Income Tax

Individual Income taxpayers

Citizens
Under the Constitution, citizens are:

a. Those who are citizens of the Philippines at the time

of the adoption of the Constitutions on February 2,
1987.
b. Those whose fathers or mothers are citizens of the
Philippines
c. Those born before January 17, 1973 of the Filipino
mother who elected Filipino citizenship upon
reaching the age of majority.
d. Those who are naturalized in accordance with law.
Classification of Citizens:
Resident citizen – A Filipino citizen residing in the Philippines
Non-resident citizen includes:
a. A citizen of the Philippines who establishes to the satisfaction of
the Commissioner the fact of his physical presence abroad with a
definite intention to reside therein;
b. A citizen of the Philippines who leaves the Philippines during the
taxable year to reside abroad, either as an immigrant or for an
employment on a permanent basis;
c. A citizen of the Philippines who works and derives income from
abroad and whose employment thereat requires him to be
physically present abroad most of the time during the taxable
year;
d. A citizen who has been previously considered as non-resident
citizen and who arrives in the Philippines at anytime during the
taxable year to reside permanently in the Philippines shall likewise
be treated as non-resident citizen for the taxable year in which he
arrives in the Philippines with respect to his income derived from
sources abroad until the date of his arrival in the Philippines
Alien
Resident Alien – an individual who is residing in the Philippines but is not
a citizen thereof, such as:
1. An alien who lives in the Philippines without definite intention as to his
stay; or
2. One who comes to the Philippines for a definite purpose which in its
nature would require an extended stay and to that end makes his home
temporarily in the Philippines, although it may be his intention at all
times to return to his domicile abroad;
An alien who has acquired residence in the Philippines retains his status
such until he abandons the same or actually departs from the Philippines.
Non-resident alien – an individual who is not residing in the Philippines
who is not a citizen thereof
3. Non-resident aliens engaged in business (NRA-ETB) – aliens who
stayed in the Philippines for an aggregate period of more than 180
days during the year.
4. Non-resident aliens not engaged in business (NRA-NETB) – include:
a. Aliens who come to the Philippines for a definite purpose which
in its nature may be promptly accomplished;
b. Aliens who shall come to the Philippines and stay therein for an
aggregate period of not more than 180 days during the year.
THE GENERAL CLASSIFICATION RULE FOR INDIVIDUALS
1. Intention
The intention or the taxpayer regarding the nature of his stay with outside the
Philippines shall determine his appropriate residency classification. The taxpayer shall
submit to the CIR of the BIR documentary proofs such as visas, work contracts and other
documents indicating intention.
Documents purporting short term stay such as tourist visa shall not result in the
classification of the taxpayers normal residency. Documents purporting a long stay such
as immigration visa or working visa for an extended period would result in the automatic
reclassification of the taxpayer’s residency.

Examples
a. An alien is normally non-resident. An alien who come to the Philippines with a tourist
visa would still be classified as non-resident alien.
b. A citizen is normally resident. A citizen who would go abroad under a tourist visa would
still be considered a resident citizen.
c. An alien who come to the Philippines with an immigration visa would be reclassified as
a resident alien upon his arrival.
d. A citizen who would go abroad with a two-year working visa would be reclassified as a
non-resident citizen upon his departure.
2. Length of stay

In default of such documentary proof, the length of stay

of the taxpayer is considered:
a. Citizens staying abroad for a period of at least 183
days are considered non-resident.
b. Aliens who stayed in the Philippines for more than 1
year as of the end of the taxable year are considered
resident.
c. Aliens who are staying in the Philippines for not more
than 1 year but more than 180 days are deemed non-
resident aliens engaged in business.
d. Aliens who stayed in the Philippines for not more
than 180 days are considered non-resident aliens not
engaged in trade or business
Illustration 1

Daniel Mario Aresmendi, a Mexican actor, was

contracted by a Philippine television company to do a
project in the Philippines. He arrived in the country on
February 29, 2021 and returned to Mexico three weeks
later upon completion of the project.

Daniel Maria Aresmendi shall be classified as an

NRA-NETB in 2021. His stay is for a definite purpose
which in its nature will be accomplished immediately
Illustration II

Philip, a Libyan national, arrived in the

country on the November 4, 2021. Mr. Philip
stayed in the Philippines since then without any
working visa or work permit.

For the year 2021, Mr. Philip would be

considered an NRA-NETB because he
stayed in the Philippines for less than 180
days as of December 31, 2021. if he still
within the Philippines until December 31,
2022, he will qualify as a resident alien for
2022.
Illustration III

Without any definite intention as to the

nature of his stay, Juan Miguel, a Filipino
citizen, left the Philippines and stayed abroad
from March 15, 2020 to April 1, 2021 before
returning to the Philippines.

For the year 2020, Juan is a non-

resident citizen because he is absent for
more than 183 days but he will be classified
as resident citizen for the year 2021 because
he is absent for less than 183 days in 2021.
The issue of international double
taxation

The rule on extraterritorial taxation on

RESIDENTS CITIZENS and DOMESTIC
CORPORATIONS exposes these
taxpayers to double taxation. However,
the NIRC allows a tax credit for taxes
paid in foreign countries. In fact, residents
citizens and domestics corporation pay
minimal taxes in the Philippines on their
foreign income because of the tax credit.
 Income Tax
What is Income?

1.a. Income means all the wealth which flows into the taxpayer other
than a mere return on capital.
 Income Tax
What is Income?

1.b. Capital is a fund or property existing at one distinct point in time

while income denotes a flow of wealth during a definite period of
time. Income is gain derived and severed from capital.
 Income Tax
What is Income?

1.c. For income to be taxable, the following requisites must exist:

(1) there must be gain;

(2) the gain must be realized or received; and,
(3) the gain must not be excluded by law or treaty from
taxation.
(CREBA vs. Romulo, GR No. 168118 dated August 28, 2006)
 Income Tax
What is Income?

2.a. Are membership fees, assessment dues and other similar fees
collected by nonprofit clubs subject to income tax?
 Income Tax
What is Income?

2.a. Case law provides that in order to constitute "income," there must
be realized "gain." Clearly, because of the nature of membership fees
and assessment dues as funds inherently dedicated for the
maintenance, preservation, and upkeep of the clubs' general
operations and facilities, nothing is to be gained from their collection.
 Income Tax
What is Income?

2.b. As correctly argued by ANPC, membership fees, assessment dues,

and other fees of similar nature only constitute contributions to and/or
replenishment of the funds for the maintenance and operations of the
facilities offered by recreational clubs to their exclusive members. They
represent funds "held in trust" by these clubs to defray their operating
and general costs and hence, only constitute infusion of capital.
(Association of Non-Profit Clubs, Inc. vs. BIR, GR No. 228539 dated June
26, 2019)
 Income Tax
What is Income?

3. Similarly, association dues, membership fees, and other

assessments/charges collected by Condominium Corporations are not
subject to income tax because they do not constitute profit or gain. To
repeat, they are collected purely for the benefit of the condominium
owners and are the incidental consequence of a condominium
corporation's responsibility to effectively oversee, maintain, or even
improve the common areas of the condominium as well as its
governance. (BIR vs. First E-Bank Tower Condominium Corp., GR Nos.
215801 and 218924 dated January 15, 2020)
 Income Tax
What is Income?

4. The amounts considered by the CIR as Shinko's income actually

came from the subsidies remitted by its head office abroad, for
Shinko's operations in the Philippines. Certainly, these remittances
cannot be considered as income because they are not payment for the
services rendered by Shinko. They cannot be regarded as a gain
realized by Shinko or a flow of fruits from Shinko's labor. At the very
least, the remittances Shinko received as subsidy from its parent
company can only be regarded as capital which is intended for the
continued operation of a representative office in the Philippines, and
from which no income tax may be collected or imposed. (CIR vs. Shinko
Electric Industries Co., Ltd., GR No. 226287 dated July 6, 2021)
 Income Tax
Exclusions from Gross Income – Life Insurance:

1.a. The proceeds of life insurance policies paid to the heirs or

beneficiaries upon the death of the insured. (Sec. 32(B)(1) of the Tax
Code)
 Income Tax
Exclusions from Gross Income – Life Insurance:

1.b. The amount received by the insured as a return of premiums. (Sec.

32(B)(2) of the Tax Code)
 Income Tax
Exclusions from Gross Income – Gift and Inheritance:

2. The value of property acquired by gift or inheritance. (Sec. 32(B)(3)

of the Tax Code)
 Income Tax
Exclusions from Gross Income – Compensation for Injuries or
Sickness:

3. Amounts received, through Accident or Health Insurance or under

Workmen's Compensation Acts, as compensation for personal injuries
or sickness.

The amounts of any damages received, whether by suit or agreement,

on account of such injuries or sickness. (Sec. 32(B)(4) of the Tax Code)
 Income Tax
Exclusions from Gross Income – Retirement Benefits:

4.a. Retirement benefits received under Republic Act No. 7641 and
those received by officials and employees of private firms, whether
individual or corporate, in accordance with a reasonable private
benefit plan maintained by the employer: Provided, That the retiring
official or employee has been in the service of the same employer for
at least ten (10) years and is not less than fifty (50) years of age at the
time of his retirement: Provided, further, That the benefits granted
under this subparagraph shall be availed of by an official or employee
only once. (Sec. 32(B)(6)(a) of the Tax Code)
 Income Tax
Exclusions from Gross Income – Retirement Benefits:

4.b. Benefits received from the GSIS under Republic Act No. 8291,
including retirement gratuity received by government officials and
employees. (Sec. 32(B)(6)(f) of the Tax Code)
 Income Tax
Exclusions from Gross Income – Separation Benefits:

5. Any amount received by an official or employee or by his heirs from

the employer as a consequence of separation of such official or
employee from the service of the employer because of: (1) death, (2)
sickness or other physical disability or (3) for any cause beyond the
control of the said official or employee. (Sec. 32(B)(6)(b) of the Tax
Code)
 Income Tax
Exclusions from Gross Income – Prizes and Awards:

6.a. Prizes and awards made primarily in recognition of religious,

charitable, scientific, educational, artistic, literary, or civic achievement
but only if:

(i)The recipient was selected without any action on his part to

enter the contest or proceeding; and,
(ii)The recipient is not required to render substantial future services
as a condition to receiving the prize or award. (Sec. 32(B)(7)(c) of the
Tax Code)
 Income Tax
Exclusions from Gross Income – Prizes and Awards:

6.b.1. All prizes and awards granted to athletes in local and

international sports competitions and tournaments whether held in
the Philippines or abroad and sanctioned by their national sports
associations. (Sec. 32(B)(7)(d) of the Tax Code)
 Income Tax
Exclusions from Gross Income – Prizes and Awards:

6.b.2. National Sports Association — shall refer to any association

which is:

a.Organized for their respective sports in the Philippines who

have the exclusive technical control over the promotion
and development of the particular sports for which they are
organized;
b. Affiliated with its respective international federation; and,
c.Affiliated with the Philippine Olympic Committee or the
National Paralympics Committee of the Philippines as the case
may be. (Revenue Regulations No. 13-2020 dated May 27, 2020)
 Income Tax
Exclusions from Gross Income – 13th Month Pay and Other Benefits:

7.a. 13th Month Pay and Other Benefits. - Gross benefits received by
officials and employees of public and private entities: Provided,
however, That the total exclusion under this subparagraph shall not
exceed Ninety Thousand Pesos (₱90,000.00). (Sec. 32(B)(7)(e) of the
Tax Code)
 Income Tax
Exclusions from Gross Income – 13th Month Pay and Other Benefits:

7.b. Exempt to the extent of P90,000.00 and includes the following:

a. 13th month pay;

b.“Other benefits” such as Productivity Incentives, Christmas
bonus, loyalty award, gifts in cash or in kind and other benefits of
similar nature actually received by officials and employees of
both government and private offices; and,
c. Excess de minimis benefits
 Income Tax
Exclusions from Gross Income – 13th Month Pay and Other Benefits:

7.c. Example of Excess de minimis benefits covered by the P90,000.00

exemption:

Hernando received annual clothing allowance amounting to

P10,000.00. His 13th month pay is P80,000.00. No other benefits were
received for the entire year. In this case, since the prescribed
maximum amount for clothing allowance is only P6,000.00 the excess
of P4,000.00 shall be added to the 13th month pay, thereby the entire
benefits received amounted to P84,000.00. In this scenario, the same
shall still be exempt from income tax since the ceiling amount for
these other benefits is P90,000.00. (Revenue Memorandum Circular
No. 50-2018 dated May 11, 2018)
 Income Tax
Is Retirement Pay Taxable?

1. “(a) Retirement benefits received under Republic Act No. 7641 and
those received by officials and employees of private firms, whether
individual or corporate, in accordance with a reasonable private
benefit plan maintained by the employer: xxx.” (Sec. 32(B)(6)(a) of the
Tax Code)
 Income Tax
Is Retirement Pay Taxable?

2.Requirement for exemption under a

Reasonable Private Benefit Plan:

a.Employeeretires under a BIR-registered/approved Reasonable

Private Benefit Plan;
b.The retiring official or employee must have been in service of
the same employer for at least ten (10) years;
c.He/She is not less than fifty (50) years of age at
the time of retirement; and,
d. The benefit is availed of only once.
 Income Tax
Is Retirement Pay Taxable?

3.a. Exempt under the Labor Code:

a.Those received under existing collective bargaining agreements

and other agreements; and,

b. In the absence of a retirement plan and other agreements:

1. Retiring employee served for at least five (5) years; and,
2. Not less than sixty (60) years of age but not more than
sixty-five
(65). (Sec. 302 of the Labor Code, as amended)
 Income Tax
Is Retirement Pay Taxable?

3.b. Illustration No. 1:

In 2000, Hernando was hired as a manager in ABC Company. His

employment contract states that he may retire starting the age of 50
years old and after rendering at least five (5) years in service to the
company. His retirement pay shall be computed based on his basic
salary multiplied by the number of years he has been employed at the
time of retirement.

If Hernando retires at the age of 58 years old and after 7 years in

service, will his retirement pay be exempt from income tax?
 Income Tax
Is Retirement Pay Taxable?

3.b. Illustration No. 2:

Hernando retired at the age of 62 years old and after rendering 10

years in service in a private company. His employment contract is silent
as to the grant of retirement pay. His employer does not have a BIR-
registered retirement plan.

Is Hernando’s retirement pay exempt from income tax?

 Income Tax
Minimum Wage Earners:

1. Revenue Regulations (“RR”) No. 10-2008 dated July 8, 2008 which

states that a Minimum Wage Earner (“MWE”) is disqualified to claim
exemption if he receives other benefits in excess of the statutory limit
of (now) P90,000.00 is inconsistent with the NIRC and is therefore
invalid. It adds a condition that is not found under the law. The NIRC is
clear that a MWE is exempt from income tax on his Statutory
Minimum Wage, overtime pay, holiday pay, hazard pay and night shift
differential pay. It does not provide or require any other qualification
as to who are MWEs. (Soriano vs. Secretary of Finance, GR No. 184450
dated February 8, 2017)
 Income Tax
Minimum Wage Earners:

2.a. Tax-exempt items:

a. Statutory Minimum wage;

b. Holiday pay;
c. Overtime pay;
d. Night shift differential pay; and,
e. Hazard pay
 Income Tax
Minimum Wage Earners:

2.b. Service Charge is taxable. Income other than those in the

enumeration shall already be taxable. (Q12/A12 of Revenue
Memorandum Circular No. 50-2018 dated May 11, 2018)
 Income Tax
Minimum Wage Earners:

3. Minimum Wage Earners receiving other income from other sources

in addition to compensation income, such as income from other
concurrent employers, from the conduct of trade, business or practice
of profession, except income subject to final tax, are subject to income
tax only to the extent of income other than SMW, holiday pay,
overtime pay, night shift differential pay, and hazard pay earned during
the taxable year. (Revenue Regulations No. 11-2018 dated January 31,
2018)
 Income Tax
8% Tax – Important Rules:

1.a. Individuals earning income purely from self-employment and/or

practice of profession whose gross sales/receipts and other non-
operating income does not exceed P3,000,000.00 shall have the option
to be taxed:

a. The graduated rates: 0%-35%; OR

b.8% tax on gross sales or receipts (net of returns and
cash discounts) and other non-operating income in excess
of P250,000.00 in lieu of the graduated income tax rates under
and the 3% percentage tax.
 Income Tax
8% Tax – Important Rules:

1.b. Individuals Earning Income Both from Compensation and from

Self-employment (business or practice of profession) – Mixed Income
Earners:

a. Compensation Income – graduated rates: 0%-35%; and,

b.Income from business or practice of profession -
gross sales/receipts and other non-operating income does not
exceed P3,000,000.00 shall have the option to be taxed either
at the graduated rates or the 8% tax.
 Income Tax
8% Tax – Important Rules:

2. Taxpayer must signify his intention to avail of the 8% income tax rate
in the 1st Quarter ITR / Percentage Tax Return, or on the initial
quarterly return of the taxable year after the commencement of a new
business/practice of profession. Otherwise, the taxpayer is considered
to have availed of the graduated rates.

Such election shall be irrevocable and no amendment of option shall

be made for the said taxable year.
 Income Tax
8% Tax – Important Rules:

3. The 8% income tax rate shall be based on the gross sales/receipts

and other non-operating income, net of returns and cash discounts, in
excess of P250,000.00.

The P250,000.00 deduction for those subject to the 8% tax is not

applicable to mixed income earners since it is already incorporated in
the first tier of the graduated income tax rates applicable to
compensation income.
 Income Tax
8% Tax – Important Rules - Sample Problem:

4.a. Hernando, a non-VAT taxpayer, is a free lance architect. During the

year 2022, he had the following gross receipts of P1,000,000.00:

May Hernando avail of the 8% income tax rate?

 Income Tax
8% Tax – Important Rules - Sample Problem:

4.b. Hernando, a non-VAT taxpayer, is a free lance architect. He is also

employed as a part time professor. During the year 2018, he had the
following gross receipts:

free lance architect – P1,000,000.00; and,

part time professor - P5,500,000.00.

May Hernando avail of the 8% income tax rate?

 Income Tax
8% Tax – Important Rules:

5.a. Not entitled to avail of the 8% tax:

a. Purely compensation income earners;

b. VAT registered taxpayers;
c.Non-VAT taxpayers whose gross receipts/sales exceed
P3,000,000.00;
d. Taxpayers subject to other percentage taxes except Sec. 116;
e. Partners of General Professional Partnerships; and,
f.Individuals enjoying income tax exemption such as those
registered with Barangay Micro Business Enterprise since
taxpayers are not allowed to avail of double or multiple tax
exemptions under different tax laws unless specifically provided by law.
 Income Tax
8% Tax – Important Rules – Sample Problem:

5.b. Hernando, a VAT taxpayer, is a free lance architect. By the end of

2022, he had gross receipts of P1,000,000.00.

May Hernand avail of the 8% income tax rate?

 Income Tax
New Tax Rates for Corporations:

1. Regular Corporate Income Tax for Domestic Corporations:

NIRC CREATE – Effective July 1, 2020

30% 25% in general

20% for corporations with net taxable income not

exceeding Five Million Pesos (P5,000,000.00) AND
total assets not exceeding One Hundred Million
(P100,000,000.00), excluding the land on which
the particular business entity’s office, plant and
equipment are situated
 Income Tax
New Tax Rates for Corporations:

2. Regular Corporate Income Tax for Resident Foreign Corporations:

NIRC CREATE – Effective July

1, 2020
30% 25%
 Income Tax
New Tax Rates for Corporations:

3. Tax on Gross Income for Nonresident Foreign Corporations:

NIRC CREATE – Effective

January 1, 2021
30% 25%
 Income Tax
Minimum Corporate Income Tax - Coverage:

1. Domestic Corporation (Sec. 27(E) of the Tax Code); and,

2. Resident Foreign Corporation (Sec. 28(A)(2) of the Tax Code)
 Income Tax
Minimum Corporate Income Tax – When Liable?

1.a. Beginning on the fourth taxable year immediately following the

year in which such corporation commenced its business operations.

“Commencement of business operations” – Date of BIR registration.

(Revenue Regulations No. 9-1998 dated August 25, 1998)
 Income Tax
Minimum Corporate Income Tax – When Liable?

1.b. Hernando Domestic Corporation was registered with the BIR on

April 1, 2023.

When will it be covered by the MCIT?

 Income Tax
Minimum Corporate Income Tax – When Liable?

2.a. The intent of Congress relative to the minimum corporate income

tax is to grant a four (4)-year suspension of tax payment to newly
formed corporations. Corporations still starting their business
operations have to stabilize their venture in order to obtain a
stronghold in the industry. It does not come as a surprise then when
many companies reported losses in their initial years of operations.
 Income Tax
Minimum Corporate Income Tax – When Liable?

2.b. Thus, in order to allow new corporations to grow and develop at

the initial stages of their operations, the lawmaking body saw the need
to provide a grace period of four years from their registration before
they pay their minimum corporate income tax. (Manila Banking
Corporation, GR No. 168118 dated August 28, 2006)
 Income Tax
Minimum Corporate Income Tax – How Computed?

1. Two percent (2%) of the gross income.

The MCIT shall be imposed whenever such corporation has zero or

negative taxable income or whenever the amount of the MCIT is
greater than the normal tax (regular corporate income tax) due for
such corporation. (Revenue Regulations No. 9-1998 dated August 25,
1998)
 Income Tax
Minimum Corporate Income Tax – How Computed?

2.a. “Gross income" as used in determining MCIT means "gross

receipts less sales returns, allowances, discounts and cost of services."
 Income Tax
Minimum Corporate Income Tax – How Computed?

2.b. In formulaic terms, Section 27 (E)(4) can be expressed thusly:

Gross Receipts/Sales xxx

Less: Sales Returns xxx
Sales Allowances xxx
Sales Discounts xxx
Cost of xxx
Services/Sales xxx
Gross Income
MCIT Rate: 2%
Total MCIT Due xxx
 Income Tax
Minimum Corporate Income Tax – How Computed?

3. Are premium taxes and passed on DST deductions from gross

income as cost of services?
 Income Tax
Minimum Corporate Income Tax – How Computed?

3.a. Premium taxes are not deductible as cost of services. As per the
provision, "cost of services" means all direct costs and expenses
necessarily incurred to provide the services required by the customers
and clients, including: (A) salaries and employee benefits of personnel,
consultants and specialists directly rendering the service and (B) cost
of facilities directly utilized in providing the service such as
depreciation or rental of equipment used and cost of supplies.
 Income Tax
Minimum Corporate Income Tax – How Computed?

3.b. While we agree that the enumeration in the provision is not

exhaustive, the CTA paid little to no attention to one of the express
requirements for deductibility — that the claimed deduction should
be a direct cost or expense. A cost or expense is deemed "direct"
when it is readily attributable to the production of the goods or for the
rendition of the service.

Measured against this standard, it is then easy to discern that premium

taxes, though payable by MBLIC, are not direct costs within the
contemplation of the phrase "cost of services," incurred as they are
after the sale of service had already transpired. This cannot therefore
be considered as the equivalent of raw materials, labor, and
manufacturing cost of deductible "cost of sales" in the sale of goods.
 Income Tax
Minimum Corporate Income Tax – How Computed?

4.a. DSTs are NOT deductible costs of services. DST is incurred "by the
person making, signing, issuing, accepting, or transferring" the
document subject to the tax. And since a contract of insurance is
mutual in character, either the insurer or the insured may shoulder the
cost of the DST.
 Income Tax
Minimum Corporate Income Tax – How Computed?

4.b. In this case, it was duly noted by the CTA that MBLIC never
disputed charging DSTs from its clients as part of their premiums.
Hence, it cannot readily be said that it was MBLIC who "necessarily
incurred" the expense. Moreover, DSTs cannot also qualify as direct
costs "to provide the services required by the customers and clients"
since, just like premium taxes, they are incurred after the service had
been rendered. (Manila Bankers' Life Insurance Corp. vs. CIR, GR Nos.
199729-30 & 199732-33 dated February 27, 2019)
 Income Tax
Income tax of schools:

1. Proprietary educational institution;

2. Nonstock nonprofit educational institution; and,
3. Government educational institution
 Income Tax
Income tax of schools – Proprietary educational institution:

1.a.
RA No. 8424 RA No. 11635
“xxx. Proprietary educational “xxx. Hospitals which are
institutions and hospitals nonprofit and proprietary
which are nonprofit shall pay a educational institutions shall
tax of ten percent (10%) on pay a tax of ten percent (10%)
their taxable income except on their taxable income except
those covered by Subsection those covered by Subsection
(D) hereof: xxx” (D) hereof: xxx”
 Income Tax
Income tax of schools – Proprietary educational institution:

1.b. Proprietary educational institution - means any private school

maintained and administered by private individuals or groups with an
issued permit to operate from the Department of Education (DepEd),
or the Commission on Higher Education (CHED), or the Technical
Education and Skills Development Authority (TESDA), as the case may
be, in accordance with existing laws and regulations.
 Income Tax
Income tax of schools – Proprietary educational institution:

1.c. A proprietary educational institution is subject to a preferential

rate of 10% provided that its income from unrelated trade, business or
activity does not exceed 50% of its income from all sources. (Sec. 27(B)
of the Tax Code)
 Income Tax
Income tax of schools – Proprietary educational institution:

1.d. A school entitled to the reduced rate of 10% (currently at 1%)

corporate income tax if:

a. The school is a proprietary educational institution; and,

b.Its gross income from unrelated trade, business or activity does
not exceed 50% of its total gross income.
 Income Tax
Income tax of schools – Proprietary educational institution:

1.e. Illustration No. 1:

Income from Tuition Fees – P2,000,000.00 (67%)

Lease Income – P1,000,000.00 (33%)
Total P3,000,000.00
 Income Tax
Income tax of schools – Proprietary educational institution:

1.e. Illustration No. 2:

Income from Tuition Fees – P1,000,000.00 (33%)

Lease Income – P2,000,000.00 (67%)
Total P3,000,000.00
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

1.a.1. 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. (Sec. 4(3), Art. XIV of
the Constitution)
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

1.a.2. Non-stock Non-profit educational institution to be exempt from

tax under the Constitution:

a.The taxpayer falls under the classification non-stock, non-

profit educational institution; and,
b.The income it seeks to be exempted from taxation is used
actually, directly and exclusively for educational purposes. (CIR vs. De
La Salle University, GR No. 196596 dated November 9, 2016)
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

1.b. Charitable institutions, churches and personages 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 – does not cover income tax. Covers only property taxes.
(Sec. 28 Art. VI of the Constitution)
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

2. Exempt under the NIRC in respect to income received by them as

such:

Sec. 30 (H) - A nonstock and nonprofit educational institution;

“Notwithstanding the provisions in the preceding paragraphs, the

income of whatever kind and character of the foregoing organizations
from any of their properties, real or personal, or from any of their
activities conducted for profit regardless of the disposition made of
such income, shall be subject to tax imposed under this Code.” – Last
paragraph of Sec. 30.
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

3. Revenues derived from and assets used in the operations of

cafeterias/canteens, dormitories, bookstores are exempt from taxation
provided they are owned and operated by the educational institution
as ancillary activities and the same are located within the school
premises. (DOF Order No. 137-87 dated December 15, 1987)
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

4. Conflict between the last paragraph of Sec. 30 of the NIRC and the
Constitution:
Last paragraph of Sec. 30 Constitution
Notwithstanding the revenues and assets of
provisions in the All non-stock, non-profit
preceding
paragraphs, the income of institutions
whatever kind and character educational used
of the foregoing organizations actuall fordirectly,
educational
from any of their properties, purposes
y, shall be and exempt
real or personal, or from any from taxes and duties
exclusively
of their activities conducted
for profit regardless of the
disposition made of such
income, shall be subject to tax
imposed under this Code
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

4.a. The last paragraph of Section 30 of the Tax Code is without force
and effect with respect to non-stock, non-profit educational
institutions, provided, that the non-stock, non-profit educational
institutions prove that its assets and revenues are used actually,
directly and exclusively for educational purposes.

The tax-exemption constitutionally-granted to non-stock, non-profit

educational institutions, is not subject to limitations imposed by law.
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

4.b. The tax exemption granted by the Constitution to non-stock, non-

profit educational institutions is conditioned only on the actual, direct
and exclusive use of their assets, revenues and income for educational
purposes.
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

4.c. A plain reading of the Constitution would show that Article XIV,
Section 4(3) does not require that the revenues and income must have
also been sourced from educational activities or activities related to
the purposes of an educational institution. The phrase all revenues is
unqualified by any reference to the source of revenues. Thus, so long
as the revenues and income are used actually, directly and exclusively
for educational purposes, then said revenues and income shall be
exempt from taxes and duties.
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

4.d. To avail of the exemption, the taxpayer must factually prove that it
used actually, directly and exclusively for educational purposes the
revenues or income sought to be exempted. (CIR vs. De La Salle
University, GR No. 196596 dated November 9, 2016; La Sallian
Educational Innovators Foundation, Inc. v. CIR, GR No. 202792 dated
February 27, 2019)
 Income Tax
Income tax of schools – Nonstock nonprofit educational institutions:

Hernando School of Law had the following incomes during the year:

Tuition Fees: P1,000,000.00

Rental Income: P 500,000.00
Total: P1,500,000.00
 Income Tax
Income tax of schools – Government educational institution:

1. Exempt under the NIRC in respect to income received by them as

such:

Sec. 30 (I) - Government educational institution;

“Notwithstanding the provisions in the preceding paragraphs, the

income of whatever kind and character of the foregoing organizations
from any of their properties, real or personal, or from any of their
activities conducted for profit regardless of the disposition made of
such income, shall be subject to tax imposed under this Code.” – Last
paragraph of Sec. 30.
 Income Tax
Income tax of schools – Government educational institution:

2. Hernando Public School had the following incomes during the year:

Tuition Fees: P1,000,000.00

Rental Income: P 500,000.00
Total: P1,500,000.00
 Income Tax
Capital Assets vs. Ordinary Assets:

1.a. The term “capital assets” means property held by the taxpayer
(whether or not connected with his trade or business), but does not
include 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, or property held by the taxpayer
primarily for sale to customers in the ordinary course of his trade or
business, or property used in the trade or business, of a character
which is subject to the allowance for depreciation provided in Sec.
34(F); or real property used in trade or business of the taxpayer. (Sec.
39(A)(1) of the NIRC)
 Income Tax
Capital Assets vs. Ordinary Assets:

1.b. Thus, "capital assets" refers to taxpayer’s property that is NOT any
of the following:

1. Stock in trade;
2.Property that should be included in the taxpayer’s inventory
at the close of the taxable year;
3.Property held for sale in the ordinary course of the
taxpayer’s business;
4. Depreciable property used in the trade or business; and,
5. Real property used in the trade or business.
 Income Tax
Capital Assets vs. Ordinary Assets:

2.a. Are the buildings, machineries and equipment of a Philippine

Economic Zone Authority registered corporation whose primary
purpose is "to engage in the business of manufacturing ultra high-
density microprocessor unit package" but did not commence business
operations capital or ordinary assets?
 Income Tax
Capital Assets vs. Ordinary Assets:

2.b. The properties involved in this case include petitioner’s buildings,

equipment, and machineries. They are not among the exclusions
enumerated in Section 39(A)(1) of the NIRC. None of the properties
were used in petitioner’s trade or ordinary course of business because
petitioner never commenced operations. They were not part of the
inventory. None of them were stocks in trade. Based on the definition
of capital assets under Section 39 of the National Internal Revenue
Code of 1997, they are capital assets. (SMI-ED Technology Corporation,
Inc. vs. CIR, GR No. 175410 dated November 12, 2014)
 Income Tax
Capital Assets vs. Ordinary Assets:

3. An equity investment is a capital, not ordinary, asset of the investor

the sale or exchange of which results in either a capital gain or a capital
loss. It is considered an ordinary asset only to a dealer in securities.
(China Banking Corporation vs. CA, GR No. 125508 dated July 19, 2000)
 Income Tax
Sale of Real Property – 6% Capital Gains Tax:

1.a. Applicability and Tax Base:

a.For individuals – All real property located in the Philippines held as

a capital asset.

b.For corporations – Only to Domestic corporations and limited to

the sale of land and building located in the Philippines and held
as a capital asset.

Tax Base – Gross Selling Price or Fair Market Value whichever is higher
 Income Tax
Sale of Real Property – 6% Capital Gains Tax:

1.b. Applicability and Tax Base – Ordinary Income Tax:

a.Requirements for the application of the 6% capital gains tax are

not present

b. Check situs rules

c. Subject to income tax if there is realized or actual gain on the sale

 Income Tax
Sale of Real Property – 6% Capital Gains Tax:

2.a. For domestic corporations, the National Internal Revenue Code of

1997 treats the sale of land and buildings, and the sale of machineries
and equipment, differently. Domestic corporations are imposed a 6%
capital gains tax only on the presumed gain realized from the sale of
lands and/or buildings. The National Internal Revenue Code of 1997
does not impose the 6% capital gains tax on the gains realized from the
sale of machineries and equipment.
 Income Tax
Sale of Real Property – 6% Capital Gains Tax:

2.b. Therefore, only the presumed gain from the sale of petitioner's
land and/or building may be subjected to the 6% capital gains tax. The
income from the sale of petitioner's machineries and equipment is
subject to the provisions on normal corporate income tax. (SMI-ED
Technology Corporation, Inc. vs. CIR, GR No. 175410 dated November
12, 2014)
 Income Tax
Sale of Real Property – 6% Capital Gains Tax – Sample Problem:

1. Hernando, a resident citizen, acquired a condominium unit in Japan.

Two (2) years after his acquisition, Hernando sold said condominium
unit.

Is the condominium unit subject to the 6% Capital Gains Tax?

 Income Tax
Sale of Real Property – 6% Capital Gains Tax – Sample Problem:

2. Hernando, a real estate dealer, acquired a condominium unit in the

Philippines. Two (2) years after his acquisition, Hernando sold said
condominium unit.

Is the condominium unit subject to the 6% Capital Gains Tax?

 Income Tax
Sale of Principal Residence – Requirements for Exemption from the
6% Capital Gains Tax:

1.Taxpayer notifies the BIR of his intention to avail of the

tax exemption within thirty (30) days from the date of sale;
2.The proceeds of the sale is fully utilized in acquiring or
constructing a new principal residence within eighteen (18) months
from the date of sale;
3.Historical cost or adjusted basis of the real property sold is
carried over to the new principal residence built or acquired;
4. Tax exemption can only be availed of once every ten (10) years; and,
5.Post reporting by way of submission of documents within thirty
(30) days from the lapse of the eighteen (18) month period.
 Income Tax
Sale of Real Property - Expropriation:

1. The transfer of property through expropriation proceedings is a sale

or exchange within the meaning of Sections 24(D) and 56(A)(3) of the
NIRC, and profit from the transaction constitutes capital gain. Since
Capital Gains Tax (“CGT”) is a tax on passive income, it is the seller, or
respondents in this case, who are liable to shoulder the tax. (Republic
vs. Spouses Salvador, GR No. 205428 dated June 7, 2017)
 Income Tax
Sale of Real Property - Expropriation:

2.a. The Court's ruling in Spouses Salvador is clear — CGT may not be
awarded in the form of consequential damages since the term
assumes a fixed definition in the context of expropriation proceedings;
it is limited to the impairment or decrease in value of the portion
which remains with the affected owner after expropriation.

It must be clarified, however, that the ruling in Spouses Salvador

should not be interpreted to preclude the courts from considering the
value of CGT and other transfer taxes in determining the amount of
just compensation to be awarded to the affected owner.
 Income Tax
Sale of Real Property - Expropriation:

2.b. While the award of consequential damages equivalent to the

value of CGT and transfer taxes must be struck down for being
erroneous, the Court deems it just and equitable to direct the
Republic to shoulder such taxes to preserve the compensation
awarded to Spouses Bunsay as a consequence of the expropriation.
To stress, compensation, to be just, must be of such value as to fully
rehabilitate the affected owner; it must be sufficient to make the
affected owner whole. (Republic vs. Spouses Bunsay, GR No. 205473
dated December 10, 2019)
 Income Tax
Sale of Unlisted Shares – 15% Capital Gains Tax:

Applicability:

a. Sale of Unlisted Shares of a Domestic Corporation

b. 15% rate for all taxpayers
c. Based on the Net Capital Gain
d. Shares must be held as a capital asset
 Income Tax
Sale of Listed Shares:

Tax Implications on the Sale of a Domestic Corporation Listed and

Traded thru the local stock exchange and held as a capital asset:

a.Stock Transaction Tax under Sec. 127(A) - 6/10 of 1% of the

gross selling price or gross value in money (not an income tax
but a percentage tax).

b.Gain not subject to Income Tax – “Gain derived from the sale
of listed shares is not subject to income tax.” (Sec. 127(D) of the
Tax Code)
 Income Tax
Sale of Shares – Ordinary Income Tax:

Considerations:

a.Requirements for the application of

the 15% capital gains tax or Stock Transaction Tax
are not present

b. Check situs rules

c.Subject to income tax if there is realized or actual gain on the sale

of shares
 Income Tax
Kinds of Dividends for Income Tax Purposes:

1. Cash and Property Dividends;

2. Stock Dividends; and,
3. Liquidating Dividends.
 Income Tax
Cash and Property Dividends from a Domestic Corporation – Final Tax
Implications:

1. Individuals:

Generally subject to a final tax of 10% except:

a.Nonresident Alien Engaged in Trade or Business – Final Tax of

20%; and,
b.Nonresident Alien Not Engaged in Trade or Business – Final Tax
of 25%
 Income Tax
Cash and Property Dividends from a Domestic Corporation – Final Tax
Implications:

2.a. Corporations:

a.Tax Exempt if received by a Domestic Corporation and a

Resident Foreign Corporation

b.Final Tax of 25% or 15% (subject to the tax sparing rule) if

received by a Nonresident Foreign Corporation
 Income Tax
Cash and Property Dividends from a Domestic Corporation – Final Tax
Implications:

2.b.1. Tax Sparing Rule:

a.Applies to Cash and Property Dividends received by a

Nonresident Foreign Corporation from a Domestic Corporation
b.Generally subject to a final tax of 25% but lowered to 15% if
“xxx the country in which the nonresident foreign corporation is
domiciled, shall allow a credit against the tax due from the
nonresident foreign corporation taxes deemed to have been paid
in the Philippines equivalent to ten percent (10%), which
represents the difference between the regular income tax of thirty
percent (25%) and the fifteen percent (15%) tax on dividends; (Sec.
28(B)(5)(b) of the Tax Code)
 Income Tax
Cash and Property Dividends from a Domestic Corporation – Final Tax
Implications:

2.b.2. Tax Sparing Rule:

If the foreign country in which the nonresident foreign corporation is

domiciled does not impose tax on dividends, the condition under the
Tax Sparing Credit Rule is considered satisfied. (CIR vs. Wander
Philippines, Inc., GR No. L-68375 dated April 16, 1988)
 Income Tax
Foreign Sourced Dividends received by a Domestic Corporation:

In general, foreign-sourced dividends received by domestic

corporations are subject to income tax. However, the same shall be
exempt if all of the following conditions concur:

1.The dividends actually received or remitted into the Philippines

are reinvested in the business operations of the domestic
corporation within the next taxable year from the time the
foreign-source dividends were received or remitted;

2.The dividends received shall only be used to fund the

working capital requirements, capital expenditures, dividend
payments, investment in domestic subsidiaries, and infrastructure
projects; and,
 Income Tax
Foreign Sourced Dividends received by a Domestic Corporation:

3. The domestic corporation holds directly at least twenty percent

(20%) in value of the outstanding shares of the foreign corporation
and has held the shareholdings uninterruptedly for a minimum of two
(2) years at the time of the dividends distribution. In case the foreign
corporation has been in existence for less than two (2) years at the
time of dividends distribution, then the domestic corporation must
have continuously held directly at least twenty percent (20%) in
value of the foreign corporation's outstanding shares during the
entire existence of the corporation.
 Income Tax
Stock Dividends:

1. General Rule: A stock dividend representing the transfer of surplus

to capital account shall not be subject to tax.

However, if a corporation cancels or redeems stock issued as a

dividend at such time and in such manner as to make the distribution
and cancellation or redemption, in whole or in part, essentially
equivalent to the distribution of a taxable dividend, the amount so
distributed in redemption or cancellation of the stock shall be
considered as taxable income to the extent that it represents a
distribution of earnings or profits. (Sec. 73(B) of the Tax Code)
 Income Tax
Stock Dividends:

2. Reasons why Stock Dividends are not taxable:

a. Represent capital and do not constitute income to its recipient.

b.Nothing but an "enrichment through increase in value of

capital investment."

c.In a loose sense, stock dividends issued by the corporation,

are considered unrealized gain, and cannot be subjected to income
tax until that gain has been realized. Before the realization,
stock dividends are nothing but a representation of an interest
in the corporate properties.
 Income Tax
Liquidating Dividends:

1. Where a corporation distributes all of its assets in complete

liquidation or dissolution, the gain realized or loss sustained by the
stockholder, whether individual or corporate, is a taxable income or a
deductible loss, as the case may be.
 Income Tax
Liquidating Dividends:

2. Determination of Gain of Loss in the receipt of Liquidating

Dividends:

Cash or Fair Market Value of Property: xxx

Less: Acquisition Cost of Shares: xxx
Gain or Loss xxx
 Income Tax
Optional Standard Deduction:

1. Forty Percent (40%) of:

a) Individuals – based on gross sales or gross receipts;

b) Corporations – based on gross income.
 Income Tax
Optional Standard Deduction:

Individual Corporation
Gross Sales 1,000,000.00 1,000,000.00
Less: Cost of Goods Sold: 800,000.00 800,000.00
Basis of OSD 1,000,000.00 200,000.00
OSD Rate - 40% 0.40 0.40
OSD Amount 400,000.00 80,000.00

Individual Corporation
Gross Sales 1,000,000.00 1,000,000.00
Less: Cost of Goods Sold: 800,000.00 800,000.00
Gross Sales/Gross Income: 1,000,000.00 200,000.00
Less: OSD 400,000.00 80,000.00
Taxable Income 600,000.00 120,000.00
 Income Tax
Optional Standard Deduction:

2. TRAIN Law Provision:

“xxx. Provided, further, That a general professional partnership and the

partners comprising such partnership may avail of the optional
standard deduction only once, either by the general professional
partnership or the partners comprising the partnership: xxx.”
 Income Tax
Optional Standard Deduction:

3. New Rules for General Professional Partnerships (“GPPs”) under RR

No. 8-2018:

a. The GPP is not a taxable entity for income tax purposes since it is
only acting as a “pass-through” entity wherein its income is ultimately
taxed to the partners comprising it. As such, a GPP may claim either
the itemized deductions allowed under Sec. 34 or in lieu thereof, it can
opt to avail of the OSD allowed to corporations.
 Income Tax
Optional Standard Deduction:

3. New Rules for GPPs under RR No. 8-2018:

b. The share in the net income of the partnership, actually or

constructively received, shall be reported as taxable income of each
partner. The partners comprising the GPP can no longer claim further
deduction from their distributive net income of the GPP and are not
allowed to avail of the 8% income tax option since their distributive
share from the GPP is already net of cost and expenses.
 Income Tax
Optional Standard Deduction:

3. New Rules for GPPs under RR No. 8-2018:

c. If the partner also derives other income from trade, business or

practice of profession apart and distinct from the share in the net
income of the GPP, the deduction that can be claimed from the other
income would either be the itemized deductions or OSD.
 Income Tax
Optional Standard Deduction:

4. Illustration No. 1:

Hernando is a partner in Hernando Law Firm, a general professional

partnership. For the year 2023, the law firm claimed Optional Standard
Deduction (“OSD”) in its Income Tax Return (“ITR”).

a. In computing taxable income on his income from the GPP,

may
Hernando claim OSD?
b. In computing taxable income on his income from the GPP,
may
Hernando claim itemized deductions?
 Income Tax
Optional Standard Deduction:

4. Illustration No. 2:

Hernando is a partner in Hernando Law Firm, a general professional

partnership. For the year 2023, the law firm claimed itemized
deductions in its Income Tax Return (“ITR”).

a. In computing taxable income on his income from the GPP,

may
Hernando claim OSD?
b. In computing taxable income on his income from the GPP,
may
Hernando claim itemized deductions?
Local Taxation
 Local Government Taxation
Local Government Unit’s Power to Tax:

1. Each local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local governments. (Sec. 5, Art. X, 1987
Constitution)
 Local Government Taxation
Local Government Unit’s Power to Tax:

2. The power to impose a tax, fee, or charge or to generate revenue

under this Code shall be exercised by the sanggunian of the local
government unit concerned through an appropriate ordinance. (Sec.
132 of the Local Government Code)
 Local Government Taxation
Local Government Unit’s Power to Tax:

LGU passes an
Person liable pays LGU uses the
ordinance
Amusement Tax to proceeds of the
imposing
the LGU Amusement Tax
Amusement Tax

Person liable FDCP gives the

LGU passes an
remits the Amusement Tax
ordinance
Amusement Tax to proceeds to the
imposing
FDCP graded film
Amusement Tax
producer
 Local Government Taxation
Local Government Unit’s Power to Tax:

2. The Amusement Tax Reward system granted to “graded films” under

Secs. 13 and 14 of RA No. 9167 violates the local fiscal autonomy
provision under Sec. 5 Art. X of the Constitution which provides that:
“Each local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local governments.” (Film Development
Council of the Philippines vs. Colon Heritage Realty Corporation, GR No.
203754 dated June 16, 2015)
 Local Government Taxation
Doctrine of Preemption or Exclusionary Rule:

1. Refers to an instance where the national government elects to tax a

particular area, impliedly withholding from the local government the
delegated power to tax the same field.
 Local Government Taxation
Doctrine of Preemption or Exclusionary Rule:

2. This doctrine primarily rests upon the intention of

Congress. Conversely, should Congress allow municipal corporations to
cover fields of taxation it already occupies, then the doctrine of
preemption will not apply. (Victorias Milling Co., Inc. vs. Municipality of
Victorias, GR No. L-21183 dated September 27, 1968)
 Local Government Taxation
Common Limitations:

1.a. Under Sec. 133(h) of the Local Government Code (“LGC”) there
are two (2) kinds of taxes which cannot be imposed by local
government units, namely:

a)Excise taxes on articles enumerated under the National

Internal Revenue Code, as amended; and,
b) Taxes, fees or charges on petroleum products.
 Local Government Taxation
Common Limitations:

1.b. An Local Government Unit (“LGU”) cannot impose business tax on

the sale of petroleum products. Sec. 133(h) of the LGC provides that
the taxing powers of LGUs shall not extend to taxes fees and charges
on petroleum products. (Petron Corp. vs. Tiangco, GR No. 158881
dated April 16, 2008)
 Local Government Taxation
Common Limitations:

1.c. Strictly speaking, as long as the subject matter of the taxing

powers of the Local Government Units is the petroleum products per
se or even the activity or privilege related to the petroleum products,
such as manufacturing and distribution of said products, it is covered
by the said limitation and thus, no levy can be imposed. (Batangas City
vs. Pilipinas Shell Petroleum Corporation, GR No. 187631 dated July 8,
2015)
 Local Government Taxation
Common Limitations:

2.a. Taxes on the gross receipts of transportation contractors and

persons engaged in the transportation of passengers or freight by hire
and common carriers by air, land or water, except as provided in this
Code. (Sec. 133(j) of the Local Government Code)
 Local Government Taxation
Common Limitations:

2.b. A Local Government Unit (“LGU”) cannot impose business tax on

common carriers. Sec. 133(j) of the Local Government Code provides
that the taxing powers of LGUs shall not extend to taxes on gross
receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers.
(City of Manila vs. Colet, GR No. 120051 dated December 10, 2014)
 Local Government Taxation
Common Limitations:

3.a. Taxes, fees, or charges, on Countryside and Barangay Business

Enterprises and cooperatives duly registered under R.A. No. 6810 and
Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938)
otherwise known as the "Cooperative Code of the Philippines"
respectively. (Sec. 133(n) of the Local Government Code)
 Local Government Taxation
Common Limitations:

3.b. An Local Government Unit (“LGU”) cannot impose real property

tax on a cooperative duly registered with the Cooperative Code of the
Philippines. Sec. 133(n) of the Local Government Code provides that an
LGU cannot impose taxes, fees and charges on cooperatives registered
under the Cooperative Code. (Provincial Assessor of Agusan del Sur vs.
Filipinas Palm Oil Plantation, Inc., GR No. 183416 dated October 5,
2016)
 Local Government Taxation
Common Limitations:

4.a. Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units. (Sec.
133(o) of the Local Government Code);
 Local Government Taxation
Common Limitations:

4.b. By express mandate of Sec. 133(o) the Local Government Code,

Local Government Units cannot impose any kind of tax on national
government instrumentalities like the MIAA. The taxing powers of local
governments do not extend to the national government, its agencies
and instrumentalities, "unless otherwise provided in this Code" as
stated in the saving clause of Section 133. The saving clause refers to
Section 234(a) on the exception to the exemption from real estate tax
of real property owned by the Republic. (MIAA vs. CA, GR No. 155640
dated July 20, 2006)
 Local Government Taxation
Common Limitations:

4.c. The Light Rail Transit Authority (“LRTA”), being an instrumentality

of the national government, cannot be taxed by local governments.

Clearly, the general rule that tax exemption is strictly construed against
the taxpayer claiming the exemption does not apply in the instant
case, as the legislature itself created an exemption to national
government instrumentalities from local taxation. Thus, such
exemption is construed liberally in favor of national government
instrumentalities, which includes LRTA. (LRTA vs. City of Pasay, GR No.
211299 dated June 28, 2022, J. Hernando)
 Local Government Taxation
Specific Taxing Powers – Province:

1. Local Transfer Tax (Sec. 135);

2. Business Tax on Printing and Publication (Sec. 136);
3. Franchise Tax (Sec. 137);
4. Tax on Sand, Gravel and Other Quarry Resources (Sec. 138);
5. Professional Tax (Sec. 139);
6. Amusement Tax (Sec. 140);
7. Annual Fixed Tax on Delivery Trucks (Sec. 141);
8. Common Revenue Raising Powers (Secs. 153, 154 and 155); and,
9. Other Fees, Taxes and Charges (Sec. 186).
 Local Government Taxation
Specific Taxing Powers – City:

1. Local Transfer Tax (Sec. 135);

2. Business Tax on Printing and Publication (Sec. 136);
3. Franchise Tax (Sec. 137);
4. Tax on Sand, Gravel and Other Quarry Resources (Sec. 138);
5. Professional Tax (Sec. 139);
6. Amusement Tax (Sec. 140);
7. Annual Fixed Tax on Delivery Trucks (Sec. 141);
8. Business Tax (Sec. 143);
9. Common Revenue Raising Powers (Secs. 153, 154 and 155);
10. Community Tax (Sec. 156); and,
12. Other Fees, Taxes and Charges (Sec. 186).
 Local Government Taxation
Specific Taxing Powers – Municipality:

1. Business Tax (Sec. 143);

2. Fees and Charges (Sec. 147);
3. Fees for Sealing and Licensing of Weights (Sec. 148);
4. Fees for Fishery Rentals, Fees and Charges (Sec. 149);
5. Common Revenue Raising Powers (Secs. 153, 154 and 155);
6. Community Tax (Sec. 156); and,
7. Other Fees, Taxes and Charges (Sec. 186).
 Local Government Taxation
Specific Taxing Powers – Barangay:

1. Business Tax on retailers (Sec. 152a);

2. Service Fees or Charges (Sec. 152b);
3. Barangay Clearance (Sec. 152c);
4. Other fees and Charges (Sec. 152d);
5. Common Revenue Raising Powers (Secs. 153, 154 and 155); and,
6. Other Fees, Taxes and Charges. (Sec. 186).
 Local Government Taxation
Specific Taxing Powers:

1. May a municipality impose franchise tax?

 Local Government Taxation
Specific Taxing Powers:

2.a. Section 142 of the Local Government Code provides:

Sec. 142. Scope of Taxing Powers. - Except as otherwise provided in

this Code, municipalities may levy taxes, fees, and charges not
otherwise levied by provinces.
 Local Government Taxation
Specific Taxing Powers:

2.b. The foregoing provisions clearly set out that municipalities may
only levy taxes not otherwise levied by the provinces. Section 137
particularly provides that provinces may impose a franchise tax on
businesses granted with a franchise to operate. Since provinces have
been vested with the power to levy a franchise tax, it follows that
municipalities, pursuant to Section 142 of the Local Government Code,
could no longer levy it. (MERALCO vs. City of Muntinlupa, GR No.
198529 dated February 9, 2021, J. Hernando).
 Local Government Taxation
Franchise Tax:

Franchise tax is a tax on the exercise of a privilege. As Section 137 of

the LGC provides, franchise tax shall be based on gross receipts
precisely because it is a tax on business, rather than on persons or
property. Since it partakes of the nature of an excise tax, the situs of
taxation is the place where the privilege is exercised, where the
taxpayer has its principal office and from where it operates, regardless
of the place where its services or products are delivered. (City of Iriga
vs. CASURECO III, GR No. 192945 dated September 5, 2012)
 Local Government Taxation
Amusement Tax:

1.a. Under Sec. 140 of the LGC, the Amusement Tax may be imposed
on proprietors, lessees, or operators of theaters, cinemas, concert
halls, circuses, boxing stadia, and other places of amusement.
 Local Government Taxation
Amusement Tax:

1.b. On the other hand, Sec. 131 (c) of the LGC defines "Amusement
Places“ as to include theaters, cinemas, concert halls, circuses and
other places of amusement where one seeks admission to entertain
oneself by seeing or viewing the show or performances.
 Local Government Taxation
Amusement Tax:

2. It is clear that resorts, swimming pools, bath houses, hot springs and
tourist spots cannot be considered venues primarily "where one seeks
admission to entertain oneself by seeing or viewing the show or
performances". While it is true that they may be venues where people
are visually engaged, they are not primarily venues for their
proprietors or operators to actively display, stage or present shows
and/or performances. (Pelizloy Realty Corp., vs. Province of Benguet,
GR No. 183137, April 10, 2013)
 Local Government Taxation
Amusement Tax:

3. An Local Government Unit cannot impose Amusement Tax on an

operator of a golf course. In order to be subject to amusement tax, the
venue must be an amusement place where one seeks admission to
entertain oneself by seeing or viewing a show or performance. People
do not enter a golf course to see or view a show or performance. The
proprietor or operator of the golf course does not actively display,
stage, or present a show or performance. People go to a golf course to
engage themselves in a physical sport activity, i.e., to play golf. (Alta
Vista Golf and Country Club vs. The City of Cebu, GR No. 180235 dated
January 20, 2016)
 Local Government Taxation
Business Tax:

1. If a business is already paying business tax as a retailer under Sec.

143(d) of the Local Government Code (“LGC”), it is no longer liable to
pay business tax on businesses subject to VAT and Percentage Tax
under Sec. 143(h) of the LGC. Sec. 143(h) of the LGC may invoked by
the Local Government Unit if the business is not otherwise specified in
the preceding paragraphs (Secs. 143(a) to (g) of the LGC). (Nursery
Care Corporation vs. Acevedo, GR No. 180651 dated July 30, 2014)
 Local Government Taxation
Business Tax:

2.a. Is a holding company liable for business tax on its dividend

income?
 Local Government Taxation
Business Tax:

2.b. On banks and other financial institutions, at a rate not exceeding

fifty percent (50%) of one percent (1%) on the gross receipts of the
preceding calendar year derived from interest, commissions and
discounts from lending activities, income from financial leasing,
dividends, rentals on property and profit from exchange or sale of
property, insurance premium. (Sec. 143(f) of the Local Government
Code)
 Local Government Taxation
Business Tax:

2.c. A holding company is not liable to pay business tax on its dividend
income. Only banks and other financial institutions are liable to pay
business tax based on dividend income. While holding companies may
partake in investment activities, this does not per se qualify them as
financial intermediaries that are actively dealing in the same. (City of
Davao vs. Randy Allied Ventures, Inc., GR No. 241697 dated July 29,
2019; City of Davao vs. AP Holdings, Inc., GR No. 245887 dated January
22, 2020)
 Real Property Taxation
General Principles:

1. "Machinery" embraces machines, equipment, mechanical

contrivances, instruments, appliances or apparatus which may or may
not be attached, permanently or temporarily, to the real property. It
includes the physical facilities for production, the installations and
appurtenant service facilities, those which are mobile, self-powered or
self-propelled, and those not permanently attached to the real
property which are actually, directly, and exclusively used to meet the
needs of the particular industry, business or activity and which by their
very nature and purpose are designed for, or necessary to its
manufacturing, mining, logging, commercial, industrial or agricultural
purposes. (Sec. 199(o) of the Local Government Code)
 Real Property Taxation
General Principles:

2.a. Transformers, electric posts, transmission lines, insulators and

electric meters owned and used by Meralco may be considered as
machineries subject to real property tax.

Under Sec. 199 (o) of the LGC, machinery, to be deemed real property
subject to real property tax, need no longer be annexed to the land or
building as these "may or may not be attached, permanently or
temporarily to the real property," and in fact, such machinery may
even be "mobile."
 Real Property Taxation
General Principles:

2.b. The same provision requires that the machinery: (a) must be
actually, directly, and exclusively used to meet the needs of the
particular industry, business, or activity; and (b) by their very nature
and purpose, are designed for, or necessary for manufacturing, mining,
logging, commercial, industrial, or agricultural purposes. Therefore, in
real property whether
determining tax, the definition
machinery is real and requirements
property subject to
under the Local
Government Code (not the Civil Code) are controlling. (Meralco vs. The
City Assessor and City Treasurer of Lucena City, GR No. 166102 dated
August 5, 2015)
 Real Property Taxation
General Principles:

3.a. The road equipment owned and used by Filipinas Palm Oil in its
Palm Oil business are real properties subject to real property tax.
 Real Property Taxation
General Principles:

3.b. Under the definition provided in Sec. 199(o) of the LGC, the road
equipment and the mini haulers are classified as machinery, thus:

"Machinery" . . . includes the physical facilities for production, the

installations and appurtenant service facilities, those which are
mobile, self-powered or self propelled, and those not permanently
attached to the real property which are actually, directly, and
exclusively used to meet the needs of the particular industry, business
or activity and which by their very nature and purpose are designed
for, or necessary to its manufacturing, mining, logging, commercial,
industrial or agricultural purposes.
 Real Property Taxation
General Principles:

3.c. The phrase pertaining to physical facilities for production is

comprehensive enough to include the road equipment and mini
haulers as actually, directly, and exclusively used by respondent to
meet the needs of its operations in palm oil production. Moreover,
"mini-haulers are farm tractors pulling attached trailers used in the
hauling of seedlings during planting season and in transferring fresh
palm fruits from the farm [or] field to the processing plant within the
plantation area." The indispensability of the road equipment and mini
haulers in transportation makes it actually, directly, and exclusively
used in the operation of respondent's business. (Provincial Assessor of
Agusan del Sur vs. Filipinas Palm Oil Plantation, Inc., GR No. 183416
dated October 5, 2016)
 Real Property Taxation
General Principles:

4. "Machinery" embraces machines, equipment, mechanical

contrivances, instruments, appliances or apparatus which may or may
not be attached, permanently or temporarily, to the real property. It
includes the physical facilities for production, the installations and
appurtenant service facilities, those which are mobile, self-powered or
self-propelled, and those not permanently attached to the real
property which are actually, directly, and exclusively used to meet the
needs of the particular industry, business or activity and which by their
very nature and purpose are designed for, or necessary to its
manufacturing, mining, logging, commercial, industrial or agricultural
purposes. (Sec. 199(o) of the Local Government Code)
 Real Property Taxation
Exemption from Real Property Taxation:

1. Sec. 234(a):
Provision Property Covered Basis of Exemption
Real property owned by All kinds of Real Property Ownership
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
 Real Property Taxation
Exemption from Real Property Taxation:

2. Sec. 234(b):
Provision Property Covered Basis of Exemption
Charitable institutions, Churches, Parsonage, Character
churches, parsonages or Convents, Mosques,
convents appurtenant Nonprofit or Religious
thereto, mosques, non- Cemeteries
profit or religious
cemeteries and all lands,
buildings, and Land, Buildings and Usage
improvements Improvements
actually, directly, and
exclusively
used for religious,
charitable or educational
purposes
 Real Property Taxation
Exemption from Real Property Taxation:

3. Sec. 234(c):
Provision Property Covered Basis of Exemption
All machineries and Machineries Usage
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
 Real Property Taxation
Exemption from Real Property Taxation:

4. Sec. 234(d):
Provision Property Covered Basis of Exemption
All real property owned by All Real Properties Ownership
duly
registered cooperatives as
provided for under R.A.
No. 6938
 Real Property Taxation
Exemption from Real Property Taxation:

4. Sec. 234(e):
Provision Property Covered Basis of Exemption
Machinery and equipment Machinery Usage
used for pollution control
and
environmental protection
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(a):

1.a. 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.
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(a):

1.b. The following things are property of public dominion:

(1)Those intended for public use, such as roads, canals,

rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character; and,

(2)Those which belong to the State, without being for public use,
and are intended for some public service or for the development of
the national wealth. (Art. 420 of the Civil Code)
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(a):

2.a. The airport lands and buildings being administered by MIAA, an

instrumentality, are exempt from real property tax under Sec. 234(a) of
the LGC. The airport is considered owned by the Republic since it is
property of public dominion under Art. 420 of the Civil Code. MIAA, an
instrumentality of the national government is also exempt from the
payment of the real property tax. Under Sec. 133(o) of the LGC, Local
Government Units are prohibited from imposing taxes, fees and
charges on the national government, its agencies, instrumentalities
and local government units.
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(a):

2.b. However, the portion of the airport leased to commercial

establishments are taxable since the beneficial use has been granted
to a taxable person for consideration. (MIAA vs. CA, GR No. 155650
dated July 20, 2006)
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(a):

3.a. Under Article 420 of the Civil Code, the rail roads and terminals of
the Light Rail Transit (“LRT”), being devoted to public use, are
properties of public dominion and thus owned by the State or the
Republic of the Philippines.
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(a):

3.b. Article 420 of the Civil Code, while not specifically mentioning "rail
roads" or "rail road tracks," allow for the inclusion of properties of a
similar character.

LRT rail roads, which necessarily include its terminals, are of a similar
character to public roads, as both are devoted for public use and both
facilitate transportation through certain vehicles. In any event, the LRT
is owned by the State through the LRTA, as its agent, and is definitely
intended for some public service, which is to provide mass
transportation to the people to alleviate the traffic and transportation
situation in Metro Manila. (LRTA vs. City of Pasay, GR No. 211299 dated
June 28, 2022, J. Hernando)
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(b):

1. 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.
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(b):

2. 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. (Sec. 4(3), Art. XIV of
the Constitution)
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(b):

3.a. To illustrate, if a university leases a portion of its school building to

a bookstore or cafeteria, the leased portion is not actually, directly and
exclusively used for educational purposes, even if the bookstore or
canteen caters only to university students, faculty and staff.

The Supreme Court has held that the test of exemption from taxation
is the use of the property for purposes mentioned in the Constitution.
It also held that the exemption extends to facilities which are
incidental to and reasonably necessary for the accomplishment of the
main purposes.
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(b):

3.b. In concrete terms, the lease of a portion of a school building for

commercial purposes, removes such asset from the property tax
exemption granted under the Constitution. There is no exemption
because the asset is not used actually, directly and exclusively for
educational purposes. The commercial use of the property is also not
incidental to and reasonably necessary for the accomplishment of the
main purpose of a university, which is to educate its students. (CIR vs.
De La Salle University, GR No. 196596 dated November 9, 2016)
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(c):

1. 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.
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(c):

2. To successfully claim exemption under Section 234(c) of the LGC, the

claimant must prove two elements: (a) the machineries and
equipment are actually, directly, and exclusively used by local water
districts and government-owned or controlled corporations; and, (b)
the local water districts and government-owned and controlled
corporations claiming exemption must be engaged in the supply and
distribution of water and/or the generation and transmission of
electric power. (NPC vs. Province of Quezon, GR No. 171586 dated July
15, 2009)
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(d):

1. All real property owned by duly registered cooperatives as provided

for under R.A. No. 6938.
 Real Property Taxation
Exemption from Real Property Taxation – Sec. 234(d):

2. Section 234 of the Local Government Code exempts all real property
owned by cooperatives without distinction. Nothing in the law
suggests that the real property tax exemption only applies when the
property is used by the cooperative itself. Similarly, the instance that
the real property is leased to either an individual or corporation is not
a ground for withdrawal of tax exemption. (Provincial Assessor of
Agusan del Sur vs. Filipinas Palm Oil Plantation, Inc., GR No. 183416
dated October 5, 2016)
 Remedies under the LGC
Constitutionality or Legality of a Tax Ordinance – What is covered?

1. Section 187 of the LGC, which outlines the procedure for

questioning the constitutionality of a tax ordinance, is inapplicable to
an ordinance imposing regulatory fees, rendering unnecessary the
resolution of the issue on non-exhaustion of administrative remedies.
(Smart vs. Municipality of Malvar, Batangas, GR No. 204429 dated
February 18, 2014)
 Remedies under the LGC
Constitutionality or Legality of a Tax Ordinance – What is covered?

2. The phrase “revenue measures” in Section 187 of the LGC also refers
to tax ordinances. The word "or" in Section 187 should be used in a
non-disjunctive sense. It should be construed in a way that the phrase
"revenue measures" is read as another way of expressing "tax
ordinances." Both refer to one and the same thing.

Proceeding to the question of non-exhaustion, the Court rules that

ordinances that impose regulatory fees do not need to be challenged
before the Secretary of Justice. (City of Cagayan De Oro v. CEPALCO,
GR No. 224825 dated October 17, 2018)
 Remedies under the LGC
Constitutionality or Legality of a Tax Ordinance – How to contest?

Procedure:

a.Appeal to the Secretary of Justice (“SOJ”) within 30 days from

the effectivity of the ordinance.
b. SOJ shall render a decision within 60 days from receipt of appeal.
c.Appeal shall not have the effect of suspending the effectivity of
the ordinance and the accrual and payment of the tax, fee, or
charge levied therein.
d.Within 30 days after receipt of the decision or the lapse of the
60 period without the SOJ acting upon the appeal, the aggrieved
party may file the appropriate proceedings with the court of
competent jurisdiction. (Sec. 187 of the LGC)
 Remedies under the LGC
Constitutionality or Legality of a Tax Ordinance – Court of Competent
Jurisdiction?

1. Considering that the subject matter of review is an exercise of quasi-

judicial power by the Secretary of Justice, the latter's decision on the
legality or constitutionality of tax ordinances and revenue measures
under Section 187 of the LGC is a proper subject of appeal through a
petition for review under Rule 43.
 Remedies under the LGC
Constitutionality or Legality of a Tax Ordinance – Court of Competent
Jurisdiction?

2. The proper venue for the foregoing actions however is the Court of
Appeals (“CA”) and not the Regional Trial Court in accordance with
Section 4, Rule 65 of the Rules of Court. In the consolidated cases of
Association of Medical Clinics for Overseas Workers, Inc. (AMCOW) vs.
GCC Approved Medical Centers Association, Inc., et al., the Court
emphasized that the "acts or omissions by quasi-judicial agencies,
regardless of whether the remedy involves a Rule 43 appeal or a Rule
65 petition for certiorari, is cognizable by the CA.“ (De Lima vs. City of
Manila, GR No. 222886 dated October 17, 2018)
 Remedies under the LGC
Constitutionality or Legality of a Tax Ordinance – Failure to avail?

1. These three separate periods under Section of the LGC are clearly
given for compliance as a prerequisite before seeking redress in a
competent court. Such statutory periods are set to prevent delays as
well as enhance the orderly and speedy discharge of judicial functions.
For this reason the courts construe these provisions of statutes as
mandatory. (CEPALCO, Inc. vs. City of Cagayan de Oro, GR No. 191761
dated November 14, 2012)
 Remedies under the LGC
Constitutionality or Legality of a Tax Ordinance – Failure to avail?

2. The doctrine of exhaustion of administrative remedies, like the

doctrine on hierarchy of courts, is not an iron-clad rule. It admits of
several well-defined exceptions. (Aala vs. Uy, GR No. 202781 dated
January 10, 2017)
 Remedies under the LGC
Constitutionality or Legality of a Tax Ordinance – Failure to avail?

3.In the following cases, the Supreme Court, as an exception to

the general rule and exception to the rule on exhaustion of
administrative remedies, held that failure to comply with Sec. 187 of
the LGC is not fatal:

1.Ongsuco vs. Malones, GR No. 182065 dated October 27, 2009 –

pure questions of law;
2.CEPALCO vs. City of Cagayan de Oro, GR No. 191761
dated November 14, 2012 – more substantive matters; and,
3.Alta Vista Golf and Country Club vs. City of Cebu, GR No.
180235 dated January 20, 2016 – pure questions of law and
substantive matters imperative for the Court to resolve.
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 1:

1. Scenario contemplated:

Taxpayer receives a notice of assessment but does not pay the tax
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 1:

2. Procedure – local treasurer and trial courts:

a.File protest within 60 days from receipt of the protest.

Otherwise, the assessment becomes final and executory;
b. Treasurer decides within 60 days from receipt of the protest; and,
c.The taxpayer shall have 30 days from the receipt of the denial of
the protest or from the lapse of the 60 day period in letter c. within
which to appeal with the MTC/RTC, otherwise, the assessment
becomes conclusive and unappealable. (Sec. 195 of the LGC)
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 2:

1. Scenario contemplated:

Taxpayer does not receive a notice of assessment but erroneously pays

the tax or claims that the tax has been illegally collected from him
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 2:

2. Procedure – local treasurer and trial courts:

a.Taxpayer files a written claim for refund with the local

treasurer within 2 years from date of payment, or from the date the
taxpayer is entitled to a refund or credit.

b.The subsequent appeal of the decision or inaction of the

MTC/RTC must be within 2 years from date of payment, or from the
date the taxpayer is entitled to a refund or credit.
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 2:

3. Doctrines related to the procedure – period to decide the refund?

Unlike Section 195, however, Section 196 does not expressly provide a
specific period within which the local treasurer must decide the
written claim for refund or credit. It is, therefore, possible for a
taxpayer to submit an administrative claim for refund very early in the
two-year period and initiate the judicial claim already near the end of
such two-year period due to an extended inaction by the local
treasurer. In this instance, the taxpayer cannot be required to await
the decision of the local treasurer any longer, otherwise, his judicial
action shall be barred by prescription. (City of Manila vs. Cosmos
Bottling Corporation, GR No. 196681 dated June 27, 2018)
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 2:

4. Doctrines related to the procedure - May the written claim for

refund with the local treasurer be dispensed with?

a. The doctrine of exhaustion of administrative remedies requires

recourse to the pertinent administrative agency before resorting to
court action. When there is an adequate remedy available with the
administrative remedy, then courts will decline to interfere when the
party refuses, or fails, to avail of it. Nonetheless, the failure to exhaust
administrative remedies is not always fatal to a party's cause. The
Supreme Court has admitted of several exceptions to the doctrine.
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 2:

4. Doctrines related to the procedure - May the written claim for

refund with the local treasurer be dispensed with?

b. If the party can prove that the resort to the administrative remedy
would be an idle ceremony such that it will be absurd and unjust for it
to continue seeking relief that evidently will not be granted to it, then
the doctrine would not apply. The filing of written claims with
respondent City Treasurer for every collection of tax under the
subject ordinance, would have yielded the same result every time.
Furthermore, the issue raised by the taxpayer legal and there is no
question concerning the reasonableness of the amount assessed, then
there is no need to exhaust administrative remedies. (ICTSI vs. City of
Manila, GR No. 185622 dated October 17, 2018)
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 3:

1. Scenario contemplated:

Taxpayer receives a notice of assessment but opts to pay the tax

 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 3:

2. Procedure:

a.File protest within 60 days from receipt of the protest.

Otherwise, the assessment becomes final and executory;
b.In its protest, the taxpayer should request for a refund in
compliance with Sec. 196 of the LGC;
c. Treasurer decides within 60 days from receipt of the protest; and,
d.The taxpayer shall have 30 days from the receipt of the denial of
the protest or from the lapse of the 60 day period in letter c. within
which to appeal with the MTC/RTC, otherwise, the assessment
becomes conclusive and unappealable. (Secs. 195 and 196 of the LGC)
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 3:

3. Doctrines related to the procedure:

a. To stress, where an assessment is issued, the taxpayer cannot

choose to pay the assessment and thereafter seek a refund at any
time within the full period of two years from the date of payment as
Section 196 may suggest. If refund is pursued, the taxpayer must
administratively question the validity or correctness of the assessment
in the 'letter-claim for refund' within 60 days from receipt of the notice
of assessment, and thereafter bring suit in court within 30 days from
either decision or inaction by the local treasurer. (City of Manila vs.
Cosmos Bottling Corporation, GR No. 196681 dated June 27, 2018)
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 3:

3. Doctrines related to the procedure:

b. If the taxpayer opts to pay the assessed tax, fee, or charge, it must
still file the written protest within the 60-day period, and then bring
the case to court within 30 days from either the decision or inaction of
the local treasurer. In its court action, the taxpayer may, at the same
time, question the validity and correctness of the assessment and seek
a refund of the taxes it paid. "Once the assessment is set aside by the
court, it follows as a matter of course that all taxes paid under the
erroneous or invalid assessment are refunded to the taxpayer.“ (ICTSI
vs. City of Manila, GR No. 185622 dated October 17, 2018)
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT – Scenario 3:

3. Doctrines related to the procedure – What if the taxpayer fails to

request for a refund?

Where protest against assessment was first made, then later payment
of the assessed tax, substantial justice or procedural economy, at the
very least, demands that the prior letter-protest be treated as having
the same effect and import as a written claim for refund for purposes
of satisfying the requirement of exhaustion of administrative
remedies. (City of Manila vs. Cosmos Bottling Corporation, GR No.
196681 dated June 27, 2018)
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT:

Procedure in the appellate courts common to the three (3) scenarios:

a.If the MTC has original jurisdiction over the case, its decision
is appealable to the RTC. The decision of the RTC is appealable to CTA
En Banc then to the Supreme Court.

b.If the RTC has original jurisdiction over the case, its decision
is appealable to the CTA Division, then to the CTA En Banc then to
the Supreme Court.
 Remedies under the LGC
Protest and Refund Cases in Local Tax Cases except RPT:

Procedure in the appellate courts common to the three (3) scenarios:

c. The jurisdictional basis of the CTA’s appellate jurisdiction is:

“Decisions, orders or resolutions of the Regional Trial Courts in local

tax cases originally decided or resolved by them in the exercise of their
original or appellate jurisdiction.” (Sec. 7(a)(3) of RA No. 9282)
 Remedies under the LGC
Real Property Tax Assessments:

Two (2) kinds of Real Property Tax Assessments:

1.Erroneous Assessment - An erroneous assessment

presupposes that the taxpayer is subject to the tax but is disputing
the correctness of the amount assessed. With an erroneous
assessment, the taxpayer claims that the local assessor erred in
determining any of the items for computing the real property tax, i.e.,
the value of the real property or the portion thereof subject to tax and
the proper assessment levels.

2.Illegal Assessment - an assessment is illegal if it was made

without authority under the law. (City of Lapu-Lapu vs. PEZA, GR No.
184203 dated November 26, 2014)
 Remedies under the LGC
Real Property Tax Assessments:

Two (2) kinds of Real Property Tax Assessments:

Erroneous Assessment Illegal Assessment

excessiveness, reasonableness legality, power, validity or
and correctness authority (of the assessor)
Payment under protest is Payment under protest not
required necessary
Must exhaust administrative May immediately avail of a
remedies judicial remedy
Factual Issues Legal Issues
 Remedies under the LGC
How to contest an Erroneous Assessment:

1. Pay under protest; (Sec. 252 of the LGC)

2.File a written protest with the treasurer within 30 days
from payment; (Sec. 252 of the LGC)
3. Treasurer to decide within 60 days; (Sec. 252 of the LGC)
4.If protest is denied or upon lapse of the 60 day period to decide
the protest, file a verified petition with the Local Board of
Assessment Appeals (“LBAA”) within 60 days from receipt of the
written notice of assessment/decision of the treasurer or from
lapse of the 60 day period to decide. (Sec. 226 of the LGC)
5.LBAA to decide the appeal/petition within 120 days from receipt
of the appeal; (Sec. 229 of the LGC)
 Remedies under the LGC
How to contest an Erroneous Assessment:

6.If the taxpayer is not satisfied with the decision of the LBAA,
an appeal may be taken to the Central Board of Assessment
Appeals (“CBAA”) by filing a notice of appeal within 30 days from
receipt thereof. (Sec. 229 of the LGC)
7.From the CBAA, appeal to the CTA EB within 30 days via Petition
for review under Rule 43. (CTA Rules)
8.The decision of the CTA EB is appealable to the SC within 15
days under Rule 45 raising pure questions of law. (CTA Rules)
 Remedies under the LGC
Erroneous Assessment Doctrines – Surety Bond Allowed?

1. Posting of surety bond (instead of payment in cash), may be

considered substantial compliance with Section 252 of the LGC
Government Code for the said bond already guarantees the payment
to the alleged real property tax. (Meralco vs. The City Assessor and City
Treasurer of Lucena City, GR No. 166102 dated August 5, 2015)
 Remedies under the LGC
Erroneous Assessment Doctrines – Claim of Exemption?

2.a. A claim for exemption from payment of real property taxes does
not actually question the assessor's authority to assess and collect
such taxes but pertains to the reasonableness or correctness of the
assessment by the local assessor, a question of fact which should be
resolved, at the very first instance, by the LBAA. This may be inferred
from Section 206 of the LGC.
 Remedies under the LGC
Erroneous Assessment Doctrines – Claim of Exemption?

2.b. Sec. 206, by providing that real property not declared and proved
as tax-exempt shall be included in the assessment roll, the above-
quoted provision implies that the local assessor has the authority to
assess the property for realty taxes, and any subsequent claim for
exemption shall be allowed only when sufficient proof has been
adduced supporting the claim.

Therefore, if the property being taxed has not been dropped from the
assessment roll, taxes must be paid under protest if the exemption
from taxation is insisted upon. (Camp John Hay vs. CBAA, GR No.
169234 dated October 2, 2013)
 Remedies under the LGC
Erroneous Assessment Doctrines – Who should file the protest?

3.a. Section 226 of the LGC lists down the two entities vested with the
personality to contest an assessment: (1) the owner and, (2) the
person with legal interest in the property. A person legally burdened
with the obligation to pay for the tax imposed on a property has legal
interest in the property and the personality to protest a tax
assessment on the property.
 Remedies under the LGC
Erroneous Assessment Doctrines – Who should file the protest?

3.b. Contractual stipulation to assume payment of the real property

tax does not clothe the party legal interest for purposes of contesting
an assessment. Corollary thereto, the local government units can
neither be compelled to recognize the protest of a tax assessment
from an entity against whom it cannot enforce the tax liability. (NPC vs.
Quezon, GR No. 171586 dated July 15, 2009)
 Remedies under the LGC
Erroneous Assessment Doctrines – Jurisdictional Basis?

4. Jurisdictional basis for appeal to the CTA EB from the CBAA’s

decision is:

“Decisions of the Central Board of Assessment Appeals 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.” (Sec. 7(a)(5) of RA No. 9282)
 Remedies under the LGC
How to contest an Illegal Assessment:

1.Taxpayer shall file a complaint for injunction before the

Regional Trial Court to enjoin the Local Government Unit from
collecting real property taxes;
2.The party unsatisfied with the decision of the RTC shall file
an appeal, not a petition for certiorari, before the CTA, the
complaint being a local tax case decided by the RTC case decided by
the RTC. The appeal shall be filed within 30 days; and,
3.Decision of the CTA is appealable to the SC under Rule 45
raising pure questions of law. (City of Lapu-Lapu vs. PEZA, GR No.
184203 dated November 26, 2014)
 Remedies under the LGC
Illegal Assessment Doctrines:

1.Cases wherein the Supreme Court held that payment under

protest was not necessary:

a.If the taxpayer questions the authority of the assessor to make

the assessment and collect the tax. (Ty vs. Trampe, GR No. 117577
dated December 1, 1995)
b.If the issue is who should pay the tax? (Testate Estate of
Concordia Lim vs. City of Manila, GR No. 90639 dated February 21,
1990)
 Remedies under the LGC
Illegal Assessment Doctrines:

1. Cases wherein the Supreme Court held that payment under protest
was not necessary:

c. Amount of protest to be paid is huge and the properties were

already levied and to be auctioned-off. In this sense, appeal to the
LBAA is not a plain, adequate and speedy remedy. (City Government of
Quezon City vs. Bayan Telecommunications, Inc., GR No. 162015 dated
March 6, 2006)
d. Claim of exemption under Sec. 234 of the LGC that was considered a
pure question of law. (Metropolitan Waterworks and Sewerage System
vs. CBAA, GR No. 215955 dated January 13, 2021)
 Remedies under the LGC
Illegal Assessment Doctrines:

2.a. The jurisdictional basis for appeal from the RTC to the CTA Division
is:

“Decisions, resolutions or orders of the Regional Trial Courts in local

tax cases decided or resolved by them in the exercise of their original
xxx jurisdiction.” (Sec. 7(a)(3) of RA No. 9282)
 Remedies under the LGC
Illegal Assessment Doctrines:

2.b. The term "local taxes" in the aforementioned provision should be

considered in its general and comprehensive sense, which embraces
real property tax assessments in line with the precept Generalia verba
sunt generaliter inteligencia — what is generally spoken shall be
generally understood. (NPC vs. Municipal Government of Navotas, GR
No. 192300 dated November 24, 2014)
 Remedies under the LGC
Refund of RPT – Refund Provision under Sec. 253:

1. When an assessment of basic real property tax, or any other tax

levied under this Title, is found to be illegal or erroneous and the tax
is accordingly reduced or adjusted, the taxpayer may file a written
claim for refund or credit for taxes and interests with the provincial or
city treasurer within two (2) years from the date the taxpayer is
entitled to such reduction or adjustment.

The provincial or city treasurer shall decide the claim for tax refund or
credit within sixty (60) days from receipt thereof. In case the claim for
tax refund or credit is denied, the taxpayer may avail of the remedies
as provided in Chapter 3, Title II, Book II of this Code. (Sec. 253 of the
LGC)
 Remedies under the LGC
Refund of RPT – Refund Provision under Sec. 253:

2. As the real property tax assessments issued in the name of MWSS

are declared void, MWSS's claim for refund of the real property taxes
erroneously paid based on void assessments cannot be ignored. This
entitlement to a tax refund, however, is not automatic. The amount
is a factual matter that must be threshed out with certainty in the
normal course and in accordance with the administrative procedure
provided under Sec. 253 of the LGC.

MWSS's claim for tax refund should, therefore, be filed with the city
treasurer within two (2) years from the finality of this Decision, as it
is only then that the invalidity of the Pasay City assessment is finally
settled. (Metropolitan Waterworks and Sewerage System vs. CBAA, GR
No. 215955 dated January 13, 2021)
 Remedies under the LGC
Refund of RPT – Refund Provision under Sec. 253:

3. Scenario contemplated under Sec. 253 of the LGC:

a. Refund of tax paid pursuant to an erroneous assessment; and,

b. Refund of tax paid pursuant to an illegal assessment.
 Remedies under the LGC
Refund of RPT – Refund Provision under Sec. 253:

4. Procedure:

1. Taxpayer pays the erroneous/illegal assessment under protest;

2. Court declares assessment null and void;
3.Taxpayer files a claim for refund withintwo (2)
years from the finality of the decision;
4. Treasurer decides within 60 days;
5. Decision of the Treasurer may be appealed to the LBAA;
6. Decision of the LBAA may be appealed to the CBAA;
7. Decision of the CBAA may be appealed to the CTA EB; and,
8. Decision of the CTA EB may be appealed to the SC.
 Remedies under the LGC
Refund of RPT – Scenario not covered by Sec. 253:

1. The fact that a taxpayer paid through error or mistake, and the
government accepted the payment gave rise to the application of the
principle of solutio indebiti under Article 2154 of the New Civil Code.
 Remedies under the LGC
Refund of RPT – Scenario not covered by Sec. 253:

2. The prescriptive period to file the claim for refund would be six (6)
years from the date of payment. (Ramie Textiles, Inc. vs. Mathay, GR
No. L-32364 dated April 30, 1979; National Development Co. vs. Cebu
City, GR No. 51593 dated November 5, 1992)
 Remedies under the NIRC
Issues that may affect the validity of the Assessment:

1. Letter of Authority
2. Demand to Pay
3. Due Process
4. Prescription
 Remedies under the NIRC
Letter of Authority:

1. Issues:

a. Total absence of a Letter of Authority

b. Assessment is beyond the scope of the Letter of Authority
 Remedies under the NIRC
Letter of Authority:

2. Section 6. Power of the Commissioner to Make Assessments and

Prescribe Additional Requirements for Tax Administration and
Enforcement. –

(A) Examination of Returns and Determination of tax Due. – After a

return has been filed as required under the provisions of this Code, the
Commissioner or his duly authorized representative may authorize the
examination of any taxpayer and the assessment of the correct
amount of tax: Provided, however, That failure to file a return shall not
prevent the Commissioner from authorizing the examination of any
taxpayer. x x x [Emphases supplied]
 Remedies under the NIRC
Letter of Authority:

3.a. The result of the absence of a Letter of Authority (“LOA”) is the

nullity of the examination and assessment based on the violation of
the taxpayer's right to due process.
 Remedies under the NIRC
Letter of Authority:

3.b. An LOA cannot be dispensed with just because none of the

financial books or records being physically kept by MEDICARD was
examined. To begin with, Section 6 of the NIRC requires an authority
from the CIR or from his duly authorized representatives before an
examination "of a taxpayer" may be made. The requirement of
authorization is therefore not dependent on whether the taxpayer
may be required to physically open his books and financial records but
only on whether a taxpayer is being subject to examination. (Medicard
Philippines, Inc. vs. CIR, GR No. 222743 dated April 5, 2017)
 Remedies under the NIRC
Letter of Authority:

4.a. The practice of reassigning or transferring revenue officers, who

are the original authorized officers named in the LOA, and
subsequently substituting them with new revenue officers who do not
have a separate LOA issued in their name, is in effect a usurpation of
the statutory power of the CIR or his duly authorized representative.
(CIR vs. McDonald’s Philippines Realty Corp., GR No. 242670 dated May
10, 2021)
 Remedies under the NIRC
Letter of Authority:

4.b. Here, as comprehensively discussed, there was no new LOA issued

by the CIR or his duly authorized representative giving revenue officer
Bagauisan the power to conduct an audit on petitioner's books of
accounts for taxable year 2009. The importance of the lack of the
revenue officer's authority to conduct an audit cannot be
overemphasized because it goes into the validity of the assessment.
The lack of authority of the revenue officers is tantamount to the
absence of a LOA itself which results to a void assessment. Being a
void assessment, the same bears no fruit. (Himlayang Pilipino Plans,
Inc. vs. CIR, GR No. 241848 dated May 14, 2021)
 Remedies under the NIRC
Letter of Authority:

5.a. Clearly, there must be a grant of authority before any revenue

officer can conduct an examination or assessment. Equally important is
that the revenue officer so authorized must not go beyond the
authority given. In the absence of such an authority, the assessment
or examination is a nullity. (CIR vs. Sony Philippines, Inc., GR No.
178697 dated November 17, 2010)
 Remedies under the NIRC
Letter of Authority:

5.b. Sample problem:

LOA covers the year 2002 and for all internal revenue taxes. Taxpayer
receives a deficiency VAT assessment for the year 2003.

Is the assessment valid?

 Remedies under the NIRC
Demand to Pay:

1. An assessment contains not only a computation of tax liabilities, but

also a demand for payment within a prescribed period. It also signals
the time when penalties and protests begin to accrue against the
taxpayer. To enable the taxpayer to determine his remedies thereon,
due process requires that it must be served on and received by the
taxpayer. (CIR vs. Pascor Realty, GR No. 128315 dated June 29, 1999)
 Remedies under the NIRC
Demand to Pay:

2.a.1. Part of the assessment reads as follows:

“The complete details covering the aforementioned discrepancies

established during the investigation of this case are shown in the
accompanying Annex 1 of this Notice. The 50% surcharge and 20%
interest have been imposed pursuant to Sections 248 and 249(B) of
the [National Internal Revenue Code], as amended. Please note,
however, that the interest and the total amount due will have to be
adjusted if paid prior or beyond April 15, 2004.”

Is the assessment valid?

 Remedies under the NIRC
Demand to Pay:

2.a.2. The assessment is not valid. It lacks the definite amount of tax
liability for which respondent is accountable. It does not purport to be
a demand for payment of tax due, which a final assessment notice
should supposedly be. Although the disputed notice provides for the
computations of respondent's tax liability, the amount remains
indefinite. It only provides that the tax due is still subject to
modification, depending on the date of payment.
 Remedies under the NIRC
Demand to Pay:

2.b.1. Part of the Assessment reads as follows:

“In view thereof, you are requested to pay your aforesaid deficiency
internal revenue tax liabilities through the duly authorized agent bank
in which you are enrolled within the time shown in the enclosed
assessment notice.” - date in the assessment notice is in blank or
unaccomplished

Is the assessment valid?

 Remedies under the NIRC
Demand to Pay:

2.b.2. Assessment is not valid. There are no due dates in the Final
Assessment Notice. This negates petitioner's demand for payment.
Petitioner's contention that April 15, 2004 should be regarded as the
actual due date cannot be accepted. The last paragraph of the Final
Assessment Notice states that the due dates for payment were
supposedly reflected in the attached assessment. However, based on
the findings of the Court of Tax Appeals First Division, the enclosed
assessment pertained to remained unaccomplished. (CIR vs. Fitness By
Design, GR No. 215957 dated November 9, 2016)
 Remedies under the NIRC
Due Process – PAN Stage:

1. Taxpayer may protest the Preliminary Assessment Notice within 15

days from receipt. The Final Assessment Notice shall be issued within
15 days from date of receipt by the taxpayer of the PAN, whether the
same was protested or not. (RR No. 18-2013 dated November 28, 2013
and RMO No. 26-2016 dated June 13, 2016)
 Remedies under the NIRC
Due Process – PAN Stage:

2.a. Clearly from the aforequoted provisions, the taxpayer has fifteen
(15) days from date of receipt of the PAN to respond to the said notice.
Only after receiving the taxpayer's response or in case of the
taxpayer's default can respondent issue the FLD/FAN.
 Remedies under the NIRC
Due Process – PAN Stage:

2.b. Per the evidence on record, the BIR issued a PAN dated December
16, 2010, which it posted by registered mail the next day, December
17, 2010. It then issued and mailed the FLD/FAN on January 10, 2011.
Although posted on different dates, the PAN and FLD/FAN were both
received by the Post Office of Dasmariñas, Cavite, on January 17, 2011,
and served upon and received by respondent on January 18, 2011.
Under the circumstances, respondent was not given any notice of the
preliminary assessment at all and was deprived of the opportunity to
respond to the same before being given the final assessment. (CIR vs.
Yumex Philippines Corporation, GR No. 222476 dated May 5, 2021)
 Remedies under the NIRC
Due Process – PAN Stage:

3.a. Section 228 of the Tax Code clearly requires that the taxpayer
must first be informed that he is liable for deficiency taxes through the
sending of a PAN. He must be informed of the facts and the law upon
which the assessment is made. The law imposes a substantive, not
merely a formal, requirement. To proceed heedlessly with tax
collection without first establishing a valid assessment is evidently
violative of the cardinal principle in administrative investigations - that
taxpayers should be able to present their case and adduce supporting
evidence.
 Remedies under the NIRC
Due Process – PAN Stage:

2.b. The use of the word shall in subsection 3.1.2 of RR No. 12-99
describes the mandatory nature of the service of a PAN. The
persuasiveness of the right to due process reaches both substantial
and procedural rights and the failure of the CIR to strictly comply with
the requirements laid down by law and its own rules is a denial of
Metro Star’s right to due process.

Thus, for its failure to send the PAN stating the facts and the law on
which the assessment was made as required by Section 228 of R.A. No.
8424, the FAN made by the CIR is void. (CIR vs. Metro Star Superama,
Inc., GR No. 185371 dated December 8, 2010)
 Remedies under the NIRC
Due Process – FAN Stage:

1. 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. (Sec. 228 of the Tax Code)
 Remedies under the NIRC
Due Process – FAN Stage:

2.a. Considering the foregoing exchange of correspondence and

documents between the parties, we find that the requirement of
Section 228 was substantially complied with. Respondent had fully
informed petitioner in writing of the factual and legal bases of the
deficiency taxes assessment, which enabled the latter to file an
"effective" protest, much unlike the taxpayer's situation in Enron.
Petitioner's right to due process was thus not violated. (Samar-I
Electric Cooperative v. CIR, GR No. 193100 dated December 10, 2014)
 Remedies under the NIRC
Due Process – FAN Stage:

3.a. The Details of Discrepancy attached to the Preliminary Assessment

Notice, as well as the Formal Letter of Demand with the Final
Assessment Notices, did not even comment or address the defenses
and documents submitted by Avon. Thus, Avon was left unaware on
how the Commissioner or her authorized representatives appreciated
the explanations or defenses raised in connection with the
assessments. There was clear inaction of the Commissioner at every
stage of the proceedings.
 Remedies under the NIRC
Due Process – FAN Stage:

3.b. It is true that the Commissioner is not obliged to accept the

taxpayer's explanations, as explained by the Court of Tax Appeals.
However, when he or she rejects these explanations, he or she must
give some reason for doing so. He or she must give the particular
facts upon which his or her conclusions are based, and those facts
must appear in the record. Indeed, the Commissioner's inaction and
omission to give due consideration to the arguments and evidence
submitted before her by Avon are deplorable transgressions of Avon's
right to due process. The right to be heard, which includes the right to
present evidence, is meaningless if the Commissioner can simply
ignore the evidence without reason.
 Remedies under the NIRC
Due Process – FAN Stage:

3.c. In this case, Avon was able to amply demonstrate the

Commissioner's disregard of the due process standards raised in Ang
Tibay and subsequent cases, and of the Commissioner's own rules of
procedure. Her disregard of the standards and rules renders the
deficiency tax assessments null and void. (Avon Products
Manufacturing, Inc., GR Nos. 201398-99 dated October 3, 2018)
 Remedies under the NIRC
Due Process – FDDA Stage:

4.a. The FDDA shall state the: (i) facts, the applicable law, rules and
regulations, or jurisprudence on which such decision is based,
otherwise, the decision shall be void, and (ii) that the same is his final
decision. (RR No. 18-2013 dated November 28, 2013)
 Remedies under the NIRC
Due Process – FDDA Stage:

4.b. The FDDA must state the facts and law on which it is based to
provide the taxpayer the opportunity to file an intelligent appeal. An
FDDA which contains a taxpayer’s supposed tax liabilities, without
providing any details on the specific transactions which gave rise to its
supposed tax deficiencies is void. While it provided for the legal bases
of the assessment, it fell short of informing the taxpayer of the factual
bases thereof.
 Remedies under the NIRC
Due Process – FDDA Stage:

4.c. However, a void FDDA does not ipso facto render the assessment
void.

Clearly, a decision of the CIR on a disputed assessment differs from the

assessment itself. Hence, the invalidity of one does not necessarily
result to the invalidity of the other—unless the law or regulations
otherwise provide. The nullity of the FDDA does not extend to the
nullification of the entire assessment. As if there was no decision
rendered by the CIR. It is tantamount to a denial by inaction by the
CIR, which may still be appealed before the CTA and the assessment
evaluated on the basis of the available evidence and documents. (CIR
vs. Liquigaz Phils. Corporation, GR No. 215534 dated April 18, 2016)
 Remedies under the NIRC
Prescription – Preliminary Considerations:

1. General Rule: BIR has 3 years from: (a) the date of actual filing of the
return or (b) the last date prescribed by law for the filing of such
return, whichever comes later to issue the Final Assessment Notice
(“FAN”). (Sec. 203 of the Tax Code; CIR vs. Transitions Optical Phils., GR
No. 227544 dated November 22, 2017)
 Remedies under the NIRC
Prescription – Preliminary Considerations:

2.a. Exception: The BIR has ten (10) years from discovery of: (a) filing of
a false return; (b) filing of a fraudulent return with intent to evade
taxes; and, (c) omission to file a return to issue the FAN. (Sec. 222(a) of
the Tax Code)
 Remedies under the NIRC
Prescription – Preliminary Considerations:

2.b. Under Section 248(B) of the NIRC, failure to report sales, receipts
or income in an amount exceeding thirty percent (30%) of that
declared per return, and a claim of deduction in an amount exceeding
thirty (30%) of actual deductions, shall constitute prima facie evidence
of false or fraudulent return.

Failure of the taxpayer to refute the presumption warrants the

application of the ten (10)-year prescriptive period for assessment
under Section 222(a) of the NIRC. (CIR vs. Asalus Corporation, GR No.
221590 dated February 22, 2017)
 Remedies under the NIRC
Prescription – Preliminary Considerations:

3.a. The prescriptive period under Sec. 203 of the NIRC applies to
withholding tax assessments such as the Expanded Withholding Tax
and Withholding Tax on Compensation Income. Withholding taxes
clearly contemplate deficiency internal revenue taxes. Their aim is to
collect unpaid income taxes and not merely to impose a penalty on the
withholding agent for its failure to comply with its statutory duty. (CIR
vs. La Flor Dela Isabela, Inc., GR No. 211289 dated January 14, 2019)
 Remedies under the NIRC
Prescription – Preliminary Considerations:

3.b. In CIR vs. La Flor Dela Isabela, Inc. (“La Flor”), the Supreme Court
declared that withholding taxes are internal revenue taxes covered by
Section 203 of the NIRC. La Flor traced the withholding tax system
observed in our jurisdiction and the distinct liabilities which arise for
the taxpayer and the withholding agent. (CIR vs. Unioil Corp., GR No.
204405 dated August 4, 2021, J. Hernando)
 Remedies under the NIRC
Prescription – Waiver Issues:

Illustration:

Filing of the Return Last Day to Make an Assessment Expiry Date of Waiver

3-year period to assess Prescriptive period extended by a Waiver

(BIR issues the FAN during the extended period)
 Remedies under the NIRC
Prescription – Waiver Issues:

1.a. No longer a requirement of a Valid Waiver:

1.The delegation of authority to a representative be in writing

and notarized;
2.The date of acceptance by the BIR Officer is no longer required to
be indicated for the Waiver's validity.
3. Notarization of the Waiver is not a requirement for its validity.
4.Must be in three (3) copies and the taxpayer must be given a copy
of the waiver.
 Remedies under the NIRC
Prescription – Waiver Issues:

1.b. Requisites of a Valid Waiver:

1.Must be executed and accepted before the expiration of the

period to assess or collect taxes (or before the lapse of the period
agreed upon in case a subsequent agreement is executed);

2.The waiver must be signed by the taxpayer himself or his

duly authorized representative. In the case of a corporation, the
waiver must be signed by any of its responsible officials;
 Remedies under the NIRC
Prescription – Waiver Issues:

1.b. Requisites of a Valid Waiver:

3.The expiry date of the period agreed upon to assess/collect the

tax after the regular three-year period of prescription should be
indicated;

4.Waiver of prescriptive period to collect must indicate the

particular taxes assessed. Waiver of prescriptive period to assess
may simply state “all internal revenue taxes;” and,
 Remedies under the NIRC
Prescription – Waiver Issues:

1.b. Requisites of a Valid Waiver:

5. Two material dates must appear on the waiver:

a) The date of execution; and,

b)The expiry date of the period the taxpayer waives the statute
of limitations. (Revenue Memorandum Order No. 14-2016 dated April
4, 2016; Revenue Memorandum Circular No. 141-19 dated December
20,
2019)
 Remedies under the NIRC
Prescription – Waiver Issues:

2. Considering the foregoing defects in the waivers executed by the

parties, the periods for the CIR to assess or collect the alleged
Withholding Tax on Compensation (WTC) and Expanded Withholding
Tax (EWT) deficiencies were not extended. The period within which the
CIR could assess the internal revenue taxes of La Flor had already
prescribed. In fine, the assessments issued by the BIR are therefore
considered void and of no legal effect. (La Flor Dela Isabela, Inc. vs.
CIR, GR No. 202105 dated April 28, 2021, J. Hernando)
 Remedies under the NIRC
Prescription – Waiver Issues – Estoppel – General Rule:

1. General Rule: Doctrine of Estoppel not applicable, as a rule, to

validate a defective waiver. Failure to strictly comply with the
requirements of a valid waiver invalidates the waiver and does not
extend the prescriptive period to assess or collect.

The BIR cannot hide behind the doctrine of estoppel to cover its failure
to comply with RMO No. 20-90 and RDAO No. 05-01, which the BIR
itself issued. Having caused the defects in the waivers, the BIR must
bear the consequence. It cannot shift the blame to the taxpayer. To
stress, a waiver of the statute of limitations, being a derogation of the
taxpayer’s right to security against prolonged and unscrupulous
investigations, must be carefully and strictly construed. (CIR vs. Kudos
Metal, GR No. 178087 dated May 5, 2010)
 Remedies under the NIRC
Prescription – Waiver Issues – Estoppel – Exceptions:

2.a. Partial payment of an assessment which is covered by a defective

waiver. RCBC, through its partial payment of the assessment impliedly
admitted the validity of those waivers. Had RCBC truly believed that
the waivers were invalid and that the assessments were issued beyond
the prescriptive period, then it should not have paid the reduced
amount of taxes in the revised assessment. RCBC’s subsequent action
effectively belies its insistence that the waivers are invalid. (RCBC vs.
CIR, GR No. 170257 dated September 7, 2011)
 Remedies under the NIRC
Prescription – Waiver Issues – Estoppel – Exceptions:

2.b. However, as clarified by the Supreme Court, not mere partial

payment of an assessment. It must be coupled by a benefit obtained
by the taxpayer in the form of a drastic reduction in the assessment.
(CIR vs. Avon Products Manufacturing, Inc., GR Nos. 201398-99 dated
October 3, 2018)
 Remedies under the NIRC
Prescription – Waiver Issues – Estoppel – Exceptions:

3. When the taxpayer never raised the invalidity of the waivers at the
earliest opportunity and the waivers were necessary to give the
taxpayer time to fully comply with the BIR notices for audit
examination and to respond to its Informal Conference request to
discuss the discrepancies. Thus, having benefitted from the waivers
executed at its instance, the taxpayer is estopped from claiming that
they were invalid and that prescription had set in. (CIR vs. Transitions
Optical Phils., GR No. 227544 dated November 22, 2017)
 Remedies under the NIRC
Prescription – Suspension of the Prescriptive Period:

1.a. When the taxpayer requests for a reinvestigation which is granted

by the Commissioner.
 Remedies under the NIRC
Prescription – Suspension of the Prescriptive Period:

1.b. Request for reconsideration. – refers to a plea for a re-evaluation

of an assessment on the basis of existing records without need of
additional evidence. It may involve both a question of fact or of law or
both.

Request for reinvestigation. – refers to a plea for re-evaluation of an

assessment on the basis of newly-discovered or additional
evidence that a taxpayer intends to present in the reinvestigation. It
may also involve a question of fact or law or both.
 Remedies under the NIRC
Prescription – Suspension of the Prescriptive Period:

1.c. The act of filing a request for reinvestigation alone does not
suspend the prescriptive period. Such request must be granted. A
request for reconsideration even if granted, does not suspend the
prescriptive period. (BPI vs. CIR, GR No. 139736 dated October 17,
2005)
 Remedies under the NIRC
Prescription – Suspension of the Prescriptive Period:

2.a. When the taxpayer cannot be located in the address given by him
in the return filed upon which a tax is being assessed or collected:
Provided, that, if the taxpayer informs the Commissioner of any change
in address, the running of the Statute of Limitations will not be
suspended.
 Remedies under the NIRC
Prescription – Suspension of the Prescriptive Period:

2.b. The suspension of the three-year period to assess applies only if

the BIR Commissioner is not aware of the whereabouts of the
taxpayer.

Hence, despite the absence of a formal written notice of the taxpayer's

change of address, the fact remains that the BIR became aware of the
taxpayer's new address as shown by documents replete in the
records. As a consequence, the running of the three-year period to
assess the taxpayer was not suspended and has already prescribed.
(CIR vs. BASF Coating + Inks Phils., GR No. 198677 dated November 26,
2014)
 Remedies under the NIRC
Procedure against the FAN and FDDA:

1.a. File protest within 30 days from receipt of the FAN, otherwise the
FAN becomes final and executory. In case of a request for
reinvestigation, the taxpayer has 60 days to submit relevant supporting
documents.
 Remedies under the NIRC
Procedure against the FAN and FDDA:

1.b. The taxpayer shall state in his protest: (i) the nature of the protest
whether reconsideration or reinvestigation, specifying newly
discovered or additional evidence he intends to present if it is a
request for reinvestigation, (ii) date of the assessment notice, and (iii)
the applicable law, rules and regulations, or jurisprudence on which his
protest is based, otherwise, his protest shall be considered void and
without force and effect.
 Remedies under the NIRC
Procedure against the FAN and FDDA:

1.c. Flaws in taxpayer’s protest. Did not state:

1. The assessment notice's date; Attaching copies of the audit

results/assessment notices is not stating the date of the
assessment notice, any more than attaching copies of assailed
judgments to a petition without stating them in the petition itself
complies with the rule on statements of material dates;
2. The applicable law, rules and regulations, or jurisprudence on
which its protest was based; and,
 Remedies under the NIRC
Procedure against the FAN and FDDA:

1.c. Flaws in taxpayer’s protest. Did not state:

3. Nature of the protest; While respondent's declaration that it was

"in the process of compiling the necessary documentation to
support [its] protest to said assessments" could imply that it was
requesting a reinvestigation, its failure to explicitly state this
means that petitioner had no way of knowing whether it should
monitor the 60-day period stated in Revenue Regulations No. 18-
2013.
 Remedies under the NIRC
Procedure against the FAN and FDDA:

1.d. Section 228 of the National Internal Revenue Code is clear. The
administrative protest must be filed not only within the stated period,
but also "in such form and manner as may be prescribed by
implementing rules and regulations." Respondent's April 29, 2015
letter did not comply with the three requirements of Revenue
Regulations No. 18-2013. (CIR vs. CTA, GR No. 239464 dated May 10,
2021)
 Remedies under the NIRC
Procedure against the FAN and FDDA:

2.a. Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted; otherwise, the
assessment shall become final.
 Remedies under the NIRC
Procedure against the FAN and FDDA:

2.b. The term "relevant supporting documents" should be understood

as those documents necessary to support the legal basis in disputing a
tax assessment as determined by the taxpayer. The BIR can only inform
the taxpayer to submit additional documents. The BIR cannot demand
what type of supporting documents should be submitted. Otherwise, a
taxpayer will be at the mercy of the BIR, which may require the
production of documents that a taxpayer cannot submit. (CIR vs. First
Express Pawnshop, GR Nos. 172045-46 dated June 16, 2009)
 Remedies under the NIRC
Procedure against the FAN and FDDA:

2.c. Failure to submit relevant supporting documents renders the

assessment final. The term “the assessment shall become final” shall
mean the taxpayer is barred from disputing the correctness of the
issued assessment by introduction of newly discovered or additional
evidence, and the Final Decision on the Disputed Assessment shall
consequently be issued. (RR No. 18-2013 dated November 28, 2013)
 Remedies under the NIRC
Procedure against the FAN and FDDA – BIR issues a Decision:

1.a. Taxpayer has 30 days within which to appeal to the CTA from
receipt of the Final Decision on a Disputed Assessment (“FDDA”).
Otherwise, the FDDA becomes final and executory.
 Remedies under the NIRC
Procedure against the FAN and FDDA – BIR issues a Decision:

1.b. If the FDDA was issued by the CIR’s duly authorized representative,
the taxpayer may file an appeal with the CIR within 30 days from
receipt of the FDDA. The administrative appeal is limited to a request
for reconsideration. Taxpayer has fresh 30 days to appeal to the CTA
from receipt of the decision on the administrative appeal. (RR No. 18-
2013 dated November 28, 2013)
 Remedies under the NIRC
Procedure against the FAN and FDDA – BIR issues a Decision:

1.c. Jurisdictional basis is:

“Decisions of the 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 or other laws administered by the Bureau of Internal
Revenue.” (Sec. 7(a)(1) of RA No. 9282)
 Remedies under the NIRC
Procedure against the FAN and FDDA – BIR does not issue a Decision:

2.a. The taxpayer has two options, either:

a)File a petition for review with the CTA within 30 days after
the expiration of the 180-day period; or
b)Await the final decision of the Commissioner on the
disputed assessment and appeal such final decision to the CTA
within 30 days after the receipt of a copy of such decision,
these options are mutually exclusive and resort to one bars the
application of the other. (Lascona Land vs. CIR, GR No. 171251
dated March 5, 2012; RCBC vs. CIR, GR No. 168498 dated April 24,
2007)
 Remedies under the NIRC
Procedure against the FAN and FDDA – BIR does not issue a Decision:

2.b. There is no mention of an appeal to the CIR from the failure to act
by the CIR's authorized representative. (PAGCOR vs. BIR, GR No.
208731 dated January 27, 2016)
 Remedies under the NIRC
Procedure against the FAN and FDDA – BIR does not issue a Decision:

1.c. Jurisdictional basis is:

Inaction by the Commissioner of Internal Revenue in cases involving

disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relations thereto, or other matters arising under
the National Internal Revenue Code or other laws administered by the
Bureau of Internal Revenue, where the National Internal Revenue
Code provides a specific period of action, in which case the inaction
shall be deemed a denial. (Sec. 7(a)(2) of RA No. 9282)
 Remedies under the NIRC
Procedure against the FAN and FDDA – Summary:

To further clarify the three options:

a.A whole or partial denial by the CIR's authorized representative

may be appealed to the CIR or the CTA;
b.A whole or partial denial by the CIR may be appealed to the
CTA; and,
c.The CIR or the CIR's authorized representative's failure to act may
be appealed to the CTA. (PAGCOR vs. BIR, GR No. 208731 dated
January 27, 2016)
 Remedies under the NIRC
Procedure against the FAN and FDDA – New Issue:

1. What if the CIR does not act on the administrative appeal? What are
the remedies available to the taxpayer?
 Remedies under the NIRC
Procedure against the FAN and FDDA – New Issue:

2.a. The taxpayer may either:

a.Appeal to the CTA within 30 days from receipt of the decision on

the administrative appeal; or
b.Appeal the inaction within 30 days from the laspe of the 180-
day period counted either from: (1) the filing of the request
for reconsideration; or (2) the submission of documents, in case
of a request for reinvestigation.
 Remedies under the NIRC
Procedure against the FAN and FDDA – New Issue:

2.b. In cases of inaction by the CIR on appeals of denials of protest, the

taxpayer has the option to await the Commissioner's decision on
appeal before filing a petition for review before the CTA. The petition
for review can be filed notwithstanding the expiration of the 180-day
period for the CIR to resolve protests of assessments. (LRTA vs. BIR, GR
No. 231238 dated June 20, 2022)
 Remedies under the NIRC
Procedure against the FAN and FDDA – New Issue:

2.c. Section 3.1.4 of Revenue Regulations (“RR”) No. 12-99, as

amended by RR No. 18-13, which implements Section 228 of the Tax
Code, provides for alternative courses of action to the taxpayer upon
its receipt of the Final Decision on Disputed Assessment issued by the
authorized representative of respondent CIR (respondent), including
the option of elevating the protest to the respondent himself through
a request for reconsideration. However, nowhere in said provision
does it provide that a fresh 180-day period is granted to the
respondent to act on such administrative appeal. (Nueva Ecija II
Electric Cooperative, Inc. Area vs. CIR, GR No. 258101 dated April 19,
2022)
 Remedies under the NIRC
Collection Stage – Prescription:

1.a. General Rule: The BIR has three (3) years from FAN to collect any
deficiency tax. (Sec. 203 of the Tax Code)
 Remedies under the NIRC
Collection Stage – Prescription:

1.b.1. The five (5) year period under Sec. 222(c) of the Tax Code only
applies to assessments issued within the extraordinary period of ten
(10) years in cases of false or fraudulent return or failure to file a
return.
 Remedies under the NIRC
Collection Stage – Prescription:

1.b.2. SEC. 222. Exceptions as to Period of Limitation of Assessment

and Collection of Taxes. - (a) In the case of a false or fraudulent return
with intent to evade tax or of failure to file a return xxx.

(c) Any internal revenue tax which has been assessed within the period
of limitation as prescribed in paragraph (a) hereof may be collected by
distraint or levy or by a proceeding in court within five (5) years
following the assessment of the tax. (Emphasis supplied)
 Remedies under the NIRC
Collection Stage – Prescription:

1.b.3. Here, given that the subject assessment was issued within the
three-year ordinary prescriptive period to assess, the CIR had another
three years to initiate the collection of taxes by distraint or levy or
court proceeding. (CIR vs. CTA Second Division and QL Development,
Inc., GR No. 258947 dated March 29, 2022)
 Remedies under the NIRC
Collection Stage – Prescription:

2.a.1. Considering the new QL Development Case, there are three (3)
prescriptive periods relative to collection:

a.Scenario 1: The assessment was issued within the 3-year

ordinary prescriptive period, the BIR has three (3) years to collect the
deficiency tax counted from the issuance of the final assessment
notice; (Sec. 203 of the Tax Code)

b.Scenario 2: The taxpayer files a false return, or fraudulent

return with intent to evade tax or the taxpayer fails to file a return
and the BIR does not issue an assessment, the BIR has ten (10)
years from discovery to collect the deficiency tax but the collection
remedy is limited to judicial collection; (Sec. 222(a) of the Tax Code)
 Remedies under the NIRC
Collection Stage – Prescription:

2.a.2. Considering the new QL Development Case, there are three (3)
prescriptive periods relative to collection:

c. Scenario 3: The taxpayer files a false return, or fraudulent return

with intent to evade tax or the taxpayer fails to file a return and the
BIR issues an assessment within the 10-year period under Sec. 222(a),
the BIR has five (5) years from the issuance of the final assessment
notice to collect the deficiency tax; (Sec. 222(c) of the Tax Code)
 Remedies under the NIRC
Collection Stage – No Injunction Rule:

1. No court shall have the authority to grant an injunction to restrain

the collection of any national internal revenue tax, fee or charge
imposed by this Code. (Sec. 218 of the Tax Code)
 Remedies under the NIRC
Collection Stage – No Injunction Rule:

2.a. Can a taxpayer file a Petition for Declaratory with a prayer for
issuance of a Temporary Restraining Order and Writ of Preliminary
Injunction to prevent the enforcement of an assessment?
 Remedies under the NIRC
Collection Stage – No Injunction Rule:

2.b.1. To begin with, Commonwealth Act No. 55 (CA 55) provides that
petitions for declaratory relief do not apply to cases where a taxpayer
questions his liability for the payment of any tax under any law
administered by the BIR.
 Remedies under the NIRC
Collection Stage – No Injunction Rule:

2.b.2. Section 1 of CA 55 provides:

SECTION 1. Construction. — Any person interested under a deed,

contract or other written instrument, or whose rights are affected by a
statute, may bring an action in a Court of First Instance to determine
any question of construction or validity arising under such deed,
contract, instrument or statute and for a declaration of his rights or
duties thereunder: Provided, however, That the provisions of this Act
shall not apply to cases where a taxpayer questions his liability for
the payment of any tax, duty, or charge collectible under any law
administered by the Bureau of Customs or the Bureau of Internal
Revenue. (Emphasis supplied)
 Remedies under the NIRC
Collection Stage – No Injunction Rule:

2.b.3. The Court has previously clarified that CA 55 has not been
repealed by another statute and remains to be good law. Thus, the
courts have no jurisdiction over petitions for declaratory relief
against the imposition of tax liability or validity of tax assessments.
 Remedies under the NIRC
Collection Stage – No Injunction Rule:

2.c. More importantly, a principle deeply embedded in our

jurisprudence is that taxes being the lifeblood of the government
should be collected promptly, without unnecessary hindrance or delay.
In line with this principle, Section 218 of the NIRC expressly provides
that no court shall have the authority to grant an injunction to
restrain the collection of any national internal revenue tax, fee or
charge imposed by the code. An exception to this rule, provided under
Section 11 of RA 1125, obtains only when in the opinion of the Court
of Tax Appeals (CTA) the collection thereof may jeopardize the interest
of the government and/or the taxpayer.
 Remedies under the NIRC
Collection Stage – No Injunction Rule:

3. Instead of appealing the assessments in the proper forum,

respondent filed with the RTC the Petition for Declaratory Relief with a
prayer for issuance of a TRO and WPI to enjoin the implementation of
the aforementioned provisions while the said petition is pending. In
reality, respondent's Petition for Declaratory Relief is utilized as a
vehicle to assail and prevent the enforcement of the tax assessments
by alleging the supposed unconstitutionality of Sections 108 and 184
of the NIRC. On this basis, the RTC should have dismissed respondent's
petition for lack of jurisdiction. (CIR vs. Standard Insurance Co., Inc., GR
No. 219340 dated April 28, 2021, J. Hernando)
 Remedies under the NIRC
Collection Stage – No Injunction Rule - Exception:

1. The Court of Tax Appeals may order suspension of collection by the

BIR if collection may jeopardize the interest of the Government and/or
the taxpayer.

Additional Requirement: Require the taxpayer either to deposit the

amount claimed or to file a surety bond for not more than double the
amount with the Court.
 Remedies under the NIRC
Collection Stage – No Injunction Rule – Exception – May the Bond
Requirement be Dispensed With?

2.a. Bond should be dispensed with whenever it is determined by the

courts that the method employed by the Collector (Commissioner) of
Internal Revenue in the collection of tax is not sanctioned by law just
like when prescription has already set in.
 Remedies under the NIRC
Collection Stage – No Injunction Rule – Exception – May the Bond
Requirement be Dispensed With?

2.b. The purpose of the rule is not only to prevent jeopardizing the
interest of the taxpayer, but more importantly, to prevent the absurd
situation wherein the court would declare “that the collection by the
summary methods of distraint and levy was violative of law, and then,
in the same breath require the petitioner to deposit or file a bond as a
prerequisite for the issuance of a writ of injunction.”
 Remedies under the NIRC
Collection Stage – No Injunction Rule – Exception – May the Bond
Requirement be Dispensed With?

2.c. Though it may be true that it would have been premature for the
CTA to immediately determine whether the assessment made against
the petitioners was valid or whether the warrants were properly issued
and served, still, it behooved upon the CTA to properly determine, at
least preliminarily, whether the CIR, in its assessment of the tax
liability of the petitioners, and its effort of collecting the same,
complied with the law and the pertinent issuances of the BIR itself.
The CTA should have conducted a preliminary hearing and received
evidence so it could have properly determined whether the
requirement of providing the required security under Section 11, R.A.
No. 1125 could be reduced or dispensed with pendente lite. (Spouses
Pacquiao vs. The CTA, GR No. 213394 dated April 6, 2016)
 Remedies under the NIRC
Refunds in General:

1. What is being refunded under Sections 204(C) and 229 of the Tax
Code is “erroneously, excessively, illegally or wrongfully paid or
collected tax.”
 Remedies under the NIRC
Refunds in General:

2. The taxpayer must file a written claim for refund with the CIR within
two (2) years from the date of payment (regardless of any supervening
event) prior to filing a judicial claim for refund with the CTA. (Sec.
204(C) of the Tax Code)

The taxpayer must also file the judicial claim for refund with the CTA
within two (2) years from the date of payment regardless of any
supervening event. (Sec. 229 of the Tax Code)
 Remedies under the NIRC
Refunds in General:

3. A claimant for refund must first file an administrative claim for

refund before the CIR, prior to filing a judicial claim before the CTA.
Notably, both the administrative and judicial claims for refund should
be filed within the two (2)-year prescriptive period indicated therein,
and that the claimant is allowed to file the latter even without waiting
for the resolution of the former in order to prevent the forfeiture of its
claim through prescription. (Metrobank vs. CIR, GR No. 182582 dated
April 17, 2017)
 Remedies under the NIRC
Refunds in General:

4.a. Section 204 refers to the Commissioner of Internal Revenue's

administrative authority to credit or refund erroneously paid or
illegally collected taxes. Under this provision, an administrative claim
for refund or credit must be filed within two years from payment of
the tax.

Section 229, on the other hand, requires two conditions for the filing
of judicial claims: (1) an administrative claim must be filed first; and (2)
the judicial claim must be filed within two years after payment of the
tax sought to be refunded.
 Remedies under the NIRC
Refunds in General:

4.b. Consequently, from the plain language of the law, it does not
matter how far apart the administrative and judicial claims were filed,
or whether the Commissioner of Internal Revenue was actually able to
rule on the administrative claim, so long as both claims were filed
within the two-year prescriptive period. (CIR vs. Carrier Air
Conditioning Phils., Inc., GR No. 226592 dated July 27, 2021)
 Remedies under the NIRC
Refunds in General:

5. Jurisdictional basis is:

Decisions/Inaction by the Commissioner of Internal Revenue in cases

involving disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties in relations thereto, or other matters
arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue, where the National
Internal Revenue Code provides a specific period of action, in which
case the inaction shall be deemed a denial. (Sec. 7(a)(1)(2) of RA No.
9282)
 Remedies under the NIRC
Refunds in General – Sample Problem:

When is the last day to file the judicial claim for refund in the following
instances?
Filing of Annual Date of Filing of Decision
ITR for calendar Claim with the denying the
year 2015 BIR claim for
refund

1. 4/15/2016 4/15/2017 3/1/2018

2. 4/10/2016 4/15/2017 4/1/2018
3. 4/20/2016 4/15/2017 4/25/2018
 Remedies under the NIRC
Refunds in General – Sample Problem:

When is the last day to file the judicial claim for refund in the following
instances?

Filing of Annual Date of Filing Decision

ITR for calendar of Claim with denying the Answer
year 2015 the BIR claim for
refund
1. 4/15/2016 4/15/2017 3/1/2018 3/31/2018
2. 4/10/2016 4/15/2017 4/1/2018 4/10/2018
3. 4/20/2016 4/15/2017 4/25/2018 No judicial
remedy
 Remedies under the NIRC
Refunds in General:

6.a. Timeliness of the filing of the claim is mandatory and

jurisdictional, and thus the Court cannot take cognizance of a judicial
claim for refund filed either prematurely or out of time.
 Remedies under the NIRC
Refunds in General:

6.b. The period to file a claim for refund under Sec. 229 is two (2)
years counted from the date of payment regardless of any
supervening event and not from the date of discovery of the
erroneous payment.
 Remedies under the NIRC
Refunds in General:

6.c. In the case of erroneously paid withholding taxes, the six (6) year
prescriptive period under Art. 1145 of the Civil Code on solutio indebiti
is not applicable because the first requisite of solutio indebiti is not
present, i.e., payment is made when there exists no binding relation
between the payor, who has no duty to pay, and the person who
received the payment. Also, the provisions of the Tax Code, being a
special law prevails over the provisions of the Civil Code, being a
general law. (CIR vs. San Miguel Corp., GR Nos. 180740 & 180910 dated
November 11, 2019, J. Hernando)
 Remedies under the NIRC
Illustration of the Creditable Withholding Tax System:

Lease contract with a monthly lease of P10,000.00, withholding tax

rate is 5%:
Particulars ITR of
Sales the Lessor 120,000.00
Cost of Sales 80,000.00
Gross Income 40,000.00
Allowable Deductions 100,000.00
Taxable Income (60,000.00)
Tax Rate 30%
Tax Due -
Creditable Withholding Tax 6,000.00
Tax Payable (6,000.00)
 Remedies under the NIRC
Irrevocability Rule:

1.a. Section 76. Final Adjustment Return. - Every corporation liable to

tax under Section 27 shall file a final adjustment return covering the
total taxable income for the preceding calendar or fiscal year. If the
sum of the quarterly tax payments made during the said taxable year is
not equal to the total tax due on the entire taxable income of that
year, the corporation shall either:

(A) Pay the balance of tax still due; or

(B) Carry-over the excess credit; or
(C)Be credited or refunded with the excess amount paid, as the
case may be.
 Remedies under the NIRC
Irrevocability Rule:

1.b. In case the corporation is entitled to a tax credit or refund of the

excess estimated quarterly income taxes paid, the excess amount
shown on its final adjustment return may be carried over and credited
against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding taxable years. 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 therefor.
 Remedies under the NIRC
Irrevocability Rule – Doctrines:

1. Under the cited law, there are two options available to the
corporation whenever it overpays its income tax for the taxable year:
(1) to carry over and apply the overpayment as tax credit against the
estimated quarterly income tax liabilities of the succeeding taxable
years (also known as automatic tax credit) until fully utilized (meaning,
there is no prescriptive period); and (2) to apply for a cash refund or
issuance of a tax credit certificate within the prescribed period. Such
overpayment of income tax is usually occasioned by the over-
withholding of taxes on the income payments to the corporate
taxpayer. (University Physicians Services, Inc. vs. CIR, GR No. 205955
dated March 7, 2018)
 Remedies under the NIRC
Irrevocability Rule – Doctrines:

2. The phrase "for that taxable period" merely identifies the excess
income tax, subject of the option, by referring to the taxable period
when it was acquired by the taxpayer.

The phrase "for that taxable period" is not a prescriptive period for the
irrevocability rule. This construal effectively renders nugatory the
irrevocability rule. The evident intent of the legislature, in adding the
last sentence to Section 76, is to keep the taxpayer from flip-flopping
on its options, and avoid confusion and complication as regards said
taxpayer's excess tax credit. The interpretation of the Court of Appeals
only delays the flip-flopping to the end of each succeeding taxable
period. (CIR vs. BPI, GR No. 178490 dated July 7, 2009)
 Remedies under the NIRC
Irrevocability Rule – Illustration:
2010 ITR of 2011 ITR of 2012 ITR of
Particulars the the
the Lessor
Lessor Lessor
Gross Income 20,000.00 30,000.0 45,000.00
0
Allowable Deductions 100,000.00 100,000.0 100,000.00
0
Taxable Income (80,000.00) (70,000.00) (55,000.00)
Tax Rate 30% 30% 30%
Tax Due - - -
Prior Year CWT - 5,000.0 5,000.00
0
Taxpayer
Currentfiles
Year aCWT
claim for refund5,000.00
for P15,000.00. Should it be 7,000.00
10,000.0 granted?
0
 Remedies under the NIRC
ITRs in the University Physicians Case:
Particulars 2005 ITR 2006 ITR 2007 ITR - 2007 ITR -
Original Amended
Gross Income 20,000.00 30,000.00 40,000.00 40,000.00
Allowable Deductions 100,000.00 100,000.00 100,000.00 100,000.00
Taxable Income (80,000.00) (70,000.00) (60,000.00) (60,000.00)
Tax Rate 30% 30% 30% 30%
Tax Due - - - -
Prior Year CWT - 5,000.00 15,000.00 5,000.00
Current Year CWT 5,000.00 10,000.00 4,000.00 4,000.00
Tax Payable (5,000.00) (15,000.00) (19,000.00) (9,000.00)
Choice Carryover Refund - Carryover Carryover
P10,000
Filed a claim for refund of P10,000.00 for the year 2006.
 Remedies under the NIRC
Irrevocability Rule – Does it Apply to the Option to Refund?

1. We cannot subscribe to the suggestion that the irrevocability rule

enshrined in Section 76 of the National Internal Revenue Code (NIRC)
applies to either of the options of refund or carry-over. Our reading of
the law assumes the interpretation that the irrevocability is limited
only to the option of carry-over such that a taxpayer is still free to
change its choice after electing a refund of its excess tax credit. But
once it opts to carry over such excess creditable tax, after electing
refund or issuance of tax credit certificate, the carry-over option
becomes irrevocable. Accordingly, the previous choice of a claim for
refund, even if subsequently pursued, may no longer be granted.
 Remedies under the NIRC
Irrevocability Rule – Does it Apply to the Option to Refund?

2. A perfunctory reading of the law unmistakably discloses that the

irrevocable option referred to is the carry-over option only. There
appears nothing therein from which to infer that the other choice, i.e.,
cash refund or tax credit certificate, is also irrevocable. If the intention
of the lawmakers was to make such option of cash refund or tax credit
certificate also irrevocable, then they would have clearly provided so.
Law and jurisprudence unequivocally support the view that only the
option of carry-over is irrevocable.
 Remedies under the NIRC
Irrevocability Rule – Does it Apply to the Option to Refund?

3. The CTA was correct in considering UPSI-MI to have constructively

chosen the option of carry-over, for which reason, the irrevocability
rule forbade it to revert to its initial choice. It does not matter that
UPSI-Ml had not actually benefited from the carry-over on the ground
that it did not have a tax due in its 2007 short period. Neither may it
insist that the insertion of the carry-over in the 2007 FAR was by mere
mistake or inadvertence. As we previously
laid down, the irrevocability rule admits of no
qualifications
(University or Inc. vs. CIR,
Physicians Services, conditions.
GR No. 205955 dated
March 7, 2018)
 Remedies under the NIRC
VAT Refund under Sec. 112:

Grounds:

1.Excess input VAT attributable to a zero-rated transaction (Sec.

112(A) of the Tax Code); and,
2.Excess input VAT at time of cancellation of VAT registration
(Sec. 112(B) of the Tax Code).
 Remedies under the NIRC
VAT Refund under Sec. 112:

1.a. Administrative Claim for Refund under Sec. 112(A) – Period to the
file the refund:

Two (2) years from the close of the taxable quarter when the zero-
rated sales were made.
 Remedies under the NIRC
VAT Refund under Sec. 112:

1.b. Administrative Claim for Refund under Sec. 112(A) – Illustration:

During the 1st Quarter of 2018, X a VAT-registered person purchased

P10,000.00 (VAT exclusive) worth of goods from Z, also a VAT-
registered person and subsequently sold the same for P30,000.00 to
the Asian Development Bank (VAT exclusive).

1st Quarter VAT return:

Output Tax: (P30,000.00 x 0%) P

Input Tax: - 1,200.00
VAT payable: P(1,200.00)
 Remedies under the NIRC
VAT Refund under Sec. 112:

2.a. Administrative Claim for Refund under Sec. 112(B) – Period to the
file the refund:

Two (2) years from cancellation of VAT registration. The date of

cancellation is the date of issuance of tax clearance by the BIR, after
full settlement of all tax liabilities relative to cessation of business or
change of status of the concerned taxpayer. (Revenue Regulations No.
13-2018 dated March 15, 2018)
 Remedies under the NIRC
VAT Refund under Sec. 112:

2.b. Administrative Claim for Refund under Sec. 112(B) – Illustration:

During the 1st Quarter of 2018, X a VAT-registered person purchased

P10,000.00 (VAT exclusive) worth of goods from Z, also a VAT-
registered person and subsequently sold the same to Y for P5,000.00
(VAT exclusive).

1st Quarter VAT return:

Output Tax: (P5,000.00 x 12%) P 600.00

Input Tax: 1,200.00
VAT payable: P (600.00)
 Remedies under the NIRC
VAT Refund under Sec. 112:

3. Judicial Claim for Refund under Sec. 112(C):

NIRC TRAIN Law

In proper cases, the Commissioner shall In proper cases, the Commissioner shall
grant a refund or issue the tax credit grant a refund for creditable input taxes
certificate for creditable input taxes within ninety (90) days from the date of
within one hundred twenty (120) days submission of the official receipts or
from the date of submission of complete invoices and other documents in
documents in support of the application support of the application filed in
filed in accordance with Subsections (A) accordance with Subsections (A) and (B)
and (B) hereof. hereof: Provided, That should the
Commissioner find that the grant of
refund is not proper, the Commissioner
must state in writing the legal and
factual basis for the denial.
 Remedies under the NIRC
VAT Refund under Sec. 112:

3. Judicial Claim for Refund under Sec. 112(C):

NIRC TRAIN Law

In case of full or partial denial of the In case of full or partial denial of the
claim for tax refund or tax credit, or the claim for tax refund, the taxpayer
failure on the part of the Commissioner affected may, within thirty (30) days
to act on the application within the from the receipt of the decision denying
period prescribed above, the taxpayer the claim, appeal the decision with the
affected may, within thirty (30) days Court of Tax Appeals: Provided, however,
from the receipt of the decision denying That failure on the part of any official,
the claim or after the expiration of the agent, or employee of the BIR to act on
one hundred twenty day-period, appeal the application within the ninety (90)-
the decision or the unacted claim with day period shall be punishable under
the Court of Tax Appeals. Section 269 of this Code.
 Remedies under the NIRC
VAT Refund under Sec. 112:

4. Doctrines under Sec. 112(C):

1.The 90-day period to decide will always start from the filing of
the claim for refund since the claim for refund must be
accompanied by complete supporting documents. (Revenue
Regulations No. 13-2018 dated March 15, 2018)
 Remedies under the NIRC
VAT Refund under Sec. 112:

4. Doctrines under Sec. 112(C):

2. The judicial claim for refund or appeal with the CTA need not be
made within the 2-year period under Secs. 112(A) and (B). (CIR vs. San
Roque Power, GR No. 187485 dated February 12, 2013)
 Remedies under the NIRC
VAT Refund under Sec. 112:

4. Doctrines under Sec. 112(C) – Gray Area:

3.a. No provision allowing the taxpayer to appeal to the CTA by way of

inaction:

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: Provided, however, That failure on the part of any official,
agent, or employee of the BIR to act on the application within the
ninety (90)-day period shall be punishable under Section 269 of this
Code.
 Remedies under the NIRC
VAT Refund under Sec. 112:

4. Doctrines under Sec. 112(C) – Gray Area:

3.b. However, under RA No. 9282, the CTA has jurisdiction over
inaction(s) of the CIR in claims for refund where the National Internal
Revenue Code provides a specific period of action, in which case the
inaction shall be deemed a denial. The lapse of the 90-day period may
be deemed a denial of the pending claim for refund. Accordingly, it
may be argued that the taxpayer has 30 days to appeal to the CTA from
lapse of the 90-day period.
 Remedies under the NIRC
VAT Refund under Sec. 112:

4. Doctrines under Sec. 112(C) – Gray Area:

3.c. On the other hand, according to RR No. 26-2018: “Provided

further, That, in the event that the 90-day period has lapsed without
having the refund released to the taxpayer-claimant, the VAT refund
claim may still continue to be processed administratively. Provided
however, That the BIR official, agent, or employee who was found to
have deliberately caused the delay in the processing of the VAT refund
claim may be subjected to penalties imposed under said section.”
 Remedies under the NIRC
VAT Refund under Sec. 112:

5. Possible problems under Sec. 112(C):

Problem No. 1:

Claim for refund filed on March 1, 2020 Taxpayer files an appeal to the CTA on April 1, 2020

90-day period for the BIR to decide

 Remedies under the NIRC
VAT Refund under Sec. 112:

5. Possible problems under Sec. 112(C):

Problem No. 2:

Claim for refund filed on March 1, 2020 Taxpayer files an appeal to the CTA on June 15, 2020

90-day period for the BIR to decide 30 days after the lapse of the 90-day period
 Remedies under the NIRC
VAT Refund under Sec. 112:

5. Possible problems under Sec. 112(C):

Problem No. 3:

Claim for refund filed on March 1, 2020 Taxpayer files an appeal to the CTA on August 15, 2020

90-day period for the BIR to decide 30 days after the lapse of the 90-day period
 Remedies under the NIRC
How to contest a ruling of the BIR?

1.a. File a request for ruling review with the Secretary of Finance
(“SOF”) within thirty (30) days from receipt of the CIR’s ruling. (DOF
Department Order No. 7-2002 dated May 7, 2002 implementing Sec. 4
of the Tax Code)
 Remedies under the NIRC
How to contest a ruling of the BIR?

1.b. Appeal to the SOF is in compliance with the rule on exhaustion of

administrative remedies. Thus, appeal to the SOF may be dispensed
with if any of the exceptions to the rule on exhaustion of
administrative remedies are present.
 Remedies under the NIRC
How to contest a ruling of the BIR?

1.c. The exceptions, among others, are the following:

(1)exhaustion would be futile – The SOF requesting a ruling from

the CIR and later on adopting the ruling as his own;
(2) issue is purely legal – Tax implications of the PEACe Bonds; and,
(3)when there are circumstances indicating the urgency of
judicial intervention – impending maturity of the PEACe Bonds.
(BDO vs. Republic, GR No. 198756 dated January 13, 2015)
 Remedies under the NIRC
How to contest a ruling of the BIR?

2. Next Remedy: Regional Trial Court or the Court of Tax Appeals

(“CTA”)?
 Remedies under the NIRC
How to contest a ruling of the BIR?

3. The CTA has exclusive appellate jurisdiction to review, on certiorari,

the constitutionality or validity of revenue issuances, even without a
prior issuance of an assessment. (Confederation for Unity, Recognition
and Advancement of Government Employees vs. Commissioner - BIR,
GR No. 213446 dated July 3, 2018)
 Remedies under the NIRC
How to contest a ruling of the BIR?

4.a. Within the judicial system, the law intends the Court of Tax
Appeals to have exclusive jurisdiction to resolve all tax problems.
Petitions for writs of certiorari against the acts and omissions of the
said quasi-judicial agencies should, thus, be filed before the Court of
Tax Appeals.
 Remedies under the NIRC
How to contest a ruling of the BIR?

4.b. Statutory Basis of the jurisdiction of the CTA, Section 7(a)(1) of RA

9282:

“Decisions of the Commissioner of Internal Revenue 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 or other laws administered by the
Bureau of Internal Revenue.”
 Remedies under the NIRC
How to contest a ruling of the BIR?

4.c. The Court of Tax Appeals has undoubted jurisdiction to pass upon
the constitutionality or validity of a tax law or regulation when raised
by the taxpayer as a defense in disputing or contesting an assessment
or claiming a refund. It is only in the lawful exercise of its power to
pass upon all matters brought before it, as sanctioned by Section 7 of
Republic Act No. 1125, as amended.

This Court, however, declares that the Court of Tax Appeals may
likewise take cognizance of cases directly challenging the
constitutionality or validity of a tax law or regulation or administrative
issuance (revenue orders, revenue memorandum circulars, rulings).
(BDO vs. Republic, GR No. 198756 dated August 16, 2016)
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

1.a. Decisions of the 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 or other laws administered by the Bureau of Internal
Revenue;
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

1.a.1. Cases covered:

a. Decisions on disputed assessments (Sec. 228 of the Tax Code);

b.Decisions on refunds (Secs. 204(C), 229, 112(A), 112(B) and 112(C)
of the Tax Code); and,
c. Other matters.
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

1.a.2. Cases under “other matters” arising under the NIRC or other
laws administered by the BIR:

a.Whether or not the BIR was able to collect within the

prescriptive period under the law. (CIR vs. Hambrecht & Quist
Philippines, Inc., GR No. 169225 November 17, 2010)

b.Validity of a warrant of distraint or levy considering that

the assessment issued by the BIR was invalid as it was issued beyond
the prescriptive period. (La Flor Dela Isabela, Inc. vs. CIR, GR No.
202105 dated April 28, 2021, J. Hernando)
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

1.a.2. Cases under “other matters” arising under the NIRC or other
laws administered by the BIR:

c. Validity of a waiver of the statute of limitations. (La Flor Dela Isabela,

Inc. vs. CIR, GR No. 202105 dated April 28, 2021, J. Hernando)

d. Unfavorable Tax Rulings/Decision of the Secretary of Finance on

appeals of Tax Rulings. (Philamlife vs. SOF, GR No. 210987 dated
November 24, 2014; BDO vs. Republic, GR No. 198756 dated January
13, 2015)
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

2.a. Inaction by the CIR in cases involving disputed assessments,

refunds of internal revenue taxes, fees or other charges, penalties in
relations thereto, or other matters arising under the National Internal
Revenue Code or other laws administered by the Bureau of Internal
Revenue, where the National Internal Revenue Code provides a
specific period of action, in which case the inaction shall be deemed a
denial;
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

2.b. Cases covered:

a. Inactions on disputed assessments (Sec. 228 of the Tax Code);

b.Inactions on refunds (Secs. 204(C), 229, 112(A) and (B) of the
Tax Code);
c. Inactions on Other matters;
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

2.c. Not covered:

BIR vs. a government agency or instrumentality except the Congress,

the Supreme Court, the Constitutional Commissions, and local
governments.

To be resolved by way of arbitration with the Security of Justice or

Solicitor General pursuant to Secs. 66 to 70 of the Revised
Administrative Code. (Power Sector Assets and Liabilities Management
vs. CIR, GR No. 198146 dated August 8, 2017)
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

3.a. Decisions, orders or resolutions of the Regional Trial Courts in local

tax cases in the exercise of their original jurisdiction;
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

3.b. Cases covered:

a. Protest cases of local taxes excluding RPT (Sec. 195 of the LGC);
b. Refund cases of local taxes excluding RPT (Sec. 196 of the LGC); and,
c.Illegal Assessment Cases (NPC vs. Municipal Government of
Navotas, GR No. 192300 dated November 24, 2014).
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

3.c. Cases covered:

To note, these issues may, inter alia, involve the legality or validity of
the real property tax assessment; protests of assessments; disputed
assessments, surcharges, or penalties; legality or validity of a tax
ordinance; claims for tax refund/credit; claims for tax exemption;
actions to collect the tax due; and even prescription of assessments.
(Ignacio vs. Office of the City Treasurer of Quezon City, GR No.
September 11, 2017)
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

4.a. Decisions of the Central Board of Assessment Appeals 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 (referring to the LBAA).
 Court of Tax Appeals
Selected Civil Cases within the Jurisdiction of the CTA:

4.b. Cases covered – note that this directly appealed to the CTA En
Banc:

a.Erroneous Real Property Tax Assessments (Secs. 252 and 226 of

the LGC); and,
b. Refund of Real Property Tax (Sec. 253 of the LGC).
 Court of Tax Appeals
Original and Exclusive Jurisdiction of the CTA in Criminal Cases:

1.a. Exclusive 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: Provided, however, That offenses or
felonies mentioned in this paragraph where the principal amount of
taxes and fees, exclusive of charges and penalties, claimed is less than
One million pesos (P1,000,000.00) or where there is no specified
amount claimed shall be tried by the regular Courts and the
jurisdiction of the CTA shall be appellate.
 Court of Tax Appeals
Original and Exclusive Jurisdiction of the CTA in Criminal Cases:

1.b. Any provision of law or the Rules of Court to the contrary

notwithstanding, the criminal action and the corresponding civil action
for the recovery of civil liability for taxes and penalties shall at all times
be simultaneously instituted with, and jointly determined in the same
proceeding by the CTA, the filing of the criminal action being deemed
to necessarily carry with it the filing of the civil action, and no right to
reserve the filling of such civil action separately from the criminal
action will be recognized. (Sec. 7(b)(2) of RA No. 9282)
 Court of Tax Appeals
Original and Exclusive Jurisdiction of the CTA in Criminal Cases:

2.a. SEC. 11. Inclusion of civil action in criminal action. — In cases

within the jurisdiction of the Court, the criminal action and the
corresponding civil action for the recovery of civil liability for taxes and
penalties shall be deemed jointly instituted in the same proceeding.
The filing of the criminal action shall necessarily carry with it the filing
of the civil action. No right to reserve the filing of such civil action
separately from the criminal action shall be allowed or recognized.
(Rule 9, Section 11 of the Revised Rules of the CTA)
 Court of Tax Appeals
Original and Exclusive Jurisdiction of the CTA in Criminal Cases:

2.b.1. Rule 111, Section 1 (a) of the Rules of Court provides that what
is deemed instituted with the criminal action is only the action to
recover civil liability arising from the crime. Civil liability arising from a
different source of obligation, such as when the obligation is created
by law, such civil liability is not deemed instituted with the criminal
action.

It is well-settled that the taxpayer's obligation to pay the tax is an

obligation that is created by law and does not arise from the offense of
tax evasion, as such, the same is not deemed instituted in the criminal
case. (Gaw, Jr. vs. CIR, GR No. 222837 dated July 23, 2018)
 Court of Tax Appeals
Original and Exclusive Jurisdiction of the CTA in Criminal Cases:

2.b.2. Gaw, Jr. Case Illustration:

Information for Tax

Evasion (non-payment of
income tax for the year
CTA
2020)

CTA?

FAN (deficiency
income tax for Protest FDDA
the year 2020)
 Court of Tax Appeals
Original and Exclusive Jurisdiction of the CTA in Criminal Cases:

2.b.3. While the tax evasion case is pending, the BIR is not precluded
from issuing a final decision on a disputed assessment, such as what
happened in this case. In order to prevent the assessment from
becoming final, executory and demandable, Section 9 of R.A. No. 9282
allows the taxpayer to file with the CTA, a Petition for Review within 30
days from receipt of the decision or the inaction of the respondent.
 Court of Tax Appeals
Original and Exclusive Jurisdiction of the CTA in Criminal Cases:

2.b.4. The tax evasion case filed by the government against the erring
taxpayer has, for its purpose, the imposition of criminal liability on the
latter. While the Petition for Review filed by the petitioner was aimed
to question the FDDA and to prevent it from becoming final. The stark
difference between them is glaringly apparent. As such, the Petition
for Review Ad Cautelam is not deemed instituted with the criminal
case for tax evasion. (Gaw, Jr. vs. CIR, GR No. 222837 dated July 23,
2018)
 Court of Tax Appeals
Certiorari Jurisdiction:

1. the Court of Tax Appeals, not the Court of Appeals, has the exclusive
original jurisdiction over petitions for certiorari assailing interlocutory
orders issued by Regional Trial Courts in a local tax case. We explained
in The City of Manila vs. Hon. Grecia-Cuerdo that while the Court of Tax
Appeals has no express grant of power to issue writs of certiorari
under Republic Act No. 9282, as amended, the tax court's judicial
power as defined in the Constitution includes the power to determine
"whether or not there has been grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the [Regional Trial Court]
in issuing an interlocutory order of jurisdiction in cases falling within
the exclusive appellate jurisdiction of the tax court."
 Court of Tax Appeals
Certiorari Jurisdiction:

2.a. Indeed, in order for any appellate court to effectively exercise its
appellate jurisdiction, it must have the authority to issue, among
others, a writ of certiorari. In transferring exclusive jurisdiction over
appealed tax cases to the CTA, it can reasonably be assumed that the
law intended to transfer also such power as is deemed necessary, if
not indispensable, in aid of such appellate jurisdiction. There is no
perceivable reason why the transfer should only be considered as
partial, not total.
 Court of Tax Appeals
Certiorari Jurisdiction:

2.b.1. If this Court were to sustain petitioners' contention that

jurisdiction over their certiorari petition lies with the CA, this Court
would be confirming the exercise by two judicial bodies, the CA and
the CTA, of jurisdiction over basically the same subject matter –
precisely the split-jurisdiction situation which is anathema to the
orderly administration of justice. Thus, the Court agrees with the
ruling of the CA that since appellate jurisdiction over private
respondents' complaint for tax refund is vested in the CTA, it follows
that a petition for certiorari seeking nullification of an interlocutory
order issued in the said case should, likewise, be filed with the same
court.
 Court of Tax Appeals
Certiorari Jurisdiction:

2.b.2. To rule otherwise would lead to an absurd situation where one

court decides an appeal in the main case while another court rules on
an incident in the very same case.
 Court of Tax Appeals
Certiorari Jurisdiction:

2.c. It is more in consonance with logic and legal soundness to

conclude that the grant of appellate jurisdiction to the CTA over tax
cases filed in and decided by the RTC carries with it the power to
issue a writ of certiorari when necessary in aid of such appellate
jurisdiction. The supervisory power or jurisdiction of the CTA to issue a
writ of certiorari in aid of its appellate jurisdiction should co-exist with,
and be a complement to, its appellate jurisdiction to review, by appeal,
the final orders and decisions of the RTC, in order to have complete
supervision over the acts of the latter. (City of Manila vs. Grecia-
Cuerdo, GR No. 175723 dated February 4, 2014)
 Court of Tax Appeals
Certiorari Jurisdiction:

3. The CTA has exclusive appellate jurisdiction to review, on certiorari,

the constitutionality or validity of revenue issuances, even without a
prior issuance of an assessment. Petitions for writs of certiorari against
the acts and omissions of the said quasi-judicial agencies should, thus,
be filed before the Court of Tax Appeals. (Confederation for Unity,
Recognition and Advancement of Government Employees vs.
Commissioner - BIR, GR No. 213446 dated July 3, 2018)
 Court of Tax Appeals
Cases directly filed with the CTA En Banc:

1.Decisions by the CentralBoard of

Assessment Appeals in Real Property Tax Cases;
2.Decisions by the Regional Trial Court in the exercise of its
appellate jurisdiction in local tax cases;
3.Decisions by the Regional Trial Court in the exercise of its
appellate jurisdiction in tax collection cases; and,
4.Decisions by the Regional Trial Court in the exercise of its
appellate jurisdiction in criminal cases.
 Court of Tax Appeals
Doctrines on the Procedure in the CTA:

1. No decision of the CTA Division may be elevated to the Supreme

Court under Rule 45 of the 1997 Rules of Civil Procedure without
passing through the CTA En Banc. (Duty Free Phils. vs. BIR, GR No.
197228 dated October 8, 2014)
 Court of Tax Appeals
Doctrines on the Procedure in the CTA – Requirement of a Motion for
Reconsideration?

2. An amended decision is a different decision and is a proper subject

of a motion for reconsideration. Thus, if an amended decision is
rendered by the CTA Division disposing of the motions for
reconsideration filed by the taxpayer and the CIR, the amended
decision must also be contested by way of a motion for
reconsideration before any appeal can be made to the CTA En Banc.
(CIR vs. Asiatrust Development Bank, GR Nos. 201680-81 dated April
19, 2017)