Taxation is a way of raising income in order to defray the necessary expenses of the government.

It is the inherent
power of the state to demand contribution to finance all the government expenses.

Taxes are classified according to the object, to the bearers of burden, to the determination of amount, to the purpose,
to the scope and to the graduation of rate.

According to the subject matter or object, taxes are either Personal, Poll or Capitation, Property and Excise.

The Personal, Poll or Capitation tax is the fixed amount that is imposed to a person that is residing within a specific
territory. This is regardless to their property, occupation or business.

The Property tax is the tax that is imposed on ones property; whether with is a real property or personal property in
proportion with the property’s value.

The Excise Tax is a tax that is imposed upon the performance of an act as well as the enjoyment of a privilege or the
engaging in a particular occupation.

According to who bears the burden, taxes are either direct or indirect.

The direct tax is the tax that is directly demanded from and paid by the taxpayers.

The Indirect tax is the tax that is demanded from a certain person in the intention as well as expectation that the
particular person shall indemnify himself at the expense of another.

According to the determination of the amount, taxes are further classified to specific and Ad valorem. The Specific
Tax is the tax that is of fixed amount that is imposed by the head or number, or by some of the standard of the weight
and measurement. The Ad valorem Tax is the Tax that is of fixed proportion in relation with the value of the property
in respect to which the tax is assed. According to the purpose, taxes are further classified as General, Fiscal or
revenue and Special of regulatory.

The General, Fiscal or revenue tax is the tax that is intended for the general purposes or expenses of the
government.

The Special or regulatory tax is the tax that is intended for a specific purpose.

According to the Scope, the taxes are classified to either National or municipal or Local.

In the National scope, the taxes are imposed by the National Government itself while in the municipal or local, the
taxes are imposed by the local government.

According to the graduation or rate, taxes are further classified into Proportional, Progressive or Graduated and
Regressive.

The Proportional tax is the tax that is based upon the fixed percentage vis-à-vis the amount of the property or other
bases on which to be taxed.

The Progressive or Graduated tax is the tax rate increase upon the increase of the base rate.The Regressive tax is
the tax rate decrease upon the increase of the base rate.

A. Individuals:
1. Citizens of the Philippines:
a. Residents of the Philippines [Secs. 23 (A) and 24 (A)]
 i. Filipinos residing in the Philippines
ii. Filipinos living abroad but without intention of residing there permanently. [Sec. 22 (E)]
b. Not Residents of the Philippines [Secs. 23 (B) and 24 (A)]
i. One has intention to reside permanently abroad
c. OFW and Seaman [Sec. 23 (C) and 24 (A)]
2. Aliens

a. Residents of the Philippines

b. Not Residents of the Philippines [Secs. 22 (G); 23 (D); 25 (A) and (B)
i. Non-resident alien engaged engaged in trade and business in the Philippines
ii. Non- resident alien engaged in trade or business in the Philippines
c. Aliens employed by multinational companies, offshore banking units and petroleum contractors and
subcontractors.
3. Estates and Trusts

B. Corporations:
1. Domestic Corporations (Sec. 27)

Domestic Corporations are liable to pay corporate income tax from sources within or without.
2. Foreign Corporations

a. Resident Corporations - foreign corporations engaged in trade or business in the Philippines;

b. Non- resident corporations - foreign corporations not engaged in business or trade in the Philippines.
3. Partnerships

a. Taxable Partnership
b. Exempt Partnership
1. General Professional Partnership (GPP)

2. Joint Venture or Consortium undertaking construction activity, or engaged in petroleum operations with
operating contract with the government.

REMEDIES OF THE TAXPAYER

BEFORE PAYMENT

1. administrative protest
2. request for reconsideration
3. request for reinvestigation
4. judicial protest

AFTER PAYMENT

1. claim for tax refund

2. claim for tax credit
 1. Administrative Protest (Protest against Assessment)

WHEN: within 30 days from receipt of final assessment notice (FAN)

WHERE: BIR

HOW: written protest, stating facts, applicable law, rules and regulations or jurisprudence o which his protest is
based; if only portions of FAN are disputed, must pay the deficiency tax on undisputed portion

PROCEDURE:

1. protest against pre-assessment notice (PAN) within 15 days from receipt

2. protest against FAN within 30 days from receipt
3. submit relevant documents within 60 days from filing of protest
4. CIR has 180 days to decide
5. in case of denial or lapse of 180-day period, taxpayer has 30 days to bring his protest to the CTA en division

WHEN PAN IS NOT REQUIRED:

1. finding for any deficiency tax is the result of mathematical error in computation of tax as appearing on face of return
2. a discrepancy has been determined between the tax withheld and the amount actually remitted
3. taxpayer who opted to claim a refund or credit of excess creditable withholding tax for at taxable period was
determined to have carried over and automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter/s for the succeeding taxable year/s
4. excise tax due on excisable articles have not been paid
5. article locally purchased or imported by an exempt person

2. Request for Reconsideration – a plea for re-evaluation of an assessment on the basis of EXISTING RECORDS
without need of additional evidence (question of law or fact or both)

3. Request for Reinvestigation – a plea for reinvestigation of an assessment on the basis of NEWLY-
DISCOVERED EVIDENCE that a taxpayer intends to present in the reinvestigation (question of law or fact or both)

- in either case, the request must be accompanied by a WAIVER of the statute of limitations in favor of the
government

4. Judicial Protest

PROCEDURE

1. within 30 days from denial of protest by CIR or from lapse of 180-day period, appeal to CTA division
2. if CTA division denies, motion for reconsideration within 15 days from receipt
3. within 15 days from denial of motion, appeal to CTA en banc
4. appeal to SC within 15 days by petition for review (Rule 45)

5. Refund/Credit
- based on the legal principle of quasi-contract or solutio indebiti
- in the nature of an exemption, which cannot be allowed unless granted in the most explicit and categorical language
- strictly construed against the claimant (proof of claim must be established)
- partial payment of a tax cannot be the basis for a tax refund
- interest on taxes refunded may not be paid by the Government to the taxpayer, UNLESS: (a) the CIR acted with
patent arbitrariness (inexcusable or obstinate disregard for legal provision); and (b) in the case of income taxes
withheld on the wages of employees, which must be refunded within 3 mos from April 15

Tax Refund vs. Tax Credit

o R: takes place when there is actually a reimbursement of the tax

o C: the Government issues a tax certificate or tax credit memo covering the amount determined to be reimbursable,
which can be applied after proper verification against any sum that may be due and collectible from the taxpayer
 Requisites for Recovery

1. there was an actual collection and receipt by the Government of the tax sought to be recovered (factual proof)
2. legal basis for the granting of refund or credit, including verification of compliance with the statutory requirements
relative to the filing of claims within the reglementary 2-yr period
3. in case of corporations, must signify whether to avail of tax refund or tax credit in the corporate income tax return

REMEDIES OF THE GOVERNMENT

- these remedies may be pursued singly or simultaneously

1. Tax Lien
- from the moment the tax is due, not from the service of the warrant of distraint
- not valid against a mortgage purchaser or judgment creditor until NOTICE has been filed by CIR with the RD of the
province or city where property is located (the tax lien shall be annotated on the title)

2. Compromise
- allowed when:

1. a reasonable doubt as to validity of the claim against the taxpayer exists

2. financial position of the taxpayer demonstrates a clear inability to pay the assessed tax (minimum compromise rate
equivalent to 10% of the basic assessed tax and the taxpayer must waive in writing his privilege under the Banking
Secrecy Law, such waiver constituting authority of the CIR to inquire into his bank deposits)

Compromise v. ABATEMENT:

o As Effect – C: reduce tax liability; A: cancel the entire tax liability

o As to when proper – C: when there is reasonable doubt as to validity of tax assessment or the taxpayer is financially
incapacitated to pay; A: when there is unjust assessment (excessive) or when administration and collection cost do
not justify the amount of tax due

GR: compromise of criminal violations is allowed, EXCEPT:

1. those already filed in court

2. those involving fraud

GR: power to compromise is a non-delegable power of CIR, EXCEPT that regional evaluation board may
compromise:

1. basic taxes less than P500,000

2. minor criminal violations

3. Distraint and Levy

- summary, extra-judicial or administrative enforcement remedies

DISTRAINT v. LEVY: distraint is to personal property while levy is to real property

KINDS OF DISTRAINT:

1. Actual – when delinquency of the payment sets in; there is actual seizure and distraint
2. Constructive – no actual delinquency ; the owner is prohibited from disposing of his property; preventive remedy to
forestall a possible dissipation of the taxpayer’s assets when delinquency takes place

CONSTRUCTIVE DISTRAINT PROPER IF:

1. taxpayer is retiring from any business subject to tax

2. he intends to leave the Philippines
3. he removes his property therefrom
4. he performs any act tending to obstruct the proceedings for collecting the tax due or which may be due from him

PROCEDURE:

o Actual Distraint Procedure

1. commencement of distraint proceedings by CIR (P1M+) or RDO (P1M or less)
2. service of warrant of distraint
3. notice of sale of distrained property to the owner or possessor not less than 20 days from date of sale, and osting in
not less than 2 public places in municipality or city where distraint is made
4. sale of property distrained by public auction, highest bidder for cash, or with approval of CIR through duly licensed
commodity or stock exchange
EQUITY OF REDEMPTION: payment of all proper charges any time prior to sale

4. Civil Action

WHEN:

1. when a tax is assessed and the assessment becomes final and unappealable (because TP failed to file administrative
protest with BIR within 30d from receipt of assessment)
2. when an administrative protest is denied or is not acted upon within 180d from submission of documents and TP fails
to appeal to the CTA

WHERE: regular courts, with approval of CIR except if express delegation to Regional Director; motion to dismiss the
complaint should also be filed in the regular courts

HOW: the complaint must be brought in the name of the Government and conducted by a legal officer of the BIR

5. Criminal Action

WHEN: before lapse of 5 years (prescription period)

WHERE: DOJ

HOW: complaint approved by CIR brought in the name of the Government and conducted by a legal officer of the BIR

GROUND: prima facie showing of failure to file a required tax return or a willful attempt to evade taxes; no need for
assessment

6. Other Remedies Available

o Forfeiture
o Suspension of Business Operations
o Enforcement of Administrative Sanctions