Tax Sababan PDF

!"#"!$%& (") *+,$+) &%!
+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!
!"#$%&'$ ") *&+&*,"- .&/ %$#,$/

,0 12345 6748549:;3 <= !<83>4>?>4<82:
.4@4>2>4<83
a) Due process cIause whIch
couId be eIther substantIve
due process and
proceduraI due process
cIause
b) EquaI protectIon cIause
Read:
Ormoc Sugar CentraI vs.
CIty Treasurer 22 SCRA
603
TIu vs. CA 301 SCRA 178
c) ArtIcIe sec. 1 oI the
1987 ConstItutIon non
ImpaIrment cIause
d) ArtIcIe sec. 5 Ireedom
oI reIIgIon
e) ArtIcIe sec. 20 non
payment oI poII tax
I) ArtIcIe V sec. 28 par. 2
IIexIbIe tarIII cIause
g) ArtIcIe V sec. 28 par. 3
exemptIon Irom reaI
property tax
Read:
Herrera vs. Quezon CIty 3
SCRA 186
Abra vs. Hernando 107 SCRA
104
Abra VaIIey vs. AquIno 52
SCRA 106
PhIIIppIne Lung Center vs.
Quezon CIty 433 SCRA 119
h) ArtIcIe V sec. 28 par. 4
quaIIIIed majorIty In tax
exemptIon
I) nternatIonaI doubIe
taxatIon
CR vs. ]ohnson 309 SCRA
87
j) DoctrIne oI equItabIe recoupment
k) DoctrIne oI SetoII or compensatIon In
taxatIon
RepubIIc vs. MambuIao 4 SCRA 622
DomIngo vs. CarIItos 8 SCRA 443
FrancIa vs. AC 162 SCRA 753
CaItex vs. COA 208 SCRA 726
PhIIex vs. CR 294 SCRA 687

,,0 ,85<@; *2A .2B
SectIon 2226 oI the NatIonaI nternaI
Revenue Code
a) Read In the commentarIes or magIc
notes the dIIIerent kInds oI:
1. ncome Taxpayers
2. ncome Taxes
3. Sources oI ncome sec. 42 oI NRC
ncome Taxpayers
a) ndIvIduaIs
b) CorporatIon
c) Estates and Trusts
ndIvIduaIs are cIassIIIed
ResIdent CItIzens sec. 23 (A), sec
24 (A) (a)
NonResIdent CItIzens sec 23 (8),
24 (A) (b) 22 (E)
Overseas Contract Workers Sec.
23 (C), 24 (A) (b)
ResIdent AIIens Rev. Reg. sec 5,
23 (D), 24 (A) (c)
NonResIdent AIIens Engaged In
trade or busIness sectIons 25 (A)
(1)
NonResIdent AIIens Not Engaged
In trade or busIness sec. 25 (8)
AIIens EmpIoyed In MuItI
NatIonaI CorporatIons sec. 25 (C)
and Rev. Reg. 122001
AIIens EmpIoyed In OIIshore
8ankIng UnIts sec 25 (D)
AIIens EmpIoyed In petroIeum
ServIce Contractors &
Subcontractors sec. 25 (E)
Corporate ncome Taxpayers
DomestIc CorporatIons sec. 23 (E),
and sec 27 oI NRC
ResIdent ForeIgn CorporatIons sec. 22
(H) and (28)A
NonResIdent ForeIgn CorporatIons
sec. 22 (1) and 28 (8)
Estates and Trusts sec. 6066 oI NRC

DIIIerent KInds oI ncome Tax
1. Net ncome Tax secs. 24 (A), 25
(A) (1), 26, 27 (A) (8) (C), 28 (A) up
to 3
rd
par. 31 and 32 (A)
2. Cross ncome Tax secs. 25 (8) IIrst
part and 28 (8) (1)
3. FInaI ncome Taxes sec. 57 (A)
4. MInImum Corporate ncome Tax
oI 2Z oI the Cross ncome secs.
27 (E), 28 (A) (2)
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#
5. mproperIy AccumuIated EarnIngs
Tax oI 10Z oI Its taxabIe Income
sec. 29 NRC Rev. Reg. 22001
OptIonaI Corporate ncome Tax oI
15Z oI Its gross Income sectIons
27 (A) 4
th
to 10
th
par. And 28 A(1)
but onIy up to the 4
th
paragraph

Proceed to sectIon 42 and 23 oI the
NRC
NDC vs. Comm 151 SCRA 472
Comm. Vs. AC 127 SCRA 9
Then go to sec. 39 oI NRC
CaIazans vs. Comm. 144 SCRA
664 RR 72003
Then proceed to sec. 24 (A), 25 (A)
(1), 25 8,C,D,E, 27 A,8,C; 28 (A) (1),
28 (A) (6) and sec 51 (D)
Then contInue to sec 24 8 1, 25
8,C,D,E; 27 (D) (1)
Then go to se. 24 (8) (2) sec. 73
Comm. Vs. MannIng 66 SCRA 14
Anscor vs. Comm. 301 SCRA 152
Sec. 25 (A) (2), 25 8, C, C, E, sec. 27 (D) (4);
28 (A) (7) (D); 32 8 (7) (a)

- Then you go to sec. 24 C, 25A (3); 25 8,
C, D, E, 27 D (2); 28 (A) (7) (C); 28 8 (5)
(C) RA 7717 sec. 127 NRC
- Then you go to sec. 24 D (1); 25 (A) (3);
25 (8) Iast par. 27 (D) (5)
ChIna 8ank vs. Court oI AppeaIs 336
SCRA ; RR 72003
Upon readIng sec. 24 (D) (2) read RR 13
1999

Upon readIng sec. 27 (A) go to sec. 22 (8)
8atangas vs. CoIIector 102 PhII. 822
EvangeIIsta vs. CoIIector 102 PhII 140
Reyes vs. Comm. 24 SCRA 198
Ona vs. 8autIsta 45 SCRA 74
ObIIIos vs. Comm 139 SCRA 436
Pascua vs. Comm. 166 SCRA 560
AIIsco vs. Comm. 302 SCRA 1

Upon readIng sec. 27 (C) oI NRC see RA
9337 then go to sec. 32 (8) (7) (b) oI NRC,
sec. 133 par (o) oI LCC, sec. 154 oI the LCC.
Pagcor vs. 8asco 197 SCRA 52
Mactan vs. Cebu 261 SCRA 667
LRT vs. CIty oI ManIIa 342 SCRA 692

Proceed to sectIons 27 (D) (1), 27 (D) (2),
27 (D) (5) read RA 9337, 28 (A) (7) (b), 28 (8)
(5) (C), 27 (D) (4), (28) (A) (7) (d), 28 (8) (5)
(b)
MarubenI vs. CR 177 SCRA 500
Proctor & CambIe vs. Comm 160 SCRA
560
Same case Proctor and CambIe on the
MotIon Ior ReconsIderatIon 204 SCRA
377
Wonder vs. Comm 160 SCRA 573

Proceed to sec. 27(D) (5)
then sectIons 27 (E) and 28 (A) (2)
Co to sec. 28 (A) (3) read RR 152002
Co to sec. 28 (A) (4) see RA 9337
Then see sec 28 (A) (5) see MarubenI vs.
Comm 177 SCRA 500
Proceed to sec. 28(8) (5) (a) and sec 32 (8)
(7) (a)
Read MItsubIshI vs. Comm 181 SCRA
214
Then go to sec. 29 and Rev. Reg. 22001
Upon readIng sec. 32 (8) 1 and 2, read sec.
85 par (e), sec. 108A and sec. 123 oI the
NRC
Proceed to sec. 33 read Rev. Reg. 398
then go to sec. 34 (A) (1) (a) see AguInaIdo
vs. Comm. 112 SCRA 136, RR 102002
Under Sec. 34 (8) read RR 132000
Upon readIng sec. 49 read 8anas vs. CA
325 SCRA 259 and FIIIpIna vs. Comm. 316
SCRA 480
Upon readIng sec. 6066, read Ona vs.
8autIsta 45 SCRA 74

,,,0 $3>2>; *2A
SectIons 8497 see sec. 104
Upon readIng sec. 85 (8) read VIdaI
de Roces vs. Posadas 58 PhII. 108
DIzon vs. Posadas 57 PhII 465
Sec. 85 (C) compare wIth sec. 100
sec. 85 (H) compare wIth sec. 86 (C)
Upon readIng sec. 86 see RR 22003
Upon readIng sec. 94 see Marcos vs.
SandIganbayan 273 SCRA 47

,#0 C<8<73 *2A .2B
- SectIons 98104
- C and CumuIatIve methods oI IIIIng
donors tax returns sections 99 (A), 103
(A) (1) and RR 22003
- SectIons 100 and 85 (9)

#0 #2:?; &DD;D *2A
SectIons 105115
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$
Read RA 9337
Read A8AKADA vs Comm.
CR 168056, Sept. 1, 2005

#,0 %;@;D4;3 E8D;7 >F; ,8>;782: %;G;8?;
!<D;
SectIons 202229
RR 1299
PhoenIx vs Comm 14 SCRA 52
8asIIan vs. Comm. 21 SCRA 17
Yabut vs. FIojo 115 SCRA 278
UnIon ShIppIng vs. Comm 185 SCRA
547
Comm. vs. TMX 205 SCRA 184
Comm. vs. PhIIamIIIe 244 SCRA
Comm. vs. CA & 8P 301 SCRA 435
8P vs. Comm. 363 SCRA 840
PrescrIptIon sectIons 203 and 222 oI
NRC, sec. 194 oI the LCC, sec. 270 oI
the LCC, sec. 1603 oI TarIII and
Customs Code
Protest sec. 228 oI NRC and RR 1299
sec. 195 oI LCC, 252 LCC, sec. 2313 oI
TarIII & Customs Code and RA 7651

#,,0 .<52: *2A2>4<8
SectIons 128196 oI LCC
Proceed 1
st
to sec. 186 read 8uIacan
vs. CA 299 SCRA 442
Then proceed to 187
Then to 151
128
Under sec. 133 (e) read PaIma vs.
MaIangas 413 SCRA 572
Under 133 (h) read PIIIIIa vs. Petron
198 SCRA 82
Under 133 (I) read FIrst HoIdIngs Co.
vs. batangas CIty 300 SCRA 661
Under 133 (I) read 8utuan vs. LTO
322 SCRA 805
Under 137 read sec. 193 oI LCC
MIsamIs vs. Cagayan de Oro 181
SCRA 38
Reyes vs. San PabIo CIty 305
SCRA 353
MeraIco vs. Laguna 306 SCRA
750
PLDT vs. Davao CIty 363 SCRA
522

- CoreIate sec. 139 and 147 oI LCC
- Under sec. 140 oI the LCC see sec.
125 oI the nternaI Revenue Code
- Under sec. 150 oI the LCC read the
IoIIowIng:
PhII. Match vs. Cebu 81 SCRA 99
AIIIed Thread vs. ManIIa 133
SCRA 338
SIpocat vs. SheII 105 PhII. 1263
IoIIo 8ottIes vs. IoIIo CIty 164
SCRA 607

#,,,0 %;2: 67<9;7>H *2A
- SectIons 197294
- Sec. 235
LRT vs. ManIIa 342 SCRA 692
Cebu CIty vs. Mactan 261 SCRA 667

,+0 *274== I !?3><@3 !<D;
- SpecIaI Customs Duty sec. 301304 oI
TCC
- Regukar Customs Duty sec. 104 oI TCC
- RA 7631

+0 !<?7> <= *2A &99;2:3
RA 1125 as amended by RA 9282

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&
%?:;3 48 >F; !:2337<<@J
1. do not be absent
II you are absent, you have to
transcrIbe what happened In cIass when
you were out.
The next meetIng you attend cIass,
consIder yourseII a resIdent oI baIIcbaIIc,
babaIIkbaIIkan ka sa recIt.
ExceptIon: II you get marrIed.
2. read the assIgnment. Wag zapote ang
araI.
3. hoIIday make up cIass probabIy on a
Sunday
4. aIIowed to gIance at your notes, wag Iang
pahaIataJgarapaI
5. materIaIs:
codaI
commentarIes (any author wIII do)
magIc notes (Sababan Lecture and
Q&A)
8ook stand

!<G;72K; <= *2A2>4<8 .2B %;G4;BJ
1. 8asIc PrIncIpIes IncIudIng ConstItutIonaI
ProvIsIons
2. ncome Tax
3. Estate Tax
4. Donors Tax
5. RemedIes
6. LocaI Tax
7. ReaI Property Tax
8. TarIII and Customs Code
9. Court oI Tax AppeaIs
10. VAT (aIthough not part oI the coverage oI
the 8ar Exams, questIons have been asked
sInce 1999)

TItIe 5,6 and 7 are aIways IncIuded In the
coverage
No computatIons In the bar
There are onIy 1 or 2 questIons In the 8ar
about 8asIc PrIncIpIes
What are the IavorIte topIcs In the 8arZ
12 questIons on ncome Tax
810 questIons on remedIes
810 questIons aIIocated to the 7 topIcs

1&L,! 6%,-!,6.$LJ

TaxatIon Is an Inherent power oI the
State.

MJ What do you mean by NHERENTZ
&J The power to tax Is not provIded Ior In
the Iaw, statute or constItutIon; It depends on
the exIstence oI the state. No Iaw or
IegIsIatIon Ior the exercIse oI the power to
tax by the natIonaI government.

MJ Do IocaI governments exercIse thIs
Inherent powerZ
&J No. OnIy the NatIonaI Covernment
exercIses the Inherent power to Impose
taxes.

MJ The taxIng power oI IocaI governments Is
a DELACATED power. DeIegated by whomZ
&J DeIegated by Congress through Iaw In
case oI autonomous regIons, and deIegated
by the constItutIon In case oI LCUs not
consIdered an autonomous regIon.

CIes, rovnces nnd muncnIIes
power granted under Art. X Sec. 5&6 oI the
ConstItutIon

AuIonomous Regons power conIerred
by Congress through Iaw. Art. X Sec. 20 #2
oI the ConstItutIon Is a nonseIIexecutIng
provIsIon. Thus the power Is granted by
Congress because saId provIsIon requIres an
enabIIng Iaw.

ArtIcIe X, SectIon 5 Is seIIexecutIng thus
the power Is granted by the constItutIon.

!"-L*,*E*,"-&. .,N,*&*,"-L

!"# %&'(#)) *+,")#

MJ why Is It a IImItatIon to the power to taxZ
&J The due process cIause as a IImItatIon to
the power to tax reIers both to substantIve
and proceduraI due process. SubstantIve due
process requIres that a tax statute must be
wIthIn the constItutIonaI authorIty oI
Congress to pass and that It be reasonabIe,
IaIr and just.
ProceduraI due process, on the other
hand, requIres notIce and hearIng or at Ieast
the opportunIty to be heard.
Ex: On SubstantIve Due Process when the
Congress passes a Iaw exemptIng the 13
th

month pay Irom tax but wIth the concurrence
onIy oI the majorIty oI the quorum Iaw
wouId be InvaIId because the ConstItutIon
provIdes that any grant oI tax exemptIon
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

'
shaII be passed wIth the concurrence oI the
majorIty oI aII the members oI the Congress.

MJ Does It IoIIow that the adverse party must
aIways be notIIIedZ
&J No. As a ruIe, notIce and hearIng or the
opportunIty to be heard Is necessary onIy
when expressIy requIred by Iaw. Where there
Is no such requIrement, notIce and the
opportunIty to be heard are dIspensabIe.
Ex. 8eIore Oct. 1, 1995, you can secure a
TRO wIthout notIIyIng the adverse party. I
you are a suspect In a crImInaI case, you have
the rIght to have an opportunIty to be heard
(II there Is a Iaw).
8eIore ]uIy 1, 1998, no notIce need be
gIven to a party decIared In deIauIt. AIter the
amendment, the party decIared In deIauIt has
to be notIIIed oI subsequent proceedIngs
aIbeIt wIthout the rIght to partIcIpate thereIn.
n the case oI a search warrant, the
person to be searched was not notIIIed. The
person searched cannot cIaIm that there was
a vIoIatIon oI due process because there Is no
Iaw requIrIng that the person to be searched
shouId be notIIIed.
RegardIng deIInquent tax payers,
beIore Ievy, there must be notIce.

REASON:
No provIsIon oI Iaw requIres notIce to the
adverse party. I the adverse party Is notIIIed,
he may abscond. Thus, In adversarIaI
proceedIngs, In connectIon wIth proceduraI
due process, the adverse party need not be
notIIIed aII the tIme.

-.",+ %&'/#(/0'1 *+,")#

As a ruIe, taxpayers oI the same IootIng
are treated aIIke, both as to prIvIIeges
conIerred and IIabIIItIes Imposed. DIIIerence
In treatment Is aIIowed onIy when based on
substantIaI dIstInctIon. DIIIerence In
treatment not based on substantIaI
dIstInction is frowned upon as class
legislation. This is violated when taxpayers
beIongIng to the same cIassIIIcatIon are
treated dIIIerentIy Iorm one another; and
taxpayers beIongIng dIIIerent cIassIIIcatIons
are treated aIIke.

RequremenIs oj RensonnbIe CInssjcnIon:
1) There must be substantIaI dIstInctIons
that make a reaI dIIIerence.
2) t must be germane or reIevant to the
purpose oI the Iaw.
3) The dIstInctIon or cIassIIIcatIon must
appIy not onIy to the present but aIso
to Iuture sItuatIons.
4) The dIstInctIon must appIy to
persons, thIngs and transactIons
beIongIng to the same cIass.

Ex: n one case, a tax ordInance was
assaIIed on the ground that the ordInance
IaIIed to dIstInguIsh a worker Iorm casuaI,
permanent or temporary. The SC saId that
the ordInance was InvaIId because oI the
IaIIure to state the saId cIassIIIcatIon.

n FOFL v. CAYAT the Supreme Court
mandated the requIsItes Ior a vaIId
cIassIIIcatIon.

TIU v. COURT OF AFFAL5 (31 5CRA 27)
MJ what happened In the cIty oI OIonggapoZ
&J The Congress, wIth the approvaI oI the
PresIdent, passed RA 7227, an act
creatIng the conversIon oI the mIIItary
bases Into other productIve uses.
MJ Who was the PresIdent at that tImeZ
&J PresIdent Ramos
MJ What were sIgnedZ
&J RA 7227, EO 97 and EO 97A
The IIrst Ied to the creatIon oI the
SubIc SpecIaI EconomIc Zone (SSEZ). The
Iatter set the IImItatIons and boundarIes
oI the appIIcatIon oI the IncentIves (no
taxes, IocaI and natIonaI, shaII be
Imposed wIthIn SSEZ. n IIeu thereoI, 3Z
oI the Cross ncome shaII be remItted to
the national govt) to those operating
theIr busInesses wIthIn the saId area.
MJ Who are the petItIoners and what was
theIr contentIonZ
&J The petItIoners are FIIIpIno busInessmen
who are operatIng theIr busIness outsIde
the secured area. The petItIoners
contended that the Iaw In questIon was
vIoIatIve oI theIr rIght to equaI protectIon
oI Iaws sInce they are aIso FIIIpIno
busInessmen.
H: The Supreme Court ruIed that there
was no vIoIatIon sInce the cIassIIIcatIon
was based on a substantIaI dIstInctIon.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

(
The eIement Invoked here Is eIement
#1 that there must be substantIaI
dIstInctIon In the cIassIIIcatIon oI
taxpayers on whom the tax wIII be
Imposed.
The Court observed that those IoreIgn
busInessmen operatIng wIthIn the
secured area have to gIve a Iarger capItaI
to operate In the secured area (to spur
economIc growth and guarantee
empIoyment).

ORMOC 5UCAR CNTRAL vs. CIR
MJ What dId the munIcIpaIIty oI Ormoc doZ
&J The CIty CouncII oI Ormoc passed a
MunIcIpaI OrdInance No.4 ImposIng upon
any and aII centrIIugaI sugar mIIIed at the
Ormoc Sugar CentraI a munIcIpaI tax on
the net saIe oI the same to the UnIted
States and other IoreIgn countrIes.
MJ DId the owner accept thIs ImposItIonZ
&J No. the tax due was paId under protest,
then IIIed a compIaInt agaInst the CIty oI
Ormoc.
H: The Supreme Court saId there was a
vIoIatIon oI the equaI protectIon cIause.
The eIement Invoked here was eIement
#3, that It must be appIIcabIe to both
present and Iuture cIrcumstances. The
Supreme Court saId that one must go to
the provIsIon ItseII, In the case at bar,
there was a vIoIatIon oI eIement #3
because the Iaw was worded In such a
way that It onIy appIIes to Ormoc Sugar
CentraI aIone and to the excIusIon oI aII
other sugar centraIs to be estabIIshed In
the Iuture.
TAKE NOTE: PeopIe vs. Cayat

2&##3'4 '5 6#+070'1

t nvoIves 3 ThIngs:
1. Ireedom to choose reIIgIon
2. freedom to exercise ones religion
3. prohIbItIon upon the natIonaI
government to estabIIsh a natIonaI reIIgIon

MJ WhIch one IImIts the power to taxZ
&J ProhIbItIon upon the natIonaI government
to estabIIsh a natIonaI reIIgIon because thIs
wIII requIre a specIaI approprIatIon oI money
comIng Irom the natIonaI treasury whIch Is
Iunded by the taxes paId by the peopIe.

8'1904:,0&4#1/ *+,")#

MJ What are the sources oI obIIgatIon In the
CIvII CodeZ
&J Law, Contracts, QuasIContracts, DeIIct,
QuasIDeIIct.

MJ What Is the obIIgatIon contempIated In
thIs IImItatIonZ
&J Those obIIgatIons arIsIng Irom contracts.

CeneraI RuIe: The power to tax Is pursuant
to Iaw, thereIore, the obIIgatIon to pay taxes
Is Imposed by Iaw, thus the nonImpaIrment
cIause does not appIy.

You have to determIne IIrst the source oI
obIIgatIon:
1. I the Iaw mereIy provIdes Ior the
IuIIIIIment oI the obIIgatIon then the Iaw Is
not the source oI the obIIgatIon.
2. When the Iaw mereIy recognIzes or
acknowIedges the exIstence oI an obIIgatIon
created by an act whIch may constItute a
contract, quasIcontract, deIIct, and quasI
deIIct, and Its onIy purpose Is to reguIate
such obIIgatIon, then the act ItseII Is the
source oI the obIIgatIon, not the Iaw.
When the Iaw estabIIshes the obIIgatIon
and aIso provIdes Ior Its IuIIIIIment, then the
Iaw ItseII Is the source oI the obIIgatIon

MJ So, In what Instance does the non
ImpaIrment oI contracts cIause becomes a
IImItatIon to the power to taxZ
&J It Is when the taxpayer enters Into a
compromIse agreement wIth the government.
n thIs Instance, the obIIgatIon to pay the tax
Is now based on the contract between the
taxpayer and the government pursuant to
theIr compromIse agreement.

Take Note: the requIrement Ior Its
appIIcatIon: the partIes are the government
and prIvate IndIvIduaI.

%'++ ;,<

MJ What Is a poII taxZ
&J t Is a tax oI a IIxed amount on IndIvIduaIs
resIdIng wIthIn a partIcuIar terrItory, whether
cItIzens or not, wIthout regard to theIr
property or to the occupatIon In whIch they
may be engaged.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)
t Is a tax Imposed on persons wIthout
any quaIIIIcatIons. persons may be aIIowed to
pay even II they are not quaIIIIed as to age or
property ownershIp.

ExampIe oI PoII Tax: CommunIty Tax
CertIIIcate under SectIon 162 oI the LocaI
Covernment Code.

MJ Why Is It a IImItatIon to the power to taxZ
&J t Is a IImItatIon to the power to tax
because Congress Is prohIbIted Irom passIng
a Iaw penaIIzIng wIth ImprIsonment a person
who does not pay poII tax. (Iunds Ior sendIng
a person to jaII Is taken Irom the natIonaI
treasury whIch Is Iunded by the taxes paId by
the peopIe)

-<#4:/0'1 5&'4 :,=4#1/ '5 6#,+ -)/,/#
;,<

MJ What Is the requIrement Ior exemptIon
Irom payment oI reaI property tax under the
1935, 1973 and 1987 ConstItutIonZ
&J ArI. b, 5ec 22 (3), 1935 ConsIIuIon
CemeterIes, churches and parsonages or
convents appurtenant thereto, and aII Iands,
buIIdIngs and Improvements used
EXCLUSVELY Ior RELCOUS, CHARTA8LE or
EDUCATONAL purposes shaII be exempt Ior
taxatIon.
ArI. , 5ec. 17 (3), 1973 ConsIIuIon
charItabIe InstItutIons, churches, parsonages
or convents appurtenant thereto, mosque,
and nonproIIt cemeterIes, and aII Iands,
buIIdIngs, and Improvements ACTUALLY,
DRECTLY, and EXCLUSVELY used Ior
RELCOUS and CHARTA8LE purposes shaII
be exempt Irom taxatIon.
ArI. b, 5ec. 2 (3), 197 ConsIIuIon
charItabIe InstItutIons, churches, and
parsonages or convents appurtenant thereto,
mosque, nonproIIt cemeterIes, and aII Iands,
buIIdIngs, and Improvements ACTUALLY,
DRECTLY and EXCLUSVELY used Ior
RELCOUS, EDUCATONAL and CHARTA8LE
purposes shaII be exempt Irom taxatIon.

HRRRA v. C-OARD OF A5555MNT
(1935 ConstItutIon)
MJ What Is InvoIved In thIs caseZ
&J A charItabIe InstItutIon, St.
Catherines Hospital. The hospital was
prevIousIy exempt Irom taxatIon untII It
was recIassIIIed and subsequentIy
assessed Ior the payment oI reaI property
tax.
The contentIon oI the respondent Is
that the hospItaI was no Ionger a
charItabIe InstItutIon because It accepts
paypatIents, It aIso operates a schooI Ior
mIdwIIery and nursIng, and a dormItory.
SInce It Is not excIusIveIy used Ior
charItabIe purposes It Is not exempt Irom
taxatIon.
H: The Court ruIed that petItIoner Is not
IIabIe Ior the payment oI reaI estate
taxes. t Is a charItabIe InstItutIon, thus
exempt Irom the payment oI such tax.
The hospItaI, schooIs and dormItory
are aII exempt Iro taxatIon because they
are IncIdentaI to the prImary purpose oI
the hospItaI.
NOTE: thIs arose durIng the 1935
ConstItutIon.
Exempted by virtue of incidentaI
purpose was merely coined by the Supreme
Court. Thus, It does not appIy to other taxes
except ReaI Estate Tax.

FROVINC OF ARA v. HRNANDO
& A reIIgIous InstItutIon was InvoIved In
thIs case, the Roman CathoIIc 8Ishop oI
8angued, nc. (bIshop IIIed decIaratory
reIIeI aIter assessed Ior payment oI tax).
The respondent judge granted the
exemptIon Irom taxes oI saId church
based onIy on the aIIegatIons oI the
compIaInt wIthout conductIng a
hearIngJtrIaI. The assIstant prosecutor
IIIed a compIaInt contendIng that
petItIoner was deprIved oI Its rIght to due
process.

SC: the Court ordered that the case be
remanded to the Iower court Ior Iurther
proceedIngs. The Court observed that the
cause actIon arose under the 1973
ConstItutIon, not under the 1935
ConstItutIon (note the dIIIerence). Tax
exemptIon Is not presumed. t must be
strIctIy construed agaInst the taxpayer and
IIberaIIy construed In Iavor oI the
government.

ARA VALLY COLLC INC. v. AUINO
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

*
&J An educatIonaI InstItutIon Is InvoIved
In thIs case. The ground IIoor oI the
schooI was Ieased to Northern MarketIng
Corp., a domestIc corporatIon. The 2
nd

IIoor thereoI was used as the resIdence oI
the schooI dIrector and hIs IamIIy.
The ProvInce oI Abra now contends
that sInce the schooI Is not excIusIveIy
used Ior educatIonaI purposes, the schooI
Is now IIabIe to pay reaI estate tax.
H: The Court heId that the schooI Is
PARTALLY IIabIe Ior reaI estate tax.
1. ResIdence exempt by vIrtue oI
IncIdentaI purpose; justIIIed because
It Is necessary.
2. CommercIaI not exempt because It
Is not pursuant to the prImary
purpose; not Ior educatIonaI
purposes.

MJ Is the doctrIne In the case oI Herrera the
same wIth thIs caseZ
&J NO. In the Herrera case, the exemptIon
was granted to aII the reaI property (hospItaI,
schooI and dorm). 8ut In thIs case, the
Supreme Court made a quaIIIIcatIon. The
Supreme Court saId It depends.

NOTE: both cases arose under the 1935
ConstItutIon despIte havIng been decIded In
1988.

MJ At present, do we stIII appIy the
exemptIon Irom tax by vIrtue oI the DoctrIne
oI ncIdentaI PurposeZ
&J Not anymore. The cause oI actIon In saId
case arose under the 1935 ConstItutIon and
It does not appIy to the provIsIons oI the
1987 ConstItutIon.

FHILIFFIN LUNC CNTR v. UZON CITY
&J A charItabIe InstItutIon, a hospItaI. t
Is provIded In the charter oI the Lung
Center oI the PhIIIppInes Is a charItabIe
InstItutIon. However, part oI Its buIIdIng
was Ieased to prIvate IndIvIduaIs and the
vacant portIon oI Its Iot was rented out to
EIIIptIcaI OrchIds. Respondent contends
that sInce the hospItaI Is not used
actuaIIy, dIrectIy, an d excIusIveIy Ior
charItabIe purposes, It Is IIabIe to pay reaI
estate taxes.
H: The Supreme Court heId that the
petItIoner Is IIabIe to pay tax Ior those
parts Ieased to prIvate IndIvIduaIs Ior
commercIaI purposes. For the part oI the
hospItaI used Ior charItabIe purposes
(whether Ior pay or nonpay patIents),
petItIoner Is exempt Irom payment oI reaI
estate tax.

NOTE: petItIoner contended that the proIIts
derIved Irom the Iease oI Its premIses were
used Ior the operatIon oI the hospItaI. The
Court heId that the use oI the proIIts does
not determIne exemptIon, rather It Is the use
oI the property that determInes exemptIon.
The case oI Herrera does not appIy
because saId case arose under the 1935
ConstItutIon and the present case arose
under the 1987 ConstItutIon. The
requIrements Ior exemptIon are dIIIerent. n
the 1935 ConstItutIon, the property must be
EXCLUSVELY used Ior reIIgIous, educatIonaI
or charItabIe purposes. Under the 1987
ConstItutIon, the property must be used
ACTUALLY, DRECTLY, and EXCLUSVELY Ior
reIIgIous, educatIonaI and charItabIe
purposes.

MJ Was the doctrIne IaId down In Abra VaIIey
aIIIrmed In the Lung Center caseZ
&J Yes. The Supreme Court unconscIousIy
appIIed a doctrIne IaId down by the 1935
ConstItutIon. The Supreme Court reIterated
the ruIIng In the Abra VaIIey case whIch arose
under the 1935 ConstItutIon. The Supreme
Court made a quaIIIIcatIon, It heId that It
depends on whether or not the use Is
IncIdentaI to the prImary purpose oI the
InstItutIon.

NOTE: at present, exemption from tax by
virtue of incidental purpose is not applicable
to aII taxes IncIudIng reaI estate tax.

COMM v. 5C )OHN5ON nnd 5ON5, INC.
mportant :
1. InternatIonaI doubIe taxatIon
2. Importance oI InternatIonaI tax treaty
3. ImpIIcatIon oI most Iavored natIon
cIause
MJ What Is the corporatIon InvoIved In thIs
caseZ
&J A domestIc corporatIon (DC).
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!+
SC ]ohnson and Sons, nc. entered
Into a IIcense agreement wIth SC ]ohnson
and Sons U.S.A (NonResIdent ForeIgn
Corp, NRFC) whereby the Iormer was
allowed to use the latters trademark and
IacIIItIes to manuIacture Its products. n
return, the DC wIII pay the NRFC royaItIes
as weII as payment oI wIthhoIdIng tax.
A case Ior reIund oI overpaId
wIthhoIdIng tax was IIIed. ApparentIy, the
DC shouId have paId onIy 10Z under the
most Iavored natIon cIause.
H: The Supreme Court coIned the term
nternatIonaI DoubIe TaxatIon or
nternatIonaI ]urIdIcaI DoubIe TaxatIon.
MJ What prompted the SC to coIn such
termZ
&J 8ecause a sIngIe Income (tax royaItIes
paId by a DC) was subjected to tax by two
countrIes, the PhIIIppInes Income tax and
the U.S. tax.
nternatIonaI ]urIdIcaI DoubIe TaxatIon
appIIes onIy to countrIes where the tax
IIabIIItIes oI Its natIonaIs are Imposed on
Income derIved Irom sources comIng
Irom wIthIn and wIthout.
MJ s there an Instance where
InternatIonaI doubIe taxatIon does not
appIyZ
&J Yes. I It InvoIves natIonaIs oI
countrIes whereIn the tax IIabIIIty Is
Imposed onIy Irom Income derIve Irom
sources wIthIn and not IncIudIng those
derIved Irom sources wIthout.
(Ex: SwItzerIand)
The controversy In the case at bar
InvoIves the Income tax paId In the
PhIIIppInes.
AIter payIng 25Z, the US IIrm
dIscovered that they are entItIed to 10Z
under the most Iavored natIon cIause.
The questIon Is: was the tax paId under
sImIIar cIrcumstances wIth that oI the RP
West Cermany TreatyZ
The CTA and Court oI AppeaIs ruIed
that It was paId under sImIIar
cIrcumstances. The phrase reIerred to the
royaItIes In payment oI Income tax. The
Supreme Court ruIed that the Iower
courts interpretation of the phrase was
erroneous. Rather, the phrase appIIes to
the appIIcatIon oI matchIng credIt.
MJ What Is matchIng tax credItZ
&J RPCermany Treaty provIdes Ior that
20Z oI the tax paId In the PhIIIppInes
shaII be credIted to theIr tax due to be
paId In Cermany.
The 10Z does not appIy because there
Is no matchIng credIt. Thus, there Is no
sImIIarIty In the cIrcumstances.

$ME,*&1.$ %$!"E6N$-* &-C C"!*%,-$
") L$*O"))

-."0/,>+# 6#('":4#1/

ThIs doctrIne provIdes that a cIaIm Ior
reIund barred by prescrIptIon may be aIIowed
to oIIset unsettIed tax IIabIIItIes. ThIs Is not
aIIowed In thIs jurIsdIctIon, because oI
common Iaw orIgIn. I aIIowed, both the
coIIectIng agency and the taxpayer mIght be
tempted to deIay and negIect the pursuIt oI
theIr respectIve cIaIms wIthIn the perIod
prescrIbed by Iaw.

MJ What Is the doctrIne oI EquItabIe
RecoupmentZ
&J When the cIaIm Ior reIund Is barred by
prescrIptIon, the same Is aIIowed to be
credIted to unsettIed tax IIabIIItIes.

(SIr gIves an IIIustratIon Iound In page 3 oI
magIc notes)

MJ s the ruIe absoIuteZ Reason
&J Yes, the ruIe Is absoIute. The ratIonaIe
behInd thIs Is to prevent the taxpayer and
government oIIIcIaI Irom beIng negIIgent In
the payment and coIIectIon oI taxes.
(Iurthermore, you have to be honest Ior thIs
to work, hence, the government Is preventIng
corruptIon)
There Is no exceptIon at aII otherwIse, the
8R wouId be IIooded wIth so many cIaIms.

?#/9'55

Presupposes mutuaI obIIgatIon between
the partIes. n taxatIon, the concept oI set
oII arIses where a taxpayer Is IIabIe to pay
tax but the government, Ior one reason or
another, Is Indebted to the saId taxpayer.

MJ What do you mean by SETOFFZ
&J ThIs presupposes mutuaI obIIgatIons
between the partIes, and that they are mutuaI
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!!
credItors and debtors oI each other. n
taxatIon, the concept oI taxatIon arIses where
a taxpayer Is IIabIe to pay taxes but the
government, Ior one reason or another, Is
NDE8TED to saId taxpayer.

RFULIC v. MAMULAO LUMR CO.
MJ What Is the IIabIIIty oI MambuIaoZ
&J They are IIabIe to pay Iorest charges
(under the oId tax code).
NOTE: under our present tax code, the NRC,
we do not have Iorest charges as the
same was aboIIshed by PresIdent AquIno.
MJ What dId the Iumber company doZ
&J The Iumber company cIaImed that
sInce the government dId not use the
reIorestatIon charges It paId Ior
reIorestatIon oI the denuded Iand covered
by Its IIcense, the amount paId shouId be
reImbursed to them or at Ieast
compensated or appIIed to theIr IIabIIIty
to pay Iorest charges.
H: The Court ruIed that the reIorestatIon
charges paId Is In the nature oI taxes.
The prIncIpIe oI compensatIon does
not appIy In thIs case because the partIes
are not mutuaIIy credItors and debtors oI
each other. A cIaIm Ior taxes Is not a
debt, demand, contract or judgment as Is
aIIowed to be setoII under the statute oI
setoII whIch Is construed unIIormIy, In
the IIght oI pubIIc poIIcy, to excIude the
remedy In connectIon or any
Indebtedness oI the State or any
munIcIpaIIty to one who Is IIabIe Ior
taxes. NeIther are they a proper subject
Ior recoupment sInce they do not arIse
out oI contract or the same transactIon
sued on.

CeneraI RuIe: no setoII Is admIssIbIe agaInst
demands Ior taxes IevIed In generaI or IocaI
governmentaI purposes.

Reason: Taxes are not In the nature oI
contracts or debts between the taxpayer and
the government, but arIses out oI a duty to,
and are posItIve acts oI the government to
the makIng and enIorcIng oI whIch, the
consent oI the IndIvIduaI Is not requIred.
Taxes cannot be the subject matter oI
compensatIon.

DOMINCO v. CARLITO5
MJ What Is beIng coIIected In thIs caseZ
&J Estate and InherItance taxes.
NOTE: we do not have InherItance taxes
anymore because the same was aboIIshed
by LoIo Macoy.
MJ Who Is the admInIstratrIxZ
&J The survIvIng spouse.
MJ What dId the survIvIng spouse doZ
&J The survIvIng spouse suggested that
the compensatIon to whIch the decedent
was entItIed to as an empIoyee oI the
8ureau oI Lands be setoII Irom the estate
and InherItance taxes Imposed upon the
estate oI the deceased.
H: 8oth the cIaIm oI the government Ior
estate and InherItance taxes and the
cIaIm oI the (Intestate) Ior the servIces
rendered have aIready become overdue
hence demandabIe as weII as IuIIy
IIquIdated, compensatIon thereIore takes
pIace by operatIon oI Iaw, In accordance
wIth Art. 1279 and 1290 oI the CIvII Code
and both debts are extInguIshed to the
concurrent amount.
CompeIIIng Reason: Congress has
enacted RA 2700, aIIocatIng a certaIn sum
oI money to the estate oI the deceased.

FRANCIA v. IAC
MJ ThIs happened In what cItyZ
&J Pasay CIty
MJ What Is the tax beIng coIIectedZ Who Is
coIIectIng the sameZ
&J Payment Ior reaI estate taxes Ior the
property oI FrancIa. t appears that
petItIoner was deIInquent In the payment
oI hIs reaI estate tax IIabIIIty. The same Is
beIng coIIected by the Treasurer oI Pasay.
MJ What Is the suggestIon oI petItIonerZ
&J Suggested that the just compensatIon
Ior the payment oI hIs exproprIated
property be setoII Irom hIs unpaId reaI
estate taxes. (the other part oI hIs
property was soId at a pubIIc auctIon)
H: The IactuaI mIIIeu oI the case does
not justIIy IegaI compensatIon.
The Court has consIstentIy ruIed that
there can be no oIIsettIng oI taxes
agaInst the cIaIms that the taxpayer may
have agaInst the government. A taxpayer
cannot reIuse to pay a tax on the ground
that the government owes hIm an
amount.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!#
nternaI Revenue taxes cannot be the
subject oI compensatIon because the
government and the taxpayer are not
mutuaIIy credItors and debtors oI each
other, and a cIaIm Ior taxes Is not a debt,
demand, contract or judgment as Is
aIIowed to be compensated or setoII.
Furthermore, the payment oI just
compensatIon was aIready deposIted wIth
PN8 Pasay, and the taxes were coIIected
by a IocaI government, the property was
exproprIated by the natIonaI government.
(dIII partIes, not mutuaI credItors and
debtors oI each other.)

CALTX FHIL v. COA
MJ What Is beIng coIIectedZ
&J Caltexs contribution to the Oil Price
StabIIIzatIon Fund (OPSF).
COA sent a Ietter to CaItex askIng the
Iatter to settIe Its unremItted coIIectIon
statIng that untII the same Is paId, Its
cIaIm Ior reImbursement Irom the OPSF
wIII be heId In abeyance.
MJ Why Is CaItex entItIed to reImbursementZ
&J 8ecause oI the IIuctuatIon oI the oII
prIces In the MIddIe East and Europe.
CaItex wanted to oIIset Its unremItted
coIIectIon Irom Its reImbursements.
H: The Court dId not aIIow the setoII,
and reIterated Its ruIIng In the case oI
MambuIao and FrancIa. Furthermore, RA
6952 expressIy prohIbIts setoII Irom the
coIIectIon oI contrIbutIons to the OPSF.
The Court IIkewIse stated that CaItex
mereIy acted as agent oI the government
In coIIectIng contrIbutIons Ior the OPSF
because such Is beIng shouIdered by the
consumers when they purchase
petroIeum products oI oII companIes,
such as CaItex.
TaxatIon Is no Ionger envIsIoned as a
measure mereIy to raIse revenues to
support the exIstence oI the government.
Taxes may be IevIed Ior reguIatory
purposes such as to provIde means Ior
the rehabIIItatIon and stabIIIzatIon oI a
threatened Industry whIch Is vested wIth
pubIIc Interest, a concern whIch Is wIthIn
the poIIce power oI the State to address.

FHILX MININC CORF v. COMM
The petItIoner Is IIabIe Ior the payment oI
excIse taxes, whIch It wanted to be setoII
Irom Its pendIng cIaIm Ior a VAT nput
credItJreIund.
The Court dId not aIIow setoII. Taxes
cannot be the subject oI compensatIon Ior
the sImpIe reason that the government and
taxpayer are not mutuaI credItors and
debtors oI each other. Taxes are not debts.
Furthermore, In the Instant case, the
cIaIm Ior VAT reIund Is stIII pendIng. The
coIIectIon oI a tax cannot awaIt the resuIts oI
a IawsuIt agaInst the government.

C"E1.$ *&+&*,"-

DoubIe taxatIon Is aIIowed because there
Is no prohIbItIon In the ConstItutIon or
statute.

ObnoxIous doubIe taxatIon Is the
synonym oI doubIe taxatIon.

EIements oI DoubIe TaxatIon:
1) LevIed by the same taxIng authorIty
2) For the same subject matter
3) For the same taxIng perIod and
4) For the same purpose

There Is no doubIe taxatIon II the tax Is
IevIed by the LCU and another by the natIonaI
government. The two (2) are dIIIerent taxIng
authorItIes.

LCUs are expressIy prohIbIted by the
provIsIons oI RA 7160 or the LCC oI 1991
Irom IevyIng tax upon: (1) the NatIonaI
Covernment; (2) Its agencIes and
InstrumentaIItIes; (3) LCUs (sec.113(o)).
The NatIonaI Covernment, pursuant to
the provIsIons oI RA 8424 oI the Tax ReIorm
Act oI 1997, can Ievy tax upon COCCs,
agencIes and InstrumentaIItIes (SectIon 27
c)), aIthough Income receIved by the
Covernment Iorm:
1) any pubIIc utIIIty or
2) the exercIse oI any essentIaI
governmentaI IunctIon
Is exempt Irom tax.

P,-CL ") ,-!"N$ *&+6&Q$%L

MJ CeneraIIy, how many kInds oI Income
taxpayers are thereZ
&J Under sectIon 22A oI NRC, there are
three (3), nameIy:
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!$
1. IndIvIduaI;
2. corporate;
3. estate and trust.

,0 ,-C,#,CE&. *&+6&Q$%

MJ How many kInds oI IndIvIduaI taxpayers
are thereZ
&J There are seven (7). NameIy:
1. ResIdent CItIzen (23A and 24A);
2. NonresIdent CItIzen (238 and 24A);
3. OCW and Seaman (23C and 24A);
4. ResIdent AIIen (22F, 23D and 24A);
5. NonresIdent AIIen Engaged In Trade
or 8usIness (22C, 23D and 25A)
6. NonresIdent AIIen NOT Engaged In
Trade or 8usIness (22C, 23D and
258)
7. AIIens Engaged In MuItInatIonaI
CompanIes, OIIshore 8ankIng UnIts,
PetroIeum ServIce Contractors
(25C,D and E)

6#)03#1/ *0/0@#1 A6*B

MJ How many types oI RCZ
&J There are two (2), nameIy:
1. RC resIdIng In the PhIIIppInes; and
2. FIIIpIno IIvIng abroad wIth no
IntentIon to resIde permanentIy
thereIn.

MJ I you are abroad, and you have the
IntentIon to permanentIy resIde thereIn, can
you stIII be consIdered a RCZ
&J Yes. I such IntentIon to permanentIy
resIde thereIn was not manIIested to the
CommIssIoner and the Iact oI your physIcaI
presence thereIn, you may stIII be consIdered
a RC.

C*D ,13 ?#,4#1

OCW was used and not OFW In the CTRP,
because the cIassIIIcatIon shaII cover onIy
those FIIIpIno cItIzens workIng abroad wIth a
contract. TNTs are not covered.

A FIIIpIno seaman Is deemed to be an
OCW Ior purposes oI taxatIon II he receIves
compensatIon Ior servIces rendered abroad
as a member oI the compIement oI a vesseI
engaged excIusIveIy In InternatIonaI trade.
ConsequentIy, II he Is not a member oI
the compIement or even II he Is but the
vesseI where he works Is not excIusIveIy
engaged In InternatIonaI trade, saId seaman
Is not deemed to be an OCW. He Is eIther a
RC or a NRC dependIng on where he stays
most oI the tIme durIng the taxabIe year.
I he stays In the PhIIIppInes most oI the
tIme durIng the taxabIe year, he Is
consIdered a RC, otherwIse, a NCR.

I you are a seaman In the US Navy, you
are not the one beIng reIerred to.

The Importance oI ascertaInIng whether
or not a seaman Is a RC or a NRC, Is that II he
Is a RCm he Is taxabIe on ALL Income derIved
Irom aII sources wIthIn and wIthout. I he Is a
NRC, he Is taxabIe onIy on Income derIved
Iorm sources wIthIn the PhIIIppInes.

MJ What Is the sIgnIIIcance oI usIng OCWZ
&J t onIy covers FIIIpInos who works abroad
wIth a contract. t does not cover TNTs.

MJ What Is the status oI a TNTZ
&J SInce they are not covered by thIs
cIassIIIcatIon, they are consIdered RC
because they work abroad wIthout a contract
and they have not manIIested theIr IntentIon
to permanentIy resIde abroad. (dIstInguIsh
Irom an ImmIgrant)

RequIrements Ior a seaman to be consIdered
an OCW:
1. must be a member oI the compIIment oI
a vesseI;
2. the vesseI must be excIusIveIy engaged In
InternatIonaI trade or commerce.

6#)03#1/ E+0#1 A6EB

An IndIvIduaI whose resIdence Is wIthIn
the PhIIIppInes and who Is not a cItIzen
thereoI.

ntentIon to resIde permanentIy In the
PhIIIppInes Is not a requIrement on the part
oI the aIIen.

The requIrement under RR#2 Is that he Is
actuaIIy present In the PhIIIppInes, neIther a
sojourner, a traveIer, not a tourIst.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!%
Whether hes a transient or not is
determIned by hIs Intent as to the nature and
Iength oI hIs stay.

MJ s the IntentIon to permanentIy resIde In
the PhIIIppInes necessaryZ
&J No, so Iong as he Is not a sojourner,
tourIst or a traveIer.

8'196#)03#1/ E+0#1 -17,7#3 01 ;&,3# '&
F")01#)) A86E-;FB

A IoreIgner not resIdIng In the PhIIIppInes
but who Is engaged In trade or busIness here.

RR 298 has expanded the coverage oI
the term, engaged in trade or business to
IncIude the exercIse oI a proIessIon.
Furthermore, by the express provIsIon oI the
Iaw, a NRA who Is neIther a busInessman nor
a proIessIonaI but who come to and stays In
the PhIIIppInes Ior an aggregate perIod oI
more than 180 days durIng any caIendar year
Is deemed to a NRAET8 In the PhIIIppInes.

MJ How many typesZ
&J There are three (3) types, nameIy:
1. NRA engaged In trade or busIness
(25a1);
2. NRA who practIces a proIessIon
(Revenue ReguIatIon 298);
3. IoreIgner who comes and stays In the
PhIIIppInes Ior an aggregate perIod oI
MORE THAN 180 days durIng any
caIendar year.

MJ What Is the status oI a ChInese who stays
here Ior 200 days In 2001Z
&J NRAET8

MJ Suppose he stayed here Ior 100 days In
2000 and another 100 days In 2001Z
&J He Is not a NRAET8. To be consIdered as
such, he must stay Ior an aggregate perIod oI
more than 180 days durIng a caIendar year.

MJ What Is the Income tax appIIcabIe to saId
taxpayerZ
&J Net ncome Tax (NT) on aII Its Income
derIved Iorm sources wIthIn the PhIIIppInes.

8'196#)03#1/ E+0#1 8'/ -17,7#3 01
;&,3# '& F")01#))

MJ How many kIndsZ
&J OnIy one.

The reason why the NRANET8 are
IncIuded In any Income tax Iaw Is because
they may be derIvIng Income Iorm sources
wIthIn the PhIIIppInes.
They are subject to tax based on theIr
CROSS NCOME receIved Iorm aII sources
wIthIn the PhIIIppInes.

E+0#1) -4:+'=#3 >= 6#70'1,+ '& E&#,
G#,3.",&/#&) H 6#70'1,+ C:#&,/017
G#,3.",&/#&) '5 I"+/01,/0'1,+
*'4:,10#)J E+0#1) -4:+'=#3 >=
C55)K'&# F,1L017 M10/) AE+0#1)
-4:+'=#3 >= IC%B

Status: eIther a RA or NRA dependIng on
theIr stay here In the PhIIIppInes.

TheIr status may eIther be RA or NRA
because SectIon 25 C and D does not
dIstInguIsh.

LIabIe to pay 15Z Irom Cross ncome
receIved Irom theIr empIoyer

ncome earned Irom aII OTHER sources
shaII be subject to the pertInent Income tax,
as the case may be.

E+0#1) -4:+'=#3 01 I"+/01,/0'1,+ ,13
C55)K'&# F,1L017 M10/)

MJ How are they cIassIIIedZ
&J I they derIved Income Irom other sources
asIde Irom theIr empIoyer, you may cIassIIy
them eIther as RA, NRAET8, or NRANET8.

E+0#1) -4:+'=#3 01 %#/&'+#"4 ?#&N0(#
*'1/&,(/'&) ,13 ?">('1/&,(/'&)

Status: ALWAYS NRA. I they derIve
Income Irom other sources, such Income
shaII be subject to the pertInent Income tax,
as the case may be.

ncome derIved or comIng Irom theIr
empIoyer shaII be subject to a tax oI 15Z oI
the gross.

,,0 !"%6"%&*$ *&+6&Q$%

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!&
1. DomesIc CorornIon (DC) created
or organIzed under PhIIIppIne Iaws.
2. ResdenI Foregn CorornIon (RFC)
corporatIon created under IoreIgn
Iaw, and engaged In trade or
busIness.
3. NonresdenI Foregn CorornIon
(NRFC) created under IoreIgn Iaw,
and NOT engaged In trade or
busIness.

MJ What are deemed corporatIons under the
NRCZ
&J The term corporatIon shaII IncIude
partnershIps, no matter how created or
organIzed, joInt stock companIes, joInt
accounts, assocIatIons, or Insurance
companIes, but DOES NOT IncIudes generaI
proIessIonaI partnershIps and a joInt venture
or consortIum Iormed oI the purpose oI
undertakIng constructIon projects or
operatIons pursuant to or engagIng In
petroIeum, coaI, geothermaI or consortIum
agreement under a servIce contract wIth the
Covernment.
1. PartnershIps and others no matter how
created
2. ]oInt Stock CompanIes
3. ]oInt Accounts
4. AssocIatIons
5. nsurance CompanIes

CIR v. COURT OF AFFAL5
The phrase no matter how created or
organized was interpreted.
Even II the partnershIp was pursuant to
Iaw or not, whether nonstIck, nonproIIt, It Is
stIII deemed a corporatIon.
Reason: because oI the possIbIIIty oI
earnIng proIIts Iorm sources wIthIn the
PhIIIppInes.

MJ Are partnershIps aIways consIdered
corporatIonsZ s there no exceptIonZ
&J CeneraI RuIe: a partnershIp Is a
corporatIon.

ExceptIon: CeneraI ProIessIonaI PartnershIps
(CPP)

MJ What Is a CPPZ
&J t Is a partnershIp Iormed by persons Ior
the soIe purpose oI exercIsIng theIr
proIessIon, no part oI the Income oI whIch In
derIved Irom any trade or busIness. (what II a
partner has other busInesses not reIated to
the CPPZ > read sectIon 26 quoted hereunder)

Two (2) KInds oI CPP Iormed Ior:
1) ExercIse oI a proIessIon not a
corporatIon; exempt Irom Corporate
ncome Tax (CT)
2) ExercIse oI a proIessIon and engaged
In trade or busIness a corporatIon;
subject to CT

TAN v. DL RO5ARIO
generaI ruIe: a partnershIp Is a
corporatIon
exceptIon: CPP
exceptIon to the exceptIon: II the CPP
derIves Income Irom other sources, It Is
consIdered a corporatIon, thus IIabIe to pay
corporate Income tax.

RuIe:
1. II the Income Is derIved Irom other
sources and such Income Is subject to NET
NCOME TAX, It Is not exempt and It Is
consIdered a corporatIon.
2. II the Income Is derIved Irom other
sources and such Income Is subject to FNAL
NCOME TAX, It Is stIII EXEMPT and It Is not
deemed a corporatIon. ( separate return Ior
this. It will not reflect in the GPPs ITR)
ThIs Is pursuant to the Iact that FT wIII
not reIIect In the TR oI the CPP sInce the
wIthhoIdIng agent Is IIabIe Ior the payment oI
the FT.

MJ What Is the Importance oI knowIng
whether the corporatIon Is exempt or notZ
&J To determIne theIr tax IIabIIIty. ThIs Is
Important to determIne the tax IIabIIIty oI the
IndIvIduaI partners oI the CPP.

5ecIon 2b (1
sI
nrngrnh) provides: a
CPP as such shaII not be subject to the Net
Income Tax however, persons engaging
In busIness as partners In a CPP shaII be
IIabIe Ior Income tax onIy In theIr separate
and individual capacities.
n short, each partner wIII be payIng NT,
and the dIstrIbutIve shares they wIII be
receIvIng Irom the net Income oI the CPP wIII
be IncIuded In the gross Income oI the
partner.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!'

MJ I the CPP Is deemed a corporatIon, wIII the
partners have to pay Ior the Income taxZ
&J No. as Iar as the share oI the CPP Is
concerned, It Is consIdered a taxabIe dIvIdend
whIch Is subject to FT.

MJ s a joInt venture a corporatIonZ
&J CeneraIIy, yes, It Is a corporatIon.

MJ CorporatIon X and CorporatIon Y joIned
together. How many corporatIons do we
haveZ
&J Three, nameIy CorporatIon X, Y, and X+Y.
the joInt venture has a separate and dIstInct
personaIIty Irom the two corporatIons.

MJ When Is a joInt venture not consIdered a
corporatIonZ
&J t Is not deemed a corporatIon when It Is
Iormed Ior the purpose oI undertakIng a
(construction?) project or engaging in
petroIeum, gas, and other energy operatIons
pursuant to ? or consortium agreement
under a servIce contract wIth the
government.

!'4#)/0( *'&:'&,/0'1

s one created or organIzed In the
PhIIIppInes or under Its Iaws.

TaxabIe on aII Income derIved Irom
sources wIthIn or wIthout the PhIIIppInes.

6#)03#1/ 2'&#071 *'&:'&,/0'1

ForeIgn corporatIons engaged In trade or
busIness In the PhIIIppInes.

TaxabIe Ior Income derIved wIthIn the
PhIIIppInes.

8'196#)03#1/ 2'&#071 *'&:'&,/0'1

ForeIgn corporatIons not engaged In
trade or busIness In the PhIIIppInes.

TaxabIe Ior Income derIved wIthIn the
PhIIIppInes.

8oth DC and RFC are IIabIe Ior the
payment oI the IoIIowIng:
1) NT Net ncome Tax
2) FT FInaI ncome Tax
3) 10Z Income tax on corporatIons wIth
properIy accumuIated earnIngs.
4) MCT (MInImum Corporate ncome
Tax) oI 2Z oI the Cross ncome
5) OptIonaI Corporate ncome Tax oI
15Z oI the Cross ncome

A NRFC Is IIabIe Ior payment oI the II:
1) CT Cross ncome Tax
2) FT FInaI ncome Tax

,,,0 *%EL* &-C $L*&*$

MJ How many Ior eachZ
&J Seven (7) kInds Ior each because the trust
or estate wIII be determIned by the status oI
the trustor, grantor, or creator, or oI the
decedent.

The status oI the estate Is determIned by
the status oI the decedent at the tIme oI hIs
death; so an estate, as an Income taxpayer
can be a cItIzen or an aIIen.

When a person who owns property dIes,
the IoIIowIng taxes are payabIe under the
provIsIon oI Income tax Iaw:
1) ncome Tax Ior ndIvIduaIs to cover
the perIod begInnIng ]anuary to
the tIme oI death.
2) Estate ncome Tax II the property Is
transIerred to the heIrs.
3) I no partItIon Is made, ndIvIduaI or
Corporate ncome Tax, dependIng
on whether there Is or there Is no
settIement oI the estate. I there
Is, dependIng on whether the
settIement Is judIcIaI or
extrajudIcIaI.

)udcnI 5eIIIemenI

1) DurIng the pendency oI the
settIement, the estate through the
executor, admInIstrator, or heIrs Is
IIabIe Ior the payment oI ESTATE
NCOME TAX (Sex, 60 (3)).
2) I upon the termInatIon oI the judIcIaI
settIement, when the decIsIon oI the
court shaII have become IInaI and
executory, the heIrs stIII do not dIvIde
the property, the IoIIowIng
possIbIIItIes may arIse:
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!(
a) I the heIrs contrIbute to the
estate money, property or Industry
wIth the IntentIon to dIvIde the
proIIts between and among
themseIves, an UNRECSTERED
PARTNERSHP Is created and the
estate becomes IIabIe Ior payment
oI CT (EvangeIIsta vs. CoIIector
(102 PhII 140))
b) I the heIrs wIthout contrIbutIng
money, property or Industry to
Improve the estate, sImpIy dIvIde
the IruIts thereoI between and
among themseIves, a CO
OWNERSHP Is created and
ndIvIduaI ncome Tax (C) Is
Imposed on the Income derIved by
each oI the heIrs, payabIe In theIr
separate and IndIvIduaI capacIty
(PascuaI vs. COMM (165 scra 560)
and ObIIIos vs. COMM (139 SCRA
436))

xIrn]udcnI 5eIIIemenI nnd j NO 5eIIIemenI

Some possIbIIItIes may arIse. The Income
tax IIabIIIty depends on whether or not the
unregIstered partnershIp or coownershIp Is
created.

;&")/

Trusts can be created by wIII, by contract
or by agreement. The status oI a trust
depends upon the status oI the grantor or
trustor or creator oI the trust. Hence, a trust
can aIso be a cItIzen or an aIIen.

MJ Where the trust earns Income and such
Income Is not passIve, who among the partIes
mentIoned Is IIabIe Ior payment oI Income
tax thereonZ
&J The TRUST ItseII, through the trustee or
IIducIary but onIy II the trust Is IrrevocabIe.
I It Is revocabIe, or Ior the beneIIt oI the
grantor, the IIabIIIty Ior the payment oI
Income tax devoIves upon the trustor hImseII
In hIs capacIty as IndIvIduaI taxpayer.

P,-CL ") ,-!"N$ *&+

MJ How many kInds oI Income taxZ
&J There are SIx (6), nameIy:
1. Net ncome Tax (NT);
2. Cross ncome Tax (CT);
3. FInaI ncome Tax (FT);
4. MInImum Corporate ncome Tax oI
2Z oI the Cross ncome (MCT)
5. ncome Tax on mproperIy
AccumuIated EarnIngs subject to 10Z
oI the TaxabIe ncome;
6. OptIonaI Corporate ncome Tax oI
15Z on the Cross ncome

,0 -$* ,-!"N$ *&+

MJ what Is the IormuIaZ
&J Cross ncome DeductIons and PersonaI
ExemptIons = TaxabIe ncome

TaxabIe ncome x Tax Rate = Net
ncome

TaxabIe Net ncome Tax CredIt =
TaxabIe Net ncome Due

Net ncome means Cross ncome Iess
deductIons and
FormuIa:
C
deductIons
Net ncome
x Tax Rate
ncome Tax Due

MJ What Is the rateZ
&J ndIvIduaI: 32Z
CorporatIon: 35Z

NOTE: the IormuIa aIIows Ior deductIon,
personaI exemptIons and tax credIt.

MJ What are the other terms Ior NTZ
&J NRC:
a. taxabIe Income
b. gross Income (wIang kasunod)
onIy Income tax Irom ImproperIy
accumuIated earnIngs does not use thIs term.

1. CFA: to be included in the gross
income
2. Revenue ReguIatIons and Statutes:
a. ordInary way oI payIng Income
tax;
b. normaI way oI payIng Income tax .

*K,&,(/#&0)/0()O
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!)

MJ Who are not IIabIe to pay NTZ
&J 1. NRANET8 (IIabIe Ior CT);
2. NRFC (CT aIso);
3. WIth certaIn modIIIcatIons, AEMOP, II
they derIve Income Irom other
sources;

MJ s the taxabIe net Income subject to
wIthhoIdIng taxZ
&J t Is subject to wIthhoIdIng tax II the Iaw
says so.

MJ What II the Iaw Is sIIentZ
&J I the Iaw Is sIIent, It Is not subject to
wIthhoIdIng tax.

MJ What Is another term Ior wIthhoIdIng taxZ
&J t Is aIso known as the credItabIe
wIthhoIdIng tax system under the Income tax
Iaw.

MJ Do we have to determIne II there Is an
actuaI gaIn or IossZ
&J Yes because the IormuIa Ior deductIons,
etc.

MJ I you IaII to pay, wIII you be heId IIabIeZ
&J Yes, you wIII be heId IIabIe.

,,0 '%"LL ,-!"N$ *&+ R',*S

MJ What Is the IormuIaZ
&J Cross ncome x Rate

MJ How many taxpayers pay by way oI the
grossZ
&J There are two (2)
IndIvIduaI NRANET8
corporatIon NRFC

NOTE: the IormuIa does not aIIow any
deductIon, personaI exemptIons and tax
credIt.

*K,&,(/#&0)/0()O

NRANET8 and NRFC, though not engaged
In trade or busIness, are IIabIe to pay by way
oI the gross Ior any Income derIved In the
PhIIIppInes. WhIIe not engaged In trade or
busIness, there Is a possIbIIIty that they may
earn Income In the PhIIIppInes.

MJ s thIs subject to wIthhoIdIng taxZ
&J Yes, It Is subject to wIthhoIdIng tax
because the persons IIabIe are IoreIgners.
ThIs ruIe Is A8SOLUTE

NOTE: there are two (2) ways oI payIng taxes
dependIng on whIch sIde oI the bench you
are.

,,,0 ),-&. ,-!"N$ *&+ R),*S

MJ What Is the IormuIaZ
&J (Each ncome) x (PartIcuIar Rate)
UnIIke In the gross Income tax where you
add aII the Income Irom aII the sources and
muItIpIy the sum thereoI by the rate oI 25Z
or 35Z, as the case may be, In IInaI Income
tax, you cannot joIn aII the Income In one
group because each Income has a partIcuIar
rate.

&J 35Z as the case may be.

NOTE: IIke CT, the IormuIa does not aIIow
deductIons, personaI exemptIons, and tax
credIt.

*K,&,(/#&0)/0()O

MJ Who are IIabIe to pay FTZ
&J AII taxpayers are IIabIe to pay FT
provIded the requIsItes Ior Its appIIcatIon are
present.

MJ Do you stIII have to pay NTZ
&J No. II you are IIabIe Ior FT, no need to
pay NT or eIse there wIII be doubIe taxatIon.

NOTE: as tIme passed by, the number oI FT
Increased.

beIore 1979 proceeds Irom the saIe oI
reaI property not exempt, It Is subject to NT
or CT, as the case may be.
aIter 1979 capItaI gaIns tax. Proceeds
Irom the saIe oI reaI property Is exempt.

MJ I you IaII to pay, wIII you be IIabIeZ
&J No. the wIthhoIdIng agent Is IIabIe to pay
FT.

Case oI ]uday, RIchard and RegIne
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

!*

For one to be IIabIe Ior the payment oI
NT, the Income must be derIved on the basIs
oI an empIoyer empIoyee reIatIonshIp.

EmpIoyer EmpIoyee ReIatIonshIp
(3 Cs):
1. contract;
2. controI;
3. compensatIon;

However, In the case oI ceIebrItIes, there
Is no empIoyer empIoyee reIatIonshIp, they
are mereIy receIvIng royaItIes. RoyaItIes are
subject to IInaI wIthhoIdIng tax, thus the
agent Is IIabIe to pay. (so, dIstInguIsh nature
oI Income, whether royaIty or compensatIon)

RULE:
1. Ior NT, whether or not subject to
CredItabIe WIthhoIdIng Tax (CWT), the
taxpayer Is aIways IIabIe II he IaIIs to
pay.
2. Ior CT and FT, absoIute IIabIIIty to
pay Is upon the wIthhoIdIng agent.

MJ Why Is It that the rate oI wIthhoIdIng Is
aIways Iower, and why Is It that the rate oI
CT and FT Is aIways equaIZ
&J
1. NT aIIows deductIons;
2. CT and FT do not aIIow deductIons.

MJ Do you have to determIne whether there
Is an actuaI Ioss or gaInZ
&J No need to determIne because the
IormuIa does not aIIow deductIons. CaIn Is
presumed. No IIabIIIty Ior IInaI wIthhoIdIng
tax except Ior the saIe oI shares oI stock. (Z)

,#0 N,-,NEN !"%6"%&*$ ,-!"N$ *&+
RN!,*S

M: What Is the IormuIaZ
&J Cross ncome x 2Z

M: Who pays thIs taxZ
&J DC and RFC onIy.

MJ May It be appIIed sImuItaneous wIth NTZ
&J No. there must be a computatIon oI the
NT IIrst then appIy whIch ever Is hIgher. The
MCT Is paId In IIeu oI the NT.

Reason: to dIscourage corporatIons Irom
cIaImIng too many deductIons.

#0 "6*,"-&. !"%6"%&*$ ,-!"N$ *&+

MJ Under what sectIon Is thIs IoundZ
&J SectIon 27A 4
th
paragraph and SectIon 28
A(1) 4
th
paragraph.

MJ s thIs appIIcabIe nowZ
&J No. thIs Is not yet ImpIemented.

MJ To what kInd oI taxpayer does thIs appIyZ
&J To DC and RFC.

MJ What kInd oI taxes are appIIcabIe or
Imposed upon the 1
st
IIve IndIvIduaI
taxpayersZ
&J OnIy two (2) kInds are appIIcabIe out oI
the sIx (6) kInds oI Income taxes.
1. NT;
2. FT;

MJ What kInd oI Income tax wIII appIy to
AEMOPZ
&J CeneraIIy, onIy one kInd, 15Z FT wIth
respect to Income derIved Irom theIr
empIoyer.

ncome Irom other sources:
1. DetermIne the status oI the AEMOP;
a. NT
b. FT
2. NRANET8
a. CT
b. FT

MJ What kInd oI Income tax appIIes to DCZ
&J OnIy Iour (4) kInds wIII appIy out oI the
sIx (6)
1. NT
2. FT
3. MCT
4. mproperIy AccumuIated EarnIngs

MJ May aII oI these be appIIed
sImuItaneousIyZ
&J No. onIy the NT, FT and mproperIy
AccumuIated EarnIngs be appIIed
sImuItaneousIy. NT and MCT cannot be
appIIed sImuItaneousIy. OnIy one wIII appIy,
whIchever Is hIgher between the two.

MJ What kInd oI tax wIII appIy to NRFCZ
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#+

&J Out oI the sIx (6) kInds, onIy two (2) wIII
appIy:
1. CT
2. FT

MJ What Is the sIgnIIIcance oI knowIng the
cIassIIIcatIon oI these taxpayersZ
&J
1. to determIne the kInd oI Income tax
appIIcabIe to them;
2. to determIne theIr tax IIabIIIty.

MJ Under SectIon 23, who are IIabIe Ior
Income wIthIn and Income wIthoutZ
&J OnIy
1. RC
2. DC

The rest oI the taxpayers wIII be IIabIe Ior
Income comIng Irom sources wIthIn.

ncome Irom sources wIthout, no IIabIIIty,
thereIore exempt.

NOTE: The Income taxpayer Is not a RC or a
DC. DetermIne II the Income came Irom
sources wIthIn or wIthout to know the
taxpayers liability.

I the Iacts are specIIIc, do not quaIIIy
your answer. Answers must be responsIve to
the questIon.

MJ s sectIon 42 reIevant to aII the taxpayersZ
&J NO. SECTON 42 S NOT MATERAL TO
ALL taxpayers, partIcuIarIy the RC and DC
because these two are IIabIe Ior both Income
wIthIn and wIthout.

SectIon 42 Is appIIcabIe onIy to taxpayers
who are IIabIe Ior Income wIthIn, the rest oI
the taxpayers are otherwIse exempt.

MJ SectIon 42(A)(1) provIdes Ior how many
kInds oI InterestsZ
&J t estabIIshes two (2) kInds oI Interests,
nameIy:
1. Interest derIved Irom sources wIthIn
the PhIIIppInes.
2. Interest on bonds, notes or other
Interest bearIng obIIgatIons oI
resIdents, corporate or otherwIse.

MJ What Is the determInIng Iactor In order to
know II the Income Is Irom wIthInZ

&J
1. IocatIon II the bank Is Irom wIthIn the
PhIIIppInes (pursuant to a Revenue
Reg.)
2. resIdence oI the obIIgor (whether an
IndIvIduaI or a corp.) contract oI
Ioan wIth respect to the Interest
earned thereon.

For exampIe the borrower Is a NRAET8,
he borrowed money Irom a RA. The Interest
earned by the Ioan wIII be consIdered as an
Income wIthout. RA Is not IIabIe to pay tax
sInce RA Is IIabIe onIy Ior Income wIthIn,
thereIore exempt Irom payIng the tax.

NATIONAL DVLOFMNT CO. v. CIR
F: The NatIonaI DeveIopment Company
(NDC) entered Into a contract wIth severaI
]apanese shIpbuIIdIng companIes Ior the
constructIon oI 12 oceangoIng vesseIs.
The contract was made and executed In
Tokyo.
The payments were InItIaIIy In cash
and IrrevocabIe Ietters oI credIt.
SubsequentIy, Iour promIssory notes were
sIgned by NDC guaranteed by the
Covernment.
Later on, sInce no tax was wIthheId
Irom the Interest on the amount due, the
8R was coIIectIng the amount Irom NDC.
The NDC contended that the Income
was not derIved Irom sources wIthIn the
PhIIIppInes, and thus they are not IIabIe
to wIthhoId anythIng. NDC saId that sInce
the contract was entered Into and was
executed In ]apan, It Is an Income
wIthout.
H: The governments right to levy and
coIIect Income tax on Interest receIved by
a IoreIgn corporatIon not engaged In
trade or busIness wIthIn the PhIIIppInes Is
not pIanted upon the condItIon that the
actIvIty or Iabor and the saIe Irom whIch
the Income IIowed had Its sItus In the
PhIIIppInes. NothIng In the Iaw (SectIon
42(1)) speaks oI the act or actIvIty oI
nonresIdent corporatIons In the
PhIIIppInes, or pIace where the contract Is
sIgned. The resIdence oI the obIIgor who
pays the Interest rather than the physIcaI
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#!
IocatIon oI the securItIes, bonds or notes
or the pIace oI payment Is the
determInIng Iactor oI the source oI the
Income. AccordIngIy, II the obIIgor Is a
resIdent oI the PhIIIppInes, the Interest
paId by hIm can have no other source
than wIthIn the PhIIIppInes.

MJ Suppose a NRFC, an ndonesIan IIrm,
becomes a stockhoIder oI two corporatIons, a
DC and a RFC, and both corporatIons
decIared dIvIdends, what Is the IIabIIIty oI the
ndonesIan IIrm II the same receIved the
dIvIdendsZ
&J
1. DIvIdends receIved Irom DC: the
ndonesIan IIrm Is IIabIe to pay taxes.
NRFC, under the Iaw, Is IIabIe II the
Income Is derIved Irom sources
wIthIn. (Sec 42a)
2. DIvIdends receIved Irom RFC: the
Indonesian firms liability will depend
on amount oI gross Income Irom
sources wIthIn the PhIIIppInes.

The NRFC wIII be IIabIe to pay Income tax II
the IoIIowIng requIsItes are present:
1. at Ieast 50Z Is Income Irom sources
wIthIn;
2. the 1
st
requIsIte Is Ior the three (3)
precedIng taxabIe years Irom the tIme
oI decIaratIon oI the dIvIdends.

n the absence oI any or both
requIsItes, the Income wIII be consIdered
Irom sources wIthout, thus exemptIng the
ndonesIan IIrm Irom payment oI Income tax.

MJ Same scenarIo, but thIs tIme the shares oI
stock oI the two corporatIons were beIng
dIsposed oII. What Is the tax IIabIIIty oI the
ndonesIan IIrmZ
&J
1. saIe oI shares oI stock oI DC: the
ndonesIan IIrm wIII be IIabIe Ior the
payment oI taxes because the Income
Is Irom sources wIthIn.
2. saIe oI shares oI stock oI RFC: the
IIabIIIty wIII depend on where the
shares oI stock were soId. (mejo
MaIabo sa notes, pIease be guIded
accordIngIy)

MJ FIIIpIno ExecutIve, assIgned to Hong
Kong, receIvIng two saIarIes, one Irom the
PhIIIppInes, the other Irom HK. The
perIormance oI the job was In HK. s he IIabIe
Ior both saIarIesZ
&J No, he Is not IIabIe Ior the two Incomes.
HIs status Is an OCW (note Iacts: workIng In
HK under contract). The compensatIon he
receIved Is not subject to tax pursuant to
SectIon 42(c). CompensatIon Ior Iabor or
personaI servIces perIormed In the
PhIIIppInes Is consIdered an Income wIthIn.
When It comes to servIces, It Is the pIace
where the same Is rendered whIch Is
controIIIng. n the case at bar, the servIces
were rendered abroad, thus It Is an Income
derIved Irom sources wIthout, IrrespectIve oI
the pIace oI payment.

MJ Suppose a DC hIred a NRFC to advertIse
Its products abroad. What Is the IIabIIIty oI
the NRFCZ WIII there be a wIthhoIdIng tax
ImposedZ
&J The Income Is derIved Irom sources
wIthout sInce the servIces In thIs case were
perIormed abroad. As such, the NRFC Is not
IIabIe and thereIore exempt Irom the
payment oI tax. I the NRFC Is not subject to
NT, then It Is not aIso subject to wIthhoIdIng
tax.

MJ What Is the controIIIng IactorZ
A: The controIIIng Iactor Is the pIace where
the servIces were perIormed and not where
the compensatIon thereIore was receIved.

%$-*&.L &-C %"Q&.*,$L
Income Irom sources wIthIn
MJ Cranted by whoZ
&J NRFC

MJ Suppose you are the IranchIse hoIder, how
much Is the wIthhoIdIngZ
&J 35Z (CT)

Q: II the IranchIse Is granted by RFC, how
much Is the wIthhoIdIngZ
A: 10Z (NT) and In some cases 15Z

SectIon 42(4) MEMORZE FOR RECT
(CEKSTTM)

a. rIght oI, or the rIght to use
copyrIght, patents, etc
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

##
b. IndustrIaI, commercIaI,
scIentIIIc equIpment
c. suppIy oI knowIedge
d. suppIy oI servIces by
nonresIdent
e. suppIy oI technIcaI assIstance
I. suppIy oI technIcaI advIce
g. rIght to use: motIon pIcture
IIIms, etc.

MJ What Is the ruIe as regards the saIe oI reaI
propertyZ
&J CaIns, proIIts, and Income Irom the saIe
oI reaI property Iocated wIthIn the PhIIIppInes
consIdered Income wIthIn.

MJ What about the saIe oI personaI property,
what Is the ruIeZ
&J DetermIne IIrst II the property Is
produced or mereIy purchased.

1. It the property Is manuIactured In the
PhIIIppInes and soId abroad, or vIce
versa, It Is an Income partIy wIthIn
and partIy wIthout.
2. II the property Is purchased,
consIdered derIved entIreIy Irom the
sources wIthIn the country where It Is
soId.

EXCEPTON: shares oI stock oI domestIc
corporatIon, It Is an Income wIthIn wherever
It Is soId.

*CIIP??PC8-6 NQ PE*
M: What Is the Issue hereZ
&J They cannot determIne II the busIness
expense was Incurred In the PhIIIppInes.
MJ II you are the 8R, and the taxpayer Is not
sure, wIII you dIsaIIow the deductIonZ
&J No. determIne It pro rata.
FormuIa: C Irom wIthIn
C Irom wIthout

ExampIe: 100,000
1,000,000
= 10Z
Hence, 10Z Is the ratabIe share In the
deductIon. I the deductIon beIng asked Is
100,000 not aII oI It wIII be aIIowed. OnIy
10,000 or 10Z oI 100,000 wIII be aIIowed
as deductIon.

!&6,*&. '&,-L &-C ."LL$L
SectIon 39

MJ What Is capItaI assetZ
&J CapItaI asset Is an asset heId by a
taxpayer whIch Is not an ordInary asset.

The IoIIowIng are ordInary assets:
1. stock In trade oI the taxpayer or other
property oI a kInd whIch wouId
properIy be IncIuded In the Inventory
oI the taxpayer II on hand at the cIose
oI the taxabIe year;
2. property heId by the taxpayer
prImarIIy Ior saIe to customers In the
ordInary course oI trade or busIness;
3. property used In trade or busIness oI
a character whIch Is subject to the
aIIowance Ior deprecIatIon provIded In
subsectIon 1.
4. reaI property used In trade or
busIness oI the taxpayer.

AII other property not mentIoned In the
IoregoIng are consIdered capItaI assets.

MJ What Is a capItaI gaInZ What Is a capItaI
IossZ
&J CapItaI gaIns are gaIns Incurred or
receIved Irom transactIons InvoIvIng property
whIch are capItaI assets. CapItaI Iosses are
Iosses Incurred Irom transactIons InvoIvIng
capItaI assets.

MJ What Is ordInary gaInZ OrdInary IossZ
&J OrdInary gaIns are those receIved Irom
transactIons InvoIvIng ordInary assets.
CapItaI Iosses are Iosses Incurred In
transactIons InvoIvIng ordInary assets.

MJ What Is the reIevance oI makIng a
dIstInctIonZ
&J t Is reIevant because SectIon 398,C, and
D appIy to capItaI assets onIy.
1. tIme when property was heId (398)
(hoIdIng perIod appIIes onIy to
IndIvIduaIs);
2. IImItatIons on capItaI Iosses (39C);
3. Net CapItaI CarryOver (39D)

,0 !&6,*&. &LL$*L

MJ What Is the hoIdIng perIodZ
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#$
&J I capItaI asset Is soId or exchanged by an
IndIvIduaI taxpayer, onIy a certaIn percentage
oI the gaIn Is subject to Income tax.
t Is the Iength oI tIme or the duratIon oI
the perIod by whIch the taxpayer heId the
asset.

MJ What Is the requIrementZ
&J
1. the taxpayer must be an IndIvIduaI.
Section 39B states in case of a
taxpayer, other than a corporatIon..
2. property Is capItaI In nature.
MJ What Is the termZ
&J 100Z II the capItaI asset has been heId
Ior not more than 12 months; (short term)
50Z II the capItaI asset has been heId Ior
more than 12 months. (Iong term)

NOTE: the hoIdIng perIod appIIes to both
gaIns and Iosses.

MJ Do you IncIude capItaI gaIns In your TRZ
&J CeneraI ruIe: yes, IncIude In TR.

EXCEPT:
1. gaIns In saIes oI shares oI stock not
traded In stock exchange(sectIon 24);
2. capItaI gaIns Irom saIe oI reaI
property(sectIon 24).

MJ When wIII the hoIdIng perIod not appIyZ
&J
1. property Is an ordInary asset
2. taxpayer Is a corporatIon
3. saIe oI reaI property consIdered as
ordInary asset

,,0 .,N,*&*,"- "- !&6,*&. ."LL$L
synonymous to 34D & Ioss capItaI ruIe
thIs appIIes to IndIvIduaI and corporate
taxpayer
MJ What Is the Ioss IImItatIon ruIeZ
&J Pursuant to SectIon 39 C, Iosses Irom
saIes or exchange oI capItaI assets may be
deducted onIy Irom capItaI gaIns, but Iosses
Irom the saIe or exchange oI ordInary assets
may be deducted Irom capItaI or ordInary
gaIns. (appIIes to IndIvIduaI and corporatIon)

MJ n connectIon wIth 34 D, Losses In
AIIowabIe DeductIon, what Is the ratIonaIe
behInd thIs ruIeZ
&J I It Is otherwIse, It wIII run counter wIth
the ruIe that the Ioss shouId aIways be
connected wIth the trade or busIness, capItaI
Iosses are Iosses not connected to the trade
or busIness, thus It Is not deductIbIe

MJ what Is your remedyZ
&J 39 D, net capItaI Ioss carryover

MJ What Is the ratIonaIe In aIIowIng ordInary
Ioss to be deducted Irom eIther the
capItaI gaIns or ordInary gaInsZ
&J t Is aIready IncIuded In TR, the gross
Income Iess deductIons hence It aIready
carrIes wIth It the deductIon

TAK NOT: NormaIIy II the Ioss Is an
ordInary Ioss there Is no carry over.
xceI: a. 34D3
b. II the Ioss Is more than C

,,,0 -$* !&6,*&. ."LL !&%%QO"#$%

MJ What are the requIrementsZ
&J
1. taxpayer Is an IndIvIduaI;
2. paId In the ImmedIateIy succeedIng
year;
3. appIIes onIy to short term capItaI
gaIn;
4. capItaI Ioss shouId not exceed net
Income In the year that It was
Incurred.

MJ How does net capItaI Ioss carryover dIIIer
Irom net operatIng Ioss carryover under
SectIon 34 D (3)Z
&J Under the net capItaI Ioss carryover ruIe,
the capItaI Ioss can be carrIed over In the
ImmedIate succeedIng year. n net operatIng
Ioss carryover ruIe, capItaI Ioss can be
carrIed over to the next three (3) succeedIng
caIendar year IoIIowIng the year when the
Ioss was Incurred.

NOTE: onIy 15Z oI the Ioss wIII be carrIed
over, II the Ioss Is greater than the gaIns.

n net operatIng Ioss carryover there Is
an exceptIon to the 3 year carryover perIod.
n case oI mInes other than oII and gas weIIs,
the perIod Is up to 5 years.

MJ What Is a short saIeZ
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#%
&J SaIe oI property by whIch the taxpayer
cannot come Into the possessIon oI the
property. EX: shares

*ERESE8? NQ *P6
F: The taxpayer InherIted the property
Iro her Iather and at the tIe oI the
InherItance It was consIdered a capItaI
asset. n order to IIquIdate the
InherItance, the taxpayer decIded to
deveIop the Iand to IacIIItate the saIe oI
the Iots.
: Was the property converted to
ordInary assetZ
H: The conversIon Irom capItaI asset to
ordInary asset Is aIIowed because SectIon
39 Is sIIent.

MJ Are you aIIowed to convert ordInary asset
to capItaI assetZ
&J CeneraI ruIe: It Is not aIIowed. Read
Revenue ReguIatIon 72003
The case at bar stIII appIIes despIte oI the
Issuance oI saId Revenue ReguIatIon.

MJ What Is the conversIon prohIbIted In the
Revenue ReguIatIonZ
&J ConversIon oI reaI estate property.

MJ What Is the ratIonaIeZ
&J SectIon 24 D IInaI Income tax oI 6Z II
the reaI estate Is capItaI asset. I It Is an
ordInary asset, It wIII be subject to Income
tax oI 32Z Ior IndIvIduaI taxpayer, and 35Z II
the taxpayer Is a corporatIon.

MJ What are the propertIes InvoIve In the RR
72003Z
&J 1. those property Ior saIe by the reaItors
2. reaI property use In trade or busIness
not necessary reaItors

MJ That Is the conversIon aIIowed by the
Revenue ReguIatIonZ s there an Instance
when an ordInary asset may be converted to
capItaI assetZ
&J Yes, provIded that the property Is an
asset other the reaI property, and It has been
IdIe Ior two (2) years.

L$!*,"- TU
*&+ "- ,-C,#,CE&.L

MJ What Is the tax mentIoned In sectIon 24Z
&J NT

MJ What Is taxabIe IncomeZ
&J (memorIze sectIon 31) It Is the pertInent
Items oI gross Income specIIIed In the NRC,
Iess the deductIons andJor personaI and
addItIonaI exemptIons, II any, authorIzed Ior
such types oI Income by the NRC or other
Iaws. t reIers to NT because It aIIows
deductIons.

MJ What do you mean by the phrase other
than B, C, and D?
&J t means that II the eIements oI passIve
Income are present, the taxpayer has to pay
FT.

MJ Who are the taxpayers mentIoned In
sectIon 24Z
&J
1. RC
2. NRC
3. OCW
4. RA

AddItIonaIIy, under SectIon 25, NRAET8

MJ What Is the tax IIabIIIty oI NRAET8Z
&J SectIon 25(1) NRAET8 Is subject to
Income tax In the same manner as those
IndIvIduaIs mentIoned In SectIon 24.

MJ What about DomestIc CorporatIonsZ
&J
1. Sec. 27 A,8, and C
2. Sec. 26 CPP Is not subject to Income
tax.

MJ What about ResIdent ForeIgn
CorporatIonsZ
&J Sec 28(I) It Is subject to 35Z Net ncome
Tax

MJ What about Non ResIdent IoreIgn
CorporatIon and Non ResIdent AIIen not
engaged In Trade or 8usInessZ
&J Not Subject to Net ncome Tax but they
are IIabIe Ior Cross ncome tax.

MJ Do IegaIIy marrIed husband and wIIe need
to IIIe separateIy or joIntIyZ
&J t depends II:
1. Pure compensatIon Income separate
2. Not Pure compensatIon Income joInt
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#&

62334G; ,85<@;
InIeresI, RoynIIes, rzes nnd OIher wnnngs

P1/#&#)/

MJ 8ank nterest, what Is the requIrementZ
&J The bank must be Iocated In the PhIIs.
because the Income must be derIved Irom
sources wJIn.

MJ Do you IncIude thIs In your TRZ
&J No! because It Is subject aIready to FT.
The bank Is the one IIabIe Ior the payment oI
thIs.

NOTE: LIabIIIty Ior NT, CT, and MCT wIII
depend on the eIements present.

MJ Who are IIabIe Ior bank InterestZ
&J
1. RC
2. NRC Sec. 24 81
3. RA
4. NRAET8
5. NRANET8 Sec. 25 (25Z)
6. AEMOP
7. DC
8. RFC
9. NRFC

MJ What Is the rate oI InterestZ
&J FT oI 20Z

MJ s there a Iower rateZ
&J 7 Z Z II under EFCDS

MJ What II the deposItor Is non resIdent
aIIenZ
&J
WJIn FT
WJout exempt

MJ What Is the ruIe on pre termInatIonZ
&J I It Is pre termInated beIore 5
th
year a FT
shaII be Imposed on the entIre Income and
shaII be deducted and wIthheId by the
deposItary bank Irom the proceeds oI the
Iong term deposIt based on the remaInIng
maturIty thereoI
a. 4 yrs to Iess than 5 yrs 5Z
b. 3 yrs to Iess than 4 yrs 12Z
c. Less than 3 yrs 20Z

MJ Does It appIy to aII IndIvIduaIsZ
&J No! t does not appIy to 10 NRFC and NRA
and NRAET8 because they are IIabIe to CT.

NOTE: II the deposItary Is a Non resIdent It Is
exempt

ResIdent cItIzen Is IIabIe to pay tax Ior
bank Interest earned abroad (NT)

MJ I the money earns Interest In abroad who
Is IIabIeZ
&J RC and DC onIy by NT, the rest are
exempt. No FT abroad because we do not
have wIthhoIdIng agent abroad.

MJ MCT appIIes to DC and RFC In reIatIon to
bank InterestZ
&J I the bank Interest Is derIved abroad, RFC
Is exempt but DC Is IIabIe.
mpose NT II It Is hIgher than the MCT,
otherwIse appIy MCT II Its hIgher than the
NT

%&0@#)

RequIrements:
1. PrIzes must be derIved Irom sources
wJIn the PhIIs.
2. It must be more than P 10,000

MJ Who are IIabIeZ (FT)
&J
1. RC
2. NRC
3. OCW
4. RA
5. NRAET8
6. AEMOP (RC, NRAET8)

Not LIabIe
1. NRANET8 IIabIe Ior CT at 25 Z
2. AEMPOP (NRANET8 CT)
3. DC NT 27 D Is sIIent
4. RFC NT Iaw Is sIIent 28A7a
5. NRFC subject to CT

MJ When can we appIy NT In PrIzesZ
&J 1. When the taxpayer Is RC, RFC and DC
2. For DC and RC It must be derIved
Irom Income abroad RFC It must be
derIved Irom Income wJIn
3. amount Is more than P10,000

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#'
NOTE: I the prIze Is derIved Irom sources
wJIn but It Is beIow P 10,000 It Is not subject
to tax. I derIved Irom sources abroad, most
oI them are exempt except Ior RC and DC
who are IIabIe wJIn and wJout.

MV s It possIbIe Ior RC and DC to pay MCTZ
&J Yes II MCT Is hIgher than NT.

D011017)

MJ Do we appIy the P10, 000 req.Z
&J No, we do not appIy It onIy appIIes to
prIzes. t must not pertaIn to IIIegaI
gambIIng.

Thus, the onIy requIrement Is It must be
derIved Irom Income wJIn.

MJ Who are IIabIeZ (FT)
&J
1. RC
2. NRC
3. OCW
4. RA
5. NRAET8
6. AEMOP (RA, NRAET8)

Not IIabIe to FTZ
1 NRANET8 CT
2 AEMOP (NRANET8 CT)
3 DC Iaw Is sIIent NT
4 RFC Iaw Is sIIent
5 NRFC CT

MJ When does NT appIy to wInnIngsZ
&J
1. I Taxpayer Is DC or RC
2. ncome Is derIved abroad
3. Taxpayer Is RFC and Income wJIn.

NOTE: I Income abroad, most TP are exempt
except DC and RC

MJ MCT appIIes whenZ
&J t Is hIgher than the NT

6'=,+/0#)

RequIrement:
The Income Is Irom wJIn

RateZ 20Z. Lower rateZ 10Z on books,
IIterary works and musIcaI composItIons.

MJ You are a wrIter Ior Snoop Dogg are you
IIabIe Ior FTZ What II Ior AprII 8oyZ
&J LIabIe Ior NT II ncome abroad IIke a
wrIter Ior Snoop. WhIIe FT II Ior AprII 8oy.

MJ Who are IIabIe (FT)Z
&J
1. RC
2. NRC
3. OCW
4. RA
5. NRAET8

Not LIabIeZ
1. NRANET8
2. AEMOP
3. DC
4. RFC
5. NRFC

NOTE: Lower rate oI 10Z appIIes to aII except
NRANET8

MJ When do we appIy NT to RoyaItIesZ
&J
1. TP Is RC or DC
2. ncome Is Irom wJout
3. TP Is RF and Income Is wJIn

I Income Is Irom sources abroad aII are
exempt except RC and DC

!0N03#13)

ConIIned wIth cash andJor property
dIvIdends.

MJ What are dIvIdendsZ
&J Any dIstrIbutIon made by CorporatIon to
Its stockhoIders outsIde oI Its earnIngs or
proIIts and payabIe to Its stockhoIders
whether In money or In property (Sec. 73)

COMM. vs. MANNINC
MJ Where dId It come IromZ
&J shares come Irom another sharehoIder
MJ What are the dIvIdends IncIudedZ
&J Sec. 24 reIers to cash or property
dIvIdend
H: For stock DIvIdends to be exempt It must
come Irom the proIIt oI the corporatIon.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#(
5Iock Dvdends It Is the transIer oI the
surpIus proIIt Irom the authorIzed capItaI
stocks.

MJ AssumIng that there are 5 ncorporators,
the CorporatIon has a P5 M AuthorIzed
CapItaI stock. t dIstrIbuted 1 M stock
dIvIdends, Is It taxabIeZ
&J NO, the dIvIdends dId not go to the Stock
hoIder but to the Auth CapItaI Stock. OnIy
cash and Prop Stock go to the Stock hoIder.

Sec 24 8 does not mentIon stock
dIvIdends because It Is not subject to FT but
It Is subject to NT under SectIon 73.

MJ s there an exceptIon when stock
dIvIdends are not taxabIeZ
&J YES, II the shares oI stocks are canceIIed
and redeemed meanIng It was reacquIred by
the corp.

AN5COR CA5
the stockhoIders cannot escape the
payment oI taxes

RequIrement:
Cen RuIe the dIvIdends must be dIstrIbuted
by a DC.
Except ReguIar operatIng aIways a IoreIgn
corp.

What rate: 10Z FT

MJ Who are IIabIeZ
&J
1. RC
2. NRC
3. OCW
4. RA
5. NRAET8

Not IIabIeZ
1. NRANET8
2. AEMOP
3. DC
4. RFC
5. NRFC

Shares oI assocIatIon and partnershIp Is
taxabIe

MJ DetermIne the tax IIabIIIty oI the
IoIIowIngZ
&J
1. DC a StockhoIder oI DC= Exempt
2. RFC stockhoIder oI DC= Exempt aIso
3. DC stockhoIder oI RF= LIabIe Ior NT.

*,:0/,+ T,01) 2&'4 ?,+# '5 ?K,&#) '5 ?/'(L
8'/ ;&,3#3 AUVW*B

1. Subj to FT
2. DetermIne whether there Is a Ioss or a
gaIn because the tax Is Impose upon
the net capItaI gaIns reaIIzed Irom the
saIe, barter, or exchange or other
dIsposItIon oI the shares oI stock In a
domestIc corp.
3. t Is unIIormIy Imposed on aII
taxpayer
4. not subj to wJhoIdIng tax.

RequIrements:
1. Shares oI stock oI a DC
2. t must be capItaI asset
3. must not be traded In the stock
market

25 R Iast part: CapItaI CaIns reaIIzed by
NRANET8 In the PhIIs. Irom the saIe oI shares
oI stock In any DC and reaI prop shaII be
subj. to the Income tax prescrIbed under Sub
sec (c) and (d) oI Sec. 24.

SEC. 24 8 1&2: I the eIements are
present NRANET8 and NRFC are IIabIe to pay
CT.

Except: under 24 C Ior NRANET8. What do
you mean by the phrase the provisions of
39 notwithstanding?

t reIers to the hoIdIng perIod. When It
comes to capItaI gaIns Irom saIe oI shares oI
stock not traded and capItaI gaIns Irom the
saIe oI reaI prop. The hoIdIng perIod does
not appIy because the basIs wIII be those
provIded In 24 C & D and not under 398 (CSP
or FMV)

$.$N$-* WX *F; 3F27; 43 2 3F27; 48 C!

MJ What II the share Is Irom IoreIgn corpZ
&J DetermIne the Income consIdered. I
Income wJIn read Sec. 42 (E)
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#)

I the shares soId are that oI a IoreIgn
corp It Is subj to the II ruIes:
a. soId In the PhIIs= Its Income wJIn
b. soId In abroad= wJout
c. Shares oI stock In a Dc Is aIways
consIdered an Income wJIn regardIess where
It was soId.

MJ Shares oI ForeIgn Corp soId In PhIIs.
Whos liable? What tax?
&J Not subj to FT because one oI the
eIements Is not present . Shares not beIng
that oI a DC.
Hence: a) RC, NRC, OCW, NRAET8, AEMOP
(RA, NRAET8) wIII pay NT. DC and RFC
b) NRANET8 and NRFC wIII pay CT

MJ Shares oI ForeIgn CorporatIon soId
abroadZ
&J t wIII be consIdered an Income wJout.
Thus:
most oI them wIII be exempt
except RC and DC IIabIe to pay NT

$.$N$-* W T -"* *%&C$C "% L".C ,-
*Y$ L*"!P N&%P$*

II soId In the stock market It Is not subj
to FT

II soId In the stock market, It wIII be subj
to percentage tax, In IIeu oI NT.

$.$N$-* W Z ,> @?3> [; 2 5294>2: 233;>0

MJ When Is It consIdered an ordInary assetZ
&J 1. When the broker or deaIer
a. used It In trade or busIness
b. heId Ior saIe In the ordInary
course oI trade or busIness
2. to aII other assets, It wIII be
consIdered a capItaI asset

NOTE: II aII eIements are present It wIII be
subj to FT

I the shares are ordInary asset

1. OrdInary shares In DC Income wJIn
a. Most oI the taxpayer wIII pay NT
except NRFC and NRANET8
2. OrdInary assets oI IoreIgn corporatIons
a. ncome wIthIn II soId In the PhIIs:
most wIII pay except NRANET8
and NRFC
b. ncome wJout II soId abroad: most
wIII be exempt except RC and DC

MCT
MJ When Is a RFC subj to NTZ
&J
1. SaIe oI shares oI stock oI a ForeIgn
corp In the PhII.
2. saIe oI shares oI stock oI DC whIch
are ordInary asset

DC and RFC are subj to MCT whIch may
be Imposed II the NT Is Iower than the
MCT2Z MCT wIII be Imposed II MCT Is
hIgher than NT.

*,:0/,+ T,01) 2&'4 ?,+# '5 6#,+ %&':#&/=
AUVW!B

n 39 8 the hoIdIng perIod does not appIy
because the basIs oI Income tax Is the gross
seIIIng prIce (CSP) or the FaIr market vaIue
(FMV) whIchever Is hIgher 6Z FT

RequIrements:
1. The reaI prop must be soId wJIn the
PhIIs and Iocated In the PhIIs.
2. t must be a capItaI asset
3. The seIIer must be an IndIvIduaI,
estate or trust or a DC

RFC not IIabIe Ior FT but IIabIe to pay NT
II aII the eIements are present.

NRFC IIabIe to pay CT and not FT

NRANET8 IIabIe to pay FT are aII
eIements are present.

$.$N$-* W Z *F; 7;2: 97<9 @?3> [; 2
5294>2: 233;>

MJ When consIdered a capItaI assetZ
&J Read R.R. 7 2003

MJ OrdInary asset shaII reIer to aII reaI
property specIIIcaIIy excIuded Irom the
deIInItIon oI capItaI asset under Sec. 39
&J Other property not mentIoned are capItaI
asset.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

#*
MJ What II aII the eIements are not presentZ
&J
most wIII be IIabIe to pay NT
Except NRANET8 and NRFC IIabIe Ior CT

MJ May a RC be IIabIe to pay NT even II aII
the eIements are presentZ
&J YES, dIsposItIon made to the Covt. Thus,
the taxpayer has the optIon oI payIng 32Z
NT or 6Z FT

MJ WhIch Is more advantageousZ
&J It depends determine first if theres a loss
or a gaIn.
If theres a gain choose to be taxed at 6%
FT. n thIs case the gaIn Is aIways presumed.
If theres a loss choose to be taxed at 32%
because Iosses may be consIdered an
aIIowabIe deductIon .

Other transactIons are covered:
1. saIe
2. barter
3. exchange
4. other dIsposItIon

NOTE: I the prop Is under mortgage contract
and the mortgagee Is a bank or IInancIaI Inst,
the FT does not appIy because the property
is not yet transferred because theres a
perIod oI redemptIon
I aIter a year the mortgagor IaIIed to
redeem the property that Is the onIy tIme that
the FIT will apply because theres now a
change oI ownershIp. I redeemed wJIn 1 yr
period FIT will not apply because theres no
change oI ownershIp.
I the mortgagee Is an IndIvIduaI the FT Is
Imposed whether or not there Is a transIer oI
ownershIp.

-<(#:/0'1) AUVWA!VBB

MJ What II the prop beIng soId was a movIe
house, can he cIaIm Ior the exceptIonZ
&J the prop covered by the exemptIon Is a
resIdentIaI Iot

MJ Who can cIaIm the exemptIonZ
&J OnIy the taxpayer mentIoned In Sec. 24

RequIrements:
1. The purpose oI the seIIer Is to acquIre
new resIdentIaI reaI prop
2. the prIvIIege must be avaIIed oI wJIn
18 mos. From the saIe
3. Comm. must be InIormed wJIn 30
days Irom the date oI saIe wIth the
IntentIon to avaII oI the exemptIon
4. the adjusted basIs or hIstorIcaI cost oI
the resIdence soId shaII be carrIed
over to the new resIdence.
5. the prIvIIege must be avaIIed onIy
once every 10 yrs
6. CertIIIcatIon oI the brgy. Capt where
the taxpayer resIdes that Indeed the
prop soId Is the prIncIpaI resIdence oI
the tax payer (RR 13 99)

MJ What II the property Is worth 10 M and It
was soId onIy Ior 2M, what wIII happen to the
unused portIon or proIItZ
&J I the proceeds are not IuIIy utIIIzed, the
portIons oI the gaIn Is subj to FT

L$!0 T\& %&*$L ") ,-!"N$ *&+

MJ How many Income taxes are paId by a
DCZ
&J
1. NT
2. MCT
3. FT
4. 10ZmproperIy AccumuIated
EarnIngs
5. OptIonaI corporate Income tax oI 15Z
oI the gross

DC IIabIe Ior IIve, but the optIonaI Is not
yet appIIcabIe so onIy 4.

MJ How many can be appIIed sImuItaneousIyZ
&J ONLY 3
1. NT, FT and 10Z AE
2. MCT, FT, 10Z AE

L$!0 T\ R1S 6%"6%,$*&%Q $CE!&*,"-&.
,-L*0 I Y"L60

Who are the taxpayersZ
1. Non ProIIt ProprIetary EducI. nst and
2. Non ProIIt ProprIetary HospItaI

MJ What II the schooI or hospItaI Is non
proIIt onIy, Is It exemptZ
&J No, subject to 10Z on theIr taxabIe
Income except those covered by subsectIon
(D)
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$+
PROVDED that gross Income Irom
unreIated busIness, trade or actIvIty must not
exceed 50Z oI Its totaI gross Income derIved
by such educatIonaI Inst or hospItaI Irom aII
sources

RequIrements:
1. t Is a prIvate schooI or hospItaI
2. It Is stock corp
3. It Is non proIIt
4. that gross Income Irom unreIated
busIness, trade or actIvIty must not
exceed50Z oI Its totaI gross Income
derIved by such educatIonaI Inst or
hospItaI Irom aII sources
5. has permIt to operate Irom DECS,
TESDA, or CHED

MJ What do you mean by unreIated trade
busIness or actIvItyZ
&J t means any trade, 8usIness, or actIvIty
whIch Is not substantIaIIy reIated to the
exercIse or perIormance by such entIty oI Its
prImary purpose or perIormance

MJ May a schooI or hospItaI be exempt Irom
payIng taxZ What are the reqZ
&J
1. t must be non stock and non proIIt
2. the assets property and revenues
must be used actuaIIy, dIrectIy, and
excIusIveIy Iro the prImary purpose

MJ Under what IawZ s It the constItutIon or
the NRC whIch provIdes Iro the exemptIonZ
&J t Is under Sec. 30 oI NRC and not
under Sec.4 Art. 14 oI the ConstItutIon. The
provIsIon oI the NRC Is the specIIIc Iaw
whIch prevaIIs over the ConstItutIon whIch Is
the generaI Iaw.
exempt Irom aII taxes and custom
dutIes

MJ What about exemptIon Irom reaI
property taxZ
&J Art. 6 Sec. 28 oI the ConstItutIon:
charitable institution churches, .and all
Iands buIIdIngs, actuaIIy dIrectIy and
excIusIveIy used Ior reIIgIous, charItabIe, and
educatIonaI purposes shaII be exempt Irom
taxatIon.
Not Sec. 4 oI Art. 14 oI the
ConstItutIon.

MJ You donated a property to a schooI wIII
you be liable for donors tax?
&J not IIabIe II It IaIIs under Sec. 101 (3) oI
the NRC

REQ. FOR EXEMPTON TO DONORS TAX:
1. It must be nonstock, nonproIIt
educatIonaI Inst.
2. not more than 30Z oI the prop donated
shaII be used by such donee Ior admIn
purposes.
3. payIng no dIvIdends
4. governed by trustees who dont receive
any compensatIon
5. devotIng aII Its Income to the
accompIIshment and promotIon oI the
purposes stated In Its ArtIcIes oI
ncorporatIon

MJ What about exemptIon Irom VATZ
&J Sec. 109 (m) oI RVAT

MJ What about exemptIon Iro Loc Cov CodeZ
&J I Its nonstock, nonproIIt educatIonaI
Inst. t may be exempted Irom IocaI taxatIon.

MJ s Art 14 Sec. 4 oI the ConstI obsoIeteZ
&J NO, II the Iaw Is sIIent appIy the ConstI.

L$!0 TZJ '"!!] &'$-!,$L] ,-L* <= >F;
'"#*0

CEN RULE: Subj to tax.

EXCEPTONS:
1. CSS
2. SSS
3. PHC
4. PCSO

PACCOR no Ionger IncIuded.

MJ I the COCC Is not one oI those
enumerated does It IoIIow aII oI Its Income Is
automatIcaIIy subject to taxZ
&J NO. Under Sec 32. 8 (7) Income derIved
Irom any pubIIc utIIIty or Irom the exercIse oI
essentIaI government IunctIon accruIng to
the Covt oI the PhIIs or to any poIItIcaI subd.
Are thereIore exempt Irom Income tax.
ThereIore, even II the COCC Is one oI
those enumerated under Sec. 27 It may stIII
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$!
be exempt under Sec. 32 b7b II Its
perIormIng governmentaI IunctIon

NOTE: Pagcor vs. 8asco case

MJ What Is the dIIIerence between Sec. 27 C
and 32 b7bZ
&J
1. Sec 27 C exempts those enumerated
wIthout any quaIIIIcatIon.
2. Sec. 32b7b quaIIIIcatIon must concur
beIore It may be exempted.

MJ Can the government Impose tax on ItseIIZ
&J t depends on who the taxIng authorIty Is.
I the taxIng authorIty Is the NatIonaI Covt. as
a ruIe, YES.
ExceptIons
1. those entItIes enumerated under 27 C
2. those COCC IaIIIng under 32b7b

I the taxIng authorIty Is the IocaI
government unIts, as a ruIe NO. LGUs are
expressIy prohIbIted Irom IevyIng tax
agaInst: (Sec 133(o)
1. NatIonaI Covt.
2. ts agencIes and InstrumentaIItIes
3. IocaI government unIts
ExceptIon: Sec 154 of LGC says that LGUs
may IIx rate Ior the operatIon oI pubIIc
utIIItIes owned and maIntaIned by the wIthIn
theIr jurIsdIctIon.

FAL CA5 )uIy 2 2b
H: The SC used 133 (o)an exceptIon to
pay tax, reaI estate tax, Imposed by CIty
oI PAranaque on NAA. The SC saId that
the aIrport Is not an agency or COCC but
mere InstrumentaIIty oI the Covt.
ThIs Is Cross Ignorance oI the Iaw Sec.
133 (o) Is Ior IocaI taxatIon not reaI
property taxatIon whIch Is the one
InvoIved In the present case.

NOTE: Mactan Cebu AIrport case

?-*Q VX !AYB

MJ How many possIbIe Incomes were
mentIonedZ
&J Two (2): bank Interest and royaItIes

REQ:
1. 8ank Interest must be receIved by a
DomestIc Corp
2. RoyaItIes derIved Irom sources wIthIn

MJ When It comes to bank Interest, what Is
the dIIIerence II the taxpayer Is an IndIvIduaI
or corporatIonZ
&J I IndIvIduaI, they may be exempt Irom
the payment oI Interest In case oI Iong term
deposIt except NRANET8
I DC, they are not exempt Irom Iong tem
deposIt.

MJ What about royaItIesZ
&J I IndIvIduaI, have a Iower rate oI 10Zon
books, other IIterary and musIcaI
composItIons. DC have no Iower preIerentIaI
rate.

?-* VX !VO *E%P;ER TEP8? 26CI ?ER- C2
?GE6-? 8C; ;6E!-!

?-* VX !ZO -2*!?

MJ What Is the expanded IoreIgn currencyZ
&J t Is a bank authorIzed by the 8SP to
transact busIness In the PhIIIppIne Currency
as weII as acceptabIe IoreIgn currency or
both.

MJ What Is the tax to be paIdZ
&J NormaIIy It Is NT because It Is subj under
Sec 27 D3 and 28 A

MJ Who Is the Income earnerZ
&J DeposItary banks

MJ Exempt Irom what kInd oI transactIonZ
&J From IoreIgn currency transactIon. I It
InvoIves IoreIgn currency transactIon It Is not
exempt but subject to 35 Z NT

MJ Who are the other partIesZ
&J
1. OII shore bankIng unIts
2. branches oI IoreIgn banks
3. IocaI commercIaI bank
4. Other deposItary banks under EFCDS
5. Non resIdents

II the above enumeratIon are the partIes,
then deposItary bank wIII be exempt Irom
payIng the NT

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$#
2'&#071 *"&&#1(= R',1

MJ Who Is the IenderZ 8orrowerZ
&J Lender EFCDS
8orrower RC

EXEMPT
OIIshore bankIng unIts
Other deposItary banks under EFCDS

exemptIon oI NR Irom EFCDS:

MJ Who Is the Income earnerZ
&J Non ResIdents whether IndIvIduaI or
CorporatIons

MJ DerIved Irom whomZ
&J DeposItary 8ank under EFCDS

NOTE: Sec. 24 8 NonresIdent exempt Irom
bank Interest under EFCDS

MJ What Is the dIIIerence between 24 b1
Irom 27 D3
&J n 24 81, NR Is exempt onIy Irom bank
Interst derIved Irom EFCDS whIIe 27D3
exempts NR Irom any Income Irom
transactIons wIth deposItary bank under
EFCDS

?-*Q VX !AW) ntercorporate dIvIdends-
exempt

VX ![ *,:0/,+ T,01) 5&'4 ),+# '5 6#,+
%&':Q

MJ What Is the taxZ
&J 6Z FT

MJ What Is the dIIIerence II the seIIer Is an
IndIvIduaI and a DCZ
&J ndIvIduaI can seII aII kInds oI reaI
property
DC can onIy dIspose Iand andJor
buIIdIngs.

?-* VX A-B I*P;

MJ AppIIcabIe to whomZ
&J DC and RFC

MJ Can It be appIIed sImuItaneousIy wIth
NTZ
&J NO, Imposed In IIeu oI the NT, whIchever
Is hIgher.

MJ What Is the RatIonaIeZ
&J to prevent corporatIons Irom cIaImIng too
many deductIons

MJ When wIII It be ImposedZ
&J
1. On the 4
th
year ImmedIateIy II the year
In whIch such corp commenced Its
busIness.
2. When the MCT Is hIgher than the NT

MJ What Is the carry over ruIeZ
&J Sec 27 E2 states the carry over ruIe.

n order to avaII: onIy In the year where
the MCT Is greater than the NT.

?#( V\ EY

MJ What KInds oI taxes are paId by the RFCZ
&J NT
MCT

?#(Q V\ FV I*P; '1 62*

same wIth Sec. 27

?#(Q V\ EZ9 P8;R *E66P-6

KInd:
1. AIr carrIer
2. shIps

An IntI. carrIer doIng busIness In the
PhIIs. shaII pay 2 Z Z on Its Cross PhII 8IIIIngs
(CP8)

MJ s 28 A3 the Cen. ruIe or the ExceptIonZ
&J t Is the generaI ruIe because It Is under
28 A3

CP8 Is In the nature oI FT, appIIes onIy II
aII the requIrements are present.

RFC wIII be IIabIe Ior NT, hence a RFC
engaged In common carrIage does not pay
CP8 but NT

ncome wIthout: EXEMPT

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$$
P1/#&1,/0'1,+ *,&&0#&O

CP8 reIers to the amount oI revenue
derIved Irom: carrIage oI persons, excess
baggage, cargo and maII orIgInatIng Irom the
PhIIs In a contInuous and unInterrupted
IIIght, IrrespectIve oI the pIace oI saIe or
Issue and the pIace oI payment oI the tIckets
or passage document.

REQ:
1. OrIgInatIng Irom the PhIIs.
2. ContInuous and unInterrupted IIIght;
3. rrespectIve oI the pIace oI saIe or
Issue and the pIace oI the payment oI
tIckets or passage document.

MJ Do you consIder IandIng rIghts to
determIne IIabIIItyZ (RR 152002)
&J
1. I orIgInates Irom the PhIIs and has
IandIng rIghts ONLNE RFC
2. No IandIng rIghts OFFLNE NRFC

MJ I there are stopovers, Is It stIII
unInterruptedZ
&J YES, provIded that the stopover does not
exceed 48 hrs.

MJ When wIII the pIace oI saIe oI tIckets
matter as to the taxpayers IIabIIItyZ
&J The pIace oI tIckets Is materIaI onIy II the
two other eIements are not present to be abIe
to know II Its subj to NT or exempt.

6#N,+03,/#3] #<(K,17#3 '& 013'&)#3 /0(L#/)

REQ:
1. The passenger boards a pIane In a
port or poInt In the PhIIs.
2. The tIckets must be revaIIdated,
exchanged, or Indorsed to another
aIrIIne.

MJ What if its the same airline but different
pIaneZ
&J CP8 does not appIy, It must be to another
aIrIIne

MJ What II It dId not orIgInate Irom the
PhIIs.Z
&J DetermIne II Its Income wIthIn or wIthout.
II tIcket was purchased In the PhIIs. It Is
Income wIthIn hence appIy NT
II purchased outsIde, It Is Income wIthout,
hence exempt

;&,1))K0:4#1/

REQ:
IIIght orIgInates Irom the PhIIs
transshIpment oI passenger takes pIace
at any port outsIde the PhIIs.
the passenger transIerred on another
aIrIIne

MJ How do you appIy CP8Z
&J OnIy the aIIquot portIon oI the cost oI the
tIcket correspondIng to the Ieg IIown Irom
the PhIIs to the poInt oI transshIpment shaII
Irom part oI the CP8.

MJ s It IIabIe Ior the whoIe IIIghtZ
&J
From the PhIIs to the poInt oI
transshIpment, It Is Income wJIn
From transshIpment to IInaI destInatIon,
Its Income wJout EXEMPT

P1/#&1,/0'1,+ ?K0::017

CP8 means gross revenue whether Irom
passenger, cargo, maII

REQ:
It must orIgInate Irom the PhIIs.
up to IInaI destInatIon
- regardIess oI the pIace oI saIe or
payments oI passenger or IreIght documents

?#(V\ EAWB C22 ?GC6- FE8^P8T M8P;?

OBUs
1. onIy acceptabIe IoreIgn currencIes
2. aIways a IoreIgn corporatIon (subj to
NT) except #3
3. Exempt II Income Is derIved by the
O8U Irom EFCDS
4. PartIes:
a) IocaI commercIaI banks
b) ForeIgn bank branch
c) Non ResIdents
d) O8U In the PhIIs.

DIIIerence wIth EFCDS:
EFCDS
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$%
1. AcceptabIe IoreIgn currency, PhII.
Currency or both
2. Can be a domestIc or IoreIgn
corporatIon
3. Exempt II Income derIved by DC or
RFC Irom EFCDS
4. PartIes:
a) IocaI commercIaI banks
b) ForeIgn bank branch
c) Non ResIdents
d) O8U In the PhIIs
e) Other banks under EFCDS

)"%$,'- !E%%$-!Q ."&-

10Z FT
I: Lender O8U
8orrower ResIdent CItIzen
EXCEPT:
1. O8U
2. LocaI CommercIaI 8anks

TransactIons oI Non ResIdents:
1. ncome earner: Non ResIdents
2. Lender: OBUs

NOTE: Non resIdent exempt Irom
transactions with OBUs and EFCDS

L$!0 T^ &_ *&+ "- 1%&-!Y 6%"),*L]
%$N,**&-!$L
proIIts based on the totaI proIIts appIIed
or earmarked Iro remIttance remItted by a
branch to Its head oIIIce
Subj to 15Z tax

Except: those actIvItIes whIch are regIstered
wIth PEZA

NOTE: nterests, DIvIdends, Rents, RoyaItIes
IncIudIng remuneratIon Ior technIcaI
sevIces, saIarIes, wages, premIums,
annuItIes, emoIuments, or casuaI gaIns,
proIIts, Income and capItaI gaIns receIved
by a IoreIgn corporatIon durIng each
taxabIe year Irom aII sources wIthIn shaII
not be treated as branch proIIts UNLESS
the same are eIIectIveIy connected wIth
the conduct oI Its trade or busIness.

F&,1(K %&'50/ 6#40//,1(#

Two ways to receIve Income (FC)
1. 8ranch
2. SubsIdIarIes

NOTE:
1. When a FC estabIIshes branch, It Is
aIways a FC
2. When a FC estabIIshes DC, It Is a RFC

MV t Is In addItIon to NT WhyZ
&J NT because It Is RFC

MV What kInd oI tax Is Imposed under 28 A5Z
&J 15Z FT

MJ How do you appIy the rateZ
&J muItIpIIed to the totaI proIIt appIIed or
earmarked Ior remIttance wJo deductIons

t appIIes Ior branches that are:
1. the proIIt remItted Is eIIectIveIy
connected wIth the conduct oI Its
trade or busIness In the PhIIs.
2. One not regIstered wIth PEZA

MARUNI CA5
F: A branch was estabIIshed wIth AC&P,
there was Investment wIth AC&P
MJ DId the petItIoner partIcIpate wIth the
negotIatIonZ
&J NO
MJ What dId the petItIoner payZ
&J 15Z 8ranch ProIIt RemIttance Tax (8PRT)
10Z ntercorporate DIvIdends
MJ Whats the issue?
&J PetItIoner maIntaIns that there was
overpayment oI taxes, thus the same was
askIng Ior a reIund oI tax erroneousIy
paId.

MJ s Is subj to FTZ
&J NO, exempt II petItIoner Is RFC
H: not correct to pay 15Z

To be IIabIe Ior 8PRT
1. t Is a RFC
2. 8ranch dId not partIcIpate In negotIatIons

L$!0 T^ &`2
RegIonaI or area headquarters (Sec. 22
DD) shaII not be subject to tax exempt Irom
Income tax II the requIsItes are present.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$&
MJ What are the requIsItesZ
&J
1. the HQ do not earn or derIve Income
Irom the PhIIs.
2. Acts onIy as supervIsory,
communIcatIons, coordInatIng centre
Ior theIr aIIIIIates, subsIdIary or
branches In the AsIa PacIIIc RegIon
and other IoreIgn markets.

L$!0 T^ &`[

RegIonaI OperatIng HQ are taxabIe and
IIabIe to pay 10Z taxabIe Income.

RegIonaI OperatIng HQ Is a branch
estabIIshed In the PhIIs by a muItInatIonaI
company engaged In any oI the servIces:
1. Cen. AdmInIstratIon and PIannIng
2. 8usIness PIannIng and CoordInatIon
3. SourcIng and procurement oI Raw
materIaIs and components.
4. Corporate FInance and AdvIsory
ServIces
5. MarketIng ControI and saIes
promotIon
6. TraInIng and personaI management
7. IogIstIc servIces
8. research and deveIopment servIces
and product deveIopment
9. technIcaI support and maIntenance
10. data processIng and communIcatIon
and busIness deveIopment

RatIonaIe: Why IIabIeZ 8ecause the cIaIm Ior
exemptIon oI resIdent aIrIInes shaII be
mInImIzed

L$!0 T^&\2 ,8>;7;3>3 28D %<H2:>4;3J

20ZFT

nterests under EFCDS= 7 Z Z

L;50 T^&\[ ,85<@; D;74G;D ?8D;7 $)!CL

X0 ncome derIved Irom IoreIgn currency
transactIons wIth:
a) Non ResIdents
b) O8U
c) LocaI commercIaI bank
d) ForeIgn bank branches
e) Other deposItory bank under the
EFCDS

As a Cen RuIe: the above transactIon Is
Exempt

EXCEPTON: ncome Irom such transactIon
as may be specIIIed by the secretary oI
FInance, upon recommendatIon by the
Monetary 8oard to be subject to reguIar
Income tax payabIe by any banks.

T0 nterest Income Irom IoreIgn currency
Ioans

granted by deposItory bank under saId
EFCDS to others shaII be subject to 10Z FT

Exempt II granted to:
1. Other O8U In the PhIIs, and
2. Other deposItory bank under the
EFCDS
SEC. 28 A7c: CapItaI CaIns Irom
Shares oI Stocks not Traded In the
Stock exchange
5Z or 10Z as the case maybe

L$! T^&\DJ ,-*$%!"%6"%&*$ C,#,C$-CL

DC RFC= EXEMPT, not subj to tax

L$! T^ 1X

MJ What kInd oI taxZ
&J 35Z CT on the II Income
1. nterest
2. DIvIdends
3. Rents
4. RoyaItIes
5. SaIarIes
6. PremIums( except reInsurance
premIums)
7. annuItIes
8. emoIuments
9. Other IIxed and determInabIe CaIns,
proIIts and Income.

L$! T^ 1T -<8 %;34D;8> !48;@2><K729F45
=4:@ <B8;7] :;33<7 <7 D43>74[?><7

IIabIe Ior 25Z CT

L$! T^ 1Z -<8 %;34D;8> <B8;7 <7 :;33<7 <=
#;33;:3 5F27>;7;D [H 6F4:49948; -2>4<82:30

IIabIe Ior 4 Z CT
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$'

EIements:
1. Chartered to FIIIpIno CItIzens or
CorporatIons
2. Approved by MARNA

L$!0 1RUS -<8 %;34D;8> "B8;7 <7 .;33<7 <=
&47572=>] N25F48474;3] 28D <>F;7
$a?49@;8>30

IIabIe Ior 7 1J2 Z CT

L$! T^ [_2 ,8>;7;3> <8 )<7;4K8 .<283

Must be read wIth Sec. 32 87a

nterest on ForeIgn Loans, II the Iender Is
1. NRFC IIabIe to 20Z FT
2. ForeIgn Covt. Exempt because It Is an
excIusIon (Sec 32 b7a: Income derIved
by a IoreIgn govt Irom Investments In
the PhIIs on Ioans, stocks, bond, and
other domestIc securItIes or Irom
Interest on deposIts In banks by:
a) ForeIgn govt.
b) FInancIng Inst owned controIIed or
enjoyIng, reIInancIng Irom IoreIgn
govt; and
c) nter natIon or RegIonaI IInancIaI
Inst estabIIshed by IoreIgn govt.

COMMI5IONR OF INTRNAL RV. vs.
MIT5UI5HI MTAL CORF. (1 5CRA 214)
F: AtIas MInIng entered Into a Loan and SaIes
Contract wIth MItsubIshI MetaI Corp. ( A
]apanese Corp.) Ior the purposes oI
projected expansIon oI the productIvIty
capacity of the formers mines in Cebu.
The contract provIdes that MItsIbushI wIII
extend a Ioan to AtIas In the amount 20
M doIIar, so that AtIas wIII be abIe InstaII
a new concentrator Ior copper
productIon.
MItsubIshI to compIy wIth Its
obIIgatIon, appIIed Ior a Ioan Irom
Export mport 8ank oI ]apan (ExIm 8ank)
and Irom consortIum oI ]apanese banks.
Pursuant to the contract AtIas paId
Interst to MItsubIshI where the
correspondIng 15Z tax thereon was
wIthheId and onIy remItted to the Covt.
SubsequentIy MItsubIshI IIIed a cIaIm
Ior tax credIt requestIng that the same be
used as payment Ior Its exIstIng IIabIIItIes
despIte havIng executed a waIver and
dIscIaImer oI Its Interest In Iavor oI AtIas
earIIer on. t Is the contentIon oI
MItsubIshI that It was the mere agent oI
ExIm 8ank whIch Is a IInancIng Inst
owned and controIIed by the ]apanese
Covt.
The status oI ExImbank as a
government controIIed Inst became the
basIs oI the cIaIm Iro exemptIon by
MItsubIshI Ior the payment oI Interest on
Ioans.
: WON MItsubIshI Is a mere agent oI
ExImbank
H: NO. The contract between the partIes does
not contaIn any dIrect reIerence to ExIm
8ank, It Is strIctIy between MItsubIshI as
credItor and AtIas as the seIIer oI copper.
The bank has nothIng to do wIth the saIe
oI copper to MItsubIshI. AtIas and
MItsubIshI had recIprocaI obIIgatIons
MItsubIshI In order to IuIIIII Its obIIgatIons
had to obtaIn a Ioan, In Its Independent
capacIty wIth ExIm bank. Laws grantIng
exemptIon Irom tax are construed strIctIy
agaInst the taxpayer and IIberaIIy In Iavor
oI the taxIng authorIty.

L$!0 T^ C_ [ ,-*$%!"%6"%&*$
C,#,C$-CLJ

FT 15Z Imposed on the amount oI cash
and or prop dIvIdends receIved Irom a
domestIc corporatIon.

SU8] TO THE CONDTON: the country where
the NRFC Is domIcIIed aIIows a credIt agaInst
the tax due Irom the NRFC taxes deemed
paId or deemed to have been paId In the
PhIIs.

Cen ruIe: 35 Z FT
ExceptIon: 15% under the tax deemed paid
ruIeJ recIprocIty ruIeJ tax sparring rule

)HON5ON5 CA5
2 KInds oI CategorIes:
1
st
: ]apan, US, Cermany, PhIIs IIabIe Ior
Income wIthIn and Income wIthout

2
nd
: countrIes IIabIe onIy Ior Income wIthIn.

MARUNI Cnse: 2 ssues
1. s the payment oI 10Z FT correctZ
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$(
No because It was a branch and RFC but
stIII MarubenI was NRFC under the oId Iaw
whIch Is IIabIe to pay 35Z, but SC saId IIabIe
onIy to 25Z because oI the tax treaty

You cannot reIund rIght away 15Z
8PRT and 10Z ntercorporate DIvIdends tax
has dIIIerent basIs

n P&C who are InvoIved
- DC (P&C PhII) and NRFC (P&C US)
- DC decIares dIvIdends to NRFC
- 35Z was wIthheId and remItted to the 8R

What dId they dIscoverZ (aIter payIng)
- they dIscovered that they are IIabIe onIy
Ior 15Z so they have a reIund oI 20Z

MJ n the 1
st
case dId the SC aIIowed the
reIundZ
&J NO, denIaI anchored on 2 grounds:
1. One cIaImIng Ior reIund was not the
proper party
2. There was a showIng or prooI as to
the existence of the tax deemed
paid rule

MJ n 2
nd
case was there a reIundZ
&J YES, the SC reversed ItseII

1. ncome tax Is FT: the wIthhoIdIng
agent Is the proper party because he
Is IIabIe to pay saId taxes
2. actuaI prooI oI payment not
necessary, what Is necessary Is the
Iaw oI the domIcIIe oI the country
provIdIng Iro tax credIt equaI to 20Z
oI the tax deemed paId.

MJ What Is the rate II the Iaw Is sIIentZ
&J 35Z FT

The rate will only be 15% if theres a law
recognIzIng the same but thIs reIers to the
case oI those beIongIng to the IIrst category.

WANDR CA5
MJ Who are the partIesZ
&J DC(Wander) and FC (CIaxo) they
beIong to dIIIerent categorIes
The 8R trIed to coIIect 35Z because
the Iaw Is totaIIy sIIent about the tax
credIt
H: The SC saId that the tax shouId be 15Z
whIch appIIes 2 Instances:
1. ForeIgn Iaw do not provIde Ior tax
credIt 35Z
2. Iaw provIdes but the Iaw Is sIIent 15Z
3. Iaw Is sIIent because there Is no Iaw
15Z
4. Iaw Is sIIent because theres no law
because the subj matter Is not
taxabIe 15Z

L$!0 Tb ,&$*

&J 10Z oI the gross Income (taxabIe Income)

t Is Imposed upon the ImproperIy
accumuIated taxabIe Income oI the
corporatIon

MJ AppIIes to what CorpZ
&J to DC onIy under RR 2 2001( cIassIIIed as
cIoseIy heId corporatIons)

MJ s It In the nature oI sanctIonZ
&J Yes, It Is Imposed to compeI the
corporatIon to decIare dIvIdends.

MJ WhyZ
&J because II proIIts are dIstrIbuted to the
sharehoIders, they wIII be IIabIe Ior the
payment oI DIvIdends tax. Now, II the proIIts
are undIstrIbuted the sharehoIders wIII not
Incur IIabIIIty on taxes wIth respect to the
undIstrIbuted proIIts oI the Corp.
- n a way It Is In the Iorm oI deterrent to
the avoIdance oI tax upon sharehoIders who
are supposed to pay dIvIdends tax on the
earnIngs dIstrIbuted to them.

MJ What Is taxabIe IncomeZ
&J SEC. 31 deIInes taxabIe Income as the
pertInent Items oI gross Income specIIIed In
thIs Code, Iess the deductIons andJor
personaI and addItIonaI exemptIons, II any,
authorIzed Ior such types oI Income by thIs
Code or other specIaI Iaw

MJ When not IIabIe to pay AETZ
&J There are 2 groups oI DC exempt Irom
payment oI AET (RR22001)

A) CorornIons jnIure Io decInre dvdends
becnuse oj rensonnbIe needs oj busness
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$)

reasonabIe needs means are construed to
mean ImmedIate needs oI the busIness
IncIudIng reasonabIe antIcIpated needs

MJ What constItutes reasonabIe accumuIatIon
of the corporations earnings? Examples?
&J
1. aIIowance Ior the Increase In the
accumuIatIon oI earnIngs up to 100Z
oI the paId up capItaI oI the
corporatIon.
2. earnIngs reserved Ior the deIInIte
corporate expansIon projects or
programs approved by the 8oard
3. EarnIngs reserved Iro buIIdIngs,
pIants, or equIpment, acquIsItIon
approved by the 8oard
4. EarnIngs reserved Ior compIIance wIth
any Ioan agreement or pre exIstIng
obIIgatIons
5. EarnIngs requIred by Iaw or other
appIIcabIe statutes to be retaIned.
6. n case oI subsIdIarIes oI IoreIgn
corporatIon, aII undIstrIbuted
earnIngs or proIIts Intended or
reserved Ior Investments

NOTE: the corporatIons beIongIng In the 1
st

group are normaIIy IIabIe but they can show
that the accumuIatIon oI earnIngs Is justIIIed
Ior reasonabIe needs oI busIness, they Incur
no IIabIIIty and exempt Irom payments oI the
same.

) CorornIons whch nre exemI wheIher or
noI I s jor rensonnbIe needs oj Ihe busness:
1. 8anks, and other non bank IInancIaI
IntermedIarIes.
2. nsurance companIes
3. PubIIcIy heId corporatIons
4. TaxabIe partnershIps
5. CeneraI ProIessIonaI PartnershIps
6. Non taxabIe joInt ventures
7. EnterprIses regIstered wIth
a) PEZA
b) 8ases ConversIon Devt Act oI 1992
(RA 9227)
c) SpecIaI EconomIc Zone decIared by
Iaw

MJ What Is a cIoseIy heId corporatIonsZ
&J *hose corporatIon at Ieast 50Z In vaIue oI
the outstandIng capItaI stock or at Ieast 50Z
oI the totaI combIned votIng power aII
cIasses oI stock entItIed to vote Is owned
dIrectIy, or IndIrectIy by or Ior not more than
20 IndIvIduaIs

NOTE: PubIIcIy heId Corp. has more than 20
sharehoIders

MJ What Is the tIme Ior payIng thIs taxZ
&J CaIendar Year: ]an 25, 2005 Dec 31,
2005. Today Is 2006. You have 1 year to
decIare aIter the cIose oI the taxabIe year.
2006 Is the grace perIod. You wIII pay on
]anuary 2007.

MJ If youre not mentioned to be exempted,
wIII you stIII be IIabIeZ
&J No, II you Invoke adjustments

L$! Zc0 $+$$N6*,"-L )%"N *&+ "-
!"%6"%&*,"-L

Determine the Corporations exemptions
under Sec. 30 27 C and 228.
1. Sec 30, the corporatIons shaII not be
taxed under thIs tItIe (tax on Income)
In respect to Income receIve by them
as such.
2. Sec 27, the corporatIons enumerated
are aIways exempt. Thus exemptIon Is
uncondItIonaI
3. Sec 228 CPP, as a generaI ruIe Is not a
corporatIon
4. except II It earns Income Irom other
busIness

]oInt Venture wJ servIce contract wJ
government not a corporatIon, otherwIse, It
Is IIabIe.

AssIgnment: Sec. 35

August 21, 2006 MIdterms

August 14, 2006

MJ What Is the reason Ior not IncIudIng the
corporatIons exempt under sectIon 27C and
SectIon 228 under SectIon 30Z
&J 8ecause there Is an exemptIon whIch
does not appIy to aII exempt corporatIon.
The exemptIon under SectIon 30 Is not
absoIute whIIe the exemptIon under SectIon
27 C Is absoIute and wIthout any condItIons.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

$*
n addItIon, SectIon 228 provIdes that a joInt
venture Is generaIIy taxabIe unIess It has a
servIce contract wIth the government, a
generaIIy taxabIe corporatIon cannot be
joIned wIth the group as generaIIy not
taxabIe corporatIon. CeneraI ProIessIonaI
PartnershIp Is exempt but the exemptIon Is
not the same as provIded by SectIon 30.

TAKE NOTE: Las Paragraph oI SectIon 30.

exemptIon to the exemptIon: Income oI
whatever kInd and character oI the IoregoIng
organIzatIons Irom:
1. any oI theIr propertIes, reaI or
personaI;
2. any actIvItIes conducted Ior proIIt

regardIess oI the dIsposItIon oI saId
Income, shaII be subject to tax.

MJ Enumerate the exempt corporatIons
under SectIon 30; What Is the requIrementZ
&J
1. Labor, agrIcuIturaI or hortIcuIturaI
organIzatIon not organIzed prIncIpaIIy
Ior proIIt;
2. MutuaI savIngs bank not havIng a
capItaI stock represented by shares,
and cooperatIve bank wIthout capItaI
stock organIzed and operated Ior
mutuaI purpose and wIthout proIIt;
3. a beneIIcIary socIety, order or
assocIatIon, operatIng Ior the
excIusIve beneIIt oI the members
such as IraternaI organIzatIon
operatIng under Iodge system. (Iodge
system: operatIng worId wIde) or a
mutuaI oId assocIatIon or a nonstock
corporatIon:
a. organIzed by empIoyees;
b. provIdIng Ior the payment oI IIIe,
sIckness, accIdent or other excIusIve
beneIIts to Its empIoyees and theIr
dependents;
4. Cemetery (a) company owned and (b)
operated excIusIveIy Ior the beneIIt oI
Its members;
5. Nonstock corporatIon or assocIatIon
organIzed and operated excIusIveIy
Ior ReIIgIous, CharItabIe, ScIentIIIc,
ArtIstIc or CuIturaI purposes, or Ior
the RehabIIItatIon oI Veterans
(RCSACR), no part oI Its net Income or
asset shaII beIong ot or Inure to the
beneIIt oI any member, organIzer,
oIIIcer, or any specIIIc person;
6. 8usIness Ieague, chamber oI
commerce, or 8oard oI trade, (a) not
organIzed Ior proIIt and (b) no part oI
the net Income oI whIch Inures to the
beneIIt oI any stock hoIder or
IndIvIduaI;
7. CIvII Ieague or organIzatIon not
organIzed Ior proIIt but operated
excIusIveIy Ior the promotIon oI socIaI
weIIare.

CIR vs. YMCA
MJ What Is the basIs oI ManIIa 8R Ior the
ImposItIon oI the taxZ
&J Iast paragraph oI SectIon 30, because
YMCA was conductIng an actIvIty Ior
proIIt.
F: the CTA and the CA Invoked the doctrIne
IaId down In Herrera and Abra VaIIey case
whIch InvoIves an exemptIon Irom the
payment oI ReaI property Tax.
H: The SC revIsed the ruIIng. YMCVA Is
IIabIe to pay Income tax appIyIng the Iast
paragraph oI SectIon 30.
YMCA s exempt Irom the payment oI
property tax, but not to Income tax on
rentaIs Irom Its property.
The tax code specIIIcaIIy mandates
that the Income oI exempt organIzatIons
(under sectIon 30) Irom any oI theIr
propertIes, reaI or personaI, shaII be
subject to tax, IncIudIng the rent Income
oI the YMCA Irom Its reaI prop.

8. a nonstock and non proIIt educatIonaI
InstItutIon;
9. govt educational institution;
10. Farmers or other mutual typhoon or
IIre Insurance company, mutuaI dItch
or IrrIgatIon company, or IIke
organIzatIon oI a pureIy IocaI
character, the Income oI whIch
consIsts soIeIy oI assessment, dues
and Iees, coIIected Irom members Ior
the soIe purpose oI meetIng Its
expenses;
11. Farmers, fruit growers or like
assocIatIon organIzed and operated
as a saIes agent Ior the purpose oI
marketIng the products oI Its
members and turnIng back to them
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%+
the proceeds oI saIes, Iess the
necessary seIIIng expenses on the
basIs oI the quantIty oI produce
IInIshed by them.

TAKE NOTE: Income oI saIes agent Is exempt.

L;5>4<8 ZXJ *&+&1.$ ,-!"N$

!Y&6*$% #,J !"N6E*&*,"- ") '%"LL
,-!"N$

L$!*,"- ZTJ '%"LL ,-!"N$

MJ What Is the tax treatmentZ Are these
taxabIe IncomeZ Are these IncIuded In the
gross IncomeZ s It IncIuded In the TRZ s It
subject to NTZ
&J Sec. 32 A answers the questIons.

MJ What Is the Income tax reIerred to hereZ
&J NT. The sectIon reIers onIy to the
payment oI NT. t speaks oI the NT.

MJ I the Is mentIoned under SectIon 32 A,
does It IoIIow that It Is automatIcaIIy IncIuded
In the CTZ
&J No, Section 32 A states Except when
otherwise provided in this title

MJ What are the Income that are not
IncIuded, not subject to NTZ
&J
1. ncome that are subject to FT.
2. ncome that are consIdered an
excIusIon; and
3. ncome that are exempt.

MJ When do you not appIy Sec. 32 AZ
&J It appIIes to aII except:
1. NRANET8
2. NRFC
they do not pay NT, they pay by way oI
CT.

MJ What are IncIuded In the Cross IncomeZ
&J
YQ ComensnIon jor servces n whnIever
jorm nd ncIudng buI nor ImIed Io
jees, snInres, wnges, commssons, nnd
smInr Iems. ]5ec. 32 A (1)]

MJ What Is compensatIonZ
&J aII remuneratIon Ior servIces perIormed
by an empIoyee Ior hIs empIoyer under an
empIoyerempIoyee reIatIonshIp.

TAKE NOTE: compensatIon Is IncIuded In the
TR II the taxpayer Is not IIabIe Ior NT. Thus,
II subject to NT, IncIuded In the TR.

MJ s there an Instance where the saIarIes oI
a RC Is not IncIuded In the TRZ
&J Yes, II the saIary Is subject to FT, IIke
when the RC Is empIoyed In MuItInatIonaI,
oIIshore bankIng, and petroIeum companIes.

VQ Cross Income derved jrom Ihe
conducI oj Irnde or busness or Ihe
exercse oj n rojesson; ]5ec. 32 A (2)]

MJ What Is the Income tax hereZ
&J NT, IncIuded In the TR.

ZQ Cnns derved jrom denIngs n
roerIy. ]5ec. 32 A (3)]

MJ DId the Iaw dIstInguIshedZ
&J No, the Iaw dId not dIstInguIshed between
reaI and personaI property.

TAKE NOTE:
1. SaIe oI reaI property
2. SaIe oI shares oI stock (personaI prop.)

II the eIements are present, subject to
FT. Thus, It Is not IncIuded In the TR, the
wIthhoIdIng agent wIII be responsIbIe Ior thIs.

MJ ncome Iorm the saIe oI property, do you
IncIude thIs In the TRZ
&J It depends
a. II subject to FT, not IncIuded.
WIthhoIdIng agent accompIIsh the Iorms
subject to FT II the IoIIowIng eIements
are present:
1. It Is a capItaI asset;
2. Iocated In the PhII.: and
3. soId by IndIvIduaI, trust, estate, DC.
b. II subject to NT, IncIuded In the TR.
EIements are not present, IIke when
the reaI prop. Is an ordInary asset or when It
Is capItaI asset II the taxpayer Is RFC.

TAKE NOTE: RR 172003
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%!

ReaI property saIe subject to FWT, the
buyer accompIIshes the TR.

WQ nIeresI; ]5ec. 32 A (4)]

MJ What Interest Is beIng reIerred to hereZ
&J Interest whIch Is IncIuded In the
computatIon oI gross Income Is Interest
earned Irom IendIng money and Interest Irom
bank deposIt whIch does not constItute
passIve Income.
8ank Interest Irom sources, wIthout or
abroad.

MJ 8ank Interest Irom SoIId 8ank, Is It
IncIuded In the TRZ
&J No, because It Is IncIuded or consIdered
an Income wIthIn, thus subject to FT. Thus,
not IncIuded In the TR.

[Q RenIs. ]5ec. 32 A (5)]

subject to NT, IncIuded In the TR.

_Q RoyaItIes; [Sec. 32 A (6)]

MJ What Is beIng reIerred to hereZ
&J royaItIes whIch does not constItute
passIve Income. RoyaItIes derIved Irom
Income wIthout. subject to NT. Thus not
IncIuded In the TR.

MJ Who are the taxpayersZ
&J LIabIe Irom Income wJIn and wJout and
the rest are exempt.
1. RC
2. DC

XQ Dvdends. ]5ec. 32 A (7)]

MJ What kInd oI dIvIdendsZ
&J one that does not constItute a passIve
Income.

TAKE NOTE:
1. DC IndIvIduaI taxpayer = FT
2. DC DC & RFC = EXEMPT
3. DC NRFC = FWT

onIy dIvIdends Issued by a FC to an
IndIvIduaI taxpayer (RC OR RA) Is IncIuded In
the computatIon oI the gross Income. Thus,
IncIuded In the TR.

\Q AnnuIes. ]5ec. 32 A ()]

MJ What kInd oI annuItIesZ
&J annuItIes whIch are not exempt Irom tax
are IncIuded In the computatIon oI the gross
Income. (IncIuded In the TR)

9. Frzes nnd Wnnngs ]5ec. 32 A (9)]

MJ What kInd oI prIzes and wInnIngsZ
&J
a. those that does not constItute passIve
Income; and
b. those that are not consIdered as an
excIusIon. Thus, exempt.

%,))0N# P1('4#

1. PrIzes derIved Irom sources wIthIn
and over 10,000.00
2. WInnIngs derIved Irom sources
wIthIn.

Exempt:
a. wInnIngs: PCSO and Lotto wInnIngs.
b. prIzes:

those prImarIIy Ior recognItIon oI
(1)reIIgIous, (2)charItabIe, (3)scIentIIIc,
(4)educatIonaI, (5)artIstIc, (6)IIterary, (7)cIvIc
achIevement are exempt PROVDED:
1. the recIpIent was seIected wIthout any
actIon on hIs part to enter the contest
or proceedIngs; and
2. the recIpIent Is not requIred to render
substantIaI Iuture servIces as a
condItIon to receIvIng the prIze or
award.

prIzes and awards granted to athIetes are
aIso exempted provIded:
1. IocaI or InternatIonaI sports
competItIon or tournament;
2. heId In the PhIIIppInes or abroad; and
3. sanctIoned by the natIonaI sports
assocIatIon.

MJ When Is a prIze subject to NTZ
&J 1. when derIved Irom Income wIthout;
2. when Iess than 10,000.00;
3. when the Income earner Is a DC or RC.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%#
MJ When Is wInnIng subject to NTZ
&J 1. When derIved Irom Income wIthout;
2. when the Income earner Is a DC or
RC.

Y`Q Fensons ]5ec. 32 A (1)]

MJ What kInd oI pensIonZ
&J ncIuded In the gross Income II not
exempt
never subject to IIt (Z)
YYQ Partners dsIrbuIve shnre jrom Ihe
neI ncome oj Ihe genernI rojessonnI
nrInersh (CFF).

MJ What Is beIng reIerred toZ
&J CPP exempt Irom payment oI corporate
Income tax

shares oI partners subject to NT Sec.
26

L$! ZT 1 $+!.EL,"-L )%"N '%"LL
,-!"N$

MJ What do you mean by excIusIonsZ Are
these exempt Irom Income taxZ
&J these are not IncIuded In the gross
Income, THUS, exempt.

TAKE NOTE: ExemptIons, excIusIons,
deductIons, have the same characterIstIcs
aII tax do not appIy.

YQ R05# 01)"&,1(# a?#(Q ZY F AYBb

&J onIy one requIrement Ior exemptIon: that
the proceeds oI the IIIe Insurance be payabIe
upon the death oI the Insured.

MJ Does It matter who the beneIIcIary Is or
paId In a Iump sun or sIngIe sumZ
&J No. It does not matter.

ExceptIon: amounts heId by the Insurer under
an agreement to pay Interest thereon, the
Interest payment shaII be IncIuded In the
gross Income.

VQ E4'"1/ &#(#0N#3 >= 01)"&#3 ,)
&#/"&1 '5 :&#40"4 a?#(Q ZV F AVBb

MJ II the Insurance Is payabIe wIthIn a certaIn
tIme, say 10 years and thereaIter the Insured
dId not dIe, how much wIII be excIudedZ
&J onIy the amount receIved by the Insured
as a return oI the premIums.

Ex. 1 M 100 thousand = capItaI
t Is exempt (100K)

900K Is taxabIe.

MJ Why Is It excIudedZ
&J because the amount receIved mereIy
represents a return oI capItaI.

MJ Is thIs subject to Estate Tax under Sec. 85
EZ do we have the same requIrementZ
&J no, the requIrement Ior exemptIon Is not
the same under SectIon 85 E.

ZQ %&'(##3) '5 +05# 01)"&,1(#O 3#(#3#1/
01)"&#3 K04)#+5] 01(+")0'1 '& #<(+")0'1
c0++ 3#:#13 '1 cK' /K# >#1#50(0,&= 0)Q

a. the beneIIcIary Is the estate.
subject to Estate tax, IncIuded In the
gross estate regardIess oI whether or not
the desIgnatIon oI the beneIIcIary Is
revocabIe or IrrevocabIe.
b. the beneIIcIary Is a thIrd person other than
the estate.
b.1 RevocabIe DesIgnatIon subject to
estate tax, IncIuded In the gross estate.
Reason: because of the insureds power
to modIIy or change the beneIIcIary.
b.2 rrevocabIe DesIgnatIon not subject
to Estate tax, not IncIuded In the gross
estate.
Reason: the Insured Ioses the power to
controI, modIIy and change the
beneIIcIary.

MJ s It subject to VATZ
&J 1. NonIIIe Insurance yes, subject to
VAT under 108 (A).
2. LIIe Insurance NO, subject to
percentage tax under Sec. 123 oI the Tax
Code.

WQ T05/)] F#."#)/ ,13 !#N0)#) a?#(Q ZV
F AZBb

MJ Why Is the donee exempt Irom Income
taxZ
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%$
&J 8ecause the Iaw cIassIIy It as an
excIusIon, not Important to know whether
property Is reaI or personaI.
What is exempted is the value of
property acquired by gift, bequest or devise

TAKE NOTE:
A. CFTS are excIuded because they are
subject to donors tax.
8. 8EQUEST and DEVSE are excIuded
because they are subject to ESTATE tax.

MJ what Is IncIuded In the gross IncomeZ
&J Income Irom such property.

gIIt, bequest, devIse or descent oI Income
Irom any property In case oI transIers oI
dIvIded Interest.

[Q *'4:#1),/0'1 5'& 01d"&0#) '&
)0(L1#)) a?#(Q ZV F AWBb

MJ Is thIs the same as those provIded under
the workmens compensation act (wca)?
&J YES. There are 3 groups:
a. HeaIth or accIdent Insurance or those
under workmens compensation.
b. personaI InjurIes and sIckness; and
c. Damages to prevent InjurIes and
sIckness.

MJ What does Injury IncIudeZ
&J The term Injury IncIudes death, even II
not Injured, II the person dIes thIs wIII be
avaIIabIe.

MJ when wIII the damages recovered be
exemptZ
&J CeneraI RuIe: aII damages awarded are
tax exempt.
ExceptIon: damages representIng Ioss oI
Income.

MJ Why Is It consIdered an excIusIonZ
&J because thIs Is just an IndemnIIIcatIon Ior
the InjurIes or damages suIIered.

_Q P1('4# #<#4:/ "13#& , /&#,/= a?#(Q
ZV F A[Bb

MJ What Is excIudedZ
&J Income oI any kInd requIred by treaty
bIndIng upon the PhII. Covernment.

XQ 6#/0&#4#1/ >#1#50/)] :#1)0'1)]
7&,/"0/0#) a?#(Q ZV F A_Bb

MJ Why do we need to dIstInguIsh retIrement
pay, separatIon pay and termInaI Ieave payZ
&J because they have dIIIerent requIrements
Ior exemptIon.

MJ What Is retIrement payZ
&J the sum oI money receIved upon reachIng
the maxImum age oI empIoyment.

a. Under RA4917 (wIth RetIrement PIan)
1. the prIvate beneIIt pIan Is approved
by the 8R (RR298);
2. the retIrIng oIIIcIaI or empIoyee has
been In the servIce oI the same
empIoyer Ior the Iast 10 years;
3. he Is at Ieast 50 years oId at the tIme
oI retIrement; and
4. the oIIIcIaI or empIoyee avaIIs
hImseIIJherseII oI the beneIIt onIy
once.

b. Under RA7641 (wIthout retIrement pIan)
1. the retIrIng oIIIcIaI empIoyee Is at
Ieast 60 years oId but not more than
65 years oId;
2. the empIoyee or oIIIcIaI must have
served the company Ior at Ieast 5
years;
entItIed to 15 days saIary and Z oI the
13th month pay Ior every year oI servIce.

TAKE NOTE: the retIrement beneIIts under
RA4917 and RA7641 are exempt Irom
Income tax provIded the requIrements are
present.

L$!0 ZT 1R`SR5S

retIrement beneIIts gIven by IoreIgn
government, IoreIgn corporatIon, pubIIc as
weII as prIvate to RC, NRC, RA resIdIng
permanentIy In the PhIIIppInes exempt
wIthout Iurther quaIIIIcatIons automatIc
excIusIons.

L$!0 ZT 1R`SRD];]=S

retIrement beneIIts gIven by the
Philippine Govt through the GSIS, SSS and
PVAO are exempt wIthout Iurther
quaIIIIcatIons = automatIc excIusIons.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%%

August 21, 2006.
mIdterms 68 pm untII sec 32 8(6) NRC.

August 28, 2006.

ANSWERS = MDTERMS

Cross ncome IncIude both capItaI and
ordInary gaIns, Sec. 31 says gross Income
deductIons, that whIch Is ordInary Ioss.
may be deducted Irom capItaI gaIns and
ordInary gaIns.

MJ What Is separatIon payZ
&J on gIven when one Is termInated Irom the
servIce because oI (1) IIIness, (2)death, (3)
physIcaI IncapacIty or Injury, or (4) causes
beyond the controI oI the empIoyee.

MJ Are there any requIrement Ior separatIon
pay granted by foreign govt or corp?
&J None, the separatIon pay granted by the
aIorementIoned InstItutIons are exempt
without further qualifications (other similar
benefits).

MJ Is separatIon pay an excIusIon, thereIore,
exemptZ
&J No.
CENERAL RULE: SeparatIon pay not
exempt (Z)
ExceptIon:
1. AutomatIc excIusIons, thus exempt II due
to:
a. IIIness
b. death
c. physIcaI IncapacIty or Injury.

2. CondItIonaI excIusIon
a. causes beyond the controI oI the
empIoyee excIuded
b. within employees control IncIuded.

ExampIes:
1. regIstratIon C8A provIdes separatIon
pay, wIthIn the controI = IncIuded.
2. InstaIIatIon oI Iabor savIng devIses or
bankruptcy beyond the controI =
excIuded.

MJ What Is termInaI Ieave payZ
&J the accumuIated vacatIon Ieave and sIck
Ieave beneIIts converted to cash or money to
be gIven eIther every year or upon retIrement
or separatIon.

TermInaI Leave Pay granted upon retIrement
or separatIon:
uder PD220, TLP in the Govt or in the
PrIvate Sector shaII be exempt Irom
Income tax II gIven or granted upon
retIrement or separatIon.
TLP granted on a yearIy basIs:
1. empIoyee In the prIvate sector:
a. accumuIated sIck Ieave subject
to Income tax.
b. AccumuIated vacatIon Ieave: II
more than 10 days (meanIng 11
pataas) subject to Income tax;
I 10 days or Iess exempt.
2. Govt Employee:
governIng Iaw: EO 291 oI Pres. Estrada,
RMC 162000.

RuIe: Govt workers (both oIIIcers or non
oIIIcers) granted TLP on a yearIy basIs
exempt Irom Income tax.
there Is no quaIIIIcatIon as to vacatIon or
sIck Ieave.

Take Note oI 3 cases.
be remInded oI EO 291, Sec. 2. 78.2
par. 97, RR298, RR16200 (3).

Cnse oj ZnIcIn
retIred Irom DO], contentIon: TLP shouId
be exempt Irom Income tax pursuant to the
oId Iaw.
SC: on a dIIIerent ground TLP Is exempt
because It Is sImIIar to RetIrement pay, thus
exempt but the rulings application is limited
onIy to DO] empIoyees.

orromeo cnse:
Same as the ZIaIcIta case
ssues: WON the TLP Is subject to Income tax
and WON COLA and RATA are IncIudedZ
SC: RULED TLP Is Exempt!
ModIIIed: the ruIe appIIes not onIy to DO]
oIIIcers but aIso to CSC commIssIoners.

COMMI55IONR v. CA5TADA
Castaeda DFA oIIIcer In PhII. Embassy In
EngIand.
1. TLP Is exempt.
2. RuIIng appIIes to DFA oIIIcers.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%&
MJ Does the rule or decision applies to Govt
oIIIcIaIs onIyZ
&J No. PD220: ExemptIon appIIes to both
prIvate and pubIIc sectors(Z)
It does not matter II TLP Is vacatIon or
sIck Ieave.

RR298, Sec. 2.78.1 par. (a)(7)
]AN, 1998 the ruIe appIIes to both
prIvate and pubIIc sectors.

EO291 (SEPT., 2000)
Officer in govt receiving TLP is always
exempt whether or not vacatIon or sIck Ieave
Is granted.

ModIIIed RR298:
TLP wIII onIy appIy to prIvate sectors
II granted on a yearIy basIs may be
subject to tax: VACATON LEAVE
1. MORE THAN 10 DAYS = TAXA8LE
2. LESS THAN 10 DAYS = EXEMPT

\Q I0)(#++,1#'") 0/#4) A?#(Q ZV F AXB
(a) income derived by foreign Govt
a?#(Q ZV F AXB A,Bb

MJ What kInd oI IncomeZ
&J
1. Investments In:
a. Ioans
b. stocks
c. bonds
d. other domestIc securItIes
2. Interest Irom deposIts In 8anks In the
PhIIIppInes.

MJ Who are Income earnersZ
&J
1. IoreIgn government
2. IInancIng InstItutIons owned,
controIIed or enjoyIng reIInancIng
Irom IoreIgn govts; and
3. intl or regional financial institutions
established by foreign govts
(estabIIshed In the PhIIIppInes)

TAKE NOTE: II pIaIn IoreIgn corp., subject to
FT 20Z.

EXAMPLES oI excIusIons:
a. Brunei Govt earns interest by depositing
money In MakatI 8ank ExcIusIon.
b. SMC Stock dividends to 3. Brunei Govt.
excIusIon
c. Income derived by the Govt or its
poIItIcaI subdIvIsIons (Sec. 32 8 (7) (b)
a. exercIse oI pubIIc utIIIty
b. exercise of any essential govt
IunctIon.
accruIng to the govt.
d prIzes and awards (Sec. 32 8 7 c)
prImarIIy Ior reIIgIous, charItabIe,
scIentIIIc, educatIonaI, artIstIc, IIterary or
cIvIc achIevements:
1. recIpIent was seIected wIthout any
actIon on hIs part to enter the contest
or proceedIngs;
2. the recIpIent was not requIred to
render substantIaI Iuture servIces as a
condItIon to receIve the prIze or
award.

D. prIzes and awards In sports (Sec. 328 7 d)
1. granted to athIetes;
2. local or intl competitions;
3. heId here or abroad;
4. sanctIoned by the natl sports associations.

E. 13
th
month pay and other beneIIts (Sec.
328 7 e)

MJ Do you IncIude ChrIstmas bonus In your
TRZ
&J No, because the Iaw says 13
th
month pay
and other benefits/similar benefits xmas
bonus Is IncIuded In the category.

MJ Who can Increase the 30,000 IImItZ
&J The Sec. oI FInance.

MJ AppIIcabIe to whomZ
&J
1. govt; and
2. PrIvate InstItutIons.

F. CSS, SSS, MedIcare and other contrIbutIons
(Sec. 32 8 7 I)
must be deducted Irom the C not NT
because It Is an excIusIon.
credItabIe wIthhoIdIng tax Is an excIusIon
must be deducted IIrst Irom the C beIore
you compute the NT. OtherwIse, you are
IncIudIng In the C somethIng that Is
excIuded Irom the same.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%'
C. CaIns Irom the SaIe oI bonds, debentures,
or other CertIIIcate oI Indebtedness. (Sec. 32
8 7 g)

MJ Why 5 yearsZ
&J certIIIcate oI Indebtedness Is sImIIar to
8ank nterest In a Iong term deposIt.

Sec. 32 8 7 g Is sImIIar or the same as 24 8
In Iong term deposIt.

H. CaIns Irom redemptIon oI shares In
mutuaI Iund (Sec. 32 8 7 h)

1. FIscaI Year means an accountIng perIod
oI 12 months endIng on the Iast day oI any
month other than December.

2. CaIendar year a perIod oI 12 months
begInnIng on ]anuary and endIng on
December.

MJ 8usIness expense Incurred In February
2006, Is It possIbIe to IncIude It Ior AprII
2006Z
&J yes, It Is possIbIe or It Is possIbIe II IIscaI
year Is empIoyed, II It IaIIs under the IIscaI
year and aII the eIements are present.

reIated to trade or busIness.
REASON: CapItaI Ioss has no connectIon to
the trade or busIness.

TAKE NOTE:
Ior taxpayers IIabIe Ior Income wIthIn and
wIthout (RC & DC)), they can cIaIm
deductIon Ior expenses Incurred wIthIn
and wIthout.
Ior taxpayers who are IIabIe onIy Ior
Income wIthIn, they can cIaIm a deductIon
Ior expenses Incurred wIthIn the
PhIIIppInes.

Sec. 34 A EXPENSES

1. For those busIness expenses not
enumerated under A. You need to prove that
It Is an ordInary and necessary expense.

2. For those enumerated under A, aII you
have to prove Is that It Is Incurred durIng the
taxabIe year.

Feb. 12, 2007 (Sec. 34 A, Expenses)

MJ DId the Iaw deIIne what Is reasonabIeZ
&J No. Ior saIarIes and wages aII that Is
requIred by Iaw Is Ior It to be reasonabIe.

Ior other Iorms oI compensatIon, there
must be servIces actuaIIy rendered.

ETMP8R!C *,)#

F: InvoIves a corporatIon engaged In seIIIng
IIsh nets, and the corporatIon have a Iand
soId through a broker.
there was substantIaI proIIts gaIned Irom
the saIe oI a Iand whIch was soId by a broker.
The proIIt was In turn gIven to the workers as
specIaI bonus.
the corporatIon cIaImed the bonus as a
deductIon.

SSUE: ShouId the deductIon be aIIowedZ

H: The SC dId not aIIow the deductIon, Ior
other Iorms oI compensatIon, It must be
made or gIven Ior servIces actuaIIy rendered.

In thIs case, It was proven that the saIe was
not made by the empIoyees, no eIIort or
servIces actuaIIy rendered by them because
the saIe was made through a broker.

MJ ReasonabIe TraveI Expenses, What Is the
requIrementZ
&J
1. TraveI must be In pursuIt oI busIness,
trade or proIessIon.
2. TraveI expense whIIe away Irom home.

MJ s there a traveI expense whIch was not In
pursuIt oI busInessZ
&J yes, those whIch are consIdered as IrInge
beneIIts (F8), expenses Ior IoreIgn traveI Is
consIdered a F8 onIy II It Is not In pursuIt oI
the trade or busIness.

MJ can you cIaIm It under Sec. 34 A (1)(a)(II)Z
&J No, you can cIaIm It under Sec. 34 A
(1)(a)(I) Iast paragraph.

MJ ReasonabIe AIIowances Ior rentaIs Ior
meraIco bIIIs, requIrementsZ
&J
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%(
1. requIred as a condItIon Ior the
contInued use or possessIon, Ior the
purpose oI the trade, busIness or
possessIon oI the property.
2. taxpayer has not taken any tItIe or no
equIty other than a Iessor.

MJ ReasonabIe aIIowance Ior entertaInment,
amusement and recreatIon expenses, what Is
the requIrementZ
&J
1. connected wIth the deveIopment,
management, and operatIon oI the trade
(DOM);
2. Does not exceed the IImIts or ceIIIng
set by the Secretary oI FInance; and
3. Not contrary to Iaw, moraIs, good
customs, pubIIc poIIcy or pubIIc order.

MJ How about brIbe, kIckbacks, and other
sImIIar payments
&J even wIthout thIs provIsIons, kIckbacks wIII
not pass the requIrement oI (I) ordInary and
(II) necessary hence not deductIbIe

$+6$-L$L &.."/&1.$ *" 6%,#&*$
$CE!&*,"-&. ,-L*,*E*,"-

MJ Why onIy prIvate educatIonaI InstItutIon Is
mentIoned and no other taxpayersZ
&J It reIers to sectIon 27 Ior PrIvate
EducatIonaI nstItutIon gIven to the
educatIonaI InstItutIon.

CENERAL RULE: 36 A (2) and 36 A (3)
expendItures Ior capItaI outIays not
deductIbIe as busIness expense

EXCEPTON: PrIvate Educ. nstItutIon can
cIaIm It under Sec. 34 A (2)

1EL,-$LL $+6$-L$ G30 &.."/&-!$ )"%
C$6%$!,&*,"-

8USNESS EXPENSE
1. No carryover
2. can be cIaImed Ior one year onIy.
3. II the amount oI capItaI outIay Is
substantIaI, It cannot accommodate aII oI the
expenses Incurred.

&.."/&-!$ )"% C$6%$!,&*,"-
1. There Is carry over
2. you can cIaIm It Ior a Ionger perIod
dependIng on the IIIe span oI the property.
3. It can accommodate aII oI the expenses
Incurred.

taxpayers allowable deductIon Ior
Interest expense shaII be deducted by an
amount equaI to 42Z (RR 102000) oI the
Interest Income subject to FT.

MJ Who cIaIms thIs deductIonZ
&J the debtor cIaIms thIs deductIon.

MJ What kInd oI Interest Is thIsZ
&J Interest on Ioan.

Interest on debt when one borrows money
to IInance hIs busIness Interest In connectIon
with the taxpayers profession trade or
busIness.

REDSCOUNTNC OF PAPERS : (Sec. 34 8 2 a)

a borrower or taxpayer can cIaIm the
Interest paId In advance as ItemIzed
deductIon when he IIIed hIs Income tax
return (TR) dependIng on whether or not the
prIncIpaI obIIgatIon has been paId.

1. II the entIre amount or entIre prIncIpaI
obIIgatIon has been paId the entIre amount
oI Interest can be cIaImed as ItemIzed
deductIon.

2. II onIy Z oI the obIIgatIon had been paId,
then the entIre amount oI Z oI that Interest
can be cIaImed as a deductIon.

3. II no payment had been paId on the
prIncIpaI obIIgatIon, the advance Interest paId
cannot be cIaImed as a deductIon on the
years that It was paId.

REQUREMENTS FOR REDSCOUNTNC OF
PAPERS:

1. Incurred wIthIn the taxabIe year.
2. IndIvIduaI taxpayer reportIng Income on a
cash basIs.

No deductIon shaII be aIIowed In respect
to the IoIIowIng Interest:

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%)
1. II wIthIn the taxabIe year an IndIvIduaI
taxpayer reportIng Income on the cash basIs
Incurs an Indebtedness on whIch an Interest
Is paId In advance or through dIscount or
otherwIse.

2. II both taxpayer and the person to whom
the payments has been made or Is to be
made are persons specIIIed under Sec. 36 (8):
a. member oI a IamIIy
b. bet. an IndIvIduaI and a corp., more than
50Z In advance oI the outstandIng stock oI
whIch Is owned dIrectIy or IndIrectIy by or Ior
such IndIvIduaI;
c. 8et. 2 corp., more than 50Z In vaIue oI the
outstandIng stock oI each oI whIch Is owned,
dIrectIy or IndIrectIy, by or Ior the same
IndIvIduaI.
d. bet. the grantor and a IIducIary oI any
trust;
e. bet. the IIducIary oI a trust and the
IIducIary oI another trust II the same person
Is a grantor wIth respect to each trust; or
I. bet. a IIducIary oI trust and a beneIIcIary oI
such trust.

MJ Who are not aIIowed to cIaIm Interest
under sec 36 8Z
&J Interest Incurred between reIated partIes.

MJ What II haIIbrotherZ
&J not aIIowed to cIaIm deductIon Ior Interest.

TAKE NOTE: Interest Incurred Irom the
expIoratIon oI petroIeum reIers not just In
Interest Incurred on Ioan oI money but aIso
Interest Incurred Ior InstaIIment payments.

MJ Who are reIated partIesZ
&J IndIvIduaIs and corporatIons.

OPTONAL TREATMENT OF NTEREST
EXPENSE:
1. Interest Incurred to acquIre property used
In trade, busIness or exercIse oI proIessIon
can be claimed a an itemize deduction
a. on Interest; or
b. deprecIatIon (as capItaI expendItureZ)

MJ What Is thIs Interest IncomeZ
&J the money borrowed was deposIted In a
bank so that It wIII warn Interest. (RR13
2000)

LLUSTRATON:
1. Ioan oI 1M Irom a bank wIth an Interest oI
20Z
2. 20Z oI 1M Is Php200,000 but you cannot
cIaIm thIs whoIe amount as a deductIon.
3. when you deposIted the 1M In the bank, It
earned a bank Interest subject to FT worth
Php10,000.00.
4. 42Z (RR) oI 10,000 = 4,200 (RR 9337)
5. Php200K4,200= Php195,800J thIs Is the
amount you can cIaIm as a deductIon.

ZU ! *&+$LJ

REQUSTES:
1. taxes must paId or Incurred wIthIn the
taxabIe year
2. It must be Incurred In connectIon wIth
trade or busIness.
3. can be cIaImed as:
a. a deductIon; or 34 C 1&2
b. tax credIt 34 C 3&7

MJ Where shouId It be deductedZ
&J
1. II cIaImed as a deductIon, It shouId be
deducted Irom the gross Income;
2. II cIaImed as a tax credIt, It shouId be
deducted Irom the Net ncome Tax due
(bottom oI the IormuIa)

I-6*M6e !6MT *E?-
DIscount oI senIor cItIzens
SC: dIscount cIaImed by senIor cItIzens shaII
create a tax credIt and must be deducted at
the bottom oI the IormuIa.

MJ What Is a tax deductIonZ ExampIeZ
&J exampIe Is busIness tax.
tax deductIon Is aIIowed II the taxes were
paId or Incurred wIthIn the taxabIe year and It
must be connected to the trade, busIness or
proIessIon oI the tax payer.

MJ Who are entItIed to cIaIm ItZ
&J those IIabIe to pay NT. (Tax credIt onIy Ior
NT)

MJ What Is a tax credItZ
&J refers to the taxpayers right to deduct
Irom the Income tax due the amount oI
tax the taxpayer paId to IoreIgn country,
subject to IImItatIons.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

%*

MJ What Is the tax credIt beIng reIerred to
under 34 C (3)Z
&J credIt agaInst taxes Ior taxes oI IoreIgn
country.

MJ What are the other tax credIt under the
codeZ
&J
1. RA 6452 seIIIng goods and commodItIes
to senIor cItIzens, the dIscount cIaImed Is
treated as a tax credIt.
2. Income tax paId to IoreIgn country.
3. nput tax on Vat
4. CredItabIe wJhoIdIng tax system under NT
5. Tax credIt certIIIcate.

Q: Who are aIIowed to cIaIm ItZ
A: RC and DC onIy.

MJ suppose you paId the 100K NT to US, can
you cIaIm as a deductIon the whoIe 100KZ
what Is the IormuIaZ

same procedure Ior (1) Income tax paId to
IoreIgn country; (2) estate tax paId to IoreIgn
country; and (3) Donors tax paid to foreign
country.

&J )<7@?:2J
STEP 1

C Irom sources wJIn
NT:
C Irom entIre worId

STEP 2

QuotIent x RATE = amount wJc can be
cIaImed as a deductIon

&J you cannot cIaIm the whoIe 100K, you can
onIy cIaIm the product oI the quotIent tImes
the rate

TAKE NOTE: deduct at the bottom oI the
IormuIa ( sa computatIon ng C)

MJ Suppose you are a RC, you pay NT to US,
wIII you be abIe to cIaIm It as a tax
deductIonZ

&J 1. generaIIy, you can cIaIm It as tax credIt.
2. you can cIaIm under Sec. 34 C (1) b

II the taxpayer dId not sIgnIIy In hIs return
hIs IntentIon to avaII hImseII oI the beneIIt oI
tax credIt Ior taxes paId to IoreIgn country.
taxes Incurred not reIated to the trade or
busIness, you have the optIon to:
a. cIaIm It as tax credIt; or
b. cIaIm It as a deductIon
Iaw gIves you thIs prIvIIege.

MJ When Is taxes not aIIowed as a deductIonZ
&J Sec. 34 C (1)
1. ncome tax;
2. ncome tax Imposed by authorIty oI
any IoreIgn country;
3. Estate and Donor tax; and
4. taxes assessed agaInst IocaI beneIIts oI
a kInd tendIng to Increase the vaIue oI
the property.

MJ Who are not aIIowed to cIaIm deductIonsZ
&J Under 34 C (3) NRC, NRA; and NJRFC

TAKE NOTE:
1. NRAE and NFC aIIowed deductIon onIy II
and to the extent that they are connected
wIth Income Irom sources wIthIn the PhIIs.
2. Taxes that had been aIIowed as deductIon
but are Iater In reIunded shouId be treated as
part oI the gross Income durIng the year that
It Is receIved (34 1 Iast paragraph)

MJ WhIch wouId you chooseZ Tax credIt or
deductIonZ
&J tax credIt because It Is deducted Irom the
taxabIe Income whIIe deductIons are
deducted Irom the C.

FORMULA: CDEDUCTON = NET NCOME x
RATE = TAXA8LE NET NCOME TAX CREDT)

ZU C ."LL$L

MJ s aIways a requIrement that It Is Incurred
In pursuIt oI trade, bus. or proIessIonZ
&J No. Sec. 34 D(1) provIdes Ior 2 kInds oI
Iosses:
a. Incurred In pursuIt oI trade, bus. or
proIessIon;
b. property connected wIth t,b,p, II the
Ioss arIses Irom IIre, storms, shIpwrecks
or other casuaItIes or Irom robbery, theIt
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&+
or embezzIement (arIsIng Irom naturaI
caIamIty).

&J
1. Loss actuaIIy sustaIned durIng the
taxabIe year
2. Not compensated Ior by Insurance or
other Iorms oI IndemnIty.
3. Not cIaImed as a deductIon Ior estate
tax purposes.

MJ ThIs Is your ItemIzed deductIon whIch can
be cIaImed as a deductIon IromZ
&J Cross Income

TAKE NOTE:
The ItemIzed deductIon oI Iosses,
however, Is not conIIned to sectIon 348. It Is
aIso Iound under sectIon 86A (1) (e) whIch
aIso pertaIns to deductIons avaIIabIe under
the estate tax Iaw.
Losses wIthIn sIx (6) months aIter the death
oI the decedent can be cIaImed as ItemIzed
deductIon oI Iosses under SectIon 348.
However, may be cIaImed as deductIon under
estate tax return provIded that the same are
not cIaImed as ItemIzed deductIon oI Iosses
under SectIon 348.

MJ How many carryovers do we have under
the CodeZ
&J 3. NameIy:
1. SectIon 27 E (32) Carry Iorward oI
excess mInImum Tax
2. SectIon 39 D Net CapItaI Loss Carry
over
3. SectIon 39 D 3 Net OperatIng Loss
CarryOver.

P,-CL ") ."LL$L &-C *Y$,% !&%%QO
"#$%LJ

EQ C6!P8E6e RC?? 8CR*C ( #3 nbove)

MJ Why Is there a need Ior a carry over under
Sec. 34 D # when you can cIaIm the Ioss Irom
both capItaI and ordInary IossZ
&J II the Ioss exceeds the Income Ior the
taxabIe year, you cannot deduct the entIre
amount oI Ioss Irom your Income Ior that
year so the excess may be deducted Ior the
taxabIe year IoIIowIng the Ioss.

10 !&6,*&. ."LL -$* !&6,*&. ."LL
!&%%Q "#$% ( # 2 nbove)

8-; *E%P;ER RC??
*E66e9Cf-6
8-; C%-6E;P8T
RC?? *E66e9Cf-6

1. taxpayers Is an
IndIvIduaI onIy not
corporatIon.

2. InvoIves net capItaI
Ioss

3. carryover as Ioss
Irom saIe oI capItaI
asset In the next
succeedIng year

4. can onIy be
deducted Irom
capItaI gaIns.
1. taxpayer may be
an IndIvIduaI or
corp;

2. Iosses Incurred
or connected wIth T
or 8;

3. 8usIness Iosses
not prevIousIy oII
set as a deductIon
Irom the C carrIed
over as such Ior the
next 3 consecutIve
years;
4. can be deducted
Irom capItaI gaIns
andJor ordInary
gaIns.

-$* "6$%&*,-' ."LL !&%%Q
REQUREMENTS:
1.Net operatIng Ioss oI the busIness or
enterprIse Incurred wJIn the taxabIe year
2. not prevIousIy oIIset as a deductIon Irom
the C
3. carrIed over as a deductIon Irom the C Ior
the next 3 consecutIve taxabIe years
ImmedIateIy IoIIowIng the year oI such Ioss.

MJ Can the perIod be extendedZ
&J yes, Ior mInes other than oII and gas weII.
1. net operatIng Ioss wJout the beneIIt
IncentIves provIded by Iaw;
2. Incurred In any oI the IIrst 10 years oI
operatIon.
3. carrIed over as a deductIon Irom the C
Ior the next 5 years IoIIowIng such Ioss.
4. no substantIaI change In the ownershIp
oI the busIness or enterprIse.

MJ What Is the IImItZ
&J 75Z oI the nomInaI vaIue oI outstandIng
shares Is heId by or on behaII oI the same
personsJ corporatIon
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&!

IndIvIduaI no probIem, probIem IIes wIth
corporatIons or enterprIses.

A8ANDONMENT LOSSES

1. contract area where petroIeum operatIons
are undertaken Is partIaIIy or whoIIy
abandoned;
aII (1) accumuIated expIoratIon and (2)
deveIopment expendItures pertaInIng thereto
shaII be aIIowed as a deductIon.

2. a producIng weII Is subsequentIy
abandoned:
unamortIzed cost and undeprecIated cost
oI equIpment dIrectIy used thereIn shaII be
aIIowed as a deductIon In the years It was
abandoned.

TAKE NOTE:
1. II abandoned weII Is reentered and
productIon Is resumed; or
2. II equIpment or IacIIItIes are restored Into
servIce In the year oI resumptIon or
restoratIon and shaII amortIzed or
deprecIated.

MJ What Is the Tax beneIIt ruIeZ
&J Last Par. oI Sec. 34 E (1): recovery oI bad
debts prevIousIy aIIowed as deductIon In the
precedIng year shaII be IncIuded as part oI
the gross Income In the year oI recovery to
the extent oI the Income tax beneIIts oI saId
deductIon.

MJ What Is a 8ad DebtZ
&J 8ad debts shaII reIer to those debts
resuItIng Irom the worthIessness or
IncoIIectIbIIIty In whoIe or In part oI amounts
due the taxpayer by others, arIsIng Irom
money Ient or Irom uncoIIectIbIe amounts oI
Income Irom goods soId and servIces
rendered.

!Y,-& 1&-P #L0 !&
bad debts can onIy be cIaImed II pursuant
to a contract oI Ioan
no bad debts Ior Ioss oI Instruments.

MJ Who cIaIms ItZ
&J a. credItor
b.money Iender

MJ What year can It be cIaImedZ
&J can be cIaImed In the year It was actuaIIy
sIt ascertaIned to be worthIess and charged
oII, meanIng canceIIed In the books oI
account.

MJ Do you need to IIIe an actIon beIore you
can cIaImZ
&J No, aII you have to do Is prove that you dId
exert eIIort to cIaIm or recover the same.

MJ What cannot be deducted as bad debtsZ
&J
1. debts not Incurred In connectIon wIth
the trade, busIness and proIessIon oI
taxpayer.
2. transactIons, mered Into between
partIes mentIoned under SectIon 36 (8)
nameIy.
a) between members oI the IamIIy
b) between an IndIvIduaI who owns
more than 30Z oI outstandIng
capItaI stock oI a corporatIon and
that corporatIon
c) between two (2) corporatIons more
that 50Z oI the outstandIng capItaI
stock oI whIch Is owned by or Ior the
same IndIvIduaI
d) between a grantor and IIducIary oI
any trust
e) between two (2) IIducIarIes oI two (2)
trusts who has the same grantor
I) between a IIducIary oI a trust and
above IIducIary oI such trust

5CURITI5 COMINC WORTHL55
1. ascertaIned to be worthIess and
charged oII wIthIn the taxabIe year
2. capItaI asset
3. taxpayer, other than a 8ank or trust
company Incorporated under PhII. Laws
4. substantIaI part oI busIness Is the
receIpt oI deposIt
5. consIdered as a Ioss Irom the saIe oI
capItaI assets on the Iast day oI such
taxabIe year

ZU ) C$6%$!,&*,"-

MJ What Is deprecIatIonZ
&J t Is the graduaI dImensIon In the servIce
or useIuI vaIue oI tangIbIe property due Irom
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&#
exhaustIon, wear and tear and normaI
obsoIescence.

MJ What kInd oI property Is InvoIvedZ
&J 1. ReaI property except parceI oI Iand
2. PersonaI Property

RUI5IT5:
1. deprecIatIon deductIon must be
reasonabIe
2. Ior the exhaustIon, wear and tear,
IncIudIng reasonabIe aIIowance Ior
obsoIescence
3. property used In the trade oI busIness

MJ What do you mean by reasonable
allowance?
&J It shaII IncIude, but not IImIted to, an
aIIowance computed In accordance wIth ruIes
and reguIatIons prescrIbed by the Secretary
oI FInance, upon recommendatIon oI the
CommIssIoner, under any oI the IoIIowIng
methods:
1.StraIghtIIne method
2.DecIInIng baIance method
3.SumoItheyeardIgItaI method; and
4.any other method whIch may be
prescrIbed by the Secretary oI FInance
upon recommendatIon oI the
CommIssIoner

C$6%$!,&*,"- ") 6%"6$%*,$L EL$C ,-
6$*%".$EN "6$%&*,"-L

1. propertIes dIrectIy reIated to productIon
oI petroIeum
2. aIIowed under (1) straIght IIne or (2)
decIInIng baIance method
3. useIuI IIIe oI propertIes used or reIated
to productIon oI petroIeum shaII be ten
(10) years or such shorter IIIe as
may be permItted by the
CommIssIoner.
4. Ior property not used dIrectIy In the
productIon oI petroIeum (1) deprecIated
under the straIght IIne method, and
useIuI IIIe Is onIy IIve (5) years

C$6%$!,&*,"- ") 6%"6$%*,$L EL$C ,-
N,-,-' "6$%&*,"-L

ALLOWANCE FOR DEPRECATON:
1.aII propertIes used In mInIng operatIons
other than petroIeum operatIons shaII be
computed as IoIIows:
a. II the expected IIIe Is ten (10) years or
Iess normaI rate oI deprecIatIon

b. II the expected IIIe Is more than ten (10)
years deprecIated over any number oI years
between IIve (5) years and the expected IIIe.

RUIRMNT5:
1. deprecIatIon Is aIIowed as a deductIon
Irom 61; and
2. contractor notIIIes the CommIssIoner at
the begInnIng oI the deprecIatIon perIod
whIch deprecIatIon rate shaII be used.

DEPRECATON DEDUCT8LE 8Y NRAET8 OR
RFC
reasonabIe aIIowance Ior the deterIoratIon
oI property

1. arIsIng out oI Its use or empIoyment
2. or nonuse In the busIness, trade or
proIessIon
3. property Is Iocated In the PhIIIppInes

ZU ' C$6.$*,"- ") ",. 28D '&L /$..L
28D N,-$L
onIy deductIon whIch Is a not seII
executIng deductIon

MJ What Is depIetIonZ
&J the exhaustIon wear and tear oI naturaI
resources as In mInes, oII, and gas weIIs
the natural resources called wasting
assets

DEPRECATON vs DEPLETON

1.InvoIves property 1. InvoIves naturaI
resources
2. ordInary wear
and tear oI
equIpments
2. ordInary wear
and tear oI naturaI
resources

TAKE NOTE:
EquIpment used In mInIng operatIon Is
deductIbIe In deprecIatIon

MJ Method Ior computIng depIetIonZ
&J cost depIetIon method

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&$
MJ to whom aIIowedZ
&J onIy mInIng entItIes ownIng economIc
Interest In mIneraI deposIts
EconomIc Interest: capItaI Investments In
mIneraI deposIts

ZUY !Y&%,*&1.$ I "*Y$%
!"-*%,1E*,"-L

TAKE NOTE:
1.unIque because deducted Irom the taxabIe
net Income and not Irom the gross Income
second step oI the IormuIa deductIon

MJ Who Is cIaImIng the deductIonZ
&J the donor

MJ Who are the DoneesZ
&J 1.Covernment oI the PhIIIppInes or any oI
Its agencIes or any poIItIcaI subdIvIsIon
thereoI excIusIveIy Ior pubIIc purpose
2. AccredIted DomestIc corporatIon or
assocIatIon organIzed and operated
excIusIveIy Ior reIIgIons, IIon, charItabIe,
scIentIIIc, youth and sports deveIopment,
cuIturaI or educatIonaI purposes or Ior
the rehabIIItatIon oI veterans, or
to socIaI weIIare InstItutIon, or to non
government organIzatIon and no part oI
Its net Income Inures to the beneIIt oI
any prIvate stock hoIder or IndIvIduaI

MJ How many kInds oI deductIonZ
&J Two (2) kInds:
1.partIaI deductIon
10Z oI taxabIe Income In case oI an
IndIvIduaI
5Z oI taxabIe Income In case oI
corporatIons
2. IuII JtotaI deductIon

MJ WhIch oI the two kInds Is the CeneraI
RuIeZ
&J CeneraI RuIe: PartIaI deductIon
ExceptIon: TotaI JFuII deductIon

MJ Suppose Mr. A made a cash donatIon oI
P1M. How much can he cIaIm as a
deductIonZ
&J FIrst determIne the taxabIe Income oI Mr A
sInce he Is an IndIvIduaI, he can onIy deduct
10Z oI hIs taxabIe Income.

Q: What II the Donee Is not one oI those
mentIoned under the Iaw, can he cIaIm a
deductIonZ
A: No.

TAKE NOTE: Donee Is never an IndIvIduaI.

MJ I the Donor Is a pure compensatIon
Income earner and he donates P100,000 to
the church, can he cIaIm It as a deductIonZ
&J No. pure compensatIon Income earner can
onIy cIaIm a deductIon under Sec 34 M

MJ I Donee Is the PhIIIppIne Covernment,
what Is the requIrementZ
&J It must be made excIusIveIy Ior pubIIc
purposes

MJ What II the Donee Is a provInceZ
&J there must be a quaIIIIcatIon that It Is Ior
pubIIc purpose

MJ I the Donee Is a DomestIc CorporatIon,
what Is the requIrementZ
&J no part oI Its Income Inures to the beneIIt
oI any prIvate sharehoIder or IndIvIduaI

MJ What are those contrIbutIons whIch can be
deductIbIe In IuIIZ
&J 1.DonatIons to the Covernment no
conIIIct wIth partIaI (dIIIerent
requIrement)
PartIaI donated Ior excIusIveIy pubIIc
purposes
FuII, used In undertakIng prIorIty
actIvItIes oI NEDA

2.DonatIons to certaIn ForeIgn
nstItutIons or nternatIonaI OrganIzatIons
In compIIance wIth agreement, treatIes
or commItment entered Into by the
PhIIIppIne Covernment and such donees

3.DonatIons to AccredIted Non
government organIzatIons Non
government organIzatIon, non proIIt
domestIc corporatIon

REQUREMENTS:
1. organIzed and operated excIusIveIy Ior
scIentIIIc, research, educatIonaI, character
buIIdIng and youth and sport deveIopment,
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&%
heaIth, socIaI weIIare, cuIturaI or charItabIe
purposes or a combInatIon thereoI
2. no part oI the net Income oI whIch Inures
to the beneIIt oI any prIvate IndIvIduaI
3. uses the contrIbutIons dIrectIy Ior the
actIve conduct oI the actIvItIes constItutIng
the purpose or IunctIon Ior whIch It Is
organIzed and operated

4. annuaI admInIstratIve expense does not
exceed 30Z oI the totaI expenses and
5. In case oI dIssoIutIon, the assets oI whIch
wouId be dIstrIbuted to:
a) another non proIIt domestIc
corporatIon organIzed Ior sImIIar purpose
or purposes
b) to the state Ior pubIIc purpose
c) dIstrIbuted by the court to another
organIzatIon to be used In such a manner
whIch wouId accompIIsh the generaI
purpose Ior wIthIn the dIssoIve
organIzatIon was organIzed

ZU, %$L$&%!Y &-C C$#$."6N$-*

n the oId Iaw, thIs Is not aIIowed as a
deductIon. To remedy thIs, they IeIt that
those shouId be a separate deductIon Ior
research and deveIopment.

REQUSTES:
tax payer may treat research and
deveIopment expendItures as ordInary and
necessary expenses provIded:
1. It Is paId or Incurred durIng the taxabIe
year
2. Incurred In connectIon wIth trade, busIness
or proIessIon; and
3. not chargeabIe to capItaI account.

MJ Treated as such whenZ
&J durIng the taxabIe year It Is paId or
Incurred

AMORTIZATION OF CRTAIN R5ARCH AND
DVLOFMNT XFNDITUR5

at the eIectIon oI the taxpayer, the
IoIIowIng shaII or may be treated as deIerred
expenses:
a. paId or Incurred by the taxpayer In
connectIon wIth hIs trade, busIness or
proIessIon;
b. not treated as expenses under par 1 and
c. chargeabIe to capItaI account but not
chargeabIe to property oI a character whIch
Is subject to deprecIatIon or depIetIon

MJ How to compute taxabIe Income:
A: deIerred expenses shaII be aIIowed as
deductIon ratabIy dIstrIbuted over a perIod oI
not Iess than 10 months as may be eIected by
the taxpayer (begInnIng wIth the month the

taxpayer IIrst reaIIzes beneIIts Irom
expendItures.)

the eIectIon or optIon may be exercIsed Ior
any taxabIe year aIter the eIIectIvIty oI the
code but not Iater than the tIme prescrIbed
by Iaw Ior IIIIng the return Ior such taxabIe
year.

LMTATON ON DEDUCTON
MJ When not deductIbIeZ
&J 1.Any expendIture Ior the
(1) acquIsItIon or Improvement oI Iand or
(2) Ior the Improvement oI property to be
used In connectIon wIth research and
deveIopment oI a character whIch Is
subject to deprecIatIon and depIetIon and
oIIIce sIte

2. Any expendIture paId or Incurred Ior
the purpose oI undermInIng the
exIstence, IocatIon, extent or quaIIty oI
any deposIt oI one or other mIneraI
IncIudIng oII or gas.
not Ior mIneraI expIoratIon

ZU d 6$-L,"- *%EL*

MJ CIaImed by WhomZ
&J the empIoyer

MV What Is a PensIon Trust contrIbutIonZ
&J a deductIon appIIcabIe onIy to empIoyer on
account oI Its contrIbutIon to a prIvate
pensIon pIan Ior the beneIIt oI Its empIoyee
deductIon Is pureIy busIness In character.

MJ RequIsItesZ
&J
1.the empIoyer must have estabIIshed a
pensIon or retIrement pIan to provIde Ior the
payment or reasonabIe pensIon oI hIs
empIoyees
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&&
2. pensIon pIan must be reasonabIe and
actuaIIy sound;
3. It must be Iunded by the empIoyer
4. the amount contrIbuted must no Ionger be
subject to hIs controI or dIsposItIon
5. the amount has not yet been aIIowed as a
deductIon and
6. the amount has or Is apportIoned In equaI
parts over a perIod oI 10 consecutIve years
begInnIng wIth the year In whIch the transIer
or payment Is made.

ZU P &CC,*,"-&. %$ME,%$N$-*L )"%
C$CE!*,1,.,*Q ") !$%*&,- 6&QN$-*L

aIIowed as a deductIon onIy II shown that
the tax requIred to be deducted and wIthheId
there Irom has been paId to the 8R In
accordance wIth SectIon 58 and SectIon 81

ZU . "6*,"-&. L*&-C&%C C$CE!*,"-

KIND5 OF DDUCTION5:
1.temIzed deductIon
2.OptIonaI Standard DeductIon
3.PersonaI JAddItIonaI DeductIon

OPTONAL STANDARD DEDUCTON:
can be avaIIed oI by an IndIvIduaI who may
eIect a standard deductIon In an amount not
exceedIng 10Z oI hIs gross Income
may appIy In IIeu oI the other deductIons
under SectIon 34
the taxpayer must sIgnIIy In hIs return hIs
IntentIon to eIect the optIonaI standard
deductIon, otherwIse, he shaII be consIdered
as havIng avaIIed oI the ItemIzed deductIon.

MJ Who can cIaIm thIs deductIonZ
&J aII IndIvIduaI taxpayers except non
resIdent aIIen not engaged In trade or
busIness (NRANET8)
Renson: he Is not IIabIe to pay by way oI the
NT, thus, IoIIows he cannot cIaIm thIs
deductIon because he Is IIabIe to pay by way
oI CT.

TAKE NOTE:
can coexIst wIth personaI and J or
addItIonaI exemptIon

ZU N 6%$N,EN 6&QN$-*L "- Y$&.*Y
&-C e"% Y"L6,*&.,f&*,"- ,-LE%&-!$
") &- ,-C,#,CE&. *&+6&Q$%
Ior (1) HeaIth and JInsurance
(2) HospItaIIzatIon

REQUREMENTS:
1. amount oI premIums, paId by taxpayer
Ior hImseII and members oI hIs IamIIy,
2. amount oI premIums shouId not exceed
(1) P2,400 per IamIIy or (2) P200 a
month
3. gross Income oI the IamIIy Ior the
taxabIe year Is not more than P250,000

MJ Who can avaII oI thIs deductIonZ
&J 1.IndIvIduaI taxpayer earnIng pureIy
compensatIon Income durIng the year;
2. IndIvIduaI taxpayer avaIIIng ItemIzed or
optIonaI standard deductIon; and
3. IndIvIduaI taxpayer earnIng both
compensatIon Income and Income Irom
busIness

L$!*,"- Z_ &.."/&-!$ )"% 6$%L"-&.
$+$N6*,"- )"% ,-C,#,CE&. *&+6&Q$%

MJ When do we appIy thIsZ
&J appIy II IndIvIduaI taxpayer Is payIng by
way oI NT

MV Who are taxpayerZ
&J those mentIoned under SectIon 24 (A)
1. RC
2. NRC
3. OCW
4. RA
aII can cIaIm both personaI and addItIonaI
exemptIon

MJ Why not IncIude NRAET8Z Can the Iatter
cIaIm any exemptIonZ
&J NRAET8 Is not IncIuded because SectIon 35
A reIers to SectIon 24 A
NRAET8 can cIaIm personaI deductIons but
not addItIonaI exemptIons pursuant to Sec 35
D

REQUREMENTS:
1.NRAET8 shouId IIIe a true and accurate
return
2. the amount to be cIaImed as personaI
exemptIons shouId not exceed the amount
provIded Ior under PhIIIppIne Laws

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&'
TAKE NOTE:
AEMOP: can be a RA or NRAET8

1&L,! 6$%L"-&. $+$N6*,"-LJ

1. SIngIe IndIvIduaI; or IndIvIduaI judIcIaIIy
decreed as IegaIIy separated wIth no quaIIIIed
dependents.
20, 000

2. For head oI the IamIIy can be sIngIe or
IegaIIy separated wIth quaIIIIed dependents.
25, 000

3. For each marrIed IndIvIduaI II onIy one
oI the spouse, earns or derIves gross Income,
onIy such spouse can cIaIm the personaI
exemptIon.
32, 000

MJ Who is the head of the family?
&J 1.unmarrIed or IegaIIy separated man or
woman
2. WIth (1) one or both partIes or
(2) WIth one or more brothers and
sIsters
(3) wIth one or more IegItImate,
recognIzed, naturaI or IegaIIy adopted
chIIdren
3. IIvIng wIth and dependents upon hIm
Ior theIr chIeI support
4. whose such brother or sIsters or
chIIdren are
(1) not more than 11 years oId and
(2) not gaInIuIIy empIoyed,
(3) unmarrIed
5. OR, regardIess oI age, the same are
IncapabIe oI seII support because oI
mentaI or physIcaI deIect.

MJ Why do we have to determIne who the
head oI the IamIIy IsZ
&J onIy IegaIIy separated IndIvIduaIs can
cIaIm addItIonaI exemptIons II they have
quaIIIIed dependents.

TAKE NOTE:
R.A. 7432 and RR 298: a senIor cItIzen can
aIso be a dependent.

MJ Can a wIdower cIaIm exemptIonsZ
&J exemptIons must be strIctIy construed,
wIdower not IncIuded In the IIst under
SectIon 35 A but can cIaIm under sec
358
wIdower, marrIed or used to be marrIed

MARRED NDVDUALS
each IegaIIy marrIed IndIvIduaIs can cIaIm
the personaI exemptIon. Husband and wIIe =
P64,000

MJ Who are aIIowed to cIaImZ
&J NormaIIy , It Is the husband who cIaIms
unIess he executes a waIver that the wIIe
wIII cIaIm the same (RR298)

AddIonnI xemIons: (35)

addItIonaI exemptIon oI P8,000 Ior each
dependent not execeedIng Iour (4)

Q: Who can cIaIm the sameZ
A: 1.MarrIed coupIes: onIy one oI the
spouses can cIaIm It;
2.IegaIIy separated IndIvIduaIs: can be
cIaImed by the spouse who has custody
oI the chIId or chIIdren
the addItIonaI exemptIon cIaImed by both
shaII not exceed the maxImum addItIonaI
exemptIon hereIn aIIowed.

MJ Define dependents
&J IegItImate, IIIegItImate or IegaIIy adopted
chIId chIeIIy dependent upon and IIvIng
wIth the taxpayer II such dependent Is (1)
not more than 21 years oI age, (2)
unmarrIed, and (3) not gaInIuIIy empIoyed
or (4) II such dependent, regardIess oI age
Is IncapabIe oI seII support because oI
mentaI or physIcaI deIect.

MJ What II wIdower has IIIegItImate chIIdren,
can cIaIm addItIonaI exemptIonZ
&J can cIaIm, can be consIdered as head oI
the IamIIy wJ dependent

MJ What II the chIIdren are temporarIIy away
Irom the parentsZ
&J stIII consIdered IIvIng wIth parents, can
cIaIm exemptIon

CHANC OF 5TATU5: (5C 35 C)
MJ ReckonIng PerIodZ
&J end oI the year or cIose oI such year when
such change oI status occurred.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&(
TAKE NOTE:
aIways choose the hIgher amount oI
exemptIon II you are IIIIng a return coverIng
the perIod wIthIn whIch the change oI status
occurred

1. II the taxpayer shouId (1) marry or (2) have
addItIonaI dependents durIng the taxabIe
year, he may cIaIm the correspondIng
exemptIon In IuII Ior the year.

IIIusIrnIon:
1.SIngIe ]an 1, 2005
2.MarrIed ]une 1, 2005 on AprII 15, 2006
status: IegaIIy marrIed can cIaIm P 32,000

2. II the taxpayer shouId dIe durIng the
taxabIe year, estate can cIaIm personaI
exemptIon.

IIustratIon
1.]an. 25, 2005 taxpayer marrIed wJ one
chIId
can cIaIm on AprII 15, 2006
P32,000+
P8,000

n thIs case, as II the change oI status
occurred at the cIose oI taxabIe year. I
taxpayers spouse or child dies within the
taxable year or the dependents became (1)
gaInIuIIy empIoyed (2) got marrIed or (3)
became 21 as II the change as status
occurred at the cIose oI taxabIe year.
IIIusIrnIon:
1. Taxpayers tragic story wife died Jan. 25,
2005 and chIId dIed the next day then
another chIId eIoped and get marrIed.
2. Taxpayer despIte the tragedy can cIaIm ton
oI money on AprII 15, 2006.
P 32,000
P 16,000 (8,000 per chIId)
48,000

L;5>4<8 Z`0 ,>;@3 8<> C;D?5>4[:;

Z` &0 CenernI RuIe: n computIng net Income,
no deductIon shaII be aIIowed:
(1) PersonaI, IIvIng or IamIIy expenses not
reIated to trade or busIness
(2) SectIon 36 A (2) and SectIon 36 A (3)
CenernI RuIe: No deductIons aIIowed Ior
1. Any amount paId out Ior new buIIdIngs
or Ior permanent Improvements, or
betterments, made to Increase the vaIue oI
any property or estate
2. Any amount expanded In restorIng
property or In makIng good the exhaustIon
thereoI Ior whIch an aIIowance Is or has
been made.
xceIons:
1. OptIon granted to PrIvate EducatIonaI
nstItutIon to deduct the same as
capItaI outIays.
TAKE NOTE:
Amount paId Ior new buIIdIngs, can be
deducted II It InvoIves IntangIbIe drIIIIng and
deveIopment cost Incurred In petroIeum
operatIons (Sec 34 6 (A)

6%$N,ENL 6&,C "- .,)$ ,-LE%&-!$
6".,!Q J

1. coverIng the IIIe oI any oIIIcer or
empIoyee or any person IInancIaIIy
Invested In any trade oI busIness
carrIed on by the taxpayer.
2. taxpayer Is dIrectIy or IndIrectIy the
beneIIcIary under such poIIcy.

."LL$L )%"N L&.$L "% $+!Y&-'$L ")
6%"6$%*Q (beIween reInIed nrIes)

1) between IamIIy members

MJ Who Is consIdered the family of the
taxpayerZ
&J a. brothers and sIster (whoIe Is Z bIood)
b. spouses
c. ancestors
d. IIneaI descendants
MJ are uncIes or nIeces IncIudedZ
&J no

IN DONORS TAX
ReIatIves IncIudes reIatIves by
consanguInIty wIthIn the 4
th
cIvII code.
Nephew Is a stranger and reIatIve ang
nephew.

2) IndIvIduaI and corporatIons
Cen. RuIe: NO DEDUCTON
Except: dIstrIbutIon In IIquIdatIon or
Iess than 50Z oI the outstandIng
capItaI stock

} P40,000
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&)
3) Two corporatIons
4) Crantor or FIducIary
5) Two IIducIarIes oI two trust
6) FIducIary and beneIIcIary oI trust

L;50 Z\ L9;542: 97<G434<83 7;K27D48K
D;D?5>4<83 <= 483?7285; 5<@9284;30

CodaI ProvIsIons
SectIon 38: Losses From Wash SaIes oI Stock
or SecurItIes

MJ What Is a wash saIeZ
&J t Is a saIes or other dIsposItIon oI stock
securItIes where substantIaIIy IdentIcaI
securItIes are purchased wIthIn 61 days,
begInnIng 30 days beIore the saIe and endIng
30 days aIter the saIe.

MJ What perIodZ
&J 61 day perIod begInnIng 30 days beIore
and endIng 30 days aIter the saIe
MJ ]an 20 you purchased share oI stock, and
dIsposed oI the same on Feb 5, 2005. s
thIs a wash saIeZ
&J No

MJ I It Is a Ioss In wash saIe, happensZ
&J ';8;72: %?:;J (Sec 131 RR No. 2)
gaIns Irom wash saIe are taxabIe but
Iosses are nondeductIbIe
xceIon:
unIess cIaIm Is made by a deaIer In stock or
securItIes and wIth respect to a transactIon
made In the ordInary course oI the busIness
oI such deaIer

MJ Reason why Iosses In wash saIe cannot be
deductedZ
&J 1. to avoId too much specuIatIon
In the market
2. taxpayer not teIIIng the truth,
because he may say he Incurred
a Ioss Instead oI a gaIn

L;5>4<8 Uc0 C;>;7@482>4<8 <= &@<?8> 28D
%;5<K84>4<8 <= '248 <7 .<33

T-8-6ER 6MR-O ThIs Is totaIIy IrreIevant
II the Income Is subject to IIt. n IIt gaIn Is
presumed.

-g*-%;O saIe oI shares oI stock where
you have to determIne actuaI gaIn or Ioss

MJ When Is there a gaInZ
&J excess oI the amount reaIIzed over the
basIs or adjusted basIs Ior determInIng
gaIn. (amount reaIIzed Irom the saIe or
other dIsposItIon oI property)

MJ When Is there a IossZ
&J the amount reaIIzed Is not In excess oI 8
or A8
P++")/&,/0'1O 1987 8ar (]uan deIa Cruz
soId jeweIry Ior 300,000 ) contract oI saIe
amount reaIIzed Is 300,000

MJ What wIII be the basIs oI the gaInZ
&J Sec. 40 8 (1), property was acquIred by
purchase
Cost: purchase prIce + expenses
MJ I there Is a gaIn, Is the whoIe gaIn subject
to Income taxZ
&J It depends
II ordInary asset = 100Z Is subject to
Income tax
II capItaI assets
a. short term(Iess than 12 months) :
100Z taxabIe
b. Iong term (more than 12 months):
50Z taxabIe

MJ suppose property soId Is a parceI oI Iand
wIII the ruIe be the sameZ
&J No, and It depends
ordInary asset: appIy the cost
capItaI asset: 6Z FMV or seIIIng prIce
whIch ever Is hIgher

Q: Do we appIy the hoIdIng perIodZ
A: No, hoIdIng perIod does not appIy to the
saIe oI reaI property. ThIs Is an absoIute
ruIe:

I reaIty Is ordInary hoIdIng perIod
does not appIy.
I reaIty Is capItaI asset 6Z FMV or
seIIIng prIce appIIes.

HoIdIng perIod appIIes onIy to saIe oI
personaI property whIch Is a capItaI asset
except saIe oI shares oI stocks.

HoIdIng perIod aIso do not appIy to
corporatIons.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

&*
MJ I the property Is acquIred through
InherItance, what Is the basIsZ
&J Sec 40 8 (2) IaIr market vaIue or prIce as
oI the date oI acquIsItIon.

MJ Suppose It was a saIe oI personaI property,
do we appIy the same prIncIpIesZ
&J No.
MJ What II It InvoIves a saIe oI reaI propertyZ
&J AppIy the same prIncIpIes

Suppose It was a resuIt oI swIndIIng, theIt,
robbery or estaIa, do we appIy the
same prIncIpIesZ
&J Law Is sIIent, take note oI the oId CA
ruIIng on thIs one

MJ Feb 14, 2006, your CC gave you a jeweIry
In Sept your CC breaks up wIth you. CC
request the jeweIry be returned but you
aIready soId It Ior P200,000. WIII the
entIre P200,000 be IncIuded In gross
IncomeZ

&J 8asIs: (1) same as II It wouId be In the
hands oI the Donor (FMV as oI date oI
acquIsItIon); or (2) Iast owner who dId not
acquIre the same by gIIt (cost)

MJ I It InvoIves a parceI oI IandZ
&J appIy the same ruIes SectIon 40 8 (4)
what Is the basIsZ
1. Property was acquIred Ior Iess
than an adequate consIderatIon In
money or moneys worth: the basIs
wouId be the amount paId by the
transIeree Ior the property.

MJ SectIon 40 8 (5) what Is the basIsZ &J 40 C
(5)
II the property was acquIred In a
transactIon where gaIn or Ioss Is not
recognIzed (pursuant to a merger or
consoIIdatIon pIan)
a. corporatIon, party to a merger or
consoIIdatIon, exchanges property
soIeIy Ior stocks In another
corporatIon, aIso a party to the
merger or consoIIdatIon
b. Is a party to the merger or
consoIIdatIon, soIeIy Ior the stocks oI
another corporatIon aIso a party to
the merger or consoIIdatIon, or
c. SecurIty hoIder oI a corporatIon,
party to a merger or consoIIdatIon,
exchanges hIs securItIes soIeIy Ior
stock or securIty In another
corporatIon, aIso a party to the
merger or consoIIdatIon. person
transIers property to corporatIon to
gaIn controI

Uc ! $+!Y&-'$ ") 6%"6$%*Q

CNRAL RUL: n saIe or exchange oI
property, the controI amount oI gaIn or Ioss
shaII be recognIzed.
1. gaIn Is taxabIe
2. Iosses are deductIbIe
xceIon: I permanent to a merger or
consoIIdatIon pIan, no gaIn or Ioss shaII
be recognIzed
1. gaIn Is exempt
2. Iosses are not deductIbIe
RUI5IT5:
1. the transactIon InvoIves a contract oI
exchange
2. the partIes are members oI the
merger or consoIIdatIon

3. the subject matter Is onIy IImIted or
conIIned wIth the one provIded Ior by
Iaw

Merger and ConsoIIdatIon In corporatIon
code and tax code are not the same.
Sec 40 (2) (a)
a corporatIon whIch Is a party to a
merger or consoIIdatIon, exchnnges
roerIy soIeIy jor sIock n a corporatIon
whIch Is a party to the merger or
consoIIdatIon

IIIusIrnIon:
TransIeror gIves 1M
TransIeree gIves 700,000 = not
taxbIe gaIn P300,000

I other property receIved by transIeree (40
C (3) (a) TRAN5FR
II the party receIves not just the subject
matter permItted to be receIved: IIe II the
party receIves money and Jor property,
the gaIn, II any, but not the Ioss, shaII be
recognIzed (meanIng taxabIe) but In an
amount not In excess oI the sum oI the
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

'+
money and the FMV oI such other
property receIved.

(40 C (3) (b) TRAN5FROR

1.TransIeror corporatIon receIves money and
J or property, dIstrIbutes It pursuant to the
merger or consoIIdatIon pIan
no gaIn to the corporatIon shaII be
recognIzed
2. TransIeror corporatIon receIves money and
J or property, does not dIstrIbute It pursuant
to the merger or consoIIdatIon pIan
the gaIn shaII be recognIzed but In an
amount not In excess oI the sum oI such
money and the FMV oI such other property so
receIved.

MJ What Is the ruIeZ
&J 40 C (3) (a)
1. gaIn taxabIe
2. Ioss not deductIbIe
40 C (3) (b)
II deends on how dsIrbuIed:
1. pursuant to the merger or
consoIIdatIon pIan:
gaIn exempt
Ioss not deductIbIe
2. not pursuant to merger or
consoIIdatIon pIan:
gaIn taxabIe
Ioss not deductIbIe.

L;5 Uc ! RXS R[S
a sharehoIder exchnnges sIock In a
corporatIon whIch Is a party to a merger
or consoIIdatIon, soIeIy jor Ihe sIock oj
nnoIher corornIon whIch Is a party to
the merger or consoIIdatIon

L;5 Uc ! RTS R5S
a securIty hoIder oI a corporatIon
whIch Is a party to the merger or
consoIIdatIon, exchnnges hs securIes n
such corornIon, soIeIy jor sIock
securIes n nnoIher corornIon.

The ruIe Is sImIIar In 40 C (3), (a), (b) and
(c) aIthough dIIIerent property are InvoIve,
that Is why the Iast paragraph oI 40 C Is a
separate paragraph.

ThereIore, Sec 40 C (3) (a,b,c) the ruIe Is
1. gaIn exempt
2. Ioss not deductIbIe

Uc5 :23> 9272K729F
the transIeree becomes a stockhoIder,
partIes are not members oI the merger

the IndIvIduaI wants to be a sharehoIder
but does not want to purchase shares but
wIIIIng to gIve up property as a resuIt oI
the exchange , the person gaIns controI
oI the corporatIon

The ruIe Is:
a. gaIn Is exempt
b. Ioss not deductIbIe
RequIsItes:
1. There Is A contract oI exchange
where property was transIerred by
the person In exchange oI stock
or unIt oI partIcIpatIon In a
corporatIon.
2. As a resuIt, the person aIone or
together wIth others (not
exceedIng oI 4 persons) gaIns
controI oI the corporatIon.

MJ What Is controIZ
&J ownershIp oI stocks In a corporatIon
possessIng at Ieast 51Z oI totaI votIng
power.

L;5 Uc 1 R_S
non appIIcabIIIty oI Income tax Is onIy
temporary

Renson : 8asIs wIII be 40 C (5)
1. 40 C (5) (a) TransIeror
basIs oI stock or securItIes receIved by
the transIeror: same as the basIs oI the
property, stock or securItIes exchanged:
decreased by the (1) money and (2) FMV
oI the property receIved; and
Increased by (a) amount treated as
dIvIdend and (b) amount oI gaIn
recognIzed

2. 40 C (5) (b) TransIeree
as It wouId be In the hands oI
transIeror Increased by the amount oI
gaIn recognIzed.

L;5 Uc R5S RUS &33?@9>4<8 <= .42[4:4>H
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

'!
1. Taxpayer, In connectIon wIth the
exchanges descrIbed receIves
securItIes or stocks permItted (no
gaIns recognIzed) It Is soIe
consIderatIon oI the same the other
party assumes IIabIIIty oI the same
the acquIsItIon oI IIabIIIty not treated
as money and J or other property
the exchange stIII IaIIs wIthIn the
exceptIons.
2. I amount oI IIabIIItIes assumed +
amount oI IIabIIItIes to whIch
property Is subjected to exceeds
adjusted basIs oI the property
transIerred the excess shaII be
consIdered a gaIn Irom the saIe oI a
capItaI asset or oI property whIch Is
not a capItaI asset, as the case may
be.

L$!*,"- UX ,-#$-*"%,$L

Furose: Change oI Inventory to determIne
cIearIy the Income oI any taxpayerJ to reIIect
the true Income.

LmInIon:
1. once every 3 years
2. approvaI oI the secretary oI IInance

L;5>4<8 UZ &55<?8>48K 6;74<D3
1. FIscaI year
2. use oI caIendar year
a. no annuaI accountIng
b. does not keep books oI account
c. IndIvIduaIs

Use oI method as In the opInIon oI the
commIssIoner cIearIy reIIects the Income:
1. no accountIng method has been
empIoyed
2. the method does not cIearIy reIIect
the Income

L;5 UU 6;74<D 48 BF45F 4>;@3 <= '7<33
,85<@; 485:?D;D 28D L;5 U_ 6;74<D =<7
BF45F C;D?5>4<83 28D !7;D4> *2g;8
Under Sec 44 amount oI aII Items oI
gross Income shaII be IncIuded In the
gross Income Ior the taxabIe year In
whIch they are receIved by the taxpayer
Under Sec 45 deductIons shaII be taken
for the taxable year in which paid or
accrued or paid or incurred.

Sec 44 and Sec 45 are mentIoned In the
code because oI the death oI the person.

IIIusIrnIon:
Facts: taxpayer dIes In the mIddIe oI the
year
]anuary 1, 2006 ]une 15, 2006
]une 26, 2006 to Dec 31, 2006 the
estate Is the taxpayer
So the Income and deductIons Irom ]an
1 to ]une 25,, IncIuded In the
computatIon

L;5>4<8 U` !F28K; <= &55<?8>48K 6;74<D
MJ Who Is the taxpayerZ
&J corporatIon (taxpayer other than
IndIvIduaI)

MJ What kInds oI accountIng perIodZ
&J 1.IIscaI year
2. caIendar year

MJ Changes contempIatedZ

&J 1. IIscaI to caIendar
2. caIendar to IIscaI
3. IIscaI to another IIscaI

wIth the approvaI oI the CommIssIoner,
net Income shaII be computed on the
basIs oI the new accountIng perIod.

MJ CaIendar to caIendar, correctZ
&J not correct statement

L;5>4<8 U\ R&S
Tnxnyer: CorornIon
1. FIscaI to caIendar
separate IInaI or adjusted return shaII
be made Ior the perIod between the so
cIose oI the Iast IIscaI year Ior whIch the
return was made and (2) the IoIIowIng
Dec 31.

2. CaIendar to FIscaI
be made Ior the perIod between the cIose
oI the Iast caIendar year and the date
desIgnated as the cIose oI the IIscaI year.

3. FIscaI to IIscaI
be made Ior the perIod between the cIose
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

'#
oI the Iormer IIscaI year and the date
desIgnated as the cIose oI the new IIscaI
year.
FIIe return IndIcatIng the change In
accountIng method

L;5>4<8 U^ &55<?8>48K =<7 .<8K *;7@
!<8>725>3

MJ Who are the proIessIonaIs InvoIvedZ
&J appIIes to archItects and engIneers

MJ What Is a Iong term contractZ
&J It means buIIdIng, InstaIIatIon or
constructIon contracts coverIng a perIod In
excess oI one (1) year.

MJ 8asIs oI IncomeZ
&J a. persons whose gross Income Is derIved
In whoIe or In part Irom such contract
shaII report such Income upon the basIs
oI percentage oI consumptIon.

b. the return shaII be accompanIed by a
certIIIcate oI archItects or engIneers
showIng the percentage oI compIetIon

c. deductIon oI expendItures made durIng
the taxabIe year, on account oI the
contract Is aIIowed

L;5>4<8 Ub ,83>2::@;8> 12343
contempIates a seIIer oI the property

MJ s It Important to know II the property Is
personaI or reaIZ
&J Yes

MJ SaIe oI ReaI Property Is It Important to
know II It Is a casuaI saIe or reguIar saIeZ
&J No

RequremenI: The InItIaI payments do not
exceed 25Z oI the seIIIng prIce.

MJ I the InItIaI payment exceeds 25Z what do
you caII ItZ
&J caIIed deIerred saIe

MJ ConsequenceZ
&J you must pay the whoIe amount oI the tax

MJ SaIe oI PersonaI Property, Is It Important to
know II It Is a casuaI or reguIar saIeZ
&J Yes

CnsunI 5nIe hns RequremenIs:
1. seIIIng prIce exceeds P1,000
2. InItIaI payment not exceedIng 25Z
seIIIng prIce

ReguIar saIe no requIrements
*,)# '5 F,h,)
1. subject matter
2. soId by way
3. agreement
4. cash deposIt
5. post dated promIssory notes
(InstaIIments)
3. 1
st
InstaIIment promIssory note was
dIsconnected
4. 2
nd
InstaIIment exchanged wIth cash
these two exceeds the seIIIng prIce
5. you onIy compute cash

H: nItIaI payment exceeds 25Z InstaIIment
basIs Is not appIIcabIe

RR 2; 5ecIon 175: n payment by way oI
InstaIIment promIssory note, bIIIs oI
exchange and checks wIII not be consIdered
In computIng the 25Z InItIaI downpayment.

L;5>4<8 _c &::<52>4<8 <= ,85<@; 28D
C;D?5>4<83
tremendous power oI the
CommIssIoner to aIIocate the Income and
deductIon oI severaI corporatIons havIng
the same Interest.
MJ Same InterestZ
&J stockhoIders substantIaIIy the same

MJ LImItatIonsZ
&J None
That Is why It Is a great source oI
corruptIon

L;5>4<8 _X ,8D4G4D?2: %;>?783
/F< 27; 7;a?47;D >< =4:;h R,*%S
1. RC
2. NRC
3. RA
4. NRAET8 sources wIthIn

MJ Who Is not mentIoned In Sec 51 but IIabIe
to pay by way oI NTZ
&J OCWJ seaman
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

'$

xceIon:
RC OR ALENS: engaged In trade or practIce
oI proIessIon In PhII. ShaII IIIe TR regardIess
oI the amount oI gross Income.

MJ I OFW Is exempt Irom IIIIng a return, what
Is he requIred to IIIeZ
&J nIormatIon Return

MJ who are not requIred to IIIe a returnZ
&J
a. an IndIvIduaI whose gross Income
does not exceed hIs totaI personaI
and addItIonaI exemptIons Ior
dependents
b. worker (compensatIon Income
earners) regardIess oI the amount oI
compensatIon shaII not requIred to
IIIe TR because the management IIIes
It. (RR 32002)
c. IndIvIduaIs whose soIe Income Is
subject to FT
d. IndIvIduaIs who are exempt Irom
Income tax

xceIon: T
1. the management IIIes an Incorrect
return
2. the empIoyee has two or more
empIoyer

_X & RZS

&J not requIred to IIIe TR may be requIred to
IIIe InIormatIon return

_X 1 O /F;7; >< =4:;h
1. authorIzed agent bank
2. revenue dIstrIct oIIIcer
3. coIIectIon agent
4. duIy authorIzed treasurer oI the cIty or
munIcIpaIIty where taxpayer resIdes or
has prIncIpaI pIace oI busIness
5. oIIIce oI commIssIoner II no IegaI
resIdence or pIace oI busIness In PhII

_X !
MJ When to IIIeZ
&J IIIed on or beIore the 15
th
day oI AprII
each year

51 C (1) NT Payers usIng CY
two days provIded (caIendar)
1. on AprII 15; or
2. beIore AprII 15 (]anuary, Feb or March)
not December because the caIendar year Is
not yet over

FIscaI year: 15
th
day oI the 4
th
month
IoIIowIng the cIose oI the IIscaI year.

_X ! RTS 48D4G4D?2:3 3?[i;5> >< >2A <8
5294>2: K2483
xceIon: CeneraI RuIes Sec 58
1. SaIe oI shares oI stocks
return IIIed wIthIn 30 days aIter each
transactIon and
FInaI consoIIdated return on or beIore
AprII 15
2.SaIe oI ReaI Property
return IIIed wIthIn 30 days IoIIowIng each
saIe

_X C Y?3[28D 28D /4=;
1. Pure compensatIon Income earner
separate return RR 3-2 pure
compensatIon Income earner regardIess oI
amount oI Income not IIIe TR.
2. Not pure compensatIon: joInt return

_X $0 %;>?78 <= 627;8> >< ,85:?D; ,85<@; <=
!F4:D7;8

unmarrIed mInor receIves Income Irom
property receIved Irom IIvIng parent
included in the parents ITR.
xceIon:
1.Donors tax has been paid
2.Property exempt from donors tax

_X )0 6;73<83 E8D;7 C432[4:4>H

MJ Who makes the returnZ
&J
1.duIy authorIzed agent
2. duIy authorIzed representatIves
3. guardIans
4.other persons charged wIth the care oI
hIs person or property
both IncapacItated taxpayer and agent
wIII be IIabIe Ior:
1.erroneous return
2. IaIse or IrauduIent return

_X ' L4K82>?7; 67;3?@;D !<77;5>
prIma IacIe evIdence the return was
actuaIIy sIgned by the taxpayer
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

'%

L;5>4<8 _T !<79<72>4<8 %;>?78
go back to Sec 51 A (2)

';8;72: %?:;J Sec 58 FInaI ncome
Tax
return and credItabIe wIthhoIdIng tax
return Is IIIed monthIy

xceIon: SaIe oI Shares oI Stocks
(Sec 51 A (2)) SaIe oI ReaI Property
RR 172003: SaIe oI ReaI Property
subject to IInaI wIthhoIdIng tax, the buyer
Is deemed the agent.

5nIe oj 5hnres oj 5Iocks
MJ Reasons Ior IIIIng FInaI ncome tax or FInaI
ConsoIIdated ReturnZ
&J Reasons:
1. FT whose actuaI determInatIon oI
gaIn or Ioss
2. In connectIon wIth Sec 24 C the
basIs oI the tax Is not the gross
Income but the net capItaI gaIns
reaIIzed.

In connecIon wIh 5ec 4:
actuaI determInatIon oI Ioss or gaIn
IIIe a return wIthIn 30 days Irom date oI
transactIon

*&P$ -"*$J n aII other Income subject to
FT, the gaIns are presumed

,-!"N$ ") N,-"%L
MJ MInor beIow 18: WIII It be IncIuded In the
Minors ITR?
&J It depends
1. Income Irom property receIved Irom
parents IncIuded In parents ITR
xceI:
a.Donors tax paid
b.Property exempt from donors tax

2. income from minors own industry
Minors ITR accomplished by guardian
or parents

MJ II the IndIvIduaI Is exempt Irom Income
tax, can be requIred to IIIe a returnZ
&J CeneraI RuIe: No
xceIons:
1.engaged In trade or busIness; or
2.exercIse oI proIessIon Sec 51 A (2)

L$! _T !"%6"%&*,"- %$*E%-L
A.RequremenIs
Taxpayer: DC or RFC (except NRFC)
TR FIIed: 1. TRUE AND ACCURATE
a. quarterIy Income tax return
b. IInaI or adjusted Income tax return

FIIed by:
1.PresIdent;
2.VIce PresIdent
3. Other prIncIpaI oIIIcer
TR must be sworn by such oIIIcer and the
treasurer or assIstant treasurer

. TnxnbIe Yenr
1. IIscaI; or 2. caIendar
corporatIon cannot change accountIng
method empIoyed wIthout the approvaI or
prIor approvaI oI the commIssIoner (Sec 47)

C. ReIurn oj CorornIon ConIemInIory
DssoIuIon or RecognIon
1.WIthIn 30 days aIter:
a. the adoptIon by the corporatIon oI a
resoIutIon or pIan Ior Its dIssoIutIon; or
b. IIquIdatIon oI the whoIe or any part oI
Its capItaI stock, IncIudIng a corporatIon
whIch has been notIIIed oI possIbIe
InvoIuntary dIssoIutIon by the SEC; or
c. Ior Its reorganIzatIon

2.Render a correct return verIIIed under oath
settIng Iorm:
a. Iorms oI the resoIutIon or pIan;
b. such other InIormatIon prescrIbed

3.Secure a tax cIearance Irom the 8R and IIIe
It wIth the SEC

4.ThereaIter, SEC Issued a CertIIIcate oI
DIssoIutIon or ReorganIzatIon.

D. 5nIe oj 5Iocks ITR
Iook at the prevIous notes about It

L;5>4<8 _Z $A>;834<8 <= *4@; >< )4:;
%;>?783

MJ To whom grantedZ
&J CorporatIons
Crounds: MerItorIous case
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

'&
subject to the provIsIons oI Sec 56
TIme ExtensIon

L;5>4<8 _U %;>?783 <7 %;5;4G;73] *7?3>;;3
48 128g7?9>5H <7 &334K8;;3
the aIorementIoned persons shaII make
returns oI net Income as and Ior such
corporatIon In the same manner and Iorm
as such organIzatIon Is requIred to make.

L;5>4<8 __ %;>?783 <= ';8;72: 67<=;334<82:
627>8;73F49
IIIe a return oI Its Income settIng Iorth
1. Items oI gross Income and oI
deductIons aIIowed by thIs tItIe (TItIe
Tax on ncome)
2. Names oI partners
3. Taxpayer IdentIIIcatIon number (TN)
4. address oI partners
5. shares oI each partners

CPP Is exempt Irom corporate Income tax

MJ Why Is the CPP obIIged to IIIe a returnZ
&J to determIne the shares oI each partners

L;5>4<8 _` 62H@;8> 28D &33;33@;8> <=
,85<@; *2A =<7 ,8D4G4D?2:3 28D
!<79<72>4<83

A. FnymenI oj Tnx

MJ Who pays the tax oI tramp vesseIsZ
&J 1.the shIppIng agents and or the
husbandIng agent
2.In theIr absence, the captaIns thereoI
those peopIe are requIred to IIIe a return
and pay the tax due beIore departure

MJ What Is the eIIect oI IaIIure to IIIe the
return and pay the tax dueZ
&J 1.8ureau oI Customs may hoId the vesseI
and prevent Its departure untII:
a. prooI oI payment oI tax Is presented;
or
b. a suIIIcIent bond Is IIIed to answer
Ior the tax due.

InsInIImenI FnymenIs
Tax due: more than P2,000
Taxpayer: IndIvIduaIs onIy (other than
corporatIon)
EIect to pay the tax In two (2) equaI
InstaIIments

a. 1
st
InstaIIment: paId at the tIme the
return Is IIIed
b. 2
nd
InstaIIment on or beIore ]uIy 15
IoIIowIng the cIose oI the caIendar
year

MJ What Is the eIIect oI non payment on the
date IIxedZ
&J The whoIe amount oI tax unpaId becomes
due and demandabIe together wIth the
deIInquency penaItIes.

FnymenI oj cnInI gnns Inx :
M: PaId whenZ
&J on the date the return Is IIIed
AvnI exemIon jor cnInI gnns:
a. no payments shaII be requIred;
b. II you IaII to quaIIIy Ior exemptIon
tax due shaII ImmedIateIy become
due and payabIe and subject to
penaItIes
c. seIIer pays tax submIt IntentIon or
prooI oI Intent wIthIn sIx (6) months
Irom the regIstratIon oI document
transIerrIng
MJ when Is the reaI property entItIed to
reIundZ
&J upon verIIIcatIon oI compIIance wIth
the requIrements Ior exemptIon.

Report gaIns on InstaIIments under Sec
49 tax due Irom each InstaIIment
payment shaII be paId wIthIn 30 days
Irom the receIpt oI such payments.
No regIstratIon oI document
transIerrIng reaI property
1. wIthout a certIIIcatIon Irom
commIssIoner or hIs duIy authorIze
representatIve that
a. transIer has been reported
b. tax has been paId

. AssessmenI nnd FnymenI oj Dejcency Tnx
Return Is IIIed, the commIssIoner examIner
and assess the correct amount oI tax
tax deIIcIency dIscovered shaII be paId
upon notIce and demand Irom the
commIssIoner.

3 IN5TANC5 CONTMFLATD
1. IIIe the return and pay the tax
2. IIIe the return but not pay the tax
3. not IIIe the return and not pay the tax
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

''

L;5>4<8 _\ /4>FF<:D48K <= *2A 2> L<?75;

A. WIhhoIdng oj Tnxes
subject to the RuIes and ReguIatIons the
SectIon oI FInance may promuIgate, upon
recommendatIon oI commIssIoner: RequIre
the IIIIng up oI certaIn Income tax return by
certaIn Income payees.

MJ EnumeratIon Is aII about whatZ
&V Enumer atIon about FInaI ncome Tax
xceI: Cross ncome Tax
1. 25 8 (NRANET8)
2. 28 8 (NRFC)

8. WIthhoIdIng oI CredItabIe Tax at Source
The Sec. oI FInance, upon
recommendatIon oI the commIssIoner
requIre the wIthhoIdIng oI a tax on the
Items oI Income payabIe to naturaI or
jurIdIcaI persons, resIdIng In the PhII, by
payorcorporation/ person the same
shaII be credIted agaInst the Income tax
IIabIIIty oI the taxpayer Ior the taxabIe
year. At the rate oI not Iess than 1Z but
not more than 32Z thereoI.

MJ What Is the maxImumZ
&J MaxImum: now 35Z pursuant to RA 9337
MJ When wIII you aIIow wIthhoIdIng beyond
15ZZ
&J
For NT 15Z Is the maxImum
1. FT the amount oI wIthhoIdIng Is
totaIIy
2. CT equaI to the amount oI tax

Tnx Free CovennnI ond
the bonds, mortgages, deeds oI trust or
other sImIIar obIIgatIons oI

DC or RFC
contaIns a contract or provIsIon where the
obIIgor (debtor) agrees to pay the tax
Imposed hereIn
normaIIy between the credItor and debtor

MJ Who pays the taxZ
&J CredItor pays the tax by vIrtue oI an
agreement the debtor assumes the IIabIIIty
and the credItor Is now Iree Irom payment oI
tax beIore It can transIer the property to the
buyer.

L;5>4<8 _^ %;>?783 28D 62H@;8> <= *2A;3
/4>FF;:D 2> L<?75;

A. unrIerIy ReIurns nnd FnymenI oj Tnxes
WIhheId nI 5ource
1. covered by a return and paId to:
a. authorIzed agent bank
b. revenue dIstrIct oIIIcer
c. coIIectIon agent
d. duIy authorIzed treasurer oI cIty or
munIcIpaIIty where wIthhoIdIng agent
has:
1. hIs IegaI resIdence; or
2. prIncIpaI pIace oI busIness; or
3. II corporatIon , where prIncIpaI
oIIIce Is Iocated

2.Tax deducted and wIthheId
heId as a specIaI Iund In trust Ior the
government untII paId to the coIIectIng
oIIIcers.

3.Return Ior IInaI wIthhoIdIng tax
IIIed and paId wIthIn 25 days Irom the
cIose oI each caIendar quarter

4.Return Ior CredItabIe wIthhoIdIng taxes
IIIed and paId not Iater than Iast day oI the
month IoIIowIng the cIose oI the quarter
durIng whIch wIthhoIdIng was made

5. CommIssIoner, wIth approvaI oI Sec
FInance
requIre wIthhoIdIng agents to pay or
deposIt taxes at more Irequent IntervaIs
where necessary to protect the Interest oI the
government

. 5InIemenI oj Income FnymenIs Mnde nnd
Tnxes WIhheId
WIthhoIdIng agent shaII IurnIsh payee a
wrItten statement showIng:
1. Income or other payments made by
WHA durIng such quarter or year and
2. amount oI tax deducted and wIthheId
statement gIven sImuItaneousIy upon
payment at the request oI the payee.

CredInbIe wIhhoIdng Inxes
1. corporate payee not Iater than the
20
th
day IoIIowIng the cIose oI the
quarter
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

'(
2. IndIvIduaIs payee not Iater than
March 1 oI the IoIIowIng year

FnnI WIhhoIdng Inxes
the statement shouId be gIven to the
payee on or beIore ]anuary 31 oI the
succeedIng year.

C. AnnunI InjormnIon ReIurn
WIthhoIdIng agent shaII submIt to the
commIssIoner an annuaI InIormatIon return
contaInIng :
1. the IIst oI payees and Income requIred
2. amount oI taxes wIthheId Irom each
payees
3. other pertInent InIormatIon requIred

)482: /4>FF<:D48K *2AJ &,%

IIIed on or beIore ]anuary 31 oI the
succeedIng year

CredInbIe wIhhoIdng Inx: AIR
not Iater than March 1 oI the year IoIIowIng
the year Ior whIch the annuaI report Is beIng
submItted
CommIssIoner may grant WHA reasonabIe
extensIon oI tIme to IurnIsh and submIt the
return requIred hereIn.

D. Income oj RecenI
1. ncome upon whIch any credItabIe tax
Is requIred to be wIthheId at source
shaII be IncIuded In the return oI Its
recIpIent.
2. the excess oI the amount oI tax so
wIthheId over the tax due on hIs
return shaII be reIunded
3. Income tax coIIected at source Is Iess
than the tax due on hIs return
dIIIerence shaII be paId
4. aII taxes wIthheId
1. consIdered trust Iund
2. maIntaIned In separate account
3. not commIngIed wIth other Iunds
oI WHA

. RegsIrnIon wIh RegsIer oj Deeds
No regIstratIon oI any document
transIerrIng reaI property shaII be
eIIected by the RegIster oI Deeds unIess
the commIssIoner or hIs duIy authorIze
representatIve has certIIIed that the
transIer (1) has been reported and (2) tax
due has been paId
RegIster oI Deeds requIres payment oI
tax beIore transIer oI property

L;5>4<8 _b *2A <8 67<=4>3 !<::;5>4[:; =7<@
"B8;7 <= <>F;7 6;73<83

Tax Imposed under thIs tItIe upon gaIns,
proIIts and Income not IaIIIng under the
IoregoIng and not returned and paId by
vIrtue oI the IoregoIng
shaII be assessed by personaI return

InIenI nnd Furose oj Ihs TIIe
1. AII gaIns, proIIts and Income oI a
taxabIe cIass shaII be charged and
assessed wIth the correspondIng tax.
2. SaId tax be paId by the owner oI the
gaIns, proIIt or Income or the person
havIng the receIpt, custody, controI or
dIsposaI oI the same

DeIermnnIon oj Ownersh:
determIned as oI the year Ior whIch a
return Is requIred to be IIIed

!Y&6*$% +J $L*&*$L &-C *%EL*L

L;5>4<8 `cJ ,@9<34>4<8 <= *2A
1. Estate property oI the decedent
created by an agreement, trust or by
Iast wIII and testament
2. Trust agreement, contract or Iast
wIII and testament

5InIus:
1. Estate: same status as decedent
2. Trust: same status as the grantor

Income Inxnyer s Ihe sInIe:
Income oI the estate pendIng partItIon
or no partItIon at aII:

Three knds oj nrIIon:
1. judIcIaI
2. extra judIcIaI partItIon
3. or no partItIon at aII
Durng nrIIon sInIe enrns ncome:
1. IndIvIduaI Income tax
2. corporatIon corporate Income
tax
3. estate (Taxpayer = TP)
a.mpose ncome as II TP Is IndIvIduaI
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

')
b.mpose Income as II TP Is corporatIon
c.mpose Income as II estate ItseII
depends whether there Is a (1) judIcIaI
(2)extra judIcIaI partItIon or (3) no partItIon at
aII

When there Is a judIcIaI settIement whIch Is
IInaI and executory but no partItIon:
;c' :'))0>0+0/0#)O
1.CreatIon oI unregIstered partnershIp
ncome oI the Estate: corporate Income tax

2.CreatIon oI CoownershIp
ncome oI the Estate: ncome tax on
IndIvIduaI
coowner IIabIe In theIr IndIvIduaI company

%'1(# *,)#O
H: AIter IInaIIty heIrs dId not dIvIde the
property, the appIIcabIe Income tax Is
corporate Income tax because they
contrIbuted money to engage In reaI estate.

L$!*,"- `X *&+&1.$ ,-!"N$ (mportant)
Taxable income of the estate or trust shall
be comuIed n Ihe snme mnnner nnd on Ihe
same basis as ill the use of an individual.

L;5>4<8 `TJ &99:4;3 D?748K 6;8D;85H <=
$A>72 d?D4542: L;>>:;@;8>
PersonaI ExemptIon (P20,000)
ndIvIduaI It wIII depend whether
heJshe Is cIassIIIed as sIngIe, head oI
the IamIIy or marrIed
Estate regardIess

5ecnI deducIons:Income dsIrbuIed Io Ihe
hers
II you dIstrIbute nothIng you cannot
cIaIm thIs specIaI deductIons
II there Is a dIstrIbutIon, the heIr shaII
be IIabIe to pay whether IndIvIduaI
capacIty
II there Is no dIstrIbutIon, heIrs are not
IIabIe to pay anythIng

SpecIaI deductIon not appIy II IndIvIduaI tax
Is paId by the Estate ItseII.

FnymenI: made by executor, admInIstrator,
to credItor to preserve the estate

L;50 `X 28D L;5 `T
does not appIy II estate Is subject to
Income or corporate Income tax
It appIIes II the estate pays ItseII durIng
the pendency oI the judIcIaI settIement

12343J L;5 `c !
during the period of administration or
settlement of the estate.

*2A92H;7 43 2 *7?3>J
MV When IIabIe to pay Income taxZ
&J I the trust Is revocabIe (II revocabIe, Sec
61 and 62 aIso appIy)

FnrIes:
1.Crantor Jcreator Jtrustor
2.IIducIary J trustee
3.beneIIcIary J Les QuI trust

MJ Who Is IIabIe to pay tax:
&J I trust revocabIe:
obIIgatIon oI the trustee
IIabIIIty oI trust ItseII and not personaI

LnbIIy oj IrusIee:
I trust IrrevocabIe
obIIgatIon oI the grantor
personaI IIabIIIty oI the grantor as an
IndIvIduaI

*/" /&QL ") %$6"%*,-' ,-!"N$J
6E%LE&-* *" %%T RXbUbS
1. report onIy once
(buIIdIng paId once)
2. aIter the span oI 25 years
(payment oI buIIdIng dIvIded per year)

$L*&*$ *&+J
1.Sec 60
2.ReaI Estate Tax
3. Estate Tax
transIer tax Impose on the Net Estate
Ior the transIer oI property to the heIrs or
beneIIcIary whether reaI, personaI,
tangIbIe or IntangIbIe

Z P,-CL ") *%&-L)$% *&+J
1.Estate Tax
2. Donors Tax
3. Sec 135 oI LCU TransIer oI ReaI
Property

MJ We dont have InherItance tax and donees
tax, whyZ
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

'*
&J 1973 Marcos Issued P.D. 69
ExpIaIn: Sec 84, rate Is max oI 20Z oI net
beIore the rate Is 60Z pIus addItIonaI
amount.
resuIted to many gImIks through tax
avoIdance scheme, IIke creatIng a IamIIy
corporatIon (onIy taxabIe Is the stockhoIders
whIch Is exempt)
Congress enacted RA 7449 decreased 60Z
to 35Z and then RA 8424 35Z to 20Z
MJ Now Is It saIe to create a IamIIy
corporatIonZ
&J No more.

MJ Now: ba na ang scheme whIch Is better
saIe or donatIonZ
&J
1.SaIe oI RP consIdered capItaI assets
6Z to 1.5Z doc. Tax 7.5 Z better
2.SaIe oI RP consIdered ordInary asset
5Z to 52Z as per use may be
3.DonatIon II gIven to aII compuIsory heIr
reIatIve Iower than 20Z whIch Is 15Z
stranger: 30Z so go wIth 20Z

MJ Who are the taxpayersZ
&J Sec 104 Estate and Donors
1.Estate
a. RC
b.NRC
c. RA
d. NRA
2. Donors Tax
a. RC
b.NRC
c. RA
d. NRA
e. DC
I. FC

A corporatIon cannot dIe oI a naturaI death.
MJ What Is the reason Ior cIassIIyIng the
taxpayersZ
&J
1. NRA and Estate
2. NRA and FC Donors = property
outsIde PhII exempt
3. aII, other than these 3 taxabIe w In
and wJout
MJ s SectIon 104 reIevant to aII taxpayersZ
&J No, materIaI onIy to NRA and FC
5ecIon 14 senks oj nInngbIe ersonnI
roerIy IocnIed n Ihe FhInes.
1.FranchIse whIch must be exercIsed In
the PhIIIppInes;
2.S.O.8. Issued by a DomestIc
corporatIon;
3.S.O.8. Issued by IoreIgn corporatIon at
Ieast 85Z oI the busIness oI whIch Is
Iocated In the PhIIIppInes. do not
conIuse wIth 42 (2
nd
par)
4.S.O.8. oI IoreIgn corporatIon whIch
acquIred a busIness sItus In PhII
5.S.R. In busIness, partnershIp or Industry
estabIIshed In the PhIIs

MJ NRA, Cerman donates SOS oI FC to
FIIIpIna gI, is it subject to donors tax?
&J It depends (you must quaIIIy)
1.Subject to donors tax II:
1.S.O.8. FC at Ieast 85Z oI busIness
Iocated In the PhII
2.S.O.8. FC whIch acquIred a busIness
sItus In PhII
2.Exempt
1.personaI property outsIde oI PhII; or
2.IntangIbIe personaI property net taxabIe
II IoIIowIng requIsItes concern:

A decedenI nI Ihe Ime oj hs denIh or Ihe
donor nI Ihe Ime oj donnIon wns n cIzen
nnd resdenI.
1.oI a IoreIgn country whIch at the tIme oI
hIs death or donatIon dId not Impose a
transIer tax oI any manner, In respect oI
IntangIbIe personaI property oI cItIzens oI
PhIIIppInes not resIdIng In that IoreIgn
country; or

2. the Iaws oI the IoreIgn country aIIows
a sImIIar exemptIon Irom transIer or
death taxes oI every character or
descrIptIon In respect oI IntangIbIe
personaI property owned by cItIzens oI
the PhIIIppInes not resIdIng In that
IoreIgn country.

MJ What II cItIzen oI one country and resIdent
oI another country wIII the exemptIon
appIyZ
&J No, Iaw requIres that he must be a cItIzen
and resIdent oI the IoreIgn country.

*,4:') 6"#3, *,)#O
F: NRA dIed marrIed to Moroccan man, so
she was a Moroccan resIdent.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

(+
Donated SS In DC admInIstrator cIaIms
exemptIon, ground: n Morocco,
IntangIbIe personaI property oI FIIIpInos
not resIdIng thereIn Is exempt Irom
transIer tax.
8R contends: Morocco Is not a country
but a coIony oI SpaIn.
H: cIaIm granted even II It Is not a IuII
pledged state, or its a mere colony, what
matter Is that the IoreIgn Iaw provIdes Ior
an exceptIon.

L$!*,"- ^U %&*$L ") $L*&*$ *&+

MJ What Is the IormuIa Ior Estate taxZ
&J Cross Estate (Sec 85)
DeductIons (Sec 86)

Net Estate
x Rate

TaxabIe net Income
Tax credIt

Tax due
'7<33 ;3>2>; RD;=48;S L;5 XcU
gross estate IncIude reaI and personaI
property, whether tangIbIe or IntangIbIe,
or mIxed, wherever sItuated
NRA: DecedenI , Donor roerIy
sIunIed ouIsde oj FhInes noI
ncIuded on Ihe gross esInIe

L;5>4<8 ^_ '7<33 $3>2>; R485:?34<8S
A.Decedents interest

IncIudes property (1) owned at the tIme oI
death and (2) property not owned at the tIme
oI death
CIassIc exampIe: UsuIruct

MJ II termInated by the death oI usuIructuary,
Is It subject to estate taxZ
&J Not subject to estate tax

Renson: Exempt TransmIssIon under
Sec 87 (a)
merger oI the usuIruct In the owner oI
the naked tItIe

MJ Is there a conIIIct between Sec 88 a and
Sec 87 aZ How do you reconcIIeZ
&J No conIIIct
1.SectIon 87 a contempIates a sItuatIon
where the usuIruct Is termInated.
2.SectIon 88a contempIates a usuIruct Ior
a IIxed perIod. Ex contract oI Iease

MJ How do you determIne the vaIue oI
usuIructZ
&J Sec. 88 a provIdes to determIne the vaIue
oI the rIght oI usuIruct, take Into account
the probabIe IIIe oI the beneIIcIary.

MJ Why deIInItIon oI gross estate Is Ionger
than deIInItIon oI gross gIItZ
&J transIer occurrIng aIter death. estate tax
absoIute

;&,1)5#& 3"&017 /K# +05# /04#
Normally Donors tax
However Ihere nre exceIons:
1.transIer In contempIatIon oI death (858)
2.revocabIe transIer (85 C)
3.transIer Ior InsuIIIcIent consIderatIon

. Trnnsjer n conIemInIon oj denIh
6'(#) (,)#O
F: durIng IIIetIme, the IoIIowIng document
were InstItuted or executed sImuItaneousIy
1.wIII and 2. donatIon
The heirs insisted to pay Donors tax,
Posados the coIIector trIed to coIIect
InherItance tax.
unque Ihng: Donees were aIso the heIrs In
the Iast wIII and testament
Donees wanted to pay donors tax because
It Is aIways Iower than the estate tax except
when the donee Is a stranger
H: thIs Is a transIer In contempIatIon oI death

!0@'1 *,)#O
F: Deed oI DonatIon was executed
DIzon dIed severaI days thereaIter
son claims Donors tax
H:TransIers In contempIatIon oI death

MJ What are transIers deemed In
contempIatIon oI deathZ
A: 1.Property was transIerred durIng the
IIIetIme but the decedent:
a. retaIns possessIon or receIve Income
or IruIts oI property; or
b.retaIns the rIght to desIgnate persons
who wIII possess the property or the
rIght to receIve IruIts or Income
c.RevocabIe TransIers
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

(!
1Q&#N'(,>+# /&,1)5#&) are IncIuded In the
gross estate
Renson: the decedent retaIns tremendous
power and controI over the property
2.P&&#N'(,>+# /&,1)5#&) are not IncIuded In
the gross estate: exempt
Renson: the decedent Iosses controI over
the property

NoIce NoI Requred becnuse Ihe erson hns
Ihe conIroI over Ihe roerIy

D. FroerIy nssng under genernI ower oj
nonImenI
same wIth IIdeI commIssary substItutIon
3 partIes:
1.testator J decedent
2.1
st
heIr
3.2
nd
heIr

TAK NOT: To determIne whether IncIuded
In Estate or not, know who has the choIce to
desIgnate the 2
nd
heIr:
II decedent Instructs the 1
st
heIr that he can
transIer the property to whomever he wants
IncIuded In gross estate
1
st
heIr choIce IncIuded In gross estate

. Froceed oj Lje Insurnnce
1.8eneIIcIary Is the estate
IncIuded In gross estate whether
desIgnatIon Is revocabIe or not

2.8eneIIcIary Is 3
rd
person
revocabIe IncIuded
IrrevocabIe not IncIuded

F. Fror InIeresI
Important onIy due to the codIIIcatIon oI
the tax code 8,C,E, IncIuded whether beIore
or aIter the eIIectIvIty oI the code

C. Trnnsjer jor nsujjcenI consdernIon

MJ SImIIar provIsIon in Sec 100 (Donors tax)
can you appIy the two (2) provIsIons
sImuItaneousIyZ
&J No, aIternatIve appIIcatIon, one or the
other but not both.
The nIcnIon wII deend on Ihe Ime oj
Irnnsjer or moIve:
1.I transIerred because oI ImpendIng
death
estate tax
2.I transIer because oI generosIty
Donors tax

MJ ParceI oI Iand was soId Ior Iess than
adequate consIderatIon (adequate) to
reIatIve Ior P600,000 when FMV Is 1
mIIIIon pesos. s thIs subject to transIer
tax? Is it subject to Donors tax?
&J No, Sec 100 provIdes the property shouId
be other than reaI property reIerred to In
SectIon 24 (D)
Not subject to Donors tax, the
appIIcabIe tax Is 6Z FT

MJ WIII your answer be the same II SOS are
soIdZ
&J No, answer not the same, SOS not property
contempIated In Sec 24 D (1)
In thIs case, the amount by whIch the
FMV oI prop exceeds the vaIue oI the
consIderatIon shaII be deemed a gIIt and
IncIuded In the computatIon oI the gross
gift: subject to Donors Tax

MJ What Is the subject matter In 85 CZ
&J paragraphs 85 8, 85 C, 85 D
5nIe n good jnIh ns n dejense:
1.under SectIon 100 Is not a deIense

2. under SectIon 85 C, It Is a deIense

H. CnInI oj 5urvvng 5ouse
correIate wIth Sec 86 C
both speak oI IegaIIy marrIed IndIvIduaI
pertaIns to the separate property oI
spouse who survIved
capItaI used In Its generIc sense
survIvIng spouse may be man or woman

L;5>4<8 ^` R5S
to determIne the IImItatIons oI
1. FuneraI Expense
2. Whether wrItten notIce Is requIred
3. to determIne whether gross vaIue Is
at Ieast P200,000 (Sec 90)
4.to determIne II gross vaIue Is at Ieast
42 M

MJ Who are the taxpayers under 86 AZ
&J 1.RC
2.NRC
3.RA

MJ Who Is the taxpayer under 86 8Z
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

(#
&J NRA

MJ Why do we need to know thIsZ
&J NRA cannot avaII oI the IoIIowIng
deductIons:
1.IamIIy Income
2.standard deductIon
3.hospItaIIzatIon
4.retIrement pay under RA 4917

EQ !#3"(/0'1) E++'c#3 /' /K# -)/,/# '5 ,
*0/0@#1 '& 6#)03#1/

1.ELT (expenses, Iosses, Indebtedness and
taxes)
a) 1.ActuaI FuneraI Expenses; or
2.amount equaI to 5Z oI gross estate
appIy whIchever Is Iower
LmInIon:
a)amount equaI to 5Z oI gross estate
shouId not exceed P200,000 (basIs Is
the gross vaIue)
b) ]udIcIaI Expenses
no IImItatIon

Fn]onnr vs Commssoner
: Whether or not extrajudIcIaI expenses
may be aIIowed as a deductIon
H: ThIs Iaw has been copIed Irom U.S. n US,
expenses to be cIaImed as a deductIon
both judIcIaI and extra judIcIaI expenses.

CInms ngnnsI Ihe esInIe
Estate Is the debtor

RequremenIs:
1.at the tIme the Indebtedness was
Incurred the debt Instrument was duIy
notarIzed;
2.Ioan contracted wIthIn 3 days beIore
death;
3.the admInIstrator or executor shaII
submIt a statement showIng the
dIsposItIon oI the proceeds oI the Ioan

CInms oj Ihe decensed ngnnsI nsoIvenI
erson
Estate Is the credItor

RequremenI:
the onIy requIrement Is that the (onIy)
amount oI Ioan Is IncIuded In the gross
estate
notarIzatIon and certIIIcatIon not requIred

Unnd MorIgnge, Inxes nnd Iosses
MJ n unpaId mortgage who Is the
mortgagorZ
decedent mortgagor
1. UnpaId mortgage
1.value of the decedents interest in the
property Is undImInIshed by such
mortgage;
2.IncIuded In the vaIue oI the gross
estate;
IIIusIrnIon:
1 mIIIIon FMV but mortgage Is onIy
600,000 you IncIude 1 mIIIIon
2.Estate tax
3.Losses

RequremenIs:
1.Iosses Incurred durIng the settIement oI
the estate;
2.arIsIng Irom IIre, storms, shIpwreck or
other casuaItIes, or Irom robbery, theIt or
unbezzIement
3.Iosses not compensated by Insurance
4.Iosses not been cIaImed as a deductIon
Ior Income as purpose
5. Iosses Incurred not better than the Iast
day Ior the payment oI the estate tax

FroerIy FrevousIy Tnxed
VanIshIng DeductIon Return
RequremenI:
1.person acquIres the property by vIrtue oI
donatIon or InherItance
MJ What II acquIred through purchaseZ
&J Not appIy, the property must be acquIred
by InherItance or donatIon
2.Estate tax or Donors tax already paId by
the Estate oI the Decedent (1
st
par)
3.Any person who dIed wIthIn IIve (5) years
prIor to the death oI the decedent

MJ What are the amountsZ
&J PrIor Decedent dIed wIthIn:
1.5years 20Z
2.4years 40Z
3.3 years 60Z
4. 2years 80Z
5. 1 year 100Z

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

($
MJ Suppose the person dIed wIthIn 1 year and
It was InherIted by son, suppose the son
aIso dIed wIthIn 1 year or may be 2 years,
shouId we appIy the vanIshIng
deductIonsZ
&J No more (Iast par Sec 86 A2)

Trnnsjer jor FubIc Use
amount oI aII bequest, IegacIes, devIses
or transIers
RecenI:government or any poIItIcaI
subdIvIsIon
excIusIveIy Ior pubIIc purpose
Take Note: 30Z oI whIch not used Ior
admInIstratIve purpose Is not a
requIrement

FAMILY HOM
amount equIvaIent to the current FMV oI
the FamIIy Home oI decedent.
LmI: FMV shouId not exceeds 1 mIIIIon
otherwIse the excess wIII be subject to
estate tax.
RequremenIs: (RR 2-23)
1.Person Is IegaIIy marrIed
CR: II sIngIe not aIIowed to cIaIm
Except: II head oI the IamIIy
2.FamIIy Home actuaI resIdence oI the
decedent
3.CertIIIcatIon oI 8arangay CaptaIn oI
IocaIIty

5TANDARD DDUCTION5
automatIc: RR 22003 no requIrement
provIded the decedent Is the one In 86 (A)
(RC, NRC, RA)

MDICAL XFN55
RequremenIs:
1.amount not exceedIng P500,000
2.medIcaI expenses Incurred by the
decedent wIthIn one (1) year prIor to hIs
death.
must be duIy substantIated wIth receIpt

RTIRMNT FAY UNDR RA 4917
(RTIRMNT FAY WITH FRIVAT FLAN)
RequremenIs:
1.pIan duIy approved by the 8R
2.person at Ieast 50 years oId
3. 10 years In servIce
4. avaII onIy once

TAK NOT: ThIs Is a deductIon In the nature
oI exemptIon, aII other retIrement pIan Is
excIuded

FQ !#3"(/0'1) E++'c#3 /' 8'1 &#)03#1/
-)/,/#)
1.ELT
2.Property PrevIousIy taxed
3.TransIers Ior pubIIc use

*Q ?K,&#) 01 /K# *'1d"7,+ %&':#&/=

!Q I0)(#++,1#'") %&'N0)0'1)
For NRA: No deductIon aIIowed unIess
IncIude In the return the vaIue at the tIme
oI hIs death that part oI hIs gross estate
not sItuated In the PhIIIppInes. For proper
deductIon must IncIude E. beIow

-Q ;,< *&#30/ 5'& -)/,/# ;,< %,03 /'
2'&#071 *'"1/&=

L$!*,"- ^\ $+$N6*,"- ") !$%*&,-
&!ME,L,*,"- &-C *%&-LN,LL,"-L
1. Merger oI usuIruct In the owner oI the
naked tItIe;
2. transmIssIon or deIIvery oI the
InherItance or Iegacy by the IIducIary heIr
or Iegatee to the IIdeIcommIssary;
3. transmIssIon Irom the IIrst heIr, Iegatee
or Iegacy donee In Iavor oI another
beneIIcIary, In accordance wIth the desIre
oI the predecessor;
4. AII bequest, devIses, IegacIes or transIers
to (1) socIaI weIIare (2) cuIturaI and (3)
charItabIe InstItutIon

RequremenIs:
1.no part oI the net Income Insures to the
beneIIt oI any IndIvIduaI;
2.not more than 30Z oI donatIon (8DL)
shaII be used by such InstItutIons Ior
admInIstratIon purposes.

L$!*,"- ^^ C$*$%N,-&*,"- ") *Y$
#&.E$ ") *Y$ $L*&*$
A.UsujrucI
1.DetermIne vaIue oI rIght oI usuIruct:
consIder the probabIe IIIe oI the
beneIIcIary based on the Iatest 8asIc
Standard MortaIIty TabIe
.FroerIes
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

(%
IaIr market vaIue oI the Estate at the tIme
oI death
1.FMV determIned by CommIssIoner
2.FMV scheduIe oI vaIues IIxed by the
ProvIncIaI or CIty Assessors

L$!*,"- ^b -"*,!$ ") C$&*Y *" 1$
),.$C

MJ What Is the 8asIsZ
&J the gross estate oI the person

MJWhen Is the notIce requIred to be IIIedZ
&J 1.aII cases oI transIer subject to tax
2.aIthough exempt, when gross vaIues oI
the estate exceeds P200,000

MJ When IIIedZ
&J wIthIn two (2) months
1. aIter decedents death
2.same perIod aIter quaIIIyIng as executor
or admInIstrator
gIve a wrItten notIce

MJ I the Net Estate Is at Ieast P16,000 wIII
you In Iorm the commIssIonerZ
&J yes, the gross Is at Ieast 34 mIIIIon

L$!*,"- bc $L*&*$L *&+ %$*E%-L
MJ When requIred to IIIe returnZ
&J 1.aII cases oI transIer subject to tax
2.even though exempt, gross vaIue
oI the estate exceeds P200,000
3.regardIess oI gross vaIue oI the
estate, when the same consIsts oI
regIstered or regIstrabIe prop such as:
a.reaI property
b.motor vehIcIe
c. shares oI stocks
d. other sImIIar property where
cIearance Irom 8R necessary Ior
transIer oI ownershIp In the name oI
the transIeree

return must set Iorth the IoIIowIng:
1.vaIue oI the gross estate at tIme oI death
2.deductIons aIIowed
3.InIormatIon necessary to estabIIsh correct
taxes

MJ What II Estate Is exempt, Is It requIred to
IIIe a returnZ
&J CenernI RuIe: No
xceIon:
a. gross vaIue exceeds P200,000
b.estate contaIns regIstrabIe property

MJ II the estate or gross estate exceeds 2
mIIIIon, what Is the requIrementZ
&J return must be duIy certIIIed by a CPA

. Tme oj FIng

filed within 6 months from decedents
death
wIthIn 30 days Ior IIIIng the return
wIthIn 30 days aIter promuIgatIon oI such
order
1.certIIIed copy oI the scheduIe oI partItIon
and
2.order oI court approvIng the same

C. xIenson oj Tme
Tme: 30 days
Crounds: merItorIous cases
Who grnnIs: CommIssIoner

D. FInce oj jIng:
return shaII be IIIed wIth:
1.authorIzed agent bank
2.revenue dIstrIct oIIIcer
3. coIIectIon oIIIcer
4. duIy authorIzed treasurer
cIty or munIcIpaIIty In whIch decedent
was domIcIIed at the tIme oI hIs death
MJ What II non resIdentZ
&J NR wIth no IegaI resIdence here, wIth the
oIIIce oI the commIssIoner.

MJ Let us say there are 3 compuIsory heIrs,
nameIy A, 8, and C. A renounces hIs
InherItance comIng Irom the parents, but A
renounces hIs InherItance In Iavor oI hIs 2
sIbIIngs, brother and sIster 8 and C. s thIs
subject to donors tax?
&J NO. t Is exempt.

MJ But if in the given example, A said I am
renouncIng my InherItance, but am gIvIng It
to my sister B, is this subject to donors tax?
&J YES. RenuncIatIon Is to the dIsadvantage
oI the brother.

TAXATON UNDER THE LOCAL COVERNMENT
CODE:
1. LocaI Tax
2. ReaI Property Tax
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

(&

."!&. *&+&*,"- (1b, 17, Ihen go Io
151, 12 down)

MJ Mayor 8Inay oI MakatI ordered the
coIIectIon oI eIevator tax (Ior eIevator In the
cIty haII). s the order oI Mayor 8Inay IegaIIy
tenabIeZ
&J NO. There shouId aIways be a Inx
ordnnnce aIter conductIng a ubIc henrng.
(186)

Inx ordnnnce

MJ Can 8R coIIect the tax even In the
absence oI a revenue reguIatIonZ
&J YES.

MJ Can a provInce, cIty, munIcIpaIIty or
barangay coIIect the tax II there Is no tax
ordInanceZ
&J NO.

MJ Why Is It that there shouId be a tax
ordInance as requIred by 186Z
&J The ratIonaIe Is not mentIoned In 186,
but II you read the other provIsIons oI the
LCC, you wIII come to set oI concIusIons oI
the reason why there must be a tax
ordInance.

n most oI these provIsIons, It aIways say:
one-hnIj j Ihe Iown or muncnIIy shnII
coIIecI n Inx oj noI exceedng 1 oj Ihe gross
receI.
TAKE NOTE: There Is no exact amount;
hence, It Is the tax ordInance whIch wIII IIx
the exact amount.

ubIc henrng

n Congress, the requIrement Is not
absoIute (by dIscretIon onIy). Under IocaI
taxatIon (Iast phrase oI 186), the
requIrement Is A8SOLUTE.

RY5 vs. 5CRTARY (32 5CRA 4b)
F: n the munIcIpaIIty oI San ]uan (just
besIde MandaIuyong) there was a tax
ordInance passed. Reyes, a resIdent,
cIaIms that there was no pubIIc hearIng
conducted, he maIntaIns that under 186
Iast phrase, there shouId aIways be a
pubIIc hearIng.
H: The SC said: yes, that requirement is an
absoIute one, but sInce the petItIoner
IaIIed to produce evIdence to support hIs
aIIegatIon, II there Is no prooI presented
other than hIs own statement, we hereby
ruIe that the ordInance was passed In
accordance to the procedure mandated
by law. While it is true that a public
hearIng Is an absoIute requIrement, he
who aIIeges, must prove the same.

MJ If you dont agree with the validity or the
constItutIonaIIty oI the tax ordInance, what
wIII be your remedyZ
&J WIthIn 30 days Irom the eIIectIvIty oI the
ordInance, the taxpayer shouId IIIe an appeaI
wIth the oIIIce oI the Secretary oI the DO]
(187)

RY5 vs. 5CRTARY (32 5CRA 4b)
F: Reyes asserted the vaIIdIty and
constItutIonaIIty oI the tax ordInance onIy
aIter the Iapse oI thIrty (30) days (perhaps
hIs Iawyer was thInkIng that an ordInary
statute may be contested anytIme wIth
the RTC, CA or SC).
H: WIth regard to a tax ordInance, w have a
specIIIc ruIe, IaIIure to assaII the vaIIdIty
wIth the specIIIc perIod oI tIme, Is IataI to
the taxpayer. SInce It was IIIed beyond
the 30day perIod, we do not dIsturb the
vaIIdIty oI the ordInance.

MJ WIthIn what perIod shouId the Sec. oI
]ustIce decIdeZ
&J WIthIn 60 days Irom the tIme the appeaI
was IIIed. FaIIure to decIde wIthIn thIs tIme,
the taxpayer has the remedy to IIIe an actIon
wIth the reguIar courts.

I the decIsIon was made wIthIn the 60
day perIod, and receIves the decIsIon, hIs
remedy Is to IIIe an appeaI wIthIn 30days
Iorm the receIpt oI the decIsIon to court oI
competent jurIsdIctIon RTC.

8egInnIng ArI 23, 24, Irom the ruIIng
oI the RTC, pursuant to RA 9282 (the Iaw
upIIItIng the standards oI the CTA), the
ruIIng oI RTC on IocaI tax cases, Is
appeaIabIe to the CTA en banc.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

('

TWO APPEALS DECDED 8Y THE CTA EN 8ANC:
1. decIsIons oI RTC InvoIvIng IocaI tax
cases
2. decIsIon oI the CentraI 8oard oI
Assessment AppeaIs.

From CTA en banc, the appeaI must be
IIIe wIth the SC wIthIn 15days.

Co to 151:
The cIty couId Impose the tax aIready
Imposed by the provInce oI by the
munIcIpaIIty.

MJ What are the numerous taxes ImposabIe
by the provInce whIch a cIty now aIIowed to
ImposeZ
&J Those enumerated In 135 to 141 oI the
LCC

Reasons why a munIcIpaIIty wanted to be
converted Into a cIty:
1. 151
2. 233 (reaI estate tax)
n addItIon, the Iaw says that the cIty
couId Increase the rate oI the tax by not more
than 50Z oI the maxImum EXCEPT those
enumerated In 139:
a) proIessIonaI tax
b) amusement tax

&0 ';8;72: 6748549:;3 (12-13)

reIteratIon oI the constItutIonaI tax
provIsIons

notIce that the constItutIonaI IImItatIons
on taxatIon do not onIy appIy to the natIonaI
government but aIso to IocaI government
unIts.

10 C;=484>4<83 (132)

R'(,+ ;,<017 E"/K'&0/= (132)
Ior a provInce, It Is the provIncIaI
board or the provIncIaI councII
(sanggunIang panIaIawIgan)
Ior a cIty, we have the cIty councII
(sanggunIang panIusod)
Ior the munIcIpaIIty, we have the
munIcIpaI councII (sanggunIang
pangbayan)
Ior the barangay or barrIo, we have
the barangay councII.

!0 !<@@<8 :4@4>2>4<83 <8 >F; >2A48K
power of the LGUs (133)

Under the oId Iaw thIs was 5 oI the LocaI
Tax Code.

MJ Why commonZ
&J 8ecause the IImItatIons or prohIbItIons
appIy to aII LCUs, the provInces, cItIes,
munIcIpaIItIes and barangays.

Two Common CrImes (under 133)
1. absoIute prohIbItIon
2. reIatIve prohIbItIon

t shaII be unIawIuI Ior the LCUs to coIIect:
PQ Income Tnx XCFT when Ieved on bnnks
nnd oIher jnnncng nsIIuIons (133(A))
the term other financing institution
shaII IncIude money changer, IendIng
Investor, pawnshop (131())
rate oI tax: does not mentIon rate oI
tax, so long as it is fair, just and
reasonable
It cannot be prohibited taxation,
because the element of imposed by the
same taxing power is not present. One Is
Imposed by the natIonaI government and
the other Is by the LCU.
PPQ DocumenInry 5Inm Tnx (133())
absoIute prohIbItIon
PPPQ sInIe Inx, nherInnce, donnIons nIer
vvos, donnIons morIs cnusn XCFT n
135 (133(C))
transIer tax on the transIer oI reaIty
to be Imposed by provInces and cItIes
(135)
NOTE: thIs Is not a reaI estate tax,
thIs Is a IocaI tax.
PfQ CusIom duIes, chnrges or jees jor Ihe
regsIrnIon oj vesseIs or shs, whnrjnges
jees nnd whnrnge dues XCFT j Ihe whnrj
hnd been esInbIshed, mnnInned nnd
oernIed by Ihe IocnIIy (133(D))
wharIage due Is a custom Iee
Imposed on the weIght oI the cargoes.
wharI a pIer
specIaI Ievy on pubIIc works (240)
aIIows provInces cItIes and
munIcIpaIItIes to Impose a specIaI reaI
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

((
estate tax known as special levy or
public works
Iet us say the munIcIpaIIty estabIIshed
a pIer Ior a mInImaI vaIue oI P10M; out
oI P10M, under 240, 60Z oI thIs may be
recovered; the other 40Z may be
recovered by warIage due.
NQ Tnx, jee or chnrge jor goods or
commodIes comng ouI or nssng Ihrough
Ihe IerrIornI ]ursdcIon even j n Ihe guse
oj n IoII or n jee (133())
an absoIute prohIbItIon
commodItIes marketed In a pubIIc
market, lets say in the city of Pasig,
where the commodItIes came Irom
Laguna then to Tanay, CaInta, Taytay; just
ImagIne II each oI the towns wIII Impse
1peso Ior every head oI a chIcken or
50cents Ior every bundIe oI vegetabIe.
PALMA DEVT CORP v. MALANGAS
ZAMOANCA DL 5UR (113 5CRA 572)
F: MunIcIpaI councII passed a tax ordInance
entitled police surveillance fee which
provIde that ALL motor vehIcIe passIng
through a partIcuIar street In the town
proper oI MaIangas whIch wIII Iead to the
pIer or wharI wIII pay a certaIn sum oI
money whether It Is camote, copra,
paIay,or rIce. One oI the owners oI the
motor vehicle is Palma Devt Corp.
carryIng copra, banana and coconut to be
Ioaded In a shIp docked at pIer oI
MaIangas. The Iawyer oI petItIoner
assaIIed the vaIIdIty oI the ordInance
statIng that It Is a cIear vIoIatIon oI
133(E).
H: t Is not the tItIe oI the ordInance whIch Is
controIIIng but It Is the essence oI the
substance oI the tax ordInance. The tax
ordInance cIearIy vIoIated 133(E),
thereIore, the SC had no optIon but to
decIare the tax ordInance nuII and voId
Ior beIng In vIoIatIon oI the Iaw.
fPQ Tnxes, jees or chnrges on ngrcuIIurnI
nnd nqunIc roducIs when soId by mnrgnnI
jnrmers or jshermen (133(F))
MJ Don AntonIo FIorendo, a person
comIng Irom Pampanga who settIed In
Davao CIty, empIoyed thousands oI
workers In the dIIIerent banana
pIantatIon. Can the LCU Impose tax on
the agrIcuIturaI product whIch Is a
bananaZ
&J YES. The LCU can Impose because
Don AntonIo Is not a margInaI Iarmer. t
Is onIy prohIbIted II It Is soId by a
margInaI Iarmer.
MargInaI Farmer a Iarmer or a
IIsherman Ior subsIstence onIy, whose
ImmedIate members are the ImmedIate
members oI the IamIIy (131(P))
fPPQ Tnx, jee or chnrge on oneer nnd non-
oneer enIerrse duIy regsIered wIh Ihe
bonrd oj nvesImenIs jor n erod oj byrs nnd
4yrs resecIveIy (133(C))
reIatIve prohIbItIon because aIter the
perIod, the LCU concerned may now
Impose the tax.
fPPPQ xcse Inx on nrIcIes nnd Inx, jees nnd
chnrges on eIroIeum roducIs (133(C))
reIatIve prohIbItIon sInce under
143(H), It says there that taxes whIch
are prohIbIted such as excIse tax,
percentage tax and vaIue added tax
nonetheIess, the LCU may Impose a tax
not exceedIng 2Z oI the gross receIpt (Ior
cItIes 3Z).
My Iormer student an assIstant In the
cIty IegaI attorney In a cIty In Metro
ManIIa, receIved a summon Irom the RTC
(on compIaInt oI a supermarket In Metro
ManIIa) questIonIng the vaIIdIty oI the tax
ordInance under 143(H) sInce the rate
Imposed was 3Z
I said, ineng, una file kayo ng motion
to dIsmIss. Nak ng puta, absent ka na
naman ata eh, you Invoke 151 statIng
that a cIty can Impose a tax hIgher than
the rate provIded Ior by Iaw not more
than 50Z oI the maxImum (50Z oI the
maxImum oI 2Z Is 1, thereIore, 2+1 Is
3%)
ULACAN v. CA (299 5CRA 442)
*IIrst case decIde by the SC whIch Interpreted
both the LCC and the NRC.
F: The then governor, Obet PanganIban
together wIth hIs provIncIaI councII
passed an ordInance ImposIng tax on
quarryIng under the provIsIon oI 138 oI
the LCC. The probIem Is that the
ordInance appIIes to ALL entItIes
quarryIng In the provInce. One oI the
taxpayers, RepubIIc Cement obIIged to
pay the tax, argued that under 138 oI
the LCC, the tax on quarryIng on whIch
the provInce may be aIIowed shaII onIy be
wIth regard to quarryIng prIvate Iand, and
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

()
not onIy that but under 133(H), there Is
a prohIbItIon to Impose excIse tax and
tax on quarryIng under the RC Is an
excIse tax.
H: The tax on quarryIng aIIowed to
provIncIaI governments shaII onIy be wIth
regard to Iands whIch are pubIIc Iands,
and sInce thIs Is a prIvate tax on
quarryIng reIers to a Iot wIthout any
dIstInctIon. Hence, II the LCC made a
quaIIIIcatIon as to the kInd oI Iand (where
It says It shouId be pubIIc Iand), by
ImpIIcatIon, It shouId reIer to prIvate Iand
under 151 (aIthough the Iaw dId not
dIstInguIsh); and sInce It Is a tax by the
natIonaI government, It shouId be
coIIected by the 8R (not the LCU), and
aIso the SC agreed that It Is an excIse tax
where LGUs are prohibited from
coIIectIng; thus, the SC decIared the tax
ordInance nuII and voId Ior beIng contrary
to Iaw.
SIr, why Is It a probIem when the Iaw
Is cIear that under 138, It shaII onIy
appIy to pubIIc IandZ
Perhaps the provIncIaI councII thought
that the subject matter oI the tax
ordInance may be a subject matter
provIded In any book IncIudIng the RC,
or worse, that It may Impose a tax on a
subject matter not mentIoned In any
book.
MoraI Iesson: aIthough a tax
ordInance may be passed even II the
subject matter Is not provIded Ior In any
Iaw, It has to compIy wIth the IImItatIons.
FTRON v. FNILLA (19 5CRA b)
* The Iacts here arose under the oId Iaw
under 5 (now 133) oI the IocaI tax code
(PD 231)
F: Petron has a IactoryJpIant In PenIIIa
where the raw materIaIs petroIeum
products are beIng converted Into reIIned
petroIeum products. The munIcIpaI
councII oI PenIIIa Imposed a tax by way oI
a tax ordInance sayIng that they are
InvokIng the oId 19 (now 143(A))
statIng that munIcIpaIItIes are authorIzed
to Impose tax oI the manuIacture oI any
commodIty, hence, sInce It Is
manuIacture oI a petroIeum product, the
LCU must e authorIzed. However, Petron
objected sInce under 5 (now 133(H)),
the prohIbItIon IncIudes the prohIbItIon to
Impose excIse tax and not onIy that,
under thIs par., the tax on petroIeum
products Is an excIse tax. Under thIs par.,
the Iaw Is cIear It does not onIy prohIbIt
the ImposItIon oI tax, Iee or charge over
petroIeum products.
H: The controIIIng provIsIon here the oId
19 (now 143(A)) that LCUs are
authorIzed to Impose the busIness tax Ior
the manuIacturIng over any kInd oI
commodIty by and petroIeum product Is
any kind of commodity.
MJ What do you thInkZ
&J I dont agree with this ruling because
between 133(H) and 143(A), It Is the
Iormer whIch Is more specIIIc.
PgQ VnIue ndded Inx nnd ercenInge (133(I)
XCFT 143(H)
ReIatIve prohIbItIon.
gQ Tnx, jee or chnrge on common cnrrers
wheIher by Innd, wnIer or nr (133()))
FIR5T HOLDINC CO. v.ATANCA5 CITY (3
5CRA bb1)
* 2
nd
SC ruIIng dIscussIng both the RC and
LCC.
F: ThIs reveaIed to the pubIIc the exIstence
oI 2 very bIg oII pIpeIInes comIng Iorm
8atangas CIty wIth a dIstance oI more
than 100km, one goIng to Pandacan OII
Depot and the other one Is goIng to 8rgy.
8Icutan, TaguIg. The 8atangas CIty
councII deemed It necessary to Impose a
tax on the gross receIpt oI the 1
st
hoIdIng
company Ior the operatIon oI the oII
pIpeIIne, but the operator argued that the
oII pIpeIIne Is not a common carrIer.
H: The SC reasoned out IIke In the case oI
Fn]unnr v. Comm (325CRAbbb), sayIng
that we have copied the code of carrier
Iaw Iorm the US where the deIInItIon oI a
common carrIer Is one habItuaIIy carryIng
not onIy IndIvIduaIs or passengers but
aIso goods or commodItIes, and sInce the
oII pIpeIInes Is habItuaIIy carryIng
petroIeum products whIch Is a
commodIty, we ruIe thIs as a common
carrIer whIch Is under 133(]), LCU Is
prohIbIted Irom ImposIng tax on common
carrIers, and not onIy that but under
170 oI the LCC, the Iaw Is very expIIcIt,
that ALL LCUs are prohIbIted to Impose
percentage tax on common carriers. With
that, the tax ordInance passed was
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

(*
decIared nuII and voId Ior beIng contrary
to Iaw.
gPQ Fremums on re-nsurnnce (133(K))
absoIute prohIbItIon.
gPPQ Tnx, jee or chnrge on regsIrnIon oj
moIor vehcIes nnd jor Ihe ssunnce oj Icense
nnd ermI jor drvng Ihereoj XCFT
IrcycIes. (133(L))
ATUAN CITY v. LTO (322 5CRA 5)
: WhIch IunctIon was deIegated to the LCUZ
The LTO registering motor vehicles or
the LTFR8 grantIng IranchIse and
reguIatIon oI common carrIersZ
H: Under 133(L), the IunctIon oI the LTO Is
prohIbIted, an thereIore what may be
deIegated to the LCU Is the IunctIon oI
LTFR8.
gPPPQ Tnx, jee or chnrge on exorInIon oj
roducIs nnd s ncIunIIy exorIed XCFT
under 143(C) where Ihe LCU s nuIhorzed Io
mose busness Inx on exorInIon (133(M))
gPfQ Tnx, jee or chnrge on cooernIves
duIy regsIered under Ihe cooernIve cod (RA
b93) nnd usness KnInknInn (RA b1)
(133(N))
A cooperatIve Is exempt Irom IocaI
tax, provIded It Is duIy regIstered wIth the
cooperatIve code and the cooperatIve
development authority or Business
KaIakaIan (not kaIkaIan)
gfQ Tnx, jee or chnrge over Ihe nnIonnI
governmenI, oIIcnI subdvsons nnd
ngences nnd nsIrumenInIIes oj Ihe
governmenI (133(O))
ReIatIve prohIbItIon sInce It admIts oI
an exceptIon under 154 oI the LCC
where It says that a LCU may be
authorIzed to Impose a Iee or charge Ior
the operatIon oI a pubIIc utIIIty provIded
It Is owned, maIntaIned and operated by
such LCU.
NAIA v. FARANAU ()ULY 2b)
H: SC ruIed In Iavor oI the aIrport. Paranaque
being a LGU cant impose tax on a
government InstrumentaIIty. AIrport
owned by the government Is not an
agency, It beIng an InstrumentaIIty.
MJ May the government tax ItseII It the
taxIng power Is the IocaI governmentZ
&J NO. The IocaI government cannot
Impose tax on the natIonaI government,
and wIth more reason that It cannot
Impose a tax wIth equaI LCU.

C0 *2A;3 >F2> 528 ;4>F;7 [; 4@9<3;D [H
67<G485;3 <7 !4>4;3

PQ Inx on Irnnsjer oj renIIy (135)

Note that thIs Is not a reaI estate tax, thIs
Is a IocaI tax Ior the sImpIe reason that It Is
not provIde Ior under the topIc oI reaI estate
tax (198280)

Law says it should not exceed of 1% of
the consideration (NOTE: do not use zonaI
vaIue sInce thIs Is used onIy under the RC,
not the LCC.

MJ SInce aII the provInces and cItIes must
IoIIow the IImItatIon oI the rate (not
exceedIng Z oI 1Z), Is It vIoIatIve oI the equaI
protectIon cIauseZ
&J NO, because the sanggunInan had to
determIne the actuaI rate consIderIng the
status oI the provInce.

MJ Why Is that MakatI IIx the rate oI 75Z or
3J4 oI 1ZZ
&J 8ecause cItIes are authorIzed to Increase
the rate oI 50Z oI the maxImum, that Is 50Z
oI Z Is 25Z (50+25 Is 75Z).

NOTE: Do not appIy transIer oI reaIty
pursuant to RA 6657 (CARP) thIs Is the
ComprehensIve AgrarIan ReIorm Program
thIs Is exempt.

PPQ Inx on rnIng nn ubIcnIon (13b)

NormaIIy, a provInce cannot Impose thIs
because the tax on busIness can onIy be
Imposed by a cIty or munIcIpaIIty EXCEPT thIs
one, on prIntIng and pubIIcatIon oI
magazInes and perIodIcaIs.

PPPQ jrnnchse Inx (137)

The oId natIonaI IranchIse tax under the
oId tax code was aIready aboIIshed.

We stIII have IranchIse tax other than thIs
one, known as natIonaI IranchIse tax
provIded Ior In the repubIIc act grantIng
IranchIse.

Two kInds oI FranchIse Tax:
1. IocaI IranchIse tax (under LCC 137)
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)+
2. natIonaI IranchIse tax (provIded Ior In
the statute or repubIIc act authorIzIng
the IranchIse)

MJ May LCUs Impose IocaI IranchIse taxZ
&J We have to consIder here many supreme
court decIsIons and aIso 193 oI the LCC.
Under 193, it says there unless
especIaIIy provIded Ior In thIs code,
exemptIons granted to naturaI jurIdIcaI
persons are hereby wIthdrawn (aboIIshed)
EXCEPT:
1. IocaI water dIstrIcts
2. cooperatIves regIstered under the
cooperatIve code (RA 6938)
3. nonproIIt and nonstock educatIonaI
InstItutIon.

A5CO v. FACCOR (197 5CRA 52)
F: The cIty councII passed a tax ordInance
ImposIng tax on PACCOR, an agency oI
the government. PACCOR objected sayIng
that the IocaI cIty Is prohIbIted under the
oId IocaI authorIty act to Impose tax on
an agency oI the government.
H: The SC decIared nuII and voId the tax
ordInance sayIng ManIIa cannot do that.

CU v. MACTAN (2b1 5CRA bb7)
F: Cebu government was tryIng to coIIect
reaI estate tax Irom the Mactan aIrport
(note: reaI property tax Is a terrItorIaI tax,
meanIng It shouId onIy be coIIected
wIthIn Its terrItorIaI jurIsdIctIon). Lawyers
oI Mactan aIrport argued that under
13(O), Cebu, a LCU, cannot Impose tax
on an agency oI the government, and
they aIso Invoked the ruIIng In 8ASCO.
H: The Iawyer oI Mactan aIrport Is devoId oI
any merIt at aII, It Is 100Z erroneous
sInce the reaI estate tax Is not a IocaI tax,
hence, why Invoke a SC ruIIng and codaI
provIsIon whIch can onIy be appIIed to
IocaI tax. ThereIore, Mactan aIrport
shouId pay ReaI Property Tax.

8eIore the codIIIcatIon In 1991 (to take
eIIect ]anuary 1, 1992), IocaI taxatIon was
embodIed In a separate book known as LocaI
Tax Code (PD 231) whIIe reaI property tax
was provIded Ior In a separate book known
as ReaI Property Tax Code (PD 464)

LRT v. CITY OF MANILA (342 5CRA b92)
F: The ManIIa cIty government trIed to
coIIect reaI property tax but the
management of the LRT said no you
cannot do that to us sInce It Is excIusIveIy
for public use.
H: NO, you are not excIusIveIy Ior pubIIc use
sInce every tIme a person wants to use
the LRT he has to pay.

MJ Why not use the deIense that It Is owned
by the governmentZ
&J 8ecause In reaI estate tax, the deIense
that It Is owned by the government Is not a
deIense.
The LCC In 199(8) and In 217, both
provIsIons says that the basIs Ior the
ImposItIon oI reaI estate tax Is the ACTUAL
USE oI anybody who Is usIng that (maybe In
the concept oI usuIructuary or In the concept
oI a Iessee, or In the concept oI an owner);
the basIs Is not ownershIp.

In 134, the taxes here must not onIy be
Imposed by provInces, It may aIso be
Imposed by cItIes In IIne wIth 151 those
enumerated In 135 to 141.

CACAYAN D ORO LCTRIC CO. v. MI5AMI5
OCCIDNTAL (11 5CRA 3)
* ThIs was the prevaIIIng ruIe Ior more than
10years Irom 1988
H: n the IranchIse or the repubIIc act, there
are onIy two (2) kInds oI IranchIse, one Is
a IranchIse whIch provIde Ior a condItIon
that thIs tax (reIerrIng to the IranchIse
tax) shaII be In IIeu oI aII other taxes, and
the other IranchIse Is the one whIch do
not provIde Ior such provIsIon; the
provInce or the cIty can Impose IocaI
IranchIse tax II the IranchIse beIong to
the second exampIe.

RY5 v. 5AN FALO CITY (35 5CRA 353)
* Here the SC unIIormIy ruIed
H: A provIsIon on exemptIon under 193
dont only refer to exemptions provided
Ior by dIIIerent statutes, but It IncIudes
those whIch cIaIm exemptIons by vIrtue
oI the case oI Cngnynn de Oro (because
SC decIsIons are aIso Iaws).

FLDT v. DAVAO (3b3 5CRA 75)
F: The IranchIse hoIders oI Smart and CIobe
are cIaImIng exemptIons Irom the IocaI
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)!
IranchIse tax because they are sayIng that
they are hoIdIng a IranchIse whIch says
that It Is a IranchIse enacted by the house
oI Congress In 1995 whIch carrIes wIth It
an exemptIon Iorm IocaI IranchIse tax.
H: 8y the very expIIcIt provIsIon oI 193, the
removaI oI exemptIons granted by
dIIIerent statutes and aIso by SC
decIsIons appIIes onIy to statutes and
decIded by the SC on or beIore ]an. 1,
1992, because 193 says upon
effectivity of this law. For exemptIons
covered by 193 thereIore, Smart and
CIobe are authorIzed to cIaIm exemptIons
because the statue (RA 7082) was enacted
on 1995.

PfQ Inx on snnd, grnveI nnd oIher qunrry
resources (13)

We are through wIth that In the case oI
uIncnn

fQ rojessonnI Inx (139)
thIs must be correIated wIth the tax under
147.

NOTE that thIs Is an exemptIon to the ruIe
that a cIty may Increase the rate oI the tax
under 151 oI the LCC, the Increase Is not
aIIowed.

both 139 and 147 are taxes Imposed
on persons exercIsIng proIessIonaI caIIIng.

L;5>4<8 XZb L;5>4<8 XU\
are to be Imposed
by provInces and
cItIes
are to be Imposed
by munIcIpaIItIes
and cItIes
are appIIcabIe to
workers who must
pass a government
examInatIon (e.g.
engIneers,
physIcIans, etc)
are appIIcabIe to
persons who are
workIng but are
not requIred to
take government
examInatIons
there Is a
maxImum (P300)
NOTE: It Is not
aIways 300, sInce
the exact amt
must be IIxed by
the ordInance.
t does not provIde
Ior any amount,
the onIy
requIrement Is that
It must be
reasonabIe

fPQ nmusemenI Inx (14)

under the RC, there Is aIso amusement
tax under 125.

FA v. UZON CITY (137 5CRA 35)
F: The cIty government enacted a tax
ordInance tryIng to coIIect amusement
tax IncIudIng amusement tax on the P8A
(in Araneta, Cubao); but PBA and no, we
are aIready payIng amusement tax to the
natIonaI government through the 8R
because of 125 of the IRC
H: QC government can no Ionger coIIect on
the ground that It Is aIready beIng
coIIected by the natIonaI government and
secondIy, In the enumeratIons oI
amusement under 140, you wIII never
see proIessIonaI basketbaII. Most oI aII, It
Is the IntentIon oI the author that It Is
onIy the natIonaI government.
*nak ng putang katangahan yan.. the IocaI
tax code PD 231 was enacted In 1974 when
we dont have any professionaI basketbaII..
sInce proIessIonaI basketbaII was born May
1975.
* ano ba dapt tama dIyanZ both the
natIonaI government and the QC government
can coIIect. There Is no vIoIatIon oI the
prohIbIted doubIe taxatIon, because the
taxIng powers are dIIIerent, and not onIy that
140 speaks oI amusement tax on admIssIon
Iee but under 125, It Is abut gross receIpts.

fPPQ deIvery vnn (141)

MJ What if not a delivery van, but sako
IangZ

&J The appIIcabIe tax Is under 143(C)
(peddlers tax, one imposed by munIcIpaIItIes
and cItIes.
I may daIang sasakyan, yarI sIya ng
provInce sa tax.

NOTE: 135141, these are taxes that can be
Imposed by PROVNCES and CTES.
143150 are taxes to be Imposed by
MUNCPALTES, whIch can aIso be Imposed
by CTES.

$0 *2A;3 >F2> 528 ;4>F;7 [; 4@9<3;D [H
N?845492:4>4;3 <7 !4>4;3
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)#

PQ usness Tnx (143(A-H))
a. manuIacturIng, repackIng,
processIng, IncIudIng the
manuIacturer oI permItted IIquor and
aIso Its deaIer
b. whoIesaIIng
c. exportatIon
d. retaIIIng
e. contractors tax
I. tax on bankIng InstItutIon and
IInancIng InstItutIon
g. peddlers tax
h. the exemptIon under 133(I)

MJ I you have two branches, how many
busIness taxes do you have to payZ
&J You pay onIy one busIness tax (146)

ILO-ILO OTTLR5 v. ILO-ILO CITY (1b4 5CRA
b7)
F: IoIIo 8ottIers was aIready payIng a
busIness tax on manuIacturIng under
143(A) to the cIty government by vIrtue
oI a tax ordInance. Later on, they are
obIIged to pay by vIrtue oI another tax
ordInance ImposIng busIness tax on
whoIesaIIng. NaturaIIy, IoIIo 8ottIers
argued, how could it be, if you
manuIacture, It necessary IoIIows that
you seII the commodIty so, wIth the
payment oI the busIness tax on
manuIacturIng, It carrIes wIth It the
business of wholesaling.
H: NO, you have to determIne the marketIng
system oI the company. I whoIesaIIng Is
aIso beIng done In the pIace oI
manuIacture, the busIness tax on
whoIesaIIng shouId no Ionger be paId It
shouId onIy be the busIness tax on
manuIacturIng. 8ut II the marketIng
system oI the company provIdes that
whoIesaIIng shaII be done In a separate
pIace (maybe severaI kIIometers away),
the manuIacturer must stIII pay the
busIness tax on whoIesaIe because now It
couId be argued that they have the
separate busIness oI whoIesaIIng.

MJ On the busIness oI retaIIIng, shouId the
busIness tax oI retaIIIng be Imposed by the
city or by the municipality OR by the
barangay In the cIty or the barrIo In the
munIcIpaIItyZ
&J 143(D) must be correIated wIth 152,
the tax to be Imposed by the barangay.
t depends:
a. cIty
II the gross receIpt oI the retaIIer
exceeds P50T In a mInImum oI
one year, It Is the rIght and
prIvIIege oI a cIty to Impose the
busIness tax on retaIIIng.
b. barangay
dId not exceed P50T, It Is the
barangay councII where the
busIness oI retaIIIng Is Iocated.
c. munIcIpaIIty
dId not exceed P30T wIthIn a
perIod oI one year.
d. barrIo
dId not exceed P30T wIthIn a
perIod oI one year.
NOTE: These dIstInctIons do not appIy In
whoIesaIIng. These are onIy Ior retaIIIng.

Paragraph H: Ior the ImposItIon oI
excIse tax, percentage tax and vaIue added
tax, the munIcIpaIIty may Impose a tax not
exceedIng 2Z oI the gross receIpt (wIth
regard to a cIty, It may go as Iar as 3Z)

PPQ MuncnIIes n MeIro MnnIn who cnn
ncrense Iher rnIe (144)

RIght now there are onIy two
munIcIpaIItIes:
1. San ]uan
2. Pateros

PPPQ FrojessonnI Tnx (147)

we are through wIth that

PfQ Fees jor senIng nnd Icensng oj weghIs
nnd mensures (14)

fQ Fshery renInIs, jees nnd chnrges (149)

)0 L4>?3 <= *2A (150)

The tax reIerred to In here Is the busIness
tax on whoIesaIIng and retaIIIng.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)$
MJ RFM Is manuIacturIng commodItIes, one
oI them Is SwIIt hotdogs, thIs Is beIng soId
not onIy In MandaIuyong, Metro ManIIa, but
aIso to the Inter country Irom 8atanes to
TawItawI. Where shouId the busIness tax oI
whoIesaIIng or the busIness tax oI retaIIIng
be paIdZ ShouId It be In the prIncIpaI oIIIce
(Mandaluyong) or the place where the
commodItIes are soIdZ
&J t wIII be paId In the pIace where It had
been soId PROVDED there Is a branch oIIIce
or a saIes outIet (150(A)).

I It so happens that the company has a
Iactory dIIIerent Irom the pIace where the
prIncIpaI oIIIce Is Iocated 30Z shouId be
paIn In the prIncIpaI oIIIce and 70Z In the
munIcIpaIIty or cIty where the branch Is
Iocated.

FHIL MATCH5 v. CU (1 5CRA 99)
F: PhII Matches were produced In Nagtahan,
ManIIa. n Cebu cIty, there was a
warehouse where the matches were
stored. Many oI the customers, by way oI
whoIesaIe In the warehouse In Cebu CIty,
they came Irom dIIIerent towns oI the
VIsayan RegIon. May the busIness tax
ordInance oI Cebu be Imposed on those
transactIons even II the buyers dId not
come Irom the terrItorIaI jurIsdIctIon oI
CebuZ
H: SInce In thIs case the contract booked and
paId, meanIng, It was negotIated
perIected and consummated In the
warehouse where It was Iocated In Cebu
CIty, the Cebu CIty government has the
rIght to coIIect busIness tax.

MJ What II there Is an agreement that
commodItIes wouId be deIIvered and that the
buyer wouId be waItIng In some other town,
Is the answer stIII the sameZ
&J YES, the answer Is stIII the same because
deIIvery to the carrIer Is deIIvery to the buyer
where deIIvery has been termed wIthIn the
terrItorIaI jurIsdIctIon oI Cebu.

5HLL v. CUCOT, CAMARIN5 5UR (15
FHIL 1b3)
F: The petroIeum products were purchased
at the motor vehIcIe traversIng the
neIghborIng towns oI Cebucot IIke 8ason,
DImaIaon, aII towns In CamarInes Norte.
The contract oI saIe was negotIated and
perIected In dIIIerent munIcIpaIItIes
where the motor vehIcIe oI SheII was
traveIIng.
H: AIthough the oII depot was Iocated In
Cebucot, the saId munIcIpaIIty cannot
Impose tax on that because the contract
oI saIe was negotIated and perIected In
the dIIIerent nearby towns oI CamarInes.

MJ s there a conIIIct wIth the case oI 5heII
and FhI MnIchesZ
&J NONE. As a matter oI Iact, these two
decIsIons compIement each other.

'0 *2A48K 6<B;73 <= >F; 12728K2H (152)

OnIy a mInImaI sum (IaIr and reasonabIe)

Power to Impose tax:
1. On commercIaI breedIng oI IIghtIng
cocks, cockIIghts and cockpIts
must be Ior commercIaI purposes
2. On pIaces oI recreatIon whIch charge
admInIstratIon Iee
3. On bIIIboards, sIgnboards, neon sIgns
and outdoor advertIsements
especIaIIy Ior the barrIos and
barangays aIong the hIghway
4. For barangay cIearance
II you want to engage In the busIness
oI retaIIIng or whoIesaIIng II
barangay captaIn wIII not approve that
wIthIn 7days go to the munIcIpaI
haII or cIty haII Ior approvaI
5. For the use oI barangay property
Ior Instance the barangay has a pIaza.

Y0 !<@@<8 %;G;8?; %24348K 6<B;73
(153155)

MJ Why commonZ
&J AII the LCU couId Impose the same. 8ut It
does not IoIIow that aII the provInces, cItIes,
munIcIpaIItIes couId Impose the same. OnIy
the LCU whIch operate, estabIIsh, maIntaIn
the entIty
I estabIIshed by the provInce, It shouId
onIy be the provInce.

These are:
1. servIce Iee and charges
Ior servIces rendered
2. pubIIc utIIIty charges
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)%
provIded owned, operate and
maIntaIned by them
3. toII Iees and charges
tax or toII Ior the use oI a brIdge or a
street

Padua IIIed a cIvII actIon In the Makat
RTC tryIng to stop the government Iorm
coIIectIng a toII Iree In the South Express
IncIudIng the North expressway aIIegIng that
he Is aIIected as a taxpayer because he Is
Irom Paranaque. He argued that II you use
the property oI the government IIke a street
or a pubIIc pIaza, you do not pay. He made
the anaIogy, that II you go to Luneta, you do
not pay the cIty government oI ManIIa.
The MakatI RTC, the CA and SC had a
unIIorm ruIIng that the operator shouId be
prohIbIted Irom coIIectIng Iurther toII Iess
because II the operator had aIready recovered
hIs Investment and earned an Income
aIready, he shouId be stopped. As argue by
the SC, It copIed the argument oI the Iawyer
(re: Luneta).
NOTE: that Res ]udIcata do not appIy
here.
When the ruIIng became IInaI an
executory In 1993, the North and South
Express were totaIIy dIsmantIed and totaIIy
destroyed by the DPWH to gIve way to the
IInaI and executory ruIIng oI the Court, that t
shouId no Ionger be coIIected.
AIter severaI months, the government
announced In the radIo that the party In the
case oI Padua, mutuaIIy agreed that the
coIIectIon shaII be resumed In order to have
money Ior the maIntenance and repaIr oI the
hIghway.

ExceptIons to 155 (coIIectIon oI toII Iees)
1. members oI AFP
2. members oI the PMP
3. post oIIIce personneI deIIverIng maII
4. physIcaIIy handIcapped
5. dIsabIed cItIzens 65 years and oIder.

,0 !<@@?84>H *2A (156)

In the old days, known as residence tax
certIIIcate.

MJ I the FIIIpIno Is a resIdent oI a IoreIgn
country (NRC), Is he IIabIe to pay the
communIty tax certIIIcateZ
&J NO, because the basIs oI ImposItIon oI
thIs tax Is whether or not you are an
InhabItant oI the PhIIIppInes. MeanIng you
are a resIdent oI the PhIIIppInes.

MJ What about a IoreIgner resIdIng In the
PhIIIppInes (RA)Z
&J YES. You have to pay unIess the IoreIgner
Is a transInvestor Ior not more than
3months.

ThIs Is appIIed to both naturaI and
jurIdIcaI persons.

RequIrements:
1. Ior a naturaI person at Ieast 18
years oI age
2. Ior corporatIons upon regIstratIon
wIth the SEC

MJ What II you become 18 In the month oI
]anuary or November or DecemberZ
&J For those who ceIebrated theIr bIrthday
beIore ]uIy 1 (that Is up to ]une 30), they are
IIabIe to pay the tax, Ior thIs year.
For those who ceIebrated theIr bIrthday
on or aIter ]uIy 1, they are not yet IIabIe to
pay thIs year, but have to waIt untII next year.

MJ s there a dIIIerence Ior those who
reached 18 In the months oI ]anFebMarch
and those who reached 18 In the months oI
AprIIMay]uneZ
&J YES. For those who ceIebrated bIrthdays
In the months oI ]anFebMarch, they have a
grace perIod oI 20days wIthIn whIch to pay.
Those who ceIebrated theIr 18
th
bIrthday In
the month oI AprIIMay]une, they do not
have any grace perIod at aII, they have to pay
the tax ImmedIateIy.

MJ I you have a communIty tax certIIIcate
Ior thIs year (2006), can It be used onIy untII
December 31, 2006Z
&J NO. t shaII be vaIId up to AprII 15, 2007.
(163(C))

d0 &557?2: <= >F; *2A (166)

]anuary 1

MJ What II the tax was onIy approved In the
month oI May 2006, do you have to waIt untII
]anuary 2007Z
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)&
&J NO. You have the rIght to coIIect that In
July 1, because the law is saying that it
shouId be coIIected In the next succeedIng
quarter (167)

Mayor 8Inay had a tax ordInance In May,
sabi ng mga bata niya: bosing, collect na
tayo ng June.
8Inay: hindi nga pupwede, maghintay pa
tayo ng July 1.

MJ What II the tax ordInance had been
exIstIng Ior severaI years aIreadyZ
&J The tIme oI accruaI wIII aIways be ]anuary
1.

%$N$C,$L E-C$% *Y$ ,-*$%-&. %$#$-E$
!"C$

1. RemedIes oI the Covernment
2. RemedIes oI the Taxpayer

6#4#30#) '5 /K# 7'N#&14#1/O

1. Assessment
2. CoIIectIon

Under the NRC, assessment and coIIectIon
have 2 kInds:

1. NormaIJOrdInary assessment and
coIIectIon Sec. 203, NRC
2. AbnormaIJExtraordInary assessment
and coIIectIon Sec. 222, NRC

,0 NormnI,Ordnnry nssessmenI nnd
coIIecIon
There was a return IIIed and It
Is not IrauduIent and not IaIse

,,0 AbnormnI,xIrnordnnry nssessmenI
nnd coIIecIon
There was:
1. an omIssIon or IaIIure to IIIe
the return;
2. II there was a return IIIed, It
was IrauduIent, or;
3. the return was IaIse

MJ s a IaIse and IrauduIent return
presumedZ
&J NO, IaIse and IrauduIent return Is not
presumed. The burden oI prooI to prove that
the return was IaIse and IrauduIent IIes
agaInst the government through the 8R.
The mere Iact that the return Is erroneous
wIII not make the return IrauduIent, It must
be proven by the 8R.

MJ Why Is It Important to know whether the
assessment Is under normaI or abnormaI
condItIonZ
&J t Is Important to know because the
prescrIptIve perIod between normaI and
abnormaI assessment dIIIer.

%&#)(&0:/0N# %#&0'3 5'& E))#))4#1/
YQ NormnI,Ordnnry AssessmenI 3 yenrs
jrom Ihe Ime Ihe reIurn hns been jIed
(noI Ihe nymenI oj Ihe Inx) (5ec. 23,
NIRC)
3 Ways oI IIIIng the return under Sec.
203, NRC:
1. IIIed beIore the deadIIne (Ior any tax
under NRC)
2. IIIed on the date oI deadIIne
3. IIIed aIter the deadIIne
2 Ways oI countIng the 3 year perIod oI
Assessment:
1. II return Is IIIed beIore or on the day
oI the deadIIne, the prescrIptIve
perIod starts on the date oI the
deadIIne;
2. II return Is IIIed aIter the deadIIne, the
prescrIptIve perIod starts on the date
the return has been IIIed.
For the caIendar year oI 2004, a return
must be IIIed and paId Ior Net ncome Tax on
or beIore AprII 15, 2005. SInce he was not
abIe to meet the deadIIne, the taxpayer Is
now beIng assessed Ior tax due Ior 2004. To
mInImIze Interest and surcharges, It has been
suggested by the 8R that the taxpayer IIIe a
Iate return. Supposed he IIIed hIs return
coverIng 2004 on AprII 1, 2006. n thIs
exampIe, the reckonIng poInt Is the deadIIne
oI AprII 15, 2005. The startIng poInt oI the
countIng the 3 yr. perIod Is on the date the
return Is IIIed whIch Is AprII 1, 2006.
Suppose It Is not a Iate IIIIng oI return,
the countIng oI the perIod Is on the date oI
the deadIIne whIch Is AprII 15.

VQ AbnormnI,xIrnordnnry AssessmenI
the government has 2 optIons:
a. Assess and CoIIect
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)'
the prescrIptIve perIod Ior
assessment shall be 10 years from
the dIscovery oI none IIIIng or IaIse or
IrauduIent return (Sec. 222, par. o,
NRC)
the prescrIptIve perIod Ior
collection shall be 5 years Irom the
date oI IInaI assessment (Sec. 222,
par c, NRC)

b. CoIIect WIthout Assessment through
]udIcIaI ActIon
since there is no assessment
there Is no prescrIptIve perIod Ior
assessment
prescriptive period for collection
shaII be 10 years Irom the date oI
dIscovery oI none IIIIng oI return or
IaIse or IrauduIent return.

These optIons are avaIIabIe onIy II the
Assessment Is under the
AbnormaIJExtraordInary CondItIons.
These are not avaIIabIe under
NormaIJOrdInary Assessment

%&#)(&0:/0N# %#&0'3 5'& *'++#(/0'1
X0 NormnI,Ordnnry CoIIecIon Sec. 203
dId not provIde Ior the prescrIptIve perIod
Ior the coIIectIon
ntentIon oI the author: 5 years
Irom the date oI IInaI assessment
Reasons: (Sababan agrees wIth the 5 year
prescrIptIve perIod)
PrescrIptIve perIod oI coIIectIon under
1
st
optIon on AbnormaI Assessment Is
5 years Irom IInaI assessment (Sec.
222, par c, NRC)
1. under the oId code oI 1939, 1977,
and 1985, II the prescrIptIve
perIod Ior coIIectIon under
abnormaI Is 3 years, then the
prescrIptIve perIod Ior coIIectIon
under normaI Is aIso 3 years. I
now a days, It Is 5 years In
abnormaI, the prescrIptIve perIod
Ior normaI shouId aIso be 5 years.
2. to say that there Is a prescrIptIve
perIod Ior coIIectIon under
AbnormaI and there Is none under
NormaI Is too abnormaI. t shouId
be the other way around.

VQ AbnormnI,xIrnordnnry CoIIecIon
a. assess and coIIect 5 years Irom
the IInaI assessment
b. coIIect wIthout assessment
through judIcIaI actIon 10 years
Irom date oI dIscovery oI none
IIIIng, or IaIse, or IrauduIent
return.

MJ How to appIy these perIodsZ
&J AnnuaI net Income tax return IIIed by
IndIvIduaI usIng a caIendar year. The return
shouId be IIIed on or beIore AprII 15, 2000.
t was IIIed on AprII 15, 2000.

M WIthout statIng the date oI IInaI
assessment, can It be coIIected In 2007Z
&J Under normaI condItIon, IIrst determIne
the date oI IInaI assessment. I the 8R IInaIIy
assessed the tax In November 2001, then
2007 Is way beyond the 5year perIod to
coIIect. Count the prescrIptIve perIod Ior
coIIectIon Irom the date oI IInaI assessment.

MJ (same Iacts) Supposed It was IInaIIy assed
on March 2003, can It be coIIected In 2007Z
&J Yes, because It Is wIthIn the prescrIptIve
perIod oI 5years.

A5ILAN v. COMMI55IONR (21 5CRA 17)
F: Supposed the notIce oI assessment was
gIven wIthIn the perIod but It was
receIved by the taxpayer outsIde the
perIod.
: Whether or not the assessment Is wIthIn
the perIod oI 3 years.
H: Yes. t Is wIthIn the perIod. I the notIce Is
sent through regIstered maII, the runnIng
of the prescriptive period is stopped.
What matters Is the sendIng oI the notIce
Is made wIthIn the perIod oI prescrIptIon.

t Is the sendIng oI the notIce and not the
receIpt that toIIs the prescrIptIve perIod.

MJ What II the return has been amended,
how wouId you compute the perIod oI
assessmentZ
&J NRC Is sIIent.

FHONIX v. COMMI5IONR (14 5CRA 52)
I the amendment oI the return Is
substantIaI as dIstInguIshed Irom superIIcIaI,
the countIng oI the prescrIptIve perIod Is aIso
amended. The prescrIptIve perIod shaII be
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)(
reckoned on the date the substantIaI
amendment was made. I the amendment Is
superIIcIaI, the countIng oI the prescrIptIve
perIod Is stIII the orIgInaI perIod.

67<5;D?7; =<7 &33;33@;8> RL;50 TT^] -,%!V
%% XTObbS

Steps oI assessment
1. Sec. 228, NRC (2 steps)
2. RR 1299 (3 steps)

2 Steps under Sec. 228, NRC
1. Preassessment notIce
2. FInaI assessment notIce

3 Steps under RR 1299
1. NotIce oI nIormaI ConIerence
2. PreIImInary Assessment NotIce
3. FormaI Letter oI Demand and NotIce
to Pay the Tax

6%"!$CE%$ RL;50 TT^] -,%!V %% XTObbS
1. Upon receIpt oI the notIce oI InIormaI
conIerence, IIIe a repIy wIthIn 15 days
Irom receIpt oI notIce;
2. FaIIure to IIIe a repIy, 2 thIngs may
happen:
a. 8R wIII send agaIn the NotIce oI
nIormaI ConIerence or
b. 8R wIII send a PreIImInary NotIce
oI Assessment
3. Upon receIpt oI PreIImInary
Assessment NotIce (PAN), IIIe a repIy
wIthIn 15 days Irom receIpt
4. FaIIure to IIIe a repIy wIII resuIt In
eIther:
a. 8R wIII repeat PAN
b. DecIare the taxpayer In deIauIt,
and send you a FInaI Assessment
NotIce (FAN)
5. Upon receIpt oI FAN, taxpayer may
IIIe a protest wIthIn 30 days.

MJ s FAN the one appeaIabIe to the Court oI
Tax AppeaIs (CTA)Z
&J NO. ThIs Is because 228, NRC and RR
1299 requIres the exhaustIon oI
admInIstratIve remedy oI protest. AIter the
receIpt oI FAN or IormaI demand wIthIn
30days must IIIe a protest beIore the oIIIce
oI the commIssIoner oI InternaI revenue.

)"%NL ") 6%"*$L*
1. LocaI Tax (Sec. 125, LocaI
Covernment Code (LCC))
2. ReaI Property Tax (Sec. 252, LCC)
3. TarIII and Customs Code (Sec. 2313,
RA 7651)

n aII protest under the dIIIerent codes,
payment under protest Is onIy necessary
under the Real Estate Tax.

66 YV9ii
I the taxpayer receIves 2 IInaI
assessments, one under the Net ncome Tax
(NT) and the other In VAT. I the taxpayer
dont want to file protest under VAT but want
to IIIe a protest under NT. The taxpayer In
order to be aIIowed to IIIe a protest under the
NT must IIrst pay the VAT where he does not
Intend to IIIe a protest.

This is not payment under protest
because, payment under protest Is the one
mentIoned In ReaI Property Tax under Sec.
252, LCC.

Under NRC, Protest Is reIerred to as:
1. dIsputIng oI IInaI assessment or
2. IIIe a motIon Ior reconsIderatIon or
reInvestIgatIon

MJ What shouId be done aIter IIIIng a
protestZ
&J Count 60days Is the perIod to IIIe the
necessary documents and receIpts In support
oI the protest.

MJ What Is the eIIect oI IaIIure to IIIe the
supportIng documentsZ
&J FaIIure to IIIe the necessary and
supportIng documents wIthIn the 60day
perIod, to be counted on the day the protest
Is IIIed, the IInaI assessment shaII become
IInaI and executory.

On the 51
st
day you IIIed the necessary
document, you have to count another perIod,
whIch Is 180 days Irom the day you IIIed the
necessary documents.

ReIevance oI the 180 Days: 180 days Is
the tIme gIven to the 8R to decIde the case

MJ Supposed It dId not decIde the case
wIthIn 180daysZ
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

))
&J Do not Invoke the Lascano case because
It was rejected by RA 9282
n the Lascano case, beIore you IIIe an
appeaI aIthough the 180 days have Iapsed,
you have to waIt Ior the 8R to take posItIve
actIon.
The case was ruIed onIy by the CTA,
hence It Is not a Iaw. The jurIsdIctIon oI the
CTA has been amended by RA 9282.
RA 9282 provIdes that In case oI InactIon
oI the commIssIoner aIter the Iapse oI
180days, remedy Is to IIIe an appeaI.
RR 1299 says that aIter Iapse oI 180days
but wIthIn 30days aIter 180days, that Is the
tIme to IIIe an appeaI.

MJ Supposed the 8R ruIe wIthIn 180Z
&J WIthIn 30days Irom receIpt oI the
decIsIon IIIe an appeaI to the CTA sIttIng In
dIvIsIon.

MJ Supposed the CTA decIded not In your
IavorZ
&J FIIe a motIon Ior reconsIderatIon wIthIn
15days to the same dIvIsIon decIdIng the
case.

MJ Supposed the CTA, In dIvIsIon decIded
not In you IavorZ
&J FIIe an appeaI to the CTA sIttIng en banc.

MJ Supposed the CTA en banc decIded not In
your IavorZ
&J FIIe an appeaI wIthIn 15days Irom receIpt
oI decIsIon to Supreme Court.

MJ DurIng the pendency oI the protest In the
oIIIce oI the CommIssIoner, supposed you
receIve a notIce oI coIIectIon, Ievy andJ or
dIstraInt, what Is your remedyZ
&J
1. YA5 v. COMMI55IONR (15 5CRA
27)
2. UNION 5HIFFINC LIN5 v.
COMMI55IONR (15 5CRA 547)

YA5 v. COMMI55IONR (15 5CRA 27)
F: The taxpayer receIves a notIce oI
coIIectIon whIIe waItIng Ior the decIsIon
oI his protest. He then filed an appeal
wIth the CTA contendIng hIs protest has
been denIed because he dId not receIve a
decIsIon but receIve a notIce oI coIIectIon.
SImuItaneousIy, the 8R IIIed beIore the
CFI an ordinary civil action for the
coIIectIon oI sum oI money. When the
judge oI the CF, was about to conduct
the hearIng oI the case, the taxpayer IIIed
an InjunctIon wIth the SC to prohIbIt the
judge oI the CF contendIng that a sIngIe
cause oI actIon Is pendIng In two courts,
one In the CTA and another In CF.
H: njunctIon was granted prohIbItIng the
]udge oI the CF and requIrIng the ]udge
to transIer the records to the CTA sayIng
that the remedy made by the taxpayer
was the correct remedy.

MJ Was the appeaI made on tImeZ
&J Yes, when the 8R IIIed an ordInary actIon,
the protest Is deemed denIed. Hence an
appeaI Is a proper remedy.

UNION 5HIFFINC LIN5 v. COMMI55IONR
F: The taxpayer was waItIng Ior the decIsIon
oI hIs protest. 8ut Instead, he receIved a
notIce oI coIIectIon. mmedIateIy, he IIIed
a MotIon Ior ReconsIderatIon and
CIarIIIcatIon askIng whether hIs protest
has been denIed. The 8R dId not repIy or
answer but Instead IIIed an OrdInary CIvII
ActIon beIore the CF. When the taxpayer
receIved summons, he dId not answer but
Instead IIIed an AppeaI beIore the CTA.
: Whether or not the remedy oI AppeaI was
the correct remedy and Whether or not It
was IIIed on tIme.
H: Yes. The remedy oI appeaI Is the correct
remedy and the appeaI was IIIed on tIme.
The reckonIng perIod wIthIn whIch to IIIe
an appeaI Is the tIme the taxpayer
receIved the summons.

WhIIe an AppeaI Is pendIng beIore the CTA,
the CTA wIII determIne:
1. I the decIsIon was made wIthIn 180
days, whether the appeaI was made
wIthIn 30 days Irom the receIpt oI the
saId decIsIon, or
2. II there was no decIsIon aIter the
Iapse oI 180 days, whether the appeaI
was made wIthIn 30 days upon the
expIratIon or the Iapse oI the 180day
perIod.

MJ PendIng appeaI wIth the CTA, can the 8R
amend the IInaI assessmentZ
&J 2 SCHOOLS OF THOUCHT:
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

)*
1. CURRRO v. COMMI55IONR (19
5CRA 25)
2. ATANCA5 v. COLLCTOR (12
FHIL 22)

CURRRO v. COMMI55IONR (19 5CRA 25)
YJ No. 8ecause It Is no Ionger the dIsputed
assessment.

ATANCA5 v. COLLCTOR (12 FHIL 22)
YJ Yes. n order to avoId muItIpIIcIty oI suIts

ACCORDNC TO ]USTCE VTUC:
ATANCA5 v. COLLCTOR (12 FHIL 22) s
Ihe beIIer ruIng

6%"*$L* E-C$% ."!&. *&+ RL;50 Xb_]
.'!S
Under NRC, protest Is IIIed In the OIIIce
oI the CommIssIoner
Under LCC, protest Is IIIed wIth the same
CIty or ProvIncIaI or MunIcIpaI Treasurer who
Issued the assessment

PerIod to IIIe Protest
60 days Irom receIpt oI assessment

MJ I the treasurer dId not decIde wIthIn a
60day perIod, remedyZ
&J Co to the court oI competent jurIsdIctIon
(RTC)

MJ I the RTC decIded not In you IavorZ
&J FIIe an appeaI wIth CTA en banc
(begInnIng AprII 23, 2004)

MJ I the CTA decIded not In your IavorZ
&J AppeaI to the SC.

NOTE:
Pursuant to RA 9282, dIrect appeaI to CTA en
banc can be made Irom:
1. DecIsIon oI the RTC InvoIvIng IocaI
taxatIon exercIsIng appeIIate
jurIsdIctIon
2. DecIsIon oI the CentraI 8oard oI
Assessment AppeaI exercIsIng
appeIIate jurIsdIctIon.

6%"*$L* E-C$% %$&. 6%"6$%*Q *&+
RL;530 TT`] TZc] 28D T_TS
Remedy shaII be the same

L;50 T_T] .'!
I the taxpayer receIves a NotIce oI
Assessment Irom munIcIpaI, cIty, or
provIncIaI treasurer, the remedy Is to
IIIe a protest but there must be IIrst
Payment Under Protest.
ThIs Is the onIy Instance where
payment under protest Is
necessary

MJ How Is payment under protest madeZ
&J At the back oI the receIpt there wIII be an
annotatIon that there was a payment under
protest wIthIn 60days Irom receIpt oI the
notIce oI assessment wIthIn the same
treasurer who Issued the assessment.

MJ I the treasurer ruIes agaInst the taxpayer,
remedyZ
&J The remedy Is to IIIe an appeaI to the
LocaI 8oard oI Assessment wIthIn 30days
Irom the receIpt oI the decIsIon.

MJ From the decIsIon oI the LocaI 8oard oI
AssessmentZ
&J AppeaI shouId be made to the CentraI
8oard oI Assessment AppeaI.

8egInnIng AprII 23, 2004, the ruIIng oI
the CentraI 8oard oI Assessment AppeaI Is no
Ionger IInaI. t can now be appeaIed to the
CTA, sIttIng en banc.

6%"*$L* E-C$% *Y$ *&%,)) &-C
!EL*"NL !"C$ R*!!S RL;50 TZXZ] 23
2@;8D;D [H %& \`_XS

FormerIy, the automatIc appeaI under the
TCC appIIed onIy to protest; but now a days,
the automatIc appeaI appIIes to both protest
and IorIeIture.

For ForIeIture Under the TarIII and Customs
Code
ReIers to the Order oI the CoIIector
conIIscatIng the Imported goods or
commodItIes

!'(/&01# '5 %&04,&= j"&0)30(/0'1
I the CoIIector ordered the IorIeIture oI
the Imported commodItIes the order oI the
CoIIector shaII be to the excIusIon oI aII
government oIIIces and authorIty.

!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

*+
mporter oI ChemIcaI, under the TCC, the
custom dutIes Is onIy P27 but the coIIector
says It shouId be P52. The Importer wIII then
IIIe a protest wIth the OIIIce oI the CoIIector.
n the oId days, there Is an automatIc
appeaI Irom the decIsIon oI the coIIector
under protest. 8ut under RA 7651, the
remedy oI automatIc appeaI Is appIIcabIe to
both protest and IorIeIture.

. In boIh cnses oj roIesI nnd jorjeIure, j
Ihe morIer Iose Ihe cnse nnd Ihe
governmenI wns, Ihe remedy s Io jIe nn
nenI wIhn 15 dnys bejore Ihe Ojjce oj Ihe
Commssoner.
From the ruIIng oI the CommIssIoner,
the Importer shouId IIIe an appeaI
wIthIn 30 days beIore the CTA, sIttIng
In dIvIsIon.
From the ruIIng oI the CTA In dIvIsIon,
the Importer shouId IIIe an MR wIthIn
15 days beIore the same dIvIsIon
hearIng the case.
From the ruIIng oI the CTA In dIvIsIon,
decIdIng on the MR, the Importer
shouId IIIe an appeaI wIthIn 15 days
beIore the CTA sIttIng en banc.
From the CTA en banc, appeaI to SC
wIthIn 15 days.

. Ij Ihe morIer-Inxnyer wns Ihe cnse, Ihe
governmenI Iose Ihe cnse, 5ec. 2313 oj TCC
ns nmended by RA 7b51, Ihere shnII be nn
nuIomnIc revew wIhn 15 dnys.

MJ Where shouId the automatIc revIew be
madeZ
&J t depends. PubIIsh the vaIue oI the
commodIty.
1. F P5 MLLON OR MORE AUTOMATC
REVEW SHALL 8E 8EFORE THE
SECRETARY OF THE DEPT. OF
FNANCE.
2. F LESS THAN P5 MLLON
AUTOMATC REVEW SHALL 8E 8EFORE
THE OFFCE OF THE COMMSSONER

MJ Suppose the commIssIoner decIde or dId
not decIde wIthIn 30days, what happensZ
&J I the commIssIoner reverses the ruIIng oI
the coIIector, the ruIIng Is IInaI and
executory.
I the commIssIoner aIIIrms or dId not
decIde wIthIn 30days, there shaII be an
automatIc appeaI beIore the sec. oI IInance.

MJ 8etween the two whIch wIII be appeaIed
to the CTAZ
&J The decIsIon oI the secretary whIch
passes through the oIIIce oI the
commIssIoner (RA 9282)
8ut not aII the decIsIon oI the secretary
whIch passes the oIIIce oI the commIssIoner
aIIIrms or dId not decIde wIthIn 30days and
appeaIed beIore the secretary oI IInance wIII
appeaI to the CTA be aIIowed.

There are 3 Instances when the Secretary oI
FInance renders a decIsIon appeaIabIe to the
CTA:
1. decIsIon oI the Secretary by vIrtue oI
automatIc revIew passIng through the
CommIssIoner
2. cases oI antIdumpIng duty, where the
antIdumpIng duty was ordered by the
Secretary
3. decIsIon oI the Secretary oI FInance
on countervenIng duty.

!"N6%"N,L$ RL;50 TcU] -,%!S

3 QuestIons asked In 2004 8AR:
1. May the Covernment compromIse
crImInaI cases and cIvII casesZ
2. Supposed the corporatIon Is aIready
dIssoIved, can the stockhoIder be
obIIged to payZ
3. Suppose the cIvII case IIIed by the 8R
Is IInaI and executor, can It be subject
to compromIseZ

!&- *Y$%$ 1$ !"N6%"N,L$ ,-J
X0 CVL CASESZ
YES, N ANY STACE OF THE
PROCEEDNC
EXCEPT WHEN THE CVL CASE S
ALREADY FNAL AND EXECUTORY
8ECAUSE T WLL 8E VOLATVE OF
THE SEPARATON OF POWERS
T0 CRMNAL CASESZ
YES, EXCEPT:
a. F ALREADY FLED N COURT
(RTC) OR;
b. F T NVOLVES FRAUD
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

*!
Z0 F THE CORPORATON S ALREADY
DSSOLVED, CAN THE STOCKHOLDER 8E
HELD LA8LE TO PAY TAXZ
CENERAL RULE: NO
EXCEPT:
a. F T S PROVEN THAT THE
ASSETS OF THE COPORATON
S TAKEN 8Y ONE
STOCKHOLDER OR;
b. F THE STOCKHOLDER DD
NOT PAY HS UNPAD
SU8SCRPTON

MInImum Amount to be CompromIsed (Sec.
204)
1. I the ground Is IInancIaI IncapacIty oI
the taxpayer, the mInImum shaII not
be Iess than 10Z oI the orIgInaI
assessment.
2. I based on other grounds, the
mInImum amount shaII not be Iower
than 40Z oI the orIgInaI assessment.

MJ Can It be Iower than that prescrIbed by
IawZ
&J As a ruIe, no. EXCEPT, II aIIowed by the
evaIuatIon board consIstIng oI the:
a) commIssIoner; and
b) deputy commIssIoner.

nstances when the FInaI Assessment
becomes IInaI and executor:
1. I the taxpayer dId not IIIe the protest
on tIme
2. FaIIure to submIt the supportIng
documents wIthIn the 60day perIod
3. AIter the Iapse oI the 180day perIod,
you dId not IIIe an appeaI wIthIn the
30day perIod to the CTA
4. An appeaI was IIIed but made beyond
the regIementary perIod to appeaI

N$*Y"CL ") !"..$!*,"- RL$!0 Tc_S
X0 )udcnI AcIon
a. CIvII
b. CrImInaI
T0 AdmnsIrnIve AcIon
a. DIstraInt
b. Levy
c. Tax IIen

MJ Why Is It Important to know whether the
IInaI assessment Is under normaI or
abnormaI condItIonsZ
&J t Is Important because oI the
requIrement under 222. I the IInaI
assessment becomes IInaI and executory, the
government (8R) can exercIse the remedIes
under 205 In any order or sImuItaneousIy
(207). 8ut It Is not aIways the case, because
the rIght oI the government to coIIect Is
IImIted In case oI abnormaI
assessmentJcoIIectIon under 222. Under
the second optIon, the rIght oI the
government Is IImIted to judIcIaI actIon eIther
cIvII or crImInaI. AdmInIstratIve remedIes
such as dIstraInt, Ievy, or tax IIen Is not
avaIIabIe under such condItIon.

MJ n dIstraInt, Ievy or tax IIen, Is the 10 year
perIod oI coIIectIon appIIcabIeZ
&J No, onIy the 5year perIod shouId appIy.

!0)/&,01/

KInds:
1. ConstructIve (Sec. 206)
2. DIstraInt oI ntangIbIe (Sec. 208)
3. ActuaI (Sec. 207, par. a, and Sec. 209)

X0 ConsIrucIve DsIrnnI

The dIstraInIng oIIIcer shaII make a IIst oI
the personaI property oI the property to be
dIstraInt In the presence oI the owner oI the
property or the person In possessIon oI the
property.
The owner shaII be requested to sIgn the
receIpt.

MJ What II the owner reIuses to sIgn the
receIptZ
&J Sec. 206: The dIstraInIng oIIIcer shaII
requIre 2 IndIvIduaIs wIthIn the neIghborhood
wIth the warnIng that they shouId not aIIow
the taxpayer to dIspose, transIer, or seII the
property subject oI dIstraInt.

Crounds Ior ConstructIve DIstraInt (Sec. 206):
1. The taxpayer Intends to Ieave the
PhIIIppInes
2. The taxpayer Ieaves the PhIIIppInes
3. The taxpayer ceases or retIres Irom
busIness
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

*#
4. The taxpayer obstructs the coIIectIon
oI the tax.

THESE CROUNDS ALSO ANSWER THE
QUESTON: WHAT ARE THE TAXA8LE PEROD
LESSER THAN 12 MONTHSZ

T0 DsIrnnI oj InInngbIe FroerIy

LImIted to 3 ntangIbIe PropertIes:
1. Shares oI stocks
2. 8ank accounts
3. CredIts and debIts

5hnre oj sIocks
Warrant oI dIstraInt IurnIshed to the
taxpayer or the oIIIcer oI the corporatIon
wIth the warnIng that the property Is
subject oI dIstraInt and It shouId not
dIspose oI It.

nnk AccounIs
taxpayer or the oIIIcer oI the bank wIth
the warnIng that the taxpayer shouId not
be aIIowed to wIthdraw.

DebIs nnd CredIs
debtor and credItor

Z0 AcIunI DsIrnnI

PersonaI property shaII be physIcaIIy
taken by the dIstraInIng oIIIcer.
WIthIn 10 days Irom the receIpt oI the
warrant, a report oI the dIstraInt shaII be
submItted to the 8R (Sec. 207, par a Iast
par.)
The property subject oI dIstraInt shaII
be soId at a pubIIc auctIon EXCEPT bank
accounts and debIts and credIts.
NotIce oI saIe shaII be by postIng
In 2 conspIcuous pIace, statIng the
date and the pIace oI the saIe (No
pubIIcatIon requIrement)
Sec. 211: aIter the saIe and wIthIn 2
days, a report shaII be made to the 8R

MJ I the property soId Is a personaI
property, Is there a rIght oI redemptIonZ
&J NO. The ruIe Is absoIute.

MJ I the property Is a personaI property, Is
there a rIght oI preemptIonZ
&J SEC. 210: 8eIore the scheduIed saIe, the
taxpayer Is aIIowed to recover the property
by payIng aII the property by payIng aII the
proper charges as weII as the Interest, cost
and penaItIes.

DurIng the ScheduIed AuctIon SaIe, 2 ThIngs
may happen:
1. There Is bIdder and the bId Is enough
2. There Is no bIdder or there Is a bIdder
but the bId Is not enough

MJ What Is the reIevance oI knowIng the
dIIIerenceZ
&J 1. Ij Ihere s n bdder nnd Ihe bd s
enough
n case oI InsuIIIcIency, there shaII be
Iurther dIstraInt to cover the IIabIIIty.
(217)
n case oI excess, the excess shaII be
returned to the taxpayer.
2. Ij Ihere s no bdder or Ihe bd s noI
enough.
t wIII be purchase by the government
and the Iater soId In a pubIIc auctIon
agaIn (212)
n case oI InsuIIIcIency, no Iurther
dIstraInt, 217 appIIes onIy II there was a
bIdder.
n case oI excess, the excess shaII not
be returned to the taxpayer but shaII be
remItted to the natIonaI treasury.

R#N=

Other than the deIInquent taxpayer,
warrant oI Ievy Is served to the regIster oI
deeds havIng jurIsdIctIon over the reaI
property (Sec. 213)
WIthIn 10 days Irom the receIpt oI the
warrant, a report oI the Ievy shaII be
submItted to the 8R (Sec. 207 (b) Iast
par)

NotIce oI SaIe In PubIIc AuctIon:
1. PostIng In 2 conspIcuous pIaces
2. PubIIcatIon In newspaper oI generaI
cIrcuIatIon once a week Ior 3
consecutIve weeks.

MJ s there a rIght oI pre emptIonZ
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

*$
&J Yes, 213.

MJ s there a rIght oI redemptIonZ
&J Yes.

2 ThIngs may happen In a PubIIc AuctIon:
1. There Is a bIdder and the bId Is
enough
2. There Is no bIdder or the bId Is not
enough

MJ What II there Is no bIdder or the bId Is not
enoughZ
&J ForIeIture shaII be made (215)

3 DeIInItIons oI ForIeIture under the nternaI
Revenue Code
1. VIoIatIon oI ExcIse Tax Law (Sec. 224)
2. I there Is no bIdder or the bId Is not
enough (Sec. 215)
3. The order oI the CoIIector to
conIIscate Imported commodItIes
(Sec. 2313, TCC)

ReIevance oI the ChoIce oI Words:
Under sec. 212, the Iaw says
purchase
Under sec. 215, the Iaw says
forfeiture
under 215: the reaI property shaII
be automatIcaIIy regIstered In the
name oI the Covernment (IorIeIture)
under 212: the reaI property Is
not automatIcaIIy regIstered In the
name oI the Covernment (purchase)

MJ I soId at a prIvate saIe, what Is the
requIrementZ
&J There must be an approvaI oI the
Secretary oI FInance (216)

MJ AIter saIe, II there was deIIcIencyZ
&J There shaII be no Iurther Ievy, because
215 says that It shaII be to the totaI
satIsIactIon oI the taxpayer.

MJ AIter saIe, II there was an excessZ
&J t shaII not be returned to the taxpayer
but shaII be remItted to the natIonaI treasury.

L;50 TX\J thIs Is onIy true II there was no
bIdder or the bId was not enough because oI
the provIsIons oI the Secs. 212, 215, and 216

L;50 TX^J no court shaII Issue an InjunctIon
to restraIn the coIIectIon oI tax under thIs
code

DetermIne what kInd oI InjunctIon Is reIerred
to here:
1. ProhIbItory reIerred In Sec. 218
because It restraIns the coIIectIon oI
tax.
2. Mandatory

MJ Is the provision limited to tax under this
code?
&J LImIted to InternaI revenue taxes.
EXCEPT: CTA (ReguIar Court) RA 1125 and
9282: CTA Is authorIzed to Issue InjunctIon
to restraIn the coIIectIon oI taxes or Iees
coIIected under other code.

MJ s the ruIe oI dIstraInt or Ievy the same
under IocaI taxatIonZ
&J Yes, IocaI tax.
175 Ior DSTRANT
176 Ior LEVY

MJ How about reaI property taxZ
&J No, dIstraInt Is not authorIzed (256,
LCC), because the remedy Is onIy )udcnI
AcIon and Levy.

;,< R0#1

Non payment oI tax, the government has
the rIght to cIaIm a IIen over the property oI
the taxpayer
1. NRC Sec. 219, NRC
2. LocaI Tax Sec. 173, NRC
3. ReaI Property Tax Sec. 257, NRC

MJ Supposed a parceI oI Iand Is about to be
IevIed by the government, but the same Is
beIng IorecIosed by the mortgagee, whIch oI
the 2 obIIgee, the government or the
mortgagee shaII be preIerredZ
&J 219, Iast portIon: The government Is
the preIerred one II the IIen Is annotated and
recorded In the regIstry oI deed. n the
absence oI annotatIon In the regIstry oI
deeds, the mortgagee Is preIerred.

MJ Do we have the same ruIe under LocaI
Tax and ReaI Property TaxZ
&J NO. 8oth 173 and 257, the government
Is aIways the preIerred one. The IIen can onIy
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

*%
be removed by payment oI tax, Interest and
penaIty.

L;50 TTcJ approvIng oI IIIIng an ordInary cIvII
actIon Ior vIoIatIon oI the InternaI revenue
code

The approvaI must be made by the
CommIssIoner oI nternaI Revenue

GPSC8 NQ 6-%MFRP* AZV` ?*6E [XWB
)J An ordInary cIvII actIon Ior vIoIatIon oI the
tax code was IIIed In the cIty oI San
Fernando. 8ut the IIIIng was onIy
approved by the Revenue RegIonaI
DIrector oI CentraI Luzon. The pIaIntIII
opposed the IIIIng In the court on the
ground that It shouId be approved by the
CommIssIoner and the Revenue RD.
YJ Sec. 220 shouId be read wIth Sec. 7 oI the
NRC
CeneraI RuIe: powers and
IunctIons oI the CommIssIoner may
be deIegated but not to a posItIon
Iower than a DIvIsIon ChIeI
Under Sec. 7, there are powers
whIch can not be deIegated
a) Power to recommend to the
Secretary oI FInance to Issue
ruIes and reguIatIon
b) Power to decIde a case oI IIst
ImpressIon
c) Power to enter Into a
compromIse agreement
d) Power to assIgn 8R oIIIcer In
the pIace oI productIon
subject to Income tax
SInce the case does not IaII under
the prohIbIted deIegatIon, the IIIIng oI
the case Is IegaI and tenabIe.

DecIsIon oI the CommIssIoner oI nternaI
Revenue (CR) Is appeaIabIe to CTA.

MJ When Is a decIsIon oI the cIr appeaIabIe
to the Secretary oI FInanceZ
&J 4, on matters oI InterpretatIon oI tax
Iaws.

L$!0 TTZJ LEL6$-L,"- ") *Y$ %E--,-'
") 6%$L!%,6*,#$ 6$%,"C

MJ A FIIIpIno taxpayer went to Canada, aIter
15years he went back, he Is beIng assessed
by the 8R under normaI assessment. Has the
rIght oI the government to asses the tax
aIready prescrIbedZ
&J NO. When he went to Canada, the runnIng
oI the prescrIbed perIod Is suspended.

MJ What II the change oI address Is wIthIn
the PhIIIppInes, say onIy Irom manIIa to Pasay
CIty, Is the runnIng oI the prescrIptIve perIod
suspendedZ
&J n order that the runnIng oI the
prescrIptIve perIod wIII not be suspended,
especIaIIy II the change Is dIstrIct oIIIce,
223 provIdes that the taxpayer must send a
wrItten notIce oI change oI address to the
8R.
n the absence oI the wrItten notIce, the
perIod wIII be suspended.

MJ Change oI address Is Irom PhIIIppInes to
abroadZ
&J The perIod wIII be suspended.

Other Crounds Ior SuspensIon:
1. DurIng coIIectIon II there Is no
property Iound, the perIod Is
suspended
2. I the 8R Is prohIbIted Irom makIng
assessment such when the subject
property Is under IItIgatIon
3. n dIstraInt oI Ievy, the 8R oIIIcer
cant locate the property

!.&,N )"% %$)E-C RL$! TTbS

WrItten cIaIm Ior reIund:
1. Sec. 229, NRC
2. Sec. 112, VAT
3. Sec. 136, LocaI Tax
4. Sec. 253, ReaI Property Tax
5. None except sec. 1603, TarIII and
Custom

/74>>;8 5:24@ =<7 7;=?8D ?8D;7 >F; 489?>
>2A RL;50 XXTS
PerIod Is aIso 2 years Irom the cIose oI
the taxabIe quarter when the transactIon was
made

MJ Can we appIy 229 to VATZ
&J Yes, because there Is no conIIIct. 112 Is
reIund under Input tax system.
!"#"!$%& (") *+,$+) &%!+-
. "!!/0 1*"&2$- 30 -"4"4"& .

*&
229 Is reIund Ior:
1. errors In payment or;
2. coIIected wIthout authorIty; or
3. assessment wIthout authorIty.

The perIod to cIaIm reIund Is 2years.

C<5>748; <= $a?4>2[:; %;5<?9@;8>
I a taxpayer Is entItIed to a wrItten cIaIm
Ior reIund but the prescrIptIve perIod to
cIaIm has Iapsed, the taxpayer Is aIIowed to
credIt hIs wrItten cIaIm Ior reIund whIch he
IaIIed to recover to hIs exIstIng tax IIabIIIty.

Computed Irom;
a. ndIvIduaI counted on the day the
tax has been paId
1. payIng by way oI wIthhoIdIng tax
system, the reckonIng poInt Is the
end oI the taxabIe year.
2. payIng by way oI InstaIIment,
reckonIng poInt Is the date the
Iast InstaIIment Is paId.
3. II soId to pubIIc auctIon through
dIstraInt or Ievy, the date the
proceeds Is appIIed to the
satIsIactIon oI the tax IIabIIIty.

b. CorporatIon
1. ExIstIng
1992, *** v. CommIssIoner (205
SCRA 184)
1995, CommIssIoner v. PhIIam IIIe
(244 SCRA 446)
1998, CommIssIoner v. CTA (301
SCRA 435)
2. NonexIstIng
2001, 8P v. CommIssIoner (363
SCRA 840)

1. ExIstIng the countIng oI the
prescrIptIve perIod Is 2 years on the
day the annuaI adjusted return Is
IIIed, because It Is at that day that the
tax IIabIIIty Is known.
2. NonexIstIng the countIng oI the
prescrIptIve perIod shouId aIso be
reckoned on the day the annuaI return
Is IIIed. 8ut the corporatIon Is no
Ionger requIred to waIt tIII the taxabIe
perIod Is over to IIIe the return. Upon
receIpt oI a notIce Irom the SEC to
dIssoIve the corporatIon, wIthIn 30
days thereaIter, a return shouId be
IIIed.

MJ Suppose there Is a supervenIng event,
and the taxpayer was not abIe to IIIe a wrItten
cIaIm oI reIund wIthIn the perIodZ
&J RegardIess oI supervenIng event, a
wrItten cIaIm Ior reIund must be IIIed wIthIn
2years.

MJ Suppose the 2 year perIod Is about to
expIre and there Is no decIsIon yet as to your
reIundZ
&J Remedy Is to IIIe an appeaI beIore the
CTA (deemed a denIaI)

MJ Suppose the 8R decIded wIthIn 2 years
agaInst the reIundZ
&J AppeaI wIthIn 30days Irom the decIsIon,
provIded It Is stIII wIthIn the 2 year perIod.

MJ Suppose there Is onIy 21days remaInIng
aIter receIvIng the decIsIon, when to IIIe an
appeaIZ
&J WIthIn 21days beIore the end oI the 2
year perIod.

A wrItten cIaIm Ior reIund shouId be IIIed
wIthIn 2 years

Sec 204 (c) Iast phrase: In case oI over
payment a wrItten cIaIm Is not necessary
because a return constItutes a wrItten cIaIm
Ior reIund.

MJ May the commIssIoner oI InternaI revenue
open the bank account oI a taxpayerZ
&J CeneraI RuIe: NO. EXCEPT:
1. To determIne the gross vaIue oI the
estate; and
2. To enter Into a compromIse
agreement. (under 204(A))

The wrItten cIaIm Ior reIund to determIne
the gross vaIue oI the estate because the
taxpayer Is aIready dead
n case oI compromIse, there must be
consent.

Tax Sababan PDF

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Tax Sababan PDF

Încărcat de

Drepturi de autor:

Formate disponibile

!"#"!$%& (") *+,$+) &%!

S-ar putea să vă placă și