Tax Quick Reviewer - Edward Arriba PDF

ESTATE TAX
- Tax on the right to transmit property at the death. Not a tax on property
- Imposed upon the basis of net estate regardless of beneficiaries
INHERITANCE TAX - Tax on right to succeed. Not anymore applied.
- Accrues at the moment of death. Obligation to pay is 6 months after the death of the
decedent
- The executor or judicial administrator shall not deliver a distributive share to any party
interested in the estate unless there is a certification form the commissioner that the estate has
been paid.
- 200K - EXEMPT
- No estate tax for corporation because it is not capable of natural death
GROSS ESTATE - The value of the property, real or personal, tangible or intangible, of the
decedent wherever situated to the extent of his interest at the time of his death.
NET ESTATE - Value of gross estate less the ordinary and special deductions
COMPOSITION
1. Citizen or Resident Alien - All properties WHEREVER SITUATED.
2. Non Resident Alien - Only if situated in PH. PROVIDED THAT with respect to intangible personal
property, its inclusion is subject to the rule of reciprocity. No SPECIAL DEDUCTION ALLOWED
INTANGIBLE PROPERTIES CONSIDERED SITUATED IN PH

1. Franchise which must be exercised in the PH
2. Shares, obligations or bonds issued by corporations organized in PH
3. Shares, obligations or bonds issued by a foreign corporation 85% of the business is located in
PH.
RULE ON RECIPROCITY (INTANGIBLE PROP OF NON RESIDENT ALIEN) (EXCLUSIONARY RULE)

1. With reciprocity - Shall not be included in gross estate if no imposition of such transfer tax and
foreign country allows similar exemption.
2. Without Reciprocity - Included in Estate
VALUATION OF GROSS ESTATE

1. Property - Death of death valuation - FMV at the time of the death
2. FOR REAL PROPERTY
1. FMV by commissioner
2. By schedule of value
- WHICH EVER IS HIGHER
2. Share of stock
© Edward vange arriba Page 1 of 70

1. Listed - FMV is the arithmetic mean between the highest and the lowest quotation at a
date nearest the date of death.
2. Unlisted - Bookvalue at the time of death
3. Right of Usufruct - Probable life of the beneficiary in accordance with the latest basic
standard mortality table
4. Improvement - Construction cost per building permit or the FMV of latest tax declaration
INCLUSIONS IN GROSS ESTATE

1. Decedent’s interest at the time of his death
2. Transfer in contemplation of death
3. Revocable transfer
4. Property passing under a general power of appointment
5. Proceeds of life insurance taken out by the decedent upon his own life where the
beneficiary is the estate, his executor or administrator irrespective of whether or not the
insured retained the power of revocation
6. Prior interest
7. Transfers for insufficient consideration
#1 Decedent’s interest at the time of his death

- Dividends declared by a corporation before death of the stockholder although paid after
death
- Partnership profits even if paid after death of the partner
#2 Transfer in contemplation of death

- During the lifetime, he retained any of the following:
A. Possession or enjoyment
B. Receipt of income or the fruits notwithstanding the transfer
C. Right, either alone or in conjunction with any person to designate person who shall possess or
enjoy the said property or income
- This does not constitute any transfer made by dying person.

- The retention of some type of control over the property is material
CIRCUMSTANCES TAKEN INTO ACCOUNT

1. Age, state of health of the decedent at the time of the gift
2. Length of time between the gift and date of death. A short interval suggests that the thought
of the death was in the decedent’s mind. Long interval is opposite
3. Concurrent making of a will within a short time after transfer.
- Transfer done during the lifetime of decedent is presumed to be in contemplation if made to

compulsory heirs.
#3 Revocable trust
Revocable if:
1. There is transfer by trust or otherwise and

2. Enjoyment thereof was subject at the date of his death to any change through the exercise
of power by:
1. Decedent alone
2. Decedent in with any person
3. Where any such power is relinquished in contemplation of death
- If there is bonafide sale in full consideration - not liable

- If the decedent’s power could be exercised only with the consent of all the parties having
interest, and if it does not affect the rights of all parties, the property transferred would not be
included in the revocable transfer
#4 Property passing under General power of appointment

Requisites
1. GPA
2. Exercise by will or deed
General - When it authorizes the donee to appoint any person he pleases including himself thus
giving full dominion over the property
Special - Can only appoint restricted or designated class of persons other than himself. - NOT
INCLUDED.
#5 Proceeds of life insurance

REQUISITES:
1. Decedent takes an insurance policy on HIS OWN LIFE
2. Received by estate, executor or administrator irrespective of whether or not the insured
retained the power of revocation.
3. Beneficiary is Revocable
- Not included in estate if IRREVOCABLE

- Life insurance proceeds are always excluded from gross income of the recipient whether the
designation is revocable or irrevocable
#6 Transfer for insufficient consideration

- The value to be included in the gross estate is the excess of the fair market value of the
property at the time of the decedent’s death over the consideration received.
FORMULA: FMV at the time of decedent’s death LESS Actual consideration received
DEDUCTIONS FROM GROSS ESTATE

1. Ordinary
2. Special

ORDINARY SPECIAL
1. Funeral expenses 1. Family home
2. Judicial expenses 2. Amount received by heir
3. Claims against the estate 3. Medical expenses
4. Claims against insolvent persons 4. Standard deduction

5. Unpaid mortgages
6. Unpaid taxes
7. Losses
8. Vanishing Deductions
9. Transfer for public use
10. Net share of the surviving spouse
- Citizen and resident aliens are entitled.

- Non resident aliens are not entitled to special deductions
ORDINARY DEDUCTIONS
1. Expenses, Losses, Indebtedness and Taxes (ELIT)
1. Funeral expenses
- Whichever is LOWEST
1. Actual funeral
2. 5% of gross estate
3. PHP 200,000
- Funeral expenses already paid in memorial plans may be deducted subject to limit. It can
only be deducted if it is included in gross estate
- The cut off of funeral expenses is internment
2. Judicial Expenses
- Must be incurred during the settlement of estate but not beyond 6 months from the
death of the decedent
- Extrajudicial expenses may be deducted.
- If it will individually benefit the heirs - NOT DEDUCTIBLE
3. Claims against the estate

- It must have been duly notarized at the time incurred
EXCEPT: For loans granted by financial institutions where notarization is not part of
practice
- If monetary claim against the decedent did not arise out of the debt instrument, the
requirement of a notarized debt instrument does not apply.
- Must be personal obligation of the deceased existing at the time of the death except
unpaid funeral expenses.
2. Claims against insolvent persons

REQUISITES:
1. Amount initially included in gross estate

2. Incapacity is proven
3. Unpaid mortgages
- Included in the gross estate
 
4. Unpaid taxes
REQUISITES
1. Accrued as of or before the death
2. Unpaid as of the time of his death regardless of whether or not incurred in connection with
trade or business.
5. Losses
REQUISITES:
1. Arising from fire, storms, shipwreck, or other casualties or from robbery, theft or embezzlement
2. Not compensated by insurance
3. Incurred not later than the 6 months at the time of death
4. Not claimed as deduction for income tax purposes.
5. Incurred during settlement of estate
5. Vanishing deductions
- Properties previously subject to donor’s or estate tax.
- Deduction allowed diminishes over a period of 5 years
- Two transfers must occur within 5 years and the first transfer has already been subjected to
transfer
REQUISITES:
1. Death of present decedent within 5 years from the receipt of property
2. Identity of property
3. Prior tax determined and paid
4. Formed part of gross estate situated in PH or the prior decedent or total amount of gifts
5. No previous vanishing deduction
PERIOD OF TIME BETWEEN DEATH OF PRIOR % OF VALUE OF PROPERTY ALLOWED AS

AND THE DECEDENT DEDUCTION
Within 1 year 100%
More than 1 but less than 2 80%
6. Transfer for public use

- Entire amount of all bequests, legacies, devises or transfers to or for the use of government of
the RP or any political subdivision EXCLUSIVELY for public purpose
REQ:
1. In last will or testament
2. Take effect after death
3. EXCLUSIVELY for public purpose
SPECIAL DEDUCTIONS
1. FAMILY HOME
REQUISITES:
1. Actual residential home as certified by Barangay captain
2. Total value must be included as part of gross estate
3. Allowable deduction must be the lowest of:
1. Current FMV
2. Extent of interest
3. 1M
2. Standard Deduction - 1M without need of substantiation

3. Medical Expenses
REQUISITES:
1. Incurred whether paid or unpaid within 1 year prior to death
2. Substantiated
3. Not exceeding 500K
4. Retirement benefits of Employees of private firms

REQUISITES
1. Reasonable maintained by employer
2. Retiring employee has been in the service of same employer for at least 10 years and is not
less than 50 years of age at the time of the retirement.
3. Amount must have been received by heirs of the decedent-employee
4. Included in gross estate
EXCLUSIONS FROM GROSS ESTATE

1. Capital of surviving spouse
EXEMPTIONS FROM GROSS ESTATE

1. Bequests, devises, legacies, transfers to social welfare, cultural and charitable institutions. No
part of which inures to benefit of individual. And that not more than 30% of the said property
will be used for ADMINISTRATION PURPOSES.
- Educational institutions not included.
2. Merger of usufruct in the owner of the naked title

3. Fideicommissary substitution

4. Transmission from the first heir, legatee, or donee in favor of another beneficiary in
accordance with the desire of the predecessor.
TAX CREDIT - Allowed for the estate tax or taxes paid to foreign country
PROCEDURE FOR SETTLEMENT

1. FILING OF NOTICE OF DEATH
- When the transfer is subject to tax AND although exempt, the gross value of the estate
exceeds 20K
- It must be filed within 2 months after death
2. Filing of Estate tax return: WITHIN 6 MONTHS FROM THE DEATH

- In all cases of transfers subject to estate tax
- If exceeds 200K even though exempt.
- Regardless of gross value if it consists of registrable property
- If net estate exceeds 2M, estate tax return shall be supported and certified by CPA and
separate TIN
PAYMENT
- Pay as you file
- May be extended but it must be filed before the expiration of 6 months
- Extension must not be for a period exceeding 5 years or 2 years if extrajudicial
- It is subject to interest BUT NOT TO SURCHARGE
- Running of statute of limitations is suspended
- There may be payment by installment
- Estate tax shall be paid by the executor or administrator (PRIMARY). Beneficiary shall be
subsidiarily liable but it shall not exceed the value of inheritance
- Judge shall not issue authorization to deliver until certification of payment is shown
- ROD shall not register also without such certification
- Debtor of the deceased shall not pay unless certification
- The administrator of the estate or anyone of the heirs may upon authorization by the
commissioner withdraw an amount not exceeding 20K without certification
- In survivorship agreement, the bank deposit does not form part of the gross estate. It is
allowed.
DONOR’S TAX
- An excise tax imposed on the privilege to transfer property by way of gift intervivos based on
a pure act of liberality without any or less than adequate consideration and without any legal
compulsion to give
- Imposed upon any person, resident or non resident

- Includes transfer of property in trust or less than title.
- It shall not apply unless there is a completed gift

REQUISITES:
1. Capacity of donor at the time of the making of donation
2. Donative intent
3. Delivery
4. Acceptance made known to the donor
5. Form if prescribed by law
COVERAGE
1. Real or personal property wherever situated belonging to the donor - Resident or Citizen
2. Non resident Alien - Within PH only - Intangible subject to reciprocity
- Graduated tax rate is apply applicable if the donee is not a stranger

- If stranger - Fixed. 30%
STRANGER:
1. Not brother, sister whether full or half blood, spouse, ancestor, and lineal descendants
2. Person not a relative of consanguinity in the collateral line within 4 CD
3. Between business org
4. Business and individual
SITUS:
- Where the transfer took place
VALUE:
1. REAL - FMV at the time of the gift.
2. All other - FMV at the time of the gift
- Void donations are not subject to donor’s tax. But if already paid, only 2 years to refund from
the date of payment
DONATIONS FOR ELECTION CAMPAIGN

- Not subject to payment of gift tax if DULY REPORTED TO THE COMMISSION
- No corporation, Domestic or foreign shall give donation, aid of any political party or
candidate for purpose of partisan activity
- Renunciation of share of surviving spouse in favor of the SPECIFIC PERSON is subject to donor’s
tax
- If merely renounces without specification - NOT SUBJECT TO DT. Automatically transfers
LIFE INSURANCE WITH THIRD PERSON AS BENEFICIARY

- Total amount of premium paid by the insured provided that:
1. Payable to other than insured’s estate and insured retains no power to change the
beneficiaries

REMUNARATORY DONATION
- Donation as to the period which exceeds the value of the burden imposed.
- Donations to Homeowner’s association is taxable

- Donation in consideration of performance of a service - LIABLE FOR INCOME AND VAT
TRANSFER CONSIDERED AS DONATION

1. Transfer for less than adequate and full consideration
- The amount of which the FMV exceeds the consideration shall be deemed gift
EXCEPTION: Where proper transferred is real property located in PH considered as CAPITAL ASSET,
the donor’s tax is NOT APPLICABLE but the Final capital gains tax of 6% shall apply.
- If sale is fictitious, entire value of the property shall be subject to DT
2. Forgiveness of indebtedness
- If for service: Income tax
- If no: Gift
- If because of restructuring, it shall not be liable for DT. It was not a result of mutual agreement
of debtors and creditors. It was because of rehabilitation
DONATIONS THAT ARE TAX EXEMPT:

1. Dowries
REQ:
1. On account of marriage
2. Before or within one
3. By parents to each of their LEGITIMATE, recognized, natural and adopted children
4. Extent of 10K
- Each spouse may donate separately
2. Gift made to or for the use of the national government or any entity created by any of its
agencies which is not conducted for profit or to any political subdivision of the said government
3. Gift in favor of an educational and or charitable, religious cultural, social welfare corporation,
institution, ACCREDITED NGO or Philanthrophic organization or research institution.
REQ:
1. Not more than 30% of said gift shall be used for administrative purpose
2. Non stock non profit
3. Governed by trustees who do not receive any compensation
4. Not authorized to receive dividends
- Donation of ordinary assets to charitable institution is exempt from donor’s tax provided
requisites are complied

- If the donor is VAT REGISTERED person and the donation involves ORDINARY ASSET, the
donation is subject to vat- TRANSACTION DEEMED SALE
4. Athlete’s Prizes and award

REQ:
1. In local and international sports tournaments and competitions
2. Held in PH or abroad
3. Sanctioned by their respective national sports association or duly accredited by Philippine
Olympics Committee
5. Encumbrances on the property donated if assumed by donee

- The value of the mortgaged assumed
6. Donations to entities exempted by special laws
EXEMPTIONS TO NON RESIDENT ALIENS

1. To national government
2. To Educational, charitable, religious, cultural,
BASIS OF DT:
- NET GIFT
- When the donation is more than 10M, the cumulative method is no longer relevant. - Rate is
fixed at 15%
TAX CREDIT - Only to residents and citizens of PH
- Donee is not required to file any return unless acts as agent

- Return shall be filed within 30 days from the date of gift
- The donor’s tax is paid upon filing. No extension allowed.
VAT
- Tax on the consumption levied on the Barter, Exchange, Lease or Sale (BELS) of goods or
properties or services in the PH and on importation of goods into the PH
- Impact of taxation is on the SELLER

EXCEPT: Technical Importations - In case of tax free importations by entities exempt from tax,
where it is subsequently sold in the PH to non exempt, the purchases shall be considered as the
importers who shall be liable to VAT.
INCIDENCE - Where the burden is shifted

- In VAT - It is the final consumer
- The buyer cannot invoke an exemption privilege to avoid paying output tax passed on them
- Barter has the same tax consequence as a sale

Tax Credit method - Input tax shifted by the seller to the buyer is credited against the buyer’s
output tax when he in turn sells the taxable goods, properties and services.
Cascading - Tax passed on by the previous seller which is now a component of gross selling price
is again subjected to tax (tax on tax)
- No cascading in VAT
DESTINATION PRINCIPLE - Goods and series are taxed only in the country where these are
CONSUMED
CROSS BORDER DOCTRINE - No vat shall be imposed to form part of the cost of the goods
destined for consumption outside the territorial border of the taxing authority
- Exports are zero rated because they are consumed outside. and imports are liable to vat
FREEPORT AND ECONOMIC ZONE

- Separate customs territory. Sales within these zones are either treated as
- 1. Sale outside the country - If purchaser is also a locator, or if the goods are for export to a
country other than PH
- 2. Domestic Sale - Importations in the hands of purchaser and are thus subject to customs
duties
PEZA REGISTERED ENTERPRISES - VAT EXEMPT and no vat can be passed on them
- A taxable business can claim for the refund of the Input VAT only if the claim is supported by
purchase invoices
PERSONS LIABLE TO VAT

1. Any person who IN THE COURSE OF BUSINESS BELS or renders services
EXCEPT: Whether or not vat registered whose annual gross sales or receipts does not
exceed PHP 1,919,500, shall not be liable to VAT but instead he shall be liable for 3% percentage
tax unless he opted to be a registered VAT person
2. Importer whether or not in the course of trade or business
RULE OF REGULARITY - Regular conduct of a commercial or an economic activity including

transactions incidental thereto by any person regardless of whether or not the person engaged
therein is a non stock, non profit, private organization or government entity
Transaction will be characterized in the course of business if:

1. Regularly conducted - More than one isolated transaction
2. Undertaken in pursuit of a commercial or economic activity
- Transactions incidental to the pursuit of a commercial or economic activity are considered as

entered into the course of trade or business - VATABLE

EXCEPTION TO RULE OF REGULARITY
1. Importation is subject to VAT regardless of whether or not in the course of business.
2. Services rendered in the PH by non resident foreign person shall be considered as being in
the course of business even if the performance is not regular
3. Any business where the gross sales or receipt do not exceed 100K during any 12 month
period shall be considered principally for subsistence or livelihood and not in the course of
business.
VAT REGISTERED PERSON

1. Registered according to law
2. Opted to register as VAT person
- Status shall continue until registration is cancelled or until the 3 consecutive years
moratorium had lapsed if decides to revert back to exempt status
VAT REGISTRABLE PERSON

1. Gross sale or receipt for the past 12 months other than those are exempt have exceeded
PHP 1,919,500
2. Reasonable grounds to believe that his gross sales will exceed PHP 1,919,500
3. Any person who is required but failed to do so.
- He cannot be entitled to claim INPUT TAX CREDIT but shall pay his output tax
VAT EXEMPT PERSON

- Not liable for Output tax but he must still pay to his VAT REGISTERED SUPPLIER the VAT as
component of his purchases
1. Transactions are not taxable
2. Specifically exempt from VAT by this vote or special law or international agreements
VAT EXEMPT PERSON

1. Person not engaged in VATable transactions
1. Do not exceed 1,919,500
2. Non stock non profit organizations organized primarily for the purpose of engaging in non
taxable transactions
- If undertake taxable transactions, but the value does not exceed PHP1,919,500 per
year, it remains exempt from VAT. BUT LIABLE FOR PERCENTAGE TAX OF 3%
2. Subsistence Livelihood Income

- Any business - Aggregate gross sales do not exceed 100k during the 12 month period
- Exempt from VAT and percentage tax
3. Exempt from VAT under Special laws

A. CDA Registered cooperatives
B. Special economic zones or free ports
C. Regional or area headquarters established in PH by multinational corporation
D. Inventors

4. Vienna Convention - Diplomatic agents are exempt from all dues, taxes, personal or real,
national or regional
TRANSACTIONS OF SPECIAL VAT PERSONS

1. Husband and wife
- Shall be separate tax payers for purposes of PHP 1,919,500 but aggregation rule shall apply
AGGREGATION RULE - A spouse who derives revenue not only from the practice of his profession
but also from other lines shall be aggregated for the purposes of threshold amount.
2. Joint Venture - Shall be liable for vat even those undertaking construction or energy related
activities with government.
3. General professional partnership

A. Personal capacity - Personally liable for vat unless below threshold
B. GPP - GPP shall be liable. Partner shall not be liable for his shares
4. Government
A. Essential Function - Exempt
B. Proprietary - Not exempt
- No automatic exemption for LGU. They are still required to register.
5. Non stock, Non profit association

A. Purely from association dues or special assessments - Exempt from VAT
B. Taxable sale - Liable for vat
- They are only exempted for DIRECT TAXES. Not indirect
6. Real Estate developers

- If made by real estate dealer, developer, lessor and gross selling price exceeds threshold
7. Importer - Seller pays out the VAT except technical importation above.
VAT ON SALE OF GOODS OR PROPERTIES

REQUISITES:
1. Actual or deemed sale, barter or exchange of goods or personal properties for a valuable
consideration
2. In the course of business or exercise of profession
3. Located in the PH or for use or consumption here
4. Not Vat exempt
Tax base - Gross selling price or gross value in money

Tax rate - 12%

- If vat is not billed separately, it shall be deemed inclusive of VAT
ALLOWABLE DEDUCTIONS FROM GROSS SELLING PRICE

1. Sales and discounts
- Discounts conditioned upon the subsequent happening of an event or certain conditions shall
not be allowed as deductions
2. Sales returns and allowances
VAT ON SALE OF REAL PROPERTIES

REQUISITES:
1. Located within the PH
2. Ordinary asset - Primarily for sale or lease in ordinary course of business
3. Seller or transferor is real estate dealer
4. Not exempt
5. Within the threshold amount
- Transmission of property to a trustee shall not be subject to vat if the property is merely held in
trust for the beneficiary.
Gross selling price of RP:

1. Consideration stated in document
2. Zonal value as determined by BIR
3. Schedule of values
THRESHOLD:
1. RESIDENTIAL LOT - Exceeding PHP1,919,500
2. RESIDENTIAL HOUSE AND LOT or other residential dwellings - Exceeding PHP3,199,200
3. Sale, Transfer or disposal within 12 months of two or more adjacent:
1. Residential Lot
2. House and lot
3. Other residential dwelling in favor of one buyer from the same seller for the purchase of
utilizing lots, house and lots or other residential dwellings as one residential area wherein
the AGGREGATE VALUE of the adjacent property exceeds PHP1,919,500 for lots and
PHP3,199,200 for house and lot
- Sale of parking lots in a condo is a separate and distinct transaction and is not covered by the
threshold - LIABLE FOR VAT REGARDLESS OF AMOUNT
- Threshold applies even if nominated as conditional sale or absolute sale
MODES OF SALE OF REAL PROPERTY

1. Installment plan - Initial payments NOT EXCEEDING 25% of gross selling price
- Buyer can claim input tax in the same period as recognized.

2. Deferred Payment - Initial payment EXCEEDS 25%
- As if cash payment. Full payment of VAT
- Low cost housing units even though above threshold may still be exempt if not beyond the
PHP 1,919,500 and PHP3,199,200
VAT ON IMPORTATION OF GOODS

- May or may not be engaged in business in PH
TECHNICAL IMPORTATION - MC (Tax exempt) imports and sold it to E (Vat person). E shall pay the
vat and may claim the input creditable tax.
VAT ON SALE OF SERVICE OR LEASE

- Lease - All forms of property for lease whether real or personal are liable for VAT except if not
exceeding threshold.
- Service must be in the course of taxpayer’s business or profession to be VATABLE
- Place of service determines the taxability
GROSS RECEIPTS: Total amount of money or its equivalent actually or constructively received
EXCLUDING
1. Amounts earmarked for payment to unrelated third party
2. Amounts received as reimbursement for advanced payment on behalf of another which do
not redound to the benefit of the payor
ADVANCE PAYMENTS IN LEASE

1. Loan to the lessor from the lessee
2. Option money
3. Security deposit to insure faithful performance of obligations
4. Prepaid rental
- 1-3 - not VATABLE

- Security deposit are subject to vat WHEN APPLIED AS A RENTAL
- Security deposit does not gross selling price. It is only upon the forfeiture that makes it
taxable
- Prepaid rental - taxable in the month received.
- Transfer of assets of a corporation to another corporation in exchange for shares of the latter is
subject to vat
- Lending investor other than banks, non bank financial intermediaries, finance companies non
performing quasi banking function - LIABLE FOR VAT
- Banks or nonbank financial intermediaries performing quasi banking functions and other
non bank financial intermediaries are VAT EXEMPT TRANSACTIONS
- Extending cash advances for a fee - vatable
- Sales of electricity by generation, transmission and distribution are SUBJECT TO VAT

- EXCEPT: Power of fuel generated through renewable sources of energy like biomass, solar,
wind, hydro, ocean, etc - ZERO RATED
- Franchise grantees of radio or tv broadcasting whose annual gross income receipts do not
exceed 10M shall be exempt
- Non life insurance companies ARE VATABLE
- Non life REINSURANCE PREMIUMS are not vatable
- Insurance and Reinsurance COMMISSIONS whether life or non life shall be VATABLE
- When the INCOME PAYOR is a PEZA REGISTERED ENTITY to whom VAT may not be passed, the
royalties shall be exempted from VAT
- The lease of MOTION FILMS shall be VATABLE.
- The exemption of cinema/theater operators or proprietors from VAT is only limited to gross
receipts derived from ticket sales.
- Condominium corporations are subject to VAT and Income tax
GR: Contributions in exchange of goods or service to associations are subject to Income and VAT
EXC: Association dues and income derived from rentals of property of the Homeowners
association may be exempted from income tax, vat and percentage tax PROVIDED:
It complement, support and strengthen the LGU in providing vital service to their members
LAWYER’S VAT
1. There must be no EER
2. Gross receipts exceeds PHP1,919,500
TRANSACTION DEEMED SALE - Subject to 12% VAT
1. Transfer, Use, consumption of goods or properties NOT in the course of business of goods or
properties ORIGINALLY INTENDED for sale or for use in the course of business
- EX: When VAT registered person withdraws goods from his business for personal use.
- Donation by VAT registered person of its ordinary assets is Transaction deemed sale
2. Distribution or transfer to Shareholders or investors of shares in the profits of a VAT REGISTERED

PERSON or creditors in payment of debt or obligation
- Includes property dividends
3. Consignment of goods if actual sale is not made within 60 days following the date of
consignment.
- EXCEPT when physically returned within 60 days
4. Retirement from or cessation of business with respect to all goods on hand whether capital
goods, stock in trade, supplies or materials as of date of retirement.
- There must be change of ownership or dissolution of a partnership and creation of a new
partnership.

- Deed of assignment to one stockholder - TRANSACTION DEEMED SALE
- Deemed sales apply only to goods and properties not to services
CHANGE OR CESSATION OF STATUS OF VAT REGISTERED PERSON
SUBJECT TO 12% OUTPUT TAX NOT SUBJECT TO 12% OUTPUT TAX
Apply to all the goods or properties EXISTING Not apply to goods or properties which are
at the time of occurrence of: originally intended for sale or use in the course of
1. Change of business activity from VAT status business as they are mere changes in form NOT
to VAT exempt status. IN SUBSTANCE
2. Approval of a request for cancellation of 1. Change of control of corporation by

VAT registration because of reversion to acquisition of the controlling interest of such
exempt status, desire to revert to exempt corporation by another stockholder
status after lapse of 3 years EXCEPT:
3. Failure to meet the specific threshold a. Exchange of property by corporation

acquiring control for the shares of stock of the
corporation
b. Person who joins corporation who

EXCHANGES PROPERTY for stock
2. Change in trade name or corporate names
3. Merger or consolidation
ZERO RATED SALES OF VAT REGISTERED PERSONS

- Result to zero output tax.
- Still considered taxable but rate is 0%
- The seller must be a vat registered person to make his export sales zero rated. Any input Vat
may be refunded or credited.
- If not a VAT registered person, his export sales shall merely be VAT Exempt disallowing him to
claim his unused creditable input taxes in the form of refund or tax credit.
KINDS OF ZERO RATED SALES
GOODS AND PROPERTIES

1. Export sales
1. Sale and actual shipment of goods from the PH to a foreign country which must be paid
in acceptable foreign currency and accounted for in accordance with the rules and
regulations of BSP
2. Sale of raw materials or packaging materials to a non resident buyer for delivery to
resident local export oriented enterprise to be used in manufacturing, processing,
packing or repacking in the PH of the said buyer’s goods which must be paid in
acceptable foreign currency
3. Sale of Raw materials or packaging materials to an export oriented enterprise.
4. Sale of Gold to BSP
5. Those considered export sales under EO226

6. Sale of goods, supplies, equipment and fuel to persons engaged EXCLUSIVELY in
international shipping or international air transport operation
- Without docking or stopping at any other port in the PH - Stopover to unload
passengers and cargoes from foreign destination or to pick up passenger is deemed NOT TO
HAVE DOCKED OR STOPPED at any other port in PH
2. Foreign Currency denominated sale

A. Sale paid in acceptable foreign currency and accounted by BSP
B. Sale of goods assembled or manufactured in PH exempt automobiles and non essential
goods.
C. Sale to non resident or balikayans
D. Sale for delivery to a resident in PH
3. Sale to person or entities exempt by special law or international agreement

1. Subic bay Metropolitan authority - AUTOMATICALLY ZERO RATED
2. PH Economic zone authority - AUTOMATICALLY ZERO RATED
3. Asian development bank - EFFECTIVELY ZERO RATED
4. International rice research institute - EFFECTIVELY ZERO RATED
SERVICES
1. Processing, manufacturing or repacking of goods for other persons doing business outside
the PH which goods are subsequently exported and paid for in acceptable foreign currency
2. Same services rendered to a person engaged in business conducted Outside the PH or to a
non resident person not engaged in business who is outside the PH when services are
performed and paid for in acceptable foreign currency
3. Exempted under laws and international agreements
4. Services rendered to persons engaged in INTERNATIONAL SHIPPING or air transport including
leases of property for use thereof. (NOT FROM ONE PLACE IN PH TO ANOTHER)
5. Services performed by subcontractors and or contractors in processing, converting or
manufacturing goods for an enterprise whose export sales exceed 70% of total annual
production.
6. Transport of passengers and cargo by domestic air or sea carriers from PH to foreign country
(but subject to percentage tax if doing business in PH)
7. Sale of pows or fuel generated through renewable sources
AUTOMATICALLY ZERO RATED EFFECTIVELY ZERO RATED
Export sale of goods or properties and supply LOCAL SALE of goods and properties and supply
of service by a VAT REGISTERED PERSON of services by VAT Reg person to a person or
entity who was granted INDIRECT TAX
EXEMPTION under special laws or IA
Primarily intended to be enjoyed by the seller Intended to benefit purchaser who not being
who is directly and legally liable for the vat, directly or legally liable for the payment of VAT
making such seller internationally competitive
by allowing refund or credit
- Pagcor’s exemption from corporate income tax was removed. But it is still exempt from VAT.

- Sales made to foreign embassies- Considered foreign sales.
- Transaction of VAT registered person with embassy and its personnel shall be zero rated
provided that they can submit a copy of special legislation of international agreement that
such foreign government allows same exemption. APPLIES ONLY IN OFFICIAL CAPACITY
Sale in Ecozone - Deemed separate customs territory.
VAT EXEMPT PERSONS

- Not subject to output tax
- Not allowed any tax credit of vat on purchases.
- Person shall not bill any output tax
- Seller does not charge vat and he cannot claim exemption
- Not included in determining threshold
- Not be liable for VAT or percentage tax
Exempt party - allowed to tax refund.
ZERO RATED VAT EXEMPT SALES
Completely free of VAT because tax rate is zero Exemption only as it removes vat at exempt
stage
Can claim credit or refund for input tax. Hence Cannot claim credit or refund
Total relief
Still considered taxable Not considered as taxable
Vat registration is required Vat registration is optional
EXEMPT SALE OR IMPORTATION

1. Sale or importation of agricultural and marine food products in their ORIGINAL STATE, livestock
and poultry of a kind generally used as or yielding or producing foods for human
consumption and breeding stock and genetic materials therefor.
- ORIGINAL STATE - Shall remain even if undergone simple process of preparation or
preservation for the market such as freezing, drying, salting, broiling, roasting, smoking or
stripping.
- Packaging such as shrink wapping in plastic, vacuum packaging, tetrapack does not make it
liable for vat.
- NOT IN ORIGINAL STATE: Solar salt, iodized salt, chili powder, onion powder, garlic powder
- NOT SIMPLE if it is a physical or chemical process which would alter the exterior or inner
substance of the product
- Centrifugal process in sugar - not exempt
- Andok’s chicken is exempt. But if they offer dine in service - vatable (SALE OF SERVICE)
- Non food agricultural produces are subject to VAT

2. Sale or importation of fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and
poultry feeds including ingredients WHETHER LOCALLY OR IMPORTED used in manufactured of
finished feeds.
- Except those made for race horses, fighting cocks, aquarium, zoo, or for pets.
3. Sale, importation or lease of passenger or cargo vessel and aircraft including engine
equipment and spare parts thereof for domestic and international transport operations
weighing 150 tons and above.
4. Sale, importation, printing or publication of books and any newspaper, magazine, review or
bulletin.
REQUISITES: Newspapers, magazine, review and bulletin must:
1. Printed or published at regular interval
2. Available for subscription and sold at fixed prices
3. Not principally devoted to publication of paid ads
- Only for hard copies. In digital form - subject to VAT

- GR: All imported books whether for commercial or personal use shall be exempt.
- EXC: For and by private commercial enterprise essentially for advertising
SALE
1. Real properties
EXEMPT IF:
1. Not primarily held for ordinary course of trade or business.
2. Low cost or socialized housing
3. Residential lot valued at PHP1,919,500 and BELOW.
4. House and lot and other residential dwellings at PHP3,199,200 and BELOW
5. Two or more adjacent residential lots sold within 12 month period and aggregate exceeds
PHP 1,919,500 or PHP3,199,200
- Parking lots in condo - subject to vat

- Even if not held for lease but is used in the course of business - INCIDENTAL - Subject to VAT
- PCGG - Exempt from VAT
2. Export sales by person who is not vat registered.

- Only exempt. But if registered, ZERO RATED.
3. Sale by Agricultural COOPERATIVES of food and non food products whether original or
processed duly registered by CDA
- Members - exempt even if not the producer
- Non members - only if cooperative is the producer.
4. Sales by non agricultural, non electric and non credit cooperatives not duly registered and in
good standing with CDA

5. Sales to senior citizens
IMPORTATION
1. Personal and household effects belonging to residents of PH returning from abroad and non
resident citizen coming to resettle in PH. provided they are exempt in customs duties.
2. Importation of professional instruments and implements, wearing apparel, domestic animals
and personal household effects.
REQUISITES:
1. Belonging to person coming to PH
2. For their own use
3. Accompanying such persons or arriving within 90 days before or after arrival
4. Except vehicle, vessel, aircraft, machinery, and other goods for manufacture in
commercial quantity
5. Satisfactory evidence given to CIR
3. Fuel, goods and supplies by persons engaged in international shipping or air transport
operations directly to a foreign port without stopping
4. Life saving equipment, safety and rescue equipment for shipping operations
5. Capital equipment, machinery, spare parts of machine vessel operated in PH
SERVICES
1. Subject to percentage tax
2. Agricultural contract growers and milling for others of play into rice
3. Medical, dental, hospital and veterinary services except those rendered by professionals.
- Sale of drugs to hospital in patients - non VAT
- If out patient - VATABLE
4. Services of banks, non bank financial intermediaries performing quasi banking functions and
non bank financial intermediaries such as pawnshops and money changers.
- Pawnshops - liable to percentage tax
5. Educational services rendered by private educational institutions DULY ACCREDITED by

DEPED or CHED and TESDA and those rendered by government institutions. Educational
services rendered DO NOT INCLUDE seminars, review classes and other similar services
rendered by persons who are not accredited.
6. Services rendered by Regional and area HQ
OTHERS
1. LEASE of residential units if monthly
1. Does not exceed PHP12,800 regardless of aggregate rentals - Not liable for VAT and
Percentage tax
2. Exceeds PHP12,800 but aggregate does not exceed PHP1,919,500 - Liable only for
percentage tax 3%
- To be liable for Vat - both shall be present
- In case of several units, each shall be treated separately for percentage tax.

2. Gross receipts from lending activities duly registered by CDA
3. By international agreements
4. Transport of passenger by international carriers (only percentage tax)
5. Gross annual sales do not exceed PHP1,919,500
- ONCE ELECTION IS MADE, It shall be irrevocable for period of 3 years.

- except: Radio, TV, Broadcasting - Does note exceed 10M - PERPETUALLY irrevocable
INPUT AND OUTPUT TAX

Input Tax - Due from or PAID BY VAT registered person in the course of his trade or business from
VAT registered person
- Tax passed to the purchaser by the seller.
Output Tax - Vat due on sale or lease of taxable goods or properties or services by any person
registered or required to register under vat.
- Output tax of the SELLER is the INPUT tax of the purchaser.
SOURCES OF INPUT TAX SOURCES OF OUTPUT TAX
1. Passed on Vat 1. Actual Sales
2. Transaction deemed sale 2. Zero rated sales
3. Presumptive tax 3. Deemed sales

4. Transitional input tax
5. Standard Input tax
6. Withholding input tax
7. Excess input tax
INPUT TAX ON DEPRECIABLE GOODS

Property is considered depreciable if:
1. Used in trade or business or for production or income
2. Limited useful life
When it has AGGREGATE ACQUISITION COST exceeding 1M:

1. Estimated useful life exceeds 5years - Input tax shall be spread evenly over a period of 60
months
2. Estimated useful life is less than 5 years - Evenly on monthly basis by dividing the input tax by
the actual number of months estimated.
AGGREGATE ACQUISITION COST - Does not include vat
If does not exceed 1m: Total amount of input taxes shall be allowed in the month of acquisition.
ACQUIRED BY INSTALLMENT - Subject to amortization of input tax despite the fact that the
monthly payments or installments may not exceed 1M

- Amortization merely delays the crediting of the input tax and not the filing. Hence, the vat
registered tax payers are not deprived of their privilege to credit their input tax as long as they
file their claim within 2 years from the close of the taxable quarter.
ON CONSTRUCTION IN PROGRESS - Based on progress billings
TRANSITIONAL INPUT TAX

- Opportunity to offset the losses incurred through the remittance of the output vat at a stage
when the person us yet unable to credit input VAT
- Tax on the inventory on hand as of the effectivity of the vat registration who:
1. Became vat registered person upon exceeding the threshold
2. Voluntarily registers except for radio, TV broadcasting
3. Already vat registered person and deals in goods or properties the sale of which is exempt
but becomes a taxable transaction under a new or amendatory law.
ALLOWED CREDIT: WHICH EVER IS HIGHER

1. 2% OF VALUE OF BEGINNING INVENTORY
2. Actual vat paid on such goods
- Prior payment of taxes not necessary
PRESUMPTIVE INPUT TAX - 4% of the gross value in money of their purchases of primary
agricultural products used to their production.
- Persons engaged in:
1. Processing of Mackerel, Milk and sardines
2. Manufacturing cooking oil, packed noodle based instant meals and refined sugar
WITHHOLDING VAT
1. Payments by government - 5%
2. Payments to Nonresidents - 12% with respect to
1. Lease or use of properties or property rights owned by non resident
2. Other services rendered in PH by non residents
SUBSTANTIATION OF INPUT VAT

- All purchases covered by invoices other than a VAT invoice cannot be entitled for refund of
input tax.
- The company’s failure to substantiate zero rated sales with duly registered vat invoices shall
result to denial of application for refund. Vat invoice and official receipts must be duly
registered with BIR.
REFUND OF TAX CREDIT OF EXCESS INPUT TAX

- Transitional input tax cannot be claimed as refund or credit.

- Claim must be filed within 2 years after the close of taxable quarter when such sale was
made. (if filing of action to recover taxes already paid: RECKON FROM DATE OF PAYMENT)
PRESCRIPTION:
1. Administrative claim with BIR
- Filed within 2 years after the close of the taxable quarter where such sale was made
- Applies only to filing of administrative claim with CIR and not with the filing of Judicial claims
with CTA
- Tax payer shall file his claim with COMPLETE SUPPORTING DOCUMENTS. He is barred from
submitting additional documents after he has filed his administrative claim.
2. Judicial Claim
- Filed with CTA within 30 days from receipt of CIR’s decision OR from expiration of 120day
period without action from CIR
- Observance of 120+30 days period is MANDATORY AND JURISDICTIONAL
- The 30day period to file a judicial claim need not necessarily fall within 2 year prescriptive
period as long as the administrative claim is filed within 2 year period.
- Prior such period, Claims are premature.
- From December 10, 2003 - October 6, 2010 - Claims need not to observe stringent
requirements.
- Failure to print the word Zero-rated on the invoices or receipts is fatal to a claim for credit of
refund.
- Input vat attributable to zero rated sales incurred BEFORE its registration may not be subject to
refund
- A vat registered person may apply for the issuance of tax credit certificate for any unused
input tax within 2 years from the cancellation of registration
- It shall commence from the date of cancellation of registration
REGISTRATION
Persons required to register:
1. Every person who is liable for payment of vat - VAT PERSON
2. Every person who is exempted from VAT - Non Vat person or Vat Exempt
3. Every person who is engaged in vatable and exempt transaction must both register as VAT
AND NON VAT.
- Registration of VAT person is MANDATORY

- An exempt person may elect to register as VAT person by paying the annual registration fee.
- It is irrevocable for the next 3 years. EXC: Radio, broadcast or TV - Irrevocable forever
- Registration of income tax as a tax type does not automatically carry with it the registration of
VAT and or percentage tax.
- Person shall register for every separate or distinct establishment or place of business

INVOICING REQUIREMENT
1. Invoice - Goods (IG)
2. Official receipt - Lease and services (OLS)
- If the sale is exempt, the term VAT EXEMPT SALE shall be printed prominently in the invoice.
- Also in zero rated sale.
CONSEQUENCES OF ERRONEOUS VAT RECEIPT:

- If not vat registered issues VAT Receipt:
1. In addition to liability to other percentage tax - 12% + 50% surcharge
2. Vat shall be recognized as input tax on the purchaser
FILING OF RETURN AND PAYMENT OF VAT

Others Who are required to file:
1. Person required to pay but failed to register
2. Imports goods
3. Professional practitioners
Time of filing:
1. Monthly and Quarterly
OTHER PERCENTAGE TAX - Essentially a tax on the transaction and not on the articles sold. 3%
EXCISE TAX - Tax levied on a specific article

- Considered as tax on production as they are collected only from the manufacturers.
- Indirect tax
1. Specific - Weight or volume
2. Ad valorem - Selling price or value
Documentary Stamp Tax - Tax on documents, instruments, loan agreements and papers
evidencing the acceptance, assignment, sale, transfer of an obligation, right or property.
- Excise tax for certain privileges conferred by law
- Court considers the nature and character
- Transfer by means of merger is not subject to DST
- May be imposed even on electronic form
- Paid on the issuance of the said instruments
- Imposed upon person making, signing, issuing, accepting, transferring

REMEDIES
ASSESSMENT
- SELF ASSESSING SYSTEM - Tax payer has the obligation to conduct an assessment of himself so
he could determine and declare the amount to be used as tax basis.
- After the return has been filed, the CIR or his duly authorized representative may authorize the
examination of any tax payer and the assessment of the correct amount.
- Failure to file a return does not prevent CIR from authorizing examination
DELINQUENCY DEFICIENCY
If fails to: 1. Amount by which tax imposed by law as

1. Pay the amount of the tax due on any return determined by CIR EXCEEDS the amount
required to be filed. shown as the tax by the tax payer in his return
2. Pay the deficiency tax on the date 2. No amount is sown or no return was filed
demanded by CIR
Can be collected administratively via distraint, Must be assed prior to collection as deficiency
levy or judicial action has to be determined first
GR: Any return statement or declaration filed to office authorized to receive shall not be
withdrawn.
EXC: It may be changed, modified or amended 
1. Done within 3 years from the filing of return
2. No notice of audit or investigation has been actually SERVED upon the tax payer.
ASSESSMENT BASED ON BEST EVIDENCE OBTAINABLE if:

1. Report was not submitted within the time fixed by law
2. There is reason to believe that report is false, incomplete or erroneous.
BEST EVIDENCE OBTAINABLE:

1. Corporate and accounting records
2. Records of other tax payers engaged in the same line of business
3. Data gathered from other tax payers who had personal transactions or from the subject tax
payer received any income
4. Record from government offices or agencies
- CIR may order inventory taking of goods at any time during the taxable year
- CIR may place the business under observation and surveillance if they have reason to believe
that they are not declaring proper taxes.
TYPES OF SURVEILLANCE:
1. Covert surveillance - Undercover watch
2. Overt - Inventory taking and actual observation
3. Short duration surveillance (TAX COMPLIANCE CHECK) - Business operations are checked

PRESUMPTIVE GROSS SALES - Taking to account the income of similar businesses under same
situations, CIR may prescribe MINIMUM AMOUNT of such gross sales in the following cases:
1. Failed to issue receipts
2. Reason to believe that books do not reflect the correct declarations
CONSTRUCTIVE METHOD OF INCOME DETERMINATION

1. Percentage Method - Equivalent of a ratio analysis of percentages considered of typical of
the business under investigation
2. Net Worth Method - Reconstructing income based on theory that if the tax payer’s net worth
has increased, he had understated his income this year.
3. Bank Deposit Method
4. Cash Expenditure Method
5. Unit and value method - Applying price and profit figures done by taxpayer
6. Third Party Information or access to records
7. Surveillance and assessment
PERIOD OF LIMITATION ASSESSMENT

GR: 3 Years from the last day prescribed by law or the date actually filed which ever is LATER
EXCEPTION:
1. 10 Year from discovery of falsity or fraud - False or fraudulent return with intent to evade tax
2. Waiver - Period agreed
- Liberally construed
- 12 months - 1 year - Administrative code
REQUISITES IN ORDER THAT A RETURN MAY BE CONSIDERED FILED:

1. Valid
2. Appropriate
AMENDMENT OF TAX RETURN

1. SUBSTANTIAL - Counting of prescriptive period shall be on the date it was made
2. SUPERFICIAL - Still on the original period
EXCEPTION: if the return is SUFFICIENTLY COMPLETE in order for CIR to intelligently determine the
proper assessment - Commence at the original filing
FALSE RETURN - Contains wrong information due to mistake, carelessness or ignorance

- Substantial under remittance warrants falsity
FRAUDULENT RETURN - Must be proved as fact by BIR

- Such fact in a fraud assessment which has already become final and executory shall be
judicially taken cognizance

INSTANCES NEGATING FRAUD:
1. Failed to impute or imputed only on appeal to CTA
2. CIR did not include the fraud in penalty
FALSE RETURN FRAUDULENT RETURN
Merely implies a deviation from truth or fact Intentional or deceitful entry with intent to evade
whether intentional or not the taxes due
50% surcharges DOES NOT APPLY 50% surcharge applies
Not subject to criminal liability Subject to criminal liability

- 10 years prescriptive period both applies
FAILURE TO FILE A RETURN

10 year prescriptive period if:
1. Deficient return which prevented CIR from computing taxes due
2. Failure to report income which were clearly not exempt
WAIVER OF STATUTE OF LIMITATIONS

REQUISITES:
1. May be or not necessarily in the form prescribed
2. Failure to comply with forms does not invalidate it provided:
1. Executed before the expiration of period to assess
2. Signed by taxpayer himself or authorized rep
3. Expiry date of period agreed upon to assess or collect shall be indicated.
3. There shall only be two material dates:
1. Date of execution of waiver
2. Expiry date of period of the waiver of prescription
4. Executed and duly accepted by the CIR
5. It may simply state all internal revenue taxes
6. In writing but no need to be notarized
7. Take legal effect and be binding upon execution
8. May be extended by subsequent written waiver
GROUNDS FOR SUSPENSION OF RUNNING OF STATUTE OF LIMITATIONS

1. CIR is Prohibited from making assessment or beginning the distraint or levy AND for 60 days
thereafter.
- When a case is on appeal to the CTA, CIR is prevented from filing an ordinary action to collect
tax in the regular court
- When there is pending petition for review in CTA, the filing of such petition interrupts the
running of prescriptive period for collection.
2. Tax payer requests for reinvestigation and granted by CIR

REQUISITES:

1. Request for reinvestigation and not a request for reconsideration
2. Granted by CIR
3. When tax payer cannot be located in the address given by him in the return unless he informs
CIR of change of address
4. When warrant of distraint is duly served
5. Taxpayer is out of the PH
ASSESSMENT AND PROTEST
ASSESSMENT - Finding by a taxable agency that the taxpayer has not paid his correct taxes.
REQUISITES
1. Issued within the prescriptive period for the issuance of assessment notices
2. Issued only after a PRELIMINARY ASSESSMENT NOTICE (PAN) has been served upon the tax
payer
3. State facts and laws which it is based or else void.
4. Taxpayer personally received the assessment notice or a tax agent who is appointed
received it.
- Assessment must demand payment of taxes for specific period

- Presumption of correctness of Tax assessments is applied.
- EXC: When utterly without foundation or is arbitrary and capricious
- Assessment is discretionary on the part of CIR. Mandamus will not lie
- Exc: Grave abuse of discretion
ASSESSMENT PROCESS
1. Issuance of Letter of Authority (LA)
2. Tax Audit investigation
3. Issuance of PAN
4. Issuance of Formal Letter of Demand (FLD) or Final Assessment Notice (FAN)
5. Administrative action / Inaction
LETTER OF AUTHORITY - Official document that empowers RO to examine and scrutinize a

taxpayer’s books of accounts and other accounting records.
- Only Electronic letter of authority shall be issued by Bureau for audit investigation EXCEPT
estate tax.
REQUISITES OF VALID LA
1. Issued by proper approving official
2. Not contain any manually written character
3. Must cover only one taxable year except in TAX FRAUD CASES.
4. Served within 30 days

PRELIMINARY ASSESSMENT NOTICE - Issued to tax payer informing him of the findings of RO after
review and evaluation
- Prior to issuance of PAN, Taxpayer may be allowed to make voluntary payments
REQUISITES:
1. Served to the taxpayer personally or if not practicable by mail
2. Conducted within the scope of authority by LA
3. In writing and contains facts and law as basis
4. Issued by CIR or his duly authorized representatives
3 POSSIBLE SCENARIOS
1. Tax payer pays
2. Tax Payer replies
3. Tax payer ignores
PAYS:
- After payment, FLD/FAN shall be issued to formalize assessment.
REPLIES:
- Within 15 days from receipt of PAN filed by the taxpayer or authorized representatives
IGNORES
- Considered default and FAN/FLD shall be issued.
ISSUANCE OF FLD/FAN
REQUISITES:
1. Issued after valid PAN except when not required
2. Issued by CIR or AuthRep
3. Served to tax payer personally or mail
4. Served before lapse of prescriptive period of making assessment
5. In writing and stating basis
6. Conducted within the scope as stated in LA
- It must be issued 15 days from the receipt of Taxpayer of the PAN WHETHER PROTESTED OR
NOT.
WHEN PAN IS NOT REQUIRED / WHEN FLD OR FAN MAY BE FILED OUTRIGHT
1. Mathematical error in the computation of tax appearing on the face
2. Excise due on excisable articles has not been paid
3. Discrepancy has been determined between tax withheld and the amount actually remitted
by agent
4. Article locally purchased or imported by exempt person has been sold or transferred to non
exempt person
5. When Taxpayer automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter.

- Issuance of FAN before lapse of 15 days for taxpayer to file its reply to PAN INFLICTS NO
PREJUDICE as long as the tax payer is properly served the FAN and is able to intelligently
contest the FAN
- PAN legally speaking is not an assessment.
FAN IS DEEMED MADE: On the date when the demand letter or notice of assessment is released,
mail or sent, even though the same is actually received by taxpayer AFTER the expiration of
prescription period.
3 POSSIBLE SCENARIOS AFTER ISSUANCE OF FLD/FAN

1. Pay
2. Fails to file Protest
3. Files protest
PAYS
- FULL PAYMENT.
FAILS TO FILE PROTEST

- Within 30 days from date of receipt, Shall become final, executory and demandable
FILES PROTEST
REQUISITES:
1. Accompanied of waiver of prescription
2. Writing
3. Addressed to the CIR or Duly authorized rep
4. Submitted WITHIN 30 DAYS from the receipt of FAN/FLD
5. Filed by tax payer or AuthRep
REPLY TO PAN PROTEST IN FLD/FAN
15 Days from receipt of pan 30 days from receipt of FLD/FAN
Not in an adequate manner to the specific Sufficient and comprehensive to explain the legal
findings and factual bases why the assessment is incorrect
Failure to file - No liability for additional Failure to file: Assessment becomes final and
deficiency tax executory
Directory Mandatory
- Reply to PAN is not the same as protest in FAN
DEFENSES OF TAX PAYER

1. PRESCRIPTION - FAN/FLD must be served within the prescriptive period to make valid
assessment. It may be raised even first time on appeal.
2. LEGAL AND FACTUAL BASES

- An assessment based on Summary list Purchases (SLP) cannot be used as sole basis. It is
inconclusive and unreliable
RULES ON PAYMENT WHEN PROTEST IS FILED:

GR: No prior payment is required.
EXCEPTIONS
1. Taxpayer only protests partially or some of the issues raised.
2. If fails to state the facts and the law in support of protest - Same shall be considered
undisputed issues.
FORMS OF PROTEST
1. Request for Reconsideration - Reevaluation of assessment on the basis of existing records
without need of additional evidence
2. Request for Reinvestigation - Based on newly discovered evidence
RECONSIDERATION REINVESTIGATION
Based on existing records Newly discovered evidence
Does not toll the prescription Tolls because it entails presentation of new
evidence
Submission of new documents not requried Required within 60 days from the filing of protest
(non submission renders the assessment final and

executory)
180 day period to decide of CIR commences Commences from the submission of complete
from the filing of the protest supporting documents
3 POSSIBLE SCENARIOS AFTER PROTEST

1. Direct grant or denial
2. Indirect denial
3. Inaction
PERIOD TO ACT UPON

1. CIR - 180 days from the filing of protest
2. Authorized representative
1. Reinvestigation - Within 180 days from the submission of relevant documents
2. Reconsideration - 180 days from the filing of protest
DISPUTED ASSESSMENT - Valid protest against FAN/FLD

FINAL DECISION ON DISPUTED ASSESSMENT - Admin decision of Disputed assessment
REQUISITES OF VALID FDAA
1. Issued by CIR or aRep
2. Served to taxpayer or through mail
3. In writing with basis

4. Must state the final decision
SCENARIOS:
1. DIRECT DENIAL
REMEDIES:
1. FDAA BY ARep
1. File Administrative appeal to CIR within 30 days from receipt of FDAA
- Administrative appeal SHALL TOLL the 30 day period to appeal to CTA
2. Appeal to CTA within 30 days
- No request for reinvestigation shall be allowed
2. FDAA BY CIR
1. MR with CIR
- MR will not toll the 30 day period to appeal
2. Appeal to CTA within 30 days
FDAA BY AUTHORIZED REP FDAA BY CIR
Will TOLL the period to appeal wil NOT TOLL
TENOR OF FINALITY RULE - If tenor of the letter shows the firm stand of the BIR against
reconsideration of the disputed assessment, the letter should be considered the final decision of
BIR
- Where CIR not only demanded payment but gave warning that in the event that the
taxpayer failed to pay the same, he would be constrained to enforce the collection
EXAMPLE:
1. Final notice before seizure
- VOID FDDA on assessment - ASSESSMENT REMAINS VALID. Assessment differs from a decision of
disputed assessment
SCENARIO 2: INDIRECT DENIAL OF PROTEST (WITHOUT FDDA)

- Duly authorized representatives executed ADMINISTRATIVE ACTIONS
EXAMPLE:
1. Civil collection
2. Issuance of warrant of distraint
3. Referral by CIR of request for reinvestigation to Solgen
SCENARIO 3: INACTION BY CIR OR AREP

Remedies:
1. Inaction by CIR
1. Appeal to CTA within 30 days from the expiration of 180 day period

2. Await the final decision of CIR on the disputed assessment and then appeal such final
decision to CTA within 30 days after the receipt of copy of such decision.
2. Inaction by Arep
1. Appeal to CTA within 30 days after the expiration of 180 day period counted from the date of
filing for request of reconsideration or from the date of submission by taxpayer of required
documents in reinvestigation
2. Await for final decision
- OPTIONS ARE MUTUALLY EXCLUSIVE
Failure to appeal the inaction - WILL NOT RESULT IN THE FINALITY
TAX PAYER’S JUDICIAL REMEDIES

1. Appeal to CTA
2. Action for Damages
3. Certiorari
4. Action to contest forfeiture of chattel
TAXPAYER’S REMEDY BEFORE PAYMENT

1. COMPROMISE - Contract whereby the parties by making reciprocal concessions avoid
litigation or put an end to one already commenced.
APPROVING AUTHORITIES IN COMPROMISE

1. CIR
2. National evaluation board
3. Regional Evaluation board
GROUNDS
1. Doubtful validity
2. Financial incapacity
- A minimum rate for 40% of the basic tax assessed or lower amount subject to approval
CASES THAT MAY BE COMPROMISED

1. Delinquent accounts
2. Cases under administrative protest after DAN
3. Civil tax cases
4. Collection cases
5. Criminal violations EXCEPT CRIMINAL TAX FRAUD
- A COMPROMISE CAN NEVER BE ENTERED AFTER FINAL JUDGMENT BECAUSE GOVERNMENT HAS
ALREADY ACQUIRED VESTED RIGHTS

NOT SUBJECT TO COMPROMISE
1. Withholding tax except doubtful provisions
2. Criminal tax fraud
3. Final and executory
4. Estate tax
- Payment of full amount is required

- Waiver in writing of privilege of secrecy of bank deposits is required if based on Financial
incapacity
ABATEMENT - Cancellation of entire tax liability

- Only CIR has power
GR: Only surcharge and compromise penalties

EXC: Interest as well as basic tax assessed provided that it shall be coursed through certain
officials
GROUNDS:
1. Unjustly or excessively assessed
2. Collection costs involved do not justify the collection of amount due
COMPROMISE ABATEMENT
Reduction of taxpayer’s liability Cancellation of entire tax liability
CEB,NEP,REB may allow CIR ONLY
TAX REFUND TAX CREDIT
Actual reimbursement of the tax Amount of tax due to a tax payer resulting from
overpayment of a tax liability or erroneous
payment
- BIR Issues Tax credit certificate
- All TCC shall not be allowed to be transferred or assigned to any person
GROUNDS FOR FILING TAX REFUND OR CREDIT

1. Erroneously assessed
2. Penalty collected without authority
3. Sum collected is excessive
REQUISITES OF TR/TC
1. Legal ground
2. Written claim
EXCEPTIONS:

1. Return filed showing overpayment shall be considered as written claim
2. If on the face of return it has been erroneously paid
3. Categorical demand
4. Claim with the CIR and 30 day period to appeal to CTA shall be filed within 2 years from the
date of payment of penalty or tax
- Administrative claim must be filed within 2 years regardless of any supervening cause
TWO YEAR PRESCRIPTIVE PERIOD

GR: From the payment of tax
EXCEPTIONS
1. Overpaid quarterly income taxes - Date of final adjustment return
2. Final adjustment return was actually filed before the last day perfected by law - actual filing
3. Tax sought to be refunded is illegally or erroneously collected - From date of payment
4. Tax is paid only in installment - From date of last or final installment
5. Merely made deposit - From the conversion of deposit to payment
6. Withheld from source - From date it falls due at the end of taxable year
- THERE MUST BE ACTUAL COLLECTION
PARTIES ENTITLED
GR: Taxpayer who paid the same
TAXPAYERS REMEDIES WHEN NOT ACTED UPON OR DENIED

1. If period of 2 years is about to end, the suit or proceeding must be started in the CTA before
the end of two year period without awaiting for the decision of CIR
2. If denied within 2 year period, has 30 days to appeal to CTA
- Failure to submit documents in support of a taxpayer’s claim for refund at the administrative
level does not prevent CTA from entertaining the appeal. Non submission in administrative
level IS NOT FATAL in the judicial claim.
- Offsetting of taxes is allowed only when the determination of the taxpayer’s liability is
intertwined with the resolution of the claim for tax refund of erroneously or illegally collected
taxes.
GR: No payment of interest by government

EXC:
1. CIR Acted with patent arbitrariness
2. Refunds and credits withheld from the wages of employees
FORFEITURE -If unclaimed or unencashed within 5 years from the date of mailing or delivery or
issue
- Payment under protest is NOT REQUIRED.

- Tax refund cannot be availed to revive the right to contest the validity of an assessment
- A withholding agent has a legal right to file a claim for refund
- A corporation has an option to carryover excess income tax payments in the succeeding
taxable years in lieu of tax credit or refund.
COLLECTION - Actual effort exerted by the government to effect the exaction of what is due
from the taxpayer. Final stage and goal of tax administration
REQUISITES
1. Final, executory and collectible
2. Part of government’s accounts receivable
3. Not written off or cancelled
4. Not prescribed
5. Proper procedure followed
6. Tax payer can still be located
7. Not enjoined from collecting
GR: Prescriptive period 5 years from the date of assessment

EXC:
1. 10 Years from discovery without need of prior assessment- False and fraudulent return with
intent to evade taxes
2. 10 years from discovery - Failure or omission to file a return
3. Waiver in writing
GR: ASSESSMENT PRECEDES COLLECTION

EXC: When the unpaid tax due per return as in case of a self assessed income tax under the pay
as you file system, collection may be instituted without need of assessment.
GR: NO PROCEEDING IN COURT without assessment for collection shall be commenced

EXC:
1. False or fraudulent return
2. Failure to file
- A warrant of distraint and or levy WITHOUT FAN IS VOID

- A Taxpayer who fails to contest the BIR assessment in the CTA cannot contest the same in an
action to collect.
WHEN DEEMED COLLECTED:

1. Collection is through summary remedies when government avails distraint or levy
2. Collection through judicial remedies.
ADMINISTRATIVE REMEDIES
1. Tax Lien - A legal claim or charge on property, real or personal, established by law as security
in default of payment of taxes.
1. Personal property - Arise from the time the tax became due

2. Real property - From the time of registration with ROD.
- Government lien on tax is superior to private litigant.
- Valid against any mortgagee purchaser or judgment creditor only when notice of such lien
shall be filed by the CIR in the office of ROD
2. Distraint - Enforced on the goods, chattels or personal property of whatever kind by taxpayer.
1. Actual - Actual seizure and taking possession of personal property
2. Constructive - Where no actual delinquency of the taxpayer is necessary before the
same is reported to by the government.
Who commences:
1. CIR - More than 1M
2. RDO - 1M or less
ACTUAL DISTRAINT
- Bank accounts may be distrained notwithstanding the Bank secrecy act. BIR simply seizes the
deposit as is sufficient to discharge the obligation.
- It must be sold at public auction. Any residue over and above what is required shall be
RETURNED to the owner.
- There is right of PRE-EMPTION - Payment before the actual sale.
- NO RIGHT OF REDEMPTION
- CIR or his deputies may purchase in behalf of the national government
CONSTRUCTIVE DISTRAINT
1. Retiring from any business subject to tax
2. Intending to leave PH
3. Intending to remove property or conceal it
4. Perform any act tending to obstruct the proceeding
ACTUAL CONSTRUCTIVE
Property of the delinquent taxpayer Made on the property of any taxpayer
Taking of possession Merely prohibited from disposing his property
Effective by service of warrant of distraint Requiring the taxpayer to sign a receipt of the
property or leaving a list of such property
3. Levy - Seizure of real properties and interest

- May be effected after the expiration of time required to pay the obligation, real property may
be levied upon BEFORE, simultaneously or after the distraint of personal property belonging to
the taxpayer.
- IT MAY BE REPEATED UNTIL THE FULL AMOUNT IS COLLECTED.
- Issuance of warrant of levy shall operate with the fore of a legal execution throughout the PH
- There must be advertisement of sale
- The owner also has preemptive right

- REDEMPTION OF PROPERTY - Within 1 year from DATE OF SALE
- Full payment of taxes, penalties and interests with interest on purchase price at 15% per
annum from the date of sale to the date of redemption.
- Owner shall not be deprived of possession of property and still be entitled to rends and other
income until the expiration of time of redemption
FORFEITURE TO THE GOVERNMENT

1. No bidder
2. Highest bidder is for an amount insufficient to pay the taxes
DISTRAINT LEVY
Personal property Real
Effected by seizure of personal property Effected by writing and written notice of the levy
shall be mailed to or served upon the ROD
No need for publication. Only posting There is a need for publication in newspaper
May be purchased by CIR in behalf of May be forfeited in favor of the government

government
No redemption Redemption
- Real property may be sold in levy for less than its market value because it is subject to right of
redemption.
- Forfeited property shall not be destroyed until at least 20 days after seizure.
JUDICIAL REMEDIES
1. CIVIL ACTION - Collection
- BIR can file a civil action for collection PENDING DECISION of administrative protest.
Considered denied.
- No civil or criminal action for recovery shall be filed without the approval of CIR
2. CRIMINAL ACTION - Prescribe after 5 years

COMMENCEMENT:
1. From the day of commission
2. If not known, At the time of discovery and institution of judicial action for investigation.
- In case of falsity or fraud with intent to evade, the right of government is generally
imprescriptible because it is only deemed instituted from discovery and institution of judicial
proceedings
INTERRUPTED WHEN:
1. Instituted
2. Absent from PH

NON FILING OF TAX RETURN
REQUISITES
1. Required to file
2. Failed to make or file at the time required
3. Willful
FAILURE TO SUPPLY CORRECT INFORMATION

REQUISITES
1. Required to make a return
2. Failed to supply correct and accurate information
3. Willful
- Assessment is not necessary before filing of criminal action and criminal action may be filed
during the pendency of an administrative protest in BIR
- Acquittal in criminal action does not necessarily result to exoneration of civil liability to pay
taxes
- Payment of tax due after apprehension shall not constitute a valid defense in any prosecution
for violation of the code
- Subsequent satisfaction of civil liability or prescription does not extinguish criminal liability
- In case of insolvency, no subsidiary imprisonment
- Filing of criminal action is not an implied assessment by CIR
- No reservation to file civil action
- Assessment is still necessary even when found guilty of criminal offense.
TAX ADMINISTRATION - Manner or procedure of assessing and collecting tax liabilities.
POWERS OF BIR
1. Assess and collect NIR taxes
2. Enforce all forfeitures, penalties and fines
3. Execute judgment in all cases decided in its favor by the CTA
4. Effect and administer the supervisory and police powers
GR: No estoppel against the government

- The state is not estopped from collecting taxes by the mistake and errors of its agents
- Estoppel rule is not absolute. When the tax payer only raises the defense of prescription only
on appeal and the state does not question the timeliness of the defense, state can be
bound by the acts of its agents
POWER OF CIR
1. Interpret tax laws
2. Decide cases
3. Obtain information to summon and examine
4. Make assessments and prescribe additional requirements

5. Make arrests and seizures
6. Delegate
7. Assign internal revenue officers
8. Suspend business operations
- Secretary of Finance may review the rulings of CIR motu proprio
THIRD PARTY INFORMATION RULE - May gather information to other persons. BIR can assess the
records of the taxpayer’s customers or suppliers to confirm the accuracy if the declared sales or
purchases in the tax returns.
- The power to require production of books is subject only to the rule prescribing a period to
preserve books and other records. Beyond it, cannot be subject to subpoena.
AUTHORITY TO TERMINATE TAXABLE PERIOD

1. Retiring from business subject to tax
2. Intending to leave PH
3. Intending to remove his properties or hide
4. Performing an act tending to obstruct the proceedings for collection
- Tax shall be due and demandable immediately
GR: Cir cannot inquire to the bank deposits of Taxpayer

EXC:
1. To determine gross estate
2. Compromise of tax liability
3. Request for the supply of tax information from foreign tax authority
- CIR have the authority to make arrests and seizures for the violation of penal law and rules.
- This does not require any previous warrant but it must cover only violations committed within
the view of internal revenue officers.
POWERS THAT CANNOT BE DELEGATED BY CIR

1. Power to recommend the promulgation of rules to SOF
2. Power to issue ruling of first impressions or reverse, revoke or modify
3. Power to compromise or abate.
POWER TO SUSPEND BUSINESS OPERATIONS

1. Failure to issue receipts or invoices
2. Failure to file a vat return
3. Understatement of taxable sales or receipts by 30% or more than the correct taxable sales.
- CIR has no power to prescribe penalties because it is SOF who issues rules and regulations
COMPLIANCE REQUIREMENTS

- The keeping of books in any language other than Filipino, English and spanish is prohibited.
- All taxpayers are required to preserved their books of accounts including subsidiary books for
a period of 10 yeas from the day following the deadline in filing a return or if filed after the
deadline, on the date filed.
- If the taxpayer has any pending protest or claim, he is required to preserve his books until the
case has rested.
GR: The books of accounts shall be subject to examination and inspection only once every
taxable year
EXC:
1. Fraud, irregularity, mistake
2. Requests reinvestigation
3. Verification of compliance with withholding tax
4. Verification of capital gains tax
5. Cir’s power to obtain information to people
- All corporations, partnerships that retire shall submit their books to the CIR within 10 days
- Before a taxpayer transfers his place of business, he must secure tax clearance
ADMINISTRATIVE ISSUANCES
1. Revenue regulations - Issued by SOF
REQUISITES
1. Necessary to proper enforcement
2. Not contrary to law
3. Published in official gazette
2. BIR RULINGS - By CIR

- can be repealed, modified or amended by subsequent ruling by same or other CIR
- A tax payer has 30 days to seek review by the SOF
NON RETROACTIVITY OF RULINGS

- Any modification or reversal of any rules and regulations PROMULGATED BY CIR shall not be
given retroactive effect if prejudicial to the tax payer.
- EXCEPT:
- 1. Where the tax payer deliberately misstates or omits material facts from his return or in any
document
- 2. Where the facts subsequently gathered by BIR are materially different from the facts of
the ruling
- 3. Bad faith
- 4. Beneficial to tax payer
- This does not apply when the ruling is NULL AND VOID for being contrary to law
CIVIL PENALTIES - Surcharge and interests in addition to all taxes, fees and charges imposed by
NIRC

Not penal in nature but compensatory for the use of funds by taxpayer beyond the date of
supposed payment
SURCHARGE - Added to the main tax is subject to interest
PRIMA FACIE EVIDENCE OF FALSE OR FRAUDULENT RETURN - Failure to report in an amount

exceeding 30% of declared per return.
DEFICIENCY AND DELINQUENCY INTEREST may be imposed simultaneously
GR: Payment of surcharge is mandatory and CIR is not vested with authority to waive
EXC:
1. Good faith and honest belief that one is not subject to tax
2. Imposition of tax statute was controversial
TAX EVASION
ELEMENTS
1. End to be achieved
2. Accompanying state of mind which is evil, in bad faith, willful or deliberate not accidental
3. Unlawful course of action or failure of action
- Crime is deemed complete when the violator knowingly or willfully files a fraudulent return with
intent to evade or defeat tax
- CIR may not collect compromise penalty through an action in court or by distraint or levy. The
remedy is to file a criminal action against the taxpayer.
INFORMERS REWARD
- Any qualified person who voluntarily provides definite and sworn information NOT YET IN THE
POSSESSION of BIR nor public knowledge, leading the discovery of fraud upon the internal
revenue laws resulting to the recovery of revenues.
REQUISITES:
1. Not disqualified.
NOT QUALIFIED:
1. BIR official or employee
2. Relative within 6 degrees of BIR
3. Already retired
- Reward is conditioned upon the payment and collection of unpaid deficiency

- Reward is subject to income tax
COURT OF TAX APPEALS

- CTA shall not be governed by the technical rules of evidence
- CTA is bound by the rules on DOCUMENTARY EVIDENCE

JURISDICTION OF CTA
- It has no jurisdiction to determine the validity of a ruling issued by CIR or COC in the exercise of
QUASI LEGISLATIVE POWERS to interpret Tax laws.
- Excludes the power to tule on the constitutionality or validity of law, rule or regulation.
- CTA is vested with jurisdiction to issue writs of certiorari in cases falling within its exclusive
jurisdiction.
- The grant of appellate jurisdiction with CTA in cases decided by RTC comes with the power
to issue writs of certiorari when necessary to the exercise of appellate jurisdiction
JURISDICTION OVER CIVIL CASES

1. EXCLUSIVE ORIGINAL JURISDICTION OF CTA DIVISION - Involving Final and executory
assessment for taxes fees, where the principal amount of taxes EXCLUSIVE OF PENALTIES AND
CHARGES claimed is 1M OR MORE.
- If less than 1M - MTC, RTC depending on respective jurisdiction. CTA HAS APPELLATE
JURISDICTION
2. EXCLUSIVE APPELLATE JURISDICTION OF CTA DIVISION

A. Decisions or inaction of CIR
B. Decisions of Commissioner of Customs
C. Decisions of the SOF on customs cases for AUTOMATIC REVIEW from decisions of COC
which are adverse to the Government
D. Devisions of the Secretary of Trade and industry
E. Decisions, resolutions of RTC in Local Tax Cases decided or resolved by them in
exercise of Original Jurisdiction
F. Appeals from the Judgment, Resolutions or Orders of the RTC in tax collection cases
originally decided by them where the principal amount is LESS THAN 1M
3. EXCLUSIVE APPELLATE JURISDICTION OF CTA EN BANC

A. Decisions on Motions for Reconsideration or Noted! of Court in Division in the exercise
of Exclusive Appellate jurisdiction.
B. Decisions on MR or New Trial of the court in Division in the exercise of its Exclusive
original jurisdiction over tax collection cases where claim is 1M OR MORE.
- Petition for review must be preceded by timely MR
C. Decisions of RTC decided in the exercise of their appellate jurisdiction over
1. Local tax cases
2. Tax Collection cases
- RPT tax cases decided by RTC are not under CTA. The jurisdiction of CTA involves
only those RPT cases ORIGINALLY DECIDED by CBAA in the exercise if its appellate jurisdiction.
D. Decisions of CBAA in the exercise of Appellate jurisdiction.
JURISDICTION OF CTA OVER CRIMINAL CASES

1. EXCLUSIVE ORIGINAL JURISDICTION OF CTA DIVISION
- Violations of NIRC or CMTA and other laws administered by BIR where the principal amount of
Taxes is 1M OR MORE.

Regular courts if:
1. Less than 1M
2. No specified amount
- In these cases, CTA is in the appellate
2. EXCLUSIVE APPELLATE JURISDICTION OVER CTA DIVISION

A. Appeals from judgment of RTC in original Jurisdiction in Criminal cases (Less than 1m)
B. Criminal offenses over petitions for review in exercise of appellate jurisdiction
3. EXCLUSIVE APPELLATE JURISDICTION OVER CTA EN BANC

A. Decisions on MR in exercise of its exclusive original jurisdiction
B. Decisions on MR in exercise of exclusive appellate jurisdiction
APPEALS
- Only final decisions
- Not interlocutory orders
- PAN not appeasable
- Commissioner did not rule on taxpayer’s motion for Recon, It was only when taxpayer
received the summons on civil action for the collection of deficiency that the period to
appeal commence to run.
CTA HAS JURISDICTION EVEN IF THERE IS NO DECISION

1. Not acted in refund case
2. Two year prescriptive period is about to expire.
3. Cir has not acted upon a protested assessment within 180 days from submission of all relevant
documents.
- Authority to make tax assessments may be delegated to Authorized rep, same force
and effect. May be appealable.
GR: New issues cannot be raised for the first time on appeal
EXC:
1. Prescription
2. Error of administrative officials
- The government cannot raise the issue of incapacity for the first time on appeal.
- Withdrawal of an appeal rendered the assailed decision final and executory
- Findings of fact of CTA is not reviewable in the absence of any clear and convincing proof to
the contrary
PRINCIPLE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES

- Applied to CTA
- Must be exhausted first before the court’s power of judicial review can be sought.

- No injunction rule applies to courts BUT NOT IN CTA
- CTA MAY ISSUE INJUNCTION
APPEAL IN CIVIL CASES

1. APPEAL TO CTA DIVISION
1. CIR
2. COC
3. SOF
4. STI
5. SOA
6. RTC
2. APPEAL TO CTA EN BANC

- After MR
CBAA
RTC in exercise of Appellate jurisdiction
PERIOD - within 30 days after the receipt of decision or after expiration of period fixed by law
- In case of disputed assessments, the inaction of CIR within 180 day period shall be deemed a
denial for purposes of allowing the taxpayer to appeal to court and does not necessarily
constitute a formal decision.
- The taxpayer may await for such decision even beyond 180 days.
- MR of denial of administrative protest does not toll the 30 day period to appeal to CTA.
- The 30 day period is reckoned from the date taxpayer is notified of denial
- 30 day period is mandatory and jurisdictional
MR OR NEW TRIAL IS A CONDITION PRECEDENT FOR APPEAL

mode of appeal is RULE 43
- Appeal shall not suspend the payment, levy, distraint or sale: LIFEBLOOD
- Injunction shall not be available
REQUISITES FOR SUSPENSION OF COLLECTION OF TAX

1. Deposit of amount not more than double the amount
2. Collection may jeopardize the interest of the government or taxpayer
3. Verified
4. There is an Appeal to the CTA from a decision of CIR
5. Appeal is not frivolous or dilatory
APPEAL IN CRIMINAL CASES

1. Decided by RTC - Notice of appeal within 15 days to CTA DIVISION
2. Decided by Division - Petition for review under Rule 43 within 15 days to En banc
3. Decided by RTC in exercise of appellate jurisdiction - Petition for review to En banc
- Institution of criminal action shall interrupt the running of prescriptive period
APPEAL TO SC: From En Banc. MR or New trial in en banc is deemed abandoned

GROUNDS
1. FAME
2. Newly discovered evidence
- MR IS A REQUISITE FOR PETITION FOR REVIEW OF A DECISION IN CTA DIVISION

- Filing of MR or new trial shall suspend the running of the period to appeal.
- Omnibus motion rule applies.
- No 2nd MR or New trial
REAL PROPERTY TAX

- Direct taxes imposed on the privilege to use real property
- Indivisible
- Ad valorem
- Local tax
- Imposed on the ACTUAL USE not ownership
- Appraisal, Assessment and collection cannot be let to any private person.
- Appraised at its current and Fair market value
REAL PROPERTY CLASSIFICATION

1. Realty by Destination - Essential to the business
REQUISITES:
1. Actually, directly and exclusively used to meet the needs of particular industry
2. Necessary and indispensable to the business.
- Power barges are real property
2. Incorporation - Permanently attached.
3. Analogy
- If necessary to the business, even when not placed by the owner of the tenement or was
merely placed by the lessee, It is still REAL PROPERTY and subject to RPT
- LGU may fix real estate tax rates.

- NO PUBLIC HEARING SHALL BE REQUIRED for levying BASIC REAL PROPERTY TAX

PROCEDURE
- All persons, natural, juridical owning or administering RP including improvements are required
to prepare and file ONCE EVERY 3 YEARS
- For newly acquired property or improvement, It must be filed within 60 days after acquisition or
completion or occupancy which ever comes earlier.
- Tax declaration does not prove ownership. But it may be a good indicia of possession.
- A tax declaration in the name of a person who has no successional rights to decedent’s
estate is NULL AND VOID because real property tax shall be assessed in the name of the
person OWNING OR ADMINISTERING.
DECLARED FOR THE FIRST TIME - Shall be assessed FOR BACK TAXES for not more than 10 years
prior to the date of initial assessment
- Based on values in force during corresponding period
- Any person who transfers real property ownership to another is required to notify the assessor
concerned within 60 days from the date of transfer.
- Each buyer of real property must make a new declaration thereof.
- When a person refuses or fails, provincial, municipal or city may declare. No oath is required.
- All RP whether taxable or exempt shall be appraised at its current market value
APPRAISAL - Act or process of determining value of property as of a specific date for a specific
purpose.
DETERMINATION OF FMV -
1. Machinery - Acquisition cost
ASSESSMENT - Act or process of determining the value of a property or proportion thereof subject
to tax including the discovery, listing, classification and appraisal of properties.
- RP shall be classified, valued and ASSESSED based on ACTUAL USE regardless of owner.
ACTUAL USE - Purpose for which the property is PRINCIPALLY OR PREDOMINANTLY UTILIZED by
person in possession thereof.
EXC: MIXED - Predominance rule applies.
- Imposition cannot be passed to the subsequent user. It will be unjust.
ASSESSMENT LEVEL - Percentage applied to the fair market value to determine the assessed
value.
ASSESSED VALUE = FMV X AL
CLASSES OF RP FOR ASSESSMENT

1. Residential
2. Agricultural
3. Commercial
4. Industrial
5. Mineral
6. Timberland
7. Special
- City or municipality through their respective sanggunian shall have the power to classify lands
with their zoning ordinances
- For Condominiums, Each condo owners shall be separately assessed for purposes of RPT.
REVERSION OR RP
- Every after 3 years.
- Assessment of RP shall not be increased oftener than once every 3 years
- EXC: Improvements substantially increasing the value and actual use.
GR: All assessments shall take effect on Jan 1 on the succeeding year
EXC: Beginning the next quarter if
1. Partial or total destruction
2. Major change
3. Great and sudden inflation
4. Gross illegality
ACCRUAL - Jan 1 of every year and such will constitute as a lien.

COLLECTING OFFICER - City, Municipal treasurer but may deputize barangay treasurer.
- Interest of 2% each month if late payment

- Prompt payment discount of not more than 10%
- Payment shall be first applied to prior year’s delinquency
- RPT is chargeable against the person who has actual and beneficial use and possession of
regardless of ownership.
PRESCRIPTION OF COLLECTION
1. 5 YEARS FROM DUE - Basic RPT
2. 10 YEARS FROM DISCOVERY OF FRAUD OR INTENT TO EVADE
FAIR MARKET VALUE - Price at which a property may be sold by a seller who is not compelled to
sell and bought by the buyer who is not compelled to buy.
SPECIAL LEVIES - Additional to RPT

1. SPECIAL EDUCATION FUND - 1% of Assessed value
2. AD VALOREM TAX ON IDLE LANDS - Not exceeding 5% AV of property

1. Agricultural land - More than 1 hectare and more than 1/2 remain uncultivated or
unimproved by the owner
2. Non Agricultural - More than 1000SQM and More than 1/2 remain unutilized
3. Residential lots in subdivision - Duly approved by authorities regardless of area.
NOT IDLE LAND IF:

1. Agricultural lands planted to permanent or perennial crops with at least 50 trees to a hectare
2. Used for Grazing purposes.
EXEMPT FROM ADDITIONAL TAX

1. Force majeure
2. Civil disturbance
3. Natural calamity
4. Any cause which physically or legally prevents
3. SPECIAL ASSESSMENTS OR SPECIAL LEVY

Does not apply to:
1. Exempt from RPT
2. Remainder of land portions donated to LGU
TAX EXEMPTIONS, CONDONATIONS, REDUCTIONS

1. RP Owned by RP or any of political subdivision
EXC: Beneficial use has been granted FOR CONSIDERATIOn or otherwise to Taxable person
- GOCC is not exempt.

- Gov instrumentalities which has corporate powers or government corporate entities are
exempt.
1. BSP
2. PRRI
3. Laguna lake dev
4. Fisheries dev
5. Philippine ports authority
6. PNR
- An installment purchasers of land within housing project of GSIS is LIABLE TO PAY RPT from the
time possession is transferred to him although pending full payment of the purchase price.
- A fishing port which is devoted for public use is exempt from RPT
2. CHARITABLE INSTITUTIONS, CHURCHES, PARSONAGES OR CONVENTS APPURTENANT THERETO,

MOSQUES, NON PROFIT OR RELIGIOUS CEMETERIES AND ALL LANDS, BUILDINGS AND
IMPROVEMENTS ACTUALLY, DIRECTLY AND EXCLUSIVELY USED FOR RELIGIOUS, CHARITABLE OR
EDUCATIONAL PURPOSES.
- Machineries and equipment are exempted for non stock non profit educational institution

- If real property is used for one or more commercial purposes, it is not exclusively used for the
exempted purposes but is subject to taxation
- It is the ACTUAL USE OF THE PROPERTY that is determinative whether or not it is exempted from
RPT
- It extends to FACILITIES WHICH ARE INCIDENTAL AND REASONABLY NECESSARY for the
accomplishment of such purpose. Like School for training nurses, nurses’ home, housing
facilities for interns and other hospital staff, or farm used by inmates of institution.
- When portions of hospital and portions of the land are LEASED TO PRIVATE ENTITIES, those
portions are no longer except from real property taxes as the actual use of the property is no
longer for charitable purposes.
EXEMPTION OF NON STOCK NON PROFIT EDUCATIONAL INSTITUTION:

ALL REVENUES AND ASSETS of non stock non profit educational institutions used actually, directly
and exclusively for educational purposes shall be exempt from taxes and duties.
- Exempts from income tax, real property tax, donor’s tax and customs duties
- Revenues and assets must be ADE for educational purposes.
- TEST: Use of both revenue and assets
- When revenues are ADE used for NSTP educational institution shall be exempt from income
tax, vat and local business tax
- When assets are ADE used for educational purposes, the NSTP educational institution shall
be exempt from real property tax.
- If a university leases a portion of a school building to a bookstore or canteen, the leased
portion is NO LONGER USED FOR EDUCATIONAL PURPOSES and thus subject to real property
tax.
- Income from cafeterias, canteen and bookstore are also except if they are owned and
operated by the educational institution and are located within the premises
3. ALL MACHINERIES AND EQUIPMENT THAT ARE ACTUALLY, DIRECTLY AND EXCLUSIVELY USED BY
LOCAL WATER UTILITIES AND ELECTRIC GENERATION AND TRANSMISSION.
- Machineries and Equipment only
4. RP OWNED BY DULY REGISTERED COOPERATIVES.
5. MACHINERY AND EQUIPMENT USED FOR POLLUTION CONTROL AND ENVIRONMENT PROTECTION
DISTRIBUTION OF PROCEEDS
1. PROVINCES
1. 35% Province
2. 40% Municipality
3. 25% Barangay
2. CITIES
1. 70% City
2. 30% Barangay
1. 50% located
2. 50% all component barangays

3. MUNICIPALITIES WITHIN METRO MANILA
1. 35% Metro Manila
2. 35% Located
3. 30% Barangay
1. 50 - 50 also
REMEDIES OF LGU
1. Lien
2. Administrative Action
1. Levy on the property
2. Distraint
3. Judicial action
- No hierarchy. Same as national taxes remedies

- Forfeiture hall be in favor of the local government done by local treasurer.
REDEMPTION PERIOD
- 1 year from the Date of sale
- EXCEPTION: DATE OF REGISTRATION OR ANNOTATION if it was stated in the ordinance.
- Absence of requisite notice is tantamount to a violation of substantial right to due process

- CIVIL ACTION IS INSTITUTED IN THE REGULAR COURTS SINCE CTA HAS NO JURISDICTION OVER
RPT.
REMEDIES OF TAX PAYER

1. PROTEST AGAINST NEWLY ENACTED ORDINANCE
2. ADMINISTRATIVE ACTION
1. REMEDY AGAINST ASSESSMENT
2. ADMINISTRATIVE PROTEST
3. CLAIM FOR REFUND
3. JUDICIAL ACTION
REMEDY AGAINST ASSESSMENT

- Question the ACT of the assessor.
- May appeal to LBAA (Within 60 days from the date of receipt of written notice of
assessment)
- LBAA has 120 days to decide.
- May appeal to CBAA (Within 30 days after receipt)
- Appeal to CTA En banc (Appeal by Petition for review (R43) within 30 days)
- No MR of the adverse division of Local assessor or treasurer

PROTEST

- When the protest contemplated is the REASONABLENESS of amount assessed
- Payment first. PAYMENT UNDER PROTEST
- Within 30 days from the payment to LOCAL TREASURER CONCERNED. (60days to decide)
- Appeal to LBAA (within 60 days from receipt or expiration of 60 days)
- Appeal to CBAA
- Appeal to CTA En banc
CLAIM FOR REFUND - Tax levied is illegal or erroneous with the city treasurer within 2 years from
the date the taxpayer is entitled to reduction or adjustment
- 60 days to decide
- APPEAL TO LBAA (within 60 days upon expiration or denial)
- APPEAL TO CBAA
- APPEAL TO CTA EN BANC
-Action assailing the validity of public auction - deposit the amount
LOCAL GOVERNMENT TAXATION

- Power of the LGU to impose and collect taxes on its constituents in order to raise revenues to
enable them to perform the functions which they have been organized
- Such taxes shall acre to them exclusively
- Congress cannot abolish the power. But it may provide guidelines and limitations
NATURE
1. Not inherent but a direct grant
2. Limited
3. Legislative in nature - Exercised only by sanggunian
4. Territorial
LOCAL TAXATION
FUNDAMENTAL PRINCIPLES
1. Public purpose
2. Inure solely to the benefit of and subject to disposition by the LGU levying the tax
3. Equitable
4. Not contrary to public policy, national economic policy or restraint of trade
5. Uniform in each LGU
6. Collection and other imposition shall not be let to any private person.
7. Not Unjust, excessive or oppressive or confiscatory
ELEVATOR TAX BY MAYOR - Not allowed. Sanggunian
LOCAL SANGGUNIAN’S AUTHORITY TO IMPOSE TAXES:

1. To generate revenue

2. Prescribe penalties for violation of tax ordinance
3. Granting local tax exemptions
4. Condoning tax deficiencies
PROCEDURE FOR EFFECTIVITY OF ORDINANCE

1. Filing of proposal
2. Publication and posting
3. Notification to interested or affected parties
4. Mandatory public hearing (Only sanggunians are required. Congress, no need)
5. Reading the proposal
6. Approval of ordinances
- Shall be presented to LCE who may approve or veto.
- Veto shall be communicated within 15 days for prov/10days for city or municipality
otherwise deemed approved
- LCE may veto only once
- Sanggunian may override the veto by 2/3 of all its members
7. Review of the approved ordinance by higher sanggunian

1. Panlalawigan - Transmitted Within 3 days after approval. If no action within 30 days after
submission of ordinance, PRESUMED VALID
2. Panlungsod/Bayan - Transmitted 10 days after enactment. If no action within 30 days
from receipt, DEEMED APPROVED.
8. Publication of Tax ordinances and revenue measures

9. Effectivity
REQUISITES FOR IMPOSITION OF FEE OR TAX

1. Within the rage of rate
2. Uniform
3. Fair and reasonable
RESIDUAL TAXING POWER - Fees, taxes beside those specifically enumerated in LGC
REQUISITES FOR IMPOSITION OF RESIDUAL POWER

1. Not against any fundamental principles of local taxation
2. Not prohibited under common limitations
3. Not one of the taxes denied by LGC to LGU
4. Not unjust, excessive, oppressive, confiscatory or contrary to national policy
5. THERE MUST BE PUBLIC HEARING for that purpose
PRINCIPLE OF PRE-EMPTION OR EXCLUSIONARY DOCTRINE - Where the national government

elects to tax a particular area, it impliedly withholds from the LGU the delegated power to tax
the same field.
- IF LGU to LGU - Not applied.

- Example: Province imposed amusement tax on cockpit arena, NOT ALLOWED. NIRC imposes
it.
COMMON LIMITATIONS ON LOCAL TAXING POWER (Cannot levy on the following)

1. Customs duties, registration fees of vessels and wharfage, tonnage dues and all other kinds
of customs and fees
EXCEPTION:
1. Wharfage on wharves constructed and maintained by the LGU
2. Issuance of licenses for the operation of fishing vessels of 3 tons or less by municipalities
and cities
WHARFAGE - Fee assessed against the cargo of the vessel based on quantity, weight or measure
2. Taxes, fees or charges on countryside and barangay business enterprise and cooperative
3. TFC upon goods

1. Carried into
2. Out of
3. Passing through the territorial jurisdiction of LGU in guise of charges for wharfage, tolls for
bridges or otherwise.
- It is irrelevant of it is for police surveillance on the goods, because any other form of imposition
on goods passing through is prohibited.
4. Taxes on the gross receipt of transportation contractors, persons engaged in transportation,

common carriers.
EXCEPT: TRICYLE
5. DST
6. Estate tax, inheritance, gift
7. Excise taxes on articles enumerated under NIRC on petroleum products.
1. Excise taxes on articles enumerated
2. Taxes, Fees or charges on petroleum products - Includes all kinds of taxes. LGU are
prohibited from imposing not only excise tax on petroleum but ALL TAXES, FEES AND
CHARGES
8. Percentage or VAT
9. Charges on Ph products actually exported.
EXCEPT: Municipalities may imposes taxes on exporters of essential commodities.
10. Taxes on business enterprises certified by BOI for a period of 6 and 4 years.
11. TFC for registration of motor vehicles and issuance of all kinds of licenses for driving
12. Taxes on premiums paid by way of reinsurance or retrocession
13. TFC on agricultural and aquatic products when sold by Marginal farmers or fishermen
14. Income tax
EXCEPT: Bank and other financial institutions
15. Any kind on National government, its agencies and instrumentalities.
SPECIFIC POWERS TO IMPOSE TAX

TAXES THAT MAY BE IMPOSED BY PROVINCES:
1. Transfer of real property ownership
EXCEPT: Covered by CARP
- Real property for the use of ambassador for residence - EXEMPT.
2. Business of printing and publication

EXCEPT: Printing of CHED/TESDA/DEPED Prescribed texts
- The press is not exempt from the taxing power of the state and that what the
constitutional guarantee of free press prohibits are laws which single out or target a
group belonging to the press for a special treatment or which in any way discriminate
against the press on the basis of the content of publication
3. Franchise Tax
REQUIREMENTS BEFORE A TAX PAYER BE LIABLE FOR FRANCHISE TAX:
1. It has a franchise in a secondary or special franchise
2. Exercising its rights or privileges under this franchise within the territory of LGU
- Business tax imposed on the privilege of engaging in the business and franchise tax is
imposed for exercise of enjoying franchise. No double taxation.
4. Tax on sand, gravel and other quarry resources

- FROM PUBLIC LAND
- In absence of a tax ordinance levying a fee on quarry resources extracted from
private lands, there will be no basis for the collection. Province has NO POWER to
impose tax on quarry resources extracted from private lands.
5. Professional tax
EXCEPT: Exclusively employed in the government
- In province where he practices his profession or where principal office is located.
- May exercise on any part of PH
- Imposed only to those who have passed the BAR or BOARDS
- CPA Lawyer, Pay as CPA and as a Lawyer.
6. Amusement tax
- Ownership, lease or operation of theaters, cinemas, concert halls and other places of
amusement.
EXCEPTION: Operas, concerts, dramas, recitals, paintings and art exhibitions,
flower shows, musical programs, literary and oratorical presentation.
EXCEPT: Pop, rock concerts.

NOT SUBJECT TO AMUSEMENT TAX
1. Resorts, swimming pools, bath houses, hotsprings, tourist spots
2. Professional basketball games - Basically for sports and gaming not amusement.
3. Cockpits
4. Cabarets
5. Night day clubs
6. boxing exhibitions
7. Jai alai
8. Racetracks
- ADMISSION TICKETS are not subject to vat because it is already subject to amusement
tax
9. #6 Annual fixed tax for every delivery truck or van of manufacturers or producers,
wholesalers, dealers or retailers in certain products
- They shall be exempt from the tax on peddlers
TAXES THAT MAY BE IMPOSED BY MUNICIPALITIES AND CITIES:

1. TAX ON BUSINESS
1. Manufacturers, assemblers, repackers, processors of any article of commerce of
whatever kind or nature.
2. Wholesalers, distributors, dealers in any article of commerce
3. Exporters and manufacturers, millers, producers, wholesalers, of essential
commodities.
4. Retailers
5. Contractors
- Transportation contractors are not included.
6. Banks and other financial institutions
7. On any business not otherwise specified in the preceding paragraph which
sanggunian may deem proper
2. Fees and charges - Municipalities may impose and collect such reasonable fees and
charges on business and occupation except reserved to the province.
- The municipalities within metro manila may levy taxes at rates which shall not exceed
50% the maximum rates prescribed in LGC
- Condominium corporations are exempted from Local business taxes.

- A license as a commercial bank should include all other activities incidental for its
being a bank
SITUS OF BUSINESS TAX

- The recording of the sales of goods and services subject to local business taxes shall
be made in the BRANCH OR SALES OUTLET making the sale or transaction and the tax
thereon shall accrue and shall be paid to the MUNICIPALITY OR CITY where such
branch or sales outlet is located.
- In case where there is no such branch or sales outlet in the city or municipality
where the sale is made, The sale shall be duly recorded in the PRINCIPAL OFFICE
and taxes due shall accrue and shall be paid in such city or municipality
- When Manufacturers, assemblers, contractors, producers and exporters with
factories, project officers, plants, plantation in pursuit of business:
- 30% OF ALL SALES RECORDED IN PRINCIPAL OFFICE - Shall be taxable by city or
municipality where the principal office is located.
- 70% OF ALL SALES RECORDED IN THE PRINCIPAL OFFICE - Shall be taxable by city
or municipality where the factory, project office or plant is located.
- PLANTATION LOCATED AT A PLACE DIFFERENT FROM FACTORY: 70% is
divided to:
- 60% - City or municipality where the factory is located
- 40% - Where the plantation is located.
- Where MAPEC has two or more factories, project offices, plants or
plantation located in DIFFERENT LOCALITIES
- It shall be prorated among the localities where the factories,
project offices, plants and plantations are located respective to their volume of
production. It shall be applied irrespective whether the sales are made in locality where
the factory, project, plant is located .
CIRCUMSTANCE SITUS
With branch or sales office Where located
No branch, sales office or warehouse Principal office
There is factory, project office, plant or - 30% OF ALL SALES RECORDED IN

plantation PRINCIPAL OFFICE - Shall be taxable by
city or municipality where the principal
office is located.
- 70% OF ALL SALES RECORDED IN THE
PRINCIPAL OFFICE - Shall be taxable by
city or municipality where the factory,
project office or plant is located.
- PLANTATION LOCATED AT A
PLACE DIFFERENT FROM
FACTORY: 70% is divided to:
60% - City or municipality
where the factory is located
- 40% - Where the plantation is
located.

CIRCUMSTANCE SITUS
Sales are made by ROUTE TRUCKS IN Such branch or office

LOCALITIES with branch or sales office or
warehouse
No branch, sales office or warehouse Where the route trucks withdraw their products for
sale
CITIES
- May levy TFC which the province or municipality may impose.
BARANGGAY
1. Stores with gross receipt of 50k or less for cities and 30k or less in municipalities
2. Service fees and charges
3. Barangay clearance
POWER TO PRESCRIBE PENALTIES FOR TAX VIOLATIONS

- Sanggunian is authorized to prescribe fines or other penalties for violations of tax
ordinance but in no case shall be less 1K or more 5K nor imprisonment shall be less
1Month or more 6 months
- Adjustment of tax rates shall not be oftener than once every 5 years.
- Sanggunian may impose surcharges not exceeding 25% of taxes and interest of not
more than 2% per month but in no case shall the same exceeds total of 36 months.
- LGU may grant local business tax exemptions through ordinances.

- Unlike in RPT - It cannot
EXEMPTED FROM LOCAL TAXES

1. Local water districts
2. Cooperatives
3. Non stock non profit hospitals and educational institutions
4. Business enterprises certified by BOI
5. Business entity association or cooperatives
6. Printer and or publisher of books or other reading materials prescribed by DECS as
school texts or references.
- Withdrawal of tax exemptions can only affect those franchises granted prior to the
effectivity of said law..
- IN LIEU OF ALL TAXES - shall only apply to national internal revenue taxes and not to
local taxes.

PRESCRIPTIVE PERIOD FOR ASSESSMENT AND COLLECTION OF LOCAL TAX
ASSESSMENT
- 5 YEARS from date of becoming due
- 10 years - when there is fraud to evade the payment of taxes
COLLECTION - Within 5 years from the date of assessment by administrative or judicial

action
TAX REMEDIES - ALMOST SAME AS REMEDIES

1. Local Government’s Lien
2. ADMINISTRATIVE ACTION
1. Distraint
2. Levy
3. Judicial Action
WHEN PERSONAL PROPERTY CONSIDERED SOLD TO LGU: When property distrained is not
disposed within 120 days
- PRELIMINARY INJUNCTION IS ALLOWED IN LOCAL TAXES. No specific prohibition
JUDICIAL ACTION JURISDICTION

1. MTC
1. ORIGINAL - Principal amount exclusive of charges and penalties DOES NOT
EXCEED 300/400
2. RTC
1. ORIGINAL - Principal amount EXCEEDS 300/400 PROVIDED IT DOES NOT EXCEED
1MILLION
2. APPELLATE - All cases decided by MTC
3. CTA DIVISION
1. ORIGINAL - 1Million or above
2. APPELLATE - Appeals from RTC ORIGINALLY DECIDED
4. CTA EN BANC
1. APPELLATE
1. Decisions over petitions for review of CYA in exercise of appellate
2. Petitions for review of RTC in exercise of Appellate jurisdiction over cases
decided by MTC.

REMEDIES MAY BE PURSUED CONCURRENTLY
TAX REMEDIES OF THE TAX PAYER

1. ADMINISTRATIVE
1. BEFORE ASSESSMENT
1. QUESTION THE CONSTITUTIONALITY OR LEGALITY OF THE TAX ORDINANCE OR
REVENUE MEASURES ON APPEAL
1. Within 30 days from the effectivity to SECRETARY OF JUSTICE
2. Decision of SOJ must be rendered within 60 days from receipt of appeal
3. Taxpayer must file appropriate action with court of competent
jurisdiction (RTC) within 30 DAYS FROM the receipt of SOJ or lapse of 60
day period.
- Taxpayer’s failure to avail of the remedy to SOJ does not necessarily bar recourse to
Appeal with court of competent jurisdiction. They are separate and distinct appeals
- SOJ can only review the constitutionality or legality of the ordinance and if warranted
REVOKE it. He cannot replace it with his own version
- No need for written protest in this case
- Appeal shall not suspend the effectivity of the ordinance
- When disputing an ordinance, appeal to SOJ is MANDATORY
2. AFTER ASSESSMENT
1. PROTEST - Written protest must be filed within 60 days from receipt of
notice of assessment.
PROCEDURE
PROTEST WITHIN 60 DAYS ———> Local treasurer: decision within 60 days ———> appeal
with the court of competent jurisdiction (See jurisdiction above, MTC, RTC, CTA)
- The court cannot consider the city treasurer as entity that exercises original juridiction
2. CLAIM FOR REFUND req

1. Written claim within local treasurer
2. Filed within 2 years from the date of payment of tax, fee or
charge or from the date the taxpayer is entitled to refund
TARIFF AND CUSTOMS LAW
POLICY REFORMS
1. Application of information and communications technology
2. Types of importation
3. Goods declaration for consumption and provisional goods declaration

4. Non intrusive examination of goods
5. Increase in de minimis value from PHP10 to PHP10k
6. Returning OFWs bring in personal effects with value of 150k
7. Increase of tax exemption of balikbayan boxes with the value of 150K up to 3x a
year
8. Conditionally exempts personal and household effects including 1 motor car of DFA
employees, members of PH diplomatic missions including civil or military attaches or
any AFP military personnel
9. Gross negligence is no longer considered as degree of culpability, only NEGLIGENCE
AND FRAUD
10. Administrative remedy of issuance of alert orders
11. Administrative remedy of distraint of personal property and levy
12. Steeper penalties for crimes and offenses
13. New treatment for authorized economic operators.
TARIFF - List or schedule of articles on which a duty is imposed upon the importation into
the country payable to the government.
KINDS
1. Export
2. Import
CUSTOMS DUTIES - Taxes on the importation and exportation of commodities, the tariff or
tax assessed upon the merchandised imported from or exported to a foreign country.
- Unless otherwise provided, goods admitted into the free zone shall not be subject to
duty and tax
FUNCTIONS OF BOC
1. Assessment and collection of revenue
2. Simplification of customs procedure
3. Border control to prevent entry of smuggled goods
4. Facilitation and security of international trade
5. Supervision and control over the entrance and clearance of vessel engaged in
foreign trade
6. Supervision and control over all import and export.
7. Conduct compensation studies
8. Exercise exclusive original jurisdiction over forfeiture cases under CMTA
POWER OF COMMISSIONER
1. Review any action or decision of any customs officer performed

2. Review and divide disputed assessments and other matters related thereto subject
to review by SECRETARY OF FINANCE and exclusive appellate jurisdiction of CMTA
3. Perform all duties necessary
- Any person exercising police authority has the power to seize any vessel, aircraft,
cargo, goods, animal or any other movable when the same is subject to forfeiture
- It shall only be exercised within customs premises and within the limits of the
authority granted by the commissioner.
- BOC shall have exclusive control, direction and management
AUTHORITY TO ENTER PROPERTIES - At any time, to enter, pass through and search any
land, enclosure, warehouse, store, building or structure not principally used as dwelling
house.
- Upon reasonable cause, travelers arriving from foreign countries may be subjected to
search and detention
- The BOC has the power to demand evidence of payments of duties and taxes
openly for sale or kept in storage. In case failure to present within 15 days, it may be
seized.
- VALID SEARCH WARRANT IS NEEDED IN CASE OF DWELLING HOUSE.
JURISDICTION OF BOC
1. All seas within the jurisdiction of PH
1. Territorial waters
2. Contiguous zone
3. EEZ
4. All coasts, ports, airports, harbors, bays, rivers and inland waters
- Exclusive jurisdiction of BOC cannot be interfered with by regular courts even upon
allegation of ownership
- Treatment of Subic bay freeport as a separate customs territory cannot completely
divest the government of its right to intervene in the operations and management of
SBF especially with patent violations of customs and tax laws.
HOT PURSUIT - Bureau shall pursue goods subject to seizure during the transport by land,
water, air and shall exercise jurisdiction as may be necessary for the effective
enforcement of CMTA
GOODS - Articles, wares, merchandise and any other items

- US Dollar included.
KINDS OF GOODS

1. DUTIABLE IMPORTATION - All goods when imported into the PH including goods
previously exported from PH except as otherwise provided by laws
2. PROHIBITED IMPORTATIONS
1. Writing or printed goods in any form inciting treason, rebellion, sedition or threat
to take life or inflict injury upon any person
2. Obscene or immoral articles
3. Goods manufactured in good, silver or other precious metals and do not
indicate the actual fineness of quality
4. Articles used for producing unlawful abortion
5. Adulterated or misbranded food
6. Infringing goods
7. All other goods or parts prohibited by law
3. RESTRICTED IMPORATIONS
1. Gambling devises
2. Firearms or weapons of war EXCEPT when authorized by law
3. Lottery and sweepstakes ticket
4. Opium pipes and parts
5. Any other goods restricted
6. Drugs
4. DE MINIMIS IMPORTATIONS - Do not exceed 10K.
5. CONDITIONALLY FREE AND DUTY EXEMPT

1. Granted to government agencies or GOCC
2. Given to international institutions entitled to exemption by agreement
3. CMTA in favor of returning residents to their personal effects of household effects.
- Not exceeding 150K that may be done 3x in every calendar year
CUSTOMS DUTIES
CLASSIFICATION
1. REGULAR - for purpose of raising revenue
1. AD VALOREM - Based on VALUE
2. SPECIFIC - Based WEIGHT
2. SPECIAL
1. ANTI DUMPING - A trade remedy measure adopted by government to protect a
domestic industry against unfair trade practice of dumping - When foreign
producers sell their products to an importer in the domestic market at prices
lower than in their own national markets or prices below cost of production
CAUSING or is threatening to cause material injury to domestic industry.

2. COUNTERVAILING - Whenever any article of commerce is granted directly or
indirectly by the government in the country of origin any kind or form of specific
SUBSIDY upon the production, manufacture or exportation and importation has
caused or threatens to cause material injury to the domestic industry.
KINDS OF SUBSIDIES
1. Countervailable or actionable OR yellow - Specific subsidies to an enterprise or
industry or designated geographical region
2. Non actionable or green - Applied across the board to all industries. General nature.
3. Prohibited subsidies / Red - Include export subsidies.
1. 3. MARKING - Additional customs duties imposed on foreign articles NOT

MARKED in any official language of the PH in conspicuous place legibly and
permanently.
2. 4. DISCRIMINATORY - Duty imposed upon articles of foreign country which
discriminates against ph commerce
3. 5. SAFEGUARD MEASURES - Trade remedy measures to provide affected

domestic industries relief against imports.
FLEXIBLE CLAUSE - The congress may by law authorize the president to fix within the
specified limits tariff rates, import and export quotas, tonnage and wharfage dues and
other duties or imposts within the framework of NEDA
REQUISITES:
1. In the interest of general welfare
2. Recommendation of NEDA
EXCEPT:: WHEN ADDITIONAL DUTY NOT EXCEEDING 10% ADVALOREM
PREFERENTIAL TARIFF - Imposing lower tariff by regional, bilateral or multilateral

agreements.
TARIFF BARRIER - Imposition of high customs duties which results in making foreign goods
more expensive
IMPORTATION - Refers to act of bringing goods from a foreign territory into PH
BEGINS: Carrying vessel enters the jurisdiction of PH with the intention to unload.
IMPORTATION DEEMED TERMINATED:

1. Dutiable goods - Upon payment
2. Duty free goods - Until legally left the jurisdiction of BOC

PROVISIONAL GOODS DECLARATION - Declarant does not have all the information to
complete goods declaration
REQUISITES
1. Such declaration contains necessary information
2. Undertakes to complete the information within 45 days from the filing of the
declaration
DEGREES OF CULPABILITY
1. Negligence - Deficiency results from an offender’s failure to exercise reasonable
care.
2. Fraud - With imprisonment
RELIEF CONSIGNMENT - Goods and materials donated or leased to government

institutions and accredited private entities for free distribution to or use of victims of
calamities. - EXEMPT
- Payment of duties constitutes as personal debt due from the importer to the
government. It constitutes lien upon the articles imported.
ASSESSMENT DEEMED FINAL - 15 days after the receipt of the notice of assessment by
importer.
SURCHARGE - For failure to pay duties within 15 days from date of final assessment.
- All importers are required to keep relevant importation documents for 3 years from
date of final payment.
CRIMES AND OTHER OFFENSES
SMUGGLING
1. Fraudulently import or export or bring into or outside the PH any good contrary to
law
2. Assist in doing to
3. Receive, conceal, buy, sell or in any manner facilitate the transportation or sale
4. Commit technical smuggling
REQUISITES
1. Fraudulently or knowingly imported contrary to law
2. Received, concealed, bought, sold, or in any manner facilitated the transportation,
concealment or sale of merchandise
3. Shown to have knowledge that merchandise had been illegally imported.

OUTRIGHT SMUGGLING
1. Without complete customs prescribe documents
2. Without being cleared by customs or other agencies
TECHNICAL SMUGGLING - Act of importing goods into the country by means of

fraudulent, falsified or erroneous declaration of goods to its nature, kind, quality to
reduce or avoid payment of prescribed taxes and duties.
TYPES:
1. Misdeclaration - surcharge of 250% of duty and tax due
2. Misclassification - surcharge of 250% of duty and tax due
- No surcharge when discrepancy is less than 10% or declared tariff heading is rejected
in formal customs or relied in tariff ruling
3. Undervaluation - surcharge of 250% of duty and tax due

- No surcharge if discrepancy is less than 10% or declared value is based on official
ruling or decision
IF INTENTIONAL OR FRAUDULENT 1-3 - Surcharge equivalent to 500% regardless of

amount of discrepancy
CONTRABAND - Prohibited importations
- Mere possession of article is enough evidence for conviction

- Payment after apprehension is not a valid defense.
Things subject to confiscation

1. Any article contrary to law
2. Anything that was used for smuggling subject to confiscation like VESSEL, PLANE
- Common carriers that are NOT PRIVATELY CHARTERED cannot be confiscated
TAX REMEDIES
A. ADMINISTRATIVE REMEDIES
A. Compulsory acquisition
B. Reduction of custom duties/Compromise
C. Alert orders
D. Seizure and forfeiture
E. Distraint/Levy
B. JUDICIAL REMEDIES

A. Civil
B. Criminal
Administrative remedies
1. Compulsory acquisition - may motu proprio acquire imported goods under question
for a price equal to their declared customs value plus any duties already paid on
the goods
- Reduction of customs duties is subject to approval of Sec of Finance

- EXCEPT: Forfeiture proceeding: No compromise
Alert orders - Written orders issued by customs officers as authorized by commissioner on

the basis of derogatory information regarding possible non compliance
Seizure - Actual or constructive taking or bring into custody the goods, things or cattle
by virtue of warrant of seizure or detention
FORFEITURE - permanent transfer from importer to government
BOC acquires exclusive jurisdiction over imported goods for purposes of enforcement of
customs laws.
- RTC is devoid of any competence to pass upon the validity or regularity of seizure
and forfeiture proceedings conducted by BOC and to enjoin or otherwise interfere
with these proceedings.
- Even through certiorari, Prohibition or mandamus
FORFEITURE PROCEEDINGS - Administrative and civil and directed to the thing itself.
- Private respondent’s defense that he has no actual knowledge that the vessel was
used illegally is personal to him but cannot absolve the vessel
- Customs compromise does not extinguish criminal liability
REQUISITES OF CUSTOMS FORFEITURE

1. Wrongful making by owner or other person of any declaration or affidavit
2. False declaration
3. Intention to evade payment
- Articles does not have to be imported goods

- Unmanifested cargo is subject to forfeiture whether the act of smuggling is
established or not. It is enough that the cargo was unmanifested and that there was
no clear showing of payment of dues.

GR: COMMON CARRIER IS NOT SUBJECT TO FORFEITURE
EXC: Owner has knowledge of its use in smuggling and was a consenting party
PRESUMPTION OF KNOWLEDGE
1. Used for smuggling before
2. Not in the business for which it is generally used
3. Financially not in position to own such conveyance
TAX REMEDIES OF TAXPAYER

1. PROTEST
2. REFUND
3. PAYMENT OF FINE OR REDEMPTION
4. ABANDONMENT
5. APPEAL TO COMMISSIONER
JUDICIAL REMEDIES
1. APPEAL TO CTA
2. ACTION QUESTION OF LEGALITY OF SEIZURE
WHEN PROTEST BE MADE

1. By presenting to commissioner at the time when payment of amount claimed to be
due the government is made
2. Within 15 days thereafter, a written protest
- Commissioner shall render a decision within 30 days.

- WHEN DECISION IS ADVERSE TO THE GOVERNMENT - Automatically elevated to
commissioner for review and if affirmed, automatically elevated to SOF
CLAIM FOR ABATEMENT

1. When goods are abandoned, destroyed or rendered commercially valueless
2. Goods are destroyed or irrevocably lost by accident or Force majeure, the
remaining waste or scrap after destruction shall be subject to duties and taxes
3. Shortages due to nature of goods
- No abatement of duties on account of damage incurred during the voyage

- If less than 5k - denied
CLAIM FOR REFUND

1. In writing
2. Filed with bureau within 12 months from the date of payment
3. Due and demandable

DRAWBACK - Allowance made by government upon the duties due on imported
merchandise when the importer instead of selling it here reexports it.
- Failure to comply with import permit requirements within 15 days from final
assessment - abandonment
Express abandonment - in writing and under oath.
- Failure to claim goods after 30 days after payment of dues - abandonment
APPEAL FOR FORFEITURE CASES

- 15 days or 5 days for perishable goods from receipt of decision to District collector
who shall transmit the records to commissioner
- Commissioner shall review and decide within 30 days or 15 days for perishable
- If no decision, DEEMED AFFIRMED.
APPEAL FOR PROTEST - 15 DAYS from receipt of such questioned decision
JUDICIAL REMEDIES
A. APPEAL - Within 30 days from decision of Commissioner or SOF to CTA Division
- May issue injunction
DISPOSITION OF PROPERTY
- If injurious to public health - DESTROY

Tax Quick Reviewer - Edward Arriba PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Tax Quick Reviewer - Edward Arriba PDF

Uploaded by

Copyright:

Available Formats

ESTATE TAX

INHERITANCE TAX - Tax on right to succeed. Not anymore applied.

- No estate tax for corporation because it is not capable of natural death

INTANGIBLE PROPERTIES CONSIDERED SITUATED IN PH

RULE ON RECIPROCITY (INTANGIBLE PROP OF NON RESIDENT ALIEN) (EXCLUSIONARY RULE)

VALUATION OF GROSS ESTATE

© Edward vange arriba Page 1 of 70

INCLUSIONS IN GROSS ESTATE

#1 Decedent’s interest at the time of his death

#2 Transfer in contemplation of death

- This does not constitute any transfer made by dying person.

CIRCUMSTANCES TAKEN INTO ACCOUNT

- Transfer done during the lifetime of decedent is presumed to be in contemplation if made to

© Edward vange arriba Page 2 of 70

- If there is bonafide sale in full consideration - not liable

#4 Property passing under General power of appointment

#5 Proceeds of life insurance

- Not included in estate if IRREVOCABLE

#6 Transfer for insufficient consideration

DEDUCTIONS FROM GROSS ESTATE

© Edward vange arriba Page 3 of 70

1. Funeral expenses 1. Family home

2. Judicial expenses 2. Amount received by heir

3. Claims against the estate 3. Medical expenses

4. Claims against insolvent persons 4. Standard deduction

- Citizen and resident aliens are entitled.

3. Claims against the estate

2. Claims against insolvent persons

© Edward vange arriba Page 4 of 70

PERIOD OF TIME BETWEEN DEATH OF PRIOR % OF VALUE OF PROPERTY ALLOWED AS

Within 1 year 100%

More than 1 but less than 2 80%

More than 2 but less than 3 60%

More than 3 but less than 4 40%

More than 4 but less than 5 20%

6. Transfer for public use

© Edward vange arriba Page 5 of 70

2. Standard Deduction - 1M without need of substantiation

4. Retirement benefits of Employees of private firms

EXCLUSIONS FROM GROSS ESTATE

EXEMPTIONS FROM GROSS ESTATE

2. Merger of usufruct in the owner of the naked title

© Edward vange arriba Page 6 of 70

PROCEDURE FOR SETTLEMENT

2. Filing of Estate tax return: WITHIN 6 MONTHS FROM THE DEATH

- Imposed upon any person, resident or non resident

© Edward vange arriba Page 7 of 70

- Graduated tax rate is apply applicable if the donee is not a stranger

DONATIONS FOR ELECTION CAMPAIGN

LIFE INSURANCE WITH THIRD PERSON AS BENEFICIARY

© Edward vange arriba Page 8 of 70

- Donations to Homeowner’s association is taxable

TRANSFER CONSIDERED AS DONATION

- If sale is fictitious, entire value of the property shall be subject to DT

DONATIONS THAT ARE TAX EXEMPT:

- Each spouse may donate separately

© Edward vange arriba Page 9 of 70

4. Athlete’s Prizes and award

5. Encumbrances on the property donated if assumed by donee

6. Donations to entities exempted by special laws

EXEMPTIONS TO NON RESIDENT ALIENS

TAX CREDIT - Only to residents and citizens of PH

- Donee is not required to file any return unless acts as agent