San Beda College of Law

2005 CENTRALIZED BAR

OPERATIONS
Table of Contents
I.

General Principles

II.

National Taxation

The Power of Taxation................................................................................1

Limitations on the Taxing Power....................................................................7
Double Taxation.......................................................................................11
Forms of Escape from Taxation.....................................................................13
Tax Enforcement and Administration...............................................................16

i. Income Taxation..........................................22
Classification of Taxpayers......................................................................23
1. Individuals.................................................................................23
2. Corporations .............................................................................24
3. Estates and Trusts ......................................................................24
4. Partnerships...............................................................................26
Kinds of Income Taxes under the NIRC........................................................27
1. Net Income Tax...........................................................................28
Gross Income............................................................................28
Kinds of Dividends.................................................................28
Deductions...............................................................................30
2. Optional Corporate Income Tax .......................................................44
3. Minimum Corporate Income Tax Sources of Revenue...............................44
4. Improperly Accumulated Earnings Tax................................................46
5. Preferential Rates or Special Rates of Income Tax..................................48
6. Gross Income Tax ........................................................................48
7. Final Income Tax.........................................................................48
8. Fringe Benefits Tax.......................................................................48
9. Capital Gains Tax ........................................................................50
Capital Gains and Losses In General...............................................51
Capital Gains and Losses Shares of Stock.........................................53
Capital Gains and Losses Real Property...........................................54
Gross Income from Different Sources.........................................................54
Accounting Periods and Methods of Accounting.............................................54
Filing of Tax Return and Payment of Tax......................................................57
Withholding Tax..................................................................................61

B. Transfer Taxes....................................................................................62
Estate Taxation ..................................................................................62
Gross Estate..................................................................................63
Deductions...................................................................................65
Settlement of the Estate Tax..............................................................69
Donors Tax........................................................................................71
Coverage of the Taxes......................................................................71
Settlement of the Donors Taxes..........................................................73
C. Tax Remedies under the National Internal Revenue Code..............................73
Tax Remedies of the Government..............................................................73
Prescriptive Periods for the Assessment and Collection of Taxes.....................85
Tax Remedies of a Taxpayer....................................................................88
Filing of Claim for Tax Refund or Tax Credit.............................................90
Additions to the Tax.........................................................................92

THIS IS THE INTELLECTUAL PROPERTY OF THE SAN BEDA COLLEGE OF LAW 2005 CENTRALIZED BAR
OPERATIONS. UNAUTHORIZED USE AND REPRODUCTION OF THIS MATERIAL IS NOT ALLOWED.

San Beda College of Law

2005 CENTRALIZED BAR
OPERATIONS
III.

Local Taxation
Powers and Limitations...............................................................................93
Local Tax Remedies under the LGC.................................................................101
Tax Remedies of the Local Government Units...............................................101
Prescriptive Period in the Assessment and Collection of Taxes.......................102
Tax Remedies of the Taxpayer..................................................................102

IV.

Real Property Taxation

V.

Tariff and Customs Code

Nature and Classes....................................................................................103

Procedure..............................................................................................105
Real Property Tax Remedies under the LGC.......................................................106
Tax Remedies of the Government..............................................................106
Prescriptive Period for the Collection of Real Property Taxes........................107
Tax Remedies of the Taxpayer..................................................................107

The Bureau of Customs...............................................................................108

Customs Duties........................................................................................109
The Tariff Commission................................................................................112
Tax Remedies under the Tariff and Customs Code...............................................113
Tax Remedies of the Government..............................................................113
Tax Remedies of the Taxpayer..................................................................113
Two Kinds of Proceedings in the Bureau of Customs...................................114

VI.

Court of Tax Appeals

Nature and Powers....................................................................................119

Jurisdiction............................................................................................119
Appeal ................................................................................................. 121

THIS IS THE INTELLECTUAL PROPERTY OF THE SAN BEDA COLLEGE OF LAW 2005 CENTRALIZED BAR
OPERATIONS. UNAUTHORIZED USE AND REPRODUCTION OF THIS MATERIAL IS NOT ALLOWED.

San Beda College of Law

2005 CENTRALIZED BAR
OPERATIONS
VII.

Annex
Rates, Tables and Diagrams
A. Individual Tax Rates..............................................................................127
B. Corporation Tax Rates...........................................................................131
B-1 Comparative Table on MCIT, IAET, NOLCO ..............................................133
B-2 Tax Exemptions on Non-Stock Non-Profit Corporations ...............................136
C. Preferential Tax Rates...........................................................................137
D. Gross Income......................................................................................139
E. Business Expenses................................................................................144
F. Ceiling on Entertainment, Recreational and Amusement Expenses
(Rev. Reg. 10-2002)..............................................................................146
G. Guidelines in Determining Whether a Real Property is a Capital Asset
or Ordinary Asset (Rev. Reg. 07-2003).........................................................147
H. Additional Rules on Taxable Fringe Benefits.................................................150
I. Different Sources of Income (Section 42, NIRC).............................................151
J. Provinces..........................................................................................153
K. Municipalities.....................................................................................155
L. Comparative Table Income, Estate and Donors Tax.......................................157
M. Comparative Table Tax Remedies of Taxpayer (NIRC, LGC, TCC)........................165
N. Assessment Process..............................................................................169
O. Comparative Table (Court of Tax Appeals)
RA No. 1125 and Amendments made by RA No. 9282 ......................................173
P. Comparative Diagrams Court of Tax Appeals Jurisdiction ...............................176
Illustrative Problems
Q.
R.
S.
T.
U.
V.
W.

Taxable Income from Different Sources (Individual)........................................178

Taxable Income from Different Sources (Corporation).....................................180
Net Operating Loss Carry Over (NOLCO) .....................................................181
Normal Tax, MCIT, Optional Corporate Income Tax..........................................182
Capital Gains and Losses........................................................................183
Quarterly Payments..............................................................................185
Donors Tax .......................................................................................186

THIS IS THE INTELLECTUAL PROPERTY OF THE SAN BEDA COLLEGE OF LAW 2005 CENTRALIZED BAR
OPERATIONS. UNAUTHORIZED USE AND REPRODUCTION OF THIS MATERIAL IS NOT ALLOWED.