Remedies, Tarrif and Custom, Local Government Tax, Real Property and Esate and Other Taxes

NOTES & CASES IN TAXATION
PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

surety bond for not more than double the amount with the Court. Exclusive Appellate Jurisdiction to Review by Appeal
COURT OF TAX APPEALS RA 9282 took effect on April 23, 2004. The role of the judiciary is to be sympathetic or be vigilant court which would check injustice or abuses of the legislative and administrative agents of the state in their exercise of power of taxation. The role of the courts is limited to the application and interpretation of tax laws. Rationale for the Creation of CTA 1. To prevent delay in the disposition of tax cases by the then CFI in view of the backlog of civil, criminal and cadastral cases accumulating in the dockets of such courts. 2. To have a body with specialized knowledge which ordinary judges are not likely to possess, thus providing for an adequate remedy for a speedy determination of tax cases. Nature of the CTA It is a court of special jurisdiction and can act only in matter where it has exclusive original jurisdiction as well as in aid of its appellate jurisdiction. CTA proceedings need not be governed strictly by technical rules of evidence. GR - SEC. 218 NIRC. Injunction not Available to Restrain Collection of Tax. No court shall have the authority to grant an
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injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code.
Exception Sec. 9 RA 9282. No appeal taken to the CTA from the decision of the CIR or the COC or the RTC, provincial, city or municipal treasurer or the Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case may be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the opinion of the Court the collection by the aforementioned government agencies may jeopardize the interest of the Government and/or the taxpayer the Court any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a
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Decisions of the CIR in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the BIR. Division Inaction by the CIR in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the NIRC or other laws administered by the BIR where the NIRC provides a specific period of action, in which case the inaction shall be deemed a denial. Division Decisions, orders or resolutions of the RTCs in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction; If Original DIVISION; If Appellate EN BANC 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 in relation thereto, or other matters arising under the Customs Law or other laws administered by the BOC; Division Decisions of the CBAA in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the provincial or city board of assessment appeals; En Banc Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs which are adverse to the Government under Sec. 2315 of the TCC Division Decisions of the Secretary of DTI, in the case of nonagricultural product, commodity or article, and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and countervailing duties under Sec 301 and 302, respectively, of the TCC, and safeguard measures under RA 8800, where either party may appeal the decision to impose or not to impose said duties. Division
The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the CIR on matters relating to assessments or refunds. It gives the CTA the jurisdiction to determine if the warrant of distraint and levy issued by the BIR is valid and to rule if the Waiver of Statute of Limitations was validly effected [PHIL. JOURNALISTS, INC., v. CIR 447 SCRA 214]
Reference Reviewer on Taxation Vol. 1 & 2 by Prof. A. Domondon, Reviewer on Taxation by Victorino Mamalateo, Tax Law and Jurisprudence by Justice Jose Vitug and Justice Ernesto Acosta, And Revenue Regulations 2-2003. Unauthorized users shall be punished by the law of karma and they will not pass the examination they shall take or be unsuccessful and unhappy in life page ii
Jurisdiction over cases involving Criminal Offenses
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Exclusive original jurisdiction over all criminal offenses arising from violations of the NIRC or
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TCC and other laws administered by the Bureau of Internal Revenue or the BOC: Provided, however, That offenses or felonies mentioned in this paragraph where the principal amount o taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos or where there is no specified amount claimed shall be tried by the regular Courts and the jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with, and jointly determined in the same proceeding by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to reserve the filling of such civil action separately from the criminal action will be recognized.
Exclusive appellate jurisdiction in criminal offenses:
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Over appeals from the judgments, resolutions or orders of the RTC in tax collection cases originally decided by them, in their respective territorial jurisdiction. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in the Exercise of their appellate jurisdiction over tax collection cases originally decided by the MeTC, MTC and MCTC, in their respective jurisdiction.
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Over appeals from the judgments, resolutions or orders of the RTCs in tax cases originally decided by them, in their respected territorial jurisdiction. Over petitions for review of the judgments, resolutions or orders of the RTCs in the exercise of their appellate jurisdiction over tax cases originally decided by the MeTC, MTC and MCTC in their respective jurisdiction.
The civil case for the collection of unpaid customs duties and taxes cannot be simultaneously instituted and determined in the same proceedings as the criminal cases before the Sandiganbayan, as it cannot be made the civil aspect of the criminal cases filed before it. Said obligation is not a consequence of the felonious acts charged in the criminal proceeding nor is it a mere civil liability arising from crime that could be wiped out by the judicial declaration of non-existence of the criminal acts charged [PROTON PILIPINAS v. REPUBLIC 504 SCRA 528] The determination of the validity or invalidity of the Tax Credit Certificates cannot be regarded as a prejudicial issue that must first be resolved with finality in the Criminal Cases filed before the Sandiganbayan [supra]
Instances where the CTA would have jurisdiction even if there is no decision yet by the CIR 1. Where the Commissioner has not acted on the disputed assessment after a period of 180 days from submission of complete supporting documents, the taxpayer has period of 30 days from the expiration of the 180 day period within which to appeal to the CTA [Last par. Sec. 228] 2. Where the Commissioner has not acted on an application for refund or credit and the 2 year period from the time of payment is about to expire , the taxpayer has to file his appeal with the CTA before the expiration of the 2 years from the time the tax was paid. Instances where the CTA would have jurisdiction even if there is no decision of the Commissioner of Customs 1. Decision of the DTI Sec. or the Sec. of Agriculture in anti-dumping and countervailing duty cases are appeallable to the CTA within 30 days from receipt of such decision 2. In case of automatic review by the Sec. of Finance in seizure or forfeiture cases where the value of the importation exceeds P5 million or where the decision of the Collector of Customs which fully or partially releases the shipment seized is affirmed by the Comm. of Customs 3. In cases of automatic review by the Sec. of Finance of a decision of a Collector of Customs acting favorably upon a customs protest. The legal remedies under the NIRC available to the aggrieved taxpayer may be classified into the tax remedies with respect to 1. Assessment 2. Collection and 3. refund of internal revenue taxes The remedies may also be classified into the administrative or the judicial remedies. The legal remedy under the NIRC available to an aggrieved taxpayer at administrative level with respect to refund or recovery of tax erroneously or illegally collected is to file a claim for refund or credit with the CIR [1st Par. Sec. 229] The legal remedy under the NIRC available to an aggrieved taxpayer at judicial level with respect to refund or recovery of tax erroneously or illegally collected is the filing of a suit or proceeding with the CTA before the expiration of the 2 years from the date
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Jurisdiction over Tax Collection Cases
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Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees, charges and penalties: Provided, however, That collection cases where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos shall be tried by the proper MTC, MeTC and RTC. Exclusive appellate jurisdiction in tax collection cases:

OUTLINE of TAX REMEDIES of a TAXPAYER & the Government relative to Assessment of Internal Revenue Taxes DISPUTED ASSESSMENT 1. 2. THE TAXPAYER FILES HIS TAX RETURN A LETTER OF AUTHORITY IS ISSUED BY THE BIR EXAMINER TO AUDIT OR EXAMINE THE TAX RETURN AND DETERMINE WHETHER THE FULL AND COMPLETES TAXES HAS BEEN PAID The Letter of Authority [LA] should indicate accurately the year or years to be examined and the name of the examiner authorized to examine. The LA must be served to the taxpayer within 30 days from its date of issue, otherwise it becomes null and void. An LA issued by an RDO which does not have jurisdiction over the taxpayer has no force and effect. Once an LA has been issued a tax return cannot be amended. 3. IF THE EXAMINER IS SATISFIED THAT THE TAX RETURN IS TRULY REFLECTIVE OF THE TAXABLE TRANSACTION AND ALL TAXES HAVE BEEN PAID THE PROCESS ENDS. HOWEVER IF THE EXAMINER IS NOT SATISFIED THAT THE TAX RETURN IS TRULY REFLECTIVE OF THE TAXABLE TRANSACTION AND THAT THE TAXES HAVE NOT BEEN FULLY PAID, A NOTICE OF INFORMAL CONFERENCE IS ISSUED INVITING THE TAXPAYER TO EXPLAIN WHY HE SHOULD NOT BE SUBJECT TO ADDITIONAL TAXES IF THE TAXPAYER ATTENDS THE INFORMAL CONFERENCE AND THE EXAMINER IS SATISFIED WITH THE EXPLANATION OF THE TAXPAYER, THE PROCESS IS AGAIN ENDED. If the taxpayer fails to respond within 15 days from date of receipt of the notice for informal conference, he shall be considered in default, in which case, the RDO or the Chief of the Special Investigation Division of the Revenue Regional Office, or the Chief of Division in the National Office, as the case may be, shall endorse the case with the least possible delay to the Assessment Division of the Revenue Regional Office or to the Commissioner or his duly authorized representative, as the case may be, for appropriate review and issuance of a deficiency tax assessment, if warranted [RR 12-99 Sec. 3 3.1.1] If after review and evaluation by the Assessment Division or by the Commissioner or his duly authorized representative, as the case may be, it is determined that there exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said Office shall issue to the taxpayer, at least by registered mail, a Preliminary Assessment Notice [PAN] for the proposed assessment, showing in detail, the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based [RR 12- 99 Sec. 3 3.1.2]
of payment of the tax regardless of any supervening cause that may arise after payment [2nd Par. Sec. 229] or within 30 days from receipt of the denial by the CIR of the application for refund or credit [Sec. 11 RA 1125] REMEDIES DISPUTED ASSESSMENT
SEC 228. Protesting of Assessment. When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That a pre-assessment notice shall not be required in the following cases: a. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return; b. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or c. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or d. When the excise tax due on excisable articles has not been paid; or e. When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to nonexempt persons. The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within 30 days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within 60 days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within 180 days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the CTA within 30 days from receipt of the said decision, or from the lapse of the 180-day period; otherwise, the decision shall become final, executory and demandable.
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registered mail or by personal delivery [RR 12-99 SEC 3. 3.1.4] Rationale to give the taxpayer the opportunity to refute the findings of the examiner and give a more accurate and detailed explanation regarding assessments.
The PAN requires the taxpayer to explain within 15 days from receipt why no notice of assessment and letter of demand for additional taxes should be directed to him If the taxpayer fails to respond within 15 days from date of receipt of the PAN, he shall be considered in default, in which case, a formal letter of demand and assessment notice shall be caused to be issued by the said Office, calling for payment of the taxpayer's deficiency tax liability, inclusive of the applicable penalties [RR 12- 99 Sec. 3 3.1.2] GR - Notice of informal conference is required before the issuance of a PAN and a PAN is required before the issuance of assessment notice. Exceptions - The notice for informal conference and the preliminary assessment notice shall not be required in any of the following cases, in which case, issuance of the formal assessment notice for the payment of the taxpayer's deficiency tax liability shall be sufficient: 1. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the tax return filed by the taxpayer; or 2. When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent; or 3. When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; or 4. When the excise tax due on excisable articles has not been paid; or 5. When an article locally purchased or imported by an exempt person, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons [RR 12-99 SEC 3. 3.1.3] Requirements of Due Process for Validity of Assessment Notice 1. The issuance of a notice for informal conference 2. A pre-assessment notice must be furnished the taxpayer advising him that proper taxes should be assessed. 5. IF THE CIR IS SATISFIED WITH THE EXPLANATION OF THE TAXPAYER THEN THE PROCESS IS AGAIN ENDED. IF THE TAXPAYER IGNORES THE PAN BY NOT RESPONDING OR HIS EXPLANATION IS NOT ACCEPTED BY THE CIR THEN A NOTICE OF ASSESSMENT AND A LETTER OF DEMAND IS ISSUED BY THE COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVE. The letter of demand calling for payment of the taxpayer's deficiency tax or taxes shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of demand and assessment notice shall be void. The same shall be sent to the taxpayer only by
SEC. 203. Period of Limitation upon Assessment and Collection. Except as provided in Sec. 222, internal revenue taxes shall be assessed within 3 years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the 3-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.
The notice of assessment must be issued by the CIR within a period of 3 years from the time the tax return was filed or should have been filed whichever is the latter of the two events. Where the taxpayer did not file a tax return or where the tax return filed is false or fraudulent, then the CIR has a period of 10 years from discovery of the failure to file a tax return or from discovery of the fraud within which to issue an assessment notice. The running of the above prescriptive periods may however be suspended under certain circumstances. Requisites of a Valid Assessment 1. It must be issued within the prescribed period 2. As a GR it may be issued only after a pre-assessment notice has been served upon the taxpayer 3. It must conform to the formal requisites for the validity of a formal letter of demand and assessment notice. GR Prescriptive periods for making assessments - at any time within 3 years EXCEPTIONS: 1. After the last day prescribed by law for the filing of the return 2. Where a return is filed beyond the period prescribed by law, the 3-year period shall be counted from the day the return was filed 3. Where the return was filed before the last day prescribed by law for the filing thereof, it shall be considered as filed on such last day [Sec. 203] Exceptions - Instances where the 3 year period does not apply 1. In case of false or fraudulent return to evade the payment of tax At anytime within 10 years after the discovery of the falsity or fraud 2. In case of failure to file a return At anytime within 10 years after the discovery of the omission to file a return 3. If before the expiration of the 3 year period for the assessment of the tax, there is an agreement in writing between the taxpayer and the BIR Commissioner the period agreed upon which may be extended by subsequent written agreements made before the period previously agreed upon.
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Assessment **It is a finding by the taxing agency that the taxpayer has not paid his correct taxes. The purpose of which is to ascertain the amount that a taxpayer should pay. It also signals the time when penalties and interests begin to accrue against the taxpayer. It must be sent to and received by a taxpayer, and must demand payment of the taxes described therein within a specific period. An assessment is deemed made only when the collector of internal revenue releases, mails or sends such notice to the taxpayer [CIR v. PASCOR REALTY & DEVT. CORP. GR 128315. June 29, 1999] Internal revenue taxes are self-assessing. A self assessed tax a tax that the taxpayer himself assesses or computes and pays to the taxing authority. The notice was not sent to the taxpayer for the purpose of giving effect to the assessment, and said notice could not produce any effect [VDA. DE GABRIEL v. CIR 421 SCRA 266] When an estate is under administration, notice must be sent to the administrator of the estate, since it is the said administrator, as representative of the estate, who has the legal obligation to pay and discharge all debts of the estate and to perform all orders of the court [supra] Initiation by BIR of criminal prosecution is not an assessment notice because this was not sent to the taxpayer and does not demand payment of the tax within a certain period of time. **An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and evade the income tax. A crime is complete when the violator has knowingly and willfully filed a fraudulent return with intent to evade and defeat the tax [UNGAB v. CUSI] Since the registered wholesale price of the goods, approved by the BIR, is presumed to be the actual wholesale price, therefore, not fraudulent and unless and until the BIR had made a final determination of what is supposed to be the correct taxes, the taxpayer should not be placed in the crucible of criminal prosecution [CIR v. CA GR 119322. June 4, 1996] CRIMINAL CHARGE FOR VIOLATION OF THE NIRC Should be supported by a prima facie showing of failure to file a required return Such is not so with a criminal charge ASSESSMENT The fact of failure to file a return need not proven in an assessment Before an assessment is issued the is by practice required the issuance of a pre-assessment notice to the taxpayer The purpose of the issuance of an assessment is to collect the tax
Under Section 203 CIR had 3 years from the last day for the filing of the return to send an assessment notice to petitioner. An assessment is made within the prescriptive period if notice to this effect is released, mailed or sent by the CIR to the taxpayer within said period. Receipt thereof by the taxpayer within the prescriptive period is not necessary but this rule does not dispense with the requirement that the taxpayer should actually receive, even beyond the prescriptive period, the assessment notice [BARCELON, ROXAS SECURITIES, INC. v. CIR 498 SCRA 126] The release, mailing, or sending of the notice be clearly and satisfactorily proved. Mere notations made without the taxpayers intervention, notice, or control, without adequate supporting evidence, cannot suffice; otherwise, the taxpayer would be at the mercy of the revenue offices, without adequate protection or defense [supra] The failure of the respondent to prove receipt of the assessment by the Petitioner leads to the conclusion that no assessment was issued. Consequently, the governments right to issue an assessment for the said period has already prescribed [supra] The 3 year prescriptive period has a total of 1095 days [BPI v. CIR Oct. 17, 2005] The 3 year prescriptive period within which the CIR may assess a taxpayer of expanded withholding tax shall be counted from the last day required by law for filing a monthly remittance return which is 10 days after the end of each calendar month [save December] and 25 days after the end of December for taxes withheld from the last compensation/income payment for the said month [HPCO AGRIDEV CORP. v. CIR CTA CASE July 18, 2002] Effect of amended return - The prescriptive period within which to assess is counted from the date of filing the amended return and not the date when the original return was filed. Rationale for the prescriptive period or statute of limitations for assessment - Though the statute of limitations on assessment and collection of national internal revenue taxes benefits both the Government and the taxpayer, it principally intends to afford protection to the taxpayer against unreasonable investigation. The indefinite extension of the period for assessment is unreasonable because it deprives the said taxpayer of the assurance that he will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time. Laws on prescription should be liberally construed in favor of the taxpayer. Reason for the purpose of safeguarding taxpayers from an unreasonable examination, investigation or assessment, our tax laws provide a statute of limitations on the collection of taxes.
Instituted to penalize the taxpayer for violation of the Tax Code
A taxpayers actual knowledge of the basis of the assessment, such that it or he was able to intelligently
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Prima Facie evidence of a false or fraudulent return 1. A substantial underdeclaration of taxable sales, receipts or income, or a substantial overstatement of deductions, as determined by the Commissioner or his duly authorized representative pursuant to rules and regulations issued by the Sec. of Finance 2. Failure to report sales, receipts or income in an amount exceeding 30% of that declared per return, constitute substantial underdeclaration of sales receipts, or income. 3. A claim of deductions in an amount exceeding 30% of actual deductions constitutes overstatement of deductions [Sec. 248 B] 4. There is a prima facie evidence of a false or fraudulent return when the taxpayer has willfully and knowingly filed it with intent to evade a part or all of the tax legally due from him [UNGAB v. CUSI] FALSE RETURN merely a deviation from the truth due to mistake not subject to 50% fraud penalty does not subject the taxpayer to criminal penalties Waiver It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date contained therein. A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. A taxpayer is stopped from questioning the validity of a waiver extending the period to assess by his act of paying the assess taxes covered by the same waiver. Requisites for agreement waiving the 3 year period 1. Entered before the expiration of the 3 year period for the assessment of the tax 2. In writing 3. Signed both by the taxpayer and the BIR Commissioner 4. The waiver must be for a definite period beyond the ordinary prescriptive period for assessment and collection. The period agreed upon can still be extended by a subsequent written agreement, provided that it is executed prior to the expiration of the first period agreed upon [PHIL. JOURNALISTS v. CIR 447 SCRA 214] Characteristics of an Invalid Waiver 1. The waiver is defective if it does not specify a definite agreed date between the BIR and the taxpayer within which to formally assess and collect 2. Waiver is defective if signed only by the Revenue District Officer and not by the Commissioner 3. Waiver is not complete if copies were not furnished to the taxpayer FRAUDULENT RETURN implies intentional or deceitful entry with intent to evade the taxes due subject to the 50% fraud penalty may subject the taxpayer to criminal penalties
protest the assessments is sufficient compliance with the requirement under Sec. 228. Assessments are prima facie correct and made in good faith. Reason Lifeblood theory.
SEC 222. Exceptions as to Period of Limitation of Assessment

and Collection of Taxes.
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In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within 10 years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof. If before the expiration of the time prescribed in Sec. 203 for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon. Any internal revenue tax which has been assessed within the period of limitation as prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within 5 years following the assessment of the tax. Any internal revenue tax, which has been assessed within the period agreed upon as provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the 5-year period. The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon. Provided, however, That nothing in the immediately preceding Section and paragraph (a) hereof shall be construed to authorize the examination and investigation or inquiry into any tax return filed in accordance with the provisions of any tax amnesty law or decree.
An act or omission which amounts to intentional wrongdoing with the sole object of avoiding the tax Fraud is a question of fact and the circumstances constituting fraud must be alleged and proved in the court. Actual, not presumed, fraud shall be the bench mark of liability. Fraud must be proved to exist by clear and convincing evidence amounting to more than mere preponderance, and cannot be justified by mere speculation.
Fraud

which is the period provided for by implementing rules and regulations [3rd par. Sec. 228] Upon the issuance of an assessment notice, the taxpayer shall protest administratively by filing a request for reconsideration or reinvestigation within 30 days from receipt of the assessment in such form and manner as may be prescribed by the implementing rules and regulations. Within 60 days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final [par. 4 Sec. 228] Provisional assessment cannot supersede an earlier assessment which had become final and executor. Where the assessment has become final, executor and collectible the taxpayer cannot pay the tax, ask for a refund and when denied appeal to the CTA. Reason He would be doing indirectly, what he could not do directly, that is open an assessment that has become final. The taxpayer could not immediately interposed an appeal to the CTA because there is no decision yet of the CIR that could be the subject of a review. There is no need to pay under protest. PROTEST it is the act by the taxpayer of questioning the validity of the imposition of the corresponding delinquency increments for internal revenue taxes as shown in the notice of assessment and letter of demand. Protest under the NIRC Protest under the NIRC as well as under the LGC for local taxes does not require payment of the taxes being protested. Protest under other Special Laws Under the TCC, payment of the protested custom duties is a requirement. So, also with the LGC for real property taxes, where the issue is reasonableness and excessiveness of the tax being collected but not where the issue is validity or legality of the tax or solution indebeti. For real property taxation, the protest is to be filed at the time of the payment of the tax being protested
SEC 223. Suspension of Running of Statute of Limitations. The running of the Statute of Limitations provided in Secs. 203 and 222 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for 60 days thereafter; when the taxpayer requests for a reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected: Provided, That, if the taxpayer informs the Commissioner of any change in address, the running of the Statute of Limitations will not be suspended; when the warrant of distraint or levy is duly served upon the taxpayer, his authorized representative, or a member of his household with sufficient discretion, and no property could be located; and when the taxpayer is out of the Philippines.
Events that Suspend/Interrupt the prescriptive period to assess the tax 1. When the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for 60 days thereafter 2. When the taxpayer requests for a reinvestigation which is granted by the Commissioner 3. When the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected 4. When the warrant of distraint or levy is duly served upon the taxpayer, his authorized representative, or a member of his household with sufficient discretion, and no property could be located; 5. When the taxpayer is out of the Philippines. 6. THE TAXPAYER SHOULD THEN FILE AN ADMINISTRATIVE PROTEST BY FILING A REQUEST FOR RECONSIDERATION OR REINVESTIGATION WITHIN 30 DAYS FROM RECEIPT OF THE ASSESSMENT NOTICE. The taxpayer shall state the facts, the applicable law, rules and regulations, or jurisprudence on which his protest is based, otherwise, his protest shall be considered void and without force and effect [RR 12-99 SEC 3. 3.1.5] If the taxpayer fails to file a valid protest against the formal letter of demand and assessment notice within 30 days from date of receipt thereof, the assessment shall become final, executory and demandable [RR 1299 Sec. 3 3.1.5] and the BIR could use its administrative and judicial remedies in collecting the tax. Remedies under the NIRC available to an aggrieved Taxpayer at the Administrative Level with respect to assessment of internal revenue taxes 1. Upon receipt of a pre-assessment notice, the taxpayer shall respond to the same within 15 days from receipt
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Protest under the NIRC should be filed within 30 days from receipt of the assessment notice.
Even if the protest did not categorically state or use the words reinvestigation and reconsideration, the same are to be treated as letters of reinvestigation and reconsideration. Two kinds of protest to an assessment 1. Request for reconsideration refers to a plea for a reevaluation of an assessment on the basis of the existing records without evidence. It may involve a question of fact or law or both. 2. Request for reinvestigation - refers to a plea for a reevaluation of an assessment on the basis of newly
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BEEN SUBMITTED; OTHERWISE, THE ASSESSMENT SHALL BECOME FINAL, EXECUTORY AND DEMANDABLE. Once the assessment has become final and collectible, not even the BIR Commissioner could change the same. 8. IF THE PROTEST IS DENIED IN WHOLE OR IN PART, OR IS NOT ACTED UPON WITHIN 180 DAYS FROM SUBMISSION OF DOCUMENTS, THE TAXPAYER ADVERSELY AFFECTED BY THE DECISION OR INACTION MAY APPEAL TO THE CTA WITHIN 30 DAYS FROM RECEIPT OF THE SAID DECISION, OR FROM THE LAPSE OF THE 180-DAY PERIOD, WITH AN APPLICATION FOR THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION TO ENJOIN THE BIR FROM COLLECTING THE TAX SUBJECT OF THE APPEAL. OTHERWISE, THE DECISION SHALL BECOME FINAL, EXECUTORY AND DEMANDABLE.
discovered or additional evidence that a taxpayers intends to presenting the reinvestigation. A request for reinvestigation, and not a request for reconsideration, interrupts the running of the statute of limitations on the collection of the assessed tax [CIR v. PHIL. GLOBAL COMMUNICATIONS 506 SCRA 427] Where a taxpayer demands a reinvestigation, the time employed in reinvestigating should be deducted from the total period of limitation [supra] GR No prior payment of the assessed internal revenue tax is required when protested or disputed; Exceptions 1. If there are several issues involved in the formal letter or demand assessment notice but the taxpayer only disputes or protests against the validity of some of the issues raised, the taxpayer shall be required to pay the deficiency tax or taxes attributable to the undisputed issues, in which case, a collection letter shall be issued to the taxpayer calling for payment of the said deficiency tax, inclusive of the applicable surcharge and/or interest. 2. No action shall be taken on the taxpayers disputed issues until the taxpayer has paid the deficiency tax or taxes attributable to the said undisputed issues. The prescriptive period for assessment or collection of the tax or taxes attributable to the disputed issues shall be suspended. Formal Requirements for an administrative protest 1. The taxpayer shall state the facts, the applicable law, rules and jurisprudence on which his protest is based, otherwise, his protest shall be considered void and without force and effect. 2. If there are several issues involved in the disputed assessment and the taxpayer fails to state the facts, the applicable law, rules and regulations, or jurisprudence in support of his protest against some of the several issues on which the assessment is based, the same shall be considered undisputed issue or issues, in which case, the taxpayer shall be required to pay the corresponding deficiency tax or taxes attributable thereto. 3. The taxpayer shall submit the required documents in support of his protest within 60 days from the date of filing of his letter of protest, otherwise the assessment shall become final, executor and demandable. Requisites for grant of protest, dispute or reinvestigation 1. Showing that the protest was seasonably filed within 30 days from receipt of the assessment notice 2. Compliance with the formal requirements for an administrative protest 3. Proof that the assessment is wrong 4. Proof that the assessment is merely a presumption and not based on actual facts 5. Showing of the correct and just assessment. 7. WITHIN 60 DAYS FROM FILING OF THE PROTEST, ALL RELEVANT SUPPORTING DOCUMENTS SHALL HAVE
The decision of the Commissioner or his duly authorized representative shall: 1. Sate the facts, the applicable law, rules and regulations, or jurisprudence on which such decision is based, otherwise, the decision shall be void, in which case, the same shall not be considered a decision on a disputed assessment; and 2. That the same is his final decision [RR 12-99 Sec. 3 3.1.6] If the decision is void for failure of the BIR Commissioner to comply with the said requirements, then it is as if there is no decision, and the taxpayer must interpose an appeal within 30 days from the lapse of 180 days period from submission of the complete and supporting documents If the protest is denied, in whole or in part, by the Commissioner or his duly authorized representative, the taxpayer may appeal to the CTA within 30 days from date of receipt of the said decision, otherwise, the assessment shall become final, executory and demandable [Sec. 3.1.5, RR 12-99] In case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: 1. File a petition for review with the CTA within 30 days after the expiration of the 180-day period; or 2. Await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the CTA within 30 days after receipt of a copy of such decision [RCBC v. CIR 522 SCRA 144] However, these options are mutually exclusive, and resort to one bars the application of the other [supra] After availing the first option, i.e., filing a petition for review which was however filed out of time, petitioner can not successfully resort to the second option, i.e., awaiting the final decision of the Commissioner and appealing the same to the CTA, on the pretext that there is yet no final decision on the disputed

If the assessment notice has become final, executory and collectible and the BIR files a collection suit in court, the taxpayer may use affirmative defenses but not negative defenses which are deemed waived for failure to raise the same in the administrative proceedings. Estoppel could not be raised as a defense because the government is not estopped by the acts of its agents. Motion for reconsideration is essential to file petition for review with CTA. The motion for reconsideration need not conform to a particular form of procedure. Remedies under the NIRC available to an aggrieved taxpayer at the judicial level with respect to assessment of internal revenue taxes 1. If the protest is denied in whole or in part, or is not acted upon within 180 days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the CTA within 30 days from receipt of the said decision, or from the lapse of the 180-day period; otherwise, the decision shall become final, executory and demandable. 2. The appeal is to be heard by a division. If the Divisions decision is unfavorable to the taxpayer, he could then file a motion for reconsideration or new trial with the Division within 15 days from notice. The Divisions unfavorable action on the motion for new trial or reconsideration may file a petition for review with the CTA en banc. The adverse ruling of the CTA en banc is appealable to the SC through a verified petition for review on certiorari within a period of 15 days from receipt of the CTA adverse decision, which period is extendible for 30 days GR - New issues cannot be raised for the first time on appeal. Exceptions 1. Defense of prescription 2. Errors of administrative officials. Two rules on Prescription 1. ASSESSMENT 3 years computed from the time the tax return was filed or should be filed whichever is later. However, where there is no return filed or what was filed was a false and fraudulent return, then the prescriptive period is 10 years computed from the discovery of the falsity or of the fraud, or of the failure the tax return 2. COLLECTION 5 years from the issuance of an assessment notice. Where the return is false or fraudulent, or no return was filed, the deficiency taxes may be collected even without assessment within 10 years from the discovery of the falsity or of the fraud, or of the failure the tax return UNDISPUTED ASSESSMENT 1. The CIR files an ordinary action for the collection of the tax before a regular court or the CTA, depending upon the jurisdictional amount Any decision of the trial court sustaining an undisputed assessment would be appealable to the CTA then to the SC in accordance with the ROC. Any decision of the CTA
assessment because of the Commissioners inaction [supra] A final demand letter from the BIR, reiterating to the taxpayer the immediate payment of a tax deficiency assessment previously made, is tantamount to a denial of the taxpayers request for reconsideration. Such letter amounts to a final decision on a disputed assessment and is thus appealable to the CTA [CIR v. ISABELA CULTURAL CORP. G.R. No. 135210. July 11, 2001] A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the letter being sent to the taxpayer [OCEANIC WIRELESS NETWORK v. CIR 477 SCRA 205] The authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same force and effect as that issued by the Commissioner himself, if not reviewed or revised by the latter such as in this case [supra] Acts of the CIR considered as denial of a protest which serve as basis for appeal to the CTA 1. Filing by the BIR of a civil suit for the collection of the deficiency tax is considered a denial of the request for reconsideration 2. An indication to the taxpayer by the Commissioner in clear and unequivocal language of his final denial not the issuance of the warrant of distraint and levy. What is the subject of the appeal is the final decision not the warrant of distraint. 3. A BIR demand letter sent to the taxpayer after his protest of the assessment notice is considered as the final decision of the Commissioner on the protest. 4. A letter of the BIR Commissioner reiterating to a taxpayer his previous demand to pay an assessment is considered a denial of the request for reconsideration or protest and is appealable to the CTA 5. Final notice before seizure considered as Commissioners decision of taxpayers request for reconsideration who received no other response. Only Commissioners final decision denying the dispute is subject of appeal. 9. THE APPEAL IS TO BE HEARD BY A DIVISION. IF THE DIVISIONS DECISION IS UNFAVORABLE TO THE TAXPAYER, HE COULD THEN FILE A MOTION FOR RECONSIDERATION OR NEW TRIAL WITH THE DIVISION WITHIN 15 DAYS FROM NOTICE. THE DIVISIONS UNFAVORABLE ACTION ON THE MOTION FOR NEW TRIAL OR RECONSIDERATION MAY FILE A PETITION FOR REVIEW WITH THE CTA EN BANC. THE ADVERSE RULING OF THE CTA EN BANC IS APPEALABLE TO THE SC THROUGH A VERIFIED PETITION FOR REVIEW ON CERTIORARI WITHIN A PERIOD OF 15 DAYS FROM RECEIPT OF THE CTA ADVERSE DECISION, WHICH PERIOD IS EXTENDIBLE FOR 30 DAYS
2.

The 5-year period for collection of the assessed tax began to run on the date the assessment notice had been released, mailed or sent by the BIR [supra]
upon the tax collection may be appealed to the SC through a verified petition for review. Methods that may be utilized by the commissioner to determine the correct taxable income of the taxpayer if the latters record or methods of accounting are not reflective of his true income [Known as best evidence obtainable rules] 1. NET WORTH METHOD A method of reconstructing income which is based on the theory that if the taxpayers net worth has increased in a given year in an amount larger that his reported income, he has understated his income for the year. The net worth on a fixed starting date is compared with the net worth on a fixed ending date. Any increase in net worth is presumed to be income not declared for tax purposes. FORMULA: ASSETS LIABILITIES = NET WORTH 2. Cash expenditure method When during a taxable year, a taxpayer incurs expenditures, the source of which could not be explained [such as from gifts, donations, income subject to final taxes, disposal of previously paid, excluded or tax exempt income] the amount of expenditures is presumed to be income for the taxable year subject to income tax 3. Percentage method It is the equivalent of ratio analysis of percentages considered typical of the business under investigation to indicate potential areas of revenue adjustment in examination where revenue records do not exist. The computed amount of revenues based on the percentage computation is compared to the amount of revenues reflected on the return. The percentages used may be obtained from the taxpayer, industry publications; prior years audit results or third parties. The comparison will provide an indication of the possibility of revenue being understated. 4. Bank deposit method Unexplained increases in bank deposits, not coming from excluded income, raise the presumption that the increases are unreported income subject to tax. 5. Unit value method The determination or verification of gross receipts may be computed by applying price and profit figures to known ascertainable quality of business of the taxpayer. 6. Third party information or access to records method The BIR inquires from third parties through access of records. This is usually done in order to verify gross receipts and non-availability of needed information through other methods. 7. Surveillance and assessment method 8. Such method as in the opinion of the BIR Commissioner clearly reflect the income. II. COLLECTION When the BIR validly issues an assessment, within the 3-year period or the 10-year period, whichever was applicable, the law provided another 5 years after the assessment for the collection of the tax due thereon through the administrative process of distraint and/or levy or through judicial proceedings [CIR v. PHILIPPINE GLOBAL COMMUNICATION 506 SCRA 427]
SEC. 205. Remedies for the Collection of Delinquent Taxes. The civil remedies for the collection of internal revenue taxes, fees, or charges, and any increment thereto resulting from delinquency shall be: a. By distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property; and b. By civil or criminal action. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes: Provided, however, that the remedies of distraint and levy shall not be availed of where the amount of tax involved is not more than P100. The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as finally decided by the Commissioner. The BIR shall advance the amounts needed to defray costs of collection by means of civil or criminal action, including the preservation or transportation of personal property distrained and the advertisement and sale thereof, as well as of real property and improvements thereon.
Government remedies for enforcement and collection of internal revenue taxes 1. Criminal proceedings as may be warranted by the circumstances filed before the regular court, or with the CTA 2. Civil Remedies which may judicial or administrative a. Judicial actions before the regular courts b. Administrative actions 1. Distraint of personal Property either actual or constructive [Secs. 206 & 207] 2. Levy on real estate [Sec 207 B] 3. Enforcement of tax lien [Sec. 219] 4. Enforcement of forfeiture of real and personal properties [Sec. 224] 5. Non-issuance of clearance for travel [PD 1183] 6. The power of the Comm. To compromise under Sec. 204 7. The giving of rewards to informers who gave information as to violations of tax laws 8. Deportation of aliens who violate any tax legislations of the Phil. 9. Filing of performance bond to assure compliance with certain tax laws or regulations 10. Surcharges or penalties for the payment of tax 11. Authority of the Comm. To effect arrest in certain cases
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3. Where the assessment was issued within a period agreed upon between the taxpayer and the BIR, this is an extended assessment which could be collected within a period of 5 years from issuance of the assessment. Under Sec. 222 c the warrant of distraint and/or levy need not be fully executed to suspend the prescriptive period for collection of the tax. It is enough that the proceedings have validly began or commenced and that their execution has not been suspended by reason of the voluntary desistance of the BIR Commissioner. Various periods for payment of selected internal revenue taxes Income Taxes 1. In general. Income taxes shall be paid by the person thereof at the time the return is filed [sec. 56 A] Known as pay as you go system or pay as you file system 2. Where the income tax due from tramp vessels, the shipping agents and/or the husbanding agents, and in their absence, the captains thereof are required to file the return herein provided and pay the tax due thereon before their departure. 3. When the tax due is in excess of P2,000, the taxpayer other than a corporation may elect to pay the tax in 2 equal installments in which case, the first installment shall be paid at the time the return is filed and the second installment, on or before July 15 following the close of the calendar year 4. For income derived from the sale or exchange of shares of stocks not traded through a local stock exchange a retrun shall be filed and the tax shall be paid within 30 days after each transaction. For an individual a final consolidated return shall be filed on or before April 15 of each year covering all stock transactions of the preceding taxable year [Sec. 52 D in relation to Sec. 56 A] 5. Income from the sale or disposition of real property classified as capital the return shall be paid and the tax paid within 30 days following each sale or other disposition. Estate Taxes Shall be paid at the time the return is filed which is within 6 months from the decedents death Donors Tax Shall be paid at the time the donors tax return is filed which is filed which is 30 days after the date the gift is made. Summary of governmental remedies for the collection of delinquent internal revenue taxes 1. Judicial Action Civil or Criminal 2. Civil or administrative remedies By distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property and by
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12. Power of the Comm. To obtain, information, examine, summon and take testimony from government officers or agencies and other persons 13. Authority of tax officers to examine and inspect book of accounts and other accounting records of the taxpayer. Distinction of Taxpayers Remedies Tax Assessments Taxpayer has a period of 30 days from receipt of an assessment within which to dispute the same The period to appeal from the denial of the taxpayers dispute is 30 days from receipt of BIRs denial Generally the taxpayer has to wait for the BIRs decision on the application for refund before he could appeal to the CTA Claim of Refund for Taxes the taxpayer is given a period of two years within which to apply for a refund counted from payment the taxpayer in refunds has likewise the same period but the said 30 days must be within 2 years from the payment of the tax There is no need for the taxpayer to wait for the BIRs decision on the application for refund or credit, if the 2 year period is about to expire
RA 9282 SEC. 7. C. Jurisdiction over tax collection case as herein provided: 1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees, charges and penalties: Provided, however, That collection cases where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos shall be tried by the proper MTC, MeTC and RTC. 2. Exclusive appellate jurisdiction in tax collection cases: a. Over appeals from the judgments, resolutions or orders of the RTCs in tax collection cases originally decided by them, in their respective territorial jurisdiction. b. Over petitions for review of the judgments, resolutions or orders of the RTCs in the exercise of their appellate jurisdiction over tax collection cases originally decided by the MTC in their respective jurisdiction.
Prescriptive periods for collection of internal revenue taxes 1. Within 5 years from the issuance of an assessment notice where there was a return filed, the return is not false and fraudulent, and the assessment is not an extended one issued after an agreement between the taxpayer and the BIR to suspend the running of the prescriptive period 2. Where the internal revenue taxes has been assessed within the prescriptive period of 10 years after the discovery of the falsity, fraud or omission in the filing of the tax return the prescriptive period is within 5 years following the assessment of the tax.

the Revenue District Officer, if the amount involved is One million pesos or less 2. Levy on Real Property
levy upon real property and interest in or rights to real property [SEC. 205] Conditions for the exercise of remedies 1. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes: 2. The remedies of distraint and levy shall not be availed of where the amount of tax involved is not more than P100. Conditions for the court action for collection of delinquent taxes a. No proceeding in court without assessment for the collection of internal revenue taxes shall be begun after the expiration of the 3 or 10 year period for assessment as the case may be. Note while the assessment is still pending with the Commissioner of Internal Revenue it cannot serve as the basis for the collection by distraint or levy or by judicial action. Constructive Distraint b. The service of a notice upon the taxpayer that he could not dispose of his personal property until he has paid the tax deficiency. Grounds for effecting constructive distraint The Commissioner may place under constructive distraint the property of a delinquent taxpayer or any taxpayer who, in his opinion, is 1. Retiring from any business subject to tax, or is 2. Intending to leave the Philippines or to 3. Remove his property therefrom or to 4. Hide or conceal his property or to 5. Perform any act tending to obstruct the proceedings for collecting the tax due or which may be due from him. The constructive distraint of personal property shall be effected by 1. requiring the taxpayer or any person 2. having possession or control of such property 3. to sign a receipt covering the property distrained and 4. obligate himself to 5. preserve the same intact and unaltered and 6. not to dispose of the same in any manner whatever, without the express authority of the Commissioner. In case the taxpayer or the person having the possession and control of the property sought to be placed under constructive distraint refuses or fails to sign the receipt herein referred to, the revenue officer effecting the constructive distraint shall 1. proceed to prepare a list of such property and, in the presence of 2 witnesses, leave a copy thereof in the premises where the property distrained is located, 2. after which the said property shall be deemed to have been placed under constructive distraint. Summary Remedies [Sec. 207] 1. Actual distraint of personal property - The physical taking of taxpayers personal property to answer for his tax liability. The Commissioner or his duly authorized representative, if the amount involved is in excess of One million pesos
Garnishment [Sec. 208] The taking of personal properties usually cash or sum of money, owned by a delinquent taxpayer which is in the possession of a third party. CONSTRUCTIVE DISTRAINT the BIR does not take physical possession of the personal property there is no finding yet of a discrepancy, only that the taxpayer is leaving the country or disposing of his property in fraud of creditors or is in the process of liquidation the personal property is merely held as security to answer for any future tax delinquencies The purpose is protection of government revenues and ensure that there are properties of the taxpayer which the government could proceed against after a determination of the amount of delinquency taxes ACTUAL DISTRAINT The personal property actually taken
is
The taxpayer is already delinquent in the payment of his taxes
The personal property is taken to be sold in order to satisfy tax delinquencies The deficiency taxes are already determined
The timely service of a warrant of distraint or levy suspends the running of the period to collect the tax deficiency in the sense that the disposition of the attached properties might well take time to accomplish, extending even after the lapse of the statutory period of collections. Redemption of property sold Period within 1 year from the date of the sale. It may redeem by the taxpayer or anyone for him. Redemption shall be made by payment of the amount of the public taxes, penalties, and interest thereon from the date of delinquency to the date of sale, together with interest on said purchase price at the rate of 15% per annum from the date of purchase to the date of redemption [Sec. 214] Tax Lien A legal claim or charge on property either real or personal as security for the tax obligation. The unpaid tax constitutes as a burden upon all property and property rights belonging to the delinquent taxpayer. It is a warning to all potential buyers of that property that any proceeds of the sale should be applied to the tax deficiency. Tax lien superior to judgment claim of private property. Reason - The tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax became due and payable
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Tax Liens under the NIRC - Upon any internal revenue tax like 1. Income tax lien 2. Estate and donor's taxes lien 3. Value-added tax lien 4. Other percentage taxes lien 5. Excise taxes lien 6. Documentary stamp taxes lien 7. Miscellaneous taxes fees and charges liens Taxes lien superior to judgment claim of private property. A tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax become due and payable. Warrant of distraint Subject Matter personal property owned by and in the possession of the taxpayer As to disposition for want of bidders or bids inadequate to satisfy tax deficiency Personal property distraint or garnished are purchased by the government and resold to meet the deficiency. As to advertisement of Sale - There is no newspaper publication required for the sale of personal property distrained or garnished Levy Real property owned by and in the possession of the taxpayer. Real property subject to levy is forfeited to the Govt. then sold to meet the deficiency. Garnishment Personal property owned by the taxpayer but in the possession of a third party
2.
The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax provided that the minimum compromise entered into is equivalent to 10% of the basic assessed tax
In the above instances the Comm. Is allowed to enter into a compromise only if the basic tax involved does not exceed 1 million, and the settlement offered is not less than the prescribed percentages. B. Abate or cancel a tax liability, when: 1. The tax or any portion thereof appears to be unjustly or excessively assessed; or 2. The administration and collection costs involved do not justify the collection of the amount due. All criminal violations may be compromised except: (a) those already filed in court, or (b) those involving fraud.
Related Provision
Sale of real property subject to levy is required to be published once a week for 3 weeks in a newspaper of general circulation in the municipality or city where the property is located. SEIZURE Taxpayer retains ownership of property seized Reverse is true with seizure.
FORFIETURE ownership is transferred to the government In the disposition of the proceeds of forfeited properties the excess shall not return to the taxpayer
***SEC 204. Authority of the Commissioner Compromise, Abate and Refund or Credit Taxes.
to
A. The Commissioner may compromise the payment of any internal revenue tax, when: 1. A reasonable doubt as to the validity of the claim against the taxpayer exists provided that the minimum compromise entered into is equivalent to 40% of the basic tax or
**SEC. 7. Authority of the Commissioner to Delegate Power. 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: Provided, however, That the following powers of the Commissioner shall not be delegated: a. The power to recommend the promulgation of rules and regulations by the Secretary of Finance; b. The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau; c. The power to compromise or abate, under Sec. 204(A) and (B) of this Code, any tax liability: Provided, however, That assessments issued by the regional offices involving basic deficiency taxes of P500,000 or less, and minor criminal violations, as may be determined by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner, discovered by regional and district officials, may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman, the Assistant Regional Director, the heads of the Legal, Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer, as members; and d. The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept.
Compromise requires mutual agreement between the BIR and the taxpayer. A compromise being by its nature mutual in essence requires agreement. A compromise agreement must be strictly construed.
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***Tax cases which may be the subject of a compromise 1. Delinquent accounts 2. Cases under administrative protest after issuance of the FAN to the taxpayer which are still pending in the Regional offices, Revenue District Office and other offices in the National Office 3. Civil tax cases being disputed before the courts 4. Collection cases filed in courts 5. Criminal violations other than those filed in court or those involving tax frauds [RR 30-2002] ***Taxes which could not be the subject of a compromise 1. Withholding tax cases, unless the applicant-taxpayer invokes provisions of law that cast doubt on the taxpayers obligation to withhold 2. Criminal tax fraud cases confirmed as such by the CIR or his duly authorized representative; 3. Criminal violations already filed in court; 4. Delinquent accounts with duly approved schedule of installment payments; 5. Cases where final reports of reinvestigation or reconsideration have been issued resulting to reduction in the original assessment and the taxpayer is agreeable to such decision by signing the required agreement form for the purpose. On the other hand, other protested cases shall be handled by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB) on a case to case basis; 6. Cases which become final and executory after final judgment of a court, where compromise is requested on the ground of doubtful validity of the assessment; and 7. Estate tax cases where compromise is requested on the ground of financial incapacity of the taxpayer [RR 302002] Abatement It is the diminution or decreased in the amount of tax imposed. III. REFUND OF INTERNAL REVENUE TAXES They are in the nature of tax exemptions. Taxes are the lifeblood of the nation, therefore statutes that allow exemptions are construed strictly against the grantee and liberally in favor of the government. He who claims a refund or exemption from taxes has the burden of justifying the exemption by words too plain to be mistaken and too categorical to be misinterpreted.
claim for credit or refund within 2 years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund. A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any internal revenue tax, excluding withholding taxes, for which the taxpayer is directly liable. Any request for conversion into refund of unutilized tax credits may be allowed, subject to the provisions of Sec. 230 of this Code: Provided, That the original copy of the Tax Credit Certificate showing a creditable balance is surrendered to the appropriate revenue officer for verification and cancellation: Provided, further, That in no case shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made.
No refund of documentary stamp taxes. Reason Because they are levied upon the privilege, opportunity or facility to execute certain instrument, irrespective of whether the contracts are subsequently declared rescissible, void, voidable or unenforceable.
***SEC 229. Recovery of Tax Erroneously or Illegally Collected. No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of 2 years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.
Related Provision RRCTA R8 SEC. 3. Who may appeal; period to file petition. a] A party adversely affected by a decision, ruling or the inaction of the CIR on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the CoC, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a RTC in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within 30 days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the CIR to act on the disputed assessments. In case of inaction of the CIR on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes.
***SEC. 204 C] Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a
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days from receipt but within 2 years from payment of the tax A decision of the CTA Division denying the petition may be the subject of a motion for reconsideration or new trial with the same division A decision of the CTA Division denying the motion for reconsideration or new trial may be the subject of a petition for review to be filed with the CTA en banc. A decision of the CTA En banc adverse to the taxpayer may be appealed to the SC through a petition for review on certiorari within 15 days from receipt of the adverse decision, extendible for a period of 30 days For indirect taxes like an excise tax the proper party who can question or seek a refund of the tax is the person on whom the tax is imposed by law and who paid the tax even when he shifts the burden thereof to another. **Withholding agent could file application for refund. Since the withholding agent who is required to deduct and withhold any tax is made personally liable for such tax, subject to and liable for deficiency assessments, surcharges and penalties should the amount of the tax withheld be finally found to be less than that required to be withheld by law, then he is a taxpayer. But for purposes of tax amnesty a withholding tax agent is not a taxpayer. Period for claiming tax credit or refund of internal revenue taxes or penalties 1. Within 2 years after the payment of the tax or penalty 2. For corporations the 2 year prescriptive period should be computed from the time of filing the Final Adjustment Return [FAR] or Annual Income Tax return and final payment of the tax for that year. Reason it is only upon the filing of the FAR that a corporation could ascertain whether it made profits or incurred losses in its business operations and determine whether it is liable or not for the payment of income tax. Sec. 229 is intended to apply to suits for the recovery of internal revenue taxes or sums erroneously, excessively, illegally or wrongfully collected [CIR v. PNB 474 SCRA 303] An availment of a tax credit due for reasons other than the erroneous or wrongful collection of taxes may have a different prescriptive period. Absent any specific provision in the Tax Code or special laws, that period would be 10 years under Art. 1144 CC [supra] **Rules for computation of 2 year period for filing suit 1. The 2 year period is computed regardless of any supervening cause that may arise after the payment 2. If the tax is paid in installments, count the period from the last installment. Reason It is only upon full payment where it could be determined whether there was an overpayment. 3. Notice by the BIR that the refund is being processed and that the notice of the refund shall be mailed does not stop the running of the period
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*Grounds for claiming refund or tax credit 1. The tax have been erroneously or illegally assessed or collected [one that is levied without statutory authority] 2. The penalty have been collected without authority 3. Any sum which have been excessive or in any manner wrongfully collected 4. The tax was paid by mistake 5. Failure to use excess income tax credit against quarterly income taxes for the next taxable year. A judicial claim for refund or tax credit in the CTA is by no means an original action but rather an appeal by way of petition for review of a previous, unsuccessful administrative claim [ATLAS CONSOLIDATED v. CIR 518 SCRA 425] Tax credit Refers to an amount that is subtracted directly from ones total tax liability. It is an allowance against the tax itself or a deduction from what is owed by a taxpayer to the government. Examples of tax credits are withheld taxes, payments of estimated tax, and investment tax credits [CIR v. Central Luzon Drug 456 SCRA 414] Tax deduction A subtraction from income for tax purposes or an amount that is allowed by law to reduce income prior to [the] application of the tax rate to compute the amount of tax which is due. An example of a tax deduction is any of the allowable deductions enumerated in Sec. 34. [supra] Tax credit from tax refund A tax refund requires a physical return of the sum erroneously paid by the taxpayer, while a tax credit involves the application of the reimbursable amount against any sum that may be due and collectible from the taxpayer. Tax Credit Reduces the tax due, including whenever applicable the income tax that is determined after applying the corresponding tax rates to taxable income Used only after the tax has been computed Tax Deduction Reduces the income that is subject to tax in order to arrive at taxable income.
3.
4.
5.
Before
Requisites for a judicial claim for refund of input vat 1. The taxpayer must not only prove that it is a VAT registered entity and that it filed its claim within the prescriptive period. 2. It must substantiate the input VAT paid by purchase invoices or official receipts *Procedure for recovery by taxpayers of internal revenue taxes 1. Taxpayer files a claim for refund or credit with the CIR 2. Within 2 years from payment taxpayer may file a petition for review for recovery with the CTA Division. The decision of the CIR appealable to the CTA within 30

4.

2. Agreement exists between the taxpayer and the BIR to wait for a decision of the SC **Where assessment became final taxpayer cannot pay, ask for a refund then institute a suit for recovery. Reason The taxpayer is estopped from further questioning the assessment that has attained a state of finality, otherwise government revenues shall suffer. Even if the 2 year period had already lapsed the same is not jurisdictional and may be suspended for reasons of equity and other special circumstances such as when there is an erroneous interpretation of tax law that enabled the government to collect taxes. The 2 year period does not refer only to recovery of tax erroneously or illegally collected. It also refers to: 1. Any national internal revenue tax erroneously or illegally assessed or collected 2. Any penalty claimed to have been collected without authority 3. Any sum alleged to have been excessive or in any manner wrongfully collected.
5.
6.
For payment effected through selling of the property levied, seized or distraint at the time of the application proceeds to the tax deficiency, not of the time of the sale If the property was purchased by the government or forfeited in favor of the government, at the time of the purchase or forfeiture In computing the 2 year period with respect to excise taxes particularly on petroleum, the date of the payment is counted from the date of removal pursuant to Sec. 158.
Computation of 2 year period for withheld taxes 1. Final withholding taxes from the 25th day after the close of each calendar quarter 2. Creditable withholding taxes - from the last day of the month following the close of the quarter during which the withholding was made. Computation of 2 year period for return of VAT on zero rated sales Counted from the date of filing of the quarterly VAT return which is within 25 days after the close of each taxable quarter. It is only after the filing of the quarterly VAT liability or refundability can be determined. Computation of 2 year period for refund of gross receipts of percentage taxes Computed from the payment of the tax due which is 25 days after the end of each taxable quarter. Dates of filing FAR by corporation
SEC. 77. B] Time of Filing the Income Tax Return. The corporate quarterly declaration shall be filed within 60 days following the close of each of the first 3 quarters of the taxable year. The final adjustment return shall be filed on or before the 15th day of April, or on or before the 15th day of the 4th month following the close of the fiscal year, as the case may be.
If using the calendar year The FAR shall be filed on or before the 15th day of April If using the fiscal year The FAR shall be filed on or before the 15th day of the 4th month following the close of the fiscal year, as the case may be ***Reconciliation between the 2 year period under the NIRC and the 30 day period under RA 9282 a. If the 30 day period does not go beyond the 2 year period, apply the 30 day period b. If in the application of the 30 day period, the 2 year period would be exceeded apply the 2 year period c. If the 2 year period is about to expire but the BIR has not yet acted on the application for refund, interpose a petition for review with the CTA within the 2 year period. When 2 year period is suspended 1. Taxpayer made to believe by Comm. that the overpayment would be credited for other tax liabilities
SEC. 76. Fiscal Adjustment Return. Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year, the corporation shall either: a. Pay the balance of tax still due; or b. Carry-over the excess credit; or c. Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and 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 cash refund or issuance of a tax credit certificate shall be allowed therefor.
Sec. 76 emphasizes that it is imperative to indicate in the tax return or the final adjustment return whether a tax credit or refund is sought by making the taxpayers choice irrevocable [PASEO REALTY v. CA 440 SCRA 235] The availment of the remedy of tax credit is not absolute and mandatory. It does not confer an absolute right on the taxpayer to avail of the tax credit scheme if it so chooses. Neither does it impose a duty on the part of the government to sit back and allow an important facet of tax collection to be at the sole control and discretion of the taxpayer [supra]
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with what he believes is his legal obligation, where such obligation does not really exist. Refund depends upon the validity of tax return. Without the tax return it is error to grant a refund since it would be virtually impossible to determine whether the proper taxes have been assessed and paid. *A tax refund for a year should not be granted if there is a pending deficiency assessment for the same year Reason A deficiency assessment is intimately related to and inextricably intertwined with the right of a taxpayer to claim a tax refund for the same year. To award such a refund despite the existence of a deficiency assessment is absurdity and polarity in conceptual effects. Interest is not to be awarded against a sovereign government, unless its consent has been manifested by an Act of its Legislature or by a lawful contract of its executive officers.
Under Sec. 76 a taxable corporation with excess quarterly income tax payments may apply for either a 1. tax refund or a 2. tax credit [PHILAM ASSET Management v. CIR 477 SCRA 761] These two options under Sec. 76 are alternative in nature. The choice of one precludes the other. Failure to indicate a choice, however, will not bar a valid request for a refund, should this option be chosen by the taxpayer later on [supra] Failure to signify ones intention in the FAR does not mean outright barring of a valid request for a refund, should one still choose this option later on. A tax credit should be construed merely as an alternative remedy to a tax refund under Sec. 76, subject to prior verification and approval by respondent [supra] The reason for requiring that a choice be made in the FAR upon its filing is to ease tax administration, particularly the self-assessment and collection aspects. A taxpayer that makes a choice expresses certainty or preference and thus demonstrates clear diligence [supra] **Requisites for refund of excess withholding taxes; Taxpayer should prove 1. That he filed a written claim for credit or refund with the Comm. within the 2 year periods after the payment of the tax or penalty. Provided further that a refund filed showing an overpayment shall be considered as a written claim for credit or refund [Sec. 204 C in relation to Sec. 229] 2. That the income tax deducted and withheld is declared as part of the gross income declared in the income tax return of the recipient 3. The fact of withholding is established by the copy of the statement duly issued by the payor [withholding agent] to the payee showing the amount paid and the amount of the tax withheld therefrom. **Reason for requiring claim for refund before resort made to court 1. To afford the CIR an opportunity to correct the errors of subordinate officers 2. To notify the government that such taxes have been questioned and the notice should be borne in mind in estimating the revenue available for its expenditures. **Exceptions where there is no requirement for refund before resort may be had to the courts 1. In case of solution indebeti 2. In protested assessment where after denial of the protest the taxpayer pays and goes directly to the CTA without a claim for refund or credit. Such a claim would be in futility because the BIR already denied the protest. Protest is not a requirement in order that a taxpayer who paid under a mistaken belief that it is required by law, may claim for a refund. Reason taxpayer could not be held to suffer loss by his good intention to comply
*SEC 281. Prescription for Violations of any Provision of this Code. All violations of any provision of this Code shall prescribe after 5 years. Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. The prescription shall be interrupted when proceedings are instituted against the guilty persons and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy. The term of prescription shall not run when the offender is absent from the Philippines.
LOCAL GOVERNMENT TAXATION Constitutional Provision
***ART. X SEC. 5 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, and charges shall accrue exclusively to the local governments.
Art. 10 Sec. is not a self executing provision. Local government unit are the political subdivisions. The power of taxation has been directly granted only to the provinces, cities, municipalities and barangays. It has not been granted to the different administrative regions. Direct grant by the constitution An act of congress could not remove that particular power. It has to be by
17

4. The application of local government taxes is limited only in the territorial boundaries of the local government unit that has imposed this particular taxes.
constitutional amendment in order that particular power maybe removed. Powers that has been granted 1. To create their own sources of revenue the revenue raising power 2. To levy taxes, fees, and charges Aside from the guidelines and limitations that congress may provide, there are other kinds of limitations such as the inherent and the constitutional limitations. Congress does not have the power to take away this power because this is a direct grant by the constitution. Congress is given the authority to limit the exercise of this power. However congress could not provide guidelines and limitations which would collide directly with the basic policy of local autonomy and that the taxes, fees, and charges shall accrue exclusively to the benefit of local governments unit concerned. The power to tax is primarily vested in the Congress; however, it may be exercised by local legislative bodies, no longer merely be virtue of a valid delegation as before, but pursuant to direct authority conferred by Sec. 5, Art. 10 [CITY GOVERNMENT OF QUEZON CITY v. BAYAN 484 SCRA 169] Sec. 5 does not change the doctrine that municipal corporations do not possess inherent powers of taxation. What it does is to confer municipal corporations a general power to levy taxes and otherwise create sources of revenue. They no longer have to wait for a statutory grant of these powers. The power of the legislative authority relative to the fiscal powers of local governments has been reduced to the authority to impose limitations on municipal powers. Moreover, these limitations must be consistent with the basic policy of local autonomy. The important legal effect of Section 5 is thus to reverse the principle that doubts are resolved against municipal corporations [supra] The grant of taxing powers to local government units under the Constitution and the LGC does not affect the power of Congress to grant exemptions to certain persons, pursuant to a declared national policy [supra] Local government taxation These are taxes that are imposed and collected by local government units in order to raise revenues to enable them to perform the function for which they have been organized. *Nature of local government taxation 1. It is a direct grant and not merely a delegated power 2. The power is not absolute in character - subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. 3. It must exercise only by the local legislative body sanggunian of the local government unit concerned.
Limitations upon congress when it provides guidelines and limitations on the LGUs power of taxation The fundamental law did not intend the delegation to be absolute and unconditional; the constitutional objective obviously is to ensure that, while the local government units are being strengthened and made more autonomous, the legislature must still see to it that a. the taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions; b. each local government unit will have its fair share of available resources; c. the resources of the national government will not be unduly disturbed; and d. local taxation will be fair, uniform, and just.
**SEC. 186 Power to Levy Other Taxes, Fees or Charges/ known

as the Residual Taxing Power
Local government units may exercise the power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated herein or taxed under the provisions of the NIRC, as amended, or other applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fees or charges shall not be enacted without any prior public hearing conducted for the purpose.
*Common revenue raising powers of LGU 1. Fees, service, or user charges - Local government units may impose and collect such reasonable fees and charges for services rendered [Sec. 153] 2. Public utility Charges - Local government units may fix the rates for the operation of public utilities owned, operated and maintained by them within their jurisdiction [Sec. 154] 3. Toll fees or charges - The sanggunian concerned may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any public road, pier, or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the local government unit concerned: Provided, That no such toll fees or charges shall be collected from a. officers and enlisted men of the AFP and members of the PNP on mission, b. post office personnel delivering mail, c. physically-handicapped, and d. disabled citizens who are 65 years or older [Sec. 155] Concept of express authorization limitation/principle A local government unit could exercise only the power allocated to it and could not exercise the other powers allocated to the different local government units. For example, the province could exercise the powers allocated to it and it could not exercise the powers that had been granted to the municipality or the barangay.
18

local government units to private enterprises. Reason it is violative of public purpose. Par. d
By the same token, the municipality could exercise the powers granted to it solely and could not exercise the powers granted to the province or to the barangay. However with respect to the city, because the city could exercise the powers that had been granted to the province and to the municipality but not that of the barangay. The limitations are considered as standards that must be complied by the tax law. So if any of the limitations had been violated since they are standard for the validity of the tax law, then the tax law is invalid.
Public purpose As applied to local government taxation, it is the benefit of the local government concerned solely. So, whatever collections that are collected by the city should accrue to the said city. It should not accrue to the other city.
***SEC. 133. Common limitations on the taxing powers of

LGUs /known as exclusionary rule/rule of preemption/rule of reservation. Exclusionary rules - because the common limitations are the taxes that are authorize for the national government to be exercise to the exclusion of the local government units. Rule of reservation Because the national government has reserved for it the exercise of these powers. ***The power of taxation does not limit the exercise of police power. Analyze the problem, if the problem says that the imposition was made under police power, then the common limitation do not apply. Reason the concept of police power it much more urgent than the power of taxation.
***SEC. 132. Fundamental Principles/known as the requisites of municipal taxation. The following fundamental principles shall govern the exercise of the taxing and other revenueraising powers of local government units: a. Taxation shall be uniform in each local government unit; b. Taxes, fees, charges and other impositions shall: 1. be equitable and based as far as practicable on the taxpayer's ability to pay; 2. be levied and collected only for public purposes; 3. not be unjust, excessive, oppressive, or confiscatory; 4. not be contrary to law, public policy, national economic policy, or in the restraint of trade; c. The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person; - known as the Let Principle d. The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to the disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; and, e. Each local government unit shall, as far as practicable, evolve a progressive system of taxation 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.
*Requisites for the imposition of a fee or tax authorized by the LGC The rate should be a. Within the range provided by the code b. Uniform throughout the political subdivision c. Fair and reasonable to the taxpayers. The provisions of the LGC served as the guidelines and limitations. There has still to be a tax ordinance to be passed by the local government unit before the local government could collect taxes. Without tax ordinance LGU could not collect. Let principle The imposition, levy and collection of local government taxes shall not be delegated by the
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: a. Income tax, except when levied on banks and other financial institutions;
Exception - A city or municipality may levy business taxes on banks and other financial institution.
b. c.
Documentary stamp tax; ***Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa.
Except: Provinces and cities could impose a tax on transfer of real property ownership.
d.
e.
*Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of customs fee, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned ***Taxes, fee, and charges and other impositions upon goods carried into or out of, or passing through the territorial jurisdictions of LGUs in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or merchandise;
These common limitations are for the purpose of limiting the exercise of revenue raising power as well as the power of taxation. It has not therefore find application in the instance where
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it is an exercise of police power. If the imposition is for the protection of health, safety or morals then it is not subject to this limitation such as for example inspection fees. **Classes of licenses that may be imposed by the LGUs 1. For the regulation of useful occupations and enterprises - In order for a license fee to be valid it should not exceed the cost of special regulation, supervision and control. 2. For the regulation or restriction of non-useful occupations and enterprises The license fee collected could exceed the cost of special regulation, supervision and control that is with respect to the regulation of nonuseful occupations. So if what is regulated is a nonuseful occupation then the amount collected could exceed the cost of special regulation, supervision and control. Reason in order to discourage the proliferation of non-useful occupation. 3. For revenue only The power of taxation to be exercised jointly with the police power. If there is a joint exercise of these two powers, the weakness of one power could be overcome by the strength of the other. So if the issue is the validity of the license fee, determine whether or not it is a regulation of useful occupations, regulation or restriction of non-useful occupations or for revenue only.
transportation of passengers or freight by hire and common carriers by air, land or water, except on the operation and franchising of tricycles; k. Taxes on premiums paid by way of reinsurance or retrocession; l. Taxes, fees, or charges for the registration of motor vehicles and for the issuance of all kinds of licences or permits for the driving thereof, except tricycles; m. Taxes, fees, or other charges on Philippine products actually exported, n. Taxes, fees, or charges, on countryside and barangay business enterprises and cooperatives duly registered under RA 6810, and RA 6938. o. Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and LGUs.
Taxing power of a City
*SEC. 151. Scope of Taxing Powers. Except as otherwise provided in this Code, the city, may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than 50% except the rates of professional and amusement taxes.
The taxing power of a city is that which is exercise by the municipality or a province. Taxing Power of Province 1. *Tax on Transfer of Real Property Ownership [Sec. 135] 2. Tax on Business of Printing and Publication [Sec. 136] 3. Franchise Tax; Tax on Sand, Gravel and Other Quarry Resources [Sec. 138] Province has no authority to impose taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands. Reason The tax imposed by the province is an excise tax, being a tax upon the performance, carrying on, or exercise of an activity. The province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because it is expressly empowered to do so under the LGC [PROVINCE OF BULACAN v. CA] 4. 5. Professional Tax [Sec. 139 Amusement Tax [Sec. 140] The legislative intent was to place professional basketball games within the ambit of national taxation, as is presently being taxed under the provision of NIRC [PBA v. CA]
f.
g.
h.
i.
*Taxes, fee, or charges on agricultural and aquatic products when sold by marginal farmers or fishermen; Taxes on business enterprises certified by the BOI as pioneer or non-pioneer for a period of 6 and 4 years, respectively, from the date of registration; *Excise taxes on articles enumerated under the NIRC, and taxes, fees or charges on petroleum products; Percentage or VAT on sales, barters, or exchanges or similar transactions on goods or services, except as otherwise provided herein;
Requisites 1. The tax imposed must be a percentage or value added tax 2. It must be on sale, barter, or exchanges. Percentage taxes There should be a direct relations between the tax and the sale. For example 1 centavo per litter sold. When it is not a percentage tax tax of 1 centavo for 1 gallon produce. It is not prohibited to impose a producers tax or manufacturers tax. Examples of exception The province may imposes taxes on the business of printing and publications [Sec. 136] franchise tax [Sec. 137] and amusement tax [Sec. 140] at rates dependent upon certain percentage.
j.
Taxes on the gross receipts of transportation contractors and persons engaged in the
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6.

The tax imposed is in accordance with the taxing ordinance but should not exceed P300. The tax is to be paid only once. Such that if the tax has already been paid in one city or province, then the other province or cities are already precluded from making the collection. Likewise there should be no other professional tax to be collected under whatever guise, under whatever name. Taxing power of a Municipality
Annual fixed tax for every delivery truck or van of manufacturers or producers, wholesalers of, dealers, or retailers in, certain products [Sec. 141] ***The taxing power of the province may also be exercised by a city but not by a municipality or barangay.
***SEC. 139. Professional Tax a. The province may levy an annual professional tax on each person engaged in the exercise or practice of his profession requiring government examination at such amount and reasonable classification as the sangguniang panlalawigan may determine but shall in no case exceed P300. b. Every person legally authorized to practice his profession shall pay the professional tax to the province where he practices his profession or where he maintains his principal office in case he practices his profession in several places: Provided, however, That such person who has paid the corresponding professional tax shall be entitled to practice his profession in any part of the Philippines without being subjected to any other national or local tax, license, or fee for the practice of such profession. c. Any individual or corporation employing a person subject to professional tax shall require payment by that person of the tax on his profession before employment and annually thereafter. d. The professional tax shall be payable annually, on or before the 31st day of January. Any person first beginning to practice a profession after the month of January must, however, pay the full tax before engaging therein. A line of profession does not become exempt even if conducted with some other profession for which the tax has been paid. Professionals exclusively employed in the government shall be exempt from the payment of this tax. e. Any person subject to the professional tax shall write in deeds, receipts, prescriptions, reports, books of account, plans and designs, surveys and maps, as the case may be, the number of the official receipt issued to him.
What is being tax is the exercise of a profession. The professionals subject to the professional tax are only those who have passed the bar examinations, or any board or other examination conducted by the PRC. **Whether or not a professional is engaged in the practice of his profession and therefore subject to the payment of a professional tax - Customarily or habitually holding himself out to the public as a professional and or demanding compensation as such. ***It is the concept of habituality and or compensation that makes a person in the practice of a profession.
SEC. 142. Scope of Taxing Powers. Except as otherwise provided in this Code, municipalities may levy taxes, fees, and charges not otherwise levied by provinces.
Scope of the taxing power Tax on business A tax on business is distinct from a tax on the article itself. The basis for local business tax is gross receipt and not gross revenue. The importance of distinction between gross receipt and gross revenue is that if the local government unit would be taxing on the basis of gross revenue it would be stricken down because of double taxation. Reason The gross receipts are part of gross revenues already previously tax and then when you report the gross revenues you will be subject to tax again on the same gross receipts. Gross receipts - include money or its equivalent actually or constructively received in consideration of services rendered or articles sold, exchanged or leased, whether actual or constructive Gross revenue - covers money or its equivalent actually or constructively received including the value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be received. It includes gross receipts plus those that have not been paid for yet. The imposition of local business tax based on petitioners gross revenue will inevitably result in the constitutionally proscribed double taxation taxing of the same person twice by the same jurisdiction for the same thing inasmuch as petitioners revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid [ERICSSON TELECOM v. CITY OF PASIG GR 176667 November 22, 2007] **SEC. 150. Situs of the Tax The tax is about the business tax. What city or municipality has the power to collect the business tax.
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Scenarios 1st

Community Tax
A main office with no branch sales office, warehouse or factory. Ex. A main office in Pasig and no branch sales office throughout the Philippines and in that case, all sales made throughout the Philippines shall be subject to tax in Pasig. It shall be reported in the Pasig. 2nd A main office with branch or sales office or warehouse. In that case, what happens is that all sales that are made within the municipality or city where the branch or sales office or warehouse is located, all sales there should be reported in that municipality or city. All sales throughout the Philippines other than where there is a branch or sales office would have to be reported still in the place where the main office is located. 3rd A main office with a factory, a project office, plant, or plantation in different locations but no branch or sales office. The amount of tax would have divided to the extent of 70-30. 70% of all gross sales shall be taxable by the city or municipality where the factory, project office, plant, or plantation is located. 30% of all sales recorded in the principal office shall be taxable by the city or municipality where the principal office is located. 30% -Principal Office 70% -To the Factory If there are numerous factories, 70% shall be allocated pro rata depending upon the quantity of production. 4th A main office, a factory, and a branch sale office. 30% - Principal Office 70% shall be divided as follows. 60% - To the city or municipality where the factory is located. 40% - to the city or municipality where the plantation is located. Principal office The place shown in the different documents that are reported to the government. Branch or sales office or warehouse Sales must have been made from the branch sales office or warehouse and the products and the goods should have originated from the branch or sales office or warehouse. Taxing power of a barangay
SEC. 156. Cities or municipalities may levy a community tax in accordance with the provisions of this Article. SEC. 159. Exemptions. The following are exempt from the community tax: 1. Diplomatic and consular representatives; and 2. Transient visitors when their stay in the Philippines does not exceed 3 months. SEC 160. Place of Payment. The community tax shall be paid in the place of residence of the individual, or in the place where the principal office of the juridical entity is located.
Civil remedies of LGU for collection of revenues 1. Local governments lien 2. Civil remedies Distraint of personality Levy upon realty Compromise Judicial action [Sec. 173 & 174, LGC] Judicial Action for collection The LGU concerned may enforce the collection of delinquent taxes, fees, charges or other revenues By civil action in any court of competent jurisdiction The civil action shall be filled within 5 years from the date taxes, fees, or charges become due. Any competent court it is the MTC or the RTC depending upon the jurisdictional amount. However the CTA Division may exercise an exclusive original jurisdiction where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is One million pesos and above. Taxpayers remedies for Assessments ***SEC 194. Periods of Assessment and Collection.
a.
b.
c.
SEC. 152. Scope of Taxing Powers. The barangays may levy taxes, fees, and charges, as provided in this Article, which shall exclusively accrue to them. a. Taxes. b. Service Fees or Charges c. Barangay Clearance d. Other fees and Charges.
Local taxes, fees, or charges shall be assessed within 5 years from the date they became due. No action for the collection of such taxes, fees, or charges, whether administrative or judicial, shall be instituted after the expiration of such period: Provided, That taxes, fees or charges which have accrued before the effectivity of this Code may be assessed within a period of 3 years from the date they became due. In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed within 10 years from discovery of the fraud or intent to evade payment. Local taxes, fees, or charges may be collected within 5 years from the date of assessment by administrative or judicial action. No such action shall be instituted after the expiration of said period: Provided, however, That, taxes, fees or charges assessed before the effectivity of this Code may be collected within a period of 3 years from the date of assessment.
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Claim for Refund of Tax Credit
d.
The running of the periods of prescription provided in the preceding paragraphs shall be suspended for the time during which: 1. The treasurer is legally prevented from making the assessment of collection; 2. The taxpayer requests for a reinvestigation and executes a waiver in writing before expiration of the period within which to assess or collect; and 3. The taxpayer is out of the country or otherwise cannot be located.
***SEC 196. No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of 2 years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit
Grounds for refund 1. Erroneously collected 2. Illegally collected Procedure for Approval and Effectivity of Tax, Ordinances and Revenue Measures; Mandatory Public Hearings.
Protest of Assessment
***SEC. 195. When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties. Within 60 days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest within 60 days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice cancelling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have 30 days from the receipt of the denial of the protest or from the lapse of the 60 day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.
The competent court referred to is the RTC or the MTC depending upon the jurisdictional amount. However the CTA Division may exercise an exclusive original jurisdiction where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is One million pesos and above. An adverse decision of the RTC may be appealed to the CTA Division within 30 days from receipt of the RTC decision through a petition for review The adverse decision of the CTA Division may be the subject of a Motion for Reconsideration or a motion for a new trial directed to the CTA En banc within 15 days from receipt of the adverse decision The adverse decision of the CTA En banc may be the subject of a petition for review on certiorari directed to the SC within 15 days from receipt of the adverse decision of the CTA extendible for 30 days.
***SEC. 187. The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within 30 days from the effectivity thereof to the Secretary of Justice who shall render a decision within 60 days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within 30 days after receipt of the decision or the lapse of the 60day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction
Local taxing power and authority exercised by the Sanggunian through an appropriate ordinance. The competent court RTC Publication of Tax Ordinances and Revenue Measures.
**SEC. 188. Within ten 10 days after their approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue measures shall be published in full for 3 consecutive days in a newspaper of local circulation: Provided, however, That in provinces, cities and municipalities where there are no newspapers of local circulation, the same may be posted in at least 2 conspicuous and publicly accessible places. SEC. 192. Authority to Grant Tax Exemption Privileges. Local government units may, through ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and conditions as they may deem necessary.
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regarded as personalty under the Civil Law [CALTEX v. CBAA] Power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work [FELS ENERGY v. Province of Batangas 516 SCRA 187] 4 real property taxes/Kinds of imposition in real property 1. The basic real property tax under sec. 232 & 233 2. The additional levy on real property for the special education fund under Sec. 235 3. Ad valorem tax on idle land - Purpose of imposing ad valorem taxes on idle land To penalize property owners who do not use their property productively, and to encourage utilization of land resources in order to contribute to national development. 4. Special Levy According to Prof. Domondon There are only 3 real property tax. Special levy is not a tax but an imposition to recover at least 6% of the public works expenditures of a local government. Who may levy real property tax a. Province b. City c. municipality within the Metropolitan Manila Area Municipalities outside Metro Manila are not authorized to levy basic real property tax, special education fund, and ad valorem tax on idle land but they are authorized to impose special levy. Basic Real Property Tax
REAL PROPERTY TAXATION These are direct taxes imposed on the privilege to use real property such as land, building, machinery and other improvements unless specifically exempted Nature of real property taxes 1. Direct taxes whose burden cannot be shifted by the one who pays to the other person 2. Ad valorem tax based on the assessed value of a property 3. Real property taxes are local taxes not national taxes 4. ***They are imposed on use and not ownership, hence, exemptions are all premised upon use not ownership 5. They are progressive in character depending to a certain extent on the use and value of the property.
***SEC. 217. Actual Use of Real Property as Basis for Assessment. Real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it.
*For real property tax purposes such personal properties may be considered as real property, if they are essential and principal elements of the business being conducted in said land or building and must have been placed by one who is not the owner of the land or building. *Doctrine of essentiality - the property to be considered immobilized for real property taxes must be essential and principal elements of an industry without which such industry or works would be unable to function or carry on the principal industrial purpose for which it was established. However property which are merely incidentals acquired and used only for expediency or improve services are not part of real property. ***For purposes of real property taxation real properties may be 1. That defines as immovables under Art. 415 CC. 2. Personal property that are attached to an immovable parcel of land or a building by one who is not the owner of the parcel of land or building, which are personal property are essential and principal elements of the business being conducted in said land or building 3. Machinery, including mobile equipment which are essential to an industry. ***Gasoline station equipment and machinery necessary to the operation of a gas station and which are attached or affixed permanently thereto or embedded therein are taxable improvements and machinery. Reason They are immobilized by destination because they are essential and principal elements of the business of operating a gasoline station. Furthermore, for purposes of taxation, the term real property may include things which should generally be
SEC. 232. Power to Levy Real Property Tax. A province or city or a municipality within the Metropolitan Manila Area my levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted. SEC. 233. Rates of Levy. A province or city or a municipality within the Metropolitan Manila Area shall fix a uniform rate of basic real property tax applicable to their respective localities as follows: a. In the case of a province, at the rate not exceeding 1% of the assessed value of real property; and b. In the case of a city or a municipality within the Metropolitan Manila Area, at the rate not exceeding 2% of the assessed value of real property.
Special Education Fund/SEF
SEC. 235. Additional Levy on Real Property for the Special Education Fund. A province or city, or a municipality within the Metropolitan Manila Area, may levy and collect an annual tax of 1% on the assessed value of real property which shall be in addition to the
24
basic real property tax. The proceeds thereof shall exclusively accrue to the SEF. SEC. 272. Application of Proceeds of the Additional One Percent SEF Tax. The proceeds from the additional 1% tax on real property accruing to the SEF shall be automatically released to the local school boards: Provided, That, in case of provinces, the proceeds shall be divided equally between the provincial and municipal school boards: Provided, however, That the proceeds shall be allocated for the operation and maintenance of public schools, construction and repair of school buildings, facilities and equipment, educational research, purchase of books and periodicals, and sports development as determined and approved by the Local School Board.
Ad Valorem Tax on Idle Lands
3. 4.
natural calamity or any cause or circumstance which physically or legally prevents the owner of the property or person having legal interest therein from improving, utilizing or cultivating the same.
Special Levy/Special Assessments SEC. 240. Special Levy by LGUs. A province, city or
SEC. 236. A province or city, or a municipality within the Metropolitan Manila Area, may levy an annual tax on idle lands at the rate not exceeding 5% of the assessed value of the property which shall be in addition to the basic real property tax. **Idle Lands, Coverage. For purposes of real property taxation, idle lands shall include the following: 1. Agricultural lands, more than 1 hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, of which remain uncultivated or unimproved by the owner of the property or person having legal interest therein. 2. Lands, other than agricultural, located in a city or municipality, more than one 1,000 sq. m. in area of which remain unutilized or unimproved by the owner of the property or person having legal interest therein. 3. Regardless of land area, residential lots in subdivisions duly approved by proper authorities, the ownership of which has been transferred to individual owners, who shall be liable for the additional tax: Provided, however, That individual lots of such subdivisions, the ownership of which has not been transferred to the buyer shall be considered as part of the subdivision, and shall be subject to the additional tax payable by subdivision owner or operator [Art. 237 except for
minor changes for review purposes]
municipality may impose a special levy on the lands comprised within its territorial jurisdiction specially benefited by public works projects or improvements funded by the local government unit concerned: Provided, however, That the special levy shall not exceed 60% of the actual cost of such projects and improvements, including the costs of acquiring land and such other real property in connection therewith: Provided, further, That the special levy shall not apply to lands exempt from basic real property tax and the remainder of the land portions of which have been donated to the local government unit concerned for the construction of such projects or improvements. SEC. 274. Proceeds of the Special Levy. The proceeds of the special levy on lands benefited by public works, projects and other improvements shall accrue to the general fund of the local government unit which financed such public works, projects or other improvements.
Municipalities even if outside the Metropolitan Manila Area may impose the special levy since Sec. 240 does not qualify municipalities into within Metropolitan Manila, unlike Sec. 232 which contains the qualification. Ordinance Imposing a Special Levy
SEC. 241. A tax ordinance imposing a special levy shall describe with reasonable accuracy the nature, extent, and location of the public works projects or improvements to be undertaken, state the estimated cost thereof, specify the metes and bounds by monuments and lines and the number of annual installments for the payment of the special levy which in no case shall be less than 5 nor more than 10 years. The sanggunian concerned shall not be obliged, in the apportionment and computation of the special levy, to establish a uniform percentage of all lands subject to the payment of the tax for the entire district, but it may fix different rates for different parts or sections thereof, depending on whether such land is more or less benefited by proposed work.
Publication of Proposed Ordinance Imposing a Special Levy
**Lands not considered idle and therefore exempted 1. Agricultural lands planted to permanent or perennial crops with at least 50 trees to a hectare shall not be considered idle lands. 2. Lands actually used for grazing purposes shall likewise not be considered idle lands [Art. 237]
**SEC. 238. Idle Lands Exempt from Tax. A province or city or a municipality within the Metropolitan Manila Area may exempt idle lands from the additional levy by reason of 1. force majeure, 2. civil disturbance,
SEC. 242. Before the enactment of an ordinance imposing a special levy, the sanggunian concerned shall conduct a public hearing thereon; notify in writing the owners of the real property to be affected or the persons having legal interest therein as to the date and place thereof and afford the latter the opportunity to express their positions or objections relative to the proposed ordinance.
Taxpayer's Remedies against Special Levy
25
SEC. 244. Owners can appeal to the LBAA and to CBAA as provided in Secs. 226 231, LGC. Limitations on the power of the local government to administer, appraise, levy and collect real property taxes 1. Inherent limitations 2. Constitutional limitations 3. The authorize limitation under the RA 7160 4. Fundamental principles of appraisal, assessment, levy and collection of real property tax [Sec. 198] 5. The real property taxes collected shall accrue exclusively to the benefit of the LGU concerned.
assessor, a sworn statement declaring the true value of subject property, within 60 days after the acquisition of such property or upon completion or occupancy of the improvement, whichever comes earlier. ***SEC. 217. Actual Use of Real Property as Basis for Assessment. Real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it.
The purpose of a tax declaration is to determine the assessment levels and does not bind the assessor. Actual Use - refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof [Sec. 199 b]
***SEC. 198. Fundamental Principles. The appraisal, assessment, levy and collection of real property tax shall be guided by the following fundamental principles: a. Real property shall be appraised at its current and fair market value; b. Real property shall be classified for assessment purposes on the basis of its actual use; c. Real property shall be assessed on the basis of a uniform classification within each local government unit; d. The appraisal, assessment, levy and collection of real property tax shall not be let to any private person; and e. The appraisal and assessment of real property shall be equitable. SEC. 202. Declaration of real Property by the Owner or Administrator. It shall be the duty of all persons, natural or juridical, owning or administering real property, including the improvements therein, within a city or municipality, or their duly authorized representative, to prepare, or cause to be prepared, and file with the provincial, city or municipal assessor, a sworn statement declaring the true value of their property, whether previously declared or undeclared, taxable or exempt, which shall be the current and fair market value of the property, as determined by the declarant. Such declaration shall contain a description of the property sufficient in detail to enable the assessor or his deputy to identify the same for assessment purposes. SEC. 204. Declaration of Real Property by the Assessor. When any person, natural or juridical, by whom real property is required to be declared under Sec. 202 hereof, refuses or fails for any reason to make such declaration within the time prescribed, the provincial, city or municipal assessor shall himself declare the property in the name of the defaulting owner, if known, or against an unknown owner, as the case may be, and shall assess the property for taxation in accordance with the provision of this Title. No oath shall be required of a declaration thus made by the provincial, city or municipal assessor. SEC. 203. Duty of Person Acquiring Real Property or Making Improvement Thereon. It shall also be the duty of any person, or his authorized representative, acquiring at any time real property in any municipality or city or making any improvement on real property, to prepare, or cause to be prepared, and file with the provincial, city or municipal
SEC. 201. Appraisal of Real Property. All real property, whether taxable or exempt, shall be appraised at the current and fair market value prevailing in the locality where the property is situated.
Fair Market Value - is the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy Fair Market Value declared by the owner subject to final determination by the assessor supposed to be the actual value of the real property in the open market Assessed Value determined by the application of the assessment level to the FMV Merely percentage of the FMV depending on the assessment level of the property in question
SEC. 215. Classes of Real Property for Assessment Purposes. For purposes of assessment, real property shall be classified as residential, agricultural, commercial, industrial, mineral, timberland or special. The city or municipality within the Metropolitan Manila Area, through their respective sanggunian, shall have the power to classify lands as residential, agricultural, commercial, industrial, mineral, timberland, or special in accordance with their zoning ordinances.
***Taxpayers remedies in classification & assessments 1. Within 30 days from revision of the assessment, the assessor furnishes the declarant of copy of the new or revised assessment [Sec. 223] 2. Within 60 days from the receipt of the new or revised assessment the dissatisfied owner or person having legal interest in the property appeals to the LBAA under oath with copies of tax declaration and evidence 3. Within 120 days from receipt, the LBAA decides. 4. Within30 days from receipt of the LBAAs adverse decision, dissatisfied property owner appeals to the CBAA whose decision are final and executory 5. Within 30 days from receipt of the CBAAs adverse decision, the dissatisfied property owner may appeal to the CTA En banc by filing a verified petition for review 6. An adverse decision of the CTA may appeal to the SC within 15 days from receipt of the judgment through a
26
verified petition for review on certiorari raising only questions of law. An assessment fixes and determines the tax liability of a taxpayer. The assessor is mandated under Sec. 223 to give written notice within 30 days of such assessment to the person in whose name the property is declared. As soon as the notice is duly served, an obligation arises on the part of the taxpayer to pay the amount assessed and demandable. The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city or municipal assessor in the assessment of the property [FELS ENERGY, INC., v. PROVINCE OF BATANGAS 516 SCRA 186] The taxpayers failure to question the assessment in the LBAA renders the assessment of the local assessor final, executory and demandable [supra]
***ART. VI SEC. 28. 3] Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation.
This exemption applies only to property taxes. What is exempted is not the institution itself but the lands, buildings and improvements actually, directly and exclusively used for religious, charitable and educational purposes. Related Provision SEC. 206. Proof of Exemption of Real Property from Taxation.
SEC. 231. Effect of Appeal on the Payment of Real Property Tax. Appeal on assessments of real property made under the provisions of this Code shall, in no case, suspend the collection of the corresponding realty taxes on the property involved as assessed by the provincial or city assessor, without prejudice to subsequent adjustment depending upon the final outcome of the appeal.
Remedies for collection of real property tax 1. Administrative Action a. Distraint of personal property [Sec. 254 b] b. Exercise of lien on the property subject to tax [Sec. 246 & 258] c. Levy on the real property subject of the tax [Sec. 256 & 258] 2. Judicial Action The LGU may enforce the collection of real property tax by civil action in any court of competent jurisdiction filed by Local treasurer within 5 years from the date real property taxes and special levies becomes due [Sec. 270 in relation to Sec. 256] Inadequacy of sale price does not invalidate a tax sale upon the theory that the lesser the price, the easier it is for the owner to effect redemption. Tax Legislation No public hearing shall be required before the enactment of a local tax ordinance levying the basic real property tax. But the imposition of special levy requires public hearing under Sec. 242. Sources or basis of exemptions from the payment of real property taxes 1. The 1987 Constitution 2. The Local Government Code 3. Provisions of special law 4. The principle of comity in international law 5. Local Tax exemptions ordinance Constitutional Provision
Every person by or for whom real property is declared, who shall claim tax exemption for such property under this Title shall file with the provincial, city or municipal assessor within 30 days from the date of the declaration of real property sufficient documentary evidence in support of such claim including corporate charters, title of ownership, articles of incorporation, by-laws, contracts, affidavits, certifications and mortgage deeds, and similar documents. If the required evidence is not submitted within the period herein prescribed, the property shall be listed as taxable in the assessment roll. However, if the property shall be proven to be tax exempt, the same shall be dropped from the assessment roll.
The test of exemption from taxation is the use of the property for purposes mentioned in the constitution. Conversely even if the property is owned by the government if the beneficial use has been granted, for consideration or otherwise, to a taxable person, then the property is subject to tax. What is exempted is not the institution itself those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes [LUNG CENTER v. QUEZON CITY] What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for which the charitable institution is organized [supra] If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation [supra] The exemption in favor of property used exclusively for charitable or educational purposes is not limited to property actually indispensable therefore, but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes [CITY ASSESSOR OF CEBU v. ASSOC. OF BENEVOLA 524 SCRA 128]
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MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. The real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax [MIAA v. CA 495 SCRA 591] The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man [supra] The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not [supra] Users tax - this means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility [supra] MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic [supra] The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption [supra] However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax [supra] The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality under Sec. 133(o) LGC [supra]
d. e.
distribution of water and/or generation and transmission of electric power; All real property owned by duly registered cooperatives as provided for under RA 6938; Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.
Reduction and refund of real property taxes ***Payment under Protest a. No protest shall be entertained unless the taxpayer first pays the tax. b. There shall be annotated on the tax receipts the words "paid under protest". c. If not paid under protest, protest is to be made in writing and within 30 days from payment d. The treasurer shall decide within 60 days from receipt of protest. e. If decision is adverse or no decision within the prescribed 60 days, owner can appeal to the LBAA and to the CBAA as provided in Sec. 226 -231 LGC. Procedure for refund of real property taxes based on the validity of the tax measure or solution indebeti 1. Payment under protest is not required, claim must be direct to the local treasurer, who must decide within 60 days from receipt 2. The denial by the local treasurer of the protest would fall within the RTCs original jurisdiction, the review being the initial cognizance of the matter. 3. The decision of the RTC should be appealed by means of a petition for review directed to the CTA Division 4. The decision of the CTA Division may be the subject of a review by the CTA En banc 5. The decision of the CTA En banc] may be the subject of a petition for review on certiorari on pre questions of law directed to the SC. Refund/Repayment of Excessive Collections
***SEC. 234 Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: a. Real property owned by the RP or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; b. Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; c. All machineries and equipment that are actually, directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and
SEC. 253. When an assessment of basic real property tax, or any other tax levied, is found to be illegal or erroneous and the tax is accordingly reduced or adjusted, the taxpayer may file a written claim for refund or credit for taxes and interests with the provincial or city treasurer within 2 years from the date the taxpayer is entitled to such reduction or adjustment. The provincial or city treasurer shall decide the claim for tax refund or credit within 60 days from receipt thereof. In case the claim for refund or credit is denied, the taxpayer can appeal to the LBAA and the CBAA as provided in Sec. 226 -231 LGC. SEC. 276. Condonation or Reduction of Real Property Tax and Interest. In case of a general failure of crops or substantial decrease in the price of agricultural or agribased products,
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2. 3. Specific custom duties Custom duties that are computed on the basis of a unit of measure Mixed or compound custom duties Custom duties that impose both ad valorem and specific custom duties.
or calamity in any province, city or municipality, the sanggunian concerned, by ordinance passed prior to the 1st day of January of any year and upon recommendation of the Local Disaster Coordinating Council, may condone or reduce, wholly or partially, the taxes and interest thereon for the succeeding year or years in the city or municipality affected by the calamity. SEC. 277. Condonation or Reduction of Tax by the President of the Philippines. The President of the Philippines may, when public interest so requires, condone or reduce the real property tax and interest for any year in any province or city or a municipality within the Metropolitan Manila Area.
TARRIF & CUSTOMS TAXATION Tariff **Means taxes and customs refer to the required procedure for importation to, and exportation from the Philippines of articles. Violation of the tariff and customs laws refers to the act of failure to pay the duties, taxes, and other charges due from imported or exported articles or that the proper customs procedures were not followed. Custom duties, toll or tribute payable upon merchandise to the general government or rate of customs or list of articles liable to duties Custom duties Taxes on the importation and exportation of commodities or tariff or taxed assessed upon merchandise from or exported to, a foreign country. Customs and tariffs are synonymous with one another because they both refer to the taxes imposed on imported or exported wares, articles, or merchandise. Kinds of tariff or customs duties 1. *Regular tariffs or customs duties These are the taxes that are imposed or assessed upon merchandise from or exported to, a foreign country for the purpose of raising revenues. They may be also imposed to serve as protective barriers which would prevent the entry of merchandise that would compete with locally manufactured items [referred as tariff barriers or protective barriers] 2. *Special tariffs or customs duties are additional import duties imposed on specific kinds of imported articles under certain conditions. They are imposed for the protection of consumers and manufacturers as well as the Phil. products from undue competition posed by foreign made products. Kinds of regular custom duties 1. Ad valorem custom duties These are the custom duties that are computed on the basis of the value. The present basis is the transaction value of the imported articles.
***Kinds of special custom duties under the TCC 1. Anti - Dumping Duty refers to a special duty imposed on the importation of a product, commodity or article of commerce into the Philippines at less than its normal value when destined for domestic consumption in the exporting country, which is the difference between the export price and the normal value of such product, commodity or article. It is the difference between the export price and the normal value of such product, commodity or article. Requisites for the Imposition 1. The anti-dumping duty is imposed where a product, commodity or article of commerce is exported to the Phil. at a price less than its normal value when destined for domestic consumption and such exportation 2. Is causing or is threatening to cause material injury to a domestic industry or materially retarding the establishment of a domestic industry producing the like product. *Dumped import/product Refers to any product commodity or article of commerce introduced into the Philippines at an export price less than its normal value in the ordinary course of trade, for the like product, commodity or article destined for consumption in the exporting country, which is causing or is threatening to cause material injury to a domestic industry, or materially retarding the establishment of a domestic industry producing the like product. Normal value refers to a comparable price at the date of sale of the like product, commodity or article in the ordinary course of trade when destined for consumption in the country of export. Imposing authority for anti-dumping duty 1. The Sec. of Trade and Industry in the case of nonagricultural product, commodity or article or 2. The Sec. of Agriculture in the case of agricultural product, commodity or article after formal investigation and affirmative finding of the Tariff Commission 3. Even when all the requirements for the imposition have been fulfilled, the decision on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff Commission 2. **Countervailing duty Additional customs duties imposed on any product, commodity or article of commerce which is granted directly or indirectly by the government in the country of origin or exportation any kind or 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
29

is nonagricultural product
materially retarded the growth or prevents the establishment of a domestic industry. The imposing authority is the same Kinds of specific subsidies 1. Bounty Cash reward paid to an exporter or manufacturer 2. Subsidy Fiscal incentives not in the form of direct cash award to encourage manufacturers or exporters 3. Subvention Any assistance other than a bounty or subsidy given by a government for the manufacturer and/or exportation of an article 3. **Marking duty Additional customs duties imposed on foreign articles [or its article if the article itself cannot be marked] not marked in any official language of the Phil. in a conspicuous place as legibly, indelibly and permanently in such manner as to indicate to an ultimate purchaser in the Phil. the name of the country of origin. The duty shall be 5% ad valorem of the articles. Imposing authority is the Comm. of Customs. **Discriminatory duty are special duties collected in an amount not exceeding 100% ad valorem, imposed by the President of the Phil. against goods of a foreign country which discriminates against Phil. commerce or against goods coming from the Phil. and shipped to a foreign country.
Countervailing duty Imposed on imported items granted a specific subsidy upon their production, manufacture or exportation Discriminatory duty Imposed on articles of or imported in a vessel of any foreign country which in any manner places the commerce of the Phil. at a disadvantage compared with the commerce of any foreign country Marking duty The failure to mark the article of the container
Additional tariff imposed as a safeguard measure under the safeguard measures act [SMA] Safeguard measures These are the emergency measures, including tariffs to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them. Other safeguard measures may include tariff rate quotas or quantitative restrictions on the importation of a product into the country. Imposing authority is the Secretary of Agriculture, if the article in questioned is an agricultural products or the Sec. of Trade and Industry if the article is a nonagricultural product who shall apply a general safeguard measure upon a positive final determination of the Tariff Commission ***Basic postulates on the grant of tariff powers to the President 1. It is Congress which authorizes the President to impose tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts. 2. The authorization granted to the President must be embodied in a law 3. The authorization to the President can be exercised only within the specified limits set in the law and is further subject to limitations and restrictions which Congress may impose [SOUTHERN CROSS CEMENT CORP. v. CEMENT MANUFACTURERS ASSOC. 465 SCRA 532]
Flexible tariff clause
4.
Anti dumping duty Basis premised on importation and sale of imported item and below their normal value causing or likely to cause injury to local industry
***The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government [Art. VI
Sec. 28 par. 2] In the interest of national economy, general welfare and/or national security, and subject to the limitations herein prescribed, the President, upon recommendation of the NEDA is empowered; 1. to increase, reduce or remove existing protective rates of import duty, Provided that the increase should not be higher 100% ad valorem 2. To establish import quota or to ban imports to any commodity 3. To impose an additional duty on all imports not exceeding 10% ad valorem 4. To modify the forms of duty, whether ad valoren or specific [Sec. 401 TCC] The imposition under the flexible tariff clause fall within the realm of the power of taxation, a power which is within the sole province of the legislature under the Constitution. Without Sec. 28(2), Article VI, the executive branch has no authority to impose tariffs and other similar tax levies involving the importation of foreign goods [SOUTHERN 30
Rates - Shall be equal to the difference between the actual price and the normal value of the article. Imposing authority - The authority that determines the imposition of duty is the Sec. of Agriculture if the article in question is an agricultural product or the Sec. of DTI if it
Shall be equivalent to the subsidy and discriminatory duty shall not exceed 100% ad valorem of the articles
Should not exceed 5% ad valorem of the articles.
The additional tariff rates that may be imposed by the Pres.
same
The President
Commissioner Customs
of

adding certain cost elements such as cost of containers and packing, freight, insurance and others. If the transaction value could be so determined then the dutiable value shall be determined using the following values one after the other 1. Transaction value of identical goods 2. Transaction value of similar goods 3. Deductive value 4. Computed value 5. Fallback value. ***Protest and payment under protest in civil matters 1. Adverse ruling of the Collector of Customs imposing custom duties and taxes may be protested By presenting to the collector at the time when payment of the amount claimed to be due the government is made or within 15 days thereafter. A written protest setting forth his objection to the ruling together with the reasons therefore. 2. No protest shall be considered unless payment of the amount due has first been made and the corresponding docket fee paid. 3. Upon termination of the hearing, the Collector shall render a decision within 30 days If the protest is sustained the entry is made If the Collector renders a decision adverse to the government such decisions together with the entire records of the case shall be automatically elevated to the Commissioner of Customs for automatic review If the protest is denied, the aggrieved party has 15 days after notification in writing, to appeal to the Comm. 4. The person aggrieved by the decision of the Comm. has 30 days from receipt of the decision to appeal to the CTA. Note - The procedure is a general procedure and is basically the same for seizure proceedings except that no protest is required The requirement of a prior protest as an exclusive remedy in protestable cases applies only to a situation, whereby liability for duties, taxes, and fees and other charges are determined. ***No protest no refund rule The claim for refund of customs duties in protestable cases may be foreclosed by failure to file a written protest. Customs Seizure & Forfeiture Contraband Articles of prohibited importation or exportation. Known as smuggled goods. Smuggling An act of any person who shall fraudulently import any article contrary to law or assist in so doing or receive, conceal, buy, sell, facilitate, transportation, concealment or sale of such article knowing its illegal importation. Export in any manner contrary to law.
31
CROSS CEMENT CORP. v. CEMENT MANUFACTURERS ASSOC. 465 SCRA 532] When Congress tasks the President or his/her alter egos to impose safeguard measures under the delineated conditions, the President or the alter egos may be properly deemed as agents of Congress to perform an act that inherently belongs as a matter of right to the legislature [supra]
*Any order issued by the President pursuant to the flexible tariff clause shall take effect 30 days after promulgation, except in the imposition of additional duty not exceeding 10% ad valorem which shall take effect at the discretion of the President. *Wharfage fees are collectible even if a private wharf was used or even if the loading or unloading took place at shipside. Reason - wharfage dues partake of the nature of a tax which is collected by the Government to support its operation of the custom service.
When Importation Begins and Deemed Terminated Importation begins from the time the carrying vessel or aircraft enters Philippine territorial jurisdiction with the intention to unload therein and ends at the time the goods are released or withdrawn from the customhouse upon payment of the custom duties or with legal permit to withdraw. All imported articles subject to custom duties. Articles goods wares and merchandise and in general anything that may be made the subject of importation or exportation. Checks, money orders and dollar bills properly fall within the concept of merchandise. GR No exemption from custom duties Exceptions 1. If provided under the TCC the conditionally freeimportation 2. Those granted to government agencies, instrumentalities or GOCC with existing contract, commitments, agreements or obligations [requiring such exemptions] with foreign countries 3. International institutions, associations or organization entitled to exemption pursuant to agreements or special laws. 4. Those that may be granted by the Pres. Upon recommendation of NEDA in the interest of national economic development. *Liability of importer for custom duties 1. A personal debt due from the importer to the govt. which can be discharged only by payment in full of all duties, taxes, fees, and other charges illegally accruing 2. A lien upon the articles imported which may be enforced while such articles are in custody or subject to the control of the govt. **The basis of dutiable value is the transaction value, which shall be the price actually paid or payable for the goods when sold for export to the Phil. adjusted by

process should the Comm. decide a protest adversely against the government Comm. adverse to the government is the subject of an automatic review by the Sec. of Finance.
Requisites of smuggling 1. That the merchandise must have been fraudulently or knowingly imported contrary to law 2. That the defendant if he is not the importer himself, must have received, concealed, bought sold, or in any manner facilitated the transportation, concealment or sale of the merchandise 3. That the defendant must have shown to have knowledge that the merchandise had been illegally imported. If the defendant however is shown to have had possession of the illegally imported merchandise, without satisfactory explanation, such possession shall be sufficient to authorize conviction. Evidence for conviction in smuggling cases mere possession of the article in question unless defendant could explain that his possession is lawful to the satisfaction of the court. Payment of the tax due after the apprehension is not a valid defense. Outline of administrative and judicial remedies relative to custom search, seizure and forfeiture 1. Determination of the probable cause and issuance of warrant 2. Actual seizure of the articles 3. Listing of descriptions, appraisal and classification of seized property 4. Report of seizure to the Comm. of Customs and the Chairman of COA 5. Issuance by the Collector of a Warrant of detention 6. Notification to owner or importer 7. Formal Hearing 8. District Collectors Renders his decision 9. Appeal by the Aggrieved owner or importer 10. Automatic Review by the Commissioner of Customs While a judicial warrant is not necessary for the actual seizure, a warrant of seizure and detention should be issued in order to justify the continued possession by the BOC of the articles that were without a warrant. Tax Remedies NIRC TCC Discrepancies in the form of Payment must first be effected additional taxes are not paid if contested There is no need for payment Payment under protest in the under protest before resort to TCC is required CTA is made The Comm. takes action It is the collector who takes action before the Commissioner Protest shall be filed within a Protest shall be made at the period of 30 days from receipt time of payment or within 15 of the assessment notice. days thereafter The Comm. is given a period of No time period is given within 180 days from receipt of the which the Collector must complete supporting decide the protest documents There is no automatic review A decision of the Customs
Doctrine of hot pursuit 1. Over vessels When a vessel becomes subject to seizure by reason to an act done in the Phil. in violations of the tariff and custom laws a pursuit of such vessel began within the jurisdictional waters may continue beyond the maritime zone and the vessel nay be seized on the high seas. 2. Over imported articles Imported articles which may subject to seizure for violations of the tariff and customs laws may be pursued in their transportation in the Phil. by land, water or air and such jurisdiction exerted over them at any place therein as may be necessary for the due enforcement of the law.
***Right of customs police officer to enter inclosure 1. May enter, pass through, or search any land or enclosure or any warehouse, store or other building, not being a dwelling house 2. A warehouse, store, or other building or enclosure used for the keeping and storage of articles does not become a dwelling house by reason of the fact that a person employed as a watchman lives in the place or his family stays with him. ***Search of dwelling house 1. Only upon a warrant issued by a judge of the court. 2. Upon sworn application showing probable cause and particularly describing the placed to be searched and person or thing to be seized. ****The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus. ***Reasons for vesting exclusive jurisdiction upon Collector of Customs 1. There should be no unnecessary hindrance on the governments drive to prevent smuggling and other frauds upon the Customs. 2. To render effective and efficient the collection of import and export duties due the state, which enables the government to carry out the functions it has been instituted to perform. 3. The doctrine of primary jurisdiction 4. The specific mandate of Sec. 602g TCC the general powers and jurisdiction of the BOC shall include Exercise exclusive original jurisdiction over seizure and forfeiture cases under the tariff and customs laws.
32

be forfeited and disposed of in accordance with law for violation of the TCC [supra] Forfeiture proceedings under the Tariff and custom laws are not criminal in nature, proof beyond reasonable doubt is not required in order to justify the forfeiture of the goods. Reason forfeiture proceedings does not result in the conviction of the wrongdoer or in the imposition upon him of a penalty. Customs compromise does not extinguish the criminal liability. Exclusive appellate jurisdiction of the CTA Decisions of the CoC in cases involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs; Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the CoC which are adverse to the Government under Section 2315 of the TCC. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article, and the Secretary of Agriculture in the case of agricultural product, commodity or article, involving dumping and countervailing duties under Section 301 and 302, respectively, of the Tariff and Customs Code, and safeguard measures under Republic Act No. 8800, where either party may appeal the decision to impose or not to impose said duties. ESTATE TAX Transfer Tax A tax imposed upon the privilege of passing ownership of property without any valuable consideration. Kinds of transfer taxes 1. Estate tax 2. Donors Tax *Estate and donors taxes are excise or privilege taxes that are imposed on the act of passing ownership of property and not taxes on the property transferred. Estate Tax Is an excise tax on the right of transmitting property at the time of death and on the privilege that a person is given in controlling to a certain extent the disposition of his property to take effect upon death. Esate tax laws rest in their essence upon the principle that death of an individual is the generating source from which the taxing power takes its being, and that is the power to transmit from the death to the living on which the tax is more immediately based.
Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have said that such act does not deprive the Bureau of Customs of jurisdiction thereon. ***Where a decision of the collector of customs in seizure and protest cases is adverse to the government, it shall automatically be reviewed by the Commissioner of Customs. Reason The owner of the goods cannot be expected to appeal the Collectors decision when it is favorable to him and adverse to the government. On the other hand, the Collector cannot be expected to appeal his own decision. ***Remedies of an importer during the pendency of the seizure proceedings If the owner or importer desires the release of the property under seizure for legitimate use, the Collector shall with the approval of the Commissioner of Customs in writing release the same upon the filing of the sufficient bond to be fixed by the collector subject to the following conditions 1. The amount of the cash bond shall not in any case be less than the appraised value of the article plus fine, expenses and costs that may be adjudge in the case 2. That there is no prima facie evidence of fraud attendant to the importation 3. That the importation of the article is not prohibited by law 4. That the release under cash bond has been approved by the Commissioner. Requisites for customs forfeiture 1. The wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same person of any invoice, letter or paper - all touching on the importation or exportation of merchandise; 2. The falsity of such declaration, affidavit, invoice, letter or paper; 3. An intention on the part of the importer/consignee to evade the payment of the duties due Fraud must be prove to justify forfeiture. Good faith is not a defense in forfeiture. Forfeiture retroacts to the date of the commission of the offense. Forfeiture of seized goods is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation [TRANSGLOBE INT. INC. v. CA 302 SCRA 57] In this proceeding, it is in legal contemplation the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner. The issue here is limited to whether the imported goods should
33

bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines; Shares or rights in any partnership, business or industry established in the Philippines [Sec. 104]
The Estate Tax is based on the laws in force at the time of death notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary. The estate tax accrues as of the death of the decedent and the accrual of the tax is distinct from the obligation to pay the same. Upon the death of the decedent, succession takes place and the right of the State to tax the privilege to transmit the estate vests instantly upon death. Purpose of imposing the estate tax 1. To generate additional revenue for the government 2. To reduce the concentration of wealth 3. Provide for an equal distribution of wealth Inheritance tax An imposition created by law on the privilege to receive property. There is no inheritance tax imposed by law. Estate tax A tax on the privilege to transfer property upon ones death paid by the estate represented by the administrator or executor Inheritance tax Tax on the privilege to receive property from the deceased Paid by the recipients of the properties of the estate
2.
Reciprocity provision exempting from estate taxation intangible personal property situated in the Phil. owned by a nonresident alien decedent No tax shall be collected under this Title in respect of intangible personal property: a. If the decedent at the time of his death or the donor at the time of the donation was a citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of any character, in respect of intangible personal property of citizens of the Philippines not residing in that foreign country, or b. If the laws of the foreign country of which the decedent or donor was a citizen and resident at the time of his death or donation allows a similar exemption from transfer or death taxes of every character or description in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country [Sec. 104] Gross Estate
***Gross Este for Purposes of Estate Taxation of Filipino Citizens whether Residents or Nonresident/ Alien who is a Philippine resident at the time of death Value at the time of death of all 1. real property wherever situated 2. Personal property whether tangible or intangible or mixed, wherever situated 3. To the extent of the interest therein of the decedent at the time of his death Note - No. 3 is a general rule because there are certain instances where the decedent does not have any interest in a property at the time of his death but the same is still included as part of his gross estate. Note If the net estate is below P200,000 it is exempt. ***Gross Estate for Purposes of Estate Taxation of a Non-Resident Alien Decedent The gross estate of the decedent shall be determined by including the value at the time of his death of his: 1. Real property situated in the Phil. 2. Personal property whether tangible, intangible or mixed situated in the Phil. 3. To the extent of the interest therein of the decedent at the time of his death. ***Intangible property of a non-resident alien decedent considered as situated in the Phil. 1. Franchise which must be exercised in the Philippines; shares, obligations or bonds issued by any corporation organized or constituted in the Philippines in accordance with its laws; shares, obligations or bonds by any foreign corporation 85% of the business of which is located in the Philippines, shares, obligations or
SEC 85. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated: Provided, however, that in the case of a nonresident decedent who at the time of his death was not a citizen of the Philippines, only that part of the entire gross estate which is situated in the Philippines shall be included in his taxable estate. 1. Decedent's Interest. To the extent of the interest therein of the decedent at the time of his death; 2. ***Transfer in Contemplation of Death. To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after death, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period which does not in fact end before his death i. the possession or enjoyment of, or the right to the income from the property, or ii. the right, either alone or in conjunction with any person, to designate the person who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth.
Reason of the Law To reach ingenious schemes to evade the estate tax liability by the use of other forms of conveyances rather than by succession.
34
Death must be contemplated, and the thought of death must be the impelling cause of transfer. Circumstances taken into account 1. Age and state of health of the decedent at the time of gift especially where he was aware of serious illness. 2. Length of time between the gift and the death. 3. Concurrent making of a will or making a will within a short time after the transfer.
3.
Revocable Transfer. To the extent of any interest
therein, of which the decedent has at any time made a transfer by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or by the decedent in conjunction with any other person (without regard to when or from what source the decedent acquired such power), to alter, amend, revoke or terminate, or where any such power is relinquished in contemplation of the decedent's death. The power to alter, amend or revoke shall be considered to exist on the date of the decedent's death even though the exercise of the power is subject to a precedent giving of notice or even though the alteration, amendment or revocation takes effect only on the expiration of a stated period after the exercise of the power, whether or not on or before the date of the decedent's death notice has been given or the power has been exercised. In such cases, proper adjustment shall be made representing the interests which would have been excluded from the power if the decedent had lived, and for such purpose if the notice has not been given or the power has not been exercised on or before the date of his death, such notice shall be considered to have been given, or the power exercised, on the date of his death. Except In case of bona fide sale for an adequate and full consideration in money or money's worth
Revocable transfer In the condition for the transfer, like donation or sale, the condition is that at any point in time the transfer could be revoked by the person who gave the property. And therefore if there was no actual transfer at the time of death then that property becomes part of gross estate. However if the sale was for sufficient and full consideration, even if there is a provision for the revocation it would not form part of the gross estate. Analyze
passing under a general power of appointment exercised by the decedent: i. by will, or ii. by deed executed in contemplation of, or intended to take effect in possession or enjoyment at, or after his death, or iii. by deed under which he has retained for his life or any period not ascertainable without reference to his death or for any period which does not in fact end before his death a. the possession or enjoyment of, or the right to the income from, the property, or b. the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth.
Property Passing Under General Power of Appointment it is exercised by the decedent or intended in contemplation of death to take effect in possession or enjoyment at or after death. Meaning a person has been appointed to take over the property but in the meantime, the person who transferred it while still alive enjoys the possession or enjoyment of the fruits.
5.
***Proceeds of Life Insurance. To the extent of the
amount receivable by the estate of the deceased, his executor, or administrator, as insurance under policies taken out by the decedent upon his own life, irrespective of whether or not the insured retained the power of revocation, or to the extent of the amount receivable by any beneficiary designated in the policy of insurance, except when it is expressly stipulated that the designation of the beneficiary is irrevocable
Life insurance proceeds that are received upon the death of natural person it is always excluded from gross income irrespective of the designation of the beneficiary. Reason they are not income. They are more for compensation for loss of life. Whether life insurance proceeds are formed part of the gross estate that is were have to look at the revocability or irrevocability of the designation of the beneficiary.
4.
Property Passing Under General Power of Appointment. To the extent of any property
who took out the life insurance a. If the one who took out the life insurance on his own life is the deceased himself and the designated beneficiary is his estate, his executor or administrator irrespective of the designation of
35
PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN SEC. 88 B] The estate shall be appraised at its fair market value as of the time of death. However, the appraised value of real property as of the time of death shall be, whichever is the higher of 1. The fair market value as determined by the Commissioner, or 2. The fair market value as shown in the schedule of values fixed by the Provincial and City Assessors. Note- the same rules apply
with respect to Valuation of Gifts Made in Property under the donors tax.
b.
the beneficiary always forms part of the gross estate. If the one who took out the life insurance is the decedent himself and the designated beneficiary is not the estate, not the administrator, not the executor but somebody else for example the wife, the children etc., look into the nature of the designation. i. If the designation of the beneficiary is revocable proceeds form part of the gross estate. ii. If the designation of the beneficiary is irrevocable it will not form part of the gross estate.
Note the only time you look into the revocability or irrevocability of the designation of the heir or the beneficiary other than the estate, the executor, or administrator would be if it was the decedent who took out the life insurance on his own life. It was not the decedent who took out the life insurance on his own life like the corporation. Look for the beneficiary the designation does not matter. i. If the designated beneficiary is the estate of the deceased, his executor or administrator forms part of the gross estate ii. The designated beneficiary is not the estate of the deceased, nor the executor or administrator then it does not matter whether the designation is revocable or irrevocable not form part of the gross estate. The beneficiary is not deprived of his right to the insurance proceeds except that the insurance proceeds will form part of gross estate for purposes of estate taxation.
Items deductable from gross estate of a Filipino decedent, whether a resident or not, or of a resident alien decedent 1. Expenses, Losses, Indebtedness, and Taxes
a.
*For actual funeral expenses or in an amount equal to 5% of the gross estate, whichever is lower, but in no case to exceed P200,000; Actual funeral expenses those which are actually incurred in connection with the interment or burial of the deceased.
b.
For judicial expenses of the testamentary or intestate proceedings; These deductible

items are expenses incurred during the settlement of the estate but not beyond the last day prescribed by law, or the extension thereof, for the filing of the estate tax return. For claims against the estate. Claims means debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime and could have been reduced to simple money judgements. It may arise out of out of : (1) Contract; (2) Tort; or (3) Operation of Law
c.
d.
6.
Transfers for Insufficient Consideration. Where the
e.
decedents property is transferred in contemplation of death, revocable transfer or pass under the general power of appointment for a consideration in money or moneys worth but is not a bona fide sale for an adequate and full consideration in money or money's worth the amount includible as part of the decedents gross estate should be the difference between the fair market value at the time of the decedents death and the actual consideration received by the decedent.
Example Property worth 10M was sold only for 2M in case of death 8M will form part of the gross estate.
SEC. 85 H] Capital of the Surviving Spouse
The capital of the surviving spouse of a decedent shall not, be deemed a part of his or her gross estate. Capital means the property of the spouses
brought into the marriage. *Determination of the Value of the Estate
For claims of the deceased against insolvent persons where the value of decedent's interest therein is included in the value of the gross estate For unpaid mortgages upon, or any indebtedness in respect to, property where the value of decedent's interest therein, undiminished by such mortgage or indebtedness, is included in the value of the gross estate, but not including any income tax upon income received after the death of the decedent, or property taxes not accrued before his death, or any estate tax. The deduction herein allowed in the case of claims against the estate, unpaid mortgages or any indebtedness shall, when founded upon a promise or agreement, be limited to the extent that they were contracted bona fide and for an adequate and full consideration in money or money's worth. There shall also be deducted losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualties, or from robbery, theft or embezzlement, when such losses are not compensated for by insurance or otherwise, and if at the time of the filing of the return such
36
losses have not been claimed as a deduction for income tax purposes in an income tax return, and provided that such losses were incurred not later than the last day for the payment of the estate tax.
Requisites for deductibility of claims against the estate 1. The liability represents of a personal obligation of the deceased existing at the time of his death except unpaid obligations incurred incident to his death such as unpaid funeral expenses and unpaid medical expenses which are classified under different category of deductions 2. The liability was contracted in good faith and for adequate and full consideration in money or moneys worth 3. The claim must be a debt or claim which is valid in law and enforceable in court 4. The indebtedness must not have been condoned by the creditor or the action to collect from the decedent must not have been prescribed. 2. Property Previously Taxed/vanishing deductions
3.
4.
5. 6.
7.
*Vanishing Deductions Refers to the diminishing deducibility/ exemption, at the rate of 20% over a period of 5 years until it is lost after the fifth year, of any property (situated in the Philippines) forming part of the gross estate, acquired by the decedent from a prior decedent who died within a period of 5 years from the decedent's death. It is called vanishing deductions because the deductions allowed diminishes over a period of 5 years. It is designed to mitigate the harshness of successive taxation. Requisites 1. Death The present decedent died within 5 years from date of death of the prior decedent or date of gift. 2. Identity of the Property The property with respect to which deduction is sought can be identified as one received from prior decedent or from the donor or as the property acquired in exchange for the original property so received. 3. Inclusion of the property The property must have been formed part of the gross estate situated in the Phil. of the prior decedent or have been included in the total amount of the gifts of the donor within 5 years prior to the present decedents death. 4. Previous taxation of the property The estate tax on the prior succession, or the donors tax on the gift must have been finally determined and paid by the prior decedent or by the donor, as the case may be. 5. No previous vanishing deduction of the property No such deduction on the property or the property given in exchanged therefore, was allowed in determining the value of the net estate of the prior decedent. This limitation is intended to preclude the application of vanishing deduction on the same property more than once.
Transfers for Public Use - The amount of all bequests, legacies, devises or transfers to or for the use of the Government of the Republic of the Philippines, or any political subdivision thereof, for exclusively public purposes. The Family Home. An amount equivalent to the current fair market value of the decedent's family home: Provided, however, That if the said current fair market value exceeds P1,000,000, the excess shall be subject to estate tax. As a sine qua non condition for the exemption or deduction, said family home must have been the decedent's family home as certified by the barangay captain of the locality. Standard Deduction - An amount equivalent to One million pesos. Medical Expenses - Medical expenses incurred by the decedent within 1 year prior to his death which shall be duly substantiated with receipts: Provided, That in no case shall the deductible medical expenses exceed P500,000. Amount Received by Heirs under RA 4917 - Any amount received by the heirs from the decedent's employer as a consequence of the death of the decedent-employee in accordance with Republic Act No. 4917: Provided, That such amount is included in the gross estate of the decedent. Net share of the surviving spouse in the conjugal partnership
8.
Items deductable from the gross estate of a non-resident alien decedent 1. The proportion which expenses, losses, indebtedness and taxes bears to the total value of the entire gross estate wherever situated. 2. Property previously taxed/vanishing deductions 3. Transfer for public use 4. Net share of the surviving spouse in the conjugal partnership [Sec. 86] Requirements for the estate of a nonresident alien decdent to avail of deductions No deduction shall be allowed in the case of a nonresident not a citizen of the Philippines, unless the executor, administrator, or anyone of the heirs, as the case may be, includes in the return required to be filed the value at the time of his death of that part of the gross estate of the nonresident not situated in the Philippines [Sec. 86 D,]
*SEC. 86 E] Tax Credit for Estate Taxes Paid to a Foreign

Country.
1.
In General. The tax shall be credited with the
2.
amounts of any estate tax imposed by the authority of a foreign country. Limitations on Credit. The amount of the credit taken under this Section shall be subject to each of the following limitations: a. The amount of the credit in respect to the tax paid to any country shall not exceed the same proportion of the tax against which such
37
b.
credit is taken, which the decedent's net estate situated within such country taxable under this Title bears to his entire net estate; and The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the decedent's net estate situated outside the Philippines taxable under this Title bears to his entire net estate.
C] Extension of Time. The Commissioner shall have authority to grant, in meritorious cases, a reasonable extension not exceeding 30 days for filing the return. D] Place of Filing. Except in cases where the Commissioner otherwise permits, the return required shall be filed with an authorized agent bank, or Revenue District Officer, Collection Officer, or duly authorized Treasurer of the city or municipality in which the decedent was domiciled at the time of his death or if there be no legal residence in the Philippines, with the Office of the Commissioner. SEC. 91. Payment of Tax a. Time of Payment. The estate tax shall be paid at the time the return is filed by the executor, administrator or the heirs. b. Extension of Time. When the Commissioner finds that the payment on the due date of the estate tax or of any part thereof would impose undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed 5 years, in case the estate is settled through the courts, or 2 years in case the estate is settled extrajudicially. In such case, the amount in respect of which the extension is granted shall be paid on or before the date of the expiration of the period of the extension, and the running of the Statute of Limitations for assessment [Section 203] shall be suspended for the period of any such extension. Where the taxes are assessed by reason of negligence, intentional disregard of rules and regulations, or fraud on the part of the taxpayer, no extension will be granted by the Commissioner. If an extension is granted, the Commissioner may require the executor, or administrator, or beneficiary, as the case may be, to furnish a bond in such amount, not exceeding double the amount of the tax and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance with the terms of the extension. c.
***Liability for Payment. The estate tax shall be paid by the executor or administrator before delivery to any beneficiary of his distributive share of the estate. Such beneficiary shall, to the extent of his distributive share of the estate, be subsidiarily liable for the payment of such portion of the estate tax as his distributive share bears to the value of the total net estate.
Notice of Death to be Filed
SEC. 89. In all cases of transfers subject to tax, or where, though exempt from tax, the gross value of the estate exceeds P20,000, the executor, administrator or any of the legal heirs, as the case may be, within 2 months after the decedent's death, or within a like period after qualifying as such executor or administrator, shall give a written notice thereof to the Commissioner.
Prohibition on withdrawal of bank deposits upon depositors death
***SEC. 97 par. 2 If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the said deposit account, unless the Commissioner has certified that the taxes imposed thereon by this Title have been paid; Provided, however, That the administrator of the estate or any one of the heirs of the decedent may, upon authorization by the Commissioner, withdraw an amount not exceeding P20,000 without the said certification. For this purpose, all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors.
Instances where estate tax return is required to be filed In all cases of transfers subject to the tax imposed herein, or where, though exempt from tax, the gross value of the estate exceeds P200,000, or regardless of the gross value of the estate, where the said estate consists of registered or registrable property such as real property, motor vehicle, shares of stock or other similar property for which a clearance from the Bureau of Internal Revenue is required as a condition precedent for the transfer of ownership thereof in the name of the transferee, the executor, or the administrator, or any of the legal heirs, as the case may be, shall file a return under oath [Sec. 90 A]
B] Time for Filing. For the purpose of determining the estate tax, the estate tax return required shall be filed within 6 months from the decedent's death. A certified copy of the schedule of partition and the order of the court approving the same shall be furnished the Commissioner within 30 days after the promulgation of such order.
'executor' or 'administrator' means the executor or administrator of the decedent, or if there is no executor or administrator appointed, qualified, and acting within the Philippines, then any person in
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delivery, either actually or onstructively, of the donated property to the donee. Thus, the law in force at the time of the perfection/completion of the donation shall govern the imposition of the donors tax. A gift that is incomplete because of reserved powers, becomes complete when either: 1. The donor renounces the power; or 2. His right to exercise the reserved power ceases because of the happening of some event or contingency or the fulfilment of some condition, other than because of the donors death. Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community after the dissolution of the marriage in favor of the heirs of the deceased spouse or any other person/s is subject to donors tax whereas general renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent is not subject to donors tax, unless specifically and categorically done in favor of identified heir/s to the exclusion or disadvantage of the other co-heirs in the hereditary estate. Purpose of donors tax 1. To raise revenue 2. To tax the wealthy and reduce certain other excise tax 3. To discourage inter vivos transfers of property which could reduce the mortis causa transfer on which a higher tax, the estate tax would be collected
actual or constructive possession of any property of the decedent.

***Collection of estate taxes does not require court approval since there is nothing in the Tax Code and in the pertinent remedial laws that implies the necessity of the probate or estate settlement courts approval of the states claim for the estate taxes before the same can be enforced or collected. On the contrary, under Sec 94, it is the probate or settlement court which is bidden not to authorize the executor or judicial administrator of the decedent's estate to deliver any distributive share to any party interested in the estate, unless it is shown a Certification by the CIR that the estate taxes have been paid [MARCOS II v. CA] Two ways of collecting estate taxes 1. Going after all the heirs and collecting from each one of them the amount of tax proportionate to the estate received. 2. Pursuant to the lien created under Sec. 219 upon all property and rights to property of the estate and subjecting such part which is in the hands of an heir or transferee to the payment of the tax due the estate. Effects of failure to pay the estate tax 1. The executor or administrator shall not be discharged from personal liability for the payment of the estate tax [Sec. 92] 2. No judge shall authorize the executor or administrator to delver a distributive share to any partly interested in the estate unless a certification from the Commissioner that the estate tax has been paid is shown [Sec. 94] Estate planning The manner by which a person takes steps to conserve the property to be transmitted to his heirs by decreasing the amount of estate taxes to be paid upon his death. The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted. DONORS TAX Donors Tax A tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer. It shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect and whether the property is real or personal, tangible or intangible. *Donors tax is a tax on the privilege to transfer property during ones lifetime while Estate Tax is a tax on the privilege to transfer property upon ones death. The donors tax is not a property tax, but is a tax imposed on the transfer of property by way of gift inter vivos. The donors tax shall not apply unless and until there is a completed gift. The transfer of property by gift is perfected from the moment the donor knows of the acceptance by the donee; it is completed by the
SEC. 98. Imposition of Tax a. There shall be levied, assessed, collected and paid upon the transfer by any person, resident or nonresident, of the property by gift, a donors tax. b. The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible.
The donors tax shall not apply unless and until there is a completed gift. ***Elements of a donation subject to donors tax 1. Act of liberality on the part of the donor 2. Inter vivos in its effects 3. Gratuitous disposal of property or for less than adequate consideration 4. In favor of another 5. Who accepts it without any legal compulsion to give.
***SEC. 99. Rates of Tax Payable by Donor. A] In General. The tax for each calendar year shall be computed on the basis of the total net gifts made during the calendar year.
Net gifts The net economic benefit from the transfer that accrues to the donee. The basis for the computation of the net gifts is the totality of the gifts that have been given during a
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4. 5. 6. Donations of intangibles subject to reciprocity Donations for athletes prizes and rewards Donations under adopt - a - school program
calendar year meaning from January 1 up to December 31. As a result of which there is now a concept of donation splitting. Donation/Gift splitting Spreading the gift over numerous calendar years in order to avail of lower donors taxes. The totality of the gift given during the calendar year. For example You have an intention to donate P200,000 worth of property, you could donate the first 100,000 on Dec. 31 and then donate the remaining 100,000 on January 1 and both would be exempt because the basis is calendar year. *Note if the total net gifts made during the calendar year is not P100,000 and above it is exempt from donors tax.
SEC 100. Transfer for Less Than Adequate and full Consideration. Where property, other than real property referred to in Sec. 24(D) [Capital Gains from Sale of Real Property], is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the fair market value of the property exceeded the value of the consideration shall, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year.
***Elements of onerous donations subject to donors tax 1. A person gives to another a thing or right 2. Other than real property 3. The transfer is for less than an adequate or full consideration in moneys worth; or the gift imposes upon the done a burden which is less than the value of the thing given. 4. The excess of the fair market value of the property over the actual value of the consideration shall be subject to donors tax.
B] Tax Payable by Donor if Donee is a Stranger. When the donee or beneficiary is a stranger, the tax payable by the donor shall be 30% of the net gifts. **Stranger is a person who is not a: 1. Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal descendant; or 2. Relative by consanguinity in the collateral line within the fourth degree of relationship.
Donation by a stranger - The scale does not anymore apply, and since you dont use the scale you dont also have the 100, 000 as an exemption. Technically speaking it is a straight of 30% of the net gifts. Husband and wife are considered separate and distinct taxpayers for the purpose of donors tax. However, if what was donated is a conjugal or community property and only the husband signed the deed of donation, there is only one donor for donors tax purposes. A legally adopted child is entitled to all the rights and obligations provided by law to legitimate children, and therefore, donation to him shall not be considered as donation made to stranger. Donation made between business organizations and those made between an individual and a business organization shall be considered as donation made to a stranger.
***SEC. 101. Exemption of Certain Gifts. The following gifts or donations shall be exempt from the tax provided for in this Chapter: A] In the Case of Gifts Made by a Resident. 1. Dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents to each of their legitimate, recognized natural, or adopted children to the extent of the first P10,000 2. Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government; and 3. Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization: Provided, however, That not more than 30% of said gifts shall be used by such donee for administration purposes.
Requisites in order that all grants, donations and contributions to non-stock, non-profit private educational institutions may be exempt from the donor's tax 1. Not more than 30% of said gifts shall be used by such donee for administration purposes; 2. The educational institution is incorporated as a nonstock entity, 3. paying no dividends, 4. governed by trustees who receive no compensation, and 5. devoting all its income, whether students' fees or gifts, donations, subsidies or other forms of philanthropy, to the accomplishment and promotion of the purposes enumerated in its Articles of
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***C] Any contribution in cash or in kind to any candidate, political party or coalition of parties for campaign purposes shall be governed by the Election Code, as amended.
Related Provision Any contribution in cash or in kind to any candidate or political party or coalition of parties for campaign purposes, duly reported to the COMELEC shall not be subject to the payment of any gift tax[RA 7166 Sec. 13 last par.] Donations exempt from the payment of donors taxes 1. Donations for purposes of political campaign 2. Certain gifts made by a resident 3. Certain gifts made by a nonresident aliens

Incorporation.
B] In the Case of Gifts made by a Nonresident not a Citizen of the Philippines.
1.
2.
Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government. Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization: Provided, however, That not more than 30% of said gifts shall be used by such donee for administration purposes.
*Requirements in order to consider the giving as a gift and not as income 1. The gift was made to the widow rather than to the estate 2. There was no obligation on the part of the employer corporation to make further payments to the deceased 3. The widow had never worked for the corporation 4. The corporation received no economic benefit for the payment 5. The deceased had been full compensated for his service.
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Remedies, Tarrif and Custom, Local Government Tax, Real Property and Esate and Other Taxes

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NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

Jurisdiction over cases involving Criminal Offenses

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

Jurisdiction over Tax Collection Cases

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

Instituted to penalize the taxpayer for violation of the Tax Code

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

SEC 222. Exceptions as to Period of Limitation of Assessment

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

The taxpayer is already delinquent in the payment of his taxes

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

**SEC. 186 Power to Levy Other Taxes, Fees or Charges/ known

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

***SEC. 133. Common limitations on the taxing powers of

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION

PERSONAL NOTES OF Atty. OLIVER R. GATCHALIAN

NOTES & CASES IN TAXATION