Prepared by : Atty. Bayani S.

Atup, CPA Prepared for: Gullas College of Law (UV

VALUE ADDED TAX (AS AMENDED)

Taxable transactions 1. Persons liable Any person who, in he !o"rse o# ra$e or b"siness, sells, bar ers, e%!han&es, leases &oo$s or proper ies, ren$ers ser'i!es, an$ any person who i(por s &oo$s shall be s"b)e! o he 'al"e a$$e$ a% (VAT) i(pose$ in Se! ions 1*+ o 1*, o# his !o$e. -. Na "re o# he a% Val"e a$$e$ a% is an in$ire! a% an$ he a(o"n o# a% (ay be shi# e$ or passe$ on o he b"yer, rans#erree or lessee o# he &oo$s, proper ies or ser'i!es. This r"le shall li.ewise apply o e%is in& !on ra! s o# sale or lease o# &oo$s, proper ies or ser'i!es a he i(e o# he e##e! i'i y o# /ep"bli! A! 001+. 1. 2n he !o"rse o# ra$e or b"siness This (eans he re&"lar !on$"! or p"rs"i o# a !o((er!ial or an e!ono(i! a! i'i y, in!l"$in& ransa! ions in!i$en al here o, by any person re&ar$less o# whe her or no he person en&a&e$ herein is a non3s o!., non3pro#i pri'a e or&ani4a ion (irrespe! i'e o# he $isposi ion o# i s ne in!o(e an$ whe her or no i sells e%!l"si'ely o (e(bers or heir &"es s), or &o'ern(en en i y. Ser'i!e as $e#ine$ in his 5o$e ren$ere$ in he Philippines by non3resi$en #orei&n persons shall be !onsi$ere$ as bein& ren$ere$ in he !o"rse o# ra$e or b"siness. 6. Sale o# 7oo$s or Proper ies There shall be le'ie$, assesse$ an$ !olle! e$ on e'ery sale, bar er or e%!han&e o# &oo$s or proper ies, a 'al"e a$$e$ a% e8"i'alen o en per!en (1*9) o# he &ross sellin& pri!e or &ross 'al"e in (oney o# &oo$s or proper ies sol$, bar ere$ or e%!han&e, such tax to be paid by the seller or transferor : Provided, that the president, upon recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent 12!", after any of the followin# conditions has $een satisfied% a& b. ;. 'alue (dded )ax collection as a percenta#e of *ross +omestic Product *+P" of the previous year exceeds two and four-fifth percent 2 ,-.!"/ or 0ational #overnment deficit as a percenta#e of *+P of the previous year exceeds one and one-half percent 1 1!"&(As a(en$e$ by !"PUBL#C AC$ %&. '(()).

7oo$s or Proper ies<Sale or e%!han&e o# Ser'i!es The er(s 7oo$s or proper ies shall (ean all an&ible an$ in an&ible ob)e! s whi!h are !apable o# pe!"niary es i(a ion an$ shall in!l"$e: 2eal properties held primarily for sale to customers or held for lease in the ordinary course of trade or $usiness (s"b)e! o he e%e(p ion "n$er Se! ion 1*=(w) > (%))? 3 (1) Sale o# real proper ies no pri(arily hel$ #or sale o !"s o(ers or hel$ #or lease in he or$inary !o"rse o# ra$e or b"siness (-) or real proper y " ili4e$ #or low3!os ho"sin& as $e#ine$ by /ep"bli! A! No. 0-0=, o herwise .nown as he Urban De'elop(en an$ @o"sin& A! o# 1==-, (1) an$ o her rela e$ laws, ho"se an$ lo an$ o her resi$en ial $wellin& 'al"e$ a Ane Million pesos (P1,***,***.**) an$ below: Pro'i$e$, ha no la er han Ban"ary 11s o# he !alen$ar year s"bse8"en o he e##e! i'i y o# his A! an$ shall be a$)"s e$ o i s presen 'al"e "sin& he 5ons"(er Pri!e 2n$e%, as p"blishe$ by he Na ional S a is i! A##i!e (NSA): Lease o# resi$en ial "ni wi h a (on hly ren al no e%!ee$in& Ei&h Tho"san$ Pesos (P,,***.**) pro'i$e$ ha no la er han Ban"ary 11s o# he !alen$ar year s"bse8"en o he e##e! i'i y o# his A! an$ shall be a$)"s e$ o i s presen 'al"e "sin& he 5ons"(er Pri!e 2n$e%, as p"blishe$ by he Na ional S a is i! A##i!e (NSA) )he ri#ht or the privile#e to use patent, copyri#ht, desi#n or model plan, secret formula or process, #oodwill, trademar3, trade $rand or other li3e property or ri#ht )he ri#ht or privile#e to use in the Philippines of any industrial, commercial or scientific e4uipment

)he ri#ht or privile#e to use motion picture films, films, tapes and discs/ and 2adio, television, satellite, transmission and ca$le television time

The phrase Csale or e%!han&e o# ser'i!esD (eans he per#or(an!e o# all .in$s o# ser'i!es in he Philippines #or o hers #or a #ee, re("nera ion or !onsi$era ion, in!l"$in& hose per#or(e$ or ren$ere$ by: o o o o o o o o o o o o o o o o 5ons r"! ion an$ ser'i!e !on ra! ors? S o!., real es a e, !o((er!ial, !"s o(s an$ i((i&ra ion bro.ers? Lessors o# proper y, whe her personal or real? Eareho"sin& ser'i!es? Lessors or $is rib" ors o# !ine(a o&raphi! #il(s? Persons en&a&e$ in (illin&, pro!essin&, (an"#a! "rin& or repa!.in& &oo$s #or o hers? Proprie ors, opera ors or .eepers o# ho els, (o els, res ho"ses, pension ho"ses, inns, resor s? Proprie ors or opera ors o# res a"ran s, re#resh(en parlors, !a#es an$ o her ea in& pla!es, in!l"$in& !l"bs an$ !a erers? Dealers in se!"ri ies? Len$in& in'es ors? Transpor a ion !on ra! ors on heir ranspor o# &oo$s or !ar&oes, in!l"$in& persons who ranspor &oo$s or !ar&oes #or hire an$ o her $o(es i! !o((on !arriers by lan$ rela i'e o heir ranspor o# &oo$s or !ar&oes? 5o((on !arriers by air an$ sea rela i'e o heir ranspor o# passen&ers, &oo$s or !ar&oes #ro( one pla!e in he Philippines o ano her pla!e in he Philippines? Sales o# ele! ri!i y by &enera ion !o(panies, rans(ission, an$ $is rib" ion !o(panies? Ser'i!es o# #ran!hise &ran ees o# ele! ri! " ili ies, elephone an$ ele&raph, ra$io an$ ele'ision broa$!as in& an$ all o her #ran!hise &ran ees e%!ep hose "n$er Se! ion 11= o# his 5o$e an$ Non3li#e ins"ran!e !o(panies (e%!ep heir !rop ins"ran!e) in!l"$in& s"re y, #i$eli y, in$e(ni y an$ bon$in& !o(panies? an$ si(ilar ser'i!es re&ar$less o# whe her or no he per#or(an!e hereo# !alls #or he e%er!ise or "se o# he physi!al or (en al #a!"l ies.

The phrase Csale or e%!han&e o# ser'i!esD shall li.ewise in!l"$e: o o o o o o o o The lease or he "se o# or he ri&h or pri'ile&e o "se any !opyri&h , pa en , $esi&n or (o$el, plan, se!re #or("la or pro!ess, &oo$will, ra$e(ar., ra$e bran$ or o her li.e proper y or ri&h ? The lease or he "se o#, or he ri&h o "se o# any in$"s rial, !o((er!ial or s!ien i#i! e8"ip(en ? The s"pply o# s!ien i#i!, e!hni!al, in$"s rial or !o((er!ial .nowle$&e or in#or(a ion? The s"pply o# any assis an!e ha is an!illary an$ s"bsi$iary o an$ is #"rnishe$ as a (eans o# enablin& he appli!a ion or en)oy(en o# any s"!h proper y, or ri&h as is (en ione$ in s"bpara&raph (-) or any s"!h .nowle$&e or in#or(a ion as is (en ione$ in s"bpara&raph (1)? The s"pply o# ser'i!es by a nonresi$en person or his e(ployee in !onne! ion wi h he "se o# proper y or ri&h s belon&in& o, or he ins alla ion or opera ion o# any bran$, (a!hinery or o her appara "s p"r!hase$ #ro( s"!h nonresi$en person? The s"pply o# e!hni!al a$'i!e, assis an!e or ser'i!es ren$ere$ in !onne! ion wi h e!hni!al (ana&e(en or a$(inis ra ion o# any s!ien i#i!, in$"s rial or !o((er!ial "n$er a.in&, 'en "re, pro)e! or s!he(e? The lease o# (o ion pi! "re #il(s, #il(s, apes an$ $is!s? an$ The lease or he "se o# or he ri&h o "se ra$io, ele'ision, sa elli e rans(ission an$ !able ele'ision i(e. Lease o# proper ies shall be s"b)e! o he a% herein i(pose$ irrespe! i'e o# he pla!e where he !on ra! o# lease or li!ensin& a&ree(en was e%e!" e$ i# he proper y is lease$ or "se$ in he Philippines. $*e ter+ ,G!&SS !"C"#P$S- F (eans he o al a(o"n o# (oney or i s e8"i'alen represen in& he !on ra! pri!e, !o(pensa ion or ser'i!e #ee, rental or royalty, in!l"$in& he a(o"n !har&e$ #or (a erials s"pplie$ wi h he ser'i!es an$ $eposi s or a$'an!e pay(en s a! "ally or !ons r"! i'ely re!ei'e$ $"rin& he a%able 8"ar er #or he ser'i!es per#or(e$ or o be per#or(e$ #or ano her person, e%!l"$in& Val"e3a$$e$ a%. +. 7ross Sellin& Pri!e (Ta% Gase)

Means he o al a(o"n o# (oney or i s e8"i'alen whi!h he p"r!haser pays or is obli&a e$ o pay o he seller in !onsi$era ion o# he sale, bar er or e%!han&e o# he &oo$s or proper ies, e%!l"$in& he 'al"e a$$e$ a%. The excise tax, if any, on such goods or properties shall form part of the gross selling price . 0. 2n'oi!in& /e8"ire(en s (2n'oi!in& o# sale) A VAT3 /e&is ere$ person shall, #or e'ery sale, iss"e an in'oi!e or re!eip . 2n a$$i ion o he in#or(a ion re8"ire$ "n$er Se! ion -10, he #ollowin& in#or(a ion shall be in$i!a e$ in he in'oi!e or re!eip ,. A s a e(en ha he seller is a VAT3re&is ere$ person, #ollowe$ by his a%payerDs i$en i#i!a ion no. (T2N)? The o al a(o"n whi!h he p"r!haser pays or is obli&a e$ o pay o he seller wi h he in$i!a ion ha s"!h a(o"n in!l"$es he 'al"e3a$$e$ a%.

Ta% Hor("la The a% shall be !o(p" e$ by ("l iplyin& he o al a(o"n in$i!a e$ in he A##i!ial re!eip by one3ele'en h (1<11) (This pro'ision whi!h "se$ o be 1*+ (D) (1) was no o"!he$ by !"PUBL#C AC$ %&. '(()) Sales /e "rns, Allowan!es an$ Sales Dis!o"n s F The 'al"e o# &oo$s or proper ies sol$ an$ s"bse8"en ly re "rne$ or #or whi!h allowan!es were &ran e$ by a VAT3re&is ere$ person (ay be $e$"! e$ #ro( he &ross sales or re!eip s #or he 8"ar er in whi!h a re#"n$ is (a$e or a !re$i (e(oran$"( or re#"n$ is iss"e$. Sale $is!o"n &ran e$ an$ in$i!a e$ in he in'oi!e a he i(e o# sale an$ he &ran o# whi!h $oes no $epen$ "pon he happenin& o# a #" "re e'en (aybe e%!l"$e$ #ro( he &ross sales wi hin he sa(e 8"ar er i was &i'en. 2# he a%payer is no re&is ere$ an$ has no been !olle! in& VAT b" is re8"ire$ by law o !olle! VAT he #or("la shall be he &ross a(o"n in$i!a e$ in he A##i!ial re!eip by 1*9

=.

2np" a% #or("la 2np" a% is !o(p" e$ by ("l iplyin& he &ross re!eip e$ a(o"n by 1<11 o# a p"r!hase (a$e by a b"yer. 2np" a% is Va #or he b"yer an$ i is prepay(en o# a% o he b"yer.

1*.

A" p" a% #or("la A" p" a% is !o(p" e$ by ("l iplyin& he &ross re!eip e$ a(o"n by 1<11 o# a sale (a$e by a seller. A" p" a% is Va #or he seller an$ he sa(e is a liabili y.

11.

Iero per!en (* 9) ra e VAT sale There are wo &ro"ps o# 4ero ra e$ sales an$ he sa(e are (a) e%por sales (b) an$ Horei&n 5"rren!y Deno(ina e$ sales. @ere are he e.port sales, o wi : The sale an$ a! "al ship(en o# goods from the Philippines to a foreign country , irrespe! i'e o# any shippin& arran&e(en ha (ay be a&ree$ "pon whi!h (ay in#l"en!e or $e er(ine he rans#er o# ownership o# he &oo$s so e%por e$ and paid for in acceptable foreign currency or its equivalent in goods or services, an$ accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas Sale o# raw materials or packaging material to a nonresident buyer for delivery to a resident local export-oriented enterprise o be "se$ in (an"#a! "rin&, pro!essin&, pa!.in& or repa!.in& in he Philippines o# he sai$ b"yerDs &oo$s an$ paid for in acceptable foreign currency and accounted for in accordance with the rules and regulation of the Banko Sentral ng Pilipinas (GSP) Sale o# raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent !"#$ of total amount production? Sale o# gold to the Banko Sentral ng Pilipinas (GSP) Those !onsi$ere$ export sales under %xecutive &rder 'o( ))* , o herwise .nown as he A(nib"s 2n'es (en 5o$e o# 1=,0, an$ o her spe!ial laws+ and The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations( (As a(en$e$ by !"PUBL#C AC$ %&. '(()).

/oreign 0urren0y deno+inated sales means sale to a nonresident o# &oo$s, e%!ep hose (en ione$ in Se! ions 16= (a" o(obiles) an$ 1;* (non3essen ial &oo$s), asse(ble$ or (an"#a! "re$ in he Philippines #or $eli'ery o a resi$en in he Philippines, pai$ #or in a!!ep able #orei&n !"rren!y an$ a!!o"n e$ #or in a!!or$an!e wi h he r"les an$ re&"la ions o# he GSP. Sales to persons or entities w*ose e.e+ption under spe0ial laws or international agree+ents o whi!h he Philippines is a si&na ory e##e! i'ely s"b)e! s s"!h sales o 4ero ra e. 1ero per0ent (2 3 rate VA$ sale or e.0*ange of ser4i0es Pro!essin&, (an"#a! "rin& or repa!.in& &oo$s #or o her persons $oin& b"siness o" si$e he Philippines whi!h &oo$s are s"bse8"en ly e%por e$, where he ser'i!es are pai$ #or in a!!ep able #orei&n !"rren!y an$ a!!o"n e$ #or in a!!or$an!e wi h he r"les an$ re&"la ions o# he GSP? Ser'i!es o her han hose (en ione$ in he pre!e$in& para&raph ren$ere$ o a person en&a&e$ in b"siness !on$"! e$ o" si$e o# he Philippines or o a nonresi$en person no en&a&e$ in b"siness who is o" si$e o# he Philippines when he ser'i!es are per#or(e$, he !onsi$era ion #or whi!h is pai$ #or in a!!ep able #orei&n !"rren!y an$ a!!o"n e$ #or in a!!or$an!e wi h he r"les an$ re&"la ion o# he GSP? Ser'i!es ren$ere$ o persons or en i ies who e%e(p ion "n$er spe!ial laws or in erna ional a&ree(en s o whi!h he Philippines is a si&na ory e##e! i'ely s"b)e! s he s"pply o# s"!h ser'i!es o 4ero per!en (*9) ra e? Ser'i!es ren$ere$ o persons en&a&e$ in in erna ional shippin& or in erna ional air ranspor opera ions, in!l"$in& leases o# proper y #or "se hereo#? Ser'i!e per#or(e$ by s"b!on ra! ors an$<or !on ra! ors in pro!essin&, !on'er in&, or (an"#a! "rin& &oo$s #or an en erprise whose e%por sales e%!ee$s se'en y per!en (0*9) o# o al a(o"n pro$"! ion? Transpor o# passen&ers an$ !ar&o by air or sea 'essels #ro( he Philippines o a #orei&n !o"n ry?

Sale o# power or #"el &enera e$ hro"&h renewable so"r!es o# ener&y s"!h as, b" no li(i e$ o bio(ass, solar, win$, hy$ropower, &eo her(al, o!ean ener&y, an$ o her e(er&in& ener&y so"r!es "sin& e!hnolo&ies, s"!h as #"el !ells an$ hy$ro&en #"els?

1-.

Transi ional 2np" Ta% This e%is s when a person who be!o(es liable o 'al"e3a$$e$ a% or any person who ele! s o be a VAT3 re&is ere$ person shall, s"b)e! o he #ilin& o# an in'en ory a!!or$in& o r"les an$ re&"la ions pres!ribe$ by he Se!re ary o# Hinan!e, "pon re!o((en$a ion o# he 5o((issioner, be allowed input tax on his beginning inventory o# &oo$s, (a erials an$ s"pplies equivalent to two percent )#$ of the value of such inventory or the actual value-added tax paid on s"!h &oo$s, (a erials an$ s"pplies which is higher, whi!h shall be !re$i able a&ains he o" p" a%. (As a(en$e$)

11.

Pres"(p i'e 2np" Ta% This VAT r"le is only appli!able o he #ollowin& persons or #ir(s en&a&e$ in he pro!essin& o# Sar$ines Ma!.erel Mil.

An$ hose ha are en&a&e$ in he (an"#a! "rin& o# /e#ine$ S"&ar 5oo.in& oil an$ pa!.e$ noo$le3base$ ins an (eals

Pres"(p i'e inp" a% is e8"i'alen o #o"r per!en (69) o# he &ross 'al"e in (oney o# heir p"r!hases o# primary agricultural products which are used as inputs to their production . (As a(en$e$)

An$ hose who are p"bli! wor.s !on ra! ors shall be allowe$ a pres"(p i'e inp" a% e8"i'alen o one an$ one3hal# per!en (131<-9) of the contract price with respect to government contracts only in lie" o# a! "al inp" a%es here#ro(. 16. Pro!essin& Mean pasteuri,ation, canning and activities which through physical or chemical process alter the exterior texture or form or inner substance of a product in s"!h (anner as o prepare i #or spe!ial "se o whi!h i !o"l$ no ha'e been p" in i s ori&inal #or( or !on$i ion. 1;. Pri(arily a&ri!"l "ral pro$"! s A7/25ULTU/AL P/ADU5TSJ DEH2NED. K JThe !o((on parlan!e o# he !o"n ry, an$ he !o((on pra! i!e o# he !o"n ry ha'e been o !onsi$er all hose hin&s as #ar(in& pro$"! s or a&ri!"l "ral pro$"! s whi!h an$ he si "s o# heir pro$"! ion "pon he #ar(, an$ whi!h were bro"&h in o !on$i ion #or he "ses o# so!ie y by he labor o# hose en&a&e$ in a&ri!"l "ral p"rs"i s, as !on ra3$is in&"ishe$ #ro( (an"#a! "rin& or o her in$"s rial p"rs"i s.J (Dis ri! o# 5ol"(bia 's. Ays er L1,,;M, ;6 A( /ep., -0;.) The er( Ja&ri!"l "ral pro$"! sJ has been hel$ o in!l"$e swine, horses, (ea , !a le, sheep, (an"re, !or$ woo$, hay, po"l ry, 'e&e ables, #r"i , e&&s, (il., b" er, an$ lar$ K b" no #ish. 2D? 2D. K Hish are no an a&ri!"l "ral pro$"! . (Molina 's. /a##er y F 7/ L311=,, *10 Phil ;6; 1+. /e!or$in& o# 'al"e a$$e$ a%es in he boo.s o# a!!o"n s All persons s"b)e! o he 'al"e3a$$e$ a% "n$er Se! ions 1*+ an$ 1*, shall, in a$$i ion o he re&"lar a!!o"n in& re!or$s re8"ire$, (ain ain a s"bsi$iary sales )o"rnal an$ s"bsi$iary p"r!hase )o"rnal on whi!h he $aily sales an$ p"r!hases are re!or$e$. The s"bsi$iary )o"rnals shall !on ain s"!h in#or(a ion as (aybe re8"ire$ by he Se!re ary o# Hinan!e. 10. /e "rn an$ pay(en 7eneral /"le: E'ery person liable o pay he 'al"e3a$$e$ a% i(pose$ "n$er his i le shall #ile a 8"ar erly re "rn o# he a(o"n o# his &ross sales or re!eip s wi hin wen y3#i'e (-;) $ays #ollowin& he !lose o# ea!h a%able 8"ar er pres!ribe$ #or ea!h a%payer: Pro'i$e$, howe'er, Tha VAT3re&is ere$ persons shall pay he 'al"e3a$$e$ a% on a (on hly basis. Any person, whose re&is ra ion has been !an!elle$ in a!!or$an!e wi h Se! ion -1+ shall #ile a re "rn an$ pay he a% $"e hereon wi hin wen y3#i'e (-;) $ays #ro( he $a e o# !an!ella ion o# re&is ra ion: Pro'i$e$, Tha only one !onsoli$a e$ re "rn shall be #ile$ by he a%payer #or his prin!ipal pla!e o# b"siness or hea$ o##i!e an$ all bran!hes. 1,. Ehere o #ile he re "rn an$ pay he a% E%!ep as he 5o((issioner o herwise per(i s, he re "rn shall be #ile$ wi h an$ he a% pai$ o an a" hori4e$ a&en ban., /e'en"e 5olle! ion A##i!er or $"ly a" hori4e$ !i y or ("ni!ipal reas"rer in he Philippines lo!a e$ wi hin he re'en"e $is ri! where he a%payer is re&is ere$ or re8"ire$ o re&is er. 1=. Transa! ions Dee(e$ Sale The #ollowin& ransa! ions shall be $ee(e$ sale: Trans#er, "se or !ons"(p ion no in he !o"rse o# b"siness o# &oo$s or proper ies ori&inally in en$e$ #or sale or #or "se in he !o"rse o# b"siness Dis rib" ion or rans#er o o o -*. Sharehol$ers or in'es ors as share in he pro#i s o# he VAT3re&is ere$ persons 5re$i ors in pay(en o# $eb

5onsi&n(en o# &oo$s i# a! "al sale is no (a$e wi hin si% y (+*) $ays #ollowin& he $a e s"!h &oo$s were !onsi&ne$ /e ire(en #ro( or !essa ion o# b"siness, wi h respe! o in'en ories o# a%able &oo$s e%is in& as o# s"!h re ire(en or !essa ion.

Lease o# proper ies

Lease o# proper ies shall be s"b)e! o he a% herein i(pose$ irrespe! i'e o# he pla!e where he !on ra! o# lease or li!ensin& a&ree(en was e%e!" e$ i# he proper y is lease$ or "se$ in he Philippines -1. 7ross re!eip s 2s he o al a(o"n o# (oney or i s e8"i'alen represen in& he 5on ra! pri!e 5o(pensa ion Ser'i!e #ee /en al or royal y

2n!l"$in& he a(o"n !har&e$ #or (a erials s"pplie$ wi h he ser'i!es $eposi s a$'an!e$ pay(en s

a! "ally or !ons r"! i'ely re!ei'e$ $"rin& he a%able 8"ar er #or he ser'i!es per#or(e$ or o be per#or(e$ #or ano her person e%!l"$in& 'al"e a$$e$ a% --. 2np" a% Means he 'al"e a$$e$ a% $"e #ro( or pai$ by a VAT3re&is ere$ person in he !o"rse o# his ra$e or b"siness on i(por a ion o# &oo$s or lo!al p"r!hase o# &oo$s or ser'i!es, in!l"$in& lease or "se o# proper y, #ro( a VAT3re&is ere$ person. 2 shall also in!l"$e he ransi ional inp" a% $e er(ine$ in a!!or$an!e wi h Se! ion 111 o# his 5o$e -1. A" p" a% Means he 'al"e3a$$e$ a% $"e on he sale or lease o# a%able &oo$s or proper ies or ser'i!es by any person re&is ere$ or re8"ire$ o re&is er "n$er Se! ion -1+ o# his 5o$e -6. De er(ina ion o# 5re$i able 2np" a% E%!ess A" p" or 2np" Ta%. K 2# a he en$ o# any a%able 8"ar er he o" p" a% e%!ee$s he inp" a%, he e%!ess shall be pai$ by he VAT3re&is ere$ person. 2# he inp" a% e%!ee$s he o" p" a%, he e%!ess shall be !arrie$ o'er o he s"!!ee$in& 8"ar er or 8"ar ers: Pro'i$e$, That the input tax inclusive of input -.T carried over from the previous quarter that may be credited in every quarter shall not exceed seventy percent !"#$ of the output -.T : Pro'i$e$, howe'er, Tha any inp" a% a rib" able o 4ero3ra e$ sales by a VAT3re&is ere$ person (ay a his op ion be re#"n$e$ or !re$i e$ a&ains o her in ernal re'en"e a%es, s"b)e! o he pro'isions o# Se! ion 11-. De er(ina ion o# 5re$i able 2np" Ta%. K The s"( o# he e%!ess inp" a% !arrie$ o'er #ro( he pre!e$in& (on h or 8"ar er an$ he inp" a% !re$i able o a VAT3re&is ere$ person $"rin& he a%able (on h or 8"ar er shall be re$"!e$ by he a(o"n o# !lai( #or re#"n$ or a% !re$i #or 'al"e3a$$e$ a% an$ o her a$)"s (en s, s"!h as p"r!hase re "rns or allowan!es an$ inp" a% a rib" able o e%e(p sale. The !lai( #or a% !re$i re#erre$ o in he #ore&oin& para&raph shall in!l"$e no only hose #ile$ wi h he G"rea" o# 2n ernal /e'en"e b" also hose #ile$ wi h o her &o'ern(en a&en!ies, s"!h as he Goar$ o# 2n'es (en s an$ he G"rea" o# 5"s o(s.J -;. Val"e A$$e$ Ta% on 2(por a ion o# 7oo$s. Gase A(o"n shall be !o(p" e$ by ("l iplyin& 1*9 o he s"( o# he #ollowin&: To al Val"e "se$ by he G"rea" o# 5"s o(s in $e er(inin& ari## an$ !"s o(s $" ies 5"s o(s $" ies E%!ise a%es, i# any An$ o her !har&es, s"!h a% o be pai$ by he i(por er prior o he release o# s"!h &oo$s #ro( !"s o(s !"s o$y? Pro'i$e$, ha where he !"s o(s $" ies are $e er(ine$ on he basis o# he 8"an i y or 'ol"(e o# he &oo$s, he 'al"e a$$e$ a% shall be base$ on: o The lan$e$ !os pl"s e%!ise a%es, i# any

Pro'i$e$, #"r her, ha he Presi$en , upon recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent 12!", after any of the followin# conditions has $een satisfied% a& $& 'alue (dded )ax collection as a percenta#e of *ross +omestic Product *+P" of the previous year exceeds two and four-fifth percent 2 ,-.!"/ or 0ational #overnment deficit as a percenta#e of *+P of the previous year exceeds one and one-half percent 1 1!"&(As a(en$e$ by !"PUBL#C AC$ %&. '(()).

Trans#er o# 7oo$s by Ta%3e%e(p Persons. 2n he !ase o# a%3#ree i(por a ion o# &oo$s in o he Philippines by persons, en i ies or a&en!ies e%e(p #ro( a% where s"!h &oo$s are s"bse8"en ly sol$, rans#erre$ or e%!han&e$ in he Philippines o non3 e%e(p persons or en i ies, he p"r!hasers, rans#erees or re!ipien s shall be !onsi$ere$ he i(por ers hereo#, who shall be liable #or any in ernal re'en"e a% on s"!h i(por a ion. The a% $"e on s"!h i(por a ion shall !ons i " e a lien on he &oo$s s"perior o all !har&es or liens on he &oo$s, irrespe! i'e o# he possessor hereo#. -+. E%e(p ransa! ions "n$er VAT (Se! ion 1*=) F S"b)e! o he pro'isions o# s"bse! ion (-) hereo#, he #ollowin& ransa! ions shall be e%e(p #ro( he 'al"e3a$$e$ a%: JA) Sale or i(por a ion o# agricultural and marine food products in their original state, li'es o!. an$ po"l ry o# a .in$ #enerally used as, or yieldin# or producin# foods for human consumption+ and breeding stock and genetic materials here#or. JPro$"! s !lassi#ie$ "n$er his para&raph shall be !onsi$ere$ in heir ori&inal s a e even if they have under#one the simple processes of preparation or preservation for the mar3et, s"!h as #ree4in&, $ryin&, sal in&, broilin&, roas in&, s(o.in& or s rippin&. Polishe$ an$<or h"s.e$ ri!e, !orn &ri s, raw !ane s"&ar an$ (olasses, or$inary sal , an$ !opra shall be !onsi$ere$ in heir ori&inal s a e? J(G) Sale or importation o# #er ili4ers? see$s, see$lin&s an$ #in&erlin&s? #ish, prawn, li'es o!. an$ po"l ry #ee$s, includin# in#redients, whether locally produced or imported, used in the manufacture of finished feeds (e%!ep spe!ial y #ee$s #or ra!e horses, #i&h in& !o!.s, a8"ari"( #ish, 4oo ani(als an$ o her ani(als &enerally !onsi$ere$ as pe s)? 2(por a ion o# personal an$ ho"sehol$ e##e! s belon&in& o he resi$en s o# he Philippines re "rnin& #ro( abroa$ an$ nonresi$en !i i4ens !o(in& o rese le in he Philippines: Provided, That such goods are exempt from customs duties under the Tariff and /ustoms /ode of the Philippines? 2(por a ion o# pro#essional ins r"(en s an$ i(ple(en s, wearin& apparel, $o(es i! ani(als, an$ personal ho"sehol$ e##e! s (e%!ep any 'ehi!le, 'essel, air!ra# , (a!hinery, o her &oo$s #or "se in he (an"#a! "re an$ (er!han$ise o# any .in$ in !o((er!ial 8"an i y) belon&in& o persons !o(in& o se le in he Philippines, #or heir own "se an$ no #or sale, bar er or e%!han&e, a!!o(panyin& s"!h persons, or arri'in& wi hin nine y (=*) $ays be#ore or a# er heir arri'al, "pon he pro$"! ion o# e'i$en!e sa is#a! ory o he 5o((issioner, ha s"!h persons are a! "ally !o(in& o se le in he Philippines an$ ha he !han&e o# resi$en!e is bona #i$e? Ser'i!es s"b)e! o per!en a&e a% "n$er Ti le V? Ser'i!es by a&ri!"l "ral !on ra! &rowers an$ (illin& #or o hers o# palay in o ri!e, !orn in o &ri s an$ s"&ar !ane in o raw s"&ar? Me$i!al, $en al, hospi al an$ 'e erinary ser'i!es e%!ep pro#essionals? hose ren$ere$ by

J(5)

J(D)

J(E) J(H) J(7) J(@)

E$"!a ional ser'i!es ren$ere$ by pri'a e e$"!a ional ins i " ions, $"ly a!!re$i e$ by he Depar (en o# E$"!a ion (DepE$), he 5o((ission on @i&her E$"!a ion (5@ED), the Technical %ducation and Skills 0evelopment .uthority T%S0.$ and those rendered by government educational institutions?

J(2) J(B)

Ser'i!es ren$ere$ by in$i'i$"als p"rs"an rela ionship?

o an e(ployer3e(ployee

Ser'i!es ren$ere$ by regional or area headquarters es ablishe$ in he Philippines $y multinational corporations whi!h act as supervisory, communications and coordinating centers #or heir a##ilia es, s"bsi$iaries or bran!hes in he Asia3Pa!i#i! /e&ion and do not earn or derive income from the Philippines? Transa! ions whi!h are e%e(p "n$er in erna ional a&ree(en s o whi!h he Philippines is a si&na ory or "n$er spe!ial laws, e%!ep hose "n$er Presi$en ial De!ree No. ;-=? Sales by agri0ultural 0ooperati4es duly registered wit* t*e Cooperati4e 5e4elop+ent Aut*ority to their mem$ers as well as sale of their produce , whether in its original state or processed form, to non-members ? t*eir i+portation of dire0t far+ inputs, +a0*ineries and e6uip+ent, in0luding spare parts t*ereof, to be used directly and exclusively in the production and1or processing of their produce? 7ross re!eip s #ro( len$in& a! i'i ies by !re$i or ("l i3p"rpose !oopera i'es $"ly re&is ere$ wi h he 5oopera i'e De'elop(en A" hori y? Sales by non3a&ri!"l "ral, non3ele! ri! an$ non3!re$i !oopera i'es $"ly re&is ere$ wi h he 5oopera i'e De'elop(en A" hori y: Pro'i$e$, That the share capital contribution of each member does not exceed 2ifteen thousand pesos P34,"""$ an$ re&ar$less o# he a&&re&a e !api al an$ ne s"rpl"s ra ably $is rib" e$ a(on& he (e(bers: %xport sales by persons who are not -.T-registered ? Sale o# real proper ies no pri(arily hel$ #or sale o !"s o(ers or hel$ #or lease in he or$inary !o"rse o# ra$e or b"siness, or real proper y " ili4e$ #or low3!os an$ so!iali4e$ ho"sin& as $e#ine$ by /ep"bli! A! No. 0-0=, o herwise .nown as he Urban De'elop(en an$ @o"sin& A! o# 1==-, an$ o her rela e$ laws, resi$en ial lo 'al"e$ a Ane (illion #i'e h"n$re$ ho"san$ pesos (P1,;**,***) an$ below, ho"se an$ lo , an$ o her resi$en ial $wellin&s 'al"e$ a Two (illion #i'e h"n$re$ ho"san$ pesos (P-,;**,***) an$ below: Pro'i$e$, Tha no la er han Ban"ary 11, -**= an$ e'ery hree (1) years herea# er, he a(o"n s herein s a e$ shall be a$)"s e$ o heir presen 'al"es "sin& he 5ons"(er Pri!e 2n$e%, as p"blishe$ by he Na ional S a is i!s A##i!e (NSA)? Lease o# a resi$en ial "ni wi h a (on hly ren al no e%!ee$in& Ten ho"san$ pesos (P1*,***): Pro'i$e$, Tha no la er han Ban"ary 11, -**= an$ e'ery hree (1) years herea# er, he a(o"n herein s a e$ shall be a$)"s e$ o i s presen 'al"e "sin& he 5ons"(er Pri!e 2n$e%, ass p"blishe$ by he Na ional S a is i!s A##i!e (NSA)? Sale, i(por a ion, prin in& or p"bli!a ion o# boo.s an$ any newspaper, (a&a4ine, re'iew or b"lle in whi!h appears a re&"lar in er'als wi h #i%e$ pri!es #or s"bs!rip ion and sale and which is not devoted principally to the publication of paid advertisements? Sale, i(por a ion or lease o# passen&er or !ar&o 'essels an$ air!ra# , in!l"$in& en&ine, e8"ip(en an$ spare par s hereo# #or $o(es i! or in erna ional ranspor opera ions? 2(por a ion o# #"el, &oo$s an$ s"pplies by persons en&a&e$ in in erna ional shippin& or air ranspor opera ions? Ser'i!es o# ban.s, non3ban. #inan!ial in er(e$iaries per#or(in& 8"asi3ban.in& #"n! ions, an$ o her non3ban. #inan!ial in er(e$iaries? an$ Sale or lease o# &oo$s or proper ies or he per#or(an!e o# ser'i!es o her han he ransa! ions (en ione$ in he pre!e$in& para&raphs, the gross annual sales and1or receipts do not exceed the amount of &ne million five hundred thousand pesos P3,4"","""$: Pro'i$e$, Tha no la er han Ban"ary 11, -**= an$ e'ery hree (1) years herea# er. he a(o"n herein s a e$ shall be a$)"s e$ o

J(N)

J(L)

J(M) J(N)

J(A) J(P)

J(O)

J(/)

J(S)

J(T) J(U) J(V)

i s presen 'al"e "sin& he 5ons"(er Pri!e 2n$e%, as p"blishe$ by he Na ional S a is i!s A##i!e (NSA)? J(-) A VAT3re&is ere$ person (ay ele! ha S"bse! ion (1) no apply o i s sale o# &oo$s or proper ies or ser'i!es: Pro'i$e$, Tha an ele! ion (a$e "n$er his S"bse! ion shall be irre'o!able #or a perio$ o# hree (1) years #ro( he 8"ar er he ele! ion was (a$e.J

-0.

JSE5. 11-. /e#"n$s or Ta% 5re$i s o# 2np" Ta%. K J(A) Iero3/a e$ or E##e! i'ely Iero3/a e$ Sales K Any VAT3re&is ere$ person, whose sales are 4ero3ra e$ or e##e! i'ely 4ero3 ra e$ (ay, within two )$ years after the close of the taxable quarter when the sales were made , apply for the issuance of a tax credit certificate or refund of credita$le input tax due or paid attri$uta$le to such sales, except transitional input tax , o he e% en ha s"!h inp" a% has no been applie$ a&ains o" p" a%: Pro'i$e, howe'er, Tha in he !ase o# 4ero3ra e$ sales "n$er Se! ion 1*+(A)(-)(a)(1), (-) an$ (b) an$ Se! ion 1*,(G)(1) an$ (-), he a!!ep able #orei&n !"rren!y e%!han&e pro!ee$s hereo# ha$ been $"ly a!!o"n e$ #or in a!!or$an!e wi h he r"les an$ re&"la ions o# he Gan&.o Sen ral n& Pilipinas (GSP): Pro'i$e$, #"r her, Tha where he a%payer is en&a&e$ in 4ero3ra e$ or e##e! i'ely 4ero3ra e$ sale an$ also in a%able or e%e(p sale o# &oo$s or proper ies or ser'i!es, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions , it shall be allocated proportionately on the basis of the volume of sales : Pro'i$e$, #inally, Tha #or a person (a.in& sales ha are 4ero3ra e$ "n$er Se! ion 1*,(G)(+), he inp" a%es shall be allo!a e$ ra ably be ween his 4ero3ra e$ an$ non3 4ero3ra e$ sales. J(G) 5an!ella ion o# VAT /e&is ra ion. K A person whose re&is ra ion has been !an!elle$ $"e o re ire(en #ro( or !essa ion o# b"siness, or $"e o !han&es in or !essa ion o# s a "s "n$er Se! ion 1*+(5) o# his 5o$e may, within two )$ years from the date of cancellation, apply for the issuance of a tax credit certificate for any unused input tax whi!h (ay be "se$ in pay(en o# his o her in ernal re'en"e a%es. J(5) Perio$ wi hin whi!h /e#"n$ or Ta% 5re$i o# 2np" Ta%es shall be Ma$e. K 2n proper !ases, he 5o((issioner shall &ran a re#"n$ or iss"e he a% !re$i !er i#i!a e #or !re$i able inp" a%es within one hundred twenty 3)"$ days from the date of submission of complete documents in support of the application #ile$ in a!!or$an!e wi h S"bse! ion (A) hereo#. J5n case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the 6ommissioner to act on the application within the period prescri$ed a$ove , t*e ta.payer affe0ted +ay, wit*in t*irty ((2 days fro+ t*e re0eipt of t*e de0ision denying t*e 0lai+ or after t*e e.piration of t*e one *undred twenty day7period, appeal t*e de0ision or t*e una0ted 0lai+ wit* t*e Court of $a. Appeals. J(D) Manner o# 7i'in& /e#"n$. K 5efunds shall be made upon warrants drawn by the /ommissioner or by his duly authori,ed representative without the necessity of being countersigned by the /hairman, /ommission on .udit , he pro'isions o# he A$(inis ra i'e 5o$e o# 1=,0 o he !on rary no wi hs an$in&: Pro'i$e$, Tha re#"n$s "n$er his para&raph shall be s"b)e! o pos a"$i by he 5o((ission on A"$i .J Appli!able 5ases: /&'T%6 /&5P&5.T7&', petitioner, vs( 8&'( /&997SS7&'%5 &2 7'T%5'.: 5%-%';%, respondent( <=(5( 'o( 3433>4( ?uly ), )""@(A Ha! s: Pe i ioner is a $o(es i! !orpora ion en&a&e$ in he b"siness o# (an"#a! "rin& hospi al e% iles an$ &ar(en s an$ o her hospi al s"pplies #or e%por . Pe i ionerPs pla!e o# b"siness is a he S"bi! Gay Hreepor Ione (SGHI). 2 is $"ly re&is ere$ wi h he S"bi! Gay Me ropoli an A" hori y (SGMA) as a S"bi! Gay Hreepor En erprise, p"rs"an o he pro'isions o# /ep"bli! A! No. 0--0. As an SGMA3 re&is ere$ #ir(, pe i ioner is e%e(p #ro( all lo!al an$ na ional in ernal re'en"e a%es e%!ep #or he pre#eren ial a% pro'i$e$ #or in Se! ion 1-(!) o# /ep. A! No. 0--0. Pe i ioner also re&is ere$ wi h he G"rea" o# 2n ernal /e'en"e (G2/) as a non3VAT a%payer "n$er 5er i#i!a e o# /e&is ra ion /DA 5on rol No. =;31,*3***111.

Hro( Ban"ary 1, 1==0 o De!e(ber 11, 1==,, pe i ioner p"r!hase$ 'ario"s s"pplies an$ (a erials ne!essary in he !on$"! o# i s (an"#a! "rin& b"siness. The s"ppliers o# hese &oo$s shi# e$ "n o pe i ioner he 1*9 VAT on he p"r!hase$ i e(s, whi!h le$ he pe i ioner o pay inp" a%es in he a(o"n s o# P;1=,611.,, an$ P;*6,*;0.6= #or 1==0 an$ 1==,, respe! i'ely. A! in& on he belie# ha i was e%e(p #ro( all na ional an$ lo!al a%es, in!l"$in& VAT, p"rs"an o /ep. A! No. 0--0, pe i ioner #ile$ wo appli!a ions #or a% re#"n$ or a% !re$i o# he VAT i pai$. Mr. E$ilber o 5arlos, re'en"e $is ri! o##i!er o# G2/ /DA No. 1=, $enie$ he #irs appli!a ion le er, $a e$ De!e(ber -=, 1==,. Un#a4e$ by he $enial, pe i ioner on May 6, 1===, #ile$ ano her appli!a ion #or a% re#"n$<!re$i , his i(e $ire! ly wi h A y. Alber o Pa&abao, he re&ional $ire! or o# G2/ /e'en"e /e&ion No. 6. The se!on$ le er so"&h a re#"n$ or iss"an!e o# a a% !re$i !er i#i!a e in he a(o"n o# P1,1*,,1*0.0-, represen in& erroneo"sly pai$ inp" VAT #or he perio$ Ban"ary 1, 1==0 o No'e(ber 1*, 1==,. Ehen no response was #or h!o(in& #ro( he G2/ /e&ional Dire! or, pe i ioner hen ele'a e$ he (a er o he 5o"r o# Ta% Appeals, in a pe i ion #or re'iew $o!.e e$ as 5TA 5ase No. ;,=;. Pe i ioner s resse$ ha Se! ion 11-(A) i# rea$ in rela ion o Se! ion 1*+(A)(-)(a) o# he Na ional 2n ernal /e'en"e 5o$e, as a(en$e$ an$ Se! ion 1-(b) an$ (!) o# /ep. A! No. 0--0 wo"l$ show ha i was no liable in any way #or any 'al"e3a$$e$ a%. 2n opposin& he !lai( #or a% re#"n$ or a% !re$i , he G2/ as.e$ he 5TA o apply he r"le ha !lai(s #or re#"n$ are s ri! ly !ons r"e$ a&ains he a%payer. Sin!e pe i ioner #aile$ o es ablish bo h i s ri&h o a a% re#"n$ or a% !re$i an$ i s !o(plian!e wi h he r"les on a% re#"n$ as pro'i$e$ #or in Se! ions -*6 an$ --= o# he Ta% 5o$e, i s !lai( sho"l$ be $enie$, a!!or$in& o he G2/. A. E@ET@E/ A/ NAT T@E EXEMPT2AN H/AM ALL LA5AL AND NAT2ANAL 2NTE/NAL /EVENUE TAXES P/AV2DED 2N /EPUGL25 A5T NA. 0--0 5AVE/S T@E VALUE ADDED TAX PA2D GQ PET2T2ANE/, A SUG25 GAQ H/EEPA/T ENTE/P/2SE AN 2TS PU/5@ASES AH SUPPL2ES AND MATE/2ALS. G. E@ET@E/ A/ NAT T@E 5AU/T AH TAX APPEALS 5A//E5TLQ @ELD T@AT PET2T2ANE/ 2S ENT2TLED TA A TAX 5/ED2T A/ /EHUND AH T@E VAT PA2D AN 2TS PU/5@ASES AH SUPPL2ES AND /AE MATE/2ALS HA/ T@E QEA/S 1==0 AND 1==,. A his )"n! "re, i ("s be s resse$ ha he -.T is an indirect tax. As s"!h, the amount of tax paid on the goods, properties or services bought, transferred, or leased may be shifted or passed on by the seller, transferor, or lessor to the buyer, transferee or lessee( Unli.e a $ire! a%, s"!h as he in!o(e a%, whi!h pri(arily a%es an in$i'i$"alPs abili y o pay base$ on his in!o(e or ne weal h, an indirect tax, such as the -.T, is a tax on consumption of goods, services, or certain transactions involving the same( The -.T, thus, forms a substantial portion of consumer expenditures(

H"r her, in in$ire! a%a ion, here is a nee$ o $is in&"ish be ween the liability for the tax an$ the burden of the tax . As earlier poin e$ o" , he a(o"n o# a% pai$ (ay be shi# e$ or passe$ on by he seller o he b"yer. Bhat is transferred in such instances is not the liability for the tax, but the tax burden. #n adding or in0luding t*e VA$ due to t*e selling pri0e, t*e seller re+ains t*e person pri+arily and legally

liable for t*e pay+ent of t*e ta. & 7hat is shifted only to the intermediate $uyer and ultimately to the final purchaser is the $urden of the tax& S a e$ $i##eren ly, a seller who is $ire! ly an$ le&ally liable #or pay(en o# an in$ire! a%, s"!h as he VAT on &oo$s or services is not necessarily the person who ultimately $ears the $urden of the same tax. 7t is the final purchaser or consumer of such goods or services who, although not directly and legally liable for the payment thereof, ultimately bears the burden of the tax( %xemptions from -.T are granted by express provision of the Tax /ode or special laws( ;nder -.T, the transaction can have preferential treatment in the following waysC (a) VAT E%e(p ion. K An e%e(p ion (eans ha he sale o# &oo$s or proper ies an$<or ser'i!es an$ he "se or lease o# proper ies is no s"b)e! o VAT (o" p" a%) an$ he seller is no allowe$ any a% !re$i on VAT (inp" a%) pre'io"sly pai$. -* This is a !ase wherein he VAT is re(o'e$ a he e%e(p s a&e (i.e., a he poin o# he sale, bar er or e%!han&e o# he &oo$s or proper ies). The person making the exempt sale of goods, properties or services shall not bill any output tax to his customers because the said transaction is not subDect to -.T . &n the other hand, a -.Tregistered purchaser of -.T-exempt goods1properties or services which are exempt from -.T is not entitled to any input tax on such purchase despite the issuance of a -.T invoice or receipt( (b) Iero3ra e$ Sales. K These are sales by VAT3re&is ere$ persons whi!h are s"b)e! o *9 ra e, meanin# the tax $urden is not passed on to the purchaser. . ,ero-rated sale by a -.T-registered person, which is a taxable transaction for -.T purposes, shall not result in any output tax. 8owever, the input tax on his purchases of #oods, properties or services related to such 9ero-rated sale shall $e availa$le as tax credit or refund in accordance with these re#ulations. Under 1ero7rating, all '() is removed from the 9ero-rated #oods, activity or firm. 2n !on ras , e.e+ption only removes the '() at the exempt sta#e, and it will actually increase, rather than reduce the total taxes paid $y the exempt firm:s $usiness or non-retail customers . 2 is #or his reason ha a sharp $is in! ion ("s be (a$e be ween 4ero3 ra in& an$ e%e(p ion in $esi&na in& a 'al"e3a$$e$ a%. Apropos, he pe i ionerPs !lai( o VAT e%e(p ion in he ins an !ase #or i s p"r!hases o# s"pplies an$ raw (a erials is #o"n$e$ (ainly on Se! ion 1-(b) an$ (!) o# /ep. A! No. 0--0, whi!h basi!ally e%e(p s he( #ro( all na ional an$ lo!al in ernal re'en"e a%es, in!l"$in& VAT an$ Se! ion 6(A)(a) o# G2/ /e'en"e /e&"la ions No. 13=;.

&n t*is point, petitioner rig*tly 0lai+s t*at it is indeed VA$7 ".e+pt and t*is fa0t is not 0ontro4erted by t*e respondent. #n fa0t, petitioner is registered as a %&%7VA$ ta.payer per Certifi0ate of !egistration issued by t*e B#!. As su0*, it is e.e+pt fro+ VA$ on all its sales and i+portations of goods and ser4i0es. Petitioner8s 0lai+, *owe4er, for e.e+ption fro+ VA$ for its pur0*ases of supplies and raw +aterials is in0ongruous wit* its 0lai+ t*at it is VA$7".e+pt, for only VA$7!egistered entities 0an 0lai+ #nput VA$ Credit9!efund.
)he point of contention here is whether or not the petitioner may claim a refund on the 5nput '() erroneously passed on to it $y its suppliers& Ehile i is r"e ha he pe i ioner sho"l$ no ha'e been liable #or he VAT ina$'er en ly passe$ on o i by i s s"pplier since such is a 9erorated sale on the part of the supplier , t*e petitioner is not t*e proper party to 0lai+ su0* VA$ refund.

Se! ion 6.1**3- o# G2/Ps /e'en"e /e&"la ions 03=;, as a(en$e$, or he J5onsoli$a e$ Val"e3A$$e$ Ta% /e&"la ionsJ pro'i$e: Se!. 6.1**3-. Iero3ra e$ Sales. K . ,ero-rated sale by a VAT3 re&is ere$ person, whi!h is a a%able ransa! ion #or VAT p"rposes, shall not result in any output tax. @owe'er, the input tax on his purchases of goods, properties or services related to such ,ero-rated sale shall be available as tax credit or refund in accordance with these regulations. The #ollowin& sales by VAT3re&is ere$ persons shall be s"b)e! o *9: (a) E%por Sales JE%por SalesJ shall (ean %%% %%% %%% (;) Those !onsi$ere$ e%por sales "n$er Ar i!les -1 an$ 00 o# E%e!" i'e Ar$er No. --+, o herwise .nown as he A(nib"s 2n'es (en s 5o$e o# 1=,0, an$ o her spe!ial laws, e.&. /ep"bli! A! No. 0--0, o herwise .nown as he Gases 5on'ersion an$ De'elop(en A! o# 1==-. %%% %%% %%% (!) Sales o persons or en i ies whose e%e(p ion "n$er spe!ial laws, e.&. /.A. No. 0--0 $"ly re&is ere$ an$ a!!re$i e$ en erprises wi h S"bi! Gay Me ropoli an A" hori y (SGMA) an$ 5lar. De'elop(en A" hori y (5DA), /.A. No. 0=1+, Philippine E!ono(i! Ione A" hori y (PEIA), or in erna ional a&ree(en s, e.&. Asian De'elop(en Gan. (ADG), 2n erna ional /i!e /esear!h 2ns i " e (2//2), e !. o whi!h he Philippines is a si&na ory e##e! i'ely s"b)e! s"!h sales o 4ero3ra e.J Since the transaction is deemed a ,ero-rated sale, petitionerEs supplier may claim an 7nput -.T credit with no corresponding &utput -.T liability( /ongruently, no &utput -.T may be passed on to the petitioner( An he se!on$ iss"e, i (ay no be a(iss o re3e(phasi4e ha he pe i ioner is re&is ere$ as a NAN3VAT a%payer an$ h"s, is e%e(p #ro( VAT. As an e%e(p VAT a%payer, i is no allowe$ any a% !re$i on VAT (inp" a%) pre'io"sly pai$. 2n #ine, e'en i# we are o ass"(e ha e%e(p ion #ro( he b"r$en o# VAT on pe i ionerPs p"r!hases $i$ e%is , pe i ioner is s ill no en i le$ o any a% !re$i or re#"n$ on he inp" a% pre'io"sly pai$ as pe i ioner is an e%e(p VAT a%payer. 5ather, it is the petitionerEs suppliers who are the proper parties to claim the tax credit and accordingly refund the petitioner of the -.T erroneously passed on to the latter( A!!or$in&ly, we #in$ ha he 5o"r o# Appeals $i$ no !o((i any re'ersible error o# law in hol$in& ha pe i ionerPs VAT e%e(p ion "n$er /ep. A! No. 0--0 is li(i e$ o he VAT on whi!h i is $ire! ly liable as a seller an$ hen!e, i !anno !lai( any re#"n$ or e%e(p ion #or any inp" VAT i pai$, i# any, on i s p"r!hases o# raw (a erials an$ s"pplies. 5ASES AN VAT:

/&997SS7&'%5 &2 7'T%5'.: 5%-%';%, petitioner, vs( S%.=.T% T%/8'&:&=F P87:7PP7'%S$, respondent( <=(5( 'o( 34>G**( 2ebruary 33, )""4(A G"siness !o(panies re&is ere$ in an$ opera in& #ro( he Spe!ial E!ono(i! Ione in Na&a, 5eb" K li.e herein respon$en K are en i ies e%e(p #ro( all in ernal re'en"e a%es an$ he i(ple(en in& r"les rele'an here o, in!l"$in& he 'al"e3a$$e$ a%es or VAT. Al ho"&h e%por sales are no $ee(e$ e%e(p ransa! ions, hey are none heless

4ero3ra e$. @en!e, in he presen !ase, he $is in! ion be ween e%e(p en i ies an$ e%e(p ransa! ions has li le si&ni#i!an!e, be!a"se he ne res"l is ha he a%payer is no liable #or he VAT. /espon$en , a VAT3re&is ere$ en erprise, has !o(plie$ wi h all re8"isi es #or !lai(in& a a% re#"n$ o# or !re$i #or he inp" VAT i pai$ on !api al &oo$s i p"r!hase$. Th"s, he 5o"r o# Ta% Appeals an$ he 5o"r o# Appeals $i$ no err in r"lin& ha i is en i le$ o s"!h re#"n$ or !re$i . Ha! s: 1. L/espon$en M is a resi$en #orei&n !orpora ion $"ly re&is ere$ wi h he Se!"ri ies an$ E%!han&e 5o((ission o $o b"siness in he Philippines, wi h prin!ipal o##i!e a$$ress a he new 5eb" Township Ane, Spe!ial E!ono(i! Ione, Garan&ay 5an ao3an, Na&a, 5eb"? -. LPe i ionerM is s"e$ in his o##i!ial !apa!i y, ha'in& been $"ly appoin e$ an$ e(powere$ o per#or( he $" ies o# his o##i!e, in!l"$in&, a(on& o hers, he $" y o a! an$ appro'e !lai(s #or re#"n$ or a% !re$i ? 1. L/espon$en M is re&is ere$ wi h he Philippine E%por Ione A" hori y (PEIA) an$ has been iss"e$ PEIA 5er i#i!a e No. =03*66 p"rs"an o Presi$en ial De!ree No. ++, as a(en$e$, o en&a&e in he (an"#a! "re o# re!or$in& !o(ponen s pri(arily "se$ in !o(p" ers #or e%por . S"!h re&is ra ion was (a$e on + B"ne 1==0? 6. L/espon$en M is VAT L(Val"e A$$e$ Ta%)M3re&is ere$ en i y as e'i$en!e$ by VAT /e&is ra ion 5er i#i!a ion No. =03*,13***+**3V iss"e$ on - April 1==0? ;. VAT re "rns #or he perio$ 1 April 1==, o 1* B"ne 1=== ha'e been #ile$ by Lrespon$en M? +. An a$(inis ra i'e !lai( #or re#"n$ o# VAT inp" a%es in he a(o"n o# P-,,1+=,--+.1, wi h s"ppor in& $o!"(en s (in!l"si'e o# he P1-,-+0,=,1.*6 VAT inp" a%es s"b)e! o# his Pe i ion #or /e'iew), was #ile$ on 6 A! ober 1=== wi h /e'en"e Dis ri! A##i!e No. ,1, Talisay 5eb"? 0. No #inal a! ion has been re!ei'e$ by Lrespon$en M #ro( Lpe i ionerM on Lrespon$en PsM !lai( #or VAT re#"n$. JThe a$(inis ra i'e !lai( #or re#"n$ by he Lrespon$en M on A! ober 6, 1=== was no a! e$ "pon by he Lpe i ionerM pro(p in& he Lrespon$en M o ele'a e he !ase o L he 5TAM on B"ly -1, -*** by way o# Pe i ion #or /e'iew in or$er o oll he r"nnin& o# he wo3year pres!rip i'e perio$. JHor his par , Lpe i ionerM . . . raise$ he #ollowin& Spe!ial an$ A##ir(a i'e De#enses, o wi : 1. L/espon$en PsM alle&e$ !lai( #or a% re#"n$<!re$i is s"b)e! o a$(inis ra i'e ro" inary in'es i&a ion<e%a(ina ion by Lpe i ionerPsM G"rea"? -. Sin!e P a%es are pres"(e$ o ha'e been !olle! e$ in a!!or$an!e wi h laws an$ re&"la ions,P he Lrespon$en M has he b"r$en o# proo# ha he a%es so"&h o be re#"n$e$ were erroneo"sly or ille&ally !olle! e$ . . .? 1. 2n 5i iban., N.A. 's. 5o"r o# Appeals, -,* S5/A 6;= (1==0), he S"pre(e 5o"r r"le$ ha : JA !lai(an has he b"r$en o# proo# o es ablish he #a! "al basis o# his or her !lai( #or a% !re$i <re#"n$.J 6. 5lai(s #or a% re#"n$< a% !re$i are !ons r"e$ in Ps ri! issi(i )"risP a&ains he a%payer. This is $"e o he #a! ha !lai(s #or re#"n$<!re$i Lpar a.e o#M he na "re o# an e%e(p ion #ro( a%. Th"s, i is in!"(ben "pon he Lrespon$en M o pro'e ha i is in$ee$ en i le$ o

he re#"n$<!re$i so"&h . Hail"re on he par o# he Lrespon$en M o pro'e he sa(e is #a al o i s !lai( #or a% !re$i . @e who !lai(s e%e(p ion ("s be able o )"s i#y his !lai( by he !leares &ran o# or&ani! or s a " ory law. An e%e(p ion #ro( he !o((on b"r$en !anno be per(i e$ o e%is "pon 'a&"e i(pli!a ions? ;. 7ran in&, wi ho" a$(i in&, ha Lrespon$en M is a Philippine E!ono(i! Ione A" hori y (PEIA) re&is ere$ E!o4one En erprise, hen i s b"siness is no s"b)e! o VAT p"rs"an o Se! ion -6 o# /ep"bli! A! No. (L/AM) 0=1+ in rela ion o Se! ion 1*1 o# he Ta% 5o$e, as a(en$e$. As Lrespon$en PsM b"siness is no s"b)e! o VAT, he !api al &oo$s an$ ser'i!es i alle&e$ o ha'e p"r!hase$ are !onsi$ere$ no "se$ in VAT a%able b"siness. As s"!h, Lrespon$en M is no en i le$ o re#"n$ o# inp" a%es on s"!h !api al &oo$s p"rs"an o Se! ion 6.1*+.1 o# /e'en"e /e&"la ions No. (L//M)03=;, an$ o# inp" a%es on ser'i!es p"rs"an o Se! ion 6.1*1 o# sai$ re&"la ions. +. L/espon$en M ("s show !o(plian!e wi h he pro'isions o# Se! ion -*6 (5) an$ --= o# he 1==0 Ta% 5o$e on #ilin& o# a wri en !lai( #or re#"n$ wi hin wo (-) years #ro( he $a e o# pay(en o# a%.P JAn B"ly 1=, -**1, he Ta% 5o"r ren$ere$ a $e!ision &ran in& he !lai( #or re#"n$.J Sole 2ss"e Pe i ioner s"b(i s his sole iss"e #or o"r !onsi$era ion: JEhe her or no respon$en is en i le$ o he re#"n$ or iss"an!e o# Ta% 5re$i 5er i#i!a e in he a(o"n o# P1-,1--,=--.++ represen in& alle&e$ "n" ili4e$ inp" VAT pai$ on !api al &oo$s p"r!hase$ #or he perio$ April 1, 1==, o B"ne 1*, 1===.J The 5o"r Ps /"lin& The Pe i ion is "n(eri orio"s. Sole 2ss"e: En i le(en o# a VAT3/e&is ere$ PEIA En erprise o a /e#"n$ o# or 5re$i #or 2np" VAT. No $o"b , as a PEIA3re&is ere$ en erprise wi hin a spe!ial e!ono(i! 4one, respon$en is en i le$ o he #is!al in!en i'es an$ bene#i s pro'i$e$ #or in ei her PD ++ or EA --+. 2 shall, (oreo'er, en)oy all pri'ile&es, bene#i s, a$'an a&es or e%e(p ions "n$er bo h /ep"bli! A! Nos. (/A) 0--0 11 an$ 0,66. Pre#eren ial Ta% Trea (en Un$er Spe!ial Laws 2# i a'ails i sel# o# PD ++, no wi hs an$in& he pro'isions o# o her laws o he !on rary, respon$en shall no be s"b)e! o in ernal re'en"e laws an$ re&"la ions #or raw (a erials, s"pplies, ar i!les, e8"ip(en , (a!hineries, spare par s an$ wares, e%!ep hose prohibi e$ by law, bro"&h in o he 4one o be s ore$, bro.en "p, repa!.e$, asse(ble$, ins alle$, sor e$, !leane$, &ra$e$ or o herwise pro!esse$, (anip"la e$, (an"#a! "re$, (i%e$ or "se$ $ire! ly or in$ire! ly in s"!h a! i'i ies. E'en so, respon$en wo"l$ en)oy a ne 3opera in& loss !arry o'er? a!!elera e$ $epre!ia ion? #orei&n e%!han&e an$ #inan!ial assis an!e? an$ e%e(p ion #ro( e%por a%es, lo!al a%es an$ li!enses. 5o(para i'ely, he sa(e e%e(p ion #ro( in ernal re'en"e laws an$ re&"la ions applies i# EA --+ is !hosen. Un$er his law, respon$en shall #"r her be en i le$ o an in!o(e a% holi$ay? a$$i ional $e$"! ion #or labor e%pense? si(pli#i!a ion o# !"s o(s pro!e$"re? "nres ri! e$ "se

o# !onsi&ne$ e8"ip(en ? a!!ess o a bon$e$ (an"#a! "rin& wareho"se sys e(? pri'ile&es #or #orei&n na ionals e(ploye$? a% !re$i s on $o(es i! !api al e8"ip(en , as well as #or a%es an$ $" ies on raw (a erials? an$ e%e(p ion #ro( !on ra! orsP a%es, whar#a&e $"es, a%es an$ $" ies on i(por e$ !api al e8"ip(en an$ spare par s, e%por a%es, $" ies, i(pos s an$ #ees, 1+ lo!al a%es an$ li!enses, an$ real proper y a%es. A pri'ile&e a'ailable o respon$en "n$er he pro'ision in /A 0--0 on a% an$ $" y3#ree i(por a ion o# raw (a erials, !api al an$ e8"ip(en K is, ipso #a! o, also a!!or$e$ o he 4one "n$er /A 0=1+. H"r her(ore, he la er law K no wi hs an$in& o her e%is in& laws, r"les an$ re&"la ions o he !on rary K e% en$s o ha 4one he pro'ision s a in& ha no lo!al or na ional a%es shall be i(pose$ herein. No e%!han&e !on rol poli!y shall be applie$? an$ #ree (ar.e s #or #orei&n e%!han&e, &ol$, se!"ri ies an$ #" "re shall be allowe$ an$ (ain aine$. Gan.in& an$ #inan!e shall also be liberali4e$ "n$er (ini("( Gan&.o Sen ral re&"la ion wi h he es ablish(en o# #orei&n !"rren!y $eposi ory "ni s o# lo!al !o((er!ial ban.s an$ o##shore ban.in& "ni s o# #orei&n ban.s. 2n he sa(e 'ein, respon$en bene#i s "n$er /A 0,66 #ro( ne&o iable a% !re$i s #or lo!ally3pro$"!e$ (a erials "se$ as inp" s. Asi$e #ro( he o her in!en i'es possibly alrea$y &ran e$ o i by he Goar$ o# 2n'es (en s, i also en)oys pre#eren ial !re$i #a!ili ies an$ e%e(p ion #ro( PD 1,;1. 2rom the above-cited laws, it is immediately clear that petitioner enDoys preferential tax treatment( 2 is no s"b)e! o in ernal re'en"e laws an$ re&"la ions an$ is e'en en i le$ o a% !re$i s. The VAT on !api al &oo$s is an in ernal re'en"e a% #ro( whi!h pe i ioner as an en i y is e%e(p . Al ho"&h he ransa! ions in'ol'in& s"!h a% are no e%e(p , pe i ioner as a VAT3re&is ere$ person, howe'er, is en i le$ o heir !re$i s. Na "re o# he VAT an$ he Ta% 5re$i Me ho$ Viewe$ broa$ly, he VAT is a "ni#or( a% ran&in&, a presen , #ro( * per!en o 1* per!en le'ie$ on e'ery i(por a ion o# &oo$s, whe her or no in he !o"rse o# ra$e or b"siness, or i(pose$ on ea!h sale, bar er, e%!han&e or lease o# &oo$s or proper ies or on ea!h ren$i ion o# ser'i!es in he !o"rse o# ra$e or b"siness as hey pass alon& he pro$"! ion an$ $is rib" ion !hain, he a% bein& li(i e$ only o he 'al"e a$$e$ o s"!h &oo$s, proper ies or ser'i!es by he seller, rans#eror or lessor. 2 is an in$ire! a% ha (ay be shi# e$ or passe$ on o he b"yer, rans#eree or lessee o# he &oo$s, proper ies or ser'i!es. As s"!h, i sho"l$ be "n$ers oo$ no in he !on e% o# he person or en i y ha is pri(arily, $ire! ly an$ le&ally liable #or i s pay(en , b" in er(s o# i s na "re as a a% on !ons"(p ion. 2n ei her !ase, ho"&h, he sa(e !on!l"sion is arri'e$ a .

The law ha ori&inally i(pose$ he VAT in he !o"n ry, as well as he s"bse8"en a(en$(en s o# ha law, has been $rawn #ro( he a% !re$i (e ho$. S"!h (e ho$ a$op e$ he (e!hani!s an$ sel#3en#or!e(en #ea "res o# he VAT as #irs i(ple(en e$ an$ pra! i!e$ in E"rope an$ s"bse8"en ly a$op e$ in New Iealan$ an$ 5ana$a. Un$er he presen (e ho$ ha relies on in'oi!es, an en i y !an !re$i a&ains or s"b ra! #ro( he VAT !har&e$ on i s sales or o" p" s he VAT pai$ on i s p"r!hases, inp" s an$ i(por s. 2# a he en$ o# a a%able 8"ar er he o" p" a%es !har&e$ by a seller are e8"al o he inp" a%es passe$ on by he s"ppliers, no pay(en is re8"ire$. 2 is when he o" p" a%es e%!ee$ he inp" a%es ha he e%!ess has o be pai$. 2#, howe'er, he inp" a%es e%!ee$ he o" p" a%es, he e%!ess shall be !arrie$ o'er o he s"!!ee$in& 8"ar er or

8"ar ers. Sho"l$ he inp" a%es res"l #ro( 4ero3ra e$ or e##e! i'ely 4ero3ra e$ ransa! ions or #ro( he a!8"isi ion o# !api al &oo$s, any e%!ess o'er he o" p" a%es shall ins ea$ be re#"n$e$ o he a%payer or !re$i e$ a&ains o her in ernal re'en"e a%es. Iero3/a e$ an$ E##e! i'ely Iero3/a e$ Transa! ions .lthough both are taxable and similar in effect, ,ero-rated transactions differ from effectively ,ero-rated transactions as to their source( 1ero7rated transa0tions #enerally refer to the export sale of #oods and supply of services. The a% ra e is se a 4ero. Ehen applie$ o he a% base, s"!h ra e ob'io"sly res"l s in no a% !har&eable a&ains he p"r!haser. The seller of such transactions charges no output tax, but can claim a refund of or a tax credit certificate for the -.T previously charged by suppliers. "ffe0ti4ely :ero7rated transa0tions, howe'er, refer to the sale of #oods or supply of services to persons or entities whose exemption under special laws or international a#reements to which the Philippines is a si#natory effectively su$;ects such transactions to a 9ero rate. A&ain, as applie$ o he a% base, s"!h ra e $oes no yiel$ any a% !har&eable a&ains he p"r!haser. The seller who charges ,ero output tax on such transactions can also claim a refund of or a tax credit certificate for the -.T previously charged by suppliers( Iero /a in& an$ E%e(p ion 2n er(s o# he VAT !o(p" a ion, 4ero ra in& an$ e%e(p ion are he sa(e, b" he e% en o# relie# ha res"l s #ro( ei her one o# he( is no . Applyin& he $es ina ion prin!iple o he e%por a ion o# &oo$s,

auto+ati0

:ero rating

is primarily intended to be enDoyed by the seller who is directly and legally liable for the -.T, making such seller internationally competitive by allowing the refund or credit of input taxes that are attributable to export sales. "ffe0ti4e :ero rating, on he !on rary, is intended to benefit the purchaser who, not being directly and legally liable for the payment of the -.T, will ultimately bear the burden of the tax shifted by the suppliers( 2n bo h ins an!es o# 4ero ra in&, here is o al relie# #or he p"r!haser #ro( he b"r$en o# he a%. G" in an e%e(p ion here is only par ial relie#, be!a"se he p"r!haser is no allowe$ any a% re#"n$ o# or !re$i #or inp" a%es pai$. E%e(p Transa! ion an$ E%e(p Par y The ob)e! o# e%e(p ion #ro( he VAT (ay ei her be he ransa! ion i sel# or any o# he par ies o he ransa! ion. An e%e(p ransa! ion, on he one han$, in'ol'es &oo$s or ser'i!es whi!h, by heir na "re, are spe!i#i!ally lis e$ in an$ e%pressly e%e(p e$ #ro( he VAT "n$er he Ta% 5o$e, wi ho" re&ar$ o he a% s a "s K VAT3e%e(p or no K o# he par y o he ransa! ion. 2n$ee$, s"!h ransa! ion is no s"b)e! o he VAT, b" he seller is no allowe$ any a% re#"n$ o# or !re$i #or any inp" a%es pai$. An e%e(p par y, on he o her han$, is a person or en i y &ran e$ VAT e%e(p ion "n$er he Ta% 5o$e, a spe!ial law or an in erna ional a&ree(en o whi!h he Philippines is a si&na ory, an$ by 'ir "e o# whi!h i s a%able ransa! ions be!o(e e%e(p #ro( he VAT. S"!h par y is also no s"b)e! o he VAT, b" (ay be allowe$ a a% re#"n$ o#

or !re$i #or inp" a%es pai$, $epen$in& on i s re&is ra ion as a VAT or non3VAT a%payer. As (en ione$ earlier, he VAT is a a% on !ons"(p ion, he a(o"n o# whi!h (ay be shi# e$ or passe$ on by he seller o he p"r!haser o# he &oo$s, proper ies or ser'i!es. Ehile he liabili y is i(pose$ on one person, he b"r$en (ay be passe$ on o ano her. There#ore, i# a spe!ial law (erely e%e(p s a par y as a seller #ro( i s $ire! liabili y #or pay(en o# he VAT, b" $oes no relie'e he sa(e par y as a p"r!haser #ro( i s in$ire! b"r$en o# he VAT shi# e$ o i by i s VAT3re&is ere$ s"ppliers, he p"r!hase ransa! ion is no e%e(p . Applyin& his prin!iple o he !ase a bar, he p"r!hase ransa! ions en ere$ in o by respon$en are no VAT3e%e(p . Spe!ial laws (ay !er ainly e%e(p ransa! ions #ro( he VAT. @owe'er, he Ta% 5o$e pro'i$es ha hose #allin& "n$er PD ++ are no . PD ++ is he pre!"rsor o# /A 0=1+ K he spe!ial law "n$er whi!h respon$en was re&is ere$. The p"r!hase ransa! ions i en ere$ in o are, here#ore, no VAT3e%e(p . These are s"b)e! o he VAT? respon$en is re8"ire$ o re&is er. 2 s sales ransa! ions, howe'er, will ei her be 4ero3ra e$ or a%e$ a he s an$ar$ ra e o# 1* per!en , $epen$in& a&ain on he appli!a ion o# he $es ina ion prin!iple. 2# respon$en en ers in o s"!h sales ransa! ions wi h a p"r!haser K "s"ally in a #orei&n !o"n ry K #or "se or !ons"(p ion o" si$e he Philippines, hese shall be s"b)e! o * per!en . 2# en ere$ in o wi h a p"r!haser #or "se or !ons"(p ion in he Philippines, hen hese shall be s"b)e! o 1* per!en , "nless he p"r!haser is e%e(p #ro( he in$ire! b"r$en o# he VAT, in whi!h !ase i shall also be 4ero3ra e$. Sin!e he p"r!hases o# respon$en are no e%e(p #ro( he VAT, he ra e o be applie$ is 4ero. 2 s e%e(p ion "n$er bo h PD ++ an$ /A 0=1+ e##e! i'ely s"b)e! s s"!h ransa! ions o a 4ero ra e, be!a"se he e!o4one wi hin whi!h i is re&is ere$ is (ana&e$ an$ opera e$ by he PEIA as a separa e !"s o(s erri ory. This (eans ha in s"!h 4one is !rea e$ he le&al #i! ion o# #orei&n erri ory. Un$er he !ross3bor$er prin!iple o# he VAT sys e( bein& en#or!e$ by he G"rea" o# 2n ernal /e'en"e (G2/), no VAT shall be i(pose$ o #or( par o# he !os o# &oo$s $es ine$ #or !ons"(p ion o" si$e o# he erri orial bor$er o# he a%in& a" hori y. 2# e%por s o# &oo$s an$ ser'i!es #ro( he Philippines o a #orei&n !o"n ry are #ree o# he VAT, hen he sa(e r"le hol$s #or s"!h e%por s #ro( he na ional erri ory K e%!ep spe!i#i!ally $e!lare$ areas K o an e!o4one. Sales (a$e by a VAT3re&is ere$ person in he !"s o(s erri ory o a PEIA3re&is ere$ en i y are !onsi$ere$ e%por s o a #orei&n !o"n ry? !on'ersely, sales by a PEIA3re&is ere$ en i y o a VAT3re&is ere$ person in he !"s o(s erri ory are $ee(e$ i(por s #ro( a #orei&n !o"n ry. An e!o4one K in$"bi ably a &eo&raphi!al erri ory o# he Philippines K is, howe'er, re&ar$e$ in law as #orei&n soil. This le&al #i! ion is ne!essary o &i'e (eanin&#"l e##e! o he poli!ies o# he spe!ial law !rea in& he 4one. 2# respon$en is lo!a e$ in an e%por pro!essin& 4one wi hin ha e!o4one, sales o he e%por pro!essin& 4one, e'en wi ho" bein& a! "ally e%por e$, shall in #a! be 'iewe$ as !ons r"! i'ely e%por e$ "n$er EA --+. 5onsi$ere$ as e%por sales, s"!h p"r!hase ransa! ions by respon$en wo"l$ in$ee$ be s"b)e! o a 4ero ra e. Ta% E%e(p ions Groa$ an$ E%press Applyin& he spe!ial laws we ha'e earlier $is!"sse$, respon$en as an en i y is e%e(p #ro( in ernal re'en"e laws an$ re&"la ions. This e%e(p ion !o'ers bo h $ire! an$ in$ire! a%es, s e((in& #ro( he 'ery na "re o# he VAT as a a% on !ons"(p ion, #or whi!h he

$ire! liabili y is i(pose$ on one person b" he in$ire! b"r$en is passe$ on o ano her. 5espondent, as an exempt entity, can neither be directly charged for the -.T on its sales nor indirectly made to bear, as added cost to such sales, the equivalent -.T on its purchases( <$i lex non distin#uit, nec nos distin#uere de$emus . Ehere he law $oes no $is in&"ish, we o"&h no o $is in&"ish. Moreo'er, he e%e(p ion is bo h e%press an$ per'asi'e #or he #ollowin& reasons: Hirs , /A 0=1+ s a es ha Jno a%es, lo!al an$ na ional, shall be i(pose$ on b"siness es ablish(en s opera in& wi hin he e!o4one.J ,1 Sin!e his law $oes no e%!l"$e he VAT #ro( he prohibi ion, i is $ee(e$ in!l"$e$. E%!ep io #ir(a re&"la( in !asib"s non e%!ep is. An e%!ep ion !on#ir(s he r"le in !ases no e%!ep e$? ha is, a hin& no bein& e%!ep e$ ("s be re&ar$e$ as !o(in& wi hin he p"r'iew o# he &eneral r"le. Moreo'er, e'en ho"&h he VAT is no i(pose$ on he en i y b" on he ransa! ion, i (ay s ill be passe$ on an$, here#ore, in$ire! ly i(pose$ on he sa(e en i y K a pa en !ir!"('en ion o# he law. Tha no VAT shall be i(pose$ $ire! ly "pon b"siness es ablish(en s opera in& wi hin he e!o4one "n$er /A 0=1+ also (eans ha no VAT (ay be passe$ on an$ i(pose$ in$ire! ly. O"an$o ali8"i$ prohibe "r e% $ire! o prohibe "r e per obli8""(. Ehen any hin& is prohibi e$ $ire! ly, i is also prohibi e$ in$ire! ly. Se!on$, when /A ,06, was ena! e$ o a(en$ /A 0=1+, he sa(e prohibi ion applie$, e%!ep #or real proper y a%es ha presen ly are i(pose$ on lan$ owne$ by $e'elopers. This si(ilar an$ repea e$ prohibi ion is an "na(bi&"o"s ra i#i!a ion o# he lawPs in en in no i(posin& lo!al or na ional a%es on b"siness en erprises wi hin he e!o4one. Thir$, #orei&n an$ $o(es i! (er!han$ise, raw (a erials, e8"ip(en an$ he li.e Jshall no be s"b)e! o . . . in ernal re'en"e laws an$ re&"la ionsJ "n$er PD ++ K he ori&inal !har er o# PEIA ( hen EPIA) ha was la er a(en$e$ by /A 0=1+. No pro'isions in he la er law (o$i#y s"!h e%e(p ion. Al ho"&h his e%e(p ion p" s he &o'ern(en a an ini ial $isa$'an a&e, he re$"!e$ a% !olle! ion "l i(a ely re$o"n$s o he bene#i o# he na ional e!ono(y by en i!in& (ore b"siness in'es (en s an$ !rea in& (ore e(ploy(en oppor "ni ies. Ho"r h, e'en he r"les i(ple(en in& he PEIA law !learly rei era e ha (er!han$ise K e%!ep hose prohibi e$ by law K Jshall no be s"b)e! o . . . in ernal re'en"e laws an$ re&"la ions . . .J i# bro"&h o he e!o4onePs res ri! e$ area #or (an"#a! "rin& by re&is ere$ e%por en erprises, o# whi!h respon$en is one. These r"les also apply o all en erprises re&is ere$ wi h he EPIA prior o he e##e! i'i y o# s"!h r"les. Hi# h, e%por pro!essin& 4one en erprises re&is ere$ wi h he Goar$ o# 2n'es (en s (GA2) "n$er EA --+ pa en ly en)oy e%e(p ion #ro( na ional in ernal re'en"e a%es on i(por e$ !api al e8"ip(en reasonably nee$e$ an$ e%!l"si'ely "se$ #or he (an"#a! "re o# heir pro$"! s? on re8"ire$ s"pplies an$ spare par #or !onsi&ne$ e8"ip(en ? an$ on #orei&n an$ $o(es i! (er!han$ise, raw (a erials, e8"ip(en an$ he li.e K e%!ep hose prohibi e$ by law K bro"&h in o he 4one #or (an"#a! "rin&. 2n a$$i ion, hey are &i'en !re$i s #or he 'al"e o# he na ional in ernal re'en"e a%es i(pose$ on $o(es i! !api al e8"ip(en also reasonably nee$e$ an$ e%!l"si'ely "se$ #or he (an"#a! "re o# heir pro$"! s, as well as #or he 'al"e o# s"!h a%es i(pose$ on $o(es i! raw (a erials an$ s"pplies ha are "se$ in he (an"#a! "re o# heir e%por pro$"! s an$ ha #or( par hereo#.

Si% h, he e%e(p ion #ro( lo!al an$ na ional a%es &ran e$ "n$er /A 0--0 are ipso #a! o a!!or$e$ o e!o4ones. 2n !ase o# $o"b , !on#li! s wi h respe! o s"!h a% e%e(p ion pri'ile&e shall be resol'e$ in #a'or o# he e!o4one. An$ se'en h, he a% !re$i s "n$er /A 0,66 K &i'en #or i(por e$ raw (a erials pri(arily "se$ in he pro$"! ion o# e%por &oo$s, an$ #or lo!ally pro$"!e$ raw (a erials, !api al e8"ip(en an$ spare par s "se$ by e%por ers o# non3 ra$i ional pro$"! s K shall also be !on in"o"sly en)oye$ by si(ilar e%por ers wi hin he e!o4one. 2n$ee$, he la er e%por ers are li.ewise en i le$ o s"!h a% e%e(p ions an$ !re$i s. Ta% /e#"n$ as Ta% E%e(p ion To be s"re, s a " es ha &ran a% e%e(p ions are !ons r"e$ s ri! issi(i )"ris a&ains he a%payer an$ liberally in #a'or o# he a%in& a" hori y. Ta% re#"n$s are in he na "re o# s"!h e%e(p ions. A!!or$in&ly, he !lai(an s o# hose re#"n$s bear he b"r$en o# pro'in& he #a! "al basis o# heir !lai(s? an$ o# showin&, by wor$s oo plain o be (is a.en, ha he le&isla "re in en$e$ o e%e(p he(. 2n he presen !ase, all he !i e$ le&al pro'isions are ee(in& wi h li#e wi h respe! o he &ran o# a% e%e(p ions oo 'i'i$ o pass "nno i!e$. 2n a$$i ion, respon$en easily (ee s he !hallen&e. /espon$en , whi!h as an en i y is e%e(p , is $i##eren #ro( i s ransa! ions whi!h are no e%e(p . The en$ res"l , howe'er, is ha i is no s"b)e! o he VAT. The non3 a%abili y o# ransa! ions ha are o herwise a%able is (erely a ne!essary in!i$en o he a% e%e(p ion !on#erre$ by law "pon i as an en i y, no "pon he ransa! ions he(sel'es. None heless, i s e%e(p ion as an en i y an$ he non3 e%e(p ion o# i s ransa! ions lea$ o he sa(e res"l #or he #ollowin& !onsi$era ions: Hirs , he !on e(poraneo"s !ons r"! ion o# o"r a% laws by G2/ a" hori ies who are !alle$ "pon o e%e!" e or a$(inis er s"!h laws will ha'e o be a$op e$. Their prior a% iss"an!es ha'e hel$ in!onsis en posi ions bro"&h abo" by heir probable #ail"re o !o(prehen$ an$ #"lly appre!ia e he na "re o# he VAT as a a% on !ons"(p ion an$ he appli!a ion o# he $es ina ion prin!iple. /e'en"e Me(oran$"( 5ir!"lar No. (/M5) 063==, howe'er, now !learly an$ !orre! ly pro'i$es ha any VAT3re&is ere$ s"pplierPs sale o# &oo$s, proper y or ser'i!es #ro( he !"s o(s erri ory o any re&is ere$ en erprise opera in& in he e!o4one K re&ar$less o# he !lass or ype o# he la erPs PEIA re&is ra ion K is le&ally en i le$ o a 4ero ra e. Se!on$, he poli!ies o# he law sho"l$ pre'ail. /a io le&is es ani(a. The reason #or he law is i s 'ery so"l. 2n PD ++, he "r&en !rea ion o# he EPIA whi!h pre!e$e$ he PEIA, as well as he es ablish(en o# e%por pro!essin& 4ones, see.s J o en!o"ra&e an$ pro(o e #orei&n !o((er!e as a (eans o# . . . s ren& henin& o"r e%por ra$e an$ #orei&n e%!han&e posi ion, o# has enin& in$"s riali4a ion, o# re$"!in& $o(es i! "ne(ploy(en , an$ o# a!!elera in& he $e'elop(en o# he !o"n ry.J /A 0=1+, as a(en$e$ by /A ,06,, $e!lare$ ha by !rea in& he PEIA an$ in e&ra in& he spe!ial e!ono(i! 4ones, J he &o'ern(en shall a! i'ely en!o"ra&e, pro(o e, in$"!e an$ a!!elera e a so"n$ an$ balan!e$ in$"s rial, e!ono(i! an$ so!ial $e'elop(en o# he !o"n ry . . . hro"&h he es ablish(en , a(on& o hers, o# spe!ial e!ono(i! 4ones . . . ha shall e##e! i'ely a ra! le&i i(a e an$ pro$"! i'e #orei&n in'es (en s.J Un$er EA --+, he JS a e shall en!o"ra&e . . . #orei&n in'es (en s in in$"s ry . . . whi!h shall . . (ee he es s o# in erna ional !o(pe i i'enessL,M a!!elera e $e'elop(en o# less $e'elope$ re&ions o#

he !o"n ryL,M an$ res"l in in!rease$ 'ol"(e an$ 'al"e o# e%por s #or he e!ono(y.J His!al in!en i'es ha are !os 3e##i!ien an$ si(ple o a$(inis er shall be $e'ise$ an$ e% en$e$ o si&ni#i!an pro)e! s J o !o(pensa e #or (ar.e i(per#e! ions, o rewar$ per#or(an!e !on rib" in& o e!ono(i! $e'elop(en ,J an$ J o s i("la e he es ablish(en an$ assis ini ial opera ions o# he en erprise.J Eisely a!!or$e$ o e!o4ones !rea e$ "n$er /A 0=1+ was he &o'ern(en Ps poli!y K spelle$ o" earlier in /A 0--0 K o# !on'er in& in o al erna i'e pro$"! i'e "ses he #or(er (ili ary reser'a ions an$ heir e% ensions, as well as o# pro'i$in& he( in!en i'es o enhan!e he bene#i s ha wo"l$ be $eri'e$ #ro( he( in pro(o in& e!ono(i! an$ so!ial $e'elop(en . Hinally, "n$er /A 0,66, he S a e $e!lares he nee$ J o e'ol'e e%por $e'elop(en in o a na ional e##or J in or$er o win in erna ional (ar.e s. Gy pro'i$in& (any e%por an$ a% in!en i'es, he S a e is able o $ri'e ho(e he poin ha e%por in& is in$ee$ J he .ey o na ional s"r'i'al an$ he (eans hro"&h whi!h he e!ono(i! &oals o# in!rease$ e(ploy(en an$ enhan!e$ in!o(es !an (os e%pe$i io"sly be a!hie'e$.J The Ta% 5o$e i sel# see.s o Jpro(o e s"s ainable e!ono(i! &row h . . .? . . . in!rease e!ono(i! a! i'i y? an$ . . . !rea e a rob"s en'iron(en #or b"siness o enable #ir(s o !o(pe e be er in he re&ional as well as he &lobal (ar.e .J A# er all, in erna ional !o(pe i i'eness re8"ires e!ono(i! an$ a% in!en i'es o lower he !os o# &oo$s pro$"!e$ #or e%por . S a e a! ions ha a##e! &lobal !o(pe i ion nee$ o be spe!i#i! an$ sele! i'e in he pri!in& o# par i!"lar &oo$s or ser'i!es. All hese s a " ory poli!ies are !on&r"en o he !ons i " ional (an$a es o# pro'i$in& in!en i'es o nee$e$ in'es (en s, 1-, as well as o# pro(o in& he pre#eren ial "se o# $o(es i! (a erials an$ lo!ally pro$"!e$ &oo$s an$ a$op in& (eas"res o help (a.e hese !o(pe i i'e. 1-= Ta% !re$i s #or $o(es i! inp" s s ren& hen ba!.war$ lin.a&es. /i&h ly so, J he r"le o# law an$ he e%is en!e o# !re$ible an$ e##i!ien p"bli! ins i " ions are essen ial prere8"isi es #or s"s ainable e!ono(i! $e'elop(en .J VAT /e&is ra ion, No Appli!a ion #or E##e! i'e Iero /a in&, 2n$ispensable o VAT /e#"n$ /e&is ra ion is an in$ispensable re8"ire(en "n$er o"r VAT law. Pe i ioner alle&es ha respon$en $i$ re&is er #or VAT p"rposes wi h he appropria e /e'en"e Dis ri! A##i!e. @owe'er, i is now oo la e in he $ay #or pe i ioner o !hallen&e he VAT3re&is ere$ s a "s o# respon$en , &i'en he la erPs prior represen a ion be#ore he lower !o"r s an$ he (o$e o# appeal a.en by pe i ioner be#ore his 5o"r . The PEIA law, whi!h !arrie$ o'er he pro'isions o# he EPIA law, is !lear in e%e(p in& #ro( in ernal re'en"e laws an$ re&"la ions he e8"ip(en K in!l"$in& !api al &oo$s K ha re&is ere$ en erprises will "se, $ire! ly or in$ire! ly, in (an"#a! "rin&. EA --+ e'en rei era es his pri'ile&e a(on& he in!en i'es i &i'es o s"!h en erprises. Pe i ioner (erely asser s ha by 'ir "e o# he PEIA re&is ra ion alone o# respon$en , he la er is no s"b)e! o he VAT. 5onse8"en ly, he !api al &oo$s an$ ser'i!es respon$en has p"r!hase$ are no !onsi$ere$ "se$ in he VAT b"siness, an$ no VAT re#"n$ or !re$i is $"e. This is a non se8"i "r. Gy he VATPs 'ery na "re as a a% on !ons"(p ion, he !api al &oo$s an$ ser'i!es respon$en has p"r!hase$ are s"b)e! o he VAT, al ho"&h a 4ero ra e. /e&is ra ion $oes no $e er(ine a%abili y "n$er he VAT law. Moreo'er, he #a! s ha'e alrea$y been $e er(ine$ by he lower !o"r s. @a'in& #aile$ o presen e'i$en!e o s"ppor i s !on en ions a&ains he in!o(e a% holi$ay pri'ile&e o# respon$en , pe i ioner is $ee(e$ o

ha'e !on!e$e$. 2 is a !ar$inal r"le ha Jiss"es an$ ar&"(en s no a$e8"a ely an$ serio"sly bro"&h below !anno be raise$ #or he #irs i(e on appeal.J This is a J(a er o# pro!e$"reJ an$ a J8"es ion o# #airness.J Hail"re o asser Jwi hin a reasonable i(e warran s a pres"(p ion ha he par y en i le$ o asser i ei her has aban$one$ or $e!line$ o asser i .J The G2/ re&"la ions a$$i ionally re8"irin& an appro'e$ prior appli!a ion #or e##e! i'e 4ero ra in& !anno pre'ail o'er he !lear VAT na "re o# respon$en Ps ransa! ions. The s!ope o# s"!h re&"la ions is no Jwi hin he s a " ory a" hori y . . . &ran e$ by he le&isla "re. Hirs , a (ere a$(inis ra i'e iss"an!e, li.e a G2/ re&"la ion, !anno a(en$ he law? he #or(er !anno p"rpor o $o any (ore han in erpre he la er. The !o"r s will no !o"n enan!e one ha o'erri$es he s a " e i see.s o apply an$ i(ple(en . A her han he &eneral re&is ra ion o# a a%payer he VAT s a "s o# whi!h is ap ly $e er(ine$, no pro'ision "n$er o"r VAT law re8"ires an a$$i ional appli!a ion o be (a$e #or s"!h a%payerPs ransa! ions o be !onsi$ere$ e##e! i'ely 4ero3ra e$. An e##e! i'ely 4ero3ra e$ ransa! ion $oes no an$ !anno be!o(e e%e(p si(ply be!a"se an appli!a ion here#or was no (a$e or, i# (a$e, was $enie$. To allow he a$$i ional re8"ire(en is o &i'e "n#e ere$ $is!re ion o hose o##i!ials or a&en s who, wi ho" #l"i$ !onsi$era ion, are ben on $enyin& a 'ali$ appli!a ion. Moreo'er, he S a e !an ne'er be es oppe$ by he o(issions, (is a.es or errors o# i s o##i!ials or a&en s. Se!on$, &ran ia ar&"(en i ha s"!h an appli!a ion is re8"ire$ by law, here is s ill he pres"(p ion o# re&"lari y in he per#or(an!e o# o##i!ial $" y. /espon$en Ps re&is ra ion !arries wi h i he pres"(p ion ha , in he absen!e o# !on ra$i! ory e'i$en!e, an appli!a ion #or e##e! i'e 4ero ra in& was also #ile$ an$ appro'al hereo# &i'en. Gesi$es, i is also pres"(e$ ha he law has been obeye$ by bo h he a$(inis ra i'e o##i!ials an$ he appli!an . Thir$, e'en ho"&h s"!h an appli!a ion was no (a$e, all he spe!ial laws we ha'e a!.le$ e%e(p respon$en no only #ro( in ernal re'en"e laws b" also #ro( he re&"la ions iss"e$ p"rs"an here o. Lenien!y in he i(ple(en a ion o# he VAT in e!o4ones is an i(pera i'e, pre!isely o sp"r e!ono(i! &row h in he !o"n ry an$ a ain &lobal !o(pe i i'eness as en'isione$ in hose laws. A VAT3re&is ere$ s a "s, as well as !o(plian!e wi h he in'oi!in& re8"ire(en s, is s"##i!ien #or he e##e! i'e 4ero ra in& o# he ransa! ions o# a a%payer. The na "re o# i s b"siness an$ ransa! ions !an easily be per"se$ #ro(, as alrea$y !learly in$i!a e$ in, i s VAT re&is ra ion papers an$ pho o!opie$ $o!"(en s a a!he$ here o. @en!e, i s ransa! ions !anno be e%e(p e$ by i s (ere #ail"re o apply #or heir e##e! i'e 4ero ra in&. A herwise, heir VAT e%e(p ion wo"l$ be $e er(ine$, no by heir na "re, b" by he a%payerPs ne&li&en!e K a res"l no a all !on e(pla e$. A$(inis ra i'e !on'enien!e !anno hwar le&isla i'e (an$a e. Ta% /e#"n$ or 5re$i in Ar$er @a'in& $e er(ine$ ha respon$en Ps p"r!hase ransa! ions are s"b)e! o a 4ero VAT ra e, he a% re#"n$ or !re$i is in or$er. As !orre! ly hel$ by bo h he 5A an$ he Ta% 5o"r , respon$en ha$ !hosen he #is!al in!en i'es in EA --+ o'er hose in /A 0=1+ an$ PD ++. 2 op e$ #or he in!o(e a% holi$ay re&i(e ins ea$ o# he ; per!en pre#eren ial a% re&i(e. The la er s!he(e is no a per#"n! ory a# er(a h o# a si(ple re&is ra ion "n$er he PEIA law, #or EA --+ also has pro'isions o !on en$ wi h. These wo re&i(es are in #a! in!o(pa ible an$ !anno be a'aile$ o#

si("l aneo"sly by he sa(e en i y. Ehile EA --+ (erely e%e(p s i #ro( in!o(e a%es, he PEIA law e%e(p s i #ro( all a%es. There#ore, respon$en !an be !onsi$ere$ e%e(p , no #ro( he VAT, b" only #ro( he pay(en o# in!o(e a% #or a !er ain n"(ber o# years, $epen$in& on i s re&is ra ion as a pioneer or a non3pioneer en erprise. Gesi$es, he re(i an!e o# he a#oresai$ ; per!en o# &ross in!o(e earne$ in lie" o# lo!al an$ na ional a%es i(posable "pon b"siness es ablish(en s wi hin he e!o4one !anno o" ri&h ly $e er(ine a VAT e%e(p ion. Gein& s"b)e! o VAT, pay(en s erroneo"sly !olle! e$ hereon (ay hen be re#"n$e$ or !re$i e$. E'en i# i is ar&"e$ ha respon$en is s"b)e! o he ; per!en pre#eren ial a% re&i(e in /A 0=1+, Se! ion -6 hereo# $oes no pre!l"$e he VAT. Ane !an, here#ore, !o"n erar&"e ha s"!h pro'ision (erely e%e(p s respon$en #ro( a%es i(pose$ on b"siness. To repea , he VAT is a a% i(pose$ on !ons"(p ion, no on b"siness. Al ho"&h respon$en as an en i y is e%e(p , he ransa! ions i en ers in o are no ne!essarily so. The VAT pay(en s (a$e in e%!ess o# he 4ero ra e ha is i(posable (ay !er ainly be re#"n$e$ or !re$i e$. 5o(plian!e wi h All /e8"isi es #or VAT /e#"n$ or 5re$i As #"r her en"n!ia e$ by he Ta% 5o"r , respon$en !o(plie$ wi h all he re8"isi es #or !lai(in& a VAT re#"n$ or !re$i . Hirs , respon$en is a VAT3re&is ere$ en i y. This #a! alone $is in&"ishes he presen !ase #ro( 5on e%, in whi!h his 5o"r hel$ ha he pe i ioner herein was re&is ere$ as a non3VAT a%payer. @en!e, #or bein& (erely VAT3e%e(p , he pe i ioner in ha !ase !anno !lai( any VAT re#"n$ or !re$i . Se!on$, he inp" a%es pai$ on he !api al &oo$s o# respon$en are $"ly s"ppor e$ by VAT in'oi!es an$ ha'e no been o##se a&ains any o" p" a%es. Al ho"&h en erprises re&is ere$ wi h he GA2 a# er De!e(ber 11, 1==6 wo"l$ no lon&er en)oy he a% !re$i in!en i'es on $o(es i! !api al e8"ip(en K as pro'i$e$ #or "n$er Ar i!le 1=($), Ti le 222, Goo. 2 o# EA --+ K s ar in& Ban"ary 1, 1==+, respon$en wo"l$ s ill ha'e he sa(e bene#i "n$er a &eneral an$ e%press e%e(p ion !on aine$ in bo h Ar i!le 00(1), Goo. V2 o# EA --+? an$ Se! ion 1-, para&raph (!) o# /A 0--0, e% en$e$ o he e!o4ones by /A 0=1+. There was a 'ery !lear in en on he par o# o"r le&isla ors, no only o e%e(p in'es ors in e!o4ones #ro( na ional an$ lo!al a%es, b" also o &ran he( a% !re$i s. This #a! was re'eale$ by he sponsorship spee!hes in 5on&ress $"rin& he se!on$ rea$in& o# @o"se Gill No. 16-=;, whi!h la er be!a(e /A 0=1+, as shown below: JM/. /E5TA. . . . So(e o# he in!en i'es ha his bill pro'i$es are e%e(p ion #ro( na ional an$ lo!al a%es? . . . a% !re$i #or lo!ally3 so"r!e$ inp" s . . .J %%% %%% %%%

JM/. DEL MA/. . . . To a$'an!e i s !a"se in en!o"ra&in& in'es (en s an$ !rea in& an en'iron(en !on$"!i'e #or in'es ors, he bill o##ers in!en i'es s"!h as he e%e(p ion #ro( lo!al an$ na ional a%es, . . . a% !re$i s #or lo!ally so"r!e$ inp" s . . .J An$ hir$, no 8"es ion as o ei her he #ilin& o# s"!h !lai(s wi hin he pres!rip i'e perio$ or he 'ali$i y o# he VAT re "rns has been raise$. E'en i# s"!h a 8"es ion were raise$, he a% e%e(p ion "n$er all he spe!ial laws !i e$ abo'e is broa$ eno"&h o !o'er e'en he en#or!e(en o# in ernal re'en"e laws, in!l"$in& pres!rip ion. S"((ary

To s"((ari4e, spe!ial laws e%pressly &ran pre#eren ial a% rea (en o b"siness es ablish(en s re&is ere$ an$ opera in& wi hin an e!o4one, whi!h by law is !onsi$ere$ as a separa e !"s o(s erri ory. As s"!h, respon$en is e%e(p #ro( all in ernal re'en"e a%es, in!l"$in& he VAT, an$ re&"la ions per ainin& here o. 2 has op e$ #or he in!o(e a% holi$ay re&i(e, ins ea$ o# he ; per!en pre#eren ial a% re&i(e. As a (a er o# law an$ pro!e$"re, i s re&is ra ion s a "s en i lin& i o s"!h a% holi$ay !an no lon&er be 8"es ione$. 2 s sales ransa! ions in en$e$ #or e%por (ay no be e%e(p , b" li.e i s p"r!hase ransa! ions, hey are 4ero3ra e$. No prior appli!a ion #or he e##e! i'e 4ero ra in& o# i s ransa! ions is ne!essary. Being -.T-registered and having satisfactorily complied with all the requisites for claiming a tax refund of or credit for the input -.T paid on capital goods purchased, respondent is entitled to such -.T refund or credit( ;G.!. %o. <=<>=). April ?>, ?22=.@ CALAABA S$""L C"%$"!, #%C. (for+erly BS S$""L C&!P&!A$#&% , petitioner, 4s. C&AA#SS#&%"! &/ #%$"!%AL !"V"%U", respondent. DE52S2AN PAN7AN2GAN, B p: A a% re#"n$ (ay be !lai(e$ e'en beyon$ he a%able year #ollowin& ha in whi!h he a% !re$i arises. @en!e, e%!ess in!o(e a%es pai$ in 1==; ha ha'e no been applie$ o or "se$ in 1==+ (ay s ill be he s"b)e! o# a a% re#"n$ in 1==0, pro'i$e$ ha he !lai( #or s"!h re#"n$ is #ile$ wi h he in ernal re'en"e !o((issioner wi hin wo years a# er pay(en o# sai$ a%es. As a !a'ea , he 5o"r s resses ha he re!o&ni ion o# he en i le(en o a a% re#"n$ $oes no ne!essarily (ean he a" o(a i! pay(en o# he s"( !lai(e$ in he #inal a$)"s (en re "rn o# he a%payer. The a(o"n o# he !lai( ("s s ill be pro'en in he nor(al !o"rse. The 5ase Ge#ore "s is a Pe i ion #or /e'iew 1 "n$er /"le 6; o# he /"les o# 5o"r , assailin& he Ban"ary 1*, -**- De!ision - o# he 5o"r o# Appeals (5A) in 5A37/ SP No. ;,,1,. The assaile$ De!ision $ispose$ as #ollows: J2N V2EE AH ALL T@E HA/E7A2N7, he ins an pe i ion is D2SM2SSED an$ he assaile$ De!ision an$ /esol" ion are AHH2/MED. 5os s a&ains Pe i ioner.J The Ha! s O"o in& he 5o"r o# Ta% Appeals (5TA), he 5A narra e$ he an e!e$en s as #ollows: JPe i ioner is a $o(es i! !orpora ion en&a&e$ in he (an"#a! "re o# s eel blan.s #or "se by (an"#a! "rers o# a" o(o i'e, ele! ri!al, ele! roni!s in in$"s rial an$ ho"sehol$ applian!es. JPe i ioner #ile$ an A(en$e$ 5orpora e Ann"al 2n!o(e Ta% /e "rn on B"ne 6, 1==+ $e!larin& a ne a%able in!o(e o# P=,6+1,;=0.**, a% !re$i s o# P+,601,-6+.** an$ a% $"e in he a(o"n o# P1,111,;;=.**. JPe i ioner also repor e$ 8"ar erly pay(en s #or he se!on$ an$ hir$ 8"ar ers o# 1==; in he a(o"n s o# P-,1-,,060.-+ an$ P1,*,-,1*,.**, respe! i'ely. J2 is he proposi ion o# he LpMe i ioner ha #or he year 1==;, se'eral o# i s !lien s wi hhel$ a%es #ro( heir in!o(e pay(en s o LpMe i ioner an$ re(i e$ he sa(e o he G"rea" o# 2n ernal /e'en"e (G2/) in he

s"( o# P1,1;=,+,0.**. Pe i ioner #"r her alle&e$ ha $"e o i s in!o(e<loss posi ions #or he hree 8"ar ers o# 1==+, i was "nable o "se he e%!ess a% pai$ #or an$ in i s behal# by he wi hhol$in& a&en s. JTh"s, an a$(inis ra i'e !lai( was #ile$ by he LpMe i ioner on April 1*, 1==0 #or he re#"n$ o# P1,1;=,+,0.** represen in& e%!ess or "n"se$ !re$i able wi hhol$in& a%es #or he year 1==;. The ins an pe i ion was s"bse8"en ly #ile$ on April 1,, 1==0. J/espon$en , in his Answer, a'erre$, a(on& o hers, ha : P1) Pe i ioner has no !a"se o# a! ion? P-) Pe i ioner #aile$ o !o(ply wi h he pro!e$"ral re8"ire(en s se o" in Se! ion ; o# /e'en"e /e&"la ions No. L(//)M 1-3=6? P1) 2 is in!"(ben "pon LpMe i ioner o pro'e by !o(pe en an$ s"##i!ien e'i$en!e ha he a% re#"n$ or a% !re$i bein& so"&h is allowe$ "n$er he Na ional 2n ernal /e'en"e 5o$e an$ i s i(ple(en in& r"les an$ re&"la ions? an$ P6) 5lai(s #or a% re#"n$ or a% !re$i are !ons r"e$ s ri! ly a&ains he a%payer as hey par a.e he na "re o# a% e%e(p ion. JTo b" ress i s !lai(, LpMe i ioner presen e$ $o!"(en ary an$ es i(onial e'i$en!e. /espon$en , on he o her han$, presen e$ he LrMe'en"e LoM##i!er who !on$"! e$ he e%a(ina ion o# LpMe i ionerPs !lai( an$ #o"n$ pe i ioner liable #or $e#i!ien!y 'al"e a$$e$ a%. Pe i ioner also presen e$ reb" al e'i$en!e. JThe sole iss"e s"b(i e$ #or LoM"r $e er(ina ion is whe her or no LpMe i ioner is en i le$ o he re#"n$ o# P1,1;=,+,0.** represen in& e%!ess or o'erpai$ in!o(e a% #or he a%able year 1==;.J /"lin& o# he 5o"r o# Appeals 2n $enyin& pe i ionerPs re#"n$, he 5A reasone$ o" ha no e'i$en!e o her han ha presen e$ be#ore he 5TA was a$$"!e$ o pro'e ha e%!ess a% pay(en s ha$ been (a$e in 1==;. Hro( he in!ep ion o# he !ase o he #or(al o##er o# i s e'i$en!e, pe i ioner $i$ no presen i s 1==+ in!o(e a% re "rn o $is!lose i s o al in!o(e a% liabili y, h"s (a.in& i $i##i!"l o $e er(ine whe her s"!h e%!ess a% pay(en s were " ili4e$ in 1==+. @en!e, his Pe i ion. The 2ss"e Pe i ioner raises his sole iss"e #or o"r !onsi$era ion: JEhe her he 5o"r o# Appeals &ra'ely erre$ when, while p"rpor e$ly re8"irin& pe i ioner o s"b(i i s 1==+ ann"al in!o(e a% re "rn o s"ppor i s !lai( #or re#"n$, none heless i&nore$ he e%is en!e o# he a% re "rn e% an on he re!or$ he a" hen i!i y o# whi!h has no been $enie$ or i s a$(issibili y oppose$ by he 5o((issioner o# 2n ernal /e'en"e.J + The 5o"r Ps /"lin& The Pe i ion is par ly (eri orio"s. Sole 2ss"e: En i le(en o Ta% /e#"n$ Se! ion += o# he Na ional 2n ernal /e'en"e 5o$e (N2/5) 0 pro'i$es: JSe!. +=. Hinal a$)"s (en re "rn. K E'ery !orpora ion liable o a% "n$er Se! ion -6 shall #ile a #inal a$)"s (en re "rn !o'erin& he o al a%able in!o(e #or he pre!e$in& !alen$ar or #is!al year. 2# he s"( o# he 8"ar erly a% pay(en s (a$e $"rin& he sai$ a%able year is no e8"al o he o al a% $"e on he en ire a%able ne in!o(e o# ha year he !orpora ion shall ei her:

P(a) P(b)

Pay he e%!ess a% s ill $"e? or Ge re#"n$e$ he e%!ess a(o"n pai$, as he !ase (ay be.

J2n !ase he !orpora ion is en i le$ o a re#"n$ o# he e%!ess es i(a e$ 8"ar erly in!o(e a%es pai$, he re#"n$able a(o"n shown on i s #inal a$)"s (en re "rn (ay be !re$i e$ a&ains he es i(a e$ 8"ar erly in!o(e a% liabili ies #or he a%able 8"ar ers o# he s"!!ee$in& a%able year.J Ta% /e#"n$ Allowe$ by N2/5 A per"sal o# his pro'ision shows ha a a%able !orpora ion is en i le$ o a a% re#"n$ when he s"( o# he 8"ar erly in!o(e a%es i pai$ $"rin& a a%able year e%!ee$s i s o al in!o(e a% $"e also #or ha year. 5onse8"en ly, he re#"n$able a(o"n ha is shown on i s #inal a$)"s (en re "rn (ay be !re$i e$, a i s op ion, a&ains i s 8"ar erly in!o(e a% liabili ies #or he ne% a%able year. Pe i ioner is a !orpora ion liable o pay in!o(e a%es "n$er Se! ion -6 o# he N2/5. @en!e, i is a a%able !orpora ion. 2n 1==;, i repor e$ ha i ha$ e%!ess in!o(e a%es ha ha$ been pai$ #or an$ on i s behal# by i s wi hhol$in& a&en s? an$ ha , applyin& he abo'e38"o e$ Se! ion +=, his e%!ess sho"l$ be !re$i e$ a&ains i s in!o(e a% liabili ies #or 1==+. @owe'er, i !lai(e$ in 1==0 ha i sho"l$ &e a re#"n$, be!a"se i was s ill "nable o "se he e%!ess in!o(e a%es pai$ in 1==; a&ains i s a% liabili ies in 1==+. 2s his possibleR S a in& he ar&"(en o herwise, (ay e%!ess in!o(e a%es pai$ in 1==; ha !o"l$ no be applie$ o a%es $"e in 1==+ be re#"n$e$ in 1==0R The answer is in he a##ir(a i'e. @ere are he reasons: 5lai( o# Ta% /e#"n$ Geyon$ he S"!!ee$in& Ta%able Qear Hirs , a a% re#"n$ (ay be !lai(e$ e'en beyon$ he a%able year #ollowin& ha in whi!h he a% !re$i arises. No pro'ision in o"r a% law li(i s he en i le(en o s"!h a re#"n$, o her han he re8"ire(en ha he #ilin& o# he a$(inis ra i'e !lai( #or i be (a$e by he a%payer wi hin a wo3year pres!rip i'e perio$. Se! ion -*6(1) o# he N2/5 s a es ha no re#"n$ o# a%es Jshall be allowe$ "nless he a%payer #iles in wri in& wi h he 5o((issioner L heM !lai( #or . . . re#"n$ wi hin wo years a# er he pay(en o# he a%.J Applyin& he a#ore8"o e$ le&al pro'isions, i# he e%!ess in!o(e a%es pai$ in a &i'en a%able year ha'e no been en irely "se$ by a a%able !orpora ion a&ains i s 8"ar erly in!o(e a% liabili ies #or he ne% a%able year, he "n"se$ a(o"n o# he e%!ess (ay s ill be re#"n$e$, pro'i$e$ ha he !lai( #or s"!h a re#"n$ is (a$e wi hin wo years a# er pay(en o# he a%. Pe i ioner #ile$ i s !lai( in 1==0 K well wi hin he wo3year pres!rip i'e perio$. Th"s, i s "n"se$ a% !re$i s in 1==; (ay s ill be re#"n$e$. E'en he phrase Js"!!ee$in& a%able yearJ in he se!on$ para&raph o# he sai$ Se! ion += is a li(i a ion ha applies only o a a% !re$i , no a a% re#"n$. Pe i ioner herein $oes no !lai( a a% !re$i , b" a a% re#"n$. There#ore, he s a " ory li(i a ion $oes no apply. 2n!o(e Pay(en s Merely De!lare$ Par o# 7ross 2n!o(e Se!on$, o be able o !lai( a a% re#"n$, a a%payer only nee$s o $e!lare he in!o(e pay(en s i re!ei'e$ as par o# i s &ross in!o(e an$ o es ablish he #a! o# wi hhol$in&. Se! ion ; o# // 1-3=6 , s a es:

%%%

%%%

%%%

J(a) 5lai(s #or Ta% 5re$i or /e#"n$ o# in!o(e a% $e$"! e$ an$ wi hhel$ on in!o(e pay(en s shall be &i'en $"e !o"rse only when i is shown on he re "rn ha he in!o(e pay(en re!ei'e$ has been $e!lare$ as par o# he &ross in!o(e an$ he #a! o# wi hhol$in& is es ablishe$ by a !opy o# he Ei hhol$in& Ta% S a e(en $"ly iss"e$ by he payor o he payee showin& he a(o"n pai$ an$ he a(o"n o# a% wi hhel$ here#ro(. J(b) E%!ess 5re$i s. K A a%payerPs e%!ess e%pan$e$ wi hhol$in& a% !re$i s #or he a%able 8"ar er< a%able year shall a" o(a i!ally be allowe$ as a !re$i #or p"rposes o# #ilin& his in!o(e a% re "rn #or he a%able 8"ar er< a%able year i((e$ia ely s"!!ee$in& he a%able 8"ar er< a%able year in whi!h he a#oresai$ e%!ess !re$i arose, pro'i$e$, howe'er, he s"b(i s wi h his in!o(e a% re "rn a !opy o# his in!o(e a% re "rn #or he a#oresai$ pre'io"s a%able perio$ showin& he a(o"n o# his a#ore(en ione$ e%!ess wi hhol$in& a% !re$i s. J2# he a%payer, in lie" o# he a#oresai$ a" o(a i! appli!a ion o# his e%!ess !re$i , wan s a !ash re#"n$ or a a% !re$i !er i#i!a e #or "se in pay(en o# his o her na ional in ernal a% liabili ies, he shall (a.e a wri en re8"es here#or. Upon #ilin& o# his re8"es , he a%payerPs in!o(e a% re "rn showin& he e%!ess e%pan$e$ wi hhol$in& a% !re$i s shall be e%a(ine$. The e%!ess e%pan$e$ wi hhol$in& a%, i# any, shall be $e er(ine$ an$ re#"n$e$<!re$i e$ o he a%payer3appli!an . The re#"n$<!re$i shall be (a$e wi hin a perio$ o# si% y (+*) $ays #ro( $a e o# he a%payerPs re8"es pro'i$e$, howe'er, ha he a%payer3appli!an s"b(i e$ #or a"$i all his per inen a!!o"n in& re!or$s an$ ha he a#oresai$ re!or$s es ablishe$ he 'era!i y o# his !lai( #or a re#"n$<!re$i o# his e%!ess e%pan$e$ wi hhol$in& a% !re$i s.J Tha pe i ioner #ile$ i s a(en$e$ 1==; in!o(e a% re "rn in 1==+ is "n!on es e$. 2n a$$i ion, he res"l in& in'es i&a ion by he G2/ on A"&"s 1;, 1==0, re'eals ha he in!o(e a!!o"n s were J!orre! ly $e!lare$ base$ on he e%is in& s"ppor in& $o!"(en s.J = There#ore, here is no nee$ #or pe i ioner o show a&ain he in!o(e pay(en s i re!ei'e$ in 1==; as par o# i s &ross in!o(e in 1==+. Tha pe i ioner #ile$ i s 1==+ #inal a$)"s (en re "rn in 1==0 is he !r"% o# he !on ro'ersy. @owe'er, as will be $e(ons ra e$ shor ly, he la!. o# s"!h a re "rn will no $e#ea i s en i le(en o a re#"n$. Ta% /e#"n$ Pro'isions: O"es ion o# Law Thir$, i is a !ar$inal r"le ha Jonly le&al iss"es (ay be raise$J 1* in pe i ions #or re'iew "n$er /"le 6;. The proper in erpre a ion o# he pro'isions on a% re#"n$ is a 8"es ion o# law ha J$oes no !all #or an e%a(ina ion o# he proba i'e 'al"e o# he e'i$en!e presen e$ by he par ies3li i&an s.J @a'in& been "nable o "se he e%!ess in!o(e a%es pai$ in 1==; a&ains i s o her a% liabili ies in 1==+, pe i ioner !learly $eser'es a re#"n$. 2 !anno by any sweepin& $enial be $epri'e$ o# wha ri&h #"lly belon&s o i . The r" h or #alsi y o# he !on en s o# or en ries in he 1==+ #inal a$)"s (en re "rn, whi!h has no been #or(ally o##ere$ in e'i$en!e an$ e%a(ine$ by respon$en , in'ol'es, howe'er, a 8"es ion o# #a! . This 5o"r is no a rier o# #a! s. Nei her is i a !olle! ion a&en!y #or he &o'ern(en . Al ho"&h we r"le ha pe i ioner is en i le$ o a a% re#"n$, he a(o"n o# ha re#"n$ is a (a er #or he 5TA o $e er(ine )"$i!io"sly base$ on he re!or$s ha in!l"$e i s own !opy o# pe i ionerPs 1==+ #inal a$)"s (en re "rn. Liberal 5ons r"! ion o# /"les

Ho"r h, or$inary r"les o# pro!e$"re #rown "pon he s"b(ission o# #inal a$)"s (en re "rns a# er rial has been !on$"! e$. @owe'er, bo h he 5TA law an$ )"rispr"$en!e (an$a e ha he pro!ee$in&s be#ore he a% !o"r Jshall no be &o'erne$ s ri! ly by e!hni!al r"les o# e'i$en!e.J As a r"le, i s #in$in&s o# #a! (as well as ha o# he 5A) are #inal, bin$in& an$ !on!l"si'e on he par ies an$ "pon his 5o"r ? howe'er, as an e%!ep ion, s"!h #in$in&s (ay be re'iewe$ or $is "rbe$ on appeal when hey are no s"ppor e$ by e'i$en!e. A"r /"les o# 5o"r apply Jby analo&y or in a s"pple ory !hara! er an$ whene'er pra! i!able an$ !on'enien J an$ Jshall be liberally !ons r"e$ in or$er o pro(o e heir ob)e! i'e o# se!"rin& a )"s , spee$y an$ ine%pensi'e $isposi ion o# e'ery a! ion an$ pro!ee$in&.J A# er all, JL Mhe para(o"n !onsi$era ion re(ains he as!er ain(en o# r" h.J 2n he presen !ase, he 1==+ #inal a$)"s (en re "rn was a a!he$ as Anne% A o he /eply o 5o((en #ile$ by pe i ioner wi h he 5A. The re "rn shows a ne&a i'e a(o"n #or i s a%able in!o(e ha year. There#ore, i !o"l$ no ha'e applie$ or "se$ he e%!ess a% !re$i s o# 1==; a&ains i s a% liabili ies in 1==+. B"$i!ial No i!e o# A a!he$ /e "rn Hi# h, he 5A an$ 5TA !o"l$ ha'e a.en )"$i!ial no i!e o# he 1==+ #inal a$)"s (en re "rn whi!h ha$ been a a!he$ in 5TA 5ase No. ;0==. JB"$i!ial no i!e a.es he pla!e o# proo# an$ is o# e8"al #or!e.J As a &eneral r"le, !o"r s are no a" hori4e$ o a.e )"$i!ial no i!e o# he !on en s o# re!or$s in o her !ases rie$ or pen$in& in he sa(e !o"r , e'en when hose !ases were hear$ or are a! "ally pen$in& be#ore he sa(e )"$&e. @owe'er, his r"le a$(i s o# e%!ep ions, as when re#eren!e o s"!h re!or$s is s"##i!ien ly (a$e wi ho" ob)e! ion #ro( he opposin& par ies: PJ. . . L2Mn he absen!e o# ob)e! ion, an$ as a (a er o# !on'enien!e o all par ies, a !o"r (ay properly rea all or any par o# he ori&inal re!or$ o# a !ase #ile$ in i s ar!hi'es as rea$ in o he re!or$ o# a !ase pen$in& be#ore i , when, wi h he .nowle$&e o# he opposin& par y, re#eren!e is (a$e o i #or ha p"rpose, by na(e an$ n"(ber or in so(e o her (anner by whi!h i is s"##i!ien ly $esi&na e$? or when he ori&inal re!or$ o# he #or(er !ase or any par o# i , is a! "ally wi h$rawn #ro( he ar!hi'es by he !o"r Ps $ire! ion, a he re8"es or wi h he !onsen o# he par ies, an$ a$(i e$ as a par o# he re!or$ o# he !ase hen pen$in&.PJ Prior o ren$erin& i s De!ision on Ban"ary 1-, -***, he 5TA was alrea$y well3aware o# he e%is en!e o# ano her !ase pen$in& be#ore i , in'ol'in& he sa(e s"b)e! (a er, par ies an$ !a"ses o# a! ion. Ge!a"se o# he !lose !onne! ion o# ha !ase wi h he (a er in !on ro'ersy, he 5TA !o"l$ ha'e easily a.en )"$i!ial no i!e o# he !on es e$ $o!"(en a a!he$ in ha o her !ase. H"r her(ore, here was no ob)e! ion raise$ o he in!l"sion o# he sai$ 1==+ #inal a$)"s (en re "rn in pe i ionerPs /eply o 5o((en be#ore he 5A. Despi e !lear re#eren!e o ha re "rn, a re#eren!e (a$e wi h he .nowle$&e o# respon$en , he la er s ill #aile$ o !on ro'er pe i ionerPs !lai(. The appella e !o"r sho"l$ ha'e !as asi$e s ri! e!hni!ali ies an$ $e!i$e$ he !ase on he basis o# s"!h "n!on es e$ re "rn. Verily, i ha$ he a" hori y o J a.e )"$i!ial no i!e o# i s re!or$s an$ o# he #a! s L ha M he re!or$ es ablishes.J Se! ion - o# /"le 1-= pro'i$es ha !o"r s J(ay a.e )"$i!ial no i!e o# (a ers . . . o"&h o be .nown o )"$&es be!a"se o# heir )"$i!ial #"n! ions.J 2# he lower !o"r s really belie'e$ ha pe i ioner was no en i le$ o a a% re#"n$, hey !o"l$ ha'e easily re8"ire$ respon$en o as!er ain i s 'era!i y an$ a!!"ra!y an$ o pro'e ha pe i ioner $i$ no s"##er any ne loss in 1==+.

5on rary o he !on en ion o# pe i ioner, GP23Ha(ily Sa'in&s Gan. '. 5A (on whi!h i res s i s en ire ar&"(en s) is no on all #o"rs wi h he #a! s o# his !ase. Ehile he pe i ioner in ha !ase also #ile$ a wri en !lai( #or a a% re#"n$, an$ li.ewise #aile$ o presen i s 1==* !orpora e ann"al in!o(e a% re "rn, i none heless o##ere$ in e'i$en!e i s op3ran.in& o##i!ialPs es i(ony an$ !er i#i!a ion per ainin& o only wo a%able years (1=,= an$ 1==*). The sai$ re "rn was a a!he$ only o i s Mo ion #or /e!onsi$era ion be#ore he 5TA. Pe i ioner in his !ase o##ere$ $o!"(en ary an$ es i(onial e'i$en!e ha e% en$e$ beyon$ wo a%able years, be!a"se he e%!ess !re$i s in he #irs (1==;) a%able year ha$ no been "se$ "p $"rin& he se!on$ (1==+) a%able year, an$ be!a"se he !lai( #or he re#"n$ o# hose !re$i s ha$ been #ile$ $"rin& he hir$ (1==0) a%able year. 2 s #inal a$)"s (en re "rn was ins ea$ a a!he$ o i s /eply o 5o((en #ile$ be#ore he 5A. Moreo'er, in GP23Ha(ily Sa'in&s Gan., pe i ioner was able o show J he "n$isp" e$ #a! : ha pe i ioner ha$ s"##ere$ a ne loss in 1==* . . .J 2n he ins an !ase, here is no s"!h J"n$isp" e$ #a! J as ye . The (ere a$(ission in o he re!or$s o# pe i ionerPs 1==+ #inal a$)"s (en re "rn is no a s"##i!ien proo# o# he r" h o# he !on en s o# or en ries in ha re "rn. 2n a$$i ion, he G2/ in GP23Ha(ily Sa'in&s Gan. $i$ no !on ro'er he 'era!i y o# he re "rn or #ile an opposi ion o he Mo ion an$ he re "rn. Despi e he #a! ha he re "rn was i&nore$ by bo h he 5A an$ he 5TA, he la er e'en $e!lare$ in ano her !ase (5TA 5ase No. 6,=0) ha pe i ioner ha$ s"##ere$ a ne loss #or a%able year 1==*. Ehen a a!he$ o he Pe i ion #or /e'iew #ile$ be#ore his 5o"r , ha De!ision was no a all !lai(e$ by he G2/ o be #ra"$"len or none%is en . The G"rea" (erely !on en$e$ ha his 5o"r sho"l$ no a.e )"$i!ial no i!e o# he sai$ De!ision. 2n his !ase, howe'er, he G2/ has no been &i'en he !han!e o !hallen&e he 'era!i y o# pe i ionerPs #inal a$)"s (en re "rn. Nei her has he 5TA $e!i$e$ any o her !ase !a e&ori!ally $e!larin& a ne loss #or pe i ioner in a%able year 1==+. A# er his re "rn was a a!he$ o pe i ionerPs /eply o 5o((en be#ore he 5A, he appella e !o"r sho"l$ ha'e re8"ire$ he #ilin& o# o her responsi'e plea$in&s #ro( respon$en , as was ne!essary an$ proper #or i o r"le "pon he re "rn. A$(issibili y Vers"s Eei&h 2n$ee$, JLaM$(issibili y . . . is one hin&, wei&h is ano her.J JTo a$(i e'i$en!e an$ no o belie'e i are no in!o(pa ible wi h ea!h o her . . .J Mere alle&a ions by pe i ioner o# he #i&"res in i s 1==+ #inal a$)"s (en re "rn are no a s"##i!ien proo# o# he a(o"n o# i s re#"n$ en i le(en . They $o no e'en !ons i " e e'i$en!e a$'erse o respon$en , a&ains who( hey are bein& presen e$. Ehile i see(s ha he JLnon3pro$"! ionM o# a $o!"(en whi!h !o"r s al(os in'ariably e%pe! will be pro$"!e$ P"na'oi$ably hrows a s"spi!ion o'er he !a"se,PJ his is no really he !on!l"sion o be arri'e$ a here. Ehen pe i ioner p"rpor e$ly #ile$ i s a$(inis ra i'e !lai( #or a a% re#"n$ on April 1*, 1==0, he $ea$line #or #ilin& he 1==+ #inal a$)"s (en re "rn was no ye o'er. @en!e, i !o"l$ no ha'e a a!he$ his re "rn o i s !lai(. Hor reasons "n.nown e'en o his 5o"r , pe i ioner #aile$ o o##er s"!h re "rn as e'i$en!e $"rin& he rial phase o# his !ase. Hor i s ne&li&en!e, pe i ioner J!anno be allowe$ o see. re#"&e in a liberal appli!a ion o# he LrM"lesJ by &i'in& i a blan.e appro'al o# he o al re#"n$ i !lai(s. JEhile in !er ain ins an!es, we allow a rela%a ion in he appli!a ion o# he r"les, we ne'er in en$ o #or&e a weapon #or errin& li i&an s o

'iola e he r"les wi h i(p"ni y. The liberal in erpre a ion an$ appli!a ion o# r"les apply only in proper !ases o# $e(ons rable (eri an$ "n$er )"s i#iable !a"ses an$ !ir!"(s an!es.J 2 wo"l$ no be proper o allow pe i ioner o si(ply pre'ail an$ !o(pel a re#"n$ in he a(o"n i !lai(s, wi ho" a##or$in& he &o'ern(en a reasonable oppor "ni y o !on es he #or(erPs alle&a ions. Ne&li&en!e !onsis in& o# he "ne%plaine$ #ail"re o o##er he e%hibi sho"l$ no be rewar$e$ wi h "n$eser'e$ lenien!y. Pe i ioner s ill bears he b"r$en o# pro'in& he a(o"n o# i s !lai( #or a% re#"n$. A# er all, JL Ma% re#"n$s are in he na "re o# a% e%e(p ionsJ an$ are o be !ons r"e$ s ri! issi(i )"ris a&ains he a%payer. Hinally, e'en in he absen!e o# a #inal a$)"s (en re "rn or any !lai( #or a a% re#"n$, respon$en is a" hori4e$ by law o e%a(ine any boo., paper, re!or$ or o her $a a ha (ay be rele'an or (a erial o s"!h in8"iry. Hail"re o (a.e an assess(en o# pe i ionerPs proper a% liabili y or o !on es he re "rn !o"l$ be errors or o(issions o# a$(inis ra i'e o##i!ers ha sho"l$ ne'er be allowe$ o )eopar$i4e he &o'ern(en Ps #inan!ial posi ion. Verily, J he o##i!ers o# he G"rea" o# 2n ernal /e'en"e sho"l$ re!ei'e he s"ppor o# he !o"r s when hese o##i!ers a e(p o per#or( in a !ons!ien io"s an$ law#"l (anner he $" ies i(pose$ "pon he( by law.J Anly a# er i is shown ha Ji# so(e hin& is re!ei'e$ when here is no ri&h o $e(an$ i , an$ i was $"ly $eli'ere$ hro"&h (is a.e, he obli&a ion o re "rn i arises.J 2n brie#, we hol$ ha pe i ioner is en i le$ o a re#"n$? howe'er, he a(o"n ("s s ill be pro'e$ in proper pro!ee$in&s be#ore he 5TA.

&t*er Per0entage $a.es

PE/5ENTA7E TAX $e#ine$ A a% i(pose$ on a #i%e$ ra io be ween he &ross sales or re!eip s an$ he b"r$en i(pose$ "pon he a%payer. NATE: There are in a$$i ion o in!o(e an$ o her a%es pai$, "nless spe!i#i!ally e%!ep e$. Un$er he presen pro'isions o# he N2/5, al(os all a%es are per!en a&e a%es. @owe'er, Ti le V (o her per!en a&e a%es) o# he N2/5 as a(en$e$ by /.A. No. ,6-6 spe!i#i!ally pro'i$es o# $i##eren .in$s o# per!en a&e a%es. AT@E/ PE/5ENTA7E TAX UNDE/ T2TLE V AH T@E N2/5 AS AMENDED GQ /.A NA. ,6-6 a. b. !. $. e. #. &. h. i. ). .. l. a% on persons e%e(p #ro( he 'al"e3a$$e$ a% per!en a&e a% on $o(es i! !arriers an$ .eepers o# &ara&es per!en a&e a% on in erna ional !arriers a% on #ran!hises a% on o'erseas $ispa !h, (essa&e or !on'ersa ion ori&ina in& #ro( he Philippines a% on ban.s an$ non3ban. #inan!ial ins i " ions a% on #inan!e !o(panies a% on ins"ran!e pre(i"(s a% on a&en s o# #orei&n ins"ran!e !o(panies a("se(en a%es a% on winnin&s a% on sale, bar er, or e%!han&e o# shares o# s o!. lis e$ an$ ra$e$ hro"&h he lo!al s o!. e%!han&e or hro"&h ini ial p"bli! o##erin&.

TAX AN PE/SANS EXEMPT H/AM VAT a. b. !. $. e. any persons whose sales or re!eip s who are e%e(p #ro( he pay(en o# 'al"e a$$e$ a% who is no a VAT re&is ere$ person shall pay a a% e8"i'alen o 19 o# his &ross 8"ar erly sales or re!eip s pro'i$e$, ha !oopera i'es shall be e%e(p #ro( he sai$ 19 &ross re!eip s a%

PE/5ENTA7E TAX AN DAMEST25 5A//2E/S AND NEEPE/S AH 7A/A7ES. a. b. !. $. e. #. !ars #or ren or hire $ri'en by he lessee ranspor a ion !on ra! ors, in!l"$in& persons who ranspor passen&ers #or hire o her $o(es i! !arriers by lan$, air, wa er, #or he ranspor o# passen&ers e%!ep owners o# ban!as an$ owners o# ani(al3$rawn wo wheele$ 'ehi!les .eepers o# &ara&es shall pay a a% e8"i'alen o 19 o# heir 8"ar erly &ross re!eip s

@ATEL NAT A 5AMMAN 5A//2E/ A ho el is no en&a&e$ in b"siness as a !o((on !arrier )"s be!a"se i ranspor s i s ho el &"es s. /EASAN: 2 is en&a&e$ in he ho el b"siness an$ no in he b"siness or ranspor in& passen&ers. An he o!!asion when i e% en$s ranspor a ion ser'i!es li.e pro'i$in& li(o"sine ser'i!e an$ he li.e, i $oes so only #or i s ho el &"es an$ no o he p"bli! in &eneral. PE/5ENTA7E TAX AN 2NTE/NAT2ANAL 5A//2E/S. a. b. 2n erna ional air !arriers $oin& b"siness n he Philippines shall pay a a% o# 19 o# heir 8"ar erly &ross re!eip s. 2n erna ional shippin& !arriers $oin& b"siness in he Philippines shall pay a a% o# 19 o# heir 8"ar erly &ross re!eip s.

TAX AN H/AN5@2SES a. b. !. any pro'ision o# &eneral or spe!ial law o he !on rary no wi hs an$in& here shall be le'ie$, assesse$ an$ !olle! e$ in respe! o all #ran!hises on ra$io an$<or ele'ision broa$!as in& !o(panies 1. whose ann"al &ross re!eip s o# he pre!e$in& year $o no e%!ee$ P1* (illion. -. A a% o# 19 on he &ross re!eip s $eri'e$ #ro( he b"siness !o'ere$ by he law &ran in& he #ran!hise. on ele! ri!, &as, an$ wa er " ili ies 1. a a% o# -9 on he &ross re!eip s $eri'e$ #ro( he b"siness !o'ere$ by he law &ran in& he #ran!hise.

$.

APT2AN HA/ /AD2A<TV H/AN5@2SE a. b. ra$io an$ ele'ision broa$!as in& !o(panies shall ha'e an op ion o be re&is ere$ as 'al"e3 a$$e$ a% payer an$ pay he a% hereon pro'i$e$, ha on!e he op ion is e%er!ise$, i shall no be re'o.e$

TAX AN AVE/SEAS D2SPAT5@, MESSA7E A/ 5ANVE/SAT2AN A/272NAT2N7 H/AM T@E P@2L2PP2NES. a. b. !. $. here shall be !olle! e$ "pon e'ery o'erseas $ispa !h, (essa&e or !on'ersa ion rans(i e$ #ro( he Philippines by elephone, ele&raph, elewri er e%!han&e, wireless an$ o her !o(("ni!a ion ser'i!e a a% o# 1*9 on he a(o"n pai$ #or s"!h ser'i!es

PE/SAN L2AGLE HA/ T@E AGAVE 5AMMUN25AT2AN TAX. a. b. !. he person payin& he ser'i!e ren$ere$ shall be pai$ o he person ren$erin& he ser'i!es who is re8"ire$ o !olle! an$ pay he a% wi hin wen y (-*) $ays a# er he en$ o# ea!h 8"ar er

ENT2T2ES E@ASES 5AMMUN25AT2ANS A/E EXEMPTED H/AM T@E TAX a. b. !. 7o'ern(en . A(o"n s pai$ #or (essa&es rans(i e$ by he 7o'ern(en o# he /ep"bli! o# he Philippines or any o# i s poli i!al s"b$i'isions or ins r"(en ali ies Diplo(a i! Ser'i!es. A(o"n s pai$ #or (essa&es rans(i e$ by an e(bassy an$ !ons"lar o##i!es o# #orei&n &o'ern(en . 2n erna ional or&ani4a ions. A(o"n s pai$ #or (essa&es rans(i e$ by a p"bli! in erna ional or&ani4a ion or any o# i s a&en!ies base$ in he Philippines en)oyin& pri'ile&es, e%e(p ion an$

$.

i(("ni ies whi!h he &o'ern(en o# he Philippines is !o((i e$ o re!o&ni4e$ p"rs"an o an in erna ional a&ree(en . New Ser'i!es. A(o"n s pai$ #or (essa&es #ro( any newspaper, press asso!ia ion, ra$io or ele'ision newspaper, broa$!as in& a&en!y, or news i!.er ser'i!e or op a bona #i$e !orrespon$en , whi!h (essa&es $eal e%!l"si'ely wi h he !olle! ion o# news i e(s #or, or he $isse(ina ion o# news i e( ro"&h p"bli! press, ra$io, or ele'ision broa$!as in& or a news i!.er ser'i!e #"rnishin& a &eneral news ser'i!e si(ilar o ha o# he p"bli! press.

TAX AN GANNS AND NAN3GANNS H2NAN52AL 2NTE/MED2A/2ES There shall be !olle! e$ a a% o he &ross re!eip s $eri'e$ #ro( so"r!es wi hin he Philippines by all ban.s an$ non3ban. #inan!ial in er(e$iaries li.e: a. 2n eres , !o((issions an$ $is!o"n s #ro( len$in& a! i'i ies as well as in!o(e #ro( he #inan!ial leasin&, on he basis o# he re(ainin& (a "ri ies o# ins r"(en s #ro( whi!h s"!h re!eip s are $eri'e$. b. /oyal ies, ren als o# proper y, real or personal, pro#i s #ro( e%!han&e an$ all o her i e(s rea e$ as &ross in!o(e 5AMM2SS2NE/ AH 2NTE/NAL /EVENUE MAQ 2MASE T@E AGAVE TAX AN S2M2LA/LQ S2TUATED PE/SANS No hin& in he N2/5 shall pre!l"$e he 5o((issioner o# 2n ernal /e'en"e #ro( i(posin& he abo'e a% on persons per#or(in& he sa(e ban.in& a! i'i ies. TAX AN H2NA5E 5AMPAN2ES a. b. !. $. e. here shall be !olle! e$ a a% o# ;9 on he &ross re!eip s $eri'e$ by all #inan!e !o(panies as well as by o her #inan!ial in er(e$iaries no per#or(in& 8"asi3ban.in& #"n! ions $oin& b"siness in he Philippines #or( in eres s, $is!o"n s an$ all o her i e(s rea e$ as &ross in!o(e "n$er he N2/5 Pro'i$e$, ha in eres , !o((issions an$ $is!o"n s #ro( lan$in& a! i'i ies, as well as in!o(e #ro( #inan!ial leasin& shall be a%e$ on he basis o# he re(ainin& (a "ri ies o# he ins r"(en s #ro( whi!h s"!h re!eip s are $eri'e$.

5AMM2SS2ANE/ AH 2NTE/NAL /EVENUE MAQ 2MPASE T@E AGAVE TAX AN S2M2LA/LQ S2TUATED PE/SANS. No hin& in he N2/5 shall pre!l"$e he 5o((issioner o# 2n ernal /e'en"e #ro( i(posin& he abo'e a% on persons per#or(in& si(ilar #inan!in& a! i'i ies TAX AN L2HE 2NSU/AN5E P/EM2UMS a. b. !. $. e. here shall be !olle! e$ #ro( e'ery person, !o(pany or !orpora ion (e%!ep p"rely !oopera i'e !o(panies or asso!ia ions) $oin& li#e ins"ran!e b"siness o# any sor in he Philippines a a% o# ;9 o# he o al pre(i"(s !olle! e$ whe her s"!h pre(i"(s are pai$ in (oney

5AAPE/AT2VE 5AMPAN2ES $e#ine$ a. b. !. $. !oopera i'e !o(panies or asso!ia ions are s"!h are !on$"! e$ by he (e(bers hereo# wi h he (oney !olle! e$ #ro( a(on& he(sel'es solely #or heir own pro e! ion an$ no #or pro#i

MUTUAL 2NSU/AN5E 5AMPANQ 2S A PU/ELQ 5AAPE/AT2VE 5AMPANQ EXEMPT H/AM T@E TAX AN L2NE 2NSU/AN5E P/EM2UMS The 2ns"lar Li#e Ass"ran!e 5o(pany, L $., '. 5o((issioner o# 2n ernal /e'en"e, 5TA 5ase No. ;11+, pro(. De!e(ber -=, 1==0 a$op e$ he #ollowin& an$ o her U.S. !ases !i e$ by he pe i ioner: a. S a poli!y hol$er in a (" "al ins"ran!e asso!ia ion s an$s in a wo3#ol$ rela ion owar$s he !o(pany. he is a poli!y hol$er an$ he is a (e(berT. b. S i (ay be s a e$ &enerally ha a (" "al ins"ran!e !o(pany is a !oopera i'e en erprise, wherein he (e(bers are bo h ins"rer an$ ins"re$, he poli!y hol$ers !ons i " in& he (e(bership in er se, wi h a wo3#ol$ in eres as bo h ins"rer an$ ins"re$ o !on rib" e o pay(en o# losses an$ en i le$ o pay(en o# loss an$ o a propor iona e share in he pro#i sT

L2HE 2NSU/AN5E P/EM2UMS NAT SUGBE5T TA TAX a. b. !. $. e. pre(i"(s re#"n$e$ wi hin si%(+) (on hs a# er pay(en on a!!o"n o# re)e! ion o# ris.s or re "rne$ or so(e o her reason in he a%able re!eip s /eins"ran!e pre(i"(s re!ei'e$ by a !o(pany ha has alrea$y pai$ he a%. Pre(i"(s re!ei'e$ as a res"l o# $oin& b"siness o" si$e he Philippines on a!!o"n o# any li#e ins"ran!e o# he ins"re$ who is nonresi$en , i# any a% on s"!h pre(i"(s is i(pose$ by he #orei&n !o"n ry Pre(i"(s !olle! e$ or re!ei'e$ on a!!o"n n any reins"ran!e o# he ins"re$, in !ase o# personal ins"ran!e, resi$es o" si$e he Philippines, i# any a% on s"!h pre(i"( is i(pose$ by he #orei&n !o"n ry where he ori&inal ins"ran!e has been iss"e$ o# per#e! e$. The por ion o# he pre(i"(s !olle! e$ or re!ei'e$ by he ins"ran!e !o(panies on 'ariable !on ra! s in e%!ess o# he a(o"n s ne!essary o ins"re he li'es o# he 'ariable !on ra! wor.ers

VA/2AGLE 5AT/A5T $e#ine$ Any poli!y or !on ra! on ei her a &ro"p or on in$i'i$"al basis iss"e$ by an ins"ran!e !o(panies pro'i$in& #or bene#i s o# o her !on ra! "al pay(en s or 'al"es here"n$er o 'ary so as o re#le! in'es (en res"l s o# any se&re&a e$ por #olio o# in'es (en s or o# a $esi&na e$ separa e a!!o"n in whi!h a(o"n s re!ei'e$ in !onne! ion wi h s"!h !on ra! s shall been pla!e$ an$ a!!o"n e$ #or separa ely an$ apar #ro( o her in'es (en s or a!!o"n s. TAX AN A7ENTS AH HA/E27N 2NSU/AN5E 5AMPAN2ES a. b. !. $. e. e'ery #ire, (arine or (is!ellaneo"s ins"ran!e a&en a" hori4e$ "n$er he ins"ran!e !o$e o pro!"re poli!ies o# ins"ran!e as he (ay ha'e pre'io"sly been a" hori4e$ o ransa! on ris.s lo!a e$ in he Philippines #or !o(panies no a" hori4e$ o ransa! b"siness in he Philippines shall pay a a% e8"al o wi!e he a% i(pose$ in Se! ion 1-1

/27@T AH ASSU/ED TA SE5U/E 2NSU/A5E D2/E5TLQ H/AM HA/E27N 2NSU/E/ The a%a ion o# a&en s o# #orei&n ins"ran!e !o(panies shall no a##e! he ri&h o# an owner o# proper y o apply #or an$ ob ain #or hi(sel# poli!ies in #orei&n !o(panies in !ase where sai$ owner $oes no (a.e "se o# he ser'i!es o# any a&en , !o(pany or !orpora ion resi$in& in or $oin& b"siness in he Philippines. 2n all !ases where owners o# proper y ob ain ins"ran!e $ire! ly wi h #orei&n !o(panies. AMUSEMENT TAX $e#ine$ A per!en a&e a% !olle! e$ #ro( he proprie or, lessee or opera or o# $"ly $esi&na e$ pla!es or a! i'i ies #or pleas"rable $i'ersion or en er ain(en . PLA5ES AND A5T2V2T2ES SUGBE5T TA AMUSEM,ENT TAX There shall be !olle! e$ #ro( he proprie or, lessee o# opera or o# !o!.pi s, !abare s, ni&h or $ay !l"bs, bo%in& e%hibi ions, pro#essional bas.e ball &a(es, Bai3Alai an$ ra!e ra!.s 5AND2T2ANS HA/ EXEMPT2AN AH GAX2N7 EX@2G2T2ANS a. b. !. Go%in& e%hibi ions wherein Eorl$ or Arien al !ha(pionships in any $i'ision is a s a.e A leas one o# he !on en$ers #or Eorl$ or Arien al 5ha(pionship is a !i i4en o# he Philippines Sai$ e%hibi ions are pro(o e$ by !i i4ens o# he Philippines or by a !orpora ion or asso!ia ion a leas (+*9) o# he !api al o# whi!h is owne$ by !i i4ens

TAX AN E2NN2N7S a. b. !. E'ery person who wins in horse ra!es shall pay a a% e8"i'alen o 1*9 o# his winnin&s or S$i'i$en$sT, he a% o base on a! "al a(o"n pai$ o hi( #or e'ery winnin& i!.e a# er $e$"! in& he !os o# he i!.e . Pro'i$e$, ha in he !ase o# winnin&s #ro( $o"ble, #ore!as <8"inella an$ ri#e! a be s, he a% be 69 2n he !ase o# owners o# winnin& ra!e horses, he a% shall be 1*9 or pri4es

TAX AN SALE, GA/TE/ A/ EX5@AN7E AH S@A/ES AH STA5N L2STED AND T/ADED T@/AU7@ T@E LA5AL STA5N EX5@AN7E a. b. !. $. e. here shall be le'ie$, assesse$ an$ !olle! e$ on e'ery sale, bar er, e%!han&e or o her $isposi ion o# shares o# s o!. lis e$ an$ ra$e$ ro"&h he lo!al s o!. e%!han&e o her han he sale by a $ealer in se!"ri ies a a% a he ra e o# U o# 19 o# he &ross sellin& pri!e or &ross 'al"e in (oney o# he shares o# s o!. sol$, bar ere$, e%!han&e$ or o herwise $ispose$ o#

E@A PAQS T@E TAX The seller or he rans#eror SS@A/ES AH STA5N L2STED AND T/ADED T/AU7@ T@E STA5N EX5@AN7ET $e#ine$ in $el /osario, Br. '. 5o((issioner o# 2n ernal /e'en"e, 5TA 5ase No. 60=+, pro(. De!. 1,1==6, he 5o"r o# Ta% Appeals hel$ ha he phrase ("s be &i'en i s li eral (eanin&. The !on)"n! ion San$T in he phrase Sshares o# s o!.s lis e$ an$ ra$e$ hro"&h he s o!. e%!han&eT, (eans ha he shares lis e$ ("s also be ra$e$ in he s o!. e%!han&e. Ehile i is r"e ha only shares lis e$ !an be ra$e$ in he s o!.s e%!han&e, i $oes no howe'er (ean ha lis e$ shares !anno be sol$ o'er3 he3!o"n er, in a pri'a ely ne&o ia e$ sale or e%!han&e, or o" si$e he s o!. e%!han&e. TAX AN S@A/ES AH STA5N SALD A/ EX5@AN7ED T@/AU7@ 2N2T2AL PUGL25 AHHE/2N7 a. b. !. $. e. #. &. here shall be le'ie$, assesse$ an$ !olle! e$ on e'ery sale, bar er, e%!han&e or $isposi ion hro"&h ini ial p"bli! o##erin& o# shares o# s o!.s in !losely hel$ !orpora ions a a% a he ra es below base$ on he &ross sellin& pri!e or &ross 'al"e in (oney o# he shares o# s o!. sol$, bar ere$, e%!han&e$ or o herwise $ispose$ in a!!or$an!e wi h he propor ion shares o# s o!. sol$, bar ere$, e%!han&e$ or o herwise $ispose$ o he o al o" s an$in& shares o# s o!. a# er he lis in& in he lo!al s o!. e%!han&e Up o -;9VVVVVVVVVVVVV...69 A'er -;9 b" no o'er 11 1<19VVVVV..-9 A'er 11 1<19VVVVVVVVVVVV. 19

E@A PAQS T@E TAX a. b. he iss"in& !orpora ion in pri(ary o##erin& he seller in se!on$ary o##erin&

5LASELQ @ELD 5A/PA/AT2AN $e#ine$ a. b. !. any !orpora ion a ;*9 in he 'al"e o# o" s an$in& !api al s o!. a leas ;*9 o# he o al !o(bine$ 'o in& power o# all !lasses o# s o!.s en i le$ o 'o e is owne$ $ire! ly or in$ire! ly by or #or no (ore han -* in$i'i$"als

/ULES HA/ DETE/M2N2N7 E@ET@E/ A 5A/PAA/T2AN 2S A S5LASELQ @ELD 5A/PA/AT2ANT a. b. !. $. S o!. no owne$ by in$i'i$"als. S o!. owne$ $ire! ly or in$ire! ly by or #or a !orpora ion, par nership, es a e or r"s shall be !onsi$ere$ as bein& owne$ propor iona ely by i s sharehol$ers, par ners or bene#i!iaries. Ha(ily an$ par nership ownership. An in$i'i$"al shall be !onsi$ere$ as ownin& he s o!. owne$, $ire! ly or in$ire! ly, by or #or his #a(ily, or by o# #or his par ner. The #a(ily o# an in$i'i$"al in!l"$es only his bro hers an$ sis ers, spo"se, an!es ors an$ by lineal $es!en$an s. Ap ion. 2# any person has an op ion o a!8"ire s o!., s"!h s o!. shall be !onsi$ere$ as owne$ by s"!h person. An op ion o a!8"ire s"!h an op ion an$ ea!h one o# a series o# op ions shall be !onsi$ere$ as an op ion o a!8"ire s"!h s o!.. 5ons r"! i'e ownership as a! "al ownership. S o!. !ons r"! i'ely owne$ by reason o# he appli!a ion o# para&raph a, or !, abo'e #or p"rposes o# applyin& para&raph a or b abo'e shall be rea e$ as a! "ally owne$ by s"!h person, GUT s o!. !ons r"! i'ely owne$ by he in$i'i$"al by reason o# he appli!a ion o# para&raph - shall no be rea e$ as owne$ by hi( by p"rposes o# a&ain in applyin& s"!h para&raph in or$er o (a.e ano her he !ons r"! i'e owner o# s"!h s o!..

TAX EXEMPT2AN

Any &ain $eri'e$ #ro( he sale, bar er, e%!han&e or o her $isposi ion o# shares o# s o!. lis e$ an$ rea e$ hro"&h he lo!al s o!. lis e$ an$ ra$e$ hro"&h he lo!al s o!. e%!han&e or hro"&h ini ial p"bli! o##erin& shall be e%e(p #ro(: a. b. The a% i(pose$ on !api al &ains #ro( he sale o# shares o# s o!. no ra$e$ in he s o!. e%!han&e, an$ #ro( The re&"lar in$i'i$"al or !orpora e in!o(e a%.

5ases: "% BA%C L7./. Nos. L3+;001306. April 1*, 1=,0.M 5AMM2SS2ANE/ AH 2NTE/NAL /EVENUE, pe i ioner, 's. G/2T2S@ AVE/SEAS A2/EAQS 5A/PA/AT2AN an$ 5AU/T AH TAX APPEALS, respon$en s. DE52S2AN MELEN52A3@E//E/A, B p: Pe i ioner 5o((issioner o# 2n ernal /e'en"e (52/) see.s a re'iew on 5er iorari o# he )oin De!ision o# he 5o"r o# Ta% Appeals (5TA) in 5TA 5ases Nos. -101 an$ -;+1, $a e$ -+ Ban"ary 1=,1, whi!h se asi$e pe i ionerPs assess(en o# $e#i!ien!y in!o(e a%es a&ains respon$en Gri ish A'erseas Airways 5orpora ion (GAA5) #or he #is!al years 1=;= o 1=+0, 1=+,3+= o 1=0*301, respe! i'ely, as well as i s /esol" ion o# 1, No'e(ber, 1=,1 $enyin& re!onsi$era ion. GAA5 is a 1**9 Gri ish 7o'ern(en 3owne$ !orpora ion or&ani4e$ an$ e%is in& "n$er he laws o# he Uni e$ Nin&$o(. 2 is en&a&e$ in he in erna ional airline b"siness an$ is a (e(ber3si&na ory o# he 2n erline Air Transpor Asso!ia ion (2ATA). As s"!h, i opera es air ranspor a ion ser'i!e an$ sells ranspor a ion i!.e s o'er he ro" es o# he o her airline (e(bers. D"rin& he perio$s !o'ere$ by he $isp" e$ assess(en s, it is admitted that B&./ had no landing rights for traffic purposes in the Philippines, and was not granted a /ertificate of public convenience and necessity to operate in the Philippines by the /ivil .eronautics Board /.B$, except for a nine-month period, partly in 3H*3 and partly in 3H*), when it was granted a temporary landing permit by the /.B . 6onse4uently, it did not carry passen#ers and-or car#o to or from the Philippines , although during the period covered by the assessments, it maintained a general sales agent in the Philippines I Barner Barnes and /ompany, :td(, and later Jantas .irways I which was responsible for selling B&./ tickets covering passengers and cargoes( 7./. No. +;001 (5TA 5ase No. -101, he Hirs 5ase) An 0 May 1=+,, pe i ioner 5o((issioner o# 2n ernal /e'en"e (52/, #or bre'i y) assesse$ GAA5 he a&&re&a e a(o"n o# P-,6=,,1;,.;+ #or $e#i!ien!y in!o(e a%es !o'erin& he years 1=;= o 1=+1. This was pro es e$ by GAA5. S"bse8"en in'es i&a ion res"l e$ in he iss"an!e o# a new assess(en , $a e$ 1+ Ban"ary 1=0* #or he years 1=;= o 1=+0 in he a(o"n o# P,;,,1*0.0=. GAA5 pai$ his new assess(en "n$er pro es . An 0 A! ober 1=0*, GAA5 #ile$ a !lai( #or re#"n$ o# he a(o"n o# P,;,,1*0.0=, whi!h !lai( was $enie$ by he 52/ on 1+ Hebr"ary 1=0-. G" be#ore sai$ $enial, GAA5 ha$ alrea$y #ile$ a pe i ion #or re'iew wi h he Ta% 5o"r on -0 Ban"ary 1=0-, assailin& he assess(en an$ prayin& #or he re#"n$ o# he a(o"n pai$. 7./. No. +;006 (5TA 5ase No. -;+1, he Se!on$ 5ase)

An 10 No'e(ber 1=01, GAA5 was assesse$ $e#i!ien!y in!o(e a%es, in eres s, an$ penal y #or he #is!al years 1=+,<1=+= o 1=0*31=01 in he a&&re&a e a(o"n o# P;6=,1-0.61, an$ he a$$i ional a(o"n s o# P1,***.** an$ P1,,**.** as !o(pro(ise penal ies #or 'iola ion o# Se! ion 6+ (re8"irin& he #ilin& o# !orpora ion re "rns) penali4e$ "n$er Se! ion 06 o# he Na ional 2n ernal /e'en"e 5o$e (N2/5). An -; No'e(ber 1=01, GAA5 re8"es e$ ha he assess(en be !o"n er(an$e$ an$ se asi$e. 2n a le er, $a e$ 1+ Hebr"ary 1=0-, howe'er, he 52/ no only $enie$ he GAA5 re8"es #or re#"n$ in he Hirs 5ase b" also re3iss"e$ in he Se!on$ 5ase he $e#i!ien!y in!o(e a% assess(en #or P;16,11-.*, #or he years 1=+= o 1=0*301 pl"s P1,***.** as !o(pro(ise penal y "n$er Se! ion 06 o# he Ta% 5o$e. GAA5Ps re8"es #or re!onsi$era ion was $enie$ by he 52/ on -6 A"&"s 1=01. This pro(p e$ GAA5 o #ile he Se!on$ 5ase be#ore he Ta% 5o"r prayin& ha i be absol'e$ o# liabili y #or $e#i!ien!y in!o(e a% #or he years 1=+= o 1=01. This !ase was s"bse8"en ly rie$ )oin ly wi h he Hirs 5ase. An -+ Ban"ary 1=,1, he Ta% 5o"r ren$ere$ he assaile$ )oin De!ision re'ersin& he 52/. The Ta% 5o"r hel$ ha he pro!ee$s o# sales o# GAA5 passa&e i!.e s in he Philippines by Earner Garnes an$ 5o(pany, L $., an$ la er by Oan as Airways, $"rin& he perio$ in 8"es ion, $o no !ons i " e GAA5 in!o(e #ro( Philippine so"r!es Jsin!e no ser'i!e o# !arria&e o# passen&ers or #rei&h was per#or(e$ by GAA5 wi hin he PhilippinesJ an$, here#ore, sai$ in!o(e is no s"b)e! o Philippine in!o(e a%. The 5TA posi ion was ha in!o(e #ro( ranspor a ion is in!o(e #ro( ser'i!es so ha he pla!e where ser'i!es are ren$ere$ $e er(ines he so"r!e. Th"s, in he $isposi i'e por ion o# i s De!ision, he Ta% 5o"r or$ere$ pe i ioner o !re$i GAA5 wi h he s"( o# P,;,,1*0.0=, an$ o !an!el he $e#i!ien!y in!o(e a% assess(en s a&ains GAA5 in he a(o"n o# P;16,11-.*, #or he #is!al years 1=+,3+= o 1=0*301. @en!e, his Pe i ion #or /e'iew on 5er iorari o# he De!ision o# he Ta% 5o"r . The Soli!i or 7eneral, in represen a ion o# he 52/, has ap ly $e#ine$ he iss"es, h"s: J1. Ehe her or no he re'en"e $eri'e$ by pri'a e respon$en Gri ish A'erseas Airways 5orpora ion (GAA5) #ro( sales o# i!.e s in he Philippines #or air ranspor a ion, while ha'in& no lan$in& ri&h s here, !ons i " e in!o(e o# GAA5 #ro( Philippine so"r!es, an$, a!!or$in&ly, a%able. J-. Ehe her or no $"rin& he #is!al years in 8"es ion GAA5 is a resi$en #orei&n !orpora ion $oin& b"siness in he Philippines or has an o##i!e or pla!e o# b"siness in he Philippines. J1. 2n he al erna i'e ha pri'a e respon$en (ay no be !onsi$ere$ a resi$en #orei&n !orpora ion b" a non3resi$en #orei&n !orpora ion, hen i is liable o Philippine in!o(e a% a he ra e o# hir y3#i'e per !en (1;9) o# i s &ross in!o(e re!ei'e$ #ro( all so"r!es wi hin he Philippines.J Un$er Se! ion -* o# he 1=00 Ta% 5o$e: J(h) he er( Presi$en #orei&n !orpora ionP applies o a #orei&n !orpora ion en&a&e$ in ra$e or b"siness wi hin he Philippines or ha'in& an o##i!e or pla!e o# b"siness herein. J(i) The er( Pnon3resi$en #orei&n !orpora ionP applies o a #orei&n !orpora ion no en&a&e$ in ra$e or b"siness wi hin he Philippines an$ no ha'in& any o##i!e or pla!e o# b"siness herein.J

2 is o"r !onsi$ere$ opinion ha GAA5 is a resi$en #orei&n !orpora ion. There is no spe!i#i! !ri erion as o wha !ons i " es J$oin&J or Jen&a&in& inJ or J ransa! in&J b"siness. Ea!h !ase ("s be )"$&e$ in he li&h o# i s pe!"liar en'iron(en al !ir!"(s an!es. The er( i(plies a !on in"i y o# !o((er!ial $ealin&s an$ arran&e(en s, an$ !on e(pla es, o ha e% en , he per#or(an!e o# a! s or wor.s or he e%er!ise o# so(e o# he #"n! ions nor(ally in!i$en o, an$ in pro&ressi'e prose!" ion o# !o((er!ial &ain or #or he p"rpose an$ ob)e! o# he b"siness or&ani4a ion. J2n or$er ha a #orei&n !orpora ion (ay be re&ar$e$ as $oin& b"siness wi hin a S a e, here ("s be !on in"i y o# !on$"! an$ in en ion o es ablish a !on in"o"s b"siness, s"!h as he appoin (en o# a lo!al a&en , an$ no one o# a e(porary !hara! er.P GAA5, $"rin& he perio$s !o'ere$ by he s"b)e! 3assess(en s, (ain aine$ a &eneral sales a&en in he Philippines. Tha &eneral sales a&en , #ro( 1=;= o 1=01, Jwas en&a&e$ in (1) sellin& an$ iss"in& i!.e s? (-) brea.in& $own he whole rip in o series o# rips K ea!h rip in he series !orrespon$in& o a $i##eren airline !o(pany? (1) re!ei'in& he #are #ro( he whole rip? an$ (6) !onse8"en ly allo!a in& o he 'ario"s airline !o(panies on he basis o# heir par i!ipa ion in he ser'i!es ren$ere$ hro"&h he (o$e o# in erline se le(en as pres!ribe$ by Ar i!le V2 o# he /esol" ion No. ,;* o# he 2ATA A&ree(en .J 6 Those a! i'i ies were in e%er!ise o# he #"n! ions whi!h are nor(ally in!i$en o, an$ are in pro&ressi'e p"rs"i o#, he p"rpose an$ ob)e! o# i s or&ani4a ion as an in erna ional air !arrier. 2n #a! , he re&"lar sale o# i!.e s, i s (ain a! i'i y, is he 'ery li#ebloo$ o# he airline b"siness, he &enera ion o# sales bein& he para(o"n ob)e! i'e. There sho"l$ be no $o"b hen ha GAA5 was Jen&a&e$ inJ b"siness in he Philippines hro"&h a lo!al a&en $"rin& he perio$ !o'ere$ by he assess(en s. A!!or$in&ly, i is a resi$en #orei&n !orpora ion s"b)e! o a% "pon i s o al ne in!o(e re!ei'e$ in he pre!e$in& a%able year #ro( all so"r!es wi hin he Philippines. JSe!. -6. J(b) /a es o# a% on !orpora ions. K . . .

Ta% on #orei&n !orpora ions. K . . .

J(-) /esi$en !orpora ions. K A !orpora ion or&ani4e$, a" hori4e$, or e%is in& "n$er he laws o# any #orei&n !o"n ry, e%!ep a #orei&n li#e ins"ran!e !o(pany, en&a&e$ in ra$e or b"siness wi hin he Philippines, shall be a%able as pro'i$e$ in s"bse! ion (a) o# his se! ion "pon he o al ne in!o(e re!ei'e$ in he pre!e$in& a%able year #ro( all so"r!es wi hin he Philippines. (E(phasis o"rs) Ne% , we a$$ress o"rsel'es o he iss"e o# whe her or no he re'en"e #ro( sales o# i!.e s by GAA5 in he Philippines !ons i " es in!o(e #ro( Philippine so"r!es an$, a!!or$in&ly, a%able "n$er o"r in!o(e a% laws. The Ta% 5o$e $e#ines J&ross in!o(eJ h"s: JP7ross in!o(eP in!l"$es &ains, pro#i s, an$ in!o(e $eri'e$ #ro( salaries, wa&es or !o(pensa ion #or personal ser'i!e o# wha e'er .in$ an$ in wha e'er #or( pai$, or #ro( pro#ession, 'o!a ions, ra$es, b"siness, !o((er!e, sales, or $ealin&s in proper y, whe her real or personal, &rowin& o" o# he ownership or "se o# or in eres in s"!h proper y? also #ro( in eres s, ren s, $i'i$en$s, se!"ri ies, or he ransa! ions o# any b"siness !arrie$ on #or &ain or pro#i or &ains, pro#i s, an$ in!o(e $eri'e$ #ro( any so"r!e wha e'erJ (Se!. -=L1M? E(phasis s"pplie$) The $e#ini ion is broa$ an$ !o(prehensi'e o in!l"$e pro!ee$s #ro( sales o# ranspor $o!"(en s. JThe wor$s Pin!o(e #ro( any so"r!e wha e'erP $is!lose a le&isla i'e poli!y o in!l"$e all in!o(e no e%pressly e%e(p e$ wi hin he !lass o# a%able in!o(e "n$er o"r laws.J 2n!o(e (eans J!ash re!ei'e$ or i s e8"i'alen J? i is he a(o"n o# (oney !o(in& o a person wi hin a spe!i#i! i(e . . .? i (eans

so(e hin& $is in! #ro( prin!ipal or !api al. Hor, while !api al is a #"n$, in!o(e is a #low. As "se$ in o"r in!o(e a% law, Jin!o(eJ re#ers o he #low o# weal h. The re!or$s show ha he Philippine &ross in!o(e o# GAA5 #or he #is!al years 1=+,3+= o 1=0*301 a(o"n e$ o P1*,6-,,1+,.**. Di$ s"!h J#low o# weal hJ !o(e #ro( Jso"r!es wi hin he PhilippinesJR The so"r!e o# an in!o(e is he proper y, a! i'i y or ser'i!e ha pro$"!e$ he in!o(e. Hor he so"r!e o# in!o(e o be !onsi$ere$ as !o(in& #ro( he Philippines, i is s"##i!ien ha he in!o(e is $eri'e$ #ro( a! i'i y wi hin he Philippines. 2n GAA5Ps !ase, he sale o# i!.e s in he Philippines is he a! i'i y ha pro$"!es he in!o(e. The i!.e s e%!han&e$ han$s here an$ pay(en s #or #ares were also (a$e here in Philippine !"rren!y. The si "s o# he so"r!e o# pay(en s is he Philippines. The #low o# weal h pro!ee$e$ #ro(, an$ o!!"rre$ wi hin, Philippine erri ory, en)oyin& he pro e! ion a!!or$e$ by he Philippine &o'ern(en . 2n !onsi$era ion o# s"!h pro e! ion, he #low o# weal h sho"l$ share he b"r$en o# s"ppor in& he &o'ern(en . A ranspor a ion i!.e is no a (ere pie!e o# paper. Ehen iss"e$ by a !o((on !arrier, i !ons i " es he !on ra! be ween he i!.e 3hol$er an$ he !arrier. 2 &i'es rise o he obli&a ion o# he p"r!haser o# he i!.e o pay he #are an$ he !orrespon$in& obli&a ion o# he !arrier o ranspor he passen&er "pon he er(s an$ !on$i ions se #or h hereon. The or$inary i!.e iss"e$ o (e(bers o# he ra'ellin& p"bli! in &eneral e(bra!es wi hin i s er(s all he ele(en s o !ons i " e i a 'ali$ !on ra! , bin$in& "pon he par ies en erin& in o he rela ionship. Tr"e, Se! ion 10(a) o# he Ta% 5o$e, whi!h en"(era es i e(s o# &ross in!o(e #ro( so"r!es wi hin he Philippines, na(ely: (1) in eres , (-) $i'i$en$s, (1) ser'i!e, (6) ren als an$ royal ies, (;) sale o# real proper y, an$ (+) sale o# personal proper y, $oes no (en ion in!o(e #ro( he sale o# i!.e s #or in erna ional ranspor a ion. @owe'er, ha $oes no ren$er i less an in!o(e #ro( so"r!es wi hin he Philippines. Se! ion 10, by i s lan&"a&e, $oes no in en$ he en"(era ion o be e%!l"si'e. 2 (erely $ire! s ha he ypes o# in!o(e lis e$ herein be rea e$ as in!o(e #ro( so"r!es wi hin he Philippines. A !"rsory rea$in& o# he se! ion will show ha i $oes no s a e ha i is an all3 in!l"si'e en"(era ion, an$ ha no o her .in$ o# in!o(e (ay be so !onsi$ere$. GAA5, howe'er, wo"l$ i(press "pon his 5o"r ha in!o(e $eri'e$ #ro( ranspor a ion is in!o(e #or ser'i!es, wi h he res"l ha he pla!e where he ser'i!es are ren$ere$ $e er(ines he so"r!e? an$ sin!e GAA5Ps ser'i!e o# ranspor a ion is per#or(e$ o" si$e he Philippines, he in!o(e $eri'e$ is #ro( so"r!es wi ho" he Philippines an$, here#ore, no a%able "n$er o"r in!o(e a% laws. The Ta% 5o"r "phol$s ha s an$ in he )oin De!ision "n$er re'iew. )he a$sence of fli#ht operations to and from the Philippines is not determinative of the source of income or the situs of income taxation& (dmittedly, =>(6 was an off-line international airline at the time pertinent to this case& $*e test of ta.ability is t*e Csour0eCD and t*e sour0e of an in0o+e is t*at a0ti4ity . . . w*i0* produ0ed t*e in0o+e . Un8"es ionably, he passa&e $o!"(en a ions in hese !ases were sol$ in he Philippines an$ he re'en"e here#ro( was $eri'e$ #ro( a b"siness a! i'i y re&"larly p"rs"e$ wi hin he Philippines. An$ e'en i# he GAA5 i!.e s sol$ !o'ere$ he J ranspor o# passen&ers an$ !ar&o o an$ #ro( #orei&n !i iesJ, it cannot alter the fact that income from the sale of tickets was derived from the Philippines( The word KsourceK conveys one essential idea, that of origin, and the origin of the income herein is the Philippines. 2 sho"l$ be poin e$ o" , howe'er, ha he assess(en s "phel$ herein apply only o he #is!al years !o'ere$ by he 8"es ione$ $e#i!ien!y in!o(e a% assess(en s in hese !ases, or, #ro( 1=;= o 1=+0, 1=+,3+=

o 1=0*301. Hor, p"rs"an o Presi$en ial De!ree No. +=, pro("l&a e$ on -6 No'e(ber, 1=0-, in erna ional !arriers are now a%e$ as #ollows: J. . . Pro'i$e$, howe'er, Tha in erna ional !arriers shall pay a a% o# -3 1<- per !en on heir &ross Philippine billin&s.J (Se!. -6LbM L-M, Ta% 5o$e). Presi$en ial De!ree No. 11;;, pro("l&a e$ on -1 April, 1=0,, pro'i$e$ a s a " ory $e#ini ion o# he er( J&ross Philippine billin&s,J h"s: J. . . P7ross Philippine billin&sP in!l"$es &ross re'en"e reali4e$ #ro( "pli# s anywhere in he worl$ by any in erna ional !arrier $oin& b"siness in he Philippines o# passa&e $o!"(en s sol$ herein, whe her #or passen&er, e%!ess ba&&a&e or (ail, pro'i$e$ he !ar&o or (ail ori&ina es #ro( he Philippines. . . .J The #ore&oin& pro'ision ens"res ha in erna ional airlines are a%e$ on heir in!o(e #ro( Philippine so"r!es. The -31<-9 a% on &ross Philippine billin&s is an in!o(e a%. 2# i ha$ been in en$e$ as an e%!ise or per!en a&e a% i wo"l$ ha'e been pla!e "n$er Ti le V o# he Ta% 5o$e !o'erin& Ta%es on G"siness. Las ly, we #in$ as "n enable he GAA5 ar&"(en ha he $is(issal #or la!. o# (eri by his 5o"r o# he appeal in BAL 's. 5o((issioner o# 2n ernal /e'en"e (7./. No. L31**61) on Hebr"ary 1, 1=+=, is res )"$i!a a o he presen !ase. The r"lin& by he Ta% 5o"r in ha !ase was o he e##e! ha he (ere sale o# i!.e s, "na!!o(panie$ by he physi!al a! o# !arria&e o# ranspor a ion, $oes no ren$er he a%payer herein s"b)e! o he !o((on !arrierPs a%. As el"!i$a e$ by he Ta% 5o"r , howe'er, he !o((on !arrierPs a% is an e%!ise a%, bein& a a% on he a! i'i y o# ranspor in&, !on'eyin& or re(o'in& passen&ers an$ !ar&o #ro( one pla!e o ano her. 2 p"rpor s o a% he b"siness o# ranspor a ion. Gein& an e%!ise a%, he sa(e !an be le'ie$ by he S a e only when he a! s, pri'ile&es or b"sinesses are $one or per#or(e$ wi hin he )"ris$i! ion o# he Philippines. The s"b)e! (a er o# he !ase "n$er !onsi$era ion is in!o(e a%, a $ire! a% on he in!o(e o# persons an$ o her en i ies Jo# wha e'er .in$ an$ in wha e'er #or( $eri'e$ #ro( any so"r!e.J Sin!e he wo !ases rea o# a $i##eren s"b)e! (a er, he $e!ision in one !anno be res )"$i!a a o he o her. E@E/EHA/E, he appeale$ )oin De!ision o# he 5o"r o# Ta% Appeals is hereby SET AS2DE. Pri'a e respon$en , he Gri ish A'erseas Airways 5orpora ion (GAA5), is hereby or$ere$ o pay he a(o"n o# P;16,11-.*, as $e#i!ien!y in!o(e a% #or he #is!al years 1=+,3+= o 1=0*301 pl"s ;9 s"r!har&e, an$ 19 (on hly in eres #ro( April 1+, 1=0- #or a perio$ no o e%!ee$ hree (1) years in a!!or$an!e wi h he Ta% 5o$e. The GAA5 !lai( #or re#"n$ in he a(o"n o# P,;,,1*0.0= is hereby $enie$. Ei ho" !os s. /#!S$ 5#V#S#&% ;G.!. %o. E)E?<. Aay <E, <''2.@ C&AA#SS#&%"! &/ #%$"!%AL !"V"%U", petitioner, 4s. F&%. C&U!$ &/ $AG APP"ALS A%5 AA%#LA G&L/ H C&U%$!I CLUB, #%C., respondents. DE52S2AN MED2ALDEA, B p: 2n 5o((issioner o# 2n ernal /e'en"e '. Manila @o el 5orpora ion, e al., 7./. No. ,1-;*, Sep e(ber -+, 1=,=, Ee o'err"le$ a $e!ision o# he 5o"r o# Ta% Appeals whi!h $e!lare$ he !olle! ion o# !a ererPs a% "n$er Se! ion 1=13A o# /ep"bli! A! No. +11* ille&al be!a"se Se!. 6o# @o"se Gill No. 10,1=, whi!h !arries ha pro'iso, was 'e oe$ by hen Presi$en Her$inan$ E. Mar!os when he bill was presen e$ o hi(

an$ 5on&ress ha$ no a.en any s ep o o'erri$e he presi$en ial 'e o. Ee hel$ h"s: JThe power o# he S a e o i(pose he 19 !a ererPs a% is no $eba able. The 5o"r o# Ta% Appeals erre$, howe'er, in hol$in& ha he a% was abolishe$ as a res"l o# he presi$en ial 'e o o# A"&"s 6, 1=+=. 2 #aile$ o e%a(ine he law hen, an$ "p o now, e%is in& on he s"b)e! whi!h has always i(pose$ a 19 !a ererPs a% on opera ors o# res a"ran s. Sin!e he Manila @o el opera es res a"ran s in i s pre(ises, i is liable o pay he a% pro'i$e$ in para&raph (1), Se! ion -*+ o# he Ta% 5o$e.J (5o((issioner o# 2n ernal /e'en"e '. Manila @o el 5orpora ion an$ he 5o"r o# Ta% Appeals, 7./. No . ,1-;*, Sep e(ber -+, 1=,=). The pe i ion now be#ore Us presen s an i$en i!al 8"es ion: whe her he presi$en ial 'e o re#erre$ o he en ire se! ion or (erely o he i(posi ion o# -*9 a% on &ross re!eip s o# opera ors or proprie ors o# res a"ran s, re#resh(en s parlors, bars an$ o her ea in& pla!es whi!h are (ain aine$ wi hin he pre(ises or !o(po"n$ o# a ho el, (o el or res ho"ses. /e#eren!e o he Manila @o el !ase, here#ore, (i&h ha'e been s"##i!ien o $ispose o# his pe i ion were i no #or he posi ion o# he 5TA ha a !hie# e%e!" i'e has no power o 'e o par o# an i e( in a bill? ei her he 'e oes an en ire se! ion or appro'es i b" no a #ra! ion hereo#. 8erein private respondent, 9anila =olf L /ountry /lub, 7nc( is a non-stock corporation( True, it maintains a golf course and operates a clubhouse with a lounge, bar and dining room, but these facilities are for the exclusive use of its members and accompanied guests, and it charges on cost-plus-expense basis( .s such, it claims it should have been exempt from payment of privilege taxes were it not for the last paragraph of Section 3H3-. of 5(.( 'o( *33", otherwise known as the K&mnibus Tax :aw(K Section 3H3-. readsC JSe!. 1=13A. 5a erer. K A !a ererPs a% is hereby i(pose$ as #ollows: J(1) An proprie ors or opera ors o# res a"ran s, re#resh(en parlors an$ o her ea in& pla!es, in!l"$in& !l"bs, an$ !a erers, hree per !en o# heir &ross re!eip s. J(-) An proprie ors or opera ors o# res a"ran s, bars, !a#es an$ o her ea in& pla!es, in!l"$in& !l"bs, where $is ille$ spiri s, #er(en e$ li8"ors, or wines are ser'e$, hree per !en o# heir &ross re!eip s #ro( sale o# #oo$ or re#resh(en s an$ se'en per !en o# heir &ross re!eip s #ro( sale o# $is ille$ spiri s, #er(en e$ li8"ors or wines. Two se s o# !o((er!ial in'oi!es or re!eip s serially n"(bere$ in $"pli!a e shall be separa ely prepare$ an$ iss"e$, one #or sale o# re#resh(en s ser'e$, an$ ano her #or ea!h sale o# $is ille$ spiri s, #er(en e$ li8"ors or wines ser'e$, he ori&inals o# he in'oi!es or re!eip s o be iss"e$ o he p"r!haser or !"s o(er. J(1) An proprie ors or opera ors o# res a"ran s, re#resh(en parlors, bars, !a#es an$ o her ea in& pla!es whi!h are (ain aine$ wi hin he pre(ises or !o(po"n$ o# a ho el, (o el, res ho"se, !o!.pi , ra!e ra!., )ai3alai, !abare , ni&h or $ay !l"b by (eans o# a !onne! in& $oor or passa&e wen y per !en o# heir &ross re!eip s. JEhere he es ablish(en s are opera e$ or (ain aine$ by !l"bs o# any .in$ or na "re (irrespe! i'e o# he $isposi ion o# heir ne in!o(e an$ whe her or no hey !a er e%!l"si'ely o (e(bers or heir &"es s) he .eepers o# he es ablish(en s shall pay he !orrespon$in& a% a he ra e #i%e$ abo'e.J (E(phasis o"rs) /ep"bli! A! No. +11* oo. e##e! on Sep e(ber 1, 1=+=. Gy his 'ir "e, pe i ioners assesse$ he !l"b #i%e$ a%es as opera ors o# &ol# lin.s an$ res a"ran s, an$ also per!en a&e a% (!a ererPs a%) #or i s sale o# #oo$s an$ #er(en e$ li8"ors<wines #or he perio$ !o'erin& Sep e(ber 1=+= o De!e(ber 1=0* in he a(o"n o# P1-,;*6.=+. The !l"b pro es e$ !lai(in& he assess(en o be wi ho" basis be!a"se

Se! ion 6- was 'e oe$ by hen Presi$en Mar!os. The 'e o (essa&e rea$s: JMALA5AWAN7 Manila A"&"s 6, 1=+= J7en le(en o# he @o"se o# /epresen a i'es: J2 ha'e he honor o in#or( yo" ha 2 ha'e his $ay si&ne$ @.G. No. 10,1=, en i le$: PAN A5T AMEND2N7 5E/TA2N P/AV2S2ANS AH T@E NAT2ANAL 2NTE/NAL /EVENUE 5ADE, AS AMENDEDP JP"rs"an o he pro'isions o# Se! ion -*3(1), Ar i!le V2, o# he 5ons i " ion, howe'er, 2 ha'e 'e oe$ he #ollowin& i e(s in his bill: %%% %%% %%% pp. 66, SE5. 6-. 2nser in& a new Se! ion 1=13A whi!h i(poses a !a ererPs a% o# hree per!en o# he &ross re!eip s o# proprie ors or opera ors o# res a"ran s, re#resh(en parlors an$ o her ea in& pla!es? hree per!en o# &ross re!eip s #ro( sale o# #oo$ or re#resh(en an$ se'en per!en on &ross re!eip s #ro( he sale o# $is ille$ spiri s, #er(en e$ li8"ors or wines, on proprie ors or opera ors o# res a"ran s, bars, !a#es an$ o her ea in& pla!es, in!l"$in& !l"bs, where $is ille$ spiri s, #er(en e$ li8"ors, or wines are ser'e$? an$ wen y per!en o# &ross re!eip s on proprie or or opera ors o# res a"ran s, re#resh(en parlors, bars, !a#es an$ o her ea in& pla!es (ain aine$ wi hin he pre(ises or !o(po"n$ o# a ho el, (o el, res ho"se, !o!.pi , ra!e ra!., )ai3alai, !abare , ni&h or $ay !l"b, or whi!h are a!!essible o pa rons o# sai$ es ablish(en s by (eans o# a !onne! in& $oor or passa&e. PThe b"r$en o# a%a ion will be shi# e$ o he !ons"(in& p"bli!. PThe $e'elop(en o# ho els, essen ial o o"r o"ris in$"s ry, (ay be res raine$ !onsi$erin& ha a bi& por ion o# ho el earnin&s !o(es #ro( #oo$ sale. . . .P JThis bill, @.G. No. 10,1=, has be!o(e /ep"bli! A! No. +11*. J/espe! #"lly, J(S7D.) HE/D2NAND E. MA/5ASJ LE(phasis o"rsM

The pro es a ion o# he !l"b was $enie$ by he pe i ioner who (ain ains ha Se! ion 6- was no en irely 'e oe$ b" (erely he wor$s Jho els, (o els, res ho"sesJ on he &ro"n$ ha i (i&h res rain he $e'elop(en o# ho els whi!h is essen ial o he o"ris( in$"s ry. This in #a! was he posi ion o# he @o"se Eays an$ Means 5o((i ee whi!h repor e$, o wi : JEhen 5on&ress $e!i$e$ o spli Se! ion 1=1 in o wo par s, one $ealin& wi h !on ra! ors, an$ he o her $ealin& wi h hose who ser'e #oo$ an$ $rin.s, he in en ion was o !lassi#y an$ o i(pro'e. Ehile he 5on&ress e%pan$e$ he !o'era&e o# bo h 1=1 an$ 1=13A, i also pro'i$e$ #or !er ain e%e(p ions. The 'e o (essa&e see(s o ob)e! o !er ain a$$i ions o 1=13A. Eha a$$i ions are ob)e! ionables !an be &leane$ #ro( he reasons &i'en: a &eneral reason ha his sor o# a% is passe$ on o he !ons"(in& p"bli!, an$ a par i!"lar reason ha ho el $e'elop(en s, so essen ial o he o"ris in$"s ry, (ay be res raine$.

These reasons ha'e been a.en o&e her in he in erpre a ions o# he 'e o (essa&e an$ he $ele ions o# s"!h en erprises as are !onne! e$ wi h he o"ris in$"s ry has here#ore been re!o((en$e$. JTo in erpre he 'e o (essa&e o herwise wo"l$ res"l in he e%e(p ion o# en i ies alrea$y s"b)e! o# a%. This wo"l$ be abs"r$. Ehere he 5on&ress wan e$ o e%e(p , i was so pro'i$e$ in he bill. Ehile he Presi$en (ay 'e o any i e( or i e(s in a re'en"e bill, he !ons i " ion $oes no &i'e hi( he power o repeal an e%is in& a%. (-n$ 2n$orse(en $a e$ De!e(ber =, 1=+=, 5hair(an on Eays an$ Means, Si% h 5on&ress o# he /ep"bli! o# he Phil.) (E%hs. 16, p. ,;, G.2./. re!.).J (pp. -*3-1, /ollo) 2 was by reason o# his in erpre a ion o# he 5o((i ee ha /.A. No. +11* was p"blishe$ in Vol"(e ++, No. 1,, p. 6;11 o# he A##i!ial 7a4e e (May 6, 1=0*) in s"!h a way ha Se! ion 1=13A was in!l"$e$ in he e% sa'e #or he wor$s Jho els, (o els res ho"ses.J As alrea$y (en ione$, he 5o"r o# Ta% Appeals, "pon pe i ion by he !l"b, s"s aine$ he la erPs posi ion reasonin& ha he 'e o (essa&e was !lear an$ "n8"ali#ie$, as in #a! i was !on#ir(e$ hree years la er, a# er ("!h !on ro'ersy, by he A##i!e o# he Presi$en , h"s: JMr. An ero M. Sison, Br. San Mar in G"il$in&, 1;+6, A. Mabini, P.A. Go% --,, Manila, Philippines JDear Sir: JEi h re#eren!e o yo"r le er $a e$ B"ly 16, 1=0-, we wish o in#or( yo" ha Se! ion 6- (whi!h !on ains Se!. 1=13A) o# @o"se Gill No. 10,1=, now /.A. +11* was one o# he Se! ions 'e oe$ by he Presi$en in his 'e o (essa&e $a e$ A"&"s 6, 1=+=, 'e oin& !er ain se! ions o# he sai$ re'en"e bill. Very Tr"ly Qo"rs, J(S7D.) 2/2NEA T. A7U2//E, B/. Presi$en ial S a## Assis an J (p. 6=, /ollo) As (en ione$ earlier, Be have already ruled that the presidential veto referred merely to the inclusion of hotels, motels and resthouses in the )"# catererEs tax bracket but not to the whole section . G" , as (en ione$ earlier also, he 5TA opine$ ha he Presi$en !o"l$ no 'e o wor$s or phrases in a bill b" only an en ire i e(. >$viously, what the 6)( meant $y ?item? was an entire section& Be do not agree( But even assuming it to be so, it would also be to petitionerEs favor( The ineffectual veto by the President rendered the whole section 3H3-. as not having been vetoed at all and it, therefore, became law as an unconstitutional veto has no effect, whatsoever( (See Golinao Ele! roni!s 5orp. '. Valeria, No. L3-*06*, B"ne 1*, 1=+6, 11 S5/A 6,+). @owe'er, Ee a&ree wi h hen Soli!i or 7eneral Es eli o Men$o4a an$ his asso!ia es ha in!l"sion o# ho els, (o els an$ res ho"ses in he -*9 !a ererPs a% bra!.e are Ji e(sJ in he(sel'es wi hin he (eanin& o# Se!. -*(1), Ar . V2 o# he 1=1; 5ons i " ion whi!h, here#ore, he Presi$en has he power o 'e o. .n KitemK in a revenue bill does not refer to an entire section imposing a particular kind of tax, but rather to the subDect of the tax and the tax rate( 7n the portion of a revenue bill which actually imposes a tax, a section identifies the tax and enumerates the persons liable therefor with the corresponding tax rate( To construe the word KitemK as referring to the whole section would tie the PresidentEs hand in choosing either to approve the whole section at the expense of also approving a provision therein which he deems unacceptable or veto the entire section at the expense

of foregoing the collection of the kind of tax altogether( The evil which was sought to be prevented in giving the President the power to disapprove items in a revenue bill would be perpetrated rendering that power inutile (See 5o((onweal h e% rel. El.in '. Garne , 1== Pa. 1+1, ;; L/A ,,- L1=*1M). A55A/D2N7LQ, he pe i ion is 7/ANTED an$ he $e!ision o# he 5o"r o# Ta% Appeals in 5TA 5ase No. -+1* is se asi$e. Se! ion 1=13 A o# /A No. +11* is 'ali$ an$ en#or!eable an$, hen!e, he Manila 7ol# > 5o"n ry 5l"b 2n!. is liable #or he a(o"n assesse$ a&ains i . "% BA%C ;G.!. %o. L7<J>=2. Aay (2, <'J?.@ C&AA#SS#&%"! &/ #%$"!%AL !"V"%U", petitioner, 4s. U%#$"5 S$A$"S L#%"S C&APA%I, respondent. SQLLAGUS 1. TAXAT2AN? PE/5ENTA7E TAXES? 5ALLE5T H/E27@T HEES? /ATE AH 5ANVE/S2AN AH DALLA/ 2NTA PESAS. K The J!olle! J #rei&h #ees (or hose earne$ in he Philippines b" a! "ally pai$ in he Uni e$ S a es in $ollars) sho"l$ be a he ra e o# P-.** o X1.** as es ablishe$ by Se! ion 6,, /ep"bli! A! No. -+;, an$ no he ra e o# e%!han&e #i%e$ by he Mone ary Goar$, i# no #orei&n e%!han&e opera ions were in'ol'e$. -. 2D.? 2D.? PE/5ENTA7E AN T/ANSPA/TAT2AN GUS2NESS? L2AG2L2TQ AH A7ENT. K .lthough under Section 3H) of the Tax /ode, which taxes the business of transportation, the person liable is the owner or operator, whoever acts on his behalf and for his benefit may be held liable to pay, for and in behalf of the carrier or operator, the percentage tax on the business( 1. 2D.? 2D.? 2D.? 2D.? EHHE5T E@E/E A S@2PP2N7 5AMPANQ @ALDS 2TSELH AS S@2PAENE/PS A7ENT. K . shipping company that holds to the public and to the =overnment as the shipownerEs local agent, and in fact renders services as such, is under obligation to pay, for and in behalf of its principal, whatever tax is due from the latter, especially where the principal is a nonresident corporation beyond the Durisdiction of the Philippines( 6. VESSELS? MEAN2N7 AH J@USGAND2N7 A7ENTJ. K . Khusbanding agentK is the general agent of the owner in relation to the ship, with powers, among others, to engage the vessel for general freight and the usual conditions, and settle for freight and adDust averages with the merchant BouvierEs :aw 0ictionary, p( >"*@, citing @ B( L .d( >!4+ 3 F( L /( >)*+ Turner vs( Burrows, G Bend( '(F($ 3@@+ =ould vs( Stanton, 3* /onn( 3)$( ;. 5ANT/A5TS? ENHA/5EAG2L2TQ? PE/T2NENT P/AV2S2ANS AH LAE DEEMED 2N5A/PA/ATED. K Any a&ree(en or !on ra! , o be en#or!eable, is "n$ers oo$ o in!orpora e herein he pro'ision or pro'isions o# law spe!i#yin& he obli&a ions o# he par ies "n$er he !on ra! . DE52S2AN GA//E/A, B p: This is an appeal by the /ommissioner of 7nternal 5evenue from the decision of the /ourt of Tax .ppeals in /T. /ase 'o( 44*$ holding the ;( S( :ines /ompany liable for payment of common carrierEs tax deficiency and surcharges in the total sum of only P4")(!4 instead of

P)4,!*H(@3 as originally assessed and demanded by appellant /ommissioner( As #o"n$ an$ s a e$ in he $e!ision o# he 5o"r o# Ta% Appeals, he <& S& @ines 6ompany, a forei#n corporation duly licensed to do $usiness in the Philippines, under the trade name ?(merican Pioneer @ines? for short hereinafter referred to as the 6ompany", is the operator of ocean-#oin# vessels transportin# passen#ers and frei#ht to and from the Philippines& 5t is also the sole a#ent and representative of the Pacific Far Aast @ine, 5nc&, another shippin# company en#a#ed in $usiness in the Philippines as a common carrier $y water. 2n he e%a(ina ion o# i s boo.s o# a!!o"n s an$ o her re!or$s o $e er(ine i s a% liabili ies #or he perio$ #ro( Ban"ary 1, 1=;* o Sep e(ber 1*, 1=;;, it was found that the /ompany also acted in behalf of the Best /oast Trans-&ceanic Steamship :ines /o(, 7nc(, a non-resident foreign corporation, in connection with the transportation, on board the KSS Portland TraderK belonging to the latter, on 'ovember )!, 3H43 and .pril )H, 3H4), of chrome ores from 9asinloc, Mambales to the ;nited States, from which carriage or transportation freight revenue in the total sum of N)!),@!"("" was reali,ed by the vesselEs owner, and for which the )# common carrierEs percentage tax imposed by Section 3H) of the 'ational 7nternal 5evenue /ode was never paid. (s a conse4uence, the 6ommissioner of 5nternal 2evenue assessed and demanded from the 6ompany, as deficiency tax, a" the sum of P6,6B1&C6 for its own $usiness under the name (merican Pioneer @ines/ $" P.,,2B&00, as a#ent of Pacific Far Aast @ine, 5nc&, and c" P1C,6,B&0. on the frei#ht revenue of the 7est 6oast )rans->ceanic Steamship @ines 6o& from the carria#e or transportation of the chrome ores/ or a total of P2.,D6B&,1. A he ins an!e o# he 5o(pany, a rein'es i&a ion o# he !ase was !on$"! e$ an$ a hearin& hereon hel$ be#ore he Appella e Di'ision o# he G"rea" o# 2n ernal /e'en"e. These, no wi hs an$in&, he 5o((issioner (ain aine$ his $e(an$. Th"s, he 5o(pany #ile$ a pe i ion wi h he 5o"r o# Ta% Appeals !on es in& he !orre! ness o# (1) he !on'ersion o# J!olle! J re'en"es or hose #rei&h an$ passa&e re!eip s, !o((issions, an$ a&en!y #ees #or ser'i!es in he Philippines, b" payable in he Uni e$ S a es, a he ra e o# P-.**10; o X1.** an$ (-) he $e(an$ on he 5o(pany o# he -9 !arrierPs per!en a&e a% on he &ross re!eip s o# he Ees 5oas Trans3A!eani! S ea(ship Lines #ro( he !hro(e ore ship(en s o# No'e(ber -0, 1=;1 an$ April -=, 1=;-. The 5o"r o# Ta% Appeals, in i s $e!ision, r"le$ #or he 5o(pany on he #irs iss"e, h"s K JEe wish o (a.e i !lear ha #ro( he re!or$s o# he !ase, i appears ha all he P!olle! P re'en"es, or hose #rei&h !har&es, passa&e #ares, !o((issions an$ a&en!y #ees, !olle! e$ in he Uni e$ S a es !"rren!y belon& o pe i ionerPs ho(e o##i!e in he Uni e$ S a es an$ were no re(i e$ o pe i ionerPs lo!al o##i!e in he Philippines. 2n shor , he Uni e$ S a es $ollars !olle! e$ abroa$ were no a! "ally !on'er e$ o an$ re!ei'e$ in Philippine pesos, an$ here#ore here is no o!!asion nor reason o "se a !on'ersion ra e asi$e #ro( he le&al ra e o# e%!han&e, i.e., X1.** o P-.**. 2# we ha'e pla!e$ he )"$i!ial s a(p o# appro'al on he a&ree$ !on'ersion ra es X1.** o P-.*1; an$ X1.** o P-.*- wi h re&ar$ o he Pprepai$P #rei&h an$ passa&e re'en"es, respe! i'ely, we $i$ so in or$er o arri'e a he a! "al a(o"n s !olle! e$ by he pe i ioner in Philippine pesos K he !orre! a%able &ross re!eip s.J (E(phasis s"pplie$.) As o he se!on$ iss"e, i r"le$ ha he -9 per!en a&e a% "n$er Se! ion 1=- o# he Ta% 5o$e is i(possible only on owners or opera ors o# he !o((on !arrier, an$ as here is no law !ons i " in& he shippin& a&en he wi hhol$in& a&en o# he a%es $"e #ro( he prin!ipal, sai$ shippin& a&en is no personally liable #or he a% obli&a ions o# he la er, "nless he a&en 'ol"n arily ass"(es s"!h obli&a ion whi!h, in

his !ase, he a&en 5o(pany $i$ no . 5onse8"en ly, he pe i ionin& a%payer was or$ere$ o pay only a a% $e#i!ien!y an$ s"r!har&e in he s"( o# P;*-.0;. @en!e, he ins i " ion o# his appeal. The r"lin& by he lower !o"r ha he !on'ersion o# he J!olle! J #rei&h #ees (or hose earne$ in he Philippines b" a! "ally pai$ in he Uni e$ S a es in $ollar) sho"l$ be a he ra e o# P-.** o X1.** as es ablishe$ by law (Se!. 6,, /ep. A! No. -+;), an$ no he ra e o# e%!han&e o# P-.**10; o X1.**, as #i%e$ by he Mone ary Goar$, ("s be "phel$. No e'i$en!e was presen e$ reb" in& he posi i'e alle&a ion o# respon$en a%payer, whi!h was s"s aine$ by he Ta% 5o"r , ha he J!olle! J #rei&h a&e #ees were no re(i e$ o he lo!al o##i!e o# he U. S. Lines 5o(pany (in he Philippines) nor a! "ally !on'er e$ o an$ re!ei'e$ in Philippine pesos. 2n o her wor$s, no #orei&n e%!han&e opera ions were in'ol'e$ here. The s a e(en (a$e in he 5o((issionerPs brie# (p. -*) ha Ji is "n!on ro'er e$ ha he respon$en Ps (5o(panyPs) $ollar earnin&s here represen in& i s so3!alle$ P!olle! P re'en"es were a!!o"n e$ #or hr" i s ban., he Na ional 5i y Gan. o# New Qor. a P-.**10; o a $ollar, is no borne o" by he re!or$s. Eha appears is ha he 5o(pany re!ei'e$ !er ain a(o"n s #ro( i s ho(e o##i!e in he Uni e$ S a es o (ee i s lo!al e%penses, an$ hese were wi h$rawn #ro( a le er o# !re$i in he Hirs 5i y Gan. o# New Qor. in Manila a he ra e o# P-.**10; o a $ollar. G" he 5o(pany asser s K an$ here is no e'i$en!e o he !on rary K ha here is no rela ionship wha soe'er be ween hese #"n$s an$ he #rei&h #ees !olle! e$ in he Uni e$ S a es. The o her iss"e is whe her on he #a! s o# he !ase, he 5o(pany as a&en o# he 'essel JSS Por lan$ Tra$erJ in behal# o# i s owner, he Ees 5oas Trans3A!eani! S ea(ship Lines 5o(pany, !an be !o(pelle$ o pay he -9 per!en a&e a% on he #rei&h re'en"e earne$ #ro( he ship(en o# !hro(e ores ranspor e$ #ro( he Philippines o he Uni e$ S a es. As s a e$ earlier, he 5o"r o# Ta% Appeals r"le$ in he ne&a i'e, !i in& an$ a$op in& a "nani(o"s $e!ision o# he $e#"n! Goar$ o# Ta% Appeals ren$ere$ on B"ly 1*, 1=;1, p"rpor in& o in erpre Se! ion 1=- o# he Na ional 2n ernal /e'en"e 5o$e, in whi!h i hel$ ha a shippin& a&en is no personally responsible #or he pay(en o# he a% obli&a ions o# i s prin!ipal, reasonin& ha here is no law !ons i " in& a shippin& a&en as a wi hhol$in& a&en o# he a%es $"e #ro( i s prin!ipal. 2# #"r her s a e$ ha a shippin& a&en !an only be hel$ liable #or he pay(en o# he !o((on !arrierPs per!en a&e a% i# s"!h obli&a ion is s ip"la e$ in he a&en!y a&ree(en , or i# he a&en 'ol"n arily ass"(es he a% liabili y. Be can not agree to this view as applied to the present case , be!a"se i a$op s a 'ery res ri! i'e in erpre a ion o# Se! ion 1=- o# he Ta% 5o$e. 7hat the le#al provision purports to tax is the $usiness of transportation, so much so that the tax is based on the gross receipts. The person liable is of course the owner or operators , $ut this does not mean that he and he alone can $e made actually to pay the tax . 7n other words, whoever acts on his behalf and for his benefit may be held liable to pay, for and on behalf of the carrier or operator, such percentage tax on the business. 2 is !lai(e$ #or he 5o(pany ha i (erely a! e$ as a Jh"sban$in& a&en J o# he 'essel wi h li(i e$ powers. This appears no o be so. ( ?hus$andin# a#ent? is the #eneral a#ent of the owner in relation to the ship, with powers, amon# others, to en#a#e the vessel for #eneral frei#ht and the usual conditions, and settle for frei#ht and ad;ust avera#es with the merchant. G" wha e'er (ay be he e!hni!al #"n! ions o# a JshipPs h"sban$J, he 5o(pany, in he !ase a bar, was !onsi$ere$ an$ a! e$ (ore as a &eneral a&en . The a&en!y !on ra! is no e% an in he re!or$s. S ill, #ro( he !orrespon$en!e be ween he prin!ipal Ees 5oas Trans3A!eani! S ea(ship Lines an$ he 5o(pany i sel#, an$ wi h o her en i ies re&ar$in& he ship(en in 8"es ion, he real na "re o# he a&en!y (ay be &leane$. )hus, in the letter of 7est 6oast )rans->ceanic Steamship @ines, dated >cto$er 20, 1B.1 Axh& C0", #ivin# instructions to the master of its vessel ?SS Portland

)rader?, it referred to respondent 6ompany as the ?>wner:s a#ents? at the loadin# point Easinloc" to which the vessel had to $e consi#ned& 5n line with its desi#nation as the ?>wner:s a#ent? and the vessel:s consi#nee, respondent 6ompany wrote the master of the vessel Axh& 2C" advisin# him that it had secured 6ustoms authority for the vessel to proceed to Easinloc, as well as the Axport Antry coverin# the loadin# of the ore, #ivin# instructions how to proceed with the loadin# and to 3eep it closely advised of all movements and daily tonna#es laden& 5t also undertoo3 to and did in fact prepare all the car#o documents& )he correspondin# $ill of ladin# for the car#o was prepared and si#ned $y the respondent 6ompany ?(s (#ent for 7est 6oast )rans->ceanic Steamship @ine? wherein it ac3nowled#ed the receipt of B,B00 lon# tons of chrome, a prero#ative act of a common carrier itself p& 11,, =52 record"& (#ain, si#nin# ?(s (#ents for 7est 6oast )rans->ceanic Steamship @ine?, respondent 6ompany transmitted the shippin# documents coverin# the shipment of ore to 6astle 6oo3e, @td&, the vessel:s a#ent at 8onolulu Axh& 20"& (ll these were in respect to the first shipment on 0ovem$er 2D, 1B.1. 5on!ernin& he se!on$ ship(en , we ha'e #irs he le er o# Ees 5oas Trans3A!eani! S ea(ship Lines, $a e$ Hebr"ary -1, 1=;- a$$resse$ o respon$en 5o(pany, a$'isin& i o# he se!on$ rip o# JSS Por lan$ Tra$erJ an$ s a in&: JEe r"s ha yo" will han$le he 'essel a Manila an$ ha yo"r "s"al #ee will applyJ, an$ re8"es in& respon$en 5o(pany o a! also as s"per'isory a&en s a Sai&on an$ @aiphon& (p. ;0, G2/ re!or$s). The s ea(ship !o(pany, li.ewise, a$'ise$ he (as er o# i s 'essel ha Ji s a&en s #or Masinlo!J will be he respon$en 5o(pany #ro( whi!h J#"ll assis an!e an$ in#or(a ionJ !o"l$ be ob aine$ (E%h. 1,, $a e$ Mar!h 1-, 1=;-). E'i$en ly a!!ep in& he $esi&na ion, respon$en 5o(pany, represen in& i sel# as J he lo!al a&en sJ o# he 'essel (E%h. -1, $a e$ Mar!h -+, 1=;-), se!"re$ he en ry an$ !learan!e o# he 'essel a he !"s o(s. A# er he loa$in& o# ore a Masinlo!, a&ain respon$en 5o(pany prepare$ he shippin& $o!"(en s an$ si&ne$ he bill o# la$in& JAs A&en #or he Ees 5oas Trans3A!eani! S ea(ship LinesJ (p. 116, G2/ re!or$). .ll these documents show that respondent /ompany clearly acted I as it held itself to the public and to the =overnment specifically the Bureau of /ustoms$ I as the shipownerEs local agent or the ship agent representing the ownership of the vessel . To a$op he 'iew o# he rial !o"r wo"l$ be o san! ion he $oin& o# b"siness in he Philippines by non3resi$en !orpora ions o'er whi!h we ha'e no )"ris$i! ion, without su$;ectin# the same to the operation of our revenue and tax laws, to the detriment and discrimination of local $usiness enterprises. Be, therefore, hold that in the circumstances, said respondent is under obligation to pay, for and in behalf of its principal, the tax due from the latter( .nd, this is but logical, because, as provided in .rticle 4H4 of the /ode of /ommerce, Kthe ship agent shall represent the ownership of the vessel, and may, in his own name and in such capacity, take Dudicial and extraDudicial steps in matters relating to commerceK( 7f the shipping agent represents the ownership of the vessel in matters relating to commerce, then any liability arising in connection therewith may be enforced against the agent who is, as a consequence thereof, authori,ed to take Dudicial or extra-Dudicial steps, either in the

.s a matter of fact, if a foreign shipping company has a claim against the =overnment in relation to commerce, its local shipping agent, by virtue of .rticle 4H4 of the /ode of /ommerce, can file such a claim in his own name( /onversely, and logically, it must be admitted, the =overnment can hold the local shipping agent liable for the taxes due from his principal( This is, of course,
prosecution or defense of the ownerEs rights or interests(

without preDudice to the right of the agent to seek reimbursement from his principal.
The !on en ion ha he a&ree(en be ween he prin!ipal an$ a&en solely $e er(ines he liabili y o# he a&en , is no enable. Any a&ree(en or !on ra! o be en#or!eable in his )"ris$i! ion is "n$ers oo$ o in!orpora e herein he pro'ision or pro'isions o# law spe!i#yin& he obli&a ions o# he par ies "n$er s"!h !on ra! . The !on ra! be ween herein respon$en 5o(pany an$ i s prin!ipal !onse8"en ly i(pose$ "pon he par ies no only he ri&h s an$ $" ies $elinea e$ herein, b" also he pro'isions o# law s"!h as ha o# he 5o$e o# 5o((er!e a#ore!i e$. As o he hir$ assi&ne$ error, i.e., he a(o"n o# a%able re!eip s, he re!or$s are no !lear. Pe i ioner 5o((issioner o# 2n ernal /e'en"e !lai(s ha here are !on ra$i! ions in an$ a(on& he hree se s o# s"((aries s"b(i e$ by he respon$en 5o(pany an$ hey sho"l$ no ha'e been !onsi$ere$ by he rial !o"r . An he o her han$, we #in$ also ha he assess(en s iss"e$ by he 5o((issioner are, li.ewise, !on#li! in&. 2n he presen pe i ion, he prayer se s he a% $elin8"en!y o# he respon$en 5o(pany a P-+,61+.10, whi!h is he a(o"n $e(an$e$ in his le er o# $e(an$ o# B"ne +, 1=;, (E%h. E, also (ar.e$ as E%h. 16). 2n his brie#, he 5o((issioner prays ha respon$en 5o(pany be or$ere$ o pay he s"( o# P-;,0+=.61, he a(o"n $e(an$e$ in his le er o# B"ne -,, 1=;+ (E%h. A, also (ar.e$ as E%h. -+). 2n 'iew o# hese $is!repan!ies, a re3e%a(ina ion an$ 'eri#i!a ion o# he re!or$s is ne!essary o $e er(ine he e%a! a%able a(o"n on whi!h he -9 !o((on !arrierPs per!en a&e a% is o be !o(p" e$ in a!!or$an!e wi h he er(s o# his $e!ision. E@E/EHA/E, he $e!ision o# he 5o"r o# Ta% Appeals in his !ase is (o$i#ie$ as abo'e3in$i!a e$, an$ he re!or$s re(an$e$ o he !o"r a 8"o #or he p"rpose herein $ire! e$. No !os s. So or$ere$. "% BA%C ;G.!. %o. L7?(2<E. Bune (2, <')2.@ "SCU5"!& "L"C$!#C S"!V#C" C&APA%I, petitioner, 4s. B"%BAA#% %. $AB#&S, in *is 0apa0ity as Co++issioner of #nternal !e4enue, respondent. SQLLAGUS 1. TAXAT2AN? 2NTE/NAL /EVENUE 5ADE? SE5T2AN -;= AH T@E TAX 5ADE AMENDED T@E P/AV2S2AN AH MUN252PAL H/AN5@2SE 2SSUED UNDE/ A5T NA. ++0. K The pro'ision o# ("ni!ipal #ran!hise iss"e$ p"rs"an o A! No. ++0 re&ar$in& he ra e o# a% o be pai$ by he #ran!hise hol$er ha'e been a(en$e$ by Se! ion -;= o# he Ta% 5o$e, as a(en$e$ by /ep"bli! A! s Nos. 1= an$ 61,. -. 2D.? 2D.? 2D.? EXPLA2NED. K 2n e##e! in& s"!h al era ion in he ra e o# a%, o"r le&isla i'e $epar (en (erely e%er!ise$ a power e%pressly reser'e$ here o by sai$ #ran!hises, an$ has a! e$ here#ore, in !on#or(i y herewi h, no in 'iola ion o# he pro'isions hereo# or o he $e ri(en o# he ri&h s here 'es e$ in he #ran!hise hol$er. 1. 2D.? 2D.? 7/ASS EA/N2N7S A/ /E5E2PT 5ANST/UED. K The "n!olle! e$ !har&es or a(o"n s $"e #ro( he !"s o(ers o# a #ran!hise hol$er sho"l$ be !onsi$ere$ par o# he a%able &ross earnin&s or re!eip s. Se! ion -;= o# he Ta% 5o$e, as a(en$e$ by /. A. Nos. 1= an$ 61,, "ses he er( J&ross earnin&s or re!eip s,J so h"s ha J&ross re!eip sJ as so "se$ has he sa(e (eanin& as J&ross earnin&s.J

6. 2D.? 2D.? SU/5@A/7E AN DEH252EN5Q? D2SPENSED E2T@ 2H TAXPAQE/ 2N 7AAD HA2T@. K This !o"r in 2("s Ele! ri! 5o., 2n!. 's. 5o"r o# Ta% Appeals. an$ 7"a&"a Ele! ri! Li&h 5o., 's. 5olle! or o# 2n ernal /e'en"e, r"le$ ha when he a%payer a! e$ in &oo$ #ai h in payin& he #ran!hise a% a he lower ra e #i%e$ by i s #ran!hise, he s"r!har&e (ay be $ispense$ wi h ;. 2D.? 2D.? 2D.? 2NSTANT 5ASE. K Ehere he $elay in he pay(en o# $e#i!ien!y a% was $"e o he erroneo"s 'iew o# he pe i ioner ha i s #ran!hise ha$ no been a(en$e$ by Se!. -;= o# he Na ional 2n ernal /e'en"e 5o$e whi!h 'iew was share$ by respon$en 5o((issioner when i (a$e re#"n$s o #ran!hise hol$ers who ha$ pai$ a he ra e o# ;9, i wo"l$ no be #air o i(pose on he pe i ioner he -;9 s"r!har&e on he $e#i!ien!y a%. DE52S2AN MANAL2NTAL, B p: This is a re'iew o# he $e!ision o# he 5o"r o# Ta% Appeals in i s 5ase No. 1--+. P"rs"an o A! No. ++0, as a(en$e$, he Es!"$ero Ele! ri! Ser'i!e was &ran e$ ("ni!ipal #ran!hises o opera e an$ (ain ain ele! ri! li&h , hea an$ power sys e(s by he ("ni!ipal !o"n!il o# 5an$elaria, O"e4on, "n$er /esol" ion No. +1, $a e$ B"ne 0, 1=-, an$ by he ("ni!ipal !o"n!il o# 5ala"an, La&"na "n$er /esol" ion No. 11, $a e$ Mar!h 1=, 1=-=. The #ran!hise #or 5an$elaria #i%e$ he ra e o# #ran!hise a% a J"no por!ien o $e los in&resos br" os 8"e ob en&a por $i!ho pri'ile&io $"ran e los pri(eros 'ein e (-*) aYos y el $os por !ien o (-9) $e los (is(os in&resos $"ran e los 8"in!e aYos res an es $e la 'i&en!ia $e es e (is(o pri'ile&io.J As o he #ran!hise o# 5ala"an, sin!e no !opy hereo# was presen e$ in e'i$en!e, he a% !o"r pres"(e$ ha he ra e o# #ran!hise a% pres!ribe$ herein was -9, as i was he ra e bein& pai$ by he pe i ioner. An No'e(ber -, 1=+* he respon$en assesse$ a&ains he pe i ioner $e#i!ien!y #ran!hise a% an$ s"r!har&e in he s"( o# P-*,--,.11 #or he perio$ #ro( Ban"ary 1, 1=6, o B"ne 1*, 1=;=, !o(p" e$ as #ollows: 7ross re!eip s per a"$i P,01,+=1.,+ ; 9 a% $"e hereon 61,+,6.;= Less: A(o"n alrea$y pai$ -0,;*1.=1 KKKKK Galan!e: P 1+,1,-.++ A$$: -; 9 s"r!har&e 6,*6;,+0 KKKKK TATAL AMAUNT DUE P -*,--,.11 ZZZZZZZZZ All billin&s (a$e by he pe i ioner, re&ar$less o# whe her pai$ or no , were (a$e s"b)e! o he #ran!hise a%. A!!or$in& o he respon$en , he a% o# ;9 on he &ross re!eip s, as well as he -;9 s"r!har&e on he $e#i!ien!y, was i(pose$ in a!!or$an!e wi h Se! ion -;= o# he Na ional 2n ernal /e'en"e 5o$e, as a(en$e$. The pe i ioner, hro"&h i s !o"nsel, pro es e$ he assess(en an$ re8"es e$ #or i s wi h$rawal an$ !an!ella ion on he #ollowin& &ro"n$s, na(ely: (< t*at t*e rig*t to assess t*e alleged defi0ien0y ta. for t*e period fro+ Banuary <, <'E> to Septe+ber (2, <'== *ad already pres0ribedD (? t*at t*e ?3 ta. pres0ribed in its fran0*ise pre4ailed o4er t*e =3 ta. pro4ided for in Se0tion ?=' of t*e %ational #nternal !e4enue Code, as a+endedD and

(( t*at t*e un0olle0ted re4enues do not 0onstitute part of t*e ta.able gross re0eipts or earnings. #n *is letter dated /ebruary <E, <'J<, t*e respondent denied t*e re6uest for la0K of legal basis. $*ereupon, t*e petitioner filed wit* t*e Court of $a. Appeals a petition for re4iew of t*e respondent8s de0ision. A# er proper pro!ee$in&s, he a% !o"r ren$ere$ i s $e!ision $a e$ De!e(ber -+, 1=+1, he $isposi i'e por ion o# whi!h rea$s: J2n res"(e, we are o# he opinion ha he ri&h o# he 7o'ern(en o assess he $e#i!ien!y #ran!hise a% a&ains pe i ioner !o'erin& he perio$ #ro( Ban"ary 1, 1=6, o Sep e(ber 1*, 1=;; has alrea$y pres!ribe$. Ei h respe! o he $e#i!ien!y #ran!hise a% an$ s"r!har&e !o'erin& he perio$ #ro( A! ober 1, 1=;; o B"ne 1*, 1=;= in he s"( o# P1;,00-.=1 (P1-,+1,.11 $e#i!ien!y a% pl"s P1,1;6.;, as -;9 s"r!har&e), he $e!ision o# respon$en is hereby a##ir(e$. J2N V2EE AH T@E HA/E7A2N7, pe i ioner is hereby or$ere$ o pay he s"( o# P1;,00-.=1 wi hin hir y $ays #ro( he $a e his $e!ision be!o(es #inal, wi ho" prono"n!e(en as o !os s.J Unable o se!"re a re!onsi$era ion o# he a$'erse por ion o# he $e!ision, he pe i ioner ins i " e$ he ins an pe i ion #or re'iew. The #irs iss"e o be resol'e$ in his !ase is whe her or no he pro'isions o# pe i ionerPs ("ni!ipal #ran!hises re&ar$in& he ra e o# a% ha'e been a(en$e$ by Se! ion -;= o# he Ta% 5o$e, as a(en$e$ by /ep"bli! A! s Nos. 1= an$ 61,, whi!h rea$s: JSE5 -;=. Ta% on !orpora e #ran!hises. KThere shall be !olle! e$ in respe! o all e%is in& an$ #" "re #ran!hises, "pon he &ross earnin&s or re!eip s #ro( he b"siness !o'ere$ by he law &ran in& he #ran!hise a a% o# #i'e per !en "( or s"!h a%es, !har&es, an$ per!en a&es as are spe!i#ie$ in he spe!ial !har ers o# he &ran ees "pon who( s"!h #ran!hises are !on#erre$, whi!he'er is hi&her, "nless he pro'isions hereo# pre!l"$e he i(posi ion o# a hi&her a%. Hor he p"rpose o# #a!ili a in& he assess(en o# his a%, repor s shall be (a$e by he respe! i'e hol$ers o# he #ran!hises in s"!h #or( an$ a s"!h i(es, as shall be re8"ire$ by he re&"la ions o# he Depar (en o# Hinan!e. JThe a%es, !har&es, an$ per!en a&es on !orpora e #ran!hises, shall be $"e an$ payable as spe!i#ie$ in he par i!"lar #ran!hise, or in !ase no i(e li(i is spe!i#ie$ herein, he pro'isions o# se! ion one h"n$re$ an$ ei&h y3 hree shall apply? an$ i# s"!h a%es, !har&es, an$ per!en a&es re(ain "npai$ #or #i# een $ays #ro( an$ a# er he $a e on whi!h hey ("s be pai$, wen y3#i'e per !en "( shall be a$$e$ o he a(o"n o# s"!h a%es, !har&es, an$ per!en a&es, whi!h in!rease shall #or( par o# he a%.P 2n a leas #o"r !ases si(ilar o he presen !ase, where he #ran!hises were iss"e$ by he ("ni!ipal !o"n!ils also p"rs"an o A! No. ++0, his 5o"r has hel$ ha he a#ore8"o e$ se! ion o# he a% !o$e a(en$e$ he per inen pro'isions o# he ("ni!ipal #ran!hises. 2n Galan&a Power Plan 5o. 's. 5o((issioner o# 2n ernal /e'en"e, his 5o"r sai$: JA he o" se , i sho"l$ be no e$ he s a "s o# pe i ionerPs ("ni!ipal #ran!hises as proper y an$ proper y ri&h is $epen$en "pon or 8"ali#ie$ by he na "re an$ li(i a ions o# he a" hori y "n$er whi!h sai$ #ran!hises were &ran e$ by he ("ni!ipal !orpora ions !on!erne$. A$(i e$ly, s"!h a" hori y, as re&ar$s he #ran!hises #or Galan&a an$ Sa(al, e(ana e$ #ro( A! No. ++0, p"rs"an o whi!h #ran!hises &ran e$ here"n$er shall be Ps"b)e! o he power o# 5on&ress o al er, (o$i#y or repeal he sa(e.P To he e% en ha Se! ion -;= o# o"r Na ional 2n ernal /e'en"e 5o$e is in!onsis en wi h he ra e o# a%es #i%e$ in sai$ ("ni!ipal #ran!hises K an$ he heory ha Se! ion -,= as applie$ o pe i ioner herein is "n!ons i " ional, ne!essarily i(plies s"!h

in!onsis en!y K i is ob'io"s ha , #or all in en s an$ p"rposes, sai$ le&al pro'ision al ers he per inen pro'isions o# sai$ #ran!hises. 2n e##e! in& s"!h al era ion, o"r le&isla i'e $epar (en has (erely e%er!ise$, howe'er, a power e%pressly reser'e$ here o by sai$ #ran!hises, an$ has a! e$, here#ore, in !on#or(i y herewi h, no in 'iola ion o# he pro'isions hereo# or o he $e ri(en o# he ri&h s hereby 'es e$ in pe i ioner herein . . . J Ee now !o(e o he 8"es ion as o whe her he "n!olle! e$ a(o"n s $"e #ro( pe i ionerPs !"s o(ers sho"l$ be e%!l"$e$ in !o(p" in& he #ran!hise a%. 2n "phol$in& he assess(en (a$e by he respon$en wherein he #ran!hise a% payable by he pe i ioner was base$ on &ross re!eip s, whe her !olle! e$ or no , he a% !o"r relie$ on he !ase o# Philippine Lon& Dis an!e Telephone 5o(pany 's. 5olle! or o# 2n ernal /e'en"e. 2n ha !ase his 5o"r !ons r"e$ J&ross re!eip sJ o (ean J&ross earnin&s,J hereby s"b)e! in& he "n!olle! e$ re'en"es o he a%. Th"s: J . . . J/e!eip sJ (eans a(o"n a! "ally re!ei'e$, #or o herwise hey wo"l$ no be re!eip s. 2# he wor$s o# he #ran!hise were o be !ons r"e$ in heir li eral sense, in$epen$en ly o# he or&ani! a! or he 5ons i " ion, he heory o# he plain i##3appellan (ay be pla"sible? b" i sho"l$ be no e$ ha he Philippine Le&isla "re &ran e$ he #ran!hises hro"&h A! s Nos. 11+, an$ 161+ "n$er he a" hori y 'es e$ in i by Se! ion 06 o# he Philippine Gill o# 1=*-, he #irs or&ani! a! , an$ by Se! ion -, o# he Bones Law, . . . JThe a! s o# he Le&isla "re &ran in& he #ran!hises sho"l$ be !ons r"e$ so as no o !on ra'ene or 'iola e he or&ani! a! s abo'e (en ione$, #or o herwise sai$ le&isla i'e a! s wo"l$ be n"ll an$ 'oi$ or "n!ons i " ional. The or&ani! a! s "se he wor$ Pearnin&s.P A person (ay ha'e earne$ his salary b" (ay no ha'e !olle! e$ i , or (ay be "nable o !olle! i #ro( an insol'en e(ployer. A person !anno $e(an$ pay(en o# his "npai$ salary "nless he has earne$ i . This wo"l$ show ha o !olle! is a $i##eren a! #ro( o earn. 5onse8"en ly, he "n!olle! e$ P&ross re!eip sP whi!h sho"l$ be !ons r"e$ as (eanin& he sa(e hin& as P&ross earnin&sP sho"l$ be s"b)e! o he #ran!hise a%.J 2n$ee$, Se! ion -;= o# he Na ional 2n ernal /e'en"e 5o$e, as a(en$e$ by /ep"bli! A! s Nos. 1= an$ 61,, "ses he er( J&ross earnin&s or re!eip s,J so h"s ha J&ross re!eip sJ as so "se$ has he sa(e (eanin& as J&ross earnin&s.J A!!or$in&ly, he "n!olle! e$ !har&es or a(o"n s $"e #ro( he pe i ionerPs !"s o(ers sho"l$ be !onsi$ere$ par o# he a%able J&ross earnin&s or re!eip s.J Bith respect to the imposition of )4# surcharge on the deficiency , his 5o"r in 2("s Ele! ri! 5o., 2n!. 's. 5o"r o# Ta% Appeals, s"pra, an$ 7"a&"a Ele! ri! Li&h 5o., 2n!. 's. 5olle! or o# 2n ernal /e'en"e, s"pra, ruled that when the taxpayer acted in #ood faith in payin# the franchise tax at the lower rate fixed $y its franchise, the surchar#e may $e dispensed with. 7n the instant case, the delay in the payment of the deficiency tax was due to the erroneous view of the petitioner that its franchises had not been amended by Section )4H of the 'ational 7nternal 5evenue /ode( Since it appears that at one time or another the office of the respondent also shared the view of the petitioner to the extent of making refunds to franchise holders who had paid at the rate of 4# as in the aforecited cases, it would not be fair to impose on the herein petitioner the )4# surcharge( E'i$en ly i was only a# er o"r $e!ision in he wo !ases o# @oa @in 5o. 's. Da'i$, 7./. Nos. L3=+1+ an$ L3110,1, May -;, 1=;=, wherein we hel$ Se! ion -;= o# he Ta% 5o$e o be appli!able, ha he G"rea" o# 2n ernal /e'en"e $e#ine$ i s s an$ a!!or$in&ly an$ s ar e$ assessin& ("ni!ipal #ran!hise a%es a ;9 ins ea$ o# a he lower ra es s a e$ in he !orrespon$in& #ran!hises. 2n he presen !ase he assess(en o# he $e#i!ien!y a%es, (a$e on No'e(ber -, 1=+* !o'ere$ a perio$ "p o B"ne 1*, 1=;= only? an$ i !anno here#ore be sai$ ha he pe i ioner ha$ been payin& be#ore hen a he lower ra e o# -9 wi h .nowle$&e ha i s pay(en s

were $e#i!ien . A"r r"lin& wi h respe! o he s"r!har&e in he 2("s an$ 7"a&"a !ases sho"l$ apply herein. E@E/EHA/E, (o$i#ie$ by eli(ina in& he -;9 s"r!har&e on he a(o"n o# P1,1;6.;,, he $e!ision appeale$ #ro( is hereby a##ir(e$. No prono"n!e(en as o !os s. "% BA%C ;G.!. %o. L7?22J2. April (2, <'J>.@ L#L#A 5" B"SUS7S"V#LLA, petitioner, 4s. $F" C&LL"C$&! &/ #%$"!%AL !"V"%U", respondent. Meer, Meer > Meer #or pe i ioner. Soli!i or 7eneral Ar "ro A. Ala#ri4, Soli!i or Ale)an$ro G. A#"ron&, A y. Pres!illa /. 7on4ales an$ A y. Bes"s P. L".ban #or respon$en . DE52S2AN MANAL2NTAL, B p: The #a! s o# his !ase are s a e$ in he $e!ision "n$er re'iew (5.T.A. 5ase No. 166): JThe pe i ioner is a lawyer an$ a b"siness3wo(an, who, so(e i(e in B"ne, 1=;6, was in ro$"!e$ by one /ene Nie o o Bes"s S o. To(as 5or es (Bes 5or es #or shor ), now $e!ease$, a well3.nown opera or an$ pro(o er o# spor s e%hibi ions an$ o her en er ain(en s in he Philippines. An his (ee in&, Bes 5or es broa!he$ he s"b)e! o# pro(o in& he #irs b"ll#i&h e%hibi ions in he Philippines an$ pi! "re$ o her i s #inan!ial s"!!ess. Ge!a"se he s a&in& o# b"ll#i&h s re8"ires a !onsi$erable a(o"n o# (oney, an$ no bein& in a posi ion o raise he !api al, he propose$ ha pe i ioner "n$er a.e he raisin& o# wor.in& !api al #or he 'en "re o whi!h proposal he la er a&ree$. JAn A"&"s -*, 1=;6, he pe i ioner &a'e Bes 5or es a spe!ial power o en er in o a !on ra! wi h he represen a i'es o# he b"ll#i&h ro"pe #ro( Lisbon, Por "&al (E%h. 1, p. 1++, Vol. 222, G2/ re!.). An A"&"s -+, 1=;6, Bes 5or es !on!l"$e$ personally an$ in his own na(e a b"ll#i&h !on ra! wi h Da'i$ /o$ri&"e4 Garro e, represen in& Al#re$o Da Sil'a A'er 1 ha, E(presario an$ Mana&er o# he Por "&"ese G"ll#i&h Tro"pe (E%h. A, pp. ;13;+, 5TA re!.). JAn A! ober 1*, 1=;6, Bes 5or es an$ he pe i ioner en ere$ in o a P5on ra! o# Mana&e(en ,P wherein he #or(er was $eno(ina e$ as pro(o er an$ he la er as &eneral (ana&er o# he b"ll#i&h . A(on& o hers, he !on ra! pro'i$e$: PTha he sai$ A7ENT, as 7eneral Mana&er, shall arran&e an$ pro'i$e a wor.in& !api al #or he opera ions o# he P/AMATE/, by (eans o# an o'er$ra# or o'er$ra# s in one or (ore o# he ban.in& ins i " ions o# he 5i y o# Manila, in s"!h s"(s as (aybe, #ro( i(e o i(e, ne!essary an$ proper no o e%!ee$ in he s"( o al a any one i(e, he s"( o# ANE @UND/ED T@AUSAND (P1**,***.**) PESAS, an$ $oes hereby warran ha sai$ wor.in& !api al shall be a'ailable in sai$ re8"isi e s"(s, pro(isin& an$ a&reein&, whene'er ne!essary, o &"aran ee he repay(en o# he sai$ o'er$ra# s "n o he in eres e$ ban.in& ins i " ions he ple$&e o# he #ai h an$ !re$i o# he sai$ A7ENT, o he en ire sa is#a! ion o# he in eres e$ ban.in& ins i " ions, or o her !re$i ors, i# any.P (Par. 22, E%h. D, pp. ;=, +* 5TA re!.). JS"bse8"en ly, he pe i ioner en ere$ in o !on ra! s (E%h. ;, pp. 1;+3 1;0, Vol. 222, G2/ re!.) wi h he Taba!alera &ran in& he la er Pe%!l"si'e ri&h o "se #or he a$'er ise(en o# i s pro$"! s he b"ll#i&h s whi!h shall be hel$ in Manila,P an$ wi h @arry Lyons, 2n!. #or he !ons r"! ion by he la er o# he b"ll#i&h arena.

JAn De!e(ber 1, 1=;6, Bes 5or es se!"re$ #ro( he Dire! or o# Lan$s a per(i o o!!"py an$ !ons r"! a b"ll#i&h arena in he S"n.en 7ar$en (E%h. @30, p. 06, 5TA re!.). JThere were a! "ally se'en (0) b"ll#i&h e%hibi ions hel$ be ween De!e(ber 11, 1=;6 o Hebr"ary +, 1=;;. Ge#ore, $"rin& an$ a# er he e%hibi ions were hel$, he pe i ioner .ep he boo.s o# a!!o"n s? !a"se$ he prin in& o# han$bills an$ i!.e s an$ he sale o# he la er? an$ e(ploye$ he personnel nee$e$ #or he opera ion o# he b"ll#i&h 'en "re. She also pro'i$e$ he 'en "re wi h a wor.in& !api al in he o al a(o"n o# P10*,***.**. JAn he basis o# he &ross pro!ee$s $eri'e$ #ro( he b"ll#i&h e%hibi ions, respon$en (5olle! or o# 2n ernal /e'en"e) assesse$ an$ $e(an$e$ #ro( pe i ioner he a(o"n o# P111,*;+.,6 as a("se(en a% an$ s"r!har&e, pl"s P+**.** as !o(pro(ise penal y #or #ail"re o re&is er he boo.s o# a!!o"n s wi h he G"rea" o# 2n ernal /e'en"e (E%h. -1, pp. -;*3-;1, Vol. 2, G2/ re!.). JA# er re8"es #or re!onsi$era ion o# he assess(en an$ $e(an$ ha'in& been $enie$ by respon$en (E%h. /, p. ,, 5TA re!.), pe i ioner appeale$ ( o he 5o"r o# Ta% Appeals).J An May -1, 1=+- he 5o"r o# Ta% Appeals a##ir(e$, wi h !os s a&ains pe i ioner, he $e!ision o# he 5olle! or o# 2n ernal /e'en"e Je%!ep wi h respe! o he s"( o# P+**.** so"&h o be !olle! e$ as !o(pro(ise penal y.J @en!e his appeal. There is no $isp" e as o he !orre! ness o# he a(o"n o# a("se(en a% so"&h o be !olle! e$ by respon$en . The sole iss"e #or $e er(ina ion is whe her or no pe i ioner (aybe properly !onsi$ere$ he proprie or or opera or o# he b"ll#i&h e%hibi ions, h"s (a.in& her liable #or he pay(en o# he a("se(en a% "n$er Se! ion -+* o# he Na ional 2n ernal /e'en"e 5o$e. 2n $enyin& her liabili y #or he pay(en o# he a("se(en a% $e(an$e$, pe i ioner !on en$s ha he la e Bes 5or es, ins ea$ o# her, sho"l$ be !onsi$ere$ he opera or or pro(o er. She submits that being merely a financier or capitalist who furnished the necessary funds for the staging of the bullfight exhibitions, she cannot be held liable for the payment of the amusement tax due( 7n this connection, she invokes our ruling in the case of Blaquera vs( .ldaba :-3"4>@, 9arch >", 3H*"$ to the effect that a Kfinancier and capitalistK of a stage presentation cannot be held liable for the payment of the amusement tax( Ee belie'e ha pe i ionerPs relian!e on he a#ore!i e$ !ase is (ispla!e$. 2n ha !ase, i was !on!l"si'ely shown ha he #inan!ierPs only par i!ipa ion in he s a&e presen a ion was li(i e$ o he &i'in& o# ne!essary #"n$s K whi!h really was in he na "re o# a loan K o he !o(pany in3!har&e o# he opera presen a ion wi h he "n$ers an$in& ha he sa(e wo"l$ be re "rne$ as soon as he !o(pany ha$ #"n$s. The instant case presents an entirely different working arrangement( 7n addition to financing the bullfight exhibitions, petitioner assumed active involvement in the agreed business venture . An A"&"s -*, 1=;6 she e%pressly &a'e Bes 5or es a" hori y K as e(bo$ie$ in he spe!ial power o# a orney e%e!" e$ by pe i ioner in #a'or o# Bes 5or es K o en er in o a !on ra! wi h he represen a i'es o# he b"ll#i&h ro"pe o s a&e se'eral b"ll#i&h e%hibi ions in Manila. Si% (+) $ays la er, Bes 5or es e%e!" e$ an$ si&ne$ he b"ll#i&h !on ra! . A$(i e$ly, pe i ionerPs par i!ipa ion wi h respe! o he s a&in& o# he b"ll#i&h e%hibi ions be!a(e (ore in'ol'e$ a# er he b"ll#i&h !on ra! was per#e! e$. She acknowledged having granted to Tabacalera the exclusive right to use the bullfights for advertisement of its products+ she likewise contracted the services of 8arry :yons, 7nc( for the construction of the bullfight arena( She took charge of the disbursements and gate receipts during the bullfight exhibitions as

well as the recording and keeping of the pertinent books of account . She was here#ore (ore han a (ere #inan!ier or !api alis in he sense "n$ers oo$ in he Gla8"era 's. Al$aba !ase (s"pra). Pe i ioner !i es he pro'ision o# he Mana&e(en 5on ra! e%e!" e$ be ween her an$ Bes 5or es on A! ober 1*, 1=;6, wherein she is re#erre$ o as A7ENT an$ 5or es as P/AMATE/. She insis s ha i# e'er she a en$e$ a! i'ely o he $e ails !on!ernin& he b"ll#i&h e%hibi ions, h"s (a.in& her an a! i'e #inan!ier, i was pri(arily in .eepin& wi h her new role as &eneral (ana&er in3!har&e. She a$'an!es he 'iew ha Bes 5or es ass"(e$ personal responsibili y as prin!ipal when he si&ne$ he b"ll#i&h !on ra! sin!e "n$er he er(s hereo#, he !on e(pla e$ b"ll#i&h e%hibi ions wo"l$ be "n$er he (ana&e(en , !on rol an$ $ire! ion o# he Se!on$ Par y (Bes 5or es), a s"!h pla!es an$ a s"!h i(es as he Se!on$ Par y (ay in$i!a e wi ho" any re#eren!e o her a all. P"rs"in& her ar&"(en #"r her, pe i ioner says: JA# er he !on ra! (E%h.PAP) was e%e!" e$, Bes 5or es showe$ he sa(e o he pe i ioner, in#or(in& he la er ha he e%e!" e$ he sa(e as prin!ipal be!a"se, in he (ean i(e, he ha$ !han&e$ his (in$ an$ he wan e$ o be he prin!ipal hi(sel#, an$ he pe i ioner o be he (ana&er ( .s.n. p. 11, Sep . -=, 1=;,). JGe!a"se o# he !han&e in he arran&e(en an$ in or$er o pro e! he lar&e s"( o# (oney he pe i ioner ha$ alrea$y spen in prepara ion #or he b"ll#i&h e%hibi ions, she #inally a&ree$ o )oin Bes 5or es as (ana&er, an$ so, on A! ober 1*, 1=;6, he pe i ioner si&ne$ he 5on ra! o# Mana&e(en (E%h. PDP) wherein he roles o# he par ies were re'erse$ . . . J (Pe i ionerPs brie#, p. +) An his s!ore, we #in$ pe i ionerPs ar&"(en wi ho" (eri . As !orre! ly no e$ by respon$en , in A"&"s o# 1=;6 when Bes 5or es alle&e$ly in#or(e$ pe i ioner ha he ha$ en ere$ in o he b"ll#i&h !on ra! #or his own a!!o"n , pe i ioner ha$ no ye in'es e$ any (oney in he 'en "re sin!e i was only la er K Sep e(ber 1, 1=;6 o be e%a! K ha pe i ioner p" "p her ini ial in'es (en o# P=*,***. 2n o her wor$s, i is ina!!"ra e o say ha pe i ioner a&ree$ o he $e(an$s o# Bes 5or es o pro e! her in'es (en be!a"se a ha i(e she ha$ no ye spen any si&ni#i!an a(o"n . 2# here was any person who ha$ 'ali$ reason o #ear ha he propose$ b"ll#i&h e%hibi ions (i&h no (a eriali4e, i was Bes 5or es who ("s ha'e ho"&h o# he serio"s !onse8"en!es sho"l$ pe i ioner ba!. o" a ha s a&e. Ab'io"sly i was #or his reason ha Bes 5or es !a"se$ pe i ioner o si&n he Mana&e(en 5on ra! , "n$er whi!h pe i ionerPs #inan!ial s"ppor was ass"re$ an$ her ri&h as in'es or well3pro e! e$. Ei h hese #a! s in (in$, he Mana&e(en 5on ra! !o"l$ no ha'e been in en$e$ o re'o.e he spe!ial power o# a orney? ra her, he #or(er was an a$$e$ pro e! ion o he in eres s o# bo h par ies sin!e i &a'e pe i ioner s"##i!ien se!"ri y an$ pro e! ion o# her wor.in& !api al an$, a he sa(e i(e, ass"re$ Bes 5or es o# he a'ailabili y o# ne!essary #"n$s. The "se o# he er( pro(o er in $es!ribin& Bes 5or es "n$er he Mana&e(en 5on ra! sho"l$ no be &i'en any "n$"e si&ni#i!an!e sin!e "n$er he se 3"p )"s $es!ribe$, pro(o er was !on'enien ly "se$ only in he sense ha Bes 5or es .new he pra! i!al aspe! s o# he b"siness be er han pe i ioner $i$. 2n a #"r her e##or o a'oi$ liabili y, pe i ioner poin s o he #a! ha i was Bes 5or es, no she, who appro'e$ an$ si&ne$ he a("se(en a% re "rn !o'erin& he b"ll#i&h e%hibi ions in 8"es ion an$ ha he s a e(en o# in!o(e an$ e%penses o# he 'en "re was si&ne$ by Bes 5or es as pro(o er an$ opera or. This #a! !an ha'e 'ery li le pers"asi'e e##e! , !onsi$erin& ha sai$ $o!"(en s were prepare$ an$ #ile$ a# er pe i ioner ha$ been assesse$ #or a("se(en a%es on Ban"ary -1, 1=;; in her !apa!i y as opera or an$ pro(o er. 2n #a! , we see in i a s"b le a e(p o ren$er he !olle! ion o# he a("se(en a%es $"e (ore $i##i!"l . E@E/EHA/E, he )"$&(en appeale$ #ro( is hereby a##ir(e$. 5os s a&ains pe i ioner.

"% BA%C ;G.!. %o. L7<((>). Aar0* ?>, <'J2.@ SI CF#UC&, petitioner, 4s. C&LL"C$&! &/ #%$"!%AL !"V"%U", respondent. SQLLAGUS TAXAT2AN? AMUSEMENT TAXES? APE/AT2AN AH 5AGA/ETS? STATUTA/Q 5ANST/U5T2AN? S/&P% &2 T%59 K=5&SS 5%/%7PTSK. K A !abare is a pla!e o# a("se(en where !"s o(ers &o be!a"se o# heir $esire o $an!e an$ where he JbailarinasJ are he (ain a ra! ion. Dan!in& is he (ain b"siness an$ !"s o(ers pa roni4e he pla!e a ra! e$ by he JbailarinasJ. As a (a er o# #a! , JbailarinasJ are he in$ispensable #a! or in he opera ion o# he b"siness. Bhatever is paid to them should, therefore, be considered as paid on account of the business, and as such as part of the operatorEs gross receipts. The #ore&oin& in erpre a ion (ay be &leane$ #ro( se! ion -+* o# he Na ional 2n ernal /e'en"e 5o$e which, in referring to the gross receipts the operation of the cabaret may reali,e, includes mainly all receipts Kirrespective of whether or not any amount is charged or paid for admission(K The law "n$o"b e$ly (ainly !on e(pla es o in!l"$e he #ees ha (ay be pai$ by he !"s o(er #or he pri'ile&e o# $an!in& #or i !onsi$ers as in!i$en al wha (ay be pai$ by he !"s o(ers as a$(ission #ee. 2n o her wor$s, he law in e##e! !onsi$ers he a(o"n !har&e$ a&ains he !"s o(ers #or $an!in& wi h he JbailarinasJ as he (ain &ross re!eip s o# he !abare , he a$(ission #ee here o bein& (erely in!i$en al. DE52S2AN GAUT2STA AN7ELA, B p: Pe i ioner was he owner an$ opera or o# he La Lo(a 5abare lo!a e$ a La Lo(a, O"e4on 5i y #ro( 1=-+ o Ban"ary, 1=;+. The !"s o(ers who pa roni4e$ he !abare were !har&e$ P*.1* per $an!e, P*.1* o be pai$ be#ore en erin& he $an!e hall an$ he re(ainin& P*.-* o be pai$ o he JbailarinasJ a# er he $an!e. The !"s o(ers were in#or(e$ o# he #ees o be pai$ per $an!e by (eans o# pos ers #o"n$ in !onspi!"o"s pla!es o# he !abare s a in&:. 7a e ....................... P*.1* La$ies ......................... .-*A Dan!e To al ............. P*.1*. D"rin& he perio$ #ro( Ban"ary, 1=60 o A"&"s , 1=;*, pe i ioner $e!lare$ in his re "rn only he #ollowin& #ross receipts% receipts from #ate admissions at P0&10 each, P.B,160&,0/ receipts from restaurant sales, P.,CCB&B0/ receipts from $ar sales, P,D,,.B&10, and paid thereon a 10 per cent amusement tax in the amount of P11,1BD&,0& @a'in& #aile$ o $e!lare #or a% p"rposes he P*.-* $an!e #ee payable o he JbailarinasJ whi!h pe i ioner !olle! e$ as par o# his b"siness, respon$en assesse$ a&ains hi( a $e#i!ien!y a("se(en a%, in!l"$in& ;* per !en s"r!har&e, in he a(o"n o# P10,+1+.*;. /espon$en also assesse$ a&ains pe i ioner he #"r her s"( o# P1**.** as penal y in se le(en o# his 'iola ion o# Se! ion -+* o# he Ta% 5o$e an$ he Goo..eepin& /e&"la ions. Hro( he abo'e assess(en , pe i ioner oo. he !ase on appeal o he 5o"r o# Ta% Appeals where, a# er $"e hearin&, sai$ !o"r ren$ere$ $e!ision a##ir(in& he !on en ion o# respon$en inso#ar as he hol$s pe i ioner liable o pay he s"( o# P10,+1+.*; as $e#i!ien!y a("se(en a% an$ s"r!har&e #or he perio$ #ro( Ban"ary, 1=60 o A"&"s , 1=;*. @owe'er, he 5o"r o# Ta% Appeals re)e! e$ he i(posi ion o# he penal y in he s"( o# P1**.** alle&in& la!. o# power or a" hori y o

or$er he pay(en o# s"!h penal y. 2n $"e i(e, pe i ioner #ile$ he presen pe i ion #or re'iew. The law "n$er whi!h he $e#i!ien!y a("se(en a% was !olle! e$ #ro( pe i ioner #or his alle&e$ &ross re!eip s #ro( Ban"ary, 1=60 o A"&"s , 1=;* is Se! ion -+* o# he Ta% 5o$e, he per inen por ion o# whi!h rea$s: J2n he !ase o# !o!.pi s, !abare s, an$ ni&h !l"bs, here shall be !olle! e$ #ro( he proprie ors, lessees, or opera ors a a% e8"i'alen o en per !en "( . . . o# the gross receipts, irrespective of whether or not any amount is charged or paid for admission( ( ( ( 2or the purpose of amusement tax, the term Egross receiptsE embraces all the receipts of the proprietor, lessee, or operator of the amusement place(J 2 wo"l$ appear ha he owner or opera or o# a !abare is re8"ire$ o pay an a("se(en a% e8"i'alen o 1* per !en o# he &ross re!eip s o# his b"siness Kirrespective of whether or not any amount is charged or paid for admission. The law #"r her a$$s ha , #or he p"rposes o# a("se(en a%, the term Kgross receiptsK embraces all the receipts of the proprietor or operator of the business( The 8"es ion ha now arises is: Eha sho"l$ be !onsi$ere$ as &ross re!eip s o# he La Lo(a 5abare opera e$ by pe i ionerR Does his er( in!l"$e only wha i !olle! s #ro( i s !"s o(ers as a$(ission #ee o he !abare , or i sho"l$ also in!l"$e he $an!e #ee ha is !har&e$ by he !abare as !o(pensa ion #or i s JbailarinasJR Pe i ioner !on en$s ha i sho"l$ only in!l"$e wha he !olle! s as a$(ission #ee, and not those representin# the dance fee $ecause they do not #o to the operator, $ut to the ?$ailarinas?& 5n other words, petitioner contends that $ecause those dance fees #o to the ?$ailarinas?, they could not $e considered as part of the #ross receipts of the ca$aret. Ei h his !on en ion we $isa&ree. A !abare is a pla!e o# a("se(en where !"s o(ers &o be!a"se o# heir $esire o $an!e an$ where he JbailarinasJ are he (ain a ra! ion. Dan!in& is he (ain b"siness an$ !"s o(ers pa roni4e he pla!e a ra! e$ by he JbailarinasJ. As a (a er o# #a! , JbailarinasJ are he in$ispensable #a! or in he opera ion o# he b"siness. Eha e'er is pai$ o he( sho"l$, here#ore, be !onsi$ere$ as pai$ on a!!o"n o# he b"siness, an$ as s"!h i sho"l$ be !onsi$ere$ as par o# pe i ionerPs &ross re!eip s. Tha he #ore&oin& is he !orre! in erpre a ion o# he er( J&ross re!eip sJ !an be &leane$ #ro( he 'ery er(inolo&y o# he law wherein in re#errin& o he &ross re!eip s he opera ion o# he !abare (ay reali4e i in!l"$es (ainly all re!eip s Jirrespe! i'e o# whe her or no any a(o"n is !har&e$ or pai$ #or a$(ission.J The law "n$o"b e$ly (ainly !on e(pla es o in!l"$e he #ees ha (ay be pai$ by he !"s o(er #or he pri'ile&e o# $an!in& #or i !onsi$ers as in!i$en al wha (ay be pai$ by he !"s o(er as a$(ission #ee. 2n o her wor$s, he law in e##e! !onsi$ers he a(o"n !har&e$ a&ains he !"s o(ers #or $an!in& wi h he JbailarinasJ as he (ain &ross re!eip s o# he !abare , he a$(ission #ee here o bein& (erely in!i$en al. 2n his respe! , we are in #"ll a!!or$ wi h he #ollowin& prono"n!e(en o# he 5o"r o# Ta% Appeals: JEe hol$ ha when an opera or, proprie or or lessee o# a !abare a.es i "pon hi(sel# o se a #i%e$ $an!e #ee an$ hereby en$s o he !olle! ion o# he sa(e #or he bene#i o# his PbailarinasP or hos esses, he in!o(e $eri'e$ here#ro( #or(s par o# his &ross re!eip s an$ here#ore s"b)e! o a("se(en a%. Gy s"!h i(posi ion, he opera or be!o(es he prin!ipal par y o he i(plie$ !on ra! o# lease o# ser'i!es wi h his !"s o(ers in pla!e o# he PbailarinasP or hos esses "n$er his e(ploy an$ here#ore s"b)e! o he res"l in& liabili ies as s"!h !on ra! in& par y.J Pe i ioner, howe'er, !on en$s ha he 5o"r o# Ta% Appeals erre$ in !har&in& a&ains hi( he s"r!har&e o# ;* per !en on he a(o"n he

alle&e$ly "n$er$e!lare$ #or he reason ha here is no e'i$en!e on re!or$ o show ha he $e#ra"$e$ he 7o'ern(en . Ehile here is no $ire! e'i$en!e o show a! "al #ra"$ on he par o# pe i ioner, howe'er, he !ir!"(s an!es #o"n$ by he 5o"r o# Ta% Appeals in$i!a e ha he has $elibera ely o(i e$ in his boo. a si4eable por ion o# his a%able in!o(e whi!h in s"bs an!e a(o"n s o #ra"$. 2n he !ir!"(s an!es, we are no prepare$ o $is "rb he #in$in& o# he 5o"r o# Ta% Appeals on his (a er e'en i# here is no $ire! e'i$en!e ha #ra"$ was !o((i e$. As re&ar$s he !on en ion ha he !olle! ion o# he a% in 8"es ion has alrea$y pres!ribe$, i appears ha his 8"es ion was no raise$ as an iss"e in he pe i ion #or re'iew #ile$ by pe i ioner in he 5o"r o# Ta% Appeals. 2 was no e'en o"!he$ by hi( in he (e(oran$"( he s"b(i e$. There is, here#ore, eno"&h reason o belie'e ha pe i ioner has wai'e$ his $e#ense an$ so i !anno now be en er aine$. To hol$ o herwise wo"l$ be o $epri'e respon$en o# his ri&h o show he !on rary, his (a er bein& e'i$en iary in na "re. Ehere#ore, he $e!ision appeale$ #ro( is a##ir(e$, wi h !os s a&ains pe i ioner.

EX52SE TAX, $e#ine$ A a% i(pose$ "pon he per#or(an!e o# an a! , he en)oy(en o# a pri'ile&e, or he en&a&in& in an o!!"pa ion. 2 (ay re#er o a a% "pon proper y #or he pri'ile&e o en)oy or he "se he sa(e. EX52SE TAX D2ST2N7U2S@ED H/AM /AQALTQ a. b. E%!ise a% on he pri'ile&e o# e% ra! in& (inerals #ro( he ear h E@2LE royal y as he er( "se$ an$ "n$ers oo$ in (inin& an$ oil opera ion (eans a share in he pro$"! or pro#i pai$ o he owner o# he proper y. /oyal y pai$ o he &o'ern(en is ri&h #"lly base$ on he a(o"n in$i!a e$ in he #inal in'oi!e be!a"se i is he a(o"n whi!h will be re!ei'e$ by he seller #ro( he b"yer as !onsi$era ion #or he sale o# (ineral pro$"! s E@2LE e%!ise a% is base$ on he 'al"e o# (ineral pro$"! s a he i(e o# re(o'al.

7AADS SUGBE5T TA EX52SE TAX E%!ise a% apply o: a. b. 7oo$s (an"#a! "re$ or pro$"!e$ in he Philippines #or $o(es i! sales or !ons"(p ion or #or any o her $isposi ion an$ To hin&s i(por e$.

The e%!ise a% shall be in a$$i ion o he 'al"e a$$e$ a%. P/ADU5TS SUGBE5T TA EX52SE TAX a. b. !. $. e. Al!ohol pro$"! s Toba!!o pro$"! s Pe role"( pro$"! s Mineral pro$"! s an$ Mis!ellaneo"s pro$"! s li.e: 1. A" o(obiles -. Bewelry 1. Per#"(es an$ oile wa ers 6. Qa!h s an$ o her 'essels in en$e$ #or pleas"re or spor s

N2NDS AH EX52SE TAXES a. b. Spe!i#i! Ta% A$ Valore( Ta%

SPE52H25 TAX $e#ine$ E%!ise a% base$ on wei&h or 'ol"(e !apa!i y or any o her physi!al "ni o# (eas"re(en .

AD VALA/EM TAX $e#ine$ E%!ise a% base$ on sellin& pri!e or o her spe!i#ie$ 'al"e o# he &oo$. MEAN2N7 AH SA5TUAL MA/NET VALUE AH T@E 7/ASS AUTPUT T@E/EAH AT T@E T2ME AH /EMAVAL,T HA/ EX52SE TAXES AN M2NE/AL P/ADU5TS. The a! "al (ar.e 'al"e o# he (inerals a he i(e (inerals were re(o'e$ away #ro( he posi ion i o!!"pie$, ob'io"sly re#errin& o Philippine 'al"a ion an$ analysis be!a"se i is his !o"n ry where hese (inerals were e% ra! e$, re(o'e$ an$ e'en "ally shippe$ abroa$. This (eanin& is !onsis en wi h he essen!e o# e%!ise a%. 2 is a !har&e "pon he pri'ile&e o# se'erin& or e% ra! in& (inerals #ro( he ear h, an$ i is $"e an$ payable "pon re(o'al o# he (ineral pro$"! s #or( i s be$ or (ines. The law is !lear. 2 $oes no spea. o# a! "al (ar.e 'al"e a he i(e he (ineral pro$"! s are "nloa$e$ a he !o"n ry o# $es ina ion nei her $oes i spea. o# he sellin& pri!e as he basis o# he e%!ise a%.

5&CUA"%$A!I S$AAP $AG

SUGBE5T AH DA5UMENTA/Q STAMP TAXES a. b. !. "pon $o!"(en s, ins r"(en s, loan a&ree(en s an$ papers "pon a!!ep an!es, assi&n(en s, sales an$ rans#ers o# he obli&a ion, ri&h or proper y in!i$en here o, There shall be le'ie$, !olle! e$ an$ pai$ #or, an$ in respe! o# he ransa! ion so ha$ or a!!o(plishe$ he !orrespon$in& $o!"(en ary s a(p a%.

DA5UMENTS AND PAPE/S SUGBE5T TA DA5UMEENTA/Q STAMP TAX. a. b. !. $eben "res an$ !er i#i!a es o# in$eb e$ness ori&inal iss"e o# shares o# s o!. sales, a&ree(en s o sell, (e(oran$a o# sales, $eli'eries an$ rans#ers o# $"e3bills, !er i#i!a es o# obli&a ion or shares or !er i#i!a es o# s o!.s. $. Gon$s, $eben "res, !er i#i!a es o# s o!.s or in$eb e$ness iss"e$ in #orei&n !o"n ries e. 5er i#i!a es o# pro#i s or in eres in proper y or a!!"("la ion #. Gan.s, !he!.s, $ra# s, !er i#i!a es o# $eposi no bearin& in eres or o her ins r"(en s &. Gon$s, loan a&ree(en s, pro(issory no es, bills o# e%!han&e, $ra# s, ins r"(en s an$ se!"ri ies iss"e$ by he 7o'ern(en or any o# i s ins r"(en ali ies, $eposi s"bs i " e $eb ins r"(en s, !er i#i!a es o# $eposi s bearin& in eres an$ o hers no payable on si&h or $e(an$ h. A!!ep an!e o# bills o# e%!han&e or o hers i. Horei&n bills o# e%!han&e an$ le ers o# !re$i ). Poli!ies o# ins"ran!e or proper y .. Hi$eli y bon$s an$ o her ins"ran!e poli!ies l. Poli!ies o# ann"i ies an$ pre3nee$ plans (. 2n$e(ni y bon$s n. 5er i#i!a es o. Eareho"se re!eip s p. Bai3alai, horse ra!in& i!.e s, lo o an$ o her a" hori4e$ n"(ber &a(es 8. Gills o# la$in& or re!eip s r. Pro%ies s. Powers or A orney . Leasin& an$ o her hirin& arran&e(en s ". Mor &a&es, ple$&es an$ o her $ee$s o# r"s '. Dee$s o# sale or o her !on'eyan!e o# real proper y w. 5har er par ies an$ o her ins r"(en s %. Assi&n(en s an$ renewals o# !er ain ins r"(en s HAE/5LASU/E SALE SUGBE5T TA DA5UMENTA/Q STAMP TAX Se! 101 in rela ion wi h Se! 1=+ o# he Ta% 5o$e spe!i#i!ally le'ies on $o!"(en ary s a(p a% on all !on'eyan!es, $ee$s, ins r"(en s, or wri in&s, o her han &ran s, pa en s o# ori&inal !er i#i!a es o# a$)"$i!a ion iss"e$ by he &o'ern(en , whereby any lan$s, ene(en s or o her real y sol$ shall be &ran e$, assi&ne$, rans#erre$ or o herwise !on'eye$ o he p"r!haser, or p"r!hasers, or o any o her person or persons $esi&na e$ by s"!h p"r!haser or p"r!hasers.

5er i#i!a es iss"e$ o he #ore!losin& (or &a&ees !ons i " e a #or( o# !on'eyan!e, $ee$ or ins r"(en whereby he real proper y so #ore!lose$ an$ sol$ in an a"! ion o he #ore!losin& (or &a&ee e##e! i'ely &ran e$, assi&ne$ rans#erre$ or o herwise o he la er s"!h real Lproper y sol$. The law $oes no $is in&"ishe$ as o wha .in$ sales, whe her absol" e or !on$i ional, are in!l"$e$ in he wor$ SsalesT as "se$ in Se! 101 an$ 1=+. @en!e, a #ore!los"re sale is $ee(e$ in!l"$e$ wi h i s $e#ini ion. 2 is o# no (o(en whe her he proper y was s"bse8"en ly re$ee(e$. DA5UMENTS AND PAPE/S %&$ SUBB"C$ TA DA5UMENTA/Q STAMP TAX a. Poli!ies o# ins"ran!e or ann"i ies (a$e or &ran e$ by: 1. A #ra ernal or bene#i!iary so!ie y, or$er, asso!ia ion o# !oopera i'e !o(pany -. Apera e$ on he lo$&e sys e( or lo!al !oopera ion plan 1. Ar&ani4e$ an$ !on$"! e$ solely by he (e(bers hereo# #or he bene#i o# ea!h (e(ber an$ no #or pro#i 5er i#i!a es o# oa h a$(inis ere$ o any &o'ern(en o##i!ial !apa!i y or o# a!.nowle$&e(en by any &o'ern(en o##i!ial in he per#or(an!e o# his o##i!ial $" ies. Eri en appearan!e in any !o"r by any &o'ern(en o##i!ial in his o##i!ial !apa!i y 5er i#i!a es o# he a$(inis ra ion o# oa hs o any person or par y here o, whe her he pro!ee$in&s be !i'il or !ri(inal Papers an$ !o((en s #ile$ in !o"r s by or #or he na ional, pro'in!ial, !i y or ("ni!ipal &o'ern(en s A##i$a'i s o# poor persons #or he p"rpose or pro'in& po'er y S a e(en s an$ o her !o(p"lsory in#or(a ion re8"ire$ o# persons or !orpora ions by he r"les an$ re&"la ions o# he na ional, pro'in!ial, !i y or ("ni!ipal &o'ern(en s e%!l"si'ely #or s a is i!al p"rposes an$ whi!h hey are #ile$, an$ no a he ins an!e or #or he "se o# bene#i o# he person #ilin& he( 5er i#ie$ !opies an$ o her !er i#i!a es pla!e$ "pon $o!"(en s, ins r"(en s an$ papers #or he na ional, pro'in!ial, !i y or ("ni!ipal &o'ern(en s (a$e a ins an!e an$ #or he sole "se o# so(e o her na ional, pro'in!ial,. 5i y or ("ni!ipal &o'ern(en s 5er i#i!a es o# hey assesse$ 'al"e o# lan$s no e%!ee$in& P-**.** in 'al"e assesse$, #"rnishe$ by he pro'in!ial, !i y, or ("ni!ipal Treas"rer o appli!an s #or re&is ra ion o i le he lan$.

b. !. $. e. #. &.

h. i.

NULL2H25AT2AN AH HA/5LASU/E SALE DAES NAT /ESULT 2N /EHUND AH DA5UMENTA/Q STAMPS TAXES PA2D AN T@E SALE. The $o!"(en ary s a(p a% on he sale or rans#er or real proper y is i(pose$ on he pri'ile&e o# rans#errin& real proper y, in his !ase he #ore!los"re sale whi!h was $one by p"bli! a"! ion. Th"s, he a%able ransa! ion is he sale. Eha e'er $o!"(en ary s a(p is $"e, is $"e a he i(e A s"bse8"en e'en ha is, he pay(en o# he $o!"(en ary s a(p a% be!a"se he pri'ile&e was a! "ally "se$ an$ e##e! e$ a he i(e ha he i le o he proper y was rans#erre$ o he b"yer. The s"bse8"en !an!ella ion o# he ransa! ion were he $o!"(en ary s a(p a% liabili y a a!hes, $oes no ha'e he e##e! o# !an!elin& he a! i'i y. 5ANVEQAN5ES A/ /EAL ESTATE GQ 5A/PA/AT2AN E2T@AUT VALUAGLE 5ANS2DE/T2AN TA AN AENE/ AH ALL 2TS 5AP2TAL STA5N NAT SUGBE5T TA DA5UMANTA/Q STAMP TAX There sho"l$ be no $o!"(en ary s a(p a% $"e on he !on'eyan!e o# real proper y re!ei'e$ by a !orpora ion as li8"i$a in& $i'i$en$ #ro( i s wholly owne$ s"bsi$iary. This is pre(ise$ on Se! ions 1,; an$ 1,= o# /e'. /e&s. No. -+, as a(en$e$ whi!h pro'i$es ha !on'eyan!e o# real y, no in !onne! ion wi h a sale, o r"s ees or o her persons wi ho" !onsi$era ion are no a%able. E@A PAQS T@E DA5UMENTA/Q STAMP TAX a. b. !. $. The person (a.in&, si&nin&, iss"in&, a!!ep in& or rans#errin& he obli&a ion, ri&h or proper y where'er he $o!"(en is (a$e, si&ne$, iss"e$, a!!ep e$ or rans#erre$. Ehen he obli&a ion or ri&h arises #ro( he Philippine so"r!es The proper y is si "a e$ in he Philippines A he sa(e i(e s"!h a! is $one or ransa! ion ha$.

E@A PAQS 2N5ASE AH EXEMPT2AN Ehene'er one par y o a%able $o!"(en en)oys e%e(p ion #ro( he $o!"(en ary s a(p a%, he o her par y who is no e%e(p shall be he one $ire! ly liable #or he a%.

MANNE/ AH PAQ2N7 T@E DA5UMENTA/Q STAMP TAX a. 2n &eneral, Any person liable o pay $o!"(en ary s a(p a% shall #ile a a% re "rn an$ pay he a% in a!!or$an!e wi h he r"les an$ re&"la ions pres!ribe$ by he Se!re ary o# Hinan!e "pon re!o((en$a ion o# he 5o((issioner o# in ernal /e'en"e 2n lie" o# he #ore&oin&, he a% (ay be pai$ 1. ei her hro"&h p"r!hase or a! "al a##i% "re -. by i(prin in& he s a(ps hro"&h a $o!"(en ary s a(p (e erin& (a!hine, on he a%able $o!"(en .

b.

2n (anner as (ay be pres!ribe$ by r"les an$ re&"la ions o be pro("l&a e$ by he Se!re ary o# Hinan!e "pon re!o((en$a ion o# he 5o((issioner o# 2n ernal /e'en"e. EHHE5T AH NAN3PAQMENT AH T@E DA5UMENTA/Q STAMP TAX. An ins r"(en , $o!"(en or paper whi!h is re8"ire$ by law o be s a(pe$ an$ whi!h has been si&ne$, iss"e$, rans#erre$ or a!!ep e$ wi ho" bein& $"ly s a(pe$. a. b. Shall no be re!or$e$ Nor shall i any or any !opy hereo# or any re!or$ o# rans#er o# he sa(e be a$(i e$ or "se$ in e'i$en!e in any !o"r "n il he re8"isi e s a(p or s a(ps are a##i%e$ here o an$ !an!ele$.