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Facts: From 1995 to 1998, Respondent Petron Corporation (Petron) used several
TCCs assigned to it by various BOI-registered entities for the payment of its excise tax
liabilities. The transfers to Petron of the TCCs were approved by the Department of
Finance’s One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (DOFOSS),
which is composed of representatives from the DOF, the BOI, the BOC and the BIR. In
2002, Petitioner CIR assessed Petron deficiency excise taxes for taxable years 1995 to
1998 on the ground that the TCCs utilized by Petron in payment of its excise tax liabilities
have been cancelled by the DOF for having been fraudulently issued and transferred.
Petron filed its protest against the BIR’s assessment. After the CIR served a warrant of
distraint and/or levy against Petron to enforce payment of the tax deficiencies, Petron
filed a Petition for Review with the CTA. The CIR argued that in a post-audit, the DOF-OSS
found that the TCCs were fraudulently obtained and transferred to Petron. Hence, the
DOF’s cancellation of the TCCs and related Tax Debit Memos (TDMs) used by Petron to
settle its tax liabilities was tantamount to non-payment of the excise taxes. The CTA
Second Division agreed with the CIR and found Petron liable for deficiency excise taxes
but, on appeal, the CTA En Banc reversed the CTA Second Division’s decision. The CIR
appealed to the Supreme Court.
Ruling: No. Petron is not liable as it is an innocent transferee for value of the
TCCs. A TCC undergoes a stringent process of verification by various specialized
government agencies before it is accepted as payment for an assignee’s tax liability. TCCs
are valid and effective from their issuance, and an innocent transferee for value has the
right to rely on the validity and effectivity of the TCCs assigned to it. An assignee of a
TCC is liable if proven to have been a party to the fraud or to have had knowledge of
the fraudulent issuance of the TCCs. Although the principle of estoppel generally does
not apply to the government, especially on matters of taxation, this general rule cannot
be applied if it would work injustice against an innocent party. Petron was not proven to
have had any participation in or knowledge of the CIR’s allegation of the fraudulent
transfer and utilization of the subject TCCs. It is a transferee in good faith and for value
of the TCCs.
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On further appeal, the Court of Appeals (CA) reversed the CTA decision and confirmed
the BIR’s position that the assessment has become final, executory and demandable for
failure by Lascona to promptly appeal the case to the CTA. Lascona appealed to the
Supreme Court.
Issue: Did the assessment become final, executory and demandable because of
Lascona’s failure to appeal to the CTA within 30 days from the lapse of the 180- day
period?
Ruling: No. A taxpayer has two options in case the CIR fails to act on a disputed
assessment within 180 days from submission by the taxpayer of relevant documents in
support of its protest, namely: (1) file a petition for review with the CTA within 30 days
from the expiration of the 180-day period, or (2) wait for the final decision of the CIR
on the disputed assessment and appeal such final decision to the CTA within 30 days
from receipt.
3. Commissioner of Customs and the District Collector of the Port of Subic vs. Hypermix
Feeds Corporation
G.R. No. 179579 promulgated February 1, 2012
Facts: On November 7, 2003, petitioner Commissioner of Customs issued CMO No. 27-
2003 where, for tariff purposes, wheat was classified into either food grade or feed
grade depending on the following: 1) importer or consignee; 2) country of origin; and 3)
port of discharge. The CMO provides an exclusive list of corporate flour millers, ports of
discharge, commodity descriptions and countries of origin, and depending on whether
the importer is enumerated on the list and its importation meets the information (as to
port of discharge, commodity description and country of origin), the wheat importation
would be classified either as food grade or feed grade, subject to a 3% or 7% tariff,
respectively. On December 19, 2003, respondent Hypermix Feeds Corporation
(Hypermix) filed with the Regional Trial Court (RTC) a Petition for Declaratory Relief, as it
anticipated the implementation of CMO on its imported and perishable Chinese milling
wheat in transit from China. Hypermix argued that the order violates the equal
protection clause of the Constitution when it treats non-flour millers differently from
flour millers for no justifiable reason. Hypermix also argued that the order summarily
adjudges it to be a feed grade supplier without the benefit of prior assessment and
examination. Thus, despite having imported food grade wheat, it would be subject to
the 7% tariff upon arrival of its shipment. The RTC and, on appeal, the Court of Appeals
(CA) both ruled in favor of Hypermix.
Issues:
1. Does CMO No. 27-2003 violate the equal protection clause of the Constitution?
Ruling:
1. Yes, CMO No. 27-2003 violates the equal protection clause. The equal protection
clause means that no person or class of persons shall be deprived of the same
protection of laws enjoyed by other persons or other classes in the same place in
similar circumstances. Thus, the guarantee of the equal protection of laws is not
violated if there is a reasonable classification.
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For a classification to be reasonable, it must be shown that (1) it rests on
substantial distinctions; (2) it is germane to the purpose of the law; (3) it is not
limited to existing conditions only; and (4) it applies equally to all members of the
same class. CMO No. 27-2003 does not meet these requirements as it is not
shown how the quality of wheat is affected by who imports it, where it is
discharged, or which country it came from. Thus, on the one hand, even if other
millers excluded from CMO No. 27-2003 have imported food grade wheat, the
product would still be declared as feed grade wheat, a classification subjecting
them to 7% tariff. On the other hand, even if the importers listed under CMO No.
27-2003 have imported feed grade wheat, they would only be made to pay 3%
tariff.
4. Bureau of Customs Employees Association (BOCEA) vs. Hon. Margarito B. Teves, et.al.
G.R. No. 181704 December 6, 2011 (EN BANC)
Facts : RA No. 9335, otherwise known as the Attrition Act of 2005, took effect on
February 11, 2005, while its implementing rules and regulations (IRR) became effective
in June 2006. Enacted to optimize the revenue-generation capability and collection of
the BIR and the BOC, the law intends to encourage BIR and BOC officials and employees
to exceed their revenue targets by providing a system of rewards and sanctions,
through the creation of a Rewards and Incentives Fund (Fund) and a Revenue
Performance Evaluation Board (Board). It covers all BIR and BOC officials and employees
with at least 6 months of service, regardless of employment status.
BOCEA argues that RA No. 9335 and its IRR are unconstitutional because:
(1) There is undue delegation of legislative power to the Board;
(2) The law and its IRR violate the rights of BOCEA’s members to equal protection of
the laws, security of tenure and due process; and
(3) The law is a bill of attainder (i.e., a legislative act which inflicts punishment on
individuals or members of a particular group without a judicial trial).
Issues:
2. Do the law and its IRR violate the rights of BOCEA’s members to equal protection
of the laws, security of tenure and due process?
Ruling:
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2. No, the law and its IRR do not violate the rights of BOCEA’s members to equal
protection of the laws, security of tenure and due process.
On the matter of equal protection, since the subject of the law is the revenue
generation capability and collection of the BIR and the BOC, agencies which have
the distinct primary function of generating revenues for the government, the
incentives and/or sanctions provided under the law pertain only to the said
agencies.
3. No, the law is not a bill of attainder. Instead, the law merely lays down the
grounds for the termination of a BIR or BOC official or employee and provides for
the consequences. The democratic processes are still followed and the
constitutional rights of the concerned employee are amply protected.
Facts: The Philippine National Bank (PNB) filed with the Commissioner of Internal
Revenue (CIR) a claim for refund of overpaid income tax for calendar year 1998. When
the BIR did not act on the claim, PNB filed a Petition for Review with the Court of Tax
Appeals (CTA). The CTA Division partially granted the claim and Petitioner PNB moved
for a reconsideration to the extent of the denial. After the CTA Division affirmed its
decision, PNB appealed to the CTA En Banc, which denied the appeal for having been
filed 4 days beyond the additional 15 days granted to PNB to file its petition. PNB argued
that the petition was filed in a timely manner, via LBC Express, on the last day of the
additional 15-day period granted by CTA En Banc.
Ruling: No. What constitutes the date of filing of a pleading is the date of actual receipt
by the court. The rules provide that a pleading shall be filed by presenting the
original copy personally to the clerk of court or by sending it through registered
mail. Service by ordinary mail is allowed only in instances where no registry
service exists. So, the date on which the court actually received the pleadings
delivered through a private letter-forwarding agency is considered the date of
filing in court, and not the date of delivery to the agency.
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UNDER THE WITHHOLDING TAX SYSTEM, THE PAYOR IS THE TAXPAYER UPON WHOM
THE TAX IS IMPOSED, WHILE THE WITHHOLDING AGENT SIMPLY ACTS AS AGENT OR
COLLECTOR OF THE GOVERNMENT TO ENSURE THE COLLECTION OF TAXES.
Facts: During the investigation of its book of accounts for taxable year 1994 and 1995,
RCBC executed two waivers of the defense of prescription under the Statute of
Limitations of the NIRC. After receiving a Formal Letter of Demand together with
Assessment Notices (FAN) from the BIR, RCBC filed its protest. Due to the inaction of the
CIR on its protest, RCBC appealed to the CTA. While the appeal was pending, RCBC
received another FAN from the CIR with a reduced amount of deficiency taxes
assessment. On the same day, RCBC paid the deficiency taxes assessed, except for the
deficiency Foreign Currency Deposit Unit (FCDU onshore tax. RCBC argued that the
waivers it had previously executed were invalid since they were not executed under the
Tax Code. It also argued that the FCDU onshore tax was collected in the form of FWT,
and it was the borrower, as the withholding agent constituted by law, which was
primarily liable for the remittance of the said tax. Hence, RCBC argued that it is not
liable for the tax.
Issues:
Ruling:
1. YES. By making a partial payment on the revised assessments issued within the
extended period provided for in the questioned waivers, RCBC impliedly admitted,
and therefore cannot question, the validity of waivers.
2. YES. Under the FWT system, the payor is the taxpayer upon whom the tax is
imposed, while the withholding agent simply acts as an agent or a collector of the
government to ensure collection of taxes. The liability of the withholding agent is
independent from that of the taxpayer. It can be held liable for failure to perform its
duty to withhold the tax and remit the same to the government. However, it cannot
be made liable for the tax due because the one liable is the taxpayer who earned the
income subject to WT. The liability for the tax remains with the taxpayer, RCBC,
because the gain was realized and received by the said bank.
Facts: Prior to January 1, 1997, excise taxes on cigarette products were in the form of
ad valorem taxes imposed pursuant to Section 142 of the 1977 Tax Code. The 1977 Tax
Code was amended by RA No. 8240, effective January 1, 1997, and provided for a shif
from ad valorem to specific taxes. Section 142(c) on excise taxes on cigarettes packed by
machine provided that, during a 3-year transition period, the specific tax from any brand
of cigarettes “shall not be lower than the tax which is due from each brand on October 1,
1996.” It also provided for a 12% increase in the excise tax rates for cigarettes packed by
machine effective January 1, 2000. The implementing RR No. 1-97 echoed Section 142
of the Tax Code. The 1977 Tax Code was later repealed by RA No. 8424 (or the 1997 Tax
Code), effective January 1, 1998. Section 145(c) of the Code provides for specific tax
rates of cigarettes packed by machine and a 12% increase on these rates on January 1,
2000.
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To implement the 12% increase in the rates, RR No. 17-99 was issued, which provided
that “the new specific tax rate for any existing brand of cigars and cigarettes packed by
machine, distilled spirits, wines and fermented liquors shall not be lower than the excise
tax that is actually being paid prior to January 1, 2000.”
The CIR argued otherwise and stated that the inclusion of the proviso in Section 1 of RR
No. 17-99 was made to carry into effect the law’s intent to increase the collection of
excise taxes and is well within the scope of his delegated legislative authority. The
implementing rules issued by the Department of Finance (DOF) should not go beyond
the law which the rules seek to implement. The CIR additionally pointed out that
Section 145(c) of the 1997 Tax Code categorically declares that the excise tax from any
brand of cigarettes within the 3-year transition period (January 1, 1997 to December 31,
1999) shall not be lower than the tax which is due from each brand on October 1, 1996.
Thus, there is no reason why the new specific tax rates due beginning January 1, 2000
should not be subject to the same “higher tax rule,” i.e., the new tax shall not be lower
than the tax which is being paid prior to January 1, 2000.
Issue: Did the Secretary of Finance err when he required in RR No. 17-99 that
effective January 1, 2000, the new specific tax rate for any existing brand of cigars,
cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be
lower than the excise tax actually being paid prior to January 1, 2000?
Ruling: Yes. The Secretary of Finance went beyond the allowable limits of
legislative delegation. Section 145 states that during the transition period, i.e., within the
next 3 years from the effectivity of the Tax Code, the excise tax from any brand of
cigarettes shall not be lower than the tax due from each brand on October 1, 1996. This
qualification, however, is conspicuously absent with respect to the 12% increase which is
to be applied on cigars and cigarettes packed by machine, effective on January 1, 2000.
Clearly, Section 145 mandates a 12% increase in excise tax effective on January 1, 2000
without regard to whether the revenue collection starting from this period may turn out
to be lower than that collected prior to this date. By adding the qualification that the tax
due after the 12% increase becomes effective shall not be lower than the tax actually
paid prior to January 1, 2000, RR No. 17-99 effectively imposes a tax which is the higher
amount between the ad valorem tax being paid at the end of the 3-year transition
period and the specific tax for cigarettes packed by machine, as increased by 12% – a
situation not supported by the plain wording of Section 145 of the Tax Code.
REAL PROPERTIES THOUGH OWNED BY THE REPUBLIC OF THE PHILIPPINES ARE NOT
EXEMPT FROM REAL PROPERTY TAX IF LEASED TO PRIVATE ENTITIES.
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assets and corporations which he had held in trust for the deposed president. These
included Mid-Pasig Land Development Corporation (MLDC) which was the registered
owner of two parcels of land located in Pasig City. In 2005, the Pasig City Assessor’s
Office assessed MLDC delinquency real property taxes (RPT) on the properties for the
period 1987 to 2005, despite claims that the properties are exempt from RPT by virtue
of the States’ ownership of the parcels of land. While MLDC paid a portion of the tax
assessed under protest, it received two warrants of levy on the properties. The Republic
filed a case with the Regional Trial Court (RTC) to question Pasig City’s levy. Pending
disposition of the case, Pasig City sold the properties at public auction.
Issues:
Ruling:
1. No. Section 234(a) of RA No. 7160 (the Local Government Code) states that
properties owned by the Republic are exempt from RPT “except when the beneficial
use has been granted, for consideration or otherwise, to a taxable person.” Thus,
the portions of the properties not leased to taxable entities are exempt from RPT
while those leased to taxable entities are subject to RPT. The law imposes the liability
to pay RPT on the Republic.
9. Philippine Veterans Bank vs. Justina Callangan, in her capacity as Director of the
Corporation Finance Department of the Securities and Exchange Commission and/or
the Securities and Exchange Commission
G.R. No. 191995 Resolution promulgated August 3, 2011
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Ruling: Yes. The SRC rules define a “public company” as “any corporation with a
class of equity securities listed on an Exchange or with assets in excess of P50,000,000
and having 200 or more holders, at least 200 of which are holding at least 100 shares of
a class of its equity securities.” The records establish, and PVB does not dispute, that PVB
has assets exceeding P50,000,000 and has 395,998 shareholders. Thus, it is considered
a public company that must comply with the reportorial requirements of Section 17.1 of
SRC. Subsection 17.1 of the SRC provides that every issuer satisfying the requirements in
Subsection 17.2 shall file with the SEC: (i) an annual report which shall include, among
others, a balance sheet, profit and loss statement and statement of cash flows, for such
last fiscal year, certified by an independent certified public accountant, and a
management discussion and analysis of results of operations, and (ii) b) other periodical
reports for interim fiscal periods and current reports on significant developments of the
issuer as the SEC may prescribe.
10. Commissioner of Internal Revenue vs. Manila Bankers’ Life Insurance Corporation
G.R. No. 169103 promulgated March 16, 2011
Facts: The BIR assessed Manila Bankers’ Life Insurance Corporation (Manila Bankers), a
domestic corporation primarily engaged in the life insurance business, deficiency DST for
taxable year 1997 on the increases in the life insurance coverage of two of its policies,
namely, the “Money Plus Plan,” which is an ordinary term life insurance policy, and the
group life insurance policy. Upon denial by the BIR of its protest, Manila Bankers
appealed to the CTA, which ruled in its favor. The Court of Appeals (CA) affirmed the
decision on appeal. Hence, the CIR appealed to the Supreme Court.The DST on life
insurance policies is levied on every document which establishes that insurance was
either made or renewed upon a life.
Issue: Is Manila Bankers liable to pay deficiency DST on the increases in life insurance
coverage even without the issuance of new policies?
Ruling: Yes. Under the Tax Code of 1977 which was in place in 1997, DST shall be
imposed “on all policies of insurance or other instruments by whatever name the same
may be called, whereby any insurance shall be made or renewed upon any life or lives,”
and the DST is based on the amount insured by any such policy. The Money Plus Plan is a
20-year term ordinary life insurance plan with a “Guaranteed Continuity Clause” which
allowed the policy holder to continue the policy after the 20-year term, subject to
certain conditions. Under the policy, Manila Bankers was actually offering the option to
renew the policy after the expiration of its original term. Consequently, the acceptance
of this offer would give rise to the renewal of the original policy, and additional premium
payments made pursuant to the availment of the option would be subject to DST.
Page 08
On the other hand, the Supreme Court holds that the provision subjecting
PAGCOR to 10% VAT under RR No. 16-2005 is INVALID for being contrary to RA 9337.
Nowhere in RA 9337 is it provided that PAGCOR can be subjected to VAT. RA 9337 is
clear only as to the removal of PAGCOR’s exemption from the payment of corporate
income tax. PAGCOR is exempt from the payment of VAT because PAGCOR’s charter, P.D.
No. 1869, is a special law that grants petitioner exemption from taxes.
In the refund of INDIRECT TAXES such as excise taxes, the statutory taxpayer is
the proper party who can claim the refund. Silkair, as the purchaser and end consumer,
ultimately bears the tax burden but this does not transform its status into a statutory
taxpayer. The statutory taxpayer is the proper party who can claim the refund of indirect
taxes.
Here, both the CTA Second Division and CTA En Banc found that the taxpayer’s
receipts did not indicate the word “ZERO RATED” on its official receipts. Taxpayer thus
failed to comply with the invoicing requirements of the 1997 NIRC and existing rules and
regulations to claim a tax credit
Before the amendment introduced by RA 9337, input tax subject of Tax Refund
can be evidenced by a VAT invoice OR official receipt and the word zero rated is required
to be printed only of VAT invoices,
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Real property tax, being an ad valorem tax, could not be treated as a local tax.
Hence, Section 7(a)(3) of RA 9282 giving the CTA jurisdiction over decision, orders, or
resolutions of the RTC in cases involving local taxes does not apply.
15. DIAZ v. Secretary of Finance
G.R. No. 193007 promulgated July 19, 2011
The Court held that the law imposes VAT on all kind of services rendered in the
Philippines for a fee. When a tollway operator takes a toll fee from a motorist, the fee is
in effect for the latter’s use of the tollway facilities over which the operator enjoys
private propriety rights that its contract and the law recognize. Tollway operators also
come under specific class described in Sec. 108 of the NIRC of 1997 as “all other
franchise grantees” that are subject to VAT.
The Court held that there must be proof of the actual or, at the very least,
probable receipt or realization by the controlled taxpayer of the item of gross income
sought to be distributed, apportioned, or allocated by the CIR. A perusal of the record
yielded no evidence of actual or possible showing that the advances that the taxpayer
extended to its affiliates had resulted to the interests subsequently assessed by the CIR.
While the CIR asserted that the taxpayer had resorted to borrowings from commercial
banks, it had adduced no concrete proof that said funds were, indeed, the source of
advances the former provided its affiliates. Moreover, even if the taxpayer had deducted
substantial interest expense from its gross income, there would still be no factual basis
for the imputation of theoretical interests on the subject advances, more so, when it is
borne in mind that, pursuant to Article 1956 of the Civil Code of the Philippines, no
interest shall be due unless it has been expressly stipulated in writing.
In as much as the taxpayer already opted to carry over its unutilized creditable
withholding tax to taxable year 1998, the election to carry-over could no longer be
converted into a claim for tax refund because of the irrevocability rule provided in
Section 76 NIRC of 1997. Thereby, the taxpayer became barred from claiming refund.
Page 10
As the BOC’s motion for reconsideration of the challenged CTA Resolution did not
bear the imprimatur of the public prosecutor to which the control of the prosecution of
the case belongs, the present petition for certiorari fails.
The sending of a PAN to a taxpayer to inform him of the assessment made is but
part of the “due process requirement in the issuance of a deficiency tax assessment,”
the absence of which renders nugatory any assessment made by the tax authorities. The
use of the word “shall” in subsections 3.1.2 of Revenue Regulations No. 12-99 describes
the mandatory nature of the service of a PAN. The persuasiveness of the right to due
process reaches both substantial and procedural rights and the failure of the
Commissioner to strictly comply with the requirements laid down by law and its own
rules is a denial of Metro Star’s right to due process.
- VAT and Excise Taxes shall be paid by the IMPORTER to the Bureau of
Customs.
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The IMPORTER may file a claim for credit or refund with the Bureau of
Customs, which shall process the claim but subject to the favorable
indorsement of the BIR.
Effectivity of Threshold Amounts for Sale of Residential Lot, Sale of House and
Lot, Lease of Residential Unit and Sale or Lease of goods or Properties or
Performance of Services covered by Section 109 (P0, (Q), and (V) of the Tax Code.
Using the Consumer Price Index as published by the NSO, the threshold amounts
has been adjusted as follows
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So, ALL rulings prior to January 1, 1998 will no longer have any binding effect and
cannot be invoke as basis for any current business transactions. Neither can
these rulings be used as basis for securing legal tax opinions/rulings.
Take note also that RR No. 5-2011 dated March 16, 2011 deleted from the list of
De Minimis Benefits ----“FLOWERS, FRUITS, BOOKS, OR SIMILAR ITEMS GIVEN TO
EMPLOYEES UNDER SPECIAL CIRCUMSTANCES, E.G. on account of illness,
marriage, birth of a baby, etc”.
TAX REMEDIES
DURING ASSESSMENT OF INTERNAL REVENUE TAXES
REMEDIES AVAILABLE TO THE TAXPAYER
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Requisites:
The law provides the government various remedies to enforce effective collection of internal
revenue taxes, fees, and charges and increments thereto where the taxpayer is delinquent. The
taxes may be collected by the government by DISTRAINT or LEVY, or BY PROCEEDING in COURT
WITHIN 5 YEARS FOLLOWING THE ASSESSMENT OF TAX.
1. DISTRAINT OF PERSONAL PROPERTY
2. CONSTRUCTIVE DISTRAINT OF PERSONAL PROPERTY
3. LEVY OF REAL PROPERTY
4. FILING OF CIVIL and CRIMINAL ACTION
Either or both of these remedies may be pursued simultaneously in the collection of taxes once
to assessment becomes FINAL and DEMANDABLE.
When the amount of the tax liability is NOT MORE THAN P100 PESOS, the remedies of distraint
and levy SHALL NOT BE AVAILABLE.
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No civil or criminal action for the recovery of taxes or the enforcement of any fine, penalty or
forfeiture under the Tax Code shall be filed in court without the approval of the BIR
Commissioner.
5. OTHER COLLECTION REMEDIES AVAILABLE TO THE GOVERNMENT.
Enforcement of tax lien;
Enforcement of forfeiture;
Deportation of aliens;
Imposition of Surcharges
Surcharge for Simple Neglect-25% for each violation
Surcharge for Willful Neglect-50% for each violation
Imposition of Interest
Deficiency interest – 20% or higher rate
Delinquency interest-20% or higher rate
Page 17
2. PROTEST ON THE ASSESSMENT OF LOCAL TAX
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Local Assessor makes an appraisal on the real property based on the current market value and
classifies the property according to actual use. Local Assessor applies the assessment level and
fixes the assessed value of the real property.
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TAX REMEDIES-TARIFF and CUSTOMS CODE
STEPS INVOLVED IN PROTEST CASES
UNDER THE TARIFF AND CUSTOMS CODE
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STEPS INVOLVED IN SEIZURE and FORFEITURE CASES
UNDER THE TARIFF AND CUSTOMS CODE
The imported articles are seized and a warrant for detention of the property is
issued by the Collector of Customs. The Collector of Customs makes a report of
the seizure to the Commissioner of Customs. The Collector of Customs gives
notification to the importer/owner;
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INCOME TAXATION
Q and A
Page 25
3. How should husband And wife file their income tax return?
Husband and wife should file their taxable income in a consolidated return.
If the tax due is more than P2,000, the taxpayer has the option to pay the tax in
two equal installment, the second installment falling due July 15
The tax due on the respective income earned by husband and wife should be
computed separately
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7. With respect to additional personal exemption for each child, who is the
legal claimant between husband and wife?
The husband is the legal claimant of additional personal exemption and hospitalization
insurance premium.
To be filed and paid to AUTHORIZED AGENT BANKS and to BIR Revenue District
Office if no amount of tax is to be paid
10. How could the taxpayer prove his entitlement for tax credit?
The taxpayer must attach to the return form 2316 accomplished by the employer
declaring the withholding tax taken from the compensation of the employee.
11. Who are exempted from filing individual income tax return?
a. Those whose gross compensation income does not exceed his total personal
exemption
b. The gross compensation income does not exceed P60,000 and the amount is
correctly withheld with amount of tax
c. The following employees whose compensation income was withheld final
income tax of 15% on compensation income;
Employed by regional or area headquarter of multinational
Employed by Petroleum service contractor and sub-contractor
Employed by an Offshore banking unit
12. Are there cases that taxpayer is allowed not to file his 1700 in lieu of an
alternative option?
Yes, we called this the Substituted Filing of Income Tax Return. In lieu of BIR
form 1700, the Annual Information Return of income taxes withheld on
compensation and final withholding taxes form 1604CF filed by the employer
shall tantamount to filing of regular income tax returns.
13. In what tax returns are business and mixed income of individual
reported?
Business Income and Mixed Income are reported in Form 1701
i. 1701Q for the first 3 quarters
ii. 1701 for the final return at the end of the year.
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14. What is the tax treatment of income earned by minor from property
received of parents?
Income of unmarried minors derived from property received from a living
parent shall be included in the return of the parent, except when donor’s tax
has been paid on the transfer of such property
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22.What are the entities that are excluded from the tax definition of
corporations?
For income tax purposes, a corporation does not include general professional
partnerships. It does not also include a joint venture or consortium formed to
undertake construction projects or engage in petroleum, coal, geothermal and
other energy related operation, pursuant to an operating or consortium
agreement with the Government (Sec. 22A, NIRC).
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33.Are there resident foreign corporations which are not subject to normal
corporate tax rate of 30% on their taxable income?
Yes,
1. International carrier, 2.5% of gross receipts within
2. Offshore banking unit, 10% of income transacted with the residents
3. Branch profit remittance by local branch .= 15% of remittance to H.O.
4. Regional operating headquarters of Multi-national companies = 10% of gross
income within
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34.Are there non-resident foreign corporations which are not subject to Final
corporate tax rate of 30% on their Gross Income?
Yes,
1. Cinema film owner, lessor/distributor = 25% of gross income within
2. Lessor of machinery, equipment, aircraft to resident = 7.5% of gross income
within
3. Lessor of vessels chartered by Philippine Nationals = 4.5% of gross income
within
36.Are corporations allowed to claim NOLCO (Net Operating Loss Carry Over)
as item of deduction from their reportable income?
Yes, for the next 3 succeeding taxable years. But if the corporation opted for OSD,
then it could not anymore claim NOLCO because in each taxable year, it is either
ITEMIZED or OSD and one OSD is elected, such is irrevocable for that taxable
year.
37. Are corporations allowed to deduct their Net Capital Loss incurred for the
taxable year, against their reportable income for the same year?
No, capital losses are deductible only up to the extent of capital gain.
38.Are corporations allowed to carry over their capital loss for the next
period as deduction from their capital gain?
NO. Net Capital Loss Carry Over (NCLC) IS ALLOWED ONLY FOR INDIVIDUAL
TAXPAYER.
39.Are capital gains or losses arising from merger or consolidation recognized
for tax purposes?
No, If it is TRANSACTIONS SOLELY IN KIND. (No Gain, No Loss will be recognized
which means Gain is not taxable and Loss is not deductible).
BUT, if aside from the exchange of securities, money or property is given, then
GAIN is RECOGNIZED, meaning it will be taxable. For the losses, it is not
recognize, it is not deductible.
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42.Are all domestic and resident foreign corporations subject to IAE tax?
No, only holding companies and investment companies, closely held or
family corporations are subject to IAE tax
43.What corporations are exempt from IAE tax?
Publicly-owned corporations
Banks and other non-bank financial intermediaries
Insurance companies
44.What is the effect of 10% IAET, if the earnings collected with IAE tax is
till undeclared the succeeding year/s?
Once the profit has been subjected to IAET, the same shall no longer be
subjected to IAET in later years, even if not declared as dividend.
Commercial
Professional Partnership
Partnership
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50.What are the co-ownership which are exempt from income tax?
Co-ownership that exists as INHERITANCE and DONATION.
Although co-ownership is tax exempt because the activities of the co-
owners are usually intended to preserve the property and to collect the
income from the property, the income derived by a co-owner from the
property shall be reported in his individual tax return regardless of
whether such income is actually or constructively received.
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61. What are the rate withholding tax for the onerous transfer of real
property other than capital assets, meaning REAL PROPERTY classified
as ordinary assets?
62.When is the required Time of Withholding?
The obligation of the payor to deduct and withhold the tax under Section
25.7 of these regulations arises at the time an income is paid or payable,
whichever comes first.
The term “payable” refers to the date the obligation becomes due,
demandable or legally enforceable (Sec. 2.47.4, NIRC).
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• Corporations which are exempt from the income tax under Section 10 of
NIRC, to wit: the Government Service Insurance System (GSIS), the Social
Security System (SSS), the Philippine Health Insurance Corporation (PHIC),
the Philippine Charity Sweepstakes Office (PCSO) and the Philippine
Amusement and Gaming Corporation (PAGCOR); However, the income
payments arising from any activity which is conducted for profit or income
derived from real or personal property shall be subject to a withholding tax
as prescribed in these regulations.
• (Sec. 2.57.5, NIRC.)
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