TAXATION LAW.

Taxation law refers to any law that arises from the exercise of the taxation power of the State.

Types of taxation laws

1. Tax laws. These are laws that provide for the assessment and collection of taxes.

Examples:

a. The National Internal Revenue Code (NIRC)

b. The Tariff and Customs Code
c. The Local Tax Code
d. The Real Property Tax Code

2. Tax exemption laws. These are laws that grant certain immunity from taxation.

Examples:

a. The Minimum Wage Law

b. The Omnibus Investment Code of 1987 (E.O.226)
c. Barangay Micro-Business Enterprise (BMBE) Law
d. Cooperative Development Act

Sources of Taxation Laws

1. Constitution
2. Statutes and Presidential Decrees
3. Judicial Decisions or case laws
4. Executive Orders and Batas Pambansa
5. Administrative Issuances
6. Local Ordinances
7. Tax Treaties and Conventions with foreign countries
8. Revenue Regulations

Types of Administrative Issuances

1. Revenue regulations
2. Revenue memorandum orders
3. Revenue memorandum rulings
4. Revenue memorandum circulars
5. Revenue bulletins
6. BIR rulings
Revenue Regulations are issuances signed by the Secretary of Finance upon recommendation
of the Commissioner of Internal Revenue (CIR) that specify, prescribe, or define rules and
regulations for the effective enforcement of the provisions of the National Internal Revenue
Code (NIRC) and related statutes.

Revenue regulations are formal pronouncements intended to clarify or explain the tax law and
carry into effect its general provisions by providing details of administrative and procedure.
Revenue regulation has the force and effect of a law, but is not intended to expand or limit the
application of the law; otherwise, it is void.

Revenue Memorandum Orders (RMOs) are issuances that provide directives and instructions;
prescribe guidelines; and outline processes, operations, activities, workflows, methods, and
procedures necessary in the implementation of state policies, goals, objectives, plans, and
programs of the Bureau in all areas of operation except auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the CIR with
respect to the provisions of the Tax Code and other tax laws as applied to a specific set of facts,
with or without established precedents, and which the CIR may issue from time to time for the
purpose of providing taxpayers guidance on the tax consequences in specific situations. BIR
Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and
void ab initio.

Revenue Memorandum Circulars (RMCs) are issuances that publish pertinent and applicable
portions as well as amplifications of laws, rules, regulations, and precedents issued by the BIR
and other agencies/offices.

Revenue Bulletins (RB) refer to periodic issuances, notices, and official announcements of the
Commissioner of Internal Revenue that consolidate the Bureau of Internal Revenue’s position
on certain specific issues of law or administration in relation to the provisions of the Tax Code,
relevant tax laws, and other issuances for the guidance of the public.

BIR Rulings are official positions of the Bureau to queries raised by taxpayers and other
stakeholders relative to clarification and interpretation of tax laws.

Rulings are merely advisory or a sort of information service to the taxpayer such that none of
them is binding except to the addressee and may be reversed by the BIR at anytime.

Types of rulings

1. Value Added Tax (VAT) rulings

2. International Tax Affairs Division (ITAD) rulings
3. BIR rulings
4. Delegated Authority (DA) rulings
Generally Accepted Accounting Principles (GAAP) vs. Tax Laws

Generally accepted accounting principles or GAAP are not laws, but are mere conventions of
financial reporting. They are benchmarks for the fair and relevant valuation and recognition of
income, expense, assets, liabilities, and equity of a reporting entity for general purpose financial
reporting. GAAP accounting reports are intended to meet the common needs of a vast number
of users in the general public.

Tax laws including rules, regulations, and rulings prescribe the criteria for tax reporting a special
form of financial reporting which is intended to meet specific needs of tax authorities.

Taxpayers normally follow GAAP in recording transactions in their books. However, in the
preparation and filing of tax returns, taxpayers are mandated to follow the tax law in cases of
conflict with GAAP.

NATURE OF PHILIPPINE TAX LAWS

Philippine tax laws are civil and not political in nature. They are effective even during periods of
enemy occupation. They are laws of the occupied territory and not by the occupying enemy. Tax
payments made during occupations of foreign enemies are valid.

Our internal revenue laws are not penal in nature because they do not define crime. Their
penalty provisions are merely intended to secure taxpayers’ compliance.

TAX

Tax is an enforced proportional contribution levied by the lawmaking body of the State to raise
revenue for public purpose.

Elements of a Valid Tax

1. Tax must be levied by the taxing power having jurisdiction over the object of taxation.
2. Tax must not violate Constitutional and inherent limitations.
3. Tax must be uniform and equitable.
4. Tax must be for public purpose.
5. Tax must be proportional in character.
6. Tax is generally payable in money.

Classification of Taxes

A. As to purpose

1. Fiscal or revenue tax - a tax imposed for general purpose

2. Regulatory - a tax imposed to regulate business, conduct, acts or transactions

3. Sumptuary - a tax levied to achieve some social or economic objectives

B. As to subject matter

1. Personal, poll or capitation - a tax on persons who are residents of a particular territory

2. Property tax - a tax on properties, real or personal

3. Excise or privilege tax - a tax imposed upon the performance of an act or enjoyment of a
privilege or engagement in an occupation

C. As to incidence

1. Direct tax - When both the impact and incidence of taxation rest upon the same taxpayer, the
tax is said to be direct. The tax is collected from the person who is intended to pay the same.
The statutory taxpayer is the economic taxpayer.

2. Indirect tax - When the tax is paid by any person other than the one who is intended to pay
the same, the tax is said to be indirect. This occurs in the case of business taxes where the
statutory taxpayer is not the economic taxpayer.

The statutory taxpayer is the person named by law to pay the tax. An economic taxpayer is the
one who actually pays the tax.

D. As to amount

1. Specific tax - a tax of a fixed amount imposed on a per unit basis such as per kilo, liter or
meter, etc.

2. Ad valorem - a tax of a fixed proportion imposed upon the value of the tax object

E. As to rate

1. Proportional tax - This is a flat or fixed rate tax. The use of proportional tax emphasizes
equality as it subjects all taxpayers with the same rate without regard to their ability to pay.

2. Progressive or graduated tax - This is a tax which imposes increasing rates as the tax base
increases. The use of progressive tax rates results in equitable taxation because it gets more
tax to those who are more capable. It aids in lessening the gap between the rich and the poor.
3. Regressive tax - This tax imposes decreasing tax rates as the tax base increases. This is the
total reverse of progressive tax. Regressive tax is regarded as anti-poor. It directly violates the
Constitutional guarantee of progressive taxation.

4. Mixed tax - This tax manifests tax rates which is a combination of any of the above types of
tax.

F. As to imposing authority

1. National tax - tax imposed by the national government

Examples:
a. Income tax - tax on annual income, gains or profits
b. Estate tax - tax on gratuitous transfer of properties by a decedent upon death
c. Donor’s tax - tax on gratuitous transfer of properties by a living donor
d. Value Added Tax - consumption tax collected by VAT business taxpayers
e. Other percentage tax - consumption tax collected by non-VAT business taxpayers
f. Excise tax - tax on sin products and non-essential commodities such as alcohol, cigarettes
and metallic minerals. This should be differentiated with the privilege tax which is also called
excise tax.
g. Documentary stamp tax - a tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, sale or transfer of an obligation, right or property
incident thereto.

2. Local tax - tax imposed by the municipal or local government

Examples:
a. Real property tax
b. Professional tax
c. Business taxes, fees, and charges
d. Community tax
e. Tax on banks and other financial institutions

DISTINCTION OF TAXES WITH SIMILAR ITEMS

Tax vs. Revenue

Tax refers to the amount imposed by the government for public purposes. Revenue refers to all
income collections of the government which includes taxes, tariffs, licenses, toll, penalties and
others. The amount imposed is tax but the amount collected is revenue.

Tax vs. License fee

Tax has a broader subject than license. Tax emanates from taxation power and is imposed upon
any object such as persons, properties, or privileges to raise revenue.

License fee emanates from police power and is imposed to regulate the exercise of a privilege
such as the commencement of a business or a profession.

Taxes are imposed after the commencement of a business or profession whereas license fee is
imposed before engagement in those activities. In other words, tax is a post-activity imposition
whereas license is a pre-activity imposition.

Tax vs. Toll

Tax is a levy of government; hence, it is a demand of sovereignty. Toll is a charge for the use of
other’s property; hence, it is a demand of ownership.

The amount of tax depends upon the needs of the government, but the amount of toll is
dependent upon the value of the property leased.

Both the government and private entities impose toll, but private entities cannot impose taxes.

Tax vs. Debt

Tax arises from law while debt arises from private contracts. Non-payment of tax leads to
imprisonment, but non-payment of debt does not lead to imprisonment. Debt can be subject to
set-off but tax is not. Debt can be paid in kind (dacion en pago) but tax is generally payable in
money.

Tax draws interest only when the taxpayer is delinquent. Debt draws interest when it is so
stipulated by the contracting parties or when the debtor incurs a legal delay.

Tax vs. Special Assessment

Tax is an amount imposed upon persons, properties, or privileges. Special assessment is levied
by the government on lands adjacent to a public improvement. It is imposed on land only and is
intended to compensate the government for a part of the cost of the improvement.

The basis of special assessment is the benefit in terms of the appreciation in land value caused
by the public improvement. On the other hand, tax is levied without expectation of a direct
proximate benefit.

Unlike taxes, special assessment attaches to the land. It will not become a personal obligation
of the land owner. Therefore, the non-payment of special assessment will not result in
imprisonment of the owner (unlike in non-payment of taxes).
Tax vs. Tariff

Tax is broader than tariff. Tax is an amount imposed upon persons, privilege, transactions, or
properties. Tariff is the amount imposed on imported or exported commodities.

Tax vs. Penalty

Tax is an amount imposed for the support of the government. Penalty is an amount imposed to
discourage an act. Penalty may be imposed by both the government and private individuals. It
may arise both from law or contract whereas tax arises from law.

TAX SYSTEM

The tax system refers to the methods or schemes of imposing, assessing, and collecting taxes.
It includes all the tax laws and regulations, the means of their enforcement, and the government
offices, bureaus and withholding agents which are part of the machineries of the government in
tax collection. The Philippine tax system is divided into two: the national tax system and the
local tax system.

Types of Tax Systems According to Imposition

1. Progressive - employed in the taxation of income of individuals, and certain local business
taxes
2. Proportional - employed in taxation of corporate income and business
3. Regressive - not employed in the Philippines

Types of Tax System According to Impact

1. Progressive system

A progressive tax system is one that emphasizes direct taxes. A direct tax cannot be shifted.
Hence, it encourages economic efficiency as it leaves no other resort to taxpayers than to be
efficient. This type of tax system impacts more upon the rich.

2. Regressive system

A regressive tax system is one that emphasizes indirect taxes. Indirect taxes are shifted by
businesses to consumers; hence, the impact of taxation rests upon the bottom end of the
society. In effect, a regressive tax system is anti-poor.

It is widely believed that despite the Constitutional guarantee of a progressive taxation, the
Philippines has a dominantly regressive tax system due to the prevalence of business taxes.

TAX COLLECTION SYSTEMS

A. Withholding system on income tax - Under this collection system, the payor of the income
withholds or deducts the tax on the income before releasing the same to the payee and remits
the same to the government. The following are the withholding taxes collected under this
system:

1. Creditable withholding tax

a. Withholding tax on compensation - an estimated tax required by the government to be
withheld (i.e. deducted) by employers against the compensation income to their employees
b. Expanded withholding tax - an estimated tax required by the government to be deducted on
certain income payments made by taxpayers engaged in business

The creditable withholding tax is intended to support the self-assessment method to lessen the
burden of lump sum tax payment of taxpayers and also provides for a possible third-party check
for the BIR of non-compliant taxpayers.

2. Final withholding tax - a system of tax collection wherein payors are required to deduct the
full tax on certain income payments

The final withholding tax is intended for the collection of taxes from income with high risk of
non-compliance.

Similarities of final tax and creditable withholding tax

a. In both cases, the income payor withholds a fraction of the income and remits the same to the
government.
b. By collecting at the moment cash is available, both serve to minimize cash flow problems to
the taxpayer and collection problems to the government.

Final Withholding Tax Creditable Withholding Tax

Income tax withheld Full Only a portion

Coverage of withholding Certain passive income Certain passive and active

income

Who remits the actual tax Income payor Income payor for the CWT
and the taxpayer for the
balance

Necessity of income tax Not required Required

return for taxpayer
B. Withholding system on business tax - when the national government agencies and
instrumentalities including government-owned and controlled corporations (GOCCs) purchase
goods or services from private suppliers, the law requires withholding of the relevant business
tax (i.e. VAT or percentage tax). Business taxation is discussed under Business and Transfer
Taxation by the same author.

C. Voluntary compliance system - Under this collection system, the taxpayer himself determines
his income, reports the same through income tax returns and pays the tax to the government.
This system is also referred to as the "Self-assessment method."

The tax due determined under this system will be reduced by:
a. Withholding tax on compensation withheld by employers
b. Expanded withholding taxes withheld by suppliers of goods or services

The taxpayer shall pay to the government any tax balance after such credit or claim refund or
tax credit for excessive tax withheld.

D. Assessment or enforcement system - Under this collection system, the government identifies
non-compliant taxpayers, assesses their tax dues including penalties, demands for taxpayer’s
voluntary compliance or enforces collections by coercive means such as a summary proceeding
or judicial proceedings when necessary.

PRINCIPLES OF A SOUND TAX SYSTEM

According to Adam Smith, governments should adhere to the following principles or canons to
evolve a sound tax system:

1. Fiscal adequacy
2. Theoretical justice
3. Administrative feasibility

Fiscal adequacy

Fiscal adequacy requires that the sources of government funds must be sufficient to cover
government costs. The government must not incur a deficit. A budget deficit paralyzes the
government’s ability to deliver the essential public services to the people. Hence, taxes should
increase in response to increase in government spending.

Theoretical justice

Theoretical justice or equity suggests that taxation should consider the taxpayer’s ability to pay.
It also suggests that the exercise of taxation should not be oppressive, unjust, or confiscatory.

Administrative feasibility
Administrative feasibility suggests that tax laws should be capable of efficient and effective
administration to encourage compliance. Government should make it easy for the taxpayer to
comply by avoiding administrative bottlenecks and reducing compliance costs.

The following are applications of the principle of administrative feasibility:

1. E-filing and e-payment of taxes

2. Substituted filing system for employees
3. Final withholding tax on non-resident aliens or corporations
4. Accreditation of authorized agent banks for the filing and payment of taxes

TAX ADMINISTRATION

Tax administration refers to the management of the tax system. Tax administration of the
national tax system in the Philippines is entrusted to the Bureau of Internal Revenue which is
under the supervision and administration of the Department of Finance.

Chief Officials of the Bureau of Internal Revenue

1. 1 Commissioner
2. 4 Deputy Commissioners, each to be designated to the following:
a. Operations group
b. Legal Enforcement group
c. Information Systems Group
d. Resource Management Group

POWERS OF THE BUREAU OF INTERNAL REVENUE

1. Assessment and collection of taxes

2. Enforcement of all forfeitures, penalties and fines, and judgments in all cases decided in its
favor by the courts
3. Giving effect to, and administering the supervisory and police powers conferred to it by the
NIRC and other laws
4. Assignment of internal revenue officers and other employees to other duties
5. Provision and distribution of forms, receipts, certificates, stamps, etc. to proper officials
6. Issuance of receipts and clearances
7. Submission of annual report, pertinent information to Congress and reports to the
Congressional Oversight Committee in matters of taxation

POWERS OF THE COMMISSIONER OF INTERNAL REVENUE

1. To interpret the provisions of the NIRC, subject to review by the Secretary of Finance
2. To decide tax cases, subject to the exclusive appellate jurisdiction of the Court of Tax
Appeals, such as:
a. Disputed assessments
b. Refunds of internal revenue taxes, fees, or other charges
c. Penalties imposed
d. Other NIRC and special law matters administered by the BIR

3. To obtain information and to summon, examine, and take testimony of persons to effect tax
collection

Purpose: For the CIR to ascertain:

a. The correctness of any tax return or in making a return when none has been made by the
taxpayer
b. The tax liability of any person for any internal revenue tax or in correcting any such liability
c. Tax compliance of the taxpayer

Authorized acts:
a. To examine any book, paper, record or other data relevant to such inquiry
b. To obtain on a regular basis any information from any person other than the person whose
internal revenue tax liability is subject to audit
c. To summon the person liable for tax or required to file a return, his employees, or any person
having possession and custody of his books of accounts and accounting records to produce
such books, papers, records or other data and to give testimony
d. To take testimony of the person concerned, under oath, as may be relevant or material to the
inquiry
e. To cause revenue officers and employees to make canvass of any revenue district

4. To make an assessment and prescribe additional requirement for tax administration and
enforcement

5. To examine tax returns and determine tax due thereon

The CIR or his duly authorized representatives may authorize the examination of any taxpayer
and the assessment of the correct amount of tax notwithstanding any law requiring the prior
authorization of any government agency or instrumentality. Failure to file a return shall not
prevent the CIR from authorizing the examination.

Tax or deficiency assessments are due upon notice and demand by the CIR or his
representatives.

Returns, statements or declarations shall not be withdrawn but may be modified, changed and
amended by the taxpayer within 3 years from the date of filing, except when a notice for audit or
investigation has been actually served upon the taxpayer.
When a return shall not be forthcoming within the prescribed deadline or when there is a reason
to believe that the return is false, incomplete or erroneous, the CIR shall assess the proper tax
on the basis of best evidence available.

In case a person fails to file a required return or other documents at the time prescribed by law
or willfully files a false or fraudulent return or other documents, the CIR shall make or amend the
return from his own knowledge and from such information obtained from testimony. The return
shall be presumed prima facie correct and sufficient for all legal purposes.

6. To conduct inventory taking or surveillance

7. To prescribe presumptive gross sales and receipts for a taxpayer when:

a. The taxpayer failed to issue receipts; or
b. The CIR believes that the books or other records of the taxpayer do not correctly reflect the
declaration in the return.

The presumptive gross sales or receipt shall be derived from the performance of similar
business under similar circumstances adjusted for other relevant information.

8. To terminate tax period when the taxpayer is:

a. Retiring from business
b. Intending to leave the Philippines
c. Intending to remove, hide, or conceal his property
d. Intending to perform any act tending to obstruct the proceedings for the collection of the tax
or render the same ineffective

The termination of the taxable period shall be communicated through a notice to the taxpayer
together with a request for immediate payment. Taxes shall be due and payable immediately.

9. To prescribe real property values

The CIR is authorized to divide the Philippines into zones and prescribe real property values
after consultation with competent appraisers. The values thus prescribed are referred to as
zonal value.

Zonal values are subject to automatic adjustment once every 3 years through rules and
regulations issued by the Secretary of Finance based on the current Philippine valuation
standards. However, no adjustment in zonal valuation shall be valid unless published in a
newspaper of general circulation in the province, city or municipality concerned, or in the
absence thereof, shall be posted in the provincial capitol, city or municipal hall and in 2 other
conspicuous public places therein. Furthermore, the basis of any valuation, including the
records of consultations done, shall be public records open to the inquiry of any taxpayer.
For purposes of internal revenue taxes, fair value of real property shall mean whichever is
higher of:
a. Zonal value prescribed by the Commissioner
b. Fair market value as shown in the schedule of market values of the Provincial and City
Assessor’s Office

The NIRC previously used the assessed value which is merely a fraction of the fair market
value. Assessed value is the basis of the real property tax in local taxation. The value to use
now is the full fair value of the property.

10. To compromise tax liabilities of taxpayers

11. To inquire into bank deposits, only under the following instances:
a. Determination of the gross estate of a decedent
b. To substantiate the taxpayer’s claim of financial incapacity to pay tax in an application for tax
compromise

In cases of financial incapacity, inquiry can proceed only if the taxpayer waives his privilege
under the Bank Deposit Secrecy Act.

12. To accredit and register tax agents

The denial by the CIR of application for accreditation is appealable to the Department of
Finance. The failure of the Secretary of Finance to act on the appeal within 60 days is deemed
an approval.

13. To refund or credit internal revenue taxes

14. To abate or cancel tax liabilities in certain cases

15. To prescribe additional procedures or documentary requirements

16. To delegate his powers to any subordinate officer with a rank equivalent to a division chief of
an office

Non-delegated power of the CIR

The following powers of the Commissioner shall not be delegated:

1. The power to recommend the promulgation of rules and regulations to the Secretary of
Finance.

2. The power to issue rulings of first impression or to reverse, revoke or modify any existing
rulings of the Bureau.
3. The power to compromise or abate any tax liability

Exceptionally, the Regional Evaluation Boards may compromise tax liabilities under the
following:
a. Assessments are issued by the regional offices involving basic deficiency tax of P500,000 or
less, and
b. Minor criminal violations discovered by regional and district officials

Composition of the Regional Evaluation Board

a. Regional Director as chairman
b. Assistant Regional Director
c. Heads of the Legal, Assessment and Collection Division
d. Revenue District Officer having jurisdiction over the taxpayer where articles subject to excise
tax are produced or kept.

4. The power to assign and reassign internal revenue officers to establishments where articles
subject to excise tax are produced or kept.

Rules in assignments of revenue officers to other duties

1. Revenue officers assigned to an establishment where excisable articles are kept shall in no
case stay there for more than 2 years.

2. Revenue officers assigned to perform assessment and collection functions shall not remain in
the same assignment for more than 3 years.

3. Assignment of internal revenue officers and employees of the Bureau to special duties shall
not exceed 1 year.

Agents and Deputies for Collection of National Internal Revenue Taxes

The following are constituted agents for the collection of internal revenue taxes:

1. The Commissioner of Customs and his subordinates with respect to collection of national
internal revenue taxes on imported goods.

2. The head of appropriate government offices and his subordinates with respect to the
collection of energy tax.

3. Banks duly accredited by the Commissioner with respect to receipts of payments of internal
revenue taxes authorized to be made thru banks. These are referred to as authorized
government depository banks (AGDB).
OTHER AGENCIES TASKED WITH TAX COLLECTIONS OR TAX INCENTIVES RELATED
FUNCTIONS

1. Bureau of Customs
2. Board of Investments
3. Philippine Economic Zone Authority
4. Local Government Tax Collecting Unit
5. Fiscal Incentives Review Board

Bureau of Customs (BOC)

Aside from its regulatory functions, the Bureau of Customs is tasked to administer collection of
tariffs on imported articles and collection of the Value Added Tax on importation. Together with
the BIR, the BOC is under the supervision of the Department of Finance.

The Bureau of Customs is headed by the Customs Commissioner and is assisted by five Deputy
Commissioners and 14 District Collectors.

Board of Investments (BOI)

The BOI is tasked to lead the promotion of investments in the Philippines by assisting Filipinos
and foreign investors to venture and prosper in desirable areas of economic activities. It
supervises the grant of tax incentives under the Omnibus Investment Code. The BOI is an
attached agency of the Department of Trade and Industry (DTI).

The BOI is composed of five full-time governors, excluding the DTI secretary as its chairman.
The President of the Philippines shall appoint a vice chairman of the board who shall act as the
BOI’s managing head.

Philippine Economic Zone Authority (PEZA)

The PEZA is created to promote investments in export-oriented manufacturing industries in the

Philippines and, among other myriads of functions, supervise the grant of both fiscal and
non-fiscal incentives.

PEZA registered enterprises enjoy tax holidays for certain years, exemption from PEZA
registered enterprises enjoy tax holidays. The PEZA is also an attached agency of the DTI.

The PEZA is headed by a director general and is assisted by three deputy directors.

Local Government Tax Collecting Units

Provinces, municipalities, cities and barangays also imposed and collect various local taxes,
fees and charges to rationalize their fiscal autonomy.
The special tax treatments of BOI-registered or PEZA-registered enterprise including the local
taxes imposed by local governments will be discussed under Local & Preferential Taxation by
the same author.

Fiscal Incentive Review Board (FIRB)

FIRB has oversight function on the administration and grant of tax incentives by the Investment
Promotion Agencies and other government agencies administering tax incentives. It approves or
disapproves grant of tax incentives to private entities and tax subsidies to government-owned
and controlled corporations, government instrumentalities, government commissaries, state
universities and colleges.

TAXPAYER CLASSIFICATION FOR PURPOSES OF TAX ADMINISTRATION

For purposes of effective and efficient tax administration, taxpayers are classified into:

1. Large taxpayers - under the supervision of the Large Taxpayer Service (LTS) of the BIR
National Office.

2. Non-large taxpayers - under the supervision of the respective Revenue District Offices
(RDOs) where the business, trade or profession of the taxpayer is situated

Criteria for Large Taxpayers:

A. As to payment

1. Value Added Tax - At least P200,000 per quarter for the preceding year

2. Excise Tax - At least P1,000,000 tax paid for the preceding year

3. Income Tax - At least P1,000,000 annual income tax paid for the preceding year

4. Withholding Tax - At least P1,000,000 annual withholding tax payments or remittances from
all types of withholding taxes

5. Percentage tax - At least P200,000 percentage tax paid or payable per quarter for the
preceding year

6. Documentary stamp tax - At least P1,000,000 aggregate amount per year

B. As to financial conditions and results of operations

1. Gross receipts or sales - P1,000,000,000 total annual gross sales or receipts

2. Net worth - P300,000,000 total net worth at the close of each calendar or fiscal year

3. Gross purchases - P800,000,000 total annual purchases for the preceding year

4. Top corporate taxpayer listed and published by the Securities and Exchange Commission

Automatic classification of taxpayers as large taxpayers

The following taxpayers shall be automatically classified as large taxpayers upon notice in
writing by the CIR:

1. All branches of taxpayers under the Large Taxpayer’s Service

2. Subsidiaries, affiliates, and entities of conglomerates or group of companies of a large

taxpayer

3. Surviving company in case of merger or consolidation of a large taxpayer

4. A corporation that absorbs the operation or business in case of spin-off of any large taxpayer

5. Corporation with an authorized capitalization of at least P300,000,000 registered with the

SEC

6. Multinational enterprises with an authorized capitalization or assigned capital of at least

P300,000,000

7. Publicly listed corporations

8. Universal, commercial, and foreign banks (the regular business unit and foreign currency
deposit unit shall be considered one taxpayer for purposes of classifying them as large
taxpayer)

9. Corporate taxpayers with at least P100,000,000 authorized capital in banking, insurance,

telecommunication, utilities, petroleum, tobacco, and alcohol industries

10. Corporate taxpayers engaged in the production of metallic minerals