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TAXATION 1
2nd Semester, AY 2018-2019
A. Classroom Rules:
1. Attendance will be checked at the beginning of every meeting.
2. Quiz and reporting will be conducted every meeting. Students are expected, therefore, to come to
class prepared and to have read the materials scheduled to be covered during the meeting. When a
student is reporting, the rest of the class is expected to listen to him. Students are encouraged to
participate in the discussion by asking questions.
3. Electronic gadgets are not prohibited during class hours. A student is expected, however, to turn
off his mobile phone or to put it on silent mode as soon as he steps into the classroom. If the
student expects a call during the meeting, he can take the call by discretely leaving the classroom.
Laptops, tablets, and other similar electronic devices, are not, likewise, prohibited but the
students who are called to recite should close these electronic devices for the duration of their
recitation. The same rule applies to mobile phones that serve as data storage.
4. Any student may discretely leave the classroom if and when absolutely necessary.
B. Grading System:
Report - 20%
Quiz - 30%
Mid-Term Exam - 25%
Final Exam - 25%
C. Reference/s:
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OUTLINE PROPER
1. Lifeblood Theory
2. Necessity Theory
3. Benefits- Protection Theory (Symbiotic Relationship)
4. Jurisdiction over subject and objects
E. Purpose of Taxation
1. Revenue-raising
– CIR vs. Algue, Inc., et. al. L-28896, 02/17/1988 168 SCRA 9
– PAL vs. Edu. 164 SCRA 320
– Tolentino vs. Secretary of Finance, 233 SCRA 630, 249 SCRA 628
2. Non-revenue/special or regulatory
– Osmeña vs. Orbos, 220 SCRA 703
– Caltex vs. COA 208 SCRA 755
– CIR vs. Central Luzon Drug Corp (456 SCRA 414, 445)
G. Characteristics/Extent of Taxation
– Sison vs. Ancheta, 130 SCRA 654
– CIR vs. Pineda, 21 SCRA 105
– Phil. Guaranty vs. CIR, 13 SCRA 775
– Collector vs. Yuseco, 3 SCRA 313
1. Fiscal Adequacy
2. Theoretical Justice
3. Administrative Feasibility
1. Police Power
2. Power of Eminent Domain
J. Doctrines in Taxation
1. Prospectivity of tax laws
2. Imprescriptibility
3. Construction and Interpretation of
a. Tax laws
1) Sources
a) Constitution
b) Statutes
i. RA 8424, as amended
ii. RA 9337
iii. Tariff and Customs Code
iv. Book II LGC
v. Special Laws
c) Administrative Issuances
i. BIR Revenue Administrative Order (RAO) No. 1-2003
ii. Revenue Regulations
Secs. 244-245, NIRC
RAO 1-2003
Revenue Memorandum Circular 20-86
Art. 7 Civil Code
Asturias Sugar Central vs. CIR, 29 SCRA 617
Tan v. Del Rosario, 237 SCRA 234
CIR vs. Seagate Technology, GR 153866, Feb. 11, 2005
iii. BIR Rulings
Sec. 4, 246, NIRC
PBCOM vs. CIR, 302 SCRA 241
d) Tax Revenue/Ordinances
– Tuazon vs. CA, 212 SCRA 739
– Hagonoy Market Vendor vs. Municipality of Hagonoy, GR 137621, Feb. 6,
2002
– Jardine Davies vs. Aliposa, GR 118900, Feb. 27, 20003
e) Tax Treaties
– Tañada vs. Angara, GR 118925, May 2, 1997
f) Case Laws (SC/CA/CTA)
g) Legislative Materials
2) General Rule
3) Exception
b. Tax exemption and exclusion
1) General Rule
2) Exception
c. Tax rules and regulations
1) General rule only
d. Penal provisions of tax laws
e. Non-retroactive application to taxpayers
1) Exceptions
– Lorenzo vs. Pozadas, Jr., et. al. 64 Phil 353
4. Exemption from taxation
a. In General
– (Meaning of exemption from taxation, nature, kinds, rationale/ground, revocation)
– Greenfield v. Meer, 77 Phil 394
– Basco vs. PAGCOR, 196 SCRA 52
– CIR vs. Botelho Shipping Corp.
– CIR vs. CTA, GCL Retirement Plan, 207 SCRA 487
– CIR vs. Guerrero, 21 SCRA 180
– Philippine Acetylene Co., Inc. vs. CIR ,GR L-19707, 8/17/1967, 20 SCRA 1056
– Maceda vs. Macaraig, Jr., 197 SCRA 771
– Sea-Land Service vs. CA, 357 SCRA 441
– Davao Gulf vs. CIR, GR 117359, July 23, 1998
– PLDT vs. Davao City, GR 143867, Aug. 22, 2001
b. Exemption Compared with Other Terms
1) Tax Remission/Condonation
– Surigao Con. Min. vs. Collector, 9 SCRA 728
2) Tax Amnesty
– PD 370
– EO 399 (as amended by EO 422); BIR Revenue Regulations
Nos. 6-005 and 10-2005
– CIR vs. CA, 240 SCRA 368
– CIR vs. Marubeni, GR 137377, Dec. 18, 2001
3) Exclusion/Deduction
– Sec. 32(B), NIRC
– Sec. 34, NIRC
c. Construction of Tax Exemptions
– Rodriguez, Inc. vs. Collector, 23 SCRA 119
– Republic Flour Mills vs. CIR, 31 SCRA 148
– Luzon Stevedoring Corp. vs. CTA, 163 SCRA 647
– Coconut Oil Refiners vs. Torres, GR 132527, July 29, 2005
– Maceda vs. Macaraig, 196 SCRA 771, 223 SCRA 217
5. Escape from taxation
a. Shifting of tax burden
1) Ways of shifting the tax burden
2) Taxes that can be shifted
3) Meaning of impact and incidence of taxation
a) Tax avoidance
b) Tax evasion
– Sec. 254 NIRC
– CIR vs. Toda GR 147188, 9/14/2004
– Republic vs. Gonzales, 13 SCRA 633
– Delpher Traders vs. IAC, 157 SCRA 349
– CIR vs. Lincoln Philippine Lie, GR 119176, Mar. 19, 2002
6. Tax amnesty
a. Definition
b. Distinguished from tax exemption
7. Double taxation
– Procter & Gamble Co. vs. Mun. of Jagna , 94 SCRA 894
– Sanchez vs. CIR, 97 Phil. 687
– Punzalan vs. Municipal Board of Manila, 95 Phil. 46
– CIR vs. SC Johnson & Sons, Inc. 309 SCRA 87
– Villanueva vs. City of Iloilo, 26 SCRA 578
– Ericsson Telecommunications, Inc. vs. City of Pasig, 538 SCRA 99, 114-115
a. Strict sense
b. Broad sense
c. Constitutionality of double taxation
d. Modes of eliminating double taxation
L. Kinds of Taxes
1. As to object
a. Personal, capitation or poll tax
b. Property tax
c. Privilege tax
2. As to burden or incidence
a. Direct
b. Indirect
3. As to tax rates
a. Specific
b. Ad valorem
c. Mixed
4. As to purposes
a. General or fiscal
b. Special, regulatory or sumptuary
– Osmeña vs. Orbos (220 SCRA 703)
5. As to scope or authority to impose
a. National
b. Local
6. As to graduation
a. Progressive
b. Regressive
c. Proportionate
A. Government’s Remedies
1. Assessment
a. Concept of assessment
– Commissioner of Internal Revenue vs. Court of Appeals (G.R. No.
104151)
– Republic of the Philippines vs. Court of Appeals (149 SCRA 351)
1) Requisites for valid assessment
2) Constructive methods of income determination
3) Inventory method for income determination
4) Jeopardy assessment
5) Tax delinquency and tax deficiency
b. Power of the Commissioner to make assessments and prescribe
additional requirements for tax administration and enforcement
1) Power of the Commissioner to obtain information, and to
summon/examine, and take testimony of persons
c. When assessment is made
1) Prescriptive period for assessment
a) False, fraudulent, and non-filing of returns
– Mambulao Lumber Company vs. Republic (132 SCRA 1)
2) Suspension of running of statute of limitations
– Republic vs. Hizon (320 SCRA 574)
d. General provisions on additions to the tax
1) Civil penalties
2) Interest
e. Assessment process
1) Tax audit
2) Notice of informal conference
3) Issuance of preliminary assessment notice (PAN)
4) Notice of informal conference
5) Issuance of preliminary assessment notice (PAN)
6) Exceptions to Issuance of PAN
7) Reply to PAN
8) Issuance of formal letter of demand and assessment notice/final
assessment notice
9) Disputed assessment
10) Administrative decision on a disputed assessment
f. Rendition of decision by Commissioner
1) Denial of protest
a) CIR’s actions equivalent to denial of protest
i. Filing of criminal action against taxpayer
ii. Issuing a warrant of distraint and levy
b) Inaction by Commissioner
2. Collection
a. Requisites
b. Prescriptive periods
3. Administrative remedies
a. Tax lien
b. Distraint of personal property including garnishment
1) Summary remedy of distraint of personal property
a) Procedure for distraint and garnishment
b) Sale of property distrained and disposition of proceeds
i. Release of distrained property upon payment prior to sale
c) Purchase by the government at sale upon distraint
d) Report of sale to BIR
e) Constructive distraint to protect the interest of the government
c. Summary remedy of levy on real property
1) Advertisement and sale
2) Redemption of property sold
3) Final deed of purchaser
d. Forfeiture to government for want of bidder
1) Remedy of enforcement of forfeitures
a) Action to contest forfeiture of chattel
b) Resale of real estate taken for taxes
c) When property to be sold or destroyed
d) Disposition of funds recovered in legal proceedings or obtained
from forfeiture
e. Further distraint or levy
f. Suspension of business operation
g. Non-availability of injunction to restrain collection of tax
4. Statutory Offenses and Penalties
a. Civil penalties
1) Surcharge
2) Interest
a) In General
b) Deficiency interest
c) Delinquency interest
d) Interest on extended payment
5. Compromise and Abatement of taxes
a. Compromise
– CIR vs. Abad, etc. (G.R. No. L-19627, June 27, 1968)
b. Abatement
B. Taxpayer’s Remedies
1. Assessment
a. Protesting assessment
1) Protest of assessment by taxpayer
– CIR vs. Villa (22 SCRA 3)
a) Protested assessment
b) When to file a protest
c) Forms of protest
2) Submission of documents within 60 days from filing of protest
3) Effect of failure to protest
b. Remedies of taxpayer to action by Commissioner
1) In case of denial of protest
2) In case of inaction by Commissioner within 180 days from
submission of documents
3) Effect of failure to appeal
2. Refund
a. Grounds and requisites for refund
b. Requirements for refund as laid down by cases
1) Necessity of written claim for refund
2) Claim containing a categorical demand for reimbursement
3) Filing of administrative claim for refund and the suit/proceeding
before the CTA within 2 years from date of payment regardless of
any supervening cause
c. Legal basis of tax refunds
d. Statutory basis for tax refund under the Tax Code
1) Scope of claims for refund
2) Necessity of proof for claim or refund
3) Burden of proof for claim of refund
4) Nature of erroneously paid tax/illegally assessed collected
5) Tax refund vis-à-vis tax credit
6) Essential requisites for claim of refund
e. Who may claim/apply for tax refund/tax credit
1) Taxpayer/withholding agents of non-resident foreign corporation
f. Prescriptive period for recovery of tax erroneously or illegally collected
g. Other consideration affecting tax refunds
3. Taxpayer’s suit impugning the validity of tax measures or acts of taxing
authorities
a. Taxpayer’s suit, defined
b. Distinguished from citizen’s suit
c. Requisites for challenging the constitutionality of a tax measure or act of
taxing authority
1) Concept of locus standi as applied in taxation
2) Doctrine of transcendental importance
3) Ripeness for judicial determination
– Maceda vs. Macaraig, Jr. (197 SCRA 771)
– Gonzales vs. Marcos (65 SCRA 624)
– Abaya vs. Ebdane (515 SCRA 720)
D. Judicial Remedies; Republic Act 1125 The Act that Created the Court of Tax Appeals
(CTA), as amended, and the Revised Rules of the Court of Tax Appeals
1. Jurisdiction of the Court of Tax Appeals
a. Exclusive appellate jurisdiction over civil tax cases
1) Cases within the jurisdiction of the Court en banc
2) Cases within the jurisdiction of the Court in divisions
b. . Criminal cases
1) Exclusive original jurisdiction
2) Exclusive appellate jurisdiction in criminal cases
2. Judicial Procedures
a. Judicial action for collection of taxes
1) Internal revenue taxes
2) Local taxes
a) Prescriptive period
b. Civil cases
1) Who may appeal, mode of appeal, effect of appeal
a) Suspension of collection of tax
i. Injunction not available to restrain collection
b) Taking of evidence
c) Motion for reconsideration or New trial
2) Appeal to the CTA, en banc
3) Petition for review on certiorari to the Supreme Court
c. Criminal cases
1) Institution and prosecution of criminal actions
a) Institution on civil action in criminal action
2) Appeal and period to appeal
a) Solicitor General as counsel for the People and government
officials sued in their official capacity
3) Petition for review on certiorari to the Supreme Court
INCOME TAXATION
II. Taxpayers
A. General Principles
B. Individuals
1. Resident Citizens
2. Non-Resident Citizens
3. Overseas Filipino Workers
4. Resident Alien
5. Non-Resident Alien Engaged in Trade or Business
6. Non-Resident Alien Not Engaged in Trade or Business
7. Special Aliens
C. Corporations
– CIR v. Batangas Tayabas Bus Co., 102 Phil 822
1. Large Taxpayers
2. Partnership; Co-ownership; GPP
– Onav.CIR,45SCRA78
– Obilles v. CIR, L-681185, Oct. 20,1985
– Reyes v. Commissioner, 24 SCRA 198
– Gatchalian v. Collector, 67 Phil 666
– Evangelista v. Collector, 102 Phil 140
– Collector v. Batangas Transport, 102 Phil 822
– Tan v. CIR, GR L-109289, Oct. 3,1994
– Pascual v. CIR, 166 SCRA 560
– Afisco v. CIR, 302 SCRA 1
– Solidbank v. CIR, CTA Case No. 4868, June 19,1997
3. Joint Venture; Exempt v. Taxable
4. Domestic Corporations
5. Resident Foreign Corporations
– Branch v. Subsidiary
– Winship v. Philippine Trust Co., 90 Phil 744
– Marubeni v. CIR, 177 SCRA 500
6. Non-Resident Foreign Corporations
– CIR v. BOAC149 SCRA 395
– Marubeni v. CIR, 177 SCRA 500
– CIR v. Procter and Gamble, 204 SCRA 277
D. Estates and Trusts
– CIR v. Visayas Electric, 23 SCRA 715
– CIR v. CA, 207 SCRA 487
E. Registration of Taxpayers