
t*e %rovisions of A!t No. 0121 favora9le to t*e ta8%a6er 9e given retroa!tive effe!tM FeG &as
t*ere 9een delinJuen!6 in t*e %a6ment of t*e in*eritan!e ta8M If so, s*ould t*e additional
interest !laimed 96 t*e defendant in *is a%%eal 9e %aid 96 t*e estateM 't*er %oints of
in!idental im%ortan!e, raised 96 t*e %arties in t*eir 9riefs, 7ill 9e tou!*ed u%on in t*e
!ourse of t*is o%inion.
FaG T*e a!!rual of t*e in*eritan!e ta8 is distin!t from t*e o9ligation to %a6 t*e same.
Se!tion "<01 as amended, of t*e Administrative !ode, im%oses t*e ta8 u%on Dever6
transmission 96 virtue of in*eritan!e, devise, 9eJuest, gift mortis !ausa, or advan!e in
anti!i%ation of in*eritan!e, devise, or 9eJuest.D T*e ta8 t*erefore is u%on transmission or t*e
transfer or devolution of %ro%ert6 of a de!edent, made effe!tive 96 *is deat*. F1" C. J., %.
"<3;.G It is in realit6 an e8!ise or %rivilege ta8 im%osed on t*e rig*t to su!!eed to, re!eive, or
ta>e %ro%ert6 96 or under a 7ill or t*e intesta!6 la7, or deed, grant, or gift, to 9e!ome
o%erative at or after deat*. A!!ording to arti!le 1<4 of t*e Civil Code, Dt*e rig*ts to t*e
su!!ession of a %erson are transmitted from t*e moment of *is deat*.D DIn ot*er 7ordsD, said
Arellano, C. J., D. . . t*e *eirs su!!eed immediatel6 to all of t*e %ro%ert6 of t*e de!eased
an!estor. T*e %ro%ert6 9elongs to t*e *eirs at t*e moment of t*e deat* of t*e an!estor as
!om%letel6 as if t*e an!estor *ad e8e!uted and delivered to t*em a deed for t*e same 9efore
*is deat*.D F"3 P*il., #0#? $o7a vs. $riones, 0= P*il., ;41? 'sorio vs. 'sorio K ,n!*austi
Steams*i% Co., #" P*il., <0"? (ule vs. (ule, #1 P*il., 0"4? ais vs. Court of (irst Instan!e of
Ca%iH, <" P*il., 031? $aun vs. &eirs of $aun, <0 P*il., 1<#.G Plaintiff, *o7ever, asserts t*at
7*ile arti!le 1<4 of t*e Civil Code is a%%li!a9le to testate as 7ell as intestate su!!ession, it
o%erates onl6 in so far as for!ed *eirs are !on!erned. $ut t*e language of Arti!le 1<4 of t*e
Civil Code is 9road and ma>es no distin!tion 9et7een different !lasses of *eirs. T*at arti!le
does not s%ea> of for!ed *eirs? it does not even use t*e 7ord D*eirD. It s%ea>s of t*e rig*ts of
su!!ession and of t*e transmission t*ereof from t*e moment of deat*. T*e %rovision of
se!tion 1;< of t*e Code of Civil Pro!edure regarding t*e aut*enti!ation and %ro9ate of a 7ill
as a ne!essar6 !ondition to effe!t transmission of %ro%ert6 does not effe!t t*e general rule
laid do7n in arti!le 1#4 of t*e Civil Code. T*e aut*enti!ation of a 7ill im%lies its due
e8e!ution 9ut on!e %ro9ated and allo7ed t*e transmission is effe!tive as of t*e deat* of t*e
testator in a!!ordan!e 7it* arti!le 1<4 of t*e Civil Code. I*atever ma6 9e t*e time 7*en
a!tual transmission of t*e in*eritan!e ta>es %la!e, su!!ession ta>es %la!e in an6 event at t*e
moment of t*e de!edent@s deat*. T*e time 7*en t*e *eirs legall6 su!!eed to t*e in*eritan!e
ma6 differ from t*e time 7*en t*e *eirs a!tuall6 re!eived su!* in*eritan!e. DPo!o im%ortaD,
sa6s Manresa !ommenting on arti!le <14 of t*e Civil Code, DJue desde el falle!imiento del
!ausante, *asta Jue el *eredero o legatario entre en %osesion de los 9ienes de la *eren!ia a
del legado, trans!urra mu!*o o %o!o tiem%o, %ues la adJuisi!ion *a de retrotraerse al
momento de la muerte, 6 asi lo ordena el arti!ulo 3=3, Jue de9e !onsiderarse !omo
!om%lemento del %resente.D F< Manresa, 02<? see also art. ##2, %ar. ", Civil Code.G T*omas
&anle6 *aving died on Ma6 ;4, "3;;, t*e in*eritan!e ta8 a!!rued as of t*at date.
(rom t*e fa!t, *o7ever, t*at T*omas &anle6 died on Ma6 ;4, "3;;, it does not follo7 t*at
t*e o9ligation to %a6 t*e ta8 arose as of t*at date. T*e time for t*e %a6ment of in*eritan!e
ta8 is !learl6 fi8ed 96 se!tion "<## of t*e Revised Administrative !ode as amended 96 A!t
No. 020", in relation to se!tion "<#0 of t*e same !ode. T*e t7o se!tions follo7C
DSEC. "<#0. E8em%tion of !ertain a!Juisitions and transmission. B T*e follo7ing s*all not
9e ta8edC
DFaG T*e merger of t*e usufru!t in t*e o7ner of t*e na>ed title.
DF9G T*e transmission or deliver6 of t*e in*eritan!e or lega!6 96 t*e fidu!iar6 *eir or
legatee to t*e trustees.
DF!G T*e transmission from t*e first *eir, legatee, or donee in favor of anot*er 9enefi!iar6,
in a!!ordan!e 7it* t*e desire of t*e %rede!essor.
DIn t*e last t7o !ases, if t*e s!ale of ta8ation a%%ro%riate to t*e ne7 9enefi!iar6 is greater
t*an t*at %aid 96 t*e first, t*e former must %a6 t*e differen!e.
DSEC. "<##. I*en ta8 to 9e %aid. B T*e Ta8 fi8ed in t*is arti!le s*all 9e %aidC
DFaG In t*e se!ond and t*ird !ases of t*e ne8t %re!eding se!tion, 9efore entran!e into
%ossession of t*e %ro%ert6.
DF9G In ot*er !ases, 7it*in t*e si8 mont*s su9seJuent to t*e deat* of t*e %rede!essor? 9ut
if :udi!ial testamentar6 or intestate %ro!eedings s*all 9e instituted %rior to t*e e8%iration of
said %eriod, t*e %a6ment s*all 9e made 96 t*e e8e!utor or administrator 9efore delivering to
ea!* 9enefi!iar6 *is s*are.
DIf t*e ta8 is not %aid 7it*in t*e time *erein9efore %res!ri9ed, interest at t*e rate of t7elve
%er !entum %er annum s*all 9e added as %art of t*e ta8? and to t*e ta8 and interest due and
un%aid 7it*in ten da6s after t*e date of noti!e and demand t*ereof 96 t*e Colle!tor, t*ere
s*all 9e furt*er added a sur!*arge of t7ent6/five %er !entum.
DA !ertified !o%6 of all letters testamentar6 or of administration s*all 9e furnis*ed t*e
Colle!tor of Internal Revenue 96 t*e Cler> of Court 7it*in t*irt6 da6s after t*eir issuan!e.D
It s*ould 9e o9served in %assing t*at t*e 7ord DtrusteeD, a%%earing in su9se!tion F9G of
se!tion "<#0, s*ould read Dfidei!ommissar6D or D!estui Jue trustD. T*ere 7as an o9vious
mista>e in translation from t*e S%anis* to t*e Englis* version.
T*e instant !ase does not fall under su9se!tion FaG, 9ut under su9se!tion F9G, of se!tion "<##
a9ove/Juoted, as t*ere is *ere no fidu!iar6 *eir, first *eir, legatee or donee. -nder t*at
su9se!tion, t*e ta8 s*ould *ave 9een %aid 9efore t*e deliver6 of t*e %ro%erties in Juestion to
P. J. M. Moore as trustee on Mar!* "2, "3;#.
F9G T*e %laintiff !ontends t*at t*e estate of T*omas &anle6, in so far as t*e real
%ro%erties are !on!erned, did not and !ould not legall6 %ass to t*e instituted *eir, Matt*e7
&anle6, until after t*e e8%iration of ten 6ears from t*e deat* of t*e testator on Ma6 ;4, "3;;
and, t*at t*e in*eritan!e ta8 s*ould 9e 9ased on t*e value of t*e estate in "30;, or ten 6ears
after t*e testator@s deat*. T*e %laintiff introdu!ed eviden!e tending to s*o7 t*at in "30; t*e
real %ro%erties in Juestion *ad a reasona9le value of onl6 P<,4=4. T*is amount added to t*e
value of t*e %ersonal %ro%ert6 left 96 t*e de!eased, 7*i!* t*e %laintiff admits is P",#1<,
7ould generate an in*eritan!e ta8 7*i!*, e8!luding dedu!tions, interest and sur!*arge,
7ould amount onl6 to a9out P"13.<;.
If deat* is t*e generating sour!e from 7*i!* t*e %o7er of t*e state to im%ose in*eritan!e
ta8es its 9eing and if, u%on t*e deat* of t*e de!edent, su!!ession ta>es %la!e and t*e rig*t of
t*e state to ta8 vests instantl6, t*e ta8 s*ould 9e measured 96 t*e value of t*e estate as it
stood at t*e time of t*e de!edent@s deat*, regardless of an6 su9seJuent !ontingen!6 affe!ting
value or an6 su9seJuent in!rease or de!rease in value. F1" C. J., %%. "13;, "130? ;1 R. C. L.,
%. ;0;? $la>emore and $an!roft, In*eritan!e Ta8es, %. "04. See also Lno7lton vs. Moore,
"4= -. S., #"? ;2 Su%. Ct. Re%., 4#4? ## La7 ed., 313.G DT*e rig*t of t*e state to an
in*eritan!e ta8 a!!rues at t*e moment of deat*, and *en!e is ordinaril6 measured as to an6
9enefi!iar6 96 t*e value at t*at time of su!* %ro%ert6 as %asses to *im. Su9seJuent
a%%re!iation or de%re!iation is immaterial.D FRoss, In*eritan!e Ta8ation, %. 4;.G.
'ur attention is dire!ted to t*e statement of t*e rule in C6!lo%edia of La7 and Pro!edure
Fvol. 04, %%. "<4#, "<4<G t*at, in t*e !ase of !ontingent remainders, ta8ation is %ost%oned
until t*e estate vests in %ossession or t*e !ontingen!6 is settled. T*is rule 7as formerl6
follo7ed in Ne7 ,or> and *as 9een ado%ted in Illinois, Minnesota, Massa!*usetts, '*io,
Penns6lvania and Iis!onsin. t*is rule, *o7ever, is 96 no means entirel6 satisfa!tor6 eit*er to
t*e estate or to t*ose interested in t*e %ro%ert6 F;1 R. C. L., %. ;0"G. RealiHing, %er*a%s, t*e
defe!ts of its anterior s6stem, 7e find u%on e8amination of !ases and aut*orities t*at Ne7
,or> *as varied and no7 reJuires t*e immediate a%%raisal of t*e %ost%oned estate at its
!lear mar>et value and t*e %a6ment fort*7it* of t*e ta8 on it out of t*e !or%us of t*e estate
transferred. FIn re Vander9ilt, "4; N. ,., 13? 13 N. E., 4=;? In re &o9er, =1 N. ,. A%%. iv.,
#<=? =0 N. ,. Su%%., 413? Estate of Tra!6, "43, "43 N. ,., <2"? 4; N. ,., <"3? Estate of $reH,
"4; N. ,., 123? 1#? 1# N. E., 3<=? Estate of Post, =< A%%. iv., 1""? =; N. ,. Su%%., "243.
Vide also, Saltoun vs. Lord Advo!ate, " Pater. S!. A%%., 342? 0 Ma!J. &. L., 1<3? ;0 Eng.
Rul. Cas., ===.G California ad*eres to t*is ne7 rule FStats. "32<, se!. <, %. 0#0G.
$ut 7*atever ma6 9e t*e rule in ot*er :urisdi!tion, 7e *old t*at a transmission 96
in*eritan!e is ta8a9le at t*e time of t*e %rede!essor@s deat*, not7it*standing t*e
%ost%onement of t*e a!tual %ossession or en:o6ment of t*e estate 96 t*e 9enefi!iar6, and t*e
ta8 measured 96 t*e value of t*e %ro%ert6 transmitted at t*at time regardless of its
a%%re!iation or de%re!iation.
F!G Certain items are reJuired 96 la7 to 9e dedu!ted from t*e a%%raised gross value in
arriving at t*e net value of t*e estate on 7*i!* t*e in*eritan!e ta8 is to 9e !om%uted Fse!.
"<03, Revised Administrative CodeG. In t*e !ase at of onl6 P#=2.=". T*is sum re%resents t*e
e8%enses and dis9ursement of t*e e8e!utors until Mar!* "2, "3;#, among 7*i!* 7ere t*eir
fees and t*e %roven de9ts of t*e de!eased. T*e %laintiff !ontends t*at t*e !om%ensation and
fees of t*e trustees, 7*i!* aggregate P","=4.;= FE8*i9its C, AA, EE, PP, &&, JJ, LL, NN,
''G., s*ould also 9e dedu!ted under se!tion "<03 of t*e Revised Administrative Code 7*i!*
%rovides, in %art, as follo7sC DIn order to determine t*e net sum 7*i!* must 9ear t*e ta8,
7*en an in*eritan!e is !on!erned, t*ere s*all 9e dedu!ted, in !ase of a resident, . . . t*e
:udi!ial e8%enses of t*e testamentar6 or intestate %ro!eedings, . . ..D
A trustee, no dou9t, is entitled to re!eive a fair !om%ensation for *is servi!es F$arne6 vs.
Saunders, "1 &o7., <0<? "# La7. ed., "2#4G. $ut from t*is it does not follo7 t*at t*e
!om%ensation due *im ma6 la7full6 9e dedu!ted in arriving at t*e net value of t*e estate
su9:e!t to ta8. T*ere is no statute in t*e P*ili%%ines 7*i!* reJuires trustees@ !ommissions to
9e dedu!ted in determining t*e net value of t*e estate su9:e!t to in*eritan!e ta8 F1" C. J., %.
"42<G. (urt*ermore, t*oug* a testamentar6 trust *as 9een !reated, it does not a%%ear t*at
t*e testator intended t*at t*e duties of *is e8e!utors and trustees s*ould 9e se%arated. FI9id.?
In re Vanne!>@s Estate, "1" N. ,. Su%%., =30? "4< A%%. iv., 010? In re Collard@s Estate, "1"
N. ,. Su%%., #<<.G 'n t*e !ontrar6, in %aragra%* < of *is 7ill, t*e testator e8%ressed t*e
desire t*at *is real estate 9e *andled and managed 96 *is e8e!utors until t*e e8%iration of
t*e %eriod of ten 6ears t*erein %rovided. Judi!ial e8%enses are e8%enses of administration
F1" C. J., %. "42<G 9ut, in State vs. &enne%in Count6 Pro9ate Court F""; N. I., =4=? "2"
Minn., #=<G, it 7as saidC D . . . T*e !om%ensation of a trustee, earned, not in t*e
administration of t*e estate, 9ut in t*e management t*ereof for t*e 9enefit of t*e legatees or
devisees, does not !ome %ro%erl6 7it*in t*e !lass or reason for e8em%ting administration
e8%enses. . . . Servi!es rendered in t*at 9e*alf *ave no referen!e to !losing t*e estate for t*e
%ur%ose of a distri9ution t*ereof to t*ose entitled to it and are not reJuired or essential to t*e
%erfe!tion of t*e rig*ts of t*e *eirs or legatees. . . . Trusts . . . of t*e !*ara!ter of t*at *ere
9efore t*e !ourt, are !reated for t*e 9enefit of t*ose to 7*om t*e %ro%ert6 ultimatel6 %asses,
are of voluntar6 !reation, and intended for t*e %reservation of t*e estate. No sound reason is
given to su%%ort t*e !ontention t*at su!* e8%enses s*ould 9e ta>en into !onsideration in
fi8ing t*e value of t*e estate for t*e %ur%ose of t*is ta8.D
FdG T*e defendant levied and assessed t*e in*eritan!e ta8 due from t*e estate of T*omas
&anle6 under t*e %rovisions of se!tion "<## of t*e Revised Administrative Code, as amended
96 se!tion 0 of A!t No. 0121. $ut A!t No. 0121 7ent into effe!t on Januar6 ", "302. It,
t*erefore, 7as not t*e la7 in for!e 7*en t*e testator died on Ma6 ;4, "3;;. T*e la7 at t*at
time 7as se!tion "<## a9ove/mentioned, as amended 96 A!t No. 020", 7*i!* too> effe!t on
Mar!* 3, "3;;.
It is 7ell/settled t*at in*eritan!e ta8ation is governed 96 t*e statute in for!e at t*e time of t*e
deat* of t*e de!edent F;1 R. C. L., %. ;21? # Coole6 on Ta8ation, #t* ed., %. 0#1"G. T*e
ta8%a6er !an not foresee and oug*t not to 9e reJuired to guess t*e out!ome of %ending
measures. 'f !ourse, a ta8 statute ma6 9e made retroa!tive in its o%eration. Lia9ilit6 for
ta8es under retroa!tive legislation *as 9een Done of t*e in!idents of so!ial life.D FSeattle vs.
Lelle*er, "3< -.S., 0<", 012? #3 La7. ed., ;0;? ;< Su%. Ct. Re%., ##.G $ut legislative intent
t*at a ta8 statute s*ould o%erate retroa!tivel6 s*ould 9e %erfe!tl6 !lear. FS!7a9 vs. o6le, #;
Su%. Ct., Re%., #3"? Smietan>a vs. (irst Trust K Savings $an>, ;<4 -. S., 12;? Sto!>dale vs.
Insuran!e Co., ;2 Iall., 0;0 Lun!* vs. Turris*, ;#4 -. S., ;;".G DA statute s*ould 9e
!onsidered as %ros%e!tive in its o%eration, 7*et*er it ena!ts, amends, or re%eals an
in*eritan!e ta8, unless t*e language of t*e statute !learl6 demands or %resses t*at it s*all
*ave a retroa!tive effe!t, . . . F1" C. J., %. "12;.G T*oug* t*e last %aragra%* of se!tion of
Regulations No. 1< of t*e e%artment of (inan!e ma>es se!tion 0 of A!t No. 0121, amending
se!tion "<## of t*e Revised Administrative Code, a%%li!a9le to all estates t*e in*eritan!e
ta8es due from 7*i!* *ave not 9een %aid, A!t No. 0121 itself !ontains no %rovisions
indi!ating legislative intent to give it retroa!tive effe!t. No Su!* effe!t !an 9e given t*e
statute 96 t*is !ourt.
T*e defendant Colle!tor of Internal Revenue maintains, *o7ever, t*at !ertain %rovisions of
A!t No. 0121 are more favora9le to t*e ta8%a6er t*an t*ose of A!t No. 020", t*at said
%rovisions are %enal in nature and, t*erefore, s*ould o%erate retroa!tivel6 in !onformit6 7it*
t*e %rovisions of arti!le ;; of t*e Revised Penal Code. T*is is t*e reason 7*6 *e a%%lied A!t
No. 0121 instead of A!t No. 020". Indeed, under A!t No. 0121, F"G t*e sur!*arge of ;< %er
!ent is 9ased on t*e ta8 onl6, instead of on 9ot* t*e ta8 and t*e interest, as %rovided for in
A!t No. 020", and F;G t*e ta8%a6er is allo7ed t7ent6 da6s from noti!e and demand 96 t*e
Colle!tor of Internal Revenue 7it*in 7*i!* to %a6 t*e ta8, instead of ten da6s onl6 as
reJuired 96 t*e old la7.
Pro%erl6 s%ea>ing, a statute is %enal 7*en it im%oses %unis*ment for an offense !ommitted
against t*e state 7*i!*, under t*e Constitution, t*e E8e!utive *as t*e %o7er to %ardon. In
!ommon use, *o7ever, t*is sense *as 9een enlarged to in!lude 7it*in t*e term D%enal
statutesD all statutes 7*i!* !ommand or %ro*i9it !ertain a!ts, and esta9lis* %enalties for
t*eir violation, and even t*ose 7*i!*, 7it*out e8%ressl6 %ro*i9iting !ertain a!ts, im%ose a
%enalt6 u%on t*eir !ommission F<3 C. J., %. """2G. Revenue la7s, generall6, 7*i!* im%ose
ta8es !olle!ted 96 t*e means ordinaril6 resorted to for t*e !olle!tion of ta8es are not !lassed
as %enal la7s, alt*oug* t*ere are aut*orities to t*e !ontrar6. FSee Sut*erland, Statutor6
Constru!tion, 01"? T7ine Co., vs. Iort*ington, "#" -.S. , #1=? "; Su%. Ct., <<? Ri!e vs. -.
S., # C. C. A., "2#? <0 (ed., 3"2? Com. vs. Standard 'il Co., "2" Pa. St., "<2? State vs.
I*eeler, ## P., #02? ;< Nev., "#0.G Arti!le ;; of t*e Revised Penal Code is not a%%li!a9le to
t*e !ase at 9ar, and in t*e a9sen!e of !lear legislative intent, 7e !annot give A!t No. 0121 a
retroa!tive effe!t.
FeG T*e %laintiff !orre!tl6 states t*at t*e lia9ilit6 to %a6 a ta8 ma6 arise at a !ertain time
and t*e ta8 ma6 9e %aid 7it*in anot*er given time. As stated 96 t*is !ourt, Dt*e mere failure
to %a6 one@s ta8 does not render one delinJuent until and unless t*e entire %eriod *as ela%sed
7it*in 7*i!* t*e ta8%a6er is aut*oriHed 96 la7 to ma>e su!* %a6ments 7it*out 9eing
su9:e!ted to t*e %a6ment of %enalties for failure to %a6 *is ta8es 7it*in t*e %res!ri9ed
%eriod.D F-. S. vs. La9adan, ;1 P*il., ;03.G
T*e defendant maintains t*at it 7as t*e dut6 of t*e e8e!utor to %a6 t*e in*eritan!e ta8 9efore
t*e deliver6 of t*e de!edent@s %ro%ert6 to t*e trustee. Stated ot*er7ise, t*e defendant
!ontends t*at deliver6 to t*e trustee 7as deliver6 to t*e !estui Jue trust, t*e 9enefi!iar6 in
t*is !ase, 7it*in t*e meaning of t*e first %aragra%* of su9se!tion F9G of se!tion "<## of t*e
Revised Administrative Code. T*is !ontention is 7ell ta>en and is sustained. T*e
a%%ointment of P. J. M. Moore as trustee 7as made 96 t*e trial !ourt in !onformit6 7it* t*e
7is*es of t*e testator as e8%ressed in *is 7ill. It is true t*at t*e 7ord DtrustD is not mentioned
or used in t*e 7ill 9ut t*e intention to !reate one is !lear. No %arti!ular or te!*ni!al 7ords
are reJuired to !reate a testamentar6 trust F13 C. J., %. 4""G. T*e 7ords DtrustD and DtrusteeD,
t*oug* a%t for t*e %ur%ose, are not ne!essar6. In fa!t, t*e use of t*ese t7o 7ords is not
!on!lusive on t*e Juestion t*at a trust is !reated F13 C. J., %. 4"#G. DTo !reate a trust 96 7ill
t*e testator must indi!ate in t*e 7ill *is intention so to do 96 using language suffi!ient to
se%arate t*e legal from t*e eJuita9le estate, and 7it* suffi!ient !ertainl6 designate t*e
9enefi!iaries, t*eir interest in t*e trust, t*e %ur%ose or o9:e!t of t*e trust, and t*e %ro%ert6 or
su9:e!t matter t*ereof, Stated ot*er7ise, to !onstitute a valid testamentar6 trust t*ere must
9e a !on!urren!e of t*ree !ir!umstan!esC F"G Suffi!ient 7ords to raise a trust? F;G a definite
su9:e!t? F0G a !ertain or as!ertained o9:e!t? statutes in some :urisdi!tions e8%ressl6 or in
effe!t so %roviding.D F13 C. J., %%. 42<, 421.G T*ere is no dou9t t*at t*e testator intended to
!reate a trust. &e ordered in *is 7ill t*at !ertain of *is %ro%erties 9e >e%t toget*er
undis%osed during a fi8ed %eriod, for a stated %ur%ose. T*e %ro9ate !ourt !ertainl6 e8er!ised
sound :udgment in a%%ointing a trustee to !arr6 into effe!t t*e %rovisions of t*e 7ill Fsee se!.
<=;, Code of Civil Pro!edureG.
P. J. M. Moore 9e!ame trustee on Mar!* "2, "3;#. 'n t*at date t*e trust estate vested in *im
Fse!. <=; in relation to se!. <32, Code of Civil Pro!edureG. T*e mere fa!t t*at t*e estate of
t*e de!eased 7as %la!ed in trust did not remove it from t*e o%eration of our in*eritan!e ta8
la7s or e8em%t it from t*e %a6ment of t*e in*eritan!e ta8. T*e !orres%onding in*eritan!e ta8
s*ould *ave 9een %aid on or 9efore Mar!* "2, "3;#, to es!a%e t*e %enalties of t*e la7. T*is
is so for t*e reason alread6 stated t*at t*e deliver6 of t*e estate to t*e trustee 7as in esse
deliver6 of t*e same estate to t*e !estui Jue trust, t*e 9enefi!iar6 in t*is !ase. A trustee is 9ut
an instrument or agent for t*e !estui Jue trust FS*elton vs. Ling, ;33 -. S., 32? 00 Su%. Ct.
Re%., 1=3? <4 La7.ed., "2=1G. I*en Moore a!!e%ted t*e trust and too> %ossession of t*e
trust estate *e t*ere96 admitted t*at t*e estate 9elonged not to *im 9ut to *is !estui Jue trust
FTolentino vs. Vitug, 03 P*il., ";1, !ited in 1< C. J., %. 13;, n. 10G. &e did not a!Juire an6
9enefi!ial interest in t*e estate. &e too> su!* legal estate onl6 as t*e %ro%er e8e!ution of t*e
trust reJuired F1< C. J., %. <;=G and, *is estate !eased u%on t*e fulfillment of t*e testator@s
7is*es. T*e estate t*en vested a9solutel6 in t*e 9enefi!iar6 F1< C. J., %. <#;G.
T*e *ig*est !onsiderations of %u9li! %oli!6 also :ustif6 t*e !on!lusion 7e *ave rea!*ed. Iere
7e to *old t*at t*e %a6ment of t*e ta8 !ould 9e %ost%oned or dela6ed 96 t*e !reation of a
trust of t*e t6%e at *and, t*e result 7ould 9e %lainl6 disastrous. Testators ma6 %rovide, as
T*omas &anle6 *as %rovided, t*at t*eir estates 9e not delivered to t*eir 9enefi!iaries until
after t*e la%se of a !ertain %eriod of time. In t*e !ase at 9ar, t*e %eriod is ten 6ears. In ot*er
!ases, t*e trust ma6 last for fift6 6ears, or for a longer %eriod 7*i!* does not offend t*e rule
against %er%etuities. T*e !olle!tion of t*e ta8 7ould t*en 9e left to t*e 7ill of a %rivate
individual. T*e mere suggestion of t*is result is a suffi!ient 7arning against t*e a!!e%tan!e
of t*e !ontention of t*e %laintiff in t*e !ase at 9ar. Ta8es are essential to t*e ver6 e8isten!e of
government. Fo99ins vs. Erie Count6, "1 Pet., #0<? "2 La7. ed., "2;;? Lir>land vs.
&ot!*>iss, "22 -. S., #3"? ;< La7. ed., <<=? Lane Count6 vs. 'regon, 4 Iall, 4"? "3 La7.
ed., "2"? -nion Refrigerator Transit Co., vs. Lentu!>6, "33 -. S., "3#? ;1 Su%. Ct., Re%., 01?
<2 La7.ed., "<2? C*arles River $ridge vs. Iarren $ridge, "" Pet., #;2? 3 La7.ed., 440.G T*e
o9ligation to %a6 ta8es rests not u%on t*e %rivileges en:o6ed 96, or t*e %rote!tion afforded to,
a !itiHen 96 t*e government, 9ut u%on t*e ne!essit6 of mone6 for t*e su%%ort of t*e state
Fo99ins vs. Erie Count6, su%raG. (or t*is reason, no one is allo7ed to o9:e!t to or resist t*e
%a6ment of ta8es solel6 9e!ause no %ersonal 9enefit to *im !an 9e %ointed out. FT*omas vs.
+a6, "13 -. S., ;1#? "= Su%.Ct. Re%., 0#2? #0 La7.ed., 4#2.GI*ile !ourts 7ill not enlarge, 96
!onstru!tion, t*e government@s %o7er of ta8ation F$romle6 vs. M!Caug*n, ;=2 -. S., ";#?
4# La7. ed., ;;1? <2 Su%. Ct. Re%., #1G t*e6 also 7ill not %la!e u%on ta8 la7s so loose a
!onstru!tion as to %ermit evasions on merel6 fan!iful and insu9stantial distin!tions. F-. S.
vs. Iatts, " $ond, <=2? (ed.Cas. No. "1,1<0? -. S. vs. Iiggles7ort*, ; Stor6, 013? (ed.Cas.
No. "1,132, follo7ed in (roeli!* K Luttner vs. Colle!tor of Customs, "= P*il., #1", #="?
Castle $ros., Iolf K Sons vs. M!Co6, ;" P*il., 022? MuNoH K Co. vs. &ord, "; P*il., 1;#?
&ong>ong K S*ang*ai $an>ing Cor%oration vs. Raffert6, 03 P*il., "#<? LuHon Stevedoring
Co. vs. Trinidad, #0 P*il., =20.G I*en %ro%er, a ta8 statute s*ould 9e !onstrued to avoid t*e
%ossi9ilities of ta8 evasion. Construed t*is 7a6, t*e statute, 7it*out resulting in in:usti!e to
t*e ta8%a6er, 9e!omes fair to t*e government.
T*at ta8es must 9e !olle!ted %rom%tl6 is a %oli!6 dee%l6 intren!*ed in our ta8 s6stem. T*us,
no !ourt is allo7ed to grant in:un!tion to restrain t*e !olle!tion of an6 internal revenue ta8
Fse!. "<4=, Revised Administrative Code? Sarasola vs. Trinidad, #2 P*il., ;<;G. In t*e !ase of
Lim Co C*ui vs. Posadas F#4 P*il., #1"G, t*is !ourt *ad o!!asion to demonstrate tren!*ant
ad*eren!e to t*is %oli!6 of t*e la7. It *eld t*at Dt*e fa!t t*at on a!!ount of riots dire!ted
against t*e C*inese on '!to9er "=, "3, and ;2, "3;#, t*e6 7ere %revented from %a6ing t*eir
internal revenue ta8es on time and 96 mutual agreement !losed t*eir *omes and stores and
remained t*erein, does not aut*oriHe t*e Colle!tor of Internal Revenue to e8tend t*e time
%res!ri9ed for t*e %a6ment of t*e ta8es or to a!!e%t t*em 7it*out t*e additional %enalt6 of
t7ent6 five %er !ent.D FS6lla9us, No. 0.G D. . . It is of t*e utmost im%ortan!e,D said t*e
Su%reme Court of t*e -nited States. D. . . t*at t*e modes ado%ted to enfor!e t*e ta8es levied
s*ould 9e interfered 7it* as little as %ossi9le. An6 dela6 in t*e %ro!eedings of t*e offi!ers,
u%on 7*om t*e dut6 is devolved of !olle!ting t*e ta8es, ma6 derange t*e o%erations of
government, and t*ere96 !ause serious detriment to t*e %u9li!.D Fo7s vs. C*i!ago, ""
Iall., "2=? ;2 La7. ed., 1<.11? C*ur!*ill and Tait vs. Raffert6, 0; P*il., <=2.G
It results t*at t*e estate 7*i!* %laintiff re%resents *as 9een delinJuent in t*e %a6ment of
in*eritan!e ta8 and, t*erefore, lia9le for t*e %a6ment of interest and sur!*arge %rovided 96
la7 in su!* !ases.
T*e delinJuen!6 in %a6ment o!!urred on Mar!* "2, "3;#, t*e date 7*en Moore 9e!ame
trustee. T*e interest due s*ould 9e !om%uted from t*at date and it is error on t*e %art of t*e
defendant to !om%ute it one mont* later. T*e %rovision of la7 reJuiring t*e %a6ment of
interest in a%%ro%riate !ases is mandator6 Fsee and !f. Lim Co C*ui vs. Posadas, su%raG, and
neit*er t*e Colle!tor of Internal Revenue nor t*is !ourt ma6 remit or de!rease su!* interest,
no matter *o7 *eavil6 it ma6 9urden t*e ta8%a6er.
To t*e ta8 and interest due and un%aid 7it*in ten da6s after t*e date of noti!e and demand
t*ereof 96 t*e Colle!tor of Internal Revenue, a sur!*arge of t7ent6/five %er !entum s*ould
9e added Fse!. "<##, su9se!. F9G, %ar. ; Revised Administrative CodeG. emand 7as made 96
t*e e%ut6 Colle!tor of Internal Revenue u%on Moore in a !ommuni!ation dated '!to9er
"1, "30" FE8*i9it ;3G. T*e date fi8ed for t*e %a6ment of t*e ta8 and interest 7as Novem9er
02, "30". Novem9er 02 9eing an offi!ial *olida6, t*e tent* da6 fell on e!em9er ", "30". As
t*e ta8 and interest due 7ere not %aid on t*at date, t*e estate 9e!ame lia9le for t*e %a6ment
of t*e sur!*arge.
In vie7 of t*e foregoing, it 9e!omes unne!essar6 for us to dis!uss t*e fift* error assigned 96
t*e %laintiff in *is 9rief.
Ie s*all no7 !om%ute t*e ta8, toget*er 7it* t*e interest and sur!*arge, due from t*e estate
of T*omas &anle6 in a!!ordan!e 7it* t*e !on!lusion 7e *ave rea!*ed.
At t*e time of *is deat*, t*e de!eased left real %ro%erties valued at P;4,3;2 and %ersonal
%ro%erties 7ort* P",#1<, or a total of P;3,0=<. edu!ting from t*is amount t*e sum of
P#=2.=", re%resenting allo7a9le dedu!tions under se!tion "<03 of t*e Revised
Administrative Code, 7e *ave P;=,32#."3 as t*e net value of t*e estate su9:e!t to
in*eritan!e ta8.
T*e %rimar6 ta8, a!!ording to se!tion "<01, su9se!tion F!G, of t*e Revised Administrative
Code, s*ould 9e im%osed at t*e rate of one %er !entum u%on t*e first ten t*ousand %esos and
t7o %er !entum u%on t*e amount 96 7*i!* t*e s*are of t*e 9enefi!iar6 e8!eeds ten t*ousand
%esos 9ut does not e8!eed t*irt6 t*ousand %esos, %lus an additional t7o *undred %er !entum.
'ne %er !entum of ten t*ousand %esos is P"22. T7o %er !entum of P"=,32#."3 is P04=.2=.
Adding to t*ese t7o sums an additional t7o *undred %er !entum, or P3<1."1, 7e *ave as
%rimar6 ta8, !orre!tl6 !om%uted 96 t*e defendant, t*e sum of P",#0#.;#.
To t*e %rimar6 ta8 t*us !om%uted s*ould 9e added t*e sums !olle!ti9le under se!tion "<## of
t*e Revised Administrative Code. (irst s*ould 9e added P",#1<.0" 7*i!* stands for interest
at t*e rate of t7elve %er !entum %er annum from Mar!* "2, "3;#, t*e date of delinJuen!6, to
Se%tem9er "<, "30;, t*e date of %a6ment under %rotest, a %eriod !overing = 6ears, 1 mont*s
and < da6s. To t*e ta8 and interest t*us !om%uted s*ould 9e added t*e sum of P4;#.==,
re%resenting a sur!*arge of ;< %er !ent on 9ot* t*e ta8 and interest, and also P"2, t*e
!om%romise sum fi8ed 96 t*e defendant FE8*. ;3G, giving a grand total of P0,10#.#0.
As t*e %laintiff *as alread6 %aid t*e sum of P;,2<;.4#, onl6 t*e sum of P",<=".13 is legall6
due from t*e estate. T*is last sum is P032.#; more t*an t*e amount demanded 96 t*e
defendant in *is !ounter!laim. $ut, as 7e !annot give t*e defendant more t*an 7*at *e
!laims, 7e must *old t*at t*e %laintiff is lia9le onl6 in t*e sum of P","3".;4, t*e amount
stated in t*e !ounter!laim.
T*e :udgment of t*e lo7er !ourt is a!!ordingl6 modified, 7it* !osts against t*e %laintiff in
9ot* instan!es. So ordered.
Ta8 s*ould 9e measured 96 t*e value of t*e estate at t*e time of de!edent@s deat*.
If deat* is t*e generating sour!e from 7*i!* t*e %o7er of t*e state to im%ose in*eritan!e
ta8es ta>es its 9eing and if, u%on t*e deat* of t*e de!edent, su!!ession ta>es %la!e and
t*e rig*t of t*e state to ta8 vests instantl6, t*e ta8 s*ould 9e measured 96 t*e value of t*e
estate as it stood at t*e time of t*e de!edent@s deat*, regardless of an6 su9seJuent
!ontingen!6 affe!ting value of an6 su9seJuent in!rease or de!rease in value.
Rig*t of t*e state to in*eritan!e ta8 a!!rues at t*e moment of deat*.
T*e rig*t of t*e state to in*eritan!e ta8 a!!rues at t*e moment of deat*, and *en!e is
ordinaril6 measured as to an6 9enefi!iar6 96 t*e value at t*at time of su!* %ro%ert6 as
%asses to *im. Su9seJuent a%%re!iation or de%re!iation is immaterial.
Pa6ment of in*eritan!e ta8 !annot 9e %ost%oned or dela6ed 96 t*e !reation of a trust.
T*e %a6ment of in*eritan!e ta8 !annot 9e %ost%oned or dela6ed 96 t*e !reation of a trust.
Testators ma6 %rovide t*at t*eir estates 9e not delivered to t*eir 9enefi!iaries until after
t*e la%se of a !ertain %eriod of time. T*e !olle!tion of t*e ta8 7ould t*en 9e left to t*e
7ill of a %rivate individual. Ta8es are essential to t*e ver6 e8isten!e of government.
Com%ensation of trustee is not dedu!ti9le e8%ense.
T*e !om%ensation of a trustee, earned, not in t*e administration of t*e estate, 9ut in t*e
management t*ereof for t*e 9enefit of t*e legatees or devisees, does not !ome %ro%erl6
7it*in t*e !lass or reason for e8em%ting administration e8%enses. Servi!es rendered in
t*at 9e*alf *ave no referen!e to !losing t*e estate for t*e %ur%ose of a distri9ution
t*ereof to t*ose entitled to it and are not reJuired or essential to t*e %erfe!tion of t*e
rig*ts of t*e *eirs or legatees.
A!!rual of in*eritan!e ta8 is distin!t from t*e o9ligation to %a6 t*e same.
T*e a!!rual of t*e in*eritan!e ta8 is distin!t from t*e o9ligation to %a6 t*e same. It is in
realit6 an e8!ise or %rivilege ta8 im%osed on t*e rig*t to su!!eed to, re!eive, or ta>e
%ro%ert6 96 or under a 7ill or t*e intesta!6 la7, or deed, grant, or gift, to 9e!ome
o%erative at or after deat*.
Premiums %aid on t*e 9ond filed 96 administrator is not dedu!ti9le as administration
e8%ense.
T*e %remiums %aid on t*e 9ond filed 96 t*e administrator is not dedu!ti9le as an e8%ense
of administration sin!e t*e giving of a 9ond is in t*e nature of a Jualifi!ation for t*e
offi!e, and not ne!essar6 in t*e settlement of t*e estate. A %erson ma6 a!!e%t t*e %osition
of e8e!utor or administrator 7it* all t*e in!idents a%%ertaining t*ereto *aving in mind
t*e !om%ensation 7*i!* t*e la7 allo7s for t*e %ur%ose, 9ut *e ma6 7aive t*is
!om%ensation in t*e same manner as *e ma6 refuse to serve 7it*out it.
Carlos Moran Sison vs. Nar!isa (. Teodoro, +.R. No. L/3;4", Mar!* ;3, "3<4
Notarial fee %aid for e8tra:udi!ial settlement is a dedu!ti9le e8%ense.
T*e notarial fee %aid for t*e e8tra:udi!ial settlement is !learl6 a dedu!ti9le e8%ense sin!e
su!* settlement effe!ted a distri9ution of t*e de!edentOs estate to *is la7ful *eirs.
Similarl6, t*e attorne6@s fees %aid to PN$ for a!ting as t*e guardian of t*e de!edentOs
%ro%ert6 during *is lifetime s*ould also 9e !onsidered as a dedu!ti9le administration
e8%ense. PN$ %rovided a detailed a!!ounting of de!edent@s %ro%ert6 and gave advi!e as
to t*e %ro%er settlement of t*e latter@s estate, a!ts 7*i!* !ontri9uted to7ards t*e
!olle!tion of de!edent@s assets and t*e su9seJuent settlement of t*e estate.
Commissioner of Internal Revenue vs. Court of A%%eals, et al., +.R. No. ";0;21, Mar!*
;;, ;222
6$7 <or $la"'s a,a"nst the estate- Pro!"ded# That at the t"'e the "ndetedness (as
"n$&rred the det "nstr&'ent (as d&l+ notar"5ed and# "f the loan (as $ontra$ted
("th"n three 637 +ears efore the death of the de$edent# the ad'"n"strator or
exe$&tor shall s&'"t a state'ent sho("n, the d"s%os"t"on of the %ro$eeds of the
loan8
MELECI' R. 'MIN+', as Commissioner of Internal Revenue, %etitioner, vs. &'N.
L'REN)' C. +ARLIT'S, in *is !a%a!it6 as Judge of t*e Court of (irst Instan!e of Le6te,
and SIME'NA L. PRICE, as administratri8 of t*e Intestate Estate of t*e late Ialter S!ott
Pri!e, res%ondents. +.R. No. L/"=33#. June ;3, "310.5
S,LLA$-S
". TAAATI'N? IN&ERITANCE TAA? PR'CE-RE IN EN('RCEMENT A+AINST
ESTATE '( ECEASE? CLAIM M-ST $E (ILE $E('RE PR'$ATE C'-RT. B T*e
ordinar6 %ro!edure 96 7*i!* to settle !laims or inde9tedness against t*e estate of a de!eased
%erson, as an in*eritan!e ta8, is for t*e !laimant to %resent a !laim 9efore t*e %ro9ate !ourt
so t*at said !ourt ma6 order t*e administrator to %a6 t*e amount t*ereof FAldamiH vs. Judge
of t*e Court of (irst Instan!e of Mindoro, =< P*il., ;;=G.
;. I.? I.? I.? I.? LE+AL $ASIS. B T*e legal 9asis for su!* a %ro!edure is t*e fa!t
t*at in t*e testate or intestate %ro!eedings to settle t*e estate of a de!eased %erson, t*e
%ro%erties 9elonging to t*e estate are under t*e :urisdi!tion of t*e !ourt and su!*
:urisdi!tion !ontinues until said %ro%erties *ave 9een distri9uted among t*e *eirs entitled
t*ereto. uring t*e %enden!6 of t*e %ro!eedings all t*e estate is in !ustodia legis and t*e
%ro%er %ro!edure is not to allo7 t*e s*eriff, in !ase of a !ourt :udgment, to seiHe t*e
%ro%erties 9ut to as> t*e !ourt for an order to reJuire t*e administrator to %a6 t*e amount
due from t*e estate and reJuired to 9e %aid.
0. I.? I.? C'MPENSATI'N $ETIEEN TAAES AN CLAIMS '( INTESTATE
REC'+NI)E AN APPR'PRIATE ('R $, LAI. B T*e fa!t t*at t*e !ourt *aving
:urisdi!tion of t*e estate *ad found t*at t*e !laim of t*e estate against t*e +overnment *as
9een a%%ro%riated for t*e %ur%ose 96 a !orres%onding la7 FRe% A!t No. ;422G s*o7s t*at
9ot* t*e !laim of t*e +overnment for in*eritan!e ta8es and t*e !laim of t*e intestate for
servi!es rendered *ave alread6 9e!ome overdue and demanda9le as 7ell as full6 liJuidated.
Com%ensation, t*erefore, ta>es %la!e 96 o%eration of la7, in a!!ordan!e 7it* t*e Provisions
of Arti!les ";43 and ";32 of t*e Civil Code, and 9ot* de9ts are e8tinguis*ed to t*e
!on!urrent amount.
E C I S I ' N
LA$RA'R, J %C
T*is is a %etition for !ertiorari and mandamus against t*e Judge of t*e Court of (irst
Instan!e of Le6te, &on. LorenHo C. +arlitos, %residing, see>ing to annul !ertain orders of t*e
!ourt and for an order in t*is Court dire!ting t*e res%ondent !ourt 9elo7 to e8e!ute t*e
:udgment in favor of t*e +overnment against t*e estate of Ialter S!ott Pri!e for internal
revenue ta8es.
It a%%ears t*at in Mele!io R. omingo vs. &on. Judge S. C. Mos!oso, "21 P*il., ""0=, t*is
Court de!lared as final and e8e!utor6 t*e order for t*e %a6ment 96 t*e estate of t*e estate
and in*eritan!e ta8es, !*arges and %enalties amounting to P#2,2<=.<<, issued 96 t*e Court
of (irst Instan!e of Le6te in s%e!ial %ro!eedings No. "# entitled DIn t*e Matter of t*e
Intestate Estate of t*e Late Ialter S!ott Pri!e.D In order to enfor!e t*e !laims against t*e
estate t*e fis!al %resented a %etition dated June ;", "31", to t*e !ourt 9elo7 for t*e
e8e!ution of t*e :udgment. T*e %etition 7as, *o7ever, denied 96 t*e !ourt 7*i!* *eld t*at t*e
e8e!ution is not :ustifia9le as t*e +overnment is inde9ted to t*e estate under administration
in t*e amount of P;1;,;22. T*e orders of t*e !ourt 9elo7 dated August ;2, "312 and
Se%tem9er ;=, "312, res%e!tivel6, are as follo7sC
DAtt6. $enedi!to su9mitted a !o%6 of t*e !ontra!t 9et7een Mrs. Simeona L. Pri!e,
Administratri8 of t*e estate of *er late *us9and Ialter S!ott Pri!e and ire!tor )oilo
Castrillo of t*e $ureau of Lands dated Se%tem9er "3, "3<1 and a!>no7ledged 9efore Notar6
Pu9li! Salvador V. Esguerra, legal adviser in Mala!aNang to E8e!utive Se!retar6 e Leon
dated e!em9er "#, "3<1, t*e note of &is E8!ellen!6, Pres. Carlos P. +ar!ia, to ire!tor
Castrillo dated August ;, "3<=, dire!ting t*e latter to %a6 to Mrs. Pri!e t*e sum of
P01=,"#2.22, and an e8tra!t of %age 41< of Re%u9li! A!t No. ;422 a%%ro%riating t*e sum of
P;1;,;22.22 for t*e %a6ment to t*e Le6te Cadastral Surve6, In!., re%resented 96 t*e
administratri8 Simeona L. Pri!e, as dire!ted in t*e a9ove note of t*e President. Considering
t*ese fa!ts, t*e Court orders t*at t*e %a6ment of in*eritan!e ta8es in t*e sum of P#2,2<=.<<
due t*e Colle!tor of Internal Revenue as ordered %aid 96 t*is Court on Jul6 <, "312 in
a!!ordan!e 7it* t*e order of t*e Su%reme Court %romulgated Jul6 02, "312 in "21 P*il.,
""0=, 9e dedu!ted from t*e amount of P;1;,;22.22 due and %a6a9le to t*e administratri8
Simeona L. Pri!e, in t*is estate, t*e 9alan!e to 9e %aid 96 t*e +overnment to *er 7it*out
furt*er dela6.D F'rder of August ;2, "312G
DT*e Court *as not*ing furt*er to add to its order dated August ;2, "312 and it orders t*at
t*e %a6ment of t*e !laim of t*e Colle!tor of Internal Revenue 9e deferred until t*e
+overnment s*all *ave %aid its a!!ounts to t*e administratri8 *erein amounting to
P;1;,;22.22. It ma6 not 9e amiss to re%eat t*at it is onl6 fair for t*e +overnment. as a
de9tor, to %a6 its a!!ounts to its !itiHens/!reditors 9efore it !an insist in t*e %rom%t %a6ment
of t*e latter@s a!!ount to it, s%e!iall6 ta>ing into !onsideration t*at t*e amount due t*e
+overnment dra7s interests 7*ile t*e !redit due to t*e %resent estate does not a!!rue an6
interest.D F'rder of Se%tem9er ;=, "312G
T*e %etition to set aside t*e a9ove orders of t*e !ourt 9elo7 and for t*e e8e!ution of t*e
!laims of t*e +overnment against t*e estate must 9e denied for la!> of merit. T*e ordinar6
%ro!edure 96 7*i!* to settle !laims or inde9tedness against t*e estate of a de!eased %erson,
as an in*eritan!e ta8, is for t*e !laimant to %resent a !laim 9efore t*e %ro9ate !ourt so t*at
said !ourt ma6 order t*e administrator to %a6 t*e amount t*ereof. To su!* effe!t is t*e
de!ision of t*is Court in AldamiH vs. Judge of t*e Court of (irst Instan!e of Mindoro, +.R.
No. L/;012, e!. ;3, "3#3, t*usC
D. . . a 7rit of e8e!ution is not t*e %ro%er %ro!edure allo7ed 96 t*e Rules of Court for t*e
%a6ment of de9ts and e8%enses of administration. T*e %ro%er %ro!edure is for t*e !ourt to
order t*e sale of %ersonal estate or t*e sale or mortgage of real %ro%ert6 of t*e de!eased and
all de9ts or e8%enses of administration s*ould 9e %aid out of t*e %ro!eeds of t*e sale or
mortgage. T*e order for t*e sale or mortgage s*ould 9e issued u%on motion of t*e
administrator and 7it* t*e 7ritten noti!e to all t*e *eirs, legatees and devisees residing in
t*e P*ili%%ines, a!!ording to Rule =3, se!tion 0, and Rule 32, se!tion ;. And 7*en sale or
mortgage of real estate is to 9e made, t*e regulations !ontained in Rule 32, se!tion 4, s*ould
9e !om%lied 7it*.
DE8e!ution ma6 issue onl6 7*ere t*e devisees, legatees or *eirs *ave entered into %ossession
of t*eir res%e!tive %ortions in t*e estate %rior to settlement and %a6ment of t*e de9ts and
e8%enses of administration and it is later as!ertained t*at t*ere are su!* de9ts and e8%enses
to 9e %aid, in 7*i!* !ase @t*e !ourt *aving :urisdi!tion of t*e estate ma6, 96 order for t*at
%ur%ose, after *earing, settle t*e amount of t*eir several lia9ilities, and order *o7 mu!* and
in 7*at manner ea!* %erson s*all !ontri9ute, and ma6 issue e8e!ution if !ir!umstan!es
reJuire@ FRule =3 se!tion 1? see also Rule 4#, se!tion #? Em%*asis ours.G And t*is is not t*e
instant !ase.D
T*e legal 9asis for su!* a %ro!edure is t*e fa!t t*at in t*e testate or intestate %ro!eedings to
settle t*e estate of a de!eased %erson, t*e %ro%erties 9elonging to t*e estate are under t*e
:urisdi!tion of t*e !ourt and su!* :urisdi!tion !ontinues until said %ro%erties *ave 9een
distri9uted among t*e *eirs entitled t*ereto. uring t*e %enden!6 of t*e %ro!eedings all t*e
estate is in !ustodia legis and t*e %ro%er %ro!edure is not to allo7 t*e s*eriff, in !ase of a
!ourt :udgment, to seiHe t*e %ro%erties 9ut to as> t*e !ourt for an order to reJuire t*e
administrator to %a6 t*e amount due from t*e estate and reJuired to 9e %aid.
Anot*er ground for den6ing t*e %etition of t*e %rovin!ial fis!al is t*e fa!t t*at t*e !ourt
*aving :urisdi!tion of t*e estate *ad found t*at t*e !laim of t*e estate against t*e
+overnment *as 9een re!ogniHed and an amount of P;1;,;22 *as alread6 9een a%%ro%riated
for t*e %ur%ose 96 a !orres%onding la7 FRe%. A!t No. ;422G. -nder t*e a9ove
!ir!umstan!es, 9ot* t*e !laim of t*e +overnment for in*eritan!e ta8es and t*e !laim of t*e
intestate for servi!es rendered *ave alread6 9e!ome overdue and demanda9le as 7ell as full6
liJuidated. Com%ensation, t*erefore, ta>es %la!e 96 o%eration of la7, in a!!ordan!e 7it* t*e
%rovisions of Arti!les ";43 and ";32 of t*e Civil Code, and 9ot* de9ts are e8tinguis*ed to
t*e !on!urrent amount, t*usC
DArt. ";22. I*en all t*e reJuisites mentioned in arti!le ";43 are %resent, !om%ensation
ta>es effe!t 96 o%eration of la7, and e8tinguis*es 9ot* de9ts to t*e !on!urrent amount, even
t*oug* t*e !reditors and de9tors are not a7are of t*e !om%ensation.D
It is !lear, t*erefore, t*at t*e %etitioner *as no !lear rig*t to e8e!ute t*e :udgment for ta8es
against t*e estate of t*e de!eased Ialter S!ott Pri!e. (urt*ermore, t*e %etition for !ertiorari
and mandamus is not t*e %ro%er remed6 for t*e %etitioner. A%%eal is t*e remed6.
T*e %etition is, t*erefore, dismissed, 7it*out !osts.
6d7 <or $la"'s of the de$eased a,a"nst "nsol!ent %ersons (here the !al&e of
de$edent's "nterest there"n "s "n$l&ded "n the !al&e of the ,ross estate8 and
6e7 <or &n%a"d 'ort,a,es &%on# or an+ "ndetedness "n res%e$t to# %ro%ert+ (here
the !al&e of de$edent's "nterest there"n# &nd"'"n"shed + s&$h 'ort,a,e or
"ndetedness# "s "n$l&ded "n the !al&e of the ,ross estate# &t not "n$l&d"n, an+
"n$o'e tax &%on "n$o'e re$e"!ed after the death of the de$edent# or %ro%ert+ taxes
not a$$r&ed efore h"s death# or an+ estate tax.
The ded&$t"on here"n allo(ed "n the $ase of $la"'s a,a"nst the estate# &n%a"d
'ort,a,es or an+ "ndetedness shall# (hen fo&nded &%on a %ro'"se or a,ree'ent#
e l"'"ted to the extent that the+ (ere $ontra$ted ona f"de and for an ade;&ate and
f&ll $ons"derat"on "n 'one+ or 'one+'s (orth.
There shall also e ded&$ted losses "n$&rred d&r"n, the settle'ent of the estate
ar"s"n, fro' f"res# stor's# sh"%(re$9# or other $as&alt"es# or fro' roer+# theft or
e'e55le'ent# (hen s&$h losses are not $o'%ensated for + "ns&ran$e or
other("se# and "f at the t"'e of the f"l"n, of the ret&rn s&$h losses ha!e not een
$la"'ed as a ded&$t"on for "n$o'e tax %&r%oses "n an "n$o'e tax ret&rn# and
%ro!"ded that s&$h losses (ere "n$&rred not later than the last da+ for the %a+'ent
of the estate tax as %res$r"ed "n S&se$t"on 6A7 of Se$t"on >2.
6/7 Pro%ert+ Pre!"o&sl+ Taxed. An a'o&nt e;&al to the !al&e s%e$"f"ed elo( of
an+ %ro%ert+ for'"n, a %art of the ,ross estate s"t&ated "n the Ph"l"%%"nes of an+
%erson (ho d"ed ("th"n f"!e 6)7 +ears %r"or to the death of the de$edent# or
transferred to the de$edent + ,"ft ("th"n f"!e 6)7 +ears %r"or to h"s death# (here
s&$h %ro%ert+ $an e "dent"f"ed as ha!"n, een re$e"!ed + the de$edent fro' the
donor + ,"ft# or fro' s&$h %r"or de$edent + ,"ft# e;&est# de!"se or "nher"tan$e#
or (h"$h $an e "dent"f"ed as ha!"n, een a$;&"red "n ex$han,e for %ro%ert+ so
re$e"!ed-
One h&ndred %er$ent 620017 of the !al&e# "f the %r"or de$edent d"ed ("th"n one 627
+ear %r"or to the death of the de$edent# or "f the %ro%ert+ (as transferred to h"' +
,"ft ("th"n the sa'e %er"od %r"or to h"s death8
E",ht+ %er$ent 68017 of the !al&e# "f the %r"or de$edent d"ed 'ore than one 627
+ear &t not 'ore than t(o 6/7 +ears %r"or to the death of the de$edent# or "f the
%ro%ert+ (as transferred to h"' + ,"ft ("th"n the sa'e %er"od %r"or to h"s death8
S"xt+ %er$ent 6*017 of the !al&e# "f the %r"or de$edent d"ed 'ore than t(o 6/7 +ears
&t not 'ore than three 637 +ears %r"or to the death of the de$edent# or "f the
<ort+ %er$ent 64017 of the !al&e# "f the %r"or de$edent d"ed 'ore than three 637
+ears &t not 'ore than fo&r 647 +ears %r"or to the death of the de$edent# or "f the
and
T(ent+ %er$ent 6/017 of the !al&e# "f the %r"or de$edent d"ed 'ore than fo&r 647
+ears &t not 'ore than f"!e 6)7 +ears %r"or to the death of the de$edent# or "f the
%ro%ert+ (as transferred to h"' + ,"ft ("th"n the sa'e %er"od %r"or to h"s death.
These ded&$t"ons shall e allo(ed onl+ (here a donor's tax or estate tax "'%osed
&nder th"s T"tle (as f"nall+ deter'"ned and %a"d + or on ehalf of s&$h donor# or
the estate of s&$h %r"or de$edent# as the $ase 'a+ e# and onl+ "n the a'o&nt
f"nall+ deter'"ned as the !al&e of s&$h %ro%ert+ "n deter'"n"n, the !al&e of the
,"ft# or the ,ross estate of s&$h %r"or de$edent# and onl+ to the extent that the !al&e
of s&$h %ro%ert+ "s "n$l&ded "n the de$edent's ,ross estate# and onl+ "f "n
deter'"n"n, the !al&e of the estate of the %r"or de$edent# no ded&$t"on (as
allo(ale &nder %ara,ra%h 6/7 "n res%e$t of the %ro%ert+ or %ro%ert"es ,"!en "n
ex$han,e therefore.
?here a ded&$t"on (as allo(ed of an+ 'ort,a,e or other l"en "n deter'"n"n, the
donor's tax# or the estate tax of the %r"or de$edent# (h"$h (as %a"d "n (hole or "n
%art %r"or to the de$edent's death# then the ded&$t"on allo(ale &nder sa"d
S&se$t"on shall e red&$ed + the a'o&nt so %a"d. S&$h ded&$t"on allo(ale shall
e red&$ed + an a'o&nt (h"$h ears the sa'e rat"o to the a'o&nts allo(ed as
ded&$t"ons &nder %ara,ra%hs 627 and 637 of th"s S&se$t"on as the a'o&nt other("se
ded&$t"le &nder sa"d %ara,ra%h 6/7 ears to the !al&e of the de$edent's estate.
?here the %ro%ert+ referred to $ons"sts of t(o or 'ore "te's# the a,,re,ate !al&e
of s&$h "te's shall e &sed for the %&r%ose of $o'%&t"n, the ded&$t"on.
637 Transfers for P&l"$ =se. The a'o&nt of all e;&ests# le,a$"es# de!"ses or
transfers to or for the &se of the 4o!ern'ent of the Re%&l"$ of the Ph"l"%%"nes# or
an+ %ol"t"$al s&d"!"s"on thereof# for ex$l&s"!el+ %&l"$ %&r%oses.
647 The <a'"l+ Ho'e. An a'o&nt e;&"!alent to the $&rrent fa"r 'ar9et !al&e of
the de$edent's fa'"l+ ho'e- Pro!"ded# ho(e!er# That "f the sa"d $&rrent fa"r 'ar9et
!al&e ex$eeds One '"ll"on %esos 6P2#000#0007# the ex$ess shall e s&:e$t to estate
tax. As a s"ne ;&a non $ond"t"on for the exe'%t"on or ded&$t"on# sa"d fa'"l+ ho'e
'&st ha!e een the de$edent's fa'"l+ ho'e as $ert"f"ed + the aran,a+ $a%ta"n of
the lo$al"t+.
6)7 Standard Ded&$t"on. An a'o&nt e;&"!alent to One '"ll"on %esos
6P2#000#0007.
6*7 @ed"$al Ex%enses. @ed"$al ex%enses "n$&rred + the de$edent ("th"n one
627 +ear %r"or to h"s death (h"$h shall e d&l+ s&stant"ated ("th re$e"%ts-
Pro!"ded# That "n no $ase shall the ded&$t"le 'ed"$al ex%enses ex$eed <"!e
h&ndred tho&sand %esos 6P)00#0007.
6A7 A'o&nt Re$e"!ed + He"rs =nder Re%&l"$ A$t No. 4>2A. An+ a'o&nt
re$e"!ed + the he"rs fro' the de$edent's e'%lo+er as a $onse;&en$e of the death
of the de$edentBe'%lo+ee "n a$$ordan$e ("th Re%&l"$ A$t No. 4>2A- Pro!"ded#
That s&$h a'o&nt "s "n$l&ded "n the ,ross estate of the de$edent.
6.7 Ded&$t"ons Allo(ed to Nonres"dent Estates. In the $ase of a nonres"dent not
a $"t"5en of the Ph"l"%%"nes# + ded&$t"n, fro' the !al&e of that %art of h"s ,ross
estate (h"$h at the t"'e of h"s death "s s"t&ated "n the Ph"l"%%"nes-
627 Ex%enses# Losses# Indetedness and Taxes. That %ro%ort"on of the
ded&$t"ons s%e$"f"ed "n %ara,ra%h 627 of S&se$t"on 6A7 of th"s Se$t"on (h"$h the
!al&e of s&$h %art ears to the !al&e of h"s ent"re ,ross estate (here!er s"t&ated8
6/7 Pro%ert+ Pre!"o&sl+ Taxed. An a'o&nt e;&al to the !al&e s%e$"f"ed elo( of
an+ %ro%ert+ for'"n, %art of the ,ross estate s"t&ated "n the Ph"l"%%"nes of an+
%erson (ho d"ed ("th"n f"!e 6)7 +ears %r"or to the death of the de$edent# or
transferred to the de$edent + ,"ft ("th"n f"!e 6)7 +ears %r"or to h"s death# (here
s&$h %ro%ert+ $an e "dent"f"ed as ha!"n, een re$e"!ed + the de$edent fro' the
donor + ,"ft# or fro' s&$h %r"or de$edent + ,"ft# e;&est# de!"se or "nher"tan$e#
or (h"$h $an e "dent"f"ed as ha!"n, een a$;&"red "n ex$han,e for %ro%ert+ so
re$e"!ed-
One h&ndred %er$ent 620017 of the !al&e# "f the %r"or de$edent d"ed ("th"n one 627
+ear %r"or to the death of the de$edent# or "f the %ro%ert+ (as transferred to h"' +
,"ft# ("th"n the sa'e %er"od %r"or to h"s death8
E",ht+ %er$ent 68017 of the !al&e# "f the %r"or de$edent d"ed 'ore than one 627
+ear &t not 'ore than t(o 6/7 +ears %r"or to the death of the de$edent# or "f the
S"xt+ %er$ent 6*017 of the !al&e# "f the %r"or de$edent d"ed 'ore than t(o 6/7 +ears
&t not 'ore than three 637 +ears %r"or to the death of the de$edent# or "f the
%ro%ert+ (as transferred to h"' + ,"ft ("th"n the sa'e %er"od %r"or to h"s death-
<ort+ %er$ent 64017 of the !al&e# "f the %r"or de$edent d"ed 'ore than three 637
+ears &t not 'ore than fo&r 647 +ears %r"or to the death of the de$edent# or "f the
and
T(ent+ %er$ent 6/017 of the !al&e# "f the %r"or de$edent d"ed 'ore than fo&r 647
+ears &t not 'ore than f"!e 6)7 +ears %r"or to the death of the de$edent# or "f the
%ro%ert+ (as transferred to h"' + ,"ft ("th"n the sa'e %er"od %r"or to h"s death.
These ded&$t"ons shall e allo(ed onl+ (here a donor's tax# or estate tax "'%osed
&nder th"s T"tle "s f"nall+ deter'"ned and %a"d + or on ehalf of s&$h donor# or the
estate of s&$h %r"or de$edent# as the $ase 'a+ e# and onl+ "n the a'o&nt f"nall+
deter'"ned as the !al&e of s&$h %ro%ert+ "n deter'"n"n, the !al&e of the ,"ft# or the
,ross estate of s&$h %r"or de$edent# and onl+ to the extent that the !al&e of s&$h
%ro%ert+ "s "n$l&ded "n that %art of the de$edent's ,ross estate (h"$h at the t"'e of
h"s death "s s"t&ated "n the Ph"l"%%"nes8 and onl+ "f# "n deter'"n"n, the !al&e of the
net estate of the %r"or de$edent# no ded&$t"on "s allo(ale &nder %ara,ra%h 6/7 of
S&se$t"on 6.7 of th"s Se$t"on# "n res%e$t of the %ro%ert+ or %ro%ert"es ,"!en "n
ex$han,e therefore.
?here a ded&$t"on (as allo(ed of an+ 'ort,a,e or other l"en "n deter'"n"n, the
donor's tax# or the estate tax of the %r"or de$edent# (h"$h (as %a"d "n (hole or "n
%art %r"or to the de$edent's death# then the ded&$t"on allo(ale &nder sa"d
%ara,ra%h shall e red&$ed + the a'o&nt so %a"d.
S&$h ded&$t"on allo(ale shall e red&$ed + an a'o&nt (h"$h ears the sa'e
rat"o to the a'o&nts allo(ed as ded&$t"ons &nder %ara,ra%hs 627 and 637 of th"s
S&se$t"on as the a'o&nt other("se ded&$t"le &nder %ara,ra%h 6/7 ears to the
!al&e of that %art of the de$edent's ,ross estate (h"$h at the t"'e of h"s death "s
s"t&ated "n the Ph"l"%%"nes.
?here the %ro%ert+ referred to $ons"sts of t(o 6/7 or 'ore "te's# the a,,re,ate
!al&e of s&$h "te's shall e &sed for the %&r%ose of $o'%&t"n, the ded&$t"on.
637 Transfers for P&l"$ =se. The a'o&nt of all e;&ests# le,a$"es# de!"ses or
transfers to or for the &se of the 4o!ern'ent of the Re%&l"$ of the Ph"l"%%"nes or
an+ %ol"t"$al s&d"!"s"on thereof# for ex$l&s"!el+ %&l"$ %&r%oses.
6C7 Share "n the Con:&,al Pro%ert+. The net share of the s&r!"!"n, s%o&se "n the
$on:&,al %artnersh"% %ro%ert+ as d"'"n"shed + the ol",at"ons %ro%erl+ $har,eale
to s&$h %ro%ert+ shall# for the %&r%ose of th"s Se$t"on# e ded&$ted fro' the net
estate of the de$edent.
6D7 @"s$ellaneo&s Pro!"s"ons. No ded&$t"on shall e allo(ed "n the $ase of a
nonres"dent not a $"t"5en of the Ph"l"%%"nes# &nless the exe$&tor# ad'"n"strator# or
an+one of the he"rs# as the $ase 'a+ e# "n$l&des "n the ret&rn re;&"red to e f"led
&nder Se$t"on >0 the !al&e at the t"'e of h"s death of that %art of the ,ross estate of
the nonres"dent not s"t&ated "n the Ph"l"%%"nes.
6E7 Tax Cred"t for Estate Taxes Pa"d to a <ore",n Co&ntr+.
627 In 4eneral. The tax "'%osed + th"s T"tle shall e $red"ted ("th the a'o&nts
of an+ estate tax "'%osed + the a&thor"t+ of a fore",n $o&ntr+.
6/7 L"'"tat"ons on Cred"t. The a'o&nt of the $red"t ta9en &nder th"s Se$t"on
shall e s&:e$t to ea$h of the follo("n, l"'"tat"ons-
6a7 The a'o&nt of the $red"t "n res%e$t to the tax %a"d to an+ $o&ntr+ shall not
ex$eed the sa'e %ro%ort"on of the tax a,a"nst (h"$h s&$h $red"t "s ta9en# (h"$h the
de$edent's net estate s"t&ated ("th"n s&$h $o&ntr+ taxale &nder th"s T"tle ears to
h"s ent"re net estate8 and
67 The total a'o&nt of the $red"t shall not ex$eed the sa'e %ro%ort"on of the tax
a,a"nst (h"$h s&$h $red"t "s ta9en# (h"$h the de$edent's net estate s"t&ated o&ts"de
the Ph"l"%%"nes taxale &nder th"s T"tle ears to h"s ent"re net estate.
SECTION 8A. Exe'%t"on of Certa"n A$;&"s"t"ons and Trans'"ss"ons. The
follo("n, shall not e taxed-
6A7 The 'er,er of &s&fr&$t "n the o(ner of the na9ed t"tle8
6.7 The trans'"ss"on or del"!er+ of the "nher"tan$e or le,a$+ + the f"d&$"ar+ he"r
or le,atee to the f"de"$o''"ssar+8
6C7 The trans'"ss"on fro' the f"rst he"r# le,atee or donee "n fa!or of another
enef"$"ar+# "n a$$ordan$e ("th the des"re of the %rede$essor8 and
6D7 All e;&ests# de!"ses# le,a$"es or transfers to so$"al (elfare# $&lt&ral and
$har"tale "nst"t&t"ons# no %art of the net "n$o'e of (h"$h "n&res to the enef"t of
an+ "nd"!"d&al- Pro!"ded# ho(e!er# That not 'ore than th"rt+ %er$ent 63017 of the
sa"d e;&ests# de!"ses# le,a$"es or transfers shall e &sed + s&$h "nst"t&t"ons for
ad'"n"strat"on %&r%oses.
SECTION 88. Deter'"nat"on of the Cal&e of the Estate.
6A7 =s&fr&$t. To deter'"ne the !al&e of the r",ht of &s&fr&$t# &se or ha"tat"on#
as (ell as that of ann&"t+# there shall e ta9en "nto a$$o&nt the %roale l"fe of the
enef"$"ar+ "n a$$ordan$e ("th the latest .as"$ Standard @ortal"t+ Tale# to e
a%%ro!ed + the Se$retar+ of <"nan$e# &%on re$o''endat"on of the Ins&ran$e
Co''"ss"oner.
6.7 Pro%ert"es. The estate shall e a%%ra"sed at "ts fa"r 'ar9et !al&e as of the
t"'e of death. Ho(e!er# the a%%ra"sed !al&e of real %ro%ert+ as of the t"'e of death
shall e# (h"$he!er "s the h",her of
627 The fa"r 'ar9et !al&e as deter'"ned + the Co''"ss"oner# or
6/7 The fa"r 'ar9et !al&e as sho(n "n the s$hed&le of !al&es f"xed + the
Pro!"n$"al and C"t+ Assessors.
SECTION 8>. Not"$e of Death to e <"led. In all $ases of transfers s&:e$t
to tax# or (here# tho&,h exe'%t fro' tax# the ,ross !al&e of the estate ex$eeds
T(ent+ tho&sand %esos 6P/0#0007 the exe$&tor# ad'"n"strator or an+ of the le,al
he"rs# as the $ase 'a+ e# ("th"n t(o 6/7 'onths after the de$edent's death# or
("th"n a l"9e %er"od after ;&al"f+"n, as s&$h exe$&tor or ad'"n"strator# shall ,"!e a
(r"tten not"$e thereof to the Co''"ss"oner.
'9ligation to inform Commissioner of Internal Revenue of ta8%a6er@s deat* does not
a%%l6 to !ases involving defi!ien!6 in!ome ta8.
Se!tion "2# of t*e National Internal Revenue Code of "344 Fno7 Se!. =3 of NIRC of
"334G %ertains to Dall !ases of transfers su9:e!t to ta8D or 7*ere t*e Dgross value of t*e
estate e8!eeds t*ree t*ousand %esosD. It *as a9solutel6 no a%%li!a9ilit6 to a !ase for
defi!ien!6 in!ome ta8. It furt*er la!>s a%%li!a9ilit6 sin!e P*iltrust F7*i!* managed t*e
9usiness affairs of t*e de!easedG 7as never t*e e8e!utor, administrator of t*e de!edent@s
estate, and, as su!*, never *ad t*e legal o9ligation, 9ased on t*e a9ove %rovision, to
inform t*e Commissioner of Internal Revenue of *er deat*.
Estate of t*e Late Juliana ieHvda.de +a9riel vs. Commissioner of Internal Revenue,
+.R. No. "<<<#", Januar6 ;4, ;22#
SECTION >0. Estate Tax Ret&rns.
6A7 Re;&"re'ents. In all $ases of transfers s&:e$t to the tax "'%osed here"n# or
(here# tho&,h exe'%t fro' tax# the ,ross !al&e of the estate ex$eeds T(o h&ndred
tho&sand %esos 6P/00#0007# or re,ardless of the ,ross !al&e of the estate# (here the
sa"d estate $ons"sts of re,"stered or re,"strale %ro%ert+ s&$h as real %ro%ert+# 'otor
!eh"$le# shares of sto$9 or other s"'"lar %ro%ert+ for (h"$h a $learan$e fro' the
.&rea& of Internal Re!en&e "s re;&"red as a $ond"t"on %re$edent for the transfer of
o(nersh"% thereof "n the na'e of the transferee# the exe$&tor# or the ad'"n"strator#
or an+ of the le,al he"rs# as the $ase 'a+ e# shall f"le a ret&rn &nder oath "n
d&%l"$ate# sett"n, forth-
627 The !al&e of the ,ross estate of the de$edent at the t"'e of h"s death# or "n $ase
of a nonres"dent# not a $"t"5en of the Ph"l"%%"nes# of that %art of h"s ,ross estate
s"t&ated "n the Ph"l"%%"nes8
6/7 The ded&$t"ons allo(ed fro' ,ross estate "n deter'"n"n, the estate as def"ned
"n Se$t"on 8*8 and
637 S&$h %art of s&$h "nfor'at"on as 'a+ at the t"'e e as$erta"nale and s&$h
s&%%le'ental data as 'a+ e ne$essar+ to estal"sh the $orre$t taxes.
Pro!"ded# ho(e!er# That estate tax ret&rns sho("n, a ,ross !al&e ex$eed"n, T(o
'"ll"on %esos 6P/#000#0007 shall e s&%%orted ("th a state'ent d&l+ $ert"f"ed to +
a Cert"f"ed P&l"$ A$$o&ntant $onta"n"n, the follo("n,-
6a7 Ite'"5ed assets of the de$edent ("th the"r $orres%ond"n, ,ross !al&e at the t"'e
of h"s death# or "n the $ase of a nonres"dent# not a $"t"5en of the Ph"l"%%"nes# of that
%art of h"s ,ross estate s"t&ated "n the Ph"l"%%"nes8
67 Ite'"5ed ded&$t"ons fro' ,ross estate allo(ed "n Se$t"on 8*8 and
6$7 The a'o&nt of tax d&e (hether %a"d or st"ll d&e and o&tstand"n,.
6.7 T"'e for <"l"n,. <or the %&r%ose of deter'"n"n, the estate tax %ro!"ded for
"n Se$t"on 84 of th"s Code# the estate tax ret&rn re;&"red &nder the %re$ed"n,
S&se$t"on 6A7 shall e f"led ("th"n s"x 6*7 'onths fro' the de$edent's death.
A $ert"f"ed $o%+ of the s$hed&le of %art"t"on and the order of the $o&rt a%%ro!"n,
the sa'e shall e f&rn"shed the Co''"ss"oner ("th"n th"rt+ 6307 da+s after the
%ro'&l,at"on of s&$h order.
6C7 Extens"on of T"'e. The Co''"ss"oner shall ha!e a&thor"t+ to ,rant# "n
'er"tor"o&s $ases# a reasonale extens"on not ex$eed"n, th"rt+ 6307 da+s for f"l"n,
the ret&rn.
6D7 Pla$e of <"l"n,. Ex$e%t "n $ases (here the Co''"ss"oner other("se %er'"ts#
the ret&rn re;&"red &nder S&se$t"on 6A7 shall e f"led ("th an a&thor"5ed a,ent
an9# or Re!en&e D"str"$t Off"$er# Colle$t"on Off"$er# or d&l+ a&thor"5ed Treas&rer
of the $"t+ or '&n"$"%al"t+ "n (h"$h the de$edent (as do'"$"led at the t"'e of h"s
death or "f there e no le,al res"den$e "n the Ph"l"%%"nes# ("th the Off"$e of the
Co''"ss"oner.
'mission to file estate ta8 return and to !ontest ta8 assessment is fatal.
T*e omission to file an estate ta8 return, and t*e su9seJuent failure to !ontest or a%%eal
t*e assessment made 96 t*e $IR is fatal, as under t*e NIRC, in !ase of failure to file a
return, t*e ta8 ma6 9e assessed at an6 time 7it*in ten 6ears after t*e omission, and an6
ta8 so assessed ma6 9e !olle!ted 96 lev6 u%on real %ro%ert6 7it*in t*ree 6ears follo7ing
t*e assessment of t*e ta8. Sin!e t*e estate ta8 assessment *ad 9e!ome final and
una%%eala9le 96 t*e %etitioner@s default as regards %rotesting t*e validit6 of t*e said
assessment, t*ere is no7 no reason 7*6 t*e $IR !annot !ontinue 7it* t*e !olle!tion of
t*e said ta8. An6 o9:e!tion against t*e assessment s*ould *ave 9een %ursued follo7ing
t*e avenue %aved in Se!tion ;;3 of t*e NIRC on %rotests or assessments of internal
revenue ta8es.
(erdinand R. Mar!os II vs. Court of A%%eals, et al., +.R. No. ";2==2, June <, "334
SECTION >2. Pa+'ent of Tax.
6A7 T"'e of Pa+'ent. The estate tax "'%osed + Se$t"on 84 shall e %a"d at the
t"'e the ret&rn "s f"led + the exe$&tor# ad'"n"strator or the he"rs.
6.7 Extens"on of T"'e. ?hen the Co''"ss"oner f"nds that the %a+'ent on the
d&e date of the estate tax or of an+ %art thereof (o&ld "'%ose &nd&e hardsh"% &%on
the estate or an+ of the he"rs# he 'a+ extend the t"'e for %a+'ent of s&$h tax or
an+ %art thereof not to ex$eed f"!e 6)7 +ears# "n $ase the estate "s settled thro&,h the
$o&rts# or t(o 6/7 +ears "n $ase the estate "s settled extra:&d"$"all+.
In s&$h $ase# the a'o&nt "n res%e$t of (h"$h the extens"on "s ,ranted shall e %a"d
on or efore the date of the ex%"rat"on of the %er"od of the extens"on# and the
r&nn"n, of the Stat&te of L"'"tat"ons for assess'ent as %ro!"ded "n Se$t"on /03 of
th"s Code shall e s&s%ended for the %er"od of an+ s&$h extens"on.
?here the taxes are assessed + reason of ne,l",en$e# "ntent"onal d"sre,ard of r&les
and re,&lat"ons# or fra&d on the %art of the tax%a+er# no extens"on ("ll e ,ranted
+ the Co''"ss"oner.
If an extens"on "s ,ranted# the Co''"ss"oner 'a+ re;&"re the exe$&tor# or
ad'"n"strator# or enef"$"ar+# as the $ase 'a+ e# to f&rn"sh a ond "n s&$h a'o&nt#
not ex$eed"n, do&le the a'o&nt of the tax and ("th s&$h s&ret"es as the
Co''"ss"oner dee's ne$essar+# $ond"t"oned &%on the %a+'ent of the sa"d tax "n
a$$ordan$e ("th the ter's of the extens"on.
6C7 L"a"l"t+ for Pa+'ent. The estate tax "'%osed + Se$t"on 84 shall e %a"d +
the exe$&tor or ad'"n"strator efore del"!er+ to an+ enef"$"ar+ of h"s d"str"&t"!e
share of the estate. S&$h enef"$"ar+ shall# to the extent of h"s d"str"&t"!e share of
the estate# e s&s"d"ar"l+ l"ale for the %a+'ent of s&$h %ort"on of the estate tax as
h"s d"str"&t"!e share ears to the !al&e of the total net estate.
<or the %&r%ose of th"s Cha%ter# the ter' 'exe$&tor' or 'ad'"n"strator' 'eans the
exe$&tor or ad'"n"strator of the de$edent# or "f there "s no exe$&tor or
ad'"n"strator a%%o"nted# ;&al"f"ed# and a$t"n, ("th"n the Ph"l"%%"nes# then an+
%erson "n a$t&al or $onstr&$t"!e %ossess"on of an+ %ro%ert+ of the de$edent.
SECTION >/. D"s$har,e of Exe$&tor or Ad'"n"strator fro' Personal L"a"l"t+.
If the exe$&tor or ad'"n"strator 'a9es a (r"tten a%%l"$at"on to the
Co''"ss"oner for deter'"nat"on of the a'o&nt of the estate tax and d"s$har,e fro'
%ersonal l"a"l"t+ therefore# the Co''"ss"oner 6as soon as %oss"le# and "n an+
e!ent ("th"n one 627 +ear after the 'a9"n, of s&$h a%%l"$at"on# or "f the a%%l"$at"on
"s 'ade efore the ret&rn "s f"led# then ("th"n one 627 +ear after the ret&rn "s f"led#
&t not after the ex%"rat"on of the %er"od %res$r"ed for the assess'ent of the tax "n
Se$t"on /03 shall not"f+ the exe$&tor or ad'"n"strator of the a'o&nt of the tax. The
exe$&tor or ad'"n"strator# &%on %a+'ent of the a'o&nt of (h"$h he "s not"f"ed#
shall e d"s$har,ed fro' %ersonal l"a"l"t+ for an+ def"$"en$+ "n the tax thereafter
fo&nd to e d&e and shall e ent"tled to a re$e"%t or (r"t"n, sho("n, s&$h
d"s$har,e.
SECTION >3 Def"n"t"on of Def"$"en$+. As &sed "n th"s Cha%ter# the ter'
'def"$"en$+' 'eans-
6a7 The a'o&nt + (h"$h the tax "'%osed + th"s Cha%ter ex$eeds the a'o&nt
sho(n as the tax + the exe$&tor# ad'"n"strator or an+ of the he"rs &%on h"s ret&rn8
&t the a'o&nt so sho(n on the ret&rn shall f"rst e "n$reased + the a'o&nts
%re!"o&sl+ assessed 6or $olle$ted ("tho&t assess'ent7 as a def"$"en$+ and
de$reased + the a'o&nts %re!"o&sl+ aated# ref&nded or other("se re%a"d "n
res%e$t of s&$h tax8 or
67 If no a'o&nt "s sho(n as the tax + the exe$&tor# ad'"n"strator or an+ of the
he"rs &%on h"s ret&rn# or "f no ret&rn "s 'ade + the exe$&tor# ad'"n"strator# or an+
he"r# then the a'o&nt + (h"$h the tax ex$eeds the a'o&nts %re!"o&sl+ assessed 6or
$olle$ted ("tho&t assess'ent7 as a def"$"en$+8 &t s&$h a'o&nts %re!"o&sl+
assessed or $olle$ted ("tho&t assess'ent shall f"rst e de$reased + the a'o&nts
%re!"o&sl+ aated# ref&nded or other("se re%a"d "n res%e$t of s&$h tax.
SECTION >4. Pa+'ent .efore Del"!er+ + Exe$&tor or Ad'"n"strator. No
:&d,e shall a&thor"5e the exe$&tor or :&d"$"al ad'"n"strator to del"!er a d"str"&t"!e
share to an+ %art+ "nterested "n the estate &nless a $ert"f"$at"on fro' the
Co''"ss"oner that the estate tax has een %a"d "s sho(n.
A%%roval of %ro9ate !ourt is not a mandator6 reJuirement in !olle!tion of estate ta8es.
T*e a%%roval of t*e !ourt, sitting in %ro9ate, or as a settlement tri9unal over t*e
de!eased is not a mandator6 reJuirement in t*e !olle!tion of estate ta8es. T*ere is
not*ing in t*e Ta8 Code, and in t*e %ertinent remedial la7s t*at im%lies t*e ne!essit6 of
t*e %ro9ate or estate settlement !ourt@s a%%roval of t*e state@s !laim for estate ta8es,
9efore t*e same !an 9e enfor!ed and !olle!ted. -nder t*e NIRC, it is t*e %ro9ate or
settlement !ourt 7*i!* is 9idden not to aut*oriHe t*e e8e!utor or :udi!ial administrator of
t*e de!edent@s estate to deliver an6 distri9utive s*are to an6 %art6 interested in t*e estate,
unless it is s*o7n a Certifi!ation 96 t*e Commissioner of Internal Revenue t*at t*e estate
ta8es *ave 9een %aid. T*is %rovision dis%roves t*e !ontention t*at it is t*e %ro9ate !ourt
7*i!* a%%roves t*e assessment and !olle!tion of t*e estate ta8.
T*e delinJuent ta8%a6er is t*e Estate of de!edent and not t*e *eirs of t*e de!eased.
In t*e !ase of noti!es of lev6 issued to satisf6 t*e delinJuent estate ta8, t*e delinJuent
ta8%a6er is t*e Estate of t*e de!edent, and not ne!essaril6 and e8!lusivel6, t*e %etitioner
as *eir of t*e de!eased. In t*e same vein, in t*e matter of in!ome ta8 delinJuen!6 of t*e
late %resident and *is s%ouse, %etitioner is not t*e ta8%a6er lia9le. T*us, it follo7s t*at
servi!e of noti!es of lev6 in satisfa!tion of t*ese ta8 delinJuen!ies u%on t*e %etitioner is
not reJuired 96 la7, as under Se!tion ;"0 of t*e NIRC,
SECTION >). D&t"es of Certa"n Off"$ers and Detors. Re,"sters of Deeds
shall not re,"ster "n the Re,"str+ of Pro%ert+ an+ do$&'ent transferr"n, real
%ro%ert+ or real r",hts there"n or an+ $hattel 'ort,a,e# + (a+ of ,"fts "nter !"!os
or 'ort"s $a&sa# le,a$+ or "nher"tan$e# &nless a $ert"f"$at"on fro' the
Co''"ss"oner that the tax f"xed "n th"s T"tle and a$t&all+ d&e thereon had een
%a"d "s sho(n# and the+ shall "''ed"atel+ not"f+ the Co''"ss"oner# Re,"onal
D"re$tor# Re!en&e D"str"$t Off"$er or Re!en&e Colle$t"on Off"$er or Treas&rer of
the $"t+ or '&n"$"%al"t+ (here the"r off"$es are lo$ated# of the non%a+'ent of the
tax d"s$o!ered + the'.
An+ la(+er# notar+ %&l"$# or an+ ,o!ern'ent off"$er (ho# + reason of h"s off"$"al
d&t"es# "nter!enes "n the %re%arat"on or a$9no(led,'ent of do$&'ents re,ard"n,
%art"t"on or d"s%osal of donat"on "nter !"!os or 'ort"s $a&sa# le,a$+ or "nher"tan$e#
shall ha!e the d&t+ of f&rn"sh"n, the Co''"ss"oner# Re,"onal D"re$tor# Re!en&e
D"str"$t Off"$er or Re!en&e Colle$t"on Off"$er of the %la$e (here he 'a+ ha!e h"s
%r"n$"%al off"$e# ("th $o%"es of s&$h do$&'ents and an+ "nfor'at"on (hatsoe!er
(h"$h 'a+ fa$"l"tate the $olle$t"on of the afore'ent"oned tax.
Ne"ther shall a detor of the de$eased %a+ h"s dets to the he"rs# le,atee# exe$&tor
or ad'"n"strator of h"s $red"tor# &nless the $ert"f"$at"on of the Co''"ss"oner that
the tax f"xed "n th"s Cha%ter had een %a"d "s sho(n8 &t he 'a+ %a+ the exe$&tor
or :&d"$"al ad'"n"strator ("tho&t sa"d $ert"f"$at"on "f the $red"t "s "n$l&ded "n the
"n!entor+ of the estate of the de$eased.
SECTION >*. Rest"t&t"on of Tax =%on Sat"sfa$t"on of O&tstand"n,
Ol",at"ons. If# after the %a+'ent of the estate tax# ne( ol",at"ons of the
de$edent shall a%%ear# and the %ersons "nterested shall ha!e sat"sf"ed the' + order
of the $o&rt# the+ shall ha!e a r",ht to the rest"t&t"on of the %ro%ort"onal %art of the
tax %a"d.
SECTION >A. Pa+'ent of Tax Ante$edent to the Transfer of Shares# .onds or
R",hts. There shall not e transferred to an+ ne( o(ner "n the oo9s of an+
$or%orat"on# so$"edadanon"'a# %artnersh"%# &s"ness# or "nd&str+ or,an"5ed or
estal"shed "n the Ph"l"%%"nes an+ share# ol",at"on# ond or r",ht + (a+ of ,"ft
"nter !"!os or 'ort"s $a&sa# le,a$+ or "nher"tan$e# &nless a $ert"f"$at"on fro' the
Co''"ss"oner that the taxes f"xed "n th"s T"tle and d&e thereon ha!e een %a"d "s
sho(n.
If a an9 has 9no(led,e of the death of a %erson# (ho 'a"nta"ned a an9 de%os"t
a$$o&nt alone# or :o"ntl+ ("th another# "t shall not allo( an+ ("thdra(al fro' the
sa"d de%os"t a$$o&nt# &nless the Co''"ss"oner has $ert"f"ed that the taxes "'%osed
thereon + th"s T"tle ha!e een %a"d8
Pro!"ded# ho(e!er# That the ad'"n"strator of the estate or an+ one 627 of the he"rs
of the de$edent 'a+# &%on a&thor"5at"on + the Co''"ss"oner# ("thdra( an
a'o&nt not ex$eed"n, T(ent+ tho&sand %esos 6P/0#0007 ("tho&t the sa"d
$ert"f"$at"on. <or th"s %&r%ose# all ("thdra(al sl"%s shall $onta"n a state'ent to the
effe$t that all of the :o"nt de%os"tors are st"ll l"!"n, at the t"'e of ("thdra(al + an+
one of the :o"nt de%os"tors and s&$h state'ent shall e &nder oath + the sa"d
de%os"tors.
CHAPTER II
Donor's Tax
SECTION >8 I'%os"t"on of Tax
6A7 There shall e le!"ed# assessed# $olle$ted and %a"d &%on the transfer + an+
%erson# res"dent or nonres"dent# of the %ro%ert+ + ,"ft# a tax# $o'%&ted as %ro!"ded
"n Se$t"on >>.
6.7 The tax shall a%%l+ (hether the transfer "s "n tr&st or other("se# (hether the
,"ft "s d"re$t or "nd"re$t# and (hether the %ro%ert+ "s real or %ersonal# tan,"le or
"ntan,"le.
SECTION >> Rates of Tax Pa+ale + Donor.
6A7 In 4eneral. The tax for ea$h $alendar +ear shall e $o'%&ted on the as"s of
the total net ,"fts 'ade d&r"n, the $alendar +ear "n a$$ordan$e ("th the follo("n,
s$hed&le-
If the net ,"ft "s-
DO!er .&t Not O!er The Tax Shall .e Pl&s Of the Ex$ess O!er
P100,000 Exempt
P100,000 200,000 0 2% P100,000
200,000 500,000 2,000 4% 200,000
500,000 1,000,000 14,000 6% 500,000
1,000,000 3,000,000 44,000 8% 1,000,000
3,000,000 5,000,000 204,000 10% 3,000,000
5,000,000 10,000,000 404,000 12% 5,000,000
10,000,000 1,004,000 15% 10,000,000
6.7 Tax Pa+ale + Donor "f Donee "s a Stran,er ?hen the donee or enef"$"ar+
"s a stran,er# the tax %a+ale + the donor shall e th"rt+ %er$ent 63017 of the net
,"fts. <or the %&r%ose of th"s tax# a 'stran,er' "s a %erson (ho "s not a-
627 .rother# s"ster 6(hether + (hole or halfBlood7# s%o&se# an$estor and l"neal
des$endant8 or
6/7 Relat"!e + $onsan,&"n"t+ "n the $ollateral l"ne ("th"n the fo&rth de,ree of
relat"onsh"%.
6C7 An+ $ontr"&t"on "n $ash or "n 9"nd to an+ $and"date# %ol"t"$al %art+ or $oal"t"on
of %art"es for $a'%a",n %&r%oses shall e ,o!erned + the Ele$t"on Code# as
a'ended.
REVEN-E RE+-LATI'NS N'. 22=/23 '!to9er ;;, ;223
Amending (urt*er Se!s. ;.<4.; and ;.<4.0 of Revenue Regulations No. ;/3=, as
Amended, Su9:e!ting to Credita9le Iit**olding Ta8 t*e In!ome Pa6ments Made 96
Politi!al Parties and Candidates of Lo!al and National Ele!tions of All T*eir Cam%aign
E8%enditures and In!ome Pa6ments Made 96 an Individual or Juridi!al Person (orming
Part of T*eir Cam%aign Contri9utions to Candidates of Lo!al and National Ele!tions
and to Politi!al Parties
REVEN-E RE+-LATI'NS N'. 224/"" (e9ruar6 "1, ;2""
Poli!ies in t*e Ta8 Treatment of Cam%aign Contri9utions and E8%enditures
SECTION 200. Transfer for Less Than Ade;&ate and <&ll Cons"derat"on.
?here %ro%ert+# other than real %ro%ert+ referred to "n Se$t"on /46D7# "s
transferred for less than an ade;&ate and f&ll $ons"derat"on "n 'one+ or 'one+'s
(orth# then the a'o&nt + (h"$h the fa"r 'ar9et !al&e of the %ro%ert+ ex$eeded the
!al&e of the $ons"derat"on shall# for the %&r%ose of the tax "'%osed + th"s Cha%ter#
e dee'ed a ,"ft# and shall e "n$l&ded "n $o'%&t"n, the a'o&nt of ,"fts 'ade
d&r"n, the $alendar +ear.
SECTION 202. Exe'%t"on of Certa"n 4"fts. The follo("n, ,"fts or
donat"ons shall e exe'%t fro' the tax %ro!"ded for "n th"s Cha%ter-
6A7 In the Case of 4"fts @ade + a Res"dent.
627 Do(r"es or ,"fts 'ade on a$$o&nt of 'arr"a,e and efore "ts $elerat"on or
("th"n one +ear thereafter + %arents to ea$h of the"r le,"t"'ate# re$o,n"5ed nat&ral#
or ado%ted $h"ldren to the extent of the f"rst Ten tho&sand %esos 6P20#00078
6/7 4"fts 'ade to or for the &se of the Nat"onal 4o!ern'ent or an+ ent"t+ $reated
+ an+ of "ts a,en$"es (h"$h "s not $ond&$ted for %rof"t# or to an+ %ol"t"$al
s&d"!"s"on of the sa"d 4o!ern'ent8 and
637 4"fts "n fa!or of an ed&$at"onal andEor $har"tale# rel","o&s# $&lt&ral or so$"al
(elfare $or%orat"on# "nst"t&t"on# a$$red"ted non ,o!ern'ent or,an"5at"on# tr&st or
%h"lanthro%"$ or,an"5at"on or resear$h "nst"t&t"on or or,an"5at"on- Pro!"ded#
ho(e!er# That not 'ore than th"rt+ %er$ent 63017 of sa"d ,"fts shall e &sed +
s&$h donee for ad'"n"strat"on %&r%oses.
<or the %&r%ose of th"s exe'%t"on# a 'nonB%rof"t ed&$at"onal andEor $har"tale
$or%orat"on# "nst"t&t"on# a$$red"ted non ,o!ern'ent or,an"5at"on# tr&st or
%h"lanthro%"$ or,an"5at"on andEor resear$h "nst"t&t"on or or,an"5at"on' "s a s$hool#
$olle,e or &n"!ers"t+ andEor $har"tale $or%orat"on# a$$red"ted non ,o!ern'ent
or,an"5at"on# tr&st or %h"lanthro%"$ or,an"5at"on andEor resear$h "nst"t&t"on or
or,an"5at"on# "n$or%orated as a non sto$9 ent"t+# %a+"n, no d"!"dends# ,o!erned +
tr&stees (ho re$e"!e no $o'%ensat"on# and de!ot"n, all "ts "n$o'e# (hether
st&dents' fees or ,"fts# donat"ons# s&s"d"es or other for's of %h"lanthro%+# to the
a$$o'%l"sh'ent and %ro'ot"on of the %&r%oses en&'erated "n "ts Art"$les of
In$or%orat"on.
6.7 In the Case of 4"fts @ade + a Nonres"dent not a C"t"5en of the Ph"l"%%"nes.
627 4"fts 'ade to or for the &se of the Nat"onal 4o!ern'ent or an+ ent"t+ $reated
+ an+ of "ts a,en$"es (h"$h "s not $ond&$ted for %rof"t# or to an+ %ol"t"$al
s&d"!"s"on of the sa"d 4o!ern'ent.
6/7 4"fts "n fa!or of an ed&$at"onal andEor $har"tale# rel","o&s# $&lt&ral or so$"al
(elfare $or%orat"on# "nst"t&t"on# fo&ndat"on# tr&st or %h"lanthro%"$ or,an"5at"on or
resear$h "nst"t&t"on or or,an"5at"on- Pro!"ded# ho(e!er# That not 'ore than th"rt+
%er$ent 63017 of sa"d ,"fts shall e &sed + s&$h donee for ad'"n"strat"on
%&r%oses.
6C7 Tax Cred"t for Donor's Taxes Pa"d to a <ore",n Co&ntr+.
627 In 4eneral. The tax "'%osed + th"s T"tle &%on a donor (ho (as a $"t"5en or
a res"dent at the t"'e of donat"on shall e $red"ted ("th the a'o&nt of an+ donor's
tax of an+ $hara$ter and des$r"%t"on "'%osed + the a&thor"t+ of a fore",n $o&ntr+.
6/7 L"'"tat"ons on Cred"t. The a'o&nt of the $red"t ta9en &nder th"s Se$t"on
shall e s&:e$t to ea$h of the follo("n, l"'"tat"ons-
6a7 The a'o&nt of the $red"t "n res%e$t to the tax %a"d to an+ $o&ntr+ shall not
ex$eed the sa'e %ro%ort"on of the tax a,a"nst (h"$h s&$h $red"t "s ta9en# (h"$h the
net ,"fts s"t&ated ("th"n s&$h $o&ntr+ taxale &nder th"s T"tle ears to h"s ent"re net
,"fts8 and
67 The total a'o&nt of the $red"t shall not ex$eed the sa'e %ro%ort"on of the tax
a,a"nst (h"$h s&$h $red"t "s ta9en# (h"$h the donor's net ,"fts s"t&ated o&ts"de the
Ph"l"%%"nes taxale &nder th"s T"tle ears to h"s ent"re net ,"fts.
Elements of a !*arita9le institutionPentit6.
In t*e legal sense, a !*arit6 ma6 9e full6 defined as a gift, to 9e a%%lied !onsistentl6 7it*
e8isting la7s, for t*e 9enefit of an indefinite num9er of %ersons, eit*er 96 9ringing t*eir
minds and *earts under t*e influen!e of edu!ation or religion, 96 assisting t*em to
esta9lis* t*emselves in life or ot*er7ise lessening t*e 9urden of government. It ma6 9e
a%%lied to almost an6t*ing t*at tend to %romote t*e 7ell/doing and 7ell/9eing of so!ial
man. It em9ra!es t*e im%rovement and %romotion of t*e *a%%iness of man. To determine
7*et*er an enter%rise is a !*arita9le institutionPentit6 or not, t*e elements 7*i!* s*ould
9e !onsidered in!lude t*e statute !reating t*e enter%rise, its !or%orate %ur%oses, its
!onstitution and 96/la7s, t*e met*ods of administration, t*e nature of t*e a!tual 7or>
%erformed, t*e !*ara!ter of t*e servi!es rendered, t*e indefiniteness of t*e 9enefi!iaries,
and t*e use and o!!u%ation of t*e %ro%erties. T*e 7ord D!*arita9leD is not restri!ted to
relief of t*e %oor or si!>. T*e test of a !*arit6 and a !*arita9le organiHation are in la7
t*e same. T*e test 7*et*er an enter%rise is !*arita9le or not is 7*et*er it e8ists to !arr6
out a %ur%ose reorganiHed in la7 as !*arita9le or 7*et*er it is maintained for gain,
%rofit, or %rivate advantage. %rem2<!d
Lung Center of t*e P*il. vs. QueHon Cit6, et al., +.R. No. "##"2#, June ;3, ;22#
A !*arita9le institution does not lose its !*ara!ter as su!* and its e8em%tion from ta8es
sim%l6 9e!ause it derives in!ome from %a6ing %atients.
As a general %rin!i%le, a !*arita9le institution does not lose its !*ara!ter as su!* and its
e8em%tion from ta8es sim%l6 9e!ause it derives in!ome from %a6ing %atients, 7*et*er
out/%atient, or !onfined in t*e *os%ital, or re!eives su9sidies from t*e government, so
long as t*e mone6 re!eived is devoted or used altoget*er to t*e !*arita9le o9:e!t 7*i!* it
is intended to a!*ieve? and no mone6 inures to t*e %rivate 9enefit of t*e %ersons
managing or o%erating t*e institution.
Lung Center of t*e P*il. vs. QueHon Cit6, et al., +.R. No. "##"2#, June ;3, ;22#
SECTION 20/. Cal&at"on of 4"fts @ade "n Pro%ert+. If the ,"ft "s 'ade "n
%ro%ert+# the fa"r 'ar9et !al&e thereof at the t"'e of the ,"ft shall e $ons"dered the
a'o&nt of the ,"ft. In $ase of real %ro%ert+# the %ro!"s"ons of Se$t"on 886.7 shall
a%%l+ to the !al&at"on thereof.
SECTION 203. <"l"n, of Ret&rn and Pa+'ent of Tax.
6A7 Re;&"re'ents. An+ "nd"!"d&al (ho 'a9es an+ transfer + ,"ft 6ex$e%t those
(h"$h# &nder Se$t"on 202# are exe'%t fro' the tax %ro!"ded for "n th"s Cha%ter7
shall# for the %&r%ose of the sa"d tax# 'a9e a ret&rn &nder oath "n d&%l"$ate. The
ret&rn shall set forth-
627 Ea$h ,"ft 'ade d&r"n, the $alendar +ear (h"$h "s to e "n$l&ded "n $o'%&t"n,
net ,"fts8
6/7 The ded&$t"ons $la"'ed and allo(ale8
637 An+ %re!"o&s net ,"fts 'ade d&r"n, the sa'e $alendar +ear8
647 The na'e of the donee8 and
6)7 S&$h f&rther "nfor'at"on as 'a+ e re;&"red + r&les and re,&lat"ons 'ade
%&rs&ant to la(.
6.7 T"'e and Pla$e of <"l"n, and Pa+'ent. The ret&rn of the donor re;&"red
"n th"s Se$t"on shall e f"led ("th"n th"rt+ 6307 da+s after the date the ,"ft "s 'ade
and the tax d&e thereon shall e %a"d at the t"'e of f"l"n,. Ex$e%t "n $ases (here
the Co''"ss"oner other("se %er'"ts# the ret&rn shall e f"led and the tax %a"d to an
a&thor"5ed a,ent an9# the Re!en&e D"str"$t Off"$er# Re!en&e Colle$t"on Off"$er or
d&l+ a&thor"5ed Treas&rer of the $"t+ or '&n"$"%al"t+ (here the donor (as
do'"$"led at the t"'e of the transfer# or "f there e no le,al res"den$e "n the
Ph"l"%%"nes# ("th the Off"$e of the Co''"ss"oner. In the $ase of ,"fts 'ade + a
nonres"dent# the ret&rn 'a+ e f"led ("th the Ph"l"%%"ne E'ass+ or Cons&late "n
the $o&ntr+ (here he "s do'"$"led at the t"'e of the transfer# or d"re$tl+ ("th the
Off"$e of the Co''"ss"oner.
T*e filing of t*e return and %a6ment of donor@s ta8es are mandator6.
-nder t*e National Internal Revenue Code of "344, t*e ta8 !ode in for!e at t*e time of
t*e e8e!ution of t*e deed, an individual 7*o ma>es an6 transfer 96 gift s*all ma>e a
return and file t*e same 7it*in 02 da6s after t*e date t*e gift is made 7it* t*e Revenue
istri!t 'ffi!er, Colle!tion Agent or dul6 aut*oriHed Treasurer of t*e muni!i%alit6 in
7*i!* t*e donor 7as domi!iled at t*e time of t*e transfer. T*e filing of t*e return and
%a6ment of donorOs ta8es are mandator6. In fa!t, t*e registrar of deeds is mandated not to
register in t*e registr6 of %ro%ert6 an6 do!ument transferring real %ro%ert6 96 7a6 of
gifts inter vivos unless a !ertifi!ation t*at t*e ta8es fi8ed and a!tuall6 due on t*e transfer
*ad 9een %aid or t*at t*e transa!tion is ta8 e8em%t from t*e Commissioner of Internal
Revenue, in eit*er !ase, is %resented.
L6dia Sumi%at, et al. vs. $rigido$anga, et al., +.R. No. "<<="2, August "0, ;22#
SECTION 204.Def"n"t"ons. <or %&r%oses of th"s T"tle# the ter's ',ross estate'
and ',"fts' "n$l&de real and %ersonal %ro%ert+# (hether tan,"le or "ntan,"le# or
'"xed# (here!er s"t&ated- Pro!"ded# ho(e!er# That (here the de$edent or donor
(as a nonres"dent al"en at the t"'e of h"s death or donat"on# as the $ase 'a+ e# h"s
real and %ersonal %ro%ert+ so transferred &t (h"$h are s"t&ated o&ts"de the
Ph"l"%%"nes shall not e "n$l&ded as %art of h"s ',ross estate' or ',ross ,"ft'-
Pro!"ded# f&rther# That fran$h"se (h"$h '&st e exer$"sed "n the Ph"l"%%"nes8
shares# ol",at"ons or onds "ss&ed + an+ $or%orat"on or so$"edadanon"'a
or,an"5ed or $onst"t&ted "n the Ph"l"%%"nes "n a$$ordan$e ("th "ts la(s8 shares#
ol",at"ons or onds + an+ fore",n $or%orat"on e",ht+Bf"!e %er$ent 68)17 of the
&s"ness of (h"$h "s lo$ated "n the Ph"l"%%"nes# shares# ol",at"ons or onds "ss&ed
+ an+ fore",n $or%orat"on "f s&$h shares# ol",at"ons or onds ha!e a$;&"red a
&s"ness s"t&s "n the Ph"l"%%"nes8 shares or r",hts "n an+ %artnersh"%# &s"ness or
"nd&str+ estal"shed "n the Ph"l"%%"nes# shall e $ons"dered as s"t&ated "n the
Ph"l"%%"nes-
Pro!"ded# st"ll f&rther# That no tax shall e $olle$ted &nder th"s T"tle "n res%e$t of
"ntan,"le %ersonal %ro%ert+-
6a7 "f the de$edent at the t"'e of h"s death or the donor at the t"'e of the donat"on
(as a $"t"5en and res"dent of a fore",n $o&ntr+ (h"$h at the t"'e of h"s death or
donat"on d"d not "'%ose a transfer tax of an+ $hara$ter# "n res%e$t of "ntan,"le
%ersonal %ro%ert+ of $"t"5ens of the Ph"l"%%"nes not res"d"n, "n that fore",n $o&ntr+#
or
67 "f the la(s of the fore",n $o&ntr+ of (h"$h the de$edent or donor (as a $"t"5en
and res"dent at the t"'e of h"s death or donat"on allo(s a s"'"lar exe'%t"on fro'
transfer or death taxes of e!er+ $hara$ter or des$r"%t"on "n res%e$t of "ntan,"le
%ersonal %ro%ert+ o(ned + $"t"5ens of the Ph"l"%%"nes not res"d"n, "n that fore",n
$o&ntr+.
The ter' 'def"$"en$+' 'eans- 6a7 the a'o&nt + (h"$h the tax "'%osed + th"s
Cha%ter ex$eeds the a'o&nt sho(n as the tax + the donor &%on h"s ret&rn8 &t the
a'o&nt so sho(n on the ret&rn shall f"rst e "n$reased + the a'o&nt %re!"o&sl+
assessed 6or $olle$ted ("tho&t assess'ent7 as a def"$"en$+# and de$reased + the
a'o&nts %re!"o&sl+ aated# ref&nded or other("se re%a"d "n res%e$t of s&$h tax# or
67 "f no a'o&nt "s sho(n as the tax + the donor# then the a'o&nt + (h"$h the
tax ex$eeds the a'o&nts %re!"o&sl+ assessed 6or $olle$ted ("tho&t assess'ent7 as a
def"$"en$+# &t s&$h a'o&nt %re!"o&sl+ assessed# or $olle$ted ("tho&t assess'ent#
shall f"rst e de$reased + the a'o&nt %re!"o&sl+ aated# ref&nded or other("se
re%a"d "n res%e$t of s&$h tax.
TITLE IC
Cal&eBAdded Tax
CHAPTER I
I'%os"t"on of Tax
SECTION 20). Persons L"ale. An+ %erson (ho# "n the $o&rse of trade or
&s"ness# sells# arters# ex$han,es# leases ,oods or %ro%ert"es# renders ser!"$es# and
an+ %erson (ho "'%orts ,oods shall e s&:e$t to the !al&eBadded tax 6CAT7
"'%osed "n Se$t"ons 20* to 208 of th"s Code.
The !al&eBadded tax "s an "nd"re$t tax and the a'o&nt of tax 'a+ e sh"fted or
%assed on to the &+er# transferee or lessee of the ,oods# %ro%ert"es or ser!"$es.
Th"s r&le shall l"9e("se a%%l+ to ex"st"n, $ontra$ts of sale or lease of ,oods#
%ro%ert"es or ser!"$es at the t"'e of the effe$t"!"t+ of Re%&l"$ A$t No. AA2*.
The %hrase '"n the $o&rse of trade or &s"ness' 'eans the re,&lar $ond&$t or %&rs&"t
of a $o''er$"al or an e$ono'"$ a$t"!"t+# "n$l&d"n, transa$t"ons "n$"dental thereto#
+ an+ %erson re,ardless of (hether or not the %erson en,a,ed there"n "s a
nonsto$9# non%rof"t %r"!ate or,an"5at"on 6"rres%e$t"!e of the d"s%os"t"on of "ts net
"n$o'e and (hether or not "t sells ex$l&s"!el+ to 'e'ers or the"r ,&ests7# or
,o!ern'ent ent"t+.
The r&le of re,&lar"t+# to the $ontrar+ not("thstand"n,# ser!"$es as def"ned "n th"s
Code rendered "n the Ph"l"%%"nes + nonres"dent fore",n %ersons shall e
$ons"dered as e"n, rendered "n the $o&rse of trade or &s"ness.
A$ALAA +-R' PART, LIST '((ICER SAMS'N S. ALCANTARA, ET AL.,
%etitioners, vs. T&E &'N. EAEC-TIVE SECRETAR, E-AR' R. ERMITA,
res%ondents. .+.R. No. "1=2<1. '!to9er "=, ;22<.5
AQ-ILIN' Q. PIMENTEL, JR., ET AL., %etitioners, vs. EAEC-TIVE SECRETAR,
E-AR' R. ERMITA, ET AL., res%ondents..+.R. No. "1=;24. '!to9er "=, ;22<.5
ASS'CIATI'N '( PILIPINAS S&ELL EALERS, INC., ET AL., %etitioners, vs. CESAR
V. P-RISIMA, ET AL., res%ondents. .+.R. No. "1=#1". '!to9er "=, ;22<.5
(RANCIS J'SEP& +. ESC-ER', ET AL., %etitioners, vs. CESAR V. P-RISIMA, ET
AL., res%ondents. .+.R. No. "1=#10. '!to9er "=, ;22<.5
$ATAAN +'VERN'R ENRIQ-E T. +ARCIA, JR., %etitioner, vs. &'N. SECRETAR,
E-AR' R. ERMITA, ET AL., res%ondents. .+.R. No. "1=402. '!to9er "=, ;22<.5
R E S ' L - T I ' N
Quoted *ereunder, for 6our information, is a resolution of t*e Court of En $an! dated "=
'!to9er ;22<
+.R. No. "1=2<1 FA$ALAA +uro Part6 List 'ffi!er Samson S. Al!antara, et al. vs. T*e
&on. E8e!utive Se!retar6 Eduardo R. ErmitaG? +.R. No. "1=;24 FAJuilino Q. Pimentel,
Jr., et al. vs. E8e!utive Se!retar6 Eduardo R. Ermita, et al.G? +.R. No. "1=#1"
FAsso!iation of Pili%inas S*ell ealers, In!., et al. vs. Cesar V. Purisima, et al.G? +.R. No.
"1=#10 F(ran!is Jose%* +. Es!udero vs. Cesar V. Purisima, et alG? and +.R. No. "1=402
F$ataan +overnor EnriJue T. +ar!ia, Jr. vs. &on. Eduardo R. Ermita, et al.G
(or resolution are t*e follo7ing motions for re!onsideration of t*e Court@s e!ision
dated Se%tem9er ", ;22< u%*olding t*e !onstitutionalit6 of Re%u9li! A!t No. 3004 or t*e
VAT Reform A!t " C
"G Motion for Re!onsideration filed 96 %etitioners in +.R. No. "1=#10, Es!udero, et
al., on t*e follo7ing groundsC
A. T&E ELETI'N '( T&E DN' PASS 'N PR'VISI'NSD ('R T&E SALE '(
PETR'LE-M PR'-CTS AN P'IER +ENERATI'N SERVICES C'NSTIT-TE
+RAVE A$-SE '( ISCRETI'N AM'-NTIN+ T' LACL 'R EACESS '(
J-RISICTI'N 'N T&E PART '( T&E $ICAMERAL C'N(ERENCE C'MMITTEE.
$. REP-$LIC ACT N'. 3004 +R'SSL, VI'LATES T&E C'NSTIT-TI'NAL
IMPERATIVE 'N EACL-SIVE 'RI+INATI'N '( REVEN-E $ILLS -NER R;#,
ARTICLE VI, "3=4 P&ILIPPINE C'NSTIT-TI'N.
C. REP-$LIC ACT N'. 3004@S STAN/$, A-T&'RIT, T' T&E EAEC-TIVE T'
INCREASE T&E VAT RATE, ESPECIALL, 'N ACC'-NT '( T&E E((ECTIVE
REC'MMENAT'R, P'IER +RANTE T' T&E SECRETAR, '( (INANCE,
C'NSTIT-TES -N-E ELE+ATI'N '( LE+ISLATIVE A-T&'RIT,.
;G Motion for Re!onsideration of %etitioner in +.R. No. "1=402, $ataan +overnor
EnriJue T. +ar!ia, Jr., 7it* t*e argument t*at 9urdening t*e !onsumers 7it* signifi!antl6
*ig*er %ri!es under a VAT regime vis/S/vis a 0E gross ta8 renders t*e la7
un!onstitutional for 9eing ar9itrar6, o%%ressive and ineJuita9le.
and
0G Motion for Re!onsideration 96 %etitioners Asso!iation of Pili%inas S*ell ealers,
In!. in +.R. No. "1=#1", on t*e grounds t*atC
I. T*is &onora9le Court erred in u%*olding t*e !onstitutionalit6 of Se!tion ""2FAG
F;G and Se!tion ""2F$G of t*e NIRC, as amended 96 t*e EVAT La7, im%osing limitations
on t*e amount of in%ut VAT t*at ma6 9e !laimed as a !redit against out%ut VAT, as 7ell
as Se!tion ""#FCG of t*e NIRC, as amended 96 t*e EVAT La7, reJuiring t*e government
or an6 of its instrumentalities to 7it**old a <E final 7it**olding VAT on t*eir gross
%a6ments on %ur!*ases of goods and servi!es, and finding t*at t*e Juestioned %rovisionsC
A. are not ar9itrar6, o%%ressive and !onfis!ator6 as to amount to a de%rivation of
%ro%ert6 7it*out due %ro!ess of la7 in violation of Arti!le III, Se!tion " of t*e "3=4
P*ili%%ine Constitution?
$. do not violate t*e eJual %rote!tion !lause %res!ri9ed under Arti!le III, Se!tion " of
t*e "3=4 P*ili%%ine Constitution? and
C. a%%l6 uniforml6 to all t*ose 9elonging to t*e same !lass and do not violate Arti!le
VI, Se!tion ;=F"G of t*e "3=4 P*ili%%ine Constitution.
II. T*is &onora9le Court erred in u%*olding t*e !onstitutionalit6 of Se!tion ""2F$G of
t*e NIRC, as amended 96 t*e EVAT La7, im%osing a limitation on t*e amount of in%ut
VAT t*at ma6 9e !laimed as a !redit against out%ut VAT not7it*standing t*e finding t*at
t*e ta8 is not %rogressive as e8*orted 96 Arti!le VI, Se!tion ;=F"G of t*e "3=4 P*ili%%ine
Constitution.
Res%ondents filed t*eir Consolidated Comment. Petitioner +ar!ia filed *is Re%l6.
Petitioners Es!udero, et al., insist t*at t*e 9i!ameral !onferen!e !ommittee s*ould not
even *ave a!ted on t*e no %ass/on %rovisions sin!e t*ere is no disagreement 9et7een
&ouse $ill Nos. 042< and 0<<< on t*e one *and, and Senate $ill No. "3<2 on t*e ot*er,
7it* regard to t*e no %ass/on %rovision for t*e sale of servi!e for %o7er generation
9e!ause 9ot* t*e Senate and t*e &ouse 7ere in agreement t*at t*e VAT 9urden for t*e
sale of su!* servi!e s*all not 9e %assed on to t*e end/!onsumer. As to t*e no %ass/on
%rovision for sale of %etroleum %rodu!ts, %etitioners argue t*at t*e fa!t t*at t*e %resen!e
of su!* a no %ass/on %rovision in t*e &ouse version and t*e a9sen!e t*ereof in t*e Senate
$ill means t*ere is no !onfli!t 9e!ause Da &ouse %rovision !annot 9e in !onfli!t 7it*
somet*ing t*at does not e8ist.D
Su!* argument is fla7ed. Note t*at t*e rules of 9ot* *ouses of Congress %rovide t*at a
!onferen!e !ommittee s*all settle t*e Ddifferen!esD in t*e res%e!tive 9ills of ea!* *ouse.
Veril6, t*e fa!t t*at a no %ass/on %rovision is %resent in one version 9ut a9sent in t*e
ot*er, and one version intends t7o industries, i.e., %o7er generation !om%anies and
%etroleum sellers, to 9ear t*e 9urden of t*e ta8, 7*ile t*e ot*er version intended onl6 t*e
industr6 of %o7er generation, transmission and distri9ution to 9e saddled 7it* su!*
9urden, !learl6 s*o7s t*at t*ere are indeed differen!es 9et7een t*e 9ills !oming from
ea!* *ouse, 7*i!* differen!es s*ould 9e a!ted u%on 96 t*e 9i!ameral !onferen!e
!ommittee. It is in!orre!t to !on!lude t*at t*ere is no !las* 9et7een t7o o%%osing for!es
7it* regard to t*e no %ass/on %rovision for VAT on t*e sale of %etroleum %rodu!ts merel6
9e!ause su!* %rovision e8ists in t*e &ouse version 7*ile it is a9sent in t*e Senate
version. It is %re!isel6 t*e a9sen!e of su!* %rovision in t*e Senate 9ill and t*e %resen!e
t*ereof in t*e &ouse 9ills t*at !auses t*e !onfli!t. T*e a9sen!e of t*e %rovision in t*e
Senate 9ill s*o7s t*e Senate@s disagreement to t*e intention of t*e &ouse of
Re%resentatives ma>e t*e sellers of %etroleum 9ear t*e 9urden of t*e VAT. T*us, t*ere are
indeed t7o o%%osing for!esC on one side, t*e &ouse of Re%resentatives 7*i!* 7ants
%etroleum dealers to 9e saddled 7it* t*e 9urden of %a6ing VAT and on t*e ot*er, t*e
Senate 7*i!* does not see it %ro%er to ma>e t*at %arti!ular industr6 9ear said 9urden.
Clearl6, su!* !onfli!ts and differen!es 9et7een t*e no %ass/on %rovisions in t*e Senate
and &ouse 9ills *ad to 9e a!ted u%on 96 t*e 9i!ameral !onferen!e !ommittee as
mandated 96 t*e rules of 9ot* *ouses of Congress.
Moreover, t*e deletion of t*e no %ass/on %rovision made t*e %resent VAT la7 more in
!onsonan!e 7it* t*e ver6 nature of VAT 7*i!*, as stated in t*e e!ision %romulgated on
Se%tem9er ", ;22<, is a ta8 on s%ending or !onsum%tion, t*us, t*e 9urden t*ereof is
ultimatel6 9orne 96 t*e end/!onsumer.
Es!udero, et al., t*en !laim t*at t*ere *ad 9een !*anges introdu!ed in t*e Rules of t*e
&ouse of Re%resentatives regarding t*e !ondu!t of t*e &ouse %anel in a 9i!ameral
!onferen!e !ommittee, sin!e t*e time of Tolentino vs. Se!retar6 of (inan!e ; to a!t as
safeguards against %ossi9le a9use of aut*orit6 96 t*e &ouse mem9ers of t*e 9i!ameral
!onferen!e !ommittee. Even assuming t*at t*e rule reJuiring t*e &ouse %anel to re%ort
9a!> to t*e &ouse if t*ere are su9stantial differen!es in t*e &ouse and Senate 9ills *ad
indeed 9een introdu!ed after Tolentino, t*e Court stands 96 its ruling t*at t*e issue of
7*et*er or not t*e &ouse %anel in t*e 9i!ameral !onferen!e !ommittee !om%lied 7it*
said internal rule !annot 9e inJuired into 96 t*e Court. To reiterate, Dmere failure to
!onform to %arliamentar6 usage 7ill not invalidate t*e a!tion Fta>en 96 a deli9erative
9od6G 7*en t*e reJuisite num9er of mem9ers *ave agreed to a %arti!ular measure.D 0
Es!udero, et. al., also !ontend t*at Re%u9li! A!t No. 3004 grossl6 violates t*e
!onstitutional im%erative on e8!lusive origination of revenue 9ills under Se!tion ;# of
Arti!le VI of t*e Constitution 7*en t*e Senate introdu!ed amendments not !onne!ted
7it* VAT.
T*e Court is not %ersuaded.
Arti!le VI, Se!tion ;# of t*e Constitution %rovidesC
Se!. ;# All a%%ro%riation, revenue or tariff 9ills, 9ills aut*oriHing in!rease of t*e
%u9li! de9t, 9ills of lo!al a%%li!ation, and %rivate 9ills s*all originate e8!lusivel6 in t*e
&ouse of Re%resentatives, 9ut t*e Senate ma6 %ro%ose or !on!ur 7it* amendments.
Se!tion ;# s%ea>s of origination of !ertain 9ills from t*e &ouse of Re%resentatives 7*i!*
*as 9een inter%reted in t*e Tolentino !ase as follo7sC
. . . To 9egin 7it*, it is not t*e la7 B 9ut t*e revenue 9ill B 7*i!* is reJuired 96 t*e
Constitution to Doriginate e8!lusivel6D in t*e &ouse of Re%resentatives. It is im%ortant to
em%*asiHe t*is, 9e!ause a 9ill originating in t*e &ouse ma6 undergo su!* e8tensive
!*anges in t*e Senate t*at t*e result ma6 9e a re7riting of t*e 7*ole . . . At t*is %oint,
7*at is im%ortant to note is t*at, as a result of t*e Senate a!tion, a distin!t 9ill ma6 9e
%rodu!ed. To insist t*at a revenue statute B and not onl6 t*e 9ill 7*i!* initiated t*e
legislative %ro!ess !ulminating in t*e ena!tment of t*e la7 B must su9stantiall6 9e t*e
same as t*e &ouse 9ill 7ould 9e to den6 t*e Senate@s %o7er not onl6 to D!on!ur 7it*
amendmentsD 9ut also to D%ro%ose amendments.D It 7ould 9e to violate t*e !oeJualit6 of
legislative %o7er of t*e t7o *ouses of Congress and in fa!t ma>e t*e &ouse su%erior to
t*e Senate.
. . . +iven, t*en, t*e %o7er of t*e Senate to %ro%ose amendments, t*e Senate !an %ro%ose
its o7n version even 7it* res%e!t to 9ills 7*i!* are reJuired 96 t*e Constitution to
originate in t*e &ouse.
888 888 888
Indeed, 7*at t*e Constitution sim%l6 means is t*at t*e initiative for filing revenue, tariff,
or ta8 9ills, 9ills aut*oriHing an in!rease of t*e %u9li! de9t, %rivate 9ills and 9ills of lo!al
a%%li!ation must !ome from t*e &ouse of Re%resentatives on t*e t*eor6 t*at, ele!ted as
t*e6 are from t*e distri!ts, t*e mem9ers of t*e &ouse !an 9e e8%e!ted to 9e more
sensitive to t*e lo!al needs and %ro9lems. 'n t*e ot*er *and, t*e senators, 7*o are
ele!ted at large, are e8%e!ted to a%%roa!* t*e same %ro9lems from t*e national
%ers%e!tive. $ot* vie7s are t*ere96 made to 9ear on t*e ena!tment of su!* la7s.
Clearl6, after t*e &ouse 9ills as a%%roved on t*ird reading are dul6 transmitted to t*e
Senate, t*e Constitution states t*at t*e latter !an %ro%ose or !on!ur 7it* amendments.
T*e Court finds t*at t*e su9:e!t %rovisions found in t*e Senate 9ill are 7it*in t*e %urvie7
of su!* !onstitutional %rovision as de!lared in t*e Tolentino !ase.
T*e intent of t*e &ouse of Re%resentatives in initiating &ouse $ill Nos. 0<<< and 042<
7as to solve t*e !ountr6@s serious finan!ial %ro9lems. It 7as stated in t*e res%e!tive
e8%lanator6 notes t*at t*ere is a need for t*e government to ma>e signifi!ant e8%enditure
savings and a !redi9le %a!>age of revenue measures. T*ese measures in!lude
im%rovement of ta8 administration and !ontrol and lea>ages in revenues from in!ome
ta8es and value added ta8. It is also stated t*at one o%%ortunit6 t*at !ould 9e 9enefi!ial
to t*e overall status of our e!onom6 is to revie7 e8isting ta8 rates, evaluating t*e
relevan!e given our %resent !onditions. T*us, 7it* t*ese %ur%oses in mind and to
a!!om%lis* t*ese %ur%oses for 7*i!* t*e *ouse 9ills 7ere filed, i.e., to raise revenues for
t*e government, t*e Senate introdu!ed amendments on in!ome ta8es, 7*i!* as admitted
96 Senator Ral%* Re!to, 7ould 6ield a9out P"2.< 9illion a 6ear.
Moreover, sin!e t*e o9:e!tive of t*ese *ouse 9ills is to raise revenues, t*e in!rease in
!or%orate in!ome ta8es 7ould 9e a great *el% and 7ould also soften t*e im%a!t of VAT
measure on t*e !onsumers 96 distri9uting t*e 9urden a!ross all se!tors instead of %utting
it entirel6 on t*e s*oulders of t*e !onsumers.
As to t*e ot*er National Internal Revenue Code FNIRCG %rovisions found in Senate $ill
No. "3<2, i.e., %er!entage ta8es, fran!*ise ta8es, amusement and e8!ise ta8es, t*ese
%rovisions are needed so as to !us*ion t*e effe!ts of VAT on !onsumers. As 7e said in our
de!ision, !ertain goods and servi!es 7*i!* 7ere su9:e!t to %er!entage ta8 and e8!ise ta8
7ould no longer 9e VAT e8em%t, t*us, t*e !onsumer 7ould 9e 9urdened more as t*e6
7ould 9e %a6ing t*e VAT in addition to t*ese ta8es. T*us, t*ere is a need to amend t*ese
se!tions to soften t*e im%a!t of VAT. T*e Court finds no reason to reverse t*e earlier
ruling t*at t*e Senate introdu!ed amendments t*at are germane to t*e su9:e!t matter and
%ur%oses of t*e *ouse 9ills.
Petitioners Es!udero, et al., also reiterate t*at R.A. No. 3004@s stand/96 aut*orit6 to t*e
E8e!utive to in!rease t*e VAT rate, es%e!iall6 on a!!ount of t*e re!ommendator6 %o7er
granted to t*e Se!retar6 of (inan!e, !onstitutes undue delegation of legislative %o7er.
T*e6 su9mit t*at t*e re!ommendator6 %o7er given to t*e Se!retar6 of (inan!e in regard
to t*e o!!urren!e of eit*er of t7o events using t*e +ross omesti! Produ!t F+PG as a
9en!*mar> ne!essaril6 and in*erentl6 reJuired e8tended anal6sis and evaluation, as 7ell
as %oli!6 ma>ing.
T*ere is no merit in t*is !ontention. T*e Court reiterates t*at in ma>ing *is
re!ommendation to t*e President on t*e e8isten!e of eit*er of t*e t7o !onditions, t*e
Se!retar6 of (inan!e is not a!ting as t*e alter ego of t*e President or even *er
su9ordinate. &e is a!ting as t*e agent of t*e legislative de%artment, to determine and
de!lare t*e event u%on 7*i!* its e8%ressed 7ill is to ta>e effe!t. T*e Se!retar6 of (inan!e
9e!omes t*e means or tool 96 7*i!* legislative %oli!6 is determined and im%lemented,
!onsidering t*at *e %ossesses all t*e fa!ilities to gat*er data and information and *as a
mu!* 9roader %ers%e!tive to %ro%erl6 evaluate t*em. &is fun!tion is to gat*er and !ollate
statisti!al data and ot*er %ertinent information and verif6 if an6 of t*e t7o !onditions
laid out 96 Congress is %resent. Congress granted t*e Se!retar6 of (inan!e t*e aut*orit6
to as!ertain t*e e8isten!e of a fa!t, namel6, 7*et*er 96 e!em9er 0", ;22<, t*e value/
added ta8 !olle!tion as a %er!entage of +P of t*e %revious 6ear e8!eeds t7o and four/
fift* %er!ent F; #P<EG or t*e national government defi!it as a %er!entage of +P of t*e
%revious 6ear e8!eeds one and one/*alf %er!ent F" "P;EG. If eit*er of t*ese t7o instan!es
*as o!!urred, t*e Se!retar6 of (inan!e, 96 legislative mandate, must su9mit su!*
information to t*e President. T*en t*e ";E VAT rate must 9e im%osed 96 t*e President
effe!tive Januar6 ", ;221. Congress does not a9di!ate its fun!tions or undul6 delegate
%o7er 7*en it des!ri9es 7*at :o9 must 9e done, 7*o must do it, and 7*at is t*e s!o%e of
*is aut*orit6? in our !om%le8 e!onom6 t*at is freJuentl6 t*e onl6 7a6 in 7*i!* t*e
legislative %ro!ess !an go for7ard. T*ere is no undue delegation of legislative %o7er 9ut
onl6 of t*e dis!retion as to t*e e8e!ution of a la7. T*is is !onstitutionall6 %ermissi9le.
Congress did not delegate t*e %o7er to ta8 9ut t*e mere im%lementation of t*e la7. T*e
intent and 7ill to in!rease t*e VAT rate to ";E !ame from Congress and t*e tas> of t*e
President is to sim%l6 e8e!ute t*e legislative %oli!6. T*at Congress !*ose to use t*e +P
as a 9en!*mar> to determine e!onomi! gro7t* is not 7it*in t*e %rovin!e of t*e Court to
inJuire into, its tas> 9eing to inter%ret t*e la7.
Iit* regard to %etitioner +ar!ia@s arguments, t*e Court also finds t*e same to 9e 7it*out
merit. As stated in t*e assailed e!ision, t*e Court re!ogniHes t*e 9urden t*at t*e
!onsumers 7ill 9e 9earing 7it* t*e %assage of R.A. No. 3004. $ut as 7as also stated 96
t*e Court, it !annot stri>e do7n t*e la7 as un!onstitutional sim%l6 9e!ause of its 6o>es.
T*e legislature *as s%o>en and t*e onl6 role t*at t*e Court %la6s in t*e %i!ture is to
determine 7*et*er t*e la7 7as %assed 7it* due regard to t*e mandates of t*e
Constitution. Inasmu!* as t*e Court finds t*at t*ere are no !onstitutional infirmities 7it*
its %assage, t*e validit6 of t*e la7 must t*erefore 9e u%*eld.
(inall6, %etitioners Asso!iation of Pili%inas S*ell ealers, In!. reiterated t*eir arguments
in t*e %etition, !iting t*is time, t*e dissertation of Asso!iate Justi!e ante '. Tinga in *is
issenting '%inion.
T*e glit!* in %etitioners@ arguments is t*at it %resents figures 9ased on an event t*at is 6et
to *a%%en. T*eir illustration of t*e %ossi9le effe!ts of t*e 42E limitation, 7*ile seemingl6
!on!rete, still remains t*eoreti!al. T*eories *ave no %la!e in t*is !ase as t*e Court must
onl6 deal 7it* an e8isting !ase or !ontrovers6 t*at is a%%ro%riate or ri%e for :udi!ial
determination, not one t*at is !on:e!tural or merel6 anti!i%ator6. T*e Court 7ill not
intervene a9sent an a!tual and su9stantial !ontrovers6 admitting of s%e!ifi! relief
t*roug* a de!ree !on!lusive in nature, as distinguis*ed from an o%inion advising 7*at
t*e la7 7ould 9e u%on a *6%ot*eti!al state of fa!ts.
T*e im%a!t of t*e 42E limitation on t*e !redita9le in%ut ta8 7ill ultimatel6 de%end on
*o7 one manages and o%erates its 9usiness. Mar>et for!es, strateg6 and a!umen 7ill
di!tate t*eir moves. Iit* or 7it*out t*ese VAT %rovisions, an entre%reneur 7*o does not
*ave t*e >en to ada%t to e!onomi! varia9les 7ill surel6 %eris* in t*e !om%etition. T*e
arguments %osed are 7it*in t*e realm of 9usiness, and t*e solution lies also in 9usiness.
Petitioners also reiterate t*eir argument t*at t*e in%ut ta8 is a %ro%ert6 or a %ro%ert6
rig*t. In t*e same 9reat*, t*e Court reiterates its finding t*at it is not a %ro%ert6 or a
%ro%ert6 rig*t, and a VAT/registered %erson@s entitlement to t*e !redita9le in%ut ta8 is a
mere statutor6 %rivilege.
Petitioners also !ontend t*at even if t*e rig*t to !redit t*e in%ut VAT is merel6 a statutor6
%rivilege, it *as alread6 evolved into a vested rig*t t*at t*e State !annot remove.
As t*e Court stated in its e!ision, t*e rig*t to !redit t*e in%ut ta8 is a mere !reation of
la7. Prior to t*e ena!tment of multi/stage sales ta8ation, t*e sales ta8es %aid at ever6
level of distri9ution are not re!overa9le from t*e ta8es %a6a9le. Iit* t*e advent of
E8e!utive 'rder No. ;40 im%osing a "2E multi/stage ta8 on all sales, it 7as onl6 t*en
t*at t*e !rediting of t*e in%ut ta8 %aid on %ur!*ase or im%ortation of goods and servi!es
96 VAT/registered %ersons against t*e out%ut ta8 7as esta9lis*ed. T*is !ontinued 7it* t*e
E8%anded VAT La7 FR.A. No. 44"1G, and T*e Ta8 Reform A!t of "334 FR.A. No. =#;#G.
T*e rig*t to !redit in%ut ta8 as against t*e out%ut ta8 is !learl6 a %rivilege !reated 96 la7,
a %rivilege t*at also t*e la7 !an limit. It s*ould 9e stressed t*at a %erson *as no vested
rig*t in statutor6 %rivileges.
T*e !on!e%t of Dvested rig*tD is a !onseJuen!e of t*e !onstitutional guarant6 of due
%ro!ess t*at e8%resses a %resent fi8ed interest 7*i!* in rig*t reason and natural :usti!e is
%rote!ted against ar9itrar6 state a!tion? it in!ludes not onl6 legal or eJuita9le title to t*e
enfor!ement of a demand 9ut also e8em%tions from ne7 o9ligations !reated after t*e
rig*t *as 9e!ome vested. Rig*ts are !onsidered vested 7*en t*e rig*t to en:o6ment is a
%resent interest, a9solute, un!onditional, and %erfe!t or fi8ed and irrefuta9le. = As
ade%tl6 stated 96 Asso!iate Justi!e Minita V. C*i!o/NaHario in *er Con!urring '%inion,
7*i!* t*e Court ado%ts, %etitioners@ rig*t to t*e in%ut VAT !redits *as not 6et vested, t*us
B
It s*ould 9e remem9ered t*at %rior to Re%. A!t No. 3004, t*e %etroleum dealers@ in%ut
VAT !redits 7ere ine8istent B t*e6 7ere unre!ogniHed and disallo7ed 96 la7. T*e
%etroleum dealers *ad no su!* %ro%ert6 !alled in%ut VAT !redits. It is onl6 rational,
t*erefore, t*at t*e6 !annot a!Juire vested rig*ts to t*e use of su!* in%ut VAT !redits 7*en
t*e6 7ere never entitled to su!* !redits in t*e first %la!e, at least, not until Re%. A!t No.
3004.
M6 vie7, at t*is %oint, 7*en Re%. A!t No. 3004 *as not 6et even 9een im%lemented, is t*at
%etroleum dealers@ rig*t to use t*eir in%ut VAT as !redit against t*eir out%ut VAT
unlimitedl6 *as not vested, 9eing a mere e8%e!tan!6 of a future 9enefit and 9eing
!ontingent on t*e !ontinuan!e of Se!tion ""2 of t*e National Internal Revenue Code of
"334, %rior to its amendment 96 Re%. A!t No. 3004.
T*e elu!idation of Asso!iate Justi!e Artemio V. Pangani9an is li>e7ise 7ort*6 of note, to
7itC
Moreover, t*ere is no vested rig*t in generall6 a!!e%ted a!!ounting %rin!i%les. T*ese
refer to a!!ounting !on!e%ts, measurement te!*niJues, and standards of %resentation in a
!om%an6@s finan!ial statements, and are not rooted in la7s of nature, as are t*e la7s of
%*6si!al s!ien!e, for t*ese are merel6 develo%ed and !ontinuall6 modified 96 lo!al and
international regulator6 a!!ounting 9odies. To state ot*er7ise and re!ogniHe su!* asset
a!!ount as a vested rig*t is to limit t*e ta8ing %o7er of t*e State. -nlimited, %lenar6,
!om%re*ensive and su%reme, t*is %o7er !annot 9e undul6 restri!ted 96 mere !reations of
t*e State.
More im%ortantl6, t*e assailed %rovisions of R.A. No. 3004 alread6 involve legislative
%oli!6 and 7isdom. So long as t*ere is a %u9li! end for 7*i!* R.A. No. 3004 7as %assed,
t*e means t*roug* 7*i!* su!* end s*all 9e a!!om%lis*ed is for t*e legislature to !*oose
so long as it is 7it*in !onstitutional 9ounds. As stated in Carmi!*ael vs. Sout*ern Coal
K Co>e Co.C
If t*e Juestion 7ere ours to de!ide, 7e !ould not sa6 t*at t*e legislature, in ado%ting t*e
%resent s!*eme rat*er t*an anot*er, *ad no 9asis for its !*oi!e, or 7as ar9itrar6 or
unreasona9le in its a!tion. $ut, as t*e state is free to distri9ute t*e 9urden of a ta8
7it*out regard to t*e %arti!ular %ur%ose for 7*i!* it is to 9e used, t*ere is no 7arrant in
t*e Constitution for setting t*e ta8 aside 9e!ause a !ourt t*in>s t*at it !ould *ave
distri9uted t*e 9urden more 7isel6. T*ose are fun!tions reserved for t*e legislature.
I&ERE('RE, t*e Motions for Re!onsideration are *ere96 ENIE IIT& (INALIT,.
T*e tem%orar6 restraining order issued 96 t*e Court is LI(TE.
S' 'RERE.
FT*e Justi!es 7*o filed t*eir res%e!tive !on!urring and dissenting o%inions maintain
t*eir res%e!tive %ositions. Justi!e ante '. Tinga filed a dissenting o%inion to t*e %resent
Resolution? 7*ile Justi!e Consuelo ,nares/Santiago :oins *im in *is dissenting o%inion.G
Se%arate '%inions
TIN+A, J., dissentingC
'n!e again, t*e ma:orit6 *as refused to engage and refute in an6 meaningful fas*ion t*e
arguments raised 96 t*e %etitioners in +.R. No. "1=#1". T*e de minimis a%%re!iation
e8*i9ited 96 t*e ma:orit6 of t*e issues of 42E !a%, t*e 12/mont* amortiHation %eriod,
and <E 7it**olding VAT on transa!tions made 7it* t*e national government is
regretta9le, 7it* ruinous !onseJuen!es for t*e nation. I see no reason to turn 9a!> from
an6 of t*e vie7s e8%ressed in m6 issenting '%inion, and I a!!ordingl6 dissent from t*e
denial of t*e Motion for Re!onsideration filed 96 t*e %etitioners in +.R. No. "1=#1".
T*e reasons for m6 vote *ave 9een !om%re*ensivel6 dis!ussed in m6 %revious issenting
'%inion, and I do not see t*e need to re%li!ate t*em *erein. &o7ever, I 7is* to stress a
fe7 %oints.
Ta8 Statutes Ma6 $e Invalidated
If T*e6 Pose a Clear and Present anger
To t*e e%rivation of Life, Li9ert6 and
Pro%ert6 Iit*out ue Pro!ess of La7
T*e ma:orit6 again dismisses t*e arguments of t*e %etitioners as Dt*eoreti!alD,
D!on:e!turalD or merel6 Danti!i%ator6,D not7it*standing t*at t*e in:ur6 to t*e ta8%a6ers
resulting from Se!tion = and "; of t*e E/VAT La7 is as!ertaina9le 7it* mat*emati!al
!ertaint6. In su%%ort of t*is vie7, t*e ma:orit6 !ites t*e Court@s Resolution dated "< June
;22< in Information Te!*nolog6 (oundation v. C'MELEC, one of t*e rulings issued in
t*at !ase su9seJuent to t*e main e!ision rendered on "0 Januar6 ;22#. T*e referen!e is
grievousl6 ironi!, !onsidering t*at in t*e "0 Januar6 ;22# e!ision, t*e Court, over
vigorous dissents, !*ose an67a6 to intervene and grant t*e %etition des%ite t*e fa!t t*at
t*e %etitioners t*erein did not allege an6 violation of an6 !onstitutional %rovision or
letter of statute. In t*is !ase, t*e %etitioners *ave sJuarel6 invo>ed t*e violation of t*e
$ill of Rig*ts of t*e Constitution, and 6et t*e ma:orit6 is suddenl6 timid, unli>e in
Infote!*.
Still, t*e formulation of t*e ma:orit6 unfortunatel6 leaves t*e im%ression t*at an6 statute,
ta8ing or ot*er7ise, is 9e6ond :udi!ial atta!> %rior to its im%lementation. If t*e ta8
measure in Juestion %rovided t*at t*e ta8%a6er s*all remit all in!ome earned to t*e
government 9eginning " Januar6 ;22=, 7ould t*is mean t*at t*e Court !an ta>e
!ogniHan!e of t*e legal !*allenge onl6 starting ; Januar6 ;22=M
I do not s*are t*e ma:orit6@s %en!*ant for a7aiting t*e 9lood s%urts 9efore ta>ing a!tion
even 7*en t*e >nife@s edge alread6 dangles. As I maintained in m6 issenting '%inion, a
ta8 measure ma6 9e validl6 !*allenged and stri!>en do7n even 9efore its im%lementation
if it %oses a !lear and %resent danger to t*e de%rivation of life, li9ert6 or %ro%ert6 of t*e
ta8%a6er 7it*out due %ro!ess of la7. T*is is t*e e8%e!tation of ever6 !itiHen 7*o 7is*es
to maintain trust in all t*e 9ran!*es of government. In t*e enfor!ement of t*e
!onstitutional rig*ts of all %ersons, t*e !ommonsense e8%e!tation is t*at t*e Court, as
guardian of t*ese rig*ts, is em%o7ered to ste% in even 9efore t*e %ros%e!tive violation
ta>es %la!e. &en!e, t*e evolution of t*e D!lear and %resent dangerD do!trine and ot*er
analogous %rin!i%les, 7it*out 7*i!*, t*e Court 7ould 9e seen as inutile in t*e fa!e of
!onstitutional violation.
'f !ourse, not ever6 anti!i%ator6 t*reat to !onstitutional li9erties !an 9e assailed %rior to
im%lementation, *en!e t*e em%lo6ment of t*e D!lear and %resent dangerD standard to
se%arate t*e 7*eat from t*e !*aff. Still, t*e Court s*ould not 9e so readil6 dismissive of
t*e %etitioners@ %osture *erein merel6 9e!ause it is anti!i%ator6. T*ere s*ould *ave 9een a
meaningful engagement 96 t*e ma:orit6 of t*e fa!ts and formulae %resented 96 t*e
%etitioners 9efore t*e reasona9le !on!lusion !ould *ave 9een rea!*ed on t*e maturit6 of
t*e !laim. T*at t*e ma:orit6 *as not 9ot*ered to do so is ultimatel6 of tragi!
!onseJuen!e.
42E In%ut VAT Credit
An Im%aired Asset
T*e %onen!ia, :oined 96 Justi!es Pangani9an and C*i!o/NaHario, e8%ress t*e 9elief t*at
no %ro%ert6 rig*ts atta!* to t*e in%ut VAT %aid 96 t*e ta8%a6er. T*is is a 9iHarre vie7 t*at
assumes t*at all in!ome earned 96 %rivate %ersons %reternaturall6 9elongs to t*e
government, and 7*atever is retained 96 t*e %erson after ta8es is a!Juired as a matter of
%rivilege. T*is is t*e sort of t*in>ing t*at *as fermented revolutions t*roug*out *istor6,
su!* as t*e Ameri!an Revolution of "441.
I %ointed out in m6 issenting '%inion t*at under !urrent a!!e%ted international
a!!ounting standards, t*e 02E %re%aid in%ut VAT 7ould 9e re!orded as a loss in t*e
a!!ounting 9oo>s, sin!e t*e %ossi9ilit6 of its re!over6 is im%ro9a9le, !onsidering t*at t*e
E/VAT La7 allo7s its re!over6 onl6 after t*e 9usiness *as !eased to e8ist. Even t*e
$ureau of Internal Revenue itself *as long re!ogniHed t*e unutiliHed in%ut VAT as an
asset.
T*e ma:orit6 fails to realiHe t*at even under t*e ne7 E/VAT La7, t*e State re!ogniHes t*at
t*e %ersons 7*o %re/%a6 t*at in%ut VAT, usuall6 t*e dealers or retailers, are not t*e
%ersons 7*o are lia9le to %a6 for t*e ta8. T*e VAT s6stem, as im%lemented t*roug* t*e
%revious VAT la7 and t*e ne7 E/VAT La7, sJuarel6 *olds t*e end !onsumer as t*e
ta8%a6er lia9le to s*oulder t*e in%ut VAT. Nonet*eless, under t*e me!*anism foisted in
t*e ne7 E/VAT La7, t*e dealer or retailer 7*o %re/%a6s t*e in%ut VAT is virtuall6
%re!luded from re!overing t*e %re/%aid in%ut VAT, sin!e t*e la7 onl6 allo7s su!*
re!over6 u%on t*e !essation of t*e 9usiness. Indeed, t*e onl6 7a6 said !lass of ta8%a6ers
!an re!over t*is %re/%aid in%ut VAT 7as if it 7ere to !ease o%erations at t*e end of ever6
Juarter.
T*e illusion t*at 9linds t*e ma:orit6 to t*is state of affairs is t*e !laim t*at t*e %re/%aid
in%ut VAT ma6 an67a6 9e !arried over into t*e su!!eeding Juarter, a !*imera en*an!ed
96 t*e grossl6 misleading %resentation of t*e 'ffi!e of t*e Soli!itor +eneral. I*at t*is
de!e%tion fosters, and 7*at t*e ma:orit6 fails to realiHe, is t*at sin!e t*e ta8%a6er is
%er%etuall6 o9liged to remit t*e 02E in%ut VAT ever6 Juarter, t*ere 7ould 9e a
!ontinuous a!!umulation of e8!ess in%ut VAT. It is not true t*en t*at t*e in%ut VAT
%re%aid for t*e first Juarter !an 9e re!overed in t*e se!ond, t*ird or fourt* Juarter of
t*at 6ear, or at an6 time in t*e ne8t 6ear for t*at matter sin!e t*e amount of %re%aid in%ut
VAT a!!umulates 7it* ever6 su!!eeding %re%a6ment of in%ut VAT. Moreover, t*e
a!!umulation of t*e %re%aid in%ut VAT diminis*es t*e a!tual value of t*e refunda9le
amounts, !onsidering t*e esta9lis*ed %rin!i%le of Dtime/value of mone6D, as e8%lained in
m6 issenting '%inion.
T*us, t*e %re/%aid in%ut VAT, for 7*i!* t*e %etitioners and ot*er similarl6 situated
ta8%a6ers are not even ultimatel6 lia9le in t*e first %la!e, re%resents in tangi9le terms an
a!tual loss. To %ut it more su!!in!tl6, 7*en t*e ta8%a6er %re%a6s t*e 02E in%ut VAT,
t*ere is no !*an!e for its re!over6 e8!e%t until after t*e ta8%a6er !eases to 9e su!*. T*is
%oint is !ru!ial, as it goes in t*e *eart of t*e !onstitutional !*allenge raised 96 t*e
%etitioners. A re!ognition t*at t*e in%ut VAT is a %ro%ert6 asset %la!es it sJuarel6 in t*e
am9it of t*e due %ro!ess !lause.
T*e ma:orit6 no7 stresses t*at %rior to E8e!utive 'rder No. ;40 sales ta8es %aid 96 t*e
retailer or dealers 7ere not re!overa9le. T*e nature of a sales ta8 %re!isel6 is t*at it is
s*ouldered 96 t*e seller, not t*e !onsumer. In t*at !ase, t*e !lear legislative intent is to
en!um9er t*e retailer 7it* t*e end ta8. -nder t*e VAT s6stem, as ens*rined under Re%.
A!t No. 3004, t*e ne7 E/VAT La7, t*ere is %re!isel6 a legislative re!ognition t*at it is t*e
end user, not t*e seller, 7*o s*oulders t*e E/VAT. T*e %ro9lem 7it* t*e ne7 E/VAT la7 is
t*at it !orres%ondingl6 im%oses a defeatist me!*anism t*at o9viates t*is entitlement of
t*e seller 96 for!i9l6 7it**olding in %er%etua t*is %re/%aid in%ut VAT.
T*e ma:orit6 !ites 7it* a%%roval Justi!e C*i!o/NaHario@s argument, as e8%ressed in *er
!on!urring o%inion, t*at %rior to t*e ne7 E/VAT La7, t*e %etroleum dealers in %arti!ular
*ad no in%ut VAT !redits to s%ea> of, and t*erefore, !ould not assert an6 %ro%ert6 rig*ts
to t*e in%ut VAT !redits under t*e ne7 la7. 'f !ourse t*e %etroleum dealers *ad no in%ut
VAT !redits %rior to t*e E/VAT La7 9e!ause %re!isel6 t*e6 7ere not !overed 96 t*e VAT
s6stem in t*e first %la!e. I*at 7ould no7 9e !lassified as Din%ut VAT !reditsD 7as, in real
terms, %rofit o9taina9le 96 t*e %etroleum dealers %rior to t*e ne7 E/VAT La7. T*e E/VAT
La7 stands to diminis* su!* %rofit, not 96 outrig*t ta>ing %er*a%s, 9ut 96 ad infinitum
!onfis!ation 7it* t*e illusor6 %romise of eventual return. '9viousl6, t*ere is a
de%rivation of %ro%ert6 in su!* !ase? 6et is it seriousl6 !ontended t*at su!* de%rivation is
i%so fa!to s*eltered if it is not !lassified as a ta>ing, 9ut instead re!lassified as a
D!reditDM
It is *ig*l6 distressful t*at t*e Court, in its *aste to de!ree %etitioners as 9ereft of an6
vested %ro%ert6 rig*ts, re:e!ts t*e notion t*at a %erson *as a vested rig*t to t*e earnings
and %rofits in!urred in 9usiness. $efore, no legal 9asis !ould 9e found to %ro% u% su!* a
%al%a9l6 outlandis* !laim? 9ut t*e e!ision, as affirmed 96 t*e ma:orit6@s Resolution,
no7 ens*rines a temerarious %ro%osition 7it* do!trinal status.
In t*e e!ision, and also in Justi!e Pangani9an@s Se%arate '%inion t*erein, t*e !ase of
-nited Para!ale Mining Co. v. e la Rosa 7as !ited in su%%ort of t*e %ro%osition t*at
t*ere is no vested rig*t to t*e in%ut VAT !redit. Justi!e Pangani9an 7ent as far as to !ite
t*at !ase to su%%ort t*e !ontention t*at D.t5*ere is no vested rig*t in a deferred in%ut ta8
a!!ount? it is a mere statutor6 %rivilege.D Relian!e on t*e !ase is Juite mis%la!ed. (irst,
as %ointed out in m6 issenting '%inion, it does not even %ertain to ta8 !redits involving
as it does, Juestions on t*e :urisdi!tion of t*e $ureau of Mines. Se!ond, t*e %utative
vested rig*ts t*erein %ertained to mining !laims, 6et all mineral resour!es indis%uta9l6
9elong to t*e State. &erein, t*e rig*ts %ertain to %rofit in!urred 96 %rivate enter%rise, and
!ertainl6 t*e ma:orit6 !annot !ontend t*at su!* %rofits a!tuall6 9elong to t*e State.
As stated in m6 issenting '%inion, t*e Constitution itself re!ogniHes a rig*t to in!ome
and %rofit 7*en it re!ogniHes Dt*e rig*t of enter%rises to reasona9le returns on
investments, and to e8%ansion and gro7t*.D Se!tion ;2, Arti!le II of t*e Constitution
furt*er mandates t*at t*e State re!ogniHe t*e indis%ensa9le role of t*e %rivate se!tor, t*e
en!ouragement of %rivate enter%rise, and t*e %rovision of in!entives to needed
investments. Indeed, t*ere is a fundamental re!ognition in an6 form of demo!rati!
government t*at re!ogniHes a !a%italist e!onom6 t*at t*e enter%rise *as a rig*t to its
%rofits. Toda6, t*e Court instead affirms t*at t*ere is no su!* rig*t. S*ould !a%ital flig*t
ensue, t*e %*enomenom s*ould not 9e 9lamed on investors in vie7 of our :udi!ial
s6stem@s re:e!tion of !a%italism@s fundamental %re!e%t.
Mainstream enun!iation of 42E Ca%
T*e fa!t t*at %etitioners are dealers of %etroleum %rodu!ts ma6 *ave left t*e im%ression
t*at t*e 42E !a% singularl6 affe!ts t*e %etroleum industr6? or t*at ot*er !lasses of
dealers or retailers do not %ose t*e same o9:e!tions to t*ese DinnovationsD in t*e E/VAT
la7. T*is is far from t*e trut*.
In fa!t, t*e !lamor against t*e 42E !a% *as 9een 7ides%read among t*e %la6ers and
!om%onents in t*e finan!ial mainstream. enun!iations *ave 9een registered 96 t*e
P*ili%%ine C*am9er of Commer!e and Industr6, t*e Joint (oreign C*am9ers of t*e
P*ili%%ines F!om%rising of t*e Ameri!an C*am9er of Commer!e in t*e P*ili%%ines, t*e
Australian/Ne7 )ealand C*am9er Commer!e of t*e P*ili%%ines, In!., t*e Canadian
C*am9er of Commer!e of t*e P*ili%%ines, In!., t*e Euro%ean C*am9er of Commer!e of
t*e P*ili%%ines, In!., t*e Ja%anese C*am9er of Commer!e of t*e P*ili%%ines, In!., t*e
Lorean C*am9er of Commer!e and Industr6 of t*e P*ili%%ines, and t*e P*ili%%ine
Asso!iation of Multinational Com%anies Regional &eadJuarters, In!.G, t*e (ili%ino/
C*inese C*am9er of Commer!e and Industr6, t*e (ederation of P*ili%%ine Industries, t*e
Consumer and 'il Pri!e Iat!*, t*e Asso!iation of Certified Pu9li! A!!ountants in
Pu9li! Pra!ti!e, t*e P*ili%%ine To9a!!o Institute, and t*e auditing firm of
Pri!e7ater*ouseCoo%er.
Even ne7l6 installed (inan!e Se!retar6 Margarito Teves *as e8%ressed !on!ern t*at t*e
42E in%ut VAT Dma6 not 7or> a!ross all industries 9e!ause of var6ing %rofit marginsD.
't*er e8%erts 7*o *ave voi!ed !on!erns on t*e 42E in%ut VAT are former NEA
ire!tors Cielito &a9ito and Solita Monsod, Peter Ialla!e of t*e Ialla!e $usiness
(orum, and Paul R. Coo%er, dire!tor of Pri!e7ater*ouseCoo%er.
In fa!t, Mr. Coo%er %u9lis*ed in t*e P*ili%%ine ail6 InJuirer a lengt*6 disJuisition on
t*e %ro9lems surrounding t*e 42E !a%, %ortions of 7*i!* I re%li!ate 9elo7C
Poli!6 !on!erns on t*e !a%
I*en t*e idea of %utting a !a% 7as originall6 introdu!ed on t*e floor of t*e Senate. T*e
idea 7as to address to some e8tent t*e under/re%orting of out%ut VAT 96 non/!om%liant
ta8%a6ers. T*e original suggestion 7as a 32 %er!ent !a%, or effe!tivel6 a "/%er!ent
minimum VAT. At t*at level, t*e rule s*ould not im%a!t adversel6 on !om%laint ta8%a6ers,
9ut 7ould result in non/!om%liant ta8%a6ers *aving to a!!ount for !loser to t*eir true ta8
lia9ilit6.
As a general %oli!6 !onsideration, one s*ould Juestion 7*6 our legislators are
%enaliHing !om%laint ta8%a6ers 7*en t*e fundamental issue is at t*e a%%arent ina9ilit6 of
t*e $ureau of Internal Revenue F$IRG to im%lement ta8 la7 effe!tivel6.
At a 32/%er!ent !a%, t*e measure mig*t still *ave 9een defensi9le as a roug* %ro86 for
VAT. &o7ever, some7*ere in t*e 9i!ameral %ro!ess, t*e rule *as 9e!ome even more
%unitive 7it* a 42/%er!ent !a%. As 7it* most amendments introdu!ed at t*e 9i!ameral
stage, t*ere is no %u9li! indi!ation a9out 7*at la7ma>ers 7ere t*in>ing 7*en t*e6 %ut
t*e travest6 in %la!e.
888 888 888
'ne of t*e arguments in Senate de9ates for ta8ing t*e %o7er and %etroleum se!tors 7as
t*at if it 7as good enoug* for mom/and/%o% stores to *ave to a!!ount for t*e VAT, it 7as
good enoug* for t*e 9iggest !om%anies in t*e !ountr6 to do t*e same. A similar argument
*ere is t*at if small 9usinesses *ave to %a6 a minimum 0/%er!ent ta8, 7*6 s*ould larger
VAT/registered %ersons get a7a6 7it* %a6ing lessM
T*e %ro9lem 7it* t*is t*in>ing is t*reefoldC
T T*e %er!entage ta8 a%%lies to small 9usinesses in t*e *ard/to/ta8 se!tor and a fe7
9elieve t*e $IR !olle!ts !lose to 7*at it s*ould from t*is. Nor s*ould 7e 9e overl6
!on!erned if t*is is t*e !ase B t*e revenues are small, and t*e $IR@s efforts 7ould 9e a
lot 9etter fo!used on larger ta8%a6ers 7*ere more signifi!ant revenues 7ill 9e at issue.
T VAT/registered %ersons in!ur !om%lian!e !osts. T*e 0/%er!ent ta8 mig*t 9e 9etter
!on!eived as a slig*tl6 more e8%ensive o%tion to allo7 ta8%a6ers to o%t out of t*e VAT,
rat*er t*an a %unitive rule for small 9usinesses. FIf t*e %er!entage ta8 is !onsidered
undul6 %unitive, 7*6 is it not :ust re%ealedMG
T Ironi!all6, one of t*e ne7 measures in t*e Senate 9ill 7as to allo7 ta8%a6ers 7it*
turnovers 9elo7, t*e registration t*res*old to register voluntaril6 for VAT if t*e6 9elieve
t*e 0/%er!ent ta8 im%osition to 9e e8!essive. Iit*out t*e minimum VAT, smaller
ta8%a6ers mig*t *ave 9een en!ouraged to enter t*e more formaliHed VAT se!tor.
Potential !onseJuen!es of t*e !a%
T*e minimum VAT 7ill distort t*e 7a6 ta8%a6ers !ondu!t 9usiness. A 0/%er!ent minimum
VAT is more li>el6 to im%a!t on sellers of goods t*an on sellers of servi!es, as t*eir
%ro%ortion of ta8a9le in%uts are lo7er Ft*ere is no VAT %aid 7*en using la9or, 9ut t*ere
is VAT on t*e %ur!*ase of goodsG. ConseJuentl6, t*ere 7ill 9e a 9ias to7ard !onsuming
servi!es over goods. $usinesses ma6 *ave an in!entive to o9tain goods from t*e informal
Fand %otentiall6 ta8/evadingG se!tor as t*ere 7ill 9e no in%ut ta8 %aid for t*e %ur!*ase B
in ot*er 7ords, t*e 9ill ma6 a!tivel6 en!ourage less ta8 !om%liant 9e*avior. $usiness
stru!tures ma6 !*ange? e8%e!t 9u6/sell distri9utors to !onvent into !ommission agents, as
t*is redu!es t*e ris> t*at t*e6 7ill need to %a6 more t*an s*ould 9e %aid under a VAT
s6stem to !over t*e 0/%er!ent minimum VAT.
T*ese o9:e!tions are voi!ed 96 mem9ers of t*e sensi9le !enter, and not t*ose refle8ivel6
against VAT or an6 ta8 im%osition of t*e !urrent administration. T*ese o9:e!tions are
raised 96 t*e %eo%le 7*o stand to 9e dire!tl6 affe!ted on a dail6 %unitive 9asis 96 t*e
im%osition of t*e 42E !a%, t*e 12/mont* amortiHation %eriod and t*e <E 7it**olding
VAT. Indeed, Justi!e C*i!o/NaHario *as e8%ressed *er dis9elief over, or at least *as
asserted as un%roven, t*e !laimed im%a!t of t*e in%ut VAT on t*e %etroleum dealers. 'f
!ourse t*ere !an 9e no tangi9le gauge as of 6et on t*e im%a!t of t*ese !*anges in t*e VAT
la7, sin!e t*e6 *ave 6et to 9e im%lemented. &o7ever, t*e %revalent adverse rea!tion
7it*in t*e 9usiness se!tor s*ould 9e suffi!ientl6 e8%ressive of t*e a!tual fears of t*e
%eo%le 7*o s*ould >no7 9etter. It is sad t*at t*e ma:orit6, 96 maintaining a 9lit*el6 naUve
vie7 of t*e in%ut VAT, %er%etuates t*e dis!onne!t 9et7een t*e Court and t*e 9usiness
se!tor, unne!essaril6 !onsidering t*at in t*is instan!e, t*e !on!erns of t*e finan!ial
!ommunit6 !an 9e translated into a via9le !onstitutional !*allenge.
Relian!e on Legislative Amendments
An A9di!ation of t*e Court@s Constitutional ut6
Justi!e Pangani9an *as alread6 e8%ressed t*e vie7 t*at t*e remed6 to t*e ineJuities
!aused 96 t*e ne7 in%ut VAT s6stem 7ould 9e amending t*e la7, and not an outrig*t
de!laration of un!onstitutionalit6. I !an onl6 *aHard a guess on *o7 man6 mem9ers of
t*e Court or t*e legal !ommunit6 are similarl6 reliant on t*at remed6 as a means of
assuaging t*eir fears on t*e im%a!t of t*e in%ut VAT innovations.
As I stated in m6 issenting '%inion, it is t*is Court, and not t*e legislature, 7*i!* *as
t*e dut6 to stri>e do7n un!onstitutional la7s. Congress ma6 amend un!onstitutional la7s
to remed6 su!* legal infirmities, 9ut it is under no !onstitutional or legal o9ligation to do
so. T*e same does not *old true 7it* t*is Court. T*e essen!e of :udi!ial revie7 mandates
t*at t*e Court stri>e do7n un!onstitutional la7s.
Anot*er !orollar6 %ros%e!t *as also arisen, t*at t*e E8e!utive e%artment itself 7ill
mitigate t*e im%lementation of t*e 42E !a% 96 not full6 im%lementing t*e la7.
T*is %ros%e!t of !ourse is s%e!ulative, t*e sort of s%e!ulation t*at is 7*oll6 de%endent on
t*e 7*im of t*e offi!ials of t*e e8e!utive 9ran!* and one t*at !annot 9e Juantified 96
mat*emati!al formula. T*is !annot 9e t*e 9asis for an6 :udi!ial a!tion or vote. Moreover,
su!* resort ma6 a!tuall6 9e illegal.
(or one, Arti!le ;03 of t*e Revised Penal Code im%oses t*e %enalt6 of %rision
!orre!!ional on %u9li! offi!ers D7*o s*all en!roa!* u%on t*e %o7ers of t*e legislative
9ran!* of t*e +overnment, eit*er 96 ma>ing general rules or regulations 9e6ond t*e
s!o%e of *is aut*orit6, or 96 attem%ting to re%eal a la7 or sus%ending t*e e8e!ution
t*ereof.D Certainl6, t*e remed6 to t*e ineJuities of t*e E/VAT La7 !annot 9e left to
administrative %uss6/footing, !onsidering t*at t*ese offi!ials ma6 9e :ailed for refusing to
im%lement t*e la7, or o9fus!ating t*e legislative 7ill.
Se!ond, it is a !ardinal rule t*at an administrative agen!6 su!* as t*e $ureau of Internal
Revenue or even t*e e%artment of (inan!e !annot amend an a!t of Congress. I*atever
administrative regulations t*e6 ma6 ado%t under legislative aut*orit6 must 9e in
*armon6 7it* t*e %rovisions of t*e la7 t*e6 are intended to !arr6 into effe!t. T*e6 !annot
7iden or diminis* its s!o%e.
(inall6, it must 9e remem9ered t*at one of t*e !entral do!trines enfor!ed in t*e
dis%osition of t*e :oint %etitions is t*at t*e %o7er to ta8 9elongs solel6 to t*e legislative
9ran!* of government. If t*e legislative 7ill 7ere to 9e frustrated 96 *a%*aHard
im%lementation 96 t*e e8e!utive 9ran!*, all our disJuisitions on t*is matter, as 7ell as
t*e >e6 !onstitutional %rin!i%le on t*e in*erent, non/delega9le nature of t*e legislative
%o7er of ta8ation, 7ill 9e for naug*t.
Indeed, I trul6 fear t*e s!enario 7*en, after t*e deluge, t*e e8e!utive 9ran!* of
government sus%ends t*e im%lementation of t*e 42E !a%, or in!reases t*e !a% to a
*ig*er amount su!* as 32E. An6 ta8%a6er 7ill *ave standing to atta!> su!* remedial
measure, !onsidering t*at t*e net effe!t 7ould 9e to diminis* t*e government@s !olle!tion
of !as* at *and. (ollo7ing t*e la7, t*e %ro%er :udi!ial a!tion 7ould 9e to u%*old t*e
!lear legislative intent over t*e reengineering of t*e ta8ing %rovisions 96 t*e e8e!utive
9ran!* of government. ,et if t*e !ourts instead u%*old t*e %o7er of t*e e8e!utive 9ran!*
of government to reinvent t*e ta8 statute, t*en t*e end !on!ession 7ould 9e t*at t*e
%o7er to ena!t ta8 la7s ultimatel6 9elongs to t*e e8e!utive 9ran!* of government.
I *esitate to sa6 t*is, 9ut t*ere 7ill 9e !onfusion, insta9ilit6, and multi%le fatalities 7it*in
t*e 9usiness se!tor 7it* t*e enfor!ement of t*e amendments of Se!tion = and "; of t*e E/
VAT La7. It !ould *ave 9een sto%%ed t*roug* t*e allo7an!e of t*e %etition in +.R. No.
"1=#1", 9ut regretta9l6 t*e Court did not a!t.
I res%e!tfull6 dissent.D
REVEN-E MEM'RAN-M 'RER N'. 241/"2 Se%tem9er ;4, ;2"2
S-$JECT C Pres!ri9ing t*e Poli!ies and +uidelines in t*e Issuan!e of
Certifi!ate of Ta8 E8em%tion of Coo%eratives and t*e Monitoring T*ereof
SECTI'N ". $a!>ground. B
Re%u9li! A!t FRAG No. 3<;2, ot*er7ise >no7n as t*e DP*ili%%ine Coo%erative Code of
;22=D, 7as a%%roved on (e9ruar6 "4, ;223 and too> effe!t on A%ril 1, ;223. Pursuant to
t*e %rovisions of Arti!le "## of t*e Coo%erative Code, in relation to Se!tions # and ;##
of t*e National Internal Revenue Code of "334 FNIRCG, as amended, t*e e%artment of
(inan!e, $ureau of Internal Revenue F$IRG and t*e Coo%erative evelo%ment Aut*orit6
FCAG issued t*e Joint Rules and Regulations Im%lementing Arti!les 12, 1" and "## of
t*e Coo%erative Code on (e9ruar6 <, ;2"2 7*i!* 9e!ame effe!tive on June "1, ;2"2.
RA No. 3<;2 e8tends t*e same %referential ta8 treatment to !oo%eratives granted under
RA No. 130= and reiterates most of t*e %rovisions of t*e old Coo%erative Code on ta8
in!entives and e8em%tions. T*e ma:or differen!e, *o7ever, is t*at under Arti!le 1" of t*e
ne7 la7, transa!tions of mem9ers 7it* !oo%eratives are no7 e8%ressl6 e8em%t from an6
im%osition of ta8es and fees t*ere96 ma>ing t*e legislative intent for ta8ation to give 7a6
to t*e demands of so!ial :usti!e more a%%arent.
Consistent 7it* t*e foregoing %oli!6 of t*e State, it is in!um9ent u%on t*e $IR to ensure
t*at t*e ta8 e8em%tions and in!entives e8tended to !oo%eratives are administered
effe!tivel6. To7ards t*is end, t*e $IR s*all ado%t uniform and sim%lified %ro!edures in
t*e %ro!essing and !onfirmation of !oo%erative ta8 e8em%tions.
Value/added ta8 is an indire!t ta8.
T*e VAT is an indire!t ta8. As su!*, t*e amount of ta8 %aid on t*e goods, %ro%erties or
servi!es 9oug*t, transferred, or leased ma6 9e s*ifted or %assed on 96 t*e seller,
transferor, or lessor to t*e 9u6er, transferee or lessee. -nli>e a dire!t ta8, su!* as t*e
in!ome ta8, 7*i!* %rimaril6 ta8es an individual@s a9ilit6 to %a6 9ased on *is in!ome or
net 7ealt*, an indire!t ta8, su!* as t*e VAT, is a ta8 on !onsum%tion of goods, servi!es,
or !ertain transa!tions involving t*e same. T*e VAT, t*us, forms a su9stantial %ortion of
!onsumer e8%enditures.
Conte8 Cor%. vs. Commissioner of Internal Revenue, +.R. No. "<""0<, Jul6 ;, ;22#
Non/sto!>, non/%rofit organiHations or government entities are lia9le to %a6 VAT on t*e
sale of goods or servi!es.
Se!. "2< of R.A. No. =#;#, t*e National Internal Revenue Code of "334, !larifies t*at
even a non/sto!>, non/%rofit organiHation or government entit6, is lia9le to %a6 VAT on
t*e sale of goods or servi!es. VAT is a ta8 on transa!tions, im%osed at ever6 stage of t*e
distri9ution %ro!ess on t*e sale, 9arter, e8!*ange of goods or %ro%ert6, and on t*e
%erforman!e of servi!es, even in t*e a9sen!e of %rofit attri9uta9le t*ereto. T*e term Din
t*e !ourse of trade or 9usinessD reJuires t*e regular !ondu!t or %ursuit of a !ommer!ial
or an e!onomi! a!tivit6, regardless of 7*et*er or not t*e entit6 is %rofit/oriented.
Commissioner of Internal Revenue vs. Court of A%%eals, et al., +.R. No. ";<0<<, Mar!*
02, ;222
ifferent ta8 treatment of talents and 9road!asters
T*e National Internal Revenue Code in relation to R.A. No. 44"1, as amended 96 R.A.
No. =;#", treats talents, television and radio 9road!asters differentl6. -nder t*e NIRC,
t*ese %rofessionals are su9:e!t to t*e "2E value/added ta8 FVATG on servi!es t*e6 render.
E8em%ted from t*e VAT are t*ose under an em%lo6er/em%lo6ee relations*i%. T*is
different ta8 treatment a!!orded to talents and 9road!asters 9olsters t*e !on!lusion t*at
t*e6 are inde%endent !ontra!tors, %rovided all t*e 9asi! elements of a !ontra!tual
relations*i% are %resent.
Jose ,. SonHa vs. A$S/C$N $road!asting Cor%., +.R. No. "0=2<", June "2, ;22#
T*e %erforman!e of all >inds of servi!es for ot*ers for a fee, remuneration or
!onsideration is !onsidered as sale of servi!es su9:e!t to VAT.
Even if a !or%oration 7as organiHed 7it*out an6 intention of realiHing %rofit, an6 in!ome
or %rofit generated 96 t*e entit6 in t*e !ondu!t of its a!tivities is su9:e!t to in!ome ta8.
&en!e, it is immaterial 7*et*er t*e %rimar6 %ur%ose of a !or%oration indi!ates t*at it
re!eives %a6ments for servi!es rendered to its affiliates on a reim9ursement/on/!ost 9asis
onl6, 7it*out realiHing %rofit, for %ur%oses of determining lia9ilit6 for VAT on servi!es
rendered. As long as t*e entit6 %rovides servi!e for a fee, remuneration or !onsideration,
t*en t*e servi!e rendered is su9:e!t to VAT.
Commissioner of Internal Revenue vs. Court of A%%eals, et al., +.R. No. ";<0<<, Mar!*
02, ;222
istin!tions 9et7een Dlia9ilit6 for t*e ta8D and D9urden of t*e ta8D in indire!t ta8ation
In indire!t ta8ation, t*ere is a need to distinguis* 9et7een t*e lia9ilit6 for t*e ta8 and t*e
9urden of t*e ta8. T*e amount of ta8 %aid ma6 9e s*ifted or %assed on 96 t*e seller to t*e
9u6er. I*at is transferred in su!* instan!es is not t*e lia9ilit6 for t*e ta8, 9ut t*e ta8
9urden. In adding or in!luding t*e VAT due to t*e selling %ri!e, t*e seller remains t*e
%erson %rimaril6 and legall6 lia9le for t*e %a6ment of t*e ta8. I*at is s*ifted onl6 to t*e
intermediate 9u6er and ultimatel6 to t*e final %ur!*aser is t*e 9urden of t*e ta8. Stated
differentl6, a seller 7*o is dire!tl6 and legall6 lia9le for %a6ment of an indire!t ta8, su!*
as t*e VAT on goods or servi!es is not ne!essaril6 t*e %erson 7*o ultimatel6 9ears t*e
9urden of t*e same ta8. It is t*e final %ur!*aser or !onsumer of su!* goods or servi!es
7*o, alt*oug* not dire!tl6 and legall6 lia9le for t*e %a6ment t*ereof, ultimatel6 9ears t*e
9urden of t*e ta8.
)ero/rating distinguis*ed from e8em%tion.
-nder )ero/rating, all VAT is removed from t*e Hero/rated goods, a!tivit6 or firm. In
!ontrast, e8em%tion onl6 removes t*e VAT at t*e e8em%t stage, and it 7ill a!tuall6
in!rease, rat*er t*an redu!e t*e total ta8es %aid 96 t*e e8em%t firm@s 9usiness or non/
retail !ustomers. It is for t*is reason t*at a s*ar% distin!tion must 9e made 9et7een Hero/
rating and e8em%tion in designating a value/added ta8.
Non/VAT ta8%a6er is not allo7ed an6 ta8 !redit on VAT Fin%ut ta8G %reviousl6 %aid.
Petitioner is registered as a Non/VAT ta8%a6er and t*us, is e8em%t from VAT. As an
e8em%t VAT ta8%a6er, it is not allo7ed an6 ta8 !redit on VAT Fin%ut ta8G %reviousl6 %aid.
In fine, even if it is assumed t*at e8em%tion from t*e 9urden of VAT on %etitioner@s
%ur!*ases did e8ist, %etitioner is still not entitled to an6 ta8 !redit or refund on t*e in%ut
ta8 %reviousl6 %aid as %etitioner is an e8em%t VAT ta8%a6er. Rat*er, it is t*e %etitioner@s
su%%liers 7*o are t*e %ro%er %arties to !laim t*e ta8 !redit and a!!ordingl6 refund t*e
%etitioner of t*e VAT erroneousl6 %assed on to t*e latter.
SECTION 20*. Cal&eBadded Tax on Sale of 4oods or Pro%ert"es.
6A7 Rate and .ase of Tax. There shall e le!"ed# assessed and $olle$ted on
e!er+ sale# arter or ex$han,e of ,oods or %ro%ert"es# a !al&eBadded tax e;&"!alent
to ten %er$ent 62017 of the ,ross sell"n, %r"$e or ,ross !al&e "n 'one+ of the ,oods
or %ro%ert"es sold# artered or ex$han,ed# s&$h tax to e %a"d + the seller or
transferor-
Pro!"ded# That the Pres"dent# &%on the re$o''endat"on of the Se$retar+ of
<"nan$e# shall# effe$t"!e Fan&ar+ 2# /00*# ra"se the rate of !al&eBadded tax to t(el!e
%er$ent 62/17# after an+ of the follo("n, $ond"t"ons has een sat"sf"ed-
6"7 Cal&eBadded tax $olle$t"on as a %er$enta,e of 4ross Do'est"$ Prod&$t
64DP7 of the %re!"o&s +ear ex$eeds t(o and fo&rBf"fth %er$ent 6/ 4E)178 or
6""7 Nat"onal ,o!ern'ent def"$"t as a %er$enta,e of 4DP of the %re!"o&s +ear
ex$eeds one and oneBhalf %er$ent 62 2E/17.
627 The ter' ',oods or %ro%ert"es' shall 'ean all tan,"le and "ntan,"le o:e$ts
(h"$h are $a%ale of %e$&n"ar+ est"'at"on and shall "n$l&de-
6a7 Real %ro%ert"es held %r"'ar"l+ for sale to $&sto'ers or held for lease "n the
ord"nar+ $o&rse of trade or &s"ness8
REVEN-E MEM'RAN-M CIRC-LAR N'. 20/31 Januar6 "<, "331
S-$JECT C Clarifi!ation of Issues Affe!ting t*e Sale, E8!*ange, Transfer or Lease of
Real Pro%erties, under Re%u9li! A!t No. 44"1, 't*er7ise Lno7n as t*e DE8%anded VAT
La7.D
Real estate transa!tions 7*i!* are su9:e!t to VAT starting Januar6 ", "331 in!lude t*e
follo7ingC
a. Sale, 9arter or e8!*ange of real %ro%ert6 *eld %rimaril6 for sale to !ustomers or
for lease, in t*e ordinar6 !ourse of trade or 9usiness, 7*en t*e gross annual andPor
re!ei%ts e8!eed P<22,222.22?F no7".3M G
9. Lease of real %ro%ert6 in t*e ordinar6 !ourse of trade or 9usiness, 7*et*er for
!ommer!ial or residential use, 7*en t*e gross annual re!ei%ts e8!eed P<22,22.22 and
%rovided t*at, in t*e !ase of residential use, t*e mont*l6 rental e8!eeds P0,3<2.22Punit
Fas ad:usted under Re%u9li! A!t No. 41##, ot*er7ise >no7n as t*e Rent Control La7G?
!. Se!urit6 de%osits in lease !ontra!ts, 7*en t*e same is a%%lied to rental Fat t*e time
of t*e a%%li!ationG?
d. Advan!e %a6ment re!eived in t*e mont*PJuarter 96 t*e lessor, 7*en t*e same is in
fa!t a %re/%aid rental, regardless of t*e a!!ounting met*od used?
e. Real %ro%ert6 dividends distri9uted 96 real estate dealersPlessors to its
sto!>*olders and de!lared out of t*e retained earnings. T*e VAT s*ould 9e !om%uted
9ased on t*e fair mar>et value or Honal value t*ereof, 7*i!*ever is *ig*er, at t*e time of
distri9ution.
Real estate transa!tion 7*i!* are not su9:e!t to VAT in!lude t*e follo7ingC
a. Sale of real %ro%ert6 not %rimaril6 *eld for sale to !ustomers or *eld for lease in
t*e ordinar6 !ourse of trade of 9usiness?
9. Sale of real %ro%ert6 utiliHed for so!ialiHed *ousing under RA 4;43, e8!e%t 7*en
sold 96 a real estate dealer to a %erson ot*er t*an t*e intended or Jualified 9enefi!iaries?
!. Sale of real %ro%ert6 utiliHed for lo7/!ost *ousing under $P ;;2 or P 3<4,
e8!e%t 7*en sold 96 a real estate dealer to a %erson ot*er t*an t*e intended or Jualified
9enefi!iaries?
d. Transfer of real %ro%ert6 to a trustee if t*e %ro%ert6 is to 9e *eld merel6 in trust
for t*e trustor?
e. Transfer of real %ro%ert6 to a !or%oration in e8!*ange for its s*ares of sto!> under
Se!tion 0# F!G F;G and F1G F!G of t*e Ta8 Code?
f. Advan!e %a6ment 96 t*e lessee in a lease !ontra!t, 7*en t*e same is a!tuall6 a
loan to t*e lessor from t*e lessee?
g. Se!urit6 de%osits for lease arrangements to insure t*e fait*ful %erforman!e of
!ertain o9ligations of t*e lessee to t*e lessor?
*. Lease of residential units, 9oarding *ouses, dormitories, rooms and 9ed s%a!es
offered for rent 96 t*eir o7ners at a mont*l6 rental not e8!eeding P0,3<2.22Punit as
ad:usted under Re%u9li! A!t No. 41##, FRent Control La7G?
T*e term DunitD s*all mean an a%artment unit in t*e !ase of a%artments? *ouse in
t*e !ase of residential *ouses? %er %erson in t*e !ase of dormitories, 9oarding *ouses
and 9ed s%a!es? and %er room in t*e !ase of rooms for rent.
i. Sale or lease of real %ro%ert6 %rimaril6 *eld for sale to !ustomers or for lease in
t*e ordinar6 !ourse of trade or 9usiness 7*en t*e gross annual sales andPor re!ei%ts do
not e8!eed P<22,222.22.
A su9sid6 or dole/out is not su9:e!t to VAT.
T*ere must 9e a sale, 9arter or e8!*ange of goods or %ro%erties 9efore an6 VAT ma6 9e
levied. Certainl6, t*ere 7as no su!* sale, 9arter or e8!*ange in t*e su9sid6 given to Son6
9ut an assistan!e or aid in vie7 of Son6@s dire or adverse e!onomi! !onditions. It 7as 9ut
a dole/out 96 Son6 International Singa%ore and not in %a6ment for goods or %ro%erties
sold, 9artered or e8!*anged 96 Son6.
Commissioner of Internal Revenue vs. Son6 P*il., In!., +.R. No. "4=134, Novem9er "4,
;2"2
T*e Ta8 Code e8!ludes VAT from t*e Dgross selling %ri!eD to avoid a Dta8 on t*e ta8D.
(or %ur%oses of t*e value/added ta8, Se!tion "21 of t*e Ta8 Code e8%ressl6 e8!ludes t*e
value/added ta8 from t*e Dgross selling %ri!eD to avoid a Dta8 on t*e ta8.D To !larif6 t*at
onl6 t*e value/added ta8 does not form %art of t*e gross selling %ri!e, Se!tion "21
e8%ressl6 states t*at t*e gross selling %ri!e s*all in!lude an6 e8!ise ta8, effe!tivel6
resulting in a Dta8 on a ta8.D 'f !ourse, t*e Dta8 on a ta8D is in realit6 a ta8 on t*e %ortion
of t*e in!ome or re!ei%t t*at is eJuivalent to t*e ta8, usuall6 7it**eld and remitted to t*e
government.
C*ina $an>ing Cor%. vs. Court of A%%eals, +.R. Nos. "#14#3 K "#430=, June "2, ;220
67 The r",ht or the %r"!"le,e to &se %atent# $o%+r",ht# des",n or 'odel# %lan#
se$ret for'&la or %ro$ess# ,ood("ll# trade'ar9# trade rand or other l"9e %ro%ert+
or r",ht8
Cons%i!uousl6, Se!tion "21 F$G of t*e NIRC, 7*i!* deals 7it* t*e im%osition of t*e VAT,
does not limit t*e term DsaleD to !ommer!ial sales, rat*er it e8tends t*e term to
transa!tions t*at are DdeemedD sale.
After !arefull6 e8amining t*is %rovision, t*is Court finds it an eJuita9le !onstru!tion of
t*e la7 t*at 7*en t*e term DsaleD is made to in!lude !ertain transa!tions for t*e %ur%ose
of im%osing a ta8, t*ese same transa!tions s*ould 9e in!luded in t*e term DsaleD 7*en
!onsidering t*e availa9ilit6 of an e8em%tion or ta8 9enefit from t*e same revenue
measures. It is undis%uted t*at during t*e fourt* Juarter of ;22;, %etitioner transferred
to NPC all t*e ele!tri!it6 t*at 7as %rodu!ed during t*e trial %eriod. T*e fa!t t*at it 7as
not transferred t*roug* a !ommer!ial sale or in t*e normal !ourse of 9usiness does not
defle!t from t*e fa!t t*at su!* transa!tion is deemed as a sale under t*e la7.
San RoJue Po7er Cor%. vs. Commissioner of Internal Revenue
+.R. No. "=20#<, Novem9er ;<, ;223
6$7 The r",ht or the %r"!"le,e to &se "n the Ph"l"%%"nes of an+ "nd&str"al#
$o''er$"al or s$"ent"f"$ e;&"%'ent8
6d7 The r",ht or the %r"!"le,e to &se 'ot"on %"$t&re f"l's# f"l's# ta%es and d"s$s8
and
6e7 Rad"o# tele!"s"on# satell"te trans'"ss"on and $ale tele!"s"on t"'e.
The ter' ',ross sell"n, %r"$e' 'eans the total a'o&nt of 'one+ or "ts e;&"!alent
(h"$h the %&r$haser %a+s or "s ol",ated to %a+ to the seller "n $ons"derat"on of the
sale# arter or ex$han,e of the ,oods or %ro%ert"es# ex$l&d"n, the !al&eBadded tax.
The ex$"se tax# "f an+# on s&$h ,oods or %ro%ert"es shall for' %art of the ,ross
sell"n, %r"$e.
6/7 The follo("n, sales + CATBre,"stered %ersons shall e s&:e$t to 5ero
%er$ent 6017 rate-
6a7 Ex%ort Sales. The ter' 'ex%ort sales' 'eans-
627 The sale and a$t&al sh"%'ent of ,oods fro' the Ph"l"%%"nes to a fore",n
$o&ntr+# "rres%e$t"!e of an+ sh"%%"n, arran,e'ent that 'a+ e a,reed &%on (h"$h
'a+ "nfl&en$e or deter'"ne the transfer of o(nersh"% of the ,oods so ex%orted and
%a"d for "n a$$e%tale fore",n $&rren$+ or "ts e;&"!alent "n ,oods or ser!"$es# and
a$$o&nted for "n a$$ordan$e ("th the r&les and re,&lat"ons of the
.an,9oSentraln,P"l"%"nas 6.SP78
6/7 Sale of ra( 'ater"als or %a$9a,"n, 'ater"als to a nonres"dent &+er for
del"!er+ to a res"dent lo$al ex%ortBor"ented enter%r"se to e &sed "n 'an&fa$t&r"n,#
%ro$ess"n,# %a$9"n, or re%a$9"n, "n the Ph"l"%%"nes of the sa"d &+er's ,oods and
%a"d for "n a$$e%tale fore",n $&rren$+ and a$$o&nted for "n a$$ordan$e ("th the
r&les and re,&lat"ons of the .an,9oSentraln,P"l"%"nas 6.SP7-
637 Sale of ra( 'ater"als or %a$9a,"n, 'ater"als to ex%ortBor"ented enter%r"se
(hose ex%ort sales ex$eed se!ent+ %er$ent 6A017 of total ann&al %rod&$t"on8
647 Sale of ,old to the .an,9oSentraln,P"l"%"nas 6.SP78
REVEN-E RE+-LATI'NS N'. 224/2= Mar!* ;<, ;22=
Ta8ation on t*e Sale to t*e $ang>oSentralngPili%inas of +old and 't*er Metalli!
Mineral Produ!ts E8tra!ted or Produ!ed 96 Small/S!ale Miners, and (urt*er Amending
Se!tion ;.<4 ; FTG of Revenue Regulations No. ;/3=, as Amended
Pursuant to Se!s.;## and ;#< of t*e National Internal Revenue Code, as amended, in
relation to Se!s. <4 to <3 and "<" FAG F0G F9G t*ereof, t*ese regulations are *ere96
%romulgated to im%lement Se!tion "0 FdG of Re%u9li! A!t FR.A.G No. 4241, ot*er7ise
>no7n as t*e Peo%le@s Small/S!ale Mining A!t of "33" and s*all !over onl6 transa!tions
9et7een small/s!ale miners and $ang>oSentralngPili%inas F$SPG. T*ese regulations
furt*er amend Se!tion ;.<4.; FTG of Revenue Regulations FRev. Regs.G No. ;/3=, as
amended 96 Rev. Regs. No. "4/;220.
A *older of small/s!ale mining !ontra!t is lia9le to %a6 t*e follo7ing national internal
revenue ta8es, to 7itC
aG E8!ise Ta8 at t*e rate of t7o %er!ent F;EG %res!ri9ed under Se!tion "<" FAG F0G
F9G of t*e same Ta8 Code on ever6 sale of gold to $SP, 9ased on a!tual mar>et value.
(or t*is %ur%ose, a!tual mar>et value s*all refer to t*e %ri!es !om%etitive 7it*
t*ose %revailing in t*e 7orld mar>et regardless of t*e volume or 7eig*t 96 7*i!* t*e $SP
*as agreed to 9u6 t*e gold. 1
9G Value/added ta8 at t*e rate of Hero %er!ent F2EG as %res!ri9ed under Se!tion "21
FAG F;G FaG F#G of t*e Ta8 Code on ever6 sale of gold to $SP.
!G In!ome Ta8 at t*e rate %res!ri9ed under Se!. ;# FAG in !ase of individual
ta8%a6ers, and under Se!. ;4 FAG in t*e !ase of !or%orations. (urt*er, !ontra!t *older
s*all 9e su9:e!t to t*e Credita9le Iit**olding Ta8 FCITG at t*e rate of ten %er!ent
F"2EG.
6)7 Those $ons"dered ex%ort sales &nder Exe$&t"!e Order No. //*# other("se
9no(n as the O'n"&s In!est'ent Code of 2>8A# and other s%e$"al la(s8 and
6*7 The sale of ,oods# s&%%l"es# e;&"%'ent and f&el to %ersons en,a,ed "n
"nternat"onal sh"%%"n, or "nternat"onal a"r trans%ort o%erat"ons.
67 <ore",n C&rren$+ Deno'"nated Sale. The %hrase 'fore",n $&rren$+
deno'"nated sale' 'eans sale to a nonres"dent of ,oods# ex$e%t those 'ent"oned "n
Se$t"ons 24> and 2)0# asse'led or 'an&fa$t&red "n the Ph"l"%%"nes for del"!er+ to
a res"dent "n the Ph"l"%%"nes# %a"d for "n a$$e%tale fore",n $&rren$+ and a$$o&nted
for "n a$$ordan$e ("th the r&les and re,&lat"ons of the .an,9oSentraln,P"l"%"nas
6.SP7.
6$7 Sales to %ersons or ent"t"es (hose exe'%t"on &nder s%e$"al la(s or
"nternat"onal a,ree'ents to (h"$h the Ph"l"%%"nes "s a s",nator+ effe$t"!el+ s&:e$ts
s&$h sales to 5ero rate.
6.7 Transa$t"ons Dee'ed Sale. The follo("n, transa$t"ons shall e dee'ed
sale-
627 Transfer# &se or $ons&'%t"on not "n the $o&rse of &s"ness of ,oods or
%ro%ert"es or","nall+ "ntended for sale or for &se "n the $o&rse of &s"ness8
6/7 D"str"&t"on or transfer to-
6a7 Shareholders or "n!estors as share "n the %rof"ts of the CATBre,"stered
%ersons8 or
67 Cred"tors "n %a+'ent of det8
637 Cons",n'ent of ,oods "f a$t&al sale "s not 'ade ("th"n s"xt+ 6*07 da+s
follo("n, the date s&$h ,oods (ere $ons",ned8 and
647 Ret"re'ent fro' or $essat"on of &s"ness ("th res%e$t to "n!entor"es of
taxale ,oods ex"st"n, as of s&$h ret"re'ent or $essat"on.
6C7 Chan,es "n or Cessat"on of Stat&s of a CAT re,"stered Person. The tax
"'%osed "n S&se$t"on 6A7 of th"s Se$t"on shall also a%%l+ to ,oods d"s%osed of or
ex"st"n, as of a $erta"n date "f &nder $"r$&'stan$es to e %res$r"ed "n r&les and
re,&lat"ons to e %ro'&l,ated + the Se$retar+ of <"nan$e# &%on re$o''endat"on
of the Co''"ss"oner# the stat&s of a %erson as a CATBre,"stered %erson $han,es or
"s ter'"nated.
6D7 Deter'"nat"on of the Tax
627 The tax shall e $o'%&ted + '&lt"%l+"n, the total a'o&nt "nd"$ated "n the
"n!o"$e + oneBele!enth 62E227.
6/7 Sales Ret&rns# Allo(an$es and Sales D"s$o&nts The !al&e of ,oods or
%ro%ert"es sold and s&se;&entl+ ret&rned or for (h"$h allo(an$es (ere ,ranted +
a CATBre,"stered %erson 'a+ e ded&$ted fro' the ,ross sales or re$e"%ts for the
;&arter "n (h"$h a ref&nd "s 'ade or a $red"t 'e'orand&' or ref&nd "s "ss&ed.
Sales d"s$o&nt ,ranted and "nd"$ated "n the "n!o"$e at the t"'e of sale and the ,rant
of (h"$h does not de%end &%on the ha%%en"n, of a f&t&re e!ent 'a+ e ex$l&ded
fro' the ,ross sales ("th"n the sa'e ;&arter "t (as ,"!en.
6E7 A&thor"t+ of the Co''"ss"oner to Deter'"ne the A%%ro%r"ate Tax .ase.
The Co''"ss"oner shall# + r&les and re,&lat"ons %res$r"ed + the Se$retar+ of
<"nan$e# deter'"ne the a%%ro%r"ate tax ase "n $ases (here a transa$t"on "s dee'ed
a sale# arter or ex$han,e of ,oods or %ro%ert"es &nder S&se$t"on 6.7 hereof# or
(here the ,ross sell"n, %r"$e "s &nreasonal+ lo(er than the a$t&al 'ar9et !al&e.D
C I R vs. Magsa6sa6 Lines, In!., +.R. No. "#13=#, Jul6 ;=, ;221
(ACTSPISS-EC I*et*er t*e sale 96 t*e National evelo%ment Com%an6 FNCG of five
F<G of its vessels to t*e %rivate res%ondents %ursuant to a government %rogram of
%rivatiHation is su9:e!t to value/added ta8 FVATG under t*e National Internal Revenue
Code of "3=1 FTa8 CodeG t*en %revailing at t*e time of t*e sale.
$IRC Said sale is su9:e!t to VAT 9e!ause it ma6 fall under one of t*ose transa!tions
Ddeemed saleD under Se!. "22 of t*e NIRC.
&ELC T*e sale is N'T su9:e!t to VAT %ursuant to Se!. 33 of t*e Ta8 Code, no matter
*o7 t*e said sale ma6 *e7 to t*ose transa!tions Ddeemed saleD as defined under Se!.
"22. T*e sale 7as N'T in t*e !ourse of t*e trade or 9usiness of NC. T*e normal VAT/
registered a!tivit6 of NC is leasing %ersonal %ro%ert6. T*is finding is !onfirmed 96 t*e
Revised C*arter of t*e NC 7*i!* 9ears no indi!ation t*at t*e NC 7as !reated for t*e
%rimar6 %ur%ose of selling real %ro%ert6. $ased on :uris%ruden!e, D!ourse of 9usinessD or
Ddoing 9usinessD !onnotes regularit6 of a!tivit6. In t*e instant !ase, t*e sale 7as an
isolated transa!tion. T*e sale 7*i!* 7as involuntar6 and made %ursuant to t*e
de!lared %oli!6 of +overnment for %rivatiHation !ould no longer 9e re%eated or !arried
on 7it* regularit6.
Se!. 33 is t*e ver6 first %rovision in Title IV of t*e Ta8 Code, t*e Title t*at !overs VAT in t*e
la7. $efore an6 %ortion of Se!. "22, or t*e rest of t*e la7 for t*at matter, ma6 9e a%%lied in
order to su9:e!t a transa!tion to VAT, it must first 9e satisfied t*at t*e ta8%a6er and
transa!tion involved is lia9le for VAT in t*e first %la!e under Se!. 33. An6 sale, 9arter or
e8!*ange of goods or servi!es not in t*e !ourse of trade or 9usiness is not su9:e!t to VAT. It
7ould 9e!ome ne!essar6 to as!ertain 7*et*er under t*ose t7o %rovisions t*e transa!tion
ma6 9e Ddeemed a saleD, onl6 if it is settled t*at t*e transa!tion o!!urred in t*e !ourse of
trade or 9usiness in t*e first %la!e. If t*e transa!tion trans%ired outside t*e !ourse of trade
or 9usiness, it 7ould 9e irrelevant for t*e %ur%ose of determining VAT lia9ilit6 7*et*er t*e
transa!tion ma6 9e deemed sale, sin!e it an67a6 is not su9:e!t to VAT.
Even if Se!tion "22 or Se!tion # of R.R. No. </=4 7ere to find a%%li!ation in t*is !ase,
Se!tion #FEG of R.R. No. </=4, refle!ting Se!tion "22 of t*e Ta8 Code, !larifies t*at su!*
D!*ange of o7ners*i%D is onl6 an attending !ir!umstan!e to Dretirement from or !essation of
9usiness 7it* res%e!t to all goods on *and of t*e date of su!* retirement or !essation.D
SECTION 20A.Cal&eBadded Tax on I'%ortat"on of 4oods.
6A7 In 4eneral. There shall e le!"ed# assessed and $olle$ted on e!er+
"'%ortat"on of ,oods a !al&eBadded tax e;&"!alent to ten %er$ent 62017 ased on
the total !al&e &sed + the .&rea& of C&sto's "n deter'"n"n, tar"ff and $&sto's
d&t"es# %l&s $&sto's d&t"es# ex$"se taxes# "f an+# and other $har,es# s&$h tax to e
%a"d + the "'%orter %r"or to the release of s&$h ,oods fro' $&sto's $&stod+-
Pro!"ded# That (here the $&sto's d&t"es are deter'"ned on the as"s of the
;&ant"t+ or !ol&'e of the ,oods# the !al&eBadded tax shall e ased on the landed
$ost %l&s ex$"se taxes# "f an+- Pro!"ded# f&rther# That the Pres"dent# &%on the
re$o''endat"on of the Se$retar+ of <"nan$e# shall# effe$t"!e Fan&ar+ 2# /00*# ra"se
the rate of !al&eBadded tax to t(el!e %er$ent 62/17# after an+ of the follo("n,
$ond"t"ons has een sat"sf"ed-
ex$eeds one and oneBhalf %er$ent 62 2E/17.
6.7 Transfer of 4oods + TaxBexe'%t Persons. In the $ase of taxBfree
"'%ortat"on of ,oods "nto the Ph"l"%%"nes + %ersons# ent"t"es or a,en$"es exe'%t
fro' tax (here s&$h ,oods are s&se;&entl+ sold# transferred or ex$han,ed "n the
Ph"l"%%"nes to nonBexe'%t %ersons or ent"t"es# the %&r$hasers# transferees or
re$"%"ents shall e $ons"dered the "'%orters thereof# (ho shall e l"ale for an+
"nternal re!en&e tax on s&$h "'%ortat"on. The tax d&e on s&$h "'%ortat"on shall
$onst"t&te a l"en on the ,oods s&%er"or to all $har,es or l"ens on the ,oods#
"rres%e$t"!e of the %ossessor thereof.D
SECTION 208. Cal&eBadded Tax on Sale of Ser!"$es and =se or Lease of
Pro%ert"es.
6A7 Rate and .ase of Tax. There shall e le!"ed# assessed and $olle$ted# a
!al&eBadded tax e;&"!alent to ten %er$ent 62017 of ,ross re$e"%ts der"!ed fro' the
sale or ex$han,e of ser!"$es# "n$l&d"n, the &se or lease of %ro%ert"es- Pro!"ded#
That the Pres"dent# &%on the re$o''endat"on of the Se$retar+ of <"nan$e# shall#
effe$t"!e Fan&ar+ 2# /00*# ra"se the rate of !al&eBadded tax to t(el!e %er$ent
62/17# after an+ of the follo("n, $ond"t"ons has een sat"sf"ed-
ex$eeds one and oneBhalf %er$ent 62 2E/17
The %hrase 'sale or ex$han,e of ser!"$es' 'eans the %erfor'an$e of all 9"nds of
ser!"$es "n the Ph"l"%%"nes for others for a fee# re'&nerat"on or $ons"derat"on#
"n$l&d"n, those %erfor'ed or rendered + $onstr&$t"on and ser!"$e $ontra$tors8
sto$9# real estate# $o''er$"al# $&sto's and "''",rat"on ro9ers8 lessors of
%ro%ert+# (hether %ersonal or real8 (areho&s"n, ser!"$es8 lessors or d"str"&tors of
$"ne'ato,ra%h"$ f"l's8 %ersons en,a,ed "n '"ll"n,# %ro$ess"n,# 'an&fa$t&r"n, or
re%a$9"n, ,oods for others8 %ro%r"etors# o%erators or 9ee%ers of hotels# 'otels#
restho&ses# %ens"on ho&ses# "nns# resorts8 %ro%r"etors or o%erators of resta&rants#
refresh'ent %arlors# $afes and other eat"n, %la$es# "n$l&d"n, $l&s and $aterers8
dealers "n se$&r"t"es8 lend"n, "n!estors8 trans%ortat"on $ontra$tors on the"r trans%ort
of ,oods or $ar,oes# "n$l&d"n, %ersons (ho trans%ort ,oods or $ar,oes for h"re and
other do'est"$ $o''on $arr"ers + land relat"!e to the"r trans%ort of ,oods or
$ar,oes8 $o''on $arr"ers + a"r and sea relat"!e to the"r trans%ort of %assen,ers#
,oods or $ar,oes fro' one %la$e "n the Ph"l"%%"nes to another %la$e "n the
Ph"l"%%"nes8 sales of ele$tr"$"t+ + ,enerat"on $o'%an"es# trans'"ss"on# and
d"str"&t"on $o'%an"es8 ser!"$es of fran$h"se ,rantees of ele$tr"$ &t"l"t"es# tele%hone
and tele,ra%h# rad"o and tele!"s"on road$ast"n, and all other fran$h"se ,rantees
ex$e%t those &nder Se$t"on 22> of th"s Code and nonBl"fe "ns&ran$e $o'%an"es
6ex$e%t the"r $ro% "ns&ran$es7 "n$l&d"n, s&ret+# f"del"t+# "nde'n"t+ and ond"n,
$o'%an"es8 and s"'"lar ser!"$es re,ardless of (hether or not the %erfor'an$e
thereof $alls for the exer$"se or &se of the %h+s"$al or 'ental fa$&lt"es. The %hrase
'sale or ex$han,e of ser!"$es' shall l"9e("se "n$l&de-
627 The lease or the &se of or the r",ht or %r"!"le,e to &se an+ $o%+r",ht# %atent#
des",n or 'odel# %lan# se$ret for'&la or %ro$ess# ,ood("ll# trade'ar9# trade rand
or other l"9e %ro%ert+ or r",ht8
6/7 The lease or the &se of# or the r",ht to &se of an+ "nd&str"al# $o''er$"al or
s$"ent"f"$ e;&"%'ent8
637 The s&%%l+ of s$"ent"f"$# te$hn"$al# "nd&str"al or $o''er$"al 9no(led,e or
"nfor'at"on8
647 The s&%%l+ of an+ ass"stan$e that "s an$"llar+ and s&s"d"ar+ to and "s
f&rn"shed as a 'eans of enal"n, the a%%l"$at"on or en:o+'ent of an+ s&$h
%ro%ert+# or r",ht as "s 'ent"oned "n s&%ara,ra%h 6/7 or an+ s&$h 9no(led,e or
"nfor'at"on as "s 'ent"oned "n s&%ara,ra%h 6378
6)7 The s&%%l+ of ser!"$es + a nonres"dent %erson or h"s e'%lo+ee "n
$onne$t"on ("th the &se of %ro%ert+ or r",hts elon,"n, to# or the "nstallat"on or
o%erat"on of an+ rand# 'a$h"ner+ or other a%%arat&s %&r$hased fro' s&$h
nonres"dent %erson8
6*7 The s&%%l+ of te$hn"$al ad!"$e# ass"stan$e or ser!"$es rendered "n $onne$t"on
("th te$hn"$al 'ana,e'ent or ad'"n"strat"on of an+ s$"ent"f"$# "nd&str"al or
$o''er$"al &nderta9"n,# !ent&re# %ro:e$t or s$he'e8
6A7 The lease of 'ot"on %"$t&re f"l's# f"l's# ta%es and d"s$s8 and
687 The lease or the &se of or the r",ht to &se rad"o# tele!"s"on# satell"te
trans'"ss"on and $ale tele!"s"on t"'e.
Lease of %ro%ert"es shall e s&:e$t to the tax here"n "'%osed "rres%e$t"!e of the
%la$e (here the $ontra$t of lease or l"$ens"n, a,ree'ent (as exe$&ted "f the
%ro%ert+ "s leased or &sed "n the Ph"l"%%"nes.
The ter' ',ross re$e"%ts' 'eans the total a'o&nt of 'one+ or "ts e;&"!alent
re%resent"n, the $ontra$t %r"$e# $o'%ensat"on# ser!"$e fee# rental or ro+alt+#
"n$l&d"n, the a'o&nt $har,ed for 'ater"als s&%%l"ed ("th the ser!"$es and de%os"ts
and ad!an$ed %a+'ents a$t&all+ or $onstr&$t"!el+ re$e"!ed d&r"n, the taxale
;&arter for the ser!"$es %erfor'ed or to e %erfor'ed for another %erson# ex$l&d"n,
!al&eBadded tax.
P&ILIPPINE AM-SEMENT AN +AMIN+ C'RP'RATI'N FPA+C'RG, %etitioner, vs.
T&E $-REA- '( INTERNAL REVEN-E F$IRG, re%resented *erein 96 &'N. J'SE MARI'
$-VA+, in *is offi!ial !a%a!it6 as C'MMISSI'NER '( INTERNAL REVEN-E, %u9li!
res%ondent, .+.R. No. "4;2=4. Mar!* "<, ;2"".5
ECISI'N
(or resolution of t*is Court is t*e Petition for Certiorari and Pro*i9ition 7it* %ra6er for t*e
issuan!e of a Tem%orar6 Restraining 'rder andPor Preliminar6 In:un!tion, dated A%ril "4,
;221, of %etitioner P*ili%%ine Amusement and +aming Cor%oration FPA+C'RG, see>ing t*e
de!laration of nullit6 of Se!tion " of Re%u9li! A!t FR.A.G No. 3004 insofar as it amends
Se!tion ;4 F!G of t*e National Internal Revenue Code of "334, 96 e8!luding %etitioner from
e8em%tion from !or%orate in!ome ta8 for 9eing re%ugnant to Se!tions " and "2 of Arti!le III
of t*e Constitution. Petitioner furt*er see>s to %ro*i9it t*e im%lementation of $ureau of
Internal Revenue F$IRG Revenue Regulations No. "1/;22< for 9eing !ontrar6 to la7.
T*e undis%uted fa!ts follo7.
PA+C'R 7as !reated %ursuant to Presidential e!ree FP..G No. "214/A on Januar6 ",
"344. Simultaneous to its !reation, P.. No. "214/$ Fsu%%lementing P.. No. "214/AG 7as
issued e8em%ting PA+C'R from t*e %a6ment of an6 t6%e of ta8, e8!e%t a fran!*ise ta8 of five
%er!ent F<EG of t*e gross revenue. T*ereafter, on June ;, "34=, P.. No. "033 7as issued
e8%anding t*e s!o%e of PA+C'R@s e8em%tion.
To !onsolidate t*e la7s %ertaining to t*e fran!*ise and %o7ers of PA+C'R, P.. No. "=13
7as issued. Se!tion "0 t*ereof reads as follo7sC
Se!. "0. E8em%tions. B . . .
F"G Customs uties, ta8es and ot*er im%osts on im%ortations. B All im%ortations of
eJui%ment, ve*i!les, automo9iles, 9oats, s*i%s, 9arges, air!raft and su!* ot*er gam9ling
%ara%*ernalia, in!luding a!!essories or related fa!ilities, for t*e sole and e8!lusive use of
t*e !asinos, t*e %ro%er and effi!ient management and administration t*ereof and su!* ot*er
!lu9s, re!reation or amusement %la!es to 9e esta9lis*ed under and 96 virtue of t*is
(ran!*ise s*all 9e e8em%t from t*e %a6ment of duties, ta8es and ot*er im%osts, in!luding all
>inds of fees, levies, or !*arges of an6 >ind or nature.
Vessels andPor a!!essor6 ferr6 9oats im%orted or to 9e im%orted 96 an6 !or%oration *aving
e8isting !ontra!tual arrangements 7it* t*e Cor%oration, for t*e sole and e8!lusive use of t*e
!asino or to 9e used to servi!e t*e o%erations and reJuirements of t*e !asino, s*all li>e7ise
9e totall6 e8em%t from t*e %a6ment of all !ustoms duties, ta8es and ot*er im%osts, in!luding
all >inds of fees, levies, assessments or !*arges of an6 >ind or nature, 7*et*er National or
Lo!al.
F;G In!ome and ot*er ta8es. B FaG (ran!*ise &olderC No ta8 of an6 >ind or form, in!ome
or ot*er7ise, as 7ell as fees, !*arges, or levies of 7*atever nature, 7*et*er National or
Lo!al, s*all 9e assessed and !olle!ted under t*is (ran!*ise from t*e Cor%oration? nor s*all
an6 form of ta8 or !*arge atta!* in an6 7a6 to t*e earnings of t*e Cor%oration, e8!e%t a
(ran!*ise Ta8 of five %er!ent F<EG of t*e gross revenue or earnings derived 96 t*e
Cor%oration from its o%eration under t*is (ran!*ise. Su!* ta8 s*all 9e due and %a6a9le
Juarterl6 to t*e National +overnment and s*all 9e in lieu of all >inds of ta8es, levies, fees or
assessments of an6 >ind, nature or des!ri%tion, levied, esta9lis*ed, or !olle!ted 96 an6
muni!i%al, %rovin!ial or national government aut*orit6.
F9G 't*ersC T*e e8em%tion *erein granted for earnings derived from t*e o%erations
!ondu!ted under t*e fran!*ise, s%e!ifi!all6 from t*e %a6ment of an6 ta8, in!ome or
ot*er7ise, as 7ell as an6 form of !*arges, fees or levies, s*all inure to t*e 9enefit of and
e8tend to !or%orationFsG, asso!iationFsG, agen!6FiesG, or individualFsG 7it* 7*om t*e
Cor%oration or o%erator *as an6 !ontra!tual relations*i% in !onne!tion 7it* t*e o%erations
of t*e !asinoFsG aut*oriHed to 9e !ondu!ted under t*is (ran!*ise and to t*ose re!eiving
!om%ensation or ot*er remuneration from t*e Cor%oration as a result of essential fa!ilities
furnis*ed andPor te!*ni!al servi!es rendered to t*e Cor%oration or o%erator.
T*e fee or remuneration of foreign entertainers !ontra!ted 96 t*e Cor%oration or o%erator in
%ursuan!e of t*is %rovision s*all 9e free of an6 ta8.
F0G ividend In!ome. B Not7it*standing an6 %rovision of la7 to t*e !ontrar6, in t*e
event t*e Cor%oration s*ould de!lare a !as* dividend in!ome !orres%onding to t*e
%arti!i%ation of t*e %rivate se!tor s*all, as an in!entive to t*e 9enefi!iaries, 9e su9:e!t onl6
to a final flat in!ome rate of ten %er!ent F"2EG of t*e regular in!ome ta8 rates. T*e dividend
in!ome s*all not in su!* !ase 9e !onsidered as %art of t*e 9enefi!iaries@ ta8a9le in!ome?
%rovided, *o7ever, t*at su!* dividend in!ome s*all 9e totall6 e8em%ted from in!ome or ot*er
form of ta8es if invested 7it*in si8 F1G mont*s from t*e date t*e dividend in!ome is re!eived
in t*e follo7ingC
FaG o%eration of t*e !asinoFsG or investments in an6 affiliate a!tivit6 t*at 7ill ultimatel6
redound to t*e 9enefit of t*e Cor%oration? or an6 ot*er !or%oration 7it* 7*om t*e
Cor%oration *as an6 e8isting arrangements in !onne!tion 7it* or related to t*e o%erations
of t*e !asinoFsG?
F9G +overnment 9onds, se!urities, treasur6 notes, or government de9entures? or
F!G $'I/registered or e8%ort/oriented !or%orationFsG.
PA+C'R@s ta8 e8em%tion 7as removed in June "3=# t*roug* P.. No. "30", 9ut it 7as later
restored 96 Letter of Instru!tion No. "#02, 7*i!* 7as issued in Se%tem9er "3=#.
'n Januar6 ", "33=, R.A. No. =#;#, ot*er7ise >no7n as t*e National Internal Revenue Code
of "334, too> effe!t. Se!tion ;4 F!G of R.A. No. =#;# %rovides t*at government/o7ned and
!ontrolled !or%orations F+'CCsG s*all %a6 !or%orate in!ome ta8, e8!e%t %etitioner
PA+C'R, t*e +overnment Servi!e and Insuran!e Cor%oration, t*e So!ial Se!urit6 S6stem,
t*e P*ili%%ine &ealt* Insuran!e Cor%oration, and t*e P*ili%%ine C*arit6 S7ee%sta>es
'ffi!e, t*usC
F!G +overnment/o7ned or Controlled Cor%orations, Agen!ies or Instrumentalities. B
T*e %rovisions of e8isting s%e!ial general la7s to t*e !ontrar6 not7it*standing, all
!or%orations, agen!ies or instrumentalities o7ned and !ontrolled 96 t*e +overnment, e8!e%t
t*e +overnment Servi!e and Insuran!e Cor%oration F+SISG, t*e So!ial Se!urit6 S6stem
FSSSG, t*e P*ili%%ine &ealt* Insuran!e Cor%oration FP&ICG, t*e P*ili%%ine C*arit6
S7ee%sta>es 'ffi!e FPCS'G, and t*e P*ili%%ine Amusement and +aming Cor%oration
FPA+C'RG, s*all %a6 su!* rate of ta8 u%on t*eir ta8a9le in!ome as are im%osed 96 t*is
Se!tion u%on !or%orations or asso!iations engaged in similar 9usiness, industr6, or a!tivit6.
Iit* t*e ena!tment of R.A. No. 3004 on Ma6 ;#, ;22<, !ertain se!tions of t*e National
Internal Revenue Code of "334 7ere amended. T*e %arti!ular amendment t*at is at issue in
t*is !ase is Se!tion " of R.A. No. 3004, 7*i!* amended Se!tion ;4 F!G of t*e National
Internal Revenue Code of "334 96 e8!luding PA+C'R from t*e enumeration of +'CCs t*at
are e8em%t from %a6ment of !or%orate in!ome ta8, t*usC
T*e %rovisions of e8isting s%e!ial general la7s to t*e !ontrar6 not7it*standing, all
!or%orations, agen!ies, or instrumentalities o7ned and !ontrolled 96 t*e +overnment,
e8!e%t t*e +overnment Servi!e and Insuran!e Cor%oration F+SISG, t*e So!ial Se!urit6
S6stem FSSSG, t*e P*ili%%ine &ealt* Insuran!e Cor%oration FP&ICG, and t*e P*ili%%ine
C*arit6 S7ee%sta>es 'ffi!e FPCS'G, s*all %a6 su!* rate of ta8 u%on t*eir ta8a9le in!ome as
are im%osed 96 t*is Se!tion u%on !or%orations or asso!iations engaged in similar 9usiness,
industr6, or a!tivit6.
ifferent grou%s !ame to t*is Court via %etitions for !ertiorari and %ro*i9ition assailing t*e
validit6 and !onstitutionalit6 of R.A. No. 3004, in %arti!ularC
"G Se!tion #, 7*i!* im%oses a "2E Value Added Ta8 FVATG on sale of goods and
%ro%erties? Se!tion <, 7*i!* im%oses a "2E VAT on im%ortation of goods? and Se!tion 1,
7*i!* im%oses a "2E VAT on sale of servi!es and use or lease of %ro%erties, all !ontain a
uniform %roviso aut*oriHing t*e President, u%on t*e re!ommendation of t*e Se!retar6 of
(inan!e, to raise t*e VAT rate to ";E. T*e said %rovisions 7ere alleged to 9e violative of
Se!tion ;= F;G, Arti!le VI of t*e Constitution, 7*i!* se!tion vests in Congress t*e e8!lusive
aut*orit6 to fi8 t*e rate of ta8es, and of Se!tion ", Arti!le III of t*e Constitution on due
%ro!ess, as 7ell as of Se!tion ;1 F;G, Arti!le VI of t*e Constitution, 7*i!* se!tion %rovides
for t*e Dno amendment ruleD u%on t*e last reading of a 9ill?
;G Se!tions = and "; 7ere alleged to 9e violative of Se!tion ", Arti!le III of t*e
Constitution, or t*e guarantee of eJual %rote!tion of t*e la7s, and Se!tion ;= F"G, Arti!le VI
of t*e Constitution? and
0G ot*er te!*ni!al as%e!ts of t*e %assage of t*e la7, Juestioning t*e manner it 7as
%assed.
'n Se%tem9er ", ;22<, t*e Court dismissed all t*e %etitions and u%*eld t*e !onstitutionalit6
of R.A. No. 3004. 'n t*e same date, res%ondent $IR issued Revenue Regulations FRRG No.
"1;22<, s%e!ifi!all6 identif6ing PA+C'R as one of t*e fran!*isees su9:e!t to "2E VAT
im%osed under Se!tion "2= of t*e National Internal Revenue Code of "334, as amended 96
R.A. No. 3004. T*e said revenue regulation, in %art, readsC
Se!. #. "2=/0. efinitions and S%e!ifi! Rules on Sele!ted Servi!es. B
888 888 888
F*G . . .
+ross Re!ei%ts of all ot*er fran!*isees, ot*er t*an t*ose !overed 96 Se!. ""3 of t*e Ta8
Code, regardless of *o7 t*eir fran!*isees ma6 *ave 9een granted, s*all 9e su9:e!t to t*e
"2E VAT im%osed under Se!. "2= of t*e Ta8 Code. T*is in!ludes, among ot*ers, t*e
P*ili%%ine Amusement and +aming Cor%oration FPA+C'RG, and its li!ensees or
fran!*isees.
&en!e, t*e %resent %etition for !ertiorari.
PA+C'R raises t*e follo7ing issuesC
I
I&ET&ER 'R N'T RA 3004, SECTI'N " FCG IS N-LL AN V'I A$ INITI' ('R
$EIN+ REP-+NANT T' T&E EQ-AL PR'TECTI'N .CLA-SE5 EM$'IE IN
SECTI'N ", ARTICLE III '( T&E "3=4 C'NSTIT-TI'N.
II
I&ET&ER 'R N'T RA 3004, SECTI'N " FCG IS N-LL AN V'I A$ INITI' ('R
$EIN+ REP-+NANT T' T&E N'N/IMPAIRMENT .CLA-SE5 EM$'IE IN SECTI'N
"2, ARTICLE III '( T&E "3=4 C'NSTIT-TI'N.
III
I&ET&ER 'R N'T RR "1/;22<, SECTI'N #."2=/0, PARA+RAP& F&G IS N-LL AN
V'I A$ INITI' ('R $EIN+ $E,'N T&E SC'PE '( T&E $ASIC LAI, RA =#;#,
SECTI'N "2=, INS'(AR AS T&E SAI RE+-LATI'N IMP'SE VAT 'N T&E
SERVICES '( T&E PETITI'NER AS IELL AS PETITI'NER@S LICENSEES 'R
(RANC&ISEES I&EN T&E $ASIC LAI, AS INTERPRETE $, APPLICA$LE
J-RISPR-ENCE, 'ES N'T IMP'SE VAT 'N PETITI'NER 'R 'N PETITI'NER@S
LICENSEES 'R (RANC&ISEES.
T*e $IR, in its Comment dated e!em9er ;3, ;221, !ountersC
I
SECTI'N " '( R.A. N'. 3004 AN SECTI'N "0 F;G '( P.. "=13 ARE $'T& VALI
AN C'NSTIT-TI'NAL PR'VISI'NS '( LAIS T&AT S&'-L $E &ARM'NI'-SL,
C'NSTR-E T'+ET&ER S' AS T' +IVE E((ECT T' ALL '( T&EIR PR'VISI'NS
I&ENEVER P'SSI$LE.
II
SECTI'N " '( R.A. N'. 3004 IS N'T VI'LATIVE '( SECTI'N " AN SECTI'N "2,
ARTICLE III '( T&E "3=4 C'NSTIT-TI'N.
III
$IR REVEN-E RE+-LATI'NS ARE PRES-ME VALI AN C'NSTIT-TI'NAL -NTIL
STRICLEN 'IN $, LAI(-L A-T&'RITIES.
T*e 'ffi!e of t*e Soli!itor +eneral F'S+G, 96 7a6 of Manifestation in Lieu of Comment,
!on!urred 7it* t*e arguments of t*e %etitioner. It added t*at alt*oug* t*e State is free to
sele!t t*e su9:e!ts of ta8ation and t*at t*e ineJuit6 resulting from singling out a %arti!ular
!lass for ta8ation or e8em%tion is not an infringement of t*e !onstitutional limitation, a ta8
la7 must o%erate 7it* t*e same for!e and effe!t to all %ersons, firms and !or%orations
%la!ed in a similar situation. (urt*ermore, a!!ording to t*e 'S+, %u9li! res%ondent $IR
e8!eeded its statutor6 aut*orit6 7*en it ena!ted RR No. "1/;22<, 9e!ause t*e latter@s
%rovisions are !ontrar6 to t*e mandates of P.. No. "=13 in relation to R.A. No. 3004.
T*e main issue is 7*et*er or not PA+C'R is still e8em%t from !or%orate in!ome ta8 and
VAT 7it* t*e ena!tment of R.A. No. 3004.
After a !areful stud6 of t*e %ositions %resented 96 t*e %arties, t*is Court finds t*e %etition
%artl6 meritorious.
-nder Se!tion " of R.A. No. 3004, amending Se!tion ;4 F!G of t*e National Internal Revenue
Code of "344, %etitioner is no longer e8em%t from !or%orate in!ome ta8 as it *as 9een
effe!tivel6 omitted from t*e list of +'CCs t*at are e8em%t from it. Petitioner argues t*at
su!* omission is un!onstitutional, as it is violative of its rig*t to eJual %rote!tion of t*e la7s
under Se!tion ", Arti!le III of t*e ConstitutionC
Se!. ". No %erson s*all 9e de%rived of life, li9ert6, or %ro%ert6 7it*out due %ro!ess of la7,
nor s*all an6 %erson 9e denied t*e eJual %rote!tion of t*e la7s.
In Cit6 of Manila v. Laguio, Jr., t*is Court e8%ounded t*e meaning and s!o%e of eJual
%rote!tion, t*usC
EJual %rote!tion reJuires t*at all %ersons or t*ings similarl6 situated s*ould 9e treated
ali>e, 9ot* as to rig*ts !onferred and res%onsi9ilities im%osed. Similar su9:e!ts, in ot*er
7ords, s*ould not 9e treated differentl6, so as to give undue favor to some and un:ustl6
dis!riminate against ot*ers. T*e guarantee means t*at no %erson or !lass of %ersons s*all 9e
denied t*e same %rote!tion of la7s 7*i!* is en:o6ed 96 ot*er %ersons or ot*er !lasses in li>e
!ir!umstan!es. T*e DeJual %rote!tion of t*e la7s is a %ledge of t*e %rote!tion of eJual la7s.D
It limits governmental dis!rimination. T*e eJual %rote!tion !lause e8tends to artifi!ial
%ersons 9ut onl6 insofar as t*eir %ro%ert6 is !on!erned.
888 888 888
Legislative 9odies are allo7ed to !lassif6 t*e su9:e!ts of legislation. If t*e !lassifi!ation is
reasona9le, t*e la7 ma6 o%erate onl6 on some and not all of t*e %eo%le 7it*out violating t*e
eJual %rote!tion !lause. T*e !lassifi!ation must, as an indis%ensa9le reJuisite, not 9e
ar9itrar6. To 9e valid, it must !onform to t*e follo7ing reJuirementsC
"G It must 9e 9ased on su9stantial distin!tions.
;G It must 9e germane to t*e %ur%oses of t*e la7.
0G It must not 9e limited to e8isting !onditions onl6.
#G It must a%%l6 eJuall6 to all mem9ers of t*e !lass.
It is not !ontested t*at 9efore t*e ena!tment of R.A. No. 3004, %etitioner 7as one of t*e five
+'CCs e8em%ted from %a6ment of !or%orate in!ome ta8 as s*o7n in R.A. No. =#;#, Se!tion
;4 F!G of 7*i!*, readsC
T*e %rovisions of e8isting s%e!ial or general la7s to t*e !ontrar6 not7it*standing, all
!or%orations, agen!ies or instrumentalities o7ned and !ontrolled 96 t*e +overnment, e8!e%t
t*e +overnment Servi!e and Insuran!e Cor%oration F+SISG, t*e So!ial Se!urit6 S6stem
FSSSG, t*e P*ili%%ine &ealt* Insuran!e Cor%oration FP&ICG, t*e P*ili%%ine C*arit6
S7ee%sta>es 'ffi!e FPCS'G, and t*e P*ili%%ine Amusement and +aming Cor%oration
FPA+C'RG, s*all %a6 su!* rate of ta8 u%on t*eir ta8a9le in!ome as are im%osed 96 t*is
Se!tion u%on !or%orations or asso!iations engaged in similar 9usiness, industr6, or a!tivit6.
A %erusal of t*e legislative re!ords of t*e $i!ameral Conferen!e Meeting of t*e Committee
on Ia6s on Means dated '!to9er ;4, "334 7ould s*o7 t*at t*e e8em%tion of PA+C'R from
t*e %a6ment of !or%orate in!ome ta8 7as due to t*e a!Juies!en!e of t*e Committee on Ia6s
on Means to t*e reJuest of PA+C'R t*at it 9e e8em%t from su!* ta8. T*e re!ords of t*e
$i!ameral Conferen!e Meeting revealC
&'N. R. IA).
T*e ot*er t*ing, sir, is 7e B I noti!ed 7e im%osed a ta8 on lotto 7innings.
C&AIRMAN ENRILE.
Iala na, tinanggal na namin 6on.
&'N. R. IA).
Tinanggal na 9a natin 6onM
C&AIRMAN ENRILE.
'o.
&'N. R. IA).
$e!ause I 7as 7ondering 7*et*er 7e !overed t*e ta8 on B I*et*er on a universal
9asis, 7e in!luded a ta8 on !o!>fig*ting 7innings.
C&AIRMAN ENRILE.
No, 7e removed t*e B
&'N. R. IA).
I . . . Finaudi9leG natin 6ong lottoM
C&AIRMAN ENRILE.
Pati PA+C'R tinanggal u%on reJuest.
C&AIRMAN JAVIER.
,ea*, P*ili%%ine Insuran!e Commission.
C&AIRMAN ENRILE.
P*ili%%ine Insuran!e B &ealt*, *ealt* 9a. ,on ang reJuest ng C*airman, I 7ill
a!!e%t. Flaug*terG Pag/Pag/i9ig 6on, maliliit na sa tao 6on.
&'N. R'AAS.
Mr. C*airman, I 7onder if in t*e revenue gainers if 7e fa!tored in an amount t*at
7ould refle!t t*e VAT and ot*er sales ta8es B
C&AIRMAN ENRILE.
No, 7e@re tal>ing of t*is measure onl6. Ie 7ill not B Fdis!ontinuedG
&'N. R'AAS.
No, no, no, no, from t*e B arising from t*e e8em%tion. Assuming t*at 7*en 7e
release t*e mone6 into t*e *ands of t*e %u9li!, t*e6 7ill not use t*at to B for 7all%a%er.
T*e6 7ill s%end t*at e*, Mr. C*airman. So 7*en t*e6 s%end t*at B
C&AIRMAN ENRILE.
T*ere@s a VAT.
&'N. R'AAS.
T*ere 7ill 9e a VAT and t*ere 7ill 9e ot*er sales ta8es no. Is t*ere a Juantifi!ationM
Is t*ere an a%%ro8imationM
C&AIRMAN JAVIER.
Not an6t*ing.
&'N. R'AAS.
So, in effe!t, 7e *ave steriliHed t*at entire seven 9illion. In effe!t, it is not !ir!ulating
in t*e e!onom6 7*i!* is unrealisti!.
C&AIRMAN ENRILE.
It does, it does, 9e!ause t*is is ta>en and s%ent 96 government, some9od6 re!eives it
in t*e form of 7ages and su%%lies and ot*er servi!es and ot*er goods. T*e6 are not 9eing
ta>en from t*e %u9li! and stored in a vault.
C&AIRMAN JAVIER.
T*at 4.4 loss 9e!ause of ta8 e8em%tion. T*at 7ill 9e e8tra in!ome for t*e ta8%a6ers.
&'N. R'AAS.
Pre!isel6, so t*e6 7ill 9e s%ending it.
T*e dis!ussion a9ove 9ears out t*at under R.A. No. =#;#, t*e e8em%tion of PA+C'R from
%a6ing !or%orate in!ome ta8 7as not 9ased on a !lassifi!ation s*o7ing su9stantial
distin!tions 7*i!* ma>e for real differen!es, 9ut to reiterate, t*e e8em%tion 7as granted
u%on t*e reJuest of PA+C'R t*at it 9e e8em%t from t*e %a6ment of !or%orate in!ome ta8.
Iit* t*e su9seJuent ena!tment of R.A. No. 3004, amending R.A. No. =#;#, PA+C'R *as
9een e8!luded from t*e enumeration of +'CCs t*at are e8em%t from %a6ing !or%orate
in!ome ta8. T*e re!ords of t*e $i!ameral Conferen!e Meeting dated A%ril "=, ;22<, of t*e
Committee on t*e isagreeing Provisions of Senate $ill No. "3<2 and &ouse $ill No. 0<<<,
s*o7 t*at it is t*e legislative intent t*at PA+C'R 9e su9:e!t to t*e %a6ment of !or%orate
in!ome ta8, t*usC
T&E C&AIRMAN FSEN. RECT'G.
,es, 'smeNa, t*e %ro%onent of t*e amendment.
SEN. 'SMEVA.
,ea*. Mr. C*airman, one of t*e reasons 7*6 7e@re even !onsidering t*is VAT 9ill is
7e 7ant to s*o7 t*e 7orld 7*o our !reditors, t*at 7e are in!reasing offi!ial revenues t*at
go to t*e national 9udget. -nfortunatel6 toda6, Pag!or is unoffi!ial.
No7, in ;220, I too> a Jui!> loo> t*is morning, Pag!or *ad a net in!ome of 3.4
9illion after %a6ing some small ta8es t*at t*e6 are su9:e!ted to. 'f t*e 3.4 9illion, t*e6 !laim
t*e6 remitted to national government seven 9illion. Pag>ata%os, t*ere are ot*er s%e!ifi!
remittan!es li>e to t*e P*ili%%ine S%orts Commission, et!., as mandated 96 various la7s, and
t*en a9out #22 million to t*e President@s So!ial (und. $ut all in all, t*eir net %rofit toda6
s*ould 9e a9out "; 9illion. T*at@s 7*6 I am Juestioning t*is t7o 9illion. $e!ause 7*ile
essentiall6 t*e6 !laim t*at t*e mone6 goes to government, and I 7ill a!!e%t t*at :ust for t*e
sa>e of argument. It does not %ass t*roug* t*e a%%ro%riation %ro!ess. And I t*in> t*at at
least if 7e !an !a%ture 0< %er!ent or 0; %er!ent t*roug* t*e 9udgetar6 %ro!ess, first, it is
refle!ted in our offi!ial in!ome of government 7*i!* is a%%lied to t*e national 9udget, and
se!ondl6, it goes t*roug* 7*at is !onstitutionall6 mandated as Congress a%%ro%riating and
defining 7*ere t*e mone6 is s%ent and not t*roug* a 9oard of dire!tors t*at *as a9solutel6
no a!!ounta9ilit6.
REP. P-ENTE$ELLA.
Iell, 7it* all due res%e!t, Mr. C*airman, follo7 u% lang.
T*ere is 7isdom in t*e !omments of m6 good friend from Ce9u, Senator 'smeNa.
SEN. 'SMEVA.
And Negros.
REP. P-ENTE$ELLA.
And Negros at t*e same time a6 Lasiman7a. $ut I 7ould not 7ant to %ut m6 friends
from t*e e%artment of (inan!e in a diffi!ult %osition, 9ut ma6 7e >no7 6our !omments on
t*is >no7ing t*at as Senator 'smeNa :ust mentioned, *e said, DI a!!e%t t*at t*at a lot of it is
going to s%ending for 9asi! servi!es,D 6ou >no7, going to most, I t*in>, su%%osedl6 a lot or
most of it s*ould go to government s%ending, so!ial servi!es and t*e li>e. I*at is 6our
!omment on t*isM T*is is going to affe!t a lot of servi!es on t*e government side.
T&E C&AIRMAN FREP. LAP-SG.
Mr. C*air, Mr. C*air.
SEN. 'SMEVA.
It goes from %o!>et to t*e ot*er, Moni!o.
REP. P-ENTE$ELLA.
I >no7 t*at. $ut I 7anted to as> t*em, Mr. Senator, 9e!ause 6ou ma6 *ave 6our o7n
%re/:udgment on t*is and I don@t 9lame 6ou. I don@t 9lame 6ou. And I >no7 6ou *ave 6our
o7n resear!*. $ut 7ill t*is not affe!t a lot, t*e dis9ursements on so!ial servi!es and ot*erM
REP. L'CSIN.
Mr. C*airman. Mr. C*airman, if I !an add to t*at Juestion also. Iouldn@t it 9e easier
for 6ou to e8%lain to, sa6, foreign !reditors, *o7 do 6ou e8%lain to t*em t*at if t*ere is a
fis!al ga% some of our ri!*est !or%orations *as .9een5 s%ared .from5 ta8ation 96 t*e
government 7*i!* is one ri!* sour!e of revenues. No7, 7*6 do 6ou save, 7*6 do 6ou s%are
!ertain government !or%orations on t*at, li>e Pag!orM So, 7ould it 9e easier for 6ou to ma>e
an argument if ever6t*ing 7as e8%osed to ta8ationM
REP. TEVES.
Mr. C*air, %lease.
Can 7e as> t*e '( to res%ond to t*ose 9efore 7e !all Congressman TevesM
MR. P-RISIMA.
T*an> 6ou, Mr. C*air.
,es, from definitel6 im%roving t*e !olle!tion, it 7ill *el% us 9e!ause it 7ill t*en enter
as an offi!ial revenue alt*oug* 7*en dividends de!lare it also goes in as ot*er in!ome.
888 888 888
REP. TEVES.
Mr. C*airman. 888 888 888
Congressman Teves.
REP. TEVES.
,ea*. Pag!or is !ontrolled under Se!tion ;4, t*at is on in!ome ta8. No7, 7e are
tal>ing *ere on value/added ta8. o 6ou mean to sa6 7e are going to amend it from in!ome
ta8 to value/added ta8, as far as Pag!or is !on!ernedM
No. Ie are :ust amending t*at se!tion 7it* regard to t*e e8em%tion from in!ome ta8
of Pag!or.
888 888 888
REP. N'+RALES.
Mr. C*airman, Mr. C*airman. Mr. C*airman.
Congressman Nograles.
REP. N'+RALES.
Just a %oint of inJuir6 from t*e C*air. I*at e8a!tl6 are t*e fun!tions of Pag!or t*at
are VATa9leM I*at 7ill 7e VAT in Pag!orM
T*is is on o7n in!ome ta8. T*is is Pag!or in!ome ta8.
REP. N'+RALES.
No, t*at@s 7*6. Anong i/va/Vat natin sa >an6a. Sale of 7*atM
888 888 888
REP. VILLA(-ERTE.
Mr. C*airman, m6 Juestion is, 7*at are 7e VATing Pag!or 7it*, is it t*e . . .
REP. N'+RALES.
Mr. C*airman, t*is is a se!ret agreement or t*e 7a6 t*e6 !raft t*eir !ontra!t, 7*i!*
9asisM
Congressman Nograles, t*e Senate version does not dis!uss a VAT on Pag!or 9ut it
:ust ta>es a7a6 t*eir e8em%tion from non/%a6ment of in!ome ta8.
Ta8ation is t*e rule and e8em%tion is t*e e8!e%tion. T*e 9urden of %roof rests u%on t*e %art6
!laiming e8em%tion to %rove t*at it is, in fa!t, !overed 96 t*e e8em%tion so !laimed. As a
rule, ta8 e8em%tions are !onstrued strongl6 against t*e !laimant. E8em%tions must 9e s*o7n
to e8ist !learl6 and !ategori!all6, and su%%orted 96 !lear legal %rovision.
In t*is !ase, PA+C'R failed to %rove t*at it is still e8em%t from t*e %a6ment of !or%orate
in!ome ta8, !onsidering t*at Se!tion " of R.A. No. 3004 amended Se!tion ;4 F!G of t*e
National Internal Revenue Code of "334 96 omitting PA+C'R from t*e e8em%tion. T*e
legislative intent, as s*o7n 96 t*e dis!ussions in t*e $i!ameral Conferen!e Meeting, is to
reJuire PA+C'R to %a6 !or%orate in!ome ta8? *en!e, t*e omission or removal of PA+C'R
from e8em%tion from t*e %a6ment of !or%orate in!ome ta8. It is a 9asi! %re!e%t of statutor6
!onstru!tion t*at t*e e8%ress mention of one %erson, t*ing, a!t, or !onseJuen!e e8!ludes all
ot*ers as e8%ressed in t*e familiar ma8im e8%ressio unius est e8!lusio alterius. T*us, t*e
e8%ress mention of t*e +'CCs e8em%ted from %a6ment of !or%orate in!ome ta8 e8!ludes all
ot*ers. Not 9eing e8!e%ted, %etitioner PA+C'R must 9e regarded as !oming 7it*in t*e
%urvie7 of t*e general rule t*at +'CCs s*all %a6 !or%orate in!ome ta8, e8%ressed in t*e
ma8imC e8!e%tio firmat regulam in !asi9us non e8!e%tis.
PA+C'R !annot find su%%ort in t*e eJual %rote!tion !lause of t*e Constitution, as t*e
legislative re!ords of t*e $i!ameral Conferen!e Meeting dated '!to9er ;4, "334, of t*e
Committee on Ia6s and Means, s*o7 t*at PA+C'R@s e8em%tion from %a6ment of !or%orate
in!ome ta8, as %rovided in Se!tion ;4 F!G of R.A. No. =#;#, or t*e National Internal Revenue
Code of "334, 7as not made %ursuant to a valid !lassifi!ation 9ased on su9stantial
distin!tions and t*e ot*er reJuirements of a reasona9le !lassifi!ation 96 legislative 9odies,
so t*at t*e la7 ma6 o%erate onl6 on some, and not all, 7it*out violating t*e eJual %rote!tion
!lause. T*e legislative re!ords s*o7 t*at t*e 9asis of t*e grant of e8em%tion to PA+C'R
from !or%orate in!ome ta8 7as PA+C'R@s o7n reJuest to 9e e8em%ted.
Petitioner furt*er !ontends t*at Se!tion " F!G of R.A. No. 3004 is null and void a9 initio for
violating t*e non/im%airment !lause of t*e Constitution. Petitioner avers t*at la7s form %art
of, and is read into, t*e !ontra!t even 7it*out t*e %arties e8%ressl6 sa6ing so. Petitioner
states t*at t*e %rivate %artiesPinvestors transa!ting 7it* it !onsidered t*e ta8 e8em%tions,
7*i!* inure to t*eir 9enefit, as t*e main !onsideration and indu!ement for t*eir de!ision to
transa!tPinvest 7it* it. Petitioner argues t*at t*e 7it*dra7al of its e8em%tion from !or%orate
in!ome ta8 96 R.A. No. 3004 *as t*e effe!t of !*anging t*e main !onsideration and
indu!ement for t*e transa!tions of %rivate %arties 7it* it? t*us, t*e amendator6 %rovision is
violative of t*e non/im%airment !lause of t*e Constitution.
Petitioner@s !ontention la!>s merit.
T*e non/im%airment !lause is !ontained in Se!tion "2, Arti!le III of t*e Constitution, 7*i!*
%rovides t*at no la7 im%airing t*e o9ligation of !ontra!ts s*all 9e %assed. T*e non/
im%airment !lause is limited in a%%li!ation to la7s t*at derogate from %rior a!ts or !ontra!ts
96 enlarging, a9ridging or in an6 manner !*anging t*e intention of t*e %arties. T*ere is
im%airment if a su9seJuent la7 !*anges t*e terms of a !ontra!t 9et7een t*e %arties, im%oses
ne7 !onditions, dis%enses 7it* t*ose agreed u%on or 7it*dra7s remedies for t*e
enfor!ement of t*e rig*ts of t*e %arties.
As regards fran!*ises, Se!tion "", Arti!le AII of t*e Constitution %rovides t*at no fran!*ise
or rig*t s*all 9e granted e8!e%t under t*e !ondition t*at it s*all 9e su9:e!t to amendment,
alteration, or re%eal 96 t*e Congress 7*en t*e !ommon good so reJuires.
In Manila Ele!tri! Com%an6 v. Provin!e of Laguna, t*e Court *eld t*at a fran!*ise %arta>es
t*e nature of a grant, 7*i!* is 9e6ond t*e %urvie7 of t*e non/im%airment !lause of t*e
Constitution. T*e %ertinent %ortion of t*e !ase statesC
I*ile t*e Court *as, not too infreJuentl6, referred to ta8 e8em%tions !ontained in s%e!ial
fran!*ises as 9eing in t*e nature of !ontra!ts and a %art of t*e indu!ement for !arr6ing on
t*e fran!*ise, t*ese e8em%tions, nevert*eless, are far from 9eing stri!tl6 !ontra!tual in
nature. Contra!tual ta8 e8em%tions, in t*e real sense of t*e term and 7*ere t*e non/
im%airment !lause of t*e Constitution !an rig*tl6 9e invo>ed, are t*ose agreed to 96 t*e
ta8ing aut*orit6 in !ontra!ts, su!* as t*ose !ontained in government 9onds or de9entures,
la7full6 entered into 96 t*em under ena9ling la7s in 7*i!* t*e government, a!ting in its
%rivate !a%a!it6, s*eds its !loa> of aut*orit6 and 7aives its governmental immunit6. Trul6,
ta8 e8em%tions of t*is >ind ma6 not 9e revo>ed 7it*out im%airing t*e o9ligations of
!ontra!ts. T*ese !ontra!tual ta8 e8em%tions, *o7ever, are not to 9e !onfused 7it* ta8
e8em%tions granted under fran!*ises. A fran!*ise %arta>es t*e nature of a grant 7*i!* is
9e6ond t*e %urvie7 of t*e non/im%airment !lause of t*e Constitution. Indeed, Arti!le AII,
Se!tion "", of t*e "3=4 Constitution, li>e its %re!ursor %rovisions in t*e "30< and t*e "340
Constitutions, is e8%li!it t*at no fran!*ise for t*e o%eration of a %u9li! utilit6 s*all 9e
granted e8!e%t under t*e !ondition t*at su!* %rivilege s*all 9e su9:e!t to amendment,
alteration or re%eal 96 Congress as and 7*en t*e !ommon good so reJuires.
In t*is !ase, PA+C'R 7as granted a fran!*ise to o%erate and maintain gam9ling !asinos,
!lu9s and ot*er re!reation or amusement %la!es, s%orts, gaming %ools, i.e., 9as>et9all,
foot9all, lotteries, et!., 7*et*er on land or sea, 7it*in t*e territorial :urisdi!tion of t*e
Re%u9li! of t*e P*ili%%ines. -nder Se!tion "", Arti!le AII of t*e Constitution, PA+C'R@s
fran!*ise is su9:e!t to amendment, alteration or re%eal 96 Congress su!* as t*e amendment
under Se!tion " of R.A. No. 3044. &en!e, t*e %rovision in Se!tion " of R.A. No. 3004,
amending Se!tion ;4 F!G of R.A. No. =#;# 96 7it*dra7ing t*e e8em%tion of PA+C'R from
!or%orate in!ome ta8, 7*i!* ma6 affe!t an6 9enefits to PA+C'R@s transa!tions 7it* %rivate
%arties, is not violative of t*e non/im%airment !lause of t*e Constitution.
Anent t*e validit6 of RR No. "1/;22<, t*e Court *olds t*at t*e %rovision su9:e!ting PA+C'R
to "2E VAT is invalid for 9eing !ontrar6 to R.A. No. 3004. No7*ere in R.A. No. 3004 is it
%rovided t*at %etitioner !an 9e su9:e!ted to VAT. R.A. No. 3004 is !lear onl6 as to t*e
removal of %etitioner@s e8em%tion from t*e %a6ment of !or%orate in!ome ta8, 7*i!* 7as
alread6 addressed a9ove 96 t*is Court.
As %ointed out 96 t*e 'S+, R.A. No. 3004 itself e8em%ts %etitioner from VAT %ursuant to
Se!tion 4 F>G t*ereof, 7*i!* readsC
Se!. 4. Se!tion "23 of t*e same Code, as amended, is *ere96 furt*er amended to read as
follo7sC
Se!tion "23. E8em%t Transa!tions. B F"G Su9:e!t to t*e %rovisions of Su9se!tion F;G *ereof,
t*e follo7ing transa!tions s*all 9e e8em%t from t*e value/added ta8C
888 888 888
F>G Transa!tions 7*i!* are e8em%t under international agreements to 7*i!* t*e
P*ili%%ines is a signator6 or under s%e!ial la7s, e8!e%t Presidential e!ree No. <;3.
Petitioner is e8em%t from t*e %a6ment of VAT, 9e!ause PA+C'R@s !*arter, P.. No. "=13, is
a s%e!ial la7 t*at grants %etitioner e8em%tion from ta8es.
Moreover, t*e e8em%tion of PA+C'R from VAT is su%%orted 96 Se!tion 1 of R.A. No. 3004,
7*i!* retained Se!tion "2= F$G F0G of R.A. No. =#;#, t*usC
.R.A. No. 30045, SEC. 1. Se!tion "2= of t*e same Code FR.A. No. =#;#G, as amended, is
*ere96 furt*er amended to read as follo7sC
SEC. "2=. Value/Added Ta8 on Sale of Servi!es and -se or Lease of Pro%erties. B
FAG Rate and $ase of Ta8. B T*ere s*all 9e levied, assessed and !olle!ted, a value/added
ta8 eJuivalent to ten %er!ent F"2EG of gross re!ei%ts derived from t*e sale or e8!*ange of
servi!es, in!luding t*e use or lease of %ro%ertiesC . . .
888 888 888
F$G Transa!tions Su9:e!t to )ero Per!ent F2EG Rate. B T*e follo7ing servi!es %erformed
in t*e P*ili%%ines 96 VAT/registered %ersons s*all 9e su9:e!t to Hero %er!ent F2EG rate?
888 888 888
F0G Servi!es rendered to %ersons or entities 7*ose e8em%tion under s%e!ial la7s or
international agreements to 7*i!* t*e P*ili%%ines is a signator6 effe!tivel6 su9:e!ts t*e
su%%l6 of su!* servi!es to Hero %er!ent F2EG rate?
888 888 888 0=
As %ointed out 96 %etitioner, alt*oug* R.A. No. 3004 introdu!ed amendments to Se!tion "2=
of R.A. No. =#;# 96 im%osing VAT on ot*er servi!es not %reviousl6 !overed, it did not amend
t*e %ortion of Se!tion "2= F$G F0G t*at su9:e!ts to Hero %er!ent rate servi!es %erformed 96
VAT/registered %ersons to %ersons or entities 7*ose e8em%tion under s%e!ial la7s or
su%%l6 of su!* servi!es to 2E rate.
Petitioner@s e8em%tion from VAT under Se!tion "2= F$G F0G of R.A. No. =#;# *as 9een
t*oroug*l6 and e8tensivel6 dis!ussed in Commissioner of Internal Revenue v. A!esite
FP*ili%%inesG &otel Cor%oration. A!esite 7as t*e o7ner and o%erator of t*e &olida6 Inn
Manila Pavilion &otel. It leased a %ortion of t*e *otel@s %remises to PA+C'R. It in!urred
VAT amounting to P02,"<;,=3;.2; from its rental in!ome and sale of food and 9everages to
PA+C'R from Januar6 "331 to A%ril "334. A!esite tried to s*ift t*e said ta8es to PA+C'R
96 in!or%orating it in t*e amount assessed to PA+C'R. &o7ever, PA+C'R refused to %a6
t*e ta8es 9e!ause of its ta8/e8em%t status. PA+C'R %aid onl6 t*e amount due to A!esite
minus VAT in t*e sum of P02,"<;,=3;.2;. A!esite %aid VAT in t*e amount of P02,"<;,=3;.2;
to t*e Commissioner of Internal Revenue, fearing t*e legal !onseJuen!es of its non/%a6ment.
In Ma6 "33=, A!esite soug*t t*e refund of t*e amount it %aid as VAT on t*e ground t*at its
transa!tion 7it* PA+C'R 7as su9:e!t to Hero rate as it 7as rendered to a ta8/e8em%t entit6.
T*e Court ruled t*at PA+C'R and A!esite 7ere 9ot* e8em%t from %a6ing VAT, t*usC
888 888 888
PA+C'R is e8em%t from %a6ment of indire!t ta8es
It is undis%uted t*at P.. "=13, t*e !*arter !reating PA+C'R, grants t*e latter an e8em%tion
from t*e %a6ment of ta8es. Se!tion "0 of P.. "=13 %ertinentl6 %rovidesC
Se!. "0. E8em%tions. B
888 888 888
F;G In!ome and ot*er ta8es. B FaG (ran!*ise &olderC No ta8 of an6 >ind or form, in!ome
or ot*er7ise, as 7ell as fees, !*arges or levies of 7*atever nature, 7*et*er National or
Lo!al, s*all 9e assessed and !olle!ted under t*is (ran!*ise from t*e Cor%oration? nor s*all
an6 form of ta8 or !*arge atta!* in an6 7a6 to t*e earnings of t*e Cor%oration, e8!e%t a
(ran!*ise Ta8 of five F<EG %er!ent of t*e gross revenue or earnings derived 96 t*e
Cor%oration from its o%eration under t*is (ran!*ise. Su!* ta8 s*all 9e due and %a6a9le
Juarterl6 to t*e National +overnment and s*all 9e in lieu of all >inds of ta8es, levies, fees or
assessments of an6 >ind, nature or des!ri%tion, levied, esta9lis*ed or !olle!ted 96 an6
muni!i%al, %rovin!ial, or national government aut*orit6.
F9G 't*ersC T*e e8em%tions *erein granted for earnings derived from t*e o%erations
!ondu!ted under t*e fran!*ise s%e!ifi!all6 from t*e %a6ment of an6 ta8, in!ome or ot*er7ise,
as 7ell as an6 form of !*arges, fees or levies, s*all inure to t*e 9enefit of and e8tend to
!or%orationFsG, asso!iationFsG, agen!6FiesG, or individualFsG 7it* 7*om t*e Cor%oration or
o%erator *as an6 !ontra!tual relations*i% in !onne!tion 7it* t*e o%erations of t*e !asinoFsG
aut*oriHed to 9e !ondu!ted under t*is (ran!*ise and to t*ose re!eiving !om%ensation or
ot*er remuneration from t*e Cor%oration or o%erator as a result of essential fa!ilities
furnis*ed andPor te!*ni!al servi!es rendered to t*e Cor%oration or o%erator.
Petitioner !ontends t*at t*e a9ove ta8 e8em%tion refers onl6 to PA+C'R@s dire!t ta8 lia9ilit6
and not to indire!t ta8es, li>e t*e VAT.
Ie disagree.
A !lose s!rutin6 of t*e a9ove %rovisos !learl6 gives PA+C'R a 9lan>et e8em%tion to ta8es
7it* no distin!tion on 7*et*er t*e ta8es are dire!t or indire!t. Ie are one 7it* t*e CA ruling
t*at PA+C'R is also e8em%t from indire!t ta8es, li>e VAT, as follo7sC
-nder t*e a9ove %rovision .Se!tion "0 F;G F9G of P.. "=135, t*e term DCor%orationD or
o%erator refers to PA+C'R. Alt*oug* t*e la7 does not s%e!ifi!all6 mention PA+C'R@s
e8em%tion from indire!t ta8es, PA+C'R is undou9tedl6 e8em%t from su!* ta8es 9e!ause t*e
la7 e8em%ts from ta8es %ersons or entities !ontra!ting 7it* PA+C'R in !asino o%erations.
Alt*oug*, differentl6 7orded, t*e %rovision !learl6 e8em%ts PA+C'R from indire!t ta8es. In
fa!t, it goes one ste% furt*er 96 granting ta8 e8em%t status to %ersons dealing 7it* PA+C'R
in !asino o%erations. T*e unmista>a9le !on!lusion is t*at PA+C'R is not lia9le for t*e
P02,"<;,=3;.2; VAT and neit*er is A!esite as t*e latter is effe!tivel6 su9:e!t to Hero %er!ent
rate under Se!. "2= $ F0G, R.A. =#;#. FEm%*asis su%%lied.G
Indeed, 96 e8tending t*e e8em%tion to entities or individuals dealing 7it* PA+C'R, t*e
legislature !learl6 granted e8em%tion also from indire!t ta8es. It must 9e noted t*at t*e
indire!t ta8 of VAT, as in t*e instant !ase, !an 9e s*ifted or %assed to t*e 9u6er, transferee, or
lessee of t*e goods, %ro%erties, or servi!es su9:e!t to VAT. T*us, 96 e8tending t*e ta8
e8em%tion to entities or individuals dealing 7it* PA+C'R in !asino o%erations, it is
e8em%ting PA+C'R from 9eing lia9le to indire!t ta8es.
T*e manner of !*arging VAT does not ma>e PA+C'R lia9le to said ta8.
It is true t*at VAT !an eit*er 9e in!or%orated in t*e value of t*e goods, %ro%erties, or
servi!es sold or leased, in 7*i!* !ase it is !om%uted as "P"" of su!* value, or !*arged as an
additional "2E to t*e value. Veril6, t*e seller or lessor *as t*e o%tion to follo7 eit*er 7a6 in
!*arging its !lients and !ustomer. In t*e instant !ase, A!esite follo7ed t*e latter met*od, t*at
is, !*arging an additional "2E of t*e gross sales and rentals. $e t*at as it ma6, t*e use of
eit*er met*od, and in %arti!ular, t*e first met*od, does not denigrate t*e fa!t t*at PA+C'R
is e8em%t from an indire!t ta8, li>e VAT.
VAT e8em%tion e8tends to A!esite
T*us, 7*ile it 7as %ro%er for PA+C'R not to %a6 t*e "2E VAT !*arged 96 A!esite, t*e latter
is not lia9le for t*e %a6ment of it as it is e8em%t in t*is %arti!ular transa!tion 96 o%eration of
la7 to %a6 t*e indire!t ta8. Su!* e8em%tion falls 7it*in t*e former Se!tion "2; F9G F0G of t*e
"344 Ta8 Code, as amended Fno7 Se!. "2= .95 .05 of R.A. =#;#G, 7*i!* %rovidesC
Se!tion "2;. Value/added ta8 on sale of servi!es. B FaG Rate and 9ase of ta8 B T*ere s*all
9e levied, assessed and !olle!ted, a value/added ta8 eJuivalent to "2E of gross re!ei%ts
derived 96 an6 %erson engaged in t*e sale of servi!es . . .? Provided, t*at t*e follo7ing
servi!es %erformed in t*e P*ili%%ines 96 VATregistered %ersons s*all 9e su9:e!t to 2E.
888 888 888
su%%l6 of su!* servi!es to Hero F2EG rate Fem%*asis su%%liedG.
T*e rationale for t*e e8em%tion from indire!t ta8es %rovided for in P.. "=13 and t*e
e8tension of su!* e8em%tion to entities or individuals dealing 7it* PA+C'R in !asino
o%erations are 9est elu!idated from t*e "3=4 !ase of Commissioner of Internal Revenue v.
Jo*n +otam!o K Sons, In!., 7*ere t*e a9solute ta8 e8em%tion of t*e Iorld &ealt*
'rganiHation FI&'G u%on an international agreement 7as u%*eld. Ie *eld in said !ase t*at
t*e e8em%tion of !ontra!tee I&' s*ould 9e im%lemented to mean t*at t*e entit6 or %erson
e8em%t is t*e !ontra!tor itself 7*o !onstru!ted t*e 9uilding o7ned 96 !ontra!tee I&', and
su!* does not violate t*e rule t*at ta8 e8em%tions are %ersonal 9e!ause t*e manifest
intention of t*e agreement is to e8em%t t*e !ontra!tor so t*at no !ontra!tor@s ta8 ma6 9e
s*ifted to t*e !ontra!tee I&'. T*us, t*e %roviso in P.. "=13, e8tending t*e e8em%tion to
entities or individuals dealing 7it* PA+C'R in !asino o%erations, is !learl6 to %ros!ri9e
an6 indire!t ta8, li>e VAT, t*at ma6 9e s*ifted to PA+C'R.
Alt*oug* t*e 9asis of t*e e8em%tion of PA+C'R and A!esite from VAT in t*e !ase of T*e
Commissioner of Internal Revenue v. A!esite FP*ili%%inesG &otel Cor%oration 7as Se!tion
"2; F9G of t*e "344 Ta8 Code, as amended, 7*i!* se!tion 7as retained as Se!tion "2= F$G F0G
in R.A. No. =#;#, it is still a%%li!a9le to t*is !ase, sin!e t*e %rovision relied u%on *as 9een
retained in R.A. No. 3004.
It is settled rule t*at in !ase of dis!re%an!6 9et7een t*e 9asi! la7 and a rule or regulation
issued to im%lement said la7, t*e 9asi! la7 %revails, 9e!ause t*e said rule or regulation
!annot go 9e6ond t*e terms and %rovisions of t*e 9asi! la7. #0 RR No. "1/;22<, t*erefore,
!annot go 9e6ond t*e %rovisions of R.A. No. 3004. Sin!e PA+C'R is e8em%t from VAT under
R.A. No. 3004, t*e $IR e8!eeded its aut*orit6 in su9:e!ting PA+C'R to "2E VAT under RR
No. "1/;22<? *en!e, t*e said regulator6 %rovision is *ere96 nullified.
I&ERE('RE, t*e %etition is PARTL, +RANTE. Se!tion " of Re%u9li! A!t No. 3004,
amending Se!tion ;4 F!G of t*e National Internal Revenue Code of "334, 96 e8!luding
%etitioner P*ili%%ine Amusement and +aming Cor%oration from t*e enumeration of
government/o7ned and !ontrolled !or%orations e8em%ted from !or%orate in!ome ta8 is valid
and !onstitutional, 7*ile $IR Revenue Regulations No. "1/;22< insofar as it su9:e!ts
PA+C'R to "2E VAT is null and void for 9eing !ontrar6 to t*e National Internal Revenue
Code of "334, as amended 96 Re%u9li! A!t No. 3004.
No !osts. S' 'RERE.
(ootnotes
CREATIN+ T&E P&ILIPPINE AM-SEMENTS AN +AMIN+ C'RP'RATI'N,
E(ININ+ ITS P'IERS AN (-NCTI'NS, PR'VIIN+ (-NS T&ERE('R, AN
('R 'T&ER P-RP'SES.
+RANTIN+ T&E PA+C'R A (RANC&ISE T' ESTA$LIS&, 'PERATE AN MAINTAIN
+AM$LIN+ CASIN'S 'N LAN 'R IATER IIT&IN T&E TERRIT'RIAL
J-RISICTI'N '( T&E REP-$LIC '( T&E P&ILIPPINES
Se!tion #. E8em%tions. B . . .
F"G uties, ta8es and ot*er im%osts on im%ortation. B . . .
F;G In!ome and ot*er ta8es. B
FaG (ran!*ise &olderC No ta8 of an6 >ind or form, in!ome or ot*er7ise, as
7ell as fees, !*arges, or levies of 7*atever nature, s*all 9e assessed and !olle!ted under t*is
(ran!*ise from t*e (ran!*ise &older? nor s*all an6 form of ta8 or !*arge atta!* in an6 7a6
to t*e earnings of t*e (ran!*ise &older, e8!e%t a (ran!*ise Ta8 of five %er!ent F<EG of t*e
gross revenue or earnings derived 96 t*e (ran!*ise &older form its o%eration under t*is
(ran!*ise. Su!* ta8 s*all 9e due and %a6a9le to t*e National +overnment and s*all 9e in
lieu of all ta8es, levies, fees or assessments of an6 >ind, nature or des!ri%tion, levied,
esta9lis*ed, or !olle!ted 96 an6 muni!i%al, %rovin!ial or national aut*orit6.
F9G 't*ersC T*e e8em%tion *erein granted for earnings derived from t*e
o%erations !ondu!ted under t*e fran!*ise, s%e!ifi!all6 from t*e %a6ment of an6 ta8, in!ome
or ot*er7ise, as 7ell as an6 form of !*arges, fees or levies, s*all inure to t*e 9enefit of and
e8tend to !or%orationPs, asso!iationPs, agen!6Pies, or individualPs 7it* 7*om t*e (ran!*ise
*as an6 !ontra!tual relations*i% in !onne!tion 7it* t*e o%erations of t*e !asinoPs aut*oriHed
to 9e !ondu!ted under t*e fran!*ise and to t*ose re!eiving !om%ensation or ot*er
remuneration from t*e (ran!*ise &older as a result of essential fa!ilities furnis*ed andPor
te!*ni!al servi!es rendered to t*e (ran!*ise &older. FEm%*asis su%%lied.G
T*e Constitution, Art. AII, Se!. "". No fran!*ise, !ertifi!ate, or an6 ot*er form of
aut*oriHation for t*e o%eration of a %u9li! utilit6 s*all 9e granted e8!e%t to !itiHens of t*e
P*ili%%ines or to !or%orations or asso!iations organiHed under t*e la7s of t*e P*ili%%ines at
least si8t6 %er !entum of 7*ose !a%ital is o7ned 96 su!* !itiHens, nor s*all su!* fran!*ise,
!ertifi!ate or aut*oriHation 9e e8!lusive in !*ara!ter or for a longer %eriod t*an fift6 6ears.
Neit*er s*all an6 su!* fran!*ise or rig*t 9e granted e8!e%t under t*e !ondition t*at it s*all
9e su9:e!t to amendment, alteration, or re%eal 96 t*e Congress 7*en t*e !ommon good so
reJuires. T*e State s*all en!ourage eJuit6 %arti!i%ation in %u9li! utilities 96 t*e general
%u9li!. T*e %arti!i%ation of foreign investors in t*e governing 9od6 of an6 %u9li! utilit6
enter%rise s*all 9e limited to t*eir %ro%ortionate s*are in its !a%ital, and all t*e e8e!utive
and managing offi!ers of su!* !or%oration or asso!iation must 9e !itiHens of t*e P*ili%%ines.
FEm%*asis su%%lied.G
C'MMISSI'NER '( INTERNAL REVEN-E vs. SM PRIME &'LIN+S, INC., ET AL.
.+.R. No. "=0<2<, (e9ruar6 ;1, ;2"25
(ACTSC Res%ondents SM Prime &oldings, In!. FSM PrimeG and (irst Asia Realt6
evelo%ment Cor%. are engaged in t*e 9usiness of o%erating !inema *ouses, among
ot*ers. T*e CTA (irst ivision ruled t*at t*e s*o7ing of !inematogra%*i! films is not an
a!tivit6 !overed 96 VAT under t*e NIRC of "334, as amended, 9ut one su9:e!t to
amusement ta8 under RA 4"12 FLo!al +overnment Code of "33"G. &olding t*at t*e
national government s*ould avoid im%osing its o7n 9usiness ta8, t*e CTA (irst ivision
de!ided t*at onl6 one 9usiness ta8 s*ould a%%l6 to t*eatres and movie *ouses, t*at is, t*e
02E amusement ta8 im%osed 96 !ities and %rovin!es under RA 4"12.
'n a%%eal 96 t*e CIR, t*e CTA En $an! *eld t*at t*e s*o7ing or e8*i9ition of motion
%i!tures, films or movies 96 !inema o%erators or %ro%rietors is not among t*e a!tivities
enumerated under Se!tion "2= of t*e NIRC 7*i!* are !ontem%lated in t*e %*rase Dsale
or e8!*ange of servi!esD. T*us, gross re!ei%ts derived 96 !inemaPt*eater o%erators or
%ro%rietors from admission ti!>ets in s*o7ing motion %i!tures, films or movies are not
su9:e!t to VAT. Instead, t*e said a!tivit6 is su9:e!t to amusement ta8 under RA 4"12.
ISS-EC I*et*er t*e gross re!ei%ts derived 96 o%erators or %ro%rietors of !inemaPt*eater
*ouses from admission ti!>ets are su9:e!t to VAT.
R-LIN+C T*e enumeration of servi!es su9:e!t to VAT under Se!tion "2= of t*e NIRC is
not e8*austive and is given onl6 96 7a6 of e8am%le. Legislative *istor6 also reveals t*at
t*e intent of t*e legislature 7as not to im%ose VAT on %ersons alread6 !overed 96 t*e
amusement ta8. To im%ose VAT on %ersons alread6 !overed 96 t*e amusement ta8 7ould
result in in:usti!e sin!e !inemaPt*eater *ouses o%erators or %ro%rietors 7ould 9e %a6ing
an additional "2E VAT in addition to t*e 02E amusement ta8 im%osed 96 Se!tion "#2 of
RA 4"12, or a total of #2E ta8. T*is is true even in t*e !ase of !inemaPt*eater o%erators
ta8ed under t*e Lo!al +overnment Code of "33" 9e!ause t*e VAT la7 7as intended to
re%la!e t*e %er!entage ta8 on !ertain servi!es. It is immaterial t*at t*e6 are ta8ed 96 t*e
lo!al government unit and not 96 t*e national government. T*e Lo!al Ta8 Code, in
transferring t*e %o7er to ta8 gross re!ei%ts derived 96 !inemaPt*eater o%erators or
%ro%rietors from admission ti!>ets to t*e lo!al government, did not intend to treat
!inemaPt*eater *ouses as a se%arate !lass. No distin!tion must, t*erefore, 9e made
9et7een t*e %la!es of amusement ta8ed 96 t*e national government and t*ose ta8ed 96
t*e lo!al government.
VAT on sale of servi!es of tele%*one fran!*ise grantees
T*e VAT on sale of servi!es of tele%*one fran!*ise grantees is eJuivalent to "2E of gross
re!ei%ts derived from t*e sale or e8!*ange of servi!es.
Smart Communi!ations, In!. vs. Cit6 of avao, et al.
+.R. No. "<<#3", Se%tem9er "1, ;22=
Pa7ns*o%s
At t*e time of t*e dis%uted assessment, t*at is, for t*e 6ear ;222, %a7ns*o%s 7ere not
su9:e!t to "2E VAT under t*e general %rovision on Dsale or e8!*ange of servi!esD as
defined under Se!tion "2= FAG of t*e Ta8 Code of "334, 7*i!* statesC D@sale or e8!*ange
of servi!es@ means t*e %erforman!e of all >inds of servi!es in t*e P*ili%%ines for ot*ers
for a fee, remuneration or !onsideration . . . .D Instead, due to t*e s%e!ifi! nature of its
9usiness, %a7ns*o%s 7ere t*en su9:e!t to "2E VAT under t*e !ategor6 of non/9an>
finan!ial intermediaries, as %rovided in t*e same Se!tion "2= FAG, . . .
(irst Planters Pa7ns*o%, In!. vs. Commissioner of Internal Revenue, +.R. No. "4#"0#,
Jul6 02, ;22=
S*o7ing or e8*i9ition of motion %i!tures or films
A !ursor6 reading of t*e foregoing %rovision .Se!tion "2= of t*e NIRC of t*e "3345
!learl6 s*o7s t*at t*e enumeration of t*e Dsale or e8!*ange of servi!esD su9:e!t to VAT is
not e8*austive. T*e 7ords, Din!luding,D Dsimilar servi!es,D and Ds*all li>e7ise in!lude,D
indi!ate t*at t*e enumeration is 96 7a6 of e8am%le onl6.
Among t*ose in!luded in t*e enumeration is t*e Dlease of motion %i!ture films, films,
ta%es and dis!s.D T*is, *o7ever, is not t*e same as t*e s*o7ing or e8*i9ition of motion
%i!tures or films. . . .
Commissioner of Internal Revenue vs. SM Prime &oldings, In!., et al., +.R. No. "=0<2<,
(e9ruar6 ;1, ;2"2
6.7 Transa$t"ons S&:e$t to Gero Per$ent 6017 Rate. The follo("n, ser!"$es
%erfor'ed "n the Ph"l"%%"nes + CATBre,"stered %ersons shall e s&:e$t to 5ero
%er$ent 6017 rate-
627 Pro$ess"n,# 'an&fa$t&r"n, or re%a$9"n, ,oods for other %ersons do"n,
&s"ness o&ts"de the Ph"l"%%"nes (h"$h ,oods are s&se;&entl+ ex%orted# (here the
ser!"$es are %a"d for "n a$$e%tale fore",n $&rren$+ and a$$o&nted for "n
a$$ordan$e ("th the r&les and re,&lat"ons of the .an,9oSentraln,P"l"%"nas 6.SP78
6/7 Ser!"$es other than those 'ent"oned "n the %re$ed"n, %ara,ra%h rendered to
a %erson en,a,ed "n &s"ness $ond&$ted o&ts"de the Ph"l"%%"nes or to a nonres"dent
%erson not en,a,ed "n &s"ness (ho "s o&ts"de the Ph"l"%%"nes (hen the ser!"$es
are %erfor'ed# the $ons"derat"on for (h"$h "s %a"d for "n a$$e%tale fore",n
$&rren$+ and a$$o&nted for "n a$$ordan$e ("th the r&les and re,&lat"ons of the
.an,9oSentraln,P"l"%"nas 6.SP78
CIR vs. $urmeister and Iain S!andinavian Contra!tor Mindanao, In!., +.R. No.
"<0;2<, Januar6 ;;, ;224
(ACTSC A foreign !onsortium !om%osed of $urmeister and Iain S!andinavian
Contra!tor APS F$ISC/enmar>G, Mitsui Engineering and S*i%9uilding, Ltd., and Mitsui
and Co., Ltd. entered into a !ontra!t 7it* NAP'C'R for t*e o%eration and maintenan!e
of NAP'C'R@s ; %o7er 9arges. T*e Consortium a%%ointed $ISC/enmar> as its
!oordination manager. $ISC/enmar> esta9lis*ed res%ondent domesti! !or%oration
7*i!* su9!ontra!ted t*e a!tual o%eration and maintenan!e of said ; %o7er 9arges as
7ell as t*e %erforman!e of ot*er duties and a!ts 7*i!* ne!essaril6 *ave to 9e done in t*e
P*ili%%ines. NAP'C'R %aid !a%a!it6 and energ6 fees to t*e Consortium in a mi8ture of
!urren!ies FMar>, ,en, and PesoG. T*e freel6 !onverti9le non/Peso !om%onent is
de%osited dire!tl6 to t*e Consortium@s 9an> a!!ounts in enmar> and Ja%an, 7*ile t*e
Peso/denominated !om%onent is de%osited in a se%arate and s%e!ial designated 9an>
a!!ount in t*e P*ili%%ines. 'n t*e ot*er *and, t*e Consortium %aid res%ondent in foreign
!urren!6 in7ardl6 remitted to t*e P*ili%%ines t*roug* t*e 9an>ing s6stem. E&CSI To
as!ertain t*e ta8 im%li!ations of t*e a9ove transa!tions, res%ondent soug*t a ruling from
t*e $IR 7*i!* res%onded 7it* $IR Ruling No. 2;0/3< dated (e9ruar6 "#, "33<,
de!laring t*at, if res%ondent !*ooses to register as a VAT %erson and t*e !onsideration
for its servi!es is %aid for in a!!e%ta9le foreign !urren!6 and a!!ounted for in
a!!ordan!e 7it* t*e rules and regulations of t*e $ang>oSentralngPili%inas, t*e aforesaid
servi!es s*all 9e su9:e!t to VAT at Hero/rate.
Res%ondent o%ted to register as a VAT ta8%a6er and a!ted a!!ordingl6.
'n e!em9er ;3, "334, res%ondent availed of t*e Voluntar6 Assessment Program FVAPG
of t*e $IR. It allegedl6 misinter%reted Revenue Regulations No. </31 dated (e9ruar6 ;2,
"331 to 9e a%%li!a9le to its !ase and su9:e!ted its sale of servi!es to t*e Consortium to
"2E VAT. 'n Januar6 4, "333, res%ondent 7as a9le to se!ure VAT Ruling No. 220/33
from t*e VAT Revie7 Committee 7*i!* re!onfirmed $IR Ruling No. 2;0/3< Dinsofar as it
*eld t*at t*e servi!es 9eing rendered 96 $ISCMI is su9:e!t to VAT at Hero %er!ent
F2EG.D 'n t*e strengt* of t*e aforementioned rulings, res%ondent filed a !laim for t*e
issuan!e of a ta8 !redit !ertifi!ate. Res%ondent 9elieved t*at it erroneousl6 %aid t*e
out%ut VAT for "331 due to its availment of t*e Voluntar6 Assessment Program FVAPG of
t*e $IR.
ISS-EC I*et*er res%ondentOs servi!es are su9:e!t to 2E VAT
&ELC No. Se!tion "2; F9G F no7 Se! "2= G of t*e Ta8 Code, t*e a%%li!a9le %rovision
in "331 7*en res%ondent rendered t*e servi!es and %aid t*e VAT in Juestion, enumerates
7*i!* servi!es are Hero/rated. Insisting t*at its servi!es s*ould 9e Hero/rated, res%ondent
!laims t*at it !om%lied 7it* t*e reJuirements of t*e Ta8 Code for Hero rating under t*e
se!ond %aragra%* of Se!. "2; F9G F no7 Se! "2= G. Res%ondent asserts t*at F"G t*e
%a6ment of its servi!e fees 7as in a!!e%ta9le foreign !urren!6, F;G t*ere 7as in7ard
remittan!e of t*e foreign !urren!6 into t*e P*ili%%ines, and F0G a!!ounting of su!*
remittan!e 7as in a!!ordan!e 7it* $SP rules.
Res%ondent is mista>en. T*e Ta8 Code not onl6 reJuires t*at t*e servi!es 9e ot*er t*an
D%ro!essing, manufa!turing or re%a!>ing of goodsD and t*at %a6ment for su!* servi!es 9e
in a!!e%ta9le foreign !urren!6 a!!ounted for in a!!ordan!e 7it* $SP rules. Anot*er
essential !ondition for Jualifi!ation to Hero/rating under Se!tion "2; F9G F;G is t*at t*e
re!i%ient of su!* servi!es is 'IN+ $-SINESS '-TSIE T&E P&ILIPPINES. I*ile
t*is reJuirement is not e8%ressl6 stated in t*e se!ond %aragra%* of Se!tion "2; F9G F no7
Se! "2= G, t*is is !learl6 %rovided in t*e first %aragra%* of Se!tion "2; F9G 7*ere t*e
listed servi!es must 9e Dfor ot*er %ersons doing 9usiness outside t*e P*ili%%ines.D T*e
%*rase Dfor ot*er %ersons doing 9usiness outside t*e P*ili%%inesD not onl6 refers to t*e
servi!es enumerated in t*e first %aragra%* of Se!tion "2; F9G, 9ut also %ertains to t*e
general term Dservi!esD a%%earing in t*e se!ond %aragra%* of Se!tion "2; F9G. In s*ort,
servi!es ot*er t*an %ro!essing, manufa!turing, or re%a!>ing of goods must li>e7ise 9e
%erformed for %ersons doing 9usiness outside t*e P*ili%%ines.
T*is !an onl6 9e t*e logi!al inter%retation of Se!tion "2; F9G F;G. If t*e %rovider and
re!i%ient of t*e Dot*er servi!esD are 9ot* doing 9usiness in t*e P*ili%%ines, t*e %a6ment
of foreign !urren!6 is irrelevant. 't*er7ise, t*ose su9:e!t to t*e regular VAT under
Se!tion "2; FaG !an avoid %a6ing t*e VAT 96 sim%l6 sti%ulating %a6ment in foreign
!urren!6 in7ardl6 remitted 96 t*e re!i%ient of servi!es. To inter%ret Se!tion "2; F9G F;G to
a%%l6 to a %a6er/re!i%ient of servi!es doing 9usiness in t*e P*ili%%ines is to ma>e t*e
%a6ment of t*e regular VAT under Se!tion "2; FaG de%endent on t*e generosit6 of t*e
ta8%a6er. T*e %rovider of servi!es !an !*oose to %a6 t*e regular VAT or avoid it 96
sti%ulating %a6ment in foreign !urren!6 in7ardl6 remitted 96 t*e %a6er/re!i%ient. Su!*
inter%retation removes Se!tion "2;FaG as a ta8 measure in t*e Ta8 Code, an
inter%retation t*is Court !annot san!tion. A ta8 is a mandator6 e8a!tion, not a voluntar6
!ontri9ution.
I*en Se!tion "2;F9GF;G sti%ulates %a6ment in Da!!e%ta9le foreign !urren!6D under $SP
rules, t*e la7 !learl6 envisions t*e %a6er/re!i%ient of servi!es to 9e doing 9usiness
outside t*e P*ili%%ines. 'nl6 t*ose not doing 9usiness in t*e P*ili%%ines !an 9e reJuired
under $SP rules to %a6 in a!!e%ta9le foreign !urren!6 for t*eir %ur!*ase of goods or
servi!es from t*e P*ili%%ines. In a domesti! transa!tion, 7*ere t*e %rovider and re!i%ient
of servi!es are 9ot* doing 9usiness in t*e P*ili%%ines, t*e $SP !annot reJuire an6 %art6
to ma>e %a6ment in foreign !urren!6. As t*e Court *eld in Commissioner of Internal
Revenue v. Ameri!an E8%ress International, In!. FP*ili%%ine $ran!*G, t*e %la!e of
%a6ment is immaterial, mu!* less is t*e %la!e 7*ere t*e out%ut of t*e servi!e is ultimatel6
used. An essential !ondition for entitlement to 2E VAT under Se!tion "2; F9G F"G and F;G
is t*at t*e re!i%ient of t*e servi!es is a %erson doing 9usiness outside t*e P*ili%%ines. In
t*is !ase, t*e re!i%ient of t*e servi!es is t*e Consortium, 7*i!* is doing 9usiness not
outside, 9ut 7it*in t*e P*ili%%ines 9e!ause it *as a "</6ear !ontra!t to o%erate and
maintain NAP'C'R@s t7o "22/mega7att %o7er 9arges in Mindanao.
T*e Court re!ogniHes t*e rule t*at t*e VAT s6stem generall6 follo7s t*e Ddestination
%rin!i%leD Fe8%orts are Hero/rated 7*ereas im%orts are ta8edG. &o7ever, as t*e Court
stated in Ameri!an E8%ress, t*ere is an e8!e%tion to t*is rule. T*is e8!e%tion refers to t*e
2E VAT on servi!es enumerated in Se!tion "2; and %erformed in t*e P*ili%%ines. (or
servi!es !overed 96 Se!tion "2; F9G F"G and F;G, t*e re!i%ient of t*e servi!es must 9e a
%erson doing 9usiness outside t*e P*ili%%ines. T*us, to 9e e8em%t from t*e destination
%rin!i%le under Se!tion "2; F9G F"G and F;G, t*e servi!es must 9e FaG %erformed in t*e
P*ili%%ines? F9G for a %erson doing 9usiness outside t*e P*ili%%ines? and F!G %aid in
a!!e%ta9le foreign !urren!6 a!!ounted for in a!!ordan!e 7it* $SP rules
su%%l6 of su!* servi!es to Hero %er!ent F2EG rate?
CIR vs. A!esite FP*il.G &otel Cor%., +.R. No. "#4;3<, (e9ruar6 "1, ;224
(ACTSC A!esite is t*e o7ner and o%erator of t*e &olida6 Inn Manila Pavilion &otel. It
leases a %ortion of t*e *otel@s %remises to PA+C'R for !asino o%erations. It also !aters
food and 9everages to PA+C'R@s !asino %atrons t*roug* t*e *otel@s restaurant outlets.
(or t*e %eriod Januar6 "331 to A%ril "334, A!esite in!urred VAT amounting to
P02,"<;,=3;.2; from its rental in!ome and sale of food and 9everages to PA+C'R
during said %eriod. A!esite tried to s*ift t*e said ta8es to PA+C'R 96 in!or%orating it in
t*e amount assessed to PA+C'R 9ut t*e latter refused to %a6 t*e ta8es on a!!ount of its
ta8/e8em%t status.PA+C'R %aid t*e amount due to A!esite minus t*e P02,"<;,=3;.2;
VAT? 7*ile A!esite %aid t*e VAT as it feared t*e legal !onseJuen!es of non/%a6ment of
t*e ta8. &o7ever, A!esite 9elatedl6 arrived at t*e !on!lusion t*at its transa!tion 7it*
PA+C'R 7as su9:e!t to Hero rate as it 7as rendered to a ta8/e8em%t entit6. A!esite filed
an administrative !laim for refund.
ISS-EC I*et*er t*e Hero %er!ent F2EG VAT rate under t*en Se!tion "2; F9G F0G of t*e
Ta8 Code Fno7 Se!tion "2= F$G F0G of t*e Ta8 Code of "334G legall6 a%%lies to A!esite
&ELC ,es. It 7as %ro%er for PA+C'R not to %a6 t*e "2E VAT !*arged 96 A!esite?
and t*e latter is not lia9le for t*e %a6ment of t*e same as it is e8em%t in t*is %arti!ular
transa!tion 96 o%eration of la7 to %a6 t*e indire!t ta8. Se!tion "0 of P.. "=13, t*e
!*arter !reating PA+C'R, grants t*e latter an e8em%tion from t*e %a6ment of ta8es. A
!lose s!rutin6 of t*e said %rovision !learl6 gives PA+C'R a $LANLET EAEMPTI'N to
ta8es 7it* no distin!tion on 7*et*er t*e ta8es are dire!t or indire!t. T*is VAT e8em%tion
e8tends to A!esite %ursuant to former Se!tion "2; F9G F0G of t*e "344 Ta8 Code, as
amended Fno7 Se!. "2= .95 .<5 of R.A. =#;#G.
T*e rationale for t*e e8em%tion from indire!t ta8es %rovided for in P.. "=13 and t*e
e8tension of su!* e8em%tion to entities or individuals dealing 7it* PA+C'R in !asino
o%erations are 9est elu!idated from t*e "3=4 !ase of Commissioner of Internal Revenue
v. Jo*n +otam!oK Sons, In!., 7*ere t*e a9solute ta8 e8em%tion of t*e Iorld &ealt*
'rganiHation FI&'G u%on an international agreement 7as u%*eld. It 7as *eld in said
!ase t*at t*e e8em%tion of !ontra!tee I&' s*ould 9e im%lemented to mean t*at t*e
entit6 or %erson e8em%t is t*e !ontra!tor itself 7*o !onstru!ted t*e 9uilding o7ned 96
!ontra!tee I&', and su!* does not violate t*e rule t*at ta8 e8em%tions are %ersonal
9e!ause t*e manifest intention of t*e agreement is to e8em%t t*e !ontra!tor so t*at no
!ontra!tor@s ta8 ma6 9e s*ifted to t*e !ontra!tee I&'. T*us, t*e %roviso in P.. "=13,
e8tending t*e e8em%tion to entities or individuals dealing 7it* PA+C'R in !asino
o%erations, is !learl6 to %ros!ri9e an6 indire!t ta8, li>e VAT, t*at ma6 9e s*ifted to
PA+C'R.
F#G Servi!es rendered to %ersons engaged in international s*i%%ing or international
air trans%ort o%erations, in!luding leases of %ro%ert6 for use t*ereof?
F<G Servi!es %erformed 96 su9!ontra!tors andPor !ontra!tors in %ro!essing,
!onverting, or manufa!turing goods for an enter%rise 7*ose e8%ort sales e8!eed sevent6
%er!ent F42EG of total annual %rodu!tion?
F1G Trans%ort of %assengers and !argo 96 air or sea vessels from t*e P*ili%%ines to a
foreign !ountr6? and
F4G Sale of %o7er or fuel generated t*roug* rene7a9le sour!es of energ6 su!* as, 9ut
not limited to, 9iomass, solar, 7ind, *6dro%o7er, geot*ermal, o!ean energ6, and ot*er
emerging energ6 sour!es using te!*nologies su!* as fuel !ells and *6drogen fuels.D
T*e amended Se!tion "2= F$G !larifies legislative intent.
Signifi!antl6, t*e amended Se!tion "2= F$G .%reviousl6 Se!tion "2; F9G5 of t*e %resent Ta8
Code !larifies t*is legislative intent .t*at onl6 t*e servi!es are different 9et7een
su9%aragra%*s " and ;. T*e reJuirements for Hero/rating, in!luding t*e essential
!ondition t*at t*e re!i%ient of servi!es is doing 9usiness outside t*e P*ili%%ines, remain
t*e same under 9ot* su9%aragra%*s.5. E8%ressl6 in!luded among t*e transa!tions su9:e!t
to 2E VAT are D.s5ervi!es ot*er t*an t*ose mentioned in t*e .first5 %aragra%* .of
Se!tion "2= F9G5 rendered to a %erson engaged in 9usiness !ondu!ted outside t*e
P*ili%%ines or to a nonresident %erson not engaged in 9usiness 7*o is outside t*e
P*ili%%ines 7*en t*e servi!es are %erformed, t*e !onsideration for 7*i!* is %aid for in
a!!e%ta9le foreign !urren!6 and a!!ounted for in a!!ordan!e 7it* t*e rules and
regulations of t*e $SP.D
CIR vs. $urmeister and Iain S!andinavian Contra!tor Mindanao, In!., +.R. No.
"<0;2<, Januar6 ;;, ;224
6C7 Deter'"nat"on of Tax. The tax shall e $o'%&ted + '&lt"%l+"n, the total
a'o&nt "nd"$ated "n the off"$"al re$e"%t + oneBele!enth 62E227.
TAM$-NTIN+ PAINS&'P, INC. vs. C'MMISSI'NER '( INTERNAL REVEN-E.
.+.R. No. "432=<. Januar6 ;", ;2"2.5
(ACTSC Res%ondent sent %etitioner an assessment noti!e for defi!ien!6 VAT, defi!ien!6
ST on %a7n ti!>ets, 7it**olding ta8 on !om%ensation, and defi!ien!6 EIT, all in!lusive
of interests and sur!*arges for t*e ta8a9le 6ear "333. Petitioner %rotested t*e
assessment. As t*e %rotest merited no res%onse, it filed a Petition for Revie7 7it* t*e
CTA %ursuant to Se!tion ;;= of t*e NIRC. T*e CTA ruled t*at %etitioner is lia9le for VAT
and do!umentar6 stam% ta8 9ut not for 7it**olding ta8 on !om%ensation and e8%anded
7it**olding ta8. Petitioner@s Motion for Partial Re!onsideration *aving 9een denied, it
filed a Petition for Revie7 9efore t*e CTA En $an! 7*i!* dismissed it as it did
%etitioner@s Motion for Re!onsideration
ISS-EC Petitioner raised t*e follo7ing argumentsC
A. Pa7ns*o%s are not su9:e!t to Value Added Ta8 %ursuant to Se!tion "2= of t*e
National Internal Revenue Code.
$. Petitioner %ro%erl6 7it**eld and remitted to t*e res%ondent t*e !orre!t amount of
e8%anded 7it**olding ta8 for ta8a9le 6ear "333.
C. Petitioner *as alread6 %aid t*e assessed amount of P"#,03=.0= .si!5, re%resenting
defi!ien!6 7it**olding ta8 on !om%ensation, t*us, assessment on 7it**olding on
!om%ensation must 9e !an!elled.
. Petitioner@s %a7n ti!>ets are not su9:e!t to do!umentar6 stam% ta8 %ursuant to
e8isting la7s and :uris%ruden!e.
&ELC T*e %etition is in %art meritorious.
In lig*t of t*e ruling in (irst Planters Pa7ns*o%, In!. v. Commissioner of Internal
Revenue F+.R. No. "4#"0#, Jul6 02, ;22=G, sin!e t*e im%osition of VAT on %a7ns*o%s,
7*i!* are non/9an> finan!ial intermediaries, 7as deferred for t*e ta8 6ears "331 to
;22;, %etitioner is not lia9le for VAT for t*e ta8 6ear "333. PetitionerOs argument t*at
%a7n ti!>ets are neit*er se!urities nor %rinted eviden!e of inde9tedness *en!e not lia9le
to do!umentar6 stam% ta8 failed. T*e Su%reme Court *eld t*at %ursuant to Se!tion "3< of
t*e NIRC and in t*e ruling in Mi!*el J. L*uillier Pa7ns*o%, In!. v. Commissioner of
Internal Revenue F+.R. No. "114=1, Ma6 0, ;221G, %ledge is su9:e!t to do!umentar6
stam% ta8. I*ile a %a7n ti!>et is not !onsidered as an eviden!e of se!urit6 or
inde9tedness, for %ur%oses of ta8ation, t*e same %a7n ti!>et is %roof of an e8er!ise of a
ta8a9le %rivilege of !on!luding a !ontra!t of %ledge.
T*e Su%reme Court found meritorious %etitioner@s argument against lia9ilit6 for
sur!*arges and interest B t*at it 7as in good fait* in not %a6ing do!umentar6 stam%
ta8es, it *aving relied on t*e rulings of res%ondent CIR and t*e CTA t*at %a7n ti!>ets are
not su9:e!t to do!umentar6 stam% ta8es. It is settled t*at good fait* and *onest 9elief t*at
one is not su9:e!t to ta8 on t*e 9asis of %revious inter%retations of government agen!ies
tas>ed to im%lement t*e ta8 la7 are suffi!ient :ustifi!ation to delete t*e im%osition of
sur!*arges and interest.
SECTION 20> Exe'%t Transa$t"ons. 627 S&:e$t to the %ro!"s"ons of
S&se$t"on 6/7 hereof# the follo("n, transa$t"ons shall e exe'%t fro' the !al&eB
added tax-
6A7 Sale or "'%ortat"on of a,r"$&lt&ral and 'ar"ne food %rod&$ts "n the"r or","nal
state# l"!esto$9 and %o&ltr+ of a 9"nd ,enerall+ &sed as# or +"eld"n, or %rod&$"n,
foods for h&'an $ons&'%t"on8 and reed"n, sto$9 and ,enet"$ 'ater"als therefor.
Prod&$ts $lass"f"ed &nder th"s %ara,ra%h shall e $ons"dered "n the"r or","nal state
e!en "f the+ ha!e &nder,one the s"'%le %ro$esses of %re%arat"on or %reser!at"on for
the 'ar9et# s&$h as free5"n,# dr+"n,# salt"n,# ro"l"n,# roast"n,# s'o9"n, or
str"%%"n,. Pol"shed andEor h&s9ed r"$e# $orn ,r"ts# ra( $ane s&,ar and 'olasses#
ord"nar+ salt# and $o%ra shall e $ons"dered "n the"r or","nal state8
REVEN-E RE+-LATI'NS N'. 2"0/2= Se%tem9er "3, ;22=
Consolidated Regulations on Advan!e Value Added Ta8 on t*e Sale of Refined Sugar
%romulgated FaG to %res!ri9e t*e u%dated %oli!ies and %ro!edures for t*e advan!e
%a6ment of value added ta8 FVATG on t*e sale of refined sugar, in!luding t*ose made 96 a
dul6 a!!redited and registered agri!ultural !oo%erative of good standing, F9G to %res!ri9e
%oli!ies and %ro!edures for t*e re!ognition of !lassifi!ation of sugar and sugar %rodu!ts,
F!G to %rovide for a monitoring s6stem in t*e %ro!essing of ra7 sugar into refined sugar
and t*e 7it*dra7al t*ereof from t*e sugar refineriesPmills, and FdG for ot*er related
%ur%oses.
6.7 Sale or "'%ortat"on of fert"l"5ers8 seeds# seedl"n,s and f"n,erl"n,s8 f"sh#
%ra(n# l"!esto$9 and %o&ltr+ feeds# "n$l&d"n, "n,red"ents# (hether lo$all+
%rod&$ed or "'%orted# &sed "n the 'an&fa$t&re of f"n"shed feeds 6ex$e%t s%e$"alt+
feeds for ra$e horses# f",ht"n, $o$9s# a;&ar"&' f"sh# 5oo an"'als and other an"'als
,enerall+ $ons"dered as %ets78
6C7 I'%ortat"on of %ersonal and ho&sehold effe$ts elon,"n, to the res"dents of
the Ph"l"%%"nes ret&rn"n, fro' aroad and nonres"dent $"t"5ens $o'"n, to resettle "n
the Ph"l"%%"nes- Pro!"ded# That s&$h ,oods are exe'%t fro' $&sto's d&t"es &nder
the Tar"ff and C&sto's Code of the Ph"l"%%"nes8
6D7 I'%ortat"on of %rofess"onal "nstr&'ents and "'%le'ents# (ear"n, a%%arel#
do'est"$ an"'als# and %ersonal ho&sehold effe$ts 6ex$e%t an+ !eh"$le# !essel#
a"r$raft# 'a$h"ner+# other ,oods for &se "n the 'an&fa$t&re and 'er$hand"se of an+
9"nd "n $o''er$"al ;&ant"t+7 elon,"n, to %ersons $o'"n, to settle "n the
Ph"l"%%"nes# for the"r o(n &se and not for sale# arter or ex$han,e# a$$o'%an+"n,
s&$h %ersons# or arr"!"n, ("th"n n"net+ 6>07 da+s efore or after the"r arr"!al# &%on
the %rod&$t"on of e!"den$e sat"sfa$tor+ to the Co''"ss"oner# that s&$h %ersons are
a$t&all+ $o'"n, to settle "n the Ph"l"%%"nes and that the $han,e of res"den$e "s ona
f"de8
6E7 Ser!"$es s&:e$t to %er$enta,e tax &nder T"tle C8
6<7 Ser!"$es + a,r"$&lt&ral $ontra$t ,ro(ers and '"ll"n, for others of %ala+ "nto
r"$e# $orn "nto ,r"ts and s&,ar $ane "nto ra( s&,ar8
647 @ed"$al# dental# hos%"tal and !eter"nar+ ser!"$es ex$e%t those rendered +
%rofess"onals8
C.T.A. CASE N'. 402#. e!em9er ", ;2"2
PERPET-AL S-CC'-R &'SPITAL, INC. and T&E SISTERS '( ST. PA-L E
C&ARTERS vs. C'MMISSI'NER '( INTERNAL REVEN-E
Medi!al, dental, *os%ital and veterinar6 servi!es, e8!e%t t*ose rendered 96 %rofessionals,
are e8em%t from value/added ta8 FSe!tion "23 FlG, NIRC of "334, as amendedG. T*e
maintenan!e and o%eration of a %*arma!6 or drugstore 96 a *os%ital is a ne!essar6 and
essential servi!e or fa!ilit6 rendered 96 an6 *os%ital for its %atients. T*us, t*e fa!ilit6 of
ma>ing drugs and medi!ines availa9le to in/%atients of t*e *os%ital, 7*et*er for reasons
of life/t*reatening urgen!6 or mere !onvenien!e, !annot 9ut 9e vie7ed as a *os%ital
servi!e t*at is !overed 96 t*e 9road and general e8em%tion %rovided in Se!tion "23 FlG of
t*e NIRC of "334, as amended, for D*os%ital servi!esD.
C I R vs. P*ili%%ine &ealt* Care Providers, In!., +.R. No. "1=";3, A%ril ;#, ;224
(ACTSC Res%ondent is a !or%oration o%erating a %re%aid grou% %ra!ti!e *ealt* !are
deliver6 s6stem. -nder its %re%aid grou% %ra!ti!e *ealt* !are deliver6 s6stem,
individuals enrolled in t*e *ealt* !are %rogram are entitled to %reventive, diagnosti!, and
!orre!tive medi!al servi!es to 9e dis%ensed 96 res%ondentOs dul6 li!ensed %*6si!ians,
s%e!ialists, and ot*er %rofessional te!*ni!al staff %arti!i%ating in said grou% %ra!ti!e
*ealt* !are deliver6 s6stem esta9lis*ed and o%erated 96 &ealt* Care. Su!* medi!al
servi!es 7ill 9e dis%ensed in a *os%ital or !lini! o7ned, o%erated, or a!!redited 96
&ealt* Care. To 9e entitled to re!eive su!* medi!al servi!es from &ealt* Care, an
individual must enroll in &ealt* Care@s *ealt* !are %rogram and %a6 an annual fee.
Enrollment in &ealt* Care@s *ealt* !are %rogram is on a 6ear/to/6ear 9asis and enrollees
are issued identifi!ation !ards. Moreover, t*is !ourt ad*eres to its !on!lusion t*at
%etitioner is a servi!e !ontra!tor su9:e!t to VAT sin!e it does not a!tuall6 render medi!al
servi!e 9ut merel6 a!ts as a !onduit 9et7een t*e mem9ers and %etitioner@s a!!redited and
re!ogniHed *os%itals and !lini!s.
ISS-EC I*et*er res%ondentOs 9usiness a!tivit6 is su9:e!t to VAT
&ELC ,es. Se!tion "20 of t*e "344 NIRC Fno7 Se!. "23 of t*e "334 Ta8 CodeG
s%e!ifies t*e transa!tions e8em%t from VAT, t*usC
SEC. "20 E8em%t Transa!tionsB T*e follo7ing s*all 9e e8em%t from t*e value/added
ta8C
FlG Medi!al, dental, *os%ital and veterinar6 servi!es e8!e%t t*ose rendered 96
%rofessionals
T*e im%ort of t*e a9ove %rovision is %lain. It reJuires no inter%retation. It !ontem%lates
t*e e8em%tion from VAT of ta8%a6ers engaged in t*e %erforman!e of medi!al, dental,
*os%ital, and veterinar6 servi!es. In Commissioner of Internal Revenue v. Seagate
Te!*nolog6 FP*ili%%inesG, it *eld t*at an e8em%t transa!tion is one involving goods or
servi!es 7*i!*, 96 t*eir nature, are SPECI(ICALL, LISTE in and EAPRESSL,
EAEMPTE from t*e VAT, under t*e Ta8 Code, 7it*out regard to t*e ta8 status of t*e
%art6 in t*e transa!tion. Commissioner of Internal Revenue v. Tos*i9a Information
EJui%ment FP*ils.G In!. reiterated t*is definition.
(rom t*e res%ondentOs 9usiness a!tivit6, t*e CTA made t*e follo7ing !on!lusionsC
aG Res%ondent Dis not a!tuall6 rendering medi!al servi!e 9ut merel6 a!ting as a
!onduit 9et7een t*e mem9ers and t*eir a!!redited and re!ogniHed *os%itals and !lini!s.D
9G It merel6 D%rovides and arranges for t*e %rovision of %re/need *ealt* !are servi!es
to its mem9ers for a fi8ed %re%aid fee for a s%e!ified %eriod of time.D
!G It t*en D!ontra!ts t*e servi!es of %*6si!ians, medi!al and dental %ra!titioners,
!lini!s and *os%itals to %erform su!* servi!es to its enrolled mem9ers?D and
dG Res%ondent Dalso enters into !ontra!t 7it* !lini!s, *os%itals, medi!al
%rofessionals and t*en negotiates 7it* t*em regarding %a6ment s!*emes, finan!ing and
ot*er %ro!edures in t*e deliver6 of *ealt* servi!es.D
T*e fa!tual findings of t*e CTA 7ere neit*er modified nor reversed 96 t*e Court of
A%%eals. It is a do!trine t*at findings of fa!t of t*e CTA, a s%e!ial !ourt e8er!ising
%arti!ular e8%ertise on t*e su9:e!t of ta8, are generall6 regarded as final, 9inding, and
!on!lusive u%on t*is Court, more so 7*ere t*ese do not !onfli!t 7it* t*e findings of t*e
Court of A%%eals. Perfor!e, as res%ondent 'ES N'T ACT-ALL, PR'VIE medi!al
andPor *os%ital servi!es, as %rovided under Se!tion "20 on e8em%t transa!tions, 9ut
merel6 arranges for t*e same, its servi!es are not VAT/e8em%t.
REVEN-E RE+-LATI'NS N'. 22=/"2 Se%tem9er 0, ;2"2
Im%lementing t*e Ta8 Privileges Provisions of R.A. No. 333#, 't*er7ise Lno7n as t*e
DE8%anded Senior CitiHens A!t of ;2"2D %romulgated 96 t*e e%artment of So!ial
Ielfare and evelo%ment, to amend t*e first %aragra%* of Se!tion "2 of Revenue
Regulations FRRG No. 4/;2"2 e8!luding t*e ele!tri! and 7ater !onsum%tion of senior
!itiHens from t*e e8em%tion from value/added ta8 FVATG.
REVEN-E RE+-LATI'NS N'. 224/"2 Jul6 ;2, ;2"2
Im%lementing t*e Ta8 Privileges Provisions of Re%u9li! A!t No. 333#, 't*er7ise Lno7n
as t*e DE8%anded Senior CitiHens A!t of ;2"2D, and Pres!ri9ing t*e +uidelines for t*e
Availment of t*e follo7ingC
". T*e availment of t*e in!ome ta8 e8em%tion of Senior CitiHens?
;. T*e value/added ta8 e8em%tion %rivileges granted to VAT/registered ta8%a6ers selling
goods and servi!es identified in t*e A!t to Senior CitiHens?
0. T*e ta8 %rivileges granted to esta9lis*ments giving dis!ount on t*eir sale of goods
and servi!es to Senior CitiHens?
#. T*e ta8 im%li!ation of ta>ing !are and su%%orting senior !itiHens 96 t*eir 9enefa!tors?
and,
<. T*e ta8 %rivileges granted to %rivate entities 7*o engage Senior CitiHens as t*eir
em%lo6ees.
6H7 Ed&$at"onal ser!"$es rendered + %r"!ate ed&$at"onal "nst"t&t"ons# d&l+
a$$red"ted + the De%art'ent of Ed&$at"on 6De%Ed7# the Co''"ss"on on H",her
Ed&$at"on 6CHED7# the Te$hn"$al Ed&$at"on and S9"lls De!elo%'ent A&thor"t+
6TESDA7 and those rendered + ,o!ern'ent ed&$at"onal "nst"t&t"ons8
6I7 Ser!"$es rendered + "nd"!"d&als %&rs&ant to an e'%lo+erBe'%lo+ee
relat"onsh"%8
6F7 Ser!"$es rendered + re,"onal or area head;&arters estal"shed "n the
Ph"l"%%"nes + '&lt"nat"onal $or%orat"ons (h"$h a$t as s&%er!"sor+#
$o''&n"$at"ons and $oord"nat"n, $enters for the"r aff"l"ates# s&s"d"ar"es or
ran$hes "n the As"aBPa$"f"$ Re,"on and do not earn or der"!e "n$o'e fro' the
Ph"l"%%"nes8
6H7 Transa$t"ons (h"$h are exe'%t &nder "nternat"onal a,ree'ents to (h"$h the
Ph"l"%%"nes "s a s",nator+ or &nder s%e$"al la(s# ex$e%t those &nder Pres"dent"al
De$ree No. )/>8
6L7 Sales + a,r"$&lt&ral $oo%erat"!es d&l+ re,"stered ("th the Coo%erat"!e
De!elo%'ent A&thor"t+ to the"r 'e'ers as (ell as sale of the"r %rod&$e# (hether
"n "ts or","nal state or %ro$essed for'# to nonB'e'ers8 the"r "'%ortat"on of d"re$t
far' "n%&ts# 'a$h"ner"es and e;&"%'ent# "n$l&d"n, s%are %arts thereof# to e &sed
d"re$tl+ and ex$l&s"!el+ "n the %rod&$t"on andEor %ro$ess"n, of the"r %rod&$e8
6@7 4ross re$e"%ts fro' lend"n, a$t"!"t"es + $red"t or '&lt"B%&r%ose
$oo%erat"!es d&l+ re,"stered ("th the Coo%erat"!e De!elo%'ent A&thor"t+8
6N7 Sales +
6"7 nonBa,r"$&lt&ral#
6""7 nonBele$tr"$ and
6"""7 nonB$red"t $oo%erat"!es d&l+ re,"stered ("th the Coo%erat"!e De!elo%'ent
A&thor"t+- Pro!"ded# That the share $a%"tal $ontr"&t"on of ea$h 'e'er does not
ex$eed <"fteen tho&sand %esos 6P2)#0007 and re,ardless of the a,,re,ate $a%"tal
and net s&r%l&s ratal+ d"str"&ted a'on, the 'e'ers-
6O7 Ex%ort sales + %ersons (ho are not CATBre,"stered8
6P7 Sale of real %ro%ert"es not %r"'ar"l+ held for sale to $&sto'ers or held for
lease "n the ord"nar+ $o&rse of trade or &s"ness# or real %ro%ert+ &t"l"5ed for lo(B
$ost and so$"al"5ed ho&s"n, as def"ned + Re%&l"$ A$t No. A/A># other("se 9no(n
as the =ran De!elo%'ent and Ho&s"n, A$t of 2>>/# and other related la(s#
res"dent"al lot !al&ed at One '"ll"on f"!e h&ndred tho&sand %esos 6P2#)00#0007 and
elo(# ho&se and lot# and other res"dent"al d(ell"n,s !al&ed at T(o '"ll"on f"!e
h&ndred tho&sand %esos 6P/#)00#0007 and elo(-
Pro!"ded# That not later than Fan&ar+ 32# /00> and e!er+ three 637 +ears thereafter#
the a'o&nts here"n stated shall e ad:&sted to the"r %resent !al&es &s"n, the
Cons&'er Pr"$e Index# as %&l"shed + the Nat"onal Stat"st"$s Off"$e 6NSO78
6I7 Lease of a res"dent"al &n"t ("th a 'onthl+ rental not ex$eed"n, Ten tho&sand
%esos 6P20#0007- Pro!"ded# That not later than Fan&ar+ 32# /00> and e!er+ three 637
+ears thereafter# the a'o&nt here"n stated shall e ad:&sted to "ts %resent !al&e
&s"n, the Cons&'er Pr"$e Index# ass %&l"shed + the Nat"onal Stat"st"$s Off"$e
6NSO78
6R7 Sale# "'%ortat"on# %r"nt"n, or %&l"$at"on of oo9s and an+ ne(s%a%er#
'a,a5"ne# re!"e( or &llet"n (h"$h a%%ears at re,&lar "nter!als ("th f"xed %r"$es
for s&s$r"%t"on and sale and (h"$h "s not de!oted %r"n$"%all+ to the %&l"$at"on of
%a"d ad!ert"se'ents8
6S7 Sale# "'%ortat"on or lease of %assen,er or $ar,o !essels and a"r$raft#
"n$l&d"n, en,"ne# e;&"%'ent and s%are %arts thereof for do'est"$ or "nternat"onal
trans%ort o%erat"ons8
6T7 I'%ortat"on of f&el# ,oods and s&%%l"es + %ersons en,a,ed "n "nternat"onal
sh"%%"n, or a"r trans%ort o%erat"ons8
6=7 Ser!"$es of an9s# nonBan9 f"nan$"al "nter'ed"ar"es %erfor'"n, ;&as"B
an9"n, f&n$t"ons# and other nonBan9 f"nan$"al "nter'ed"ar"es8 and
6C7 Sale or lease of ,oods or %ro%ert"es or the %erfor'an$e of ser!"$es other than
the transa$t"ons 'ent"oned "n the %re$ed"n, %ara,ra%hs# the ,ross ann&al sales
andEor re$e"%ts do not ex$eed the a'o&nt of One '"ll"on f"!e h&ndred tho&sand
%esos 6P2#)00#0007- Pro!"ded# That not later than Fan&ar+ 32# /00> and e!er+ three
637 +ears thereafter# the a'o&nt here"n stated shall e ad:&sted to "ts %resent !al&e
&s"n, the Cons&'er Pr"$e Index# as %&l"shed + the Nat"onal Stat"st"$s Off"$e
6NSO78
6/7 A CATBre,"stered %erson 'a+ ele$t that S&se$t"on 627 not a%%l+ to "ts sale of
,oods or %ro%ert"es or ser!"$es8 Pro!"ded# That an ele$t"on 'ade &nder th"s
S&se$t"on shall e "rre!o$ale for a %er"od of three 637 +ears fro' the ;&arter the
ele$t"on (as 'ade.
SECTION 220. Tax Cred"ts.
6A7 Cred"tale In%&t Tax.
627 An+ "n%&t tax e!"den$ed + a CAT "n!o"$e or off"$"al re$e"%t "ss&ed "n
a$$ordan$e ("th Se$t"on 223 hereof on the follo("n, transa$t"ons shall e
$red"tale a,a"nst the o&t%&t tax-
6a7 P&r$hase or "'%ortat"on of ,oods-
6"7 <or sale8 or
6""7 <or $on!ers"on "nto or "ntended to for' %art of a f"n"shed %rod&$t for sale
"n$l&d"n, %a$9a,"n, 'ater"als8 or
6"""7 <or &se as s&%%l"es "n the $o&rse of &s"ness8 or
6"!7 <or &se as 'ater"als s&%%l"ed "n the sale of ser!"$e8 or
6!7 <or &se "n trade or &s"ness for (h"$h ded&$t"on for de%re$"at"on or
a'ort"5at"on "s allo(ed &nder th"s Code.
67 P&r$hase of ser!"$es on (h"$h a !al&eBadded tax has a$t&all+ een %a"d.
6/7 The "n%&t tax on do'est"$ %&r$hase or "'%ortat"on of ,oods or %ro%ert"es +
a CATBre,"stered %erson shall e $red"tale-
6a7 To the %&r$haser &%on $ons&''at"on of sale and on "'%ortat"on of ,oods or
%ro%ert"es8 and
67 To the "'%orter &%on %a+'ent of the !al&eBadded tax %r"or to the release of
the ,oods fro' the $&stod+ of the .&rea& of C&sto's.
Pro!"ded# That the "n%&t tax on ,oods %&r$hased or "'%orted "n a $alendar 'onth
for &se "n trade or &s"ness for (h"$h ded&$t"on for de%re$"at"on "s allo(ed &nder
th"s Code# shall e s%read e!enl+ o!er the 'onth of a$;&"s"t"on and the f"ft+Bn"ne
6)>7 s&$$eed"n, 'onths "f the a,,re,ate a$;&"s"t"on $ost for s&$h ,oods# ex$l&d"n,
the CAT $o'%onent thereof# ex$eeds One '"ll"on %esos 6P2#000#0007-
Pro!"ded# ho(e!er# That "f the est"'ated &sef&l l"fe of the $a%"tal ,ood "s less than
f"!e 6)7 +ears# as &sed for de%re$"at"on %&r%oses# then the "n%&t CAT shall e s%read
o!er s&$h a shorter %er"od- Pro!"ded# f"nall+# That "n the $ase of %&r$hase of
ser!"$es# lease or &se of %ro%ert"es# the "n%&t tax shall e $red"tale to the
%&r$haser# lessee or l"$ensee &%on %a+'ent of the $o'%ensat"on# rental# ro+alt+ or
fee.
637 A CATBre,"stered %erson (ho "s also en,a,ed "n transa$t"ons not s&:e$t to the
!al&eBadded tax shall e allo(ed tax $red"t as follo(s-
6a7 Total "n%&t tax (h"$h $an e d"re$tl+ attr"&ted to transa$t"ons s&:e$t to
!al&eBadded tax8 and
67 A ratale %ort"on of an+ "n%&t tax (h"$h $annot e d"re$tl+ attr"&ted to
e"ther a$t"!"t+.
The ter' '"n%&t tax' 'eans the !al&eBadded tax d&e fro' or %a"d + a CATB
re,"stered %erson "n the $o&rse of h"s trade or &s"ness on "'%ortat"on of ,oods or
lo$al %&r$hase of ,oods or ser!"$es# "n$l&d"n, lease or &se of %ro%ert+# fro' a CATB
re,"stered %erson. It shall also "n$l&de the trans"t"onal "n%&t tax deter'"ned "n
a$$ordan$e ("th Se$t"on 222 of th"s Code.
The ter' 'o&t%&t tax' 'eans the !al&eBadded tax d&e on the sale or lease of taxale
,oods or %ro%ert"es or ser!"$es + an+ %erson re,"stered or re;&"red to re,"ster
&nder Se$t"on /3* of th"s Code.
6.7 Ex$ess O&t%&t or In%&t Tax. If at the end of an+ taxale ;&arter the o&t%&t
tax ex$eeds the "n%&t tax# the ex$ess shall e %a"d + the CATBre,"stered %erson. If
the "n%&t tax ex$eeds the o&t%&t tax# the ex$ess shall e $arr"ed o!er to the
s&$$eed"n, ;&arter or ;&arters- Pro!"ded# ho(e!er# That an+ "n%&t tax attr"&tale
to 5eroBrated sales + a CATBre,"stered %erson 'a+ at h"s o%t"on e ref&nded or
$red"ted a,a"nst other "nternal re!en&e taxes# s&:e$t to the %ro!"s"ons of Se$t"on
22/.
6C7 Deter'"nat"on of Cred"tale In%&t Tax. The s&' of the ex$ess "n%&t tax
$arr"ed o!er fro' the %re$ed"n, 'onth or ;&arter and the "n%&t tax $red"tale to a
CATBre,"stered %erson d&r"n, the taxale 'onth or ;&arter shall e red&$ed + the
a'o&nt of $la"' for ref&nd or tax $red"t for !al&eBadded tax and other ad:&st'ents#
s&$h as %&r$hase ret&rns or allo(an$es and "n%&t tax attr"&tale to exe'%t sale.
The $la"' for tax $red"t referred to "n the fore,o"n, %ara,ra%h shall "n$l&de not
onl+ those f"led ("th the .&rea& of Internal Re!en&e &t also those f"led ("th other
,o!ern'ent a,en$"es# s&$h as the .oard of In!est'ents and the .&rea& of
C&sto's.D
C I R vs. Se>isui Jus*i P*ili%%ines, In!., +.R. No. "#314", Jul6 ;", ;221
(ACTSC Res%ondent is a domesti! !or%oration 7it* %rin!i%al offi!e lo!ated at t*e
S%e!ial E8%ort Pro!essing )one, Laguna Te!*no%ar>, $iNan, Laguna. It is %rin!i%all6
engaged in t*e 9usiness of manufa!turing, im%orting, e8%orting, 9u6ing, selling, or
ot*er7ise dealing in, at 7*olesale su!* goods as stra%%ing 9ands and ot*er %a!>aging
materials and goods of similar nature, and an6 and all eJui%ment, materials, su%%lies
used or em%lo6ed in or related to t*e manufa!ture of su!* finis*ed %rodu!ts. &aving
registered 7it* t*e $ureau of Internal Revenue F$IRG as a value/added ta8 FVATG
ta8%a6er, res%ondent filed its Juarterl6 returns 7it* t*e $IR, for t*e %eriod Januar6 " to
June 02, "334, refle!ting in%ut ta8es in t*e amount of P#,10","0;.42 in !onne!tion 7it*
its domesti! %ur!*ase of !a%ital goods and servi!es. Said in%ut ta8es remained unutiliHed
sin!e res%ondent *as not engaged in an6 9usiness a!tivit6 or transa!tion for 7*i!* it ma6
9e lia9le for out%ut ta8 and for 7*i!* said in%ut ta8es ma6 9e !redited.
Res%ondent filed ; se%arate a%%li!ations for ta8 !reditPrefund of VAT in%ut ta8es %aid for
t*e %eriod Januar6 " to Mar!* 0", "334 and A%ril " to June 02, "334, res%e!tivel6.
ISS-EC I*et*er res%ondent is entitled to t*e refund or issuan!e of ta8 !redit !ertifi!ate
in t*e amount of P#,044,"2;.;1 as alleged unutiliHed in%ut ta8es %aid on domesti!
%ur!*ase of !a%ital goods and servi!es for t*e %eriod !overing Januar6 " to June 02,
"334.
&ELC ,es. $usiness enter%rises registered 7it* t*e P*ili%%ine E8%ort )one Aut*orit6
FPE)AG ma6 !*oose 9et7een t7o fis!al in!entive s!*emesC F"G to %a6 a five %er!ent
%referential ta8 rate on its gross in!ome and t*us 9e e8em%t from all ot*er ta8es? or F9G to
en:o6 an in!ome ta8 *olida6, in 7*i!* !ase it is not e8em%t from a%%li!a9le national
revenue ta8es in!luding t*e value/added ta8 FVATG. T*e %resent res%ondent, 7*i!*
availed itself of t*e se!ond ta8 in!entive s!*eme, *as %roven t*at all its transa!tions 7ere
e8%ort sales. &en!e, t*e6 s*ould 9e VAT Hero/rated. Res%ondent !an !laim a refund for
t*e in%ut VAT %reviousl6 !*arged 96 its su%%liers. T*e amount of P#,044,"2;.;1 is e8!ess
in%ut ta8es t*at :ustif6 a refund.
Nota9l6, 7*ile an e!oHone is geogra%*i!all6 7it*in t*e P*ili%%ines, it is deemed a
se%arate !ustoms territor6 and is regarded in la7 as foreign soil. Sales 96, su%%liers from
outside t*e 9orders of t*e e!oHone to t*is se%arate !ustoms territor6 are deemed as
e8%orts and treated as e8%ort sales. T*ese sales are Hero/rated or su9:e!t to a ta8 rate of
Hero %er!ent. Not7it*standing t*e fa!t t*at its %ur!*ases s*ould *ave 9een Hero/rated,
res%ondent 7as a9le to %rove t*at it *ad %aid in%ut ta8es in t*e amount of P#,044,"2;.;1.
T*e CTA found, and t*e CA affirmed, t*at t*is amount 7as su9stantiall6 su%%orted 96
invoi!es and 'ffi!ial Re!ei%ts? and %etitioner *as not !*allenged t*e !om%utation.
'n t*e ot*er *and, sin!e "22E of t*e %rodu!ts of res%ondent are e8%orted, all its
transa!tions are deemed e8%ort sales and are t*us VAT Hero/rated. It *as 9een s*o7n t*at
res%ondent *as no out%ut ta8 7it* 7*i!* it !ould offset its %aid in%ut ta8. Sin!e t*e
su9:e!t in%ut ta8 it %aid for its domesti! %ur!*ases of !a%ital goods and servi!es
remained unutiliHed, it !an !laim a refund for t*e in%ut VAT %reviousl6 !*arged 96 its
su%%liers. T*e amount of P#,044,"2;.;1 is e8!ess in%ut ta8es t*at :ustif6 a refund.
C I R vs. $i!olandia rug Cor%., +.R. No. "#=2=0, Jul6 ;", ;221
(ACTSC In "33<, res%ondent $i!olandia rug Cor%oration, a !or%oration engaged in
t*e 9usiness of retailing %*arma!euti!al %rodu!ts under t*e 9usiness st6le of DMer!ur6
rug,D granted ;2 %er!ent sales dis!ount to Jualified senior !itiHens %ur!*asing t*eir
medi!ines in !om%lian!e 7it* R.A. No. 4#0;. Res%ondent treated t*is dis!ount as a
dedu!tion from its gross in!ome in !om%lian!e 7it* Revenue Regulations No. ;/3#,
7*i!* im%lemented R.A. No. 4#0;. 'n A%ril "<, "331, res%ondent filed its "33<
Cor%orate Annual In!ome Ta8 Return de!laring a net loss %osition 7it* nil in!ome ta8
lia9ilit6. Res%ondent filed a !laim for ta8 refund or !redit 7it* t*e A%%ellate ivision of
t*e $ureau of Internal Revenue B 9e!ause its net losses for t*e 6ear "33< %revented it
from 9enefiting from t*e treatment of sales dis!ounts as a dedu!tion from gross sales
during t*e said ta8a9le 6ear. It alleged t*at t*e %etitioner Commissioner of Internal
Revenue erred in treating t*e ;2 %er!ent sales dis!ount given to senior !itiHens as a
dedu!tion from its gross in!ome for in!ome ta8 %ur%oses or ot*er %er!entage ta8
%ur%oses rat*er t*an as a ta8 !redit.
'n A%ril 1, "33=, res%ondent a%%ealed to t*e Court of Ta8 A%%eals in order to toll t*e
running of t7o F;G/6ear %res!ri%tive %eriod to file a !laim for refund %ursuant to Se!tion
;02 of t*e Ta8 Code t*en. Res%ondent argued t*at sin!e Se!tion # of R.A. No. 4#0;
%rovided t*at dis!ounts granted to senior !itiHens ma6 9e !laimed as ta8 !redit, Se!tion
;FiG of Revenue Regulations No. ;/3#, 7*i!* referred to t*e ta8 !redit as t*e amount
re%resenting t*e ;2 %er!ent dis!ount t*at Ds*all 9e dedu!ted 96 t*e said esta9lis*ments
from t*eir gross in!ome for in!ome ta8 %ur%oses and from t*eir gross sales for value/
added ta8 or ot*er %er!entage ta8 %ur%oses,D is illegal, void and 7it*out effe!t for 9eing
in!onsistent 7it* t*e statute it im%lements.
ISS-EC I*et*er t*e ;2 %er!ent sales dis!ount granted to Jualified senior !itiHens 96
res%ondent %ursuant to R.A. No. 4#0; ma6 9e !laimed as a ta8 !redit, instead of a
dedu!tion from gross in!ome or gross sales.
&ELC T*e %ro9lem stems from t*e issuan!e of Revenue Regulations No. ;/3#, 7*i!*
7as su%%osed to im%lement R.A. No. 4#0;, and t*e radi!al de%arture it made 7*en it
defined t*e Dta8 !reditD t*at 7ould 9e granted to esta9lis*ments t*at give ;2 %er!ent
dis!ount to senior !itiHens. -nder Revenue Regulations No. ;/3#, t*e ta8 !redit is Dt*e
amount re%resenting t*e ;2 %er!ent dis!ount granted to a Jualified senior !itiHen 96 all
esta9lis*ments relative to t*eir utiliHation of trans%ortation servi!es, *otels and similar
lodging esta9lis*ments, restaurants, drugstores, re!reation !enters, t*eaters, !inema
*ouses, !on!ert *alls, !ir!uses, !arnivals and ot*er similar %la!es of !ulture, leisure and
amusement, 7*i!* dis!ount s*all 9e dedu!ted 96 t*e said esta9lis*ments from t*eir gross
in!ome for in!ome ta8 %ur%oses and from t*eir gross sales for value/added ta8 or ot*er
%er!entage ta8 %ur%oses.D It eJuated Dta8 !reditD 7it* Dta8 dedu!tion,D !ontrar6 to t*e
definition in $la!>@s La7 i!tionar6, 7*i!* defined ta8 !redit asC WAn amount su9tra!ted
from an individual@s or entit6@s ta8 lia9ilit6 to arrive at t*e total ta8 lia9ilit6. A ta8 !redit
redu!es t*e ta8%a6er@s lia9ilit6 . . . , !om%ared to a dedu!tion 7*i!* redu!es ta8a9le
in!ome u%on 7*i!* t*e ta8 lia9ilit6 is !al!ulated. A !redit differs from dedu!tion to t*e
e8tent t*at t*e former is su9tra!ted from t*e ta8 7*ile t*e latter is su9tra!ted from
in!ome 9efore t*e ta8 is !om%uted.X
T*e inter%retation of an administrative government agen!6, 7*i!* is tas>ed to im%lement
t*e statute, is a!!orded great res%e!t and ordinaril6 !ontrols t*e !onstru!tion of t*e
!ourts. $e t*at as it ma6, t*e definition laid do7n in t*e Juestioned Revenue Regulations
!an still 9e su9:e!ted to s!rutin6. Courts 7ill not *esitate to set aside an e8e!utive
inter%retation 7*en it is !learl6 erroneous. T*ere is no need for inter%retation 7*en t*ere
is no am9iguit6 in t*e rule, or 7*en t*e language or 7ords used are !lear and %lain or
readil6 understanda9le to an ordinar6 reader. T*e definition of t*e term Dta8 !reditD is
%lain and !lear, and t*e attem%t of Revenue Regulations No. ;/3# to define it differentl6
is t*e root of t*e !onfli!t. Revenue Regulations No. ;/3# is still su9ordinate to R.A. No.
4#0;, and in !ases of !onfli!t, t*e im%lementing rule 7ill not %revail over t*e la7 it see>s
to im%lement. I*ile seemingl6 !onfli!ting la7s must 9e *armoniHed as far as
%ra!ti!a9le, in t*is %arti!ular !ase, t*e !onfli!t !annot 9e resolved in t*e manner t*e
%etitioner 7is*es. T*ere is a great divide se%arating t*e idea of Dta8 !reditD and Dta8
dedu!tion,D as seen in t*e definition in $la!>@s La7 i!tionar6.
(inall6, %etitioner argues t*at s*ould %rivate esta9lis*ments, 7*i!* !ount res%ondent in
t*eir num9er, 9e allo7ed to !laim ta8 !redits for dis!ounts given to senior !itiHens, t*e6
7ould 9e earning and not :ust 9e reim9ursed for t*e dis!ounts given. It !annot 9e
denied t*at R.A. No. 4#0; *as a lauda9le goal. Moreover, it !annot 9e argued t*at it 7as
t*e intent of la7ma>ers for %rivate esta9lis*ments to 9e t*e %rimar6 9enefi!iaries of t*e
la7. &o7ever, 7*ile t*e %ur%ose of t*e la7 to 9enefit senior !itiHens is %raise7ort*6, t*e
!on!erns of t*e affe!ted %rivate esta9lis*ments 7ere also !onsidered 96 t*e la7ma>ers.
As in ot*er !ases 7*erein %rivate %ro%ert6 is ta>en 96 t*e State for %u9li! use, t*ere must
9e :ust !om%ensation. In t*is %arti!ular !ase, it too> t*e form of t*e ta8 !redit granted to
%rivate esta9lis*ments, %ur%osel6 !*osen 96 t*e la7ma>ers. In t*e similar !ase of
Commissioner of Internal Revenue v. Central LuHon rug Cor%oration, s!rutiniHing t*e
deli9erations of t*e $i!ameral Conferen!e Committee Meeting on So!ial Justi!e on
(e9ruar6 <, "33; 7*i!* finaliHed R.A. No. 4#0;, t*e dis!ussions of t*e la7ma>ers !learl6
s*o7ed t*e intent t*at t*e !ost of t*e ;2 %er!ent dis!ount ma6 9e !laimed 96 t*e %rivate
esta9lis*ments as a ta8 !redit.
It must 9e !on!luded, t*erefore, t*at Revenue Regulations No. ;/3# is null and void for
failing to !onform to t*e la7 it soug*t to im%lement. In !ase of dis!re%an!6 9et7een t*e
9asi! la7 and a rule or regulation issued to im%lement said la7, t*e 9asi! la7 %revails
9e!ause said rule or regulation !annot go 9e6ond t*e terms and %rovisions of t*e 9asi!
la7. Revenue Regulations No. ;/3# 9eing null and void, it must 9e ruled t*en t*at under
R.A. No. 4#0;, 7*i!* 7as effe!tive at t*e time, res%ondent is entitled to its !laim of a ta8
!redit, and t*e ruling of t*e Court of A%%eals must 9e affirmed. $ut even as t*is
%arti!ular !ase is de!ided in t*is manner, it must 9e noted t*at t*e !on!erns of t*e
%etitioner regarding ta8 !redits granted to %rivate esta9lis*ments giving dis!ounts to
senior !itiHens *ave 9een addressed. R.A. No. 4#0; *as 9een amended 96 Re%u9li! A!t
No. 3;<4, t*e DE8%anded Senior CitiHens A!t of ;220.D In t*is, t*e term Dta8 !reditD is no
longer used. T*e ;2 %er!ent dis!ount granted 96 *otels and similar lodging
esta9lis*ments, restaurants and re!reation !enters, and in t*e %ur!*ase of medi!ines in
all esta9lis*ments for t*e e8!lusive use and en:o6ment of senior !itiHens is treated in t*e
follo7ing mannerC
WT*e esta9lis*ment ma6 !laim t*e dis!ounts granted under FaG, FfG, FgG and F*G as ta8
dedu!tion 9ased on t*e net !ost of t*e goods sold or servi!es renderedC Provided, T*at
t*e !ost of t*e dis!ount s*all 9e allo7ed as dedu!tion from gross in!ome for t*e same
ta8a9le 6ear t*at t*e dis!ount is granted. Provided, furt*er, t*at t*e total amount of t*e
!laimed ta8 dedu!tion net of value added ta8 if a%%li!a9le, s*all 9e in!luded in t*eir
gross sales re!ei%ts for ta8 %ur%oses and s*all 9e su9:e!t to %ro%er do!umentation and to
t*e %rovisions of t*e National Internal Revenue Code, as amended.X
T*is time around, t*ere is no !onfli!t 9et7een t*e la7 and t*e im%lementing Revenue
Regulations. -nder Revenue Regulations No. #/;221, Donl6 t*e a!tual amount of t*e
dis!ount granted or a sales dis!ount not e8!eeding ;2E of t*e gross selling %ri!e !an 9e
dedu!ted from t*e gross in!ome, net of value added ta8, if a%%li!a9le, for in!ome ta8
%ur%oses, and from gross sales or gross re!ei%ts of t*e 9usiness enter%rise !on!erned, for
VAT or ot*er %er!entage ta8 %ur%oses.D -nder t*e ne7 la7, t*ere is no ta8 !redit to s%ea>
of, onl6 dedu!tions.
Petitioner !an find some vindi!ation in t*e amendment made to R.A. No. 4#0; 96 R.A.
No. 3;<4, 7*i!* ma6 9e more in !onsonan!e 7it* t*e %rin!i%les of ta8ation, 9ut as it 7as
R.A. No. 4#0; in for!e at t*e time t*is !ase arose, t*is la7 !ontrols t*e result in t*is
%arti!ular !ase, for 7*i!* reason t*e %etition must fail. T*is !ase s*ould remind all
*eads of e8e!utive agen!ies 7*i!* are given t*e %o7er to %romulgate rules and
regulations, t*at t*e6 assume t*e roles of la7ma>ers. It is 7ell/settled t*at a regulation
s*ould not !onfli!t 7it* t*e la7 it im%lements. T*us, t*ose drafting t*e regulations s*ould
stud6 7ell t*e la7s t*eir rules 7ill im%lement, even to t*e e8tent of revie7ing t*e minutes
of t*e deli9erations of Congress a9out its intent 7*en it drafted t*e la7. T*e6 ma6 also
!onsult t*e Se!retar6 of Justi!e or t*e Soli!itor +eneral for t*eir o%inions on t*e drafted
rules. Administrative rules, regulations and orders *ave t*e effi!a!6 and for!e of la7 so
long as t*e6 do not !ontravene an6 statute or t*e Constitution. It is t*en t*e dut6 of t*e
agen!ies to ensure t*at t*eir rules do not deviate from or amend a!ts of Congress, for
t*eir regulations are al7a6s su9ordinate to la7.
An advertising e8%ense is a legitimate 9usiness e8%ense.
It is evident under Se!tion ""2 of t*e "334 Ta8 Code t*at an advertising e8%ense dul6
!overed 96 a VAT invoi!e is a legitimate 9usiness e8%ense.
Commissioner of Internal Revenue vs. Son6 P*il., In!., +.R. No. "4=134, Novem9er "4,
;2"2
VAT invoi!e !an 9e used onl6 for sale of goods and servi!es su9:e!t to VAT.
A VAT invoi!e !an 9e used onl6 for t*e sale of goods and servi!es t*at are su9:e!t to VAT.
T*e !orres%onding ta8es t*ereon s*all 9e allo7ed as in%ut ta8 !redits for t*ose su9:e!t to
VAT.
Atlas Consolidated Mining K evelo%ment Cor%. vs. Commissioner of Internal Revenue,
+.R. No. "0##14, Novem9er "4, "333
SECTION 222. Trans"t"onalEPres&'%t"!e In%&t Tax Cred"ts.
6A7 Trans"t"onal In%&t Tax Cred"ts. A %erson (ho e$o'es l"ale to !al&eB
added tax or an+ %erson (ho ele$ts to e a CATBre,"stered %erson shall# s&:e$t to
the f"l"n, of an "n!entor+ a$$ord"n, to r&les and re,&lat"ons %res$r"ed + the
Se$retar+ of <"nan$e# &%on re$o''endat"on of the Co''"ss"oner# e allo(ed
"n%&t tax on h"s e,"nn"n, "n!entor+ of ,oods# 'ater"als and s&%%l"es e;&"!alent to
t(o %er$ent 6/17 of the !al&e of s&$h "n!entor+ or the a$t&al !al&eBadded tax %a"d
on s&$h ,oods# 'ater"als and s&%%l"es# (h"$he!er "s h",her# (h"$h shall e
$red"tale a,a"nst the o&t%&t tax.
6.7 Pres&'%t"!e In%&t Tax Cred"ts.
Persons or f"r's en,a,ed "n the %ro$ess"n, of sard"nes# 'a$9erel and '"l9# and "n
'an&fa$t&r"n, ref"ned s&,ar# $oo9"n, o"l and %a$9ed noodleBased "nstant 'eals#
shall e allo(ed a %res&'%t"!e "n%&t tax# $red"tale a,a"nst the o&t%&t tax#
e;&"!alent to fo&r %er$ent 6417 of the ,ross !al&e "n 'one+ of the"r %&r$hases of
%r"'ar+ a,r"$&lt&ral %rod&$ts (h"$h are &sed as "n%&ts to the"r %rod&$t"on.
As &sed "n th"s S&se$t"on# the ter' '%ro$ess"n,' shall 'ean %aste&r"5at"on# $ann"n,
and a$t"!"t"es (h"$h thro&,h %h+s"$al or $he'"$al %ro$ess alter the exter"or text&re
or for' or "nner s&stan$e of a %rod&$t "n s&$h 'anner as to %re%are "t for s%e$"al
&se to (h"$h "t $o&ld not ha!e een %&t "n "ts or","nal for' or $ond"t"on.D
('RT $'NI(ACI' EV@T.C'RP. vs. C'MMISSI'NER '( INTERNAL REVEN-E, ET
AL. .+.R. Nos. "<===< K "421=2. A%ril ;, ;223.5
(ACTSC Petitioner (ort $onifa!io evelo%ment Cor%. F($CG, a real estate develo%er,
9oug*t from t*e national government a tra!t of land t*at formerl6 formed %art of t*e (ort
$onifa!io militar6 reservation. No VAT 7as %aid t*ereon sin!e t*e sale 7as
!onsummated %rior to R.A. No. 44"1. Iit* t*e effe!tivit6 of R.A. No. 44"1, 7*i!*
im%osed VAT for t*e first time on t*e sale of real %ro%erties, ($C 9e!ame o9liged to
remit to t*e $IR out%ut VAT %a6ments it re!eived from t*e sale of its %ro%erties. es%ite
its ena!tment, t*e %rovisions of Se!tion "2< of t*e NIRC, on t*e transitional in%ut ta8
!redit, remained inta!t. T*us, 7*en ($C sold t7o %ar!els of land to Metro Pa!ifi!
Cor%., it used its %resum%tive in%ut VAT on its land inventor6 in %artial %a6ment of its
out%ut VAT for t*e fourt* Juarter of "331. -%on ($COs inJuir6, t*e $IR disallo7ed t*e
!laimed %resum%tive in%ut VAT !redit. $IR t*en issued ($C a Pre/Assessment Noti!e,
follo7ed 96 an Assessment Noti!e re%resenting defi!ien!6 VAT for t*e #t* Juarter of
"331, in!luding sur!*arge, interest and %enalt6. After t*e Regional ire!tor denied
($C@s motion for re!onsiderationP%rotest, ($C filed a %etition for revie7 7it* t*e
Court of Ta8 A%%eals 7*i!* affirmed t*e assessment. T*is de!ision 7as %artl6 affirmed
96 t*e Court of A%%eals u%on a %etition for revie7 filed 96 ($C? *en!e, t*e first
%etition.
T*e se!ond %etition involves t*e same %arties and legal issues, 9ut !on!erns t*e !laim of
($C t*at it is entitled to !laim a similar transitionalP%resum%tive in%ut ta8 !redit, t*is
time for t*e t*ird Juarter of "334. T*is stemmed from ($COs !as* %a6ments and usage
of its regular in%ut ta8 !redit on %ur!*ases of goods and servi!es. -tiliHing t*e same
valuation of =E of t*e total 9oo> value of its 9eginning inventor6 of real %ro%erties,
($C argued t*at its in%ut ta8 !redit 7as more t*an enoug* to offset t*e VAT %aid 96 it
for t*e t*ird Juarter of "334.
ISS-ESC
". In determining t*e "2E value/added ta8 in Se!tion "22 of t*e .'ld NIRC5 on t*e
sale of real %ro%erties 96 real estate dealers, is t*e =E transitional in%ut ta8 !redit in
Se!tion "2< a%%lied onl6 to t*e im%rovements on t*e real %ro%ert6 or is it a%%lied on t*e
value of t*e entire real %ro%ert6M
;. Are Se!tion #."2<." and %aragra%* FaGFIIIG of t*e Transitor6 Provisions of
Revenue Regulations No. 4/3< valid in limiting t*e =E transitional in%ut ta8 to t*e
im%rovements on t*e real %ro%ert6M.
R-LIN+C 'n its fa!e, t*ere is not*ing in Se!tion "2< of t*e 'ld NIRC t*at %ro*i9its t*e
in!lusion of real %ro%erties, toget*er 7it* t*e im%rovements t*ereon, in t*e 9eginning
inventor6 of goods, materials and su%%lies, 9ased on 7*i!* inventor6 t*e transitional
in%ut ta8 !redit is !om%uted. Moreover, t*e amendments introdu!ed 96 R.A. No. 44"1 to
Se!tion "22, !ou%led 7it* t*e fa!t t*at t*e said la7 left Se!tion "2< inta!t, reveal t*e la!>
of an6 legislative intention to ma>e %ersons or entities in t*e real estate 9usiness su9:e!t
to a VAT treatment different from t*ose engaged in t*e sale of ot*er goods or %ro%erties
or in an6 ot*er !ommer!ial trade or 9usiness.
T*e transitional in%ut ta8 !redit o%erates to 9enefit ne7l6 VAT/registered %ersons,
7*et*er or not t*e6 %reviousl6 %aid ta8es in t*e a!Juisition of t*eir 9eginning inventor6
of goods, materials and su%%lies. uring t*at %eriod of transition from non/VAT to VAT
status, t*e transitional in%ut ta8 !redit serves to alleviate t*e im%a!t of t*e VAT on t*e
ta8%a6er. At t*e ver6 9eginning, t*e VAT/registered ta8%a6er is o9liged to remit a
signifi!ant %ortion of t*e in!ome it derived from its sales as out%ut VAT. T*e transitional
in%ut ta8 !redit mitigates t*is initial diminution of t*e ta8%a6er@s in!ome 96 affording t*e
o%%ortunit6 to offset t*e losses in!urred t*roug* t*e remittan!e of t*e out%ut VAT at a
stage 7*en t*e %erson is 6et una9le to !redit in%ut VAT %a6ments.
-nder Se!tion "2< of t*e 'ld NIRC, t*e rate of t*e transitional in%ut ta8 !redit is D=E of
t*e value of su!* inventor6 or t*e a!tual value/added ta8 %aid on su!* goods, materials
and su%%lies, 7*i!*ever is *ig*er.D If indeed t*e transitional in%ut ta8 !redit is %remised
on t*e %revious %a6ment of VAT, t*en it does not ma>e sense to afford t*e ta8%a6er t*e
9enefit of su!* !redit 9ased on D=E of t*e value of su!* inventor6D s*ould t*e same %rove
*ig*er t*an t*e a!tual VAT %aid.
Se!tion #."22/" of RR No. 4/3< itself in!ludes in its enumeration of Dgoods or %ro%ertiesD
su!* Dreal %ro%erties *eld %rimaril6 for sale to !ustomers or *eld for lease in t*e
ordinar6 !ourse of trade or 9usiness.D Said definition 7as ta>en from t*e ver6 statutor6
language of Se!tion "22 of t*e 'ld NIRC. $6 limiting t*e definition of goods to
Dim%rovementsD in Se!tion #."2</", t*e $IR not onl6 !ontravened t*e definition of
DgoodsD as %rovided in t*e 'ld NIRC, 9ut also t*e definition 7*i!* t*e same revenue
regulation itself *as %rovided.
Se!tion #."2<." of RR No. 4/3<, insofar as it disallo7s real estate dealers from in!luding
t*e value of t*eir real %ro%erties in t*e 9eginning inventor6 of goods, materials and
su%%lies, *as in fa!t alread6 9een re%ealed. T*e offending %rovisions 7ere deleted 7it*
t*e ena!tment of Revenue Regulation No. 1/34 FRR 1/34G dated ; Januar6 "334, 7*i!*
amended RR 4/3<.
T*e language of Se!tion "2<Fno7 se! """AG is e8%li!it. It %re!ludes reading into t*e la7
t*at t*e transitional in%ut ta8 !redit is limited to t*e amount of VAT %reviousl6 %aid.
I*en t*e aforesaid se!tion s%ea>s of Deig*t %er!ent F=EG of t*e value of su!* inventor6D
follo7ed 96 t*e !lause Dor t*e a!tual value/added ta8 %aid on su!* goods, materials and
su%%liesD, t*e im%li!ation is !lear t*at under t*e first !lause, Deig*t %er!ent F=EG of t*e
value of su!* inventor6D, t*e la7 does not !ontem%late t*e %a6ment of an6 %rior ta8 on
su!* inventor6. T*is is distinguis*ed from t*e se!ond !lause, Dt*e a!tual value/added ta8
%aid on t*e goods, materials and su%%liesD 7*ere a!tual %a6ment of VAT on t*e goods,
materials and su%%lies is assumed. &ad t*e intention of t*e la7 9een to limit t*e amount
to t*e a!tual VAT %aid, t*ere 7ould *ave 9een no need to e8%li!itl6 allo7 a !laim 9ased
on =E of t*e value of su!* inventor6.
(ort $onifa!ioev@t. Cor%. vs. Commissioner of Internal Revenue, et al., +.R. Nos.
"<===< K "421=2, '!to9er ;, ;223
SECTION 22/.Ref&nds or Tax Cred"ts of In%&t Tax.
6A7 GeroBRated or Effe$t"!el+ GeroBRated Sales. An+ CATBre,"stered %erson#
(hose sales are 5eroBrated or effe$t"!el+ 5eroBrated 'a+# ("th"n t(o 6/7 +ears after
the $lose of the taxale ;&arter (hen the sales (ere 'ade# a%%l+ for the "ss&an$e of
a tax $red"t $ert"f"$ate or ref&nd of $red"tale "n%&t tax d&e or %a"d attr"&tale to
s&$h sales# ex$e%t trans"t"onal "n%&t tax# to the extent that s&$h "n%&t tax has not
een a%%l"ed a,a"nst o&t%&t tax-
Pro!"ded# ho(e!er# That "n the $ase of 5eroBrated sales &nder Se$t"on 20*6A76/76a7
627# 6/7 and 67 and Se$t"on 2086.7627 and 6/7# the a$$e%tale fore",n $&rren$+
ex$han,e %ro$eeds thereof had een d&l+ a$$o&nted for "n a$$ordan$e ("th the
r&les and re,&lat"ons of the .an,9oSentraln,P"l"%"nas 6.SP7-
Pro!"ded# f&rther# That (here the tax%a+er "s en,a,ed "n 5eroBrated or effe$t"!el+
5eroBrated sale and also "n taxale or exe'%t sale of ,oods or %ro%ert"es or
ser!"$es# and the a'o&nt of $red"tale "n%&t tax d&e or %a"d $annot e d"re$tl+ and
ent"rel+ attr"&ted to an+ one of the transa$t"ons# "t shall e allo$ated
%ro%ort"onatel+ on the as"s of the !ol&'e of sales-
Pro!"ded# f"nall+# That for a %erson 'a9"n, sales that are 5eroBrated &nder Se$t"on
2086.76*7# the "n%&t taxes shall e allo$ated ratal+ et(een h"s 5eroBrated and
nonB5eroBrated sales.
REVEN-E MEM'RAN-M CIRC-LAR N'. #;/20 Jul6 "<, ;220
Pro!essing of Claims for Value/Added Ta8 FVATG CreditPRefund, In!luding T*ose (iled
7it* t*e Ta8 and Revenue +rou%, 'ne/Sto% S*o% Inter/Agen!6 Ta8 Credit and ut6
ra79a!> Center, e%artment of (inan!e F'SSG 96 ire!t E8%orters
REVEN-E MEM'RAN-M 'RER N'. =1/3= Novem9er "2, "33=
S-$JECT C Pa6ment of National Internal Revenue Ta8es in t*e (orm of Ta8
Credit Certifi!ate FTCCG, -nder Certain Conditions, Pursuant to Se!tion ;2# of t*e Ta8
Code of "334
SECTI'N " S!o%e B T*is 'rder is issued to ensure a uniform !om%lian!e 7it* t*e
%ertinent %rovisions of Se!tion ;2# of t*e Ta8 Code of "334, as follo7sC
DA Ta8 Credit Certifi!ate validl6 issued under t*e %rovisions of t*is Code ma6 9e a%%lied
against an6 internal revenue ta8, e8!luding 7it**olding ta8es, for 7*i!* t*e ta8%a6er is
dire!tl6 lia9le. An6 reJuest for !onversion into refund of unutiliHed ta8 !redits ma6 9e
allo7ed, su9:e!t to t*e %rovisions of Se!tion ;02 of t*is CodeC Provided, T*at t*e
original !o%6 of t*e Ta8 Credit Certifi!ate s*o7ing a !redita9le 9alan!e is surrendered to
t*e a%%ro%riate revenue offi!er for verifi!ation and !an!ellationC Provided, furt*er T*at
in no !ase s*all a ta8 refund 9e given resulting from availment of in!entives granted
%ursuant to s%e!ial la7s for 7*i!* no a!tual %a6ment 7as made.D
SECTI'N ; Coverage. B All !on!erned are *ere96 en:oined to stri!tl6 im%lement t*e
a9ove %rovisions of la7, as follo7sC
". TCC issued %rior to Januar6 ", "33=. B A TCC dul6 issued under t*e %rovisions
of t*e National Internal Revenue Code %rior to Januar6 ", "33= s*all not 9e a!!e%ted in
%a6ment of t*e ta8%a6er@s internal revenue ta8 lia9ilities, unless t*e same *as 9een dul6
revalidated %ursuant to t*e %rovisions of Se!tion ;02 of t*e said Code, as im%lemented 96
Revenue Regulations No. 4/3=, dated Jul6 3, "33=.
;. TCC issued 9eginning Januar6 ", "33=. B A TCC dul6 issued under t*e
%rovisions of t*e National Internal Revenue Code 9eginning Januar6 ", "33= ma6 9e
used 96 its grantee in %a6ment of *is internal revenue ta8es, e8!e%t *is 7it**olding ta8
lia9ilit6.
0. Linds of internal revenue ta8es against 7*i!* a TCC ma6 9e a%%lied in %a6ment?
E8!e%tion. B Su9:e!t to t*e %rovisions of t*e %re!eding %aragra%*s, an6 TCC dul6 issued
96 t*e Commissioner of Internal Revenue, or *is dul6 aut*oriHed re%resentative, under
t*e %rovisions of t*e National Internal Revenue Code ma6 9e used 96 its grantee in
%a6ment of *is internal revenue ta8es, su!* as in!ome ta8es, estate and donor@s ta8es,
value/added ta8, %er!entage ta8es, e8!ise ta8es and do!umentar6 stam% ta8es, e8!e%t *is
7it**olding ta8 lia9ilit6.
#. Meaning of a TCC Dissued under t*e %rovisions of t*e CodeD? E8!e%tion. B FaG
T*is term is limited onl6 to an6 TCC issued under t*e %ertinent %rovisions of t*e National
Internal Revenue Code, su!* as, 9ut not limited to, a TCC dul6 issued 96 t*e
Commissioner of Internal Revenue, or *is dul6 aut*oriHed re%resentative, for ta8es
erroneousl6 %aid 96 or illegall6 !olle!ted from t*e ta8%a6er, e8!ess !redit for !redita9le
in!ome ta8es 7it**eld from in!ome derived, or a TCC dul6 issued to a VAT/registered
ta8%a6er on a!!ount of *is transa!tions su9:e!t to Hero %er!ent F2EG value/added ta8. F9G
E8!e%tion. B T*e term Dissued under t*e %rovisions of t*e CodeD does not in!lude an6
TCC issued %ursuant to t*e %rovisions of an6 la7, ot*er t*an t*e National Internal
Revenue Code, su!* as a TCC issued %ursuant to t*e %rovisions of t*e 'mni9us
Investments Code, t*e Tariff and Customs Code, or ot*er general or s%e!ial la7.
<. TCC issued %ursuant to t*e %rovisions of an6 la7 ot*er t*an t*e NIRC . B An6
TCC dul6 issued %ursuant to t*e %rovisions of an6 la7, ot*er t*an t*e National Internal
Revenue Code, ma6 onl6 9e used, su9:e!t to t*e limitations of t*e la7 and regulations
under 7*i!* t*e same *as 9een issued.
<." TCC issued 96 t*e $ureau of Customs. B An6 TCC issued 96 t*e Commissioner of
Customs, or *is dul6 aut*oriHed re%resentative, %ursuant to Se!tion "21 of t*e Tariff and
Customs Code , as ut6 ra79a!>s, ma6 onl6 9e used in %a6ment of t*e grantee@s
lia9ilit6 to t*e $ureau of Customs for duties, !*arges and ta8es on *is im%ortation, t*e
%rovisions of Se!tion ";FaG of t*e NIRC not7it*standing. It ma6 not 9e used in %a6ment
of *is internal revenue ta8 lia9ilities dire!tl6 %a6a9le to t*e $ureau of Internal Revenue.
<.; TCC issued under t*e 'mni9us Investments Code. B A TCC issued 96 t*e $oard
of Investments, or its dul6 aut*oriHed re%resentative, %ursuant to t*e %rovisions of t*e
'mni9us Investments Code , as amended, ma6 onl6 9e used for t*e %ur%oses for 7*i!*
t*e same *as 9een issued to t*e grantee, in a!!ordan!e 7it* t*e %rovisions of t*e
'mni9us Investments Code and its im%lementing rules and regulations. An6 TCC issued
:ointl6 96 t*e $oard of Investments F$'IG and t*e $ureau of Internal Revenue F$IRG,
%ursuant to t*e %rovisions of t*e 'mni9us Investments Code and its im%lementing rules
and regulations, ma6 9e used 96 t*e grantee or *is Jualified transferee, in %a6ment of t*e
granteePtransferee@s internal revenue ta8es, e8!e%t *is 7it**olding ta8 lia9ilitiesC
Provided, *o7ever, T*at an6 TCC issued :ointl6 96 t*e $oard of Investments F$'IG and
t*e $ureau of Customs F$'CG, %ursuant to t*e %rovisions of t*e 'mni9us Investments
Code and its im%lementing rules and regulations, s*all not 9e used in %a6ment of t*e
granteePtransferee@s lia9ilit6 for an6 internal revenue ta8 dire!tl6 %a6a9le to t*e $IR, t*e
%rovisions of Se!tion ";FaG of t*e NIRC not7it*standing, *en!e, t*e same ma6 onl6 9e
used in %a6ment of !ustoms duties, !*arges and ta8es on *is im%ortation, dire!tl6 %a6a9le
to t*e $ureau of Customs.
6.7 Ca%"tal 4oods. A CATBre,"stered %erson 'a+ a%%l+ for the "ss&an$e of a
tax $red"t $ert"f"$ate or ref&nd of "n%&t taxes %a"d on $a%"tal ,oods "'%orted or
lo$all+ %&r$hased# to the extent that s&$h "n%&t taxes ha!e not een a%%l"ed a,a"nst
o&t%&t taxes. The a%%l"$at"on 'a+ e 'ade onl+ ("th"n t(o 6/7 +ears after the $lose
of the taxale ;&arter (hen the "'%ortat"on or %&r$hase (as 'ade.
6C7 Per"od ("th"n (h"$h Ref&nd or Tax Cred"t of In%&t Taxes shall e @ade.
In %ro%er $ases# the Co''"ss"oner shall ,rant a ref&nd or "ss&e the tax $red"t
$ert"f"$ate for $red"tale "n%&t taxes ("th"n one h&ndred t(ent+ 62/07 da+s fro' the
date of s&'"ss"on of $o'%lete do$&'ents "n s&%%ort of the a%%l"$at"on f"led "n
a$$ordan$e ("th S&se$t"on 6A7 hereof.
In $ase of f&ll or %art"al den"al of the $la"' for tax ref&nd or tax $red"t# or the
fa"l&re on the %art of the Co''"ss"oner to a$t on the a%%l"$at"on ("th"n the %er"od
%res$r"ed ao!e# the tax%a+er affe$ted 'a+# ("th"n th"rt+ 6307 da+s fro' the
re$e"%t of the de$"s"on den+"n, the $la"' or after the ex%"rat"on of the one h&ndred
t(ent+ da+B%er"od# a%%eal the de$"s"on or the &na$ted $la"' ("th the Co&rt of Tax
A%%eals.
6D7 @anner of 4"!"n, Ref&nd. Ref&nds shall e 'ade &%on (arrants dra(n
+ the Co''"ss"oner or + h"s d&l+ a&thor"5ed re%resentat"!e ("tho&t the ne$ess"t+
of e"n, $o&nters",ned + the Cha"r'an# Co''"ss"on on A&d"t# the %ro!"s"ons of
the Ad'"n"strat"!e Code of 2>8A to the $ontrar+ not("thstand"n,- Pro!"ded# That
ref&nds &nder th"s %ara,ra%h shall e s&:e$t to %ost a&d"t + the Co''"ss"on on
A&d"t.D
To !laim refund or ta8 !redit under Se!tion ""; FAG, %etitioner must !om%l6 7it* t*e
follo7ing !riteriaC F"G t*e ta8%a6er is VAT registered? F;G t*e ta8%a6er is engaged in Hero/
rated or effe!tivel6 Hero/rated sales? F0G t*e in%ut ta8es are due or %aid? F#G t*e in%ut
ta8es are not transitional in%ut ta8es? F<G t*e in%ut ta8es *ave not 9een a%%lied against
out%ut ta8es during and in t*e su!!eeding Juarters? F1G t*e in%ut ta8es !laimed are
attri9uta9le to Hero/rated or effe!tivel6 Hero/rated sales? F4G for Hero/rated sales under
Se!tion "21 FAG F;G F"G and F;G? "21 F$G? and "2= F$G F"G and F;G, t*e a!!e%ta9le foreign
!urren!6 e8!*ange %ro!eeds *ave 9een dul6 a!!ounted for in a!!ordan!e 7it* $SP rules
and regulations? F=G 7*ere t*ere are 9ot* Hero/rated or effe!tivel6 Hero/rated sales and
ta8a9le or e8em%t sales, and t*e in%ut ta8es !annot 9e dire!tl6 and entirel6 attri9uta9le
to an6 of t*ese sales, t*e in%ut ta8es s*all 9e %ro%ortionatel6 allo!ated on t*e 9asis of
sales volume? and F3G t*e !laim is filed 7it*in t7o 6ears after t*e !lose of t*e ta8a9le
Juarter 7*en su!* sales 7ere made.
San RoJue Po7er Cor%. vs. Commissioner of Internal Revenue, +.R. No. "=20#<,
Novem9er ;<, ;223
In granting t*e ta8 9enefit to VAT/registered Hero/rated or effe!tivel6 Hero/rated
ta8%a6ers, Se!tion ""; FAG of t*e NIRC does not limit t*e definition of DsaleD to
!ommer!ial transa!tions in t*e normal !ourse of 9usiness.
San RoJue Po7er Cor%. vs. Commissioner of Internal Revenue, +.R. No. "=20#<,
Novem9er ;<,;223

CHAPTER II
Co'%l"an$e Re;&"re'ents
SECTION 223.In!o"$"n, and A$$o&nt"n, Re;&"re'ents for CATBRe,"stered
Persons.
6A7 In!o"$"n, Re;&"re'ents. A CATBre,"stered %erson shall "ss&e-
627 A CAT "n!o"$e for e!er+ sale# arter or ex$han,e of ,oods or %ro%ert"es8 and
6/7 A CAT off"$"al re$e"%t for e!er+ lease of ,oods or %ro%ert"es# and for e!er+
sale# arter or ex$han,e of ser!"$es.
6.7 Infor'at"on Conta"ned "n the CAT In!o"$e or CAT Off"$"al Re$e"%t. The
follo("n, "nfor'at"on shall e "nd"$ated "n the CAT "n!o"$e or CAT off"$"al re$e"%t-
627 A state'ent that the seller "s a CATBre,"stered %erson# follo(ed + h"s
Tax%a+er's Ident"f"$at"on N&'er 6TIN78
6/7 The total a'o&nt (h"$h the %&r$haser %a+s or "s ol",ated to %a+ to the seller
("th the "nd"$at"on that s&$h a'o&nt "n$l&des the !al&eBadded tax- Pro!"ded# That-
6a7 The a'o&nt of the tax shall e sho(n as a se%arate "te' "n the "n!o"$e or
re$e"%t8
67 If the sale "s exe'%t fro' !al&eBadded tax# the ter' 'CATBexe'%t sale' shall
e (r"tten or %r"nted %ro'"nentl+ on the "n!o"$e or re$e"%t8
6$7 If the sale "s s&:e$t to 5ero %er$ent 6017 !al&eBadded tax# the ter' '5eroB
rated sale' shall e (r"tten or %r"nted %ro'"nentl+ on the "n!o"$e or re$e"%t8
6d7 If the sale "n!ol!es ,oods#.%ro%ert"es or ser!"$es so'e of (h"$h are s&:e$t
to and so'e of (h"$h are CAT 5eroBrated or CATBexe'%t# the "n!o"$e or re$e"%t
shall $learl+ "nd"$ate the rea9Bdo(n of the sale %r"$e et(een "ts taxale# exe'%t
and 5eroBrated $o'%onents# and the $al$&lat"on of the !al&eBadded tax on ea$h
%ort"on of the sale shall e sho(n on the "n!o"$e or re$e"%t-
Pro!"ded# That the seller 'a+ "ss&e se%arate "n!o"$es or re$e"%ts for the taxale#
exe'%t# and 5eroBrated $o'%onents of the sale.
637 The date of transa$t"on# ;&ant"t+# &n"t $ost and des$r"%t"on of the ,oods or
%ro%ert"es or nat&re of the ser!"$e8 and
647 In the $ase of sales "n the a'o&nt of One tho&sand %esos 6P2#0007 or 'ore
(here the sale or transfer "s 'ade to a CATBre,"stered %erson# the na'e# &s"ness
st+le# "f an+# address and Tax%a+er Ident"f"$at"on N&'er 6TIN7 of the %&r$haser#
$&sto'er or $l"ent.
REVEN-E MEM'RAN-M CIRC-LAR N'. 1;/2< '!to9er "=, ;22<
Revised +uidelines in t*e Registration K Invoi!ing ReJuirements In!luding Clarifi!ation
on Common Issues Affe!ting Value Added Ta8 FVATG Ta8%a6ers Pursuant to RA 3004 FAn
A!t Amending Se!tions ;4, ;=, 0#, "21, "2=, "23, ""2, """, "";, ""0, ""#, ""1, ""4, ""3,
";", "#=, "<", ;01, ;04 and ;== of t*e National Internal Revenue Code of "334, as
Amended, and for ot*er Pur%osesG in t*e form of 9asi! Juestions and ans7ers regarding
t*e registration and invoi!ing reJuirements relative to VAT ta8%a6ers as reJuired under
RA 3004C
Q" I*o are lia9le to register as VAT ta8%a6ersM
A" An6 %erson 7*o, in t*e !ourse of trade or 9usiness, sells, 9arters or e8!*anges
goods or %ro%erties or engages in t*e sale or e8!*ange of servi!es s*all 9e lia9le to
register ifC
FaG &is gross sales or re!ei%ts for t*e %ast t7elve F";G mont*s, ot*er t*an t*ose t*at
are e8em%t under Se!tion "23 FAG to F-G, *ave e8!eeded one million five *undred
t*ousand %esos FP",<22,222G? or
F9G T*ere are reasona9le grounds to 9elieve t*at *is gross sales or re!ei%ts for t*e
ne8t t7elve F";G mont*s, ot*er t*an t*ose t*at are e8em%t under Se!tion "23 FAG to F-G,
7ill e8!eed one million five *undred t*ousand %esos FP",<22,222G.
Q; Are all VAT ta8%a6ers mentioned in Q/" a9ove still reJuired to registerM
A; T*ose ta8%a6ers %reviousl6 registered as VAT ta8%a6ers under t*e old VAT La7
are not reJuired to register ane7, ta8%a6ers 7*o are %reviousl6 registered as non/VAT
ta8%a6ers 9ut are no7 !overed 96 t*e VAT La7 s*all u%date t*eir registration 96 filing
$IR (orm "32< FA%%li!ation for Registration Information -%dateG at t*e R' *aving
:urisdi!tion over t*e ta8%a6er@s &ead 'ffi!e.
Q0 Can t*e $IR automati!all6 register %reviousl6 Non/VAT ta8%a6ers 7*o are no7
su9:e!t to VATM
A0 ,es, t*e $IR 7ill automati!all6 register ta8%a6ers 7*o 7ere %reviousl6 registered
as Non/VAT 9ut are no7 su9:e!t to VAT t*roug* its Information S6stem +rou%.
Q# I*at is t*e !riterion to 9e !onsidered to 9e automati!all6 registered in relation to
No. 0 a9oveM
A# T*ose ta8%a6ers 7*ose transa!tions 7ere %reviousl6 not su9:e!t to VAT 9ut are
no7 VATa9le Fin!luding %reviousl6 VAT/e8em%t transa!tionsG, %rovided *is gross sales
e8!eeded t*e P".<M t*res*old.
Q< Ma6 a ta8%a6er alread6 registered as VAT ta8%a6er under t*e old VAT La7 9ut
7*ose annual gross sales does not e8!eed P".<M !*ange *is status to non/VAT ta8%a6erM
A< ,es, %reviousl6 registered VAT ta8%a6er under t*e old VAT La7 ma6 !*ange *is
status to non/VAT ta8%a6er 96 ma>ing a 7ritten a%%li!ation, filing $IR (orm "32< and
96 demonstrating to t*e Commissioner@s satisfa!tion t*at *is gross sales or re!ei%ts for
t*e follo7ing t7elve F";G mont*s, ot*er t*an t*ose t*at are e8em%t under Se!tion "23 FAG
to F-G, 7ill not e8!eed one million five *undred t*ousand %esos FP",<22,222.22G.
Q1 I*at 7ill 9e t*e registration reJuirements of %rofessionals no7 !overed 96 VAT
%ursuant to R.A. 3004 Fe.g. do!tors and la76ersGM
A1 (ollo7ing are t*e registration reJuirementsC
". Professionals no7 !overed 96 VAT %ursuant to R.A. 3004 are reJuired to u%date
t*eir registration using $IR (orm "32<C
"." If t*eir gross sales or re!ei%ts for t*e %ast t7elve F";G mont*s *ave e8!eeded t*e
P".<M t*res*old, t*e6 are reJuired to register as VAT ta8%a6ers 96 registering VAT as
additional ta8 t6%e of said ta8%a6ers. T*e6 *ave to a!!om%lis* $IR (orm No. "32<?
".; If t*eir gross sales or re!ei%ts for t*e %ast t7elve mont*s *ave not e8!eeded t*e
P".<M t*res*old, t*e6 are still reJuired to u%date t*eir registration 96 registering PT as
ta8 t6%e 9e!ause t*e6 are no7 su9:e!t to %er!entage ta8.
;. A%%l6 for Aut*orit6 to Print Re!ei%ts FATPG using $IR (orm "321 to 9e a9le to
*ave %rinted VAT Re!ei%ts.
Q4 I*ere s*ould a ne7 VAT ta8%a6er registerM
A4 All ta8%a6ers are reJuired to register 7it* t*e R' *aving :urisdi!tion over t*e
ta8%a6er@s %rin!i%al %la!e of 9usiness follo7ing e8isting %ro!edures on registration.
Q= I*en is a ne7 VAT ta8%a6er reJuired to a%%l6 for registration and %a6 t*e
registration feeM
A= Ne7 VAT ta8%a6ers s*all a%%l6 for registration as VAT Ta8%a6ers and %a6 t*e
!orres%onding registration fee of five *undred %esos FP<22.22G 9efore t*e start of t*eir
9usiness follo7ing e8isting issuan!es on registration.
T*ereafter, ta8%a6ers are reJuired to %a6 t*e annual registration fee of five
*undred %esos FP<22G not later t*an Januar6 0", ever6 6ear.
Q3 I*at is t*e lia9ilit6 of a ta8%a6er 9e!oming lia9le to VAT and did not register as
su!*M
A3 An6 %erson 7*o 9e!omes lia9le to VAT and fails to register as su!* s*all 9e lia9le
to %a6 t*e out%ut ta8 as if *e 7ere a VAT/registered %erson, 9ut 7it*out t*e 9enefit of
in%ut ta8 !redits for t*e %eriod in 7*i!* *e 7as not %ro%erl6 registered.
Q"2 I*o ma6 o%t to register as VAT and 7*at 7ill 9e *is lia9ilit6M
A"2 ". An6 %erson 7*o is VAT/e8em%t under Se!. #."23/" F$G F"G FVG not reJuired to
register for VAT ma6, in relation to Se!. #."23/;, ele!t to 9e VAT/registered 96 registering
7it* t*e R' t*at *as :urisdi!tion over t*e *ead offi!e of t*at %erson, and %a6 t*e
annual registration fee of P<22.22 for ever6 se%arate and distin!t esta9lis*ment.
;. An6 %erson 7*o is VAT/registered 9ut enters into transa!tions 7*i!* are e8em%t
from VAT Fmi8ed transa!tionsG ma6 o%t t*at t*e VAT a%%l6 to *is transa!tions 7*i!*
7ould *ave 9een e8em%t under Se!tion "23F"G of t*e Ta8 Code, as amended. .Se!.
"23F;G5.
0. (ran!*ise grantees of radio andPor television 9road!asting 7*ose annual gross
re!ei%ts of t*e %re!eding 6ear do not e8!eed ten million %esos FP"2,222,222.22G derived
from t*e 9usiness !overed 96 t*e la7 granting t*e fran!*ise ma6 o%t for VAT registration.
T*is o%tion, on!e e8er!ised, s*all 9e irrevo!a9le. FSe!. ""3, Ta8 CodeG.
#. An6 %erson 7*o ele!ts to register under su9se!tions F"G and F;G a9ove s*all not
9e allo7ed to !an!el *is registration for t*e ne8t t*ree F0G 6ears.
T*e a9ove/stated ta8%a6ers ma6 a%%l6 for VAT registration not later t*an ten F"2G
da6s 9efore t*e 9eginning of t*e !alendar Juarter and s*all %a6 t*e registration fee
%res!ri9ed under su9/%aragra%* FaG of t*is Se!tion, unless t*e6 *ave alread6 %aid at t*e
9eginning of t*e 6ear. In an6 !ase, t*e Commissioner of Internal Revenue ma6, for
administrative reason den6 an6 a%%li!ation for registration. 'n!e registered as a VAT
%erson, t*e ta8%a6er s*all 9e lia9le to out%ut ta8 and 9e entitled to in%ut ta8 !redit
9eginning on t*e first da6 of t*e mont* follo7ing registration.
Q"" I*at are t*e instan!es 7*en a VAT/registered %erson ma6 !an!el *is VAT
registrationM
A"" ". If *e ma>es a 7ritten a%%li!ation and !an demonstrate to t*e !ommissioner@s
satisfa!tion t*at *is gross sales or re!ei%ts for t*e follo7ing t7elve F";G mont*s, ot*er
t*an t*ose t*at are e8em%t under Se!tion "23 FAG to F-G, 7ill not e8!eed one million five
*undred t*ousand %esos FP",<22,222G? or
;. If *e *as !eased to !arr6 on *is trade or 9usiness, and does not e8%e!t to
re!ommen!e an6 trade or 9usiness 7it*in t*e ne8t t7elve F";G mont*s.
Q"; I*en 7ill t*e !an!ellation for registration 9e effe!tiveM
A"; T*e !an!ellation for registration 7ill 9e effe!tive from t*e first da6 of t*e
follo7ing mont* t*e !an!ellation 7as a%%roved.
Q"0 I*at is t*e invoi!ingPre!ei%t reJuirement of a VAT/registered %ersonM
A"0 A VAT registered %erson s*all issueC
F"G A VAT invoi!e for ever6 sale, 9arter or e8!*ange of goods or %ro%erties? and
F;G A VAT offi!ial re!ei%t for ever6 lease of goods or %ro%erties and for ever6 sale,
9arter or e8!*ange of servi!es.
Q"# Ma6 a VAT registered %erson issue a single invoi!ePre!ei%t involving VAT and
Non/VAT transa!tionsM
A"# ,es. &e ma6 issue a single invoi!ePre!ei%t involving VAT and non/VAT
transa!tions %rovided t*at t*e invoi!e or re!ei%t s*all !learl6 indi!ate t*e 9rea>/do7n of
t*e sales %ri!e 9et7een its ta8a9le, e8em%t and Hero/rated !om%onents and t*e
!al!ulation of t*e Value Added Ta8 on ea!* %ortion of t*e sale s*all 9e s*o7n on t*e
invoi!e or re!ei%t.
Q"< Ma6 a VAT registered %erson issue se%arate invoi!esPre!ei%ts involving VAT and
Non/VAT transa!tionsM
A"< ,es. A VAT registered %erson ma6 issue se%arate invoi!esPre!ei%ts for t*e ta8a9le,
e8em%t, and Hero/rated !om%onent of its sales %rovided t*at if t*e sale is e8em%t from
value/added ta8, t*e term DVAT/EAEMPT SALED s*all 9e 7ritten or %rinted %rominentl6
on t*e invoi!e or re!ei%t and if t*e sale is su9:e!t to Hero %er!ent F2EG VAT, t*e term
D)ER'/RATE SALED s*all 9e 7ritten or %rinted %rominentl6 on t*e invoi!e or re!ei%t.
Q"1 &o7 is t*e Value Added Ta8 %resented in t*e re!ei%tPinvoi!eM
A"1 T*e amount of t*e ta8 s*all 9e s*o7n as a se%arate item in t*e invoi!e or re!ei%t.
Sam%leC
Sales Pri!e P"22,222.22
VAT "2,222.22
BBBBB
Invoi!e Amount P""2,222.22
YYYYYYYYY
Q"4 I*at is t*e information t*at must 9e !ontained in t*e VAT invoi!e or VAT offi!ial
re!ei%tM
A2A ". Name of t*e Seller
;. $usiness St6le of t*e Seller
0. $usiness Address of Seller
#. A statement t*at t*e seller is a VAT/registered %erson, follo7ed 96 *is TIN
<. Name of $u6er
1. $usiness St6le of $u6er
4. Address of $u6er
=. TIN of 9u6er, if VAT/registered and amount e8!eed P",222.22
3. ate of transa!tion
"2. Quantit6
"". -nit !ost
";. es!ri%tion of t*e goods or %ro%erties or nature of t*e servi!e
"0. Pur!*ase %ri!e %lus t*e VAT, %rovided t*atC
T T*e amount of ta8 s*all 9e s*o7n as a se%arate item in t*e invoi!e or re!ei%t?
T If t*e sale is e8em%t from VAT, t*e term DVAT/EAEMPT SALED s*all 9e 7ritten or
%rinted %rominentl6 on t*e invoi!e or re!ei%t?
T If t*e sale is su9:e!t to Hero %er!ent F2EG VAT, t*e term D)ER'/RATE SALED
s*all 9e 7ritten or %rinted %rominentl6 on t*e invoi!e re!ei%t?
T If t*e sale involves goods, %ro%erties or servi!es some of 7*i!* are su9:e!t to and
some of 7*i!* are Hero/rated or e8em%t from VAT, t*e invoi!e or re!ei%t s*all !learl6
indi!ate t*e 9rea>do7n of t*e sales %ri!e 9et7een its ta8a9le, e8em%t and Hero/rated
!om%onents, and t*e !al!ulation of t*e VAT on ea!* %ortion of t*e sale s*all 9e s*o7n on
t*e invoi!e or re!ei%t.
"#. Aut*orit6 to Print Re!ei%t Num9er at t*e lo7er left !orner of t*e invoi!e or
re!ei%t.
Sam%le Re!ei%tPInvoi!eC
". Invoi!e for manuall6 issued re!ei%tC
;. 'ffi!ial Re!ei%t generated 96 CRMPP'SC
Q"= I*at additional information must 9e !ontained in t*e VAT invoi!e or VAT re!ei%t
in t*e !ase of sales in t*e amount of one t*ousand %esos FP",222.22G or moreM
A"= In t*e !ase of sales in t*e amount of one t*ousand %esos FP",222.22G or more
7*ere t*e sale or transfer is made 96 a VAT/registered ta8%a6er to anot*er VAT/
registered %erson, t*e name, 9usiness st6le, if an6, address and Ta8%a6er Identifi!ation
Num9er FTING of t*e %ur!*aser, !ustomer or !lient.
Q"3 I*at is t*e lia9ilit6 of a ta8%a6er not registered as VAT and issues a VAT
invoi!ePre!ei%tM
A"3 T*e non/VAT registered %erson s*all, in addition to %a6ing ot*er %er!entage ta8es,
9e lia9le to t*e ta8 im%osed in Se!tion "21 or "2= of t*e Ta8 Code 7it*out t*e 9enefit of
an6 in%ut ta8 !redit %lus <2E sur!*arge on t*e VAT %a6a9le Fout%ut ta8G. If t*e
invoi!ePre!ei%ts !ontain t*e reJuired information, %ur!*aser s*all 9e allo7ed to
re!ogniHe an in%ut ta8 !redit.
Q;2 I*at is t*e lia9ilit6 of a VAT/registered %erson in t*e issuan!e of a VAT
invoi!ePre!ei%t for VAT/e8em%t transa!tionsM
A;2 If a VAT/registered %erson issues a VAT invoi!e or VAT offi!ial re!ei%t for a VAT/
e8em%t transa!tion, 9ut fails to dis%la6 %rominentl6 on t*e invoi!e or re!ei%t t*e 7ords
DVAT/EAEMPT SALED, t*e transa!tions s*all 9e!ome ta8a9le and t*e issuer s*all 9e
lia9le to %a6 t*e VAT t*ereon. T*e %ur!*aser s*all 9e entitled to !laim an in%ut ta8 !redit
on *is %ur!*ase.
Q;" Are transa!tions Ddeemed saleD on 7it*dra7al of goods for %ersonal use reJuired
to issue invoi!e for VAT %ur%osesM
A;" In t*e !ase of deemed sale on 7it*dra7al of goods for %ersonal use, a memo entr6
in t*e su9sidiar6 sales :ournal to re!ord 7it*dra7al of goods for %ersonal use is
reJuired.
T*e data a%%earing in t*e su9sidiar6 sales :ournal and t*e total amount of
Ddeemed saleD s*all 9e in!luded in t*e return to 9e filed for t*e mont* or Juarter.
Q;; Can a VAT ta8%a6er engaged in sale of goods 7*o usuall6 ma>es sales of goods
on !redit issue CAS& RECEIPT do!ument for t*e !olle!tion of a!!ounts re!eiva9le and
ot*er mis!ellaneous re!ei%tsM
A;; ,es, %rovided t*e format of t*e CAS& RECEIPT do!ument is su!* t*at it s*all not
s*o7 t*e 9rea>do7n of t*e Juantit6, des!ri%tion, unit !ost and total %ri!e of t*e goods
sold. T*e reason for t*is is to %revent t*e re!i%ient of t*is do!ument to use it as %roof for
!laiming in%ut ta8.
Q;0 Are fran!*ise grantees of radio and television reJuired to register as VAT
ta8%a6erM
A;0 If t*eir annual gross re!ei%t for t*e %re!eding !alendar 6ear e8!eeded ten million
%esos FP"2,222,222.22G, t*e6 are reJuired to register 7it*in t*irt6 F02G da6s after t*e end
of t*e !alendar 6ear.
Q;# Can ta8%a6ers %reviousl6 registered as VAT 7*o are no7 not su9:e!t to VAT still
use t*eir e8isting VAT invoi!esPre!ei%tsM
A;# ,es. Ta8%a6ers %reviousl6 registered as VAT ma6 !ontinue to issue VAT invoi!es
and VAT offi!ial re!ei%ts for t*e %eriod Novem9er ", ;22< to e!em9er 0", ;22<, in
a!!ordan!e 7it* t*e $ureau of Internal Revenue administrative %ra!ti!es t*at e8isted as
of e!em9er 0", ;22# %rovided t*ese re!ei%tsPinvoi!es are stam%ed 96 t*e 7ord DN'N/
VAT registered as of Novem9er ", ;22<D.
Q;< Can ta8%a6ers 7*o 7ere %reviousl6 registered as non/VAT 7*o are no7 su9:e!t to
VAT still use t*eir e8isting Non/VAT re!ei%tsPinvoi!esM
A;< ,es, non/VAT re!ei%tsPinvoi!es ma6 still 9e used 96 t*e ne7 VAT ta8%a6er for t*e
%eriod Novem9er ", ;22< to e!em9er 0", ;22<, %rovided t*ese re!ei%tsPinvoi!es are
stam%ed 96 t*e 7ord DVAT registered as of Novem9er ", ;22<D.
Q;1 I*at is t*e effe!t of t*e Ne7 VAT la7 on CRMPP'S and ot*er sales ma!*ines
relative to t*e issuan!e of re!ei%tsM
A;1 Ta8%a6er/users 7*o *ave 9een issued %ermit to use sales ma!*ines are reJuired to
re/!onfigure t*eir ma!*ines in !onformit6 7it* t*e ne7 VAT la7 and *ave until
e!em9er 0", ;22< to do so.
Su%%liers 7*o *ave 9een granted a!!reditation are not reJuired to a%%l6 for re/
a!!reditation 9ut t*e6 *ave t*e res%onsi9ilit6 to re/!onfigure t*e ma!*ines t*e6 intend to
sell in !onformit6 7it* t*e ne7 VAT la7. &o7ever t*e $ureau reserves t*e rig*t to
randoml6 !*e!> t*eir !om%lian!e and if found to 9e non/!om%liant, t*e $ureau s*all
7it*dra7 t*eir a!!reditation.
6C7 A$$o&nt"n, Re;&"re'ents. Not("thstand"n, the %ro!"s"ons of Se$t"on
/33# all %ersons s&:e$t to the !al&eBadded tax &nder Se$t"ons 20* and 208 shall# "n
add"t"on to the re,&lar a$$o&nt"n, re$ords re;&"red# 'a"nta"n a s&s"d"ar+ sales
:o&rnal and s&s"d"ar+ %&r$hase :o&rnal on (h"$h the da"l+ sales and %&r$hases are
re$orded. The s&s"d"ar+ :o&rnals shall $onta"n s&$h "nfor'at"on as 'a+ e
re;&"red + the Se$retar+ of <"nan$e.
6D7 Conse;&en$e of Iss&"n, Erroneo&s CAT In!o"$e or CAT Off"$"al Re$e"%t.
627 If a %erson (ho "s not a CATBre,"stered %erson "ss&es an "n!o"$e or re$e"%t
sho("n, h"s Tax%a+er Ident"f"$at"on N&'er 6TIN7# follo(ed + the (ord 'CAT'-
6a7 The "ss&er shall# "n add"t"on to an+ l"a"l"t+ to other %er$enta,e taxes# e
l"ale to-
6"7 The tax "'%osed "n Se$t"on 20* or 208 ("tho&t the enef"t of an+ "n%&t tax
$red"t8 and
6""7 A f"ft+ %er$ent 6)017 s&r$har,e &nder Se$t"on /48 6.7 of th"s Code8
67 The CAT shall# "f the other re;&"s"te "nfor'at"on re;&"red &nder S&se$t"on
6.7 hereof "s sho(n on the "n!o"$e or re$e"%t# e re$o,n"5ed as an "n%&t tax $red"t
to the %&r$haser &nder Se$t"on 220 of th"s Code.
6/7 If a CATBre,"stered %erson "ss&es a CAT "n!o"$e or CAT off"$"al re$e"%t for a
CATBexe'%t transa$t"on# &t fa"ls to d"s%la+ %ro'"nentl+ on the "n!o"$e or re$e"%t
the ter' 'CATBexe'%t sale'# the "ss&er shall e l"ale to a$$o&nt for the tax "'%osed
"n Se$t"on 20* or 208 as "f Se$t"on 20> d"d not a%%l+.
6E7 Trans"t"onal Per"od. Not("thstand"n, S&se$t"on 6.7 hereof# tax%a+ers
'a+ $ont"n&e to "ss&e CAT "n!o"$es and CAT off"$"al re$e"%ts for the %er"od F&l+ 2#
/00) to De$e'er 32# /00)# "n a$$ordan$e ("th .&rea& of Internal Re!en&e
ad'"n"strat"!e %ra$t"$es that ex"sted as of De$e'er 32# /004.D
Se!. ""0 / Invoi!ing and A!!ounting ReJuirements for VAT/Registered Persons
Petitioner . . . %oints out t*at Se!tions ""0 and ;04 did not reJuire t*e in!lusion of t*e
7ord DHero/ratedD for Hero/rated sales !overed 96 its re!ei%ts or invoi!es. T*e $IR
in!or%orated t*is reJuirement onl6 after t*e ena!tment of R.A. 3004 on Novem9er ",
;22<, a la7 t*at did not 6et e8ist at t*e time it issued its invoi!es.
$ut 7*en %etitioner . . . made t*e e8%ort sales su9:e!t of t*is !ase, i.e., from A%ril "33= to
Mar!* "333, t*e rule t*at a%%lied 7as Se!tion #."2=/" of RR 4/3<, ot*er7ise >no7n as
t*e Consolidated Value/Added Ta8 Regulations, 7*i!* t*e Se!retar6 of (inan!e issued on
e!em9er 3, "33< and too> effe!t on Januar6 ", "331. It alread6 reJuired t*e %rinting of
t*e 7ord DHero/ratedD on t*e invoi!es !overing Hero/rated sales. I*en R.A. 3004
amended t*e "334 NIRC on Novem9er ", ;22<, it made t*is %arti!ular revenue
regulation a %art of t*e ta8 !ode. T*is !onversion from regulation to la7 did not diminis*
t*e 9inding for!e of su!* regulation 7it* res%e!t to a!ts !ommitted %rior to t*e ena!tment
of t*at la7.
Panasoni! Communi!ations Imaging Cor%. of t*e P*il. vs. Commissioner of Internal
Revenue, +.R. No. "4=232, (e9ruar6 =, ;2"2
Se!tion ""0 of t*e Ta8 Code does not !reate a distin!tion 9et7een a sales invoi!e and an
offi!ial re!ei%t. Parent*eti!all6, to determine t*e validit6 of %etitioner@s !laim as to
unutiliHed in%ut VAT, an invoi!e 7ould suffi!e %rovided t*e reJuirements under Se!tions
""0 and ;04 of t*e Ta8 Code are met. Sales invoi!es are re!ogniHed !ommer!ial
do!uments to fa!ilitate trade or !redit transa!tions. T*e6 are %roofs t*at a 9usiness
transa!tion *as 9een !on!luded, *en!e, s*ould not 9e !onsidered 9ereft of %ro9ative
value. 'nl6 t*e %re%onderan!e of eviden!e t*res*old as a%%lied in ordinar6 !ivil !ases is
needed to su9stantiate a !laim for ta8 refund %ro%er.
ATKT Communi!ations Servi!es P*il., In!. vs. Commissioner of Internal Revenue, +.R.
No. "=;01#, August 0, ;2"2
SECTION 224. Ret&rn and Pa+'ent of Cal&eBadded Tax.
6A7 In 4eneral. E!er+ %erson l"ale to %a+ the !al&eBadded tax "'%osed &nder
th"s T"tle shall f"le a ;&arterl+ ret&rn of the a'o&nt of h"s ,ross sales or re$e"%ts
("th"n t(ent+Bf"!e 6/)7 da+s follo("n, the $lose of ea$h taxale ;&arter %res$r"ed
for ea$h tax%a+er-
Pro!"ded# ho(e!er# That CATBre,"stered %ersons shall %a+ the !al&eBadded tax on a
'onthl+ as"s.
An+ %erson# (hose re,"strat"on has een $an$elled "n a$$ordan$e ("th Se$t"on /3*#
shall f"le a ret&rn and %a+ the tax d&e thereon ("th"n t(ent+Bf"!e 6/)7 da+s fro' the
date of $an$ellat"on of re,"strat"on- Pro!"ded# That onl+ one $onsol"dated ret&rn
shall e f"led + the tax%a+er for h"s %r"n$"%al %la$e of &s"ness or head off"$e and
all ran$hes.
6.7 ?here to <"le the Ret&rn and Pa+ the Tax. Ex$e%t as the Co''"ss"oner
other("se %er'"ts# the ret&rn shall e f"led ("th and the tax %a"d to an a&thor"5ed
a,ent an9# Re!en&e Colle$t"on Off"$er or d&l+ a&thor"5ed $"t+ or '&n"$"%al
Treas&rer "n the Ph"l"%%"nes lo$ated ("th"n the re!en&e d"str"$t (here the tax%a+er
"s re,"stered or re;&"red to re,"ster.
6C7 ?"thhold"n, of Cal&eBadded Tax. The 4o!ern'ent or an+ of "ts %ol"t"$al
s&d"!"s"ons# "nstr&'ental"t"es or a,en$"es# "n$l&d"n, ,o!ern'entBo(ned or
B$ontrolled $or%orat"ons 64OCCs7 shall# efore 'a9"n, %a+'ent on a$$o&nt of
ea$h %&r$hase of ,oods and ser!"$es (h"$h are s&:e$t to the !al&eBadded tax
"'%osed "n Se$t"ons 20* and 208 of th"s Code# ded&$t and ("thhold a f"nal !al&eB
added tax at the rate of f"!e %er$ent 6)17 of the ,ross %a+'ent thereof-
Pro!"ded# That the %a+'ent for lease or &se of %ro%ert"es or %ro%ert+ r",hts to
nonres"dent o(ners shall e s&:e$t to ten %er$ent 62017 ("thhold"n, tax at the
t"'e of %a+'ent. <or %&r%oses of th"s Se$t"on# the %a+or or %erson "n $ontrol of the
%a+'ent shall e $ons"dered as the ("thhold"n, a,ent.
The !al&eBadded tax ("thheld &nder th"s Se$t"on shall e re'"tted ("th"n ten 6207
da+s follo("n, the end of the 'onth the ("thhold"n, (as 'ade.D
Even if t*e la7 does not e8%ressl6 state t*at Iron!on@s e8!ess !redita9le VAT 7it**eld is
refunda9le, it ma6 9e t*e su9:e!t of a !laim for refund as an erroneousl6 !olle!ted ta8
under Se!tions ;2# FCG and ;;3. It s*ould 9e !larified t*at t*is ruling onl6 refers to
!redita9le VAT 7it**eld %ursuant to Se!tion ""# %rior to its amendment. After its
amendment 96 R.A. 3004, t*e amount 7it**eld under Se!tion ""# is no7 treated as a
final VAT, no longer under t*e !redita9le 7it**olding ta8 s6stem.
Commissioner of Internal Revenue vs. Iron!on $uilders and evelo%ment Cor%., +.R.
No. "=22#;, (e9ruar6 =, ;2"2
SECTION 22).Po(er of the Co''"ss"oner to S&s%end the .&s"ness O%erat"ons of
a Tax%a+er. The Co''"ss"oner or h"s a&thor"5ed re%resentat"!e "s here+
e'%o(ered to s&s%end the &s"ness o%erat"ons and te'%orar"l+ $lose the &s"ness
estal"sh'ent of an+ %erson for an+ of the follo("n, !"olat"ons-
6a7 In the Case of a CATBre,"stered Person.
627 <a"l&re to "ss&e re$e"%ts or "n!o"$es8
6/7 <a"l&re to f"le a !al&eBadded tax ret&rn as re;&"red &nder Se$t"on 2248 or
637 =nderstate'ent of taxale sales or re$e"%ts + th"rt+ %er$ent 63017 or 'ore of
h"s $orre$t taxale sales or re$e"%ts for the taxale ;&arter.
67 <a"l&re of an+ Person to Re,"ster as Re;&"red &nder Se$t"on /3*.
The te'%orar+ $los&re of the estal"sh'ent shall e for the d&rat"on of not less
than f"!e 6)7 da+s and shall e l"fted onl+ &%on $o'%l"an$e ("th (hate!er
re;&"re'ents %res$r"ed + the Co''"ss"oner "n the $los&re order.
TITLE C
Other Per$enta,e Taxes
SECTION 22*. Tax on Persons Exe'%t fro' Cal&eBadded Tax 6CAT7. An+
%erson (hose sales or re$e"%ts are exe'%t &nder Se$t"on 20>6C7 of th"s Code fro'
the %a+'ent of !al&eBadded tax and (ho "s not a CATBre,"stered %erson shall %a+ a
tax e;&"!alent to three %er$ent 6317 of h"s ,ross ;&arterl+ sales or re$e"%ts-
Pro!"ded# That $oo%erat"!es shall e exe'%t fro' the three %er$ent 6317 ,ross
re$e"%ts tax here"n "'%osed.D
SECTION 22A. Per$enta,e Tax on Do'est"$ Carr"ers and Hee%ers of 4ara,es.
Cars for rent or h"re dr"!en + the lessee8 trans%ortat"on $ontra$tors# "n$l&d"n,
%ersons (ho trans%ort %assen,ers for h"re# and other do'est"$ $arr"ers + land for
the trans%ort of %assen,ers 6ex$e%t o(ners of an$as and o(ners of an"'alBdra(n
t(o (heeled !eh"$le7# and 9ee%ers of ,ara,es shall %a+ a tax e;&"!alent to three
%er$ent 6317 of the"r ;&arterl+ ,ross re$e"%ts.
The ,ross re$e"%ts of $o''on $arr"ers der"!ed fro' the"r "n$o'"n, and o&t,o"n,
fre",ht shall not e s&:e$ted to the lo$al taxes "'%osed &nder Re%&l"$ A$t No.
A2*0# other("se 9no(n as the Lo$al 4o!ern'ent Code of 2>>2.
In $o'%&t"n, the %er$enta,e tax %ro!"ded "n th"s Se$t"on# the follo("n, shall e
$ons"dered the '"n"'&' ;&arterl+ ,ross re$e"%ts "n ea$h %art"$&lar $ase-
Fee%ne+ for h"re
2. @an"la and other $"t"es P/#400
/. Pro!"n$"al 2#/00
P&l"$ &t"l"t+ &s
Not ex$eed"n, 30 %assen,ers P3#*00
Ex$eed"n, 30 &t not ex$eed"n, )0 %assen,ers *#000
Ex$eed"n, )0 %assen,ers A#/00
Tax"s
2. @an"la and other $"t"es P3#*00
/. Pro!"n$"al /#400
Car for h"re 6("th $ha&ffe&r7 3#000
Car for h"re 6("tho&t $ha&ffe&r7 2#800D
T*e !ommon !arriers@ ta8 is 9ased on Dgross re!ei%tsD.
T*e Ta8 Code does not also define t*e term Dgross re!ei%tsD for %ur%oses of t*e !ommon
!arriers@ ta8, t*e international !arriers@ ta8, t*e ta8 on radio and television fran!*ises,
and t*e ta8 on finan!e !om%anies. All t*ese 9usiness ta8es under Title V of t*e Ta8 Code
are 9ased on gross re!ei%ts. es%ite t*e a9sen!e of a statutor6 definition, t*ese ta8es
*ave 9een !olle!ted in t*is !ountr6 for over *alf a !entur6 on t*e general and !ommon
understanding t*at t*e6 are 9ased on all re!ei%ts 7it*out an6 dedu!tion.
SECTION 228. Per$enta,e Tax on Internat"onal Carr"ers.
6A7 Internat"onal a"r $arr"ers do"n, &s"ness "n the Ph"l"%%"nes shall %a+ a tax of
three %er$ent 6317 of the"r ;&arterl+ ,ross re$e"%ts.
6.7 Internat"onal sh"%%"n, $arr"ers do"n, &s"ness "n the Ph"l"%%"nes shall %a+ a tax
e;&"!alent to three %er$ent 6317 of the"r ;&arterl+ ,ross re$e"%ts.
T*e international !arriers@ ta8 is 9ased on Dgross re!ei%tsD.
SECTION 22>. Tax on <ran$h"ses. An+ %ro!"s"on of ,eneral or s%e$"al la(
to the $ontrar+ not("thstand"n,# there shall e le!"ed# assessed and $olle$ted "n
res%e$t to all fran$h"ses on rad"o andEor tele!"s"on road$ast"n, $o'%an"es (hose
ann&al ,ross re$e"%ts of the %re$ed"n, +ear do not ex$eed Ten '"ll"on %esos
6P20#000#0007# s&:e$t to Se$t"on /3* of th"s Code# a tax of three %er$ent 6317 and
on ,as and (ater &t"l"t"es# a tax of t(o %er$ent 6/17 on the ,ross re$e"%ts der"!ed
fro' the &s"ness $o!ered + the la( ,rant"n, the fran$h"se-
Pro!"ded# ho(e!er# That rad"o and tele!"s"on road$ast"n, $o'%an"es referred to "n
th"s Se$t"on shall ha!e an o%t"on to e re,"stered as a !al&eBadded tax%a+er and %a+
the tax d&e thereon-
Pro!"ded# f&rther# That on$e the o%t"on "s exer$"sed# sa"d o%t"on shall e
"rre!o$ale.
DThe ,rantee shall f"le the ret&rn ("th# and %a+ the tax d&e thereon to the
Co''"ss"oner or h"s d&l+ a&thor"5ed re%resentat"!e# "n a$$ordan$e ("th the
%ro!"s"ons of Se$t"on 2/8 of th"s Code# and the ret&rn shall e s&:e$t to a&d"t +
the .&rea& of Internal Re!en&e# an+ %ro!"s"on of an+ ex"st"n, la( to the $ontrar+
not("thstand"n,.D
C I R vs. P*ili%%ine +lo9al Communi!ations, In!., +.R. No. "##131, August "1, ;221
(ACTSC Res%ondent o%erates under a legislative fran!*ise granted 96 Re%u9li! A!t No.
#1"4 to !onstru!t, maintain and o%erate !ommuni!ations s6stems 96 radio, 7ire, satellite
and ot*er means >no7n to s!ien!e for t*e re!e%tion and transmission of messages
9et7een an6 %oints in t*e P*ili%%ines to %oints e8terior t*ereto. As su!*, it 7as su9:e!t
to 0E fran!*ise ta8 under Se!. ""4 F9G of t*e Ta8 Code, as amended 96 E' No. 4;, 7*i!*
%rovidedC
SEC. ""4. Ta8 on fran!*ises. B An6 %rovision of general or s%e!ial la7s to t*e
!ontrar6 not7it*standing, t*ere s*all 9e levied, assessed and !olle!ted in res%e!t to all
fran!*ise, u%on t*e gross re!ei%ts from t*e 9usiness !overed 96 t*e la7 granting t*e
fran!*ise, a ta8 in a!!ordan!e 7it* t*e s!*edule %res!ri9ed *ereunderC
FaG 'n ele!tri! utilities, !it6 gas and 7ater su%%lies T7o F;EG %er!ent
F9G 'n tele%*one andPor telegra%* s6stems, K radioPor 9road!asting stations T*ree F0EG
%er!ent
F!G 'n ot*er fran!*ises (ive F<EG %er!ent
T*e said %rovision of t*e Ta8 Code 7as amended 96 Se!. "; of t*e E/VAT La7 7*i!* 7as
%assed in "33#, readingC
SEC. ";. Se!tion ""4 of t*e National Internal Revenue Code, as amended, is *ere96
furt*er amended to read as follo7sC
SEC. ""4. Ta8 on (ran!*ises. B An6 %rovision of general or s%e!ial la7 to t*e
!ontrar6 not7it*standing t*ere s*all 9e levied, assessed and !olle!ted in res%e!t to all
fran!*ises on ele!tri!, gas and 7ater utilities a ta8 of t7o %er!ent F;EG on t*e gross
re!ei%ts derived from t*e 9usiness !overed 96 t*e la7 granting t*e fran!*ise.
Noti!e t*at t*e amendment omitted t*e %a6ment of 0E fran!*ise ta8 96 a
tele!ommuni!ations !om%an6 reJuired under t*e %revious la7.T*e E/VAT La7 too> effe!t
on Ma6 ;=, "33#.
'n June 02, "33#, t*e SC issued a Tem%orar6 Restraining 'rder FTR'G en:oining t*e
Denfor!ement andPor im%lementationD of said la7. T*e TR' 7as later to 9e lifted,
*o7ever, on '!to9er 02, "33<. 'n a!!ount of t*e sus%ension, res%ondent filed a !laim for
refund of t*e 0E fran!*ise ta8 it allegedl6 erroneousl6 %aid during t*e ;nd Juarter of
"33# until t*e #t* Juarter of "33<.
Res%ondentC Iit* t*e %assage and effe!tivit6 of t*e E/VAT La7 on Ma6 ;#, "33#, it 7as
no longer o9liged to %a6 t*e 0E fran!*ise ta8 under Se!tion ""4 F9G of t*e Ta8 Code. T*e
TR' issued en:oining t*e enfor!ement andPor im%lementation of t*e E/VAT La7 did not
*ave t*e effe!t of e8tending its o9ligation under Se!tion ""4 F9G of t*e Ta8 Code to %a6
t*e 0E fran!*ise ta8 sin!e 7it* t*e effe!tivit6 of t*e E/VAT La7 on Ma6 ;#, "33#, it 7as
9enefited 96 t*e ta8 e8em%tion from or removal of lia9ilit6 for said fran!*ise ta8 under
t*e E/VAT La7 7*i!* 7as self/o%erative and reJuired no im%lementation to ta>e effe!t.
ISS-EC Is res%ondent tele!ommuni!ations !om%an6, lia9le to %a6 t*e 0E fran!*ise ta8
under Se!tion ""4 F9G of Presidential e!ree No. ""<= of t*e "344 National Internal
Revenue Code FTa8 CodeG during t*e sus%ension of t*e enfor!ement or im%lementation of
Re%u9li! A!t No. 44"1 or t*e E8%anded Value Added Ta8 La7 FE/VAT La7G 7*i!* 7as
%assed in "33# amending su!* %rovision of t*e Ta8 CodeM
&ELC ,es. (rom t*e sus%ension of t*e effe!tivit6 of t*e E/VAT La7 on June 02, "33# u%
to '!to9er 02, "33< 7*en t*e TR' 7as lifted, t*e ta8 lia9ilit6 of res%ondent 7as
governed 96 Se!. ""4 F9G of t*e Ta8 Code in 7*i!* !ase it 7as lia9le to %a6 t*e 0E
fran!*ise ta8. Iit* t*e lifting of t*e TR' on '!to9er 02, "33<, res%ondent 7ould *ave
!eased to 9e lia9le to %a6 t*e 0E fran!*ise ta8. T*e a9olition of t*e 0E fran!*ise ta8 on
tele!ommuni!ations !om%anies, and its re%la!ement 96 t*e "2E VAT, 7as effe!tive and
im%lemented onl6 on Januar6 ", "331, *o7ever, follo7ing t*e %assage of Revenue
Regulation No. 4/3< FC'NS'LIATE VAL-E/AE TAA RE+-LATI'NSG.
To grant a refund of t*e fran!*ise ta8 it %aid %rior to t*e effe!tivit6 and im%lementation
of t*e VAT 7ould !reate a va!uum and t*ere96 de%rive t*e government from !olle!ting
eit*er t*e VAT or t*e fran!*ise ta8. -nder Se!. "; of t*e E/VAT La7, onl6 t*e fran!*ise
ta8 on Dele!tri!, gas and 7ater utilitiesD 7as retained. T*e 0E fran!*ise ta8 on
Dtele%*one andPor telegra%* s6stems and radio 9road!asting stationsD to 7*i!* !ategor6
res%ondent 9elongs 7as omitted.
-nder Se!. 0 of t*e E/VAT La7, *o7ever, res%ondent@s sale of servi!es is su9:e!t to VAT,
t*usC
SEC. 0. Se!tion "2; of t*e National Internal Revenue Code, as amended, is *ere96
furt*er amended to read as follo7sC
SEC. "2;. Value/added ta8 on sale of servi!es and use or lease of %ro%erties.B FaG
Rate and 9ase of ta8. B T*ere s*all 9e levied, assessed and !olle!ted, as value/added ta8
eJuivalent to "2E of gross re!ei%ts derived from t*e sale or e8!*ange of servi!es,
in!luding t*e use or lease of %ro%erties.
T*erefore, under t*e E/VAT La7, res%ondent !eased to 9e lia9le to %a6 t*e 0E fran!*ise
ta8. Instead, it is made lia9le to %a6 "2E VAT on sale of servi!es. Iit* t*e issuan!e of t*e
TR', t*e enfor!ement andPor im%lementation of t*e entire E/VAT la7 7as sto%%ed. T*e
7ording of t*e order leaves no dou9t t*at 7*at 7as restrained 96 t*e TR' 7as t*e
im%lementation of t*e E/VAT la7 in its entiret6.
T*erefore, t*e %rovisions of t*e Ta8 Code in!luding Se!tion ""4F9G, %rior to t*eir
amendment 96 t*e E/VAT La7, 7ere to a%%l6 in t*e interim.
T*e ta8 on radio and television fran!*ises is 9ased on Dgross re!ei%tsD.
SECTION 2/0. Tax on O!erseas D"s%at$h# @essa,e or Con!ersat"on
Or","nat"n, fro' the Ph"l"%%"nes.
6A7 Persons L"ale. There shall e $olle$ted &%on e!er+ o!erseas d"s%at$h#
'essa,e or $on!ersat"on trans'"tted fro' the Ph"l"%%"nes + tele%hone# tele,ra%h#
tele(r"ter ex$han,e# ("reless and other $o''&n"$at"on e;&"%'ent ser!"$es# a tax
of ten %er$ent 62017 on the a'o&nt %a"d for s&$h ser!"$es.
The tax "'%osed "n th"s Se$t"on shall e %a+ale + the %erson %a+"n, for the
ser!"$es rendered and shall e %a"d to the %erson render"n, the ser!"$es (ho "s
re;&"red to $olle$t and %a+ the tax ("th"n t(ent+ 6/07 da+s after the end of ea$h
;&arter.
6.7 Exe'%t"ons. The tax "'%osed + th"s Se$t"on shall not a%%l+ to-
627 4o!ern'ent. A'o&nts %a"d for 'essa,es trans'"tted + the 4o!ern'ent of
the Re%&l"$ of the Ph"l"%%"nes or an+ of "ts %ol"t"$al s&d"!"s"ons or
"nstr&'ental"t"es8
6/7 D"%lo'at"$ Ser!"$es. A'o&nts %a"d for 'essa,es trans'"tted + an+
e'ass+ and $ons&lar off"$es of a fore",n ,o!ern'ent8
637 Internat"onal Or,an"5at"ons. A'o&nts %a"d for 'essa,es trans'"tted + a
%&l"$ "nternat"onal or,an"5at"on or an+ of "ts a,en$"es ased "n the Ph"l"%%"nes
en:o+"n, %r"!"le,es# exe'%t"ons and "''&n"t"es (h"$h the 4o!ern'ent of the
Ph"l"%%"nes "s $o''"tted to re$o,n"5e %&rs&ant to an "nternat"onal a,ree'ent8 and
647 Ne(s Ser!"$es. A'o&nts %a"d for 'essa,es fro' an+ ne(s%a%er# %ress
asso$"at"on# rad"o or tele!"s"on ne(s%a%er# road$ast"n, a,en$+# or ne(st"$9ers
ser!"$es# to an+ other ne(s%a%er# %ress asso$"at"on# rad"o or tele!"s"on ne(s%a%er
road$ast"n, a,en$+# or ne(st"$9er ser!"$e or to a ona f"de $orres%ondent# (h"$h
'essa,es deal ex$l&s"!el+ ("th the $olle$t"on of ne(s "te's for# or the
d"sse'"nat"on of ne(s "te' thro&,h# %&l"$ %ress# rad"o or tele!"s"on road$ast"n,
or a ne(st"$9er ser!"$e f&rn"sh"n, a ,eneral ne(s ser!"$e s"'"lar to that of the
%&l"$ %ress.
C'MMISSI'NER '( INTERNAL REVEN-E vs. PAL
.+.R. No. "=22#0.Jul6 "#, ;223.5
(ACTSC (or t*e %eriod Jan. to e!. ;22", PLT !olle!ted from res%ondent PAL t*e "2E
'verseas Communi!ations Ta8 F'CTG im%osed 96 Se!. ";2 of t*e NIRC of "334 on t*e
amount %aid 96 t*e latter for overseas tele%*one !alls it *ad made t*roug* t*e former.
Res%ondent later filed 7it* t*e $IR an administrative !laim for refund of t*e amount it
alleged to *ave erroneousl6 %aid in ;22", !laiming t*at ot*er t*an 9eing lia9le for 9asi!
!or%orate in!ome ta8 or t*e fran!*ise ta8, 7*i!*ever 7as lo7er, res%ondent 7as !learl6
e8em%ted from all ot*er ta8es, in!luding 'CT, 96 virtue of t*e Din lieu of all ta8esD !lause
in Se!. "0 of P.. No. "<32. I*en %etitioner failed to a!t on t*e reJuest for refund,
res%ondent filed a Petition for Revie7 7it* t*e CTA in ivision. T*e CTA (irst ivision
granted t*e %etition, ordering t*e %etitioner to refund t*e amount %aid. Not satisfied 7it*
t*e de!ision, %etitioner filed a Motion for Re!onsideration, 7*i!* 7as denied.
Petitioner t*en filed an a%%eal 7it* t*e CTA En $an!. T*e same 7as li>e7ise denied. T*e
CTA En $an! ruled t*at P.. No. "<32 does not %rovide t*at onl6 t*e a!tual %a6ment of
9asi! !or%orate in!ome ta8 or fran!*ise ta8 96 res%ondent 7ould entitle it to t*e ta8
e8em%tion %rovided under Se!. "0 of t*e latter@s fran!*ise. Li>e t*e CTA (irst ivision,
t*e CTA en 9an! ruled t*at 96 %roviding for net loss !arr6/over, P.. No. "<32 re!ogniHed
t*e %ossi9ilit6 t*at res%ondent 7ould end u% 7it* a net loss in t*e !om%utation of its
ta8a9le in!ome, 7*i!* 7ould mean Hero lia9ilit6 for 9asi! !or%orate in!ome ta8.
T*e CTA En $an! denied %etitioner@s Motion for Re!onsideration? *en!e, t*e %resent
Petition for Revie7.
ISS-ESC
". I*et*er t*e CTA En $an! erred in *olding t*at t*e %*rase Din lieu of all ot*er ta8esD
in Se!tions "0 and "# of P.. No. "<32 does not !ontem%late t*e fulfilment of a !ondition
9efore t*e e8em%tion from all ot*er ta8es ma6 9e a%%lied.
;. I*et*er ta8 refunds are in t*e nature of ta8 e8em%tions, and as su!*, t*e6 s*ould 9e
!onstrued stri!tissimi:uris against t*e %erson or entit6 !laiming t*e e8em%tion.
R-LIN+C
". T*e language used in Se!. "0 of P.. No. "<32, granting res%ondent ta8
e8em%tion, is !learl6 all/in!lusive. T*e 9asi! !or%orate in!ome ta8 or fran!*ise ta8 %aid
96 res%ondent s*all 9e Din lieu of all ot*er ta8es, duties, ro6alties, registration, li!ense,
and ot*er fees and !*arges of an6 >ind, nature, or des!ri%tion im%osed, levied,
esta9lis*ed, assessed or !olle!ted 96 an6 muni!i%al, !it6, %rovin!ial, or national
aut*orit6 or government agen!6, no7 or in t*e future . . .D, e8!e%t onl6 real %ro%ert6 ta8.
Even a meti!ulous e8amination of P.. No. "<32 7ill not reveal an6 %rovision t*erein
limiting t*e ta8 e8em%tion of res%ondent to final 7it**olding ta8 on interest in!ome or
e8!luding from said e8em%tion t*e 'CT.
In CIR vs. PAL, +.R. No. "12<;=, '!to9er 3, ;221, t*e Su%reme Court *eldC WA !areful
reading of Se!tion "0 re9uts t*e argument of t*e CIR t*at t*e Din lieu of all ot*er ta8esD
%roviso is a mere in!entive t*at a%%lies onl6 7*en PAL a!tuall6 %a6s somet*ing. It is
!lear t*at P "<32 intended to give res%ondent t*e o%tion to avail itself of Su9se!tion FaG
or F9G as !onsideration for its fran!*ise. Eit*er o%tion e8!ludes t*e %a6ment of ot*er
ta8es and dues im%osed or !olle!ted 96 t*e national or t*e lo!al government. PAL *as t*e
o%tion to !*oose t*e alternative t*at results in lo7er ta8es. It is not t*e fa!t of ta8
%a6ment t*at e8em%ts it, 9ut t*e e8er!ise of its o%tion.X In t*e event t*at res%ondent
in!urs a net loss, it s*all *ave Hero lia9ilit6 for 9asi! !or%orate in!ome ta8, t*e lo7est
%ossi9le ta8 lia9ilit6. T*ere 9eing no Jualifi!ation to t*e e8er!ise of its o%tions under
Se!tion "0 of Presidential e!ree No. "<32, t*en res%ondent is free to !*oose 9asi!
!or%orate in!ome ta8, even if it 7ould *ave Hero lia9ilit6 for t*e same in lig*t of its net
loss %osition for t*e ta8a9le 6ear.
;. Indeed, a ta8 refund, 7*i!* is in t*e nature of a ta8 e8em%tion, s*ould 9e !onstrued
stri!tissimi:uris against t*e ta8%a6er. &o7ever, 7*en t*e !laim for refund *as !lear legal
9asis and is suffi!ientl6 su%%orted 96 eviden!e, as in t*e %resent !ase, t*en t*e Court
s*all not *esitate to grant t*e same.
'verseas Communi!ation Ta8 is not even an in!ome ta8. It is a 9usiness ta8, 7*i!* t*e
government im%oses on t*e gross annual sales of o%erators of !ommuni!ation eJui%ment
sending overseas dis%at!*es, messages or !onversations from t*e P*ili%%ines. A!!ording
to Se!tion ";2 of t*e NIRC, t*e %erson %a6ing for t*e servi!es rendered Fres%ondent, in
t*is !aseG s*all %a6 t*e 'CT to t*e %erson rendering t*e servi!e FPLTG? t*e latter, in
turn, s*all remit t*e amount to t*e $IR. If t*is Court deems t*at final ta8 on interest
in!ome B 7*i!* is also an in!ome ta8, 9ut distin!t from 9asi! !or%orate in!ome ta8 B is
in!luded among Dall ot*er ta8esD from 7*i!* res%ondent is e8em%t, t*en 7it* all t*e more
reason s*ould t*e Court !onsider 'CT, 7*i!* is altoget*er a different t6%e of ta8, as also
!overed 96 t*e said e8em%tion.
Commissioner of Internal Revenue vs. PAL, In!., +.R. No. "=22#0, Jul6 "#, ;223
SECTION 2/2. Tax on .an9s and NonB.an9 <"nan$"al Inter'ed"ar"es
Perfor'"n, I&as"B.an9"n, <&n$t"ons. There shall e $olle$ted a tax on ,ross
re$e"%ts der"!ed fro' so&r$es ("th"n the Ph"l"%%"nes + all an9s and nonBan9
f"nan$"al "nter'ed"ar"es "n a$$ordan$e ("th the follo("n, s$hed&le-
6a7 On "nterest# $o''"ss"ons and d"s$o&nts fro' lend"n, a$t"!"t"es as (ell as
"n$o'e fro' f"nan$"al leas"n,# on the as"s of re'a"n"n, 'at&r"t"es of "nstr&'ents
fro' (h"$h s&$h re$e"%ts are der"!ed-
@at&r"t+ %er"od "s f"!e +ears or less )1
@at&r"t+ %er"od "s 'ore than f"!e +ears 21
67 On d"!"dends and e;&"t+ shares and net "n$o'e of s&s"d"ar"es 01
6$7 On ro+alt"es# rentals of %ro%ert+# real or %ersonal# %rof"ts# fro' ex$han,e and
all other "te's treated as ,ross "n$o'e &nder Se$t"on 3/ of th"s Code A1
6d7 On net trad"n, ,a"ns ("th"n the taxale +ear on fore",n $&rren$+# det
se$&r"t"es# der"!at"!es# and other s"'"lar f"nan$"al "nstr&'ents A1
Pro!"ded# ho(e!er# That "n $ase the 'at&r"t+ %er"od referred to "n %ara,ra%h 6a7 "s
shortened thr& %reBter'"nat"on# then the 'at&r"t+ %er"od shall e re$9oned to end as
of the date of %reBter'"nat"on for %&r%oses of $lass"f+"n, the transa$t"on and the
$orre$t rate of tax shall e a%%l"ed a$$ord"n,l+.
Pro!"ded# f"nall+# That the ,enerall+ a$$e%ted a$$o&nt"n, %r"n$"%les as 'a+ e
%res$r"ed + the .an,9oSentraln,P"l"%"nas for the an9 or nonan9 f"nan$"al
"nter'ed"ar+ %erfor'"n, ;&as"Ban9"n, f&n$t"ons shall l"9e("se e the as"s for the
$al$&lat"on of ,ross re$e"%ts.
Noth"n, "n th"s Code shall %re$l&de the Co''"ss"oner fro' "'%os"n, the sa'e tax
here"n %ro!"ded on %ersons %erfor'"n, s"'"lar an9"n, a$t"!"t"es.D
REVEN-E RE+-LATI'NS N'. 22=/2= August ;2, ;22=
S-$JECTC Su%%lementing Revenue Regulations No. 23/;22#, as Amended 96 Revenue
Regulations No. "2/;22#, Clarif6ing t*at t*e Transa!tions of t*e
$ang>oSentralngPili%inas F$SPG Entered into in t*e E8er!ise of its +overnmental,
Regulator6 Aut*orit6 are outside of t*e Coverage of t*e +ross Re!ei%ts Ta8 Im%osed
-nder Se!tions ";" and ";; of t*e "334 National Internal Revenue Code, as Last
Amended 96 Re%u9li! A!t No. 3004
C I R vs. Cit6trust Investment P*il., In!., +.R. Nos. "034=1 K "#2=<4, Se%tem9er ;4,
;221
(ACTSC Cit6trust is a domesti! !or%oration engaged in Juasi/9an>ing a!tivities. In
"33#, it re%orted t*e amount of P""2,4==,<#;.02 as its total gross re!ei%ts and %aid t*e
amount of P<,<03,#;4."" !orres%onding to its <E +RT.
Mean7*ile, on Januar6 02, "331, t*e CTA, in Asian $an> Cor%oration v. Commissioner
of Internal Revenue FASIAN $ANL !aseG, ruled t*at t*e 9asis in !om%uting t*e <E +RT
is t*e gross re!ei%ts minus t*e ;2E (IT. In ot*er 7ords, t*e ;2E (IT on a 9an>@s
%assive in!ome does not form %art of t*e ta8a9le gross re!ei%ts. 'n Jul6 "3, "331,
Cit6trust, ins%ired 96 t*e a9ove/mentioned CTA ruling, filed 7it* t*e Commissioner a
7ritten !laim for t*e ta8 refund or !redit in t*e amount of P0;1,224.2". It alleged t*at its
re%orted total gross re!ei%ts in!luded t*e ;2E (IT on its %assive in!ome amounting to
P0;,122,42".;<. T*us, it soug*t to 9e reim9ursed of t*e <E +RT it %aid on t*e %ortion of
;2E (IT or t*e amount of P0;1,224.2".
'n t*e same 9oat is Asian9an>, a domesti! !or%oration also engaged in 9an>ing
9usiness. (or t*e ta8a9le Juarters ending June 02, "33# to June 02, "331, Asian9an>
filed and remitted to t*e $ureau of Internal Revenue F$IRG t*e <E +RT on its total gross
re!ei%ts.'n t*e strengt* of t*e Januar6 02, "331 CTA e!ision in t*e ASIAN $ANL !ase,
Asian9an>, li>e7ise, filed 7it* t*e Commissioner a !laim for refund of t*e over%aid +RT
amounting to P;,2;;,#=<.4=.
ISS-EC
". oes t*e t7ent6 %er!ent F;2EG final 7it**olding ta8 F(ITG on a 9an>@s %assive
in!ome form %art of t*e ta8a9le gross re!ei%ts for t*e %ur%ose of !om%uting t*e five
%er!ent F<EG gross re!ei%ts ta8 F+RTGM
;. Se!t. #FeG of Revenue Regulations No. ";/=2 states t*at Dt*e rates of ta8es to 9e
im%osed on t*e gross re!ei%ts of su!* finan!ial institutions s*all 9e 9ased on all items of
in!ome a!tuall6 re!eived.D Sin!e t*e ;2E (IT is 7it**eld at sour!e and is %aid dire!tl6
to t*e government 96 t*e entities from 7*i!* t*e 9an>s derived t*e in!ome, !an t*e6 9e
!onsidered Wa!tuall6 re!eivedX? *en!e, must 9e e8!luded from t*e ta8a9le gross re!ei%tsM
0. oes t*e im%osition of t*e ;2E (IT and <E +RT !onstitute dou9le ta8ationM
&ELC
". ,es.
T*e issue of 7*et*er t*e ;2E (IT on a 9an>@s interest in!ome forms %art of t*e ta8a9le
gross re!ei%ts for t*e %ur%ose of !om%uting t*e <E +RT *as 9een %reviousl6 resolved in
a !atena of !ases, su!* as C*ina $an>ing Cor%oration v. Court of A%%eals,
Commissioner of Internal Revenue v. Solid9an> Cor%oration, Commissioner of Internal
Revenue v. $an> of Commer!e, and t*e latest, Commissioner of Internal Revenue v. $an>
of t*e P*ili%%ine Islands.
T*e a9ove !ases are unanimous in defining Dgross re!ei%tsD as Dt*e entire re!ei%ts
7it*out an6 dedu!tion.D (rom t*ese !ases, Dgross re!ei%tsD refer to t*e total, as o%%osed
to t*e net in!ome. T*ese are t*erefore t*e total re!ei%ts 9efore an6 dedu!tion for t*e
e8%enses of management. Ie9ster@s Ne7 International i!tionar6, in fa!t, defines gross
as D7*ole or entire.D
In C*ina $an>ing Cor%oration, t*e Court e8%lained t*at t*e legislative intent to a%%l6
t*e term in its %lain and ordinar6 meaning ma6 9e surmised from a *istori!al %ers%e!tive
of t*e lev6 on gross re!ei%ts. (rom t*e time t*e +RT on 9an>s 7as first im%osed in "3#1
under Re%u9li! A!t No. 03 and t*roug*out its su!!essive re/ena!tments, t*e legislature
*as not esta9lis*ed a definition of t*e term Dgross re!ei%ts.D -nder Revenue Regulations
No. ";/=2 and No. "4/=#, as 7ell as several num9ered rulings, t*e $IR *as !onsistentl6
ruled t*at t*e term Dgross re!ei%tsD does not admit of an6 dedu!tion. T*is inter%retation
*as remained un!*anged t*roug*out t*e various re/ena!tments of t*e %resent Se!tion ";"
of t*e Ta8 Code. 'n t*e %resum%tion t*at t*e legislature is familiar 7it* t*e
!ontem%oraneous inter%retation of a statute given 96 t*e administrative agen!6 tas>ed to
enfor!e t*e statute, t*e reasona9le !on!lusion is t*at t*e legislature *as ado%ted t*e
$IR@s inter%retation. In ot*er 7ords, t*e su9seJuent re/ena!tments of t*e %resent Se!tion
";", 7it*out !*anges in t*e term inter%reted 96 t*e $IR, !onfirm t*at its inter%retation
!arries out t*e legislative %ur%ose.
;. ,es.
(irst, Se!t. #FeG merel6 re!ogniHes t*at in!ome ma6 9e ta8a9le eit*er at t*e time of its
a!tual re!ei%t or its a!!rual, de%ending on t*e a!!ounting met*od of t*e ta8%a6er. It does
not reall6 e8!lude a!!rued interest in!ome from t*e ta8a9le gross re!ei%ts 9ut merel6
%ost%ones its in!lusion until a!tual %a6ment of t*e interest to t*e lending 9an>. T*us,
7*ile it is true t*at Se!tion #FeG states t*at Dt*e rates of ta8es to 9e im%osed on t*e gross
re!ei%ts of su!* finan!ial institutions s*all 9e 9ased on all items of in!ome a!tuall6
re!eived,D it goes on to distinguis* a!tual re!ei%t from a!!rual, i.e., t*at Dmere a!!rual
s*all not 9e !onsidered, 9ut on!e %a6ment is re!eived in su!* a!!rual or in !ase of
%re%a6ment, t*en t*e amount a!tuall6 re!eived s*all 9e in!luded in t*e ta8 9ase of su!*
finan!ial institutions.D
And se!ond, Revenue Regulations No. ";/=2, issued on Novem9er 4, "3=2, *ad 9een
su%erseded 96 Revenue Regulations No. "4/=# issued on '!to9er ";, "3=#. Se!tion #FeG
of Revenue Regulations No. ";/=2 %rovides t*at onl6 items of in!ome a!tuall6 re!eived
s*all 9e in!luded in t*e ta8 9ase for !om%uting t*e +RT. 'n t*e ot*er *and, Se!tion 4F!G
of Revenue Regulations No. "4/=# in!ludes all interest in!ome in !om%uting t*e +RT.
Revenue Regulations No. "4/=# !ategori!all6 states t*at if t*e re!i%ient of t*e a9ove/
mentioned items of in!ome are finan!ial institutions, t*e same s*all 9e in!luded as %art
of t*e ta8 9ase u%on 7*i!* t*e gross re!ei%ts ta8 is im%osed. T*ere is, t*erefore, an
im%lied re%eal of Se!tion #FeG. T*ere e8ists a dis%arit6 9et7een Se!tion #FeG 7*i!*
im%oses t*e +RT onl6 on all items of in!ome a!tuall6 re!eived Fas o%%osed to t*eir mere
a!!rualG and Se!tion 4F!G 7*i!* in!ludes all interest in!ome F7*et*er a!tual or a!!ruedG
in !om%uting t*e +RT. As *eld in Commissioner of Internal Revenue v. Solid9an>
Cor%oration, Dt*e e8!e%tion *aving 9een eliminated, t*e !lear intent is t*at t*e later R.R.
No. "4/=# in!ludes t*e e8!e%tion 7it*in t*e s!o%e of t*e general rule.D Clearl6, t*en, t*e
!urrent Revenue Regulations reJuire interest in!ome, 7*et*er a!tuall6 re!eived or merel6
a!!rued, to form %art of t*e 9an>@s ta8a9le gross re!ei%ts.
Moreover, in t*e $an> of Commer!e !ase, it *as 9een settled t*at Da!tual re!ei%t ma6
eit*er 9e %*6si!al re!ei%t or !onstru!tive re!ei%t,D A!tual re!ei%t of interest in!ome is not
limited to %*6si!al re!ei%t. A!tual re!ei%t ma6 eit*er 9e %*6si!al re!ei%t or !onstru!tive
re!ei%t. I*en t*e de%ositar6 9an> 7it**olds t*e final ta8 to %a6 t*e ta8 lia9ilit6 of t*e
lending 9an>, t*ere is %rior to t*e 7it**olding a !onstru!tive re!ei%t 96 t*e lending 9an>
of t*e amount 7it**eld. (rom t*e amount !onstru!tivel6 re!eived 96 t*e lending 9an>, t*e
de%ositar6 9an> dedu!ts t*e final 7it**olding ta8 and remits it to t*e government for t*e
a!!ount of t*e lending 9an>. T*us, t*e interest in!ome a!tuall6 re!eived 96 t*e lending
9an>, 9ot* %*6si!all6 and !onstru!tivel6, is t*e net interest %lus t*e amount 7it**eld as
final ta8.
T*e !on!e%t of a 7it**olding ta8 on in!ome o9viousl6 and ne!essaril6 im%lies t*at t*e
amount of t*e ta8 7it**eld !omes from t*e in!ome earned 96 t*e ta8%a6er. Sin!e t*e
amount of t*e ta8 7it**eld !onstitute in!ome earned 96 t*e ta8%a6er, t*en t*at amount
manifestl6 forms %art of t*e ta8%a6er@s gross re!ei%ts. $e!ause t*e amount 7it**eld
9elongs to t*e ta8%a6er, *e !an transfer its o7ners*i% to t*e government in %a6ment of
*is ta8 lia9ilit6. T*e amount 7it**eld indu9ita9l6 !omes from t*e in!ome of t*e ta8%a6er,
and t*us forms %art of *is gross re!ei%ts.
0. No.
ou9le ta8ation means ta8ing for t*e same ta8 %eriod t*e same t*ing or a!tivit6 t7i!e,
7*en it s*ould 9e ta8ed 9ut on!e, for t*e same %ur%ose and 7it* t*e same >ind of
!*ara!ter of ta8. T*is is not t*e situation in t*e !ase at 9ar. T*e +RT is a %er!entage ta8
under Title V of t*e Ta8 Code F.Se!tion ";"5, 't*er Per!entage Ta8esG, 7*ile t*e (IT is
an in!ome ta8 under Title II of t*e Code FTa8 on In!omeG. T*e t7o !on!e%ts are different
from ea!* ot*er. In Solid9an> Cor%oration, t*e Court defined t*at a %er!entage ta8 is a
national ta8 measured 96 a !ertain %er!entage of t*e gross selling %ri!e or gross value in
mone6 of goods sold, 9artered or im%orted? or of t*e gross re!ei%ts or earnings derived
96 an6 %erson engaged in t*e sale of servi!es. It is not su9:e!t to 7it**olding. An in!ome
ta8, on t*e ot*er *and, is a national ta8 im%osed on t*e net or t*e gross in!ome realiHed
in a ta8a9le 6ear. It is su9:e!t to 7it**olding. T*us, t*ere !an 9e no dou9le ta8ation *ere
as t*e Ta8 Code im%oses t7o different >inds of ta8es.
+ross re!ei%ts ta8 distinguis*ed from final 7it**olding ta8.
T*ere is no dou9le ta8ation 7*en Se!tion ";" of t*e Ta8 Code im%oses a gross re!ei%ts
ta8 on interest in!ome t*at is alread6 su9:e!ted to t*e ;2E final 7it**olding ta8 under
Se!tion ;4 of t*e Ta8 Code. T*e gross re!ei%ts ta8 is a 9usiness ta8 under Title V of t*e
Ta8 Code, 7*ile t*e final 7it**olding ta8 is an in!ome ta8 under Title II of t*e Code.
T*ere is no dou9le ta8ation if t*e la7 im%oses t7o different ta8es on t*e same in!ome,
9usiness or %ro%ert6.
Interest in!ome is ta8a9le for gross re!ei%ts ta8 %ur%oses onl6 u%on a!tual re!ei%t.
In!ome ma6 9e ta8a9le eit*er at t*e time of its a!tual re!ei%t or its a!!rual, de%ending on
t*e a!!ounting met*od of t*e ta8%a6er. Se!tion #FeG of Revenue Regulations No. ";/=2
merel6 %rovides for an e8!e%tion to t*e rule, ma>ing interest in!ome ta8a9le for gross
re!ei%ts ta8 %ur%oses onl6 u%on a!tual re!ei%t. Interest is a!!rued, and not a!tuall6
re!eived, 7*en t*e interest is due and demanda9le 9ut t*e 9orro7er *as not a!tuall6 %aid
and remitted t*e interest, 7*et*er %*6si!all6 or !onstru!tivel6. Se!tion #FeG does not
e8!lude a!!rued interest in!ome from gross re!ei%ts 9ut merel6 %ost%ones its in!lusion
until a!tual %a6ment of t*e interest to t*e lending 9an>
T*e Ta8 Code does not define t*e term Dgross re!ei%tsD for %ur%oses of t*e gross re!ei%ts
ta8 on 9an>s.
Se!tion ";" of t*e Ta8 Code e8%ressl6 su9:e!ts interest in!ome to t*e gross re!ei%ts ta8
on 9an>s. Su!* e8%ress in!lusion of interest in!ome in ta8a9le gross re!ei%ts !reates a
%resum%tion t*at t*e entire amount of t*e interest in!ome, 7it*out an6 dedu!tion, is
su9:e!t to t*e gross re!ei%ts ta8. T*e Ta8 Code does not define t*e term Dgross re!ei%tsD
for %ur%oses of t*e gross re!ei%ts ta8 on 9an>s. Sin!e " '!to9er "3#1 7*en RA No. 03
first im%osed t*e gross re!ei%ts ta8 on 9an>s until t*e %resent, t*ere *as 9een no statutor6
definition of t*e term Dgross re!ei%ts.D A9sent a statutor6 definition, t*e $IR *as a%%lied
t*e term in its %lain and ordinar6 meaning. As !ommonl6 understood, t*e term Dgross
re!ei%tsD means t*e entire re!ei%ts 7it*out an6 dedu!tion. edu!ting an6 amount from
t*e gross re!ei%ts !*anges t*e result, and t*e meaning, to net re!ei%ts. An6 dedu!tion
from gross re!ei%ts is in!onsistent 7it* a la7 t*at mandates a ta8 on gross re!ei%ts,
unless t*e la7 itself ma>es an e8!e%tion. A9sent a statutor6 definition, t*e term Dgross
re!ei%tsD is understood in its %lain and ordinar6 meaning. Iords in a statute are ta>en in
t*eir usual and familiar signifi!ation, 7it* due regard to t*eir general and %o%ular use.
T*e term Dgross re!ei%tsD does not admit of an6 dedu!tion.
-nder Revenue Regulations Nos. ";/=2 and "4/=#, as 7ell as in several num9ered
rulings, t*e $IR *as !onsistentl6 ruled t*at t*e term Dgross re!ei%tsD does not admit of
an6 dedu!tion. T*is inter%retation *as remained un!*anged t*roug*out t*e various re/
ena!tments of t*e %resent Se!tion ";" of t*e Ta8 Code. T*e onl6 !on!lusion t*at !an 9e
dra7n is t*at t*e legislature *as ado%ted t*e $IR@s inter%retation, follo7ing t*e %rin!i%le
of legislative a%%roval 96 re/ena!tment.
Meaning of DinterestD.
I*en Se!tion ";" of t*e Ta8 Code in!ludes DinterestD as %art of gross re!ei%ts, it refers to
t*e entire interest earned and o7ned 96 t*e 9an> 7it*out an6 dedu!tion. DInterestD means
t*e gross amount %aid 96 t*e 9orro7er to t*e lender as !onsideration for t*e use of t*e
lender@s mone6. Se!tion ;F*G of Revenue Regulations No. ";/=2, no7 Se!tion ;FiG of
Revenue Regulations No. "4/=#, defines t*e term DinterestD as Dt*e amount 7*i!* a
de%ositor6 9an> F9orro7erG ma6 %a6 on savings and time de%osit in a!!ordan!e 7it*
rates aut*oriHed 96 t*e Central $an> of t*e P*ili%%ines.D T*is definition does not allo7
an6 dedu!tion. T*e entire interest %aid 96 t*e de%ositor6 9an>, 7it*out an6 dedu!tion, is
7*at forms %art of t*e lending 9an>@s gross re!ei%ts.
$an>s are !overed 96 %er!entage ta8 and in!ome ta8.
$an>s are !overed 96 t7o t6%es of ta8esC F"G t*e +ross Re!ei%ts Ta8 F+RTG, 7*i!* is a
%er!entage ta8? and F;G t*e (inal Iit**olding Ta8 F(ITG, 7*i!* is an in!ome ta8. A
%er!entage ta8 is a national ta8 measured 96 a !ertain %er!entage of t*e gross selling
%ri!e or gross value in mone6 of goods sold, 9artered or im%orted? or of t*e gross
re!ei%ts or earnings derived 96 an6 %erson engaged in t*e sale of servi!es. It is not
su9:e!t to 7it**olding. An in!ome ta8, on t*e ot*er *and, is a national ta8 im%osed on
t*e net or t*e gross in!ome realiHed in a ta8a9le 6ear. It is su9:e!t to 7it**olding.
Commissioner of Internal Revenue vs. Solid9an> Cor%., +.R. No. "#="3", Novem9er ;<,
;220
In!ome !onstru!tivel6 re!eived is in!luded as %art of t*e ta8 9ase u%on 7*i!* t*e +RT is
im%osed.
In our 7it**olding ta8 s6stem, %ossession is a!Juired 96 t*e %a6or as t*e 7it**olding
agent of t*e government, 9e!ause t*e ta8%a6er ratifies t*e ver6 a!t of %ossession for t*e
government. T*ere is t*us !onstru!tive re!ei%t. T*e %ro!esses of 9oo>>ee%ing and
a!!ounting for interest on de%osits and 6ield on de%osit su9stitutes t*at are su9:e!ted to
(IT are indeed B for legal %ur%oses B tantamount to deliver6, re!ei%t or remittan!e.
$esides, res%ondent itself admits t*at its in!ome is su9:e!ted to a ta8 9urden immediatel6
u%on Dre!ei%t,D alt*oug* it !laims t*at it derives no %e!uniar6 9enefit or advantage
t*roug* t*e 7it**olding %ro!ess. T*ere 9eing !onstru!tive re!ei%t of su!* in!ome B %art
of 7*i!* is 7it**eld B RR "4/=# a%%lies, and t*at in!ome is in!luded as %art of t*e ta8
9ase u%on 7*i!* t*e +RT is im%osed.
Commissioner of Internal Revenue vs. Solid9an> Cor%.,
+.R. No. "#="3", Novem9er ;<, ;220
Amounts earmar>ed do not form %art of gross re!ei%ts.
Earmar>ing is not t*e same as 7it**olding. Amounts earmar>ed do not form %art of
gross re!ei%ts, 9e!ause, alt*oug* delivered or re!eived, t*ese are 96 la7 or regulation
reserved for some %erson ot*er t*an t*e ta8%a6er. 'n t*e !ontrar6, amounts 7it**eld
form %art of gross re!ei%ts, 9e!ause t*ese are in !onstru!tive %ossession and not su9:e!t
to an6 reservation, t*e 7it**olding agent 9eing merel6 a !onduit in t*e !olle!tion
%ro!ess.
;220
Rev. Reg ";/=2 is su%erseded 96 RR "4/=#.
RR ";/=2 im%oses t*e +RT onl6 on all items of in!ome a!tuall6 re!eived, as o%%osed to
t*eir mere a!!rual, 7*ile RR "4/=# in!ludes all interest in!ome in !om%uting t*e +RT.
RR ";/=2 is su%erseded 96 t*e later rule, 9e!ause Se!tion #FeG t*ereof is not restated in
RR "4/=#. Clearl6 t*erefore, t*is %arti!ular %rovision 7as im%liedl6 re%ealed 7*en t*e
later regulations too> effe!t.
Commissioner of Internal Revenue vs. Solid9an> Cor%.,
+.R. No. "#="3", Novem9er ;<, ;220
+ross re!ei%ts do not in!lude monies or re!ei%ts entrusted to t*e ta8%a6er.
+ross re!ei%ts su9:e!t to ta8 under t*e Ta8 Code do not in!lude monies or re!ei%ts
entrusted to t*e ta8%a6er 7*i!* do not 9elong to t*em and do not redound to t*e
ta8%a6er@s 9enefit? and it is not ne!essar6 t*at t*ere must 9e a la7 or regulation 7*i!*
7ould e8em%t su!* monies and re!ei%ts 7it*in t*e meaning of gross re!ei%ts under t*e
Ta8 Code.
Commissioner of Internal Revenue vs. Tours S%e!ialists, In!., et al.,
+.R. No. 11#"1, Mar!* ;", "332
T*e ;2E %ortion of 9an>s@ %assive in!ome !onstitutes %art of t*eir a!tual earnings.
T*e fa!t is t*at if t*ere 7ere no 7it**olding ta8 s6stem in %la!e in t*is !ountr6, t*is ;2
%er!ent %ortion of t*e D%assiveD in!ome of 9an>s 7ould a!tuall6 9e %aid to t*e 9an>s and
t*en remitted 96 t*em to t*e government in %a6ment of t*eir in!ome ta8. T*e institution of
t*e 7it**olding ta8 s6stem does not alter t*e fa!t t*at t*e ;2 %er!ent %ortion of t*eir
D%assiveD in!ome !onstitutes %art of t*eir a!tual earnings, e8!e%t t*at it is %aid dire!tl6
to t*e government on t*eir 9e*alf in satisfa!tion of t*e ;2 %er!ent final in!ome ta8 due on
t*eir D%assiveD in!omes.
;220
SECTION 2//. Tax on Other NonB.an9 <"nan$"al Inter'ed"ar"es. There
shall e $olle$ted a tax of f"!e %er$ent 6)17 on the ,ross re$e"%ts der"!ed + other
nonBan9 f"nan$"al "nter'ed"ar"es do"n, &s"ness "n the Ph"l"%%"nes# fro' "nterest#
$o''"ss"ons# d"s$o&nts and all other "te's treated as ,ross "n$o'e &nder th"s
Code-
Pro!"ded# That "nterests# $o''"ss"ons and d"s$o&nts fro' lend"n, a$t"!"t"es# as
(ell as "n$o'e fro' f"nan$"al leas"n,# shall e taxed on the as"s of re'a"n"n,
'at&r"t"es of the "nstr&'ents fro' (h"$h s&$h re$e"%ts are der"!ed# "n a$$ordan$e
("th the follo("n, s$hed&le-
@at&r"t+ %er"od "s f"!e 6)7 +ears or less )1
@at&r"t+ %er"od "s 'ore than f"!e 6)7 +ears 21
Pro!"ded# ho(e!er# That "n $ase the 'at&r"t+ %er"od "s shortened thr& %reB
ter'"nat"on# then the 'at&r"t+ %er"od shall e re$9oned to end as of the date of %reB
ter'"nat"on for %&r%oses of $lass"f+"n, the transa$t"on and the $orre$t rate shall e
a%%l"ed a$$ord"n,l+.
Pro!"ded# f"nall+# That the ,enerall+ a$$e%ted a$$o&nt"n, %r"n$"%les as 'a+ e
%res$r"ed + the Se$&r"t"es and Ex$han,e Co''"ss"on for other nonBan9
f"nan$"al "nter'ed"ar"es shall l"9e("se e the as"s for the $al$&lat"on of ,ross
re$e"%ts.
Noth"n, "n th"s Code shall %rel&de the Co''"ss"oner fro' "'%os"n, the sa'e tax
here"n %ro!"ded on %ersons %erfor'"n, s"'"lar f"nan$"n, a$t"!"t"es.
A+ENCIA EAQ-ISITE '( $'&'L, INC. vs. C'MMISSI'NER '( INTERNAL
REVEN-E
.+.R. Nos. "<2"#", "<40<3 K "<=1##.(e9ruar6 ";, ;223.5
(ACTSC $IR Commissioner Jose -. 'ng issued Revenue Memorandum 'rder No. "</3"
!lassif6ing t*e %a7ns*o% 9usiness as a>in to t*e lending investor@s 9usiness a!tivit6 and
im%osing on 9ot* a <E lending investor@s ta8 9ased on t*eir gross in!ome. T*e RM' 7as
later !larified 96 Revenue Memorandum Cir!ular No. #0/3". T*us, $IR an issued
Assessment Noti!e against Agen!ia E8Juisite of $o*ol, In!. FAE$IG demanding %a6ment
of t*e <E lending investors@ ta8 for "33<, %lus interest and !*arges. AE$I filed a %rotest
7*i!* t*e $IR Revenue Regional ire!tor denied. ConseJuentl6, AE$I filed 7it* t*e CTA
a Petition for Revie7 7*i!* ruled in favor of AE$I !an!elling t*e Assessment Noti!e and
de!laring RM' No. "</3" and RMC No. #0/3" null and void, in so far as t*e6 !lassif6
%a7ns*o%s as lending investors su9:e!t to <E lending investors@ ta8
T*roug* a Petition for Revie7, t*e $IR soug*t re!ourse 9efore t*e Court of A%%eals
7*i!* reversed and set aside t*e CTAOs de!ision. AE$I t*en filed a motion for
re!onsideration 7*i!* 7as denied 96 t*e CA. &en!e, t*e %resent Petition for Revie7 on
Certiorari.
ISS-EC I*et*er or not %a7ns*o%s are lia9le for t*e %a6ment of t*e <E lending
investor@s ta8.
R-LIN+C In Commissioner of Internal Revenue v. Mi!*el J. L*uillier Pa7ns*o%, In!.,
.#<0 P*il. "2#0 .;2205G and reiterated in Commissioner of Internal Revenue v.
Trust7ort*6 Pa7ns*o%, In!., F+.R. No. "#3=0#, Ma6 ;, ;221G, t*is Court *eld t*at
%a7ns*o%s are not in!luded in t*e term lending investors for t*e %ur%ose of im%osing t*e
<E %er!entage ta8 under t*en Se!tion ""1 of t*e National Internal Revenue Code of
"344, as amended 96 E.'. No. ;40. T*us, 7*ile %a7ns*o%s are indeed engaged in t*e
9usiness of lending mone6, t*e6 !annot 9e deemed Dlending investorsD for t*e %ur%ose of
im%osing t*e <E lending investor@s ta8.
T*e rulings are 9uttressed 96 t*e follo7ing reasonsC
". -nder Se!tion "3; of t*e NIRC of "334, %rior to its amendment 96 E.'. No. ;40,
as 7ell as Se!tion "1", %aragra%* ;, su9/%aragra%*s FddG and FffG of t*e NIRC of "3=1,
%a7ns*o%s and lending investors 7ere su9:e!ted to different ta8 treatments
;. Congress never intended %a7ns*o%s to 9e treated in t*e same 7a6 as lending
investors.
0. Se!tion ""1 of t*e NIRC of "344, as amended 96 E.'. No. ;40, su9:e!ts to
%er!entage ta8 dealers in se!urities and lending investors onl6. T*ere is no mention of
%a7ns*o%s. -nder t*e ma8im e8%ression unius est e8!lusion alterius, t*e mention of one
t*ing im%lies t*e e8!lusion of anot*er t*ing not mentioned.
#. T*e $IR *ad ruled several times %rior to t*e issuan!e of RM' No. "</3" and
RMC No. #0/3" t*at %a7ns*o%s 7ere not su9:e!t to t*e <E %er!entage ta8 im%osed 96
Se!tion ""1 of t*e NIRC of "344, as amended 96 E.'. No. ;40.
-nder t*e do!trine of stare de!isiset non Juietamovere, it 9e*ooves t*e Court to a%%l6 its
%revious ruling in L*uillier and Trust7ort*6 to t*e !ases under !onsideration. 'n!e a
!ase *as 9een de!ided one 7a6, an6 ot*er !ase involving e8a!tl6 t*e same %oint at issue,
as in t*e %resent !onsolidated !ases, s*ould 9e de!ided in t*e same manner.
C I R vs. Trust7ort*6 Pa7ns*o%, In!., +.R. No. "#3=0#, Ma6 ;, ;221
(ACTSC 'n Mar!* "", "33", t*e CIR issued Revenue Memorandum 'rder FRM'G No.
"</3", !lassif6ing t*e %a7ns*o% 9usiness as Da>in to t*e lending investor@s 9usiness
a!tivit6D and su9:e!ting 9ot* to t*e <E lending investor@s ta8 9ased on t*eir gross
in!ome, %ursuant to t*en Se!tion ""1 of t*e National Internal Revenue Code FNIRCG of
"344, as amended. T*is RM' 7as !larified 96 Revenue Memorandum Cir!ular FRMCG
No. #0/3" mandating inter alia t*at %a7ns*o% o%erators Ds*all 9e!ome lia9le to t*e
lending investor@s ta8 on t*eir gross in!ome 9eginning Januar6 ", "33"?D t*at DFsGin!e t*e
deadline for t*e filing of %er!entage ta8 return and t*e %a6ment of t*e ta8 on lending
investors !overing t*e first Juarter of "33" *as alread6 la%sed, ta8%a6ers are given u% to
June 02, "33" 7it*in 7*i!* to %a6 t*e said ta8 7it*out %enalt6?D t*at if t*e ta8 is %aid
after said date, Dt*e !orres%onding %enalties s*all 9e assessed and !om%uted from A%ril
;", "33"?D and t*at sin!e %a7ns*o%s are !onsidered lending investors, t*e6 are also
su9:e!t to do!umentar6 stam% ta8es.
Pursuant to t*ese issuan!es, t*e $IR Revenue Region No. 4, Ce9u Cit6, issued an
Assessment Noti!e against res%ondent Pa7ns*o% demanding %a6ment of defi!ien!6
%er!entage ta8 for t*e 6ear "33# amounting to P;,"2=,00<."3, in!lusive of sur!*arges
and interests. (eeling aggrieved, res%ondent Pa7ns*o%, on Jul6 #, "334, filed an
administrative %rotest, alleging t*at a %a7ns*o% 9usiness is different from a lending
investor@s 9usiness, *en!e, s*ould not 9e su9:e!ted to t*e <E lending investor@s ta8.
ISS-EC I*et*er %a7ns*o%s are !onsidered lending investors under t*e %rovisions of t*e
NIRC of "344, as amended, for t*e %ur%ose of su9:e!ting t*e former to t*e <E lending
investor@s ta8.
&ELC No. In Commissioner of Internal Revenue v. Mi!*ael J. L*uillier Pa7ns*o%,
7*ere t*e Court 7as alread6 !onfronted 7it* t*is same issue, it 7as *eld t*at 7*ile
%a7ns*o%s are indeed engaged in t*e 9usiness of lending mone6, t*e6 !annot 9e deemed
Dlending investorsD for t*e %ur%ose of im%osing t*e <E lending investor@s ta8. T*e ruling
is an!*ored on t*e follo7ing reasonsC
(irst. -nder Se!tion "3;, %aragra%* 0, su9/%aragra%*s FddG and FffG of t*e NIRC of
"334, %rior to its amendment 96 E.'. No. ;40, as 7ell as Se!tion "1", %aragra%* ;, su9/
%aragra%*s FddG and FffG of t*e NIRC of "3=1, %a7ns*o%s and lending investors 7ere
su9:e!ted to different ta8 treatments.
Se!ond. Congress never intended %a7ns*o%s to 9e treated in t*e same 7a6 as lending
investors. Se!tion ""1 of t*e NIRC of "344, as renum9ered and rearranged 96 E.'. No.
;40, 7as 9asi!all6 lifted from Se!tion "4< Fformerl6 Se!. ;23, NIRC of "344, as amended
96 P.. "403, Se%t. "4, "3=2G of t*e NIRC of "3=1, 7*i!* treated 9ot* ta8 su9:e!ts
differentl6. Note t*at t*e definition of lending investors found in Se!tion "<4 FuG of t*e
NIRC of "3=1 is not found in t*e NIRC of "344, as amended 96 E.'. No. ;40, 7*ere
Se!tion ""1 invo>ed 96 t*e CIR is found. &o7ever, as em%*asiHed earlier, 9ot* t*e NIRC
of "3=1 and NIRC of "344 dealt 7it* %a7ns*o%s and lending investors differentl6. Veril6
t*en, it 7as t*e intent of Congress to deal 7it* 9ot* su9:e!ts differentl6. &en!e, 7e must
li>e7ise inter%ret t*e statute to !onform to su!* legislative intent.
T*ird. Se!tion ""1 of t*e NIRC of "344, as amended 96 E.'. No. ;40, su9:e!ts to
%er!entage ta8 dealers in se!urities and lending investors onl6. T*ere is no mention of
%a7ns*o%s. -nder t*e ma8im e8%ressiouniuseste8!lusioalterius, t*e mention of one t*ing
im%lies t*e e8!lusion of anot*er t*ing not mentioned. T*us, if a statute enumerates t*e
t*ings u%on 7*i!* it is to o%erate, ever6t*ing else must ne!essaril6 and 96 im%li!ation 9e
e8!luded from its o%eration and effe!t FVera v. (ernandeH, L/0"01#, Mar!* 02, "343, =3
SCRA "33, ;20G. T*is rule, as a guide to %ro9a9le legislative intent, is 9ased u%on t*e
rules of logi! and natural 7or>ings of t*e *uman mind FRe%u9li! v. EstenHo, L/0<041,
Se%tem9er "", "3=2, 33 SCRA 1<", 1<1G.
(ourt*. T*e $IR *ad ruled several times %rior to t*e issuan!e of RM' No. "</3" and
RMC No. #0/3" t*at %a7ns*o%s 7ere not su9:e!t to t*e <E %er!entage ta8 im%osed 96
Se!tion ""1 of t*e NIRC of "344, as amended 96 E.'. No. ;40. T*is 7as even admitted
96 t*e CIR in RM' No. "</3" itself. Considering t*at Se!tion ""1 of t*e NIRC of "344,
as amended, 7as %ra!ti!all6 lifted from Se!tion "4< of t*e NIRC of "3=1, as amended,
and t*ere 9eing no !*ange in t*e la7, t*e inter%retation t*ereof s*ould not *ave 9een
altered. -nder t*e %rin!i%le of stare de!isiset non Juietamovere Ffollo7 %ast %re!edents
and do not distur9 7*at *as 9een settledG, it is our dut6 to a%%l6 our %revious ruling in
Commissioner of Internal Revenue v. Mi!*ael J. L*uillier Pa7ns*o% to t*e instant !ase.
'n!e a !ase *as 9een de!ided one 7a6, an6 ot*er !ase involving e8a!tl6 t*e same %oint
at issue, as in t*e !ase at 9ar, s*ould 9e de!ided in t*e same manner.
T*e ta8 on finan!e !om%anies is 9ased on Dgross re!ei%tsD.
SECTION 2/3.Tax on L"fe Ins&ran$e Pre'"&'s. There shall e $olle$ted fro'
e!er+ %erson# $o'%an+ or $or%orat"on 6ex$e%t %&rel+ $oo%erat"!e $o'%an"es or
asso$"at"ons7 do"n, l"fe "ns&ran$e &s"ness of an+ sort "n the Ph"l"%%"nes a tax of
t(o %er$ent 6/17 of the total %re'"&' $olle$ted# (hether s&$h %re'"&'s are %a"d
"n 'one+# notes# $red"ts or an+ s&st"t&te for 'one+8 &t %re'"&'s ref&nded ("th"n
s"x 6*7 'onths after %a+'ent on a$$o&nt of re:e$t"on of r"s9 or ret&rned for other
reason to a %erson "ns&red shall not e "n$l&ded "n the taxale re$e"%ts8 nor shall
an+ tax e %a"d &%on re"ns&ran$e + a $o'%an+ that has alread+ %a"d the tax8 nor
&%on %re'"&'s $olle$ted or re$e"!ed + an+ ran$h of a do'est"$ $or%orat"on#
f"r' or asso$"at"on do"n, &s"ness o&ts"de the Ph"l"%%"nes on a$$o&nt of an+ l"fe
"ns&ran$e of the "ns&red (ho "s a nonres"dent# "f an+ tax on s&$h %re'"&' "s
"'%osed + the fore",n $o&ntr+ (here the ran$h "s estal"shed nor &%on %re'"&'s
$olle$ted or re$e"!ed on a$$o&nt of an+ re"ns&ran$e# "f the "ns&red# "n $ase of
%ersonal "ns&ran$e# res"des o&ts"de the Ph"l"%%"nes# "f an+ tax on s&$h %re'"&'s "s
"'%osed + the fore",n $o&ntr+ (here the or","nal "ns&ran$e has een "ss&ed or
%erfe$ted8 nor &%on that %ort"on of the %re'"&'s $olle$ted or re$e"!ed + the
"ns&ran$e $o'%an"es on !ar"ale $ontra$ts# "n ex$ess of the a'o&nts ne$essar+ to
"ns&re the l"!es of the !ar"ale $ontra$t o(ners.
Coo%erat"!e $o'%an"es or asso$"at"ons are s&$h as are $ond&$ted + the 'e'ers
thereof ("th the 'one+ $olle$ted fro' a'on, the'sel!es and solel+ for the"r o(n
%rote$t"on and not for %rof"t.
SECTION 2/4.Tax on A,ents of <ore",n Ins&ran$e Co'%an"es. E!er+ f"re#
'ar"ne or '"s$ellaneo&s "ns&ran$e a,ent a&thor"5ed &nder the Ins&ran$e Code to
%ro$&re %ol"$"es of "ns&ran$e as he 'a+ ha!e %re!"o&sl+ een le,all+ a&thor"5ed to
transa$t on r"s9s lo$ated "n the Ph"l"%%"nes for $o'%an"es not a&thor"5ed to transa$t
&s"ness "n the Ph"l"%%"nes shall %a+ a tax e;&al to t("$e the tax "'%osed "n Se$t"on
2/3-
Pro!"ded# That the %ro!"s"ons of th"s Se$t"on shall not a%%l+ to re"ns&ran$e-
Pro!"ded# ho(e!er# That the %ro!"s"ons of th"s Se$t"on shall not affe$t the r",ht of
an o(ner of %ro%ert+ to a%%l+ for and ota"n for h"'self %ol"$"es "n fore",n
$o'%an"es "n $ases (here sa"d o(ner does not 'a9e &se of the ser!"$es of an+
a,ent# $o'%an+ or $or%orat"on res"d"n, or do"n, &s"ness "n the Ph"l"%%"nes.
In all $ases (here o(ners of %ro%ert+ ota"n "ns&ran$e d"re$tl+ ("th fore",n
$o'%an"es# "t shall e the d&t+ of sa"d o(ners to re%ort to the Ins&ran$e
Co''"ss"oner and to the Co''"ss"oner ea$h $ase (here "ns&ran$e has een so
effe$ted# and shall %a+ the tax of f"!e %er$ent 6)17 on %re'"&'s %a"d# "n the
'anner re;&"red + Se$t"on 2/3.
SECTION 2/). A'&se'ent Taxes. There shall e $olle$ted fro' the
%ro%r"etor# lessee or o%erator of $o$9%"ts# $aarets# n",ht or da+ $l&s# ox"n,
exh""t"ons# %rofess"onal as9etall ,a'es# Fa"BAla" and ra$etra$9s# a tax
e;&"!alent to-
6a7 E",hteen %er$ent 62817 "n the $ase of $o$9%"ts8
67 E",hteen %er$ent 62817 "n the $ase of $aarets# n",ht or da+ $l&s8
6$7 Ten %er$ent 62017 "n the $ase of ox"n, exh""t"ons- Pro!"ded# ho(e!er#
That ox"n, exh""t"ons (here"n ?orld or Or"ental Cha'%"onsh"%s "n an+ d"!"s"on
"s at sta9e shall e exe'%t fro' a'&se'ent tax- Pro!"ded# f&rther# That at least one
of the $ontenders for ?orld or Or"ental Cha'%"onsh"% "s a $"t"5en of the
Ph"l"%%"nes and sa"d exh""t"ons are %ro'oted + a $"t"5enEs of the Ph"l"%%"nes or
+ a $or%orat"on or asso$"at"on at least s"xt+ %er$ent 6*017 of the $a%"tal of (h"$h
"s o(ned + s&$h $"t"5ens8
6d7 <"fteen %er$ent 62)17 "n the $ase of %rofess"onal as9etall ,a'es as
en!"s"oned "n Pres"dent"al De$ree No. 8A2- Pro!"ded# ho(e!er# That the tax here"n
shall e "n l"e& of all other %er$enta,e taxes of (hate!er nat&re and des$r"%t"on8
and
6e7 Th"rt+ %er$ent 63017 "n the $ase of Fa"BAla" and ra$etra$9s of the"r ,ross
re$e"%ts# "rres%e$t"!e of (hether or not an+ a'o&nt "s $har,ed for ad'"ss"on.
<or the %&r%ose of the a'&se'ent tax# the ter' ',ross re$e"%ts' e'ra$es all the
re$e"%ts of the %ro%r"etor# lessee or o%erator of the a'&se'ent %la$e. Sa"d ,ross
re$e"%ts also "n$l&de "n$o'e fro' tele!"s"on# rad"o and 'ot"on %"$t&re r",hts# "f
an+. A %erson or ent"t+ or asso$"at"on $ond&$t"n, an+ a$t"!"t+ s&:e$t to the tax
here"n "'%osed shall e s"'"larl+ l"ale for sa"d tax ("th res%e$t to s&$h %ort"on of
the re$e"%ts der"!ed + h"' or "t.
The taxes "'%osed here"n shall e %a+ale at the end of ea$h ;&arter and "t shall e
the d&t+ of the %ro%r"etor# lessee or o%erator $on$erned# as (ell as an+ %art+ l"ale#
("th"n t(ent+ 6/07 da+s after the end of ea$h ;&arter# to 'a9e a tr&e and $o'%lete
ret&rn of the a'o&nt of the ,ross re$e"%ts der"!ed d&r"n, the %re$ed"n, ;&arter and
%a+ the tax d&e thereon.
T*e Ta8 Code ma>es a s%e!ial definition of t*e term Dgross re!ei%tsD.
(or t*e amusement ta8, 7*i!* is also a 9usiness ta8 under t*e same Title V, t*e Ta8 Code
ma>es a s%e!ial definition of t*e term Dgross re!ei%ts.D T*e term Dgross re!ei%tsD for
amusement ta8 %ur%oses Dem9ra!es all re!ei%ts of t*e %ro%rietor, lessee or o%erator of
t*e amusement %la!e.D T*e Ta8 Code furt*er adds t*at D.s5aid gross re!ei%ts also in!lude
in!ome from television, radio and motion %i!ture rig*ts, if an6.D T*is definition merel6
!onfirms t*at t*e term Dgross re!ei%tsD em9ra!es t*e entire re!ei%ts 7it*out an6
dedu!tion or e8!lusion, as t*e term is generall6 and !ommonl6 understood.
SECTION 2/*.Tax on ?"nn"n,s. E!er+ %erson (ho ("ns "n horse ra$es shall
%a+ a tax e;&"!alent to ten %er$ent 62017 of h"s ("nn"n,s or 'd"!"dends'# the tax to
e ased on the a$t&al a'o&nt %a"d to h"' for e!er+ ("nn"n, t"$9et after ded&$t"n,
the $ost of the t"$9et- Pro!"ded# That "n the $ase of ("nn"n,s fro' do&le#
fore$astE;&"nella and tr"fe$ta ets# the tax shall e fo&r %er$ent 6417. In the $ase of
o(ners of ("nn"n, ra$e horses# the tax shall e ten %er$ent 62017 of the %r"5es.
The tax here"n %res$r"ed shall e ded&$ted fro' the 'd"!"dends' $orres%ond"n, to
ea$h ("nn"n, t"$9et or the '%r"5e' of ea$h ("nn"n, ra$e horse o(ner and ("thheld
+ the o%erator# 'ana,er or %erson "n $har,e of the horse ra$es efore %a+"n, the
d"!"dends or %r"5es to the %ersons ent"tled thereto.
The o%erator# 'ana,er or %erson "n $har,e of horse ra$es shall# ("th"n t(ent+ 6/07
da+s fro' the date the tax (as ded&$ted and ("thheld "n a$$ordan$e ("th the
se$ond %ara,ra%h hereof# f"le a tr&e and $orre$t ret&rn ("th the Co''"ss"oner "n
the 'anner or for' to e %res$r"ed + the Se$retar+ of <"nan$e# and %a+ ("th"n
the sa'e %er"od the total a'o&nt of tax so ded&$ted and ("thheld.
SECTION 2/A. Tax on Sale# .arter or Ex$han,e of Shares of Sto$9 L"sted and
Traded thro&,h the Lo$al Sto$9 Ex$han,e or thro&,h In"t"al P&l"$ Offer"n,.
6A7 Tax on Sale# .arter or Ex$han,e of Shares of Sto$9 L"sted and Traded thro&,h
the Lo$al Sto$9 Ex$han,e. There shall e le!"ed# assessed and $olle$ted on
e!er+ sale# arter# ex$han,e or other d"s%os"t"on of shares of sto$9 l"sted and traded
thro&,h the lo$al sto$9 ex$han,e other than the sale + a dealer "n se$&r"t"es# a tax
at the rate of oneBhalf of one %er$ent 6J of 217 of the ,ross sell"n, %r"$e or ,ross
!al&e "n 'one+ of the shares of sto$9 sold# artered# ex$han,ed or other("se
d"s%osed (h"$h shall e %a"d + the seller or transferor.
6.7 Tax on Shares of Sto$9 Sold or Ex$han,ed thro&,h In"t"al P&l"$ Offer"n,.
There shall e le!"ed# assessed and $olle$ted on e!er+ sale# arter# ex$han,e or
other d"s%os"t"on thro&,h "n"t"al %&l"$ offer"n, of shares of sto$9 "n $losel+ held
$or%orat"ons# as def"ned here"n# a tax at the rates %ro!"ded here&nder ased on the
,ross sell"n, %r"$e or ,ross !al&e "n 'one+ of the shares of sto$9 sold# artered#
ex$han,ed or other("se d"s%osed "n a$$ordan$e ("th the %ro%ort"on of shares of
sto$9 sold# artered# ex$han,ed or other("se d"s%osed to the total o&tstand"n,
shares of sto$9 after the l"st"n, "n the lo$al sto$9 ex$han,e-
K=% to t(ent+Bf"!e %er$ent 6/)17 41
DO!er t(ent+Bf"!e %er$ent 6/)17 &t not o!er
th"rt+Bthree and one th"rd %er$ent 633 2E317 /1
DO!er th"rt+Bthree and one th"rd %er$ent 633 2E317 21
The tax here"n "'%osed shall e %a"d + the "ss&"n, $or%orat"on "n %r"'ar+ offer"n,
or + the seller "n se$ondar+ offer"n,.
<or %&r%oses of th"s Se$t"on# the ter' '$losel+ held $or%orat"on' 'eans an+
$or%orat"on at least f"ft+ %er$ent 6)017 "n !al&e of the o&tstand"n, $a%"tal sto$9 or
at least f"ft+ %er$ent 6)017 of the total $o'"ned !ot"n, %o(er of all $lasses of
sto$9 ent"tled to !ote "s o(ned d"re$tl+ or "nd"re$tl+ + or for not 'ore than t(ent+
6/07 "nd"!"d&als.
<or %&r%oses of deter'"n"n, (hether the $or%orat"on "s a $losel+ held $or%orat"on#
"nsofar as s&$h deter'"nat"on "s ased on sto$9 o(nersh"%# the follo("n, r&les shall
e a%%l"ed-
627 Sto$9 Not O(ned + Ind"!"d&als. Sto$9 o(ned d"re$tl+ or "nd"re$tl+ + or
for a $or%orat"on# %artnersh"%# estate or tr&st shall e $ons"dered as e"n, o(ned
%ro%ort"onatel+ + "ts shareholders# %artners or enef"$"ar"es.
6/7 <a'"l+ and Partnersh"% O(nersh"%s. An "nd"!"d&al shall e $ons"dered as
o(n"n, the sto$9 o(ned# d"re$tl+ or "nd"re$tl+# + or for h"s fa'"l+# or + or for h"s
%artner. <or %&r%oses of th"s %ara,ra%h# the ''fa'"l+ of an "nd"!"d&al' "n$l&des onl+
h"s rothers and s"sters 6(hether + (hole or halfBlood7# s%o&se# an$estors and
l"neal des$endants.
637 O%t"on. If an+ %erson has an o%t"on to a$;&"re sto$9# s&$h sto$9 shall e
$ons"dered as o(ned + s&$h %erson. <or %&r%oses of th"s %ara,ra%h# an o%t"on to
a$;&"re s&$h an o%t"on and ea$h one of a ser"es of o%t"ons shall e $ons"dered as an
o%t"on to a$;&"re s&$h sto$9.
647 Constr&$t"!e O(nersh"% as A$t&al O(nersh"%. Sto$9 $onstr&$t"!el+ o(ned
+ reason of the a%%l"$at"on of %ara,ra%h 627 or 637 hereof shall# for %&r%oses of
a%%l+"n, %ara,ra%h 627 or 6/7# e treated as a$t&all+ o(ned + s&$h %erson8 &t
sto$9 $onstr&$t"!el+ o(ned + the "nd"!"d&al + reason of the a%%l"$at"on of
%ara,ra%h 6/7 hereof shall not e treated as o(ned + h"' for %&r%oses of a,a"n
a%%l+"n, s&$h %ara,ra%h "n order to 'a9e another the $onstr&$t"!e o(ner of s&$h
sto$9.
6C7 Ret&rn on Ca%"tal 4a"ns Real"5ed fro' Sale of Shares of Sto$9s.
627 Ret&rn on Ca%"tal 4a"ns Real"5ed fro' Sale of Shares of Sto$9 L"sted and
Traded "n the Lo$al Sto$9 Ex$han,e. It shall e the d&t+ of e!er+ sto$9 ro9er
(ho effe$ted the sale s&:e$t to the tax "'%osed here"n to $olle$t the tax and re'"t
the sa'e to the .&rea& of Internal Re!en&e ("th"n f"!e 6)7 an9"n, da+s fro' the
date of $olle$t"on thereof and to s&'"t on @onda+s of ea$h (ee9 to the se$retar+
of the sto$9 ex$han,e# of (h"$h he "s a 'e'er# a tr&e and $o'%lete ret&rn (h"$h
shall $onta"n a de$larat"on of all the transa$t"ons effe$ted thro&,h h"' d&r"n, the
%re$ed"n, (ee9 and of taxes $olle$ted + h"' and t&rned o!er to the .&rea& of
Internal Re!en&e.
6/7 Ret&rn on P&l"$ Offer"n,s of Shares of Sto$9. In $ase of %r"'ar+ offer"n,#
the $or%orate "ss&er shall f"le the ret&rn and %a+ the $orres%ond"n, tax ("th"n th"rt+
6307 da+s fro' the date of l"st"n, of the shares of sto$9 "n the lo$al sto$9 ex$han,e.
In the $ase of se$ondar+ offer"n,# the %ro!"s"on of S&se$t"on 6C7627 of th"s Se$t"on
shall a%%l+ as to the t"'e and 'anner of the %a+'ent of the tax.
6D7 Co''on Pro!"s"ons. An+ ,a"n der"!ed fro' the sale# arter# ex$han,e or
other d"s%os"t"on of shares of sto$9 &nder th"s Se$t"on shall e exe'%t fro' the tax
"'%osed "n Se$t"ons /46C7# /A6D76/7# /86A76876$7# and /86.76)76$7 of th"s Code
and fro' the re,&lar "nd"!"d&al or $or%orate "n$o'e tax. Tax %a"d &nder th"s
Se$t"on shall not e ded&$t"le for "n$o'e tax %&r%oses.
SECTION 2/8.Ret&rns and Pa+'ent of Per$enta,e Taxes.
6A7 Ret&rns of 4ross Sales# Re$e"%ts or Earn"n,s and Pa+'ent of Tax.
627 Persons L"ale to Pa+ Per$enta,e Taxes. E!er+ %erson s&:e$t to the
%er$enta,e taxes "'%osed &nder th"s T"tle shall f"le a ;&arterl+ ret&rn of the a'o&nt
of h"s ,ross sales# re$e"%ts or earn"n,s and %a+ the tax d&e thereon ("th"n t(ent+B
f"!e 6/)7 da+s after the end of ea$h taxale ;&arter- Pro!"ded# That "n the $ase of a
%erson (hose CAT re,"strat"on "s $an$elled and (ho e$o'es l"ale to the tax
"'%osed "n Se$t"on 22* of th"s Code# the tax shall a$$r&e fro' the date of
$an$ellat"on and shall e %a"d "n a$$ordan$e ("th the %ro!"s"ons of th"s Se$t"on.
6/7 Person Ret"r"n, fro' .&s"ness. An+ %erson ret"r"n, fro' a &s"ness s&:e$t
to %er$enta,e tax shall not"f+ the nearest "nternal re!en&e off"$er# f"le h"s ret&rn and
%a+ the tax d&e thereon ("th"n t(ent+ 6/07 da+s after $los"n, h"s &s"ness.
637 Ex$e%t"ons. The Co''"ss"oner 'a+# + r&les and re,&lat"ons# %res$r"e-
6a7 The t"'e for f"l"n, the ret&rn at "nter!als other than the t"'e %res$r"ed "n the
%re$ed"n, %ara,ra%hs for a %art"$&lar $lass or $lasses of tax%a+ers after $ons"der"n,
s&$h fa$tors as !ol&'e of sales# f"nan$"al $ond"t"on# ade;&ate 'eas&res of se$&r"t+#
and s&$h other rele!ant "nfor'at"on re;&"red to e s&'"tted &nder the %ert"nent
%ro!"s"ons of th"s Code8 and
67 The 'anner and t"'e of %a+'ent of %er$enta,e taxes other than as here"nao!e
%res$r"ed# "n$l&d"n, a s$he'e of tax %re%a+'ent.
647 Deter'"nat"on of Corre$t Sales or Re$e"%ts. ?hen "t "s fo&nd that a %erson
has fa"led to "ss&e re$e"%ts or "n!o"$es# or (hen no ret&rn "s f"led# or (hen there "s
reason to el"e!e that the oo9s of a$$o&nts or other re$ords do not $orre$tl+
refle$t the de$larat"ons 'ade or to e 'ade "n a ret&rn re;&"red to e f"led &nder
the %ro!"s"ons of th"s Code# the Co''"ss"oner# after ta9"n, "nto a$$o&nt the sales#
re$e"%ts or other taxale ase of other %ersons en,a,ed "n s"'"lar &s"nesses &nder
s"'"lar s"t&at"ons or $"r$&'stan$es# or after $ons"der"n, other rele!ant "nfor'at"on
'a+ %res$r"e a '"n"'&' a'o&nt of s&$h ,ross re$e"%ts# sales and taxale ase
and s&$h a'o&nt so %res$r"ed shall e %r"'a fa$"e $orre$t for %&r%oses of
deter'"n"n, the "nternal re!en&e tax l"a"l"t"es of s&$h %erson.
6.7 ?here to <"le. Ex$e%t as the Co''"ss"oner other("se %er'"ts# e!er+ %erson
l"ale to the %er$enta,e tax &nder th"s T"tle 'a+# at h"s o%t"on# f"le a se%arate ret&rn
for ea$h ran$h or %la$e of &s"ness# or a $onsol"dated ret&rn for all ran$hes or
%la$es of &s"ness ("th the a&thor"5ed a,ent an9# Re!en&e D"str"$t Off"$er#
Colle$t"on A,ent or d&l+ a&thor"5ed Treas&rer of the $"t+ or '&n"$"%al"t+ (here
sa"d &s"ness or %r"n$"%al %la$e of &s"ness "s lo$ated# as the $ase 'a+ e.
TITLE CI
Ex$"se Taxes on Certa"n 4oods
CHAPTER I
4eneral Pro!"s"ons
SECTION 2/>. 4oods S&:e$t to Ex$"se Taxes. Ex$"se taxes a%%l+ to ,oods
'an&fa$t&red or %rod&$ed "n the Ph"l"%%"nes for do'est"$ sale or $ons&'%t"on or
for an+ other d"s%os"t"on and to th"n,s "'%orted. The ex$"se tax "'%osed here"n
shall e "n add"t"on to the !al&eBadded tax "'%osed &nder T"tle IC.
<or %&r%oses of th"s T"tle# ex$"se taxes here"n "'%osed and ased on (e",ht or
!ol&'e $a%a$"t+ or an+ other %h+s"$al &n"t of 'eas&re'ent shall e referred to as
's%e$"f"$ tax' and an ex$"se tax here"n "'%osed and ased on sell"n, %r"$e or other
s%e$"f"ed !al&e of the ,ood shall e referred to as 'ad !alore' tax.'
As used in t*e NIRC, t*erefore, e8!ise ta8es refer to ta8es a%%li!a9le to !ertain s%e!ified
or sele!ted goods or arti!les manufa!tured or %rodu!ed in t*e P*ili%%ines for domesti!
sale or !onsum%tion or for an6 ot*er dis%osition and to t*ings im%orted into t*e
P*ili%%ines. T*ese e8!ise ta8es ma6 9e !onsidered ta8es on %rodu!tion as t*e6 are
!olle!ted onl6 from manufa!turers and %rodu!ers. $asi!all6 an indire!t ta8, e8!ise ta8es
are dire!tl6 levied u%on t*e manufa!turer or im%orter u%on removal of t*e ta8a9le goods
from its %la!e of %rodu!tion or from t*e !ustoms !ustod6. T*ese ta8es, *o7ever, ma6 9e
a!tuall6 %assed on to t*e end !onsumer as %art of t*e transfer value or selling %ri!e of
t*e goods sold, 9artered or e8!*anged.
Sil>air FSinga%oreG Pte. Ltd. vs. Commissioner of Internal Revenue, +.R. No. "=#03=,
(e9ruar6 ;<, ;2"2
SECTION 230. <"l"n, of Ret&rn and Pa+'ent of Ex$"se Tax on Do'est"$
Prod&$ts.
6A7 Persons L"ale to <"le a Ret&rn# <"l"n, of Ret&rn on Re'o!al and Pa+'ent of
Tax.
627 Persons L"ale to <"le a Ret&rn. E!er+ %erson l"ale to %a+ ex$"se tax
"'%osed &nder th"s T"tle shall f"le a se%arate ret&rn for ea$h %la$e of %rod&$t"on
sett"n, forth# a'on, others# the des$r"%t"on and ;&ant"t+ or !ol&'e of %rod&$ts to
e re'o!ed# the a%%l"$ale tax ase and the a'o&nt of tax d&e thereon-
Pro!"ded# ho(e!er# That "n the $ase of "nd",eno&s %etrole&'# nat&ral ,as or
l";&ef"ed nat&ral ,as# the ex$"se tax shall e %a"d + the f"rst &+er# %&r$haser or
transferee for lo$al sale# arter or transfer# (h"le the ex$"se tax on ex%orted
%rod&$ts shall e %a"d + the o(ner# lessee# $on$ess"ona"re or o%erator of the
'"n"n, $la"'.
Sho&ld do'est"$ %rod&$ts e re'o!ed fro' the %la$e of %rod&$t"on ("tho&t the
%a+'ent of the tax# the o(ner or %erson ha!"n, %ossess"on thereof shall e l"ale
for the tax d&e thereon.
6/7 T"'e for <"l"n, of Ret&rn and Pa+'ent of the Tax. =nless other("se
s%e$"f"$all+ allo(ed# the ret&rn shall e f"led and the ex$"se tax %a"d + the
'an&fa$t&rer or %rod&$er efore re'o!al of do'est"$ %rod&$ts fro' %la$e of
%rod&$t"on-
Pro!"ded# That the ex$"se tax on lo$all+ 'an&fa$t&red %etrole&' %rod&$ts and
"nd",eno&s %etrole&' le!"ed &nder Se$t"ons 248 and 2)26A7647# res%e$t"!el+# of
th"s T"tle shall e %a"d ("th"n ten 6207 da+s fro' the date of re'o!al of s&$h
%rod&$ts for the %er"od fro' Fan&ar+ 2# 2>>8 to F&ne 30# 2>>88 ("th"n f"!e 6)7 da+s
fro' the date of re'o!al of s&$h %rod&$ts for the %er"od fro' F&l+ 2# 2>>8 to
De$e'er 32# 2>>88 and# efore re'o!al fro' the %la$e of %rod&$t"on of s&$h
%rod&$ts fro' Fan&ar+ 2# 2>>> and thereafter-
Pro!"ded# f&rther# That the ex$"se tax on non'etall"$ '"neral or '"neral %rod&$ts#
or ;&arr+ reso&r$es shall e d&e and %a+ale &%on re'o!al of s&$h %rod&$ts fro'
the lo$al"t+ (here '"ned or extra$ted# &t ("th res%e$t to the ex$"se tax on lo$all+
%rod&$ed or extra$ted 'etall"$ '"neral or '"neral %rod&$ts# the %erson l"ale shall
f"le a ret&rn and %a+ the tax ("th"n f"fteen 62)7 da+s after the end of the $alendar
;&arter (hen s&$h %rod&$ts (ere re'o!ed s&:e$t to s&$h $ond"t"ons as 'a+ e
%res$r"ed + r&les and re,&lat"ons to e %ro'&l,ated + the Se$retar+ of <"nan$e#
&%on re$o''endat"on of the Co''"ss"oner. <or th"s %&r%ose# the tax%a+er shall
f"le a ond "n an a'o&nt (h"$h a%%rox"'ates the a'o&nt of ex$"se tax d&e on the
re'o!als for the sa"d ;&arter. The fore,o"n, r&les not("thstand"n,# for "'%orted
'"neral or '"neral %rod&$ts# (hether 'etall"$ or non'etall"$# the ex$"se tax d&e
thereon shall e %a"d efore the"r re'o!al fro' $&sto's $&stod+.
637 Pla$e for <"l"n, of the Ret&rn and Pa+'ent of the Tax. Ex$e%t as the
Co''"ss"oner other("se %er'"ts# the ret&rn shall e f"led ("th and the tax %a"d to
an+ a&thor"5ed a,ent an9 or Re!en&e Colle$t"on Off"$er# or d&l+ a&thor"5ed C"t+
or @&n"$"%al Treas&rer "n the Ph"l"%%"nes.
647 Ex$e%t"ons. The Se$retar+ of <"nan$e# &%on re$o''endat"on of the
Co''"ss"oner# 'a+# + r&les and re,&lat"ons# %res$r"e-
6a7 The t"'e for f"l"n, the ret&rn at "nter!als other than the t"'e %res$r"ed "n the
%re$ed"n, %ara,ra%hs for a %art"$&lar $lass or $lasses of tax%a+ers after $ons"der"n,
fa$tors s&$h as !ol&'e of re'o!als# ade;&ate 'eas&res of se$&r"t+ and s&$h other
rele!ant "nfor'at"on re;&"red to e s&'"tted &nder the %ert"nent %ro!"s"ons of th"s
Code8 and
67 The 'anner and t"'e of %a+'ent of ex$"se taxes other than as here"n
%res$r"ed# &nder a tax %re%a+'ent# ad!an$e de%os"t or s"'"lar s$he'es. In the
$ase of lo$all+ %rod&$ed or extra$ted '"nerals and '"neral %rod&$ts or ;&arr+
reso&r$es (here the '"ne s"te or %la$e of extra$t"on "s not the sa'e as the %la$e of
%ro$ess"n, or %rod&$t"on# the ret&rn shall e f"led ("th and the tax %a"d to the
Re!en&e D"str"$t Off"$e ha!"n, :&r"sd"$t"on o!er the lo$al"t+ (here the sa'e are
'"ned# extra$ted or ;&arr"ed-
Pro!"ded# ho(e!er# That for 'etall"$ '"nerals %ro$essed aroad# the ret&rn shall e
f"led and the tax d&e thereon %a"d to the Re!en&e D"str"$t Off"$e ha!"n,
:&r"sd"$t"on o!er the lo$al"t+ (here the sa'e are '"ned# extra$ted or ;&arr"ed.
6.7 Deter'"nat"on of 4ross Sell"n, Pr"$e of 4oods S&:e$t to Ad Calore' Tax.
=nless other("se %ro!"ded# the %r"$e# ex$l&d"n, the !al&eBadded tax# at (h"$h the
,oods are sold at (holesale "n the %la$e of %rod&$t"on or thro&,h the"r sales a,ents
to the %&l"$ shall $onst"t&te the ,ross sell"n, %r"$e.
If the 'an&fa$t&rer also sells or allo(s s&$h ,oods to e sold at (holesale "n
another estal"sh'ent of (h"$h he "s the o(ner or "n the %rof"ts of (h"$h he has an
"nterest# the (holesale %r"$e "n s&$h estal"sh'ent shall $onst"t&te the ,ross sell"n,
%r"$e.
Sho&ld s&$h %r"$e e less than the $ost of 'an&fa$t&re %l&s ex%enses "n$&rred &nt"l
the ,oods are f"nall+ sold# then a %ro%ort"onate 'ar,"n of %rof"t# not less than ten
%er$ent 62017 of s&$h 'an&fa$t&r"n, $ost and ex%enses# shall e added to
$onst"t&te the ,ross sell"n, %r"$e.
6C7 @an&fa$t&rer's or Prod&$er's S(orn State'ent. E!er+ 'an&fa$t&rer or
%rod&$er of ,oods or %rod&$ts s&:e$t to ex$"se taxes shall f"le ("th the
Co''"ss"oner on the date or dates des",nated + the latter# and as often as 'a+ e
re;&"red# a s(orn state'ent sho("n,# a'on, other "nfor'at"on# the d"fferent ,oods
or %rod&$ts 'an&fa$t&red or %rod&$ed and the"r $orres%ond"n, ,ross sell"n, %r"$e
or 'ar9et !al&e# to,ether ("th the $ost of 'an&fa$t&re or %rod&$t"on %l&s ex%enses
"n$&rred or to e "n$&rred &nt"l the ,oods or %rod&$ts are f"nall+ sold.
6D7 Cred"t for Ex$"se Tax on 4oods A$t&all+ Ex%orted. ?hen ,oods lo$all+
%rod&$ed or 'an&fa$t&red are re'o!ed and a$t&all+ ex%orted ("tho&t ret&rn"n, to
the Ph"l"%%"nes# (hether so ex%orted "n the"r or","nal state or as "n,red"ents or %arts
of an+ 'an&fa$t&red ,oods or %rod&$ts# an+ ex$"se tax %a"d thereon shall e
$red"ted or ref&nded &%on s&'"ss"on of the %roof of a$t&al ex%ortat"on and &%on
re$e"%t of the $orres%ond"n, fore",n ex$han,e %a+'ent-
Pro!"ded# That the ex$"se tax on '"neral %rod&$ts# ex$e%t $oal and $o9e# "'%osed
&nder Se$t"on 2)2 shall not e $red"tale or ref&ndale e!en "f the '"neral %rod&$ts
are a$t&all+ ex%orted.
SECTION 232.Pa+'ent of Ex$"se Taxes on I'%orted Art"$les.
6A7 Persons L"ale. Ex$"se taxes on "'%orted art"$les shall e %a"d + the o(ner
or "'%orter to the C&sto's Off"$ers# $onfor'al+ ("th the re,&lat"ons of the
De%art'ent of <"nan$e and efore the release of s&$h art"$les fro' the $&sto's
ho&se# or + the %erson (ho "s fo&nd "n %ossess"on of art"$les (h"$h are exe'%t
fro' ex$"se taxes other than those le,all+ ent"tled to exe'%t"on.
In the $ase of taxBfree art"$les ro&,ht or "'%orted "nto the Ph"l"%%"nes + %ersons#
ent"t"es# or a,en$"es exe'%t fro' tax (h"$h are s&se;&entl+ sold# transferred or
ex$han,ed "n the Ph"l"%%"nes to nonBexe'%t %ersons or ent"t"es# the %&r$hasers or
re$"%"ents shall e $ons"dered the "'%orters thereof# and shall e l"ale for the d&t+
and "nternal re!en&e tax d&e on s&$h "'%ortat"on.
The %ro!"s"on of an+ s%e$"al or ,eneral la( to the $ontrar+ not("thstand"n,# the
"'%ortat"on of $",ars and $",arettes# d"st"lled s%"r"ts# fer'ented l";&ors and ("nes
"nto the Ph"l"%%"nes# e!en "f dest"ned for tax and d&t+Bfree sho%s# shall e s&:e$t to
all a%%l"$ale taxes# d&t"es# $har,es# "n$l&d"n, ex$"se taxes d&e thereon.
Th"s shall a%%l+ to $",ars and $",arettes# d"st"lled s%"r"ts# fer'ented l";&ors and
("nes ro&,ht d"re$tl+ "nto the d&l+ $hartered or le,"slated free%orts of the S&"$
S%e$"al E$ono'"$ and <ree%ort Gone# $reated &nder Re%&l"$ A$t No. A//A8 the
Ca,a+an S%e$"al E$ono'"$ Gone and <ree%ort# $reated &nder Re%&l"$ A$t No.
A>//8 and the Ga'oan,a C"t+ S%e$"al E$ono'"$ Gone# $reated &nder Re%&l"$
A$t No. A>03# and s&$h other free%orts as 'a+ hereafter e estal"shed or $reated
+ la(-
Pro!"ded# f&rther# That "'%ortat"ons of $",ars and $",arettes# d"st"lled s%"r"ts#
fer'ented l";&ors and ("nes 'ade d"re$tl+ + a ,o!ern'entBo(ned and o%erated
d&t+Bfree sho%# l"9e the D&t+B<ree Ph"l"%%"nes 6D<P7# shall e exe'%ted fro' all
a%%l"$ale d&t"es onl+-
Pro!"ded# st"ll f&rther# That s&$h art"$les d"re$tl+ "'%orted + a ,o!ern'entBo(ned
and o%erated d&t+Bfree sho%# l"9e the D&t+B<ree Ph"l"%%"nes# shall e laeled 'd&t+B
free' and 'not for resale'-
Pro!"ded# f"nall+# That the re'o!al and transfer of tax and d&t+Bfree ,oods#
%rod&$ts# 'a$h"ner+# e;&"%'ent and other s"'"lar art"$les other than $",ars and
$",arettes# d"st"lled s%"r"ts# fer'ented l";&ors and ("nes# fro' one free%ort to
another free%ort# shall not e dee'ed an "ntrod&$t"on "nto the Ph"l"%%"ne $&sto's
terr"tor+.D
C",ars and $",arettes# d"st"lled s%"r"ts and ("nes ("th"n the %re'"ses of all d&t+Bfree
sho%s (h"$h are not laelled as here"nao!e re;&"red# as (ell as tax and d&t+Bfree
art"$les ota"ned fro' a d&t+Bfree sho% and s&se;&entl+ fo&nd "n a nonBd&t+Bfree
sho% to e offered for resale shall e $onf"s$ated# and the %er%etrator of s&$h nonB
laell"n, or reBsell"n, shall e %&n"shale &nder the a%%l"$ale %ro!"s"ons of th"s
Code.
Art"$les $onf"s$ated shall e d"s%osed of "n a$$ordan$e ("th the r&les and
re,&lat"ons to e %ro'&l,ated + the Se$retar+ of <"nan$e# &%on re$o''endat"on
of the Co''"ss"oners of C&sto's and Internal Re!en&e# &%on $ons&ltat"on ("th
the Se$retar+ of To&r"s' and the 4eneral @ana,er of the Ph"l"%%"ne To&r"s'
A&thor"t+.
The tax d&e on an+ s&$h ,oods# %rod&$ts# 'a$h"ner+# e;&"%'ent or other s"'"lar
art"$les shall $onst"t&te a l"en on the art"$le "tself# and s&$h l"en shall e s&%er"or to
all other $har,es or l"ens# "rres%e$t"!e of the %ossessor thereof.
6.7 Rate and .as"s of the Ex$"se Tax on I'%orted Art"$les. =nless other("se
s%e$"f"ed# "'%orted art"$les shall e s&:e$t to the sa'e rates and as"s of ex$"se
taxes a%%l"$ale to lo$all+ 'an&fa$t&red art"$les.D
SECTION 23/.@ode of Co'%&t"n, Contents of Cas9 or Pa$9a,e. E!er+
fra$t"onal %art of a %roof l"ter e;&al to or ,reater than a half l"ter "n a $as9 or
%a$9a,e $onta"n"n, 'ore than one l"ter shall e taxed as a l"ter# and an+ s'aller
fra$t"onal %art shall e exe'%t8 &t an+ %a$9a,e of s%"r"ts# the total $ontents of
(h"$h are less than a %roof l"ter# shall e taxed as one l"ter.
CHAPTER II
Exe'%t"on or Cond"t"onal TaxB<ree Re'o!al of Certa"n Art"$les
SECTION 233. Re'o!al of ?"nes and D"st"lled S%"r"ts for Treat'ent of Toa$$o
Leaf . =%on "ss&an$e of a %er'"t fro' the Co''"ss"oner and s&:e$t to the
r&les and re,&lat"ons %res$r"ed + the Se$retar+ of <"nan$e# 'an&fa$t&rers of
$",ars and $",arettes 'a+ ("thdra( fro' ond# free of ex$"se tax# lo$al and
"'%orted ("nes and d"st"lled s%"r"ts "n s%e$"f"$ ;&ant"t"es and ,rades for &se "n the
treat'ent of toa$$o leaf to e &sed "n the 'an&fa$t&re of $",ars and $",arettes# &t
s&$h ("nes and d"st"lled s%"r"ts '&st f"rst e s&"tal+ denat&red.
SECTION 234.Do'est"$ Denat&red Al$ohol. Do'est"$ al$ohol of not less than
one h&ndred e",ht+ de,rees 6280L7 %roof 6n"net+ %er$ent 6>017 asol&te al$ohol7
shall# (hen s&"tal+ denat&red and rendered &nf"t for oral "nta9e# e exe'%t fro'
the ex$"se tax %res$r"ed "n Se$t"on 242-
Pro!"ded# ho(e!er# That s&$h denat&red al$ohol shall e s&:e$t to tax &nder
Se$t"on 20*6A7 of th"s Code-
Pro!"ded# f&rther# That "f s&$h al$ohol "s to e &sed for 'ot"!e %o(er# "t shall e
taxed &nder Se$t"on 2486d7 of th"s Code- Pro!"ded# f"nall+# That an+ al$ohol#
%re!"o&sl+ rendered &nf"t for oral "nta9e after denat&r"n, &t s&se;&entl+ rendered
f"t for oral "nta9e after &nder,o"n, fer'entat"on# d"l&t"on# %&r"f"$at"on# '"xt&re or
an+ other s"'"lar %ro$ess shall e taxed &nder Se$t"on 242 of th"s Code and s&$h
tax shall e %a"d + the %erson "n %ossess"on of s&$h re%ro$essed s%"r"ts.
SECTION 23). Petrole&' Prod&$ts Sold to Internat"onal Carr"ers and Exe'%t
Ent"t"es or A,en$"es. Petrole&' %rod&$ts sold to the follo("n, are exe'%t fro'
ex$"se tax-
6a7 Internat"onal $arr"ers of Ph"l"%%"ne or fore",n re,"str+ on the"r &se or
$ons&'%t"on o&ts"de the Ph"l"%%"nes-
Pro!"ded# That the %etrole&' %rod&$ts sold to these "nternat"onal $arr"ers shall e
stored "n a onded stora,e tan9 and 'a+ e d"s%osed of onl+ "n a$$ordan$e ("th
the r&les and re,&lat"ons to e %res$r"ed + the Se$retar+ of <"nan$e# &%on
re$o''endat"on of the Co''"ss"oner8
67 Exe'%t ent"t"es or a,en$"es $o!ered + tax treat"es# $on!ent"ons and other
"nternat"onal a,ree'ents for the"r &se or $ons&'%t"on-
Pro!"ded# ho(e!er# That the $o&ntr+ of sa"d fore",n "nternat"onal $arr"er or exe'%t
ent"t"es or a,en$"es exe'%ts fro' s"'"lar taxes %etrole&' %rod&$ts sold to
Ph"l"%%"ne $arr"ers# ent"t"es or a,en$"es8 and
6$7 Ent"t"es (h"$h are + la( exe'%t fro' d"re$t and "nd"re$t taxes.
REVEN-E RE+-LATI'NS N'. 220/2= Januar6 ;;, ;22=
S-$JECT C Amending Certain Provisions of E8isting Revenue Regulations on
t*e +ranting of 'utrig*t E8!ise Ta8 E8em%tion on Removal of E8!isa9le Arti!les
Intended for E8%ort or SalePeliver6 to International Carriers or to Ta8/E8em%t
EntitiesPAgen!ies and Pres!ri9ing t*e Provisions for Availing Claims for Produ!t
Re%lenis*ment
SECTION 23* Denat&rat"on# ?"thdra(al and =se of Denat&red Al$ohol. An+
%erson (ho %rod&$es# ("thdra(s# sells# trans%orts or 9no("n,l+ &ses# or "s "n
%ossess"on of denat&red al$ohol# or art"$les $onta"n"n, denat&red al$ohol "n
!"olat"on of la(s or re,&lat"ons no( or hereafter "n for$e %erta"n"n, thereto shall e
re;&"red to %a+ the $orres%ond"n, tax# "n add"t"on to the %enalt"es %ro!"ded for
&nder T"tle M of th"s Code.
SECTION 23A. Re'o!al of S%"r"ts =nder .ond for Re$t"f"$at"on. S%"r"ts
re;&"r"n, re$t"f"$at"on 'a+ e re'o!ed fro' the %la$e of %rod&$t"on to another
estal"sh'ent for the %&r%ose of re$t"f"$at"on ("tho&t the %re%a+'ent of the ex$"se
tax-
Pro!"ded# That the d"st"ller re'o!"n, s&$h s%"r"ts and the re$t"f"er re$e"!"n, the'
shall f"le ("th the Co''"ss"oner the"r :o"nt ond $ond"t"oned &%on the %a+'ent +
the re$t"f"er of the ex$"se tax d&e on the re$t"f"ed al$ohol-
Pro!"ded# f&rther# That "n $ases (here al$ohol has alread+ een re$t"f"ed e"ther +
or","nal and $ont"n&o&s d"st"llat"on or + red"st"llat"on# no loss for re$t"f"$at"on and
handl"n, shall e allo(ed and the re$t"f"er thereof shall %a+ the ex$"se tax d&e on
s&$h losses-
Pro!"ded# f"nall+# That (here a re$t"f"er 'a9es &se of s%"r"ts &%on (h"$h the ex$"se
tax has not een %a"d# he shall e l"ale for the %a+'ent of the tax other("se d&e
thereon.
SECTION 238.Re'o!al of <er'ented L";&ors to .onded ?areho&se. An+
re(er 'a+ re'o!e or trans%ort fro' h"s re(er+ or other %la$e of 'an&fa$t&re to
a onded (areho&se &sed + h"' ex$l&s"!el+ for the stora,e or sale "n &l9 of
fer'ented l";&ors of h"s o(n 'an&fa$t&re# an+ ;&ant"t+ of s&$h fer'ented l";&ors#
not less than one tho&sand 62#0007 l"ters at one re'o!al# ("tho&t %re%a+'ent of the
tax thereon &nder a %er'"t (h"$h shall e ,ranted + the Co''"ss"oner.
S&$h %er'"t shall e aff"xed to e!er+ %a$9a,e so re'o!ed and shall e $an$elled or
destro+ed "n s&$h 'anner as the Co''"ss"oner 'a+ %res$r"e. Thereafter# the
'an&fa$t&rer of s&$h fer'ented l";&ors shall %a+ the tax "n the sa'e 'anner and
&nder the sa'e %enalt+ and l"a"l"t+ as (hen %a"d at the re(er+.
SECTION 23>.Re'o!al of Da'a,ed L";&ors <ree of Tax. ?hen an+ fer'ented
l";&or has e$o'e so&r or other("se da'a,ed so as to e &nf"t for &se as s&$h#
re(ers 'a+ sell and after se$&r"n, a s%e$"al %er'"t fro' the Co''"ss"oner# &nder
s&$h $ond"t"ons as 'a+ e %res$r"ed "n the r&les and re,&lat"ons %res$r"ed + the
Se$retar+ of <"nan$e# re'o!e the sa'e ("tho&t the %a+'ent of tax thereon# "n $as9
or other %a$9a,es# d"st"n$t fro' those ord"nar"l+ &sed for fer'ented l";&ors# ea$h
$onta"n"n, not less than one h&ndred se!ent+Bf"!e 62A)7 l"ters ("th a note of the"r
$ontents %er'anentl+ aff"xed thereon.
SECTION 240. Re'o!al of Toa$$o Prod&$ts ?"tho&t Pre%a+'ent of Tax.
Prod&$ts of toa$$o ent"rel+ &nf"t for $he("n, or s'o9"n, 'a+ e re'o!ed free of
tax for a,r"$&lt&ral or "nd&str"al &se# &nder s&$h $ond"t"ons as 'a+ e %res$r"ed "n
the r&les and re,&lat"ons %res$r"ed + the Se$retar+ of <"nan$e.
Ste''ed leaf toa$$o# f"neB$&t shorts# the ref&se of f"neB$&t $he("n, toa$$o#
s$ra%s# $&tt"n,s# $l"%%"n,s# ste's or '"dr"s# and s(ee%"n,s of toa$$o 'a+ e sold
"n &l9 as ra( 'ater"al + one 'an&fa$t&rer d"re$tl+ to another ("tho&t %a+'ent of
the tax# &nder s&$h $ond"t"ons as 'a+ e %res$r"ed "n the r&les and re,&lat"ons
%res$r"ed + the Se$retar+ of <"nan$e.
DSte''ed leaf toa$$o#' as here"n &sed# 'eans leaf toa$$o (h"$h has had the ste'
or '"dr" re'o!ed. The ter' does not "n$l&de ro9en leaf toa$$o.
Conditions for transfer 7it*out %re%a6ment of s%e!ifi! ta8 on stemmed leaf to9a!!o.
T*e follo7ing !onditions must 9e met for stemmed leaf to9a!!o to 9e transferred 7it*out
%re%a6ment of s%e!ifi! ta8, to 7itC
FaG T*e transfer s*all 9e made %ursuant to an offi!ial L/4 invoi!e on 7*i!* s*all 9e
entered t*e e8a!t 7eig*t of t*e to9a!!o at t*e time of its removal?
F9G Entr6 s*all 9e made in t*e L/4 register in t*e %la!e %rovided on t*e %age
removals? and
F!G Corres%onding de9it entr6 s*all 9e made in t*e L/4 register 9oo> of t*e fa!tor6
re!eiving t*e to9a!!o under t*e *eading DRefuse, et!., re!eived from t*e ot*er fa!tor6,D
s*o7ing t*e date of re!ei%t, assessment and invoi!e num9ers, name and address of t*e
!onsignor, form in 7*i!* re!eived, and t*e 7eig*t of t*e to9a!!o.
Commissioner of Internal Revenue vs. La Cam%ana(a9ri!a de Ta9a!os, In!., +.R. No.
"#<;4<, Novem9er "<, ;22"
Ta8 Code %rovisions on sale of stemmed leaf to9a!!o must 9e read and inter%reted in
a!!ordan!e 7it* %ertinent Revenue Regulations.
$ot* Se!tions "04 and "#" of t*e former Ta8 Code Fno7 Se!tions "#2 and "## of R.A.
No. =#;#G allo7ed t*e sale of stemmed leaf to9a!!o 7it*out an6 %re/%a6ment of ta8.
&o7ever, a !areful reading of t*e %rovisions s*o7 t*at su!* sale is Jualified 96 and is
su9:e!t to Dsu!* !onditions as ma6 9e %res!ri9ed in t*e regulations of t*e e%artment of
(inan!e.D Said !onditions 7ere %rovided for in Revenue Regulations Nos. V/03 and "4/
14, 7*i!* 7ere issued to !larif6 and im%lement t*e foregoing %rovisions of t*e Ta8 Code.
&en!e, said %rovisions of t*e Ta8 Code must 9e read and inter%reted in a!!ordan!e 7it*
said regulations.
Com%ania +eneral de Ta9a!os de (ili%inas vs. Court of A%%eals, et al., +.R. No. "#401",
Mar!* ;0, ;22#
To !laim e8em%tion from s%e!ifi! ta8, 9ot* t*e entit6 and t*e transferee must 9e
!ategoriHed as L/4 manufa!turers.
It is !lear t*at an entit6 !laiming e8em%tion from s%e!ifi! ta8 under Se!tion "04, must
%rove t*at 9ot* t*e entit6 and t*e transferee are !ategoriHed as L/4 manufa!turers sin!e
onl6 an L/4 to9a!!o manufa!turer *as an L/4 invoi!e and an L/4 registr6 9oo>. T*e
ta8%a6er is engaged in t*e e8%ort, domesti! sale and re/dr6ing of to9a!!o leaves,
a!tivities 7*i!* are designated as falling eit*er under L/0R or L/1 under Revenue
Regulations No. "4/14. T*us, not 9eing designated as an L/4 to9a!!o manufa!turer, it
!annot !laim an6 e8em%tion from %a6ment of t*e s%e!ifi! ta8 on its stemmed leaf to9a!!o.
T*erefore, it is lia9le to %a6 t*e s%e!ifi! ta8 t*ereon and is not lia9le to an6 refund of t*e
s%e!ifi! ta8es %aid.
Com%ania +eneral de Ta9a!os de (ili%inas vs. Court of A%%eals, et al., +.R. No. "#401",
Mar!* ;0, ;22#
As !an 9e seen, t*e la7 !reates a four/tiered s6stem 7*i!* 7e ma6 refer to as t*e lo7/
%ri!ed, medium/%ri!ed, *ig*/%ri!ed, and %remium/%ri!ed ta8 9ra!>ets. I*en a 9rand is
introdu!ed in t*e mar>et, t*e !urrent net retail %ri!e is determined t*roug* t*e
aforeJuoted s%e!ified %ro!edure. T*e !urrent net retail %ri!e is t*en used to !lassif6
under 7*i!* ta8 9ra!>et t*e 9rand 9elongs in order to finall6 determine t*e
!orres%onding e8!ise ta8 rate on a %er %a!> 9asis. T*e assailed feature of t*is la7
%ertains to t*e me!*anism 7*ere, after a 9rand is !lassified 9ased on its !urrent net
retail %ri!e, t*e !lassifi!ation is froHen and onl6 Congress !an t*ereafter re!lassif6 t*e
same. (rom a %ra!ti!al %oint of vie7, Anne8 DD is merel6 a 96/%rodu!t of t*e 7*ole
me!*anism and %*iloso%*6 of t*e assailed la7. T*at is, t*e 9rands under Anne8 DD 7ere
also !lassified 9ased on t*eir !urrent net retail %ri!e, t*e onl6 differen!e 9eing t*at t*e6
7ere t*e first ones so !lassified sin!e t*e6 7ere t*e onl6 9rands surve6ed as of '!to9er ",
"331, or %rior to t*e effe!tivit6 of RA =;#2 on Januar6 ", "334.
ue to t*is legislative !lassifi!ation s!*eme, it is %ossi9le t*at over time t*e net retail
%ri!e of a %reviousl6 !lassified 9rand, 7*et*er it 9e a 9rand under Anne8 DD or a ne7
9rand !lassified after t*e effe!tivit6 of RA =;#2 on Januar6 ", "334, 7ould in!rease Fdue
to inflation, in!rease of %rodu!tion !osts, manufa!turer@s de!ision to in!rease its %ri!es,
et!.G to a %oint t*at its net retail %ri!e %ier!es t*e ta8 9ra!>et to 7*i!* it 7as %reviousl6
!lassified. ConseJuentl6, even if its %resent da6 net retail %ri!e 7ould ma>e it fall under a
*ig*er ta8 9ra!>et, t*e %reviousl6 !lassified 9rand 7ould !ontinue to 9e su9:e!t to t*e
e8!ise ta8 rate under t*e lo7er ta8 9ra!>et 96 virtue of t*e legislative !lassifi!ation
freeHe.
$ritis* Ameri!an To9a!!o vs. Jose Isidro N. Cama!*o, et al., +.R. No. "10<=0, August
;2, ;22=
CHAPTER III
Ex$"se Tax on Al$ohol Prod&$ts
SECTION 242.D"st"lled S%"r"ts. On d"st"lled s%"r"ts# there shall e $olle$ted#
s&:e$t to the %ro!"s"ons of Se$t"on 233 of th"s Code# ex$"se taxes as follo(s-
6a7 If %rod&$ed fro' the sa% of n"%a# $o$on&t# $assa!a# $a'ote# or &r" %al' or
fro' the :&"$e# s+r&% or s&,ar of the $ane# %ro!"ded s&$h 'ater"als are %rod&$ed
$o''er$"all+ "n the $o&ntr+ (here the+ are %ro$essed "nto d"st"lled s%"r"ts# %er
%roof l"ter# Ele!en %esos and s"xt+Bf"!e $enta!os 6P22.*)78
67 If %rod&$ed fro' ra( 'ater"als other than those en&'erated "n the %re$ed"n,
%ara,ra%h# the tax shall e "n a$$ordan$e ("th the net reta"l %r"$e %er ottle of
se!en h&ndred f"ft+ '"ll"l"ter 6A)0 'l.7 !ol&'e $a%a$"t+ 6ex$l&d"n, the ex$"se tax
and the !al&eBadded tax7 as follo(s-
627 Less than T(o h&ndred and f"ft+ %esos 6P/)0.007 One h&ndred t(ent+Bs"x
%esos 6P2/*.007 %er %roof l"ter8
6/7 T(o h&ndred and f"ft+ %esos 6P/)0.007 &% to S"x h&ndred and se!ent+Bf"!e
%esos 6P*A).007 T(o h&ndred f"ft+Bt(o %esos 6P/)/.007# %er %roof l"ter8 and
637 @ore than S"x h&ndred and se!ent+ f"!e %esos 6P*A).007 <"!e h&ndred fo&r
%esos 6P)04.007# %er %roof l"ter.
6$7 @ed"$"nal %re%arat"ons# fla!or"n, extra$ts# and all other %re%arat"ons# ex$e%t
to"let %re%arat"ons# of (h"$h# ex$l&d"n, (ater# d"st"lled s%"r"ts for' the $h"ef
"n,red"ent# shall e s&:e$t to the sa'e tax as s&$h $h"ef "n,red"ent.
Th"s tax shall e %ro%ort"onall+ "n$reased for an+ stren,th of the s%"r"ts taxed o!er
%roof s%"r"ts# and the tax shall atta$h to th"s s&stan$e as soon as "t "s "n ex"sten$e
as s&$h# (hether "t e s&se;&entl+ se%arated as %&re or "'%&re s%"r"ts# or
transfor'ed "nto an+ other s&stan$es e"ther "n the %ro$ess of or","nal %rod&$t"on
or + an+ s&se;&ent %ro$ess.
S%"r"ts or d"st"lled s%"r"ts' "s the s&stan$e 9no(n as eth+l al$ohol# ethanol or s%"r"ts
of ("ne# "n$l&d"n, all d"l&t"ons# %&r"f"$at"ons and '"xt&res thereof# fro' (hate!er
so&r$e# + (hate!er %ro$ess %rod&$ed# and shall "n$l&de (h"s9+# rand+# r&'# ,"n
and !od9a# and other s"'"lar %rod&$ts of '"xt&res.
Proof s%"r"ts' "s l";&or $onta"n"n, oneBhalf 62E/7 of "ts !ol&'e of al$ohol of a
s%e$"f"$ ,ra!"t+ of se!en tho&sand n"ne h&ndred and th"rt+Bn"ne ten tho&sandths
60.A>3>7 at f"fteen de,rees $ent",rade 62)NC7. A '%roof l"ter' 'eans a l"ter of %roof
s%"r"ts.
Net reta"l %r"$e'# as deter'"ned + the .&rea& of Internal Re!en&e thro&,h a %r"$e
s&r!e+ to e $ond&$ted + the .&rea& of Internal Re!en&e "tself# or + the Nat"onal
Stat"st"$s Off"$e (hen de%&t"5ed for the %&r%ose + the .&rea& of Internal
Re!en&e# shall 'ean the %r"$e at (h"$h the d"st"lled s%"r"ts "s sold on reta"l "n at
least ten 6207 'a:or s&%er'ar9ets "n @etro @an"la# ex$l&d"n, the a'o&nt "ntended
to $o!er the a%%l"$ale ex$"se tax and the !al&eBadded tax. <or rands (h"$h are
'ar9eted o&ts"de @etro @an"la# the 'net reta"l %r"$e' shall 'ean the %r"$e at (h"$h
the d"st"lled s%r"ts "s sold "n at least f"!e 6)7 'a:or s&%er'ar9ets "n the re,"on
ex$l&d"n, the a'o&nt "ntended to $o!er the a%%l"$ale ex$"se tax and the !al&eB
added tax.
Car"ants of ex"st"n, rands and !ar"ants of ne( rands (h"$h are "ntrod&$ed "n the
do'est"$ 'ar9et after the effe$t"!"t+ of th"s A$t shall e taxed &nder the %ro%er
$lass"f"$at"on thereof ased on the the"r s&,,ested net reta"l %r"$e- Pro!"ded#
ho(e!er# That s&$h $lass"f"$at"on shall not# "n an+ $ase# e lo(er than the h",hest
$lass"f"$at"on of an+ !ar"ant of that rand.
A '!ar"ant of a rand' shall refer to a rand on (h"$h a 'od"f"er "s %ref"xed andEor
s&ff"xed to the root na'e of the rand.
Ne( rands# as def"ned "n the "''ed"atel+ follo("n, %ara,ra%h# shall "n"t"all+ e
$lass"f"ed a$$ord"n, to the"r s&,,ested net reta"l %r"$e.
?"llf&l &nderstate'ent of the s&,,ested net reta"l %r"$e + as '&$h as f"fteen
%er$ent 62)17 of the a$t&al net reta"l %r"$e shall render the 'an&fa$t&rer l"ale for
add"t"onal ex$"se tax e;&"!alent to the tax d&e and d"fferen$e et(een the
&nderstated s&,,ested net reta"l %r"$e and the a$t&al net reta"l %r"$e.
Ne( rand' shall 'ean a rand re,"stered after the date of effe$t"!"t+ of R.A. No.
8/40.
S&,,ested net reta"l %r"$e' shall 'ean the net reta"l %r"$e at (h"$h ne( rands# as
def"ned ao!e# of lo$all+ 'an&fa$t&red or "'%orted d"st"lled s%"r"ts are "ntended +
the 'an&fa$t&rer or "'%orter to e sold on reta"l "n 'a:or s&%er'ar9ets or reta"l
o&tlets "n @etro @an"la for those 'ar9eted nat"on("de# and "n other re,"ons# for
those ("th re,"onal 'ar9ets. At the end of three 637 'onths fro' the %rod&$t
la&n$h# the .&rea& of Internal Re!en&e shall !al"date the s&,,ested net reta"l %r"$e
as def"ned here"n and deter'"ne the $orre$t tax ra$9et to (h"$h a %art"$&lar ne(
rand of d"st"lled s%"r"ts# as def"ned ao!e# shall e $lass"f"ed. After the end of
e",hteen 6287 'onths fro' s&$h !al"dat"on# the .&rea& of Internal Re!en&e shall
re!al"date the "n"t"all+ !al"dated net reta"l %r"$e a,a"nst the net reta"l %r"$e of the
t"'e of re!al"dat"on "n order to f"nall+ deter'"ne the $orre$t tax ra$9et (h"$h a
%art"$&lar ne( rand of d"st"lled s%"r"ts shall e $lass"f"ed-
Pro!"ded# ho(e!er# That rands of d"st"lled s%"r"ts "ntrod&$ed "n the do'est"$
'ar9et et(een Fan&ar+ 2# 2#>>A and De$e'er 32# /003 shall re'a"n "n the
$lass"f"$at"on &nder (h"$h the .&rea& of Internal Re!en&e has deter'"ned the' to
elon, as of De$e'er 32# /003. S&$h $lass"f"$at"on of ne( rands and rands
"ntrod&$ed et(een Fan&ar+ 2# 2>>A and De$e'er 32# /003 shall not e re!"sed
ex$e%t + an a$t of Con,ress.
The rates of tax "'%osed &nder th"s Se$t"on shall e "n$rease + e",ht %er$ent 6817
e!er+ t(o +ears start"n, on Fan&ar+ 2# /00A &nt"l Fan&ar+ 2# /022.
An+ do(n(ard re$lass"f"$at"on of %resent $ate,or"es# for tax %&r%oses# of ex"st"n,
rands of d"st"lled s%"r"ts d&l+ re,"stered at the t"'e of the effe$t"!"t+ of th"s A$t
(h"$h ("ll red&$e the tax "'%osed here"n# or the %a+'ent thereof# shall e
%roh""ted.
The $lass"f"$at"on of ea$h rand of d"st"lled s%"r"ts ased on the a!era,e net reta"l
%r"$e as of O$toer 2# 2>>*# as set forth "n Annex 'A'# "n$l&d"n, the $lass"f"$at"on of
rands for the sa'e %rod&$ts (h"$h# altho&,h not set forth "n sa"d Annex 'A'# (ere
re,"stered and (ere e"n, $o''er$"all+ %rod&$ed and 'ar9eted on or after
O$toer 2# 2>>*# and (h"$h $ont"n&e to e $o''er$"all+ %rod&$ed and 'ar9eted
after the effe$t"!"t+ of th"s A$t# shall re'a"n "n for$e &nt"l re!"sed + Con,ress.
@an&fa$t&rers and "'%orters of d"st"lled s%"r"ts shall# ("th"n th"rt+ 6307 da+s fro'
the effe$t"!"t+ of th"s A$t# and ("th"n the f"rst f"!e 6)7 da+s of e!er+ th"rd 'onth
thereafter# s&'"t to the Co''"ss"oner a s(orn state'ent of the !ol&'e of sales
for ea$h %art"$&lar rand of d"st"lled s%"r"ts sold at h"s estal"sh'ent for the threeB
'onth %er"od "''ed"atel+ %re$ed"n,.
An+ 'an&fa$t&rer or "'%orter (ho# "n !"olat"on of th"s Se$t"on# 9no("n,l+
'"sde$lares or '"sre%resents "n h"s or "ts s(orn state'ent here"n re;&"red an+
%ert"nent data or "nfor'at"on shall# &%on f"nal f"nd"n,s + the Co''"ss"oner that
the !"olat"on (as $o''"tted# e %enal"5ed + a s&''ar+ $an$ellat"on or
("thdra(al of h"s or "ts %er'"t to en,a,e "n &s"ness as 'an&fa$t&rer or "'%orter
of d"st"lled s%"r"ts.
An+ $or%orat"on# asso$"at"on or %artnersh"% l"ale for an+ of the a$ts or o'"ss"ons
"n !"olat"on of th"s Se$t"on shall e f"ned trele the a'o&nt of def"$"en$+ taxes#
s&r$har,es and "nterest (h"$h 'a+ e assessed %&rs&ant to th"s Se$t"on.
An+ %erson l"ale for an+ of the a$ts or o'"ss"on %roh""ted &nder th"s Se$t"on
shall e $r"'"nall+ l"ale and %enal"5ed &nder Se$t"on /)4 of th"s Code. An+
%erson (ho ("llf&ll+ a"ds or aets "n the $o''"ss"on of an+ s&$h a$t or o'"ss"on
shall e $r"'"nall+ l"ale "n the sa'e 'anner as the %r"n$"%al.
If the offender "s not a $"t"5en of the Ph"l"%%"nes# he shall e de%orted "''ed"atel+
after ser!"n, the senten$e# ("tho&t f&rther %ro$eed"n,s for de%ortat"on.D
SECTION 24/. ?"nes. On ("nes# there shall e $olle$ted %er l"ter of
!ol&'e $a%a$"t+# the follo("n, taxes.
6a7 S%ar9l"n, ("nesE$ha'%a,nes re,ardless of %roof# "f the net reta"l %r"$e %er
ottle 6ex$l&d"n, the ex$"se tax and the !al&eBadded tax7 "s-
627 <"!e h&ndred %esos 6P)00.007 or less One h&ndred fort+Bf"!e %esos and s"xt+
$enta!os 6P24).*078 and
6/7 @ore than <"!e h&ndred %esos 6P)00.007 <o&r h&ndred th"rt+Bs"x %esos and
e",ht+ $enta!os 6P43*.807.
67 St"ll ("nes $onta"n"n, fo&rteen %er$ent 62417 of al$ohol + !ol&'e or less#
Se!enteen %esos and fort+Bse!en $enta!os 6P2A.4A78 and
6$7 St"ll ("nes $onta"n"n, 'ore than fo&rteen %er$ent 62417 &t not 'ore than
t(ent+Bf"!e %er$ent 6/)17 of al$ohol + !ol&'e# Th"rt+Bfo&r %esos and n"net+Bfo&r
$enta!os 6P34.>47.
<ort"f"ed ("nes $onta"n"n, 'ore than t(ent+Bf"!e %er$ent 6/)17 of al$ohol +
!ol&'e shall e taxed as d"st"lled s%"r"ts. '<ort"f"ed ("nes' shall 'ean nat&ral ("nes
to (h"$h d"st"lled s%"r"ts are added to "n$rease the"r al$ohol stren,th.
s&r!e+ to e $ond&$ted + the .&rea& of Internal Re!en&e "tself# or + the Nat"onal
Re!en&e# shall 'ean the %r"$e at (h"$h ("ne "s sold on reta"l "n at least ten 6207
'a:or s&%er'ar9ets "n @etro @an"la# ex$l&d"n, the a'o&nt "ntended to $o!er the
a%%l"$ale ex$"se tax and the !al&eBadded tax. <or rands (h"$h are 'ar9eted
o&ts"de @etro @an"la# the 'net reta"l %r"$e' shall 'ean the %r"$e at (h"$h the ("ne "s
sold "n at least f"!e 6)7 'a:or s&%er'ar9ets "n the re,"on ex$l&d"n, the a'o&nt
"ntended to $o!er the a%%l"$ale ex$"se tax and the !al&eBadded tax.
$lass"f"$at"on thereof ased on the"r s&,,ested net reta"l %r"$e- Pro!"ded# ho(e!er#
That s&$h $lass"f"$at"on shall not# "n an+ $ase# e lo(er than the h",hest
8/40.
def"ned ao!e# of lo$all+ 'an&fa$t&red or "'%orted ("nes are "ntended + the
'an&fa$t&rer or "'%orter to e sold on reta"l "n 'a:or s&%er'ar9ets or reta"l o&tlets
"n @etro @an"la for those 'ar9eted nat"on("de# and "n other re,"ons# for those
("th re,"onal 'ar9ets. At the end of three 637 'onths fro' the %rod&$t la&n$h# the
.&rea& of Internal Re!en&e shall !al"date the s&,,ested net reta"l %r"$e of the ne(
rand a,a"nst the net reta"l %r"$e as def"ned here"n and deter'"ne the $orre$t tax
ra$9et to (h"$h a %art"$&lar ne( rand of ("ne# as def"ned ao!e# shall e
$lass"f"ed.
After the end of e",hteen 6287 'onths fro' s&$h !al"dat"on# the .&rea& of Internal
Re!en&e shall re!al"date the "n"t"all+ !al"dated net reta"l %r"$e a,a"nst the net reta"l
%r"$e as of the t"'e of re!al"dat"on "n order to f"nall+ deter'"ne the $orre$t tax
ra$9et (h"$h a %art"$&lar ne( rand of ("nes shall e $lass"f"ed- Pro!"ded#
ho(e!er# That rands of ("nes "ntrod&$ed "n the do'est"$ 'ar9et et(een Fan&ar+
2# 2>>A and De$e'er 32# /003 shall re'a"n "n the $lass"f"$at"on &nder (h"$h the
.&rea& of Internal Re!en&e has deter'"ned the' to elon, as of De$e'er 32#
/003. S&$h $lass"f"$at"on of ne( rands and rands "ntrod&$ed et(een Fan&ar+ 2#
2>>A and De$e'er 32# /003 shall not e re!"sed ex$e%t + an+ a$t of Con,ress.
The rates of tax "'%osed &nder th"s Se$t"on shall e "n$reased + e",ht %er$ent
6817 e!er+ t(o +ears start"n, on Fan&ar+ 2# /00A &nt"l Fan&ar+ 2# /022.
rands of ("nes d&l+ re,"stered at the t"'e of the effe$t"!"t+ of th"s A$t (h"$h ("ll
red&$e the tax "'%osed here"n# or the %a+'ent thereof# shall e %roh""ted.
The $lass"f"$at"on of ea$h rand of ("nes ased on the a!era,e net reta"l %r"$e as of
O$toer 2# 2>>*# as set forth "n Annex '.'# "n$l&d"n, the $lass"f"$at"on of rands for
the sa'e %rod&$ts (h"$h# altho&,h not set forth "n sa"d DAnnex .D# (ere re,"stered
and (ere e"n, $o''er$"all+ %rod&$ed and 'ar9eted after the effe$t"!"t+ of th"s
A$t# shall re'a"n "n for$e &nt"l re!"sed + Con,ress.
@an&fa$t&rers and "'%orters of ("nes shall# ("th"n th"rt+ 6307 da+s fro' the
effe$t"!"t+ of th"s A$t# and ("th"n the f"rst f"!e 6)7 da+s of e!er+ 'onth thereafter#
s&'"t to the Co''"ss"oner a s(orn state'ent of the !ol&'e of sales for ea$h
%art"$&lar rand of ("nes sold at h"s estal"sh'ent for the threeB'onth %er"od
"''ed"atel+ %re$ed"n,.
%ert"nent data or "nfor'at"on shall# &%on d"s$o!er+# e %enal"5ed + a s&''ar+
$an$ellat"on or ("thdra(al of h"s or "ts %er'"t to en,a,e "n &s"ness as
'an&fa$t&rer or "'%orter of ("nes.
An+ %erson l"ale for an+ of the a$ts or o'"ss"ons %roh""ted &nder th"s Se$t"on
SECTION 243. <er'ented L";&ors. There shall e le!"ed# assessed and
$olle$ted an ex$"se tax on eer# la,er eer# ale# %orter and other fer'ented l";&ors
ex$e%t t&a# as"# ta%&+ and s"'"lar fer'ented l";&ors "n a$$ordan$e ("th the
follo("n, s$hed&le-
6a7 If the net reta"l %r"$e 6ex$l&d"n, the ex$"se tax and the !al&eBadded tax7 %er l"ter
of !ol&'e $a%a$"t+ "s less than <o&rteen %esos and f"ft+ $enta!os 6P24.)07# the tax
shall e E",ht %esos and t(ent+Bse!en $enta!os 6P8./A7 %er l"ter8
67 If the net reta"l %r"$e 6ex$l&d"n, the ex$"se tax and the !al&eBadded tax7 %er l"ter
of !ol&'e $a%a$"t+ "s <o&rteen %esos and f"ft+ $enta!os 6P24.)07 &% to T(ent+Bt(o
%esos 6P//.007# the tax shall e T(el!e %esos and th"rt+ $enta!os 6P2/.307 %er l"ter8
6$7 If the net reta"l %r"$e 6ex$l&d"n, the ex$"se tax and the !al&eBadded tax7 %er l"ter
of !ol&'e $a%a$"t+ "s 'ore than T(ent+Bt(o %esos 6P//.007# the tax shall e
S"xteen %esos and th"rt+Bthree $enta!os 6P2*.337 %er l"ter.
$lass"f"$at"on thereof ased on the"r s&,,ested net reta"l %r"$e- Pro!"ded# ho(e!er#
That s&$h $lass"f"$at"on shall not# "n an+ $ase# e lo(er than the h",hest
<er'ented l";&ors (h"$h are re(ed and sold at '"$roBre(er"es or s'all
estal"sh'ents s&$h as %&s and resta&rants shall e s&:e$t to the rate "n %ara,ra%h
6$7 hereof.
8/40.
def"ned ao!e# of lo$all+ 'an&fa$t&red or "'%orted fer'ented l";&or are "ntended
+ the 'an&fa$t&rer or "'%orter to e sold on reta"l "n 'a:or s&%er'ar9ets or reta"l
o&tlets "n @etro @an"la for those 'ar9eted nat"on("de# and "n other re,"ons# for
those ("th re,"onal 'ar9ets.
At the end of three 637 'onths fro' the %rod&$t la&n$h# the .&rea& of Internal
Re!en&e shall !al"date the s&,,ested net reta"l %r"$e of the ne( rand a,a"nst the
net reta"l %r"$e as def"ned here"n and deter'"ne the $orre$t tax ra$9et to (h"$h a
%art"$&lar ne( rand of fer'ented l";&or# as def"ned ao!e# shall e $lass"f"ed.
ra$9et (h"$h a %art"$&lar ne( rand of fer'ented l";&ors shall e $lass"f"ed-
Pro!"ded# ho(e!er# That rands of fer'ented l";&ors "ntrod&$ed "n the do'est"$
'ar9et et(een Fan&ar+ 2# 2>>A and De$e'er 32# /003 shall re'a"n "n the
$lass"f"$at"on &nder (h"$h the .&rea& of Internal Re!en&e has deter'"ned the' to
elon, as of De$e'er 32# /003. S&$h $lass"f"$at"on of ne( rands and rands
"ntrod&$ed et(een Fan&ar+ 2# 2>>A and De$e'er 32# /003 shall not e re!"sed
ex$e%t + an a$t of Con,ress.
s&r!e+ to e $ond&$ted + the .&rea& of Internal Re!en&e "tself# or the Nat"onal
Re!en&e# shall 'ean the %r"$e at (h"$h the fer'ented l";&or "s sold on reta"l "n at
least t(ent+ 6/07 'a:or s&%er'ar9ets "n @etro @an"la 6for rands of fer'ented
l";&or 'ar9eted nat"onall+7# ex$l&d"n, the a'o&nt "ntended to $o!er the a%%l"$ale
ex$"se tax and the !al&eBadded tax.
<or rands (h"$h are 'ar9eted o&ts"de @etro @an"la# the 'net reta"l %r"$e' shall
'ean the %r"$e at (h"$h the fer'ented l";&or "s sold "n at least f"!e 6)7 'a:or
s&%er'ar9ets "n the re,"on ex$l&d"n, the a'o&nt "ntended to $o!er the a%%l"$ale
ex$"se tax and the !al&eBadded tax.
The $lass"f"$at"on of ea$h rand of fer'ented l";&or ased on "ts a!era,e net reta"l
%r"$e as of O$toer 2# 2>>*# as set forth "n Annex 'C'# "n$l&d"n, the $lass"f"$at"on of
rands for the sa'e %rod&$ts (h"$h# altho&,h not set forth "n sa"d Annex 'C'# (ere
The rates of tax "'%osed &nder th"s Se$t"on shall e "n$reased + e",ht %er$ent
6817 e!er+ t(o +ears start"n, on Fan&ar+ 2# /00A &nt"l Fan&ar+ 2# /022.
rands of fer'ented l";&or d&l+ re,"stered at the t"'e of the effe$t"!"t+ of th"s A$t
(h"$h ("ll red&$e the tax "'%osed here"n# or the %a+'ent thereof# shall e
%roh""ted.
E!er+ re(er or "'%orter of fer'ented l";&or shall# ("th"n th"rt+ 6307 da+s fro'
the effe$t"!"t+ of th"s A$t# and ("th"n the f"rst f"!e 6)7 da+s of e!er+ 'onth
for ea$h %art"$&lar rand of fer'ented l";&or sold at h"s estal"sh'ent for the threeB
'onth %er"od "''ed"atel+ %re$ed"n,.
An+ re(er or "'%orter (ho# "n !"olat"on of th"s Se$t"on# 9no("n,l+ '"sde$lares
or '"sre%resents "n h"s or "ts s(orn state'ent here"n re;&"red an+ %ert"nent data or
"nfor'at"on shall e %enal"5ed + a s&''ar+ $an$ellat"on or ("thdra(al of h"s or
"ts %er'"t to en,a,e "n &s"ness as re(er or "'%orter of fer'ented l";&or.
An+ $or%orat"on# asso$"at"on or %artnersh"% l"ale for an+ the a$ts or o'"ss"ons "n
!"olat"on of th"s Se$t"on shall e f"ned trele the a'o&nt of def"$"en$+ taxes#
CHAPTER IC
Ex$"se Tax on Toa$$o Prod&$ts
SECTION 244. Toa$$o Prod&$ts. There shall e $olle$ted a tax of One
%eso 6P2.007 on ea$h 9"lo,ra' of the follo("n, %rod&$ts of toa$$o-
6a7 Toa$$o t("sted + hand or red&$ed "nto a $ond"t"on to e $ons&'ed "n an+
'anner other than the ord"nar+ 'ode of dr+"n, and $&r"n,8
67 Toa$$o %re%ared or %art"all+ %re%ared ("th or ("tho&t the &se of an+ 'a$h"ne
or "nstr&'ents or ("tho&t e"n, %ressed or s(eetened ex$e%t as other("se %ro!"ded
here&nder8 and
6$7 <"neB$&t shorts and ref&se# s$ra%s $l"%%"n,s# $&tt"n,s# ste's and s(ee%"n,s of
toa$$o ex$e%t as other("se %ro!"ded here&nder.
Ste''ed leaf toa$$o# toa$$o %re%ared or %art"all+ %re%ared ("th or ("tho&t the
&se of an+ 'a$h"ne or "nstr&'ent or ("tho&t e"n, %ressed or s(eetened# f"neB$&t
shorts and ref&se# s$ra%s# $l"%%"n,s# $&tt"n,s# ste's# '"dr"s8 and s(ee%"n,s of
toa$$o res&lt"n, fro' the handl"n, or str"%%"n, of (hole leaf toa$$o shall e
transferred# d"s%osed of# or other("se sold# ("tho&t an+ %re%a+'ent of the ex$"se
tax here"n %ro!"ded for# "f the sa'e are to e ex%orted or to e &sed "n the
'an&fa$t&re of $",ars# $",arettes# or other toa$$o %rod&$ts on (h"$h the ex$"se tax
("ll e!ent&all+ e %a"d on the f"n"shed %rod&$t# &nder s&$h $ond"t"ons as 'a+ e
%res$r"ed "n the r&les and re,&lat"ons %ro'&l,ated + the Se$retar+ of <"nan$e#
&%on re$o''endat"on of the Co''"ss"oner.
On toa$$o s%e$"all+ %re%ared for $he("n, so as to e &ns&"tale for &se "n an+
other 'anner# on ea$h 9"lo,ra'# Se!ent+Bn"ne $enta!os 6P0.A>7.
The rates of tax "'%osed &nder th"s Se$t"on shall e "n$reased + s"x %er$ent 6*17
e!er+ t(o +ears start"n, on Fan&ar+ 2# /00A &nt"l Fan&ar+ 2# /022.
@an&fa$t&rers and "'%orters of toa$$o %rod&$ts shall# ("th"n th"rt+ 6307 da+s
fro' the effe$t"!"t+ of th"s A$t# and ("th"n the f"rst f"!e 6)7 da+s of e!er+ 'onth
for ea$h %art"$&lar rand of toa$$o %rod&$ts sold at the"r estal"sh'ent for the
threeB'onth %er"od "''ed"atel+ %re$ed"n,.
%ert"nent data or "nfor'at"on# shall &%on d"s$o!er+# e %enal"5ed + a s&''ar+
'an&fa$t&rer or "'%orter of $",ars or $",arettes.
An+ %erson l"ale for an+ of the a$ts or o'"ss"on %roh""ted &nder th"s Se$t"on
SECTION 24). C",ars and C",arettes.
6A7 C",ars. There shall e le!"ed# assessed and $olle$ted on $",ars an ad
!alore' tax ased on the net reta"l %r"$e %er $",ar 6ex$l&d"n, the ex$"se tax and the
!al&eBadded tax7 "n a$$ordan$e ("th the follo("n, s$hed&le-
627 If the net reta"l %r"$e %er $",ar "s <"!e h&ndred %esos# 6P)00.007 or less# ten
%er$ent 620178 and
6/7 If the net reta"l %r"$e %er $",ar 6ex$l&d"n, the ex$"se tax and the !al&eBadded
tax7 "s 'ore than <"!e h&ndred %esos 6P)00.007# <"ft+ %esos 6P)0.007 %l&s f"fteen
%er$ent 62)17 of the net reta"l %r"$e "n ex$ess of <"!e h&ndred %esos 6P)00.007.
6.7 C",arettes Pa$9ed + Hand. There shall e le!"ed# assessed and $olle$ted on
$",arettes %a$9ed + hand a tax at the rates %res$r"ed elo(-
DEffe$t"!e on Fan&ar+ 2# /00)# T(o# %esos 6P/.007 %er %a$98
DEffe$t"!e on Fan&ar+ 2# /00A# T(o %esos and t(ent+Bthree $enta!os 6P/./37 %er
%a$98
DEffe$t"!e on Fan&ar+ 2# /00># T(o %esos and fort+Bse!en $enta!os 6P./.4A7 %er
%a$98 and
DEffe$t"!e on Fan&ar+ 2# /022# T(o %esos and se!ent+Bt(o $enta!os 6P/.A/7 %er
%a$9.
D&l+ re,"stered or ex"st"n, rands of $",arettes or ne( rands thereof %a$9ed +
hand shall onl+ e %a$9ed "n th"rt"es.
6C7 C",arettes Pa$9ed + @a$h"ne. There shall e le!"ed# assessed and $olle$ted
on $",arettes %a$9ed + 'a$h"ne a tax at the rates %res$r"ed elo(-
627 If the net reta"l %r"$e 6ex$l&d"n, the ex$"se tax and the !al&eBadded tax7 "s
elo( <"!e %esos 6P).007 %er %a$9# the tax shall e-
DEffe$t"!e on Fan&ar+ 2# /00)# T(o %esos 6P/.007 %er %a$98
DEffe$t"!e on Fan&ar+ 2# /00A# T(o %esos and t(ent+Bthree $enta!os 6P/./37 %er
%a$98
DEffe$t"!e on Fan&ar+ 2# /00># T(o %esos and fort+Bse!en $enta!os 6P/.4A7 %er
%a$98 and
DEffe$t"!e on Fan&ar+ 2# /022# T(o %esos and se!ent+Bt(o $enta!os 6P/.A/7 %er
%a$9.
6/7 If the net reta"l %r"$e 6ex$l&d"n, the ex$"se tax and the !al&eBadded tax7 "s <"!e
%esos 6P).007 &t does not ex$eed S"x %esos and f"ft+ $enta!os 6P*.)07 %er %a$9#
the tax shall e-
DEffe$t"!e on Fan&ar+ 2# /00)# S"x %esos and th"rt+Bf"!e $enta!os 6P*.3)7 %er %a$98
DEffe$t"!e on Fan&ar+ 2# /00A# S"x %esos and se!ent+Bfo&r $enta!os 6P*.A47 %er
%a$98
DEffe$t"!e on Fan&ar+ 2# /00># Se!en %esos and fo&rteen $enta!os 6PA.247 %er
%a$98 and
DEffe$t"!e on Fan&ar+ 2# /022# Se!en %esos and f"ft+Bs"x $enta!os 6PA.)*7 %er %a$9.
637 If the net reta"l %r"$e 6ex$l&d"n, the ex$"se tax and the !al&eBadded tax7 ex$eeds
S"x %esos and f"ft+ $enta!os 6P*.)07 &t does not ex$eed Ten %esos 6P20.007 %er
%a$9# the tax shall e8
DEffe$t"!e on Fan&ar+ 2# /00)# Ten %esos and th"rt+Bf"!e $enta!os 6P20.3)7 %er
%a$98
DEffe$t"!e on Fan&ar+ 2# /00A# Ten %esos and e",ht+Be",ht $enta!os 6P20.887 %er
%a$98
DEffe$t"!e on Fan&ar+ 2# /00># Ele!en %esos and fort+Bthree $enta!os 6P22.437 %er
%a$9 and8
DEffe$t"!e on Fan&ar+ 2# /022# T(el!e %esos 6P2/.007 %er %a$98
647 If the net reta"l %r"$e 6ex$l&d"n, the ex$"se tax and the !al&eBadded tax7 ao!e
Ten %esos 6P20.007 %er %a$9# the tax shall e-
DEffe$t"!e on Fan&ar+ 2# /00)# T(ent+Bf"!e %esos 6P/).007 %er %a$98
DEffe$t"!e on Fan&ar+ 2# /00A# T(ent+Bs"x %esos and s"x $enta!os 6P/*.0*7 %er
%a$98
DEffe$t"!e on Fan&ar+ 2# /00># T(ent+Bse!en %esos and s"xteen $enta!os 6P/A.2*7
%er %a$98 and
DEffe$t"!e on Fan&ar+ 2# /022# T(ent+Be",ht %esos and th"rt+ $enta!os 6/8.307 %er
%a$9.
Car"ants of ex"st"n, rands and !ar"ants of ne( rands of $",arettes (h"$h are
"ntrod&$ed "n the do'est"$ 'ar9et after the effe$t"!"t+ of th"s A$t shall e taxed
&nder the %ro%er $lass"f"$at"on thereof ased on the"r s&,,ested net reta"l %r"$e-
Pro!"ded# ho(e!er# That s&$h $lass"f"$at"on shall not# "n an+ $ase# e lo(er than
the h",hest $lass"f"$at"on of an+ !ar"ant of that rand.
D&l+ re,"stered or ex"st"n, rands of $",arettes or ne( rands thereof %a$9ed +
'a$h"ne shall onl+ e %a$9ed "n t(ent"es.
rands of $",ars and $",arettes d&l+ re,"stered at the t"'e of the effe$t"!"t+ of th"s
A$t (h"$h ("ll red&$e the tax "'%osed here"n# or the %a+'ent thereof# shall e
%roh""ted.
8/40.
def"ned ao!e# of lo$all+ 'an&fa$t&red or "'%orted $",arettes are "ntended + the
'an&fa$t&rer or "'%orter to e sold on reta"l "n 'a:or s&%er'ar9ets or reta"l o&tlets
"n @etro @an"la for those 'ar9eted nat"on("de# and "n other re,"ons# for those
("th re,"onal 'ar9ets. At the end of three 637 'onths fro' the %rod&$t la&n$h# the
.&rea& of Internal Re!en&e shall !al"date the s&,,ested net reta"l %r"$e of the ne(
rand a,a"nst the net reta"l %r"$e as def"ned here"n and deter'"ne the $orre$t tax
ra$9et &nder (h"$h a %art"$&lar ne( rand of $",arette# as def"ned ao!e# shall e
$lass"f"ed.
ra$9et &nder (h"$h a %art"$&lar ne( rand of $",arettes shall e $lass"f"ed-
Pro!"ded# ho(e!er# That rands of $",arettes "ntrod&$ed "n the do'est"$ 'ar9et
et(een Fan&ar+ 2# 2>>A and De$e'er 32# /003 shall re'a"n "n the $lass"f"$at"on
&nder (h"$h the .&rea& of Internal Re!en&e has deter'"ned the' to elon, as of
De$e'er 32# /003. S&$h $lass"f"$at"on of ne( rands and rands "ntrod&$ed
et(een Fan&ar+ 2# 2>>A and De$e'er 32# /003 shall not e re!"sed ex$e%t + an
a$t of Con,ress.
Net reta"l %r"$e#' as deter'"ned + the .&rea& of Internal Re!en&e thro&,h a %r"$e
s&r!e+ to e $ond&$ted + the .&rea& of Internal Re!en&e "tself# or the Nat"onal
Re!en&e# shall 'ean the %r"$e at (h"$h the $",arette "s sold on reta"l "n at least
t(ent+ 6/07 'a:or s&%er'ar9ets "n @etro @an"la 6for rands of $",arettes 'ar9eted
nat"onall+7# ex$l&d"n, the a'o&nt "ntended to $o!er the a%%l"$ale ex$"se tax and
!al&eBadded tax. <or rands (h"$h are 'ar9eted onl+ o&ts"de @etro @an"la# the
'net reta"l %r"$e'# shall 'ean the %r"$e at (h"$h the $",arette "s sold "n at least f"!e
6)7 'a:or s&%er'ar9ets "n the re,"on ex$l&d"n, the a'o&nt "ntended to $o!er the
a%%l"$ale ex$"se tax and the !al&eBadded tax.
The $lass"f"$at"on of ea$h rand of $",arettes ased "n "ts a!era,e net reta"l %r"$e as
of O$toer 2# 2>>*# as set forth "n Annex 'D'# "n$l&d"n, the $lass"f"$at"on of rands
for the sa'e %rod&$ts (h"$h# altho&,h not set forth "n sa"d Annex 'D'# (ere
@an&fa$t&rers and "'%orters of $",ars and $",arettes shall# ("th"n th"rt+ 6307 da+s
fro' the effe$t"!"t+ of th"s A$t and ("th"n the f"rst f"!e 6)7 da+s of e!er+ 'onth
for ea$h %art"$&lar rand of $",ars andEor $",arettes sold at h"s estal"sh'ent for the
threeB'onth %er"od "''ed"atel+ %re$ed"n,.
%ert"nent data or "nfor'at"on shall# &%on d"s$o!er+# e %enal"5ed + a s&''ar+
'an&fa$t&rer or "'%orter of $",ars or $",arettes.
"n !"olat"on of th"s Se$t"on shall e f"ned trele the a,,re,ate a'o&nt of def"$"en$+
taxes# s&r$har,es and "nterest (h"$h 'a+ e assessed %&rs&ant to th"s Se$t"on.
SECTION 24*. Ins%e$t"on <ee. <or "ns%e$t"on 'ade "n a$$ordan$e ("th th"s
Cha%ter# there shall e $olle$ted a fee of <"ft+ $enta!os 6P0.)07 for ea$h tho&sand
$",ars or fra$t"on thereof8 Ten $enta!os 6P0.207 for ea$h tho&sand $",arettes or
fra$t"on thereof8 T(o $enta!os 6P0.0/7 for ea$h 9"lo,ra' of leaf toa$$o or
fra$t"on thereof8 and Three $enta!os 6P0.037 for ea$h 9"lo,ra' or fra$t"on thereof#
of s$ra% and other 'an&fa$t&red toa$$o.
The "ns%e$t"on fee on leaf toa$$o# s$ra%# $",ars# $",arettes and other toa$$o
%rod&$ts as def"ned "n Se$t"on 24A of th"s Code shall e %a"d + the (holesaler#
'an&fa$t&rer# %rod&$er# o(ner or o%erator of redr+"n, %lant# as the $ase 'a+ e#
"''ed"atel+ efore re'o!al thereof fro' the estal"sh'ent of the (holesaler#
'an&fa$t&rer# o(ner or o%erator of the redr+"n, %lant. In $ase of "'%orted leaf
toa$$o and %rod&$ts thereof# the "ns%e$t"on fee shall e %a"d + the "'%orter
efore re'o!al fro' $&sto's' $&stod+.
<"ft+ %er$ent 6)017 of the toa$$o "ns%e$t"on fee shall a$$r&e to the Toa$$o
Ins%e$t"on <&nd $reated + Se$t"on 2/ of A$t No. /*23# as a'ended + A$t No.
32A># and f"ft+ %er$ent 6)017 shall a$$r&e to the C&lt&ral Center of the Ph"l"%%"nes.
$IR Commissioner is em%o7ered to !olle!t to9a!!o ins%e!tion fees even 7it*out
ins%e!tion.
To9a!!o Ins%e!tion fees are undou9tedl6 National Internal Revenue ta8es, t*e6
9eing one of t*e mis!ellaneous ta8es %rovided for under t*e Ta8 Code. Se!tion ;;=
Fformerl6 Se!tion 02;G of C*a%ter VII of t*e Code s%e!ifi!all6 %rovides for t*e
!olle!tion and manner of %a6ment of t*e said ins%e!tion fees. It is 7it*in t*e
%o7er and dut6 of t*e Commissioner to !olle!t t*e same, even 7it*out ins%e!tion,
s*ould to9a!!o %rodu!ts 9e removed !landestinel6 or surre%titiousl6 from t*e
esta9lis*ment of t*e 7*olesaler, manufa!turer or redr6ing %lant and from t*e
!ustoms !ustod6 in !ase of im%orted leaf to9a!!o. Errors, omissions or fla7s
!ommitted 96 $IR ins%e!tors and re%resentatives 7*ile in t*e %erforman!e of t*eir
duties !annot 9e set u% as esto%%el nor esto% t*e +overnment from !olle!ting a ta8
legall6 due. To9a!!o ins%e!tion fees are levied and !olle!ted for %ur%oses of
regulation and !ontrol and also as a sour!e of revenue sin!e fift6 %er!entum F<2EG
of said fees s*all a!!rue to t*e To9a!!o Ins%e!tion (ee (und !reated 96 Se!. "; of
A!t No. ;1"0, as amended and t*e ot*er fift6 %er!entum, to t*e Cultural Center of
t*e P*ili%%ines.
La Suerte Cigar and Cigarette (a!tor6, et al. vs. Court of Ta8 A%%eals, et al., +.R. No. L/
01"02, Januar6 "4, "3=<
SECTION 24A. Def"n"t"on of Ter's. ?hen &sed here"n and "n state'ents or
off"$"al for's %res$r"ed here&nder# the follo("n, ter's shall ha!e the 'ean"n,
"nd"$ated-
6a7 'C",ars' 'ean all rolls of toa$$o or an+ s&st"t&te thereof# (ra%%ed "n leaf
toa$$o.
67 'C",arettes' 'ean all rolls of f"nel+B$&t leaf toa$$o# or an+ s&st"t&te therefor#
(ra%%ed "n %a%er or "n an+ other 'ater"al.
6$7 '?holesale %r"$e' shall 'ean the a'o&nt of 'one+ or %r"$e %a"d for $",ars or
$",arettes %&r$hased for the %&r%ose of resale# re,ardless of ;&ant"t+.
6d7 'Reta"l %r"$e' shall 'ean the a'o&nt of 'one+ or %r"$e (h"$h an &lt"'ate
$ons&'er or endB&ser %a+s for $",ars or $",arettes %&r$hased.
CHAPTER C
Ex$"se Tax on Petrole&' Prod&$ts
SECTION 248. @an&fa$t&red O"ls and Other <&els. There shall e
$olle$ted on ref"ned and 'an&fa$t&red '"neral o"ls and 'otor f&els# the follo("n,
ex$"se taxes (h"$h shall atta$h to the ,oods here&nder en&'erated as soon as the+
are "n ex"sten$e as s&$h-
6a7 L&r"$at"n, o"ls and ,reases# "n$l&d"n, &t not l"'"ted to# asesto$9 for l&e
o"ls and ,reases# h",h !a$&&' d"st"llates# aro'at"$ extra$ts and other s"'"lar
%re%arat"ons# ant"Badd"t"!es for l&r"$at"n, o"ls and ,reases# (hether s&$h add"t"!es
are %etrole&' ased or not# %er l"ter and 9"lo,ra'# res%e$t"!el+# of !ol&'e $a%a$"t+
or (e",ht# <o&r %esos and f"ft+ $enta!os 6P4.)07-
Pro!"ded# ho(e!er# That the ex$"se taxes %a"d on the %&r$hased feedsto$9 6&n9er7
&sed "n the 'an&fa$t&re of ex$"sale art"$les and for'"n, %art thereof shall e
$red"ted a,a"nst the ex$"se tax d&e therefro'-
Pro!"ded# f&rther# That l&r"$at"n, o"ls and ,reases %rod&$ed fro' asesto$9s and
add"t"!es on (h"$h the ex$"se tax has alread+ een %a"d shall no lon,er e s&:e$t
to ex$"se tax-
Pro!"ded# f"nall+# That lo$all+ %rod&$ed or "'%orted o"ls %re!"o&sl+ taxed as s&$h
&t are s&se;&entl+ re%ro$essed# reBref"ned or re$+$led shall l"9e("se e s&:e$t to
the tax "'%osed &nder th"s Se$t"on.
67 Pro$essedB,as# %er l"ter of !ol&'e $a%a$"t+# <"!e $enta!os 6P0.0)78
6$7 ?axes and %etrolat&'# %er 9"lo,ra'# Three %esos and f"ft+ $enta!os 6P3.)078
6d7 On denat&red al$ohol to e &sed for 'ot"!e %o(er# %er l"ter of !ol&'e
$a%a$"t+# <"!e $enta!os 6P0.0)7- Pro!"ded# That &nless other("se %ro!"ded +
s%e$"al la(s# "f the denat&red al$ohol "s '"xed ("th ,asol"ne# the ex$"se tax on
(h"$h has alread+ een %a"d# onl+ the al$ohol $ontent shall e s&:e$t to the tax
here"n %res$r"ed. <or %&r%oses of th"s S&se$t"on# the re'o!al of denat&red
al$ohol of not less than one h&ndred e",ht+ de,rees 6280N7 %roof 6n"net+ %er$ent
6>017 asol&te al$ohol7 shall e dee'ed to ha!e een re'o!ed for 'ot"!e %o(er#
&nless sho(n other("se8
6e7 Na%htha# re,&lar ,asol"ne and other s"'"lar %rod&$ts of d"st"llat"on# %er l"ter
of !ol&'e $a%a$"t+# <o&r %esos and th"rt+Bf"!e $enta!os 6P4.3)7-
Pro!"ded# ho(e!er# That na%htha# (hen &sed as a ra( 'ater"al "n the %rod&$t"on of
%etro$he'"$al %rod&$ts or as re%la$e'ent f&el for nat&ralB,asBf"redB$o'"ned
$+$le %o(er %lant# "n l"e& of lo$all+Bextra$ted nat&ral ,as d&r"n, the nonB
a!a"la"l"t+ thereof# s&:e$t to the r&les and re,&lat"ons to e %ro'&l,ated + the
Se$retar+ of Ener,+# "n $ons&ltat"on ("th the Se$retar+ of <"nan$e# %er l"ter of
!ol&'e $a%a$"t+# 5ero 6P0.007-
Pro!"ded# f&rther# That the +B%rod&$t "n$l&d"n, f&el o"l# d"esel f&el# 9erosene#
%+rol+s"s ,asol"ne# l";&ef"ed %etrole&' ,ases and s"'"lar o"ls ha!"n, 'ore or less
the sa'e ,enerat"n, %o(er# (h"$h are %rod&$ed "n the %ro$ess"n, of na%htha "nto
%etro$he'"$al %rod&$ts shall e s&:e$t to the a%%l"$ale ex$"se tax s%e$"f"ed "n
th"s Se$t"on# ex$e%t (hen s&$h +B%rod&$ts are transferred to an+ of the lo$al o"l
ref"ner"es thro&,h sale# arter or ex$han,e# for the %&r%ose of f&rther %ro$ess"n, or
lend"n, "nto f"n"shed %rod&$ts (h"$h are s&:e$t to ex$"se tax &nder th"s Se$t"on8
6f7 Leaded %re'"&' ,asol"ne# %er l"ter of !ol&'e $a%a$"t+# <"!e %esos and
th"rt+Bf"!e $enta!os 6P).3)78 &nleaded %re'"&' ,asol"ne# %er l"ter of !ol&'e
$a%a$"t+# <o&r %esos and th"rt+Bf"!e $enta!os 6P4.3)78
6,7 A!"at"on t&ro :et f&el# %er l"ter of !ol&'e $a%a$"t+# Three %esos and s"xt+B
se!en $enta!os 6P3.*A78
6h7 Herosene# %er l"ter of !ol&'e $a%a$"t+# 5ero 6P0.007- Pro!"ded# That
9erosene# (hen &sed as a!"at"on f&el# shall e s&:e$t to the sa'e tax on a!"at"on
t&ro :et f&el &nder the %re$ed"n, %ara,ra%h 6,7# s&$h tax to e assessed on the &ser
thereof8
6"7 D"esel f&el o"l# and on s"'"lar f&el o"ls ha!"n, 'ore or less the sa'e
,enerat"n, %o(er# %er l"ter of !ol&'e $a%a$"t+# 5ero 6P0.0078
6:7 L";&ef"ed %etrole&' ,as# %er l"ter# 5ero 6P0.007- Pro!"ded# That l";&ef"ed
%etrole&' ,as &sed for 'ot"!e %o(er shall e taxed at the e;&"!alent rate as the
ex$"se tax on d"esel f&el o"l8
697 As%halts# %er 9"lo,ra'# <"ft+Bs"x $enta!os 6P0.)*78 and
6l7 .&n9er f&el o"l# and on s"'"lar f&el o"ls ha!"n, 'ore or less the sa'e
,enerat"n, %o(er# %er l"ter of !ol&'e $a%a$"t+# 5ero 6P0.007.D
CHAPTER CI
Ex$"se Tax on @"s$ellaneo&s Art"$les
SECTION 24>. A&to'o"les. There shall e le!"ed# assessed and $olle$ted
an ad !alore' tax on a&to'o"les ased on the 'an&fa$t&rer's or "'%orter's sell"n,
%r"$e# net of ex$"se and !al&eBadded taxes# "n a$$ordan$e ("th the follo("n,
s$hed&le-
Net 'an&fa$t&rer's %r"$eE Rate
"'%orter's sell"n, %r"$e
&% to P*00 Tho&sand /1
O!er P*00 Tho&sand to P2/.000 O /01
P2.2 @"ll"on of !al&e "n ex$ess of
P*00 Tho&sand
O!er P2.2 @"ll"on to P22/#000 O 401
P/.2 @"ll"on of !al&e "n ex$ess
of
P2.2 @"ll"on
O!er P/.2 @"ll"on P)2/#000 O *01
of !al&e "n ex$ess of
P/.2 @"ll"on
Pro!"ded# That the ra$9ets refle$t"n, the 'an&fa$t&rer's %r"$e or "'%orter's sell"n,
%r"$e# net of ex$"se and !al&eBadded taxes# ("ll e "ndexed + the Se$retar+ of
<"nan$e on$e e!er+ t(o 6/7 +ears "f the $han,e "n the ex$han,e rate of the
Ph"l"%%"ne %eso a,a"nst the =n"ted States 6=.S.7 dollar "s 'ore than ten %er$ent
62017 fro' the date of effe$t"!"t+ of th"s A$t# "n the $ase of "n"t"al ad:&st'ent and
fro' the last re!"s"on date "n the $ase of s&se;&ent ad:&st'ents.
The 'an&fa$t&rer's %r"$e or "'%orter's sell"n, %r"$e# net of ex$"se and !al&eBadded
taxes# shall e "ndexed + the f&ll rate of the %eso de%re$"at"on or a%%re$"at"on# as
the $ase 'a+ e.
Pro!"ded# f&rther# That "n $ase the $han,e "n the ex$han,e rate of the Ph"l"%%"ne
%eso a,a"nst the =.S. dollar "s at least t(ent+ %er$ent 6/017 at an+t"'e ("th"n the
t(oB+ear %er"od referred to ao!e# the Se$retar+ of <"nan$e shall "ndex the ra$9ets
refle$t"n, the 'an&fa$t&rer's %r"$e or "'%orter's sell"n, %r"$e# net of ex$"se and
!al&eBadded taxes# + the f&ll rate of the %eso de%re$"at"on or a%%re$"at"on# as the
$ase 'a+ e.
As &sed "n th"s Se$t"on
6a7 A&to'o"le shall 'ean an+ fo&r 647 or 'ore (heeled 'otor !eh"$le re,ardless
of seat"n, $a%a$"t+# (h"$h "s %ro%elled + ,asol"ne# d"esel# ele$tr"$"t+ or an+ other
'ot"!e %o(er- Pro!"ded# That for %&r%oses of th"s A$t# &ses# tr&$9s# $ar,o !ans#
:ee%sE:ee%ne+sE:ee%ne+ s&st"t&tes# s"n,le $a $hass"s# and s%e$"alB%&r%ose !eh"$les
shall not e $ons"dered as a&to'o"les.
67 Tr&$9E$ar,o !an shall 'ean a 'otor !eh"$le of an+ $onf",&rat"on that "s
ex$l&s"!el+ des",ned for the $arr"a,e of ,oods and ("th an+ n&'er of (heels and
axles- Pro!"ded# That %"$9B&%s shall not e $ons"dered as tr&$9s.
6$7 Fee%E:ee%ne+E:ee%ne+ s&st"t&tes shall 'ean as DPh"l"%%"ne :ee% or :ee%ne+D
(h"$h are of the :"tne+ t+%e lo$all+ des",ned and 'an&fa$t&red ,enerall+ fro'
s&r%l&s %arts and $o'%onents. It shall also "n$l&de :ee%ne+ s&st"t&tes that are
'an&fa$t&red fro' randBne( s"n,le $a $hass"s or $o(l $hass"s and lo$all+
$&sto'"5ed rear od+ that has $ont"n&o&s s"de(a+ ro( seats ("th o%en rear door
and ("tho&t retra$tale ,lass ("ndo(s.
6d7 .&s shall 'ean a 'otor !eh"$le of an+ $onf",&rat"on ("th ,ross !eh"$le (e",ht
of 4.0 tons or 'ore ("th an+ n&'er of (heels and axles# (h"$h "s ,enerall+
a$$e%ted and s%e$"all+ des",ned for 'ass or %&l"$ trans%ortat"on.
6e7 S"n,le $a $hass"s shall 'ean a 'otor !eh"$le ("th $o'%lete en,"ne %o(er tra"n
and $hass"s e;&"%%ed ("th a $a that has a 'ax"'&' of t(o 6/7 doors and onl+ one
627 ro( of seats.
6f7 S%e$"al %&r%ose !eh"$le shall 'ean a 'otor !eh"$le des",ned for s%e$"f"$
a%%l"$at"ons s&$h as $e'ent '"xer# f"re tr&$9# oo' tr&$9# a'&lan$e andEor
'ed"$al &n"t# and offBroad !eh"$les for hea!+ "nd&str"es and not for re$reat"onal
a$t"!"t"es.
Pro!"ded# That "n the $ase of "'%orted a&to'o"les not for sale# the tax "'%osed
here"n shall e ased on the total landed !al&e# "n$l&d"n, transa$t"on !al&e#
$&sto's d&t+ and all other $har,es.
A&to'o"les &sed ex$l&s"!el+ ("th"n the free%ort 5one shall e exe'%t fro' ex$"se
tax.
SECTION 2)0.NonBessent"al 4oods. There shall e le!"ed# assessed and
$olle$ted a tax e;&"!alent to t(ent+ %er$ent 6/017 ased on the (holesale %r"$e or
the !al&e of "'%ortat"on &sed + the .&rea& of C&sto's "n deter'"n"n, tar"ff and
$&sto's d&t"es# net of ex$"se tax and !al&eBadded tax# of the follo("n, ,oods-
6a7 All ,oods $o''onl+ or $o''er$"all+ 9no(n as :e(elr+# (hether real or
"'"tat"on# %earls# %re$"o&s and se'"B%re$"o&s stones and "'"tat"ons thereof8 ,oods
'ade of# or orna'ented# 'o&nted or f"tted ("th# %re$"o&s 'etals or "'"tat"ons
thereof or "!or+ 6not "n$l&d"n, s&r,"$al and dental "nstr&'ents# s"l!erB%lated (ares#
fra'es or 'o&nt"n,s for s%e$ta$les or e+e,lasses# and dental ,old or ,old allo+s
and other %re$"o&s 'etals &sed "n f"ll"n,# 'o&nt"n, or f"tt"n, of the teeth78 o%era
,lasses and lor,nettes. The ter' '%re$"o&s 'etals' shall "n$l&de %lat"n&'# ,old#
s"l!er and other 'etals of s"'"lar or ,reater !al&e. The ter' '"'"tat"ons thereof '
shall "n$l&de %lat"n,s and allo+s of s&$h 'etals8
67 Perf&'es and to"let (aters8
6$7 Pa$hts and other !essels "ntended for %leas&re or s%orts.
CHAPTER CII
Ex$"se Tax on @"neral Prod&$ts
SECTION 2)2.@"neral Prod&$ts.
6A7 Rates of Tax. There shall e le!"ed# assessed and $olle$ted on '"nerals#
'"neral %rod&$ts and ;&arr+ reso&r$es# ex$"se tax as follo(s-
627 On $oal and $o9e# a tax of Ten %esos 6P20.007 %er 'etr"$ ton8
6/7 On all non'etall"$ '"nerals and ;&arr+ reso&r$es# a tax of t(o %er$ent 6/17
ased on the a$t&al 'ar9et !al&e of the ,ross o&t%&t thereof at the t"'e of re'o!al#
"n the $ase of those lo$all+ extra$ted or %rod&$ed8 or the !al&e &sed + the .&rea&
of C&sto's "n deter'"n"n, tar"ff and $&sto's d&t"es# net of ex$"se tax and !al&eB
added tax# "n the $ase of "'%ortat"on.
Not("thstand"n, the %ro!"s"on of %ara,ra%h 647 of S&se$t"on 6A7 of th"s Se$t"on#
lo$all+ extra$ted nat&ral ,as and l";&ef"ed nat&ral ,as shall not e s&:e$t to the
ex$"se tax "'%osed here"n.
637 On all 'etall"$ '"nerals# a tax ased on the a$t&al 'ar9et !al&e of the ,ross
o&t%&t thereof at the t"'e of re'o!al# "n the $ase of those lo$all+ extra$ted or
%rod&$ed8 or the !al&e &sed + the .&rea& of C&sto's "n deter'"n"n, tar"ff and
$&sto's d&t"es# net of ex$"se tax and !al&eBadded tax# "n the $ase of "'%ortat"on# "n
a$$ordan$e ("th the follo("n, s$hed&le-
6a7 Co%%er and other 'etall"$ '"nerals8
6"7 On the f"rst three 637 +ears &%on the effe$t"!"t+ of Re%&l"$ A$t No. AA/>#
one %er$ent 62178
6""7 On the fo&rth and the f"fth +ears# one and a half %er$ent 62 2E/178 and
6"""7 On the s"xth +ear and thereafter# t(o %er$ent 6/178
67 4old and $hro'"te# t(o %er$ent. 6/17.
Pursuant to Se!s.;## and ;#< of t*e National Internal Revenue Code, as amended, in
relation to Se!s. <4 to <3 and "<" FAG F0G F9G t*ereof, t*ese regulations are *ere96
%romulgated to im%lement Se!tion "0 FdG of Re%u9li! A!t FR.A.G No. 4241, ot*er7ise
>no7n as t*e Peo%le@s Small/S!ale Mining A!t of "33" and s*all !over onl6 transa!tions
9et7een small/s!ale miners and $ang>oSentralngPili%inas F$SPG. T*ese regulations
furt*er amend Se!tion ;.<4.; FTG of Revenue Regulations FRev. Regs.G No. ;/3=, as
amended 96 Rev. Regs. No. "4/;220.
A *older of small/s!ale mining !ontra!t is lia9le to %a6 t*e follo7ing national internal
revenue ta8es, to 7itC
aG E8!ise Ta8 at t*e rate of t7o %er!ent F;EG %res!ri9ed under Se!tion "<" FAG F0G F9G of
t*e same Ta8 Code on ever6 sale of gold to $SP, 9ased on a!tual mar>et value.
(or t*is %ur%ose, a!tual mar>et value s*all refer to t*e %ri!es !om%etitive 7it* t*ose
%revailing in t*e 7orld mar>et regardless of t*e volume or 7eig*t 96 7*i!* t*e $SP *as
agreed to 9u6 t*e gold. 1
9G Value/added ta8 at t*e rate of Hero %er!ent F2EG as %res!ri9ed under Se!tion "21
FAG F;G FaG F#G of t*e Ta8 Code on ever6 sale of gold to $SP.
!G In!ome Ta8 at t*e rate %res!ri9ed under Se!. ;# FAG in !ase of individual
ta8%a6ers, and under Se!. ;4 FAG in t*e !ase of !or%orations. (urt*er, !ontra!t *older
s*all 9e su9:e!t to t*e Credita9le Iit**olding Ta8 FCITG at t*e rate of ten %er!ent
F"2EG.
647 On "nd",eno&s %etrole&'# a tax of three %er$ent 6317 of the fa"r "nternat"onal
'ar9et %r"$e thereof# on the f"rst taxale sale# arter# ex$han,e or s&$h s"'"lar
transa$t"on# s&$h tax to e %a"d + the &+er or %&r$haser efore re'o!al fro' the
%la$e of %rod&$t"on. The %hrase 'f"rst taxale sale# arter# ex$han,e or s"'"lar
transa$t"on' 'eans the transfer of "nd",eno&s %etrole&' "n "ts or","nal state to a f"rst
taxale transferee. The fa"r "nternat"onal 'ar9et %r"$e shall e deter'"ned "n
$ons&ltat"on ("th an a%%ro%r"ate ,o!ern'ent a,en$+.
<or the %&r%ose of th"s S&se$t"on# '"nd",eno&s %etrole&'' shall "n$l&de lo$all+B
extra$ted '"neral o"l# h+dro$aron ,as# "t&'en# $r&de as%halt# '"neral ,as and all
other s"'"lar or nat&rall+ asso$"ated s&stan$es ("th the ex$e%t"on of $oal# %eat#
"t&'"no&s shale andEor strat"f"ed '"neral de%os"ts.
6.7 <or %&r%oses of th"s Se$t"on# the ter'
627 '4ross o&t%&t' shall e "nter%reted as the a$t&al 'ar9et !al&e of '"nerals or
'"neral %rod&$ts# or of &ll"on fro' ea$h '"ne or '"neral land o%erated as a
se%arate ent"t+# ("tho&t an+ ded&$t"on fro' '"n"n,# '"ll"n,# ref"n"n, 6"n$l&d"n, all
ex%enses "n$&rred to %re%are the sa"d '"nerals or '"neral %rod&$ts "n a 'ar9etale
state7# as (ell as trans%ort"n,# handl"n,# 'ar9et"n, or an+ other ex%enses-
Pro!"ded# That "f the '"nerals or '"neral %rod&$ts are sold or $ons",ned aroad +
the lessee or o(ner of the '"ne &nder C.I.<. ter's# the a$t&al $ost of o$ean fre",ht
and "ns&ran$e shall e ded&$ted- Pro!"ded# ho(e!er# That "n the $ase of '"neral
$on$entrate not traded "n $o''od"t+ ex$han,es "n the Ph"l"%%"nes or aroad# s&$h
as $o%%er $on$entrate# the a$t&al 'ar9et !al&e shall e the (orld %r"$e ;&otat"ons
of the ref"ned '"neral %rod&$ts $ontent thereof %re!a"l"n, "n the sa"d $o''od"t+
ex$han,es# after ded&$t"n, the s'elt"n,# ref"n"n, and other $har,es "n$&rred "n the
%ro$ess of $on!ert"n, the '"neral $on$entrates "nto ref"ned 'etal traded "n those
$o''od"t+ ex$han,es.
6/7 '@"nerals' shall 'ean all nat&rall+ o$$&rr"n, "nor,an"$ s&stan$es 6fo&nd "n
nat&re7 (hether "n sol"d# l";&"d# ,aseo&s or an+ "nter'ed"ate state.
637 '@"neral %rod&$ts' shall 'ean th"n,s %rod&$ed and %re%ared "n a 'ar9etale
state + s"'%le treat'ent %ro$esses s&$h as (ash"n, or dr+"n,# &t ("tho&t
&nder,o"n, an+ $he'"$al $han,e or %ro$ess or 'an&fa$t&r"n, + the lessee#
$on$ess"ona"re or o(ner of '"neral lands.
647 'I&arr+ reso&r$es' shall 'ean an+ $o''on stone or other $o''on '"neral
s&stan$es as the D"re$tor of the .&rea& of @"nes and 4eoS$"en$es 'a+ de$lare to
e ;&arr+ reso&r$es s&$h as# &t not restr"$ted to 'arl# 'arle. ,ran"te# !ol$an"$
$"nders# asalt# t&ff and ro$9 %hos%hate- Pro!"ded# That the+ $onta"n no 'etal or
'etals or other !al&ale '"nerals "n e$ono'"$all+ (or9ale ;&ant"t"es.D
CHAPTER CIII
Ad'"n"strat"!e Pro!"s"ons Re,&lat"n, .&s"ness of Persons Deal"n, "n
Art"$les S&:e$t to Ex$"se Tax
SECTION 2)/. Extent of S&%er!"s"on O!er Estal"sh'ents Prod&$"n, Taxale
O&t%&t. The .&rea& of Internal Re!en&e has a&thor"t+ to s&%er!"se
estal"sh'ents (here art"$les s&:e$t to ex$"se tax are 'ade or 9e%t. The Se$retar+
of <"nan$e shall %res$r"e r&les and re,&lat"ons as to the 'ode "n (h"$h the %ro$ess
of %rod&$t"on shall e $ond&$ted "nsofar as 'a+ e ne$essar+ to se$&re a san"tar+
o&t%&t and to safe,&ard the re!en&e.
SECTION 2)3. Re$ords to e He%t + @an&fa$t&rers8 Assess'ent .ased
Thereon. @an&fa$t&rers of art"$les s&:e$t to ex$"se shall 9ee% s&$h re$ords as
re;&"red + r&les and re,&lat"ons re$o''ended + the Co''"ss"oner and
a%%ro!ed + the Se$retar+ of <"nan$e# and s&$h re$ords# (hether of ra( 'ater"als
re$e"!ed "nto the fa$tor+ or of art"$les %rod&$ed there"n# shall e dee'ed %&l"$
and off"$"al do$&'ents for all %&r%oses.
The re$ords of ra( 'ater"als 9e%t + s&$h 'an&fa$t&rers 'a+ e &sed as e!"den$e
+ (h"$h to deter'"ne the a'o&nt of ex$"se taxes d&e fro' the'# and (hene!er
the a'o&nts of ra( 'ater"als re$e"!ed "nto an+ fa$tor+ ex$eeds the a'o&nt of
'an&fa$t&red or %art"all+ 'an&fa$t&red %rod&$ts on hand and la(f&ll+ re'o!ed
fro' the fa$tor+# %l&s (aste re'o!ed or destro+ed# and a reasonale allo(an$e for
&na!o"dale loss "n 'an&fa$t&re# the Co''"ss"oner 'a+ assess and $olle$t the tax
d&e on the %rod&$ts (h"$h sho&ld ha!e een %rod&$ed fro' the ex$ess.
The ex$"se tax d&e on the %rod&$ts as deter'"ned and assessed "n a$$ordan$e ("th
th"s Se$t"on shall e %a+ale &%on de'and or ("th"n the %er"od s%e$"f"ed there"n.
SECTION 2)4.Pre'"ses S&:e$t to A%%ro!al + Co''"ss"oner. No %erson shall
en,a,e "n &s"ness as a 'an&fa$t&rer of or dealer "n art"$les s&:e$t to ex$"se tax
&nless the %re'"ses &%on (h"$h the &s"ness "s to e $ond&$ted shall ha!e een
a%%ro!ed + the Co''"ss"oner.
SECTION 2)).@an&fa$t&rers to Pro!"de The'sel!es ("th Co&nt"n, or @eter"n,
De!"$es to Deter'"ne Prod&$t"on. @an&fa$t&rers of $",arettes# al$ohol"$
%rod&$ts# o"l %rod&$ts and other art"$les s&:e$t to ex$"se tax that $an e s"'"larl+
'eas&red shall %ro!"de the'sel!es ("th s&$h ne$essar+ n&'er of s&"tale
$o&nt"n, or 'eter"n, de!"$es to deter'"ne as a$$&ratel+ as %oss"le the !ol&'e#
;&ant"t+ or n&'er of the art"$les %rod&$ed + the' &nder r&les and re,&lat"ons
%ro'&l,ated + the Se$retar+ of <"nan$e# &%on re$o''endat"on of the
Co''"ss"oner.
Th"s re;&"re'ent shall e $o'%l"ed ("th efore $o''en$e'ent of o%erat"ons.
SECTION 2)*.Laels and <or' of Pa$9a,es. All art"$les of do'est"$
'an&fa$t&re s&:e$t to ex$"se tax and all leaf toa$$o shall e %&t &% and %re%ared
+ the 'an&fa$t&rer or %rod&$er# (hen re'o!ed for sale or $ons&'%t"on# "n s&$h
%a$9a,es onl+ and ear"n, s&$h 'ar9s or rands as shall e %res$r"ed "n the r&les
and re,&lat"ons %ro'&l,ated + the Se$retar+ of <"nan$e8 and ,oods of s"'"lar
$hara$ter "'%orted "nto the Ph"l"%%"nes shall l"9e("se e %a$9ed and 'ar9ed "n
s&$h a 'anner as 'a+ e re;&"red.
SECTION 2)A. Re'o!al of Art"$les After the Pa+'ent of Tax. ?hen the tax
has een %a"d on art"$les or %rod&$ts s&:e$t to ex$"se tax# the sa'e shall not
thereafter e stored or %er'"tted to re'a"n "n the d"st"ller+# d"st"ller+ (areho&se#
onded (areho&se# or other fa$tor+ or %la$e (here %rod&$ed.
Ho(e!er# &%on %r"or %er'"t fro' the Co''"ss"oner# o"l ref"ner"es andEor
$o'%an"es 'a+ store or de%os"t taxB%a"d %etrole&' %rod&$ts and $o''"n,le the
sa'e ("th "ts o(n 'an&fa$t&red %rod&$ts not +et s&:e$ted to ex$"se tax. I'%orted
%etrole&' %rod&$ts 'a+ e allo(ed to e ("thdra(n fro' $&sto's $&stod+
("tho&t the %re%a+'ent of ex$"se tax# (h"$h %rod&$ts 'a+ e $o''"n,led ("th the
taxB%a"d or onded %rod&$ts of the "'%orter h"'self after se$&r"n, a %r"or %er'"t
fro' the Co''"ss"oner-
Pro!"ded# That ("thdra(als shall e taxed and a$$o&nted for on a 'f"rstB"n# f"rstB
o&t' as"s.
SECTION 2)8.Stora,e of 4oods "n InternalBre!en&e .onded ?areho&ses. An
"nternalBre!en&e onded (areho&se 'a+ e 'a"nta"ned "n an+ %ort of entr+ for the
stor"n, of "'%orted or 'an&fa$t&red ,oods (h"$h are s&:e$t to ex$"se tax. The
taxes on s&$h ,oods shall e %a+ale onl+ &%on re'o!al fro' s&$h (areho&se and
a reasonale $har,e shall e 'ade for the"r stora,e there"n. The Co''"ss"oner
'a+# "n h"s d"s$ret"on# exa$t a ond to se$&re the %a+'ent of the tax on an+ ,oods
so stored.
SECTION 2)>.Proof of Ex%ortat"on8 Ex%orter's .ond. Ex%orters of ,oods that
(o&ld e s&:e$t to ex$"se tax# "f sold or re'o!ed for $ons&'%t"on "n the
Ph"l"%%"nes# shall s&'"t %roof of ex%ortat"on sat"sfa$tor+ to the Co''"ss"oner#
and# (hen the sa'e "s dee'ed ne$essar+# shall e re;&"red to ,"!e a ond %r"or to
the re'o!al of the ,oods for sh"%'ent# $ond"t"oned &%on the ex%ortat"on of the
sa'e "n ,ood fa"th.
SECTION 2*0.@an&fa$t&rers' and I'%orters' .ond. @an&fa$t&rers and
"'%orters of art"$les s&:e$t to ex$"se tax shall %ost a ond s&:e$t to the follo("n,
$ond"t"ons-
6A7 In"t"al .ond. In $ase of "n"t"al ond# the a'o&nt shall e e;&al to One
h&ndred tho&sand %esos 6P200#0007- Pro!"ded# That "f after s"x 6*7 'onths of
o%erat"on# the a'o&nt of "n"t"al ond "s less than the a'o&nt of the total ex$"se tax
%a"d d&r"n, the %er"od# the a'o&nt of the ond shall e ad:&sted to t("$e the tax
a$t&all+ %a"d for the %er"od.
6.7 .ond for the S&$$eed"n, Pears of O%erat"on. The onds for the s&$$eed"n,
+ears of o%erat"on shall e ased on the a$t&al total ex$"se tax %a"d d&r"n, the +ear
"''ed"atel+ %re$ed"n, the +ear of o%erat"on.
S&$h ond shall e $ond"t"oned &%on fa"thf&l $o'%l"an$e# d&r"n, the t"'e s&$h
&s"ness "s follo(ed# ("th la(s and r&les and re,&lat"ons relat"n, to s&$h &s"ness
and for the sat"sfa$t"on of all f"nes and %enalt"es "'%osed + th"s Code.
SECTION 2*2. Re$ords to e He%t + ?holesale Dealers. ?holesale dealers
shall 9ee% re$ords of the"r %&r$hases and sales or del"!er"es of art"$les s&:e$t to
ex$"se tax# "n s&$h for' as shall e %res$r"ed "n the r&les and re,&lat"ons + the
Se$retar+ of <"nan$e. These re$ords and the ent"re sto$9 of ,oods s&:e$t to tax
shall e s&:e$t at all t"'es to "ns%e$t"on of "nternal re!en&e off"$ers.
SECTION 2*/. Re$ords to e He%t + Dealers "n Leaf Toa$$o. Dealers "n
leaf toa$$o shall 9ee% re$ords of the %rod&$ts sold or del"!ered + the' to other
%ersons "n s&$h 'anner as 'a+ e %res$r"ed "n the r&les and re,&lat"ons + the
Se$retar+ of <"nan$e# s&$h re$ords to e at all t"'es s&:e$t to "ns%e$t"on of
"nternal re!en&e off"$ers.
SECTION 2*3.Preser!at"on of In!o"$es and Sta'%s. All dealers (hosoe!er
shall %reser!e# for the %er"od %res$r"ed "n Se$t"on /3)# all off"$"al "n!o"$es
re$e"!ed + the' fro' other dealers or fro' 'an&fa$t&rers# to,ether ("th the
fra$t"onal %arts of sta'%s aff"xed thereto# "f an+# and &%on de'and# shall del"!er or
trans'"t the sa'e to an+ "nternal re!en&e off"$er.
SECTION 2*4. Infor'at"on to e 4"!en + @an&fa$t&rers# I'%orters# Indentors#
and ?holesalers of an+ A%%arat&s or @e$han"$al Contr"!an$e S%e$"all+ for the
@an&fa$t&re of Art"$les S&:e$t to Ex$"se Tax and I'%orters# Indentors#
@an&fa$t&rers or Sellers of C",arette Pa%er "n .o"ns# C",arette T"%%"n, Pa%er or
C",arette <"lter T"%s.
@an&fa$t&rers# "ndentors# (holesalers and "'%orters of an+ a%%arat&s or
'e$han"$al $ontr"!an$e s%e$"all+ for the 'an&fa$t&re of art"$les s&:e$t to tax
shall# efore an+ s&$h a%%arat&s or 'e$han"$al $ontr"!an$e "s re'o!ed fro' the
%la$e of 'an&fa$t&re or fro' the $&sto's ho&se# ,"!e (r"tten "nfor'at"on to the
Co''"ss"oner as to the nat&re and $a%a$"t+ of the sa'e# the t"'e (hen "t "s to e
re'o!ed# and the %la$e for (h"$h "t "s dest"ned# as (ell as the na'e of the %erson
+ (ho' "t "s to e &sed8 and s&$h a%%arat&s or 'e$han"$al $ontr"!an$e shall not
e set &% nor d"s'antled or transferred ("tho&t a %er'"t "n (r"t"n, fro' the
Co''"ss"oner.
A (r"tten %er'"t fro' the Co''"ss"oner for "'%ort"n,# 'an&fa$t&r"n, or sell"n, of
$",arette %a%er "n o"ns or rolls# $",arette t"%%"n, %a%er or $",arette f"lter t"%s "s
re;&"red efore an+ %erson shall en,a,e "n the "'%ortat"on# 'an&fa$t&re or sale of
the sa"d art"$les. No %er'"t to sell sa"d art"$les shall e ,ranted &nless the na'e and
address of the %ros%e$t"!e &+er "s f"rst s&'"tted to the Co''"ss"oner and
a%%ro!ed + h"'. Re$ords# sho("n, the sto$9 of the sa"d art"$les and the d"s%osal
thereof + sale of %ersons ("th the"r res%e$t"!e addresses as a%%ro!ed + the
Co''"ss"oner# shall e 9e%t + the seller# and re$ords# sho("n, sto$9 of sa"d
art"$les and $ons&'%t"on thereof# shall e 9e%t + the &+er# s&:e$t to "ns%e$t"on
+ "nternal re!en&e off"$ers.
SECTION 2*). Estal"sh'ent of D"st"ller+ ?areho&se. E!er+ d"st"ller# (hen so
re;&"red + the Co''"ss"oner# shall %ro!"de at h"s o(n ex%ense a (areho&se# and
shall e s"t&ated "n and $onst"t&te a %art of h"s d"st"ller+ %re'"ses and to e &sed
onl+ for the stora,e of d"st"lled s%"r"ts of h"s o(n 'an&fa$t&re &nt"l the tax thereon
shall ha!e een %a"d8 &t no d(ell"n, ho&se shall e &sed for s&$h %&r%ose. S&$h
(areho&se# (hen a%%ro!ed + the Co''"ss"oner# "s de$lared to e a onded
(areho&se# and shall e 9no(n as a d"st"ller+ (areho&se.
SECTION 2**. C&stod+ of D"st"ller+ or D"st"ller+ ?areho&se. E!er+ d"st"ller+
or d"st"ller+ (areho&se shall e "n the :o"nt $&stod+ of the re!en&e "ns%e$tor# "f one
"s ass",ned thereto# and of the %ro%r"etor thereof. It shall e 9e%t se$&rel+ lo$9ed#
and shall at no t"'e e &nlo$9ed or o%ened or re'a"n &nlo$9ed or o%ened &nless "n
the %resen$e of s&$h re!en&e "ns%e$tor or other %erson (ho 'a+ e des",nated to
a$t for h"' as %ro!"ded + la(.
SECTION 2*A. L"'"tat"on on I&ant"t+ of S%"r"ts Re'o!ed fro' ?areho&se.
No d"st"lled s%"r"ts shall e re'o!ed fro' an+ d"st"ller+# d"st"ller+ (areho&se# or
onded (areho&se "n ;&ant"t"es of less than f"fteen 62)7 ,a&,e l"ters at an+ one
t"'e# ex$e%t ottled ,oods# (h"$h 'a+ e re'o!ed + the $ase of not less than
t(el!e 62/7 ottles.
SECTION 2*8.Denat&r"n, ?"th"n Pre'"ses. <or %&r%oses of th"s T"tle# the
%ro$ess of denat&r"n, al$ohol shall e effe$ted onl+ ("th"n the d"st"ller+ %re'"ses
(here the al$ohol to e denat&red "s %rod&$ed "n a$$ordan$e ("th for'&las d&l+
a%%ro!ed + the .&rea& of Internal Re!en&e and onl+ "n the %resen$e of d&l+
des",nated re%resentat"!es of sa"d .&rea&.
SECTION 2*>.Re$o!er+ of Al$ohol for =se "n Arts and Ind&str"es.
@an&fa$t&rers e'%lo+"n, %ro$esses "n (h"$h denat&red al$ohol &sed "n arts and
"nd&str"es "s ex%ressed or e!a%orated fro' the art"$les 'an&fa$t&red 'a+# &nder
r&les and re,&lat"ons to e %res$r"ed + the Se$retar+ of <"nan$e# &%on
re$o''endat"on of the Co''"ss"oner# e %er'"tted to re$o!er the al$ohol so &sed
and restore "t a,a"n to a $ond"t"on s&"tale solel+ for &se "n 'an&fa$t&r"n,
%ro$esses.
SECTION 2A0.Re;&"re'ents 4o!ern"n, Re$t"f"$at"on and Co'%o&nd"n, of
L";&ors. Persons en,a,ed "n the re$t"f"$at"on or $o'%o&nd"n, of l";&ors shall#
as to the 'ode of $ond&$t"n, the"r &s"ness and s&%er!"s"on o!er the sa'e# e
s&:e$t to all the re;&"re'ents of la( a%%l"$ale to d"st"ller"es-
Pro!"ded# That (here a re$t"f"er 'a9es &se of s%"r"ts &%on (h"$h the ex$"se tax has
een %a"d# no f&rther tax shall e $olle$ted on an+ re$t"f"ed s%"r"ts %rod&$ed
ex$l&s"!el+ therefro'.
Pro!"ded# f&rther# That $o'%o&nders "n the 'an&fa$t&re of an+ "ntox"$at"n,
e!era,e (hate!er# shall not e allo(ed to 'a9e &se of s%"r"ts &%on (h"$h the
ex$"se tax has not een %re!"o&sl+ %a"d.
SECTION 2A2.A&thor"t+ of Internal Re!en&e Off"$er "n Sear$h"n, for Taxale
Art"$les. An+ "nternal re!en&e off"$er 'a+# "n the d"s$har,e of h"s off"$"al
d&t"es# enter an+ ho&se# &"ld"n, or %la$e (here art"$les s&:e$t to tax &nder th"s
T"tle are %rod&$ed or 9e%t# or are el"e!ed + h"' &%on reasonale ,ro&nds to e
%rod&$ed or 9e%t# so far as 'a+ e ne$essar+ to exa'"ne# d"s$o!er or se"5e the
sa'e.
He 'a+ also sto% and sear$h an+ !eh"$le or other 'eans of trans%ortat"on (hen
&%on reasonale ,ro&nds he el"e!es that the sa'e $arr"es an+ art"$le on (h"$h the
ex$"se tax has not een %a"d.
SECTION 2A/.Detent"on of Pa$9a,e Conta"n"n, Taxale Art"$les. An+ re!en&e
off"$er 'a+ deta"n an+ %a$9a,e $onta"n"n, or s&%%osed to $onta"n art"$les s&:e$t
to ex$"se tax (hen he has ,ood reason to el"e!e that the la(f&l tax has not een
%a"d or that the %a$9a,e has een or "s e"n, re'o!ed "n !"olat"on of la(# and
e!er+ s&$h %a$9a,e shall e held + s&$h off"$er "n a safe %la$e &nt"l "t shall e
deter'"ned (hether the %ro%ert+ so deta"ned "s l"ale + la( to e %ro$eeded
a,a"nst for forfe"t&re8 &t s&$h s&''ar+ detent"on shall not $ont"n&e "n an+ $ase
lon,er than se!en 6A7 da+s ("tho&t d&e %ro$ess of la( or "nter!ent"on of the off"$er
to (ho' s&$h detent"on "s to e re%orted.
TITLE CII
Do$&'entar+ Sta'% Tax
SECTION 2A3. Sta'% Taxes =%on Do$&'ents# Loan A,ree'ents# Instr&'ents
and Pa%ers. =%on do$&'ents# "nstr&'ents# loan a,ree'ents and %a%ers# and
&%on a$$e%tan$es# ass",n'ents# sales and transfers of the ol",at"on# r",ht or
%ro%ert+ "n$"dent thereto# there shall e le!"ed# $olle$ted and %a"d for# and "n
res%e$t of the transa$t"on so had or a$$o'%l"shed# the $orres%ond"n, do$&'entar+
sta'% taxes %res$r"ed "n the follo("n, Se$t"ons of th"s T"tle# + the %erson
'a9"n,# s",n"n,# "ss&"n,# a$$e%t"n,# or transferr"n, the sa'e (here!er the
do$&'ent "s 'ade# s",ned# "ss&ed# a$$e%ted or transferred (hen the ol",at"on or
r",ht ar"ses fro' Ph"l"%%"ne so&r$es or the %ro%ert+ "s s"t&ated "n the Ph"l"%%"nes#
and at the sa'e t"'e s&$h a$t "s done or transa$t"on had-
Pro!"ded# That (hene!er one %art+ to the taxale do$&'ent en:o+s exe'%t"on fro'
the tax here"n "'%osed# the other %art+ thereto (ho "s not exe'%t shall e the one
d"re$tl+ l"ale for the tax.
REVEN-E RE+-LATI'NS N'. 224/23 June ;3, ;223
Im%lementing t*e Ele!troni! o!umentar6 Stam% Ta8 S6stem to Re%la!e t*e
o!umentar6 Stam% Ta8 Ele!troni! Im%rinting Ma!*ine
Nature of a do!umentar6 stam% ta8
o!umentar6 stam% ta8 is a ta8 on do!uments, instruments, loan agreements, and %a%ers
eviden!ing t*e a!!e%tan!e, assignment, sale or transfer of an o9ligation, rig*t or
%ro%ert6 in!ident t*ereto. A ST is a!tuall6 an e8!ise ta8 9e!ause it is im%osed on t*e
transa!tion rat*er t*an on t*e do!ument.
P*il. $an>ing Cor%. vs. Commissioner of Internal Revenue, +.R. No. "42<4#, Januar6
02, ;223
T*e la7 im%oses ST on do!uments issued in res%e!t of t*e s%e!ified transa!tions, su!*
as %ledge, and not onl6 on %a%ers eviden!ing inde9tedness. T*erefore, a %a7n ti!>et,
9eing issued in res%e!t of a %ledge transa!tion, is su9:e!t to do!umentar6 stam% ta8.
&. Tam9unting Pa7ns*o%, In!. vs. Commissioner of Internal Revenue, +.R. No. "4""0=,
A%ril 4, ;223
ST is a ta8 on do!uments, instruments, loan agreements, and %a%ers eviden!ing t*e
a!!e%tan!e, assignment, sale or transfer of an o9ligation, rig*t or %ro%ert6 in!ident
t*ereto. ST is a!tuall6 an e8!ise ta8 9e!ause it is im%osed on t*e transa!tion rat*er
t*an on t*e do!ument.
Commissioner of Internal Revenue vs. (irst E8%ress Pa7ns*o% Co., In!., +.R. Nos.
"4;2#</#1, June "1, ;223
Ta8 9ase for !om%utation of do!umentar6 stam% ta8es on life insuran!e %oli!ies is t*e
amount fi8ed in t*e %oli!6.
T*e amount fi8ed in t*e %oli!6 is t*e figure 7ritten on its fa!e and 7*atever in!reases
7ill ta>e effe!t in t*e future 96 reason of t*e Dautomati! in!rease !lauseD em9odied in t*e
%oli!6 7it*out t*e need of anot*er !ontra!t. &ere, alt*oug* t*e automati! in!rease in t*e
amount of life insuran!e !overage 7as to ta>e effe!t later on, t*e date of its effe!tivit6, as
7ell as t*e amount of t*e in!rease, 7as alread6 definite at t*e time of t*e issuan!e of t*e
%oli!6. T*us, t*e amount insured 96 t*e %oli!6 at t*e time of its issuan!e ne!essaril6
in!luded t*e additional sum !overed 96 t*e automati! in!rease !lause 9e!ause it 7as
alread6 determina9le at t*e time t*e transa!tion 7as entered into and formed %art of t*e
%oli!6.
Commissioner of Internal Revenue vs. Lin!oln P*ili%%ine Life Insuran!e Com%an6, In!.,
et al., +.R. No. ""3"41, Mar!* "3, ;22;
In!rease in insuran!e due to Dautomati! in!rease !lauseD in %oli!6 is su9:e!t to
do!umentar6 stam% ta8.
T*e Dautomati! in!rease !lauseD in t*e %oli!6 is in t*e nature of a !onditional o9ligation
under Arti!le ""=", 96 7*i!* t*e in!rease of t*e insuran!e !overage s*all de%end u%on
t*e *a%%ening of t*e event 7*i!* !onstitutes t*e o9ligation. T*us, t*e additional
insuran!e t*at *ad ta>en effe!t 7as an o9ligation su9:e!t to a sus%ensive o9ligation, 9ut
still a %art of t*e insuran!e sold to 7*i!* t*e life insuran!e !om%an6 7as lia9le for t*e
%a6ment of t*e do!umentar6 stam% ta8.
et al., +.R. No. ""3"41, Mar!* "3, ;22;
efi!ien!6 of do!umentar6 stam% ta8 is im%osed on t*e in!rease of amount insured u%on
t*e effe!tivit6 of t*e DJunior Estate $uilder Poli!6.D
T*e defi!ien!6 of do!umentar6 stam% ta8 im%osed on life insuran!e !om%an6 is definitel6
not on t*e amount of t*e original insuran!e !overage, 9ut on t*e in!rease of t*e amount
insured u%on t*e effe!tivit6 of t*e DJunior Estate $uilder Poli!6.D
et al., +.R. No. ""3"41, Mar!* "3, ;22;
o!umentar6 stam% ta8es are levied inde%endentl6 of t*e legal status of transa!tions
giving rise t*ereto.
A do!umentar6 stam% ta8 is in t*e nature of an e8!ise ta8. It is not im%osed u%on t*e
9usiness transa!ted 9ut is an e8!ise u%on t*e %rivilege, o%%ortunit6 or fa!ilit6 offered at
e8!*anges for t*e transa!tion of t*e 9usiness. It is an e8!ise u%on t*e fa!ilities used in
t*e transa!tion of t*e 9usiness se%arate and a%art from t*e 9usiness itself. o!umentar6
stam% ta8es are levied on t*e e8er!ise 96 %ersons of !ertain %rivileges !onferred 96 la7
for t*e !reation, revision, or termination of s%e!ifi! legal relations*i%s t*roug* t*e
e8e!ution of s%e!ifi! instruments. T*us, 7e *ave *eld t*at do!umentar6 stam% ta8es are
levied inde%endentl6 of t*e legal status of t*e transa!tions giving rise t*ereto. T*e
do!umentar6 stam% ta8es must 9e %aid u%on t*e issuan!e of t*e said instruments, 7it*out
regard to 7*et*er t*e !ontra!ts 7*i!* gave rise to t*em are res!issi9le, void, voida9le, or
unenfor!ea9le.
Ja>a Investments Cor%. vs. Commissioner of Internal Revenue, +.R. No. "#41;3, Jul6 ;=,
;2"2
SECTION 2A4. Sta'% Tax on Or","nal Iss&e of Shares of Sto$9. On e!er+
or","nal "ss&e# (hether on or,an"5at"on# reor,an"5at"on or for an+ la(f&l %&r%ose#
of shares of sto$9 + an+ asso$"at"on# $o'%an+ or $or%orat"on# there shall e
$olle$ted a do$&'entar+ sta'% of One %eso 6P2.007 on ea$h T(o h&ndred %esos
6P/007# or fra$t"onal %art thereof# of the %ar !al&e# of s&$h shares of sto$9-
Pro!"ded# That "n the $ase of the or","nal "ss&e of shares of sto$9 ("tho&t %ar !al&e#
the a'o&nt of the do$&'entar+ sta'% tax here"n %res$r"ed shall e ased &%on the
a$t&al $ons"derat"on for the "ss&an$e of s&$h shares of sto$9-
Pro!"ded# f&rther# That "n the $ase of sto$9 d"!"dends# on the a$t&al !al&e
re%resented + ea$h share.
C'MMISSI'NER '( INTERNAL REVEN-E vs. (IRST EAPRESS PAINS&'P C'.,
INC .+.R. Nos. "4;2#</#1. June "1, ;223.5
(ACTSC Petitioner issued assessment noti!es against (irst E8%ress Pa7ns*o% Co. for
defi!ien!6 in!ome ta8, VAT and do!umentar6 stam% ta8 on de%osit on su9s!ri%tion and
on %a7n ti!>ets. Res%ondent filed its 7ritten %rotest on t*e assessments. I*en %etitioner
did not a!t on t*e %rotest during t*e "=2/da6 %eriod, res%ondent filed a %etition 9efore
t*e CTA. (irst E8%ress later %aid defi!ien!6 in!ome ta8 in!lusive of interest. In its ruling,
t*e CTA (irst ivision ordered t*e CIR to !an!el t*e assessments for defi!ien!6 ST and
dire!ted t*e res%ondent to %a6 t*e defi!ien!6 VAT. $ot* %arties filed t*eir Motions for
Re!onsideration 7*i!* 7as denied 96 t*e CTA (irst ivision. T*ereafter, 9ot* %arties
filed t*eir res%e!tive Petitions for Revie7 7it* t*e CTA En $an!. T*e CTA En $an!
affirmed res%ondent@s lia9ilit6 to %a6 t*e VAT and ordered it to %a6 ST on its %a7ns*o%
ti!>ets. &o7ever, it found t*at res%ondent@s de%osit on su9s!ri%tion 7as not su9:e!t to
ST, %ointing out t*at de%osit on su9s!ri%tion is not su9:e!t to ST in t*e a9sen!e of
%roof t*at an eJuivalent amount of s*ares 7as su9s!ri9ed or issued in !onsideration for
t*e de%osit.
Aggrieved 96 t*e CTA En $an!@s e!ision 7*i!* ruled t*at res%ondent@s de%osit on
su9s!ri%tion 7as not su9:e!t to ST, %etitioner elevated t*e !ase 9efore t*is Court.
ISS-ESC
". I*et*er t*e CTA erred on a Juestion of la7 in disregarding t*e rule on finalit6 of
assessments %res!ri9ed under Se!tion ;;= of t*e Ta8 Code.
;. I*et*er res%ondent is lia9le to %a6 ST on de%osit on su9s!ri%tion of !a%ital
sto!>.
R-LIN+C
". Ie re:e!t %etitioner@s vie7 t*at t*e assessment *as 9e!ome final and
una%%eala9le. It !annot 9e said t*at res%ondent failed to su9mit relevant su%%orting
do!uments t*at 7ould render t*e assessment final 9e!ause 7*en res%ondent su9mitted its
%rotest, res%ondent atta!*ed t*e +IS and $alan!e S*eet. (urt*er, %etitioner !annot insist
on t*e su9mission of %roof of ST %a6ment 9e!ause su!* do!ument does not e8ist as
res%ondent !laims t*at it is not lia9le to %a6, and *as not %aid, t*e ST on t*e de%osit on
su9s!ri%tion.
T*e term Drelevant su%%orting do!umentsD s*ould 9e understood as t*ose do!uments
ne!essar6 to su%%ort t*e legal 9asis in dis%uting a ta8 assessment as determined 96 t*e
ta8%a6er. T*e $IR !an onl6 inform t*e ta8%a6er to su9mit additional do!uments. T*e $IR
!annot demand 7*at t6%e of su%%orting do!uments s*ould 9e su9mitted. 't*er7ise, a
ta8%a6er 7ill 9e at t*e mer!6 of t*e $IR, 7*i!* ma6 reJuire t*e %rodu!tion of do!uments
t*at a ta8%a6er !annot su9mit.
Res%ondent *as !om%lied 7it* t*e reJuisites in dis%uting an assessment %ursuant to
Se!tion ;;= of t*e Ta8 Code. &en!e, t*e ta8 assessment !annot 9e !onsidered as final,
e8e!utor6 and demanda9le.
;. Res%ondent is not lia9le for t*e %a6ment of ST on its de%osit on su9s!ri%tion
9e!ause t*ere is 6et no su9s!ri%tion t*at !reates rig*ts and o9ligations 9et7een t*e
su9s!ri9er and t*e !or%oration. T*e de%osit on sto!> su9s!ri%tion is merel6 an amount of
mone6 re!eived 96 a !or%oration 7it* a vie7 of a%%l6ing t*e same as %a6ment for
additional issuan!e of s*ares in t*e future, an event 7*i!* ma6 or ma6 not *a%%en.
SECTION 2A). Sta'% Tax on Sales# A,ree'ents to Sell# @e'oranda of Sales#
Del"!er"es or Transfer of Shares or Cert"f"$ates of Sto$9. On all sales# or
a,ree'ents to sell# or 'e'oranda of sales# or del"!er"es# or transfers of shares or
$ert"f"$ates of sto$9 "n an+ asso$"at"on# $o'%an+# or $or%orat"on# or transfer of s&$h
se$&r"t"es + ass",n'ent "n lan9# or + del"!er+# or + an+ %a%er or a,ree'ent# or
'e'orand&' or other e!"den$es of transfer or sale (hether ent"tl"n, the holder "n
an+ 'anner to the enef"t of s&$h sto$9# or to se$&re the f&t&re %a+'ent of 'one+#
or for the f&t&re transfer of an+ sto$9# there shall e $olle$ted a do$&'entar+ sta'%
tax of Se!ent+Bf"!eB$enta!os 6P0.A)7 on ea$h T(o h&ndred %esos 6P/007# or
fra$t"onal %art thereof# of the %ar !al&e of s&$h sto$9-
Pro!"ded# That onl+ one tax shall e $olle$ted on ea$h sale or transfer of sto$9
fro' one %erson to another# re,ardless of (hether or not a $ert"f"$ate of sto$9 "s
"ss&ed# "ndorsed# or del"!ered "n %&rs&an$e of s&$h sale or transfer- and
Pro!"ded# f&rther# That "n the $ase of sto$9 ("tho&t %ar !al&e the a'o&nt of the
do$&'entar+ sta'% tax here"n %res$r"ed shall e e;&"!alent to t(ent+Bf"!e %er$ent
6/)17 of the do$&'entar+ sta'% tax %a"d &%on the or","nal "ss&e of sa"d sto$9.
"4;2#</#1, June "1, ;223
In Se!tion "4< of t*e Ta8 Code, ST is im%osed on t*e original issue of s*ares of sto!>.
T*e ST, as an e8!ise ta8, is levied u%on t*e %rivilege, t*e o%%ortunit6 and t*e fa!ilit6 of
issuing s*ares of sto!>. In Commissioner of Internal Revenue v. Constru!tion Resour!es
of Asia, In!., t*is Court e8%lained t*at t*e ST atta!*es u%on a!!e%tan!e of t*e
sto!>*older@s su9s!ri%tion in t*e !or%oration@s !a%ital sto!> regardless of a!tual or
!onstru!tive deliver6 of t*e !ertifi!ates of sto!>.
C'MPA+NIE (INANCIERE S-CRES ET ENREES, %etitioner, vs. C'MMISSI'NER '(
INTERNAL REVEN-E, res%ondent. .+.R. No. "00=0#. August ;=, ;221.5
E C I S I ' N
(or our resolution is t*e instant Petition for Revie7 on Certiorari assailing t*e e!ision of
t*e Court of A%%eals dated '!to9er ;4, "334 in CA/+.R. SP No. 03<2".
Com%agnie (inan!iere Su!res et enrees, %etitioner, is a non/resident %rivate !or%oration
dul6 organiHed and e8isting under t*e la7s of t*e Re%u9li! of (ran!e.
'n '!to9er ;", "33", %etitioner transferred its eig*t %er!ent F=EG eJuit6 interest in t*e
Ma>ati S*angri/La &otel and Resort, In!or%orated to Lerr6 &oldings Ltd. Fformerl6 Sligo
&oldings LtdG, as s*o7n 96 a eed of Sale and Assignment of Su9s!ri%tion and Rig*t of
Su9s!ri%tion of t*e same date. Transferred 7ere FaG "24,3;3 issued s*ares of sto!> valued at
P"22.22 %er s*are 7it* a total %ar value of P"2,43;,322.22? F9G "<;,20" 7it* a %ar value of
P"22.22 %er s*are 7it* a total %ar value of P"<,;20,"22.22? F!G de%osits on sto!>
su9s!ri%tions amounting to P#0,"#4,102.;=? and FdG %etitioner@s rig*t of su9s!ri%tion.
'n Novem9er ;3, "33", %etitioner %aid t*e do!umentar6 stam%s ta8 and !a%ital gains ta8 on
t*e transfer under %rotest.
'n '!to9er ;", "330, %etitioner filed 7it* t*e Commissioner of Internal Revenue, *erein
res%ondent, a !laim for refund of over%aid !a%ital gains ta8 in t*e amount of P"24,=13.22
and over%aid do!umentar6 stam%s ta8es in t*e sum of P3<",=02.22 or a total of
P",2<3,133.22. Petitioner alleged t*at t*e transfer of de%osits on sto!> su9s!ri%tions is not a
salePassignment of s*ares of sto!> su9:e!t to do!umentar6 stam%s ta8 and !a%ital gains ta8.
&o7ever, res%ondent did not a!t on %etitioner@s !laim for refund. T*us, on Novem9er "3,
"330, %etitioner filed 7it* t*e Court of Ta8 A%%eals FCTAG a %etition for revie7, do!>eted as
CTA Case No. <2#;.
In its e!ision dated '!to9er 1, "33<, t*e CTA denied %etitioner@s !laim for refund. T*e
CTA *eld t*at it is !lear from Se!tion "41 of t*e Ta8 Code t*at sales Dto se!ure t*e future
%a6ment of mone6 or for t*e future transfer of an6 9ond, due/9ill, !ertifi!ates of o9ligation
or sto!>D are ta8a9le. (urt*ermore, %etitioner admitted t*at it %rofited from t*e sale of
s*ares of sto!>s. Su!* %rofit is su9:e!t to !a%ital gains ta8.
Petitioner filed a motion for re!onsideration, 9ut in a Resolution dated e!em9er ;1, "33<,
t*e CTA denied t*e same. T*is %rom%ted %etitioner to file 7it* t*e Court of A%%eals a
%etition for revie7, do!>eted as CA/+.R. SP No. 03<2".
'n '!to9er ;4, "334, t*e Court of A%%eals denied t*e %etition and affirmed t*e e!ision of
t*e CTA. T*e a%%ellate !ourt ruled t*at a ta8%a6er *as t*e onus %ro9andi of %roving
entitlement to a refund or dedu!tion, follo7ing t*e rule t*at ta8 e8em%tions are stri!tl6
!onstrued against t*e ta8%a6er and li9erall6 in favor of t*e State. Petitioner failed to meet
t*e reJuisite 9urden of %roof to su%%ort its !laim.
&en!e, %etitioner@s re!ourse to t*is Court 96 7a6 of a Petition for Revie7 on Certiorari.
T*e sole issue for our resolution is 7*et*er t*e Court of A%%eals erred in *olding t*at t*e
assignment of de%osits on sto!> su9s!ri%tions is su9:e!t to do!umentar6 stam%s ta8 and
!a%ital gains ta8.
Along 7it* %oli!e %o7er and eminent domain, ta8ation is one of t*e t*ree 9asi! and
ne!essar6 attri9utes of sovereignt6. T*us, t*e State !annot 9e de%rived of t*is most essential
%o7er and attri9ute of sovereignt6 96 vague im%li!ations of la7. Rat*er, 9eing derogator6 of
sovereignt6, t*e governing %rin!i%le is t*at ta8 e8em%tions are to 9e !onstrued in stri!tissimi
:uris against t*e ta8%a6er and li9erall6 in favor of t*e ta8ing aut*orit6? and *e 7*o !laims
an e8em%tion must 9e a9le to :ustif6 *is !laim 96 t*e !learest grant of statute.
In t*e instant !ase, %etitioner see>s a refund. Ta8 refunds are a derogation of t*e State@s
ta8ing %o7er. &en!e, li>e ta8 e8em%tions, t*e6 are !onstrued stri!tl6 against t*e ta8%a6er
and li9erall6 in favor of t*e State. ConseJuentl6, *e 7*o !laims a refund or e8em%tion from
ta8es *as t*e 9urden of :ustif6ing t*e e8em%tion 96 7ords too %lain to 9e mista>en and too
!ategori!al to 9e misinter%reted. Signifi!antl6, %etitioner !annot %oint to an6 s%e!ifi!
%rovision of t*e National Internal Revenue Code aut*oriHing its !laim for an e8em%tion or
refund. Rat*er, Se!tion "41 of t*e National Internal Revenue Code a%%li!a9le to t*e issue
%rovides t*at t*e future transfer of s*ares of sto!>s is su9:e!t to do!umentar6 stam% ta8,
t*usC
SEC. "41. Stam% ta8 on sales, agreements to sell, memoranda of sales, deliveries or transfer
of due/9ills, !ertifi!ates of o9ligation, or s*ares or !ertifi!ates of sto!>. B 'n all sales, or
agreements to sell, or memoranda of sales, or deliveries, or transfer of due/9ills, !ertifi!ates
of o9ligation, or s*ares or !ertifi!ates of sto!> in an6 asso!iation, !om%an6, or !or%oration,
or transfer of su!* se!urities 96 assignment in 9lan>, or 96 deliver6, or 96 an6 %a%er or
agreement, or memorandum or ot*er eviden!es of transfer or sale 7*et*er entitling t*e
*older in an6 manner to t*e 9enefit of su!* due 9ills, !ertifi!ates of o9ligation or sto!>, or to
se!ure t*e future %a6ment of mone6, or for t*e future transfer of an6 due/9ill, !ertifi!ates of
o9ligation or sto!>, t*ere s*all 9e !olle!ted a do!umentar6 stam% ta8 of fift6 !entavos
FP".<2G on ea!* t7o *undred %esosFP;22.22G, or fra!tional %art t*ereof, of t*e %ar value of
su!* due/9ill, !ertifi!ates of o9ligation or sto!>C Provided, T*at onl6 one ta8 s*all 9e
!olle!ted on ea!* sale or transfer of sto!> or se!urities from one %erson to anot*er,
regardless of 7*et*er or not a !ertifi!ate of sto!> or o9ligation is issued, indorsed, or
delivered in %ursuan!e of su!* sale or transfer? and Provided, furt*er, T*at in !ase of sto!>
7it*out %ar value t*e amount of t*e do!umentar6 stam% ta8 *erein %res!ri9ed s*all 9e
eJuivalent to t7ent6/five %er!entum F;<EG of t*e do!umentar6 stam% ta8 %aid u%on t*e
original issue of t*e said sto!>. FEm%*asis su%%liedG.
Clearl6, under t*e a9ove %rovision, sales to se!ure Dt*e future transfer of due/9ills,
!ertifi!ates of o9ligation or !ertifi!ates of sto!>D are lia9le for do!umentar6 stam% ta8. No
e8em%tion from su!* %a6ment of do!umentar6 stam% ta8 is s%e!ified t*erein.
Petitioner !ontends t*at t*e assignment of its Dde%osits on sto!> su9s!ri%tionD is not su9:e!t
to !a%ital gains ta8 9e!ause t*ere is no gain to s%ea> of. In t*e Ca%ital +ains Ta8 Return on
Sto!> Transa!tion, 7*i!* %etitioner filed 7it* t*e $ureau of Internal Revenue, t*e
a!Juisition !ost of t*e s*ares it sold, in!luding t*e sto!> su9s!ri%tion is P13,"#0,102.;=. T*e
transfer %ri!e to Lerr6 &oldings, Ltd. is P42,00;,=13.3;. '9viousl6, %etitioner *as a net
gain in t*e amount of P","=3,;03.1#. As t*e CTA a%tl6 ruled, Da ta8 on t*e %rofit of sale on
net !a%ital gain is t*e ver6 essen!e of t*e net !a%ital gains ta8 la7. To *old ot*er7ise 7ill
inelu!ta9l6 de%rive t*e government of its due and undul6 set free from ta8 lia9ilit6 %ersons
7*o %rofited from said transa!tions.D
Veril6, t*e Court of A%%eals !ommitted no error in affirming t*e CTA e!ision.
Ie reiterate t*e 7ell/esta9lis*ed do!trine t*at as a matter of %ra!ti!e and %rin!i%le, t*is
Court 7ill not set aside t*e !on!lusion rea!*ed 96 an agen!6, li>e t*e CTA, es%e!iall6 if
affirmed 96 t*e Court of A%%eals. $6 t*e ver6 nature of its fun!tion, it *as dedi!ated itself to
t*e stud6 and !onsideration of ta8 %ro9lems and *as ne!essaril6 develo%ed an e8%ertise on
t*e su9:e!t, unless t*ere *as 9een an a9use or im%rovident e8er!ise of aut*orit6 on its %art,
7*i!* is not %resent *ere.
I&ERE('RE, 7e EN, t*e %etition. T*e e!ision of t*e Court of A%%eals in CA/+.R. SP
No. 03<2" is A((IRME IN T'T'. Costs against %etitioner. S' 'RERE.
SECTION 2A*. Sta'% Tax on .onds# Deent&res# Cert"f"$ates of Sto$9 or
Indetedness Iss&ed "n <ore",n Co&ntr"es. On all onds# deent&res# $ert"f"$ates
of sto$9# or $ert"f"$ates of "ndetedness "ss&ed "n an+ fore",n $o&ntr+# there shall e
$olle$ted fro' the %erson sell"n, or transferr"n, the sa'e "n the Ph"l"%%"nes# s&$h
tax as "s re;&"red + la( on s"'"lar "nstr&'ents (hen "ss&ed# sold or transferred "n
the Ph"l"%%"nes.
Se!urit6 $an> Cor%oration vs. Commissioner of Internal Revenue, +.R. No. "02=0=,
August ;;, ;221
(ACTSC Sometime 9efore Mar!* "3, "3=4, Se!urit6 $an> Cor%oration FS$CG re!eived a
Pre/Assessment Noti!e dated Mar!* 1, "3=4 from t*e $ureau of Internal Revenue F$IRG
for defi!ien!6 o!umentar6 Stam% Ta8 FSTG. S$C !laims t*at t*e $IR@s ST
assessment on its SALES '( SEC-RITIES IIT& REP-RC&ASE A+REEMENTS la!>s
fa!tual and legal 9ases. It !laimed t*at t*ese !onve6an!es are instruments !overed under
Se!tion ;;3 Fno7 Se!tion "=2G of t*e National Internal Revenue Code FNIRCG t*at are
not su9:e!t to ST im%osed 96 Se!tion ;;< Fno7 "41G of t*e NIRC.
ISS-EC I*et*er said sales of se!urities 7it* re%ur!*ase agreements are su9:e!t to
do!umentar6 stam% ta8 FSTG.
&ELC ,es. T*e NIRC levies ST u%on do!uments, instruments and %a%ers as follo7sC
SEC. "40. Stam% ta8es u%on do!uments, instruments, and %a%ers B -%on do!uments,
instruments, and %a%ers, and u%on a!!e%tan!es, assignments, sales, and transfers of t*e
o9ligation, rig*t, or %ro%ert6 in!ident t*ereto, t*ere s*all 9e levied, !olle!ted and %aid
for, and in res%e!t of t*e transa!tion so *ad or a!!om%lis*ed, t*e !orres%onding
do!umentar6 stam% ta8es %res!ri9ed in t*e follo7ing se!tions of t*is Title, 96 t*e %erson
ma>ing, signing, issuing, a!!e%ting, or transferring t*e same, and at t*e same time su!*
a!t is done or transa!tion *adC Provided, T*at 7*enever one %art6 to t*e ta8a9le
do!ument en:o6s e8em%tion from t*e ta8 *erein im%osed, t*e ot*er %art6 to t*ereto 7*o is
not e8em%t s*all 9e t*e one dire!tl6 lia9le for t*e ta8. Parti!ularl6 !overing sales of
se!urities, 7*i!* S$C *as 9een assessed 96 t*e $IR in t*is !ase, and t*e !orres%onding
ST rates due t*ereon at t*e time t*e said ta8 a!!rued, t*e former Se!tion ;;< Fno7
Se!tion "41G of t*e NIRC %rovidesC
SEC. ;;<. Stam% ta8 on sales, agreements to sell, memorandum of sales, deliveries or
transfer of 9onds, due/9ills, !ertifi!ates of o9ligations, or s*ares or !ertifi!ates of sto!>s
B 'n all sales, or agreements to sell or memorandum of sales, or deliveries, or transfer
of 9onds, due/9ills, !ertifi!ates of o9ligation, or s*ares or !ertifi!ates of sto!> in an6
asso!iation, !om%an6 or !or%oration, or transfer of su!* se!urities 96 assignment in
9lan>, or 96 deliver6, or 96 an6 %a%er or agreement, or memorandum or ot*er eviden!es
of transfer or sale 7*et*er entitling t*e *older in an6 manner to t*e 9enefit of su!* 9ond,
due/9ills, !ertifi!ates of o9ligation or sto!>, or to se!ure t*e future %a6ment of mone6, or
for t*e future transfer of an6 9ond, due/9ill, !ertifi!ates of o9ligation or sto!>, t*ere s*all
9e !olle!ted a do!umentar6 stam% ta8 of t7ent6/five !entavos on ea!* t7o *undred %esos,
or fra!tional %art t*ereof, of t*e %ar value of su!* 9ond, due/9ill, !ertifi!ates of
o9ligation or sto!>? Provided, T*at onl6 one ta8 s*all 9e !olle!ted of ea!* sale or
transfer of sto!> or se!urities from one %erson to anot*er, regardless of 7*et*er or not a
!ertifi!ate of sto!> or o9ligation is issued, indorsed, or delivered in %ursuan!e of su!*
sale or transfer? and %rovided, furt*er, T*at in !ase of sto!> 7it*out %ar value t*e
amount of t*e do!umentar6 stam% ta8 *erein %res!ri9ed s*all 9e eJuivalent to t7ent6/five
%er!entum of t*e do!umentar6 stam% ta8 %aid u%on t*e original issue of said sto!>.
It is !lear from t*e %lain language of t*e la7 t*at all sales of se!urities, IIT&'-T
MALIN+ AN, ISTINCTI'N as to t*e nature or t6%e of t*e sale, i.e., 7*et*er it 9e 7it*
a re%ur!*ase agreement or not, are ta8a9le. 'n t*e ot*er *and, all se!urities !onsisting
of 9onds, due/9ills, !ertifi!ates of o9ligation, or s*ares or !ertifi!ates of sto!> in an6
asso!iation, !om%an6 or !or%oration, of 7*atever t6%e or nature are 7it*in t*e s!o%e of
t*is se!tion.
S$C !ontends, *o7ever, t*at t*e sales of se!urities 9eing levied u%on are not !overed 96
Se!tion ;;< Fno7 Se!tion "41G, 9ut instead fall under Se!tion ;;3 Fno7 Se!tion "=2G of
t*e Ta8 Code. In t*is res%e!t, S$C invo>es Revenue Memorandum Cir!ulars No. "0/=4
and No. 00/=1 and $IR Ruling No. ""3/3".
T*is is untena9le for t*e sim%le reason t*at t*e $IR !ir!ulars and ruling relied u%on 7ere
all issued after "3=0, t*e ta8 %eriod involved in t*is !ase. T*ose !ir!ulars and ruling
!annot %revail over t*e !lear and %lain language of t*e Ta8 Code.
In Se!tion "41 of t*e Ta8 Code, ST is im%osed on t*e sales, agreements to sell,
memoranda of sales, deliveries or transfer of s*ares or !ertifi!ates of sto!> in an6
asso!iation, !om%an6, or !or%oration, or transfer of su!* se!urities 96 assignment in
9lan>, or 96 deliver6, or 96 an6 %a%er or agreement, or memorandum or ot*er eviden!es
of transfer or sale 7*et*er entitling t*e *older in an6 manner to t*e 9enefit of su!*
!ertifi!ates of sto!>, or to se!ure t*e future %a6ment of mone6, or for t*e future transfer of
!ertifi!ates of sto!>. In Com%agnie(inan!iereSu!resetenrees v. Commissioner of
Internal Revenue, t*is Court *eld t*at under Se!tion "41 of t*e Ta8 Code, sales to se!ure
t*e future transfer of due/9ills, !ertifi!ates of o9ligation or !ertifi!ates of sto!> are
su9:e!t to do!umentar6 stam% ta8.
"4;2#</#1, June "1, ;223
T*ere is no grant of e8em%tion from %a6ment of do!umentar6 stam% ta8 under Se!. "41 of
t*e NIRC.
Sales to se!ure Dt*e future transfer of due/9ills, !ertifi!ates of o9ligation or !ertifi!ates of
sto!>D are lia9le for do!umentar6 stam% ta8. No e8em%tion from su!* %a6ment of
do!umentar6 stam% ta8 is s%e!ified t*erein.
Com%agnie(inan!iereSu!resEtenrees vs. Commissioner of Internal Revenue, +.R. No.
"00=0#, August ;=, ;221
All sales of se!urities are ta8a9le.
It is !lear from t*e %lain language of t*e la7 t*at all sales of se!urities, 7it*out ma>ing
an6 distin!tion as to t*e nature or t6%e of t*e sale, i.e., 7*et*er it 9e 7it* a re%ur!*ase
agreement or not, are ta8a9le. 'n t*e ot*er *and, all se!urities !onsisting of 9onds, due/
9ills, !ertifi!ates of o9ligation, or s*ares or !ertifi!ates of sto!> in an6 asso!iation,
!om%an6 or !or%oration, of 7*atever t6%e or nature are 7it*in t*e s!o%e of t*is se!tion.
Se!urit6 $an> Cor%. vs. Commissioner of Internal Revenue, +.R. No. "02=0=, August ;;,
;221
SECTION 2AA. Sta'% Tax on Cert"f"$ates of Prof"ts or Interest "n Pro%ert+ or
A$$&'&lat"ons. On all $ert"f"$ates of %rof"ts# or an+ $ert"f"$ate or 'e'orand&'
sho("n, "nterest "n the %ro%ert+ or a$$&'&lat"ons of an+ asso$"at"on# $o'%an+ or
$or%orat"on# and on all transfers of s&$h $ert"f"$ates or 'e'oranda# there shall e
$olle$ted a do$&'entar+ sta'% tax of <"ft+ $enta!os 6P0.)07 on ea$h T(o h&ndred
%esos 6P/007# or fra$t"onal %art thereof# of the fa$e !al&e of s&$h $ert"f"$ate or
'e'orand&'.
SECTION 2A8. Sta'% Tax on .an9 Che$9s# Drafts# Cert"f"$ates of De%os"t not
.ear"n, Interest# and Other Instr&'ents. On ea$h an9 $he$9# draft# or
$ert"f"$ate of de%os"t not dra("n, "nterest# or order for the %a+'ent of an+ s&' of
'one+ dra(n &%on or "ss&ed + an+ an9# tr&st $o'%an+# or an+ %erson or %ersons#
$o'%an"es or $or%orat"ons# at s",ht or on de'and# there shall e $olle$ted a
do$&'entar+ sta'% tax of One %eso and f"ft+ $enta!os 6P2.)07.
SECTION 2A>. Sta'% Tax on All Det Instr&'ents. On e!er+ or","nal "ss&e
of det "nstr&'ents# there shall e $olle$ted a do$&'entar+ sta'% tax on One %eso
6P2.007 on ea$h T(o h&ndred %esos 6P/007# or fra$t"onal %art thereof# of the "ss&e
%r"$e of an+ s&$h det "nstr&'ents-
Pro!"ded# That for s&$h det "nstr&'ents ("th ter's of less than one 627 +ear# the
do$&'entar+ sta'% tax to e $olle$ted shall e of a %ro%ort"onal a'o&nt "n
a$$ordan$e ("th the rat"o of "ts ter' "n n&'er of da+s to three h&ndred s"xt+Bf"!e
63*)7 da+s- Pro!"ded# f&rther# That onl+ one do$&'entar+ sta'% tax shall e
"'%osed on e"ther loan a,ree'ent# or %ro'"ssor+ notes "ss&ed to se$&re s&$h loan.
<or %&r%oses of th"s se$t"on# the ter' det "nstr&'ent shall 'ean "nstr&'ents
re%resent"n, orro("n, and lend"n, transa$t"ons "n$l&d"n, &t not l"'"ted to
deent&res# $ert"f"$ates of "ndetedness# d&e "lls# onds# loan a,ree'ents#
"n$l&d"n, those s",ned aroad (here"n the o:e$t of $ontra$t "s lo$ated or &sed "n
the Ph"l"%%"nes# "nstr&'ents and se$&r"t"es "ss&ed + the ,o!ern'ent of an+ of "ts
"nstr&'ental"t"es# de%os"t s&st"t&te det "nstr&'ents# $ert"f"$ates or other
e!"den$es of de%os"ts that are e"ther dra("n, "nterest s",n"f"$antl+ h",her than the
re,&lar sa!"n,s de%os"t ta9"n, "nto $ons"derat"on the s"5e of the de%os"t and the
r"s9s "n!ol!ed or dra("n, "nterest and ha!"n, a s%e$"f"$ 'at&r"t+ date# orders for
%a+'ent of an+ s&' of 'one+ other("se than at s",ht or on de'and# %ro'"ssor+
notes# (hether ne,ot"ale or nonBne,ot"ale# ex$e%t an9 notes "ss&ed for
$"r$&lat"on.
T*e amendment of Se!tion "=2 of t*e NIRC and its re/num9ering as Se!tion "43 96
Re%u9li! A!t No. 3;#0 in ;22# do not mean t*at %rior t*ereto, s%e!ial savings de%osits
eviden!ed 96 %ass9oo>s 7ere e8em%ted from %a6ment of ST.
Metro%olitan $an> and Trust Co. vs. Commissioner of Internal Revenue, +.R. No.
"4=434, August #, ;223
$ased on t*e definition and !om%arison, it is !lear t*at a !ertifi!ate of de%osit dra7ing
interest as used in Se!tion "=2 of t*e "344 NIRC refers to a time de%osit a!!ount. As t*e
$ureau of Internal Revenue F$IRG e8%lained in Revenue Memorandum Cir!ular No. "1/
;220, #1 t*e distin!t features of a !ertifi!ate of de%osit from a te!*ni!al %oint of vie7 are
as follo7sC
a. Minimum de%osit reJuirement?
9. Stated maturit6 %eriod?
!. Interest rate is *ig*er t*an t*e ordinar6 savings a!!ount?
d. Not %a6a9le on sig*t or demand, 9ut u%on maturit6 or in !ase of %re/termination,
%rior noti!e is reJuired? and
e. Earl6 7it*dra7al %enalt6 in t*e form of %artial loss or total loss of interest in !ase
of %re/termination.
P*il. $an>ing Cor%. vs. Commissioner of Internal Revenue, +.R. No. "42<4#, Januar6
02, ;223
SECTION 280. Sta'% Tax on All ."lls of Ex$han,e or Drafts. On all "lls of
ex$han,e 6et(een %o"nts ("th"n the Ph"l"%%"nes7 or drafts# there shall e $olle$ted
a do$&'entar+ sta'% tax of Th"rt+ $enta!os 6P0.307 on ea$h T(o h&ndred %esos
6P/007# or fra$t"onal %art thereof# of the fa$e !al&e of an+ s&$h "ll of ex$han,e or
draft.
P&IL. $ANLIN+ C'RP. vs. C'MMISSI'NER '( INTERNAL REVEN-E .+.R. No.
"42<4#, Januar6 02, ;223.5
(ACTSC (or ta8a9le 6ears "331 and "334, %etitioner P*ili%%ine $an>ing Cor%., no7
+lo9al $usiness $an>, offered to its de%ositors, DS%e!ialPSu%er Savings e%osit A!!ountD
FSSAG, a form of a savings de%osit eviden!ed 96 a %ass9oo> and earning a *ig*er
interest rate t*an a regular savings a!!ount. T*e Commissioner of Internal Revenue sent
%etitioner a (inal Assessment Noti!e assessing defi!ien!6 do!umentar6 stam% ta8 FSTG
9ased on t*e outstanding 9alan!es of its SSA, in!luding in!rements for "331 and "334.
Petitioner maintains t*at t*e ta8 assessments are erroneous 9e!ause Se!tion "=2 of t*e
"344 NIRC does not in!lude de%osits eviden!ed 96 a %ass9oo> among t*e enumeration of
instruments su9:e!t to ST.
T*e Court of Ta8 A%%eals En $an! affirmed t*e e!ision and Resolution of t*e CTA@s
Se!ond ivision, ruling t*at a de%osit a!!ount 7it* t*e same features as a time de%osit,
i.e., a fi8ed term in order to earn a *ig*er interest rate, is su9:e!t to ST im%osed in
Se!tion "=2 of t*e "344 NIRC.
ISS-EC I*et*er %etitioner@s %rodu!t !alled S%e!ialPSu%er Savings A!!ount are
D!ertifi!ates of de%osits dra7ing interestD as used in Se!tion "=2 of t*e "344 and
t*erefore su9:e!t to ST.
R-LIN+C T*e SSA is a !ertifi!ate of de%osit dra7ing interest su9:e!t to ST even if it
is eviden!ed 96 a %ass9oo> and non/negotia9le in !*ara!ter. T*e SSA is for de%ositors
7*o maintain savings de%osits 7it* su9stantial average dail6 9alan!e and 7*i!* earn
*ig*er interest rates. T*e *olding %eriod of an SSA floats at t*e o%tion of t*e de%ositor
at 02, 12, 32, ";2 da6s or more and for maintaining a longer *olding %eriod, t*e
de%ositor earns *ig*er interest rates. T*ere is no %re/termination of a!!ounts in an SSA
9e!ause t*e a!!ount is sim%l6 reverted to an ordinar6 savings status in !ase of earl6 or
%artial 7it*dra7al or if t*e reJuired *olding %eriod is not met. Mean7*ile, Metro9an>,
t*e surviving entit6 t*at a9sor9ed %etitioner@s 9an>ing 9usiness, filed a Ta8 Amnest6
Return, %aid t*e amnest6 ta8 and full6 !om%lied 7it* all t*e reJuirements of t*e Ta8
Amnest6 Program under RA 3#=2.
T*e ST is one of t*e ta8es !overed 96 t*e Ta8 Amnest6 Program under RA 3#=2. I*ile
%etitioner is !learl6 lia9le to %a6 t*e ST on its SSA for t*e 6ears "331 and "334, t*e
%etitioner, as t*e a9sor9ed !or%oration, !an avail of t*e ta8 amnest6 9enefits granted to
Metro9an>.
Considering t*at t*e !om%letion of t*e reJuirements s*all 9e deemed full !om%lian!e
7it* t*e ta8 amnest6 %rogram, t*e la7 mandates t*at t*e ta8%a6er s*all t*ereafter 9e
immune from t*e %a6ment of ta8es, and additions t*ereto, as 7ell as t*e a%%urtenant
!ivil, !riminal or administrative %enalties under t*e NIRC of "334, as amended, arising
from t*e failure to %a6 an6 and all internal revenue ta8es for ta8a9le 6ear ;22< and %rior
6ears.
Metro9an> vs. Commissioner of Internal Revenue +.R.
No. "4=434, August #, ;223
(ACTSC Res%ondent Commissioner of Internal Revenue issued a Pre/Assessment Noti!e
assessing %etitioner Metro9an> for defi!ien!6 do!umentar6 stam% ta8 on its -niversal
Savings A!!ount F-NISAG, 9ased on Se!tion "=2 of t*e NIRC. -NISA is for a de%ositor
a9le to maintain a savings de%osit 7it* Metro9an> 7it* su9stantial average dail6
9alan!e under 7*i!* *e is entitled to a *ig*er interest rate t*an in a regular savings
a!!ount. A %rotest 7as t*ereafter filed 96 %etitioner. I*en res%ondent issued an
assessment noti!e and formal letter of demand, Metro9an> filed anot*er %rotest 7*i!*
7as denied, %rom%ting it to file a Petition for Revie7 7it* t*e CTA. After dismissal of t*e
%etition 96 t*e CTA ;nd ivision, t*e !ase rea!*ed t*e CTA en 9an! 7*i!* affirmed t*e
Juestioned ruling. A!!ording to t*e CTA en 9an!, t*e de!isive issue of 7*et*er s%e!ial
savings a!!ounts eviden!ed 96 %ass9oo>s, su!* as t*e -NISA of Metro9an>, 7ere su9:e!t
to ST under Se!tion "=2 of t*e NIRC, *ad alread6 9een resolved in t*e affirmative 96
t*e Su%reme Court in its Jan. "<, ;224 Resolution in $an!o de 'ro -niversal $an> v.
Commissioner of Internal Revenue F$' !aseG and its A%ril #, ;224 e!ision in
International E8!*ange $an> v. Commissioner of Internal Revenue FIE$ !aseG.
ISS-EC I*et*er or not t*e -NISA 7as su9:e!t to ST under Se!. "=2 of t*e NIRC, %rior
to its amendment 96 R.A. No. 3;#.
R-LIN+C T*e Court agrees 7it* t*e CTA en 9an! t*at t*e %ivotal issue in t*is !ase *ad
9een sJuarel6 resolved in t*e $' !ase and t*e IE$ !ase, 7*i!* involved assessments
issued 96 t*e $IR against t*e 9an>s $' and IE$ for ST on t*eir res%e!tive s%e!ial
savings a!!ounts, !losel6 similar to t*e -NISA of Metro9an>. Indeed, t*e -NISA B t*e
s%e!ial savings a!!ount of Metro9an>, granting a *ig*er ta8 rate to de%ositors a9le to
maintain t*e reJuired minimum de%osit 9alan!e for t*e s%e!ified *olding %eriod, and
eviden!ed 96 a %ass9oo> B is a !ertifi!ate of de%osit 9earing interest, alread6 su9:e!t to
ST even under t*e t*en Se!tion "=2 of t*e NIRC. &en!e, t*e assessment 96 t*e CIR
against Metro9an> for defi!ien!6 ST on t*e -NISA for "333 7as onl6 %ro%er. &o7ever,
during t*e %enden!6 of t*e %resent Petition, Metro9an> manifested t*at it *ad availed
itself of t*e Ta8 Amnest6 Program under R.A. No. 3#=2. To avail of t*e ta8 amnest6, it
%aid <E of t*e resulting in!rease in its net 7ort*.
T*e fa!tual determination made 96 t*e CTA en 9an! in C.T.A. E$ No. ;13 and 96 t*is
Court in t*e P$C !ase B t*at Metro9an> *ad !om%lied 7it* t*e reJuirements for its
a%%li!ation and 7as Jualified for t*e ta8 amnest6 under Re%u9li! A!t No. 3#=2 B is
9inding on t*is Court. T*erefore, 96 virtue of t*e availment 96 Metro9an> of t*e Ta8
Amnest6 Program under R.A. No. 3#=2, it is alread6 immune from t*e %a6ment of ta8es,
in!luding t*e defi!ien!6 ST on t*e -NISA for "333, as 7ell as t*e addition t*ereto.
International E8!*ange $an> vs. C I R, +.R. No. "4";11, A%ril #, ;224
(ACTSC Petitioner 7as assessed of defi!ien!6 do!umentar6 stam% ta8 on its %ur!*ases of
se!urities from t*e $ang>oSentralngPili%inas or +overnment Se!urities Pur!*ased/
Reverse Re%ur!*ase Agreement FRRPAG and its Savings A!!ount/(i8ed Savings e%osit
F(SG for t*e ta8a9le 6ears "331 and "334. Petitioner argued t*at its (S is not su9:e!t
to ST sin!e it 7as not one of t*e do!uments enumerated eit*er under t*e "344 Ta8 Code
FTa8 CodeG or t*e "334 National Internal Revenue Code FNIRCG. Res%ondent on t*e
ot*er *and argued t*at %etitioner s*ould 9e lia9le not onl6 for ST on its (S 9ut also
on its RRPA.
ISS-EC Is a Savings A!!ount/(i8ed Savings e%osit F(SG eviden!ed 96 a %ass9oo>
issued 96 International E8!*ange $an> F%etitionerG su9:e!t to do!umentar6 stam% ta8
FSTG for t*e 6ears "331 and "334M
&ELC ,es. T*e a%%li!a9le %rovision is Se!tion "=2 of t*e Ta8 Code, as amended 96
R.A. 4112.
A %ass9oo> re%resenting an interest earning de%osit a!!ount issued 96 a 9an> Jualifies as
a !ertifi!ate of de%osit dra7ing interest. A do!ument to 9e deemed a !ertifi!ate of
de%osit reJuires no s%e!ifi! form as long as t*ere is some 7ritten memorandum t*at t*e
9an> a!!e%ted a de%osit of a sum of mone6 from a de%ositor. I*at is im%ortant and
!ontrolling is t*e nature or meaning !onve6ed 96 t*e %ass9oo> and not t*e %arti!ular
la9el or nomen!lature atta!*ed to it, inasmu!* as su9stan!e, not form, is %aramount.
'rders for t*e %a6ment of sum of mone6 %a6a9le at sig*t or on demand are of !ourse
e8%li!itl6 e8em%ted from t*e %a6ment of ST. T*us, a regular savings a!!ount 7it* a
%ass9oo> 7*i!* is 7it*dra7a9le at an6 time is not su9:e!t to ST, unli>e a time de%osit
7*i!* is %a6a9le on a fi8ed maturit6 date.
As for %etitioner@s argument t*at its (S is similar to a regular savings de%osit 9e!ause
it is eviden!ed 96 a %ass9oo>, and t*at 9ased on t*e legislative deli9erations on t*e 9ill
7*i!* 7as to 9e!ome R.A. 3;#0 7*i!* amended Se!tion "=2 of t*e NIRC F7*i!* is to a
large e8tent t*e same as Se!tion "=2 of t*e Ta8 Code, as amended 96 R.A. 4112G,
Congress admitted t*at de%osits eviden!ed 96 %ass9oo>s 7*i!* *ave features a>in to time
de%osits are not su9:e!t to ST, t*e same does not lie. T*e (S, li>e a time de%osit,
%rovides for a *ig*er interest rate 7*en t*e de%osit is not 7it*dra7n 7it*in t*e reJuired
fi8ed %eriod? ot*er7ise, it earns interest %ertaining to a regular savings de%osit. &aving
a fi8ed term and t*e redu!tion of interest rates in !ase of %re/termination are essential
features of a time de%osit.
T*e same feature is %resent in a time de%osit. A de%ositor is allo7ed to 7it*dra7 *is time
de%osit even 9efore its maturit6 su9:e!t to 9an> !*arges on its %re/termination and t*e
de%ositor loses *is entitlement to earn t*e interest rate !orres%onding to t*e time de%osit.
Instead, *e earns interest %ertaining onl6 to a regular savings de%osit. T*us, %etitioner@s
argument t*at t*e savings de%osit/(S is 7it*dra7a9le an6time as o%%osed to a time
de%osit 7*i!* *as a maturit6 date, is not tena9le. In 9ot* !ases, t*e de%osit ma6 9e
7it*dra7n an6time 9ut t*e de%ositor gets to earn a lo7er rate of interest. T*e onl6
differen!e lies on t*e eviden!e of de%osit, a savings de%osit/(S is eviden!ed 96 a
%ass9oo>, 7*ile a time de%osit is eviden!ed 96 a !ertifi!ate of time de%osit. In order for
a de%ositor to earn t*e agreed *ig*er interest rate in a SA/(S, t*e amount of de%osit
must 9e maintained for a fi8ed %eriod. Su!* 9eing t*e !ase, Ie agree 7it* t*e finding
t*at t*e SA/(S is a de%osit a!!ount 7it* a fi8ed term. Iit*dra7al 9efore t*e e8%iration
of said fi8ed term results in t*e redu!tion of t*e interest rate. &aving a fi8ed term and
redu!tion of interest rate in !ase of %re/termination are essentiall6 t*e features of a time
de%osit. &en!e, t*is Court !on!urs 7it* t*e !on!lusion rea!*ed in t*e assailed e!ision
t*at %etitioner@s SA/(S and time de%osit are su9stantiall6 t*e same.
Negotia9ilit6 of do!uments is immaterial in im%osing do!umentar6 stam% ta8.
Nature of o!umentar6 Stam% Ta8.
ST is levied on t*e e8er!ise 96 %ersons of !ertain %rivileges !onferred 96 la7 for t*e
!reation, revision, or termination of s%e!ifi! legal relations*i%s t*roug* t*e e8e!ution of
s%e!ifi! instruments. It is an e8!ise u%on t*e %rivilege, o%%ortunit6 or fa!ilit6 offered at
e8!*anges for t*e transa!tion of t*e 9usiness.
International E8!*ange $an> vs. CIR, +.R. No. "4";11, A%ril #, ;224
-nli>e a regular savings a!!ount, a time de%osit is su9:e!t to do!umentar6 stam% ta8.
'rders for t*e %a6ment of sum of mone6 %a6a9le at sig*t or on demand are of !ourse
e8%li!itl6 e8em%ted from t*e %a6ment of ST. T*us, a regular savings a!!ount 7it* a
%ass9oo> 7*i!* is 7it*dra7a9le at an6 time is not su9:e!t to ST, unli>e a time de%osit
7*i!* is %a6a9le on a fi8ed maturit6 date.
To !laim t*at time de%osits s*ould not 9e su9:e!t to do!umentar6 stam% ta8 is an evasion
of t*e rule on eJualit6 and uniformit6 in ta8ation.
I*ile ta8 avoidan!e s!*emes and arrangements are not %ro*i9ited, ta8 la7s !annot 9e
!ir!umvented in order to evade %a6ment of :ust ta8es. To !laim t*at time de%osits
eviden!ed 96 %ass9oo>s s*ould not 9e su9:e!t to ST is a !lear evasion of t*e rule on
eJualit6 and uniformit6 in ta8ation t*at reJuires t*e im%osition of ST on do!uments
eviden!ing transa!tions of t*e same >ind, in t*is %arti!ular !ase, on all !ertifi!ates of
de%osits dra7ing interest.
S%e!ial savings de%osits are su9:e!t to do!umentar6 stam% ta8.
Contrar6 to t*e !laim of %etitioner, t*e SSs .s%e!ial savings de%osits5 are in fa!t
D!ertifi!ates of de%osits dra7ing interestD su9:e!t to do!umentar6 stam% ta8 as %rovided
for in Se!tion "=2 of t*e "334 NIRC.
C*ina $an>ing Cor%. vs. Commissioner of Internal Revenue, +.R. No. "4;0<3, '!to9er
;, ;223
SECTION 282. Sta'% Tax =%on A$$e%tan$e of ."lls of Ex$han,e and Others.
=%on an+ a$$e%tan$e or %a+'ent of an+ "ll of ex$han,e or order for the
%a+'ent of 'one+ %&r%ort"n, to e dra(n "n a fore",n $o&ntr+ &t %a+ale "n the
Ph"l"%%"nes# there shall e $olle$ted a do$&'entar+ sta'% tax of Th"rt+ $enta!os
6P0.307 on ea$h T(o h&ndred %esos 6P/007# or fra$t"onal %art thereof# of the fa$e
!al&e of an+ s&$h "ll of ex$han,e# or order# or the Ph"l"%%"ne e;&"!alent of s&$h
!al&e# "f ex%ressed "n fore",n $&rren$+.
C I R vs. &S$C Ltd. P*ili%%ine $ran!*es, CA/+.R. SP No. 44<=2, Jul6 =, ;22#
(ACTSC Res%ondent &S$C/LP$ %erforms !ustodial servi!es on 9e*alf of its investor/
!lients, !or%orate or individual, resident or non/resident, 7it* res%e!t to t*e latter@s
%assive investments in t*e P*ili%%ines. T*e investor/!lients maintain P*ili%%ine %eso
andPor foreign !urren!6 a!!ounts. In t*e management of t*eir funds maintained in t*e
said %eso andPor foreign !urren!6 a!!ounts, e.g. transfer and dis9ursements of funds
%a6ment or for reinvestment, said investor/!lients give instru!tions to res%ondent from
outside t*e P*ili%%ines via ele!troni! messages. T*ese ele!troni! message instru!tions
are standard forms >no7n in t*e 9an>ing industr6 as SII(T MT "22, MT ;2; andPor MT
<;". In !ase of %ur!*ase of s*ares of sto!> and ot*er investment se!urities, t*e investor/
!lients send ele!troni! messages from a9road to res%ondent in t*e form of SII(T MT
"22, MT ;2;, andPor MT <;", instru!ting t*e latter to de9it its lo!al or foreign !urren!6
a!!ount and to %a6 t*e %ur!*ase %ri!e u%on re!ei%t of t*e se!urities.
(rom August to '!to9er "334, res%ondent allegedl6 %ur!*ased and %aid ST in t*e total
amount of P0<,222,222.22.
A!!ording to res%ondent, for t*e %eriod Se%tem9er "334 to e!em9er "334, it %aid ST
on ele!troni! instru!tionsPadvises FSII(T MT "22, MT ;2; andPor MT <;"G re!eived
from a9road at t*e rate of P2.02 on ea!* P;22.22 9ased on t*e settlement %ri!e on t*e
fa!e of t*e advise under Se!tion "=" of t*e National Internal Revenue Code FNIRCG,
totaling P"3,<4;,33;."2.
'n August ;0, "333, t*e $IR issued $IR Ruling No. "0;/33, stating t*at
instru!tionsPadvises from a9road on t*e management of funds lo!ated in t*e P*ili%%ines
7*i!* do not involve transfer of from funds Fsi!G a9road are not su9:e!t to ST. 'n t*e
9asis of t*is ruling, res%ondent filed 7it* t*e $IR on '!to9er =, "333 an administrative
!laim for refund of t*e ST it erroneousl6 %aid on t*e ele!troni! instru!tions it re!eived
from its investor/!lients a9road during t*e %eriod Se%tem9er to e!em9er "334 in t*e
amount of P"3,<4;,33;."2.
ISS-EC Ias t*e do!umentar6 stam% ta8 im%osed in t*e instant !ase erroneousl6 or
illegall6 assessed and !olle!ted so as to 7arrant t*e grant of ta8 refund or ta8 !redit in
favor of &S$C/LP$M
&ELC No. Se!tion "=" of t*e National Internal Revenue Code, as amended 96 P..
""<=, P.. "33#, E.'. ;40 and R.A. 4112, 7*i!* 7as in effe!t at t*e time t*e su9:e!t
do!umentar6 stam% ta8 7as !olle!ted s%e!ifi!all6 %rovidesC
D-%on an6 a!!e%tan!e or %a6ment of an6 9ill of e8!*ange or order for t*e %a6ment of
mone6 %ur%orting to 9e dra7n in a foreign !ountr6 9ut %a6a9le in t*e P*ili%%ines, t*ere
s*all 9e !olle!ted a do!umentar6 stam% ta8 of t*irt6 !entavos on ea!* t7o *undred %esos,
or fra!tional %art t*ereof, of t*e fa!e value of an6 su!* 9ill of e8!*ange, or order, or t*e
P*ili%%ine eJuivalent of su!* value, it e8%ressed in foreign !urren!6.D
T7o !on!erns are immediatel6 a%%arent from t*e foregoing %rovision. (irst, t*e
do!umentar6 stam% ta8 is im%osed eit*erC FaG u%on an6 a!!e%tan!e of a 9ill of e8!*ange
or order for t*e %a6ment of mone6, or F9G u%on an6 %a6ment of a 9ill of e8!*ange or
order for t*e %a6ment of mone6. Se!ond, t*e 9ill of e8!*ange or t*e order for t*e %a6ment
of mone6 %ur%orts to 9e dra7n in a foreign !ountr6 9ut %a6a9le in t*e P*ili%%ines.
Su!!in!tl6 %ut, t*e do!umentar6 stam% ta8 s*all 9e assessed and !olle!ted ea!* time a
dra7ee or %erson so aut*oriHed eit*er a!!e%ts a 9ill of e8!*ange or order for t*e
%a6ment of mone6, or %a6s a sum of mone6 96 virtue of t*e dra7er@s instru!tions t*erein,
%rovided t*at t*e said 9ill of e8!*ange or order to %a6 mone6 7as dra7n in a foreign
!ountr6 9ut %a6a9le in t*e P*ili%%ines.
At 9ar, t*e res%ondent %erforms !ustodial servi!es in 9e*alf of its investor/!lients as
regards t*eir %assive investments in t*e P*ili%%ines mainl6 involving s*ares of sto!>s in
domesti! !or%orations. T*ese investor/!lients maintain P*ili%%ine %eso andPor foreign
!urren!6 a!!ounts 7it* &S$C/LP$. S*ould t*e6 desire to %ur!*ase s*ares of sto!> and
ot*er investments se!urities in t*e P*ili%%ines, t*e investor/!lients send t*eir instru!tions
and advises via ele!troni! messages from a9road to &S$C/LP$ in t*e form of SII(T MT
"22, MT ;2;, or MT <;" dire!ting t*e latter to de9it t*eir lo!al or foreign !urren!6
a!!ount and to %a6 t*e %ur!*ase %ri!e u%on re!ei%t of t*e se!urities. Pursuant to Se!tion
"=" of t*e NIRC, res%ondent 7as t*us reJuired to %a6 do!umentar6 stam% ta8es 9ased on
its a!!e%tan!e of t*ese ele!troni! messages B 7*i!*, as &S$C/LP$ readil6 admits in its
%etition filed 9efore t*e Court of Ta8 A%%eals, 7ere essentiall6 orders to %a6 t*e
%ur!*ases of se!urities made 96 its !lient/investors.
A%%ositel6, t*e $IR !orre!tl6 and legall6 assessed and !olle!ted t*e do!umentar6 stam%
ta8 from res%ondent !onsidering t*at t*e said ta8 7as levied against t*e a!!e%tan!es and
%a6ments 96 &S$C/LP$ of t*e su9:e!t ele!troni! messagesPorders for %a6ment. T*e issue
of 7*et*er su!* ele!troni! messages ma6 9e eJuated as a 7ritten do!ument and t*us 9e
su9:e!t to ta8 is 9eside t*e %oint. As alread6 stressed, Se!tion "=" of t*e la7 !ited earlier
im%oses t*e do!umentar6 stam% ta8 not on t*e 9ill of e8!*ange or order for %a6ment of
mone6 9ut on t*e a!!e%tan!e or %a6ment of t*e said 9ill or order. T*e a!!e%tan!e of a
9ill or order is t*e signifi!ation 96 t*e dra7ee of its assent to t*e order of t*e dra7er to
%a6 a given sum of mone6 7*ile %a6ment im%lies not onl6 t*e assent to t*e said order of
t*e dra7er and a re!ognition of t*e dra7er@s o9ligation to %a6 su!* aforesaid sum, 9ut
also a !om%lian!e 7it* su!* o9ligation FP*ili%%ine National $an> vs. Court of A%%eals,
;< SCRA 130 ."31=5? Prudential $an> vs. Intermediate A%%ellate Court, ;"1 SCRA ;<4
."33;5G.
I*at is vital to t*e valid im%osition of t*e do!umentar6 stam% ta8 under Se!tion "=" is
t*e e8isten!e of t*e reJuirement of a!!e%tan!e or %a6ment 96 t*e dra7ee Fin t*is !ase,
&S$C/LP$G of t*e order for %a6ment of mone6 from its investor/!lients and t*at t*e said
order 7as dra7n from a foreign !ountr6 and %a6a9le in t*e P*ili%%inesC T*ese reJuisites
are surel6 %resent *ere. It 7ould serve t*e %arties 7ell to understand t*e nature of t*e
ta8 9eing im%osed in t*e !ase at 9ar. In P*ili%%ine &ome Assuran!e Cor%oration vs.
Court of A%%eals F02" SCRA ##0 ."3335G, t*e Su%reme Court ruled t*at do!umentar6
stam% ta8es are levied on t*e e8er!ise 96 %ersons of !ertain %rivileges !onferred 96 la7
for t*e !reation, revision, or termination of s%e!ifi! legal relations*i%s t*roug* t*e
e8e!ution of s%e!ifi! instruments, inde%endentl6 of t*e legal status of t*e transa!tions
giving rise t*ereto. In t*e same !ase, t*e &ig* Court also de!lared B !iting u Pont vs.
-nited States F022 -.S. "<2, "<0 ."3015GC
DT*e ta8 is not u%on t*e 9usiness transa!ted 9ut is an e8!ise u%on t*e %rivilege,
o%%ortunit6, or fa!ilit6 offered at e8!*anges for t*e transa!tion of t*e 9usiness. It is an
e8!ise u%on t*e fa!ilities used in t*e transa!tion of t*e 9usiness se%arate and a%art from
t*e 9usiness itself.D
To reiterate, t*e su9:e!t do!umentar6 stam% ta8 7as levied on t*e a!!e%tan!e and
%a6ment made 96 &S$C/LP$ %ursuant to t*e order made 96 its !lient/investors as
em9odied in t*e !ited ele!troni! messages, t*roug* 7*i!* t*e *erein %arties@ %rivilege
and o%%ortunit6 to transa!t 9usiness res%e!tivel6 as dra7ee and dra7ers 7as e8er!ised,
se%arate and a%art from t*e !ir!umstan!es and !onditions related to su!* a!!e%tan!e
and su9seJuent %a6ment of t*e sum of mone6 aut*oriHed 96 t*e !on!erned dra7ers.
Stated anot*er 7a6, t*e do!umentar6 stam% ta8 7as e8a!ted on t*e res%ondent@s e8er!ise
of its %rivilege under its dra7ee/dra7er relations*i% 7it* its !lient/investor t*roug* t*e
e8e!ution of a s%e!ifi! instrument 7*i!*, in t*e !ase at 9ar, is t*e a!!e%tan!e of t*e order
for %a6ment of mone6. T*e a!!e%tan!e of a 9ill or order for %a6ment ma6 9e done in
7riting 96 t*e dra7ee in t*e 9ill or order itself, or in a se%arate instrument FPrudential
$an> vs. Intermediate A%%ellate Court, su%ra.G. &ere, t*e res%ondent@s a!!e%tan!e of t*e
orders for t*e %a6ment of mone6 7as verita9l6 Ddone in 7riting in a se%arate instrumentD
ea!* time it de9ited t*e lo!al or foreign !urren!6 a!!ounts of its !lient/investors %ursuant
to t*e latter@s instru!tions and advises sent 96 ele!troni! messages to t*e res%ondent
9an>. T*e do!umentar6 stam% ta8 t*erefore must 9e %aid u%on t*e e8e!ution of t*e
s%e!ified instruments or fa!ilities !overed 96 t*e ta8 B in t*is !ase, t*e a!!e%tan!e 96
&S$C/LP$ of t*e order for %a6ment of mone6 sent 96 t*e !lient/investors t*roug*
ele!troni! messages FP*ili%%ine &ome Assuran!e Cor%oration vs. Court of A%%eals,
su%ra.G.
T*e Court of Ta8 A%%eals nevert*eless granted t*e res%ondent@s entreated refund,
ratio!inating t*at $IR Ruling No. "0;/33 e8em%ts Dele!troni! message instru!tionsD from
t*e %a6ment of t*e do!umentar6 stam% ta8 under Se!tion "=" of t*e NIRC. T*e Ta8 Court
!ommitted a reversi9le error in t*is regard.
$IR Ruling No. "0;/33 7as issued 96 t*en Commissioner $eet*oven L. Rualo on August
;0, "333 9ased on a reJuest made 96 Citi9an> and Standard C*artered $an> for a ruling
on t*e issue of 7*et*er instru!tions sent 96 overseas !lients to t*eir 9an>s in t*e
P*ili%%ines to de9it t*eir lo!al or foreign !urren!6 a!!ounts and %a6 a named re!i%ient
in t*e P*ili%%ines is su9:e!t to do!umentar6 stam% ta8.
(ittingl6, t*e Court is not 9ound 96 su!* erroneous ruling of t*e $IR. T*e rule t*at t*e
!onstru!tion given to a statute 96 an administrative agen!6 !*arged 7it* t*e
inter%retation and a%%li!ation of a statute is normall6 entitled to great res%e!t and s*ould
9e a!!orded great 7eig*t 96 t*e !ourts is not a9solute. T*e e8!e%tion is 7*en su!*
!onstru!tion is !learl6 s*o7n to 9e in s*ar% !onfli!t 7it* t*e governing statute and ot*er
la7s, as is t*e !ase *ere F-nited &ar9or Pilots@ Asso!iation of t*e P*ili%%ines, In!. vs.
Asso!iation of International S*i%%ing Lines, In!., 03" SCRA <;; .;22;5G. I*en an
administrative agen!6 renders an o%inion or issues a statement of %oli!6, it merel6
inter%rets a %re/e8isting la7 and t*e administrative inter%retation is at 9est advisor6 for
it is t*e !ourts t*at finall6 determine 7*at t*e la7 means. T*us, an a!tion 96 an
administrative agen!6 ma6 9e set aside 96 t*e :udi!ial de%artment if t*ere is an error of
la7 !learl6 !onfli!ting 7it* t*e letter and s%irit of t*e la7 FEnerg6 Regulator6 $oard vs.
Court of A%%eals, 0<4 SCRA 02 .;22"5G.
SECTION 28/. Sta'% Tax on <ore",n ."lls of Ex$han,e and Letters of Cred"t.
On all fore",n "lls of ex$han,e and letters of $red"t 6"n$l&d"n, orders# + tele,ra%h or
other("se# for the %a+'ent of 'one+ "ss&ed + ex%ress or stea'sh"% $o'%an"es or + an+
%erson or %ersons7 dra(n "n &t %a+ale o&t of the Ph"l"%%"nes "n a set of three 637 or
'ore a$$ord"n, to the $&sto' of 'er$hants and an9ers# there shall e $olle$ted a
do$&'entar+ sta'% tax of Th"rt+ $enta!os 6P0.307 on ea$h T(o h&ndred %esos 6P/007# or
fra$t"onal %art thereof# of the fa$e !al&e of an+ s&$h "ll of ex$han,e or letter of $red"t# or
the Ph"l"%%"ne e;&"!alent of s&$h fa$e !al&e# "f ex%ressed "n fore",n $&rren$+.
$an> of t*e P*ili%%ine Islands vs. C I R, +.R. No. "0422;, Jul6 ;4, ;221
(ACTSC (rom ;= (e9ruar6 "3=1 to = '!to9er "3=1, %etitioner, $an> of t*e P*ili%%ine
Islands F$PIG, sold to t*e Central $an> of t*e P*ili%%ines Fno7
$ang>oSentralngPili%inasG -.S. dollars for P",12=,<#",322.22. $PI instru!ted, 96 !a9le,
its !orres%ondent 9an> in Ne7 ,or> to transfer -.S. dollars de%osited in $PI@s a!!ount
t*erein to t*e (ederal Reserve $an> in Ne7 ,or> for !redit to t*e Central $an>@s a!!ount
t*erein. T*ereafter, t*e (ederal Reserve $an> sent to t*e Central $an> !onfirmation t*at
su!* funds *ad 9een !redited to its a!!ount and t*e Central $an> %rom%tl6 transferred to
%etitioner@s a!!ount in t*e P*ili%%ines t*e !orres%onding amount in P*ili%%ine %esos.
ISS-EC I*et*er $PI is lia9le for do!umentar6 stam% ta8es in !onne!tion 7it* said sale
of foreign e8!*ange to t*e Central $an> in "3=1 under Se!tion "3< Fno7 Se!tion "=;G of
t*e NIRC.
&ELC ,es. In t*is !ase, $PI ordered its !orres%ondent 9an> in t*e -.S. to %a6 t*e
(ederal Reserve $an> in Ne7 ,or> a sum of mone6, 7*i!* is to 9e !redited to t*e a!!ount
of t*e Central $an>. T*ese are t*e same a!ts des!ri9ed under Se!tion <" of Regulations
No. ;1, inter%reting t*e do!umentar6 stam% ta8 %rovision in t*e Administrative Code of
"3"4, 7*i!* is su9stantiall6 identi!al to Se!tion "3< Fno7 Se!tion "=;G of t*e NIRC.
T*ese a!ts %erformed 96 $PI in!idental to its sale of foreign e8!*ange to t*e Central
$an> are in!luded among t*ose ta8ed under Se!tion "3< Fno7 Se!tion "=;G of t*e NIRC.
$PI alleges t*at t*e assailed de!ision must 9e reversed sin!e t*e sale 9et7een $PI and
t*e Central $an> of foreign e8!*ange, as distinguis*ed from foreign 9ills of e8!*ange, is
not su9:e!t to t*e do!umentar6 stam% ta8es %res!ri9ed in Se!tion "3< Fno7 Se!tion "=;G
of t*e NIRC. T*is argument is untena9le. In t*is !ase, it is not t*e sale of foreign
e8!*ange %er se t*at is 9eing ta8ed under Se!tion "3< of t*e NIRC. T*is se!tion refers to
a do!umentar6 stam% ta8, 7*i!* is an e8!ise u%on t*e fa!ilities used in t*e transa!tion of
t*e 9usiness se%arate and a%art from t*e 9usiness itself. IT IS N'T A TAA -P'N T&E
$-SINESS ITSEL( I&IC& IS S' TRANSACTE, 9ut IT IS A -T, -P'N T&E
(ACILITIES MAE -SE '( AN ACT-ALL, EMPL',E IN T&E TRANSACTI'N
'( T&E $-SINESS, AN SEPARATE AN APART (R'M T&E $-SINESS ITSEL(.
T*e fa!ts s*o7 t*at $PI, 7*ile in t*e P*ili%%ines, ordered its !orres%ondent 9an> 96
!a9le to ma>e a %a6ment, and t*at %a6ment is to 9e made to t*e (ederal Reserve $an> in
Ne7 ,or>. T*us, $PI MAE -SE '( T&E A('REMENTI'NE (ACILIT,. As a result,
$PI need not *ave sent a re%resentative to Ne7 ,or>, nor did t*e (ederal Reserve $an>
*ave to go to t*e P*ili%%ines to !olle!t t*e funds 7*i!* 7ere to 9e !redited to t*e Central
$an>@s a!!ount 7it* t*em. T*e transa!tion 7as made at t*e s*ortest time %ossi9le and at
t*e greatest !onvenien!e to t*e %arties. T*e ta8 7as laid u%on t*is %rivilege or fa!ilit6
used 96 t*e %arties in t*eir transa!tions, transa!tions 7*i!* t*e6 ma6 effe!t t*roug* our
!ourts, and 7*i!* are regulated and %rote!ted 96 our government.
SECTION 283. Sta'% Tax on L"fe Ins&ran$e Pol"$"es. On all %ol"$"es of
"ns&ran$e or other "nstr&'ents + (hate!er na'e the sa'e 'a+ e $alled# (here+
an+ "ns&ran$e shall e 'ade or rene(ed &%on an+ l"fe or l"!es# there shall e
$olle$ted a oneBt"'e do$&'entar+ sta'% tax at the follo("n, rates-
If the a'o&nt of "ns&ran$e does not
ex$eed Ph%200#000.00 exe'%t
If the a'o&nt of "ns&ran$e ex$eeds
Ph%200#000.00 &t does not
ex$eed Ph%300#000.00 Ph%20.00
Ph%300#000.00 &t does not
ex$eed Ph%)00#000.00 Ph%/).00
Ph%)00#000.00 &t does not
ex$eed Ph%A)0#000.00 Ph%)0.00
Ph%A)0#000.00 &t does not
ex$eed Ph%2#000#000.00 Ph%A).00
Ph%2#000#000.00 Ph%200.00
SECTION 284. Sta'% Tax on Pol"$"es of Ins&ran$e =%on Pro%ert+. On all
%ol"$"es of "ns&ran$e or other "nstr&'ents + (hate!er na'e the sa'e 'a+ e
$alled# + (h"$h "ns&ran$e shall e 'ade or rene(ed &%on %ro%ert+ of an+
des$r"%t"on# "n$l&d"n, rents or %rof"ts# a,a"nst %er"l + sea or on "nland (aters# or
+ f"re or l",htn"n,# there shall e $olle$ted a do$&'entar+ sta'% tax of <"ft+
$enta!os 6P0.)07 on ea$h <o&r %esos 6P4.007# or fra$t"onal %art thereof# of the
a'o&nt of %re'"&' $har,ed-
Pro!"ded# ho(e!er# That no do$&'entar+ sta'% tax shall e $olle$ted on
re"ns&ran$e $ontra$ts or on an+ "nstr&'ent + (h"$h $ess"on or a$$e%tan$e of
"ns&ran$e r"s9s &nder an+ re"ns&ran$e a,ree'ent "s effe$ted or re$orded.
SECTION 28). Sta'% Tax on <"del"t+ .onds and Other Ins&ran$e Pol"$"es.
On all %ol"$"es of "ns&ran$e or onds or ol",at"ons of the nat&re of "nde'n"t+ for
loss# da'a,e or l"a"l"t+ 'ade or rene(ed + an+ %erson# asso$"at"on# $o'%an+ or
$or%orat"on transa$t"n, the &s"ness of a$$"dent# f"del"t+# e'%lo+er's l"a"l"t+# %late#
,lass# stea' o"ler# &r,lar# ele!ator# a&to'at"$ s%r"n9ler# or other ran$h of
"ns&ran$e 6ex$e%t l"fe# 'ar"ne# "nland# and f"re "ns&ran$e7# and all onds#
&nderta9"n,s# or re$o,n"5an$es# $ond"t"oned for the %erfor'an$e of the d&t"es of
an+ off"$e or %os"t"on# for the do"n, or not do"n, of an+th"n, there"n s%e$"f"ed# and
on all ol",at"ons ,&arantee"n, the !al"d"t+ or le,al"t+ of an+ ond or other
ol",at"ons "ss&ed + an+ %ro!"n$e# $"t+# '&n"$"%al"t+# or other %&l"$ od+ or
or,an"5at"on# and on all ol",at"ons ,&arantee"n, the t"tle to an+ real estate# or
,&arantee"n, an+ 'er$ant"le $red"ts# (h"$h 'a+ e 'ade or rene(ed + an+ s&$h
%erson# $o'%an+ or $or%orat"on# there shall e $olle$ted a do$&'entar+ sta'% tax
of <"ft+ $enta!os 6P0.)07 on ea$h <o&r %esos 6P4.007# or fra$t"onal %art thereof# of
the %re'"&' $har,ed.
P*ili%%ine &ealt* Care Providers vs. Commissioner of Internal Revenue,
+.R. No. "14002, Se%tem9er "=, ;223
(ACTSC T*e Commissioner of Internal Revenue sent %etitioner, P*ili%%ine &ealt* Care
Providers, a *ealt* maintenan!e organiHation, a formal demand letter and assessment
noti!es demanding t*e %a6ment of defi!ien!6 ta8es for "331 and "334. T*e defi!ien!6
Fdo!umentar6 stam% ta8G assessment 7as im%osed on %etitioner@s *ealt* !are agreement
7it* t*e mem9ers of its *ealt* !are %rogram %ursuant to Se!tion "=< of t*e "334 Ta8
Code. Petitioner %rotested t*e assessment. I*en res%ondent did not a!t on t*e %rotest, it
filed a %etition for revie7 7it* t*e CTA see>ing !an!ellation of t*e defi!ien!6 VAT and
ST assessments. T*e CTA ordered %etitioner to %a6 t*e defi!ien!6 VAT 9ut !an!elled t*e
defi!ien!6 ST assessment against it. Res%ondent a%%ealed t*is de!ision to t*e Court of
A%%eals, 7*i!* *eld t*at %etitioner@s *ealt* !are agreement 7as in t*e nature of a non/
life insuran!e !ontra!t su9:e!t to ST. T*is de!ision 7as affirmed 96 t*e Su%reme Court.
Petitioner t*en filed a motion for re!onsideration, revealing for t*e first time t*at it
availed of a ta8 amnest6 under RA 3#=2 FTa8 Amnest6 A!t of ;224G 96 full6 %a6ing t*e
amount re%resenting <E of its net 7ort* as of t*e 6ear ending e!em9er 0", ;22<.
ISS-ESC
". I*et*er %etitioner is an &M' or an insuran!e !om%an6.
;. I*et*er or not %etitioner is lia9le for ST on its *ealt* !are agreements.
R-LIN+C
". Petitioner is an &M'. -nder RA 4=4< FT*e National &ealt* Insuran!e A!t of
"33<G, an &M' is Dan entit6 t*at %rovides, offers or arranges for !overage of designated
*ealt* servi!es needed 96 %lan mem9ers for a fi8ed %re%aid %remiumD. -.S. !ourts *ave
determined t*at &M's are not in t*e insuran!e 9usiness a%%l6ing t*e WPrin!i%al '9:e!ts
and Pur%ose TestX. -nder t*is test, t*e6 determine 7*et*er t*e assum%tion of ris> and
indemnifi!ation of loss F7*i!* are elements of an insuran!e 9usinessG are t*e %rin!i%al
o9:e!t and %ur%ose of t*e organiHation or 7*et*er t*e6 are merel6 in!idental to its
9usiness. If t*ese are t*e %rin!i%al o9:e!tives, t*e 9usiness is t*at of insuran!e. $ut if t*e6
are merel6 in!idental and servi!e is t*e %rin!i%al %ur%ose, t*en t*e 9usiness is not
insuran!e. As an &M', its o9ligation is to maintain t*e good *ealt* of its mem9ers.
T*us, its *ealt* !are %rograms are designed to %revent or to minimiHe t*e %ossi9ilit6 of
an6 assum%tion of ris> on its %art. T*erefore, its underta>ing under its agreements is not
to indemnif6 its mem9ers against an6 loss or damage arising from a medi!al !ondition
9ut to %rovide t*e *ealt* and medi!al servi!es needed to %revent su!* loss or damage.
Lastl6, as an &M', is not %art of t*e insuran!e industr6, it 9eing su%ervised 96 t*e
e%artment of &ealt*, and not 96 t*e Insuran!e Commission.
; T*e agreements 9et7een %etitioner and its mem9ers do not %ossess all t*e
elements of an insuran!e !ontra!t. T*ere is not*ing in %etitioner@s agreements
t*at gives rise to a monetar6 lia9ilit6 on t*e %art of t*e mem9er to an6 t*ird/
%art6 %rovider of medi!al servi!es 7*i!* mig*t in turn ne!essitate
indemnifi!ation from %etitioner. T*e terms Dindemnif6D or Dindemnit6D
%resu%%ose t*at a lia9ilit6 or !laim *as alread6 9een in!urred. T*ere is no
indemnit6 %re!isel6 9e!ause t*e mem9er merel6 avails of medi!al servi!es to
9e %aid or alread6 %aid in advan!e at a %re/agreed %ri!e under t*e
agreements. A!!ording to t*e agreement, a mem9er !an ta>e advantage of t*e
9ul> of t*e 9enefits an6time, even in t*e a9sen!e of an6 %eril, loss or damage
on *is or *er %art. (urt*ermore, in !ase of emergen!6, %etitioner is o9liged to
reim9urse t*e mem9er 7*o re!eives !are from a non/%arti!i%ating %*6si!ian or
*os%ital. &o7ever, t*is is onl6 a ver6 minor %art of t*e list of servi!es
availa9le. T*e assum%tion of t*e e8%ense 96 %etitioner is not !onfined to t*e
*a%%ening of a !ontingen!6 9ut in!ludes in!idents even in t*e a9sen!e of
illness or in:ur6.
And even if a !ontra!t !ontains all t*e elements of an insuran!e !ontra!t, if its %rimar6
%ur%ose is t*e rendering of servi!e, it is not a !ontra!t of insuran!e.
". T*ere 7as no legislative intent to im%ose ST on *ealt* !are agreements of
&M's.
I*en t*e la7 im%osing t*e ST 7as first %assed, &M's 7ere 6et un>no7n in t*e
P*ili%%ines. &o7ever, 7*en t*e various amendments to t*e ST la7 7ere ena!ted, t*e6
7ere alread6 in e8isten!e in t*e P*ili%%ines and t*e term *ad in fa!t alread6 9een defined
96 RA 4=4<. If it *ad 9een t*e intent of t*e legislature to im%ose ST on *ealt* !are
agreements, it !ould *ave done so in !lear and !ategori!al terms. It *ad man6
o%%ortunities to do so. $ut it did not. T*e fa!t t*at t*e NIRC !ontained no s%e!ifi!
%rovision on t*e ST lia9ilit6 of *ealt* !are agreements of &M's at a time t*e6 7ere
alread6 >no7n as su!*, 9elies an6 legislative intent to im%ose it on t*em. As a matter of
fa!t, %etitioner 7as assessed its ST lia9ilit6 onl6 on Januar6 ;4, ;222, after more t*an a
de!ade in t*e 9usiness as an &M'.
#. Petitioner@s lia9ilit6 for ST for t*e ta8a9le 6ears "331 and "334 7as totall6
e8tinguis*ed 96 its availment of t*e ta8 amnest6 under RA 3#=2.
(rom t*e language of Se!tion "=<, it is evident t*at t7o reJuisites must !on!ur 9efore t*e
ST !an a%%l6, namel6C F"G t*e do!ument must 9e a %oli!6 of insuran!e or an o9ligation
in t*e nature of indemnit6 and F;G t*e ma>er s*ould 9e transa!ting t*e 9usiness of
a!!ident, fidelit6, em%lo6er@s lia9ilit6, %late, glass, steam 9oiler, 9urglar, elevator,
automati! s%rin>ler, or ot*er 9ran!* of insuran!e Fe8!e%t life, marine, inland, and fire
insuran!eG.
P*il. &ealt* Care Providers, In!. vs. Commissioner of Internal Revenue, +.R. No.
"14002, Se%tem9er "=, ;223
I*en an &M' offers to %rovide *ealt* servi!es, it underta>es a 9usiness ris>C t*e ris>
t*at it mig*t fail to earn a reasona9le return on its investment. $ut it is not t*e ris> of t*e
t6%e %e!uliar onl6 to insuran!e !om%anies. Insuran!e ris>, also >no7n as a!tuarial ris>,
is t*e ris> t*at t*e !ost of insuran!e !laims mig*t 9e *ig*er t*an t*e %remiums %aid.
&o7ever, assuming t*at an &M'@s !ommitment to %rovide medi!al servi!es to its
mem9ers !an 9e !onstrued as an a!!e%tan!e of t*e ris> t*at it 7ill s*ell out more t*an t*e
%re%aid fees, it still 7ill not Jualif6 as an insuran!e !ontra!t 9e!ause %etitioner@s
o9:e!tive is to %rovide medi!al servi!es at redu!ed !ost, not to distri9ute ris> li>e an
insurer.
"14002, Se%tem9er "=, ;223
Considering t*at Se!tion "=< did not !*ange sin!e "32# Fe8!e%t for t*e rate of ta8G, it
7ould 9e safe to sa6 t*at *ealt* !are agreements 7ere never, at an6 time, re!ogniHed as
insuran!e !ontra!ts or deemed engaged in t*e 9usiness of insuran!e 7it*in t*e !onte8t of
t*e %rovision.
"14002, Se%tem9er "=, ;223
T*e ST is levied on t*e e8er!ise 96 %ersons of !ertain %rivileges !onferred 96 la7 for
t*e !reation, revision, or termination of s%e!ifi! legal relations*i%s t*roug* t*e e8e!ution
of s%e!ifi! instruments. It is an e8!ise u%on t*e %rivilege, o%%ortunit6, or fa!ilit6 offered
at e8!*anges for t*e transa!tion of t*e 9usiness. In %arti!ular, t*e ST under Se!tion "=<
of t*e "334 Ta8 Code is im%osed on t*e %rivilege of ma>ing or rene7ing an6 %oli!6 of
insuran!e Fe8!e%t life, marine, inland and fire insuran!eG, 9ond or o9ligation in t*e
nature of indemnit6 for loss, damage, or lia9ilit6.
P*ili%%ine &ealt* Care Providers, In!. vs. Commissioner of Internal Revenue, +.R. No.
"14002, June ";, ;22=
SECTION 28*. Sta'% Tax on Pol"$"es of Ann&"t"es and PreBNeed Plans. On
all %ol"$"es of ann&"t"es# or other "nstr&'ents + (hate!er na'e the sa'e 'a+ e
$alled# (here+ an ann&"t+ 'a+ e 'ade# transferred or redee'ed# there shall e
$olle$ted a do$&'entar+ sta'% tax of <"ft+ $enta!os 6P0.)07 on ea$h T(o h&ndred
%esos 6P/007# or fra$t"onal %art thereof# of the %re'"&' or "nstall'ent %a+'ent or
$ontra$t %r"$e $olle$ted. On %reBneed %lans# the do$&'entar+ sta'% tax shall e
T(ent+ $enta!os 6P0./07 on tea$h T(o h&ndred %esos 6P/007# or fra$t"onal %art
thereof# of the %re'"&' or $ontr"&t"on $olle$ted.
SECTION 28A. Sta'% Tax on Inde'n"t+ .onds. On all onds for
"nde'n"f+"n, an+ %erson# f"r' or $or%orat"on (ho shall e$o'e o&nd or en,a,ed
as s&ret+ for the %a+'ent of an+ s&' of 'one+ or for the d&e exe$&t"on or
%erfor'an$e of the d&t"es of an+ off"$e or %os"t"on or to a$$o&nt for 'one+
re$e"!ed + !"rt&e thereof# and on all other onds of an+ des$r"%t"on# ex$e%t s&$h
as 'a+ e re;&"red "n le,al %ro$eed"n,s# or are other("se %ro!"ded for here"n# there
shall e $olle$ted a do$&'entar+ sta'% tax of Th"rt+ $enta!os 6P0.307 on ea$h
<o&r %esos 6P4.007# or fra$t"onal %art thereof# of the %re'"&' $har,ed.
SECTION 288. Sta'% Tax on Cert"f"$ates. On ea$h $ert"f"$ate of da'a,e or
other("se# and on e!er+ other $ert"f"$ate or do$&'ent "ss&ed + an+ $&sto's
off"$er# 'ar"ne s&r!e+or# or other %erson a$t"n, as s&$h# and on ea$h $ert"f"$ate
"ss&ed + a notar+ %&l"$# and on ea$h $ert"f"$ate of an+ des$r"%t"on re;&"red +
la( or + r&les or re,&lat"ons of a %&l"$ off"$e# or (h"$h "s "ss&ed for the %&r%ose
of ,"!"n, "nfor'at"on# or estal"sh"n, %roof of a fa$t# and not other("se s%e$"f"ed
here"n# there shall e $olle$ted a do$&'entar+ sta'% tax of <"fteen %esos 6P2).007.
SECTION 28>. Sta'% Tax on ?areho&se Re$e"%ts. On ea$h (areho&se
re$e"%t for %ro%ert+ held "n stora,e "n a %&l"$ or %r"!ate (areho&se or +ard for an+
%erson other than the %ro%r"etor of s&$h (areho&se or +ard# there shall e $olle$ted
a do$&'entar+ sta'% tax of <"fteen %esos 6P2).007- Pro!"ded# That no tax shall e
$olle$ted on ea$h (areho&se re$e"%t "ss&ed to an+ one %erson "n an+ one $alendar
'onth $o!er"n, %ro%ert+ the !al&e of (h"$h does not ex$eed T(o h&ndred %esos
6P/007.
SECTION 2>0. Sta'% Tax on Fa"Bala"# Horse Ra$e T"$9ets# Lotto or Other
A&thor"5ed N&'ers 4a'es. On ea$h :a"Bala"# horse ra$e t"$9et# lotto# or other
a&thor"5ed n&'ers ,a'es# there shall e $olle$ted a do$&'entar+ sta'% tax of
Ten $enta!os 6P0.207- Pro!"ded# That "f the $ost of the t"$9et ex$eeds One %eso
6P2.007# an add"t"onal tax of Ten $enta!os 6P0.207 on e!er+ One %eso 6P2.007# or
fra$t"onal %art thereof# shall e $olle$ted.
SECTION 2>2. Sta'% Tax on ."lls of Lad"n, or Re$e"%ts. On ea$h set of
"lls of lad"n, or re$e"%ts 6ex$e%t $harter %art+7 for an+ ,oods# 'er$hand"se or
effe$ts sh"%%ed fro' one %ort or %la$e "n the Ph"l"%%"nes to another %ort or %la$e "n
the Ph"l"%%"nes 6ex$e%t on ferr"es a$ross r"!ers7# or to an+ fore",n %ort# there shall
e $olle$ted a do$&'entar+ sta'% tax of One %eso 6P2.007# "f the !al&e of s&$h
,oods ex$eeds One h&ndred %esos 6P2007 and does not ex$eed One tho&sand %esos
6P2#00078 Ten %esos 6P20.007# "f the !al&e ex$eeds One tho&sand %esos 6P2#0007-
Pro!"ded# ho(e!er# That fre",ht t"$9ets $o!er"n, ,oods# 'er$hand"se or effe$ts
$arr"ed as a$$o'%an"ed a,,a,e of %assen,ers on land and (ater $arr"ers %r"'ar"l+
en,a,ed "n the trans%ortat"on of %assen,ers are here+ exe'%t.
SECTION 2>/. Sta'% Tax on Prox"es. On ea$h %rox+ for !ot"n, at an+
ele$t"on for off"$ers of an+ $o'%an+ or asso$"at"on# or for an+ other %&r%ose#
ex$e%t %rox"es "ss&ed affe$t"n, the affa"rs of asso$"at"ons or $or%orat"ons or,an"5ed
for rel","o&s# $har"tale or l"terar+ %&r%oses# there shall e $olle$ted a do$&'entar+
sta'% tax of <"fteen %esos 6P2).007.
SECTION 2>3. Sta'% Tax on Po(ers of Attorne+. On ea$h %o(er of attorne+
to %erfor' an+ a$t (hatsoe!er# ex$e%t a$ts $onne$ted ("th the $olle$t"on of $la"'s
d&e fro' or a$$r&"n, to the 4o!ern'ent of the Re%&l"$ of the Ph"l"%%"nes# or the
,o!ern'ent of an+ %ro!"n$e# $"t+ or '&n"$"%al"t+# there shall e $olle$ted a
do$&'entar+ sta'% tax of <"!e %esos 6P).007.
SECTION 2>4. Sta'% Tax on Leases and Other H"r"n, A,ree'ents. On ea$h
lease# a,ree'ent# 'e'orand&'# or $ontra$t for h"re# &se or rent of an+ lands or
tene'ents# or %ort"ons thereof# there shall e $olle$ted a do$&'entar+ sta'% tax of
Three %esos 6P3.007 for the f"rst T(o tho&sand %esos 6P/#0007# or fra$t"onal %art
thereof# and an add"t"onal One %eso 6P2.007 for e!er+ One tho&sand %esos 6P2#0007
or fra$t"onal %art thereof# "n ex$ess of the f"rst T(o tho&sand %esos 6P/#0007 for
ea$h +ear of the ter' of sa"d $ontra$t or a,ree'ent.
SECTION 2>). Sta'% Tax on @ort,a,es# Pled,es and Deeds of Tr&st. On
e!er+ 'ort,a,e or %led,e of lands# estate# or %ro%ert+# real or %ersonal# her"tale or
'o!ale# (hatsoe!er# (here the sa'e shall e 'ade as a se$&r"t+ for the %a+'ent
of an+ def"n"te and $erta"n s&' of 'one+ lent at the t"'e or %re!"o&sl+ d&e and
o("n, or fororne to e %a"d# e"n, %a+ale# and on an+ $on!e+an$e of land#
estate# or %ro%ert+ (hatsoe!er# "n tr&st or to e sold# or other("se $on!erted "nto
'one+ (h"$h shall e and "ntended onl+ as se$&r"t+# e"ther + ex%ress st"%&lat"on
or other("se# there shall e $olle$ted a do$&'entar+ sta'% tax at the follo("n,
rates-
6a7 ?hen the a'o&nt se$&red does not ex$eed <"!e tho&sand %esos 6P)#0007#
T(ent+ %esos 6P/0.007.
67 On ea$h <"!e tho&sand %esos 6P)#0007# or fra$t"onal %art thereof "n ex$ess of
<"!e tho&sand %esos 6P)#0007# an add"t"onal tax of Ten %esos 6P20.007.
On an+ 'ort,a,e# %led,e# or deed of tr&st# (here the sa'e shall e 'ade as a
se$&r"t+ for the %a+'ent of a fl&$t&at"n, a$$o&nt or f&t&re ad!an$es ("tho&t f"xed
l"'"t# the do$&'entar+ sta'% tax on s&$h 'ort,a,e# %led,e or deed or tr&st shall e
$o'%&ted on the a'o&nt a$t&all+ loaned or ,"!en at the t"'e of the exe$&t"on of
the 'ort,a,e# %led,e or deed of tr&st.
Ho(e!er# "f s&se;&ent ad!an$es are 'ade on s&$h 'ort,a,e# %led,e or deed of
tr&st# add"t"onal do$&'entar+ sta'% tax shall e %a"d (h"$h shall e $o'%&ted on
the as"s of the a'o&nt ad!an$ed or loaned at the rates s%e$"f"ed ao!e-
Pro!"ded# ho(e!er# That "f the f&ll a'o&nt of the loan or $red"t# ,ranted &nder the
'ort,a,e# %led,e or deed of tr&st "s s%e$"f"ed "n s&$h 'ort,a,e# %led,e or deed of
tr&st# the do$&'entar+ sta'% tax %res$r"ed "n th"s Se$t"on shall e %a"d and
$o'%&ted on the f&ll a'o&nt of the loan or $red"t ,ranted.
&. TAM$-NTIN+ PAINS&'P, INC. vs. C'MMISSI'NER '( INTERNAL REVEN-E
.+.R. No. "4""0=. A%ril 4, ;223.5
(ACTSC T*e !ase stemmed from a Pre/Assessment Noti!e issued 96 t*e Commissioner of
Internal Revenue against &. Tam9unting Pa7ns*o%, In!. FTam9untingG for, among ot*ers,
defi!ien!6 do!umentar6 stam% ta8. T*ereafter, t*e CIR issued an assessment noti!e 7it*
t*e !orres%onding demand letters for t*e %a6ment of t*e ST and t*e !orres%onding
!om%romise %enalt6 for ta8a9le 6ear "334. Tam9unting filed its 7ritten %rotest to t*e
assessment noti!e alleging t*at it 7as not su9:e!t to do!umentar6 stam% ta8 under
Se!tion "3< of t*e NIRC 9e!ause do!umentar6 stam% ta8es 7ere a%%li!a9le onl6 to
%ledge !ontra!ts, and t*e %a7ns*o% 9usiness did not involve !ontra!ts of %ledge.
I*en Tam9unting@s 7ritten %rotest 7as not a!ted u%on 96 t*e CIR, t*e former filed a
%etition 7it* t*e CTA 7*i!* ruled in its favour. T*e CIR filed a motion for
re!onsideration 9ut 7as denied 96 t*e CTA. T*us, t*e CIR elevated t*e !ase to t*e Court
of A%%eals. T*e a%%ellate !ourt ruled in favor of t*e CIR? *en!e, t*is %etition for revie7
96 Tam9unting.
ISS-EC Is Tam9unting lia9le for do!umentar6 stam% ta8es 9ased on t*e %a7n ti!>ets t*at
it issuedM
R-LIN+C ,es.
(irst, t*e %a7n ti!>et is reJuired to !ontain t*e same essential information t*at 7ould 9e
found in a %ledge agreement. 'nl6 t*e nomen!lature of t*e reJuirements in t*e %a7n
ti!>et is !*anged to refer to t*e s%e!ifi! >ind of %ledge transa!tions underta>en 96
%a7ns*o%s. True, t*e %a7n ti!>et is neit*er a se!urit6 nor a %rinted eviden!e of
inde9tedness. $ut, %re!isel6 9eing a re!ei%t for a %a7n, it do!uments t*e %ledge. A %ledge
is a real !ontra!t, *en!e, it is ne!essar6 in order to !onstitute t*e !ontra!t of %ledge, t*at
t*e t*ing %ledged 9e %la!ed in t*e %ossession of t*e !reditor, or of a t*ird %erson 96
!ommon agreement. ConseJuentl6, t*e issuan!e of t*e %a7n ti!>et 96 t*e %a7ns*o%
means t*at t*e t*ing %ledged *as alread6 9een %la!ed in its %ossession and t*at t*e
%ledge *as 9een !onstituted.
Se!ond, t*e la7 im%oses ST on do!uments issued in res%e!t of t*e s%e!ified
transa!tions, su!* as %ledge, and not onl6 on %a%ers eviden!ing inde9tedness. T*erefore,
a %a7n ti!>et, 9eing issued in res%e!t of a %ledge transa!tion, is su9:e!t to do!umentar6
stam% ta8.
T*ird, t*e issue in t*is !ase is not novel. T*e Juestion of 7*et*er %a7ns*o% transa!tions
eviden!ed 96 %a7n ti!>ets are su9:e!t to do!umentar6 stam% ta8es *as 9een ans7ered in
t*e affirmative in Mi!*el J. L*uillier Pa7ns*o%, In!. v. Commissioner of Internal
Revenue, F+.R. No. "114=1, Se%tem9er "", ;221GC WZ No la7 on legal *ermeneuti!s
!ould !*ange t*e fa!t t*at t*e entries !ontained in a %a7ns*o% ti!>et s%ell out a !ontra!t
of %ledge.X
TAM$-NTIN+ PAINS&'P, INC. vs. C'MMISSI'NER '( INTERNAL REVEN-E.
.+.R. No. "432=<. Januar6 ;", ;2"2.5
(ACTSC Res%ondent sent %etitioner an assessment noti!e for defi!ien!6 VAT, defi!ien!6
ST on %a7n ti!>ets, 7it**olding ta8 on !om%ensation, and defi!ien!6 EIT, all in!lusive
of interests and sur!*arges for t*e ta8a9le 6ear "333. Petitioner %rotested t*e
assessment. As t*e %rotest merited no res%onse, it filed a Petition for Revie7 7it* t*e
CTA %ursuant to Se!tion ;;= of t*e NIRC. T*e CTA ruled t*at %etitioner is lia9le for VAT
and do!umentar6 stam% ta8 9ut not for 7it**olding ta8 on !om%ensation and e8%anded
7it**olding ta8. Petitioner@s Motion for Partial Re!onsideration *aving 9een denied, it
filed a Petition for Revie7 9efore t*e CTA En $an! 7*i!* dismissed it as it did
%etitioner@s Motion for Re!onsideration
ISS-EC Petitioner raised t*e follo7ing argumentsC
A. Pa7ns*o%s are not su9:e!t to Value Added Ta8 %ursuant to Se!tion "2= of t*e
National Internal Revenue Code.
$. Petitioner %ro%erl6 7it**eld and remitted to t*e res%ondent t*e !orre!t amount of
e8%anded 7it**olding ta8 for ta8a9le 6ear "333.
C. Petitioner *as alread6 %aid t*e assessed amount of P"#,03=.0= .si!5, re%resenting
defi!ien!6 7it**olding ta8 on !om%ensation, t*us, assessment on 7it**olding on
!om%ensation must 9e !an!elled.
. Petitioner@s %a7n ti!>ets are not su9:e!t to do!umentar6 stam% ta8 %ursuant to
e8isting la7s and :uris%ruden!e.
&ELC T*e %etition is in %art meritorious.
In lig*t of t*e ruling in (irst Planters Pa7ns*o%, In!. v. Commissioner of Internal
Revenue F+.R. No. "4#"0#, Jul6 02, ;22=G, sin!e t*e im%osition of VAT on %a7ns*o%s,
7*i!* are non/9an> finan!ial intermediaries, 7as deferred for t*e ta8 6ears "331 to
;22;, %etitioner is not lia9le for VAT for t*e ta8 6ear "333. PetitionerOs argument t*at
%a7n ti!>ets are neit*er se!urities nor %rinted eviden!e of inde9tedness *en!e not lia9le
to do!umentar6 stam% ta8 failed. T*e Su%reme Court *eld t*at %ursuant to Se!tion "3< of
t*e NIRC and in t*e ruling in Mi!*el J. L*uillier Pa7ns*o%, In!. v. Commissioner of
Internal Revenue F+.R. No. "114=1, Ma6 0, ;221G, %ledge is su9:e!t to do!umentar6
stam% ta8. I*ile a %a7n ti!>et is not !onsidered as an eviden!e of se!urit6 or
inde9tedness, for %ur%oses of ta8ation, t*e same %a7n ti!>et is %roof of an e8er!ise of a
ta8a9le %rivilege of !on!luding a !ontra!t of %ledge.
T*e Su%reme Court found meritorious %etitioner@s argument against lia9ilit6 for
sur!*arges and interest B t*at it 7as in good fait* in not %a6ing do!umentar6 stam%
ta8es, it *aving relied on t*e rulings of res%ondent CIR and t*e CTA t*at %a7n ti!>ets are
not su9:e!t to do!umentar6 stam% ta8es. It is settled t*at good fait* and *onest 9elief t*at
one is not su9:e!t to ta8 on t*e 9asis of %revious inter%retations of government agen!ies
tas>ed to im%lement t*e ta8 la7 are suffi!ient :ustifi!ation to delete t*e im%osition of
sur!*arges and interest.
All %ledges are su9:e!t to o!umentar6 Stam% Ta8.
Se!tion "3< of t*e National Internal Revenue Code FNIRCG im%oses a ST on ever6
%ledge regardless of 7*et*er t*e same is a !onventional %ledge governed 96 t*e Civil
Code or one t*at is governed 96 t*e %rovisions of P.. No. ""#. All %ledges are su9:e!t to
ST, unless t*ere is a la7 e8em%ting t*em in !lear and !ategori!al language. T*is
e8%lains 7*6 t*e Legislature did not see t*e need to e8%li!itl6 im%ose a ST on %ledges
entered into 96 %a7ns*o%s. T*ese %ledges are alread6 !overed 96 Se!tion "3< and to
!reate a se%arate %rovision es%e!iall6 for t*em 7ould 9e su%erfluous.
Mi!*el J. L*uillier Pa7ns*o%, In!. vs. Commissioner of Internal Revenue, +.R. No.
"114=1, Se%tem9er "", ;221
T*e e8er!ise of t*e %rivilege to enter into a !ontra!t of %ledge gives rise to t*e o9ligation
to %a6 o!umentar6 Stam% Ta8.
It is t*e e8er!ise of t*e %rivilege to enter into an a!!essor6 !ontra!t of %ledge, as
distinguis*ed from a !ontra!t of loan, 7*i!* gives rise to t*e o9ligation to %a6 ST. If t*e
ST under Se!tion "3< is levied on t*e loan or t*e e8er!ise of t*e %rivilege to !ontra!t a
loan, t*en t*ere 7ould 9e no use for Se!tion "43 of t*e NIRC, to se%aratel6 im%ose stam%
ta8 on all de9t instruments, li>e a sim%le loan agreement. It is for t*is reason 7*6 t*e
definition of %a7ns*o% ti!>et, as not an eviden!e of inde9tedness, is in!onseJuential to
and *as no 9earing on t*e ta8a9ilit6 of !ontra!ts of %ledge entered into 96 %a7ns*o%s.
(or %ur%oses of Se!tion "3<, %a7ns*o% ti!>ets need not 9e an eviden!e of inde9tedness
nor a de9t instrument 9e!ause it ta8es t*e same as a %ledge instrument. Neit*er s*ould
t*e definition of %a7ns*o% ti!>et, as not a se!urit6, e8em%t it from t*e im%osition of ST.
It 7as !orre!tl6 defined as su!* 9e!ause t*e ti!>et itself is not t*e se!urit6 9ut t*e %a7n
or t*e %ersonal %ro%ert6 %ledged to t*e %a7n9ro>er.
Mi!*el J. L*uillier Pa7ns*o%, In!. vs. Commissioner of Internal Revenue, +.R. No.
"114=1, Se%tem9er "", ;221
Tam9unting Pa7ns*o%, In!. vs. Commissioner of Internal Revenue, +.R. No. "432=<,
Januar6 ;", ;2"2
&. Tam9unting Pa7ns*o%, In!. vs. Commissioner of Internal Revenue, +.R. No. "4""0=,
A%ril 4, ;223
SECTION 2>*. Sta'% Tax on Deeds of Sale and Con!e+an$es of Real Pro%ert+.
On all $on!e+an$es# deeds# "nstr&'ents# or (r"t"n,s# other than ,rants# %atents
or or","nal $ert"f"$ates of ad:&d"$at"on "ss&ed + the 4o!ern'ent# (here+ an+
land# tene'ent or other realt+ sold shall e ,ranted# ass",ned# transferred or
other("se $on!e+ed to the %&r$haser# or %&r$hasers# or to an+ other %erson or
%ersons des",nated + s&$h %&r$haser or %&r$hasers# there shall e $olle$ted a
do$&'entar+ sta'% tax# at the rates here"n elo( %res$r"ed# ased on the
$ons"derat"on $ontra$ted to e %a"d for s&$h realt+ or on "ts fa"r 'ar9et !al&e
deter'"ned "n a$$ordan$e ("th Se$t"on *6E7 of th"s Code# (h"$he!er "s h",her-
Pro!"ded# That (hen one of the $ontra$t"n, %art"es "s the 4o!ern'ent# the tax
here"n "'%osed shall e ased on the a$t&al $ons"derat"on-
6a7 ?hen the $ons"derat"on# or !al&e re$e"!ed or $ontra$ted to e %a"d for s&$h
realt+# after 'a9"n, %ro%er allo(an$e of an+ en$&'ran$e# does not ex$eed One
tho&sand %esos 6P2#0007# <"fteen %esos 6P2).007.
67 <or ea$h add"t"onal One tho&sand %esos 6P2#0007# or fra$t"onal %art thereof "n
ex$ess of One tho&sand %esos 6P2#0007 of s&$h $ons"derat"on or !al&e# <"fteen
%esos 6P2).007.
?hen "t a%%ears that the a'o&nt of the do$&'entar+ sta'% tax %a+ale here&nder
has een red&$ed + an "n$orre$t state'ent of the $ons"derat"on "n an+ $on!e+an$e#
deed# "nstr&'ent or (r"t"n, s&:e$t to s&$h tax the Co''"ss"oner# %ro!"n$"al or
$"t+ Treas&rer# or other re!en&e off"$er shall# fro' the assess'ent rolls or other
rel"ale so&r$e of "nfor'at"on# assess the %ro%ert+ of "ts tr&e 'ar9et !al&e and
$olle$t the %ro%er tax thereon.
Re%u9li! A!t FRAG No. 4;43, ot*er7ise >no7n as t*e -r9an evelo%ment and &ousing
A!t of "33; %rovides as follo7sC
Se!. "3 In!entives for t*e National &ousing Aut*orit6 B T*e National &ousing
Aut*orit6, 9eing t*e %rimar6 government agen!6 in !*arge of %roviding *ousing for t*e
under%rivileged and *omeless, s*all 9e e8em%ted from t*e %a6ment of all fees and
!*arges of an6 >ind, 7*et*er lo!al or national, su!* as in!ome and realt6 ta8es. All
do!uments or !ontra!ts e8e!uted 96 and in favor of t*e National &ousing Aut*orit6 s*all
also 9e e8em%t from t*e %a6ment of do!umentar6 stam% ta8 and registration fees,
in!luding fees reJuired for t*e issuan!e of transfer !ertifi!ates of title. T*e e8em%tion
from do!umentar6 stam% ta8 of N&A in !onne!tion 7it* an6 of its so!ialiHed *ousing
%ro:e!t e8tends to t*e ot*er %art6Feit*er seller or 9u6erG t*at deals or transa!ts 7it* t*e
N&A.
SECTION 2>A. Sta'% Tax on Charter Part"es and S"'"lar Instr&'ents. On
e!er+ $harter %art+# $ontra$t or a,ree'ent for the $harter of an+ sh"%# !essel or
stea'er# or an+ letter or 'e'orand&' or other (r"t"n, et(een the $a%ta"n# 'aster
or o(ner# or other %erson a$t"n, as a,ent of an+ sh"%# !essel or stea'er# and an+
other %erson or %ersons for or relat"n, to the $harter of an+ s&$h sh"%# !essel or
stea'er# and on an+ rene(al or transfer of s&$h $harter# $ontra$t# a,ree'ent# letter
or 'e'orand&'# there shall e $olle$ted a do$&'entar+ sta'% tax at the follo("n,
rates-
6a7 If the re,"stered ,ross tonna,e of the sh"%# !essel or stea'er does not ex$eed
one tho&sand 62#0007 tons# and the d&rat"on of the $harter or $ontra$t does not
ex$eed s"x 6*7 'onths# <"!e h&ndred %esos 6P)0078 and for ea$h 'onth or fra$t"on
of a 'onth "n ex$ess of s"x 6*7 'onths# an add"t"onal tax of <"ft+ %esos 6P)0.007
shall e %a"d.
67 If the re,"stered ,ross tonna,e ex$eeds one tho&sand 62#0007 tons and does not
ex$eed ten tho&sand 620#0007 tons# and the d&rat"on of the $harter or $ontra$t does
not ex$eed s"x 6*7 'onths# One tho&sand %esos 6P2#00078 and for ea$h 'onth or
fra$t"on of a 'onth "n ex$ess of s"x 6*7 'onths# an add"t"onal tax of One h&ndred
%esos 6P2007 shall e %a"d.
6$7 If the re,"stered ,ross tonna,e ex$eeds ten tho&sand 620#0007 tons and the
d&rat"on of the $harter or $ontra$t does not ex$eed s"x 6*7 'onths# One tho&sand
f"!e h&ndred %esos 6P2#)0078 and for ea$h 'onth or fra$t"on of a 'onth "n ex$ess
of s"x 6*7 'onths# an add"t"onal tax of One h&ndred f"ft+ %esos 6P2)07 shall e
%a"d.
SECTION 2>8. Sta'% Tax on Ass",n'ents and Rene(als of Certa"n Instr&'ents.
=%on ea$h and e!er+ ass",n'ent or transfer of an+ 'ort,a,e# lease or %ol"$+ of
"ns&ran$e# or the rene(al or $ont"n&an$e of an+ a,ree'ent# $ontra$t# $harter# or an+
e!"den$e of ol",at"on or "ndetedness + alter"n, or other("se# there shall e
le!"ed# $olle$ted and %a"d a do$&'entar+ sta'% tax# at the sa'e rate as that
"'%osed on the or","nal "nstr&'ent.
SECTION 2>>. Do$&'ents and Pa%ers Not S&:e$t to Sta'% Tax. The
%ro!"s"ons of Se$t"on 2A3 to the $ontrar+ not("thstand"n,# the follo("n,
"nstr&'ents# do$&'ents and %a%ers shall e exe'%t fro' the do$&'entar+ sta'%
tax-
6a7 Pol"$"es of "ns&ran$e or ann&"t"es 'ade or ,ranted + a fraternal or enef"$"ar+
so$"et+# order# asso$"at"on or $oo%erat"!e $o'%an+# o%erated on the lod,e s+ste' or
lo$al $oo%erat"on %lan and or,an"5ed and $ond&$ted solel+ + the 'e'ers thereof
for the ex$l&s"!e enef"t of ea$h 'e'er and not for %rof"t.
67 Cert"f"$ates of oaths ad'"n"stered to an+ ,o!ern'ent off"$"al "n h"s off"$"al
$a%a$"t+ or of a$9no(led,'ent + an+ ,o!ern'ent off"$"al "n the %erfor'an$e of
h"s off"$"al d&t"es# (r"tten a%%earan$e "n an+ $o&rt + an+ ,o!ern'ent off"$"al# "n
h"s off"$"al $a%a$"t+8 $ert"f"$ates of the ad'"n"strat"on of oaths to an+ %erson as to
the a&thent"$"t+ of an+ %a%er re;&"red to e f"led "n $o&rt + an+ %erson or %art+
thereto# (hether the %ro$eed"n,s e $"!"l or $r"'"nal8 %a%ers and do$&'ents f"led
"n $o&rts + or for the nat"onal# %ro!"n$"al# $"t+ or '&n"$"%al ,o!ern'ents8
aff"da!"ts of %oor %ersons for the %&r%ose of %ro!"n, %o!ert+8 state'ents and other
$o'%&lsor+ "nfor'at"on re;&"red of %ersons or $or%orat"ons + the r&les and
re,&lat"ons of the nat"onal# %ro!"n$"al# $"t+ or '&n"$"%al ,o!ern'ents ex$l&s"!el+
for stat"st"$al %&r%oses and (h"$h are (holl+ for the &se of the &rea& or off"$e "n
(h"$h the+ are f"led# and not at the "nstan$e or for the &se or enef"t of the %erson
f"l"n, the'8 $ert"f"ed $o%"es and other $ert"f"$ates %la$ed &%on do$&'ents#
"nstr&'ents and %a%ers for the nat"onal# %ro!"n$"al# $"t+ or '&n"$"%al ,o!ern'ents#
'ade at the "nstan$e and for the sole &se of so'e other ran$h of the nat"onal#
%ro!"n$"al# $"t+ or '&n"$"%al ,o!ern'ents8 and $ert"f"$ates of the assessed !al&e of
lands# not ex$eed"n, T(o h&ndred %esos 6P/007 "n !al&e assessed# f&rn"shed + the
%ro!"n$"al# $"t+ or '&n"$"%al Treas&rer to a%%l"$ants for re,"strat"on of t"tle to land.
6$7 .orro("n, and lend"n, of se$&r"t"es exe$&ted &nder the Se$&r"t"es .orro("n,
and Lend"n, Pro,ra' of a re,"stered ex$han,e# or "n a$$ordan$e ("th re,&lat"ons
%res$r"ed + the a%%ro%r"ate re,&lator+ a&thor"t+- Pro!"ded# ho(e!er# That an+
orro("n, or lend"n, of se$&r"t"es a,ree'ent as $onte'%lated hereof shall e d&l+
$o!ered + a 'aster se$&r"t"es orro("n, and lend"n, a,ree'ent a$$e%tale to the
a%%ro%r"ate re,&lator+ a&thor"t+# and (h"$h a,ree'ent "s d&l+ re,"stered and
a%%ro!ed + the .&rea& of Internal Re!en&e 6.IR7.
6d7 Loan a,ree'ents or %ro'"ssor+ notes# the a,,re,ate of (h"$h does not ex$eed
T(o h&ndred f"ft+ tho&sand %esos 6P/)0#0007# or an+ s&$h a'o&nt as 'a+ e
deter'"ned + the Se$retar+ of <"nan$e# exe$&ted + an "nd"!"d&al for h"s %&r$hase
on "nstall'ent for h"s %ersonal &se or that of h"s fa'"l+ and not for &s"ness or
resale# arter or h"re of a ho&se# lot# 'otor !eh"$le# a%%l"an$e or f&rn"t&re-
Pro!"ded# ho(e!er# That the a'o&nt to e set + the Se$retar+ of <"nan$e shall e
"n a$$ordan$e ("th a rele!ant %r"$e "ndex &t not to ex$eed ten %er$ent 62017 of
the $&rrent a'o&nt and shall re'a"n "n for$e at least for three 637 +ears.
6e7 Sale# arter or ex$han,e of shares of sto$9 l"sted and traded thro&,h the lo$al
sto$9 ex$han,e for a %er"od of f"!e 6)7 +ears fro' the effe$t"!"t+ of th"s A$t.
6f7 Ass",n'ent or transfer of an+ 'ort,a,e# lease or %ol"$+ of "ns&ran$e# or the
rene(al or $ont"n&an$e of an+ a,ree'ent# $ontra$t# $harter# or an+ e!"den$e of
ol",at"on or "ndetedness# "f there "s no $han,e "n the 'at&r"t+ date or re'a"n"n,
%er"od of $o!era,e fro' that of the or","nal "nstr&'ent.
6,7 <"xed "n$o'e and other se$&r"t"es traded "n the se$ondar+ 'ar9et or thro&,h an
ex$han,e.
6h7 Der"!at"!es- Pro!"ded# That for %&r%oses of th"s exe'%t"on# re%&r$hase
a,ree'ents and re!erse re%&r$hase a,ree'ents shall e treated s"'"larl+ as
der"!at"!es.
6"7 InterBran$h or "nterde%art'ental ad!an$es ("th"n the sa'e le,al ent"t+.
6:7 All forearan$e ar"s"n, fro' sales or ser!"$e $ontra$ts "n$l&d"n, $red"t $ard and
trade re$e"!ales- Pro!"ded# That the exe'%t"on e l"'"ted to those exe$&ted + the
seller or ser!"$e %ro!"der "tself.
697 .an9 de%os"t a$$o&nts ("tho&t a f"xed ter' or 'at&r"t+.
6l7 All $ontra$ts# deeds# do$&'ents and transa$t"ons related to the $ond&$t of
&s"ness of the .an,9oSentraln,P"l"%"nas.
6'7 Transfer of %ro%ert+ %&rs&ant to Se$t"on 406$76/7 of the Nat"onal Internal
Re!en&e Code of 2>>A# as a'ended.
6n7 InterBan9 $all loans ("th 'at&r"t+ of not 'ore than se!en 6A7 da+s to $o!er
def"$"en$+ "n reser!es a,a"nst de%os"t l"a"l"t"es# "n$l&d"n, those et(een or a'on,
an9s and ;&as"Ban9s.
SECTION /00.Pa+'ent of Do$&'entar+ Sta'% Tax.
6A7 In 4eneral. The %ro!"s"ons of Pres"dent"al De$ree No. 204)
not("thstand"n,# an+ %erson l"ale to %a+ do$&'entar+ sta'% tax &%on an+
do$&'ent s&:e$t to tax &nder T"tle CII of th"s Code shall f"le a tax ret&rn and %a+
the tax "n a$$ordan$e ("th the r&les and re,&lat"ons to e %res$r"ed + the
Se$retar+ of <"nan$e# &%on re$o''endat"on of the Co''"ss"oner.
6.7 T"'e for <"l"n, and Pa+'ent of the Tax. Ex$e%t as %ro!"ded + r&les and
re,&lat"ons %ro'&l,ated + the Se$retar+ of <"nan$e# &%on re$o''endat"on of the
Co''"ss"oner# the tax ret&rn %res$r"ed "n th"s Se$t"on shall e f"led ("th"n ten
6207 da+s after the $lose of the 'onth (hen the taxale do$&'ent (as 'ade#
s",ned# "ss&ed# a$$e%ted# or transferred# and the tax thereon shall e %a"d at the
sa'e t"'e the aforesa"d ret&rn "s f"led.
6C7 ?here to <"le. Ex$e%t "n $ases (here the Co''"ss"oner other("se %er'"ts#
the aforesa"d tax ret&rn shall e f"led ("th and the tax d&e shall e %a"d thro&,h the
a&thor"5ed a,ent an9 ("th"n the terr"tor"al :&r"sd"$t"on of the Re!en&e D"str"$t
Off"$e (h"$h has :&r"sd"$t"on o!er the res"den$e or %r"n$"%al %la$e of &s"ness of
the tax%a+er. In %la$es (here there "s no a&thor"5ed a,ent an9# the ret&rn shall e
f"led ("th the Re!en&e D"str"$t Off"$er $olle$t"on a,ent# or d&l+ a&thor"5ed
Treas&rer of the $"t+ or '&n"$"%al"t+ "n (h"$h the tax%a+er has h"s le,al res"den$e
or %r"n$"%al %la$e of &s"ness.
6D7 Ex$e%t"on. In l"e& of the fore,o"n, %ro!"s"ons of th"s Se$t"on# the tax 'a+
e %a"d e"ther thro&,h %&r$hase and a$t&al aff"xt&re# or + "'%r"nt"n, the sta'%s
thro&,h a do$&'entar+ sta'% 'eter"n, 'a$h"ne# on the taxale do$&'ent# "n the
'anner as 'a+ e %res$r"ed + r&les and re,&lat"ons to e %ro'&l,ated + the
Se$retar+ of <"nan$e# &%on re$o''endat"on of the Co''"ss"oner.
SECTION /02. Effe$t of <a"l&re to Sta'% Taxale Do$&'ent. An "nstr&'ent#
do$&'ent or %a%er (h"$h "s re;&"red + la( to e sta'%ed and (h"$h has een
s",ned# "ss&ed# a$$e%ted or transferred ("tho&t e"n, d&l+ sta'%ed# shall not e
re$orded# nor shall "t or an+ $o%+ thereof or an+ re$ord of transfer of the sa'e e
ad'"tted or &sed "n e!"den$e "n an+ $o&rt &nt"l the re;&"s"te sta'% or sta'%s shall
ha!e een aff"xed thereto and $an$elled.
No notar+ %&l"$ or other off"$er a&thor"5ed to ad'"n"ster oaths shall add h"s :&rat
or a$9no(led,'ent to an+ do$&'ent s&:e$t to do$&'entar+ sta'% tax &nless the
%ro%er do$&'entar+ sta'%s are aff"xed thereto and $an$elled.

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TITLE III

Estate and Donor's Taxes

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