under the said law.

Tax Updates 2015

I.

General Principles

??? Is the building permit fee a tax from

which Petitioner is exempt?

!!! It is a REGULATORY FEE. The DPWH

has in fact issued implementing rules
La Suerte Cigar & Cigarette Factory vs.which provide the bases for the
assessment of fees and Petitioner has
CIR
failed to show that they were arbitrarily
The cigarette manufacturers
determined or unrelated to the activity
contend that for a long time prior to
being regulated. Neither has there
the transactions involved in the case,
been
proof
that
the
fee
was
the CIR had never subjected their
unreasonable or in excess of the cost of
purchases
and
importations
of
regulation or inspection. The Court
stemmed leaf tobacco to excise
added that even if there was incidental
taxes.
revenue, the same is deemed not to
change the nature of the charge. Thus,
???
Will
an
erroneous
the City of Angeles was justified in its
interpretation by a BIR oficer
assessment.
based on a misapprehension of
law put the government in
estoppel?
CIR vs. Pilipinas Shell Petroleum
!!! NO. Prolonged practice of the BIR in
not collecting specific tax on stemmed
leaf tobacco cannot validate what is an
otherwise erroneous application and
enforcement
of
the
law.
The
government is never estopped from
collecting legitimate taxes because of
the error committed by its agents. The
BIR is not precluded from making a
new
interpretation
of
the
law,
especially when the old interpretation
was flawed.

Corporation
Shell filed a claim for refund
for excise taxes it paid on sales
of gas and fuel oils to various
international carriers. The Court
initially denied the claims but
the Respondent filed a Motion for
Reconsideration
??? Is Shell entitled to refund the excise
taxes?

!!! YES. Section 135 is concerned with

the exemption of the article itself and
Angeles University Foundation vs. Citynot the ostensible exemption of the
international
carrier-buyer.
In
of Angeles
addition,
the
failure
to
grant
Petitioner is a non-stock, non-profit
exemption will cause adverse impact
educational foundation. It received a
on the domestic oil industry (similar
Building Permit Fee assessment for
to the practice of tankering) as well
the construction of the AUF Medical
as result to violations of international
Center but claimed exemption from
agreements
on
aviation.
Thus,
the same as well as from other
Respondent,
as
the
statutory
permits
and
fees.
Respondent
taxpayer who is directly liable to pay
disputed the claimed exemption by
the excise tax is entitled to a refund
stating that the impositions are
or credit for taxes paid on products
regulatory in nature and not taxes
sold to international carriers.
from which Petitioner is exempt

Philippine Airlines, Inc. vs. CIR

Caltex sold aviation fuel to PAL
and included excise taxes in its
billings. PAL filed for a refund of the
excise taxes passed-on to it by
Caltex. The claim was based on PALs
franchise which confers upon PAL tax
exemption on purchases of fuel. The
CTA denied PALs claim using as
basis the earlier decision in Silkair.
??? Does PAL have standing to refund
excise taxes passed-on by Caltex?
!!! YES. The case of Silkair is not
applicable
since
PALs
franchise
provides
it
with
tax
exemption
privileges from both direct and indirect
taxes. While there have been previous
cases discussing which party is entitled
to a refund in the case of excise taxes
sold to exempt entities, the Court
reiterated the statement in Silkair
which said that it is primarily the
statutory taxpayer which has the right
to file the claim. However, the above
rule was deemed not to apply in PALs
case since the law/franchise clearly
grants the party to which the economic
burden of the tax is shifted (i.e., PAL)
an exemption from both direct and
indirect taxes, thus following the
principle laid down in the earlier case
of Maceda.

have filed a tax treaty relief

application prior to availing of the
preferential treaty rate in view of the
existing doctrine in the Mirant case.
??? Is Deutsche Bank entitled to the
claim for refund even if it did not file
a tax treaty relief application with
the BIR?
Deutsche Bank AG Manila Branch vs.
CIR
the
!!! YES. The Court said that the
principle of pacta sunt servanda
requires the performance in good faith
of treaty obligations. Thus, to require
that taxpayers must first comply with
an administrative requirement (under
RMO 1-2000) is not in consonance with
the performance in good faith. The
obligation to comply with a tax treaty
must take precedence over the
objectives of the said RMO. In addition,
it was pointed out that the prior
application becomes illogical if the
premise of the claim was an erroneous
payment since the taxpayer could not
have known it would be entitled to the
refund since precisely it was using a
diferent basis when it paid the taxes
due.
Swedish Match Philippines, Inc.
Treasurer of the City of Manila

vs.

The City of Manila sought to enforce

Deutsche Bank AG Manila Branch vs.both Sections 14 and 21 of the Manila
CIR
Revenue Code claiming that the
former is a tax on manufacturers, etc.
Petitioner withheld a 15% tax on its
while the latter applies to business
remittances to its head ofice in
subject to excise, VAT or percentage
Germany using as basis the Tax Code
tax.
provision on BPRT. Believing that it
overpaid the BPRT since the RPGermany provides for a lower rate of
10% on branch remittances, the
Petitioner filed a refund with the BIR
and subsequently with the CTA. Both
the BIR and the CTA denied the claim
stating that the branch ofice should

??? Will the imposition of both sections

amount to invalid double taxation?
!!! YES. There is in fact double taxation
since both sections are being imposed
on the same subject matter (privilege
of doing business within the city), for

the same purpose, by the same taxing

authority, within the same taxing
jurisdiction, for the same taxing period,
and of the same kind or character (a
local business tax imposed on gross
sales or receipts). The Court further
said that the LGC provision applicable
(Section 143) clearly states that
Section 143 (h) may be imposed only
on businesses that are subject to
excise tax, VAT, and percentage tax
and that are not otherwise specified in
the preceding paragraphs.

the contract/s.

II.

INCOME TAX

CIR vs. Julia Campos Benedicto

After the PCGG filed cases to

recover the ill-gotten wealth of the
late husband of the Respondent, a
compromise agreement was reached
wherein the parties agreed that Swiss
cases
involving
Respondents
husbands bank deposits would be
terminated in exchange for the PCGG
unfreezing all of the deposits so that
Benedicto could get his 49% share
Land Bank of the Philippines vs.from the deposits. The CIR assessed
Cacayuran
the amount of the unfrozen accounts
claiming that the same was income
The Municipality of Agoo, La Union
subject to tax.
passed a resolution authorizing its
mayor to obtain a loan from the
??? Did the Respondents husband
Petitioner and mortgage as collateral a
realize income as a result of the
portion of the Agoo plaza. As additional
compromise agreement which led to
security, the municipality assigned a
him receiving 49% of the deposits?
portion of its internal revenue allotment
!!! NO. The 49% was in no way income
(IRA) in favor of the Petitioner. The loan
because the Respondents husband did
proceeds were used to construct a
not gain any wealth nor did he become
commercial center on the plaza which
any richer than he was before as in fact
was objected to by the local residents
his wealth diminished to the extent of
including the Respondent.
the 51% which he ceded to the PCGG.
??? Did the Respondent have standing to fileThe 49% was a mere return of capital
for the nullification of the loan?
not subject to income tax. The Court
ruled that it is only the interest income
!!! YES. The two requisites for a
of the deposits which may be subjected
taxpayers suit have been complied
to income tax as the same is the only
with. First, even if the construction of
gain.
the commercial center would be
sourced from the loan proceeds from
the Petitioner, the said funds were
CIR vs. Spouses Manly
already converted into public funds
upon receipt by the municipality, and
The CIR filed criminal charges
the assignment of the IRA likewise
against the spouses claiming that there
characterized the funds as public.
was unreported income after applying
Second, since the plaza is for public
the
expenditure
method
of
use, the Respondent, like all other
reconstructing income which is done by
Agoo residents, is directly afected.
reconstructing a taxpayers income by
Besides it has been held that as long
deducting
the
aggregate
yearly
as taxes are involved, people have a
expenditures from the declared yearly
right
to
question
government
income. This method is resorted to
contracts even if they are not party to
when the records submitted by

taxpayers
inaccurate.

are

inadequate

or

the sale but the BIR failed to act on the

claim and thus an appeal was filed
with the CTA. The CTA then decided
??? Did the CIR erroneously base the
that the Petitioner was liable for
criminal charges on its use of the
capital gains tax (CGT) on the sale.
expenditure method?
The company objected to the CTAs
finding claiming that it cannot on its
!!! NO. The Court ruled that there
own make the assessment against the
is probable cause to indict
Petitioner.
respondent for tax evasion since
the method clearly yielded a huge
???
(1) Was the sale subject to CGT?
disparity between respondents
reported income and their cash
(2) Did the CTA commit an error when
acquisitions. The use of the
it made an
assessment?
expenditure method was thus
upheld.
(3) Has the right to assess by the BIR
prescribed?
Oficemetro Philippines, Inc. vs. CIR
??? Are condominium dues, membershipSMI-Ed Philippines Technology, Inc. vs.
fees
and
other
assessment/chargesCIR
considered as income?
!!!
(1) The sale was subject to
!!! NO. The said payments which are
both CGT and ordinary income tax. As
the Petitioner did not do business, it
merely held in trust and which are to
be used solely for administrative
was not entitled to the incentives
under the PEZA law. The Court also
expenses
in
implementing
their
purposes (i.e., safeguard the welfare
pointed out that the CGT imposed on
individuals
and
corporations
is
of the owners, provide utilities and
amenities, etc.) and from which the
diferent in that the CGT for
individuals is imposed on all real
corporation could not realize any gain
or profit as a result of their receipt
properties while CGT on corporations
is imposed only on sale of lands
thereof, must not be included in said
corporations gross income. As such,
and/or buildings. The income from the
sale of machineries was thus subject
payments of the said dues are not
subject to withholding taxes.
to the regular corporate income tax.
(2)
The
CTA
acquired
jurisdiction
because
of
the
inaction
SMI-Ed Philippines Technology, Inc. vs.
CIR
of the BIR. As such, the CTA was not
making an assessment but was
Petitioner constructed buildings and
merely determining the proper
purchased
machineries
for
its
category of tax the petitioner should
microprocessor factory within the
have paid which became an
PEZA zone. However, the company
incidental matter.
failed to commence operations and it
then sold its machineries to another
(3) YES. The filing of the
PEZA entity, subjecting the sale to the
refund by the taxpayer was not a
5% preferential tax applicable to some
bar to the BIRs exercise of its
PEZA enterprises. Petitioner thereafter
assessment powers. Since, more
filed for a refund of the taxes paid on
than 10 years have lapsed from the

filing of the returns, the right to

assess has lapsed.
DPWH vs. Soriano
??? In expropriation proceedings,
which party is liable for the taxes
due on the transfer of the property
taken?
!!! The buyer-owner is still the party
liable for the CGT in expropriation
proceedings,
although
the
said
liability
is
enforced
is
via
a
withholding tax obligation imposed on
DPWH as the withholding agent.
However, the DST is a liability of the
government since the DPWHs guide
in
acquiring
property
through
expropriation clearly provides that the
government should shoulder this tax.
Banco de Oro vs. CIR
The BIR initially issued a BIR ruling
in 2001to CODE-NGO confirming that
the PEACe Bonds are not deposit
substitutes and as such were not
subject to withholding tax. In 2011,
another ruling was issued in reply to
the query of the Secretary of Finance
this time stating that the bonds are in
fact deposit substitutes since the
determination of the 20 or more
lenders is at any one time which
means that it is the entire term of the
bond and not merely the point of
origination or issuance.

!!! (1) YES. While BIR rulings are

generally reviewable by the Secretary
of Finance, the rule on exhaustion of
administrative remedies does not apply
since (1) it involved a pure question of
law and (2) an appeal to the SOF is
deemed futile because the request for
ruling in 2011 was filed by the SOF
himself.
(2) The phrase at any one time for
purposes of determining the 20 or
more lenders would mean every
transaction executed in the primary
and secondary market in connection
with the sale of the bonds. The Court
also mentioned that income from
debt instruments that are not deposit
substitutes are nevertheless subject
to the regular income tax rates.
(3) NO. The term gains as used in
Section 32 does not include interests
which represents forbearance for the
use of money. The exclusion covers
gains representing the diference
between the selling price and the
purchase price of the bonds in cases
where the said securities are
transferred/sold.
CIR vs. St. Lukes Medical Center, Inc.

St. Lukes is a non-stock non-profit

hospital. The BIR assessed St. Lukes
based on the argument that Section
27 (B) of the Tax Code should apply to
it and hence all of St. Lukes income
should be subject to the 10% tax
???
(1) Does the Supreme Court havetherein as it is a more specific
provision and should prevail over
jurisdiction?
Section 30 which is a general
(2) At what point is the 20 lender ruleprovision. St. Lukes countered by
determined?
saying that its free services to
(3) Is the interest from the bondspatients was 65% of its operating
income and that no part of its income
exempt under the
exclusion provision on trading gains? inures to the benefit of any individual.
Banco de Oro vs. CIR

??? Does Section 27 (B) have the

effect of taking proprietary non-profit

hospitals out of the income tax

exemption under Section 30 of the
Tax Code and should instead be
subject to a preferential rate of 10%
on its entire income?

and 1997, its obligation to withhold

arose in those years and not later
(1997 and 1998) when it actually paid
the bonuses.

!!! NO. The enactment of Section 27

(B) does not remove the possible
income tax exemption of proprietary
non-profit hospitals. The only thing
that Section 27 (B) captures (at 10%
tax) in the case of qualified hospitals
is in the instance where the income
realized by the hospital falls under
the last paragraph of Section 30 such
as when the entity conducts any
activity for profit. The revenues
derived by St. Lukes from pay
patients are clearly income from
activities conducted for profit.

Tambunting Pawnshop vs. CIR

ING Bank N.V. vs. CIR

Petitioner accrued some bonuses to
be paid to its employees in 1996 and
1997 and claimed the same as
deductible expenses but did not
withhold taxes claiming that the same
were only paid in 1997 and 1998.
???
Is
Petitioner
liable
for
deficiency withholding tax on
accrued bonuses for taxable years
1996 and 1997?
!!! YES. The Tax Code expressly
requires as a condition for deductibility
of an expense that the tax required to
be withheld on the amount paid or
payable is shown to have been
remitted to the BIR by the withholding
agent. The obligation of the payoremployer to deduct and withhold the
related withholding tax arises at the
time the income was paid or accrued or
recorded as an expense in the payoremployers books, whichever comes
first. As Petitioner accrued or recorded
the bonuses as a deduction in 1996

Petitioner
claimed
losses
as
deductions arising from the auction
sales it conducted. To prove the same,
Petitioner submitted in evidence its
Rematado book containing a record
of items foreclosed and Subasta book
containing a record of the auction sale
of pawned items foreclosed.
??? Is Petitioner entitled to the losses as
deductions?
!!! NO. Petitioner did not properly
prove its losses since the Subasta
books did not reflect the true
amounts of the proceeds and the
Rematado books did not reflect the
capital since the only amounts
therein were those given to the
pawnees. The losses claimed from
fire and theft were also disallowed
since while certifcations from the
police and fire departments and a
list of the properties lost were
submitted, the Petitioner did not
submit sworn declarations.
Manila
Memorial
Park,
Secretaries of DSWD & DOF

Inc.

??? Is the law providing that the

20% senior citizen discount may
be claimed only as a tax deduction
unconstitutional?
!!! NO. The law is a legitimate exercise
of police power which has general
welfare for its object. This is despite
the claim of Petitioner that the law has
the effect of imposing upon private
entities
the
burden
of
partly
subsidizing a government program.
Even if the current rule does not
provide the entities providing discounts

vs.

a peso for peso reimbursement, no

payment of just compensation is
warranted for being an exercise of
police power and not eminent domain,
which is a similar characterization for
similar rules such as price control laws.
The law has also not been shown to be
unreasonable,
oppressive
or
confiscatory and doe not necessarily
afect companies rates of return since
(1) not all customers are senior
citizens; (2) the level of profit margin of
the goods and services ofered to the
public; and (3) the entities ability to
recoup the discounts through higher
mark-ups or from other products not
subject to discounts.

the Petitioner as lessor.

??? Can a claim for refund be granted
notwithstanding claimants failure to
show in the return that that income
upon which the creditable taxes
withheld were based was in fact
reported?

!!! NO. The 3 essential requirements

for a claim for refund of this nature
to prosper are (1) filing the same
within the 2-year period; (2)
establishing the fact of withholding
with copies of the CWT certificates;
and (3) showing that the income
received was declared as part of
gross income. Here the Petitioner
failed to prove (3) as the return in
fact showed Not Applicable under
the portion referring to Rental
PAGCOR vs. BIR
Income.
In
addition,
some
??? Did Republic Act 9337 have the effect ofcertificates
were
likewise
not
totally
withdrawing
the
income
tax
submitted as evidence.
exemption of PAGCOR?
!!! NO. The income of PAGCOR from its
gaming operations conducted under
its franchise is still subject only to the
5% franchise tax under PD 1869 while
its
income
from
other
related
services (such as licensing income,
private internet casino gaming, etc.) is
subject to corporate income tax based
on R.A. 9337. The Court ruled that the
grant of exemption under R.A. 8424
was unnecessary since PAGCORs
exemption under its franchise was
retained as having emanated from a
special law. It was only Petitioners
income from other related services that
was afected by the provisions of both
R.A. 8424 (grant of exemption) and
9337 (withdrawal of exemption).

Weinbrenner & Inigo Insurance Brokers,

Inc. vs. CIR
???
Is
the
submission
and
presentation of the quarterly ITRs of
the succeeding quarters of a taxable
year indispensable in a claim for
refund?

!!!
NO.
While
presenting
the
succeeding quarterly ITRs significantly
help claimants cause in proving that it
did not carry-over the excess income
tax, they are not absolutely needed as
Section 76 of the Tax Code does not
mandate it. Also, the 3 requirements
(discussed in the Far East Bank case)
for a claim of overpaid income tax does
not include presenting the subsequent
quarterly returns. The Court said that
CIR vs. Far East Bank & Trust Company the presentation of the annual ITR
would sufice in proving that prior
Far East Bank filed a claim for
years excess credits were not utilized
refund
of
overpaid
creditable
for the current taxable year.
withholding taxes which included CWT
on rental income allegedly earned by

CIR vs. Smart Communications, Inc.

Smart entered into an Agreement
with Prism, a nonresident foreign
corporation domiciled in Malaysia,
whereby
Prism
will
provide
programming and consultancy services
to Smart. Thinking that the payments
to Prism were royalties, Smart withheld
25% under the RP-Malaysia Tax Treaty.
Smart then filed a refund with the BIR
alleging that the payments were not
subject to Philippine withholding taxes
given that they constituted business
profits paid to an entity without a
permanent
establishment
in
the
Philippines.
??? Does Smart have the right to file
claim for refund?
!!! YES. The Court reiterated the ruling
in Procter & Gamble stating that a
person liable for tax has suficient
legal interest to bring a suit for refund
of taxes he believes were illegally
collected
from
him.
Since
the
withholding agent is an agent of the
beneficial owner of the payments (i.e.,
nonresident), the authority as agent is
held to include the filing of a claim for
refund. The Silkair case was held
inapplicable as it involved excise taxes
and not withholding taxes.
United Airlines, Inc. vs. CIR

Petitioner used to be an online

carrier but ceased operating cargo
flights from the Philippines starting
2001. It is now an ofline international
air carrier but has a general sales
agent in the Philippines which sells
passage documents for its of-line
flights for carriage of passengers and
cargo. It filed a claim for refund on the
Gross Philippine Billings (GPB) tax it
paid. The CTA ruled that Petitioner was
not liable for the GBP but was liable to
pay 32% tax on its net income derived

from the sales of passage documents

in the Philippines.
???
Is Petitioner liable for either the GPB
or the 32% tax?
United Airlines, Inc. vs. CIR
!!! 32% tax. The Court reiterated the
ruling in South African Airways stating
that it is the sale of tickets which is the
revenue-generating activity subject to
Philippine
tax.
The
correct
interpretation of the applicable rules is
that, if an international air carrier
maintains flights to and from the
Philippines, it shall be taxed at the rate
of 2 1/2% of its Gross Philippine
theBillings, while international air carriers
that do not have flights to and from the
Philippines
but
nonetheless
earn
income from other activities in the
country will be taxed at the rate of 32%
of such income.
The Court also ruled that to avoid
multiplicity of suits and unnecessary
dificulties and expenses the issue
of deficiency tax assessment be
resolved jointly with the its claim for
refund and doing so does not
violate the rule against ofsetting of
taxes.
Republic Act 10653 Increasing the 13th
month pay exclusion
!!! The 13th month pay and other
benefits exclusion from gross income
has been increased from P30,000 to
P82,000.
!!! This will cover other benefits such as
productivity
incentives
and
Christmas
bonus.
!!! The increased amount applies to
bonuses and other benefits paid or
accrued beginning January 1, 2015.
Republic Act 10378 Exemption of

International Air Carriers

!!! international air carriers doing
business in the Philippines may avail
of a preferential rate or exemption on
the basis of a tax treaty or
international agreement to which the
Philippines is a signatory or on the
basis of reciprocity such that an
international carrier, whose home
country grants income tax exemption
to Philippine carriers, shall likewise be
exempt from the tax on Gross
Philippine Billings.

employee.
RMC 51-2014 Inurement Prohibition
under Section 30
!!! Non-profit under Section 30 means
that no net income or asset accrues
to or benefits any member or specific
person. Thus, the earnings or assets
shall not inure to the benefit of any of
its trustees, organizers, oficers,
members, or any specifc person.

!!!
The
following
are
considered
inurements:
!!! Transport of passengers by international
carriers are now exempt from VAT.
payment of compensation, salaries,
or honorarium to its trustees or
!!! International air and shipping
organizers
carriers
doing
business
in
the
Philippines are now subject to the 3%
payment
of
exorbitant
or
percentage only on their gross receipts
unreasonable
compensation
to
its
employees
derived from the transport of cargo
and not on their transport of
provision of welfare aid and financial
passengers.
assistance to its members
Republic Act 10026 Exemption of Local
Water Districts
!!! Local water districts are now
exempt from income taxes under
Section 27 provided that the amount
saved by virtue of the exemption is to
be used for capital equipment
expenditure to expand water services
coverage
!!! All unpaid taxes starting August
13, 1996 are condoned provided
(1) the BIR establishes financial
incapacity of the LWD and (2) the
LWD submits to Congress a
program of internal reforms.

donation to any person or entity

(except those to other entities with
similar purposes)
purchase of goods or services
for amounts in excess of fair
market value from an entity which
one of its trustees or oficers has
an interest
Where upon dissolution its
assets are distributed to its
trustees, organizers, oficers, or
members

RMC 79-2014 Tax Treatment of Stock

RR 01-2015 Amendment to De MinimisOption Plans
Benefits
!!! The diference between book
value/fair market value of the shares
!!! Benefits received by an employee
at the time of the exercise of the
under a CBA and productivity
option and the price fixed on the grant
incentive schemes with a combined
date is subject to --maximum amount of P10,000 per

 income tax and withholding tax servants

if
on compensation if the grantee is a permanent
Philippines).
rank-and-file employee

NOT
nationals
residents
of

or
the

employees
of
the
following
fringe benefits tax if the grantee All
occupies a supervisory or managerial REGARDLESS
of
nationality
and
position
residence --- AUSAID / UN / ILO / FAOUN / UNESCO / WHO / UNDP.
!!! The transfer of the option is subject to --Philippine
nationals
claiming
CGT if the same is transferred for
exemptions under the above laws,
a consideration
agreements must file an application
donors tax if transferred without for confirmation of tax exemption with
any consideration
the ITAD of the BIR.
RMC 31-2013 --- Taxation of
Compensation
Income
of
Philippine Nationals and Alien
Individuals
Employed
by
Embassies,
International
Organizations, etc.
!!! Foreign governments, embassies,
diplomatic missions, and international
organizations as employers in the
Philippines are immune from being
withholding agents on the salaries of
their
employees
based
on
international comity.
!!! However, this immunity does not
translate into all employees of these
entities being exempt from income
tax. Only the individuals specifically
named in the treaties, international
agreements, and laws are exempt
from income taxes while those not
covered are not relieved of their duty
to report their income and pay the
taxes but must do so on their own.
RMC 31-2013 --- Taxation of
Compensation
Income
of
Philippine Nationals and Alien
Individuals
Employed
by
Embassies,
International
Organizations, etc.
!!! Some examples of those exempted
are diplomats (including family, staf,

The following entities only exempt

those that are not Philippine nationals
--- JICA (must be from Japan) Red
Cross / AUSAID / CIDA / ADB / IMF /
IBRD / UNICEF / IRRI / Ford Foundation
/ Rockefeller Foundation.
RR 2-2013 Transfer Pricing Guidelines
!!! Critical features of the TP regulations --1) The rules apply to cross border and
domestic transactions.
2) For purposes of applying the rules,
the parties are considered related if
one participates directly or indirectly
in the management, control or capital
of another. Control refers to any kind
of control, direct or indirect, whether
exercised or not, and shall be
assumed if income or deductions have
been arbitrarily shifted.
3) The transactions between
related parties must be at
arms length otherwise BIR
will make adjustments on the
basis of the rules.
RR 2-2013 Transfer Pricing Guidelines
4) Advance Pricing Arrangement --either unilateral (only the taxpayer and
the
BIR)
or
bilateral/multilateral
(involves the Philippines and one or

more treaty partner/s)

5) The documentation requirements
need not be submitted to the BIR but
must be retained. The same must be
contemporaneous which means it
exists or is brought into existence at
the time the associated enterprises
implement any arrangement that
might raise transfer pricing issues. The
documentation
will
contain
the
organizational structure, nature of
business, assumptions, comparability
analysis, TP method, application, etc.

lower
amounts
were
paid
as
compromise payments during the
settlement of the estate and these are
amounts that should be considered as
deductions in arriving at the net estate.
??? Will the compromise amounts be the
amounts considered as deductions to the
gross estate?

!!! NO. The deductions allowable are

the amounts determined at the time of
death. Post-death developments are
not material in determining the
amount of deduction. Thus, the Court
6) There are no safe harbor rates/rules inapplied the date-of-death valuation
rule which is the US rule on
the TP regulations.
deductions and which is applicable
also in the Philippines. The amount
Other Significant Issuances
deductible is the debt which could
!!! RMC 9-2013 --- Provides for the
have been enforced against the
possible
income
tax
and
VAT
deceased in his lifetime.
exemption of association dues and
income derived from rentals of
IV. DONORS TAX
homeowners associations properties if
Metro Pacific Corporation vs. CIR
(i) constituted as an association under
RA 9904; (ii) the LGU having
Petitioner sold its shares in
jurisdiction certifies that the basic
Bonifacio Land Corporation for around
services (i.e., security, street lights,
P400M when the book value of the
maintenance and repair of streets,
unlisted shares was at around P850M.
garbage disposal, etc.) for which the
The BIR assessed the Petitioner for
dues are being used cannot be
donors tax on the diference between
provided by the said LGU; and (iii) the
the consideration and the book value
homeowners
association
presents
citing Section 100 of the Tax Code. The
proof that the dues are used for the
parties claimed that the donors tax is
aforesaid basic services.
not due since it was an ordinary
!!! RR 12-2012 --- For motor vehicles
allowed for use of an employee, the
company providing the same can only
take up as a deductible expense (via
depreciation)
the
amount
representing one vehicle and the
value of which should not exceed
P2,400,000.

III.

ESTATE TAX

Dizon vs. CIR

There were claims against the estate
which the BIR contested stating that

commercial transaction negotiated in

good faith between unrelated parties
and motivated by legitimate business
reasons.
??? Is the transfer of the shares subject to
donors tax?
!!! YES. The Court upheld the use of
the book value of the shares as the fair
market value for purposes of applying
Section 100 of the Tax Code. Likewise,
the same provision shows that no
exemption/exception is permitted. The
Court also pointed out that the ruling

upholding the Petitioners position

cannot be relied upon since it was a
ruling of first impression which was
issued by the Assistant Commissioner
and not the CIR herself, in violation of
Section 7 on the non-delegability of the
power to issue rulings of first
impression.

March 1998 and (2) deficiency VAT on

reimbursable
received
by
Sony
Philippines from its ofshore afiliate,
Sony International Singapore (SIS).
??? (1) Is Petitioner liable for deficiency
VAT?
(2) Was the investigation of its 1998 FWT
return valid?

!!! (1) NO. Sony Philippines did in fact

incur expenses supported by valid VAT
Mindanao II Geothermal Partnership vs.invoices when it paid for certain
advertising costs. This is suficient to
CIR
accord it the benefit of input VAT
??? Is the sale of a fully depreciated
credits and where the money came
motor vehicle an isolated transaction
from to satisfy said advertising billings
which should not be subject to VAT in
is another matter but does not alter
the hands of a power generation
the VAT efect. In the same way, Sony
company?
Philippines can not be deemed to have
received the reimbursable as a fee for
!!! NO. While the sale is admittedly an
a VAT-taxable activity.
isolated transaction, it does not follow
that the same cannot be considered as
an
incidental
transaction
which
CIR vs. Sony Philippines, Inc.
satisfies the requirement to attract VAT
The reimbursable was couched as an
liability. The Court deemed that the
aid for Sony Philippines by SIS in view
sale of the motor vehicle was in the
of the companys dire or adverse
course of its business of converting
economic
conditions.
More
steam into electricity for supply to NPC.
importantly, the absence of a sale,
The case of Magsaysay cannot apply
barter or exchange of goods or
since the sale of the vessels therein
properties supports the non-VAT
was not in the course of business of
nature of the reimbursement. This
NDC and the same was involuntary for
was
distinguished
from
the
having been made pursuant to the
COMASERCO case where even if there
Governments policy of privatization.
was similarly a reimbursement-on-cost
(Note: At the time when Magsaysay
arrangement between afiliates, there
was decided the Tax Code did not
was in fact an underlying service.
cover incidental transactions.)
Here, the advertising services were
rendered in favor of Sony Philippines
CIR vs. Sony Philippines, Inc.
not SIS.

V.

VALUE-ADDED TAX

Sony Philippines was ordered

examined for the period 1997 and
unverified prior years as indicated in
the Letter of Authority . The audit
yielded assessments against Sony
Philippines for deficiency VAT and FWT,
viz: (1) late remittance of FWT on
royalties for the period January to

!!! (2) NO. A Letter of Authority

should cover a taxable period not
exceeding one year and to indicate
that it covers unverifed prior years
should be enough to invalidate it. In
addition, even if the FWT was covered
by Sony Philippines fiscal year ending
March 1998, the same fell outside of

the period 1997 and was thus not

validly covered by the LOA.
Maxicare
CIR

Healthcare

Corporation

Petitioner claims that the portion of

the enrollment fees (80%) which is
earmarked
for
medical/hospital
utilization expenses does not belong
nor does it redound to its benefit and
should thus not be considered as part
of its gross receipts for VAT purposes.
??? Is the total amount of enrollment
collected by Petitioner subject to VAT?
!!! YES. The diference of this case
with that of Tours Specialists where
the tourists asked the local tour
agency to pay for their lodging
accommodations is that in that case
the local agency had nothing to do at
all with contract between the payors
(tourists) and the payees (hotels) and
was only making the payment as an
accommodation. On the other hand, in
the instant case, the alleged amounts
earmarked
for payment form part and parcel of the
entire package ofered to its members.
Thus, there is no portion of the funds
that go into the hands of the petitioner
is delineated for delivery to a third
party. The members are deemed to
have prepaid only the HMO and not the
doctors or hospitals. All these negate
the concept of money in trust as used
in Tours Specialists.

Kepco which failed to indicate the

words zero-rated. Lastly, they also
alleged that invoices and receipts are
vs.interchangeable and either should
sufice as proof of purchase and
consequently as support for a claim
for refund.
??? Is Petitioner entitled to the claim for
refund on the disallowed portion?
!!! NO. The requirement that the TIN
be imprinted and not merely stamped
is a reasonable requirement imposed
feesby the BIR. More importantly, the
requirement of the appearance of the
words zero-rated on the face of the
invoice prevents buyers from falsely
claiming
input
VAT
from
their
purchases when no VAT was actually
paid. The failure to adhere to the said
rules will not only expose the taxpayer
to penalties but should also serve to
disallow the claim. Finally, the Court
disagreed with the position that
invoices
and
receipts
are
interchangeable since the former
clearly refers to sales of goods while
the latter to services.

Kepco Philippines Corporation vs. CIR

Kepco filed a claim for refund of
unutilized input VAT based on its zerorated sale of power to NPC. A
substantial portion of the claim was
disallowed for having been supported
by VAT invoices which only had the
TIN-VAT stamped and not printed.
There were also certain sales by

Fort
Bonifacio
Corporation vs. CIR

Development

Petitioner was a real estate

developer that bought from the
national government a parcel of land
that used to be the Fort Bonifacio
military reservation. At the time of the
said sale there was as yet no VAT
imposed so Petitioner did not pay any
VAT on its purchase. Subsequently,
Petitioner sold two parcels of land to
Metro Pacific Corp. In reporting the said
sale for VAT purposes (because the
VAT had already been imposed in the
interim), Petitioner claimed transitional
input
VAT corresponding
to
its
inventory of land. The BIR disallowed
the claim of presumptive input VAT and
thereby
assessed
Petitioner
for

deficiency VAT.
??? Is Petitioner entitled to claim the
transitional input VAT on its sale of
real property or is it applied on the
value of the entire real property
and (ii) should there have been a
previous tax payment for the
transitional input VAT to be
creditable?
Fort
Bonifacio
Corporation vs. CIR

real properties given its nature as a

real estate dealer and if so (i) is the
transitional input VAT applied only to
the improvements on the
were
zero-rated
for
being
in
connection with services rendered to
nonresident recipients. The CIR
denied the claim stating that
Accenture failed to prove that its
foreign clients did business outside
the Philippines.

??? Is Accenture entitled to the VAT refund?

Development!!! NO. Accenture failed to prove that

!!! YES. Petitioner is entitled to claim

transitional input VAT based on the
value of not only the improvements
but on the value of the entire real
property and regardless of whether
there was in fact actual payment on
the purchase of the real property or
not.
The amendments to the VAT law do not
show any intention to make those in
the real estate business subject to a
different
treatment
from
those
engaged in the sale of other goods or
properties or in any other commercial
trade or business. On the scope of the
basis for determining the available
transitional input VAT, the CIR has no
power to limit the meaning and
coverage of the term "goods" in
Section 105 of the Tax Code without
statutory authority or basis. The
transitional input tax credit operates to
benefit newly VAT-registered persons,
whether or not they previously paid
taxes in the acquisition of their
beginning
inventory
of
goods,
materials and supplies.
Accenture, Inc. vs. CIR
Accenture filed a VAT claim for
refund on unutilized input VAT
premised on its claim that its sales

services
were
rendered
for
nonresident. The Amex case did not
rule that the services recipients need
not be doing business outside the
Philippines
but
only
that
the
consumption need not be abroad.
However, Accenture failed to prove
that the clients/service recipients are
doing business outside the Philippines
as
they
only
submitted
SEC
certifications showing that their clients
have not established any branch
ofices in the Philippines and billing
statements issued to the said clients.
The Court ruled that while it did prove
that its clients are foreign, there was
no proof that they were doing business
outside the Philippines.
Luzon Hydro Corporation vs. CIR
Petitioner filed a VAT claim for
refund on unutilized input VAT arising
from its alleged zero-rated sales of
electricity to NPC. The claims were
denied since Petitioner failed to show
proof of the actual zero-rated sales
since they did not present as evidence
the VAT oficial receipts and VAT
returns.
??? Is Petitioner entitled to the VAT refund?
!!! NO. The Court reiterated the
requirements for a valid input VAT
refund from zero-rated sales as

follows: (a) the taxpayer is VATregistered; (b) the taxpayer is

engaged in zero-rated sales; (c) the
input taxes are paid; (d) input taxes
are not transitional input taxes; (e)
the input taxes are attributable to
zero-rated transactions; (f) input
taxes have been unapplied; (g) filing
the claim within 2 years.
Significant issuances
!!! RMC 057-2013 --- Unutilized
creditable input taxes attributable to
zero-rated sales can only be
recovered through the application
for refund or tax credit. The practice
of claiming as an outright (income
tax) expense accumulated and
unapplied input VAT credits after the
expiration of the 2-year period to
process to claim does not have legal
basis.
!!! RR 08-2015 --- Only raw cane
sugar (natural sugar extracted from
sugarcane through simple mechanical
process by pressing the juice, boiled
to
crystallize,
filtered
using
centrifuge)and muscovado shall be
considered as being entitled to VAT
exemption.
VI.

REMEDIES

CIR vs. Gonzalez

An investigation was conducted
against LMCEC for taxable years 1997
to 1999. The assessments that came
out of the said investigation was
disputed by the taxpayers on the
grounds that (i) the assessment
notices issued were invalid for not
bearing serial numbers and (ii) the
examinations made on the books of
accounts and other records were done
more than once in the relevant taxable
years.
??? Are the assessments invalid?

!!! NO. The formality of a control

number in the assessment notice is not
a requirement for its validity but rather
it is the contents which should inform
the taxpayer of the deficiency and
which should contain the facts and the
laws on the which the assessment is
based. Likewise, this case is an
exception to the general rule of having
the books examined only once in a
year. Section 235 of the Tax Code
allows the multiple examinations when
(a) there is fraud or irregularity; (b) the
taxpayer requests for reinvestigation;
(c) there is a required verification of
compliance with withholding taxes and
capital gains tax liabilities.
Rizal Commercial Banking Corporation
vs. CIR
??? Whether a taxpayer, by paying
the other tax assessments covered
by a Waiver of the Statute of
Limitations, is considered estopped
from questioning the validity of the
said waiver (on the basis that the
CIR did not sign it) with respect to
the other covered but unsettled
assessments?
!!! YES. RCBC is considered estopped
through its partial payment of the
revised
assessments
within
the
extended period provided in the said
waivers. Thus, it had impliedly
admitted the validity of the said
waivers. Had it believed that the
waiver was invalid and that the period
to assess had efectively prescribed,
RCBC could have refused to make any
payment based on any assessment
against it.
(Note: In the more recent case of CIR
vs. Standard Chartered Bank, the
Court said that the taxpayer did not
waive the defense of prescription
based on a defective waiver as it
continued to raise the issue of

prescription.)

albeit using a lower 15% rate under

the RP-US Tax Treaty.

Samar-I Electric Cooperative vs. CIR

The FAN and demand letter
issued to Petitioner were not
accompanied
by
a
written
explanation of the legal and factual
bases of the deficiency taxes
assessed against the Petitioner.
However, the CIRs response to
Petitioners protest of the FAN did
explain at length the factual and
legal bases of the deficiency tax
assessments in denying the protest.
??? Was the Petitioner
required due process?

accorded

!!! YES. Considering the exchange of

correspondence
and
documents
between the parties, the Court found
that the requirement of Section 228
was substantially complied with. The
CIR had fully informed the company in
writing of the factual and legal bases
of the assessment which enabled the
taxpayer to file an efective protest,
much unlike the taxpayers situation
in Enron. Thus, there was no finding of
any violation of due process.
The Court likewise upheld the
application of the Aznar doctrine in
saying that the substantial under
declaration of withholding taxes
constituted falsity in the subject
returns which this justified the use of
the 10-year period to assess.
Fluor Daniel Philippines, Inc. vs. CIR
Fluor Daniel was initially assessed
for deficiency EWT on its software
maintenance fees paid to an ofshore
afiliate. In response to Petitioners
protest, the CIR issued a Final Decision
on Disputed Assessment (FDDA)
cancelling
the
deficiency
EWT
assessment but issuing an assessment
for FWT on the same software fees

??? Was the Petitioner deprived of due

process when the FDDA changed the
assessment from deficiency EWT to
deficiency FWT?
!!! YES. The change of the assessment
in the FDDA itself constituted a new
assessment. As such, the taxpayer
should have been given the chance to
dispute the same via the process laid
down in the Tax Code which is by way
of filing a protest. Given that this was
not complied with as what was issued
already
an
FDDA,
the
thewas
circumstances certainly deprived the
Petitioner of a reasonable opportunity
to be heard and submit evidence in
support of its defense which is a clear
violation of due process requirements.
Lascona Land Co., Inc. vs. CIR
Lascona Land appealed a decision
by the CIR holding that the
assessment against it has become
final and executory for failure to
appeal to the CTA within 30 days
from the lapse of the 180-day period
provided for under the Tax Code.
??? In cases of inaction on disputed
assessments, can the taxpayer still
file an appeal with the CTA even after
the lapse of the 180-day period?
!!! YES. In case the CIR fails to act
on a disputed assessment within
the 180-day period from the
submission of documents, the
taxpayer can either (a) file an
appeal with the CTA within 30 days
after the expiry of the 180-day
period or (b) await the final decision
of the CIR and then appeal the same
within 30 days. These options are
mutually exclusive and resort to one
bars the application of the other. A
taxpayer can not be prejudiced if he

chooses to wait for the final decision

of the CIR as this is the normal
expectation when a protest is filed.
Thus, an appeal filed within the 30day period from the receipt of the
decision, even if made after the
180-day period, is still considered as
having been filed on time.

counting the 30 day period to appeal

to the CTA from receipt of the decision
of the CIR and not issuance of the
assessment, this particular case was
deemed a clear exception in view of
the CIRs own actions.

Allied Banking Corporation vs. CIR

Petitioner initially received a PAN

which it protested. Subsequent to the
filing of the protest and instead of
serving a FAN on the taxpayer, the CIR
sent
Petitioner
a
Preliminary
Collection Letter (PCL) informing the
Petitioner of the existence of two
assessment notices the details of
which may be viewed in the BIRs
ofice. Subsequently, the taxpayer
filed a petition with the CTA attaching
the assessment notices. The CIR
moved to dismiss the petition claiming
lack of jurisdiction since it is neither
the assessment nor the PCL that is
appealable to the CTA but the decision
of
the
CIR
on
the
disputed
assessment.

Allied Banking Corporation received

a PAN from the BIR which it timely
disputed. In response, the BIR issued a
Formal Letter of Demand with
Assessment
Notices.
Instead
of
protesting the FAN, the petitioner filed
a Petition for Review with the CTA. The
CTA dismissed the Petition stating that
it is neither the assessment nor the
formal demand letter itself that is
appealable before it but instead it
should be the decision of the CIR on
the disputed assessment.
??? Can the Formal Letter of Demand
be construed as the final decision of
the CIR appealable to the CTA under
Republic Act 9282?
Allied Banking Corporation vs. CIR
!!! YES. This is considered an
exception to the general rule on
exhaustion of administrative remedies
since the CIR is considered estopped
from claiming the same principle
applies in its case. The tenor of the
demand letter is clear that the CIR had
already made a final decision and that
the remedy of the Petitioner was to
appeal the same within 30 days of
receipt. This can be gleaned from the
use of the terms final decision and
appeal
which
were
deemed
unequivocal language pointing to the
finality of the decision. While the Court
cited the rules relative to (a) protesting
the FAN and not the PAN and (b)

V.Y. Domingo Jewellers, Inc. vs. CIR

??? Did the CTA have jurisdiction on the

petition filed by the taxpayer?
!!! YES. The contention of the CIR that
the taxpayer should have appealed
the decision of the CIR on the disputed
assessment cannot hold water since
there was no assessment notice
issued by the BIR in the first place. In
fact, the burden is on the CIR to prove
that the taxpayer received the FAN
required under Section 228 of the Tax
Code. Thus, the Court allowed the CTA
to take cognizance of the case as it
falls under other matters given the
peculiarity of the case.
CIR vs. Hambrecht & Quist Philippines,
Inc.
The assessment against Hambrecht
& Quist had become final and

unappelable since there was a failure

to protest the same within the 30-day
period provided by law. However, the
CTA held that the BIR failed to collect
within the prescribed time and thus
ordered the cancellation of the
assessment notice. The CIR disputed
the jurisdiction of the CTA arguing
that since the assessment had
become final and unappealable, the
taxpayer can no longer dispute the
correctness of the assessment even
before the CTA.

granted/acted upon by the CIR. Thus,

the period to collect was never
suspended.
Festo Holdings, Inc. vs. CIR
??? Is the FDDA issued by the Revenue
District Officer (RDO) appealable to the
CTA?

!!! NO. The RDOs decision can not be

considered as the CIRs decision
appealable to the CTA in the absence
of any proof that the RDO was
??? Can the CTA still take cognizance
authorized to decide and act on behalf
of an assessment case which has
of the CIR on the protest of a
become final and unappealable for
taxpayer. This is notwithstanding the
failure of the taxpayer to protest
fact that Section 7 of the Tax Code
within the 30-day protest period?
allows the CIR to delegate her vested
powers (except those specifically
enumerated as non-delegable) to any
CIR vs. Hambrecht & Quist Philippines,
subordinate oficial with the rank
Inc.
equivalent to a division chief or
higher. Lastly, Sections 11 and 13 of
!!! YES. The appellate jurisdiction of
the Tax Code which enumerate the
the CTA is not limited to cases which
duties and authority of the RDO do
involve decisions of the CIR on matters
not, by themselves, provide that an
relating to assessments or refunds.
RDO can issue decisions that are
The
CTA
law
clearly
bestows
appealable to the CTA.
jurisdiction to the CTA even on other
matters arising under the National
Note: The RDO has a rank of Division Chief.
Internal Revenue Code. Thus, the
issue of whether the right of the CIR to
CIR vs. BASF Coating + Inks Phils., Inc.
collect has prescribed, collection being
one of the duties of the BIR, is
??? Is the period to assess suspended
considered covered by the term other
if the taxpayer failed to formally
matters. The fact that assessment
notify of the BIR of its change of
has become final for failure to protest
address even if the BIR is in fact
only means that the validity or
aware of the said change?
correctness of the assessment may no
!!! NO. The rule that the periods to
longer be questioned on appeal.
assess and collect are suspended if
However, this issue is entirely distinct
the taxpayer cannot be located does
from the issue of whether the right to
not apply even if the taxpayer failed
collect has in fact prescribed.
to follow the process for the
notification on the change of address
as long as there is proof that the BIR
The Court ruled that the right to collect
in fact was aware of the whereabouts
has indeed prescribed since there was
of the taxpayer. In this case, all
no proof that the request for
indications point to the fact that the
reinvestigation
was
in
fact
CIR knew of the change in address

given that several submissions of

various records already show the new
address and, more importantly, the
BIR already conducted an inspection
in the taxpayers new address.
China Banking Corporation vs.
CIR Bank of the Philippine
Islands vs. CIR
??? Will the filing of an Answer in
the case filed before the CTA by
the taxpayer being assessed be
considered as collection on the
part of the BIR?
!!! While previous cases have in fact
upheld the rule that the filing of an
Answer by the CIR may constitute the
collection contemplated by law
required to be done within the
prescribed period, the same must
have been done properly to be
efective. In this case, the Answer
was deemed ineffective since the
case was filed with the CTA at the
time (i.e., before 2004 or the
efective date of R.A. 9282) when the
judicial actions for collection of
internal revenue taxes was within the
jurisdiction of the regular courts.
Thus, the right to collect had indeed
prescribed.
People of the Philippines vs. Kintanar
The spouses Kintanar were charged
for alleged tax evasion and non-filing of
income tax returns. Gloria Kintanars
defense was that she did not have
personal knowledge of the actual filing
of the said returns since it was her
husband who filed their ITRs. The
husband in turn alleged that their ITRs
were in fact prepared by their
accountant and that they necessarily
just relied on the said accountant.
These facts supposedly contradicted
the claim that their failure to file the
returns was willful.

??? Was the defendant guilty of tax evasion?

!!! YES. The elements of a violation
under Section 255 have been
satisfied. These are (1) that the
accused is a person required to make
or file a return; (2) that the accused
failed to file the return at the time
required by law; and (3) that the
failure to file was willful. For (1), as
income-generating
spouses,
they
were obviously covered by the filing
requirements. For (2), the BIR
witnesses presented showed suficient
proof that indeed no returns were filed
in the RDOs where they should have
filed.
People of the Philippines vs. Kintanar
For (3), the Court said that the mere
fact of having an accountant prepare
ones returns is not enough to show
that that there was no voluntary,
intentional or deliberate failure to file.
The Court added that the fact of her
being a businesswoman presupposes
that she ought to know and understand
all matters concerning her business
including the filing of returns, citing
Rule 131 on the Rules on Evidence
which states that it is presumed that a
person takes ordinary care of his
concern. More importantly, the Court
found no afirmative acts on the part of
defendant to make sure her obligation
to file ITRs had been fully complied
with given that she testified that she
does not even know how much her tax
liabilities were. This neglect or
omission was considered tantamount
to deliberate ignorance or conscious
avoidance. Lastly, the Court noted
that the accountant himself was not
even presented as witness.
People of the Philippines vs. Judy Anne
Santos

 The evidence presented against

defendant
showed
discrepancies
between the income tax return filed
and the documents which showed the
amounts she earned from various
companies
(ABS-CBN,
Viva,
Star
Cinema, Century Tuna). The defense
forwarded was that she relied on her
manager and CPA in the preparation of
her tax returns. The defendant likewise
said that she had signed her contracts
without reading the same since she had
put her trust and confidence in her
manager.

waiver as laid down in RMO 20-90 and

RDAO No. 5-01 are mandatory to give
efect to Section 222 of the Tax Code.
Specifically, the flaws in the waiver
executed by Kudos Metal were as
follows: (a) there was no notarized
written authority in favor of the
signatory for the company; (b) there is
no stated date of acceptance by the
Commissioner or his representative;
and (c) the fact of the receipt of the
copy was not indicated in the original
waivers.

Neither can it be said that by merely

??? Was the defendant guilty of tax evasion? executing the waiver the taxpayer is
already estopped from disputing an
!!! NO. The element of willfulness to
action by the CIR beyond the
find defendant guilty of tax evasion
statutory 3-year period since the
is not present in this case. At most,
exception under the Suyoc case (i.e.,
the accused was found guilty of
when the delays were due to
being negligent and there is thus no
taxpayers acts) does not apply.
proof of guilt beyond reasonable
doubt. The accused was merely
Note: Requisites of a valid waiver: (i)
made
to
pay
the
deficiency
acceptance date; (ii) expiry date; (iii)
assessment against her.
signed by authorized officer of
taxpayer and BIR; (iv) notarized; (v)
fact of receipt must be indicated in the
CIR vs. Kudos Metal Corporation
copies

CIR
assessed
Kudos
Metal
Corporation for taxable year 1998. A
CIR vs. MERALCO
Waiver of the Statute of Limitations
was executed on December 2001. The
Respondent obtained a loan from a
CTA issued a Resolution canceling the
Singapore branch of ING Barings and
assessment notices issued against
withheld
10%
on
its
interest
Petitioner for having been issued
payments. Subsequently, it discovered
beyond the prescriptive period as the
that
the
lender
is
a
foreign
waiver purportedly failed to (a) have
government-owned
financing
the valid oficer execute the same (i.e.,
institution of Germany and then filed a
only the Assistant Commissioner signed
request for ruling with the BIR seeking
it and not the CIR); (b) the date of
confirmation of the tax exempt status
acceptance was not indicated; (c) the
of the lender and consequently their
fact of receipt by the taxpayer was not
non-liability to withholding taxes. After
indicated in the original copy.
the BIR issued the ruling confirming
??? Has the CIRs right to assess prescribed? the exemption, Respondent filed a
claim for refund with the CIR. The CIR
denied the claim stating that the claim
CIR vs. Kudos Metal Corporation
has prescribed as 2 years has lapsed
from the time the withholding taxes
!!! YES. The requirements for a valid

were paid.

administrative and judicial claims.

??? Has the right to claim refund of the??? (1) Was the Petitioners administrative
erroneously
paid
withholding
taxesclaim filed out of time?
prescribed?
(2) Was the filing of the judicial claim
premature?
CIR vs. MERALCO
!!! YES. The 2-year period is applied
regardless of any supervening cause
that may arise after payment. In this
case, the issuance by the BIR of the
ruling is merely confirmatory in nature
and is not the operative act from
which an entitlement of refund is
determined. The period also cannot
begin to run merely from the
discovery
by
the
taxpayer
of
erroneous or excessive payment of
taxes. Neither can solution indebiti be
used as basis since this legal concept
presupposes that there is no binding
relationship between the payor and
the payee. There is clearly a binding
relationship since Respondent is
required by law to act as withholding
agent on its payment to the lenderbank.

CIR vs. Aichi Forging Company of Asia,

Inc.

On September 30, 2004, Aichi

Forging filed a claim for refund/credit
of input VAT attributable to its zerorated sales for the period July 1, 2002
to September 30, 2002 with the CIR
through the DOF One-Stop Shop. On
the same day, Aichi Forging filed a
Petition for Review with the CTA for
the same action. The BIR disputed the
claim and alleged that the same was
filed beyond the two-year period
given that 2004 was a leap year and
thus the claim should have been filed
on September 29, 2004. The CIR also
raised issues related to the reckoning
of the 2-year period and the
simultaneous
filing
of
the

(2) YES. Section 112 mandates that the

taxpayer filing the refund must either
wait for the decision of the CIR or the
lapse of the 120-day period provided
therein before filing its judicial claim.
Failure to observe this rule is fatal to a
claim. Thus, Section 112 (A) was
interpreted to refer only to claims filed
with the CIR and not appeals to the CTA
given
that
the
word
used
is
application. Finally, the Court said
that applying the 2-year period even
to
judicial
claims
would
render
nugatory Section 112 (D) which already
provides for a specific period to appeal
to the CTA --- i.e., (a) within 30 days
after a decision within the 120-day

!!! (1) NO. The right to claim the

refund must be reckoned from the
close of the taxable quarter when the
sales were made in this case
September 30, 2004. The Court added
that the rules under Sections 204 (C)
and 229 as cross-referred to Section
114 do not apply as they only cover
erroneous
payments
or
illegal
collections of taxes which is not the
case for refund of unutilized input VAT.
Thus, the claim was
filed on time even if 2004 was a leap
year since the sanctioned method of
counting is the number of months. The
period of exception for this rule is from
June 8, 2007 to September 11, 2008
when the 2-year period is reckoned
from the date of the payment of
CIR vs. Aichi Forging Company of Asia,output VAT (Atlas Consolidated Mining
vs. CIR)
Inc.

period and (b) upon expiry of the 120day without a decision.

years after it became an ofline

carrier. While the CTA agreed that
the Petitioner can no longer be taxed
CIR
vs.
Mindanao
II
Geothermalfor
gross
passenger
revenues
Partnership
starting 1999, it also found that
Petitioner
erroneously
deducted
items from its gross cargo revenues
Aichi, Mirant, Atlas, San Roque, etc.
which was not consistent with the
Tax Code. The CTA thus disallowed
the refund by pointing out that
Aichi, Mirant, Atlas, San Roque, etc.
Petitioner in fact underpaid its taxes
on cargo revenues by P31 million
Miramar Fish Company, Inc. vs. CIR
which amount was higher than the
P5 million being claimed for refund.

Petitioner
amended
its
administrative claims filed with the
BIR claiming that it had revised the
amounts contained in the letterclaims. Given this claim, it also
argued that that the remedy to
appeal the inaction of the BIR on the
claims (using the 120+30 rule) has
not yet prescribed.
??? Will the amendment of the
administrative
claims
serve
to
extend the period to appeal the
inaction with the CTA?
!!! NO and YES. The claims that merely
relied on the same unamended VAT
returns cannot be used since both
versions of the claim relied on the
figures reflected in the VAT returns. On
the other hand, the claims that were
revised relied as well on amendments
made to the VAT returns themselves
and as such are considered as validly
justified amendments.
United Airlines, Inc. vs. CIR
United Airlines was formerly an
online carrier and stopped being
such in 1998 at which time it
appointed a sales agent in the
Philippines. They filed a claim for
refund in 2002 covering alleged
overpaid income taxes on gross
passenger revenues arising from the

??? Can the Court, without violating

the general principle against offsetting
of taxes, disallow a claim for refund on
the ground that its (Courts) finding of
a defciency assessment against the
same claimant is even higher than
that sought to be refunded?
United Airlines, Inc. vs. CIR
!!! YES. Section 72 of the Tax Code
states that When an assessment is
made in case of any list, statement or
return, which in the opinion of the
Commissioner was false or fraudulent
or contained any statement or
undervaluation, no tax collected under
such assessment shall be recovered by
any suit, unless it is proved that said
list, statement or return was not false
nor fraudulent and did not contain any
understatement or undervaluation.
While the Court reiterated and
recognized the rule against ofsetting
of tax claims upheld in previous cases,
it brought up the point that the grant
of a refund is founded on the
assumption that the tax return is
valid. It also said that the practical
benefit of dispensing of the issues on
the proper assessment in the same
claim for refund case likewise avoids a
multiplicity of proceedings or suits.

Note: The Court apparently did not

find it relevant that the Tax Code
provision refers to the Commissioner
having such an opinion/finding since
in this case it was the CTA which first
brought up the issue of the tax return
not being relied upon.
Smart
Communications,
Municipality of Malvar

Inc.

Petitioner received a closure order

from the Respondent for the nonpayment of dues arising out of an
ordinance regulating the establishment
of special projects which included
Petitioners telecommunications tower.
Petitioner protested and upon denial of
the protest appealed the same to the
Regional Trial Court of Tanauan
questioning as well the validity of the
ordinance.
Thereafter,
Petitioner
appealed the RTCs decision to the CTA
which dismissed the same for lack of
jurisdiction claiming that it cannot
resolve
cases
where
the
constitutionality of a law or rule is
challenged.

!!! The CTA. The power of the CTA to

rule on decisions of the SOF is
covered by the phrase other matters
arising under the NIRC in Section 7 of
R.A. 9282. This decision now resolves
the apparent split jurisdiction where if
what
is
being
questioned
are
administrative issuances, the same is
vs.appealed to the regular courts (British
American Tobacco), while if is assailed
are rulings of the Commissioner, then
the
CTA
has
jurisdiction
(Asia
International Auctioneers). The Court
very clearly said that the CTA can now
rule not only on the propriety of an
assessment or tax treatment of a
certain transaction, but also on the
validity of the revenue regulation or
revenue memorandum circular on
which said assessment is based.
Clark
Investors
and
Association, Inc. vs. CIR

Locators

??? Can a taxpayer file a petition for

certiorari under Rule 65 direct to the
Supreme Court to question a revenue
regulation?
??? Does the CTA have jurisdiction over a
decision of the RTC on a purported tax!!! NO. The CIR and the Secretary of
Finance issued the regulations on the
case?
excise
tax
on
importation
of
!!! NO. The primary reason for the
petroleum products into the BCDA in
CTAs lack of jurisdiction is that what
the exercise of their quasi-legislative
was imposed under the questioned
or rule-making powers, not judicial or
ordinance are not taxes but are
quasi-judicial functions. Thus, the
instead regulatory fees, specifcally to
same is outside the scope of a
address
the
environmental
petition for certiorari. The Court lastly
depredation of the said special
ruled that it shall not entertain a
projects. As such, the case that
direct resort to them unless there are
originated from the RTC is not
exceptional
and
compelling
considered a local tax case over which
circumstances which is not present in
the CTA has jurisdiction.
this case.
Philippine American Life and GeneralCommissioner of Customs vs. Marina
Insurance Company vs. CIR
Sales, Inc.
??? To whom are adverse rulings of the???
Is
a
Secretary of Finance appealed?
Reconsideration

Motion
from

for
the

decision of a division of the CTA

mandatory prior to elevating the
case to the CTA en banc
!!! YES. The use of the term must
clearly indicates that the requirement
is
mandatory
and
not
merely
directory. There is no exigent and
persuasive reason (such as relieving a
litigant of injustice) to relax the rules
in this case.
CIR vs. CBK Power Company Limited
??? May an interlocutory order (Order
of Default) issued by a division of the
CTA be brought directly on certiorari
to the Supreme Court even without
appealing the same to the CTA en
banc?
!!! YES. The CTA en banc has clear
jurisdiction over final orders or
judgments but not over interlocutory
orders issued by the CTA in division.
As no appeal can be taken from the
questioned order to declare in default,
Petitioners filing of the instant
petition for certiorari with the
Supreme Court is in conformity with
the rules.
Note: As a general rule, decisions of
the CTA in division are still only
appealable to the CTA en banc and
not to the Supreme Court. (Duty Free
Philippines vs. BIR)
Republic Act 10021 --- Exchange of
Information by the Bureau of
Internal
Revenue
on
Internationally-agreed
Tax
Standards
!!! The Commissioner can now inquire
into bank deposits and other related
information
held
by
financial
institutions of a specific taxpayer or
taxpayers subject of a request for
supply of tax information from a

foreign tax authority pursuant to an

international convention or agreement
on tax matters to which the Philippines
is a signatory or a party. The
information may be used by the BIR for
tax assessment, verification, audit, and
enforcement purposes. The exchange
of information shall be done in a secure
manner to ensure confidentiality.
!!! The provision of information
to a foreign tax authority
requires that the requesting
foreign
tax
authority
has
provided relevant information
such as the identity of the
taxpayer,
the
tax
purpose,
statement
that
the
foreign
authority has exhausted all
means, etc.
!!! If the subject of the request are
income tax returns, the same shall
be open to inspection upon the order
of the President of the Philippines.
Executive Order 56 --- Opening of
Income Tax Returns to Implement
Republic Act 10021
!!! The authority to order the opening
for inspection of the income tax
returns of specific taxpayers for
exchange of information by a foreign
tax authority is delegated to the
Secretary of Finance.
!!! Any information received by the
foreign tax authority as a result of
the opening of the income tax returns
are absolutely confidential and shall
be disclosed only to persons or
authorities
involved
in
the
assessment or collection of, or
enforcement
or
prosecution
in
respect of the taxes covered by such
conventions/agreements.
RR 18-2013 & RMC
Amending RR 12-99

11-2014

---

purposes)
!!! The significant provisions are as follows
5) The issuance of FLD/FAN reiterating
--immediate payment of assessment
1) The Notice of Informal Conference
previously made in the PAN is a denial
step has been removed. Thus, first
of the PAN protest and is thus a
step after examination is the
decision on disputed assessment
issuance of the PAN (unless not
which may be appealed
required)
(Note: This upholds the Allied
Banking decision that the FAN and not
2) The taxpayer must specify if what
just the FDDA is appealable to the
is being filed is a request for
CTA)
reinvestigation or a request for
reconsideration. If the appeal is from
the decision of an authorized
representative to the CIR, the only
mode of appeal allowed is a request
for reconsideration

Other Significant Issuances

!!! RR 17-2013 --- All taxpayers are

required to preserve their books of
accounts
and
other
accounting
3) The modes of service of the PAN, FAN,
records (including invoices, receipts,
and FDDA have been defined --vouchers,
and
other
source
personal service on registered or knowndocuments) for a period of ten (10)
years
reckoned
from
the
day
address (where business is conducted)
following the deadline in filing a
return or if filed after the deadline,
RR 18-2013 & RMC 11-2014 ---from the date of actual filing. If there
Amending RR 12-99
is a pending examination due to an
assessment or a filed refund claim,

substituted service (where the

the records are to be preserved until
same is left with the clerk or
the case is finally resolved.
person-in-charge if in a place of
business or with a person of
legal age if in a house or if there
is nobody there or there is
refusal to receive, then 2
barangay oficials will witness
the service)

service by mail which is either

registered
or
reputable
professional courier service, or,
if neither is available, ordinary
mail

4)
The
duly
authorized
representatives are Revenue Regional
Directors, Assistant Commissioners
LTS, and Assistant Commissioner for
Enforcement (Note: This upholds the
case of Festo which held that Revenue
District Oficers are not authorized
representatives
for
assessment

VII.

LOCAL BUSINESS TAX

Pelizloy Realty Corporation vs. Province

of Benguet
??? Can Benguet province impose
amusement taxes on admission fees
for resorts, swimming pools, bath
houses, hot springs, tourist spots and
other similar places for recreation?

!!! NO. The Court stated that a valid

local tax imposition must (1) be
consistent with the principles under
Section 130 and (2) not breach the
limitations imposed under Section 133.
Even while Petitioner disputed the
imposition of the tax by stating that
Section 133 of the LGC prohibits LGUs

to impose percentage taxes (such as

the amusement tax) and/or VAT, the
Court ruled that provinces are not
barred from levying amusement taxes
given that the LGC expressly allows
them to levy amusement taxes but
only on theaters, cinemas, and other
places of amusement. However, it was
ruled that resorts, pools, hot springs,
etc. are not covered by other places
of amusement since the enumeration
under Section 140 are all venues
primarily for staging of spectacles
which cannot encompass the facilities
of Petitioner.

and gravel mined to construct and

maintain concrete structures needed
in its mining operations such as a
tailings dam, access roads, and
offices. The provincial treasurer of
Benguet
then
asked
Lepanto
Consolidated Mining to pay sand and
gravel tax for the quarry materials
extracted from the mining site. The
counterargument was that the said
tax applied only to commercial
extractions and since Lepanto did not
supply other users for some profit, the
tax should not apply.

??? Is Lepanto liable for the tax

imposed by Benguet on the sand and
gravel that it extracted from within the
City of Manila vs. Colet
area of its mining claim used
??? Can LGUs impose local business tax onexclusively in its mining operations?
transportation contractors?

!!! NO. Section 133 clearly proscribes

LGUs from imposing any tax on the
gross
receipts
of
transportation
contractors engaged in the transport of
passengers or freight by hire, and
common carriers by air, land, or water.
The supposed omnibus grant of power
to cities and municipalities under
Section 143 (h) of the LGC cannot
overcome
the
specific
exception/exemption in Section 133.
This does not result in Section 143 (h)
being a hollow decorative provision
since there are still other businesses
subject to excise tax, VAT, or
percentage tax which the LGUs can still
tax under Section 143 such as hotels,
caterers,
dealers
in
securities,
franchise holders, banks, finance
companies, amusement places, etc.

Lepanto Consolidated Mining Company

vs. Ambanloc
!!! YES. The CTA erred in applying the
provision of the Local Government
Code (Section 138) since the basis of
Benguet province emanates from the
Revised Benguet Revenue Code itself.
This notwithstanding, the provincial
revenue
measure
still
did
not
distinguish between commercial and
non-commercial extractions.

In addition, the Petitioners argument

that when a company is taxed on its
main business it can no longer be
taxable for engaging in an activity that
is but part of, incidental to, and
necessary to such main business, was
held to be inapplicable. The Court said
that the cases where the above
principle has been applied involved
business taxes and thus the incidental
Lepanto Consolidated Mining Companyactivities could not be treated as
vs. Ambanloc
separate and distinct from the main
business. Here the tax being imposed
Lepanto Consolidated Mining had a
was an excise tax levied on the
mining lease contract for a mining
privilege of extracting gravel and sand.
claim in Benguet. They used the sand

Michigan
Holdings,
Inc.
Treasurer of Makati City

vs.

CityAngeles City
Corporation

Vs.

Angeles

Electric

??? Are holding companies subject to local??? Can an injunction be issued to enjoin the
business tax on dividends received fromcollection of local taxes?
their subsidiaries?
!!! YES. The Local Government Code
!!! NO. Section 133 of the LGC
does not specifcally prohibit an
expressly provides that the taxing
injunction enjoining the collection of
powers of LGUs shall not extend to the
taxes. This is diferent in the case of
levy of income tax, except when levied
national taxes where the Tax Code
on
banks
and
other
financial
expressly provides that no court shall
institutions. In this relation, Section
have the authority to grant an
131 defines banks and other financial
injunction to restrain the collection on
institutions
to
include
lending
national internal revenue tax, fee or
investors,
investment
companies,
charge with the sole exception of when
pawnshops,
insurance
companies,
the CTA finds that the collection
stock brokers etc. The same does not
thereof may jeopardize the interest of
cover holding companies.
the government and/or the taxpayer.
Nevertheless, there must still be proof
of the existence of the requirements
National Power Corporation vs. Bataan
for injunction to be issued under the
Rules of Court (i.e., clear right to be
Bataan assessed NPC for franchise
protected and urgent necessity to
tax deficiency basing its claim on
prevent serious damage).
NPCs sale of electricity it generated
from the power plants in Bataan. NPC
refused to pay and said that it had
City of Manila vs. Grecia-Cuerdo
ceased being liable for the tax after
the efectivity of the Electric Power
??? Does the CTA have jurisdiction
Industry Reform Act (EPIRA) relieving it
over a special civil action for certiorari
(NPC) of the function of generating and
assailing
an
interlocutory
order
supplying electricity.
(injunction) issued by the RTC in a
local tax case?
??? Is NPC still liable for local tax?
!!! YES. While Republic Act 9282 does
!!! NO. The EPIRA transferred to
not contain a categorical statement
TRANSCO NPCs electrical transmission
which vests to the CTA jurisdiction over
function and thus NPC ceased to
petitions for certiorari on orders by the
operated that business in Bataan by
RTC on local tax cases, the grant of
operation of law. Since the local
appellate jurisdiction on local tax cases
franchise tax is imposed on the
leads to an assumption that the law
privilege of operating a franchise, not a
intended to transfer also such power
tax
on
the
ownership
of
the
as is deemed necessary if not
transmission facilities, it is clear that
indispensable in aid of such appellate
NPC is no longer taxable. The
jurisdiction. The Court pointed out that
distribution business was likewise
to confer the power over certiorari
transferred to PSALM Corp. and as such
petitions to the Court of Appeals would
the liability for the local franchise tax
create a split-jurisdiction situation
on that end passed to PSALM.
which is anathema to the orderly
administration of justice. Thus, the

power of the CTA to rule on petitions

for certiorari on interlocutory orders
issued by the RTC in local tax cases is
included in the powers granted by the
Constitution as well as inherent in the
exercise of its appellate jurisdiction.

either to refund or credit the tax

assessed
against
Petitioner
indispensable?

!!! NO. The decision provided for two

options to the taxpayer to recover the
erroneously paid tax refund or credit
in the succeeding years. In either case,
National Power Corporation vs. City ofthe issuance of a writ of execution is
Cabanatuan
superfluous because the judgment can
neither be considered an award for a

Respondent
computed
the
specific sum of money susceptible of
surcharge imposed on the deficiency
execution by levy or garnishment nor a
local business tax imposed against
special judgment. It could not have
Petitioner based on the total unpaid
been the intention of the law to burden
tax for each particular year. For
the taxpayer with going though the
example, if in 1993 the tax due was
process of execution under the Rules of
P1,000,000 (not the true amount )
Civil Procedure. If at all, the City may
and in 1994 the tax due was again
be allowed to verify documents and
P1,000,000 (also not true). The
information relative to the grant of the
surcharge imposed for 1994 was based
tax refund or tax credit.
on
P2,000,000
and
not
just
P1,000,000. In efect, the Citys
VIII. REAL PROPERTY TAX
computation resulted in the imposition
Mactan-Cebu
International
Airport
of the 25% surcharge for every year of
Authority
vs.
City
of
Lapu-Lapu
default.
??? Did the City compute the imposable??? Are the real property of Mactan-Cebu
International Airport Authority subject to
surcharge correctly?
RPT ?
!!! NO. There is nothing in the law
!!! NO. Petitioner is an instrumentality
which would justify the computation
of the government and thus its
done by the City. The surcharge is to
properties
actually,
solely,
and
be computed only against the annual
exclusively used for public purposes
tax due and not compounded. While it
consisting of the airport terminal
is true that imposing a higher amount
building, airfield, runway, taxiway, and
may be a more efective deterrent, it
the lots in which they are situated are
cannot be done as to make it
exempt from RPT. The decision follows
confiscatory and oppressive since in
the 2006 MIAA case and not the 1996
efect the surcharge would even
MCIAA case. The Court reiterated that
exceed the 72% limit on the interest
MIAA/MCIAA is not a GOCC (as it is not
imposable. Besides, if the legislative
organized as a stock or non-stock
intent was to make the 25% surcharge
corporation)
but
a
government
proportionate to the period of delay,
instrumentality vested with corporate
the law should have clearly said so.
powers. As properties of public
dominion being for public use, the
Coca-Cola Bottlers Philippines, Inc. vs.properties of MCIAA are not subject to
City of Manila
levy, encumbrance, or disposition. The
case likewise cited the previous rulings
??? Is a writ of execution of the
in the PFDA, GSIS, and PPA cases.
judgment ordering Respondent

LBAA has 120 days to decide the appeal

City
of
Lapu-Lapu
vs.
Economic Zone Authority

Philippine

???
(1) Is the Philippine Economic Zone
Authority exempt from
real property taxes?
(2) What are the remedies of a
taxpayer against an RPT assessment?
!!! (1) YES. PEZA is an instrumentality
of the national government. Even if it is
not integrated within the department
framework, it is an agency attached to
the DTI. Although PEZA is a body
corporate vested with some corporate
powers, it is not a GOCC and is thus not
required to be economically viable. The
Court added that a provision in the
Special Economic Zone Act explicitly
exempting
PEZA
was
deemed
unnecessary since it assumed the RPT
exemption of the EPZA under the
previous law given that PEZA likewise
replicated EPZAs non-profit character.
Lastly, the Court stated that even the
lands and buildings whose beneficial
use have been granted to other
persons are not subject to RPT since
PEZA only leases its lands and
buildings to PEZA-registered companies
which are also not subject to RPT.
City
of
Lapu-Lapu
vs.
Economic Zone Authority
!!! (2) The taxpayer
remedies below.

must

Appeal to the CBAA within 30

days from the denial or after the
lapse of the 120-day period
Appeal the CBAA decision to the CTA en
banc under Rule 43
Appeal the CTA decision to the Supreme
Court under Rule 45

City
of
Lapu-Lapu
vs.
Economic Zone Authority

Philippine

!!! In case of an illegal assessment

where the same was issued without
authority, exhaustion of remedies in
not necessary and the taxpayer may
directly resort to judicial action by
asking the RTC to enjoin the collection
of RPT following the Ty vs. Trampe
case. An appeal may be filed of the
RTC decision with the CTA within 15
days from the RTC decision.

In case the LGU has issued a notice of

delinquency, the taxpayer may ask
the court to enjoin the sale. In case
the property has been sold at public
auction, the taxpayer must first
deposit with the court the amount for
which the property was sold with a 2%
interest per month from the date of
sale and can then file an action to
assail the validity of the sale.
Philippine

follow

of
Lapu-Lapu
vs.
theCity
Economic Zone Authority

Philippine

Pay the tax then file a protest with theNote: The decision in the recent case
local treasurer within 30 days fromof National Power Corporation vs.
Navotas reiterated the principle that if
payment
Treasurer has 60 days to decide thethe issue with the RPT assessment is
one that deals with a legal issue, then
appeal
resort to the LBAA and CBAA are not
Appeal to the LBAA within 60
mandatory and the taxpayer can go
days from the denial of the
straight to the RTC. This case dealt
protest or after the lapse of the
with the power of the municipality
60-day period
itself to impose RPT notwithstanding
Petitioner NPCs actual and direct

control and supervision of the power

stations.

structure
intended
primarily
for
pollution control of silted materials and
hence exempt from real property
taxes.
City
of
Pasig
vs.
Presidential
Commission On Good Government
??? Are the properties exempt from real
property tax?
MPLDC owned two parcels of land in
!!! NO. While Section 234 (e) exempts
Pasig City. In 1986, Jose Y. Campos, the
from the real property tax machinery
registered owner of MPLDC, voluntarily
and equipment used for pollution
surrendered
MPLDC
to
the
control, the Court found that during
government. From 2002-2005, Pasig
the period covered by the assessment,
City sent notices of assessment to
no evidence was presented that the
MPLDC to demand payment of real
property was used actually, directly,
property taxes. PCGG filed with the
and exclusively for pollution control
RTC a petition for prohibition with a
purposes. In addition, the DENR itself
prayer for issuance of a TRO claiming
characterized the property as a
ownership over the said properties.
structure rather than as machinery or
??? Are the properties owned by PCGGequipment which thus takes it away
subject to real property taxes?
from the exempting provision.
!!! Only those portions of the
properties leased to taxable entities
Provincial Assessor of Marinduque vs.
are subject to real estate taxes for the
Court of Appeals
period of such leases and may also be
Note: The assessment was for years
sold at public auctioned to satisfy the
tax
delinquency.
While
it
was
before the law expanded the definition
of pollution control device to include
established that the owner of the
properties is now clearly the Republic
infrastructure
or
improvement.
However, the Court said that the
of the Philippines given the voluntary
surrender, the Local Government Code
owner can not get the benefit of a
retroactive
application
of
the
clearly states that the exemption will
not apply when the beneficial use
amendment.
thereof
has
been
granted,
for
consideration or otherwise, to a
Demaala vs. Commission on Audit
taxable person. The
Court cited several cases to
??? Can an LGU impose and collect a Special
support the decision such as
Education Fund at less than 1%?
Philippine Fisheries, GSIS, MIAA,
!!! YES. The imposition of the SEF is
and Lung Center.
within the taxing power of local
government units and which is
Provincial Assessor of Marinduque vs.consistent
with
the
guiding
Court of Appeals
constitutional principle of local
autonomy and fiscal flexibility. The
The Provincial Assessor issued an
permissive language (use of the
assessment against Marcopper for real
term may) of the LGC provision
property taxes supposedly due on the
imposing the SEF supports the
siltation dam and decant system.
authority of the LGUs to prescribe
Respondent
submitted
a
DENR
their own rates and that the 1% is a
certification stating that the dam is a

maximum rate rather

immutable edict.
National
Power
Province of Quezon

than

an

Corporation

NPC is a GOCC that entered into an

Energy Conversion Agreement (ECA)
under a build-operate-transfer (BOT)
arrangement with Mirant Pagbilao
Corp. Under the agreement, Mirant
will build and finance a thermal power
plant in Quezon, and operate and
maintain the same for 25 years, after
which, Mirant will transfer the power
plant to the Respondent without
compensation. NPC also undertook to
pay all taxes that the government
may impose on Mirant. Quezon then
assessed Mirant real property taxes on
the power plant and its machineries.

responsibility for the taxes due on the

power plant and its machineries, the
tax liability referred to is the liability
arising from law that the local
vs.government unit can rightfully and
successfully
enforce,
not
the
contractual liability that is enforceable
between the parties to a contract. The
local government units cannot be
compelled to recognize the protest of a
tax assessment from the Petitioner, an
entity against whom it cannot enforce
the tax liability.
National
Power
Province of Quezon

Corporation

!!! (2) NO. To successfully claim

exemption under Section 234 (c) of the
LGC, the claimant must prove two
elements: a) the machineries and
equipment are actually, directly, and
???
(1) Can Petitioner (NPC) file the
exclusively used by local water
protest against the real property tax
districts and government-owned or
assessment?
controlled corporations; and b) the
(2) Can Petitioner claim
local water districts and governmentexemption from the RPT given the
owned and controlled corporations
BOT
claiming exemption must be engaged
arrangement with Mirant?
in the supply and distribution of water
(3) Is payment under protest requiredand/or
the
generation
and
before an appeal to
transmission of electric power. Since
the LBAA is made?
neither the Petitioner nor Mirant
satisfies both requirements, the claim
for exemption must fall.
National
Power
Corporation
vs.
Province of Quezon
!!! (1) NO. The two entities vested with
personality to contest an assessment
are (a) the owner or (b) the person with
legal interest in the property. NPC is
neither
the
owner
nor
the
possessor/user
of
the
subject
machineries even if it will acquire
ownership of the plant at the end of 25
years. The Court said that legal interest
should be an interest that is actual and
material, direct and immediate, not
simply contingent or expectant. While
the Petitioner does indeed assume

(3) YES. If a taxpayer disputes the

reasonableness of an increase in a
real property tax assessment, he is
required to "first pay the tax" under
protest. The case of Ty does not apply
as it involved a situation where the
taxpayer was questioning the very
authority and power of the assessor,
acting solely and independently, to
impose the assessment and of the
treasurer to collect the tax. A claim for
tax exemption, whether full or partial,
does not question the authority of

vs.

local assessors to assess real property

tax.

City
on
February
10,
2004.
Respondent tendered payment on
June 10, 2004 but the Treasurer of
Quezon City refused on the ground
Camp
John
Hay
Developmentthat the one-year redemption period
Corporation vs. CBAA
has lapsed.
Petitioner was assessed by Baguio
??? Did the Respondent still have the right
City for its buildings within the John
to redeem?
Hay
Special
Economic
Zone.
!!! YES. While the LGC provides that
Petitioner protested the same and
the one year begins from the date of
raised as defense its alleged
sale on which date the delinquent tax
exemption from paying all taxes
and other fees are paid (in this case
under the Bases Conversion Act.
May 30, 2003), the local ordinance of
However, there was no payment
Quezon City provides that the period
under protest made by the Petitioner.
is reckoned from the date of
???
Can the CBAA/CTA assume
annotation of the sale (in this case
jurisdiction over a real property
February 10, 2004). To reconcile the
assessment case even if the taxpayer
conflicting provisions, the Court
did not pay under protest?
applied the rule laid down in the
special law or the Quezon City
!!! NO. A claim for tax exemption,
ordinance.
whether full or partial, does not deal
with the authority of local assessor to
Executive Orders 27 & 173 assess real property tax. Such claim
Reduction and Condonation of
questions the correctness of the
Real Property Taxes on Power
assessment and compliance with the
Generation Facilities of IPPs Under
provisions of the LGC and as such
payment under protest is mandatory.
BOT Contracts
Neither
can
Petitioner
use
the
!!! Based on the case of NPC vs.
argument that the rule on paying
Province of Quezon, Quezon Province
under protest will not apply to it since
was allowed to impose RPT on
it is not a taxpayer as it is a taxmachineries and equipment under a
exempt entity. The Court replied by
BOT agreement. Given that the
stating that the LGC provides for a
payment of the same RPT has been
process by which an entity claiming
contractually assumed by NPC/PSALM
exemption can comply with the same
which are GOCCs, the President
and hence it becomes a question of
reduced all RPT liabilities based on an
fact
which
would
require
and
assessment level of 15% depreciated
administrative determination.
at the rate of 2% per annum.
City Mayor of Quezon City vs.
Commercial Banking Corporation
An auction sale of the properties
of RCBC was conducted in May 30,
2003. The Certificate of Sale of
Delinquent Property was registered
with the Register of Deeds of Quezon

!!! All fines, penalties, and interest on all

Rizal
deficiencies were likewise condoned.

IX.

CUSTOMS

Subic Bay Metropolitan Authority vs.

Rodriguez

On

September

29,

2001,

shipment described as agricultural

product arrived at Subic Bay Freeport
Zone. On October 23, the BOC issued
a Memorandum stating that upon
examination the shipment was found
to contain rice. The representative of
the importer then stated that there
was a misshipment and manifested
willingness to pay appropriate duties
and taxes. The BOC then issued a
Hold Order on October 25, 2001.
Despite several certifications for its
clearance, Petitioner SBMA refused to
allow the release of the rice shipment.
Hence, on June 11, 2002, the
respondent-importers filed with the
RTC of Olongapo City a complaint for
Injunction and Damages against
SBMA.

!!! NO. The Customs Brokers Act of

2004 expressly repealed the TCCP
provisions on customs brokers and
created the Professional Regulatory
Board for Customs Brokers (PRBCB).
Notably, the COC is not a member of
the PRBCB to show the legislative
intent to remove the power he
previously exercised over customs
brokers. While the COC has the
mandate to enforce tarif laws and
prevent smuggling, these powers do
not include the power to regulate
customs broker profession. This is not
the same as tax agents who are to be
accredited by and register with the BIR
Commissioner.

??? Is Customs Administrative Order

(CAO) 3-2006 requiring customs
brokers desiring to practice their
profession to apply for accreditation
with the BOC valid?

??? Did the CA, not the CTA, have

jurisdiction over the appeal filed from the
RTC?

Philippine
British
Assurance
Company, Inc. vs. Bureau of
??? Did the RTC have jurisdiction over the
Customs
case?

Philippine
British
Assurance
Company was an insurance company
!!! NO. The Collector of Customs has
which regularly issued customs bonds
exclusive jurisdiction over seizure and
to its clients in favor of the BOC. The
forfeiture proceedings and the regular
bonds secure the release of imported
courts can not interfere nor can it
goods in order that the goods may be
enjoin these proceedings. This is the
released without prior payment of
rule the moment the imported goods
duties and taxes. Under these bonds,
are in the possession or control of the
Petitioner and its clients jointly bind
Customs authorities even if no warrant
themselves to pay BOC the value of the
for seizure or detention had previously
bonds in the event that the bonds
been issued. The actions of the BOC
expire without the imported goods
are then only appealed to the CTA.
being re-exported or the proper duties
The Court also said that this rule,
being paid. BOC then filed a collection
which is anchored upon the policy of
case alleging that Petitioner had
placing no unnecessary hindrance on
unliquidated customs bonds. The RTC
the governments drive to prevent
decided in favor of BOC but the appeal
smuggling and fraud and to collect
filed with the Court of Appeals was
correct duties, is absolute.
dismissed as the CA claimed lack of
jurisdiction and said that the appeal
Airlift Asia Customs Brokerage, Inc. vs.lies with the CTA as a case for
collection of taxes.
Court of Appeals

!!! YES. An action to collect on a bond

used to secure the payment of taxes

is not a tax collection case but rather

a simple case for enforcement of
contractual liability. This was the same
ruling in Mambulao Lumber where to
satisfy its deficiency sales tax, the
parties agreed for the taxpayer to pay
in installments and as a security a
bond was executed. Upon default, the
government proceeded against the
bond while the taxpayer argued that
the 5-year period to collect had set in.
The Court also ruled that the
prescription rules under the Tax Code
do not apply and instead those under
the Civil Code apply.

2) Except in case of fraud, COC

(upon approval by the DOF with the
recommendation of the FIU) may
compromise
with
the
erring
importer but the same has to be
based to based on full disclosure
that is made prior to the issuance of
the Audit Notification Letter.

3) All importers and brokers are

required to keep at their principal
place of business for a period of 10
years (as amended by DOF Order
011-2014)
from
the
date
of
importation all the records of their
importations
and/or
books
of
accounts, business and computer
DOF Order 011-2014
systems and all customs commercial
!!! The significant provisions of the Order aredata including payment records
relevant to the verification of the
as follows --accuracy of the transaction value
1)
Post-entry
audit
is
now
declared by the importers/customs
administered by Fiscal Intelligence
brokers on the import entry.
Unit of the DOF and no longer the
THANK YOU.
BOC-PEAG.