Tax Law Review
Atty. Salvador
ESTATE TAX
REVENUE REGULATIONS NO. 2-2003 dated December 16, 2002
Consolidated Revenue Regulations on Estate Tax and Donor's Tax
Incorporating the Amendments
Introduced by Republic Act No. 8424, the Tax Reform Act of 1997
Pursuant to Section 244, in relation to Sections 84 to 104 of the Tax Code
of 1997 (Code), these Regulations are hereby promulgated for the purpose of
consolidating all the regulations on estate tax and donor's tax, thereby
amending Revenue Regulations No. 17-93 relative to the change in the tax
rates of estate tax and donor's tax pursuant to Republic Act No. 8424, the
manner of claiming the deductions from the gross estate of the decedent, and
for other purposes. These regulations shall govern the taxation of the
transmission of the decedent's estate and donations made by persons, natural
or juridical, whether citizens or aliens, residents or non-residents. For
purposes of these regulations, the provisions of the Family Code of the
Philippines (E.O. No. 209) which took effect on August 3, 1988 shall govern
the property relations between husband and wife whose marriage was
celebrated on or after such date. For marriages celebrated prior to the
effectivity of the Family Code of the Philippines, the Civil Code of the
Philippines shall govern the property relations between husband and wife in
relation to the pertinent provisions of the Family Code.
Rates Of Estate Tax. The transfer of the net estate of every decedent,
whether resident or non-resident of the Philippines, as determined in
accordance with the Code, shall be subject to the estate tax. The entire value
of the net estate is divided into brackets and each rate is imposed on the
corresponding bracket. Below is a table showing the tax on each bracket and
the cumulative total tax for the entire net estate, pursuant to the rates provided
in the Code.
If the Net Estate is:
But not The tax Of the excess
Over overshall be Plusover
P200,000 Exempt
P200,000 500,000 0 5% P200,000
500,000 2,000,000 P15,000 8% 500,000
2,000,000 5,000,000 135,000 11%2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 and over 1,215,000 20% 10,000,000
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 1
The Law That Governs The Imposition Of Estate Tax. It is a well-
settled rule that estate taxation is governed by the statute in force at the time
of death of the decedent. The estate tax accrues as of the death of the decedent
and the accrual of the tax is distinct from the obligation to pay the same.
Upon the death of the decedent, succession takes place and the right of the
State to tax the privilege to transmit the estate vests instantly upon death.
The application of the rates herein prescribed and the procedures in
determining the estate tax due shall apply to estate taxes falling due or have
accrued beginning January 1, 1998, the effectivity date of Republic Act No.
8424, otherwise known as "The Tax Reform Act of 1997".
Composition Of The Gross Estate. The gross estate of a decedent shall
be comprised of the following properties and interest therein at the time of his
death, including revocable transfers and transfers for insufficient
consideration, etc.:
A) Residents and citizens all properties, real or personal, tangible or
intangible, wherever situated.
B) Non-resident aliens only properties situated in the Philippines
provided, that, with respect to intangible personal property, its inclusion in the
gross estate is subject to the rule of reciprocity provided for under Section
104 of the Code.
Valuation Of The Gross Estate. The properties comprising the gross
estate shall be valued based on their fair market value as of the time of death.
If the property is a real property, the fair market value shall be the fair
market value as determined by the Commissioner or the fair market value as
shown in the schedule of values fixed by the provincial and city assessors,
whichever is higher. For purposes of prescribing real property values, the
Commissioner is authorized to divide the Philippines into different zones or
areas and shall, upon consultation with competent appraisers, both from the
private and public sectors, determine the fair market value of real properties
located in each zone or area.
In the case of shares of stocks, the fair market value shall depend on
whether the shares are listed or unlisted in the stock exchanges. Unlisted
common shares are valued based on their book value while unlisted preferred
shares are valued at par value. In determining the book value of common
shares, appraisal surplus shall not be considered as well as the value assigned
to preferred shares, if there are any.
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Atty. Salvador
For shares which are listed in the stock exchanges, the fair market value
shall be the arithmetic mean between the highest and lowest quotation at a
date nearest the date of death, if none is available on the date of death itself.
To determine the value of the right to usufruct, use or habitation, as well
as that of annuity, there shall be taken into account the probable life of the
beneficiary in accordance with the latest basic standard mortality table, to be
approved by the Secretary of Finance, upon recommendation of the Insurance
Commissioner.
Computation Of The Net Estate Of A Decedent Who Is Either A Citizen
Or Resident Of The Philippines. The value of the net estate of a citizen
or resident alien of the Philippines shall be determined by deducting from the
value of the gross estate the following items of deduction:
(A) Expenses, losses, indebtedness, and taxes Such amounts for:
(1) Actual funeral expenses (whether paid or unpaid) up to the time of
interment, or an amount equal to five percent (5%) of the gross estate,
whichever is lower, but in no case to exceed P200,000.
Any amount of funeral expenses in excess of the P200,000 threshold,
whether the same had actually been paid or still payable, shall not be allowed
as a deduction under this Subsection. Neither shall the unpaid portion of the
funeral expenses incurred which is in excess of the P200,000 threshold be
allowed to be claimed as a deduction under "claims against the estate"
provided under Subsection (C) hereof.
The term "FUNERAL EXPENSES" is not confined to its ordinary or
usual meaning. They include:
(a) The mourning apparel of the surviving spouse and unmarried
minor children of the deceased bought and used on the occasion of the
burial;
(b) Expenses for the deceased's wake, including food and drinks;
(c) Publication charges for death notices;
(d) Telecommunication expenses incurred in informing relatives of
the deceased;
(e) Cost of burial plot, tombstones, monument or mausoleum but
not their upkeep. In case the deceased owns a family estate or several
burial lots, only the value corresponding to the plot where he is buried is
deductible;
(f) Interment and/or cremation fees and charges; and
(g) All other expenses incurred for the performance of the rites and
ceremonies incident to interment.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 2
Expenses incurred after the interment, such as for prayers, masses,
entertainment, or the like are not. deductible. Any portion of the funeral and
burial expenses borne or defrayed by relatives and friends of the deceased are
not deductible.
Medical expenses as of the last illness will not form part of funeral
expenses but should be claimed under subsection (F) of this section.
Actual funeral expenses shall mean those which are actually incurred in
connection with the interment or burial of the deceased. The expenses must
be duly supported by receipts or invoices or other evidence to show that they
were actually incurred.
Illustrations on how to determine the amount of allowable funeral
expenses
(a) If five percent (5%) of the gross estate is P70,000 and the
amount actually incurred is P50,000, only P50,000 will be allowed as
deduction;
(b) If the expenses actually incurred amount to P90,000 and five
percent (5%) of the gross estate is P70,000, only P70,000 will be allowed
as deduction;
(c) If five percent (5%) of the gross estate is P220,000 and the
amount actually incurred is P215,000, the maximum amount that may be
deducted is only P200,000;
(d) If five percent (5%) of the gross estate is P100,000 and the total
amount incurred is P150,000 where P20,000 thereof is still unpaid, the
only amount that can be claimed as deduction for funeral expenses is
P100,000. The entire P50,000 excess amount consisting of P30,000 paid
amount and P20,000 unpaid amount can no longer be claimed as
FUNERAL EXPENSES. Neither can the P20,000 unpaid portion be
deducted from the gross estate as CLAIMS AGAINST THE ESTATE
under Subsection (C) hereof .
(2) Judicial expenses of the testamentary or intestate proceedings.
Expenses allowed as deduction under this category are those incurred in the
inventory-taking of assets comprising the gross estate, their administration,
the payment of debts of the estate, as well as the distribution of the estate
among the heirs. In short, these deductible items are expenses incurred during
the settlement of the estate but not beyond the last day prescribed by law, or
the extension thereof, for the filing of the estate tax return. Judicial expenses
may include:
(a) Fees of executor or administrator;
(b) Attorney's fees;
(c) Court fees;
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Atty. Salvador
(d) Accountant's fees;
(e) Appraiser's fees;
(f) Clerk hire;
(g) Costs of preserving and distributing the estate;
(h) Costs of storing or maintaining property of the estate; and
(i) Brokerage fees for selling property of the estate.
Any unpaid amount for the aforementioned cost and expenses claimed
under "Judicial Expenses" should be supported by a sworn statement of
account issued and signed by the creditor.
(3) Claims against the estate. The word "claims" is generally
construed to mean debts or demands of a pecuniary nature which could have
been enforced against the deceased in his lifetime and could have been
reduced to simple money judgments. Claims against the estate or
indebtedness in respect of property may arise out of: (1) Contract; (2) Tort; or
(3) Operation of Law.
(i) Requisites for Deductibility of Claims Against the Estate
(a) The liability represents a personal obligation of the deceased
existing at the time of his death except unpaid obligations incurred
incident to his death such as unpaid funeral expenses (i.e., expenses
incurred up to the time of interment) and unpaid medical expenses which
are classified under a different category of deductions pursuant to these
Regulations;
(b) The liability was contracted in good faith and for adequate and
full consideration in money or money's worth;
(c) The claim must be a debt or claim which is valid in law and
enforceable in court;
(d) The indebtedness must not have been condoned by the creditor
or the action to collect from the decedent must not have prescribed.
(ii) Substantiation Requirements. All unpaid obligations and
liabilities of the decedent at the time of his death (except unpaid funeral or
medical expenses which are deductible under a different category) are
allowed as deductions from gross estate. Provided, however, that the
following requirements/documents are complied with/submitted
(a) In case of simple loan (including advances):
(1) The debt instrument must be duly notarized at the time the
indebtedness was incurred, such as promissory note or contract of
loan, except for loans granted by financial institutions where
notarization is not part of the business practice/policy of the financial
institution-lender;
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 3
(2) Duly notarized Certification from the creditor as to the
unpaid balance of the debt, including interest as of the time of death.
If the creditor is a corporation, the sworn certification should be
signed by the President, or Vice-President, or other principal officer
of tie corporation. If the creditor is a partnership, the sworn
certification should be signed by any of the general partners. In case
the creditor is a bank or other financial institutions, the Certification
shall be executed by the branch manager of the bank/financial
institution which monitors and manages the loan of the decedent-
debtor. If the creditor is an individual, the sworn certification should
be signed by him. In any of these cases, the one who should certify
must not be a relative of the borrower within the fourth civil degree,
either by consanguinity or affinity, except when the requirement
below is complied with.
When the lender, or the President/Vice-president/principal officer of the
creditor-corporation, or the general partner of the creditor-partnership is a
relative of the debtor in the degree mentioned above, a copy of the
promissory note or other evidence of the indebtedness must be filed with the
RDO having jurisdiction over the borrower within fifteen days from the
execution thereof.
(3) In accordance with the requirements as prescribed in
existing or prevailing internal revenue issuances, proof of financial
capacity of the creditor to lend the amount at the time the loan was
granted, as well as its latest audited balance sheet with a detailed
schedule of its receivable showing the unpaid balance of the
decedent-debtor. In case the creditor is an individual who is no
longer required to file income tax returns with the Bureau, a duly
notarized Declaration by the creditor of his capacity to lend at the
time when the loan was granted without prejudice to verification that
may be made by the BIR to substantiate such declaration of the
creditor. If the creditor is a non-resident, the executor/administrator
or any of the legal heirs must submit a duly notarized declaration by
the creditor of his capacity to lend at the time when the loan was
granted, authenticated or certified to as such by the tax authority of
the country where the non-resident creditor is a resident;
(4) A statement under oath executed by the administrator or
executor of the estate reflecting the disposition of the proceeds of the
loan if said loan was contracted within three (3) years prior to the
death of the decedent;
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Atty. Salvador
(b) If the unpaid obligation arose from purchase of goods or
services:
(1) Pertinent documents evidencing the purchase of goods or
service, such as sales invoice/delivery receipt (for sale of goods), or
contract for the services agreed to be rendered (for sale of service),
as duly acknowledged, executed and signed by decedent-debtor, and
creditor, and statement of account given by the creditor as duly
received by the decedent-debtor;
(2) Duly notarized Certification from the creditor as to the
unpaid balance of the debt, including interest as of the time of death.
If the creditor is a corporation, the sworn Certification should be
signed by the President, or Vice-President, or other principal officer
of the corporation. If the creditor is a partnership, the sworn
certification should be signed by any of the general partners. If the
creditor is a sole proprietorship, the sworn certification should be
signed by the owner of the business. In any of these cases, the one
who issues the certification must not be a relative of the decedent-
debtor within the fourth civil degree, either by consanguinity or
affinity, except when the requirement below is complied with.
When the lender, or the President/Vice-President/principal officer of the
creditor-corporation, or the general partner of the creditor-partnership is a
relative of the debtor in the degree mentioned above, a copy of the
promissory note or other evidence of the indebtedness must be filed with the
RDO having jurisdiction over the borrower within fifteen days from the
execution thereof.
(3) Certified true copy of the latest audited balance sheet of the
creditor with a detailed schedule of its receivable showing the unpaid
balance of the decedent-debtor. Moreover, a certified true copy of
the updated latest subsidiary ledger/records of the debt of the debtor-
decedent, (certified by the creditor, i.e., the officers mentioned in the
preceding paragraphs) should likewise be submitted.
(c) Where the settlement is made through the Court in a testate or
intestate proceeding, pertinent documents filed with the Court evidencing
the claims against the estate, and the Court Order approving the said
claims, if already issued, in addition to the documents mentioned in the
preceding paragraphs.
(4) Claims of the deceased against insolvent persons where the value of
the decedent's interest therein is included in the value of the gross estate; and,
(5) Unpaid mortgages, taxes and casualty losses
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 4
(a) Unpaid mortgages upon, or any indebtedness in respect to,
property where the value of the decedent's interest therein, undiminished
by such mortgage or indebtedness, is included in the value of the gross
estate. The deduction herein allowed in the case of claims against the
estate, unpaid mortgages or any indebtedness shall, when founded upon a
promise or agreement, be limited to the extent that they were contracted
bona fide and for an adequate and full consideration in money or money's
worth.
(b) Taxes which have accrued as of the death of the decedent which
were unpaid as of the time of death. This deduction will not include
income tax upon income received after death, or property taxes not
accrued before his death, or the estate tax due from the transmission of
his estate.
(c) There shall also be deducted losses incurred during the
settlement of the estate arising from fires, storms, shipwreck, or other
casualties, or from robbery, theft or embezzlement, when such losses are
not compensated for by insurance or otherwise, and if at the time of the
filing of the return such losses have not been claimed as a deduction for
income tax purposes in an income tax return, and provided that such
losses were incurred not later than the last day for the payment of the
estate tax as prescribed in Subsections (A) and (B) of Section 91.
In case unpaid mortgage payable is being claimed by the estate,
verification must be made as to who was the beneficiary of the loan proceeds.
If the loan is found to be merely an accommodation loan where the loan
proceeds went to another person, the value of the unpaid loan must be
included as a receivable of the estate. If there is a legal impediment to
recognize the same as receivable of the estate, said unpaid
obligation/mortgage payable shall not be allowed as a deduction from the
gross estate. In all instances, the mortgaged property, TO THE EXTENT OF
THE DECEDENT'S INTEREST THEREIN, should always form part of the
gross taxable estate.
(B) Property previously taxed . . .
(C) Transfers for public use . . .
(D) The family home An amount equivalent to the current fair market
value of the decedent's family home: Provided, however, That if the said
current fair market value exceeds One million pesos (P1,000,000), the excess
shall be subject to estate tax. As a sine qua non condition for the exemption or
deduction, said family home must have been the decedent's family home as
certified by the barangay captain of the locality.
a) Definition of terms
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Family home The dwelling house, including the land on which it is
situated, where the husband and wife, or a head of the family, and members of
their family reside, as certified to by the Barangay Captain of the locality. The
family home is deemed constituted on the house and lot from the time it is
actually occupied as a family residence and is considered as such for as long
as any of its beneficiaries actually resides therein. (Arts. 152 and 153, Family
Code)
For purposes of these regulations, however, actual occupancy of the
house or house and lot as the family residence shall not be considered
interrupted or abandoned in such cases as the temporary absence from the
constituted family home due to travel or studies or work abroad, etc.
In other words, the family home is generally characterized by
permanency, that is, the place to which, whenever absent for business or
pleasure, one still intends to return.
The family home must be part of the properties of the absolute
community or of the conjugal partnership, or of the exclusive properties of
either spouse depending upon the classification of the property (family home)
and the property relations prevailing on the properties of the husband and
wife. It may also be constituted by an unmarried head of a family on his or
her own property. (Art. 156, Ibid)
For purposes of availing of a family home deduction to the extent
allowable, a person may constitute only one family home. (Art. 161, Ibid)
Husband and Wife Legally married man and woman.
Unmarried Head of a Family An unmarried or legally separated man
or woman with one or both parents, or with one or more brothers or sisters, or
with one or more legitimate, recognized natural or legally adopted children
living with and dependent upon him or her for their chief support, where such
brothers or sisters or children are not more than twenty one (21) years of age,
unmarried and not gainfully employed or where such children, brothers or
sisters, regardless of age are incapable of self-support because of mental or
physical defect, or any of the beneficiaries mentioned in Article 154 of the
Family Code who is living in the family home and dependent upon the head
of the family for legal support.
The beneficiaries of a family home are:
(1) The husband and wife, or the head of a family; and
(2) Their parents, ascendants, descendants including legally adopted
children, brothers and sisters, whether the relationship be legitimate or
illegitimate, who are living in the family home and who depend upon the
head of the family for legal support. (Art. 154, Ibid)
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 5
b) Conditions for the allowance of FAMILY HOME as deduction from
the gross estate
1. The family home must be the actual residential home of the
decedent and his family at the time of his death, as certified by the
Barangay Captain of the locality where the family home is situated;
2. The total value of the family home must be included as part of
the gross estate of the decedent; and
3. Allowable deduction must be in an amount equivalent to the
current fair market value of the family home as declared or included in
the gross estate, or the extent of the decedent's interest (whether
conjugal/community or exclusive property), whichever is lower, but not
exceeding P1,000,000.
(E) Standard deduction. A deduction in the amount of One Million Pesos
(P1,000,000) shall be allowed as an additional deduction without need of
substantiation. The full amount of P1,000,000 shall be allowed as deduction
for the benefit of the decedent. The presentation of such deduction in the
computation of the net taxable estate of the decedent is properly illustrated in
these Regulations.
(F) Medical expenses. All medical expenses (cost of medicines, hospital
bills, doctors' fees, etc.) incurred (whether paid or unpaid) within one (1) year
before the death of the decedent shall be allowed as a deduction provided that
the same are duly substantiated with official receipts for services rendered by
the decedent's attending physicians, invoices, statements of account duly
certified by the hospital, and such other documents in support thereof and
provided, further, that the total amount thereof, whether paid or unpaid, does
not exceed Five Hundred Thousand Pesos (P500,000).
Any amount of medical expenses incurred within one year from death in
excess of Five Hundred Thousand Pesos (P500,000) shall no longer be
allowed as a deduction under this subsection. Neither can any unpaid amount
thereof in excess of the P500,000 threshold nor any unpaid amount for
medical expenses incurred prior to the one-year period from date of death be
allowed to be deducted from the gross estate as claim against the estate.
Illustrations on how to determine the amount of allowable medical
expenses given the P500,000 threshold amount
a. If the actual amount of medical expenses incurred is P250,000, then
only P250,000 shall be allowed as deduction and not to the extent of the
P500,000 threshold amount;
b. If the actual amount of medical expenses incurred within the year
prior to decedent's death is P600,000, only the maximum amount of P500,000
shall be allowed as deduction. If in case the excess of P100,000 (P600,000-
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500,000) is still unpaid, such amount shall not be allowed to be deducted (a) Real and personal properties P5,000,000
from the gross estate as "claims against the estate". Family Home 2,000,000
(G) Amount received by heirs under Republic Act No. 4917. Any amount
received by the heirs from the decedent's employer as a consequence of the Gross Estate P7,000,000
death of the decedent-employee in accordance with Republic Act No. 4917 is ==========
allowed as a deduction provided that the amount of the separation benefit is Less: Deductions
included as part of the gross estate of the decedent. Ordinary Deductions
(8) Net share of the surviving spouse in the conjugal partnership or Funeral Expenses P200,000
community property. After deducting the allowable deductions Other Deductions 1,300,000 P1,500,000
appertaining to the conjugal or community properties included in the gross
estate, the share of the surviving spouse must be removed to ensure that only Special Deductions
the decedent's interest in the estate is taxed. Family Home P1,000,000
Standard Deduction 1,000,000
Computation Of The Net Estate Of A Decedent Who Is A Non-Resident Medical Expenses* 500,000 2,500,000
Alien Of The Philippines. - The value of the net estate of a decedent who is
a non-resident alien in the Philippines shall be determined by deducting from Total Deductions P4,000,000
the value of that part of his gross estate which at the time of his death is
situated in the Philippines the following items of deductions: Net Taxable Estate P3,000,000
(1) Expenses, losses, indebtedness, and taxes That proportion of the total ==========
expenses, losses, indebtedness, and taxes which the value of such part bears Although the family home is valued at P2 million, the maximum allowable
to the value of his entire gross estate wherever situated. The allowable deduction for the family home is P1million only.
deduction under this subsection shall be computed using the following Note: * Medical expenses are not included in the deductions referred under
formula: Section 86(A)(1) of the Code but are treated as a special item of deduction
(2) Property previously taxed . . . under Section 86(A)(6) of the same Code.
(3) Transfers for public use . . . (b) Real and personal properties P5,000,000
(4) Net share of the surviving spouse in the conjugal property or community Family Home 800,000
property. . . .
No deduction shall be allowed in the case of a non-resident decedent not Gross Estate P5,800,000
a citizen of the Philippines, unless the executor, administrator, or anyone of ==========
the heirs, as the case may be, includes in the return required to be filed under Less: Deductions
Section 90 of the Code the value at the time of the decedent's death of that Ordinary Deductions
part of his gross estate not situated in the Philippines. Funeral Expenses P200,000
Other Deductions 1,300,000 P1,500,000
Proper Presentation Of Funeral Expenses, Family Home, Standard
Deduction, And Medical Expenses As Deductions From The Gross Estate. Special Deductions
Illustrative examples to properly present the manner of deducting funeral Family Home P800,000
expenses, family home, standard deduction, and medical expenses from the Standard Deduction 1,000,000
gross estate in accordance with the provisions of the Code. Medical Expenses 500,000 2,300,000
Illustrations:
(1) Decedent is an unmarried head of a family: Total Deductions P3,800,000

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
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(P3,500,000/2) (1,750,000)
Net Taxable Estate P2,000,000
========== Net Taxable Estate P3,750,000
Note: Deduction for family home is allowed for P800,000 only which is the
declared value of the family home.
(b) Family home is a conjugal or community property
(2) Decedent is a married man with surviving spouse: Exclusive Conjugal Total
(a) The family home is his exclusive property Conjugal Properties:
Exclusive Conjugal Total Family Home P2,000,000
Conjugal Properties: Other Real Properties P5,000,000 P7,000,000
Real Properties P5,000,000 P5,000,000 Exclusive Properties P2,000,000 - 2,000,000
Exclusive Properties:
Family Home P2,000,000 Gross Estate P2,000,000 P7,000,000 P9,000,000
Other Exclusive properties2,500,000 4,500,000
Less: Deductions
Gross Estate P4,500,000 P5,000,000 P9,500,000 Ordinary Deductions
========= ========= ========= Conjugal Deductions
Less: Funeral Expenses (P200,000) (200,000)
Ordinary Deductions Other Deductions (1,300,000) (1,300,000)
Conjugal Deductions
Funeral Expenses (P200,000) (200,000) Total Conjugal Deductions (P1,500,000) (P1,500,000)
Other Deductions (1,300,000) (1,300,000)
Net Conjugal Estate P5,500,000
Total Conjugal Deductions (P1,500,000) (P1,500,000)
Special Deductions
Net Conjugal Estate P3,500,000 Family Home (1,000,000)
Standard Deduction (1,000,000)
Special Deductions Medical Expenses (500,000)
Family Home (1,000,000)
Standard Deduction (1,000,000) Total Deductions (P4,000,000)
Medical Expenses (500,000)
Total Deductions (P4,000,000) Net Estate P5,500,000
Less: Share of Surviving Spouse
Net Estate P5,500,000 Conjugal Property P7,000,000
Less: Share of Surviving Spouse Conjugal Deduction (1,500,000)
Conjugal Property P5,000,000
Conjugal Deduction (1,500,000) Net Conjugal Estate P5,500,000

Net Conjugal Estate P3,500,000 (P5,500,000/2) (2,750,000)

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Tax Law Review
Atty. Salvador Page 8
Net Taxable Estate P2,250,000 Note: Since the fair market value/zonal value of the conjugal family home in
the above example is P1,500,000, the family home deduction corresponding
(c) Same facts and figures as in (b) except that the family home has a fair to of such fair market value/zonal value is P750,000 only.
market value/zonal value of only P1,500,000. (d) Family home is conjugal property, but lot on which it stands is exclusive
Exclusive Conjugal Total property
Conjugal Properties: Exclusive Conjugal Total
Family Home P1,500,000 P1,500,000 Conjugal Properties
Other Real Properties P5,000,000 P5,000,000 Other Real Properties P3,000,000 P3,000,000
Exclusive Properties P2,000,000 - 2,000,000 Family Home P1,000,000 1,000,000
Exclusive Properties
Gross Estate P2,000,000 P6,500,000 P8,500,000 Other Real Properties P2,000,000 2,000,000
Family lot 400,000 400,000
Less:
Ordinary Deductions Gross Estate P2,400,000 P4,000,000 P6,400,000
Conjugal Deductions
Funeral Expenses (P200,000) (200,000) Less:
Other Deductions (1,300,000) (1,300,000) Ordinary Deductions
Conjugal Deductions
Total Conjugal Deductions (P1,500,000) (P1,500,000) Funeral Expenses (P200,000) (200,000)
Other Deductions (1,300,000) (1,300,000)
Net Conjugal Estate P5,000,000
Total Conjugal Deductions (P1,500,000) (P1,500,000)
Special Deductions
Family Home (750,000) Net Conjugal Estate P2,500,000
Standard Deduction (1,000,000)
Medical Expenses (500,000) Special Deductions
Family Home
Total Deductions (P3,750,000) Exclusive Lot P400,000
Conjugal Home
Net Estate P4,750,000 (P1,000,000/2) (500,000) (900,000)
Less: Share of Surviving Spouse
Conjugal Property P6,500,000 Standard Deduction (1,000,000)
Conjugal Deduction (1,500,000) Medical Expenses (500,000)

Net Conjugal Estate P5,000,000 Total Deductions (P3,900,000)

(P5,000,000/2) (2,500,000) Net Estate P2,500,000
Less: Share of Surviving Spouse
Net Taxable Estate P2,250,000 Conjugal Property P4,000,000
Conjugal Deduction (1,500,000)

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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executor or administrator's legal residence. Nonetheless, in case the non-
Net Conjugal Estate P2,500,000
Philippines, the estate tax return shall be filed with and the TIN for the estate
(P2,500,000/2) (1,250,000)
South Quezon City.
Net Taxable Estate P1,250,000
Revenue may continue to exercise his power to allow a different venue/place
Time And Place Of Filing Estate Tax Return And Payment Of Estate Tax
Due.
(A) Time for filing estate tax return. For purposes of determining the
estate tax, the estate tax return shall be filed within six (6) months from the
decedent's death. The Court approving the project of partition shall furnish
the Commissioner with a certified copy thereof and its order within thirty (30)
days after promulgation of such order.
(B) Extension of time to file estate tax return. The Commissioner or any
Revenue Officer authorized by him pursuant to the Code shall have authority
to grant, in meritorious cases, a reasonable extension, not exceeding thirty
(30) days, for filing the return. The application for the extension of time to
file the estate tax return must be filed with the Revenue District Office (RDO)
where the estate is required to secure its Taxpayer Identification Number
(TIN) and file the tax returns of the estate, which RDO likewise, has
jurisdiction over the donor's tax return required to be filed by any party as a
result of the distribution of the assets and liabilities of the decedent.
(C) Place of filing the return and payment of the tax. In case of a resident
decedent, the administrator or executor shall register the estate of the
decedent and secure a new TIN therefor from the Revenue District Office
where the decedent was domiciled at the time of his death and shall file the
estate tax return and pay the corresponding estate tax with the Accredited
Agent Bank (AAB), Revenue District Officer, Collection Officer or duly
authorized Treasurer of the city or municipality where the decedent was
domiciled at the time of his death, whichever is applicable, following
prevailing collection rules and procedures.
In case of a non-resident decedent, whether non-resident citizen or non-
resident alien, with executor or administrator in the Philippines, the estate tax
return shall be filed with and the TIN for the estate shall be secured from the
Revenue District Office where such executor or administrator is registered:
Provided, however, that in case the executor or administrator is not registered,
the estate tax return shall be filed with and the TIN of the estate shall be
secured from the Revenue District Office having jurisdiction over the
Page 9
resident decedent does not have an executor or administrator in the
shall be secured from the Office of the Commissioner through RDO No. 39
The foregoing provisions notwithstanding, the Commissioner of Internal
in the filing of tax returns.
(D) Time for payment of the estate tax. As a general rule, the estate tax
imposed under the Code shall be paid at the time the return is filed by the
executor, administrator or the heirs.
(E) Extension of time to pay estate tax. When the Commissioner finds that
the payment of the estate tax or of any part thereof would impose undue
hardship upon the estate or any of the heirs, he may extend the time for
payment of such tax or any part thereof not to exceed five (5) years in case
the estate is settled through the courts, or two (2) years in case the estate is
settled extrajudicially. In such case, the amount in respect of which the
extension is granted shall be paid on or before the date of the expiration of the
period of the extension, and the running of the statute of limitations for
deficiency assessment shall be suspended for the period of any such
extension.
For purposes of these Regulations, the application for extension of time
to file the return and extension of time to pay estate tax shall be filed with the
Revenue District Officer (RDO) where the estate is required to secure its TIN
and file the estate tax return. This application shall be approved by the
Commissioner or his duly authorized representative.
Where the request for extension is by reason of negligence, intentional
disregard of rules and regulations, or fraud on the part of the taxpayer, no
extension will be granted by the Commissioner.
If an extension is granted, the Commissioner or his duly authorized
representative may require the executor, or administrator, or beneficiary, as
the case may be, to furnish a bond in such amount, not exceeding double the
amount of the tax and with such sureties as the Commissioner deems
necessary, conditioned upon the payment of the said tax in accordance with
the terms of the extension.
Any amount paid after the statutory due date of the tax, but within the
extension period, shall be subject to interest but not to surcharge.
(F) Payment of the estate tax by installment. In case the available cash of
the estate is not sufficient to pay its total estate tax liability, the estate may be
allowed to pay the tax by installment and a clearance shall be released only

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Tax Law Review
Atty. Salvador
with respect to the property the corresponding/computed tax on which has
been paid. There shall, therefore, be as many clearances (Certificates
Authorizing Registration) as there are as many properties released because
they have been paid for by the installment payments of the estate tax. The
computation of the estate tax, however, shall always be on the cumulative
amount of the net taxable estate. Any amount paid after the statutory due date
of the tax shall be imposed the corresponding applicable penalty thereto.
However, if the payment of the tax after the due date is approved by the
Commissioner or his duly authorized representative, the imposable penalty
thereon shall only be the interest. Nothing in this paragraph, however,
prevents the Commissioner from executing enforcement action against the
estate after the due date of the estate tax provided that all the applicable laws
and required procedures are followed/observed.
(G) Liability for payment The estate tax imposed under the Code shall be
paid by the executor or administrator before the delivery of the distributive
share in the inheritance to any heir or beneficiary. Where there are two or
more executors or administrators, all of them are severally liable for the
payment of the tax. The estate tax clearance issued by the Commissioner or
the Revenue District Officer (RDO) having jurisdiction over the estate, will
serve as the authority to distribute the remaining/distributable properties/share
in the inheritance to the heir or beneficiary.
The executor or administrator of an estate has the primary obligation to pay
the estate tax but the heir or beneficiary has subsidiary liability for the
payment of that portion of the estate which his distributive share bears to the
value of the total net estate. The extent of his liability, however, shall in no
case exceed the value of his share in the inheritance.
A. GROSS ESTATE
The value of the gross estate of the decedent shall be determined by including
the value at the time of his death of all property, real or personal, tangible or
intangible, wherever situated: Provided, however, That in the case of a
nonresident decedent who at the time of his death was not a citizen of the
Philippines, only that part of the entire gross estate which is situated in the
Philippines shall be included in his taxable estate.
1. GROSS ESTATE
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
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i. Resident, non-resident alien
The term resident alien means an individual whose residence is within the
Philippines and who is not a citizen thereof.
The term nonresident alien means an individual whose residence is not
within the Philippines and who is not a citizen thereof.
ii. Reciprocity of Exemption
Collector v. Fisher, 1 SCRA 93
Facts: Stevenson is a resident of California, U.S.A. He had real and
personal properties [shares of stock in 2 Philippine corporations and cash in
bank] in the Philippines. He died in the U.S. leaving his wife Beatrice as his
sole heiress. Ancillary administration proceedings were instituted in Manila
for the settlement of the estate. Beatrice assigned all her rights to her
husbands estate to the Fishers. The Fishers claim exemption from the
payment of estate and inheritance taxes on the Philippine corporation shares
of stock owned by the estate of Stevenson. The basis of the Fishers claim is
the reciprocity proviso of sec 122 of the NIRC. CIR denied the claim. The
CTA allowed the claim hence this petition.
Issue: Whether or not the estate can avail itself of the reciprocity?
Held: No, the estate cannot avail of the reciprocity Sec 22 of the NIRC does
not apply. Under sec 122 of the Tax Code and sec 13851 of the California
Inheritance Tax Law, the reciprocity must be total, that is with respect to
transfer or death taxes of any and every character, in the case of the Philippine
law, and to legacy, succession, or death taxes of any and every character, in
the case of the California law. Therefore, if any of the two states collects or
imposes and does not exempt any transfer, death, legacy, or succession tax of
any character, the reciprocity does not work. The shares of stock in the
Philippines, left by a deceased resident of California, are subject to the
Philippine inheritance tax. The reciprocity provisions of sec 122 of the tax
code are not applicable because there is no total reciprocity under the two
laws.
iii. Valuation of gross estate
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Atty. Salvador
a) Decedents interest
To the extent of the interest therein of the decedent at the time of his death;
b) Transfer in Contemplation of Death
To the extent of any interest therein of which the decedent has at any time
made a transfer, by trust or otherwise, in contemplation of or intended to take
effect in possession or enjoyment at or after death, or of which he has at any
time made a transfer, by trust or otherwise, under which he has retained for
his life or for any period which does not in fact end before his death (1) the
possession or enjoyment of, or the right to the income from the property, or
(2) the right, either alone or in conjunction with any person, to designate the
person who shall posses or enjoy the property or the income therefrom;
except in case of a bona fide sale for an adequate and full consideration in
money or moneys worth.
c) Revocable Transfer
(1) To the extent of any interest therein, of which the decedent has at any time
made a transfer (except in case of bona fide sale for an adequate and full
consideration in money or moneys worth) by trust or otherwise, where the
enjoyment thereof was subject at the date of his death to any change through
the exercise of a power (in whatever capacity exercisable) by the decedent
alone or by the decedent in conjunction with any other person (without regard
to when or from what source the decedent acquired such power), to alter,
amend, revoke or terminate, or where any such power is relinquished in
contemplation of the decedents death.
d) Property Passing Under General Appointment
To the extent of any property passing under a general power of appointment
exercised by the decedent: (1) by will, or (2) by deed executed in
contemplation of, or intended to take effect in possession or enjoyment at, or
after his death, or (3) by deed under which he has retained for his life or any
period not ascertainable without reference to his death or for any period
which does not in fact end before his death (a) the possession or enjoyment
of, or the right to the income from , the property, or (b) the right, either alone
or in conjunction with any person, to designate the persons who shall possess
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
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or enjoy the property or the income therefrom; except in case of a bona fide
sale for an adequate and full consideration in money or moneys worth.
e) Proceeds of Life Insurance
To the extent of the amount receivable by the estate of the deceased, his
executor, or administrator, as insurance under policies taken out by the
decedent upon his own life, irrespective of whether or not the insured retained
the power of revocation, or to the extent of the amount receivable by any
beneficiary designated in the policy of insurance, except when it is expressly
stipulated that the designation of the beneficiary is irrevocable.
f) Prior Interests
Except as otherwise specifically provided, therein, Subsections (B), (C) and
(E) of this Section shall apply to the transfers, trusts, estates, interests, rights,
powers and relinquishment of powers, as severally enumerated and described
therein, whether made, created, arising, existing, exercised or relinquished
before or after the effectivity of this Code.
g) Transfer for Insufficient Consideration
If any one of the transfers, trusts, interests, rights or powers enumerated and
described in Subsections (B), (C) and (C) of this Section is made, created,
arising, existing, exercised or relinquished for a consideration in money or
moneys worth, there shall be included in the gross estate only the excess of
the fair market value, at the time of death, of the property otherwise to be
included on account of such transaction, over the value of the consideration
received therefore by the decedent.
REVENUE REGULATIONS NO. 2-82
TAXATION OF SHARES OF STOCK
Taxation of Sales of Shares of Stock Classified as Capital Assets.
Definition of Terms. For the purpose of these regulations, the following
definitions of terms are hereby adopted:
(a) "Stock classified as capital assets" shall mean all stocks and securities
held by taxpayers other than dealers in securities.
(b) "Dealer in securities" includes all persons who for their own account are
engaged in the sale of stock, bonds, exchange, bullion, coined money, bank
Tax Law Review
Atty. Salvador
notes, promissory notes, or other securities as licensed by the Securities and
Exchange Commission. Notwithstanding the foregoing, nothing in these
regulations shall preclude the Commissioner of Internal Revenue from
treating other taxpayers engaged in similar activities but not licensed by the
Securities and Exchange Commission as a dealer in securities.
(c) "Gross selling price" is the total amount of money or its equivalent which
the purchaser pays the vendor to receive or get the goods.
Persons Liable to the Tax. The following persons are liable to the tax
provided for in Section 5 of these Regulations:
(a) individual taxpayer, citizens or alien;
(b) corporate taxpayer, domestic or foreign;
(c) other taxpayers not falling under (a) or (b), such as estate, trust, trust
funds and pension funds among others.
Persons Not Liable to the Tax. The taxes imposed herein shall not apply
to the following:
(a) gains derived by dealers in securities;
(b) gains on sale of shares of stock to the extent invested in new shares of
stock in banks, non-bank financial intermediaries and corporations organized
primarily to hold equities in banks, in accordance with Presidential Decree
No. 1739; and
(c) all other gains which are specifically exempt from income tax under
existing investment incentives and other special law.
Imposition of the Tax.
(a) Sales of shares of stock listed and traded through a local stock exchange.
A tax of 1/4 of 1% shall be imposed on the gross selling price of the shares
of stock sold, exchanged or transferred through the facilities of a stock
exchange registered with the Securities and Exchange Commission.
(b) Shares of stock not traded through a local stock exchange. Net capital
gains derived during the taxable year from sales, exchanges, transfers or
similar transaction shall be taxed as follows:
Not over P100,000 10%
Over P100,000 20%
Determination of Tax Base. In determining the tax base, the following
rules shall apply:
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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(a) Determination of selling price. The selling price of the shares of
stocks shall be the fair market value of the shares of stocks transferred or
exchanged and not the fair market value of the property received in exchange.
If the total consideration of the sale or disposition consists partly in cash or
money and partly in kind, the selling price shall be the fair market value of
the shares disposed.
(1) In the case of shares traded through the stock exchange, "fair market
value" shall consist of the actual selling price as shown in the sales
confirmation issued by the member of the stock exchange through whom the
sale was effected.
(2) In the case of shares not traded through the stock exchange, but
listed in one or more stock exchanges, the highest closing price on the day
when the shares are sold, transferred or exchanged, shall be the "fair market
value." When no sale is made in any stock exchange, the highest closing price
on the day nearest to the day of sale, transfer or exchange of the shares shall
be the fair market value.
(3) In the case of sale, transfer or exchange of shares not listed in the
stock exchange, the following rules shall be observed:
(i) In general, the unlisted shares shall be valued at their book value
nearest the valuation date. The book value of these unlisted shares of
stock shall be prima facie considered as their fair market value.
(ii) In case the shares are valued on a basis lower than their book
values, a justification for the deviation from the book value, together with
the evidences in support thereof, should be submitted. The following
factors are considered relevant in the valuation of shares of stock of
closed corporations.
A) The nature of the business and the financial history of the
enterprise, from the date of incorporation
B) The economic outlook in general and the business condition
and outcome of the specific industry in particular
C) The financial condition of the business
D) The earning capacity of the company
E) The dividend paying capacity
F) Goodwill
G) Sales of stocks and size of the block of stock to be valued
H) Market price of stocks of corporations engaged in the same
or similar line of business to be valued
I) Existence of corporate debts in favor of the family of the
principal shareholder
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J) Restrictive agreements impairing the alienability of the
stock
K) Investments in business or property maintained at a deficit
L) Dividend arrearages
M) Voting rights of stockholders
N) Difficulty in liquidating the assets
If such lower fair market valuation is not clearly established and
documented, the book value of the unlisted shares of stock shall be adopted.
If there have been previous sales/exchanges of the unlisted shares of stock,
the price at which these shares exchanged hands should be taken/considered
as its fair market value/s.
(b) Determination of cost. The cost basis for determining the capital gains
or losses shall be the basis as determined in accordance with the provisions of
Section 35 of the National Internal Revenue Code, as amended, and its
implementing regulations applied in the following manner:
(1) If the stocks can be identified, then the cost shall be the actual
purchase price plus all costs of acquisition such as commission, documentary
tax, transfer fees, etc.
(2) If the stocks cannot be properly identified, then the cost to be
assigned shall be computed on the basis of the first-in, first-out (FIFO)
method. However -
(3) If books of accounts are maintained by the seller where every
transaction of a particular stocks are recorded, then the moving average
method shall be applied rather than the first-in, first-out, (FIFO) method.
(4) In all cases, stock dividend received must be assigned a
corresponding cost by allocating the original cost of acquisition to the total
number of shares composed of the original shareholdings plus the number of
shares of stocks received as stock dividend.
(c) In determining the deductibility of capital losses, the following rules shall
apply:
(1) The provisions of Section 33 of the National Internal Revenue Code,
as amended, and its implementing regulations on the non-deductibility of
losses on wash sales.
(2) The net capital losses sustained during the taxable year shall be
allowed as a capital loss deductible in the same taxable year only.
(3) The entire amount of capital gains and capital loss shall be
considered without taking into account the period or duration during which
the stocks were held by the seller up to disposition for purposes of computing
net capital gains.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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(d) Installment sales of shares of stock not listed and traded through any
local stock exchange. In cases of gains arising from installment sales of
shares of stocks, the provisions of Section 43 of the National Internal
Revenue Code, as amended, and its implementing regulations shall apply.
Payment of Tax and Manner of Filing Returns. The tax imposed by
Section 5 of these Regulations shall be collected as follows:
(a) Payment of tax.
(1) Tax on sale of shares of stock listed and traded through a stock
exchange. For purposes of the tax herein imposed, the stockbroker shall be
constituted as withholding agent. He shall withhold the tax from the seller
upon issuance of the confirmation of sale and issue the corresponding official
receipt to the seller or transferor.
(2) Tax on gains on sale of shares of stock not traded through any local
stock exchange. The tax on net capital gains shall be paid by the seller on a
per transaction basis upon filing the required return within 30 days following
each sale or other disposition of shares of stock.
(b) Manner of Filing Returns.
(1) Tax on sale of shares of stock listed and traded through a local stock
exchange. It shall be the duty of every stockbroker to turn over the sums
collected by him as tax to the Bureau of Internal Revenue within five banking
days from the date of collection thereof; and to submit on Monday of each
week to the secretary of the stock exchange of which he is a member, a true
and complete return, which shall contain a declaration that he made it under
the penalties of perjury, of all transactions effected through him during the
preceding week and of the taxes collected by him and turned over to the
Bureau of Internal Revenue. The secretary of the stock exchange shall
reconcile the same with the weekly reports of stockbrokers and in turn
transmit to the Bureau of Internal Revenue on the first and sixteenth day of
each month a consolidated return of all transactions effected during the
preceding period through the stock exchange.
(2) On sale of shares of stock not traded through any local stock
exchange. Taxpayers subject to the net capital gains tax shall, within 30
days following each sale or other disposition of shares of stock, file in
duplicate a capital gains tax return on BIR form No. ______ showing, among
others, the name of seller and buyer; amount realized (selling price or fair
market value of other property received) and contract price; cost or adjusted
basis; date of acquisition; sale or disposition. The return shall be accompanied
with a copy of the instrument of sale.
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A final consolidated return or an adjustment return (BIR Form No. _____
) covering all stock transactions during the taxable year shall be filed on or
before the fifteenth day of the fourth month following the close of the taxable
year.
The return shall include all stock transactions resulting in capital gains or
capital losses for the whole year. The tax shown on the final or adjustment
return after deducting therefrom the taxes paid during the taxable year shall
be paid upon filing or refunded as the case may be.
If a taxpayer elects and is qualified to pay the capital gains tax on stock
transaction on installments, the amount of the tax due on its installment
payment shall be determined as follows:
The net capital gains tax shall be computed on the basis of the entire
amount of gain realized from the sale or disposition of shares of stock and the
tax so computed may be paid in installments. The amount of the tax on each
installment shall be the proportion of the tax so determined which bears to the
total installment payment received over the total selling price or to the total
contract price, in case of sale or mortgaged shares of stock or where the
mortgage on such shares is assumed by the purchaser.
For this purpose, installment received shall mean
(i) On the date of sale or disposition. First payment received,
including the excess of the mortgage, if any, assumed by the purchaser
over the basis of the property sold.
(ii) Succeeding installments. Installment payments actually
received by seller.
Effect of Non-payment of Tax. No sale, exchange, transfer or similar
transaction intended to convey ownership of, or title to any share of stock
shall be registered in the books of the corporation unless the receipt of
payment of the tax herein imposed is filed with and recorded by the stock
transfer agent or secretary of the corporation. It shall be duty of the aforesaid
persons to inform the Bureau of Internal Revenue in case of non-payment of
tax.
Any stock transfer agent or secretary of the corporation who caused the
registration in violation of the aforementioned requirement shall be punished
by a fine of not more than P2,000.00 or by imprisonment for not more than
six months, or both.
Penalties. In addition to civil and criminal penalties for violation of the
Income Tax Laws as provided for under Sections 73, 74 and 337 of the
National Internal Revenue Code, as amended, the following administrative
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
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penalties incident to delinquency or deficiency prescribed in Sections 51 and
72 of the National Internal Revenue Code, as amended, shall be imposed.
These penalties shall be collected at the same time in the same manner and as
part of the tax.
(a) Surcharges. In case of any failure to make and file a return within the
time prescribed by law, not due to willful neglect, there shall be added to the
tax twenty-five per centum (25%) of its amount, except that when a return is
voluntarily and without notice from the Commissioner or any other revenue
officer filed after such time, and it is shown that the failure to file it was due
to a reasonable cause, no such addition shall be made to the tax.
If a false or fraudulent return is filed, there shall be added to the tax or
the deficiency tax, in case payment had been made on the basis of the return
before the discovery of the falsity or fraud, a surcharge of 50% thereof plus
25% of the tax or deficiency tax due.
(b) Interest on deficiency tax. Where a deficiency tax is determined to
exist, there shall be collected as part of the tax, deficiency interest at the rate
of twenty per centum (20%) per annum from the date prescribed for the
payment of the tax to the date the deficiency is assessed: Provided, That the
maximum amount of interest that may be collected as interest on deficiency
shall in no case exceed the amount corresponding to a period of three (3)
years.
(c) Addition to tax in case of non-payment.
(1) Tax shown on the return. Where the amount determined by the
taxpayer as the final capital gains tax is not paid on or before the date
prescribed for its payment, there shall be collected as part of the tax, interest
upon such unpaid amount at the rate of twenty per centum (20%) per annum
from the date prescribed for its payment until it is paid: Provided, That the
amount that may be collected as interest on deficiency shall in no case exceed
the amount corresponding to a period of three (3) years.
(2) Deficiency. Where a deficiency, or any interest assessed in
connection therewith, or any addition to the final capital gains tax provided
herein is not paid in full within thirty days from the date of notice and
demand from the Commissioner of Internal Revenue, there shall be collected
upon the unpaid amount, as part of the tax, interest at the rate of twenty per
centum (20%) per annum from the date of such notice and demand until it is
paid: Provided, That the maximum amount that may be collected as interest
on deficiency shall in no case exceed the amount corresponding to a period of
three years.
(3) Surcharge. If any amount of final capital gains tax included in the
notice and demand from the Commissioner of Internal Revenue is not paid in
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full within thirty days after notice and demand, there shall be collected in
addition to the interest prescribed herein and in paragraph (b) above and as
part of the tax a surcharge of ten per centum (10%) of the amount of tax
unpaid.
Similar surcharges and penalties shall be collected from the person
selling, transferring or exchanging, in case of trading outside the stock
exchange, who fails to pay the tax to the stock transfer agent or secretary of
the corporation.
2. EXCLUSION FROM GROSS ESTATE: CAPITAL OF SURVIVING
SPOUSE
The capital of the surviving spouse of a decedent shall not, for the purpose of
this Chapter, be deemed a part of his or her gross estate.
3. DEDUCTION FROM GROSS ESTATE
a) Funeral Expenses
For actual funeral expenses or in an amount equal to five percent (5%) of the
gross estate, whichever is lower, but in no case to exceed Two hundred
thousand pesos (P200, 000);
Page 15
For claims of the deceased against insolvent persons where the value of
decedents interest therein is included in the value of the gross estate; and
e) Unpaid Mortgages and Losses
For unpaid mortgages and losses upon, or any indebtedness in respect to,
property where the value of decedents interest therein, undiminished by such
mortgage or indebtedness, is included in the value of the gross estate, but not
including any income tax upon income received after the death of the
decedent, or property taxes not accrued before his death, or any estate tax.
The deduction herein allowed in the case of claims against the estate, unpaid
mortgages or any indebtedness shall, when founded upon a promise or
agreement, be limited to the extent that they were contracted bona fide and
for an adequate and full consideration in money or moneys worth. There
shall also be deducted losses incurred during the settlement of the estate
arising from fires, storms, shipwreck, or other casualties, or from robbery,
theft or embezzlement, when such losses are not compensated for by
insurance or otherwise, and if at the time of the filing of the return such losses
have not been claimed as a deduction for income tax purposes in an income
tax return, and provided that such losses were incurred not later than the last
day for the payment of the estate tax as prescribed in Subsection (A) of
Section 91.
f) Property Previously Taxed

b) Judicial Expenses
For judicial expenses of the testamentary or interstate proceedings;
c) Claims vs. The Estate
For claims against the estate: Provided, That at the time the indebtedness was
incurred the debt instrument was duly notarized and, if the loan was
contracted between three(3) years before the death of the decedent, the
administrator or executor shall submit a statement showing the disposition of
the proceed of the loan;
d) Claims vs. Insolvent Persons
An amount specified below of any property forming a part of the gross estate
situated in the Philippines of any person who died within five (5) years prior
to the death of the decedent, or transferred to the decedent by gift within five
(5) years prior to his death, where such property can be identified as having
been received by the decedent from the donor by gift, or from such prior
decedent by gift, bequest, devise or inheritance, or which can be identified as
having been acquired in exchange for property so received.
One hundred percent (100%) of the value, if prior decedent died more
than one (1) year prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to his death;
Eighty percent (80%) of the value, if the prior decedent died more than
two (1) year but not more than two (2) years prior to the death of the
decedent, or if the property was transferred to him by gift within the same
period prior to his death;

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
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Atty. Salvador
Sixty percent (60%) of the value, if the prior decedent died for more
than two (2) years but not more than three (3) years prior to the death of the
decedent, or if the property was transferred to him by gift within the same
period prior to his death;
Forty percent (40%) of the value, if the decedent died more than three
(3) years but not more than four years (4) prior to the death of the decedent,
of if the property was transferred to him by gift within the same period prior
to his death; and
Twenty percent (20%) of the value, if the prior decedent died more than
four years but not more than five years prior to the death of the decedent, or if
the property was transferred to him by gift within the same period prior to his
death;
g) Transfer for Public Purpose
The amount of all bequest, legacies, devises or transfers to or for the use of
the Government of the Republic of the Philippines, or any political
subdivision thereof, for exclusively public purposes.
h) Family House
The amount equivalent to the current fair market value of the decedents
family home: Provided, however That, if the said current fair market value
exceeds one million pesos (P1,000,000), the excess shall be subject to estate
tax. As a sine qua non condition for the exemption or deduction, said family
home must have been the decedents family home as certified by the barangay
captain of the locality.
i) Share in the Conjugal Property
The net share of the surviving spouse in the conjugal partnership property as
diminished by the obligations properly changeable to such property shall, for
the purpose of this Section, be deducted from the net estate of the decedent.
j) Standard Deduction
An amount equivalent to one million pesos (P1,000,000)
4. TAX CREDIT FOR ESTATE TAXES
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1) In General, The tax imposed by this title shall be credited with the
amount of any estate tax imposed by the authority of a foreign country.
2) Limitations on Credit, The amount of the credit taken under this
Section shall be subject to each of the following limitations:
a. The amount of the credit in respect to the tax paid to any
country shall not exceed the same proportion of the tax
against which such credit is taken, which the decedents net
estate situated within such country taxable under this title
bears to his entire estate; and
b. The total amount of the credit shall not exceed the same
proportion of the tax against which such credit is taken,
which the decedents net estate situated outside the
Philippines taxable under this Title bears to his entire net
estate.
5. EXEMPTION OF CERTAIN ACQUISITIONS
The following shall not be taxed:
a) The merger of usufruct in the owner of the naked title;
b) The transmission or delivery of the inheritance or legacy by the fiduciary
heir or legatee to the fideicommissary;
c) The transmission from the first heir, legatee or donee in favor of another
beneficiary, in accordance with the desire of the predecessor; and
d) All bequests, devises, legacies or transfers to social welfare, cultural and
charitable institutions, no part of the net income of which insures to the
benefit of any individual: Provided, however, That not more than thirty
percent (30%) of the said bequest, devises, legacies or transfers shall be
used by such institutions for administration purposes.
6. TAX RETURNS
i. Time to File and Notice
The estate tax return shall be filed within six (6) months from the decedents
death.
In all cases of transfers subjects to tax, or where, though exempt from
tax, the gross value of the estate exceeds 20, 000 , the executor, administrator
or any of the legal heirs, as the case may be, within 2 months after the
Tax Law Review
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decedents death, or within a like period after qualifying as such executor or DONORS TAX
administrator shall give a written notice thereof to the Commissioner.
Rates Of Donor's Tax. (A) Schedular rates of donor's tax imposable on
ii. Payment of Tax donation made to a donee who is not a stranger. The transfer of the total net
gifts made during the calendar year shall be subject to tax in accordance with
The estate tax shall be paid at the time the return is filed by the executor, the schedule provided in Section 99 of the Code. The entire value of the net
administrator, or the heirs gifts for each calendar year is divided into brackets and each rate is imposed
on the corresponding brackets as shown below:
If the net gift is:
7. OBLIGATION OF EXECUTOR, ADMINISTRATOR, OFFICERS, But not The tax Of the excess
OTHERS Over overshall be Plusover
P100,000 Exempt
The estate tax shall be paid by the executor or administrator before delivery to P100,000 200,000 0 2% P100,000
any beneficiary of his distributive share of the estate 200,000 500,000 2,000 4% 200,000
If the executor or administrator makes a written application to the 500,000 1,000,000 14,000 6% 500,000
Commissioner for determination of the amount of the estate tax and 1,000,000 3,000,000 44,000 8% 1,000,000
discharge from personal liability therefore, the Commissioner as 3,000,000 5,000,000 204,000 10% 3,000,000
soon as possible, and in any event within 1 year after the making of 5,000,000 10,000,000 404,000 12% 5,000,000
such application, or if the application is made before the return is 10,000,000 1,004,000 15% 10,000,000
filed, then within 1 year after the return is filed, but not after the (B) Tax payable by the donor if donee is a stranger. When the donee or
expiration of the period prescribed for the assessment of the tax in beneficiary is a stranger, the tax payable by the donor shall be thirty per cent
sec 203shall notify the administrator or executor of the amount of (30%) of the net gifts. For purposes of the donor's tax, a "stranger" is a person
the tax. The executor or administrator, upon payment of the amount who is not a:
of which he is notified, shall be discharged from personal liability (1) Brother, sister (whether by whole or half blood), spouse, ancestor,
for any deficiency in the tax thereafter found to be due and shall be and lineal descendant; or
entitled to a receipt or writing showing such discharge. (2) Relative by consanguinity in the collateral line within the fourth
degree of relationship.
A legally adopted child is entitled to all the rights and obligations
provided by law to legitimate children, and therefore, donation to him shall
not be considered as donation made to stranger.
Donation made between business organizations and those made between
an individual and a business organization shall be considered as donation
made to a stranger.
(C) Contribution for election campaign. Any contribution in cash or in
kind to any candidate, political party or coalition of parties for campaign
purposes, shall be governed by the Election Code, as amended.
The application of the rates as provided above is imposed on donations
made beginning January 1, 1998, which is the effectivity date of Republic Act
No. 8424, otherwise known as "The Tax Reform Act of 1997".

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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Atty. Salvador Page 18
The Law That Governs The Imposition Of Donor's Tax. The donor's For purposes of the donor's tax, "NET GIFT" shall mean the net
tax is not a property tax, but is a tax imposed on the transfer of property by economic benefit from the transfer that accrues to the donee. Accordingly, if a
way of gift inter vivos. (Lladoc vs. Commissioner of Internal Revenue, L- mortgaged property is transferred as a gift, but imposing upon the donee the
19201, June 16, 1965; 14 SCRA, 292) The donor's tax shall not apply unless obligation to pay the mortgage liability, then the net gift is measured by
and until there is a completed gift. The transfer of property by gift is perfected deducting from the fair market value of the property the amount of mortgage
from the moment the donor knows of the acceptance by the donee; it is assumed.
completed by the delivery, either actually or constructively, of the donated
property to the donee. Thus, the law in force at the time of the Computation Of The Donor's Tax. For donor's tax purposes, donations
perfection/completion of the donation shall govern the imposition of the made before January 1, 1998 shall be subject to the donor's tax computed on
donor's tax. the basis of the old rates imposed under Section 92 of the National Internal
In order that the donation of an immovable may be valid, it must be made Revenue Code of 1977 (R.A. No. 7499), while donations made on or after
in a public document specifying therein the property donated. The acceptance January 1, 1998 shall be subject to the donor's tax computed in accordance
may be made in the same Deed of Donation or in a separate public document, with the amended schedule of rates prescribed under Section 99 of the
but it shall not take effect unless it is done during the lifetime of the donor. If National Internal Revenue Code of 1997 (R.A. No. 8424). THE
the acceptance is made in a separate instrument, the donor shall be notified COMPUTATION OF THE DONOR'S TAX IS ON A CUMULATIVE BASIS
thereof in an authentic form, and this step shall be noted in both instruments. OVER A PERIOD OF ONE CALENDAR YEAR. Husband and wife are
A gift that is incomplete because of reserved powers, becomes considered as separate and distinct taxpayer's for purposes of the donor's tax.
complete when either: (1) the donor renounces the power; or (2) his However, if what was donated is a conjugal or community property and only
right to exercise the reserved power ceases because of the happening the husband signed the deed of donation, there is only one donor for donor's
of some event or contingency or the fulfillment of some condition, tax purposes, without prejudice to the right of the wife to question the validity
other than because of the donor's death. of the donation without her consent pursuant to the pertinent provisions of the
Renunciation by the surviving spouse of his/her share in the conjugal Civil Code of the Philippines and the Family Code of the Philippines.
partnership or absolute community after the dissolution of the marriage in Illustration:
favor of the heirs of the deceased spouse or any other person/s is subject to Donations made on:
donor's tax whereas general renunciation by an heir, including the surviving January 30, 2002 P2,000,000
spouse, of his/her share in the hereditary estate left by the decedent is not March 30, 2002 1,000,000
subject to donor's tax, unless specifically and categorically done in favor of August 15, 2002 500,000
identified heir/s to the exclusion or disadvantage of the other co-heirs in the
hereditary estate. Solution/computation:
Where property, other than a real property that has been subjected to the Date of donation Amount Donor's Tax
final capital gains tax, is transferred for less than an adequate and full 1. January 30, 2002 P2,000,000 P124,000
consideration in money or money's worth, then the amount by which the fair 2. March 30, 2002 1,000,000
market value of the property at the time of the execution of the Contract to March 30, 2002 donation 1,000,000
Sell or execution of the Deed of Sale which is not preceded by a Contract to Add: January 30, 2002 donation 2,000,000
Sell exceeded the value of the agreed or actual consideration or selling price
shall be deemed a gift, and shall be included in computing the amount of gifts Total 3,000,000
made during the calendar year.
The law in force at the time of the completion of the donation shall Tax Due Thereon 204,000
govern the imposition of donor's tax. Less: Tax due/paid on January donation 124,000

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Tax Law Review
Atty. Salvador
Tax Due/Payable on the March donation P80,000
3. August 15, 2002 500,000
August 15, 2002 donation 500,000
Add: January 2002 donation 2,000,000
March 2002 donation 1,000,000
Total 3,500,000
Tax Due Thereon 254,000
Less: Tax due/paid on Jan/March donation 204,000
Tax Due/Payable on the August donation P50,000
Filing Of Returns And Payment Of Donor's Tax.
(A) Requirements. Any person making a donation (whether direct or
indirect), unless the donation is specifically exempt under the Code or other
special laws, is required, for every donation, to accomplish under oath a
donor's tax return in duplicate. The return shall set forth:
(1) Each gift made during the calendar year which is to be included in
computing net gifts;
(2) The deductions claimed and allowable;
(3) Any previous net gifts made during the same calendar year,
(4) The name of the donee;
(5) Relationship of the donor to the donee; and
(6) Such further information as the Commissioner may require.
(B) Time and place of filing and payment. The donor's tax return shall be
filed within thirty (30) days after the date the gift is made or completed and
the tax due thereon shall be paid at the same time that the return is filed.
Unless the Commissioner otherwise permits, the return shall be filed and the
tax paid to an authorized agent bank, the Revenue District Officer, Revenue
Collection Officer or duly authorized Treasurer of the city or municipality
where the donor was domiciled at the time of the transfer, or if there be no
legal residence in the Philippines, with the Office of the Commissioner. In the
case of gifts made by a non-resident, the return may be filed with the
Philippine Embassy or Consulate in the country where he is domiciled at the
time of the transfer, or directly with the Office of the Commissioner. For this
purpose, the term "OFFICE OF THE COMMISSIONER" shall refer to the
Revenue District Office (RDO) having jurisdiction over the BIR-National
Office Building which houses the Office of the Commissioner, or presently, to
the Revenue District Office No. 39 South Quezon City.
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(C) Notice of donation by a donor engaged in business. In order to be
exempt from donor's tax and to claim full deduction of the donation
given to qualified donee institutions duly accredited by the Philippine
Council for NGO Certification, Inc. (PCNC), the donor engaged in
business shall give a notice of donation on every donation worth at least
Fifty Thousand Pesos (P50,000) to the Revenue District Office (RDO)
which has jurisdiction over his place of business within thirty (30) days
after receipt of the qualified donee institution's duly issued Certificate of
Donation, which shall be attached to the said Notice of Donation, stating
that not more than thirty percent (30%) of the said donation/gifts for the
taxable year shall be used by such accredited non-stock, non-profit
corporation/NGO institution (qualified-donee institution) for
administration purposes pursuant to the provisions of Section 101(A)(3)
and (B)(2) of the Code.
1. IMPOSITION OF GIFT TAX
There shall be levied, assessed, collected, and paid upon the transfer by any
person, resident or nonresident, of the property by gift, a tax. The tax shall
apply whether the transfer is in trust or otherwise, whether the gift is direct or
indirect, and whether the property is real or personal, tangible or intangible.
[sec 98, NIRC]
Donors tax is imposed to complement the estate tax by preventing tax-free
depletion of the transferors estate during his lifetime.
2. TRANSFER OF INADEQUATE CONSIDERATION
There is a transfer for less than an adequate and full consideration where
property, other than real property classified as capital asset subject to final
capital gains tax, is transferred for less than an adequate and full
consideration in money or moneys worth, the amount by which the fair
market value of the property exceeded the value of the consideration shall for
purposes of donors tax, be deemed a gift. [sec 100, NIRC]
3. EXEMPTION FROM GIFT TAX
Tax Law Review
Atty. Salvador
The exemptions provided by law on donors tax are not to be treated as
exclusions from the gross gifts of the donor. They partake the nature of
deductions and are, therefore, deductible from gross gifts in order to arrive at
the taxable net gifts.
Exemptions from gift tax [sec 101, NIRC]
a. dowries or gifts made on account of marriage the amount of P10,
000 may be claimed by each parent on gifts given on account of
marriage; provided, that the following requisites are met:
1. the gift is given on account of marriage
2. the gift is given before the celebration of marriage or within 1
year thereafter
3. the donor is the parent or parents
4. the donee is the legitimate, recognized natural, or legally
adopted child of the donor
5. the maximum amount of exemption is P10,000 for each child
that may be claimed by each parent
b. gifts made to or for the use of the National Government or any entity
created by any of its agencies which is not conducted for profit, or to
any political subdivision of the said Government;
c. Gifts in favor of an educational and/or charitable, religious, cultural
or social welfare corporation, institution, accredited non-government
organization, trust or philanthropic organization or research
institution or organization; provided, that not more than thirty (30%)
of said gifts shall be used by the donee for administrative purposes.
Page 20
a. the amount of the credit in respect to the tax paid to any country
shall not exceed the same proportion of the tax against which such
credit is taken, which the net gifts situated within such country
taxable under this title bears to his entire net gifts; and
b. the total amount of the credit shall not exceed the same proportion of
the tax against which such credit is taken, which the donors net gifts
situated outside the Philippines taxable under this title bears to his
entire net gifts [sec 101, NIRC
5. TAX RETURN (TIME AND FILING AND PAYMENT)
Q: When shall the donors tax return be filed?
A: The donors tax return shall be filed within 30 days after the date the gift
is made [sec 103, NIRC]
Q: Where shall the donors tax return be filed?
A: The donors tax return shall be filed and the tax paid to an authorized
agent bank, the Revenue District Officer, Revenue Collection Officer or duly
authorized treasurer of the city or municipality where the donor was
domiciled at the time of the transfer, or if there be no legal residence in the
Philippines, with the Office of the Commissioner. In the case of gifts made
by a nonresident, the return may be filed with the Philippine Embassy or
Consulate in the country where he is domiciled at the time of the transfer, or
directly with the Office of the Commissioner. [sec 103, NIRC]

Q: When shall the donors tax be paid?

4. TAX CREDIT A: The donors tax shall be paid at the time the return is filed.[sec 103,
NIRC]
A situation may arise when the subject property given as a gift is located in a
foreign country and the donor may be subject to donors tax twice on the
same property: first, by the Philippine government; and second, by the foreign
government where the property is situated.
The remedy of claiming a TAX CREDIT is, therefore, aimed at
minimizing the burdensome effect of double taxation, by allowing the
taxpayer to deduct his foreign tax paid from his Philippine tax.
Tax credit for donors tax may be claimed only by a resident citizen
and resident alien, but excluding the nonresident alien.
It is subject to the following limitation:

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Tax Law Review
Atty. Salvador
DOCUMENTARY STAMP TAX
SEC. 173. Stamp Taxes Upon Documents, Loan Agreements, Instruments and
Papers. - Upon documents, instruments, loan agreements and papers, and upon acceptances,
assignments, sales and transfers of the obligation, right or property incident thereto, there shall
be levied, collected and paid for, and in respect of the transaction so had or accomplished, the
corresponding documentary stamp taxes prescribed in the following Sections of this Title, by the
person making, signing, issuing, accepting, or transferring the same wherever the document is
made, signed, issued, accepted or transferred when the obligation or right arises from
Philippine sources or the property is situated in the Philippines, and the same time such act is
done or transaction had: Provided, That whenever one party to the taxable document enjoys
exemption from the tax herein imposed, the other party who is not exempt shall be the one
directly liable for the tax.
SEC. 174. Stamp Tax on Debentures and Certificates of Indebtedness . - On all
debentures and certificates of indebtedness issued by any association, company or corporation,
there shall be collected a documentary stamp tax of One peso and fifty centavos (P1.50) on
each Two hundred pesos (P200), or fractional part thereof, of the face value of such
documents.
SEC. 175. Stamp Tax on Original Issue of Shares of Stock. - On every original
issue, whether on organization, reorganization or for any lawful purpose, of shares of stock by
any association, company or corporation, there shall be collected a documentary stamp tax of
Two pesos (P2.00) on each Two hundred pesos (P200), or fractional part thereof, of the par
value, of such shares of stock: Provided, That in the case of the original issue of shares of stock
without par value the amount of the documentary stamp tax herein prescribed shall be based
upon the actual consideration for the issuance of such shares of stock: Provided, further, That in
the case of stock dividends, on the actual value represented by each share.
SEC. 176. Stamp Tax on Sales, Agreements to Sell, Memoranda of Sales,
Deliveries or Transfer of Due-bills, Certificates of Obligation, or Shares of Certificates
of Stock. - On all sales, or agreements to sell, or memoranda of sale, or deliveries, or transfer
of due-bills, certificates of obligation, or shares of certificates of stock in any association,
company, or corporation, or transfer of such securities by assignment in blank, or by delivery, or
by any paper or agreement, or memorandum or other evidences of transfer or sale whether
entitling the holder in any manner to the benefit of such due-bills, certificates of obligation or
stock, or to secure the future payment of money, or for the future transfer of any due-bill,
certificate of obligation or stock, there shall be collected a documentary stamp tax of One peso
and fifty centavos (P1.50) on each Two hundred pesos (P200) or fractional part thereof, of the
par value of such due-bill, certificate of obligation or stock; Provided, That only one tax shall be
collected on each sale or transfer of stock or securities from one person to another, regardless
of whether or not a certificate of stock or obligation is issued, indorsed, or delivered in
pursuance of such sale or transfer: and, Provided, further, That in the case of stock without par
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value the amount of documentary stamp tax herein prescribed shall be equivalent to twenty-five
percent (25%) of the documentary stamp tax paid upon the original issue of said stock.
SEC. 177. Stamp Tax on Bonds, Debentures, Certificate of Stock or
Indebtedness Issued in Foreign Countries. - On all bonds, debentures, certificates of
stock, or certificates of indebtedness issued in any foreign country, there shall be collected from
the person selling or transferring the same in the Philippines, such as tax as is required by law
on similar instruments when issued, sold or transferred in the Philippines.
SEC. 178. Stamp Tax on Certificates of Profits or Interest in Property or
Accumulations. - On all certificates of profits, or any certificate or memorandum showing
interest in the property or accumulations of any association, company or corporation, and on all
transfers of such certificates or memoranda, there shall be collected a documentary stamp tax
of Fifty centavos (P0.50) on each Two hundred pesos (P200), or fractional part thereof, of the
face value of such certificate or memorandum.
SEC. 179. Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not
Bearing Interest, and Other Instruments. - On each bank check, draft, or certificate of
deposit not drawing interest, or order for the payment of any sum of money drawn upon or
issued by any bank, trust company, or any person or persons, companies or corporations, at
sight or on demand, there shall be collected a documentary stamp tax of One peso and fifty
centavos (P1.50).
SEC. 180. Stamp Tax on All Bonds, Loan Agreements, promissory Notes, Bills of
Exchange, Drafts, Instruments and Securities Issued by the Government or Any of its
Instrumentalities, Deposit Substitute Debt Instruments, Certificates of Deposits
Bearing Interest and Others Not Payable on Sight or Demand. - On all bonds, loan
agreements, including those signed abroad, wherein the object of the contract is located or
used in the Philippines, bills of exchange (between points within the Philippines), drafts,
instruments and securities issued by the Government or any of its instrumentalities, deposit
substitute debt instruments, certificates of deposits drawing interest, orders for the payment of
any sum of money otherwise than at sight or on demand, on all promissory notes, whether
negotiable or non-negotiable, except bank notes issued for circulation, and on each renewal of
any such note, there shall be collected a documentary stamp tax of Thirty centavos (P0.30) on
each Two hundred pesos (P200), or fractional part thereof, of the face value of any such
agreement, bill of exchange, draft, certificate of deposit, or note: Provided, That only one
documentary stamp tax shall be imposed on either loan agreement, or promissory notes issued
to secure such loan, whichever will yield a higher tax: Provided, however, That loan agreements
or promissory notes the aggregate of which does not exceed Two hundred fifty thousand pesos
(P250,000) executed by an individual for his purchase on installment for his personal use or
that of his family and not for business, resale, barter or hire of a house, lot, motor vehicle,
appliance or furniture shall be exempt from the payment of the documentary stamp tax provided
under this Section.
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SEC. 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others. - Upon
any acceptance or payment of any bill of exchange or order for the payment of money
purporting to be drawn in a foreign country but payable in the Philippines, there shall be
collected a documentary stamp tax of Thirty centavos (P0.30) on each Two hundred pesos
(P200), or fractional part thereof, of the face value of any such bill of exchange, or order, or the
Philippine equivalent to such value, if expressed in foreign currency.
SEC. 182. Stamp Tax on Foreign Bills of Exchange and Letters of Credit. - On all
foreign bills of exchange and letters of credit (including orders, by telegraph or otherwise, for the
payment of money issued by express or steamship companies or by any person or persons)
drawn in but payable out of the Philippines in a set of three (3) or more according to the custom
of merchants and bankers, there shall be collected a documentary stamp tax of Thirty centavos
(P0.30) on each Two hundred pesos (P200), or fractional part thereof, of the face value of any
such bill of exchange or letter of credit, or the Philippine equivalent of such face value, if
expressed in foreign currency.
SEC. 183. Stamp Tax on Life Insurance Policies. - On all policies of insurance or
other instruments by whatever name the same may be called, whereby any insurance shall be
made or renewed upon any life or lives, there shall be collected a documentary stamp tax of
Fifty centavos (P0.50) on each Two hundred pesos (P200), or fractional part thereof, of the
amount insured by any such policy.
SEC. 184. Stamp Tax on Policies of Insurance Upon Property. - On all policies of
insurance or other instruments by whatever name the same may be called, by which insurance
shall be made or renewed upon property of any description, including rents or profits, against
peril by sea or on inland waters, or by fire or lightning, there shall be collected a documentary
stamp tax of Fifty centavos (P0.50) on each Four pesos (P4.00), or fractional part thereof, of the
amount of premium charged: Provided, however, That no documentary stamp tax shall be
collected on reinsurance contracts or on any instrument by which cession or acceptance of
insurance risks under any reinsurance agreement is effected or recorded.
SEC. 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies. - On all
policies of insurance or bonds or obligations of the nature of indemnity for loss, damage or
liability made or renewed by any person, association, company or corporation transacting the
business of accident, fidelity, employers liability, plate, glass, steam, boiler, burglar, elevator,
automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire
insurance), and all bonds, undertakings, or recognizances, conditioned for the performance of
the duties of any office or position, for the doing or not doing of anything therein specified, and
on all obligations guaranteeing the validity or legality of any bond or other obligations issued by
any province, city, municipality, or other public body or organization, and on all obligations
guaranteeing the title to any real estate, or guaranteeing any mercantile credits, which may be
made or renewed by any such person, company or corporation, there shall be collected a
documentary stamp tax of Fifty centavos (P0.50) on each Four pesos (P4.00), or fractional part
thereof, of the premium charged.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 22
SEC. 186. Stamp Tax on Policies of Annuities and Pre-Need Plans. - On all
policies of annuities, or other instruments by whatever name the same may be called, whereby
an annuity may be made, transferred or redeemed, there shall be collected a documentary
stamp tax of One peso and fifty centavos (P1.50) on each Two hundred pesos (P200) or
fractional part thereof, of the capital of the annuity, or should this be unknown, then on each
Two hundred (P200) pesos, or fractional part thereof, of thirty-three and one-third (33 1/3) times
the annual income. On pre-need plans, the documentary stamp tax shall be Fifty centavos
(P0.50) on each Five hundred pesos (P500), or fractional part thereof, of the value or amount of
the plan.
SEC. 187. Stamp Tax on Indemnity Bonds. - On all bonds for indemnifying any
person, firm or corporation who shall become bound or engaged as surety for the payment of
any sum of money or for the due execution or performance of the duties of any office or position
or to account for money received by virtue thereof, and on all other bonds of any description,
except such as may be required in legal proceedings, or are otherwise provided for herein,
there shall be collected a documentary stamp tax of Thirty centavos (P0.30) on each Four
pesos (P4.00), or fractional part thereof, of the premium charged.
SEC. 188. Stamp Tax on Certificates. - On each certificate of damages or otherwise,
and on every certificate or document issued by any customs officer, marine surveyor, or other
person acting as such, and on each certificate issued by a notary public, and on each certificate
of any description required by law or by rules or regulations of a public office, or which is issued
for the purpose of giving information, or establishing proof of a fact, and not otherwise specified
herein, there shall be collected a documentary stamp tax of Fifteen pesos (P15.00).
SEC. 189. Stamp Tax on Warehouse Receipts. - On each warehouse receipt for
property held in storage in a public or private warehouse or yard for any person other than the
proprietor of such warehouse or yard, there shall be collected a documentary stamp tax of
Fifteen pesos (P15.00): Provided, That no tax shall be collected on each warehouse receipt
issued to any one person in any one calendar month covering property the value of which does
not exceed Two hundred pesos (P200).
SEC. 190. Stamp Tax on Jai-Alai, Horse Racing Tickets, lotto or Other
Authorized Numbers Games. - On each jai-alai, horse race ticket, lotto, or other authorized
number games, there shall be collected a documentary stamp tax of Ten centavos (P0.10):
Provided, That if the cost of the ticket exceeds One peso (P1.00), an additional tax of Ten
centavos (P0.10) on every One peso (P1.00, or fractional part thereof, shall be collected.
SEC. 191. Stamp Tax on Bills of Lading or Receipts. - On each set of bills of lading
or receipts (except charter party) for any goods, merchandise or effects shipped from one port
or place in the Philippines to another port or place in the Philippines (except on ferries across
rivers), or to any foreign port, there shall be collected documentary stamp tax of One peso
(P1.00), if the value of such goods exceeds One hundred pesos (P100) and does not exceed
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One Thousand pesos (P1,000); Ten pesos (P10), if the value exceeds One thousand pesos
(P1,000): Provided, however, That freight tickets covering goods, merchandise or effects carried
as accompanied baggage of passengers on land and water carriers primarily engaged in the
transportation of passengers are hereby exempt.
SEC. 192. Stamp Tax on Proxies. - On each proxy for voting at any election for officers
of any company or association, or for any other purpose, except proxies issued affecting the
affairs of associations or corporations organized for religious, charitable or literary purposes,
there shall be collected a documentary stamp tax of Fifteen pesos (P15.00).
SEC. 193. Stamp Tax on Powers of Attorney. - On each power of attorney to perform
any act whatsoever, except acts connected with the collection of claims due from or accruing to
the Government of the Republic of the Philippines, or the government of any province, city or
municipality, there shall be collected a documentary stamp tax of Five pesos (P5.00).
SEC. 194. Stamp Tax on Leases and Other Hiring Agreements. - On each lease,
agreement, memorandum, or contract for hire, use or rent of any lands or tenements, or
portions thereof, there shall be collected a documentary stamp tax of Three pesos (P3.00) for
the first Two thousand pesos (P2,000), or fractional part thereof, and an additional One peso
(P1.00) for every One Thousand pesos (P1,000) or fractional part thereof, in excess of the first
Two thousand pesos (P2,000) for each year of the term of said contract or agreement.
SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. - On every
mortgage or pledge of lands, estate, or property, real or personal, heritable or movable,
whatsoever, where the same shall be made as a security for the payment of any definite and
certain sum of money lent at the time or previously due and owing of forborne to be paid, being
payable and on any conveyance of land, estate, or property whatsoever, in trust or to be sold, or
otherwise converted into money which shall be and intended only as security, either by express
stipulation or otherwise, there shall be collected a documentary stamp tax at the following rates:
(a) When the amount secured does not exceed Five thousand pesos
(P5,000), Twenty pesos (P20.00).
(b) On each Five thousand pesos (P5,000), or fractional part thereof in
excess of Five thousand pesos (P5,000), an additional tax of Ten pesos (P10.00).
On any mortgage, pledge, or deed of trust, where the same shall be made as a security
for the payment of a fluctuating account or future advances without fixed limit, the documentary
stamp tax on such mortgage, pledge or deed of trust shall be computed on the amount actually
loaned or given at the time of the execution of the mortgage, pledge or deed of trust, additional
documentary stamp tax shall be paid which shall be computed on the basis of the amount
advanced or loaned at the rates specified above: Provided, however, That if the full amount of
the loan or credit, granted under the mortgage, pledge or deed of trust shall be computed on
the amount actually loaned or given at the time of the execution of the mortgage, pledge or
deed of trust. However, if subsequent advances are made on such mortgage, pledge or deed of
trust, additional documentary stamp tax shall be paid which shall be computed on the basis of
the amount advanced or loaned at the rates specified above: Provided, however, That if the full
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 23
amount of the loan or credit, granted under the mortgage, pledge or deed of trust is specified in
such mortgage, pledge or deed of trust, the documentary stamp tax prescribed in this Section
shall be paid and computed on the full amount of the loan or credit granted.
SEC. 196. Stamp tax on Deeds of Sale and Conveyances of Real Property. - On
all conveyances, deeds, instruments, or writings, other than grants, patents or original
certificates of adjudication issued by the Government, whereby any land, tenement, or other
realty sold shall be granted, assigned, transferred or otherwise conveyed to the purchaser, or
purchasers, or to any other person or persons designated by such purchaser or purchasers,
there shall be collected a documentary stamp tax, at the rates herein below prescribed, based
on the consideration contracted to be paid for such realty or on its fair market value determined
in accordance with Section 6(E) of this Code, whichever is higher: Provided, That when one of
the contracting parties is the Government the tax herein imposed shall be based on the actual
consideration.
(a) When the consideration, or value received or contracted to be paid for
such realty after making proper allowance of any encumbrance, does not exceed
One thousand pesos (P1,000) fifteen pesos (P15.00).
(b) For each additional One thousand Pesos (P1,000), or fractional part
thereof in excess
of One thousand pesos (P1,000) of such consideration or value, Fifteen pesos
(P15.00).
When it appears that the amount of the documentary stamp tax payable hereunder has
been reduced by an incorrect statement of the consideration in any conveyance, deed,
instrument or writing subject to such tax the Commissioner, provincial or city Treasurer, or other
revenue officer shall, from the assessment rolls or other reliable source of information, assess
the property of its true market value and collect the proper tax thereon.
SEC. 197. Stamp Tax on Charter Parties and Similar Instruments. - On every
charter party, contract or agreement for the charter of any ship, vessel or steamer, or any letter
or memorandum or other writing between the captain, master or owner, or other person acting
as agent of any ship, vessel or steamer, and any other person or persons for or relating to the
charter of any such ship, vessel or steamer, and on any renewal or transfer of such charter,
contract, agreement, letter or memorandum, there shall be collected a documentary stamp tax
at the following rates:
(a) If the registered gross tonnage of the ship, vessel or steamer does not exceed one
thousand (1,000) tons, and the duration of the charter or contract does not exceed
six (6) months, Five hundred pesos (P500); and for each month or fraction of a
month in excess of six (6) months, an additional tax of Fifty pesos (P50.00) shall be
paid.
(b) If the registered gross tonnage exceeds one thousand (1,000) tons and does not
exceed ten thousand (10,000) tons, and the duration of the charter or contract does
not exceed six (6) months, One thousand pesos (P1,000); and for each month or
fraction of a month in excess of six (6) months, an additional tax of One hundred
pesos (P100) shall be paid.
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(c) If the registered gross tonnage exceeds ten thousand (10,000) tons and the duration
of the charter or contract does not exceed six (6) months, One thousand five
hundred pesos (P1,500); and for each month or fraction of a month in excess of six
(6) months, an additional tax of One hundred fifty pesos (P150) shall be paid.
SEC. 198. Stamp Tax on Assignments and Renewals of Certain Instruments. -
Upon each and every assignment or transfer of any mortgage, lease or policy of insurance, or
the renewal or continuance of any agreement, contract, charter, or any evidence of obligation or
indebtedness by altering or otherwise, there shall be levied, collected and paid a documentary
stamp tax, at the same rate as that imposed on the original instrument.
SEC. 199. Documents and Papers Not Subject to Stamp Tax. - SEC. 199.
Documents and Papers Not Subject to Stamp Tax. - The provisions of Section 173 to the
contrary notwithstanding, the following instruments, documents and papers shall be exempt
from the documentary stamp tax:
(a) Policies of insurance or annuities made or granted by a fraternal or beneficiary
society, order, association or cooperative company, operated on the lodge system or
local cooperation plan and organized and conducted solely by the members thereof
for the exclusive benefit of each member and not for profit.
(b) Certificates of oaths administered to any government official in his official capacity or
of acknowledgment by any government official in the performance of his official
duties, written appearance in any court by any government official, in his official
capacity; certificates of the administration of oaths to any person as to the
authenticity of any paper required to be filed in court by any person or party thereto,
whether the proceedings be civil or criminal; papers and documents filed in courts by
or for the national, provincial, city or municipal governments; affidavits of poor
persons for the purpose of proving poverty; statements and other compulsory
information required of persons or corporations by the rules and regulations of the
national, provincial, city or municipal governments exclusively for statistical purposes
and which are wholly for the use of the bureau or office in which they are filed, and
not at the instance or for the use or benefit of the person filing them; certified copies
and other certificates placed upon documents, instruments and papers for the
national, provincial, city, or municipal governments, made at the instance and for the
sole use of some other branch of the national, provincial, city or municipal
governments; and certificates of the assessed value of lands, not exceeding Two
hundred pesos (P200) in value assessed, furnished by the provincial, city or
municipal Treasurer to applicants for registration of title to land.
SEC. 200. Payment of Documentary Stamp Tax. -
(A) In General. - The provisions of Presidential Decree No. 1045 notwithstanding, any
person liable to pay documentary stamp tax upon any document subject to tax under Title VII of
this Code shall file a tax return and pay the tax in accordance with the rules and regulations to
be prescribed by the Secretary of Finance, upon recommendation of the Commissioner.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
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4B 2004
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(B) Time for Filing and Payment of the Tax. - Except as provided by rules and
regulations promulgated by the Secretary of Finance, upon recommendation of the
Commissioner, the tax return prescribed in this Section shall be filed within ten (10) days after
the close of the month when the taxable document was made, signed, issued, accepted, or
transferred, and the tax thereon shall be paid at the same time the aforesaid return is filed.
(C) Where to File. - Except in cases where the Commissioner otherwise permits, the
aforesaid tax return shall be filed with and the tax due shall be paid through the authorized
agent bank within the territorial jurisdiction of the Revenue District Office which has jurisdiction
over the residence or principal place of business of the taxpayer. In places where there is no
authorized agent bank, the return shall be filed with the Revenue District Officer, collection
agent, or duly authorized Treasurer of the city or municipality in which the taxpayer has his legal
residence or principal place of business.
(D) Exception. - In lieu of the foregoing provisions of this Section, the tax may be paid
either through purchase and actual affixture; or by imprinting the stamps through a documentary
stamp metering machine, on the taxable document, in the manner as may be prescribed by
rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of
the Commissioner.
SEC. 201. Effect of Failure to Stamp Taxable Document. - An instrument, document
or paper which is required by law to be stamped and which has been signed, issued, accepted
or transferred without being duly stamped, shall not be recorded, nor shall it or any copy thereof
or any record of transfer of the same be admitted or used in evidence in any court until the
requisite stamp or stamps are affixed thereto and cancelled.
CIR V. CONSTRUCTION RESOURCES OF ASIA 145 SCRA 673
On the question of whether or not the certificate of stocks, to be subject to the
documentary stamp tax, must be delivered to the respective stockholders. the
Supreme Court ruled that delivery, either actual or constructive, is not
necessary. The certificates of stocks only need to be issued but not delivered.
A documentary stamp tax is in the nature of an excise tax because it is levied
upon the privilege. It may be levied only once upon the original issue of the
certificate.
Ordinarily, when a corporation issues a certificate of stock (representing the
ownership of stocks in the corporation to fully paid subscription) the
certificate of stock can be utilized for the exercise of the attributes of
ownership over the stocks mentioned on its face. The stocks can be alienated;
the dividends or fruits derived therefrom can be enjoyed, and they can be
conveyed, pledged or encumbered. The certificate as issued by the
corporation, irrespective of whether or not it is in the actual or constructive
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possession of the stockholder, is considered issued because it is with value
and hence the documentary stamp tax must be paid.
PHIL. CONSOLIDATED COCONUT IND. V. CIR 70 SCRA 22
Petitioner is registered with the Securities and Exchange Commission (SEC)
with an authorized capital of P70,000,000 of which P14,375,000 was
subscribed. Of this worth of shares of stock, upon suggestion of the Secretary
of Justice to protect the investing public, petitioner deposited P14,000,000
with the SEC, on condition that no sale or transfers shall be made from said
deposited shares until such time as the Commission may deem such release
justisfied. Later, under a permit granted by the SEC, shares of stock worth
P791,400.00 were transferred to various persons. The Collector of Internal
Revenue assessed and imposed documentary stamp tax not only on the
transfer issues but on the certificate or stock held on mandatory deposit by the
Securities and Exchange Commission. The Court of Tax Appeals sustained
the assessment. On appeal, the Supreme Court reversed the decision of the
Court of Tax Appeals holding that the certificate of stocks deposited with the
Securities and Exchange Commission and temporarily subject to the
suspensive conditions imposed by the Commission shall be liable to said tax
only when released from said conditions, for then and only then shall they
truly acquire any practical value for their owners.
It is the Government itself, thru the SEC, which required the petitioner's
incorporators-subscribers to deposit with said Commission P14,000.000
worth of shares of stock out of the P14,375,000 shares outstanding in their
names (Certificates of Stock Nos. 1 to 15) with the aforestated condition. It is
very manifest that in so far as the fifteen (15) certificates of stocks are
concerned, they nominally appear in the names of the incorporators-
subscribers appearing therein but actually none among them can exercise any
attribute of ownership over said stocks until the SEC decides otherwise. If it
is an act of the Government that temporarily deprived these fifteen (15)
certificates of stocks of any value in favor of their owners, We cannot see Our
way clear as to why that same Government shall consider said certificates
issued and with practical value for the purpose of imposing the documentary
stamp tax. Certainly, the Government cannot declare those fifteen (15)
certificates of stocks without value to their owners temporarily to protect the
investing public and in the same breath claim that they have value for
purposes of taxation. We do agree, however, that at any time those fifteen (15)
certificates of stock are released by the Securities and Exchange Commission
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 25
from the condition imposed which deprives their owners momentarily of the
rights of ownership over the stocks appearing therein, then they shall be
considered as originally issued and subject to the documentary stamp tax.
REVENUE MEMORANDUM CIRCULAR NO. 44-86
1. Background. Stamp taxes on taxable documents, including instrument
of sale or conveyance of real property, shall be paid by any of the parties to
the taxable document at the time the act is done or transaction had. Whenever
one of the parties enjoys exemption from the tax, the other party who is not
exempt shall be the one directly liable (Sec. 186, NIRC, as amended). Section
2 of Presidential Decree No. 1045, as implemented by Section 6 of Revenue
Regulations No. 9-76, requires that if the amount of the stamp tax due is ten
pesos (P10.00) or more, the stamp tax shall be paid to the Bureau of Internal
Revenue or through its authorized agent bank, after which a corresponding
official receipt evidencing payment shall be issued and a notation of such
payment shall be made on the original and every copy of the document, as
follows: (a) Amount of stamp tax paid; (b) Official receipt number; (c) Date
of payment; and (d) Name and signature of the payor. If the amount of stamp
tax due is below ten pesos (below P10.00), rather than the said official
receipt, actual stamp shall be issued by the BIR - the stamp shall be affixed in
the taxable document and after affixture shall be cancelled in order that
payment of the tax may be effected. Section 214 of the Tax Code provides
that a taxable document shall not be recorded nor shall it or any copy thereof
or any record of transfer of the same be admitted or used in evidence in any
court unless the corresponding stamp tax due thereon had been paid and that a
notary public is prohibited from adding his jurat or acknowledgment to any
taxable document unless the proper documentary stamp tax had been paid.
2. Stamp tax on instrument of sale/conveyance of real property. Section
209 of the Tax Code imposes a documentary stamp tax on all conveyances,
deeds, instruments or writings bearing on the sale or other disposition of real
property for a consideration. The tax shall be based on the amount of
consideration, or value received or contracted to be paid or the fair market
value of the real property, whichever is higher.
3. Procedure for determination and collection of stamp tax on instrument of
sale or conveyance of real property.
3.1 The stamp tax on the said document shall be paid through the
Revenue District Office having jurisdiction over the locality where
the real property sold/disposed is located.
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3.2 The stamp tax referred hereunder applies only if the instrument
is a sale or other conveyance of real property for a consideration in
money or money's worth.
3.3 Since the basis of the tax is either (a) the consideration as shown
in the said document or (b) the fair market value of the real property,
whichever is higher, the taxpayer shall present to the Revenue
District Officer for verification (a) the original and every other
copy/ies of the said document and (b) a true copy of the latest Tax
Declaration of the said real property, duly certified by the
corresponding City/Municipal Assessor. aisa dc
From the said documents, the Revenue District Officer shall
determine the actual amount of stamp tax due on the said taxable
document.
3.4 Payment Order shall be issued by the said Revenue District
Officer to effect payment of the stamp tax due.
3.5 After payment, the Revenue District Officer shall cause the
notation on the taxable document of the following information: (a)
Amount of stamp tax paid; (b) Official Receipt number; (c) Date of
payment; and (d) Name and signature of the payor.
At the bottom of the foregoing notations, the following shall also be
shown:
"AMOUNT OF STAMP TAX PAID ON THIS
DOCUMENT CERTIFIED CORRECT:
__________________
Revenue District Officer
3.6 A notary public shall not add his jurat or acknowledgment on
the taxable document unless evidence of payment of the tax as
provided in paragraph 3.5 hereof is shown on the said document.
3.7 The Register of Deeds shall not record the transaction and cause
transfer of title to the real property unless the evidence of payment of
the tax as provided in paragraph 3.5 hereof is shown on the said
document.
This requirement shall be in addition to the certification of the
Revenue District Officer in case of a sale, exchange or other
disposition of real property, classified as capital asset, made by an
individual, estate or trust, pursuant to the provisions of Batas
Pambansa Blg. 37, as amended. cdt
3.8 The stamp tax referred herein shall be due and payable on every
instrument of sale or conveyance of real property, regardless of the
parties to the taxable document, whether an individual, estate, trust, a
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
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corporation or a partnership and regardless of the class of the real
property, whether capital or ordinary business asset in the hands of
the vendor/transferor.
REPUBLIC ACT 7660
Amended the provisions of the title on Documentary Stamp Tax now
incorporated into the NIRC
RR NO. 9-94
Sec. 12. PENALTY CLAUSE. - (a) In case of late payment of the
documentary stamp tax due, there shall be imposed a surcharge equivalent to
twenty-five percent (25%) of the basic tax due. In case of failure to pay the
basic tax and twenty-five percent (25%) surcharge within the time prescribed
in the notice and demand, there shall be further assessed and collected a
twenty percent (20%) interest per annum, computed on the basis of the
aforesaid basic tax and surcharge.
(b) Any other violation of the provisions of these regulations shall be
punishable under the pertinent provisions of Title X, Chapter II of the Tax
Code, as amended.
RR 9-00 -- Payment of DST within 10 days of the next month
Identifies the persons liable for the Documentary Stamp Tax (DST) and the
mode of payment/remittance of the said tax under certain conditions. The
DST, in general, is a tax imposed against the person making, signing, issuing,
accepting or transferring the document or facility evidencing the aforesaid
transactions. Thus, in general, it may be imposed on the transaction itself or
upon the document underlying such act. Any of the parties to the taxable
transaction will be liable and responsible for the payment and remittance of
the full amount of the tax due. However, whenever one of the parties to the
taxable transaction is exempt from the DST, the other party who is not exempt
shall be the one directly liable for the said tax.
If the tax-exempt party is one of the persons constituted as agent of the
Commissioner for the collection of the tax, he shall be required to collect and
remit the DST. Failure on his part to collect and remit the DST would make
him personally liable for the tax and the penalties prescribed under Title X of
the Tax Code.
The DST on the specified cases will be remitted as follows: 1) stamp tax on
bonds, debentures, certificates of indebtedness, deposit substitute, or other
similar instruments - to be remitted by the person who issued the instrument;
2) stamp tax on original issue of shares of stock in a corporation - to be
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remitted by the corporation which issued the share(s) of stock; and 3) stamp
tax on jai-alai, horse race, lotto or other authorized number games - to be
remitted by the proprietor or operators. Whenever one of the parties to the
taxable document or transaction is included in any of the entities enumerated
in the Regulations, such entities will be responsible for the remittance of the
DST.
The "on-line electronic DST imprinting machine", unless expressly exempted
by the Commissioner, will be used in the payment and remittance of the DST
by the following class of taxpayers: a) bank, quasi-bank or non-bank financial
intermediary, finance company, insurance, surety, fidelity, or annuity
company; b) the Philippine Stock Exchange (in the case of shares of stock
and other securities traded in the local stock exchange); c) shipping and
airline companies; d) pre-need company (on sale of pre-need plans); and e)
other industries as may be required by the Commissioner.
RR 6-01 Payment of DST within 5 days
The documentary stamp tax return shall be filed within 5 days after the close
of the month when the taxable document was made, signed, accepted, or
transferred, and the tax thereon shall be paid at the same time the aforesaid
return is filed.
Page 27
the DS-EIM to the taxpayer/user. However, the taxpayer/user shall have the
option to purchase directly their own DS-EIM. The taxpayer/user shall
shoulder the costs to install and operate the BIR-owned DS-EIM in the
premises and the cost of maintaining the same. BIR retains the ownership of
the DS-EIM purchased and distributed to the taxpayers/users.
The large taxpayers, such as commercial and universal banks, shall pay/remit
the DST payment through the Direct Tax Debit System. Schedule I, Details of
Documentary Stamp Tax for Replenishment, of BIR Form 2000
(Documentary Stamp Tax Declaration/Return) shall be accomplished/attached
to the Tax Return when paying DST, while the use of BIR Form No. 2002
(Information Return for Documentary Stamp Taxes Paid) shall be
discontinued. However, in the initial payment of DST through DS-EIM,
Schedule I of the Tax Return need not be accomplished. Payment of DST
shall be made per machine to be supported by the corresponding BIR Form
2000.

For large taxpayers:

Large taxpayers shall pay their documentary stamp taxes within 5 days after
the close of the month when the taxable document was made, signed, issued,
accepted, or transferred by the filing of the documentary stamp tax returns,
through purchase or actual affixture or by imprinting the documentary stamps
through a documentary stamp tax metering machine.

RR 15-01
Unless exempted by the Commissioner of Internal Revenue, the following
classes of taxpayers shall use the said machine in the payment and
remittances of DST: 1) banks, quasi banks or non-bank financial
intermediaries, finance companies or insurance, surety, fidelity, or annuity
companies; 2) Philippine Stock Exchange, in the case of shares of stock and
other securities traded in the local stock exchange; 3) shipping and airline
companies; 4) pre-need companies on sale of pre-need plans; and 5) such
other industries as may be required by the Commissioner.
The BIR shall identify and notify the DST taxpayers/users who are required
to use the Documentary Stamp Electronic Imprinting Machine with
Encryption (DS-EIM). The BIR shall purchase and distribute, free of charge,

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Tax Law Review
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REMEDIES
1. Sec. 4, NIRC, Power of Secretary of Finance as implemented by
RMC 44-2001 (Oct. 11, 2001) and DOF Order No. 7-02 (May 7, 2002)
The power to interpret the provisions of the NIRC and other tax laws shall be
under the exclusive and original jurisdiction of the Commissioner, subject to
review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other
matters arising under the NIRC or other laws or portions thereof administered
by the BIR is vested in the Commissioner, subject to the exclusive appellate
jurisdiction of the CTA.
2. Secs. 6-17, NIRC
SEC. 6. Power of the Commissioner to Make assessments and Prescribe
additional Requirements for Tax Administration and Enforcement . -
(A) Examination of Returns and Determination of Tax Due. - After a return has been filed
as required under the provisions of this Code, the Commissioner or his duly authorized
representative may authorize the examination of any taxpayer and the assessment of the
correct amount of tax: Provided, however; That failure to file a return shall not prevent the
Commissioner from authorizing the examination of any taxpayer.
The tax or any deficiency tax so assessed shall be paid upon notice and demand from the
Commissioner or from his duly authorized representative.
Any return, statement of declaration filed in any office authorized to receive the same
shall not be withdrawn: Provided, That within three (3) years from the date of such filing, the
same may be modified, changed, or amended: Provided, further, That no notice for audit or
investigation of such return, statement or declaration has in the meantime been actually served
upon the taxpayer.
(B) Failure to Submit Required Returns, Statements, Reports and other Documents. When
a report required by law as a basis for the assessment of any national internal revenue tax shall
not be forthcoming within the time fixed by laws or rules and regulations or when there is reason
to believe that any such report is false, incomplete or erroneous, the Commissioner shall
assess the proper tax on the best evidence obtainable.
In case a person fails to file a required return or other document at the time prescribed by
law, or willfully or otherwise files a false or fraudulent return or other document, the
Commissioner shall make or amend the return from his own knowledge and from such
information as he can obtain through testimony or otherwise, which shall be prima facie correct
and sufficient for all legal purposes.
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(C) Authority to Conduct Inventory-taking, surveillance and to Prescribe Presumptive
Gross Sales and Receipts. - The Commissioner may, at any time during the taxable year, order
inventory-taking of goods of any taxpayer as a basis for determining his internal revenue tax
liabilities, or may place the business operations of any person, natural or juridical, under
observation or surveillance if there is reason to believe that such person is not declaring his
correct income, sales or receipts for internal revenue tax purposes. The findings may be used
as the basis for assessing the taxes for the other months or quarters of the same or different
taxable years and such assessment shall be deemed prima facie correct.
When it is found that a person has failed to issue receipts and invoices in violation of the
requirements of Sections 113 and 237 of this Code, or when there is reason to believe that the
books of accounts or other records do not correctly reflect the declarations made or to be made
in a return required to be filed under the provisions of this Code, the Commissioner, after taking
into account the sales, receipts, income or other taxable base of other persons engaged in
similar businesses under similar situations or circumstances or after considering other relevant
information may prescribe a minimum amount of such gross receipts, sales and taxable base,
and such amount so prescribed shall be prima facie correct for purposes of determining the
internal revenue tax liabilities of such person.
(D) Authority to Terminate Taxable Period. - When it shall come to the knowledge of the
Commissioner that a taxpayer is retiring from business subject to tax, or is intending to leave
the Philippines or to remove his property therefrom or to hide or conceal his property, or is
performing any act tending to obstruct the proceedings for the collection of the tax for the past
or current quarter or year or to render the same totally or partly ineffective unless such
proceedings are begun immediately, the Commissioner shall declare the tax period of such
taxpayer terminated at any time and shall send the taxpayer a notice of such decision, together
with a request for the immediate payment of the tax for the period so declared terminated and
the tax for the preceding year or quarter, or such portion thereof as may be unpaid, and said
taxes shall be due and payable immediately and shall be subject to all the penalties hereafter
prescribed, unless paid within the time fixed in the demand made by the Commissioner.
(E) Authority of the Commissioner to Prescribe Real Property Values. - The Commissioner
is hereby authorized to divide the Philippines into different zones or areas and shall, upon
consultation with competent appraisers both from the private and public sectors, determine the
fair market value of real properties located in each zone or area. For purposes of computing any
internal revenue tax, the value of the property shall be, whichever is the higher of:
(1) the fair market value as determined by the Commissioner, or
(2) the fair market value as shown in the schedule of values of the Provincial and
City Assessors.
(F) Authority of the Commissioner to inquire into Bank Deposit Accounts. -
Notwithstanding any contrary provision of Republic Act No. 1405 and other general or special
laws, the Commissioner is hereby authorized to inquire into the bank deposits of:
(1) a decedent to determine his gross estate; and
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(2) any taxpayer who has filed an application for compromise of his tax liability under
Sec. 204 (A) (2) of this Code by reason of financial incapacity to pay his tax liability.
In case a taxpayer files an application to compromise the payment of his tax liabilities on
his claim that his financial position demonstrates a clear inability to pay the tax assessed, his
application shall not be considered unless and until he waives in writing his privilege under
Republic Act No. 1405 or under other general or special laws, and such waiver shall constitute
the authority of the Commissioner to inquire into the bank deposits of the taxpayer.
(G) Authority to Accredit and Register Tax Agents. - The Commissioner shall accredit and
register, based on their professional competence, integrity and moral fitness, individuals and
general professional partnerships and their representatives who prepare and file tax returns,
statements, reports, protests, and other papers with or who appear before, the Bureau for
taxpayers. Within one hundred twenty (120) days from January 1, 1998, the Commissioner shall
create national and regional accreditation boards, the members of which shall serve for three
(3) years, and shall designate from among the senior officials of the Bureau, one (1) chairman
and two (2) members for each board, subject to such rules and regulations as the Secretary of
Finance shall promulgate upon the recommendation of the Commissioner.
Individuals and general professional partnerships and their representatives who are
denied accreditation by the Commissioner and/or the national and regional accreditation boards
may appeal such denial to the Secretary of Finance, who shall rule on the appeal within sixty
(60) days from receipt of such appeal. Failure of the Secretary of Finance to rule on the Appeal
within the prescribed period shall be deemed as approval of the application for accreditation of
the appellant.
(H) Authority of the Commissioner to Prescribe Additional Procedural or Documentary
Requirements. - The Commissioner may prescribe the manner of compliance with any
documentary or procedural requirement in connection with the submission or preparation of
financial statements accompanying the tax returns.
SEC. 7. Authority of the Commissioner to Delegate Power . - The Commissioner
may delegate the powers vested in him under the pertinent provisions of this Code to any or
such subordinate officials with the rank equivalent to a division chief or higher, subject to such
limitations and restrictions as may be imposed under rules and regulations to be promulgated
by the Secretary of finance, upon recommendation of the Commissioner: Provided, however,
That the following powers of the Commissioner shall not be delegated:
(a) The power to recommend the promulgation of rules and regulations by the
Secretary of Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify any
existing ruling of the Bureau;
(c) The power to compromise or abate, under Sec. 204 (A) and (B) of this Code, any
tax liability: Provided, however, That assessments issued by the regional offices involving
basic deficiency taxes of Five hundred thousand pesos (P500,000) or less, and minor
criminal violations, as may be determined by rules and regulations to be promulgated by
the Secretary of finance, upon recommendation of the Commissioner, discovered by
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regional and district officials, may be compromised by a regional evaluation board which
shall be composed of the Regional Director as Chairman, the Assistant Regional Director,
the heads of the Legal, Assessment and Collection Divisions and the Revenue District
Officer having jurisdiction over the taxpayer, as members; and
(d) The power to assign or reassign internal revenue officers to establishments
where articles subject to excise tax are produced or kept.
SEC. 8. Duty of the Commissioner to Ensure the Provision and Distribution of
forms, Receipts, Certificates, and Appliances, and the Acknowledgment of Payment of
Taxes.-
(A) Provision and Distribution to Proper Officials . - It shall be the duty of the
Commissioner, among other things, to prescribe, provide, and distribute to the proper officials
the requisite licenses internal revenue stamps, labels all other forms, certificates, bonds,
records, invoices, books, receipts, instruments, appliances and apparatus used in administering
the laws falling within the jurisdiction of the Bureau. For this purpose, internal revenue stamps,
strip stamps and labels shall be caused by the Commissioner to be printed with
adequate security features.
Internal revenue stamps, whether of a bar code or fusion design, shall be firmly and
conspicuously affixed on each pack of cigars and cigarettes subject to excise tax in the manner
and form as prescribed by the Commissioner, upon approval of the Secretary of Finance.
(B) Receipts for Payment Made. - It shall be the duty of the Commissioner or his duly
authorized representative or an authorized agent bank to whom any payment of
any tax is made under the provision of this Code to acknowledge the payment
of such tax, expressing the amount paid and the particular account for which such
payment was made in a form and manner prescribed therefor by the Commissioner.
SEC. 9. Internal Revenue Districts. - With the approval of the Secretary of Finance,
the Commissioner shall divide the Philippines into such number of revenue districts as may
form time to time be required for administrative purposes. Each of these districts shall be under
the supervision of a Revenue District Officer.
SEC. 10. Revenue Regional Director . - Under rules and regulations, policies and
standards formulated by the Commissioner, with the approval of the Secretary of Finance, the
Revenue Regional director shall, within the region and district offices under his jurisdiction,
among others:
(a) Implement laws, policies, plans, programs, rules and regulations of the
department or agencies in the regional area;
(b) Administer and enforce internal revenue laws, and rules and regulations,
including the assessment and collection of all internal revenue taxes, charges and fees.
(c) Issue Letters of authority for the examination of taxpayers within the region;
(d) Provide economical, efficient and effective service to the people in the area;
(e) Coordinate with regional offices or other departments, bureaus and agencies in
the area;
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(f) Coordinate with local government units in the area;
(g) Exercise control and supervision over the officers and employees within the
region; and
(h) Perform such other functions as may be provided by law and as may be
delegated by the Commissioner.
SEC. 11. Duties of Revenue District Officers and Other Internal Revenue
Officers. - It shall be the duty of every Revenue District Officer or other internal revenue
officers and employees to ensure that all laws, and rules and regulations affecting national
internal revenue are faithfully executed and complied with, and to aid in the prevention,
detection and punishment of frauds of delinquencies in connection therewith.
It shall be the duty of every Revenue District Officer to examine the efficiency of all officers
and employees of the Bureau of Internal Revenue under his supervision, and to report in writing
to the Commissioner, through the Regional Director, any neglect of duty, incompetency,
delinquency, or malfeasance in office of any internal revenue officer of which he may obtain
knowledge, with a statement of all the facts and any evidence sustaining each case.
SEC. 12. Agents and Deputies for Collection of National Internal Revenue Taxes .
- The following are hereby constituted agents of the Commissioner:
(a) The Commissioner of Customs and his subordinates with respect to the
collection of national internal revenue taxes on imported goods;
(b) The head of the appropriate government office and his subordinates with respect
to the collection of energy tax; and
(c) Banks duly accredited by the Commissioner with respect to receipt of payments
internal revenue taxes authorized to be made thru bank.
Any officer or employee of an authorized agent bank assigned to receive internal revenue
tax payments and transmit tax returns or documents to the Bureau of Internal Revenue shall be
subject to the same sanctions and penalties prescribed in Sections 269 and 270 of this Code.
SEC. 13. Authority of a Revenue Offices . - subject to the rules and regulations to be
prescribed by the Secretary of Finance, upon recommendation of the Commissioner, a
Revenue Officer assigned to perform assessment functions in any district may, pursuant to a
Letter of Authority issued by the Revenue Regional Director, examine taxpayers within the
jurisdiction of the district in order to collect the correct amount of tax, or to recommend the
assessment of any deficiency tax due in the same manner that the said acts could have been
performed by the Revenue Regional Director himself.
SEC. 14. Authority of Officers to Administer Oaths and Take Testimony . - The
Commissioner, Deputy Commissioners, Service Chiefs, Assistant Service Chiefs, Revenue
Regional Directors, Assistant Revenue Regional Directors, Chiefs and Assistant Chiefs of
Divisions, Revenue District Officers, special deputies of the Commissioner, internal revenue
officers and any other employee of the Bureau thereunto especially deputized by the
Commissioner shall have the power to administer oaths and to take testimony in any official
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matter or investigation conducted by them regarding matters within the jurisdiction of the
Bureau.
SEC. 15. Authority of Internal Revenue Officers to Make Arrests and Seizures . -
The Commissioner, the Deputy Commissioners, the Revenue Regional Directors, the Revenue
District Officers and other internal revenue officers shall have authority to make arrests and
seizures for the violation of any penal law, rule or regulation administered by the Bureau of
Internal Revenue. Any person so arrested shall be forthwith brought before a court, there to be
dealt with according to law.
SEC. 16. Assignment of Internal Revenue Officers Involved in Excise Tax
Functions to Establishments Where Articles subject to Excise Tax are Produced or
Kept. - The Commissioner shall employ, assign, or reassign internal revenue officers involved
in excise tax functions, as often as the exigencies of the revenue service may require, to
establishments or places where articles subject to excise tax are produced or kept: Provided,
That an internal revenue officer assigned to any such establishment shall in no case stay in his
assignment for more than two (2) years, subject to rules and regulations to be prescribed by the
Secretary of Finance, upon recommendation of the Commissioner.
SEC. 17. Assignment of Internal Revenue Officers and Other Employees to
Other Duties. - The Commissioner may, subject to the provisions of Section 16 and the laws
on civil service, as well as the rules and regulations to be prescribed by the Secretary of
Finance upon the recommendation of the Commissioner, assign or reassign internal revenue
officers and employees of the Bureau of Internal Revenue, without change in their official rank
and salary, to other or special duties connected with the enforcement or administration of the
revenue laws as the exigencies of the service may require: Provided, That internal revenue
officers assigned to perform assessment or collection function shall not remain in the same
assignment for more than three (3) years; Provided, further, That assignment of internal
revenue officers and employees of the Bureau to special duties shall not exceed one (1) year.
3. SECS. 202-282, NIRC
SEC. 202. Final Deed to Purchaser. - In case the taxpayer shall not redeem the
property as herein provided the Revenue District Officer shall, as grantor, execute a deed
conveying to the purchaser so much of the property as has been sold, free from all liens of any
kind whatsoever, and the deed shall succintly recite all the proceedings upon which the validity
of the sale depends.
SEC. 203. Period of Limitation Upon Assessment and Collection . - Except as
provided in Section 222, internal revenue taxes shall be assessed within three (3) years after
the last day prescribed by law for the filing of the return, and no proceeding in court without
assessment for the collection of such taxes shall be begun after the expiration of such period:
Provided, That in a case where a return is filed beyond the period prescribed by law, the three
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(3)-year period shall be counted from the day the return was filed. For purposes of this Section,
a return filed before the last day prescribed by law for the filing thereof shall be considered as
filed on such last day.
SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or
Credit Taxes. - The Commissioner may -
(A) Compromise the payment of any internal revenue tax, when:
(1) A reasonable doubt as to the validity of the claim against the taxpayer
exists; or
(2) The financial position of the taxpayer demonstrates a clear inability to pay
the assessed tax.
The compromise settlement of any tax liability shall be subject to the following minimum
amounts:
For cases of financial incapacity, a minimum compromise rate equivalent to ten percent
(10%) of the basic assessed tax; and
For other cases, a minimum compromise rate equivalent to forty percent (40%) of the
basic assessed tax.
Where the basic tax involved exceeds One million pesos (P1,000.000) or where the
settlement offered is less than the prescribed minimum rates, the compromise shall be subject
to the approval of the Evaluation Board which shall be composed of the Commissioner and the
four (4) Deputy Commissioners.
(B) Abate or cancel a tax liability, when:
(1) The tax or any portion thereof appears to be unjustly or excessively assessed; or
(2) The administration and collection costs involved do not justify the collection of the
amount due.
All criminal violations may be compromised except: (a) those already filed in court, or (b)
those involving fraud.
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good condition
by the purchaser, and, in his discretion, redeem or change unused stamps that have been
rendered unfit for use and refund their value upon proof of destruction. No credit or refund of
taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a
claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided,
however, That a return filed showing an overpayment shall be considered as a written claim for
credit or refund.
A Tax Credit Certificate validly issued under the provisions of this Code may be applied
against any internal revenue tax, excluding withholding taxes, for which the taxpayer is directly
liable. Any request for conversion into refund of unutilized tax credits may be allowed, subject to
the provisions of Section 230 of this Code: Provided, That the original copy of the Tax Credit
Certificate showing a creditable balance is surrendered to the appropriate revenue officer for
verification and cancellation: Provided, further, That in no case shall a tax refund be given
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resulting from availment of incentives granted pursuant to special laws for which no actual
payment was made.
The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of
both the Senate and House of Representatives, every six (6) months, a report on the exercise
of his powers under this Section, stating therein the following facts and information, among
others: names and addresses of taxpayers whose cases have been the subject of abatement or
compromise; amount involved; amount compromised or abated; and reasons for the exercise of
power: Provided, That the said report shall be presented to the Oversight Committee in
Congress that shall be constituted to determine that said powers are reasonably exercised and
that the government is not unduly deprived of revenues.
SEC. 205. Remedies for the Collection of Delinquent Taxes. - The civil remedies for
the collection of internal revenue taxes, fees or charges, and any increment thereto resulting
from delinquency shall be:
(a) By distraint of goods, chattels, or effects, and other personal property of whatever
character, including stocks and other securities, debts, credits, bank accounts and interest in
and rights to personal property, and by levy upon real property and interest in rights to real
property; and
(b) By civil or criminal action.
Either of these remedies or both simultaneously may be pursued in the discretion of the
authorities charged with the collection of such taxes: Provided, however, That the remedies of
distraint and levy shall not be availed of where the amount of tax involve is not more than One
hundred pesos (P100).
The judgment in the criminal case shall not only impose the penalty but shall also order
payment of the taxes subject of the criminal case as finally decided by the Commissioner.
The Bureau of Internal Revenue shall advance the amounts needed to defray costs of
collection by means of civil or criminal action, including the preservation or transportation of
personal property distrained and the advertisement and sale thereof, as well as of real property
and improvements thereon.
SEC. 206. Constructive Distraint of the Property of A Taxpayer. - To safeguard the
interest of the Government, the Commissioner may place under constructive distraint the
property of a delinquent taxpayer or any taxpayer who, in his opinion, is retiring from any
business subject to tax, or is intending to leave the Philippines or to remove his property
therefrom or to hide or conceal his property or to perform any act tending to obstruct the
proceedings for collecting the tax due or which may be due from him.
The constructive distraint of personal property shall be affected by requiring the taxpayer
or any person having possession or control of such property to sign a receipt covering the
property distrained and obligate himself to preserve the same intact and unaltered and not to
dispose of the same; in any manner whatever, without the express authority of the
Commissioner.
In case the taxpayer or the person having the possession and control of the property
sought to be placed under constructive distraint refuses or fails to sign the receipt herein
referred to, the revenue officer effecting the constructive distraint shall proceed to prepare a list
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of such property and, in the presence of two (2) witnessed, leave a copy thereof in the premises
where the property distrained is located, after which the said property shall be deemed to have
been placed under constructive distraint.
SEC. 207. Summary Remedies. -
(A) Distraint of Personal Property. - Upon the failure of the person owing any
delinquent tax or delinquent revenue to pay the same at the time required, the Commissioner or
his duly authorized representative, if the amount involved is in excess of One million pesos
(P1,000,000), or the Revenue District Officer, if the amount involved is One million pesos
(P1,000,000) or less, shall seize and distraint any goods, chattels or effects, and the personal
property, including stocks and other securities, debts, credits, bank accounts, and interests in
and rights to personal property of such persons ;in sufficient quantity to satisfy the tax, or
charge, together with any increment thereto incident to delinquency, and the expenses of the
distraint and the cost of the subsequent sale.
A report on the distraint shall, within ten (10) days from receipt of the warrant, be
submitted by the distraining officer to the Revenue District Officer, and to the Revenue Regional
Director: Provided, That the Commissioner or his duly authorized representative shall, subject
to rules and regulations promulgated by the Secretary of Finance, upon recommendation of the
Commissioner, have the power to lift such order of distraint: Provided, further, That a
consolidated report by the Revenue Regional Director may be required by the Commissioner as
often as necessary.
(B) Levy on Real Property. - After the expiration of the time required to pay the
delinquent tax or delinquent revenue as prescribed in this Section, real property may be levied
upon, before simultaneously or after the distraint of personal property belonging to the
delinquent. To this end, any internal revenue officer designated by the Commissioner or his duly
authorized representative shall prepare a duly authenticated certificate showing the name of the
taxpayer and the amounts of the tax and penalty due from him. Said certificate shall operate
with the force of a legal execution throughout the Philippines.
Levy shall be affected by writing upon said certificate a description of the property upon
which levy is made. At the same time, written notice of the levy shall be mailed to or served
upon the Register of Deeds for the province or city where the property is located and upon the
delinquent taxpayer, or if he be absent from the Philippines, to his agent or the manager of the
business in respect to which the liability arose, or if there be none, to the occupant of the
property in question.
In case the warrant of levy on real property is not issued before or simultaneously with the
warrant of distraint on personal property, and the personal property of the taxpayer is not
sufficient to satisfy his tax delinquency, the Commissioner or his duly authorized representative
shall, within thirty (30) days after execution of the distraint, proceed with the levy on the
taxpayer's real property.
Within ten (10) days after receipt of the warrant, a report on any levy shall be submitted by
the levying officer to the Commissioner or his duly authorized representative: Provided,
however, That a consolidated report by the Revenue Regional Director may be required by the
Commissioner as often as necessary: Provided, further, That the Commissioner or his duly
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authorized representative, subject to rules and regulations promulgated by the Secretary of
Finance, upon recommendation of the Commissioner, shall have the authority to lift warrants of
levy issued in accordance with the provisions hereof.
SEC. 208. Procedure for Distraint and Garnishment . - The officer serving the warrant
of distraint shall make or cause to be made an account of the goods, chattels, effects or other
personal property distrained, a copy of which, signed by himself, shall be left either with the
owner or person from whose possession such goods, chattels, or effects or other personal
property were taken, or at the dwelling or place of business of such person and with someone
of suitable age and discretion, to which list shall be added a statement of the sum demanded
and note of the time and place of sale.
Stocks and other securities shall be distrained by serving a copy of the warrant of distraint
upon the taxpayer and upon the president, manager, treasurer or other responsible officer of the
corporation, company or association, which issued the said stocks or securities.
Debts and credits shall be distrained by leaving with the person owing the debts or having
in his possession or under his control such credits, or with his agent, a copy of the warrant of
distraint. The warrant of distraint shall be sufficient authority to the person owning the debts or
having in his possession or under his control any credits belonging to the taxpayer to pay to the
Commissioner the amount of such debts or credits.
Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer
and upon the president, manager, treasurer or other responsible officer of the bank. Upon
receipt of the warrant of garnishment, the bank shall tun over to the Commissioner so much of
the bank accounts as may be sufficient to satisfy the claim of the Government.
SEC. 209. Sale of Property Distrained and Disposition of Proceeds . - The Revenue
District Officer or his duly authorized representative, other than the officer referred to in Section
208 of this Code shall, according to rules and regulations prescribed by the Secretary of
Finance, upon recommendation of the Commissioner, forthwith cause a notification to be
exhibited in not less than two (2) public places in the municipality or city where the distraint is
made, specifying; the time and place of sale and the articles distrained. The time of sale shall
not be less than twenty (20) days after notice. One place for the posting of such notice shall be
at the Office of the Mayor of the city or municipality in which the property is distrained.
At the time and place fixed in such notice, the said revenue officer shall sell the goods,
chattels, or effects, or other personal property, including stocks and other securities so
distrained, at public auction, to the highest bidder for cash, or with the approval of the
Commissioner, through duly licensed commodity or stock exchanges.
In the case of Stocks and other securities, the officer making the sale shall execute a bill
of sale which he shall deliver to the buyer, and a copy thereof furnished the corporation,
company or association which issued the stocks or other securities. Upon receipt of the copy of
the bill of sale, the corporation, company or association shall make the corresponding entry in
its books, transfer the stocks or other securities sold in the name of the buyer, and issue, if
required to do so, the corresponding certificates of stock or other securities.
Any residue over and above what is required to pay the entire claim, including expenses,
shall be returned to the owner of the property sold. The expenses chargeable upon each
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seizure and sale shall embrace only the actual expenses of seizure and preservation of the
property pending ;the sale, and no charge shall be imposed for the services of the local internal
revenue officer or his deputy.
SEC. 210. Release of Distrained Property Upon Payment Prior to Sale . - If at any
time prior to the consummation of the sale all proper charges are paid to the officer conducting
the sale, the goods or effects distrained shall be restored to the owner.
SEC. 211. Report of Sale to Bureau of Internal Revenue. - Within two (2) days after
the sale, the officer making the same shall make a report of his proceedings in writing to the
Commissioner and shall himself preserve a copy of such report as an official record.
SEC. 212. Purchase by Government at Sale Upon Distraint. - When the amount bid
for the property under distraint is not equal to the amount of the tax or is very much less than
the actual market value of the articles offered for sale, the Commissioner or his deputy may
purchase the same in behalf of the national Government for the amount of taxes, penalties and
costs due thereon.
Property so purchased may be resold by the Commissioner or his deputy, subject to the
rules and regulations prescribed by the Secretary of Finance, the net proceeds therefrom shall
be remitted to the National Treasury and accounted for as internal revenue.
SEC. 213. Advertisement and Sale. - Within twenty (20) days after levy, the officer
conducting the proceedings shall proceed to advertise the property or a usable portion thereof
as may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a
period of a least thirty (30) days. It shall be effectuated by posting a notice at the main entrance
of the municipal building or city hall and in public and conspicuous place in the barrio or district
in which the real estate lies and ;by publication once a week for three (3) weeks in a newspaper
of general circulation in the municipality or city where the property is located. The advertisement
shall contain a statement of the amount of taxes and penalties so due and the time and place of
sale, the name of the taxpayer against whom taxes are levied, and a short description of the
property to be sold. At any time before the day fixed for the sale, the taxpayer may discontinue
all proceedings by paying the taxes, penalties and interest. If he does not do so, the sale shall
proceed and shall be held either at the main entrance of the municipal building or city hall, or on
the premises to be sold, as the officer conducting the proceedings shall determine and as the
notice of sale shall specify.
Within five (5) days after the sale, a return by the distraining or levying officer of the
proceedings shall be entered upon the records of the Revenue Collection Officer, the Revenue
District officer and the Revenue Regional Director. The Revenue Collection Officer, in
consultation with the Revenue district Officer, shall then make out and deliver to the purchaser a
certificate from his records, showing the proceedings of the sale, describing the property sold
stating the name of the purchaser and setting out the exact amount of all taxes, penalties and
interest: Provided, however, That in case the proceeds of the sale exceeds the claim and cost
of sale, the excess shall be turned over to the owner of the property.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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The Revenue Collection Officer, upon approval by the Revenue District Officer may, out of
his collection, advance an amount sufficient to defray the costs of collection by means of the
summary remedies provided for in this Code, including ;the preservation or transportation in
case of personal property, and the advertisement and subsequent sale, both in cases of
personal and real property including improvements found on the latter. In his monthly collection
reports, such advances shall be reflected and supported by receipts.
SEC. 214. Redemption of Property Sold. - Within one (1) year from the date of sale,
the delinquent taxpayer, or any one for him, shall have the right of paying to the Revenue
District Officer the amount of the public taxes, penalties, and interest thereon from the date of
delinquency to the date of sale, together with interest on said purchase price at the rate of
fifteen percent (15%) per annum from the date of purchase to the date of redemption, and such
payment shall entitle the person paying to the delivery of the certificate issued to the purchaser
and a certificate from the said Revenue District Officer that he has thus redeemed the property,
and the Revenue District Officer shall forthwith pay over to the purchaser the amount by which
such property has thus been redeemed, and said property thereafter shall be free form the lien
of such taxes and penalties.
The owner shall not, however, be deprived of the possession of the said property and shall
be entitled to the rents and other income thereof until the expiration of the time allowed for its
redemption.
SEC. 215. Forfeiture to Government for Want of Bidder. - In case there is no bidder
for real property exposed for sale as herein above provided or if the highest bid is for an amount
insufficient to pay the taxes, penalties and costs, the Internal Revenue Officer conducting the
sale shall declare the property forfeited to the Government in satisfaction of the claim in
question and within two (2) days thereafter, shall make a return of his proceedings and the
forfeiture which shall be spread upon the records of his office. It shall be the duty of the Register
of Deeds concerned, upon registration with his office of any such declaration of forfeiture, to
transfer the title of the property forfeited to the Government without the necessity of an order
from a competent court.
Within one (1) year from the date of such forfeiture, the taxpayer, or any one for him may
redeem said property by paying to the Commissioner or the latter's Revenue Collection Officer
the full amount of the taxes and penalties, together with interest thereon and the costs of sale,
but if the property be not thus redeemed, the forfeiture shall become absolute.
SEC. 216. Resale of Real Estate Taken for Taxes. - The Commissioner shall have
charge of any real estate obtained by the Government of the Philippines in payment or
satisfaction of taxes, penalties or costs arising under this Code or in compromise or adjustment
of any claim therefore, and said Commissioner may, upon the giving of not less than twenty (20)
days notice, sell and dispose of the same of public auction or with prior approval of the
Secretary of Finance, dispose of the same at private sale. In either case, the proceeds of the
sale shall be deposited with the National Treasury, and an accounting of the same shall
rendered to the Chairman of the Commission on Audit.
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SEC. 217. Further Distraint or Levy. - The remedy by distraint of personal property
and levy on realty may be repeated if necessary until the full amount due, including all
expenses, is collected.
SEC. 218. Injunction not Available to Restrain Collection of Tax. - No court shall
have the authority to grant an injunction to restrain the collection of any national internal
revenue tax, fee or charge imposed by this Code.
SEC. 219. Nature and Extent of Tax Lien. - If any person, corporation, partnership,
joint-account (cuentas en participacion), association or insurance company liable to pay an
internal revenue tax, neglects or refuses to pay the same after demand, the amount shall be a
lien in favor of the Government of the Philippines from the time when the assessment was
made by the Commissioner until paid, with interests, penalties, and costs that may accrue in
addition thereto upon all property and rights to property belonging to the taxpayer: Provided,
That this lien shall not be valid against any mortgagee purchaser or judgment creditor until
notice of such lien shall be filed by the Commissioner in the office of the Register of Deeds of
the province or city where the property of the taxpayer is situated or located.
SEC. 220. Form and Mode of Proceeding in Actions Arising under this Code . -
Civil and criminal actions and proceedings instituted in behalf of the Government under the
authority of this Code or other law enforced by the Bureau of Internal Revenue shall be brought
in the name of the Government of the Philippines and shall be conducted by legal officers of the
Bureau of Internal Revenue but no civil or criminal action for the recovery of taxes or the
enforcement of any fine, penalty or forfeiture under this Code shall be filed in court without the
approval of the Commissioner.
SEC. 221. Remedy for Enforcement of Statutory Penal Provisions . - The remedy
for enforcement of statutory penalties of all sorts shall be by criminal or civil action, as the
particular situation may require, subject to the approval of the Commissioner.
SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of
Taxes.
(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a
return, the tax may be assessed, or a preceeding in court for the collection of such tax may be
filed without assessment, at any time within ten (10) years after the discovery of the falsity,
fraud or omission: Provided, That in a fraud assessment which has become final and executory,
the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the
collection thereof.
(b) If before the expiration of the time prescribed in Section 203 for the assessment of the
tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after
such time, the tax may be assessed within the period agreed upon. The period so agreed upon
may be extended by subsequent written agreement made before the expiration of the period
previously agreed upon.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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(c) Any internal revenue tax which has been assessed within the period of limitation as
prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in
court within five (5) years following the assessment of the tax.
(d) Any internal revenue tax, which has been assessed within the period agreed upon as
provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding
in court within the period agreed upon in writing before the expiration of the five (5) -year period.
The period so agreed upon may be extended by subsequent written agreements made before
the expiration of the period previously agreed upon.
(e) Provided, however, That nothing in the immediately preceding and paragraph (a)
hereof shall be construed to authorize the examination and investigation or inquiry into any tax
return filed in accordance with the provisions of any tax amnesty law or decree.
SEC. 223. Suspension of Running of Statute of Limitations . - The running of the
Statute of Limitations provided in Sections 203 and 222 on the making of assessment and the
beginning of distraint or levy a proceeding in court for collection, in respect of any deficiency,
shall be suspended for the period during which the Commissioner is prohibited from making the
assessment or beginning distraint or levy or a proceeding in court and for sixty (60) days
thereafter; when the taxpayer requests for a reinvestigation which is granted by the
Commissioner; when the taxpayer cannot be located in the address given by him in the return
filed upon which a tax is being assessed or collected: Provided, that, if the taxpayer informs the
Commissioner of any change in address, the running of the Statute of Limitations will not be
suspended; when the warrant of distraint or levy is duly served upon the taxpayer, his
authorized representative, or a member of his household with sufficient discretion, and no
property could be located; and when the taxpayer is out of the Philippines.
SEC. 224. Remedy for Enforcement of Forfeitures. - The forfeiture of chattels and
removable fixtures of any sort shall be enforced by the seizure and sale, or destruction, of the
specific forfeited property. The forfeiture of real property shall be enforced by a judgment of
condemnation and sale in a legal action or proceeding, civil or criminal, as the case may
require.
SEC. 225. When Property to be Sold or Destroyed. - Sales of forfeited chattels and
removable fixtures shall be effected, so far as practicable, in the same manner and under the
same conditions as the public notice and the time and manner of sale as are prescribed for
sales of personal property distrained for the non-payment of taxes.
Distilled spirits, liquors, cigars, cigarettes, other manufactured products of tobacco, and all
apparatus used I or about the illicit production of such articles may, upon forfeiture, be
destroyed by order of the Commissioner, when the sale of the same for consumption or use
would be injurious to public health or prejudicial to the enforcement of the law.
All other articles subject to excise tax, which have been manufactured or removed in
violation of this Code, as well as dies for the printing or making of internal revenue stamps and
labels which are in imitation of or purport to be lawful stamps, or labels may, upon forfeiture, be
sold or destroyed in the discretion of the Commissioner.
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Forfeited property shall not be destroyed until at least twenty (20) days after seizure.
SEC. 226. Disposition of funds Recovered in Legal Proceedings or Obtained
from Forfeitures. - all judgments and monies recovered and received for taxes, costs,
forfeitures, fines and penalties shall be paid to the Commissioner or his authorized deputies as
the taxes themselves are required to be paid, and except as specially provided, shall be
accounted for and dealt with the same way.
SEC. 227. Satisfaction of Judgment Recovered Against any Internal Revenue
Officer. - When an action is brought against any Internal Revenue officer to recover damages
by reason of any act done in the performance of official duty, and the Commissioner is notified
of such action in time to make defense against the same, through the Solicitor General, any
judgment, damages or costs recovered in such action shall be satisfied by the Commissioner,
upon approval of the Secretary of Finance, or if the same be paid by the person used shall be
repaid or reimbursed to him.
No such judgment, damages, or costs shall be paid or reimbursed in behalf of a person
who has acted negligently or in bad faith, or with willful oppression.
SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized
representative finds that proper taxes should be assessed, he shall first notify the taxpayer of
his findings: provided, however, That a preassessment notice shall not be required in the
following cases:
(a) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and automatically
applied the same amount claimed against the estimated tax liabilities for the taxable quarter or
quarters of the succeeding taxable year; or
(d) When the excise tax due on exciseable articles has not been paid; or
(e) When the article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or
transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which the
assessment is made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall
be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his
duly authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration
or reinvestigation within thirty (30) days from receipt of the assessment in such form and
manner as may be prescribed by implementing rules and regulations.Within sixty (60) days from
filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the
assessment shall become final.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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If the protest is denied in whole or in part, or is not acted upon within one hundred eighty
(180) days from submission of documents, the taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said
decision, or from the lapse of one hundred eighty (180)-day period; otherwise, the decision shall
become final, executory and demandable.
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - no suit or
proceeding shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, of any sum alleged to have been excessively
or in any manner wrongfully collected without authority, or of any sum alleged to have been
excessively or in any manner wrongfully collected, until a claim for refund or credit has been
duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or
not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years
from the date of payment of the tax or penalty regardless of any supervening cause that may
arise after payment: Provided, however, That the Commissioner may, even without a written
claim therefor, refund or credit any tax, where on the face of the return upon which payment
was made, such payment appears clearly to have been erroneously paid.
SEC. 230. Forfeiture of Cash Refund and of Tax Credit.
(A) Forfeiture of Refund. - A refund check or warrant issued in accordance with the
pertinent provisions of this Code, which shall remain unclaimed or uncashed within five (5)
years from the date the said warrant or check was mailed or delivered, shall be forfeited in favor
of the Government and the amount thereof shall revert to the general fund.
(B) Forfeiture of Tax Credit. - A tax credit certificate issued in accordance with the
pertinent provisions of this Code, which shall remain unutilized after five (5) years from the date
of issue, shall, unless revalidated, be considered invalid, and shall not be allowed as payment
for internal revenue tax liabilities of the taxpayer, and the amount covered by the certificate shall
revert to the general fund.
(C) Transitory Provision. - For purposes of the preceding Subsection, a tax credit
certificate issued by the Commissioner or his duly authorized representative prior to January 1,
1998, which remains unutilized or has a creditable balance as of said date, shall be presented
for revalidation with the Commissioner or his duly authorized representative or on before June
30, 1998.
SEC. 231. Action to Contest Forfeiture of Chattel. - In case of the seizure of personal
property under claim of forfeiture, the owner desiring to contest the validity of the forfeiture may,
at any time before sale or destruction of the property, bring an action against the person seizing
the property or having possession thereof to recover the same, and upon giving proper bond,
may enjoin the sale; or after the sale and within six (6) months, he may bring an action to
recover the net proceeds realized at the sale.
SEC. 232. Keeping of Books of Accounts. -
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(A) Corporations, Companies, Partnerships or Persons Required to Keep Books
of Accounts. - All corporations, companies, partnerships or persons required by law to pay
internal revenue taxes shall keep a journal and a ledger or their equivalents: Provided, however,
That those whose quarterly sales, earnings, receipts, or output do not exceed Fifty thousand
pesos (P50,000) shall keep and use simplified set of bookkeeping records duly authorized by
the Secretary of Finance where in all transactions and results of operations are shown and from
which all taxes due the Government may readily and accurately be ascertained and determined
any time of the year: Provided, further, That corporations, companies, partnerships or persons
whose gross quarterly sales, earnings, receipts or output exceed One hundred fifty thousand
pesos (P150,000) shall have their books of accounts audited and examined yearly by
independent Certified Public Accountants and their income tax returns accompanied with a duly
accomplished Account Information Form (AIF) which shall contain, among others, information
lifted from certified balance sheets, profit and loss statements, schedules listing income-
producing properties and the corresponding income therefrom and other relevant statements.
(B) Independent Certified Public Accountant Defined. - The term 'Independent
Certified Public Accountant', as used in the preceding paragraph, means an accountant who
possesses the independence as defined in the rules and regulations of the Board of
Accountancy promulgated pursuant to Presidential Decree No. 692, otherwise known as the
Revised Accountancy Law.
SEC. 233. Subsidiary Books. - All corporations, companies, partnerships or persons
keeping the books of accounts mentioned in the preceding Section may, at their option, keep
subsidiary books as the needs of their business may require: Provided, That were such
subsidiaries are kept, they shall form part of the accounting system of the taxpayer and shall be
subject to the same rules and regulations as to their keeping, translation, production and
inspection as are applicable to the journal and the ledger.
SEC. 234. Language in which Books are to be Kept; Translation. - All such
corporations, companies, partnerships or persons shall keep the books or records mentioned in
Section 232 hereof in native language, English or Spanish: Provided, however, That if in
addition to said books or records the taxpayer keeps other books or records in a language other
than a native language, English or Spanish, he shall make a true and complete translation of all
the entries in suck other books or records into a native language; English or Spanish, and the
said translation must be made by the bookkeeper, or such taxpayer, or in his absence, by his
manager and must be certified under oath as to its correctness by the said bookkeeper or
manager, and shall form an integral part of the aforesaid books of accounts. The keeping of
such books or records in any language other than a native language, English or Spanish, is
hereby prohibited.
SEC. 235. Preservation of Books and Accounts and Other Accounting Records. -
All the books of accounts, including the subsidiary books and other accounting records of
corporations, partnerships, or persons, shall be preserved by them for a period beginning from
the last entry in each book until the last day prescribed by Section 203 within which the
Commissioner is authorized to make an assessment. The said books and records shall be
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
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subject to examination and inspection by internal revenue officers: Provided, That for income
tax purposes, such examination and inspection shall be made only once in a taxable year,
except in the following cases:
(a) Fraud, irregularity or mistakes, as determined by the Commissioner;
(b) The taxpayer requests reinvestigation;
(c) Verification of compliance with withholding tax laws and regulations;
(d) Verification of capital gains tax liabilities; and
(e) In the exercise of the Commissioner's power under Section 5(B) to obtain information
from other persons in which case, another or separate examination and inspection may be
made. Examination and inspection of books of accounts and other accounting records shall be
done in the taxpayer's office or place of business or in the office of the Bureau of Internal
Revenue. All corporations, partnerships or persons that retire from business shall, within ten
(10) days from the date of retirement or within such period of time as may be allowed by the
Commissioner in special cases, submit their books of accounts, including the subsidiary books
and other accounting records to the Commissioner or any of his deputies for examination, after
which they shall be returned. Corporations and partnerships contemplating dissolution must
notify the Commissioner and shall not be dissolved until cleared of any tax liability.
Any provision of existing general or special law to the contrary notwithstanding, the books
of accounts and other pertinent records of tax-exempt organizations or grantees of tax
incentives shall be subject to examination by the Bureau of Internal Revenue for purposes of
ascertaining compliance with the conditions under which they have been granted tax
exemptions or tax incentives, and their tax liability, if any.
SEC. 236. Registration Requirements. -
(A) Requirements. - Every person subject to any internal revenue tax shall register once
with the appropriate Revenue District Officer:
(1) Within ten (10) days from date of employment, or
(2) On or before the commencement of business,or
(3) Before payment of any tax due, or
(4) Upon filing of a return, statement or declaration as required in this Code.
The registration shall contain the taxpayer's name, style, place of residence, business and
such other information as may be required by the Commissioner in the form prescribed therefor.
A person maintaining a head office, branch or facility shall register with the Revenue
District Officer having jurisdiction over the head office, brand or facility. For purposes of this
Section, the term 'facility' may include but not be limited to sales outlets, places of production,
warehouses or storage places.
(B) Annual Registration Fee. - An annual registration fee in the amount of Five hundred
pesos (P500) for every separate or distinct establishment or place of business, including facility
types where sales transactions occur, shall be paid upon registration and every year thereafter
on or before the last day of January: Provided, however, That cooperatives, individuals earning
purely compensation income, whether locally or abroad, and overseas workers are not liable to
the registration fee herein imposed.
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The registration fee shall be paid to an authorized agent bank located within the revenue
district, or to the Revenue Collection Officer, or duly authorized Treasurer of the city of
municipality where each place of business or branch is registered.
(C) Registration of Each Type of Internal Revenue Tax. - Every person who is
required to register with the Bureau of Internal Revenue under Subsection (A) hereof, shall
register each type of internal revenue tax for which he is obligated, shall file a return and shall
pay such taxes, and shall updates such registration of any changes in accordance with
Subsection (E) hereof.
(D) Transfer of Registration. - In case a registered person decides to transfer his place
of business or his head office or branches, it shall be his duty to update his registration status
by filing an application for registration information update in the form prescribed therefor.
(E) Other Updates. - Any person registered in accordance with this Section shall,
whenever applicable, update his registration information with the Revenue District Office where
he is registered, specifying therein any change in type and other taxpayer details.
(F) Cancellation of Registration. - The registration of any person who ceases to be
liable to a tax type shall be cancelled upon filing with the Revenue District Office where he is
registered an application for registration information update in a form prescribed therefor.
(G) Persons Commencing Business. - Any person, who expects to realize gross sales
or receipts subject to value-added tax in excess of the amount prescribed under Section 109(z)
of this Code for the next 12-month period from the commencement of the business, shall
register with the Revenue District Office which has jurisdiction over the head office or branch
and shall pay the annual registration fee prescribed in Subsection (B) hereof.
(H) Persons Becoming Liable to the Value-added Tax. - Any person, whose gross
sales or receipts in any 12-month period exceeds the amount prescribed under Subsection
109(z) of this Code for exemption from the value-added tax shall register in accordance with
Subsection (A) hereof, and shall pay the annual registration fee prescribed within ten (10) days
after the end of the last month of that period, and shall be liable to the value-added tax
commencing from the first day of the month following his registration.
(I) Optional Registration of Exempt Person. - Any person whose transactions are
exempt from value-added tax under Section 109(z) of this Code; or any person whose
transactions are exempt from the value-added tax under Section 109(a), (b), (c), and (d) of this
Code, who opts to register as a VAT taxpayer with respect to his export sales only, may update
his registration information in accordance with Subsection (E) hereof, not later than ten (10)
days before the beginning of the taxable quarter and shall pay the annual registration fee
prescribed in Subsection (B) hereof.
In any case, the Commissioner may, for administrative reasons, deny any application for
registration including updates prescribed under Subsection (E) hereof.
For purposes of Title IV of this Code, any person who has registered value-added tax as a
tax type in accordance with the provisions of Subsection (C) hereof shall be referred to as VAT-
registered person who shall be assigned only one Taxpayer Identification Number.
(J) Supplying of Taxpayer Identification Number (TIN). - Any person required under
the authority of this Code to make, render or file a return, statement or other document shall be
supplied with or assigned a Taxpayer Identification Number (TIN) which he shall indicate in such
return, statement or document filed with the Bureau of Internal Revenue for his proper
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
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identification for tax purposes, and which he shall indicate in certain documents, such as, but
not limited to the following:
(1) Sugar quedans, refined sugar release order or similar instruments;
(2) Domestic bills of lading;
(3) Documents to be registered with the Register of Deeds of Assessor's Office;
(4) Registration certificate of transportation equipment by land, sea or air;
(5) Documents to be registered with the Securities and Exchange Commission;
(6) Building construction permits;
(7) Application for loan with banks, financial institutions, or other financial intermediaries;
(8) Application for mayor's permit;
(9) Application for business license with the Department of Trade & Industry; and
(10) Such other documents which may hereafter be required under rules and regulations
to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.
In cases where a registered taxpayer dies, the administrator or executor shall register the
estate of the decedent in accordance with Subsection (A) hereof and a new Taxpayer
Identification Number (TIN) shall be supplied in accordance with the provisions of this Section.
In the case of a nonresident decedent, the executor or administrator of the estate shall
register the estate with the Revenue District Office where he is registered: Provided, however,
That in case such executor or administrator is not registered, registration of the estate shall be
made with the Taxpayer Identification Number (TIN) supplied by the Revenue District Office
having jurisdiction over his legal residence.
Only one Taxpayer identification Number (TIN) shall be assigned to a taxpayer. Any
person who shall secure more than one Taxpayer Identification Number shall be criminally liable
under the provision of Section 275 on 'Violation of Other Provisions of this Code or Regulations
in General'.
SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons
subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services
rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales
or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity,
unit cost and description of merchandise or nature of service: Provided, however, That in the
case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or more, or
regardless of the amount, where the sale or transfer is made by a person liable to value-added
tax to another person also liable to value-added tax; or where the receipt is issued to cover
payment made as rentals, commissions, compensations or fees, receipts or invoices shall be
issued which shall show the name, business style, if any, and address of the purchaser,
customer or client: Provided, further, That where the purchaser is a VAT-registered person, in
addition to the information herein required, the invoice or receipt shall further show the Taxpayer
Identification Number (TIN) of the purchaser.
The original of each receipt or invoice shall be issued to the purchaser, customer or client
at the time the transaction is effected, who, if engaged in business or in the exercise of
profession, shall keep and preserve the same in his place of business for a period of three (3)
years from the close of the taxable year in which such invoice or receipt was issued, while the
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duplicate shall be kept and preserved by the issuer, also in his place of business, for a like
period.
The Commissioner may, in meritorious cases, exempt any person subject to internal
revenue tax from compliance with the provisions of this Section.
SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who
are engaged in business shall secure from the Bureau of Internal Revenue an authority to print
receipts or sales or commercial invoices before a printer can print the same.
No authority to print receipts or sales or commercial invoices shall be granted unless the
receipts or invoices to be printed are serially numbered and shall show, among other things, the
name, business style, Taxpayer Identification Number (TIN) and business address of the person
or entity to use the same, and such other information that may be required by rules and
regulations to be promulgated by the Secretary of Finance, upon recommendation of the
Commissioner.
All persons who print receipt or sales or commercial invoices shall maintain a
logbook/register of taxpayers who availed of their printing services. The logbook/register shall
contain the following information:
(1) Names, Taxpayer Identification Numbers of the persons or entities for whom the
receipts or sales or commercial invoices were printed; and
(2) Number of booklets, number of sets per booklet, number of copies per set and the
serial numbers of the receipts or invoices in each booklet.
SEC. 239. Sign to be Exhibited by Distiller, Rectifier, Compounder, Repacker and
Wholesale Liquor Dealer. - Every person engaged in distilling or rectifying spirits,
compounding liquors, repacking wines or distilled spirits, and every wholesale liquor dealer
shall keep conspicuously on the outside of his place of business a sign exhibiting, in letters not
less than six centimeters (6 cms.) high, his name or firm style, with the words 'Registered
Distiller,' 'Rectifier of Spirits,' 'Compounder of Liquors,' 'Repacker of Wines or Distilled Spirits,' or
'Wholesale Liquor Dealer,' as the case may be, and his assessment number.
SEC. 240. Sign to be exhibited by manufacturer of Products of Tobacco. - Every
manufacturer of cigars, cigarettes or tobacco, and every wholesale dealer in leaf tobacco or
manufactured products of tobacco shall place and keep on outside of the building wherein his
business is carried on, so that it can be distinctly seen, a sign stating his full name and business
in letters not less than six centimeters (6 cms.) high and also giving his assessment number.
SEC. 241. Exhibition of Certificate of Payment at Place of Business. - The
certificate or receipts showing payment of taxes issued to a person engaged in a business
subject to an annual registration fee shall be kept conspicuously exhibited in plain view in or at
the place where the business is conducted; and in case of a peddler or other persons not
having a fixed place of business, shall be kept in the possession of the holder thereof, subject
to production upon demand of any internal revenue officer.
SEC. 242. Continuation of Business of Deceased Person. - When any individual
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
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who has paid the annual registration fee dies, and the same business is continued by the
person or persons interested in his estate, no additional payment shall be required for the
residue of the term which the tax was paid: Provided, however, That the person or persons
interested in the estate should, within thirty (30) days from the death of the decedent, submit to
the Bureau of Internal Revenue or the regional or revenue District Office inventories of goods or
stocks had at the time of such death.
The requirement under this Section shall also be applicable in the case of transfer of
ownership or change of name of the business establishment.
SEC. 243. Removal of Business to Other Location. - Any business for which the
annual registration fee has been paid may, subject to the rules and regulations prescribed by
the Secretary of Finance, upon recommendation of the Commissioner, be removed and
continued in any other place without the payment of additional tax during the term for which the
payment was made.
SEC. 244. Authority of Secretary of Finance to Promulgate Rules and
Regulations. - The Secretary of Finance, upon recommendation of the Commissioner, shall
promulgate all needful rules and regulations for the effective enforcement of the provisions of
this Code.
SEC. 245. Specific Provisions to be Contained in Rules and Regulations. - The
rules and regulations of the Bureau of Internal Revenue shall, among other thins, contain
provisions specifying, prescribing or defining:
(a) The time and manner in which Revenue Regional Director shall canvass their
respective Revenue Regions for the purpose of discovering persons and property liable to
national internal revenue taxes, and the manner in which their lists and records of taxable
persons and taxable objects shall be made and kept;
(b) The forms of labels, brands or marks to be required on goods subject to an excise tax,
and the manner in which the labelling, branding or marking shall be effected;
(c) The conditions under which and the manner in which goods intended for export, which
if not exported would be subject to an excise tax, shall be labelled, branded or marked;
(d) The conditions to be observed by revenue officers respecting the institutions and
conduct of legal actions and proceedings;
(e) The conditions under which goods intended for storage in bonded warehouses shall be
conveyed thither, their manner of storage and the method of keeping the entries and records in
connection therewith, also the books to be kept by Revenue Inspectors and the reports to be
made by them in connection with their supervision of such houses;
(f) The conditions under which denatured alcohol may be removed and dealt in, the
character and quantity of the denaturing material to be used, the manner in which the process
of denaturing shall be effected, so as to render the alcohol suitably denatured and unfit for oral
intake, the bonds to be given, the books and records to be kept, the entries to be made therein,
the reports to be made to the Commissioner, and the signs to be displayed in the business ort
by the person for whom such denaturing is done or by whom, such alcohol is dealt in;
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(g) The manner in which revenue shall be collected and paid, the instrument, document or
object to which revenue stamps shall be affixed, the mode of cancellation of the same, the
manner in which the proper books, records, invoices and other papers shall be kept and entries
therein made by the person subject to the tax, as well as the manner in which licenses and
stamps shall be gathered up and returned after serving their purposes;
(h) The conditions to be observed by revenue officers respecting the enforcement of Title
III imposing a tax on estate of a decedent, and other transfers mortis causa, as well as on gifts
and such other rules and regulations which the Commissioner may consider suitable for the
enforcement of the said Title III;
(i) The manner in which tax returns, information and reports shall be prepared and
reported and the tax collected and paid, as well as the conditions under which evidence of
payment shall be furnished the taxpayer, and the preparation and publication of tax statistics;
(j) The manner in which internal revenue taxes, such as income tax, including withholding
tax, estate and donor's taxes, value-added tax, other percentage taxes, excise taxes and
documentary stamp taxes shall be paid through the collection officers of the Bureau of Internal
Revenue or through duly authorized agent banks which are hereby deputized to receive
payments of such taxes and the returns, papers and statements that may be filed by the
taxpayers in connection with the payment of the tax: Provided, however, That notwithstanding
the other provisions of this Code prescribing the place of filing of returns and payment of taxes,
the Commissioner may, by rules and regulations, require that the tax returns, papers and
statements that may be filed by the taxpayers in connection with the payment of the tax.
Provided, however, That notwithstanding the other provisions of this Code prescribing the place
of filing of returns and payment of taxes, the Commissioner may, by rules and regulations
require that the tax returns, papers and statements and taxes of large taxpayers be filed and
paid, respectively, through collection officers or through duly authorized agent banks: Provided,
further, That the Commissioner can exercise this power within six (6) years from the approval of
Republic Act No. 7646 or the completion of its comprehensive computerization program,
whichever comes earlier: Provided, finally, That separate venues for the Luzon, Visayas and
Mindanao areas may be designated for the filing of tax returns and payment of taxes by said
large taxpayers.
For the purpose of this Section, 'large taxpayer' means a taxpayer who satisfies any of the
following criteria;
(1) Value-Added Tax (VAT) - Business establishment with VAT paid or payable of at
least One hundred thousand pesos (P100,000) for any quarter of the preceding taxable year;
(2) Excise tax - Business establishment with excise tax paid or payable of at least One
million pesos (P1,000,000) for the preceding taxable year;
(3) Corporate Income Tax - Business establishment with annual income tax paid or
payable of at least One million pesos (P1,000,000) for the preceding taxable year; and
(4) Withholding tax - Business establishment with withholding tax payment or remittance
of at least One million pesos (P1,000,000) for the preceding taxable year.
Provided, however, That the Secretary of Finance, upon recommendation of the
Commissioner, may modify or add to the above criteria for determining a large taxpayer after
considering such factors as inflation, volume of business, wage and employment levels, and
similar economic factors.
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The penalties prescribed under Section 248 of this Code shall be imposed on any violation
of the rules and regulations issued by the Secretary of Finance, upon recommendation of the
Commissioner, prescribing the place of filing of returns and payments of taxes by large
taxpayers.
SEC. 246. Non- Retroactivity of Rulings. - Any revocation, modification or reversal of
any of the rules and regulations promulgated in accordance with the preceding Sections or any
of the rulings or circulars promulgated by the Commissioner shall not be given retroactive
application if the revocation, modification or reversal will be prejudicial to the taxpayers, except
in the following cases:
(a) Where the taxpayer deliberately misstates or omits material facts from his return or any
document required of him by the Bureau of Internal Revenue;
(b) Where the facts subsequently gathered by the Bureau of Internal Revenue are
materially different from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith.
SEC. 247. General Provisions. -
(a) The additions to the tax or deficiency tax prescribed in this Chapter shall apply to all
taxes, fees and charges imposed in this Code. The Amount so added to the tax shall be
collected at the same time, in the same manner and as part of the tax.
(b) If the withholding agent is the Government or any of its agencies, political subdivisions
or instrumentalities, or a government-owned or controlled corporation, the employee thereof
responsible for the withholding and remittance of the tax shall be personally liable for the
additions to the tax prescribed herein.
(c) the term 'person', as used in this Chapter, includes an officer or employee of a
corporation who as such officer, employee or member is under a duty to perform the act in
respect of which the violation occurs.
SEC. 248. - Civil Penalties. -
(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent
to twenty-five percent (25%) of the amount due, in the following cases:
(1) Failure to file any return and pay the tax due thereon as required under the provisions
of this Code or rules and regulations on the date prescribed; or
(2) Unless otherwise authorized by the Commissioner, filing a return with an internal
revenue officer other than those with whom the return is required to be filed; or
(3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice
of assessment; or
(4) Failure to pay the full or part of the amount of tax shown on any return required to be
filed under the provisions of this Code or rules and regulations, or the full amount of tax due for
which no return is required to be filed, on or before the date prescribed for its payment.
(B) In case of willful neglect to file the return within the period prescribed by this Code or
by rules and regulations, or in case a false or fraudulent return is willfully made, the penalty to
be imposed shall be fifty percent (50%) of the tax or of the deficiency tax, in case, any payment
has been made on the basis of such return before the discovery of the falsity or fraud: Provided,
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That a substantial underdeclaration of taxable sales, receipts or income, or a substantial
overstatement of deductions, as determined by the Commissioner pursuant to the rules and
regulations to be promulgated by the Secretary of Finance, shall constitute prima facie evidence
of a false or fraudulent return: Provided, further, That failure to report sales, receipts or income
in an amount exceeding thirty percent (30%) of that declared per return, and a claim of
deductions in an amount exceeding (30%) of actual deductions, shall render the taxpayer liable
for substantial underdeclaration of sales, receipts or income or for overstatement of deductions,
as mentioned herein.
SEC. 249. Interest. -
(A) In General. - There shall be assessed and collected on any unpaid amount of tax,
interest at the rate of twenty percent (20%) per annum, or such higher rate as may be
prescribed by rules and regulations, from the date prescribed for payment until the amount is
fully paid.
(B) Deficiency Interest. - Any deficiency in the tax due, as the term is defined in this
Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall
be assessed and collected from the date prescribed for its payment until the full payment
thereof.
(C) Delinquency Interest. - In case of failure to pay:
(1) The amount of the tax due on any return to be filed, or
(2) The amount of the tax due for which no return is required, or
(3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the
notice and demand of the Commissioner, there shall be assessed and collected on the unpaid
amount, interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid,
which interest shall form part of the tax.
(D) Interest on Extended Payment. - If any person required to pay the tax is qualified
and elects to pay the tax on installment under the provisions of this Code, but fails to pay the
tax or any installment hereof, or any part of such amount or installment on or before the date
prescribed for its payment, or where the Commissioner has authorized an extension of time
within which to pay a tax or a deficiency tax or any part thereof, there shall be assessed and
collected interest at the rate hereinabove prescribed on the tax or deficiency tax or any part
thereof unpaid from the date of notice and demand until it is paid.
SEC. 250. Failure to File Certain Information Returns. - In the case of each failure
to file an information return, statement or list, or keep any record, or supply any information
required by this Code or by the Commissioner on the date prescribed therefor, unless it is
shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon
notice and demand by the Commisssioner, be paid by the person failing to file, keep or supply
the same, One thousand pesos (1,000) for each failure: Provided, however, That the aggregate
amount to be imposed for all such failures during a calendar year shall not exceed Twenty-five
thousand pesos (P25,000).
SEC. 251. Failure of a Withholding Agent to Collect and Remit Tax. - Any person
required to withhold, account for, and remit any tax imposed by this Code or who willfully fails to
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withhold such tax, or account for and remit such tax, or aids or abets in any manner to evade
any such tax or the payment thereof, shall, in addition to other penalties provided for under this
Chapter, be liable upon conviction to a penalty equal to the total amount of the tax not withheld,
or not accounted for and remitted.
SEC. 252. Failure of a Withholding Agent to refund Excess Withholding Tax. -
Any employer/withholding agent who fails or refuses to refund excess withholding tax shall, in
addition to the penalties provided in this Title, be liable to a penalty to the total amount of
refunds which was not refunded to the employee resulting from any excess of the amount
withheld over the tax actually due on their return.
SEC. 253. General Provisions. -
(a) Any person convicted of a crime penalized by this Code shall, in addition to being liable
for the payment of the tax, be subject to the penalties imposed herein: Provided, That payment
of the tax due after apprehension shall not constitute a valid defense in any prosecution for
violation of any provision of this Code or in any action for the forfeiture of untaxed articles.
(b) Any person who willfully aids or abets in the commission of a crime penalized herein or
who causes the commission of any such offense by another shall be liable in the same manner
as the principal.
(c) If the offender is not a citizen of the Philippines, he shall be deported immediately after
serving the sentence without further proceedings for deportation. If he is a public officer or
employee, the maximum penalty prescribed for the offense shall be imposed and, in addition,
he shall be dismissed from the public service and perpetually disqualified from holding any
public office, to vote and to participate in any election. If the offender is a Certified Public
Accountant, his certificate as a Certified Public Accountant shall, upon conviction, be
automatically revoked or cancelled.
(d) In the case of associations, partnerships or corporations, the penalty shall be imposed
on the partner, president, general manager, branch manager, treasurer, officer-in-charge, and
the employees responsible for the violation.
(e) The fines to be imposed for any violation of the provisions of this Code shall not be
lower than the fines imposed herein or twice the amount of taxes, interest and surcharges due
from the taxpayer, whichever is higher.
SEC. 254. Attempt to Evade or Defeat Tax. - Any person who willfully attempts in any
manner to evade or defeat any tax imposed under this Code or the payment thereof shall, in
addition to other penalties provided by law, upon conviction thereof, be punished by a fine not
less than Thirty thousand (P30,000) but not more than One hunderd thousand pesos
(P100,000) and suffer imprisonment of not less than two (2) years but not more than four (4)
years: Provided, That the conviction or acquittal obtained under this Section shall not be a bar
to the filing of a civil suit for the collection of taxes.
SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay
Tax Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation. -
Any person required under this Code or by rules and regulations promulgated thereunder to pay
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any tax make a return, keep any record, or supply correct the accurate information, who willfully
fails to pay such tax, make such return, keep such record, or supply correct and accurate
information, or withhold or remit taxes withheld, or refund excess taxes withheld on
compensation, at the time or times required by law or rules and regulations shall, in addition to
other penalties provided by law, upon conviction thereof, be punished by a fine of not less than
Ten thousand pesos (P10,000) and suffer imprisonment of not less than one (1) year but not
more than ten (10) years.
Any person who attempts to make it appear for any reason that he or another has in fact
filed a return or statement, or actually files a return or statement and subsequently withdraws
the same return or statement after securing the official receiving seal or stamp of receipt of
internal revenue office wherein the same was actually filed shall, upon conviction therefor, be
punished by a fine of not less than Ten thousand pesos (P10,000) but not more than Twenty
thousand pesos (P20,000) and suffer imprisonment of not less than one (1) year but not more
than three (3) years.
SEC. 256. Penal Liability of Corporations. - Any corporation, association or general
co-partnership liable for any of the acts or omissions penalized under this Code, in addition to
the penalties imposed herein upon the responsible corporate officers, partners, or employees
shall, upon conviction for each act or omission, be punished by a fine of not less than Fifty
thousand pesos (P50,000) but not more than One hundred thousand pesos (P100,000).
SEC. 257. Penal Liability for Making False Entries, Records or Reports, or Using
Falsified or Fake Accountable Forms. -
(A) Any financial officer or independent Certified Public Accountant engaged to examine
and audit books of accounts of taxpayers under Section 232 (A) and any person under his
direction who:
(1) Willfully falsifies any report or statement bearing on any examination or audit, or
renders a report, including exhibits, statements, schedules or other forms of accountancy work
which has not been verified by him personally or under his supervision or by a member of his
firm or by a member of his staff in accordance with sound auditing practices; or
(2) Certifies financial statements of a business enterprise containing an essential
misstatement of facts or omission in respect of the transactions, taxable income, deduction and
exemption of his client; or
(B) Any person who:
(1) Not being an independent Certified Public Accountant according to Section 232(B) or a
financial officer, examines and audits books of accounts of taxpayers; or
(2) Offers to sign and certify financial statements without audit; or
(3) Offers any taxpayer the use of accounting bookkeeping records for internal revenue
purposes not in conformity with the requirements prescribed in this Code or rules and
regulations promulgated thereunder; or
(4) Knowingly makes any false entry or enters any false or fictitious name in the books of
accounts or record mentioned in the preceding paragraphs; or
(5) Keeps two (2) or more sets of such records or books of accounts; or
(6) In any way commits an act or omission, in violation of the provisions of this Section; or
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(7) Fails to keep the books of accounts or records mentioned in Section 232 in a native
language, English or Spanish, or to make a true and complete translation as required in Section
234 of this Code, or whose books of accounts or records kept in a native language, English or
Spanish, and found to be at material variance with books or records kept by him in another
language; or
(8) Willfully attempts in any manner to evade or defeat any tax imposed under this Code,
or knowingly uses fake or falsified revenue official receipts, Letters of Authority, certificates
authorizing registration, Tax Credit Certificates, Tax Debit Memoranda and other accountable
forms shall, upon conviction for each act or omission, be punished by a fine not less than Fifty
thousand pesos (P50,000) but not more than One hundred pesos (P100,000) and suffer
imprisonment of not less than two (2) years but not more than six (6) years.
If the offender is a Certified Public Accountant, his certificate as a Certified Public
Accountant shall be automatically revoked or cancelled upon conviction.
In the case of foreigners, conviction under this Code shall result in his immediate
deportation after serving sentence, without further proceedings for deportation.
SEC. 258. Unlawful Pursuit of Business. - Any person who carries on any business
for which an annual registration fee is imposed without paying the tax as required by law shall,
upon conviction for each act or omission, be punished by a fine of not less than Five thousand
pesos (P5,000) but not more than Twenty thousand pesos (P20,000) and suffer imprisonment
of not less than six (6) months but not more than two (2) years: Provided, That in the case of a
person engaged in the business of distilling, rectifying, repacking, compounding or
manufacturing any article subject to excise tax, he shall, upon conviction for each act or
omission, be punished by a fine of not less than Thirty thousand pesos (P30,000) but not more
than Fifty thousand pesos (P50,000) and suffer imprisonment of not less than two (2) years but
not more than four (4) years.
SEC. 259. Illegal Collection of Foreign Payments. - Any person who knowingly
undertakes the collection of foreign payments as provided under Section 67 of this Code
without having obtained a license therefor, or without complying with its implementing rules and
regulations, shall, upon conviction for each act or omission, be punished by a fine of not less
than Twenty thousand pesos (P20,000) but not more than Fifty thousand pesos (P50,000) and
suffer imprisonment of not less than one (1) year but not more than two (2) years.
SEC. 260. Unlawful Possession of Cigarette Paper in Bobbins or Rolls, Etc. - It
shall be unlawful for any person to have in his possession cigarette paper in bobbins or rolls,
cigarette tipping paper or cigarette filter tips, without the corresponding authority therefor issued
by the Commissioner. Any person, importer, manufacturer of cigar and cigarettes, who has been
found guilty under this Section, shall, upon conviction for each act or omission, be punished by
a fine of not less than Twenty thousand pesos (P20,000) but not more than One hundred
thousand pesos (P1000,000) and suffer imprisonment for a term of not less than six (6) years
and one (1) day but not more than twelve (12) years.
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SEC. 261. Unlawful Use of Denatured Alcohol. - Any person who for the purpose of
manufacturing any beverage, uses denatured alcohol or alcohol specially denatured to be used
for motive power or withdrawn under bond for industrial uses or alcohol knowingly
misrepresented to be denatured to be unfit for oral intake or who knowingly sells or offers for
sale any beverage made in whole or in part from such alcohol or who uses such alcohol for the
manufacture of liquid medicinal preparations taken internally, or knowingly sells or offers for
sale such preparations containing as an ingredient such alcohol, shall upon conviction for each
act or omission be punished by a fine of not less than Twenty thousand pesos (P20,000) but not
more than One hundred thousand pesos (P100,000) and suffer imprisonment for a term of not
less than six (6) years and one (1) day but not more than twelve (12) years.
Any person who shall unlawfully recover or attempt to recover by distillation or other
process any denatured alcohol or who knowingly sells or offers for sale, conceals or otherwise
disposes of alcohol so recovered or redistilled shall be subject to the same penalties imposed
under this Section.
SEC. 262. Shipment or Removal of Liquor or Tobacco Products under False
Name or Brand or as an Imitation of any Existing or Otherwise Known Product Name
or Brand. - Any person who ships, transports or removes spirituous, compounded or fermented
liquors, wines or any manufactured products of tobacco under any other than the proper name
or brand known to the trade as designating the kind and quality of the contents of the cask,
bottle or package containing the same or as an imitation of any existing or otherwise known
product name or brand or causes such act to be done, shall, upon conviction for each act or
omission, be punished by a fine of not less than Twenty thousand pesos (P20,000) but not more
than One hundred thousand pesos (P1000,000) and suffer imprisonment of not less than six (6)
years and one (1) day but not more than twelve (12) years.
SEC. 263. Unlawful Possession or Removal of Articles Subject to Excise Tax
without Payment of the Tax. - Any person who owns and/or is found in possession of
imported articles subject to excise tax, the tax on which has not been paid in accordance with
law, or any person who owns and/or is found in possession of imported tax-exempt articles
other than those to whom they are legally issued shall be punished by:
(a) A fine of not less than One thousand pesos (P1,000) nor more than Two thousand
pesos (P2,000) and suffer imprisonment of not less than sixty (60) days but not more than one
hundred (100) days, if the appraised value, to be determined in the manner prescribed in the
Tariff and Customs Code, including duties and taxes, of the articles does not exceed One
thousand pesos (P1,000).
(b) A fine of not less than Ten thousand pesos (P10,000) but not more than Twenty
thousand pesos (P20,000) and suffer imprisonment of not less than two (2) years but not more
than four (4) years, if the appraised value, to be determined in the manner prescribed in the
Tariff and Customs Code, including duties and taxes, of the articles exceeds One thousand
pesos (P1,000) but does not exceed Fifty thousand pesos (P50,000);
(c) A fine of not less than Thirty thousand pesos (P30,000) but not more than Sixty
thousand pesos (P60,000) and suffer imprisonment of not less than four (4) years but not more
than six (6) years, if the appraised value, to be determined in the manner prescribed in the Tariff
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and Customs Code, including duties and taxes of the articles is more than Fifty thousand pesos
(P50,000) but does not exceed One hundred fifty thousand pesos (P150,000); or
(d) A fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred
thousand pesos (P100,000) and suffer imprisonment of not less than ten (10) years but not
more than twelve (12) years, if the appraised value, to be determined in the manner prescribed
in the Tariff and Customs Code, including duties and taxes, of the articles exceeds One hundred
fifty thousand pesos (P150,000).
Any person who is found in possession of locally manufactured articles subject to excise
tax, the tax on which has not been paid in accordance with law, or any person who is found in
possession of such articles which are exempt from excise tax other than those to whom the
same is lawfully issued shall be punished with a fine of not less than (10) times the amount of
excise tax due on the articles found but not less than Five hundred pesos (P500) and suffer
imprisonment of not less than two (2) years but not more than four (4) years.
Any manufacturer, owner or person in charge of any article subject to excise tax who
removes or allows or causes the unlawful removal of any such articles from the place of
production or bonded warehouse, upon which the excise tax has not been paid at the time and
in the manner required, and any person who knowingly aids or abets in the removal of such
articles as aforesaid, or conceals the same after illegal removal shall, for the first offense, be
punished with a fine of not less than ten (10) times the amount of excise tax due on the articles
but not less than One thousand pesos (P1,000) and suffer imprisonment of not less than one
(1) year but not more than two (2) years.
The mere unexplained possession of articles subject to excise tax, the tax on which has
not been paid in accordance with law, shall be punishable under this Section.
Sec. 264. Failure or refusal to Issue Receipts or Sales or Commercial Invoices,
Violations related to the Printing of such Receipts or Invoices and Other Violations. -
(a) Any person who, being required under Section 237 to issue receipts or sales or
commercial invoices, fails or refuses to issue such receipts of invoices, issues receipts or
invoices that do not truly reflect and/or contain all the information required to be shown therein,
or uses multiple or double receipts or invoices, shall, upon conviction for each act or omission,
be punished by a fine of not less than One thousand pesos (P1,000) but not more than Fifty
thousand pesos (P50,000) and suffer imprisonment of not less than two (2) years but not more
than four (4) years.
(b) Any person who commits any of the acts enumerated hereunder shall be penalized in
the same manner and to the same extent as provided for in this Section:
(1) Printing of receipts or sales or commercial invoices without authority from the Bureau
of Internal Revenue; or
(2) Printing of double or multiple sets of invoices or receipts; or
(3) Printing of unnumbered receipts or sales or commercial invoices, not bearing the
name, business style, Taxpayer Identification Number, and business address of the person or
entity.
SEC. 265. Offenses Relating to Stamps. - Any person who commits any of the acts
enumerated hereunder shall, upon conviction thereof, be punished by a fine of not less than
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Twenty thousand pesos (P20,000) but not more than Fifty thousand pesos (P50,000) and suffer
imprisonment of not less than four (4) years but not more than eight (8) years:
(a) making, importing, selling, using or possessing without express authority from the
Commissioner, any die for printing or making stamps, labels, tags or playing cards;
(b) Erasing the cancellation marks of any stamp previously used, or altering the written
figures or letters or cancellation marks on internal revenue stamps;
(c) Possessing false, counterfeit, restored or altered stamps, labels or tags or causing the
commission of any such offense by another;
(d) Selling or offering for sale any box or package containing articles subject to excise tax
with false, spurious or counterfeit stamps or labels or selling from any such fraudulent box,
package or container as aforementioned; or
(e) Giving away or accepting from another, or selling, buying or using containers on which
the stamps are not completely destroyed.
Sec. 266. Failure to Obey Summons. - Any person who, being duly summoned to
appear to testify, or to appear and produce books of accounts, records, memoranda or other
papers, or to furnish information as required under the pertinent provisions of this Code,
neglects to appear or to produce such books of accounts, records, memoranda or other papers,
or to furnish such information, shall, upon conviction, be punished by a fine of not less than Five
thousand pesos (P5,000) but not more than ten thousand pesos (P10,000) and suffer
imprisonment of not less than one (1) year but not more than two (2) years.
SEC. 267. Declaration under Penalties of Perjury. - Any declaration, return and other
statement required under this Code, shall, in lieu of an oath, contain a written statement that
they are made under the penalties of perjury. Any person who willfully files a declaration, return
or statement containing information which is not true and correct as to every material matter
shall, upon conviction, be subject to the penalties prescribed for perjury under the Revised
Penal Code.
SEC. 268. Other Crimes and Offenses. -
(A) Misdeclaration or Misrepresentation of Manufacturers Subject to Excise Tax. -
Any manufacturer who, in violation of the provisions of Title VI of this Code, misdeclares in the
sworn statement required therein or in the sales invoice, any pertinent data or information shall
be punished by a summary cancellation or withdrawal of the permit to engage in business as a
manufacturer of articles subject to excise tax.
(B) Forfeiture of Property Used in Unlicensed Business or Dies Used for Printing
False Stamps, Etc. - All chattels, machinery, and removable fixtures of any sort used in the
unlicensed production of articles subject to excise tax shall be forfeited. Dies and other
equipment used for the printing or making of any internal revenue stamp, label or tag which is in
imitation of or purports to be a lawful stamp, label or tag shall also be forfeited.
(C) Forfeiture of Goods Illegally Stored or Removed. - Unless otherwise specifically
authorized by the Commissioner, all articles subject to excise tax should not be stored or
allowed to remain in the distillery warehouse, bonded warehouse or other place where made,
after the tax thereon has been paid; otherwise, all such articles shall be forfeited. Articles
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withdrawn from any such place or from customs custody or imported into the country without
the payment of the required tax shall likewise be forfeited.
SEC. 269. Violations Committed by Government Enforcement Officers. - Every
official, agent, or employee of the Bureau of Internal Revenue or any other agency of the
Government charged with the enforcement of the provisions of this Code, who is guilty of any of
the offenses herein below specified shall, upon conviction for each act or omission, be punished
by a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred
thousand pesos (P100,000) and suffer imprisonment of not less than ten (10) years but not
more than fifteen (15) years and shall likewise suffer an additional penalty of perpetual
disqualification to hold public office, to vote, and to participate in any public election:
(a) Extortion or willful oppression through the use of his office or willful oppression and
harassment of a taxpayer who refused, declined, turned down or rejected any of his offers
specified in paragraph (d) hereof;
(b) Knowingly demanding or receiving any fee, other or greater sums that are authorized
by law or receiving any fee, compensation or reward, except as by law prescribed, for the
performance of any duty;
(c) Willfully neglecting to give receipts, as by law required, for any sum collected in the
performance of duty or willfully neglecting to perform any other duties enjoined by law;
(d) Offering or undertaking to accomplish, file or submit a report or assessment on a
taxpayer without the appropriate examination of the books of accounts or tax liability, or offering
or undertaking to submit a report or assessment less than the amount due the Government for
any consideration or compensation, or conspiring or colluding with another or others to defraud
the revenues or otherwise violate the provisions of this Code;
(e) Neglecting or by design permitting the violation of the law by any other person;
(f) Making or signing any false entry or entries in any book, or making or signing any false
certificate or return;
(g) Allowing or conspiring or colluding with another to allow the unauthorized retrieval,
withdrawal or recall of any return, statement or declaration after the same has been officially
received by the Bureau of Internal Revenue;
(h) Having knowledge or information of any violation of this Code or of any fraud
committed on the revenues collectible by the Bureau of Internal Revenue, failure to report such
knowledge or information to their superior officer, or failure to report as otherwise required by
law; and
(i) Without the authority of law, demanding or accepting or attempting to collect, directly or
indirectly, as payment or otherwise any sum of money or other thing of value for the
compromise, adjustment or settlement of any charge or complaint for any violation or alleged
violation of this Code.
Provided, That the provisions of the foregoing paragraph notwithstanding, any internal
revenue officer for which a prima facie case of grave misconduct has been established shall,
after due notice and hearing of the administrative case and subject to Civil Service Laws, be
dismissed from the revenue service: Provided, further, That the term 'grave misconduct', as
defined in Civil Service Law, shall include the issuance of fake letters of authority and receipts,
forgery of signature, unsurpation of authority and habitual issuance of unreasonable
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assessments.
SEC. 270. Unlawful Divulgence of Trade Secrets. - Except as provided in Section 71
of this Code and Section 26 of Republic Act No. 6388, any officer or employee of the Bureau of
Internal Revenue who divulges to any person or makes known in any other manner than may
be provided by law information regarding the business, income or estate of any taxpayer, the
secrets, operation, style or work, or apparatus of any manufacturer or producer, or confidential
information regarding the business of any taxpayer, knowledge of which was acquired by him in
the discharge of his official duties, shall upon conviction for each act or omission, be punished
by a fine of not less than Fifty thousand pesos (P50,000) but not more than One hundred
thousand pesos (P100,000), or suffer imprisonment of not less than two (2) years but not more
than five (5) years, or both.
SEC. 271. Unlawful Interest of Revenue Law Enforcers in Business. - Any internal
revenue officer who is or shall become interested, directly or indirectly, in the manufacture, sale
or importation of any article subject to excise tax under Title VI of this Code or in the
manufacture or repair or sale, of any die for printing, or making of stamps, or labels shall upon
conviction for each act or omission, be punished by a fine of not less than Five thousand pesos
(P5,000) but not more than Ten thousand pesos (P10,000), or suffer imprisonment of not less
than two (2) years and one (1) day but not more than four (4) years, or both.
SEC. 272. Violation of Withholding Tax Provision. - Every officer or employee of the
Government of the Republic of the Philippines or any of its agencies and instrumentalities, its
political subdivisions, as well as government-owned or controlled corporations, including the
Bangko Sentral ng Pilipinas (BSP), who, under the provisions of this Code or rules and
regulations promulgated thereunder, is charged with the duty to deduct and withhold any
internal revenue tax and to remit the same in accordance with the provisions of this Code and
other laws is guilty of any offense herein below specified shall, upon conviction for each act or
omission be punished by a fine of not less than Five thousand pesos (P5,000) but not more
than Fifty thousand pesos (P50,000) or suffer imprisonment of not less than six (6) months and
one (1) day but not more than two (2) years, or both:
(a) Failing or causing the failure to deduct and withhold any internal revenue tax under any
of the withholding tax laws and implementing rules and regulations;
(b) Failing or causing the failure to remit taxes deducted and withheld within the time
prescribed by law, and implementing rules and regulations; and
(c) Failing or causing the failure to file return or statement within the time prescribed, or
rendering or furnishing a false or fraudulent return or statement required under the withholding
tax laws and rules and regulations.
SEC. 273. Penalty for Failure to Issue and Execute Warrant. - Any official who fails
to issue or execute the warrant of distraint or levy within thirty (30) days after the expiration of
the time prescribed in Section 207 or who is found guilty of abusing the exercise thereof by
competent authority shall be automatically dismissed from the service after due notice and
hearing.
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SEC. 274. Penalty for Second and Subsequent Offenses. - In the case of
reincidence, the maximum of the penalty prescribed for the offense shall be imposed.
SEC. 275. Violation of Other Provisions of this Code or Rules and Regulations in
General. - Any person who violates any provision of this Code or any rule or regulation
promulgated by the Department of Finance, for which no specific penalty is provided by law,
shall, upon conviction for each act or omission, be punished by a fine of not more than One
thousand pesos (P1,000) or suffer imprisonment of not more than six (6) months, or both.
SEC. 276. Penalty for Selling, Transferring, Encumbering or in any way
Disposing of Property Placed under Constructive Distraint. - Any taxpayer, whose
property has been placed under constructive distraint, who sells, transfers, encumbers or in any
way disposes of said property, or any part thereof, without the knowledge and consent of the
Commissioner, shall, upon conviction for each act or omission, be punished by a fine of not less
than twice the value of the property so sold, encumbered or disposed of but not less than Five
Thousand pesos (P5,000), or suffer imprisonment of not less than two (2) years and one (1) day
but not more than four (4) years, of both.
SEC. 277. Failure to Surrender Property Placed under Distraint and Levy. - Any
person having in his possession or under his control any property or rights to property, upon
which a warrant of constructive distraint, or actual distraint and levy has been issued shall, upon
demand by the Commissioner or any of his deputies executing such warrant, surrender such
property or right to property to the Commissioner or any of his deputies, unless such property or
right is, at the time of such demand, subject to an attachment or execution under any judicial
process. Any person who fails or refuses to surrender any of such property or right shall be
liable in his own person and estate to the Government in a sum equal to the value of the
property or rights not so surrendered but not exceeding the amount of the taxes (including
penalties and interest) for the collection of which such warrant had been issued, together with
cost and interest if any, from the date of such warrant. In addition, such person shall, upon
conviction for each act or omission, be punished by a fine of not less than Five thousand pesos
(P5,000), or suffer imprisonment of not less than six (6) months and one (1) day but not more
than two (2) years, or both.
SEC. 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who
causes or procures an officer or employee of the Bureau of Internal Revenue to divulge any
confidential information regarding the business, income or inheritance of any taxpayer,
knowledge of which was acquired by him in the discharge of his official duties, and which it is
unlawful for him to reveal, and any person who publishes or prints in any manner whatever, not
provided by law, any income, profit, loss or expenditure appearing in any income tax return,
shall be punished by a fine of not more than Two thousand pesos (P2,000), or suffer
imprisonment of not less than six (6) months nor more than five (5) years, or both.
SEC. 279. Confiscation and Forfeiture of the Proceeds or Instruments of Crime. -
In addition to the penalty Imposed for the violation of the provisions of Title X of this Code, the
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same shall carry with it the confiscation and forfeiture in favor of the government of the
proceeds of the crime or value of the goods, and the instruments or tools with which the crime
was committed: Provided, however, That if in the course of the proceedings, it is established
that the instruments or tools used in the illicit act belong to a third person, the same shall be
confiscated and forfeited after due notice and hearing in a separate proceeding in favor of the
Government if such third person leased, let, chartered or otherwise entrusted the same to the
offender: Provided, further, That in case the lessee subleased, or the borrower, charterer, or
trustee allowed the use of the instruments or tools to the offender, such instruments or tools
shall, likewise, be confiscated and forfeited: Provided, finally, That property of common carriers
shall not be subject to forfeiture when used in the transaction of their business as such common
carrier, unless the owner or operator of said common carrier was, at the time of the illegal act, a
consenting party or privy thereto, without prejudice to the owner's right of recovery against the
offender in a civil or criminal action. Articles which are not subject of lawful commerce shall be
destroyed.
SEC. 280. Subsidiary Penalty. - If the person convicted for violation of any of the
provisions of this Code has no property with which to meet the fine imposed upon him by the
court, or is unable to pay such fine, he shall be subject to a subsidiary personal liability at the
rate of one (1) day for each Eight pesos and fifty centavos (P8.50) subject to the rules
established in Article 39 of the Revised Penal Code.
SEC. 281. Prescription for Violations of any Provision of this Code. - All violations
of any provision of this Code shall prescribe after Five (5) years.
Prescription shall begin to run from the day of the commission of the violation of the law,
and if the same be not known at the time, from the discovery thereof and the institution of
judicial proceedings for its investigation and punishment.
The prescription shall be interrupted when proceedings are instituted against the guilty
persons and shall begin to run again if the proceedings are dismissed for reasons not
constituting jeopardy.
The term of prescription shall not run when the offender is absent from the Philippines.
SEC. 282. Informer's Reward to Persons Instrumental in the Discovery of
Violations of the National Internal Revenue Code and in the Discovery and Seizure of
Smuggled Goods. -
(A) For Violations of the National Internal Revenue Code. Any person, except an
internal revenue official or employee, or other public official or employee, or his relative within
the sixth degree of consanguinity, who voluntarily gives definite and sworn information, not yet
in the possession of the Bureau of Internal Revenue, leading to the discovery of frauds upon
the internal revenue laws or violations of any of the provisions thereof, thereby resulting in the
recovery of revenues, surcharges and fees and/or the conviction of the guilty party and/or the
imposition of any of the fine or penalty, shall be rewarded in a sum equivalent to ten percent
(10%) of the revenues, surcharges or fees recovered and/or fine or penalty imposed and
collected or One Million Pesos (P1,000,000) per case, whichever is lower. The same amount of
reward shall also be given to an informer where the offender has offered to compromise the
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violation of law committed by him and his offer has been accepted by the Commissioner and
collected from the offender: Provided, That should no revenue, surcharges or fees be actually
recovered or collected, such person shall not be entitled to a reward: Provided, further, That the
information mentioned herein shall not refer to a case already pending or previously
investigated or examined by the Commissioner or any of his deputies, agents or examiners, or
the Secretary of Finance or any of his deputies or agents: Provided, finally, That the reward
provided herein shall be paid under rules and regulations issued by the Secretary of Finance,
upon recommendation of the Commissioner.
(B) For Discovery and Seizure of Smuggled Goods. To encourage the public to
extend full cooperation in eradicating smuggling, a cash reward equivalent to ten percent (10%)
of the fair market value of the smuggled and confiscated goods or One Million Pesos
(P1,000,000) per case, whichever is lower, shall be given to persons instrumental in the
discovery and seizure of such smuggled goods.
The cash rewards of informers shall be subject to income tax, collected as a final
withholding tax, at a rate of ten percent (10%).
The Provisions of the foregoing Subsections notwithstanding, all public officials, whether
incumbent or retired, who acquired the information in the course of the performance of their
duties during their incumbency, are prohibited from claiming informer's reward.
4. RR 12-99 IMPLEMENTING THE PROVISIONS OF THE NIRC ON THE
RULES OF ASSESSMENT, CIVIL PENALTIES AND INTEREST AND
EXTRAJUDICIAL SETTLEMENT OF TAXPAYER'S CRIMINAL VIOLATION
UNDER RMO 1-90
Section 1. Scope. - Pursuant to the provisions of Section 244, in relation
to Section 245 of the NIRC of 1997, these Regulations are hereby
promulgated to implement the provisions of Sections 6, 7, 204, 228, 247, 248
and 249 on assessment of national internal revenue taxes, fees and charges
and to provide the rules governing the extra-judicial settlement of a
taxpayers criminal violation of the said Code or any of its implementing
Regulations through payment of a suggested compromise penalty.
Section 2. General Principles. -
2.1 The surcharge and/or interest herein prescribed shall apply to all
taxes, fees and charges imposed under the Code which shall be collected at
the same time, in the same manner, and as part of the tax.
2.2 In case the tax due from the taxpayer is paid on a partial or
installment basis, the interest on the deficiency tax or on the delinquency tax
liability of the taxpayer shall be imposed from due date of the tax until full
payment thereof. The interest shall be computed based on the diminishing
balance of the tax, inclusive of interests.
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Section 3. Due process requirement in the issuance of a deficiency tax
assessment. -
3.1 Mode of procedures in the issuance of a deficiency tax assessment:
3.1.1 Notice for informal conference. - The Revenue
Officer who audited the taxpayers records shall, among others, state
in his report whether or not the taxpayer agrees with his findings that
the taxpayer is liable for deficiency tax or taxes. If the taxpayer is
not amenable, based on the said Officers submitted report of
investigation, the taxpayer shall be informed, in writing, by the
Revenue District Office or by the Special Investigation Division, as
the case may be (in the case Revenue Regional Offices) or by the
Chief of Division concerned (in the case of the BIR National Office)
of the discrepancy or discrepancies in the taxpayers payment of his
internal revenue taxes, for the purpose of Informal Conference, in
order to afford the taxpayer with an opportunity to present his side of
the case. If the taxpayer fails to respond within fifteen (15) days
from date of receipt of the notice for informal conference, he shall be
considered in default, in which case, the Revenue District Office or
the Chief of the Special Investigation Division of the Revenue
Regional Office, or the Chief of Division in the National Office, as
the case may be, shall endorse the case with the least possible delay
to the Assessment Division of the Revenue Regional Office or to the
Commissioner or his duly authorized representative, as the case may
be, for appropriate review and issuance of a deficiency tax
assessment, if warranted.
3.1.2 Preliminary Assessment Notice (PAN). - If after
review and evaluation by the Assessment Division or by the
Commissioner or his duly authorized representative, as the case may
be, it is determined that there exists sufficient basis to assess the
taxpayer for any deficiency tax or taxes, the said Office shall issue to
the taxpayer, at least by registered mail, a Preliminary Assessment
Notice (PAN) for the proposed assessment, showing in detail, the
facts and the law, rules and regulations, or jurisprudence on which
the proposed assessment is based. If the taxpayer fails to respond
within fifteen (15) days from date of receipt of the PAN, he shall be
considered in default, in which case, a formal letter of demand and
assessment notice shall be caused to be issued by the said Office,
calling for payment of the taxpayers deficiency tax liability,
inclusive of the applicable penalties.
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3.1.3 Exceptions to Prior Notice of the Assessment. - The
notice for informal conference and the preliminary assessment notice
shall not be required in any of the following cases, in which case,
issuance of the formal assessment notice for the payment of the
taxpayers deficiency tax liability shall be sufficient:
(i) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax appearing on the
face of the tax return filed by the taxpayer; or
(ii) When a discrepancy has been determined between the tax
withheld and the amount actually remitted by the withholding agent;
or
(iii) When a taxpayer who opted to claim a refund or tax credit
of excess creditable withholding tax for a taxable period was
determined to have carried over and automatically applied the same
amount claimed against the estimated tax liabilities for the taxable
quarter or quarters of the succeeding taxable year; or
(iv) When the excise tax due on excisable articles has not been
paid; or
(v) When an article locally purchased or imported by an
exempt person, such as, but not limited to, vehicles, capital
equipment, machineries and spare parts, has been sold, traded or
transferred to non-exempt persons.
3.1.4 Formal Letter of Demand and Assessment Notice. -
The formal letter of demand and assessment notice shall be issued by
the Commissioner or his duly authorized representative. The letter of
demand calling for payment of the taxpayers deficiency tax or taxes
shall state the facts, the law, rules and regulatins, or jurisprudence on
which the assessment is based, otherwise, the formal letter of
demand and assessment notice shall be void. The same shall be sent
to the taxpayer only by registered mail or by personal delivery. If
sent by personal delivery, the taxpayer or his duly authorized
representative shall acknowledge receipt thereof in the duplicate
copy of the letter of demand, showing the following: (a) His name;
(b) signature; (c) designation and authority to act for and in behalf of
the taxpayer, if acknowledged received by a person other than the
taxpayer himself; and (d) date of receipt thereof.
3.1.5 Disputed Assessment. - The taxpayer or his duly
authorized representative may protest administratively against the
aforesaid formal letter of demand and assessment notice within thirty
(30) days from date of receipt thereof. If there are several issues
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involved in the formal letter of demand and assessment notice but
the taxpayer only disputes or protests against the validity of some of
the issues raised, the taxpayer shall be required to pay the deficiency
tax or taxes attributable to the undisputed issues, in which case, a
collection letter shall be issued to the taxpayer calling for payment of
the said deficiency tax, inclusive of the applicable surcharge and/or
interest. No action shall be taken on the taxpayers undisputed
issues. The prescriptive period for assessment or collection of tax or
taxes attributable to the disputed issues shall be suspended.
The taxpayer shall state the facts, the applicable law, rules and
regulations, or jurisprudence on which his protest is based,
otherwise, his protest shall be considered void and without force
and effect. If there are several issues involved in the disputed
assessment and the taxpayer fails to state the facts, the applicable
law, rules and regulations, or jurisprudence in support of his protest
against some of the several issues on which the assessment is based,
the same shall be considered undisputed issue or issues, in which
case, the taxpayer shall be required to pay the corresponding
deficiency tax or taxes attributable thereto.
The taxpayer shall submit the required documents in support of
his protest within sixty (60) days from date of filing of his letter of
protest, otherwise, the assessment shall become final, executory and
demandable. The phrase submit the required documents includes
submission or presentation of the pertinent documents for scrutiny
and evaluation by the Revenue Officer conducting the audit. The
said Revenue Officer shall state this fact in his report of
investigation.
If the taxpayer fails to file a valid protest against the formal
letter of demand and assessment notice within thirty (30) days from
date of receipt thereof, the assessment shall become final, executory
and demandable.
If the protest is denied, in whole or in part, by the
Commissioner, the taxpayer may appeal to the Court of Tax Appeals
within thirty (30) days from date of receipt of the said decision,
otherwise, the assessment shall become final, executory and
demandable.
In general, if the protest is denied, in whole or in part, by the
Commissioner or his duly authorized representative, the taxpayer
may appeal to the Court of Tax Appeals within thirty (30) days from
date of receipt of the said decision, otherwise, the assessment shall
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become final, executory and demandable: Provided, however, that if
the taxpayer elevates his protests to the Commissioners duly
authorized representative, the latters decision shall not be
considered final, executory and demandable, in which case, the
protest shall be decided by the Commissioner.
If the Commissioner or his duly authorized representative fails
to act on the taxpayers protest within one hundred eighty (180) days
from date of submission, by the taxpayer, of the required documents
in support of his protest, the taxpayer may appeal to the Court of Tax
Appeals within thirty (30) days from the lapse of the said 180-day
period, otherwise, the assessment shall become final, executory and
demandable.
3.1.6 Administrative Decision on a Disputed Assessment.
- The decision of the Commissioner or his duly authorized
representative shall (a) state the facts, the applicable law, rules and
regulations, or jurisprudence on which such decision is based,
otherwise, the decision shall be void, in which case, the same shall
not be considered a decision on a disputed assessment; and (b) that
the same is his final decision.
3.1.7 Constructive Service. - If the notice to the taxpayer
herein required is served by registered mail, and no response is
received from the taxpayer within the prescribed period from date of
the posting thereof in the mail, the same shall be considered actually
or constructively received by the taxpayer. If the same is personally
served on the taxpayer or his duly authorized representative who,
however, refused to acknowledge receipt thereof, the same shall be
constructively served on the taxpayer. Constructive service thereof
shall be considered effected by leaving the same in the premises of
the taxpayer and this fact of constructive service is attested to,
witnessed and signed by at least two (2) revenue officers other than
the revenue officer who constructively served the same. The revenue
officer who constrictively served the same shall make a written
report of this matter which shall form part of the docket of this case.
Section 4. Civil Penalties:
4.1 Twenty-Five Percent (25%) Surcharge. - There shall be imposed,
in addition to the basic tax required to be paid, a penalty equivalent to twenty-
five percent (25%) thereof, in any of the following cases:
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4.1.1 Failure to file any return and pay the tax due thereon as
required under the provisions of this Code or rules and regulations
on the date prescribed; or
4.1.2 Unless otherwise authorized by the Commissioner, filing a
return with an internal revenue officer other than those with whom
the return is required to be filed; or
4.1.3 Failure to pay the deficiency tax within the time prescribed
for its payment in the notice of assessment; or
4.1.4 Failure to pay the full or part of the amount of tax shown on
any return required to be filed under the provisions of this Code or
rules and regulations, or the full amount of tax due for which no
return is required to be filed, on or before the date prescribed for its
payment.
4.2 Fifty Percent (50%) Surcharge:
4.2.1 In case of willful neglect to file the return within the period
prescribed by the Code, or in case a false or fraudulent return is
willfully made, the penalty to be imposed shall be fifty percent
(50%) of the tax or of the deficiency tax, in case any payment has
been made on the basis of such return before the discovery of the
falsity or fraud: Provided, That a substantial underdeclaration of
taxable sales, receipts or income, or a substantial overstatement of
deductions, as determined by the Commissioner or his duly
authorized representative, shall constitute prima facie evidence of a
false or fraudulent return: Provided, further, That failure to report
sales, receipts or income in an amount exceeding thirty percent
(30%) of that declared per return, and a claim of deductions in an
amount exceeding thirty percent (30%) of actual deductions, shall
render the taxpayer liable for substantial underdeclaration of sales,
receipts or income or for overstatement of deductions, as mentioned
herein: Provided, further, that the term willful neglect to file the
return within the period prescribed by the Code shall not apply in
case the taxpayer, without notice from the Commissioner or his
authorized representative, voluntarily files the said return, in which
case, only 25% surcharge shall be imposed for late filing and late
payment of the tax in lieu of the above 50% surcharge. Conversely,
the 50% surcharge shall be imposed in case the taxpayer files the
return only after prior notice in writing from the Commissioner or
his duly authorized representative.
4.2.2 Section 6 (A) of the Code provides that any tax return filed
by a taxpayer may be modified, changed or amended by the
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taxpayer within three (3) years from the date of such filing
provided, however, that no notice for audit or investigation of such
return, statement or declaration has, in the meantime, been actually
served upon the taxpayer. Thus, if upon investigation, it is
determined that the taxpayers originally filed tax return is false and
fraudulent, such taxpayer shall remain liable to the 50% civil penalty
regardless that the taxpayer has filed his amended tax return, if the
said amended tax return, however, has been filed only after issuance
of the Letter of Authority for the investigation of the taxpayers tax
return or such amendment has been made in the course of the said
investigation.
Section 5. Mode of Procedures in Computing for the Tax and/or
Applicable Surcharge. - Shown hereunder are illustrative cases for the
computation and assessment of the tax, inclusive of surcharge (if applicable)
and interest:
5.1 Late filing and late payment of the tax. - Illustration: Income
tax return for the calendar year 1998 was due for filing on April 15,
1999 but the taxpayer voluntarily filed his tax return, without notice
from the BIR, only on June 30, 1999. The tax due per return amounts
to P100,000. In this case, the taxpayer shall be liable for delinquency
penalties consisting of 25% surcharge, plus 20% interest per annum,
computed from due of the tax until date of payment, computed as
follows:
Calendar Year 1998
Income tax due per return P100,000.00
Add: 25% surcharge for late filing and late
payment (100,000 x 25%) 25,000.00
20% int. p.a. from 4-15-99 to 6-30-99
(100,000 x .0415524) 4,155.24
29,155.24
Total amount due (excluding suggested compromise
for late filing and late payment of the tax) P129,155.24
Only one 25% surcharge shall be imposed for late filing of the return and
the late payment of the tax.
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5.2 The tax return is filed on time but filed through an internal 5.4 Penalty or penalties for deficiency tax. - As a rule, no
revenue officer other than with whom the return is required to surcharge is imposed on deficiency tax and on the basic tax.
be filed. - Illustration: The taxpayers 1998 income tax return is However, if the amount due inclusive of penalties is not paid on or
required to be filed through the authorized agent bank under the before the due date stated on the demand letter, the corresponding
jurisdiction of RDO East Makati. But, without prior authorization surcharge shall be imposed.
from the BIR, the taxpayer filed his tax return and paid the tax
through the authorized agent bank under the jurisdiction of RDO Illustration No. 1: Taxpayer filed on time his income tax return
Davao City. Tax due and paid return is P100,000.00. for calendar year 1997 and paid P100,000.00 on April 15, 1998.
Upon pre-audit of his return, it was disclosed that he erroneously
Calendar Year 1998 computed the tax due. The correct amount of tax due is P120,000.00.
The taxpayer is assessed for deficiency income tax in a letter of
Income tax due per return P100,000.00 demand and assessment notice issued on June 30, 1999.
Add: 25% surcharge 25,000.00
Total amount due P125,000.00 Calendar Year 1997
Less: Amount paid 100,000.00
Tax due per pre-audit P120,000.00
Amount still due P 25,000.00 Less: Amount assessed and paid per tax return filed P100,000.00
Deficiency income tax P 20,000.00
5.3 Late filing and late payment due to taxpayers wilfull Add: 20% int. p.a. fr 4-15-98 to 6-30-99 (20,000 x .2415524)
neglect.- Illustration: The taxpayer did not file his income tax P 4,831.05
return for the calendar year 1997 which was due for filing on April
15, 1998. He was notified by the BIR of his failure to file the tax Amount still due P 24,831.05
return, for which reason, he filed his tax return and paid the tax, only
after the said notice, on June 30, 1999. The tax due per return is Illustration No. 2: ABC CORPORATION filed its income tax
P100,000.00. return for calendar year 1997 and paid on time its income tax shown
thereunder, amounting to P100,00. Said taxpayer was investigated.
Calendar Year 1997 Upon verification of its accounting records, it was disclosed that its
deduction, from gross income, of representation expenses in the
Income tax due per return P100,000.00 amount of P200,000.00 did not meet all the statutory requisites for
Add: 50% surcharge for willful neglect to deductibility. The corporation was duly notified of the said
file the return and late payment of the tax discrepancy through a Preliminary Assessment Notice. Based on the
(P100,000 x 50%) 50,000.00 35% income tax rate on corporations applicable in the year 1997, the
income tax due after investigation amounts to P170,000.00 After
20% int. p.a. fr 4-15-98 to 6-30-99 deduction of income tax paid per return filed, the basic deficiency
(P100,000 x .2415524) P24,155.24 income tax amounts to P70,000, excluding penalties. Failing to
P 74,155.24 protest on time against the preliminary assessment notice, a formal
letter of demand and assessment notice was issued on May 31, 1999,
Total amount due (excluding suggested compromise requiring payment of the assessment not later than June 30, 1999.
for late filing and late payment of the tax) P174,155.24
Calendar Year 1997

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MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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Tax due per investigation P170,000.00
Less: Income tax paid per return P100,000.00
Deficiency income tax P 70,000.00
Add: 20% int. p.a. fr 4-15-98 to 6-30-99 (20,000 x .2415524)
P 16,908.67
Total amount still due P 86,908.67
Illustration No. 3: XYZ CORPORATION filed its income tax
return for calendar year 1997 with a net taxable income of
P500,000.00. At the applicable income tax rate of 35% for the year
1997, its income tax amounted to P175,000.00. However, upon
investigation, it was disclosed that its income tax return was false or
fraudulent because it did not report a taxable income amounting to
another P500,000.00. On its net income of P1,000,000.00, per
investigation, the income tax due is P350,000.00. Deducting its
payment per return filed, the deficiency, excluding penalties,
amounted to P175,000.00. It was duly informed of this finding
through a Preliminary Assessment Notice. Failing to protest on time
against the preliminary assessment notice, a formal letter of demand
and assessment notice was issued on May 31, 1999 calling for
payment of the deficiency income tax on or before June 30, 1999.
In this case, said corporation is liable for the civil penalties of 50%
surcharge for having filed a false or fraudulent return, plus 20%
interest per annum on the deficiency, computed as follows:
Page 50
5.5 Late payment of a deficiency tax assessed. - In
general, the deficiency tax assessed shall be paid by the taxpayer
within the time prescribed in the notice and demand, otherwise, such
taxpayer shall be liable for the civil penalties incident to late
payment.
Illustration: Based on the above Illustration No. 3,
Scenario 4, assuming that the calendar year 1997 deficiency income
tax assessment against XYZ CORPORATION, in the amount of
P304,711.67, is not paid by June 30, 1999, the deadline for payment
of the assessment, and assuming further that this assessment has
already become final and collectible. In this case, such corporation
shall be considered late in payment of the said assessment.
Assuming, further, that the corporation pays its tax assessment only
by July 31, 1999, the civil penalties for late payment shall be
computed as follows:
Calendar Year 1997
Total deficiency income tax assessed on May 31, 1999
P304,771.67
Add: surcharge for late payment
(304,771.67 x 25%) P76,192.92
20% int. p.a. fr 7-1-99 to 7-31-99
(304,771.67 x .0166667) P 5,079.54
P 81,272.46

Calendar Year 1997 Total amount due (excluding suggested compromise

penalty for late payment) P386,044.13
Tax due per investigation P350,000.00
Less: Income tax paid per return P175,000.00 5.6 Computation of 20% interest per annum in case of
Deficiency income tax P175,000.00 partial or installment payment of a tax liability. - Illustration No.
Add: 50% surcharge for filing a fraudulent or false 1: In case extended payment of the tax is duly authorized. - DEF
return (175,000 x 50%) P 87,500.00 CORPORATION, due to financial incapacity, requested that it be
20% int. p.a. fr 4-15-98 to 6-30-99 allowed to pay its income tax liability per return for calendar year
(20,000 x .2415524) P 42,271.67 1998, in the amount of P1,000,000.00, in four (4) monthly
P129,771.67 installments, starting April 15, 1999. Its request has been duly
approved pursuant to Sec. 53 if the Tax Code.
Total amount due P304,771.67 In this case, no 25% surcharge shall be imposed for late
payment of the tax since its deadline for payment has been duly
extended. However, 20% interest per annum for the extended

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payment shall be imposed, computed based on the diminishing Example: GHI CORPORATION did not file its final
balance of the unpaid amount, pursuant to the provisions of adjustment income tax return for the calendar year 1998 which was
Section 249 (D) of the Code. due on April 15, 1999. The BIR informed the corporation of its
No 25% surcharge on extended payment shall be imposed failure to file its said tax return and required that it file the same,
provided, however, that the taxpayers request for extension of the inclusive of the 25% surcharge and 20% interest per annum penalties
period within which to pay is made on or before the deadline incident to the said omission. On May 15, 1999 it advised that its
prescribed for payment of the tax due. Conversely, it such request is income tax dye for the said year amounts to P1,000,000.00 but,
made after the deadline prescribed for payment, the taxpayer shall however, due to its adverse financial condition at the moment, it will
already be treated late in payment, in which case, the 25% surcharge be unable to pay the entire amount, inclusive of the delinquency
shall be imposed, even if payment of the delinquency be allowed in penalties. Hence, on May 15, 1999, it made a partial payment of
partial amortization. P400,000.00. Assuming that the BIR demanded payment of the
unpaid balance of its tax obligation payable by June 15, 1999, the
Example: unpaid balance of the corporations delinquent income tax shall be
computed as follows:
Calendar Year 1998
Calendar Year 1998
Income tax due per return P1,000,000.00
Less: 1st installment of the tax on or before 4-15-99 P 250,000.00 Income tax due per return P1,000,000.00
Balance as of 4-15-99 P 750,000.00 Add: 25% surcharge for late filing and
Add: 20% int. p.a. from 4-15-99 to 5-15-99 late payment P250,000.00
(750,000 x .0166667) P 12,500.03 20% int. p.a. from 4-15-99 to 5-15-99
Amount due on 5-15-99 P 762,500.03 (1,000,000 x .0166667) P 16,666.70 P 266,666.70
Less: 2nd installment on 5-15-99 Amount due as of 5-15-99 P1,266,666.70
(250,000 + 12,500.03 interest) P 262,500.03 Less: partial payment on 5-15-99 P 400,000.00
Balance as of 5-15-99 P 500,000.00 Balance as of 5-15-99 P 866,666.70
Add: 20% int. p.a. from 5-15-99 to 6-15-99 Add: 20% int. p.a. from 5-15-99 to 6-15-99
(500,000 x .0166667) P 8,333.35 (866,666.70 x .0166667) P 14,444.47
Amount due on 6-15-99 P 508,333.35 Amount still due (exclusive of the suggested compromise
Less: 3rd installment on 6-15-99 penalty for late payment) P 811,111.17
(250,000 + 8,333.35 interest) P 258,333.35
Balance as of 6-15-99 P 250,000.00 If the said taxpayer fails to pay the amount of P811,111.17
Add: 20% int. p.a. from 6-15-99 to 7-15-99 by June a5, 1999, no further 25% surcharge for late payment of the
(250,000 x .0166667) P 4,166.68 tax shall be imposed. Instead, only 20% interest per annum shall be
4th and final installment on 7-15-99 P 254,166.68 imposed against the taxpayer, computed from the due date thereof
(i.e., June 15, 1999) until paid. If said taxpayer pays the same on
Illustration No. 2: Computation of tax delinquency in partial payment basis, the 20% interest per annum shall be computed
case of partial payment of the tax due without prior BIR on the diminishing balance thereof, pursuant to the procedures in the
authorization for extended payment. - preceding Illustration No. 1, Section 6.6. hereof.

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MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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Section 6. Suggested Compromise Penalty in Extra-judicial
Settlement of a Taxpayers Criminal Violation. - Section 204 of the Tax
Code of 1997 provides that All criminal violations may be compromised
except: (a) those already filed in court, or (b) those involving fraud. This
means that, in general, the taxpayers criminal liability arising from his
violation of the pertinent provision of this Code may be settled extra-
judicially instead of the BIR instituting against a taxpayer a criminal action in
Court. A compromise in extra-judicial settlement of the taxpayers criminal
liability for his violation is consensual in character, hence, may not be
imposed on the taxpayer without his consent. Hence, the BIR may only
suggest settlement of the taxpayers liability through a compromise.
The extra-judicial settlement of the taxpayers criminal liability and the
amount of the suggested compromise penalty shall conform with the schedule
of compromise penalties provided under Revenue Memorandum Order No. 1-
90 or as hereafter revised.
5. RA 1125, AS AMENDED; SEC 301 TARIFF AND CUSTOMS CODE
Sec. 7, RA 1125 The CTA shall exercise exclusive appellate jurisdiction to
review by appeal, as herein provided
(1) Decisions of the CIR in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in
relation thereto, or other matters arising under the NIRC or other laws or
parts of law administered by the BIR;
(2) Decisions of the Commissioner of Customs involving liability for
customs duties, fees or other money charges; seizure, detention or release
of property affected; fines, forfeitures or other penalties imposed in
relation thereto; or other matters arising under the Customs Law or other
law or part of law administered by the Bureau of Customs; and
(3) Decisions of provincial or city Boards of Assessment Appeals in cases
involving the asseessment and taxation of real property or other matters
arising under the Assessment Law, including rules and regulations
relative thereto.
SEC. 301, TARIFF AND CUSTOMS CODE. DUMPING DUTY.
a. Whenever the Secretary of Finance (hereinafter called the Secretary") has
reason to believe, from invoices or other papers or from information made
available to him by any government agency or interested party, that a specific
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kind or class of foreign article, whether dutiable or duty-free, is being sold or
is likely to be sold for exportation to, or in, the Philippines, at a price less than
its fair value, as hereinafter defined, the importation or sale of which might
injure, or prevent the establishment of, or is likely to injure an industry in the
Philippines, he shall so advise the Tariff Commission (hereinafter called the
"Commission").
b. The Commission, upon receipt of such advice from the Secretary, shall
conduct an investigation to
1. Verify if the kind or class of articles in question is being sold or is likely
to be sold for exportation to, or in, the Philippines at a price less than its fair
value;
2. Determine if, as a result thereof, an industry in the Philippines is being
injured or is likely to be injured or is prevented from being established by
reason of the importation or sale of such kind or class of article into the
Philippines; and
3. Ascertain the difference, if any, between the purchase price or, in the
absence thereof, the exporter's sales price, and the fair value of the article.
The Commission shall submit its findings to the Secretary within one month
after receipt of the aforesaid advice.
c. The Secretary shall, within fifteen days from the report of the
Commission, decide whether the article in question is being imported in
violation of this section and shall give due notice of such finding and shall
direct the Commissioner of Customs to cause the dumping duty, to be levied,
collected and paid, as prescribed in this section, in addition to any other
duties, taxes and charges imposed by law on such article.
d. The "dumping duty" as provided for in subsection "e" hereof shall be
equal to the difference between the purchase price or, in the absence thereof,
the exporter's sales price, and the fair value of the article.
e. For the purpose of this section
1. The "fair value" of an article shall be its foreign market value, or, in the
absence of such value, its cost of production.
2. The "purchase price" of an imported article shall be the price at which
such article has been purchased or agreed to be purchased, prior to the time of
exportation, by the person by whom or for whose account the article is
imported, plus, when not included in such price
(a) The cost of all containers and coverings and all other costs, charges and
expenses incident to placing the article in condition, packed ready for
shipment to the Philippines;
(b) The amount of any export tax paid in the country of exportation on the
exportation of the article to the Philippines;
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(c) The amount of any import duties imposed by the country of exportation
which have been rebated, or which have not been collected, by reason of the
exportation of the article to the Philippines; and
(d) The amount of any taxes imposed in the country of exportation upon the
manufacturer, producer or seller, in respect to the manufacture, production or
sale of the article, which have been rebated, or which have not been collected,
be reason of the exportation of the article of the Philippines.
Any additional costs, charges and expenses incident to bringing the article
from the place of shipment in the country of exportation to the place of
delivery in the Philippines and Philippine customs duties imposed thereon
shall not be included.
3. The "exporter's sale price" of an imported article shall be the price at
which such article is sold or agreed to be sold in the Philippines, before or
after the time of exportation, by or for the account of the exporter, including
process employed in manufacturing or producing, identical or substantially
(a) The cost of all containers and coverings and all other costs, charges and
expenses incident to placing the article in condition, packed ready for
shipment to the Philippines;
(b) The amount of any import duties imposed by the country of exportation
which have been rebated, or which have not been collected, by reason of the
exportation of the article to the Philippines; and
(c) The amount of any taxes imposed in the country of exportation upon the
manufacturer, producer or seller in respect to the manufacture, production or
sale of the article, which have been rebated, or which have not been collected,
by reason of its exportation to the Philippines. The following amount, if
included, shall be deducted
(1) The amount of costs, charges and expenses, and Philippine customs
duties, incident to bringing the article from the place of shipment in the
country of exportation to the place of delivery in the Philippines;
(2) The amount of commissions, if any, for selling in the Philippines the
particular article under consideration;
(3) An amount equal to the expenses, if any, generally incurred by or for the
account of the exporter in the Philippines in selling identical or substantially
identical article; and
(4) The amount of any export tax paid in the country of exportation on the
exportation of the article to the Philippines.
4. The "foreign market value" of an imported article shall be the price, at
the time of exportation of such article to the Philippines, at which such or
similar article is sold or freely offered for sale to all purchasers in the
principal markets of the country from which exported, in the usual wholesale
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quantities and in the ordinary course of trade for home consumption (or, if not
sold or offered for sale for home consumption, then for exportation to
countries other than the Philippines), including the cost of all containers and
coverings and all other costs, charges and expenses incident to placing the
article in condition packed ready for shipment to the Philippines, except that
in the case of articles purchased or agreed to be purchased by the person by
whom or for whose account the article is imported, prior to the time of
exportation, the foreign market value shall be ascertained as of the date of
such purchase or agreement to purchase. In the ascertainment of foreign
market value for the purpose of this section, no pretended sale or offer for
sale, and no sale or offer for sale intended to establish a fictitious market,
shall be taken into account.
5. The "cost of production" of an imported article shall be the sum of
(a) The cost of materials of, and of fabrication, manipulation or other
identical article, at a time preceding the date of shipment of the particular
article under consideration which would ordinarily permit the manufacture or
production of the particular article under consideration in the usual course of
business;
(b) The usual general expenses not less than 10 per cent of such cost, in the
case of identical or substantially identical articles;
(c) The cost of all containers and coverings, and all other costs, charges and
expenses incident to placing the particular article under consideration in condition,
packed ready for shipment to the Philippines; and
(d) An addition for profit not less than 8 per cent of the sum of the amounts
determined under subparagraphs (a) and (b) hereof, equal to the profit which is
originally added, in the case of articles of the same general character as the particular
article under consideration, by manufacturers or producers in the country of
manufacture or production who are engaged in the same general trade as the
manufacturer or producer of the particular article under consideration.
f. For the purposes of this section the "exporter" of an imported article shall be the
person by whom or for whose account the article is imported into the Philippines
1. If such person is the agent or principal of the exporter, manufacturer or producer;
or
2. If such person owns or controls, directly or indirectly, through stock ownership or
control or otherwise, any interest in the business of the exporter, manufacturer or
producer; or
3. If the exporter, manufacturer or producer owns or controls, directly or indirectly,
through stock ownership or control or otherwise, any interest in any business
conducted by such persons; or
4. If any person or persons, jointly or severally, directly or indirectly, through stock
ownership or control or otherwise, own or control in the aggregate 20 per cent or more
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of the voting power or control in the business carried on by the person by whom or for
whose account the article is imported into the Philippines, and also 20 per cent or
more of such power or control in the business of the exporter, manufacturer or
producer.
g. Pending investigation and final decision of the case, the article in question, and
articles of the same specific kind or class subsequently imported under similar
circumstances, shall be released to the owner, importer, consignee or agent upon the
giving of a bond in an amount equal to the double the estimated value thereof. Articles
which may have been delivered under the provision of section fifteen hundred and
three of this Code prior to the institution of the investigation provided in this section
shall, pending final decision, be ordered returned to the custody of the collectors of
customs unless released under bond in accordance with this section.
h. Any aggrieved party may only appeal the amount of dumping duty that is levied
and collected by the Commissioner of Customs to the Court of Tax Appeals in the
same manner and within the same period provided for by law in the case of appeals
from decisions of the Commissioner of Customs.
i. (1) The article, if it has not been previously released under bond as provided in
subsection "g" hereof, shall be released after payment by the party concerned of the
corresponding dumping duty in addition to any other duties, taxes and charges, if any,
or re-exported by the owner, importer, consignee or agent, at his option and expense,
upon the filing of a bond in an amount equal to double the estimated value of the
article, conditioned upon the presentation of a landing certificate issued by a consular
officer of the Philippines at the country of destination; or
(2) If the article has been previously released under bond, as provided in subsection
"g" hereof, the party concerned shall be required to pay the corresponding dumping
done in addition to any other duties, taxes and charges, if any.
j. Any investigation to be conducted by the Commission under this section shall
include a hearing or hearings where the owner, importer, consignee or agent of the
imported article, the local producers of a like article, other parties directly affected,
and such other parties as in the judgment of the Commission are entitled to appear,
shall be given an opportunity to be heard and to present evidence bearing on the
subject matter.
k. It shall be the duty of collectors of customs at all ports of entry to levy and collect
the dumping duty in accordance with subsection "d" hereof on the specific kind or
class of article as to which the Secretary has made a decision of dumping.
It shall also be their duty to bring to the attention of the Secretary, thru the
Commissioner of Customs, any case coming within their notice which may, in their
opinion, require action as provided in this section.
l. The Secretary shall promulgate all rules and regulations necessary to carry out
the provisions of this section.
6. CIRCULAR NO. 1-91, AS AMENDED BY CIRCULAR NO. 1-95 (EFFECTIVE FEB.
15, 1995)
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7. CASES:
a. REPUBLIC OF THE PHILIPPINES V. CA, AND NIELSON &
CO., INC., 149 SCRA 351
FACTS: In a demand letter, dated 16 July 1955, the Commissioner of Internal
Revenue assessed Nielson & Co. deficiency taxes for years 1949 to 1952. CIR
reiterated its demand for payment through 2 subsequent letters (24 April 1956 and 9
Feb 1960). Nielson did not contest the assessment in the Court of Tax Appeals. On the
theory that the assessment had become final and executory, the CIR filed a complaint
for collection of the said amount against Nielson. However, for failure to serve
summons upon Nielson, the complaint was dismissed without prejudice. In 1962, the
case was re-filed. The Court of First Instance rendered a decision against Nielson. On
appeal, the Court of Appeals reversed.
The CIR claims that the demand letter showed an imprint indicating that the
original thereof was released and mailed on 4 August 1955 by the Chief, Records
Section of the BIR, and that the original letter was not returned to said Bureau; thus,
said demand letter must be considered to have been received by the private
respondent. According to the CIR, if service is made by ordinary mail, unless the
actual date of receipt is shown, service is deemed complete and effective upon the
expiration of five (5) days after mailing. As the letter demand dated 16 July 1955 was
actually mailed to Nielson, there arises the presumption that the letter was received by
Nielson in the absence of evidence to the contrary.
ISSUE: Whether Nielson is liable for deficiency taxes
HELD: While the contention of the CIR is correct that a mailed letter is deemed
received by the addressee in the ordinary course of mail, still, this is merely a
disputable presumption, subject to controversion, and a direct denial of the receipt
thereof shits the burden upon the party favored by the presumption to prove that the
mailed letter was indeed received by the addressee.
Since the CIR has not adduced proof that Nielson had in fact received the
demand letter dated 16 July 1955, it cannot be assumed that Nielson received said
letter. Records, however, show that the CIR wrote Nielson a follow-up letter
reiterating its demand for the payment of taxes as originally demanded in the first
letter. This follow-up letter is considered a notice of assessment in itself which was
duly received by Nielson in accordance with its own admission.
The taxpayers failure to appeal within 30 days from receipt of the letter with the
Court of Tax Appeals, makes the assessment final, executory and demandable. Nielson
is now barred from disputing the correctness of the assessment or from invoking any
defense that would reopen the question of its liability on the merits.
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b. COLLECTOR OF INTERNAL REVENUE V. BAUTISTA,
105 PHIL 1326 (1959)
FACTS: The spouses Bautista filed and paid their income tax separately. Upon
investigation by the BIR, the returns were consolidated and a deficiency was assessed
against them which was mainly based on the alleged under declaration of the proceeds
of the sale of the wifes share in the Tabora property and the overvaluation of the cost
thereof. On appeal, the Court of Tax Appeals, overruled their defense of prescription
and ordered the spouses to pay the deficiency income tax.
ISSUE: Whether the spouses are liable for the deficiency tax
HELD: Yes. The income tax returns of the spouses for 1947 are deemed filed as of
March 1, 1948. The Tax Code provides that the deficiency assessment must be made
within 5 years after the return was filed, and the assessment is deemed made when the
notice to this effect is released, mailed or sent by the Collector to the taxpayer, for the
purpose of giving effect to said assessment. The Code does not require that the notice
be received by the taxpayer within the said period of 5 years. In the case at bar, the
Collector assessed the deficiency tax on January 21, 1953 and notice to this effect was
sent or given due course prior to March 1, 1953, for it was received in the Office of the
City Treasurer of Quezon City, on February 13, 1953, and hence, before the expiration
of said period.
c. REPUBLIC v. RICARTE
Facts: On March 2, 1959, Ricarte filed his income tax return for the year 1958. On
April 6, 1959, the office of the CIR made the corresponding assessment and fixed at
P222. Defendant paid his income tax in two equal installments of P111 each, first on
May 15, 1959 and the second on August 17, 1959.
On June 20, 1959, RA 2343 took effect. Under the amendatory act, the taxpayer
assesses himself, files his return and pays the tax as shown in his return upon filing
thereof.
In the year 1961, the BIR found that the defendant had a deficiency of P1,136.87
in his income tax for 1958. On January 19, 1961, assessment notice for the amount
aforestated was issued and, together with the corresponding audit sheet and letter of
demand, was mailed to defendant on January 25, 1961.
For failure of defendant to pay his deficiency income tax liability, plaintiff on
January 14, 1966, filed a complaint for collection of unpaid taxes. The trial court
dismissed the case on the ground of prescription of action. The trial court reasoned out
that the assessment was made by the BIR on April 6, 1959 but the present case was
filed only on January 14, 1966 or more than the prescriptive period of 5 years.
Issue: Whether the CIR could still collect the alleged deficiency income tax liability
through judicial proceeding?
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Held: No. Before the amendment, the taxpayer files his income tax return and the
Collector assesses the tax due and notifies the taxpayer thereof. On the other hand,
under the amendatory act, the taxpayer assesses himself, files his return and is required
to pay the tax as shown in his return upon filing thereof. This procedure is commonly
known as the pay-as-you-file system. In other words, under the old law, the
Collector was required to assess the tax due, while under RA 2343 the taxpayer
himself computes the tax on the basis of the figures appearing in his income tax return.
The amount of tax due was previously computed by the BIR. Finding that it made
an error, the Bureau reassessed the income tax return of Ricarte, but such reassessment
was made pursuant to the old law and not under the amendatory act.
Although a subsequent notice of assessment was allegedly made to Ricarte on
January 19, 1961, there was no evidence that Ricarte actually received a copy of that
assessment notice regarding the alleged deficiency tax. Thus, the prescriptive period
should be counted from April 6, 1959, the date when the Bureau assessed the income
tax return of Ricarte. From said date until the filing of this case on January 14, 1966, 6
years and 9 months had elapsed. Verily, the action had already prescribed.
d. ADVERTISING ASSOCIATES v. CTA
Facts: This case is about the liability of Advertising Associates, Inc. for P382,700 as
3% contractors percentage tax on its rental income from the lease of neon signs and
billboards on business agents and independent contractors. PD 69 added par. 17 sec.
191 by taxing lessors of personal property.
Advertising Assoc. alleged that it sold in 1949 its advertising agency business to
Philippine Advertising Counselors, that its business is limited to the making,
construction and installation of billboards ad electric signs and making and printing of
posters, signs, handbills. It contends that it is a media company, not an advertising
company.
The CIR required Advertising Assoc. to pay contractors tax including 25%
surcharge on its income from billboards and neon signs. The basis of the assessment is
the fact that the taxpayers articles of incorporation provide that its primary purpose is
to engage in general advertising business. Its income tax returns indicate that its
business was advertising.
Petitioner contested the assessments however, the CIR reiterated its assessments
in his letters of July 12 and September 16, 1974. the taxpayer requested the
cancellation of the assessments. Inexplicably, for about 4 years there was no
movement in the case. Then on March 31, 1978, the Commissioner resorted to the
summary remedy of issuing 2 warrants of distraint, directing the collection
enforcement division to levy on the taxpayers personal properties as would be
sufficient to satisfy the deficiency taxes. The warrants were served upon the taxpayer
on April 18 and May 25, 1978.
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More than a year later, Acting Commissioner write a letter in answer to the
requests of the taxpayer for the cancellation of the assessments and the withdrawal of
the warrants of distraint. He closed his demand letter with:
This constitutes our final decision on the matter. If you are not agreeable, you
may appeal to the Court of Tax appeals within 30 days from receipt of this letter.
Issue: Whether or not said final decision was properly made?
Held: No. The Commissioner should always indicate to the taxpayer in clear and
equivocal language what constitutes his final determination of the disputed
assessment. Thus, the reviewable decision is that contained in the letter of the
Commissioner of May 23, 1979 and not the warrants of distraint.
e. SURIGAO ELECTRIC v. CTA
Facts: In November 1961, Surigao Electric, grantee of a legislative electric franchise,
received a warrant of distraint and levy to enforce the collection from Mainit
Electric of a deficiency franchise tax plus surcharge. Petitioner contested this
warrant, stating that it did not have a franchise in Maninit, Surigao.
The controversy culminated in a revised assessment dated April 29, 1963
representing petitioners deficiency franchise tax and surcharges. The petitioner then
requested a recomputation, which was denied by the Commissioner.
On August 1, 1963 the petitioner appealed to the Court of Tax Appeals, which
dismissed the appeal on the ground that it as filed beyond the 30-day period of appeal.
Issue: whether or not the petitioners appeal to the CTA was time barred?
Held: The letter of demand issued by the Commissioner on April 28, 1963 and
received by petitioner on May 8, 1963 constitutes the definite determination of the
petitioners deficiency franchise tax liability or the decision on the disputed
assessment and, therefore the decision appealable to the tax court. Moreover, the letter
of demand dated April 29, 1963 unquestionably constitutes the final action taken by
the Commissioner on the petitioners several requests for reconsideration and
recompuation. In this letter, the Commissioner not only in effect demanded that the
petitioner pay the amount due but also gave warning that in the event it failed to pay,
the said Commissioner would be constrained to enforce the collection thereof by
means of the remedies provided by law. The tenor of the letter, specifically the
statement regarding the resort to legal remedies, unmistakably indicates the final
nature of the determination made by the Commissioner of the petitioners deficiency
franchise tax liability.
f. Gibbs vs. Commissioner (1965)
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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Facts: CIR issued against petitioners deficiency income tax assessment notice for the
tax year 1950 with the demand that the said amount should be paid on or before March
15, 1956. A day before the date due, petitioners brother acknowledged receipt of the
above assessment notice and notified the commissioner that petitioner was then living
in California and that the latter was notified by him of the said deficiency assessment.
In the same letter, petitioners brother questioned the disallowance of the items which
gave rise to the deficiency assessment and requested for a correction thereof. On
August 26, 1956 however, the commissioner denied the request.
Having deemed the reply as the final decision of the respondent commissioner
on the matter, petitioners brother demanded refund from the Commissioner, to which
the latter refused. Hence, on October 1, 1958 petitioner filed with the CTA a Petition
for Review.
Issue: Whether or not petitioner timely filed its petition with the CTA?
Held: No. Petitioners assert that the brother merely acted as an agent of petitioner in
receiving the assessment and corresponding with the commissioner. That Allison
Gibbs (the brother) was not merely the agent of the petitioners in the matter under
litigation is demonstrated by the following circumstances:
1. Allison Gibbs acknowledged for the petitioners receipt of the
deficiency income tax assessment, formally protested the same in
writing, paid the assessment and likewise formally demanded in writing
its refund.
2. Allison Gibbs have already been representing petitioners as the latters
counsel in other matters
Thus, the receipt of the October 26, 1956 letter-decision of the Commissioner by
Allison Gibbs was receipt of the same by petitioners. The 30-day prescriptive period
to file petition for review has therefore lapsed.
Gibbs vs. Collector (1960)
Facts: Same facts as above.
Issue: whether or not the petitioners appeal (petition for review) from the decision of
the Commissioner was filed with the CTA within the statutory period?
Held: No. Since petitioners received on November 14, 1956 notice of commissioners
decision denying their request for a refund of the deficiency assessment paid by them,
they only had 30 days from said date within which to file their appeal. However, they
filed the said appeal only after 10 months.
Petitioners contend that although their appeal was filed beyond the said 30 day
period, the CTA still had jurisdiction over the same by virtue of a provision in the
NIRC which allows a claim for refund for taxes erroneously or illegally collected
within 2 years from the date of payment of the tax or penalty.
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The 30 day prescriptive period should be read together the 2 year limit for refund
for tax erroneously or illegally paid. A taxpayer who has paid the tax, whether under
protest or not, and who is claiming a refund of the same, must comply with the
requirements of both provisions, that is, he must file a claim for refund with the
commissioner within 2 years from the date of his payment of the tax, and appeal to the
CTA within 30 days from receipt of the commissioners decision or ruling denying his
claim for refund. If however, the commissioner takes time in deciding the claim, and
the period of 2 years is about to end, the suit or proceeding must be started in the CTA
before the end of the 2 year period without awaiting the decision of the commissioner.
This is so because of the positive requirement of sec. 30 and the doctrine that delay of
the commissioner in rendering decision does not extend the peremptory period fixed
by the statute.
g. CIR vs. TMX
Issue: In a case involving corporate quarterly income tax, does the 2 year prescriptive
period to claim a refund of erroneously collected tax provided for in Sec. 292 (230) of
the NIRC commence to run from the date the quarterly income tax was paid, or from
the date of the filing of the Final Adjustment Return (final payment)?
Held: Sec. 292 of the NIRC provides a 2 year prescriptive period to file a suit for
refund of a tax erroneously or illegally paid, counted from the time the tax was paid.
How do we apply this rule? The most reasonable and logical application of the law
would be to compute the 2 year prescriptive period at the time of filing the Final
Adjustment Return or the Annual Income Tax Return, when it can be finally
ascertained if the taxpayer has still to pay additional income tax or if he is entitled to a
refund of overpaid income tax.
Since the audit, as required by sec. 232 (NIRC) is to be conducted yearly, then it
is the Final Adjustment Return, where figures of the gross receipts and deductions
have been audited and adjusted, that is truly reflective of the results of the operations
of a business enterprise. Thus, it is only when the Adjustment Return covering the
whole year is filed that the taxpayer would know whether there is still due or a refund
can be claimed based on the adjusted and audited figure.
Therefore, the filing of a quarterly income tax return required in sec. 68 and
implemented per BIR form 1702-Q and payment of quarterly income tax should only
be considered mere installments of the annual tax due. These quarterly tax payments
which are computed based on the cumulative figures of gross receipts and deductions
in order to arrive at a net taxable income, should be treated as advances or portions of
annual income tax due, to be adjusted at the end of the calendar or fiscal year. This is
reinforced by sec. 69 which provides for the filing of adjustment returns and final
payment of income tax. Consequently, the 2 year prescriptive period should be
computed from the time of filing the Adjustment Return or Annual Income Tax Return
and final payment of income tax.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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COMMISSIONER VS. PHILAMLIFE INSURANCE CO.
Facts: This is a petition for review filed by the CIR of the decision of the CTA which
ordered the refund to respondent PhilamLife excess corporate income taxes for the 1 st
and 2nd quarters of 1983. CIR poses the following question: where a corporate
taxpayer remits/pays to the BIR tax withheld on income for the 1 st quarter but whose
business operations actually resulted in a loss for that year, as reflected in the
Corporate Final Adjustment Return subsequently filed with the BIR, should not the
running of the prescriptive period commence from the remittance/payment at the end
of the 1st quarter of the tax withheld instead of from the filing of the Final Adjustment
Return?
Issue: when is the reckoning date of the 2-year prescriptive period?
Held: It is true that in the Pacific Procon Limited case, we held that the right to bring
an action for refund had prescribed, the tax having been found to have been paid at the
end of the 1st quarter when the withholding tax corresponding thereto was remitted to
the BIR, not at the time of the filing of the Final Adjustment Return in April of the
following year.
However, this case was overturned by CIR vs. TMX. Sec. 230 stipulates that the
2-year prescriptive period to claim refunds should be counted from date of payment of
the tax sought to be refunded. When applied to tax payers filing income tax returns on
a quarterly basis, the date of payment mentioned in sec. 230 must be deemed to be
qualified by sections 68 and 69 of the NIRC, which requires payment of quarterly
taxes due within 60 days from the close of each quarter. Thus the fact that the amount
shall be deducted from the tax due for the succeeding quarters shows that until a final
adjustment return shall have been filed, the taxes paid in the preceding quarters are
merely partial taxes due from a corporation. Neither amount can serve as the final
figure to quantify what is due the government nor what should be refunded to the
corporation.
The prescriptive period of 2-years should therefore commence to run only from
the time that the refund is ascertained, which can only be determined after final
adjustment return is accompanied.
H. REQUEST FOR REINVESTIGATION SUSPENDS THE 5 YEAR
PERIOD FOR COLLECTION OF TAX
SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of
Taxes.
(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a
return, the tax may be assessed, or a preceeding in court for the collection of such tax may be
filed without assessment, at any time within ten (10) years after the discovery of the falsity,
fraud or omission: Provided, That in a fraud assessment which has become final and executory,
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the fact of fraud shall be judicially taken cognizance of in the civil or criminal action for the
collection thereof.
(b) If before the expiration of the time prescribed in Section 203 for the assessment of the
tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after
such time, the tax may be assessed within the period agreed upon. The period so agreed upon
may be extended by subsequent written agreement made before the expiration of the period
previously agreed upon.
(c) Any internal revenue tax which has been assessed within the period of limitation as
prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in
court within five (5) years following the assessment of the tax.
(d) Any internal revenue tax, which has been assessed within the period agreed upon as
provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding
in court within the period agreed upon in writing before the expiration of the five (5) -year period.
The period so agreed upon may be extended by subsequent written agreements made before
the expiration of the period previously agreed upon.
(e) Provided, however, That nothing in the immediately preceding and paragraph (a)
hereof shall be construed to authorize the examination and investigation or inquiry into any tax
return filed in accordance with the provisions of any tax amnesty law or decree.
SEC. 223. Suspension of Running of Statute of Limitations . - The running of the
Statute of Limitations provided in Sections 203 and 222 on the making of assessment and the
beginning of distraint or levy a proceeding in court for collection, in respect of any deficiency,
shall be suspended for the period during which the Commissioner is prohibited from making the
assessment or beginning distraint or levy or a proceeding in court and for sixty (60) days
thereafter; when the taxpayer requests for a reinvestigation which is granted by the
Commissioner; when the taxpayer cannot be located in the address given by him in the return
filed upon which a tax is being assessed or collected: Provided, that, if the taxpayer informs the
Commissioner of any change in address, the running of the Statute of Limitations will not be
suspended; when the warrant of distraint or levy is duly served upon the taxpayer, his
authorized representative, or a member of his household with sufficient discretion, and no
property could be located; and when the taxpayer is out of the Philippines.
CIR v. WYETH, (GR 76281, Sept. 30, 1991)
Wyeth is a domestic corporation engaged in the manufacture and sale of
assorted pharmaceutical and nutritional products. It was investigated and
examined by the BIR and the report disclosed that Wyeth was paying
royalties to its foreign licensors as well as remuneration for technical services
to Wyeth International Laboratories of London, that it declared cash
dividends on September 27, 1973 and these were paid on October 31, 1973
but it failed to remit withholding tax at source for the fourth (4th) quarter of
1973 on accrued royalties, remuneration for technical services and cash
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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dividends, resulting in a deficiency withholding tax at source in the aggregate
amount of P3.1+M. It was also reported that during the periods from
November 1, 1972 to December 31, 1972 and January 1, 1973 to October 31,
1973, Wyeth Suaco deducted the cost of non-deductible raw materials,
resulting in its alleged failure to pay the correct amount of advance sales tax.
There was reportedly also a short payment of advance sales tax in its
importation of "Mega Polymycin D" on October 3, 1972. All these resulted in
a deficiency sales tax in the amount of P60+k and compromise penalty in the
amount of P300.00.
Wyeth Protested on the ground that said assessments lacked factual or
legal basis. It mostly denied its liabilities and admitted some of its liabilities
in order to avail of a compromise settlement.
The CIR contends that the five-year prescriptive period provided by law
to make a collection by distraint or levy or by a proceeding in court has not
yet prescribed. Although he admits that more than five (5) years have already
lapsed from the time the assessment notices were received by private
respondent on December 19, 1974 up to the time the warrants of distraint and
levy were served on March 12, 1980, he avers that the running of the
prescriptive period was stayed or interrupted when Wyeth Suaco protested the
assessments. CIR argues that the protest letters sent by SGV & Co. in behalf
of Wyeth Suaco dated January 17, 1975 and February 8, 1975, requesting for
withdrawal and cancellation of the assessments were actually requests for
reinvestigation or reconsideration, which could interrupt the running of the
five-year prescriptive period.
Wyeth maintains the position that it never asked for a reinvestigation nor
reconsideration of the assessments and what it requested was the cancellation
and withdrawal of the assessments for lack of legal and factual basis. Thus, its
protest letters dated January 17, 1975 and February 8, 1975 did not suspend
or interrupt the running of the five-year prescriptive period.
ISSUE: Whether or not petitioner's right to collect deficiency withholding tax
at source and sales tax liabilities from private respondent is barred by
prescription.
HELD: NO. The applicable laws in the instant case are Sections 318 and 319
(c) of the National Internal Revenue Code of 1977 (now Sections 203 and 224
of the National Internal Revenue Code of 1986), to wit:
"SEC. 318. Period of limitation upon assessment and collection Except
as provided in the succeeding section, internal revenue taxes shall be assessed
within five years after the return was filed, and no proceeding in court
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without assessment for the collection of such taxes shall be begun after the
expiration of such period . . ."
"SEC. 319. Exceptions as to period of limitation of assessment and
collection of taxes.
xxx xxx xxx
(c) Where the assessment of any internal revenue tax has been made within
the period of limitation above-prescribed such tax may be collected by
distraint or levy or by a proceeding in court, but only if begun (1) within five
years after the assessment of the tax, or (2) prior to the expiration of any
period for collection agreed upon in writing by the Commissioner and the
taxpayer before the expiration of such five-year period. The period so agreed
upon may be extended by subsequent agreements in writing made before the
expiration of the period previously agreed upon."
Settled is the rule that the prescriptive period provided by law to make a
collection by distraint or levy or by a proceeding in court is interrupted once a
taxpayer requests for reinvestigation or reconsideration of the assessment.
The statutory period of limitation for collection may be interrupted if by the
taxpayer's repeated requests or positive acts the Government has been, for
good reasons, persuaded to postpone collection to make him feel that the
demand was not unreasonable or that no harassment or injustice is meant by
the Government.
Although the protest letters prepared by SGV & Co. in behalf of private
respondent did not categorically state or use the words "reinvestigation" and
"reconsideration," the same are to be treated as letters of reinvestigation and
reconsideration. By virtue of these letters, the BIR ordered its Manufacturing
Audit Division to review the assessments made.
The letters of Wyeth interrupted the running of the five-year prescriptive
period to collect the deficiency taxes. The BIR, after having reviewed the
records of Wyeth, in accordance with its request for reinvestigation, rendered
a final assessment. This final assessment issued by then Acting Commissioner
Ancheta was dated December 10, 1979 and received by private respondent on
January 2, 1980, fixed its tax liability at P1.9+M as deficiency withholding
tax at source and P61+k as deficiency sales tax. It was only upon receipt by
Wyeth of this final assessment that the 5-year prescriptive period started to
run again.
The original assessments dated December 16 and 17, 1974 were both
received by Wyeth on December 19, 1974. However, when Wyeth Suaco
protested the assessments and sought its reconsideration in two (2) letters
received by the Bureau of Internal-Revenue on January 20 and February 10,
1975, the prescriptive period was interrupted. This period started to run again
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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when the Bureau of Internal Revenue served the final assessment to Wyeth
Suaco on January 2, 1980. Since the warrants of distraint and levy were
served on Wyeth Suaco on March 12, 1980, then, only about four (4) months
of the five-year prescriptive period was used.
I. NON-RETROACTIVITY OF RULINGS; REQUIRING 3 YEARS
BACK TAXES AFTER PREVIOUS CIRCULAR VIOLATED SEC.
246
ABS-CBN BROADCASTING CORP. V. CTA
(108 SCRA 143)
ABS-CBN was engaged in the business of telecasting local as well as
foreign films acquired from foreign corporations not engaged in trade or
business within the Philippines, for which petitioner paid rentals after
withholding and turning over to the Bureau of Internal Revenue income tax of
30% of one-half of the film rentals pursuant to Section 24(b) of NIRC, as
amended by RA 2343 and the Implementing General Circular No. V-334
issued by the Commissioner of Internal Revenue on April 12, 1961. For the
years 1963 through 1968, petitioner dutifully observed the practice. With the
amendment of Section 24(b) of the Tax Code by RA 5431 on June 27, 1968,
increasing the tax rate from 3O% to 35%, the CIR revoked, for being
"erroneous for lack of legal basis" Gen. Circular No. V-334, by issuing RMC
No. 471, basing the tax therein prescribed on gross income. Pursuant thereto,
respondent Commissioner issued against petitioner a letter of assessment and
demand requiring the latter to pay deficiency with holding income tax on the
remitted film rentals for the years 1965 to 1968 in the total amount of
P525,897.06. Without acting on petitioner's request for a reconsideration and
withdrawal of the assessment, respondent Commissioner issued a warrant of
distraint and levy over the former's personal and real property. On petition for
review filed with respondent Court of Tax Appeals, the latter dismissed it and
affirmed the questioned assessment. Petitioner appealed contesting the
retroactivity of Revised Memo-Circular 471 and averring prescription of the
right of respondent Commissioner to assess the deficiency with holding
income tax.
Held: In reversing the judgment appealed from and setting aside the
assessment, the Court ruled that in the interest of justice and fairplay, rulings
or circulars promulgated by the Commissioner of Internal Revenue have no
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retroactive application where to so apply them would be prejudicial to
taxpayers, who in the case at bar, relied in good faith and religiously complied
with no less than a circular issued "to all internal revenue officials" by the
highest official of the Bureau of Internal Revenue and approved by the then
Secretary of Finance.
"Sec. 338-A. Non-retroactivity of rulings. Any revocation,
modification, or reversal of any of the rules and regulations promulgated in
accordance with the preceding Section or any of the rulings or circulars
promulgated by the Commissioner of Internal Revenue shall not be given
retroactive application if the revocation, modification, or reversal will be
prejudicial to the taxpayers, except in the following cases: (a) where the
taxpayer deliberately mis-states or omits material facts from his return or any
document required of him by the Bureau of Internal Revenue; (b) where the
facts subsequently gathered by the Bureau of Internal Revenue are materially
different from the facts on which the ruling is based; or (c) where the taxpayer
acted in bad faith."
It is clear from the foregoing that rulings or circulars promulgated by the
Commissioner of Internal Revenue have no retroactive application where to
so apply them would be prejudicial to taxpayers. The prejudice to petitioner
of the retroactive application of Memorandum Circular No. 4-71 is beyond
question. It was issued only in 1971, or three years after 1968, the last year
that petitioner had withheld taxes under General Circular No. V-334. The
assessment and demand on petitioner to pay deficiency withholding income
tax was also made three years after 1968 for a period of time commencing in
1965. Petitioner was no longer in a position to withhold taxes due from
foreign corporations because it had already remitted all film rentals and no
longer had any control over them when the new Circular was issued. And in
so far as the enumerated exceptions are concerned, admittedly, petitioner does
not fall under any of them.
The SC is not unaware of the well-entrenched principle that the
Government is never estopped from collecting taxes because of mistakes or
errors on the part of its agents. But, like other principles of law, this also
admits of exceptions in the interest of justice and fairplay. The Commissioner
or Collector is precluded from adopting a position inconsistent with one
previously taken where injustice would result therefrom, or where there has
been a misrepresentation to the taxpayer.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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J. PRESCRIPTIVE PERIOD TO FILE CRIMINAL CASE UNDER SEC.
281, NIRC, 5 YEARS FROM FAILURE TO PAY TAX AFTER NOTICE
AND DEMAND
EMILIO S. LIM V. CA (190 SCRA 616)
Spouses Emilio E. Lim, Sr. and Antonia Sun Lim were engaged in the
dealership of various household appliances. They filed ITR for the years
1958 and 1959. On October 5, 1959, a raid was conducted at their business
and residence address by the NBI by virtue of a search warrant. Seized from
the Lim couple were business and accounting records which served as bases
for an investigation undertaken by the BIR. As it was found that the income
tax returns filed by petitioners for the years 1958 and 1959 were false or
fraudulent, on April 7, 1965, then Acting BIR Commissioner Tabios informed
petitioners that there was due from them the amount of P922+k as deficiency
income taxes for 1958 and 1959, giving them until May 7, 1965 to pay the
amount.
Emilio E. Lim, Sr. requested for a reinvestigation. The BIR expressed
willingness to grant such request but on condition that within ten days from
notice, Lim would accomplish a waiver of defense of prescription under the
Statute of Limitations and that one half of the deficiency income tax would be
deposited with the BIR and the other half secured by a surety bond. If within
the ten-day period the BIR did not hear from petitioners, then it would be
presumed that the request for reinvestigation had been abandoned. Emilio E.
Lim, Sr. refused to comply with the above conditions and reiterated his
request for another investigation.
On January 31, 1967, the BIR Commissioner informed petitioners that
their deficiency income tax liabilities for 1958 and 1959 had been assessed at
P934k including interest and compromise penalty for late payment. Spouses
Lime were given until March 7, 1967 to submit their objections with the
admonition that if they failed to do so, it would be assumed that they were
agreeable to the assessment and a formal demand would issue. On March 15,
1967, the spouses wrote the BIR to protest the latest assessment and repeated
their request for a reinvestigation. On October 10, 1967, the BIR rendered a
final decision holding that there was no cause for reversal of the assessment
against the Lim couple. Petitioners were required to pay deficiency income
taxes for 1958 and 1959 amounting to P1,237,190.55 inclusive of interest,
surcharges and compromise penalty for late payment. The final notice and
demand for payment was served on petitioners through their daughter-in-law
on July 3, 1968.
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Because of nonpayment, on September 1, 1969, the matter was referred
by the BIR to the Manila Fiscal's Office for investigation and prosecution. On
June 23, 1970, four (4) separate criminal informations were filed against
petitioners in the then Court of First Instance of Manila, Branch VI for
violation of Sections 45 and 51 in relation to Section 73 of the National
Internal Revenue Code. 2 Trial ensued. On August 19, 1975, the trial court
rendered two (2) joint decisions finding petitioners guilty as charged. Spouses
appealed to the CA. The CA appealed the lower court decision in toto.
ISSUE: Whether the CA erred in holding that the offenses charged in the
criminal cases had already prescribed, being filed beyond the five-year period
HELD: The criminal cases were not time-barred. It must be made clear
that what we are dealing here are criminal prosecutions for filing fraudulent
income tax returns and for refusing to pay deficiency taxes. The governing
penal provision of the National Internal Revenue Code is Section 73 in
conjunction with Section 354.
"Section 354. Prescription for violations of any provisions of this
Code. All violations of any provision of this Code shall prescribe after five
years.
"Prescription shall begin to run from the day of the commission of the
violation of the law, and if the same be not known at the time, from the
discovery thereof and the institution of judicial proceedings for its
investigation and punishment.
"The prescription shall be interrupted when proceedings are instituted
against the guilty persons and shall begin to run again if the proceedings are
dismissed for reasons not constituting jeopardy.
"The term of prescription shall not run when the offender is absent from the
Philippines."
The Spouses Contend that the five-year period of limitation under
Section 354 should be reckoned from April 7, 1965, the date of the original
assessment while the Government insists that it should be counted from July
3, 1968 when the final notice and demand was served on petitioners'
daughter-in-law.
Inasmuch as the final notice and demand for payment of the deficiency
taxes was served on petitioners on July 3, 1968, it was only then that the
cause of action on the part of the BIR accrued. This is so because prior to the
receipt of the letter-assessment, no violation has yet been committed by the
taxpayers. The offense was committed only after receipt was coupled with the
willful refusal to pay the taxes due within the alloted period. The two criminal
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
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informations, having been filed on June 23, 1970, are well-within the five-
year prescriptive period and are not time-barred.
With regard to Criminal Cases Nos. 1790 and 1791 which dealt with
petitioners' filing of fraudulent consolidated income tax returns with intent to
evade the assessment decreed by law, petitioners contend that the said crimes
have likewise prescribed. They advance the view that the five-year period
should be counted from the date of discovery of the alleged fraud which, at
the latest, should have been October 15, 1964, the date stated by the Appellate
Court in its resolution of April 4, 1978 as the date the fraudulent nature of the
returns was unearthed.
The crime of filing false returns can be considered "discovered" only
after the manner of commission, and the nature and extent of the fraud have
been definitely ascertained. It was only on October 10, 1967 when the BIR
rendered its final decision holding that there was no ground for the reversal of
the assessment and therefore required the petitioners to pay P1,237,190.55 in
deficiency taxes that the tax infractions were discovered. Not only that.
Section 354 speaks not only of discovery of the fraud but also institution of
judicial proceedings. Note the conjunctive word "and" between the phrases
"the discovery thereof" and "the institution of judicial proceedings for its
investigation and proceedings." In other words, in addition to the fact of
discovery, there must be a judicial proceeding for the investigation and
punishment of the tax offense before the five-year limiting period begins to
run. It was on September 1, 1969 that the offenses subject of Criminal Cases
Nos. 1790 and 1791 were indorsed to the Fiscal's Office for preliminary
investigation. Inasmuch as a preliminary investigation is a proceeding for
investigation and punishment of a crime, it was only on September 1, 1969
that the prescriptive period commenced.
As Section 354 stands in the statute book (and to this day it has remained
unchanged) it would indeed seem that tax cases, such as the present ones, are
practically imprescriptible for as long as the period from the discovery and
institution of judicial proceedings for its investigation and punishment, up to
the filing of the information in court does not exceed five (5) years.
K. COMMISSIONER V. CA, LUCIO TAN, ET. AL. (257 SCRA
200)
On June 1 1993, the President issued a Memorandum creating a Task
Force to investigate the tax liabilities of manufacturers engaged in tax evasion
scheme, such as selling products through dummy marketing corporations to
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avoid payment of correct internal revenue tax, to collect from them any tax
liabilities discovered from such investigation, and to file the necessary
criminal actions against those who may have violated the tax code. The task
force was composed of the Commissioner of Internal Revenue as Chairman, a
representative of the Department of Justice and a representative of the
Executive Secretary.
On July 1, 1993, the Commissioner of Internal Revenue issued a
Revenue Memorandum Circular No. 37-93 reclassifying best selling
cigarettes bearing the brands "Hope," "More," and "Champion" as cigarettes
of foreign brands subject to a higher rate of tax. On August 3, 1993,
respondent Fortune Tobacco Corporation (Fortune) questioned the validity of
the reclassification of said brands of cigarettes as violative of its right to due
process and equal protection of law. Parenthetically, on September 8, 1993,
the Court of Tax Appeals by resolution ruled that the reclassification made by
the Commissioner "is of doubtful legality" and enjoined its enforcement.
In a letter of August 13, 1993 which was received by Fortune on August
24, 1993, the CIR assessed against Fortune the total amount of P7.6+B
representing deficiency income, ad valorem and value-added tax for the year
1992 with the request that the said amount be paid within thirty (30) days
upon receipt thereof. Fortune on September 17, 1993 moved for
reconsideration of the assessments.
On September 7, 1993, the CIR filed a complaint with the Department
of Justice against respondent Fortune, its corporate officers, nine (9) other
corporations and their respective corporate officers for alleged fraudulent tax
evasion for supposed non-payment by Fortune of the correct amount of
income tax, ad valorem tax and value-added tax for the year 1992.
The complaint docketed as I.S. No. 93-508, was referred to the DOJ Task
Force on revenue cases which found sufficient basis to further investigate the
allegations that Fortune, through fraudulent means, evaded payment of
income tax, ad valorem tax, and value-added tax for the year 1992 thus,
depriving the government of revenues in the amount of Seven and One-half
(P7.5) Billion Pesos.
The fraudulent scheme allegedly adopted by private respondents
consisted of making fictitious and simulated sales of Fortune's cigarette
products to non-existing individuals and to entities incorporated and existing
only for the purpose of such fictitious sales by declaring registered wholesale
prices with the BIR lower than Fortune's actual wholesale prices which are
required for determination of Fortune's correct income, ad valorem, and
value-added tax liabilities The "ghosts wholesale buyers" then ostensibly sold
the products to customers and other wholesalers/retailers at higher wholesale
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prices determined by Fortune. The tax returns and manufacturer's sworn
statements filed by Fortune would then declare the fictitious sales it made to
the conduit corporators and non-existing individual buyers as its gross sales.
Fortune filed a motion to dismiss due to lack evidence. It was denied by
the panel. It filed a motion for reconsideration. On December 20, 1993, the
panel of prosecutors issued an Omnibus Order denying private respondents'
motion for reconsideration, motion for suspension of investigation, motion to
inhibit the State Prosecutors, and motion to require submission by the BIR of
certain documents to further support private respondents' motion to dismiss.
On January 4, 1994, private respondents filed a petition for certiorari and
prohibition with prayer for preliminary injunction with the RTC, Branch 88,
Quezon City, praying that the complaint of the CIR and the orders of the
prosecutors in I.S. No. 93-508 be dismissed or set aside, alternatively, the
proceedings on the preliminary investigation be suspended pending final
determination by the CIR of Fortune's motion for
reconsideration/reinvestigation of the August 13, 1993 assessment of the
taxes due.
On January 17, 1994, petitioners filed a motion to dismiss the petition on
the grounds that (a) the trial court is bereft of jurisdiction to enjoin a criminal
prosecution under preliminary investigation; (b) a criminal prosecution for tax
fraud can proceed independently of criminal or administrative action; (c)
there is no prejudicial question to justify suspension of the preliminary
investigation; (d) private respondents' rights to due process was not violated;
and (e) selective prosecution is not a valid defense in this jurisdiction.
On January 25, 1994, the trial court issued an order granting the prayer
for the issuance of a preliminary injunction. The CIR appealed to the CA. The
CA upheld and denied the CIRs motion to dismiss.
ISSUE: Whether or not a criminal prosecution for tax evasion may be
enjoined.
HELD: YES. It is the opinion of both the trial court and respondent Court of
Appeals, that before Fortune and the other private respondents could be
prosecuted for tax evasion under Sections 253 and 255 of the Tax Code, the
fact that the deficiency income, ad valorem and value-added taxes were due
from Fortune for the year 1992 should first be established. Fortune received
from the Commissioner of Internal Revenue the deficiency assessment
notices in the total amount of P7.6+B on August 24, 1993. However, under
Section 229 of the Tax Code, the taxpayer has the right to move for
reconsideration of the assessment issued by the Commissioner of Internal
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Revenue within thirty (30) days from receipt of the assessment; and if the
motion for reconsideration is denied, it may appeal to the Court of Appeals
within thirty (30) days from receipt of the Commissioner's decision. Here,
Fortune received the Commissioner's assessment notice dated August 13,
1993 on August 24, 1993 asking for the payment of the deficiency taxes.
Within thirty (30) days from receipt thereof, Fortune moved for
reconsideration. The Commissioner has not resolved the request for
reconsideration up to the present.
The SC share the view of both the RTC and CA that before the tax
liabilities of Fortune are first finally determined, it cannot be correctly
asserted that private respondents have wilfully attempted to evade or defeat
the taxes sought to be collected from Fortune. In plain words, before one is
prosecuted for wilful attempt to evade or defeat any tax under Sections 253
and 255 of the Tax Code, the fact that a tax is due must first be proved.
In the mind of the trial court and the Court of Appeals, Fortune's situation
is quite apart factually since the registered wholesale price of the goods,
approved by the BIR, is presumed to be the actual wholesale price, therefore,
not fraudulent and unless and until the BIR has made a final determination of
what is supposed to be the correct taxes, the taxpayer should not be placed in
the crucible of criminal prosecution.
In issuing the questioned orders granting the issuance of a writ of
preliminary injunction, the RTC believed that said orders were warranted to
afford private respondents adequate protection of their constitutional rights,
particularly in reference to presumption of innocence, due process and equal
protection of the laws. The RTC also found merit in private respondents'
contention that preliminary injunction should be issued to avoid oppression
and because the acts of the state prosecutors were without or in excess of
authority and for the reason that there was a prejudicial question.
Contrary to the CIRs submission, preliminary investigation may be
enjoined where exceptional circumstances so warrant. Indeed, the purpose of
a preliminary injunction is to secure the innocent against hasty, malicious and
oppressive prosecution and to protect him from an open and public accusation
of crime, from the-trouble, expense and anxiety of a public trial and also to
protect the state from useless and expensive trials.
As found by the Court of Appeals, there was obvious haste by which the
subpoena was issued to private respondents, just the day after the complaint
was filed, hence, without the investigating prosecutors being afforded
material time to examine and study the voluminous documents appended to
the complaint for them to determine if preliminary investigation should be
conducted. The Court of Appeals further added that the precipitate haste in
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the issuance of the subpoena justified private respondents' misgivings
regarding the objectivity. and neutrality of the prosecutors in the conduct of
the preliminary investigation and so, the appellate court concluded, the grant
of preliminary investigation by the trial court to afford adequate protection to
private respondents' constitutional rights and to avoid oppression does not
constitute grave abuse of discretion amounting to lack of jurisdiction.
L. COMMISSIONER V. CTA, FORTUNE TOBACCO, (261
SCRA 236)
Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the
manufacture of different brands of cigarettes. On various dates, the Philippine
Patent Office issued to the corporation separate certificates of trademark
registration over "Champion," "Hope," and "More" cigarettes. In a letter,
dated 06 January 1987, of then CIR Tan, Jr., to Deputy Minister Ramon Diaz
of the PCGG, "the initial position of the Commission was to classify
'Champion,' 'Hope,' and 'More' as foreign brands since they were listed in the
World Tobacco Directory as belonging to foreign companies. However,
Fortune Tobacco changed the names of 'Hope' to Luxury' and 'More to
'Premium More', thereby removing the said brands from the foreign brand
category. Proof was also submitted to the BIR that 'Champion' was an original
Fortune Tobacco Corporation register and therefore a local brand."
RA 7654 was enacted, on 10 June 1993 and became effective on 03 July
1993. It amended Section 142(c)(1) of the National Internal Revenue Code
("NITC") to read; as follows:
"SEC. 142. Cigars and Cigarettes.
xxx xxx xxx
"(c). Cigarettes packed by machine. There shall be levied, assessed and
collected on cigarettes packed by machine a tax at the rates prescribed below based on
the constructive manufacturer's wholesale price or the actual manufacturer's wholesale
price, whichever is higher:
"(1) On locally manufactured cigarettes which are currently classified and taxed
at fifty-five percent (55%) or the exportation of which is not authorized by contract or
otherwise, fifty-five (55%) provided that the minimum tax shall not be less than Five
Pesos (P5.00) per pack.
"(2). On other locally manufactured cigarettes, forty-five percent (45%) provided
that the minimum tax shall not be less than Three Pesos (P3.00) per pack.
xxx xxx xxx
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"When the registered manufacturer's wholesale price or the actual manufacturer's cumbersome the implementation of the law but substantially adds to or
wholesale price whichever is higher of existing brands of cigarettes, including the increases the burden of those governed, it behooves the agency to accord at
amounts intended to cover the taxes, of cigarettes packed in twenties does not exceed least to those directly affected a chance to be heard, and thereafter to be duly
Four Pesos and eighty centavos (P4.80) per pack, the rate shall be twenty percent informed, before that new issuance is given the force and effect of law.
(20%)."
A reading of RMC 37-93, particularly considering the circumstances
About a month after the enactment and two (2) days before the effectivity
under which it has been issued, convinces us that the circular cannot be
of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was
viewed simply as a corrective measure (revoking in the process the previous
issued by the BIR wherin it was stated that 'HOPE,' 'MORE', and
holdings of past Commissioners) or merely as construing Section 142(c)(1) of
'CHAMPION' being manufactured by Fortune Tobacco Corporation are
the NIRC, as amended, but has, in fact and most importantly, been made in
hereby considered locally manufactured cigarettes bearing a foreign brand
order to place "Hope Luxury," "Premium More" and "Champion" within the
subject to the 55% ad valorem tax on cigarettes.
classification of locally manufactured cigarettes bearing foreign brands and to
In a letter, dated 19 July 1993, addressed to the appellate division of the
thereby have them covered by RA 7654. Specifically, the new law would have
BIR, Fortune Tobacco, requested for a review, reconsideration and recall of
its amendatory provisions applied to locally manufactured cigarettes which at
RMC 37-93. The request was denied on 29 July 1993. The following day, or
the time of its effectivity were not so classified as bearing foreign brands.
on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax
Prior to the issuance of the questioned circular, "Hope Luxury," "Premium
deficiency amounting to P9.5+M. On 03 August 1993, Fortune Tobacco filed
More," and "Champion" cigarettes were in the category of locally
a petition for review with the CTA.
manufactured cigarettes not bearing foreign brand subject to 45% ad valorem
On 10 August 1994, the CTA found RMC no. 37-93 to be defective,
tax. Hence, without RMC 37-93, the enactment of RA 7654, would have had
invalid and unenforceable, such that when R.A. No. 7654 took effect on July
no new tax rate consequence on private respondent's products.
3, 1993, the brands in question were not CURRENTLY CLASSIFIED AND
Evidently, in order to place "Hope Luxury," "Premium More," and
TAXED at 55% pursuant to Section 1142(c)(1) of the Tax Code, as amended
"Champion" cigarettes within the scope of the amendatory law and subject
by R.A. No. 7654 and were therefore still classified as other locally
them to an increased tax rate, the now disputed RMC 37-93 had to be issued.
manufactured cigarettes and taxed at 45% or 20% as the case may be. The
In so doing, the BIR not simply interpreted the law; verily, it legislated under
CTA dismissed for lack of merit the CIRs motion for reconsideration.
it quasi-legislative authority. The due observance of the requirements of
The CIR forthwith filed a petition for review with the CA, questioning
notice, of hearing, and of publication should not have been then ignored.
the CTA's 10th August 1994 decision and 11th October 1994 resolution. On
31 March 1993, the CAs Special Thirteenth Division affirmed in all respects
the assailed decision and resolution.
M. ASSESSMENT NOT NECESSARY BEFORE FILING CRIMINAL
ISSUE: Whether or not RMC 37-93 is merely an interpretative ruling of the COMPLAITN FOR TAX EVASION BASED ON SEC. 222 ITSELF
BIR which can thus become effective without any prior need for notice and
hearing, nor publication, and that its issuance is not discriminatory since it CIR V. PASCOR REALTY DEVT. CORP, 309 SCRA 402)
would apply under similar circumstances to all locally manufactured
cigarettes. CIR Ong, by virtue of an LA authorized Ros to examine the books of
accounts and other accounting records of Pascor for the years ending 1986,
HELD: It should be understandable that when an administrative rule is 1987, and 1988. The said examination resulted in a recommendation for the
merely interpretative in nature, its applicability needs nothing further than its issuance of assessments in the amounts P7.4+M, and P3+M for the years
bare issuance for it gives no real consequence more than what the law itself 1986 and 1987.
has already prescribed. When, upon the other hand, the administrative rule On March 1, 1995, the CIR filed a criminal complaint before the DOJ
goes beyond merely providing for the means that can facilitate or render least against Pascor, its President and its Treasurer for tax evasion in the amount of
P10.5+M. Pascor filed an Urgent request for Reconsideration/Reinvestigation

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disputing the tax assessement and tax liability. The CIR denied on the ground
that no formal assessment has yet been issued by the CIR. Pascor elevated the
petition to the CTA. CIR filed a motion to dismiss as there was no formal
assessment. The CTA denied the motion of the CIR. It is of the belief that the
criminal case for tax evasion is already an assessment. The word assessment
when used in connection with taxation, may have more than one meaning.
The ultimate purpose of an assessment to such a connection is to ascertain the
amount that each taxpayer is to pay. More commonly, the word assessment
means the official valuation of a taxpayers property for purpose of taxation.
The CA sustained the CTA and dismissed the CIRs petition for review.
ISSUE: Whether or not the criminal complaint for tax evasion can be
construed as an assessment
WON an assessment is necessary before criminal charges for tax evasion
may be instituted
WON the CTA can take cognizance of the case in the absence of an
assessment
WON the revenue officers affidavit-report which was attached to the
criminal complaint constituted as assessment that could be questioned before
the CTA.
HELD: NO. Sec 205 of the NIRC provides that remedies for the collection of
deficient taxes may be by either civil or criminal action. Sec 223(a) states that
in case of failure to file a return, the tax may be assessed or a proceeding in
court may be begun without assessment.
The issuance of an assessment is vital in determining the period of
limitation regarding its proper issuance and the period within which to protest
it. Section 203 of the NIRC provides that internal revenue taxes must be
assessed within 3 tears from the laws day within which to file the return.
Section 222, on the other hand, specifies a period of 10 years in case of a
fraudulent return with intent to evade was submitted or in case of failure to
file a return. Sec 228 states that the said assessment may be protested only
within 30 days from receipt thereof.
An assessment is deemed made only when the CIR releases, mails or
sends such notice to the taxpayer. In this case, the RO affidavit merely
contained a computation of Pascors tax liability. It did not state a demand or
a period of payment. It was addressed to the SOJ, and not to the taxpayer. The
purpose of the affidavit was merely to support and substantiate the criminal
complaint for tax evasion.
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Before an assessment is issued, there is usually a pre-assessment notice.
The taxpayer is then given a chance to submit position papers and documents
to prove that the assessment is unwarranted. If the CIR is unsatisfied, an
assessment signed by him or her is then sent to the taxpayer informing the
latter specifically and clearly that an assessment has been made. A criminal
charge need not go through all that because it is filed directly with the DOJ.
Thereafter, the taxpayer is notified that a criminal case had beeen filed against
him.
N. WHEN TO ELEVATE ASSESSMENT TO CTA
LASCONA V. COMM, (CTA CASE NO. 5777, JAN. 4, 2000)
Lascona Doctrine: In cases of inaction by the CIR, Section 228 of the NIRC
merely gave the taxpayer an option: first, he may appeal to the CTA within 30
days from the lapse of the 180 day period provided for under said section or
second, he may await until the CIR decides on his protest before he elevates
the case. The CTA believes that the taxpayer was given this option so that in
case his protest is not acted upon within the 180-day period, he may be able
to seek immediate relief and need not wait for an indefinite period of time for
the CIR to decide. But if he chooses to wait for a positive action on the part of
the CIR, then the same could not result in the assessment becoming final,
executory and demandable.
O. SAN AGUSTIN VS. CIR (364 SCRA 802)
Facts: The Commissioner issued an assessment notice demanding that the
estate of the deceased pay the deficiency tax. Although the estate paid
beyond the period required, the commissioner accepted said payment and
imposed surcharges and interests.
The estate of the deceased filed a petition for review with the CTA,
praying that the commissioners decision be reversed and claiming a refund
from the payment made.
Commissioner opposed said petition, alleging that the CTAs jurisdiction was
not properly invoked since no claim for a tax refund of the deficiency tax
collected was filed with the BIR before the petition was filed, in violation of
the Sec 204 and 230 of the NIRC.
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Issue: W/N the filing of a claim for refund is essential before the filing of a
petition for review?
W/N imposition of surcharge, interest and penalties on the deficiency estate
tax is in accord with the law and therefore legal?
Held:
1. No. Requiring the taxpayer to file a claim for refund of the taxes paid as a
condition precedent to his right to appeal, would in effect require him to go
through a useless and needless ceremony that would only delay the
disposition of the case, for the Commissioner would certainly disallow the
claim for refund in the same way as a he disallowed the protest against the
assessment. The law should not be interpreted as to result in absurdities.
2. Yes. The delay in the payment of the deficiency tax within the time
prescribed for its payment in the notice of assessment justifies the imposition
of a 25% surcharge. Sec 249 of the Tax Code states that any deficiency in the
tax due would be subject to interest at the rate of 20% per annum, which
interest shall be assessed and collected from the date prescribed for its
payment until full payment is made.
8. REGULATIONS
RR 12-85
Procedure covering administrative protests on assessments of the Bureau of
Internal Revenue
POST REPORTING NOTICE
SECTION 1. Post-reporting notice. Upon receipt of the report of
findings, the Division Chief, Revenue District Officer or Chief, Office Audit
Section, as the case may be, shall send to the taxpayer a notice for an informal
conference before forwarding the report to higher authorities for approval.
The notice which is Annex "A" hereof shall be accompanied by a summary of
findings as basis for the informal conference.
In cases where the taxpayer has agreed in writing to the proposed
assessment, or where such proposed assessment has been paid, the required
notice may be dispensed with.
PRE-ASSESSMENT NOTICE
SECTION 2. Notice of proposed assessment. When the Commissioner
or his duly authorized representative finds that taxes should be assessed, he
shall first notify the taxpayer of his findings in the attached prescribed form
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as Annex "B" hereof. The notice shall be made in writing and sent to the
taxpayer at the address indicated in his return or at his last known address as
stated in his notice of change of address.
In cases where the taxpayer has agreed in writing to the proposed
assessment, or where such proposed assessment has been paid, the required
notice may be dispensed with.
SECTION 3. Time to reply. Venue for filing reply.
(a) Regional Office cases The taxpayer shall reply within a period of
fifteen (15) days from receipt of the pre-assessment notice. In meritorious
cases and upon written request of the taxpayer an extension may be granted
within which to respond, but in no case shall the extension exceed a total of
ten (10) days.
The reply of the taxpayer shall be filed with the Assessment Branch of
the Regional Office which has jurisdiction over the case.
(b) National Office cases - The taxpayer shall reply within a period of
fifteen (15) days from receipt of pre-assessment notice. In meritorious cases
and upon written request the taxpayer may be given an extension within
which to respond but in no case shall the extension exceed a total of ten (10)
days.
The reply of the taxpayer shall be filed with the Sector Audit Review
Division or the National Audit Review Division, as the case may be, having
jurisdiction over the case.
With regard to pre-assessment notices sent by the Withholding Tax
Division in compliance with withholding tax provisions, the same shall be
filed with the Withholding Tax Division.
SECTION 4. Examination of records. In case the taxpayer responds to
the notice within the above-prescribed period, he or his duly authorized
representative shall be allowed to examine the records of the case and to
present his arguments in writing protesting the proposed assessment.
Thereafter, the Commissioner or his authorized representative shall, of the
basis of the evidence on record, decide whether or not to approve the report as
a prelude to the issuance of the corresponding assessment notice.
ISSUANCE OF ASSESSMENT
SECTION 5. Failure to reply to pre-assessment notices; issuance of
assessment. In the event the taxpayer fails to respond to the pre-assessment
notice within the above prescribed period, or when the Commissioner or his
duly authorized representative finds the response to be without merit, he
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should be informed of such fact and the report of investigation shall be given
due course.
PROTEST TO ASSESSMENT
SECTION 6. Protest. The taxpayer may protest administratively an
assessment by filing a written request for reconsideration or reinvestigation
specifying the following particulars:
(a) Name of the taxpayer and address for the immediate past three (3)
taxable year.
(b) Nature of request whether reinvestigation or reconsideration specifying
newly discovered evidence he intends to present if it is a request for
investigation.
(c) The taxable periods covered.
(d) Assessment number.
(e) Date of receipt of assessment notice or letter of demand.
(f) Itemized statement of the findings to which the taxpayer agrees as a basis
for computing the tax due, which amount should be paid immediately upon
the filing of the protest. For this purpose, the protest shall not be deemed
validly filed unless payment of the agreed portion of the tax is paid first.
(g) The itemized schedule of the adjustments with which the taxpayer does
not agree.
(h) A statement of facts and/or law in support of the protest.
A request for reconsideration or reinvestigation of an assessment shall be
accompanied by a waiver of the Statute of Limitations in favor of the
government.
For the purpose of the protest herein
(a) Request for reconsideration refers to a plea of re-evaluation of the
assessment on the basis of existing records without need of additional
evidence. It may involve both a question of fact or of law or both.
(b) Request for reinvestigation refers to a plea of re-evaluation of an
assessment on the basis of newly discovered or additional evidence that a
taxpayer intends to present in the reinvestigation. It may also involve a
question of fact or law or both.
SECTION 7. When to file protest A protest must be filed within thirty
(30) days from receipt of the assessment.
SECTION 8. Where to file protest In Regional Office cases, the
request for reconsideration or reinvestigation of assessment shall be filed with
the Collection Branch of the region which has jurisdiction over the case.
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For cases handled by the National Office, such request shall be filed with
the Collection Office.
SECTION 9. Finality of assessments. If a taxpayer who receives an
assessment from the Bureau of Internal Revenue fails to file a protest within
the period prescribed in Section 7 of these regulations, the said assessment
shall be final and unappealable and the taxpayer is thereby precluded from
disputing the assessment.
SECTION 10. Appeals of decision of Commissioner or Regional
Director of the Court of Tax Appeals. Final decision issued by the
Commissioner or Regional Director may be appealed to the Court of Tax
Appeals within thirty (30) days from receipt thereof, otherwise the same shall
be final and executory.
SECTION 11. Change of address. In case of change of address, the
taxpayer must give written notice thereof to the Revenue District Officer or
the district having jurisdiction over his former legal residence and/or place of
business, copy furnished the Revenue District Officer having jurisdiction over
his new legal residence or place of business, the Revenue Computer Center
and the Receivable Accounts Division, BIR, National Office, Quezon City,
and in case of failure to do so, any communication referred to in these
regulations previously sent to his former legal residence or business address
as appearing in his tax return for the period involved shall be considered valid
and binding for purposes of the period within which to reply.
RR 2-90
Restoring the requirement to register and stamp receipts and invoices prior to
their use.
SECTION 1. Pursuant to the provisions of Section 245 in relation to
Section 4 of the National Internal Revenue Code, as amended, the following
regulations are hereby promulgated to restore the requirement to register and
stamp receipts and invoices prior to their use, as provided for under Section
19 of Revenue Regulations V-1, as amended.
SECTION 2. Paragraph (4) of Section 19 of Revenue Regulations V-1,
otherwise known as the "Bookkeeping Regulations," as amended by Section 3
of Revenue Regulations No. 2-78, is hereby amended to read as follows:
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"Sec. 19. Authentication and registration of books, register, or records;
authority to print receipts, sales or commercial invoices; and registration and
stamping of receipts and invoices."
xxx xxx xxx
"(d) Registration and stamping of receipts and invoices.
Before being used, the printed receipts, sales or commercial invoices shall be
registered with the revenue district officer where the principal place of
business of the taxpayer is located within thirty (30) days from the date of
printing the same. The registration of the printed receipts or invoices shall be
evidenced by an appropriate stamp on the face of the taxpayer's copy of the
authority to print as well as on the front cover, on the back of the middle
invoice or receipt and on the back of the last invoice or receipt of the
registered booklet or pad, authenticated by the signature of the officer
authorized to place the stamp thereon."
SECTION 3. Unused or unissued receipts and invoices in the possession
of taxpayers and have been printed prior to the effectivity of these regulations
must also be registered with the Revenue District Office where the principal
place of business of the taxpayer is located within thirty days from the
effectivity of these regulations.
RR 12-99
Implementing the Provisions of the National Internal Revenue Code of 1997
Governing the Rules on Assessment of National Internal Revenue Taxes,
Civil Penalties and Interest and the Extra-judicial Settlement of a Taxpayer's
Criminal Violation of the Code Through Payment of a Suggested
Compromise Penalty
POST REPORTING NOTICE
SECTION 1. Post-reporting notice. Upon receipt of the report of
findings, the Division Chief, Revenue District Officer or Chief, Office Audit
Section, as the case may be, shall send to the taxpayer a notice for an informal
conference before forwarding the report to higher authorities for approval.
The notice which is Annex "A" hereof shall be accompanied by a summary of
findings as basis for the informal conference.
In cases where the taxpayer has agreed in writing to the proposed
assessment, or where such proposed assessment has been paid, the required
notice may be dispensed with.
PRE-ASSESSMENT NOTICE
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 68
SECTION 2. Notice of proposed assessment. When the Commissioner
or his duly authorized representative finds that taxes should be assessed, he
shall first notify the taxpayer of his findings in the attached prescribed form
as Annex "B" hereof. The notice shall be made in writing and sent to the
taxpayer at the address indicated in his return or at his last known address as
stated in his notice of change of address.
In cases where the taxpayer has agreed in writing to the proposed
assessment, or where such proposed assessment has been paid, the required
notice may be dispensed with.
SECTION 3. Time to reply. Venue for filing reply.
(a) Regional Office cases The taxpayer shall reply within a period of
fifteen (15) days from receipt of the pre-assessment notice. In meritorious
cases and upon written request of the taxpayer an extension may be granted
within which to respond, but in no case shall the extension exceed a total of
ten (10) days.
The reply of the taxpayer shall be filed with the Assessment Branch of
the Regional Office which has jurisdiction over the case.
(b) National Office cases - The taxpayer shall reply within a period of
fifteen (15) days from receipt of pre-assessment notice. In meritorious cases
and upon written request the taxpayer may be given an extension within
which to respond but in no case shall the extension exceed a total of ten (10)
days.
The reply of the taxpayer shall be filed with the Sector Audit Review
Division or the National Audit Review Division, as the case may be, having
jurisdiction over the case.
With regard to pre-assessment notices sent by the Withholding Tax
Division in compliance with withholding tax provisions, the same shall be
filed with the Withholding Tax Division.
SECTION 4. Examination of records. In case the taxpayer responds to
the notice within the above-prescribed period, he or his duly authorized
representative shall be allowed to examine the records of the case and to
present his arguments in writing protesting the proposed assessment.
Thereafter, the Commissioner or his authorized representative shall, of the
basis of the evidence on record, decide whether or not to approve the report as
a prelude to the issuance of the corresponding assessment notice.
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Atty. Salvador
ISSUANCE OF ASSESSMENT
SECTION 5. Failure to reply to pre-assessment notices; issuance of
assessment. In the event the taxpayer fails to respond to the pre-assessment
notice within the above prescribed period, or when the Commissioner or his
duly authorized representative finds the response to be without merit, he
should be informed of such fact and the report of investigation shall be given
due course.
PROTEST TO ASSESSMENT
SECTION 6. Protest. The taxpayer may protest administratively an
assessment by filing a written request for reconsideration or reinvestigation
specifying the following particulars:
(a) Name of the taxpayer and address for the immediate past three (3)
taxable year.
(b) Nature of request whether reinvestigation or reconsideration specifying
newly discovered evidence he intends to present if it is a request for
investigation.
(c) The taxable periods covered.
(d) Assessment number.
(e) Date of receipt of assessment notice or letter of demand.
(f) Itemized statement of the findings to which the taxpayer agrees as a basis
for computing the tax due, which amount should be paid immediately upon
the filing of the protest. For this purpose, the protest shall not be deemed
validly filed unless payment of the agreed portion of the tax is paid first.
(g) The itemized schedule of the adjustments with which the taxpayer does
not agree.
(h) A statement of facts and/or law in support of the protest.
A request for reconsideration or reinvestigation of an assessment shall be
accompanied by a waiver of the Statute of Limitations in favor of the
government.
For the purpose of the protest herein
(a) Request for reconsideration refers to a plea of re-evaluation of the
assessment on the basis of existing records without need of additional
evidence. It may involve both a question of fact or of law or both.
(b) Request for reinvestigation refers to a plea of re-evaluation of an
assessment on the basis of newly discovered or additional evidence that a
taxpayer intends to present in the reinvestigation. It may also involve a
question of fact or law or both.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 69
SECTION 7. When to file protest A protest must be filed within thirty
(30) days from receipt of the assessment.
SECTION 8. Where to file protest In Regional Office cases, the
request for reconsideration or reinvestigation of assessment shall be filed with
the Collection Branch of the region which has jurisdiction over the case.
For cases handled by the National Office, such request shall be filed with
the Collection Office.
SECTION 9. Finality of assessments. If a taxpayer who receives an
assessment from the Bureau of Internal Revenue fails to file a protest within
the period prescribed in Section 7 of these regulations, the said assessment
shall be final and unappealable and the taxpayer is thereby precluded from
disputing the assessment.
SECTION 10. Appeals of decision of Commissioner or Regional
Director of the Court of Tax Appeals. Final decision issued by the
Commissioner or Regional Director may be appealed to the Court of Tax
Appeals within thirty (30) days from receipt thereof, otherwise the same shall
be final and executory. Cdasia
SECTION 11. Change of address. In case of change of address, the
taxpayer must give written notice thereof to the Revenue District Officer or
the district having jurisdiction over his former legal residence and/or place of
business, copy furnished the Revenue District Officer having jurisdiction over
his new legal residence or place of business, the Revenue Computer Center
and the Receivable Accounts Division, BIR, National Office, Quezon City,
and in case of failure to do so, any communication referred to in these
regulations previously sent to his former legal residence or business address
as appearing in his tax return for the period involved shall be considered valid
and binding for purposes of the period within which to reply.
RR 2-78
Printing of Receipts or Sales or Commercial Invoices
Section 3 sec. 19 of rr v-i as amended, shall read as follows:
Sec. 19 authentication and registration of book, register or record;
authority to print receipts, sales or commercial invoices; and registration and
stamping of receipts and invoices.
a) In general persons required to keep books of accounts, internal
revenue books, records of receipts and disbursements, additional registers and
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Atty. Salvador
other records, invoices and receipts for recording their transactions as
prescribed in these regulations, shall before using any of the aforesaid books,
records, registers, invoices and receipts first present them to the revenue
district officer where his principal place of business is located for approval
and registration.
A register book for every book, register or records which has been
approved shall be kept showing such information as the date of approval; the
name and address of the taxpayer; his citizenship; the number of the alien
registration certificate, if an alien;
The kind of business and tax numerical code number and number of privilege
tax receipt issued for the business, if any; and the kind, volume, number of
pages or sheets of the book, register or record. Every book, register or record
so approved and registered shall be serially numbered for each taxpayer.
Authentication and registration of book, register or record.-before any
book, register, or record is presented for registration, there shall be place on
the front cover by owner thereof an identification as to the kind of book,
register, or record, the name and business address of the owner, citizenship,
the number of the alien registration certificate, if an alien, the kind of business
engaged in, and tax numeric code number and number of the privilege tax
receipt issued for the business. If the book, register, or record is approved, an
authentication shall be made by the approving officer on the reverse side of
the front cover thereof.
If the book, register, or records presented for approval is a continuation
of previous books, register or records, besides the foregoing authentication, a
notation shall be added to the authentication.
Authority to print receipts, sales or commercial invoice. before printing
any receipt or sales or comercial invoice, shall file an aplication or authority
to print [bir from no. ----------- hereto atta ched as annex a] with the
revenue district officer where the principal place of business of the printer is
located, for approval thereof. The same shall be accomplished in
quadruplicate by the printer, duly attested to buy the tax payer and shall be
accompanied by for[4] draft copies of the receipts or invoice to be printed as
well as the job order issued by the printer to the tax payer.in case of loose leaf
invoice or receipts the printer is further required to attach a copy of the
approved permit of taxpayer to use said loose leaf.
upon approval, the original copy of said authority to print shall be
retaind by the printer, the duplicate furnished the taxpayer for purposes of the
registration of the printed receipts or invoiuce, triplicate for taxpayers file
copy, and the quadruplicate retained by the revenue district officer issuing
the authority to print.
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 70
1. Issuing officer of authority to print receipts or invoice.- the
revenue district officer of the principal place of business of the printer is the
issuing officer of the authority to print receipts or invoice. The saidofficer is
hereby required-
1.1 to keep the separate file of approved authorities to print;
and-
1.2 to keep aregister book of approved authorities to print which shall
contact the folling data:
a. Name, business address,tan and ptr of printer;
b. Name and business address of tax payer for whom
authority to print was resured ; and
c. Authority number and date of issuance
2. Quarterly report of printer.- whitin twenty [20] days after the end of
every calendar quarter, the printer shall, under the penalty of perjury, submit
to the revenue district officer from whom authority to print receipts or
invoice was secured, a quarterly report accomplished in triplicate. [bir form
no._________ hereto attached as annex b
3. Other requirements.-
1. Every copy of invoice or receipt approved for printing under these
regulations shallbe on original and every copy thereof and its lower left hand
corner the name, business address and authority number of the printer.
2. In the case of receipts or invoice printed and registered prior to the
effectivity of these regulation ,the same may still be use,provided the tax
payer complies with the following:
a. submit to the revenue district officer where his principal place of
business is located an inventory of unused receipts or invoice within
thirty[30] daysafter the date of effectivity of these regulation.
said inventory shall be accompanied by a copy fo the previosely
approved permet for registration of such receipts or invoice;and
b. the unused receipts or invoice refered to in the preceding paragraph
shall, at the time of submission of the required inventory, be presented to the
same revenue district officer for appropriate restamping.
Failure of the taxpayer to comply with these requirements shall render
the unused receipts or invoice invalid and the possession or use thereof after
the lapse of thirty [30] days from the effectivity of these regulations shallbe
punishable under the privisions of presidential decree no. 1254.
Registration and stamping of receipts and ivoice.
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Atty. Salvador
Before being used, the printed receipts, salea or commercial invoice shall be
registered with the revenue district officer where the principal place of
business of the taxpayer is located within thirty [30] days from the date of the
invoice issued by the printe. The registration of the printed receipts of invoice
shall be evidenced by an appropraite stamp on the face of the taxpayers copy
of the authority to print as well as on the front cover, on the back of the
middle page and on back of the last invoice or receipt of the registered
booklet orpad, authenticated by the sinature of the officer authorzed to place
the stamp thereon
RMC 48-90
Counting of the Three-year Prescriptive
SECTION 2. General Principles.
2.1 The surcharge and/or interest herein prescribed shall apply to all
taxes, fees and charges imposed under the Code which shall be collected at
the same time, in the same manner, and as part of the tax.
2.2 In case the tax due from the taxpayer is paid on a partial or
installment basis, the interest on the deficiency tax or on the delinquency tax
liability of the taxpayer shall be imposed from due date of the tax until full
payment thereof. The interest shall be computed based on the diminishing
balance of the tax, inclusive of interests.
SECTION 3. Due Process Requirement in the Issuance of a Deficiency
Tax Assessment.
3.1 Mode of procedures in the issuance of a deficiency tax assessment:
3.1.1 Notice for informal conference. The
Revenue Officer who audited the taxpayer's records
shall, among others, state in his report whether or not
the taxpayer agrees with his findings that the
taxpayer is liable for deficiency tax or taxes. If the
taxpayer is not amenable, based on the said Officer's
submitted report of investigation, the taxpayer shall
be informed, in writing, by the Revenue District Office
or by the Special Investigation Division, as the case
may be (in the case Revenue Regional Offices) or by
the Chief of Division concerned (in the case of the BIR
National Office) of the discrepancy or discrepancies in
the taxpayer's payment of his internal revenue taxes,
for the purpose of "Informal Conference," in order to
afford the taxpayer with an opportunity to present his
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 71
side of the case. If the taxpayer fails to respond within
fifteen (15) days from date of receipt of the notice for
informal conference, he shall be considered in
default, in which case, the Revenue District Officer or
the Chief of the Special Investigation Division of the
Revenue Regional Office, or the Chief of Division in
the National Office, as the case may be, shall endorse
the case with the least possible delay to the
Assessment Division of the Revenue Regional Office
or to the Commissioner or his duly authorized
representative, as the case may be, for appropriate
review and issuance of a deficiency tax assessment, if
warranted.
3.1.2 Preliminary Assessment Notice (PAN). If after review and
evaluation by the Assessment Division or by the Commissioner or his duly
authorized representative, as the case may be, it is determined that there exists
sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said
Office shall issue to the taxpayer, at least by registered mail, a Preliminary
Assessment Notice (PAN) for the proposed assessment, showing in detail, the
facts and the law, rules and regulations, or jurisprudence on which the
proposed assessment is based (see illustration in ANNEX A hereof). If the
taxpayer fails to respond within fifteen (15) days from date of receipt of the
PAN, he shall be considered in default, in which case, a formal letter of
demand and assessment notice shall be caused to be issued by the said Office,
calling for payment of the taxpayer's deficiency tax liability, inclusive of the
applicable penalties.
3.1.3 Exceptions to Prior Notice of the Assessment. The notice for
informal conference and the preliminary assessment notice shall not be
required in any of the following cases, in which case, issuance of the formal
assessment notice for the payment of the taxpayer's deficiency tax liability
shall be sufficient:
(i) When the finding for any deficiency tax is the result of mathematical
error in the computation of the tax appearing on the face of the tax return filed
by the taxpayer; or
(ii) When a discrepancy has been determined between the tax withheld
and the amount actually remitted by the withholding agent; or
(iii) When a taxpayer who opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period was determined to have carried
over and automatically applied the same amount claimed against the
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Atty. Salvador
estimated tax liabilities for the taxable quarter or quarters of the succeeding
taxable year; or
(iv) When the excise tax due on excisable articles has not been paid; or
(v) When an article locally purchased or imported by an exempt person,
such as, but not limited to, vehicles, capital equipment, machineries and spare
parts, has been sold, traded or transferred to non-exempt persons.
3.1.4 Formal Letter of Demand and Assessment Notice. The
formal letter of demand and assessment notice shall be issued by the
Commissioner or his duly authorized representative. The letter of demand
calling for payment of the taxpayer's deficiency tax or taxes shall state the
facts, the law, rules and regulations, or jurisprudence on which the assessment
is based, otherwise, the formal letter of demand and assessment notice shall
be void (see illustration in ANNEX B hereof). The same shall be sent to the
taxpayer only by registered mail or by personal delivery. If sent by personal
delivery, the taxpayer or his duly authorized representative shall acknowledge
receipt thereof in the duplicate copy of the letter of demand, showing the
following: (a) His name; (b) signature; (c) designation and authority to act for
and in behalf of the taxpayer, if acknowledged received by a person other
than the taxpayer himself; and (d) date of receipt thereof.
3.1.5 Disputed Assessment. The taxpayer or his duly authorized
representative may protest administratively against the aforesaid formal letter
of demand and assessment notice within thirty (30) days from date of receipt
thereof. If there are several issues involved in the formal letter of demand and
assessment notice but the taxpayer only disputes or protests against the
validity of some of the issues raised, the taxpayer shall be required to pay the
deficiency tax or taxes attributable to the undisputed issues, in which case, a
collection letter shall be issued to the taxpayer calling for payment of the said
deficiency tax, inclusive of the applicable surcharge and/or interest. No action
shall be taken on the taxpayer's disputed issues until the taxpayer has paid the
deficiency tax or taxes attributable to the said undisputed issues. The
prescriptive period for assessment or collection of the tax or taxes attributable
to the disputed issues shall be suspended.
The taxpayer shall state the facts, the applicable law, rules and
regulations, or jurisprudence on which his protest is based, otherwise, his
protest shall be considered void and without force and effect. If there are
several issues involved in the disputed assessment and the taxpayer fails to
state the facts, the applicable law, rules and regulations, or jurisprudence in
support of his protest against some of the several issues on which the
assessment is based, the same shall be considered undisputed issue or issues,
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 72
in which case, the taxpayer shall be required to pay the corresponding
deficiency tax or taxes attributable thereto.
The taxpayer shall submit the required documents in support of his
protest within sixty (60) days from date of filing of his letter of protest,
otherwise, the assessment shall become final, executory and demandable. The
phrase "submit the required documents" includes submission or presentation
of the pertinent documents for scrutiny and evaluation by the Revenue Officer
conducting the audit. The said Revenue Officer shall state this fact in his
report of investigation.
If the taxpayer fails to file a valid protest against the formal letter of
demand and assessment notice within thirty (30) days from date of receipt
thereof, the assessment shall become final, executory and demandable.
If the protest is denied, in whole or in part, by the Commissioner, the
taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from
date of receipt of the said decision, otherwise, the assessment shall become
final, executory and demandable.
In general, if the protest is denied, in whole or in part, by the
Commissioner or his duly authorized representative, the taxpayer may appeal
to the Court of Tax Appeals within thirty (30) days from date of receipt of the
said decision, otherwise, the assessment shall become final, executory and
demandable: Provided, however, that if the taxpayer elevates his protest to the
Commissioner within thirty (30) days from date of receipt of the final
decision of the Commissioner's duly authorized representative, the latter's
decision shall not be considered final, executory and demandable, in which
case, the protest shall be decided by the Commissioner.
If the Commissioner or his duly authorized representative fails to act on
the taxpayer's protest within one hundred eighty (180) days from date of
submission, by the taxpayer, of the required documents in support of his
protest, the taxpayer may appeal to the Court of Tax Appeals within thirty
(30) days from the lapse of the said 180-day period, otherwise, the assessment
shall become final, executory and demandable.
3.1.6 Administrative Decision on a Disputed Assessment. The
decision of the Commissioner or his duly authorized representative shall (a)
state the facts, the applicable law, rules and regulations, or jurisprudence on
which such decision is based, otherwise, the decision shall be void (see
illustration in ANNEX C hereof), in which case, the same shall not be
considered a decision on a disputed assessment; and (b) that the same is his
final decision.
3.1.7 Constructive Service. If the notice to the taxpayer herein
required is served by registered mail, and no response is received from the
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Atty. Salvador
taxpayer within the prescribed period from date of the posting thereof in the
mail, the same shall be considered actually or constructively received by the
taxpayer. If the same is personally served on the taxpayer or his duly
authorized representative who, however, refused to acknowledge receipt
thereof, the same shall be constructively served on the taxpayer. Constructive
service thereof shall be considered effected by leaving the same in the
premises of the taxpayer and this fact of constructive service is attested to,
witnessed and signed by at least two (2) revenue officers other than the
revenue officer who constructively served the same. The revenue officer who
constructively served the same shall make a written report of this matter
which shall form part of the docket of this case
SECTION 4. Civil Penalties.
4.1 Twenty-Five Percent (25%) Surcharge. There shall be imposed, in
addition to the basic tax required to be paid, a penalty equivalent to twenty-
five percent (25%) thereof, in any the following cases:
4.1.1 Failure to file any return and pay the tax due thereon as required
under the provisions of this Code or rules and regulations on the date
prescribed; or
4.1.2 Unless otherwise authorized by the Commissioner, filing a
return with an internal revenue officer other than those with whom the return
is required to be filed; or
4.1.3 Failure to pay the deficiency tax within the time prescribed for
its payment in the notice of assessment; or
4.1.4 Failure to pay the full or part of the amount of tax shown on any
return required to be filed under the provisions of this Code or rules and
regulations, or the full amount of tax due for which no return is required to be
filed, on or before the date prescribed for its payment.
4.2 Fifty Percent (50%) Surcharge:
4.2.1 In case of willful neglect to file the return within the period
prescribed by the Code, or in case a false or fraudulent return is willfully
made, the penalty to be imposed shall be fifty percent (50%) of the tax or of
the deficiency tax, in case any payment has been made on the basis of such
return before the discovery of the falsity or fraud: Provided, That a substantial
underdeclaration of taxable sales, receipts or income, or a substantial
overstatement of deductions, as determined by the Commissioner or his duly
authorized representative, shall constitute prima facie evidence of a false or
fraudulent return: Provided, further, That failure to report sales, receipts or
income in an amount exceeding thirty percent (30%) of that declared per
return, and a claim of deductions in an amount exceeding thirty percent (30%)
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 73
of actual deductions, shall render the taxpayer liable for substantial
underdeclaration of sales, receipts or income or for overstatement of
deductions, as mentioned herein: Provided, further, that the term "willful
neglect to file the return within the period prescribed by the Code" shall not
apply in case the taxpayer, without notice from the Commissioner or his
authorized representative, voluntarily files the said return, in which case, only
25% surcharge shall be imposed for late filing and late payment of the tax in
lieu of the above 50% surcharge. Conversely, the 50% surcharge shall be
imposed in case the taxpayer files the return only after prior notice in writing
from the Commissioner or his duly authorized representative.
4.2.2 Section 6 (A) of the Code provides that any tax return filed by a
taxpayer "may be modified, changed or amended" by the taxpayer "within
three (3) years from date of such filing" provided, however, that "no notice
for audit or investigation of such return, statement or declaration has, in the
meantime, been actually served upon the taxpayer." Thus, if upon
investigation, it is determined that the taxpayer's originally filed tax return is
false or fraudulent, such taxpayer shall remain liable to the 50% civil penalty
regardless that the taxpayer has filed his amended tax return, if the said
amended tax return, however, has been filed only after issuance of the Letter
of Authority for the investigation of the taxpayer's tax return or such
amendment has been made in the course of the said investigation.
SECTION 5. Mode of Procedures in Computing for the Tax and/or
Applicable Surcharge. Shown hereunder are illustrative cases for the
computation and assessment of the tax, inclusive of surcharge (if applicable)
and interest:
5.1 Late filing and late payment of the tax. Illustration: Income tax
return for the calendar year 1998 was due for filing on April 15, 1999 but the
taxpayer voluntarily filed his tax return, without notice from the BIR, only on
June 30, 1999. The tax due per return amounts to P100,000. In this case, the
taxpayer shall be liable for delinquency penalties consisting of 25%
surcharge, plus 20% interest per annum, computed from due date of the tax
until date of payment.
Only one 25% surcharge shall be imposed for late filing of the return and
late payment of the tax.
5.2 The tax return is filed on time but filed through an internal revenue
officer other than with whom the return is required to be filed.
5.3 Late filing and late payment due to taxpayer's willful neglect
5.4 Penalty or penalties for deficiency tax. As a rule, no surcharge is
imposed on deficiency tax and on the basic tax. However, if the amount due
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inclusive of penalties is not paid on or before the due date stated on the
demand letter, the corresponding surcharge shall be imposed.
5.5 Late payment of a deficiency tax assessed. In general, the
deficiency tax assessed shall be paid by the taxpayer within the time
prescribed in the notice and demand, otherwise, such taxpayer shall be liable
for the civil penalties incident to late payment.
5.6 Computation of 20% interest per annum in case of partial or
installment payment of a tax liability.
Illustration No. 1: In case extended payment of the tax is duly authorized.
DEF CORPORATION, due to financial incapacity, requested that it be
allowed to pay its income tax liability per return for calendar year 1998, in the
amount of P1,000,000.00, in four (4) monthly installments, starting April 15,
1999. Its request has been duly approved pursuant to Sec. 53 of the Tax Code.
In this case, no 25% surcharge shall be imposed for late payment of the
tax since its deadline for payment has been duly extended. However, 20%
interest per annum for the extended payment shall be imposed, computed
based on the diminishing balance of the "unpaid amount", pursuant to the
provisions of Section 249 (D) of the Code.
No 25% surcharge on extended payment shall be imposed provided,
however, that the taxpayer's request for extension of the period within which
to pay is made on or before the deadline prescribed for payment of the tax
due. Conversely, if such request is made after the deadline prescribed for
payment, the taxpayer shall already be treated late in payment, in which case,
the 25% surcharge shall be imposed, even if payment of the delinquency be
allowed in partial amortization
Illustration No. 2: Computation of tax delinquency in case of partial
payment of the tax due without prior BIR authorization for extended
payment.
Page 74
The extra-judicial settlement of the taxpayer's criminal liability and the
amount of the suggested compromise penalty shall conform with the schedule
of compromise penalties provided under Revenue Memorandum Order No. 1-
90 or as hereafter revised.
ASIANBANK vs. COMM, CTA (CTA Case No. 6095)
Facts: Corporation filed with the BIR its Corporate Annual Income Tax
Return, reporting a net loss and claming a refund that will be credited to the
next year. Although it had a net loss, said corporation paid a minimum
corporate income tax from which the prior years excess credits and
creditable taxes withheld were deducted resulting to an income tax payable.
Since it allegedly paid an amount which was not the income tax payable,
corporation claims that it failed to utilize the prior years excess tax credits as
well as the creditable withholding taxes. Hence, the claim for refund. BIR
claims that the claim for refund has prescribed because it failed to file a claim
within the 2 year period of prescription
Issue: W/N Corporation is entitled to a refund?
Held: No. The time to claim a refund has already prescribed. The term
Year must be interpreted to mean 365 days. In counting the prescriptive
period for tax purposes, Leap year is counted/included in the computation. In
the case at bar, the period of 1 year within which to redeem is to count 365
days from August 24, 1983. Consequently, the last day to redeem would be
and indeed fell on August 23, 1984, said year being a leap year.

SECTION 6. Suggested Compromise Penalty in Extra-judicial Settlement

of a Taxpayer's Criminal Violation. Section 204 of the Tax Code of 1997
provides that "All criminal violations may be compromised except: (a) those
already filed in court, or (b) those involving fraud." This means that, in
general, the taxpayer's criminal liability arising from his violation of the
pertinent provision of the Code may be settled extra-judicially instead of the
BIR instituting against the taxpayer a criminal action in Court. A compromise
in extra-judicial settlement of the taxpayer's criminal liability for his violation
is consensual in character, hence, may not be imposed on the taxpayer
without his consent. Hence, the BIR may only suggest settlement of the
taxpayer's liability through a compromise.

BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,

MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Tax Law Review
Atty. Salvador
LOCAL TAXATION
Ty v. Trampe
Facts: Ty is a resident of and registered owner of lands and buildings in Pasig
City. In January 1994, the Assessor sent him a notice of assessment
concerning his real properties in Pasig. In response, Ty filed a petition for
prohibition with prayer for TRO and/or writ of preliminary injunction at the
sala of Judge Trampe to declare void the new tax assessments and to enjoin
the collection of realty tax based on such assessments. Ty argued that the
assessments were void because it did not conform to PD 921 which requires
that the schedule of assessments shall be prepared jointly by the city assessors
of the district. The Assessor argued that PD 921 has been repealed by RA
7160 because PD 921 is merely an implementing law of PD 464, which was
expressly repealed by RA 7160. Judge Trampe denied Tys petition for lack of
merit and ruled that the assessments were correct. Thus Ty filed this petition
with the Supreme Court.
Held: The SC ruled in favor of Ty. It held that RA 7160 has a repealing
provision and if the intention of the legislature was to repeal PD 921, it would
have expressly included PD 921 in such repealing clause. The SC then
compared the aims of PD 921 and RA 7160 to determine if they are so
incompatible as to constitute an implied repeal. After comparison, the SC
found that the two laws are not co-extensive and mutually inclusive in their
scope and purpose. While RA 7160 covers almost all governmental functions
delegated to local government units all over the country, PD 921 embraces
only Metro Manila and is limited to the administration of financial services
therein, especially the assessment and collection of real estate and some other
local taxes. Thus, there was no implied repeal. PD 921 remains effective.
Trampes decision was set aside. The Schedule of Market Values for Pasig
and the assessments based thereon were declared null and void. Ty won.
Drilon v. Lim
Facts: An ordinance of the City of Manila known as the Manila Revenue
Code was enacted by the council of Manila and Mayor Lim. Four oil
companies and a taxpayer who were affected by the Manila Revenue Code
questioned the legality of its enactment with Drilon, then the Secretary of
Justice. They alleged that the ordinance was void for non-compliance with the
prescribed procedure in Section 187 of LGC for the enactment of ordinances
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and for containing certain provisions contrary to law and public policy. Drilon
declared the ordinance void. The City of Manila filed a petition for certiorari
with the RTC of Manila which revoked Drilons resolution and sustained the
ordinance. The RTC judge also declared Sec. 187 of LGC unconstitutional
insofar as it empowered the SOJ to review tax ordinances and, inferentially, to
annul them. He cited the distinction between control and supervision, the first
being the power of an officer to alter or modify or set aside what a
subordinate had done in the performance of duties and to substitute the
judgment of the former for the latter while the second is the power of a
superior officer to see to it that the lower officers perform their functions in
accordance in law. Hence Drilon filed this petition for review on certiorari.
Held: The SC held in favor of Drilon. The SC explained that Sec. 187
authorizes the SOJ to review only the constitutionality or legality of the tax
ordinance and if warranted, to revoke it on either or both these grounds.
When he alters or modifies or sets aside a tax ordinance, he is not also
permitted to substitute his own judgment for the judgment of the local
government that enacted the measure. Sec. Drilon did set aside the Manila
Regulation Code, but he did not replace it with his own version of what the
Code should be. He did not pronounce the ordinance unwise or unreasonable
as basis for its annulment. He did not say that in his judgment it was a bad
law. What he found only was that it was illegal. All he did in reviewing the
said measure was determine if the petitioners were performing their functions
in accordance with law, that is, with the prescribed procedure for the
enactment of tax ordinances and the grant of powers to the city government
under the LGC. The SC held that this was an act of mere supervision, not
control. The SC reversed the judgment finding Sec. 187 unconstitutional but
affirmed the RTCs finding that there was proper observance of procedure in
enacting the Manila Revenue Code.
Philippine Match Co. Ltd. V. City of Cebu
Facts: The Phil. Match whose principal office is in Manila, is engaged in the
manufacture of matches. Its factory is located at Punta, Sta. Ana Manila. It
ships cases or cartons of matches from Manila to its branch office in Cebu
City for storage, sale and distribution within the territories and districts under
its Cebu branch or the whole Vis-Min region. Cebu City itself is just one of
the 11 districts under the companys Cebu branch. Pursuant to an ordinance,
Cebu City Assessor assessed taxes on the companys out-of-town deliveries
of matches, to wit: (1) sales of matches booked and paid for in Cebu but
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shipped directly to customers outside of the city; (2) transfers of matches to
salesmen assigned to different agencies outside of the city; (3) shipments of
matches to provincial customers pursuant to salesmens instructions. The
company paid under protest and filed a complaint with CFI seeking refund.
The TC sustained the tax on #1 and held that the sales were consummated in
Ceby because delivery to the carrier in the city is deemed to be delivery to the
customers outside of the city. However, it ordered a refund of #2 and #3. The
TC characterized the tax on 2 & 3 as storage tax and not sales tax. It
assumed the sales were consummated outside the city and hence, beyond the
citys taxing power. The company appealed the portion of the decision
regarding #1.
Held: The SC held that the appeal is devoid of merit because the city can
validly tax the sales of matches to customers outside the city as long as the
orders were booked and paid for in the companys branch office in the city.
Those matches can be regarded as sold in the city, as contemplated in the
ordinance, because the matches were delivered to the carrier in Cebu.
Generally, delivery to the carrier is delivery to the buyer. A different
interpretation would defeat the tax ordinance in question or encourage tax
evasion through the simple expedient of arranging for the delivery of the
matches at the outskirts of the city though the purchases were effected and
paid for in the companys branch office in the city. Moreover, the municipal
board of Cebu is empowered to provide for the levy and collection of taxes
for general and special purposes in accordance with law. The taxing power
validly delegated to cities and municipalities is defined in LGC.
Bar Exam Questions on Local Taxation
1. Taxes are generally imprescriptible; statutes however, may provide
otherwise. State the rules that have been adopted on this score by the
LGC.
Ans: Local taxes, fees or charges shall be assessed within 5 years from
the date they become due. In case of fraud or intent to evade the payment
of taxes, fees or charges, the same may be assessed within 10 years from
discovery of the fraud or intent to evade payment. They shall also be
collected either by administrative or judicial action within 5 years from
assessment.
2. Give the remedies available to LGUs to enforce collection of taxes,
fees and charges.
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Ans: (1) Administrative remedies of distraint of personal property of
whatever kind whether tangible or intangible and levy of real property
and interest therein; (2) Judicial remedy by institution of an ordinary civil
action for collection with the regular courts of proper jurisdiction.
3. May local governments impose an annual realty tax in addition to
the basic real property tax on idle or vacant lots located in residential
subdivisions within their respective territorial jurisdiction?
Ans: Not all LGUs may do so. Only provinces, cities and municipalities
within the Metro Manila area may impose an ad valorem tax not
exceeding 5% of the assessed value of idle or vacant residential lots in a
subdivision, duly approved by proper authorities regardless of area.
4. Congress, after much public hearing and consultations with various
sectors of society, came to the conclusion that it will be good for the
country to have only one system of taxation by centralizing the
imposition and collection of all taxes in the national government.
Accordingly, it is thinking of passing a law that would abolish the
taxing power of all local government units. In your opinion, would
such a law be valid under the present Constitution? Explain.
Ans. No. The law centralizing the imposition and collection of all taxes
in the national government would contravene the Constitution which
mandates that Each LGU shall have the power to create their own
sources of revenue and to levy taxes, fees and charges subject to such
guidelines and limitations as Congress may provide consistent with the
basic policy of local autonomy. It is clear that Congress can only give
the guidelines and limitations on the exercise by the local governments of
the power to tax but what was granted by the fundamental law cannot be
withdrawn by Congress.
5. Aside from the basic real estate tax, give 3 other taxes which may be
imposed by provincial and city governments as well as by
municipalities in metro manila area.
Ans: (1) franchise tax and amusement tax; (2) occupational tax, fees and
other rentals on mineral lands where the mining claim is located; (3)
municipal licenses, fees and community tax.
6. What are the limitations on the local power of taxation?
Ans: (1) inherent limitations; (2) constitutional limitations (3)
congressional limitations.
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7. What are the fundamental principles underlying local taxation?
Ans: a. Taxation shall be uniform in each local government unit
b. taxes, fees, charges and other impositions shall:
i. be equitable and based as far as practicable on the
taxpayers ability to pay;
ii. be levied and collected only for public purposes;
iii. not be unjust, excessive, oppressive or
confiscatory; and
iv. not be contrary to law, public policy, national
economic policy, or in restraint of trade.
c. The collection of local taxes, fees, charges, and other
impositions shall in no case be let to any private person;
d. the revenue collected pursuant to the provisions of the
LGC shall inure solely to the benefit of, and be subject to
disposition by the LGU levying the tax, fee, charge or other
imposition, unless otherwise specifically provided herein;
and
e. Each LGU shall, as far as practicable, evolve a
progressive system of taxation.
Local Finance Circular No. 1-93 Business tax on Banks and other banking
institutions
- Municipalities and cities may impose taxes on businesses, including banks and
banking institutions.
- banks and other banking institutions--shall refer to persons or entities engaged in the
lending of funds obtained from the public through the receipt of deposits or the sale
of bonds, securities or obligations of any kind and all entities regularly conducting
such operations. The terms "banks" and "banking institutions" are synonymous and
interchangeable.
- banks shall be classified as follows:
(1) Commercial banks;
(2) Thrift banks composed of -
(i) Savings and Mortgage banks;
(ii) Stock savings and loan associations;
(iii) Private development banks
(3) Regional unit banks consisting of rural banks;
(4) Specialized and unique Government banks like the Development Bank of the Philippines,
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which are governed by their respective charters.
(5) Other classes of banks as may be authorized by the Monetary Board of the Central Bank
of the Philippines; and
(6) Branches of the above-cited banks which have been authorized to be established
nationwide by the Monetary Board of the Central Bank of the Philippines.
- Banking institutions include the following:
(1) Entities regularly engaged in the lending of funds or purchasing of receivables or other
obligations with funds obtained from the public through the issuance, endorsement or
acceptance of debt instruments of any kind for their own account, or through the issuance of
certificates of assignments or similar instruments with recourse, trust certificates, or of
reproaches agreements, whether any of these means of obtaining funds from the public is done
on a regular basis or only occasionally;
(2) Entities regularly engaged in the lending of funds which receive deposits only
occasionally; and
(3) Trust, companies, building and loan associations, non-stock savings and loan
associations.
(b) Head Office shall refer to the main office of the banking institution indicated in the
pertinent documents submitted to the Securities and Exchange Commission (SEC) and to other
appropriate agencies; the city or municipality specifically mentioned in the Articles of
Incorporation and other official registration papers as being the official address of said "Head
Office" hall be considered as the site thereof.
(c) Branch a fixed place in a locality established as a branch of a banking institution, as
authorized by the Monetary Board of the Central Bank of the Philippines. However, a regional or
extension offices of banks and banking institutions shall not be considered as a branch.
* The tax on banks and banking institutions may be levied on their gross receipts for the
preceding calendar year, as follows:
(1) By municipalities, at a rate not exceeding fifty percent (50%) of one percent (1%) of the
gross receipts for the preceding calendar year; and
(2) By cities including municipalities within the Metropolitan Manila area, at a rate not
exceeding seventy five percent (75%) of one percent (1%) of the gross receipts for the
preceding calendar year.
* gross receipts shall only include the following:
(1) Interest from loans and discounts this represents interest earned and actually collected
on loans and discounts. The following is a breakdown:
(i) Discounts earned and actually collected in advance on bills discounted;
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(ii) Interest earned and actually collected on demand loans;
(iii) Interest earned and actually collected on time loans, including the earned portions of
interest collected in advance;
(iv) Interest earned and actually collected on mortgage contracts receivables;
(2) Interest earned and actually collected on inter-bank loans.
(3) Rental of property this represents the following rental income:
(i) Earned portion of rental collected in advance from lessees of safe deposit boxes;
(ii) Rental earned and actually collected from lessees on bank premises and equipment.
(4) Income earned and actually collected from acquired assets.
(5) Income from sale or exchange of assets and property.
(6) Cash dividends earned and received on equity investments.
(7) Bank commissions from lending activities.
(8) Income component of rentals from financial leasing.
* All other income and receipts of banks and banking institutions not otherwise enumerated
above shall be excluded from the taxing authority of the LGU concerned, such as:
(1) Interest earned under the expanded foreign currency deposit system.
(2) Interest accumulated by lending institutions on mortgages insured under Republic Act No.
580, as amended, otherwise known as Home Financing Act.
(3) Receipts from filing fees, service and other administrative charges.
In view thereof, the provisions of Art. 242 of the IRR requiring a person or entity to get a
separated mayor's permit for each business activity shall not apply to the banking activities, as
defined above.
* The tax on banks and banking institutions as provided herein may be imposed by a city or
municipality only through an appropriate ordinance enacted by the Sangguniang Panlungsod or
Sangguniang Bayan, as the case may be. Such ordinance shall be enacted and approved in
accordance with Arts. 107, 108, 275 and 276 of the IRR.
(b) Pursuant to the procedures on the conduct of public hearings as prescribed in Art. 276 (b)
of the IRR, the Sanggunians concerned shall cause the sending of written notices of public
hearings for proposed ordinances to the branch manager or the highest officer of the Head
Office of affected banks and banking institutions within their territorial jurisdictions.
(c) Any tax ordinance which does not comply with the above provisions shall be deemed null
and void. Enforcement of such ordinance shall be a ground for disciplinary action against the
officials or employees responsible therefore as provided for in Art. 280 of the IRR.
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* Situs of the Tax. For purposes of collection of the tax, the following shall apply -
(a) All transactions filed with or negotiated in the branch shall be recorded in said branch and
the gross receipts derived from said transactions shall be applied to:
(1) transactions negotiated with and approved by the branch manager under his own
authority; or
(2) transactions filed and negotiated in the branch but being beyond the approving
authority of the branch manager, are forwarded to the Head Office for final approval.
(b) The gross receipts derived from transactions made by the Head Office, except gross
receipts recorded in the branches, shall be taxable by the city or municipality where said Head
Office is located.
(c) In case there is a transfer or relocation of the Head Office or of any branch to another city
or municipality, the bank shall give due notice of such transfer or relocation to the chief
executives of the cities or municipalities concerned within fifteen (15) days after such transfer or
relocation is effected.
* Time of Payment. The tax on banks due and accruing to the LGUs shall be payable within
the first twenty (20) days of January or of each subsequent quarter, as the case may be, unless
otherwise fixed in the corresponding local tax ordinance.
* Examination of Books of Accounts and Pertinent Records
(a) The Treasurer of the LGU concerned or through his deputies duly authorized in writing
may examine the books of accounts and other pertinent records of banks in order to
ascertain, assess, and collect to correct amount of tax due.
(b) The examination shall be made during regular office hours not oftener than once a
year for every tax period, which shall be limited to verifying the summary of transactions
contained in the prescribed form (see Annex "A") submitted by the bank upon which the
declaration of gross receipts for the preceding calendar year has been based and the tax paid
thereon. Such examination shall be certified by the examining official, which certification shall
be made of record in the books of accounts of the bank examined.
Local Finance Circular No. 2-93 Business tax on insurance companies
* insurance companies -- shall mean those formed or organized to save any person or persons
or other corporations harmless form loss, damage or liability, arising form any unknown or future
or contingent event, or to indemnify or to compensate any person or persons or other
corporations for any such loss, damage or liability, or to guarantee the performance of or
compliance with contractual obligations or the payment of debts of others.
The term "insurance companies" shall include all individuals, partnerships, associations,
or corporations including government owned or controlled corporations or entities, engaged as
principals in the insurance business, including their branches, except mutual benefit
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associations and purely cooperative insurance associations organized under the laws on
cooperatives. The term shall also include professional reinsures.
* Domestic insurance company - shall refer to companies formed, organized, or existing under
the laws of the Philippines.
* Foreign insurance company shall include companies formed, organized, or existing under any
laws other than those in the Philippines.
* Branch a fixed place in a locality established as a branch of an insurance company as
authorized by the Insurance Commission.
* General Agent is any person duly licensed so to act by the Insurance Commission, who for
compensation solicits or obtains insurance in behalf of any insurance company or transmits for
a person other than himself an application for a policy or contract of insurance to or from such
company, or offers or assumes to act in the negotiation of such insurance and empowered by
such company to do such other acts and things for and on its behalf in the conduct of its
business as specified in the general agency agreement executed by and between them. In
property and liability insurance, a general agent can bind a risk and thereby make insurance
effective immediately and prior to the actual delivery of the policy; a limited agent has restricted
powers and must operate within the scope of the authority delegated to him.
* Head Office shall refer to the principal office of the insurance company appearing in its
article of incorporation.
* Insurance Policy is a written instrument in which a contract of insurance is set forth.
* Insurance policies shall be classified as follows:
(1) Life insurance policies which may be -
(i) Individual life
(ii) Group life
(iii) Health, accident and disability insurance
(2) Non-life insurance contracts which may be -
(i) Marine
(ii) Fire
(iii) Casualty
(3) Contracts of suretyship or bonding
* Insurance Premium is the agreed price for assuming and carrying the risk, i.e., the
consideration is paid to an insurer for undertaking to identify the insured against a specified
peril, as indicated in the insurance contract.
* Insurance Agent any person who for compensation solicits or obtains insurance in behalf of
any insurance company or transmits for a person other than himself or application for a policy or
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contract of insurance to or from such company, or offers or assumes to act in the negotiating of
such insurance.
* Insurance Broker any person who for any compensation, commission or other thing of
value acts or aids in any manner in soliciting, negotiating or procuring the making of any
insurance contract or in placing risk or taking out insurance, on behalf of the insured other than
himself.
* The tax on insurance companies may be levied on their gross receipts for the preceding
calendar year as follows:
(1) By municipalities, at a rate not exceeding fifty percent (50%) of one percent (1%) of the
gross receipts for the preceding calendar year; and
(2) By all cities and municipalities within the Metropolitan Manila area, at a rate not exceeding
seventy five percent (75%) of one percent (1%) of the gross receipts for the preceding calendar
year.
* "gross receipts" shall include only the following:
(1) Insurance premiums actually collected, except the following:
(i) Premiums collected before the effectivity of the ordinance enacted by the city or
municipality imposing the tax;
(ii) Two percent (2%) of all premiums for the sake of fire, earthquake, and explosions
hazard insurance pursuant to P.D. 1185, otherwise known as Fire Code of the
Philippines;
(iii) Premiums refunded within six (6) months after payment of account;
(iv) Reinsurance premiums by a company that has already paid the tax:
(v) Premiums collected or received by any branch of a domestic corporation, firm, or
association doing business outside the Philippines on account of any life insurance
of the insured who is non-resident.
(vi) Premiums collected or received on account of any reinsurance, if the risk insured
against covers property located outside the Philippines, or the insured, in the case of
personal insurance, resides outside the foreign country where the original insurance
has been issued or perfected;
(vii) Portions of the premiums collected or received by insurance companies pertaining to
variable contracts; and
(viii) The excess of the amounts necessary to insure the lives of variable contracts.
However, the aforementioned tax-exempt premiums shall be recorded and declared separately.
(2) Interest earnings on loans and discounts actually collected;
(3) Rentals actually collected from property owned by insurance companies.
(4) Income actually collected from acquired assets.
(5) Cash dividends received on equity investments.
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* gross receipts shall not include the following:
(l) All other income are receipts not otherwise enumerated in the preceding guidelines shall
be excluded from the taxing authority of the city or municipality concerned.
(2) Service fees received from fire, earthquake, and explosion preinsurance adjustment
business directly to agents, pursuant to P.D. No. 1185, otherwise known as the Fire Code of the
Philippines.
* At the time of the annual payment of the tax due, the Head Office or branch of an insurance
company, shall submit to the LGU concerned, a breakdown of the declared gross receipts for
the preceding calendar year.
* Commissions and other means of earnings of insurance agents and service representatives
and insurance brokers shall not be taxable; however, these persons may be levied an
occupation fee pursuant to Sec. 147 of the LGC;
* The gross receipts of insurance brokers may, however be levied the tax on contractors and/or
independent contractors pursuant to
* Activities which are inherent, related, necessary or incidental to the insurance business shall
treated as one business activity subject to the same tax rate under Section 2(a) hereof. The
amount of tax thereon shall be computed on the basis of the combined gross receipts of all said
insurance activities.
In view thereof, the provisions of Art. 242 of the IRR requiring a person or entity top get a
separate mayor's permit for each activity shall not apply to the insurance activities, as defined
above.
(a) The tax on insurance companies as provided herein may be imposed by a city or
municipality only through an appropriate ordinance enacted by the Sangguniang Panlungsod or
Sangguniang Bayan, as the case may be. Such ordinance shall be enacted and approved in
accordance with Arts. 107, 108, 276 of the IRR.
(b) Pursuant to the procedures on the conduct of public hearings as prescribed in the Art. 276
(b) of the IRR, the Sanggunians concerned shall cause the sending of written notices of public
hearings for proposed ordinances to the branch manager or the highest officer of the Head
Office of affected insurance companies within their territorial jurisdictions.
(c) Any tax ordinance which does not comply with the above provisions shall be deemed null
and void. Enforcement of such ordinance shall be a ground for disciplinary action against the
officials or employees responsible therefore as provided in Art. 280 of the IRR.
** Situs of the Tax. For purposes of collection of the tax, the following shall apply (a)
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Insurance contracts/policies issued by the Head Office or branch shall be recorded in said office
or branch as the case may be and the premiums and/or gross receipts due on such
contracts/policies shall be taxable by the city or municipality where such Head Office or branch
to which such premiums or gross receipts were actually paid is located. This rule shall be
applied irrespective of whether the insurance contracts/policies were solicited or negotiated by
insurance agents, or brokers who are not residents of the city or municipality where the branch
is located or affiliated with or assigned to such branch:
(b) The offices of an insurance agent or broker, shall not be considered a branch and shall not
be subject to the situs of taxation rule.
(c) All insurance premiums and/or gross receipts from transactions not recorded in the
branches of the insurance companies in accordance with paragraph (a) above shall be
recorded in the Head Office and taxable by the city or municipality where said Head Office is
located.
(d) In case there is a transfer or relocation of the Head Office or of any branch to another city
or municipality, the insurance companies shall give due notice of such transfer or relocation to
the chief executives of the cities or municipalities concerned within fifteen (15) days after such
transfer or relocation is effected.
Time of Payment. The tax on insurance companies accruing the LGU's shall be paid within
the first twenty (20) days of January or of each subsequent quarter, as the case may be, unless
otherwise fixed in the corresponding local tax ordinance. cd i
Examination of Books of Accounts and Pertinent Records.
(a) The Treasurer of the LGU concerned or through any of his deputies duly authorized in
writing may examine the books of accounts and other pertinent records of insurance companies
in order to ascertain, assess, and collect the correct amount of the tax due.
(b) The examination shall be made during regular office hours not oftener than once a year
for every tax period, which shall be the year immediately preceding the transactions submitted
by the Head Office or branch of the insurance companies being audited, upon which the
declaration of gross receipts for the preceding calendar year has been based and the tax paid
thereon. Such certification shall be made of record in the books of accounts of the insurance
company examined.
Local Finance Circular No. 3-93 business tax on financing companies
* financing companies shall refer to corporations or partnerships, except those regulated by the
Central Bank of the Philippines, Insurance Commission and the Cooperatives Development
Authority, which are primarily organized for the purpose of extending credit facilities to
consumers and to industrial, commercial or agricultural enterprises, either by discounting or
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factoring commercial papers or accounts receivable, or by buying and selling contracts, leases,
chattel mortgages, or other evidences of indebtedness, or by leasing of motor vehicles, heavy
equipment and industrial machinery, business and office machines and equipment, appliances
and other movable property;
* Credit shall mean any loan, mortgage, deed of trust, advance, or discount; and conditional
sales contract, any contract to sell, or sale or contract of sale of property or service, either for
present or future delivery, under which, part or all of the price is payable subsequent to the
making of such sale or contract; any rental-purchase contract; any option, demand, lien, pledge,
or other claim against, or for the delivery of, property or money, any purchase or other
acquisition of or any credit upon the security of, any obligation or claim arising out of foregoing;
and transaction or series of transaction having a similar purpose or effect;
* Purchase discount is the difference between the value of the receivable purchased or credit
assigned, and the net amount paid by the finance company for such purchase or assignment,
exclusive of fees, service charges, interests and other charges incident to the extension of
credit;
* Head Office shall refer to the main office of the financing company indicated in the pertinent
documents submitted to the Securities and Exchange Commission or to the Monetary Board of
the Central Bank of the Philippines; the city or municipality specifically mentioned in the Articles
of Incorporation and other official registration papers as being the official address of said Head
Office;
* Branch is a fixed place in a locality established as a branch of a financing company, as
authorized by the Securities and Exchange Commission. However, a regional or extension
office of financing companies shall not be considered as a branch.
* The tax on financing companies may be levied on their gross receipts for the preceding
calendar year, as follows:
(1) By municipalities, at a rate not exceeding fifty percent (50%) of one percent (1%) of
the gross receipts for the preceding calendar year; and
(2) By cities and municipalities within the Metropolitan Manila area, at a rate not
exceeding seventy five percent (75%) of one percent (1%) of the gross receipts for the
preceding calendar year.
* gross receipts shall include only the following:
(1) Interest from loans and discounts this represents interest earned and actually
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collected on loans and discounts. The following is a breakdown:
(i) Discounts earned and actually collected on the portion of interest
collected in advance on bills discounted;
(ii) Interest earned and actually collected on demand loans;
(iii) Interest earned and actually collected on time loans, including the earned
portion of interest collected in advance;
(iv) Interest earned and actually collected on mortgage contracts receivable;
(2) Interest earned and actually collected on inter-bank loans.
(3) Rental of property this represents the following rental income:
(i) Earned portion of rental collected in advance from lessees of safe deposit
boxes;
(ii) Rental earned and actually collected from lessees on bank premises and
equipment.
(4) Income earned and actually collected from acquired assets.
(5) Income from sale or exchange of assets or property.
(6) Cash dividends earned and received on equity investments.
(7) Income components of rentals from financial leasing.
At the time of the annual payment of the tax due, the Head Office or branch of the financing
company shall submit to the LGU concerned, a breakdown of the declared gross receipts for
the preceding calendar year.
* All other income and receipts of financing companies not otherwise enumerated above shall
be excluded from the taxing authority of the LGU concerned.
* Activities which are inherent, related, necessary or incidental to the financing company
business shall be treated as one business activity subject to the same tax rate under Section 2
(a) hereof. The amount of tax thereon shall be computed on the basis of the combined gross
receipts of all said financial activities.
In view thereof, the provisions of Art. 242 of the IRR requiring a person or entity to get a
separated mayor's permit for each business activity shall not apply to the banking activities, as
defined above.
* The tax on banks and banking institutions as provided herein may be imposed by a city or
municipality only through an appropriate ordinance enacted by the Sangguniang Panlungsod or
Sangguniang Bayan, as the case may be. Such ordinance shall be enacted and approved in
accordance with Arts. 107, 108, 275 and 276 of the IRR.
* Pursuant to the procedures on the conduct of public hearings as prescribed in Art. 276 (b) of
the IRR, the Sanggunians concerned shall cause the sending of written notices of public
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hearings for proposed ordinances to the branch manager or the highest officer of the Head
Office of affected banks and banking institutions within their territorial jurisdictions.
Local Finance Circular No. 5-93 the Power of Municipalities and Cities to Impose a
* Any tax ordinance which does not comply with the above provisions shall be deemed null and Business Tax on BOI-Registered Enterprises
void. Enforcement of such ordinance shall be a ground for disciplinary action against the
* The exercise of the taxing powers of the Local Government Units (LGUs) shall not extend to
officials or employees responsible therefore as provided for in Art. 280 of the IRR.
the levy of local business tax (LBT) on business enterprises certified to by the Board of
SECTION 5. Situs of the Tax. For purposes of collection of the tax, the following shall
Investments as pioneer or non-pioneer for a period of six (6) and four (4) years, respectively,
apply - (a) All transactions filed with or negotiated in the branch shall be recorded in said branch
from the date of registration;
and the gross receipts derived from said transactions shall be applied to:
(1) transactions negotiated with and approved by the branch manager under his own
* Registered Enterprise shall mean any individual, partnership, cooperative, corporation or
authority; or
other entity incorporated and/or organized and registered with the Board of Investments (BOI) in
(2) transactions filed and negotiated in the branch but being beyond the approving authority
accordance with Book I of Executive Order No. 226; Provided, however that the term
of the branch manager, are forwarded to the Head Office for final approval.
"registered enterprise" shall not include commercial banks, savings, and mortgage banks, rural
(b) The gross receipts derived from transactions made by the Head Office, except gross
banks, savings and loans associations, development banks, trust companies, investment
receipts recorded in the branches, shall be taxable by the city or municipality where said Head
banks, finance companies, brokers and dealers in securities, consumer cooperatives and credit
Office is located.
unions and other business organizations whose principal purpose or principal source of income
(c) In case there is a transfer or relocation of the Head Office or of any branch to another city
is to receive deposits, lend or borrow money, buy and sell or otherwise deal, trade or invest in
or municipality, the bank shall give due notice of such transfer or relocation to the chief
common or preferred stocks, debentures, bonds or other marketable instruments generally
executives of the cities or municipalities concerned within fifteen (15) days after such transfer or
recognized as securities, or discharge other similar intermediary, trust or fiduciary functions.
relocation is effected.
{Art. 11, E.O. 226}
* Pioneer enterprise shall mean a BOI-registered enterprise (i) engaged in the manufacture,
* Time of Payment. The tax on banks due and accruing to the LGUs shall be payable within
processing or production, and not merely in the assembly or packaging of goods, commodities
the first twenty (20) days of January or of each subsequent quarter, as the case may be, unless
or raw materials that have not been or are nor being produced in the Philippines on a
otherwise fixed in the corresponding local tax ordinance.
commercial scale, or (ii) which uses a design, formula, scheme, method, process or system of
production or transformation of any element, substance or raw materials into another raw
* Examination of Books of Accounts and Pertinent Records.
material or finished goods which is new and untried in the Philippines, or (iii) engaged in the
(a) The Treasurer of the LGU concerned or through his deputies duly authorized in writing may
pursuit of agricultural, forestry and mining activities and/or services including the industrial
examine the books of accounts and other pertinent records of banks in order to ascertain,
aspects of food processing whenever appropriate, pre-determined by the BOI to be feasible and
assess, and collect the correct amount of tax due.
highly essential to the attainment of the national goal, in relation to a declared specific national
(b) The examination shall be made during regular office hours not oftener than once a year
food and agricultural program for self-sufficiency and other social benefits of the project, or (iv)
for every tax period, which shall be limited to verifying the summary of transactions submitted
which produces non-conventional sources of energy or uses or converts to coal or other non-
by the financing company upon which the declaration of gross receipts for the preceding
conventional fuels or manufacturers equipment which utilize non-conventional fuels or sources
calendar year has been based and the tax paid thereon. Such examination shall be certified by
of energy in its production, manufacturing or processing operations: Provided, that the final
the examining official, which certification shall be made of record in the books of accounts of the
product in any of the foregoing instances, involves or will involve substantial use and
Head Office or branch of the financing company being examined.
processing of domestic raw materials, whenever available; taking into account the risks and
magnitude of investment.
Memo Circular No. 92-02 - Jan. 16, 1992 issued by Department of the Interior and
Local Government - MISSING
* Non-pioneer enterprise shall include all BOI-registered producer enterprises other than

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pioneer enterprises.
* Expansion shall include modernization and rehabilitation and shall mean increase of existing
volume or value of production or upgrading the quality of the registered product or utilization of
inefficient or idle equipment under such guidelines as the BOI may adopt.
* Exemption of pioneer and non-pioneer enterprises.
(a) Pursuant Sec. 133 (g) of the LGC and Art. 221 (g) of its IRR, business enterprises certified
to and registered with the Board of Investments (BOI) as pioneer to non-pioneer shall be
exempt from local business taxes for a period of six (6) and four (4) years respectively, from the
date registration;
(b) Starting January 1, 1992, pioneer and non-pioneer enterprises registered with the BOI
prior to the effectivity of the LGC shall be exempt from local business taxes until the end of their
six (6) and four (4) years exemption from the date of registration.
(c) Pioneer and non-pioneer enterprises registered with the BOI on or after the effectivity of
the LGC shall be exempt from local business taxes for a period of six (6) and four (4) years,
respectively, starting from the date indicated in the certificate of registration issued by the BOI;
and
(d) In the case of registered expanding firms, the gross sales or receipts directly arising from
such expansion shall be exempt from local business taxes for a period stated in (a) or (b)
above.
Availment of the Exemption. (a) Within sixty (60) days -
(i) from the receipt of the Certificate of Registration from the BOI, or
(ii) from the effectivity of the tax ordinance or revenue measure imposing a
tax on business, or
(iii) from the effectivity of these guidelines, whichever comes later, the
President or any duly authorized representative of the registered
enterprise, shall submit a BOI-certified true copy of said Certificate of
Registration to the local treasurer concerned together with a request for a
Certificate of Exemption for the appropriate period, as indicated in Sec. 3
above.
* Within fifteen (15) days from the submission of its BOI Certificate of Registration by the
registered enterprise, the local treasurer concerned shall, after due verification of the
documents submitted, issue a Certificate of Exemption, in the form hereto attached as Annex
"A", to the registered enterprise.
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* Business tax on BOI-registered Enterprises. - For business enterprises registered with the BOI
not covered or no longer exempt under Sec. 3 above and whose goods or products are sold
abroad and/or domestically, the said enterprises shall be subject to the business tax as follows:
(a) the gross sales/receipts on goods or products sold domestically shall be
subject to the business tax at rates prescribed under paragraphs (a), (b) and (d) of
Sec. 143 of the LGC;
(b) the amount of export sales as defined in Sec. 2(b) shall be subject to the
business tax at rates not exceeding one-half (1/2) of the rates stated in paragraph
(a) of this Section;
For this purpose, the amount of export sales shall be excluded and declared
separately from the total sales and shall be subject to the rates prescribed in (b)
above. Failure to make this separate declaration of export sales shall subject the
total sales to the rates prescribed in (a) hereof.
(c) Upon expiration of the period of exemption of BOI-registered enterprises as
provided for in the preceding Sec. 3 hereof, the situs of the tax shall be determined
in accordance with Sec. 150 of the LGC and Art. 243 of the IRR.
(d) In case of manufactures or produces which engage the services of an
independent contractor to produce or manufacture some of their products, the rules
on situs of taxation shall apply except that the factory or plant and warehouse of the
contractor utilized for the production and storage of the manufacturer's products
shall be considered as the factory or plant and warehouse of the manufacturer; the
independent contractor under Sec. 143 (e) of the LGC, as implemented under Art.
232 (e) of its IRR.
* Non-separability of business enterprises registered with the BOI. The provisions of Art. 242
of the IRR requiring a person or entity to get a separate mayor's permit for each business
activity shall not apply to business enterprises registered with the BOI, with respect to activities
inherent, necessary and incidental to its business operations.
* Transfer or Relocation In case there is a transfer or relocation of the principal office or of
any of its branch to another city or municipality, due notice of such transfer or relocation shall be
given to the chief executives of the cities or municipalities concerned within fifteen (15) days
after such transfer or relocation is effected.
* The tax due and accruing to the city or municipality shall be paid within the first twenty (20)
days of January or of each subsequent quarter, as the case may be.
Examination of Books of Accounts and Pertinent Records.
(a) The Treasurer of the LGU concerned or through his deputies duly authorized in writing
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may examine the books of accounts and other pertinent records of banks in order to ascertain,
assess, and collect the correct amount of tax due.
(b) The examination shall be made during regular office hours not oftener than once a year
for every tax period, which shall be the year immediately preceding the examination and shall
be certified by the examining official. Such certification shall be made of record in the books of
accounts of the business enterprise examined.

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TARIFF AND CUSTOMS CODE
I. CONCEPT
A. THE TARIFF AND CUSTOMS CODE
B. THE BUREAU OF CUSTOMS (DUTIES, POWER, AND JURISDICTION)
SECTION 602
Section 601. Chief Officials of Bureau of Customs. The Bureau of
Customs shall have one chief and one assistant chief, to be known
respectively at the Commissioner (hereinafter known as the "Commissioner")
and Assistant Commissioner of Customs, who shall each receive an annual
compensation in accordance with the rates prescribed by existing laws. The
Assistant Commissioner of Customs shall be appointed by the proper
department head.
Sec. 602. Functions of the Bureau. The general duties, powers and
jurisdiction of the bureau shall include:
a. The assessment and collection of the lawful revenues from imported
articles and all other dues, fees, charges, fines and penalties accruing
under the tariff and customs laws.
b. The prevention and suppression of smuggling and other frauds upon
the customs.
c. The supervision and control over the entrance and clearance of
vessels and aircraft engaged in foreign commerce.
d. The general supervision, control and regulation of vessels engaged in
the carrying of passengers and freight or in towage in coastwise
trade and in the bays and rivers of the Philippines.
e. The prohibition and suppression of unnecessary noises, such as
explosion of gasoline engines, the excessive blowing of whistles or
sirens, and other needless and disturbing sounds made by water craft
in the ports of the Philippines or in parts of rivers included in such
ports.
f. The exclusion, if the conditions of traffic should at any time so
require, of vessels of more than one hundred and fifty tons from
entering, berthing or mooring in the Pasig River.
g. The admeasurement, registration, documenting and licensing of
vessels built or owned in the Philippines, the recording of sales,
transfers and encumbrances of such vessels, and the performance of
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all the duties pertaining to marine registry.
h. The inspection of Philippine vessels, and supervision over the safety
and sanitation of such vessels.
i. The enforcement of the lawful quarantine regulations for vessels
entering Philippine ports.
j. The enforcement of the tariff and customs laws and all other laws,
rules and regulations relating to the tariff and customs
administration.
k. The licensing of marine officers who have qualified in the
examination required by law to be carried on Philippine vessels, the
determination of the qualifications of pilots, the regulation of this
service, and the fixing of the fees which they may charge.
l. The supervision and control over the handling of foreign mails
arriving in the Philippines, for the purpose of the collection of the
lawful duty on dutiable articles thus imported and the prevention of
smuggling through the medium of such mails.
Sec. 603. Territorial Jurisdiction. For the due and effective exercise of the
powers conferred by law and to the extent requisite therefor, said bureau shall
have the right of supervision and police authority over all seas within the
jurisdiction of the Philippines and over all coasts, ports, airports, harbors,
bays, rivers and inland waters navigable from the sea.
When a vessel becomes subject to seizure by reason of an act done in
Philippine waters in violation of the tariff and customs laws, a pursuit of such
vessel begun within the jurisdictional waters may continue beyond the
maritime zone, and the vessel may be seized on the high sea. Imported
articles which may be subject to seizure for violation of the tariff and customs
laws may be pursued in their transportation in the Philippines by land, water
or air and such jurisdiction exerted over it at any place therein as may be
necessary for the due enforcement of the law.
Sec. 604. Jurisdiction over Premises Used for Customs Purposes. The
Bureau of Customs shall, for customs purposes, have exclusive control,
direction and management of custom-houses, warehouses, offices, wharves,
and other premises in the respective ports of entry, in all cases without
prejudice to the general police powers of the city or municipality wherein
such premises are situated.
Sec. 605. Enforcement of Port Regulation of Bureau of Quarantine.
Customs officials and employees shall cooperate with the quarantine
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authorities in the enforcement of the port quarantine regulations promulgated
by the Bureau of Quarantine and shall give effect to the same in so far as they
are connected with matters of shipping and navigation.
Sec. 606. Power of the President to Subject Premises to Jurisdiction of
Bureau of Customs. When any public wharf, landing place, street or land,
not previously under the jurisdiction of the Bureau of Customs, in any port of
entry, is necessary or desirable for any proper customs purpose, the President
of the Philippines may, by executive order, declare such premises to be under
the jurisdiction of the Bureau of Customs, and thereafter the authority of such
Bureau in respect thereto shall be fully effective.
II. ARTICLES SUBJECT TO DUTY
A. EXPORT (SUSPENDED EXCEPT ON LOGS) AND IMPORT
DUTIES
B. MEANING OF IMPORTATION (SECS. 1201, 1202)
Section 1201. Articles to be Imported Only Through Customhouse All
articles imported into the Philippines, whether subject to duty or not shall be
entered through a customhouse at a port of entry.
Section 1202. When importation Begins and Deemed Terminated
Importation begins when the carrying vessel or aircraft enters the jurisdiction
of the Philippines with intention to unlade therein. Importation is deemed
terminated upon payment of the duties, taxes and other charges due upon the
articles, or secured to be paid, at a port of entry and the legal permit for
withdrawal shall have been granted, or in case said articles are free of duties,
taxes and other charges, until they have legally left the jurisdiction of the
customs.
C. CLASSES OF IMPORTATION
a. Dutiable importation (Sec. 100)
Section 100. Imported Articles Subject to Duty. - All articles, when imported
from any foreign country into the Philippines, shall be subject to duty upon
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each importation, even though previously exported from the Philippines,
except as otherwise specifically provided for in this Code in other laws.
b. Prohibited importations (Secs. 101, 1207)
Section 101. Prohibited Importations. - The importation into the Philippines
of the following articles is prohibited:
(a) Dynamite, gunpowder, ammunitions and other explosives, firearms and
weapons of war, and parts thereof, except when authorized by law.
(b)Written or printed articles in any form containing any matter advocating
or inciting treason, or rebellion, or insurrection, sedition or subversion
against the Government of the Philippines, or forcible resistance to any
law of the Philippines, or containing any threat to take the life of, or
inflict bodily harm upon any person in the Philippines.
(c) Written or printed articles, negatives or cinematographic film,
photographs, engravings, lithographs, objects, paintings, drawings or
other representation of an obscene or immoral character.
(d)Articles, instruments, drugs and substances designed, intended or adapted
for producing unlawful abortion, or any printed matter which advertises
or describes or gives directly or indirectly information where, how, or by
whom unlawful abortion is produced.
(e) Roulette wheels, gambling outfits, loaded dice, marked cards, machines,
apparatus or mechanical devices used in gambling or the distribution of
money, cigars, cigarettes or other articles when such distribution is
dependent on chance, including jackpot and pinball machines or similar
contrivances, or parts thereof.
(f) Lottery and sweepstakes tickets except those authorized by the Philippine
Government, advertisements thereof, and lists of drawings therein.
(g) Any article manufactured in whole or in part of gold, silver or other
precious metals or alloys thereof, the stamps, brands or marks or which
do not indicate the actual fineness of quality of said metals or alloys.
(h)Any adulterated or misbranded articles of food or any adulterated or
misbranded drug in violation of the provisions of the "Food and Drugs
Act."
(i) Marijuana, opium, pipes, coca leaves, heroin or any other narcotics or
synthetic drugs which are or may hereafter be declared habit forming by
the President of the Philippines, or any compound, manufactured salt,
derivative, or preparation thereof, except when imported by the
Government of the Philippines or any person duly authorized by the
Dangerous Drugs Board, for medicinal purposes only.
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(j) Opium pipes and parts thereof, of whatever material.
(k)All other articles and parts thereof, the importation of which prohibited
by law or rules and regulations issued by competent authority.
Section 1207. Jurisdiction of Collectors over Articles of Prohibited
Importation Where articles are of prohibited importation or subject to
importation only upon conditions prescribed by law, it shall be the duty of the
Collector to exercise such jurisdiction in respect thereto as will prevent
importation or otherwise secure compliance with all legal requirements.
c. Conditionally Free importation (Sec. 105)
Sec. 105. Conditionally-Free Importations. - The following articles shall be
exempt from the payment of import duties upon compliance with the
formalities prescribed in, or with, the regulations which shall be promulgated
by the Commissioner of Customs with the approval of the Secretary of
Finance; Provided, That any article sold, bartered, hired or used for purposes
other than that they were intended for without prior payment of the duty, tax
or other charges which would have been due and payable at the time of entry
if the article had been entered without the benefit of this section, shall be
subject to forfeiture and the importation shall constitute a fraudulent practice
against customs revenue punishable under Section Thirty-six hundred and
two, as amended of this Code: Provided, further, That a sale pursuant to a
judicial order or in liquidation of the estate of a deceased person shall be
subject to the preceding proviso, without prejudice to the payment of duties,
taxes and other charges: Provided, finally, That the President may upon
recommendation of the Secretary of Finance, suspend, disallow or completely
withdraw, in whole or in part, any of the conditionally-free importation under
this section:
a. Aquatic products (e.g., fishes, crustaceans, mollusks, marine
animals, seaweeds, fish oil, roe), caught or gathered by fishing
vessels of Philippine registry: Provided, That they are imported in
such vessels or in crafts attached thereto: And provided, further, That
they have not been landed in any foreign territory or, if so landed,
they have been landed solely for transshipment without having been
advanced in condition;
b. Equipment for use in the salvage of vessels or aircrafts, not available
locally, upon identification and the giving of a bond in an amount
equal to one and one-half times the ascertained duties, taxes and
other charges thereon, conditioned for the exportation thereof or
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payment of the corresponding duties, taxes and other charges within
six (6) months from the date of acceptance of the import entry:
Provided, That the Collector of Customs may extend the time for
exportation or payment of duties, taxes and other charges for a term
not exceeding six (6) months from the expiration of the original
period;
c. Cost of repairs, excluding the value of the article used, made in
foreign countries upon vessels or aircraft documented, registered or
licensed in the Philippines, upon proof satisfactory to the Collector
of Customs (1) that adequate facilities for such repairs are not
afforded in the Philippines, or (2) that such vessels or aircrafts, while
in the regular course of her voyage or flight was compelled by stress
of weather or other casualty to put into a foreign port to make such
repairs in order to secure the safety, seaworthiness or airworthiness
of the vessel or aircraft to enable her to reach her port of destination;
d. Articles brought into the Philippines for repair, processing or
reconditioning to be re-exported upon completion of the repair,
processing or reconditioning: Provided, That the Collector of
Customs shall require the giving of a bond in an amount equal to one
and one-half times the ascertained duties, taxes and other charges
thereon, conditioned for the exportation thereof or payment of the
corresponding duties, taxes and other charges within six (6) months
from the date of acceptance of the import entry;
e. Medals, badges, cups and other small articles bestowed as trophies
or prizes, or those received or accepted as honorary distinction;
f. Personal and household effects belonging to residents of the
Philippines returning from abroad including jewelry, precious stones
and other articles of luxury which were formally declared and listed
before departure and identified under oath before the Collector of
Customs when exported from the Philippines by such returning
residents upon their departure therefrom and during their stay
abroad; personal and household effects including wearing apparel,
articles of personal adornment (except luxury items), toilet articles,
portable appliances and instruments and similar personal effects,
excluding vehicles, watercrafts, aircrafts, and animals purchased in
foreign countries by residents of the Philippines which were
necessary, appropriate and normally used for the comfort and
convenience in their journey and during their stay abroad upon proof
satisfactory to the Collector of Customs that same have been in their
use abroad for more than six (6) months and accompanying them on
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their return, or arriving within a reasonable time which, barring
unforeseen circumstances, in no case shall exceed ninety (90) days
before or after the owners' return: Provided, That the personal and
household effects shall neither be in commercial quantities nor
intended for barter, sale or hire and that the total dutiable value of
which shall not exceed two thousand pesos (P2,000.00): Provided
further, That the returning residents have not previously received the
benefit under this section within one year from and after the last
exemption granted: Provided furthermore, That a fifty (50) per cent
ad valorem duty across the board shall be levied and collected on the
personal and household effects (except luxury items) in excess of
two thousand pesos (P2,000.00): And provided, finally, That the
personal and household effects (except luxury items) of a returning
resident who has not stayed abroad for six (6) months shall be
subject to fifty (50)per cent ad valorem duty across the board, the
total dutiable value of which does not exceed two thousand pesos
(P2,000.00); any excess shall be subject to the corresponding duty
provided in this Code;
g. Wearing apparel, articles of personal adornment, toilet articles,
portable tools and instruments, theatrical costumes and similar
effects accompanying travelers, or tourists. or arriving within a
reasonable time before and after their arrival in the Philippines,
which are necessary and appropriate for the wear and use of such
persons according to the nature of the journey, their comfort and
convenience: Provided, That this exemption shall not apply to
articles intended for other persons or for barter, sale or hire:
Provided, further, That the Collector of Customs may, in his
discretion, require either a written commitment or a bond in an
amount equal to one and one-half times the ascertained duties, taxes
and other charges conditioned for the exportation thereof or payment
of the corresponding duties, taxes and other charges within three (3)
months from the date of acceptance of the import entry: And
Provided finally, That the Collector of Customs may extend the time
for exportation or payment of duties, taxes and other charges for a
term not exceeding three (3) months from the expiration of the
original period;
g-1. Personal and household effects and vehicles belonging to
foreign consultants and experts hired by, and/or rendering service to,
the government, and their staff or personnel and families,
accompanying them or arriving within a reasonable time before or
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after their arrival in the Philippines, in quantities and of the kind
necessary and suitable to the profession, rank or position of the
person importing them, for their own use and not for barter, sale or
hire provided that, the Collector of Customs may in his discretion
require either a written commitment or a bond in an amount equal to
one and one-half times the ascertained duties, taxes and other
charges upon the articles classified under this subsection;
conditioned for the exportation thereof or payment of the
corresponding duties, taxes and other charges within six (6) months
after the expiration of their term or contract; And Provided, finally,
That the Collector of Customs may extend the time for exportation
or payment of duties, taxes and other charges for term not exceeding
six (6) months from the expiration of the original period;
h. Professional instruments and implements, tools of trade, occupation
or employment, wearing apparel, domestic animals, and personal
and household effects belonging to persons coming to settle in the
Philippines or Filipinos and/or their families and descendants who
are now residents or citizens of other countries, such parties
hereinafter referred to as Overseas Filipinos, in quantities and of the
class suitable to the profession, rank or position of the persons
importing them, for their own use and not for barter or sale,
accompanying such persons, or arriving within a reasonable time, in
the discretion of the Collector of Customs, before or after the arrival
of their owners, which shall not be later than February 28, 1979 upon
the production of evidence satisfactory to the Collector of Customs
that such persons are actually coming to settle in the Philippines, that
change of residence was bona fide and that the privilege of free entry
was never granted to them before or that such person qualifies under
the provisions of Letters of Instructions 105, 163 and 210, and that
the articles are brought from their former place of abode, shall be
exempt from the payment of customs duties and taxes: Provided,
That vehicles, vessels, aircrafts, machineries and other similar
articles for use in manufacture, shall not be classified hereunder;
i. Articles used exclusively for public entertainment, and for display in
public expositions, or for exhibition or competitionfor prizes, and
devices for projecting pictures and parts and appurtenances thereof,
upon identification, examination, and appraisal and the giving of a
bond in an amount equal to one and one-half times the ascertained
duties, taxes and other charges thereon, conditioned for exportation
thereof or payment of the corresponding duties, taxes and other
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charges within six (6) months from the date of acceptance of the
import entry; Provided, That the Collector of Customs may extend
the time for exportation or payment of duties, taxes and other
charges for a term not exceeding six (6) months from the expiration
of the original period; and technical and scientific films when
imported by technical, cultural and scientific institutions, and not to
be exhibited for profit: Provided, further, That if any of the said films
is exhibited for profit, the proceeds therefrom shall be subject to
confiscation, in addition to the penalty provided under Section
Thirty-six hundred and ten as amended, of this Code;
j. Articles brought by foreign film producers directly and exclusively
used for making or recording motion picture films on location in the
Philippines, upon their identification, examination and appraisal and
the giving of a bond in an amount equal to one and one-half times
the ascertained duties, taxes and other charges thereon, conditioned
for exportation thereof or payment of the corresponding duties, taxes
and other charges within six (6) months from the date of acceptance
of the import entry, unless extended by the Collector of Customs for
another six (6) months; photographic and cinematographic films,
undeveloped, exposed outside the Philippines by resident Filipino
citizens or by producing companies of Philippine registry where the
principal actors and artists employed for the production are Filipinos,
upon affidavit by the importer and identification that such exposed
films are the same films previously exported from the Philippines.
As used in this paragraph, the terms "actors" and "artists" include the
persons operating the photographic cameras or other photographic
and sound recording apparatus by which the film is made;
k. Importations for the official use of foreign embassies, legations, and
other agencies of foreign governments: Provided, That those foreign
countries accord like privileges to corresponding agencies of the
Philippines;
Articles imported for the personal or family use of the members
and attaches of foreign embassies, legations, consular officers and
other representatives of foreign governments: Provided, That such
privilege shall be accorded under special agreements between the
Philippines and the countries which they represent: And Provided,
further, That the privilege may be granted only upon specific
instructions of the Secretary of Finance in each instance which will
be issued only upon request of the Department of Foreign Affairs;
l. Imported articles donated to, or for the account of, any duly
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registered relief organization, not operated for profit, for free
distribution among the needy, upon certification by the Department
of Social Services and Development or the Department of Education,
Culture and Sports, as the case may be;
m. Containers, holders and other similar receptacles of any material
including kraft paper bags for locally manufactured cement for
export, including corrugated boxes for bananas, mangoes, pineapples
and other fresh fruits for export, except other containers made of
paper, paperboard and textile fabrics, which are of such character as
to be readily identifiable and/or reusable for shipment or
transportation of goods shall be delivered to the importer thereof
upon identification, examination and appraisal and the giving of a
bond in an amount equal to one and one-half times the ascertained
duties, taxes and other charges within six (6) months from the date
of acceptance of the import entry;
n. Supplies which are necessary for the reasonable requirements of the
vessel or aircraft in hervoyage or flight outside the Philippines,
including articles transferred from a bonded warehouse in any
collection district to any vessel or aircraft engaged in foreign trade,
for use or consumption of the passengers or its crew on board such
vessel or aircrafts as sea or air stores; or articles purchased abroad
for sale on board a vessel or aircraft as saloon stores or air store
supplies: Provided, That any surplus or excess of such vessel or
aircraft supplies arriving from foreign ports or airports shall be
dutiable;
o. Articles and salvage from vessels recovered after a period of two (2)
years from the date of filing the marine protest or the time when the
vessel was wrecked or abandoned, or parts of a foreign vessel or her
equipment, wrecked, abandoned in Philippine waters or elsewhere:
Provided, That articles and salvage recovered within the said period
oftwo (2) years shall be dutiable;
p. Coffins or urns containing human remains, bones or ashes, used
personal and household effects (not merchandise) of the deceased
person, except vehicles, the value of which does not exceed ten
thousand pesos (P10,000.00), upon identification as such;
q. Samples of the kind, in such quantity and of such dimension or
construction as to render them unsalable or of no appreciable
commercial value; models not adapted for practical use; and samples
of medicines, properly marked "sample-sale punishable by law," for
the purpose of introducing a new article in the Philippine market and
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imported only once in a quantity sufficient for such purpose by a
person duly registered and identified to be engaged in that trade:
Provided, That importations under this subsection shall be
previously authorized by the Secretary of Finance: Provided,
however, That importation of sample medicine shall be previously
authorized by the Secretary of Health that such samples are new
medicines not available in the Philippines: Provided, finally, That
samples not previously authorized and/or properly marked in
accordance with this section shall be levied the corresponding tariff
duty.
Commercial samples, except those that are not readily and
easily identifiable (e.g., precious and semi-precious stones, cut or
uncut, and jewelry set with precious stones), the value of any single
importation of which does not exceed ten thousand pesos
(P10,000.00) upon the giving of a bond in an amount equal to twice
the ascertained duties, taxes and other charges thereon, conditioned
for the exportation of said samples within six (6) months from the
date of the acceptance of the import entry or in default thereof, the
payment of the corresponding duties, taxes and other charges. If the
value of any single consignment of such commercial samples
exceeds ten thousand pesos (P10,000.00),the importer thereof may
select any portion of same not exceeding in value of ten thousand
pesos (P10,000.00) for entry under the provision of this subsection,
and the excess of the consignment may be entered in bond, or for
consumption, as the importer may elect;
r. Animals (except race horses), and plants for scientific, experimental,
propagation, botanical, breeding, zoological and national defense
purposes: Provided, That no live trees, shoots, plants, moss, and
bulbs, tubers and seeds for propagation purposes may be imported
under this section, except by order of the Government or other duly
authorized institutions: Provided, further, That the free entry of
animals for breeding purposes shall be restricted to animals of
recognized breed, duly registered in the book of record established
for that breed, certified as such by the Bureau of Animal Industry:
Provided, furthermore, That certificate of such record, and pedigree
of such animal duly authenticated by the proper custodian of such
book of record, shall be produced and submitted to the Collector of
Customs, together with affidavit of the owner or importer, that such
animal is the animal described in said certificate of record and
pedigree: And Provided, finally, That the animals and plants are
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certified by the National Economic and Development Authority as
necessary for economic development;
s. Economic, technical, vocational, scientific, philosophical, historical,
and cultural books and/or publications: Provided, That those which
may have already been imported but pending release by the Bureau
of Customs at the effectivity of this Decree may still enjoy the
privilege herein provided upon certification by the Department of
Education, Culture and Sports that such imported books and/or
publications are for economic, technical, vocational, scientific,
philosophical, historical or cultural purposes or that the same are
educational, scientific or cultural materials covered by the
International Agreement on Importation of Educational Scientific
and Cultural Materials signed by the President of the Philippines on
August 2, 1952, or other agreements binding upon the Philippines.
Educational, scientific and cultural materials covered by
international agreements or commitments binding upon the
Philippine Government so certified by the Department of Education,
Culture and Sports.
Bibles, missals, prayer books, Koran, Ahadith and other
religious books of similar nature and extracts therefrom, hymnal and
hymns for religious uses;
t. Philippine articles previously exported from the Philippines and
returned without having been advanced in value or improved in
condition by any process of manufacture or other means, and upon
which no drawback or bounty has been allowed, including
instruments and implements, tools of trade, machinery and
equipment, used abroad by Filipino citizens in the pursuit of their
business, occupation or profession; and foreign articles previously
imported when returned after having been exported and loaned for
use temporarily abroad solely for exhibition, testing and
experimentation, for scientific or educational purposes; and foreign
containers previously imported which have been used in packing
exported Philippine articles and returned empty if imported by or for
the account of the person or institution who exported them from the
Philippines and not for sale, barter or hire subject to identification:
Provided, That any Philippine article falling under this subsection
upon which drawback or bounty has been allowed shall, upon re-
importation thereof, be subject to a duty under this subsection equal
to the amount of such drawback or bounty.
u. Aircraft, equipment and machinery, spare parts commissary and
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catering supplies, aviation gas, fuel and oil, whether crude or refined,
and such other articles or supplies imported by and for the use of
scheduled airlines operating under Congressional franchise:
Provided, That such articles or supplies are not locally available in
reasonable quantity, quality and price and are necessary or incidental
for the proper operation of the scheduled airline importing the same;
v. Machineries, equipment, tools for production, plants to convert
mineral ores into saleable form, spare parts, supplies, materials,
accessories, explosives, chemicals, and transportation and
communication facilities imported by and for the use of new mines
and old mines which resume operations, when certified to as such by
the Secretary of Agriculture and Natural Resources upon the
recommendation of the Director of Mines, for a period ending five
(5) years from the first date of actual commercial production of
saleable mineral products: Provided, That such articles are not
locally available in reasonable quantity, quality and price and are
necessary or incidental in the proper operation of the mine; and
aircrafts imported by agro-industrial companies to be used by them
in their agriculture and industrial operations or activities, spare parts
and accessories thereof;
w. Spare parts of vessels or aircraft of foreign registry engaged in
foreign trade when brought into the Philippine exclusively as
replacements or for the emergency repair thereof, upon proof
satisfactory to the Collector of Customs that such spare parts shall be
utilized to secure the safety, seaworthiness or airworthiness of the
vessel or aircraft, to enable it to continue its voyage or flight;
x. Articles of easy identification exported from the Philippines for
repair and subsequently reimported upon proof satisfactory to the
Collector of Customs that such articles are not capable of being
repaired locally: Provided, That the cost of the repairs made to any
such article shall pay a rate of duty of thirty per cent ad valorem;
y. Trailer chassis when imported by shipping companies for their
exclusive use inhandling containerized cargo, upon posting a bond in
an amount equal to one and one-half times the ascertained duties,
taxes and other charges due thereon to cover a period of one year
from the date of acceptance of the entry, which period for
meritorious reasons may be extended by the Commissioner of
Customs from year to year, subject to the following conditions:
1. That they shall be properly identified and registered with the Land
Transportation Commission;
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2. That they shall be subject to customs supervision fee to be fixed
by the Collector of Customs and subject to the approval of the
Commissioner of Customs;
3. That they shall be deposited in the Customs zone when not in use;
and
4. That upon the expiration of the period prescribed above, duties
and taxes shall be paid, unless otherwise re-exported.
The provisions of Sec. 105 of Presidential Decree No. 34, dated October
27, 1972, to the contrary notwithstanding any officer or employee of the
Department of Foreign Affairs, including any attache, civil or military, or
member of his staff assigned to a Philippine diplomatic mission abroad by his
Department or any similar officer or employee assigned to a Philippine
consular office abroad, or any personnel of the Reparations Mission in Tokyo
or AFP military personnel detailed with SEATO or any AFP military
personnel accorded assimilated diplomatic rank on duty abroad who is
returning from a regular assignment abroad, for reassignment to his Home
office, or who dies, resigns, or is retired from the service, after the approval of
this Decree, shall be exempt from the payment of all duties and taxes on his
personal and household effects, including one motor car which must have
been ordered or purchased prior to the receipt by the mission or consulate of
his order of recall, and which must be registered in his name: Provided,
however, That this exemption shall apply only to the value of the motor car
and to aggregate assessed value of said personal and household effects the
latter not to exceed thirty per centum (30%) of the total amount received by
such officer or employee in salary and allowances during his latest
assignment abroad but not to exceed four years; And Provided, finally, That
the officer or employee concerned must have served abroad for not less than
two years.
The provisions of general and special laws, including those granting
franchises, to the contrary notwithstanding, there shall be no exemptions
whatsoever from the payment of customs duties except those provided for in
this Code; those granted to government agencies, instrumentalities or
government-owned or controlled corporations with existing contracts,
commitments, agreements, or obligations (requiring such exemption) with
foreign countries; international institutions, associations or organizations
entitled to exemption pursuant to agreements or special laws; and those that
may be granted by the President upon prior recommendation of the National
Economic and Development Authority in the interest of national economic
development.
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III. RATES OF DUTY
A. GENERAL RULES (SEC. 104)
Sec. 104. All Tariff Sections, Chapters, headings and subheadings and the
rates of import duty under Section 104 of Presidential Decree No. 34 and all
subsequent amendment issues under Executives Orders and Presidential
Decrees are hereby adopted and form part of this Code.
There shall be levied, collected, and paid upon all imported articles the
rates of duty indicated in the Section under this Section except as otherwise
specifically provided for in this Code: provided, that the maximum rate shall
not exceed one hundred per cent ad valorem.
The rates of duty herein provided or subsequently fixed pursuant to
Section four hundred one of this Code shall be subject to periodic
investigation by the Tariff Commission and may be revised by the President
upon recommendation of the National Economic and Development Authority.
The rates of duty herein provided shall apply to all products whether
imported directly or indirectly of all foreign countries, which do not
discriminate against Philippine export products. An additional 100% across-
the-board duty shall be levied on the products of any foreign country which
discriminates against Philippine export products.
The tariff Sections, Chapters, headings and subheadings and the rate of
import duty under Section one hundred four of this Code shall be as follows:
(This portion containing the voluminous description of rates of import duties,
has been deleted for the convenience of readers who are more interested on
the substantive provisions of the Code)
B. BASIS OF DUTY (Secs. 201, 202, 204, 205, 1308-10, 1313; CAO 2-
96, June 14, 1996; RA 8181 Transaction Value; CAO 2-99
Implementing RA 8181 on customs dutiable value amended by RA
9135)
SEC. 201. Basis of Dutiable Value. - (A) Method One. - Transaction Value. -
The dutiable value of an imported article subject to an ad valorem rate of duty
shall be the transaction value, which shall be the price actually paid or
payable for the goods when sold for export to the Philippines, adjusted by
adding:
(1) The following to the extent that they are incurred by the buyer but are not
included in the price actually paid or payable for the imported goods:
(a) Commissions and brokerage fees (except buying commissions);
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(b) Cost of containers;
(c) The cost of packing, whether for labour or materials;
(d) The value, apportioned as appropriate, of the following goods and
services: materials, components, parts and similar items incorporated
in the imported goods; tools; dies; moulds and similar items used in
the production of imported goods; materials consumed in the
production of the imported goods; and engineering, development,
artwork, design work and plans and sketches undertaken elsewhere
than in the Philippines and necessary for the production of imported
goods, where such goods and services are supplied directly or
indirectly by the buyer free of charge or at a reduced cost for use in
connection with the production and sale for export of the imported
goods;
(e) The amount of royalties and license fees related to the goods being
valued that the buyer must pay, either directly or indirectly, as a
condition of sale of the goods to the buyer;
(2) The value of any part of the proceeds of any subsequent resale, disposal
or use of the imported goods that accrues directly or indirectly to the
seller;
(3) The cost of transport of the imported goods from the port of exportation
to the port of entry in the Philippines;
(4) Loading, unloading and handling charges associated with the transport of
the imported goods from the country of exportation to the port of entry in
the Philippines; and
(5) The cost of insurance.
All additions to the price actually paid or payable shall be made
only on the basis of objective and quantifiable data.
No additions shall be made to the price actually paid or payable in
determining the customs value except as provided in this Section:
Provided, That Method One shall not be used in determining the dutiable
value of imported goods if:
(a) There are restrictions as to the disposition or use of the goods by the
buyer other than restrictions which:
(i) Are imposed or required by law or by Philippine authorities;
(ii) Limit the geographical area in which the goods may be resold;
or
(iii) Do not substantially affect the value of the goods.
(b) The sale or price is subject to some condition or consideration for
which a value cannot be determined with respect to the goods being
valued;
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(c) Part of the proceeds of any subsequent resale, disposal or use of the
goods by the buyer will accrue directly or indirectly to the seller,
unless an appropriate adjustment can be made in accordance with the
provisions hereof; or
(d) The buyer and the seller are related to one another, and such
relationship influenced the price of the goods. Such persons shall be
deemed related if:
(i) They are officers or directors of one another's businesses;
(ii) They are legally recognized partners in business;
(iii) There exists an employer-employee relationship between them;
(iv) Any person directly or indirectly owns, controls or holds five
percent (5%) or more of the outstanding voting stock or shares
of both seller and buyer;
(v) One of them directly or indirectly controls the other;
(vi) Both of them are directly or indirectly controlled by a third
person;
(vii)Together they directly or indirectly control a third person; or
(viii) They are members of the same family, including those
related by affinity or consanguinity up to the fourth civil degree.
Persons who are associated in business with one another in that one
is the sole agent, sole distributor or sole concessionaire, however
described, of the other shall be deemed to be related for the purposes of
this Act if they fall within any of the eight (8) cases above.
(B) Method Two. - Transaction Value of Identical Goods. - Where the dutiable
value cannot be determined under method one, the dutiable value shall be the
transaction value of identical goods sold for export to the Philippines and
exported at or about the same time as the goods being valued. "Identical
goods" shall mean goods which are the same in all respects, including
physical characteristics, quality and reputation. Minor differences in
appearances shall not preclude goods otherwise conforming to the definition
from being regarded as identical.
(C) Method Three. - Transaction Value of Similar Goods. - Where the dutiable
value cannot be determined under the preceding method, the dutiable value
shall be the transaction value of similar goods sold for export to the
Philippines and exported at or about the same time as the goods being valued.
"Similar goods" shall mean goods which, although not alike in all respects,
have like characteristics and like component materials which enable them to
perform the same functions and to be commercially interchangeable. The
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quality of the goods, their reputation and the existence of a trademark shall be
among the factors to be considered in determining whether goods are similar.
If the dutiable value still cannot be determined through the successive
application of the two immediately preceding methods, the dutiable value
shall be determined under method four or, when the dutiable value still cannot
be determined under that method, under method five, except that, at the
request of the importer, the order of application of methods four and five shall
be reversed: Provided, however, That if the Commissioner of Customs deems
that he will experience real difficulties in determining the dutiable value using
method five, the Commissioner of Customs may refuse such a request in
which event the dutiable value shall be determined under method four, if it
can be so determined.
(D) Method Four. - Deductive Value. - The dutiable value of the imported
goods under this method shall be the deductive value which shall be based on
the unit price at which the imported goods or identical or similar imported
goods are sold in the Philippines, in the same condition as when imported, in
the greatest aggregate quantity, at or about the time of the importation of the
goods being valued, to persons not related to the persons from whom they
buy such goods, subject to deductions for the following:
(1) Either the commissions usually paid or agreed to be paid or the additions
usually made for profit and general expenses in connection with sales in
such country of imported goods of the same class or kind;
(2) The usual costs of transport and insurance and associated costs incurred
within the Philippines; and
(3) Where appropriate, the costs and charges referred to in subsection (A)
(3), (4) and (5); and
(4) The customs duties and other national taxes payable in the Philippines by
reason of the importation or sale of the goods.
If neither the imported goods nor identical nor similar imported goods
are sold at or about the time of importation of the goods being valued in the
Philippines in the conditions as imported, the customs value shall, subject to
the conditions set forth in the preceding paragraph hereof, be based on the
unit price at which the imported goods or identical or similar imported goods
sold in the Philippines in the condition as imported at the earliest date after
the importation of the goods being valued but before the expiration of ninety
(90) days after such importation.
If neither the imported goods nor identical nor similar imported goods
are sold in the Philippines in the condition as imported, then, if the importer
so requests, the dutiable value shall be based on the unit price at which the
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imported goods, after further processing, are sold in the greatest aggregate
quantity to persons in the Philippines who are not related to the persons from
whom they buy such goods, subject to allowance for the value added by such
processing and deductions provided under Subsections (D)(1), (2), (3) and (4)
hereof.
(E) Method Five. - Computed Value. - The dutiable value under this method
shall be the computed value which shall be the sum of:
(1) The cost or the value of materials and fabrication or other processing
employed in producing the imported goods;
(2) The amount for profit and general expenses equal to that usually reflected
in the sale of goods of the same class or kind as the goods being valued
which are made by producers in the country of exportation for export to
the Philippines;
(3) The freight, insurance fees and other transportation expenses for the
importation of the goods;
(4) Any assist, if its value is not included under paragraph (1) hereof; and
(5) The cost of containers and packing, if their values are not included under
paragraph (1) hereof.
The Bureau of Customs shall not require or compel any person not
residing in the Philippines to produce for examination, or to allow access to,
any account or other record for the purpose of determining a computed value.
However, information supplied by the producer of the goods for the purposes
of determining the customs value may be verified in another country with the
agreement of the producer and provided they will give sufficient advance
notice to the government of the country in question and the latter does not
object to the investigation.
(F) Method Six. - Fallback Value. - If the dutiable value cannot be determined
under the preceding methods described above, it shall be determined by using
other reasonable means and on the basis of data available in the Philippines.
If the importer so requests, the importer shall be informed in writing of
the dutiable value determined under Method Six and the method used to
determine such value.
No dutiable value shall be determined under Method Six on the basis of:
(1) The selling price in the Philippines of goods produced in the Philippines;
(2) A system that provides for the acceptance for customs purposes of the
higher of two alternative values;
(3) The price of goods in the domestic market of the country of exportation;
(4) The cost of production, other than computed values, that have been
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determined for identical or similar goods in accordance with Method
Five hereof;
(5) The price of goods for export to a country other than the Philippines;
(6) Minimum customs values; or
(7) Arbitrary or fictitious values.
If in the course of determining the dutiable value of imported goods, it
becomes necessary to delay the final determination of such dutiable value, the
importer shall nevertheless be able to secure the release of the imported goods
upon the filing of a sufficient guarantee in the form of a surety bond, a
deposit, cash or some other appropriate instrument in an amount equivalent to
the imposable duties and taxes on the imported goods in question conditioned
upon the payment of customs duties and taxes for which the imported goods
may be liable: Provided, however, That goods, the importation of which is
prohibited by law shall not be released under any circumstance whatsoever.
Nothing in this Section shall be construed as restricting or calling into
question the right of the Collector of Customs to satisfy himself as to the truth
or accuracy of any statement, document or declaration presented for customs
valuation purposes. When a declaration has been presented and where the
customs administration has reason to doubt the truth or accuracy of the
particulars or of documents produced in support of this declaration, the
customs administration may ask the importer to provide further explanation,
including documents or other evidence, that the declared value represents the
total amount actually paid or payable for the imported goods, adjusted in
accordance with the provisions of Subsection (A) hereof.
If, after receiving further information, or in the absence of a response, the
customs administration still has reasonable doubts about the truth or accuracy
of the declared value, it may, without prejudice to an importer's right to
appeal pursuant to Article 11 of the World Trade Organization Agreement on
customs valuation, be deemed that the customs value of the imported goods
cannot be determined under Method One. Before taking a final decision, the
Collector of Customs shall communicate to the importer, in writing if
requested, his grounds for doubting the truth or accuracy of the particulars or
documents produced and give the importer a reasonable opportunity to
respond. When a final decision is made, the customs administration shall
communicate to the importer in writing its decision and the grounds therefor.
Sec. 202. Bases of Dutiable Weight. - On articles that are subject to the
specific rate of duty, based on weight, the duty shall be ascertained as
follows:
(a) When articles are dutiable by the gross weight, the dutiable weight
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thereof shall be the weight of same, together with the weight of all
containers, packages, holders and packing, of any kind, in which said
articles are contained, held or packed at the time of importation.
(b) When articles are dutiable by the legal weight thereof shall be the
weight of same, together with the weight of the immediate
containers, holders and/or packing in which such articles are usually
contained, held or packed at the time of importation and/or, when
imported in retail packages, at the time of their sale to the public in
usual retail quantities:
Provided, That when articles are packed in single container, the
weight of the latter shall be included in the legal weight.
(c) When articles are dutiable by the net weight, the dutiable weight
thereof shall be only the actual weight of the articles at the time of
importation, excluding the weight of the immediate and all other
containers, holders or packing in which such articles are contained,
held or packed.
(d) Articles affixed to cardboard, cards, paper, wood or similar common
material shall be dutiable together with the weight of such holders.
(e) When a single package contains imported articles dutiable according
to different weights, or to weight and value, the common exterior
receptacles shall be prorated and the different proportions thereof
treated in accordance with the provisions of this Code as to the
dutiability or non-dutiability of such packing.
Sec. 204. Effective Date of Rates of Import Duty. - Imported articles shall be
subject to the rate or rates of import duty existing at the time of entry, or
withdrawal from warehouse, in the Philippines, for consumption.
On and after the day when this Code shall go into effect, all articles
previously imported, for which no entry has been made, and all articles
previously entered without payment of duty and under bond for warehousing,
transportation, or any other purpose, for which no permit of delivery to the
importer or his agent has been issued, shall be subject to the rates of any duty
imposed by this Code and to any other duty, upon the entry, or withdrawal
thereof from warehouse, for consumption.
On article abandoned or forfeited to, or seized by, the government, and
then sold at public auction, the rates of duty and the tariff in force on the date
of the auction shall apply: Provided, That duty based on the weight, volume
and quantity of articles shall be levied and collected on the weight, volume
and quantity at the time of their entry into the warehouse or the date of
abandonment, forfeiture and/or seizure.
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Sec. 205. Entry, or Withdrawal from Warehouse, for Consumption. - Imported
articles shall be deemed "entered" in the Philippines for consumption when
the specified entry form is properly filed and accepted, together with any
related documents required by the provisions of this Code and/or regulations
to be filed with such form at the time of entry, at the port or station by the
customs official designated to receive such entry papers and any duties, taxes,
fees and/or other lawful charges required to be paid at the time of making
such entry have been paid or secured to be paid with the customs official
designated to receive such monies, provided that the article has previously
arrived within the limits of the port of entry.
Imported articles shall be deemed "withdrawn" from warehouse in the
Philippines for consumption when the specified form is properly filed and
accepted, together with any related documents required by any provisions of
this Code and/or regulations to be filed with such form at the time of
withdrawal, by the customs official designated to receive the withdrawal
entry and any duties, taxes, fees and/or other lawful charges required to be
paid at the time of withdrawal have been deposited with the customs official
designated to receive such payment.
Sec. 1308. Invoice Contents of . Invoice of articles imported into the
Philippines shall set forth
a. The place where, the date when, and the person by whom and the
person to whom the articles are sold or agreed to be sold, or if to be
imported otherwise than in pursuance of a purchase, the place from
which shipped, the date when, and the person to whom and the
person by whom they are shipped;
b. The port of entry to which the articles are destined;
c. A detailed description of the articles in customary terms or
commercial designation, including the grade or quality, numbers,
marks or symbols under which sold by the seller or manufacturer,
together with the marks and numbers of the packages in which the
articles are packed;
d. The quantities in the weights and measures of the country or place
from which the articles are shipped, or in the weights and measures
of the Philippines;
e. The purchase price of each item in the currency of the purchase and
in the unit of the quantity in which the articles were bought and sold
in the place or country of exportation, if the articles are shipped in
pursuance of a purchase or an agreement to purchase;
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f. The kind of currency; whether gold, silver or paper;
g. If the articles are shipped otherwise than in pursuance of a purchase
or an agreement to purchase, the value for each item in the unit of
quantity in which the articles are usually bought and sold, and in the
currency in which the transactions are usually made, or, in the
absence of such value, the price in such currency which the
manufacturer, seller, shipper or owner would have received, or was
willing to receive, for such articles if sold in the ordinary course of
trade and in the usual wholesale quantities in the country of
exportation;
h. All charges upon the articles itemized by name and amount when
known to the seller or shipper; or all charges by name (e.g.,
commission, insurance, freight, cases, containers, coverings and cost
of packing) included in invoice prices when the amounts for such
charges are unknown to the seller or shipper;
i. All discounts, rebates, drawbacks and bounties separately itemized,
allowed upon the exportation of the articles, all internal and excise
taxes applicable to the home market;
j. The current price at which same, like or similar article is offered for
sale for exportation to the Philippines, on the date the invoice is
prepared or the date of exportation; and
k. Any other facts deemed necessary to a proper examination,
appraisement and classification of the articles which the
Commissioner may require.
Sec. 1309. Certification of Invoice.
a. Consular Certification Required. Invoice required by the
preceding section shall, at or before the shipment of the articles or as
soon thereafter as conditions will permit, be produced for
certification to the consular officer of the Philippines of the consular
district in which the articles were manufactured or purchased, or
from which they are shipped, as the case may be: Provided, That in
the absence of a Philippine consul in the country of exportation, such
invoice may be certified by the consul of any friendly country in the
country of exportation, or by any responsible official of the country
of exportation.
b. Declaration. Every invoice prescribed above shall contain a
declaration signed by the purchaser, manufacturer, seller, owner or
agent setting forth that the invoice is in all respects correct and true
and was made at the place whence the articles are exported to the
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Philippines; that it contains, if the articles were obtained by purchase
or an agreement to purchase, a true and full statement of the date
when, the place where, the person from whom the same were
purchased and the purchase price and unit of quantity thereof, and of
all charges thereon; and that no discounts, bounties or drawbacks are
contained in the invoice except such as have been allowed thereon;
and when obtained in any other manner than by purchase or an
agreement to purchase, the market value on wholesale price thereof
at the time of exportation to the Philippines in the principal market
of the country from which exported; that such market value is the
price in the unit of quantity at which the articles described in the
invoice are freely offered for sale to all purchasers in said market for
exportation to the Philippines, and that it is the price which the
manufacturer, seller, owner or agent making the declaration would
have received and was willing to receive for such articles when sold
in the ordinary course of trade in the usual wholesale quantities, and
that it included all charges thereon; that the number, weight,
measurement or quantity stated is correct, and that no invoice of the
articles described different from the invoice so produced has been or
will be furnished to anyone.
If the articles were purchased, or shipped otherwise than in
pursuance of a purchase or an agreement to purchase, the declaration
shall also contain a statement that the amount in the unit of quantity
shown is that which was paid, or the price in the unit of quantity that
the shipper would have received, or was willing to receive, for such
articles, and that the currency stated in such invoice is the currency
of the purchase, or in which the transaction is usually made.
c. Making and Signing. The invoice to be certified in accordance
with the provisions of this section shall be made out in five copies
and signed by the manufacturer or seller if the articles have been
purchase, or by the manufacturer, shipper or owner thereof if the
same have been procured or obtained otherwise than by purchase, or
by the duly authorized agent of such manufacturer, seller, shipper or
owner.
d. Purchases in Different Consular Districts. When articles have
been purchased in different consular districts for shipment to the
Philippines and are assembled for shipment and embraced in a single
invoice which is produced for certification under the provisions of
this section, there shall be attached to the consular invoice the
original bills or invoices certified by the manufacturer or seller and
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received by the shipper showing the prices paid or to be paid for
such articles. The consular officer to whom the invoice is so
produced for certification may require that any such original bill or
invoice be certified by the consular officer for the district in which
the articles were purchased.
e. Disposition. The original and the quintuplicate of the invoice
shall be delivered to the exporter, the former to be forwarded to the
consignee for use in making entry of the articles. The duplicate shall
be filed in the office of the consular officer by whom the invoice was
certified there to be kept until the Secretary of Foreign Affairs
authorizes its destruction. The triplicate shall be promptly
transmitted by the consular officer to the Collector of the port of
entry named in the invoice, and the quadruplicate to the Tariff
Commission, through the Department of Foreign Affairs.
Sec. 1310. Invoice to Accompany Every Importation over P500 in Export
Value. Except in case of personal and household effects accompanying a
passenger as baggage, or arriving within a reasonable time which in no case
shall exceed ninety days before or after the owner's return, or in case of other
articles brought in for personal use, no importation of articles exceeding five
hundred pesos in export value shall be admitted to entry without the
production of a duly certified invoice of the kind hereinabove described, or
the filing of an affidavit made by the owner, importer or consignee before the
Collector, showing why it is not possible to produce such invoice, together
with a bond, conditioned upon the production of such invoice within a
reasonable time, in an amount prescribed by law, rules or regulations. In the
absence of such invoice, no entry shall be made based on the aforesaid
affidavit unless the same be accompanied by a commercial invoice signed by
the manufacturer or seller or a statement in the form of an invoice showing
the purchase price of such articles in the unit of quantity and currency of the
purchase, if same were purchased, or if obtained otherwise than by purchase,
the market value or wholesale price thereof at the time of exportation to the
Philippines at which sold or offered for sale in the principal markets of the
country from whence imported for export to the Philippines, and in the
currency and unit of quantity in which the transaction is usually made. This
statement shall be verified by the oath of the owner, importer, consignee or
agent desiring to make the entry, taken before the Collector and it shall be
lawful for that official to examine the deponent under oath regarding the
source of his knowledge, information or belief, concerning any matter
contained in his affidavit, and to require him to produce any correspondence,
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document or statement of account in his possession or under his control,
which may assist the customs authorities in ascertaining the value of the
importation or of any part thereof; and in the event of his failure to produce
such correspondence, document or statement of account when so required,
such owner, importer, consignee or agent shall thereafter be barred from
producing such correspondence, document or statement for the purpose of
avoiding the imposition of additional duty, penalty or forfeiture incurred
under this Code or any other Act in force in the Philippines unless it is shown
to the satisfaction of the Collector that it was not in his power to produce the
same when so demanded; but no articles shall be admitted to entry under the
provisions of this section unless the Collector shall be satisfied that the failure
to produce the required invoice is due to causes beyond the control of the
owner, importer, consignee or agent: Provided, That whenever it is shown to
the satisfaction of the Collector that it is impossible to produce the consular
invoice required by this section, the entry of the articles may be effected upon
the filing of a commercial or pro forma invoice and the payment of a
surcharge provided by section twenty-five hundred and two of this Code.
Sec. 1313. Information Furnished Prior to Entry.
a. As to Classification. When an article imported or intended to be
imported is not specifically mentioned in this Code, the interested
party, importer or foreign exporter may submit to the Tariff
Commission a sample together with a full description of its
component materials and uses, and request it in writing to indicate
the heading under which the article is or shall be dutiable, and the
Tariff Commission shall comply with such request if it is satisfied
that the application is made in good faith, in which case
classification of the article in question, upon the particular
importation involved, shall be made according to the heading
indicated by the Tariff Commission.
b. As to Value. Upon written application of the consignee or his
agent, the Collector shall furnish any importer the latest information
in his possession as to the value of the articles to be entered at his
port, after arrival or upon satisfactory evidence that they have been
exported and are en route to the Philippines: Provided, that the
information shall be given only if the Collector is satisfied after
questioning the importer and examining all pertinent papers
presented to him, such as invoices, contracts of sale or purchase, and
orders, that the importer is acting in good faith and is unable to
obtain proper information as to the value of the articles on the date
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of exportation due to unusual conditions: And Provided, further,
That the information so given is in no sense an appraisal or binding
upon the Collector's action on appraisal.
C. SPECIAL DUTIES
a. Dumping (Sec. 301)
Sec. 301. Dumping Duty. -
a. Whenever the Secretary of Finance (hereinafter called the
"Secretary") has reason to believe, from invoices or other documents
or newspapers, magazines or information made available by any
government agency or interested party, that a specific kind or class
of foreign article, is being imported into, or sold or is likely to be
sold in the Philippines, at a price less than its fair value, the
importation and sale of which might injure, or retard the
establishment of, or is likely to injure, an industry producing like
goods in the Philippines, he shall so advise the Tariff Commission
(hereinafter called the "Commission"), and shall instruct the
Collector of Customs to require an anti-dumping bond of twice the
dutiable value of the imported article coming from the specific
country.
b. The Commission, upon receipt of the advice from the Secretary shall
conduct an investigation to:
1. Verify if the kind or class of article in question is being imported
into, or sold or is likely to be sold in the Philippines at a price
less than its fair value;
The fair value of an article shall be its home consumption
price, excluding internal excise tax.
If the fair value of an article cannot be determined, the
following rules shall apply:
i. If the home consumption price is unreliable because of
association or a compensatory arrangement between the
exporter and the importer or a third party, or if the quality
of like to similar articles sold by the producers for home
consumption is negligible in relation to the quality sold for
exportation to countries other than the Philippines as to be
an inadequate basis for comparison, then the fair value of
the articles shall be based from the export price of like
articles sold to countries other than the Philippines, or
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ii. If the country of export is a state-controlled economy, then
the fair value of like articles shall be the home consumption
price of like articles in a proxy country at the same stage of
economic development which is a proven or established
competitive producer of the article under consideration.
iii. In the case where products are not imported directly from
the country of origin but are exported to the country of
importation from an intermediate country, the fair value
shall be the home consumption in the country of origin or
the country of export whichever is higher.
iv. If the fair value of such or like articles cannot be
determined in accordance with the preceding paragraphs
then, the fair value of the article under consideration shall
be its cost of production as determined of calculated from
reasonably available data.
2. Determine if, as a result thereof, an industry producing like
goods in the Philippines, is being injured or is likely to be
injured or is retarded from being established by reason of the
importation or sale of that kind or class of article into the
Philippines: Provided, That a finding that an article is being
imported into the Philippines at a price less than its fair market
value shall be deemed prima facie proof of injury, or retarding
the establishment of an industry producing like goods in the
Philippines: And provided, further, That in determining whether
the domestic industry has suffered is being threatened with
injury, the Commission shall determine whether the wholesale
prices at which the domestic products are sold are reasonable,
taking into account the cost of raw materials, labor, overhead, a
fair return on investment and the overall efficiency of the
industry; and
3. Ascertain the difference, if any, between the purchase price and
the fair market value of the article. The Commission shall
submit its findings to the Secretary within sixty (60) days after
the submission of the memoranda of the parties which shall not
be later than fifteen (15) days after the termination of the public
hearing.
c. The Secretary shall, within sixty (60) days after receipt of the report
of the Commission, decide whether the article in question is being
imported in violation of this section and shall give due notice of such
decision and shall direct the Commissioner of Customs to cause the
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dumping duty, to be levied, collected and paid, as prescribed in this
section, in addition to any other duties, taxes and charges as
prescribed in this section, addition to any other duties, taxes and
charges imposed by law on such article, and on the articles of the
same specific kind or class subsequently imported under similar
circumstances coming from the specific country.
d. The "Dumping Duty" as provided for in sub-section "c" hereof shall
be equal to the difference between the actual purchase price and the
fair value of the article as determined in the dumping decision. All
importations of like articles within sixty (60)days immediately
preceding the filing of the protest are covered by the investigation.
However, in cases of subsequent importations of the same kind or
class of article from the specific country named in the protest, the
dumping duty shall be equal to the difference between the actual
purchase price and the fair value actually existing at the time of
importation as determined by the Tariff Commission from the
supporting documents submitted or from other reliable sources.
e. Pending investigation and final decision of the case, the article in
question, and articles of the same specific kind or class subsequently
imported under similar circumstances, shall be released to the owner,
importer, consignee or agent upon the giving of a bond in an amount
equal to twice the estimated dutiable value thereof.
f. Any aggrieved party may appeal only the amount of the dumping
duty to the Court of Tax Appeals in the same manner and within the
same period provided for by law in the case of appeal from decision
of the Commissioner of Customs.
g. (1) The article, if it has not been previously released under bond as
provided for in subsection "e" hereof, shall be released after payment
by the party concerned of the corresponding dumping duty in
addition to any ordinary duties, taxes, and charges, if any, or re-
exported by the owner, importer, consignee or agent, at his option
and expense, upon the filing of a bond in an amount equal to twice
the estimated dutiable value of the article, conditioned upon
presentation of landing certificate issued by a consular officer of the
Philippines at the country of destination; or
(2) If the article has been previously released under bond, as
provided in subsection "e" hereof, the party concerned shall be
required to pay the corresponding dumping duty in addition to any
ordinary duties, taxes and charges, if any.
h. Any investigation to be conducted by the Commission under this
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section shall include a public hearing or hearings where the importer,
consignee or agent, of the imported article, the local producers of a
like article, other parties directly affected, and such other parties as
in the judgment of the Commission are entitled to appear, shall be
given an opportunity to be heard and to present evidence bearing on
the subject matter.
i. The established dumping duty shall be subject to adjustment based
on the prevailing home consumption price or the exporter's sales
price to third country or the home consumption price of a proxy
country or in the absence thereof, the cost of production. The
Commission shall conduct quarterly examination and/or verification
of the fair value to determine the necessity of adjustment. Should the
Secretary, upon receipt of the report of the Commission, find that
there is a need for an adjustment he shall direct the commissioner of
Customs to effect the necessary adjustment in dumping duty.
The Philippines Finance Attache or, in the absence thereof, the
Commercial Attache or, in the absence thereof, the diplomatic officer
and/or consular officer abroad shall be advised by the Secretary of
any article covered by dumping decision. The concerned Attache or
the Officer shall submit quarterly report on home consumption
prices, or in the absence thereof, the cost of production, of said
articles to the Secretary and the Commission, thru the department
head.
j. Whenever the Commission, on its own motion or upon the
application of any interested party, finds that any of the conditions
which necessitated the imposition of the dumping duty has ceased to
exist, it shall submit the necessary recommendation to the Secretary
for the discontinuance or modification of such dumping duty. Any
decision or order made under this section by the Secretary shall be
published in the Official Gazette and/or in a newspaper of general
circulation.
k. Any dumping decision promulgated by the Secretary shall be
effective for a period of five years from the time of its promulgation
except upon the representation of the interested party of the necessity
to continues the implementation of said decision, in which case the
Secretary shall advice the Commission to conduct an investigation to
determine whether the conditions in paragraphs b-1 and b-2 still
exist. The action for extension shall be brought before the Secretary
at least six (6) months before the expiration of the period.
The findings of the Commission shall be submitted to the
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Secretary at least three (3) months before the expiration of the
period.
[All industries protected by any dumping decision for five years
or more from the time of its promulgation may apply for extension to
the Secretary within six (6) months from effectivity of this Decree.
The decision shall be deemed terminated upon failure to file the
application within the period so provided.]
l. The Secretary and the Commission shall promulgate all rules and
regulations necessary to carry out their respective functions under
this Section.
b. Countervailing (Sec. 302)
Sec. 302. Countervailing Duty. -
a. Whenever any article is directly or indirectly granted any bounty,
subsidy or subvention upon its production, manufacture or exportation in the
country of origin and/or exportation, and the importation of which has been
determined by the Secretary, after investigation and report of the
Commission, as likely to injure an established industry, or prevent or
considerably retard the establishment of an industry in the Philippines, there
shall be levied a countervailing duty equal to the ascertained or estimated
amount of such bounty, countervailing duty equal to the ascertained or
estimated amount of such bounty, subsidy or subvention: Provided, That the
injury criterion to a domestic industry shall be applied only in case of imports
from countries which adhere to the GATT Code on Subsidies and
Countervailing Duties; Provided further, That the exemption of any exported
article from duty or tax imposed on like articles when destined for
consumption in the country of origin and/or exportation or the refunding of
such duty or tax, shall not be deemed to constitute a grant of a bounty,
subsidy or subvention within the meaning of this subsection: Provided,
furthermore, That should an article be allowed drawback by the country of
origin and/or exportation, only the ascertained or estimated excess of the
amount of the drawback over the total amount of the duties and/or internal
taxes, if any, shall constitute a bounty, subsidy or subvention: Provided,
finally, That petitions for imposition of countervailing duty shall be filed with
the Secretary of Finance. Upon finding of a prima facie case of bounty,
subsidy or subvention enjoyed by the imported article and injury to, or
likelihood of injury to a domestic industry, the Secretary shall refer the case to
the Tariff Commission for investigation for investigation and shall instruct the
Commissioner of Customs to require the filing of countervailing bonds for
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importations entered during the pendency of countervailingproceedings;
b. The Secretary shall, after receipt of the reports of the Commission,
decide whether the article in question is granted any bounty, subsidy or
subvention and if so, fix the countervailing duty equal to the ascertained or
estimated bounty, subsidy or subvention.He shall give due notice of his
decision and shall direct the Commissioner of Customs to cause the
countervailing duty to be levied, collected and paid in addition to any
ordinary duties, taxes and charges imposed by law on such articles and on
articles of the same specific kind or class subsequently imported under similar
circumstances;
c. Pending investigation and final decision of the case, the article in
question shall not be released from customs custody to the owner except upon
the filing of a bond equal to the ascertained or estimated amount of bounty,
subsidy or subvention as provisionally determined by the Secretary of
Finance;
d. The article, if not previously released under bond as provided for in
this section, shall be released after payment by the party concerned of the
corresponding countervailing duty in addition to any ordinary duties, taxes
and charges, if any, or re-exported upon the filing of a bond in an amount
twice the estimated dutiable value of the article, conditioned upon the
presentation of a landing certificate issued by a consular officer of the
Philippines at the country of destination. If the article has been previously
released under bond, the party concerned shall be required to pay the
corresponding countervailing duty in addition to ordinary duties, taxes and
other charges, if any;
e. Whenever the Commission, on its motion or upon application of any
interested party, finds that the condition which necessitated the imposition of
the countervailing duty has ceased to exist, it shall submit the necessary
recommendations to the Secretary for the discontinuance of the imposition of
that duty. Any order made under this section by the Secretary shall be
published in the Official Gazette and/or in a newspaper of general circulation;
f. Any countervailing decision promulgated by the Secretary shall be
effective for a period of five (5) years from the time of its promulgation
except upon the representation of the interested party of the necessity to
continue the implementation of said decision, in which case the Secretary
shall advise the Commission to conduct an investigation to determine whether
the conditions in paragraph "a" still exist. The action for extension shall be
brought before the Secretary at least six (6) months before the expiration of
the period.
The findings of the Commission shall be submitted to the Secretary at
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least three (3) months before the expiration of the period.
g. The Secretary and the Commission shall promulgate all rules and
regulations necessary to carry out their respective functions under this
section.
c. Marking (Sec. 303)
Sec. 303. Marking of Imported Articles and Containers. -
a. Marking of Articles. - Except as hereinafter provided, every article
of foreign origin (or its container, as provided in subsection "b"
hereof) imported into the Philippines shall be marked in any official
language of the Philippines and in a conspicuous place as legibly,
indelibly and permanently as the nature of the article (or container)
will permit in such manner as to indicate to an ultimate purchaser in
the Philippines the name of the country of origin of the article. The
Commissioner of Customs shall, with the approval of the department
head, issue rules and regulations to
1. Determine the character of words and phrases or abbreviation
thereof which shall be acceptable as indicating the country of
origin and prescribe any reasonable method of marking, whether
by printing, stenciling, stamping, branding, labelling or by any
other reasonable method, and a conspicuous place on the article
or container where the marking shall appear.
2. Require the addition of any other words or symbols which may
be appropriate to prevent deception or mistake as to the origin of
the article or as to the origin of any other article with which such
imported article is usually combined subsequent to importation
but before delivery to an ultimate purchaser; and
3. Authorize the exception of any article from the requirements of
marking if -
a. Such article is incapable of being marked;
b. Such article cannot be marked prior to shipment to the
Philippines without injury;
c. Such article cannot be marked prior to shipment to the
Philippines, except at an expense economically prohibitive
of its importation;
d. The marking of a container of such article will reasonably
indicate the origin of such article;
e. Such article is a crude substance;
f. Such article is imported for use by the importer and not
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intended for sale in its imported or any other form;
g. Such article is to be processed in the Philippines by the
importer or for his account otherwise than for the purpose
of concealing the origin of such article and in such manner
that any mark contemplated by this section would
necessarily be obliterated, destroyed or permanently
concealed;
h. An ultimate purchaser, by reason of the character of such
article or by reason of the circumstances of its importation
must necessarily know the country of origin of such article
even though it is not marked to indicate its origin;
i. Such article was produced more than twenty years prior to
its importation into the Philippines; or
j. Such article cannot be marked after importation except at
an expense which is economically prohibitive, and the
failure to mark the article before importation was not due to
any purpose of the importer, producer, seller or shipper to
avoid compliance with this section.
b. Marking of Containers. - Whenever an article is excepted under
subdivision (3) of subsection "a" of this section from the
requirements of marking, the immediate container, if any, of such
article, or such other container or containers of such article as may
be prescribed by the Commissioner of Customs with the approval of
the department head, shall be marked in such manner as to indicate
to an ultimate purchaser in the Philippines the name of the country of
origin of such article in any official language of the Philippines,
subject to all provisions of this section, including the same
exceptions as are applicable to articles under subdivision (3) of
subsection "a".
c. Marking Duty for Failure to Mark. - If at the time of importation any
article (or its container, as provided in subsection "b" hereof), is not
marked in accordance with the requirements of this section, there
shall be levied, collected and paid upon such article a marking duty
of 5 per cent ad valorem, which shall be deemed to have accrued at
the time of importation, except when such article is exported or
destroyed under customs supervision and prior to the final
liquidation of the corresponding entry.
d. Delivery Withheld Until Marked. - No imported article held in
customs custody for inspection, examination or appraisement shall
be delivered until such article and/or its containers, whether released
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or not from customs custody, shall have been marked in accordance
with the requirements of this section and until the amount of duty
estimated to be payable under subsection "c" of this section shall
have been deposited. Nothing in this section shall be construed as
excepting any article or its container from the particular
requirements of marking provided for in any provision of law.
e. The failure or refusal of the owner or importer to mark the articles as
herein required within a period of thirty days after due notice shall
constitute as an act of abandonment of said articles and their
disposition shall be governed by the provisions of this Code relative
to abandonment of imported articles.
d. Discriminatory (Sec. 304)
Sec. 304. Discrimination by Foreign Countries. -
a. The President, when he finds that the public interest will be serves
thereby, shall by proclamation specify and declare new or additional
duties in an amount not exceeding one hundred (100) per cent ad
valorem upon articles wholly or in part the growth or product of, or
imported in a vessel of, any foreign country whenever he shall find
as a fact that such country -
1. Imposes, directly or indirectly, upon the disposition or
transportation in transit through or re-exportation from such
country of any article wholly or in part the growth or product of
the Philippines, any unreasonable charge, exaction, regulation or
limitation which is not equally enforced upon the like articles of
every foreign country; or
2. Discriminates in fact against the commerce of the Philippines,
directly or indirectly, by law or administrative regulation or
practice, by or in respect to any customs, tonnage, or port duty,
fee, charge, exaction, classification, regulation, condition,
restriction or prohibition, in such manner as to place the
commerce of the Philippines at a disadvantage compared with
the commerce of any foreign country.
b. If at any time the President shall find it to be a fact that any foreign
country has not only discriminated against the commerce of the
Philippines, as aforesaid, but has, after the issuance of a
proclamation as authorized in subsection "a" of this section,
maintained or increased its said discrimination against the commerce
of the Philippines, the President is hereby authorized, if he deems it
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consistent with the interests of the Philippines, to issue a further
proclamation directing that such product of said country or such
article imported in its vessels as he shall deem consistent with the
public interests, shall be excluded from importation into the
Philippines.
c. Any proclamation issued by the President under this section shall, if
he deems it consistent with the interest of the Philippines, extend to
the whole of any foreign country or may be confined to any
subdivision or subdivisions thereof; and the President shall,
whenever he deems the public interests require, suspend, revoke,
supplement or amend any such proclamation.
d. All articles imported contrary to the provisions of this section shall
be forfeited to the Government of the Philippines and shall be liable
to be seized, prosecuted and condemned in like manner and under
the same regulations, restrictions and provisions as may from time to
time be established for the recovery, collection, distribution and
remission or forfeiture to the government by the tariff and customs
laws. Whenever the provision of this section shall be applicable to
importations into the Philippines of articles wholly or in part the
growth or product of any foreign country, they shall be applicable
thereto, whether such articles are imported directly or indirectly.
e. It shall be the duty of the Commission to ascertain and at all times to
be informed whether any of the discrimination against the commerce
of the Philippines enumerated in subsections "a" and "b" of this
section are practiced by any country; and if and when such
discriminatory acts are disclosed, it shall be the duty of the
Commission to bring the matter to the attention of the President,
together with recommendations.
f. The Secretary of finance shall make such rules and regulations as are
necessary for the execution of such proclamation as the President
may issue in accordance with the provisions of this section.
D. FLEXIBLE TARIFF RATES (SEC. 401)
Sec. 401. Flexible Clause. -
a. In the interest of national economy, general welfare and/or national
security, and subject to the limitations herein prescribed, the
President, upon recommendation of the National Economic and
Development Authority (hereinafter referred to as NEDA), is hereby
empowered: (1) to increase, reduce or remove existing protective
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rates of import duty (including any necessary change in
classification). The existing rates may be increased or decreased to
any level, in one or several stages but in no case shall the increased
rate of import duty be higher than a maximum of one hundred (100)
per cent ad valorem; (2) to establish import quota or to ban imports
of any commodity, as may be necessary; and (3) to impose an
additional duty on all imports not exceeding ten (10%) per cent ad
valorem whenever necessary; Provided, That upon periodic
investigations by the Tariff Commission and recommendation of the
NEDA, the President may cause a gradual reduction of protection
levels granted in Section One Hundred and Four of this Code,
including those subsequently granted pursuant to this section.
b. Before any recommendation is submitted to the President by the
NEDA pursuant to the provisions of this section, except in the
imposition of an additional duty not exceeding ten (10) per cent ad
valorem, the Commission shall conduct an investigation in the
course of which they shall hold public hearings wherein interested
parties shall be afforded reasonable opportunity to be present,
produce evidence and to be heard. The Commission shall also hear
the views and recommendations of any government office, agency or
instrumentality concerned. The Commission shall submit their
findings and recommendations to the NEDA within thirty (30) days
after the termination of the public hearings.
c. The power of the President to increase or decrease rates of import
duty within the limits fixed in subsection "a" shall include the
authority to modify the form of duty. In modifying the form of duty,
the corresponding ad valorem or specific equivalents of the duty
with respect to imports from the principal competing foreign country
for the most recent representative period shall be used as bases.
d. The Commissioner of Customs shall regularly furnish the
Commission a copy of all customs import entries as filed in the
Bureau of Customs. The Commission or its duly authorized
representatives shall have access to, and the right to copy all
liquidated customs import entries and other documents appended
thereto as finally filed in the Commission on Audit.
e. The NEDA shall promulgate rules and regulations necessary to carry
out the provisions of this section.
f. Any Order issued by the President pursuant to the provisions of this
section shall take effect thirty (3) days after promulgation, except in
the imposition of additional duty not exceeding ten (10) per cent ad
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valorem which shall take effect at the discretion of the President.
IV. IMPOSITION OF DUTIES
A. PERSONS LIABLE (SECS. 1203-5)
Sec. 1203. Owner of Imported Articles. All articles imported into the
Philippines shall be held to be the property of the person to whom the same
are consigned; and the holder of a bill of lading duly indorsed by the
consignee therein named, or, if consigned to order, by the consignor, shall be
deemed the consignee thereof. The underwriters of abandoned articles and the
salvors of articles saved from a wreck at sea, along a coast or in any area of
the Philippine may be regarded as the consignees.
Sec. 1204. Liability of Importer for Duties. Unless relieved by laws or
regulations, the liability for duties, taxes, fees and other charges attaching on
importation constitutes a personal debt due from the importer to the
government which can be discharged only by payment in full of all duties,
taxes, fees and other charges legally accruing. It also constitutes a lien upon
the articles imported which may be enforced while such articles are in
custody or subject to the control of the government.
Sec. 1205. Importations by the Government. Except as otherwise
specifically provided, all importations by the government for its own use or
that of its subordinate branches on instrumentalities, or corporations, agencies
or instrumentalities owned or controlled by the government, shall be subject
to the duties, taxes, fees and other charges provided for in this Code:
Provided, however, That upon certification of the head of the department or
political subdivision concerned, with the approval of the Auditor General, that
the imported article is actually being used by the government or any of its
political subdivision concerned, the amount of duty, tax, fee or charge shall be
refunded to the government or the political subdivision which paid it.
B. DECLARATION (SECS. 1302-1307)
Sec. 1302. Import Entries. - All imported articles, except importations
admitted free of duty under Subsection "k", Section one hundred and five of
this Code, shall be subject to a formal or informal entry. Articles of a
commercial nature intended for sale, barter or hire, the dutiable value of
which is Two thousand pesos (P2,000.00) or less, land personal and
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household effects or articles, not in commercial quantity, imported in
passenger's baggage, mail or otherwise, for personal use, shall be cleared on
an informal entry whenever duty, tax or other charges are collectible.
The Commissioner may, upon instruction of the Secretary of Finance, for
the protection of domestic industry or of the revenue, require a formal entry,
regardless of value, whatever be the purpose and nature of the importation.
A formal entry may be for immediate consumption, or under irrevocable
domestic letter of credit, bank guarantee or bond for:
(a) Placing the article in customs bonded warehouse;
(b) Constructive warehousing and immediate transportation to other port
of the Philippines upon proper examination and appraisal; or
(c) Constructive warehousing and immediate exportation.
Import entries under irrevocable domestic letter of credit, bank guarantee
or bond shall be subject to the provisions of Title V, Book II of this Code.
All importations entered under formal entry shall be covered by a letter
of credit or any other verifiable document evidencing payment.
Sec. 1303. Entry of Articles in Part for Consumption and in Part for
Warehousing. Import entries of articles covered by one bill of lading may
be made simultaneously for both consumption and warehouse. Where an
intent to export the articles is shown by the bill of lading and invoice, the
whole or a part of a bill of lading (not less than one package may be entered
for warehouse and immediate exportation. Articles received at any port from
another port of the Philippines on any entry for immediate transportation
without appraisal may be entered at the port of delivery either for
consumption or warehouse.
Sec. 1304. Declaration of the Import Entry. Except in case of informal
entry, no entry of imported article shall be effected until there shall have been
submitted to the Collector a written declaration, in such form as shall be
prescribed by the Commissioner, containing statements of substance as
follows:
a. That the entry delivered to the Collector contains a full and true
statement of all the articles which are the subject of the entry.
b. That the invoice and entry contain a just and faithful account of the
actual cost of said articles, including and specifying the value of all
containers or coverings, and that nothing has been omitted therefrom
or concealed whereby the Government of the Republic of the
Philippines might be defrauded of any part of the duties lawfully due
on the articles.
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c. That, to the best of declarant's information and belief, the invoice
and all bills of lading relating to the articles are the only ones in
existence relating to the importation in question and that they are in
the state in which they were actually received by him; and,
furthermore,
d. That, to the best of the declarant's information and belief, the entry,
invoice and bill of lading, and the declaration thereon are in all
respects genuine and true, and were made by the person by whom
the same purport to have been made, respectively.
Sec. 1305. By Whom to be Signed. The declaration shall be signed by the
importer, consignee or holder of the bill, by or for whom the entry is effected,
if such person is an individual, or in case of a corporation, firm or association,
by its manager, or by a licensed customs broker duly authorized to act for
either of them. When it is impracticable to obtain a declaration thus signed,
the Collector may allow it to be signed by some person in interest having first
and best knowledge of the facts. A Collector may also, in his discretion,
require that the declaration shall be sworn to by the person signing the same.
Sec. 1306. Form and Contents of Import Entry. Import entries shall be in
the required number of copies in such form as prescribed by regulations. They
shall be signed by the person making the entry of the articles, and shall
contain the names of the importing vessel and master, port of departure and
date of arrival, the number and marks of packages, or the quantity, if in bulk,
and the nature of the articles contained therein, and its value as set forth in a
proper invoice to be presented in duplicate with the entry.
Sec. 1307. Description of Articles. The description of the articles in the
import entry shall be in customary terms or communal designation, or, if
feasible and practical, in tariff terms, and in the currency of the invoice; and
the values of the several classes of articles shall be separately declared
according to their respective rates of duty, and the totals of each class duly
shown.
C. EXAMINATION, APPRAISAL, AND CLASSIFICATION (SECS. 1405-8)
Sec. 1405. Proceedings and Report of Appraisers. Appraisers, shall by all
reasonable ways and means, ascertain, estimate and determine the value or
price of the articles as required by law, any invoice or affidavit thereto or
statement of cost, or of cost of production to the contrary notwithstanding,
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and after revising and correcting the reports of the examine as they may judge
proper, shall report in writing on the face of the entry the value so determined,
irrespective of whether such value is equal, higher or lower than the invoice
and/or entered value of the articles.
Appraisers shall describe all articles on the face of the entry in tariff and
such terms as will enable the Collector to pass upon the appraisal and
classification of the same, which appraisal and classification shall be subject
to his approval or modification, and shall note thereon the measurements and
quantities, and any disagreement with the declaration.
Sec. 1406. Appraisers' Samples. Appraisers shall see that representative
and sufficient samples of all kinds of articles which may be readily sampled
are taken under proper receipt and retained for official purposes; but samples
of articles identical in quality, material and values shall not be retained, if
their return is desired, longer than may be required for use in contested cases.
The quantity and value of the samples taken shall be noted on the face of
the entry. Such samples shall be duly labeled as will definitely identify them
with the importation for which they are taken.
Section 1407. Readjustment of Appraisal, Classification or Return. - Such
appraisal, classification or return as finally passed upon and approved or
modified by the Collector shall not be altered or modified in any manner,
except:
(a) Within one year after payment of the duties, upon statement of error
in conformity with Section seventeen hundred and seven hereof,
approved by the Collector.
(b) Within fifteen days after such payment upon request for reappraisal
and/or reclassification addressed to the Commissioner by the
Collector, if the appraisal and/or classification is deemed to be low.
(c) Upon request for reappraisal and/or reclassification, in the form of a
timely protest addressed to the Collector by the interested party if the
latter should bed dissatisfied with the appraisal or return.
(d) Upon demand by the Commissioner of Customs after the completion
of compliance audit pursuant to the provisions of this Code.
Sec. 1408. Assessment of Duty on Less Than Entered Value. Duty shall not
be assessed in any case upon an amount less than the entered value, unless by
direction of the Commissioner in cases in which the importer certifies at the
time of entry that the entered value is higher than the market value and that
the articles are so entered in order to meet increases made by the appraised on
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similar cases then pending reappraisement; and the lower assessment shall be
allowed only when the importer's contention is sustained by final decision,
and shall appear that such action of the importer was taken in good faith after
due diligence and inquiry on his part.
D. ASSESSMENT OF TAXES
E. LIQUIDATION (SECS. 1601-1603)
Sec. 1601. Liquidation and Record of Entries. If the Collector shall
approve the returns of the appraiser and the report of the weights, gauge or
quantity, the liquidation shall be made on the face of the entry showing the
particulars thereof, initiated by the liquidating clerk, approved by the chief
liquidator, and recorded in the record of liquidations.
A daily record of all entries liquidated shall be posted in the public
corridor of the customhouse, stating the name of the vessel or aircraft, the
port from which she arrived, the date of her arrival, the name of the importer,
and the serial number and date of the entry. A daily record must also be kept
by the Collector of all additional duties, taxes and other charges found upon
liquidation, and notice shall promptly be sent to the interested parties.
Sec. 1602. Tentative Liquidation. If to determine the exact amount due
under the law in whole or in part some future action is required, the
liquidation shall be deemed to be tentative as to the item or items affected and
shall to that extent be subject to future and final readjustment and settlement.
The entry in such case shall be stamped "Tentative liquidation".
Section 1603. Finality of Liquidation. When articles have been entered and
passed free of duty or final adjustments of duties made, with subsequent
delivery, such entry and passage free of duty or settlements of duties will,
after the expiration of three (3) years from the date of the final payment of
duties, in the absence of fraud or protest or compliance audit pursuant to the
provisions of this Code, be final and conclusive upon all parties, unless the
liquidation of the import entry was merely tentative.
V. REMEDIES OF THE GOVERNMENT
A. EXTRAJUDICIAL
a. Enforcement of Tax Lien (Sec. 1508)
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b. Seizure and Forefeiture (Secs. 2205, 2301-2316)
Sec. 2205. Exercise of Power of Seizure and Arrest. It shall be within the
power of a customs official or person authorized as aforesaid, and it shall be
his duty, to make seizure of any vessel, aircraft, cargo, articles, animal or
other movable property when the same is subject to forfeiture or liable for any
fine imposed under customs and tariff laws, and also to arrest any person
subject to arrest for violation of any customs and tariff laws, such power to be
exercised in conformity with the law and the provisions of this Code.
Sec. 2301. Warrant for Detention of Property-Cash Bond. - Upon making any
seizure, the Collector shall issue a warrant for the detention of the property;
and if the owner or importer desires to secure the release of the property for
legitimate use, the Collector shall, with the approval of the Commissioner of
Customs, surrender it upon the filing of a cash bond, in an amount to be fixed
by him, conditioned upon the payment of the appraised value of the article
and/or any fine, expenses and costs which may be adjudged in the case:
Provided, That such importation shall not be released under any bond when
there is a prima facie evidence of fraud in the importation of article:
Provided, further, That articles the importation of which is prohibited by law
shall not be released under any circumstance whatsoever: Provided, finally,
That nothing in this section shall be construed as relieving the owner or
importer from any criminal liability which may arise from any violation of
law committed in connection with the importation of the article.
Sec. 2302. Report of Seizure To Commissioner and Auditor. When a
seizure is made for any cause, the Collector of the district wherein the seizure
is effected shall immediately make report thereof to the Commissioner and to
the Auditor General.
Sec. 2303. Notification to Owner or Importer. The Collector shall give the
owner or importer of the property or his agent a written notice of the seizure
and shall give him an opportunity to be heard in reference to the delinquency
which was the occasion of such seizure.
For the purpose of giving such notice and of all other proceedings in the
matter of such seizure, the importer, consignee or person holding the bill of
lading shall be deemed to be the "owner" of the article included in the bill.
For the same purpose, "agent" shall be deemed to include not only any
agent in fact of the owner of the seized property but also any person having
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responsible possession of the property at the (missing) of the seizure, if the
owner or his agent in fact is unknown or cannot be reached.
Sec. 2304. Notification to Unknown Owner. Notice to an unknown owner
shall be effected by posting a notice for fifteen days in the public corridor of
the customhouse of the district in which the seizure was made, and, in the
discretion of the Commissioner, by publication in a newspaper or by such
other means as he shall consider desirable.
Sec. 2305. Description and Appraisal and Classification of Seized Property.
The Collector shall also cause a list and particular description of the
property seized to be prepared and an appraisement or classification of the
same at its wholesale value in the local market in the usual wholesale
quantities to be made by at least two appraising officials, if there are such
officials at or near the place of seizure; in the absence of such officials, then
by two competent and disinterested citizens of the Philippines, to be selected
by him for that purpose, residing at or near the place of seizure, which list and
appraisement shall be properly attested to by such Collector and the persons
making the appraisal.
Sec. 2306. Proceedings in Case of Property Belonging to Unknown Parties.
If, within fifteen days after the notification prescribed in section twenty-
three hundred and four of this Code, no owner or agent can be found or
appears before the Collector, the latter shall declare the property forfeited to
the government to be sold at auction in accordance with law.
Sec. 2307. Settlement of Case by Payment of Fine or Redemption of Forfeited
Property. If, in any seizure case, the owner or agent shall, while the case is
yet before the Collector of the district of seizure, pay to such Collector the
fine imposed by him or, in case of forfeiture, shall pay the appraised value of
the property, or, if after appeal of the case, he shall pay to the Commissioner
the amount of the fine as finally determined by him, or, in case of forfeiture,
shall pay the appraised value of the property, such property shall be forthwith
surrendered, and all liability which may or might attach to the property by
virtue of the offense which was the occasion of the seizure and all liability
which might have been incurred under any bond given by the owner or agent
in respect to such property shall thereupon be deemed to be discharged.
Redemption of forfeited property shall not be allowed in any case where
the importation is absolutely prohibited or where the surrender of the property
to the person offering to redeem the same would be contrary to law.
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Sec. 2308. Protest and Payment upon Protest in Civil Matters. When a
ruling or decision of the Collector is made whereby liability for duties, fees,
or other money charge is determined, except the fixing of fines in seizure
cases, the party adversely affected may protest such ruling or decision by
presenting to the Collector at the time when payment of the amount claimed
to be due the Government is made, or within thirty days thereafter, a written
protest setting forth his objections to the ruling or decision in question,
together with the reasons therefor. No protest shall be considered unless
payment of the amount due after final liquidation has first been made.
Sec. 2309. Protest Exclusive Remedy in Protestable Case. In all cases
subject to protest, the interested party who desires to have the action of the
Collector reviewed, shall make a protest, otherwise, the action of the
Collector shall be final and conclusive against him, except as to matters
correctible for manifest error in the manner prescribed in section one
thousand seven hundred and seven hereof.
Sec. 2310. Form and Scope of Protest. Every protest shall be filed in
accordance with the prescribed rules and regulations promulgated under this
section and shall point out the particular decision or ruling of the Collector to
which exception is taken or objection made, and shall indicate with
reasonable precision the particular ground or grounds upon which the
protesting party bases his claim for relief.
The scope of a protest shall be limited to the subject matter of a single
adjustment or other independent transaction; but any number of issue may be
raised in a protest with reference to the particular item or items constituting
the subject matter of the protest.
"Single adjustment", as hereinabove used, refers to the entire content of
one liquidation, including all duties, fees, surcharges or fines incident thereto.
Sec. 2311. Samples to be Furnished by Protesting Parties. If the nature of
the articles permit, importers filing protests involving questions of fact must,
upon demand, supply the Collector with samples of the articles which are the
subject matter of the protests. Such samples shall be verified by the custom
official who made the classification against which the protest are filed.
Sec. 2312. Decision or Action by Collector in Protest and Seizure Cases.
When a protest in proper form is presented in a case where protest in
required, the Collector shall reexamine the matter thus presented, and if the
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protest is sustained, in whole or in part, he shall enter the appropriate order,
the entry reliquidated if necessary.
In seizure cases, the Collector, after a hearing, shall in writing make a
declaration of forfeiture or fix the amount of the fine or take such other action
as may be proper.
Sec. 2313. Review by Commissioner. - The person aggrieved by the decision
or action of the Collector in any matter presented upon protest or by his
action in any case of seizure may, within fifteen (15) days after notification in
writing by the Collector of his action or decision, file a written notice to the
Collector with a copy furnished to the Commissioner of his intention to
appeal the action or decision of the Collector to the Commissioner. Thereupon
the Collector shall forthwith transmit all the records of the proceedings to the
Commissioner, who shall approve, modify or reverse the action or decision of
the Collector and take such steps and make such orders as may be necessary
to give effect to his decision: Provided, That when an appeal is filed beyond
the period herein prescribed, the same shall be deemed dismissed.
If in any seizure proceedings, the Collector renders a decision adverse to
the Government, such decision shall be automatically reviewed by the
Commissioner and the records of the case elevated within five (5) days from
the promulgation of the decision of the Collector. The Commissioner shall
render a decision of the automatic appeal within thirty (30) days from receipt
of the records of the case. If the Collector's decision is reversed by the
Commissioner, the decision of the Commissioner shall be final and executory.
However, if the Collector's decision is affirmed, or if within thirty (30) days
from receipt of the records of the case by the Commissioner no decision is
rendered or the decision involves imported articles whose published value is
Five million pesos (P5,000,000) or more, such decision shall be deemed
automatically appealed to the Secretary of Finance and the records of the
proceedings shall be elevated within five (5) days from the promulgation of
the decision of the Commissioner or of the Collector under appeal, as the case
may be: Provided, further, That if the decision of the Commissioner or of the
Collector under appeal, as the case may be, is affirmed by the Secretary of
Finance, or if within thirty (30) days from receipt of the records of the
proceedings by the Secretary of Finance, no decision is rendered, the decision
of the Secretary of Finance, or of the Commissioner, or of the Collector under
appeal, as the case may be, shall become final and executory.
In any seizure proceeding, the release of imported articles shall not be
allowed unless and until a decision of the Collector has been confirmed in
writing by the Commissioner of Customs.
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Sec. 2314. Notice of Decision of Commissioner. Notice of the decision of
the Commissioner shall be given to the party by whom the case was brought
before him for review, and in seizure cases such notice shall be effected by
personal service if practicable.
Sec. 2315. Supervisory Authority of Commissioner And of Department Head
in Certain Cases. If in any case involving the assessment of duties the
importer shall fail to protest the ruling of the Collector, and the Commissioner
shall be of the opinion that the ruling was erroneous and unfavorable to the
Government, the latter may order a reliquidation; and if the ruling of the
Commissioner in any unprotested case should, in the opinion of the
department head, be erroneous and unfavorable to the Government, the
department head may require the Commissioner to order a reliquidation.
Except as in the preceding paragraph provided, the supervisory authority
of the department head over the Bureau of Customs shall not extend to the
administrative review of the ruling of the Commissioner in matters appealed
to the Court of Tax Appeals.
Section 2317. Government's Right of Compulsory Acquisition. - In order to
protect government revenues against the undervaluation of goods subject to
ad valorem duty, the Commissioner of Customs may acquire imported goods
under question for a price equal to their declare customs value plus any duties
already paid on the goods, payment for which shall be made within ten (10)
working days from issuance of a warrant signed by the Commissioner of
Customs for the acquisition of such goods.
An importer who is dissatisfied with a decision of the Commissioner of
Customs pertaining to this section may, within twenty (20) working days after
the date on which notice of the decision is given, appeal to the Secretary of
Finance and thereafter if still dissatisfied, to the court of Tax Appeals as
provided for in Section 2402 of the Tariff and Customs Code of the
Philippines, as amended.
Where no appeal is made by the importer, or upon reaffirmation of the
commissioner's decision during the appeals process, the Bureau of Customs
or its agent shall sell the acquired goods pursuant to existing laws and
regulations.
Nothing in this Section limits or affects any other powers of the Bureau
of Customs with respect to the disposition of the goods or any liability of the
importer or any other person with respect to an offense committed in the
importation of the goods.
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B. JUDICIAL
VI. REMEDIES OF THE TAXPAYER
A. REFUND (SECS. 1707-1708)
Sec. 1707. Correction of Errors Refund of Excess Payments. Manifest
clerical errors made in an invoice or entry, errors in return of weight, measure
and gauge, when duly certified to by the surveyor or examining official (when
there are such officials at the port), and errors in the distribution of charges on
invoices not involving any question of law and certified to by the examining
official, may be corrected in the computation of duties, if such errors be
discovered before the payment of duties, or, if discovered within one year
after the final liquidation, upon written request and notice of error from the
importer, or upon statement of error certified by the Collector.
For the purpose of correcting errors specified in the next preceding
paragraph the Collector is authorized to reliquidate entries and collect
additional charges, or to make refunds on statement of error within the
statutory time limit.
Sec. 1708. Claim for Refund and Mode of Payment. All claims for refund
of duties shall be made in writing, and forwarded to the Collector to whom
such duties are paid, who upon receipt of such claim shall verify the same by
the records of his office, and if found to be correct and in accordance with
law, shall certify the same to the Commissioner with his recommendation
together with all necessary papers and documents. Upon receipt by the
Commissioner of such certified claim he shall cause the same to be paid if
found correct.
B. PROTEST (SECS. 2308, 2310, 2309, 2312)
Sec. 2308. Protest and Payment upon Protest in Civil Matters. When a
ruling or decision of the Collector is made whereby liability for duties, fees,
or other money charge is determined, except the fixing of fines in seizure
cases, the party adversely affected may protest such ruling or decision by
presenting to the Collector at the time when payment of the amount claimed
to be due the Government is made, or within thirty days thereafter, a written
protest setting forth his objections to the ruling or decision in question,
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together with the reasons therefor. No protest shall be considered unless
payment of the amount due after final liquidation has first been made.
Sec. 2309. Protest Exclusive Remedy in Protestable Case. In all cases
subject to protest, the interested party who desires to have the action of the
Collector reviewed, shall make a protest, otherwise, the action of the
Collector shall be final and conclusive against him, except as to matters
correctible for manifest error in the manner prescribed in section one
thousand seven hundred and seven hereof.
Sec. 2310. Form and Scope of Protest. Every protest shall be filed in
accordance with the prescribed rules and regulations promulgated under this
section and shall point out the particular decision or ruling of the Collector to
which exception is taken or objection made, and shall indicate with
reasonable precision the particular ground or grounds upon which the
protesting party bases his claim for relief.
The scope of a protest shall be limited to the subject matter of a single
adjustment or other independent transaction; but any number of issue may be
raised in a protest with reference to the particular item or items constituting
the subject matter of the protest.
"Single adjustment", as hereinabove used, refers to the entire content of
one liquidation, including all duties, fees, surcharges or fines incident thereto.
Sec. 2312. Decision or Action by Collector in Protest and Seizure Cases.
When a protest in proper form is presented in a case where protest in
required, the Collector shall reexamine the matter thus presented, and if the
protest is sustained, in whole or in part, he shall enter the appropriate order,
the entry reliquidated if necessary.
In seizure cases, the Collector, after a hearing, shall in writing make a
declaration of forfeiture or fix the amount of the fine or take such other action
as may be proper.
C. ABANDONMENT (SECS. 1801-3)
Sec. 1801. Abandonment, Kinds and Effects of . - An imported article is
deemed abandoned under any of the following circumstances:
(a) When the owner, importer or consignee of the imported article expressly
signifies in writing to the Collector of Customs his intentions to abandon;
or
(b)When the owner, importer, consignee or interested party after due notice,
BAN ANDRADE, RIAH CUA, FAYE DARVIN, JO-ANNE LEGASPI,
MILDRED QUE, YUMI VILLANUEVA, AZENITH VIOJAN, STEN YAP
4B 2004
Page 109
fails to file an entry within thirty (30) days, which shall not be
extendible, from the date of discharge of the last package from the vessel
or aircraft, or having filed such entry, fails to claim his importation
within fifteen (15) days which shall not likewise be extendible, from the
date of posting of the notice to claim such importation.
Any person who abandons an article or who fails to claim his importation
as provided for in the preceding paragraph shall be deemed to have renounced
all his interests and property rights therein.
Sec. 1802. Abandonment of Imported Articles. - An abandoned article shall
ipso facto be deemed the property of the Government and shall be disposed of
in accordance with the provisions of this Code.
Nothing in this section shall be construed as relieving the owner or
importer from any criminal liability which may arise from any violation of
law committed in connection with the importation of the abandoned article.
Any official or employee of the Bureau of Customs or of other
government agencies who, having knowledge of the existence of an
abandoned article or having control or custody of such abandoned article,
fails to report to the Collector within twenty-four (24) hours from the time the
article is deemed abandoned, shall be punished with the penalties prescribed
in Paragraph 1, Section 3604 of this Code.
Sec. 1803. Right to Reclaim Article. The owner or importer of an article
impliedly abandoned may, at any time before it is sold or otherwise disposed
of, reclaim such article provided all legal requirements regarding its
importation are complied with and the corresponding duties, taxes and other
charges as well as all expenses incurred as a consequence of the
abandonment, are paid.