TAXPAYERS SUIT 1) Sovereign equality of States

- a case where the act complained of directly involves

the illegal disbursement
of public funds derived from taxation 2) Usage among States
> courts discretion to allow
• > Taxpayers have sufficient interest of preventing 3) Immunity from suit of a State
the illegal expenditures of
money raised by taxation (NOT DONATIONS AND NON-DELEGATION OF THE POWER TO TAX
CONTRIBUTIONS) GENERAL RULE:
• - The power of taxation is peculiarly and exclusively
> A taxpayer is not relieved from the obligation of paying legislative, therefore, it
a tax because of his may not be delegated
belief that it is being misappropriated by certain officials EXCEPTIONS:
• > A taxpayer has no legal standing to question
executive acts that do not
involve the use of public funds.
1) Delegation to the President

2) Delegation to local government units

REQUISITES FOR A TAXPAYERS PETITION
1) That money is being extracted and spent in violation
of specific constitutional 3) Delegation to administrative units
protections against abuses of legislative power
2) That public money is being deflected to any improper POWERS WHICH CANNOT BE DELEGATED
purpose
3) That the petitioner seeks to restrain respondents from
wasting public funds
1) Determination of the subjects to be taxed
through the enforcement of an invalid or unconstitutional
law.
KILOS BAYAN vs. GUINGONA 2) Purpose of the tax
•
> The Supreme Court has discretion whether or not to 3) Amount or rate of the tax
entertain taxpayers suit
and could brush aside lack of locus standi
4) Manner, means and agencies of collection
CONCEPTS RELATIVE TO PUBLIC PURPOSE
5) Prescription of the necessary rules with respect
1) Inequalities resulting from the singling out of one
thereto
particular class for taxation
DELEGATION TO THE PRESIDENT
or exemption infringe no constitutional limitation
•
 It is inherent in the power to tax that the legislature
> Congress may authorize, by law, the President to fix,
is free to select the
within specified limits
subject of taxation
and subject to such limitations and restrictions as it may
n individual taxpayer need not derive direct benefits from
impose
the tax
1) Tariff rates
 The paramount consideration is the welfare of the
2) Import and export quotas
greater portion of
3) Tonnage and wharfage dues
the population
4) Other duties and import within the national
development program of the
3) Public purpose is continually expanding. Areas formerly left government
to private initiative now loose their boundaries and may •
be undertaken by the government, if it is to meet the > There must be a law authorizing the President to fix
increasing social challenges of the times tariff rates
•
> The delegation of power must impose limitations and
4) Public purpose is determined at the time of enactment restrictions and
of the tax law and not specify the minimum as well as the maximum tariff rates
at the time of implementation TERRITORIAL JURISDICTION
NTERNATIONAL COMITY RULES:
- Based on tradition, practice or custom •
DOCTRINE OF INCORPORATION > Tax laws cannot operate beyond a State’s territorial
• > The Philippines adopts the generally accepted limits
principles of international law •
as part of the law of the land > The government cannot tax a particular object of
• > If a tax law violates certain principles of taxation which is not
international law, then it is not only within its territorial jurisdiction.
invalid but also unconstitutional •
GROUNDS FOR TAX EXEMPTION OF FOREIGN > Property outside ones jurisdiction does not receive any
GOVERNMENT PROPERTY protection of the State
•
> If a law is passed by Congress, Congress must always 4) Shares, obligations, bonds issued by a foreign
see to it that the object or subject of taxation is within the corporation which shares of stock or
bonds acquire situs here
territorial jurisdiction of the taxing authority 5) Rights, interest in a partnership, business or industry
established in the Philippines
SITUS OF TAXATION
 Place of taxation
> These intangible properties acquire business situs
RULE:
- The State where the subject to be taxed has a situs here in the Philippines, you cannot apply the principle of
may rightfully levy and “Mobilia Sequntur Personam” because the properties
collect the tax have acquired situs here.
•
> In determining the situs of taxation, you have to - The location where the income earner resides in the
consider the nature of the situs of taxation
taxes B) NATIONALITY THEORY
Example: - The country where the income earner is a citizen is the
1) POLL TAX, CAPITATION TAX, COMMUNITY TAX situs of taxation
> Residence of the taxpayer C) SOURCE RULE
2) REAL PROPERTY TAX OR PROPERTY TAX - The country which is the source of the income or where
> Location of the property the activity that
• produced the income took place is the situs of taxation
> We can only impose property tax on the properties of a SITUS OF TAX ON INTEREST INCOME
person whose •
residence is in the Philippines. > The residence of the borrower who pays the interest
EXCEPTIONS TO THE TERRITORIALITY RULE irrespective of the
A)Where the tax laws operate outside territorial place where the obligation was contracted
jurisdiction CIR vs. BOAC
1) TAXATION of resident citizens on their incomes •
derived from abroad
B)Where tax laws do not operate within the territorial
jurisdiction of the State > Revenue derived by an of-line international carrier
1) When exempted by treaty obligations without any flight from the Philippines, from ticket sales
2) When exempted by international comit through its local agent are subject to tax on gross
SITUS OF TAX ON REAL PROPERTY Philippine billings
- LEX REI SITUS or where the property is located
REASON:
SITUS OF EXCISE TAX
 The place where the real property is located gives
> Where the transaction performed
protection to the
HOPEWELL vs. COM. OF CUSTOMS
real property, hence the property or its owner should
•
support the
government of that place
SITUS OF PROPERTY TAX ON PERSONAL > The power to levy an excise upon the performance of
PROPERTY an act or the engaging in an occupation does not
- MOBILIA SEQUNTUR PERSONAM depend upon the domicile of the person subject to the
= movables follow the owner
exercise, nor upon the physical location of the property
= movables follow the domicile of the owner
or in connection with the act or occupation taxed, but
RULES: depends upon the place on which the act is performed or
1) TANGIBLE PERSONAL PROPERTY occupation engaged in.
- Where located, usually the owners domicile
2) INTANGIBLLE PERSONAL PROPERTY
Thus, the gauge of taxability does not depend on the
G. R. – Domicile of the owner
EXCEPTION: The situs location not domicile location of the office, but attaches upon the place where
> Where the intangible personal property has acquired a the respective transaction is perfected and
business situs in another consummated
jurisdiction
* CONSTITUTIONAL LIMITATIONS
> The principle of “Mobilia Sequntur Personam” is only I.
for purposes of DUE PROCESS
convenience. It must yield to the actual situs of such • > Due process mandates that no person shall be
property. deprived of life, liberty, or
* property without due process of law.
> Personal intangible properties which acquires PEPSI COLA vs. MUN. OF TANAUAN
business situs here in the - REQUIREMENTS OF DUE PROCESS IN TAXATIO
Philippines
1) Franchise which is exercised within the Philippines
2) Shares, obligations, bonds issued by a domestic
corporation
3) Shares, obligations, bonds issued by a foreign
corporation, 85% of its business is
conducted in the Philippines
 > A violation of the inherent limitations on taxation
1) Tax must be for a Public purpose would contravene the
constitutional injunctions against deprivation of property
without due process
2) Imposed within the Territorial jurisdiction of law
•
3) No arbitrariness or oppression in > There must be proof of arbitrariness, otherwise
apply the presumption of
A) assessment, and constitutionality
B) collection •
DUE PROCESS IN TAXATION DOES NOT REQUIRE > Due process requires hearing before adoption of
1)Determination through judicial inquiry of legislative rules by
A) property subject to tax administrative bodies of interpretative rulings. (Misamis
B) amount of tax to be imposed vs. DFA)
2) Notice of hearing as to: •
A) amount of the tax > Compliance with strict procedural requirements must
B) manner of apportionment be followed effectively
REQUISITES OF DUE PROCESS OF LAW to avoid a collision course between the states power to
1) There must be a valid law tax and the individual
2) Tax measure should not be unconscionable and recognized rights (CIR vs. Algue)
unjust as to amount to •
confiscation of property > The due process clause may correctly be invoked
3) Tax statute must not be arbitrary as to find no support only when there is a clear
in the constitution contravention of inherent or constitutional limitations in
• > When is deprivation of life, liberty or property the exercise of tax
done in accordance power. (Tan vs. del Rosario)
with due process of law? •
1) If done under authority of a law that is valid or of the > SUBSTATNTIVE DUE PROCESS requires that a tax
constitution itself statute must be within the
2) After compliance with fair and reasonable methods of constitutional authority of Congress to pass and that it be
procedure prescribed reasonable, fair and
by law. just
• •
> If properties are taxed on the basis of an invalid law, > PROCEDURAL DUE PROCESS requires notice
such deprivation is a and hearing or at least an
violation of due process opportunity to be heard
REMEDY – ask for refund EQUAL PROTECTION CLAUSE
• > All persons, all properties, all businesses should be
> To justify the nullification of a tax law, there must be a taxed at the same rate
clear and > prohibits class legislation
unequivocal breach of the constitution > prohibits undue discrimination
> There must be proof of arbitrariness EQUALITY IN TAXATION (UNIFORMITY)
NSTANCES WHEN THE TAX LAW MAYBE DECLARED > Equality in taxation requires that all subjects or
AS UNCONSTITUTIONAL objects of taxation similarly
[C, O, N, U] situated should be treated alike or put on equal footing
1)If it amounts to confiscation of property without due both on the privilege
process conferred and liabilities imposed
2)If the subject of taxation is outside of the jurisdiction of > All taxable articles of the same class shall be taxed
the taxing state at the same rat
> The Doctrine does not require that persons or
properties different in fact be
3)The law maybe declared as unconstitutional if it is treated in law as though there were the same. What it
imposed not for a prohibits is class
public purpose legislation which discriminates against some and favors
4)If a tax law which is applied retroactively, imposes others
unjust and •
oppressive taxes. > As long as there are rational or reasonable grounds
• for doing so, Congress
> A tax law which denies a taxpayer a fair opportunity
to assert his substantial may group persons or properties to be taxed and it is
rights before a competent tribunal is invalid sufficient if all members of the same class are subject to
• the same rate and the tax is administered impartially
> A taxpayer must not be deprived of his property for
upon them.
non-payment of taxes
without
1) notice of liability REQUISITES OF A VALID CLASSIFICATION (S A G E )
2) sale of property at public auction
> The validity of statute maybe contested only by one
who will sustain a direct
injury in consequence of its enforcement
•
 ex. When the classification does not rest upon
1) It must be based on substantial distinction substantial distinctions that make
for real difference
2) When no classification is made where a classification
2) It must apply not only to the present condition, but is called for
ex. When substantial distinctions exist but no
also to future conditions corresponding classification is made
on the basis thereof
ORMOC SUGAR CENTRAL vs. CIR
3) It must be germane to the purpose of the law
•
> If the ordinance is intended to supply to a specific
4) It must apply equally to all members of the same class taxpayer and to no one

SUBSTANTIAL DISTINCTION else regardless of whether or not other entities belonging

> It must be real, material and not superficial distinction
to the same class are established in the future, it is a
•
> What is not allowed is inequality resulting from violation of the equal protection clause, but if it is
singling out of a particular intended to apply also to similar establishments which
class which violates the requisites of a valid maybe established in the future, then the tax ordinance
classification is valid even if in the meantime, it applies to only one
• entity or taxpayer for the simple reason that there is so
> There maybe inequality but as long as it does not
far only one member of the class subject of the tax
violate the requisites of a
valid classification that such mere inequality is not measure
enough to justify the
nullification of a tax law or tax ordinance UNIFORMITY IN TAXATION
• The concept of uniformity in taxation implies that all
> Taxation is equitable when its burden falls on those taxable articles or
better able to pay properties of the same class shall be taxed at the same
• rate.
>Although the equal protection clause does not forbid
classification, it is It requires the uniform application and operation, without
imperative that the substantial differences having a
discrimination, of the tax in every place where the
reasonable relation to the
subject of the particular legislation subject of the tax is found. It does not, however, require
• absolute identity or equality under all circumstances, but
> Taxes are uniform and equal when imposed upon all subject to reasonable classification.
property of the same
class or character within the taxing authority EQUITY IN TAXATION
• •
> Tax exemptions are not violative of the equal > The concept of equity in taxation requires that the
protection clause, as long as apportionment of the tax
there is valid classification
TIU vs. CA
burden be more or less, just in the light of the taxpayer’s
ability to shoulder to tax burden and if warranted, on the
The Constitutional right to equal protection of the
basis of the benefits received from the government. Its
law is not violated by an executive order, issued
cornerstone is the taxpayers ability to pay.
pursuant to law, granting tax and duty incentives only to
business within the “secured area” of the Subic Special
CRITERIA OF EQUAL PROTECTION
Economic Zone” and denying them to those who live
within the zone but outside such “fenced in” territory. The
Constitution does not require the absolute equality
1) When the laws operate uniformly
among residents. It is enough that all persons under like
circumstances or conditions are given the same
A) on all persons
privileges and required to follow the same obligations. In
short, a classification based on valid and reasonable
B) under similar circumstances
standards does not violate the equal protection clause.

We find real and substantial distinctions between

2) All persons are treated in the same manner
the circumstances obtaining inside and those outside the
Subic Naval Base, thereby justifying a valid and
A) The conditions not being different
reasonable classification.

TWO WAYS EQUAL PROTECTION CLAUSE CAN BE B) Both in privileges conferred and liabilities imposed
VIOLATED
1) When classification is made where there should be C) Favoritism and preference not allowed
none
REEDOM OF THE PRESS •
• > The constitutional guarantee of the non-impairment
> The press is not exempt from taxation clause can only
• invoked in the grant of tax exemption
> The sale of magazines or newspapers, maybe the RULES:
subject of taxation 1) If the exemption was granted for valuable
• consideration and it is granted on the
> What is not allowed is to impose tax on the exercise basis of a contract.
of an activity which has > cannot be revoked
a connection with freedom of the press (license fee) 2) If the exemption is granted by virtue of a contract,
> If we impose tax on persons before they can deliver wherein the government enters
or broadcast a particular into a contract with a private corporation
news or information, that is the one which cannot be > cannot be revoked unilaterally by the government
taxed. 3) If the basis of the tax exemption is a franchise granted
TOLENTINO vs. SEC. OF FINANCE by Congress and under the
• franchise or the tax exemption is given to a particular
> What is prohibited by the constitutional guarantee of holder or person
free press are laws > can be unilaterally revoked by the government
(Congress)
which single out the press or target a group belonging to •
> The non-impairment clause applies only to contracts
the press for special treatment or which in any way
and not to a franchise.
discriminates against the press on the basis of the •
content of the publication > The non-impairment clause applies to taxation but
not to police power and
FREEDOM OF RELIGION eminent domain. Furthermore, it applies only where one
• party is the
> It is the activity which cannot be taxed government and the other, a private individual.
• •
> activities which have connection with the exercise of > As a rule, the obligation to pay tax is based on law.
religion But when, for instance, a
AMERICAN BIBLE SOCIETY vs. MANILA taxpayer enters into a compromise with the BIR, the
• obligation of the taxpayer
> The payment of license fees for the distribution becomes one based on contract
and sale of bibles RULES ON TAX AMNESTY
suppresses the constitutional right of free exercise of •
religion. > Tax amnesty, like tax exemption, is never favored
JIMMY SWAGGART vs. BOARD OF EQUALIZATION nor presumed in law and if
• granted by statute must be construed strictly against the
> The Free Exercise of Religion Clause does not taxpayer, who must
prohibit imposing a generally show compliance with the law.
applicable sales and use tax on the sale of religious •
materials by a religious >The government is not estopped from questioning the
organization. tax liability even if
• amnesty tax payments were already received
> The Sale of religious articles can be the subject of REASON: Erroneous application and enforcement of the
the VAT law by public officers
• do not block subsequent correct application of the
> What cannot be taxed is the exercise of religious statute. The government is
worship or activity never estopped by mistakes or errors by its agents
• ENROLLED BILL DOCTRINE
> The income of the priest derived from the exercise of G.R. – An enrolled copy of a bill is conclusive not only of
religious activity can its provisions but also of
be taxed its due enactment
NON-IMPAIRMENT CLAUSE EXCEPTION: In ASTORGA vs. VILLEGAS, the
• Supreme Court “went behind” the
> The parties to the contract cannot exercise the power
of taxation. enrolled bill and consulted the journal to determine
•
whether certain provisions of a state had been approved
> They cannot agree or stipulate that this particular
transaction may be by the Senate President’s admission of a mistake and
exempt from tax- not allowed (except if government) withdrawal of his signature.
OPOSA vs. FACTORAN
• ARDONING POWER OF THE PRESIDENT
> Police power prevails over the non-impairment > The President has the power to grant reprieves,
clause commutations and pardons and
LA INSULAR vs. MANCHUCA remit fines and forfeitures after conviction by final
• judgment. (Sec. 19, ART VII)
> A lawful tax on a new subject or an increased tax on NATURE OF TAX AMNESTY
an old one, does not
interfere with a contract or impairs its obligation.
– A general pardon or intentional overlooking by the PRESIDENTIAL VETO
state of its authority to impose penalties on persons • > “The President shall have the power to veto any
particular item or items in
otherwise guilty of evasion or violation of a revenue or
an appropriation, revenue or tariff bill, but the veto shall
tax law not affect the item or
items to which he does not object” (Sec. 27 (2), ART VI)
- absolute forgiveness or waiver to collect XIII. TARIFF POWER OF THE PRESIDENT
VIII. NO IMPRISONMENT FOR NON-PAYMENT OF • “The Congress may, by law, authorizing the
POLL TAX President to fix within specific
- No person shall be imprisoned for debt or non-
payment of poll tax (Sec. 20
limits, and subject to such limitations and restrictions as
ART III)
• it may impose, tariff rates, import and export quotas,
> The non-imprisonment rule applies to non-payment tonnage and wharfage dues, the other duties or imports
of poll tax which is within the framework of the national development
punishable only by a surcharge, but not to other program of the Government” (Sec. 28 (2), ART VI)
violations like falsification of
community tax certificate or non-payment of other taxes REQUISITES:
1) There must be a law passed by Congress authorizing
the President to impose
tariff rates and other fees.
POLL TAX – tax of fixed amount imposed upon residents 2) Under the law, there must be limitations and
within a specific territory restrictions on the exercise of
regardless of citizenship, business or profession such power
Ex. Community tax 3) The taxes that may be imposed by the President are
IX. TAXATION SHALL BE UNIFORM AND EQUITABLE limited to:
- The rule of taxation shall be uniform and equitable. A) Tariff rates
The Congress shall evolve
a progressive system of taxation. (Sec. 28 (1) ART VI)
UNIFORMITY B) Import and export quotas
- means that all taxable articles kinds of property of the
same class shall be
taxed at the same rate C) Tonnage and wharfage dues
•
> A tax is uniform when it operates with the same force D) Other duties (customs duties)
and effect in every
place where the subject of it is found 4) The imposition of these tariff and duties must be
EQUITABILITY within the framework of the
> Taxation is said to be equitable when its burden falls National Development program of the government
on those better able to •
pay > Congress “may not pass” a law authorizing the
X. CONGRESS SHALL EVOLVE A PROGRESSIVE President to impose income
SYSTEM OF TAXATION tax, donors tax, and other taxes which are not in the
PROGRESSIVITY nature of customs duties
• > The Constitution allows only the imposition by the
> Taxation is progressive when its rate goes up President of these custom
depending on the sources of duties
the person affected XIV. TAX EXEMPTION OF REAL PROPERTY
SYTEMS OF TAXATION • “Charitable institutions, churches and personages
1) PROPORTIONAL TAXATION or convents appurtenant
- where the tax increases or decreases in relation to the
tax bracket
2) PROGRESSIVE or GRADUATED SYSTEM thereto, morgues, non-profit cemeteries and all lands,
- where the tax increases as the income of the taxpayer buildings and improvements, actually directly and
goes higher exclusively used for religious, charitable, or educational
3) REGRESSIVE SYSTEM purposes shall be exempt from taxation.” (Sec. 28 (3)
where the tax decreases as the income of the taxpayer
ART VI)
increases
PROGRESSIVITY IS NOT REPUGNANT TO
UNIFORMITY and EQUALITY APPLICATION:
A) Uniformity does not require the things which are not > The exemption only covers property taxes and not
different be treated in the other taxes
same manner TEST OF EXEMPTION:
B) Differentiation, which is not arbitrary and conforms to > It is the USE of the property and not ownership of the
the dictates of justice and property
equity is allowed. Progressivity is one way of ABRA VALLEY COLLEGE vs. AQUINO (162 SCRA 106)
classification. •
C) The State has the inherent right to select subjects of
taxation > The exemption does not only extend to indispensable
facilities but also covers incidental facilities which are
reasonably necessary to the accomplishment of said
purpose
•
> A property leased by the owner to another who uses it
exclusively for religious purposes is exempt from
property tax, but the owner is subject to income tax or
rents received.
•
> Real property purchased by any religious sect to be
used exclusively for religious purposes are subject to the
tax on the transfer of ownership or of title to real property
(also if donated- donor’s tax)
• “The Supreme Court shall have the power to review,
> Property held for future use is not tax exemp
LAW GRANTING TAX EXEMPTIONS
• assessment, or toll, or any penalty imposed in relation
“ No law granting any tax exemptions shall be passed
without the
concurrence of a majority of all members of the
Congress” (Sec. 28 (4) ART
VI)
RULES ON VOTE REQUIREMENT
1) Law granting any tax exemption
> absolute majority
2) Law withdrawing any tax exemption
> Relative majority
••
> Tax exemption, amnesties, refunds are considered in
the nature of tax
exemptions
> A law granting such needs approval of the absolute
majority of the Congress
NO USE OF PUBLIC MONEY OR PROPERTY FOR
PUBLIC PURPOSES
• > “ No public money or property shall be
appropriated, applied, paid, or
employed, directly or indirectly, for the use, benefit, or
support of any sect, church, denomination, sectarian,
institution or system of religion, or of any priest,
preacher, minister or other religious teacher or dignitary
as such, EXCEPT when such priest, preacher, minister
or dignitary is assigned to the armed forces, or to any
penal institution, or government orphanage or
leprosarium as such” (Sec. 29 (2) ART VI)
•
> Public property may be leased to a religious group
provided that the lease will be totally under the same
conditions as that to private persons (amount of rent)
•
> Congress is without power to appropriate funds for a
private purpose
AX LEVIED FOR SPECIAL PURPOSES
“ All money collected or any tax levied for a special
purpose shall be treated as a special fund and paid out
for such purpose only. If the purpose for which a special
fund was created has been fulfilled or abandoned, the
balance, if any, shall be transferred to the general funds
of the Government.” (Sec. 29 (3) ART VI)
• > If a President of the Philippines spent a special
fund for a general purpose,
he can be charged with culpable violation of the
Constitution.
XVIII. SUPREME COURT’S POWER OF REVIEW
revise, reverse, modify or affirm on appeal or certiorari,
all cases involving the legality of any tax imposed,
thereto.” (Sec. 5 (2B) ART VIII)
• > Congress cannot take away from the Supreme
Court the power given to it
by the Constitution as the final arbiter of the tax cases.
DELEGATED AUTHORITY TO LOCAL GOVERNMENT
UNITS
“ Each local government unit shall have the power to
create its own sources of revenues and to levy taxes,
fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent with
the basic policy of local autonomy. Such taxes, fees,
charges shall have exclusivity to the local government.”
(Sec. 5, ART X)
LIMITATIONS ON POWER TO TAX (L.G.U.)
1) It is subject to such guidelines and limitations
provided by Congress.
2) It must be consistent with the basic policy of local
autonomy.
3) Such taxes, fees, and charges shall accrue
exclusively to the local government.
RULES: NATIONAL GOV’T vs. LGU
 IMPOSITION OF TAXES
1) The National Government may impose local taxes on
articles or subjects which are
within the territorial jurisdiction of the local government
unit.
2) The Local Government unit cannot impose tax on the
national government.
> You can only tax those articles, which are within your
jurisdiction
SEC. 6, ART X
“ local government units shall have a just share, as
determined by law, in the national taxes which shall be
automatically released to them.”
AX EXEMPTIONS OF EDUCATIONAL INSTITUTIONS
“ All revenues and assets of non-stock, non-profit
educational institutions used actually, directly, and
exclusively for educational purposes shall be exempt
from taxes and duties.” (Sec. 4 (3) ART XIV)
REQUISITES FOR EXEMPTION:
1) It must be a private educational institution
2) It must be non-stock and non-profit
3) It’s assets (property) and revenues (income) must be
used actually, directly and
exclusively for educational purposes
RULES:
1) If the first requisite is absent (meaning, it’s a
government educational institution),
it is nonetheless exempt from income tax
2) If the second requirement is absent (meaning, it is
stock and profit) as long as the
third requirement is present, it is nonetheless exempt
from real estate tax
3) If the third requirement is absent, as long as it is non-
stock and non-profit, it is
nonetheless exempt from income tax
4) If the third requirement is absent, but it is private and
non-profit, it is subject to
income tax, but at the preferential rate of ten percent
(10%)
• by law to file an income tax return shall pay an annual
> Under the present tax code, for a private educational
institution to be exempt from the payment of income tax,
all it has to be is non-stock and non- profit. However, a
governmental educational institution is exempt from
income tax without any condition
EXEMPTION DOES NOT EXTEND TO:
1) Income derived by these educational institutions from
their property, real or
personal, and
2) From activities conducted by them for profit
regardless of the disposition made on
such income
TAX EXEMPTION OF DONATIONS for EDUCATIONAL
PURPOSES
• > “Subject to conditions prescribed by law, all
grants endowments, donations,
or contributions used actually, directly and exclusively for
educational
purposes shall be exempt from tax.” (Sec. 4 (4) ART
XIV)
XXII. NO EXPOST FACTO LAW PROHIBITION IN
TAXATION
FERNANDEZ vs. FERNANDEZ
• business in the Philippines during the preceding year
> The prohibition against “ex post facto laws” applies
only to criminal laws
and not to those that concern civil matters
 Our tax laws are civil in nature
• additional tax, be considered as part of the gross
> The collection of interest on taxes is not penal in
nature and the ex post
facto law prohibition does not apply to it
Section 129. Power to Create Sources of Revenue. - Each
local government unit shall exercise its power to create its own
sources of revenue and to levy taxes, fees, and charges
subject to the provisions herein, consistent with the basic
policy of local autonomy. Such taxes, fees, and charges shall
accrue exclusively to the local government units.
Section 132. Local Taxing Authority. - The power to impose a
tax, fee, or charge or to generate revenue under this Code
shall be exercised by the sanggunian of the local government
unit concerned through an appropriate ordinance.
Section 137. Franchise Tax. - Notwithstanding any exemption
granted by any law or other special law, the province may
impose a tax on businesses enjoying a franchise, at the rate
not exceeding fifty percent (50%) of one percent (1%) of the
gross annual receipts for the preceding calendar year based
on the incoming receipt, or realized, within its territorial
jurisdiction.
In the case of a newly started business, the tax shall not
exceed one-twentieth (1/20) of one percent (1%) of the capital
investment. In the succeeding calendar year, regardless of
when the business started to operate, the tax shall be based
on the gross receipts for the preceding calendar year, or any
fraction thereon, as provided herein
Section 157. Individuals Liable to Community Tax. - Every
inhabitant of the Philippines eighteen (18) years of age or over
who has been regularly employed on a wage or salary basis
for at least thirty (30) consecutive working days during any
calendar year, or who is engaged in business or occupation, or
who owns real property with an aggregate assessed value of
One thousand pesos (P1,000.00) or more, or who is required
additional tax of Five pesos (P5.00) and an annual additional
tax of One peso (P1.00) for every One thousand pesos
(P1,000.00) of income regardless of whether from business,
exercise of profession or from property which in no case shall
exceed Five thousand pesos (P5,000.00).
In the case of husband and wife, the additional tax herein
imposed shall be based upon the total property owned by them
and the total gross receipts or earnings derived by them.
Section 158. Juridical Persons Liable to Community Tax. -
Every corporation no matter how created or organized,
whether domestic or resident foreign, engaged in or doing
business in the Philippines shall pay an annual community tax
of Five hundred pesos (P500.00) and an annual additional tax,
which, in no case, shall exceed Ten thousand pesos
(P10,000.00) in accordance with the following schedule:
(1) For every Five thousand pesos (P5,000.00) worth
of real property in the Philippines owned by it during
the preceding year based on the valuation used for
the payment of real property tax under existing laws,
found in the assessment rolls of the city or
municipality where the real property is situated - Two
pesos (P2.00); and
(2) For every Five thousand pesos (P5,000.00) of
gross receipts or earnings derived by it from its
- Two pesos (P2.00).
The dividends received by a corporation from another
corporation however shall, for the purpose of the
receipts or earnings of said corporation.