Beruflich Dokumente
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1. GENERAL PRINCIPLES
TAXES are the enforced contribution from persons and property levied
by the law-making body of the state by virtue of its sovereignty for the
support of the government and all public needs.
Exceptions:
1. the government and the taxpayer are creditors and debtors of
each other;
2. it is due and demandable;
3. it is fully liquidated.
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*** A taxpayer cannot refuse to pay his taxes when they fall due
simply because he has a claim against the government or that the
collection of the tax is contingent on the result of the lawsuit it
filled with the government. (Philex Mining Corp. vs. CIR, G.R. No. 125704, August 28,
1998).
*** Where the exemption from indirect tax is given to the contractee ,
but the evident intention is to exempt the contractor so that the
contractor may no longer shift or pass on any tax to the
contractee. (Commissioner of Internal Revenue vs. John Gotamco & Sons, G.R. L-31092,
February 27, 1987).
A: NO, the drugstore cannot claim from the BIR a tax refund in
lieu of tax credit. There is nothing in the law that grants a
refund when the drugstore has no tax liability against which the
tax credit can be used . A tax credit is in the nature of
a tax exemption and in case of doubt, the doubt should be
resolved in strictissimi juris against the claimant.
Q: Can the BIR require the drugstore to deduct the amount of the
discount from their gross income?
A: NO. Tax credit which reduces the tax liability is different from a tax
deduction which merely reduces the tax base. Since the law allowed
the drugstores to claim in full the discount as a tax credit, the
BIR is not allowed to expand or contract the legislative mandate.
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ISSUE: Whether or not the 20% discount to senior citizens that may be
claimed as a tax deduction by private establishments, valid and
constitutional.
*** The salaries of justices and judges in the judiciary are taxable . The
clear intent of the Constitutional Commission was to delete the
proposed express grant of exemption from payment of income tax to
members of the judiciary, so as to give substance to equality
among the three branches of Government . (Nitafan vs. Commissioner of Internal
Revenue, G.R. No. L-78780, July 23, 1987).
FACTS: Upon the enactment of the 1991 Local Government Code , the
tax exemption on real property tax enjoyed by the government-owned
and controlled corporations like MIAA has been withdrawn . The City of
Parañaque filed notice of assessment to MIAA to settle its tax
obligations.
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HELD: YES. To be exempt from real property tax , the land and
buildings of Lung Center of the Philippines should be used actually ,
directly and exclusively for charitable purposes. Lung Center of the
Philippines as a charitable institution does not lose its character as
such and its exemptions from taxes simply because it derives income
from paying patients, rentals of private persons and receives subsidies
from the government so long as the money received is devoted
or used altogether to the charitable object which it is intended
to achieve and no money inures to the private benefit of the
persons managing or operating the institution.
DISTINCTION:
Whereas the tax evader breaks the law , the tax avoider
sidesteps it.
*** A tax return which does not correctly reflect income may only be false
but not necessarily fraudulent where it appears that the return was not
prepared by the taxpayer himself but by his accountant and that after
the original deficiency tax assessment was made , the same was
subsequently reduced by the BIR by a substantial amount . Hence, the
50% surcharge for fraud may be dispensed with but the tax may
still be assessed within the prescriptive period of ten years from
discovery thereof. (Aznar vs. CTA, G.R. No. L-20569, August 23, 1974).
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**** A law (RA 3843) which imposes a preferential franchise tax rate of 2%
on a particular franchise grantee while other franchise grantees are subject
to 5% is not violative of the equal protection or equality of taxation
rule in the Constitution. The legislature has the inherent power not only to
select the subjects of taxation but also to grant tax exemptions . (Commissioner
of Internal Revenue vs. Lingayen Gulf, G.R. No. L-23771, August 4, 1988).
**** A local tax which levies an ad valorem tax on motor vehicles registered
in Manila without also taxing those which are registered outside the city
but which enter the city and use its streets occasionally violates the rule
on the equality of taxation. (Association of Customs Brokers vs. Municipality Board,
G.R. No. L-4376, May 22, 1953).
NON-IMPAIRMENT OF CONTRACTS
**** Where a mining concession was granted under a Royal Decree and
where it appears that under said decree , no other taxes except mentioned
therein shall be imposed on mining and metallurgical industries , the levy
of a tax on said mining claim plus an ad valorem tax on mineral
output under a subsequent law (Act 1189) constitute an impairment of
contract because a mining concession is a contract . (Casanovas vs. Hord, G.R.
No. L-3473, March 22, 1907).
DOUBLE TAXATION
DOUBLE TAXATION means taxing twice by the same taxing authority
with the same jurisdiction or taxing district for the same purpose in the
same year or taxing period.
Where double taxation occurs, the taxpayer may seek relief under the
uniformity rule or the equal protection guarantee.
SITUS OF TAXATION
Situs of taxation is the state or country which has jurisdiction to
tax a person, property or interest. In short, situs of taxation is the
place of taxation.
**** The absence of flight operations to and from the Philippines is not
determinative of the source of income or the situs of income taxation. The
test of taxability is the “source” and the source of an income is that
activity which produced the income . Income from the sale of tickets was
derived from the Philippines. The word “source” conveys one essential idea,
and that of origin, and the origin of the income herein is the Philippines.
(CIR vs. British Overseas Airways Corp, G.R. No. L-657773-74, April 30, 1987) .
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 shall not be
given retroactive application if the revocation, modification or reversal will be
prejudicial to the taxpayer except in the following cases:
HELD: NO. The Tax Code explicitly states that “Any revocation, modification,
or reversal of any rules and regulations promulgated by the Commissioner
of Internal Revenue shall not be given retroactive application if the
revocation, modification or reversal will be prejudicial to the taxpayer .
Clearly, the prejudice to respondent by the retroactive application of
VAT Ruling No. 008-92 is patently evident.
FACTS: Deutshe Bank filed an administrative claim for refund with the
BIR TAID on its 15% BPRP upon RBU profits and at the same time
requested the International Tax Affairs Division (ITAD) a confirmation of its
entitlement to the preferential tax rate of 10% under the RP-Germany Tax
Treaty.
The claim for a refund was denied by the BIR on the ground that
the application for a tax treaty relief was not filed with ITAD prior to
the payment of Deutshe Bank of its BRPT and actual remittance of its
branch profits to DB Germany or prior to its availment of the preferential
rate of 10% under the RP-Germany Tax Treaty provisions.
The tax court ruled that Deutshe Bank violated the 15 day period
mandated under Section III paragraph (2) of Revenue Memorandum Order
(RMO) No. 1-2000.
ISSUE: Whether the failure to strictly comply with RMO No. 1-2000 will
deprive Deutshe Bank of the benefits of the RP-Germany Tax Treaty.
HELD: NO. Tax treaties are entered into to minimize, if not eliminate
the harshness of international juridical double taxation , which is why they
are also known as double tax treaty or double tax agreement.
The BIR must not impose additional requirements that should negate
the availment of the reliefs provided for under international agreements .
More so, when the RP-Germany Tax Treaty does not provide for any
pre-requisite for the availment of the benefits under said agreement.
2. T A X RE M E D I E S
FACTS: Medicard filed its Quarterly VAT Returns through Electronic Filing and
Payment System.
Medicare filed its protest against the FAN arguing that its services
include actual and direct rendition of medical and laboratory services.
On February 14, 2008, the CIR issued a Tax Verification Notice (TVN)
to verify the supporting documents of Medicard’s protest . Medicard submitted
additional supporting documentary evidence in aid of its protest on March
18, 2008.
On July 20, 2009, Medicard filed a petition for review before CTA
contending that the absence of a Letter of Authority (LOA) violated its
right to due process.
ISSUE
Whether the absence of the Letter of Authority (LOA) violates
Medicard’s right to due process.
RULING
YES, the absence of the Letter of Authority (LOA) disregards
Medicard’s right to due process which warrants the reversal of the assailed
decision and resolution.
The Court cannot convert the LN into an LOA as required under the
law even if the same was issued by the CIR himself . In the absence
of such authority, the assessment or examination is a nullity.
On appeal to the Supreme Court , CBC invoked for the first time
the argument of prescription that the government has three years from
April 19, 1989, the date CBC received the assessment of the BIR to
collect the tax and within that frame , however, neither a warrant of
distraint of levy was issued nor a collection case was filed in court.
ISSUES:
(1) Whether the right of the BIR to collect the assessed
DST is barred by the statute of limitation.
HELD: (1) YES. The assessment of the tax is deemed made and
the three – year period for collection of the assessed tax begins to
run on the date the assessment notice had been released , mailed
or sent by the BIR to the taxpayer. Thus, failure of the BIR
to file a warrant of distraint or serve a levy on taxpayer’s
properties nor file collection case in court within the three – year
period is fatal.
The demand was made almost thirteen years from the date
from which the prescriptive period is to be reckoned . Thus, the
attempt to collect the tax was made beyond the three-year
prescriptive period.
The fact that the taxpayer in this case may have requested a
reinvestigation did not toll the running of the three-year prescriptive
period.
The rule is based on the political law concept “the king can
do wrong” which liken to a king : it does not commit mistakes ,
and it does not sleep on its rights . Thus, the mistake or
negligence of government officials should not bind the state , lest it
bring harm to the government and ultimately the people , in whom
sovereignty resides.
On August 26, 2014, Asalus received the Final Assessment Notice (FAN)
stating that it was liable for deficiency VAT for 2007 . Thereafter, Asalus
filed a supplemental protest stating that the deficiency VAT assessment had
prescribed pursuant to Section 203 of the NIRC.
The CIR claims that Asalus was informed in the PAN of the ten-
year prescriptive period and that the FAN made specific reference that
there was substantial understatement in Asalus’ income which exceeded 30%
of what was declared in its VAT returns , according to an audit
investigation.
ISSUE
Whether the ten-year prescriptive period under Sec. 222 of NIRC
applies when there is an understatement of income in the return.
RULING
YES, the ten-year prescriptive period under Sec. 222 of the NIRC
applies in this case.
In this case, there was undeclared VATable sales more than 30% of
that declared in Asalus’ VAT return . Hence, failure to overcome the
presumption of falsify of the returns warranted the application of the ten-
year prescription period for assessment under Section 222 of NIRC.
ISSUE
Whether Asiatrust considered to have availed of Tax Abatement Program
(TAP) without a termination letter from CIR.
RULING
NO, Asiatrust had not given a substantial proof that it had availed
the Tax Abatement Program (TAP).
On April 27, 2005, BIR issued Letter of Authority (LA) authorizing its
revenue officers to investigate Spouses Manly’s internal revenue tax liabilities
for taxable year 2003 and prior years.
Since Spouses Manly failed to comply with the letter, the revenue
officers concluded that Manly’s Income Tax Return (ITR) for taxable years
2000, 2001 and 2003 were underdeclared . And since the underdeclaration
exceeded 30% of the reported or declared income, it was considered a
prima facie evidence of fraud with intent to evade the payment of proper
tax due to the government.
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The Spouses Manly opposed the said complaint due to lack deficiency
tax assessment.
In this case, tax evasion is deemed complete when the violator has
knowingly and willfully filed a fraudulent return with intent to evade and
defeat a part or all of the tax.
San Roque subsequently filed with the BIR separate claim for refund
or tax credit of its creditable input taxes for all four quarters of
2006.
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Meanwhile, San Roque filed its amended administrative claims for the
third and fourth quarters of 2006 on September 21, 2007 , however, the
CTA denied the petition for having no jurisdiction thereof being a
premature invocation of the judicial relief.
ISSUE: Whether the premature judicial claim would render CTA to acquire
jurisdiction over the judicial relief.
The taxpayer can file his administrative claim for refund or credit
at anytime within the two-year prescriptive period . If he files his claims
on the last day of the two-year prescriptive period , his claim is still
filed on time.
The Commissioner will have 120 day from such filing of the claim . If
the Commissioner decides on the 120 th day or does not decide it on
that day, the taxpayer still has 30 days to file his judicial claim
with the CTA.
On April 24, 2006, due to the BIR’s inaction, TSC filed a petition
with CTA and prayed for the refund or issuance of tax credit certification
for its alleged unutilized input VAT for the year 2004.
ISSUES
(1) Whether the failure of the Commissioner to act within the 120-
day period is deemed a denial of its application for tax refund or
credit.
(2) Whether the failure to submit the complete documents would not
warrant the grant of tax refund or credit.
HELD: (1) YES. Under Section 112 (C) of the NIRC, in case of failure
on the part of the Commissioner to act on the application , the taxpayer
affected may, within 30 days after the expiration of the 120-day period ,
appeal the inacted claim with the CTA.
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Thus, TSC filed its petition for review with the CTA on 24 April
2006, or within 30 days after the expiration of the 120-day period .
Hence, the judicial claim was not prematurely filed.
Respondent filed an application for relief from double taxation with the
BIR to confirm that the redemption was not subject to Philippine Income
Tax.
On October 21, 2010, respondent filed a claim for refund before the
BIR. Thereafter, or on November 3, 2010, it filed a judicial claim before
the CTA.
ISSUES
1) Whether the filing of administrative and judicial claims only 13
days apart satisfy the requirement of exhaustion of administrative remedy.
2) Whether the net capital gain by GRTC from the redemption of its
preferred shares should be subject to 15% Final Withholding Tax (FWT).
RULINGS
1) YES. Section 229 of the Tax Code states that judicial claims for
refund must be filed within two (2) years from the date of payment of
the tax or penalty, providing further that the same may not be
maintained until a claim for refund or credit has been duly filed with
the Commissioner of Internal Revenue.
In the case at bar, records show that both administrative and judicial
claims for refund of respondent for its erroneous withholding and remittance
of FWT were indubitably filed within the two (2) year prescriptive period.
Notably, Section 229 of the Tax Code , as worded, only required that
an administrative claim should first be filled . It bears stressing that
respondent could not be faulted for resorting to court action , considering
that the prescriptive period stated therein was about to expire.
Had respondent awaited the action of petitioner knowing fully well that
the prescriptive period was about to lapse , it would have resultantly
forfeited its right to seek a judicial review of its claim , thereby suffering
irreparable damage. Thus, respondent correctly and timely sought judicial
redress, notwithstanding that its administrative and judicial claims were filed
only 13 days apart.
3. LOCAL TAXATION
The Local Taxing Power is directly conferred by the 1987
Constitution in Section 5 Article X, to wit:
***** Congress cannot abolish local taxing power which is expressly granted by
the Fundamental Law. The only authority conferred to Congress is to provide
the guidelines and limitations on the local government’s exercise of the
power to tax through the enactment of the 1991 Local Government Code.
--- the city or municipal mayor nor governor alone could not order the
collection of any tax as the same is exercised by the Sanggunian of the
local government concerned through an appropriate ordinance.
Ten (10) petitions were filed against City of Manila challenging the
unconstitutionality of Section 21 (B) of the Manila Revenue Code being in
violation of the guidelines and limitations on the taxing power of the
Local Government Unit.
HELD: NO. The power of taxation is inherent in the state , the same
is not true for the LGUs whose power must be exercised within the
guidelines and limitations that Congress may provide.
**** May local governments impose an annual realty tax in addition to the
basic real property tax in addition to the basic real property tax on idle or
vacant lots located in residential subdivisions within their respective territorial
jurisdictions?
A: Not all local government units may do so. Only provinces, cities and
municipalities within 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.
2) for military attaché, they must have served abroad for not less
than two (2) years and served his tour of duty and had not
availed of the tax exemption for the past four years.
6. ESTATE TAXATION
KINDS OF TAXPAYERS FOR GROSS ESTATE TAXATION PURPOSES:
1. Citizen and non resident citizen - value of the properties within and
without the Philippines.
5. revocable transfer;
7. standard deduction;
7. DONOR’S TAXATION
*** Donation to candidate for elective positions shall not be subject of
donor’s tax but under Omnibus Election Code.
*** Sale of shares of stock below the fair market value is considered
a donation.
Gift Splitting is spreading the gift over numerous calendar years in order to
avail of lower donor’s tax.
8. INCOME TAXATION
***Income is all wealth that flows into the taxpayer other than as a
mere return of capital.
*** A “fringe benefit” is defined as being any good, service or other benefit
furnished or granted in cash or in kind by an employer to an individual
employee.
*** In order that debts be considered as bad debts because they have
become worthless, the taxpayer should establish that during the year for
which the deduction is sought, a situation developed as a result of which it
became evident in the exercise of sound , objective business judgment that
there remained no practical but only vaguely theoretical prospect that the debt
would ever be paid.
POSSIBLE Q & A
Q: Explain the symbiotic relationship theory
A: It is said that taxes are what we pay for civilized society . Without
taxes, the government would be paralyzed for lack of the motive power to
activate and operate it. Hence, despite the natural reluctance to surrender
part of one’s hard-earned income to the taxing authorities , every person who
is able to must contribute his share in the running of the government .
The government, for its part, is expected to respond in the form of
tangible and intangible benefits intended to improve the lives of the people
and enhance their moral and material values. This symbiotic relationship is
the rationale of taxation and should dispel the erroneous notion that it is
an arbitrary method of exaction by those in the seat of power.
PURPOSE OF TAXATION
FACTS: Pursuant to the LOI 1465 which provided for the imposition of
a capital recovery component on the domestic sale of all grades of
fertilizers in the Philippines, Fertiphil paid P10 for every bag of fertilizer
it sold in the domestic market to the Fertilizer and Pesticide Authority
(FPA). FPA then remitted the amount collected to the FEBC , the depository
bank of Planters Products, Inc. (PPI). After the 1986 EDSA Revolution, FPA
voluntarily stopped the imposition of the P10 levy . With the return of
democracy, Fertiphil demanded from PPI a refund of the amounts it paid
but PPI refused to accede to the demand invoking the State’s legitimate
exercise of the power of taxation.
ISSUE: Whether or not the P10 levy under LOI No. 1465 is a valid
exercise of the power of taxation.
HELD: NO. The imposition of the levy was an exercise by the State
of its power of taxation . While it is true that the power of taxation
can be used as an implement of police power , the primary purpose of
the levy is revenue generation. If the purpose is primarily revenue or if
revenue is at least one of the real and substantial purposes , then the
exaction is properly called a tax.
The P10 levy under LOI No. 1465 is too excessive to serve as a
mere regulatory measure. The levy, no doubt, was a big burden on the
seller or the ultimate consumer. It increased the price of a bag of
fertilizer by as much as five percent . The P10 levy is unconstitutional
because it was not for a public purpose . The levy was imposed to
give undue benefit to PPI.
FACTS: Petitioner was organized under P.D. 269 . The same granted a
number of tax and duty exemption privileges to electric cooperatives . In
1984, PD 1955 withdrew all exemptions from or any preferential treatment in
the payment of duties, taxes, fees, imposts, and other charges granted to
private business enterprises and/or persons engaged in any economic activity .
PD 2008 issued on January 8, 1986 subsequently restored exemptions
withdrawn by PD 1955.
In December 1986, Executive Order (EO) No. 93 withdrew all tax and
duty exemptions granted to private entities effective March 10, 1987 . Finally
on July 1, 1987, FIRB No. 24-87 restored the tax and duty exemption
privileges of electric cooperatives under PD 269.
ISSUE: Whether or not the tax exemption under FIRB Resolution No. 24-
87 be given retroactive effect.
HELD: NO. FIRB Resolution No. 24-87 is crystal clear in stating that “the
tax and duty exemption privileges of electric cooperatives granted under
the terms and conditions of PD 269 are restored effective July 1, 1987 .”
There is no other way to construe it . The language of the law is
plain and unambiguous. When the language of the law is clear and
unequivocal, the law must be taken to mean exactly what it says.
Further, because taxes are the lifeblood of the nation , the court has
always applied the doctrine of strict interpretation in construing tax
exemptions. A claim for exemption from tax payments must be clearly
shown and be based on language too plain to be mistaken . Elsewhere
stated, taxation is the rule, exemption thereof is the exception.
FACTS: The City of Manila assessed local business taxes for the year
2002 against SM Group of Retail Business in addition to the regular
local business taxes assessment as a precondition for the issuance of
their business permits.
Petitioner City of Manila filed a special civil action for Certiorari with
the CA assailing orders of the RTC.
The CA ruled that since appellate jurisdiction over SMs complaint for
tax refund, which was filed with the RTC, is vested in the CTA
pursuant to its expanded jurisdiction under RA 9282.
HELD: YES. Since appellate jurisdiction over complaint for tax refund is
vested in the CTA, it follows that a petition for certiorari seeking
nullification of an interlocutory order issued in the said case should
likewise be filed in the same court.
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ISSUE: Whether or not Exxon is the proper party to claim refund for
the excise taxes paid.
HELD; NO. The excise tax, when passed to the purchaser, becomes part
of the purchase price. Excise taxes are of the nature of indirect taxes ,
the liability for payment of which may fall on a person other than he
who actually bears the burden of the tax . The party liable for the tax
can shift the burden to another , as part of the purchase price of the
goods or services.
In a case where the party statutorily liable for the tax is different
from the party who bears the burden of such tax , the proper party to
question, or to seek a refund of an indirect tax , is the statutory
taxpayer, or the person on whom the tax is imposed by law and
who passed the same, even if he shifts the burden thereof to another .
Therefore, Exxon is not the party statutorily liable for payment of excise
tax and it is not the proper party to claim a refund of any taxes
erroneously paid.
HELD: NO. The person entitled to claim a tax refund is the statutory
taxpayer, the person on whom the tax is imposed by law and who
paid the same even when he shifts the burden thereof to another.
Unsatisfied, Surfield elevated the case to the CTA , however CTA denied
the appeal for lack of jurisdiction.
ISSUE: Whether CTA has jurisdiction over decisions of the RTC in real
property tax cases.
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HELD: NO. The CTA has no jurisdiction over decisions of the RTC in
real property tax cases. LGC covers only appeals of the decisions,
orders or resolutions of the RTC in local taxes . The provision is
clearly limited to local tax disputes decided by the RTC . In contrast,
the CTA is cognizance of appeals of the decisions of the Central
Board of Assessment Appeals in the exercise of its appellate jurisdiction
over cases involving the assessment and taxation of real property
originally decided by the provincial or city board of assessment appeals.
Real property tax, being an ad valorem tax, could not be treated as
a local tax.