Documente Academic
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Documente Cultură
This supplement covers significant and relevant cannot qualify the exemption constitutionally-granted
Supreme Court jurisprudence on taxation law and to non-stock, non-profit educational institutions.
Bureau of Internal Revenue (BIR) issuances from June (Commissioner of Internal Revenue v. De La Salle
1, 2016 to June 30, 2017. University, G.R. No. 196596, 198841, and 198941,
November 9, 2016)
For jurisprudence and BIR issuances for the period
prior to June 1, 2016, please refer to the previous It is clear and unmistakable from the Constitution that
supplements. A review of the jurisprudence and BIR non-stock, non-profit educational institutions are
issuances cited in previous supplements is strongly constitutionally exempt from tax on all revenues
encouraged. derived in pursuance of its purpose as an educational
institution and used actually, directly and exclusively
In addition, this supplement covers the salient for educational purposes. This constitutional
provisions of the Customs Modernization and Tariff exemption gives the non-stock, non profit educational
Act (CMTA), which took effect on June 16, 2016. institutions a distinct character. And for the
constitutional exemption to be enjoyed, jurisprudence
GENERAL PRINCIPLES and tax rulings affirm the doctrinal rule that there are
only two requisites: (1) The school must be non-stock
Q. A non-stock, non-profit educational institution and non-profit; and (2) The income is actually, directly
argues that is rental income from and exclusively used for educational purposes. There
restaurants/canteens and bookstores operating are no other conditions and limitations. (RMO 44-
within its campus are exempt from income tax 2016 dated July 25, 2016 as cited in Commissioner
considering that such revenues derived therefrom of Internal Revenue v. St. Paul College of Makati,
are used for educational purposes. The BIR G.R. No. 215383, March 8, 2017)
argues that under the Tax Code, income of
whatever kind and character of a non-stock and Q. St. Lukes Medical Center (SLMC) is a hospital
non-profit educational institution from any of its organized as a non-stock and non-profit
properties, real or personal, or from any of its corporation. It admits both paying and non-
activities conducted for profit regardless of the paying patients. The BIR claimed that SLMC was
disposition made of such income shall be subject liable for income tax at 10% as provided under
to income tax. Is the BIR correct? Section 27(B) of the NIRC. SLMC argues that it is
a non-stock, non-profit institution for charitable
No. The income, revenues and assets of non-stock, and social welfare purposes exempt from income
non-profit educational institutions proved to have tax under Section 30(E) and (G) of the NIRC. Is
been used actually, directly, and exclusively for SLMC correct?
education purposes are exempt from duties and taxes.
No. To be exempt, Section 30(E) and (G) of the
There is a distinction between the tax treatment of NIRC requires an institution to operate exclusively for
non-stock, non-profit educational institutions and charitable or social welfare purpose. In case an exempt
proprietary educational institutions. The latter is institution earns income from its profit activities, it will
granted tax exemption conditioned only on the actual, not lose its tax exemption. However, its income from
direct and exclusive use of their revenues and assets for profit activities shall be subject to income tax. For
educational purposes while tax exemptions for the proprietary educational institutions and hospitals, the
former are subject to limitations imposed by law such rate shall be 10%. (Commissioner of Internal
as Section 30(H) of the Tax Code. The Tax Code
Page 1 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer and its supplements. No portion of this work may
be copied or reproduced without the written permission of the author. Possessors may reproduce and
distribute this supplement provided the name of the author remains clearly associated with my work and no
alterations in the form and content of this supplement are made.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Revenue v. St. Lukes Medical Center, G.R. No. lack of Senate concurrence; and (b) that, based on
203514, February 13, 2017) a revenue memorandum circular it issued, the
proper remedy of Mitsubishi is to recover or obtain
Q. Is a Revenue Regulation which treats a refund from the National Power Corporation, the
petroleum and petroleum products brought into executing agency. Is the BIR correct?
Freeport and economic zones (FEZs) as taxable
importations valid and constitutional? No. The subject taxes was erroneously collected from
the taxpayer, considering that the obligation to pay the
No. Such a revenue regulation is invalid and same had already been assumed by the Philippine
unconstitutional because: Government by virtue of its Exchange of Notes with
the Japanese Government. Case law explains that an
1. It erroneously considers petroleum and exchange of notes is considered as an executive
petroleum products brought into a FEZ as agreement, which is binding on the State even without
taxable importations. Goods brought into an Senate concurrence.
FEZ remain to be in foreign territory and are
not therefore goods introduced into Philippine Further, the Tax Code vests upon the CIR, being the
customs territory subject to Philippine customs head of the BIR, the authority to credit or refund taxes
and tax laws; which are erroneously collected by the government.
2. It illegally imposes taxes upon Freeport and This specific statutory mandate cannot be overridden
economic zones (FEZs), which, by law, enjoy by averse interpretations made through mere
tax and duty-free incentives on its administrative issuances, which - as argued by the CIR
importations; - shifts to the executing agencies the power to refund
3. It illegally amends the law a power vested the subject taxes. (Mitsubishi Corporation Manila
solely on the Legislature. Regulations may not Branch v. Commissioner of Internal Revenue,
enlarge, alter, restrict, or otherwise go beyond G.R. No. 175772, June 29, 2017)
the provisions of the law they administer. The
revenue regulation, an executive issuance,
attempts to withdraw the tax incentives clearly INCOME TAXATION
accorded by the Legislature to FEZ
enterprises. (Secretary of Finance v. Lazatin, Q. A law was passed granting income tax
G.R. No. 210588, November 29, 2016) exemption for minimum wage earners (MWE) as
well as increase in personal and additional
Q. The governments of Japan and the Philippines exemptions. The law became effective on July 6,
executed an Exchange of Notes, whereby the 2008. The BIR issued a revenue regulation
former agreed to extend a loan amounting to Forty providing for (a) the prorated application of the
Billion Four Hundred Million Japanese Yen personal and additional exemptions for taxable
(40,400,000,000) to the latter for the year 2008 and for the period of applicability of the
implementation of a Coal-Fired Thermal Power MWE exemption for taxable year 2008 to begin
Plant Project. In Paragraph 5 (2) of the Exchange only on 6 July 2008; and (b) the disqualification of
of Notes, the Philippine Government, by itself or MWEs who earn purely compensation income,
through its executing agency, i.e. National Power whether in the private or public sector, from the
Corporation, undertook to assume all taxes privilege of availing themselves of the MWE
imposed by the Philippines on Japanese exemption in case they receive compensation
contractors, i.e. Mitsubishi Corporation, engaged related benefits exceeding the statutory ceiling of
in the Project. Mitsubishi Corporation included in P30,000 (now P82,000). Is the revenue regulation
its income tax payments to the BIR income valid?
pertaining to the Japanese Government-funded
portion of the project. Thus, Mitsubishi filed for a No. The personal and additional exemptions should be
claim for refund. The BIR argues that (a) applied to the entire taxable year 2008. The test is
Mitsubishi is not entitled to the refund as the whether the new set of personal and additional
Exchange of Notes cannot be read as a treaty exemptions was available at the time of the filing of the
validly granting tax exemption considering the income tax return. In other words, while the status of
Page 2 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
1. An administrative claim must be filed with the The rules are as follows:
CIR within two years after the close of the
taxable quarter when the zero-rated or 1. The claimant-taxpayer has two (2) years after
effectively zero-rated sales were made. the close of the taxable quarter when the sales
were made to apply for the issuance of a tax
2. The CIR has 120 days from the date of credit certificate or refund of creditable input
submission of complete documents in support tax due or paid attributable to such sales. Thus,
of the administrative claim within which to before the administrative claim is barred by
decide whether to grant a refund or issue a tax prescription, the taxpayer must have submitted
credit certificate. The 120-day period may his complete documents in support of the
extend beyond the two-year period from the application.
filing of the administrative claim if the claim is 2. In all case, whatever documents a taxpayer
filed in the later part of the two-year period. If intends to file to support his claim must be
the 120-day period expires without any completed within the two-year period under
decision from the CIR, then the administrative Section 112(A) of the Tax Code and the
claim may be considered to be denied by Commissioner, or his duly authorized
inaction. representative should have decided on the
claim for tax credit or refund within 120 days
3. A judicial claim must be filed with the CTA from the date of submission of complete
within 30 days from the receipt of the CIRs documents or from the date of filing of the
decision denying the administrative claim or application if the claimant-taxpayer did not
from the expiration of the 120-day period submit additional documents. Pending
without any action from the CIR. administrative claims prior to the effectivity of
RMC No. 54-2014 shall be processed based on
4. All taxpayers, however, can rely on BIR Ruling available documents submitted by the taxpayer
No. DA-489-03 from the time of its issuance within the two-year period. (RR No. 1-2017
on 10 December 2003 up to its reversal by this dated January 3, 2017)
Court in Aichi on 6 October 2010, as an
exception to the mandatory and jurisdictional NOTE: In Pilipinas Total Gas v. Commissioner of
120+30 day periods. (Harte-Hanks Internal Revenue, G.R. No. 207112, December 8,
Philippines v. Commissioner of Internal 2016, the Supreme Court held that RMC No. 54-2014
Revenue, G.R. No. 205721, September 14, cannot be applied retroactively as this would prejudice
2016; Tekenaka Corporation v. taxpayers whose VAT claims for tax credit or tax
Commissioner of Internal Revenue, G.R. refund were filed and pending before June 11, 2014,
Page 4 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Page 5 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Q. The BIR issued a Letter of Authority (1) A Final Assessment Notice that does not contain a
authorizing its revenue officers to examine the definite due date for payment by the taxpayer is void.
taxpayers books of accounts and other
accounting records for all internal revenue taxes (2) The reckoning date of the accrual of penalties and
for the period Fiscal Year Ending 2003 and surcharges cannot be considered as the due date for
Unverified Prior Years. Is the assessment made payment of tax liabilities In the absence of an actual
pursuant to this Letter of Authority valid? due date, a FAN does not contain a definite and actual
demand to pay. (Commissioner of Internal Revenue
Partly. A LOA which contains a specified year and v. Fitness by Design, Inc., G.R. No. 215957,
unverified prior years is not entirely void. The November 9, 2016)
assessment for the year clearly specified remains to be
valid while the assessments which pertain to the Q. The taxpayer filed its income tax return in 1995.
unverified prior years are void for having been In 2014, the BIR issued a final assessment notice.
unspecified on separate LOAs. (Commissioner of The taxpayer argued prescription as its defense.
Internal Revenue v. De La Salle University, G.R. The BIR, on the other hand, contends that the
No. 196596, 198841, and 198941, November 9, 2016) assessment is based on fraud and thus the period
of assessment is 10 years, not 3 years. Is the BIR
Q. Is an assessment based merely on a Letter correct?
Notice (LN) valid?
No Fraud is a question of fact that should be alleged
No. An assessment based only on a LN is void. A and duly proven. To avail of the 10-year period to
Letter of Authority (LOA) cannot be dispensed with assess, the BIR should show that the facts upon which
just because none of the financial books or records the fraud is based is communicated to the taxpayer.
being physically kept was examined. The SC opined The BIR must include the basis for its allegations of
that the statutory requirement of a LOA is not fraud in the assessment notice. (Commissioner of
dependent on whether the taxpayer may be required to Internal Revenue v. Fitness by Design, Inc., G.R.
physically open his books or financial records but only No. 215957, November 9, 2016)
on whether a taxpayer is being subject to examination.
A LN is issued only for the purpose of notifying the Q. The BIRs audit investigation revealed that
taxpayer that a discrepancy is found based on the BIRs there were undeclared VATable sales more than
RELIEF System and nothing more. 30% of that declared in a taxpayers VAT returns.
The BIR concluded that there was prima facie
Revenue Memorandum Order (RMO) No. 32-2005 evidence of a false return warranting the
states that in case the discrepancies shown in the LN application of the ten (10) year prescriptive period
remained unresolved within 120 days from issuance of to assess. The taxpayer argues that the BIRs right
the LN, the revenue officer shall recommend the to assess had already prescribed considering that
issuance of a LOA to replace the LN. Due process the 3-year period had lapsed and that the CIR
requires that the revenue officer should secure first a should substantiate with clear and convincing
LOA before proceeding with the further examination evidence its claim that it filed a false return for the
and assessment of a taxpayer. The Court cannot 10-year period to apply. Is the taxpayer correct?
Page 6 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
No. A mere showing that the returns filed by the statute of limitations is a derogation of the taxpayer's
taxpayer were false, notwithstanding the absence of right to security against prolonged and unscrupulous
intent to defraud, is sufficient to warrant the investigations and thus, it must be carefully and strictly
application of the ten (10) year prescriptive period construed. (Philippine Daily Inquirer v.
under Section 222 of the NIRC. Commissioner of Internal Revenue, G.R. No.
213943, March 22, 2017)
Under Section 248(B) of the NIRC, there is a prima facie
evidence of a false return if there is a substantial BUT NOTE: In the above-cited case, the CIR failed
underdeclaration of taxable sales, receipt or income. to provide the office accepting the 1st and 2nd waivers
The failure to report sales, receipts or income in an with their respective third copies. Further, the third
amount exceeding 30% what is declared in the returns waiver was not executed in three copies. Thus, the
constitute substantial underdeclaration. waivers were defective. Note that there was no finding
that the taxpayer was equally at fault, thus, the case of
A prima facie evidence is one which that will establish a Commissioner of Internal Revenue v. Next
fact or sustain a judgment unless contradictory Mobile, G.R. No. 212825, December 7, 2015
evidence is produced. In other words, when there is a applying the in pari delicto doctrine does not apply.
showing that a taxpayer has substantially underdeclared
its sales, receipt or income, there is a presumption that Q. Can the BIR collect deficiency taxes from a
it has filed a false return. As such, the CIR need not corporation subject of rehabilitation proceedings
immediately present evidence to support the falsity of and where a Commencement Order has already
the return, unless the taxpayer fails to overcome the been issued?
presumption against it. (Commissioner of Internal
Revenue v. Asalus Corporation, G.R. No. 221590, No. Section 16 of RA 10142 or the Financial
February 22, 2017) Rehabilitation and Insolvency Act (FRIA) provides
that upon issuance of a Commencement Order which
HOWEVER: To warrant the application of the 10- includes a Stay or Suspension Order all actions or
year prescriptive period, the filing of a false return must proceedings, in court or otherwise, for the
be intentional and not due to honest mistake. Entry of enforcement of claims against a distressed company
wrong information due to mistake, carelessness, or shall be suspended.
ignorance, without intent to evade tax, does not
constitute a false return. (Philippine Daily Inquirer Claims includes all claims of the government,
v. Commissioner of Internal Revenue, G.R. No. whether national or local, including taxes, tariffs and
213943, March 22, 2017) customs duties. Creditors, including the government,
must ventilate their claims before the rehabilitation.
Q. (1) What is the effect of non-compliance with Thus, it is improper for the BIR to collect, or even
the requirements of a valid waiver per RMO No. attempt to collect deficiency taxes outside of the
20-90 and RDAO 05-01? (2) Is the taxpayer rehabilitation proceedings in willful disregard of a
estopped from questioning the validity of a Commencement Order lawfully issued by a
waiver? Rehabilitation Court. (Bureau of Internal Revenue v.
Lepanto Ceramics, G.R. No. 224764, April 24,
(1) A waiver in order to be valid must comply with the 2017)
requirements per RMO No. 20-90 and RDAO 05-01.
A defective waiver does not extend the 3-year Q. When is an application for tax abatement
prescriptive period and thus any assessment issued deemed approved?
beyond said period is void.
An application for tax abatement is deemed approved
(2) No. The taxpayer is not estopped from questioning only upon issuance of a termination letter by the BIR.
the validity of a waiver. The BIR cannot shift the blame The last step in the abatement process is the issuance
to the taxpayer for issuing defective waivers. The BIR of the termination letter. The presentation of the
cannot hide behind the doctrine of estoppel to cover termination letter is essential as it proves that the
its failure to comply with RMO 20-90 and RDAO 05- taxpayers application for tax abatement has been
01 which were issued by the BIR itself. A waiver of the approved. Thus, without a termination letter, a tax
Page 7 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
assessment cannot be considered closed or terminated. counted from the date of the payment of the tax or
(Commissioner of Internal Revenue v. Asiatrust penalty.
Development Bank, G.R. Nos. 201680-81, April 19,
2017) In this case, the tax involved in the case is the final
withholding tax on the taxpayers interest income on
Q. A taxpayer filed its administrative claim and its foreign currency denominated loan. Final
judicial claim for refund of tax erroneously or withholding taxes are considered as full and final
illegally collected only 13 days apart. The BIR payment of the income tax due and thus are not subject
argues that this does not satisfy the requirement of to any adjustments. Thus, the two-year prescriptive
exhaustion of administrative remedies. Is the BIR period shall commence to run from the time the refund
correct? is ascertained, i.e. date such tax was paid, and not upon
discovery of the taxpayer of the erroneous or excessive
No. Section 229 of the Tax Code states that judicial payment of taxes. (Metropolitan Bank and Trust
claims for refund of tax erroneously or illegally Company v. Commissioner of Internal Revenue,
collected must be filed within 2 years from the date of G.R. No. 182582, April 17, 2017)
payment of the tax or penalty providing further that
the same may not be maintained until a claim for Q. For taxpayers using the On-line Electronic
refund or credit has been duly filed with the CIR. Documentary Stamp Metering Machine (DS
metering machine), what should be deemed the
Section 229 does not mean that the taxpayer must date of payment of the DST for the purpose of
await the final resolution of its administrative claim. counting the two-year prescriptive period for filing
Section 229 only requires that the administrative claim a claim for a refund or tax credit?
should first be filed. The purpose of the administrative
claim is to serve as notice of warning to the CIR that The date of payment of the DST when the
court action would follow unless the tax erroneously or prescriptive period to file a claim for refund/credit
illegally collected is refunded. (Commissioner of must commence shall be the date when the
Internal Revenue v. Goodyear Philippines, G.R. documentary stamps are imprinted upon the
No. 216130, August 3, 2016) documents and not the date of purchase of
documentary stamps for loading or reloading on the
Q. A taxpayer-bank extended a foreign currency DS metering machine.
denominated loan to a company. As agreed, the
company withheld and paid to the BIR the final The payment of the DST and the filing of the DST
withholding tax on taxpayer-banks interest Declaration Return upon loading/reloading of the DS
income on the said loan. However, the taxpayer- Metering machine must not be considered as the date
bank mistakenly remitted the same amounts to of payment when the prescriptive period to file a
the BIR on April 25, 2001. Thus, the taxpayer-bank claim for refund/credit must commence. For DS
filed its administrative claim for refund on metering machine users, the payment of DST upon
December 27, 2002 while the judicial claim was loading/reloading is merely an advanced payment for
filed only on September 10, 2003. The taxpayer- future application. The liability of the payment of DST
bank argues that the two-year prescriptive period falls due only upon occurrence of the taxable
of its claim for refund should be reckoned not from transaction. (Philippine Bank of Communications
April 25, 2001, when it remitted the tax to the BIR v. Commissioner of Internal Revenue, G.R. No.
but at the time it filed its Final Adjustment Return 194065, June 20, 2016)
or Annual Income Tax Return for the taxable year
of 2001, or in April 2002, as it was only at this time LOCAL GOVERNMENT TAXATION
that its right to refund was ascertained. Is the
taxpayer-bank correct? Q. Uniwide conducted bsiness in buildings and
establishments constructed on parcels of land
No. In claims for refund of tax erroneously or illegally covered by Transfer Certificates of Title (TCTs)
collected, both the administrative and judicial claims issued by the Registry of Deeds of Pasig City. In
for refund should be filed within the two-year the said TCTs, the location of the parcels of land
prescriptive period. The two-year prescriptive period is is indicated as being in Pasig. From 1989 to 1996,
Page 8 of 14
NOTICE
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Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Uniwide paid business and realty taxes, fees, and Government Code, its road equipment and mini
other charges to the City of Pasig. However, haulers should be considered machinery directly
beginning 1997 and after receiving notice from the used by the taxpayer to meet the needs of its
Municipality of Cainta that the subject properties operations and thus real property subject to real
were within its territorial jurisdiction, Uniwide no property tax. The taxpayer, on the other hand,
longer paid local taxes to the City of Pasig. For contends that, under the Civil Code, they are
purposes of complying with local tax liabilities in movables by nature. Is the taxpayer correct?
case of a boundary dispute between local
governments, to whom should the taxpayer pay its No. The characterization of machinery as real property
local business tax and realty taxes? is governed by the Local Government Code and not
the Civil Code. In this case, the phrase pertaining to
The taxpayer should pay its local business tax to the physical facilities for production in the definition of
City of Pasig who has the apparent right to levy and machinery in the Local Government Code is
collect local business tax and realty taxes on the subject comprehensive enough to include road equipment and
properties on the basis of the TCTs. Under the Local mini haulers as actually, directly, and exclusively used
Government Code, local business taxes are payable for by the taxpayer to meet the needs of its operations in
every separate or distinct establishment or place where palm oil production. (Provincial Assessor of Agusan
business subject to the tax is conducted, which must del Sur v. Filipinas Palm Oil Plantation, G.R. No.
be paid by the person conduct the same. The situs of 183416, October 5, 2016)
taxation shall be paid to the local government where
such branch or sales outlet is located. For real property Q. A taxpayer argues that payment under protest
taxes, collection is vested in the locality where the is not required before it could challenge the
property is situated. In determining the location for authority of the local government to assess tax on
purposes of identifying the local government entitled its tax exempt properties before the LBAA. Is the
to collect taxes, the taxpayer should follow the location taxpayer correct?
stated in the certificate of title until amended through
proper judicial proceedings. (Municipality of Cainta No. Settled is the rule that should the taxpayer/real
v. City of Pasig and Uniwide, G.R. No. 176703, property owner question the excessiveness or
June 28, 2017) reasonableness of the assessment, the law directs that
the taxpayer should first pay the tax due before his
REAL PROPERTY TAXATION protest can be entertained.
Q. Does the exemption from real property taxes A claim for exemption from the payment of real
given to cooperatives exclude real property leased property taxes does not question the assessors
to other persons? authority to assess and collect such taxes, but pertains
to the reasonableness or correctness of the assessment
No. The Local Government Code exempts duly by the local assessor. Thus, payment under protest is
registered cooperatives from payment of real property required. (National Power Corporation v. The
taxes without distinction. Nothing in the law suggests Provincial Treasurer of Benguet, G.R. No. 209303,
that real property tax exemption only applies when the November 14, 2016)
property is used by the cooperative itself. Thus, the
exemption from real property taxes given to Q. Does the filing of a Motion for Reconsideration
cooperatives applies regardless of whether or not the before the LBAA toll the 30-day period within
land owned is leased. The instance that the real which to appeal before the CBAA?
property is leased to either an individual or corporation
is not a ground for withdrawal of tax exemption. No. Filing of a Motion for Reconsideration before the
(Provincial Assessor of Agusan del Sur v. Filipinas Local Board of Assessment Appeals (LBAA) will not
Palm Oil Plantation, G.R. No. 183416, October 5, toll the 30-day period within which to appeal before
2016) the Central Board of Assessment Appeals (CBAA).
Q. A taxpayer is engaged in palm oil production. The fresh period rule in Neypes does not apply as the
The Local Assessor argues that, under the Local appeal from a decision of the LBAA to the CBAA is
Page 9 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
administrative in nature, not judicial. (National Power (2) Returning residents shall have tax and duty
Corporation v. The Provincial Treasurer of exemption on personal and household effects
Benguet, G.R. No. 209303, November 14, 2016) provided that:
Page 10 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Q. What is a Provisional Goods Declaration? All claims and application for refund of duties and
taxes shall be made in writing and filed with the Bureau
If, at the time of importation, the importer does not within twelve (12) months from the date of payment
have all the documents necessary to complete the of duties and taxes. (Section 913, CMTA)
Goods Declaration, the importer shall file a
Provisional Goods Declaration.
Page 11 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
BUT NOTE: The filing of claims for refund of 2. When the 250% surcharge of the
national internal revenue taxes shall be governed by the discrepancy in duty duty and tax due is
provisions provided under the NIRC of 1997 as and tax to be paid imposed
amended. between what is
legally determined
Q. Define misdeclaration, misclassification and what is declared
and undervaluation in the Goods Declaration. is more than ten
percent (10%)
They are defined as follows: 3. When the The discrepancy shall
discrepancy in duty constitute a prima facie
Misdeclaration Wrong declaration of quantity, and tax to be paid evidence of fraud.
quality, description, weight, or between what is
measurement of the goods legally determined
Misclassification Insufficient or wrong and what is declared
description of the goods or use is more than thirty
of wrong tariff heading percent (30%)
Undervaluation There is undervaluation when: 4. When the 500% of the duty and tax
(a) the declared value fails to misdeclaration, due and that the goods
disclose in frill the price misclassification or shall be subject to
actually paid or payable or any undervaluation is seizure regardless of the
dutiable adjustment to the price intentional or amount of the
actually paid or payable; or (b) fraudulent, such as discrepancy without
when an incorrect valuation when a false or prejudice to the
method is used or the valuation altered document is application of fines or
rules are not properly submitted or when penalties against the
observed. (Section 1400, false statements or importer and other
CMTA) information are person or persons who
knowingly made willfully participated in
Q. What are the rules in case of misdeclaration, the fraudulent act.
misclassification or undervaluation in the Goods (Section 1400, CMTA)
Declaration?
Q. What are the grounds in order for imported
The rules are as follows: goods to be deemed abandoned?
1. When the No surcharge imposed Imported goods are deemed abandoned under the
discrepancy in duty is following circumstances:
less than ten percent
(10%), or when the 1. When the owner, importer, or consignee of the
declared tariff imported goods expressly signifies in writing to
heading is rejected in the District Collector the intention to abandon
a formal customs the same; or
dispute settlement 2. When the owner, importer, consignee, or
process involving interested party after due notice, falls to file the
difficult or highly goods declaration 15 days from notice of
technical question of discharge of the last package from the vessel or
tariff classification, aircraft (extendible for another 15 days on valid
or when the tariff grounds); or
classification 3. Having filed such goods declaration, the
declaration relied on owner, importer, consignee or interested party
an official after due notice, fails to pay the assessed duties,
government ruling. taxes and other charges thereon, or, if the
regulated goods failed to secure the necessary
Page 12 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
goods declaration or export declaration, certiorari against the acts and omissions of the said
clearances, licenses, and any other quasi-judicial agencies should, thus, be filed before the
requirements, prior to importation, within CTA. Except for local tax cases, actions directly
fifteen (15) days from the date of final challenging the constitutionality or validity of a tax law
assessment; or or regulation or administrative issuance may be filed
4. Having paid the assessed duties, taxes and directly before the CTA.
other charges, the owner, importer or
consignee or interested party after due notice, With respect to administrative issuances (revenue
fails to claim the goods within thirty (30) days orders, revenue memorandum circulars, or rulings),
from payment; or these are issued by the Commissioner under its power
5. When the owner or importer fails to claim to make rulings or opinions in connection with the
goods in customs bonded warehouses within implementation of the provisions of internal revenue
the prescribed period. (Section 1129, CMTA) laws. Tax rulings, on the other hand, are official
positions of the Bureau on inquiries of taxpayers who
JUDICIAL REMEDIES request clarification on certain provisions of the
National Internal Revenue Code, other tax laws, or
Q. Does the Secretary of Justice have jurisdiction their implementing regulations. Hence, the
to review disputed assessments involving determination of the validity of these issuances clearly
government owned and controlled corporations? falls within the exclusive appellate jurisdiction of the
CTA, subject to prior review by the Secretary of
The Secretary of Justice does not have jurisdiction to Finance. (Banco de Oro v. Republic, G.R. No.
review disputed assessments. The prevailing rule is that 198756, August 16, 2016)
it is the CTA that has the exclusive appellate
jurisdiction to review, among others, the decisions of Q. Can a taxpayer directly question a tax ruling
the Commissioner of Internal Revenue in cases with the Supreme Court?
involving disputed assessments. (Commissioner of
Internal Revenue v. Secretary of Justice and No. Rulings of the CIR (including Revenue
Philippine Amusement and Gaming Corporation, Memorandum Circulars) are appealable to the Court of
G.R. No. 177387, November 9, 2016) Tax Appeals, and not to any other courts. If a remedy
in the administrative machinery can still be resorted to,
Q. Does the CTA have exclusive jurisdiction to then such remedy must first be exhausted before the
determine the constitutionality or validity of tax courts power of judicial review can be sought. In
laws, rules and regulations, and other questioning the validity of a Revenue Memorandum
administrative issuances of the CIR? Circular, taxpayers should not resort directly to the
Supreme Court. Taxpayers should comply with the
Yes. The CTA has exclusive jurisdiction to determine doctrine of administrative remedies and the rule on
the constitutionality or validity of tax laws, rules and hierarchy of courts. (Bloomberry Resorts and
regulations, and other administrative issuances of the Hotels v. Bureau of Internal Revenue, G.R. No.
Commissioner of Internal Revenue. 212530, August 10, 2016)
The CTA has not only jurisdiction to pass upon the Interpretative rulings of the Bureau of Internal
constitutionality or validity of a tax law or regulation Revenue are reviewable by the Secretary of Finance.
when raised by the taxpayer as a defense in disputing However, in one case, the Supreme Court has held that
or contesting an assessment or claiming a refund, but because of special circumstances - namely: the question
also jurisdiction to take cognizance of cases directly involved is purely legal; the urgency of judicial
challenging the constitutionality or validity of a tax law intervention given impending maturity of the PEACe
or regulation or administrative issuance (revenue Bonds; and the futility of an appeal to the Secretary of
orders, revenue memorandum circulars, rulings). Finance as the latter appeared to have adopted the
challenged Bureau of Internal Revenue rulings - there
The law intends the CTA to have exclusive jurisdiction was no need to exhaust all administrative remedies
to resolve all tax problems. Petitions for writs of before seeking judicial relief directly with the Supreme
Page 13 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT JURISPRUDENCE
AND BIR ISSUANCES FOR THE 2017 BAR (WITH SALIENT PROVISIONS OF THE CMTA)
PIERRE MARTIN D. REYES
Court. (Banco de Oro v. Republic, G.R. No. no instance in which the en banc may reverse, annul or
198756, August 16, 2016) void a final decision of a division. The Revised Rules of
the CTA provide for no instance of an annulment of
Q. The National Power Corporation (NPC) judgment at all. The Rules of Court are silent as to
received a notice of franchise tax delinquency whether a collegial court sitting en banc may annul a
from the Provincial Government of Bataan. NPC final judgment of its own division.The silence of the
argued that it was exempt from the local franchise Rules may be attributed to the need to preserve the
tax. Eventually, the Provincial Government issued principles that there can be no hierarchy within a
Warrants of Levy on 14 properties owned by NPC collegial court between its divisions and the en banc, and
in Limay, Bataan. The same were likewise sold via that a court's judgment, once final, is immutable.
public auction where the Provincial Government
was the winning bidder. NPC filed a Petition for Further, a direct petition for annulment of a judgment
declaration of nullity of foreclosure sale with of the CTA to the Supreme Court, meanwhile, is
prayer for preliminary mandatory injunction with likewise unavailing, for the same reason that there is no
the Regional Trial Court (RTC). The RTC identical remedy with the High Court to annul a final
dismissed the same. NPC appealed to the Court of and executory judgment of the Court of Appeals. The
Appeals (CA). The Provincial Government of proper remedy of the taxpayer is to file a petition for
Bataan moved to dismiss the same for lack of certiorari under Rule 65, which can be filed as an original
jurisdiction of the CA over the subject matter as action with the Supreme Court and not before the
the suit was essentially a local tax case CTA En Banc. (Commissioner of Internal Revenue
questioning the validity of the imposition of the v. Kepco Ilijan Corporation, G.R. No. 199422, June
local franchise tax. Is the Provincial Government 21, 2016)
of Bataan correct?
Q. May the requirement of a bond for the CTA to
Yes. The Court of Tax Appeals is vested with the suspend the collection of tax be dispensed with?
exclusive appellate jurisdiction over, among others,
appeals from the "decisions, orders or resolutions of Yes. The requirement of the bond as a condition
the Regional Trial Courts in local tax cases originally precedent to suspension of collection applies only in
decided or resolved by them in the exercise of their cases where the processes by which the collection
original or appellate jurisdiction." ought to be made by means thereof are carried out in
consonance with the law, not when the processes are
The case a quo is a local tax case that is within the in plain violation of the law that they have to be
exclusive appellate jurisdiction of the Court of Tax suspended for jeopardizing the interests of the
Appeals. Parenthetically, the case arose from the taxpayer.
dispute between Napocor and the Provincial
Government of Bataan over the purported franchise The CTA should conduct a preliminary hearing to
tax delinquency of Napocor. Although the complaint ascertain and rule whether the bond may be dispensed
filed with the trial court is a Petition for declaration of or reduced. The CTA should consider other factors
nullity of foreclosure sale with prayer for preliminary recognized by law towards suspending the collection
mandatory injunction, the petition essentially assails of the assessment, like whether or not the assessment
the correctness of the local franchise tax assessments would jeopardize the interest of the taxpayer, or
by the Provincial Government of Bataan. (Napocor v. whether the means adopted by the CIR in determining
Provincial Government of Bataan, G.R. No. the liability of the taxpayer was legal and valid.
180654, March 6, 2017) (Tridharma Marketing Corporation v. Court of
Tax Appeals and Commissioner of Internal
Q. Does the CTA En Banc have jurisdiction to Revenue, G.R. No. 215950, June 20, 2016)
take cognizance of a petition for annulment of
judgment to annul and set aside a final decision of ***Nothing else follows***
a CTA division ?
No. The Revised Rules of the CTA and even the Rules
of Court which apply suppletorily thereto provide for
Page 14 of 14
NOTICE
This material supplements the authors 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar Supplement, and
Tax Audit Primer. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author remains
clearly associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.