TAXATION 2

2nd Semester, AY 2019-2020

Prof. R. R. Dujunco

Grades:
Recitation/Quizzes 40%
Midterms 30%
Finals 30%

Textbook: The Law on Transfer and Business Taxation by de Leon. Note that this not an updated edition
for TRAIN Law so use this for concepts only. You can also check various bar review materials on
Taxation.

Provisions cited below pertain to the 1997 NIRC, as amended, unless otherwise stated.

I. NATIONAL INTERNAL REVENUE CODE OF AS AMENDED BY TRAIN

A. Transfer Taxes

1. Estate Tax – Secs. 84 to 97

Revenue Regulations 12-2018

• Lorenzo v. Posadas, G.R. No. L-43082, 1937

• CIR v. Fisher, G.R. Nos. L-11622 & L-11668, 1961

a) Basic principles, concept, and definition

b) Nature, purpose, and object
c) Time and transfer of properties
d) Classification of decedent
e) Gross estate and net estate
f) Tax credit for estate taxes paid to a foreign country
g) Exemption of certain acquisitions and transmissions
h) Filing of notice of death – repealed by TRAIN
i) Estate tax return – filing, payment, extension and installment
j) Estate Tax Amnesty – RA No. 11213 and RR No. 6-2019

2. Donor’s Tax – Secs. 97 to 104

• Abello v. CIR, G.R. No. 120721, 2005

• Philamlife v. Secretary of Finance, G.R. No. 210987, 2014

a) Basic principles, concept and definition

b) Requisites of a valid donation
c) Transfers which may be constituted as donation
(1) transfer for less than adequate and full consideration
(2) campaign contributions
d) Valuation of gifts made in property
e) Tax credit for donor’s taxes paid to a foreign country
f) Exemption of gifts from donor’s tax

B. Value-Added Tax (VAT) – Secs. 105 to 115

Revenue Regulations 16-2005
Revenue Regulations 13-2018

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1. Concept, characteristics/elements of VAT-taxable transactions
• Abakada Guro Party List v. Ermita, G.R. No. 168056, September 1, 2005.
• CIR v. Magsaysay Lines, G.R. No. 146984, 2006
• Mindanao II Geothermal v. CIR, 693 SCRA 49, March 11, 2013
2. Impact and incidence of tax
3. Tax credit method
4. Destination Principle / Cross Border Doctrine
• CIR v. Toshiba Information Equipment, G.R. 150154, 2005
• CIR v. Burmeister and Wain, G.R. No. 153205, 2007
5. Persons liable
6. Imposition of VAT
a) On sale of goods or properties
b) On importation of goods
(1) Transfer of goods by tax exempt persons
c) On services
• American Express v. CIR, G.R. No. 152609, 2005
• CIR v. CA, G.R. No. 125355, 2000
7. Transactions deemed sale
a) Transfer, use or consumption not in the course of business of goods/properties
originally intended for sale or use in the course of business
b) Distribution or transfer to shareholders, investors or creditors
c) Consignment of goods if actual sale is not made within 60 days from date of
consignment
d) Retirement from or cessation of business with respect to inventories on hand
•
8. Change or cessation of status as VAT-registered person
a) Subject to VAT
(1) Change of business activity from VAT taxable status to VAT-exempt status
(2) Approval of request for cancellation of a registration due to reversion to
exempt status
(3) Approval of request for cancellation of registration due to desire to revert to
exempt status after lapse of 3 consecutive years
b) Not subject to VAT
(1) Change of control of a corporation
(2) Change in the trade or corporate name
(3) Merger or consolidation of corporations
9. Zero-rated and effectively zero-rated sales of goods or properties
10.VAT-exempt transactions
a) VAT exempt transactions; in general; enumeration
• CIR v. Seagate Technology, G.R. No. 153866, 2005
• CIR v. Cebu Toyo Corporation, 451 SCRA 447
11. Input and Output tax
• Kapatiran ng Naglilingkod sa Pamahalaan, 163 SCRA 371
• Philippine Geothermal Inc. v. CIR, G.R. No. L-154028, 2005
• Fort Bonifacio Development Corp v. CIR, G.R. No. 173425, 2013
• Diaz v. Secretary of Finance, G.R. No. 193007, 2011
a) Definition
b) Sources of input tax
(1) Purchase or importation of goods
(2) Purchase of real properties for which VAT has actually been paid
(3) Purchase of services for which VAT has actually been paid
(4) Transactions deemed sale
(5) Presumptive input
(6) Transitional input
c) Persons who can avail of input tax credits

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 d) Determination of output/input tax; VAT payable; excess input tax credits
(1) Determination of output tax
(2) Determination of creditable input tax
(3) Allocation of input tax on mixed transactions
(4) Determination of the output tax and VAT payable and computation of VAT
payable or excess tax credits
e) Substantiation of input tax credits
12. Refund or tax credit of excess input tax
a) Who may claim for refund/apply for issuance of tax credit certificates
b) Period to file claim/apply for the issuances of tax credit certificates
Revenue Memorandum Circular No. 54-2014
• Pilipinas Total Gas v. CIR, G.R. No. 2017112, 2015
• Philex Mining Corp v. CIR, G.R. No. 125704, 1998
• Atlas Consolidated Mining v. CIR, 524 SCRA 73 (2007)
• CIR v. Mirant Pagbilao, G.R. No. 172129, September 12, 2008
• CIR v. Aichi Forging Company, G.R. No. 184823, October 6, 2010
• CIR v. San Roque Power Corporation, G.R. Nos. 187485, 196113, and
197156, February 12, 2013
• Rohm Apollo Semiconductor v. CIR, G.R. No. 168950, 2015
• KEPCO Philippines v. CIR, G.R. No. 181858, November 24, 2010.
13. Invoicing Requirements
a) In general
b) In “deemed sale” transactions
c) Consequences of issuing erroneous VAT invoice or VAT official receipt
14.Filing of returns and payment
15.Withholding of final VAT on sales to government

C. Percentage Taxes – Secs. 116 to 128

• China Banking Corporation v. CTA, G.R. No. 146749, June 10, 2003
• Republic of the Philippines v. Sunlife Assurance Company of Canada, G.R. No. 158085,
October 14, 2005
• CIR v. Lhuiller Pawnshop, G.R. No. 150947, July 15, 2003
• First Planters Pawnshop v. CIR, G.R. No. 174134, July 30, 2008

1. Tax on persons exempt from VAT – Sec. 116

2. Carriers tax as amended by RA 9377 (July 1, 2005) – Secs. 117 and 118
Revenue Regulations No. 11-2011 – defining gross receipts for common carrier’s tax for
international carriers
3. Tax on franchises – Sec. 119
4. Overseas communication tax – Sec. 120
5. Tax on banks and financial intermediaries – Sec. 121, as amended by RA 7716 and RA 9238
6. Tax on finance companies – Sec. 122
7. Tax on insurance premiums – Sec 123, as amended by RA 10001
8. Tax on agents of foreign insurance companies – Sec. 124
9. Amusement taxes – Sec. 125
10. Tax on winnings – Sec. 126

11. Percentage tax on IPOs – Sec. 127

12. Payment of Percentage Taxes – Sec. 128
Revenue Regulations No. 6-2001, July 31, 2001
Revenue Regulations No. 10-2004.

D. Excise Tax (concept and nature only) – Secs. 129 to 172

See amendments under TRAIN

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E. Documentary Stamp Taxes – Secs. 173 to 201
• Philippine Banking Corporation v. CIR, G.R. No. 170574, 2009
• Jaka Investments Corporation v. CIR, G.R. No. 147629, 2010
• CIR v. Filinvest Development Corporation, G.R. No. 163653, 2011

1. Concept and nature

2. Transactions not subject to DST
3. Effect of non-filing and payment

F. Tax Remedies under the NIRC

Revenue Regulations No. 12-1999
Revenue Regulations No. 07-2018

1. General Concepts
a) Assessment – Sec. 6
(1) Definition and requisites of a valid assessment – Sec. 203, 228
b) Tax delinquency as distinguished from Tax deficiency
c) Jeopardy assessment
d) Prescriptive period for assessment – Secs. 203 and 222
(1) General rule
(2) False or fraudulent returns and non-filing of returns
(3) Suspension of the running of statute of limitations
• CIR v. BF Goodrich, G.R. No. 104171, 1999
• Asianbank v. CIR, CTA Case No. 6095, 2001
• Revenue Memorandum Circular 48-1990
• Revenue Memorandum Order 14-2016

2. Civil penalties, additions to the tax

a) Delinquency interest and deficiency interest
b) Surcharge
c) Compromise penalty
• Lhuiller v. CIR, G.R. No. 166786, 2006

3. Assessment process and reglementary periods –

a) Letter of Authority and Tax Audit
b) Notice of Informal Conference
c) Issuance of Preliminary Assessment Notice; general rule and exceptions
d) Issuance of Formal Letter of Demand and Final Assessment Notice
e) Disputed Assessment
• RP v. CTA & Nielson, G.R. No. 38540, 1987
• CIR. V. DLSU, G.R. No. 196596, 2016, on RMO 43-90
• Medicard Philippines v. CIR, G.R. No. 222743, 2017
• Collector v. Bautista and Tan, G.R. Nos. L-12250 & L-12259, 1959
• Republic v. Ricarte, G.R. No. L-46893, 1985
• Advertising Associates v. CTA, G.R. No. L-59758, 1984
• CIR v. Union Shipping, G.R. No. 66160, 1990
• Surigao Electric v. CTA, G.R. No. L-25289, 1974
• CIR v. Isabela Cultural Corporation, G.R. No. 135210, 2001
• Oceanic Wireless Network v. CIR, G.R. No. 148380, 2005
• CIR v. Pascor Realty, G.R. No. 128315, 1999
• CIR v. Enron Subic Power, G.R. No. 166387, 2009

4. Collection
a) Requisites
b) Prescriptive periods; suspension of running of statute of limitations

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G. Taxpayer’s remedies

1. Protesting an assessment – Revenue Regulations No. 12-99

a) Protested assessment
b) Period to file protest
c) Form, content, and validity of protest
d) Submission of supporting documents
e) Effect of failure to file protest
f) Decision of the Commissioner on the protest filed
(1) Period to act upon or decide on protest filed
(2) Remedies of the taxpayer in case the Commissioner denies the protest or
fails to act on the protest
(3) Effect of failure to appeal
• RCBC v. CIR, G.R. No. 168498, 2007
• Lascona Land Co. v. CIR, G.R. No. 171251, 2012
• CIR v. Kudos Metal Corporation, G.R. No. 178087, 2010
• Fishwealth Canning Corp v. CIR, G.R. No. 179343, 2010
• CIR v. V.Y. Domingo Jeweller, Inc., G.R. No. 22178, 2019
• CIR v. Wyeth, G.R. No. 76281, 1991

2. Compromise and abatement of taxes – Sec. 204

3. Recovery of Tax Erroneously or Illegally Collected

a) Tax refund as distinguished from Tax credit
b) Grounds, requisites and period for filing a claim for refund or issuance of a tax credit
certificate
c) Statutory basis and proof of claim for refund or tax credit
d) Proper party to file claim for refund or tax credit
• CIR v. TMX Sales, G.R. No. 83736, 1992
• CIR v. Philamlife, G.R. No. 105208, 1995
• CIR v. Smart Communications, G.R. No. 179045-46, 2010

H. Government remedies
• CIR v. Suyoc Consolidated Mining, 104 Phil. 819
• Republic v. Patanao, G.R. No. L-22356, 1967, L14142, 1961
• CIR v. Philippine Global Communications, G.R. No. 167146, 2006
1. Administrative remedies
a) Tax lien
b) Distraint and levy
c) Forfeiture of real property

d) Suspension of business operation

e) Non-availability of injunction to restrain collection of tax

2. Judicial remedies – civil or criminal action

III. LOCAL TAXATION [LOCAL GOVERNMENT CODE (LGC) OF 1991, as amended]

A. Local government taxation

• Mactan Cebu International Airport Authority v. Marcos, G.R. No. 120082, September
11, 1996
• City of San Pablo v. Reyes, 305 SCRA 353, 1999
• Pepsi-Cola Bottling v. City, 24 SCRA 789
• Matalin Coconut v. Municipal Council, 143 SCRA 404

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 • Phil Match Co. Ltd v. City of Cebu, 81 SCRA 99, January 18, 1999
• PLDT v. City of Davao, G.R. No. 143867, August 22, 2001
• Meralco v. Province of Laguna, 306 SCRA 353
• Figuerres v. CA, G.R. No. 119172, March 25, 1999
• Coca-Cola v. City of Manila, G.R. No. 156252, June 27, 2000
• Yamane v. BA Lepanto Condominium Corporation 474 SCRA 258
• Lopez v. City of Manila, 303 SCRA 448
• Iloilo Bottlers v. Iloilo City, G.R. No. 52019, 1988
• Arabay v. CFI, 66 SCRA 617, 1975
• Allied Thread v. City of Manila, G.R. No. 40296, 1984
• Mobil Philippines v. City Treasurer of Makati, G.R. No. 154092, 2005
• Hagonoy Market Vendor Association v. Municipality of Hagonoy Bulacan, G.R. No.
137621, 2002
• Mindanao Shopping Destination v. Duterte, G.R. No. 211093, 2017

1. Fundamental principles – Sec. 130, LGC

2. Nature and source of taxing power – 1987 Const., Article X, Secs 5 and 6
a) Grant of local taxing power under the LGC
b) Authority to prescribe penalties for tax violations
c) Authority to grant local tax exemptions – Sec. 192, LGC
d) Withdrawal of exemptions
e) Authority to adjust local tax rates – Sec. 191, LGC
f) Residual taxing power of local governments – Sec. 186, LGC
g) Authority to issue local tax ordinances – Secs. 187 to 189, LGC

3. Local taxing authority

a) Power to create revenues exercised through Local Government Units (LGUs)
b) Procedure for approval and effectivity of tax ordinances

4. Scope of taxing power

5. Specific taxing power of LGUs – pre-emption. Secs. 142, 151, LGC

6. Taxing powers of provinces (Exclude: Rates) – Secs. 135 to 141

a) Tax on transfer of real property ownership
b) Tax on business of printing and publication
c) Franchise tax
d) Tax on sand, gravel and other quarry services
e) Professional tax
f) Amusement tax
g) Tax on delivery truck/van

7. Taxing powers of cities (Exclude: Rates) – Sec. 143, LGC

8. Taxing powers of municipalities (Exclude: Rates)

a) Tax on various types of businesses
b) Ceiling on business taxes imposable by LGUs within Metro Manila
c) Tax on retirement of business
d) Rules on payment of business taxes
e) Fees and charges for regulation & licensing
f) Situs of tax collected – Sec. 143, LGC

9. Taxing powers of barangays (Exclude: Rates) – Sec. 152, LGC

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 10. Common revenue raising powers – Secs. 154-154, LGC
a) Service fees and charges
b) Public utility charges
c) Toll fees or charges

11. Community tax

12. Common limitations on the taxing powers of LGUs

13. Collection of business taxes – Secs. 165 to 170, LGC

a) Tax period and manner of payment
b) Accrual of tax
c) Time of payment
d) Penalties on unpaid taxes, fees or charges
e) Authority of treasurer in collection and inspection of books

14.Taxpayer’s remedies
a) Periods of assessment and collection of local taxes, fees or charges – Sec. 194, LGC
b) Protest of assessment – Sec. 187, LGC
c) Claim for refund of tax credit for erroneously or illegally collected tax, fee or charge

15. Civil remedies by the LGUs for collection of revenues

a) Local government’s lien for delinquent taxes, fees or charges
b) Civil remedies, in general
(1) Administrative action
(2) Judicial action

B. Real property taxation

• Army and Navy Club v. Trinidad, 44 Phil., 383
• Philippine Fisheries Development Authority v. CBAA, G.R. No. 178030, 2010
• NPC v. CBAA, G.R. No. 171470, 2009
• City Assessor of Pasay v. BAA of Pasay City
• Lopez v. City of Manila, G.R. No. 127139, 1999
• Callanta v. Abellana, Gr. NO. 115253, 1998
• Province of Nueva Ejica v. Imperial Mining, G.R. No. 59463, 1982
• Mindanao Bus Co., v. City Assessor of Cagayan de Oro, G.R. No. 17870, 1962
• Caltex Philippines v. CBAA, G.R. No. 50466, 1982
• City Assessor of Cebu v. Association of Benevola de Cebu, G.R. No. 152904,
2007
• LRT v. SEC, G.R. No. 127316, 2000
• Allied Banking v. Quezon City, G.R. No. 154126, 2005
• Sec. of Finance v. Ilarde, G.R. No. 121782, 2005
• Manila International Airport Authority v. CA, G.R. No. 155650, 2006
• UP v. City Treasurer of QC, G.R. No. 214044, 2019

1. Fundamental principles – Sec. 199, LGC

2. Nature of real property tax – Secs. 233, 235, 236, and 240, LGC
3. Imposition of real property taxes
a) Power to levy real property taxes
b) Exemption from real property taxes – Sec. 234, LGC
4. Appraisal and assessment of real property tax
a) Rule on appraisal of real property tax at fair market value
b) Declaration of real property – Secs. 202, 222, LGC
c) Listing of real property in assessment rolls
d) Preparation of schedules of fair market values

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 (1) Authority of assessor to take evidence
(2) Amendment of schedule of fair market values
e) Classes of real property
f) Actual use of property as basis of assessment – Sec. 218, LGC
g) Assessment of property
(1) General revisions of assessments and property classifications – Sec. 219
(2) Date of effectivity of assessment or reassessment
h) Assessment of property subject to back taxes – Sec. 222, LGC
i) Notification of new or revised assessments

C. Collection of real property tax

1. Date of accrual of real property taxes and special levies – Sec. 246, LGC
2. Collection of taxes
a) Collecting authority – Sec. 247, LGC
b) Duty of assessor to furnish local treasurer with assessment rolls
c) Notice of time for collection of taxes – Sec. 249, LGC
3. Periods within which to collect real property taxes
4. Special rules on payment
a) Payment of real property taxes in installments
b) Interests on unpaid real property taxes
c) Condonation of real property taxes – Secs. 276-277, LGC
5. Remedies of LGUs for collection of real property taxes
a) Issuance of notice of delinquency for real property tax payment
b) Local government’s lien
c) Remedies in general
d) Resale of real estate taken for taxes, fees or charges
e) Further levy until full payment of amount due

D. Refund or credit of real property taxes

1. Payment under protest
2. Repayment of excessive collections

E. Taxpayer’s remedies
1. Contesting an assessment of value of real property
a) Appeal to the Local Board of Assessment Appeals (LBAA)
b) Appeal to the Central Board of Assessment Appeals (CBAA)
c) Effect of payment of tax

F. Payment of real property tax under protest

1. File protest with local treasurer
2. Appeal to the LBAA
3. Appeal to the CBAA
4. Appeal to the Court of Tax Appeals (CTA)
5. Appeal to the Supreme Court (SC)

IV. TARIFF AND CUSTOMS CODE OF THE PHILIPPINES (P.D. No. 1464), as amended by the
CUSTOMS MODERNIZATION AND TARIFF ACT (Republic Act No. 10863, which took effect on June 16,
2016)
• Nestle Philippines v. CA, G.R. No. 134114, 2001
• Commissioner of Customs v. Milwaukee Industrial Corporation, G.R. No. 135253,
2004
• Auyong Hian v. CTA, 59 SCRA 110, 1974
• Llamado v. Commissioner of Customs, G.R. No. 28809, 1983
• Transglobe International v. CA, G.R. No. 126634, 1999
• SBMA v. Rodriguez, G.R. No. 160270, 2010

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 • Philippines Phosphate v. Commissioner, G.R. No. 141973, 2005
• RV Marzan Freight v. CA, G.R. No. 128064, 2004

1. When importation begins and deemed terminated – Sec. 103

2. When duty and tax are due on imported goods – Sec. 104
3. Declarant – Sec. 106
4. Decision and ruling – Sec. 113
5. Right of appeal, forms and ground – Sec. 114
6. Relief consignment – Sec. 120
7. Importations subject to goods declaration – Sec. 401
8. Goods declaration on consumption – Sec. 402
9. Owner of imported goods – Sec. 404
10. Determination of De Minimis value – Sec. 423
11. Valuation Methods – Secs. 700-706
12. Government’s rights of compulsory acquisition – Sec. 709
13. Discrimination by foreign countries – Sec. 714
14. Conditionally free and duty exempt importations – Sec. 800
15. Duty drawbacks – Sec. 900
16. Records – Secs 1000 to 1003
17. Refunds – Sec. 913
18. Rulings, Protest and Review – Secs. 1100, 1106, 1126, 1127, 1128, and 1136

V. JUDICIAL REMEDIES [R.A. No. 1125, as amended, and the Revised Rules of the Court of Tax
Appeals (CTA)]
• Blaquera v. Rodriguez, 103 Phil. 267, 1958
• Raymundo v. de Joya, 101 SCRA 495, 1980
• CIR v. CA and Atlas Consolidated, 271 SCRA 605, 1997

A. Jurisdiction of the CTA

1. Exclusive appellate jurisdiction over civil tax cases
a) Cases within the jurisdiction of the court en banc
b) Cases within the jurisdiction of the court in divisions
2. Criminal cases
a) Exclusive original jurisdiction
b) Exclusive appellate jurisdiction in criminal cases

B. Judicial procedures
1. Judicial action for collection of taxes
a) Internal revenue taxes
b) Local taxes
(1) Prescriptive period
2. Civil cases
a) Who may appeal, mode of appeal, effect of appeal
(1) Suspension of collection of tax
(2) Injunction not available to restrain collection
(3) Taking of evidence
(4) Motion for reconsideration or new trial
b) Appeal to the CTA, en banc
c) Petition for review on certiorari to the SC
3. Criminal cases
a) Institution and prosecution of criminal actions
(1) Institution of civil action in criminal action
b) Appeal and period to appeal
(1) Solicitor General as counsel for the people and government officials sued in
their official capacity
c) Petition for review on certiorari to the SC

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