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[Tax on Individuals] - prorating is not is not indicated in the law -when the law does not

02 JAIME SORIANO VS. SECRETARY OF FINANCE distinguish so will the court


January 24, 2017 | Sereno, C.J. - prorating of personal and additional exemptions was in the 1939 Tax
Code, but R.A. 6110 (1969) amended this and adopted a full taxable year
Petitioners: *consolidated petitions* which include Sen. Manuel Roxas (primary author treatment for such exemptions
of R.A. 9504) and Francis Escudero as petitioners (2) W/N an MWE is exempt for the entire taxable year 2008 or from July 6, 2008
Respondents: Secretary of Finance Margarito Teves and BIR Commissioner Lilian only – ENTIRE TAXABLE YEAR 2008
Hefti, etc.  SC clarified that an MWE is exempt based on his status -- when wages
received exceed the minimum wage anytime during the taxable year, the
Doctrine: Tax exemptions are applicable for the full taxable year and not only counted employee necessarily loses the MWE qualification
from date of effectivity - But the exemption of the employee from tax on the income previously
earned as an MWE remains
Facts: (3) W/N an MWE who receives other benefits in excess of the statutory limit of
 June 2008 – R.A. 9504 was passed which amended certain provisions of the P30k is no longer entitled to the tax exemption – NO, SECS. 1 AND 3 OF R.R.
NIRC – took effect July 6 10-2008 ARE BASELESS
- Pertinent provisions: granted minimum wage earners (MWEs) exemption  R.A. 9504 bases its definition of minimum wage from the Labor Code. It is
from payment of income tax on their minimum wage, holiday pay, distinct and different from other payments including allowances, honoraria,
overtime pay, night shift differential pay and hazard pay; increased the commissions, allowances or benefits that an employer may pay or provide an
basic personal exemptions employee
 BIR issued Revenue Regulation (RR) No. 10-2008 as IRR of R.A. 9504:
- Sec. 1 provides that MWEs receiving ‘other benefits’ exceeding the P30k Dispositive:
limit shall be taxable on the excess benefits WHEREFORE, the Court resolves to declare NULL and VOID (i) Secs. 1 and 3 of R.R.
- Sec. 1 also provides that a MWE who receives additional compensation No. 10-2008 insofar as they disqualify MWEs who earn purely compensation income
such as honoraria and fringe benefits in excess of the allowable statutory from the privilege of the MWE exemption in case they receive bonuses and other
amount of P30k … are not exempt from income tax, and consequently, compensation-related benefits exceeding the statutory ceiling of P30,000; (ii) Section
from withholding tax 3 insofar as it provides for the prorated application of the personal and additional
- Sec. 3 provides for a prorating of the tax exemptions effective July 6, 2008 exemptions under R.A. 9504 for taxable year 2008, and for the period of applicability of
 Consolidated petitions argue that the IRR violates the legislative intent by: the MWE exemption to begin only on 6 July 2008
(1) not applying the tax exemptions for the full taxable year 2008 (Sec. 3 says
effective only from July 6 or date when R.A. 9504 took effect)
(2) by limiting the tax exemptions of minimum wage earners (Sec. 1 says
MWEs who receives ‘other benefits’ exceeding P30k lose the exemption)

Ruling:
(1) W/N the tax exemptions should be applied to the entire taxable year 2008 or
prorated, applying only from July 6 – ENTIRE TAXABLE YEAR 2008 because
it was a piece of social legislation intended to afford immediate tax relief to
MWEs, particularly due to increase in prices of goods
 Congress saw the urgency in passing R.A. 9504; was even certified by Pres.
Macapagal-Arroyo as a priority bill – due to increase in prices, so increasing
take-home pay and affording tax exemptions would be beneficial
 Individual taxpayers are entitled to claim the increased amounts for the entire
year 2008
- the taxable income of an individual taxpayer shall be computed on the
basis of the calendar year
- the deadline for submission of income tax returns is every April 15 of the
year. R.A. 9504 was enacted more than 9 months before the deadline for
taxable year 2008
 The policy in this jurisdiction is full taxable year treatment based on Sec.
35(c) of the 1997 Tax Code, not by R.A. 9504. The new law simply introduced
a change in the amounts of the basic and additional personal exemptions