1

Pointers in Taxation Law

2018 Bar Examinations
Professor Victoria V. Loanzon (U.P. College of Law)
with the assistance of
Atty. Joshua Bagotsay, CPA (DLSU-COL Manila, 2017)
Atty. Sid Angelo Bautista (DLSU-COL Manila)
Atty. Leo Larcia, CPA (ADMU- School of Law)
Atty. William Russel S. Malang, CPA (UST – Faculty of Civil Law)

I. General Principles

Q1. What is the nature of the taxing power of government?

A. The power to tax is inherent to the state but constitutional provisions limit the
exercise thereof. Taxes are mandatory impositions and not a contract between the
state and the taxpayer (in invitum) because consent, which is an essential element of
contract, is absent. It has the power to destroy as it puts restraint on personal and
property rights.
Q2. What is the two-fold nature of the power to tax?
A. The two-fold nature of the power of taxation is inherent power and legislative
power. It is inherent because it is an exercise of sovereign powers and not granted
by the Constitution. The primary purpose of taxation is to generate funds for the
state to finance the needs of the citizens and promote the common good. This is
carried out by way of legislation.
Q3. What are the relevant theories governing the state’s inherent power to
tax?
A. Relevant Theories: Necessity Theory – existence of government is a necessity,
therefore it has the right to compel citizens and property to pay taxes; Benefits –
Protection Theory – payment of taxes allows a citizen to enjoy benefits in an
organized society; and Life Blood Theory – taxes constitute the lifeblood of the
country and taxes support the operations of government and the public services
extended to the people.
Lifeblood Theory: Taxes are the lifeblood of the nation. The Philippines has been
struggling to improve its tax efficiency collection for the longest time with minimal
success. Consequently, the Philippines has suffered the economic adversities arising
from poor tax collections, forcing the government to continue borrowing to fund the
budget deficits. (Western Mindanao Power Corp v. CIR, 2013)
Taxes are the lifeblood of the government, for without taxes, the government can
neither exist nor endure. (National Power Corporation v. City of Cabanatuan,
(2003))
Benefits Protection Theory: The individual receives the equivalent of the tax in the
form of protection and benefit he receives from the government as such. Churchill
and Tait vs. Rafferty, 32 Phil. 580, No. 10572, December 21, 1915)
Necessity Theory: The power to tax is an attribute of sovereignty. It is a power
emanating from necessity. It is a necessary burden to preserve the State’s
sovereignty and a means to give the citizenry an army to resist an aggression, a navy
to defend its shores from invasion, a corps of civil servants to serve, public

1|Page
 2

improvements designed for the enjoyment of the citizenry and those which come
within the State’s territory, and facilities and protection which a government is
supposed to provide. (Phil. Guaranty Co., Inc, vs. Commissioner of Int. Rev., 13
SCRA 775, No. L-22074 April 30, 1965)
Q4. What is the distinction between the power to tax and the exercise of police
power?
A. When the purpose of the imposition of a royalty fee upon an oil company is not
for the purpose of generating revenue but recognition that the oil industry is
imbued with public interest, then the royalty fee will be considered as a regulatory
fee.
*Simply stated an imposition that is for revenue is generally a tax while an
imposition that has another purpose such as regulation is an exercise of police
power. (Chevron v. BCDA and CDC)
Q5. The 20% discount given to senior citizens and PWDs was once can be
claimed as a tax credit, which can be applied against the income tax of the
seller. However, a new law was enacted changing the tax treatment of the
discount, which is now claimed as a deduction from the gross income of the
seller. Is this change in tax treatment a valid exercise of police power?
A. Yes. The change in the tax treatment of the discount was a valid exercise of police
power. The State can impose upon private establishments the burden of partly
subsidizing a government program in promoting the health and welfare of a special
group of citizens. The new law is a legitimate exercise of police power which, similar
to the power of eminent domain, has general welfare for its object.
With its obligation under parens patriae, the State has a duty to care for the elderly
and the disabled. In fulfilling this duty, the State may resort to the exercise of its
inherent powers: police power, eminent domain and power of taxation. It is in the
exercise of its police power that the Congress enacted R.A. Nos. 9257 and 9442, the
laws mandating a 20% discount on purchases of medicines made by senior citizens
and PWDs. It is also in further exercise of this power that the legislature opted that
the said discount be claimed as tax deduction, rather than tax credit, by covered
establishments. (SOUTHERN LUZON DRUG CORPORATION v. DEPARTMENT OF
SOCIAL WELFARE AND DEVELOPMENT, NATIONAL COUNCIL FOR WLEFARE OF
DISABLED PERSONS, ET AL., G.R. No. 199669, April 25, 2017, En Banc, REYES, J.)
Q6. What are the constitutional proscriptions in enacting tax laws?
A. All tax measures must originate from the House of Representatives but Senate
may propose or concur with amendments.
The rule on taxation must be uniform and equitable; Congress shall evolve a
progressive system of taxation (tax rate and tax base are directly proportional as
against proportional system which has a fixed rate regardless of tax base; and
regressive system where the tax rate and tax base are inversely proportional).
The constitutional provision has been interpreted to mean simply that "direct taxes
are to be preferred [and] as much as possible, indirect taxes should be minimized.
(Tolentino v. Secretary of Finance, 1995)
The Constitution has delegated legislative power to the President to impose tariff
rates, import and export quotas, tonnage and wharfage dues and other duties or
imposts within the framework of the national development program.
2|Page
 3

Charitable institutions, churches and personages or convents appurtenant thereto,

mosques, non-profit cemeteries and all lands, buildings and improvements,
actually, directly and exclusively (ADE) used for religious, charitable or
educational purposes are tax exempt.
ADE means solely used for the purposes enumerated in the Constitution.
Note also that it is the use of property that determines exemption not the use of
income coming from such property. (Lung Center of the Philippines v. Quezon City,
2004)
Any law granting tax exemption must be approved by majority of all members of
Congress.
All money collected for a special purpose (special levy or tax as contrasted to general
tax) shall be dedicated only for that purpose and any excess shall be transferred to
the general fund of the government.
All local government units may impose tolls (ex. use of roads), charges (ex. special
assessment for certain activities) and fees (ex. building permits, business permits) in
line with the principle of local autonomy; except for non-payment of community
taxes/poll taxes, non-payment of other taxes such as real property taxes may
subject one to imprisonment.
While taxes are not subject to set-off or compensation and over payment when
proven forces the government to restore to the taxpayer the amount it overpaid
(solutio indebiti).
Q7. Can a non-profit, non-stock educational institution refuse to settle the
assessment of a local government for its building permit?
A. No. The DPWH implements the Building Code through the Building Officials of all
local government units. While there is incidental revenue to the local government
unit, the imposition of a Building Permit partakes of a regulatory nature. The
imposition of Building Permit fee is an exercise of police power to ensure
compliance with the standards under the Building Code to protect the public from
any danger. (Angeles University Foundation v. City of Angeles)
Q8. When enacting tax measures, what general guidelines must the legislator
consider?
A. In enacting tax measures the legislator must exert every effort to distribute
the tax burden between individuals or classes of population; in general, to
redistribute resources between individuals (to include some form subsidy by way of
support to particular classes like the senior citizens, the poor, the retired employees,
the disabled); to provide basis for fiscal policy; to modify patterns of consumption
or employment (may have incentives or factors to make them less attractive).
Q9. What are general characteristics of tax measures?
A. Taxes are enforced and never voluntary (does not need consent of the taxpayer);
exacted pursuant to law (part of legislative power but limited by constitutional
provisions; and must originate from the House of Representatives); exaction is
always in the form of money but failure to pay may result to distraint and levy of
properties; taxes are personal and cannot be transferred or transmitted but the
burden can be shifted (in case of indirect taxes like VAT), purpose is to raise
revenue for public/ governmental purpose; proceeds of tax collection cannot be
used for private purpose; levied by authority which has jurisdiction over the
3|Page
 4

following person, property, transaction, rights and privileges (which is the extent of
coverage/scope of powers).
Q10. Discuss the normal tax cycle.
A. The Tax Cycle:
Levy – Congress determines the persons, property or exercises to be taxed, amount
to be raised, rates to be imposed and manner of implementation.
Assessment and Collection – The executive branch administers and implements all
tax laws; and enforces the levy.
Payment and/or Exercise of Remedies – Compliance results in payment but
resistance will allow the government and the taxpayer to exercise both
administrative and judicial remedies.
Q11. What is the purpose of tax?
A. Fiscal when it raises funds or regulatory when it seeks to achieve social or
economic goals.
Q12. Who are liable for tax?
A. For direct taxes, same person absorbs the tax (ex. income tax, PTR, CTC) and
burden to pay cannot be shifted while in indirect taxes, tax is paid by the person
other than the one upon whom it is imposed, thus the burden can be shifted (ex.
VAT). (Expect questions on VAT-exempt transactions and VATable transactions).
Q13. What factors must be considered in imposing taxes?
A. Consider persons (natural and juridical) to be taxed; consider residence of the tax
payer (mobilia sequntur personam); consider threshold period and threshold
amount; determine situs of the tax to avoid double taxation; review reciprocity and
comity principles under tax treaties which may operate for a given tax incident.
Q14. The employees of the Bureau of Customs assailed the constitutionality of
the Attrition Law on the following grounds: denial of due process, violative of
the equal protection clause, undue delegation of power, constitutes itself as a
bill of attainder and threatens their security of tenure. Will the case prosper?
A. No. The Attrition Bill is constitutional. There is a valid classification not violative
of the equal protection clause as the employees of BIR and BOC, being involved in
revenue collection, are different from other government employees. The law does
not violate due process and security of tenure; it is also not a bill of attainder as the
underperformance is indicated by a clear standard expressly provided and dismissal
is subject to civil service substantive and procedural rules. (BOCEA v. Sec. Teves)
Q15. How are tax measures interpreted?
A. As a general rule, tax statutes are construed strictly against the government and
liberally in favor of taxpayers; under the lifeblood theory, it frowns against
exemptions and there therefore the taxpayer has the burden of proof to show his
claim (strictissimi juris); tax amnesty is never presumed.
Miramar Fish Company, Inc. v Commissioner of Internal Revenue., G.R. No.
185432, June 4, 2014: A claim for tax refund or credit, like a claim for tax refund
exemption, is construed strictly against the taxpayer. One of the conditions for a
judicial claim of refund or credit under the VAT System is compliance with the
120+30 day mandatory and jurisdictional periods.
CIR v. San Roque Power Corp and other consolidated cases, G.R No. 205543, June
30, 2014: The general rule is that a void law or administrative act cannot be the
4|Page
 5

source of legal rights or duties. Article 7 of the Civil Code enunciates this general
rule, as well as its exception. The Court said that although Section 4 of the 1997 Tax
Code provides that the "power to interpret the provisions of this Code and other tax
laws shall be under the exclusive and original jurisdiction of the Commissioner,
subject to review by the Secretary of Finance," Section 7 of the same Code does not
prohibit the delegation of such power. Thus, "the Commissioner may delegate the
powers vested in him under the pertinent provisions of this Code to any or such
subordinate officials with the rank equivalent to a division chief or higher, subject to
such limitations and restrictions as may be imposed under rules and regulations to
be promulgated by the Secretary of Finance, upon recommendation of the
Commissioner."
The Court further held that provisions of the NIRC particularly Section 112(A) and
(C) must be interpreted according to its clear, plain, and unequivocal language. The
taxpayer can file his administrative claim for refund or credit within the two-
year prescriptive period. If he files his claim on the last day of the two-year
prescriptive period, his claim is still filed on time. The Commissioner will have 120
days from such filing to decide the claim. If the Commissioner decides the claim
on the 120th day, or does not decide it on that day, the taxpayer still has 30
days to file his judicial claim with the CTA.
Q16. When will the prescriptive period for refund of final withholding taxes
commence?
A. Final withholding taxes are considered as full and final payment of the income tax
due, and thus, are not subject to any adjustments. Thus, the two (2)-year
prescriptive period commences to run from the time the refund is ascertained, i.e.,
the date such tax was paid, and not upon the discovery by the taxpayer of the
erroneous or excessive payment of taxes.
In the case at bar, it is undisputed that Metrobank's final withholding tax liability in
March 2001 was remitted to the BIR on April 25, 2001. As such, it only had until
April 25, 2003 to file its administrative and judicial claims for refund. However,
while Metrobank's administrative claim was filed on December 27, 2002, its
corresponding judicial claim was only filed on September 10, 2003. Therefore,
Metrobank's claim for refund had clearly prescribed. (Metropolitan Bank & Trust Co.
v. Commissioner of Internal Revenue G.R. No. 182582, April 17, 2017, First Division,
PERLAS-BERNABE, J.)
Q17. What can a corporation do when it has overpaid its income taxes?
A. In case the corporation is entitled to a refund of the excess estimated quarterly
income taxes paid, the refundable amount shown on its final adjustment return may
be credited against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding taxable years. Once the option to carry over and apply
the excess quarterly income tax against income tax due for the taxable quarters of
the succeeding taxable years has been made, such option shall be considered
irrevocable for that taxable period and no application for tax refund or issuance of a
tax credit certificate shall be allowed therefor.
Under the new law, in case of overpayment of income taxes, the remedies are still
the same; and the availment of one remedy still precludes the other. But unlike
Section 69 of the old NIRC, the carry-over of excess income tax payments is no
5|Page
 6

longer limited to the succeeding taxable year. Unutilized excess income tax
payments may now be carried over to the succeeding taxable years until fully
utilized. In addition, the option to carry-over excess income tax payments is now
irrevocable. Hence, unutilized excess income tax payments may no longer be
refunded. (BELLE CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R.
No. 181298, January 10, 2011, FIRST DIVISION, DEL CASTILLO, J.)
Q18. What is tax amnesty?
A. A tax amnesty is a general pardon or intentional overlooking by the State of its
authority to impose penalties on persons otherwise guilty of evasion or violation of
a revenue or tax law. It partakes of an absolute forgiveness or waiver by the
government of its right to collect what is due it and to give tax evaders who wish to
relent a chance to start with a clean slate. A tax amnesty, much like a tax exemption,
is never favored nor presumed in law. The grant of a tax amnesty, similar to a tax
exemption, must be construed strictly against the taxpayer and liberally in favor of
the taxing authority. (COMMISSIONER OF INTERNAL REVENUE v. PHILIPPINE
ALUMINUM WHEELS, INC., GR No. 216161, August 09, 2017, Second Division, CARPIO,
J.)
Q19. What constitutes a false return?
A. Under Section 248 (B) of the NIRC, there is a prima facie evidence of a false return
if there is a substantial under declaration of taxable sales, receipt or income. The
failure to report sales, receipts or income in an amount exceeding 30% what is
declared in the returns constitute substantial underdeclaration. A prima facie
evidence is one which that will establish a fact or sustain a judgment unless
contradictory evidence is produced.
In other words, when there is a showing that a taxpayer has substantially under
declared its sales, receipt or income, there is a presumption that it has filed a false
return. As such, the CIR need not immediately present evidence to support the
falsity of the return, unless the taxpayer fails to overcome the presumption against
it. (Commissioner of Internal Revenue v. Asalus Corp., G.R. No. 221590, February 22,
2017, Second Division, Mendoza J.)
Q20. Will the exemption of minimum wage earners from income tax be
removed when he/she receives other benefits in excess of the statutory limits
of Php30,000 (now Php90,000.00)?
A. No. R.A. 9504 is explicit as to the coverage of the exemption: the wages that are
not in excess of the minimum wage as determined by the wage boards, including the
corresponding holiday, overtime, night differential and hazard pays.
In other words, the law exempts from income taxation the most basic compensation
an employee receives—the amount afforded to the lowest paid employees by the
mandate of law. In a way, the legislature grants to these lowest paid employees
additional income by no longer demanding from them a contribution for the
operations of government. This is the essence of R.A. 9504 as a social legislation.
The government, by way of the tax exemption, affords increased purchasing power
to this sector of the working class.
The treatment of bonuses and other benefits that an employee receives from the
employer in excess of the P30,000 ceiling cannot but be the same as the prevailing
treatment prior to R.A. 9504—anything in excess of P30,000 is taxable; no more, no
6|Page
 7

less. The treatment of this excess cannot operate to disenfranchise the MWE from
enjoying the exemption explicitly granted by R.A. 9504. (JAIME N. SORIANO v.
SECRETARY OF FINANCE, G.R. No. 184450, January 24, 2017, En Banc, SERENO, C.J.)
Q21. May a private company refuse to grant a 20% senior for its services?
A. No. The validity of the 20% senior citizen discount and tax deduction scheme
under RA 9257, as an exercise of police power of the State, has already been settled
in Carlos Superdrug Corporation. The discount given to senior citizens meets all
the requirements under the equal protection class. Senior citizens are
likewise exempt from 12% VAT imposition. (Manila Memorial Park, Inc and La
Funeraria Paz-Sucat v. DSWD Secretary, 2013)
Q22. What are the factors to consider in enacting revenue-raising measures?
A. Purpose is lawful, identify specific person, property or privilege to be taxed,
specify schedule of the rate to be imposed; distinguish if tax is direct or indirect;
apportionment of the tax to be collected; situs of taxation; and mode of
levy/collection.
Q23. What may be the subject matter of taxes?
A. Personal, capitation or poll – fixed amount without regard to class;
Property – subject to assessment based on area, location, use and normally
distinguishes between land and improvements which may include equipment;
Excise – based on exercise of privileges or doing business (Expect questions on
input/output tax and zero rated transactions); and
Customs duties – imposed on commodities exported or imported.
Q24. May the provisions of a tax law be extended by implication?
A. Yes. It is well settled that where the language of the law is clear and unequivocal,
it must be given its literal application and applied without interpretation. The
general rule of requiring adherence to the letter in construing statutes applies with
particular strictness to tax laws and provisions of a taxing act are not to be extended
by implication. A careful reading of the RMOs pertaining to the Voluntary
Assessment Program (VAP) shows that the recording of the information in the
Official Registry Book of the BIR is a mandatory requirement before a taxpayer may
be excluded from the coverage of the VAP. (CIR v. Ariete et al, 2010)
Q25. Is a claim for tax exemption tantamount to questioning the authority of
the assessor?
A. No. A claim for tax exemption, whether full or partial, does not deal with the
authority of local assessor to assess real property tax. Such claim questions the
correctness of the assessment and compliance with the applicable provisions of
Republic Act (RA) No. 7160 or the Local Government Code (LGC) of 1991,
particularly as to requirement of payment under protest, is mandatory. (Camp John
Hay Dev. Corp. v. Central Board of Assessment Appeals (“CBAA”), 2013)
Q26. PEZA holds a special charter and created by law. The main objective of
the law is to provide a package of incentives to investors locating in areas
identified as export processing zones. Through the years, PEZA has
established a number of these zones. May PEZA be taxed as a corporate body?
A. No. Being an instrumentality of the national government, the PEZA cannot be
taxed by local government units. Although a body corporate vested with some
corporate powers, the PEZA is not a government-owned or controlled corporation
7|Page
 8

taxable for real property taxes. The PEZA’s predecessor, the EPZA, it was declared
non-profit in character with all its revenues devoted for its development,
improvement, and maintenance. Consistent with this non- profit character, the EPZA
was explicitly declared exempt from real property taxes under its charter. Even the
PEZA’s lands and building whose beneficial use have been granted to other persons
may not be taxed with real property taxes. The PEZA may only lease its lands and
buildings to PEZA-registered economic zone enterprises and entities. These PEZA-
registered enterprises and entities, which operate within economic zones, are not
subject to real property taxes. (CITY OF LAPU-LAPU vs. PHILIPPINE ECONOMIC
ZONE AUTHORITY; PROVINCE OF BATAAN, REPRESENTED BY GOVERNOR
ENRIQUE T. GARCIA, JR., AND EMERLINDA S. TALENTO, IN HER CAPACITY AS
PROVINCIAL TREASURER OF BATAAN vs. PHILIPPINE ECONOMIC ZONE
AUTHORITY, G.R No. 184203, G.R NO. 187583, November 26, 2014)
Q27. What is the income tax liability, if any, of proprietary non-profit
hospitals?
A. Section 27(B) of the NIRC imposes a 10% preferential tax rate on the income of
(1) proprietary nonprofit educational institutions and (2) proprietary non-profit
hospitals. The only qualifications for hospitals are that they must be proprietary and
non-profit. 'Proprietary' means private, following the definition of a 'proprietary
educational institution' as 'any private school maintained and administered by
private individuals or groups' with a government permit. 'Non-profit' means no net
income or asset accrues to or benefits any member or specific person, with all the
net income or asset devoted to the institution's purposes and all its activities
conducted not for profit.
The Court finds that St. Luke's is a corporation that is not 'operated exclusively' for
charitable or social welfare purposes insofar as its revenues from paying patients
are concerned. This ruling is based not only on a strict interpretation of a provision
granting tax exemption, but also on the clear and plain text of Section 30(E) and (G).
Section 30(E) and (G) of the NIRC requires that an institution be 'operated
exclusively' for charitable or social welfare purposes to be completely exempt from
income tax. An institution under Section 30(E) or (G) does not lose its tax exemption
if it earns income from its for-profit activities. Such income from for-profit activities,
under the last paragraph of Section 30, is merely subject to income tax, previously at
the ordinary corporate rate but now at the preferential 10% rate pursuant to
Section 27(B).
St. Luke's fails to meet the requirements under Section 30(E) and (G) of the NIRC to
be completely tax exempt from all its income. However, it remains a proprietary
non-profit hospital under Section 27(B) of the NIRC as long as it does not distribute
any of its profits to its members and such profits are reinvested pursuant to its
corporate purposes. St Luke's, as a proprietary non-profit hospital, is entitled to the
preferential tax rate of 10% on its net income from its for-profit activities.
(COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R.
No. 203514, February 13, 2017, DEL CASTILLO, J.)
Q28. What is the cross border doctrine of the VAT system?
A. The cross border doctrine states that no VAT shall be imposed to form part of the
cost of goods destined for consumption outside of the territorial border of the taxing
8|Page
 9

authority. Accordingly, the sales made by suppliers from a customs territory to a

purchaser located within an ECOZONE will be considered as exportations.
(Commissioner of Internal Revenue v. Toshiba Information Equipment (PHILS.)
Inc., G.R. No. 150154, August 9, 2005)
Q29. What is the Destination Principle of the VAT system?
A. The destination principle states that goods and services are taxed only in the
country where they are consumed.(Commissioner of Internal Revenue v.
American Express International, G.R. No. 152609, June 29, 2005)
Q30. Can an entity located within an ECOZONE seek from BIR the refund of its
unutilized input taxes?
A. No. CORAL BAY NICKEL CORPORATION v. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 190506, June 13, 2016: Under the destination principle and
cross border doctrine, sales of goods and services to Coral Bay Nickel Corporation, a
PEZA-registered enterprise located in Rio Tuba Export Processing Zone (Ecozone) is
subject to 0% VAT. The proper party to seek the tax refunds or credits should be the
sellers of the goods, not the BIR. Thus, Coral Bay Nickel is not entitled to claim for
refund of input VAT it paid on its purchases of goods and services.
Q31. Are cinema ticket sales subject to VAT?
A. No. Under the NIRC of 1977, the national government imposed amusement tax
only on proprietors, lessees or operators of cabarets, day and night clubs, Jai-Alai
and race tracks. When the VAT law was implemented, it exempted persons subject
to amusement tax under the NIRC from the coverage of VAT. When the Local Tax
Code was repealed by the LGC of 1991, the local government continued to impose
amusement tax on admission tickets from theaters, cinematographs, concert halls,
circuses and other places of amusements. Amendments to the VAT law have been
consistent in exempting persons subject to amusement tax under the NIRC from the
coverage of VAT.
These reveal the legislative intent not to impose VAT on persons already covered by
the amusement tax. To hold otherwise would impose an unreasonable burden on
cinema/theater houses operators or proprietors, who would be paying an additional
10% VAT on top of the 30% amusement tax imposed by Section 140 of the LGC of
1991, or a total of 40% tax. Such imposition would result in injustice, as persons
taxed under the NIRC of 1997 would be in a better position than those taxed under
the LGC of 1991. We need not belabor that a literal application of a law must be
rejected if it will operate unjustly or lead to absurd results. (COMMISSIONER OF
INTERNAL REVENUEv.SM PRIME HOLDINGS, INC. and FIRST ASIA REALTY
DEVELOPMENT CORPORATION, G.R. No. 183505, February 26, 2010, SECOND
DIVISION, DEL CASTILLO, J.)
Q32. When is there double taxation?
A. There is double taxation when the two taxes must be imposed on the same
subject matter, for the same purpose, by the same taxing authority, within the same
jurisdiction, during the same taxing period; and the taxes must be of the same kind
or character. (NURSERY CARE CORPORATION; SHOEMART, INC.; STAR APPLIANCE
CENTER, INC.; H&B, INC.; SUPPLIES STATION INC.; and HARDWARE WORKSHOP,
INC. vs. ANTHONY ACEVEDO, in his capacity as THE TREASURER OF MANILA; and
THE CITY OF MANILA, G.R. NO. 180651, July 30, 2014)
9|Page
 10

Q34. XYZ is a cigarette manufacturing company. The Bureau of Internal

Revenue assessed it separately for the raw materials it used for
manufacturing its products and for its finished products. Is the taxation of raw
materials and the products resulting therefrom considered double taxation?
A. No. Stemmed leaf tobacco is subject to the specific tax under Section 141 (b). It is
a partially prepared tobacco. The removal of the stem or midrib from the leaf
tobacco makes the resulting stemmed leaf tobacco a prepared or partially prepared
tobacco. Since the Tax Code contained no definition of “partially prepared tobacco,”
then the term should be construed in its general, ordinary, and comprehensive
sense x x x.” Finally, excise taxes are essentially taxes on property because they are
levied on certain specified goods or articles manufactured or produced in the
Philippines for domestic sale or consumption or for any other disposition, and on
goods imported. In this case, there is no double taxation in the prohibited sense
despite the fact that they are paying the specific tax on the raw material and
on the finished product in which the raw material was a part, because the
specific tax is imposed by explicit provisions of the Tax Code on two different
articles or products: (1) on the stemmed leaf tobacco; and (2) on cigar or
cigarette. (LA SUERTE CIGAR & CIGARETTE FACTORY vs. COURT OF APPEALS
AND COMMISSIONER OF INTERNAL REVENUE, G.R No. 125346, G.R Nos. 136328-
29, G.R No. 144942, G.R No. 148605, G.R No. 158197, G.R. No. 165499, November
11, 2014)
Q35. The City of Manila sought to enforce both Sections 14 and 21 of the
Manila Revenue Code claiming that the former is a tax on manufacturers, etc.
while the latter applies to business subject to excise, VAT or percentage tax.
Will the imposition of both sections amount to invalid double taxation?
A. Yes. There is in fact double taxation since both sections are being imposed on the
same subject matter (privilege of doing business within the city), for the same
purpose, by the same taxing authority, within the same taxing jurisdiction, for the
same taxing period, and of the same kind or character (a local business tax imposed
on gross sales or receipts). NURSERY CARE CORPORATION; SHOEMART, INC.; STAR
APPLIANCE CENTER, INC.; H&B, INC.; SUPPLIES STATION INC.; and HARDWARE
WORKSHOP, INC. vs. ANTHONY ACEVEDO, in his capacity as THE TREASURER OF
MANILA; and THE CITY OF MANILA, G.R. NO. 180651, July 30, 2014)
Q36. What is a Final Withholding Tax?
A. Revenue Regulation No. 02-98: The final withholding tax (FWT) is the amount
of income tax that constitutes as a full and final payment of income tax due from the
recipient of the income.
Q36. CODE-NGO, assisted by RCBC requested for the approval of the
Department of Finance (“DOF”) in order for the Bureau of Treasury’s (“BOT”)
issuance of ten-year zero coupon treasury certificates (T-notes). These T-
Notes would initially be purchased by a special purpose vehicle on behalf of
CODE-NGO, repackaged and sold at a premium to investors as PEACE Bonds.
Thereafter, the BOT issued the T-notes to RCBC on behalf of CODE-NGO. RCBC
Capital, as the lead underwriter, sold the Peace Bonds in the secondary
market. Note that BDO purchased several PEACE Bonds on different dates.
10 | P a g e
 11

However, the BIR issued a later ruling declaring that the PEACE Bonds, being
deposit substitutes, are subject to the 20% final withholding tax. Are these
PEACE Bonds subject to final withholding tax?
A. Yes. The Supreme Court held that the number of lenders is determinative of
whether a debt instrument should be considered a deposit substitute and
consequently subject to the 20% final withholding tax. From the point of view of the
financial market, the phrase “at any one time” for purposes of determining the “20
or more lenders” would mean every transaction executed in the primary or
secondary market in connection with the purchase or sale of securities. Where the
financial assets involved are government securities like bonds, the reckoning of the
“20 or more lenders/investors” is made at any transaction in connection with the
purchase or sale of the government bonds, such as: a) Issuance by the Bureau of
Treasury of the bonds to the Government Securities Eligible Dealers (GSEDs) in the
primary market; b) Sale and distribution by GSEDs to various lenders/investors in
the secondary market; c) Subsequent sale or trading by a bondholder to another
lender/investor in the secondary 
 market usually through a broker or dealer; or d)
Sale by a financial intermediary-bondholder of its participation interests in the
bonds to 
 individual or corporate lenders in the secondary market. 

When, through any of the foregoing transactions, funds are simultaneously obtained
from 20 or more lenders/investors, there is deemed to be a public borrowing and
the bonds at that point in time are deemed deposit substitutes. Consequently, the
seller is required to withhold the 20% final withholding tax on the imputed interest
income from the bonds.
Q38. What is the nature of Documentary Stamp Tax (“DST”)?
A. DST partakes of Excise Tax: Liability for payment of DST is for account of the
Seller
Fort Bonifacio Dev. Corp v. CIR, 2013. DST is an excise tax levied on the exercise
by persons of privileges conferred by law.
* note that this was asked in the 2014 bar even though excluded in the coverage

Philacor Credit Corp v. CIR, 2013: DST is due the person (1) making; (2) signing;
(3) issuing; (4) accepting; or (5) transferring the taxable documents.
Q39. When is DST imposed?
A. DST is in the nature of an excise tax because it is imposed upon the privilege,
opportunity or facility offered at exchanges for the transaction of the business.
DST is a tax on documents, instruments, loan agreements, and papers evidencing
the acceptance, assignment, or transfer of an obligation, right or property
incident thereto. DST is thus imposed on the exercise of these privileges through
the execution of specific instruments, independently of the legal status of the
transactions giving rise thereto. In a merger of two corporations, the transfer of
real properties not conveyed to or vested by means of any specific deed,
instrument or writing is not subject to DST.R.A No. 9243, entitled “An Act
Rationalizing the Provisions of the Documentary Stamp Tax of the National
Internal Revenue Code of 1997” was enacted and took effect on April 27, 2004,
which exempts the transfer of real property of a corporation, which is a party to
11 | P a g e
 12

the merger or consolidation, to another corporation, which is also a party to the

merger or consolidation, from the payment of DST. (COMMISSIONER OF
INTERNAL REVENUE vs. PILIPINAS SHELL PETROLEUM CORPORATION, G.R
No. 192398, September 29, 2014)
Q40. Can a passbook be considered a certificate of deposit, which may be
subject to DST?
Yes. A certificate of deposit is defined as "a written acknowledgment by a bank or
banker of the receipt of a sum of money on deposit which the bank or banker
promises to pay to the depositor, to the order of the depositor, or to some other
person or his order, whereby the relation of debtor and creditor between the bank
and the depositor is created." A certificate of deposit need not be in a specific form;
thus, a passbook of an interest-earning deposit account issued by a bank is a
certificate of deposit drawing interest.
In China Banking Corporation v. CIR, we held that the Savings Plus Deposit Account,
which has the following features: 1. Amount deposited is withdrawable anytime; 2.
The same is evidenced by a passbook; 3. The rate of interest offered is the prevailing
market rate, provided the depositor would maintain his minimum balance in thirty
(30) days at the minimum, and should he withdraw before the period, his deposit
would earn the regular savings deposit rate; is subject to DST.
Q41. Are transfers of real property during a merger subject to DST?
A. No. Section 196 of the NIRC does not include the transfer of real property from
one corporation to another pursuant to a merger. A perusal of the subject provision
would clearly show it pertains only to sale transactions where real property is
conveyed to a purchaser for a consideration. The phrase "granted, assigned,
transferred or otherwise conveyed" is qualified by the word "sold" which means
that documentary stamp tax under Section 196 is imposed on the transfer of realty
by way of sale and does not apply to all conveyances of real property.
In a merger, the real properties are not deemed "sold" to the surviving corporation
and the latter could not be considered as "purchaser" of realty since the real
properties subject of the merger were merely absorbed by the surviving corporation
by operation of law and these properties are deemed automatically transferred to
and vested in the surviving corporation without further act or deed. Therefore, the
transfer of real properties to the surviving corporation in pursuance of a merger is
not subject to documentary stamp tax. (COMMISSIONER OF INTERNAL REVENUE v.
LA TONDEÑA DISTILLERS, INC. (LTDI [now GINEBRA SAN MIGUEL] G.R. No. 175188,
July 15, 2015, SECOND DIVISION, DEL CASTILLO, J.)
Q42. Is an electronic message with instruction to debit an account and pay a
person subject to DST?
A. No. On review with the Supreme Court, it held that an electronic message
containing instructions to debit their respective local or foreign currency accounts
in the Philippines and pay a certain named recipient also residing in the Philippines
is not transaction contemplated under Section 181 of the Tax Code. They are also
not bills of exchange due to their non-negotiability. Hence, they are not subject to
DST. (THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-
PHILIPPINE BRANCHES vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
166018 & 167728, June 4, 2014)
12 | P a g e
 13

Philippine Bank Communications v. Commissioner of Internal Revenue, G.R. No.

194065. June 20, 2016: The payment of the DST and the filing of the DST
Declaration Return upon loading/reloading of the DS metering machine must not be
considered as the "date of payment" when the prescriptive period to file a claim for
a refund/credit must commence. For DS metering machine users, the payment of
the DST upon loading/reloading is merely an advance payment for future
application. The liability for the payment of the DST falls due only upon the
occurrence of a taxable transaction. Therefore, it is only then that payment may be
considered for the purpose of filing a claim for a refund or tax credit. Since actual
payment was already made upon loading/reloading of the DS metering machine
and the filing of the DST Declaration Return, the date of imprinting the
documentary stamp on the taxable document must be considered as the date of
payment contemplated under Section 229 of the NIRC.
Q43. National Power Corporation (“NAPOCOR”) transferred its franchise to the
newly-created National Transmission Corporation (“TRANSCO”). At the time of
transfer, NAPOCOR had pending franchise tax obligations to the local
government. May the liability to pay delinquent franchise tax be transferred to
TRANSCO?
A. Yes. A corporation that has been ordered to pay franchise tax delinquency but
which facilities, including its nationwide franchise, had been transferred to the
National Transmission Corporation (TRANSCO) by operation of law during the time
of the alleged delinquency, cannot be ordered to pay as it is not the proper party
subject to the local franchise tax, the transferee being the one liable. (NATIONAL
POWER CORPORATION vs. PROVINCIAL GOVERNMENT OF BATAAN,
SANGGUNIANG PANLALAWIGAN OF BATAAN, PASTOR B. VICHUACO (IN HIS
OFFICIAL CAPACITY AS PROVINCIAL TREASURER OF BATAAN) and THE
REGISTER OF DEEDS OF THE PROVINCE OF BATAAN, G.R. No. 180654, April 21,
2014)
Q44. What is the 120+30 Rule in a Claim for refund or credit of unutilized
input tax under Section 112 of NIRC?
A. Requisites – first, administrative claim must be filed with BIR within two years
after the close of taxable quarter when zero-rated or effectively zero rated sales
were made; second, judicial claim must be made within 30 days from receipt of BIR
decision on tax refund/credit claim or if no action is received from the BIR within
120 days. (Mindanao Geothermal v. CIR, 2013)
Nippon Express Corp v. CIR, 2013: Failure of BIR to act on a claim within 120 days
will allow the taxpayer to seek relief within 30 days from the lapse of said 120 day
period.
CIR v. Visayas Geothermal Power Co., 2013: The failure to observe the 120-day
period to claim refund/credit is considered prematurely filed and CTA cannot take
cognizance of the judicial claim.
Q45. Can a withholding agent file a claim for refund?
A. Yes. The person entitled to claim a tax refund is the taxpayer. However, in case
the taxpayer does not file a claim for refund, the withholding agent may file the
claim. In CIR v. Procter & Gamble Philippine Manufacturing Corporation, a

13 | P a g e
 14

withholding agent was considered a proper party to file a claim for refund of the
withheld taxes of its foreign parent company.
The term "taxpayer" is defined in our NIRC as referring to "any person subject to tax
imposed by the Title [on Tax on Income]." It thus becomes important to note that
under Section 53(c) of the NIRC, the withholding agent who is "required to deduct
and withhold any tax" is made "personally liable for such tax" and indeed is
indemnified against any claims and demands which the stockholder might wish to
make in questioning the amount of payments effected by the withholding agent in
accordance with the provisions of the NIRC. The withholding agent, P&GPhil., is
directly and independently liable for the correct amount of the tax that should be
withheld from the dividend remittances. The withholding agent is, moreover,
subject to and liable for deficiency assessments, surcharges and penalties should the
amount of the tax withheld be finally found to be less than the amount that should
have been withheld under law.
A "person liable for tax" has been held to be a "person subject to tax" and properly
considered a "taxpayer." The terms "liable for tax" and "subject to tax" both connote
legal obligation or duty to pay a tax. It is very difficult, indeed conceptually
impossible, to consider a person who is statutorily made "liable for tax" as not
"subject to tax." By any reasonable standard, such a person should be regarded as a
party in interest, or as a person having sufficient legal interest, to bring a suit for
refund of taxes he believes were illegally collected from him.
In this connection, it is however significant to add that while the withholding agent
has the right to recover the taxes erroneously or illegally collected, he nevertheless
has the obligation to remit the same to the principal taxpayer. As an agent of the
taxpayer, it is his duty to return what he has recovered; otherwise, he would be
unjustly enriching himself at the expense of the principal taxpayer from whom the
taxes were withheld, and from whom he derives his legal right to file a claim for
refund. (COMMISSIONER OF INTERNAL REVENUE v. SMART COMMUNICATION, INC.
G.R. Nos. 179045-46, August 25, 2010, FIRST DIVISION, DEL CASTILLO, J.)
Q46. Migrant Pagbilao Corporation (MPC) was approved for Effective Zero-
Rating for the construction and operation of its power plant. On March 11,
2002, MPC filed before the BIR an administrative claim for refund of its input
VAT for taxable year 2000.
On March 26, 2002, fearing that the period for filing a judicial claim for refund
was about to expire, MPC proceeded to file a petition for review before the
Court of Tax Appeals (CTA), without waiting for the CIR's action on the
administrative claim. The CTA Second Division partially granted the refund
claim of MPC but in the reduced amount of P118,749,001.55, representing
unutilized input VAT incurred for the second, third and fourth quarters of
taxable year 2000. The CTA Second Division held that by virtue of
NAPOCOR's exemption from direct and indirect taxes as provided for in
Section 13 of Republic Act No. 6395, MPC's sale of services to NAPOCOR is
subject to VAT at 0% rate. The CTA en banc affirmed in toto the decision
of the CTA Second Division. Is the CTA en banc correct in its ruling?
A. No, the CTA has no jurisdiction over the case. The 120+30 Day Periods are
mandatory and jurisdictional.
14 | P a g e
 15

MPC filed its petition for review with the CTA on March 26, 2002, or a mere
15 days after it filed an administrative claim for refund with the CIR on March 11,
2002. It then did not wait for the lapse of the 120-day period expressly provided for
by law within which the CIR shall grant or deny the application for refund. MPC's
failure to observe the mandatory 120-day period under the law was fatal to its
immediate filing of a judicial claim before the CTA. It rendered the filing of the CTA
petition premature, and barred the tax court from acquiring jurisdiction over the
same.
Note: A jurisdictional issue may be invoked by the Supreme Court motu
proprio , and may be raised at any stage of the proceedings. (CIR vs. Mirant
Pagbilao Corporation, G.R. No. 180434. January 20, 2016)
Northern Mindanao Power Corporation vs. Commissioner of Internal Revenue,
G.R. No. 185115, February 18, 2015: In case the BIR fails to act on a claim for
refund within the 120-day period prescribed by law, the taxpayer only has 30 days
counted from the expiration of the 120-day period to appeal the unacted claim with
the CTA. A taxpayer’s non-compliance with the mandatory period of 30 days is fatal
to its refund claim on the ground of prescription. Consequently, the CTA acquires no
jurisdiction over the taxpayer’s claim as the petition was belatedly filed.
Q47: When must a judicial claim before the CTA be filed, in case of inaction of
the BIR for an application of tax credit/refund?
A. Upon filing of the administrative claim, the BIR is given a period of 120 days
within which to (1) grant a refund or issue the tax credit certificate for creditable
input taxes; or (2) make a full or partial denial of the claim for a tax refund or tax
credit. Failure on the part of the BIR to act on the application within the 120-day
period shall be deemed a denial. Note that the 120-day period begins to run from
the date of submission of complete documents supporting the administrative claim.
If there is no evidence showing that the taxpayer was required to submit – or
actually submitted – additional documents after the filing of the administrative
claim, it is presumed that the complete documents accompanied the claim when it
was filed.
Whether the BIR rules in favor of or against the taxpayer – or does not act at all on
the administrative claim – within the period of 120 days from the submission of
complete documents, the taxpayer may resort to a judicial claim before the CTA. The
judicial claim shall be filed within a period of 30 days after the receipt of
respondent's decision or ruling or after the expiration of the 120-day period,
whichever is sooner.
The judicial claim shall be filed within a period of 30 days after the receipt of
respondent's decision or ruling or after the expiration of the 120-day period,
whichever is sooner. (Silicon Philippines v. CIR, 2 Mar 2016)
Q48. What is the effect of the non-observance of the 120-day period?
A. Two claims for refund of the VAT were filed within the two-year prescriptive
periods. The taxpayer failed to comply with the 120-day period as it filed its judicial
claim in C.T.A Case No. 6792 four (4) days after the filing of the administrative claim.
The Court held that only C.T.A Case No. 6792 should be dismissed on the ground of
lack of jurisdiction for being prematurely filed.
However, the Court held that since C.T.A Case No. 6837, the judicial claim was filed a
15 | P a g e
 16

day after the filing of the administrative claim, the same should be sustained based
on equitable estoppel having been filed i.e., from December 10, 2003 to October 6,
2010, when BIR Ruling No. DA-489-03 was in place. The supposed jurisdictional
defect, which would have attended the filling of its judicial claim before the
expiration of the 120-day period, was cured. (COMMISSIONER OF INTERNAL
REVENUE vs. CE LUZON GEOTHERMAL POWER COMPANY, INC., G.R No. 190198,
September 17, 2014)
Q49. Is the 120+30 day rule always mandatory?
A. No. As an exception to the mandatory and jurisdictional nature of the 120+30 day
period, judicial claims filed between December 10, 2003 or from the issuance of BIR
Ruling No. DA-489-03, up to October 6, 2010 need not wait for the lapse of the
120+30 day period in consonance with the principle of equitable estoppel. Since
Taganito filed its judicial claim with the CTA on February 19, 2004, clearly within
the period of exception of December 10, 2003 to October 6, 2010. Its judicial claim
was, therefore, not prematurely filed and should not have been dismissed by the
CTA En Banc.
The SC ruled that the jurisdiction of the CTA over decisions or inaction of the CIR is
only appellate in nature and, thus, necessarily requires the prior filing of an
administrative case before the CIR under Section 112. A petition filed prior to the
lapse of the 120-day period prescribed under said Section would be premature for
violating the doctrine on the exhaustion of administrative remedies. There is,
however, an exception to the mandatory and jurisdictional nature of the 120+30 day
period under BIR Ruling No. DA-489-03, dated December 10, 2003, expressly stated
that the “taxpayer-claimant need not wait for the lapse of the 120-day period before
it could seek judicial relief with the CTA by way of Petition for Review.” (TAGANITO
MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
198076, November 19, 2014 and G.R. No. 201195, November 26, 2014)
Q50. What are the purposes of the aforementioned 120+30 periods?
A. Section 112(D) of the 1997 Tax Code states the time requirements for filing a
judicial claim for the refund or tax credit of input VAT. The legal provision speaks of
two periods: the period of 120 days, which serves as a waiting period to give
time for the CIR to act on the administrative claim for a refund or credit; and
the period of 30 days, which refers to the period for filing a judicial claim with
the CTA. It is the 30-day period that is at issue in this case. (ROHM APOLLO
SEMICONDUCTOR PHILIPPINES vs. COMMISSIONER OF INTERNAL REVENUE, G.R.
No. 168950, January 14, 2015)
Q51. What is the purpose of the requirement for printing of sales invoices and
official receipts?
A. In Silicon Valley, Phils., Inc. v. CIR, 2011, the Supreme Court reiterated that the
requirement of [printing] the BIR permit to print on the face of the sales invoices
and official receipts is a control mechanism adopted by the Bureau of Internal
Revenue to safeguard the interest of the government. Without producing the
Authority to Print, the taxpayer cannot claim any tax refund/tax credit.
Q52. Differentiate a VAT invoice from a VAT receipt.
A. A VAT invoice is necessary for every sale, barter or exchange of goods or
properties while a VAT official receipt properly pertains to every lease of goods or
16 | P a g e
 17

properties, and every sale, barter or exchange of services. In other words, the VAT
invoice is the seller's best proof of the sale of the goods or services to the buyer
while the VAT receipt is the buyer's best evidence of the payment of goods or
services received from the seller. (NIPPON EXPRESS (PHILIPPINES) CORP v.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 185666, February 4, 2015)
Q53. What are the requirements for a tax refund or tax credit?
A. The Supreme Court reiterated that it is fatal if the taxpayer failed to print the
word “zero-rated” on the VAT invoices or official receipts in claims for a refund or
credit of input VAT on zero-rated sales, even if the claims were made prior to the
effectivity of R.A 9337. A VAT invoice is the seller’s best proof of the sale of goods or
services to the buyer, while a VAT receipt is the buyer’s best evidence of the
payment of goods or services received from the seller. The requirement of
imprinting the word “zero-rated” proceeds from the rule-making authority granted
to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax
Code and its amendments. A VAT-registered person whose sales are zero-rated or
effectively zero-rated, Section 112(A) specifically provides for a two-year
prescriptive period after the close of the taxable quarter when the sales were made
within which such taxpayer may apply for the issuance of a tax credit certificate or
refund of creditable input tax. (CARGILL PHILIPPINES, INC vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 203774, March 11, 2015)
Q54. May a claim of refund prosper if the VAT invoices do not indicate the
transactions as zero-rated?
A. No. The Court stressed that the failure to indicate the words “zero-rated” on the
invoices and receipts issued by a taxpayer would result in the denial of the claim for
refund or tax credit. (EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., vs.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 183531, March 25, 2015)
Q55. In a claim for refund of excess income tax payments resulting from
unutilized creditable withholding taxes, is the taxpayer required to present in
evidence its quarterly income tax return of the subsequent year to prove that
excess income tax payment was indeed not carried over to the succeeding
year?
A. No. According to the Supreme Court, subsequent quarterly income tax returns are
not indispensable. What Sec. 76 of the Tax Code requires is to prove the prima facie
entitlement to a claim, including the fact of not having carried over the excess
credits to the subsequent quarters or taxable year. It does not say that to prove such
a fact, succeeding quarterly ITRs are absolutely needed. This simply underscores the
rule that any document, other than quarterly ITRs may be used to establish that
indeed the non-carry over clause has been complied with, provided that such is
competent, relevant and part of the records. (Winebrenner & Iñigo Insurance
Brokers, Inc. vs. Commissioner of Internal Revenue, 748 SCRA 591, G.R. No.
206526 January 28, 2015)
Q56. May the BIR impose conditions not included in a tax treaty for the
application of tax relief?
A. No. A tax treaty is an agreement that provides for a uniform treatment of a
taxable event between agreeing countries. The Court reiterated that the purpose of
a tax treaty is “it is used to reconcile the national fiscal legislations of the contracting
17 | P a g e
 18

parties in order to help the taxpayer avoid international juridical double taxation.
Double taxation is the imposition of comparable taxes in two or more states on the
same taxpayer in respect of the same subject matter and for identical periods”
Thus the Court held that the BIR cannot impose additional requirements that would
negate the availment of relief provided under international agreements. (Deutsche
Bank v. CIR, 2013)
Q57. Are persons selling aviation fuel exempt from paying taxes for selling
their fuel to international air carriers?
A. Under the basic international law principle of pacta sunt servanda, the state has
the duty to fulfill its treaty obligations in good faith. This entails harmonization of
national legislation with treaty provisions. Section 135 (a) of the National Internal
Revenue Code embodies the country’s compliance with its undertakings under the
1944 Chicago Convention on International Aviation (Chicago Convention), Article 24
(9) of which has been interpreted to prohibit taxation of aircraft fuel consumed for
international transport, and various bilateral air service agreements not to impose
excise tax on aviation fuel purchased by international carriers from domestic
manufacturers or suppliers on petroleum products sold to tax-exempt international
carriers. Evidently, construction of the tax exemption provision in question should
give primary consideration to its broad implications on the country’s commitment
under international agreements. In view of the foregoing the Court held that
respondent, as the statutory taxpayer who is directly liable to pay the excise tax on
its petroleum products is entitled to a refund or credit of the excise taxes it paid for
petroleum products sold to international carriers, the latter having been granted
exemption from the payment of said excise tax under Section 135 (a) of the NIRC.
(Commissioner of Internal Revenue v. Pilipinas Shell Petroleum
Corporation, G.R. No. 188497. February 19, 2014)

II. National Internal Revenue Code

Q58. What is income?

A. Income consists of profit or gains as to the amount of money coming to a person
or corporation over a specified period of time.
Income: definition, nature, tests when it becomes taxable; inclusions of gross
income, classification as to source (compensation income, fringe benefits,
professional income, income from business, income from dealings in property;
passive income investment (ex. Final tax of 20% on interest income, royalty income
except on royalty on books which is subject to 10%, yield on monetary benefit from
deposit substitutes, prizes or awards except PCSO and Lotto winnings);10% final tax
on royalties on literary works, books and musical compositions (LBM); 10% on
from winnings from horse races; 10% on cash and stock dividends for Filipinos,
annuities, proceeds from insurance policies, prizes and awards, pensions,
retirement benefit or separation pay; income from whatever source (ex. forgiveness
of indebtedness, tax refund); capital gains tax expect a question on this review Sec.
24(D) of the NIRC for schedule of rate and for actual computation of final sale over a
property transaction); Tax rates for non-resident aliens are higher. Check
relevant provisions.
18 | P a g e
 19

Q59. Who shall be liable for capital gains tax in expropriation proceedings?
A. The transfer of property through expropriation proceedings is a sale or exchange
within the meaning of Sections 24(D) and 56(A) (3) of the National Internal
Revenue Code, and profit from the transaction constitutes capital gain. Since capital
gains tax is a tax on passive income, it is the seller, who are liable to shoulder the
tax. Thus, as far as the government is concerned, the capital gains tax in
expropriation proceedings remains a liability of the seller, as it is a tax on the seller's
gain from the sale of real property. (REPUBLIC OF THE PHILIPPINES, represented by
the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH) v. SPOUSES
SENANDO F. SALVADOR AND JOSEFINA R. SALVADOR, G.R. No. 205428, June 7, 2017,
First Division, DEL CASTILLO, J.)
Q60. What are the elements of income?
A. Presence of gain or profit, such is realized actually or constructively; and is not
exempt by any law or treaty.
Q61. What is taxable income?
A. Items earned or gained as gross income less deductions and/ or personal and
additional exemptions, if authorized under the NIRC or any special law; distinguish
between ordinary income and ordinary loss.
Q62. Who are liable to pay income tax?
A. Resident citizens with minimum wage earners considered as special class; non -
resident citizens (Overseas contract workers, seafarers); aliens (determine
threshold as to amount and period), domestic corporations (review principles on
transfer pricing); foreign corporations (review profit sharing for branches)
including resident and non-resident foreign corporations, partnerships including
general partnerships, co-ownerships and estates and trusts.
Q63. What is included in income tax?
A. Income tax, estate and donor’s taxes, value-added tax, other percentage taxes,
excise taxes; documentary stamp taxes; and such other taxes as are or hereafter may
be imposed and collected by the BIR.
Q64. What is the nature of capital gains tax?
A. Capital gains is a tax on passive income, it is the seller, not the buyer, who
generally would shoulder the tax. As a general rule, therefore, any of the parties to a
transaction shall be liable for the full amount of the documentary stamp tax due,
unless they agree among themselves on who shall be liable for the same. (REPUBLIC
OF THE PHAILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC WORKS
AND HIGHWAYS vs. ARLENE R. SORIANO, G.R No. 211666, February 25, 2015)
Q65. Is the sale of goodwill subject to ordinary income tax?
A. No. Goodwill is not an ordinary asset as it is not among the exceptions under the
definition of capital assets in Section 39(A)(1) of the 1997 National Internal
Revenue Code. Thus, it is a capital subject to capital gains tax, not ordinary income
tax. (WM. H. Anderson v. Juan Posadas, Jr., G.R. No. 44100, September 22, 1938)
Q66. What are included when a natural person is taxed?
A. Inclusions in compensation income, exclusions and deductions (itemized and
standard deductions. Memorize the amounts on personal exemption for individual
tax payer under Section 35 (A) of the NIRC.); Income derived from business or
19 | P a g e
 20

practice of profession; treatment of passive income (final tax and need not be
reported since deduction is in the form of final tax); tax on capital gains; senior
citizens, minimum wage earners and those who granted exemptions under
international agreements (those employed with Asian Development Bank and IRRI)
are exempt from payment.
Q67. What are included when domestic corporations are taxed?
A. Covered transactions, payment schedule, allowable deductions (itemized and
optional standard deductions); treatment of passive incomes subject to tax and
those not subject to tax; tax on capital gains; check also on principle of transfer
pricing if domestic corporation does business in another foreign country; treatment
of accumulated earnings.
Section 27(B) of the NIRC imposes a 10% preferential tax rate on the income of
(1) proprietary non-profit educational institutions and (2) proprietary non-
profit hospitals. The only qualifications for hospitals are that they must be
proprietary and non-profit. "Proprietary" means private, following the
definition of a "proprietary educational institution" as "any private school
maintained and administered by private individuals or groups" with a
government permit. "Non-profit" means no net income or asset accrues to or
benefits any member or specific person, with all the net income or asset devoted
to the institution's purposes and all its activities conducted not for profit.
Q68. What taxes are imposed on an educational institution?
A. Only portions actually, directly and exclusively used for charitable purposes are
exempt from real property taxes; while portions leased to private entities are not
exempt from such taxes. (Angeles University Foundation v. City of Angles, 2012)
Q68. What taxes are imposed on a hospital?
A. As a general principle, a charitable institution does not lose its character as such
and its exemption from taxes simply because it derives income from paying patients,
whether out-patient, or confined in the hospital, or receives subsidies from the
government, so long as the money received is devoted or used altogether to the
charitable object which it is intended to achieve; and no money inures to the private
benefit of the persons managing or operating the institution. (CIR v. St. Luke’s
Medical Center, 2012)
Q69. What taxes are imposed on resident foreign corporations?
A. General rule – foreign corporations are liable for income derived from Philippine
sources; may enjoy certain incentives if covered by a treaty or special provision of
law (registration under the Board of Investments and the Philippine Economic Zone
Authority); minimum corporate tax due and schedule of payment; treatment of
other incomes; liability for capital gains tax; treatment of accumulated earnings
Q70. Enumerate the different kinds of resident foreign corporations and
discuss their tax liabilities, if any.
A. Philippine Branch is a foreign corporation in the Philippines that is allowed by
the SEC to do business in the Philippines in such activities it normally does in its
home country. It is normally taxable in like manner as a local corporation – 12%
VAT, 30% corporate income tax, and such other applicable internal revenue taxes.
Also, repatriation of its operational income in the Philippines is subject to 15%
branch profit remittance tax.
20 | P a g e
 21

Representative Office is a foreign corporation licensed to do business in the

Philippines to deal directly with the clients of its parent company abroad on
information dissemination, as communication center, product promotion, and
quality control for exports. It is not allowed to earn income in the Philippines, thus
not subject to income tax.
Regional Operating Headquarters in the Philippines (ROHQ) is a special type of
income producing foreign corporation. The income to be generated is limited to
specific services rendered to its affiliates, branches, and subsidiaries within the
Asia-Pacific Region. It is subject to a special income tax rate of 10% and 12% VAT in
the Philippines. Repatriation of its operational income in the Philippines is subject
to 15% branch profit remittance tax.
Regional Area Headquarters (RAHQ) is a non-income generating foreign
corporation tasked to act as a supervisory, communications, or coordinating center
for its subsidiaries, affiliates, and branches in the Asia-Pacific region. It is only a cost
center and is not allowed to earn income.
Q71. Air Canada is a foreign corporation. It was granted an authority to
operate as an offline carrier by the Civil Aeronautics Board. As an off-line
carrier, Air Canada does not have flights originating from or coming to the
Philippines and does not operate any airplane in the Philippines. Air Canada
engaged the services of Aerotel Ltd., Corp. (Aerotel) as its general sales agent
in the Philippines. Aerotel sells Air Canada’s passage documents in the
Philippines. May Air Canada be subject to the 2½% tax on Gross Philippine
Billings pursuant to Section 28(A)(3) of the Tax Code?
A. No, an international air carrier with no landing rights in the Philippines is a
resident foreign corporation if its local sales agent sells and issues tickets in its
behalf. An offline international carrier selling passage tickets in the Philippines,
through a local general sales agent, is considered a resident foreign corporation
doing business in the Philippines. As such, it is taxable on income derived from
sources within the Philippines, and not on Gross Philippine Billings, subject to any
applicable tax treaty. (Air Canada vs. Commissioner of Internal Revenue G.R. No.
169507. January 11, 2016)
Accenture, Inc. v. CIR, 2012: Tax for services rendered by a resident
corporation outside Philippine territory: The Court held that that the recipient
of the service should be doing business outside the Philippines to qualify for zero-
rating is the only logical interpretation of Section 102(b) (2) of the 1977 Tax Code,
as we explained in Burmeister: “This can only be the logical interpretation of Section
102 (b) (2). If the provider and recipient of the "other services" are both doing
business in the Philippines, the payment of foreign currency is irrelevant. Otherwise,
those subject to the regular VAT under Section 102 (a) can avoid paying the VAT by
simply stipulating payment in foreign currency inwardly remitted by the recipient
of services. To interpret Section 102 (b) (2) to apply to a payer-recipient of services
doing business in the Philippines is to make the payment of the regular VAT under
Section 102 (a) dependent on the generosity of the taxpayer. The provider of
services can choose to pay the regular VAT or avoid it by stipulating payment in
foreign currency inwardly remitted by the payer-recipient. Such interpretation
21 | P a g e
 22

removes Section 102 (a) as a tax measure in the Tax Code, an interpretation this
Court cannot sanction. A tax is a mandatory exaction, not a voluntary contribution. x
xx
Further, when the provider and recipient of services are both doing business in the
Philippines, their transaction falls squarely under Section 102 (a) governing
domestic sale or exchange of services. Indeed, this is a purely local sale or exchange
of services subject to the regular VAT, unless of course the transaction falls under
the other provisions of Section 102 (b).’
Q72. What taxes are imposed on non-resident foreign corporations?
A. Non-resident foreign corporations are liable only for income derived from
Philippine sources, rate and schedule of payment, tax liability on certain incomes
like interest on foreign loans, intra corporate dividends; may enjoy certain
exemptions under tax treaty or provision of special laws; treatment of accumulated
earnings.
Q73. Goodyear Philippines (“Goodyear”) increased its Authorized Capital
Stock from P400M (divided to 4M shares with par value of P100) to P1.73B
(divided to 4M common shares and 13.3M preferred shares with par value of
P100 each). Consequently, all the preferred shares were subscribed by
Goodyear Tire and Rubber Company (“GTRC”), a foreign company registered
in the US. Thereafter, Goodyear’s Board of Directors authorized the
redemption of GTRC’s 3.72M worth of preferred shares at the redemption
price of P372M representing the aggregate par value and P97M representing
accrued and unpaid dividends. Is the gain derived by GTRC subject to 15%
Final Witholding Tax (“FWT”) on dividends?
A. No. The term dividends means any distribution made by a corporation to its
shareholders out of its earnings or profits and payable to its shareholders, whether
in one or in other property. In light of the foregoing, the Court holds therefore that
the redemption price representing the amount of P97,732,314.00 received by GTRC
could not be treated as accumulated dividends in arrears that could be subjected to
15% FWT. Verily, respondent’s AFS covering the years 2003 to 2009 show that it
did not have unrestricted retained earnings, and in fact, operated in a position of
deficit. Thus, absent the availability of unrestricted retained earnings, the board of
directors of respondent had no power to issue dividends. (Commissioner of
Internal Revenue v. Goodyear Philippines Inc., G.R. No. 216130, August 3, 2016)

III. Estate Tax and Donor’s Taxes under the NIRC

Q74. How do you determine the value of estate to be taxed?

A. Only the net value of the estate is liable to tax. A schedule of brackets of amount
of net value and the corresponding rate schedule per bracket are imposed.
Q75. Who are liable to pay estate taxes?
A. Residents and citizens covering all properties, real or personal, tangible or
intangible, wherever situated; and non-resident aliens covering only properties in
the Philippines provided, that, with respect to intangible personal property, its
inclusion in the gross estate is subject to the rule on reciprocity.

22 | P a g e
 23

Q76. What is gross estate?

A. Decedent’s interest at the time of his death, transfer in contemplation of death,
property transfers subject to revocation, property passing under a general power of
appointment, proceeds of life insurance; and property transfers for insufficient
consideration
Q77. What may be deducted from the estate?
A. The following may be deducted from the estate:
1. Expenses, losses, indebtedness and taxes (funeral expenses, judicial expenses,
claims against the estate, claims against insolvent persons, unpaid mortgages, taxes
and casualty losses); and
2. Property previously taxed (transfers for public use, family home, standard
deduction, medical expenses and amounts received by heirs under R.A. 4917 on
Retirement Benefits of Private Employee). Please review the concept of vanishing
deduction and the corresponding holding period and the tax rate based on the value
of the property under Section 86(A) (2) of the NIRC.
Q78. Who are considered strangers for purposes of donor’s tax?
A. Read on definition, transactions covered and schedule of payment based on
brackets as to the value of the donation (Section 16 of the NIRC); for the “stranger”,
a flat rate of 30% is imposed; the following are NOT “strangers”- brother, sister
(whether by whole or half blood), spouse, ancestor and lineal descendant; and
relative by consanguinity in the collateral line within the fourth civil degree of
relationship.
Q79. What items are not subject to donor’s tax?
A. Dowries or gifts made on account of marriage, gifts made or for use of the
national government or entity created by any of its agencies which is not conducted
for profit, or to any political subdivision of said government; and gifts in favor of an
educational and/or charitable, religious, cultural or social welfare corporation,
institution, accredited non- governmental organization, trust or philanthropic
organization or research institution or organization.

IV. Tax Remedies under the NIRC

Q80. What are the steps in the assessment process?

A. Letter of Authority issued for tax audit, notice of informal conference
(terminated if taxpayer presents satisfactory proof); release of preliminary
assessment in case of unsatisfactory explanation and if taxpayer disagrees, he
has 15 days to request for reconsideration; service of formal letter of demand/
notice of assessment if basis for reconsideration is not meritorious; taxpayer
may file a protest within the 30-day period of the formal demand and must
submit supporting documents within 60 days (if not, the protest is deemed
waived); if the Commissioner does not decide the matter within 180 days or
decides with finality that the taxpayer is liable for the assessment ; taxpayer has
30 days from the lapse of the 180 day period for the Commissioner to decide or
notice of final decision of the Commissioner of the Internal Revenue ( even
beyond 180 days) to file an appeal with the Court of Tax Appeals (Lascona Land
v Commissioner of Internal Revenue, 2012); case is heard initially by a division
23 | P a g e
 24

of the CTA and an appeal can further be made with the CTA en banc ( within 15
days under Section 4 (A) RULE, 8 in relation to Rule 43 of the Rules of Civil
Procedure) and final arbiter is the Supreme Court. Through the enactment of
Republic Act No. 9282, the jurisdiction of the CTA has been expanded to include not
only civil tax cases but also cases that are criminal in nature, as well as local tax
cases, property taxes and final collection of taxes.
Q81. What are the differences between a Letter of Authority and a Letter
Notice?
A. An LOA is the authority given to the appropriate revenue officer assigned to
perform assessment functions. It empowers or enables said revenue officer to
examine the books of account and other accounting records of a taxpayer for the
purpose of collecting the correct amount of tax. An LOA is premised on the fact that
the examination of a taxpayer who has already filed his tax returns is a power that
statutorily belongs only to the CIR himself or his duly authorized representatives.
With the advances in information and communication technology, BIR implemented
the "no-contact-audit approach" in the CIR's exercise of its power to authorize any
examination of taxpayer and the assessment of the correct amount of tax. The no-
contact-audit approach includes the process of computerized matching of sales and
purchases data contained in the Schedules of Sales and Domestic Purchases, and
Schedule of Importation submitted by VAT taxpayers under the RELIEF System.
Under this policy, even without conducting a detailed examination of taxpayer's
books and records, if the computerized/manual matching of sales and
purchases/expenses appears to reveal discrepancies, the same shall be
communicated to the concerned taxpayer through the issuance of Letter Notice
(LN). The LN shall serve as a discrepancy notice to taxpayer similar to a Notice for
Informal Conference to the concerned taxpayer. Thus, under the RELIEF System, a
revenue officer may begin an examination of the taxpayer even prior to the issuance
of an LN or even in the absence of an LOA with the aid of a computerized/manual
matching of taxpayers' documents/records.
The following differences between an LOA and LN are crucial. First, an LOA
addressed to a revenue officer is specifically required under the NIRC before an
examination of a taxpayer may be had while an LN is not found in the NIRC and is
only for the purpose of notifying the taxpayer that a discrepancy is found based on
the BIR's RELIEF System. Second, an LOA is valid only for 30 days from date of issue
while an LN has no such limitation. Third, an LOA gives the revenue officer only a
period of 120 days from receipt of LOA to conduct his examination of the taxpayer
whereas an LN does not contain such a limitation. Simply put, LN is entirely
different and serves a different purpose than an LOA. Due process demands, as
recognized under RMO No. 32-2005, that after an LN has serve its purpose, the
revenue officer should have properly secured an LOA before proceeding with the
further examination and assessment of the petitioner. (Medicard Philippines, Inc. v.
Commissioner of Internal Revenue, G.R. No. 222743, April 5, 2017, Third Division, Reyes
J.)
Q82. Is the assessment valid if it covers a period outside the scope of the LOA?

24 | P a g e
 25

A. No. The taxable year covered by the assessment being outside of the period
specified in the LOA in this case, the assessment issued against Lancaster is,
therefore, void.
The subject LOA specified that the examination should be for the taxable year 1998
only but the subsequent assessment issued against Lancaster involved disallowed
expenses covering the next fiscal year, or the period ending 31 March 1999.The
taxable year covered by the assessment being outside of the period specified in the
LOA in this case, the assessment issued against Lancaster is, therefore, void.
(COMMISSIONER OF INTERNAL REVENUE v. LANCASTER PHILIPPINES, INC. G.R. No.
183408, July 17, 2017, Second Division, MARTIRES, J.)
Q83: What is the due process requirement for Formal Letter of Demand/FAN?
A. Under Section 228 of the NIRC, a taxpayer shall be informed in writing of the law
and the facts on which the assessment is made, otherwise, the assessment shall be
void.
The requirement of providing the taxpayer with written notice of the factual and
legal bases applies both to the Formal Letter of Demand (FLD)/Formal
Assessment Notice (FAN) and the Final Decision on Disputed Assessment (FDDA).
Section 228 of the NIRC should not be read restrictively as to limit the written notice
only to the assessment itself. As implemented by RR No. 12-99, the written notice
requirement for both the FLD and the FAN is in observance of due process—to
afford the taxpayer adequate opportunity to file a protest on the assessment and
thereafter file an appeal in case of an adverse decision. (CIR vs. Liquigaz
Philippines Corporation/Liquigaz Philippines Corporation/CIR, G.R. No.
215534/G.R. No. 215557)
Q84. When the Formal Letter of Demand indicates the word "appeal" instead
of "protest", "reinvestigation", or "reconsideration," is the BIR estopped from
arguing that the taxpayer prematurely filed a Petition for Review before the
CTA for failure to file an administrative appeal?
A. Yes. The CIR must indicate clearly and unequivocally to the taxpayer whether an
action constitutes a final determination on a disputed assessment.
A careful reading of the Formal Letter of Demand leads us to agree with petitioner
that the instant case is an exception to the rule on exhaustion of administrative
remedies, i.e., estoppel on the part of the administrative agency concerned. In the
Formal Letter of Demand with Assessment Notices, respondent used the word
"appeal" instead of "protest", "reinvestigation", or "reconsideration". Although there
was no direct reference for petitioner to bring the matter directly to the CTA, it
cannot be denied that the word "appeal" under prevailing tax laws refers to the
filing of a Petition for Review with the CTA. (ALLIED BANKING CORPORATION vs.
COMMISSIONER OF INTERNAL REVENUE G.R. No. 175097, February 5, 2010, Second
Division, DEL CASTILLO, J.)
Q85. Can a protesting taxpayer appeal to the CIR from the failure to act by the
CIR’s authorized representative?
A. No. In PAGCOR v. Commissioner of Internal Revenue, 27 Jan 2016, the Supreme
Court outlined the remedies available to a protesting taxpayer, to wit:
(1) A whole or partial denial by the CIR's authorized representative may be
appealed to the
25 | P a g e
 26

CIR or the CTA

(2) A whole or partial denial by the CIR may be appealed to the CTA
(3) The CIR or CIR's authorized representative's failure to act may be appealed to
the CTA.
NOTE: There is no mention of an appeal to the CIR from the failure to act by
the CIR's authorized representative.
Q86. What cases are within the jurisdiction of the Court of Tax Appeals?
A. Pursuant to the provisions of Republic Act No. 1125 and other laws prior to R.A.
9282, the Court of Tax Appeals retains exclusive appellate jurisdiction to review by
appeal, the following:
1. Decisions of the Commissioner of Internal Revenue in cases involving
disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under
the National Internal Revenue Code or other law or part of law administered
by the Bureau of Internal Revenue;
2. Decisions of the Commissioner of Customs in cases involving liability for
customs duties, fees or other money charges; seizure, detention or release of
property affected; fines, forfeitures or other penalties imposed in relation
thereto; or other matters arising under the Customs Law or other law or part
of law administered by the Bureau of Customs [Rep. Act. No. 1125, (1954),
Sec. 7];
3. In automatic review cases where such decisions of the Commission of
Customs favorable to the taxpayer is elevated to the Secretary of Finance
(Sec. 2315, TCC); and
4. Decisions of the Secretary of Trade and Industry, in the case of non-
agricultural product, commodity or article, or the Secretary of Agriculture, in
the case of agricultural product, commodity or article, in connection with the
imposition of the Anti-Dumping Duty, Countervailing and Safeguard Duty
[Republic Act Nos. 8751 and 8752, (1999) Sec. 301 (a) and (p), and Republic
Act 8800].
Under Republic Act Number 9282, the CTA's original appellate jurisdiction was
expanded to include the following:
1. Criminal cases involving violations of the National Internal Revenue Code
and the Tariff and Customs Code;
2. Decisions of the Regional Trial Courts (RTC) in local tax cases;
3. Decisions of the Central Board of Assessment Appeals (CBAA) in cases
involving the assessment and taxation of real property; and
4. Collection of internal revenue taxes and customs duties the assessment of
which have already become final.
Q87. How can the CTA En Banc take cognizance of an appeal?
A. In order for the CTA En Banc to take cognizance of an appeal via a petition for
review, a timely motion for reconsideration or new trial must first be filed with the
CTA Division that issued the assailed decision or resolution. Failure to do so is a
ground for the dismissal of the appeal as the word "must" indicates that the filing of
a prior motion is mandatory, and not merely directory.

26 | P a g e
 27

The same is true in the case of an amended decision. Section 3, Rule 14 of the same
rules defines an amended decision as "[a]ny action modifying or reversing a
decision of the Court en banc or in Division." As explained in CE Luzon Geothermal
Power Company, Inc. v. Commissioner of Internal Revenue, an amended decision is a
different decision, and thus, is a proper subject of a motion for reconsideration.
(Asiatrust Development Bank, Inc. v. Commissioner of Internal Revenue G.R. Nos.
201530 & 201680-81, April 19, 2017, First Division, DEL CASTILLO, J.)
Q88. Discuss the function of the Court of Tax Appeals?
A. Being dedicated exclusively to the resolution of tax problems, the Court of Tax
Appeals (“CTA”) has developed an expertise on the subject. In the absence of grave
abuse of discretion or palpable error, the CTA’s findings are accorded the highest
respect and are generally conclusive upon the Supreme Court. (Commissioner of
Internal Revenue v. GJM Philippines, Inc. G.R. No. 202695, February 29, 2016)
Q89. What is the jurisdiction of the CTA over decisions, orders, or resolutions
of the RTC?
A. Under RA 9282, the Court of Tax Appeals (CTA) has exclusive appellate
jurisdiction over all decisions, orders or resolutions of the Regional Trial Courts in
local tax cases originally decided or resolved by them in the exercise of their original
or appellate jurisdiction. Based on the said provision, it is apparent that the CTA's
appellate jurisdiction over decisions of RTCs becomes operative only when the RTC
has ruled on a local tax case. Thus, before the case can be raised on appeal to the
CTA, the action before the RTC must be in the nature of a tax case, or one which
primarily involves a tax issue.
In this case, a reading of the Annulment Complaint shows that Teresa's action before
the RTC-Branch 85 is essentially one for recovery of ownership and possession of
the property, with damages, which is not anchored on a tax issue, but on due
process considerations. As such, the RTC-Branch 85's ruling thereon could not be
characterized as a local tax case over which the CTA could have properly assumed
jurisdiction on appeal. From the foregoing, the case was correctly elevated to the CA.
(TERESA R. IGNACIO v. OFFICE OF CITY TREASURER OF QUEZON CITY G.R. No.
221620, September 11, 2017, Division, PERLAS-BERNABE, J.)
Q90. Petron imported liters of alkylate and paid VAT therein. However, the
Collector of Customs subjected these alkylate imports to excise tax following
Customs Memorandum Circular (CMC) No. 164-2012 stating that alkylate is a
product of distillation similar to naphta and is subject to excise tax under
Section 148(e) of the NIRC. Thereafter, Petron filed a petition for review with
the CTA raising the issue of whether its importation of alkylates is subject to
excise tax. The CIR argued that the interpretation of Section 148(e) is an
exercise of her quasi-legislative function, which is reviewable by the Secretary
of Finance, thus, the CTA has no jurisdiction to decide on the matter. Decide.
A. The Court ruled in favor of the CIR. It recognized the fact that the CTA is a court of
special jurisdiction, with power to review by appeal decision involving tax disputes
rendered wither by the Commissioner of Internal Revenue and Commissioner of
Customs. Conversely, it has no jurisdiction to determine the validity of a ruling
issued by the CIR or the COC in the exercise of their quasi-legislative powers to
interpret tax laws. In this case, Petron’s tax liability was premised on the COC’s
27 | P a g e
 28

issuance of CMC No. 164-2012, which gave effect to the CIR’s June 29, 2012 Letter
interpreting Section 148(e) of the NIRC as to include alkylate among the articles
subject to customs duties, hence, Petron’s petition before the CTA ultimately
challenging the legality and constitutionality of the CIR’s interpretation of a tax
provision. The CTA had no jurisdiction to take cognizance of the petition as its
resolution would necessarily involve a declaration of the validity or constitutionality
of the CIR's interpretation of Section 148 (e) of the NIRC, which is subject to the
exclusive review by the Secretary of Finance and ultimately by the regular courts.
(Commissioner of Internal Revenue vs. Court of Tax Appeals and Petron
Corporation, G.R. No. 207843, July 15, 2015)
Q91. Kepco Corporation filed with the BIR its claim for refund for input tax
incurred for the 1st and 2nd quarters of calendar year 2000 from its
importation and domestic purchases of capital goods and services
preparatory to its production and sales of electricity to NAPOCOR. For failure
of BIR to act upon the claim for refund or issuance of tax credit certificate,
KEPCO filed a Petition for Review. Thereafter, KEPCO filed its Memorandum,
but BIR failed to file its Memorandum despite notice, thus, the case was
deemed submitted for decision. Subsequently, the CTA First Division rendered
a Decision, holding that KEPCO is entitled to a refund for its unutilized input
VAT paid. There being no Motion for Reconsideration filed by BIR, the decision
became final and executory. Aggrieved, BIR filed a petition for annulment of
judgment with the CTA en banc but it was dismissed, and its motion for
reconsideration was likewise denied. Does the CTA en banc have jurisdiction
to take cognizance of Petition for Annulment of Judgment filed by BIR?
A. The Court denied BIR’s Petition as it ruled that SC, CA, and CTA en banc cannot
annul judgment of their divisions. Annulment of Judgment (Rule 47) involves
exercise of original jurisdiction and implies power by a superior court against the
final judgment, decision or ruling of an inferior court based on the grounds of
extrinsic fraud and lack of jurisdiction. The Divisions are not separate and distinct
courts but are divisions of one and the same court. There is no hierarchy of courts
within the SC, CA, and CTA, for each remain as one court notwithstanding that they
also work in divisions.
Q92. Will a case for tax evasion fail without a deficiency tax assessment?
A. No. BUREAU OF INTERNAL REVENUE, as represented by the COMMISSIONER
OF INTERNAL REVENUE vs. COURT OF APPEALS, SPOUSES ANTONIO VILLAN
MANLY, and RUBY ONG MANLY, G.R No. 197590, November 24, 2014: The Court
ruled that tax evasion is deemed complete when the violator has knowingly and
willfully field a fraudulent return with intent to evade and defeat a part of all of the
tax. Corollarily, an assessment of the tax deficiency is not required in a criminal
prosecution for tax evasion. However, in Commissioner of Internal Revenue v. Court
of Appeals, the Court clarified that although a deficiency assessment is not
necessary, the fact that a tax is due must first be proved before one can be
prosecuted for tax evasion. (Commissioner of Internal Revenue v. Kepco Ilijan
Corporation, G.R. No. 199422, June 21, 2016)

28 | P a g e
 29

Q93. Is a deficiency assessment a requirement before a criminal complaint for

tax evasion can be filed?
A. No. There is no need for a deficiency tax assessment before a criminal complaint
for tax evasion be filed.
Tax evasion is deemed complete when the violator has knowingly and willfully filed
a fraudulent return with intent to evade and defeat a part or all of the tax.
Corollarily, an assessment of the tax deficiency is not required in a criminal
prosecution for tax evasion. However, in Commissioner of Internal Revenue v. Court
of Appeals, we clarified that although a deficiency assessment is not necessary, the
fact that a tax is due must first be proved before one can be prosecuted for tax
evasion. (BUREAU OF INTERNAL REVENUE, as represented by the (COMMISSIONER
OF INTERNAL REVENUE v. COURT OF APPEALS, SPOUSES ANTONIO VILLAN MANLY,
and RUBY ONG MANLY G.R. No. 197590, November 24, 2014, DEL CASTILLO, J.)
SAMAR-I ELECTRIC COOPERATIVE vs. COMMISSIONER OF INTERNAL REVENUE,
G.R No. 193100, December 10, 2014: The Court held that the notice requirement
under section 228 of the NIRC is substantially complied with whenever the taxpayer
had been fully informed in writing of the factual and legal bases of the deficiency
taxes assessment, which enabled the latter to file an effective protest.
Q93. Discuss the Expenditure Method in reconstructing a taxpayer’s income.
A. The Expenditure Method is a method used by the government to reconstruct the
income of a taxpayer by deducting the aggregate yearly expenditures from the
declared yearly income. he theory of this method is that when the amount of the
money that a taxpayer spends during a given year exceeds his reported or declared
income and the source of such money is unexplained, it may be inferred that such
expenditures represent unreported or undeclared income. (BUREAU OF INTERNAL
REVENUE, as represented by the COMMISSIONER OF INTERNAL REVENUE vs.
COURT OF APPEALS, SPOUSES ANTONIO VILLAN MANLY, and RUBY ONG MANLY,
G.R No. 197590, November 24, 2014)
Q94. When is a tax assessment deemed made?
A. . The assessment of the tax is deemed made and the three-year period for
collection of the assessed tax begins to run on the date the assessment notice had
been released, mailed or sent by the BIR to the taxpayer. Thus, failure of the BIR to
file a warrant of distraint or serve a levy on taxpayer’s properties nor file collection
case within the three-year period is fatal. Also, the attempt of the BIR to collect the
tax through its Answer with a demand for the taxpayer to pay the assessed DST in
the CTA is not deemed compliance with the Tax Code. (CHINA BANKING
CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 172509,
February 04, 2015)
Q95. Will a request for reinvestigation suspend the statute of limitations?
A. No. A request for reinvestigation alone will not suspend the statute of limitations.
Two things must concur: there must be a request for reinvestigation and the CIR
must have granted it. (CHINA BANKING CORPORATION vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 172509, February 04, 2015)
Q96. What are the requirements for a valid waiver of statute of limitations?
Answer: 1. The waiver must be in the proper form prescribed by RMO 20- 90. The
phrase "but not after ________ 20 _",which indicates the expiry date of the period
29 | P a g e
 30

agreed upon to assess/collect the tax after the regular three-year period of
prescription, should be filled up.
2. The waiver must be signed by the taxpayer himself or his duly authorized
representative. In the case of a corporation, the waiver must be signed by any of its
responsible officials. In case the authority is delegated by the taxpayer to a
representative, such delegation should be in writing and duly notarized.
3. The waiver should be duly notarized.
4. The CIR or the revenue official authorized by him must sign the waiver indicating
that the BIR has accepted and agreed to the waiver. The date of such acceptance by
the BIR should be indicated. However, before signing the waiver, the CIR or the
revenue official authorized by him must make sure that the waiver is in the
prescribed form, duly notarized, and executed by the taxpayer or his duly
authorized representative.
5. Both the date of execution by the taxpayer and date of acceptance by the Bureau
should be before the expiration of the period of prescription or before the lapse of
the period agreed upon in case a subsequent agreement is executed.
6. The waiver must be executed in three copies, the original copy to be attached to
the docket of the case, the second copy for the taxpayer and the third copy for the
Office accepting the waiver. The fact of receipt by the taxpayer of his/her file copy
must be indicated in the original copy to show that the taxpayer was notified of the
acceptance of the BIR and the perfection of the agreement.
These requirements are mandatory and must strictly be followed. To be sure; in a
number of cases, this Court did not hesitate to strike down waivers which failed to
strictly comply with the provisions of RMO 20-90 and RDAO 05-01. (COMMISSIONER
OF INTERNAL REVENUE v. SYSTEMS TECHNOLOGY INSTITUTE, INC., G.R. No. 220835,
July 26, 2017, First Division, Caguioa, J.)
Q97. Ms. Sarmiento, Next Mobile Inc’s Director of Finance, executed several
waivers of the statute of limitations to extend the three-year prescriptive
period of assessment for taxes due. Naturally, BIR issued its assessment
beyond the prescriptive period. Thereafter, Ms. Sarmiento contests the issued
assessment arguing that her waivers were void because of the following: (a)
waivers were executed without a notarized board authority; (b) the dates of
acceptance by BIR were not indicated therein; (c) several irregularities were
present in the subject waivers; and (d) estoppel does not apply in questioning
the validity of waiver of the statute of limitations. Are the Waivers valid? Did
the BIR’s right to assess already prescribe?
A. No. The general rule is that a waiver of the statute of limitations that does not
comply with the requisites for its validity specified under RMO No. 20-90 and RDAO
01-05 is generally invalid and ineffective to extend the prescriptive period to assess
taxes. However, due to peculiar circumstances and as an exception to the general
rule, the supposedly invalid waivers may be considered valid for the following
reasons:
First, the parties are in pari delicto or in equal fault. The two parties to a
controversy are equally guilty and they shall have no action against each other.
Second, Parties must come to court with clean hands. Parties who do not come to
Court with clean hands cannot be allowed to benefit from their own wrongdoing.
30 | P a g e
 31

Taxpayer should not be allowed to benefit from the flaws in its own waivers and
successfully insist on their invalidity in order to evade its responsibility to pay taxes.
Third, taxpayer is estopped from questioning the validity of its Waivers. Verily, the
application of estoppel in this case would promote the administration of the law,
prevent injustice and avert the accomplishment of a wrong.
Finally, the Court cannot tolerate a highly suspicious situation.
In this case, the taxpayer, on one hand, after voluntarily executing the Waivers
insisted on their invalidity by raising the very same defects it caused. On the other
hand, the BIR miserably failed to exact from the taxpayer strict compliance with the
rules. (COMMISSIONER OF INTERNAL REVENEU v. NEXT MOBILE, INC., G.R.
NO.212825, DECEMBER 7, 2015)
Q98: On April 12, 2000, GJM Philippines Manufacturing, Inc. (GJM) filed its
Annual Income Tax Return for the year 1999.
On February 12, 2003, the BIR issued a Pre-Assessment Notice and Details of
Discrepancies against GJM. On April 14, 2003, it issued an undated Assessment
Notice, indicating a deficiency income tax assessment in the amount of
PI,480,099.29.
On July 25, 2003, the BIR issued a Preliminary Collection Letter requesting
GJM to pay said income tax deficiency for the taxable year 1999. Said letter
was addressed to GJM's former address in Pio del Pilar, Makati. On August 18,
2003, although the BIR sent a Final Notice Before Seizure to GJM's address in
Cavite, the latter claimed that it did not receive the same. Is the right to assess
prescribed?
A. Yes, the right to assess has prescribed already. CIR has three (3) years from the
date of the actual filing of the return or from the last day prescribed by law for the
filing of the return, whichever is later, to assess internal revenue taxes. GJM filed its
Annual Income tax Return for the taxable year 1999 on April 12, 2000. The three
(3)-year prescriptive period, therefore, was only until April 15, 2003.
If the taxpayer denies having received an assessment from the BIR, it then
becomes incumbent upon the latter to prove by competent evidence that such
notice was indeed received by the addressee. Here, the onus probandi has
shifted to the BIR to show by contrary evidence that GJM indeed received the
assessment in the due course of mail. It has been settled that while a mailed letter
is deemed received by the addressee in the course of mail, this is merely a
disputable presumption subject to controversion, the direct denial of which shifts
the burden to the sender to prove that the mailed letter was, in fact, received by the
addressee.
BIR failed to prove that GJM received the assessment, thus, right to assess has
prescribed. (Commissioner of Internal Revenue vs. GJM Philippines
Manufacturing, Inc., G.R. No. 202695. February 29, 2016)
Q99. What must a party present as evidence to prove that a valid assessment
has made?
A. The Court held that in order to prove the fact of mailing, it is essential to present
the registry receipt issued by the Bureau of Posts or the Registry return card, which
would have been signed by the taxpayer or its authorized representative. And if said
documents could not be located, the CIR should have, at the very least, submitted to
31 | P a g e
 32

the Court a certification issued by the Bureau of Posts and any other pertinent
document executed with its intervention. The Court does not put much credence to
the self-serving documentations made by the BIR personnel, especially if they are
unsupported by substantial evidence establishing the fact of mailing.
While it is true that an assessment is made when the notice is sent within the
prescribed period, the release, mailing, or sending of the same must still be
clearly and satisfactorily proved. Mere notations made without the taxpayer's
intervention, notice or control, and without adequate supporting evidence cannot
suffice. Otherwise, the defenseless taxpayer would be unreasonably placed at the
mercy of the revenue offices. The BIR's failure to prove GJM's receipt of the
assessment leads to no other conclusion but that no assessment was issued.
Consequently, the government's right to issue an assessment for the said period has
already prescribed. (Commissioner of Internal Revenue vs. GJM Philippines
Manufacturing, Inc., G.R. No. 202695. February 29, 2016)
Q99. What constitutes proof of taxes withheld?
A. The Court held that the certificate of creditable tax withheld at source is the
competent proof of establish the fact that taxes are withheld. It is not necessary for
the person who executed and prepared the certificate of creditable tax withheld
source to be presented and to testify personally to prove the authenticity of the
certificates. (COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE NATIONAL
BANK, G.R. No. 180290 September 29, 2014)
Q100. Is a deficiency VAT assessment tantamount to an assessment for
withholding tax liabilities such that the taxpayer cannot avail of a tax amnesty
program?
A. No. Indirect taxes, like VAT and excise tax, are different from withholding taxes.
To distinguish, in indirect taxes, the incidence of taxation falls on one person but the
burden thereof can be shifted or passed on to another person, such as when the tax
is imposed upon goods before reaching the consumer who ultimately pays for it. On
the other hand, in case of withholding taxes, the incidence and burden of taxation
fall on the same entity, the statutory taxpayer. The burden of taxation is not shifted
to the withholding agent who merely collects, by withholding, the tax due from
income payments to entities arising from certain transactions and remits the same
to the government.
Q100. What are the rules with regard to claims for refund or tax credit of
unutilized creditable input VAT?
A. When to file an administrative claim with the CIR:
a. General rule — Section 112(A)
Within 2 years from the close of the taxable quarter when the sales were
made.
b. Exception —
Within 2 years from the date of payment of the output VAT, if the
administrative claim was filed from June 8, 2007 (promulgation of Atlas case)
to September 12, 2008 (promulgation of Mirant case).
B. When to file a judicial claim with the CTA:
a. General rule — Section 112(D); not Section 229

32 | P a g e
 33

i. Within 30 days from the full or partial denial of the administrative claim by
the CIR; or
ii. Within 30 days from the expiration of the 120-day period provided to the
CIR to decide on the claim. This is mandatory and jurisdictional beginning
January 1, 1998 (effectivity of 1997 NIRC).
b. Exception — BIR Ruling No. DA-489-03
The judicial claim need not await the expiration of the 120-day period, if such
was filed from December 10, 2003 (issuance of BIR Ruling No. DA-489-03) to
October 6, 2010 (promulgation of Aichi).
Q. What are the rules on protest and refund for income tax?
A. A taxpayer may protest any assessment administratively; taxes may be paid
under protest.
General Rule: Refund may be requested by the taxpayer within two years from
payment.
Commissioner of Internal Revenue v. Team (Philippines) Operations
Corporation (formerly Mirant Phils., Operation Corporation), G.R. No. 179260
(2014: There are three essential conditions for the grant of a claim for refund of
creditable withholding income tax, to wit:
(1) The claim is filed with the Commissioner of Internal Revenue within the
two-year period from the date of payment of the tax;
(2) It is shown on the return of the recipient that the income payment
received was declared as part of the gross income; and
(3) The fact of withholding is established by a copy of a statement duly issued
by the payor to the payee showing the amount paid and the amount of the tax
withheld therefrom.
Q101. What is the government’s remedy in case of taxpayer’s delinquency?
A. Distraint of personal property, levy of real property; civil action and criminal
action.
Q102. What are the requirements for entitlement of a corporate taxpayer for a
refund or the issuance of tax credit certificate involving excess withholding
taxes?
A. The Court held that the following requisites must be complied with to sustain the
claim for refund:
1) That the claim for refund was filed within the two-year reglementary period
pursuant to Sec. 229 of the NIRC;
2) When it is shown on the ITR that the income payment received is being
declared part of the tax payer’s gross income; and
3) When the fact of withholding is established by a copy of the withholding tax
statement, duly issued by the payor to the payee, showing the amount paid and
income tax withheld from that account. . REPUBLIC OF THE PHILIPPINES,
REPRESENTED BY THE COMMISSIONER OF INTERNAL REVENUE vs. TEAM
(PHILS.) ENERGY CORPORATION (FORMERLY MIRANT PHILS ENERGY
CORPORATION), G.R. No. 188016, January 14, 2015)
Q103. Is the CTA prohibited from determining whether taxes should have
been paid because it is an assessment?
A. No. The Supreme Court ruled that in an action for the refund of taxes allegedly
33 | P a g e
 34

erroneously paid, the Court of Tax Appeals may determine whether there are taxes
that should have been paid is not assessment. It is incidental to determining
whether there should be a refund. (SMI-ED PHILIPPINES TECHNOLOGY, INC. vs.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 175410, November 12, 2014)
THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY vs.
SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, G.R No.
210987, November 24, 2014: The Court ruled that, the CTA can now rule not only
on the propriety of an assessment or tax treatment of a certain transaction, but also
on the validity of the revenue regulation or revenue memorandum circular on which
the said assessment is based.
Q104. What is a revenue memorandum circular (RMC)?
A. A revenue memorandum circular is an administrative ruling issued by the CIR to
interpret tax laws. It is widely accepted that an interpretation by the executive
officers, whose duty is to enforce the law, is entitled to great respect from the courts.
However, such interpretation is not conclusive and will be disregarded if judicially
found to be incorrect. Verily, courts will not tolerate administrative issuances that
override, instead of remaining consistent and in harmony with, the law they seek to
implement. (MITSUBISHI CORPORATION - MANILA BRANCH v. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 175772, June 5 2017, First Division, PERLAS-BERNABE,
J.)
CITY OF LAPU-LAPU vs. PHILIPPINE ECONOMIC ZONE AUTHORITY; PROVINCE OF
BATAAN, REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND
EMERLINDA S. TALENTO, IN HER CAPACITY AS PROVINCIAL TREASURER OF
BATAAN vs. PHILIPPINE ECONOMIC ZONE AUTHORITY, G.R. No. 184203, G.R No.
187583, November 26, 2014: The Court held that in case of an illegal assessment
where the assessment was issued without authority, exhaustion of administrative
remedies is not necessary and the taxpayer may directly resort to judicial action.
The taxpayer shall file a complaint for injunction before the Regional Trial Court to
enjoin the local government unit from collecting real property taxes. The party
unsatisfied with the decision of the Regional Trial Court shall file an appeal, not a
petition for certiorari, before the Court of Tax Appeals, the complaint being a local
tax case decided by the Regional Trial Court. The appeal shall be filed within fifteen
(15) days from notice of the trial court’s decision.
NIPPON EXPRESS (PHILIPPINES) CORP vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 185666, February 04, 2015: The Court held the BIR has 120
days from the date of submission of complete documents in support of the
administrative claim within which to decide whether to grant a refund or issue a tax
credit certificate. In case of failure on the part of the BIR to act on the application
within the 120-day period prescribed by law, the taxpayer has only has 30 days
after the expiration of the 120-day period to appeal the unacted claim with the CTA.
Q105. What is the principle of exhaustion of administrative remedies in tax
cases before a judicial action may be instituted?
A. Taxpayer submits that the requirement to exhaust the 120-day period under
Section 112 (c) of the National Internal Revenue Code prior to filing the judicial
claim with the Court of Tax Appeals (CTA) is a doctrine of “exhaustion of
administrative remedies.” The non-observance of the same merely results in lack of
34 | P a g e
 35

cause of action which may be waived for failure to timely invoke the same.
(Commissioner of Internal Revenue vs. Team Sual Corporation (Formerly Mirant
Sual Corporation), G.R. No. 194105. February 5, 2014)
Commissioner of Internal Revenue v. Team (Philippines) Operations
Corporation (formerly Mirant Phils., Operation Corporation), G.R. No. 179260,
April 2, 2014. The findings and conclusions of the Court of Tax Appeals (CTA) are
accorded the highest respect and will not be lightly set aside. In the absence of any
clear and convincing proof to the contrary, the Court must presume that the CTA
rendered a decision which is valid in every respect.
The City of Manila, etc. et al. v. Hon. Caridad H. Grecia-Cuerdo etc., et al, G.R. No.
175723. February 4, 2014: Petitioners availed of the wrong remedy when they
filed the special civil action for certiorari under Rule 65 of the Rules of Court with
the Court in assailing the resolutions of the Court of Appeals (CA) which dismissed
their petition filed with the said court and their motion for reconsideration of such
dismissal. Hence, in the instant case, petitioner should have filed a petition for
review on certiorari under Rule 45, which is a continuation of the appellate process
over the original case.
Q106. Can the CTA take cognizance over a special civil action for certiorari
assailing an interlocutory order issued by the RTC in an action for injunction
to restrain collection?
A. Yes. The expanded jurisdiction of the CTA includes its exclusive appellate
jurisdiction to review by appeal the decisions, orders or resolutions of the RTC in
local tax cases originally decided or resolved by the RTC in the exercise of its
original or appellate jurisdiction. The CTA likewise has the jurisdiction to issue writs
of certiorari or to determine whether there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the CTA’s exclusive appellate jurisdiction.
The Court of Tax Appeals (CTA) has exclusive jurisdiction over a special civil action
for certiorari assailing an interlocutory order issued by the Regional Trial Court
(RTC) in a local tax case.In filing an action for injunction to restrain collection,
petitioner was in effect also challenging the validity of the RPT assessment. Simply
because the action is an application for injunctive relief does not necessarily mean
that it may no longer be considered as a local tax case. (CE CASECNAN WATER and
ENERGY COMPANY, INC. vs THE PROVINCE OF NUEVA ECIJA, et. al. G.R. No. 196278,
June 17, 2015, SECOND DIVISION, DEL CASTILLO, J.)
Clark Investors and Locators Association, Inc. vs. Secretary of Finance and
Commissioner of Internal Revenue, G.R. No. 200670, July 6, 2015: A petition for
certiorari (Rule 65) cannot be invoked against the Secretary of Finance and
Commissioner of Internal Revenue as they do not fall within the ambit of a tribunal,
board, or officer exercising judicial or quasi-judicial functions in issuing Revenue
Regulations. On the contrary, what they exercise in issuing these Revenue
Regulations is their quasi-legislative or rule-making power, thus, outside the scope
of a petition for certiorari.
V. Local Taxation
Q107. What taxes may local government unit collect?
A. Under Section 5 of Article X of the Constitution, local government units are
35 | P a g e
 36

allowed to collect tolls, fees and charges. (TFC).

Q108. Are submarine or underwater cables considered real property, thus
subject to real property tax under the LGC?
A. Yes. Submarine or underwater cables are akin to electric transmission lines
which the Court declared in Manila Electric Company v. City Assessor and City
Treasurer of Lucena City (G.R. No. 166202, August 5, 2015), as “no longer exempted
from real property tax” and may qualify as “machinery” subject to real property tax.
Both electric lines and communication cables, in the strictest sense, are not directly
adhered to the soil but pass through posts, relay or landing stations, but both may
be classified under the term “machinery” as real property under Article 415(5) of
the New Civil Code for the simple reason that such pieces of equipment serve the
owner's business or tend to meet the needs of his industry or works that are on real
estate. (Capitol Wireless, Inc., v. The Provincial Treasurer of Batangas, et al., G.R.
No. 180110, May 30, 2016)
Q109. Is a golf course considered a place of amusement subject to amusement
tax?
A: No. Following the principle of ejusdem generis, a golf course cannot be
considered a place of an amusement subject to amusement of tax. In so ruling, the
Court cited its pronouncements in Pelizloy Realty Corporation v. The Province of
Benguet wherein it held that amusement taxes cannot be imposed on admission fees
to resorts, swimming pools, bath houses, hot springs, and tourist spots as they do
not belong to the same category or class as theaters, cinemas, concert halls, circuses,
and boxing stadia. (ALTA VISTA GOLF AND COUNTRY CLUB v. THE CITY OF CEBU,
et al., G.R. No. 180235, January 20, 2016)
Mactan-Cebu International Airport Authority (MCIAA) v. City of Lapu-Lapu and
Elena T. Pacaldo, G.R. No. 181756, June 15, 2015: Mactan-Cebu International
Airport Authority (MCIAA) is a government instrumentality and not a government-
owned or controlled corporation (GOCC). Thus, its properties actually, solely and
exclusively used for public purposes, consisting of airport terminal building, airfield,
runway, taxiway and the lots on which they are situated are not subject to real
property tax under Section 133(o) and 234(a) of the LGC. Moreover, when a tax
exemption is strictly construed against the taxpayer claiming the exemption.
However, when Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed liberally in favor of
the national government instrumentality.
Q110. SNAPM registered its power plant operation as a pioneer enterprise with
the Board of Investments (BOI). BOI approved the application on July 12, 2007.
The Local Government Code exempts BOI-registered pioneer enterprises from
the payment of local business taxes (LBTs) for a period of 6 years from the date
of registration. SNAPM however, overlooked this exemption and paid its LBTs for
the year 2007.
On January 20, 2009, SNAPM realized its mistake and notified the officials of
Alfonso Lista, Ifugao, of its exemption from paying LBTs until July 11, 2013.
However, the mayor of Alfonso Lista refused to recognize the exemption. He
threatened to withhold the issuance of a mayor’s Permit should SNAPM refuse to
pay its LBTs. Is SNAPM exempted for paying LBT?
36 | P a g e
 37

A. A pioneer enterprise registered with the BOI has a clear and unmistakable right
to be exempt from paying LBTs under the Local Government Code, for a period of
6 years from registration. However, SNAPM's entitlement to a six-year exemption
from LBTs already expired on July 12, 2013; hence, the municipality now has the
right to collect LBTs from SNAPM. (The Municipality of Alfonso Lista, Ifugao,
represented by Charles L. Cattiling, in his capacity as Municipal Mayor and
Estrella S. Aliguyon, in her capacity as Municipal Treasurer vs. The Court of
Appeals, Special former Sixth Division and SN Aboitiz Power-Magat, Inc. G.R. No.
191442. July 27, 2016)

VI. Tariff and Customs Code of 1978, as amended

A. IMPORT DUTIES
Q110. When does importation begin and deemed terminated?
A. Importation begins when the carrying vessel or aircraft enters the jurisdiction of
the Philippines with the intention to unlade therein. Importation is deemed
terminated upon payment of the duties, taxes and other charges due upon the
articles, or secured to be paid, at a port of entry and the legal permit for withdrawal
shall have been granted, or in case said articles are free of duties, taxes and other
charges, until they have legally left the jurisdiction of Customs.
Q111. What are ordinary import duties?
A. Tariff duties are levied on imported goods either as a revenue generating
measure or a protective scheme to artificially or temporarily inflate prices to protect
a country’s domestic output and its industries from their foreign counterparts. With
the exception of certain articles which can be imported duty-free, upon compliance
with certain prescribed conditions or formalities, goods are levied ordinary import
duties under the Most Favored Nation (MFN) treatment, ranging from Free/Zero to
30% except in cases of sensitive agricultural products which are accorded a certain
degree of protection via higher tariff rates reaching to as high as 65%. On the other
hand, under the Common Effective Preferential Tariff (CEPT) Scheme, goods are
levied ordinary import duties ranging from 0% to 5%, except also in cases of
sensitive agricultural products which are subject to as high as 40% tariff duties.
Q112. What are special duties under the Tariff Code?
A. These are levied in addition to the ordinary import duties, taxes and charges
imposed by law on the imported product under the following circumstances:
Q113. Define the following terms:
a. Anti-Dumping Duty: The anti-dumping duty is a special duty imposed in the
event that a specific kind or class of foreign article, is being imported into, sold or is
likely to be sold in the Philippines, at an export price less than its normal
value in the ordinary course of trade for a like product, commodity or article
destined for consumption in the exporting country which is causing or threatening
to cause material injury to a domestic industry, or materially retarding the
establishment of a domestic industry producing similar product.
b. Countervailing Duty: The countervailing duty is a special duty charged
whenever any product, commodity or article of commerce is granted directly or
indirectly by the government in the country of origin or exportation, any kind or
37 | P a g e
 38

form of specific subsidy upon the production, manufacture or exportation of such

product, commodity or article, and the importation of such subsidized product,
commodity or article has caused or threatens to cause material injury to a domestic
industry or has materially retarded the growth or prevents the establishment of a
domestic industry.
c. Marking Duty: The marking of articles (or its containers) is a prerequisite for
every article or container imported into the Philippines in accordance with Section
303 of the TCCP. In case of failure to mark an article or its container at the time
of importation, there shall be levied upon such article a marking duty of 5% ad
valorem.
d. Discriminatory Duty: The discriminatory duty is imposed by the President by
proclamation upon articles of a foreign country which discriminate against
Philippine commerce or against goods coming from the Philippines as
stipulated under Section 304 of the TCCP. The amount of additional duty to be levied
shall not exceed 100% ad valorem based on the dutiable value of imported articles.
e. General Safeguard Measure: The general safeguard measure is applied by the
Secretary of Trade and Industry, in the case of non-agricultural products, or the
Secretary of Agriculture, in the case of agricultural products, upon positive final
determination of the Tariff Commission that a product is being imported into the
country in increased quantities, whether absolute or relative to domestic
production, as to cause or threaten to cause serious injury to the domestic
industry. In the case of non-agricultural products, however, the Secretary of Trade
and Industry shall first establish that the application of such safeguard measures
will be in the course of public interest.
The general safeguard measure shall be limited to the extent of redressing or
preventing the injury and to facilitate adjustments by the domestic industry from
the adverse effects directly attributed to the increased imports.
f. Special Safeguard Duty: An additional special safeguard duty is imposed on an
agricultural product whenever the cumulative import volume in a given year
exceeds its trigger volume and when the actual c.i.f. (Cost, Insurance and
Freight) import price falls below its trigger price. The safeguard duty is imposed
by the Commissioner of Customs through the Secretary of Finance upon request by
the Secretary of Agriculture.
B. EXPORT DUTIES
Q. What domestic items remain subject to export duties?
A. Logs are the only remaining products subject to the duty under Section 514 of
the TCCP, as amended. The export duty imposed on logs is 20% of the gross Free on
Board (FOB) value at the time of shipment based on the prevailing rate of exchange.
However, only planted trees are subject to the export duty, since all naturally
grown trees are banned from being exported under Ministry of Environment and
Natural Resources Memorandum Order No. 8 (issued June 20, 1986).
C. Remedies
1. The Commissioner of Customs has jurisdiction in cases involving liability for
customs duties, fees or other money charges; seizure, detention or release of
property affected; fines, forfeitures or other penalties imposed in relation thereto;
or other matters arising under the Customs Law or other law or part of law
38 | P a g e
 39

administered by the Bureau of Customs [Rep. Act. No. 1125, (1954), Sec. 7].
2. Decisions of the Commission of Customs favorable to the taxpayer are elevated to
the Secretary of Finance (Sec. 2315, TCC); and
3. The Secretary of Trade and Industry has jurisdiction in the case of non-
agricultural product, commodity or article, while the Secretary of Agriculture, in the
case of agricultural product, commodity or article, in connection with the imposition
of the Anti-Dumping Duty, Countervailing and Safeguard Duty [Republic Act Nos.
8751 and 8752, (1999) Sec. 301 (a) and (p), and Republic Act 8800].
4. Decisions/ Resolutions of the DTI and DA Secretaries may be elevated to the Tariff
Commission.
5. Decisions of the Tariff Commission are appealable to the CTA.
6. CTA decisions are appealable to the Supreme Court.

39 | P a g e