July 2011 Philippine Decisions on Tax Law

Posted on August 22, 2011 by Carina C. Laforteza

Supreme

Court

Here are selected July 2011 rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) inco!e ta") ad(ances to affiliates) ) i! utation of interest inco!e) o#er of Co!!issioner of &nternal 'e(enue. Section *+ ,no# Section -0. of the 1//+ %ational &nternal 'e(enue Code 0%&'C1 ro(ides that. 20i1n case of t#o or !ore organizations, trades or businesses 0#hether or not incor orated and #hether or not organized in the Phili ines1 o#ned or controlled directly or indirectly by the sa!e interests, the Co!!issioner of &nternal 'e(enue ,0C&'1. is authorized to distribute, a ortion or allocate gross inco!e or deductions bet#een or a!ong such organization, trade of business, if he deter!ines that such distribution, a ortion!ent or allocation is necessary in order to re(ent e(asion of ta"es or clearly to reflect the inco!e of any such organization, trade or business,3 Section 14/ of 'e(enue 'egulations %o. 2 ro(ides in art that 20i1n deter!ining the true net inco!e of a controlled ta" ayer, the ,C&'. is not restricted to the case of i! ro er accounting, to the case of a fraudulent, colorable, or sha! transaction, or to the case of a de(ice designed to reduce of a(oid ta" by shifting or distorting inco!e or deductions. 5he authority to deter!ine true net inco!e e"tends to any case in #hich either by inad(ertence or design the ta"able net inco!e in #hole or in art, of a controlled ta" ayer, is other than it #ould ha(e been had the ta" ayer in the conduct of his affairs been an uncontrolled ta" ayer dealing at ar!6s length #ith another uncontrolled ta" ayer.3 7es ite the broad ara!eters ro(ided, ho#e(er, the C&'6s o#er of distribution, a ortion!ent or allocation of gross inco!e and deductions under the %&'C and 'e(enue 'egulations %o. 2 do not include the o#er to i! ute 2theoretical interests3 to the ta" ayer6s transactions. Pursuant to Section 28 ,no# Section +2. of the %&'C, the ter! 2gross inco!e3 is understood to !ean all inco!e fro! #hate(er source deri(ed, including, but not li!ited to certain ite!s. 9hile it has been held that the hrase 2fro! #hate(er source deri(ed3 indicates a legislati(e olicy to include all inco!e not e" ressly e"e! ted #ithin the class of ta"able inco!e under Phili ine la#s, the ter! 2inco!e3 has been (ariously inter reted to !ean 2cash recei(ed or its e:ui(alent,3 the a!ount of !oney co!ing to a erson #ithin a s ecific ti!e3 or so!ething distinct fro! rinci al or ca ital.3 ;ther#ise stated, there !ust be roof of the actual or, at the (ery least, robable recei t or realization by the controlled ta" ayer of the ite! of gross inco!e sought to be distributed, a ortioned or allocated by the C&'. &n this case, there is no e(idence of actual or ossible sho#ing that the ad(ances ta" ayer e"tended to its affiliates had resulted to interests subse:uently assessed by the C&'. <(en if the Court #ere to accord credulity to the C&'6s assertion that ta" ayer had deducted substantial interest e" ense fro! its gross inco!e, there #ould still be no factual basis for the i! utation of theoretical interests on the sub=ect ad(ances and assess deficiency inco!e ta"es thereon. >urther, ursuant to Article 1/-/ of the Ci(il Code of the Phili ines, no interest shall be due unless it has been e" ressly sti ulated in #riting. Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 163653, July 19, !11" Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 16#6$9, July 19, !11. %ational &nternal 'e(enue Code) docu!entary sta! ta") ad(ances to affiliates. Loan agree!ents and ro!issory notes are ta"ed under Section 180 of the 1//+ %ational &nternal 'e(enue Code 0%&'C1 ,they are no# ta"ed under Section 14/ as 2e(idence of indebtedness..

9hen read in con=unction #ith Section 14+ of the %&'C, Section 180 concededly a lies to 2,a.ll loan agree!ents, #hether !ade or signed in the Phili ines, or abroad #hen the obligation or right arises fro! Phili ine sources or the ro erty or ob=ect of the contract is located or used in the Phili ines.3 Section + 0b1 of 'e(enue 'egulations %o. /?/* ro(ides in art that the ter! 2loan agree!ent3 shall include 2credit facilities, #hich !ay be e(idenced by credit !e!o, ad(ice or dra#ings.3 Section @ of the sa!e re(enue regulations further ro(ides that 2,i.n cases #here no for!al agree!ents or ro!issory notes ha(e been e"ecuted to co(er credit facilities, the docu!entary sta! ta" shall be based on the a!ount of dra#ings or a(ail!ent of the facilities, #hich !ay be e(idenced by creditAdebit !e!o, ad(ice or dra#ings by any for! of checB or #ithdra#al sli C3 A lying the foregoing to the case, the instructional letters as #ell as the =ournal and cash (ouchers e(idencing the ad(ances ta" ayer e"tended to its affiliates in 1//@ and 1//4 :ualified as loan agree!ents u on #hich docu!entary sta! ta"es !ay be i! osed. Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 163653, July 19, !11" Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 16#6$9, July 19, !11. %ational &nternal 'e(enue Code) non?retroacti(ity of !odification of rulings, circulars, rules and regulations) #ho is entitled to the benefit of such rule. Any re(ocation, !odification or re(ersal of a Dureau of &nternal 'e(enue 0D&'1 ruling shall not be a lied retroacti(ely if to so a ly it #ould be re=udicial to the ta" ayer. 5his rule does not a ly$ 0a1 #here the ta" ayer deliberately !isstates or o!its !aterial facts fro! his return or in any docu!ent re:uired of hi! by the D&') 0b1 #here the facts subse:uently gathered by the D&' are !aterially different fro! the facts on #hich the ruling is based) or 0c1 #here the ta" ayer acted in bad faith. 5he foregoing rinci le of non?retroacti(ity of D&' !ay be in(oBed by the ta" ayer #ho, in the first lace, sought the ruling fro! the Co!!issioner of &nternal 'e(enue. Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 163653, July 19, !11" Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 16#6$9, July 19, !11. %ational &nternal 'e(enue Code) inco!e ta") ta"?free e"change) ac:uisition of control. 5he re:uisites for the non?recognition of gain or loss under section +* 0c1 021 ,no# Section *0 0c1 021. of the 1//+ %ational &nternal 'e(enue Code 0%&'C1 are the follo#ing$ 0a1 the transferee is a cor oration) 0b1 the transferee e"changes its shares of stocB for ro ertyAies of the transferor) 0c1 the transfer is !ade by a erson, acting alone or together #ith others, not e"ceeding four ersons) and 0d1 as a result of the e"change the transferor, alone or together #ith others, not e"ceeding four, gains control of the transferee. ,Prior to the e"change, transferor already had a controlling interest in the transferee. 5he ta" ayer, together #ith another affiliate #hich #as not an e"isting stocBholder of the transferor rior to the e"change, e"changed ro erty for shares of stocB in the transferee. 5he ta" ayer6s controlling interest #ent do#n fro! @4.*2E rior to the e"change to @1.0+E after the e"change. 5he affiliate ac:uired /./@E of the transferee as a result of the e"change..5he Co!!issioner of &nternal 'e(enue 0C&'1 argues that ta"able gain should be recognized for the e"change considering that the ta" ayer6s controlling interest in the transferee #as decreased as a result of the transfer #hile the affiliate ac:uired only /./@E of the transferee. 'ather than isolating the sa!e as ro osed by the C&', the ta" ayer6s @1.0+E control of transferee should be a reciated in co!bination #ith the /./@E #hich as issued to its affiliate. Since, the ter! 2control3 is clearly defined as 2o#nershi of stocBs in a cor oration ossessing at least fifty?one ercent of the total (oting o#er of classes of stocB entitled to (ote,3 the e"change of ro erty for stocBs bet#een ta" ayer, the affiliate and the transferee clearly :ualify as a ta" free e"change under the %&'C. Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 163653, July 19, !11" Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 16#6$9, July 19, !11.

%ational &nternal 'e(enue Code) inco!e ta") gross inco!e. %o deficiency ta" can be assessed on the gain on the su osed dilution andAor increase in the (alue of ta" ayer6s shareholdings in the transferee #hich the Co!!issioner of &nternal 'e(enue 0C&'1, at any rate, failed to establish. Dearing in !ind the !eaning of 2gross inco!e,3 it cannot be gainsaid that a !ere increase or a reciation in the (alue of the shares cannot be considered inco!e for ta"ation ur oses. Since 2a !ere ad(ance in the (alue of the ro erty of a erson or cor oration in no sense constitute the Finco!e6 s ecified in the re(enue la#,3 it has been held in the early case of Fis%er vs. &rini'a' that it 2constitutes and can be treated !erely as an increase of ca ital.3 Hence, the C&' has no factual and legal basis in assessing inco!e ta" on the increase in the (alue of the ta" ayer6s shareholdings in the transferee until the sa!e is actually sold. Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 163653, July 19, !11" Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 16#6$9, July 19, !11. %ational &nternal 'e(enue Code) (alue?added ta") toll fees as gross recei ts deri(ed fro! sale of ser(ices. Section 108 of the %ational &nternal 'e(enue Code 0%&'C1 i! oses (alue added ta" on 2all Binds of ser(ice3 rendered in the Phili ines for a fee, including those s ecified in the list. 5he enu!eration of affected ser(ices is not e"clusi(e. Dy :ualifying ser(ices #ith the #ords 2all Binds,3 Congress has gi(en the ter! 2ser(ices3 an all?enco! assing !eaning. 5hus, e(ery acti(ity that can be i!agined as a for! of 2ser(ice3 rendered for a fee should be dee!ed included unless so!e ro(ision of la# es ecially e"cludes it. 9hen a toll#ay o erator taBes a toll fee fro! a !otorist, the fee is in effect for the latter6s use of the toll#ay facilities o(er #hich the o erator en=oys ri(ate ro rietary rights that its contract and the la# recognize. &n this sense, the toll#ay o erator is no different fro! those enu!erated under Section 108 of the %&'C #ho allo# others to use their ro erties or facilities for a fee. Renato (. Dia) an' *urora +a. F. &im,ol vs. t%e -e.retary of Finan.e an' t%e Commissioner of Internal Revenue, G.R. No. 193!!#" July 19, !11. %ational &nternal 'e(enue Code) (alue?added ta") toll#ay o erators as franchise grantees. Section 108 of the %ational &nternal 'e(enue Code 0%&'C1 also i! oses (alue added ta" 0GA51 on 2all other franchise grantees3 other than those under Section 11/ of the %&'C. 5oll#ay o erators are franchise grantees and they do not belong to the e"ce tions 0the lo#?inco!e radio andAor tele(ision broadcasting co! anies #ith gross annual inco!es of less than PhP 10 !illion and gas and #ater utilities1 that Section 11/ s ares fro! GA5. 5he #ord 2franchise3 broadly co(ers go(ern!ent grants of a s ecial right to do an act or series of acts of ublic concern. &t has been broadly construed as referring, not only to authorization that Congress directly issues in the for! of a s ecial la#, but also to those granted by ad!inistrati(e agencies to #hich the o#er to grant franchises has been delegated by Congress. 5oll#ay o erators are, o#ning to the nature and ob=ect of their business, 2franchise grantees.3 5he construction, o eration, and !aintenance of toll facilities on ublic i! ro(e!ents are acti(ities of ublic conse:uence that necessarily re:uire a s ecial grant of authority fro! the state. A art fro! Congress, toll#ay franchise !ay also be granted by the 5oll 'egulatory Doard, ursuant to the e"ercise of its delegated o#ers under Presidential 7ecree %o. 1112. 5he franchise in this case is e(idence by a 25oll ; eration Certificate.3 Renato (. Dia) an' *urora +a. F. &im,ol vs. t%e -e.retary of Finan.e an' t%e Commissioner of Internal Revenue, G.R. No. 193!!#" July 19, !11. %ational &nternal 'e(enue Code) (alue?added ta") toll fee is not a user6s ta". Petitioners argue that toll fee is a user6s ta" and to i! ose (alue?added ta" on toll fees is tanta!ount to ta"ing a ta". >ees aid by the ublic to toll#ay o erators for use of the toll#ays, are not ta"es in any sense. A ta" is i! osed under the ta"ing o#er of the go(ern!ent rinci ally for the ur ose of raising re(enues to fund ublic e" enditures. 5oll fees, on the other hand, are collected by

ri(ate toll#ay o erators as rei!burse!ent for the costs and e" enses incurred in the construction, !aintenance and o eration of the toll#ays, as #ell as to assure the! a reasonable !argin of inco!e. Although toll fees are charged for the use of ublic facilities, they are not go(ern!ent e"actions that can be ro erly treated as ta". 5a"es !ay be i! osed only by the go(ern!ent under its so(ereign authority, toll fees !ay be de!anded by either the go(ern!ent or ri(ate indi(iduals or entities, as an attribute of o#nershi . Renato (. Dia) an' *urora +a. F. &im,ol vs. t%e -e.retary of Finan.e an' t%e Commissioner of Internal Revenue, G.R. No. 193!!#" July 19, !11. %ational &nternal 'e(enue Code) (alue?added ta" 0GA51) e(en if toll fee is a user6s ta", GA5 is not a ta" on ta". <(en if toll fees #ere dee!ed as a 2user6s ta",3 (alue?added ta" 0GA51 on toll#ay o erations cannot be a ta" on ta". GA5 is assessed against the toll#ay o erator6s gross recei ts and not necessarily on the toll fees. Although the toll#ay o erator !ay shift the GA5 burden to the toll#ay user, it #ill not !aBe the latter directly liable for the GA5. 5he shifted GA5 si! ly beco!es art of the toll fees that one has to ay in order to use the toll#ays. Renato (. Dia) an' *urora +a. F. &im,ol vs. t%e -e.retary of Finan.e an' t%e Commissioner of Internal Revenue, G.R. No. 193!!#" July 19, !11. 5a"ation) i! air!ent of obligation of contracts. Petitioner 5i!bol has no ersonality to in(oBe the non?i! air!ent of contract clause on behalf of ri(ate in(estors in the toll#ay ro=ects. She #ill neither be re=udiced by nor be affected by the alleged di!inution of return of in(est!ents that !ay result fro! the (alue?added ta" i! osition. She has no interest at all in the rofits to be earned under the toll o erating agree!ents. 5he interest in and right to reco(er in(est!ents solely belongs to ri(ate in(estors. Renato (. Dia) an' *urora +a. F. &im,ol vs. t%e -e.retary of Finan.e an' t%e Commissioner of Internal Revenue, G.R. No. 193!!#" July 19, !11. 5a"ation) ad!inistrati(e feasibility. Ad!inistrati(e feasibility is one of the canons of a sound ta" syste!. &t si! ly !eans that the ta" syste! should be ca able of being effecti(ely ad!inistered and enforced #ith the least incon(enience to the ta" ayer. %on?obser(ance of the canon, ho#e(er, #ill not render a ta" i! osition in(alid 2e"ce t to the e"tent that s ecific constitutional or statutory li!itations are i! aired. 5hus, e(en if the i! osition of (alue?added ta" on toll#ay o erations !ay see! burdenso!e to i! le!ent, it is not necessarily in(alid unless so!e as ect of it is sho#n to (iolate any la# or the Constitution. Renato (. Dia) an' *urora +a. F. &im,ol vs. t%e -e.retary of Finan.e an' t%e Commissioner of Internal Revenue, G.R. No. 193!!#" July 19, !11. 'e ublic Act %o. 4*+2 or 2An Act to Ha"i!ize the Contribution of Senior Citizens to %ation Duilding, Irant Denefits and S ecial Pri(ileges and >or ;ther Pur oses3) ta" credit) cost of the 20E senior citizens6 discount. Prior to its a!end!ent, Section * of 'e ublic Act %o. 4*+2, allo#s the 20E senior citizens6 discount to be clai!ed by the ri(ate establish!ent as a ta" credit and not !erely as a ta" deduction fro! gross sales or gross inco!e. ,%ote that currently the la# treats the discount as a ta" deduction instead of as a ta" credit.. 5he la# is ho#e(er is silent as to ho# the 2cost of discount3 as a ta" credit should be construed. >ollo#ing other cases on this issue, the ter! 2cost3 is the a!ount of the 20E discount e"tended by a ri(ate establish!ent to senior citizens . +er.ury Dru/ Corporation vs. Commissioner of Internal Revenue, G.R. No. 160!5!" July !, !11. %ational &nternal 'e(enue Code) docu!entary sta! ta") sa(ings account lus roduct. 5he sa(ings account lus 0SAP1 roduct is sub=ect to docu!entary sta! ta" 07S51 under Section 180 ,no# 14/. of the %ational &nternal 'e(enue Code #here, although the !oney is ayable

anyti!e, the #ithdra#al of the !oney before the e" iration of the ter! results in the reduction of the interest rate. 5he fact that the SAP is e(idence by a assbooB does not re!o(e it fro! the co(erage of Section 180. A docu!ent to be considered a certificate of de osit need not be in a s ecific for!. 5hus, a ass ort issued by a banB :ualifies as a certificate of de osit dra#ing interest because it is considered a #ritten acBno#ledg!ent by a banB that it has acce ted a de osit of a su! of !oney fro! a de ositor. 1ru'ential 2an3 vs. Commissioner of Internal Revenue, G.R. No. 1$!39!" July #, !11.

September 2011 Philippine Supreme Court Decisions on Tax Law

Posted on ;ctober 2-, 2011 by Carina C. Laforteza Here are selected Se te!ber 2011 rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) Ci(il Code) #ai(er of statute of li!itations) esto el. 5a" ayer assails the (alidity of the #ai(ers of the statute of li!itations on the ground that the #ai(ers #ere !erely attested to by the coordinator for the Co!!issioner of &nternal 'e(enue 0C&'1 and he failed to indicate the acce tance or agree!ent of the C&', as re:uired under Section 22+ of the %ational &nternal 'e(enue Code. 5a" ayer argues that the rinci le of esto el cannot be used against it because its ay!ent of the other ta" assess!ent does not signify a clear intention on its art to gi(e u its right to :uestion the (alidity of the #ai(ers. 5he Court ruled that esto el a lied to the ta" ayer. Jnder Article 1*+1 of the Ci(il Code, the doctrine of esto el is anchored on the rule that 2an ad!ission or re resentation is rendered conclusi(e u on the erson !aBing it, and cannot be denied or dis ro(ed as against the erson relying thereon.3 5hus, a arty is recluded fro! denying his o#n acts, ad!issions or re resentation to the re=udice of the other arty in order to re(ent fraud and falsehood. &n this case, ta" ayer, through its artial ay!ent of the re(ised assess!ents issued #ithin the e"tended eriod as ro(ided for in the :uestioned #ai(ers, i! liedly ad!itted the (alidity of those #ai(ers. Had ta" ayer belie(ed that the #ai(ers #ere in(alid and that the assess!ents #ere issued beyond the rescri ti(e eriod, then it should not ha(e aid the reduced a!ount of ta"es in the re(ised assess!ent. &ts subse:uent action effecti(ely belie(es its insistence that its #ai(ers are in(alid. 5he records sho# that ta" ayer i!!ediately !ade ay!ent on the uncontested ta"es i!!ediately u on recei t of the re(ised assess!ent. &t is thus esto ed fro! :uestioning the (alidity of the #ai(ers. 5o hold other#ise and allo# a arty to gainsay its o#n act of deny rights #hich it had re(iously recognized #ould run counter to the rinci le of e:uity #hich the Court holds dear. Ri)al Commer.ial 2an3in/ Corporation vs. Commissioner of Internal Revenue, G.R. No. 1#! 5#, -eptem,er #, !1199$. %ational &nternal 'e(enue Code) foreign currency de osit units) liability for final #ithholding ta" on onshore inco!e) ta" ayer (ersus #ithholding agent. 5he liability of the #ithholding agent is inde endent fro! that of the ta" ayer. 5he for!er cannot be !ade liable for the ta" due because it is the latter #ho earned the inco!e sub=ect to #ithholding ta". 5he #ithholding agent is liable only insofar as he failed to erfor! his duty to #ithhold the ta" and re!it the sa!e to the go(ern!ent. 5he liability for the ta", ho#e(er, re!ains #ith the ta" ayer because the gain #as realized and recei(ed by hi!. 9hile the ayor?borro#er can be held accountable for its

negligence in erfor!ing its duty to #ithhold the a!ount of ta" due on the transaction, etitioner, as the ta" ayer and the one #hich earned inco!e on the transaction, re!ains liable for the ay!ent of ta" as the ta" ayer shares the res onsibility of !aBing certain that the ta" is ro erly #ithheld by the #ithholding agent, so as to a(oid any enalty that !ay arise fro! the non? ay!ent of the #ithholding ta" due. 5a" ayer banB cannot e(ade its liability for foreign currency de osit unit onshore ta" by shifting the bla!e on the ayor?borro#er as the #ithholding agent. As such, it is liable for ay!ent of deficiency onshore ta" on interest inco!e deri(ed fro! foreign currency loans, ursuant to Section 2*0c1 0+1 of the %ational &nternal 'e(enue Code. Ri)al Commer.ial 2an3in/ Corporation vs. Commissioner of Internal Revenue, G.R. No. 1#! 5#, -eptem,er #, !11. %ational &nternal 'e(enue Code) e"cise ta"es) 'e(enue 'egulations %o. 14?//. 5he ro(ision in Section 1 of 'e(enue 'egulations %o. 14?// 0that re:uires the ay!ent of e"cise ta" actually being aid rior to January 1, 2000 if this a!ount is higher than the ne# s ecific ta" rate1 clearly #ent beyond the ter!s of the la# it #as su osed to i! le!ent and, therefore, entitles the ta" ayer to clai! a refund of the o(er aid e"cise ta"es collected ursuant to the ro(ision. &t effecti(ely e"tended the :ualification stated in the third aragra h of Section 1*- 0c1 of the %ational &nternal 'e(enue Code that #as su osed to a ly only during the transition eriod. 5he said aragra h states$ ,t.he e"cise ta" fro! any brand of cigarettes #ithin the ne"t three 0+1 years fro! the effecti(ity of '.A. %o. 82*0 shall not be lo#er than the ta", #hich is due fro! each brand on ;ctober 1, 1//@C ,%ote that Section 1*- #as subse:uently a!ended by 'e ublic Act %o. /++* in 200-.. Commissioner of Internal Revenue vs. Fortune &o,a..o Corporation, G.R. No. 1$!!!6, -eptem,er $, !11.

December 2011 Philippine Supreme Court Decisions on Tax Laws

Posted on January 18, 2012 by Carina C. Laforteza %ational &nternal 'e(enue Code) Galue Added 5a") Ci(il Code. LGH Construction #as a#arded the construction contract #ith 7P9H. LGH as the contractor entered into a Sub? Contractor Agree!ent #ith a Joint Genture as sub?contractor. As the entity #hich directly dealt #ith the go(ern!ent insofar as the !ain contract #as concerned, LGH #as itself re:uired by la# to ay the 8.-E GA5 #hich #as #ithheld by the 7P9H. A contract constitutes the la# bet#een the arties #ho are, therefore, bound by its sti ulations #hich, #hen couched in clear and lain language, should be a lied according to their literal tenor. 5hat there #as no agree!ent regarding the offsetting urged by LGH !ay liBe#ise be readily gleaned fro! the arties6 conte! oraneous and subse:uent acts #hich are gi(en ri!ordial consideration in deter!ining their intention. &n the absence of any sti ulation regarding the Joint Genture6s sharing in the GA5 deducted and #ithheld by the 7P9H fro! its ay!ent on the !ain contract, LGH has no basis in offsetting the a!ounts of said ta" fro! the retention still in its ossession. LGH, as Contractor for the Pro=ect, #as liable for the 8.-E GA5 #hich #as #ithheld by the 7P9H fro! its ay!ents, ursuant to Section 11* 0C1 of the %&'C. Absent any agree!ent to that effect, LGH cannot deduct the a!ounts thus #ithheld fro! the su!s it still o#ed the Joint Genture #hich, as Sub?Contractor of +0E of the Pro=ect, had its o#n liability for 10E GA5 insofar as the su!s aid for the sub?contracted #orBs #ere concerned. Although the burden to

ay an indirect ta" liBe GA5 can, ad!ittedly, be assed on to the urchaser of the goods or ser(ices, it bears e! hasizing that the liability to ay the sa!e re!ains #ith the !anufacturer or seller liBe LGH and the Joint Genture. &n the sa!e !anner that LGH is liable for the GA5 due on the ay!ents !ade by the 7P9H ursuant to the contract on the Pro=ect, the Joint Genture is, conse:uently, liable for the GA5 due on the ay!ents !ade by LGH ursuant to the arties6 Sub?Contract. 4(+ Constru.tion Corporation vs. F.&. -an.%e)5-6C6R57I+8* 9Joint (enture:, G.R. No. 1$1961, De.em,er 5, !11.

January 2012 Philippine Supreme Court Decisions on Tax Laws

Posted on >ebruary 22, 2012 by Carina C. Laforteza %ational &nternal 'e(enue Code) e"cise ta") ro er arty to seeB a ta" refund. SilBair 0Singa ore1 is a foreign cor oration licensed to do business in the Phili ines as an on?line international carrier. &t urchased a(iation fuel fro! Petron and aid the e"cise ta"es. &t filed an ad!inistrati(e clai! for refund for e"cise ta"es on the urchase of =et fuel fro! Petron, #hich it alleged to ha(e been erroneously aid. >or indirect ta"es, the ro er arty to :uestion or seeB a refund of the ta" is the statutory ta" ayer, the erson on #ho! the ta" is i! osed by la# and #ho aid the sa!e e(en #hen he shifts the burden thereof to another. 5hus, Petron, not SilBair, is the statutory ta" ayer #hich is entitled to clai! a refund. <"cise ta" is due fro! the !anufacturers of the etroleu! roducts and is aid u on re!o(al of the roducts fro! their refineries. <(en before the a(iation =et fuel is urchased fro! Petron, the e"cise ta" is already aid by Petron. Petron, being the !anufacturer, is the 2 erson sub=ect to ta".3 &n this case, Petron, #hich aid the e"cise ta" u on re!o(al of the roducts fro! its Dataan refinery, is the 2 erson liable for ta".3 Petitioner is neither a 2 erson liable for ta"3 nor 2a erson sub=ect to ta".3 -il3air 9-in/apore: 1te. 4t'. vs. Commissioner of Internal Revenue, G.R. No. 1660$ , January 5, !1 .

February 2012 Philippine Supreme Court Decisions on Tax Laws

Posted on Harch 1@, 2012 by Carina C. Laforteza 5ariff and Custo!s Code) 'e(ised Ad!inistrati(e Code Custo!s He!orandu! ;rder %o. 24? 200+. Custo!s He!orandu! ;rder %o. 24?200+ 0CH; 2+?20041 is in(alid. 5he Co!!issioner of Custo!s 011 (iolated the right to due rocess in the issuance of CH; 24?200+ #hen he failed to obser(e the re:uire!ents under the 'e(ised Ad!inistrati(e Code, 021 (iolated the right to e:ual rotection of la#s #hen he ro(ided for an unreasonable classification in the a lication of the regulation, and 0+1 #ent beyond his o#ers of delegated authority #hen the regulation li!ited the o#ers of the custo!s officer to e"a!ine and assess i! orted articles. CH; 24?200+ #as issued #ithout follo#ing the !andate of the 'e(ised Ad!inistrati(e Code on ublic

artici ation, rior notice, and ublication or registration #ith the Jni(ersity of the Phili ines La# Center. >or tariff ur oses, CH; 24?200+ classified #heat according to the follo#ing$ 011 i! orter or consignee) 021 country of origin) and 0+1 ort of discharge. 5his is a (iolation of the e:ual rotection clause under the Constitution. 5he Court does not see ho# the :uality of #heat is affected by #ho i! orts it, #here it is discharged, or #hich country it ca!e fro!. 5hus, on the one hand, e(en if other !illers e"cluded fro! CH; 24?200+ ha(e i! orted food grade #heat, the roduct #ould still be declared as feed grade #heat, a classification sub=ecting the! to 4E tariff. ;n the other hand, e(en if the i! orters listed under CH; 24?200+ ha(e i! orted feed grade #heat, they #ould only be !ade to ay +E tariff, thus de ri(ing the state of the ta"es due. 5he regulation, therefore, does not beco!e disad(antageous to res ondent only, but e(en to the state. Section 1*0+ of the 5ariff and Custo!s La#, as a!ended !andates that the custo!s officer !ust first assess and deter!ine the classification of the i! orted article before tariff !ay be i! osed. Jnfortunately, CH; 2+?2004 has already classified the article e(en before the custo!s officer had the chance to e"a!ine it. >inally, Co!!issioner of Custo!s di!inished the o#ers granted by the 5ariff and Custo!s Code #ith regard to #heat i! ortation #hen it no longer re:uired the custo!s officer6s rior e"a!ination and assess!ent of the ro er classification of the #heat. Commissioner of Customs vs. ;ypermi< Fee's Corporation, G.R. No. 1#95#9, Fe,ruary 1, !1 .

March 2012 Philippine Supreme Court Decisions on Tax Law

Posted on A ril 2+, 2012 by Carina C. Laforteza Here are select Harch 2012 rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) assess!ent) re!edies. &n case the Co!!issioner of &nternal 'e(enue failed to act on the dis uted assess!ent #ithin the 180?day eriod fro! date of sub!ission of docu!ents, a ta" ayer can either$ 011 file a etition for re(ie# #ith the Court of 5a" A eals #ithin +0 days after the e" iration of the 180?day eriod) or 021 a#ait the final decision of the Co!!issioner on the dis uted assess!ents and a eal such final decision to the Court of 5a" A eals #ithin +0 days after recei t of a co y of such decision. 5hese o tions are !utually e"clusi(e and resort to one bars the a lication of the other. &n arguing that the assess!ent beca!e final and e"ecutory by the sole reason that etitioner failed to a eal the inaction of the Co!!issioner #ithin +0 days after the 180?day regle!entary eriod, res ondent, in effect, li!ited the re!edy of Lascona, as a ta" ayer, under Section 228 of the %ational &nternal 'e(enue Code to =ust one, that is K to a eal the inaction of the Co!!issioner on its rotested assess!ent after the la se of the 180?day eriod. 5his is incorrect. 5he #ord 2decisions3 in aragra h 1, Section 4 of 'e ublic Act %o. 112-, has been inter reted to !ean the 'e.isions of the Co!!issioner of &nternal 'e(enue on the protest of the ta" ayer against the assess!ents. 5a" ayers cannot be left in :uandary by the Co!!issioner6s inaction on the rotested assess!ent. 5he ta" ayers !ust be infor!ed infor!ed of its action in order that the ta" ayer should be able to taBe recourse to the ta" court at the o ortune ti!e. >inally, as ointed out by the Court of 5a" A eals, to ado t the inter retation of the Co!!issioner #ill not only sanction inefficiency, but #ill liBe#ise condone the Dureau of &nternal 'e(enue6s

inaction 4as.ona 4an', In.. vs. Commissioner of Internal Revenue, G.R. No. 1#1 51, +ar.% 5, !1 . %ational &nternal 'e(enue Code) ;!nibus &n(est!ents Code) 'e(enue 'egulation %o. -?2000) ta" credit certificate 05CC1) assign!ent of 5CC. Jnder the ;!nibus &n(est!ents Code, ta" credit certificates 05CC1 are granted to entities registered #ith the Doard of &n(est!ent 0D;&1 and are gi(en for ta"es and duties aid on ra# !aterials used for the !anufacture of their e" ort roducts. A 5CC !ay be used by the grantee assignee in the ay!ent of its direct internal re(enue ta" liability. &t !ay also be transferred to an assignee sub=ect to the follo#ing conditions$ 11 the 5CC transfer is !ade #ith the rior a ro(al of the Co!!issioner of &nternal 'e(enue or his duly authorized re resentati(e) 21 the transfer of a 5CC is li!ited to one transfer only) and +1 the transferee shall strictly use the 5CC for the ay!ent of the assignee6s direct internal re(enue ta" liability. 5he rocessing of a 5CC is entrusted to a s ecialized agency called the 2;ne?Sto ? Sho &nter?Agency 5a" Credit and 7uty 7ra#bacB Center3 02Center31. A 5CC !ay be assigned through a 7eed of Assign!ent, #hich the assignee sub!its to the Center for its a ro(al. J on a ro(al of the deed, the Center #ill issue a 7;> 5a" 7ebit He!o 07;>?57H1, ,+8. #hich #ill be utilized by the assignee to ay the latter6s ta" liabilities for a s ecified eriod. J on surrender of the 5CC and the 7;>?57H, the corres onding Authority to Acce t Pay!ent of <"cise 5a"es 0A5AP<51 #ill be issued by the Dureau of &nternal 'e(enue 0D&'1 Collection Progra! 7i(ision and #ill be sub!itted to the issuing office of the D&' for acce tance by the Assistant Co!!issioner of Collection Ser(ice. 5his act of the D&' signifies its acce tance of the 5CC as ay!ent of the assignee6s e"cise ta"es. &ssued 5CCs are i!!ediately (alid and effecti(e and are not sub=ect to a ost?audit as a sus ensi(e condition. A transferee in good faith and for (alue has the right to rely on the (alidity and effecti(ity of the 5CCs that #ere assigned to it. Commissioner of Internal Revenue vs. 1etron Corporation, G.R. No. 1$556$, +ar.% 1, !1 .

pril 2012 Philippine Decisions on Tax Law

Posted on Hay 1*, 2012 by Carina C. Laforteza

Supreme

Court

%ational &nternal 'e(enue Code) e"cise ta" on etroleu! roducts) sales to international carriers) clai! for refund. 5he e"e! tion fro! e"cise ta" ay!ent on etroleu! roducts under Section 1+- 0a1 of the %ational &nternal 'e(enue Code 0%&'C1 is conferred on international carriers #ho urchased the sa!e for their use or consu! tion outside the Phili ines. Section 1+- 0a1 in relation to the other ro(isions on e"cise ta" and fro! the nature of indirect ta"ation, !ay only be construed as rohibiting the !anufacturers?sellers of etroleu! roducts fro! assing on the ta" to international carriers by incor orating re(iously aid e"cise ta"es into the selling rice. Considering that the e"cise ta"es attaches to etroleu! roducts 2as soon as they are in e"istence as such,3 there can be no outright e"e! tion fro! the ay!ent of e"cise ta" on etroleu! roducts sold to international carriers. 5he sole basis of ta" ayer?!anufacturer6s clai! for refund is the e" ress grant of e"cise ta" e"e! tion in fa(or of international carriers under Section 1+- 0a1 for the latter6s urchases of locally !anufactured etroleu! roducts. Pursuant to ruling of the Court in 1%ilippine *.etylene, a ta" e"e! tion being en=oyed by the buyer cannot be the basis of a clai! for ta" e"e! tion by the !anufacturer or seller of the goods for

any ta" due to it as the !anufacturer or seller. 5he e"cise ta" i! osed on etroleu! roducts under Section 1*8 is the direct liability of the !anufacturer #ho cannot thus in(oBe the e"cise ta" e"e! tion granted to its buyers #ho are international carriers. An e"cise ta" is a ta" on the !anufacturer and not on the urchaser, and there being no e" ress grant under the %&'C of e"e! tion fro! ay!ent of e"cise ta" to local !anufacturers of etroleu! roducts sold to international carriers, and absent any ro(ision in the %&'C authorizing the refund or crediting of such e"cise ta"es aid, Section 1+- 0a1 should be construed as rohibiting the shifting of the burden of the e"cise ta" to the international carriers #ho buys etroleu! roducts fro! the local !anufacturers. Said ro(ision thus !erely allo#s the international carriers to urchase etroleu! roducts #ithout the e"cise ta" co! onent as an added cost in the rice fi"ed by the !anufacturers or distributorsAsellers. Conse:uently, the oil co! anies #hich sold such etroleu! roducts to international carriers are not entitled to a refund of e"cise ta"es re(iously aid on the goods.Commissioner of Internal Revenue vs. 1ilipinas -%ell 1etroleum Corporation, G.R. No. 1$$09#, *pril 5, !1 .

June 2012 Philippine Decisions on Tax Law

Posted on July 18, 2012 by Carina C. Laforteza

Supreme

Court

Here are select June 2012 rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) 'e(enue 'egulations %o. 4?/-) refund of in ut GA5) rinting of 2zero?rated3 on official recei t. 'e(enue 'egulations %o. 4?/-, #hich tooB effect on 1 January 1//@, roceeds fro! the rule?!aBing authority granted to the Secretary of >inance by the %ational &nternal 'e(enue Code for the efficient enforce!ent of the sa!e 5a" Code and its a!end!ents. &n Panasonic Co!!unications &!aging Cor oration of the Phili ines (. Co!!issioner of &nternal 'e(enue, the Court had ruled that this ro(ision is 2reasonable and is in accord #ith the efficient collection of GA5 fro! the co(ered sales of goods and ser(ices.3 Horeo(er, the Court held in Le co Phili ines Cor oration (. Co!!issioner of &nternal 'e(enue that the subse:uent incor oration of Section *.108?1 of '' 4?/- in Section 11+ 0D1 021 0c1 of 'e ublic Act %o. /++4 actually confir!ed the (alidity of the i! rinting re:uire!ent on GA5 in(oices or official recei ts K a case falling under the rinci le of legislati(e a ro(al of ad!inistrati(e inter retation by reenact!ent. 5he Court has consistently held as fatal the failure to rint the #ord 2zero?rated3 on the GA5 in(oices or official recei ts in clai!s for a refund or credit of in ut GA5 on zero?rated sales, e(en if the clai!s #ere !ade rior to the effecti(ity of '.A. /++4. 8estern +in'anao 1o=er Corporation vs. Commissioner of Internal Revenue, G.R. No. 1$1136, June 13, !1 . 'e ublic Act %o. @0--) Presidential 7ecree %o. 10/@ 0%ational Duilding Code of the Phili ines1) 'e ublic Act %o. 41@0 0Local Io(ern!ent Code of 1//11) e"e! tion of non?stocB non? rofit foundations) building er!it fee. 'e ublic Act 0'.A.1 %o. @0-- granted the follo#ing ta" e"e! tions to educational institutions liBe etitioner #hich con(erted to non?stocB, non? rofit educational foundations$ e"e! tion fro! the ay!ent of all ta"es, i! ort duties, assess!ents, and other charges i! osed by the Io(ern!ent on all inco!e deri(ed fro! or ro erty, real or ersonal, used e"clusi(ely for the educational acti(ities of the >oundation. ;n

the other hand, under the %ational Duilding Code, only ublic buildings and traditional indigenous fa!ily d#ellings are e"e! ted fro! the ay!ent of building er!it fees. Hence, not being e" ressly included in the enu!eration of structures to #hich the building er!it fees does not a ly, etitioner6s clai! for e"e! tion rests solely on its inter retation of the ter! 2other charges i! osed by the %ational Io(ern!ent3 in the ta" e"e! tion clause of '.A. %o. @0--. A 2charge3 is broadly defined as the 2 rice of, or rate for, so!ething,3 #hile the #ord 2fee3 ertains to a 2charge fi"ed by la# for ser(ices of ublic officers or for use of a ri(ilege under control of go(ern!ent.3 As used in the Local Io(ern!ent Code of 1//1 0'.A. %o. 41@01, 2charges3 refers to ecuniary liability, as rents or fees against ersons or ro erty, #hile 2fee3 !eans a charge fi"ed by la# or ordinance for the regulation or ins ection of a business or acti(ity. 5hat 2charges3 in its ordinary !eaning a ears to be a general ter! #hich could co(er a s ecific 2fee3 does not su ort etitioner6s osition that building er!it fees are a!ong those 2other charges3 fro! #hich it #as e" ressly e"e! ted. %ote that the 2other charges3 !entioned in '.A. %o. @0-- is :ualified by the #ords 2i! osed by the Io(ern!ent on all ro erty used e"clusi(ely for the educational acti(ities of the foundation.3 Duilding er!it fees are not i! ositions on ro erty but on the acti(ity sub=ect of go(ern!ent regulation. 9hile it !ay be argued that the fees relate to articular ro erties, i.e., buildings and structures, they are actually i! osed on certain acti(ities the o#ner !ay conduct either to build such structures or to re air, alter, reno(ate or de!olish the sa!e. Since building er!it fees are regulatory i! ositions and not charges on ro erty, they are not i! ositions fro! #hich the etitioner is e"e! t. *n/eles >niversity Foun'ation vs. City of *n/eles, et al., G.R. No. 1$9999, June #, !1 .

July 2012 Philippine Decisions on Tax Law

Posted on August +, 2012 by Carina C. Laforteza

Supreme

Court

Here are select July 2012 rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) Galue Added 5a") 2zero?rated3 transaction) reci ient of ser(ices. 5he reci ient of ser(ices !ust be doing business outside the Phili ines for the transaction to :ualify it as zero?rated under Section 108 0D1 of the %ational &nternal 'e(enue Code of 1//4 01//4 5a" Code1. Since Section 108 0D1 of the 1//4 5a" Code is a (erbati! co y of Section 102 0b1 of the %ational &nternal 'e(enue Code of 1/44 01/44 5a" Code1, any inter retation of the latter holds true for the for!er. 9hen the Su re!e Court decides a case, it does not ass a ne# la#, but !erely inter rets a re?e"isting one. <(en though the ta" ayer6s resent etition #as filed before the decision in the case of Co!!issioner of &nternal 'e(enue ( Dur!eister and 9ain Scandina(ian Contractor Hindanao, &nc. #as ro!ulgated, the ronounce!ents !ade in that case !ay be a lied to the resent case #ithout (iolating the rule against retroacti(e a lication. 9hen the Court inter reted Section 102 0b1 of the 1/44 5a" Code in the Dur!eister case, this inter retation beca!e art of the la# fro! the !o!ent it beca!e effecti(e. &t is ele!entary that the inter retation of a la# by the Court constitutes art of that la# fro! the date it #as originally assed, since the Court6s construction !erely establishes the conte! oraneous legislati(e intent that the inter reted la# carried into effect.

As e" lained by the Court in the Dur!eister case$ 2&f the ro(ider and reci ient of the Fother ser(ices6 are both doing business in the Phili ines, the ay!ent of foreign currency is irrele(ant. ;ther#ise, those sub=ect to the regular GA5 under section 102 0a1 ,of the 1/44 5a" Code. can a(oid aying the GA5 by si! ly sti ulating ay!ent in foreign currency in#ardly re!itted by the reci ient of ser(ices. 5o inter ret section 102 0b1 021 to a ly to a ayer?reci ient of ser(ices doing business in the Phili ines is to !aBe the ay!ent of the regular GA5 under section 102 0a1 de endent on the generosity of the ta" ayer. 5he ro(ider of ser(ices can choose to ay the regular GA5 or a(oid it by sti ulating ay!ent in foreign currency in#ardly re!itted by the ayer?reci ient. Such inter retation re!o(es section 102 0a1 as a ta" !easure in the 5a" Code, an inter retation this Court cannot sanction. A ta" is a !andatory e"action, not a (oluntary contribution.3 Accenture, &nc. (s. Co!!issioner of &nternal 'e(enue, I.'. %o. 1/0102, July 11, 2012. %ational &nternal 'e(enue Code) Galue Added 5a") 2zero?rated3 transaction) not doing business in the Phili ines. &t is not enough that the reci ient of the ser(ices be ro(en to be a foreign cor oration) it !ust be s ecifically ro(en to be a non?resident foreign cor oration. 5here is no s ecific criterion as to #hat constitutes 2doing3 or 2engaging in3 or 2transacting3 business. <ach case !ust be =udged in the light of its eculiar en(iron!ental circu!stances. 5he ter! i! lies a continuity of co!!ercial dealings and arrange!ents, and conte! lates, to that e"tent the erfor!ance of acts or #orBs or the e"ercise of so!e of the functions nor!ally incident to, and in rogressi(e rosecution of co!!ercial gain or for the ur ose and ob=ect of the business organization. Accenture, &nc. (s. Co!!issioner of &nternal 'e(enue, I.'. %o. 1/0102, July 11, 2012. Local Io(ern!ent Code) local business ta") a eal under Section 1/-) 'ule @- etition for certiorari. A ta" ayer dissatisfied #ith a local treasurer6s denial of or inaction on his rotest o(er an assess!ent has +0 days #ithin #hich to a eal to the court of co! etent =urisdiction. 5he said eriod is to be recBoned fro! the ta" ayer6s recei t of the denial of his rotest or the la se of the @0?day eriod #ithin #hich the local treasurer is re:uired to decide the rotest, fro! the !o!ent of its filing. Section 1/- of the Local Io(ern!ent Code does not elaborate on ho# an a eal is to be !ade fro! the denial by a local treasurer of a rotest on assess!ent !ade by a ta" ayer. Ho#e(er, ta" ayer erroneously a(ailed of the #rong re!edy in filing a 'ule @- etition for certiorari to :uestion the treasurer6s inaction on its letter? rotest. As a s ecial ci(il action, certiorari is a(ailable only if the follo#ing essential re:uisites concur$ 0i1 it !ust be directed against a tribunal, board, or officer e"ercising =udicial or :uasi?=udicial functions) 021 the tribunal, board, or officer !ust ha(e acted #ithout or in e"cess of =urisdiction or #ith gra(e abuse of discretion a!ounting to lacB or e"cess of =urisdiction, or #ith gra(e abuse of discretion a!ounting to lacB or e"cess of =urisdiction) and, 0+1 there is no a eal nor any lain, s eedy, and ade:uate re!edy in the ordinary course of la#. Judicial function entails the o#er to deter!ine #hat the la# is and #hat the legal rights of the arties are, and then undertaBes to deter!ine these :uestions and ad=udicate u on the rights of the arties. Muasi?=udicial function, on the other hand, refers to the action and discretion of ublic ad!inistrati(e officers or bodies, #hich are re:uired to in(estigate facts or ascertain the e"istence of facts, hold hearings, and dra# conclusions fro! the! as a basis for their official action and to e"ercise discretion of a =udicial nature. >ro! the foregoing, the treasurer cannot be said to be erfor!ing a =udicial or :uasi? =udicial in assessing the business ta" andAor effecti(ely denying the ta" ayer6s rotest. >or this reason, the treasurer6s actions are not the ro er sub=ects of a 'ule @- etition for certiorari #hich is the a ro riate re!edy in cases #here the tribunal, board or officer e"ercising =udicial or :uasi?=udicial functions acted #ithout or in gra(e abuse of discretion a!ounting to lacB or e"cess of =urisdiction and there is no a eal or any lain, s eedy, and ade:uate re!edy in la#.

Certiorari is an e"traordinary re!edy designed for the correction of errors of =urisdiction and not errors of =udg!ent. &t is liBe#ise considered !utually e"clusi(e #ith a eal liBe the one ro(ided by Article 1/- of the Local Io(ern!ent Code for a local treasurer6s denial or inaction on a rotest. A eals fro! the =udg!ents, resolutions or orders of the 'egional 5rial Court in ta" collection cases originally decided by the! in their res ecti(e territorial =urisdiction !ust be filed #ith the Court of 5a" A eal #ithin +0 days fro! recei t of the decision. 5ea! Pacific Cor oration (s. 7aza as Hunici al 5reasurer of 5aguig, I.'. %o. 1@44+2, July 11, 2012. 'e ublic Act %o. 112-) Court of 5a" A eals) e"clusi(e a ellate =urisdiction. Dy going directly to the Su re!e Court on a 'ule *- etition for re(ie# on certiorari, ta" ayer lost sight of the fact that Court of 5a" A eals has the e"clusi(e a ellate =urisdiction o(er, a!ong others, a eals fro! =udg!ents, resolutions or orders of the regional trial courts in ta" collection cases originally decided by the! in their res ecti(e territorial =urisdictions A eals to the Court of 5a" A eals !ust be erfected #ithin +0 days fro! recei t of the decision and shall be !ade by filing a etition for re(ie# under a rocedure analogous to that ro(ided for under 'ule *2 of the 1//4 'ules of Ci(il Procedure. 5he erfection of an a eal in the !anner and #ithin the eriod fi"ed by la# is not only !andatory but =urisdictional and non?co! liance #ith these legal re:uire!ents is fatal to a arty6s cause. 5ea! Pacific Cor oration (s. 7aza as Hunici al 5reasurer of 5aguig, I.'. %o. 1@44+2, July 11, 2012. Local Io(ern!ent Code) real ro erty ta") ta" e"e! tion of the 'e ublic. Section 1++ of the Local Io(ern!ent Code 0LIC1 rohibits local go(ern!ents fro! i! osing ta"es of any Bind on the %ational Io(ern!ent, its agencies or instru!entalities. Ho#e(er, Section 1/+ of the LIC has #ithdra#n ta" e"e! tions en=oyed by, a!ong others go(ern!ent?o#ned or controlled cor orations 0I;CCs1. ;n the other hand, Section 2+* of the LIC e"e! ts fro! real ro erty ta", real ro erty o#ned by the 'e ublic of the Phili ines or any of its olitical subdi(isions e"ce t #hen the beneficial use thereof has been granted, for consideration, or other#ise, to a ta"able erson. 5he Phili ine 'ecla!ation Authority 0P'A1 is not a I;CC because it is neither a stocB nor non?stocB cor oration as re:uired by the Ad!inistrati(e Code, #hich is the go(erning la# defining the legal relationshi and status of go(ern!ent entities. P'A is a go(ern!ent instru!entality (ested #ith cor orate o#ers and erfor!ing an essential ublic ser(ice. Deing an incor orated go(ern!ent instru!entality, it is e"e! t fro! ay!ent of real ro erty ta". Horeo(er, real ro erty o#ned by the 'e ublic of the Phili ines is e"e! t fro! real ro erty ta" unless the beneficial use thereof has been granted to a ta"able erson. 'e ublic of the Phili ines re resented by the Phili ine 'ecla!ation Authority (s. City of Parana:ue, I.'. %o. 1/110/, July 18, 2012. Constitution) Ci(il Code) ro erty of ublic do!ain) foreclosure. 5he sub=ect reclai!ed lands are still art of the ublic do!ain, o#ned by the State and, therefore e"e! t fro! real ro erty ta". 5hey are ortions of the foreshore and offshore areas of Hanila Day. As such, they re!ain ublic lands and for! art of the ublic do!ain under the Constitution and the Ci(il Code. As held by the Court in the case of Cha(ez (. Public <states Authority and AHA'& Coastal 7e(elo !ent Cor oration, foreshore and sub!erged areas irrefutably belonged to the ublic do!ain and #ere inalienable unless reclai!ed, classified as alienable lands o en to dis osition and further declared no longer needed for ublic ser(ice. 5he fact that alienable lands of the ublic do!ain #ere transferred to the Public <states Authority 0no# P'A1 and issued land atents or certificates of title in P<A6s na!e did not auto!atically !aBe such lands ri(ate. 5he Court in the said case also held that reclai!ed lands retained their inherent otential as areas for ublic use or ublic ser(ice. 'eclai!ed lands are reser(ed lands for ublic use. 5hey are ro erties of ublic do!inion. 5he o#nershi of such land re!ains #ith the State unless they are

#ithdra#n by la# or residential rocla!ation fro! ublic use. Pro erties of ublic do!inion are not sub=ect to e"ecution or foreclosure sale. 'e ublic of the Phili ines re resented by the Phili ine 'ecla!ation Authority (s. City of Parana:ue, I.'. %o. 1/110/, July 18, 2012.

u!ust 2012 Philippine Supreme Court Decision on Tax Law

Posted on Se te!ber 1/, 2012 by Carina C. Laforteza %ational &nternal 'e(enue Code) Galue Added 5a") clai! for credit or refund of in ut (alue? added ta") rinting of 2zero?rated.3. Section 2** of the %ational &nternal 'e(enue Code 0%&'C1 e" licitly grants the Secretary of >inance the authority to ro!ulgate the necessary rules and regulations for the effecti(e enforce!ent of the ro(isions of the ta" code. Conse:uently, the follo#ing in(oicing re:uire!ents enu!erated in Section *.108?1 of the 'e(enue 'egulations 0''1 4?/- !ust be obser(ed by all GA5?registered ta" ayers$ 011 the na!e, 5&% and address of seller) 021 date of transaction) 0+1 :uantity, unit cost and descri tion of !erchandise or nature of ser(ice) 0*1 the na!e, 5&%, business style, if any, and address of the GA5?registered urchaser, custo!er or client) 0-1 the #ord 2zero?rated i! rinted on the in(oice co(ering zero?rated sales) and the in(oice (alue or consideration. 5he need for ta" ayers to indicate in their in(oices and recei ts the fact that they are zero?rated or that its transactions are zero?rated beca!e !ore a arent u on the integration of the abo(e!entioned ro(isions of '' %o. 4?/- in Section 11+ of the %&'C enu!erating the in(oicing re:uire!ents of GA5?registered ersons #hen the %&'C #as a!ended by 'e ublic Act %o. /++4. 5he Court has consistently ruled that the absence of the #ord 2zero?rated3 on the in(oices and recei ts of a ta" ayer #ill result in the denial of the clai! for ta" refund. ?astern &ele.ommuni.ations 1%ilippines, In.. vs. Commissioner of Internal Revenue, G.R. No. 16$$56, *u/ust 9, !1 .

February 201" Philippine Supreme Court Decisions on Tax Law

Posted on Harch 20, 201+ by Carina C. Laforteza N Posted in Phili ines ? Cases, Phili ines ? La#, 5a" La# N 5agged docu!entary sta! ta", gross recei ts ta", (alue added ta" N Here are select >ebruary 201+ rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) docu!entary sta! ta") issuance of ro!issory notes) ersons liable for the ay!ent of 7S5) acce tance. Jnder Section 14+ of the %ational &nternal 'e(enue Code, the ersons ri!arily liable for the ay!ent of 7S5 are the ersons 011 !aBing) 021 signing) 0+1 issuing) 0*1 acce ting) or 0-1 transferring the ta"able docu!ents, instru!ents or a ers. Should these arties be e"e! ted fro! aying ta", the other arty #ho is not e"e! t #ould then be liable. &n this case, etitioner Philacor is engaged in the business of retail financing. 5hrough retail financing, a ros ecti(e buyer of ho!e a liance !ay urchase an a liance on install!ent by e"ecuting a unilateral ro!issory note in fa(or of the a liance dealer, and the sa!e ro!issory note is assigned by the a liance dealer to Philacor. 5hus, under

this arrange!ent, Philacor did not !aBe, sign, issue, acce t or transfer the ro!issory notes. &t is the buyer of the a liances #ho !ade, signed and issued the docu!ents sub=ect to ta" #hile it is the a liance dealer #ho transferred these docu!ents to Philacor #hich liBe#ise indis utably recei(ed or 2acce ted3 the!. Acce tance, ho#e(er, is an act that is not e(en a licable to ro!issory notes, but only to bills of e"change. Jnder the %egotiable &nstru!ents La#, the act of acce tance refers solely to bills of e"change. &n a ruling ado ted by the Dureau of &nternal 'e(enue as early as 1//-, 2acce tance3 has been defined as ha(ing reference to inco!ing foreign bills of e"change #hich are acce ted in the Phili ines by the dra#ees thereof, and not as referring to the co!!on usage of the #ord as in recei(ing. 5hus, a arty to a ta"able transaction #ho 2acce ts3 any docu!ents or instru!ents in the lain and ordinary !eaning does not beco!e ri!arily liable for the ta". 1%ila.or Cre'it Corporation vs. Commissioner of Internal Revenue, G.R. No. 169$99. Fe,ruary 6, !13. %ational &nternal 'e(enue Code) docu!entary sta! ta") issuance of ro!issory notes) ersons liable for the ay!ent of 7S5) 'e(enue 'egulations %o. 2@ 'e(enue 'egulations %o. 2@. Section *2 of 'e(enue 'egulations 0''1 %o. 2@ issued on Harch 2@, 1/2* ro(ides that the erson using a ro!issory note can be held res onsible for the ay!ent of docu!entary sta! ta" 07S51. 5he rule uses the #ord 2can3 #hich is er!issi(e, rather than the #ord 2shall,3 #hich #ould !aBe the liability of the ersons na!ed definite and unconditional. &n this sense, a erson using a ro!issory note can be !ade liable for the 7S5 if the erson is$ 0a1 a!ong those ersons enu!erated under the la# K i.e., the erson #ho !aBes, issues, signs, acce ts or transfers the docu!ent or instru!ent) or 021 if these ersons are e"e! t, a non?e"e! t arty to the transaction. Such inter retation #ould a(oid any conflict bet#een Section 14+ of the 1//4 %ational &nternal 'e(enue Code and section *2 of '' %o. 2@ and !aBe it unnecessary for the latter to be strucB do#n as ha(ing gone beyond the la# it seeBs to inter ret. Ho#e(er, section *2 of '' %o. 2@ cannot be inter reted to !ean that anyone #ho 2uses3 the docu!ent, regardless of #hether such erson is a arty to the transaction, should be liable, as this reading #ould go beyond section 14+ of the 1/8@ %ational &nternal 'e(enue Code, the la# it seeBs to i! le!ent. &! le!enting rules and regulations cannot a!end a la# for they are intended to carry out, not su lant or !odify, the la#. 5o allo# '' %o. 2@ to e"tend the liability for 7S5 to ersons #ho are not e(en !entioned in the rele(ant ro(isions of the ta" codes 0 articularly the 1/8@ %ational &nternal 'e(enue Code #hich is the rele(ant la# at that ti!e1 #ould be a clear breach of the rule that a statute !ust al#ays be su erior to its i! le!enting regulations. 1%ila.or Cre'it Corporation vs. Commissioner of Internal Revenue, G.R. No. 169$99. Fe,ruary 6, !13. %ational &nternal 'e(enue Code) docu!entary sta! ta") assign!ent or transfer of e(idence of indebtedness. Jnder Section 1/8 of the then 1/8@ %ational &nternal 'e(enue Code, an assign!ent or transfer beco!es ta"able only in connection #ith !ortgages, leases and olicies of insurance. 5he list does not include the assign!ent or transfer of e(idence of indebtedness) rather it is the rene#al of these that is ta"able. 5he resent case does not in(ol(e a rene#al, but a !ere transfer or assign!ent of the e(idence of indebtedness or ro!issory notes. A rene#al #ould in(ol(e an increase in the a!ount of indebtedness or an e"tension of a eriod, and not the !ere change in the erson of the ayee. 5he la# has set a attern of e" ressly ro(iding for the i! osition of docu!entary sta! ta" on the transfer andAor assign!ent of docu!ents e(idencing certain transactions. 9here the la# did not s ecify that such transfer andAor assign!ent is to be ta"es, there #ould be no basis to recognize an i! osition. 1%ila.or Cre'it Corporation vs. Commissioner of Internal Revenue, G.R. No. 169$99. Fe,ruary 6, !13. %ational &nternal 'e(enue Code) (alue added ta") 120?day eriod gi(en by la# to the Co!!issioner of &nternal 'e(enue to grant or deny a lication for ta" refund or credit

!andatory and =urisdictional. >ailure to co! ly #ith the 120?day #aiting eriod (iolates a !andatory ro(ision of la#. &t (iolates the doctrine of e"haustion of ad!inistrati(e re!edies and renders the etition re!ature and thus #ithout a cause of action, #ith the effect that the Court of 5a" A eals 0C5A1 does not ac:uire =urisdiction o(er the ta" ayer6s etition. 5he charter of the C5A e" ressly ro(ides that its =urisdiction is to re(ie# on a eal 2decisions of the Co!!issioner of &nternal 'e(enue 0C&'1 in cases in(ol(ing """ refunds of internal re(enue ta"es.3 9hen a ta" ayer re!aturely files a =udicial clai! for ta" refund or credit #ith the C5A #ithout #aiting for the decision of the C&', there is no 2decision3 of the C&' to re(ie# and thus the C5A as a court of s ecial =urisdiction has no =urisdiction o(er the a eal. 5he charter of the C5A also e" ressly ro(ides that if the C&' fails to decide #ithin 2a s ecific eriod3 re:uired by la#, such inaction shall be dee!ed a denial3 of the a lication for a ta" refund or credit. &t is the C&'6s decision or inaction 2dee!ed a denial,3 that the ta" ayer can taBe to the C5A for re(ie#. 9ithout a decision or an 2inaction """ dee!ed a denial3 of the C&', the C5A has no =urisdiction o(er a etition for re(ie#. Commissioner of Internal Revenue vs. -an Ro@ue 1o=er Corporation5&a/anito +inin/ Corporation vs. Commissioner of Internal Revenue51%ile< +inin/ Corporation vs. Commissioner of Internal Revenue, G.R. No. 1$#0$55G.R. No. 1961135G.R. No. 19#156. Fe,ruary 1 , !13. %ational &nternal 'e(enue Code) (alue added ta") +0?day eriod need not fall #ithin the t#o? year rescri ti(e eriod. 5he +0?day eriod ro(ided for under section 112 0C1 of the %ational &nternal 'e(enue Code 0%&'C1 #ithin #hich to a eal the decision of the Co!!issioner of &nternal 'e(enue 0C&'1 to the Court of 5a" A eals 0C5A1 need not necessarily fall #ithin the t#o?year rescri ti(e eriod under section 112 0A1 of the %&'C. First, section 112 0A1 clearly states that the ta" ayer !ay a ly #ith the C&' for a refund or credit 2#ithin t#o 021 years,3 #hich !eans at any ti!e #ithin t#o years. 5hus, the a lication for refund or credit !ay be filed on the last day of the t#o?year rescri ti(e eriod and it #ill still strictly co! ly #ith the la#. 5he t#o?year rescri ti(e eriod is a grace eriod in fa(or of the ta" ayer and he can a(ail of the full eriod before his right to a ly for a ta" refund or credit is barred by rescri tion. -e.on', as held by the Court in the case of Commissioner of Internal Revenue v *i.%i , the 2 hrase F#ithin t#o years """ a ly for the issuance of a ta" credit or refund6 refers to a lications for refundAcredit #ith the C&' and not to a eals !ade to the C5A.3 &%ir', if the +0?day eriod, or any art of it, is re:uired to fall #ithin the t#o?year rescri ti(e eriod 0e:ui(alent to 4+0 days1, then the ta" ayer !ust file his ad!inistrati(e clai! for refund or credit #ithin the first @10 days of the t#o?year rescri ti(e eriod. ;ther#ise, the filing of the ad!inistrati(e clai! beyond the first @10 days #ill result in the a eal to the C5A being filed beyond the t#o?year rescri ti(e eriod. 5hus, if the ta" ayer files his ad!inistrati(e clai! on the @11 th day, the C&', #ith his 120?day eriod, #ill ha(e until the 4+1 st day to decide the clai!. &f the C&' decides only on the 4+1st day, or does not decide at all, the ta" ayer can no longer file his =udicial clai! #ith the C5A because the t#o?year rescri ti(e eriod 0e:ui(alent to 4+0 days1 has la sed. 5he +0?day eriod granted by la# to the ta" ayer to file an a eal before the C5A beco!es utterly useless, e(en if the ta" ayer co! lied #ith the la# by filing his ad!inistrati(e clai! #ithin the t#o?year rescri ti(e eriod. Commissioner of Internal Revenue vs. -an Ro@ue 1o=er Corporation5&a/anito +inin/ Corporation vs. Commissioner of Internal Revenue51%ile< +inin/ Corporation vs. Commissioner of Internal Revenue, G.R. No. 1$#0$55G.R. No. 1961135G.R. No. 19#156. Fe,ruary 1 , !13. %ational &nternal 'e(enue Code) (alue added ta") 2e"cess3 in ut GA5 and 2e"cessi(ely3 collected ta". Jnder Section 22/ of the %ational &nternal 'e(enue Code 0%&'C1, the rescri ti(e eriod for filing a =udicial clai! for refund is t#o years fro! the date of ay!ent of the ta" 2erroneously, """ illegally, """ e"cessi(ely or in any !anner #rongfully collected.3 Ho#e(er,

in a clai! for refund or credit of 2e"cess3 in ut (alue?added ta" 0GA51 under Section 110 0D1 and Section 112 0A1 of the %&'C, the in ut GA5 is not 2e"cessi(ely3 collected as understood under Section 22/. At the ti!e of ay!ent of the in ut GA5, the a!ount aid is the correct and ro er a!ount. Jnder the GA5 syste!, there is no clai! or issue that the in ut GA5 is 2e"cessi(ely3 collected, that is, that the in ut GA5 aid is !ore than #hat is legally due. 5he erson legally liable for the in ut GA5 cannot clai! that he o(er aid the in ut GA5 by the !ere e"istence of an 2e"cess3 in ut GA5. 5he ter! 2e"cess3 in ut GA5 si! ly !eans that the in ut GA5 a(ailable as credit e"ceeds the out ut GA5, not that the in ut GA5 is e"cessi(ely collected because it is !ore than #hat is legally due. 5hus, the ta" ayer #ho legally aid the in ut GA5 cannot clai! for refund or credit of the in ut GA5 as 2e"cessi(ely3 collected under Section 22/. Commissioner of Internal Revenue vs. -an Ro@ue 1o=er Corporation5&a/anito +inin/ Corporation vs. Commissioner of Internal Revenue51%ile< +inin/ Corporation vs. Commissioner of Internal Revenue, G.R. No. 1$#0$55G.R. No. 1961135G.R. No. 19#156. Fe,ruary 1 , !13. %ational &nternal 'e(enue Code) (alue added ta") e:uitable esto el under section 2*@) Dureau of &nternal 'e(enue 'uling. Dureau of &nternal 'e(enue 0D&'1 'uling %o. 7A?*8/?0+ does ro(ide a (alid clai! for e:uitable esto el under section 2*@ of the %ational &nternal 'e(enue Code 0%&'C1. D&' 'uling %o. 7A?*8/?0+ e" ressly states that the 2ta" ayer?clai!ant need not #ait for the la se of the 120?day eriod before it could seeB =udicial relief #ith the C5A by #ay of Petition for 'e(ie#.3 Prior to this ruling, the D&' held that the e" iration of the 120?day eriod is !andatory and =urisdictional before a =udicial clai! can be filed. 5here is no dis ute that the 120?day eriod is !andatory and =urisdictional, and that the C5A does not ac:uire =urisdiction o(er a =udicial clai! that is filed before the e" iration of the 120?day eriod. 5here are t#o e"ce tions to this rule. 5he first e"ce tion is if the C&', through a s ecific ruling, !isleads a articular ta" ayer to re!aturely file a =udicial clai! #ith the C5A. Such s ecific ruling is a licable only to such articular ta" ayer. 5he second e"ce tion is #here the C&', through a general inter retati(e rule issued under section * of the %&'C, !isleads all ta" ayers into filing re!aturely =udicial clai!s #ith the C5A. &n these cases, the C&' cannot be allo#ed to later on :uestion the C5A6s assu! tion of =urisdiction o(er such clai! since e:uitable esto el has set in as e" ressly authorized under section 2*@ of the %&'C. A general inter retati(e rule issued by the C&' !ay be relied u on by ta" ayers fro! the ti!e the rule is issued u to its re(ersal by the C&' or the Court. 5a" ayers should not be re=udiced by an erroneous inter retation by the C&', articularly on a difficult :uestion of la#. D&' 'uling %o. 7A?*8/?0+ is a general inter retati(e rule because it #as a res onse to a :uery !ade, not by a articular ta" ayer, but by a go(ern!ent agency tasBed #ith rocessing ta" refunds and credits, that is, the ;ne Sto Sho &nter?Agency 5a" Credit and 7ra#bacB Center of the 7e art!ent of >inance. All ta" ayers can rely on D&' 'uling %o. 7A?*8/?0+ fro! the ti!e of its issuance on 7ece!ber 10, 200+ u to its re(ersal by the Court in the case of Aichi on ;ctober @, 2010, #hether the Court held that the 120O+0 day eriods are !andatory and =urisdictional. Commissioner of Internal Revenue vs. -an Ro@ue 1o=er Corporation5&a/anito +inin/ Corporation vs. Commissioner of Internal Revenue51%ile< +inin/ Corporation vs. Commissioner of Internal Revenue, G.R. No. 1$#0$55G.R. No. 1961135G.R. No. 19#156. Fe,ruary 1 , !13. %ational &nternal 'e(enue Code) docu!entary sta! ta") le(ied on the e"ercise of ri(ileges not on obligations i! osed by la#. 7ocu!entary sta! ta" 07S51 is by nature an e"cise ta" since it is le(ied on the e"ercise by ersons of ri(ileges conferred by la#. 5hese ri(ileges !ay co(er the creation, !odification or ter!ination of contractual relationshi s by e"ecuting s ecific docu!ents liBe deeds of sale, !ortgages, ledges, trust and issuance of shares of stocB. 5he sale

of >ort Donifacio land #as not a ri(ilege but an obligation i! osed by la# #hich #as to sell lands to fulfill a ublic ur ose. 5o charge 7S5 on a transaction #hich #as basically a co! liance #ith a legislati(e !andate #ould go against its (ery nature as an e"cise ta". Fort 2onifa.io Development Corporation vs. Commissioner of Internal Revenue, G.R. Nos. 160155 A 1#5503. Fe,ruary 5, !13. %ational &nternal 'e(enue Code) gross recei ts ta") final #ithholding ta" for!s art of gross recei ts. 5he a!ount of interest inco!e #ithheld, in ay!ent of the 20E final #ithholding ta", for!s art of a banB6s gross recei ts in co! uting the gross recei ts ta" on banBs. 2Iross 'ecei ts3 co! rise the 2entire recei ts #ithout any deduction.3 ;ther#ise, if deductions #ere to be !ade, it #ould ha(e been considered as 2net recei ts.3 Horeo(er, the e"clusion of the final #ithholding ta" fro! gross recei ts o erates as a ta" e"e! tion #hich the la# !ust e" ressly grant. &n this case, etitioner failed to oint to any s ecific ro(ision of la# allo#ing deduction, e"e! tion or e"clusion fro! its ta"able gross recei ts, of the a!ount #ithheld as final ta". C%ina 2an3in/ Corporation vs. Commissioner of Internal Revenue, G.R. No. 1#51!$. Fe,ruary #, !13.

March 201" Philippine Supreme Court Decisions on Tax Law

Posted on A ril 1-, 201+ by Carina C. Laforteza N Posted in Phili ines ? Cases, Phili ines ? La#, 5a" La# N Here are select rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) (alue added ta") rescri ti(e eriod for filing a ta" refund or credit of in ut (alue?added ta". 5he rules on the deter!ination of the rescri ti(e eriod for filing a ta" refund or credit of unutilized in ut (alue?added ta" 0GA51, as ro(ided in Section 112 of the 1//4 5a" Code, are as follo#s$ 011 An ad!inistrati(e clai! !ust be filed #ith the Co!!issioner of &nternal 'e(enue 0C&'1 #ithin t#o years after the close of the ta"able :uarter #hen the zero?rated or effecti(ely zero? rated sales #ere !ade. 021 5he C&' has 120 days fro! the date of sub!ission of co! lete docu!ents in su ort of the ad!inistrati(e clai! #ithin #hich to decide #hether to grant a refund or issue a ta" credit certificate. 5he 120?day eriod !ay e"tend beyond the t#o?year eriod fro! the filing of the ad!inistrati(e clai! if the clai! is filed in the later art of the t#o?year eriod. &f the 120?day eriod e" ires #ithout any decision fro! the C&', then the ad!inistrati(e clai! !ay be considered to be denied by inaction. 0+1 A =udicial clai! !ust be filed #ith the Court of 5a" A eals 0C5A1 #ithin +0 days fro! the recei t of the C&'6s decision denying the ad!inistrati(e clai! or fro! the e" iration of the 120? day eriod #ithout any action fro! the C&'. 0*1 All ta" ayers, ho#e(er, can rely on Dureau of &nternal 'e(enue 'uling %o. 7A?*8/?0+, #hich e" ressly states that the 2ta" ayer?clai!ant need not #ait for the la se of the 120?day eriod before it could seeB =udicial relief #ith the C5A by #ay of Petition for 'e(ie#,3 fro! the

ti!e of its issuance on 10 7ece!ber 200+ u to its re(ersal by the Court in CIR vs. *i.%i For/in/ Company of *sia on @ ;ctober 2010, as an e"ce tion to the !andatory and =urisdictional 120O+0 day eriods. +in'anao II Geot%ermal 1artners%ip vs. Commissioner of Internal Revenue5+in'anao I Geot%ermal 1artners%ip vs. Commissioner of Internal Revenue. I.'. %o. 1/++01 P I.'. %o. 1/*@+4. Harch 11, 201+. %ational &nternal 'e(enue Code) (alue?added ta") isolated transactions. 5a" ayer6s sale of the %issan Patrol is said to be an isolated transaction. Ho#e(er, it does not follo# that an isolated transaction cannot be an incidental transaction for ur oses of (alue?added ta" 0GA51 liability. Section 10- of the %ational &nternal 'e(enue Code of 1//4 #ould sho# that a transaction 2in the course of trade or business3 includes 2transactions incidental thereto.3 5a" ayer6s business is to con(ert the stea! su lied to it by P%;C?<7C into electricity and to deli(er the electricity to %ational Po#er Cor oration. &n the course of its business, ta" ayer bought and e(entually sold a %issan Patrol. Prior to the sale, the %issan Patrol #as art of ta" ayer6s ro erty, lant, and e:ui !ent. 5herefore, the sale of the %issan Patrol is an incidental transaction !ade in the course of ta" ayer6s business #hich should be liable for GA5. +in'anao II Geot%ermal 1artners%ip vs. Commissioner of Internal Revenue5+in'anao I Geot%ermal 1artners%ip vs. Commissioner of Internal Revenue. I.'. %o. 1/++01 P I.'. %o. 1/*@+4. Harch 11, 201+. %ational &nternal 'e(enue Code) (alue?added ta") eriod to a eal decision or inaction of the Co!!issioner of &nternal 'e(enue in clai!s for ta" refund or credit of in ut (alue?added ta". 5he ta" ayer !ay a eal the denial or the inaction of the Co!!issioner of &nternal 'e(enue 0C&'1 only #ithin thirty 0+01 days fro! recei t of the decision denying the clai! or the e" iration of the 120?day eriod gi(en to the C&' to decide the clai!. Decause the la# is categorical in its language, there is no need for further inter retation by the courts and non? co! liance #ith the ro(ision cannot be =ustified. Nippon ?<press 91%ilippines: Corporation vs. Commissioner of Internal Revenue. I.'. %o. 1/@/04. Harch 1+, 201+ %ational &nternal 'e(enue Code) (alue?added ta") eriod to a eal decision or inaction of the Co!!issioner of &nternal 'e(enue in clai!s for ta" refund or credit of in ut (alue?added ta") e"ce tion. Judicial clai!s for ta" refund or credit filed fro! January 1, 1//8 until the resent should strictly adhere to the 120O +0?day eriod referred to in Section 112 of the %ational &nternal 'e(enue Code of 1//4 0%&'C1. 5he 120?day eriod is gi(en by la# to the Co!!issioner of &nternal 'e(enue 0C&'1 to grant or deny a lication for ta" refund or credit. 5he +0?day eriod refers to the eriod #ithin #hich the ta" ayer !ay a eal the denial or the inaction of the C&'. 5he only e"ce tion to the 120O +0?day eriod is the eriod fro! 7ece!ber 10, 200+ Q #hen Dureau of &nternal 'e(enue 'uling %o. 7A?*8/?0+, #hich e" ressly stated that the ta" ayer need not #ait for the la se of the 120?day eriod before seeBing =udicial relief, #as issued Q until its re(ersal on ;ctober @, 2010. Nippon ?<press 91%ilippines: Corporation vs.Commissioner of Internal Revenue. I.'. %o. 1/@/04. Harch 1+, 201+.

pril 201" Philippine Supreme Court Decisions on Tax Law

Posted on Hay 1-, 201+ by Carina C. Laforteza N Posted in Phili ines ? Cases, Phili ines ? La#, Phili ines ? 'egulation, 5a" La# N Here are select A ril 201+ rulings of the Su re!e Court of the Phili ines on ta" la#$

%ational &nternal 'e(enue Code) 'e(enue 'egulations %o. 12?8@) #ithholding ta"es) i! osition thereof de endent u on the nature of #orB erfor!ed. >or ta"ation ur oses, a director is considered an e! loyee under Section - of 'e(enue 'egulations %o. 12?8@. An indi(idual erfor!ing ser(ices for a cor oration, #hether as an officer and director or !erely as a director #hose duties are confined to attendance at and artici ation in the !eetings of the Doard of 7irectors, is an e! loyee. 5he non?inclusion of the na!es of so!e of etitioner6s directors in the co! any6s Al ha List does not ipso fa.to create a resu! tion that they are not e! loyees of the cor oration, because the i! osition of #ithholding ta" on co! ensation hinges u on the nature of #orB erfor!ed by such indi(iduals in the co! any. 'e(enue 'egulations %o. 2?/8 does not a ly to this case as the latter is a later regulation #hile the accounting booBs e"a!ined #ere for ta"able years 1//4. First 4epanto &ais%o Insuran.e Corporation vs. Commissioner of Internal Revenue, I.'. %o. 1/4114. A ril 10, 201+. Local Io(ern!ent Code) ta"ing o#er of local go(ern!ent units. 5he o#er to ta" 2is an attribute of so(ereignty,3 and as such, inheres in the State. Such, ho#e(er, is not true for ro(inces, cities, !unici alities and barangays as they are not the so(ereign) rather, they are !ere 2territorial and olitical subdi(isions of the 'e ublic of the Phili ines3. 5he o#er of a ro(ince to ta" is li!ited to the e"tent that such o#er is delegated to it either by the Constitution or by statute. DooB && of the Local Io(ern!ent Code establishes the ara!eters of the ta"ing o#ers of local go(ern!ent units. 1eli)loy Realty Corporation vs. &%e 1rovin.e of 2en/uet, I.'. %o. 18+1+4. A ril 10, 201+. Local Io(ern!ent Code) li!itations on ta"ing o#er of local go(ern!ent units) ercentage ta". Section 1++ 0i1 of the Local Io(ern!ent Code 0LIC1 rohibits the le(y by local go(ern!ent units 0LIJs1 of ercentage ta" e"ce t as other#ise ro(ided by the LIC. Percentage 5a" is a ta" !easured by a certain ercentage of the gross selling rice or gross (alue in !oney of goods sold, bartered or i! orted) or of the gross recei ts or earnings deri(ed by any erson engaged in the sale of ser(ices. Since a!use!ent ta"es are fi"ed at a certain ercentage of the gross recei ts incurred by certain s ecified establish!ents, they are actually ercentage ta"es. Ho#e(er, ro(inces are not barred fro! le(ying a!use!ent ta"es e(en if a!use!ent ta"es are a for! of ercentage ta"es. Section 1*0 of the LIC car(es a clear e"ce tion to the general rule in Section 1++ 0i1. 1eli)loy Realty Corporation vs. &%e 1rovin.e of 2en/uet. I.'. %o. 18+1+4. A ril 10, 201+. Local Io(ern!ent Code) li!itations on ta"ing o#er of local go(ern!ent units) a!use!ent ta". Section 1*0 of the Local Io(ern!ent Code 0LIC1 e" ressly allo#s for the i! osition by ro(inces of a!use!ent ta"es on 2the ro rietors, lessees, or o erators of theaters, cine!as, concert halls, circuses, bo"ing stadia, and other laces of a!use!ent.3 1eli)loy Realty Corporation vs. &%e 1rovin.e of 2en/uet. I.'. %o. 18+1+4. A ril 10, 201+. 5heaters, cine!as, concert halls, circuses, and bo"ing stadia are bound by a co!!on ty ifying characteristic in that they are all (enues ri!arily for the staging of s ectacles or the holding of ublic sho#s, e"hibitions, erfor!ances, and other e(ents !eant to be (ie#ed by an audience. Accordingly, 2other laces of a!use!ent3 !ust be inter reted in light of the ty ifying characteristic of being (enues 2#here one seeBs ad!ission to entertain oneself by seeing or (ie#ing the sho# or erfor!ances3 or being (enues ri!arily used to stage s ectacles or hold ublic sho#s, e"hibitions, erfor!ances, and other e(ents !eant to be (ie#ed by an audience. Considering that resorts, s#i!!ing ools, bath houses, hot s rings and tourist s ots do not belong to the sa!e category or class as theaters, cine!as, concert halls, circuses, and bo"ing stadia, it follo#s that they cannot be considered as a!ong the Fother laces of a!use!ent6

conte! lated by Section 1*0 of the LIC and #hich !ay ro erly be sub=ect to a!use!ent ta"es. 1eli)loy Realty Corporation vs. &%e 1rovin.e of 2en/uet. I.'. %o. 18+1+4. A ril 10, 201+.

June 201" Philippine Supreme Court Decisions on Tax Law

Posted on July 10, 201+ by Carina C. Laforteza N Posted in 5a" La# N 5agged local ta", etition for re(ie#, ta" certificate N Here are select June 201+ rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) Certificate of 5a" Clearance under Section -20C1) li:uidation under the %e# Central DanB Act. A ta" clearance is not a rere:uisite to the a ro(al of the ro=ect of distribution of the assets of a banB under li:uidation by the Phili ine 7e osit &nsurance Cor oration 0P7&C1 for the follo#ing reasons$ 011 Section -20C1 of the %ational &nternal 'e(enue Code of 1//4 ertains only to a regulation of the relationshi bet#een the Securities and <"change Co!!ission 0S<C1 and the Dureau of &nternal 'e(enue 0D&'1 #ith res ect to cor orations conte! lating dissolution or reorganization. ;n the other hand, banBs under li:uidation by the P7&C as ordered by the Honetary Doard constitute a s ecial case go(erned by the s ecial rules and rocedures ro(ided under Section +0 of the %e# Central DanB Act, #hich does not re:uire that a ta" clearance be secured fro! the D&'. 021 ;nly a final ta" return is re:uired to satisfy the interest of the D&' in the li:uidation of a closed banB, #hich is the deter!ination of the ta" liabilities of a banB under li:uidation by the P7&C. &n (ie# of the ti!eline of the li:uidation roceedings under Section +0 of the %e# Central DanB Act, it is unreasonable for the li:uidation court to re:uire that a ta" clearance be first secured as a condition for the a ro(al of ro=ect of distribution of a banB under li:uidation. 0+1 &t is not for the courts to fill in any ga in current statutes and regulations as to the relations a!ong the D&', the DangBo Sentral ng Pili inas and the P7&C. &t is u to the legislature to address the !atter through a ro riate legislation, and to the e"ecuti(e to ro(ide the regulations for its i! le!entation. 0*1 Section +0 of the %e# Central DanB Act e" ressly ro(ides that debts and liabilities of the banB under li:uidation are to be aid in accordance #ith the rules on concurrence and reference of credit under the Ci(il Code. 7uties, ta"es, and fees due the Io(ern!ent en=oy riority only #hen they are #ith reference to a s ecific !o(able ro erty, under Article 22*1011 of the Ci(il Code, or i!!o(able ro erty, under Article 22*2011 of the sa!e Code. Ho#e(er, #ith reference to the other real and ersonal ro erty of the debtor, so!eti!es referred to as 2free ro erty,3 the ta"es and assess!ents due the %ational Io(ern!ent, other than those in Articles 22*1011 and 22*2011 of the Ci(il Code, such as the cor orate inco!e ta", #ill co!e only in ninth lace in the order of reference. &f a ta" clearance shall be re:uired before the ro=ect of distribution of the assets of a banB under li:uidation !ay be a ro(ed, then its ta" liabilities #ill be gi(en absolute reference in all instances, including those that do not fall under Articles 22*1011 and 22*2011 of

the Ci(il Code. 1%ilippine Deposit Insuran.e Corporation v. 2ureau of Internal Revenue , I.'. %o. 1428/2, June 1+, 201+. Local Io(ern!ent Code) Clai!s for 5a" 'efund or Credit. Section 1/@ of the Local Io(ern!ent Code ro(ides that in order to be entitled to a refund or credit of local ta"es, the follo#ing rocedural re:uire!ents !ust concur$ first, the ta" ayer concerned !ust file a #ritten clai! for refundAcredit #ith the local treasurer) and se.on', the case or roceeding for refund has to be filed #ithin t#o 021 years fro! the date of the ay!ent of the ta", fee, or charge or fro! the date the ta" ayer is entitled to a refund or credit. As etitioners ha(e failed to ro(e that they ha(e filed a #ritten clai! for refund #ith the local treasurer, their clai! for local ta" refundAcredit !ust be denied. &t is hornbooB rinci le that a clai! for a ta" refundAcredit is in the nature of a clai! for an e"e! tion and the la# is construed in stri.tissimi Buris against the one clai!ing it and in fa(or of the ta"ing authority. +etro +anila -%oppin/ +e..a Corp., et al. v. +s. 4i,erty +. &ole'o, in %er offi.ial .apa.ity as t%e City &reasurer of +anila, an' t%e City of +anila, I.'. %o. 1/0818, June -, 201+. 'e(ised 'ules of the Court of 5a" A eals) e"tension to file etition for re(ie#. 5he 'e(ised 'ules of the Court of 5a" A eals 0the 2'ules61 does not e" licitly sanction e"tensions to file a etition for re(ie# #ith the Court of 5a" A eals 0C5A1. Ho#e(er, section 1, 'ule 4 thereof reads that in the absence of any e" ress ro(ision in the 'ules, 'ules *2, *+, ** and *@ of the 'ules of Court !ay be a lied in a su letory !anner. &n articular, Section / of 'e ublic Act %o. /282 !aBes reference to the rocedure under 'ule *2 of the 'ules of Court. &n this light, Section 1 of 'ule *2 states that the eriod for filing a etition for re(ie# !ay be e"tended u on !otion of the concerned arty. &n other #ords, the regle!entary eriod ro(ided under Section +, 'ule 8 of the 'ules is e"tendible and, as such, the C5A 7i(ision6s grant of res ondents6 !otion for e"tension falls s:uarely #ithin the la#. +etro +anila -%oppin/ +e..a Corp., et al. v. +s. 4i,erty +. &ole'o, in %er offi.ial .apa.ity as t%e City &reasurer of +anila, an' t%e City of +anila, I.'. %o. 1/0818, June -, 201+.

July 201" Philippine Supreme Court Decisions on Tax Law

Posted on August 4, 201+ by Carina C. Laforteza N Posted in Phili ines ? Cases, Phili ines ? La#, 5a" La# N 5agged double ta"ation, e"cise ta" N 2 Co!!ents Here are select July 201+ rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) e"cise ta") goods sub=ect to e"cise ta") ersons liable to ay. <"cise ta"es are i! osed on t#o 021 Binds of goods, na!ely$ 0 a1 goods !anufactured or roduced in the Phili ines for do!estic sales or consu! tion or for any other dis osition) and 0,1 things i! orted. 9ith res ect to the first Bind of goods, Section 1+0 of the %ational &nternal 'e(enue Code 0the 25a" Code31 states that, unless other#ise s ecifically allo#ed, the ta" ayer obligated to file the return and ay the e"cise ta"es due thereon is the !anufacturerA roducer.;n the other hand, #ith res ect to the second Bind of goods, Section 1+1 of the 5a" Code states that the ta" ayer obligated to file the return and ay the e"cise ta"es due thereon is the o#ner or i! orter, unless the i! orted articles are e"e! t fro! e"cise ta"es and the erson found to be in ossession of the sa!e is other than those legally entitled to such ta" e"e! tion.9hile the 5a" Code !andates the foregoing ersons to ay the a licable e"cise ta"es directly to the

go(ern!ent, they !ay, ho#e(er, shift the econo!ic burden of such ay!ents to so!eone else K usually the urchaser of the goods K since e"cise ta"es are considered as a Bind of indirect ta". 1%ilippine *irlines, In.. v. Commissioner of Internal Revenue, I.'. %o. 1/84-/, July 1, 201+. %ational &nternal 'e(enue Code) e"cise ta") statutory ta" ayer as ro er arty to seeB refund) e"ce tion. Since e"cise ta"es are considered as a Bind of indirect ta", the statutory ta" ayer can transfer to its custo!ers the (alue of the e"cise ta"es it aid or #ould be liable to ay to the go(ern!ent by treating it as art of the cost of the goods and tacBing it on to the selling rice. 5his not#ithstanding, ursuant to Section 20*0c1 of the 5a" Code, the ro er arty to :uestion, or seeB a refund of, e"cise ta" is the statutory ta" ayer, the erson on #ho! the ta" is i! osed by la# and #ho aid the sa!e e(en if he shifts the burden thereof to another. Accordingly, in cases in(ol(ing e"cise ta" e"e! tions on etroleu! roducts under Section 1+- of the 5a" Code, the Court has consistently held that it is the statutory ta" ayer #ho is entitled to clai! a ta" refund based thereon and not the arty #ho !erely bears its econo!ic burden. Ho#e(er, the abo(e!entioned rule should not a ly to instances #here the la# clearly grants the arty to #hich the econo!ic burden of the ta" is shifted an e"e! tion fro! both direct and indirect ta"es. &n #hich case, the latter !ust be allo#ed to clai! a ta" refund e(en if it is not considered as the statutory ta" ayer under the la#.5hus, the ro riety of a ta" refund clai! is hinged on the Bind of e"e! tion #hich for!s its basis. &f the la# confers an e"e! tion fro! both direct or indirect ta"es, a clai!ant is entitled to a ta" refund e(en if it only bears the econo!ic burden of the a licable ta". ;n the other hand, if the e"e! tion conferred only a lies to direct ta"es, then the statutory ta" ayer is regarded as the ro er arty to file the refund clai!. 1%ilippine *irlines, In.. v. Commissioner of Internal Revenue, I.'. %o. 1/84-/, July 1, 201+. Phili ine Airlines franchise) #ithdra#al of ta" e"e! tion. Letter of &nstructions %o. 1*+8 0L;& 1*+81 a!ended Phili ine Airlines6s 0PAL6s1 franchise by #ithdra#ing the ta" e"e! tion ri(ilege granted to PAL on its urchase of do!estic etroleu! roducts for use in its do!estic o erations. Dased on Section 1+ of PAL6s franchise, PAL6s ta" e"e! tion ri(ilege on all ta"es on a(iation gas, fuel and oil !ay be classified into three 0+1 Binds$ 0i1 all ta"es due on PAL6s local urchase of a(iation gas, fuel and oil, 0ii1 all ta"es directly due fro! or i! osable u on the urchaser of the seller, roducer, !anufacturer, or i! orter of a(iation gas, fuel and oil but are billed or assed on to PAL, and 0iii1 all ta"es due on all i! ortations by PAL of a(iation gas, fuel, and oil. 5he hrase 2 urchase of do!estic etroleu! roducts for use in its do!estic o erations3? #hich characterizes the ta" ri(ilege #ithdra#n by L;& 1*+8? refers only to PAL6s ta" e"e! tions on assed on e"cise ta" costs due fro! the seller, !anufacturerA roducer of locally !anufacturedA roduced goods for do!estic sale and does not, in any #ay, ertain to any of PAL6s ta" ri(ileges concerning i! orted goods. 'ecords disclose that Calte" i! orted a(iation fuel fro! abroad and !erely re?sold the sa!e to PAL, tacBing the a!ount of e"cise ta"es it aid or #ould be liable to ay to the go(ern!ent on to the urchase rice. 5he said etroleu! roducts are in the nature of 2things i! orted3 and thus, beyond the co(erage of L;& 1*8+. 1%ilippine *irlines, In.. v. Commissioner of Internal Revenue, I.'. %o. 1/84-/, July 1, 201+. Local Io(ern!ent Code) double ta"ation) definition) ele!ents. 7ouble ta"ation !eans ta"ing the sa!e ro erty t#ice #hen it should be ta"ed only once) that is, 2ta"ing the sa!e erson t#ice by the sa!e =urisdiction for the sa!e thing.3 &t is obno"ious #hen the ta" ayer is ta"ed t#ice, #hen it should be but once. ;ther#ise described as 2direct du licate ta"ation,3 the t#o ta"es !ust be i! osed on the sa!e sub=ect !atter, for the sa!e ur ose, by the sa!e ta"ing authority, #ithin the sa!e =urisdiction, during the sa!e ta"ing eriod) and the ta"es !ust be of the sa!e Bind or character. Petitioner is indeed liable to ay business ta"es to the City of Hanila)

ne(ertheless, considering that the for!er has already aid these ta"es under Section 1* of the Hanila 'e(enue Code, it is e"e! t fro! the sa!e ay!ents under Section 21 of the sa!e code. As held in &%e City of +anila v. Co.aCCola 2ottlers 1%ilippines, In.., #hen a !unici ality or city has already i! osed a business ta" on !anufacturers, etc. of li:uors, distilled s irits, #ines, and any other article of co!!erce, ursuant to Section 1*+0a1 of the Local Io(ern!ent Code 0LIC1, said !unici ality or city !ay no longer sub=ect the sa!e !anufacturers, etc. to a business ta" under Section 1*+0h1 of the sa!e code. Section 1*+0h1 !ay be i! osed only on businesses that are sub=ect to e"cise ta", (alue?added ta", or ercentage ta" under the %ational &nternal 'e(enue Code, and that are 2not other#ise s ecified in receding aragra hs.3 5hus, business already sub=ect to a local business ta" under Section 1* ,#hich is based on Section 1*+0a1 of the LIC., can no longer be !ade liable for local business ta" under Section 21 ,#hich is based on Section 1*+0h1 of the LIC.. -=e'is% +at.% 1%ilippines In.. v. &%e &reasurer of t%e City of +anila, I.'. %o. 181244, July +, 201+.

July 201" Philippine Supreme Court Decisions on Tax Law

Posted on August 1/, 201+ by Carina C. Laforteza N Posted in Phili ines ? Cases, Phili ines ? La#, 5a" La# N Here are select July 201+ rulings of the Su re!e Court of the Phili ines on ta" la#$ %ational &nternal 'e(enue Code) (alue?added ta") clai!s for ta" refund or credit. Defore an ad!inistrati(e clai! for refund or ta" credit can be granted, there !ust be a sho#ing that all docu!entary and e(identiary re:uire!ents are satisfied. 5he ta" ayer clai!ing the refund !ust co! ly #ith the in(oicing and accounting re:uire!ents !andated by the %ational &nternal 'e(enue 5a" Code, as #ell as the re(enue regulations i! le!enting the!. 5hus, the change of ta" ayer6s na!e to 2Donifacio I7< 9ater Cor oration,3 being unauthorized and #ithout a ro(al of the Securities and <"change Co!!ission, and the issuance of official recei ts under that na!e #hich #ere resented to su ort ta" ayer6s clai! for ta" refund, cannot be used to allo# the grant of ta" refund or issuance of a ta" credit certificate in ta" ayer6s fa(or. 5he absence of official recei ts issued in its na!e is tanta!ount to nonco! liance #ith the substantiation re:uire!ents ro(ided by la#. 2onifa.io 8ater Corporation 9formerly 2onifa.io (iven'i 8ater Corporation: v. &%e Commissioner of Internal Revenue, I.'. %o. 14-1*2, July 22, 201+. %ational &nternal 'e(enue Code) (alue?added ta") ca ital goods) definition. 2Ca ital goods or ro erties3 refer to goods or ro erties #ith esti!ated useful life greater than one year and #hich are treated as de reciable assets under Section 2/0f1 of the %ational &nternal 'e(enue Code, used directly or indirectly in the roduction or sale of ta"able goods or ser(ices. 5hus, ay!ent for ser(ices relating to the construction of the ca ital assets #ere not considered ca ital assets considering, es ecially, that the sa!e #ere not recorded in the ta" ayer6s ro erty, lant and e:ui !ent account. 2onifa.io 8ater Corporation 9formerly 2onifa.io (iven'i 8ater Corporation: v. &%e Commissioner of Internal Revenue, I.'. %o. 14-1*2, July 22, 201+. >actual findings of the Court of 5a" A eals) gra(e abuse of discretion. &t is doctrinal that the Su re!e Court #ill not lightly set aside the conclusions reached by the Court of 5a" A eals

0C5A1 #hich, by the (ery nature of its function of being dedicated e"clusi(ely to the resolution of ta" roble!s, has accordingly de(elo ed an e" ertise on the sub=ect unless there has been an abuse or i! ro(ident e"ercise of authority. &n 2ar.elon, Ro<as -e.urities, In.. v. Commissioner of Internal Revenue, the Court held that it accords the findings of fact by the C5A #ith the highest res ect. &t ruled that factual findings !ade by the C5A can only be disturbed on a eal if they are su orted by substantial e(idence or there is a sho#ing of gross error or abuse on the art of the 5a" Court. &n the absence of any clear and con(incing roof to the contrary, this Court !ust resu!e that the C5A rendered a decision #hich is (alid in e(ery res ect. 2onifa.io 8ater Corporation 9formerly 2onifa.io (iven'i 8ater Corporation: v. &%e Commissioner of Internal Revenue, I.'. %o. 14-1*2, July 22, 201+.