FREQUENCY OF BAR QUESTIONS

TAXPAYERS REMEDIES POWER TO DECLARE DIVIDENDS

15% 13%
ULTRA VIRES DOCTRINE
5%
VALUE-ADDED TAX (VAT)
CONCEPT AND ELEMENTS RIGHTDERIVATIVE SUIT
TO DIVIDENDS
OF VATABLE TRANSACTIONS 3%11%
14%

OPTIONAL STANDARD DEDUCTION

3%

INHERENT AND CONSTITUTIONAL LIMITA- FOREIGN CORPORATIONS

TIONS OF TAXATION EQUAL PROTECTION PERSONALITY TO SUE AND
8%
INHERENT AND CONSTITUTIONAL LIMI- SUABILITY
TATIONS OF TAXATION INTERNATIONAL 3%
COMITY
6% INSURABLE INTEREST
INHERENT AND CONSTITUTIONAL LIMITATIONS OF TAXATION 18%
PUBLIC PURPOSE
4%
 LAWS TOPIC NO. OF TIMES ASKED IN 2009 YEARS WHERE SAME TOPIC
WAS ASKED
POWER TO DECLARE DIVIDENDS 1 2023, 2015, 2009, 2008, 2005, 2001,
1991, 1990, 1989, 1987
ULTRA VIRES DOCTRINE 1 2015, 2014, 2009, 1996
Republic Act No. 11232: RIGHT TO DIVIDENDS 1 2009, 2008
REVISED CORPORATION CODE OF THE DERIVATIVE SUIT 1 2019, 2016, 2014, 2013, 2010, 2009,
PHILIPPINES 2005, 2004, 1993
FOREIGN CORPORATIONS 1 2012, 2009

PERSONALITY TO SUE AND SUABILITY

Presidential Decree No. 612, as amended INSURABLE INTEREST 1 2023, 2019, 2018, 2017, 2015, 2014,
by Republic Act No. 10607: 2009, 2002, 2001, 2000, 1994, 1991,
INSURANCE CODE OF THE PHILIPPINES 1990, 1987
INHERENT AND CONSTITUTIONAL 2 2009, 2009, 1991
LIMITATIONS OF TAXATION

PUBLIC PURPOSE
INHERENT AND CONSTITUTIONAL 1 2012, 2009, 2000, 1996, 1992
LIMITATIONS OF TAXATION

TAXATION LAW & NIRC INTERNATIONAL COMITY

INHERENT AND CONSTITUTIONAL 1 2017, 2013, 2010, 2009, 2004, 2000

LIMITATIONS OF TAXATION

EQUAL PROTECTION
OPTIONAL STANDARD DEDUCTION 1 2015, 2009
VALUE-ADDED TAX (VAT) 1 2022, 2019, 2017, 2016, 2015, 2014,
2013, 2012, 2010, 2009, 2008
CONCEPT AND ELEMENTS OF VATABLE
TRANSACTIONS
 TAXPAYERS REMEDIES 1 2018, 2017, 2014, 2012, 2009, 2008,
2005, 2002, 2000, 1996, 1989, 1987

TOPIC YEARS WHERE SAME TOPIC BAR QUESTION SUGGESTED ANSWER

WAS ASKED
POWER TO DECLARE DIVIDENDS 2023, 2015, 2009, 2008, 2005, 2001, On September 15, 2007, XYZ Corporation NO, the suit will not prosper. Paterno
1991, 1990, 1989, 1987 issued to Paterno 800 preferred shares cannot compel XYZ Corporation to pay
with the following terms: dividends, which have to be declared by
the Board of Directors and the latter
“The Preferred Shares shall have the cannot do so, unless there are sufficient
following rights, preferences, unrestricted retained earnings.
qualifications, and limitations, to wit: Otherwise, the corporation will be forced
to use its capital to make said payments
The right to receive a quarterly dividend in violation of the trust fund doctrine.
of 1% cumulative participating; Likewise, redemption of shares cannot be
These shares may be redeemed, by compelled. While the certificate allows
drawing of lots, at any time after 2 years such redemption, the option and
from date of issue, at the option of the discretion to do so are clearly vested in
Corporation; x x x.” the Corporation.

Today, Paterno sues XYZ Corporation for

specific performance, for the payment of
dividends on, and to compel the
redemption of, the preferred shares,
under the terms and conditions provided
in the stock certificates. Will the suit
prosper? Explain. (2009 BAR)
ULTRA VIRES DOCTRINE 2015, 2014, 2009, 1996 When is there an ultra vires act on the a.) Under Sec. 45 of the Corporation
part of the: (2009 BAR) Code, no corporation shall possess or
exercise any corporate power except
(a) Corporation those conferred by the Code or by its
(b) Board of Directors articles of incorporation and except such
(c) Corporate Officers. as are necessary or incidental to the
exercise of the powers so conferred.
When the corporation does an act or
engages in an activity which is outside of
its express, implied, or incidental powers
set out in its articles of incorporation, the
act is deemed to be ultra vires.

b.) When the Board engages in an activity

or enters into a contract without the
ratificatory vote of the stockholders in
those instances where the Corporation
Code so requires such ratificatory vote,
such as when the corporation is made to
invest in another corporation or engage
in a business which is not in pursuit of its
primary purpose, the board resolution
not ratified by stockholders owning or
representing at least 2/3 of the
outstanding capital stock would make the
transaction void, as being ultra vires.

c.) When a corporate officer enters into a

contract on behalf of the corporation
without having been so expressly or
impliedly authorized by the board of
Directors, even when the act or contract
falls within the corporation’s express,
implied or incidental power, then the
 unauthorized act of the corporate officer
is deemed to be ultra vires.
RIGHT TO DIVIDENDS 2009, 2008 Ace Cruz subscribed to 100,000 shares of Ace is entitled to be paid cash dividends
stock of JP Development Corporation, for 100,000 shares of stock. Although he
which has a par value of P1 per share. has not fully paid for his shares of stock,
He paid P25,000 and promised to pay he is not delinquent and is therefore
the balance before December 31, 2008. entitled to all the rights of a stockholder.
JP Development Corporation declared a
cash dividend on October 15, 2008,
payable on December 1, 2008. For how
many shares is Ace Cruz entitled to be
paid cash dividends? Explain. (2008 BAR)
DERIVATIVE SUIT 2019, 2016, 2014, 2013, 2010, 2009, Atlantis Realty Corporation (ARC), a local NO, the suit will not prosper. There is no
2005, 2004, 1993 firm engaged in real estate requisite demand on the officers and
development, plans to sell one of its directors concerned. There is, therefore,
prime assets—a 3- hectare land valued no exhaustion of administrative
at about P100M. For this purpose, the remedies.
board of directors of ARC unanimously
passed a resolution approving the sale of
the property for P75M to Shangrila Real
Estate Ventures (SREV), a rival realty
firm. The resolution also called for a
special stockholder meeting at which the
proposed sale would be up for
ratification. Atty. Edric, a stockholder
who owns only 1 share in ARC, wants to
stop the sale. He then commences a
derivative suit for and in behalf of the
corporation from approving the sale.
(2009 BAR)

(a) Can Atty. Edric, who owns only 1

share in the company, initiate a
derivative suit? Why or why not?
 (b) Will the suit prosper? Why or why
not?
Foreign Corporations 2012, 2009 After disposing of his last opponent in NO. Philippine courts have jurisdiction
only two rounds in Las Vegas, the over it if it is doing business in the
a. Personality to Sue and Suability renowned boxer Sonny Bachao arrived Philippines. Moreover, under Section 133
at the NAIA met by thousands of of the Corporation Code, while a foreign
heroworshipping fans and hundreds of corporation doing business in the
media photographers. The following day, Philippines without license to do
a colored photograph of Sonny wearing business, cannot sue or intervene in any
a black polo short embroidered with the action, it may be sued or proceeded
2inch Lacoste crocodile logo appeared against before our courts or
on the front page of every Philippine administrative tribunal.
newspaper.

Lacoste International, the French firm

that manufactures Lacoste apparel and
owns the Lacoste trademark, decided to
cash in on the universal popularity of the
boxing icon. It reprinted the
photographs, with the permission of the
newspaper publishers, and went on a
world-wide blitz of print commercials in
which Sonny is shown wearing a Lacoste
shirt alongside the phrase “Sonny
Bachao just loves Lacoste”.

When Sonny sees the Lacoste

advertisements, he hires you as a lawyer
and asks you to sue Lacoste
International before a Philippine court:

Can Lacoste International validly invoke

the defense that it is not a Philippine
 company and, therefore, Philippine
courts have no jurisdiction? Explain.
(2009 BAR)

INSURABLE INTEREST 2023, 2019, 2018, 2017, 2015, 2014, Ciriaco leased a commercial apartment Ciriaco is entitled to receive the proceeds
2009, 2002, 2001, 2000, 1994, 1991, from SBC. One of the provisions of the 1- of the insurance policy. The stipulation
1990, 1987 year lease contract states: “18. x x x The that the policy is deemed assigned and
LESSEE shall not insure against fire the transferred to SBC is void, because SBC
chattels, merchandise, textiles, goods has no insurable interest in the
and effects placed at any stall or store or merchandise of Ciriaco.
space in the leased premises without
first obtaining the written consent of the
LESSOR. If the LESSEE obtains five
insurance coverage without the consent
of the LESSOR, the insurance policy is
deemed assigned and transferred to the
LESSOR for the latter’s benefit.”

Notwithstanding the stipulation in the

contract, without the consent of SBC,
Ciriaco insured the merchandise inside
the premises against loss by fire in the
amount of P500,000 with FUIC. A day
before the lease contract expired, fire
broke out inside the leased premises,
damaging Ciriaco’s merchandise. Having
learned of the insurance earlier procured
by Ciriaco, SBC demanded from FUIC
that the proceeds of the insurance policy
be paid directly to it, as provided in the
lease contract. Who is legally entitled to
receive the insurance proceeds? Explain.
(2009 BAR)
INHERENT AND CONSTITUTIONAL 2009, 2009, 1991 Enumerate the four (4) inherent The inherent limitations on the power to
LIMITATIONS OF TAXATION limitations on taxation. Explain each tax are:
item briefly. (2009 BAR)
PUBLIC PURPOSE 1. Taxation is for a public purpose – The
proceeds of the tax must be used: (a) for
the support of the State; or (b) for some
recognized objective of the government
or to directly promote the welfare of the
community.

2. Taxation is inherently legislative – Only

the legislature has full discretion as to the
persons, property, occupation or business
to be taxed, provided these are all within
the State’s territorial jurisdiction. It can
also finally determine the amount or rate
of tax, the kind of tax to be imposed and
the method of collection.

3. Taxation is territorial – Taxation may be

exercised only within the territorial
jurisdiction of the taxing authority. Within
the territorial jurisdiction, the taxing
authority may determine the “place of
taxation” or “tax situs."

4. Taxation is subject to international

comity – This is a limitation which is
founded on reciprocity designed to
maintain harmonious and productive
relationships among the various states.
Under international comity, a state must
recognize the generally accepted tenets
of international law, among which are the
principles of sovereign equality among
 states and of their freedom from suit
without their consent, that limit the
authority of a government to effectively
impose taxes on a sovereign state and its
instrumentalities, as well as on its
property held, and activities undertaken
in that capacity.
The Sangguniang Bayan of the YES. The municipality is authorized to
Municipality of Sampaloc, Quezon, impose reasonable fees and charges as a
passed an ordinance imposing a storage regulatory measure in an amount
fee of ten centavos for every 100 kilos of commensurate with the cost of
copra deposited in any bodega within regulation, inspection and licensing. (Sec.
the Municipality’s jurisdiction. The 147, LGC) In the case at bar, the storage
Metropolitan Manufacturing of copra in any warehouse within the
Corporation (MMC), with principal office municipality can be the proper subject of
in Makati, is engaged in the manufacture regulation pursuant to the police power
of soap, edible oil, margarine, and other granted to municipalities under the
coconut oil-based products. It has a Revised Administrative Code or the
warehouse in Sampaloc, Quezon, used “general welfare clause”. A warehouse
as storage space for the copra purchased used for keeping or storing copra is an
in Sampaloc and nearby towns before establishment likely to endanger the
the same is shipped to Makati. MMC public safety o likely to give rise to
goes to court to challenge the validity of conflagration xxx It is, thus, reasonable
the ordinance, demanding the refund of that the Municipality impose storage fees
the storage fees it paid under protest. Is for its own surveillance and lookout.
the ordinance valid? (2009 BAR)
INTERNATIONAL COMITY 2012, 2009, 2000, 1996, 1992 ABCD Corporation (ABCD) is a domestic YES. The provision of a treaty must take
corporation with individual and precedence over and above the
corporate shareholders who are provisions of the local taxing statute
residents of the United States. For the consonant with the principle of
2nd quarter of 1983, these U.S.-based international comity. Tax treaties are
individual and corporate stockholders accepted limitations to the power of
received cash dividends from the taxation. Thus, the CTA should apply the
corporation. The corresponding treaty provision so that the claim for
 withholding tax on dividend income — refund representing the difference
30% for individual and 35% for corporate between the amount actually withheld
non-resident stockholders — was and paid to the BIR and the amount due
deducted at source and remitted to the and payable under the treaty should be
BIR. On May 15, 1984, ABCD filed with granted. (Hawaiian-Philippine Company v.
the Commissioner of Internal Revenue a CIR, CTA Case No. 3887, 31 May 1988.
formal claim for refund, alleging that
under the RPUS Tax Treaty, the
deduction withheld at source as tax on
dividends earned was fixed at 25% of
said income. Thus, ABCD asserted that it
overpaid the withholding tax due on the
cash dividends given to its non-resident
stockholders in the U.S. The
Commissioner denied the claim.

On January 17, 1985, ABCD filed a

petition with the Court of Tax Appeals
(CTA) reiterating its demand for refund.
Is the contention of ABCD Corporation,
correct? Why or why not? (2009 BAR)
EQUAL PROTECTION 2017, 2013, 2010, 2009, 2004, 2000 The City of Manila enacted Ordinance The Ordinance is VALID. The tax imposed
No. 55-66 which imposes a municipal by the ordinance is in the nature of a
occupation tax on persons practicing professional tax which is authorized by
various professions in the city. Among law to be imposed by cities. (Sec. 151, in
those subjected to the occupation tax relation to Sec. 139, LGC) The ordinance
were lawyers. Atty. Mariano Batas, who is not discriminatory because the City
has a law office in Manila, pays the Council has the power to select the
ordinance-imposed occupation tax subjects of taxation and impose the same
under protest. He goes to court to assail tax on those belonging to the same class.
the validity of the ordinance for being The authority given by law to cities is to
discriminatory. Decide with reasons. impose a professional tax only on persons
(2009 BAR) engaged in the practice of their
profession requiring government
 examination and lawyers are included
within that class of professionals.
OPTIONAL STANDARD DEDUCTION 2015, 2009 Ernesto, a Filipino citizen and a No. Since Ernesto has elected to claim the
practicing lawyer, filed his income tax optional standard deduction, said
return for 2007 claiming optional election is irrevocable for the taxable year
standard deductions. Realizing that he for which the return is made. (Sec. 34(L),
has enough documents to substantiate NIRC)
his profession-connected expenses, he
now plans to file an amended income
tax return for 2007, in order to claim
itemized deductions, since no audit has
been commenced by the BIR on the
return he previously filed. Will Ernesto
be allowed to amend his return? Why or
why not? (2009 BAR)
VALUE-ADDED TAX (VAT) 2022, 2019, 2017, 2016, 2015, 2014, Emiliano Paupahan is engaged in the I will advise Emiliano that he is not
2013, 2012, 2010, 2009, 2008 business of leasing out several required to register as a VAT taxpayer. His
CONCEPT AND ELEMENTS OF VATABLE residential apartment units he owns. transactions of leasing residential units
TRANSACTIONS The monthly rental for each unit ranges for an amount not exceeding P15,000.00
from P8,000.00 to PI0,000.00. His gross per unit per month are exempt from VAT
rental income for one year is irrespective of the aggregate amount of
PI,650,000.00. He consults you on rentals received annually.
whether it is necessary for him to
register as a VAT taxpayer. What legal
advice will you give him, and why? (2009
BAR)
TAXPAYERS REMEDIES 2018, 2017, 2014, 2012, 2009, 2008, A final assessment notice was issued by YES. The protest against the FAN was filed
2005, 2002, 2000-1996, 1989, 1987 the BIR on June 13, 2000 and received by out of time resulting in the assessment
the taxpayer on June 15, 2000. The becoming final and executory. There
taxpayer protested the assessment on being no disputed assessment, the CTA
July 31, 2000. The protest was initially does not acquire jurisdiction over the
given due course but was eventually matter. (CIR v. Atlas Mining and
denied by the Commissioner of Internal Development Corp., G.R. No. 140488, 24
Revenue in a decision dated June 15, Jan. 2000)
2005. The taxpayer then filed a petition
for review with the CTA, but the CTA
dismissed the same. Is the CTA correctin
dismissing the petition for review?
Explain your answer. (2009 BAR)