TAXATION LAW REVIEW

Atty.Bernardino T. Amago IV, CPA

 Definition

• The inherent power of the sovereign exercised through the

legislature to impose burdens upon subjects and objects within its
jurisdiction for the purpose of raising revenues to carry out the
legitimate objects of government

• It is the power by which the sovereign raises revenue to defray the

expenses of the government. It is a way of apportioning the cost of
government among those who in some measure are privileged to
enjoy its benefits and must bear its burden
 TAXATION AS DISTINGUISHED FROM OTHER
INHERENT POWERS
• Police Power
1. Purpose: Revenue vs. General Welfare
2. Amount: Practically Unlimited vs. Should not exceed cost of regulation
3. Compensation: Enjoyment of Public Services vs. Altruistic Feeling of
Contributing
4. Property Taken: Generally Money (Constructive) vs. Any Property
(Destroyed)
5. Non-impairment Clause: Inferior vs. Superior
6. Scope: Property Rights vs. Liberty and Property Rights
7. Surrender: Can be Bargained vs. Cannot be Bargained
 TAXATION AS DISTINGUISHED FROM OTHER
INHERENT POWERS

• EMINENT DOMAIN
1.Who could exercise: Government v. Private Entities
2. Property taken: Money v. Property
3. Scope: All v. Property Owner
4. Consideration: Social Benefits v. Just Compensation
 Manila Memorial Park, Inc., et al. v. Sec. of
DSWD, et al.
The judicious approach, therefore, is to look at the nature and
effects of the challenged governmental act and decide, on the basis
thereof, whether the act is the exercise of police power or eminent
domain.

As to its nature and effects, the 20% discount is a regulation affecting

the ability of private establishments to price their products and
services relative to a special class of individuals, senior citizens, for
which the Constitution affords preferential concern.
 INHERENT LIMITATIONS – Public Purpose

• devoted to the purpose of government

• Tests: The proceeds of the tax must be used -
a. for the support of the government; or
b. for any of the recognized objects of the government; or
c. to promote the welfare of the community
 INHERENT LIMITATION – Public Purpose

• The term public purpose is not defined. It is an elastic concept that

can be hammered to fit modern standards. Jurisprudence states that
public purpose should be given a broad interpretation. It does not
only pertain to those purposes which are traditionally viewed as
essentially government functions, such as building roads and delivery
of basic services, but also includes those purposes designed to
promote social justice. [Planters Products, Inc. v. Fertiphil
Corporation, G.R. No. 166006, March 14, 2008]
 INHERENT LIMITATION – Public Purpose

• It is a general rule that the legislature is without power to appropriate public

revenue for anything but a public purpose. . . . It is the essential character of
the direct object of the expenditure which must determine its validity as
justifying a tax, and not the magnitude of the interest to be affected nor the
degree to which the general advantage of the community, and thus the public
welfare, may be ultimately benefited by their promotion. Incidental to the
public or to the state, which results from the promotion of private interest and
the prosperity of private enterprises or business, does not justify their aid by
the use public money. (25 R.L.C. pp. 398-400; Emphasis supplied.) [Pascual v.
Secretary of Public Works et. al., G.R. No. L- 10405, December 29, 1960]
 INHERENT LIMITATION – Public Purpose

Analysis of the Act, and particularly of section 6 (heretofore quoted in full), will
show that the tax is levied with a regulatory purpose, to provide means for the
rehabilitation and stabilization of the threatened sugar industry.xxx.

This Court can take judicial notice of the fact that sugar production is one of the
great industries of our nation, sugar occupying a leading position among its export
products; that it gives employment to thousands of laborers in fields and
factories; that it is a great source of the state's wealth, is one of the important
sources of foreign exchange needed by our government, and is thus pivotal in the
plans of a regime committed to a policy of currency stability. Its promotion,
protection and advancement, therefore redounds greatly to the general welfare.
[Lutz v. Araneta, et. al., G.R. No. L-7859, December 22, 1955]
 INHERENT LIMITATION – Non-Delegation of Tax
Power

• Delegata potestas non potest delegari

• Exceptions:
(a) Delegation to local governments
(b) Delegation to the President (for practicality and
expediency)
(c) Delegation to administrative agencies
 INHERENT LIMITATION – Non-Delegation of Tax
Power

• Two (2) Tests:

1. Completeness Test – Congress has set forth in the law the policy to be
executed, carried out, or implemented by the delegate; so that, the only
thing left for the delegate is to implement the law.
2. Sufficiently Determinate Standards Test – The law fixes a standard- the limits
of which are sufficiently determinate and determinable – to which the
delegate must conform in the performance of his functions. [Abakada Guro
Party List v. Ermita, G.R. No. 168056, 1 September 2005]
 INHERENT LIMITATION – Exemption of
Government

• to levy a tax upon public property would render necessary new taxes
on other public property for the payment of the tax so laid; thus, the
government would be taxing itself to raise money to pay over itself
• Exempt – performing governmental function
• Taxable – performing proprietary function; unless, unless their
charters or special laws otherwise provide
 INHERENT LIMITATION – International Comity

• in par parem non habet imperium

• Justification:
• Sovereign equality among states;
• Usage among states – no intention of degrading its
dignity
• Foreign government may not be sued without its
consent
 INHERENT LIMITATION – Territorial Jurisdiction

• The fundamental basis of the right to tax is the capacity of the

government to provide benefits and protection to the object of the
tax.

• A person may be taxed where there is between him and the taxing
state, a privity of relationship justifying the levy.
 CONSTITUTIONAL LIMITATIONS – DIRECT

A. Revenue bill must originate exclusively in the House but the

Senate may propose with amendments – lawmaking process

• Section 24, Article VI – “All appropriation, revenue or tariff bills, bills

authorizing increase of the public debt, xxx shall originate
exclusively in the House of Representatives, but the Senate may
propose or concur with amendments.”
 CONSTITUTIONAL LIMITATIONS – DIRECT

B. Concurrence of a majority of ALL the members of Congress for

the passage of a law granting tax exemption

• Section 28(4), Article VI – “No law granting any tax exemption shall
be passed without the concurrence of a majority of all the members
of the Congress.”
 CONSTITUTIONAL LIMITATIONS – DIRECT

C.Rule of uniformity and equity in taxation

• Section 28 (1), Article VI - The rule of taxation shall be uniform

and equitable.xxx.
CONSTITUTIONAL LIMITATIONS – DIRECT

D. Progressive system of taxation

• Section 28 (1), Article VI – xxx. The Congress shall evolve a

progressive system of taxation.
 CONSTITUTIONAL LIMITATIONS – DIRECT

E. Exemption of religious, charitable and educational entities, non-

profit cemeteries, and churches from property taxation

• Section 28(3), Article VI – “Charitable institutions, churches,

parsonages or convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings and improvements actually,
directly and exclusively used for religious, charitable or educational
purposes shall be exempt from taxation.”
 CONSTITUTIONAL LIMITATIONS – DIRECT

F. Exemption of non-stock, non-profit educational institutions from

taxation

• Section 4 Article XIV – 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.
Proprietary educational institutions, including those cooperatively owned, may
likewise be entitled to such exemptions, subject to the limitations provided by
law, including restrictions on dividends and provisions for reinvestment.
Subject to conditions prescribed by law, all grants, endowments, donations or
contributions used, actually, directly and exclusively for educational purposes
shall be exempt from tax.
 CONSTITUTIONAL LIMITATIONS – DIRECT

G. Non-imprisonment for non-payment of a poll tax

• Section 20, Article III – No person shall be imprisoned for

debt and non-payment of a poll tax
 CONSTITUTIONAL LIMITATIONS – DIRECT

H. Non-impairment of the jurisdiction of the SC in tax cases

• Section 30, Article VI – “No law shall be passed increasing the

appellate jurisdiction of the Supreme Court as provided in this
Constitution without its advice and concurrence.”
 CONSTITUTIONAL LIMITATIONS – DIRECT

I. Prohibition on use of tax levied for special purpose

• Section 29, Article VI – “All money collected on any tax levied for a
special purpose shall be treated as a special fund and paid out for
such purpose only. If the purpose for which a special fund was
created has been fulfilled or abandoned, the balance, if any, shall
be transferred to the general funds of the Government.”
 CONSTITUTIONAL LIMITATIONS – DIRECT

J. President’s veto power on appropriation, revenue, tariff bills

• Section 27, Article VI – “The President shall have the power to

veto any particular item or items in an appropriation, revenue, or
tariff bill, but the veto shall not affect the item or items to which
he does not object.”
CONSTITUTIONAL LIMITATIONS – INDIRECT

A. DUE PROCESS OF LAW

Section 1, Article III – “No person shall be deprived of life,

liberty, or property without due process of law xxx”

üSubstantive – valid authority under the law

üProcedural – fair and reasonable methods to be heard
CONSTITUTIONAL LIMITATIONS – INDIRECT

B. EQUAL PROTECTION OF LAWS

Section 1, Article III – “xxx nor shall any person be denied

the equal protection of the laws.”

• VALID CLASSIFICATION
 CONSTITUTIONAL LIMITATIONS – INDIRECT

C. NON-IMPAIRMENT OF THE OBLIGATION OF CONTRACTS

Article III Section 10 – No law impairing the obligation of contracts

shall be passed.

The obligation of a contract is impaired when its terms or conditions

are changed by law or by a party without the consent of the other,
thereby weakening the position or rights of the latter.
 CONSTITUTIONAL LIMITATIONS – INDIRECT

D. NON-INFRINGEMENT OF RELIGIOUS FREEDOM

Section 5, Article III – “No law shall be made respecting an

establishment of religions, or prohibiting the free exercise thereof.
The free exercise and enjoyment of religious profession and
worship, without discrimination or preference, shall forever be
allowed. No religious test shall be required for the exercise of civil
or political rights.”
 CONSTITUTIONAL LIMITATIONS – INDIRECT

E. NO APPROPRIATION FOR RELIGIOUS PURPOSES

Section 29[2]. Article VI – No public money or property shall be

appropriated, applied, paid, or employed, directly or indirectly,
for the use, benefit, or support of any sect, church,
denomination, sectarian institution, or system of religion, or of
any priest, preacher, minister or other religious teacher or
dignitary as such, except when such priest, preacher, minister, or
dignitary, is assigned to the armed forces, or to any penal
institution, or government orphanage or leprosarium.
 CONSTITUTIONAL LIMITATIONS – INDIRECT

F. NON-INFRINGEMENT OF THE FREEDOM OF THE PRESS

ARTICLE III, SECTION 4 – No law shall be passed abridging

the freedom of speech, of expression, or of the press, or
xxx.
TAXES : DEFINED

• Taxes are enforced contributions, generally payable in

money, proportionate in character, levied on persons,
property or exercise of a right or privilege by the state
having jurisdiction, through its legislature, for public
purpose and paid at regular periods or intervals
ESSENTIAL CHARACTERISTICS

• Enforced contribution
• Generally payable in money – except, tax liens, TCCs
• Proportionate in character – ability-to-pay principle
• Levied on person, property or the exercise of a right or
privilege
• Levied by the State which has jurisdiction over the subject or
object of taxation – within the boundary of the State
• Levied by the lawmaking body of the State
• Levied for public purpose/s
 TAXES VS. OTHER IMPOSITIONS

• LICENSE/PERMIT FEE
a. Purpose – Raising revenue v. Regulatory
b. Basis – Power of Taxation v. Police Power
c. Amount – Unlimited v. Limited
d. Time of Payment – After v. Before
e. Effect of non-payment – Still Legal v. Illegal
f. Surrender – w/ compensation v. w/o compensation
g. Exemption – LGU may grant exemptions v. LGU cannot grant
exemptions
 TAXES VS. OTHER IMPOSITIONS

• TOLL FEE
a. Purpose – Raising revenue v. Reimbursement of Costs
b. Basis – Power of Taxation v. Unjust Enrichment
c. Subject and Object – All v. Actual users only
d. Amount – Unlimited v. Costs incurred
e. Authority – Sovereign v. Private entities
f. Time of Payment – After v. Before and After
g. Effect of Nonpayment – Closure/Suspension v. Prohibition of Use
h. Surrender – Cannot be waived w/o consideration v. Can be waived
TAXES VS. OTHER IMPOSITIONS

• DEBT
a. Basis – law v. contract or judgment
b. Effects of Non-payment – Imprisonment v. No imprisonment
c. Mode of payment – Money v. Any form
d. Assignability – Not assignable v. assignable
e. Set-off – no compensation or set-off v. may be set-off
f. Interest – does not draw interest v. draws interest if
stipulated or there is delay
g. Authority – public v. private
 Construction and Interpretation

• Tax Laws – in case of doubt, tax statutes are construed strictly against the
government and liberally in favor of the taxpayer
• Tax Exemptions and Exclusions – construed strictissimi juris against
taxpayer
• Tax Rules and Regulations - a reversal of a BIR ruling favorable to a
taxpayer would not necessarily create a perpetual exemption in his favor,
for after all the government is never estopped from collecting taxes
because of mistakes or errors on the part of its agents
• Penal Provisions - In criminal cases, statutes of limitations are acts of
grace, a surrendering by the sovereign of its right to prosecute. They
receive a strict construction in favor of the Government and limitations in
such cases will not be presumed in the absence of clear legislation.
 DOCTRINES IN TAXATION

PROSPECTIVITY OF TAX LAWS

• As a general rule, tax laws are prospective in operation, unless the
legislative intent that statute should operate retrospectively is distinctly
expressed or necessarily implied.

• Where a statute amending a tax law is silent as to whether it operates

retroactively, the amendment will not be given a retroactive effect so as to
subject to tax past transactions not subject to tax under the original
act. Every case of doubt must be resolved against its retroactive effect.
 DOCTRINES IN TAXATION

IMPRESCRIPTIBILITY OF TAXES

Considering that taxes are the lifeblood of the government, it maybe stated
that the assessment and collection of taxes are imprescriptible unless
otherwise provided by the tax law itself. Thus, if the tax law itself is silent
on prescription, the right of the government to assess and collect taxes will
not prescribe.
DOUBLE TAXATION

• STRICT SENSE - The same object or property is taxed twice, by

the same taxing authority, for the same purpose; during the
same tax period.

• BROAD SENSE - taxing the same subject or object twice during

the same taxing period.
 ESCAPE FROM TAXATION

SHIFTING
• - transferring the economic burden from one who pays the tax to
another;

• impact v. incidence

• Kinds : Forward, Backward, Onward

 ESCAPE FROM TAXATION

• Capitalization – reduction in the price of the taxed object equal to the

capitalized value of future taxes which the purchaser expects to be
called upon to pay
• Transformation – the manufacturer or producer upon whom the tax
has been imposed, fearing the loss of his market if he should add the
tax to the price, pays the tax and endeavors to recoup himself by
improving his process of production thereby turning out his units of
products at a lower cost.
• Tax Avoidance – tax saving device within the means sanctioned by law
and used by the taxpayer in good faith and at arms length.
• Tax Evasion - the use of pretenses and forbidden devices to lessen or
defeat taxes.
TAX EVASION

• ELEMENTS:
1. The end to be achieved, i.e., payment of less than that known
by the taxpayer to be legally due, or in paying no tax when it is
shown that a tax is due;
2. An accompanying state of mind which is described as being
evil, in bad faith, willful or deliberate and not accidental;
3. A course of action (or failure of action) which is unlawful.
TAX EXEMPTION

grant of immunity to particular persons or

corporations or to persons or corporations
of a particular class from a tax which
persons and corporations generally within
the same state or taxing district are obliged
to pay
TAX EXEMPTION

• personal privilege of the grantee

• generally revocable by the government
• Implies a waiver on the part of the government
• not necessarily discriminatory
 TAX EXEMPTIONS

• CONSTRUCTION
• GENERAL RULE : Strictly against the taxpayer

• Exceptions:
(1) When the law itself expressly provides for a liberal construction;
(2) When the exemption is in favor of the government itself or its
agencies;
(3) When the exemption is in favor of religious, charitable and
educational institutions because the general rule is that they are exempt
from tax.
 Set-Off and Equitable Recoupment

• a. Collection of taxes may not be enjoined by injunction except, if in the CTA/SC’s

opinion it will jeopardize the interest of the government and/or taxpayer

• b. Not subject of compensation and set-off

• Exception: both claims already become overdue and demandable as well as
fully liquidated
• Doctrine of Equitable Recoupment – Where the refund of a tax illegally or
erroneously collected from or overpaid by a taxpayer is barred by prescription,
a tax presently being assessed against a taxpayer may be recouped or set-off
TAX AMNESTY

• a general pardon to taxpayers or intentional

overlooking by the State of its authority to impose
penalties on persons otherwise guilty of evasion or
violation of a revenue or tax law.

• only Congress can grant tax amnesties

National Taxation: Administration

BIR BOC DOE

AAB LGUs
POWERS OF BIR

To assess and collect national internal taxes, fees, and

charges

To enforce all forfeitures, penalties and fines connected

therewith

To executed judgment in all cases decided in its favor by the

CTA and the ordinary courts

To effect and administer the supervisory and police powers

conferred upon it by the Tax Code or other special laws
 POWERS OF CIR

1. Power to Interpret the Tax Code and Other Tax Laws (exclusive and original
jurisdiction)
2. Power to Decide Disputed Assessments, Refunds, Penalties and Other Matters
3. Power to Obtain Information and to Summon, Examine and Take Testimony of
Persons
4. Power to Make Assessment
5. Power to Prescribe Real Property Values
6. Power to Inquire into Bank Deposits
7. Power to Prescribe Additional Procedural or Documentary Requirements
8. Power Not to Allow the Withdrawal of any Return, Statement or Declaration,
Although the Same May be Amended
 NON-DELEGABLE POWERS

1. Power to recommend the promulgation of rules and regulations by the SoF;

2. Power to issues rulings of first impression or to reverse, revoke or modify
any existing ruling of the BIR;
3. Power to compromise or abate any tax liability Except assessments issued
by the regional offices involving basic deficiency taxes of P500,000.00 or
less and minor criminal violations;
4. Power to assign or reassign internal revenue officers to establishments
where the articles subject to excise tax are produced or kept.
 BIR RULES AND REGULATIONS

• Secretary of Finance, may promulgate, upon the

recommendation of the CIR, all needful rules and
regulations for the effective enforcement of the
Code (Sec. 244)
• RR must be consistent and in harmony with law;
reasonable; useful and necessary; and published in
the official gazette (Lim v. Central Bank, 103 Phil
573)
 Non-retroactive Application

• Any revocation, modification, or reversal of any rules and regulations or

any rulings or circulars promulgated by the CIR cannot be given retroactive
application when prejudicial to the taxpayer, except:
1.Where the taxpayer deliberately misstates or omits material facts from
his return or any document required of him by the BIR;
2.Where the facts subsequently gathered by the BIR are materially
different from the facts on which the ruling is based; or
3.Where the taxpayer acted in bad faith. (Sec. 246, NIRC)
INCOME TAXATION
DEFINITION

Income tax is a tax on all yearly profits

arising from property, professions, trades
or offices, or as a tax on a person’s
income, emoluments, profits and the
like.
NATURE

•An EXCISE TAX

•SELF-ASSESSING OR SELF-COMPUTED
GENERAL PRINCIPLES: INDIVIDUALS

RESIDENT
OTHERS
CITIZENS
•Within and •Within only
Without
GENERAL PRINCIPLES: CORPORATIONS

DOMESTIC FOREIGN

•Within and •Within only

Without
INCOME vs. CAPITAL

• INCOME: Broad Sense - all wealth which flows into the hands of
the taxpayer other than a mere return of capital. (any thing
which comes into the hands of the taxpayer which adds to its
asset)
Strict Sense - amount of money coming to the taxpayer
for the service performed, for an activity which he engaged
in, or for an investment he has made, including those which
do not have specific owners but comes in the hands of a
finder.
• CAPITAL : fund or property existing at one point of time
CRITERIA TO DETERMINE TAXABLE INCOME

1. There is gain or profit

2. The gain or profit is realized or received
(actually or constructively)
3. Such gain or profit is not exempt under
any law or treaty
TAX-FREE EXCHANGE [Sec. 40 (C)]

MERGER & CONSOLIDATION SHARE PURCHASE

REORGANIZATION

RECAPITALIZATION &
ASSET PURCHASE
REINCORPORATION

PRIOR TAX RULING IS NO LONGER REQUIRED

Tax-free Exchange [Sec. 40(c)(2)]

• One or together with 4 persons gain/s

control
SITUS

• Compensation – where the service is rendered

• Gross income from business or exercise of
profession – where the business is undertaken
• Gains from Dealings in property:
- personal – place of sale;
- real property – place or location of
property;
SITUS

• Interest – residence of the debtor

• Rents – where leased property is located
• Royalties – where the intangible is used
• Dividends – if from domestic corp. – purely within
- if foreign corp. (last 3 years income)
i. more than 85% - within
ii. More than 50% to 85% - partly within and without
iii. 50% or less - without
SITUS

• Annuities – where the contract is made

• Prizes and winnings – where given
• Pensions – where the services is rendered
• Partner’s Share in GPP – where the profession is
undertaken
TAXATION FOR
INDIVIDUALS
TYPES OF INDIVIDUAL TAXPAYERS

ESTATE &
CITIZEN ALIEN
TRUST

RESIDENT RESIDENT

NON-RESIDENT
NON-RESIDENT • ETB
• NETB
TAX RATE & TAX BASE

RC/NRC/RA/NRA- • Rate: 0-35%

ETB • Base: Net Income

• Rate: 25%
NRA-NETB
• Base: Gross Income

• Rate: 0-35%
Estate & Trust
• Base: Net Income
GROSS INCOME

• All income derived from whatever source

• List is not exhaustive

• Mnemonic Device: CG2IR2DAP3

TAXATION REGIMES

Graduated • All individuals earning income

• 0-35%
Tax Rate
8% Gross • Business/Professional Income Earner
and Mixed Income Earner

Income Tax • Not for businesses not subject to 3%

OPT
Passive Income

• The taxpayer did not have any active participation in the

generation of the income

• Generally subject to final withholding tax

Passive Income

• a. Royalties
• subject to 20% final tax except in the case of literary works, books and
musical compositions, w/c are subject to 10% final tax

• sourced from the Philippines

• not in the business of extending royalties

Passive Income

• b.Prizes
• if 10k or less – Sec. 24(a)
• if more than 10K – 20%
• Exclusions: 1. Given in recognition of education, literary, civic, religious,
charitable achievements so long as you did not actively participate and that
no future services have to be rendered;
2. Given in sports competitions duly sanctioned by the National Sports
Association of the Philippines and the Philippine Olympic Committee.
Passive Income

• Winnings
• 20%

• Exclusions: P10,000 or less PCSO Lotto

Passive Income

• Interests

• must be sourced from the Philippines

• 20% final withholding tax
• interest on foreign currency – is 15% for residents; non-residents is 0%
• Exclusion: interest from long-term deposits, trust funds and deposit
substitutes – if 5 yrs or more; w/pretermination – 5%; 12%; 20%
Passive Income

• Dividends
• Dividends declared by domestic corporations
• Share in a trade partnership
• Cash, Property, Scrip Dividends
• 10% - RC, NRC, RA
• 20% - NRA-ETB
 Passive Income

• Stock dividend – not taxable unless:

• these shares are later redeemed for a consideration by the corp. or otherwise conveyed by the stockholder to the
extent of such consideration (Sec. 73(B), NIRC) – Redemption or Cancellation
• the recipient is other than the shareholder (stock dividend to a usufructuary)
• change in the stockholders’ equity results by virtue of the stock dividend issuance

• Distribution of treasury stocks should be considered taxable, since the stocks are not sourced from
the unissued shares of the corporation and there being no transfer from surplus to capital account.

• Liquidating Dividends – The difference between the amount received from the corporation and the
cost of the shares surrendered by the stockholder is a taxable capital gain or deductible capital loss
to the extent of the capital gain.

• Indirect Dividends – The corporation forgives a stockholder’s debt; allowing personal use of
corporate property
CAPITAL GAINS

• Ordinary Assets vs. Capital Assets

• Ordinary Assets:
• stock in trade of the taxpayer or other property of a kind which would
properly be included in the inventory of the taxpayer if on hand at the close
of the taxable year;
• property held by the taxpayer primarily for sale to customers in the
ordinary course of his trade or business;
• property used in the trade or business, of a character which is subject to
the allowance for depreciation; or
• real property used in trade or business of the taxpayer.
CAPITAL GAINS

Type of Capital Asset Tax Rate Tax Base

SHARES OF STOCK 15% Net Gains

GSP, FMV w/c ever is

REAL PROPERTY 6% higher

OTHERS 0-35% Net Gains

Required to File Returns

• RC

• NRC/RA/NRA-ETB with income within

Not Required to File Returns

• An individual whose taxable income is not more than P250k;

• An individual whose compensation income derived from one
employer and the income tax on which has been correctly
withheld;
• An individual whose sole income has been subjected to final
withholding tax
• A minimum wage earner
Not Required to File Returns

• Those who are qualified under “substituted filing”. However, substituted filing
applies only if all of the following requirements are present :
• the employee received purely compensation income (regardless of
amount) during the taxable year
• the employee received the income from only one employer in the
Philippines during the taxable year
• the amount of tax due from the employee at the end of the year
equals the amount of tax withheld by the employer
• the employee’s spouse also complies with all 3 conditions stated
above
• the employer files the annual information return (BIR Form No. 1604-
CF)
• the employer issues BIR Form No. 2316 to each employee.
Where to File

WITH PAYMENT
• Authorized Agent Bank (AAB) of the place where taxpayer is registered
or required to be registered.
• In places where there are no AABs:
- the return will be filed directly with the Revenue Collection Officer or
duly Authorized Treasurer of the city or municipality in which such
person has his legal residence or principal place of business in the
Philippines, or
- if there is none, filing of the return will be at the Office of the
Commissioner.
Where to File

Without Payment

• Revenue District Office (RDO) where the taxpayer is registered

INSTALLMENT PAYMENT

• Excess of Two Thousand Pesos (P2,000.00)

• April 15 & October 15

Corporate Taxation
CORPORATE INCOME
TAXATION
CORPORATION: Defined

• An artificial being created by operation of law,

having the right of succession, and the powers,
attributes and properties expressly authorized by
law or incident to its existence. (Sec. 2, Corp.
Code of the Philippines)
CORPORATION: Scope

• Includes partnership no matter how created or organized, joint account

companies, insurance companies and other associations, except:
1. General Professional Partnership;
2. Joint Venture or consortium for purpose of undertaking construction
projects; and
3. Joint Venture or consortium for the purpose of engaging in petroleum,
geothermal and other energy operations pursuant to a consortium
agreement with the government.
CLASSIFICATION

Resident Non-Resident
Domestic
Foreign Foreign
• w/in & w/ • w/in • w/in
out • Net income • Gross
• Net income • 20/25% income
• 20/25% • 25%
Tax Regimes – DC & RFC

Normal Income Tax Minimum

Corporate Income
Tax
20%/25% 2%/1%
Net Income Gross Income
General Rule Mutually Exclusive
with NIT
RATES FOR Domestic CORPORATIONS [SEC. 27(A)]

25% 20%

• GENERAL RULE • P5M OR LESS

TAXABLE INCOME
• P100M OR LESS
TOTAL ASSETS
MINIMUM CORPORATE INCOME TAX [SEC. 27(E)]

JULY 2020-
JUNE 2023 ONE PERCENT (1%)

THEREAFTER •TWO PERCENT (2%)

MCIT
• Beginning the 4th taxable year immediately following the taxable
year in which such corporation commence its business
operations
• Imposable when corporation has zero or negative taxable income
or when the MCIT > NIT
• Not imposable on income subject to special income tax system
• Excess MCIT may be carried over for 3 immediately succeeding
taxable year
 2024 2025 2026 2027 2028

Gross Income 1,000,000.00 1,000,000.00 1,000,000.00 1,000,000.00 1,000,000.00

Allowable
Deductions 950,000.00 980,000.00 970,000.00 960,000.00 940,000.00
DC: Proprietary Educational Institutions and
Non-profit Hospitals
Tax Rate 10%
Tax Base Net Income
Predominance If the gross income from unrelated trade,
Test business or other activity exceeds 50% of the
total gross income derived by any educational
institution or hospital from all sources, the
NIT shall be imposed on the entire income.
PROPRIETARY EDUCATIONAL INSTITUTIONS AND
HOSPITALS [SEC. 27(B)]

JULY 2020- • PREDOMINANCE TEST

JUNE 2023 • ONE PERCENT (1%)

• PREDOMINANCE TEST
THEREAFTER • TEN PERCENT (10%)
PEI & NPH

Related Income Unrelated Income Total

1,000,000 500,000 1,500,000 (10%)
1,000,000 1,500,000 2,500,000 (30%)
DC: GOCC

• Same as those corporations engaged in a similar business,

industry or activity
• Exempted: GSIS, SSS, PhilHealth, HDMF, local water districts
• PAGCOR is exempted from tax on its income from gaming
operations
• Government or any of its political subdivisions are exempted.
[Sec. 32(B)(7)(b)]
RFC: INTERNATIONAL CARRIERS

Type Air and Shipping

Tax Rate 2.5%
Tax Base Gross Philippine Billings – amount of revenue derived from
carriage of persons, excess baggage, cargo and mail
ORIGINATING from the Philippines
(i) For Air- in a continuous and uninterrupted flight,
(ii)For Shipping – up to final destination,
irrespective of the place of sale or issue and the place of
payment of ticket or passage document
RFC: Offshore Banking Units

Foreign Currency Transactions Exempt

(with non-residents, other OBUs,
local commercial banks)
Interest income from foreign 10% final tax
currency loans (granted to
residents)
Any income of non-residents from Exempt
transactions with OBUs
RFC: MNCs

Branch Profit Remittance 15% on total profits applied or

earmarked for remittance without
any deduction for the tax
component thereof
Regional or Area Exempted
Headquarters
Regional Operating 20%/25% on taxable income (Net)
Headquarters
NRFC

Cinematographic Film Owners, 25% on gross income

Lessors or Distributors
Owners or Lessors of Vessels 4.5% on gross rentals
chartered by Philippine Nationals and fees
Owners, or Lessors of Aircraft, 7.5% on gross rentals
machineries and other equipment and fees
Passive Income
DC RFC NRFC
Interest from Deposits and Yield or any other 20% 20% 25%
Monetary Benefit from Deposit Substitutes and
from Trust Funds and Similar Arrangements
Interest on FCDU accounts 15% 15% exempt
Royalties 20% 20% 25%
Capital Gains from the Sale of Shares of Stock 15% 15% 15%
Not Traded in the Stock Exchange.
Capital Gains Realized from the Sale, Exchange 6% NA NA
or Disposition of Lands and/or Buildings.
INTERCORPORATE DIVIDENDS

DC RFC NRFC
DC Exempt Exempt Tax Sparing Rule
(15%)
RFC DG DG (Situs) DG (Situs)
NRFC DG NA NA
Exempt Corporations

General Rule Exempted based on enumeration

Exceptions Income from usage of real or
personal property
Income from activities for profit
regardless of disposition
 Tax Returns

Coverage All corporations except NRFC

When Quarterly Basis - 60 days after close of each of the first 3 quarters
Annual – 15th day of the 4th month following the close of the taxable period

Where Where AABs having jurisdiction over the location of the principal office of the
corporation

Tax Payment Pay-as-you-file system

Installment Option If tax due is more than P2,000 –not available to corporations
Fiscal Adjustment Return (Section 76)

Coverage Total Quarter Tax Payment > Total Tax Due

Options • Pay the balance of tax still due;

• Carry-over the excess credit; or
• Be credited or refunded with the excess amount paid

Irrevocability Rule Once the option to carry-over and apply the excess quarterly income tax
against income tax due for the taxable quarters of the succeeding taxable
years has been made, such option shall be considered irrevocable for that
taxable period and no application for cash refund or issuance of a tax
credit certificate shall be allowed.
Withholding Tax
Creditable Withholding Tax

1. Compensation - is the tax withheld from income payments to individuals arising from an
employer-employee relationship.
2. Expanded - is a kind of withholding tax which is prescribed on certain income payments and
is creditable against the income tax due of the payee for the taxable quarter/year in which
the particular income was earned.
3. Withholding Tax on GMP - Value Added Taxes (GVAT) - is the tax withheld by National
Government Agencies (NGAs) and instrumentalities, including government-owned and
controlled corporations (GOCCs) and local government units (LGUs), before making any
payments to VAT registered taxpayers/suppliers/payees on account of their purchases of
goods and services.
4. Withholding Tax on Government Money Payments (GMP) - Percentage Taxes - is the tax
withheld by National Government Agencies (NGAs) and instrumentalities, including
government-owned and controlled corporations (GOCCs) and local government units (LGUs),
before making any payments to non-VAT registered taxpayers/suppliers/payees
Final Withholding Tax

• a kind of withholding tax which is prescribed on certain income

payments and is not creditable against the income tax due of the
payee on other income subject to regular rates of tax for the taxable
year. Income Tax withheld constitutes the full and final payment of
the Income Tax due from the payee on the particular income
subjected to final withholding tax.
Value added tax (VAT)
NATURE
• a. Tax on value added
• b. Sales tax
• c. Tax on consumption
• d. Indirect tax: impact and incidence of tax
• e. Tax credit method
• f. Destination principle and cross-border doctrine
NATURE
• Destination principle holds that good and services are
taxed only in the country where they are consumed.
• Under Cross-border Doctrine, no VAT shall be imposed to
form part of the cost of the goods destined for
consumption outside the Philippine customs territory.
 LIABLE Persons
• SELLER OR TRANSFEROR
• IMPORTER
• NON-RESIDENT PERSONS

a. Gross sales or receipts for the past twelve (12) months, other than
those that are exempt under Section 109 (A) to (U), have exceeded
Three Million Pesos (P3,000,000.00): or
b. There are reasonable grounds to believe that his gross sales or
receipts for the next twelve (12) months, other than those that are
exempt under Section 109 (A) to (U), will exceed Three Million
Pesos (P3,000,000.00).
 REGISTRATION
• Registration fee – Five Hundred Pesos (P500.00) using BIR Form No. 0605 for
every separate or distinct establishment or place of business
• Any person who becomes liable to VAT and fails to register
as such shall be liable to pay the output tax but without
the benefit of input tax credits for the period in which he
was not properly registered.
• Any person who elects to register under optional
registration shall not be allowed to cancel his registration
for the next three (3) years.
VAT ON SALE OF GOODS

REGULAR Tax Base : Gross Selling Price

TRANSACTIONS Tax Rate : 12%
ZERO RATED Tax Base: Gross Selling Price
TRANSACTIONS Tax Rate: 0%
TRANSACTIONS Tax Base : Fair Market Value
DEEMED SALE Tax Rate: 12%
VAT ON SALE OF GOODS: REgular

• General Rule: Subject to the Rule of

Regularity
• Exception: Services rendered in the
Philippines by nonresident foreign persons
shall be considered as being course of
trade or business whether isolated
transaction or not
 VAT ON SALE OF GOODS: ZERO-RATED
• Export sales
1. (1)The sale and actual shipment of goods from the Philippines to a foreign
country, irrespective of any shipping arrangement that may be agreed upon
which may influence or determine the transfer of ownership of the goods so
exported, (2) paid in acceptable foreign currency or its equivalent in goods or
services, and (3) accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP);
2. The (1) sale of raw materials or packaging materials to a (2) non-resident
buyer (3) for delivery to as a resident local export-oriented enterprise (4) to
be used in manufacturing, processing, packing or repacking in the Philippines
of the said buyer's goods, (5) paid for in acceptable foreign currency, and (6)
accounted for in accordance with the rules and regulations of the BSP;
3. The (1) sale of raw materials or packaging materials to an (2) export-
oriented enterprise whose (3) export sales exceed seventy percent (70%) of
total annual production;
 VAT ON SALE OF GOODS: ZERO-RATED
Export sales
4. Transactions considered export sales under Executive Order No. 226, otherwise
known as the Omnibus Investments Code of 1987, and other special laws; and
5. The sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operations; Provided, That
the goods, supplies, equipment, and fuel shall be used exclusively for
international shipping or air transport operations; Provided, that the same is
limited to goods, supplies, equipment and fuel that shall be used in the transport
of goods and passengers from a port in the Philippines directly to a foreign port,
or vice-versa without docking or stopping at any other port in the Philippines
unless the docking or stopping at any other Philippine port is for the purpose of
unloading passengers and/or cargoes that originated from abroad, or to load
passengers and/or cargoes bound for abroad; Provided, further, that if any
portion of such fuel, goods or supplies is used for purposes other than the
mentioned in this paragraph, such portion of fuel, goods and supplies shall be
subject to twelve percent (12%) output VAT.
 VAT ON SALE OF GOODS: ZERO-RATED
• Sales to Persons or Entities Deemed Tax-exempt under
Special Law or International Agreement
VAT ON SALE OF GOODS: DEEMED sale

1. Transfer, use or consumption not in the course

of business of goods or properties originally
intended for sale or for use in the course of
business;
2. Distribution or transfer to:
a. Shareholders or investors as share in the
profits of the VAT-registered person; or
b. Creditors in payment of debt or obligation.
VAT ON SALE OF GOODS: DEEMED sale
3. Consignment of goods if actual sale is not made
within sixty (60) days following the date such goods
were consigned. Consigned goods returned by the
consignee within the 60-day period are not deemed
sold;
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 the date of
such retirement or cessation, whether or not the
business is continued by the new owner or successor.
VAT ON SALE OF SERVICES

REGULAR Tax Base : Gross Receipts

TRANSACTIONS Tax Rate : 12%
ZERO RATED Tax Base: Gross Receipts
TRANSACTIONS Tax Rate: 0%
 VAT ON SALE OF SERVICES: ZERO-RATED
1. (1) Processing, manufacturing or repacking goods for (2) other persons doing
business outside the Philippines (3) which goods are subsequently exported where the
services are (4) paid for in acceptable foreign currency and (5) accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
2. (1) Services other than processing, manufacturing or repacking (2) rendered to a
person engaged in business conducted outside the Philippines or to a non-resident
person engaged in business who is outside the Philippines when the services are
performed, the (3) consideration for which is paid for in acceptable foreign currency
and (4) accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);
3. Services rendered to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively subjects
the supply of such services to zero percent (0%) rate;
 VAT ON SALE OF SERVICES: ZERO-RATED
4. Services rendered to persons engaged in international shipping or air transport
operations, including leases of property for use thereof; Provided, that these
services shall be exclusively for international shipping or air transport
operations. (Thus, the services referred to herein shall not pertain to those made
to common carriers by air and sea relative to their transport of passengers, goods
or cargoes from one place in the Philippines to another place in the Philippines,
the same being subject to twelve percent (12%) VAT under Sec. 108 of the Tax
Code, as amended);
5. Services performed by subcontractors and/or contractors in processing,
converting, or manufacturing goods for an enterprise whose export sales exceeds
seventy percent (70%) of total annual production;
 VAT ON SALE OF SERVICES: ZERO-RATED
6. Transport of passengers and cargo by domestic air or sea carriers from the
Philippines to a foreign country. (Gross receipts of international air carriers and
international sea carriers doing business in the Philippines derived from transport
of passengers and cargo from the Philippines to another country shall be exempt
from VAT; however they are still liable to a percentage tax of three percent (3%)
based on their gross receipts derived from transport of cargo from the Philippines
to another country as provided for in Sec. 118 of the Tax Code, as amended); and
7. Sale of power or fuel generated through renewable sources of energy such as,
but not limited to, biomass, solar, wind, hydropower, geothermal and steam,
ocean energy, and other shipping sources using technologies such as fuel cells and
hydrogen fuels; Provided, however that zero-rating shall apply strictly to the sale
of power or fuel generated through renewable sources of energy, and shall not
extend to the sale of services related to the maintenance or operation of plants
generating said power.
VAT ON IMPORTATION

REGULAR Tax Base : Transaction Value

TRANSACTIONS Tax Rate : 12%
TECHNICAL Tax Base: Transaction Value
IMPORTATION Tax Rate: 12%
 VAT EXEMPT TRANSACTIONS
a.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 therefore;
b.Sale or importation of fertilizers; seeds, seedlings and fingerlings;
fish, prawn, livestock and poultry feeds, including ingredients,
whether locally produced or imported, used in the manufacture of
finished feeds (except specialty feeds for race horses, fighting
cocks, aquarium fish, zoo animals and other animals considered as
pets);
 VAT EXEMPT TRANSACTIONS
c. Importation of personal and household effects belonging to residents of the Philippines
returning from abroad and non-resident citizens coming to resettle in the Philippines; Provided,
that such goods are exempt from custom duties under the Tariff and Customs Code of the
Philippines;
d. Importation of professional instruments and implements, tools of trade, occupation or
employment, wearing apparel, domestic animals, and personal and household effects ( except
vehicles, vessels, aircrafts machineries and other similar goods for use in manufacture which
are subject to duties, taxes and other charges) belonging to persons coming to settle in the
Philippines or Filipinos or their families and descendants who are now residents or citizens of
other countries, such parties hereinafter referred to as overseas Filipinos, in quantities and of
the class suitable to the profession, rank or position of the persons importing said items, for
their own use and not barter or sale, accompanying such persons, or arriving within a
reasonable time; Provided, That the Bureau of Customs may, upon the production of
satisfactorily evidence that such persons are actually coming to settle in the Philippines and
that the goods are brought from their place of residence, exempt such goods from payment of
duties and taxes.
 VAT EXEMPT TRANSACTIONS
e. Services subject to percentage tax under Title V of the Tax Code, as
amended;
f. Services by agricultural contract growers and milling for others of palay into
rice, corn into grits, and sugar cane into raw sugar;
g. Medical, dental, hospital and veterinary services except those rendered by
professionals;
h. Educational services rendered by private educational institutions duly
accredited by the Department of Education (DepED), the Commission on
Higher Education (CHED) and the Technical Education and Skills Development
Authority (TESDA) and those rendered by the government educational
institutions;
 VAT EXEMPT TRANSACTIONS
i. Services rendered by individuals pursuant to an employer-employee
relationship;
j. Services rendered by regional or area headquarters established in the
Philippines by multinational corporations which act as supervisory,
communications and coordinating centers for their affiliates, subsidiaries
or branches in the Asia-Pacific Region and do not earn or derive income
from the Philippines;
k. Transactions which are exempt under international agreements to
which the Philippines is a signatory or under special laws except those
granted under P.D. No. 529 - Petroleum Exploration Concessionaires under
the Petroleum Act of 1949;
 VAT EXEMPT TRANSACTIONS
l. Sales by agricultural cooperatives duly registered and in good standing with
the Cooperative Development Authority (CDA) to their members, as well as of
their produce, whether in its original state or processed form, to non-members,
their importation of direct farm inputs, machineries and equipment, including
spare parts thereof, to be used directly and exclusively in the production
and/or processing of their produce;
m. Gross receipts from lending activities by credit or multi-purpose
cooperatives duly registered and in good standing with the Cooperative
Development Authority;
n. Sales by non-agricultural, non-electric and non-credit cooperatives duly
registered with and in good standing with CDA; Provided, that the share capital
contribution of each member does not exceed Fifteen Thousand Pesos
(P15,000.00) and regardless of the aggregate capital and net surplus ratably
distributed among the members;
 VAT EXEMPT TRANSACTIONS
o. Export sales by persons who are not VAT-registered;
p. The following sales of real properties:
1. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of
trade or business.
2. Sale of real properties utilized for low-cost housing as defined by RA No. 7279, otherwise known as the
"Urban Development and Housing Act of 1992" and other related laws, such as RA No. 7835 and RA No. 8763;
3, Sale of real properties utilized for socialized housing as defined under RA No. 7279, and other related laws,
such as RA No. 7835 and RA No. 8763, wherein price ceiling per unit is Php 450,000.00 or as may from time to
time be determined by the HUDCC and the NEDA and other related laws;
4. Sale of residential lot valued at One Million Five Hundred Thousand Pesos (P1,500,000.00) and below, or
house and lot and other residential dwellings valued at Two Million Five Hundred Thousand Pesos
(P2,500,000.00) and below, as adjusted using latest Consumer Price Index values. (If two or more adjacent
lots are sold or disposed in favor of one buyer, for the purpose of utilizing the lots as one residential lot, the
sale shall be exempt from VAT only if the aggregate value of the lots do not exceed One Million Five Hundred
Thousand Pesos (P1,500,000.00). Adjacent residential lots, although covered by separate titles and/or
separate tax declarations, when sold or disposed to one and the same buyer, whether covered by one or
separate Deed of Conveyance, shall be presumed as a sale of one residential lot.)
 VAT EXEMPT TRANSACTIONS
q. Lease of residential units with a monthly rental per unit not exceeding
Fifteen Thousand Pesos (P15,000.00), regardless of the amount of aggregate
rentals received by the lessor during the year; Provided, that not later than
January 31, 2009 and every three (3) years thereafter, the amount of
P15,000.00 shall be adjusted to its present value using the Consumer Price
Index, as published by the Philippine Statistics Authority (Formerly known as
NSO);
r. Sale, importation, printing or publication of books and any newspaper,
magazine, review or bulletin which appears at regular intervals with fixed
prices for subscription and sale and which is not devoted principally to the
publication of paid advertisements;
s. Transport of passengers by international carriers;
 VAT EXEMPT TRANSACTIONS
t. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine
equipment and spare parts thereof for domestic or international transport operations; Provided,
that the exemption from VAT on the importation and local purchase of passenger and/or cargo
vessels shall be subject to the requirements on restriction on vessel importation and mandatory
vessel retirement program of Maritime Industry Authority (MARINA);
u. Importation of fuel, goods and supplies by persons engaged in international shipping or air
transport operations; Provided, that the said fuel, goods and supplies shall be used exclusively
or shall pertain to the transport of goods and/or passenger from a port in the Philippines
directly to a foreign port, or vice-versa, without docking or stopping at any other port in the
Philippines unless the docking or stopping at any other Philippine port is for the purpose of
unloading passengers and/or cargoes that originated form abroad, or to load passengers and/or
cargoes bound for abroad; Provided, further, that if any portion of such fuel, goods or supplies is
used for purposes other that the mentioned in the paragraph, such portion of fuel, goods and
supplies shall be subject to 12% VAT;
v. Services of banks, non-bank financial intermediaries performing quasi-banking functions, and
other non-bank financial intermediaries, such as money changers and pawnshops, subject to
percentage tax under Sections 121 and 122, respectively of the Tax Code;
 VAT EXEMPT TRANSACTIONS
w. Sale or lease of goods and services to senior citizens and persons with
disabilities, as provided under Republic Act Nos. 9994 (Expanded Senior
Citizens Act of 2010) and 10754 (An Act Expanding the Benefits and
Privileges of Persons with Disability), respectively;
x. Transfer of property in merger or consolidation (pursuant to Section
40(C)(2) of the Tax Code, as amended);
y. Association dues, membership fees, and other assessments and charges
collected on a purely reimbursement basis by homeowners’ associations
and condominium established under Republic Act No. 9904 (Magna Carta
for Homeowners and Homeowner’s Association) and Republic Act No. 4726
(The Condominium Act), respectively;
z. Sale of gold to the Banko Sentral ng Pilipinas (BSP) (previously zero-
rated transaction);
 VAT EXEMPT TRANSACTIONS
aa. Sale of drugs and medicines prescribed for diabetes, high
cholesterol, and hypertension (beginning on January 1, 2019 as
determined by the Department of Health); and
ab. Sale or lease of goods or properties or the performance of
services other than the transactions mentioned in the preceding
paragraphs, the gross annual sales and/or receipts do not exceed
the amount of Three Million Pesos (Php 3,000,000.00). Note: Self-
employed individuals and professionals availing of the 8% on gross
sales and/or receipts and other non-operating income, under
Sections 24 (A)(2)(b) and 24 (A)(2)(c)(2) of the NIRC shall also be
exempt from the payment of twelve (12%) VAT.
OUTPUT VAT

a. 12% vat on the sale of goods/services less

sales returns, allowances, discounts
b. 12% of total value plus customs duties, excise
taxes, other charges (if imported)
INPUT VAT

• The vat due on or paid by a (1) vat-registered

person on (2) importation of goods or local
purchases of goods, properties, or services,
including lease or use of properties, (3) in the
course of his trade or business
• Includes the transitional input tax and the
presumptive input tax
SOURCE OF INPUT VAT

• 12% Actual Input VAT

• 2% Transitional Input VAT
• 4% Presumptive Input VAT
• 12% Creditable Withholding VAT (Non-Resident
Persons)
VAT on government transactions

• Final VAT
• 5% based on gross payments
• 7% standard input VAT in lieu of the actual input VAT
directly attributable or ratably apportioned to such sales

> 7% Added to expense or cost

< 7% Closed to expense or cost account
 REFUND

• Zero-rated and Effectively Zero-rated Sales - within two (2) years after
the close of the taxable quarter when such sales were made, apply for
the issuance of a tax refund of input tax
• Cancellation of Vat Registration - within two (2) years from the date of
cancellation, apply for the issuance of tax credit certificate for any
unused input tax
• CIR shall grant refund for creditable input taxes within ninety (90) days
from the date of submission of the official receipts or invoices and
other documents in support of the application
• In case of full or partial denial of the claim for tax refund, the taxpayer
affected may, within thirty (30) days from the receipt of the decision
denying the claim, appeal the decision with the Court of Tax Appeals
FILING AND PAYMENT
• File a quarterly return of the amount of his gross sales or receipts
within twenty-five (25) days following the close of each taxable
quarter prescribed for each taxpayer
• VAT-registered persons shall pay the value-added tax on a monthly
basis on or before the 20th day following the end of the taxable
month
Penalties
• Issues VAT Receipt but NOT Registered – issuer is liable for OPT, VAT, &
50% surcharge
• Does not indicate “VAT Exempt Sale” – issuer is liable for VAT
• Temporary Closure (not less than 5 days)/ Suspension of Business
Operations:
• Fails to register
• Failure to issue receipts or invoices;
• Failure to file a value-added tax return as required under
Section 114; or
• Understatement of taxable sales or receipts by thirty percent
(30%) or more of his correct taxable sales or receipts for the
taxable quarter
ASSESSMENT

Illegal or
Self Deficiency
Void
Assessment Assessment
Assessment

Erroneous Jeopardy
Assessment Assessment
ASSESSMENT PROCESS

Notice of
Issuance of Informal
LOA PAN FAN
Conference/ND
REQUISITES OF VALID ASSESSMENT

• The taxpayers shall be informed in writing

of the LAW and the FACTS on which the
assessment is made; otherwise, the
assessment shall be void. (NIRC, Sec. 228)
 DELINQUENCY VS DEFICIENCY

Deficiency Tax – one where the taxpayer has already paid the
amount of tax due but the BIR later on found that such amount
was incorrect.

Delinquency Tax – one where the taxpayer failed to pay the

amount of the tax due after having been assessed.
 PRESCRIPTIVE PERIOD OF ASSESSMENT

GENERAL RULE 3 years from:

(a) the last day prescribed by law for the filing of
return
(b) the day the return was filed, if in default
False or Fraudulent 10 years after discovery
Return or Failure to
file Return

Reckoning Point Date of Actual Assessment (released, mailed or sent)

Date of Substantial Amendment (that which changes
the tax liability of the taxpayer)
 WAIVER

1. The waiver must be in the proper form prescribed by RMC 20-90;

2. The waiver must be signed by the taxpayer himself or his duly authorized
representative;
3. The waiver should be duly notarized;
4. The CIR or the revenue official authorized by him must sign the waiver
indicating that the BIR has accepted and agreed to the waiver;
5. Both the date of execution by the taxpayer and date of acceptance by the
BIR should be before the expiration of the period of prescription or before
the lapse of the period agreed upon in case a subsequent agreement is
executed;
6. The waiver must be executed in 3 copies.
 SUSPENSION OF STATUTE OF LIMITATIONS (Sec. 223)

1. When the CIR is PROHIBITED from making the assessment or beginning

the distraint or levy or a proceeding in court, AND 60 days thereafter;
2. When the taxpayer requests for a REINVESTIGATION which is
GRANTED by the CIR;
3. When the taxpayer canNOT be located in the ADDRESS given by him in
the return UNLESS he informs the CIR of any change in his address;
4. When the warrant of distraint or levy is duly served, AND No
property is located; or
5. When the taxpayer is Out of the Philippines.
TAXPAYER’S REMEDIES: Protest of Assessment

TYPES i. Request for Reconsideration – plea for a reevaluation of an assessment on the basis
of existing records

ii. Request for Reinvestigation – plea for the reevaluation of the assessment on the
basis of newly-discovered evidence or additional evidence

Requisites 1. In writing
2. Addressed to the CIR
3. It must be accompanied by a waiver of the Statute of Limitations in favor of the
government
TAXPAYER’S REMEDIES: Protest of Assessment

File Protest within 30 days from receipt of

the FAN
Submit all relevant supporting documents within 60
days from date of filing of protest
Within the said 180-day period
• BIR decides
• BIR does not decide

Appeal to CTA (30 days)

Appeal to Supreme Court (15 days)

 TAXPAYER’S REMEDIES:REFUND

GROUNDS a. Tax is erroneously or illegally collected

b. Penalty is collected without authority
c. Sum collected is excessive or in any manner wrongfully collected

REQUISITES a. Must be in writing;

b. Filed within two (2) years from date of payment
c. Show proof of payment

Taxpayer should not wait for the decision of the CIR; both the claim for refund and
subsequent appeal must be filed within the 2-year period.
TAXPAYER’S REMEDIES:REFUND

• withholding agent is the proper party to file the claim for

refund. (CIR vs. Smart Communications Inc., G.R. No. 179045-46,
dated 25 August 2010; CIR vs. Procter & Gamble Philippine
Manufacturing Corporation, G.R. No. 66838, 2 December 1991)

• This is different from the INPUT VAT REFUND: 2-year Period is for
both administrative and judicial remedies; no 90-day period to
decide
 COLLECTION
• Rule: Three (3) years from date return is filed or last day of filing, whichever
comes later if no assessment.

• Exceptions: Five (5) years from date of final assessment notice

• Exception to the Exceptions: Ten (10) years from date of discovery if the
government will collect without assessment. (NIRC, Sec.222(a))
• False or Fraudulent Return
• Failure to file a Return/No Return
SUSPENSION OF Statute of LIMITATIONS
• When the CIR is PROHIBITED from making the assessment or beginning the
distraint or levy or a proceeding in court, AND 60 days thereafter;
• When the taxpayer requests for a REINVESTIGATION which is GRANTED by the
CIR;
• When the taxpayer canNOT be located in the ADDRESS given by him in the
return UNLESS he informs the CIR of any change in his address;
• When the warrant of distraint or levy is duly served, AND No property is
located
• When the taxpayer is Out of the Philippines
 Administrative Remedies

Tax Lien – denote a legal claim or charge on property as security for

the payment of some debt or obligation
• Personal Property – at the time the tax becomes due and payable
• Real Property – from the time of registration with the Register of
Deeds
Administrative Remedies

Distraint/Garnishment - applies to personal property only

A. Actual Distraint – resorted to when there is actual tax delinquency

and the taxpayer fails to pay his obligation which consists in the
actual seizure and taking of personal property of the taxpayer
Administrative Remedies
Constructive Distraint – issued when there is no actual tax delinquency yet as preventive
remedy to forestall possible dissipation of the taxpayer’s assets under the following cases:

1. a taxpayer is retiring from business subject to tax

2. a taxpayer is intending to:
i. leave the Philippines or remove his property therefrom; or
ii. hide or conceal his property;
3. a taxpayer is performing any act tending to:
i. obstruct the proceedings for the collection of the tax for past or current
year;or
ii. render the same totally or partly ineffective unless such proceedings are
begun immediately.
Administrative Remedies

3. Levy - applies to real property only

When: Before, simultaneously, or after the distraint proceedings is
effected

4. Forfeiture - divestiture of property without compensation, in consequence of

a default or offense
Administrative Remedies

5. COMPROMISE - a contract whereby the parties by making reciprocal concessions, avoid litigation or put
an end to one already commenced. (Civil Code, Art. 2028)

Requisites i. The taxpayer has tax liability;

ii. There must be an offer of an amount to be paid by the taxpayer;
iii. There must be acceptance of the offer in settlement of the original claim.
Grounds 1. Doubtful Validity – minimum @ 40% of bdt
2. Financial Incapacity – 10%, 20% or40%, depending on the condition of taxpayer
Authority i. Commissioner; or
ii. Regional Evaluation Board, in case the assessment involves basic deficiency tax (bdt) of
P500,000 or less and minor violations discovered by regional and district officials.
iii. NEB - a. The basic tax involved exceeds P1M
b. The settlement offered is less than the prescribed minimum
Administrative Remedies

Allowed Prohibited
1. Delinquent accounts 1. Withholding tax cases
2. Cases under administrative protest after issuance 2. Criminal tax fraud cases confirmed by CIR or his
of FAN pending before the BIR representatives
3. Civil tax cases being disputed before the courts 3. Criminal violations already filed in court
4. Collection cases filed in courts 4. Delinquent accounts with duly approved schedule
5. Criminal violations not yet filed in court except of installment payments
criminal tax fraud 5. Cases where final reports of reinvestigation or
reconsideration have been issued where the taxpayer
is agreeable
6. Cases which are already final and executory after
final judgment
7. Estate tax cases on the ground of financial
incapacity
 Administrative Remedies

5. Abatement - cancellation of the taxpayer’s entire tax liability

Grounds 1. The tax or any portion thereof appears to be unjustly or

excessively assessed
2. The administration and collection costs involved do not
justify the collection of the amount due
Authority Commissioner only
JUDICIAL Remedies

CIVIL CRIMINAL
1. By filing a civil case for collection of a sum of 1. Attempt to evade or defeat tax; and
money with proper regular court (MTC or RTC); 2. Failure to file return, supply correct and accurate
2. By filing an answer to the petition for review filed information, pay tax, withhold and remit tax and
by taxpayer with CTA. refund excess taxes withheld on compensation.

The judgment in the criminal case shall not only

impose the penalty but shall also order the payment
of taxes subject of the criminal case as finally decided
by the Commissioner.
 CIVIL PENALTIES

Surcharge 25% Civil Penalty or Surcharge

Failure to file any return and pay the tax due thereon; or
filing a return with an internal revenue officer other than those with whom the return is
required to be filed; or
-filing the return in a wrong revenue officer (sec 248 a)
Failure to pay the deficiency tax within the time prescribed for its payment in the notice of
assessment; or
Failure to pay the full or part of the amount of tax shown on any return or the full amount of
tax due for which no return is required to be filed, on or before the date prescribed for its
payment. (Sec. 248)

50% Civil Penalty or Surcharge

a. In case of willful neglect to file the return within the period prescribed by the Code, or
b. In case a false or fraudulent return is willfully made
 CIVIL PENALTIES
Interest a. Deficiency Interest - Any deficiency in the tax due shall be subject to the interest of 12%
per annum which shall be assessed and collected from the date prescribed for its payment
until the full payment thereof (Sec. 249[B], NIRC).

b. Delinquency Interest In case of failure to pay:

i. The amount of the tax due on any return required to be filed; or
ii. The amount of the tax due for which no return is required; or
iii. A deficiency tax, or any surcharge or interest thereon on the due date appearing in
the notice and demand of the CIR (Sec. 249[C], NIRC).

c. Interest of Extended Payment – An interest of 12% p.a. shall be assessed and collected in
the following cases:
i. When a taxpayer elects to pay the tax on installment but fails to pay the tax
or any installment thereof on or before the date prescribed for its payment;
ii. Where the CIR has authorized an extension of time within which to pay a tax or a
deficiency tax or any part thereof (Sec. 249[D], NIRC).
 CIVIL PENALTIES

Compromise It is a penalty imposed in settlement of a tax liability to get away from any criminal
Penalty prosecution. In practice, this is imposed whenever there is a criminal violation of the tax
code.

Maximum: P 25,000 per taxable year (but there is a table, need not be memorized)
LOCAL GOVERNMENT
TAXATION
 Local Government Taxation

• The Fundamental Principles

• Taxation shall be uniform in each LGU
• Taxes, fees, charges and other impositions shall:
• be equitable and based as far as practicable on the TP’s ability
to pay
• be levied and collected only for public purposes
• public purpose
• not unjust, excessive, oppressive, or confiscatory; and
• not be contrary to law, public policy, national economic policy,
or in restraint of trade
Local Government Taxation

• The collection of local taxes, fees, charges and other impositions shall in no case be
let to any private person
• The revenue collected shall inure solely to the benefit of and be subject to disposition
by the LGU levying the tax, fee, charge or imposition unless otherwise provided in the
LGC
• Each LGU shall, as far as practicable, evolve a progressive system of taxation.
 Nature and Source of Taxing Power

• Grant of local taxing power under the Local Government Code

• It is constitutionally granted and is expressly provided to be subject to the
limitations set by Congress
• Section 129. Power to Create Sources of Revenue. - Each local
government unit shall exercise its power to create its own sources of
revenue and to levy taxes, fees, and charges subject to the provisions
herein, consistent with the basic policy of local autonomy. Such taxes,
fees, and charges shall accrue exclusively to the local government units.
 Nature and Source of Taxing Power

• Authority to prescribe penalties for tax violations

• Section 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. - The
sanggunian may impose a surcharge not exceeding twenty-five (25%) of the
amount of taxes, fees or charges not paid on time and an interest at the rate not
exceeding two percent (2%) per month of the unpaid taxes, fees or charges
including surcharges, until such amount is fully paid but in no case shall the total
thirty-six (36) months.
 Nature and Source of Taxing Power

• Authority to grant local tax exemptions

• Section 192. Authority to Grant Tax Exemption Privileges. -
Local government units may, through ordinances duly approved,
grant tax exemptions, incentives or reliefs under such terms and
conditions as they may deem necessary.
 Nature and Source of Taxing Power

• Withdrawal of exemptions
• Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or
presently enjoyed by all persons, whether natural or juridical, including
government-owned or controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock and
non-profit hospitals and educational institutions, are hereby withdrawn
upon the effectivity of this Code.
 Nature and Source of Taxing Power

• Authority to adjust local tax rates

• Section 191. Authority of Local Government Units to Adjust Rates of Tax
Ordinances. - Local government units shall have the authority to adjust
the tax rates as prescribed herein not oftener than once every five (5)
years, but in no case shall such adjustment exceed ten percent (10%) of
the rates fixed under this Code.
 Nature and Source of Taxing Power

• Residual taxing power of local governments

• Section 186. Power To Levy Other Taxes, Fees or Charges. - Local
government units may exercise the power to levy taxes, fees or charges on
any base or subject not otherwise specifically enumerated herein or taxed
under the provisions of the National Internal Revenue Code, as amended,
or other applicable laws: Provided, That the taxes, fees, or charges shall
not be unjust, excessive, oppressive, confiscatory or contrary to declared
national policy: Provided, further, That the ordinance levying such taxes,
fees or charges shall not be enacted without any prior public hearing
conducted for the purpose.
 Scope of Taxing Power

• Section 128. Scope. - The provisions herein shall govern the exercise by
provinces, cities, municipalities, and barangays of their taxing and other
revenue-raising powers.

• EXCLUSIONARY RULE – refers to the pre-emption of one government unit on

the right of another government unit to impose a tax. Once a tax has been
imposed by the National Government, it can longer be imposed by the LGU. As
a rule, the National Government pre-empts the taxing role of the Local
Government unit unless otherwise provided.
 Specific taxing power of LGUs: Province

• Tax on Transfer of Real Property Ownership.

• Basis: consideration
• Rate: Not exceeding fifty percent (50%) of the one percent (1%)
• Deadline for payment: Within sixty (60) days from the date of
the execution of the deed or from the date of the decedent's
death.
 Specific taxing power of LGUs: Province

• Tax on Business of Printing and Publication

• Not a tax on the business of selling books
• Rate: 1st year of operation – capital investment; Succeeding
years - fifty percent (50%) of one percent (1%) of the gross
annual receipts.
 Specific taxing power of LGUs: Province

• Franchise Tax
• Tax on businesses enjoying a franchise.
• Entities exempted from National Franchise Tax are still subject
to Local Franchise Tax because this is a separate tax. It’s not
double taxation because you have different taxing authority.
• Basis: Gross annual receipts for the preceding calendar year
based on the incoming receipt, or realized, within its territorial
jurisdiction.
• Rate: Not exceeding fifty percent (50%) of one percent (1%)
 Specific taxing power of LGUs: Province

• Tax on Sand, Gravel and Other Quarry Resources

• Rate: Not more than ten percent (10%)
• Basis: Fair market value in the locality
• Coverage: those extracted from public lands.
• The proceeds of the revenues generated shall be distributed as follows:
• Province - Thirty percent where the sand, gravel, and other quarry resources are
extracted (30%);
• Component City or Municipality where the sand, gravel, and other quarry resources
are extracted - Thirty percent (30%)
• Barangay where the sand, gravel, and other quarry resources are extracted - Forty
percent (40%).
 Specific taxing power of LGUs: Province

• Professional Tax
• GR: Impose on persons engaged in the exercise or practice of his
profession requiring government examination.
• EXC: Professionals exclusively employed in the government.
• Situs of the tax: Province where he practices his profession or where he
maintains his principal office in case he practices his profession in several
places.
 Specific taxing power of LGUs: Province

• Amusement Tax
• Rate: 10%
• Basis: gross receipts
• Who are subject to this tax: proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia, and other places of
amusement
 Specific taxing power of LGUs: Province

• Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or

Producers, Wholesalers of, Dealers, or Retailers in, Certain Products
• Who are taxable: every truck, van or any vehicle used by manufacturers,
producers, wholesalers, dealers or retailers in the delivery or distribution
of distilled spirits, fermented liquors, soft drinks, cigars and cigarettes,
and other products as may be determined by the sangguniang
panlalawigan, to sales outlets, or consumers.
 Specific taxing power of LGUs: Municipalities

• Fees and Charges

• Who are taxable: any person engage in business, or occupation, or practice
of any profession or calling
• Exception: those who are already subject to professional tax under Sec.
139
 Specific taxing power of LGUs: Municipalities

• Fees for Sealing and Licensing of Weights and Measures

• Who are taxable: any person using weights and measures
• Rate: reasonable rate
• Penalty on fraudulent practices and unlawful possession or use of
instruments of weights and measure
 Specific taxing power of LGUs: Municipalities

• Fishery Rentals, Fees and Charges

• Who are taxable: Those who were granted fishery privileges
• Preference on registered organization and cooperative of marginal
fishermen
• Free for marginal fishermen: privilege to gather, take or catch bangus fry,
prawn fry or kawag-kawag or fry of other species and fish from the
municipal waters
• Issue licenses for the operation of fishing vessels of three (3) tons or less
 Specific taxing power of LGUs: Municipalities

• Local Business Tax

• Can only be imposed by the municipality and city
• LBT is a tax based on gross receipts or gross sales not on income. It is a tax
on the operation of the business and also as under the police power of
LGUs in regulating the business.
• Just look at what is the minimum and maximum rate for every type of
business that is subject to local business tax.
• LBT is imposed on the gross sales or gross receipts based on the preceding
year.
• Same line of business should be consolidated; otherwise, they should be
separately taxes
 Specific taxing power of LGUs: Municipalities

• Local Business Tax

Manufacturers, assemblers, Exporters, and on
repackers, processors, brewers, Wholesalers, manufacturers, millers,
distributors, or dealers in
distillers, rectifiers, and compounders producers, wholesalers,
of liquors, distilled spirits, and wines any article of commerce distributors, dealers or Retailers
of whatever kind or
or manufacturers of any article of retailers of essential
nature
commerce of whatever kind or nature commodities

Peddlers engaged in the

Contractors and other Banks and other financial sale of any merchandise Any business not
independent contractors institutions otherwise specified
or article of commerce
 Specific taxing power of LGUs: Municipalities

• Retirement of Business
• SEC. 145. 4 Retirement of Business. - A business subject to tax pursuant to
the preceding sections shall, upon termination thereof, submit a sworn
statement of its gross sales or receipts for the current year. If the tax
paid during the year be less than the tax due on said gross sales or
receipts of the current year, the difference shall be paid before the
business is considered officially retired.
 Specific taxing power of LGUs: Municipalities

• Situs of Taxation
• If with sales transaction, LGU of branch or sales outlet; otherwise, LGU of
principal office
• Sales allocation: 30% LGU of principal office; 70% LGU of
factory/plantation
• 70% : 60% LGU of factory; 40% LGU of plantation
• 2 or more factories/plantation: prorated based on volume of production
Specific taxing power of LGUs: Cities

• The city, may levy the taxes, fees, and charges which the
province or municipality may impose;
• Rule of Pre-emption
• Rate is higher by 50%, except for Professional and Amusement
Tax
 Specific taxing power of LGUs: Barangays

• Taxes
• Who are taxable: only stores or retailers with gross receipts of—
• P50,000 or less if located in city
• P30,000 or less if located in municipality
• Rate: not exceeding 1%
• Basis: on gross sales or receipts
 Specific taxing power of LGUs: Barangays

• Service Fees or Charges - barangays may collect reasonable fees or

charges for services rendered in connection with the regulation or the
use of barangay-owned properties or service facilities such as palay,
copra, or tobacco dryers.
• Barangay Clearance
• Other fees and charges:
(1) On commercial breeding of fighting cocks, cockfights and cockpits;
(2) On places of recreation which charge admission fees; and
(3) On billboards, signboards, neon signs, and outdoor advertisements.
 Common Revenue Raising Power

• SEC. 153. Service Fees and Charges. - Local government units may
impose and collect such reasonable fees and charges for services
rendered.

• SEC. 154. Public Utility Charges. - Local government units may fix
the rates for the operation of public utilities owned, operated and
maintained by them within their jurisdiction.
 Common Revenue Raising Power

• SEC. 155. Toll Fees or Charges. - The sanggunian concerned may prescribe the terms and
conditions and fix the rates for the imposition of toll fees or charges for the use of any public
road, pier or wharf, waterway, bridge, ferry or telecommunication system funded and
constructed by the local government unit concerned
• Exceptions:
1. officers and enlisted men of the Armed Forces of the Philippines and members of
the Philippine National Police on mission;
2. post office personnel delivering mail;
3. physically-handicapped; and
4. disabled citizens who are sixty-five (65) years or older
 Community Tax

• WHO MAY LEVY COMMUNITY TAX:

• Only cities and municipalities may levy community tax.
• SEC. 156. Community Tax. - Cities or municipalities may levy a community
tax in accordance with the provisions of this Article.
• TO WHOM IT MAY BE IMPOSED:
• Individual
• Juridical Persons
 Community Tax - Individual

• Every inhabitant of the Philippines eighteen (18) years of age or over

who has been regularly employed on a wage or salary basis for at least
thirty (30) consecutive working days during any calendar year, or
• who is engaged in business or occupation, or
• who owns real property with an aggregate assessed value of One
thousand pesos (P=1,000.00) or more, or
• who is required by law to file an income tax return
 Community Tax – Individual

Tax • an annual community tax of Five pesos (P=5.00) and

Rate • an annual additional tax of One peso (P=1.00) for every
One thousand pesos (P=1,000.00) of income regardless
of whether from business, exercise of profession or
from property which in no case shall exceed Five
thousand pesos (P=5,000.00).
Tax Base income of the individual or if no income based on real
property’s aggregate assessed value or both
 Community Tax – Juridical Person

Who Every corporation no matter how created or organized, whether domestic or resident
foreign, engaged in or doing business in the Philippines shall pay an annual community
tax
Tax Base • on the valuation used for the payment of the real property tax under existing laws, found
in the assessment rolls of the city or municipality where the real property is situated
• gross receipts or earnings derived by it from its business in the Philippines during the
preceding year
• The dividends received by a corporation from another corporation however shall, for the
purpose of the additional tax, be considered as part of the gross receipts or earnings of
said corporation.
 Community Tax – Juridical Person

Tax Rate Basic of Five hundred pesos (P=500.00) and an annual additional tax, which, in no case,
shall exceed Ten thousand pesos (P=10,000.00)
• For every Five thousand pesos (P=5,000.00) worth of real property in the
Philippines owned by it during the preceding year based on the valuation additional
Two pesos (P=2.00);
• For every Five thousand pesos (P=5,000.00) of gross receipts or earnings derived
by it from its business in the Philippines during the preceding year - Two pesos
(P=2.00).
 Community Tax

• SEC. 159. Exemptions. - The following are exempt from the community tax:
• (1) Diplomatic and consular representatives; ABSOLUTE EXEMPTION
• (2) Transient visitors when their stay in the Philippines does not exceed three
(3) months. RELATIVE EXEMPTION
• those below 18 are not exempted from CTC but are EXCLUDED from CTC.
• Place of Payment. - The community tax shall be paid in the place of residence of
the individual, or in the place where the principal office of the juridical entity is
located
 Community Tax

• GR: The community tax shall accrue on the first (1st) day of January of each year which shall be
paid not later than the last day of February of each year.
• EXC: If a person reaches the age of eighteen (18) years or otherwise loses the benefit of
exemption on or before the last day of June, he shall be liable for the community tax on the
day he reaches such age or upon the day the exemption ends.
• However, if a person reaches the age of eighteen (18) years or loses the benefit of exemption on
or before the last day of March, he shall have twenty (20) days to pay the community tax
without becoming delinquent.
• Persons who come to reside in the Philippines or reach the age of eighteen (18) years on or after
the first (1st) day of July of any year, or who cease to belong to an exempt class on or after
the same date, shall not be subject to the community tax for that year
 Community Tax

• If the tax is not paid within the time prescribed above, there shall be added to the
unpaid amount an interest of twenty-four percent (24%) per annum from the due
date until it is paid.
• A community tax certificate shall be issued to every person or corporation upon
payment of the community tax. A community tax certificate may also be issued to
any person or corporation not subject to the community tax upon payment of One
peso (P=1.00).
• CTC is required to be exhibited when acknowledging document before public officers
or notary public, except when registering as voter
• CTC is required to be exhibited when corp. receives any license, certificate or permit
 Community Tax

• WHO PRINTS THE CTC: BIR

• WHO COLLECTS THE CTC: The city or municipal treasurer shall

deputize the barangay treasurer to collect the community tax in their
respective jurisdictions: Provided, however, That said barangay
treasurer shall be bonded in accordance with existing laws
 Common Limitations

• The exercise of the taxing powers of provinces, cities, municipalities, and

barangays shall not extend to the levy of the following:
• Income tax, except when levied on banks and other financial institutions;
• Documentary stamp tax;
• Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except Local
Transfer Tax.
• Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all
other kinds of customs fees, charges and dues except wharfage on wharves constructed and
maintained by the local government unit concerned;
• Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing
through, the territorial jurisdictions of local government units in the guise of charges for
wharfage, tolls for bridges or otherwise, or other taxes, fees, or charges in any form
whatsoever upon such goods or merchandise;
• Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or
fishermen;
 Requirements for Valid Tax Ordinance

• Public hearings shall be conducted for the purpose prior to the enactment
thereof.
• Once everything is put into order, the Sanggunian will now pass the ordinance.
• Approval by the Local Chief Executive.
• Publication for 3 consecutive days
• If it requires an implementing rules and regulations, the law may not be
implemented until such implementing rules and regulations are issued.
 Questioning the Tax Ordinance

• question the legality or constitutionality of such ordinance within 30 days from

the effectivity of such ordinance. à PETITION with the Sec. of Justice. This is
only a precursor to an action in court;
• SOJ then is given a period to decide of 60 days.
• If denied: file a PETITION FOR DECLARATORY RELIEF with the RTC within 30 days
from denial. Because you are questioning the constitutionality of a local tax
ordinance.
• If inaction of the SOJ: file a PETITION FOR DECLARATORY RELIEF with the RTC
within 30 days after the lapse of 60 days for the SOJ to decide.
 Taxpayer’s Remedies

Protest (Section 195)

Appeal to
File Protest RTC/MTC
with LT within within 30 days Appeal to CTA
within 30 days
60 days from from receipt of
from receipt of
receipt of LT decision or
RTC/MTC
Notice of lapse of 60
decision
Assessment days from filing
of protest
 Taxpayer’s Remedies

Refund (Section 196)

Appeal to
Appeal to
RTC/MTC
File written CTA within 30
within 2
claim for days from
years from
refund with receipt of
entitlement
LT RTC/MTC
for refund or
decision
credit
Assessment

Accrual GR: all local taxes, fees, and charges shall accrue on the first (1st) day of January of
each year.
EXC: However, new taxes, fees or charges, or changes in the rates thereof, shall accrue
on the first (1st) day of the quarter next following the effectivity of the ordinance
imposing such new levies or rates.
Deadline all local taxes, fees, and charges shall be paid within the first twenty (20) days of January
or of each subsequent quarter, as the case may be.
The sanggunian concerned may, for a justifiable reason or cause, à extend the time for
payment of such taxes, fees, or charges without surcharges or penalties, but only for a
period not exceeding six (6) months
Accounting Calendar Year
Period
Collector provincial, city, municipal, or barangay treasurer, or their duly authorized deputies
 Assessment

• CAN LOCAL TREASURER LOOK AT THE BOOKS OF THE TAXPAYER:

• The provincial, city, municipal or barangay treasurer may, by himself or
through any of his deputies duly authorized in writing, examine the books,
accounts, and other pertinent records of any person, partnership, corporation,
or association subject to local taxes, fees and charges in order to ascertain,
assess, and collect the correct amount of the tax, fee, or charge.
• Such examination shall be made during regular business hours, only once for
every tax period, and shall be certified to by the examining official.
 Collection

• Local Government's Lien.

Local taxes, fees, charges and other revenues constitute a lien, superior to all
liens, charges or encumbrances in favor of any person, enforceable by
appropriate administrative or judicial action, not only upon any property or
rights therein which may be subject to the lien but also upon property used in
business, occupation, practice of profession or calling, or exercise of privilege
with respect to which the lien is imposed.

The lien may only be extinguished upon full payment of the delinquent local taxes
fees and charges including related surcharges and interest.
 Collection

• Civil Remedies
• Distraint or Levy
• Judicial Action
• w/o ASSESSMENT: Local taxes, fees, or charges shall be assessed within five (5) years from the
date they became due. (BECAME DUE)
• w/ ASSESSMENT: Local taxes, fees, or charges may be collected within five (5) years
from the date of assessment by administrative or judicial action. (date of assessment)
• In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may
be assessed within ten (10) years from discovery of the fraud or intent to evade
payment. (DISCOVERY)
REAL PROPERTY TAX
 Fundamental Principles (SEC. 198)

(a) Real property shall be appraised at its current and fair market value;
(b) Real property shall be classified for assessment purposes on the basis of
its actual use;
(c) Real property shall be assessed on the basis of a uniform classification
within each local government unit;
(d) The appraisal, assessment, levy and collection of real property tax shall
not be let to any private person; and
(e) The appraisal and assessment of real property shall be equitable.
Nature

Real property tax is a tax on the property.

Imposition (SEC. 232/233/235)

AUTHORITY PROVINCE / CITY / MUNICIPALITY WITHIN METRO

MANILA
SUBJECT LAND / BUILDING / MACHINERY / IMPROVEMENT
TAX RATE BASIC RPT – 1% (PROVINCE)
- 2% (CITY / MUNICIPALITY)
SEF – 1%
TAX BASE ASSESSED VALUE
 Special Levy (SEC. 237 & 240)

Ad valorem Rate not exceeding five percent (5%) of the assessed

tax on Idle value
Land Coverage Agricultural Land & Non-Agricultural Land

Rate not exceed sixty percent (60%) of the actual cost

of such projects and improvements, including the
Special costs of acquiring land and such other real
Assessment property
Coverage on project or improvement which raises the value
of the land
 Imposition – Exemption (SEC. 234)

1. Real property owned by the Republic of the Philippines or any

of its political subdivisions, except when the beneficial use
thereof has been granted, for consideration or otherwise, to a
taxable person;
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;
 Imposition - Exemption

3. All machineries and equipment that are actually, directly and

exclusively used by local water districts and government owned
or controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power;
4. All real property owned by duly registered cooperatives as
provided for under R.A. No. 6938
5. Machinery and equipment used for pollution control and
environmental protection.
 Appraisal and Assessment

• All real property, whether taxable or exempt, shall be appraised at the

current and fair market value prevailing in the locality where the property is
situated. (Sec. 201)
• file with the provincial, city or municipal assessor, a sworn statement
declaring the true value of their property, whether previously declared or
undeclared, taxable or exempt, which shall be the current and fair market
value of the property, as determined by the declarant (Sec. 202)
• the provincial, city or municipal assessor shall himself declare the property in
the name of the defaulting owner, if known, or against an unknown owner, as
the case may be, and shall assess the property for taxation (Sec. 204)
Classes of Real Property (Sec. 215)

Residential Agricultural Commercial Industrial

Mineral Timberland Special

 Special Class (Sec. 216)

actually, directly and exclusively used for

hospitals, cultural, or scientific purposes
owned and used by local water districts
owned and used by GOCC rendering
LAND, BUILDINGS AND
essential public service in the supply and
IMPROVEMENTS
distribution of water
owned and used by GOCC rendering
essential public service in the generation
and transmission of electric power
 Appraisal and Assessment

• Real property shall be classified, valued and assessed on the basis

of its actual use regardless of where located, whoever owns it, and
whoever uses it (Sec. 217)
• Zero Assessment Level which only applies to a residential
buildings and other structures when the value does not exceed
P175,000 (Sec. 218)
• LGUs can generally amend or revise the assessment levels and the
classifications of property once every 3 years. (Sec.219)
 Collection (Secs. 246-249)

• accrue on the first day of January and from that date it shall constitute a
lien on the property which shall be superior to any other lien, mortgage, or
encumbrance of any kind whatsoever, and shall be extinguished only upon
the payment of the delinquent tax.
• DEADLINE OF PAYMENT: depends on ordinance but there is required quarterly
payments which are 31st day of March, June, September and December
• TAX DISCOUNT FOR ADVANCE PAYMENT:
• ANNUAL on or before the 31st day on January àdiscount of not exceeding (20%) of
the annual tax due.
• INSTALLMENT on or before the last day of the end of each quarter à discount of
10% prompt payment
 Periods to Collect (Sec. 270)

General PP 5 years from due date

Extended PP 10 years from discovery
Grounds for (1) The local treasurer is legally prevented from collecting the
suspension of tax;
PP (2) The owner of the property or the person having legal interest
therein requests for reinvestigation and executes a waiver in
writing before the expiration of the period within which to
collect; and
(3) The owner of the property or the person having legal interest
therein is out of the country or otherwise cannot be located.
LGU Remedies (Sec. 256)

Lien (Sec. 257)

Administrative Distraint (Sec. 254)
Levy (Sec. 258)

• The civil action shall be filed by the local

Judicial treasurer within the period of 5 years for
ordinary cases or 10 years if there is fraud.
Taxpayer’s Remedies

Contesting an Assessment

Contesting the valuation

Compromise
Contesting an Assessment (for Tax)

File Protest CTA en banc Supreme Court

with LT within LBAA (60 days CBAA (30 days (30 days from (15 days from
Payment under from receipt of from receipt of
Protest 30 days from receipt of receipt of
payment decision) decision) decision) decision)
Refund

File Claim for Supreme Court

Refund with LT LBAA (60 days CBAA (30 days CTA en banc (30 (15 days from
from receipt of from receipt of days from receipt
within 2 years receipt of
from entitlement decision) decision) of decision) decision)
Contesting the Valuation/Classification

CTA en banc Supreme

LBAA (60 days CBAA (30 days
(30 days from Court (15 days
from receipt from receipt
receipt of from receipt
of NOA) of decision)
decision) of decision)
Condonation/Reduction

In case of a general failure of crops or substantial

Sanggunian decrease in the price of agricultural or agribased

products, or calamity in any province, city or
municipality

President • when public interest so requires

COURT OF TAX APPEALS
 CTA DIVISION: EXCLUSIVE Original AND appellate
JURISDICTION

CIVIL CASES
1. Decisions of the Commissioner of Internal Revenue (CIR) in cases
involving disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties in relation thereto, or other matters
arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue;
2. Inaction of the CIR on the foregoing cases;
3. Decisions, resolutions or orders of the Regional Trial Courts in local
tax cases decided or resolved by them in the exercise of their
original jurisdiction;
 CTA DIVISION: EXCLUSIVE Original AND appellate
JURISDICTION
CIVIL CASES
4. Decisions of the Commissioner of Customs in cases involving liability for
customs duties, fees or other money charges, seizure, detention or release of
property affected, fines, forfeitures of other penalties in relation thereto, or
other matters arising under the Customs Law or other laws administered by the
Bureau of Customs;
5. Decisions of the Secretary of Finance on customs cases elevated to him
automatically for review from decisions of the Commissioner of Customs adverse
to the Government;
6. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural
product, commodity or article, and the Secretary of Agriculture, in the case of
 CTA DIVISION: EXCLUSIVE Original AND appellate
JURISDICTION
CIVIL CASES
7. Original jurisdiction in tax collection cases involving final and
executory assessments for taxes, fees, charges and penalties, where
the principal amount of taxes and fees, exclusive of charges and
penalties, claimed is one million pesos or more; and
8. Appellate jurisdiction over appeals from the judgments,
resolutions or orders of the Regional Trial Courts in tax collection
cases originally decided by them within their respective territorial
jurisdiction.
 CTA Division: COLLECTION CASES

Petition for Review CTA En Banc

MR/NT with CTA Division (Rule 42) (Rule 43) Supreme Court
Plaintiff files a Complaint
(15 days) / extended for 15 days) (15 days under Rule 45)
(15 days)

Petition for Review CTA En

Appellant files a Petition for Review MR/NT with CTA Division (Rule 42) Banc(Rule 43) Supreme Court
(30 days from receipt of decision) (15 days w/ 15 days extension) (15 days under Rule 45)
(15 days)
 CTA DIVISION: Civil CASES

Petitioner files Petition for Review MR/NT with CTA Division (Rule 42) Petition for Review CTA En Banc (Rule 43) Supreme Court
(30 days after receipt of decision/ lapse of
(15 days w/ 15 days extension) (15 days)
180 days/ 2-year period in case of refund) (15 days under Rule 45)

Petition for Review CTA En Banc (Rule

Appellant files a Petition for Review MR/NT with CTA Division (Rule 42) 43) Supreme Court
(30 days from receipt of RTC decision) (15 days w/ 15 days extension) (15 days under Rule 45)
(15 days)
 CTA DIVISION: EXCLUSIVE Original AND appellate
JURISDICTION
CRIMINAL CASES
1. Original jurisdiction over all criminal offenses arising from violations of the
National internal Revenue Code or Tariff and Customs Code and other laws
administered by the Bureau of Internal Revenue or the Bureau of Customs,
where the principal amount of taxes and fees, exclusive of charges and
penalties, claimed is one million pesos or more; and
2. Appellate jurisdiction over appeals from the judgments, resolutions or orders
of the Regional Trial Courts in their original jurisdiction in criminal offenses
arising from violations of the National Internal Revenue Code or Tariff and
Customs Code and other laws administered by the Bureau of Internal Revenue
or Bureau of Customs, where the principal amount of taxes and fees, exclusive
of charges and penalties, claimed is less than one million pesos or where
 CTA Division: CRIMINAl CASES

Petition for Review with CTA en banc (Rule

File information after securing approval from 43) Supreme Court
CIR / CoC (15 days under Rule 45)
(15 days w/ 15 days extension)

Petition for Review with CTA en banc (Rule

43) Supreme Court
Appellant files a Petition for Review
(15 days under Rule 45)
(15 days w/ 15 days extension)
Suspension of COLLECTION OF TAXES

vjeopardize the interest of government or taxpayer

vfile a motion for suspension of collection of taxes

(together with petition for review or answer or as a
separate motion)

vcorporate surety bonds

 CTA En Banc: JURISDICTION

a. Decisions or resolutions on motions for reconsideration or new

trial of the Court in Divisions in the exercise of its exclusive
appellate jurisdiction over
(1)Cases arising from administrative agencies – Bureau of Internal Revenue,
Bureau of Customs, Department of Finance, Department of Trade and Industry,
Department of Agriculture;
(2) Local tax cases decided by the Regional Trial Courts in the exercise of their
original jurisdiction; and
(3) Tax collection cases decided by the Regional Trial Courts in the exercise of
their original jurisdiction involving final and executory assessments for taxes,
fees, charges and penalties, where the principal amount of taxes and penalties
claimed is less than one million pesos;
 CTA En Banc: JURISDICTION

(b) Decisions, resolutions or orders of the Regional Trial Courts in

local tax cases decided or resolved by them in the exercise of
their appellate jurisdiction;
(c) Decisions, resolutions or orders of the Regional Trial Courts in
tax collection cases decided or resolved by them in the exercise
of their appellate jurisdiction;
(d) Decisions, resolutions or orders on motions for reconsideration
or new trial of the Court in Division in the exercise of its exclusive
original jurisdiction over tax collection cases;
 CTA En Banc: JURISDICTION

(e) Decisions of the Central Board of Assessment Appeals (CBAA) in

the exercise of its appellate jurisdiction over cases involving the
assessment and taxation of real property originally decided by the
provincial or city board of assessment appeals;
(f) Decisions, resolutions or orders on motions for reconsideration
or new trial of the Court in Division in the exercise of its exclusive
original jurisdiction over cases involving criminal offenses arising
from violations of the National Internal Revenue Code or the Tariff
and Customs Code and other laws administered by the Bureau of
Internal Revenue or Bureau of Customs;
 CTA En Banc: JURISDICTION

(g) Decisions, resolutions or orders on motions for reconsideration

or new trial of the Court in Division in the exercise of its exclusive
appellate jurisdiction over criminal offenses mentioned in the
preceding subparagraph; and
(h) Decisions, resolutions or orders of the Regional trial Courts in
the exercise of their appellate jurisdiction over criminal offenses
mentioned in subparagraph (f).
APPEAL to the supreme court

vfile a verified petition for review on certiorari

vwithin fifteen days from receipt of a copy of

the decision or resolution

vunder Rule 45 of the Rules of Court

THANK YOU!