Updates in Taxation

General Principles
 Tax Treaties
Revenue Memorandum Order (“RMO”) No. 1-2000 requires that
any availment of a tax treaty relief (lower income tax rate) must
be preceded by an application with the International Tax Affairs
Division (“ITAD”) of the Bureau of Internal Revenue (“BIR”) at
least 15 days before the transaction.

Examples:

Particulars Tax Code Rate Tax Treaty Rate

BPRT 15% 10%
Dividends 30%/15% 10%
Royalties 30% 10%/15%
Interest 20% 10%
 Tax Treaties
May the BIR add a requirement – prior application for an ITAD
ruling – that is not found in the income tax treaties signed by
the Philippines before a taxpayer can avail of preferential tax
rates under said treaties?

The obligation to comply with a tax treaty must take precedence

over the objective of RMO No. 1-2000. Bearing in mind the
rationale of tax treaties, the period of application for the
availment of tax treaty relief as required by RMO No. 1-2000
should not operate to divest entitlement to the relief as it would
constitute a violation of the duty required by good faith in
complying with a tax treaty. At most, the application for a tax
treaty relief from the BIR should merely operate to confirm the
entitlement of the taxpayer to the relief.
 Tax Treaties
[But] we cannot totally deprive those who are entitled to the
benefit of a treaty for failure to strictly comply with an
administrative issuance requiring prior application for tax treaty
relief.

However, as pointed out in Deutsche Bank, the underlying

principle of prior application with the BIR becomes moot in
refund cases – as in the present case – where the very basis of
the claim is erroneous or there is excessive payment arising
from the non-availment of a tax treaty relief at the first instance.
 Tax Treaties
Just as Deutsche Bank was not faulted by the Court for not
complying with RMO No. 1-2000 prior to the transaction, so
should CBK Power. In parallel, CBK Power could not have applied
for a tax treaty relief 15 days prior to its payment of the final
withholding tax on the interest paid to its lenders precisely
because it erroneously paid said tax on the basis of the regular
rate as prescribed by the NIRC, and not on the preferential tax
rate provided under the different treaties. As stressed by the
Court, the prior application requirement under RMO No. 1-2000
then becomes illogical.
 Tax Treaties
Not only is the requirement illogical, but it is also an imposition
that is not found at all in the applicable tax treaties. In Deutsche
Bank, the Court categorically held that the BIR should not
impose additional requirements that would negate the availment
of the reliefs provided for under international agreements,
especially since said tax treaties do not provide for any
prerequisite at all for the availment of the benefits under said
agreements. (CBK Power Company Limited vs. CIR, GR No.
193383-84 dated January 14, 2015)
 Taxes vs. Fees
Municipality of Malvar, Batangas issued Ordinance No. 18, which is
entitled "An Ordinance Regulating the Establishment of Special
Projects," to regulate the "placing, stringing, attaching, installing,
repair and construction of all gas mains, electric, telegraph and
telephone wires, conduits, meters and other apparatus, and provide
for the correction, condemnation or removal of the same when found
to be dangerous, defective or otherwise hazardous to the welfare of
the inhabitant[s]."

It was also envisioned to address the foreseen "environmental

depredation" to be brought about by these "special projects" to the
Municipality. Pursuant to these objectives, the Municipality imposed
fees on various structures, which included telecommunications
towers.
 Taxes vs. Fees
Are the fees imposed under Ordinance No. 18 considered as
taxes?

No, since the main purpose of Ordinance No. 18 is to regulate

certain construction activities of the identified special projects,
which included "cell sites" or telecommunications towers, the
fees imposed in Ordinance No. 18 are primarily regulatory in
nature, and not primarily revenue-raising. While the fees may
contribute to the revenues of the Municipality, this effect is
merely incidental. Thus, the fees imposed in Ordinance No. 18
are not taxes.
 Taxes vs. Fees
In Progressive Development Corporation v. Quezon City, the
Court declared that "if the generating of revenue is the primary
purpose and regulation is merely incidental, the imposition is a
tax; but if regulation is the primary purpose, the fact that
incidentally revenue is also obtained does not make the
imposition a tax.“(Smart vs. Municipality of Malvar, Batangas, GR
No. 204429 dated February 18, 2014.)
Income Tax
 Exclusions from Gross Income
Sec. 32(B)(7)(e) of the NIRC:

(e) 13th Month Pay and Other Benefits. — Gross benefits received by
officials and employees of public and private entities: Provided,
however, That the total exclusion under this subparagraph shall not
exceed eighty-two thousand pesos (P82,000) which shall cover:

(iv) Other benefits such as productivity incentives and Christmas

bonus: Provided, That every three (3) years after the effectivity of
this Act, the President of the Philippines shall adjust the amount
herein stated to its present value using the Consumer Price Index
(CPI), as published by the National Statistics Office (NSO).“ (RA No.
10653)
 Exclusions from Gross Income
De Minimis Benefits which are exempt from income and FBT:

1. Monetized unused vacation leave credits of private employees not

exceeding ten (10) days during the year and the monetized value of leave
credits paid to government officials and employees;
2. Monetized value of vacation and sick leave credits paid to government
officials and employees;
3. Medical cash allowance to dependents of employees not exceeding
Php750 per employee per semester or Php125 per month;
4. Rice subsidy of Php1,500 or one (1) sack of 50-kg. rice per month
amounting to not more than Php1,500;
5. Uniform and clothing allowance not exceeding Php5,000 per annum;
6. Actual yearly medical benefits not exceeding Php10,000 per annum;
7. Laundry allowance not exceeding Php300 per month;
 Exclusions from Gross Income
8. Employee achievement awards, e.g., for length of service or safety
achievement, which must be in the form of a tangible personal property
other than cash or gift certificate, with an annual monetary value not
exceeding Php10,000 received by the employee under an established
written plan which does not discriminate in favor of highly paid
employees;
9. Gifts given during Christmas and major anniversary celebrations not
exceeding Php5,000 per employee per annum;
10. Daily meal allowance for overtime work not exceeding twenty-five
percent (25%) of the basic minimum wage; and,
11. Benefits received by an employee by virtue of a collective bargaining
agreement (“CBA”) and productivity incentive schemes provided that
the total annual monetary value received from both CBA and
productivity incentive schemes combined do not exceed ten thousand
pesos (Php10,000.00) per employee per taxable year. (RR No. 1-2015
dated January 5, 2015)
 Capital Gains Tax
Is the sale of machineries by a corporation classified as a capital asset
subject to 6% capital gains tax?

No, capital gains of individuals and corporations from the sale of real
properties are taxed differently. Individuals are subject to the 6%
capital gains from sale of all real properties located in the Philippines
and classified as capital assets under Sec. 24(D) of the Tax Code.

For corporations, the National Internal Revenue Code (“NIRC”) of 1997

treats the sale of land and buildings, and the sale of machineries and
equipment, differently. Domestic corporations are imposed a 6%
capital gains tax only on the presumed gain realized from the sale of
lands and/or buildings under Sec. 27(D). The NIRC of 1997 does not
impose the 6% capital gains tax on the gains realized from the sale of
machineries and equipment.
 Capital Gains Tax
Therefore, the income from the sale of SEPTI’s machineries and
equipment is subject to the provisions on normal corporate income
tax. (SMI-ED Philippines Technology Corporation, Inc. vs. CIR, GR No.
175410 dated November 12, 2014)
 Capital Gains Tax
In expropriation proceedings, may the government be
compelled to pay the capital gains tax?

No. Thus, it has been held that since capital gains is a tax on
passive income, it is the seller, not the buyer, who generally
would shoulder the tax. Accordingly, the BIR, in its BIR Ruling No.
476-2013, dated December 18, 2013, constituted the DPWH as a
withholding agent to withhold the six percent (6%) final
withholding tax in the expropriation of real property for
infrastructure projects. As far as the government is concerned,
therefore, the capital gains tax remains a liability of the seller
since it is a tax on the seller's gain from the sale of the real
estate. (Republic vs. Soriano, GR No. 21166 dated February 25,
2015)
 Deposit Substitutes
BIR Ruling No. 370-2011 dated October 7, 2011 provides that all
treasury bonds regardless of the number of purchasers/lenders at the
time of origination/issuance are considered deposit substitutes. Is
the said ruling valid?

No, under Sec. 22(Y) of the NIRC, the term ‘deposit substitutes’ shall
mean an alternative form of obtaining funds from the public (the term
“public” means borrowing from twenty (20) or more individual or
corporate lenders at any one time) xxx.

The said BIR Ruling is invalid because it completely disregarded the 20

or more lender rule added by Congress in the NIRC. It also created a
distinction for government debt instruments as against those issued by
private corporations when there was none in the law.
 Deposit Substitutes
What would be the tax consequence if the interest income is derived
from a deposit substitute?

It would be subject to the 20% Final Withholding Tax. On the other

hand, interest income from debt instruments that do not qualify as
deposit substitutes are subject to the regular income tax. The phrase
"all income derived from whatever source" in Chapter VI, Computation
of Gross Income, Section 32(A) of the NIRC discloses a legislative policy
to include all income not expressly exempted as within the class of
taxable income under our laws.
 Deposit Substitutes
In a 2001 ruling, the BIR held that: “to be able to determine whether the
financial assets are deposit substitutes, the “20 or more individual or
corporate lenders” rule must apply. Moreover, the determination of the
phrase “at any one time” for purposes of determining the “20 or more
lenders” is to be determined at the time of the original issuance.” Is this
correct?

No, its interpretation of "at any one time" to mean at the point of
origination alone is unduly restrictive. From the point of view of the
financial market, the phrase “at any one time” for purposes of
determining the “20 or more lenders” would mean every transaction
executed in the primary or secondary market in connection with the
purchase or sale of securities.
 Deposit Substitutes

For example, where the financial assets involved are government

securities like bonds, the reckoning of "20 or more lenders/investors" is
made at any transaction in connection with the purchase or sale of the
Government Bonds, such as:

1) Issuance by the Bureau of Treasury of the bonds to the Government

Securities Eligible Dealers (GSEDs) in the primary market; 2) Sale and
distribution by GSEDs to various lenders/investors in the secondary
market; 3) Subsequent sale or trading by a bondholder to another
lender/investor in the secondary market usually through a broker or
dealer; or 4) Sale by a financial intermediary-bondholder of its
participation interests in the bonds to individual or corporate lenders
in the secondary market.
 Deposit Substitutes
When, through any of the foregoing transactions, funds are
simultaneously obtained from 20 or more lenders/investors, there is
deemed to be a public borrowing and the bonds at that point in time
are deemed deposit substitutes. Consequently, the seller is required to
withhold the 20% final withholding tax on the imputed interest income
from the bonds. (BDO vs. Republic, GR No. 198756 dated January 13,
2015)
Transfer Taxes
 Estate Tax
Would it be proper for a bank to release a deceased depositor’s deposit
without payment of estate tax?

No, in this case, petitioners PNB and Aguilar released Angel C. Santos’ deposit to
Manimbo without having been presented the BIR-issued certificate of payment
of, or exception from, estate tax. This is a legal requirement before the deposit
of a decedent is released.

Under Sec. 97 of the NIRC, if a bank has knowledge of the death of a person,
who maintained a bank deposit account alone, or jointly with another, it shall
not allow any withdrawal from the said deposit account, unless the
Commissioner has certified that the taxes imposed thereon by this Title have
been paid xxx.
 Estate Tax
Taxes are created primarily to generate revenues for the
maintenance of the government. However, this particular tax
may also serve as guard against the release of deposits to
persons who have no sufficient and valid claim over the deposits.
Based on the assumption that only those with sufficient and
valid claim to the deposit will pay the taxes for it, requiring the
certificate from the BIR increases the chance that the deposit
will be released only to them. (PNB vs. Santos, GR No. 208295
dated December 10, 2014)
 Donor’s Tax
Can the taxpayer argue, in order to avoid any Donor’s Tax
liability, that the sale below fair market value (book value) is
without any donative intent on the part of the seller?

No, absence of donative intent, if that be the case, does not

exempt the sale of stock transaction from donor’s tax since Sec.
100 of the NIRC categorically states that the amount by which
the fair market value of the property exceeded the value of the
consideration shall be deemed a gift. Thus, even if there is no
actual donation, the difference in price is considered a donation
by fiction of law.
 Donor’s Tax

Moreover, RR No. 6-2008 does not alter Sec. 100 of the NIRC but
merely sets the parameters for determining the “fair market
value” of a sale of stocks. Such issuance was made pursuant to
the CIR’s power to interpret tax laws and to promulgate rules and
regulations for their implementation. (Philamlife vs. SOF, GR No.
210987 dated November 24, 2014)
Value-added Tax
 VAT Refund under Sec. 112

Requisites for claim for refund of excess input VAT attributable to

a zero-rated transaction:

1. There must be zero-rated or effectively zero-rated sales;

2. That input taxes were incurred or paid;
3. That such input VAT payments are directly attributable to zero-
rated sales or effectively zero-rated sales;
4. That the input VAT payments were not applied against any
output VAT liability; and
5. That the claim for refund was filed within the two-year
prescriptive period.
 VAT Refund under Sec. 112
A. Two-Year Prescriptive Period

1. It is only the administrative claim that must be filed within the

two-year prescriptive period. (Aichi)
2. The proper reckoning date for the two-year prescriptive
period is the close of the taxable quarter when the relevant sales
were made. (San Roque)
3. The only other rule is the Atlas ruling, which applied only from
8 June 2007 to 12 September 2008 (Mirant). Atlas states that the
two-year prescriptive period for filing a claim for tax refund or
credit of unutilized input VAT payments should be counted from
the date of filing of the VAT return and payment of the tax. (San
Roque)
 VAT Refund under Sec. 112
B. 120+30 Day Period

1. The taxpayer can file an appeal in one of two ways: (1) file
the judicial claim within thirty days after the Commissioner
denies the claim within the 120-day period, or (2) file the judicial
claim within thirty days from the expiration of the 120-day
period if the Commissioner does not act within the 120-day
period.
2. The 30-day period always applies, whether there is a denial or
inaction on the part of the CIR.
3. As a general rule, the 30-day period to appeal is both
mandatory and jurisdictional. (Aichi and San Roque)
 VAT Refund under Sec. 112
B. 120+30 Day Period

4. As an exception to the general rule, premature filing is allowed

only if filed between 10 December 2003 and 5 October 2010,
when BIR Ruling No. DA-489-03 was still in force. (San Roque)

5. Late filing is absolutely prohibited, even during the time when

BIR Ruling No. DA-489-03 was in force. (San Roque) [Mindanao II
Geothermal Partnership vs. CIR GR No. 191498 dated January 15,
2014]
Remedies under the NIRC
 Waiver of the Statute of Limitations
Rule on the Waiver of the Statute of Limitations:

Sec. 222 (b) and (d) of the Tax Code:

(b) If before the expiration of the time prescribed in Section 203

for the assessment of the tax, both the Commissioner and the
taxpayer have agreed in writing to its assessment after such
time, the tax may be assessed within the period agreed upon.
The period so agreed upon may be extended by subsequent
written agreement made before the expiration of the period
previously agreed upon.
 Waiver of the Statute of Limitations
Rule on the Waiver of the Statute of Limitations:

(d) Any internal revenue tax, which has been assessed within the
period agreed upon as provided in paragraph (b) hereinabove,
may be collected by distraint or levy or by a proceeding in court
within the period agreed upon in writing before the expiration of
the five (5) -year period. The period so agreed upon may be
extended by subsequent written agreements made before the
expiration of the period previously agreed upon.
 Waiver of the Statue of Limitations
Requisites of a valid waiver:

a) The waiver must be in the proper form prescribed by RMO 20-

90. The phrase "but not after ______ 19 ___", which indicates
the expiry date of the period agreed upon to assess/collect the
tax after the regular three-year period of prescription, should be
filled up;

b) The waiver must be signed by the taxpayer himself or his duly

authorized representative. In the case of a corporation, the
waiver must be signed by any of its responsible officials. In case
the authority is delegated by the taxpayer to a representative,
such delegation should be in writing and duly notarized;
 Waiver of the Statue of Limitations

c) The waiver should be duly notarized;

d) The CIR or the revenue official authorized by him must sign

the waiver indicating that the BIR has accepted and agreed to
the waiver. The date of such acceptance by the BIR should be
indicated. However, before signing the waiver, the CIR or the
revenue official authorized by him must make sure that the
waiver is in the prescribed form, duly notarized, and executed by
the taxpayer or his duly authorized representative;
 Waiver of the Statue of Limitations
e) Both the date of execution by the taxpayer and date of
acceptance by the Bureau should be before the expiration of the
period of prescription or before the lapse of the period agreed
upon in case a subsequent agreement is executed; and,

f) The waiver must be executed in three copies, the original copy

to be attached to the docket of the case, the second copy for the
taxpayer and the third copy for the Office accepting the waiver.
The fact of receipt by the taxpayer of his/her file copy must be
indicated in the original copy to show that the taxpayer was
notified of the acceptance of the BIR and the perfection of the
agreement. (CIR vs. Stanley Works (Phils.) Incorporated, GR No.
187859 dated December 3, 2014)
 Statute of Limitations
Section 223. Suspension of Running of Statute of Limitations. -
The running of the Statute of Limitations provided in Sections
203 and 222 on the making of assessment and the beginning of
distraint or levy a proceeding in court for collection, in respect of
any deficiency, shall be suspended xxx; (1) during which the
Commissioner is prohibited from making the assessment or
beginning distraint or levy or a proceeding in court and for sixty
(60) days thereafter; xxx (3) when the taxpayer cannot be
located in the address given by him in the return filed upon
which a tax is being assessed or collected: Provided, that, if the
taxpayer informs the Commissioner of any change in address,
the running of the Statute of Limitations will not be suspended;
xxx.
 Statute of Limitations
In contesting a deficiency tax assessment, will mere appeal by
the taxpayer to the CTA suspend the statute of limitations on
the government’s right to collect taxes?

No, with respect to petitioner’s argument that respondent’s act

of elevating its protest to the CTA has fortified the continuing
interruption of petitioner’s prescriptive period to collect under
Section 223 of the Tax Code, the same is flawed at best because
respondent was merely exercising its right to resort to the
proper Court, and does not in any way deter petitioner’s right to
collect taxes from respondent under existing laws. (CIR vs. United
Salvage Towage (Phils.), Inc., GR No. 197515 dated July 2, 2014)
 Statute of Limitations
Sec. 11. Change of Address. - In case of change of address, the
taxpayer must give a written notice thereof to the Revenue
District Officer or the district having jurisdiction over his former
legal residence and/or place of business, copy furnished the
Revenue District Officer having jurisdiction over his new legal
residence or place of business, the Revenue Computer Center
and the Receivable Accounts Division, BIR, National Office,
Quezon City, and in case of failure to do so, any communication
referred to in these regulations previously sent to his former
legal residence or business address as appearing in his tax return
for the period involved shall be considered valid and binding for
purposes of the period within which to reply. (RR No. 12-85)
 Statute of Limitations
Does failure to provide written notice to the BIR that the taxpayer
changed his address automatically warrant the suspension of the Statute
of Limitations?

No, the suspension of the three-year period to assess applies only if the
BIR Commissioner is not aware of the whereabouts of the taxpayer.

Hence, despite the absence of a formal written notice of respondent's

change of address, the fact remains that petitioner became aware of
respondent's new address as shown by documents replete in its records.
As a consequence, the running of the three-year period to assess
respondent was not suspended and has already prescribed. (CIR vs. BASF
Coating + Inks Phils., GR No. 198677 dated November 26, 2014).
 Statute of Limitations
May the defense of prescription be raised for first time on appeal?

1. No, as a general rule. We note that petitioner has raised the issue of
prescription for the first time only before this Court. While we are mindful
of the established rule of remedial law that the defense of prescription
must be raised at the trial court that has also been applied for tax
cases. Thus, as a rule, the failure to raise the defense of prescription at the
administrative level prevents the taxpayer from raising it at the appeal
stage.

However, when the pleadings or the evidence on record show that the
claim is barred by prescription, the court must dismiss the claim even if
prescription is not raised as a defense.
 Statute of Limitations
2. Estoppel or waiver prevents the government from invoking the rule
against raising the issue of prescription for the first time on appeal.

In this case, petitioner may have raised the question of prescription only
on appeal to this Court. The BIR could have crushed the defense by the
mere invocation of the rule against setting up the defense of prescription
only at the appeal stage. The government, however, failed to do so. On
the contrary, the BIR was silent despite having the opportunity to invoke
the bar against the issue of prescription. It is worthy of note that the
Court ordered the BIR to file a Comment. The government, however, did
not offer any argument in its Comment about the issue of prescription,
even if petitioner raised it in the latter’s Petition. It merely fell silent on
the issue. xxx. Its silence spoke loudly of its intent to waive its right to
object to the argument of prescription. (China Banking Corporation vs.
CIR, GR No. 172509 dated February 4, 2015)
 Claims for Refund
In a claims for refund, may the CTA determine whether there
are taxes that should have been paid in lieu of the taxes paid?

Yes, in an action for the refund of taxes allegedly erroneously

paid, the Court of Tax Appeals may determine whether there are
taxes that should have been paid in lieu of the taxes paid.
Determining the proper category of tax that should have been
paid is not an assessment. It is incidental to determining
whether there should be a refund.
 Claims for Refund
The CTA has no assessment powers. In stating that petitioner’s transactions are
subject to capital gains tax, however, the CTA was not making an assessment. It was
merely determining the proper category of tax that petitioner should have paid, in
view of its claim that it erroneously imposed upon itself and paid the 5% final tax
imposed upon PEZA-registered enterprises.

The determination of the proper category of tax that petitioner should have paid is an
incidental matter necessary for the resolution of the principal issue, which is whether
petitioner was entitled to a refund.

The issue of petitioner’s claim for tax refund is intertwined with the issue of the
proper taxes that are due from petitioner. A claim for tax refund carries the
assumption that the tax returns filed were correct. If the tax return filed was not
proper, the correctness of the amount paid and, therefore, the claim for refund
become questionable. In that case, the court must determine if a taxpayer claiming
refund of erroneously paid taxes is more properly liable for taxes other than that
paid.
 Claims for Refund
If the taxpayer is found liable for taxes other than the erroneously paid
5% final tax, the amount of the taxpayer’s liability should be computed
and deducted from the refundable amount.

Any liability in excess of the refundable amount, however, may not be

collected in a case involving solely the issue of the taxpayer’s
entitlement to refund. The question of tax deficiency is distinct and
unrelated to the question of petitioner’s entitlement to refund. Tax
deficiencies should be subject to assessment procedures and the rules
of prescription. The court cannot be expected to perform the BIR’s
duties whenever it fails to do so either through neglect or oversight.
Neither can court processes be used as a tool to circumvent laws
protecting the rights of taxpayers. (SMI-ED Technology Corporation,
Inc. vs. CIR, GR No. 175410 dated November 12, 2014)
 Claims for Refund
In a claim for refund for excess creditable withholding tax, the BIR
argued that the same should be denied because: (1) The taxpayer failed
to prove actual remittance of the withholding tax; and, (2) The
creditable withholding tax certificates were not presented before the
BIR. Are these arguments correct?

No, these arguments are bereft of merit.

1. Petitioner's posture that respondent is required to establish actual

remittance to the Bureau of Internal Revenue deserves scant
consideration. Proof of actual remittance is not a condition to claim for a
refund of unutilized tax credits. Under Sections 57 and 58 of the 1997
National Internal Revenue Code, as amended, it is the payor-withholding
agent, and not the payee-refund claimant such as respondent, who is
vested with the responsibility of withholding and remitting income taxes.
 Claims for Refund
The taxes they withhold are held in trust for the government. In the
event that the withholding agents commit fraud against the
government by not remitting the taxes so withheld, such act should
not prejudice herein respondent who has been duly withheld taxes by
the withholding agents acting under government authority. xxx.
Therefore, respondent . . . has no control over the remittance of the
taxes withheld from its income by the withholding agent or payor who
is the agent of the petitioner. The Certificates of Creditable Tax
Withheld at Source issued by the withholding agents of the
government are prima facie proof of actual payment by herein
respondent-payee to the government itself through said agents.
 Claims for Refund
2. Petitioner’s allegation that the submission of the certificates of
withholding taxes before the CTA was late is untenable. xxx. As observed
by the CTA En Banc, "[t]he Commissioner is in no position to assail the
authenticity of the CWT certificates due to PNB’s alleged failure to submit
the same before the administrative level since he could have easily
directed the claimant to furnish copies of these documents, if the refund
applied for casts him any doubt.“ xxx.

More importantly, the CTA is not precluded from accepting respondent’s

evidence assuming these were not presented at the administrative level.
Cases filed in the Court of Tax Appeals are litigated de novo. Thus,
respondent "should prove every minute aspect of its case by presenting,
formally offering and submitting ... to the Court of Tax Appeals [all
evidence] . . . required for the successful prosecution of [its] administrative
claim.“ (CIR vs. PNB, GR No. 180290 dated September 29, 2014)
 Claims for Refund
In claims for refund of erroneous Creditable Withholding Taxes
remitted to the BIR, is it absolutely necessary to present the
Certificate of Taxes Withheld (BIR Form No. 2307) to prove non-
utilization of taxes withheld?

No, while PNB was not able to submit the relevant BIR Form No.
2307 (of the mortgagor), it submitted evidence sufficiently showing
the non-utilization of taxes withheld subject of the refund.

In claims for excess and unutilized creditable withholding tax, the

submission of BIR Form No. 2307 is to prove the fact of withholding
of the excess creditable withholding tax being claimed for refund.
 Claims for Refund
Hence, the probative value of BIR Form No. 2307, which is basically a
statement showing the amount paid for the subject transaction and the
amount of tax withheld therefrom, is to establish only the fact of
withholding of the claimed creditable withholding tax. There is nothing
in BIR Form No. 2307 which would establish either utilization or non-
utilization, as the case may be, of the creditable withholding tax.

While perhaps it may be necessary to prove that the taxpayer did not
use the claimed creditable withholding tax to pay for his/its tax
liabilities, there is no basis in law or jurisprudence to say that BIR Form
No. 2307 is the only evidence that may be adduced to prove such non-
use. (PNB vs. CIR, GR No. 206016 dated March 18, 2015)
 Claims for Refund
In claims for refund of indirect taxes (excise tax), is the indirect
taxpayer the proper party to file a claim for refund?

No, as a general rule. It must be the statutory taxpayer that must

file the claim for refund.

However, the rule that it is the statutory taxpayer which has the
legal personality to file a claim for refund finds no applicability in
this case.
 Claims for Refund
In Philippine Airlines, Inc. v. Commissioner of Internal Revenue, the Court
distinguished between the kinds of exemption enjoyed by a claimant in
order to determine the propriety of a tax refund claim. "If the law confers
an exemption from both direct or indirect taxes, a claimant is entitled to
a tax refund even if it only bears the economic burden of the applicable
tax. On the other hand, if the exemption conferred only applies to direct
taxes, then the statutory taxpayer is regarded as the proper party to file
the refund claim." In PASAR's case, Section 17 of P.D. No. 66, as affirmed
in one case decided by the Supreme Court, specifically declared that
supplies, including petroleum products, whether used directly or
indirectly, shall not be subject to internal revenue laws and regulations.
Such exemption includes the payment of excise taxes, which was passed
on to PASAR by Petron. PASAR, therefore, is the proper party to file a
claim for refund. (CIR vs. Philippine Associated Smelting and Refining
Corporation, GR No. 186223 dated October 1, 2014)
 Claims for Refund
In claims for refund, may the 2-year prescriptive period under
Sec. 229 of Tax Code be reckoned from the date of discovery of
the erroneously paid tax?

No, Sec. 229 of the Tax Code provides that: “xxx. In any case, no
such suit or proceeding shall be filed after the expiration of two
(2) years from the date of payment of the tax or penalty
regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even
without a written claim therefor, refund or credit any tax, where
on the face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid.”
 Claims for Refund
As can be gleaned from the foregoing, the prescriptive period provided is
mandatory regardless of any supervening cause that may arise after
payment. It should be pointed out further that while the prescriptive
period of two (2) years commences to run from the time that the refund
is ascertained, the propriety thereof is determined by law (in this case,
from the date of payment of tax), and not upon the discovery by the
taxpayer of the erroneous or excessive payment of taxes. The issuance
by the BIR of the Ruling declaring the tax-exempt status of NORD/LB, if at
all, is merely confirmatory in nature. As aptly held by the CTA-First
Division, there is no basis that the subject exemption was provided and
ascertained only through BIR Ruling No. DA-342-2003, since said ruling is
not the operative act from which an entitlement of refund is
determined. In other words, the BIR is tasked only to confirm what is
provided under the Tax Code on the matter of tax exemptions as well as
the period within which to file a claim for refund.
 Claims for Refund
Instead, may the claim for refund be filed within the 6-year period under Art.
1145 of the Civil Code invoking solutio indebiti?

No, in this regard, petitioner is misguided when it relied upon the six (6)-year
prescriptive period for initiating an action on the ground of quasi contract or
solutio indebiti under Article 1145 of the New Civil Code. There is solutio indebiti
where: (1) payment is made when there exists no binding relation between the
payor, who has no duty to pay, and the person who received the payment; and
(2) the payment is made through mistake, and not through liberality or some
other cause. Here, there is a binding relation between petitioner as the taxing
authority in this jurisdiction and respondent MERALCO which is bound under
the law to act as a withholding agent of NORD/LB Singapore Branch, the
taxpayer. Hence, the first element of solutio indebiti is lacking. Moreover, such
legal precept is inapplicable to the present case since the Tax Code, a special
law, explicitly provides for a mandatory period for claiming a refund for taxes
erroneously paid. (CIR vs. Meralco, GR No. 181459 dated June 9, 2014)
 Claims for Refund
Is the presentation of the quarterly income tax absolutely
necessary in order to prove that there was no carry-over made
in relation to the irrevocability rule under Sec. 76 of the Tax
Code?

1. Proving that no carry-over has been made does not absolutely

require the presentation of the quarterly ITRs. What Section 76
requires, just like in all civil cases, is to prove the prima facie
entitlement to a claim, including the fact of not having carried
over the excess credits to the subsequent quarters or taxable
year. It does not say that to prove such a fact, succeeding
quarterly ITRs are absolutely needed.
 Claims for Refund
This simply underscores the rule that any document, other than
quarterly ITRs may be used to establish that indeed the non-carry over
clause has been complied with, provided that such is competent,
relevant and part of the records. The Court is thus not prepared to make
a pronouncement as to the indispensability of the quarterly ITRs in a
claim for refund for no court can limit a party to the means of proving a
fact for as long as they are consistent with the rules of evidence and fair
play. The means of ascertainment of a fact is best left to the party that
alleges the same. The Court’s power is limited only to the appreciation of
that means pursuant to the prevailing rules of evidence. To stress, what
the NIRC merely requires is to sufficiently prove the existence of the
non-carry over of excess CWT in a claim for refund. (Winebrenner & Inigo
Insurance Brokers, Inc. vs. CIR, GR No. 206526 dated January 28, 2015)
 Claims for Refund
2. We are likewise unmoved by the assertion of the petitioner that the
respondent should have submitted the quarterly returns of the
respondent to show that it did not carry-over the excess withholding tax
to the succeeding quarter. When the respondent was able to establish
prima facie its right to the refund by testimonial and object evidence, the
petitioner should have presented rebuttal evidence to shift the burden of
evidence back to the respondent. Indeed, the petitioner ought to have its
own copies of the respondent’s quarterly returns on file, on the basis of
which it could rebut the respondent's claim that it did not carry over its
unutilized and excess creditable withholding taxes for the immediately
succeeding quarters. The BIR's failure to present such vital document
during the trial in order to bolster the petitioner's contention against the
respondent's claim for the tax refund was fatal. (Republic vs. Team (Phils.)
Energy Corporation, GR No. 188016 dated January 14, 2015)
 Claims for Refund
In case of alleged overwithholding of withholding tax on
compensation income, may the employees sue the employer to
get a tax refund?

No, if the union disputes the withholding of tax and desires a

refund of the withheld tax, it should have filed an administrative
claim for refund with the CIR. Paragraph 2, Section 4 of the NIRC
expressly vests the CIR original jurisdiction over refunds of
internal revenue taxes, fees or other charges, penalties imposed
in relation thereto, or other tax matters. The union has no cause
of action against the company.
 Claims for Refund

Thus, if the BIR illegally or erroneously collected tax, the

recourse of the taxpayer, and in proper cases, the withholding
agent, is against the BIR, and not against the withholding agent.
The union's cause of action for the refund or non-withholding of
tax is against the taxing authority, and not against the employer.
(Honda Cars Philippines, Inc. vs. Honda Cars Technical Specialist
Supervisors Union, GR No. 204142 dated November 19, 2014)
 Tax Evasion
Is a categorical finding of the exact amount of tax necessary in
order to establish probable cause for purposes of filing a tax
evasion case?

No, in this case, the CA, however, found no probable cause to

indict respondent spouses for tax evasion. It agreed with Acting
Justice Secretary Devanadera that the BIR failed to make "a
categorical finding of the exact amount of tax due from
[respondent spouses]" and "to show sufficient proof of a likely
source of [respondent spouses’] income that enabled them to
purchase the real and personal properties adverted to x x x."
 Tax Evasion

1. In Ungab v. Judge Cusi, Jr., we ruled that tax evasion is

deemed complete when the violator has knowingly and willfully
filed a fraudulent return with intent to evade and defeat a part
or all of the tax. Corollarily, an assessment of the tax deficiency is
not required in a criminal prosecution for tax evasion. However,
in Commissioner of Internal Revenue v. Court of Appeals, we
clarified that although a deficiency assessment is not necessary,
the fact that a tax is due must first be proved before one can be
prosecuted for tax evasion.
 Tax Evasion

2. In the case of income, for it to be taxable, there must be a gain

realized or received by the taxpayer, which is not excluded by
law or treaty from taxation. The government is allowed to resort
to all evidence or resources available to determine a taxpayer’s
income and to use methods to reconstruct his income. A
method commonly used by the government is the expenditure
method, which is a method of reconstructing a taxpayer’s
income by deducting the aggregate yearly expenditures from the
declared yearly income. The theory of this method is that when
the amount of the money that a taxpayer spends during a given
year exceeds his reported or declared income and the source of
such money is unexplained, it may be inferred that such
expenditures represent unreported or undeclared income.
 Tax Evasion

3. Since the underdeclaration is more than 30% of respondent

spouses’ reported or declared income, which under Section
248(B) of the NIRC constitutes as prima facie evidence of false or
fraudulent return, petitioner recommended the filing of criminal
cases against respondent spouses under Sections 254 and 255, in
relation to Section 248(B) of the NIRC.

The amount of tax due from respondent spouses was specifically

alleged in the Complaint-Affidavit. The computation, as well as
the method used in determining the tax liability, was also clearly
explained. The revenue officers likewise showed that the under
declaration exceeded 30% of the reported or declared income.
 Tax Evasion

4. In view of the foregoing, we are convinced that there is

probable cause to indict respondent spouses for tax evasion as
petitioner was able to show that a tax is due from them.
Probable cause, for purposes of filing a criminal information, is
defined as such facts that are sufficient to engender a well-
founded belief that a crime has been committed, that the
accused is probably guilty thereof, and that he should be held for
trial. It bears stressing that the determination of probable cause
does not require actual or absolute certainty, nor clear and
convincing evidence of guilt; it only requires reasonable belief or
probability that more likely than not a crime has been
committed by the accused. (BIR vs. CA, GR No. 197590 dated
November 24, 2014)
 Court of Tax Appeals
Is failure to formally offer the Preliminary Assessment Notice (“PAN”)
a mere technicality considering that the CTA is not governed strictly by
the technical rules on evidence?

No, while we concur with petitioner that the CTA is not governed strictly
by technical rules of evidence, as rules of procedure are not ends in
themselves but are primarily intended as tools in the administration of
justice, the presentation of PANs as evidence of the taxpayer’s liability is
not mere procedural technicality. It is a means by which a taxpayer is
informed of his liability for deficiency taxes. It serves as basis for the
taxpayer to answer the notices, present his case and adduce supporting
evidence. More so, the same is the only means by which the CTA may
ascertain and verify the truth of respondent's claims. (CIR vs. United
Salvage Towage (Phils.), Inc., GR No. 197515 dated July 2, 2014)
 Court of Tax Appeals
Does the Supreme Court have jurisdiction over a decision or
resolution of the CTA Division involving a party’s motion for
reconsideration?

No, it is the CTA en banc that has jurisdiction over the case.

Section 2, Rule 4 of the Revised Rules of the CTA reiterates the

exclusive appellate jurisdiction of the CTA en banc relative to the
review of the court divisions’ decisions or resolutions on motion
for reconsideration or new trial in cases arising from
administrative agencies such as the BIR.
 Court of Tax Appeals
R.A. 9282 provides that the CTA en banc shall have exclusive
jurisdiction over appeals from the decision of its divisions. A
party adversely affected by the resolution of the CTA division
may, on motion for reconsideration, file a petition for review
with the CTA en banc. Thereafter, the decision or ruling of the
CTA en banc may be elevated to this Court. Simply stated, no
decision of the CTA division may be elevated to this Court under
Rule 45 of the 1997 Rules of Civil Procedure without passing
through the CTA en banc. (Duty Free Phils. vs. BIR, GR No.
197228 dated October 8, 2014)
 Court of Tax Appeals
BIR issues an unfavorable ruling to a taxpayer. What are the
remedies available to the taxpayer?

1. File a “Request for Ruling Review” with the Secretary of

Finance (“SOF) within thirty (30) days from receipt of the
unfavorable ruling. (DOF Department Order No. 23-2001 dated
October 25, 2001);
2. The unfavorable decision of the SOF is appealable to the CTA.
Basis is: “other matters arising under the NIRC or other laws
administered by the BIR” under the CTA Law. (Philamlife vs. SOF,
GR No. 210987 dated November 24, 2014; and, BDO vs. Republic,
GR No. 198756 dated January 13, 2015)
 Court of Tax Appeals
Philamlife Case:

1. Admittedly, there is no provision in law that expressly provides where

exactly the ruling of the Secretary of Finance under the adverted NIRC
provision is appealable to. However, we find that Sec. 7(a)(1) of RA
1125, as amended, addresses the seeming gap in the law as it vests the
CTA, albeit impliedly, with jurisdiction over the CA petition as “other
matters” arising under the NIRC or other laws administered by the BIR.

Even though the provision suggests that it only covers rulings of the
Commissioner, We hold that it is, nonetheless, sufficient enough to
include appeals from the Secretary’s review under Sec. 4 of the NIRC.
 Court of Tax Appeals
Philamlife Case:

2. In the recent case of City of Manila v. Grecia-Cuerdo, the Court en

banc has ruled that the CTA now has the power of certiorari in cases within
its appellate jurisdiction.

xxx. Moreover, City of Manila diametrically opposes British American

Tobacco to the effect that it is now within the power of the CTA, through
its power of certiorari, to rule on the validity of a particular administrative
rule or regulation so long as it is within its appellate jurisdiction. Hence, it
can now rule not only on the propriety of an assessment or tax
treatment of a certain transaction, but also on the validity of the revenue
regulation or revenue memorandum circular on which the said
assessment is based.
 Court of Tax Appeals
BDO Case:

1. The rule on exhaustion of administrative remedies, particularly, appeal

to the Secretary of Finance, may be dispensed with if, among others: (1)
the question involved is purely legal; (2) when there are circumstances
indicating the urgency of judicial intervention; and, (3) when exhaustion
will result in an exercise in futility.

In this case, an appeal to the Secretary of Finance from the questioned

2011 BIR Ruling would be a futile exercise because it was upon the request
of the Secretary of Finance that the 2011 BIR Ruling was issued by the
Bureau of Internal Revenue. It appears that the Secretary of Finance
adopted the Commissioner of Internal Revenue’s opinions as his own.
 Court of Tax Appeals
BDO Case:

2. We agree with respondents that the jurisdiction to review the

rulings of the Commissioner of Internal Revenue pertains to the Court
of Tax Appeals. The questioned BIR Ruling Nos. 370-2011 and DA 378-
2011 were issued in connection with the implementation of the 1997
National Internal Revenue Code on the taxability of the interest income
from zero-coupon bonds issued by the government;

3. Legal basis of the decision is again “other matters,” the decision cites
the provisions of Sec. 11 of 9282 on the period to appeal (30 days) and
mode of appeal. (Petition for Review under Rule 42)
Local Taxation
 Common Limitations
May a city impose business tax on common carriers?

The City of Manila argues that the basis for imposing business
tax on common carriers is Sec. 143(h) of the LGC which provides:

“On any business, not otherwise specified in the preceding

paragraphs, which the sanggunian concerned may deem proper
to tax: Provided, That on any business subject to the excise,
value-added or percentage tax under the National Internal
Revenue Code, as amended, the rate of tax shall not exceed two
percent (2%) of gross sales or receipts of the preceding calendar
year.”
 Common Limitations
SC: No, gross receipts of common carriers are not subject to
business tax. Section 133 (j) of the LGC clearly and unambiguously
proscribes LGUs from imposing any tax on the gross receipts of
transportation contractors, persons engaged in the transportation
of passengers or freight by hire, and common carriers by air, land,
or water. Yet, confusion arose from the phrase "unless otherwise
provided herein," found at the beginning of the said provision. The
City of Manila and its public officials insisted that said clause
recognized the power of the municipality or city, under Section 143
(h) of the LGC, to impose tax "on any business subject to the excise,
value-added or percentage tax under the National Internal Revenue
Code, as amended." And it was pursuant to Section 143 (h) of the
LGC that the City of Manila and its public officials enacted,
approved, and implemented Section 21 (B) of the Manila Revenue
Code, as amended.
 Common Limitations
Section 133 (j) of the LGC prevails over Section 143 (h) of the same
Code. The omnibus grant of power to municipalities and cities
under Section 143 (h) of the LGC cannot overcome the specific
exception/exemption in Section 133 (j) of the same Code. This is in
accord with the rule on statutory construction that specific
provisions must prevail over general ones.

Finally, Sec. 115 (now 117) of the NIRC provides: “The gross receipts
of common carriers derived from their incoming and outgoing
freight shall not be subjected to the local taxes imposed under
Republic Act No. 7160, otherwise known as the Local Government
Code of 1991.“ (City of Manila vs. Colet, GR No. 120051 etc. dated
December 10, 2014)
 Franchise Tax/Penalties
Is the imposition of a yearly 25% surcharge based on the
unpaid franchise tax valid?

No, the yearly accrual of the 25% surcharge is unconscionable

and it resulted in an aggregate penalty that is way higher than
petitioner’s basic tax liabilities.
 Franchise Tax/Penalties
Furthermore, it effectively exceeded the prescribed 72% ceiling for
interest under Section 168 of the Local Government Code. The law
allows the local government to collect an interest at the rate not
exceeding 2% per month of the unpaid taxes, fees, or charges including
surcharges, until such amount is fully paid. However, the law provides
that the total interest on the unpaid amount or portion thereof should
not exceed thirty-six (36) months or three (3) years. In other words,
respondent cannot collect a total interest on the unpaid tax including
surcharge that is effectively higher than 72%. Here, respondent applied
the 25% cumulative surcharge for more than three years. Its
computation undoubtedly exceeded the 72% ceiling imposed under
Section 168 of the Local Government Code. Hence, respondent’s
computation of the surcharge is oppressive and unconscionable. (NPC
vs. City of Cabanatuan, GR No. 177332 dated October 1, 2014)
 Remedies in Local Taxation
How do you question the Constitutionality of a Tax Ordinance?

1. Appeal to the Secretary of Justice (“SOJ”) within 30 days from the

effectivity of the ordinance.
2. SOJ shall render a decision within 60 days from receipt of appeal.
3. Appeal shall not have the effect of suspending the effectivity of the
ordinance and the accrual and payment of the tax, fee, or charge
levied therein.
4. Within 30 days after receipt of the decision or the lapse of the 60
period without the SOJ acting upon the appeal, the aggrieved party
may file a declaratory relief petition with the RTC. (Sec. 187)
 Remedies in Local Taxation
Ordinance No. 18 mandates the collection of a fee based on the total
project cost of special projects (including “cell sites”). In questioning
the constitutionality of Ordinance No. 18:

a) Does the CTA have appellate jurisdiction over the case?

b) Is Section 187 of the LGC applicable?

Considering that the fees in the said ordinance are not in the nature of
local taxes, and Smart is questioning the constitutionality of the
ordinance, the CTA correctly dismissed the petition for lack of
jurisdiction. Likewise, Section 187 of the LGC, which outlines the
procedure for questioning the constitutionality of a tax ordinance, is
inapplicable, rendering unnecessary the resolution of the issue on non-
exhaustion of administrative remedies. (Smart vs. Municipality of
Malvar, Batangas, GR No. 204429 dated February 18, 2014.)
 Remedies in Local Taxation
Is a writ of execution necessary to enforce a final and executory
decision granting a claim for refund of local business tax?

No, instead of moving for the issuance of a writ of execution

relative to the aforesaid Decision, petitioner should have merely
requested for the approval of the City of Manila in implementing
the tax refund or tax credit, whichever is appropriate. In other
words, no writ was necessary to cause the execution thereof,
since the implementation of the tax refund will effectively be a
return of funds by the City of Manila in favor of petitioner while
a tax credit will merely serve as a deduction of petitioner’s tax
liabilities in the future.
 Remedies in Local Taxation
Accordingly, while we find merit in petitioner’s contention that
there are two (2) ways by which respondents may satisfy the
judgment of the RTC-Manila: (1) to pay the petitioner the
amount of Php3,036,887.33 as tax refund; or (2) to issue a tax
credit certificate in the same amount which may be credited by
petitioner from its future tax liabilities due to the respondent
City of Manila, the issuance of the Writ of Execution relative
thereto was superfluous, because the judgment of the RTC-
Manila can neither be considered a judgment for a specific sum
of money susceptible of execution by levy or garnishment under
Section 9, Rule 39 of the Rules of Court nor a special judgment
under Section 11, Rule 39 thereof. (Coca-Cola Bottlers
Philippines, Inc. vs. City of Manila, GR No. 197561 dated April 7,
2014)
Real Property Taxation
 Exemption from Real Property Tax
Are the real properties owned by the Philippine Economic Zone
Authority (“PEZA”) subject to real property tax?

PEZA’s real properties are exempt from real estate tax for the following
reasons: (a) PEZA is an instrumentality of the National Government in
relation to Sec. 133 (o) of the LGC which provides that the taxing power
of LGUs shall not extend to: taxes, fees or charges of any kind on the
National Government, its agencies and instrumentalities, and local
government units; and, (b) Real properties under PEZA’s title are
owned by the Republic of the Philippines. The properties sought to be
taxed are located in publicly owned economic zones. These economic
zones are property of public dominion under Art. 420 of the Civil Code.
(City of Lapu-Lapu vs. PEZA, GR No. 184203 dated November 26, 2014)
 Remedies in RPT

If a real property owner questions an assessment on the

ground that it is illegal because the subject property is exempt
under Sec. 234 of the Local Government Code (“LGC”), is resort
to the Local Board of Assessment Appeals (“LBAA”) the proper
remedy?

No, the proper remedy is to directly resort to the Regional Trial

Court. When the legality or validity of the assessment is in
question, and not its reasonableness or correctness, appeals to
the LBAA, and subsequently to the Central Board of Assessment
Appeals, pursuant to Sections 226 and 229 of the LGC, are not
necessary.
 Remedies in RPT
Accordingly, if the only issue is the legality or validity of the
assessment – a question of law – direct recourse to the RTC is
warranted.

The issue in this particular case the issue is clearly legal given
that it involves an interpretation of the contract between the
parties vis-à-vis the applicable laws, i.e., which entity actually,
directly and exclusively uses the subject machineries and
equipment. The answer to such question would then determine
whether petitioner is indeed exempt from payment of real
property taxes. Since the issue is a question of law, the
jurisdiction was correctly lodged with the RTC.
 Remedies in RPT
Does the CTA have jurisdiction over Real Property Tax cases
decided by the Regional Trial Court?

Yes, the CTA Division has exclusive original or appellate

jurisdiction to review by appeal the following:

(3) Decisions, resolutions or orders of the Regional Trial

Courts in local tax cases decided or resolved by them in the
exercise of their original jurisdiction;

The term "local taxes" in the aforementioned provision should

be considered in its general and comprehensive sense, which
embraces real property tax assessments xxx.
 Remedies in RPT

Indeed, the CTA, sitting as Division, has jurisdiction to review by

appeal the decisions, rulings and resolutions of the RTC over
local tax cases, which includes real property taxes. This is evident
from a perusal of the Local Government Code (LGC) which
includes the matter of Real Property Taxation under one of its
main chapters. Indubitably, the power to impose real property
tax is in line with the power vested in the local governments to
create their own revenue sources, within the limitations set forth
by law. (NPC vs. Municipal Government of Navotas, GR No.
192300 dated November 24, 2014)
 Remedies in RPT
Once an assessment has been issued, what is the proper remedy of the
taxpayer?

Once an assessment has already been issued by the assessor, the proper
remedy of a taxpayer depends on whether the assessment was erroneous
or illegal.

An erroneous assessment “presupposes that the taxpayer is subject to the

tax but is disputing the correctness of the amount assessed.” With an
erroneous assessment, the taxpayer claims that the local assessor erred in
determining any of the items for computing the real property tax, i.e., the
value of the real property or the portion thereof subject to tax and the
proper assessment levels. In case of an erroneous assessment, the
taxpayer must exhaust the administrative remedies provided under the
Local Government Code before resorting to judicial action.
 Remedies in RPT
On the other hand, an assessment is illegal if it was made without
authority under the law. In case of an illegal assessment, the taxpayer
may directly resort to judicial action without paying under protest the
assessed tax and filing an appeal with the Local and Central Board of
Assessment Appeals.

In the present case, the PEZA did not avail itself of any of the remedies
against a notice of assessment. A petition for declaratory relief is not the
proper remedy once a notice of assessment was already issued.

Instead of a petition for declaratory relief, the PEZA should have directly
resorted to a judicial action. The PEZA should have filed a complaint for
injunction, the “appropriate ordinary civil action” to enjoin the City from
enforcing its demand and collecting the assessed taxes from the PEZA.
After all, a declaratory judgment as to the PEZA’s tax-exempt status is
useless unless the City is enjoined from enforcing its demand.
 Remedies in RPT
A. Erroneous Assessments:

1. Pay the tax then file a written protest with the Local Treasurer within 30
days from the date of payment of the tax;
2. If protest is denied or upon the lapse of the 60-day period to decide the
protest, the taxpayer may appeal to the LBAA wihin 60 days from the denial of
the protest or the lapse of the 60-day period to decide the protest;
3. The LBAA has 120 days to decide the appeal;
4. If the taxpayer is unsatisfied with the LBAA’s decision, the taxpayer may
appeal before the CBAA within 30 days from the receipt of the LBAA’s
decision;
5. The decision of the CBAA is appealble to the CTA En Banc under Rule 43;
and,
6. The decision of the CTA En Banc is appealable to the SC under Rule 45
raising pure questions of law.
 Remedies in RPT
B. Illegal Assessments:

1. Taxpayer shall file a complaint for injunction before the Regional

Trial Court to enjoin the LGU from collecting real property taxes;
2. The party unsatisfied with the decision of the RTC shall file an
appeal, not a petition for certiorari, before the CTA, the complaint
being a local tax case decided by the RTC case decided by the RTC. The
appeal shall be filed within 15 days (should be 30 days); and,
3. Decision of the CTA is appealable to the SC under Rule 45 raising
pure questions of law.
 Remedies in RPT
C. Remedies on other scenarios:

1. In case the LGU has issued a notice of delinquency, the taxpayer

may file a complaint for injunction to enjoin the impending sale of the
real property at public auction;
2. In case the LGU has already sold the property at public auction, the
taxpayer must first deposit with the court the amount for which the
real property was sold, together with interest of 2% per month from
the date of sale to the time of the institution of action. The taxpayer
may then file a complaint to assail the validity of the public auction;
3. Decisions of the RTC in these cases are appealable to the CTA and
the latter’s decisions appealable before the SC under Rule 45; (City of
Lapu-Lapu vs. PEZA, GR No. 184203 dated November 26, 2014)
Tariff and Customs Law
 Tariff and Customs Law
Does the Bureau of Customs have jurisdiction over seizure cases
within the Subic Freeport?

Yes, under RA 7227, its implementing rules and CAO 4-93 (Rules and
Regulations for Customs Operations in the Subic Special Economic and
Freeport Zone), both the SBMA and the Bureau of Customs have the
power to seize and forfeit goods or articles entering the Subic Bay
Freeport, except that SBMA’s authority to seize and forfeit goods or
articles entering the Subic Bay Freeport has been limited only to cases
involving violations of RA No. 7227 or its IRR. There is no question
therefore, that the authority of the Bureau of Customs is larger in
scope because it covers cases concerning violations of the customs
laws.
 Tariff and Customs Law
The authority of the Bureau of Customs to seize and forfeit
goods and articles entering the Subic Bay Freeport does not
contravene the nature of the Subic Bay Freeport as a separate
customs authority. Indeed, the investors can generally and freely
engage in any kind of business as well as import into and export
out goods with minimum interference from the Government.
(Agriex Co., Ltd., vs. Villanueva, GR No. 158150 dated September
10, 2014)
 Tariff and Customs Law
May the Bureau of Customs “automatically seize” an importer’s
shipment on the ground that it failed to submit to pre-shipment
inspection and to present the corresponding Clean Report Findings
(“CRF”) therefrom?

No, the phrase “shall be subject to automatic seizure” provided for

under paragraph 12 of Joint Order No. 1-91 (of the Bureau of Customs)
is not a roving commission to dispense with the procedural due
process of seizure proceedings.

Paragraph 12 of Joint Order No. 1-91 should be read in relation to

Sections 2301 and 2303 of the TCCP, as amended, in order to
effectuate the purposes of which they were enacted, particularly as to
the procedural requirements set forth in conducting seizure
proceedings.
 Tariff and Customs Law
The CTA correctly articulated that a Warrant of Seizure and
Detention (“WSD”) is a condition precedent, before any seizure
proceeding can be formally initiated. It therefore emphasized the
constitutionally enshrined right to procedural due process of any
person, natural or juridical, under investigation especially if it will
cause the person his/its life or property.
 Tariff and Customs Law
As previously mentioned, the above-quoted sections clearly laid down
the mandatory procedures to be observed in a seizure case, to wit: (1)
that a WSD must first be issued upon making any seizure; and (2) that a
written notice of such seizure must be served upon the owner or
importer or his agent. Failure to comply with the foregoing procedural
requirements would negate the propriety of having the subject
shipment of respondent seized and forfeited in favor of the
Government in all cases. Hence, even if the phrase "subject to
automatic seizure" was used under paragraph 12 of Joint Order No. 1-
91, the same must be construed together and harmonized with other
related provision of law, i.e. Sections 2301 and 2303 of the TCCP, as
amended, in order to form a uniform system of jurisprudence on
seizure proceedings. (The Commissioner of Customs vs. New Frontier
Sugar Corporation, GR No. 163055 dated June 11, 2014)
 Tariff and Customs Law
Customs Modernization and Tariff Act (“CMTA”) – RA 10863

√ Amends the Tariff and Customs Code of the Philippines.

√ Signed into law by President Aquino on May 30, 2016.
√ Took effect on June 16, 2016.
 Tariff and Customs Law
Salient / New Provisions:

1. Sec. 402. – Goods Declaration for Consumption.

General Rule: All imported goods shall be cleared though a formal

entry process. Exception: Informal entry may be allowed:

a. Goods of a commercial nature with Free on Board (FOB) or Free

Carrier At (FCA) value of less than P50,000.00.
b. Personal and household effects or goods, not in commercial
quantity, imported in a passenger’s baggage or mail.
 Tariff and Customs Law
Salient / New Provisions:

2. Sec. 800. – Conditionally Tax and/or Duty-Exempt Importation.

a. Personal and household effects of returning residents FOB or FCA

value of P150,000.00, P250,000.00 or P350,000.00 depending on
length of stay abroad;
b. OFWs shall have the privilege to bring in tax and duty free home
appliances and other durables limited to one of every kind once every
calendar year accompanying them on their return or arriving within a
period not exceeding 60 days after the OFWs return;
c. “Balikbayan boxes” containing personal and household effects with a
FCA value not exceeding P150,000.00 and the items are not in
commercial quantities or intended for barter, sale or for hire. Can be
availed up to three (3) times in a calendar year.
 Tariff and Customs Law
Salient / New Provisions:

3. Sec. 423. – De Minimis Importations.

No duties and taxes shall be collected on goods with an FOB or FCA

value of P10,000.00 or below.
 Tariff and Customs Law
Salient / New Provisions:

4. Sec. 102. – Definition of Terms.

a. Outright Smuggling – refers to an act of importing goods into the

country without complete customs prescribed importation
documents, or without being cleared by customs or other
regulatory government agencies, for the purpose of evading
payment of prescribed taxes, duties and other government
charges.
b. Technical Smuggling – refers to an act of importing goods into the
country by means of fraudulent, falsified or erroneous declaration
of goods to it nature, kind, quality, quantity or weight, for the
purpose of reducing or avoiding payment of prescribed taxes,
duties and other charges.
 Tariff and Customs Law
Salient / New Provisions:

5. Sec. 1106. – Protest.

a. Protest is now presented before the Commissioner;

b. Commissioner by way of regulation approved by the Secretary of
Finance to provide requirement for payment or nonpayment of
disputed amount and in case of nonpayment, the release of the
importation under protest upon posting of sufficient security.