UNIVERSITY OF THE PHILIPPINES

UP LAW CENTER Pre-Bar Review

WARNIN34
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BAR STAR NOTES

TAXATION
VER. 2010.06.12 copyrighted 2010

Prepared by Pro . Abe!ardo T. "o#o$do$

%AB %Eco$&' BS( %Acctg&' ))B' *A %Eco$&' ))*' "() %(a$d.&. )a+yer,(PA,(-.to#. Bro/er' *a$age#e$t (o$.-!ta$t' Pro e..or o )a+ a$d Pre,Bar Re0ie+er&

THE BEST OF LUC6 AN+ A+VANCE CON3RATULATIONS

TAXATION
3ENERAL PRINCIPLES OF TA2ATION
TA2ATION7 IN 3ENERAL 1" State )rie*&' a-( %o-%ise&' t e -ature o* ta.atio-" A&ter-ative&'7 (e*i-e ta.atio-"
S3<<ESTE" ANS=ER8 The i$here$t po+er o the .o0ereig$ e2erci.ed thro-gh the !egi.!at-re to i#po.e b-rde$. -po$ .-b6ect. a$d ob6ect. +ithi$ it. 6-ri.dictio$ or the p-rpo.e o rai.i$g re0e$-e. to carry o-t the !egiti#ate ob6ect. o go0er$#e$t.

How to use t e !BAR STAR NOTES"# The BAR STAR NOTES i$ the or# o 1-e.tio$. a$d a$.+er. a. +e!! a. te2t-a! di.c-..io$ +ere s$e%ia&&' $re$are( )' Pro*" +o,o-(o- *or t e e.%&usive use o* Bar Reviewees w o atte-(e( is /010 Le%tures oTA2ATION he!d at the 3$i0er.ity o the Phi!ippi$e.. 4$c!-ded i$ the pre.e$tatio$ are doctri$e. co$tai$ed i$ S-pre#e (o-rt deci.io$. -p to Apri! 2010.
The p-rpo.e o the 5BAR STAR NOTES i. to pro0ide the Bar Re0ie+ee +ith a ha$dy re0ie+ #ateria! +hich .er0e. a. #e#ory, 6ogger. or the Septe#ber 12' 2010 Bar E2a#i$atio$. i$ Ta2atio$. The a-thor trie. to .eco$d g-e.. +hat +o-!d be i$c!-ded i$ the Bar E2a#. -.i$g .tati.tica! a$a!y.i.. The act-a! Bar 1-e.tio$. #ay $ot be or#-!ated i$ the .a#e #a$$er a. the BAR STAR NOTES. 7o+e0er' the doctri$e. te.ted i$ the Bar +o-!d i$ a!! probabi!ity be i$c!-ded i$ the.e Note.. 4 pre..ed or ti#e' the a-thor .-gge.t. that the reader .ho-!d oc-. hi. atte$tio$ o$ the o!!o+i$g8 Nice to /$o+ Sho-!d /$o+ *-.t /$o+ a$d #a.ter 4t i. -rther .-gge.ted that the reader .ho-!d #ere!y bro+.e tho.e +itho-t .tar..

/" W at is t e -ature o* t e State8s $ower to ta. 9 E.$&ai- )rie*&'"

S3<<ESTE" ANS=ER8 The $at-re o the .tate:. po+er to ta2 i. t+o, o!d. 4t i. both a$ i$here$t po+er a$d a !egi.!ati0e po+er. 4t i. i$here$t i$ $at-re bei$g a$ attrib-te o .o0ereig$ty. Thi. i. .o' beca-.e +itho-t the ta2e.' the .tate:. e2i.te$ce +o-!d be i#peri!ed. There i. th-.' $o $eed or a co$.tit-tio$a! gra$t or the .tate to e2erci.e thi. po+er. 4t i. a !egi.!ati0e po+er beca-.e it i$0o!0e. the pro#-!gatio$ o r-!e.. Ta2atio$ i. a .et o r-!e.' ho+ #-ch i. the ta2 to be paid' +ho pay. the ta2' to +ho# it .ho-!d be paid' a$d +he$ the ta2 .ho-!d be paid.

 :"
)rie*&'"

W at is t e u-(er&'i-; t eor' o* ta.atio- 9 E.$&ai-

S3<<ESTE" ANS=ER8 Ta2e. are the !i eb!ood o the $atio$. =itho-t re0e$-e rai.ed ro# ta2atio$' the go0er$#e$t +i!! $ot .-r0i0e' re.-!ti$g i$ detri#e$t to .ociety. =itho-t ta2e.' the go0er$#e$t +o-!d be para!y;ed or !ac/ o #oti0e po+er to acti0ate a$d operate it.
%Commissioner of Internal Revenue v. Algue, Inc. et al., 1>? S(RA ?' 16,1@&

<" =ars a&& sai( t at7 !t e $ower to ta. i-vo&ves t e

$ower to (estro'"# O- t e ot er a-(7 Ho&,es state( t at !t e $ower to ta. is -ot t e $ower to (estro' w i&e t e %ourt sits"# Re%o-%i&e t e state,e-ts" I- t e a&ter-ative7 w at are t e i,$&i%atio-s t at *&ow *ro, t e a)ove state,e-ts 9
S3<<ESTE" ANS=ERS8 *ar.ha!!:. 0ie+ re er. to a 0a!id ta2 +hi!e the 7o!#e.: 0ie+ re er. to a$ i$0a!id ta2. a. The i#po.itio$ o a 0a!id ta2 co-!d $ot be 6-dicia!!y re.trai$ed #ere!y beca-.e it +o-!d pre6-dice ta2payer:. property. b. A$ i!!ega! ta2 co-!d be 6-dicia!!y dec!ared i$0a!id a$d .ho-!d $ot +or/ to pre6-dice a ta2payer:. property.

reg-!atory p-rpo.e. o$!y. b. Ba.i.8 Ta2 i#po.ed -$der po+er o ta2atio$ +hi!e !ice$.e ee -$der po!ice po+er. c. A#o-$t8 4$ ta2atio$' $o !i#it a. to a#o-$t +hi!e !ice$.e ee !i#ited to co.t o the !ice$.e a$d the e2pe$.e. o po!ice .-r0ei!!a$ce a$d reg-!atio$. d. Ti#e o pay#e$t8 Ta2e. $or#a!!y paid a ter co##e$ce#e$t o b-.i$e.. +hi!e !ice$.e ee be ore. e. E ect o pay#e$t8 Cai!-re to pay a ta2 doe. $ot #a/e the b-.i$e.. i!!ega! +hi!e ai!-re to pay !ice$.e ee #a/e. b-.i$e.. i!!ega!. . S-rre$der8 Ta2e.' bei$g the !i eb!ood o the .tate' ca$$ot be .-rre$dered e2cept or !a+ -! co$.ideratio$ +hi!e a !ice$.e ee #ay be .-rre$dered +ith or +itho-t co$.ideratio$. %(oo!ey o$ Ta2atio$' pp. 11B@,
11B?D Pacific Commercial Company v. Romualdez, et al., EF Phi!. F2E&

C" How ,a' t e $ower to ta. )e uti&iDe( to %arr' out t e so%ia& Austi%e $ro;ra, o* our ;over-,e-t 9
S3<<ESTE" ANS=ER8 The co#pe$.atory p-rpo.e o ta2atio$ i. to i#p!e#e$t the .ocia! 6-.tice pro0i.io$. o the co$.tit-tio$ thro-gh the progre..i0e .y.te# o ta2atio$' +hich +o-!d re.-!t to e1-a! di.trib-tio$ o +ea!th' etc. Progre..i0e i$co#e ta2e. a!!e0iate the #argi$ bet+ee$ rich a$d poor. %Southern Cross Cement Corporation v. Cement Manufacturers
Association of the Philippines, et al., <. R. No. 1>?>E0' A-g-.t B' 200>&

>" +is%uss )rie*&' t e )asis?)ases7 or ratio-a&e o* ta.atio-"

S3<<ESTE" ANS=ER8 a. Reciproca! d-tie. o protectio$ a$d .-pport bet+ee$ the .tate a$d it. citi;e$. a$d re.ide$t.. A!.o ca!!ed .y#biotic re!atio$ bet+ee$ the .tate a$d it. citi;e$.. b. A-ri.dictio$ by the .tate o0er per.o$. a$d property +ithi$ it. territory.

4$ rece$t year.' the i$crea.i$g .ocia! cha!!e$ge. o the ti#e. e2pa$ded the .cope o the .tate acti0ity' a$d ta2atio$ ha. beco#e a too! to rea!i;e .ocia! 6-.tice a$d the e1-itab!e di.trib-tio$ o +ea!th' eco$o#ic progre.. a$d the protectio$ o !oca! i$d-.trie. a. +e!! a. p-b!ic +e! are a$d .i#i!ar ob6ecti0e.. %Batangas Po er Corporation v. Batangas City, et
al., <. R. No. 1>26@>' a$d co#pa$io$ ca.e' Apri! 2?' 200E citi$g !ational Po er Corporation v. City of Ca"anatuan, <. R. No. 1EF110' Apri! F' 200B&

)rie*&' )ut o)Ae%tives or $ur$oses o* ta.atio-"

@" +is%uss

%o,$re e-sive&'

t e

S3<<ESTE" ANS=ER8 The p-rpo.e. or ob6ecti0e. o ta2atio$ are the o!!o+i$g8 a. The pri#ary p-rpo.e8 1& Re0e$-e p-rpo.e. b. The .eco$dary p-rpo.e. 1& S-#pt-ary or reg-!atory p-rpo.e. 2& (o#pe$.atory p-rpo.e. B& To i#p!e#e$t the po+er o e#i$e$t do#ai$.

E" E.$&ai- t e su,$tuar' $ur$ose o* ta.atio-" S3<<ESTE" ANS=ER8 The .-#pt-ary p-rpo.e o ta2atio$ i. to pro#ote the ge$era! +e! are a$d to protect the hea!th' .a ety or #ora!. o the i$habita$t.. 4t i. i$ the 6oi$t e2erci.e o the po+er o ta2atio$ a$d po!ice po+er +here reg-!atory ta2e. are co!!ected. Ta2atio$ #ay be #ade the i#p!e#e$t o the .tate:. po!ice po+er. The #oti0atio$ behi$d #a$y ta2atio$ #ea.-re. i. the i#p!e#e$tatio$ o po!ice po+er goa!.. GSouthern Cross Cement Corporation v. Cement
Manufacturers Association of the Philippines, et al., <. R. No. 1>?>E0' A-g-.t B' 200>& The reader .ho-!d $ote that the A-g-.t B' 200> Southern Cross ca.e

B" +isti-;uis a ta. *ro, a &i%e-se *ee"

S3<<ESTE" ANS=ER8 The o!!o+i$g are the di.ti$ctio$.8 a. P-rpo.e8 Ta2 i#po.ed or re0e$-e +hi!e !ice$.e ee or reg-!atio$. Ta2 or ge$era! p-b!ic p-rpo.e. +hi!e !ice$.e ee or

i. the deci.io$ o$ the #otio$ or reco$.ideratio$ o the A-!y ?' 200E Southern Cross deci.io$. The .o,ca!!ed .i$ ta2e. o$ a!coho! a$d tobacco #a$- act-rer. he!p di..-ade the co$.-#er. ro# e2ce..i0e i$ta/e o the.e pote$tia!!y har# -!

prod-ct..

%Southern Cross Cement Corporation v. Cement Manufacturers Association of the Philippines, et al., <. R. No. 1>?>E0' A-g-.t B' 200>&

1:" W at are t e e&e,e-ts or % ara%teristi%s o* a ta. 9

S3<<ESTE" ANS=ER8 a. E$ orced co$trib-tio$. b. <e$era!!y payab!e i$ #o$ey. c. Proportio$ate i$ character. d. )e0ied o$ per.o$.' property or e2erci.e o pri0i!ege. e. )e0ied by the .tate ha0i$g 6-ri.dictio$. . )e0ied by the !egi.!at-re. g. )e0ied or a p-b!ic p-rpo.e. h. Paid at reg-!ar period. or i$ter0a!..

10" Ta.atio- (isti-;uis e( *ro, $o&i%e $ower" Ta2atio$ i. di.ti$g-i.hab!e ro# po!ice po+er a. to the #ea$. e#p!oyed to i#p!e#e$t the.e p-b!ic goa!.. Tho.e doctri$e. that are -$i1-e to ta2atio$ aro.e ro# pec-!iar co$.ideratio$. .-ch a. tho.e e.pecia!!y p-$iti0e e ect. %Southern Cross Cement Corporation v. Cement Manufacturers Association of the Philippines, et al., <. R. No. 1>?>E0' A-g-.t B' 200>& a. the po+er to ta2 i$0o!0e. the po+er to de.troy a$d the be!ie that ta2e. are !i eb!ood o the .tate. %I"id.# ta2e. bei$g the !i eb!ood o the go0er$#e$t' their pro#pt a$d certai$ a0ai!abi!ity i. o the e..e$ce. The.e co$.ideratio$. $ece..itated the e0o!-tio$ o ta2atio$ a. a di.ti$ct !ega! co$cept ro# po!ice po+er. %I"id.&

a right or

1<" State t e reFuisites o* a va&i( ta."

S3<<ESTE" ANS=ER8 a. A 0a!id ta2 .ho-!d be +ithi$ the 6-ri.dictio$ o the ta2i$g a-thority. b. That the a..e..#e$t a$d co!!ectio$ o certai$ /i$d. %The .a#e a. the i$here$t !i#itatio$. o the po+er o ta2atio$& .ho-!d be or a p-b!ic p-rpo.e. c. The r-!e o ta2atio$ .ho-!d be -$i or#. d. That either the per.o$ or property o ta2e. g-ara$tee. agai$.t i$6-.tice to i$di0id-a!.' e.pecia!!y by +ay or $otice a$d opport-$ity or heari$g be pro0ided. e. The ta2 #-.t $ot i#pi$ge o$ the i$here$t a$d (o$.tit-tio$a! !i#itatio$. o$ the po+er o ta2atio$.

11" How t e $ower o* ta.atio- ,a' )e use( to i,$&e,e-t $ower o* e,i-e-t (o,ai-" Ta2 #ea.-re. are b-t
e$ orced co$trib-tio$. e2acted o$ pai$ o pe$a! .a$ctio$. a$d c!ear!y i#po.ed or p-b!ic p-rpo.e. 4$ #o.t rece$t year.' the po+er to ta2 ha. i$deed beco#e a #o.t e ecti0e too! to rea!i;e .ocia! 6-.tice' p-b!ic +e! are' a$d the e1-itab!e di.trib-tio$ o +ea!th. %Commissioner of Internal Revenue v.
Central $uzon %rug Corporation, <.R. No. 1>F6E@' Apri! 16' 200>&

E.tab!i.h#e$t. gra$ti$g the 20H .e$ior citi;e$. di.co-$t #ay c!ai# the di.co-$t. gra$ted to .e$ior citi;e$. as ta. (e(u%tio- ba.ed o$ the $et co.t o the good. .o!d or .er0ice. re$dered8 Provided' That the co.t o the di.co-$t .ha!! be a!!o+ed a. ded-ctio$ ro# gro.. i$co#e or the .a#e ta2ab!e year that the di.co-$t i. gra$ted. Provided, further, That the tota! a#o-$t o the c!ai#ed ta2 ded-ctio$ $et o 0a!-e added ta2 i app!icab!e' .ha!! be i$c!-ded i$ their gro.. .a!e. receipt. or ta2 p-rpo.e. a$d .ha!! be .-b6ect to proper doc-#e$tatio$ a$d to the pro0i.io$. o the Natio$a! 4$ter$a! Re0e$-e (ode' a. a#e$ded. GM.&.
'olding Corporation v. Court of Appeals, et al., <.R. No. 1601FB' *arch B' 200? citi$g E2pa$ded Se$ior (iti;e$. Act o 200B' Sec. E %a&I

1>" W at are t e %&asses or Gi-(s o* ta.es a%%or(i-; to t e su)Ae%t ,atter or o)Ae%t 9

S3<<ESTE" ANS=ER8 a. Per.o$a!' po!! or capita!i;atio$ J i#po.ed o$ a!! re.ide$t.' +hether citi;e$ or $ot. E2a#p!e J (o##-$ity Ta2. b. ta2. c. E2ci.e J i#po.ed -po$ the per or#a$ce o a$ act' the e$6oy#e$t o a pri0i!ege or the e$gagi$g i$ a$ occ-patio$. E2a#p!e J i$co#e ta2' e.tate ta2. Property , 4#po.ed o$ property. E2a#p!e J Rea! property

1/" W at are t e t ree )asi% $ri-%i$&es o* a sou-( ta. s'ste,9 E.$&ai- ea% )rie*&'"
S3<<ESTE" ANS=ER8 The ca$o$. o a .o-$d ta2 .y.te#' a!.o /$o+$ a. the characteri.tic. or' pri$cip!e. o a .o-$d ta2 .y.te#' are -.ed a. a criteria i$ order to deter#i$e +hether a ta2 .y.te# i. ab!e to #eet the p-rpo.e. or ob6ecti0e. o ta2atio$. They are8 a. Ci.ca! ade1-acy. b. Ad#i$i.trati0e ea.ibi!ity. c. Theoretica! 6-.tice.

1@" W at are t e Gi-(s o* ta.es %&assi*ie( as to w o )ears t e )ur(e- 9 E.$&ai- ea% )rie*&'"
S3<<ESTE" ANS=ER8 Ba.ed o$ the po..ibi!ity o .hi ti$g the i$cide$ce o ta2atio$' or a. to +ho .ha!! bear the b-rde$ o ta2atio$' ta2e. #ay be c!a..i ied i$to8 a. "irect ta2e.. Tho.e that are e2tracted ro# the 0ery per.o$ +ho' it i. i$te$ded or de.ired' .ho-!d pay the# %Commissioner of Internal

Revenue v. Philippine $ong %istance (elephone Company, <. R. No. 1E02B0' "ece#ber 1>' 200>&D they are i#po.itio$. or +hich a ta2payer i. direct!y !iab!e o$ the tra$.actio$ or b-.i$e.. he i. e$gaged i$' %Commissioner of Internal Revenue v. Philippine $ong %istance (elephone Company, supra&

+hich !iabi!ity ca$$ot be .hi ted or tra$. erred to a$other. E2a#p!e J i$co#e ta2' e.tate ta2' do$or:. ta2' etc. b. 4$direct ta2e. are tho.e that are de#a$ded i$ the ir.t i$.ta$ce' ro#' or are paid by' o$e per.o$ i$ the e2pectatio$ a$d i$te$tio$ that he ca$ .hi t the b-rde$ to %Commissioner of Internal Revenue v. Philippine $ong %istance (elephone Company, supra & to .o#eo$e e!.e $ot a. a ta2 b-t a. part o the p-rcha.e price. %Commissioner, of Internal Revenue v. American &)press International, Inc. *Philippine Branch#, <. R. No. 1>260F' A-$e 2F' 200> citi$g 0ario-. ca.e. a$d a-thoritie.& E2a#p!e J 0a!-e added ta2 %VAT&' doc-#e$tary .ta#p ta2' e2ci.e ta2' perce$tage ta2' etc.

i-s$e%tio- *ees a-( ot er (uties or ta.es i,$ose( i- t e territor' o* t e *irst Co-tra%ti-; Part'" It i-voGes =a%e(a v" =a%arai;7 5r"7 3"R" No" CC/E17 =a' :17 1EE17 1EB SCRA BB1"w i% u$ e&( t e %&ai, *or ta. %re(it or re*u-( )' t e Natio-a& Power Cor$oratio- HNPCI o- t e ;rou-( t at t e NPC is e.e,$t eve- *ro, t e $a',e-t o* i-(ire%t ta.es" Is Si&Gair e-tit&e( to t e ta. re*u-( or %re(it it seeGs 9 Reaso- out 'our a-swer"
S3<<ESTE" ANS=ER8 Si!/air i. $ot e$tit!ed to ta2 re -$d or credit or the o!!o+i$g rea.o$.8 a. The e2ci.e ta2 o$ a0iatio$ -e! i. a$ i$direct ta2. The proper party to 1-e.tio$' or .ee/ a re -$d o ' a$ i$direct ta2 i. the .tat-tory ta2payer' the per.o$ o$ +ho# the ta2 i. i#po.ed by !a+ a$d +ho paid the .a#e e0e$ i he .hi t. the b-rde$ thereo to a$other. %Philippine
+eothermal, Inc. v. Commissioner of Internal Revenue, <.R. No. 1>E02?' A-!y 2F' 200>' E6> S(RA B0?' B1@,B1?& The N4R( pro0ide. that the e2ci.e ta2

1B" Si&Gair HSi-;a$oreI PTE7 Lt("7 a- i-ter-atio-a&

%arrier7 $ur% ase( aviatio- ;as *ro, Petro- Cor$oratio-7 w i% it uses *or its o$eratio-s" It -ow %&ai,s *or re*u-( or ta. %re(it *or t e e.%ise ta.es it $ai( %&ai,i-; t at it is e.e,$t *ro, t e $a',e-t o* e.%ise ta.es u-(er t e $rovisio-s o* Se%" 1:> o* t e NIRC o* 1EEB w i% $rovi(es t at $etro&eu, $ro(u%ts are e.e,$t *ro, e.%ise ta.es w e- so&( to E2e#pt
e$titie. or age$cie. co0ered by ta2 treatie.' co$0e$tio$.' a$d other i$ter$atio$a! agree#e$t. or their -.e a$d co$.-#ptio$8 Pro0ided' ho+e0er' That the co-$try o .aid oreig$ i$ter$atio$a! carrier or e2e#pt e$titie. or age$cie. e2e#pt. ro# .i#i!ar ta2e. petro!e-# prod-ct. .o!d to Phi!ippi$e carrier.' e$titie. or age$cie.

.ho-!d be paid by the #a$- act-rer or prod-cer be ore re#o0a! o do#e.tic prod-ct. ro# p!ace o prod-ctio$. Th-.' Petro$ (orporatio$' $ot Si!/air' i. the .tat-tory ta2payer +hich i. e$tit!ed to c!ai# a re -$d ba.ed o$ Sectio$ 1B> o the N4R( o 1FF@ a$d Artic!e E%2& o the Air Tra$.port Agree#e$t bet+ee$ RP a$d Si$gapore. E0e$ i Petro$ (orporatio$ pa..ed o$ to Si!/air the b-rde$ o the ta2' the additio$a! a#o-$t bi!!ed to Si!/air or 6et -e! i. $ot a ta2 b-t part o the price +hich Si!/air had to pay a. a p-rcha.er. GPhilippine Acetylene Co.,
Inc. v. Commissioner of Internal Revenue, 12@ Phi!. E61' E@0 %1F6@&I

Si&Gair *urt er a-% ors its %&ai, o- Arti%&e <H/I o* t e Air Tra-s$ort A;ree,e-t )etwee- t e 3over-,e-t o* t e Re$u)&i% o* t e P i&i$$i-es a-( t e 3over-,e-t o* t e Re$u)&i% o* Si-;a$ore HAir Tra-s$ort A;ree,e-t )etwee- RP a-( Si-;a$oreI w i% rea(s4 C-e!' !-brica$t.' .pare part.' reg-!ar
e1-ip#e$t a$d aircra t .tore. i$trod-ced i$to' or ta/e$ o$ board aircra t i$ the territory o o$e (o$tracti$g party by' or o$ beha! o ' a de.ig$ated air!i$e o the other (o$tracti$g Party a$d i$te$ded .o!e!y or -.e i$ the operatio$ o the agreed .er0ice. .ha!!' +ith the e2ceptio$ o charge. corre.po$di$g to the .er0ice per or#ed' be e2e#pt ro# the .a#e c-.to#. d-tie.' i$.pectio$ ee. a$d other d-tie. or ta2e. i#po.ed i$ the territorie. o the ir.t (o$tracti$g Party ' e0e$ +he$ the.e .-pp!ie. are to be -.ed o$ the part. o the 6o-r$ey per or#ed o0er the territory o the (o$tracti$g Party i$ +hich they are i$trod-ced i$to or ta/e$ o$ board. The #ateria!. re erred to abo0e #ay be re1-ired to be /ept -$der c-.to#. .-per0i.io$ a$d co$tro!.

Si&Gair &iGewise ar;ues t at it is e.e,$t *ro, i-(ire%t ta.es )e%ause t e Air Tra-s$ort A;ree,e-t )etwee- RP a-( Si-;a$ore ;ra-ts e.e,$tio- !*ro, t e sa,e %usto,s (uties7

b. Si!/air co-!d $ot .ee/ re -ge -$der Maceda v. Macaraig, ,r., <.R. No. ??2F1' *ay B1' 1FF1' 1F@ S(RA @@1.+hich -phe!d the c!ai# or ta2 credit or re -$d by the Natio$a! Po+er (orporatio$ %NP(& o$ the gro-$d that the NP( i. e2e#pt e0e$ ro# the pay#e$t o i$direct ta2e.. 4$ Commissioner of Internal Revenue v. Philippine $ong %istance (elephone Company' <.R. No. 1E02B0' "ece#ber 1>' 200>' E@? S(RA 61 the S-pre#e (o-rt c!ari ied the r-!i$g i$ Maceda v. Macaraig, ,r., 0i;8 4t #ay be .o that i$ Maceda vs. Macaraig, ,r.' the (o-rt he!d that a$ e2e#ptio$ ro# a&& ta.es gra$ted to the Natio$a! Po+er (orporatio$ %NP(& -$der it. charter i$c!-de. both direct a$d i$direct ta2e.. A$ e2e#ptio$ ro# a!! ta2e. e2c!-de. i$direct ta2e.' -$!e.. the e2e#pti$g .tat-te' !i/e NP(:. charter' i. .o co-ched a. to i$c!-de i$direct ta2 ro# the e2e#ptio$. The a#e$d#e$t -$der Rep-b!ic Act No. 6BF> e$-#erated the detai!. co0ered by NP(:. e2e#ptio$. S-b.e1-e$t!y' P.". B?0' #ade e0e$ #ore .peci ic the detai!. o the e2e#ptio$ o NP( to co0er' a#o$g other.' both direct a$d i$direct ta2e. o$ a!! petro!e-# prod-ct. -.ed i$ it. operatio$. Pre.ide$tia! "ecree No. FB? GNP(:. a#e$ded charterI a#e$ded the ta2 e2e#ptio$ by .i#p!i yi$g the .a#e !a+ i$ ge$era! ter#.. 4t .-cci$ct!y e2e#pt. NP( ro# a!! or#. o ta2e.' d-tie.' ee.K The -.e o the phra.e a!! or#. o ta2e. de#o$.trate.

the i$te$tio$ o the !a+ to gi0e NP( a!! the ta2 e2e#ptio$. it ha. bee$ e$6oyi$g be ore. The e2e#ptio$ gra$ted -$der Sectio$ 1B> %b& o the N4R( o 1FF@ a$d Artic!e E%2& o the Air Tra$.port Agree#e$t bet+ee$ RP a$d Si$gapore ca$$ot' +itho-t a c!ear .ho+i$g o !egi.!ati0e i$te$t' be co$.tr-ed a. i$c!-di$g i$direct ta2e.. Stat-te. gra$ti$g ta2 e2e#ptio$. #-.t be co$.tr-ed i$ .tricti..i#i 6-ri. agai$.t the ta2payer a$d !ibera!!y i$ a0or o the ta2i$g a-thority' a$d i a$ e2e#ptio$ i. o-$d to e2i.t' it #-.t $ot be e$!arged by co$.tr-ctio$. %Sil-air *Singapore# P(&, $td., v.
Commissioner of Internal Revenue, <.R. No. 1@B>FE' Cebr-ary 6' 200?&

e. Ob.er0a$ce o the pri$cip!e o co#ity. (o#ity i. the re.pect accorded by $atio$. to each other beca-.e they are e1-a!.. O$ the other ha$d ta2atio$ i. a$ act o .o0ereig$. Th-.' the po+er .ho-!d be i#po.ed -po$ e1-a!. o-t o re.pect. So#e a-thoritie. i$c!-de $o do-b!e ta2atio$.

/" W at are t e $ri-%i$&es to %o-si(er i- t e (eter,i-atio- o* w et er ta. reve-ues are (evote( *or a $u)&i% $ur$ose 9
S3<<ESTE" ANS=ER8 a. The ta2 re0e$-e. are or a p-b!ic p-rpo.e i -ti!i;ed or the be$e it o the co##-$ity i$ ge$era!. A$ a!ter$ati0e #ea$i$g i. that ta2 proceed. .ho-!d be -ti!i;ed o$!y to attai$ the ob6ecti0e. o go0er$#e$t. b. 4$e1-a!itie. re.-!ti$g ro# the .i$g!i$g o-t o o$e partic-!ar c!a.. or ta2atio$ or e2e#ptio$ i$ ri$ge $o co$.tit-tio$a! !i#itatio$. REASON8 4t i. i$here$t i$ the po+er to ta2 that the !egi.!at-re i. ree to .e!ect the .-b6ect. o ta2atio$. BAS4S8 The !i eb!ood theory. c. A$ i$di0id-a! ta2payer $eed $ot deri0e direct be$e it. ro# the ta2. REASON8 The para#o-$t co$.ideratio$ i. the +e! are o the greater portio$ o the pop-!atio$. d. A ta2 #ay be i#po.ed' $ot .o #-ch or re0e$-e p-rpo.e.' b-t -$der po!ice po+er or the ge$era! +e! are o the co##-$ity. Thi. +o-!d .ti!! be or a p-b!ic p-rpo.e. e. P-b!ic p-rpo.e co$ti$-a!!y e2pa$di$g. Area. or#er!y !e t to pri0ate i$itiati0e $o+ !o.e their bo-$darie. a$d #ay be -$derta/e$ by the go0er$#e$t i it i. to #eet the i$crea.i$g .ocia! cha!!e$ge. o the ti#e.. . Ta2 re0e$-e #-.t $ot be -.ed or p-re!y pri0ate p-rpo.e. or or the e2c!-.i0e be$e it o pri0ate per.o$.. g. Pri0ate per.o$. #ay be be$e ited b-t .-ch be$e it .ho-!d be #ere!y i$cide$ta! a. it. #ai$ ob6ect i. the be$e it o the co##-$ity i$ ge$era!. h. "eter#i$ed at the ti#e o e$act#e$t o ta2 !a+ a$d $ot at the ti#e o i#p!e#e$tatio$. i. There i. a pre.-#ptio$ o p-b!ic p-rpo.e e0e$ i the ta2 !a+ doe. $ot .peci ica!!y pro0ide or it. p-rpo.e. %Santos . Co., v. Municipality
of Meycauayan, et al.' FE Phi!. 10E@&

1C" W at are %&assi*ie( as to $ur$ose 9

t e

(i**ere-t

Gi-(s

o*

ta.es

S3<<ESTE" ANS=ER8 a. <e$era!' i.ca! or re0e$-e J i#po.ed or the p-rpo.e o rai.i$g p-b!ic -$d. or the .er0ice o the go0er$#e$t. b. Specia! or reg-!atory J i#po.ed pri#ari!y or the reg-!atio$ o -.e -! or $o$,-.e -! occ-patio$ or e$terpri.e. a$d .eco$dari!y o$!y or the rai.i$g o p-b!ic -$d..

LI=ITATIONS OR RESTRICTIONS ON THE POWER

1" Pur$ose *or t e &i,itatio-s o- t e $ower o* ta.atio-"
The i$here$t a$d co$.tit-tio$a! !i#itatio$. to t e $ower o* ta.atio- are sa*e;uar(s +hich +o-!d pre0e$t ab-.e i$ the e2erci.e o thi. other+i.e -$!i#ited a$d p!e$ary po+er. The !i#itatio$. a!.o .er0e a. a .ta$dard to #ea.-re the 0a!idity o a ta2 !a+ or the act o a ta2i$g a-thority. A 0io!atio$ o the !i#itatio$. .er0e. to i$0a!idate a ta2 !a+ or act i$ the e2erci.e o the po+er to ta2.

INHERENT LI=ITATIONS 1" ta.atio- 9

W at are t e i- ere-t &i,itatio-s o- t e $ower o*

S3<<ESTE" ANS=ERS8 a. P-b!ic p-rpo.e. The re0e$-e. co!!ected ro# ta2atio$ .ho-!d be de0oted to a p-b!ic p-rpo.e. b. No i#proper de!egatio$ o !egi.!ati0e a-thority to ta2. O$!y the !egi.!at-re ca$ e2erci.e the po+er o ta2e. -$!e.. the .a#e i. de!egated to .o#e other go0er$#e$ta! body by the co$.tit-tio$ or thro-gh a !a+ +hich doe. $ot 0io!ate a$y pro0i.io$ o the co$.tit-tio$. c. Territoria!ity. The ta2i$g po+er .ho-!d be e2erci.ed o$!y +ithi$ territoria! bo-$darie. o the ta2i$g a-thority. d. Recog$itio$ o go0er$#e$t e2e#ptio$.D a$d

6. P-b!ic -.e i. $o !o$ger co$ i$ed to the traditio$a! $otio$ o -.e by the p-b!ic b-t he!d .y$o$y#o-. +ith p-b!ic i$tere.t' p-b!ic be$e it' p-b!ic +e! are' a$d p-b!ic co$0e$ie$ce. %Commissioner of Internal Revenue
v. Central $uzon %rug Corporation, <.R. No. 1>F6E@' Apri! 16' 200>&

:" A &aw was e-a%te( i,$osi-; a ta. o- ,a-u*a%turers o* %o%o-ut oi&7 t e $ro%ee(s o* w i% are to )e use(

e.%&usive&' *or t e $rote%tio- a-( $ro,otio- o* t e %o%o-ut i-(ustr'7 -a,e&'7 to i,$rove t e worGi-; %o-(itio-s i%o%o-ut ,i&&s a-( to %o-(u%t resear% o- t e use o* %o%o-ut oi& *or ,otor *ue&" So,e o* t e ,a-u*a%turers o* %o%o-ut oi& % a&&e-;e t e va&i(it' o* t e &aw7 %o-te-(i-; t at t e ta. is to )e use( *or a $rivate $ur$ose7 a-( t ere*ore7 t e &aw vio&ates t e ru&e t at $u)&i% reve-ues s a&& -ot )e a$$ro$riate( *or a-'t i-; )ut a $u)&i% $ur$ose" +e%i(e wit reaso-.
S3<<ESTE" ANS=ER8 The !e0y i. or a p-b!ic p-rpo.e. 4t ca$$ot be de$ied that the coco$-t i$d-.try i. o$e o the #a6or i$d-.trie. .-pporti$g the $atio$a! eco$o#y. 4t i.' there ore' the .tate:. co$cer$ to #a/e it a .tro$g a$d .ec-re .o-rce $ot o$!y o the !i0e!ihood o the .ig$i ica$t .eg#e$t o the pop-!atio$' b-t a!.o o e2port ear$i$g.' the .-.tai$ed gro+th o +hich i. o$e o the i#perati0e. o eco$o#ic gro+th. %Philippine Coconut Producers /ederation, Inc. *Cocofed v. Presidential
Commission on +ood +overnment, 1@? S(RA 2B6' 2>2&

d. Cor co$cer$ed citi;e$.' there #-.t be a .ho+i$g that the i..-e. rai.ed are o tra$.ce$de$ta! i#porta$ce +hich #-.t be .ett!ed ear!y. e. Cor !egi.!ator.' there #-.t be a c!ai# that the o icia! actio$ co#p!ai$ed o i$ ri$ge. -po$ their prerogati0e. a. !egi.!ator.. %%avid, et al., v. President +loria Macapagal0Arroyo, etc., et al., <. R. No. 1@1BF6' *ay B' 2006&

>" O-&' t ose (ire%t&' a**e%te( ave locus standi to i,$u;- t e a&&e;e( e-%roa% ,e-t )' t e e.e%utive (e$art,e-t i-to t e &e;is&ative (o,ai- o* Co-;ress"
a. O$!y tho.e +ho .ha!! be direct!y a ected by .-ch e2ec-ti0e e$croach#e$t' .-ch a. or e2a#p!e e#p!oyee. +ho +o-!d i$d the#.e!0e. .-b6ect to di.cip!i$ary po+er. that #ay be i#po.ed -$der the 1-e.tio$ed E2ec-ti0e Order a. they ha0e a direct a$d .peci ic i$tere.t i$ rai.i$g the .-b.ta$ti0e i..-e therei$ *Automotive Industry 1or-ers Alliance *AI1A#,etc., et al., v. Romulo, etc. ,et al., <. R. No. 1>@>0F' Aa$-ary 1?' 200>& or e#p!oyee. +ho are goi$g to be de#oted' tra$. erred or other+i.e a ected by a$y per.o$$e! actio$ .-b6ect o the r-!e o$ e2ha-.tio$ o ad#i$i.trati0e re#edie.. b. *oreo0er' a$d i at a!!' o$!y (o$gre..' ca$ c!ai# a$y i$6-ry ro# the a!!eged e2ec-ti0e e$croach#e$t o the !egi.!ati0e -$ctio$ to a#e$d' #odi y a$d9or repea! !a+.. %Automotive Industry 1or-ers Alliance *AI1A#,etc., et al., supra, citi$g +onzales v. !arvasa, <. R. No. 1E0?B>' A-g-.t 1E'2000' BB@ S(RA @BB' @E1&

<" ReFuisites *or ta.$a'ers7 %o-%er-e( voters or &e;is&ators to ave locus standi to sue"
a. b.

%itiDe-s7

4$ ge$era!' the ca.e .ho-!d i$0o!0e co$.tit-tio$a! i..-e..

%%avid, et al., v. President +loria Macapagal0Arroyo, etc., et al., <. R. No. 1@1BF6' *ay B' 2006&

Cor ta2payer.' there #-.t be a .ho+i$g8 1& That ta2 #o$ey i. bei$g e2tracted a$d .pe$t i$ 0io!atio$ o .peci ic co$.tit-tio$a! protectio$. agai$.t ab-.e. o !egi.!ati0e po+er. %/last v. Cohen' BF2 3.S. ?B& 2& That p-b!ic #o$ey i. bei$g de !ected to a$y i#proper p-rpo.e %Pascual v. Secretary of Pu"lic 1or-s' 110 Phi!. BB& or a c!ai# o i!!ega! di.b-r.e#e$t o p-b!ic -$d. or that the ta2 #ea.-re i. -$co$.tit-tio$a!. %%avid, supra& B& A ta2payer i. a!!o+ed to .-e +here there i. a c!ai# that p-b!ic -$d. are i!!ega!!y di.b-r.ed' or that p-b!ic #o$ey i. bei$g de !ected to a$y i#proper p-rpo.e' or that there i. a +a.tage o p-b!ic -$d. thro-gh the e$ orce#e$t o a$ i$0a!id or -$co$.tit-tio$a! !a+. %A"aya v. &"dane, <. R. No. 16@F1F' Cebr-ary 1E' 200@D +arcia v. &nri2uez, ,r. <.R. No. 1126>> "ece#ber F' 1FFB' *i$-te Re.o!-tio$# A ta2payer:. .-it i. proper!y bro-ght o$!y +he$ there i. a$ e2erci.e o the .pe$di$g or ta2i$g po+er o (o$gre...
%Automotive Industry 1or-ers Alliance *AI1A#,etc., et al., v. Romulo, etc. ,et al., <. R. No. 1>@>0F' Aa$-ary 1?' 200> citi$g +onzales v. !arvasa, <. R. No. 1E0?B>' A-g-.t 1E' 2000' BB@ S(RA @BB' @E1&

@" Locus standi )ei-; ,ere&' a ,atter o* $ro%e(ure7 ave )ee- waive( i- %ertai- i-sta-%es w ere a $art' w o is -ot $erso-a&&' i-Aure( ,a' )e a&&owe( to )ri-; suit" The
o!!o+i$g are e2a#p!e. o i$.ta$ce. +here .-it. ha0e bee$ bro-ght by partie. +ho ha0e $ot ha0e bee$ per.o$a!!y i$6-red by the operatio$ o a !a+ or a$y other go0er$#e$t act b-t by co$cer$ed citi;e$.' ta2payer. or 0oter. +ho act-a!!y .-e i$ the p-b!ic i$tere.t8 a. Ta2payer:. .-it. to 1-e.tio$ co$tract. e$tered i$to by the $atio$a! go0er$#e$t or go0er$#e$t,o+$ed or co$tro!!ed corporatio$. a!!eged!y i$ co$tra0e$tio$ o the !a+. b. A ta2payer i. a!!o+ed to .-e +here there i. a c!ai# that p-b!ic -$d. are i!!ega!!y di.b-r.ed' or that p-b!ic #o$ey i. bei$g de !ected to a$y i#proper p-rpo.e' or that there i. a +a.tage o p-b!ic -$d. thro-gh the e$ orce#e$t o a$ i$0a!id or -$co$.tit-tio$a! !a+. %A"aya v. &"dane, <. R. No. 16@F1F' Cebr-ary 1E' 200@&

c. Cor 0oter.' there #-.t be a .ho+i$g o ob0io-. i$tere.t i$ the 0a!idity o the e!ectio$ !a+ i$ 1-e.tio$.

B" T e VAT &aw $rovi(es t at7 t e Presi(e-t7 u$o- t e re%o,,e-(atio- o* t e Se%retar' o* Fi-a-%e7 s a&&7 e**e%tive

5a-uar' 17 /00@7 raise t e rate o* va&ue-a((e( ta. to twe&ve $er%e-t H1/JI a*ter a-' o* t e *o&&owi-; %o-(itio-s ave )eesatis*ie(" !HiI va&ue-a((e( ta. %o&&e%tio- as a $er%e-ta;e o* 3ross +o,esti% Pro(u%t H3+PI o* t e $revious 'ear e.%ee(s two a-( *our-*i*t $er%e-t H/ <?>JI or HiiI -atio-a& ;over-,e-t (e*i%it as a $er%e-ta;e o* 3+P o* t e $revious 'ear e.%ee(s o-e a-( o-e- a&* $er%e-t H1 KJI"# Was t ere a- i-va&i( (e&e;atio- o* &e;is&ative $ower 9
S3<<ESTE" ANS=ER8 No. There i. $o -$d-e de!egatio$ o !egi.!ati0e po+er b-t o$!y o the di.cretio$ a. to the e2ec-tio$ o the !a+. Thi. i. co$.tit-tio$a!!y per#i..ib!e. (o$gre.. doe. $ot abdicate it. -$ctio$. or -$d-!y de!egate po+er +he$ it de.cribe. +hat 6ob #-.t be do$e' +ho #-.t do it' a$d +hat i. the .cope o hi. a-thority. 4$ the abo0e ca.e the Secretary o Ci$a$ce beco#e. #ere!y the age$t o the !egi.!ati0e depart#e$t' to deter#i$e a$d dec!are the e0e$ -po$ +hich it. e2pre..ed +i!! ta/e. p!ace. The Pre.ide$t ca$$ot .et a.ide the i$di$g. o the Secretary o Ci$a$ce' +ho i. $ot -$der the co$ditio$. acti$g a. the e2ec-te a!ter ego or .-bordi$ate. . GA"a-ada +uro Party $ist *etc.# v. &rmita, etc., et al., <. R. No. 16?0>6' Septe#ber 1' 200> a$d co#pa$io$ ca.e. citi$g 0ario-. ca.e.II

!oca! !egi.!ati0e bodie. are $o+ gi0e$ direct a-thority to !e0y ta2e.' ee. a$d other charge. p-r.-a$t to Artic!e L' .ectio$ > o the 1F?@ (o$.tit-tio$.
%Batangas Po er Corporation v. Batangas City, et al. <. R. No. 1>26@>' a$d co#pa$io$ ca.e' Apri! 2?' 200E citi$g !ational Po er Corporation v. City of Ca"anatuan, <. R. No. 1EF110' Apri! F' 200B&

)oca! go0er$#e$t !egi.!atio$' i. $ot regarded a. a tra$. er o ge$era! !egi.!ati0e po+er' b-t rather a. the gra$t o a-thority to pre.cribe !oca! reg-!atio$.' accordi$g to i##e#oria! practice' .-b6ect' o co-r.e' to the i$terpo.itio$ o the .-perior i$ ca.e. o $ece..ity. %People v. 3era' 6>
Phi!. >6&

10"

Ta.i-; $ower o* t e &o%a& ;over-,e-t is &i,ite("

The ta2i$g po+er o !oca! go0er$#e$t. i. !i#ited i$ the .e$.e that (o$gre.. ca$ e$act !egi.!atio$ gra$ti$g ta2 e2e#ptio$.. =hi!e the .y.te# o !oca! go0er$#e$t ta2atio$ ha. cha$ged +ith the o$.et o the 1F?@ (o$.tit-tio$' the po+er o !oca! go0er$#e$t -$it. to ta2 i. .ti!! !i#ited. =hi!e the po+er to ta2 by !oca! go0er$#e$t. #ay be e2erci.ed by !oca! !egi.!ati0e bodie.' $o !o$ger #ere!y by 0irt-e o a 0a!id de!egatio$ a. be ore' b-t p-r.-a$t to direct a-thority co$ erred by Sectio$ >' Artic!e L o the (o$.tit-tio$' the ba.ic doctri$e o$ !oca! ta2atio$ re#ai$. e..e$tia!!y the .a#e' 4the po er to ta) is 5still6 primarily vested in the Congress.7
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16F i$ t-r$ re erri$g to Mactan Ce"u International Airport Authority, v. Marcos, <.R. No. 1200?2' Septe#ber 11' 1FF6' 261 S(RA 66@' 6?0#

C" I-sta-%es o* $ro$er (e&e;atio-4 W e- ta.i-; $ower %ou&( )e (e&e;ate(4 E.%e$tio-s to t e ru&e o- -o-(e&e;atio-4
a. "e!egatio$ o tari po+er. by (o$gre.. to the Pre.ide$t -$der the !e2ib!e tari c!a-.e' Sectio$ 2? %2&' Artic!e V4 o the (o$.tit-tio$. b. "e!egatio$ o e#erge$cy po+er. to the Pre.ide$t -$der Sectio$ 2B %2& o Artic!e V4 o the (o$.tit-tio$. c. The de!egatio$ to the Pre.ide$t o the Phi!ippi$e. to e$ter i$to e2ec-ti0e agree#e$t.' a$d to rati y treatie. +hich #ay co$tai$ ta2 e2e#ptio$ pro0i.io$. .-b6ect to the co$c-rre$ce by the Se$ate i$ the rati icatio$ #ade by the Pre.ide$t. d. "e!egatio$ to the peop!e at !arge. e. "e!egatio$ to ad#i$i.trati0e bodie. GA"a-ada +uro Party $ist */ormerly AAS,S#, etc., v, &rmita, et al., <. R. No.16?0>6' Septe#ber 1' 200>I' +hich i. re erred to a. .-bordi$ate !egi.!atio$. 4$ thi. i$.ta$ce' there i. a re1-ire#e$t that the !a+ i. co#p!ete i$ a!! a.pect. .o +hat i. de!egated i. #ere!y the i#p!e#e$tatio$ o the !a+ or there e2i.t. .- icie$t!y deter#i$ate .ta$dard. to g-ide the de!egate a$d pre0e$t a tota! tra$. ere$ce o the ta2i$g po+er.

11" Furt er a,$&i*i%atio- )' Ber-as o* t e &o%a& ;over-,e-t8s $ower to ta." =hat i. the e ect o Sectio$ > o$ the
i.ca! po.itio$ o #-$icipa! corporatio$.M Sectio$ > doe. $ot cha$ge the doctri$e that #-$icipa! corporatio$. do $ot po..e.. i$here$t po+er. o ta2atio$. =hat it doe. i. to co$ er #-$icipa! corporatio$. a ge$era! po+er to !e0y ta2e. a$d other+i.e create .o-rce. o re0e$-e. They $o !o$ger ha0e to +ait or a .tat-tory gra$t o the.e po+er.. The po+er o the !egi.!ati0e a-thority re!ati0e to the i.ca! po+er. o !oca! go0er$#e$t. ha. bee$ red-ced to the a-thority to i#po.e !i#itatio$. o$ #-$icipa! po+er.. *oreo0er' the.e !i#itatio$. #-.t be co$.i.te$t +ith the ba.ic po!icy o !oca! a-to$o#y. The i#porta$t !ega! e ect o Sectio$ > i. th-. to re0er.e the pri$cip!e that do-bt. are re.o!0ed agai$.t #-$icipa! corporatio$.. 7e$ce orth' i$ i$terpreti$g .tat-tory pro0i.io$. o$ #-$icipa! i.ca! po+er.' do-bt. +i!! be re.o!0ed i$ a0or o #-$icipa! corporatio$.. 4t i. -$der.tood' ho+e0er' that ta2e. i#po.ed by !oca! go0er$#e$t #-.t be or a p-b!ic p-rpo.e' -$i or# +ithi$ a !oca!ity' #-.t $ot be co$ i.catory' a$d #-.t be +ithi$ the 6-ri.dictio$ o the !oca! -$it to pa...
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?'

E" !Para(i;, s i*t# *ro, e.%&usive Co-;ressio-a& $ower to (ire%t ;ra-t o* ta.i-; $ower to &o%a& &e;is&ative )o(ies" The po+er to ta2 i. $o !o$ger 0e.ted e2c!-.i0e!y o$ (o$gre..D

October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16F&

1/" Re%o-%i&iatio- o* t e &o%a& ;over-,e-t8s aut orit' to ta. a-( t e Co-;ressio-a& ;e-era& ta.i-; $ower" (o$gre..
ha. the i$here$t po+er to ta2' +hich i$c!-de. the po+er to gra$t ta2 e2e#ptio$.. O$ the other ha$d' the po+er o !oca! go0er$#e$t.' .-ch a. pro0i$ce. a$d citie. or e2a#p!e N-e;o$ (ity' to ta2 i. pre.cribed by Sectio$ 1>1 i$ re!atio$ to Sectio$ 1B@ o the )<( +hich e2pre..!y pro0ide. that $ot+ith.ta$di$g a$y e2e#ptio$ gra$ted by a$y !a+ or other .pecia! !a+' the (ity or a pro0i$ce #ay i#po.e a ra$chi.e ta2. 4t #-.t be $oted that Sectio$ 1B@ o the )<( doe. $ot prohibit gra$t o -t-re e2e#ptio$.. The S-pre#e (o-rt i$ a .erie. o ca.e. ha. .-.tai$ed the po+er o (o$gre.. to gra$t ta2 e2e#ptio$. o0er a$d abo0e the po+er o the !oca! go0er$#e$t:. de!egated po+er to ta2. %8uezon City, et al., v. ABS0
CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16&

e. A (o,esti% %or$oratio- i. ta2ab!e o$ a!! i-%o,e deri0ed ro# .o-rce. wit i- a$d wit out the Phi!ippi$e.D a$d . A *orei;- %or$oratio- ' +hether e$gaged or $ot i$ trade or b-.i$e.. i$ the Phi!ippi$e.' i. ta2ab!e o$!y o$ i-%o,e deri0ed ro# .o-rce. wit i- the Phi!ippi$e.. %Sec. 2B' N4R( o 1FF@' e#pha.i. .-pp!ied&

4$deed' the gra$t o ta2i$g po+er. to !oca! go0er$#e$t -$it. -$der the (o$.tit-tio$ a$d the )<( doe. $ot a ect the po+er o (o$gre.. to gra$t e2e#ptio$. to certai$ per.o$.' p-r.-a$t to a dec!ared $atio$a! po!icy. The !ega! e ect o the co$.tit-tio$a! gra$t to !oca! go0er$#e$t. .i#p!y #ea$. that i$ i$terpreti$g .tat-tory pro0i.io$. o$ #-$icipa! ta2i$g po+er.' do-bt. #-.t be re.o!0ed i$ a0or o #-$icipa! corporatio$..
GI"id.' re erri$g to Philippine $ong %istance (elephone Company, Inc. *P$%(# vs. City of %avao6

1<" 5u&ia-e a -o--resi(e-t a&ie- a$$oi-te( as a %o,,issio- a;e-t )' a (o,esti% %or$oratio- wit a sa&es %o,,issio- o* 10J a&& sa&es a%tua&&' %o-%&u(e( a-( %o&&e%te( t rou; er e**orts" T e &o%a& %o,$a-' wit e&( t e a,ou-t o* P10B7000 *ro, er sa&es %o,,issio- a-( re,itte( t e sa,e to t e BIR" S e *i&e( a %&ai, *or re*u-( a&&e;i-; t at er sa&es %o,,issio- is -ot ta.a)&e )e%ause t e sa,e was a %o,$e-satio- *or er servi%es re-(ere( i- 3er,a-' a-( t ere*ore %o-si(ere( as i-%o,e *ro, sour%es outsi(e t e P i&i$$i-es" Is er %o-te-tio- %orre%t 9
S3<<ESTE" ANS=ER8 Oe.. The i#porta$t actor +hich deter#i$e. the .o-rce o i$co#e o per.o$a! .er0ice. i. $ot the re.ide$ce o the payor' or the p!ace +here the co$tract or .er0ice i. e$tered i$to' or the p!ace o pay#e$t' b-t the p!ace +here the .er0ice. +ere act-a!!y per or#ed. Si$ce the acti0ity o .ec-ri$g the .a!e. +ere i$ <er#a$y' the$ the i$co#e did $ot origi$ate ro# .o-rce. ro# +ithi$ the Phi!ippi$e..
%Commissioner of Internal Revenue v. Baier0!ic-el, <. R. No. 1>B@FB' A-g-.t 2F' 2006&

1:" 3e-era& $ri-%i$&es o* i-%o,e ta.atio- it e P i&i$$i-es or t e sour%e ru&e o* i-%o,e ta.atio- as $rovi(e( i- t e NIRC o* 1EEB"
a. A %itiDe- o the Phi!ippi$e. resi(i-; therei$ i. ta2ab!e o$ a&& i$co#e deri0ed ro# .o-rce. wit i- a$d wit out the Phi!ippi$e.D b. A -o-resi(e-t %itiDe- i. ta2ab!e o$!y o$ i-%o,e deri0ed ro# .o-rce. wit i- the Phi!ippi$e.D c. A$ i-(ivi(ua& %itiDe- o the Phi!ippi$e. +ho i. +or/i$g a$d deri0i$g i$co#e abroad a. a$ overseas %o-tra%t worGer i. ta2ab!e o$!y o$ i-%o,e ro# .o-rce. wit i- the Phi!ippi$e.8 Pro0ided' That a sea,a- +ho i. a citi;e$ o the Phi!ippi$e. a$d +ho recei0e. co#pe$.atio$ or .er0ice. re$dered abroad a. a #e#ber o the co#p!e#e$t o a 0e..e! e$gaged e2c!-.i0e!y i$ i$ter$atio$a! trade .ha!! be treated a. a$ overseas %o-tra%t worGerD d. A$ a&ie- i-(ivi(ua&7 +hether a resi(e-t or -ot o the Phi!ippi$e.' i. ta2ab!e o$!y o$ i-%o,e deri0ed ro# .o-rce. wit i- the Phi!ippi$e.D

1>" E-site7 Lt("" is a Ca-a(ia- %or$oratio- -ot (oi-; )usi-ess i- t e P i&i$$i-es" It o&(s <0J o* t e s ares o* P i&i$$i-e Sta,$i-; P&a-t7 I-%"7"7 a P i&i$$i-e %o,$a-' w i&e t e @0J is ow-e( )' Fre( Cor$oratio-7 a Fi&i$i-o-ow-e( P i&i$$i-e %or$oratio-" E-site Co" a&so ow-s 100J o* t e s ares o* Susa-to Co"7 a- I-(o-esia- %o,$a-' w i% as a (u&' &i%e-se( P i&i$$i-e )ra-% " +ue to wor&(wi(e restru%turi-; o* t e E-site Lt("7" ;rou$7 E-site Lt("7" (e%i(e( to se&& a&& its s ares i- P i&i$$i-e Sta,$i-; P&a-t7 I-%" a-( Susa-to Co" T e -e;otiatio-s *or t e )u'-out a-( t e si;-i-; o* t e A;ree,e-t o* Sa&e were a&& (o-e i- t e P i&i$$i-es" T e A;ree,e-t $rovi(es t at t e $ur% ase $ri%e wi&& )e $ai( to E-site Lt(8s )a-G a%%ou-t i- t e U"S" a-( t at tit&e to t e P i&i$$i-e Sta,$i-; P&a-t7 I-%" a-( Susa-to Co" s a&& )e tra-s*erre( to 3e-era& Co"7 i- Toro-to Ca-a(a w ere sto%G

%erti*i%ates wi&& )e (e&ivere(" 3e-era& Co" seeGs 'our a(vi%e as to w et er or -ot it wi&& su)Ae%t t e $a',e-ts o* t e $ur% ase $ri%e to wit o&(i-; ta." E.$&ai- 'our a(vi%e"
S3<<ESTE" ANS=ER8 The pay#e$t. o the p-rcha.e price +i!! be .-b6ect to +ithho!di$g ta2. (o$.ideri$g that a!! the acti0itie. %.a!e.& occ-rred +ithi$ the Phi!ippi$e.' the i$co#e i. co$.idered a. i$co#e ro# +ithi$' .-b6ect to Phi!ippi$e i$co#e ta2atio$. E$.ite' )td. bei$g a oreig$ corporatio$ i. to be ta2ed o$ it. i$co#e deri0ed ro# .o-rce. +ithi$ the Phi!ippi$e..

%o-tra%t o* e,$&o',e-t i- t e P i&i$$i-es" He wi&& a&so )e re%eivi-; re-ta& i-%o,e *or t e &ease o* is P i&i$$i-e resi(e-%e" Are t ese sa&aries7 a&&owa-%es a-( re-ta&s su)Ae%t to P i&i$$i-e i-%o,e ta.9 E.$&ai- )rie*&'"
S3<<ESTE" ANS=ER8 The .a!arie. a$d a!!o+a$ce. o )arry' bei$g deri0ed ro# !abor or per.o$a! .er0ice. re$dered o-t.ide o the Phi!ippi$e. i. co$.idered a. i$co#e ro# +itho-t. Si$ce )arry i. a$ O(=' the$ he i. to be ta2ed o$!y o$ hi. i$co#e deri0ed ro# +ithi$ the Phi!ippi$e. .-ch a. the re$ta!. o$ hi. Phi!ippi$e re.ide$ce' a$d $ot o$ hi. i$co#e ro# +itho-t.

1@" E-site7 Lt(" is a Ca-a(ia- %or$oratio-7 w i% as a (u&' &i%e-se( P i&i$$i-e )ra-% e-;a;e i- tra(i-; a%tivities i- t e P i&i$$i-es" E-site7 Lt("" a&so i-veste( (ire%t&' i- <0J o* t e s ares o* sto%G o* P i&i$$i-e Sta,$i-; P&a-t7 I-%""7 a P i&i$$i-e %or$oratio-" T ese s ares are )ooGe( i- t e Hea( O**i%e o* E-site7 Lt("" a-( are -ot re*&e%te( as assets o* t e P i&i$$i-e )ra-% " I- /00E7 P i&i$$i-e Sta,$i-; P&a-t7 I-%"" (e%&are( (ivi(e-(s to its sto%G o&(ers" Be*ore re,itti-; t e (ivi(e-(s to E-site Lt("7"7 P i&i$$i-e Sta,$i-; P&a-t7 I-%" Co" seeGs 'our a(vi%e as to w et er it wi&& su)Ae%t t e re,itta-%e to wit o&(i-; ta." T ere is -o -ee( to (is%uss WT rates7 i* a$$&i%a)&e" Fo%us 'our (is%ussio- o- w at is t e issue"
S3<<ESTE" ANS=ER8 Phi!ippi$e Sta#pi$g P!a$t' 4$c.. .ho-!d .-b6ect the re#itta$ce to +ithho!di$g ta2.. Si$ce Phi!ippi$e Sta#pi$g P!a$t. i. a Phi!ippi$e corporatio$' it. .hare. o .toc/ ha0e obtai$ed a b-.i$e.. .it-. i$ the Phi!ippi$e.' he$ce the di0ide$d. are co$.idered a. i$co#e ro# +ithi$. E$.ite. )td.' bei$g a oreig$ corporatio$' .ho-!d be .-b6ect to ta2 o$ it. i$co#e ro# +ithi$.

1C" O)a,a Air&i-es7 I-%"7 a *orei;- air&i-e %o,$a-' w i% (oes -ot ,ai-tai- a-' *&i; t to a-( *ro, t e P i&i$$i-es so&( air ti%Gets i- t e P i&i$$i-es7 t rou; a ;e-era& sa&es a;e-t7 re&ati-; to t e %arria;e o* $asse-;ers a-( %ar;o )etwee- two $oi-ts7 )ot outsi(e t e P i&i$$i-es" a" Is O)a,a7 I-%"7 su)Ae%t to i-%o,e ta.es o- t e sa&e o* t e ti%Gets 9
S3<<ESTE" ANS=ER8 Oe.. The .o-rce o i$co#e +hich i. ta2ab!e i. that acti0ity +hich prod-ced the i$co#e. The .a!e o tic/et. i$ the Phi!ippi$e. i. the acti0ity that deter#i$e. +hether .-ch i$co#e i. ta2ab!e i$ the Phi!ippi$e.. The tic/et. e2cha$ged ha$d. here a$d pay#e$t. or are. +ere a!.o #ade here i$ Phi!ippi$e c-rre$cy. The .it-. o the .o-rce o pay#e$t. i. the Phi!ippi$e.. the !o+ o +ea!th proceeded ro# a$d occ-rred' +ithi$ the Phi!ippi$e territory' e$6oyi$g the protectio$ accorded by the Phi!ippi$e <o0er$#e$t. 4$ co$.ideratio$ o .-ch protectio$' the !o+ o +ea!th .ho-!d .hare the b-rde$ o .-pporti$g the go0er$#e$t. GCommissioner of Internal Revenue v. British 9verseas Air ays Corporation *B9AC#, 1EF S(RA BF>6 O ,!i$e air carrier. ha0i$g ge$era! .a!e. age$t. i$ the Phi!ippi$e. are e$gaged i$ or doi$g b-.i$e.. i$ the Phi!ippi$e. a$d their i$co#e ro# .a!e. o pa..age doc-#e$t. here i. i$co#e ro# +ithi$ the Phi!ippi$e.. Th-.' the o ,!i$e air carrier !iab!e or the B2H %$o+ B0H& ta2 o$ it. ta2ab!e i$co#e. GSouth African Air ays v. Commissioner of Internal
Revenue, <.R. No. 1?0B>6' Cebr-ary 16' 2010 citi$g Commissioner of Internal Revenue v. British 9verseas Air ays Corporation %British 9verseas Air ays &' No. ),6>@@B,@E' Apri! B0' 1F?@' 1EF S(RA BF>I

1B" P i&i$$i-e Sta,$i-; P&a-t7 I-%"7 a P i&i$$i-e %or$oratio-7 as a- e.e%utive Larr' w o is a Fi&i$i-o %itiDe-" P i&i$$i-e Sta,$i-; P&a-t7 I-%7" as a su)si(iar' i- =a&a'sia H6ua&a Lu,$ur =a-u*a%turi-;7 I-%"I a-( wi&& assi;- Larr' *or a- i-(e*i-ite $erio( to worG *u&& ti,e *or 6ua&a Lu,$ur =a-u*a%turi-;7 I-%"" Larr' wi&& )ri-; is *a,i&' to resi(e i=a&a'sia a-( wi&& &ease out is resi(e-%e i- t e P i&i$$i-es" T e sa&ar' o* Larr' wi&& )e s ou&(ere( >0J )' P i&i$$i-e Sta,$i-; P&a-t7 I-%"" w i&e t e ot er >0J $&us ousi-;7 %ost o* &ivi-; a-( e(u%atio-a& a&&owa-%es o* Larr'8s (e$e-(e-ts wi&& )e s ou&(ere( )' 6ua&a Lu,$ur =a-u*a%turi-;7 I-%"" P i&i$$i-e Sta,$i-; P&a-t7 I-%"" wi&& %re(it t e >0J o* Larr'8s sa&ar' to is P i&i$$i-e )a-G a%%ou-t" Larr' wi&& si;- t e

)" Su$$osi-; t at O)a,a7 I-%"7 se&&s ti%Gets outsi(e o* t e P i&i$$i-es *or $asse-;ers it %arr' *ro, 3o&( Cit'7 Sout A*ri%a to t e P i&i$$i-es )ut retur-s to Sout A*ri%a wit out a-' %ar;o or $asse-;ers" Wou&( it t e- )e su)Ae%t to a-' P i&i$$i-e ta. o- su% sa&es 9

S3<<ESTE" ANS=ER8 4t +o-!d $ot be .-b6ect to a$y ta2. 4t i. $ot .-b6ect to a$y i$co#e ta2 beca-.e the acti0ity +hich ge$erated the i$co#e %the .a!e o the tic/et.& +a. per or#ed o-t.ide o the Phi!ippi$e.. 4t i. $ot .-b6ect to the carrier:. ta2 ba.ed o$ gro.. Phi!ippi$e bi!!i$g. beca-.e there +ere $o !i t. that origi$ated ro# the Phi!ippi$e.. <ro.. Phi!ippi$e Bi!!i$g. re er. to the a#o-$t o gro.. re0e$-e deri0ed ro# carriage o per.o$.' e2ce.. baggage' cargo a$d #ai! origi$ati$g ro# the Phi!ippi$e. i$ a co$ti$-o-. a$d -$i$terr-pted !ight' irre.pecti0e o the p!ace o .a!e or i..-e a$d the p!ace o pay#e$t o the tic/et or pa..age doc-#e$t. GN4R( o 1FF@' Sec. 2?%A&%B&%a&I

10

%" Wou&( 'our a-swer )e t e sa,e i* O)a,a7 I-%" so&( ti%Gets outsi(e o* t e P i&i$$i-es *or trave&ers w o are ;oi-; to $i%Ge( u$ )' O)a,a7 I-%"7 $&a-es *ro, t e +ios(a(o =a%a$a;a& I-t&" Air$ort at C&arG7 A-;e&es7 Pa,$a-;a7 )ou-( *or Nairo)i7 6e-'a 9 Reaso- out 'our a-swer"
S3<<ESTE" ANS=ER8 No #ore. Thi. ti#e Oba#a' 4$c.' +o-!d be .-b6ect to the carrier:. ta2 ba.ed o$ <ro.. Phi!ippi$e Bi!!i$g.. %<PB&. <ro.. Phi!ippi$e Bi!!i$g. re er. to the a#o-$t o gro.. re0e$-e deri0ed ro# carriage o per.o$.' e2ce.. baggage' cargo a$d #ai! origi$ati$g ro# the Phi!ippi$e. i$ a co$ti$-o-. a$d -$i$terr-pted !ight' irre.pecti0e o the p!ace o .a!e or i..-e a$d the p!ace o pay#e$t o the tic/et or pa..age doc-#e$t. GN4R( o 1FF@' Sec. 2?%A&%B&%a&I The p!ace o .a!e i. irre!e0a$tD a. !o$g a. the -p!i t. o pa..e$ger. a$d cargo occ-r ro# the Phi!ippi$e.' i$co#e i. i$c!-ded i$ <PB. %South African Air ays v. Commissioner of Internal Revenue, <.R. No.
1?0B>6' Cebr-ary 16' 2010&

E1-a! protectio$ c!a-.eD Creedo# o the pre..D Re!igio-. reedo#D No ta/i$g o pri0ate property +itho-t 6-.t co#pe$.atio$D No$,i#pair#e$t c!a-.eD )a+,#a/i$g proce..8 1& Bi!! .ho-!d e#brace o$!y o$e .-b6ect e2pre..ed i$ the tit!e thereo D 2& Three %B& readi$g. o$ three .eparate day.D B& Pri$ted copie. i$ i$a! or# di.trib-ted three %B& day. be ore pa..age. h. Pre.ide$tia! po+er to gra$t reprie0e.' co##-tatio$. a$d pardo$. a$d re#itta! o i$e. a$d or eit-re a ter co$0ictio$ by i$a! 6-dg#e$t.

b. c. d. e. . g.

:"

T e s$e%i*i% or (ire%t %o-stitutio-a& &i,itatio-"

1E" ta."

No i,$ro$er (e&e;atio- o* &e;is&ative aut orit' to

The po+er to ta2 i. i$here$t i$ the State' .-ch po+er bei$g i$here$t!y !egi.!ati0e' ba.ed o$ the pri$cip!e that ta2e. are a gra$t o the peop!e +ho are ta2ed' a$d the gra$t #-.t be #ade by the i##ediate repre.e$tati0e. o the peop!eD a$d +here the peop!e ha0e !aid the po+er' there it #-.t re#ai$ a$d be e2erci.ed. %Commissioner of Internal Revenue
v. /ortune (o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200?&

CONSTITUTIONAL LI=ITATIONS
1" Co-stitutio-a& &i,itatio-s o- t e $ower o* ta.atio- "
The ge$era! or i$direct co$.tit-tio$a! !i#itatio$. a. +e!! a. the .peci ic or direct co$.tit-tio$a! !i#itatio$..

/" T e ;e-era& or i-(ire%t %o-stitutio-a& &i,itatio-s ot e $ower o* ta.atio- are4

a. "-e proce.. c!a-.eD

a. No i#pri.o$#e$t or $o$,pay#e$t o a po!! ta2D b. Ta2atio$ .ha!! be -$i or# a$d e1-itab!eD c. (o$gre.. .ha!! e0o!0e a progre..i0e .y.te# o ta2atio$D d. A!! appropriatio$' re0e$-e or tari bi!!. .ha!! origi$ate e2c!-.i0e!y i$ the 7o-.e o Repre.e$tati0e.' b-t the Se$ate #ay propo.e a$d co$c-r +ith a#e$d#e$t.D e. The Pre.ide$t .ha!! ha0e the po+er to 0eto a$y partic-!ar ite# or ite#. i$ a$ appropriatio$' re0e$-e' or tari bi!!' b-t the 0eto .ha!! $ot a ect the ite# or ite#. to +hich he doe. $ot ob6ectD . "e!egated po+er o the Pre.ide$t to i#po.e tari rate.' i#port a$d e2port 1-ota.' to$$age a$d +har age d-e.8 1& "e!egatio$ by (o$gre.. 2& thro-gh a !a+ B& .-b6ect to (o$gre..io$a! !i#it. a$d re.trictio$. E& +ithi$ the ra#e+or/ o $atio$a! de0e!op#e$t progra#. g. Ta2 e2e#ptio$ o charitab!e i$.tit-tio$.' ch-rche.' par.o$age. a$d co$0e$t. app-rte$a$t thereto' #o.1-e.' a$d a!! !a$d.' b-i!di$g. a$d i#pro0e#e$t. o a!! /i$d. act-a!!y' direct!y a$d e2c!-.i0e!y -.ed or re!igio-.' charitab!e or ed-catio$a! p-rpo.e.D h. No ta2 e2e#ptio$ +itho-t the co$c-rre$ce o #a6ority 0ote o a!! #e#ber. o (o$gre..D i. No -.e o p-b!ic #o$ey or property or re!igio-. p-rpo.e. e2cept i prie.t i. a..ig$ed to the ar#ed orce.' pe$a! i$.tit-tio$.' go0er$#e$t orpha$age or !epro.ari-#D 6. *o$ey co!!ected o$ ta2 !e0ied or a .pecia! p-rpo.e to be -.ed o$!y or .-ch p-rpo.e' ba!a$ce i a$y' to ge$era! -$d.D /. The S-pre#e (o-rtP. po+er to re0ie+ 6-dg#e$t. or order. o !o+er co-rt. i$ a!! ca.e. i$0o!0i$g the !ega!ity o a$y ta2' i#po.e'

a..e..#e$t or to!! or the !ega!ity o a$y pe$a!ty i#po.ed i$ re!atio$ to the abo0eD !. A-thority o !oca! go0er$#e$t -$it. to create their o+$ .o-rce. o re0e$-e' to !e0y ta2e.' ee. a$d other charge. .-b6ect to g-ide!i$e. a$d !i#itatio$. i#po.ed by (o$gre.. co$.i.te$t +ith the ba.ic po!icy o !oca! a-to$o#yD #. A-to#atic re!ea.e o !oca! go0er$#e$tP. 6-.t .hare i$ $atio$a! ta2e.D $. Ta2 e2e#ptio$ o a!! re0e$-e. a$d a..et. o $o$,.toc/' $o$, pro it ed-catio$a! i$.tit-tio$. -.ed act-a!!y' direct!y a$d e2c!-.i0e!y or ed-catio$a! p-rpo.e.D o. Ta2 e2e#ptio$ o a!! re0e$-e. a$d a..et. o proprietary or cooperati0e ed-catio$a! i$.tit-tio$. .-b6ect to !i#itatio$. pro0ided by !a+ i$c!-di$g re.trictio$. o$ di0ide$d. a$d pro0i.io$. or rei$0e.t#e$t o pro it.D p. Ta2 e2e#ptio$ o gra$t.' e$do+#e$t.' do$atio$. or co$trib-tio$. -.ed act-a!!y' direct!y a$d e2c!-.i0e!y or ed-catio$a! p-rpo.e. .-b6ect to co$ditio$. pre.cribed by !a+.

11

4t i. i#perati0e to d-!y e.tab!i.h that the o$e i$0o/i$g e1-a! protectio$ a$d the per.o$ to +hich .he i. bei$g co#pared +ere i$deed .i#i!ar!y .it-ated' i.e.' that they co##itted ide$tica! act. or +hich they +ere charged +ith the 0io!atio$ o the .a#e pro0i.io$. o the N4R(D a$d that they pre.e$ted .i#i!ar arg-#e$t. a$d e0ide$ce i$ their de e$.e , yet' they +ere treated di ere$t!y. *Santos, supra#

C" Tests to (eter,i-e va&i(it' o* %&assi*i%atio-" The 3$ited State. S-pre#e (o-rt ha. e.tab!i.hed di ere$t te.t. to deter#i$e the 0a!idity o a c!a..i icatio$ a$d co#p!ia$ce +ith the e1-a! protectio$ c!a-.e. The recog$i;ed te.t. are8 a. The traditio$a! %or ratio$a! ba.i.& te.t. b. The .trict .cr-ti$y %or co#pe!!i$g i$tere.t& te.t. c. The i$ter#ediate !e0e! o .cr-ti$y %or 1-a.i,.-.pect c!a..& te.t. E" T e tra(itio-a& Hor ratio-a& )asisI test use( i- or(er to (eter,i-e t e va&i(it' o* %&assi*i%atio-" The c!a..i icatio$ i.
0a!id i it i. ratio$a!!y re!ated to a co$.tit-tio$a!!y per#i..ib!e .tate i$tere.t. The co#p!ai$a$t #-.t pro0e that the c!a..i icatio$ i. i$0ido-.' +ho!!y arbitrary' or capricio-.' other+i.e the c!a..i icatio$ i. pre.-#ed to be 0a!id. *$indsley v. !atural Car"oinic +as Co., 220 3.S. 61; Mc+o an v.
Maryland, B66 3.S. E20; <nited States Railroad Retirement Board v. /ritz, EEF 3.S. 166#

>" EFua& $rote%tio- o* t e &aw %&ause is su)Ae%t to reaso-a)&e %&assi*i%atio-" 4 the gro-pi$g. are characteri;ed by
.-b.ta$tia! di.ti$ctio$. that #a/e rea! di ere$ce.' o$e c!a.. #ay be treated a$d reg-!ated di ere$t!y ro# a$other. The c!a..i icatio$ #-.t a!.o be ger#a$e to the p-rpo.e o the !a+ a$d #-.t app!y to a!! tho.e be!o$gi$g to the .a#e c!a... *(iu, et al., v. Court of Appeals, et al., <.R. No. 12@E10'
Aa$-ary 20' 1FFF&

10" T e stri%t s%ruti-' Hor %o,$e&&i-; i-terestI test use( i- or(er to (eter,i-e t e va&i(it' o* t e %&assi*i%atio-"
<o0er$#e$t reg-!atio$ that i$te$tio$a!!y di.cri#i$ate. agai$.t a .-.pect c!a.. .-ch a. racia! or eth$ic #i$oritie.' i. .-b6ect to .trict .cr-ti$y a$d co$.idered to 0io!ate the e1-a! protectio$ c!a-.e -$!e.. o-$d $ece..ary to pro#ote a co#pe!!i$g .tate i$tere.t. A c!a..i icatio$ i. $ece..ary +he$ it i. $arro+!y dra+$ .o that $o a!ter$ati0e' !e.. b-rde$.o#e #ea$. i. a0ai!ab!e to acco#p!i.h the .tate i$tere.t. Th-.' it +a. he!d that de$ia! o ree p-b!ic ed-catio$ to the chi!dre$ o i!!ega! a!ie$. i#po.e. a$ e$or#o-. a$d !a.ti$g b-rde$ ba.ed o$ a .tat-. o0er +hich the chi!dre$ ha0e $o co$tro! i. 0io!ati0e o e1-a! protectio$ beca-.e there i. $o .ho+i$g that .-ch de$ia! -rther. a .-b.ta$tia! .tate goa!. *Plyler v. %oe' E>@ 3.S. 202#

@" ReFuisites *or va&i( %&assi*i%atio-" A!! that i. re1-ired

o a 0a!id c!a..i icatio$ i. that it be rea.o$ab!e' +hich #ea$. that a. the c!a..i icatio$ .ho-!d be ba.ed o$ .-b.ta$tia! di.ti$ctio$. +hich #a/e or rea! di ere$ce.' b. that it #-.t be ger#a$e to the p-rpo.e o the !a+D c. that it #-.t $ot be !i#ited to e2i.ti$g co$ditio$. o$!yD a$d d. that it #-.t app!y e1-a!!y to each #e#ber o the c!a... The .ta$dard i. .ati. ied i the c!a..i icatio$ or di.ti$ctio$ i. ba.ed o$ a rea.o$ab!e o-$datio$ or ratio$a! ba.i. a$d i. $ot pa!pab!y arbitrary.
GABA:A%A +uro Party $ist, etc., v. Purisima, etc., et a!.' <. R. No. 166@1>' A-g-.t 1E' 200?I

B" EFua& $rote%tio- (oes -ot (e,a-( a)so&ute eFua&it'" 4t #ere!y re1-ire. that a!! per.o$. .ha!! be treated a!i/e' -$der
!i/e circ-#.ta$ce. a$d co$ditio$.' both a. to the pri0i!ege. co$ erred a$d !iabi!itie. e$ orced. %Santos v. People, et al, <. R. No. 1@B1@6' A-g-.t 26'
200?&

11" T e i-ter,e(iate &eve& o* s%ruti-' Hor Fuasisus$e%t %&assI test use( i- or(er to (eter,i-e t e va&i(it' o* e %&assi*i%atio-" (!a..i icatio$ ba.ed o$ ge$der or !egiti#acy are $ot
.-.pect' b-t $either are they 6-dged by the traditio$a! or ratio$a! ba.i. te.t.

4$te$tio$a! di.cri#i$atio$. agai$.t #e#ber. o a 1-a.i,.-.pect c!a.. 0io!ate e1-a! protectio$ -$!e.. they are .-b.ta$tia!!y re!ated to i#porta$t go0er$#e$t ob6ecti0e.. *Craig v. Boren, E2F 3.S. 1F0# Th-.' a .tate !a+ gra$ti$g a property ta2 e2e#ptio$ to +ido+.' b-t $ot +ido+er.' ha. bee$ he!d 0a!id or it -rther. the .tate po!icy o c-.hio$i$g the i$a$cia! i#pact o .po-.a! !o.. -po$ the .e2 or +ho# that !o.. -.-a!!y i#po.e. a hea0ier b-rde$. *:ahn v. Shevin, E16 3.S. B>1#

12

10" T e rewar(s &aw to ta. %o&&e%tors (oes -ot vio&ate eFua& $rote%tio-" The e1-a! protectio$ c!a-.e recog$i;e. a 0a!id
c!a..i icatio$' that i.' a c!a..i icatio$ that ha. a rea.o$ab!e o-$datio$ or ratio$a! ba.i. a$d $ot arbitrary. =ith re.pect to RA FBB>' it:. e2pre..ed p-b!ic po!icy i. the opti#i;atio$ o the re0e$-e,ge$eratio$ capabi!ity a$d co!!ectio$ o the B4R a$d the BO(. Si$ce the .-b6ect o the !a+ i. the re0e$-e, ge$eratio$ capabi!ity a$d co!!ectio$ o the B4R a$d the BO(' the i$ce$ti0e. a$d9or .a$ctio$. pro0ided i$ the !a+ .ho-!d !ogica!!y pertai$ to the .aid age$cie.. *oreo0er' the !a+ co$cer$. o$!y the B4R a$d the BO( beca-.e they ha0e the co##o$ di.ti$ct pri#ary -$ctio$ o ge$erati$g re0e$-e. or the $atio$a! go0er$#e$t thro-gh the co!!ectio$ o ta2e.' c-.to#. d-tie.' ee. a$d charge.. 4$d-bitab!y' .-ch .-b.ta$tia! di.ti$ctio$ i. ger#a$e a$d i$ti#ate!y re!ated to the p-rpo.e o the !a+. 7e$ce' the c!a..i icatio$ a$d treat#e$t accorded to the B4R a$d the BO( -$der RA FBB> -!!y .ati. y the de#a$d. o e1-a! protectio$. %ABA:A%A +uro Party $ist, etc., v. Purisima,
etc., et a!.' <. R. No. 166@1>' A-g-.t 1E' 200?&

1/. EFua&it' a-( u-i*or,it' o* ta.atio- ,a' ,ea- t e sa,e as eFua& $rote%tio-. 4$ .-ch a ca.e' the ter#. +o-!d #ea$ that
a!! .-b6ect. a$d ob6ect. o ta2atio$ +hich are .i#i!ar!y .it-ated .ha!! be .-b6ect to the .a#e b-rde$. a$d gra$ted the .a#e pri0i!ege. +itho-t a$y di.cri#i$atio$ +hat.oe0er.

1:" It is i- ere-t i- t e $ower to ta. t at t e State )e *ree to se&e%t t e su)Ae%ts o* ta.atio-7 a$d it ha. bee$ repeated!y
he!d that' Qi$e1-a!itie. +hich re.-!t ro# a .i$g!i$g o-t o o$e partic-!ar c!a.. o ta2atio$' or e2e#ptio$' i$ ri$ge $o co$.tit-tio$a! !i#itatio$.Q *Commissioner of Internal Revenue, et al., v. Santos, et al., 2@@ S(RA 61@&

E" Be-Aie is a &aw-a)i(i-; %itiDe- w o $a's is rea& estate ta.es $ro,$t&'" +ue to a series o* t'$ oo-s a-( a(verse e%o-o,i% %o-(itio-s7 a- or(i-a-%e is $asse( )' So&i,a- Cit' ;ra-ti-; a >0J (is%ou-t *or $a',e-t o* u-$ai( rea& estate ta.es *or t e $re%e(i-; 'ear a-( t e %o-(o-atioo* a&& $e-a&ties o- *i-es resu&ti-; *ro, t e &ate $a',e-t" Ar;ui-; t at t e or(i-a-%e rewar(s (e&i-Fue-t ta. $a'ers a-( (is%ri,i-ates a;ai-st $ro,$t o-es7 Be-Aie (e,a-(s t at e )e re*u-(e( a- a,ou-t eFuiva&e-t to o-ea&* o* t e rea& $ro$ert' ta.es e $ai(" T e ,u-i%i$a& attor-e' re-(ere( a- o$i-io- t at Be-Aie %a--ot )e rei,)urse( )e%ause t e or(i-a-%e (i( -ot $rovi(e *or su% rei,)urse,e-t" Be-Aie *i&es suit to (e%&are t e or(i-a-%e voi( o- t e ;rou-( t at it is a %&ass &e;is&atio-" Wi&& is suit $ros$er 9 E.$&ai- 'our a-swer )rie*&'"
S3<<ESTE" ANS=ER8 No. There i. $o c!a.. !egi.!atio$ beca-.e there i. $o 0io!atio$ o the e1-a! protectio$ .-it. There i. a 0a!id c!a..i icatio$ bet+ee$ tho.e +ho a!ready paid their ta2e. a$d tho.e +ho ha0e $ot. C-rther#ore' the ta2i$g a-thority ha. the prerogati0e to .e!ect the .-b6ect. a$d ob6ect. o ta2atio$' i$c!-di$g gra$ti$g a >0H di.co-$t i$ the pay#e$t o -$paid rea! e.tate ta2e.' a$d the co$do$atio$ o a!! pe$a!tie. o$ i$e. re.-!ti$g ro# !ate pay#e$t.

11" T e $rose%utio- o* o-e ;ui&t' $erso- w i&e ot ers eFua&&' ;ui&t' are -ot $rose%ute(7 owever7 is -ot7 )' itse&*7 a (e-ia& o* t e eFua& $rote%tio- o* t e &aws " =here the o icia!
actio$ p-rport. to be i$ co$ or#ity to the .tat-tory c!a..i icatio$' a$ erro$eo-. or #i.ta/e$ per or#a$ce o the .tat-tory d-ty' a!tho-gh a 0io!atio$ o the .tat-te' i. $ot +itho-t #ore a de$ia! o the e1-a! protectio$ o the !a+.. The -$!a+ -! ad#i$i.tratio$ by o icer. o a .tat-te air o$ it. ace' re.-!ti$g i$ it. -$e1-a! app!icatio$ to tho.e +ho are e$tit!ed to be treated a!i/e' i. $ot a de$ia! o e1-a! protectio$ -$!e.. there i. .ho+$ to be pre.e$t i$ it a$ e!e#e$t o i$te$tio$a! or p-rpo.e -! di.cri#i$atio$. Thi. #ay appear o$ the ace o the actio$ ta/e$ +ith re.pect to a partic-!ar c!a.. or per.o$' or it #ay o$!y be .ho+$ by e2tri$.ic e0ide$ce .ho+i$g a di.cri#i$atory de.ig$ o0er a$other $ot to be i$ erred ro# the actio$ it.e! .
%Santos v. People, et al, <. R. No. 1@B1@6' A-g-.t 26' 200?&

1/" EFua& $rote%tio- s ou&( -ot )e use( to $rote%t %o,,issio- o* %ri,e. =hi!e a!! per.o$. acc-.ed o cri#e are to be
treated o$ a ba.i. o e1-a!ity be ore the !a+' it doe. $ot o!!o+ that they are to be protected i$ the co##i..io$ o cri#e. 4t +o-!d be -$co$.cio$ab!e' or i$.ta$ce' to e2c-.e a de e$da$t g-i!ty o #-rder beca-.e other. ha0e #-rdered +ith i#p-$ity. )i/e+i.e' i the ai!-re o pro.ec-tor. to e$ orce the cri#i$a! !a+. a. to .o#e per.o$. .ho-!d be co$0erted i$to a de e$.e or other. charged +ith cri#e' the re.-!t +o-!d be that the tria! o the di.trict

attor$ey or $o$ ea.a$ce +o-!d beco#e a$ i..-e i$ the tria! o #a$y per.o$. charged +ith hei$o-. cri#e. a$d the e$ orce#e$t o !a+ +o-!d .- er a co#p!ete brea/do+$. %Santos v. People, et al, <. R. No. 1@B1@6'
A-g-.t 26' 200?&

13

o the )oca! <o0er$#e$t (ode that it. ta2 e2e#ptio$ pri0i!ege +a. rei$.tated. 7o+e0er' Smart Communications, Inc. v. (he City of %avao, etc., et al.' <. R. No. 1>>EF1' Septe#ber 16' 200? i. e2p!icit i$ it. ho!di$g that S#art i. $ot e$tit!ed to a ta2 e2e#ptio$.

1:" I&&ustratio- o* (ou)&e ta.atio- i- &o%a& ta.atio-" there

i. i$deed do-b!e ta2atio$ i (oca,(o!a i. .-b6ected to the ta2e. -$der both Sectio$. 1E a$d 21 o Ta2 Ordi$a$ce No. @@FE' .i$ce the.e are bei$g i#po.ed8 %1& o$ the .a#e .-b6ect #atter J the pri0i!ege o doi$g b-.i$e.. i$ the (ity o *a$i!aD %2& or the .a#e p-rpo.e J to #a/e per.o$. co$d-cti$g b-.i$e.. +ithi$ the (ity o *a$i!a co$trib-te to city re0e$-e.D %B& by the .a#e ta2i$g a-thority J (ity o *a$i!aD %E& +ithi$ the .a#e ta2i$g 6-ri.dictio$ J +ithi$ the territoria! 6-ri.dictio$ o the (ity o *a$i!aD %>& or the .a#e ta2i$g period. J per ca!e$dar yearD a$d %6& o the .a#e /i$d or character J a !oca! b-.i$e.. ta2 i#po.ed o$ gro.. .a!e. or receipt. o the b-.i$e... %(he City of Manila, et al., v. Coca0Cola Bottlers
Philippines, Inc., <. R. No. 1?1?E>' A-g-.t E' 200F&

1B" W e- wit (rawa& o* a ta. e.e,$tio- i,$airs t e o)&i;atio- o* %o-tra%ts" The (o$tract (!a-.e ha. $e0er bee$
tho-ght a. a !i#itatio$ o$ the e2erci.e o the State:. po+er o ta2atio$ .a0e o$!y +here a ta2 e2e#ptio$ ha. bee$ gra$ted or a 0a!id co$.ideratio$. %Smart Communications, Inc. v. (he City of %avao, etc., et al.'
<. R. No. 1>>EF1' Septe#ber 16' 200?& citi$g (olentino v. Secretary of /inance, <. R. No. 11>E>>' A-g-.t 2>' 1FFE' 2B> S(RA 6B0' 6?>& The a-thor opi$e.

that .i$ce practica!!y a!! ra$chi.e. gra$ted to te!eco##-$icatio$. co#pa$ie. are .i#i!ar!y +orded that the abo0e doctri$e i$d. app!icatio$ to the other.&

1<" A &aw*u& ta. o- a -ew su)Ae%t7 or a- i-%rease( ta. o- a- o&( o-e7 (oes -ot i-ter*ere wit a %o-tra%t or i,$airs its o)&i;atio-' wit i- t e ,ea-i-; o* t e %o-stitutio-" *(olentino v.
Secretary of /inance, et al., and companion cases, 2B> S(RA 6B0&

1C" T e $ri,ar' reaso- *or t e wit (rawa& o* ta. e.e,$tio- $rivi&e;es ;ra-te( to ;over-,e-t ow-e( a-( %o-tro&&e( %or$oratio-s a$d a!! other -$it. o go0er$#e$t +a. that
.-ch pri0i!ege re.-!ted to .erio-. ta2 ba.e ero.io$ a$d di.tortio$. i$ the ta2 treat#e$t o .i#i!ar!y .it-ated e$terpri.e.' he$ce re.-!ti$g i$ the $eed or the.e e$titie. to .hare i$ the re1-ire#e$t. o de0e!op#e$t' i.ca! or other+i.e' by payi$g the ta2e. a$d other charge. d-e the#. %Philippine
Ports Authority v. City of Iloilo, <. R. No. 10F@F1' A-!y 1E' 200B&

1>" T e wit (rawa& o* a ta. e.e,$tio- s ou&( -ot )e %o-strue( as $ro i)iti-; *uture ;ra-ts o* e.e,$tio- *ro, a&& ta.es" *Philippine $ong %istance (elephone Company, Inc., v. City of %avao, et
al., etc., <. R. No. 1EB?6@' A-g-.t 22' 2001&

1@" Ta. e.e,$tio-s i- *ra-% ises are a&wa's su)Ae%t to wit (rawa&" A !egi.!ati0e ra$chi.e i. gra$ted +ith the e2pre..
co$ditio$ that it i. .-b6ect to a#e$d#e$t' a!teratio$' or repea!. %1F?@
(o$.tit-tio$' Art. L44' Sec. 11&

4t i. e$o-gh to .ay that the partie. to a co$tract ca$$ot' thro-gh the e2erci.e o prophetic di.cer$#e$t' etter the e2erci.e o the ta2i$g po+er o the State. Cor $ot o$!y are e2i.ti$g !a+. read i$to co$tract. i$ order to i2 ob!igatio$. a. bet+ee$ partie.' b-t the re.er0atio$ o e..e$tia! attrib-te. o .o0ereig$ po+er i. a!.o read i$to co$tract. a. a ba.ic po.t-!ate o the !ega! order. The po!icy o protecti$g co$tract. agai$.t i#pair#e$t pre.-ppo.e. the #ai$te$a$ce o a go0er$#e$t +hich retai$. ade1-ate a-thority to .ec-re the peace a$d good order o .ociety. %Smart
Communications, Inc. v. (he City of %avao, etc., et al .' <. R. No. 1>>EF1' Septe#ber 16' 200?& NOTES AN" (O**ENTS8 Philippine $ong %istance (elephone Company, Inc., v. City of %avao, et al., etc., <. R. No. 1EB?6@' A-g-.t 22' 2001 #ade the ob.er0atio$ that .i$ce S#art:. ra$chi.e +a. gra$ted a ter the e ecti0ity

1E" Natio-a& Power Cor$oratio- HNPCI is o* t e i-siste-%e t at it is -ot su)Ae%t to t e $a',e-t o* *ra-% ises ta.es i,$ose( )' t e Provi-%e o* Isa)e&a )e%ause a&& o* its s ares are ow-e( )' t e Re$u)&i% o* t e P i&i$$i-es" It is t us7 a- i-stru,e-ta&it' o* t e Natio-a& 3over-,e-t w i% is e.e,$t *ro, &o%a& ta.atio-" As su% it is -ot a $rivate %or$oratioe-;a;e( i- !)usi-ess e-Ao'i-; *ra-% ise# Is su% %o-te-tio- ,eritorious 9
S3<<ESTE" ANS=ER8 No. Philippine $ong %istance (elephone Company, Inc., v. City of %avao, et al., etc.' <. R. No. 1EB?6@' A-g-.t 22' 2001' -phe!d the a-thority o the (ity o "a0ao' a !oca! go0er$#e$t -$it' to i#po.e a$d co!!ect a !oca! ra$chi.e ta2 beca-.e the )oca! <o0er$#e$t (ode ha. +ithdra+$ a!! ta2 e2e#ptio$. pre0io-.!y e$6oyed by a!! per.o$. a$d a-thori;ed !oca! go0er$#e$t -$it. to i#po.e a ta2 o$ b-.i$e.. e$6oyi$g a ra$chi.e ta2 $ot+ith.ta$di$g the gra$t o ta2 e2e#ptio$ to the#.

/0" !I- &ieu o* a&& ta.es# i- t e *ra-% ise o* ABS-CBN (oes -ot e.e,$t it *ro, &o%a& *ra-% ise ta.es" 4t doe. $ot

e2pre..!y pro0ide +hat /i$d o ta2e. ABS,(BN i. e2e#pted ro#. 4t i. $ot c!ear +hether the e2e#ptio$ +o-!d i$c!-de both !oca!' +hether #-$icipa!' city or pro0i$cia!' a$d $atio$a! ta2. =hether the i$ !ie- o a!! ta2e. pro0i.io$ +o-!d i$c!-de e2e#ptio$ ro# !oca! ta2 i. $ot -$e1-i0oca!. The right to e2e#ptio$ ro# !oca! ra$chi.e ta2 #-.t be c!ear!y e.tab!i.hed a$d ca$$ot be #ade o-t o i$ ere$ce or i#p!icatio$. b-t #-.t be !aid beyo$d rea.o$ab!e do-bt. Veri!y' the -$certai$ty i$ the i$ !ie- o a!! ta2e. pro0i.io$ .ho-!d be co$.tr-ed agai$.t ABS,(BN. ABS,(BN ha. the b-rde$ to pro0e that it i. i$ act co0ered by the e2e#ptio$ .o c!ai#ed b-t ha. ai!ed to do .o. %8uezon City, et al., v. ABS0CB!
Broadcasting Corporation' <. R. No. 166E0?' October 6' 200?& NOTES AN" (O**ENTS8 Thi. i. practica!!y the .a#e ho!di$g i$ a$ ear!ier ca.e i$0o!0i$g a$other te!eco##-$icatio$. co#pa$y Smart Communications, Inc. v. (he City of %avao, etc., et al., <. R. No. 1>>EF1' Septe#ber 16' 200?. The a-thor opi$e. that .i$ce practica!!y a!! ra$chi.e. gra$ted to te!eco##-$icatio$. co#pa$ie. are .i#i!ar!y +orded that the abo0e doctri$e i$d. app!icatio$ to the other..&

14

2 2 2 i$ !ie- o a$y a$d a!! ta2e. o a$y /i$d' $at-re or de.criptio$ !e0ied' e.tab!i.hed or co!!ected by a$y a-thority +hat.oe0er' municipal, provincial or $atio$a!' ro# +hich the gra$tee i. hereby e2pre..!y e2e#pted' 2 2 2. %E#pha.i. .-pp!ied&. 7o+e0er' (o$gre.. did $ot e2pre..!y e2e#pt S#art ro# !oca! ta2e.. (o$gre.. -.ed the Qi$ !ie- o a!! ta2e.Q c!a-.e o$!y i$ re ere$ce to $atio$a! i$ter$a! re0e$-e ta2e.. The o$!y i$terpretatio$' -$der the r-!e o$ .trict co$.tr-ctio$ o ta2 e2e#ptio$.' i. that the Qi$ !ie- o a!! ta2e.Q c!a-.e i$ S#artP. ra$chi.e re er. o$!y to $atio$a! a$d $ot to !oca! ta2e..
GSmart Communications, Inc. v. (he City of %avao, etc., et al.' <. R. No. 1>>EF1' Septe#ber 16' 200? citi$g Philippine $ong %istance (elephone Company, Inc. v. City of %avao' EE@ Phi!. >@1' >FE %200B&I NOTES AN" (O**ENTS8 The a-thor opi$e. that the abo0e i$d. app!icatio$ to a!! te!eco##-$icatio$. co#pa$ie..

/1" !I- &ieu o* a&& ta.es# re*ers to -atio-a& i-ter-a& reve-ue ta.es a-( -ot to &o%a& ta.es" The i$ !ie- o a!! ta2e.
c!a-.e app!ie. o$!y to $atio$a! i$ter$a! re0e$-e ta2e. a$d $ot to !oca! ta2e.. A. appropriate!y poi$ted o-t i$ the .eparate opi$io$ o A-.tice A$to$io T. (arpio i$ a .i#i!ar ca.e i$0o!0i$g a de#a$d or e2e#ptio$ ro# !oca! ra$chi.e ta2e.8 GTIhe Qi$ !ie- o a!! ta2e.Q c!a-.e i$ S#artP. ra$chi.e re er. o$!y to ta2e.' other tha$ i$co#e ta2' i#po.ed -$der the Natio$a! 4$ter$a! Re0e$-e (ode. The Qi$ !ie- o a!! ta2e.Q c!a-.e doe. $ot app!y to !oca! ta2e.. The pro0i.o i$ the ir.t paragraph o Sectio$ F o S#artP. ra$chi.e .tate. that the gra$tee .ha!! Qco$ti$-e to be !iab!e or i$co#e ta2e. payab!e -$der Tit!e 44 o the Natio$a! 4$ter$a! Re0e$-e (ode.Q A!.o' the .eco$d paragraph o Sectio$ F .pea/. o ta2 ret-r$. i!ed a$d ta2e. paid to the Q(o##i..io$er o 4$ter$a! Re0e$-e or hi. d-!y a-thori;ed repre.e$tati0e i$ accorda$ce +ith the Natio$a! 4$ter$a! Re0e$-e (ode.Q *oreo0er' the .a#e paragraph dec!are. that the ta2 ret-r$. Q.ha!! be .-b6ect to a-dit by the B-rea- o 4$ter$a! Re0e$-e.Q Nothi$g i. #e$tio$ed i$ Sectio$ F abo-t !oca! ta2e.. The c!ear i$te$t i. or the Qi$ !ie- o a!! ta2e.Q c!a-.e to app!y o$!y to ta2e. -$der the Natio$a! 4$ter$a! Re0e$-e (ode a$d $ot to !oca! ta2e.. E0e$ +ith re.pect to $atio$a! i$ter$a! re0e$-e ta2e.' the Qi$ !ie- o a!! ta2e.Q c!a-.e doe. $ot app!y to i$co#e ta2. 4 (o$gre.. i$te$ded the Qi$ !ie- o a!! ta2e.Q c!a-.e i$ S#artP. ra$chi.e to a!.o app!y to !oca! ta2e.' (o$gre.. +o-!d ha0e e2pre..!y #e$tio$ed the e2e#ptio$ ro# #-$icipa! a$d pro0i$cia! ta2e.. (o$gre.. co-!d ha0e -.ed the !a$g-age i$ Sectio$ F%b& o (!a0eci!!aP. o!d ra$chi.e' a. o!!o+.8

//" T e !i- &ieu o* a&& ta.es# %&ause i- t e *ra-% ise o* ABS-CBN as )e%o,e *u-%tus o**i%io wit t e a)o&itio- o* t e *ra-% ise ta. o- )roa(%asti-; %o,$a-ies wit 'ear&' ;ross re%ei$ts e.%ee(i-; Te- =i&&io- Pesos" The c!a-.e i$ !ie- o a!!
ta2e. doe. $ot pertai$ to VAT or a$y other ta2. 4t ca$$ot app!y +he$ +hat i. paid i. a ta2 other tha$ a ra$chi.e ta2. Si$ce the ra$chi.e ta2 o$ the broadca.ti$g co#pa$ie. +ith year!y gro.. receipt. e2ceedi$g te$ #i!!io$ pe.o. ha. bee$ abo!i.hed' the i$ !ie- o a!! ta2e. c!a-.e ha. $o+ beco#e functus officio' re$dered i$operati0e. %8uezon City, et al., v. ABS0
CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200?& NOTES AN" (O**ENTS8 Thi. i. practica!!y the .a#e ho!di$g i$ a$ ear!ier ca.e i$0o!0i$g a$other te!eco##-$icatio$. co#pa$y. S#art (o##-$icatio$.' 4$c. 0. The (ity o "a0ao' etc.' et a!.' <. R. No. 1>>EF1' Septe#ber 16' 200?. The a-thor opi$e. that .i$ce practica!!y a!! ra$chi.e. gra$ted to te!eco##-$icatio$. co#pa$ie. are .i#i!ar!y +orded that the abo0e doctri$e i$d. app!icatio$ to the other..&

/:" +ou)&e ta.atio- i- its ;e-eri% se-se7 t is ,ea-s ta.i-; t e sa,e su)Ae%t or o)Ae%t twi%e (uri-; t e sa,e ta.a)&e $erio(" 4$ it. partic-!ar .e$.e' it #ay #ea$ direct
d-p!icate ta2atio$' +hich i. prohibited -$der the co$.tit-tio$ beca-.e it 0io!ate. the co$cept o e1-a! protectio$' -$i or#ity a$d e1-itab!e$e.. o ta2atio$. 4$direct d-p!icate ta2atio$ i. $ot a$athe#ati;ed by the abo0e co$.tit-tio$a! !i#itatio$..

/<"
a.

E&e,e-ts o* (ire%t (u$&i%ate ta.atio-4

Sa#e 1& S-b6ect or ob6ect i. ta2ed t+ice 2& by the .a#e ta2i$g a-thority B& or the .a#e ta2i$g p-rpo.e E& d-ri$g the .a#e ta2ab!e period

b. Ta2i$g a!! o the .-b6ect. or ob6ect. or the ir.t ti#e +itho-t ta2i$g a!! o the# or the .eco$d ti#e. 4 a$y o the e!e#e$t. are ab.e$t the$ there i. i$direct d-p!icate ta2atio$ +hich i. $ot prohibited by the co$.tit-tio$. NOTES AN" (O**ENTS8
a. Prese-%e o* t e /-( e&e,e-t vio&ates t e eFua& $rote%tio%&ause" 4 o$!y the 1.t e!e#e$t i. pre.e$t' ta2i$g the .a#e .-b6ect or ob6ect t+ice' by the .a#e ta2i$g a-thority' etc.' there i. $o 0io!atio$ o the e1-a! protectio$ c!a-.e beca-.e a!! .-b6ect. a$d ob6ect. that are .i#i!ar!y .it-ated are .-b6ect to the .a#e b-rde$. a$d gra$ted the .a#e pri0i!ege. +itho-t a$y di.cri#i$atio$ +hat.oe0er' The pre.e$ce o the 2$d e!e#e$t' ta2i$g a!! o the .-b6ect. a$d ob6ect. or the ir.t ti#e' +itho-t ta2i$g a!! or the .eco$d ti#e' re.-!t. to di.cri#i$atio$ a#o$g .-b6ect. a$d ob6ect. that are .i#i!ar!y .it-ated' he$ce 0io!ati0e o the e1-a! protectio$ c!a-.e.

15

/E" A ta. (e(u%tio- i. de i$ed a. a .-btractio$ ro i$co#e or ta2 p-rpo.e.' or a$ a#o-$t that i. a!!o+ed by !a+ to red-ce i$co#e prior to the app!icatio$ o the ta2 rate to co#p-te the a#o-$t o ta2 +hich i. d-e. A ta2 ded-ctio$ red-ce. the i$co#e that i. .-b6ect to ta2 i$ order to arri0e at ta2ab!e i$co#e. %Commissioner of Internal Revenue v. Central $uzon
%rug Corporation, <. R. No. 1>F6E@' Apri! 1>' 200>&

/>" +ou)&e ta.atio- a va&i( (e*e-se a;ai-st t e &e;a&it' o* a ta. ,easure i* t e (ou)&e ta.atio- is (ire%t (u$&i%ate ta.atio-' beca-.e it +o-!d 0io!ate the e1-a! protectio$ c!a-.e o the
co$.tit-tio$.

/@" W e- a- ite, o* i-%o,e is ta.e( i- t e P i&i$$i-es a-( t e sa,e i-%o,e is ta.e( i- a-ot er %ou-tr'7 t is wou&( )e G-ow- as i-ter-atio-a& Auri(i%a& (ou)&e ta.atio- +hich i. the
i#po.itio$ o co#parab!e ta2e. i$ t+o or #ore .tate. o$ the .a#e ta2payer i$ re.pect o the .a#e .-b6ect #atter a$d or ide$tica! gro-$d..
*Commissioner of Internal Revenue v. S.C. ,ohnson and Son, Inc., et al., <.R. No. 12@10>' A-$e 2>' 1FFF&

:0" T e $etitio-ers a&&e;e t at t e R-VAT &aw is %o-stitutio-a& )e%ause t e Bi%a,era& Co-*ere-%e Co,,itte( as e.%ee(e( its aut orit' i- i-%&u(i-; $rovisio-s w i% were -ever i-%&u(e( i- t e versio-s o* )ot t e House a-( Se-ate su% as i-serti-; t e sta-(-)' aut orit' to t e Presi(e-t to i-%rease t e VAT *ro, 10J to 1/JL (e&eti-; e-tire&' t e -o $ass-o- $rovisio-s *ou-( i- )ot t e House a-( Se-ate Bi&&sL i-serti-; t e $rovisio- i,$osi-; a B0J &i,it o- t e a,ou-t o* i-$ut ta. to )e %re(ite( a;ai-st t e out$ut ta.L a-( i-%&u(i-; t e a,e-(,e-ts i-tro(u%e( o-&' )' Se-ate Bi&& No" 1E>0 re;ar(i-; ot er Gi-(s o* ta.es i- a((itio- to t e va&ue-a((e( ta." T us7 t ere was a vio&atio- o* t e %o-stitutio-a& ,a-(ate t at reve-ue )i&&s s a&& ori;i-ate e.%&usive&' *ro, t e House o* Re$rese-tatives" Are t e %o-te-tio-s o* su% wei; t as to %o-stitute ;rave a)use o* (is%retio- w i% ,a' i-va&i(ate t e &aw 9 E.$&ai)rie*&'"
S3<<ESTE" ANS=ER8 No. There +a. $o gra0e ab-.e o di.cretio$ beca-.e a!! the cha$ge. a$d #odi icatio$. #ade by the Bica#era! (o$ ere$ce (o##ittee +ere ger#a$e to .-b6ect. o the pro0i.io$. re erred to it or reco$ci!iatio$. The Bica#era! (o$ ere$ce (o##ittee #ere!y e2erci.ed the 6-dicia!!y recog$i;ed !o$g,.ta$di$g !egi.!ati0e practice o gi0i$g .aid co$ ere$ce co##ittee a#p!e !atit-de or co#pro#i.i$g di ere$ce. bet+ee$ the Se$ate a$d the 7o-.e. GA"a-ada +uro Party $ist *etc.# v. &rmita,
etc., et al., <. R. No. 16?0>6' Septe#ber 1' 200> a$d co#pa$io$ ca.e.I

=et o(s *or avoi(i-; (ou)&e ta.atio- Hi-(ire%t (u$&i%ate ta.atio-I"

a. Ta2 treatie. +hich e2e#pt. oreig$ $atio$a!. ro# !oca! ta2atio$ a$d !oca! $atio$a!. ro# oreig$ ta2atio$ -$der the pri$cip!e o reciprocity. b. Ta2 credit. +here oreig$ ta2e. are a!!o+ed a. ded-ctio$. ro# !oca! ta2e. that are d-e to be paid. c. A!!o+i$g oreig$ ta2e. a. a ded-ctio$ ro# gro.. i$co#e.

/B"

/C"

Ta. %re(it ge$era!!y re er. to a$ a#o-$t that i. .-btracted

direct!y ro# o$e:. tota! ta2 !iabi!ity' a$ a!!o+a$ce agai$.t the ta2 it.e! ' or a ded-ctio$ ro# +hat i. o+$ed. A ta2 credit red-ce. the ta2 d-e' i$c!-di$g J+he$e0er app!icab!e J the i$co#e ta2 that i. deter#i$ed a ter app!yi$g the corre.po$di$g ta2 rate. to ta2ab!e i$co#e. %Commissioner of Internal Revenue v. Central $uzon %rug
Corporation, <. R. No. 1>F6E@' Apri! 1>' 200>&

:1" T e VAT w i&e re;ressive is NOT vio&ative o* t e ,a-(ate to evo&ve a $ro;ressive s'ste, o* ta.atio-" +o 'ou a;ree 9 The #a$date to (o$gre.. i. $ot to pre.cribe b-t to e0o!0e a
progre..i0e .y.te# o ta2atio$. Other+i.e' .a!e. ta2e. +hich perhap. are the o!de.t or# o i$direct ta2e.' +o-!d ha0e bee$ prohibited +ith the proc!a#atio$ o the co$.tit-tio$a! pro0i.io$. Sa!e. ta2e. are a!.o regre..i0e. . GA"a-ada +uro Party $ist *etc.# v. &rmita, etc., et al., <. R. No.
16?0>6' Septe#ber 1' 200> a$d co#pa$io$ ca.e. citi$g (olentino v. Secretary of /inance, et al., <. R. No. 11>E>>' A-g-.t 2>' 1FFE' 2B> S(RA 6B0I

16

:/" A&& reve-ues a-( assets o* -o--sto%G7 -o--$ro*it e(u%atio-a& i-stitutio-s t at are a%tua&&'7 (ire%t&' a-( e.%&usive&' use( *or e(u%atio-a& $ur$oses s a&& )e e.e,$t *ro, ta.atio-" ::. Reve-ues a-( assets o* $ro$rietar' e(u%atio-a& i-stitutio-s7 i-%&u(i-; t ose w i% are %oo$erative&' ow-e(7 ,a' )e e-tit&e( to e.e,$tio-s su)Ae%t to &i,itatio-s $rovi(e( )' &aw i-%&u(i-; restri%tio-s o- (ivi(e-(s a-( $rovisio-s *or rei-vest,e-ts" There i. $o !a+ at the pre.e$t +hich gra$t. e2e#ptio$.'
other the e2e#ptio$. gra$ted to cooperati0e..

/" Co,$e-satio- ta/e. p!ace by operatio$ !oca! go0er$#e$t a$d the ta2payer are i$ their o+$ debtor. a$d creditor. o each other' a$d that the debt. de#a$dab!e' i$ co$.e1-e$ce o Artic!e. 12@? a$d 12@F
*%omingo v. +arlitos, ? S(RA EEB&

o !a+' +here the right reciproca!!y are both d-e a$d o the (i0i! (ode.

:" =a' t ere )e %o,$e-satio- or set-o** )etwee- a -atio-a& ta. a-( a (e)t 9 Reaso- out 'our a-swer"
S3<<ESTE" ANS=ER8 A. a ge$era! r-!e' there co-!d be $o co#pe$.atio$ or .et,o bet+ee$ a ta2 a$d a debt or the o!!o+i$g rea.o$.8 a. )i eb!ood theory. b. Ta2e. are $ot co$tract-a! ob!igatio$. b-t ari.e o-t o a d-ty to' a$d are the po.iti0e act. o go0er$#e$t' to the #a/i$g a$d e$ orci$g o +hich the per.o$a! co$.e$t o the i$di0id-a! ta2payer i. $ot re1-ired.
*Repu"lic v. Mam"ulao $um"er Co., E S(RA 622&

OTHER CONCEPTS 1" +isti-;uis ta. *ro, (e)t"

TAL Basis Fai&ure to Pa' =o(e o* Pa',e-t Assi;-a)i&it' Pa',e-t ba.ed o$ !a+ #ay re.-!t i$ i#pri.o$#e$t ge$era!!y payab!e i$ #o$ey $ot a..ig$ab!e -$!e.. it beco#e. a debt i. $ot .-b6ect to co#pe$.atio$ or .et, o doe. $ot dra+ i$tere.t -$!e.. de!i$1-e$t i#po.ed by p-b!ic a-thority Pre.cripti0e period. or ta2 -$der N4R( "EBT ba.ed o$ co$tract or 6-dg#e$t $o i#pri.o$#e$t payab!e i$ #o$ey' property or .er0ice a..ig$ab!e #ay be a .-b6ect

c. Ta2e. ca$$ot be the .-b6ect o co#pe$.atio$ beca-.e the go0er$#e$t a$d ta2payer are $ot #-t-a!!y creditor. a$d debtor. o each other a$d a c!ai# or ta2e. i. $ot .-ch a debt' de#a$d' co$tract or 6-dg#e$t a. i. a!!o+ed to be .et,o . Th-.' it i. correct to .ay that the o .etti$g o a ta2payer:. ta2 re -$d +ith it. a!!eged ta2 de icie$cy i. -$a0ai!i$g -$der Art. 12@F o the (i0i! (ode. %South African Air ays v. Commissioner of Internal Revenue, <.R. No. 1?0B>6' Cebr-ary 16' 2010 reiterati$g Calte) Philippines, Inc. v. Commission on Audit, +hich app!ied /rancia v. Intermediate Appellate Court&

<" E.%e$tio-s4 W e- set-o** or %o,$e-satio- a&&owe( *or &o%a& ta.es" a.

=here both c!ai#. a!ready beco#e o0erd-e a$d de#a$dab!e a. +e!! a. -!!y !i1-idated. (o#pe$.atio$ ta/e. p!ace by operatio$ o !a+ -$der Art. 1200 i$ re!atio$ to Art.. 12@F a$d 12F0 a!! o the (i0i! (ode. %%omingo v. +arlitos' ? S(RA EEB& b. (o#pe$.atio$ ta/e. p!ace by operatio$ o !a+' +here the go0er$#e$t a$d the ta2payer are i$ their o+$ right reciproca!!y debtor. a$d creditor. o each other' a$d that the debt. are both d-e a$d de#a$dab!e. Thi. i. i$ co$.e1-e$ce o Artic!e 12@? a$d 12@F o the (i0i! (ode. %%omingo v. +arlitos, ? S(RA EEB& c. ,The S-pre#e (o-rt -phe!d the 0a!idity o a .et,o bet+ee$ the ta2payer a$d the go0er$#e$t. 4$ both ca.e.' the c!ai#. o the ta2payer. therei$ +ere certai$ a$d !i1-idated. The c!ai#. +ere certai$ .i$ce there +ere $o do-bt. or di.p-te. a. to their re -$dabi!ity. 4$ act' the go0er$#e$t ad#itted the act o o0er,pay#e$t. %Commissioner of
Internal Revenue v. &sso Standard &astern, Inc., 1@2 S(RA B6E&

I-terest Aut orit' Pres%ri$tio-

dra+. i$tere.t i .tip-!ated or de!ayed ca$ be i#po.ed by pri0ate i$di0id-a!. debt -$der the (i0i! (ode

WARNIN34 +o -ot use t e a)ove arra-;e,e-t i- a-sweri-; Bar Fuestio-s"

d. 4$ ca.e o a ta2 o0erpay#e$t' the B4R:. ob!igatio$ to re -$d or o ,.et ari.e. ro# the #o#e$t the ta2 +a. paid. REASON8 Solutio

inde"eti. %Commissioner of Internal Revenue v. &sso Standard &astern, Inc 1@2

S(RA B6E&

17

%I"id., citi$g CIR v. Philippine American Accident Insurance Company, Inc., <.R. No. 1E16>?' *arch 1?' 200>' E>B S(RA 66?&

e. =hi!e 6-dg#e$t .ho-!d be re$dered i$ a0or o Rep-b!ic or -$paid ta2e.' 6-dg#e$t o-ght at the .a#e ti#e to i..-e or Sa#pag-ita Pict-re. co##a$di$g pay#e$t to the !atter by the Rep-b!ic o the 0a!-e o the bac/pay certi icate. +hich the Rep-b!ic recei0ed.
%Repu"lic v. &ricta' 1@2 S(RA 62B&

>" 3i&)ert o)tai-e( a Au(;,e-t *or a su, o* ,o-e'

a;ai-st t e ,u-i%i$a&it' o* Ca,i&i-;" T e Au(;,e-t as )e%o,e *i-a& a&t ou; e.e%utio- as -ot issue(" U$ore%eivi-; a- assess,e-t *or ,u-i%i$a& sa&es ta.es *ro, t e =u-i%i$a& Treasurer7 3i&)ert e.e%ute( a $artia& assi;-,e-t o* is Au(;,e-t su**i%ie-t to %over t e assess,e-t i- *avor o* t e =u-i%i$a&it'" =a' t e =u-i%i$a& Treasurer va&i(&' a%%e$t t e assi;-,e-t9 W 'M
S3<<ESTE" ANS=ER8 Oe.. The partie. i$ thi. ca.e are #-t-a!!y debtor. a$d creditor. o each other' a$d .i$ce both o the c!ai#. beca#e o0erd-e' de#a$dab!e a$d -!!y !i1-idated' co#pe$.atio$ ta/e. p!ace by operatio$ o !a+. S-ch +a. the ho!di$g i$ %omingo v. +arlitos, ? S(RA EEB' a ca.e decided by the S-pre#e (o-rt +ho.e act-a! a$tecede$t. are .i#i!ar to the prob!e#.

C" Stri%t i-ter$retatio- o* ta. e.e,$tio- &aws" Ta2e. are +hat ci0i!i;ed peop!e pay or ci0i!i;ed .ociety. They are the !i eb!ood o the $atio$. Th-.' .tat-te. gra$ti$g ta2 e2e#ptio$. are co$.tr-ed stricissimi =uris agai$.t the ta2payer a$d !ibera!!y i$ a0or o the ta2i$g a-thority. A c!ai# o ta2 e2e#ptio$ #-.t be c!ear!y .ho+$ a$d ba.ed o$ !a$g-age i$ !a+ too p!ai$ to be #i.ta/e$. Other+i.e .tated' ta2atio$ i. the r-!e' e2e#ptio$ i. the e2ceptio$. %8uezon City, et al., v. ABS0CB!
Broadcasting Corporation' <. R. No. 166E0?' October 6' 200? citi$g Mactan Ce"u International Airport Authority v. Marcos, <.R. No. 1200?2' Septe#ber 11' 1FF6' 261 S(RA 66@' 6?0& The b-rde$ o proo re.t. -po$ the party

c!ai#i$g the e2e#ptio$ to pro0e that it i. i$ act co0ered by the e2e#ptio$ .o c!ai#ed. %8uezon City, supra citi$g Agpa!o' R.E.' Stat-tory (o$.tr-ctio$'
200B ed.' p. B01&

E" Ratio-a&e *or stri%t i-ter$retatio- o* ta. e.e,$tio&aws" The ba.i. or the r-!e o$ .trict co$.tr-ctio$ to .tat-tory pro0i.io$.
gra$ti$g ta2 e2e#ptio$. or ded-ctio$. i. to #i$i#i;e di ere$tia! treat#e$t a$d o.ter i#partia!ity' air$e.. a$d e1-a!ity o treat#e$t a#o$g ta2payer.. %8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200?& 7e +ho c!ai#. a$ e2e#ptio$ ro# hi. .hare o co##o$ b-rde$ #-.t 6-.ti y hi. c!ai# that the !egi.!at-re i$te$ded to e2e#pt hi# by -$#i.ta/ab!e ter#.. Cor e2e#ptio$. ro# ta2atio$ are $ot a0ored i$ !a+' $or are they pre.-#ed. They #-.t be e2pre..ed i$ the c!eare.t a$d #o.t -$a#big-o-. !a$g-age a$d $ot !e t to #ere i#p!icatio$.. 4t ha. bee$ he!d that e2e#ptio$. are $e0er pre.-#ed the b-rde$ i. o$ the c!ai#a$t to e.tab!i.h c!ear!y hi. right to e2e#ptio$ a$d ca$$ot be #ade o-t o i$ ere$ce or i#p!icatio$. b-t #-.t be !aid beyo$d rea.o$ab!e do-bt. 4$ other +ord.' .i$ce ta2atio$ i. the r-!e a$d e2e#ptio$ the e2ceptio$' the i$te$tio$ to #a/e a$ e2e#ptio$ o-ght to be e2pre..ed i$ c!ear a$d -$a#big-o-. ter#.. %8uezon City, supra citi$g
Agpa!o' R.E.' Stat-tory (o$.tr-ctio$' 200B ed.' p. B02&

@" I- %ase o* (ou)t7 ta. &aws ,ust )e %o-strue( stri%t&' a;ai-st t e State a-( &i)era&&' i- *avor o* t e ta.$a'er
beca-.e ta2e.' a. b-rde$. +hich #-.t be e$d-red by the ta2payer' .ho-!d $ot be pre.-#ed to go beyo$d +hat the !a+ e2pre..!y a$d c!ear!y dec!are..
*$incoln Philippine $ife Insurance Company, Inc., etc., v. Court of Appeals, et al., 2FB S(RA F2' FF&

B" I-ter$retatio- i- t e i,$ositio- o* ta.es7 is -ot t e si,i&ar (o%tri-e as t at a$$&ie( to ta. e.e,$tio-s" The r-!e i$
the i$terpretatio$ o ta2 !a+. i. that a .tat-te +i!! $ot be co$.tr-ed a. i#po.i$g a ta2 -$!e.. it doe. .o c!ear!y' e2pre..!y' a$d -$a#big-o-.!y. A ta2 ca$$ot be i#po.ed +itho-t c!ear a$d e2pre.. +ord. or that p-rpo.e. Accordi$g!y' the ge$era! r-!e o re1-iri$g adhere$ce to the !etter i$ co$.tr-i$g .tat-te. app!ie. +ith pec-!iar .trict$e.. to ta2 !a+. a$d the pro0i.io$. o a ta2i$g act are $ot to be e2te$ded by i#p!icatio$. 4$ a$.+eri$g the 1-e.tio$ o +ho i. .-b6ect to ta2 .tat-te.' it i. ba.ic that i$ ca.e o do-bt' .-ch .tat-te. are to be co$.tr-ed #o.t .tro$g!y agai$.t the go0er$#e$t a$d i$ a0or o the .-b6ect. or citi;e$. beca-.e b-rde$. are $ot to be i#po.ed $or pre.-#ed to be i#po.ed beyo$d +hat .tat-te. e2pre..!y a$d c!ear!y i#port. GCommissioner of Internal Revenue v. /ortune
(o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200? citi$g CIR v. Court of Appeals' BB? Phi!. B22' BB0,BB1 %1FF@&I A. b-rde$.' ta2e. .ho-!d $ot be

10" W ' are ta. e.e,$tio-s are stri%t&' %o-strue( a;ai-st t e ta.$a'er a-( &i)era&&' i- *avor o* t e State 9
S3<<ESTE" ANS=ER8 Ta2e. are $ece..ary or the co$ti$-ed e2i.te$ce o the State.

11" I- %ase o* a ta. over$a',e-t7 w ere t e BIR8s o)&i;atio- to re*u-( or set-o** arises *ro, t e ,o,e-t t e ta. was $ai( u-(er t e $ri-%i$&e o* solutio indebeti" *Commissioner of
Internal Revenue v. &sso Standard &astern, Inc, 1@2 SR(A B6E&

-$d-!y e2acted $or a..-#ed beyo$d the p!ai$ #ea$i$g o the ta2 !a+..

18

1/" But -ote Nestle Phil. v. Court of Appeals, et al., 3"R" No" 1:<11<7 5u&' @7 /001 +hich he!d that i$ order or the r-!e o$ solutio
inde"eti to app!y it i. a$ e..e$tia! co$ditio$ that the petitio$er #-.t ir.t .ho+ that it. pay#e$t o the c-.to#. d-tie. +a. i$ e2ce.. o +hat +a. re1-ired by the !a+ at the ti#e the .-b6ect 16 i#portatio$. o #i!/ a$d #i!/ prod-ct. +ere #ade. 3$!e.. .ho+$ other+i.e' the di.p-tab!e pre.-#ptio$ o reg-!arity o per or#a$ce o d-ty !ie. i$ a0or o the (o!!ector o (-.to#..

1<" Ta. re*u-(s $re,ise( u$o- a ta. e.e,$tiostri%t&' %o-strue(7 Ta2 e2e#ptio$ i. a re.-!t o !egi.!ati0e grace. A$d
he +ho c!ai#. a$ e2e#ptio$ ro# the b-rde$ o ta2atio$ #-.t 6-.ti y hi. c!ai# by .ho+i$g that the !egi.!at-re i$te$ded to e2e#pt hi# by +ord. too p!ai$ to be #i.ta/e$. GCommissioner of Internal Revenue v. /ortune
(o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200? citi$g Surigao Consolidated Mining Co. Inc. v. Commissioner of Internal Revenue and Court of (a) Appeals' 11F Phi!. BB' B@ %1F6B&I

1:" Stri%t i-ter$retatio- o* a ta. re*u-( t at $artaGes o* t e -ature o* a ta. (oes -ot a$$&' to ta. re*u-( )ase( oerro-eous $a',e-t or w ere t ere is -o &aw t at aut oriDes %o&&e%tio- o* t e ta." There i. parity bet+ee$ ta2 re -$d a$d ta2
e2e#ptio$ o$!y +he$ the or#er i. ba.ed either o$ a ta2 e2e#ptio$ .tat-te or a ta2 re -$d .tat-te. %Commissioner of Internal Revenue v.
/ortune (o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200?&

The r-!e i. that ta2 e2e#ptio$. #-.t be .trict!y co$.tr-ed .-ch that the e2e#ptio$ +i!! $ot be he!d to be co$ erred -$!e.. the ter#. -$der +hich it i. gra$ted c!ear!y a$d di.ti$ct!y .ho+ that .-ch +a. the i$te$tio$.
GCommissioner, supra citi$g Phil. Acetylene Co. v. Commission of Internal Revenue' et a!.' 12@ Phi!. E61' E@2 %1F6@&D Manila &lectric Company v. 3era' <.R. No. ),2FF?@' 22 October 1F@>' 6@ S(RA B>1' B>@,B>?D Surigao Consolidated Mining Co. Inc. v. Commissioner of Internal Revenue' supraI

Ta2 re -$d. %or ta2 credit.&' o$ the other ha$d' are $ot o-$ded pri$cipa!!y o$ !egi.!ati0e grace b-t o$ the !ega! pri$cip!e +hich -$der!ie. a!! 1-a.i,co$tract. abhorri$g a per.o$:. -$6-.t e$rich#e$t at the e2pe$.e o a$other. GCommissioner, supra citi$g Ramie (e)tiles, Inc. v. 'on. Mathay '
Sr.' 1@? Phi!. E?2 %1F@F&D Puyat . Sons v. City of Manila ' et a!.' 11@ Phi!. F?> %1F6B&I

The dy$a#ic o erro$eo-. pay#e$t o ta2 it. to a tee the prototypic 1-a.i,co$tract' solutio inde"iti, +hich co0er. $ot o$!y #i.ta/e i$ act b-t a!.o #i.ta/e i$ !a+. %Commissioner, supra citi$g (4V4) (O"E'
Art.. 21E2' 21>E a$d 21>>&

A c!ai# or ta2 re -$d #ay be ba.ed o$ .tat-te. gra$ti$g ta2 e2e#ptio$ or ta2 re -$d. 4$ .-ch ca.e' the r-!e o .trict i$terpretatio$ agai$.t the ta2payer i. app!icab!e a. the c!ai# or re -$d parta/e. o the $at-re o a$ e2e#ptio$' a !egi.!ati0e grace' +hich ca$$ot be a!!o+ed -$!e.. gra$ted i$ the #o.t e2p!icit a$d categorica! !a$g-age. The ta2payer #-.t .ho+ that the !egi.!at-re i$te$ded to e2e#pt hi# ro# the ta2 by +ord. too p!ai$ to be #i.ta/e$. GCommissioner, supra +ith a $ote to
.ee Surigao Consolidated Mining Co. Inc. v. CIR' supra at @B2,@BBD Phile) Mining Corp. v. Commissioner of Internal Revenue ' B6> Phi!. >@2' >@F %1FFF&D %avao +ulf $um"er Corp. v. Commissioner of Internal Revenue ' B>E Phi!. ?F1, ?F2 %1FF?&D . Commissioner of Internal Revenue v. (o-yo Shipping Co., $td .' B1E Phi!. 220' 22? %1FF>&I

The <o0er$#e$t i. $ot e2e#pt ro# the app!icatio$ o solutio inde"iti. %Commissioner, supra citi$g Commissioner of Internal Revenue v.
/ireman>s /und Insurance Co.' <.R. No. ),B06EE' F *arch 1F?@' 1E? S(RA B1>' B2E,B2>D Ramie (e)tiles, Inc. v. Mathay, supra D +onzales Puyat . Sons v. City of Manila' supra&

1>" E**e%t o* a BIR reversa& o* a $revious ru&i-; i-ter$reti-; a &aw as e.e,$ti-; a ta.$a'er" A re0er.a! o a B4R
r-!i$g a0orab!e to a ta2payer +o-!d $ot $ece..ari!y create a perpet-a! e2e#ptio$ i$ hi. a0or' or a ter a!! the go0er$#e$t i. $e0er e.topped ro# co!!ecti$g ta2e. beca-.e o #i.ta/e. or error. o$ the part o it. age$t..
*$incoln Philippine $ife Insurance Company, Inc., etc., v. Court of Appeals, et al., 2FB S(RA F2' FF&

4$deed' the ta2payer e2pect. air dea!i$g ro# the <o0er$#e$t' a$d the !atter ha. the d-ty to re -$d +itho-t a$y -$rea.o$ab!e de!ay +hat it ha. erro$eo-.!y co!!ected. %Commissioner, supra citi$g Commissioner of Internal Revenue v. (o-yo Shipping Co., supra at BB?& 4 the State e2pect. it. ta2payer. to ob.er0e air$e.. a$d ho$e.ty i$ payi$g their ta2e.' it #-.t ho!d it.e! agai$.t the .a#e .ta$dard i$ re -$di$g e2ce.. %or erro$eo-.& pay#e$t. o .-ch ta2e.. 4t .ho-!d $ot -$6-.t!y e$rich it.e! at the e2pe$.e o ta2payer.. GCommissioner, supra citi$g AB $easing and /inance
Corporation v. Commissioner of Internal Revenue' E>B Phi!. 2F@ i$ t-r$ citi$g BPI0/amily Savings Ban-, Inc. v. Court of Appeals' BB0 S(RA >0@' >10' >1? %2000&I A$d .o' gi0e$ it. e..e$ce' a c!ai# or ta2 re -$d $ece..itate. o$!y

prepo$dera$ce o e0ide$ce or it. approbatio$ !i/e i$ a$y other ordi$ary ci0i! ca.e. %Commissioner, supra&

1@" A ta. a,-est' i. a ge$era! pardo$ or i$te$tio$a! o0er!oo/i$g by the State o it. a-thority to i#po.e pe$a!tie. o$ per.o$. other+i.e g-i!ty o e0a.io$ or 0io!atio$ o a re0e$-e or a ta2 !a+. 4t parta/e. o a$ ab.o!-te +ai0er by the go0er$#e$t o it. right to co!!ect +hat i. d-e it a$d to gi0e ta2 e0ader. +ho +i.h to re!e$t a cha$ce to .tart +ith a c!ea$ .!ate. A ta2 a#$e.ty' #-ch !i/e a ta2 e2e#ptio$' i. $e0er a0ored $or pre.-#ed i$ !a+. The gra$t o a ta2 a#$e.ty' .i#i!ar to a ta2 e2e#ptio$' #-.t be co$.tr-ed .trict!y agai$.t the ta2payer a$d !ibera!!y i$ a0or o the ta2i$g a-thority. %Philippine Ban-ing Corporation,
etc., v. Commissioner of Internal Revenue, <. R. No. 1@0>@E' Aa$-ary B0' 200F&

19

1B"

T e $ur$ose o* ta. a,-est' i. to

a. gi0e ta2 e0ader. +ho +i.h to re!e$t a cha$ce to .tart a c!ea$ .!ate' a$d to b. gi0e the go0er$#e$t a cha$ce to co!!ect -$co!!ected ta2 ro# ta2 e0ader. +itho-t ha0i$g to go thro-gh the tedio-. proce.. o a ta2 ca.e. *Banas, ,r. v. Court of Appeals, et al., <.R. No. 102F6@' Cebr-ary
10' 2000#

//" Ta. s$ari-; i. a pro0i.io$ i$ .o#e ta2 treatie. +hich pro0ide. that the .tate o re.ide$ce a!!o+. a. credit the a#o-$t that +o-!d ha0e bee$ paid' a. i $o red-ctio$ ha. bee$ #ade. %Voge!' R!a-. o$
"o-b!e Ta2atio$ (o$0e$tio$.' Third Editio$' p.12>> cited i$ Segarra' Ve$ice 7' Ta2 Treatie.8 Tric/ or treat M' Phi!ippi$e "ai!y 4$1-irer' "ece#ber 6' 2002' p. (>&

1C"

Ta. a,-est' (isti-;uis e( *ro, ta. e.e,$tio-"

a. Ta2 a#$e.ty i. a$ i##-$ity ro# a!! cri#i$a!' ci0i! a$d ad#i$i.trati0e !iabi!itie. ari.i$g ro# $o$pay#e$t o ta2e. % People v. Castaneda, <.R. No. ),E6??1' Septe#ber 1>' 1F??& =74)E a ta2 e2e#ptio$ i. a$ i##-$ity ro# ci0i! !iabi!ity o$!y. 4t i. a$ i##-$ity or pri0i!ege' a reedo# ro# a charge or b-rde$ to +hich other. are .-b6ected. */lorer v. Sheridan, ?@A Ind. BC, @D !& @DE# b. Ta2 a#$e.ty app!ie. o$!y to pa.t ta2 period.' he$ce o retroacti0e app!icatio$ *Castaneda, supra& =74)E ta2 e2e#ptio$ ha. pro.pecti0e app!icatio$.

There #ay be i$.ta$ce. +here a partic-!ar i$co#e i. e2e#pt ro# ta2atio$ i$ order to e$co-rage oreig$ i$0e.t#e$t. +hich #ay !ead to eco$o#ic de0e!op#e$t. 4 the ta2 credit #ethod i. -.ed' there +o-!d be $o #ore ta2 to credit .i$ce there i. $o #ore ta2 to credit a. a re.-!t o the ta2 e2e#ptio$. (o$.e1-e$t!y' +he$ the ta2 #ethod credit #ethod i. app!ied to the.e ite#. o i$co#e' .-ch i$ce$ti0e. are .ipho$ed o .i$ce' i$ e ect' the ta2 be$e it. are ca$ce!!ed o-t. *I"id.# Th-.' the $eed or the ta2 .pari$g pro0i.io$.

NATIONAL INTERNAL REVENUE CO+E

OR3ANIMATION AN+ FUNCTIONS OF THE BUREAU OF INTERNAL REVENUE 1" Re$" A%t No" 1<0>7 t e Ba-G +e$osits Se%re%' Law $ro i)its i-Fuir' i-to )a-G (e$osits" As e.%e$tio-s to Re$" A%t No" 1<0>7 t e Co,,issio-er o* I-ter-a& Reve-ue is o-&' aut oriDe( to i-Fuire i-to t e )a-G (e$osits o*4
a. a decede$t to deter#i$e hi. gro.. e.tateD a$d b. a$y ta2payer +ho ha. i!ed a$ app!icatio$ or co#pro#i.e o hi. ta2 !iabi!ity by rea.o$ o i$a$cia! i$capacity to pay hi. ta2 !iabi!ity. GSec. > %C&' N4R( o 1FF@I c. A ta2payer +ho a-thori;e. the (o##i..io$er to i$1-ire i$to hi. ba$/ depo.it..

1E"

Ta. avoi(a-%e i. the -.e o !ega!!y per#i..ib!e #ea$. to

red-ce the ta2 +hi!e ta2 e0a.io$ i. the -.e o i!!ega! #ea$. to e.cape the pay#e$t o ta2e..

/0" *a%tors4 a.

Ta. evasio- %o--otes t e i-te;ratio- o* t ree

The e$d to be achie0ed' i.e.' the pay#e$t o !e.. tha$ that /$o+$ by the ta2payer to be !ega!!y d-e' or the $o$,pay#e$t o ta2 +he$ it i. .ho+$ that a ta2 i. d-eD b. a$ acco#pa$yi$g .tate o #i$d +hich i. de.cribed a. bei$g e0i! o$ bad aith' +i!! -!' or de!iberate a$d $ot accide$ta!D a$d c. a co-r.e o actio$ or ai!-re o actio$ +hich i. -$!a+ -!.
%Commissioner of Internal Revenue v. (he &state of Benigno P. (oda, ,r., , etc., <. R. No. 1E@1??' Septe#ber 1E' 200E&

/" Pur$ose o* t e NIRC o* 1EEB" Reve-ue ;e-eratioas u-(ou)te(&' )ee- a ,aAor %o-si(eratio- i- t e $assa;e o* t e Ta. Co(e" %Commissioner of Internal Revenue v. /ortune (o"acco
Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200?&

/1.
evasio-"

Ta.

avoi(a-%e

(isti-;uis e(

*ro,

ta.

a. Ta2 a0oida$ce i. !ega! +hi!e ta2 e0a.io$ i. i!!ega!. b. The ob6ecti0e o ta2 a0oida$ce i$ #o.t i$.ta$ce. i. #ere!y to red-ce the ta2 that i. d-e +hi!e i. ta2 e0a.io$ the ob6ect i. to e$tire!y e.cape the pay#e$t o ta2e.. c. Ta2 e0a.io$ +arra$t. the i#po.itio$ o ci0i!' ad#i$i.trati0e a$d cri#i$a! pe$a!tie. +hi!e ta2 a0oida$ce doe. $ot.

:" Pur$ose o* s i*t *ro, a( va&ore, s'ste, to s$e%i*i% ta. s'ste, i- ta.atio- o* %i;arettes" The .hi t ro# the
ad valorem .y.te# to the .peci ic ta2 .y.te# i. !i/e+i.e #ea$t to pro#ote air co#petitio$ a#o$g the p!ayer. i$ the i$d-.trie. co$cer$ed' to e$.-re a$ e1-itab!e di.trib-tio$ o the ta2 b-rde$ a$d to .i#p!i y ta2 ad#i$i.tratio$ by c!a..i yi$g cigarette.' a#o$g other.' i$to high' #edi-# a$d !o+,priced ba.ed o$ their $et retai! price a$d accordi$g!y grad-ati$g ta2 rate.. %Commissioner of Internal Revenue v.
/ortune (o"acco Corporation, <. R. No.. 16@2@E,@>' A-!y 21' 200?&

20

TA2 ON INCO=E
1" T e Ta. Co(e as i-%&u(e( u-(er t e ter, !%or$oratio-# $art-ers i$s7 -o ,atter ow %reate( or orga$i;ed'
6oi$t,.toc/ co#pa$ie.' 6oi$t acco-$t. %cuentas en participacion&' a..ociatio$.' or i$.-ra$ce co#pa$ie.. GSec. 2E $o+ Sec. 2E %B& o the N4R( o 1FF@I /" 4$ &vangelista v. Collector, 102 Phi!. 1E0, the S-pre#e (o-rt he!d citi$g *erte$. that t e ter, $art-ers i$ i-%&u(es a .y$dicate' gro-p' poo!' 6oi$t 0e$t-re or other -$i$corporated orga$i;atio$' thro-gh or by #ea$. o +hich a$y b-.i$e..' i$a$cia! operatio$' or 0e$t-re i. carried o$.

the )a+ o Part$er.hip by C!oyd R. *eche#' 2 $d Ed.' Sec. ?B' p. @E cited i$ Pascual v. Commissioner of Internal Revenue, 166 S(RA >60&

>" T e %o,,o- ow-ers i$ o* $ro$ert' (oes -ot itse&* %reate a $art-ers i$ )etwee- t e ow-ers ' tho-gh they #ay -.e it
or p-rpo.e o #a/i$g gai$.' a$d they #ay' +itho-t beco#i$g part$er.' are a#o$g the#.e!0e. a. to the #a$age#e$t a$d -.e o .-ch property a$d the app!icatio$ o the proceed. there ro#.. %Spurloc- v,. 1ilson, 1E2 S.=. B6B' 160 !o. App. ?F' cited i$ Pascual v. Commissioner of Internal Revenue, 166 S(RA >60&

@" T e i-%o,e *ro, t e re-ta& o* t e ouse7 )ou; t *ro, t e ear-i-;s o* %o-ow-e( $ro$erties7 s a&& )e treate( as t e i-%o,e o* a- u-re;istere( $art-ers i$ to be ta2ab!e a. a
corporatio$ beca-.e o the c!ear i$te$tio$ o the brother. to 6oi$ together i$ a 0e$t-re or #a/i$g #o$ey o-t o re$ta!..

:. Certai- )usi-ess or;a-iDatio-s (o -ot *a&& u-(er t e %ate;or' o* !%or$oratio-s# u-(er t e Ta. Co(e' a$d there ore $ot
.-b6ect to ta2 a. corporatio$.' i$c!-de8 a. <e$era! pro e..io$a! part$er.hip.D b. Aoi$t 0e$t-re or co$.orti-# or#ed or the p-rpo.e o -$derta/i$g co$.tr-ctio$ pro6ect. e$gagi$g i$ petro!e-#' coa!' geother#a!' a$d other e$ergy operatio$.' p-r.-a$t to a$ operatio$ or co$.orti-# agree#e$t -$der a .er0ice co$tract +ith the <o0er$#e$t. G1 .t .e$te$ce' Sec. 22 %B&' B4R( o 1FF@I

B" I-%o,e i. gai$ deri0ed a$d .e0ered ro# capita!' ro# !abor or ro# both co#bi$ed. Cor e2a#p!e' to ta2 a .toc/ di0ide$d +o-!d be to ta2 a capita! i$crea.e rather tha$ the i$co#e. *Commissioner of Internal Revenue v. Court of Appeals, et al., +.R. !o. ?GCEAD, ,anuary BG, ?HHH# C" The ter# ta.a)&e i-%o,e #ea$. the perti$e$t ite#. o gro.. i$co#e .peci ied i$ the Ta2 (ode' !e.. the ded-ctio$. a$d9or per.o$a! a$d additio$a! e2e#ptio$.' i a$y' a-thori;ed or .-ch type. o i$co#e by the Ta2 (ode or other .pecia! !a+.. %Sec. B1' N4R( o 1FF@& E" T e %a-%e&&atio- a-( *or;ive-ess o* i-(e)te(-ess
or to a %c& capita! #ay a#o-$t to %a& pay#e$t o i$co#eD %b& gi tD tra$.actio$ depe$di$g -po$ the circ-#.ta$ce..

<" Co- eirs w o ow- i- erite( $ro$erties w i% $ro(u%e i-%o,e s ou&( -ot auto,ati%a&&' )e %o-si(ere( as $art-ers o* a- u-re;istere( %or$oratio- su)Ae%t to i-%o,e ta. *or t e *o&&owi-; reaso-s4
a. The .hari$g o gro.. ret-r$. doe. $ot o it.e! e.tab!i.h a part$er.hip' +hether or $ot the per.o$. .hari$g the# ha0e a 6oi$t or co##o$ right or i$tere.t i$ a$y property ro# +hich the ret-r$. are deri0ed. There #-.t be a$ -$#i.ta/ab!e i$te$tio$ to or# a part$er.hip or 6oi$t 0e$t-re. *9"illos, ,r. v. Commissioner of Internal Revenue, 1BF S(RA EB6& b. There i. $o co$trib-tio$ or i$0e.t#e$t o additio$a! capita! to i$crea.e or e2pa$d the i$herited propertie.' #ere!y co$ti$-i$g the dedicatio$ o the property to the -.e to +hich it had bee$ p-t by their orebear.. %I"id.& c. Per.o$. +ho co$trib-te property or -$d. to a co##o$ e$terpri.e a$d agree to .hare the gro.. ret-r$. o that e$terpri.e i$ proportio$ to their co$trib-tio$' b-t +ho .e0era!!y retai$ the tit!e to their re.pecti0e co$trib-tio$' are $ot thereby re$dered part$er.. They ha0e $o co##o$ .toc/ capita!' a$d $o co##-$ity o i$tere.t a. pri$cipa! proprietor. i$ the b-.i$e.. it.e! ro# +hich the proceed. +ere deri0ed. %E!e#e$t. o

10" I* a- i-(ivi(ua& $er*or,s servi%es *or a %re(itor w o7 i- %o-si(eratio- t ereo*7 %a-%e&s t e (e)t7 it is i-%o,e to
the e2te$t o the a#o-$t rea!i;ed by the debtor a. co#pe$.atio$ or hi. .er0ice..

11" A- i-so&ve-t (e)tor (oes -ot rea&iDe ta.a)&e i-%o,e *ro, t e %a-%e&&atio- or *or;ive-ess" *Commissioner v. Simmons
+in Co., EB Cd B2@ ((A 10th&

1/" T e i-so&ve-t (e)tor rea&iDes i-%o,e resu&ti-; *ro, t e %a-%e&&atio- or *or;ive-ess o* i-(e)te(-ess w e- e )e%o,es so&ve-t. *$a-eland +rocery Co., v. Commissioner B6 BTA %C&
2?F&

21

1:" I* a %re(itor ,ere&' (esires to )e-e*it a (e)tor a-( wit out a-' %o-si(eratio- t ere*or %a-%e&s t e a,ou-t o* t e (e)t it is a ;i*t *ro, t e %re(itor to t e (e)tor a-( -ee( -ot )e i-%&u(e( i- t e &atter8s i-%o,e" 1<" I* a %or$oratio- to w i% a sto%G o&(er is i-(e)te( *or;ives t e (e)t7 t e tra-sa%tio- as t e e**e%t o* $a',e-t o* a (ivi(e-(" %Sec. >0' Re0. Reg.. No. 2& 1>" =e,)ers o* %oo$eratives -ot su)Ae%t to ta. o- t e i-terest ear-e( *ro, t eir (e$osits wit t e %oo$erative" No !e..
tha$ o-r (o$.tit-tio$ g-ara$tee. the protectio$ o cooperati0e.. Sectio$ 1>' Artic!e L44 o the (o$.tit-tio$ co$.ider. cooperati0e. a. i$.tr-#e$t. or .ocia! 6-.tice a$d eco$o#ic de0e!op#e$t. At the .a#e ti#e' Sectio$ 10 o Artic!e 44 o the (o$.tit-tio$ dec!are. that it i. a po!icy o the State to pro#ote .ocia! 6-.tice i$ a!! pha.e. o $atio$a! de0e!op#e$t. 4$ re!atio$ thereto' Sectio$ 2 o Artic!e L444 o the (o$.tit-tio$ .tate. that the pro#otio$ o .ocia! 6-.tice .ha!! i$c!-de the co##it#e$t to create eco$o#ic opport-$itie. ba.ed o$ reedo# o i$itiati0e a$d .e! ,re!ia$ce. Beari$g i$ #i$d the oregoi$g pro0i.io$.' +e i$d that a$ i$terpretatio$ e2e#pti$g the #e#ber. o cooperati0e. ro# the i#po.itio$ o the i$a! ta2 -$der Sectio$ 2E%B&%1& o the N4R( %ta2 o$ i$tere.t ear$ed by depo.it.& i. #ore i$ /eepi$g +ith the !etter a$d .pirit o o-r (o$.tit-tio$. %%umaguete
Cathedral Credit Coopertive 5%CCC#6 etc., v. Commissioner of Internal Revenue, <. R. No. 1?2@22' Aa$-ary 22' 2010&

1C" U-(er t e Natio-a& I-ter-a& Reve-ue Co(e t e ;&o)a& s'ste, is a$$&i%a)&e to ta.a)&e %or$oratio-s a-( t e s% e(u&ar to i-(ivi(ua&s" 1E" Co,$e-satio- i-%o,e is %o-si(ere( as avi-; )ee- ear-e( i- t e $&a%e w ere t e servi%e was re-(ere( a$d
$ot co$.idered a. .o-rced ro# the p!ace o origi$ o the #o$ey.

/0" Pa',e-t *or servi%es7 ot er t a- %o,$e-satioi-%o,e7 is %o-si(ere( as avi-; )ee- ear-e( at t e $&a%e w ere t e a%tivit' or servi%e was $er*or,e(" /1" A -o--resi(e-t a&ie-7 w o as sta'e( i- t e P i&i$$i-es *or a- a;;re;ate $erio( o* ,ore t a- 1C0 (a's (uri-; a-' %a&e-(ar 'ear7 s a&& )e %o-si(ere( as a -o-resi(e-t a&ie- (oi-; )usi-ess i- t e P i&i$$i-es" (o$.e1-e$t!y'
he .ha!! be .-b6ect to i$co#e ta2 o$ hi. i$co#e deri0ed ro# .o-rce. ro# +ithi$ the Phi!ippi$e.. GSec. 2> %A& %1&' N4R(I 7e i. a!!o+ed to a0ai! o the ite#i;ed ded-ctio$. i$c!-di$g the per.o$a! a$d additio$a! e2e#ptio$. .-b6ect to the r-!e o$ reciprocity.

//" W at are %o-si(ere( as de minimis )e-e*its -ot su)Ae%t to wit o&(i-; ta. o- %o,$e-satio- i-%o,e o* )ot ,a-a;eria& a-( ra-G a-( *i&e e,$&o'ees 9
S3<<ESTE" ANS=ER8 a. *o$eti;ed -$-.ed 0acatio$ !ea0e credit. o e#p!oyee. $ot e2ceedi$g te$ %10& day. d-ri$g the yearD b. *edica! ca.h a!!o+a$ce to depe$de$t. o e#p!oyee. $ot e2ceedi$g P@>0.00 per e#p!oyee per .e#e.ter or P12> per #o$thD c. Rice .-b.idy o P1'000.00 or o$e %1& .ac/ o >0,/g. rice per #o$th a#o-$ti$g to $ot #ore tha$ P1'000.00D d. 3$i or#. a$d c!othi$g a!!o+a$ce $ot e2ceedi$g PB'000.00 per a$$-#D e. Act-a! year!y #edica! be$e it. $ot e2ceedi$g P10'000.00 per a$$-#D . )a-$dry a!!o+a$ce $ot e2ceedi$g PB00 per #o$thD g. E#p!oyee. achie0e#e$t a+ard.' e.g. or !e$gth o .er0ice or .a ety achie0e#e$t' +hich #-.t be i$ the or# o a ta$gib!e per.o$a property other tha$ ca.h or gi t certi icate' +ith a$ a$$-a! #o$etary 0a!-e $ot e2ceedi$g P10'000.00 recei0ed by a$ e#p!oyee -$der a$ e.tab!i.hed +ritte$ p!a$ +hich doe. $ot di.cri#i$ate i$ a0or o high!y paid e#p!oyee.D h. <i t. gi0e$ d-ri$g (hri.t#a. a$d #a6or a$$i0er.ary ce!ebratio$. $ot e2ceedi$g P>'000 per e#p!oyee per a$$-#D

4$ c!o.i$g' cooperati0e.' i$c!-di$g their #e#ber.' de.er0e a pre ere$tia! ta2 treat#e$t beca-.e o the 0ita! ro!e they p!ay i$ the attai$#e$t o eco$o#ic de0e!op#e$t a$d .ocia! 6-.tice. Th-.' a!tho-gh ta2e. are the !i eb!ood o the go0er$#e$t' the State:. po+er to ta2 #-.t gi0e +ay to o.ter the creatio$ a$d gro+th o cooperati0e.. To borro+ the +ord. o A-.tice 4.aga$i A. (r-;8 The po+er o ta2atio$' +hi!e i$di.pe$.ab!e' i. $ot ab.o!-te a$d #ay be .-bordi$ated to the de#a$d. o .ocia! 6-.tice. %I"id., citi$g Commissioner of Internal Revenue
v. American &)press International, Inc. *Philippine Branch#' >00 Phi!. >?6 %200>&.

1@" The 3&o)a& s'ste, o* i-%o,e ta.atio- i. a .y.te# e#p!oyed +here the ta2 .y.te# 0ie+. i$di ere$t!y the ta2 ba.e a$d ge$era!!y treat. i$ co##o$ a!! categorie. o ta2ab!e i$co#e o the i$di0id-a!. *(an v. del Rosario, ,r., 2B@ S(RA B2E' BB1& 1B" T e S% e(u&ar s'ste, o* i-%o,e ta.atio- i. a .y.te# e#p!oyed +here the i$co#e ta2 treat#e$t 0arie. a$d i. #ade to depe$d o$ the /i$d or category o ta2ab!e i$co#e o the ta2payer. *(an v. del Rosario, ,r., B@A SCRA @BF, @@?#

i. C!o+er.' r-it.' boo/.' or .i#i!ar ite#. gi0e$ to e#p!oyee. -$der .pecia! circ-#.ta$ce.' e.g. o$ acco-$t o i!!$e..' #arriage' birth o a baby' etc.D a$d 6. "ai!y #ea! a!!o+a$ce or o0erti#e +or/ $ot e2ceedi$g t+e$ty i0e perce$t %2>H& o the ba.ic #i$i#-# +age. The a#o-$t o de minimis be$e it. co$ or#i$g to the cei!i$g herei$ pre.cribed .ha!! $ot be co$.idered i$ deter#i$i$g the PB0'000 cei!i$g o other be$e it. pro0ided -$der Sectio$ B2 %B&%@&%e& o the (ode. 7o+e0er' i the e#p!oyer pay. #ore tha$ the cei!i$g pre.cribed by the.e reg-!atio$.' the e2ce.. .ha!! be ta2ab!e to the e#p!oyee recei0i$g the be$e it. o$!y i .-ch e2ce.. i. beyo$d the PB0'000.00 cei!i$g' pro0ided' -rther' that a$y a#o-$t gi0e$ by the e#p!oyer a. be$e it. to it. e#p!oyee.' +hether c!a..i ied a. de minimis be$e it. or ri$ge be$e it.' .ha!! co$.tit-te a. ded-ctib!e e2pe$.e -po$ .-ch e#p!oyer. GSec. 2.@?.1 %A& %B&' Re0. Reg.. 2,F? a. a#e$ded by Re0. Reg.. No. ?,2000I

22

/:" I-%o,e su)Ae%t to !*i-a& ta.# re*ers to a- i-%o,e %o&&e%te( t rou; t e wit o&(i-; ta. s'ste," The payor o the
i$co#e +ithho!d. the ta2 a$d re#it. it to the go0er$#e$t a. a i$a! .ett!e#e$t o the i$co#e ta2 a. a i$a! .ett!e#e$t o the i$co#e ta2 d-e o$ .aid i$co#e. The recipie$t i. $o !o$ger re1-ired to i$c!-de the i$co#e .-b6ected to a i$a! ta2 a. part o hi. gro.. i$co#e i$ hi. i$co#e ta2 ret-r$.

b. A#o-$t. recei0ed by the i$.-red a. a ret-r$ o pre#i-#. paid by hi# -$der !i e i$.-ra$ce' e$do+#e$t or a$$-ity co$tract. either d-ri$g the ter#' or at #at-rity o the ter# #e$tio$ed i$ the co$tract' or -po$ .-rre$der o the co$tract. c. Va!-e o property ac1-ired by gi t' be1-e.t' de0i.e' or de.ce$t. d. A#o-$t. recei0ed' thro-gh accide$t or hea!th i$.-ra$ce or =or/#e$:. (o#pe$.atio$ Act. a. co#pe$.atio$ or per.o$a! i$6-rie. or .ic/$e..' p!-. the a#o-$t. o a$y da#age. recei0ed o$ +hether by .-it or agree#e$t o$ acco-$t o .-ch i$6-rie. or .ic/$e... e. 4$co#e o a$y /i$d to the e2te$t re1-ired by a$y treaty ob!igatio$ bi$di$g -po$ the <o0er$#e$t o the Phi!ippi$e.. . Retire#e$t be$e it. recei0ed -$der Rep-b!ic Act No. @6E1. Retire#e$t recei0ed ro# rea.o$ab!e pri0ate be$e it p!a$ a ter co#p!ia$ce +ith certai$ co$ditio$.. A#o-$t. recei0ed or beyo$d co$tro! .eparatio$. Coreig$ .ocia! .ec-rity' retire#e$t grat-itie.' pe$.io$.' etc. 3SVA be$e it.' SSS be$e it. a$d <S4S be$e it..

/@" W at are t e %o-(itio-s *or e.%&u(i-; retire,e-t )e-e*its *ro, ;ross i-%o,e7 e-%e ta.-e.e,$t 9
S3<<ESTE" ANS=ER8 a. Retire#e$t be$e it. recei0ed -$der Rep-b!ic Act No. @6E1 a$d tho.e recei0ed by o icia!. a$d e#p!oyee. o pri0ate ir#.' +hether i$di0id-a! or corporate' i$ accorda$ce +ith the e#p!oyer:. rea.o$ab!e pri0ate be$e it p!a$ appro0ed by the B4R. b. Retiri$g o icia! or e#p!oyee 1& 4$ the .er0ice o the .a#e e#p!oyer or at !ea.t te$ %10& year.D 2& Not !e.. tha$ i ty %>0& year. o age at ti#e o retire#e$tD B& A0ai!ed o the be$e it o e2c!-.io$ o$!y o$ce. GSec. B2 %B& %6& %a&' N4R( o 1FF@I The retiri$g o icia! or e#p!oyee .ho-!d $ot ha0e pre0io-.!y a0ai!ed o the pri0i!ege -$der the retire#e$t p!a$ o the .a#e or a$other e#p!oyer. G1.t par.' Sec. 2.@? %B& %1&' Re0. Reg.. No. 2,F?I

/<"

+isti-;uis e.%&usio-s *ro, (e(u%tio-s"

S3<<ESTE" ANS=ER8 a. E2c!-.io$. ro# gro.. i$co#e re er to a !o+ o +ea!th to the ta2payer +hich are $ot treated a. part o gro.. i$co#e or p-rpo.e. o co#p-ti$g the ta2payer:. ta2ab!e i$co#e' d-e to the o!!o+i$g rea.o$.8 %1& 4t i. e2e#pted by the -$da#e$ta! !a+D %2& 4t i. e2e#pted by .tat-teD a$d %B& 4t doe. $ot co#e +ithi$ the de i$itio$ o i$co#e %Sec. 61' Re0. Reg.. No. 2& =74)E ded-ctio$. are the a#o-$t. +hich the !a+ a!!o+. to be .-btracted ro# gro.. i$co#e i$ order to arri0e at $et i$co#e. b. E2c!-.io$. pertai$ to the co#p-tatio$ o gro.. i$co#e =74)E ded-ctio$. pertai$ to the co#p-tatio$ o $et i$co#e. c. E2c!-.io$. are .o#ethi$g recei0ed or ear$ed by the ta2payer +hich do $ot or# part o gro.. i$co#e =74)E ded-ctio$. are .o#ethi$g .pe$t or paid i$ ear$i$g gro.. i$co#e. A$ e2a#p!e o a$ e2c!-.io$ ro# gro.. i$co#e are !i e i$.-ra$ce proceed.' a$d a$ e2a#p!e o a ded-ctio$ are !o..e..

W at Gi-( o* se$aratio- Hretire,e-tI $a' is e.%&u(e( *ro, ;ross i-%o,e7 e-%e ta.-e.e,$t 9
S3<<ESTE" ANS=ER8 a. A$y a#o-$t recei0ed by a$ o icia!' e#p!oyee or by hi. heir.' b. Cro# the e#p!oyer c. A. a co$.e1-e$ce o .eparatio$ o .-ch o icia! or e#p!oyee ro# the .er0ice o the e#p!oyer beca-.e o 1& "eath' .ic/$e.. or other phy.ica! di.abi!ityD or

/B"

/>"

W at are e.%&u(e( *ro, ;ross i-%o,e 9

S3<<ESTE" ANS=ER8 a. Proceed. o !i e i$.-ra$ce po!icie. paid to the heir. or be$e iciarie. -po$ the death o the i$.-red +hether i$ a .i$g!e .-# or other+i.e.

2& Cor a$y ca-.e beyo$d the co$tro! o .aid o icia! or e#p!oyee GSec. B2 %B& %6& %b&' N4R( o 1FF@I' .-ch a. retre$ch#e$t' red-$da$cy a$d ce..atio$ o b-.i$e... G1.t par.' Sec. 2.@? %B&' %1& %b&' Re0. Reg.. No. 2,F?I

23

/C" W at are t e Ite,iDe( (e(u%tio-s *ro, ;ross i-%o,e a-( w o ,a' avai& o* t e, 9
a. Or(i-ar' a-( -e%essar' trade' b-.i$e.. or pro e..io$a! e.$e-ses. b. The a#o-$t o i-terest paid or i$c-rred +ithi$ a ta2ab!e year o$ i$debted$e.. i$ co$$ectio$ +ith the ta2payer:. pro e..io$' trade or b-.i$e... Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e. c. Ta.es paid or i$c-rred +ithi$ the ta2ab!e year i$ co$$ectio$ +ith the ta2payer:. pro e..io$. Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e. d. Ordi$ary &osses' !o..e. ro# ca.-a!ty' the t or e#be;;!e#e$tD a$d $et operati$g !o..e.. Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e. e. Ba( (e)ts d-e to the ta2payer' act-a!!y a.certai$ed to be +orth!e.. a$d charged o +ithi$ the ta2ab!e year' co$$ected +ith pro e..io$' trade or b-.i$e..' $ot .-.tai$ed bet+ee$ re!ated partie.. Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e.

other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e. . +e$re%iatio- or a rea.o$ab!e a!!o+a$ce or the e2ha-.tio$' +ear a$d tear %i$c!-di$g rea.o$ab!e a!!o+a$ce or ob.o!e.ce$ce& o property -.ed i$ trade or b-.i$e... Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e. g. +e$&etio- or ded-ctio$ ari.i$g ro# the e2ha-.tio$ o a $o$, rep!aceab!e a..et' -.-a!!y a $at-ra! re.o-rce. Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e. h. C arita)&e a$d other %o-tri)utio-s. Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e. i. Resear% a-( (eve&o$,e-t e2pe$dit-re. treated a. de erred e2pe$.e. paid or i$c-rred by the ta2payer i$ co$$ectio$ +ith hi. trade' b-.i$e.. or pro e..io$' $ot ded-cted a. e2pe$.e. a$d chargeab!e to capita! acco-$t b-t $ot chargeab!e to property o a character +hich i. .-b6ect to depreciatio$ or dep!etio$. Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e.

No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e. 6. Co-tri)utio-s to $e-sio- trusts. Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. "o#e.tic corporatio$.' e.tate. a$d tr-.t. #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t citi;e$. a$d oreig$ corporatio$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e. /. I-sura-%e $re,iu,s or hea!th a$d ho.pita!i;atio$. Re.ide$t citi;e$.' re.ide$t a!ie$ i$di0id-a!. a$d $o$re.ide$t a!ie$ i$di0id-a!. +ho are e$gaged i$ trade a$d b-.i$e..' o$ their gro.. i$co#e. other ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e e2pe$.e.. No$re.ide$t citi;e$. a$d $o$re.ide$t a!ie$ i$di0id-a! e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct the.e pre#i-#.. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct the.e pre#i-#.. !. Perso-a& a-( a((itio-a& e.e,$tio-s. Re.ide$t citi;e$.' a$d re.ide$t a!ie$ o$ their gro.. i$co#e. a$d ro# co#pe$.atio$ i$co#e are a!!o+ed to ded-ct the.e pre#i-#.. No$re.ide$t citi;e$. o$ their gro.. i$co#e. ro# +ithi$ #ay a!.o ded-ct thi. e2pe$.e. No$re.ide$t a!ie$ i$di0id-a!. e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are a!!o+ed to ded-ct the.e e2e#ptio$. -$der reciprocity. No$re.ide$t a!ie$ i$di0id-a!. $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. are $ot a!!o+ed to ded-ct thi. e2pe$.e.

24

1& 2& B& b-.i$e...

*-.t be ordi$ary a$d $ece..aryD *-.t be paid or i$c-rred +ithi$ the ta2ab!e *-.t be paid or i$c-rred i$ carryi$g o$ a

yearD trade or

E& *-.t $ot be bribe.' /ic/bac/. or other i!!ega! e2pe$dit-re. b. (o#p!ia$ce +ith the .-b.ta$tiatio$ te.t. Proo by e0ide$ce or record. o the ded-ctio$. a!!o+ed by !a+ i$c!-di$g co#p!ia$ce +ith the b-.i$e.. te.t.

:1" W at are t e reFuisites *or t e (e(u%ti)i&it' o* or(i-ar' a-( -e%essar' tra(e7 )usi-ess7 or $ro*essio-a& e.$e-ses7 &iGe e.$e-ses $ai( *or &e;a& a-( au(iti-; servi%es 9
S3<<ESTE" ANS=ER8 a. the e2pe$.e #-.t be ordi$ary a$d $ece..aryD b. it #-.t ha0e bee$ paid or i$c-rred d-ri$g the ta2ab!e year depe$de$t -po$ the #ethod o acco-$ti$g -po$ the ba.i. o +hich the $et i$co#e i. co#p-ted. c. it #-.t be .-pported by receipt.' record. or other perti$e$t paper.. %Commissioner of Internal Revenue v, Isa"ela cultural Corporation, <. R. No. 1@22B1' Cebr-ary 12' 200@&

/E"
e.$e-(itures"

+isti-;uis

or(i-ar' e.$e-ses *ro, %a$ita&

:/" T=3 Cor$oratio- is issui-; t e a%%rua& ,et o( o* a%%ou-ti-;" I- /00> 2YM Law Fir, a-( ABC Au(iti-; Fir, re-(ere( various servi%es w i% were )i&&e( )' t ese *ir,s o-&' (uri-; t e *o&&owi-; 'ear /00@" Si-%e t e )i&&s *or &e;a& a-( au(iti-; servi%es were re%eive( o-&' i- /00@ a-( $ai( i- t e sa,e 'ear7 T=3 (e(u%te( t e sa,e *ro, its /00@ ;ross i-%o,e" T e BIR (isa&&owe( t e (e(u%tio- 9 W o is %orre%t7 T=3 or BIR 9 E.$&ai-"
S3<<ESTE" ANS=ER8 The B4R i. correct. T*< .ho-!d ha0e ded-cted the pro e..io$a! a$d !ega! ee. i$ the year they +ere i$c-rred i$ 200> a$d $ot i$ 2006 beca-.e at the ti#e the .er0ice. +ere re$dered i$ 200>' there +a. a!ready a$ ob!igatio$ to pay the#. %Commissioner of Internal Revenue v, Isa"ela Cultural Corporation, <. R. No. 1@22B1' Cebr-ary 12' 200@& NOTES AN" (O**ENTS8 a. A%%ou-ti-; ,et o(s or ta2 p-rpo.e. co#pri.e a .et o r-!e. or deter#i$i$g +he$ a$d ho+ to report i$co#e a$d ded-ctio$.. %Commissioner of Internal Revenue v, Isa"ela cultural Corporation, <. R. No. 1@22B1' Cebr-ary 12' 200@& The t+o %2& pri$cipa! acco-$ti$g #ethod. or recog$itio$ o i$co#e are the %a& accr-a! #ethodD a$d the %b& ca.h #ethod.

S3<<ESTE" ANS=ER8 Ordi$ary e2pe$.e. are tho.e +hich are co##o$ to i$c-r i$ the trade or b-.i$e.. o the ta2payer =74)E capita! e2pe$dit-re. are tho.e i$c-rred to i#pro0e a..et. a$d be$e it. or #ore tha$ o$e ta2ab!e year. Ordi$ary e2pe$.e. are -.-a!!y i$c-rred d-ri$g a ta2ab!e year a$d be$e it. .-ch ta2ab!e year. Nece..ary e2pe$.e. are tho.e +hich are appropriate or he!p -! to the b-.i$e...

W at are t e reFuisites *or t e (e(u%ti)i&it' o* )usi-ess e.$e-ses 9

S3<<ESTE" ANS=ER8 The o!!o+i$g are the re1-i.ite. or ded-ctibi!ity o b-.i$e.. e2pe$.e.8 a. (o#p!ia$ce +ith the b-.i$e.. te.t8

:0"

b. Re%o;-itio- o* i-%o,e a-( e.$e-ses u-(er t e a%%rua& ,et o( o* a%%ou-ti-;" A#o-$t. o i$co#e accr-e +here the right to recei0e the# beco#e. i2ed' +here there i. created a$ e$ orceab!e !iabi!ity. )iabi!itie.' are i$c-rred +he$ i2ed a$d deter#i$ab!e i$ $at-re +itho-t regard to i$deter#i$acy #ere!y o ti#e o pay#e$t.. %Commissioner of Internal Revenue v, Isa"ela cultural Corporation, <. R. No. 1@22B1' Cebr-ary 12' 200@& The accr-a! o i$co#e a$d e2pe$.e i. per#itted +he$ the a!!,e0e$t. te.t ha. bee$ #et. %I"id.& c. A&&-eve-ts test" Thi. te.t re1-ire.8 1& i2i$g o a right to i$co#e or !iabi!ity to payD a$d 2& the a0ai!abi!ity o the rea.o$ab!e acc-rate deter#i$atio$ o .-ch i$co#e or !iabi!ity. The te.t doe. $ot de#a$d that the a#o-$t o .-ch i$co#e or !iabi!ity be /$o+$ ab.o!-te!y' o$!y that a ta2payer ha. at hi. di.po.a! the i$ or#atio$ $ece..ary to co#p-te the a#o-$t +ith rea.o$ab!e acc-racy. The a!!,e0e$t. te.t i. .ati. ied +here co#p-tatio$ re#ai$. -$certai$D i it. ba.i. i. -$cha$geab!e' the te.t i. .ati. ied +here a co#p-tatio$ #ay be -$/$o+$' b-t i. $ot a. #-ch a. -$/$o+ab!e' +ithi$ the ta2ab!e year. The a#o-$t o !iabi!ity doe. $ot ha0e to be deter#i$ed e2act!y'D it #-.t be deter#i$ed +ith rea.o$ab!e acc-racy i#p!ie. .o#ethi$g !e.. tha$ a$ e2act or co#p!ete!y acc-rate a#o-$t. The propriety o a$ accr-a! #-.t be 6-dged by the act that a ta2payer /$e+' or co-!d rea.o$ab!y be e2pected to ha0e /$o+$' at the c!o.i$g o it. boo/. or the ta2ab!e year. Accr-a! #ethod o acco-$ti$g pre.e$t. !arge!y a 1-e.tio$ o actD .-ch that the ta2payer bear. the b-rde$ o proo o e.tab!i.hi$g the accr-a! o a$ ite# o i$co#e or ded-ctio$. %Commissioner of Internal Revenue v, Isa"ela cultural Corporation, <. R. No. 1@22B1' Cebr-ary 12' 200@& d. 3$der the %as ,et o( i$co#e i. to be co$.tr-ed a. i$co#e or ta2 p-rpo.e. o$!y -po$ act-a! receipt o the ca.h pay#e$t. 4t i. a!.o re erred to a. the ca.h receipt. a$d di.b-r.e#e$t. #ethod beca-.e both the receipt a$d di.b-r.e#e$t. are co$.idered. Th-.' i$co#e i. recog$i;ed o$!y -po$ act-a! receipt o the ca.h pay#e$t b-t $o ded-ctio$. are a!!o+ed ro# the ca.h i$co#e -$!e.. act-a!!y di.b-r.ed thro-gh a$ act-a! pay#e$t i$ ca.h.

25

S3<<ESTE" ANS=ER8 Cor p-rpo.e. o ta2atio$' ri$ge be$e it #ea$. a$y good' .er0ice' or other be$e it -r$i.hed or gra$ted i$ ca.h or i$ /i$d by a$ e#p!oyer to a$ i$di0id-a! e#p!oyee %e2cept ra$/ a$d i!e e#p!oyee.&' .-ch a. b-t $ot !i#ited to8 a. 7o-.i$gD b. E2pe$.e acco-$tD c. Vehic!e o a$y /i$dD d. 7o-.eho!d per.o$$e!' .-ch a. #aid' dri0er a$d other.D e. 4$tere.t o$ !oa$ at !e.. tha$ #ar/et rate to the e2te$t o the di ere$ce bet+ee$ the #ar/et rate a$d act-a! rate gra$tedD . *e#ber.hip ee.' d-e. a$d other e2pe$.e. bor$e by the e#p!oyer or the e#p!oyee i$ .ocia! a$d ath!etic c!-b. or other .i#i!ar orga$i;atio$.D g. E2pe$.e. or oreig$ tra0e!D h. 7o!iday a$d 0acatio$ e2pe$.e.D i. Ed-catio$a! a..i.ta$ce to the e#p!oyee or hi. depe$de$t.D a$d 6. )i e or hea!th i$.-ra$ce a$d other $o$,!i e i$.-ra$ce pre#i-#. or .i#i!ar a#o-$t. i$ e2ce.. o +hat the !a+ a!!o+.. GSec. BB %B&'
N4R( o 1FF@D 1.t par.' Sec. 2.BB %B&' Re0. Reg.. No. B,F?I

:>" Fri-;e )e-e*its t at are -ot su)Ae%t to t e *ri-;e )e-e*its ta.4

a. =he$ the ri$ge be$e it i. re1-ired by the $at-re o ' or $ece..ary to the trade' b-.i$e.. or pro e..io$ o the e#p!oyerD or b. =he$ the ri$ge be$e it i. or the co$0e$ie$ce or ad0a$tage o the e#p!oyer. GSec. B2%A&' N4R( o 1FF@D 1 .t par.' Sec. 2.BB %A&' Re0. Reg.. No. B,F?I c. Cri$ge be$e it. +hich are a-thori;ed a$d e2e#pted ro# i$co#e ta2 -$der the Ta2 (ode or -$der a$y .pecia! !a+D d. (o$trib-tio$. o the e#p!oyer or the be$e it o the e#p!oyee to retire#e$t' i$.-ra$ce a$d ho.pita!i;atio$ be$e it p!a$.D e. Be$e it. gi0e$ to the ra$/ a$d i!e e#p!oyee.' +hether gra$ted -$der a co!!ecti0e bargai$i$g agree#e$t or $otD a$d . %e minimis be$e it. a. de i$ed i$ the r-!e. a$d reg-!atio$. to be pro#-!gated by the Secretary o Ci$a$ce -po$ reco##e$datio$ o the (o##i..io$er o 4$ter$a! Re0e$-e. G1.t par.' Sec. B2 %(&' N4R( o 1FF@D Sec.
2.BB %(&' Re0. Reg.. No. B,F?I

::" The *ri-;e )e-e*its ta. i. a i$a! +ithho!di$g ta2 i#po.ed o$ the gro..ed,-p #o$etary 0a!-e o ri$ge be$e it. -r$i.hed' gra$ted or paid by the e#p!oyer to the e#p!oyee' e2cept ra$/ a$d i!e e#p!oyee. . G1.t
par.' Sec. 2.BB %A&' Re0. Reg.. No. B,F?I

:@" De minimis )e-e*its are *a%i&ities a-( $rivi&e;es

%.-ch a. e$tertai$#e$t' #edica! .er0ice.' or .o,ca!!ed co-rte.y di.co-$t. o$ p-rcha.e.&' -r$i.hed or o ered by a$ e#p!oyer to hi. e#p!oyee.. They are $ot co$.idered a. co#pe$.atio$ .-b6ect to i$co#e ta2 a$d co$.e1-e$t!y to +ithho!di$g ta2' i .-ch aci!itie. are o ered or -r$i.hed by the e#p!oyer #ere!y a. a #ea$. o pro#oti$g the hea!th' good+i!!'

:<" W at is ,ea-t )' !*ri-;e )e-e*it# *or $ur$oses o*

ta.atio- 9

co$te$t#e$t' or e icie$cy o hi. e#p!oyee.. GSec. 2.@?'1 %A& %B&' Re0. Reg..
2,F? a. a#e$ded by Re0. Reg.. No. ?,2000I

26

:B" Pre*erre( s ares are %o-si(ere( %a$ita& re;ar(&ess o* t e %o-(itio-s u-(er w i% su% s ares are issue( a-( (ivi(e-(s or !i-terests# $ai( t ereo- are -ot a&&owe( as (e(u%tio-s *ro, t e ;ross i-%o,e o* %or$oratio-s. %Re0e$-e
*e#ora$d-# (irc-!ar No. 1@,@1&

. The debt. are -$co!!ectib!e de.pite di!ige$t e ort e2erted by the ta2payer. GSec. BE %E& %1&' N4R( o 1FF@D Sec. B' Re0. Reg.. No. >,FF reiterated i$ Re0. Reg.. No. 2>,2002D Philippine Refining Corporation v. Court of Appeals, et al., BED SCRA DDAI g. *-.t ha0e bee$ reported a. recei0ab!e. i$ the i$co#e ta2 ret-r$ o the c-rre$t or prior year.. %Sec. 10B' Re0. Reg.. No. 2& 8

<1" W at is t e !ta. )e-e*it# ru&e 9

:C" Ba( (e)ts are tho.e +hich re.-!t ro# the +orth!e..$e.. or -$co!!ectibi!ity' i$ +ho!e or i$ part' o a#o-$t. d-e the ta2payer by other.' ari.i$g ro# #o$ey !e$t or ro# -$co!!ectib!e a#o-$t. o i$co#e ro# good. .o!d or .er0ice. re$dered. %Sec. 2.a' Re0. Reg.. >,FF& :E"
W o are re&ate( $arties 9
S3<<ESTE" ANS=ER8 The o!!o+i$g are re!ated partie.4 a. *e#ber. o the .a#e a#i!y. The a#i!y o a$ i$di0id-a! .ha!! i$c!-de o$!y hi. brother. a$d .i.ter. %+hether by the +ho!e or ha! ,b!ood&' .po-.e' a$ce.tor.' a$d !i$ea! de.ce$da$t.D b. A$ i$di0id-a! a$d a corporatio$ #ore tha$ i ty perce$t %>0H& i$ 0a!-e o the o-t.ta$di$g .toc/ o +hich i. o+$ed' direct!y or i$direct!y' by or or .-ch i$di0id-a!D c. T+o corporatio$. #ore tha$ i ty perce$t %>0H& i$ 0a!-e o the o-t.ta$di$g .toc/ o +hich i. o+$ed' direct!y or i$direct!y' by or or the .a#e i$di0id-a!D d. A gra$tor a$d a id-ciary o a$y tr-.tD or e. The id-ciary o a tr-.t a$d the id-ciary o a$other tr-.t i the .a#e per.o$ i. a gra$tor +ith re.pect to each tr-.tD or . A id-ciary o a tr-.t a$d a be$e iciary o .-ch. GSec. B6 %B&'
N4R( o 1FF@I

S3<<ESTE" ANS=ER8 The ta2 be$e it r-!e po.it. that the reco0ery o bad debt. pre0io-.!y a!!o+ed a. ded-ctio$ i$ the precedi$g year or year. .ha!! be i$c!-ded a. part o the ta2payer:. gro.. i$co#e i$ the year o .-ch reco0ery to the e2te$t o the i$co#e ta2 be$e it o .aid ded-ctio$. NOTES AN" (O**ENTS8 a" 4 i$ the year the ta2payer c!ai#ed ded-ctio$ o bad debt. +ritte$,o ' he rea!i;ed a red-ctio$ o the i$co#e ta2 d-e ro# hi# o$ acco-$t o the .aid ded-ctio$' hi. .-b.e1-e$t reco0ery thereo ro# hi. debtor .ha!! be treated a. a receipt o rea!i;ed ta2ab!e i$co#e. %Sec. E' Re0.
Reg.. >,FF&

)" 4 the .aid ta2payer did $ot be$e it ro# the ded-ctio$ o the .aid bad debt +ritte$,o beca-.e it did $ot re.-!t to a$y red-ctio$ o hi. i$co#e ta2 i$ the year o .-ch ded-ctio$ %i.e. +here the re.-!t o hi. b-.i$e.. operatio$ +a. a $et !o.. e0e$ +itho-t ded-ctio$ o the bad debt. +ritte$,o &' the$ hi. .-b.e1-e$t reco0ery thereo .ha!! be treated a. a #ere reco0ery or a ret-r$ o capita!' he$ce' $ot treated a. receipt o rea!i;ed ta2ab!e i$co#e. %Sec. E' Re0. Reg.. >,FF&

<0. W at are t e reFuisites *or va&i( (e(u%tio- o* )a( (e)ts *ro, ;ross i-%o,e 9
S3<<ESTE" ANS=ER8 a. There #-.t be a$ e2i.ti$g i$debted$e.. d-e to the ta2payer +hich #-.t be 0a!id a$d !ega!!y de#a$dab!eD b. The .a#e #-.t be co$$ected +ith the ta2payer:. trade' b-.i$e.. or practice o pro e..io$D c. The .a#e #-.t $ot be .-.tai$ed i$ a tra$.actio$ e$tered i$to bet+ee$ re!ated partie.D d. The .a#e #-.t be act-a!!y charged o the boo/. o acco-$t. o the ta2payer a. o the e$d o the ta2ab!e yearD a$d e. The debt #-.t be act-a!!y a.certai$ed to be +orth!e.. a$d -$co!!ectib!e d-ri$g the ta2ab!e yearD

</" +e$re%iatio- i. the grad-a! di#i$-tio$ i$ the -.e -! 0a!-e o ta$gib!e property re.-!ti$g ro# ordi$ary +ear a$d tear a$d ro# $or#a! ob.o!e.ce$ce. The ter# i. a!.o app!ied to a#orti;atio$ o the 0a!-e o i$ta$gib!e a..et. the -.e o +hich i$ the trade or b-.i$e.. i. de i$ite!y !i#ited i$ d-ratio$. <:" T e ,et o(s o* (e$re%iatio- are t e *o&&owi-;4
a. Straight !i$e #ethodD b. "ec!i$i$g ba!a$ce #ethodD c. S-# o year. digit. #ethodD a$d d. A$y other #ethod pre.cribed by the Secretary o Ci$a$ce -po$ the reco##e$datio$ o the (o##i..io$er o 4$ter$a! Re0e$-e8 1& Apportio$#e$t to -$it. o prod-ctio$D 2& 7o-r. o prod-cti0e -.eD B& Re0a!-atio$ #ethodD a$d E& Si$/i$g -$d #ethod.

<<"

W at are $erso-a& a-( a((itio-a& e.e,$tio-s 9

S3<<ESTE" ANS=ER8 The.e are the theoretica! per.o$a' !i0i$g a$d a#i!y e2pe$.e. o a$ i$di0id-a! a!!o+ed to be ded-cted ro# the gro.. or $et i$co#e o a$ i$di0id-a! ta2payer. The.e are arbitrary a#o-$t. +hich ha0e bee$ ca!c-!ated by o-r !a+#a/er. to be ro-gh!y e1-i0a!e$t to the #i$i#-# o .-b.i.te$ce' ta/i$g i$to acco-$t the per.o$a! .tat-. a$d additio$a! 1-a!i ied depe$de$t. o the ta2payer. They are i2ed a#o-$t. i$ the .e$.e that the a#o-$t. ha0e bee$ predeter#i$ed by o-r !a+#a/er. a$d -$ti! o-r !a+#a/er. #a/e $e+ ad6-.t#e$t. o$ the.e per.o$a! e2e#ptio$.' the a#o-$t. a!!o+ed to be ded-cted by a ta2payer are i2ed a. predeter#i$ed by (o$gre...
GPansacola v. Commissioner of Internal Revenue, <. R. No. 1>FFF1' No0e#ber 16' 2006 citi$g Madrigal and Paterno v. Rafferty and Concepcion, B? Phi!. E1E' E1? %1F1?&I

27

<>"
e.e,$tio- 9

W at is t e a,ou-t a&&owe( as )asi% $erso-a&

a. 4t i. c!ear that -$der the a#e$d#e$t' .i$g!e i$di0id-a!. #ay $o+ c!ai# or the additio$a! e2e#ptio$.. C-rther#ore' the co$cept o head o a a#i!y doe. $ot i$d app!icatio$ a$y#ore. )" A depe$de$t #ea$. a. a !egiti#ate' i!!egiti#ate or !ega!!y adopted chi!d b. chie !y depe$de$t -po$ a$d !i0i$g +ith the ta2payer c. i .-ch depe$de$t i. 1& $ot #ore tha$ t+e$ty,o$e %21& year. o age' 2& -$#arried a$d B& $ot gai$ -!!y e#p!oyed or d. i .-ch depe$de$t' 1& regard!e.. o age 2& i. i$capab!e o .e! ,.-pport B& beca-.e o #e$ta! or phy.ica! de ect. G2$d par.' Sec.
2.@F %4& %1& %b&' Re0. Reg.. No. 2,F? a. a#e$ded by Re0. Reg.. No. 10, 200?' arra$ge#e$t a$d $-#beri$g .-pp!iedD Sec. B> %b&' N4R( o 1FF@' a. a#e$ded by Rep. Act No. F>0EI

S3<<ESTE" ANS=ER8 There .ha!! be a!!o+ed a ba.ic per.o$a! e2e#ptio$ a#o-$ti$g to Ci ty tho-.a$d pe.o. %P>0'000& or each i$di0id-a! ta2payer. 4$ the ca.e o #arried i$di0id-a!. +here o$!y o$e o the .po-.e i. deri0i$g gro.. i$co#e' o$!y .-ch .po-.e .ha!! be a!!o+ed the per.o$a! e2e#ptio$. GSec. B> %A&' N4R( o 1FF@ a. a#e$ded by Rep. Act No. F>0ED
Sec. 2.@F %4& %1& %a&' Re0. Reg.. No. 2,F? a. a#e$ded by Re0. Reg.. No. 10, 200?I

NOTES AN" (O**ENTS8 4t i. c!ear ro# Rep. Act No. F>0E that each o the .po-.e. #ay c!ai# the P>0'000.00. Th-.' the tota! a#i!ia! ba.ic per.o$a! e2e#ptio$ or .po-.e. i. P100'000.00. C-rther#ore' the di.ti$ctio$. bet+ee$ the co$cept. o .i$g!e' #arried a$d head o the a#i!y or p-rpo.e o a0ai!i$g o the ba.ic per.o$a! e2e#ptio$ ha. a!ready bee$ e!i#i$ated by Rep. Act No. F>0E.

%" 4t i. to be $oted that -$der the N4R( o 1FF@' a. a#e$ded by Rep. Act No. F>0E' o$!y 1-a!i ied depe$de$t chi!dre$ are co$.idered or additio$a! e2e#ptio$.. <ra$dpare$t.' pare$t.' a. +e!!' a. brother. or .i.ter.' a$d other co!!atera! re!ati0e. are $ot 1-a!i ied depe$de$t. to be c!ai#ed a. additio$a! e2e#ptio$.. 7o+e0er' i they are .e$ior citi;e$. they #ay 1-a!i y a. additio$a! e2e#ptio$. -$der the Se$ior (iti;e$. )a+ b-t $ot -$der the N4R( o 1FF@' a. a#e$ded by Rep. Act No. F>0E. Se$ior citi;e$ .ha!! be treated a. depe$de$t. pro0ided or i$ the Natio$a! 4$ter$a! Re0e$-e (ode' a. a#e$ded' a$d a. .-ch' i$di0id-a! ta2payer. cari$g or the#' be they re!ati0e. or $ot .ha!! be accorded the pri0i!ege. gra$ted by the (ode i$.o ar a. ha0i$g depe$de$t. are co$cer$ed. G!a.t par. Sec. > %a&' Rep. Act No. @EB2' a. a#e$ded by Rep. Act
F2>@' The E2pa$ded Se$ior (iti;e$. Act o 200BI

<>" W at are t e a,ou-ts o* a((itio-a& e.e,$tio-s 9

S3<<ESTE" ANS=ER8 !A$ i$di0id-a!' a. +hether .i$g!e or #arried' b. .ha!! be a!!o+ed a$ additio$a! e2e#ptio$ o T+e$ty,Ci0e Tho-.a$d Pe.o. %P2>'000.00& c. or each 1-a!i ied depe$de$t chi!d' d. pro0ided that the tota! $-#ber o depe$de$t. or +hich additio$a! e2e#ptio$. #ay be c!ai#ed 1& .ha!! $ot e2ceed o-r %E& depe$de$t.. G1.t par.' Sec.
2.@F %4& %1& %b&' Re0. Reg.. No. 2,F? a. a#e$ded by Re0. Reg.. No. 10, 200?' arra$ge#e$t a$d $-#beri$g .-pp!iedD Sec. B> %B&' N4R( o 1FF@ a. a#e$ded by Rep. Act No. F>0EI

NOTES AN" (O**ENTS8

<B" Ca$ita& assets .ha!! re er to a!! rea! propertie. he!d by a ta2payer' +hether or $ot co$$ected +ith hi. trade or b-.i$e..' a$d +hich are $ot i$c!-ded a#o$g the rea! propertie. co$.idered a. ordi$ary a..et.. %Sec. 2.a' Re0. Reg.. No. @,200B& The ter# capita! a..et. #ea$. property he!d by the ta2payer %+hether or $ot co$$ected +ith hi. trade or b-.i$e..&' B3T "OES NOT 4N()3"E8 a. Stoc/ i$ trade o the ta2payer' or b. Other property o a /i$d +hich +o-!d proper!y be i$c!-ded i$ the i$0e$tory o the ta2payer i o$ ha$d at the c!o.e o the ta2ab!e year' or c. Property he!d by the ta2payer pri#ari!y or .a!e to c-.to#er. i$ the ordi$ary co-r.e o hi. trade or b-.i$e..' or d. Property -.ed i$ the trade or b-.i$e..' o a character +hich i. .-b6ect to the a!!o+a$ce or depreciatio$D or rea! property -.ed i$ the trade or

b-.i$e.. o the ta2payer. GSec. BF %A& %1&' N4R( o 1FF@' capita!i;ed +ord.'
$-#beri$g a$d arra$ge#e$t .-pp!iedD Sec. 2.a' Re0. Reg.. No. @,200BI

28

E.a,$&es o* %a$ita& assets4 a. Stoc/ a$d .ec-ritie. he!d by ta2payer. other tha$ dea!er. i$ .ec-ritie.D b. Ae+e!ry $ot -.ed or trade a$d b-.i$e..D c. Re.ide$tia! ho-.e. a$d !a$d. o+$ed a$d -.ed a. .-chD d. A-to#obi!e. $ot -.ed i$ trade a$d b-.i$e..D e. Pai$ti$g.' .c-!pt-re.' .ta#p co!!ectio$.' ob6ect. o art. +hich are $ot -.ed i$ trade or b-.i$e..D . 4$herited !arge tract. o agric-!t-ra! !a$d +hich +ere .-bdi0ided p-r.-a$t to the go0er$#e$t #a$date -$der !a$d re or#' the$ .o!d to te$a$t.. *Ro)as v. Court of (a) Appeals, etc. $0BEGF@, April BD, ?HDC# g. Rea! property -.ed by a$ e2e#pt corporatio$ i$ it. e2e#pt operatio$.' .-ch a. a corporatio$ i$c!-ded i$ the e$-#eratio$ o Sectio$ B0 o the (ode' .ha!! $ot be co$.idered -.ed or b-.i$e.. p-rpo.e.' a$d there ore co$.idered a. capita! a..et. %!a.t .e$te$ce' Brd par.' Sec. B.b' Re0. Reg.. No. @,200B& h. Rea! property' +hether .i$g!e detached' to+$ho-.e' or co$do#i$i-# -$it' $ot -.ed i$ trade or b-.i$e.. a. e0ide$ced by a certi icatio$ ro# the Bara$gay (hair#a$ or ro# the head o ad#i$i.tratio$' i$ ca.e o co$do#i$i-# -$it' to+$ho-.e or apart#e$t' a$d a. 0a!idated ro# the e2i.ti$g a0ai!ab!e record. o the B-rea- o 4$ter$a! Re0e$-e' o+$ed by a$ i$di0id-a! e$gaged i$ b-.i$e..' .ha!! be treated a. capita! a..et. %!a.t par.' Sec. B.b.' Re0. Reg.. No. @,200B&

<C"

a. The #achi$ery a$d e1-ip#e$t o a #a$- act-ri$g co$cer$ .-b6ect to depreciatio$D b. The tractor.' trai!er. a$d tr-c/. o a ha-!i$g co#pa$yD c. The co$do#i$i-# b-i!di$g o+$ed by a rea!ty co#pa$y the -$it. o +hich are or re$t or or .a!eD d. The +ood' pai$t' 0ar$i.h' $ai!.' g!-e' etc. +hich are the ra+ #ateria!. o a -r$it-re actoryD e. 4$herited parce!. o !a$d o .-b.ta$tia! area. !ocated i$ the heart o *etro *a$i!a' +hich +ere .-bdi0ided i$to .#a!!er !ot. the$ .o!d o$ i$.ta!!#e$t ba.i. a ter i$trod-ci$g co#parati0e!y 0a!-ab!e i#pro0e#e$t. $ot or the p-rpo.e o .i#p!y !i1-idati$g the e.tate b-t to #a/e the# #ore .a!eab!e D the e#p!oy#e$t o a$ attor$ey,i$, act or the p-rpo.e o de0e!opi$g' #a$agi$g' ad#i$i.teri$g a$d .e!!i$g the !ot.D .a!e. #ade +ith re1-e$cy a$d co$ti$-ityD a$$-a! .a!e. i$co#e ro# the .a!e. +a. co$.iderab!eD a$d the heir +a. $ot a .tra$ger to the rea! e.tate b-.i$e... *(uazon, ,r. v. $ingad, EC SCRA ?AG# . 4$herited agric-!t-ra! property i#pro0ed by i$trod-ctio$ o good road.' co$crete g-tter.' drai$age a$d !ighti$g .y.te#. co$0ert. the property to a$ ordi$ary a..et. The property or#. part o the .toc/ i$ trade o the o+$er' he$ce a$ ordi$ary a..et. Thi. i. .o' a. the o+$er i. $o+ e$gaged i$ the b-.i$e.. o .-bdi0idi$g rea! e.tate. %Calasanz v.
Commissioner of Internal Revenue, 1EE S(RA at p. 6@2&

>1" Ta. treat,e-t o* rea& $ro$erties t at

ave )ee-

tra-s*erre(" Rea! propertie. c!a..i ied a. capita! or ordi$ary a..et i$ the

ha$d. o the .e!!er9tra$. eror #ay cha$ge their character i$ the ha$d. o the b-yer9tra$. eree. The c!a..i icatio$ o .-ch property i$ the ha$d. o the b-yer9tra$. eree .ha!! be deter#i$ed i$ accorda$ce +ith the o!!o+i$g r-!e.8 a. Rea! property tra$. erred thro-gh .-cce..io$ or do$atio$ to the heir or do$ee +ho i. $ot e$gaged i$ the rea! e.tate b-.i$e.. +ith re.pect to the rea! property i$herited or do$ated' a$d +ho doe. $ot .-b.e1-e$t!y -.e .-ch property i$ trade or b-.i$e..' .ha!! be co$.idered a. a capita! a..et i$ the ha$d. o the heir or do$ee. b. Rea! property recei0ed a. di0ide$d by .toc/ho!der. +ho are $ot e$gaged i$ the rea! e.tate b-.i$e.. a$d +ho $ot .-b.e1-e$t!y -.e .-ch rea! property i$ trade or b-.i$e.. .ha!! be treated a. capita! a..et. i$ the ha$d. o the recipie$t e0e$ i the corporatio$ +hich dec!ared the rea! property di0ide$d i. e$gaged i$ rea! e.tate b-.i$e... c. The rea! property recei0ed i$ a$ e2cha$ge .ha!! be treated a. ordi$ary a..et i$ the ha$d. o the tra$. eree i$ the ca.e o a ta2, ree e2cha$ge by ta2payer $ot e$gaged i$ rea! e.tate b-.i$e.. to a ta2payer +ho i. e$gaged i$ rea! e.tate b-.i$e..' or to a ta2payer +ho' e0e$ i $ot e$gaged i$ rea! e.tate b-.i$e..' +i!! -.e i$ b-.i$e.. the property recei0ed i$ the e2cha$ge. %Sec. B. .' Re0. Reg.. No. @,200B&

<E" Or(i-ar' assets s a&& re*er to a&& rea& $ro$erties s$e%i*i%a&&' e.%&u(e( *ro, t e (e*i-itio- o* %a$ita& assets7
$a#e!y8 a. Stoc/ i$ trade o a ta2payer or other rea! property o a /i$d +hich +o-!d proper!y be i$c!-ded i$ the i$0e$tory o a ta2payer i o$ ha$d at the c!o.e o the ta2ab!e yearD or b. Rea! property he!d by the ta2payer pri#ari!y or .a!e to c-.to#er. i$ the ordi$ary co-r.e o hi. trade or b-.i$e..D or c. Rea! property -.ed i$ trade or b-.i$e.. %i.e. b-i!di$g. a$d9or i#pro0e#e$t.&' o a character +hich i. .-b6ect to the a!!o+a$ce or depreciatio$D or d. Rea! property -.ed i$ trade or b-.i$e.. o the ta2payer. %Sec. 2.
b' Re0. Reg.. No. @,200B&

>0". E.a,$&es o* or(i-ar' assets e-%e -ot %a$ita&

assets4

29

>/" T e ta. is !i,$ose( u$o- %a$ita& ;ai-s $resu,e(

to ave )ee- rea&iDe( *ro, t e sa&e7 e.% a-;e7 or ot er (is$ositio- o* rea& $ro$ert' &o%ate( i- t e P i&i$$i-es7 %&assi*ie( as %a$ita& assets"# GSec. 2E %"& %1S&' N4R( o 1FF@I Re0e$-e
Reg-!atio$. No. @,200B ha. de i$ed rea! property a. ha0i$g the .a#e #ea$i$g attrib-ted to that ter# -$der Artic!e E1> o Rep-b!ic Act No. B?6' other+i.e /$o+$ a. the 5Civil Code of the Philippines.> %Sec. 2.c' Re0. Reg..
No. @,200B&

2& the air #ar/et 0a!-e a. .ho+$ i$ the .ched-!e o 0a!-e. o the Pro0i$cia! a$d (ity A..e..or.. GSec. 2E %"& %1& i$
re!atio$ to Sec. 6 %E&' both o the N4R( o 1FF@I

4t doe. $ot #atter +hether there +a. a$ act-a! gai$ or !o.. beca-.e the ta2 i. a pre.-#ed capita! gai$. ta2. 4t i. the tra$.actio$ that i. ta2ed $ot the gai$.

>B" Ho&(i-; $erio( -ot a$$&ie( to the ta2atio$ o the pre.-#ed capita! gai$. deri0ed ro# the .a!e o rea! property co$.idered a. capita! a..et..

>:" Tra-sa%tio-s %overe( )' t e $resu,e( %a$ita& ;ai-s ta. o- rea& $ro$ert'4
a. .a!e' b. e2cha$ge' c. or other di.po.itio$' i$c!-di$g pacto de retro .a!e. a$d other or#. o co$ditio$a! .a!e.. GSec. 2E %"& %1&' N4R( o 1FF@' $-#beri$g a$d arra$ge#e$t .-pp!iedI d. Sa!e' e2cha$ge' or other di.po.itio$ i$c!-de. ta/i$g by the go0er$#e$t thro-gh co$de#$atio$ proceedi$g.. *+utierrez v. Court of (a)
Appeals, et al., 101 Phi!. @1B; +onzales v. Court of (a) Appeals, et al., 121 Phi!. ?61&

>C" T e ta. &ia)i&it'7 o* i-(ivi(ua& ta.$a'ers H-ot %or$orateI7 i* a-'7 o- ;ai-s *ro, sa&es or ot er (is$ositio-s o* rea& $ro$ert'7 %&assi*ie( as %a$ita& assets7 to t e ;over-, e-t or
a$y o it. po!itica! .-bdi0i.io$. or age$cie. or to go0er$#e$t o+$ed or co$tro!!ed corporatio$. .ha!! be deter#i$ed' at the optio$ o the ta2payer' by i$c!-di$g the proceed. a. part o gro.. i$co#e to be .-b6ected to the a!!o+ab!e ded-ctio$. a$d9or per.o$a! a$d additio$a! e2e#ptio$.' the$ to the .ched-!ar ta2 GSec. 2E %"& %1&' i$ re!atio$ to Sec. 2E %A& %1&' both o the N4R( o 1FF@I or the i$a! pre.-#ed capita! gai$. ta2 o .i2 perce$t %6H&. GSec. 2E %"& %1& i$ re!atio$ to Sec. 6 %E&' both o the N4R( o 1FF@I

><" I- %ase t e ,ort;a;or e.er%ises is ri; t o* re(e,$tio- +ithi$ o$e %1& year ro# the i..-a$ce o the certi icate o
.a!e' i$ a orec!o.-re o #ortgage .a!e o rea! property' $o capita! gai$. ta2 .ha!! be i#po.ed beca-.e $o capita! gai$. ha. bee$ deri0ed by the #ortgagor a$d $o .a!e or tra$. er o rea! property +a. rea!i;ed. GSec. B %1&'
Re0. Reg.. No. E,FFI

>E" T e se&&er o* t e rea& $ro$ert'7 %&assi*ie( as a %a$ita& asset7 $a's t e $resu,e( %a$ita& ;ai-s ta. +hether8
a. a$ i$di0id-a! GSec. 2E %"& %1&' N4R( o 1FF@ID 1& (iti;e$' +hether re.ide$t or $ot GI"id.ID 2& Re.ide$t a!ie$ GI"id.ID B& No$re.ide$t a!ie$ e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. GSec. 2> %A& %B& i$ re!atio$ to Sec. 2E %"& %1&' both o the N4R( o 1FF@ID E& No$re.ide$t a!ie$ $ot e$gaged i$ trade or b-.i$e.. i$ the Phi!ippi$e. GSec. 2> %B& i$ re!atio$ to Sec. 2E %"& %1&' both o the N4R( o 1FF@ID b. a$ e.tate or tr-.t %I"id.&D c. a do#e.tic corporatio$. GSec. 2@ %"& %>&' N4R( o 1FF@I

>>" I- %ase o* -o--re(e,$tio- o* t e $ro$ert' so&( -po$ a orec!o.-re o #ortgage .a!e' the pre.-#ed capita! gai$. ta2 .ha!! be i#po.ed' ba.ed o$ the bid price o the highe.t bidder b-t o$!y -po$ the e2piratio$ o the o$e year period o rede#ptio$ pro0ided or -$der Sec. 6 o Act No. B1B>' a. a#e$ded by Act No. E11?' a$d .ha!! be paid +ithi$ thirty %B0& day. ro# the e2piratio$ o the .aid o$e,year rede#ptio$ period. GSec.
B %2&' Re0. Reg.. No. E,FFI

>@" T e )asis *or t e *i-a& $resu,e( %a$ita& ;ai-s ta.

o* si. $er %e-t H@JI i. +hiche0er i. the higher o the
a. gro.. .e!!i$g price' or b. the c-rre$t air #ar/et 0a!-e a. deter#i$ed be!o+8 1& the air #ar/et 0a!-e or rea! propertie. !ocated i$ each ;o$e or area a. deter#i$ed by the (o##i..io$er o 4$ter$a! Re0e$-e a ter co$.-!tatio$ +ith co#pete$t apprai.er. both ro# the pri0ate a$d p-b!ic .ector.D or

@0" E.%e$te( *ro, t e $a',e-t o* t e $resu,e( %a$ita& ;ai-s ta. are t ose $resu,e( to ave )ee- rea&iDe( *ro, t e (is$ositio- )' -atura& $erso-s o* t eir $ri-%i$a& $&a%e o* resi(e-%e
a. the proceed. o +hich i. -!!y -ti!i;ed i$ ac1-iri$g or co$.tr-cti$g a $e+ pri$cipa! re.ide$ceD b. +ithi$ eightee$ %1?& ca!e$dar #o$th. ro# the date o .a!e or di.po.itio$

c. the B4R (o##i..io$er .ha!! ha0e bee$ d-!y $oti ied by the ta2payer +ithi$ thirty %B0& day. ro# the date o .a!e or di.po.itio$ thro-gh a pre.cribed ret-r$ o hi. i$te$tio$ to a0ai! o the ta2 e2e#ptio$D a$d d. the .aid ta2 e2e#ptio$ ca$ o$!y be a0ai!ed o o$ce e0ery te$ %10& year.. GSec. 2E %"& %2&' N4R( o 1FF@I

30

@1" =BC was i-%or$orate( i- 1E@1 a-( e-;a;e( i%o,,er%ia& )a-Gi-; o$eratio-s si-%e 1ECB" O- =a' //7 1ECB7 it %ease( o$eratio-s t at 'ear )' reaso- o* i-so&ve-%' a-( its assets a-( &ia)i&ities were $&a%e( u-(er t e % ar;e o* a ;over-,e-t-a$$oi-te( re%eiver" O- 5u-e /:7 1EEE7 t e BSP aut oriDe( =BC to o$erate as a t ri*t )a-G" I- /0007 It *i&e( its ta. retur- *or t e 'ear 1EEE $a'i-; t e a,ou-t o* P:: ,i&&io- %o,$ute( i- a%%or(a-%e wit t e ,i-i,u, %or$orate i-%o,e ta. H=CITI" It sou; t t e BIR8s ru&i-; o- w et er it is e-tit&e( to t e *our H<I 'ear ;ra%e $erio( *or $a'i-; o- t e )asis o* =CIT re%Go-e( *ro, 1EEE" BIR t eru&e( t at %essatio- o* )usi-ess a%tivities as a resu&t o* )ei-; $&a%e( u-(er i-vo&u-tar' re%eivers i$ ,a' )e a- e%o-o,i% reaso- *or sus$e-(i-; t e i,$ositio- o* t e =CIT" As a resu&t o* t e ru&i-; =BC *i&e( a- a$$&i%atio- *or re*u-( o* t e P:: ,i&&io-" +ue to t e BIR8s i-a%tio-7 =BC *i&e( a $etitio- *or review wit t e CTA" T e CTA (e-ie( t e $etitio- o- t e ;rou-( t at =BC is -ot a -ew&' or;a-iDe( %or$oratio-" I- a vo&te *a%ie t e BIR -ow ,ai-tai-s t at =BC s ou&( $a' t e =CIT )e;i--i-; 5a-uar' 17 1EEC as it (i( -ot %&ose its )usi-ess o$eratio-s i- 1ECB )ut ,ere&' sus$e-(e( t e sa,e" Eve- i* $&a%e( u-(er re%eivers i$7 t e %or$orate e.iste-%e was -ever a**e%te(" T us7 it *a&&s u-(er t e %ate;or' o* a- e.isti-; %or$oratiore%o,,e-%i-; its )a-Gi-; o$eratio-s" S ou&( t e re*u-( )e ;ra-te( 9
S3<<ESTE" ANS=ER8 Oe.. The *(4T .ha!! be i#po.ed begi$$i$g i$ the o-rth ta2ab!e year i##ediate!y o!!o+i$g the year i$ +hich the corporatio$ co##e$ced it. b-.i$e.. operatio$.. GSec. 2@ %E& %1&' N4R( o 1FF@I The date o co##e$ce#e$t o operatio$. o a thri t ba$/ i. the date it +a. regi.tered +ith the SE( or the date +he$ the (erti icate o A-thority to Operate +a. i..-ed to it by the *o$etary Board' +hiche0er co#e. !ater. %Sec. 6' Re0. Reg.. No. E,F>& (!ear!y the$. *B( i. e$tit!ed to the grace period o o-r year. ro# A-$e 2B' 1FFF +he$ it +a. a-thori;ed by the BSP to operate a. a thri t

ba$/ be ore the *(4T .ho-!d be app!ied to it. % Manila Ban-ing Corporation v. Commissioner of Internal Revenue, <. R. No. 16?11?' A-g-.t 26' 2006& NOTES AN" (O**ENTS8 a. T e =CIT a-( w e- s ou&( )e i,$ose( a-( t e *our H<I 'ear ;ra%e $erio(" A #i$i#-# corporate i$co#e ta2 o t+o perce$t %2H& o the gro.. i$co#e a. o the e$d o the ta2ab!e year' a. de i$ed herei$' i. hereby i#po.ed o$ a corporatio$ ta2ab!e -$der thi. Tit!e' begi$$i$g o$ the o-rth ta2ab!e year i##ediate!y o!!o+i$g the year i$ +hich .-ch corporatio$ co##e$ced it. b-.i$e.. operatio$.' +he$ the #i$i#-# corporate i$co#e ta2 i. greater tha$ the ta2 co#p-ted -$der S-b.ectio$ %A& o thi. .ectio$ or the ta2ab!e year. GSec. 2@ %E& %1&' N4R( o 1FF@I b. Perio( w e- a %or$oratio- )e%o,es su)Ae%t to t e =CIT" %>& Speci ic r-!e. or deter#i$i$g the period +he$ a corporatio$ beco#e. .-b6ect to the *(4T %#i$i#-# corporate i$co#e ta2& , Cor p-rpo.e. o the *(4T' the ta2ab!e year i$ +hich b-.i$e.. operatio$. co##e$ced .ha!! be the year i$ +hich the do#e.tic corporatio$ regi.tered +ith the B-rea- o 4$ter$a! Re0e$-e %B4R&. Cir#. +hich +ere regi.tered +ith B4R i$ 1FFE a$d ear!ier year. .ha!! be co0ered by the *(4T begi$$i$g Aa$-ary 1' 1FF?. 2 2 2 %Re0. Reg.. No. F,F?& Manila Ban-ing Corporation v. Commissioner of Internal Revenue, <. R. No. 16?11?' A-g-.t 26' 2006 did $ot app!y Re0. Reg.. No. F,F? beca-.e Re0. Reg.. No. E,F> .peci ica!!y re er. to thri t ba$/..& c. Pur$ose o* t e *our H<I 'ear ;ra%e $erio(" The i$te$t o (o$gre.. re!ati0e to the *(4T i. to gra$t a o-r %EB& J year .-.pe$.io$ o ta2 pay#e$t to $e+!y orga$i;ed corporatio$.. (orporatio$. .ti!! .tarti$g their b-.i$e.. operatio$. ha0e to .tabi!i;e their 0e$t-re i$ order to obtai$ a .tro$gho!d i$ the i$d-.try. 4t doe. $ot co#e a. a .-rpri.e the$ +he$ #a$y co#pa$ie. reported !o..e. i$ their i$itia! year. o operatio$.. Th-.' i$ order to a!!o+ $e+ corporatio$. to gro+ a$d de0e!op at the i$itia! .tage. o their operatio$.' the !a+#a/i$g body .a+ the $eed to pro0ide a grace period o o-r year. ro# their regi.tratio$ be ore they pay their #i$i#-# corporate i$co#e ta2. %Manila Ban-ing Corporation v. Commissioner of Internal Revenue, <. R. No. 16?11?' A-g-.t 26' 2006&

ESTATE TA2ES 1" I- (eter,i-i-; t e ;ross estate o* a (e%e(e-t7 are is $ro$erties a)roa( to )e i-%&u(e(7 a-( ,ore $arti%u&ar&'7 w at %o-stitutes ;ross estate 9
S3<<ESTE" ANS=ER8 Oe.' i the decede$t i. a Ci!ipi$o citi;e$ or a re.ide$t a!ie$. The gro.. e.tate o a Ci!ipi$o citi;e$ or a re.ide$t a!ie$ co#pri.e. a!! hi. rea! property' +here0er .it-atedD a!! hi. per.o$a! property' ta$gib!e'

i$ta$gib!e or #i2ed' +here0er .it-ated' to the e2te$t o hi. i$tere.t e2i.ti$g therei$ at the ti#e o hi. death. The gro.. e.tate o a $o$,re.ide$t a!ie$ co#pri.e. a!! hi. rea! property' .it-ated i$ the Phi!ippi$e.D a!! hi. per.o$a! property' ta$gib!e' i$ta$gib!e or #i2ed' .it-ated i$ the Phi!ippi$e.' to the e2te$t o hi. i$tere.t e2i.ti$g therei$ at the ti#e o hi. death.

31

2& irre.pecti0e o +hether or $ot the i$.-red retai$ed the po+er o re0ocatio$.

<" Pro%ee(s o* &i*e i-sura-%e NOT i-%&u(e( i- a (e%e(e-t8s ;ross estate"

a. The decede$t ta/e. the i$.-ra$ce po!icy o$ hi. o+$ !i e' a$d b. the proceed. are recei0ab!e by a be$e iciary de.ig$ated a. irre0ocab!e. GSec. ?> %E&' N4R( o 1FF@&
NOTES AN" (O**ENTS8 The be$e iciary #-.t $ot be the decede$t:. e.tate' e2ec-tor or ad#i$i.trator' beca-.e the proceed. are i$c!-dib!e a. part o gro.. e.tate +hether or $ot the decede$t retai$ed the po+er o re0ocatio$. %I"id.&

/" Wi&&ia, S,it 7 a- A,eri%a- %itiDe-7 was a $er,a-e-t resi(e-t o* t e P i&i$$i-es" He (ie( i- SaFra-%is%o7 Ca&i*or-ia" He &e*t 107000 s ares o* Sa- =i;ue& Cor$oratio-7 a %o-(o,i-iu, u-it at t e Twi- Towers Bui&(i-; at Pasi;7 =etro =a-i&a a-( a ouse a-( &ot i=ia,i7 F&ori(a" W at assets s a&& )e i-%&u(e( i- t e Estate Ta. Retur- to )e *i&e( wit t e BIR 9
S3<<ESTE" ANS=ER8 A!! o the a..et. .ho-!d be i$c!-ded i$ the E.tate Ta2 Ret-r$ to be i!ed +ith the B4R. S#ith' a$ A#erica$ citi;e$ a$d a per#a$e$t re.ide$t o the Phi!ippi$e. i. co$.idered' or Phi!ippi$e e.tate ta2 p-rpo.e.' a re.ide$t a!ie$. (o$.e1-e$t!y' the a..et. to be i$c!-ded i$ the E.tate Ta2 Ret-r$ to be i!ed +ith the B4R .ho-!d be a!! property' rea! or per.o$a!' ta$gib!e' i$ta$gib!e or #i2ed' +here0er .it-ated' to the e2te$t o the i$tere.t that S#ith ha. at the ti#e o hi. death. Th-.' a!! o the propertie. e$-#erated i$ the prob!e# irre.pecti0e o +here they are .it-ated are i$c!-dib!e i$ the gro.. e.tate o S#ith.

c. =here the i$.-ra$ce +a. NOT ta/e$ by the decede$t -po$ hi. o+$ !i e a$d the be$e iciary i. $ot the decede$t:. e.tate' hi. e2ec-tor or ad#i$i.trator.

<. Ite,s (e(u%ti)&e *ro, t e ;ross estate o* a resi(e-t or -o-resi(e-t Fi&i$i-o (e%e(e-t or resi(e-t a&ie- (e%e(e-t4
a. E2pe$.e.' !o..e.' c!ai#.' i$debted$e.. a$d ta2e.D b. Property pre0io-.!y ta2edD c. Tra$. er. or p-b!ic -.eD d. The Ca#i!y 7o#e -p to a 0a!-e $ot e2ceedi$g P1 #i!!io$D e. Sta$dard ded-ctio$ o P1 #i!!io$D . *edica! e2pe$.e. $ot e2ceedi$g P>00'000.00D g. A#o-$t o e2e#pt retire#e$t recei0ed by the heir. -$der Rep. Act *o. EF1@D h. Net .hare o the .-r0i0i$g .po-.e i$ the co$6-ga! part$er.hip.

:" Pro%ee(s o* &i*e i-sura-%e i-%&u(i)&e i- a (e%e(e-t8s ;ross estate"

a. The decede$t ta/e. the i$.-ra$ce po!icy o$ hi. o+$ !i e 1& The a#o-$t. are recei0ab!e by a& the decede$t:. e.tate' b& hi. e2ec-tor' or c& ad#i$i.trator irre.pecti0e o +hether or $ot the i$.-red retai$ed the po+er o re0ocatio$' OR 2& The a#o-$t. are recei0ab!e by a$y be$e iciary de.ig$ated i$ the po!icy o i$.-ra$ce a. re0ocab!e be$e iciary.
GSec. ?> %E&' N4R( o 1FF@I

>" T ere is -o tra-s*er i- %o-te,$&atio- o* (eat i* t ere is -o s owi-; that the tra$. eror retai$ed or hi. !i e or or a$y
period +hich doe. $ot i$ act e$d be ore hi. death8 %1& the po..e..io$ or e$6oy#e$t o ' or the right to the i$co#e ro# the property' or %2& the right' either a!o$e or i$ co$6-$ctio$ +ith a$y per.o$' to de.ig$ate the per.o$ +ho .ha!! po..e.. or e$6oy the property or the i$co#e there ro#. GSec. ?> %B&' N4R( o 1FF@I

b. O$e' other tha$ the decede$t ta/e. the i$.-ra$ce po!icy o$ the !i e o the decede$t 1& The a#o-$t. are recei0ab!e by a& the decede$t:. e.tate' b& hi. e2ec-tor' or c& ad#i$i.trator

@" Va-is i-; (e(u%tio- H(e(u%tio- *or $ro$ert' $revious&' ta.e(I7 (e*i-e(" The ded-ctio$ a!!o+ed ro# the gro..
e.tate. o citi;e$.' re.ide$t a!ie$. a$d $o$re.ide$t e.tate. or propertie. +hich +ere pre0io-.!y .-b6ect to do$or:. or e.tate ta2e.. The ded-ctio$ i. ca!!ed a 0a$i.hi$g ded-ctio$ beca-.e the ded-ctio$ a!!o+ed di#i$i.he. o0er a period o i0e %>& year.. 4t i. a!.o /$o+$ a. a ded-ctio$ or property pre0io-.!y ta2ed.

 B" Va-is i-; (e(u%tio- H$ro$ert' $revious&' ta.e(I

a&&owe( as a (e(u%tio- *ro, t e ;ross estate o* a Fi&i$i-o %itiDe-7 w et er resi(e-t or -ot7 o* a resi(e-t a&ie- (e%e(e-t7 or o* a -o-resi(e-t a&ie- (e%e(e-t"
a. A$ a#o-$t e1-a! to the 0a!-e .peci ied be!o+ o b. A$y property or#i$g a part o the gro.. e.tate .it-ated i$ the Phi!ippi$e. c O a$y per.o$ +ho died +ithi$ i0e year. prior to the death o the decede$t' or tra$. erred to the decede$t by gi t +ithi$ i0e year. prior to hi. death' d. =here .-ch property ca$ be ide$ti ied a. ha0i$g bee$ recei0ed by the decede$t ro# the do$or by gi t' or ro# .-ch prior decede$t by gi t' be1-e.t' de0i.e' or i$herita$ce' or e. =hich ca$ be ide$ti ied a. ha0i$g bee$ ac1-ired i$ e2cha$ge or property .o recei0ed8 100H o the 0a!-e i the prior decede$t died +ithi$ o$e year prior to the death o the decede$t' or i the property +a. tra$. erred to hi# by gi t +ithi$ the .a#e period prior to hi. deathD ?0H o the 0a!-e i the prior decede$t died #ore tha$ o$e year b-t $ot #ore tha$ t+o year. prior to the death o the decede$t' or i the property +a. tra$. erred to hi# by gi t +ithi$ the .a#e period prior to hi. deathD 60H o the 0a!-e i the prior decede$t died #ore tha$ t+o year. b-t $ot #ore tha$ three year. prior to the death o the decede$t' or i the property +a. tra$. erred to hi# by gi t +ithi$ the .a#e period prior to hi. deathD E0H o the 0a!-e i the prior decede$t died #ore tha$ three year. b-t $ot #ore tha$ o-r year. prior to the death o the decede$t' or i the property +a. tra$. erred to hi# by gi t +ithi$ the .a#e period prior to hi. deathD a$d 20H o the 0a!-e i the prior decede$t died #ore tha$ o-r year. b-t $ot #ore tha$ i0e year. prior to the death o the decede$t' or i the property +a. tra$. erred to hi# by gi t +ithi$ the .a#e period prior to hi. death. GSec. ?6 %A& %2& a$d %B& %2&' N4R( o 1FF@' $-#beri$g' arra$ge#e$t a$d
-$der!i$i$g .-pp!iedI

32

The ta2 a..e..#e$t ha0i$g beco#e i$a!' e2ec-tory a$d e$ orceab!e' the .a#e ca$ $o !o$ger be co$te.ted by #ea$. o a di.g-i.ed prote.t. *Marcos, II v. Court of Appeals, et al.' 2@B S(RA E@&

+ONOR8S TA2ES

1" W at is t e (o-or8s ta. rate i* t e (o-ee is a stra-;er 9

S3<<ESTE" ANS=ER8 =he$ the do$ee or be$e iciary i. a .tra$ger' the ta2 payab!e by the do$or .ha!! be B0H o the $et gi t..

/" stra-;er 9

For $ur$oses o* t e (o-or8s ta. w o is a

S3<<ESTE" ANS=ER8 A .tra$ger i. a i. per.o$ +ho i. $ot a8 a. Brother' .i.ter %+hether by +ho!e or ha! ,b!ood&' .po-.e' a$ce.tor a$d !i$ea! de.ce$da$tD or b. Re!ati0e by co$.a$g-i$ity i$ the co!!atera! !i$e +ithi$ the o-rth degree o re!atio$.hip. GSec. FF %B&' N4R( o 1FF@I NOTES AN" (O**ENTS8 A!! re!ati0e. by a i$ity' irre.pecti0e o the degree' are co$.idered a. .tra$ger..

:"

W at is t e ta. )ase *or (o-atio-s 9

S3<<ESTE" ANS=ER8 The $et gi t. #ade d-ri$g the ca!e$dar year. GSec. FF %A&' N4R( o 1FF@I

<" For $ur$oses o* t e (o-or8s ta.7 w at is ,ea-t )' !-et ;i*ts 9#

S3<<ESTE" ANS=ER8 The $et eco$o#ic be$e it ro# the tra$. er that accr-e. to the do$ee. Accordi$g!y' i a #ortgaged property i. tra$. erred a. a gi t' b-t i#po.i$g -po$ the do$ee the ob!igatio$ to pay the #ortgage !iabi!ity' the$ the $et gi t i. #ea.-red by ded-cti$g ro# the air #ar/et 0a!-e o the property the a#o-$t o the #ortgage a..-#ed.
%!a.t par.' Sec. 11' Re0. Reg..No.2,200B&

C" T e a$$rova& o* t e %ourt sitti-; i- $ro)ate7 or as a

sett&e,e-t tri)u-a& over t e estate o* t e (e%ease( is -ot a ,a-(ator' reFuire,e-t *or t e %o&&e%tio- o* t e estate" The
probate co-rt i. deter#i$i$g i..-e. +hich are $ot agai$.t the property o the decede$t' or a c!ai# agai$.t the e.tate a. .-ch' b-t i. agai$.t the i$tere.t or property right +hich the heir' !egatee' de0i.ee' etc. ha. i$ the property or#er!y he!d by the decede$t. The $otice. o !e0y +ere reg-!ar!y i..-ed +ithi$ the pre.cripti0e period.

>" How are ;i*ts o* $erso-a& $ro$ert' to )e va&ue( *or (o-or8s ta. $ur$oses 9
S3<<ESTE" ANS=ER8 The #ar/et 0a!-e o the per.o$a! property at the ti#e o the gi t .ha!! be co$.idered the a#o-$t o the gi t. %Sec. 102' N4R( o 1FF@&

@" W at is t e va&uatio- o* (o-ate( rea& $ro$ert' *or (o-or8s ta. $ur$oses 9

S3<<ESTE" ANS=ER8 The rea! property .ha!! be apprai.ed at it. air #ar/et 0a!-e a. o the ti#e o the gi t.

7o+e0er' the apprai.ed 0a!-e o the rea! property at the ti#e o the gi t .ha!! be +hiche0er i. the higher o 8 a. the air #ar/et 0a!-e a. deter#i$ed by the (o##i..io$er o 4$ter$a! Re0e$-e %;o$a! 0a!-atio$& or b. the air #ar/et 0a!-e a. .ho+$ i$ the .ched-!e o 0a!-e. i2ed by the Pro0i$cia! a$d (ity A..e..or.. GSec. 102' i$ re!atio$ to Sec. ?? %B& both
o the N4R( o 1FF@I

33

B" A (ie( &eavi-; as is o-&' eirs7 is survivi-; s$ouse B7 a-( t ree ,i-or % i&(re-7 27 Y a-( M" Si-%e B (oes -ot wa-t to $arti%i$ate i- t e (istri)utio- o* t e estate7 s e re-ou-%e( er ere(itar' s are i- t e estate" a" Is t e re-u-%iatio- su)Ae%t to (o-or8s ta. 9 E.$&ai-"
S3<<ESTE" ANS=ER8 No. The ge$era! re$-$ciatio$ by a$ heir' i$c!-di$g the .-r0i0i$g .po-.e' a. i$ the ca.e B' o her .hare i$ the hereditary e.tate !e t by the decede$t i. $ot .-b6ect to do$or:. ta2. %E th par.' Sec. 11' Re0. Reg.. No. 2,200B& Thi. i. .o beca-.e the ge$era! re$-$ciatio$ by B +a. $ot .peci ica!!y a$d categorica!!y do$e i$ a0or o ide$ti ied heir9. to the e2c!-.io$ or di.ad0a$tage o the other co,heir. i$ the hereditary e.tate.

7o+e0er' the (orporatio$ (ode prohibit. corporatio$. ro# #a/i$g po!itica! co$trib-tio$.. %(orp. (ode' Tit!e 4V' Sec. B6.F& d. "o+rie. or gi t. #ade o$ acco-$t o #arriage a$d be ore it. ce!ebratio$ or +ithi$ o$e year therea ter by re.ide$t. +ho are pare$t. to each o their !egiti#ate' recog$i;ed $at-ra!' or adopted chi!dre$ to the e2te$t o the ir.t te$ tho-.a$d pe.o. %P10'000.00&D e. <i t. #ade by re.ide$t. or $o$,re.ide$t. to or or the -.e o the Natio$a! <o0er$#e$t or a$y e$tity created by a$y o it. age$cie. +hich i. $ot co$d-cted or pro it' or to a$y po!itica! .-bdi0i.io$. o the .aid <o0er$#e$tD . <i t. #ade by re.ide$t. or $o$ re.ide$t. i$ a0or o a$ ed-catio$a! a$d9or charitab!e' re!igio-.' c-!t-ra! or .ocia! +e! are corporatio$' i$.tit-tio$' o-$datio$' tr-.t or phi!a$thropic orga$i;atio$ or re.earch i$.tit-tio$ or orga$i;atio$8 Pro0ided' ho+e0er' That $ot #ore tha$ thirty perce$t %B0H& o .aid gi t. .ha!! be -.ed by .-ch do$ee or ad#i$i.tratio$ p-rpo.e.. GSec. 101 %A&' N4R( o 1FF@' $-#beri$g a$d arra$ge#e$t .-pp!iedI g. <i t. #ade by $o$,re.ide$t a!ie$. o-t.ide o the Phi!ippi$e. to Phi!ippi$e re.ide$t. are e2e#pt ro# do$or:. ta2e. beca-.e ta2atio$ i. ba.ica!!y territoria!. The tra$.actio$' +hich .ho-!d ha0e bee$ .-b6ect to ta2 +a. #ade by $o$,re.ide$t a!ie$. a$d too/ p!ace o-t.ide o the Phi!ippi$e..

)" Su$$osi-; t at i-stea( o* a ;e-era& re-u-%iatio-7 B re-ou-%e( er ere(itar' s are i- A8s estate to 2 w o is a s$e%ia& % i&(7 wou&( 'our a-swer )e t e sa,e 9 E.$&ai-"
S3<<ESTE" ANS=ER8 *y a$.+er +o-!d be di ere$t. The re$-$ciatio$ i$ a0or o L +o-!d be .-b6ect to do$or:. ta2. Thi. i. .o beca-.e the re$-$ciatio$ +a. .peci ica!!y a$d categorica!!y do$e i$ a0or o L a$d ide$ti ied heir to the e2c!-.io$ or di.ad0a$tage o O a$d T' the other co,heir. i$ the hereditary e.tate. %Eth
par.' Sec. 11' Re0. Reg.. No. 2,200B&

E" W at is t e %o-%e$t o* (o-atio- or ;i*t s$&itti-; 9 I&&ustrate"

S3<<ESTE" ANS=ER8 "o$atio$ or gi t .p!itti$g i. .preadi$g the gi t o0er $-#ero-. ca!e$dar year. i$ order to a0ai! o !o+er do$or:. ta2e.. 4$ 200? )eo$ +a. thi$/i$g o do$ati$g a P200'000.00 to *i/!o.' hi. ir.t co-.i$. The P200'000.00 i. the tota!ity o the $et gi t. or 200?. 4 he do$ated the P200'000.00 i$ 200? the ir.t P100'000 +o-!d be e2e#pt a$d the re#ai$i$g P>0'000.00 +o-!d be .-b6ect to do$or:. ta2 4 )eo$ .pread. the P200'000 do$atio$ o0er t+o %2& ca!e$dar year.' do$ati$g P100'000.00 o$ "ece#ber B0' 200? a$d the re#ai$i$g P100'000.00 o$ Aa$-ary 1' 200F the tra$.actio$ +o-!d be e2e#pt ro# do$or:. ta2. Thi. i. .o e0e$ i the do$atio$ i. .eparated o$!y by t+o day. beca-.e the ba.i. i. the ca!e$dar year. )eo$ +o-!d be e$6oyi$g the e2e#ptio$ or the ir.t P100'000.00 $et gi t. or each ca!e$dar year.

C"
(o-or8s ta."

3ive so,e (o-atio-s t at are e.e,$t *ro,

S3<<ESTE" ANS=ER8 a" The ir.t P100'000.00 $et do$atio$ d-ri$g a ca!e$dar year i. e2e#pt ro# do$or:. ta2 GSec. FF %A&' N4R( o 1FF@I #ade by a re.ide$t or $o$ re.ide$tD b. The do$atio$ by a re.ide$t or $o$,re.ide$t o a pri;e to a$ ath!ete i$ a$ i$ter$atio$a! .port. to-r$a#e$t he!d abroad a$d .a$ctio$ed by the $atio$a! .port. a..ociatio$ i. e2e#pt ro# do$or:. ta2 %Sec. 1' Rep. Act No. @>EF& c" Po!itica! co$trib-tio$. #ade by a re.ide$t or $o$,re.ide$t i$di0id-a! i regi.tered +ith the (O*E)E( irre.pecti0e o +hether do$ated to a po!itica! party or i$di0id-a!.

10" A7 w o is e-;a;e( i- t e %ar !)u' a-( se&&# )usi-ess so&( to B PB ,i&&io- 5a;uar *or o-&' P< ,i&&io-" T e $ro$er VAT o- t e sa&e was $ai(" I* 'ou are t e BIR e.a,i-er assi;-e( to review t e sa&e7 wou&( 'ou issue a ta. assess,e-t o- t e tra-sa%tio- 9 E.$&ai- 'our a-swer )rie*&'"
S3<<ESTE" ANS=ER8 i$.- icie$cy o co$.ideratio$. "o$or:. ta2e. +o-!d be d-e o$ the

=here property' other tha$ rea! property that ha. bee$ .-b6ected to the i$a! capita! gai$. ta2' i. tra$. erred or !e.. tha$ a$ ade1-ate a$d -!! co$.ideratio$ i$ #o$ey or #o$ey:. +orth' the$ the a#o-$t by +hich the air #ar/et 0a!-e o the property at the ti#e o the e2ec-tio$ o the (o$tract to Se!! or e2ec-tio$ o the "eed o Sa!e +hich i. $ot preceded by a (o$tract to Se!! e2ceeded the 0a!-e o the agreed or act-a! co$.ideratio$ or .e!!i$g price .ha!! be dee#ed a gi t' a$d .ha!! be i$c!-ded i$ co#p-ti$g the a#o-$t o gi t. #ade d-ri$g the ca!e$dar year. %>th par.'
Sec. 11' Re0. Reg.. No. 2,200B&

34

a. a p-rcha.er ro# it. i$direct b-rde$ o the VAT .hi ted to it by it. VAT, regi.tered .-pp!ier.' the p-rcha.e tra$.actio$ i. $ot e2e#pt. REASON8 The VAT i. a ta2 o$ co$.-#ptio$' the a#o-$t o +hich #ay be .hi ted or pa..ed o$ by the .e!!er to the p-rcha.er o the good.' propertie. or .er0ice.. GCommissioner of Internal Revenue v. Seagate
(echnology *Philippines#, <. R. No. 1>B?66' Cebr-ary 11' 200>&

<" I&&ustratio- o* e**e%ts o* e.e,$tio-s *ro, VAT w i% is a- i-(ire%t ta." A VAT e2e#pt .e!!er .e!!. to a $o$,VAT
e2e#pt p-rcha.er. The p-rcha.er i. .-b6ect to VAT beca-.e the VAT i. #ere!y added a. part o the p-rcha.e price a$d $ot a. a ta2 beca-.e the b-rde$ i. #ere!y .hi ted. The .e!!er i. .ti!! e2e#pt beca-.e it co-!d pa.. o$ the b-rde$ o payi$g the ta2 to the p-rcha.er.

VALUE-A++E+ TA2ES HVATI

WARNIN3 NNN Appro2i#ate!y 10H o the tota! 1-e.tio$. a./ed i$ the Bar E2a#i$atio$ are .o-rced ro# VAT a$d it. co$cept.. Thi. area i. probab!y the #o.t di ic-!t area to oreca.t beca-.e there are $o .tati.tica!!y percei0ed patter$.. The a-thor ha. retai$ed the Star. Sy.te# or VAT. (o$.ideri$g the !i#ited period o ti#e' the reader i. ad0i.ed to oc-. o$ area. #ar/ed +ith .tar. a$d 6-.t bro+.e the -$#ar/ed area..

>" T e VAT is a ta. o- %o-su,$tio-" =ea-i-; o* %o-su,$tio- as use( u-(er t e VAT s'ste," (o$.-#ptio$ i.
Qthe -.e o a thi$g i$ a +ay that thereby e2ha-.t. it.Q App!ied to .er0ice.' the ter# #ea$. the per or#a$ce or Q.-cce.. -! co#p!etio$ o a co$tract-a! d-ty' -.-a!!y re.-!ti$g i$ the per or#erP. re!ea.e ro# a$y pa.t or -t-re !iabi!ity 2 2 2Q 3$!i/e good.' .er0ice. ca$$ot be phy.ica!!y -.ed i$ or bo-$d or a .peci ic p!ace +he$ their de.ti$atio$ i. deter#i$ed. 4$.tead' there ca$ o$!y be a Qpredeter#i$ed e$d o a co-r.eQ +he$ deter#i$i$g the .er0ice Q!ocatio$ or po.itio$ 2 2 2 or !ega! p-rpo.e..Q GCommissioner of Internal Revenue v.
Placer %ome (echnical Services *Phils.#, Inc. <. R. No. 16EB6>' A-$e ?' 200@I

1" Va&ue-a((e( ta. HVATI i. a ta2 +hich i. i#po.ed o$!y o$ the i$crea.e i$ the +orth' #erit or i#porta$ce o good.' propertie. or .er0ice.' a$d $ot o$ the tota! 0a!-e o the good. or .er0ice. bei$g .o!d or re$dered. /"
.hi ted or propertie. co$te2t o pay#e$t'

Nature o* VAT" VAT i. a$ i$direct ta2 that #ay be pa..ed o$ to the b-yer' tra$. eree or !e..ee o the good.' or .er0ice.. A. .-ch' it .ho-!d be -$der.tood $ot i$ the the per.o$ or e$tity that i. pri#ari!y' direct!y !iab!e or it. b-t i$ ter#. o it. $at-re a. a ta2 o$ co$.-#ptio$.

@" I&&ustratio- o* t e ,ea-i-; o* %o-su,$tio- as use( u-(er t e VAT s'ste," Cor e2a#p!e the .er0ice. re$dered by a !oca!
ir# to it. oreig$ c!ie$t are per or#ed or .-cce.. -!!y co#p!eted -po$ it. .e$di$g to a oreig$ c!ie$t the dra t. a$d bi!!. it ha. gathered ro# .er0ice e.tab!i.h#e$t. here. 4t. .er0ice.' ha0i$g bee$ per or#ed i$ the Phi!ippi$e.' are there ore a!.o co$.-#ed i$ the Phi!ippi$e.. S-ch aci!itatio$ .er0ice ha. $o phy.ica! e2i.te$ce' yet ta/e. p!ace -po$ re$ditio$' a$d there ore -po$ co$.-#ptio$' i$ the Phi!ippi$e..
GCommissioner of Internal Revenue v. Placer %ome (echnical Services *Phils.#, Inc. <. R. No. 16EB6>' A-$e ?' 200@I

GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#, <. R. No. 1>B?66' Cebr-ary 11' 200> citi$g 0ario-. a-thoritie.U

VAT i. a perce$tage ta2 i#po.ed o$ a$y per.o$ +hether or $ot a ra$chi.e gra$tee' +ho i$ the co-r.e o trade or b-.i$e..' .e!!.' barter.' e2cha$ge.' !ea.e.' good. or propertie.' re$der. .er0ice.. 4t i. a!.o !e0ied o$ e0ery i#portatio$ o good. +hether or $ot i$ the co-r.e o trade or b-.i$e... The ta2 ba.e o the VAT i. !i#ited o$!y to the 0a!-e added to .-ch good.' propertie.' or .er0ice. by the .e!!er' tra$. eror or !e..or. C-rther' the VAT i. a$ i$direct ta2 a$d ca$ be pa..ed o$ to the b-yer.
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200?&

B"
a.

W o are &ia)&e *or t e va&ue-a((e( ta."

:" E**e%t o* e.e,$tio-s *ro, VAT w i% is ai-(ire%t ta." 4 a .pecia! !a+ #ere!y e2e#pt. a party a. a .e!!er ro# it.
direct !iabi!ity or pay#e$t o the VAT' b-t doe. $ot re!ie0e the .a#e party

A$y per.o$ +ho' i$ the co-r.e o hi. trade or b-.i$e..' 1& Se!!.' barter.' e2cha$ge. or !ea.e. good. or propertie.' or 2& re$der. .er0ice.' a$d b. a$y per.o$ +ho i#port. good. 222 7o+e0er' i$ the ca.e o i#portatio$ o ta2ab!e good.' the i#porter' +hether a$ i$di0id-a! or corporatio$ a$d +hether or $ot #ade i$ the

co-r.e o hi. trade or b-.i$e..' .ha!! be !iab!e to VAT 222.

No. 16,200>'Sec. E.10>,1' paraphra.i$g .-pp!ied&

35
%Re0. Reg..

*ABA:A%A +uro Party $ist, etc. et al. vs. &rmita, <.R. No. 16?20@' October 1>' 200>' a$d co#pa$io$ ca.e.' o$ the #otio$ or reco$.ideratio$&

C"

Various VAT ,et o(s a-( s'ste,s"

a. Cost (e(u%tio- ,et o(" Thi. i. a .i$g!e,.tage ta2 +hich i. payab!e o$!y by the origi$a! .e!!er.. %A"a-ada +uro Party $ist *etc.# v.
&rmita, etc., et al., <. R. No. 16?0>6' Septe#ber 1' 200> a$d co#pa$io$ ca.e.&

11" Out$ut ta. i. the 0a!-e,added ta2 d-e o$ the .a!e or !ea.e or ta2ab!e good.' propertie. or .er0ice. by a$y VAT,regi.tered per.o$. 1/" I-$ut ta. i. the 0a!-e,added ta2 d-e o$ or paid by a VAT,regi.tered per.o$ o$ i#portatio$ o good or !oca! p-rcha.e. o good. or .er0ice.' i$c!-di$g !ea.e or -.e o propertie.' i$ the co-r.e o hi. trade or b-.i$e... %Re0. Reg.. No. E.110,1' 1.t par.&
1:" I-%&u(e( i- t e i-$ut ta."
a. the tra$.itio$a! i$p-t ta2 a$d b. the pre.-#pti0e i$p-t ta2 222. 4t i$c!-de. c. i$p-t ta2e. +hich ca$ be direct!y attrib-ted to tra$.actio$. .-b6ect to the VAT p!-. a ratab!e portio$ o a$y i$p-t ta2 +hich ca$$ot be direct!y attrib-ted to either the ta2ab!e or e2e#pt acti0ity. %Re0. Reg.. No. E.110,1' 1.t par.' 2$d .e$te$ce'. A$d 2$d par.' paraphra.i$g' arra$ge#e$t a$d $-#beri$g .-pp!ied &

Thi. +a. .-b.e1-e$t!y #odi ied a$d a #i2t-re o co.t ded-ctio$ #ethod a$d ta2 credit #ethod +a. -.ed to deter#i$e the 0a!-e,added ta2 payab!e. %I"id.& b. Ta. %re(it ,et o(" Thi. #ethod re!ie. o$ i$0oice.' a$ e$tity ca$ credit agai$.t or .-btract ro# the VAT charged o$ it. .a!e. or o-tp-t. the VAT paid o$ it. p-rcha.e.' i$p-t. a$d i#port.. GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#, <. R. No. 1>B?66' Cebr-ary 11' 200>I 4 at the e$d o a ta2ab!e period' the o-tp-t ta2e. charged by a .e!!er are e1-a! to the i$p-t ta2e. pa..ed o$ by the .-pp!ier.' $o pay#e$t i. re1-ired. 4t i. +he$ the o-tp-t ta2e. e2ceed the i$p-t ta2e. that the e2ce.. ha. to be paid. 4 ho+e0er' the i$p-t ta2e. e2ceed the o-tp-t ta2e.' the e2ce.. .ha!! be carried o0er to the .-cceedi$g 1-arter or 1-arter.. Sho-!d the i$p-t ta2e. re.-!t ro# ;ero,rated or e ecti0e!y ;ero,rated tra$.actio$. or ro# ac1-i.itio$ o capita! good.' a$y e2ce.. o0er the o-tp-t ta2e. .ha!! i$.tead be re -$ded to the ta2payer or credited agai$.t other i$ter$a! re0e$-e ta2e.. %I"id.&

1<" Co-%e$t o* tra-sitio-a& i-$ut ta. %re(its o)e;i--i-; i-ve-tories" Ta2payer. +ho beco#e VAT,regi.tered
per.o$. -po$ e2ceedi$g the #i$i#-# t-r$o0er o P1'>00'000.00 i$ a$y 12,#o$th period' or +ho 0o!-$tari!y regi.ter e0e$ i their t-r$o0er doe. $ot e2ceed P1'>00'000.00 %e2cept ra$chi.e gra$tee. o radio a$d te!e0i.io$ broadca.ti$g +ho.e thre.ho!d i. P10'000'000.00& .ha!! be e$tit!ed to a tra$.itio$a! i$p-t ta2 o$ the i$0e$tory o$ ha$d a. o the e ecti0ity o their VAT regi.tratio$' o$ the o!!o+i$g8 a. good. p-rcha.ed or re.a!e i$ their pre.e$t co$ditio$D b. #ateria!. p-rcha.ed or -rther proce..i$g' b-t +hich ha0e $ot yet -$dergo$e proce..i$gD c. good. +hich ha0e bee$ #a$- act-red by the ta2payerD d. good. i$ proce.. or .a!eD or e. good. a$d .-pp!ie. or -.e i$ the co-r.e o the ta2payer:. trade or b-.i$e.. a. a VAT,regi.tered per.o$. GRe0. Reg.. No. 16,200>'
Sec.E.111,1' %a&' 1.t par.' arra$ge#e$t a$d $-#beri$g .-pp!iedI

E" How t e VAT is i,$ose( o- t e i-%rease i- wort 7 ,erit or i,$rove,e-t o* t e ;oo(s or servi%es" The VAT
-ti!i;e. the co$cept o the o-tp-t a$d i$p-t ta2e.. O-tp-t VAT !e.. 4$p-t VAT V VAT d-e o$ the i$crea.e i$ +orth' #erit or i#pro0e#e$t the good. or .er0ice..

10" T e ri; t to %re(it t e i-$ut ta. )e &i,ite( )' &e;is&atio- )e%ause it is a ,ere %reatio- o* &aw" Prior to the
e$act#e$t o #-!ti,.tage .a!e. ta2atio$' the .a!e. ta2e. paid at e0ery !e0e! o di.trib-tio$ are $ot reco0erab!e ro# the ta2e. payab!e. =ith the ad0e$t o E2ec-ti0e Order No. 2@B i#po.i$g a 10H #-!ti,.tage ta2 o$ a!! .a!e.' it +a. o$!y the$ that the crediti$g o the i$p-t ta2 paid o$ p-rcha.e or i#portatio$ o good. a$d .er0ice. by VAT,regi.tered per.o$. agai$.t the o-tp-t ta2 +a. e.tab!i.hed. Thi. co$ti$-ed +ith the E2pa$ded VAT )a+ %R.A. No. @@16&' a$d The Ta2 Re or# Act o 1FF@ %R.A. No. ?E2E&. The right to credit i$p-t ta2 a. agai$.t the o-tp-t ta2 i. c!ear!y a pri0i!ege created by !a+' a pri0i!ege that a!.o the !a+ ca$ !i#it. 4t .ho-!d be .tre..ed that a per.o$ ha. $o 0e.ted right i$ .tat-tory pri0i!ege..

1>" Co-%e$t o* $resu,$tive i-$ut ta. %re(its" Per.o$. or ir#. e$gaged i$ the proce..i$g o .ardi$e.' #ac/ere!' a$d #i!/' a$d i$ #a$- act-ri$g re i$ed .-gar' coo/i$g oi! a$d pac/ed $ood!e,ba.ed i$.ta$t #ea!.' .ha!! be a!!o+ed a pre.-#pti0e i$p-t ta2' creditab!e agai$.t the o-tp-t ta2' e1-i0a!e$t to o-r perce$t %EH& o the gro.. 0a!-e i$ #o$ey o their p-rcha.e. o pri#ary agric-!t-ra! prod-ct. +hich are -.ed a. i$p-t. to their prod-ctio$.

A. -.ed i$ thi. paragraph' the ter# proce..i$g .ha!! #ea$ pa.te-ri;atio$' ca$$i$g a$d acti0itie. +hich thro-gh phy.ica! or che#ica! proce.. a!ter the e2terior te2t-re or or# or i$$er .-b.ta$ce o a prod-ct i$ .-ch a #a$$er a. to prepare it or .pecia! -.e to +hich it co-!d $ot ha0e bee$ p-t i$ it. origi$a! or# or co$ditio$. GRe0. Reg.. No. 16,200>'
Sec.E.111,1' %b&I

36

Li,ite( o* t e =ar(e- 3rou$ )ase( i- Ho-;Go-; " T e )i( was a$$rove( )' t e Co,,ittee o- PrivatiDatio-7 a-( a Noti%e o* Awar( was issue( to =a;sa'sa' Li-es" Is t e sa&e su)Ae%t to VAT 9
S3<<ESTE" ANS=ER8 No. The ter# Qcarryi$g o$ b-.i$e..Q doe. $ot #ea$ the per or#a$ce o a .i$g!e di.co$$ected act' b-t #ea$. co$d-cti$g' pro.ec-ti$g a$d co$ti$-i$g b-.i$e.. by per or#i$g progre..i0e!y a!! the act. $or#a!!y i$cide$t thereo D +hi!e Q (oi-; )usi-essQ co$0ey. the idea o b-.i$e.. bei$g do$e' $ot ro# ti#e to ti#e' b-t a!! the ti#e. QCourse o* )usi-essQ i. +hat i. -.-a!!y do$e i$ the #a$age#e$t o trade or b-.i$e... Q(o-r.e o b-.i$e..Q or Qdoi$g b-.i$e..Q co$$ote. reg-!arity o acti0ity. 4$ the i$.ta$t ca.e' the .a!e +a. a$ i.o!ated tra$.actio$. The .a!e +hich +a. i$0o!-$tary a$d #ade p-r.-a$t to the dec!ared po!icy o <o0er$#e$t or pri0ati;atio$ co-!d $o !o$ger be repeated or carried o$ +ith reg-!arity. 4t .ho-!d be e#pha.i;ed that the $or#a! VAT, regi.tered acti0ity o N"( i. !ea.i$g per.o$a! property. Thi. i$di$g i. co$ ir#ed by the Re0i.ed (harter o the N"( +hich bear. $o i$dicatio$ that the N"( +a. created or the pri#ary p-rpo.e o .e!!i$g rea! property. %Commissioner of Internal Revenue v. Magsaysay $ines, Inc., et
al., <. R. No. 1E6F?E' A-!y 2?' 2006&

1@" T e VAT re;istratio- *ee (oes NOT vio&ate re&i;ious *ree(o," The VAT regi.tratio$ ee i#po.ed o$ $o$,VAT
e$terpri.e. +hich i$c!-de. a#o$g other.' re!igio-. .ect. +hich .e!!. a$d di.trib-te. re!igio-. !iterat-re i. $ot 0io!ati0e o re!igio-. reedo#' a!tho-gh a i2ed a#o-$t i. $ot i#po.ed or the e2erci.e o a pri0i!ege b-t o$!y or the p-rpo.e o de rayi$g part o the co.t o regi.tratio$. The regi.tratio$ ee i. th-. #ore o a$ ad#i$i.trati0e ee' o$e $ot i#po.ed o$ the e2erci.e o a pri0i!ege' #-ch !e.. a co$.tit-tio$a! right.
*(olentino v. Secretary of /inance, et al., and companion cases, 2B> S(RA 6B0&

1B" I-ter$retatio- o* t e ter, !I- t e Course o* Tra(e or Busi-ess# as use( i- t e VAT s'ste," The ter# Qdoi$g
b-.i$e..Q or co-r.e o b-.i$e.. co$0ey. the idea o b-.i$e.. bei$g do$e' $ot ro# ti#e to ti#e' b-t a!! the ti#e. 4t doe. $ot i$c!-de i.o!ated tra$.actio$.. %Commissioner of Internal Revenue v. Magsaysay $ines, Inc., et
al., <. R. No. 1E6F?E' A-!y 2?' 2006&

Pursua-t to a ;over-,e-t $ro;ra, o* $rivatiDatio-7 N+C7 a VAT-re;istere( e-tit' %reate( *or t e $ur$ose o* se&&i-; rea& $ro$ert'7 (e%i(e( to se&& to $rivate e-ter$rise a&& o* its s ares i- its w o&&'-ow-e( su)si(iar' t e Natio-a& =ari-e Cor$oratio- HN=CI" T e N+C (e%i(e( to se&& i- o-e &ot its N=C s ares a-( *ive H>I o* its s i$s7 w i% are :7B00 +WT Twee--+e%Ger7 O6&oe%G-erO t'$e vesse&s" T e vesse&s were %o-stru%te( *or t e N+C )etwee- 1EC1 a-( 1EC<7 t e- i-itia&&' &ease( to LuDo- Steve(ori-; Co,$a-'7 a&so its w o&&'-ow-e( su)si(iar'" Su)seFue-t&'7 t e vesse&s were tra-s*erre( a-( &ease(7 o- a )are)oat )asis7 to t e N=C" T e N=C s ares a-( t e vesse&s were o**ere( *or $u)&i% )i((i-;" A,o-; t e sti$u&ate( ter,s a-( %o-(itio-s *or t e $u)&i% au%tio- was t at t e wi--i-; )i((er was to $a' Oa va&ue a((e( ta. o* 10J o- t e va&ue o* t e vesse&s"O =a;sa'sa' Li-es7 I-%"7 o**ere( to )u' t e s ares a-( t e vesse&s *or P1@C70007000"00" T e )i( was ,a(e )' =a;sa'sa' Li-es7 $ur$orte(&' *or a -ew %o,$a-' sti&& to )e *or,e( %o,$ose( o* itse&*7 Ba&iwa; Navi;atio-7 I-%"7 a-( FI=

1C"

1E" U-(er t e Va&ue A((e( Ta. HVATI7 t e ta. is i,$ose( o- sa&es7 )arter7 or e.% a-;e or ;oo(s a-( servi%es" T e VAT is a&so i,$ose( o- %ertai- tra-sa%tio-s !(ee,e( sa&es# w i% i-%&u(e4
a. Tra$. er' -.e or co$.-#ptio$ $ot i$ the co-r.e o b-.i$e.. or propertie. origi$a!!y i$te$ded or .a!e or or -.e i$ the co-r.e o b-.i$e... 222 "i.trib-tio$ or tra$. er to8 1& Shareho!der. or i$0e.tor. a. .hare i$ the pro it. o the VAT, regi.tered per.o$D 222 or 2& (reditor. i$ pay#e$t o debt or ob!igatio$ c. (o$.ig$#e$t o good. i act-a! .a!e i. $ot #ade +ithi$ .i2ty %60& day. o!!o+i$g the date .-ch good. +ere co$.ig$ed. (o$.ig$ed good. ret-r$ed by the co$.ig$ee +ithi$ the 60,day period are $ot dee#ed .o!d. d. Retire#e$t ro# or ce..atio$ o b-.i$e..' +ith re.pect to a!! good. o$ ha$d' 1& +hether capita! good.' .toc/,i$,trade' .-pp!ie. or #ateria!. a. o the date o .-ch retire#e$t' or ce..atio$' 2& +hether or $ot the b-.i$e.. i. co$ti$-ed by the $e+ o+$er or .-cce..or. 222 GRe0. Reg.. No. 16,200>' Sec. E.106,@'
paraphra.i$g' arra$ge#e$t a$d $-#beri$g .-pp!iedI

b.

37

/0" Tra-sa%tio-s %o-si(ere( retire,e-t or %essatioo* )usi-ess !(ee,e( sa&e# su)Ae%t to VAT"
a. (ha$ge o o+$er.hip o the b-.i$e... There i. cha$ge i$ the o+$er.hip o the b-.i$e.. +here a .i$g!e proprietor.hip i$corporate.D or 1& the proprietor o a .i$g!e proprietor.hip .e!!. hi. e$tire b-.i$e... b. "i..o!-tio$ o a part$er.hip a$d creatio$ o a $e+ part$er.hip +hich ta/e. o0er the b-.i$e... GRe0. Reg.. No. 16,200>' Sec. E.106,@ %a&' %E& paraphra.i$g' arra$ge#e$t a$d $-#beri$g .-pp!iedI

/1"

Sa&e o* or &ease o* rea& $ro$erties su)Ae%t to VAT"

Sa!e o rea! propertie. pri#ari!y or .a!e to c-.to#er. or he!d or !ea.e i$ the ordi$ary co-r.e o trade or b-.i$e.. o the .e!!er .ha!! be .-b6ect to VAT. %Re0. Reg.. No. 16,200>' Sec. E.106,B' 1.t par.& Th-.' capita! tra$.actio$. o i$di0id-a!. are $ot .-b6ect to VAT. O$!y rea! e.tate dea!er. are .-b6ect to VAT.

Pe.o. %P2'>00'000.00& a$d be!o+ +here the i$.tr-#e$t o .a!e9tra$. er9di.po.itio$ +a. e2ec-ted o$ or a ter No0e#ber 1' 200>' pro0ided' That $ot !ater tha$ Aa$-ary B1' 200F a$d e0ery three %B& year. therea ter' the a#o-$t. .tated herei$ .ha!! be ad6-.ted to it. pre.e$t 0a!-e -.i$g the (o$.-#er Price 4$de2' a. p-b!i.hed by the Natio$a! Stati.tic. O ice %NSO&D pro0ided' -rther' that .-ch ad6-.t#e$t .ha!! be p-b!i.hed thro-gh re0e$-e reg-!atio$. to be i..-ed $ot !ater tha$ *arch B1 o each year. 4 t+o or #ore ad6ace$t re.ide$tia! !ot. are .o!d or di.po.ed i$ a0or o o$e b-yer' or the p-rpo.e o -ti!i;i$g the !ot. a. o$e re.ide$tia! !ot' the .a!e .ha!! be e2e#pt ro# VAT o$!y i the aggregate 0a!-e o the !ot. do $ot e2ceed P1'>00'000.00. Ad6ace$t re.ide$tia! !ot.' a!tho-gh co0ered by .eparate tit!e. a$d9or .eparate ta2 dec!aratio$.' +he$ .o!d or di.po.ed o to o$e a$d the .a#e b-yer' +hether co0ered by o$e or .eparate "eed o (o$0eya$ce' .ha!! be pre.-#ed a. a .a!e o o$e re.ide$tia! !ot. GRe0. Reg.. No. E.10F,1 %B&' %p&' paraphra.i$g a$d $-#beri$g .-pp!iedI

/<"

VAT o- servi%es a-( &ease o* $ro$erties"

//" O- Se$te,)er <7 /00E7 2YM7 I-%"7 a (o,esti% %or$oratio- e-;a;e( i- t e rea& estate )usi-ess7 so&( a )ui&(i-; *or P1070007000"00" Is t e sa&e su)Ae%t to t e va&uea((e( ta. HVATI9 I* so7 ow ,u% 9 E.$&ai-.
S3<<ESTE" ANS=ER8 Oe.. 12H o$ the gro.. .e!!i$g price beca-.e the .a!e +a. #ade i$ the ordi$ary co-r.e o trade o b-.i$e.. o L' a do#e.tic corporatio$ e$gaged i$ the rea! e.tate b-.i$e...

a. There .ha!! be !e0ied' a..e..ed' a$d co!!ected' b. a 0a!-e,added ta2 e1-i0a!e$t to t+e!0e perce$t %12H& o gro.. receipt. c. deri0ed ro# the .a!e or e2cha$ge o .er0ice.' 1& i$c!-di$g the -.e or !ea.e o propertie.. GN4R( o
1FF@' Sec. 10? %A&' a. a#e$ded by R.A. No. FBB@' arra$ge#e$t a$d $-#beri$g .-pp!iedI

T e *o&&owi-; sa&es o* rea& $ro$erties are e.e,$t *ro, VAT7 -a,e&'4

a. Sa!e o rea! propertie. $ot pri#ari!y he!d or .a!e to c-.to#er. or he!d or !ea.e i$ the ordi$ary co-r.e o trade or b-.i$e..D b. Sa!e o rea! propertie. -ti!i;ed or !o+,co.t ho-.i$g a. de i$ed by RA No. @2@F' other+i.e /$o+$ a. the 3rba$ a$d "e0e!op#e$t 7o-.i$g Act o 1FF2 a$d other re!ated !a+.' .-ch a. RA No. @?B> a$d RA No. ?@6B. 222 222 222 c. Sa!e o rea! propertie. -ti!i;ed or .ocia!i;ed ho-.i$g a. de i$ed -$der RA No. @2@F' a$d other re!ated !a+. +herei$ the price cei!i$g per -$it i. P22>'000.00 or a. #ay ro# ti#e to ti#e be deter#i$ed by the 73"(( a$d the NE"A a$d other re!ated !a+.. 222 222 222 d. Sa!e o re.ide$tia! !ot 0a!-ed at O$e *i!!io$ Ci0e 7-$dred Tho-.a$d Pe.o. %P1'>00'000.00& a$d be!o+' or ho-.e W !ot a$d other re.ide$tia! d+e!!i$g. 0a!-ed at T+o *i!!io$ <i0e 7-$dred Tho-.a$d

/:"

/>" !Sa&e or e.% a-;e o* servi%es#7 (e*i-e(" The ter# .a!e or e2cha$ge o .er0ice. #ea$. the per or#a$ce o a!! /i$d. o .er0ice. i$ the Phi!ippi$e. or other. or a ee' re#-$eratio$ or co$.ideratio$' +hether i$ /i$d or i$ ca.h' i$c!-di$g tho.e per or#ed or re$dered by the o!!o+i$g8 a. co$.tr-ctio$ a$d .er0ice co$tractor.D b. .toc/' rea! e.tate' co##ercia!' c-.to#. a$d i##igratio$ bro/er.D c. !e..or. o property' +hether per.o$a! or rea!D d. per.o$. e$gaged i$ +areho-.i$g .er0ice. e. !e..or. or di.trib-tor. o ci$e#atographic i!#.D . per.o$. e$gaged i$ #i!!i$g' proce..i$g' #a$- act-ri$g or repac/i$g good. or other.D g. proprietor.' operator. or /eeper. o hote!.' #ote!.' re.t,ho-.e.' pe$.io$ ho-.e.' i$$.' re.ort.D theater.' a$d #o0ie ho-.e.D h. proprietor. or operator. o re.ta-ra$t.' re re.h#e$t par!or.' ca e. a$d other eati$g p!ace.' i$c!-di$g c!-b. a$d caterer.D i. dea!er. i$ .ec-ritie.D 6. !e$di$g i$0e.tor.D

/. tra$.portatio$ co$tractor. o$ their tra$.port o good. or cargoe.' i$c!-di$g per.o$. +ho tra$.port good. or cargoe. or hire a$d other do#e.tic co##o$ carrier. by !a$d re!ati0e to their tra$.port o good. or cargoe.D !. co##o$ carrier. by air a$d .ea re!ati0e to their tra$.port o pa..e$ger.' good. or cargoe. ro# o$e p!ace i$ the Phi!ippi$e. to a$other p!ace i$ the Phi!ippi$e.D #. .a!e. o e!ectricity by ge$eratio$ co#pa$ie.' tra$.#i..io$' a$d9or di.trib-tio$ co#pa$ie.D $. ra$chi.e gra$tee. o e!ectric -ti!itie.' te!epho$e a$d te!egraph' radio a$d te!e0i.io$ broadca.ti$g a$d a!! other ra$chi.e gra$tee. e2cept ra$chi.e gra$tee. o radio a$d9or te!e0i.io$ broadca.ti$g +ho.e a$$-a! gro.. receipt. o the precedi$g year do $ot e2ceed Te$ *i!!io$ Pe.o. %P10'000'000.00&' a$d ra$chi.e gra$tee. o ga. a$d +ater -ti!itie.D o. $o$,!i e i$.-ra$ce co#pa$ie. %e2cept their crop i$.-ra$ce.&' i$c!-di$g .-rety' ide!ity' i$de#$ity a$d bo$di$g co#pa$ie.D a$d p. .i#i!ar .er0ice. regard!e.. o +hether or $ot the per or#a$ce thereo ca!!. or the e2erci.e or -.e o the phy.ica! or #e$ta! ac-!tie." GN4R( o
1FF@' Sec. 10? %A&' a. a#e$ded by R.A. No. FBB@D Re0. Reg.. No. 16,200>' Sec. E'10?,2' 1.t par.' arra$ge#e$t a$d $-#beri$g .-pp!iedI

38

a$y .cie$ti ic' i$d-.tria! or co##ercia! -$derta/i$g' 0e$t-re' pro6ect o .che#eD g. The !ea.e o #otio$ pict-re i!#.' i!# tape. a$d di.c.D h. The !ea.e or the -.e o or the right to -.e radio' te!e0i.io$' .ate!!ite tra$.#i..io$ a$d cab!e te!e0i.io$ ti#e. %Re0. Reg.. No.
16,200>' Sec. E.10?,2' 2$d par.&

/B" Mero-rate( Sa&es o* 3oo(s or Pro$erties " A ;ero,rated .a!e o good. or propertie. by a .a!e by a VAT,regi.tered per.o$ i. a ta2ab!e tra$.actio$ or VAT p-rpo.e. b-t the .a!e doe. $ot re.-!t i$ a$y o-tp-t ta2. 7o+e0er' the i$p-t ta2 o$ the p-rcha.e. o good.' propertie. or .er0ice. re!ated to .-ch ;ero,rated .a!e .ha!! be a0ai!ab!e a. ta2 credit or re -$d i$ accorda$ce +ith Re0. Reg-!atio$. No. 16,200>. %Re0. Reg.. No.
16,200>' 1.t par.&

/@" A&so i-%&u(e( i- t e $ rase !sa&e or e.% a-;e o* servi%es"

a. The !ea.e or the -.e o or the right or pri0i!ege to -.e a$y copyright' pate$t' de.ig$ or #ode!' p!a$' .ecret or#-!a or proce..' good+i!!' trade#ar/' trade bra$d or other !i/e property or rightD b. The !ea.e or the -.e o ' or the right to -.e a$y i$d-.tria!' co##ercia! or .cie$ti ic e1-ip#e$tD c. The .-pp!y o .cie$ti ic' tech$ica!' i$d-.tria! or co##ercia! /$o+!edge or i$ or#atio$D d. The .-pp!y o a$y a..i.ta$ce that i. a$ci!!ary a$d .-b.idiary to a$d i. -r$i.hed a. a #ea$. o e$ab!i$g the app!icatio$ or e$6oy#e$t o a$y .-ch property' or right a. i. #e$tio$ed i$ .-bparagraph %2& hereo or a$y .-ch /$o+!edge or i$ or#atio$ a. i. #e$tio$ed i$ .-bparagraph %B& hereo D or e. The .-pp!y o .er0ice. by a $o$,re.ide$t per.o$ or hi. e#p!oyee i$ co$$ectio$ +ith the -.e o property or right. be!o$gi$g to' or the i$.ta!!atio$ or operatio$ o a$y bra$d' #achi$ery or other apparat-. p-rcha.ed ro# .-ch $o$,re.ide$t per.o$D . The .-pp!y o tech$ica! ad0ice' a..i.ta$ce or .er0ice. re$dered i$ co$$ectio$ +ith tech$ica! #a$age#e$t or ad#i$i.tratio$ o

/C" Co-%e$t o* VAT Dero-rati-;" The ta2 rate i. .et at ;ero. =he$ app!ied to the ta2 ba.e' .-ch rate ob0io-.!y re.-!t. i$ $o ta2 chargeab!e agai$.t the p-rcha.er. The .e!!er o .-ch tra$.actio$. charge. $o o-tp-t ta2' b-t ca$ c!ai# a re -$d or a ta2 credit certi icate or the VAT pre0io-.!y charged by .-pp!ier.. GCommissioner of Internal Revenue v. Seagate (echnology *Philippines#, <. R. No. 1>B?66' Cebr-ary 11' 200>I 3$der a ;ero,rati$g .che#e' the .a!e or e2cha$ge o a partic-!ar .er0ice i. co#p!ete!y reed ro# the VAT' beca-.e the .e!!er i. e$tit!ed to reco0er' by +ay o a re -$d or a. a$ i$p-t ta2 credit' the ta2 that i. i$c!-ded i$ the co.t o p-rcha.e. attrib-tab!e to the .a!e or e2cha$ge. The ta2 paid or +ithhe!d i. $ot ded-cted ro# the ta2 ba.e.
%Commissioner, of Internal Revenue v. American &)press International, Inc. *Philippine Branch#, <. R. No. 1>260F' A-$e 2F' 200> citi$g 0ario-. ca.e.&

/E" Situs o* ta.atio- o* Dero-rate( VAT servi%es su% as *a%i&itati-; t e %o&&e%tio- o* re%eiva)&es *ro, %re(it %ar( ,e,)ers situate( i- t e P i&i$$i-es a-( $a',e-t to servi%e esta)&is ,e-ts i- t e P i&i$$i-es" The p!ace +here the .er0ice i.
re$dered deter#i$e. the 6-ri.dictio$ to i#po.e the VAT Per or#ed i$ the Phi!ippi$e.' the .er0ice i. $ece..ari!y .-b6ect to it. 6-ri.dictio$ or the State $ece..ari!y ha. to ha0e a .-b.ta$tia! co$$ectio$ to it i$ order to e$ orce a ;ero rate. The p!ace o pay#e$t i. i##ateria! #-ch !e.. i. the p!ace +here the o-tp-t o the .er0ice +i!! be -rther or -!ti#ate!y -.ed. Thi. i. .o beca-.e the !a+ $either #a/e. a 1-a!i icatio$ $or add. a co$ditio$ i$ deter#i$i$g the ta2 .it-. o a ;ero,rated .er0ice.
%Commissioner of Internal Revenue v. American &)press International, Inc. *Philipppine Branch#, <. R. No. 1>260F' A-$e 2F' 200>&

39

:0"

+esti-atio- $ri-%i$&e u-(er t e VAT S'ste,"

A. a ge$era! r-!e' the VAT .y.te# -.e. the de.ti$atio$ pri$cip!e a. a ba.i. or the 6-ri.dictio$a! reach o the ta2. <ood. a$d .er0ice. are ta2ed o$!y i$ the co-$try +here they are co$.-#ed. Th-.' e2port. are ;ero,rated' +hi!e i#port. are ta2ed. Thi. i. a!.o /$o+$ a. the (ro.. Border "octri$e. The !a+ c!ear!y pro0ide. or a$ e2ceptio$ to the de.ti$atio$ pri$cip!eD that i.' or a ;ero perce$t VAT rate or .er0ice. that are per or#ed i$ the Phi!ippi$e.' Qpaid or i$ acceptab!e oreig$ c-rre$cy a$d acco-$ted or i$ accorda$ce +ith the r-!e. a$d reg-!atio$. o the GBSPI.Q

c. Coreig$ c-rre$cy de$o#i$ated .a!eD a$d d. Sa!e. to per.o$. or e$titie. dee#ed ta2,e2e#pt -$der .pecia! !a+ or i$ter$atio$a! agree#e$t. %Re0. Reg.. No. 16,200>' Sec.
E.106,>' 2$d par.' paraphra.i$g .-pp!ied&

:>" Sa&e o* ;o&( to t e Ce-tra& Ba-G %o-si(ere( as e.$ort sa&es" A. e2port .a!e.' the .a!e o go!d to the (e$tra! Ba$/ i.
;ero,rated' he$ce' $o ta2 i. chargeab!e to it a. p-rcha.er. Tero rati$g i. pri#ari!y i$te$ded to be e$6oyed by the .e!!er' +hich charge. $o o-tp-t VAT b-t ca$ c!ai# a re -$d o or a ta2 credit certi icate or the i$p-t VAT pre0io-.!y charged to it by .-pp!ier.. %Commissioner of Internal Revenue v.
Manila Mining Corporation, <.R. No. 1>B20E' A-g-.t B1' 200>&

:1"

E.%e$tio- to t e (esti-atio- $ri-%i$&e"

:/" Ratio-a&e *or Dero-rati-; o* e.$orts" The Phi!ippi$e VAT .y.te# adhere. to the (ro.. Border "octri$e' accordi$g to +hich' $o VAT .ha!! be i#po.ed to or# part o the co.t o good. de.ti$ed or co$.-#ptio$ o-t.ide o the territoria! border o the ta2i$g a-thority. GCommissioner of Internal Revenue v. (oshi"a Information &2uipment *Phils.#, Inc., <. R.. No. 1>01>E' A-g-.t F' 200>I The (ro.. Border "octri$e i. a!.o /$o+$ a. the de.ti$atio$ pri$cip!e. 7e$ce' act-a! or co$.tr-cti0e e2port o good. a$d .er0ice. ro# the Phi!ippi$e. to a oreig$ co-$try #-.t be ;ero,rated or VATD +hi!e' tho.e de.ti$ed or -.e or co$.-#ptio$ +ithi$ the Phi!ippi$e. .ha!! be i#po.ed the t+e!0e perce$t %12H& VAT. ::"
tra-sa%tio-s4
a. A ;ero,rated .a!e i. a ta2ab!e tra$.actio$ b-t doe. $ot re.-!t i$ a$ o-tp-t ta2 =74)E a$ e2e#pt tra$.actio$ i. $ot .-b6ect to the o-tp-t ta2. b. The i$p-t ta2 o$ the p-rcha.e. o a VAT regi.tered per.o$ +ho ha. ;ero,rated .a!e. #ay be a!!o+ed a. ta2 credit. or re -$ded =74)E the .e!!er i$ a$ e2e#pt tra$.actio$ i. $ot e$tit!ed to a$y i$p-t ta2 o$ hi. p-rcha.e. de.pite the i..-a$ce o a VAT i$0oice or receipt. c. Per.o$. e$gaged i$ tra$.actio$. +hich are ;ero rated bei$g .-b6ect to VAT are re1-ired to regi.ter =74)E regi.tratio$ i. optio$a! or VAT,e2e#pt per.o$..

:@" Sa&es to e%oDo-e7 su% as PEMA7 %o-si(ere( e.$ort-sa&e" Notab!y' +hi!e a$ eco;o$e i. geographica!!y +ithi$ the
Phi!ippi$e.' it i. dee#ed a .eparate c-.to#. territory a$d i. regarded i$ !a+ a. oreig$ .oi!. Sa!e. by .-pp!ier. ro# o-t.ide the border. o the eco;o$e to thi. .eparate c-.to#. territory are dee#ed a. e2port. a$d treated a. e2port .a!e.. The.e .a!e. are ;ero,rated or .-b6ect to a ta2 rate o ;ero perce$t. %Commissioner of Internal Revenue v. Se-isui ,ushi
Philippines, Inc., <. R. No. 1EF6@1' A-!y 21' 2006 citi$g 0ario-. a-thoritie.&

Mero-rate( sa&e (isti-;uis e( *ro, e.e,$t

:B" !E%oDo-e#7 (e*i-e(" A$ E(OTONE or a Specia! Eco$o#ic To$e ha. bee$ de.cribed a. J GSIe!ected area. +ith high!y de0e!oped or +hich ha0e the pote$tia! to be de0e!oped i$to agro, i$d-.tria!' i$d-.tria!' to-ri.t' recreatio$a!' co##ercia!' ba$/i$g' i$0e.t#e$t a$d i$a$cia! ce$ter. +ho.e #ete. a$d bo-$d. are i2ed or de!i#ited by Pre.ide$tia! Proc!a#atio$.. A$ E(OTONE #ay co$tai$ a$y or a!! o the o!!o+i$g8 i$d-.tria! e.tate. %4E.&' e2port proce..i$g ;o$e. %EPT.&' ree trade ;o$e. a$d to-ri.t9recreatio$a! ce$ter.. The $atio$a! territory o the Phi!ippi$e. o-t.ide o the proc!ai#ed border. o the E(OTONE .ha!! be re erred to a. the (-.to#. Territory. GCommissioner of
Internal Revenue v. (oshi"a Information &2uipment *Phils.#, Inc., <. R.. No. 1>01>E' A-g-.t F' 200>I

:<"

Mero-rate( sa&es )' VAT-re;istere( $erso-s"

:C" Mero-rate( sa&e o* servi%e7 (e*i-e(" A ;ero, rated .a!e o .er0ice %by a VAT,regi.tered per.o$& i. a ta2ab!e tra$.actio$ or VAT p-rpo.e.' b-t .ha!! $ot re.-!t i$ a$y o-tp-t ta2. 7o+e0er' the i$p-t ta2 o$ p-rcha.e. o good.' propertie. or .er0ice. re!ated to .-ch ;ero,rated .a!e .ha!! be a0ai!ab!e a. ta2 credit or re -$d i$ accorda$ce +ith Rev. Regs. !o. ?D0BGGE. GRe0. Reg.. No. 16,200>' Sec. Sec. E.10?,>
%a&' +ord. i$ ita!ic. .-pp!ied&

The o!!o+i$g .a!e. by VAT,regi.tered per.o$. .ha!! be .-b6ect to ;ero perce$t %0H& rate8 a. E2port .a!e.D b. (o$.idered e2port .a!e. -$der E2ec-ti0e Order No. 22ED

:E" Servi%e $er*or,e( )' A,eri%a- E.$ress i*a%i&itati-; t e %o&&e%tio- o* re%eiva)&es *ro, %re(it %ar(

40

,e,)ers situate( i- t e P i&i$$i-es a-( $a',e-t to servi%e esta)&is ,e-ts i- t e P i&i$$i-es i- )e a&* o* its Ho-;-6o-; )ase( %&ie-t is su)Ae%t to VAT )ut Dero-rate(" Thi. i. .o beca-.e
it #eet. a!! the re1-ire#e$t. or VAT i#po.itio$' a. o!!o+.8 a. 4t reg-!ar!y re$der. i$ the Phi!ippi$e. the .er0ice o aci!itati$g the co!!ectio$ a$d pay#e$t o recei0ab!e. be!o$gi$g to a oreig$ co#pa$y that i. a c!ear!y .eparate a$d di.ti$ct e$tity. b. S-ch .er0ice i. co##ercia! i$ $at-reD carried o$ o0er a .-.tai$ed period o ti#eD o$ a .ig$i ica$t .ca!e +ith a rea.o$ab!e degree o re1-e$cyD a$d $ot at ra$do#' ort-ito-.' or atte$-ated. c. Cor thi. .er0ice' it de i$ite!y recei0e. co$.ideratio$ i$ oreig$ c-rre$cy that i. acco-$ted or i$ co$ or#ity +ith !a+. d. 4t i. $ot a$ e$tity e2e#pt -$der a$y o o-r !a+. or i$ter$atio$a! agree#e$t.. %Commissioner, of Internal Revenue v. American
&)press International, Inc. *Philippine Branch#, <. R. No. 1>260F' A-$e 2F' 200>&

<0" W i&e t e servi%e $er*or,e( )' A,eri%a- E.$ress is su)Ae%t to VAT it is Dero-rate(7 a-( BIR Reve-ue Re;u&atio-s t at a&ter t e &e;a& reFuire,e-ts *or Dero-rati-; are ultra vires a-( i-va&i(" The VAT .y.te# -.e. the de.ti$atio$
pri$cip!e +hich po.it. that the good. a$d .er0ice. are ta2ed o$!y i$ the co-$try +here they are co$.-#ed' 7o+e0er' the !a+ it.e! pro0ide. or c!ear e2ceptio$. -$der +hich the .-pp!y o .er0ice. .ha!! be ;ero,rated' a#o$g +hich are the o!!o+i$g8 a. The .er0ice i. per or#ed i$ the Phi!ippi$e.D b. The .er0ice. are +ithi$ the categorie. pro0ided or -$der the Ta2 (odeD a$d c. 4t i. paid or i$ acceptab!e oreig$ c-rre$cy o the Ba$g/o Se$tra! $g Pi!ipi$a.. A#erica$ E2pre.. re$der. a..i.ta$ce to it. oreig$ c!ie$t. by recei0i$g the bi!!. o .er0ice e.tab!i.h#e$t. !ocated i$ the co-$try a$d or+ardi$g the# to their c!ie$t. abroad. The .er0ice. are per or#ed or .-cce.. -!!y co#p!eted -po$ .e$d to it. oreig$ c!ie$t. the dra t. a$d bi!!. it ha. gathered ro# .er0ice e.tab!i.h#e$t. here' 4t. .er0ice.' ha0i$g bee$ per or#ed i$ the Phi!ippi$e. are there ore a!.o co$.-#ed i$ the Phi!ippi$e.. Th-.' it. .er0ice. are e2e#pt ro# the de.ti$atio$ pri$cip!e a$d are ;ero,rated. The B4R co-!d $ot cha$ge the !a+. GCommissioner, of Internal
Revenue v. American &)press International, Inc. *Philippine Branch#, <. R. No. 1>260F' A-$e 2F' 200>I

NAPOCOR *or t e o$eratio- a-( ,ai-te-a-%e o* two $ower )ar;es a$$oi-te( BWSC-+e-,arG as its %oor(i-atio,a-a;er" BWSC=I was esta)&is e( as t e su)%o-tra%tor to $er*or, t e a%tua& worG i- t e P i&i$$i-es" T e Co-sortiu, $ai( BWSC=I i- a%%e$ta)&e *orei;- e.% a-;e a-( a%%ou-te( *or i- a%%or(a-%e wit t e ru&es a-( re;u&atio-s o* t e BSP" T rou; a Fe)ruar' 1<7 1EE> ru&i-; t e BIR (e%&are( t at BWSC=I ,a' % oose to re;ister as a VAT $erso-s su)Ae%t to VAT at Dero rate" For 1EE@7 it *i&e( t e $ro$er VAT retur-s s owi-; Dero rati-;" O- +e%e,)er /E7 1EEB7 )e&ievi-; t at it is %overe( )' Rev" Re;s" >-E@7 (ate( Fe)ruar' /07 1EE@7 BWSC=I $ai( 10J out$ut VAT *or t e $erio( A$ri&-+e%e,)er 1EE@7 t rou; t e Vo&u-tar' Assess,e-t Pro;ra, HVAPI" O- 5a-uar' B7 1EEE7 BWSC=I was a)&e to o)tai- a Ru&i-; *ro, t e BIR re%o-*ir,i-; t at it is su)Ae%t to VAT at Dero-rati-;" O- t is )asis7 BWSC=I a$$&ie( *or a re*u-( o* t e out$ut VAT it $ai(" a" Is BWSC=I su)Ae%t to t e 10J VAT or is it Dero rate( 9
S3<<ESTE" ANS=ER8 Oe.. B=S(*4 i. $ot ;ero rated a$d i. .-b6ect to the 10H VAT. 4t i. re$deri$g .er0ice or the (o$.orti-# +hich i. $ot doi$g b-.i$e.. i$ the Phi!ippi$e.. Tero,rati$g i$d. app!icatio$ o$!y +here the recipie$t o the .er0ice. are other per.o$. doi$g b-.i$e.. o-t.ide o the Phi!ippi$e.. B=S(*4 pro0ide. .er0ice. to the (o$.orti-# +hich by 0irt-e o it. co$tract +ith NAPO(OR i. doi$g b-.i$e.. +ithi$ the Phi!ippi$e.. %Commissioner of Internal Revenue v. Burmeister and 1ain Scandinavian Contractor Mindanao, Inc., <. R. No. 1>B20>' Aa$-ary 22' 200@&

)" Cou&( it o)tai- a re*u-( o* t e VAT it $ai( t rou; t e VAP 9 E.$&ai-"

S3<<ESTE" ANS=ER8 Oe.. B=S(*4 i. e$tit!ed to re -$d o the 10H o-tp-t VAT it paid the ba.ed o$ the $o$,retroacti0ity o the pre6-dicia! re0ocatio$ o the B4R R-!i$g. +hich he!d that it:. .er0ice. are .-b6ect to 0H VAT a$d +hich B=S(*4 i$0o/ed i$ app!yi$g or re -$d o the o-tp-t VAT. %Commissioner of Internal Revenue v. Burmeister and 1ain Scandinavian Contractor Mindanao, Inc., supra&

<1" A *orei;- Co-sortiu, %o,$ose( o* BWSC+e-,arG7 =itsui E-;i-eeri-; a-( S i$)ui&(i-; Lt("7 a-( =itsui a-( Co"7 Lt("7 w i% e-tere( i-to a %o-tra%t wit

NOTES AN" (O**ENTS8 a. +o -ot %o-*use t e BWSC=I %ase wit t e A,eri%a- E.$ress %ase" A#erica$ E2pre.. 4$ter$atio$a!' 4$c.
%Phi!ippi$e Bra$ch&I i. a VAT,regi.tered per.o$ that aci!itate. the co!!ectio$ a$d pay#e$t o recei0ab!e. be!o$gi$g to it. -o--resi(e-t *orei;- %&ie-t GA#erica$ E2pre.. 4$ter$atio$a!' 4$c. %7o$g/o$g Bra$ch&I'

or +hich it get. paid i$ acceptab!e oreig$ c-rre$cy i$+ard!y re#itted a$d acco-$ted or i$ accorda$ce +ith BSP r-!e. a$d reg-!atio$.. %Commissioner of Internal Revenue v. Burmeister and 1ain Scandinavian Contractor Mindanao, Inc., <. R. No. 1>B20>' Aa$-ary 22' 200@& </" W at are VAT-E.e,$t tra-sa%tio-s 9 S3<<ESTE" ANS=ER8 The .a!e o good. or propertie. a$d9or .er0ice. a$d the -.e or !ea.e o propertie. that i. b.$ot .-b6ect to VAT %o-tp-t ta2& a$d c. the .e!!er i. $ot a!!o+ed a$y ta2 credit o$ VAT %i$p-t ta2& p-rcha.e.. The per.o$ #a/i$g the e2e#pt .a!e o good.' propertie. or .er0ice. .ha!! $ot bi!! a$y o-tp-t ta2 to hi. c-.to#er. beca-.e the .aid tra$.actio$ i. $ot .-b6ect to VAT. GRe0. Reg.. No. 16,200>' Sec. E.10F,1 %A&'
arra$ge#e$t a$d $-#beri$g .-pp!iedI

41

<:" VAT-e.e,$t tra-sa%tio-s (isti-;uis e( *ro, VAT-e.e,$t e-tities" a. A$ e2e#pt tra$.actio$' o$ the o$e ha$d' i$0o!0e. good. or
.er0ice. +hich' by their $at-re' are .peci ica!!y !i.ted i$ a$d e2pre..!y e2e#pted ro# the VAT -$der the Ta2 (ode' +itho-t regard to the ta2 .tat-. J VAT,e2e#pt or $ot J o the party to the tra$.actio$. A$ e2e#pt party' o$ the other ha$d' i. a per.o$ or e$tity gra$ted VAT e2e#ptio$ -$der the Ta2 (ode' a .pecia! !a+ or a$ i$ter$atio$a! agree#e$t to +hich the Phi!ippi$e. i. a .ig$atory' a$d by 0irt-e o +hich it. ta2ab!e tra$.actio$. beco#e e2e#pt ro# VAT. G(o##i..io$er o
4$ter$a! Re0e$-e 0. To.hiba 4$ or#atio$ E1-ip#e$t %Phi!..&' 4$c.' <. R. No. 1>01>E' A-g-.t F' 200>I

b. A$ e2e#pt tra$.actio$ .ha!! $ot be the .-b6ect o a$y bi!!i$g or o-tp-t VAT b-t it .ha!! $ot a!.o be a!!o+ed a$y i$p-t ta2 credit. =74)E a$ e2e#pt party bei$g ;ero,rated i. a!!o+ed to c!ai# i$p-t ta2 credit..

<<" Tra-sa%tio-s are e.e,$t *ro, VAT" %S-b6ect to the e!ectio$ by a VAT,regi.tered per.o$ $ot to be .-b6ect to the 0a!-e,added ta)#, the o!!o+i$g .ha!! be e2e#pt ro# VAT8 %A& Sa!e or i#portatio$ o agric-!t-ra! a$d #ari$e ood prod-ct. i$ their origi$a! .tate' !i0e.toc/ a$d po-!try o a /i$d ge$era!!y -.ed a.' or yie!di$g or prod-ci$g ood. or h-#a$ co$.-#ptio$D a$d breedi$g .toc/ a$d ge$etic #ateria!. there or. )i0e.toc/ .ha!! i$c!-de co+.' b-!!. a$d ca!0e.' pig.' .heep' goat. a$d rabbit.. Po-!try .ha!! i$c!-de o+!.' d-c/.' gee.e a$d t-r/ey' )i0e.toc/ or po-!try doe. $ot i$c!-de ighti$g coc/.' race hor.e.' ;oo a$i#a!. a$d other a$i#a!. ge$era!!y co$.idered a. pet..

*ari$e ood prod-ct. .ha!! i$c!-de i.h a$d cr-.tacea$.' .-ch a.' b-t $ot !i#ited to' ee!.' tro-t' !ob.ter' .hri#p.' pra+$.' oy.ter.' #-..e!. a$d c!a#.. *eat' r-it' i.h' 0egetab!e. a$d other agric-!t-ra! a$d #ari$e ood Prod-ct. c!a..i ied -$der thi. paragraph .ha!! be co$.idered i$ their origi$a! .tate e0e$ i they ha0e -$dergo$e the .i#p!e proce..e. o preparatio$ or pre.er0atio$ or the #ar/et' .-ch a. ree;i$g' dryi$g' .a!ti$g' broi!i$g' roa.ti$g' .#o/i$g or .trippi$g' i$c!-di$g tho.e -.i$g ad0a$ced tech$o!ogica! #ea$. o pac/agi$g' .-ch a. .hri$/ +rappi$g i$ p!a.tic.' 0ac--# pac/i$g' tetra,pac/' a$d other .i#i!ar pac/agi$g #ethod.. Po!i.hed a$d9or h-./ed rice' cor$ grit.' ra+ ca$e .-gar a$d #o!a..e.' ordi$ary .a!t' a$d copra .ha!! be co$.idered i$ their origi$a! .tate. S-gar +ho.e co$te$t o .-cro.e by +eight' i$ the dry .tate' ha. a po!ari#eter readi$g o FF.>o a$d abo0e are pre.-#ed to be re i$ed .-gar. (a$e .-gar prod-ced ro# the o!!o+i$g .ha!! be pre.-#ed' or i$ter$a! re0e$-e p-rpo.e.' to be re i$ed .-gar8 %1& prod-ct o a re i$i$g proce..' %2& prod-ct. o a .-gar re i$ery' or %B& prod-ct o a prod-ctio$ !i$e o a .-gar #i!! accredited by the B4R to be prod-ci$g .-gar +ith po!ari#eter readi$g o FF.>o a$d abo0e' a$d or +hich the 1-eda$i..-ed there or' a$d 0eri ied by the S-gar Reg-!atory Ad#i$i.tratio$' ide$ti ie. the .a#e to be o a po!ari#eter readi$g o FF.>o a$d abo0e. Baga..e i. $ot i$c!-ded i$ the e2e#ptio$ pro0ided or -$der thi. .ectio$. %B& Sa!e or i#portatio$ o erti!i;er.D .eed.' .eed!i$g. a$d i$ger!i$g.D i.h' pra+$' !i0e.toc/ a$d po-!try eed.' i$c!-di$g i$gredie$t.' +hether !oca!!y prod-ced or i#ported' -.ed i$ the #a$- act-re o i$i.hed eed. %e2cept .pecia!ty eed. or race hor.e.' ighti$g coc/.' a1-ari-# i.h' ;oo a$i#a!. a$d other a$i#a!. ge$era!!y co$.idered a. pet.&D Specia!ty eed. re er. to $o$,agric-!t-ra! eed. or ood or race hor.e.' ighti$g coc/.' a1-ari-# i.h' ;oo a$i#a!. a$d other a$i#a!. ge$era!!y co$.idered a. pet.. %(& 4#portatio$ o per.o$a! a$d ho-.eho!d e ect. be!o$gi$g to the re.ide$t. o the Phi!ippi$e. ret-r$i$g ro# abroad a$d $o$re.ide$t citi;e$. co#i$g to re.ett!e i$ the Phi!ippi$e.8 Pro0ided' That .-ch good. are e2e#pt ro# c-.to#. d-tie. -$der the Tari a$d (-.to#. (ode o the Phi!ippi$e.D %"& 4#portatio$ o pro e..io$a! i$.tr-#e$t. a$d i#p!e#e$t.' +eari$g appare!' do#e.tic a$i#a!.' a$d per.o$a! ho-.eho!d e ect. %e2cept a$y 0ehic!e' 0e..e!' aircra t' #achi$ery' other good. or -.e i$ the #a$- act-re a$d #ercha$di.e o a$y /i$d i$ co##ercia! 1-a$tity& be!o$gi$g to per.o$. co#i$g to .ett!e i$ the Phi!ippi$e.' or their o+$ -.e

a$d $ot or .a!e' barter or e2cha$ge' acco#pa$yi$g .-ch per.o$.' or arri0i$g +ithi$ $i$ety %F0& day. be ore or a ter their arri0a!' -po$ the prod-ctio$ o e0ide$ce .ati. actory to the (o##i..io$er o 4$ter$a! Re0e$-e' that .-ch per.o$. are act-a!!y co#i$g to .ett!e i$ the Phi!ippi$e. a$d that the cha$ge o re.ide$ce i. bo$a ideD %E& Ser0ice. .-b6ect to perce$tage ta2 -$der Tit!e V o the Ta2 (ode' a. e$-#erated be!o+8 %1& Sa!e or !ea.e o good. or propertie. or the per or#a$ce o .er0ice. o $o$,VAT,regi.tered per.o$.' other tha$ the tra$.actio$. #e$tio$ed i$ paragraph. %A& to %3& o Sec. 10F %1& o the Ta2 (ode' the a$$-a! .a!e. a$d9or receipt. o +hich doe. $ot e2ceed the a#o-$t o O$e *i!!io$ Ci0e 7-$dred tho-.a$d Pe.o. %P1'>00'000.00&' Pro0ided' That $ot !ater tha$ Aa$-ary B1' 200F a$d e0ery three %B& year. therea ter' the a#o-$t herei$ .tated .ha!! be ad6-.ted to it. pre.e$t 0a!-e -.i$g the (o$.-#er Price 4$de2' a. p-b!i.hed by the Natio$a! Stati.tic. O ice %NSO&. %Sec. 116' Ta2 (ode& %2& Ser0ice. re$dered by do#e.tic co##o$ carrier. by !a$d or the tra$.port o pa..e$ger. a$d /eeper. o garage.. %Sec. 11@& %B& Ser0ice. re$dered by i$ter$atio$a! air9.hippi$g carrier.. %Sec. 11?& %E& Ser0ice re$dered by ra$chi.e gra$tee. o radio a$d9or te!e0i.io$ broadca.ti$g +ho.e a$$-a! gro.. receipt. o the precedi$g year do $ot e2ceed Te$ *i!!io$ Pe.o. %P10'000'000.00& a$d by ra$chi.e. o ga. a$d +ater -ti!itie.. %Sec. 11F& %>& Ser0ice re$dered or o0er.ea. di.patch #e..age or co$0er.atio$ origi$ati$g ro# the Phi!ippi$e.. %Sc. 120& %6& Ser0ice. re$dered by a$y per.o$' co#pa$y or corporatio$ %e2cept p-re!y cooperati0e co#pa$ie. or a..ociatio$. & doi$g !i e i$.-ra$ce b-.i$e.. o a$y .ort i$ the Phi!ippi$e.. %Sec. 12B& %@& Ser0ice. re$dered by ire' #ari$e or #i.ce!!a$eo-. i$.-ra$ce age$t. o oreig$ i$.-ra$ce co#pa$ie.. %Sec. 12E& %?& Ser0ice. o proprietor.' !e..ee. or operator. o coc/pit.' cabaret.' $ight or day c!-b.' bo2i$g e2hibitio$. pro e..io$a! ba./etba!! ga#e.' 6ai,A!ai a$d race trac/.. %Sec. 12>&. a$d %F& Receipt. o$ .a!e' barter or e2cha$ge o .hare. o .toc/ !i.ted a$d traded thro-gh the !oca! .toc/ e2cha$ge or thro-gh i$itia! p-b!ic o eri$g. %Sec. 12@& %C& Ser0ice. by agric-!t-ra! co$tract gro+er. a$d #i!!i$g or other. o pa!ay i$to rice' cor$ i$to grit. a$d .-gar ca$e i$to ra+ .-garD

42

Agric-!t-ra! co$tract gro+er. re er. to tho.e per.o$. prod-ci$g or other. po-!try' !i0e.toc/ or other agric-!t-ra! a$d #ari$e ood prod-ct. i$ their origi$a! .tate. %<& *edica!' de$ta!' ho.pita! a$d 0eteri$ary .er0ice. e2cept tho.e re$dered by pro e..io$a!.D )aboratory .er0ice. are e2e#pted. 4 the ho.pita! or c!i$ic operate. a phar#acy or dr-g .tore' the .a!e o dr-g. a$d #edici$e i. .-b6ect to VAT. %7& Ed-catio$a! .er0ice. re$dered by pri0ate ed-catio$a! i$.tit-tio$.' d-!y accredited by the "epart#e$t o Ed-catio$ %"EPE"&' the (o##i..io$ o$ 7igher Ed-catio$ %(7E"&' the Tech$ica! Ed-catio$ A$d S/i!!. "e0e!op#e$t A-thority %TES"A& a$d tho.e re$dered by go0er$#e$t ed-catio$a! i$.tit-tio$.D Ed-catio$a! .er0ice. .ha!! re er to acade#ic' tech$ica! or 0ocatio$a! ed-catio$ pro0ided by pri0ate ed-catio$a! i$.tit-tio$. d-!y accredited by the "epE"' the (7E" a$d TES"A a$d tho.e re$dered by go0er$#e$t ed-catio$a! i$.tit-tio$. a$d it doe. $ot i$c!-de .e#i$ar.' i$, .er0ice trai$i$g' re0ie+ c!a..e. a$d other .i#i!ar .er0ice. re$dered by per.o$. +ho are $ot accredited by the "epE"' the (7E" a$d9or the TES"A. %4& Ser0ice. re$dered by i$di0id-a!. p-r.-a$t to a$ e#p!oyer, e#p!oyee re!atio$.hipD %A& Ser0ice. re$dered by regio$a! or area head1-arter. e.tab!i.hed i$ the Phi!ippi$e. by #-!ti$atio$a! corporatio$. +hich act a. .-per0i.ory' co##-$icatio$. a$d coordi$ati$g ce$ter. or their a i!iate.' .-b.idiarie. or bra$che. i$ the A.ia,Paci ic Regio$ a$d do $ot ear$ or deri0e i$co#e ro# the Phi!ippi$e.D %R& Tra$.actio$. +hich are e2e#pt -$der i$ter$atio$a! agree#e$t. to +hich the Phi!ippi$e. i. a .ig$atory or -$der .pecia! !a+.' e2cept tho.e -$der Pre.ide$tia! "ecree No. >2F J Petro!e-# E2p!oratio$ (o$ce..io$aire. -$der the Petro!e-# Act o 1FEFD a$dD %)& Sa!e. by agric-!t-ra! cooperati0e. d-!y regi.tered +ith the (ooperati0e "e0e!op#e$t A-thority %("A& to their #e#ber. a. +e!! a. .a!e o their prod-ce' +hether i$ it. origi$a! .tate or proce..ed or#' to $o$,#e#ber.D their i#portatio$ o direct ar# i$p-t.' #achi$erie. a$d e1-ip#e$t' i$c!-di$g .pare part. thereo ' to be -.ed direct!y a$d e2c!-.i0e!y i$ the prod-ctio$ a$d9or proce..i$g o their prod-ceD %*& <ro.. receipt. ro# !e$di$g acti0itie. by credit or #-!ti, p-rpo.e cooperati0e. d-!y regi.tered a$d i$ good .ta$di$g +ith the (ooperati0e "e0e!op#e$t A-thorityD %N& Sa!e. by $o$,agric-!t-ra!' $o$,e!ectric a$d $o$,credit cooperati0e. d-!y regi.tered +ith the (ooperati0e "e0e!op#e$t A-thority8 Pro0ided' That the .hare capita! co$trib-tio$ o each #e#ber doe. $ot e2ceed Ci tee$ tho-.a$d pe.o. %P1>'000& a$d regard!e.. o the aggregate capita! a$d $et .-rp!-. ratab!y di.trib-ted a#o$g the #e#ber.D

4#portatio$ by $o$,agric-!t-ra!' $o$,e!ectric a$d $o$,credit cooperati0e. o #achi$erie. a$d e1-ip#e$t' i$c!-di$g .pare part. thereo ' to be -.ed by the# are .-b6ect to VAT. %O& E2port .a!e. by per.o$. +ho are $ot VAT,regi.teredD %P& Sa!e o rea! propertie. $ot pri#ari!y he!d or .a!e to c-.to#er. or he!d or !ea.e i$ the ordi$ary co-r.e o trade or b-.i$e..' or rea! property -ti!i;ed or !o+,co.t a$d .ocia!i;ed ho-.i$g a. de i$ed by Rep-b!ic Act No. @2@F' other+i.e /$o+$ a. the 3rba$ "e0e!op#e$t a$d 7o-.i$g Act o 1FF2' a$d other re!ated !a+.' .-ch a. RA No. @?B> a$d RA No. ?@6>' re.ide$tia! !ot 0a!-ed at O$e #i!!io$ i0e h-$dred tho-.a$d pe.o. %P 1'>00'000& a$d be!o+' ho-.e a$d !ot' a$d other re.ide$tia! d+e!!i$g. 0a!-ed at T+o #i!!io$ i0e h-$dred tho-.a$d pe.o. %P 2'>00'000& a$d be!o+8 Pro0ided' That $ot !ater tha$ Aa$-ary B1' 200F a$d e0ery three %B& year. therea ter' the a#o-$t. herei$ .tated .ha!! be ad6-.ted to their pre.e$t 0a!-e. -.i$g the (o$.-#er Price 4$de2' a. p-b!i.hed by the Natio$a! Stati.tic. O ice %NSO&D %N& )ea.e o a re.ide$tia! -$it +ith a #o$th!y re$ta! $ot e2ceedi$g Te$ tho-.a$d pe.o. %P 10'000& Pro0ided' That $ot !ater tha$ Aa$-ary B1' 200F a$d e0ery three %B& year. therea ter' the a#o-$t herei$ .tated .ha!! be ad6-.ted to it. pre.e$t 0a!-e -.i$g the (o$.-#er Price 4$de2 a. p-b!i.hed by the Natio$a! Stati.tic. O ice %NSO&D %R& Sa!e' i#portatio$' pri$ti$g or p-b!icatio$ o boo/. a$d a$y $e+.paper' #aga;i$e' re0ie+ or b-!!eti$ +hich appear. at reg-!ar i$ter0a!. +ith i2ed price. or .-b.criptio$ a$d .a!e a$d +hich i. $ot de0oted pri$cipa!!y to the p-b!icatio$ o paid ad0erti.e#e$t.D %S& Sa!e' i#portatio$ or !ea.e o pa..e$ger or cargo 0e..e!. a$d aircra t' i$c!-di$g e$gi$e' e1-ip#e$t a$d .pare part. thereo or do#e.tic or i$ter$atio$a! tra$.port operatio$.D Pro0ided' that the e2e#ptio$ ro# VAT o$ the i#portatio$ a$d !oca! p-rcha.e o pa..e$ger a$d9or cargo 0e..e!. .ha!! be !i#ited to tho.e o o$e h-$dred i ty %1>0& to$. a$d abo0e' i$c!-di$g e$gi$e a$d .pare part. o .aid 0e..e!.D Pro0ided' -rther' that the 0e..e!. be i#ported .ha!! co#p!y +ith the age !i#it re1-ire#e$t' at the ti#e o ac1-i.itio$ co-$ted ro# the date o the 0e..e!:. origi$a! co##i..io$i$g' a. o!!o+.8 %i& or pa..e$ger a$d9or cargo 0e..e!.' the age !i#it i. i tee$ year. %1>& year. o!d' %ii& or ta$/er.' the age !i#it i. te$ %10& year. o!d' a$d %iii& Cor high,.peed pa..e$ger car.' the age !i#it i. i0e %>& year. o!d' Pro0ided' i$a!!y' that e2e#ptio$ .ha!! be .-b6ect to the pro0i.io$. o .ectio$ E o Rep-b!ic Act No. F2F>' other+i.e /$o+$ a. The "o#e.tic Shippi$g "e0e!op#e$t Act o 200E. %T& 4#portatio$ o -e!' good. a$d .-pp!ie. by per.o$. e$gaged i$ i$ter$atio$a! .hippi$g or air tra$.port operatio$.D Pro0ided' that the .aid -e!' good. a$d .-pp!ie. .ha!! be -.ed e2c!-.i0e!y or .ha!! pertai$ to the tra$.port o good. a$d9or pa..e$ger ro# a port i$ the Phi!ippi$e. direct!y to a oreig$ port +itho-t .toppi$g at a$y other port i$ the

43

Phi!ippi$e.D pro0ided' -rther' that i a$y portio$ o .-ch -e!' good. or .-pp!ie. i. -.ed or p-rpo.e. other tha$ that #e$tio$ed i$ thi. paragraph' .-ch portio$ o -e!' good. a$d .-pp!ie. .ha!! be .-b6ect to 10H VAT %$o+ 12H&D %3& Ser0ice. o ba$/.' $o$,ba$/ i$a$cia! i$ter#ediarie. per or#i$g 1-a.i,ba$/i$g -$ctio$.' a$d other $o$,ba$/ i$a$cia! i$ter#ediarie.D a$d %V& Sa!e or !ea.e o good. or propertie. or the per or#a$ce o .er0ice. other tha$ the tra$.actio$. #e$tio$ed i$ the precedi$g paragraph.' the gro.. a$$-a! .a!e. a$d9or receipt. do $ot e2ceed the a#o-$t o O$e #i!!io$ i0e h-$dred tho-.a$d pe.o. %P1'>00'000&8 Pro0ided' That $ot !ater tha$ Aa$-ary B1' 200F a$d e0ery three %B& year. therea ter' the a#o-$t herei$ .tated .ha!! be ad6-.ted to it. pre.e$t 0a!-e -.i$g the (o$.-#er Price 4$de2 a. p-b!i.hed by the Natio$a! Stati.tic. O ice %NSO&. Cor p-rpo.e. o the thre.ho!d o P1'>00'000.00' the h-.ba$d a$d +i e .ha!! be c$.idered .eparate ta2payer.. 7o+e0er' the aggregatio$ r-!e or each ta2payer .ha!! app!y. Cor i$.ta$ce' i a pro e.io$a!' a.ide ro# the practice o hi. pro e..io$' a!.o deri0e. re0e$-e ro# other !i$e. o b-.i$e.. +hich are other+i.e .-b6ect to VAT' the .a#e .ha!! be co#bi$ed or p-rpo.e. o deter#i$i$g +hether the thre.ho!d ha. bee$ e2ceeded. Th-.' the VAT,e2e#pt .a!e. .ha!! to be ic!-ded i$ deter#i$i$g the thre.ho!d. GN4R( o 1FF@' Sec. 10F %1&' a. a#e$ded by R. A. No. FBB@D
+ord. i$ ita!ic. ro# Re0. Reg.. No. 16,200>' Sec. E.10F,1 %B&' +ord. i$ pare$the.e. .-pp!iedI

<>"

Ta. to )e $ai( )' $erso-s e.e,$t *ro, VAT"

a. A$y per.o$' +ho.e .a!e. or receipt. are e2e#pt -$der Sec. 10F %1& %V& o the Ta2 (ode' %V& Sa!e or !ea.e o good. or propertie. or the per or#a$ce o .er0ice. other tha$ the tra$.actio$. #e$tio$ed i$ the precedi$g paragraph.' the gro.. a$$-a! .a!e. a$d9or receipt. do $ot e2ceed the a#o-$t o O$e #i!!io$ i0e h-$dred tho-.a$d pe.o. %P1'>00'000&8 Pro0ided' That $ot !ater tha$ Aa$-ary B1' 200F a$d e0ery three %B& year. therea ter' the a#o-$t herei$ .tated .ha!! be ad6-.ted to it. pre.e$t 0a!-e -.i$g the (o$.-#er Price 4$de2 a. p-b!i.hed by the Natio$a! Stati.tic. O ice %NSO&' ro# the pay#e$t o VAT a$d b. +ho i. $ot a VAT,regi.tered per.o$ c. .ha!! pay a ta2 e1-i0a!e$t to three perce$t %BH& o hi. gro.. #o$th!y .a!e. or receipt.D Pro0ided' that cooperati0e. .ha!! be e2e#pt ro# the three %BH& gro.. receipt. ta2 herei$ i#po.ed. %Re0. Reg.. No. 16,200>' Sec. E.116,1'
arra$ge#e$t' $-#beri$g a$d +ord. i$ ita!ic. .-pp!ied&

RETURNS AN+

WITHHOL+IN3

44

1" I-%o,e ta. retur-s )ei-; $u)&i% (o%u,e-ts' -$ti! co$tro0erted by co#pete$t e0ide$ce' are co#pete$t e0ide$ce' are prima facie correct +ith re.pect to the e$trie. therei$. *Ropali (rading v. !$RC, et
al., 2F6 S(RA B0F' B1@&

/.

I-(ivi(ua&s reFuire( to *i&e a- i-%o,e ta. retur-"

a. E0ery Ci!ipi$o citi;e$ re.idi$g i$ the Phi!ippi$e.D b. E0ery Ci!ipi$o citi;e$ re.idi$g o-t.ide the Phi!ippi$e. o$ hi. i$co#e ro# .o-rce. +ithi$ the Phi!ippi$e.D c. E0ery a!ie$ re.idi$g i$ the Phi!ippi$e. o$ i$co#e deri0ed ro# .o-rce. +ithi$ the Phi!ippi$e.D a$d d. E0ery $o$re.ide$t a!ie$ e$gaged i$ trade or b-.i$e.. or i$ the e2erci.e o pro e..io$ i$ the Phi!ippi$e.. GSec. >1 %A& %1&' N4R( o 1FF@I

a. A$ i$di0id-a! +ho.e gro.. i$co#e doe. $ot e2ceed hi. tota! per.o$a! a$d additio$a! e2e#ptio$. or depe$de$t.' Provided, That a citi;e$ o the Phi!ippi$e. a$d a$y a!ie$ i$di0id-a! e$gaged i$ b-.i$e.. or practice o pro e..io$ +ithi$ the Phi!ippi$e. .ha!! i!e a$ i$co#e ta2 ret-r$ regard!e.. o the a#o-$t o gro.. i$co#e GSec. >1 %A& %2&' N4R( o 1FF@I b. A$ i$di0id-a! +ith re.pect to p-re co#pe$.atio$ i$co#e' deri0ed ro# .-ch .o-rce. +ithi$ the Phi!ippi$e.' the i$co#e ta2 o$ +hich ha. bee$ correct!y +ithhe!d8 Provided' That a$ i$di0id-a! deri0i$g co#pe$.atio$ co$c-rre$t!y ro# t+o or #ore e#p!oyer. at a$y ti#e d-ri$g the ta2ab!e year .ha!! i!e a$ i$co#e ta2 ret-r$ GSec. >1 %A& %2&' N4R(
o 1FF@' a. a#e$ded by Rep. Act No. F>0E' paraphra.i$g .-pp!iedI

:" =arrie( i-(ivi(ua&s w o are ear-i-; %o,$e-satio- i-%o,e a&&owe( to *i&e se$arate retur-s"

$ure&'

c. A$ i$di0id-a! +ho.e .o!e i$co#e ha. bee$ .-b6ect to i$a! +ithho!di$g ta2D d. A #i$i#-# +age ear$er %i. a +or/er i$ the pri0ate .ector paid the .tat-tory #i$i#-# +age' or i. a$ e#p!oyee i$ the p-b!ic .ector +ith co#pe$.atio$ i$co#e o $ot #ore tha$ the .tat-tory #i$i#-# +age i$ the $o$,agric-!t-ra! .ector +here he9.he i. a..ig$ed&' a$ i$di0id-a! +ho i. e2e#pt ro# i$co#e ta2 p-r.-a$t to the pro0i.io$. o the Ta2 (ode a$d other !a+.' ge$era! or .pecia!. GSec. >1 %A& %2&' N4R( o 1FF@ i$ re!atio$
to Sec. 22 %77&' both a. a#e$ded by Rep. Act. F>0EI

<" =arrie( i-(ivi(ua&s7 w et er %itiDe-s7 resi(e-t or -o--resi(e-t a&ie-s7 w o (o -ot (erive i-%o,e $ure&' *ro, %o,$e-satio- s a&& *i&e a %o-so&i(ate( retur- *or t e ta.a)&e 'ear to i-%&u(e t e i-%o,e o* )ot s$ouses7 b-t +here it i.
i#practicab!e or the .po-.e. to i!e o$e ret-r$' each .po-.e #ay i!e a .eparate ret-r$ o i$co#e b-t the ret-r$. .o i!ed .ha!! be co$.o!idated by the B-rea- or p-rpo.e. o 0eri icatio$. GSectio$ >1 %"& o the N4R( o 1FF@I

B" =i-i,u, wa;e ear-ers are e.e,$t *ro, i-%o,e ta.atio-" That #i$i#-# +age ear$er. %i. a +or/er i$ the pri0ate .ector
paid the .tat-tory #i$i#-# +age' or i. a$ e#p!oyee i$ the p-b!ic .ector +ith co#pe$.atio$ i$co#e o $ot #ore tha$ the .tat-tory #i$i#-# +age i$ the $o$,agric-!t-ra! .ector +here he9.he i. a..ig$ed& .ha!! be e2e#pt ro# the pay#e$t o i$co#e ta2 o$ their ta2ab!e i$co#e8 Provided' further' That the ho!iday pay' o0erti#e pay' $ight .hi t di ere$tia! pay a$d ha;ard pay recei0ed by .-ch #i$i#-# +age ear$er. .ha!! !i/e+i.e be e2e#pt ro# i$co#e ta2. GSec. >1 %A& %2&' N4R( o 1FF@ i$ re!atio$ to Sec. 22
%77&' both a. a#e$ded by Rep. Act. F>0EI

>" Co,$utatio- o* i-%o,e ta. *or ,arrie( i-(ivi(ua&s w et er %itiDe-s7 resi(e-t or -o--resi(e-t a&ie-s7 w o (o -ot (erive i-%o,e $ure&' *ro, %o,$e-satio- reFuire( *i&e a %o-so&i(ate( retur- *or t e ta.a)&e 'ear )ut %ou&( -ot (o so"
Cor #arried i$di0id-a!.' the h-.ba$d a$d +i e' .-b6ect to $o. 2' supra,' .ha!! co#p-te .eparate!y their i$di0id-a! i$co#e ta2 ba.ed o$ their re.pecti0e tota! ta2ab!e i$co#e8 Provided' that i a$y i$co#e ca$$ot be de i$ite!y attrib-ted to or ide$ti ied a. i$co#e e2c!-.i0e!y ear$ed or rea!i;ed by either o the .po-.e.' the .a#e .ha!! be di0ided e1-a!!y bet+ee$ the .po-.e. or the p-rpo.e o deter#i$i$g their re.pecti0e ta2ab!e i$co#e. G2$d to the !a.t par.' Sec. 2E %A& %2&' N4R( o 1FF@ a.
a#e$ded by Rep. Act No. F>0EI

C" A- i-(ivi(ua& w o is -ot reFuire( to *i&e a- i-%o,e ta. retur- ,a' -evert e&ess )e reFuire( to *i&e a- i-*or,atioretur-" GSec. >1 %A& %B&' N4R( o 1FF@I E" A %or$oratio- *i&es its i-%o,e ta. retur- a-( $a's its i-%o,e ta. *our H<I ti,es (uri-; a si-;&e ta.a)&e 'ear"
N-arter!y ret-r$. are re1-ired to be i!ed or the ir.t three 1-arter.' the$ a i$a! ad6-.t#e$t ret-r$ i. i!ed co0eri$g the tota! ta2ab!e i$co#e or the +ho!e ta2ab!e year' be it ca!e$dar or i.ca!.

@" I-(ivi(ua&s w o are -ot reFuire( to *i&e a- i-%o,e ta. retur-.

10" A- i-(ivi(ua& ear-i-; *ro, t e $ra%ti%e o* is $ro*essio- or w o e-;a;es i- tra(e or )usi-ess *i&es is i-%o,e ta. retur- a-( $a's is i-%o,e ta. *our H<I ti,es

45

(uri-; a si-;&e ta.a)&e 'ear " N-arter!y ret-r$. are re1-ired to be i!ed
or the ir.t three 1-arter.' the$ a$ a$$-a! i$co#e ta2 ret-r$ i. i!ed co0eri$g the tota! ta2ab!e i$co#e or the +ho!e o the pre0io-. ca!e$dar year.

11" T e $ur$ose o* t e a)ove *our H<I ti,es a 'ear reFuire,e-t is to ,aGe avai&a)&e su**i%ie-t *u-(s to ,eet t e )u(;etar' reFuire,e-ts7 o$ a 1-arter!y ba.i. thereby i$crea.i$g
go0er$#e$t !i1-idity. 4t a!.o ea.e. hard.hip. o$ the part o i$di0id-a!. +ho are re1-ired to #a/e thi. o-r ti#e ret-r$. Th-.' the ta2payer doe. $ot ha0e to rai.e !arge .-#. o #o$ey i$ order to pay the ta2.

1B" U-(er t e %re(ita)&e wit o&(i-; ta. s'ste,7 ta.es wit e&( o- %ertai- i-%o,e $a',e-ts are i-te-(e( to eFua& or at &east a$$ro.i,ate t e ta. (ue *ro, t e $a'ee o- t e sai( i-%o,e" The i$co#e recipie$t i. .ti!! re1-ired to i!e a$ i$co#e ta2 ret-r$
a$d9or pay the di ere$ce bet+ee$ the ta2 +ithhe!d a$d the ta2 d-e o$ the i$co#e. G1.t a$d 2$d .e$te$ce.' Sec. 2>@%B&' Re0. Reg.. No. 2,F?I

1C" T e two Gi-(s o* %re(ita)&e wit o&(i-; ta.es are %a& ta2e. +ithhe!d o$ i$co#e pay#e$t. co0ered by the e2pa$ded +ithho!di$g ta2D a$d %b& ta2e. +ithhe!d o$ co#pe$.atio$ i$co#e. 1E" Pa',e-ts to t e *o&&owi-; are e.e,$t *ro, t e reFuire,e-t o* wit o&(i-; or w e- -o wit o&(i-; ta.es reFuire(4
a. Natio$a! <o0er$#e$t a$d it. i$.tr-#e$ta!itie. i$c!-di$g pro0i$cia!' city' or #-$icipa! go0er$#e$t.D b. Per.o$. e$6oyi$g e2e#ptio$ ro# pay#e$t o i$co#e ta2e. p-r.-a$t to the pro0i.io$. o a$y !a+' ge$era! or .pecia!' .-ch a. b-t $ot !i#ited to the o!!o+i$g8 1& Sa!e. o rea! property by a corporatio$ +hich i. regi.tered +ith a$d certi ied by the 7)3RB or 73"(( a. e$gaged i$ .ocia!i;ed ho-.i$g pro6ect +here the .e!!i$g price o the ho-.e a$d !ot or o$!y the !ot doe. $ot e2ceed P1?0'000.00 i$ *etro *a$i!a a$d other high!y -rba$i;ed area. a$d P1>0'000.00 i$ other area. or .-ch ad6-.ted a#o-$t o .e!!i$g price or .ocia!i;ed ho-.i$g a. #ay !ater be deter#i$ed a$d adopted by the 7)3RBD 2& (orporatio$. regi.tered +ith the Board o 4$0e.t#e$t. a$d e$6oyi$g e2e#ptio$. ro# i$co#e -$der the O#$ib-. 4$0e.t#e$t (ode o 1FF@D B& (orporatio$. e2e#pt ro# i$co#e ta2 -$der Sec. B0' o the Ta2 (ode' !i/e the SSS' <S4S' the P(SO' etc. 7o+e0er' i$co#e pay#e$t. ari.i$g ro# a$y acti0ity +hich i. co$d-cted or pro it or i$co#e deri0ed ro# rea! or per.o$a! property .ha!! be .-b6ect to a +ithho!di$g ta2. %Sec. >@.>' Re0. Reg.. No. 2,F?&

1/" A- i-(ivi(ua& ear-i-; $ure&' %o,$e-satio- i-%o,e *i&es o-&' o-e a--ua& i-%o,e ta. retur- co0eri$g the tota! ta2ab!e
co#pe$.atio$ i$co#e or the +ho!e o the pre0io-. ca!e$dar year.

1:" U-(er t e wit o&(i-; ta. s'ste,7 ta.es i,$ose( or $res%ri)e( )' t e NIRC o* 1EEB are to )e (e(u%te( a-( wit e&( )' t e $a'ors *ro, $a',e-ts ,a(e to $a'ees *or t e *or,er to $a' (ire%t&' to t e Bureau o* I-ter-a& Reve-ue. 4t i.
a!.o /$o+$ a. co!!ectio$ o the ta2 at .o-rce.

1<" A wit o&(i-; a;e-t is e.$&i%it&' ,a(e $erso-a&&' &ia)&e u-(er t e Ta. Co(e *or t e $a',e-t o* t e ta. reFuire( to )e wit e&(7 i$ order to co#pe! the +ithho!di$g age$t to +ithho!d the
ta2 -$der a$y a$d a!! circ-#.ta$ce.. 4$ e ect' the re.po$.ibi!ity or the co!!ectio$ o the ta2 a. +e!! a. the pay#e$t thereo i. co$ce$trated -po$ the per.o$ o0er +ho# the <o0er$#e$t ha. 6-ri.dictio$. %/ilipinas Synthetic
/i"er Corporation v. Court of Appeals, et al., <.R. No.. 11?EF? W 12EB@@' October 12' 1FFF& The .y.te# aci!itate. ta2 co!!ectio$ a$d red-ce. ta2 e0a.io$.

1>" T e two H/I t'$es o* wit o&(i-; at sour%e are t e 1I *i-a& wit o&(i-; ta.L a-( /I %re(ita)&e wit o&(i-; ta." 1@" U-(er t e *i-a& wit o&(i-; ta. s'ste, t e a,ou-t o* i-%o,e ta. wit e&( )' t e wit o&(i-; a;e-t is %o-stitute( as a *u&& a-( *i-a& $a',e-t o* t e i-%o,e (ue *ro, t e $a'ee ot e sai( i-%o,e" G1.t .e$te$ce' 1.t par.' Sec. 2.>@ %A&' Re0. Reg.. No. 2,F?I
The !iabi!ity or pay#e$t o the ta2 re.t. pri#ari!y o$ the payor or the +ithho!di$g age$t.. Th-.' i$ ca.e o hi. ai!-re to +ithho!d the ta2 or i$ ca.e o -$der +ithho!di$g' the de icie$cy ta2 .ha!! be co!!ected ro# the payor +ithho!di$g age$t. The payee i. $ot re1-ired to i!e a$ i$co#e ta2 ret-r$ or the partic-!ar i$co#e.

/0" For ta. a,-est' $ur$oses7 t e wit o&(i-; a;e-t is -ot a ta.$a'er. 7e i. #ade to pay the ta2 +here he ai!. to +ithho!d a.
a pe$a!ty a$d $ot beca-.e the ta2 i. d-e ro# hi#.
%Commissioner of Internal Revenue v. Court of Appeals, et al.' <.R. No. 10?>@6' Aa$-ary 20' 1FFF' the Anscor case#

PENALTIES7 INTERESTS AN+ SURCHAR3ES

46 S-rta2e. or .-rcharge.' a!.o /$o+$ a. the ci0i! pe$a!tie.' are the a#o-$t. i#po.ed i$ additio$ to the ta2 re1-ired. They are i$ the $at-re o pe$a!tie. a$d .ha!! be co!!ected at the .a#e ti#e' i$ the .a#e #a$$er' a$d a. part o the ta2. GSec.2E? %A&' N4R( o 1FF@I

1"

B" Co,$ro,ise $e-a&t' i. the a#o-$t agreed -po$ bet+ee$ the ta2payer a$d the <o0er$#e$t to be paid a. a pe$a!ty i$ ca.e. o a co#pro#i.e. C" As a resu&t o* (iver;e-t ru&i-;s o- w et er it is su)Ae%t to ta. or -ot7 t e ta.$a'er was -ot a)&e to $a' is ta.es o- ti,e" I,$ose( sur% ar;es a-( i-terests *or su% (e&a'7 t e ta.$a'er -ot i-voGes ;oo( *ait wit t e BIR %ou-teri-; )' sa'i-; t at ;oo( *ait is -ot a va&i( (e*e-se *or vio&atio- o* a s$e%ia& &aw" Furt er,ore7 t e BIR *urt er raises t e (e*e-se t at t e ;over-,e-t is -ot )ou-( )' t e errors o* its a;e-ts" W o is %orre%t 9
S3<<ESTE" ANS=ER8 The ta2payer i. correct. The .ett!ed r-!e i. that good aith a$d ho$e.t be!ie that o$e i. $ot .-b6ect to ta2 o$ the ba.i. o pre0io-. i$terpretatio$ o go0er$#e$t age$cie. ta./ed to i#p!e#e$t the ta2' are .- icie$t 6-.ti icatio$ to de!ete the i#po.itio$ o .-rcharge.. %Michel ,. $huillier Pa nshop, Inc. v. Commissioner of Internal
Revenue, <. R. No. 166@?6' Septe#ber 11' 2006&

/"

W at are t e two H/I Gi-(s o* %ivi& $e-a&ties 9

S3<<ESTE" ANS=ER8 a. the 2>H .-rcharge or !ate i!i$g or !ate pay#e$t GSec. 2E? %A&' N4R( o 1FF@I %a!.o /$o+$ a. the de!i$1-e$cy .-rcharge&' a$d b. the >0H +i!! -! $eg!ect or ra-d .-rcharge. GSec. 2E? %B&' I"id.I

:"

+e*i-e (e*i%ie-%' i-%o,e ta."

S3<<ESTE" ANS=ER8 "e icie$cy i$co#e ta2 i. the a#o-$t by +hich the ta2 i#po.ed -$der the N4R( o 1FF@ e2ceed. the a#o-$t .ho+$ a. the ta2 d-e by the ta2payer -po$ hi. ret-r$. GSec. >6 %B& %1&' N4R( o 1FF@I

<" +e*i%ie-%' i-terest7 (e*i-e(" The i$tere.t a..e..ed a$d co!!ected o$ a$y -$paid a#o-$t o ta2 at the rate o 20H per a$$-# or .-ch higher rate a. #ay be pre.cribed by reg-!atio$.' ro# the date pre.cribed or pay#e$t -$ti! the a#o-$t i. -!!y paid. GSec. 2EF %A& %B&' N4R( o 1FF@I
The i$tere.t a..e..ed a$d co!!ected o$ the -$paid a#o-$t -$ti! -!!y paid +here there i. ai!-re o$ the part o the ta2payer to pay the a#o-$t die o$ a$y ret-r$ re1-ired to be i!edD or the a#o-$t o the ta2 d-e or +hich $o ret-r$ i. re1-iredD or a de icie$cy ta2' or a$y .-rcharge or i$tere.t thereo$' o$ the date appeari$g i$ the $otice a$d de#a$d by the (o##i..io$er o 4$ter$a! Re0e$-e. GSec.2EF %c&' N4R( o 1FF@I

REPUBLIC ACT NO" 11/>7 CREATIN3 THE COURT OF TA2 APPEALS INCLU+IN3 5URIS+ICTION OF THE CTA7 AS A=EN+E+
COURT OF TA2 APPEALS7 IN 3ENERAL 1" +is%uss t e ro&e o* t e Au(i%iar' i- ta.atio-"
S3<<ESTE" ANS=ER8 The ro!e o the 6-diciary i. to be the .y#pathetic or 0igi!a$t co-rt +hich +o-!d chec/ i$6-.tice. or ab-.e. o the !egi.!ati0e a$d ad#i$i.trati0e age$t. o the State i$ their e2erci.e o the po+er o ta2atio$.

>"

+e&i-Fue-%' i-terest7 (e*i-e("

@" A*ter reso&vi-; t e issues t e BIR Co,,issio-er re(u%e( t e assess,e-t" Was it $ro$er to i,$ose (e&i-Fue-%' i-terest (es$ite t e re(u%tio- o* t e assess,e-t 9 W ' 9
S3<<ESTE" ANS=ER8 Oe.. The i$te$tio$ o the !a+ i. to di.co-rage de!ay i$ the pay#e$t o ta2e. d-e to the State a$d i$ thi. .e$.e the .-rcharge a$d i$tere.t charged are $ot pe$a! b-t co#pe$.atory i$ $at-re J they are co#pe$.atio$ to the State or the de!ay i$ pay#e$t' or or the co$co#ita$t t-.e o the -$d. by the ta2payer beyo$d the date he i. .-ppo.ed to ha0e paid the# to the State. %Ban- of the Philippine Islands v.
Commissioner of Internal Revenue, <. R. No. 1B@002' A-!y 2@' 2006&

/" W at is t e -ature a-( %o,$ositio- o* t e Court o* Ta. A$$ea&s 9

S3<<ESTE" ANS=ER8 The (o-rt o Ta2 Appea!. i. the .pecia! ta2 co-rt created -$der Rep-b!ic Act No. 112>' a. a#e$ded' a$d i. co#po.ed o a Pre.idi$g A-.tice a$d eight %?& A..ociate A-.tice.' orga$i;ed i$to three %B& di0i.io$..

:" W at are t e $ur$oses *or t e %reatio- o* t e Court o* Ta. A$$ea&s 9

S3<<ESTE" ANS=ER8 a. To pre0e$t de!ay i$ the di.po.itio$ o ta2 ca.e. by the the$ (o-rt. o Cir.t 4$.ta$ce %$o+ RT(.&' i$ 0ie+ o the bac/!og o ci0i!'

cri#i$a!' a$d cada.tra! ca.e. acc-#-!ati$g i$ the doc/et. o .-ch co-rt.D a$d b. To ha0e a body +ith .pecia! /$o+!edge +hich ordi$ary A-dge. o the the$ (o-rt. o Cir.t 4$.ta$ce %$o+ RT(.&' are $ot !i/e!y to po..e..' th-. pro0idi$g or a$ ade1-ate re#edy or a .peedy deter#i$atio$ o ta2 ca.e.. %<rsal v. Court of (a) Appeals, et al., 101 Phi!. 20F&

47

<"

5uris(i%tio- o* t e Court o* Ta. A$$ea&s"

a. E.%&usive a$$e&&ate Auris(i%tio- to review )' a$$ea&7 as erei- $rovi(e(4 1. "eci.io$. o the (o##i..io$er o 4$ter$a! Re0e$-e i$ ca.e. i$0o!0i$g di.p-ted a..e..#e$t.' re -$d. o i$ter$a! re0e$-e ta2e.' ee. or other charge.' pe$a!tie.' i$ re!atio$ thereto' or other #atter. ari.i$g -$der the Natio$a! 4$ter$a! Re0e$-e (ode or other !a+. ad#i$i.tered by the B-rea- o 4$ter$a! Re0e$-e:D %"4V4S4ON& 2. 4$actio$ by the (o##i..io$er o 4$ter$a! Re0e$-e i$ ca.e. i$0o!0i$g di.p-ted a..e..#e$t.' re -$d. or i$ter$a! re0e$-e ta2e.' ee. or other charge.' pe$a!tie. i$ re!atio$ thereto' or other #atter ari.i$g -$der the Natio$a! 4$ter$a! Re0e$-e (ode or other !a+. ad#i$i.tered by the B-rea- o 4$ter$a! Re0e$-e' +here the Natio$a! 4$ter$a! Re0e$-e (ode pro0ide. a .peci ic period o actio$' i$ +hich ca.e the i$actio$ .ha!! be dee#ed a de$ia!D %The i$actio$ o$ re -$d. i$ t+o year. ro# the ti#e ta2 +a. paid. Th-.' i the pre.cripti0e period o t+o year. i. abo-t to e2pire' the ta2payer .ho-!d i$terpo.e a petitio$ or re0ie+ +ith the (TA J "4V4S4ON& B. "eci.io$.' order. or re.o!-tio$. o the Regio$a! Tria! (o-rt. i$ !oca! ta2 ca.e. origi$a!!y decided or re.o!0ed by the# i$ the e2erci.e o their origi$a! or appe!!ate 6-ri.dictio$D %4 origi$a! "4V4S4OND i appe!!ate &! BA!C& E. "eci.io$. o the (o##i..io$er o (-.to#. i$ ca.e. i$0o!0i$g !iabi!ity or c-.to#. d-tie.' ee. or other #o$ey charge.' .ei;-re' dete$tio$ or re!ea.e o property a ected' i$e.' or eit-re. or other pe$a!tie. i$ re!atio$ thereto' or other #atter. ari.i$g -$der the (-.to#. )a+ or other !a+. ad#i$i.tered by the B-rea- o (-.to#.D %"4V4S4ON& >. "eci.io$. o the (e$tra! Board o A..e..#e$t Appea!. i$ the e2erci.e o it. appe!!ate 6-ri.dictio$ o0er ca.e. i$0o!0i$g the a..e..#e$t a$d ta2atio$ o rea! property origi$a!!y decided by the pro0i$cia! or city board o a..e..#e$t appea!.D %&! BA!C& 6. "eci.io$. o the Secretary o Ci$a$ce o$ c-.to#. ca.e. e!e0ated to hi# a-to#atica!!y or re0ie+ ro# deci.io$. o the (o##i..io$er o (-.to#. +hich are ad0er.e to the <o0er$#e$t -$der Sectio$ 2B1> o the Tari a$d (-.to#. (odeD %Thi. ha. re ere$ce to or eit-re ca.e. +here the deci.io$ i. to re!ea.e the .ei;ed artic!e. J "4V4S4ON&

@. "eci.io$. o the Secretary o Trade a$d 4$d-.try' i$ ca.e o $o$agric-!t-ra! prod-ct' co##odity or artic!e' a$d the Secretary o Agric-!t-re i$ the ca.e o agric-!t-ra! prod-ct' co##odity or artic!e' i$0o!0i$g d-#pi$g a$d co-$ter0ai!i$g d-tie. -$der Sectio$ B01 a$d B02' re.pecti0e!y' o the Tari a$d (-.to#. (ode' a$d .a eg-ard #ea.-re. -$der Rep-b!ic Act No. ??00' +here either party #ay appea! the deci.io$ to i#po.e or $ot to i#po.e .aid d-tie.. %"4V4S4ON& b. 5uris(i%tio- over %ases i-vo&vi-; %ri,i-a& o**e-ses as erei- $rovi(e(4 1. E.%&usive ori;i-a& Auris(i%tio- over a&& %ri,i-a& %ases ari.i$g ro# 0io!atio$. o the Natio$a! 4$ter$a! Re0e$-e (ode or Tari a$d (-.to#. (ode a$d other !a+. ad#i$i.tered by the B-rea- o 4$ter$a! Re0e$-e or the B-rea- o (-.to#.8 Provided, ho ever, That o e$.e. or e!o$ie. #e$tio$ed i$ thi. paragraph +here the pri$cipa! a#o-$t o ta2e. a$d ee.' e2c!-.i0e o charge. a$d pe$a!tie. c!ai#ed' i. !e.. tha$ O$e #i!!io$ pe.o. %P1'000'000.00& or +here there i. $o .peci ied a#o-$t c!ai#ed .ha!! be tried by the reg-!ar (o-rt. a$d the 6-ri.dictio$ o the (TA .ha!! be appe!!ate. A$y pro0i.io$ o !a+ or the R-!e. o (o-rt to the co$trary $ot+ith.ta$di$g' the cri#i$a! actio$ a$d the corre.po$di$g ci0i! actio$ or the reco0ery o ci0i! !iabi!ity or ta2e. a$d pe$a!tie. .ha!! at a!! ti#e. be .i#-!ta$eo-.!y i$.tit-ted +ith' a$d 6oi$t!y deter#i$ed i$ the .a#e proceedi$g by the (TA' the i!i$g o the cri#i$a! actio$ bei$g dee#ed to $ece..ari!y carry +ith it the i!i$g o the ci0i! actio$' a$d $o right to re.er0e the i!i$g o .-ch ci0i! actio$ .eparate!y ro# the ci0i! actio$ +i!! be recog$i;ed. 2. E.%&usive a$$e&&ate Auris(i%tio- i- %ri,i-a& o**e-ses4 a& O0er appea!. ro# the 6-dg#e$t.' re.o!-tio$. or order. o the Regio$a! Tria! (o-rt. i$ ta2 ca.e. origi$a!!y decided by the#' i$ their re.pecti0e territoria! 6-ri.dictio$. b& O0er petitio$. or re0ie+ o the 6-dg#e$t.' re.o!-tio$. or order. o the Regio$a! Tria! (o-rt. i$ the e2erci.e o their appe!!ate 6-ri.dictio$ o0er ta2 ca.e. origi$a!!y decided by the *etropo!ita$ Tria! (o-rt.' *-$icipa! Tria! (o-rt. a$d *-$icipa! (irc-it Tria! (o-rt. i$ their re.pecti0e 6-ri.dictio$. c. 5uris(i%tio- over ta. %o&&e%tio- %ases4 1. E2c!-.i0e origi$a! 6-ri.dictio$ i$ ta2 co!!ectio$ ca.e. i$0o!0i$g i$a! a$d e2ec-tory a..e..#e$t. or ta2e.' ee.' charge. a$d pe$a!tie.8 Provided, ho ever, That co!!ectio$ ca.e. +here the pri$cipa! a#o-$t o ta2e. a$d ee.' e2c!-.i0e o charge. a$d pe$a!tie.' c!ai#ed i. !e.. tha$ O$e #i!!io$ pe.o. %P1'000'000& .ha!! be tried by the proper *-$icipa! Tria! (o-rt' *etropo!ita$ Tria! (o-rt a$d Regio$a! Tria! (o-rt. 2. E2c!-.i0e appe!!ate 6-ri.dictio$ i$ ta2 co!!ectio$ ca.e.8 a& O0er appea!. ro# 6-dg#e$t.' re.o!-tio$.' or order. o the Regio$a! Tria! (o-rt. i$ ta2 co!!ectio$ ca.e. origi$a!!y decided by the#' i$ their re.pecti0e territoria! 6-ri.dictio$.

b& O0er petitio$. or re0ie+ o the 6-dg#e$t.' re.o!-tio$. or order. o the Regio$a! Tria! (o-rt. i$ the e2erci.e o their appe!!ate 6-ri.dictio$ o0er ta2 co!!ectio$ ca.e. origi$a!!y decided by the *etropo!ita$ Tria! (o-rt.' *-$icipa! Tria! (o-rt. a$d *-$icipa! (irc-it Tria! (o-rt.' i$ their re.pecti0e 6-ri.dictio$. %Sec. @' R. A. No.
112>' a. a#e$ded by R. A. No. F2?2' e#pha.i. a$d +ord. i$ pare$the.e. .-pp!ied&

48

T e $etitio- *or review to )e *i&e( wit t e CTA en banc as t e ,o(e *or a$$ea&i-; a (e%isio-7 reso&utio-7 or or(er o* t e CTA +ivisio-7 u-(er Se%tio- 1C o* Re$u)&i% A%t No" 11/>7 as a,e-(e(7 is -ot a tota&&' -ew re,e('7 u-iFue to t e CTA7 wit a s$e%ia& a$$&i%atio- or use t erei-" To the co$trary' the
(TA #ere!y adopt. the proced-re or petitio$. or re0ie+ a$d appea!. !o$g e.tab!i.hed a$d practiced i$ other Phi!ippi$e co-rt.. Accordi$g!y' doctri$e.' pri$cip!e.' r-!e.' a$d precede$t. !aid do+$ i$ 6-ri.pr-de$ce by thi. (o-rt a. regard. petitio$. or re0ie+ a$d appea!. i$ co-rt. o ge$era! 6-ri.dictio$ .ho-!d !i/e+i.e bi$d the (TA' a$d it ca$$ot depart there ro#.
%Santos v. People, et al, <. R. No. 1@B1@6' A-g-.t 26' 200?&

co$.tit-tio$a!ity o reg-!atio$. i..-ed by the B4R. The rea.o$ +a. that thi. a!!. -$der the co$cept o deci.io$. o the B4R (o##i..io$er o$ other #atter ari.i$g -$der the pro0i.io$. o !a+. ad#i$i.tered by the (o##i..io$. 4..-a$ce o re0e$-e reg-!atio$. are a-thori;ed -$der the N4R(. British American (o"acco re0er.ed Asia International Auctioneers -po$ the co$cept o the 6-diciary:. e2pa$ded po+er.

@" I-sta-%es w ere t e Court o* Ta. A$$ea&s wou&( ave Auris(i%tio- eve- i* t ere is -o (e%isio- o* t e Co,,issio-er o* Custo,s8
a. "eci.io$. o the Secretary o Trade a$d 4$d-.try or the Secretary o Agric-!t-re i$ a$ti,d-#pi$g a$d co-$ter0ai!i$g d-ty ca.e. are appea!ab!e to the (o-rt o Ta2 Appea!. +ithi$ thirty %B0& day. ro# receipt o .-ch deci.io$.. b. 4$ ca.e o a-to#atic re0ie+ by the Secretary o Ci$a$ce i$ .ei;-re or or eit-re ca.e. +here the 0a!-e o the i#portatio$ e2ceed. P> #i!!io$ or +here the deci.io$ o the (o!!ector o (-.to#. +hich -!!y or partia!!y re!ea.e. the .hip#e$t .ei;ed i. a ir#ed by the (o##i..io$er o (-.to#.. c. 4$ ca.e o a-to#atic re0ie+ by the Secretary o Ci$a$ce o a deci.io$ o a (o!!ector o (-.to#. acti$g a0orab!y -po$ a c-.to#. prote.t.

>" It is t e Re;io-a& Tria& Court t at as Auris(i%tio- to ru&e u$o- t e %o-stitutio-a&it' o* a ta. &aw or a re;u&atioissue( )' t e ta.i-; aut orities" =here +hat i. a..ai!ed i. the
0a!idity or co$.tit-tio$a!ity o a !a+' or a r-!e or reg-!atio$ i..-ed by the ad#i$i.trati0e age$cy i$ the per or#a$ce o it. 1-a.i,!egi.!ati0e -$ctio$' the reg-!ar co-rt. ha0e 6-ri.dictio$ to pa.. -po$ the .a#e. The deter#i$atio$ o +hether a .peci ic r-!e or .et o r-!e. i..-ed by a$ ad#i$i.trati0e age$cy co$tra0e$e. the !a+ or the co$.tit-tio$ i. +ithi$ the 6-ri.dictio$ o the reg-!ar co-rt.. 4$deed' the (o$.tit-tio$ 0e.t. the po+er o 6-dicia! re0ie+ or the po+er to dec!are a !a+' treaty' i$ter$atio$a! or e2ec-ti0e agree#e$t' pre.ide$tia! decree' order' i$.tr-ctio$' ordi$a$ce' or reg-!atio$ i$ the co-rt.' i$c!-di$g the regio$a! tria! co-rt.. Thi. i. +ithi$ the .cope o 6-dicia! po+er' +hich i$c!-de. the a-thority o the co-rt. to deter#i$e i$ a$ appropriate actio$ the 0a!idity o the act. o the po!itica! depart#e$t.. A-dicia! po+er i$c!-de. the d-ty o the co-rt. o 6-.tice to .ett!e act-a! co$tro0er.ie. i$0o!0i$g right. +hich are !ega!!y de#a$dab!e a$d e$ orceab!e' a$d to deter#i$e +hether or $ot there ha. bee$ a gra0e ab-.e o di.cretio$ a#o-$ti$g to !ac/ or e2ce.. o 6-ri.dictio$ o$ the part o a$y bra$ch or i$.tr-#e$ta!ity o the <o0er$#e$t. %British American
(o"acco v. Camacho et al.' <. R. No. 16B>?B' A-g-.t 20' 200? +ith a$ i$ter0e$or&

ASSESS=ENT OF INTERNAL REVENUE TA2ES 1" Out&i-e o* ta. re,e(ies o* a ta.$a'er a-( t e ;over-,e-t re&ative to ASSESS=ENT o* i-ter-a& reve-ue ta.es"
a. The ta2payer i!e. hi. ta2 ret-r$. b. A )etter o A-thority i. i..-ed a-thori;i$g B4R e2a#i$er to a-dit or e2a#i$e the ta2 ret-r$ a$d deter#i$e. +hether the -!! a$d co#p!ete ta2e. ha0e bee$ paid. c. 4 the e2a#i$er i. .ati. ied that the ta2 ret-r$ i. tr-!y re !ecti0e o the ta2ab!e tra$.actio$ a$d a!! ta2e. ha0e bee$ paid' the proce.. e$d.. 7o+e0er' i the e2a#i$er i. $ot .ati. ied that the ta2 ret-r$ i. tr-!y re !ecti0e o the ta2ab!e tra$.actio$ a$d that the ta2e. ha0e $ot bee$ -!!y paid' a Notice o 4$ or#a! (o$ ere$ce i. i..-ed i$0iti$g the ta2payer to e2p!ai$ +hy he .ho-!d $ot be .-b6ect to additio$a! ta2e.. d. 4 the ta2payer atte$d. the i$ or#a! co$ ere$ce a$d the e2a#i$er i. .ati. ied +ith the e2p!a$atio$ o the ta2payer' the proce.. i. agai$ e$ded. 4 the ta2payer ig$ore. the i$0itatio$ to the i$ or#a! co$ ere$ce' or i the e2a#i$er i. $ot .ati. ied +ith ta2payer:. e2p!a$atio$'' a$d he be!ie0e. that proper ta2e. .ho-!d be a..e..ed' the (o##i..io$er o 4$ter$a!

NOTES AN" (O**ENTS8 The abo0e doctri$e .-per.ede. Asia International Auctioneers, Inc., etc et al., .v. Parayno, ,r., etc.,, et al., <. R. No. 10BEE>' "ece#ber 1?' 200@ +hich r-!ed that it i. the (o-rt o Ta2 Appea!. that ha. 6-ri.dictio$ re!ati0e to #atter. i$0o!0i$g the

Re0e$-e or hi. d-!y a-thori;ed repre.e$tati0e .ha!! the$ $oti y the ta2payer o the i$di$g. i$ the or# o a pre,a..e..#e$t $otice. The pre, a..e..#e$t $otice re1-ire. the ta2payer to e2p!ai$ +ithi$ i tee$ %1>& day. ro# receipt +hy $o $otice o a..e..#e$t a$d !etter o de#a$d or additio$a! ta2e. .ho-!d be directed to hi#. e. 4 the (o##i..io$er i. .ati. ied +ith the e2p!a$atio$ o the ta2payer' the$ the proce.. i. agai$ e$ded. 4 the ta2payer ig$ore. the pre,a..e..#e$t $otice by $ot re.po$di$g or hi. e2p!a$atio$. are $ot accepted by the (o##i..io$er' the$ a $otice o a..e..#e$t a$d a !etter o de#a$d i. i..-ed. The $otice o a..e..#e$t #-.t be i..-ed by the (o##i..io$er to the ta2payer +ithi$ a period o three %B& year. ro# the ti#e the ta2 ret-r$ +a. i!ed or .ho-!d ha0e bee$ i!ed +hiche0er i. the !ater o the t+o e0e$t.. =here the ta2payer did $ot i!e a ta2 ret-r$ or +here the ta2 ret-r$ i!ed i. a!.e or ra-d-!e$t' the$ the (o##i..io$er ha. a period o te$ %10& year. ro# di.co0ery o the ai!-re to i!e a ta2 ret-r$ or ro# di.co0ery o the ra-d +ithi$ +hich to i..-e a$ a..e..#e$t $otice. The r-$$i$g o the abo0e pre.cripti0e period. #ay ho+e0er be .-.pe$ded -$der certai$ i$.ta$ce.. The $otice o a..e..#e$t #-.t be i..-ed +ithi$ the pre.cripti0e period a$d #-.t co$tai$ the act.' !a+ a$d 6-ri.pr-de$ce re!ied -po$ by the (o##i..io$er. Other+i.e it +o-!d $ot be 0a!id. . The ta2payer .ho-!d the$ i!e a$ ad#i$i.trati0e prote.t by i!i$g a re1-e.t or reco$.ideratio$ or rei$0e.tigatio$ +ithi$ thirty %B0& day. ro# receipt o the a..e..#e$t $otice. The ta2payer co-!d $ot i##ediate!y i$terpo.e a$ appea! to the (o-rt o Ta2 Appea!. beca-.e there i. $o deci.io$ yet o the (o##i..io$er that co-!d be the .-b6ect o a re0ie+. To be 0a!id the ad#i$i.trati0e prote.t #-.t be i!ed +ithi$ the pre.cripti0e period' #-.t .ho+ the error o the B-rea- o 4$ter$a! Re0e$-e a$d the correct co#p-tatio$. .-pported by a .tate#e$t o act.' a$d the !a+ a$d 6-ri.pr-de$ce re!ied -po$ by the ta2payer. There i. $o $eed to pay -$der prote.t. 4 the prote.t +a. $ot .ea.o$ab!y i!ed the a..e..#e$t beco#e. i$a! a$d co!!ectib!e a$d the B-rea- o 4$ter$a! Re0e$-e co-!d -.e it. ad#i$i.trati0e a$d 6-dicia! re#edie. i$ co!!ecti$g the ta2. g. =ithi$ .i2ty %60& day. ro# i!i$g o the prote.t' a!! re!e0a$t .-pporti$g doc-#e$t. .ha!! be .-b#itted' other+i.e the a..e..#e$t .ha!! beco#e i$a! a$d co!!ectib!e a$d the B4R co-!d -.e it. ad#i$i.trati0e a$d 6-dicia! re#edie. to co!!ect the ta2. O$ce a$ a..e..#e$t ha. beco#e i$a! a$d co!!ectib!e' $ot e0e$ the B4R (o##i..io$er co-!d cha$ge the .a#e. Th-.' the ta2payer co-!d $ot pay the ta2' the$ app!y or a re -$d' a$d i de$ied appea! the .a#e to the (o-rt o Ta2 Appea!.. h. 4 the prote.t i. de$ied i$ +ho!e or i$ part' or i. $ot acted -po$ +ithi$ o$e h-$dred eighty %1?0& day. ro# the .-b#i..io$ o doc-#e$t.'

49

the ta2payer ad0er.e!y a ected by the deci.io$ or i$actio$ #ay appea! to the (o-rt o Ta2 Appea!. +ithi$ thirty %B0& day. ro# receipt o the ad0er.e deci.io$' or ro# the !ap.e o the o$e h-$dred eighty %1?0,& day period' +ith a$ app!icatio$ or the i..-a$ce o a +rit o pre!i#i$ary i$6-$ctio$ to e$6oi$ the B4R ro# co!!ecti$g the ta2 .-b6ect o the appea!. 4 the ta2payer ai!. to .o appea!' the de$ia! o the (o##i..io$er or the i$actio$ o the (o##i..io$er +o-!d re.-!t to the $otice o a..e..#e$t beco#i$g i$a! a$d co!!ectib!e a$d the B4R co-!d the$ -ti!i;e it. ad#i$i.trati0e a$d 6-dicia! re#edie. to co!!ect the ta2. i. A deci.io$ o a di0i.io$ o the (o-rt o Ta2 Appea!. ad0er.e to the ta2payer or the go0er$#e$t #ay be the .-b6ect o a #otio$ or reco$.ideratio$ or $e+ tria!' a de$ia! o +hich i. appea!ab!e to the (o-rt o Ta2 Appea!. en "anc by #ea$. o a petitio$ or re0ie+. The (o-rt o Ta2 Appea!.' ha. a period o t+e!0e %12& #o$th. ro# .-b#i..io$ o the ca.e or deci.io$ +ithi$ +hich to decide. 6. 4 the deci.io$ o the (o-rt o Ta2 Appea!. en "anc a ir#. the de$ia! o the prote.t by the (o##i..io$er or the a..e..#e$t i$ ca.e o ai!-re by the (o##i..io$er to decide the ta2payer #-.t i!e a petitio$ or re0ie+ o$ certiorari +ith the S-pre#e (o-rt +ithi$ i tee$ %1>& day. ro# $otice o the 6-dg#e$t o$ 1-e.tio$. o !a+. A$ e2te$.io$ o thirty %B0& day. #ay or 6-.ti iab!e rea.o$. be gra$ted. 4 the ta2payer doe. $ot .o appea!' the deci.io$ o the (o-rt o Ta2 Appea!. +o-!d beco#e i$a! a$d thi. ha. the e ect o #a/i$g the a..e..#e$t a!.o i$a! a$d co!!ectib!e. The B4R co-!d the$ -.e it. ad#i$i.trati0e a$d 6-dicia! re#edie. to co!!ect the ta2.

wit

/" T e wor( assess,e-t w e- use( i- %o--e%tiota.atio-7 ,a' ave ,ore t a- o-e ,ea-i-;. *ore

co##o$!y the +ord a..e..#e$t #ea$. the o icia! 0a!-atio$ o a ta2payer:. property or p-rpo.e o ta2atio$. The abo0e de i$itio$ o a..e..#e$t i$d. app!icatio$ -$der tari a$d c-.to#. ta2atio$ a. +e!! a. !oca! go0er$#e$t ta2atio$. Cor rea& $ro$ert' ta.atio-7 t ere ,a' )e a s$e%ia& ,ea-i-; to t e )ur(e-s t at are i,$ose( u$o- rea& $ro$erties t at ave )ee)e-e*ite( )' a $u)&i% worGs e.$e-(iture o* a &o%a& ;over-,e-t" 4t i. .o#eti#e. ca!!ed a .pecia! a..e..#e$t or a .pecia! !e0y. *Commissioner of
Internal Revenue v. Pascor Realty and %evelopment Corporation, et al., <.R. No. 12?B1>' A-$e 2F' 1FFF&

For i-ter-a& reve-ue ta.atio- assess,e-t as &a'i-; a ta." The -!ti#ate p-rpo.e o a$ a..e..#e$t to .-ch a co$$ectio$ i. to a.certai$ the a#o-$t that each ta2payer i. to pay. %I"id.&

:" A- assess,e-t is a -oti%e (u&' se-t to t e ta.$a'er w i% is (ee,e( ,a(e o-&' w e- t e BIR re&eases7 ,ai&s or se-(s su% -oti%e to t e ta.$a'er " *Commissioner of Internal Revenue

v. Pascor Realty and %evelopment Corporation, et al., <.R. No. 12?B1>' A-$e 2F' 1FFF&

50

<" Se&*-assesse( ta.7 (e*i-e(" A ta2 that the ta2payer hi#.e! a..e..e. or co#p-te. a$d pay. to the ta2i$g a-thority. 4t i. a ta2 that .e! ,a..e..ed by the ta2payer +itho-t the i$ter0e$tio$ o a$ a..e..#e$t by the ta2 a-thority to create the ta2 !iabi!ity. The Ta2 (ode o!!o+. the pay,a.,yo-, i!e .y.te# o ta2atio$ -$der +hich the ta2payer co#p-te. hi. o+$ ta2 !iabi!ity' prepare. the ret-r$' a$d pay. the ta2 a. he i!e. the ret-r$. The pay,a.,yo-, i!e .y.te# i. a .e! , a..e..i$g ta2 ret-r$. 4$ter$a! re0e$-e ta2e. are .e! ,a..e..i$g. %"i..e$t o A. (arpio i$
Philippine !ational 9il Company v. Court of Appeals, et al., <. R. No. 10FF@6' Apri! 26' 200> a$d co#pa$io$ ca.e&

Appro2i#atio$ i$ the ca!c-!atio$ o ta2e. d-e i. 6-.ti ied. To ho!d other+i.e +o-!d be ta$ta#o-$t to ho!di$g that ./i!! -! co$cea!#e$t i. a$ i$0i$cib!e barrier to proo . %Commissioner of Internal Revenue v. 'ante) (rading Co., Inc.
<. R. No. 1B6F@>' *arch B1' 200>&

7o+e0er' the r-!e doe. $ot app!y +here the e.ti#atio$ i. arri0ed at arbitrari!y a$d capricio-.!y. %I"id.&

B" =ea-i-; o* O)est evi(e-%e o)tai-a)&eQ -$der Sec. 6 %B&' N4R( o 1FF@. Thi. #ea$. that the origi$a! doc-#e$t. #-.t be prod-ced. 4 it co-!d $ot be prod-ced' .eco$dary e0ide$ce #-.t be add-ced. %'ante) (rading Co., Inc. v. Commissioner of Internal Revenue ' (A ,
<.R. SP No. E@1@2' Septe#ber B0' 1FF?&

A c!ear e2a#p!e o a .e! ,a..e..ed ta2 i. the a$$-a! i$co#e ta2' +hich the ta2payer hi#.e! co#p-te. a$d pay. +itho-t the i$ter0e$tio$ o a$y a..e..#e$t by the B4R. The a$$-a! i$co#e ta2 beco#e. d-e a$d payab!e +itho-t $eed o a$y prior a..e..#e$t by the B4R. The B4R #ay or #ay $ot i$0e.tigate or a-dit the a$$-a! i$co#e ta2 ret-r$ i!ed by the ta2payer. The ta2payer:. !iabi!ity or the i$co#e ta2 doe. $ot depe$d o$ +hether or $ot the B4R co$d-ct. .-ch .-b.e1-e$t i$0e.tigatio$ or a-dit. 7o+e0er' i the ta2i$g a-thority i. ir.t re1-ired to i$0e.tigate' a$d a ter .-ch i$0e.tigatio$ to i..-e the ta2 a..e..#e$t that create. the ta2 !iabi!ity' the$ the ta2 i. $o !o$ger .e! ,a..e..ed. %I"id.&

C" The o!!o+i$g are the ;e-era& ,et o(s (eve&o$e( )' t e Bureau o* I-ter-a& Reve-ue *or re%o-stru%ti-; a ta.$a'er8s i-%o,e +here the record. do $ot .ho+ the tr-e i$co#e or +here $o
ret-r$ +a. i!ed or +hat +a. i!ed +a. a a!.e a$d ra-d-!e$t ret-r$ %a& Perce$tage #ethodD %b& Net +orth #ethod.D %c& Ba$/ depo.it #ethodD %d& (a.h e2pe$dit-re #ethodD %e& 3$it a$d 0a!-e #ethodD % & Third party i$ or#atio$ or acce.. to record. #ethodD %g& S-r0ei!!a$ce a$d a..e..#e$t #ethod. %(hapter L444. 4$direct Approach to 4$0e.tigatio$' 7a$dboo/ o$ A-dit Proced-re. a$d Tech$i1-e. J Vo!-#e 4' pp. 6?,@E&

>" Se%" @ HBI o* t e NIRC o* 1EEB a&&ows t e BIR to ,aGe or a,e-( a ta. retur- *ro, is ow- G-ow&e(;e or o)tai-e( t rou; testi,o-' or ot erwise. Th-.' the (o##i..io$er
o 4$ter$a! Re0e$-e i$0e.tigate. a$y circ-#.ta$ce +hich !ed hi# to be!ie0e that the ta2payer had ta2ab!e i$co#e !arger tha$ that reported. Nece..ari!y' thi. i$1-iry +o-!d ha0e to be o-t.ide o the boo/. beca-.e they .-pported the ret-r$ a. i!ed. 7e #ay ta/e the .+or$ te.ti#o$y o the ta2payer' he #ay ta/e the te.ti#o$y o third partie.D he #ay e2a#i$e a$d .-bpoe$a' i $ece..ary' trader.: a$d bro/er.: acco-$t. a$d boo/. a$d the ta2payer:. boo/. o acco-$t.. The (o##i..io$er i. $ot bo-$d to o!!o+ a$y .et o patter$.. The e2i.te$ce o -$reported i$co#e #ay be .ho+$ by a$y partic-!ar proo that i. a0ai!ab!e i$ the circ-#.ta$ce. o the partic-!ar .it-atio$. %Commissioner of Internal Revenue v. 'ante) (rading Co., Inc. <. R.
No. 1B6F@>' *arch B1' 200>&

E"

T ir( $art' i-*or,atio- or a%%ess to re%or(s

,et o(" The B4R #ay re1-ire third partie.' p-b!ic or pri0ate to .-pp!y
i$ or#atio$ to the B4R' a$d th-.' obtai$ o$ a reg-!ar ba.i. ro# a$y per.o$ other tha$ the per.o$ +ho.e i$ter$a! re0e$-e ta2 !iabi!ity i. .-b6ect to a-dit or i$0e.tigatio$' or ro# a$y o ice or o icer o the $atio$a! a$d !oca! go0er$#e$t.' go0er$#e$t age$cie. a$d i$.tr-#e$ta!itie. i$c!-di$g the Ba$g/o Se$tra! $g Pi!ipi$a. a$d go0er$#e$t,o+$ed or Jco$tro!!ed corporatio$.' a$y i$ or#atio$ .-ch a.' b-t $ot !i#ited to' co.t. a$d 0o!-#e o prod-ctio$' receipt. or .a!e. a$d gro.. i$co#e. o ta2payer.' a$d the $a#e. ' addre..e.' a$d i$a$cia! .tate#e$t. o corporatio$.' #-t-a! -$d co#pa$ie.' i$.-ra$ce co#pa$ie.' regio$a! operati$g head1-arter. or #-!ti$atio$a! co#pa$ie.' 6oi$t acco-$t.' a..ociatio$.' 6oi$t 0e$t-re. or co$.ortia a$d regi.tered part$er.hip.' a$d their #e#ber.D 222 GSec. > %B&'
N4R( o 1FF@&

@" 3e-era& ru&e4 W e- t e Co,,issio-er o* I-ter-a& Reve-ue ,a' re&' o- esti,ates" The r-!e i. that i$ the ab.e$ce o
acco-$ti$g record. o a ta2payer' hi. ta2 !iabi!ity #ay be deter#i$ed by e.ti#atio$. The petitio$er %(o##i..io$er o 4$ter$a! Re0e$-e& i. $ot re1-ired to co#p-te .-ch ta2 !iabi!itie. +ith #athe#atica! e2act$e...

10" A $re-assess,e-t -oti%e i. a !etter .e$t by the B-reao 4$ter$a! Re0e$-e to a ta2payer a./i$g hi# to e2p!ai$ +ithi$ a period o

i tee$ %1>& day. ro# receipt +hy he .ho-!d $ot be the .-b6ect o a$ a..e..#e$t $otice. 4t i. part o the d-e proce.. right. o a ta2payer. A. a ge$era! r-!e' the B4R co-!d $ot i..-e a$ a..e..#e$t $otice +itho-t ir.t i..-i$g a pre,a..e..#e$t $otice beca-.e it i. part o the d-e proce.. right. o a ta2payer to be gi0e$ $otice i$ the or# o a pre, a..e..#e$t $otice' a$d or hi# to e2p!ai$ +hy he .ho-!d $ot be the .-b6ect o a$ a..e..#e$t $otice.

51

the co!!ectio$ o ta2e.. GCommissioner of Internal Revenue v. B./. +oodrich Phils,

Inc., %no Sime %ar"y International (ire Co., Inc. &, et al., <.R. No. 10E1@1' Cebr-ary 2E' 1FFF' B0B S(RA >E6D Philippine ,ournalists, Inc. v. Commissioner of Internal Revenue, <. R. No. 162?>2' "ece#ber 16' 200EI' a. +e!! a. their

11" I-sta-%es w ere a $re-assess,e-t -oti%e is -ot

reFuire( )e*ore a -oti%e o* assess,e-t is se-t to t e ta.$a'er"
a. =he$ the i$di$g or a$y de icie$cy ta2 i. the re.-!t o #athe#atica! error i$ the co#p-tatio$ o the ta2 a. appeari$g o$ the ace o the ret-r$D or b. =he$ a di.crepa$cy ha. bee$ deter#i$ed bet+ee$ the ta2 +ithhe!d a$d the a#o-$t act-a!!y re#itted by the +ithho!di$g age$tD or c. =he$ a ta2payer opted to c!ai# a re -$d or ta2 credit o e2ce.. creditab!e +ithho!di$g ta2 or a ta2ab!e period +a. deter#i$ed to ha0e carried o0er a$d a-to#atica!!y app!ied the .a#e a#o-$t c!ai#ed agai$.t the e.ti#ated ta2 !iabi!itie. or the ta2ab!e 1-arter or 1-arter. o the .-cceedi$g tab!e yearD or d. =he$ the e2ce.. ta2 d-e o$ e2ci.ab!e artic!e. ha. $ot bee$ paidD or e. =he$ a$ artic!e !oca!!y p-rcha.ed or i#ported by a$ e2e#pt per.o$' .-ch a.' b-t $ot !i#ited to 0ehic!e.' capita! e1-ip#e$t' #achi$erie. a$d .pare part.' ha. bee$ .o!d' trade or tra$. erred to $o$,e2e#pt per.o$.. %Sec. 22?' N4R( o 1FF@&

a..e..#e$t.. The !a+ pre.cribi$g a !i#itatio$ o actio$. or the co!!ectio$ o the i$co#e ta2 i. be$e icia! both to the <o0er$#e$t a$d to it. citi;e$.D to the <o0er$#e$t beca-.e ta2 o icer. +o-!d be ob!iged to act pro#pt!y i$ the #a/i$g o a..e..#e$t' a$d to citi;e$. beca-.e a ter the !ap.e o the period o pre.criptio$ citi;e$. +o-!d ha0e a ee!i$g o .ec-rity agai$.t -$.cr-p-!o-. ta2 age$t. +ho +i!! a!+ay. i$d a$ e2c-.e to i$.pect the boo/. o ta2payer.' $ot to deter#i$e the !atter:. rea! !iabi!ity' b-t to ta/e ad0a$tage o e0ery opport-$ity to #o!e.t peace -!' !a+,abidi$g citi;e$.. =itho-t .-ch a !ega! de e$.e ta2payer. +o-!d -rther#ore be -$der ob!igatio$ to a!+ay. /eep their boo/. a$d /eep the# ope$ or i$.pectio$ .-b6ect to hara..#e$t by -$.cr-p-!o-. ta2 age$t.. The !a+ o$ pre.criptio$ bei$g a re#edia! #ea.-re .ho-!d be i$terpreted i$ a +ay co$d-ci0e to bri$gi$g abo-t the be$e ice$t p-rpo.e o a ordi$g protectio$ to the ta2payer +ithi$ the co$te#p!atio$ o the (o##i..io$ +hich reco##e$d the appro0a! o the !a+. GBan- of Philippine Islands */ormerly /ar
&ast Ban- and (rust Company# v. Commissioner of Internal Revenue, <. R. No. 1@EFE2' *arch @' 200?I

1/" Pres%ri$tive $erio(s *or ,aGi-; assess,e-ts o* i-ter-a& reve-ue ta.es"

a. Three %B& year. ro# the !a.t day +ithi$ +hich to i!e a ret-r$ or +he$ the ret-r$ +a. act-a!!y i!ed' +hiche0er i. !ater %Sec. 20B' N4R( o 1FF@&. The (4R ha. three %B& year. ro# the date o act-a! i!i$g o the ta2 ret-r$ to a..e.. a $atio$a! i$ter$a! re0e$-e ta2 or to co##e$ce co-rt proceedi$g. or the co!!ectio$ thereo +itho-t a$ a..e..#e$t. GBan- of
Philippine Islands */ormerly /ar &ast Ban- and (rust Company# Commissioner of Internal Revenue, <. R. No. 1@EFE2' *arch @' 200?I v.

Thi. #a$date go0er$. the 1-e.tio$ o pre.criptio$ o the go0er$#e$t:. right to a..e.. i$ter$a! re0e$-e ta2e. pri#ari!y to .a eg-ard the i$tere.t. o ta2payer. ro# -$rea.o$ab!e i$0e.tigatio$. Accordi$g!y' the go0er$#e$t #-.t a..e.. i$ter$a! re0e$-e ta2e. o$ ti#e .o a. $ot to e2te$d i$de i$ite!y the period o a..e..#e$t a$d depri0e the ta2payer o the a..-ra$ce that it +i!! $o !o$ger be .-b6ected to -rther i$0e.tigatio$ or ta2e. a ter the e2piratio$ o rea.o$ab!e period o ti#e.
%Commissioner of Internal Revenue v. /M/ %evelopment Corporation, <. R. No. 16@@6>' A-$e B0' 200? citi$g Philippine ,ournalists, Inc. v. Commissioner of Internal Revenue <.R. No. 162?>2' "ece#ber 16' 200E' EE@ S(RA 21E' 22>&

1<" U-reaso-a)&e i-vesti;atio- %o-te,$&ates %ases w ere t e $erio( *or assess,e-t e.te-(s i-(e*i-ite&' beca-.e
thi. depri0e. the ta2payer o the a..-ra$ce that it +i!! $ot !o$ger be .-b6ected to -rther i$0e.tigatio$ or ta2e. a ter the e2piratio$ o a rea.o$ab!e period o ti#e. %Philippine ,ournalists, Inc. v. Commissioner of
Internal Revenue, <. R. No. 162?>2' "ece#ber 16' 200E +ith $ote to .ee Repu"lic v. A"laza, 10? Phi!. 110>. 110?&

b. te$ year. ro# di.co0ery o the ai!-re to i!e the ta2 ret-r$ or di.co0ery o a!.ity or ra-d i$ the ret-r$ GSec. 222 %a&' N4R( o 1FF@G D or c. +ithi$ the period agreed -po$ bet+ee$ the go0er$#e$t a$d the ta2payer +here there i. a +ai0er o the pre.cripti0e period or a..e..#e$t %Sec. 222 %b&' N4R( o 1FF@&.

1:" Pur$ose o* $erio( o* &i,itatio-s i- ta.atio-" Cor the p-rpo.e o .a eg-ardi$g ta2payer. ro# a$y -$rea.o$ab!e e2a#i$atio$' i$0e.tigatio$ or a..e..#e$t' o-r ta2 !a+ pro0ide. a .tat-te o !i#itatio$. i$

)a+. o$ pre.criptio$ .ho-!d be !ibera!!y co$.tr-ed i$ a0or o the ta2payer. Rea.o$8 or the p-rpo.e o .a eg-ardi$g ta2payer. ro# a$ -$rea.o$ab!e e2a#i$atio$' i$0e.tigatio$ or a..e..#e$t' o-r ta2 !a+. pro0ide a .tat-te o !i#itatio$ o$ the co!!ectio$ o ta2e.. Th-.' the !a+ o$ pre.criptio$' bei$g a re#edia! #ea.-re' .ho-!d be !ibera!!y co$.tr-ed i$ order to a ord .-ch protectio$' A. a coro!!ary' the e2ceptio$. to the !a+ o$

pre.criptio$ .ho-!d per orce be .trict!y co$.tr-ed" GPhilippine ,ournalists, Inc.

v. Commissioner of Internal Revenue, <. R. No. 162?>2' "ece#ber 16' 200E citi$g Commissioner of Internal Revenue v. B./. +oodrich Phils, Inc *no Sime %ar"y International (ire Co., Inc.#,., et al., <.R. No. 10E1@1' Cebr-ary 2E' 1FFF' B0B S(RA >E6I

52

The pre.cripti0e period +a. preci.e!y i$te$ded to gi0e the ta2payer. peace o #i$d. *Commissioner of Internal Revenue v. B./. +oodrich
Phils., Inc., et al.' <.R. No. 10E1@1' Cebr-ary 2E' 1FFF&

S3<<ESTE" ANS=ER8 a. )i eb!ood theory b. Pre.-#ptio$ o reg-!arity %Commissioner of Internal Revenue v. 'ante) (rading Co., Inc., <' R. No. 1B6F@>' *arch B1' 200>& i$ the per or#a$ce o p-b!ic -$ctio$.. %Commissioner of Internal Revenue v.
(uazon, Inc., 1@B S(RA BF@&

c. The !i/e!ihood that the ta2payer +i!! ha0e acce.. to the re!e0a$t i$ or#atio$ GCommissioner of Internal Revenue, supra citi$g <nited
States v. Re)ach, E?2 C.2d 10 %1F@B&. The certiorari +a. de$ied by the 3$ited State. S-pre#e (o-rt o$ No0e#ber 1F' 1F@BI

i. a de!i$1-e$cy ta2 a..e..#e$t +hich +a. a..e..ed +itho-t the be$e it o co#p!ete or partia! a-dit by a$ a-thori;ed re0e$-e o icer' +ho ha. rea.o$ to be!ie0e that the a..e..#e$t a$d co!!ectio$ o a de icie$cy ta2 +i!! be 6eopardi;ed by de!ay beca-.e o the ta2payer:. ai!-re to co#p!y +ith the a-dit a$d i$0e.tigatio$ re1-ire#e$t. to pre.e$t hi. boo/. o acco-$t. a$d9or perti$e$t record.' or to .-b.ta$tiate a!! or a$y o the ded-ctio$.' e2e#ptio$.' or credit. c!ai#ed i$ hi. ret-r$. GSec. B.1 %a&' Re0. Reg.. No. 6,2000& Aeopardy a..e..#e$t i. a$ i$dicatio$ o the do-bt -! 0a!idity o the a..e..#e$t' he$ce it #ay be .-b6ect to a co#pro#i.e. GSec. B.1 %a&' Re0. Reg.. No. 6,2000I

1>"

A !Aeo$ar('

assess,e-t#

d. The de.irabi!ity o bo!.teri$g the record,/eepi$g re1-ire#e$t. o the N4R(. %I"id.&

1E" 3ive i-sta-%es w ere $ri,a *a%ie %orre%t-ess o* a ta. assess,e-t (oes -ot a$$&'"
S3<<ESTE" ANS=ER8 The prima facie correct$e.. o a ta2 a..e..#e$t doe. $ot app!y -po$ proo that a$ a..e..#e$t i. -tter!y +itho-t o-$datio$' #ea$i$g it i. arbitrary a$d capricio-.. =here the B4R ha. co#e o-t +ith a $a/ed a..e..#e$t i.e.' +itho-t a$y o-$datio$ character' the deter#i$atio$ o the ta2 d-e i. +itho-t ratio$a! ba.i.. GCommissioner of Internal Revenue v. 'ante) (rading Co., Inc., <' R. No. 1B6F@>'
*arch B1' 200> citi$g <nited States v. ,anis, EF ). Ed. 2d 10E6 %1F@6&D E2? 3S EBB %1F@6&I 4$ .-ch a .it-atio$' the deter#i$atio$ o the (o##i..io$er co$tai$ed i$ a de icie$cy $otice di.appear.. GCommissioner of Internal Revenue, supra citi$g a 3.S. (o-rt o Appea!. r-!i$g' i$ Clar- and Clar- v. Commissioner of Internal Revenue, 266 C. 2d 6F? %1F>F&I 7e$ce' the

1@" ReFuisites *or For,a& Letter o* +e,a-( a-( Assess,e-t Noti%e. The or#a! !etter o de#a$d a$d a..e..#e$t
$otice .ha!! be i..-ed by the (o##i..io$er or hi. d-!y a-thori;ed repre.e$tati0e. The !etter o de#a$d ca!!i$g or pay#e$t o the ta2payer:. de icie$cy ta2 or ta2e. .ha!! .tate the act.' the !a+' r-!e. a$d reg-!atio$.' or 6-ri.pr-de$ce o$ +hich the a..e..#e$t i. ba.ed' other+i.e' the or#a! !etter o de#a$d a$d a..e..#e$t $otice .ha!! be 0oid. The .a#e .ha!! be .e$t to the ta2payer o$!y by regi.tered #ai! or by per.o$a! de!i0ery.

deter#i$atio$ by the (TA #-.t re.t o$ a!! the e0ide$ce i$trod-ced a$d it. -!ti#ate deter#i$atio$ #-.t i$d .-pport i$ credib!e e0ide$ce.
GCommissioner of Internal Revenue, supraI

1B" W at are t e reFuire,e-ts *or t e va&i(it' o* a *or,a& &etter o* (e,a-( a-( assess,e-t -oti%e 9
S3<<ESTE" ANS=ER8 a. There #-.t ha0e bee$ pre0io-.!y i..-ed a pre,a..e..#e$t $otice -$ti! e2ceptedD b. 4t #-.t ha0e bee$ i..-ed prior to the pre.cripti0e periodD a$d c. The !etter o de#a$d ca!!i$g or pay#e$t o the ta2payer:. de icie$cy ta2 or ta2e. .ha!! .tate the act.' the !a+' r-!e. a$d reg-!atio$.' or 6-ri.pr-de$ce o$ +hich the a..e..#e$t i. ba.ed' other+i.e' the or#a! !etter o de#a$d a$d a..e..#e$t $otice .ha!! be 0oid. %Sec. B.1.E' Re0.
Reg.. No. 12,FF&

/0" W at are t e i-sta-%es t at sus$e-(s t e ru--i-; o* t e $res%ri$tive $erio(s HStatute o* Li,itatio-sI wit i- w i% to ,aGe a- assess,e-t a-( t e )e;i--i-; o* (istrai-t or &ev' or o* a $ro%ee(i-; i- %ourt *or t e %o&&e%tio-7 i- res$e%t o* a-' ta. (e*i%ie-%ies9
S3<<ESTE" ANS=ER8 a. =he$ the (o##i..io$er i. prohibited ro# #a/i$g the a..e..#e$t' or begi$$i$g di.trai$t' or !e0y or proceedi$g i$ co-rt a$d or .i2ty %60& day. therea terD b. =he$ the ta2payer re1-e.t. or a$d i. gra$ted a rei$0e.tigatio$ by the co##i..io$erD c. =he$ the ta2payer co-!d $ot be !ocated i$ the addre.. gi0e$ by hi# i$ the ret-r$ i!ed -po$ +hich the ta2 i. bei$g a..e..ed or co!!ectedD

1C" W at are t e reaso-s %orre%t-ess o* assess,e-ts 9

*or

$resu,$tio-

o*

d. =he$ the +arra$t o di.trai$t a$d !e0y i. d-!y .er0ed -po$ the ta2payer' hi. a-thori;ed repre.e$tati0e' or a #e#ber o hi. ho-.eho!d +ith .- icie$t di.cretio$' a$d $o property co-!d be !ocatedD a$d e. =he$ the ta2payer i. o-t o the Phi!ippi$e.. NOTES AN" (O**ENTS8 The ho!di$g i$ Commissioner of Internal Revenue v. Court of Appeals, et al., <.R. No. 11>@12' Cebr-ary 2>' 1FFF %(ar$atio$ ca.e& that the +ai0er o the period or a..e..#e$t #-.t be i$ +riti$g a$d ha0e the +ritte$ co$.e$t o the B4R (o##i..io$er i. .ti!! doctri$a! beca-.e o the pro0i.io$. o Sec. 22B' N4R( o 1FF@ +hich pro0ide. or the .-.pe$.io$ o the pre.cripti0e period8

53

i-(i%ate( i- t e ori;i-a& %o$'" d. T e *ore;oi-; $ro%e(ures s a&& )e stri%t&' *o&&owe(" A$y re0e$-e o icia! o-$d $ot to ha0e co#p!ied +ith thi. Order re.-!ti$g i$ pre.criptio$ o the right to a..e..9co!!ect .ha!! be ad#i$i.trati0e!y dea!t +ith. %Re$-#beri$g a$d e#pha.i. .-pp!ied.& 4 the abo0e are $ot o!!o+ed there i. $o 0a!id +ai0er a$d pre.criptio$ +o-!d r-$. %Commissioner of Internal Revenue v. /M/
%evelopment Corporation, <. R. No. 16@@6>' A-$e B0' 200? citi$g Philippine ,ournalists, Inc. v. Commissioner of Internal Revenue <.R. No. 162?>2' "ece#ber 16' 200E' EE@ S(RA 21E' 22?,22F&

/1" U-(er R=O No" /0-E07 w i% i,$&e,e-ts Se%tio-s /0: a-( /// H)I7 t e *o&&owi-; $ro%e(ures s ou&( )e *o&&owe( *or a va&i( waiver o* t e $res%ri$tive $erio( *or aassess,e-t8
a. The +ai0er #-.t be i$ the proper or#D b. The +ai0er .ha!! be .ig$ed by the ta2payer hi#.e! or hi. d-!y a-thori;ed repre.e$tati0e. 4$ the ca.e o a corporatio$' the +ai0er #-.t be .ig$ed by a$y o it. re.po$.ib!e o icia!.. Soo$ a ter the +ai0er i. .ig$ed by the ta2payer' the (o##i..io$er o 4$ter$a! Re0e$-e or the re0e$-e o icia! a-thori;ed by hi#' a. herei$a ter pro0ided' .ha!! .ig$ the +ai0er i$dicati$g that the B-rea- ha. accepted a$d agreed to the +ai0er. T e (ate o* su% a%%e$ta-%e )' t e Bureau s ou&( )e i-(i%ate(" Both the date o e2ec-tio$ by the ta2payer a$d date o accepta$ce by the B-rea- .ho-!d be be ore the e2piratio$ o the period o pre.criptio$ or be ore the !ap.e o the period agreed -po$ i$ ca.e a .-b.e1-e$t agree#e$t i. e2ec-ted. c. The o!!o+i$g re0e$-e o icia!. are a-thori;ed to .ig$ the +ai0er. A. 4$ the Natio$a! O ice 2222 B. Co,,issio-er For ta. %ases i-vo&vi-; ,ore t a- P1= B. 4$ the Regio$a! O ice. 1. The Re0e$-e "i.trict O icer +ith re.pect to ta2 ca.e. .ti!! pe$di$g i$0e.tigatio$ a$d the period to a..e.. i. abo-t to pre.cribe regard!e.. o a#o-$t. 2222 d. The waiver ,ust )e e.e%ute( i- t ree H:I %o$ies' the origi$a! copy to be attached to the doc/et o the ca.e' t e se%o-( %o$' *or t e ta.$a'er a$d the third copy or the O ice accepti$g the +ai0er. T e *a%t o* re%ei$t )' t e ta.$a'er o* is? er *i&e %o$' s a&& )e

//" T e $ro%e(ures i- R=O No" /0-E0 are NOT ,ere&' (ire%tor' a-( t at t e e.e%utio- o* a waiver is a re-u-%iatio- o* a ta.$a'er8s ri; t to i-voGe $res%ri$tio-" R=O No" /0-E0 ,ust )e stri%t&' *o&&owe(" A +ai0er o the .tat-te o
!i#itatio$. -$der the N4R(' to a certai$ e2te$t bei$g a derogatio$ o the ta2payer:. right to .ec-rity agai$.t pro!o$ged a$d -$.cr-p-!o-. i$0e.tigatio$.' #-.t be care -!!y a$d .trict!y co$.tr-ed. The +ai0er o the .tat-te o !i#itatio$. doe. $ot #ea$ that the ta2payer re!i$1-i.he. the right to i$0o/e pre.criptio$ -$e1-i0oca!!y' partic-!ar!y +here the !a$g-age o the doc-#e$t i. e1-i0oca!. Th-. a +ai0er beco#e. -$!i#ited i$ ti#e' a$d i$0a!id' beca-.e it did $ot .peci y a de i$ite date' agreed -po$ bet+ee$ the B4R a$d the ta2payer' +ithi$ +hich the or#er #ay a..e.. a$d co!!ect ta2e.. 4t a!.o +o-!d ha0e $o bi$di$g e ect o$ the ta2payer i there +a. $o co$.e$t by the (o##i..io$er. O$ thi. ba.i.' $o i#p!ied co$.e$t ca$ be pre.-#ed' $or ca$ it be co$te$ded that the co$c-rre$ce to .-ch +ai0er i. a #ere or#a!ity. %Commissioner of Internal Revenue v. /M/ %evelopment Corporation,
<. R. No. 16@@6>' A-$e B0' 200? citi$g Philippine ,ournalists, Inc. v. Commissioner of Internal Revenue <.R. No. 162?>2' "ece#ber 16' 200E' EE@ S(RA 21E' 22F i$ t-r$ citi$g 4d. at 22F' citi$g Commissioner of Internal Revenue v. Court of Appeals' <.R. No. 11>@12' Cebr-ary 2>' 1FFF' B0B S(RA 61E' 620, 622.&

/:" BIR %a--ot re&' o- its i-vo%atio- o* t e ru&e t at t e ;over-,e-t %a--ot )e esto$$e( )' t e ,istaGes o* its reve-ue o**i%ers i- t e e-*or%e,e-t o* R=O No" /0-E0 beca-.e the !a+ o$
pre.criptio$ .ho-!d be i$terpreted i$ a +ay co$d-ci0e to bri$gi$g abo-t the be$e ice$t p-rpo.e o a ordi$g protectio$ to the ta2payer +ithi$ the co$te#p!atio$ o the (o##i..io$ +hich reco##e$ded the appro0a! o the !a+. To the <o0er$#e$t' it. ta2 o icer. are ob!iged to act pro#pt!y i$ the #a/i$g o a..e..#e$t .o that ta2payer.' a ter the !ap.e o the period o pre.criptio$' +o-!d ha0e a ee!i$g o .ec-rity agai$.t -$.cr-p-!o-. ta2 age$t. +ho +i!! a!+ay. try to i$d a$ e2c-.e to i$.pect the boo/. o ta2payer.' $ot to deter#i$e the !atter:. rea! !iabi!ity' b-t to ta/e ad0a$tage o

a po..ib!e opport-$ity to hara.. e0e$ !a+,abidi$g b-.i$e..#e$. =itho-t .-ch !ega! de e$.e' ta2payer. +o-!d be ope$ .ea.o$ to hara..#e$t by -$.cr-p-!o-. ta2 age$t.. GCommissioner of Internal Revenue v. /M/
%evelopment Corporation, <. R. No. 16@@6>' A-$e B0' 200? citi$g Repu"lic of the Phils. v. A"laza, 10? Phi!. 110>' 110? %1F60&I

54

/<" T e si;-atures o* )ot t e Co,,issio-er a-( t e ta.$a'er7 are reFuire( *or a waiver o* t e $res%ri$tive $erio(' th-. a -$i!atera! +ai0er o$ the part o the ta2payer doe. $ot
.-.pe$d the pre.cripti0e period. GCommissioner of Internal Revenue v. Court
of Appeals, et al., <.R. No. 11>@12' Cebr-ary 2>' 1FFF %(ar$atio$ ca.e&I

o additio$a! e0ide$ce. 4t #ay i$0o!0e both a 1-e.tio$ o act or o !a+ or both. b. Re1-e.t or rei$0e.tigatio$ +hich re er. to a p!ea or re, e0a!-atio$ o a$ a..e..#e$t o$ the ba.i. o $e+!y,di.co0ered e0ide$ce or additio$a! e0ide$ce that a ta2payer i$te$d. to pre.e$t i$ the i$0e.tigatio$. 4t #ay a!.o i$0o!0e a 1-e.tio$ o act or !a+ or both. %Commissioner of
Internal Revenue v. Philippine +lo"al Communication, Inc., <. R. No. 16@1E6' October B1' 2006 citi$g Re0. Reg.. No. 12,?>&

<B" T e a%t o* reFuesti-; a rei-vesti;atio- a&o-e (oes -ot sus$e-( t e ru--i-; o* t e $res%ri$tive $erio(" T e reFuest *or rei-vesti;atio- ,ust )e ;ra-te( )' t e CIR" The
S-pre#e (o-rt dec!ared that the b-rde$ o proo that the re1-e.t or rei$0e.tigatio$ had bee$ act-a!!y gra$ted .ha!! be o$ the (o##i..io$er o 4$ter$a! Re0e$-e. S-ch gra$t #ay be e2pre..ed i$ it. co##-$icatio$. +ith the ta2payer or i#p!ied ro# the actio$ o the (o##i..io$er or hi. a-thori;ed repre.e$tati0e i$ re.po$.e to the re1-e.t or rei$0e.tigatio$. GBan- of Philippine Islands */ormerly /ar &ast Ban- and
(rust Company# v. Commissioner of Internal Revenue, <. R. No. 1@EFE2' *arch @' 200?I

:" W at is t at t'$e o* $rotest t at sus$e-(s t e ru--i-; o* t e statute o* &i,itatio-s *or t e )e;i--i-; o* (istrai-t or &ev' or a $ro%ee(i-; i- %ourt *or %o&&e%tio- 9 W '9
S3<<ESTE" ta2payer re1-e.t. (o##i..io$er %Sec. .tat-te o !i#itatio$. ANS=ER8 4t i. that type o prote.t +he$ the or a rei$0e.tigatio$ +hich i. gra$ted by the 22B' N4R( o 1FF@&' that .-.pe$d. the r-$$i$g o the or co!!ectio$ o the ta2. %Commissioner of Internal

Revenue v. Philippine +lo"al Communication, Inc., <. R. No. 16@1E6' October B1' 2006 citi$g Sec. 2@1' $o+ Sec. 22B' N4R( o 1FF@& =he$ a ta2payer de#a$d.

a rei$0e.tigatio$' the ti#e e#p!oyed i$ rei$0e.tigatio$ .ho-!d be ded-cted ro# the tota! period o !i#itatio$. GCommissioner of Internal Revenue, supra
citi$g Repu"lic v. $opez, 11@ Phi!. >@>' >@?D @ S(RA >66' >6?,>6F %1F6B&I

PROTESTIN3 INTERNAL REVENUE TA2 ASSESS=ENTS

1" W at is t e $resu,$tio- t at *&ows *ro, a ta.$a'er8s *ai&ure to $rotest a- assess,e-t 9
S3<<ESTE" ANS=ER8 Ta2 a..e..#e$t. by ta2 e2a#i$er. are pre.-#ed correct a$d #ade i$ good aith. The ta2payer ha. the d-ty to pro0e other+i.e. 4$ the ab.e$ce o proo o a$y irreg-!aritie. i$ the per or#a$ce o d-tie.' a$ a..e..#e$t d-!y #ade by a B-rea- o 4$ter$a! Re0e$-e e2a#i$er a$d appro0ed by hi. .-perior o icer. +i!! $ot be di.t-rbed. A!! pre.-#ptio$. are i$ a0or o the correct$e.. o ta2 a..e..#e$t.. %Commissioner of Internal Revenue v. Ban- of Philippine
Islands., <' R. No. 1BE062' Apri! 1@' 200@ citi$g Sy Po v. Court of Appeals, <. R. No. ),?1EE6' 1? A-g-.t 1F??' 16E S(RA >2E' >B0' citatio$. o#itted&

3$do-bted!y' a rei$0e.tigatio$' +hich e$tai!. the receptio$ a$d e0a!-atio$ o additio$a! e0ide$ce' +i!! ta/e #ore ti#e tha$ a reco$.ideratio$ o a ta2 a..e..#e$t +hich +i!! be !i#ited to the e0ide$ce a!ready at ha$dD thi. 6-.ti ie. +hy the or#er ca$ .-.pe$d the r-$$i$g o the .tat-te o !i#itatio$. o$ co!!ectio$ o the a..e..ed ta2' +hi!e the !atter ca$$ot.
%Commissioner of Internal Revenue v. Philippine +lo"al Communication, Inc., <. R. No. 16@1E6' October B1' 2006 citi$g Ban- of Philippine Islands v. Commissioner of Internal Revenue, <. R. No. 1BF@B6' 1@ October 200>' E@B S(RA 20>' 2B0,2B1&

<" W at are t e reFuire,e-ts *or t e va&i(it' o* a ta.$a'er8s $rotest 9

S3<<ESTE" ANS=ER8 a. 4t #-.t be i!ed +ithi$ the reg!e#e$tary period o thirty %B0& day. ro# receipt o the $otice o a..e..#e$t. b. The ta2payer #-.t $ot o$!y .ho+ the error. o the B-rea- o 4$ter$a! Re0e$-e b-t a!.o the correct co#p-tatio$ thro-gh 1& A .tate#e$t o the act.' the app!icab!e !a+' r-!e. a$d reg-!atio$.' or 6-ri.pr-de$ce o$ +hich the ta2payer:. prote.t i. ba.ed' 2& 4 there are .e0era! i..-e. i$0o!0ed i$ the di.p-ted a..e..#e$t a$d the ta2payer ai!. to .tate the act.' the app!icab!e !a+' r-!e. a$d reg-!atio$.' or 6-ri.pr-de$ce i$ .-pport o hi. prote.t agai$.t .o#e o the .e0era! i..-e. o$ +hich the a..e..#e$t i.

/" W at are t e two wa's o* $rotesti-; a- assess,e-t -oti%e *or a- i-ter-a& reve-ue ta. 9 A&ter-ative&'7 w at are t e two t'$es o* $rotests 9 E.$&ai- )rie*&'"
S3<<ESTE" ANS=ER8 a. Re1-e.t or reco$.ideratio$ +hich re er. to a p!ea or re, e0a!-atio$ o a$ a..e..#e$t o$ the ba.i. o e2i.ti$g record. +itho-t $eed

ba.ed' the .a#e .ha!! be co$.idered -$di.p-ted i..-e or i..-e.' i$ +hich ca.e' the ta2payer .ha!! be re1-ired to pay the corre.po$di$g de icie$cy ta2 or ta2e. attrib-tab!e thereto. %Sec. B.1.>' Re0. Reg.. 12,FF& c. =ithi$ .i2ty %60& day. ro# i!i$g o the prote.t' the ta2payer .ha!! .-b#it a!! re!e0a$t .-pporti$g doc-#e$t.. GEth par.' Sec. 22? %e&' N4R(
o 1FF@I

55

theory that it +a. the (4R:. i$a! act regardi$g the re1-e.t or reco$.ideratio$. The 0ery tit!e e2pre..!y i$dicated that it +a. a final $otice prior to .ei;-re o property. The !etter it.e! c!ear!y .tated that the ta2payer +a. bei$g gi0e$ thi. )AST OPPORT3N4TO to payD other+i.e' it. propertie. +o-!d be .-b6ected to di.trai$t a$d !e0y.

>" !Re&eva-t su$$orti-; (o%u,e-ts7# (e*i-e(. The ter# re!e0a$t .-pporti$g doc-#e$t. .ho-!d be -$der.tood a. tho.e doc-#e$t. $ece..ary to .-pport the !ega! ba.i. i$ di.p-ti$g a ta2 a..e..#e$t a. deter#i$ed by the ta2payer. The B4R ca$ o$!y i$ or# the ta2payer to .-b#it additio$a! doc-#e$t.. The B4R ca$$ot de#a$d +hat type o .-pporti$g doc-#e$t. .ho-!d be .-b#itted. Other+i.e' a ta2payer +i!! be at the #ercy o the B4R' +hich #ay re1-ire the prod-ctio$ o doc-#e$t. that a ta2payer ca$$ot .-b#it. %Commissioner of Internal Revenue v. /irst &)press Pa nshop Company,
Inc., <. R. 1@20E>,E6' A-$e 16' 200F&

/" T e ta.$a'er seaso-a)&' $roteste( t e assess,e-t issue( )' t e Co,,issio-er o* I-ter-a& Reve-ue" +uri-; t e $e-(e-%' o* t e $rotest t e CIR issue( a warra-t o* (istrai-t a-( &ev' to %o&&e%t t e ta.es su)Ae%t o* t e $rotest" As %ou-se& w at a(vi%e s a&& 'ou ;ive t e ta.$a'er" E.$&ai- )rie*&' 'our a-swer"
S3<<ESTE" ANS=ER8 The ta2payer .ho-!d appea!' by +ay o a petitio$ or re0ie+' to the (o-rt o Ta2 Appea!. $ot o$ the gro-$d o the de$ia! o the prote.t b-t o$ other #atter ari.i$g -$der the pro0i.io$. o the Natio$a! 4$ter$a! Re0e$-e (ode. The act-a! i..-a$ce o a +arra$t o di.trai$t a$d !e0y i$ certai$ ca.e. ca$$ot be co$.idered a i$a! deci.io$ o$ a di.p-ted a..e..#e$t. To be a 0a!id deci.io$ o$ a di.p-ted a..e..#e$t' the deci.io$ o the (o##i..io$er or hi. d-!y a-thori;ed repre.e$tati0e .ha!! %a& .tate the act.' the app!icab!e !a+' r-!e. a$d reg-!atio$.' or 6-ri.pr-de$ce o$ +hich .-ch deci.io$ i. ba.ed' other+i.e' the deci.io$ .ha!! be 0oid' i$ +hich ca.e the .a#e .ha!! $ot be co$.idered a deci.io$ o$ the di.p-ted a..e..#e$tD a$d %b& that the .a#e i. hi. i$a! deci.io$. %Sec. B.1.6' Re0. Reg.. 12,FF& The.e co$ditio$. are $ot co#p!ied +ith by the #ere i..-a$ce o a +arra$t o di.trai$t a$d !e0y. *Commissioner of Internal Revenue v. <nion Shipping
Corp., 1?> S(RA >E@#

5U+ICIAL RE=E+IES ASSESS=ENTS

INVOLVIN3

PROTESTE+

1" A%ts o* BIR Co,,issio-er t at ,a' )e %o-si(ere( as (e-ia& o* a $rotest w i% serve as )asis *or a$$ea& to t e Court o* Ta. A$$ea&s"
a. Ci!i$g by the B4R o a ci0i! .-it or co!!ectio$ o the de icie$cy ta2 i. co$.idered a de$ia! o the re1-e.t or reco$.ideratio$. %Commissioner
of Internal Revenue v. <nion Shipping Corporation, 1?> S(RA >E@&

b. A$ i$dicatio$ to the ta2payer by the (o##i..io$er i$ c!ear a$d -$e1-i0oca! !a$g-age o hi. i$a! de$ia! $ot the i..-a$ce o the +arra$t o di.trai$t a$d !e0y. =hat i. the .-b6ect o the appea! i. the i$a! deci.io$ $ot the +arra$t o di.trai$t. *I"id.# c. A B4R de#a$d !etter .e$t to the ta2payer a ter hi. prote.t o the a..e..#e$t $otice i. co$.idered a. the i$a! deci.io$ o the (o##i..io$er o$ the prote.t. *Surigao &lectric Co., Inc. v. Court of (a)
Appeals, et al., >@ S(RA >2B&

C-rther#ore' a #otio$ or the .-.pe$.io$ o the co!!ectio$ o the ta2 #ay be i!ed together +ith the petitio$ or re0ie+ %Sec. B' R-!e 10' RR(TA e ecti0e "ece#ber 1>' 200>& beca-.e the co!!ectio$ o the ta2 #ay 6eopardi;e the i$tere.t o the ta2payer.

d. A !etter o the B4R (o##i..io$er reiterati$g to a ta2payer hi. pre0io-. de#a$d to pay a$ a..e..#e$t i. co$.idered a de$ia! o the re1-e.t or reco$.ideratio$ or prote.t a$d i. appea!ab!e to the (o-rt o Ta2 Appea!.. *Commissioner v. Ayala Securities Corporation, @0 S(RA 20E& e. Ci$a! $otice be ore .ei;-re co$.idered a. co##i..io$er:. deci.io$ o ta2payer:. re1-e.t or reco$.ideratio$ +ho recei0ed $o other re.po$.e. Commissioner of Internal Revenue v. Isa"ela Cultural Corporation' <.R. No. 1B>210' A-!y 11' 2001 he!d that $ot o$!y i. the Notice the o$!y re.po$.e recei0ed8 it. co$te$t a$d te$or .-pport. the

:" As a ;e-era& ru&e7 t ere ,ust a&wa's )e a (e%isioo* t e Co,,issio-er o* I-ter-a& Reve-ue or Co,,issio-er o* Custo,s )e*ore t e Court o* Ta. A$$ea&s7 wou&( ave Auris(i%tio-" 4 there i. $o .-ch deci.io$' the petitio$ +o-!d be di.#i..ed
or !ac/ o 6-ri.dictio$ -$!e.. the ca.e a!!. -$der a$y o the o!!o+i$g e2ceptio$..

<" I-sta-%es w ere t e Court o* Ta. A$$ea&s wou&( ave Auris(i%tio- eve- i* t ere is -o (e%isio- 'et )' t e Co,,issio-er o* I-ter-a& Reve-ue4
a. =here the (o##i..io$er ha. $ot acted o$ the di.p-ted a..e..#e$t a ter a period o 1?0 day. ro# .-b#i..io$ o co#p!ete

.-pporti$g doc-#e$t.' the ta2payer ha. a period o B0 day. ro# the e2piratio$ o the 1?0 day period +ithi$ +hich to appea! to the (o-rt o Ta2 Appea!.. %!a.t par.' Sec. 22? %e&' N4R( o 1FF@; Commissioner of Internal
Revenue v. Isa"ela Cultural Corporation, <.R. No. 1B>210' A-!y 11' 2001&

56

b. Ta2 !a+.' -$!i/e re#edia! !a+.' are $ot to be app!ied retroacti0e!y. Re0e$-e !a+. are .-b.ta$ti0e !a+. a$d their app!icatio$ #-.t $ot be e1-ated +ith re#edia! !a+.. %Acosta, supra#

b. =here the (o##i..io$er ha. $ot acted o$ a$ app!icatio$ or re -$d or credit a$d the t+o year period ro# the ti#e o pay#e$t i. abo-t to e2pire' the ta2payer ha. to i!e hi. appea! +ith the (o-rt o Ta2 Appea!. be ore the e2piratio$ o t+o year. ro# the ti#e the ta2 +a. paid. 4t i. di.hearte$i$g e$o-gh to a ta2payer to be /ept +aiti$g or a$ i$de i$ite period or the r-!i$g'. 4t +o-!d #a/e #atter. #ore e2a.perati$g or the ta2payer i the door. o 6-.tice +o-!d be c!o.ed or .-ch a re!ie -$ti! a ter the (o##i..io$er' +o-!d ha0e' at hi. per.o$a! co$0e$ie$ce' gi0e$ hi. go .ig$a!. *Commissioner of Customs, et al, v. Court of (a) Appeals, et al., <.R.
No. ?261?' *arch 16' 1F?F' -$rep.&

:" W at is t e $res%ri$tive $erio( *or %o&&e%ti-; i-ter-a& reve-ue ta.es 9

S3<<ESTE" ANS=ER8 There are o-r %E& pre.cripti0e period. or the co!!ectio$ o a$ i$ter$a! re0e$-e ta28 a. (o!!ectio$ -po$ a a!.e or ra-d-!e$t ret-r$ or $o ret-r$ +itho-t a..e..#e$t. 4$ ca.e o a a!.e or ra-d-!e$t ret-r$ +ith the i$te$t to e0ade ta2 or o ai!-re to i!e a ret-r$' a proceedi$g i$ co-rt or the co!!ectio$ o .-ch ta2 #ay be i!ed +itho-t a..e..#e$t' at a$y ti#e +ithi$ te$ %10& year. a ter the di.co0ery o the a!.ity' ra-d or o#i..io$. GSec.
222 %a&' N4R( o 1FF@I

>" T e % ara%teristi% o* a BIR (e-ia& o* a $rotest su%

as wou&( e-a)&e t e ta.$a'er to a$$ea& t e sa,e to t e Court o* Ta. A$$ea&s" The (o##i..io$er o 4$ter$a! Re0e$-e .ho-!d a!+ay.
i$dicate to the ta2payer i$ c!ear a$d -$e1-i0oca! !a$g-age +he$e0er hi. actio$ o$ a$ a..e..#e$t 1-e.tio$ed by a ta2payer co$.tit-te. hi. i$a! deter#i$atio$ o$ the di.p-ted a..e..#e$t. O$ the ba.i. o hi. .tate#e$t i$d-bitab!y .ho+i$g that the (o##i..io$er:. co##-$icated actio$ i. hi. i$a! deci.io$ o$ the co$te.ted a..e..#e$t' the aggrie0ed ta2payer +o-!d the$ be ab!e to ta/e reco-r.e to the ta2 co-rt at the opport-$e ti#e. =itho-t $eed!e.. di ic-!ty' the ta2payer +o-!d be ab!e to deter#i$e +he$ hi. right to appea! to the ta2 co-rt accr-e.. %Commissioner of Internal Revenue v. Ban- of the Philippines
Islands, <. R. No. 1BE062' Apri! 1@' 200@&

b. (o!!ectio$ -po$ a a!.e or ra-d-!e$t ret-r$ or $o ret-r$ +ith a..e..#e$t. A$y i$ter$a! re0e$-e ta2 +hich ha. bee$ a..e..ed %beca-.e the ret-r$ i. a!.e or ra-d-!e$t +ith i$te$t to e0ade ta2 or o ai!-re to ai! a ret-r$&' +ithi$ a period o te$ %10& year. ro# di.co0ery o the a!.ity' ra-d or o#i..io$ ,a' )e %o&&e%te( )' (istrai-t or &ev' or )' a $ro%ee(i-; i- %ourt wit i- *ive H>I 'ears *o&&owi-; t e assess,e-t o* t e ta. .
GSec. 222 %c&' i$ re!atio$ to Sec. 222 %a& N4R( o 1FF@' e#pha.i. .-pp!iedI

COLLECTION OF INTERNAL REVENUE TA2ES

1" /" 3e-era& ru&e4 Co&&e%tio- o* ta.es is i,$res%ri$ti)&e" W ' is t e %o&&e%tio- o* ta.es i,$res%ri$ti)&e 9
=hi!e thi. #ay be .o' .tat-te. #ay pro0ide or period. o pre.criptio$' S3<<ESTE" ANS=ER8 a. A. a ge$era! r-!e' re0e$-e !a+. are $ot i$te$ded to be !ibera!!y co$.tr-ed' a$d e2e#ptio$. are $ot gi0e$ retroacti0e app!icatio$' co$.ideri$g that ta2e. are the !i eb!ood o the go0er$#e$t a$d i$ 7o!#e.: #e#orab!e #etaphor' the price +e pay or ci0i!i;atio$' ta2 !a+. #-.t be aith -!!y a$d .trict!y i#p!e#e$ted. %Commissioner of Internal Revenue v.
Acosta, etc., <. R. No. 1>E06?' A-g-.t B' 200@& 7o+e0er' .tat-te. #ay pro0ide or pre.cripti0e period. or the co!!ectio$ o partic-!ar /i$d. o ta2e..

c. (o!!ectio$ -po$ a$ e2te$ded a..e..#e$t. =here a ta2 ha. bee$ a..e..ed +ith the period agreed -po$ bet+ee$ the (o##i..io$er a$d the ta2payer i$ +riti$g %+hich .ho-!d i$itia!!y be +ithi$ three %B& year. ro# the ti#e the ret-r$ +a. i!ed or .ho-!d ha0e bee$ i!ed&' or a$y e2te$.io$. be ore the e2piratio$ o the period agreed -po$' the ta. !,a' )e %o&&e%te( )' (istrai-t or &ev' or )' a $ro%ee(i-; i- %ourt wit it e $erio( a;ree( u$o- i- writi-; )e*ore t e e.$iratio- o* t e *ive H>I 'ear $erio( . The period .o agreed -po$ #ay be e2te$ded by .-b.e1-e$t +ritte$ agree#e$t. #ade be ore the e2piratio$ o the period pre0io-.!y agreed -po$. GSec. 222 %d&' i$ re!atio$ to Sec.. 222 %b& a$d 20B' N4R( o 1FF@'
e#pha.i. .-pp!iedI

d. (o!!ectio$ -po$ a ret-r$ that i. $ot a!.e or ra-d-!e$t' or +here the a..e..#e$t i. $ot a$ e2te$ded a..e..#e$t. E2cept a. pro0ided i$ Sectio$ 222' i$ter$a! re0e$-e ta2e. .ha!! be a..e..ed +ithi$ three %B& year. a ter the !a.t day pre.cribed by !a+ or the i!i$g o the ret-r$' a$d -o $ro%ee(i-; i- %ourt wit out assess,e-t *or t e %o&&e%tio- o* su% ta.es s a&& )e )e;u- a*ter t e e.$iratio- o* su% $erio( D Pro0ided' That i$ ca.e +here a ret-r$ i. i!ed beyo$d the period pre.cribed by !a+' the three %B& year period .ha!! be co#p-ted ro# the day the ret-r$ +a. i!ed. Cor p-rpo.e. o thi. Sectio$' a ret-r$ i!ed be ore the !a.t day pre.cribed by !a+ or the i!i$g thereo .ha!! be co$.idered i!ed o$ .-ch !a.t day. %Sec. 20B' N4R( o 1FF@' e#pha.i. .-pp!ied& =he$ the B4R 0a!id!y i..-e. a$ a..e..#e$t +ithi$ the three %B&, year period' it ha. a$other three %B& year. +ithi$ +hich to co!!ect the ta2

d-e by di.trai$t' !e0y' or co-rt proceedi$g. The a..e..#e$t o the ta2 i. dee#ed #ade a$d the three %B&,year period or co!!ectio$ o the a..e..ed ta2 begi$. to r-$ o$ the date the a..e..#e$t $otice had bee$ re!ea.ed' #ai!ed or .e$t to the ta2payer. GBan- of Philippine Islands */ormerly /ar &ast
Ban- and (rust Company# v. Commissioner of Internal Revenue, <. R. No. 1@EFE2' *arch @' 200? citi$g BPI v. Commissioner of Internal Revenue ' <.R. No. 1BF@B6' 1@ October 200>' E@B S(RA 20>' 222,22BI

57

>" W at ta. %o,$ro,ise 9

%ases ,a' )e t e su)Ae%t o* a

NOTES AN" (O**ENTS8 a. Bot t e *or,er Se%" /@E7 NIRC o* 1EBB a-( Se%"/// o* NIRC o* 1EEB (o -ot re*er to a !re;u&ar retur-"# 4t i. c!ear that i$ e$acti$g Sec. 222' e$tit!ed E2ceptio$. a. to the period o !i#itatio$ o a..e..#e$t a$d co!!ectio$ o ta2e.' the N4R( o 1FF@ ha. e!i#i$ated .-b, paragraph c o the or#er Sec. 26F o the N4R(' a!.o e$tit!ed E2ceptio$. a. to the period o !i#itatio$ o a..e..#e$t a$d co!!ectio$ o ta2e.. Said Sec. 26F %c&' read. A$y i$ter$a! re0e$-e ta2 +hich ha. bee$ a..e..ed +ithi$ the period o !i#itatio$ abo0e,pre.cribed #ay be co!!ected by di.trai$t or !e0y or by a proceedi$g i$ co-rt +ithi$ three year. o!!o+i$g the a..e..#e$t o the ta2. A per-.a! o Sec. 222 o the N4R( i. c!ear that it co0er. o$!y three .ce$ario. o$!y. 1& No a..e..#e$t +a. #ade -po$ a a!.e or ra-d-!e$t ret-r$ or o#i..io$ to i!e a ret-r$D 2& a$ a..e..#e$t +a. #ade -po$ a a!.e or ra-d-!e$t ret-r$ or o#i..io$ to i!e a ret-r$D a$d B& a$ e2te$ded a..e..#e$t i..-ed +ithi$ a period agreed -po$ by the (o##i..io$er a$d the ta2payer. The .a#e .ce$ario. are tho.e re erred to i$ the or#er Sec. 26F +hich pro0ided or a pre.cripti0e period or co!!ectio$ o three %B& year.. 4t i. c!ear there ore that $either Sec. 222 $or the or#er Sec. 26F pro0ide or a$ i$.ta$ce +here the a..e..#e$t +a. #ade -po$ a reg-!ar ret-r$ or o$e that i. $ot a!.e or ra-d-!e$t' or that there +a. a$ agree#e$t to e2te$d the period or a..e..#e$t. Re.ort .ho-!d there ore be #ade to the three %B& year period re erred to i$ Sec. 20B o the N4R( o 1FF@ +hich read.' E2cept a. pro0ided i$ Sectio$ 222' i$ter$a! re0e$-e ta2e. .ha!! be a..e..ed +ithi$ three %B& year. a ter the !a.t day pre.cribed by !a+ or the i!i$g o the ret-r$' a$d -o $ro%ee(i-; i- %ourt wit out assess,e-t *or t e %o&&e%tio- o* su% ta.es 2 2 2 %paraphra.i$g a$d e#pha.i. .-pp!ied&

S3<<ESTE" ANS=ER8 The o!!o+i$g ca.e. #ay' -po$ ta2payer:. co#p!ia$ce +ith the ba.i. or co#pro#i.e' be the .-b6ect #atter o co#pro#i.e .ett!e#e$t8 a. "e!i$1-e$t acco-$t.D b. (a.e. -$der ad#i$i.trati0e prote.t a ter i..-a$ce o the Ci$a! A..e..#e$t Notice to the ta2payer +hich are .ti!! pe$di$g i$ the Regio$a! O ice.' Re0e$-e "i.trict O ice.' )ega! Ser0ice' )arge Ta2payer Ser0ice %)TS&' (o!!ectio$ Ser0ice' E$ orce#e$t Ser0ice a$d other o ice. i$ the Natio$a! O iceD c. (i0i! ta2 ca.e. bei$g di.p-ted be ore the co-rt.D d. (o!!ectio$ ca.e. i!ed i$ co-rt.D e. (ri#i$a! 0io!atio$.' other tha$ tho.e a!ready i!ed i$ co-rt' or tho.e i$0o!0i$g cri#i$a! ta2 ra-d. %Sec. 2' Re0. Reg.. No. B0,2002&

W at ta. %ases %ou&( -ot )e t e su)Ae%t o* %o,$ro,ise 9

S3<<ESTE" ANS=ER8 a. =ithho!di$g ta2 ca.e. -$!e.. the app!ica$t,ta2payer i$0o/e. pro0i.io$. o !a+ that ca.t do-bt o$ the ta2payer:. ob!igatio$ to +ithho!d.D b. (ri#i$a! ta2 ra-d ca.e.' co$ ir#ed a. .-ch by the (o##i..io$er o 4$ter$a! Re0e$-e or hi. d-!y a-thori;ed repre.e$tati0eD c. (ri#i$a! 0io!atio$. a!ready i!ed i$ co-rtD d. "e!i$1-e$t acco-$t. +ith d-!y appro0ed .ched-!e o i$.ta!!#e$t pay#e$t.D e. (a.e. +here i$a! report. o rei$0e.tigatio$ or reco$.ideratio$ ha0e bee$ i..-ed re.-!ti$g to red-ctio$ i$ the origi$a! a..e..#e$t a$d the ta2payer i. agreeab!e to .-ch deci.io$ by .ig$i$g the re1-ired agree#e$t or# or the p-rpo.e. O$ the other ha$d' other prote.ted ca.e. .ha!! be ha$d!ed by the Regio$a! E0a!-atio$ Board %REB& or the Natio$a! E0a!-atio$ Board %NEB& o$ a ca.e to ca.e ba.i.D . (a.e. +hich beco#e i$a! a$d e2ec-tory a ter i$a! 6-dg#e$t o a co-rt +here co#pro#i.e i. re1-e.ted o$ the gro-$d o do-bt -! 0a!idity o the a..e..#e$tD a$d g. E.tate ta2 ca.e. +here co#pro#i.e i. re1-e.ted o$ the gro-$d o i$a$cia! i$capacity o the ta2payer. %Sec. 2' Re0. Reg.. No. B0,
2002&

@"

<" W at is a %o,$ro,ise 9
S3<<ESTE" ANS=ER8 A co#pro#i.e i. a co$tract +hereby the partie.' by #a/i$g reciproca! co$ce..io$.' a0oid a !itigatio$ or p-t a$ e$d to o$e a!ready co##e$ced. %Art. 202?' (i0i! (ode& A co#pro#i.e pe$a!ty co-!d $ot be i#po.ed by the B4R' i the ta2payer did $ot agree. A co#pro#i.e bei$g' by it. $at-re' #-t-a! i$ e..e$ce re1-ire. agree#e$t. The pay#e$t #ade -$der prote.t co-!d o$!y .ig$i y that there +a. $o agree#e$t that had e ecti0e!y bee$ reached bet+ee$ the partie.. %3da. de San Agustin, et al., v. Commissioner of Internal
Revenue, <. R. No. 1B?E?>' Septe#ber 10' 2001&

B" W e- ,a' t e Co,,issio-er o* I-ter-a& Reve-ue %o,$ro,ise t e $a',e-t o* a-' i-ter-a& reve-ue ta. 9 A&ter-ative&'7 w at are t e ;rou-(s *or a %o,$ro,ise7 a-(

58

w at are t e a,ou-ts *or w i% a %o,$ro,ise ,a' )e e-tere( i-to 9

S3<<ESTE" ANS=ER8 a. A rea.o$ab!e do-bt a. to the 0a!idity o the c!ai# agai$.t the ta2payer e2i.t. pro0ided that the #i$i#-# co#pro#i.e e$tered i$to i. e1-i0a!e$t to orty perce$t %E0H& o the ba.ic ta2D or b. The i$a$cia! po.itio$ o the ta2payer de#o$.trate. a c!ear i$abi!ity to pay the a..e..ed ta2 pro0ided that the #i$i#-# co#pro#i.e e$tered i$to i. e1-i0a!e$t to te$ perce$t %10H& o the ba.ic a..e..ed ta2 4$ the abo0e i$.ta$ce. the (o##i..io$er i. a!!o+ed to e$ter i$to a co#pro#i.e o$!y i the ba.ic ta2 i$0o!0ed doe. $ot e2ceed O$e #i!!io$ pe.o. %P1'000'000.00&' a$d the .ett!e#e$t o ered i. $ot !e.. tha$ the pre.cribed perce$tage.. GSec. 20E %A&' N4R( o 1FF@I 4$ i$.ta$ce. +here the (o##i..io$er i. $ot a-thori;ed' the co#pro#i.e .ha!! be .-b6ect to the appro0a! o the E0a!-atio$ Board co#po.ed o the (o##i..io$er a$d the o-r %E& "ep-ty (o##i..io$er..

The S-pre#e (o-rt #ay e$6oi$ the co!!ectio$ o ta2e. -$der it. ge$era! 6-dicia! po+er b-t it .ho-!d be appare$t that the .o-rce o the po+er i. $ot .tat-tory b-t co$.tit-tio$a!.

11" W at is t e $ro%e(ure *or sus$e-sio- o* %o&&e%tio- o* ta.es 9

S3<<ESTE" ANS=ER8 =here the co!!ectio$ o the a#o-$t o the ta2payer:. !iabi!ity' .o-ght by #ea$. o a de#a$d or pay#e$t' by !e0y' di.trai$t or .a!e o property o the ta2payer' or by +hate0er #ea$.' a. pro0ided -$der e2i.ti$g !a+.' #ay 6eopardi;e the i$tere.t o the go0er$#e$t or the ta2payer' a$ i$tere.ted party #ay i!e a #otio$ or the .-.pe$.io$ o the co!!ectio$ o the ta2 !iabi!ity %Sec. 1' R-!e 10' RR(TA e ecti0e "ece#ber 1>' 200>& +ith the (o-rt o Ta2 Appea!.. The #otio$ or .-.pe$.io$ o the co!!ectio$ o the ta2 #ay be i!ed together +ith the petitio$ or re0ie+ or +ith the a$.+er' or i$ a .eparate #otio$ i!ed by the i$tere.ted party at a$y .tage o the proceedi$g.. %Sec.
B' R-!e 10' RR(TA e ecti0e "ece#ber 1>' 200>&

C" W e- is t e Co,,issio-er o* I-ter-a& Reve-ue aut oriDe( to a)ate or %a-%e& a ta. &ia)i&it' 98
S3<<ESTE" ANS=ER8 a. The ta2 or a$y portio$ thereo appear. to be -$6-.t!y or e2ce..i0e!y a..e..edD or b. The ad#i$i.tratio$ a$d co!!ectio$ co.t. i$0o!0ed do $ot 6-.ti y the co!!ectio$ o the a#o-$t d-e. GSec. 20E %B&' N4R( o 1FF@I

REFUN+ OF INTERNAL REVENUE TA2ES 1" W at are t e ;rou-(s *or re*u-( or %re(it o* i-ter-a& reve-ue ta.es 9
S3<<ESTE" ANS=ER8 The gro-$d. or re -$d or credit or i$ter$a! re0e$-e ta2e. are the o!!o+i$g8 a. The ta2 +a. i!!ega!!y co!!ected. There i. $o !a+ that a-thori;e. the co!!ectio$ o the ta2. b. The ta2 +a. e2ce..i0e!y co!!ected. There i. a !a+ that a-thori;e. the co!!ectio$ o a ta2 b-t the ta2 co!!ected +a. #ore tha$ +hat the !a+ a!!o+.. c. The ta2 +a. paid thro-gh a #i.ta/e$ be!ie that the ta2payer .ho-!d pay the ta2 %solution inde"eti&

E" T e %o&&e%tio- o* a ta. ,a' -ot )e sus$e-(e(" O$!y the (o-rt o Ta2 Appea!. #ay i..-e a$ order .-.pe$di$g the co!!ectio$ o a ta2. As a ;e-era& ru&e7 !No %ourt s a&& ave t e aut orit' to ;ra-t a- i-Au-%tio- to restrai- t e %o&&e%tio- o* a-' -atio-a& i-ter-a& reve-ue ta.7 *ee or % ar;e. %Sec. 21?' N4R(&
No appea! ta/e$ to the (TA ro# the deci.io$ o the (o##i..io$er o 4$ter$a! Re0e$-e or the (o##i..io$er o (-.to#. or the Regio$a! Tria! (o-rt' pro0i$cia!' city or #-$icipa! trea.-rer or the Secretary o Ci$a$ce' the Secretary o Trade a$d 4$d-.try a$d Secretary o Agric-!t-re' a. the ca.e #ay be .ha!! .-.pe$d the pay#e$t' !e0y' di.trai$t' a$d9or .a!e o a$y property o the ta2payer or the .ati. actio$ o hi. ta2 !iabi!ity a. pro0ided by e2i.ti$g !a+8 Pro0ided' ho+e0er' That +he$ i$ the opi$io$ o the (o-rt the co!!ectio$ by the a ore#e$tio$ed go0er$#e$t age$cie. #ay 6eopardi;e the i$tere.t o the <o0er$#e$t a$d9or the ta2payer the (o-rt at a$y .tage o the proceedi$g #ay .-.pe$d the .aid co!!ectio$ a$d re1-ire the ta2payer either to depo.it the a#o-$t c!ai#ed or to i!e a .-rety bo$d or $ot #ore tha$ do-b!e the a#o-$t +ith the (o-rt. %Sec. 11' Rep. Act No. 112>' a.
a#e$ded by Sec. F' Rep. Act No. F2?2 &

10"

/" W at are t e t ree H:I %o-(itio-s *or t e ;ra-t o* a %&ai, *or re*u-( o* %re(ita)&e wit o&(i-; ta. 9
S3<<ESTE" ANS=ER8 a. The c!ai# i. i!ed +ith the (o##i..io$er o 4$ter$a! Re0e$-e +ithi$ the t+o,year period ro# the date o the pay#e$t o the ta2. b. 4t i. .ho+$ o$ the ret-r$ o the recipie$t that the i$co#e pay#e$t recei0ed +a. dec!ared a. part o the gro.. i$co#eD a$d c. The act o +ithho!di$g i. e.tab!i.hed by a copy o a .tate#e$t d-!y i..-ed by the payee .ho+i$g the a#o-$t paid a$d the a#o-$t o ta2 +ithhe!d there ro#. %Banco /ilipino Savings and Mortgage Ban- v. Court of
Appeals, et al., <. R. No. 1>>6?2' *arch 2@' 200@&

NOTES AN" (O**ENTS8

a. Proo* o* *a%t o* wit o&(i-;" Sec. 10. Claim for ta) credit or refund. I %a& (!ai#. or Ta2 (redit or Re -$d o 4$co#e ta2 ded-cted a$d +ithhe!d o$ i$co#e pay#e$t. .ha!! be gi0e$ d-e co-r.e o$!y +he$ it i. .ho+$ o$ the ret-r$ that the i$co#e pay#e$t recei0ed ha. bee$ dec!ared a. part o the gro.. i$co#e a$d the act o +ithho!di$g i. e.tab!i.hed by a copy o the =ithho!di$g Ta2 State#e$t d-!y i..-ed by the payor to the payee .ho+i$g the a#o-$t paid a$d the a#o-$t o the ta2 +ithhe!d there ro# )))7 %Re0. Reg.. No. 6,?>' a. a#e$ded& The doc-#e$t +hich #ay be accepted a. e0ide$ce o the third co$ditio$' that i.' the act o +ithho!di$g' #-.t e#a$ate ro# the payor it.e! ' a$d $ot #ere!y ro# the payee' a$d #-.t i$dicate the $a#e o the payor' the i$co#e pay#e$t ba.i. o the ta2 +ithhe!d' the a#o-$t o the ta2 +ithhe!d a$d the $at-re o the ta2 paid. %Banco /ilipino Savings and
Mortgage Ban- v. Court of Appeals, et al., <. R. No. 1>>6?2' *arch 2@' 200@&

59

+hich +o-!d trigger the B0,day period' the ta2payer .ho-!d i!e a$ appea!' de.pite the ab.e$ce o a deci.io$. *Commissioners, etc. v. Court of (a)
Appeals, et al., <. R. No. ?261?' *arch 16' 1F?F' -$rep.&

@" W ere t e ta.$a'er is a %or$oratio- t e two 'ear $res%ri$tive $erio( *ro, !(ate o* $a',e-t# *or re*u-( o* i-%o,e ta.es s ou&( )e t e (ate w e- t e %or$oratio- *i&e( its *i-a& a(Aust,e-t retur- $ot o$ the date +he$ the ta2e. +ere paid o$ a
1-arter!y ba.i.. *Philippine Ban- of Communications v. Commissioner of Internal
Revenue, et al., <.R. No. 11202E' Aa$-ary 2?' 1FFF&

4t i. o$!y +he$ the ret-r$' co0eri$g the +ho!e year' i. i!ed that the ta2payer +i!! be ab!e to a.certai$ +hether a ta2 i. .ti!! d-e or re -$d ca$ be c!ai#ed ba.ed o$ the ad6-.ted a$d a-dited ig-re.. *Ban- of the Philippine
Islands v. Commissioner of Internal Revenue, <.R. No. 1EE6>B' A-g-.t 2?' 2001&

:" W at s ou&( )e esta)&is e( )' a ta.$a'er *or t e ;ra-t o* a ta. re*u-( 9 W ' 9
S3<<ESTE" ANS=ER8 A ta2payer $eed. to e.tab!i.h $ot o$!y that the re -$d i. 6-.ti ied -$der the !a+' b-t a!.o the correct a#o-$t that .ho-!d be re -$ded. 4 the !atter re1-i.ite ca$$ot be a.certai$ed +ith partic-!arity' there i. ca-.e to de$y the re -$d' or a!!o+ it o$!y to the e2te$t o the .-# that i. act-a!!y pro0e$ a. d-e. Ta2 re -$d. parta/e o the $at-re o ta2 e2e#ptio$. a$d are th-. co$.tr-ed strictissimi =uris agai$.t the per.o$ c!ai#i$g the e2e#ptio$. The b-rde$ i$ pro0i$g the c!ai# or re -$d $ece..ari!y a!!. o$ the ta2payer. %/ar &ast Ban- (rust and Company, etc., v. Commissioner of Internal Revenue , et
al., <. R. No. 1B?F1F' *ay 2' 2006&

B"
%ases 9

W at is so&utio i-(e)eti as a$$&ie( to ta.

<" W at is T e &e;a& re,e(' u-(er t e NIRC o* 1EEB at t e Au(i%ia& &eve& wit res$e%t to re*u-( or re%over' o* ta. erro-eous&' or i&&e;a&&' %o&&e%te( 9
S3<<ESTE" ANS=ER8 Ci!i$g o a .-it or proceedi$g +ith the (o-rt o Ta2 Appea!. a. be ore the e2piratio$ o t+o %2& year. ro# the date o pay#e$t o the ta2 regard!e.. o a$y .-per0e$i$g ca-.e that #ay ari.e a ter pay#e$t %2$d par.' Sec. 22F' N4R( o 1FF@&' or b. +ithi$ thirty %B0& day. ro# receipt o the de$ia! by the (o##i..io$er o the app!icatio$ or re -$d or credit. %Sec. 11' R.A. No.
112>&

S3<<ESTE" ANS=ER8 3$der the pri$cip!e o solutio inde"iti pro0ided i$ Art. 21>E' (i0i! (ode' 4 .o#ethi$g i. recei0ed +he$ there i. $o right to de#a$d it' a$d it +a. -$d-!y de!i0ered thro-gh #i.ta/e' the ob!igatio$ to ret-r$ it ari.e.. The B4R recei0ed .o#ethi$g +he$ there G+a.I $o right to de#a$d it' a$d th-.' it ha. the ob!igatio$ to ret-r$ it. GState $and Investment Corporation v. Commissioner of Internal Revenue, <. R. No. 1@1F>6' Aa$-ary 1?' 200?citing Citi"an-, !. A. v. Court of Appeals and Commissioner of Internal Revenue' <.R. No. 10@EBE' October 10' 1FF@' 2?0 S(RA E>F' i$ t-r$ citi$g Ramie (e)tiles, Inc. v. Mathay, Sr.' ?F S(RA >?6 %1F@F&I. 4t i. a$ a$cie$t pri$cip!e that $o o$e' $ot e0e$ the .tate' .ha!! e$rich o$e.e! at the e2pe$.e o a$other. 4$deed' .i#p!e 6-.tice re1-ire. the .peedy re -$d o the +ro$g!y he!d ta2e.. %I"id.&

>@" W at are t e reaso-s *or reFuiri-; t e *i&i-; o* aa(,i-istrative a$$&i%atio- *or re*u-( or %re(it wit t e BS3<<ESTE"

C"

>" T e two H/I 'ear $erio( a-( t e t irt' H:0I (a' $erio( s ou&( )e a$$&ie( o- a w i% ever %o,es *irst )asis .
Th-.' i the B0 day. i. +ithi$ the 2 year.' the B0 day. app!ie.' i the 2 year period i. abo-t to !ap.e b-t there i. $o deci.io$ yet by the (o##i..io$er

W ' is it -e%essar' to *i&e a- a(,i-istrative %&ai, *or re*u-( wit t e BIR7 )e*ore *i&i-; a %ase wit t e Court o* Ta. A$$ea&s 9

60

S3<<ESTE" ANS=ER8 Oe.. The ai!-re to ir.t i!e a +ritte$ c!ai# or re -$d or credit i. $ot ata! to a petitio$ or re0ie+ i$0o!0i$g a di.p-ted a..e..#e$t +here a$ a..e..#e$t +a. di.p-ted b-t the prote.t +a.

a. a. To a ord the (o##i..io$er a$ opport-$ity to correct hi. error. or that o .-bordi$ate o icer.. *+onzales v. Court of (a) Appeals, et al., 1E S(RA@F&

b. To $oti y the <o0er$#e$t that .-ch ta2e. ha0e bee$ 1-e.tio$ed a$d the $otice .ho-!d be bor$e i$ #i$d i$ e.ti#ati$g the re0e$-e a0ai!ab!e or e2pe$dit-re..

de$ied by the B-rea- o 4$ter$a! Re0e$-e. To ho!d that the ta2payer ha. $o+ !o.t the right to appea! ro# the r-!i$g o$ the di.p-ted a..e..#e$t a$d re1-ire hi# to i!e a c!ai# or a re -$d o the ta2e. paid a. a co$ditio$ precede$t to hi. right to appea!' +o-!d i$ e ect re1-ire o hi# to go thro-gh a -.e!e.. a$d $eed!e.. cere#o$y that +o-!d o$!y de!ay the di.po.itio$ o the ca.e' or the (o##i..io$er +o-!d certai$!y di.a!!o+ the c!ai# or re -$d i$ the .a#e +ay a. he di.a!!o+ed the prote.t agai$.t the a..e..#e$t. The !a+' .ho-!d $ot be i$terpreted a. to re.-!t i$ ab.-rditie..
*vda. de San Agustin., etc., v. Commissioner of Internal Revenue, <.R. No. 1B?E?>' Septe#ber 10' 2001 citi$g Roman Catholic Arch"ishop of Ce"u v. Collector of Internal Revenue, F SCRA BAH# NOTE8 Re%o-%i&iatio- )etwee-

E" As a ;e-era& ru&e t e *i&i-; o* a- a$$&i%atio- *or re*u-( or %re(it wit t e Bureau o* I-ter-a& Reve-ue is a- a(,i-istrative $re%o-(itio- )e*ore a suit ,a' )e *i&e( wit t e Court o* Ta. A$$ea&s 9
S3<<ESTE" ANS=ER8

a)ove two -u,)ers HC a-( EI. A$ app!icatio$ or re -$d or credit -$der Sec. 22F o the N4R( o 1FF@ i. re1-ired +here the ca.e i!ed be ore the (TA i. a re -$d ca.e' +hich i. $ot pre#i.ed -po$ a di.p-ted a..e..#e$t. There i. $o $eed or a prior app!icatio$ or re -$d or credit' i the re -$d i. #ere!y a co$.e1-e$ce o the re.o!-tio$ o the B4R:. de$ia! o a prote.ted a..e..#e$t.

W o %ou&( a$$&' *or a ta. re*u-( or %re(it 9

10" W o %ou&( a$$&' *or a re*u-( or %re(it 9

S3<<ESTE" ANS=ER8 The per.o$ +ho paid the ta2 #ay app!y or a re -$d or credit.

A +ithho!di$g ta2 age$t #ay a!.o app!y or a re -$d. 4$ a .e$.e' he i. a!.o a ta2payer beca-.e the ta2 #ay be co!!ected ro# hi# i he doe. $ot +ithho!d.

61

citi$g Philippine Ban- of Communications v. Commissioner of Internal Revenue' B61 Phi!. F16 %1FFF&I

11" W at is t e -ature o* t e ta.$a'er8s re,e(' o* eit er to asG *or a re*u-( o* e.%ess ta. $a',e-ts or to a$$&' t e sa,e i- $a',e-t o* su%%ee(i-; ta.a)&e $erio(s8 ta.es 9
S3<<ESTE" ANS=ER8 Sec. 6F o the 1F@@ N4R( %$o+ Sec. @6 o the N4R( o 1FF@& pro0ide. that a$y e2ce.. o the tota! 1-arter!y pay#e$t. o0er the act-a! i$co#e ta2 co#p-ted i$ the ad6-.t#e$t or i$a! corporate i$co#e ta2 ret-r$' .ha!! either %a& be re -$ded to the corporatio$' or %b& #ay be credited agai$.t the e.ti#ated 1-arter!y i$co#e ta2 !iabi!itie. or the 1-arter. o the .-cceedi$g ta2ab!e year. To ea.e the ad#i$i.tratio$ o ta2 co!!ectio$' the.e re#edie. are i$ the a!ter$ati0e a$d the choice o o$e prec!-de. the other. Si$ce the Ba$/ ha. cho.e$ the ta2 credit approach it ca$$ot a$y#ore a0ai! o the ta2 re -$d. *Philippine Ban- of Communications v. Commissioner of Internal Revenue, et al., <.R. No. 11202E' Aa$-ary 2?' 1FFF& NOTES AN" (O**ENTS8 a. T e % oi%e7 is ;ive- to t e ta.$a'er7 w et er to %&ai, *or re*u-( u-(er Se%" B@ or ave its e.%ess ta2e. app!ied a. ta2 credit or the .-cceedi$g ta2ab!e year' .-ch e!ectio$ i. $ot i$a!. Prior 0eri icatio$ a$d appro0a! by the (o##i..io$er o 4$ter$a! Re0e$-e i. re1-ired. The a0ai!#e$t o the re#edy o ta2 credit i. $ot ab.o!-te a$d #a$datory. 4t doe. $ot co$ er a$ ab.o!-te right o$ the part o the ta2payer to a0ai! o the ta2 credit .che#e i it .o choo.e.. Neither doe. it i#po.e a d-ty o$ the part o the go0er$#e$t to .it bac/ a$d a!!o+ a$ i#porta$t acet o ta2 co!!ectio$ to be at the .o!e co$tro! a$d di.cretio$ o the ta2payer. %Paseo Realty . %evelopment Corporation v. Court of Appeals, et al., <. R. No. 11F2?6' October 1B' 200E&

Thi. i. /$o+$ a. the irre0ocabi!ity r-!e a$d i. e#bodied i$ the !a.t .e$te$ce o Sectio$ @6 o the Ta2 (ode. The phra.e .-ch optio$ .ha!! be co$.idered irre0ocab!e or that ta2ab!e period #ea$. that the optio$ to carry o0er the e2ce.. ta2 credit. o a partic-!ar ta2ab!e year ca$ $o !o$ger be re0o/ed. The r-!e pre0e$t. a ta2payer ro# c!ai#i$g t+ice the e2ce.. 1-arter!y ta2e. paid8 %1& a. a-to#atic credit agai$.t ta2e. or the ta2ab!e 1-arter. o the .-cceedi$g year. or +hich $o ta2 credit certi icate ha. bee$ i..-ed a$d %2& a. a ta2 credit either or +hich a ta2 credit certi icate +i!! be i..-ed or +hich +i!! be c!ai#ed or ca.h re -$d. %Systra Philippines,
Inc., supra citi$g "e )eo$' 7ector' T7E NAT4ONA) 4NTERNA) REVEN3E (O"E' Se0e$th Editio$' 2000' p. EB0&

1:" I- t e 'ear /000 S'stra (erive( e.%ess ta. %re(its a-( e.er%ise( t e o$tio- to %arr' t e, over as ta. %re(its *or t e -e.t ta.a)&e 'ear" However7 t e ta. (ue *or t e -e.t ta.a)&e 'ear is &ower t a- e.%ess ta. %re(its" It -ow a$$&ies *or a re*u-( o* t e u-a$$&ie( ta. %re(its" =a' its re*u-( )e ;ra-te( 9 I* t e re*u-( is (e-ie(7 (oes S'stra &ose t e u-a$$&ie( ta. %re(its 9 E.$&ai- )rie*&' 'our a-swer"
S3<<ESTE" ANS=ER8 Sy.tra:. c!ai# or re -$d .ho-!d be de$ied. O$ce the carry o0er optio$ +a. #ade' act-a!!y or co$.tr-cti0e!y' it beca#e ore0er irre0ocab!e regard!e.. o +hether the e2ce.. ta2 credit. +ere act-a!!y or -!!y -ti!i;ed 3$der Sectio$ @6 o the Ta2 (ode' a c!ai# or re -$d o .-ch e2ce.. credit. ca$ $o !o$ger be #ade. The e2ce.. credit. +i!! o$!y be app!ied agai$.t i$co#e ta2 d-e or the ta2ab!e 1-arter. o the .-cceedi$g ta2ab!e year.. "e.pite the de$ia! o it. c!ai# or re -$d' Sy.tra doe. $ot !o.e the -$app!ied ta2 credit.. The a#o-$t +i!! $ot be or eited i$ a0or o the go0er$#e$t b-t +i!! re#ai$ i$ the ta2payer:. acco-$t. Petitio$er #ay c!ai# a$d carry it o0er i$ the .-cceedi$g ta2ab!e year.' creditab!e agai$.t -t-re i$co#e ta2 !iabi!itie. -$ti! -!!y -ti!i;ed. %Systra Philippines, Inc., v.
Commissioner of Internal Revenue, <. R. No. 1@62F0' Septe#ber 21' 200@ citi$g Philam Asset Management, Inc. v. Commissioner of Internal Revenue ' <.R. No.. 1>66B@916200E' 1E "ece#ber 200>' E@@ S(RA @61&

1/" W at is t e !irrevo%a)i&it' ru&e# i- %&ai,s *or re*u-( a-( w at is t e ratio-a&e )e i-( t is 9

S3<<ESTE" ANS=ER8 A corporatio$ e$tit!ed to a ta2 credit or re -$d o the e2ce.. e.ti#ated 1-arter!y i$co#e ta2e. paid ha. t+o optio$.8 %1& to carry o0er the e2ce.. credit or %2& to app!y or the i..-a$ce o a ta2 credit certi icate or to c!ai# a ca.h re -$d. 4 the optio$ to carry o0er the e2ce.. credit i. e2erci.ed' the .a#e .ha!! be irre0ocab!e or that ta2ab!e period. 4$ e2erci.i$g it. optio$' the corporatio$ #-.t .ig$i y i$ it. a$$-a! corporate ad6-.t#e$t ret-r$ %by #ar/i$g the optio$ bo2 pro0ided i$ the B4R or#& it. i$te$tio$ either to carry o0er the e2ce.. credit or to c!ai# a re -$d. To aci!itate ta2 co!!ectio$' the.e re#edie. are i$ the a!ter$ati0e a$d the choice o o$e prec!-de. the other. GSystra Philippines, Inc., v.
Commissioner of Internal Revenue, <. R. No. 1@62F0' Septe#ber 21' 200@

Su$$osi-; i- t e a)ove $ro)&e, t at S'stra $er,a-e-t %ease( o$eratio-s7 w at a$$e-s to t e u-a$$&ie( %re(its 9 S3<<ESTE" ANS=ER8 =here' the corporatio$ per#a$e$t!y cea.e. it. operatio$. be ore -!! -ti!i;atio$ o the ta2 credit. it opted to carry o0er' it #ay the$ be a!!o+ed to c!ai# the re -$d o the re#ai$i$g ta2 credit.. 4$ .-ch a ca.e' the re#ai$i$g ta2 credit. ca$ $o !o$ger be carried o0er a$d the irre0ocabi!ity r-!e cea.e. to app!y. Cessante ratione legis, cessat ipse le). %Coot$ote $o. 2B' Systra Philippines, Inc., v.

Commissioner of Internal Revenue, <. R. No. 1@62F0' Septe#ber 21' 200@& NOTES AN" (O**ENTS8 The ho!di$g i$ State $and Investment Corporation v. Commissioner of Internal Revenue, <. R. No. 1@1F>6' Aa$-ary 1?' 200? that the ta2payer i. e$tit!ed to a re -$d beca-.e d-ri$g the .-cceedi$g year there +a. $o ta2 d-e agai$.t +hich the e2ce.. ta2 credit. #ay be app!ied i. $ot doctri$a!. Thi. i. .o beca-.e it i$terpreted the pro0i.io$. o the$ Sec. 6F o the N4R(' +hich did $ot pro0ide or the irre0ocabi!ity r-!e $o+ co$tai$ed i$ Sec. @6 o the N4R( o 1FF@.

62

1@" +is%uss t e (i**ere-%e )etwee- ta. re*u-( a-( ta.

%re(it".
S3<<ESTE" ANS=ER8 There are -$#i.ta/ab!e or#a! a$d practica! di ere$ce. bet+ee$ the t+o #ode.. Cor#a!!y' a ta2 re -$d re1-ire. a phy.ica! ret-r$ o the .-# erro$eo-.!y paid by the ta2payer' +hi!e a ta2 credit i$0o!0e. the app!icatio$ o the rei#b-r.ab!e a#o-$t agai$.t a$y .-# that #ay be d-e a$d co!!ectib!e ro# the ta2payer. O$ the practica! .ide' the ta2payer to +ho# the ta2 i. re -$ded +o-!d ha0e the optio$' a#o$g other.' to i$0e.t or pro it the ret-r$ed .-#' a$ optio$ $ot pro2i#ate!y a0ai!ab!e i the ta2payer choo.e. i$.tead to recei0e a ta2 credit. %Commissioner of Customs v. Philippine Phosphate
/ertilizer Corporation, <. R. No. 1EEEE0' Septe#ber 1' 200E&

1<" A si,u&ta-eous *i&i-; o* t e a$$&i%atio- wit t e BIR *or re*u-(?%re(it a-( t e i-stitutio- o* t e %ourt suit wit t e CTA is a&&owe(. There i. $o $eed to +ait or a B4R de$ia!. REASONS8
a. The po.iti0e re1-ire#e$t o Sectio$ 2B0 N4R( %$o+ Sec. 22F' N4R( o 1FF@&D b. The doctri$e that de!ay o the (o##i..io$er i$ re$deri$g deci.io$ doe. $ot e2te$d the pere#ptory period i2ed by the .tat-teD c. The !a+ i2ed the .a#e period t+o year. or i!i$g a c!ai# or re -$d +ith the (o##i..io$er -$der Sec. 20E' par. B' N4R( %$o+ Sec. 20E G(I' N4R( o 1FF@&' a$d or i!i$g .-it i$ co-rt -$der Sec. 2B0' N4R( %$o+ Sec. 22F' N4R( o 1FF@&' -$!i/e i$ prote.t. o a..e..#e$t. -$der Sec. 22F %$o+ Sec. 22?' N4R( o 1FF@&' +hich i2ed the period %thirty day. ro# receipt o deci.io$& or appea!i$g to the co-rt' th-. c!ear!y i#p!yi$g that the prior deci.io$ o the (o##i..io$er i. $ece..ary to ta/e cog$i;a$ce o the ca.e. *Commissioner of Internal Revenue v. Ban- of Philippine Islands, etc. et al.'
(A,<.R. SP No. BE102' Septe#ber F' 1FFED +i""s v. Collector of Internal Revenue, et al., 10@ Phi!' 2BB; ,ohnston $um"er Co. v. C(A, 101 Phi!. 1>1&

NOTES AN" (O**ENTS8 4t #ay be that there i. $o e..e$tia! di ere$ce bet+ee$ a ta2 re -$d a$d a ta2 credit .i$ce both are #o0e. o reco0eri$g ta2e. erro$eo-.!y or i!!ega!!y paid to the go0er$#e$t.
%Commissioner of Customs v. Philippine Phosphate /ertilizer Corporation, <. R. No. 1EEEE0' Septe#ber 1' 200E&

1B" A )a-G-trustee o* e,$&o'ee trusts *i&e( aa$$&i%atio- *or t e re*u-( o* ta.es wit e&( o- t e i-terest i-%o,es o* t e i-vest,e-ts ,a(e o* t e *u-(s o* t e e,$&o'ees8 trusts" I-stea( o* $rese-ti-; se$arate a%%ou-ts *or i-terest i-%o,es ,a(e o* t ese i-vest,e-ts7 t e )a-Gtrustee i-stea( $rese-te( wit-ess to esta)&is t at it wou&( -e.t to i,$ossi)&e to si-;&e out t e s$e%i*i% tra-sa%tio-s i-vo&vi-; t e e,$&o'ees8 trust *u-(s *ro, t e tota&it' o* a&& i-terest i-%o,e *ro, its tota& i-vest,e-ts" O- t e a)ove )asis wi&& t e a$$&i%atio- *or re*u-( $ros$er 9
S3<<ESTE" ANS=ER8 No. The app!icatio$ or re -$d +i!! $ot pro.per. The ba$/,tr-.tee $eed. to e.tab!i.h $ot o$!y that the re -$d i. 6-.ti ied -$der the !a+ %+hich i. .o beca-.e i$co#e. o e#p!oyee.: tr-.t. are ta2 e2e#pt&' b-t a!.o the correct a#o-$t that .ho-!d be re -$ded. Ta2 re -$d. parta/e o the $at-re o ta2 e2e#ptio$. a$d are th-. co$.tr-ed strictissimi =uris agai$.t the per.o$ or e$tity c!ai#i$g the e2e#ptio$. The b-rde$ i$ pro0i$g the a#o-$t to be re -$ded $ece..ari!y a!!. o$ the ba$/,tr-.tee' a$d there i. a$ appare$t ai!-re to do .o. A $ece..ary co$.e1-e$ce o the .pecia! e2e#ptio$ e$6oyed a!o$e by e#p!oyee.: tr-.t. +o-!d be a $ece..ary .egregatio$ i$ the acco-$ti$g o .-ch i$co#e' i$tere.t or other+i.e' ear$ed ro# tho.e tr-.t. ro# that ear$ed by the other c!ie$t. o the ba$/,tr-.tee. %/ar &ast Ban- and (rust Company, etc., v. Commissioner, etc., et al., <.R. No. 1B?F1F' *ay 2' 2006& The a#o-$t. that are the e2e#pt ear$i$g. o the e#p!oyee:.

1>" T e ;ra-t o* a re*u-( is *ou-(e( o- t e assu,$tiot at t e ta. retur- is va&i(7 i.e. that the act. .tated therei$ are tr-e
a$d correct. %Commissioner of Internal Revenue v. Court of (a) Appeals, <. R. No. 106611' A-!y 21' 1FFE' 2BE S(RA BE?& =itho-t the ta2 ret-r$ it +o-!d be 0irt-a!!y i#po..ib!e to deter#i$e +hether the proper ta2e. ha0e bee$ a..e..ed a$d paid. A ter a!!' it i. a2io#atic that a c!ai#a$t ha. the b-rde$ o proo to e.tab!i.h the act-a! ba.i. o hi. or her c!ai# or ta2 credit or re -$d. Ta2 re -$d.' !i/e ta2 e2e#ptio$.' are co$.tr-ed .trict!y agai$.t the ta2payer. %Paseo Realty . %evelopment Corporation v. Court of
Appeals, et al., <. R. No. 11F2?6' October 1B' 200E&

7o+e0er' i$ BPI0/amily Savings Ban- v. Court of Appeals' B?6 Phi!. @1FD B26 S(RA 6E1 %2000&' re -$d +a. gra$ted' de.pite the ai!-re to pre.e$t the ta2 ret-r$' beca-.e other e0ide$ce +a. pre.e$ted to pro0e that the o0erpaid ta2e. +ere $ot app!ied. %I"id.&

tr-.t ha. $ot bee$ .ho+$ a. they ha0e bee$ co##i$g!ed +ith the i$tere.t i$co#e o the other c!ie$t. o the ba$/,tr-.tee.

63

1C" CTA Cir%u&ar No" 1-E> %&ear&' reFuires t at $ oto%o$ies o* t e re%ei$ts or i-voi%es ,ust )e $re-,arGe( a-( su),itte( to t e CTA to veri*' t e %orre%t-ess o* t e su,,ar' &isti-; a-( t e CPA %erti*i%atio-. (TA (irc-!ar No. 1,
F>' i..-ed o$ 2> Aa$-ary 1FF>' read.8 1. The party +ho de.ire. to i$trod-ce a. e0ide$ce .-ch 0o!-#i$o-. doc-#e$t. #-.t pre.e$t8 %a& S-##ary co$tai$i$g the tota! a#o-$t9. o the ta2 acco-$t or ta2 paid or the period i$0o!0ed a$d a chro$o!ogica! or $-#erica! !i.t o the $-#ber.' date. a$d a#o-$t. co0ered by the i$0oice. or receipt.D a$d %b& a (erti icatio$ o a$ i$depe$de$t (erti ied P-b!ic Acco-$ta$t atte.ti$g to the correct$e.. o the co$te$t. o the .-##ary a ter #a/i$g a$ e2a#i$atio$ a$d e0a!-atio$ o the 0o!-#i$o-. receipt. a$d i$0oice.. S-ch .-##ary a$d certi icatio$ #-.t proper!y be ide$ti ied by a co#pete$t +it$e.. ro# the acco-$ti$g ir#. 2. The #ethod o i$di0id-a! pre.e$tatio$ o each a$d e0ery receipt or i$0oice or other doc-#e$t. or #ar/i$g' ide$ti icatio$ a$d co#pari.o$ +ith the origi$a!. thereo $eed $ot be do$e be ore the (o-rt or the (o##i..io$er a$y#ore a ter the i$trod-ctio$ o the .-##ary a$d (PA certi icatio$. 4t i. e$o-gh that t e re%ei$ts7 i-voi%es a-( ot er (o%u,e-ts %overi-; t e sai( a%%ou-ts or $a',e-ts ,ust )e $re,arGe( )' t e $art' %o-%er-e( a-( su),itte( to t e Court i- or(er to )e ,a(e a%%essi)&e to t e a(verse $art' w e-ever e?s e (esires to % e%G a-( veri*' t e %orre%t-ess o* t e su,,ar' a-( CPA %erti*i%atio-" 7o+e0er' the origi$a!. o the .aid receipt.' i$0oice. or doc-#e$t. .ho-!d be ready or 0eri icatio$ a$d co#pari.o$ i$ ca.e do-bt o$ the a-the$ticity o the partic-!ar doc-#e$t. pre.e$ted i. rai.ed d-ri$g the heari$g o the ca.e. %E#pha.i. .-pp!ied&

re*&e%ti-; a re*u-(a)&e a,ou-t o* P1017CEB7B<17 )ut o-&' PBB7E:17C1/ was a$$&ie( as ta. %re(it *or t e su%%ee(i-; ta.a)&e 'ear 1ECC" A%ti-; o- a 'ear&' routi-ar' Letter o* Aut orit' No" 001C0@< NA (ate( 5u-e /B7 1ECC issue( )' $etitio-er7 (ire%ti-; t e i-vesti;atio- o* ta. &ia)i&ities o* res$o-(e-t *or ta.a)&e 'ear 1ECB7 a- i-vesti;atio- was %o-(u%te( )' Reve-ue O**i%er Fre(eri%G Ca$ita- w i% s owe( t at res$o-(e-t was &ia)&e *or !1" (e*i%ie-%' i-%o,e ta. i- t e a,ou-t o* P/7:<07E0/">/L a-( /" (e*i%ie-%' *ra-% ise ta. it e a,ou-t o* P/7C:C7::>"C<"# O- A$ri& 1B7 1ECE7 res$o-(e-t *i&e( a- a,e-(e( *i-a& %or$orate I-%o,e Ta. Retur- e-(i-; +e%e,)er :17 1ECC re*&e%ti-; a re*u-(a)&e a,ou-t o* P10B7@<E7B/E" Res$o-(e-t t us *i&e( o- =ar% :07 1EE0 a &etter-%&ai, *or re*u-( or %re(it i- t e a,ou-t o* P10B7@<E7B/E re$rese-ti-; over$ai( i-%o,e ta.es *or t e 'ears 1ECB a-( 1ECC" Petitio-er -ot avi-; a%te( o- its reFuest7 res$o-(e-t *i&e( o- A$ri& @7 1EE0 a Au(i%ia& %&ai, *or re*u-( or %re(it wit t e Court o* Ta. A$$ea&s" It is ;at ere( t at res$o-(e-t $ai( t e (e*i%ie-%' *ra-% ise ta. i- t e a,ou-t o* P/7C:C7::>"C<" It $roteste( t e $a',e-t o* t e a&&e;e( (e*i%ie-%' i-%o,e ta. a-( %&ai,e( as a- a&ter-ative re,e(' t e (e(u%tio- t ereo* *ro, its %&ai, *or re*u-( or %re(it" T e Court o* Ta. A$$ea&s ;ra-te( t e P10B7@<E7B/E %&ai, *or re*u-(7 or i- t e a&ter-ative *or t e BIR to issue a ta. %re(it" Is t e Court o* Ta. A$$ea&s %orre%t 9
S3<<ESTE" ANS=ER8 Oe.. Sectio$ 6F o the Natio$a! 4$ter$a! Re0e$-e (ode o 1F?6' $o+ Sec. @6 pro0ide.' i the .-# o the 1-arter!y ta2 pay#e$t. #ade d-ri$g a ta2ab!e year i. $ot e1-a! to the tota! ta2 d-e o$ the e$tire ta2ab!e i$co#e o that year a. .ho+$ i$ it. i$a! ad6-.t#e$t ret-r$' the corporatio$ ha. the optio$ to either8 %a& pay the e2ce.. ta2 .ti!! d-e' or %b& be re -$ded the e2ce.. a#o-$t paid. The ret-r$. .-b#itted are #ere!y pre,a-dited +hich co$.i.t #ai$!y o chec/i$g #athe#atica! acc-racy o the ig-re. i$ the ret-r$. A ter .-ch chec/i$g' the p-rpo.e o +hich bei$g to i$.-re pro#pt actio$ o$ corporate a$$-a! i$co#e ta2 ret-r$. .ho+i$g re -$dab!e a#o-$t. ari.i$g ro# o0erpaid 1-arter!y i$co#e ta2e.' %Re0e$-e *e#ora$d-# Order No. B2,@6 dated A-$e 11' 1F@6& the re -$d or ta2 credit i. gra$ted. % Commissioner of

1E" =a-i&a E&e%tri% Co,$a-' a ;ra-tee o* a &e;is&ative *ra-% ise u-(er A%t No" <C<7 as a,e-(e( )' Re$u)&i% A%t No" <1>E a-( Presi(e-tia& +e%ree No" >>171P:Q a( )ee- $a'i-; a /J *ra-% ise ta. )ase( o- its ;ross re%ei$ts7 i- &ieu o* a&& ot er ta.es a-( assess,e-ts o* w atever -ature" U$o- t e e**e%tivit' o* E.e%utive Or(er No" B/ o- Fe)ruar' 107 1ECB7 owever7 res$o-(e-t )e%a,e su)Ae%t to t e $a',e-t o* re;u&ar %or$orate i-%o,e ta." For t e &ast Fuarter e-(i-; +e%e,)er :17 1ECB7 res$o-(e-t *i&e( o- A$ri& 1>7 1ECC its te-tative i-%o,e ta.
1

Internal Revenue v. Manila &lectric Company, <. R. No. 121666' October 10' 200@&

64

TARIFF AN+ CUSTO=S LAWS

OR3ANIMATION AN+ FUNCTIONS OF THE BUREAU OF INTERNAL REVENUE TARIFF AN+ CUSTO=S CO+E
W e- (oes i,$ortatio- )e;i-7 a-( w ' is it i,$orta-t to G-ow w et er i,$ortatio- as a&rea(' )e;u- or -ot 9
S3<<ESTE" ANS=ER8 4#portatio$ begi$. +he$ the co$0eyi$g 0e..e! or aircra t e$ter. the 6-ri.dictio$ o the Phi!ippi$e. +ith i$te$tio$ to -$!ade therei$. %Sec. 1202' T((P& The 6-ri.dictio$ o the B-rea- o (-.to#. to e$ orce the pro0i.io$. o the T((P i$c!-di$g .ei;-re a$d or eit-re a!.o begi$. ro# the begi$$i$g o i#portatio$. Th-.' the B-rea- o (-.to#. obtai$. 6-ri.dictio$ o0er i#ported artic!e. o$!y a ter i#portatio$ ha. beg-$.

<" Custo,s (uties (e*i-e(" (-.to#. d-tie. i. the $a#e gi0e$ to ta2e. o$ the i#portatio$ a$d e2portatio$ o co##oditie.' the tari or ta2 a..e..ed -po$ #ercha$di.e i#ported ro#' or e2ported to' a oreig$ co-$try. %!estle Phils. v. Court of Appeals, et al., <.R. No. 1BE11E' A-!y 6' 2001& >" S$e%ia& %usto,s (uties are a((itio-a& i,$ort (uties i,$ose( o- s$e%i*i% Gi-(s o* i,$orte( arti%&es u-(er %ertai%o-(itio-s. The .pecia! c-.to#. d-tie. -$der the Tari a$d (-.to#.
(ode %T((P& are the a$ti,d-#pi$g d-ty' the co-$ter0ai!i$g d-ty' the di.cri#i$atory d-ty' a$d the #ar/i$g d-ty' a$d -$der the Sa eg-ard *ea.-re. Act %S*A& additio$a! tari . a. .a eg-ard #ea.-re..

1"

@" T e s$e%ia& %usto,s (uties are i,$ose( *or t e $rote%tio- o* %o-su,ers a-( ,a-u*a%turers7 as we&& as P i&i$$i-e $ro(u%ts"

B" +u,$i-; (ut' is a- a((itio-a& s$e%ia& (ut' a,ou-ti-; to t e (i**ere-%e )etwee- t e e.$ort $ri%e a-( t e -or,a& va&ue o* su% $ro(u%t7 %o,,o(it' or arti%&e %Sec. B01 %.&
%1&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFF.&

W e- is i,$ortatio- (ee,e( ter,i-ate( a-( w ' is it i,$orta-t to G-ow w et er i,$ortatio- as a&rea(' e-(e(9
S3<<ESTE" ANS=ER8 4#portatio$ i. dee#ed ter#i$ated -po$ pay#e$t o the d-tie.' ta2e. a$d other charge. d-e -po$ the age$cie.' or .ec-red to be paid' at the port o e$try a$d the !ega! per#it or +ithdra+a! .ha!! ha0e bee$ gra$ted. 4$ ca.e the artic!e. are ree o d-tie.' ta2e. a$d other charge.' -$ti! they ha0e !ega!!y !e t the 6-ri.dictio$ o the c-.to#.. %Sec. 1202' T((P& The B-rea- o (-.to#. !o.e. 6-ri.dictio$ to e$ orce the T((P a$d to #a/e .ei;-re. a$d or eit-re. a ter i#portatio$ i. dee#ed ter#i$ated.

/"

i#po.ed o$ the i#portatio$ o a prod-ct' co##odity or artic!e o co##erce i$to the Phi!ippi$e. at !e.. tha$ it. $or#a! 0a!-e +he$ de.ti$ed or do#e.tic co$.-#ptio$ i$ the e2porti$g co-$try +hich i. ca-.i$g or i. threate$i$g to ca-.e #ateria! i$6-ry to a do#e.tic i$d-.try' or #ateria!!y retardi$g the e.tab!i.h#e$t o a do#e.tic i$d-.try prod-ci$g the !i/e prod-ct. GSec. B01 %.& %>&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,
"-#pi$g Act o 1FFFI

C" W e- is t e a-ti-(u,$i-; (ut' i,$ose( 9

S3<<ESTE" ANS=ER8 The a$ti,d-#pi$g d-ty i. i#po.ed a. =here a prod-ct' co##odity or artic!e o co##erce i. e2ported i$to the Phi!ippi$e. at a price !e.. tha$ it. $or#a! 0a!-e +he$ de.ti$ed or do#e.tic co$.-#ptio$ i$ the e2porti$g co-$try' b. a$d .-ch e2portatio$ i. ca-.i$g or i. threate$i$g to ca-.e #ateria! i$6-ry to a do#e.tic i$d-.try' or #ateria!!y retard. the e.tab!i.h#e$t o a do#e.tic i$d-.try prod-ci$g the !i/e prod-ct. GSec. B01
%a&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFFI

:" T e *&e.i)&e tari** %&ause is a $rovisio- i- t e Tari**

a-( Custo,s Co(e' +hich i#p!e#e$t. the co$.tit-tio$a!!y de!egated
po+er to the (o$gre.. to -rther de!egate to the Pre.ide$t o the Phi!ippi$e.' i$ the i$tere.t o $atio$a! eco$o#y' ge$era! +e! are a$d9or $atio$a! .ec-rity -po$ reco##e$datio$ o the NE"A %a& to i$crea.e' red-ce or re#o0e e2i.ti$g protecti0e rate. o i#port d-ty' pro0ided that' the i$crea.e .ho-!d $ot be higher tha$ 100H ad 0a!ore#D %b& to e.tab!i.h i#port 1-ota or to ba$ i#port. o a$y co##odity' a$d %c& to i#po.e additio$a! d-ty o$ a!! i#port. $ot e2ceedi$g 10H ad 0a!ore#' a#o$g other..

E" Nor,a& va&ue *or $ur$oses o* i,$osi-; t e a-ti(u,$i-; (ut' i. the co#parab!e price at the date o .a!e o !i/e prod-ct'
co##odity' or artic!e i$ the ordi$ary co-r.e o trade +he$ de.ti$ed or

co$.-#ptio$ i$ the co-$try o e2port. GSec. B01 %.& %B &' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFFI

65

10" T e i,$osi-; aut orit' *or t e a-ti-(u,$i-; (ut' is t e Se%retar' o* Tra(e a-( I-(ustr' i- t e %ase o* -o-a;ri%u&tura& $ro(u%t7 %o,,o(it'7 or arti%&e or t e Se%retar' o* A;ri%u&ture7 i- t e %ase o* a;ri%u&tura& $ro(u%t7 %o,,o(it' or arti%&e7 a ter or#a! i$0e.tigatio$ a$d a ir#ati0e i$di$g o the Tari
(o##i..io$. GSec. B01 %a&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,
"-#pi$g Act o 1FFFI

artic!e ha. ca-.ed or threate$. to ca-.e #ateria! i$6-ry to a do#e.tic i$d-.try or ha. #ateria!!y retarded the gro+th or pre0e$t. the e.tab!i.h#e$t o a do#e.tic i$d-.try. %Sec. B02' T((P a. a#e$ded by Sectio$ 1' R.A. No. ?@>1&

1>" T e i,$osi-; aut orit' *or t e %ou-tervai&i-; (uties is t e Se%retar' o* Tra(e a-( I-(ustr' i- t e %ase o* -o-a;ri%u&tura& $ro(u%t7 %o,,o(it'7 or arti%&e or t e Se%retar' o* A;ri%u&ture7 i- t e %ase o* a;ri%u&tura& $ro(u%t7 %o,,o(it' or arti%&e7 a ter or#a! i$0e.tigatio$ a$d a ir#ati0e i$di$g o the Tari
(o##i..io$. E0e$ +he$ a!! the re1-ire#e$t. or the i#po.itio$ ha0e bee$ -! i!!ed' the deci.io$ o$ +hether or $ot to i#po.e a de i$iti0e a$ti,d-#pi$g d-ty re#ai$. the prerogati0e o the Tari (o##i..io$. % Sec. B01 %a&' T((' a.
a#e$ded by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFF&

11" Eve- w e- a&& t e reFuire,e-ts *or t e i,$ositioave )ee- *u&*i&&e(7 t e (e%isio- o- w et er or -ot to i,$ose a (e*i-itive a-ti-(u,$i-; (ut' re,ai-s t e $rero;ative o* t e Tari** Co,,issio-. GSec. B01 %a&' T((' a. a#e$ded by Rep. Act No. ?@>2'
1FFFI Th-.' the cabi$et .ecretarie. co-!d $ot co$tra0e$e the reco##e$datio$ o the Tari (o##i..io$. They co-!d $ot i#po.e the a$ti,d-#pi$g d-ty or a$y .pecia! c-.to#. d-ty +itho-t the a0orab!e reco##e$datio$ o the Tari (o##i..io$. A$ti,"-#pi$g Act o

1@" T e %ou-tervai&i-; (ut' is eFuiva&e-t to t e va&ue o* t e s$e%i*i% su)si('"

1/" I- t e (eter,i-atio- o* w et er to i,$ose t e a-ti(u,$i-; (ut'7 t e Tari** Co,,issio-7 ,a' %o-si(er a,o-; ot ers7 t e e**e%t o* i,$osi-; a- a-ti-(u,$i-; (ut' o- t e we&*are o* t e %o-su,ers a-(?or t e ;e-era& $u)&i%7 a-( ot er re&ate( &o%a& i-(ustries" %Sec. B01 %a&' T((' a. a#e$ded by Rep. Act No.
?@>2' A$ti,"-#pi$g Act o 1FFF&

1B" =arGi-; (uties are the additio$a! c-.to#. d-tie. i#po.ed o$ oreig$ artic!e. %or it. co$tai$er. i the artic!e it.e! ca$$ot be #ar/ed&' $ot #ar/ed i$ a$y o icia! !a$g-age i$ the Phi!ippi$e.' i$ a co$.pic-o-. p!ace a. !egib!y' i$de!ib!y a$d per#a$e$t!y i$ .-ch #a$$er a. to i$dicate to a$ -!ti#ate p-rcha.er i$ the Phi!ippi$e. the $a#e o the co-$try o origi$.
1C" T e Co,,issio-er o* Custo,s i,$oses t e ,arGi-; (ut'" 1E" T e ,arGi-; (ut' is eFuiva&e-t to *ive $er%e-t H>JI a( va&ore,"

1:" T e a,ou-t o* a-ti-(u,$i-; (ut' t at ,a' )e i,$ose( is t e (i**ere-%e )etwee- t e e.$ort $ri%e a-( t e -or,a& va&ue o* su% $ro(u%t7 %o,,o(it' or arti%&e" %Sec. B01 %.&
%1&' T((' a. a#e$ded by Rep. Act No. ?@>2' A$ti,"-#pi$g Act o 1FFF&

The a$ti,d-#pi$g d-ty .ha!! be e1-a! to the #argi$ o d-#pi$g o$ .-ch prod-ct' co##odity or artic!e therea ter i#ported to the Phi!ippi$e. -$der .i#i!ar circ-#.ta$ce.' i$ additio$ to ordi$ary d-tie.' ta2e. a$d charge. i#po.ed by !a+ o$ the i#ported prod-ct' co##odity or artic!e.

1<" W at are %ou-tervai&i-; (uties a-( w e- are t e' i,$ose( 9

S3<<ESTE" ANS=ER8 (o-$ter0ai!i$g d-tie. are additio$a! c-.to#. d-tie. i#po.ed o$ a$y prod-ct' co##odity or artic!e o co##erce +hich i. gra$ted direct!y or i$direct!y by the go0er$#e$t i$ the co-$try o origi$ or e2portatio$' a$y /i$d or or# o .peci ic .-b.idy -po$ the prod-ctio$' #a$- act-re or e2portatio$ o .-ch prod-ct co##odity or artic!e' a$d the i#portatio$ o .-ch .-b.idi;ed prod-ct' co##odity' or

/0" A (is%ri,i-ator' (ut' i. a $e+ a$d additio$a! c-.to#. d-ty i#po.ed -po$ artic!e. +ho!!y or i$ part the gro+th or prod-ct o ' or i#ported i$ a 0e..e!' o a$y oreig$ co-$try +hich i#po.e.' direct!y or i$direct!y' -po$ the di.po.itio$ or tra$.portatio$ i$ tra$.it thro-gh or re, e2portatio$ ro# .-ch co-$try o a$y artic!e +ho!!y or i$ part the gro+th or prod-ct o the Phi!ippi$e.' a$y -$rea.o$ab!e charge' e2actio$' reg-!atio$ or !i#itatio$ +hich i. $ot e1-a!!y e$ orced -po$ !i/e artic!e. o e0ery oreig$ co-$try' or di.cri#i$ate. agai$.t the co##erce o the Phi!ippi$e.' direct!y or i$direct!y' by !a+ or ad#i$i.trati0e reg-!atio$ or practice' by or i$ re.pect to a$y c-.to#.' to$$age' or port d-ty' ee' charge' e2actio$' c!a..i icatio$' reg-!atio$' co$ditio$' re.trictio$ or prohibitio$' i$ .-ch #a$$er a. to p!ace

the co##erce o the Phi!ippi$e. at a di.ad0a$tage co#pared +ith the co##erce o a$y oreig$ co-$try.

66

/1" T e Presi(e-t o* t e P i&i$$i-es i,$oses t e (is%ri,i-ator' (uties"

a. b. c. d. e.

Tra$.actio$ 0a!-e o ide$tica! good. Tra$.actio$ 0a!-e o .i#i!ar good. "ed-cti0e #ethod (o#p-ted #ethod Ca!!bac/ #ethod

//" Sa*e;uar( ,easures are e#erge$cy #ea.-re.' i$c!-di$g tari .' to protect do#e.tic i$d-.trie. a$d prod-cer. ro# i$crea.ed i#port. +hich i$ !ict or co-!d i$ !ict .erio-. i$6-ry o$ the#. The (TA i. 0e.ted +ith 6-ri.dictio$ to re0ie+ deci.io$. o the Secretary o Trade a$d 4$d-.try i#po.i$g .a eg-ard #ea.-re. a. pro0ided -$der Rep. Act No. ??00 the Sa eg-ard *ea.-re. Act %S*A &. %Southern
Cross Cement Corporation v. (he Philippine Cement Manufacturers Corp., et al., <. R. No. 1>?>E0' A-!y ?' 200E&

/B" How a-( to w o, s ou&( %&ai,s *or re*u-( o* %usto,s (uties )e ,a(e 9
S3<<ESTE" ANS=ER8 A!! c!ai#. or re -$d o d-tie. .ha!! be #ade i$ +riti$g a$d or+arded to the (o!!ector o (-.to#. to +ho# .-ch d-tie. are paid' +ho -po$ receipt o .-ch c!ai#' .ha!! 0eri y the .a#e by the record. o hi. O ice' a$d i o-$d to be correct a$d i$ accorda$ce +ith !a+' .ha!! certi y the .a#e to the (o##i..io$er o (-.to#. +ith hi. reco##e$datio$ together +ith a!! $ece..ary paper. a$d doc-#e$t.. 3po$ receipt by the (o##i..io$er o .-ch certi ied c!ai# he .ha!! ca-.e the .a#e to be paid i o-$d correct. %Sec. 1@0?' T((&

The "T4 Secretary ca$$ot i#po.e the .a eg-ard #ea.-re. i the Tari (o##i..io$ doe. $ot a0orab!y reco##e$d it. i#po.itio$.

/:" I,$osi-; aut orit' *or sa*e;uar( ,easures" T e i,$osi-; aut orit' *or t e %ou-tervai&i-; (uties is t e Se%retar' o* Tra(e a-( I-(ustr' i- t e %ase o* -o--a;ri%u&tura& $ro(u%t7 %o,,o(it'7 or arti%&e or t e Se%retar' o* A;ri%u&ture7 i- t e %ase o* a;ri%u&tura& $ro(u%t7 %o,,o(it' or arti%&e7 a ter
or#a! i$0e.tigatio$ a$d a ir#ati0e i$di$g o the Tari (o##i..io$.

/C" Law 9

W at is ,ea- )' t e ter, !e-tr'# i- Custo,s

/<"

Sa*e;uar(s

,easures

t at

,a'

)e

i,$ose("

Additio$a! tari .' i#port 1-ota. or ba$$i$g o i#port..

S3<<ESTE" ANS=ER8 4t ha. a trip!e #ea$i$g. a. the doc-#e$t. i!ed at the (-.to#. ho-.eD b. the .-b#i..io$ a$d accepta$ce o the doc-#e$t.D a$d c. (-.to#. dec!aratio$ or#. or c-.to#. e$try or#. re1-ired to be acco#p!i.hed by pa..e$ger. o i$co#i$g 0e..e!. or pa..e$ger p!a$e. a. e$0i.aged -$der Sec. 2>0> o the T((P %Cai!-re to dec!are baggage&. %,ardeleza v. People, <.R. No. 16>26>' Cebr-ary 6' 2006&

/>" T e )asis o* (utia)&e va&ue o* ,er% a-(ise t at is

su)Ae%t to a( va&ore, %usto,s (uties is t e tra-sa%tio- va&ue'
+hich .ha!! be the price act-a!!y paid or payab!e or the good. +he$ .o!d or e2port to the Phi!ippi$e.' ad6-.ted by addi$g certai$ co.t e!e#e$t. to the e2te$t that they are i$c-rred by the b-yer b-t are $ot i$c!-ded i$ the price act-a!!y paid or payab!e or the i#ported good.' a$d #ay i$c!-de the o!!o+i$g8 a. (o.t o co$tai$er. a$d pac/i$g' b. 4$.-ra$ce' a$d c. Creight. %Sec. 201' T(( a. a#e$ded by Sec. 1' Rep. Act No. F1B>&

/@" T e a)ove tra-sa%tio- va&ue is t e $ri,ar' ,et o( o* (eter,i-i-; (utia)&e va&ue" I* t e tra-sa%tio- va&ue o* t e i,$orte( arti%&e %ou&( -ot )e (eter,i-e( usi-; t e a)ove7 t e *o&&owi-; a&ter-ative ,et o(s s ou&( )e use( o-e a*ter t e ot er4

/E" A *&i; t stewar(ess arrive( *ro, Si-;a$ore" U$oer arriva& s e was asGe( w et er s e as a-'t i-; to (e%&are" S e a-swere( -o-e7 a-( s e su),itte( er !Custo,s Ba;;a;e +e%&aratio- For,# w i% s e a%%o,$&is e( a-( si;-e( wit -ot i-; or writte- o- t e s$a%e *or ite,s to )e (e%&are(" W e- er a-;er )a; was e.a,i-e( so,e $ie%es o* Aewe&r' were *ou-( %o-%ea&e( wit i- t e &i-i-; o* sai( )a;" S e was t e- %o-vi%te( o* vio&ati-; o* Se%" :@01 o* t e Tari** a-( Custo,s Co(e *or u-&aw*u& i,$ortatio- w i% $e-a&iDes a-' $erso- w o s a&& *rau(u&e-t&' i,$ort or )ri-; i-to t e P i&i$$i-es a-' arti%&e %o-trar' to &aw" S e -ow a$$ea&s %&ai,i-; t at &ower %ourt erre( %o-vi%ti-; er u-(er Se%" :@01 w e- t e *a%ts a&&e;e( )ot it e i-*or,atio- a-( t ose s ow- )' t e $rose%utio- %o-stitute t e o**e-se u-(er Se%" />0> !Fai&ure to +e%&are Ba;;a;e7# o* w i% s e was a%Fuitte(" Is s e %orre%t 9

S3<<ESTE" ANS=ER8 No. Sec. B601 doe. $ot de i$e a cri#e. 4t #ere!y pro0ide.' inter alia, the ad#i$i.trati0e re#edie. +hich ca$ be re.orted to by the B-rea- o (-.to#. +he$ .ei;i$g d-tiab!e artic!e. o-$d the baggage o a$y per.o$ arri0i$g i$ the Phi!ippi$e. +hich i. $ot i$c!-ded i$ the acco#p!i.hed baggage dec!aratio$ .-b#itted to the c-.to#. a-thoritie.' a$d the ad#i$i.trati0e pe$a!tie. that .-ch per.o$ #-.t pay or the re!ea.e o .-ch good. i $ot i#ported co$trary to !a+. S-ch ad#i$i.trati0e pe$a!tie. are i$depe$de$t o the cri#i$a! !iabi!ity or .#-gg!i$g that #ay be i#po.ed -$der Sec. B601' a$d other pro0i.io$. o the T(( +hich ca$ o$!y be deter#i$ed a ter the appropriate cri#i$a! proceedi$g.' pre.ci$di$g ro# the o-tco#e i$ a$y ad#i$i.trati0e ca.e that #ay ha0e bee$ i!ed a$d di.po.ed o by the c-.to#. a-thoritie.. 4$deed the .eco$d paragraph o Sec. 2>0> pro0ide. that $othi$g .ha!! pre0e$t the bri$gi$g o a cri#i$a! actio$ agai$.t the o e$der or .#-gg!i$g -$der Sectio$ B601. %,ardeleza v. People, <. R. No. 16>26>' Cebr-ary 6' 2006&

67

e$try. E$try thro-gh a c-.to# ho-.e i. $ot the e..e$ce o the act. %,ardeleza v. People, <.R. No. 16>26>' Cebr-ary 6' 2006&

:/" T e Co&&e%tor o* Custo,s sitti-; i- seiDure a-( *or*eiture $ro%ee(i-;s as e.%&usive Auris(i%tio- to ear a-( (eter,i-e a&& Fuestio-s tou% i-; o- t e seiDure a-( *or*eiture o* (utia)&e ;oo(s" RTCs are $re%&u(e( *ro, assu,i-; %o;-iDa-%e over su% ,atters eve- t rou; $etitio-s o* %ertiorari7 $ro i)itio- or ,a-(a,us. *(he Bureau of Customs, et
al., v. 9gario, et al., <.R. No. 1B?0?1' *arch 20' 2000&

W at is t e ratio-a&e *or t is (o%tri-e 9

S3<<ESTE" ANS=ER8 a. Regio$a! Tria! (o-rt. ha0e $o 6-ri.dictio$ to rep!e0i$ a property +hich i. .-b6ect to .ei;-re a$d or eit-re proceedi$g. or 0io!atio$ o the Tari a$d (-.to#. (ode other+i.e' actio$. or or eit-re o property or 0io!atio$ o the (-.to#. !a+. co-!d ea.i!y be -$der#i$ed by the .i#p!e de0ice o rep!e0i$. %%e la /uente v. %e 3eyra, et al., 120 S(RA E>>& b. The doctri$e o e2c!-.i0e c-.to#. 6-ri.dictio$ o0er c-.to#. ca.e. to the e2c!-.io$ o the RT(. i. a$chored -po$ the po!icy o p!aci$g $o -$$ece..ary hi$dra$ce o$ the go0er$#e$t:. dri0e' $ot o$!y to pre0e$t .#-gg!i$g a$d other ra-d. -po$ (-.to#.' c. b-t #ore i#porta$t!y' to re$der e ecti0e a$d e icie$t the co!!ectio$ o i#port a$d e2port d-tie. d-e the State' +hich e$ab!e. the go0er$#e$t to carry o-t the -$ctio$. it ha. bee$ i$.tit-ted to per or#. *,ao, et al., v. Court of Appeals, et al., and companion case, 2EF S(RA B>' EB& d. The i..-a$ce by reg-!ar co-rt. o +rit. o pre!i#i$ary i$6-$ctio$ i$ .ei;-re a$d or eit-re proceedi$g. be ore the B-rea- o (-.to#. #ay aro-.e .-.picio$ that the i..-a$ce or gra$t +a. or co$.ideratio$ other tha$ the .trict #erit. o the ca.e. % Juno v. Ca"redo, E02 S(RA @> G200BI& e. 3$der the doctri$e o pri#ary 6-ri.dictio$' the B-rea- o (-.to#. ha. e2c!-.i0e ad#i$i.trati0e 6-ri.dictio$ to co$d-ct .earche.' .ei;-re. a$d or eit-re. o co$traba$d +itho-t i$ter ere$ce ro# the co-rt.. 4t co-!d co$d-ct .earche. a$d .ei;-re. +itho-t $eed o a 6-dicia! +arra$t e2cept i the .earch i. to be co$d-cted i$ a d+e!!i$g p!ace. =here a$ ad#i$i.trati0e o ice ha. obtai$ed a tech$ica! e2perti.e i$ a .peci ic .-b6ect' e0e$ the co-rt. #-.t de er to thi. e2perti.e. NOTES AN" (O**ENTS8 The B-rea- o (-.to#. co-!d .earch a$d .ei;e artic!e. +itho-t $eed o a 6-dicia! +arra$t -$!e.. the p!ace to be .earched i. a d+e!!i$g p!ace. 4$ .-ch a ca.e c-.to#. re1-ire. a 6-dicia! +arra$t.

:0" Pa',e-t is -ot a (e*e-se i- s,u;;&i-; " =he$ -po$ tria! or 0io!atio$ o thi. .ectio$' the de e$da$t i. .ho+$ to ha0e po..e..io$ o the artic!e i$ 1-e.tio$' po..e..io$ .ha!! be dee#ed .- icie$t e0ide$ce to a-thori;e co$0ictio$' -$!e.. the de e$da$t .ha!! e2p!ai$ the po..e..io$ to the .ati. actio$ o the co-rt8 Pro0ided' ho+e0er' That pay#e$t o the ta2 d-e a ter apprehe$.io$ .ha!! $ot co$.tit-te a 0a!id de e$.e i$ a$y pro.ec-tio$ -$der thi. .ectio$. %!a.t par.' Sec. B601' T((& :1"
+ho8 a. ra-d-!e$t!y i#port. or bri$g. i$to the co-$try a$y artic!e co$trary to !a+D b. a..i.t. i$ .o doi$g a$y artic!e co$trary to !a+D or c. recei0e.' co$cea!.' b-y.' .e!!. or i$ a$y #a$$er aci!itate. the tra$.portatio$' co$cea!#e$t or .a!e o .-ch good. a ter i#portatio$' /$o+i$g the .a#e to ha0e bee$ i#ported co$trary to !a+. % ,ardeleza v. People, <.R. No. 16>26>' Cebr-ary 6' 2006 citi$g Rodriguez v. Court of Appeals, <. R. No. 11>21?' Septe#ber 1?' 1FF>' 2E? S(RA 2??' 2F6& NOTES AN" (O**ENTS8 a. I,$ortatio- co$.i.t. o bri$gi$g a$ artic!e i$to the co-$try ro# the o-t.ide. 4#portatio$ begi$. +he$ the co$0eyi$g 0e..e! or aircra t e$ter. the 6-ri.dictio$ o the Phi!ippi$e. +ith i$te$tio$ to -$!oad therei$. b. W e- u-&aw*u& i,$ortatio- is %o,$&ete" 4$ the ab.e$ce o a bo$a ide i$te$t to #a/e e$try a$d pay d-tie. +he$ the prohibited artic!e e$ter. the Phi!ippi$e territory. 4#portatio$ i. co#p!ete +he$ the ta2ab!e' d-tiab!e co##odity i. bro-ght +ithi$ the !i#it. o the port o

Ho

is smu!!lin! committed "

S3<<ESTE" ANS=ER8 S#-gg!i$g i. co##itted by a$y per.o$

68

::" !A# %&ai,i-; to )e t e ow-er o* a vesse& w i% is t e su)Ae%t o* %usto,s warra-t o* seiDure a-( (ete-tiosou; t t e i-ter%essio- o* t e RTC to restrai- t e Bureau o* Custo,s *ro, i-ter*eri-; wit is $ro$ert' ri; ts over t e vesse&" Wou&( t e suit $ros$er9
S3<<ESTE" ANS=ER8 No. 7i. re#edy +a. $ot +ith the RT( b-t +ith the (TA' a. i..-e. o o+$er.hip o good. i$ the c-.tody o c-.to#. o icia!. are +ithi$ the po+er o the (TA to deter#i$e. The (o!!ector o (-.to#. ha. e2c!-.i0e 6-ri.dictio$ o0er .ei;-re a$d or eit-re proceedi$g. a$d tria! co-rt. are prec!-ded ro# a..-#i$g cog$i;a$ce o0er .-ch #atter. e0e$ thro-gh petitio$. or certiorari' prohibitio$ or #a$da#-.. %Commissioner of Customs v. Court of Appeals, et al., <. R. No.. 111202,0>' Aa$-ary B1' 2006&

the apprai.ed 0a!-e o the artic!e a$d9or a$y i$e' e2pe$.e. a$d co.t. +hich #ay be ad6-dged i$ the ca.e8 Provided, T at su% i,$ortatios a&& -ot )e re&ease( u-(er a-' )o-( w e- t ere is prima facie evi(e-%e o* *rau( i- t e i,$ortatio- o* t e arti%&eK Provided, -rther' That artic!e. the i#portatio$ o +hich i. prohibited by !a+ .ha!! $ot be re!ea.ed -$der a$y circ-#.ta$ce. +hat.oe0erK Provided' i$a!!y' That $othi$g i$ thi. .ectio$ .ha!! be co$.tr-ed a. re!ie0i$g the o+$er or i#porter ro# a$y cri#i$a! !iabi!ity +hich #ay ari.e ro# a$y 0io!atio$ o !a+ co##itted i$ co$$ectio$ +ith the i#portatio$ o the artic!e. %e#pha.i. .-pp!ied&

:C" I-sta-%es w ere t ere is -o ri; t o* re(e,$tio- o* seiDe( a-( *or*eite( arti%&es4
a. b. c. There i. ra-dD The i#portatio$ i. ab.o!-te!y prohibited' or The re!ea.e o the property +o-!d be co$trary to !a+.

:<" T e %usto,s aut orities (o -ot ave to $rove to t e satis*a%tio- o* t e %ourt t at t e arti%&es o- )oar( a vesse& were i,$orte( *ro, a)roa( or are i-te-(e( to )e s i$$e( a)roa( )e*ore t e' ,a' e.er%ise t e $ower to e**e%t %usto,s sear% es7 seiDures7 or arrests $rovi(e( )' &aw a-( %o-ti-ue wit t e a(,i-istrative eari-;s . *(he Bureau of Customs, et al., v.
9gario, et al.' <.R. No. 1B?0?1' *arch 20' 2000&

*(ransglo"e International, Inc. v. Court of Appeals, et al., <.R. No. 1266BE' Aa$-ary 2>' 1FFF&

:>" The Tari a$d (-.to#. (ode a!!o+. the B-rea- o (-.to#. to re.ort to the a(,i-istrative re,e(' o* seiDure7 su% as )' e-*or%i-; t e ta. &ie- o- t e i,$orte( arti%&e w e- t e i,$orte( arti%&es %ou&( )e *ou-( a-( )e su)Ae%t to seiDure a-( *or*eiture" :@" The Tari a$d (-.to#. (ode a!!o+. the B-rea- o (-.to#. to re.ort to the Au(i%ia& re,e(' o* *i&i-; a- a%tio- i%ourt w e- t e i,$orte( arti%&es %ou&( -ot a-',ore )e *ou-("

:E" 4$ Aznar v. Court of (a) Appeals, EC SCRA E?H' reiterated i$ /arolan, ,r. v. Court of (a) appeals, et al., B?A SCRA BHC' the S-pre#e (o-rt c!ari ied that t e *rau( %o-te,$&ate( )' &aw ,ust )e a%tua& a-( -ot %o-stru%tive" 4t #-.t be i$te$tio$a!' co$.i.ti$g o deceptio$' +i!! -!!y a$d de!iberate!y do$e or re.orted to i$ order to i$d-ce a$other to gi0e -p .o#e right.

<0"

ReFuisites *or *or*eiture o* i,$orte( ;oo(s4

:B" Se%tio- /:01 o* t e TCCP states t at seiDe( arti%&es ,a' -ot )e re&ease( u-(er )o-( i* t ere is prima facie evi(e-%e o* *rau( i- t eir i,$ortatio-. Commissioner of
Customs v. Court of (a) Appeals, et al., <. R. No. 1@1>16,1@' Cebr-ary 1B' 200F Sectio$ 2B01. 1arrant for %etention of Property0Cash Bond. J 3po$ #a/i$g a$y .ei;-re' the (o##i..io$er .ha!! i..-e a +arra$t or the dete$tio$ o the propertyD a$d i the o+$er or i#porter de.ire. to .ec-re the re!ea.e o the property or !egiti#ate -.e' the (o!!ector .ha!!' +ith the appro0a! o the (o##i..io$er o (-.to#.' .-rre$der it -po$ the i!i$g o a ca.h bo$d' i$ a$ a#o-$t i2ed by hi#' co$ditio$ed -po$ the pay#e$t o

a. =ro$g -! #a/i$g by the o+$er' i#porter' e2porter or co$.ig$ee o a$y dec!aratio$ or a ida0it' or the +ro$g -! #a/i$g or de!i0ery by the .a#e per.o$ o a$y i$0oice' !etter or paper J a!! to-chi$g o$ the i#portatio$ or e2portatio$ o #ercha$di.e. b. the a!.ity o .-ch dec!aratio$' a ida0it' i$0oice' !etter or paperD a$d c. a$ i$te$tio$ o$ the part o the i#porter9co$.ig$ee to e0ade the pay#e$t o the d-tie. d-e. *Repu"lic, etc., v. (he Court of Appeals, et al.' <.R. No. 1BF0>0' October 2' 2001&

<1" O- 5a-uar' B7 1ECE7 t e vesse& =?V #Star A%e7 #%o,i-; *ro, Si-;a$ore &a(e- wit %ar;o7 e-tere( t e Port o* Sa- Fer-a-(o7 La U-io- *or -ee(e( re$airs" W e- t e Bureau o* Custo,s &ater )e%a,e sus$i%ious t at t e vesse&8s rea& $ur$ose i- (o%Gi-; was to s,u;;&e %ar;o i-to t e %ou-tr'7 seiDure $ro%ee(i-;s were i-stitute( a-( su)seFue-t&' two

69

Warra-ts o* SeiDure a-( +ete-tio- were issue( *or t e vesse& a-( its %ar;o" Cesar (oes -ot ow- t e vesse& or a-' o* its %ar;o )ut %&ai,e( a $re*erre( ,ariti,e &ie-" Cesar t e- )rou; t severa& %ases i- t e RTC to e-*or%e is &ie-" Wou&( t ese suits $ros$er 9
S3<<ESTE" ANS=ER8 No. The B-rea- o (-.to#. ha0i$g ir.t obtai$ed po..e..io$ o the 0e..e! a$d it. good. ha. obtai$ed 6-ri.dictio$ to the e2c!-.io$ o the tria! co-rt.. =he$ (e.ar ha. i#p!eaded the 0e..e! a. a de e$da$t to e$ orce hi. a!!eged #ariti#e !ie$' i$ the RT(' he bro-ght a$ actio$ in rem -$der the (ode o (o##erce -$der +hich the 0e..e! #ay be attached a$d .o!d. 7o+e0er' the ba.ic operati0e act i. the act-a! or co$.tr-cti0e po..e..io$ o the res by the trib-$a! e#po+ered by !a+ to co$d-ct the proceedi$g.. Thi. #ea$. that to ac1-ire 6-ri.dictio$ o0er the 0e..e!' a. a de e$da$t' the tria! co-rt #-.t ha0e obtai$ed either act-a! or co$.tr-cti0e po..e..io$ o0er it. Neither +a. acco#p!i.hed by the RT( a. the 0e..e! +a. a!ready i$ the po..e..io$ o the B-rea- o (-.to#.. %Commissioner of Customs v. Court of Appeals, et al., <. R. No.. 111202,0>' Aa$-ary B1' 2006& NOTES AN" (O**ENTS8 a. For*eiture o* seiDe( ;oo(s i- t e Bureau o* Custo,s is it e -ature o* a $ro%ee(i-; in rem7 i.e. directed agai$.t the res or i#ported good. a$d e$tai!. a deter#i$atio$ o the !ega!ity o their i#portatio$. 4$ thi. proceedi$g' it i. i$ !ega! co$te#p!atio$ the property it.e! +hich co##it. the 0io!atio$ a$d i. treated a. the o e$der' +itho-t re ere$ce +hat.oe0er to the character or co$d-ct o the o+$er. The i..-e i. !i#ited to +hether the i#ported good. .ho-!d be or eited a$d di.po.ed o i$ accorda$ce +ith !a+ or 0io!atio$ o the Tari a$d (-.to#. (ode. .*(ransglo"e International, Inc. v. Court of Appeals, et al.' <.R. No. 1266BE' Aa$-ary 2>' 1FFF& Cor eit-re o .ei;ed good. i$ the B-rea- o (-.to#. i. a proceedi$g agai$.t the good. a$d $ot agai$.t the o+$er. %Asian (erminals, Inc. v. Bautista0Ricafort, < .R. No. 166F01' October 2@' 2006 citi$g (ransglo"e#

There #ay be i$.ta$ce. +here $o +arra$t. i..-ed by the B-rea- o (-.to#. or the reg-!ar co-rt. i. re1-ired' a. i$ .earch a$d .ei;-re. o #otor 0ehic!e. a$d 0e..e!..

<:" S,u;;&e( ;oo(s seiDe( )' virtue o* a %ourt warra-t s ou&( )e surre-(ere( to t e %ourt t at issue( t e warra-t a-( -ot to t e Bureau o* Custo,s beca-.e the good. are i$ custodia
legis.

<<" +e%isio-s o* t e Co,,issio-er o* Custo,s !i- %ases i-vo&vi-; &ia)i&it' *or %usto,s (uties7 *ees or ot er ,o-e' % ar;es# t at ,ust )e a$$ea&e( to t e Court o* Ta. A$$ea&s +ivisio- wit i- t irt' H:0I (a's *ro, re%ei$t .peci ica!!y
re er to hi. deci.io$. o$ administrative ta) protest cases' a. .tated i$ Sectio$ 2E02 o the Tari a$d (-.to#. (ode o the Phi!ippi$e. %(CCP&8 Sectio$ 2E02. Revie "y Court of (a) Appeals. J T e $art' a;;rieve( )' a ru&i-; o* t e Co,,issio-er i- a-' ,atter )rou; t )e*ore i, u$o- $rotest or by hi. actio$ or r-!i$g i$ a$y ca.e o .ei;-re ,a' a$$ea& to t e Court o* Ta. A$$ea&s ' i$ the #a$$er a$d +ithi$ the period pre.cribed by !a+ a$d reg-!atio$.. 3$!e.. a$ appea! i. #ade to the (o-rt o Ta2 Appea!. i$ the #a$$er a$d +ithi$ the period pre.cribed by !a+. a$d reg-!atio$.' the actio$ or r-!i$g o the (o##i..io$er .ha!! be i$a! a$d co$c!-.i0e. GE#pha.i. .-pp!ied.I %Pilipinas Shell Petroleum Corporation v. Commissioner
of Customs, <. R. No. 1@6B?0' A-$e 1?' 200F&

<>" A(,i-istrative ta. $rotest u-(er t e Tari** a-( Custo,s Co(e HTCCPI" A ta2 prote.t ca.e' -$der the T((P'
i$0o!0e. a prote.t o the !i1-idatio$ o i#port e$trie.. %Pilipinas Shell
Petroleum Corporation v. Commissioner of Customs, <. R. No. 1@6B?0' A-$e 1?' 200F&

</" T e Co&&e%tor o* Custo,s u$o- $ro)a)&e %ause t at t e arti%&es are i,$orte( or e.$orte(7 or are atte,$te( to )e i,$orte( or e.$orte(7 i- vio&atio- o* t e tari** a-( %usto,s &aws s a&& issue a warra-t o* seiDure" %Sec. 6' Tit!e 444' (AO No. F,
FB& 4 the .earch a$d .ei;-re i. to be co$d-cted i$ a d+e!!i$g p!ace' the$ a .earch +arra$t .ho-!d be i..-ed by the reg-!ar co-rt. $ot the B-rea- o (-.to#..

<@" LiFui(atio-7 (e*i-e(" A !i1-idatio$ i. the i$a! co#p-tatio$ a$d a.certai$#e$t by the co!!ector o the d-tie. o$ i#ported #ercha$di.e' ba.ed o$ o icia! report. a. to the 1-a$tity' character' a$d 0a!-e thereo ' a$d the co!!ector:. o+$ i$di$g a. to the app!icab!e rate o d-tyD it i. a/i$ to a$ a..e..#e$t o i$ter$a! re0e$-e ta2e. -$der the Natio$a! 4$ter$a! Re0e$-e (ode +here the ta2 !iabi!ity o the ta2payer i. de i$ite!y deter#i$ed. %Pilipinas Shell Petroleum Corporation v. Commissioner
of Customs, <. R. No. 1@6B?0' A-$e 1?' 200F&

T e *o&&owi-; &etters o* (e,a-( %a- -ot )e %o-si(ere( as a &iFui(atio- or a- assess,e-t o* S e&&8s i,$ort ta. &ia)i&ities t at %a- )e t e su)Ae%t o* aa(,i-istrative ta. $rotest $ro%ee(i-; )e*ore t e Co,,issio-er o* Custo,s w ose (e%isio- is a$$ea&a)&e to t e Court o* Ta. A$$ea&s8
a. the O$e Stop Shop 4$ter,Age$cy Ta2 (redit a$d "-ty "ra+bac/ (e$ter *the Center# No0e#ber B !etter' .ig$ed by the Secretary o Ci$a$ce' i$ or#i$g it o the ca$ce!!atio$ o the Ta2 (redit (erti icate. %T((.&D b. the (o##i..io$er o (-.to#.: No0e#ber 1F !etter re1-iri$g She!! to rep!ace the a#o-$t e1-i0a!e$t to the a#o-$t o the ca$ce!!ed T((. -.ed by She!!D a$d c. the (o##i..io$er o (-.to#.: co!!ectio$ !etter.' i..-ed thro-gh "ep-ty (o##i..io$er Atty. Va!era' or#a!!y de#a$di$g the a#o-$t co0ered by the ca$ce!!ed T((.. No$e o the.e !etter.' ho+e0er' ca$ be co$.idered a. a !i1-idatio$ or a$ a..e..#e$t o She!!:. i#port ta2 !iabi!itie. that ca$ be the .-b6ect o a$ ad#i$i.trati0e ta2 prote.t proceedi$g be ore the re.po$de$t +ho.e deci.io$ i. appea!ab!e to the (TA. She!!:. i#port ta2 !iabi!itie. had !o$g bee$ co#p-ted a$d a.certai$ed i$ the origi$a! a..e..#e$t.' a$d She!! paid the.e !iabi!itie. -.i$g the T((. tra$. erred to it a. pay#e$t. 4t i. e0e$ a$ error to co$.ider the !etter. a. a rea..e..#e$t beca-.e they re er to the .a#e ta2 !iabi!itie. o$ the .a#e i#portatio$. co0ered by the origi$a! a..e..#e$t.. The !etter. #ere!y rei..-ed the origi$a! a..e..#e$t. that +ere pre0io-.!y .ett!ed by She!! +ith the -.e o the T((.. 7o+e0er' o$ acco-$t o the ca$ce!!atio$ o the T((.' the ta2 !iabi!itie. o She!! -$der the origi$a! a..e..#e$t. +ere co$.idered -$paidD he$ce' the !etter. a$d the actio$. or co!!ectio$. =he$ She!! +e$t to the (TA' the i..-e. it rai.ed i$ it. petitio$ +ere a!! re!ated to the fact a$d e icacy o the pay#e$t. #ade' .peci ica!!y the ge$-i$e$e.. o the T((.D the ab.e$ce o d-e proce.. i$ the e$ orce#e$t o the deci.io$ to ca$ce! the T((.D the act. .-rro-$di$g the ra-d i$ origi$a!!y .ec-ri$g the T((.D a$d the app!icatio$ o e.toppe!. The.e are pay#e$t a$d co!!ectio$ i..-e.' $ot ta2 prote.t i..-e. +ithi$ the (TA:. 6-ri.dictio$ to r-!e -po$. She!! $e0er prote.ted the origi$a! a..e..#e$t. o it. ta2 !iabi!itie. a$d i$ act .ett!ed the# -.i$g the T((.. The.e origi$a! a..e..#e$t.' there ore' ha0e beco#e i$a!' i$co$te.tab!e' a$d beyo$d a$y .-b.e1-e$t prote.t proceedi$g' ad#i$i.trati0e or 6-dicia!' to r-!e -po$. To be 0ery preci.e' She!!:. petitio$ be ore the (TA pri$cipa!!y 1-e.tio$ed the 0a!idity o the ca$ce!!atio$ o the T((. J a deci.io$ that +a. #ade $ot by the (o##i..io$er o (-.to#.' b-t by the (e$ter. A. the (TA ha. $o 6-ri.dictio$ o0er deci.io$. o the (e$ter' She!!:. re#edy agai$.t the ca$ce!!atio$ .ho-!d ha0e bee$ a certiorari petitio$ be ore the

<B"

70

reg-!ar co-rt.' $ot a ta2 prote.t ca.e be ore the (TA. Record. do $ot .ho+ that She!! e0er a0ai!ed o thi. re#edy. A!ter$ati0e!y' a. he!d i$ Shell v. Repu"lic of the Philippines, <.R. No. 161F>B' *arch 6' 200?' >E@ S(RA @01' the appropriate or-# or She!! -$der the circ-#.ta$ce. o thi. ca.e .ho-!d be at the co!!ectio$ ca.e. be ore the RT( +here She!! ca$ p-t -p the act o it. pay#e$t a. a de e$.e. %Pilipinas Shell Petroleum Corporation v. Commissioner of Customs, <. R. No. 1@6B?0' A-$e 1?' 200F&

<C" A %ase )e%o,es ri$e *or *i&i-; wit t e Re;io-a& Tria& Court HRTCI7 as a %o&&e%tio- ,atter a*ter t e *i-a&it' o* t e Co,,issio-er o* Custo,s assess,e-t" %Pilipinas
Shell Petroleum Corporation v. Commissioner of Customs, <. R. No. 1@6B?0' A-$e 1?' 200F citi$g Shell v. Repu"lic of the Philippines, <.R. No. 161F>B' *arch 6' 200?' >E@ S(RA @01&

The a..e..#e$t ha. !o$g bee$ i$a!' a$d thi. recognition o i$a!ity re#o0e. a!! percei0ed hi$dra$ce.' ba.ed o$ thi. ca.e' to the co$ti$-atio$ o the co!!ectio$ .-it.. A .-it or the co!!ectio$ o i$ter$a! re0e$-e ta2e.' +here the a..e..#e$t ha. a!ready beco#e i$a! a$d e2ec-tory' the actio$ to co!!ect i. a/i$ to a$ actio$ to e$ orce the 6-dg#e$t. No i$1-iry ca$ be #ade therei$ a. to the #erit. o the 4$ !ight o the co$c!-.io$ that the pre.e$t ca.e doe. $ot i$0o!0e a deci.io$ o the (o##i..io$er o (-.to#. o$ a #atter bro-ght to hi# a. a ta2 prote.t' Atty. Va!era:. !ac/ o a-thority to i..-e the co!!ectio$ !etter. a$d to i$.tit-te the co!!ectio$ .-it. i. irre!e0a$t. Cor thi. .a#e rea.o$' the i$6-$ctio$ agai$.t Atty. Va!era ca$$ot be i$0o/ed to e$6oi$ the co!!ectio$ o -$paid ta2e. d-e ro# She!!. %Pilipinas Shell Petroleum Corporation v. Commissioner of Customs, supra&

LOCAL 3OVERN=ENT TA2ATION

1" T e *u-(a,e-ta& $ri-%i$&es o* &o%a& ta.atio- are8
a. 3$i or#ityD b. Ta2e.' ee.' charge. a$d other i#po.itio$. .ha!! be e1-itab!e a$d ba.ed o$ abi!ity to pay' or p-b!ic p-rpo.e.' $ot -$6-.t' e2ce..i0e' oppre..i0e or co$ i.catory' $ot co$trary to !a+' p-b!ic po!icy' $atio$a! eco$o#ic po!icy or i$ re.trai$t o tradeD c. The !e0y a$d co!!ectio$ .ha!! $ot be !et to a$y pri0ate per.o$D d. 4$-re. .o!e!y to the !oca! go0er$#e$t -$it !e0yi$g the ta2D e. The progre..i0ity pri$cip!e #-.t be ob.er0ed.

/" A &aw w i% (e$rives &o%a& ;over-,e-t u-its o* t eir $ower to ta. wou&( )e u-%o-stitutio-a&" The co$.tit-tio$ ha.

de!egated to !oca! go0er$#e$t. the po+er to !e0y ta2e.' ee. a$d other charge.. Thi. co$.tit-tio$a! de!egatio$ #ay o$!y be re#o0ed by a co$.tit-tio$a! a#e$d#e$t.

71

:" U-(er t e -ow $revai&i-; Co-stitutio-7 w ere t ere is -eit er a ;ra-t -or $ro i)itio- )' statute7 t e ta.i-; $ower o* &o%a& ;over-,e-ts ,ust )e (ee,e( to e.ist a&t ou; Co-;ress ,a' $rovi(e statutor' &i,itatio-s a-( ;ui(e&i-es i$
order to .a eg-ard the 0iabi!ity a$d .e! ,.- icie$cy o !oca! go0er$#e$t -$it. by direct!y gra$ti$g the# ge$era! a$d broad ta2 po+er.. %City +overnment of San Pa"lo, $aguna, et al., v. Reyes, et al., <.R. No. 12@@0?' *arch 2>' 1FFF&

-$it. are bei$g .tre$gthe$ed a$d #ade #ore a-to$o#o-.' the !egi.!at-re #-.t .ti!! .ee to it that8 a. the ta2payer +i!! $ot be o0er,b-rde$ed or .add!ed +ith #-!tip!e a$d -$rea.o$ab!e i#po.itio$.D b. each !oca! go0er$#e$t -$it +i!! ha0e it. air .hare o a0ai!ab!e re.o-rce.D c. the re.o-rce. o the $atio$a! go0er$#e$t +i!! be -$d-!y di.t-rbedD a$d d. !oca! ta2atio$ +i!! be air' -$i or# a$d 6-.t. %Manila &lectric Company v. Province of $aguna, et al., <.R. No. 1B1B>F' *ay >' 1FFF&

C"

Ta.i-; $ower o* t e &o%a& ;over-,e-t is &i,ite("

<" T e Lo%a& 3over-,e-t Co(e e.$&i%it&' aut oriDes $rovi-%es a-( %ities7 -otwit sta-(i-; !a-' e.e,$tio- ;ra-te( )' a-' &aw or ot er s$e%ia& &aw# to i,$ose a ta. o- )usi-esses e-Ao'i-; a *ra-% ise" 4$dicati0e o the !egi.!ati0e i$te$t to carry o-t the
co$.tit-tio$a! #a$date o 0e.ti$g broad ta2 po+er. to !oca! go0er$#e$t -$it.' the )oca! <o0er$#e$t (ode ha. +ithdra+$ ta2 e2e#ptio$. or i$ce$ti0e. thereto ore e$6oyed by certai$ e$titie.. *City +overnment of San Pa"lo, $aguna, et al., v. Reyes, et al., <.R. No. 12@@0?' *arch 2>' 1FFF&

The ta2i$g po+er o !oca! go0er$#e$t. i. !i#ited i$ the .e$.e that (o$gre.. ca$ e$act !egi.!atio$ gra$ti$g ta2 e2e#ptio$.. =hi!e the .y.te# o !oca! go0er$#e$t ta2atio$ ha. cha$ged +ith the o$.et o the 1F?@ (o$.tit-tio$' the po+er o !oca! go0er$#e$t -$it. to ta2 i. .ti!! !i#ited. =hi!e the po+er to ta2 by !oca! go0er$#e$t. #ay be e2erci.ed by !oca! !egi.!ati0e bodie.' $o !o$ger #ere!y be 0irt-e o a 0a!id de!egatio$ a. be ore' b-t p-r.-a$t to direct a-thority co$ erred by Sectio$ >' Artic!e L o the (o$.tit-tio$' the ba.ic doctri$e o$ !oca! ta2atio$ re#ai$. e..e$tia!!y the .a#e' 4the po er to ta) is 5still6 primarily vested in the Congress.7
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16F i$ t-r$ re erri$g to Mactan Ce"u International Airport Authority, v. Marcos, <.R. No. 1200?2' Septe#ber 11' 1FF6' 261 S(RA 66@' 6?0#

>. Philippine Lon! Distance #elephone Compan$, %nc., v. Cit$ of Davao, et al., etc., 3" R" No" 1<:C@B7 Au;ust //7 /0017
-phe!d the a-thority o the (ity o "a0ao' a !oca! go0er$#e$t -$it' to i#po.e a$d co!!ect a !oca! ra$chi.e ta2 beca-.e the )oca! <o0er$#e$t ha. +ithdra+$ a!! ta2 e2e#ptio$. pre0io-.!y e$6oyed by a!! per.o$. a$d a-thori;ed !oca! go0er$#e$t -$it. to i#po.e a ta2 o$ b-.i$e.. e$6oyi$g a ra$chi.e ta2 $ot+ith.ta$di$g the gra$t o ta2 e2e#ptio$ to the#.

E" Furt er a,$&i*i%atio- )' Ber-as o* t e &o%a& ;over-,e-t8s $ower to ta." =hat i. the e ect o Sectio$ > o$ the
i.ca! po.itio$ o #-$icipa! corporatio$.M Sectio$ > doe. $ot cha$ge the doctri$e that #-$icipa! corporatio$. do $ot po..e.. i$here$t po+er. o ta2atio$. =hat it doe. i. to co$ er #-$icipa! corporatio$. a ge$era! po+er to !e0y ta2e. a$d other+i.e create .o-rce. o re0e$-e. They $o !o$ger ha0e to +ait or a .tat-tory gra$t o the.e po+er.. The po+er o the !egi.!ati0e a-thority re!ati0e to the i.ca! po+er. o !oca! go0er$#e$t. ha. bee$ red-ced to the a-thority to i#po.e !i#itatio$. o$ #-$icipa! po+er.. *oreo0er' the.e !i#itatio$. #-.t be co$.i.te$t +ith the ba.ic po!icy o !oca! a-to$o#y. The i#porta$t !ega! e ect o Sectio$ > i. th-. to re0er.e the pri$cip!e that do-bt. are re.o!0ed agai$.t #-$icipa! corporatio$.. 7e$ce orth' i$ i$terpreti$g .tat-tory pro0i.io$. o$ #-$icipa! i.ca! po+er.' do-bt. +i!! be re.o!0ed i$ a0or o #-$icipa! corporatio$.. 4t i. -$der.tood' ho+e0er' that ta2e. i#po.ed by !oca! go0er$#e$t #-.t be or a p-b!ic p-rpo.e' -$i or# +ithi$ a !oca!ity' #-.t $ot be co$ i.catory' a$d #-.t be +ithi$ the 6-ri.dictio$ o the !oca! -$it to pa...
%8uezon City, et al., v. ABS0CB! Broadcasting Corporation' <. R. No. 166E0?'

@" E.$&ai- t e %o-%e$t o* t e !$ara(i;, s i*t# i&o%a& ;over-,e-t ta.atio-"

S3<<ESTE" ANS=ER8 Paradig# .hi t ro# e2c!-.i0e (o$gre..io$a! po+er to direct gra$t o ta2i$g po+er to !oca! !egi.!ati0e bodie.. The po+er to ta2 i. $o !o$ger 0e.ted e2c!-.i0e!y o$ (o$gre..D !oca! !egi.!ati0e bodie. are $o+ gi0e$ direct a-thority to !e0y ta2e.' ee. a$d other charge. p-r.-a$t to Artic!e L' .ectio$ > o the 1F?@ (o$.tit-tio$. %Batangas Po er Corporation v. Batangas City, et al. <. R. No. 1>26@>' a$d co#pa$io$ ca.e' Apri! 2?' 200E citi$g !ational Po er Corporation v. City of Ca"anatuan, <. R. No. 1EF110' Apri! F' 200B&

B" T e *u-(a,e-ta& &aw (i( -ot i-te-( t e (ire%t ;ra-t to &o%a& ;over-,e-t u-its to )e a)so&ute a-( u-%o-(itio-a& ' the
co$.tit-tio$a! ob6ecti0e ob0io-.!y i. to e$.-re that' +hi!e !oca! go0er$#e$t

October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16F&

72

10" Re%o-%i&iatio- o* t e &o%a& ;over-,e-t8s aut orit' to ta. a-( t e Co-;ressio-a& ;e-era& ta.i-; $ower" (o$gre..
ha. the i$here$t po+er to ta2' +hich i$c!-de. the po+er to gra$t ta2 e2e#ptio$.. O$ the other ha$d' the po+er o !oca! go0er$#e$t.' .-ch a. pro0i$ce. a$d citie. or e2a#p!e N-e;o$ (ity' to ta2 i. pre.cribed by Sectio$ 1>1 i$ re!atio$ to Sectio$ 1B@ o the )<( +hich e2pre..!y pro0ide. that $ot+ith.ta$di$g a$y e2e#ptio$ gra$ted by a$y !a+ or other .pecia! !a+' the (ity or a pro0i$ce #ay i#po.e a ra$chi.e ta2. 4t #-.t be $oted that Sectio$ 1B@ o the )<( doe. $ot prohibit gra$t o -t-re e2e#ptio$..

The S-pre#e (o-rt i$ a .erie. o ca.e. ha. .-.tai$ed the po+er o (o$gre.. to gra$t ta2 e2e#ptio$. o0er a$d abo0e the po+er o the !oca! go0er$#e$t:. de!egated po+er to ta2. %8uezon City, et al., v. ABS0
CB! Broadcasting Corporation' <. R. No. 166E0?' October 6' 200? citi$g City +overnment of 8uezon City, et al. v. Bayan (elecommunications, Inc., <.R. No. 16201>' *arch 6' 2006' E?E S(RA 16&

that per.o$ o the ta2 o$ hi. pro e..io$ be ore e#p!oy#e$t a$d a$$-a!!y therea ter. A$y per.o$ .-b6ect to the pro e..io$a! ta2 .ha!! +rite i$ deed.' receipt.' pre.criptio$.' report.' boo/. o acco-$t' p!a$. a$d de.ig$.' .-r0ey. a$d #ap.' a. the ca.e #ay be' the $-#ber o the o icia! receipt i..-ed to hi#. E2e#ptio$8 Pro e..io$a!. e2c!-.i0e!y e#p!oyed i$ the go0er$#e$t .ha!! be e2e#pt ro# pay#e$t. %Sec. 1BF' )<(& NOTE8 Cor the p-rpo.e o co!!ecti$g the ta2' the pro0i$cia! or city trea.-rer or hi. d-!y a-thori;ed repre.e$tati0e .ha!! re1-ire ro# .-ch pro e..io$a!. their c-rre$t a$$-a! regi.tratio$ card. i..-ed by co#pete$t a-thority be ore accepti$g pay#e$t o their pro e..io$a! ta2 or the c-rre$t year. The PR( .ha!! !i/e+i.e re1-ire the pro e..io$a!. pre.e$tatio$ o proo o pay#e$t be ore regi.tratio$ o pro e..io$a!. or re$e+a! o their !ice$.e.. %!a.t par.' Art. 22?' R-!e. a$d Reg-!atio$. 4#p!e#e$ti$g the )oca! <o0er$#e$t (ode o 1FF1&

4$deed' the gra$t o ta2i$g po+er. to !oca! go0er$#e$t -$it. -$der the (o$.tit-tio$ a$d the )<( doe. $ot a ect the po+er o (o$gre.. to gra$t e2e#ptio$. to certai$ per.o$.' p-r.-a$t to a dec!ared $atio$a! po!icy. The !ega! e ect o the co$.tit-tio$a! gra$t to !oca! go0er$#e$t. .i#p!y #ea$. that i$ i$terpreti$g .tat-tory pro0i.io$. o$ #-$icipa! ta2i$g po+er.' do-bt. #-.t be re.o!0ed i$ a0or o #-$icipa! corporatio$.. GI"id.' re erri$g to Philippine $ong %istance (elephone Company, Inc. *P$%(# vs. City of %avao6

1:" W o are t e $ro*essio-a&s w o7 i* t e' are i$ra%ti%e o* t eir $ro*essio-7 are su)Ae%t to $ro*essio-a& ta. 9
S3<<ESTE" ANS=ER8 The pro e..io$a!. .-b6ect to the pro e..io$a! ta2 are o$!y tho.e +ho ha0e pa..ed the bar e2a#i$atio$.' or a$y board or other e2a#i$atio$. co$d-cted by the Pro e..io$a! Reg-!atio$ (o##i..io$ %PR(&. or e2a#p!e' a !a+yer +ho i. a!.o a (erti ied P-b!ic Acco-$ta$t %(PA& #-.t pay the pro e..io$a! ta2 i#po.ed o$ !a+yer. a$d that i2ed or (PA.' i he i. to practice both pro e..io$.. GSec. 2B? % &' R-!e LLL' R-!e. a$d Reg-!atio$. 4#p!e#e$ti$g the )oca! <o0er$#e$t (ode o 1FF1I

11" Pro*essio-a& ta. ,a' )e i,$ose( )' a $rovi-%e or %it' )ut -ot )' a ,u-i%i$a&it' or )ara-;a'"
a. Tra$.actio$ ta2ed8 E2erci.e or practice o pro e..io$ re1-iri$g go0er$#e$t !ice$.-re e2a#i$atio$. b. Ta2 rate8 4$ Accorda$ce +ith a ta2i$g ordi$a$ce +hich .ho-!d $ot e2ceed PB00.00. c. Ta2 ba.e8 Rea.o$ab!e c!a..i icatio$ by the .a$gg-$ia$. d. E2ceptio$8 Pay#e$t to o$e pro0i$ce or city $o !o$ger .-b6ect to a$y other $atio$a! or !oca! ta2' !ice$.e or ee or the practice o .-ch pro e..io$ i$ a$y part o the Phi!ippi$e pro e..io$a!. e2c!-.i0e!y e#p!oyed i$ the go0er$#e$t. e. "ate o pay#e$t8 or o$ be ore Aa$-ary B1 or e$gagi$g i$ the pro e..io$. . P!ace o pay#e$t8 Pro0i$ce or city +here the pro e..io$a! practice. hi. pro e..io$ or +here he #ai$tai$. hi. pri$cipa! o ice i$ ca.e he practice. hi. pro e..io$ i$ .e0era! p!ace..

1/" ReFuire,e-ts4 A$y i$di0id-a! or corporatio$ e#p!oyi$g a per.o$ .-b6ect to pro e..io$a! ta2 .ha!! re1-ire pay#e$t by

1<" 2 Cit' issue( a -oti%e o* assess,e-t a;ai-st ABC Co-(o,i-iu, Cor$oratio- *or u-$ai( )usi-ess ta.es" T e Co-(o,i-iu, Cor$oratio- is a (u&' %o-stitute( %o-(o,i-iu, %or$oratio- i- a%%or(a-%e wit t e Co-(o,i-iu, A%t w i% ow-s a-( o&(s tit&e to t e %o,,o- a-( &i,ite( %o,,o- areas o* t e %o-(o,i-iu," Its ,e,)ers i$ %o,$rises t e u-it ow-ers a-( is aut oriDe( u-(er its B'-Laws to %o&&e%t re;u&ar assess,e-ts *ro, its ,e,)ers *or o$erati-; e.$e-ses7 %a$ita& e.$e-(itures o- t e %o,,o- areas a-( ot er s$e%ia& assess,e-ts as $rovi(e( *or i- t e =aster +ee( wit 9 +e%&aratio- o* Restri%tio-s o* t e Co-(o,i-iu," ABC Co-(o,i-iu, Cor$oratio- i-sists t at t e 2 Cit' Reve-ue Co(e a-( t e Lo%a& 3over-,e-t Co(e (o -ot %o-tai$rovisio-s u$o- w i% t e assess,e-t %ou&( )e )ase(" Reso&ve t e %o-trovers'"

S3<<ESTE" ANS=ER8 AB( i. correct. (o$do#i$i-# corporatio$. are ge$era!!y e2e#pt ro# !oca! b-.i$e.. ta2atio$ -$der the )oca! <o0er$#e$t (ode' irre.pecti0e o a$y !oca! ordi$a$ce that .ee/. to dec!are other+i.e. L (ity' i. a-thori;ed -$der the )oca! <o0er$#e$t (ode' to i#po.e a ta2 o$ b-.i$e..' +hich i. de i$ed -$der the (ode a. trade or co##ercia! acti0ity reg-!ar!y e$gaged i$ a. a #ea$. o !i0e!ihood or +ith a 0ie+ to pro it. By it. 0ery $at-re a co$do#i$i-# corporatio$ i. $ot e$gaged i$ b-.i$e..' a$d a$y pro it that it deri0e. i. #ere!y i$cide$ta!' he$ce it #ay $ot be .-b6ect to b-.i$e.. ta2e.. %Lamane , etc. v. BA $epanto Condominium Corporation, <. R. No. 1>EFFB' October 2>' 200>&

73

property i. .it-ated a$d c!a..i ied or a..e..#e$t p-rpo.e. o$ the ba.i. o it. act-a! -.e. %Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et
al., <. R. No. 1>E126' October 11' 200>&

/" T e reaso-a)&e ,arGet va&ue is (eter,i-e( )' t e assessor i- t e *or, o* a s% e(u&e o* *air ,arGet va&ues"
The .ched-!e i. the$ e$acted by the !oca! sanggunian.

:" Fair ,arGet va&ue is t e $ri%e at w i% a $ro$ert' ,a' )e so&( )' a se&&er w o is -ot %o,$e&&e( to se&& a-( )ou; t )' a )u'er w o is -ot %o,$e&&e( to )u'7 ta/i$g i$to
co$.ideratio$ a!! -.e. to +hich the property i. adopted a$d #ight i$ rea.o$ be app!ied. The criterio$ e.tab!i.hed by the .tat-te co$te#p!ate. a hypothetica! .a!e. 7e$ce' the b-yer. $eed $ot be act-a! a$d e2i.ti$g p-rcha.er.. %Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R. No. 1>E126' October 11' 200> & NOTES AN" (O**ENTS8 4$ i2i$g the 0a!-e o rea! property' a..e..or. ha0e to co$.ider a!! the circ-#.ta$ce. a$d e!e#e$t. o 0a!-e a$d #-.t e2erci.e pr-de$t di.cretio$ i$ reachi$g co$c!-.io$.. %Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R. No. 1>E126' October 11' 200>& Pre$aratio- o* *air ,arGet va&ues4 a. The city or #-$icipa! a..e..or .ha!! prepare a .ched-!e o air #ar/et 0a!-e. or the di ere$t c!a..e. o rea! property .it-ated i$ their re.pecti0e )oca! <o0er$#e$t 3$it. or the e$act#e$t o a$ ordi$a$ce by the sanggunian co$cer$edD a$d b. The .ched-!e o air #ar/et 0a!-e. .ha!! be p-b!i.hed i$ a $e+.paper o ge$era! circ-!atio$ i$ the pro0i$ce' city or #-$icipa!ity co$cer$ed or the po.ti$g i$ the pro0i$cia! capito! or other p!ace. a. re1-ired by !a+. *$opez v. City of Manila, et al., <.R. No. 12@1BF' Cebr-ary 1F' 1FFF& Pro$ose( *air ,arGet va&ues o* rea& $ro$ert' i- a &o%a& ;over-,e-t u-it as we&& as t e or(i-a-%e %o-tai-i-; t e s% e(u&e ,ust )e $u)&is e( i- *u&& or three %B& co$.ec-ti0e day. i$ a $e+.paper o !oca! circ-!atio$' +here a0ai!ab!e' +ithi$ te$ %10& day. o it. appro0a!' a$d po.ted i$ at !ea.e t+o %2& pro#i$e$t p!ace. i$ the pro0i$cia! capito!' city' #-$icipa! or "arangay ha!! or a #i$i#-# o three %B& co$.ec-ti0e +ee/.. */iguerres v. Court of Appeals, et al,. <.R. No. 11F1@2' *arch 2>' 1FFF&

1>" Aut orit' o* Lo%a& 3over-,e-t U-its HL3UsI su%

as t e Cit' o* =a-i&a to i,$ose )usi-ess ta.es" Sectio$ 1EB o
the )<(' i. the 0ery .o-rce o the po+er o #-$icipa!itie. a$d citie. to i#po.e a !oca! b-.i$e.. ta2' a$d to +hich a$y !oca! b-.i$e.. ta2 i#po.ed by citie. or #-$icipa!itie. .-ch a. the (ity o *a$i!a #-.t co$ or#. 4t i. appare$t ro# a per-.a! thereo that +he$ a #-$icipa!ity or city ha. a!ready i#po.ed a b-.i$e.. ta2 o$ #a$- act-rer.' etc. o !i1-or.' di.ti!!ed .pirit.' +i$e.' a$d a$y other artic!e o co##erce' p-r.-a$t to Sectio$ 1EB%a& o the )<(' .aid #-$icipa!ity or city #ay $o !o$ger .-b6ect the .a#e #a$- act-rer.' etc. to a b-.i$e.. ta2 -$der Sectio$ 1EB%h& o the .a#e (ode. Sectio$ 1EB%h& #ay be i#po.ed o$!y o$ b-.i$e..e. that are .-b6ect to e2ci.e ta2' VAT' or perce$tage ta2 -$der the N4R(' a$d that are !-ot ot erwise s$e%i*ie( i- $re%e(i-; $ara;ra$ s"# 4$ the .a#e +ay' b-.i$e..e. .-ch a. re.po$de$t:.' a!ready .-b6ect to a !oca! b-.i$e.. ta2 -$der Sectio$ 1E o Ta2 Ordi$a$ce No. @@FE G+hich i. ba.ed o$ Sectio$ 1EB%a& o the )<(I' ca$ $o !o$ger be #ade !iab!e or !oca! b-.i$e.. ta2 -$der Sectio$ 21 o the .a#e Ta2 Ordi$a$ce G+hich i. ba.ed o$ Sectio$ 1EB%h& o the )<(I. %(he City of Manila, et al., v. Coca0 Cola Bottlers Philippines, Inc., <. R. No. 1?1?E>' A-g-.t E' 200F&

REAL PROPERTY TA2ATION

1" are4
a. Apprai.a! at c-rre$t a$d air #ar/et 0a!-eD b. (!a..i icatio$ or a..e..#e$t o$ the ba.i. o act-a! -.eD c. A..e..#e$t o$ the ba.i. o -$i or# c!a..i icatio$D d. Apprai.a!' a..e..#e$t' !e0y a$d co!!ectio$ .ha!! $ot be !et to a pri0ate per.o$D e. Apprai.a! a$d a..e..#e$t .ha!! be e1-itab!e. NOTES AN" (O**ENTS8 Rea! propertie. .ha!! be apprai.ed at the c-rre$t a$d air #ar/et 0a!-e pre0ai!i$g i$ the !oca!ity +here the

T e *u-(a,e-ta& $ri-%i$&es o* rea& $ro$ert' ta.atio-

<" A$$roa% es i- esti,ati-; t e *air ,arGet va&ue o* rea& $ro$ert' *or rea& $ro$ert' ta. $ur$oses 9
a. Sa!e. A$a!y.i. Approach. The .a!e. price paid i$ act-a! #ar/et tra$.actio$. i. co$.idered by ta/i$g i$to acco-$t 0a!id .a!e. data acc-#-!ated ro# a#o$g the Regi.trar o "eed.' $otarie. p-b!ic'

apprai.er.' bro/er.' dea!er.' ba$/ o icia!.' a$d 0ario-. .o-rce. .tated -$der the )oca! <o0er$#e$t (ode. b. 4$co#e (apita!i;atio$ Approach. The 0a!-e o a$ i$co#e, prod-ci$g property i. $o #ore tha$ the ret-r$ deri0ed ro# it. A$ a$a!y.i. o the i$co#e prod-ced i. $ece..ary i$ order to e.ti#ate the .-# +hich #ight be i$0e.ted i$ the p-rcha.e o the property. c. Reprod-ctio$ co.t approach i. a or#a! approach -.ed e2c!-.i0e!y $ apprai.i$g #a$,#ade i#pro0e#e$t. .-ch a. b-i!di$g. a$d other .tr-ct-re.' ba.ed o$ .-ch data a. #ateria!. a$d !abor co.t. to reprod-ce a $e+ rep!ica o the i#pro0e#e$t. The a..e..or -.e. a$y or a!! o the.e approache. i$ a$a!y;i$g the data gathered to arri0e at the e.ti#ated air #ar/et 0a!-e to be i$c!-ded i$ the ordi$a$ce co$tai$i$g the .ched-!e o air #ar/et 0a!-e.. %Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R. No. 1>E126' October 11' 200> citi$g )oca! A..e..#e$t Reg-!atio$. No. 1,F2&

74

>" A- or(i-a-%e w ere)' t e !$ar%e&s o* &a-( so&(7 %e(e(7 tra-s*erre( a-( %o-ve'e( *or re,u-erator' %o-si(eratio- a*ter t e e**e%tivit' o* t is revisio- s a&& )e su)Ae%t to rea& estate ta. )ase( o- t e a%tua& a,ou-t re*&e%te( i- t e (ee( o* %o-ve'a-%e or t e %urre-t a$$rove( Do-a& va&uatio- o* t e Bureau o* I-ter-a& Reve-ue $revai&i-; at t e ti,e o* sa&e7 %essio-7 tra-s*er a-( %o-ve'a-%e7 w i% ever is i; er7 as evi(e-%e( )' t e %erti*i%ate o* $a',e-t o* t e %a$ita& ;ai-s ta. issue( t ere*ore# is INVALI+ bei$g co$trary to
p-b!ic po!icy a$d or re.trai$i$g trade or the o!!o+i$g rea.o$.8 a. 4t #a$date. a$ e2c!-.i0e r-!e i$ deter#i$i$g the air #ar/et 0a!-e a$d depart. ro# the e.tab!i.hed proced-re. .-ch a. the .a!e. a$a!y.i. approach' the i$co#e capita!i;atio$ approach a$d the reprod-ctio$ approach pro0ided -$der the r-!e. i#p!e#e$ti$g the .tat-te. 4t -$d-!y i$ter ere. +ith the d-tie. .tat-tori!y p!aced -po$ the !oca! a..e..or by co#p!ete!y di.pe$.i$g +ith hi. a$a!y.i. a$d di.cretio$ +hich the )oca! <o0er$#e$t (ode a$d the reg-!atio$. re1-ire to be e2erci.ed. A$ ordi$a$ce that co$tra0e$e. a$y .tat-te i. ultra vires a$d 0oid. b. The co$.ideratio$ approach i$ the ordi$a$ce i. i!!ega! .i$ce the apprai.a!' a..e..#e$t' !e0y a$d co!!ectio$ o rea! property ta2 .ha!! $ot be !et to a$y pri0ate per.o$' it +i!! a!.o co#p!ete!y de.troy the -$da#e$ta! pri$cip!e i$ rea! property ta2atio$ J that rea! property .ha!! be c!a..i ied' 0a!-ed a$d a..e..ed o$ the ba.i. o it. act-a! -.e regard!e.. o +here !ocated' +hoe0er o+$. it' a$d +hoe0er -.e. it. A!!o+i$g the partie. to a pri0ate .a!e to dictate the air #ar/et 0a!-e o the property +i!! di.pe$.e +ith the di.ti$ctio$. o act-a! -.e .tated i$ the )oca! <o0er$#e$t (ode a$d i$ the reg-!atio$..

c. The i$0a!idity i. $ot c-red by the prha.e +hiche0er i. higher beca-.e a$ i$tegra! part o that .y.te# .ti!! per#it. 0a!-i$g rea! property i$ di.regard o it. act-a! -.e. d. The ordi$a$ce +o-!d re.-!t to rea! property a..e..#e$t. #ore tha$ o$ce e0ery three %B& year. a$d that i. $ot the co$gre..io$a! i$te$t a. .ho+$ i$ the pro0i.io$. o the )oca! <o0er$#e$t (ode a$d the reg-!atio$.. (o$.e1-e$t!y' the rea! property ta2 b-rde$ .ho-!d $ot be i$terpreted to i$c!-de tho.e beyo$d +hat the (ode or the reg-!atio$. e2pre..!y c!ear!y .tate. e. The pro0i.o +o-!d pro0ide a chi!!i$g e ect o$ rea! property o+$er. or ad#i$i.trator. to e$ter ree!y i$to co$tract. re !ecti$g the i$crea.i$g 0a!-e o rea! propertie. i$ accorda$ce +ith pre0ai!i$g #ar/et co$ditio$.. =hi!e the )oca! <o0er$#e$t (ode pro0ide. that the a..e..#e$t o rea! property .ha!! $ot be i$crea.ed o$ce e0ery three %B& year.' the 1-e.tio$ed pro0i.o .-b6ect. the property to a higher a..e..#e$t e0ery ti#e a .a!e. tra$.actio$ i. #ade. Rea! property o+$er. +o-!d there ore po.tpo$e .a!e. -$ti! a ter the !ap.e o the three %B& year period' or i they do .o +ithi$ the .aid period they .ha!! be co#pe!!ed to di.po.e o the property at a price $ot e2ceedi$g the !a.t prior co$0eya$ce i$ order to a0oid a higher ta2 a..e..#e$t. 4$ the abo0e t+o .ce$ario. rea! property o+$er. are e ecti0e!y pre0e$ted ro# obtai$i$g the be.t price po..ib!e or their propertie. a$d -$d-!y ha#per. the e1-itab!e di.trib-tio$ o +ea!th. %Allied Ban-ing
Corporation, etc., v. 8uezon City +overnment, et al., <. R. No. 1>E126' October 11' 200>&

@" E.a,$&es o* $erso-a& $ro$ert' u-(er t e %ivi& &aw

t at ,a' )e %o-si(ere( as rea& $ro$ert' *or $ur$oses o* ta.es .
Per.o$a! property -$der the ci0i! !a+ #ay be co$.idered a. rea! property or p-rpo.e. o ta2e. +here the property i. e..e$tia! to the co$d-ct o the b-.i$e... a. 3$dergro-$d ta$/. are e..e$tia! to the co$d-ct o the b-.i$e.. o a ga.o!i$e .tatio$ +itho-t +hich it +o-!d $ot be operatio$a!.
%Calte) Phils., Inc. v. Central Board of Assessment Appeals, et al., 11E S(RA 2F6&

b. )ight Rai! Tra$.it %)RT& i#pro0e#e$t. .-ch a. b-i!di$g.' carriage+ay.' pa..e$ger ter#i$a!. .tatio$.' a$d .i#i!ar .tr-ct-re. do $ot or# part o the p-b!ic road. .i$ce the or#er are co$.tr-cted o0er the !atter i$ .-ch a +ay that the !o+ o 0ehic-!ar tra ic +o-!d $ot be i#paired. The carriage+ay. a$d ter#i$a!. .er0e a -$ctio$ di ere$t ro# the p-b!ic road.. C-rther#ore' they are $ot ope$ to -.e by the ge$era! p-b!ic he$ce $ot e2e#pt ro# rea! property ta2e.. E0e$ gra$ti$g that the $atio$a! go0er$#e$t o+$. the carriage+ay. a$d ter#i$a! .tatio$.' the property i. $ot e2e#pt beca-.e their be$e icia! -.e ha. bee$ gra$ted to )RTA a ta2ab!e e$tity. *$ight Rail (ransit Authority v. Central Board of Assessment
Appeals, et al., <. R. No. 12@B16' October 12' 2000&

c. Barge. o$ +hich +ere #o-$ted ga. t-rbi$e po+er p!a$t. de.ig$ated to ge$erate e!ectrica! po+er' the -e! oi! barge. +hich .-pp!ied -e! oi! to the po+er p!a$t barge.' a$d the acce..ory e1-ip#e$t #o-$ted o$ the barge. +ere .-b6ect to rea! property ta2e.. *oreo0er' Artic!e E1>%F& o the (i0i! (ode pro0ide. that GdIoc/. a$d .tr-ct-re. +hich' tho-gh !oati$g' are i$te$ded by their $at-re a$d ob6ect to re#ai$ at a i2ed p!ace o$ a ri0er' !a/e or coa.t are co$.idered i##o0ab!e property by de.ti$atio$ bei$g i$te$ded by the o+$er or a$ i$d-.try or +or/ +hich #ay be carried o$ i$ a b-i!di$g or o$ a piece o !a$d a$d +hich te$d direct!y to #eet the $eed. o .aid i$d-.try or +or/. %/&$S &nergy, Inc., v.
Province of Batangas, <. R. No. 16?>>@' Cebr-ary 16' 200@ a$d co#pa$io$ ca.e&

75

E" Pu)&i% eari-;s are ,a-(ator' $rior to a$$rova& o* ta. or(i-a-%e' b-t thi. .ti!! re1-ire. the ta2payer to add-ce e0ide$ce to
.ho+ that $o p-b!ic heari$g. e0er too/ p!ace. *Reyes, et al., v. Court of Appeals, et al., <.R. No. 11?2BB' "ece#ber 10' 1FFF& P-b!ic heari$g. are re1-ired to be co$d-cted prior to the e$act#e$t o a$ ordi$a$ce i#po.i$g rea! property ta2e.. %/iguerres v. Court of Appeals, et al., <.R. No. 11F1@2'
*arch 2>' 1FFF&

B" U-$ai( rea&t' ta.es atta% to t e $ro$ert' a-( is % ar;ea)&e a;ai-st t e $erso- w o a( a%tua& or )e-e*i%ia& use a-( $ossessio- o* it re;ar(&ess o* w et er or -ot e is t e ow-er" To i#po.e the rea! property ta2 o$ the .-b.e1-e$t o+$er +hich
+a. $either the o+$er $ot the be$e icia! -.er o the property d-ri$g the de.ig$ated period. +o-!d $ot o$!y be co$trary to !a+ b-t a!.o -$6-.t. (o$.e1-e$t!y' *ERA)(O the or#er o+$er9-.er o the property +a. re1-ired to pay the ta2 i$.tead o the $e+ o+$er NAPO(OR . *Manila
&lectric Company v. Barlis, <.R. No. 11E2B1' *ay 1?' 2001&

10" T e %o-%urre-t a-( si,u&ta-eous re,e(ies a**or(e( &o%a& ;over-,e-t u-its i- e-*or%i-; %o&&e%tio- o* rea& $ro$ert' ta.es4
a. b. c. "i.trai$t o per.o$a! propertyD Sa!e o de!i$1-e$t rea! property' a$d (o!!ectio$ o rea! property ta2 thro-gh ordi$ary co-rt actio$.

11" Noti%e a-( $u)&i%atio-7 as we&& as t e &e;a& reFuire,e-ts *or a ta. (e&i-Fue-%' sa&e7 are ,a-(ator'' a$d the
ai!-re to co#p!y there+ith ca$ i$0a!idate the .a!e. The pre.cribed $otice. #-.t be .e$t to co#p!y +ith the re1-ire#e$t. o d-e proce.. . *%e :necht,
et al,. v. Court of Appeals; %e :necht, et al., v. 'onora"le Sayo, 2F0 S(RA 22B'2B6&

NOTES AN" (O**ENTS8 The abo0e *ay 1?' 2001 deci.io$ +a. .et a.ide by the S-pre#e (o-rt +he$ it gra$ted the petitio$er:. .eco$d #otio$ or reco$.ideratio$ o$ A-$e 2F' 200E. The a-thor .-b#it. that the abo0e r-!i$g i$ the *ay 1?' 2001 deci.io$ i. .ti!! 0a!id' $ot o$ the ba.i. o the *ay 1?' 2001 deci.io$ b-t i$ the !ight o pro$o-$ce#e$t. o the S-pre#e (o-rt i$ other ca.e.. Th-.' do $ot cite the doctri$e a. e#a$ati$g ro# the *ay 1?' 2001 deci.io$.

1/" T e reaso- )e i-( t e -oti%e reFuire,e-t is t at ta. sa&es are a(,i-istrative $ro%ee(i-;s w i% are in personam i- -ature. *Puzon v. A"ellera, 16F S(RA @?F' @F>; %e Asis v.
I.A.C., 16F S(RA B1E&

C" Se%retar' o* 5usti%e %a- taGe %o;-iDa-%e o* a %ase i-vo&vi-; t e %o-stitutio-a&it' or &e;a&it' o* ta. or(i-a-%es w ere t ere are *a%tua& issues i-vo&ve(" */iguerres v. Court of
Appeals, et al., <.R. No. 11F1@2' *arch 2>' 1FFF&

Ta.$a'er *i&es a$$ea& to t e Se%retar' o* 5usti%e7 wit i:0 (a's *ro, e**e%tivit' t ereo*" 4$ ca.e the Secretary decide. the
appea!' a period a!.o o B0 day. i. a!!o+ed or a$ aggrie0ed party to go to co-rt. B-t i the Secretary doe. $ot act thereo$' a ter the !ap.e o 60 day.' a party co-!d a!ready .ee/ re!ie i$ co-rt +ithi$ B0 day. ro# the !ap.e o the 60 day period. The.e three .eparate period. are c!ear!y gi0e$ or co#p!ia$ce a. a prere1-i.ite be ore .ee/i$g redre.. i$ a co#pete$t co-rt. S-ch .tat-tory period. are .et to pre0e$t de!ay. a. +e!! a. e$ha$ce the order!y a$d .peedy di.charge o 6-dicia! -$ctio$.. Cor thi. rea.o$ the co-rt. co$.tr-e the.e pro0i.io$. o .tat-te. a. #a$datory. *Reyes, et al., v. Court of Appeals,
et al.' <.R. No. 11?2BB' "ece#ber 10' 1FFF&

1:" FELS E-er;'7 I-%"7 a( a %o-tra%t to su$$&' NPC wit t e e&e%tri%it' ;e-erate( )' FELS8 $ower )ar;es" T e %o-tra%t a&so state( t at NPC s a&& )e res$o-si)&e *or a&& rea& estate ta.es a-( assess,e-ts" FELS t e- re%eive( aassess,e-t o* rea& $ro$ert' ta.es o- its $ower )ar;es *ro, t e Provi-%ia& Assessor o* Bata-;as" I* *i&e( a ,otio- *or re%o-si(eratio- wit t e Provi-%ia& Assessor" a" U$o- (e-ia&7 FELS e&evate( t e ,atter to t e Lo%a& Boar( o* Assess,e-t A$$ea&s HLBAAI7 w ere it raise( t e *o&&owi-; issues4 1I Si-%e NPC is ta.-e.e,$t t e- FEL8s s ou&( a&so )e ta.-e.e,$t )e%ause o* its %o-tra%t wit NPC" /I T e $ower )ar;es are -ot rea& $ro$ert' su)Ae%t to rea& $ro$ert' ta.es"

76

)" U$o- t e ot er a-( t e Lo%a& Treasurer i-sists t at t e assess,e-t as attai-e( a state o* *i-a&it' e-%e t e a$$ea& to t e LBAA s ou&( )e (is,isse(" Ru&e o- t e %o-*&i%ti-; %o-te-tio-s"
S3<<ESTE" ANS=ER8 a. A!! the co$te$tio$. o CE)S are +itho-t #erit8 1& NP( i. $ot the o+$er o the po+er barge. $or the operator o the po+er barge.. The ta2 e2e#ptio$ pri0i!ege gra$ted to NP( ca$$ot be e2te$ded to CE)S. the co0e$a$t i. bet+ee$ NP( a$d CE). a$d doe. $ot bi$d a third per.o$ $ot pri0y to the co$tract .-ch a. the Pro0i$ce o Bata$ga.. 2& The S-pre#e (o-rt o Ne+ Oor/ i$ Consolidated &dison Company of !e Lor-, Inc., et al., v. (he City of !e Lor-, et al., ?0 *i.c. 2d 106> %1F@>& cited i$ /&$S &nergy, Inc., v. Province of Batangas, <. R. No. 16?>>@' Cebr-ary 16' 200@ a$d co#pa$io$ ca.e' he!d that barge. o$ +hich +ere #o-$ted ga. t-rbi$e po+er p!a$t. de.ig$ated to ge$erate e!ectrica! po+er' the -e! oi! barge. +hich .-pp!ied -e! oi! to the po+er p!a$t barge.' a$d the acce..ory e1-ip#e$t #o-$ted o$ the barge. +ere .-b6ect to rea! property ta2e.. *oreo0er' Artic!e E1>%F& o the (i0i! (ode pro0ide. that GdIoc/. a$d .tr-ct-re. +hich' tho-gh !oati$g' are i$te$ded by their $at-re a$d ob6ect to re#ai$ at a i2ed p!ace o$ a ri0er' !a/e or coa.t are co$.idered i##o0ab!e property by de.ti$atio$ bei$g i$te$ded by the o+$er or a$ i$d-.try or +or/ +hich #ay be carried o$ i$ a b-i!di$g or o$ a piece o !a$d a$d +hich te$d direct!y to #eet the $eed. o .aid i$d-.try or +or/. b. The Trea.-rer i. correct. The proced-re do $ot a!!o+ a #otio$ or reco$.ideratio$ to be i!ed +ith the Pro0i$cia! A..e..or. To a!!o+ the proced-re +o-!d i$deed i$0ite corr-ptio$ i$ the .y.te# o apprai.a! a$d a..e..#e$t. it co$0e$ie$t!y co-rt. a gra t,pro$e .it-atio$ +here 0a!-e. o rea! property ay be i$itia!!y .et -$rea.o$ab!y high' a$d the$ .-b.e1-e$t!y red-ced -po$ the re1-e.t o a property o+$er. 4$ the !atter i$.ta$ce' a!!-.io$. o po..ib!e co0er' i!!icit trade,o ca$$ot be a0oided' a$d i$ act ca$ co$0e$ie$t!y ta/e p!ace. S-ch occa.io$ or #i.chie #-.t be pre0e$ted a$d e2ci.ed ro# o-r .y.te#. %/&$S &nergy, Inc., v. Province of
Batangas, <. R. No. 16?>>@' Cebr-ary 16' 200@ a$d co#pa$io$ ca.e&

1>" I* t e ;rou-( *or t e $rotest is va&i(it' o* t e rea& $ro$ert' ta. or(i-a-%e a$d $ot the -$rea.o$ab!e$e.. o the a#o-$t
co!!ected the ta2 #-.t be paid -$der prote.t' a$d the i..-e o !ega!ity #ay be rai.ed to the proper co-rt. o$ certiorari +itho-t $eed o e2ha-.ti$g ad#i$i.trati0e re#edie..

1@" I* t e ;rou-( *or t e $rotest is u-reaso-a)&e-ess o* t e a,ou-ts %o&&e%te( t ere is -ee( to $a' u-(er $rotest a$d
ad#i$i.trati0e re#edie. #-.t be re.orted to be ore reco-r.e to the proper co-rt..

1B" Pro%e(ure *or re*u-( o* rea& $ro$ert' ta.es )ase( ou-reaso-a)&e-ess or e.%essive-ess o* a,ou-ts %o&&e%te("
a. Pay#e$t -$der prote.t at the ti#e o pay#e$t or +ithi$ thirty %B0& day. therea ter' prote.t bei$g !odged to the pro0i$cia!' city or i$ the ca.e o a #-$icipa!ity +ithi$ the *etro *a$i!a Area the #-$icipa! trea.-rer. b. The trea.-rer ha. a period o .i2ty %60& day. ro# receipt o the prote.t +ithi$ to decide. c. =ithi$ thirty %B0& day. ro# receipt o trea.-rer:. deci.io$ or i the trea.-rer doe. $ot decide' +ithi$ thirty %B0& day. ro# the e2piratio$ o the .i2ty %60& period or the trea.-rer to decide' the ta2payer .ho-!d i!e a$ appea! +ith the )oca! Board o A..e..#e$t Appea!.. d. The )oca! Board o A..e..#e$t Appea!. ha. 120 day. ro# receipt o the appea! +ithi$ +hich to decide. e. The ad0er.e deci.io$ o the )oca! Board o A..e..#e$t Appea!. .ho-!d be appea!ed +ithi$ thirty %B0& day. ro# receipt to the (e$tra! Board o A..e..#e$t Appea!.. . The ad0er.e deci.io$ o the (e$tra! Board o A..e..#e$t Appea!. .ha!! be appea!ed to the (o-rt o Ta2 Appea!. %&n Banc& by #ea$. o a petitio$ or re0ie+ +ithi$ thirty %B0& day. ro# receipt o the ad0er.e deci.io$. g. The deci.io$ o the (TA #ay be the .-b6ect o a #otio$ or reco$.ideratio$ or $e+ tria! a ter +hich a$ appea! #ay be i$terpo.ed by #ea$. o a petitio$ or re0ie+ o$ certiorari directed to the S-pre#e (o-rt o$ p-re 1-e.tio$. o !a+ +ithi$ a period o i tee$ %1>& day. ro# receipt e2te$dib!e or a period o thirty %B0& day..

1<" A s$e%ia& &ev' or s$e%ia& assess,e-t is ai,$ositio- )' a $rovi-%e7 a %it'7 a ,u-i%i$a&it' wit i- t e =etro$o&ita- =a-i&a Area7 a ,u-i%i$a&it' or a )ara-;a' -po$ rea!
property .pecia!!y be$e ited by a p-b!ic +or/. e2pe$dit-re o the )<3 to reco0er $ot #ore tha$ 60H o .-ch e2pe$dit-re.

1C" T e e-tit&e,e-t to a ta. re*u-( (oes -ot -e%essari&' %a&& *or t e auto,ati% $a',e-t o* t e su, %&ai,e(" The a#o-$t
o the c!ai# bei$g a act-a! #atter' it #-.t .ti!! be pro0e$ i$ the $or#a! co-r.e a$d i$ accorda$ce +ith the ad#i$i.trati0e proced-re or obtai$i$g a re -$d o rea! property ta2e.' a. pro0ided -$der the )oca! <o0er$#e$t (ode. %Allied Ban-ing Corporation, etc., v. 8uezon City +overnment, et al., <. R.
No. 1>E126' Septe#ber 1>' 2006&

NOTES AN" (O**ENTS8 4$ the abo0e Allied Ban-ing ca.e' the S-pre#e (o-rt pro0ided or the .tarti$g date o co#p-ti$g the t+o,year pre.cripti0e period +ithi$ +hich to i!e the c!ai# +ith the Trea.-rer' +hich i. ro# i$a!ity o the "eci.io$. The proced-re to be o!!o+ed i. that .ho+$ be!o+.

77

1E" Pro%e(ure *or re*u-( o* rea& $ro$ert' ta.es )ase( o- va&i(it' o* t e ta. ,easure or solutio indebeti.
a. Pay#e$t -$der prote.t $ot re1-ired' c!ai# #-.t be directed to the !oca! trea.-rer' +ithi$ t+o %2& year. ro# the date the ta2payer i. e$tit!ed to .-ch red-ctio$ or read6-.t#e$t' +ho #-.t decide +ithi$ .i2ty %60& day. ro# receipt. b. The de$ia! by the !oca! trea.-rer o the prote.t +o-!d a!! +ithi$ the Regio$a! Tria! (o-rt:. origi$a! 6-ri.dictio$' the re0ie+ bei$g the i$itia! 6-dicia! cog$i;a$ce o the #atter. "e.pite the !a$g-age o Sectio$ 1F> o the )oca! <o0er$#e$t (ode +hich .tate. that the re#edy o the ta2payer +ho.e prote.t i. de$ied by the !oca! trea.-rer i. to appea! +ith the co-rt o co#pete$t 6-ri.dictio$' !abe!i$g the .aid re0ie+ a. a$ e2erci.e o appe!!ate 6-ri.dictio$ i. i$appropriate .i$ce the de$ia! o the prote.t i. $ot the 6-dg#e$t or order o a !o+er co-rt' b-t o a !oca! go0er$#e$t o icia!. %Lamane , etc. v. BA $epanto Condominium Corporation, <. R. No. 1>EFFB' October 2>' 200>& c. The deci.io$ o the Regio$a! Tria! (o-rt .ho-!d be appea!ed by #ea$. o a petitio$ or re0ie+ directed to the (o-rt o Ta2 Appea!. %"i0i.io$&. d. The deci.io$ o the (o-rt o Ta2 Appea!. %"i0i.io$& #ay be the .-b6ect o a re0ie+ by the (o-rt o Ta2 Appea!. %en "anc&. e. The deci.io$ o the (o-rt o Ta2 Appea!. %en "anc& #ay be the .-b6ect o a petitio$ or re0ie+ o$ certiorari o$ p-re 1-e.tio$. o !a+ directed to the S-pre#e (o-rt.

direct!y a$d e2c!-.i0e!y -.ed or ed-catio$a! p-rpo.e.. *Commissioner of Internal Revenue v. Court of Appeals, et al., 2F? S(RA ?B& The co$.tit-tio$a! ta2 e2e#ptio$ co0er. property ta2e. o$!y. =hat i. e2e#pted i. $ot the i$.tit-tio$ it.e! ' tho.e e2e#pted ro# rea! e.tate ta2e. are !a$d.' b-i!di$g. a$d i#pro0e#e$t. act-a!!y' direct!y a$d e2c!-.i0e!y -.ed or re!igio-.' charitab!e or ed-catio$a! p-rpo.e.. %$ung Center of the Philippines v. 8uezon City, et al., etc., <. R. No. 1EE10E' A-$e 2F' 200E&

//" T e 1E:> Co-stitutio- state( t at t e &a-(s7 )ui&(i-;s7 a-( i,$rove,e-ts are !use( e.%&usive&'# )ut t e $rese-t Co-stitutio- reFuires t at t e &a-(s7 )ui&(i-;s a-( i,$rove,e-ts are !a%tua&&'7 (ire%t&' a-( e.%&usive&' use("#
The cha$ge .ho-!d $ot be ig$ored. Re!ia$ce o$ pa.t deci.io$. +o-!d ha0e .- iced +ere the +ord. act-a!!y a. +e!! a. 8direct!y are $ot added. There #-.t be proo there ore o the act-a! a$d direct -.e to be e2e#pt ro# ta2atio$. %$ung Center of the Philippines v. 8uezon City, et al., etc., <. R. No.
1EE10E' A-$e 2F' 200E&

/:" T e !a%tua&7 (ire%t a-( e.%&usive use# o* t e $ro$ert' *or % arita)&e $ur$oses is t e (ire%t a-( i,,e(iate a-( a%tua& a$$&i%atio- o* t e $ro$ert' itse&* to the p-rpo.e. or
+hich the charitab!e i$.tit-tio$ i. orga$i;ed. 4t i. $ot the -.e o the i$co#e ro# the rea! property that i. deter#i$ati0e o +hether the property i. -.ed or ta2,e2e#pt p-rpo.e.. 4 rea! property i. -.ed or o$e or #ore co##ercia! p-rpo.e.' it i. $ot e2c!-.i0e!y -.ed or the e2e#pted p-rpo.e b-t i. .-b6ect to ta2atio$'. The +ord. do#i$a$t -.e or pri$cipa! -.e ca$$ot be .-b.tit-ted or the +ord. -.ed e2c!-.i0e!y +itho-t doi$g 0io!e$ce to the (o$.tit-tio$ a$d the !a+. So!e!y i. .y$o$y#o-. +ith e2c!-.i0e!y. %$ung Center of the Philippines v.
8uezon City, et al., etc., <. R. No. 1EE10E' A-$e 2F' 200E&

/0" C arita)&e i-stitutio-s7 % ur% es a-( $arso-a;es or %o-ve-ts a$$urte-a-t t ereto7 ,osFues7 -o-$ro*it %e,eteries7 a-( a&& &a-(s7 )ui&(i-;s a-( i,$rove,e-ts t at are a%tua&&'7 (ire%t&' a-( e.%&usive&' use( *or re&i;ious7 % arita)&e or e(u%atio-a& $ur$oses are e.e,$t *ro, ta.atio-"
GSec.2? %B& Artic!e V4' 1F?@ (o$.tit-tio$I

/<" Portio-s o* t e &a-( o* a % arita)&e i-stitutio-7 su% as a os$ita&7 &ease( to $rivate e-tities as we&& as t ose $arts o* t e os$ita& &ease( to $rivate i-(ivi(ua&s are -ot e.e,$t *ro, rea& $ro$ert' ta.es " O$ the other ha$d' the portio$ o the !a$d
occ-pied by the ho.pita! a$d portio$. o the ho.pita! -.ed or it. patie$t.' +hether payi$g or $o$,payi$g' are e2e#pt ro# rea! property ta2e.. %$ung Center of the Philippines v. 8uezon City, et al., etc., <. R. No. 1EE10E' A-$e 2F' 200E&

/1" T e %o-stitutio-a& ta. e.e,$tio-s re*er o-&' to rea& $ro$ert' that are act-a!!y' direct!y a$d e2c!-.i0e!y -.ed or
re!igio-.' charitab!e or ed-catio$a! p-rpo.e.' a$d that the o$!y co$.tit-tio$a!!y recog$i;ed e2e#ptio$ ro# ta2atio$ o re0e$-e. are tho.e ear$ed by $o$,pro it' $o$,.toc/ ed-catio$a! i$.tit-tio$. +hich are act-a!!y'

/>" As a ;e-era& $ri-%i$&e7 a % arita)&e i-stitutio- (oes -ot &ose its % ara%ter as su% a-( its e.e,$tio- *ro, ta.es si,$&' )e%ause it (erives i-%o,e *ro, $a'i-; $atie-ts7 w et er out-$atie-t7 or %o-*i-e( i- t e os$ita&7 or re%eives

78

su)si(ies *ro, t e ;over-,e-t" So !o$g a. the #o$ey recei0ed i.

de0oted or -.ed a!together to the charitab!e ob6ect +hich it i. i$te$ded to achie0eD a$d $o #o$ey i$-re. to the pri0ate be$e it o the per.o$. #a$agi$g or operati$g the i$.tit-tio$. %$ung Center of the Philippines v.
8uezon City, et al., etc., <. R. No. 1EE10E' A-$e 2F' 200E&

p-b!ic do#ai$. %Manila International Airport Authority v. City of Pasay, et al., <.
R. No. 16B0@2' Apri! 2' 200F&

/@" Pro$ert' t at are e.e,$t *ro, t e $a',e-t o* rea& $ro$ert' ta. u-(er t e Lo%a& 3over-,e-t Co(e.
a. Rea! property o+$ed by the Rep-b!ic o the Phi!ippi$e. or a$y o it. po!itica! .-bdi0i.io$. e2cept +he$ the be$e icia! -.e thereo ha. bee$ gra$ted to a ta2ab!e per.o$ or a co$.ideratio$ or other+i.eD b. (haritab!e i$.tit-tio$.' ch-rche.' par.o$age. or co$0e$t. app-rte$a$t thereto' #o.1-e.' $o$,pro it or re!igio-. ce#eterie.' a$d a!! !a$d.' b-i!di$g. a$d i#pro0e#e$t. act-a!!y' direct!y a$d e2c!-.i0e!y -.ed or re!igio-.' charitab!e a$d ed-catio$a! p-rpo.e.D c. *achi$erie. a$d e1-ip#e$t' act-a!!y' direct!y a$d e2c!-.i0e!y -.ed by !oca! +ater di.trict.D a$d go0er$#e$t o+$ed a$d co$tro!!ed corporatio$. e$gaged i$ the .-pp!y a$d di.trib-tio$ o +ater a$d ge$eratio$ a$d tra$.#i..io$ o e!ectric po+erD d. Rea! property o+$ed by d-!y regi.tered cooperati0e.D e. *achi$ery a$d e1-ip#e$t -.ed or po!!-tio$ co$tro! a$d e$0iro$#e$ta! protectio$.

/B" =a-i&a I-ter-atio-a& Air$ort Aut orit' H=IAAI it is

-ot a ;over-,e-t ow-e( or %o-tro&&e( %or$oratio- )ut ai-stru,e-ta&it' o* t e ;over-,e-t t at is e.e,$t *ro, ta.atio-"
4t i. $ot a .toc/ corporatio$ beca-.e it. capita! i. $ot di0ided i$to .hare.' $either i. it a $o$,.toc/ corporatio$ beca-.e there are $o #e#ber.. 4t i. i$.tead a$ i$.tr-#e$ta!ity o the go0er$#e$t -po$ +hich the !oca! go0er$#e$t. are $ot a!!o+ed to !e0y ta2e.' ee. or other charge.. A$ i$.tr-#e$ta!ity re er. to a$y age$cy o the Natio$a! <o0er$#e$t' $ot i$tegrated +ithi$ the depart#e$t ra#e+or/ 0e.ted +ith .pecia! -$ctio$. or 6-ri.dictio$ by !a+' e$do+ed +ith .o#e i $ot a!! corporate po+er.' ad#i$i.teri$g .pecia! -$d.' a$d e$6oyi$g operatio$a! a-to$o#y' -.-a!!y thro-gh a charter. Thi. ter# i$c!-de. reg-!atory age$cie. chartered i$.tit-tio$. a$d go0er$#e$t,o+$ed or co$tro!!ed corporatio$.. GSec. 2 %10&' 4$trod-ctory Pro0i.io$.' Ad#i$i.trati0e (ode o 1F?@I 4t i. a$ i$.tr-#e$ta!ity e2erci.i$g $ot o$!y go0er$#e$ta! b-t a!.o corporate po+er.. 4t e2erci.e. go0er$#e$ta! po+er. o e#i$e$t do#ai$' po!ice po+er a-thority' a$d !e0yi$g o ee. a$d charge.. Ci$a!!y' the airport !a$d. a$d b-i!di$g. are property o+$ed by the go0er$#e$t that are de0oted to p-b!ic -.e a$d are propertie. o the

/C" A te&e%o,,u-i%atio-s %o,$a-' was ;ra-te( )' Co-;ress o- 5u&' /07 1EE/7 a*ter t e e**e%tivit' o* t e Lo%a& 3over-,e-t Co(e o- 5a-uar' 17 1EE/7 a &e;is&ative *ra-% ise wit ta. e.e,$tio- $rivi&e;es w i% $art&' rea(s7 !T e ;ra-tee7 its su%%essors or assi;-s s a&& )e &ia)&e to $a' t e sa,e ta.es o- t eir rea& estate7 )ui&(i-;s a-( $erso-a& $ro$ert'' e2c!-.i0e o thi. ra$chi.e' as ot er $erso-s or %or$oratio-s are -ow or erea*ter ,a' )e reFuire( )' &aw to $a'"# T is $rovisio- e.iste( i- t e %o,$a-'8s *ra-% ise $rior to t e e**e%tivit' o* t e Lo%a& 3over-,e-t Co(e" A Cit' t ee-a%te( a- or(i-a-%e i- 1EE: i,$osi-; a rea& $ro$ert' o- a&& rea& $ro$erties &o%ate( wit i- t e %it' &i,its7 a-( wit (rawi-; a&& ta. e.e,$tio-s $revious&' ;ra-te(" A,o-; $ro$erties %overe( are t ose ow-e( )' t e %o,$a-' *ro, w i% t e Cit' is -ow %o&&e%ti-; P<: ,i&&io-" T e $ro$erties o* t e %o,$a-' were t e- s% e(u&e( )' t e Cit' *or sa&e at $u)&i% au%tio-" T e %o,$a-' t e- *i&e( a $etitio- *or t e issua-%e o* a writ o* $ro i)itio- %&ai,i-; e.e,$tio- u-(er its &e;is&ative *ra-% ise" T e Cit' (e*e-(e( its $ositio- raisi-; t e *o&&owi-;4 a" T ere was -o e. austio- o* a(,i-istrative re,e(ies )e%ause t e ,atter s ou&( ave *irst )ee- *i&e( )e*ore t e Lo%a& Boar( o* Assess,e-t A$$ea&sL )" T e %o,$a-'8s $ro$erties are e.e,$t *ro, ta. u-(er its *ra-% ise" Reso&ve t e issues raise("
S3<<ESTE" ANS=ERS8 a. There i. $o $eed to e2ha-.t ad#i$i.trati0e re#edie. a. the appea! to the )BAA i. $ot a .peedy a$d ade1-ate re#edy +ithi$ the !a+. Thi. i. .o beca-.e the propertie. are a!ready .ched-!ed or a-ctio$ .a!e. C-rther#ore o$e o the recog$i;ed e2ceptio$. to the r-!e o$ e2ha-.tio$ i. that i the i..-e i. p-re!y !ega! i$ character +hich i. .o i$ thi. ca.e. b. The propertie. are e2e#pt ro# ta2atio$. The gra$t o ta2i$g po+er. to !oca! go0er$#e$t. -$der the (o$.tit-tio$ a$d the )oca! <o0er$#e$t (ode doe. $ot a ect the po+er o (o$gre.. to gra$t ta2 e2e#ptio$.. The ter# e2c!-.i0e o thi. ra$chi.e i. i$terpreted to #ea$ propertie. act-a!!y' direct!y a$d e2c!-.i0e!y -.ed i$ the radio or te!eco##-$icatio$. b-.i$e... The .-b.e1-e$t piece o !egi.!atio$ +hich

reiterated the phra.e e2c!-.i0e o thi. ra$chi.e o-$d i$ the pre0io-. ta2 e2e#ptio$ gra$t to the co#pa$y i. a$ e2pre.. a$d rea! i$te$tio$ o$ the part o (o$gre.. to o$ce agai$.t re#o0e ro# the )<(:. de!egated ta2i$g po+er' a!! o the co#pa$y:. propertie. that are act-a!!y' direct!y a$d e2c!-.i0e!y -.ed i$ the p-r.-it o it. ra$chi.e. %(he City +overnment of 8uezon City, et al., v. Bayan (elecommunications, Inc., <. R. No. 16201>' *arch 6' 2006&

79

T e ow-er o$erator o* a BOT a-( -ot t e u&ti,ate ow-er is su)Ae%t to rea& $ro$ert' ta.es" (o$.i.te$t +ith
the BOT co$cept a$d a. i#p!e#e$ted' BPP( J the o+$er,#a$ager, operator o the pro6ect J i. the act-a! -.er o it. #achi$erie. a$d e1-ip#e$t. BPP(:. o+$er.hip a$d -.e o the #achi$erie. a$d e1-ip#e$t are act-a!' direct' a$d i##ediate' +hi!e NAPO(OR:. i. co$ti$ge$t a$d' at thi. .tage o the BOT Agree#e$t' $ot .- icie$t to .-pport it. c!ai# or ta2 e2e#ptio$. %!ational Po er Corporation v. Central
Board of Assessment Appeals, et al., <' R. No. 1@1E@0' Aa$-ary B0' 200F&

/E"

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