F.

EXEMPTION FROM
TAXATION
1. Meaning of Exemption from Taxation

It is the grant of immunity to particular persons or

corporation or to persons or corporation of a
particular class from a tax which person and
corporations generally within the same state or
taxing district are obliged to pay.
An immunity or privilege;
Freedom from financial charge or burden to
which others are subjected.
2. Nature of tax exemption

a. National Government
An attribute of sovereignty;
The sovereign state is free to select the
subjects of taxation and to also, to grant
exemptions therefrom.
b. Local Governments
No inherent power to tax;
But the legislature may delegate its power to
exempt from taxation.
3. Rationale of Tax Exemption

a. The grant of tax an exemption from taxation

rest upon the theory that such exemption will benefit
the body of the people.

b. Public benefit or interest should be sufficient

to offset the monetary loss entailed in the grant of
the exemption.
4. Grounds for Tax Exemption

a. may be based on Contract;

b. Public policy;
to encourage new and necessary industries;
Foster benevolent and charitable institutions;
c. Created in a treaty on grounds of reciprocity, or
to lessen double or multiple taxation.
5. Nature of Tax Exemption

a. Personal privilege of the grantee;

b. generally revocable by the Government;
c. Implies a waiver of the governments right to
collect;
d. Not necessarily discriminatory.
6. Kinds of Tax Exemption

a. as to manner of creation:
- express or implied exemptions.
b. as to Scope or Extent:
- Total or Partial exemptions.
c. as to Object:
- Personal or Impersonal.
7.1 Exemptions under the Tax Code

a. from Income Tax:

Civic league or organizations not organized for
profit;
Business league, chamber of commerce or board of
trade not organized for profit;
Cemeteries which are company-owned and operated
exclusively for the benefit of its members.
b. from Estate Tax:
the transmission from the first heir, legatee, or done in
favor of another beneficiary, in accordance with the
desire of the predecessor.
All bequest to social welfare, cultural, and charitable
institutions, subject to certain conditions.
c. from Donors Tax:
Gifts on account of marriage.
gifts made to or for the use of the national
government.
gifts made to educational, charitable, religious,
cultural or social welfare corporation.
7.2 Exemptions under Special Laws

a. from Income Tax:

GSIS and SSS benefit payments to its respective
members.
Income from bonds and securities for sale in the
international market.
Exemption for a limited period of new and necessary
industries.
b. from Donors Tax:
donation to the Ramon Magsaysay Award;
donation to the I.R.R.I.
donation to the National Museum, National Library,
and the National Historical Institute.
 8. Construction of Tax Exemption Laws
or Statutes

a. General Rule in interpreting tax statutes,

exemptions are not favored. The specific
provision granting the exemption must be clear
and in plain terms.
b. Exception if exemption is in favor of the
government or its agencies, or to religious,
charitable, and educational institutions.
 9. Tax Amnesty

A tax amnesty is a general pardon or intentional

overlooking by the State of its authority to impose
penalties on persons otherwise guilty of tax evasion
or violation of a revenue or tax law.