Aquila Legis Fraternity – Ateneo

Tax Law Last Minute Tips

General Principles of Taxation

Q: What are the inherent limitations of taxation?

A:

1. Exercise for a public purpose

2. Non-delegability of the power to tax
3. Territoriality or situs
4. Tax exemption of the state
5. Principle of international comity

Q: What are the exceptions to the limitations of the non-delegability of the power to tax?

A:

1. Local Government Unit

2. President
3. Administrative Agencies

Q: The CIR assessed the estate of X applying Act No. 3606 which took effect in 1930. However, X died on
May 27, 1922, when a different law was in effect. Is the CIR correct in applying Act 3606?

A: No, the CIR is mistaken. Inheritance tax is governed by the statute in force at the time of the decedent’s
death, unless the legislative intent is clear that it should be applied retroactively. (Lorenzo v. Posadas,
1937)

Q: X is a businesswoman. It was discovered by the BIR that although Mrs. X was earning income as a
businesswoman, she did not file her income tax return for the years 2000 and 2001. Summons and
subpoena duces tecum were issued but Mrs. X failed to comply. A tax evasion case was filed. Mrs. X was
charged for the willful failure to make and file a return. Mrs. X, by way of defense, stated that she did not
actively participate in the filing of his ITR’s since it was her husband who did it, further they hired an
accountant to handle all their tax payments. Is her defense valid?

A: No. the doctrine of willful blindness is applicable in the case at bar. In the case of People v. Kintanar
[CTA EB Crim No 006, December 3, 2010] the CTA stated that since X is an experienced businesswoman,
and an independent distributor/contractor she ought to know and understand all the matters concerning
her business. She should have taken ordinary care of her tax duties and obligations and she should know
that their ITRs should be filed. She cannot just claim that her husband hired an accountant, who was
tasked to handle the filing and payment of their tax obligations. She did not ensure that her obligations
were complied with. She did not even know how much her tax obligation was. Such neglect or omission
is tantamount to “deliberate ignorance” or “conscious avoidance”.

NOTE: This is not to be confused with the case of People v. Judy Ann Santos [CTA Crim Case No 012, Jan
16, 2013]. The facts of the case are different. There, Ms Santos’ tax liabilities were handled by her manager
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since childhood. It can be said that she is not an experienced manager of tax liabilities since she never
handled such task. Hence, when applying the “doctrine of willful blindess” a careful perusal of the facts is
required.

Q: Differentiate Tax Evasion and Tax Avoidance.

A:

Tax Evasion Tax Avoidance

Other Name “Tax Dodging” “Tax Minimization”
Means used Uses illegal means to forego theUses legal means to minimized
liability and payment of taxes the payment of taxes
Penalty Punishable by law and may hold Not punishable by law; only aims
the taxpayer criminally and to minimize the liability of the
civilly liable taxpayer within the bounds of
the law
Object To escape liability and payment To minimize payment of taxes
of taxes through the use of within the limits set by law
deceptive and illegal means

Q: What are the stages of taxation?

A:

1. Levy imposition of taxes which is essentially legislative in nature;

2. assessment and collection: deals with the processes and remedies available to the government in
collecting taxes which are administrative in nature;

3. Payment: time when the taxes are due and paid.

Q: What are the exceptions to the non-retroactivity rulings?

A:

1. where the taxpayer deliberately misstates or omits material facts from his return or any document
required of him by the BIR

2. where the facts subsequently gathered by the BIR are materially different from the facts on which the
ruling is based; or

3. where the taxpayer acted in bad faith. (NIRC, Sec 246)

Q: Differentiate Tax Amnesty and Tax Exemption.

A:
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Tax amnesty Tax Exemption

Scope of Immunity Covers immunity from all
criminal, civil, and
administrative liabilities from
non-payment of taxes
To whom granted A general pardon given to all
taxpayers through the
enactment of a law
Application Applies only to past tax periods;
retroactive in application. The
premise of a tax amnesty is
precisely the non-payment of a
taxpayer of taxes from previous
taxable periods.
Presence of Actual Revenue Loss There is revenue loss incurred by
the government since there was
actually taxes due, but collection
was waived by the government
for the previous taxable period.
Immunity from civil liability only
A freedom from a charge or
burden to which others are
subjected
Operates prospectively as the
beneficiary enjoys non-payment
of taxes for succeeding taxable
periods.
Since there is no actual tax due
on the succeeding taxable
periods, no revenue loss is
incurred by the State.

Q: What are the requisites of a valid tax?

A:

1. Must be for public purpose

2. Should be uniform and equitable
3. Either the person or the property being taxed is within the jurisdiction of the taxing authority
4. Complies with the requirements of due process
5. Does not infringe any constitutional limitations

Q: X, an airline company, purchased jet fuel from Y, a fuel company, for its planes. X then filed for refund
in the CIR, relying on Sec 135 of the NIRC, and Art 4 of the Air Transport Agreement between the
Philippines and Singapore. Is X entitled to the refund?

A: No, X is not entitled because it was not the proper party to claim the refund. Indirect taxes are taxes
which the liability for payment falls on one person, but the burden can be passed to another, such as
when the tax is imposed upon goods for before reaching the consumer who ultimately pays for it. Excise
tax is an example of indirect tax. [Silkair (Singapore) Pte, Ltd. V. CIR (2008)]

Note: the case is different where the law clearly grants the claiming party an exemption from both direct
and indirect taxes. In such a case, the claiming party must be allowed to claim the refund even if it is not
considered as the statutory taxpayer. [Philippine Airlines v. CIR, 2013]

Q: What are the requisites for double taxation?

A: Taxes are imposed:

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1. On the same subject matter;

2. For the same purpose;
3. By the same taxing authority;
4. Within the same taxing jurisdiction;
5. During the same taxing period;
6. And they are of the same kind and character. [Swedish Match Phil., Inc. v. Treasurer of the Coty
of Manila, (2013)]

Q: What are the elements for the imposition of income tax?

A:

1. There must be a gain or profit;

2. The gain or profit is realized or received, actually or constructively; and
3. The gain or profit is not exempted by law or treaty. [CIR v. Phil Daily Inquirer (2017)]

Q: What are the rules on Capital Gains Tax for Shares of Stocks Not Traded in the Stock Exchange?

A: Under Section 24 (C) of the NIRC, a final tax of 5% on any amount not over Php100,000.00 and an
additional 10% on any amount in excess of Php100,000.00 shall be imposed upon the net capital gains
realized during the taxable year from the sale or disposition of shares of stock of a domestic corporation
not publicly listed in the Stock Exchange. [NIRC, Sec 24(C)]

Q: What are the items included in the gross income?

A: Gross income means all income derived from whatever source, including but not limited to the
following items:

1. Compensation for services in whatever form paid, including but not limited to, fees, salaries,
wages, commission, and similar items;
2. Gross income derived from the conduct of trade or business or the exercise of a profession;
3. Gains derived from dealings in property;
4. Interests;
5. Rents;
6. Royalties;
7. Dividends;
8. Annuities;
9. Prizes and winnings;
10. Pensions; and
11. Partner’s distributive share in the net income of the general professional partnership. [NIRC, Sec
32(A)]

Q: What are the items excluded from gross income?

A:
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1. Life insurance
2. Return of premium paid by insured
3. Gifts, bequests, and devises
4. Compensation for injuries or sickness
5. Income exempt under treaty
6. Retirement benefits
7. Miscellaneous items
a. Income derived by foreign government
b. Income by the Government or its Political Subdivisions
c. Prizes and awards (Non-athletes)
d. Prizes and awards in sports competitions (ATHLETES)
e. 13th month pay and other benefits
f. GSIS, SSS, Medicare and other contributions
g. Gains from the Sale of Bonds and other Certificate of Indebtedness

Q: What is a fringe benefit?

A: Fringe benefit means any good, service or other benefit fursnished or granted in case or in kind by an
employer to an individual employee who is not rank and file. Fringe benefits are subject to 32% final
withholding tax on their grossed up monetary value. The following are some examples of a fringe benefit:

1. Housing;
2. Expense account;
3. Vehicle of any kind;
4. Household personnel;
5. Interest on loan at less than market rate to the extent of the difference between the market rate
and actual rate granted;
6. Membership fees, dues and other expenses borne by the employer in social and athletic clubs or
other similar organizations;
7. Expenses for foreign travels;
8. Holiday and vacation expenses;
9. Educational assistance to the employee or his dependents; and
10. Life or health insurance and other non-life insurance premiums or similar amounts in excess of
what the law allows.

Q: Which fringe benefits are non-taxable?

A: The fringe benefits not taxable under the tax code are those:

1. Required by the business or for the convenience of the employer;

2. Which are authorized and exempt from tax under special law;
3. Those benefits contributed by the employer for their retirement, insurance and hospitalization
plans;
4. Benefits given to rank and file employees;
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5. De minimis benefits. [NIRC, Sec 33]

Q: What are the de minimis benefits?

A:

1. Monetized unused vacation leave credits for private employees not exceeding 10 days during the
year;
2. Monetized value of vacation and sick leave credits paid to government employees;
3. Medical cash allowance to dependents of employees, not exceeding Php750/month per semester
or Php125/month;
4. Rice subsidy of Php1,500.00 or one sack of 50kg of rice per month amounting to not more than
Php 1,500.00;
5. Uniform and clothing allowance not exceeding Php5,000.00/annum;
6. Actual medical expenses not exceeding Php10,000.00/annum;
7. Laundry allowance not exceeding Php300.00/month;
8. Annual achievement awards with an annual monetary value not exceeding Php10,000.00;
9. Gifts during Christmas and major anniversaries not exceeding Php5,000.00/annum;
10. Daily meal allowance for overtime work and night shift not exceeding 25% of the basic minimum
wage;
11. Benefits received by an employee by virtue of a CBA ad productivity incentive scheme provided
that the total monetary value received from both CBA and productivity incentive schemes
combined, do not exceed Php10,000.00 per employee per taxable year [RR 05-2011 as amended
by RR 08-2012]

Q: Who are considered dependents under Sec 35(B) of the NIRC for purposes of exemptions of exemptions
of an individual’s income tax?

A: for this purpose, a dependent means a legitimate, illegitimate, or legally adopted child chiefly
dependent upon and living with the taxpayer if such dependent is not more than 21 years of age,
unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support
because of mental or physical defect. [Sec 35(B), NIRC]

Specifically, a dependent refers to the following:

a. legitimate, illegitimate, or legally adopted child chiefly dependent upon and living with the taxpayer if
such dependent is not more than 21 years of age, unmarried and not gainfully employed;

b. if such dependent is child, regardless of age, is incapable of self-support because of mental or physical
defect;

c. Filipino citizen Person with Disability related by consanguinity within 4th degree of relationship to the
taxpayer/benefactor, not gainfully employed, and chiefly dependent upon and living with the
taxpayer/benefactor;

d. foster child, not more than 12 years of age, living with and dependent to the taxpayer for chief support
for at least 12 months during the taxable period and under the supervision of the DSWD.
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Q: What is a Jeopardy Assessment?

A: it is a tax assessment made by an authorized Revenue Officer without the benefit of a complete or
partial trial in light of the Revenue Officer’s belief that assessment collection of tax will be jeopardized by
the delay caused by the taxpayer’s failure to:

1. Comply with audit and investigation requirements;

2. Substantiate any or all claims, deductions or credits in his return.

It is usually issued when statutory prescriptive periods for assessment or collection of taxes are about to
lapse due principally to taxpayer’s fault.

Q: What are the requisites for the deductibility of depreciation?

A:

1. Allowance for depreciation must be reasonable;

2. Must be for property used for employment in trade or business or out of its not being used
temporarily during the year;
3. Allowance must be charged off;
4. Schedule on the allowance must be attached to the return.

Q: What are the requisites for the deductibility of Charitable and other Contributions?

A:

1. Contributions or gifts must be actually paid or made within the taxable year;
2. To or for the use of the government or its agencies or any political subdivision exclusively for
public purpose;
3. To accredited domestic corporations or associations organized and operated exclusively for:
a. Religious;
b. Charitable;
c. Scientific;
d. Youth and sports development;
e. Cultural or educational purposes;
f. Rehabilitation of veterans;
g. Social Welfare Institutions;
h. NGOs.
4. No part of the net income inures to the benefit of any private stockholder or individual in excess
of the following limitations:
a. For an individual: not more than 10% of taxable income before deducting the charitable
contributions;
b. For a corporation: not more than 5% of the taxable income before deducting the
charitable contributions.
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Q: Company X entered into an agreement with Company Y where the former will manage and operate
the latter’s mining claim. Their agreement was entitled only as a Power of Attorney. In the course of the
operation, X made advances of cash and property to Y. Unfortunately, the project suffered losses so X
eventually withdrew itself as manager. Because of this, X deducted a sum from its gross income and
denominated it as bad debts. Was X correct?

A: No. X’s advances here were not debts but were investments in what was actually a partnership with Y.
Therefore, there were no subsisting debts for X to deduct. [Philex Mining Corp v. CIR, 2008]

Q: what is the concept of Improperly Accumulated Earnings Tax (IAET)?

A: a corporation that permits the accumulation of earnings and profits beyond the reasonable needs of
the business instead of dividing or distributing said profits, is subject to 10% improperly accumulated
earnings tax on the improperly accumulated taxable income.

The amount to be retained, taking into consideration the accumulated earnings within the “reasonable
needs of the business” shall be 100% of the Paid-up Capital or amount contributed to the corp.,
representing the par value of the shares of stock, hence, any excess Capital over and above the par shall
be excluded. [RMC No. 35-2011]

Q: What is the tax base of the IAET?

A: the tax base of the IAET shall be Improperly Accumulated Taxable Income as computed by adjusting
the taxable income by:

1. Income exempt from tax;

2. Income excluded from gross income;
3. Income subject to final tax;
4. The amount of net operating loss carry-over deducted; and
5. Retained earnings from the previous years.

And reduced by the sum of:

1. Dividends actually or constructively paid;

2. Income tax paid for the taxable year;
3. Amount that may be retained.

The resulting Improperly Accumulated Taxable Income is thereby multiplied by 10% to arrive at the
Improperly Accumulated Earnings Tax (IAET).

Note: the amount that may be retained taking into consideration the accumulated earnings within the
“reasonable needs of the business”, as determined under Section 3 of RR No. 2-2001, shall be 100% of the
paid-up capital or the amount contributed to the corporation representing the par value of the shares of
stock. Hence, any excess capital over and above the par shall be excluded.
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Q: Compare the Net Operating Loss Carry Over (NOLCO) with the benefits of Net Capital Loss Carry
Over(NCLCO/NELCO) and the Benefits of Excess Minimum Corporate Income Tax (MCIT) over Regular
Corporate Income Tax (RCIT).

A:

1. The benefits of NOLCO

a. Carried over as a deductions from gross income
b. For three consecutive years after the incurrence of the loss
c. Only if there has been no substantial change in the ownership of the business
d. Net Operating Loss when Gross Income is less than total allowable deductions
e. Applicable to business of individuals or corporations
f. Not applicable to an individual earning purely compensation income.
2. The benefits of NCLCO/NELCO
a. Benefit of individual taxpayer only
b. Net capital loss treated as a loss from the sale or exchange of a capital asset held
for not more than 12 months.
c. Treatment when Net Capital Gain or Loss:
i. Include Net Capital Gain or Loss;
ii. Net Capital Loss may be carried over for the next year to be used against
any capital gain.
1. Cannot be used as additional deduction of taxable income.

NOTE: the benefit of Net Capital Loss can be only used up to the extent of any
capital gain. If capital loss is 100, and capital gain is only 70, only 70 shall be used
and the remaining 30 capital loss shall not be used as a deduction of the gross
income.
3. the benefit of the excess MCIT over RCIT
a. excess of the minimum corporate income tax over the normal income tax shall
be carried forward
b. and credited against the normal income tax (tax due)
c. for three consecutive years after the incurrence of the minimum corporate
income tax
d. applicable to corporations only
e. used only when the corporation is already subject to the MCIT.
Note: A corporation is subject to MCIT beginning the fourth taxable year immediately
following the year in which it was incorporated. If a corporation is registered in 2018, it
shall be subject to MCIT on January 1, 2022.

ESTATE TAX

Q: When is an estate tax return required to be filed?

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A:

1. In all cases of transfers subject to estate tax;

2. Where, though exempt from estate tax, the gross value of the estate exceeds Php200,000;
or
3. Where, regardless of the gross value, the estate consists of registered or registrable property
such as real property, motor vehicle, shares of stocks or other similar property for which a
clearance from the BIR is required as a prerequisite for the transfer of ownership thereof in
the name of the transferee [NIRC, Sec. 90(A) as clarified in RMC No. 34-2013]

DONOR’S TAX

Q: What are the exemptions from donor’s tax?

A:

1. Dowries or donations made:

a. On account of marriage;
b. Before its celebration or within one year thereafter;
c. By parents to each of their legitimate, recognized natural, or adopted children;
d. To the extent of the first Php 10,000.
2. Gifts made to or for the use of the National Government or any entity created by any of its
agencies which is not concluded for profit, or to any political subdivision of the said
government;
3. Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, accredited NGO, trust, or philanthropic organization or research
institution or organization provided not more than 30% of said gifts will be used by such for
administration purposes. [NIRC, Sec. 101(A)]

NOTE: Only numbers 2 and 3 apply to non-resident aliens [NIRC, Sec. 101(B)]

VALUE ADDED TAX

Q: What are the elements of a VAT taxable transaction?

1. It involves any person;

2. There must be a sale, barter, exchange, lease, rendering of service, which includes deemed
sale transactions;
3. It must be made in course of trade or business, except if importation, including incidental
transactions;
4. The transaction is done in the Philippines; and
5. It must be neither be zero-rated nor exempt from VAT.

Q: What are the differences between zero-rated transactions and VAT-exempt transactions?

A:
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Zero-rated VAT Exempt

Does not result in an output tax and is subject to
0% VAT
Tax credits or refunds may be allowed on input tax
on the purchases of a VAT-registered person
Individuals engaged in zero-rated transactions are
require to register
Also does not result to output tax but this is not
subject to VAT at all
No refund or credit is allowed for input tax of a
VAT-registered person
VAT-exempt persons are not required to register

Q: What are the differences between “Input Tax” and “Output Tax”?

A:

Input Tax Output Tax

This represents the VAT paid by a VAT-registered
person/entity in the course of his/her trade or
business on the importation of goods or local
purchases of goods and services from a VAT-
registered person.
VAT on the purchase of goods and services
When such person/entity sells the products or
services, the VAT-registered taxpayer generally
becomes liable for 12% of the selling price as
output VAT.
VAT on the sale of taxable goods and services

Q: X was a VAT-registered corporation who engaged Y, another corporation for the latter to construct a
factory. For Y’s services, X made initial payments. These payments were then treated by X as capital goods
purchases so it filed a claim for refund with the CIR. Unfortunately, the CIR did not act on the claim within
120 days. Instead of filing judicial claim within 30 days, X filed a petition for review 5 months after with
the CTA. Was X’s action correct?

A: No. In this case, the CTA did not have jurisdiction to rule on X’s claim. The 30-day period to appeal is
mandatory and jurisdictional. Without it, X’s claim must fail. Moreover, the Court ruled that the 30-day
period applies when the CIR’s 120-day period for rendering a decision lapse. This is so because the inaction
is a decision itself. [Rohm Apollo Semiconductor Phil. V. CIR, 2015]

TAX REMEDIES

Q: What are the requisites for a valid claim of VAT refund on unutilized Input VAT on zero-rated sales?

A:

1. Taxpayer is VAT-registered;
2. Taxpayer is engaged in zero-rated/effectively zero-rated sales;
3. Input taxes are:
a. Not transitional input taxes;
b. Unutilized;
c. Attributable to zero-rated/effectively zero-rated sales;
4. The administrative claim is files within 2 years after the close of the taxable quarter when
such sales were made. [Luzon Hydro Corporation v. CIR, 2013]
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NOTE: Sales made pertain to the sale made by the supplier, not by the one claiming unutilized Input VAT.

Q: When is the “Best Evidence Obtainable“ rule applied?

A:

1. When the report or records requested from the taxpayer are not forthcoming, i.e. the records
are lost, or the taxpayer refuses to submit those records; or
2. The reports submitted are false, incomplete or erroneous. [RMC 23-00]

Q: What is the prescriptive period for a false or fraudulent report?

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 proceeding in court for the collection of such tax may be filed without assessment,
at any time within 10 years after the discovery of the falsity, fraud or omission. [NIRC, Sec 222(A)]

Q: How can the period for assessment be validly extended?

A: there has to be a written agreement between the Commissioner and the taxpayer for the tax to be
assessed in the period agreed upon. [NIRC, Sec 222(B)]

Q: What are the requirements for a valid waiver of the Statute of Limitations?

A:

1. The waiver must be in the proper form prescribed by the BIR. The phrase “but not after
____19 _____” should be filled up.
2. It must be signed by the taxpayer himself or his duly authorized representative. If the taxpayer
is a corporation, it must be signed by any of its responsible officials.
3. It must be duly notarized.
4. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR
has accepted and agreed to the waiver.
5. Both the date of execution by the taxpayer and the date of acceptance by the BIR should be
before the expiration of the period of prescription or before the lapse of the period agreed
upon in case a subsequent agreement is executed.
6. The waiver must be executed in three copies, the original to be attached to the docket of the
case, the second copy for the taxpayer and the third copy for the Office accepting the waiver.
[RMO 20-90]

Q: Can a taxpayer be examined and inspected multiple times for the same taxable year?

A: As a general rule, a taxpayer cannot be examined and inspected multiple times or the same taxable
year, except when:
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1. The CIR determines that fraud, irregularities, or mistakes were committed by the taxpayer;
2. The taxpayer’s request for reinvestigation or re-examination was granted;
3. The taxpayer’s liabilities must be verified;
4. Commissioner chooses to exercise his power to obtain information relative to the
examination of other taxpayers. [NIRC, Secs. 5 and 235]

Q: What are the instances wherein the period of prescription is suspended?

A:

1. The CIR was prohibited from making the assessment or beginning distraint/levy or a
proceeding in court for 60 days thereafter;
2. Taxpayer requests for reinvestigation which is granted by the CIR;
3. Taxpayer cannot be located in his/her registered address but this will not apply if the taxpayer
informs Commissioner of any change in address;
4. The taxpayer is out of the Philippines. [NIRC, Sec 223]

Q: Are offsetting of taxes allowed?

A: as a general rule, offsetting of taxes is not allowed. Taxes cannot be subject to compensation because
the government and the taxpayer are not mutually creditors and debtors of each other. A claim for taxes
is not allowed to be set-off unlike debts, demands, contracts or judgments.

However, offsetting is allowed in the following instances:

1. When there is an existing deficiency income and business tax assessment against the
taxpayer;
2. When the correctness of the return filed by the taxpayer is put in issue;
3. When there is a need for the court to determine if the taxpayer is liable for more taxes than
those that he had paid in a refund case.

Offsetting is allowed an all these cases because the determination of the taxpayer’s liability is intertwined
with the resolution of the claim for tax refund of erroneously or illegally collected taxes. [CIR v. Toledo,
2015]

Q: What are the remedies available to the taxpayer in case of a denial of protest?

A: if the protest is denied, in whole or in part, the taxpayer may either:

1. Appeal to the CTA within 30 days from the date of receipt of the decision; or
2. Elevate the protest through request for reconsideration to the Commissioner within 30 days
from the date of receipt of the decision. [RR 18-2013]

Q: What are the remedies available to the taxpayer in case of inaction by the Commissioner’s duly
authorized representative?
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A: if the protest is not acted upon by within 180 days from the filing of the protest (reconsideration) or
from the date of submission by the taxpayer of the required documents (reinvestigation), the taxpayer
may either:

1. Appeal to the CTA within 30 days after the expiration of the 180-day period; or
2. Await the final decision of the Commissioner’s duly authorized representative.

Q: What are the remedies available to a taxpayer in case of inaction of the CIR on the protested
assessment?

A: The taxpayer has the option to:

1. File a petition for review with the CTA within 30 days after the expiration of the 180-day
period; or
2. Await the final decision of the CIR in the disputed assessment and appeal such final decisions
to the CTA within 30 days after the receipt of the copy of such decision.

These options are mutually exclusive and the resort to one bars the application of the other.

Q: May a taxpayer file an injunction enjoining the implementation of a law imposing taxes?

A: No because this is tantamount to an injunction issued to enjoin the collection of the same. This is
prohibited by law. [Republic v. Caguioa, 2007]

Note: However, the Supreme Court has already provided an exception to this rule; the prohibition of the
issuance of injunctions enjoining the collection of taxes only applies to national internal revenue taxes
and not to local taxes collected by the local government units. [Angeles City v. Angeles Electric
Corporation, 2010]

Q: What is the jurisdiction of the Court of Tax Appeals?

A:

CTA Division CTA En Banc

Exclusive original or appellate jurisdiction to
review by appeal:
1. Decisions of the CIR in cases involving
disputed assessment, refunds of
internal revenue taxes, fees or other
charges, penalties in relation thereto,
or other matters arising under 1997
Tax Code or other laws administered
by the CIR.
2. Inaction of the CIR involving:
Exclusive appellate jurisdiction to review by
appeal:
Decisions or resolutions on motions for
reconsideration or new trial.
1. Of the CTA Division in the exercise of
its exclusive appellate jurisdiction
a. over tax collection cases decided by
the RTC in the exercise of their original
jurisdiction involving final and
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a. Disputed Assessments executory assessments for taxes, fees,

b. Refunds of internal revenue taxes, charges, penalties, where the
fees or other charges or penalties in principal amount of taxes and
relation thereto penalties is less than Php 1 Million
c. other matters arising under the Tax
Code b. over cases involving criminal
d. Other laws administered by the BIR offenses arising from violations of the
where the Tax Code or other Tax Code and other laws administered
applicable law provides a specific by the BIR.
period for action.
Exclusive Jurisdiction over cases involving criminal 2. Of the CTA division in the exercise of
offenses: its exclusive and original jurisdiction
All criminal offenses arising from the Tax Code or a. over tax collection cases;
other laws administered by the BIR where the
principal amount of taxes and fees, exclusive of b. over cases involving criminal
charges and penalties claimed is: offenses arising from violations of the
1. Php 1 Million or more – Original Tax Code and other laws administered
Jurisdiction by the BIR
2. Less than Php 1 Million or where there
is no specified amount claimed – 3. Of the RTC in the exercise of their
Appellate Jurisdiction appellate jurisdiction:
Exclusive jurisdiction over tax collection cases: a. over tax collection cases;
1. Tax collection cases involving final and
executory assessments for taxes, fees, b. over criminal offenses.
charges and penalties, where the
principal amount of taxes and fees,
exclusive of charges and penalties
claimed is Php 1 million or more –
Original Jurisdiction
2. Appellate jurisdiction over appeals
from judgments, resolution, or orders
of the RTC in tax collection cases
originally decided by them within
their territorial jurisdiction.

Real Property Taxation

Q: What are the properties exempt from Real Property Tax?

A:

1. All real property owned by duly registered cooperatives;

2. Charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques,
non-profit or religious cemeteries, and all lands, buildings or improvements actually, directly
and exclusively used for religious, charitable and educational purposes;
3. Machinery and equipment used for pollution control and environmental protection (includes
infrastructure);
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4. Real Property owned by the Republic of the Philippines or any of its political subdivisions
(except when the beneficial use has been granted to a taxable person)
5. All machineries and equipment actually, directly and exclusively used by local water districts
and GOCCs engaged in the supply and distribution of water and/or generation and
transmission of electric power (Local Government Code, Sec 234)

Local Government Tax

Q: Differentiate between the remedies of a taxpayer for the assessment of local business tax (LBT) and for
real property tax (RPT).

A:

LBT
1. Within 60 days from assessment
protest with local treasurer
a. has 60 days to act on protest.
2. Within 30 days from receipt of denial
of protest or inaction of 60 days
appeal to regular courts
3. File petition for review within 30 days
to CTA Division
4. Payment under protest: NOT required
RPT
1. Within 30 days from payment, protes
in writing to the local treasurer
a. has 60 days to decide the protest
2. Within 30 days from receipt of
decisions or 60-day inaction, appeal
to the Local Board of Assessment
Appeals (LBAA)
a. has 120 days to decide on the
appeal
b. within 30 days, appeal to the
Central Board of Assessment Appeals
(CBAA) upon LBAA denial.
3. Appeal to CTA en banc within 30 days
upon CBAA denial
4. Payment under protest: Required

Q: What is the branch or sales office rule?

A: When there is a branch, sales office, or warehouse, tax shall accrue and shall be paid to the locality
where such branch, sales office, or warehouse is located.

Tariffs and Customs

Q: What is the difference between technical smuggling from outright smuggling?

A:

Technical Smuggling

1. The act of importing goods into the country

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2. By means of fraudulent, falsified or erroneous declaration of the goods to its nature,

kind, quality, quantity or weight
3. For the purpose of reducing or avoiding payment of prescribed taxes, duties and other
charges.

Outright Smuggling

1. The act of importing the goods into the country

2. Without complete customs prescribed importation documents
3. Or without being cleared by customs or other regulatory government agencies
4. For the purpose of evading payment of prescribed taxes, duties and other
governmental charges.

[Customs Modernization and Tariff Act (CMTA), Sec 102]

Q: What are De Minimis Importations?

A: De Minimis Importations are importations with a value of Php 10,000 and below. No duties and taxes
shall be collected on De Minimis Importations. [Customs Administrative Order No. 02-2016]