Taxation 2 by Sababan Book Magic Amp Pink Notes

Atty. Francis J.
Sababan Book+ Magic & Pink Notes + CEP + Others

TAXATON
Co!erage o" Ta#ation $a% &e!ie%'
1. Basic Principles including Constitutional
Provisions
2. Income Tax
3. Estate Tax
4. Donors Tax
. !emedies
". #ocal Tax
$. !eal Propert% Tax
&. Tari'' and Customs Code
(. Court o' Tax )ppeals
1*. +)T ,alt-oug- not part o' t-e coverage o' t-e
Bar Exams. /uestions -ave 0een as1ed since
1(((2
Title ." and $ are al3a%s included in t-e
coverage
4o computations in t-e 0ar
T-ere are onl% 1 or 2 /uestions in t-e Bar
a0out Basic Principles
5-at are t-e 'avorite topics in t-e Bar6
12 /uestions on Income Tax
&71* /uestions on remedies
&71* /uestions allocated to t-e $ topics
&()es in the C)assroo*'
1. Do 48T dare miss t-e 'irst da% o' class
93rite do3n 3-at 3ill 0e 3ritten on t-e
class card and 'ollo3 instructions
93-en :8;ET854 is as1ed it means t-e
province o' %our parents. i' t-e% came
'rom separate provinces 3rite 0ot-.
T-ose 3-o live in t-e cit% ta1e note i'
CIT< is placed 0e'ore or a'ter t-e province
or localit%
Example= #)8)> CIT< or CIT< o' ;)4I#)
2. Do 48T 0e a0sent a'ter t-e 'irst da%
i' %ou are a0sent. %ou -ave to transcri0e 3-at
-appened in class 3-en %ou 3ere out.
T-e next meeting %ou attend class. consider
%oursel' a resident o' ba)ic+ba)ic.
0a0ali10ali1an 1a sa recit
4o ot-er excuse 3ill 0e accepted=
?-ead ac-e. 'ever and 'lu @ !EAID8#
?d%smenorr-ea and cleansing @ >8#DE4
& -er0al tea
?I' %ou -appen to 0e attending a sem.
usuall% on 2
nd
sem. as1 a-ead 'or routes
on 3-ic- %ou can ta1e coming 'rom %our
provinceB-ome to3n in order to ma1e it to
t-e 'irst class a'ter -olida%s.
Exception= i' %ou. as -is student is t-e one
getting married.
3. !ead and understand t-e assignment
'ollo3ing t-e 'lo3 in t-is material. 5ag
C)P8TE ang aral na naintindi-an pero di
nauna3aan
4. Dor -olida%s E ma1e up class pro0a0l% on a
Funda% or t-e class 3ill 0e -eld on t-at da%
as 3ell ,no sanction can 0e imposed i' classes
3ill 0e -eld2
EACEPTI84= :8#< D)<BDE)FT and upon order o'
our dear 8)!s
. Ba3al ang tata%o at ngingiti. magpapapicture
o magsosorr% ,except i' %ou are t-at pun% girl
last seen at t-e palace2
". )llo3ed to g)ance at %our notes. 3ag lang
,aha)ata-gara,a)
MATE&A$S=
4ational Internal !evenue Code
,0ig one 3-ere %ou can 3rite notes2
commentaries ,an% aut-or 3ill do2
magic notes ,Fa0a0an #ecture and GH)2
Or.er=
1. !E)D t-e codal provisions
'ollo3ing t-e outline
2. I4DE!FT)4D t-e provisions 3it-
t-e -elp o' t-e ;agic 4otes
3. !ead t-e cases. Fpecial la3s.
!evenue regulations,i' stated
4. Do not 'orget to compare i' t-ere
are sections to 0e compared
4ote= T-is material 3as printed and 3as made to
0e read 'rom t-e le't side 'or purposes o'
convenience in ta1ing do3n notes on t-e ot-er
side.
1
Atty. Francis J. Sababan Book+ Magic & Pink Notes + CEP + Others
TAXATON
Basic Princi,)es o" Constit(tiona)
$i*itations
a2 Due process clause 3-ic- could
0e eit-er su0stantive due
process and procedural due
process clause
02 E/ual protection clause
!ead=
8rmoc Fugar Central
vs. Cit% Treasurer 22 FC!) "*3
Tiu vs. C) 3*1 FC!)
1$&
c2 )rticle III sec. 1 o' t-e 1(&$
Constitution E non7impairment
clause
d2 )rticle III sec. E 'reedom o'
religion
e2 )rticle III sec. 2* E non7
pa%ment o' poll tax
'2 )rticle +I sec. 2& par. 2 E
'lexi0le tari'' clause
g2 )rticle +I sec. 2& par. 3 E
exemption 'rom real propert%
tax
!ead=
:errera vs. GueJon
Cit% 3 FC!) 1&"
)0ra vs. :ernando 1*$
FC!) 1*4
)0ra +alle% vs. )/uino
2 FC!) 1*"
P-ilippine #ung Center
vs. GueJon Cit% 433 FC!) 11(
-2 )rticle +I sec. 2& par. 4 E
/uali'ied maKorit% in tax
exemption
i2 International dou0le taxation
CI! vs. Lo-nson 3*(
FC!) &$
K2 Doctrine o' e/uita0le
recoupment
12 Doctrine o' Fet7o'' or
compensation in taxation
!epu0lic vs. ;am0ulao
4 FC!) "22
Domingo vs. >arlitos &
FC!) 443
Drancia vs. I)C 1"2 FC!) $3
Caltex vs. C8) 2*& FC!) $2"
P-ilex vs. CI! 2(4
FC!) "&$

2
TAXATON
BASC P&NCP$ES'
Taxation is an in-erent po3er o' t-e Ftate.
/' 5-at do %ou mean 0% I4:E!E4T6
A' T-e po3er to tax is not provided 'or in t-e
la3. statute or ConstitutionM it depends on t-e
existence o' t-e state. 4o la3 or legislation 'or
t-e exercise o' t-e po3er to tax 0% t-e national
government.
T-e po3er to tax DEPE4DF on t-e existence
o' t-e Ftate. t-e moment t-e Ftate Exists.
)IT8;)TIC)##<. t-e po3er to tax also exists.
/' Do local governments exercise t-is in-erent
po3er6
A' 4o. 8nl% t-e 4ational >overnment exercises
t-e in-erent po3er to impose taxes.
/' T-e taxing po3er o' local governments is a
DE#)>)TED po3er. Delegated 0% 3-om6
A' Delegated 0% Congress t-roug- la3 in case o'
autonomous regions. and delegated 0% t-e
Constitution in case o' #>Is not considered an
autonomous region.
Cities, provinces and municipalities po3er
granted under )rt. A Fec. H" o' t-e Constitution
Autonomous Regions po3er con'erred 0%
Congress t-roug- la3. )rt. A Fec. 2* N2 o' t-e
Constitution is a non7sel'7executing provision.
T-us t-e po3er is granted 0% Congress 0ecause
said provision re/uires an ena0ling la3.
)rticle A. Fection is sel'7executing t-us t-e
po3er is granted 0% t-e Constitution.
N0E&ENT $MTATONS o" TAXATON
/' 5-at are t-e in-erent limitations o' taxation
on t-e part o' t-e national government6
A' 1. It s-ould 0e 'or PIB#IC PI!P8FE
2. it is in-erentl% #E>IF#)TI+E
3. >overnment is tax EAE;PT
4. Territorialit%
. International comit%
G= 5-at i' t-e congress appropriate mone% 'or
t-e development o' a propert% 0elonging to a
private person. is t-e appropriation valid6
)=
Pascual vs. Secretary of Public Works
(GR No. L-10405, 1!"!1"#0$
It is a general rule that the legislature is
without power to appropriate for anything BUT
public purpose!
It is t-e essential c-aracter o' t-e direct
o0Kect o' expenditure. 3-ic- must determine its
validit% as Kusti'%ing a tax. and not t-e magnitude
o' t-e interest to 0e a''ected nor t-e degree to
3-ic- t-e general advantage o' t-e communit%.
and t-us. t-e public welfare. ma% 0e ultimatel%
0ene'ited 0% t-eir promotion. Incidental to t-e
pu0lic or t-e Ftate. 3-ic- results 'rom t-e
promotion o' pu0lic interest and t-e prosperit% o'
private enterprise or 0usiness. does not Kusti'%
t-eir aid 0% t-e use o' pu0lic mone%.
3
TAXATON
$(t1 !s. Araneta 234 Phi) 5647
Congress enacted a la3 imposing a tax on
FI>)! I4DIFT!<. It 3as contended t-at t-e
proceeds o' t-e tax s-all onl% 0ene'it a particular
industr%. :o3ever. it 3as ruled t-at t-e tax
remains valid since t-e protection and t-e
promotion o' t-e sugar industr% is a matter o'
pu0lic concern. :ence. t-e legislature ma%
determine 3it-in reasona0le 0ounds 3-at is
necessar% 'or its protection and expedient 'or t-e
promotion o' pu0lic interest.
#egislative discretion. according to t-e
court. s-ould 0e allo3ed 'ull pla%. su0Kect onl% to
t-e test o' reasona0leness. I' o0Kectives and
met-ods are ali1e and Constitutionall% valid.
t-ere can 0e no reason 3-% t-e Ftate s-ould not
0e allo3ed to lev% taxes to raise 'unds 'or t-eir
prosecution and attainment.
T)A)TI84 ;)< BE IFED T8 I;P#E;E4T
T:E FT)TEF P8#ICE P85E!
G= ;a% t-e govt tax itsel'6
)= Determine 'irst 3-o t-e taxing aut-orit%.
Taxing
)ut-orit%
#ev%ing
'rom
8Fec. 133 #>C7
po3er to tax
F-all not
extend to
taxes. 'ees.
c-arges o' an%
1ind on t-e
natl govt.
agencies and
instrumentalitie
s EACEPT
income 'rom
pu0lic utilit%
under t-eir
Kurisdiction
#ocal
>overnmen
t
4ational
>overnm
ent
48
4ational
>overnmen
t
#ocal
>overnm
ent
<EF
9 Fec 2$ C provides national govt can lev% tax.
agencies and instrumentalities alr-oug- derive
income 0% t-e govt 'orm t-e utilit% and income
derived 'rom t-e exercise o' essential
government 'unctions are exempt,Fec 32B$0
4I!C2
G= 5-at is t-e source o' po3er to tax o' #>Is
o(tsi.e the A(tono*o(s &egion and t-ose
3it-in t-e )utonomous !egion6
)= Fec. . )rt A o' t-e 1(&$ Constitution ,sel'7
executing2
Eac- #>I s-all -ave t-e po3er to create
its o3n sources o' revenue and lev% taxes. 'ees
and c-arges su0Kect to suc- guidelines and
limitations as t-e congress ma% provide.
consistent 3it- t-e 0asic polic% o' local
autonom%. Fuc- taxes. 'ees and c-arges s-all
accrue exclusivel% to t-e local governments.
G= 5-at is t-e source o' po3er to tax %ithin the
A(tono*o(s &egion:
)= Fection 2* num0er 2 o' )rticleA o' t-e 1(&$
Constitution ,non sel' executor%2
5it-in its territorial Kurisdiction and
su0Kect to provisions o' t-is Constitution and
national la3s. t-e organic act o' t-e autonomous
regions s-all provide 'or legislative po3ers over=
(1) Administrative organization;
(2) Creation of sources of revenues;
(3) Ancestral domain and natural resources;
(4) Personal, famil, and !ro!ert relations;
(") #egional ur$an and rural !lanning develo!ment;
(%) &conomic, social, and tourism develo!ment;
(') &ducational !olicies;
(() Preservation and develo!ment of t)e cultural )eritage; and
(*) +uc) ot)er matters as ma $e aut)orized $ la, for t)e
!romotion of t)e general ,elfare of t)e !eo!le of t)e region-
9 T-is merel% aut-oriJes t-e Congress to pass
an 8rganic )ct o' t-e )utonomous !egion. 3-ic-
s-all provide 'or legislative po3ers to lev% taxes
over t-eir in-a0itants.
48TE= It is t-e Constitution t-at gave #>Is t-e
po3er to tax 0ut su0Kect to suc- guidelines and
limitation as t-e congress ma% provide. T-e
Congress derives t-is po3er 'rom t-e
Constitution as 3ell.
TE&&TO&A$T;
Taxation is territorial in suc- a manner
t-at t-e taxing aut-orit% cannot impose taxes
oon su0Kect 0e%ond its territorial Kurisdiction.
:o3ever. taxing aut-orit% ma% determin t-e tax
FITIF.
Phi)i,,ine Match Co. !s. City o" Ceb(
2<& No. $+=>?6@ 5-54-53?47
T-e sales in t-e instant case 3ere in t-e Cit% o'
Ce0u and t-e matc-es 3ere stored in t-e cit%.
T-e 'act t-at t-e matc-es 3ere delivered to
customers. 3-ose places o' 0usiness 3ere
4
TAXATON
outside t-e cit%. 3ould not place t-ose sales
0e%ond t-e cit%s taxing po3er. T-ose sales
'ormed part o' t-e merc-andising 0usiness 0eing
assigned on 0% t-e compan% in t-e cit%. In
EFFE4CE. t-e% are t-e same as sales o' matc-es
'ull% consummated in t-e cit%.
Durt-er. 0ecause t-e sellers place o' 0usiness is
in Ce0u Cit%. it cannot 0e sensi0l% argued t-at
suc- sales s-ould 0e considered as transactions
su0Kect to t-e taxing po3er o' t-e political
su0divisions 3-ere t-e customers reside and
accepted deliver% o' t-e matc-es.
NTE&NATONA$ COMT;
Ftates ;IFT recogniJe t-e generall% accepted
principlesBtenets o' international la3
$e.nicky !s. C&
2<& nos. $+545A3B $+54CAC & $+C56=6
?-=5-53A67
To allo3 an alien resident to deduct 'rom -is
gross income 3-atever taxes -e pa%s to -is o3n
government amounts to con'erring on t-e latter
t-e po3er to reduce t-e tax income o' t-e
P-ilippine government. -is deduction 'rom
P-ilippine taxes 3ould correspondingl% increase.
and t-e proceeds 'or t-e P-ilippines diminis-ed.
t-ere0% su0ordinating our o3n taxes to t-ose
levied 0% a 'oreign government. Fuc- a result is
incompati0le 3it- t-e status o' t-e P-ilippines as
an independent and sovereign state.
Basco !s. PA<CO& 253? SC&A @C7
T-e cit% o' ;anila. 0eing a mere municipal
Corporation. -as no in-erent po3er to tax. #>Is
-ave no po3er to tax instrumentalities o' t-e
national government. P)>C8! 0eing an
instrumentalit% o' t-e national government. is
t-ere'ore exempt 'rom local taxes. ot-er3ise. its
operation mig-t 0e 0urdened. impeded. or
su0Kected to control 0% a mere #>I.
Mactan Ceb( ntD) Air,ort !s. Marcos 2CA5
SC&A AA?7
;actan cannot invo1e Fec 133 o' #>C. It re'ers to
local taxation. )nd since t-e llast par o' sec 234
une/uivocall% 3it-dre3 upon e''ectivit% o' t-e
#>C. exemption 'rom pa%ment o' real propert%
taxes granted to natural person including >8CCs
except as provided in t-e said section. and t-e
petitioner is. undou0tedl%. a >8CC. It is
necessaril% 'ollo3s t-at its exemption 'rom tax
granted under Fec 14 o' its c-arter. !) "(&. -as
0een 3it-dra3n.
CONSTTETONA$ $MTATONS
G= Is t-e Constitution t-e source o' t-e taxing
po3er o' t-e Ftate6
)= 48. T-e po3er to tax exist prior to and
independentl% on t-e Constitution. T-e
Constitution simpl% de'ines and delimits t-is
po3er to stri1e 0alance 0et3een t-e po3er o' t-e
government and t-e 'reedom o' t-e governed.
and to sa'eguard t-e latter 'rom t-e a0use o' t-e
'ormer.
%ue Process &lause
Fection 1. )rticle III o' t-e 1(&$ Constitution
O4o person s-all 0e deprived o' li'e. li0ert% or
propert% 3it-out due process o' la3 xxxP
T-is clause guarantees t-e protection o'
personal and propert% rig-ts. Pursuant t-ereto.
en'orced contri0ution 'rom t-e people cannot 0e
made 3it-out a la3 aut-oriJing t-e same.

G= 5-at are t-e t3o aspects o' due process6
) Fu0stantive and Procedural due process
/' 5-at do t-e% re/uire in order 'or t-em to 0e a
limitation to t-e po3er to tax6
A' Fu0stantive due process re/uires t-at a tax
statute must 0e 3it-in t-e Constitutional
aut-orit% o' Congress to pass and t-at it 0e
reasona0le. 'air and Kust.
Procedural due process. on t-e ot-er -and.
re/uires notice and -earing or at least t-e
opportunit% to 0e -eard.
G= Fuppose t-e congress passed a la3 exempting
t-e 13
t-
mont- pa% 'rom tax 3it- t-e concurrence
o' t-e maKorit% o' t-e /uorum. Is t-is valid6
)= Fection 2&,42. )rticle I+ o' t-e 1(&$
Constitution
O4o la3 granting an% tax exemption s-all
0e passed 3it-out t-e concurrence o' t-e
maKorit% o' all t-e mem0ers o' CongressP
4ote= 4o less t-an t-e Constitution re/uires t-e
TAXATON
"a#ority ,/uali'ied maKorit%2. )n%t-ing less. suc-
as t-e ma#ority of the $uorum ,simple maKorit%2.
T-ere'ore suc- tax exempting statue 3ould 0e
unconstitutional and violative o' su0stantive due
process.
G= In procedural due process. as a limitation on
t-e po3er to tax. 3it-out notice and opportunit%
to 0e -eard. limited to t-e prosecution stage
alone6
)= In t-e prosecution stage. 3it-out due process.
proceedings 3ill 0e null and void. -ence
ine''ective against t-e taxpa%er.
!! 127(( re/uires t-at as earl% as assessment
stage until extra Kudicial settlement o' a
taxpa%ers criminal violation is reac-ed
procedural due process s-ould exist
Fection 2*QBRQ2R 3-ere compromise is not
allo3ed due to or involves 'raud or t-e case 3as
'iled in court alread%.
Fec 2*& o' !) &424 i' t-e delin/uent taxpa%er is
su0se/uentl% 'ound guilt% as c-arged 0% t-e
proper court o' la3. it is 'urt-er re/uired t-at -e
s-ould still 0e properl% noti'ied
G= Does t-is appl% to t-e 4ational legislature6
)= t-is applies to legislative 0odies o' t-e #>Is
3-ic- are t-e local sanggunian.
/' Does it 'ollo3 t-at t-e adverse part% must
al3a%s 0e noti'ied6
A' 4o. )s a rule. notice and -earing or t-e
opportunit% to 0e -eard is necessar% onl% 3-en
expressl% re/uired 0% la3. 5-ere t-ere is no
suc- re/uirement. notice and t-e opportunit% to
0e -eard are dispensa0le.
%&ample'
Be'ore 8ct. 1. 1((. %ou can secure a T!8
3it-out noti'%ing t-e adverse part%. I' %ou are a
suspect in a criminal case. %ou -ave t-e rig-t to
-ave an opportunit% to 0e -eard ,i' t-ere is a
la32.
Be'ore Lul% 1. 1((&. no notice need 0e
given to a part% declared in de'ault. )'ter t-e
amendment. t-e part% declared in de'ault -as to
0e noti'ied o' su0se/uent proceedings al0eit
3it-out t-e rig-t to participate t-erein.
In t-e case o' a searc- 3arrant. t-e person to
0e searc-ed 3as not noti'ied. T-e person
searc-ed cannot claim t-at t-ere 3as a violation
o' due process 0ecause t-ere is no la3 re/uiring
t-at t-e person to 0e searc-ed s-ould 0e
noti'ied.
!egarding delin/uent tax pa%ers. 0e'ore
lev%. t-ere must 0e notice.
!E)F84=
4o provision o' la3 re/uires notice to t-e
adverse part%. I' t-e adverse part% is noti'ied. -e
ma% a0scond. T-us. in adversarial proceedings.
in connection 3it- procedural due process. t-e
adverse part% need not 0e noti'ied all t-e time.
G= Imposition on tax on cellular p-ones. Is it 'air.
Kust and reasona0le6
)= T-e elements o' pro-i0ited dou0le taxation
s-ould 0e considered in order to determine i' t-is
3ill 0e valid.
'(ual Protectio) &lause

Fection 1. )rticle III o' t-e 1(&$ Constitution
Oxxx. 4or s-all an% person 0e denied t-e e/ual
protection o' la3s.P

)s a rule. taxpa%ers o' t-e same 'ooting are
treated ali1e. 0ot- as to privileges con'erred and
lia0ilities imposed. Di''erence in treatment is
allo3ed onl% 3-en 0ased on su0stantial
distinction. Di''erence in treatment not 0ased on
su0stantial distinction is 'ro3ned upon as Oclass
legislation.P
G= :o3 can is t-is violated6
)= T-is is violated 3-en taxpa%ers 0elonging=
1. to t-e same classi'ication are treated
di''erentl% 'rom one anot-er
5-en no classi'ication does not rest upon
su0stantial distinctions t-at ma1e 'or real
di''erences
2. to di''erent classi'ications are
treated ali1e
5-en no classi'ication is called 'or.
su0stantial distinctions exist 0ut no
corresponding distinction is made on t-e
0asis t-ereo'. ,+illegas v. :siu C-iong Tsai
Pai2
Ex= In one case. a tax ordinance 3as assailed
on t-e ground t-at t-e ordinance 'ailed to
distinguis- a 3or1er 'orm casual. permanent or
temporar%. T-e FC said t-at t-e ordinance 3as
"
TAXATON
invalid 0ecause o' t-e 'ailure to state t-e said
classi'ication.
In (%)(*% v CA+AT t-e Fupreme Court
mandated t-e re/uisites 'or a valid classi'ication.
Re$uirements of Reasonable Classification'
12 T-ere must 0e su0stantial distinctions
t-at ma1e a real di''erence.
22 It must 0e germane or relevant to t-e
purpose o' t-e la3.
32 T-e distinction or classi'ication must appl%
not onl% to t-e present 0ut also to 'uture
situations.
42 T-e distinction must appl% to persons.
t-ings and transactions 0elonging to t-e
same class.
TE !. COE&T OF APPEA$S 2=>5 SC&A C?47
/' 3-at -appened in t-e cit% o' 8longapo6
A' T-e Congress. 3it- t-e approval o' t-e
President. passed !) $22$. an act creating
t-e conversion o' t-e militar% 0ases into ot-er
productive uses.
/' 5-o 3as t-e President at t-at time6
A' President !amos
/' 5-at 3ere signed6
A' !) $22$. E8 ($ and E8 ($7)
T-e 'irst led to t-e creation o' t-e Fu0ic
Fpecial Economic Cone ,FFEC2. T-e latter set
t-e limitations and 0oundaries o' t-e
application o' t-e incentives ,no taxes. local
and national. s-all 0e imposed 3it-in FFEC. In
lieu t-ereo'. 3S o' t-e >ross Income s-all 0e
remitted to t-e national govt2 to t-ose
operating t-eir 0usinesses 3it-in t-e said
area.
/' 5-o are t-e petitioners and 3-at 3as t-eir
contention6
A' T-e petitioners are Dilipino 0usinessmen
3-o are operating t-eir 0usiness outside t-e
secured area. T-e petitioners contended t-at
t-e la3 in /uestion 3as violative o' t-eir rig-t
to e/ual protection o' la3s since t-e% are also
Dilipino 0usinessmen.
:= T-e Fupreme Court ruled t-at t-ere 3as
no violation since t-e classi'ication 3as 0ased
on a su0stantial distinction.
T-e element invo1ed -ere is element N1
t-at t-ere must 0e su0stantial distinction in
t-e classi'ication o' taxpa%ers on 3-om t-e
tax 3ill 0e imposed.
T-e Court o0served t-at t-ose 'oreign
0usinessmen operating 3it-in t-e secured
area -ave to give a larger capital to operate
in t-e secured area ,to spur economic gro3t-
and guarantee emplo%ment2.
O&MOC SE<A& CENT&A$ !s. C&
/' 5-at did t-e municipalit% o' 8rmoc do6
A' T-e Cit% Council o' 8rmoc passed a ;unicipal
8rdinance 4o.4 imposing upon an% and all
centri'ugal sugar milled at t-e 8rmoc Fugar
Central a municipal tax on t-e net sale o' t-e
same to t-e Inited Ftates and ot-er 'oreign
countries.
/' Did t-e o3ner accept t-is imposition6
A' 4o. t-e tax due 3as paid under protest. t-en
'iled a complaint against t-e Cit% o' 8rmoc.
:= T-e Fupreme Court said t-ere 3as a
violation o' t-e e/ual protection clause. T-e
element invo1ed -ere 3as element N3. t-at it
must 0e applica0le to 0ot- present and 'uture
circumstances. T-e Fupreme Court said t-at
one must go to t-e provision itsel'. in t-e case
at 0ar. t-ere 3as a violation o' element N3
0ecause t-e la3 3as 3orded in suc- a 3a%
t-at it onl% applies to 8rmoc Fugar Central
alone and to t-e exclusion o' all ot-er sugar
centrals to 0e esta0lis-ed in t-e 'uture.
T)TE 48TE= Peo,)e !s. Cayat
*ree+o, of Reli-io)
Fection . )rticle III. 1(&$ Contstitution
T-is contain t3o clauses=
1. T-e non7esta0lis-ment clause
Basis o' tax exemption
1. Dree exercise clause
Pro-i0ition to esta0lis- a national religion
It Involves 3 T-ings=
1. 'reedom to c-oose religion
2. 'reedom to exercise ones religion
3. pro-i0ition upon t-e national government
to esta0lis- a national religion
/' 5-ic- one limits t-e po3er to tax6
A' Pro-i0ition upon t-e national government to
esta0lis- a national religion 0ecause t-is 3ill
re/uire a special appropriation o' mone% coming
'rom t-e national treasur% 3-ic- is 'unded 0% t-e
taxes paid 0% t-e people.
No)-i,.air,e)t &lause
Fection 1*. )rticle III. 1(&$ constitution
$
TAXATON
Fection 11. )rticle AII. 1(&$ constitution
G= 5-at does t-e non7impairment clause up-old6
)= T-e peoples rig-t and 'reedom to contract as
3ell as t-e sanctit% o' contracts.
4ote= does not appl% to 'ranc-ise
)pplies to taxation 0ut not to Police po3er
and Eminent domain
/' 5-at are t-e sources o' o0ligation in t-e Civil
Code6
A' #a3. Contracts. Guasi7Contracts. Delict.
Guasi7Delict.
/' 5-at is t-e o0ligation contemplated in t-is
limitation6
A' T-ose o0ligations arising 'rom contracts.
>eneral !ule= T-e po3er to tax is pursuant to
la3. t-ere'ore. t-e o0ligation to pa% taxes is
imposed 0% la3. t-us t-e non7impairment clause
does not appl%.
<ou -ave to determine 'irst t-e source o'
o0ligation=
1. I' t-e la3 merel% provides 'or t-e
'ul'illment o' t-e o0ligation t-en t-e la3 is not
t-e source o' t-e o0ligation.
2. 5-en t-e la3 merel% recogniJes or
ac1no3ledges t-e existence o' an o0ligation
created 0% an act 3-ic- ma% constitute a
contract. /uasi7contract. delict. and /uasi7delict.
and its onl% purpose is to regulate suc-
o0ligation. t-en t-e act itsel' is t-e source o' t-e
o0ligation. not t-e la3.
3. 5-en t-e la3 esta0lis-es t-e o0ligation
and also provides 'or its 'ul'illment. t-en t-e la3
itsel' is t-e source o' t-e o0ligation
/' Fo. in 3-at instance does t-e non7impairment
o' contracts clause 0ecomes a limitation to t-e
po3er to tax6
A' it is 3-en t-e taxpa%er enters into a
compromise agreement 3it- t-e government. In
t-is instance. t-e o0ligation to pa% t-e tax is no3
0ased on t-e contract 0et3een t-e taxpa%er and
t-e government pursuant to t-eir compromise
agreement.
Ta1e 4ote= t-e re/uirement 'or its application=
t-e parties are t-e government and private
individual.
Poll /a0
/' 5-at is a poll tax6
A' It is a tax o' a 'ixed amount on individuals
residing 3it-in a particular territor%. 3-et-er
citiJens or not. 3it-out regard to t-eir propert% or
to t-e occupation in 3-ic- t-e% ma% 0e engaged.
It is a tax imposed on persons 3it-out an%
/uali'ications. Persons ma% 0e allo3ed to pa%
even i' t-e% are not /uali'ied as to age or
propert% o3ners-ip.
Example o' Poll Tax= Communit% Tax Certi'icate
under Fection 1"2 o' t-e #ocal >overnment
Code.
/' 5-% is it a limitation to t-e po3er to tax6
A' It is a limitation to t-e po3er to tax 0ecause
Congress is pro-i0ited 'rom passing a la3
penaliJing 3it- imprisonment a person 3-o does
not pa% poll tax. ,Dunds 'or sending a person to
Kail is ta1en 'rom t-e national treasur% 3-ic- is
'unded 0% t-e taxes paid 0% t-e people2
'0e,.tio) fro, .ay,e)t of Real 'state /a0
/' 5-at is t-e re/uirement 'or exemption 'rom
pa%ment o' real propert% tax under t-e 1(3.
1($3 and 1(&$ Constitution6
A' Art ,, -ec .. /01, 2304 Constitution E
Cemeteries. c-urc-es and parsonages or
convents appurtenant t-ereto. and all lands.
0uildings and improvements used EAC#IFI+E#<
'or !E#I>I8IF. C:)!IT)B#E or EDIC)TI84)#
purposes s-all 0e exempt 'or taxation.
Art 5, -ec 26 /01, 2360 Constitution E
c-arita0le institutions. c-urc-es. parsonages or
convents appurtenant t-ereto. mos/ue. and non7
pro'it cemeteries. and all lands. 0uildings. and
improvements )CTI)##<. DI!ECT#<. and
EAC#IFI+E#< used 'or !E#I>I8IF and
C:)!IT)B#E purposes s-all 0e exempt 'rom
taxation.
Art ,, -ec .5 /01, 2356 Constitution E
c-arita0le institutions. c-urc-es. and parsonages
or convents appurtenant t-ereto. mos/ue. non7
pro'it cemeteries. and all lands. 0uildings. and
improvements )CTI)##<. DI!ECT#< and
EAC#IFI+E#< used 'or !E#I>I8IF. EDIC)TI84)#
and C:)!IT)B#E purposes s-all 0e exempt 'rom
taxation.
0E&&E&A !. /C+BOA&F OF ASSESSMENT
253=@ Constit(tion7
/' 5-at is involved in t-is case6
&
TAXATON
A' ) c-arita0le institution. Ft. Cat-erines
:ospital. T-e -ospital 3as previousl% exempt
'rom taxation until it 3as reclassi'ied and
su0se/uentl% assessed 'or t-e pa%ment o'
real propert% tax.
T-e contention o' t-e respondent is t-at
t-e -ospital 3as no longer a c-arita0le
institution 0ecause it accepts pa%7patients. it
also operates a sc-ool 'or mid3i'er% and
nursing. and a dormitor%. Fince it is not
exclusivel% used 'or c-arita0le purposes it is
not exempt 'rom taxation.
:= T-e Court ruled t-at petitioner is not lia0le
'or t-e pa%ment o' real estate taxes. It is a
c-arita0le institution. t-us exempt 'rom t-e
pa%ment o' suc- tax.
T-e -ospital. sc-ools and dormitor% are all
exempt 'ro taxation 0ecause t-e% are
incidental to t-e primar% purpose o' t-e
-ospital.
48TE= t-is arose during t-e 1(3 Constitution.
OExempted 0% virtue o' incidental purposeP
3as merel% coined 0% t-e Fupreme Court. T-us.
it does not appl% to ot-er taxes except !eal
Estate Tax.
P&OGNCE OF AB&A !. 0E&NANFO
A ) religious institution 3as involved in t-is
case. t-e !oman Cat-olic Bis-op o' Bangued.
Inc. ,0is-op 'iled declarator% relie' a'ter
assessed 'or pa%ment o' tax2. T-e respondent
Kudge granted t-e exemption 'rom taxes o'
said c-urc- 0ased onl% on t-e allegations o'
t-e complaint 3it-out conducting a
-earingBtrial. T-e assistant prosecutor 'iled a
complaint contending t-at petitioner 3as
deprived o' its rig-t to due process.
FC= t-e Court ordered t-at t-e case 0e remanded
to t-e lo3er court 'or 'urt-er proceedings. T-e
Court o0served t-at t-e cause action arose under
t-e 1($3 Constitution. not under t-e 1(3
Constitution ,note t-e di''erence2. Tax exemption
is not presumed. It must 0e strictl% construed
against t-e taxpa%er and li0erall% construed in
'avor o' t-e government.
AB&A GA$$E; CO$$E<E NC. !. A/ENO
A' )n educational institution is involved in
t-is case. T-e ground 'loor o' t-e sc-ool 3as
leased to 4ort-ern ;ar1eting Corp.. a
domestic corporation. T-e 2
nd
'loor t-ereo'
3as used as t-e residence o' t-e sc-ool
director and -is 'amil%.
T-e Province o' )0ra no3 contends t-at
since t-e sc-ool is not exclusivel% used 'or
educational purposes. t-e sc-ool is no3 lia0le
to pa% real estate tax.
:= T-e Court -eld t-at t-e sc-ool is
P)!TI)##< lia0le 'or real estate tax.
1. !esidence E exempt 0% virtue o' incidental
purposeM Kusti'ied 0ecause it is necessar%.
2. Commercial E not exempt 0ecause it is not
pursuant to t-e primar% purposeM not 'or
educational purposes.
/' is t-e doctrine in t-e case o' :errera t-e same
3it- t-is case6
A' 48. in t-e :errera case. t-e exemption 3as
granted to all t-e real propert% ,-ospital. sc-ool
and dorm2. But in t-is case. t-e Fupreme Court
made a /uali'ication. T-e Fupreme Court said it
depends.
48TE= 0ot- cases arose under t-e 1(3
Constitution despite -aving 0een decided in
1(&&.
/' )t present. do 3e still appl% t-e exemption
'rom tax 0% virtue o' t-e Doctrine o' Incidental
Purpose6
A' 4ot an%more. T-e cause o' action in said case
arose under t-e 1(3 Constitution and it does not
appl% to t-e provisions o' t-e 1(&$ Constitution.
P0$PPNE $EN< CENTE& !. /EEHON CT;
A' ) c-arita0le institution. a -ospital. It is
provided in t-e c-arter o' t-e #ung Center o'
t-e P-ilippines is a c-arita0le institution.
:o3ever. part o' its 0uilding 3as leased to
private individuals and t-e vacant portion o'
its lot 3as rented out to Elliptical 8rc-ids.
!espondent contends t-at since t-e -ospital
is not used actuall%. directl%. an d exclusivel%
'or c-arita0le purposes. it is lia0le to pa% real
estate taxes.
:= T-e Fupreme Court -eld t-at t-e
petitioner is lia0le to pa% tax 'or t-ose parts
leased to private individuals 'or commercial
purposes. Dor t-e part o' t-e -ospital used 'or
c-arita0le purposes ,3-et-er 'or pa% or non7
pa% patients2. petitioner is exempt 'rom
pa%ment o' real estate tax.
48TE= petitioner contended t-at t-e pro'its
derived 'rom t-e lease o' its premises 3ere used
'or t-e operation o' t-e -ospital. T-e Court -eld
(
TAXATON
t-at t-e use o' t-e pro'its does not determine
exemption. rat-er it is t-e use o' t-e propert%
t-at determines exemption.
T-e case o' :errera does not appl% 0ecause
said case arose under t-e 1(3 Constitution and
t-e present case arose under t-e 1(&$
Constitution. T-e re/uirements 'or exemption are
di''erent. In t-e 1(3 Constitution. t-e propert%
must 0e EAC#IFI+E#< used 'or religious.
educational or c-arita0le purposes. Inder t-e
1(&$ Constitution. t-e propert% must 0e used
)CTI)##<. DI!ECT#<. and EAC#IFI+E#< 'or
religious. educational and c-arita0le purposes.
/' 5as t-e doctrine laid do3n in )0ra +alle%
a''irmed in t-e #ung Center case6
A' <es. T-e Fupreme Court unconsciousl%
applied a doctrine laid do3n 0% t-e 1(3
Constitution. T-e Fupreme Court reiterated t-e
ruling in t-e )0ra +alle% case 3-ic- arose under
t-e 1(3 Constitution. T-e Fupreme Court made
a /uali'ication. it -eld t-at it depends on 3-et-er
or not t-e use is incidental to t-e primar%
purpose o' t-e institution.
48TE= at present. Oexemption 'rom tax 0% virtue
o' incidental purposeP is not applica0le to all
taxes including real estate tax.
C)"" v -C 7)89-)9 and -)9-, I9C
Important =
1. international dou0le taxation
2. importance o' international tax treat%
3. implication o' most 'avored nation clause
/' 5-at is t-e corporation involved in t-is case6
A' ) domestic corporation ,DC2.
FC Lo-nson and Fons. Inc. entered into a
license agreement 3it- FC Lo-nson and Fons
I.F.) ,4on7!esident Doreign Corp. 4!DC2
3-ere0% t-e 'ormer 3as allo3ed to use t-e
latters trademar1 and 'acilities to
manu'acture its products. In return. t-e DC
3ill pa% t-e 4!DC ro%alties as 3ell as
pa%ment o' 3it--olding tax.
) case 'or re'und o' overpaid 3it--olding
tax 3as 'iled. )pparentl%. t-e DC s-ould -ave
paid onl% 1*S under t-e most 'avored nation
clause.
:= T-e Fupreme Court coined t-e term
International Dou0le Taxation or International
Luridical Dou0le Taxation.
/' 5-at prompted t-e FC to coin suc- term6
A' Because a single income ,tax ro%alties
paid 0% a DC2 3as su0Kected to tax 0% t3o
countries. t-e P-ilippines income tax and t-e
I.F. tax.
International Luridical Dou0le Taxation
applies onl% to countries 3-ere t-e tax
lia0ilities o' its nationals are imposed on
income derived 'rom sources coming 'rom
3it-in and 3it-out.
/' Is t-ere an instance 3-ere international
dou0le taxation does not appl%6
A' <es. I' it involves nationals o' countries
3-erein t-e tax lia0ilit% is imposed onl% 'rom
income derive 'rom sources 3it-in and not
including t-ose derived 'rom sources 3it-out.
,Ex= F3itJerland2
T-e controvers% in t-e case at 0ar involves
t-e income tax paid in t-e P-ilippines.
)'ter pa%ing 2S. t-e IF 'irm discovered
t-at t-e% are entitled to 1*S under t-e most
'avored nation clause. T-e /uestion is= 3as
t-e tax paid under similar circumstances 3it-
t-at o' t-e !P75est >erman% Treat%6
T-e CT) and Court o' )ppeals ruled t-at it
3as paid under similar circumstances. T-e
p-rase re'erred to t-e ro%alties in pa%ment o'
income tax. T-e Fupreme Court ruled t-at t-e
lo3er courts interpretation o' t-e p-rase 3as
erroneous. !at-er. t-e p-rase applies to t-e
application o' matc-ing credit.
/' 5-at is matc-ing tax credit6
A' !P7>erman% Treat% provides 'or t-at 2*S
o' t-e tax paid in t-e P-ilippines s-all 0e
credited to t-eir tax due to 0e paid in
>erman%.
T-e 1*S does not appl% 0ecause t-ere is
no matc-ing credit. T-us. t-ere is no
similarit% in t-e circumstances.
E/ETAB$E &ECOEPMENT ANF FOCT&NE
OF SET+OFF
'(uitable Recou.,e)t
T-is doctrine provides t-at a claim 'or re'und
0arred 0% prescription ma% 0e allo3ed to o''set
unsettled tax lia0ilities 0% crediting suc- re'und
to -is existing tax lia0ilit%.
T-is is not allo3ed in t-is Kurisdiction.
0ecause o' common la3 origin. I' allo3ed. 0ot-
t-e collecting agenc% and t-e taxpa%er mig-t 0e
tempted to dela% and neglect t-e pursuit o' t-eir
respective claims 3it-in t-e period prescri0ed 0%
la3.
/' 5-at is t-e doctrine o' E/uita0le
!ecoupment6
1*
TAXATON
A' 5-en t-e claim 'or re'und is 0arred 0%
prescription. t-e same is allo3ed to 0e credited
to unsettled tax lia0ilities.
,Fir gives an illustration 'ound in page 3 o' magic
notes2
/' Is t-e rule a0solute6 !eason
A' <es. t-e rule is a0solute. T-e rationale 0e-ind
t-is is to prevent t-e taxpa%er and government
o''icial 'rom 0eing negligent in t-e pa%ment and
collection o' taxes.
,'urt-ermore. %ou -ave to 0e -onest 'or t-is to
3or1. -ence. t-e government is preventing
corruption2
T-ere is no exception at all ot-er3iseM t-e BI!
3ould 0e 'looded 3it- so man% claims.
Set-off
Presupposes mutual o0ligation 0et3een t-e
parties. In taxation. t-e concept o' set7o'' arises
3-ere a taxpa%er is lia0le to pa% tax 0ut t-e
government. 'or one reason or anot-er. is
inde0ted to t-e said taxpa%er.
/' 5-at do %ou mean 0% FET78DD6
A' T-is presupposes mutual o0ligations 0et3een
t-e parties. and t-at t-e% are mutual creditors
and de0tors o' eac- ot-er. In taxation. t-e
concept o' taxation arises 3-ere a taxpa%er is
lia0le to pa% taxes 0ut t-e government. 'or one
reason or anot-er. is I4DEBTED to said taxpa%er.
R%(UB*IC v "A"BU*A) *U"B%R C)
/' 5-at is t-e lia0ilit% o' ;am0ulao6
A' T-e% are lia0le to pa% 'orest c-arges
,under t-e old tax code2.
48TE= under our present tax code. t-e 4I!C. 3e
do not -ave 'orest c-arges as t-e same 3as
a0olis-ed 0% President )/uino.
/' 5-at did t-e lum0er compan% do6
A' T-e lum0er compan% claimed t-at since
t-e government did not use t-e re'orestation
c-arges it paid 'or re'orestation o' t-e
denuded land covered 0% its license. t-e
amount paid s-ould 0e reim0ursed to t-em or
at least compensated or applied to t-eir
lia0ilit% to pa% 'orest c-arges.
:= T-e Court ruled t-at t-e re'orestation
c-arges paid is in t-e nature o' taxes.
T-e principle o' compensation does not
appl% in t-is case 0ecause t-e parties are not
mutuall% creditors and de0tors o' eac- ot-er.
) claim 'or taxes is not a de0t. demand.
contract or Kudgment as is allo3ed to 0e set7
o'' under t-e statute o' set7o'' 3-ic- is
construed uni'orml%. in t-e lig-t o' pu0lic
polic%. to exclude t-e remed% in connection
or an% inde0tedness o' t-e Ftate or an%
municipalit% to one 3-o is lia0le 'or taxes.
4eit-er are t-e% a proper su0Kect 'or
recoupment since t-e% do not arise out o'
contract or t-e same transaction sued on.
>eneral !ule= no set7o'' is admissi0le against
demands 'or taxes levied in general or local
governmental purposes.
!eason= Taxes are not in the nat(re o"
contracts or .ebts bet%een the ta#,ayer
an. the go!ern*entB b(t arises o(t o" a
.(ty to. and are positive acts o' t-e government
to t-e ma1ing and en'orcing o' 3-ic-. t-e
consent o' t-e individual is not re/uired.
Taxes cannot 0e t-e su0Kect matter o'
compensation.
G= 5-at do 3e mean 0% t-e 3ord OmutualP6
)= O;utualP means t-at t-e cause o' action must
arouse 'rom t-e same source. Considering t-e
causes o' action o' t-e parties in t-is case came
'rom di''erent sources. it is not a proper su0Kect
matter o' set o''.
;oreover. tax is not a de0t. t-ere'ore. set
o'' or compensation 3as not allo3ed in t-e case.
FOMN<O !. <A&$TOS
<&N $+54336 A-C3-53A=
/' 5-at is 0eing collected in t-is case6
A' Estate and in-eritance taxes.
48TE= 3e do not -ave in-eritance taxes an%more
0ecause t-e same 3as a0olis-ed 0% #olo
;aco%.
/' 5-o is t-e administratrix6
A' T-e surviving spouse.
/' 5-at did t-e surviving spouse do6
A' T-e surviving spouse suggested t-at t-e
compensation to 3-ic- t-e decedent 3as
entitled to as an emplo%ee o' t-e Bureau o'
#ands 0e set7o'' 'rom t-e estate and
in-eritance taxes imposed upon t-e estate o'
t-e deceased.
11
TAXATON
:= Bot- t-e claim o' t-e government 'or
estate and in-eritance taxes and t-e claim o'
t-e ,intestate2 'or t-e services rendered -ave
alread% 0ecome overdue -ence demanda0le
as 3ell as 'ull% li/uidated. compensation
t-ere'ore ta1es place 0% operation o' la3. in
accordance 3it- )rt. 12$( and 12(* o' t-e
Civil Code and 0ot- de0ts are extinguis-ed to
t-e concurrent amount.
Compelling !eason= Congress has
enacte. &A C?>>B a))ocating a certain
s(* o" *oney to the estate o" the
.ecease..
B)! GIEFTI84 1(("=
F&ANCA !. AC
<&N $+A?A63 A-C4-5344
/' T-is -appened in 3-at cit%6
A' Pasa% Cit%
/' 5-at is t-e tax 0eing collected6 5-o is
collecting t-e same6
A' Pa%ment 'or real estate taxes 'or t-e
propert% o' Drancia. It appears t-at petitioner
3as delin/uent in t-e pa%ment o' -is real
estate tax lia0ilit%. T-e same is 0eing
collected 0% t-e Treasurer o' Pasa%.
/' 5-at is t-e suggestion o' petitioner6
A' Fuggested t-at t-e Kust compensation 'or
t-e pa%ment o' -is expropriated propert% 0e
set7o'' 'rom -is unpaid real estate taxes. ,t-e
ot-er part o' -is propert% 3as sold at a pu0lic
auction2
:= T-e 'actual milieu o' t-e case dose not
Kusti'% legal compensation.
T-e Court -as consistentl% ruled t-at
t-ere can 0e no o''7setting o' taxes against
t-e claims t-at t-e taxpa%er ma% -ave
against t-e government. ) taxpa%er cannot
re'use to pa% a tax on t-e ground t-at t-e
government o3es -im an amount.
Internal !evenue taxes cannot 0e t-e
su0Kect o' compensation 0ecause t-e
government and t-e taxpa%er are not
mutuall% creditors and de0tors o' eac- ot-er.
and a claim 'or taxes is not a de0t. demand.
contract or Kudgment as is allo3ed to 0e
compensated or set7o''.
Durt-ermore. t-e pa%ment o' Kust
compensation 3as alread% deposited 3it-
P4B Pasa%. and t-e taxes 3ere collected 0% a
local government. t-e propert% 3as
expropriated 0% t-e national government.
,di'' parties. not mutual creditors and de0tors
o' eac- ot-er.2
Ca)i"ornia Te#as 2CA$TEX7 P0$ !. COA
<&N 3C@4@ @-4-5344
/' 5-at is 0eing collected6
A' Caltexs contri0ution to t-e 8il Price
Fta0iliJation Dund ,8PFD2.
C8) sent a letter to Caltex as1ing t-e
latter to settle its unremitted collection
stating t-at until t-e same is paid. its claim
'or reim0ursement 'rom t-e 8PFD 3ill 0e -eld
in a0e%ance.
/' 5-% is Caltex entitled to reim0ursement6
A' Because o' t-e 'luctuation o' t-e oil prices
in t-e ;iddle East and Europe. Caltex 3anted
to o''7set its unremitted collection 'rom its
reim0ursements.
:= T-e Court did not allo3 t-e set7o''. and
reiterated its ruling in t-e case o' ;am0ulao
and Drancia. Durt-ermore. !) "(2 expressl%
pro-i0its set7o'' 'rom t-e collection o'
contri0utions to t-e 8PFD. T-e Court li1e3ise
stated t-at Caltex merel% acted as agent o'
t-e government in collecting contri0utions 'or
t-e 8PFD 0ecause suc- is 0eing s-ouldered
0% t-e consumers 3-en t-e% purc-ase
petroleum products o' oil companies. suc- as
Caltex.
Taxation is no longer envisioned as a
measure merel% to raise revenues to support
t-e existence o' t-e government. Taxes ma%
0e levied 'or regulator% purposes suc- as to
provide means 'or t-e re-a0ilitation and
sta0iliJation o' a t-reatened industr% 3-ic- is
vested 3it- pu0lic interest. a concern 3-ic- is
3it-in t-e police po3er o' t-e Ftate to
address.
P0$EX MNN< CO&P !. COMM
<&N 5C@?>6 4-C4-5334
T-e petitioner is lia0le 'or t-e pa%ment o'
excise taxes. 3-ic- it 3anted to 0e set7o'' 'rom
its pending claim 'or a +)T Input creditBre'und.
T-e Court did not allo3 set7o''. Taxes cannot
0e t-e su0Kect o' compensation 'or t-e simple
reason t-at t-e government and taxpa%er are not
mutual creditors and de0tors o' eac- ot-er.
Taxes are not de0ts.
Durt-ermore. in t-e instant case. t-e claim 'or
+)T re'und is still pending. T-e collection o' a
tax cannot a3ait t-e results o' a la3suit against
t-e government.
12
TAXATON
48TE= In t-ese cases. 3it- exception o'
Domingo v. >arlitos. compensation or set7o'' 3as
denied. T-e common ground 'or t-ese cases t-at
3ere denied= a tax is not a de0t 0ecause t-e
su0Kect matters under t-e Civil Code o'
compensation must 0e a de0t. Fecondl%. t-e FC
1eeps repeating t-at t-e taxpa%er and t-e
government are not creditors and de0tors 3it-
eac- ot-er.
:o3ever. in all t-ese cases 3-ere set o'' 3as
denied 0% t-e government. t-ere is al3a%s a
second reason a'ter reiterating t-e rule in t-e
case o' ;am0ulao. To 0egin 3it-. in t-e case o'
Drancia. t-e FC a'ter reiterating t-e ;am0ulao
ruling. it ruled t-e mone% 3as alread% paid in t-e
P4B account o' Drancia. In C)#TEA. 3e -ave t-e
same reason. In addition. t-e FC states t-at !)
"(2 do not allo3 set o'' or compensation to 0e
made against t-e 'und o' 8PFD. #astl%. P:I#EA
mining. 3e -ave t-e same ruling. 0ut in addition.
t-e FC added t-e claim 'or re'und is not %et
granted. In application t-e principle o' set o'' or
compensation. t-e amount must 0e DI##<
#IGIID)TED. It 'ollo3s t-at set o'' or
compensation s-ould 0e denied 0ecause t-e
re'und is not %et granted.
In Domingo vs. >arlitos. alt-oug- t-e parties are
not mutuall% creditors and de0tors. <ET. t-e FC
ruled ot-er3ise. simpl% 0ecause o' t-e ver%
uni/ue circumstance t-at Congress enacted !)
2$** appropriating mone% to t-e estate o' t-e
decedent.
FOEB$E TAXATON
De'inition= Ta#ing the sa*e s(bIect t%ice
%hen it sho(). be ta#e. on)y once. A)so
kno%n as .(,)icate ta#ation.
s .o(b)e ta#ation ,rohibite. in the
Phi)i,,ines:
No. T-ere is no constitutional pro-i0ition
against dou0le taxation in t-e P-ilippines. It is
somet-ing not 'avored 0ut permissi0le ,Pe,si
Co)a Bott)ing Co. !. City o" B(t(an. 1("&2.
Elements o' Dou0le Taxation=
12 #evied 0% t-e same taxing aut-orit%
22 Dor t-e same su0Kect matter
32 Dor t-e same taxing period and
42 Dor t-e same purpose
Jin.s o" Fo(b)e Ta#ation 2FT7
1. Firect .(,)icate ta#ation-obno#io(s E DT
in t-e o0Kectiona0le or pro-i0ited sense.
!E)F84= T-is constitutes a violation o'
su0stantive due process. T-e same propert%
is taxed t3ice 3-en it s-ould 0e taxed onl%
once.
Re$uisites'
a. t-e same propert% is taxed t3ice 3-en it
s-ould onl% 0e taxed onceM
0. 0ot- taxes are imposed on t-e same
propert% or su0Kect matter 'or t-e same
purposeM
c. imposed 0% t-e same taxing aut-orit%M
d. 3it-in t-e same Kurisdiction
e. during t-e same taxing periodM and
'. covering t-e same 1ind or c-aracter o'
tax.
C. n.irect .o(b)e ta#ation' 4ot legall%
o0Kectiona0le. T-e a0sence o' one or more o' t-e
'oregoing re/uisites o' o0noxious DT ma1es t-e
DT indirect.
Reliefs fro, 'ffects of %ouble /a0atio)
1. Ta# .e.(ctions
Example= +anis-ing deductions in trans'er
taxes.
2. Ta# cre.its
)n amount allo3ed as a reduction o' t-e
P-il. Income tax on account o' income tax,es2
paid or incurred to 'oreign countries. It is
given to a taxpa%er in order to provide a relie'
'rom too onerous a 0urden o' taxation in case
3-ere t-e same income is su0Kect to a 'oreign
and P-il. Income tax. T-is ma% 0e claimed 0%
,12 citiJens o' t-e P-ilippines and ,22 domestic
corporations.
3. E#e*,tions
4. Treaties %ith other states
5. Princi,)e o" reci,rocity
80noxious dou0le taxation is t-e s%non%m o'
dou0le taxation.
T-ere is no dou0le taxation i' t-e tax is levied
0% t-e #>I and anot-er 0% t-e national
government. T-e t3o ,22 are di''erent taxing
aut-orities.
#>Is are expressl% pro-i0ited 0% t-e
provisions o' !) $1"* or t-e #>C o' 1((1 'rom
lev%ing tax upon= ,12 t-e 4ational >overnmentM
,22 its agencies and instrumentalitiesM ,32 #>Is
,sec.113,o22.
T-e 4ational >overnment. pursuant to t-e
provisions o' !) &424 o' t-e Tax !e'orm )ct o'
1(($. can lev% tax upon >8CCs. agencies and
13
TAXATON
instrumentalities ,Fection 2$ c22. alt-oug-
income received 0% t-e >overnment 'orm=
12 an% pu0lic utilit% or
22 t-e exercise o' an% essential
governmental 'unction
is exempt 'rom tax.
To,ics (n.er Ta# 5'
. nco*e Ta# $a%
Fection 2272" o' t-e 4ational Internal
!evenue Code
a2 !ead in t-e commentaries or magic notes
t-e di''erent 1inds o'=
1. Income Taxpa%ers
2. Income Taxes
3. Fources o' Income sec. 42 o' 4I!C
7 Income Taxpa%ers
a2 Individuals
02 Corporation
c2 Estates and Trusts E
7Individuals are classi'ied
!esident CitiJens sec. 23 ,)2. sec 24
,)2 ,a2
4on7!esident CitiJens sec 23 ,B2. 24
,)2 ,02 22 ,E2
8verseas Contract 5or1ers Fec. 23
,C2. 24 ,)2 ,02
!esident )liens !ev. !eg. sec . 23
,D2. 24 ,)2 ,c2
4on7!esident )liens Engaged in trade
or 0usiness sections 2 ,)2 ,12
4on7!esident )liens 4ot Engaged in
trade or 0usiness sec. 2 ,B2
)liens Emplo%ed in ;ulti74ational
Corporations sec. 2 ,C2 and !ev.
!eg. 1272**1
)liens Emplo%ed in 8''s-ore Ban1ing
Inits sec 2 ,D2
)liens Emplo%ed in petroleum Fervice
Contractors H Fu0contractors sec. 2
,E2
7Corporate Income Taxpa%ers
Domestic Corporations sec. 23 ,E2. and
sec 2$ o' 4I!C
!esident Doreign Corporations sec. 22 ,:2
and ,2&2)
4on7!esident Doreign Corporations sec. 22
,12 and 2& ,B2
7Estates and Trusts sec. "*7"" o' 4I!C
Di''erent Tinds o' Income Tax
1. 4et Income Tax secs. 24 ,)2. 2 ,)2
,12. 2". 2$ ,)2 ,B2 ,C2. 2& ,)2 up to 3
rd
par. 31 and 32 ,)2
2. >ross Income Tax secs. 2 ,B2 'irst
part and 2& ,B2 ,12
3. Dinal Income Taxes sec. $ ,)2
4. ;inimum Corporate Income Tax o' 2S
o' t-e >ross Income secs. 2$ ,E2. 2&
,)2 ,22
. Improperl% )ccumulated Earnings Tax
o' 1*S o' its taxa0le income sec. 2(
4I!C !ev. !eg. 272**1
8ptional Corporate Income Tax o' 1S
o' its gross income sections 2$ ,)2 4
t-
to 1*
t-
par. )nd 2& ),12 0ut onl% up to
t-e 4
t-
paragrap-
7Proceed to section 42 and 23 o' t-e 4I!C
4DC vs. Comm 11 FC!) 4$2
Comm. +s. I)C 12$ FC!) (
7T-en go to sec. 3( o' 4I!C
CalaJans vs. Comm. 144 FC!) ""4 !!
$72**3
7T-en proceed to sec. 24 ,)2. 2 ,)2 ,12.
2 B.C.D.E. 2$ ).B.CM 2& ,)2 ,12. 2& ,)2 ,"2
and sec 1 ,D2
7T-en continue to sec 24 B 1. 2 B.C.D.EM
2$ ,D2 ,12
7T-en go to se. 24 ,B2 ,22 sec. $3
Comm. +s. ;anning "" FC!) 14
)nscor vs. Comm. 3*1 FC!) 12
7Fec. 2 ,)2 ,22. 2 B. C. C. E. sec. 2$ ,D2 ,42M 2&
,)2 ,$2 ,D2M 32 B ,$2 ,a2
. T-en %ou go to sec. 24 C. 2) ,32M 2 B. C.
D. E. 2$ D ,22M 2& ,)2 ,$2 ,C2M 2& B ,2 ,C2 !)
$$1$ sec. 12$ 4I!C
. T-en %ou go to sec. 24 D ,12M 2 ,)2 ,32M 2
,B2 last par. 2$ ,D2 ,2
C-ina Ban1 vs. Court o' )ppeals 33"
FC!) UUUM !! $72**3
7Ipon reading sec. 24 ,D2 ,22 read !! 1371(((
7Ipon reading sec. 2$ ,)2 go to sec. 22 ,B2
Batangas vs. Collector 1*2 P-il. &22
Evangelista vs. Collector 1*2 P-il 14*
!e%es vs. Comm. 24 FC!) 1(&
8na vs. Bautista 4 FC!) $4
80illos vs. Comm 13( FC!) 43"
Pascua vs. Comm. 1"" FC!) "*
14
TAXATON
)'isco vs. Comm. 3*2 FC!) 1
7Ipon reading sec. 2$ ,C2 o' 4I!C see !) (33$
t-en go to sec. 32 ,B2 ,$2 ,02 o' 4I!C. sec. 133
par ,o2 o' #>C. sec. 14 o' t-e #>C.
Pagcor vs. Basco 1($ FC!) 2
;actan vs. Ce0u 2"1 FC!) ""$
#!T vs. Cit% o' ;anila 342 FC!) "(2
7Proceed to sections 2$ ,D2 ,12. 2$ ,D2 ,22. 2$
,D2 ,2 read !) (33$. 2& ,)2 ,$2 ,02. 2& ,B2 ,2
,C2. 2$ ,D2 ,42. ,2&2 ,)2 ,$2 ,d2. 2& ,B2 ,2 ,02
;aru0eni vs. CI! 1$$ FC!) **
Proctor H >am0le vs. Comm 1"* FC!)
"*
Fame case Proctor and >am0le on t-e
;otion 'or !econsideration 2*4 FC!) 3$$
5onder vs. Comm 1"* FC!) $3
7Proceed to sec. 2$,D2 ,2
t-en sections 2$ ,E2 and 2& ,)2 ,22
7>o to sec. 2& ,)2 ,32 read !! 172**2
7>o to sec. 2& ,)2 ,42 see !) (33$
7T-en see sec 2& ,)2 ,2 see ;aru0eni vs. Comm
1$$ FC!) **
7Proceed to sec. 2&,B2 ,2 ,a2 and sec 32 ,B2 ,$2
,a2
!ead ;itsu0is-i vs. Comm 1&1 FC!) 214
7T-en go to sec. 2( and !ev. !eg. 272**1
7Ipon reading sec. 32 ,B2 1 and 2. read sec. &
par ,e2. sec. 1*&) and sec. 123 o' t-e 4I!C
7Proceed to sec. 33 read !ev. !eg. 37(&
7t-en go to sec. 34 ,)2 ,12 ,a2 see )guinaldo vs.
Comm. 112 FC!) 13". !! 1*72**2
7Inder Fec. 34 ,B2 read !! 1372***
7Ipon reading sec. 4( read Banas vs. C) 32
FC!) 2( and Dilipina vs. Comm. 31" FC!) 4&*
7Ipon reading sec. "*7"". read 8na vs.
Bautista 4 FC!) $4
1
TAXATON
1"
TAXATON
FO& T0S TAB$E JNF$; C0ECJ ON
EPFATES ANF F&OM SECTON OF FNA$
NCOME TAX.
1$
TAXATON
NFGFEA$ TAXPA;E&
/' :o3 man% 1inds o' individual taxpa%ers are
t-ere6
A' T-ere are seven ,$2. 4amel%=
NFGFEA$ TAXPA;E& SECTON
!esident CitiJen 23) H
24)
4onresident CitiJen 23B H
24)
8C5 and FE)men 23C H
24)
4onresident )lien E4>)>ED in Trade
or Business
22>. 23D
H 2)
4onresident )lien 48T E4>)>ED in
Ttrade or Business
22>. 23D
H 2B
)liens E4>)>ED in
;I#TI4)TI84)# C8;P)4IEF.
8DDF:8!E B)4TI4> I4ITF H
PET!8#EI; FE!+ICE C84T!)CT8!F
,AEMOP2
2
C. D H E
Resi+e)t &iti1e) (R&$
/' :o3 man% t%pes o' !C6
A' T-ere are t3o ,22. namel%=
1. !C residing in t-e P-ilippinesM and
2. Dilipino living a0road 3it- no intention to
reside permanentl% t-erein.
/' I' %ou are a0road. and %ou -ave t-e intention
to permanentl% reside t-erein. can %ou still 0e
considered a !C6
A' <es. I' suc- intention to permanentl% reside
t-erein 3as not mani'ested to t-e Commissioner
and t-e 'act o' %our p-%sical presence t-erein.
%ou ma% still 0e considered a !C.
2&W a)+ Sea,e)
8C5 3as used and not 8D5 in t-e CT!P.
0ecause t-e classi'ication s-all cover onl% t-ose
Dilipino citiJens 3or1ing a0road 3it- a contract.
T4Ts are not covered.
) Dilipino seaman is deemed to 0e an 8C5
'or purposes o' taxation i' -e receives
compensation 'or services rendered a0road as a
mem0er o' t-e complement o' a vessel engaged
exclusivel% in international trade.
Conse/uentl%. i' -e is not a mem0er o' t-e
complement or even i' -e is 0ut t-e vessel 3-ere
-e 3or1s is not exclusivel% engaged in
international trade. said seaman is not deemed
to 0e an 8C5. :e is eit-er a !C or a 4!C
depending on 3-ere -e sta%s most o' t-e time
during t-e taxa0le %ear.
I' -e sta%s in t-e P-ilippines most o' t-e time
during t-e taxa0le %ear. -e is considered a !C.
ot-er3ise. a 4C!.
I' %ou are a seaman in t-e IF 4av%. %ou are
not t-e one 0eing re'erred to.
T-e importance o' ascertaining 3-et-er or
not a seaman is a !C or a 4!C. is t-at i' -e is a
!C -e is taxa0le on )## income derived 'rom all
sources 3it-in and 3it-out. I' -e is a 4!C. -e is
taxa0le onl% on income derived 'rom sources
3it-in t-e P-ilippines.
/' 5-at is t-e signi'icance o' using 8C56
A' It onl% covers Dilipinos 3-o 3or1s a0road 3it-
a contract. It does not cover T4Ts.
/' 5-at is t-e status o' a T4T6
A' Fince t-e% are not covered 0% t-is
classi'ication. t-e% are considered !C 0ecause
t-e% 3or1 a0road 3it-out a contract and t-e%
-ave not mani'ested t-eir intention to
permanentl% reside a0road. ,distinguis- 'rom an
immigrant2
!e/uirements 'or a seaman to 0e considered an
8C5=
1. must 0e a mem0er o' t-e compliment o' a
vesselM
2. t-e vessel must 0e exclusivel% engaged in
international trade or commerce.
Resi+e)t 3lie) (R3$
)n individual 3-ose residence is 3it-in t-e
P-ilippines and 3-o is not a citiJen t-ereo'.
1&
TAXATON
Intention to reside permanentl% in t-e
P-ilippines is not a re/uirement on t-e part o' t-e
alien.
T-e re/uirement under !!N2 is t-at -e is
actuall% present in t-e P-ilippines. neit-er a
soKourner. a traveler. not a tourist.
5-et-er -es a transient or not is determined
0% -is intent as to t-e nature and lengt- o' -is
sta%.
/' Is t-e intention to permanentl% reside in t-e
P-ilippines necessar%6
A' 4o. so long as -e is not a soKourner. tourist or
a traveler.
No)-Resi+e)t 3lie) ')-a-e+ i) /ra+e or
4usi)ess (NR3'/4$
) 'oreigner not residing in t-e P-ilippines 0ut
3-o is engaged in trade or 0usiness -ere.
!! 27(& -as expanded t-e coverage o' t-e
term. Oengaged in trade or 0usinessP to include
t-e exercise o' a pro'ession. Durt-ermore. 0% t-e
express provision o' t-e la3. a 4!) 3-o is
neit-er a 0usinessman nor a pro'essional 0ut 3-o
come to and sta%s in t-e P-ilippines 'or an
aggregate period o' more t-an 1&* da%s during
an% calendar %ear is deemed to a 4!)ETB in t-e
P-ilippines.
/' :o3 man% t%pes6
A' T-ere are t-ree ,32 t%pes. namel%=
1. 4!) engaged in trade or 0usiness
,2a12M
2. 4!) 3-o practices a pro'ession
,!evenue !egulation 27(&2M
3. 'oreigner 3-o comes and sta%s in
t-e P-ilippines 'or an aggregate period o'
;8!E T:)4 1&* da%s during an% calendar
%ear.
/' 5-at is t-e status o' a C-inese 3-o sta%s
-ere 'or 2** da%s in 2**16
A' 4!)ETB
/' Fuppose -e sta%ed -ere 'or 1** da%s in 2***
and anot-er 1** da%s in 2**16
A' :e is not a 4!)ETB. To 0e considered as
suc-. -e must sta% 'or an aggregate period o'
more t-an 1&* da%s during a calendar %ear.
/' 5-at is t-e income tax applica0le to said
taxpa%er6
A' 4et Income Tax ,4IT2 on all its income derived
'rom sources 3it-in t-e P-ilippines.
No)-Resi+e)t 3lie) Not ')-a-e+ i)
/ra+e or 4usi)ess
/' :o3 man% 1inds6
A' 8nl% one.
T-e reason 3-% t-e 4!)4ETB are included in
an% income tax la3 is 0ecause t-e% ma% 0e
deriving income 'orm sources 3it-in t-e
P-ilippines.
T-e% are su0Kect to tax 0ased on t-eir >!8FF
I4C8;E received 'orm all sources 3it-in t-e
P-ilippines.
3lie)s ',.loye+ by Re-io)al or 3rea
5ea+(uarters 6 Re-io)al 2.erati)-
5ea+(uarters of 7ulti)atio)al
&o,.a)ies! 3lie)s ',.loye+ by 2ffs8ore
4a)ki)- 9)its (3lie)s ',.loye+ by 72P$
Ftatus= eit-er a !) or 4!) depending on t-eir
sta% -ere in t-e P-ilippines.
T-eir status ma% eit-er 0e !) or 4!) 0ecause
Fection 2 C and D does not distinguis-.
#ia0le to pa% 1S 'rom >ross Income
received 'rom t-eir emplo%er
Income earned 'rom all 8T:E! sources s-all
0e su0Kect to t-e pertinent income tax. as t-e
case ma% 0e.
3lie)s ',.loye+ i) 7ulti)atio)al a)+
2ffs8ore 4a)ki)- 9)its
/' :o3 are t-e% classi'ied6
A' I' t-e% derived income 'rom ot-er sources
aside 'rom t-eir emplo%er. %ou ma% classi'% t-em
eit-er as !). 4!)ETB. or 4!)4ETB.
3lie)s ',.loye+ i) Petroleu, Service
&o)tractors a)+ Subco)tractors
Ftatus= )#5)<F 4!). I' t-e% derive income
'rom ot-er sources. suc- income s-all 0e su0Kect
to t-e pertinent income tax. as t-e case ma% 0e.
Income derived or coming 'rom t-eir
emplo%er s-all 0e su0Kect to a tax o' 1S o' t-e
gross.
. CO&PO&ATE TAXPA;E&
1(
TAXATON
1. :omestic Corporation /:C1 E created or
organiJed under P-ilippine la3s.
2. Resident ;oreign Corporation /R;C1 E
corporation created under 'oreign la3.
and engaged in trade or 0usiness.
3. 9onresident ;oreign Corporation /9R;C1 E
created under 'oreign la3. and 48T
engaged in trade or 0usiness.
/' 5-at are deemed corporations under t-e
4I!C6
A' T-e term corporation s-all include
partners-ips. no matter -o3 created or
organiJed. Koint stoc1 companies. Koint accounts.
associations. or insurance companies. 0ut D8EF
48T includes general pro'essional partners-ips
and a Koint venture or consortium 'ormed o' t-e
purpose o' underta1ing construction proKects or
operations pursuant to or engaging in petroleum.
coal. geot-ermal or consortium agreement under
a service contract 3it- t-e >overnment.
1. Partners-ips and ot-ers no matter -o3
created
2. Loint Ftoc1 Companies
3. Loint )ccounts
4. )ssociations
. Insurance Companies
CIR v C)URT ); A((%A*-
T-e p-rase no Omatter -o3 created or
organiJedP 3as interpreted.
Even i' t-e partners-ip 3as pursuant to la3 or
not. 3-et-er nonstic1. nonpro'it. it is still deemed
a corporation.
!eason= 0ecause o' t-e possi0ilit% o' earning
pro'its 'rom sources 3it-in t-e P-ilippines.
/' )re partners-ips al3a%s considered
corporations6 Is t-ere no exception6
A' >eneral !ule= a partners-ip is a corporation.
Exception= >eneral Pro'essional Partners-ips
,>PP2
/' 5-at is a >PP6
A' It is a partners-ip 'ormed 0% persons 'or t-e
sole purpose o' exercising t-eir pro'ession. no
part o' t-e income o' 3-ic- in derived 'rom an%
trade or 0usiness. ,3-at i' a partner -as ot-er
0usinesses not related to t-e >PP6 9 read section
2" /uoted -ereunder2
T3o ,22 Tinds o' >PP 'ormed 'or=
12 Exercise o' a pro'ession E not a
corporationM exempt 'rom Corporate
Income Tax ,CIT2
22 Exercise o' a pro'ession and engaged in
trade or 0usiness E a corporationM su0Kect
to CIT
TA9 v :%* R)-ARI)
general rule= a partners-ip is a corporation
exception= >PP
exception to t-e exception= i' t-e >PP derives
income 'rom ot-er sources. it is considered a
corporation. t-us lia0le to pa% corporate income
tax.
!ule=
1. i' t-e income is derived 'rom ot-er
sources and suc- income is su0Kect to 4ET
I4C8;E T)A. it is not exempt and it is considered
a corporation.
2. i' t-e income is derived 'rom ot-er
sources and suc- income is su0Kect to DI4)#
I4C8;E T)A. it is still EAE;PT and it is not
deemed a corporation. , separate return 'or t-is.
It 3ill not re'lect in t-e >PPs IT!2
V T-is is pursuant to t-e 'act t-at DIT 3ill not
re'lect in t-e IT! o' t-e >PP since t-e 3it--olding
agent is lia0le 'or t-e pa%ment o' t-e DIT.
/' 5-at is t-e importance o' 1no3ing 3-et-er
t-e corporation is exempt or not6
A' To determine t-eir tax lia0ilit%. T-is is
important to determine t-e tax lia0ilit% o' t-e
individual partners o' t-e >PP.
-ection ., /2
st
paragraph1 provides= Oa >PP as
suc- s-all not 0e su0Kect to t-e 4et Income
TaxWP -o3ever. OWpersons engaging in 0usiness
as partners in a >PP s-all 0e lia0le 'or income tax
onl% in t-eir separate and individual capacities.P
In s-ort. eac- partner 3ill 0e pa%ing 4IT. and
t-e distri0utive s-ares t-e% 3ill 0e receiving 'rom
t-e net income o' t-e >PP 3ill 0e included in t-e
gross income o' t-e partner.
/' I' t-e >PP is deemed a corporation. 3ill t-e
partners -ave to pa% 'or t-e income tax6
A' 4o. as 'ar as t-e s-are o' t-e >PP is
concerned. it is considered a taxa0le dividend
3-ic- is su0Kect to DIT.
/' Is a Koint venture a corporation6
A' >enerall%. %es. it is a corporation.
/' Corporation A and Corporation < Koined
toget-er. :o3 man% corporations do 3e -ave6
2*
TAXATON
A' T-ree. namel% Corporation A. <. and AX<. t-e
Koint venture -as a separate and distinct
personalit% 'rom t-e t3o corporations.
/' 5-en is a Koint venture not considered a
corporation6
A' It is not deemed a corporation 3-en it is
'ormed 'or t-e purpose o' underta1ing a
,Oconstruction62 proKect or engaging in
petroleum. gas. and ot-er energ% operations
pursuant to O6P or consortium agreement under a
service contract 3it- t-e government.
%o,estic &or.oratio)
Is one created or organiJed in t-e P-ilippines
or under its la3s.
Taxa0le on all income derived 'rom sources
3it-in or 3it-out t-e P-ilippines.
Resi+e)t *orei-) &or.oratio)
Doreign corporations engaged in trade or
0usiness in t-e P-ilippines.
Taxa0le 'or income derived 3it-in t-e
P-ilippines.
No)-Resi+e)t *orei-) &or.oratio)
Doreign corporations not engaged in trade or
0usiness in t-e P-ilippines.
Taxa0le 'or income derived 3it-in t-e
P-ilippines.
Bot- DC and !DC are lia0le 'or t-e pa%ment o'
t-e 'ollo3ing=
12 4IT E 4et Income Tax
22 DIT E Dinal Income Tax
32 1*S income tax on
corporations 3it- properl% accumulated
earnings.
42 ;CIT ,;inimum Corporate
Income Tax2 o' 2S o' t-e >ross Income
2 8ptional Corporate
Income Tax o' 1S o' t-e >ross Income
) 4!DC is lia0le 'or pa%ment o' t-e ''=
12 >IT7 >ross Income Tax
22 DIT E Dinal Income Tax
. T&EST ANF ESTATE
/' :o3 man% 'or eac-6
A' Feven ,$2 1inds 'or eac- 0ecause t-e trust or
estate 3ill 0e determined 0% t-e status o' t-e
trustor. grantor. or creator. or o' t-e decedent.
T-e status o' t-e estate is determined 0% t-e
status o' t-e decedent at t-e time o' -is deat-M
so an estate. as an income taxpa%er can 0e a
citiJen or an alien.
5-en a person 3-o o3ns propert% dies. t-e
'ollo3ing taxes are pa%a0le under t-e provision
o' income tax la3=
12 Income Tax 'or Individuals E to cover t-e
period 0eginning Lanuar% to t-e time
o' deat-.
22 Estate Income Tax E i' t-e propert% is
trans'erred to t-e -eirs.
32 I' no partition is made. Individual or
Corporate Income Tax. depending on
3-et-er t-ere is or t-ere is no
settlement o' t-e estate. I' t-ere is.
depending on 3-et-er t-e settlement
is Kudicial or extraKudicial.
:u+icial Settle,e)t
12 During t-e pendenc% o' t-e settlement.
t-e estate t-roug- t-e executor.
administrator. or -eirs is lia0le 'or t-e
pa%ment o' EFT)TE I4C8;E T)A ,Fex. "*
,322.
22 I' upon t-e termination o' t-e Kudicial
settlement. 3-en t-e decision o' t-e court
s-all -ave 0ecome 'inal and executor%.
t-e -eirs still do not divide t-e propert%.
t-e 'ollo3ing possi0ilities ma% arise=
a2 I' t-e -eirs contri0ute to t-e estate
mone%. propert% or industr% 3it- t-e
intention to divide t-e pro'its 0et3een
and among t-emselves. an
I4!E>IFTE!ED P)!T4E!F:IP is
created and t-e estate 0ecomes lia0le
'or pa%ment o' CIT ,Evangelista vs.
Collector ,1*2 P-il 14*22
02 I' t-e -eirs 3it-out contri0uting
mone%. propert% or industr% to
improve t-e estate. simpl% divide t-e
'ruits t-ereo' 0et3een and among
t-emselves. a C87854E!F:IP is
created and Individual Income Tax
,IIC2 is imposed on t-e income derived
0% eac- o' t-e -eirs. pa%a0le in t-eir
21
TAXATON
separate and individual capacit%
,Pascual vs. C8;; ,1" scra "*2 and
80illos vs. C8;; ,13( FC!) 43"22
'0tra;u+icial Settle,e)t a)+ if N2
Settle,e)t
Fome possi0ilities ma% arise. T-e income tax
lia0ilit% depends on 3-et-er or not t-e
unregistered partners-ip or co7o3ners-ip is
created.
/rust
Trusts can 0e created 0% 3ill. 0% contract or
0% agreement. T-e status o' a trust depends
upon t-e status o' t-e grantor or trustor or
creator o' t-e trust. :ence. a trust can also 0e a
citiJen or an alien.
/' 5-ere t-e trust earns income and suc-
income is not passive. 3-o among t-e parties
mentioned is lia0le 'or pa%ment o' income tax
t-ereon6
A' T-e T!IFT itsel'. t-roug- t-e trustee or
'iduciar% 0ut onl% i' t-e trust is irrevoca0le.
I' it is revoca0le. or 'or t-e 0ene'it o' t-e
grantor. t-e lia0ilit% 'or t-e pa%ment o' income
tax devolves upon t-e trustor -imsel' in -is
capacit% as individual taxpa%er.
JNFS OF NCOME TAX
/' :o3 man% 1inds o' income tax6
A' T-ere are Fix ,"2. namel%=
1. 4et Income Tax ,4IT2M
2. >ross Income Tax ,>IT2M
3. Dinal Income Tax ,DIT2M
4. ;inimum Corporate Income Tax o'
2S o' t-e >ross Income ,;CIT2
. Income Tax on Improperl%
)ccumulated Earnings su0Kect to 1*S o'
t-e Taxa0le IncomeM
". 8ptional Corporate Income Tax o'
1S on t-e >ross Income
. NET NCOME TAX
/' 3-at is t-e 'ormula6
A' >ross Income E Deductions and Personal
Exemptions @ Taxa0le Income
Taxa0le Income x Tax !ate @ 4et Income
Taxa0le 4et Income E Tax Credit @
Taxa0le 4et Income Due
4et Income means >ross Income less
deductions and
Dormula=
>I
7 deductions
4et Income
x Tax !ate
Income Tax Due
/' 5-at is t-e rate6
A' Individual= 32S
Corporation= 3*S
48TE= t-e 'ormula allo3s 'or deduction. personal
exemptions and tax credit.
/' 5-at are t-e ot-er terms 'or 4IT6
A' 4I!C=
a. taxa0le income
0. >ross income ,3alang 1asunod2
onl% income tax 'rom improperl% accumulated
earnings does not use t-is term.
1. CD)= Oto 0e included in t-e gross
incomeP
2. !evenue !egulations and Ftatutes=
a. ordinar% 3a% o' pa%ing income taxM
0. normal 3a% o' pa%ing income tax .
&8aracteristics<
/' 5-o are not lia0le to pa% 4IT6
A' 1. 4!)4ETB ,lia0le 'or >IT2M
2. 4!DC ,>IT also2M
3. 5it- certain modi'ications. )E;8P. i' t-e%
derive income 'rom ot-er sourcesM
/' Is t-e taxa0le net income su0Kect to
3it--olding tax6
A' It is su0Kect to 3it--olding tax i' t-e la3 sa%s
so.
/' 5-at i' t-e la3 is silent6
A' I' t-e la3 is silent. it is not su0Kect to
3it--olding tax.
/' 5-at is anot-er term 'or 3it--olding tax6
A' It is also 1no3n as t-e credita0le 3it--olding
tax s%stem under t-e income tax la3.
/' Do 3e -ave to determine i' t-ere is an actual
gain or loss6
A' <es 0ecause t-e 'ormula 'or deductions. etc.
22
TAXATON
/' I' %ou 'ail to pa%. 3ill %ou 0e -eld lia0le6
A' <es. %ou 3ill 0e -eld lia0le.
. <&OSS NCOME TAX 2<T7
A' >ross Income x !ate
/' :o3 man% taxpa%ers pa% 0% 3a% o' t-e
gross6
A' T-ere are t3o ,22
individual 7 4!)4ETB
corporation 7 4!DC
48TE= t-e 'ormula does not allo3 an% deduction.
personal exemptions and tax credit.
&8aracteristics<
4!)4ETB and 4!DC. t-oug- not engaged in
trade or 0usiness. are lia0le to pa% 0% 3a% o' t-e
gross 'or an% income derived in t-e P-ilippines.
5-ile not engaged in trade or 0usiness. t-ere is a
possi0ilit% t-at t-e% ma% earn income in t-e
P-ilippines.
/' Is t-is su0Kect to 3it--olding tax6
A' <es. it is su0Kect to 3it--olding tax 0ecause
t-e persons lia0le are 'oreigners. T-is rule is
)BF8#ITE
48TE= t-ere are t3o ,22 3a%s o' pa%ing taxes
depending on 3-ic- side o' t-e 0enc- %ou are.
. FNA$ NCOME TAX 2FT7
A' ,Eac- Income2 x ,Particular !ate2
Inli1e in t-e gross income tax 3-ere %ou add
all t-e income 'rom all t-e sources and multipl%
t-e sum t-ereo' 0% t-e rate o' 2S or 3*S. as
t-e case ma% 0e. in 'inal income tax. %ou cannot
Koin all t-e income in one group 0ecause eac-
income -as a particular rate.
A' !e'er to ta0le on passive income t-en 'rom
t-e amount appl% directl% t-e rate 3it-out an%
deductions.
48TE= li1e >IT. t-e 'ormula does not allo3
deductions. personal exemptions. and tax credit.
&8aracteristics<
/' 5-o are lia0le to pa% DIT6
A' )ll taxpa%ers are lia0le to pa% DIT provided
t-e re/uisites 'or its application are present.
/' Do %ou still -ave to pa% 4IT6
A' 4o. i' %ou are lia0le 'or DIT. no need to pa%
4IT or else t-ere 3ill 0e dou0le taxation.
48TE= as time passed 0%. t-e num0er o' DIT
increased.
0e'ore 1($( E proceeds 'rom t-e sale o' real
propert% not exempt. it is su0Kect to 4IT or >IT.
as t-e case ma% 0e.
a'ter 1($( E capital gains tax. Proceeds 'rom
t-e sale o' real propert% is exempt.
/' I' %ou 'ail to pa%. 3ill %ou 0e lia0le6
A' 4o. t-e 3it--olding agent is lia0le to pa% DIT.
Case o' Luda%. !ic-ard and !egine
Dor one to 0e lia0le 'or t-e pa%ment o' 4IT.
t-e income must 0e derived on t-e 0asis o' an
emplo%er E emplo%ee relations-ip.
Emplo%er E Emplo%ee !elations-ip
,3 Cs2=
1. contractM
2. controlM
3. compensationM
:o3ever. in t-e case o' cele0rities. t-ere is no
emplo%er E emplo%ee relations-ip. t-e% are
merel% receiving ro%alties. !o%alties are su0Kect
to 'inal 3it--olding tax. t-us t-e agent is lia0le to
pa%. ,so. distinguis- nature o' income. 3-et-er
ro%alt% or compensation2
!I#E=
1. 'or 4IT. 3-et-er or not su0Kect to
Credita0le 5it--olding Tax ,C5T2. t-e
taxpa%er is al3a%s lia0le i' -e 'ails to pa%.
2. 'or >IT and DIT. a0solute lia0ilit% to pa% is
upon t-e 3it--olding agent.
/' 5-% is it t-at t-e rate o' 3it--olding is al3a%s
lo3er. and 3-% is it t-at t-e rate o' >IT and DIT is
al3a%s e/ual6
A'
1. 4IT allo3s deductionsM
2. >IT and DIT do not allo3 deductions.
23
TAXATON
/' Do %ou -ave to determine 3-et-er t-ere is an
actual loss or gain6
A' 4o need to determine 0ecause t-e 'ormula
does not allo3 deductions. >ain is presumed. 4o
lia0ilit% 'or 'inal 3it--olding tax except 'or t-e
sale o' s-ares o' stoc1. ,62
G. MNMEM CO&PO&ATE NCOME TAX
2MCT7
/= 5-at is t-e 'ormula6
A' >ross Income x 2S
/= 5-o pa%s t-is tax6
A' DC and !DC onl%.
/' ;a% it 0e applied simultaneous 3it- 4IT6
A' 4o. t-ere must 0e a computation o' t-e 4IT
'irst t-en appl% 3-ic-ever is -ig-er. T-e ;CIT is
paid in lieu o' t-e 4IT.
!eason= to discourage corporations 'rom claiming
too man% deductions.
G. OPTONA$ CO&PO&ATE NCOME TAX
/' Inder 3-at section is t-is 'ound6
A' Fection 2$) 4
t-
paragrap- and Fection 2& ),12
4
t-
paragrap-.
/' Is t-is applica0le no36
A' 4o. t-is is not %et implemented.
/' To 3-at 1ind o' taxpa%er does t-is appl%6
A' To DC and !DC.
/' 5-at 1ind o' taxes are applica0le or imposed
upon t-e 1
st
'ive individual taxpa%ers6
A' 8nl% t3o ,22 1inds are applica0le out o' t-e
six ,"2 1inds o' income taxes.
1- 4ITM
2- DITM
/' 5-at 1ind o' income tax 3ill appl% to )E;8P6
A' >enerall%. onl% one 1ind. 1S DIT 3it-
respect to income derived 'rom t-eir emplo%er.
Income 'rom ot-er sources=
1. Determine t-e status o' t-e )E;8PM
a. 4IT
0. DIT
2. 4!)4ETB
a. >IT
0. DIT
/' 5-at 1ind o' income tax applies to DC6
A' 8nl% 'our ,42 1inds 3ill appl% out o' t-e six ,"2
1. 4IT
2. DIT
3. ;CIT
4. Improperl% )ccumulated Earnings
/' ;a% all o' t-ese 0e applied simultaneousl%6
A' 4o. onl% t-e 4IT. DIT and Improperl%
)ccumulated Earnings 0e applied simultaneousl%.
4IT and ;CIT cannot 0e applied simultaneousl%.
8nl% one 3ill appl%. 3-ic-ever is -ig-er 0et3een
t-e t3o.
/' 5-at 1ind o' tax 3ill appl% to 4!DC6
A' 8ut o' t-e six ,"2 1inds. onl% t3o ,22 3ill
appl%=
1. >IT
2. DIT
/' 5-at is t-e signi'icance o' 1no3ing t-e
classi'ication o' t-ese taxpa%ers6
A'
1. to determine t-e 1ind o' income tax
applica0le to t-emM
2. to determine t-eir tax lia0ilit%.
/' Inder Fection 23. 3-o are lia0le 'or income
3it-in and income 3it-out6
A' 8nl%
1. !C
2. DC
T-e rest o' t-e taxpa%ers 3ill 0e lia0le 'or
income coming 'rom sources 3it-in.
Income 'rom sources 3it-out. no lia0ilit%.
t-ere'ore exempt.
48TE= T-e income taxpa%er is not a !C or a DC.
Determine i' t-e income came 'rom sources
3it-in or 3it-out to 1no3 t-e taxpa%ers lia0ilit%.
I' t-e 'acts are speci'ic. do not /uali'% %our
ans3er. )ns3ers must 0e responsive to t-e
/uestion.
/' Is section 42 relevant to all t-e taxpa%ers6
A' 48. FECTI84 42 IF 48T ;)TE!I)# T8 )##
taxpa%ers. particularl% t-e !C and DC 0ecause
t-ese t3o are lia0le 'or 0ot- income 3it-in and
3it-out.
Fection 42 is applica0le onl% to taxpa%ers 3-o
are lia0le 'or income 3it-in. t-e rest o' t-e
taxpa%ers are ot-er3ise exempt.
24
TAXATON
/' Fection 42,)2,12 provides 'or -o3 man% 1inds
o' interests6
A' It esta0lis-es t3o ,22 1inds o' interests.
namel%=
1. interest derived 'rom sources 3it-in t-e
P-ilippines.
2. interest on 0onds. notes or ot-er interest
0earing o0ligations o' residents. corporate
or ot-er3ise.
/' 5-at is t-e determining 'actor in order to
1no3 i' t-e income is 'rom 3it-in6
A'
1. location i' t-e 0an1 is 'rom 3it-in t-e
P-ilippines ,pursuant to a !evenue !eg.2
2. residence o' t-e o0ligor ,3-et-er an
individual or a corp.2 E contract o' loan
3it- respect to t-e interest earned
t-ereon.
Dor example t-e 0orro3er is a 4!)ETB. -e
0orro3ed mone% 'rom a !). T-e interest earned
0% t-e loan 3ill 0e considered as an income
3it-out. !) is not lia0le to pa% tax since !) is
lia0le onl% 'or income 3it-in. t-ere'ore exempt
'rom pa%ing t-e tax.
9ATI)9A* :%<%*)("%9T C) v CIR
D= T-e 4ational Development Compan%
,4DC2 entered into a contract 3it- several
Lapanese s-ip0uilding companies 'or t-e
construction o' 12 ocean7going vessels. T-e
contract 3as made and executed in To1%o.
T-e pa%ments 3ere initiall% in cas- and
irrevoca0le letters o' credit. Fu0se/uentl%.
'our promissor% notes 3ere signed 0% 4DC
guaranteed 0% t-e >overnment.
#ater on. since no tax 3as 3it--eld 'rom
t-e interest on t-e amount due. t-e BI! 3as
collecting t-e amount 'rom 4DC.
T-e 4DC contended t-at t-e income 3as
not derived 'rom sources 3it-in t-e
P-ilippines. and t-us t-e% are not lia0le to
3it--old an%t-ing. 4DC said t-at since t-e
contract 3as entered into and 3as executed
in Lapan. it is an income 3it-out.
:= T-e governments rig-t to lev% and collect
income tax on interest received 0% a 'oreign
corporation not engaged in trade or 0usiness
3it-in t-e P-ilippines is not planted upon t-e
condition t-at t-e activit% or la0or and t-e
sale 'rom 3-ic- t-e income 'lo3ed -ad its
situs in t-e P-ilippines. 4ot-ing in t-e la3
,Fection 42,122 spea1s o' t-e act or activit% o'
nonresident corporations in t-e P-ilippines. or
place 3-ere t-e contract is signed. T-e
residence o' t-e o0ligor 3-o pa%s t-e interest
rat-er t-an t-e p-%sical location o' t-e
securities. 0onds or notes or t-e place o'
pa%ment is t-e determining 'actor o' t-e
source o' t-e income. )ccordingl%. i' t-e
o0ligor is a resident o' t-e P-ilippines. t-e
interest paid 0% -im can -ave no ot-er source
t-an 3it-in t-e P-ilippines.
/' Fuppose a 4!DC. an Indonesian 'irm.
0ecomes a stoc1-older o' t3o corporations. a DC
and a !DC. and 0ot- corporations declared
dividends. 3-at is t-e lia0ilit% o' t-e Indonesian
'irm i' t-e same received t-e dividends6
A'
1. Dividends received 'rom DC= t-e
Indonesian 'irm is lia0le to pa% taxes.
4!DC. under t-e la3. is lia0le i' t-e
income is derived 'rom sources 3it-in.
,Fec 42a2
2. Dividends received 'rom !DC= t-e
Indonesian 'irms lia0ilit% 3ill depend on
amount o' gross income 'rom sources
3it-in t-e P-ilippines.
T-e 4!DC 3ill 0e lia0le to pa% income tax i' t-e
'ollo3ing re/uisites are present=
1. at least *S is income 'rom sources
3it-inM
2. t-e 1
st
re/uisite is 'or t-e t-ree ,32
preceding taxa0le %ears 'rom t-e time o'
declaration o' t-e dividends.
In t-e a0sence o' an% or 0ot- re/uisites.
t-e income 3ill 0e considered 'rom sources
3it-out. t-us exempting t-e Indonesian 'irm 'rom
pa%ment o' income tax.
/' Fame scenario. 0ut t-is time t-e s-ares o'
stoc1 o' t-e t3o corporations 3ere 0eing
disposed o''. 5-at is t-e tax lia0ilit% o' t-e
Indonesian 'irm6
A'
1. sale o' s-ares o' stoc1 o' DC= t-e
Indonesian 'irm 3ill 0e lia0le 'or t-e
pa%ment o' taxes 0ecause t-e income is
'rom sources 3it-in.
2. sale o' s-ares o' stoc1 o' !DC= t-e lia0ilit%
3ill depend on 3-ere t-e s-ares o' stoc1
3ere sold. ,meKo ;ala0o sa notes. please
0e guided accordingl%2
/' Dilipino Executive. assigned to :ong Tong.
receiving t3o salaries. one 'rom t-e P-ilippines.
2
TAXATON
t-e ot-er 'rom :T. T-e per'ormance o' t-e Ko0
3as in :T. Is -e lia0le 'or 0ot- salaries6
A' 4o. -e is not lia0le 'or t-e t3o incomes.
:is status is an 8C5 ,note 'acts= 3or1ing in :T
under contract2. T-e compensation -e received is
not su0Kect to tax pursuant to Fection 42,c2.
Compensation 'or la0or or personal services
per'ormed in t-e P-ilippines is considered an
income 3it-in. 5-en it comes to services. it is
t-e place 3-ere t-e same is rendered 3-ic- is
controlling. In t-e case at 0ar. t-e services 3ere
rendered a0road. t-us it is an income derived
'rom sources 3it-out. irrespective o' t-e place o'
pa%ment.
/' Fuppose a DC -ired a 4!DC to advertise its
products a0road. 5-at is t-e lia0ilit% o' t-e
4!DC6 5ill t-ere 0e a 3it--olding tax imposed6
A' T-e income is derived 'rom sources 3it-out
since t-e services in t-is case 3ere per'ormed
a0road. )s suc-. t-e 4!DC is not lia0le and
t-ere'ore exempt 'rom t-e pa%ment o' tax. I' t-e
4!DC is not su0Kect to 4IT. t-en it is not also
su0Kect to 3it--olding tax.
/' 5-at is t-e controlling 'actor6
)= T-e controlling 'actor is t-e place 3-ere t-e
services 3ere per'ormed and not 3-ere t-e
compensation t-ere'ore 3as received
&ENTA$S ANF &O;A$TES
income 'rom sources 3it-in
/' >ranted 0% 3-o6
A' 4!DC
/' Fuppose %ou are t-e 'ranc-ise -older. -o3
muc- is t-e 3it--olding6
A' 3*S ,>IT2
G= i' t-e 'ranc-ise is granted 0% !DC. -o3 muc- is
t-e 3it--olding6
)= 1*S ,4IT2 and in some cases 1S
Fection 42,42 ;E;8!ICE D8! !ECIT
,CETFTT;2
a. rig-t o'. or t-e rig-t to use
cop%rig-t. patents. etc
0. industrial. commercial. scienti'ic
e/uipment
c. suppl% o' 1no3ledge
d. suppl% o' services 0% nonresident
e. suppl% o' tec-nical assistance
'. suppl% o' tec-nical advice
g. rig-t to use= motion picture 'ilms.
etc.
/' 5-at is t-e rule as regards t-e sale o' real
propert%6
A' >ains. pro'its. and income 'rom t-e sale o'
real propert% located 3it-in t-e P-ilippines
considered income 3it-in.
/' 5-at a0out t-e sale o' personal propert%.
3-at is t-e rule6
A' Determine 'irst i' t-e propert% is produced or
merel% purc-ased.
1. it t-e propert% is manu'actured in t-e
P-ilippines and sold a0road. or vice7versa.
it is an income partl% 3it-in and partl%
3it-out.
2. i' t-e propert% is purc-ased. considered
derived entirel% 'rom t-e sources 3it-in
t-e countr% 3-ere it is sold.
EACEPTI84= s-ares o' stoc1 o' domestic
corporation. it is an income 3it-in 3-erever it is
sold.
&277=SS=2N'R v. =3&
/= 5-at is t-e issue -ere6
A' T-e% cannot determine i' t-e 0usiness
expense 3as incurred in t-e P-ilippines.
/' i' %ou are t-e BI!. and t-e taxpa%er is not
sure. 3ill %ou disallo3 t-e deduction6
A' 4o. determine it pro rata.
Dormula= >I 'rom 3it-in
>I 'rom 3it-out
Example= 1**.***
1.***.***
@ 1*S
:ence. 1*S is t-e rata0le s-are in t-e
deduction. I' t-e deduction 0eing as1ed is
1**.*** not all o' it 3ill 0e allo3ed. 8nl%
1*.*** or 1*S o' 1**.*** 3ill 0e allo3ed as
deduction.
CAPTA$ <ANS ANF $OSSES
Fection 3(
/' 5-at is capital asset6
A' Capital asset is an asset -eld 0% a taxpa%er
3-ic- is not an ordinar% asset. It is t-e negative
under section 3()1
T-e 'ollo3ing are ordinar% assets=
1. stoc1 in trade o' t-e taxpa%er or ot-er
propert% o' a 1ind 3-ic- 3ould properl%
2"
TAXATON
0e included in t-e inventor% o' t-e
taxpa%er i' on -and at t-e close o' t-e
taxa0le %earM
2. propert% -eld 0% t-e taxpa%er primaril%
'or sale to customers in t-e ordinar%
course o' trade or 0usinessM
3. propert% used in trade or 0usiness o' a
c-aracter 3-ic- is su0Kect to t-e
allo3ance 'or depreciation provided in
su0section 1.
4. real propert% used in trade or 0usiness o'
t-e taxpa%er.
)ll ot-er propert% not mentioned in t-e 'oregoing
are considered capital assets.
/' 5-at is a capital gain6 5-at is a capital loss6
A' Capital gains are gains incurred or received
'rom transactions involving propert% 3-ic- are
capital assets. Capital losses are losses incurred
'rom transactions involving capital assets.
/' 5-at is ordinar% gain6 8rdinar% loss6
A' 8rdinar% gains are t-ose received 'rom
transactions involving ordinar% assets. Capital
losses are losses incurred in transactions
involving ordinar% assets.
/' 5-at is t-e relevance o' ma1ing a distinction6
A' T-e relevance o' t-e distinction lies in t-e
applica0ilit% o' t-ree provisions o' t-e Code 3-ic-
appl% to capital assets onl%.
1. 0o).ing ,erio. applies onl% to
individualsBtime 3-en propert% 3as -eld
,3(B2M
2. $oss $i*itation &()eBlimitations on
capital losses ,3(C2M
3. Net Ca,ita) Carry+O!er ,3(D2
. CAPTA$ ASSETS
/' 5-at is t-is -olding period6
A' I' capital asset is sold or exc-anged 0% an
individual taxpa%er. onl% a certain percentage o'
t-e gain is su0Kect to income tax.
It is t-e lengt- o' time or t-e duration o' t-e
period 0% 3-ic- t-e taxpa%er -eld t-e asset.
/' 5-at is t-e re/uirement6
A'
1. t-e taxpa%er must 0e an individual.
Fection 3(B states Oin case o' a taxpa%er.
ot-er t-an a corporation..P
2. propert% is capital in nature.
/' 5-at is t-e term6
A' 1**S i' t-e capital asset -as 0een -eld 'or
not more t-an 12 mont-sM ,s-ort term2
*S i' t-e capital asset -as 0een -eld 'or
more t-an 12 mont-s. ,long term2
48TE= t-e -olding period applies to 0ot- gains
and losses.
/' Do %ou include capital gains in %our IT!6
A' >eneral rule= %es. include in IT!.
EACEPT=
1. gains in sales o' s-ares o' stoc1 not
traded in stoc1 exc-ange,section 242M
2. capital gains 'rom sale o' real
propert%,section 242.
/' 5-en 3ill t-e -olding period not appl%6
A'
1. propert% is an ordinar% asset
2. taxpa%er is a corporation
3. sale o' real propert% considered as
ordinar% asset
. $OSS $MTATON &E$E
s%non%mous to 34D H loss capital rule
t-is applies to individual and corporate
taxpa%er
/' 5-at is t-e loss limitation rule6
A' Pursuant to Fection 3( C. losses 'rom sales or
exc-ange o' capital assets ma% 0e deducted onl%
'rom capital gains. 0ut losses 'rom t-e sale or
exc-ange o' ordinar% assets ma% 0e deducted
'rom capital or ordinar% gains. ,applies to
individual and corporation2
/' In connection 3it- 34 D. #osses in )llo3a0le
Deduction. 3-at is t-e rationale 0e-ind t-is rule6
A' I' it is ot-er3ise. it 3ill run counter 3it- t-e
rule t-at t-e loss s-ould al3a%s 0e connected
3it- t-e trade or 0usiness. capital losses are
losses not connected to t-e trade or 0usiness.
t-us it is not deducti0le
/' 3-at is %our remed%6
A' 3( D. net capital loss carr%7over
/' 5-at is t-e rationale in allo3ing ordinar% loss
to 0e deducted 'rom eit-er t-e capital gains
or ordinar% gains6
A' It is alread% included in IT!. t-e gross income
less deductions -ence it alread% carries 3it-
it t-e deduction
2$
TAXATON
TA=% 9)T%' 4ormall% i' t-e loss is an ordinar%
loss t-ere is no carr% over.
%&cept' a. 34D3
0. i' t-e loss is more t-an >I

. NET CAPTA$ $OSS CA&&;+OGE&
/' 5-at are t-e re/uirements6
A'
1. taxpa%er is an individualM
2. paid in t-e immediatel% succeeding %earM
3. applies onl% to s-ort term capital gainM
4. capital loss s-ould not exceed net income
in t-e %ear t-at it 3as incurred.
/' :o3 does net capital loss carr%7over di''er
'rom net operating loss carr%7over under Fection
34 D ,326
A' Inder t-e net capital loss carr%7over rule. t-e
capital loss can 0e carried over in t-e immediate
succeeding %ear. In net operating loss carr%7over
rule. capital loss can 0e carried over to t-e next
t-ree ,32 succeeding calendar %ear 'ollo3ing t-e
%ear 3-en t-e loss 3as incurred.
48TE= onl% 1S o' t-e loss 3ill 0e carried over. i'
t-e loss is greater t-an t-e gains.
In net operating loss carr%7over t-ere is an
exception to t-e 3 %ear carr%7over period. In case
o' mines ot-er t-an oil and gas 3ells. t-e period
is up to %ears.
/' 5-at is a s-ort sale6
A' Fale o' propert% 0% 3-ic- t-e taxpa%er cannot
come into t-e possession o' t-e propert%. EA=
s-ares
&3L3>3N? v. &=R
D= T-e taxpa%er in-erited t-e propert% 'rom
-er 'at-er and at t-e time o' t-e in-eritance it
3as considered a capital asset. In order to
li/uidate t-e in-eritance. t-e taxpa%er
decided to develop t-e land to 'acilitate t-e
sale o' t-e lots.
I= 5as t-e propert% converted to ordinar%
asset6
:= T-e conversion 'rom capital asset to
ordinar% asset is allo3ed 0ecause Fection 3(
is silent.
/' )re %ou allo3ed to convert ordinar% asset to
capital asset6
A' >eneral rule= it is not allo3ed. !ead !evenue
!egulation $72**3
T-e case at 0ar still applies despite o' t-e
issuance o' said !evenue !egulation.
/' 5-at is t-e conversion pro-i0ited in t-e
!evenue !egulation6
A' Conversion o' real estate propert%.
/' 5-at is t-e rationale6
A' Fection 24 D E 'inal income tax o' "S i' t-e
real estate is capital asset. I' it is an ordinar%
asset. it 3ill 0e su0Kect to income tax o' 32S 'or
individual taxpa%er. and 3*S i' t-e taxpa%er is a
corporation.
/' 5-at are t-e properties involve in t-e !! $7
2**36
A' 1. t-ose propert% 'or sale 0% t-e realtors
2. real propert% use in trade or 0usiness not
necessar% realtors
/' T-at is t-e conversion allo3ed 0% t-e
!evenue !egulation6 Is t-ere an instance 3-en
an ordinar% asset ma% 0e converted to capital
asset6
A' <es. provided t-at t-e propert% is an asset
ot-er t-e real propert%. and it -as 0een idle 'or
t3o ,22 %ears.
SECTON C6
TAXES ON NFGFEA$S
/' 5-at is t-e tax mentioned in section 246
A' 4IT
/' 5-at is taxa0le income6
A' ,memoriJe section 312 it is t-e pertinent
items o' gross income speci'ied in t-e 4I!C. less
t-e deductions andBor personal and additional
exemptions. i' an%. aut-oriJed 'or suc- t%pes o'
income 0% t-e 4I!C or ot-er la3s. It re'ers to 4IT
0ecause it allo3s deductions.
/' 5-at do %ou mean 0% t-e p-rase Oot-er t-e
B. C. and DP6
A' It means t-at i' t-e elements o' passive
income are present. t-e taxpa%er -as to pa% DIT.
/' 5-o are t-e taxpa%ers mentioned in section
246
A'
1. !C
2. 4!C
3. 8C5
2&
TAXATON
4. !)
)dditionall%. under Fection 2. 4!)ETB
/' 5-at is t-e tax lia0ilit% o' 4!)ETB6
A' Fection 2 ,12 4!)ETB is su0Kect to income
tax in t-e same manner as t-ose individuals
mentioned in Fection 24.
/' 5-at a0out Domestic Corporations6
A'
1. Fec. 2$ ).B. and C
2. Fec. 2"7 >PP is not su0Kect to income tax.
/' 5-at a0out !esident Doreign Corporations6
A' Fec 2& ,l2 it is su0Kect to 3*S 4et Income Tax
/' 5-at a0out 4on !esident 'oreign Corporation
and 4on !esident )lien not engaged in Trade or
Business6
A' 4ot Fu0Kect to 4et Income Tax 0ut t-e% are
lia0le 'or >ross Income tax.
/' Do legall% married -us0and and 3i'e need to
'ile separatel% or Kointl%6
A' It depends i'=
1. Pure compensation income7 separate
2. 4ot Pure compensation income7 Koint
Passi!e nco*e
Passi!e inco*e reK(ires that it is an inco*e
LT0N
as a <ENE&A$ &E$E. Check "or those %ho
are )iab)e to ,ay on inco*e %itho(tB
e#e*,tions an. other reK(ire*ent.
>' ?here can you find in the provisions of the
code that states that these passive should be ta&
with the corresponding ;inal income ta& provided
that re$uirements are present@
)= Fection 24 ) 3it- t-e p-rase Oot-er t-an
income su0Kect to tax under su0sections B. C. D.
T-ose mentioned su0sections are not su0Kect to
t-e next income tax
nterestB &oya)tiesB ,ri1es an. Other
%innings
=)terest
/' Ban1 Interest. 3-at is t-e re/uirement6
A' T-e 0an1 must 0e located in t-e P-ils.
0ecause t-e income must 0e derived 'rom
sources 3Bin.
/' Do %ou include t-is in %our IT!6
A' 4oY 0ecause it is su0Kect alread% to DIT. T-e
0an1 is t-e one lia0le 'or t-e pa%ment o' t-is.
48TE= #ia0ilit% 'or 4IT. >IT. and ;CIT 3ill depend
on t-e elements present.
/' 5-o are lia0le 'or 0an1 interst6
A'
1. !C Z
2. 4!CZ Fec. 24 B1
3. !) Z
4. 4!)ETB
. 4!)4ETB Fec. 2 ,2S2
". )E;8P
$. DC
&. !DC
(. 4!DC
/' 5-at is t-e rate o' interest6
A' DIT o' 2*S
/' Is t-ere a lo3er rate6
A' $ [ S i' under EDCDF
/' 5-at i' t-e depositor is non resident alien6
A'
75Bin E DIT
7 5Bout7 exempt
/' 5-at is t-e rule on pre7 termination6
A' I' it is pre terminated 0e'ore
t-
%ear a DIT
s-all 0e imposed on t-e entire incomeand s-all
0e deducted and 3it--ellod 0% t-e depositar%
0an1 'rom t-e proceeds o' t-e long term deposit
0ased on t-e remaining maturit% t-ereo'
a. 4 %rs to less t-an %rs E S
0. 3 %rs to lesss t-an 4 %rs7 12S
c. #ess t-an 3 %rs7 2*S
/' Does it appl% to all individuals6
A' 4oY it does not appl% to 1* 4!DC and 4!) and
4!ETB 0ecause t-e% are lia0le to >IT.
48TE= i' t-e depositar% is a 4on resident it is
exempt
resident citiJen lia0le to pa% tax 'or 0an1
interst earned a0road ,4IT2
/' I' t-e mone% earns interst in a0road 3-o is
lia0le6
2(
TAXATON
A' !C and DC onl% 0% 4IT. t-e rest are exempt.
4o DIT a0road 0ecause 3e do not -ave
3it--olding agent a0road.
/' ;CIT applies to DC and !DC in relation to
0an1 interest6
A' I' t-e 0an1 interest is derived a0road. !DC is
exempt 0ut DC is lia0le.
Impose 4IT i' it is -ig-er t-an t-e ;CIT.
ot-er3ise appl% ;CIT i' its -ig-er t-an t-e 4IT
Pri1es
!e/uirements=
1. PriJes must 0e derived 'rom sources 3Bin
t-e P-ils.
2. it must 0e more t-an P 1*.***
/' 5-o are lia0le6 ,DIT2
A'
1. !C
2. 4!C
3. 8C5
4. !)
. 4!)ETB
". )E;8P ,!C. 4!)ETB2
4ot #ia0le
1. 4!)ETB7 lia0le 'or >IT at 2 S
2. )E;P8P ,4!)4ETB7 >IT2
3. DC7 4IT 2$ D is silent
4. !DC 4IT la3 is silent 2&)$a
. 4!DC su0Kect to >IT
/' 5-en can 3e appl% 4IT in PriJes6
A' 1. 5-en t-e taxpa%er is !C. !DC and DC
2. Dor DC and !C it must 0e derived 'rom
income a0road !DC it must 0e derived
'rom income 3Bin
3. amount is more t-an P1*.***
48TE= I' t-e priJe is derived 'rom sources 3Bin
0ut it is 0elo3 P 1**.*** it is not su0K to tax. I'
derived 'rom sources a0road. most o' t-em are
exempt except 'or !C and DC 3-o are lia0le 3Bin
and 3Bout.
/M Is it possi0le 'or !C and DC to pa% ;CIT6
A' <es i' ;CIT is -ig-er t-an 4IT.
Wi))i)-s
/' Do 3e appl% t-e P1**.*** re/.6
A' 4o. 3e do not appl% it onl% apllies to priJes. It
must not pertain to illegal gam0ling.
T-us. t-e onl% re/uirement is it must 0e
derived 'rom income 3Bin.
/' 5-o are lia0le6 ,DIT2
A'
1. !C
2. 4!C
3. 8C5
4. !)
. 4!)ETB
". )E;8P ,!). 4!)ETB2
4ot lia0le to DIT6
1 4!)4ETB7 >IT
2 )E;8P ,4!)4ETB7 >IT2
3 DC7 la3 is silent 4IT
4 !DC7 la3 is silent
4!DC7 >IT
/' 5-en does 4IT appl% to 3innings6
A'
1. I' Taxpa%er is DC or !C
2. Income is derived a0road
3. Taxpa%er is !DC and income 3Bin.
48TE= I' income a0road. most TP are exempt
except DC and !C
/' ;CIT applies 3-en6
A' It is -ig-er t-an t-e 4IT
Royalties
!e/uirement=
T-e income is 'rom 3Bin
!ate6 2*S. #o3er rate6 1*S on 0oo1s.
literar% 3or1s and musical compositions.
/' <ou are a 3riter 'or Fnoop Dogg are %ou lia0le
'or DIT6 5-at i' 'or )pril Bo%6
A' #ia0le 'or 4IT i' Income a0road li1e a 3riter 'or
Fnoop. 5-ile DIT i' 'or )pril Bo%.
/' 5-o are lia0le ,DIT26
A'
1. !C
2. 4!C
3. 8C5
4. !)
. 4!)ETB
". )E;8P ,!C. 4!)ETB2
4ot #ia0le6
1. 4!)4ETB
2. )E;8P
3*
TAXATON
3. DC
4. !DC
. 4!DC
48TE= #o3er rate o' 1*S applies to all except
4!)4ETB
/' 5-en do 3e appl% 4IT to !o%alties6
A'
1. TP is !C or DC
2. Income is 'rom 3Bout
3. TP is !D and income is 3Bin
I' income is 'rom sources a0road all are
exempt except !C and DC
%ivi+e)+s
Con'ined 3it- cas- andBor propert% dividends.
/' 5-at are dividends6
A' )n% distri0ution made 0% Corporation to its
stoc1-olders outside o' its earnings or pro'its and
pa%a0le to its stoc1-olders 3-et-er in mone% or
in propert% ,Fec. $32
C)"" vs "A99I9A
/' 5-ere did it come 'rom6
A' s-ares come 'rom anot-er s-are-older
/' 5-at are t-e dividends included6
A' Fec. 24 re'ers to cas- or propert% dividend
:= Dor stoc1 Dividends to 0e exempt it must
come 'rom t-e pro'it o' t-e corporation.
-tocB :ividends it is t-e trans'er o' t-e surplus
pro'it 'rom t-e aut-oriJed capital stoc1s.
/' )ssuming t-at t-ere are Incorporators t-e
Corpo -as a P ; )ut-oriJed Capital stoc1. It
distri0uted 1 ; stoc1 dividends. is it taxa0le6
A' 48. t-e dividends did not go to t-e Ftoc1
-older 0ut to t-e )ut- Capital Ftoc1. 8nl% cas-
and Prop Ftoc1 go to t-e Ftoc1 -older.
Fec 24 B does not mention stoc1 dividends
0ecause it is not su0Kect to DIT 0ut it is su0Kect to
4IT under Fection $3.
/' Is t-ere an exception 3-en stoc1 dividends
are not taxa0le6
A' <EF. i' t-e s-ares o' stoc1s are cancelled and
redeemed meaning it 3as reac/uired 0% t-e
corp.
A9-C)R CA-%
t-e stoc1-olders cannot escape t-e pa%ment o'
taxes
!e/uirement=
>en !ule7 t-e dividends must 0e distri0uted 0% a
DC.
Except7 !egular operating7 al3a%s a 'oreign corp.
5-at rate= 1*S DIT
/' 5-o are lia0le6
A'
1. !C
2. 4!C
3. 8C5
4. !)
. 4!)ETB
". )E;8P ,!C. 4!)ETB2
4ot lia0le6
1. 4!)4ETB
2. )E;8P
3. DC
4. !DC
. 4!DC
F-ares o' association and partners-ip is
taxa0le
/' Determine t-e tax lia0ilit% o' t-e 'ollo3ing6
A'
1. DC a Ftoc1-older o' DC@ Exempt
2. !DC stoc1-older o' DC@ Exempt also
3. DC stoc1-older o' !D@ #ia0le 'or 4IT.
&a.ital Gai)s *ro, Sale of S8ares of Stock
Not /ra+e+ (@4&$
1- Fu0K to DIT
2- Determine 3-t-er t-ere is a loss or a gain
0ecause t-e tax is impose upon t-e net
capital gains realiJed 'rom t-e sale.
0arter. or exc-ange or ot-er disposition o'
t-e s-ares o' stoc1 in a domestic corp.
3- It is uni'ormil% imposed on all taxpa%er
4- not su0K to 3B-olding tax.
!e/uirements=
1. F-ares o' stoc1 o' a DC
2. It must 0e capital asset
3. must not 0e traded in t-e stoc1 mar1et
2 ! last part= Capital >ains realiJed 0%
4!)4ETB in t-e P-ils. 'rom t-e sale o' s-ares o'
stoc1 in an% DC and real prop s-all 0e su0K. to t-e
31
TAXATON
income tax prescri0ed under Fu0 sec ,c2 and ,d2
o' Fec. 24.
FEC. 24 B 1H2= I' t-e elements are present
4!)4ETB and 4!DC are lia0le to pa% >IT.
Except= under 24 C 'or 4!)4ETB. 5-at do %ou
mena 0% t-e p-rase O t-e provisions o' 3(
not3it-satandingP6
It re'ers to t-e -olding period. 5-en it comes
to capital gains 'rom sale o' s-ares o' stoc1 not
traded and capital gains 'rom t-e sale o' real
prop. T-e -olding period does not appl% 0ecause
t-e 0asis 3ill 0e t-ose provided in 24 C H D and
not under 3( B ,>FP or D;+2
E$EMENT N5 The share is a share in FC
/' 5-at i' t-e s-are is 'rom 'oreign corp6
A' Determine t-e income considered. I' income
3Bin read Fec. 42 ,E2
I' t-e s-ares sold are t-at o' a 'oreign corp it
is su0K to t-e '' rules=
a. sold in t-e P-ils@ its income 3Bin
0. sold in a0road@ 3Bout
c. F-ares o' stoc1 in a Dc is al3a%s
considered an income 3Bin regardless 3-ere it
3as sold.
/' F-ares o' Doreign Corp sold in P-ils. 5-os
lia0le6 5-at tax6
A' 4ot su0K to DIT 0ecause one o' t-e elements is
not present . F-ares not 0eing t-at o' a DC.
:ence= a2 !C. 4!C. 8C5. 4!)ETB. )E;8P
,!). 4!)ETB2 3ill pa% 4IT. DC and !DC
02 4!)4ETB and 4!DC 3ill pa% >IT
/' F-ares o' Doreign Corporation sold a0road6
A' It 3ill 0e considered an income 3Bout.
T-us=
most o' t-em 3ill 0e exempt
except !C and DC lia0le to pa% 4IT
E$EMENT N C NOT T&AFEF O& SO$F N T0E
STOCJ MA&JET
i' sold in t-e stoc1 mar1et7 it is not su0K to DIT
i' sold in t-e stoc1 mar1et. it 3ill 0e su0K to
percentage tax. in lieu o' 4IT.
E$EMENT N = t *(st be a ca,ita) asset.
/' 5-en is it considered an ordinar% asset6
A' 1. 5-en t-e 0ro1er or dealer
a. used it in trade or 0usiness
0. -eld 'or sale in t-e ordinar% course
o' trade or 0usiness
2. to all ot-er assets. it 3ill 0e considered a
capital asset
48TE= i' all elemts are present it 3ill 0e su0K to
DIT
I' t-e s-ares are ordinar% asset
1. 8rdinar% s-ares in DC7 income 3Bin
a. ;ost o' t-e taxpa%er 3ill pa% 4IT except
4!DC and 4!)4ETB
2. 8rdinra% assets o' 'oreign corporations
a. Income 3it-in i' sold in t-e P-ils= most
3ill pa% except 4!)4ETB and 4!DC
0. Income 3Bout i' sold a0road= most 3ill
0e exempt except !C and DC
;CIT
/' 5-en is a !DC su0K to 4IT6
A'
1. Fale o' s-ares o' stoc1 o' a Doreign
corp in t-e P-il.
2. sale o' s-ares o' stoc1 o' DC 3-ic-
are ordinar% asset
DC and !DC are su0K to ;CIT 3-ic- ma% 0e
imposed i' t-e 4IT is lo3er t-an t-e ;CIT2S ;CIT
3ill 0e imposed i' ;CIT is -ig-er t-an 4IT.
&a.ital Gai)s *ro, Sale of Real Pro.erty
(@4%$
In 3( B t-e -olding period does not appl%
0ecause t-e 0asis o' income tax is t-e gross
selling price ,>FP2 or t-e Dair mar1et value ,D;+2
3-ic-ever is -ig-er7 "S DIT
!e/uirements=
1. T-e real prop must 0e sold 3Bin t-e P-ils
and located in t-e P-ils.
2. It must 0e a capital asset
3. T-e seller must 0e an individual. estate or
trust or a DC
!DC not lia0le 'or DIT 0ut lia0le to pa% 4IT i' all
t-e elements are present.
4!DC lia0le to pa% >IT and not DIT
4!)4ETB lia0le to pa% DIT are all elements
are present.
32
TAXATON
E$EMENT N = The rea) ,ro, *(st be a
ca,ita) asset
/' 5-en considered a capital asset6
A' !ead !.!. $7 2**3
/' 8rdinar% asset7 s-all re'er to all real propert%
speci'icall% excluded 'rom t-e de'inition o' capital
asset under Fec. 3(
A' 8t-er propert% not mentioned are capital
asset.
/' 5-at i' all t-e elements are not present6
A'
most 3ill 0e lia0le to pa% 4IT
Except 4!)4ETB and 4!DC lia0le 'or >IT
/' ;a% a !C 0e lia0le to pa% 4IT even i' all t-e
elements are present6
A' <EF. disposition made to t-e >ovt. T-us. t-e
taxpa%er -as t-e option o' pa%ing 32S 4IT or "S
DIT
/' 5-ic- is more advantageous6
A' It depends determine 'irst i' t-eres a loss or a
gain.
I' t-eres a gain c-oose to 0e taxed at "S DIT.
In t-is case t-e gain is al3a%s presumed.
I' t-eres a loss c-oose to 0e taxed at 32S
0ecause losses ma% 0e considered an allo3a0le
deduction .
8t-er transactions are covered=
1. sale
2. 0arter
3. exc-ange
4. ot-er disposition
48TE= I' t-e prop is under mortgage contract and
t-e mortgagee is a 0an1 or 'inancial inst. t-e DIT
does not appl% 0ecause t-e propert% is not %et
trans'erred 0ecause t-eres a period o'
redemption
I' a'ter a %ear t-e mortgagor 'ailed to redeem
t-e propert% t-at is t-e onl% time t-at t-e DIT 3ill
appl% 0ecause t-eres no3 a c-ange o'
o3ners-ip. I' redeemed 3Bin 1 %r period DIT 3ill
not appl% 0ecause t-eres no c-ange o'
o3ners-ip.
I' t-e mortgagee is an individual t-e DIT is
imposed 3-et-er or not t-ere is a trans'er o'
o3ners-ip.
'0ce.tio)s (@4(%$$
/' 5-at i' t-e prop 0eing sold 3as a movie
-ouse. can -e claim 'or t-e exception6
A' t-e prop covered 0% t-e exemption is a
residential lot
/' 5-o can claim t-e exemption6
A' 8nl% t-e taxpa%er mentioned in Fec. 24
!e/uirements=
1. T-e purpose o' t-e seller is to ac/uire ne3
residential real prop
2. t-e privilege must 0e availed o' 3Bin 1&
mos. Drom t-e sale
3. Comm. must 0e in'ormed 3Bin 3* da%s
'rom t-e date o' sale 3it- t-e intention to
avail o' t-e exemption
4. t-e adKusted 0asis or -istorical cost o' t-e
residence sold s-all 0e carried over to t-e
ne3 residence.
. t-e privilege must 0e availed onl% once
ever% 1* %rs
". Certi'ication o' t-e 0rg%. Capt 3-ere t-e
taxpa%er resides t-at indeed t-e prop sold
is t-e principal residence o' t-e tax pa%er
,!! 137 ((2
/' 5-at i' t-e propert% is 3ort- 1* ; and it 3as
sold onl% 'or 2;. 3-at 3ill -appen to t-e unused
portion or pro'it6
A' I' t-e proceeds are not 'ull% utiliJed. t-e
portions o' t-e gain is su0Kect to DIT
SEC. C?A &ATES OF NCOME TAX
/' :o3 man% income taxes are paid 0% a DC6
A'
1. 4IT
2. ;CIT
3. DIT
4. 1*SImproperl% )ccumulated Earnings
. 8ptional corporate income tax o' 1S o'
t-e gross
DC lia0le 'or 'ive. 0ut t-e optional is not %et
applica0le so onl% 4.
/' :o3 man% can 0e applied simultaneousl%6 A'
84#< 3
1. 4IT. DIT and 1*S I)E
2. ;CIT. DIT. 1*S I)E
SEC. C? 2B7 P&OP&ETA&; EFECATONA$
NST. & 0OSP.
5-o are t-e taxpa%ers6
33
TAXATON
1. 4on7 Pro'it Proprietar% Educl. Inst
and
2. 4on Pro'it Proprietar% :ospital
/' 5-at i' t-e sc-ool or -ospital is non pro'it
onl%. is it exempt6
A' 4o. su0Kect to 1*S on t-eir taxa0le
incomeexcept t-ose covered 0% su0section ,D2
P!8+IDED t-at gross income 'rom unrelated
0usiness. trade or activit% must not exceed *S
o' its total gross income derived 0% suc-
educational inst or -ospital 'rom all sources
!e/uirements=
1. It is a private sc-ool or -ospital
2. it is stoc1 corp
3. it is non pro'it
4. t-at gross income 'rom unrelated
0usiness. trade or activit% must not
exceed*S o' its total gross income
derived 0% suc- educational inst or
-ospital 'rom all sources
. -as permit to operate 'rom DECF. TEFD).
or C:ED
/' 5-at do %ou mean 0% unrelated trade
0usiness or activit%6
A' It means an% trade. Business. or activit%
3-ic- is not su0stantiall% related to t-e exercise
or per'ormance 0% suc- entit% o' its primar%
purpose or per'ormance
/' ;a% a sc-ool or -ospital 0e exempt 'rom
pa%ing tax6 5-at are t-e re/6
A'
1. It must 0e non7 stoc1 and non7 pro'it
2. t-e assets propert% and revenues must 0e
used actuall%. directl%. and exclusivel% 'ro
t-e primar% purpose
/' Inder 3-at la36 Is it t-e Constitution or t-e
4I!C 3-ic- provides 'ro t-e exemption6
A' It is under Fec. 3* o' 4I!C and not under
Fec.4 )rt. 14 o' t-e Constitution. T-e provision o'
t-e 4I!C is t-e speci'ic la3 3-ic- prevails over
t-e Constitution 3-ic- is t-e general la3.
exempt 'rom all taxes and custom duties
/' 5-at a0out exemption 'rom real propert%
tax6
A' )rt. " Fec. 2& o' t-e Constitution=
c-arita0le institution c-urc-es. W.and all lands
0uildings. actuall% directl% and exclusivel% used
'or religious. c-arita0le. and educational
purposes s-all 0e exempt 'rom taxation.
4ot Fec. 4 o' )rt. 14 o' t-e Constitution.
/' <ou donated a propert% to a sc-ool 3ill %ou
0e lia0le 'or donors tax6
A' not lia0le i' it 'alls under Fec. 1*1 ,32 o' t-e
4I!C
!EG. D8! EAE;PTI84 T8 D848!F T)A=
1. it must 0e nonstoc1. non7 pro'it
educational inst.
2. not more t-an 3*S o' t-e prop donated
s-all 0e used 0% suc- donee 'or admin
purposes.
3. pa%ing no dividends
4. governed 0% trustees 3-o dont receive
an% compensation
. devoting all its income to t-e
accomplis-ment and promotion o' t-e
purposes stated in its )rticles o' Incorporation
/' 5-at a0out exemption 'rom +)T6
A' Fec. 1*( ,m2 o' !7+)T

/' 5-at a0out exemption 'ro #oc >ov Code6
A' I' its nonstoc1. non7 pro'it educational inst. It
ma% 0e exempted 'rom local taxation.
/' Is )rt 14 Fec. 4 o' t-e Consti o0solete6
A' 48. i' t-e la3 is silent appl% t-e Consti.
SEC. C=' <OCCB A<ENCESB NST o" the
<OGT.
>E4 !I#E= Fu0K to tax.
EACEPTI84F=
1. >FIF
2. FFF
3. P:IC
4. PCF8
P)>C8! no longer included.
/' I' t-e >8CC is not one o' t-ose enumerated
does it 'ollo3 all o' its income is automaticall%
su0Kect to tax6
A' 48. Inder Fec 32. B ,$2 income derived 'rom
an% pu0lic utilit% or 'rom t-e exercise o' essential
government 'unctionaccruing to t-e >ovt o' t-e
P-ils or to an% political su0d. )re t-ere'ore
exempt 'rom income tax.
T-ere'ore. even i' t-e >8CC is one o' t-ose
enumerated under Fec. 2$ it ma% still 0e exempt
under Fec. 32 0$0 i' its per'orming governmental
'unction
48TE= Pagcor vs. Basco case
34
TAXATON
/' 5-at is t-e di''erence 0et3een Fec. 2$ C and
32 0$06
A'
1. Fec 2$ C exempts t-ose enumerated
3it-out an% /uali'ication.
2. Fec. 320$0 /uali'ication must concur
0e'ore it ma% 0e exempted.
/' Can t-e government impose tax on itsel'6
A' It depends on 3-o t-e taxing aut-orit% is. I'
t-e taxing aut-orit% is t-e 4ational >ovt. as a
rule. <EF.
Exceptions
1. t-ose entities enumerated under \2$ C
2. t-ose >8CC 'alling under \320$0
I' t-e taxing aut-orit% is t-e local government
units. as a rule 48. #>Is are expressl%
pro-i0ited 'rom lev%ing tax against= ,Fec 133,o2
1. 4ational >ovt.
2. Its agencies and instrumentalities
3. local government units
Exception= Fec 14 o' #>C sa%s t-at #>Is ma%
'ix rate 'or t-e operationo' pu0lic utilities o3ned
and maintained 0% t-e 3it-in t-eir Kurisdiction.
(A* CA-% 7uly .C .CC,
:= T-e FC used 133 ,o2an exception to pa%
tax. real estate tax. imposed 0% Cit% o'
P)rana/ue on 4)I). T-e FC said t-at t-e
airport is not an agenc% or >8CC 0ut mere
instrumentalit% o' t-e >ovt.
T-is is >ross ignorance o' t-e la3 Fec.
133 ,o2 is 'or local taxation not real propert%
taxation 3-ic- is t-e one involved in t-e
present case.
48TE= ;actan7 Ce0u )irport case
S'&. A %(1$
/' :o3 man% possi0le incomes 3ere mentioned6
A' T3o ,22= 0an1 interest and ro%alties
!EG=
1. Ban1 interest must 0e received 0% a
Domestic Corp
2. !o%alties derived 'rom sources 3it-in
/' 5-en it comes to 0an1 interest. 3-at is t-e
di''erence i' t-e taxpa%er is an individual or
corporation6
A' I' individual. t-e% ma% 0e exempt 'rom t-e
pa%ment o' interest in case o' long term deposit
except 4!)4ETB
I' DC. t-e% are not exempt 'rom long tem
deposit.
/' 5-at a0out ro%alties6
A' I' individual. -ave a lo3er rate o' 1*Son
0oo1s. ot-er literar% and musical compositions.
DC -ave no lo3er pre'erential rate.
S'& A %< &3P=/3L G3=NS *R27 S3L' 2*
S53R'S N2/ /R3%'%
S'& A %B< '*&%S
/' 5-at is t-e expanded 'oreign currenc%6
A' It is a 0an1 aut-oriJed 0% t-e BFP to transact
0usiness in t-e P-ilippine Currenc%as 3ell as
accepta0le 'oreign currenc% or 0ot-.
/' 5-at is t-e tax to 0e paid6
A' 4ormall% it is 4IT 0ecause it is su0K under Fec
2$ D3 and 2& )
/' 5-o is t-e income earner6
A' Depositar% 0an1s
/' Exempt 'rom 3-at 1ind o' transaction6
A' Drom 'oreign currenc% transaction. I' it
involves 'oreign currenc% transaction it is not
exempt 0ut su0Kect to 3 S 4IT
/' 5-o are t-e ot-er parties6
A'
1. 8'' s-ore 0an1ing units
2. 0ranc-es o' 'oreign 0an1s
3. local commercial 0an1
4. 8t-er depositar% 0an1s under EDCDF
. 4on7 residents
i' t-e a0ove enumeration are t-e parties. t-en
depositar% 0an1 3ill 0e exempt 'rom pa%ing t-e
4IT
*orei-) &urre)cy Loa)
/' 5-o is t-e lender6 Borro3er6
A' #ender7 EDCDF
Borro3er7 !C
EAE;PT
8''s-ore 0an1ing units
8t-er depositar% 0an1s under EDCDF
exemption o' 4! 'rom EDCDF=
/' 5-o is t-e income earner6
3
TAXATON
A' 4on !esidents 3-et-er individual or
Corporations
/' Derived 'rom 3-om6
A' Depositar% Ban1 under EDCDF
48TE= Fec. 24 B 4onresident exempt 'rom 0an1
interest under EDCDF
/' 5-at is t-e di''erence 0et3een 24 01 'rom 2$
D3
A' In 24 B1. 4! is exempt onl% 'rom 0an1 interst
derived 'rom EDCDF 3-ile 2$D3 exempts 4! 'rom
an% income 'rom transactions 3it- depositar%
0an1 under EDCDF
S'&. A %(427 Intercorporate dividends7 exempt
A %5 &a.ital Gai)s fro, sale of Real Pro..
/' 5-at is t-e tax6
A' "S DIT
/' 5-at is t-e di''erence i' t-e seller is an
individual and a DC6
A' Individual can sell all 1inds o' real propert%
DC can onl% dispose land andBor 0uildings.
S'& A ('$ 7&=/
/' )pplica0le to 3-om6
A' DC and !DC
/' Can it 0e applied simultaneousl% 3it- 4IT6
A' 48. imposed in lieu o' t-e 4IT. 3-ic-ever is
-ig-er.
/' 5-at is t-e !ationale6
A' to prevent corporations 'rom claiming too
man% deductions
/' 5-en 3ill it 0e imposed6
A'
1. 8n t-e 4
t-
%ear immediatel% '' t-e %ear
in 3-ic- suc- corp commenced its
0usiness.
2. 5-en t-e ;CIT is -ig-er t-an t-e 4IT
/' 5-at is t-e carr% over rule6
A' Fec 2$ E2 states t-e carr% over rule.
In order to avail= onl% in t-e %ear 3-ere t-e
;CIT is greater t-an t-e 4IT.
Sec C 31
/' 5-at Tinds o' taxes are paid 0% t-e !DC6
A' 4IT
;CIT
Sec. C 4 7&=/ o) R*&
same 3it- Fec. 2$
Sec. C 3B- =N/L &3RR='R
Tind=
1. )ir carrier
2. s-ips
)n intl. carrier doing 0usiness in t-e P-ils.
s-all pa% 2 [ S on its >ross P-il Billings ,>PB2
/' Is 2& )3 t-e >en. rule or t-e Exception6
A' It is t-e general rule 0ecause it is under 2& )3
>PB is in t-e nature o' DIT. applies onl% i' all
t-e re/uirements are present.
!DC 3ill 0e lia0le 'or 4IT. -ence a !DC
engaged in common carriage does not pa% >PB
0ut 4IT
Income 3it-out= EAE;PT
=)ter)atio)al &arrier<
>PB re'ers to t-e amount o' revenue derived
'rom= carriage o' persons. excess 0aggage.
cargo and mail originitang 'rom t-e P-ils in a
continouos and uninterrupted 'lig-t. irrespective
o' t-e place o' sale or issue and t-e place o'
pa%ment o' t-e tic1ets or passage document.
!EG=
1. 8riginating 'rom t-e P-ils.
2. Continouos and uninterrupted 'lig-tM
3. irrespective o' t-e place o' sale or issue
and t-e place o' t-e pa%ment o' tic1ets or
passage document.
/' Do %ou consider landing rig-ts to determine
lia0ilit%6 ,!! 172**22
A'
1. I' originates 'rom t-e P-ils and -as
landing rig-ts7 84#I4E7 !DC
2. 4o landing rig-ts7 8DD#I4E7 4!DC
/' I' t-ere are stopovers. is it still uninterrupted6
3"
TAXATON
A' <EF. provided t-at t-e stopover does not
exceed 4& -rs.
/' 5-en 3ill t-e place o' sale o' tic1ets matter
as to t-e taxpa%ers lia0ilit%6
A' T-e place o' tic1ets is material onl% i' t-e t3o
ot-er elements are not present to 0e a0le to
1no3 i' its su0K to 4IT or exempt.
Revali+ate+, e0c8a)-e+ or i)+orse+ tickets
!EG=
1. T-e passenger 0oards a plane in a port or
point in t-e P-ils.
2. T-e tic1ets must 0e revalidated.
exc-anged. or indorsed to anot-er airline.
/' 5-at i' its t-e same airline 0ut di''erent
plane6
A' >PB does not appl%. it must 0e to anot-er
airline
/' 5-at i' it did not originate 'rom t-e P-ils.6
A' Determine i' its income 3it-in or 3it-out.
i' tic1et 3as purc-ased in t-e P-ils. it is
income 3it-in -ence appl% 4IT
i' purc-ased outside. it is income 3it-out.
-ence exempt
/ra)s8i.,e)t
!EG=
'lig-t originates 'rom t-e P-ils
trans-ipment o' passenger ta1es placeat an%
port outside t-e P-ils.
t-e passenger trans'erred on anot-er airline
/' :o3 do %ou appl% >PB6
A' 8nl% t-e ali/uot portion o' t-e cost o' t-e
tic1et corresponding to t-e leg 'lo3n 'rom t-e
P-ils to t-e point o' trans-ipment s-all 'rom part
o' t-e >PB.
/' Is it lia0le 'or t-e 3-ole 'lig-t6
A'
Drom t-e P-ils to t-e point o' trans-ipment. it
is income 3Bin
Drom trans-ipment to 'inal destination. its
income 3Bout7 EAE;PT
=)ter)atio)al S8i..i)-
>PB means gross revenue 3-et-er 'rom
passenger. cargo. mail
!EG=
it must originate 'rom t-e P-ils.
up to 'inal destination
. regardless o' t-e place o' sale or
pa%ments o' passenger or 'reig-t
documents
SecC 3(4$ 2** S52R' 43ND=NG 9N=/S
8BIs
1. onl% accepta0le 'oreign currencies
2. al3a%s a 'oreign corporation ,su0K to 4IT2
except N3
3. Exempt i' income is derived 0% t-e 8BI
'rom EDCDF
4. Parties=
a2 local commercial 0an1s
02 Doreign 0an1 0ranc-
c2 4on !esidents
d2 8BI in t-e P-ils.
Di''erence 3it- EDCDF=
EDCDF
1. )ccepta0le 'oreign currenc%. P-il.
Currenc% or 0ot-
2. Can 0e a domestic or 'oreign corporation
3. Exempt i' income derived 0% DC or !DC
'rom EDCDF
4. Parties=
a2 local commercial 0an1s
02 Doreign 0an1 0ranc-
c2 4on !esidents
d2 8BI in t-e P-ils
e2 8t-er 0an1s under EDCDF
FO&E<N CE&&ENC; $OAN
1*S DIT
I'= #ender7 8BI
Borro3er7 !esident CitiJen
EACEPT=
1. 8BI
2. #ocal Commercial Ban1s
Transactions o' 4on !esidents=
1. Income earner= 4on7 !esidents
2. #ender= 8BIs
48TE= 4on resident exempt 'rom transactions
3it- 8BIs and EDCDF
SEC. C4 A@ TAX ON B&ANC0 P&OFTSB
&EMTTANCES
pro'its 0ased on t-e total pro'its applied or
earmar1ed 'ro remittance remitted 0% a 0ranc-
to its -ead o''ice
3$
TAXATON
Fu0K to 1S tax
Except= t-ose activities 3-ic- are registered 3it-
PEC)
48TE= Interests. Dividends. !ents. !o%alties
including remuneration 'or tec-nical sevices.
salaries. 3ages. premiums. annuities.
emoluments. or casual gains. pro'its. income
and capital gains received 0% a 'oreign
corporation during eac- taxa0le %ear 'rom all
sources 3it-in s-all not 0e treated as 0ranc-
pro'its I4#EFF t-e same are e''ectivel%
connected 3it- t-e conduct o' its trade or
0usiness.
4ra)c8 Profit Re,itta)ce
T3o 3a%s to receive income ,DC2
1. Branc-
2. Fu0sidiaries
48TE=
1. 5-en a DC esta0lis-es 0ranc-. it is al3a%s
a DC
2. 5-en a DC esta0lis-es DC. it is a !DC
/M It is in addition to 4IT7 5-%6
A' 4IT 0ecause it is !DC
/M 5-at 1ind o' tax is imposed under 2& )6 A'
1S DIT
/' :o3 do %ou appl% t-e rate6
A' multiplied to t-e total pro'it applied or
earmar1ed 'or remittance 3Bo deductions
It applies 'or 0ranc-es t-at are=
1. t-e pro'it remitted is e''ectivel% connected
3it- t-e conduct o' its trade or 0usiness in
t-e P-ils.
2. 8ne not registered 3it- PEC)
"ARUB%9I CA-%
D= ) 0ranc- 3as esta0lis-ed 3it- )>HP. t-ere
3as investment 3it- )>HP
/' Did t-e petitioner participate 3it- t-e
negotiation6
A' 48
/' 5-at did t-e petitioner pa%6
A' 1S Branc- Pro'it !emittance Tax ,BP!T2
1*S Intercorporate Dividends
/' 5-ats t-e issue6
A' Petitioner maintains t-at t-ere 3as
overpa%ment o' taxes. t-us t-e same 3as
as1ing 'or a re'und o' tax erroneousl% paid.
/' Is is su0K to DIT6
A' 48. exempt i' petitioner is !DC
:= 7not correct to pa% 1S
To 0e lia0le 'or BP!T
1. It is a !DC
2. Branc- did not participate in negotiations
SEC. C4 AAa
!egional or area -ead/uarters ,Fec. 22 DD2
s-all not 0e su0Kect to tax exempt 'rom income
tax i' t-e re/uisites are present.
/' 5-at are t-e re/uisites6
A'
1. t-e :G do not earn or derive income 'rom
t-e P-ils.
2. )cts onl% as supervisor%. communications.
coordinating centre 'or t-eir a''iliates.
su0sidiar% or 0ranc-es in t-e )sia7 Paci'ic
!egionand ot-er 'oreign mar1ets.
SEC. C4 AAb
!egional 8perating :G are taxa0le and lia0le
to pa% 1*S taxa0le income.
!egional 8perating :G is a 0ranc-
esta0lis-ed in t-e P-ils 0% a multinational
compan% engaged in an% o' t-e services=
1. >en. )dministration and Planning
2. Business Planning and Coordination
3. Fourcing and procurement o' !a3
materials and components.
4. Corporate Dinance and )dvisor% Fervices
. ;ar1eting Control and sales promotion
". Training and personal management
$. logistic services
&. researc- and development services and
product development
(. tec-nical support and maintenance
1*. data processing and communication and
0usiness development
!ationale= 5-% lia0le6 Because t-e claim 'or
exemption o' resident airlines s-all 0e
minimiJed
SEC. C4A?a nterests an. &oya)ties'
2*SDIT
Interests under EDCDF@ $ [ S
3&
TAXATON
Sec. C4A?b nco*e .eri!e. (n.er EFCFS
5. Income derived 'rom 'oreign currenc%
transactions 3it-=
a2 4on !esidents
02 8BI
c2 #ocal commercial 0an1
d2 Doreign 0an1 0ranc-es
e2 8t-er depositor% 0an1 under t-e EDCDF
)s a >en !ule= t-e a0ove transaction is
Exempt
EACEPTI84= Income 'rom suc- transaction as
ma% 0e speci'ied 0% t-e secretar% o' Dinance.
upon recommendation 0% t-e ;onetar% Board to
0e su0Kect to regular income tax pa%a0le 0% an%
0an1s.
C. Interst income 'rom 'oreign currenc% loans
granted 0% depositor% 0an1 under said EDCDF
to ot-ers s-all 0e su0Kect to 1*S DIT
Exempt i' granted to=
1. 8t-er 8BI in t-e P-ils. and
2. 8t-er depositor% 0an1 under t-e EDCDF
V FEC. 2& )$c= Capital >ains 'rom F-ares o'
Ftoc1s not Traded in t-e Ftoc1 exc-ange
V S or 1*S as t-e case ma%0e
SEC C4A?.' NTE&CO&PO&ATE FGFENFS
DC7 !DC@ EAE;PT. not su0K to tax
SEC C4 B5
/' 5-at 1ind o' tax6
A' 3*S >IT on t-e '' income
1. Interest
2. Dividends
3. !ents
4. !o%alties
. Falaries
". Premiums, except reinsurance premiums2
$. annuities
&. emoluments
(. 8t-er 'ixed and determina0le >ains. pro'its
and income.
SEC C4 BC Non &esi.ent Cine*atogra,hic
"i)* o%nerB )essor or .istrib(tor
lia0le 'or 2S >IT
SEC C4 B= Non &esi.ent o%ner or )essor o"
Gesse)s chartere. by Phi)i,,ine Nationa)s.
lia0le 'or 4 [ >IT
Elements=
1. C-artered to Dilipino CitiJens or
Corporations
2. )pproved 0% ;)!I4)
SEC. B267 Non &esi.ent O%ner or $essor o"
Aircra"tB MachiniriesB an. other
EK(i,*ents.
lia0le 'or $ 1B2 S >IT
SEC C4 b@a nterest on Foreign $oans
;ust 0e read 3it- Fec. 32 B$a
Interest on Doreign #oans. i' t-e lender is
1. 4!DC lia0le to 2*S DIT
2. Doreign >ovt. Exempt 0ecause it is an
exclusion ,Fec 32 0$a= income derived 0%
a 'oreign govt 'rom investments in t-e
P-ils on loans. stoc1s. 0ond. and ot-er
domestic securities or 'rom interest on
deposits in 0an1s 0%=
a2 Doreign govt.
02 Dinancing inst o3ned controlled or
enKo%ing. re'inancing 'rom 'oreign
govtM and
c2 Inter nation or !egional 'inancial
inst esta0lis-ed 0% 'oreign govt.
C)""I-I)9%R ); I9T%R9A* R%< vs "IT-UBI-8I
"%TA* C)R( /25C -CRA .2D1
D= )tlas ;ining enetered into a #oan and Fales
Contract 3it- ;itsu0is-i ;etal Corp. , )
Lapanese Corp.2 'or t-e purposes o' proKected
expansion o' t-e productivit% capacit% o' t-e
'ormers mines in Ce0u. T-e contract provides
t-at ;itsi0us-i 3ill extend a loan to )tlas in
t-e amount 2* ; dollar. so t-at )tlas 3ill 0e
a0le install a ne3 concentrator 'or copper
production.
7;itsu0is-i to compl% 3it- its o0ligation.
applied 'or a loan 'rom Export7 Import Ban1 o'
Lapan ,Exim Ban12 and 'rom consortium o'
Lapanese 0an1s.
Pursuant to t-e contract )tlas paid interst
to ;itsu0is-i 3-ere t-e corresponding 1S
tax t-ereon 3as 3it--eld and onl% remitted to
t-e >ovt.
Fu0se/uentl% ;itsu0is-i 'iled a claim 'or
tax credit re/uesting t-at t-e same 0e used
3(
TAXATON
as pa%ment 'or its existing lia0ilities despite
-aving executed a 3aiver and disclaimer o'
its interest in 'avour o' )tlas earlier on. It is
t-e contention o' ;itsu0is-i t-at it 3as t-e
mere agent o' Exim Ban1 3-ic- is a 'inancing
inst o3ned and controlled 0% t-e Lapanese
>ovt.
T-e status o' Exim0an1 as a government
controlled inst 0ecame t-e 0asis o' t-e claim
'ro exemption 0% ;itsu0is-i 'or t-e pa%ment
o' interst on loans.
I= 584 ;itsu0is-i is a mere agent o' Exim0an1
:= 48. T-e contract 0et3een t-e parties does not
contain an% direct re'erence to Exim Ban1. it
is strictl% 0et3een ;itsu0is-i as creditor and
)tlas as t-e seller o' copper. T-e 0an1 -as
not-ing to do 3it- t-e sale o' copper to
;itsu0is-i. )tlas and ;itsu0is-i -ad reciprocal
o0ligations7 ;itsu0is-i in order to 'ul'il its
o0ligations -ad to o0tain a loan. in its
independent capacit% 3it- Exim 0an1. #a3s
granting exemption 'rom tax are construed
strictl% against t-e taxpa%er and li0erall% in
'avour o' t-e taxing aut-orit%.
SEC. C4 F@ b NTE&CO&PO&ATE FGFENFS'
DIT 1S imposed on t-e amount o' cas- and
or prop dividends received 'rom a domestic
corporation.
FIBL T8 T:E C84DITI84= t-e countr% 3-ere t-e
4!DC is domiciled allo3s a credit against t-e tax
due 'rom t-e 4!DC taxes deemed paid or
deemed to -ave 0een paid in t-e P-ils.
>en rule= 3 S DIT
Exception= 1S under t-e Otax deemed paid ruleB
reciprocit% ruleB tax sparring ruleP
78)9-)9- CA-%
2 Tinds o' Categories=
1
st
= Lapan. IF. >erman%. P-ils lia0le 'or income
3it-in and income 3it-out
2
nd
= countries lia0le onl% 'or income 3it-in.
"ARUB%9I Case= 2 Issues
1. Is t-e pa%ment o' 1*S DIT correct6
7 4o 0ecause it 3as a 0ranc- and !DC 0ut still
;aru0eni 3as 4!DC under t-e old la3 3-ic- is
lia0le to pa% 3S. 0ut FC said lia0le onl% to 2S
0ecause o' t-e tax treat%
<ou cannot re'und rig-t a3a% 1S BP!T
and 1*S Intercorporate Dividends tax -as
di''erent 0asis
In PH> 3-o are involved
. DC ,PH> P-il2 and 4!DC ,PH> IF2
. DC declares dividends to 4!DC
. 3S 3as 3it--eld and remitted to t-e BI!
5-at did t-e% discover6 ,a'ter pa%ing2
. t-e% discovered t-at t-e% are lia0le onl%
'or 1S so t-e% -ave a re'und o' 2*S
/' In t-e 1
st
case did t-e FC allo3ed t-e re'und6
A' 48. denial anc-ored on 2 grounds=
1. 8ne claiming 'or re'und 3as not t-e
proper part%
2. T-ere 3as a s-o3ing or proo' as to t-e
existence o' t-e Otax deemed paidP rule
/' In 2
nd
case 3as t-ere a re'und6
A' <EF. t-e FC reversed itsel'
1. Income tax is DIT= t-e 3it--olding
agent is t-e proper part% 0ecause -e is
lia0le to pa% said taxes
2. actual proo' o' pa%ment not
necessar%. 3-at is necessar% is t-e la3 o'
t-e domicile o' t-e countr% providing 'ro
tax credit e/ual to 2*S o' t-e tax deemed
paid.
/' 5-at is t-e rate i' t-e la3 is silent6
A' 3S DIT
T-e rate 3ill onl% 0e 1S i' t-eres a la3
recogniJing t-e same 0ut t-is re'ers to t-e case
o' t-ose 0elonging to t-e 'irst categor%.
?A9:%R CA-%
/' 5-o are t-e parties6
A' DC,5ander2 and DC ,>laxo27 t-e% 0elong
to di''erent categories
T-e BI! tried to collect 3S 0ecause t-e
la3 is totall% silent a0out t-e tax credit
:= T-e FC said t-at t-e tax s-ould 0e 1S 3-ic-
applies 2 instances=
1. Doreign la3 do not provide 'or tax credit7
3S
2. la3 provides 0ut t-e la3 is silent7 1S
3. la3 is silent 0ecause t-ere is no la37 1S
4. la3 is silent 0ecause t-ers no la3
0ecause t-e su0K matter is not taxa0le7
1S
SEC. C3 AET
4*
TAXATON
A' 1*S o' t-e gross income ,taxa0le income2
It is imposed upon t-e improperl%
accumulated taxa0le income o' t-e corporation
/' )pplies to 3-at Corp6
A' to DC onl% under !! 27 2**1, classi'ied as
closel% -eld corporations2
/' Is it in t-e nature o' sanction6
A' <es. it is imposed to compel t-e corporation
to declare dividends.
/' 5-%6
A' 0ecause i' pro'its are distri0uted to t-e
s-are-olders. t-e% 3ill 0e lia0le 'or t-e pa%ment
o' Dividends tax. 4o3. i' t-e pro'its are
undistri0uted t-e s-are-olders 3ill not incur
lia0ilit% on taxes 3it- respect to t-e undistri0uted
pro'its o' t-e Corp.
. In a 3a% it is in t-e 'orm o' deterrent to
t-e avoidance o' tax upon s-are-olders
3-o are supposed to pa% dividends tax on
t-e earnings distri0uted to t-em.
/' 5-at is taxa0le income6
A' FEC. 31 de'ines taxa0le income as t-e
pertinent items o' gross income speci'ied in t-is
Code. less t-e deductions andBor personal and
additional exemptions. i' an%. aut-oriJed 'or suc-
t%pes o' income 0% t-is Code or ot-er special la3
/' 5-en not lia0le to pa% I)ET6
A' T-ere are 2 groups o' DC exempt 'rom
pa%ment o' I)ET ,!!272**12
A1 Corporations failure to declare dividends
because of reasonable needs of business
!easona0le needs means are construed to
mean immediate needs o' t-e 0usiness including
reasona0le anticipated needs
/' 5-at constitutes reasona0le accumulation o'
t-e corporations earnings6 Examples6
A'
1. )llo3ance 'or t-e increase in t-e
accumulation o' earnings up to 1**S o'
t-e paid7 up capital o' t-e corporation.
2. earnings reserved 'or t-e de'inite
corporate expansion proKects or programs
appoved 0% t-e Board
3. Earnings reserved 'ro 0uildings. plants. or
e/uipment. ac/uisition approved 0% t-e
Board
4. Earnings reserved 'or compliance 3it- an%
loan agreement or pre7 existing
o0ligations
. Earnings re/uired 0% la3 or ot-er
applica0le statutes to 0e retained.
". In case o' su0sidiaries o' 'oreign
corporation. all undistri0uted earnings or
pro'its intended or reserved 'or
investments
48TE= t-e corporations 0elonging in t-e 1
st
group
are normall% lia0le 0ut t-e% can s-o3 t-at t-e
accumulation o' earnings is Kusti'ied 'or
reasona0le needs o' 0usiness. t-e% incur no
lia0ilit% and exempt 'rom pa%ments o' t-e same.
B1 Corporations which are e&empt whether or not
it is for reasonable needs of the business'
1. Ban1s. and ot-er non7 0an1 'inancial
intermediaries.
2. Insurance companies
3. Pu0licl%7 -eld corporations
4. Taxa0le partners-ips
. >eneral Pro'essional Partners-ips
". 4on7 taxa0le Koint7 ventures
$. Enterprises registered 3it-
a2 PEC)
02 Bases Conversion Devt )ct o' 1((2 ,!)
(22$2
c2 Fpecial Economic Cone declared 0% la3
/' 5-at is a closel%7 -eld corporations6
A' T-ose corporation at least *S in value o' t-e
outstanding capital stoc1 or at least *S o'
t-etotal com0ined voting po3er all classes o'
stoc1 entitled to vote is o3ned directl%. or
indirectl% 0% or 'or not more t-an 2* individuals
48TE= Pu0licl% -eld Corp. -as more t-an 2*
s-are-olders
/' 5-at is t-e time 'or pa%ing t-is tax6
A' Calendar <ear= Lan 2. 2**7 Dec 31. 2**.
Toda% is 2**". <ou -ave 1 %ear to declare a'ter
t-e close o' t-e taxa0le %ear. 2**" is t-e grace
period. <ou 3ill pa% on Lanuar% 2**$.
/' I' %oure not mentioned to 0e exempted. 3ill
%ou still 0e lia0le6
A' 4o. i' %ou invo1e adKustments
SEC =>. EXEEMPTONS F&OM TAX ON
CO&PO&ATONS
41
TAXATON
Determine t-e Corporations exemptions
under Fec. 3* 2$ C and 22B.
1. Fec 3*. t-e corporations s-all not 0e
taxed under t-is title ,tax on income2 in
respect to income receive 0% t-em as
suc-.
2. Fec 2$. t-e corporations enumerated are
al3a%s exempt. T-us exemption is
unconditional
3. Fec 22B >PP. as a general rule is not a
corporation
4. except i' it earns income 'rom ot-er
0usiness
Loint +enture 3B service contract 3B
government not a corporation. ot-er3ise. it is
lia0le.
/' 5-at is t-e reason 'or not including t-e
corporations exempt under section 2$C and
Fection 22B under Fection 3*6
A' Because t-ere is an exemption 3-ic- does
not appl% to all exempt corporation.
T-e exemption under Fection 3* is not
a0solute 3-ile t-e exemption under Fection 2$ C
is a0solute and 3it-out an% conditions. In
addition. Fection 22B provides t-at a Koint
venture is generall% taxa0le unless it -as a
service contract 3it- t-e government. a
generall% taxa0le corporation cannot 0e Koined
3it- t-e group as generall% not taxa0le
corporation. >eneral Pro'essional Partners-ip is
exempt 0ut t-e exemption is not t-e same as
provided 0% Fection 3*.
T)TE 48TE= #as Paragrap- o' Fection 3*.
exemption to t-e exemption= income o'
3-atever 1ind and c-aracter o' t-e 'oregoing
organiJations 'rom=
1. an% o' t-eir properties. real or personalM
2. an% activities conducted 'or pro'it
regardless o' t-e disposition o' said income.
s-all 0e su0Kect to tax.
/' Enumerate t-e exempt corporations under
Fection 3*M 5-at is t-e re/uirement6
A'
1. #a0or. agricultural or -orticultural
organiJation not organiJed principall% 'or
pro'itM
2. ;utual savings 0an1 not -aving a capital
stoc1 represented 0% s-ares. and
cooperative 0an1 3it-out capital stoc1
organiJed and operated 'or mutual
purpose and 3it-out pro'itM
3. a 0ene'iciar% societ%. order or association.
operating 'or t-e exclusive 0ene'it o' t-e
mem0ers suc- as 'raternal organiJation
operating under lodge s%stem. ,lodge
s%stem= operating 3orld 3ide2 or a mutual
old association or a non7stoc1 corporation=
a. organiJed 0% emplo%eesM
0. providing 'or t-e pa%ment o' li'e. sic1ness.
accident or ot-er exclusive 0ene'its to its
emplo%ees and t-eir dependentsM
4. Cemeter% ,a2 compan% o3ned and ,02
operated exclusivel% 'or t-e 0ene'it o' its
mem0ersM
. 4on7stoc1 corporation or association
organiJed and operated exclusivel% 'or
!eligious. C-arita0le. Fcienti'ic. )rtistic or
Cultural purposes. or 'or t-e !e-a0ilitation
o' +eterans ,!CF)C!2. no part o' its net
income or asset s-all 0elong ot or inure to
t-e 0ene'it o' an% mem0er. organiJer.
o''icer. or an% speci'ic personM
". Business league. c-am0er o' commerce.
or Board o' trade. ,a2 not organiJed 'or
pro'it and ,02 no part o' t-e net income o'
3-ic- inures to t-e 0ene'it o' an% stoc1
-older or individualM
$. Civil league or organiJation not organiJed
'or pro'it 0ut operated exclusivel% 'or t-e
promotion o' social 3el'are.
CIR vs +"CA
/' 5-at is t-e 0asis o' ;anila BI! 'or t-e
imposition o' t-e tax6
A' last paragrap- o' Fection 3*. 0ecause <;C)
3as conducting an activit% 'or pro'it.
D= t-e CT) and t-e C) invo1ed t-e doctrine laid
do3n in :errera and )0ra +alle% case 3-ic-
involves an exemption 'rom t-e pa%ment o'
!eal propert% Tax.
:= T-e FC revised t-e ruling. <;C+) is lia0le to
pa% income tax appl%ing t-e last paragrap- o'
Fection 3*.
<;C) Is exempt 'rom t-e pa%ment o'
propert% tax. 0ut not to income tax on rentals
'rom its propert%.
T-e tax code speci'icall% mandates t-at
t-e income o' exempt organiJations ,under
section 3*2 'rom an% o' t-eir properties. real
or personal. s-all 0e su0Kect to tax. including
t-e rent income o' t-e <;C) 'rom its real
prop.
&. a non7stoc1 and non pro'it educational
institutionM
42
TAXATON
(. govt educational institutionM
1*. Darmers or ot-er mutual t%p-oon or 'ire
insurance compan%. mutual ditc- or
irrigation compan%. or li1e organiJation o'
a purel% local c-aracter. t-e income o'
3-ic- consists solel% o' assessment. dues
and 'ees. collected 'rom mem0ers 'or t-e
sole purpose o' meeting its expensesM
11. Darmers. 'ruit gro3ers or li1e association
organiJed and operated as a sales agent
'or t-e purpose o' mar1eting t-e products
o' its mem0ers and turning 0ac1 to t-em
t-e proceeds o' sales. less t-e necessar%
selling expenses on t-e 0asis o' t-e
/uantit% o' produce 'inis-ed 0% t-em.
T)TE 48TE= income o' sales agent is exempt.
Section =5' TAXAB$E NCOME
C0APTE& G' COMPETATON OF <&OSS
NCOME
SECTON =C' <&OSS NCOME
/' 5-at is t-e tax treatment6 )re t-ese taxa0le
income6 )re t-ese included in t-e gross income6
Is it included in t-e IT!6 Is it su0Kect to 4IT6
A' Fec. 32 ) ans3ers t-e /uestions.
/' 5-at is t-e income tax re'erred to -ere6
A' 4IT. T-e section re'ers onl% to t-e pa%ment
o' 4IT. It spea1s o' t-e 4IT.
/' I' t-e is mentioned under Fection 32 ). does it
'ollo3 t-at it is automaticall% included in t-e >IT6
A' 4o. Fection 32 ) states OExcept 3-en
ot-er3ise provided in t-is titleP
/' 5-at are t-e income t-at are not included.
not su0Kect to 4IT6
A'
1. Income t-at are su0Kect to DIT.
2. Income t-at are considered an exclusionM
and
3. Income t-at are exempt.
/' 5-en do %ou not appl% Fec. 32 )6
A' it applies to all except=
1. 4!)4ETB
2. 4!DC
V t-e% do not pa% 4IT. t-e% pa% 0% 3a% o' >IT.
/' 5-at are included in t-e >ross income6
A'
1. Compensation for services in whatever
form paid including but nor limited to fees,
salaries, wages, commissions, and similar
items E-ec 0. A /21F
/' 5-at is compensation6
A' all remuneration 'or services per'ormed 0% an
emplo%ee 'or -is emplo%er under an emplo%er7
emplo%ee relations-ip.
T)TE 48TE= compensation is included in t-e IT!
i' t-e taxpa%er is not lia0le 'or 4IT. T-us. i'
su0Kect to 4IT. included in t-e IT!.
/' Is t-ere an instance 3-ere t-e salaries o' a
!C is not included in t-e IT!6
A' <es. i' t-e salar% is su0Kect to DIT. li1e 3-en
t-e !C is emplo%ed in ;ultinational. o''s-ore
0an1ing. and petroleum companies.
. Aross Income derived from the conduct of
trade or business or the e&ercise of a
professionG E-ec 0. A /.1F
/' 5-at is t-e income tax -ere6
A' 4IT. included in t-e IT!.
B. Aains derived from dealings in property
E-ec 0. A /01F
/' Did t-e la3 distinguis-ed6
A' 4o. t-e la3 did not distinguis-ed 0et3een
real and personal propert%.
T)TE 48TE=
1. Fale o' real propert%
2. Fale o' s-ares o' stoc1 ,personal prop.2

i' t-e elements are present. su0Kect to DIT.
T-us. it is not included in t-e IT!. t-e 3it--olding
agent 3ill 0e responsi0le 'or t-is.
/' Income 'orm t-e sale o' propert%. do %ou
include t-is in t-e IT!6
A' it depends
a. i' su0Kect to DIT. not included. 5it--olding
agent accomplis- t-e 'orms
su0Kect to DIT i' t-e 'ollo3ing elements are
present=
1. it is a capital assetM
2. located in t-e P-il.= and
3. sold 0% individual. trust. estate. DC.
0. i' su0Kect to 4IT. included in t-e IT!.
43
TAXATON
Elements are not present. li1e 3-en t-e
real prop. is an ordinar% asset or 3-en it is
capital asset i' t-e taxpa%er is !DC.
T)TE 48TE= !7! 1$72**3
!eal propert% sale su0Kect to D5T. t-e 0u%er
accomplis-es t-e IT!.
4. interestG E-ec 0. A /D1F
/' 5-at interest is 0eing re'erred to -ere6
A' interest 3-ic- is included in t-e computation
o' gross income is interest earned 'rom lending
mone% and interest 'rom 0an1 deposit 3-ic-
does not constitute passive income.
Ban1 interest 'rom sources. 3it-out or
a0road.
/' Ban1 interest 'rom Folid Ban1. is it included in
t-e IT!6
A' 4o. 0ecause it is included or considered an
income 3it-in. t-us su0Kect to DIT. T-us. not
included in t-e IT!.
5. Rents E-ec 0. A /41F
su0Kect to 4IT. included in t-e IT!.
#. !o%altiesM QFec. 32 ) ,"2R
/' 5-at is 0eing re'erred to -ere6
A' ro%alties 3-ic- does not constitute passive
income. !o%alties derived 'rom income 3it-out.
E su0Kect to 4IT. T-us not included in t-e IT!.
/' 5-o are t-e taxpa%ers6
A' #ia0le 'rom income 3Bin and 3Bout and t-e
rest are exempt.
1. !C
2. DC
A. :ividends E-ec 0. A /61F
/' 5-at 1ind o' dividends6
A' one t-at does not constitute a passive
income.
T)TE 48TE=
1. DC individual taxpa%er @ DIT
2. DC E DC H !DC @ EAE;PT
3. DC E 4!DC @ D5T
onl% dividends issued 0% a DC to an individual
taxpa%er ,!C 8! !)2 is included in t-e
computation o' t-e gross income. T-us. included
in t-e IT!.
C. Annuities E-ec 0. A /51F
/' 5-at 1ind o' annuities6
A' annuities 3-ic- are not exempt 'rom tax are
included in t-e computation o' t-e gross income.
,included in t-e IT!2
3 (riHes and ?innings E-ec 0. A /31F
/' 5-at 1ind o' priJes and 3innings6
A'
a. t-ose t-at does not constitute passive
incomeM and
0. t-ose t-at are not considered as an
exclusion. T-us. exempt.
Passive =)co,e
1. PriJes E derived 'rom sources 3it-in and
over 1*.***.**
2. 5innings E derived 'rom sources 3it-in.
Exempt=
a. 3innings= PCF8 and #otto 3innings.
0. priJes=
t-ose primaril% 'or recognition o' ,12religious.
,22c-arita0le. ,32scienti'ic. ,42educational.
,2artistic. ,"2literar%. ,$2civic ac-ievement are
exempt P!8+IDED=
1. t-e recipient 3as selected 3it-out an%
action on -is part to enter t-e contest or
proceedingsM and
2. t-e recipient is not re/uired to render
su0stantial 'uture services as a condition
to receiving t-e priJe or a3ard.
priJes and a3ards granted to at-letes are
also exempted provided=
1. local or international sports competition or
tournamentM
2. -eld in t-e P-ilippines or a0roadM and
3. sanctioned 0% t-e national sports
association.
/' 5-en is a priJe su0Kect to 4IT6
A' 1. 3-en derived 'rom income 3it-outM
2. 3-en less t-an 1*.***.**M
3. 3-en t-e income earner is a DC or !C.
/' 5-en is 3inning su0Kect to 4IT6
A' 1. 5-en derived 'rom income 3it-outM
44
TAXATON
2. 3-en t-e income earner is a DC or !C.
10. (ensions E-ec 0. A /2C1F
/' 5-at 1ind o' pension6
A' Included in t-e gross income i' not exempt
V never su0Kect to 'it ,62
11. (artnerIs distributive share from the net
income of the general professional
partnership /A((1

/' 5-at is 0eing re'erred to6
A' >PP exempt 'rom pa%ment o' corporate
income tax
s-ares o' partners su0Kect to 4IT E Fec. 2"
SEC =C B EXC$ESONS F&OM <&OSS
NCOME
/' 5-at do %ou mean 0% exclusions6 )re t-ese
exempt 'rom income tax6
A' t-ese are not included in t-e gross income.
T:IF. exempt.
T)TE 48TE= Exemptions. exclusions. deductions.
-ave t-e same c-aracteristics all tax do not
appl%.
1. Life i)sura)ce ESec. B1 4 (1$F
A' onl% one re/uirement 'or exemption= t-at t-e
proceeds o' t-e li'e insurance 0e pa%a0le upon
t-e deat- o' t-e insured.
/' Does it matter 3-o t-e 0ene'iciar% is or paid
in a lump sun or single sum6
A' 4o. it does not matter.
Exception= amounts -eld 0% t-e insurer under an
agreement to pa% interest t-ereon. t-e interest
pa%ment s-all 0e included in t-e gross income.
. 3,ou)t receive+ by i)sure+ as retur)
of .re,iu, ESec. B 4 ($F
/' i' t-e insurance is pa%a0le 3it-in a certain
time. sa% 1* %ears and t-erea'ter t-e insured did
not die. -o3 muc- 3ill 0e excluded6
A' onl% t-e amount received 0% t-e insured as a
return o' t-e premiums.
Ex. 1 ; E 1** t-ousand @ capital
It is exempt ,1**T2
(**T is taxa0le.
/' 5-% is it excluded6
A' 0ecause t-e amount received merel%
represents a return o' capital.
/' is t-is su0Kect to Estate Tax under Fec. & E6
do 3e -ave t-e same re/uirement6
A' no. t-e re/uirement 'or exemption is not t-e
same under Fection & E.
B. Procee+s of life i)sura)ce< +ece+e)t
i)sure+ 8i,self, i)clusio) or e0clusio)
Gill +e.e)+ o) G8o t8e be)eficiary is.
a. t-e 0ene'iciar% is t-e estate.
V su0Kect to Estate tax. included in t-e gross
estate regardless o' 3-et-er or not t-e
designation o' t-e 0ene'iciar% is revoca0le or
irrevoca0le.
0. t-e 0ene'iciar% is a t-ird person ot-er t-an t-e
estate.
0.1 !evoca0le Designation su0Kect to
estate tax. included in t-e gross estate.
!eason= 0ecause o' t-e insureds po3er to
modi'% or c-ange t-e 0ene'iciar%.
0.2 Irrevoca0le Designation not su0Kect to
Estate tax. not included in t-e gross estate.
!eason= t-e insured loses t-e po3er to
control. modi'% and c-ange t-e 0ene'iciar%.
/' Is it su0Kect to +)T6
A' 1. 4on7li'e insurance E %es. su0Kect to +)T
under 1*& ,)2.
2. #i'e insurance E 48. su0Kect to percentage
tax under Fec. 123 o' t-e Tax Code.
4. Gifts, 4e(uest a)+ %evises ESec. B 4
(B$F
/' 5-% is t-e donee exempt 'rom income tax6
A' Because t-e la3 classi'% it as an exclusion.
not important to 1no3 3-et-er propert% is real or
personal.
5-at is exempted is t-e Ovalue o' propert%
ac/uired 0% gi't. 0e/uest or deviseP
T)TE 48TE=
). >IDTF are excluded 0ecause t-e% are
su0Kect to donors tax.
B. BEGIEFT and DE+IFE are excluded
0ecause t-e% are su0Kect to EFT)TE tax.
/' 3-at is included in t-e gross income6
A' income 'rom suc- propert%.
4
TAXATON
gi't. 0e/uest. devise or descent o' income
'rom an% propert% in case o' trans'ers o' divided
interest.
5. &o,.e)satio) for i);uries or sick)ess
ESec. B 4 (4$F
/' is t-is t-e same as t-ose provided under t-e
3or1mens compensation act ,3ca26
A' <EF. T-ere are 3 groups=
a. :ealt- or accident insurance or t-ose
under 3or1mens compensation.
0. personal inKuries and sic1nessM and
c. Damages to prevent inKuries and sic1ness.
/' 5-at does inKur% include6
A' T-e term inKur% includes deat-. even i' not
inKured. i' t-e person dies t-is 3ill 0e availa0le.
/' 3-en 3ill t-e damages recovered 0e exempt6
A' >eneral !ule= all damages a3arded are tax
exempt.
Exception= damages representing loss o'
income.
/' 5-% is it considered an exclusion6
A' 0ecause t-is is Kust an indemni'ication 'or t-e
inKuries or damages su''ered.
#. =)co,e e0e,.t u)+er a treaty ESec.
B 4 (5$F
/' 5-at is excluded6
A' income o' an% 1ind re/uired 0% treat% 0inding
upon t-e P-il. >overnment.
A. Retire,e)t be)efits, .e)sio)s,
-ratuities ESec. B 4 (#$F
/' 5-% do 3e need to distinguis- retirement
pa%. separation pa% and terminal leave pa%6
A' 0ecause t-e% -ave di''erent re/uirements 'or
exemption.
/' 5-at is retirement pa%6
A' t-e sum o' mone% received upon reac-ing t-e
maximum age o' emplo%ment.
a. Inder !)4(1$ ,3it- !etirement Plan2
1. t-e private 0ene'it plan is approved 0% t-e
BI! ,!!27(&2M
2. t-e retiring o''icial or emplo%ee -as 0een
in t-e service o' t-e same emplo%er 'or
t-e last 1* %earsM
3. -e is at least * %ears old at t-e time o'
retirementM and
4. t-e o''icial or emplo%ee avails
-imsel'B-ersel' o' t-e 0ene'it onl% once.
0. Inder !)$"41 ,3it-out retirement plan2
1. t-e retiring o''icial emplo%ee is at least "*
%ears old 0ut not more t-an " %ears oldM
2. t-e emplo%ee or o''icial must -ave served
t-e compan% 'or at least %earsM
V entitled to 1 da%s salar% and [ o' t-e 13t-
mont- pa% 'or ever% %ear o' service.
T)TE 48TE= t-e retirement 0ene'its under
!)4(1$ and !)$"41 are exempt 'rom income tax
provided t-e re/uirements are present.
SEC. =C B2A72c7
retirement 0ene'its given 0% 'oreign
government. 'oreign corporation. pu0lic as 3ell
as private to !C. 4!C. !) residing permanentl% in
t-e P-ilippines 7 exempt 3it-out 'urt-er
/uali'ications E automatic exclusions.
SEC. =C B2A72.BeB"7
retirement 0ene'its given 0% t-e P-ilippine
>ovt t-roug- t-e >FIF. FFF and P+)8 are
exempt 3it-out 'urt-er /uali'ications @
automatic exclusions.
>ross Income include 0ot- capital and
ordinar% gains. Fec. 31 sa%s gross income7
deductions. t-at 3-ic- is ordinar% loss.
7 ma% 0e deducted 'rom capital gains and
ordinar% gains.
/' 5-at is separation pa%6
A' on given 3-en one is terminated 'rom t-e
service 0ecause o' ,12 illness. ,22deat-. ,32
p-%sical incapacit% or inKur%. or ,42 causes
0e%ond t-e control o' t-e emplo%ee.
/' )re t-ere an% re/uirement 'or separation pa%
granted 0% 'oreign govt or corp6
A' 4one. t-e separation pa% granted 0% t-e
a'orementioned institutions are exempt 3it-out
'urt-er /uali'ications ,Oot-er similar 0ene'itsP2.
/' is separation pa% an exclusion. t-ere'ore.
exempt6
A' 4o.
>E4E!)# !I#E= Feparation pa% not exempt
,62
Exception=
4"
TAXATON
1. )utomatic exclusions. t-us exempt i' due to=
a. illness
0. deat-
c. p-%sical incapacit% or inKur%.
2. Conditional exclusion
a. causes 0e%ond t-e control o' t-e
emplo%ee7 excluded
0. 3it-in emplo%ees control E included.
Examples=
1. registration E CB) provides separation
pa%. 3it-in t-e control @ included.
2. installation o' la0or saving devises or
0an1ruptc% E 0e%ond t-e control @
excluded.
/' 5-at is terminal leave pa%6
A' t-e accumulated vacation leave and sic1
leave 0ene'its converted to cas- or mone% to 0e
given eit-er ever% %ear or upon retirement or
separation.
Terminal #eave Pa% granted upon retirement or
separation=
V uder PD22*. T#P in t-e >ovt or in t-e
Private Fector s-all 0e exempt 'rom income
tax i' given or granted upon retirement or
separation.
T#P granted on a %earl% 0asis=
1. emplo%ee in t-e private sector=
a. accumulated sic1 leave E su0Kect to
income tax.
0. )ccumulated vacation leave= i' more
t-an 1* da%s ,meaning 11 pataas2 E
su0Kect to income taxM
VI' 1* da%s or less E exempt.
2. >ovt Emplo%ee=
V governing la3= E8 2(1 o' Pres. Estrada. !;C
1"72***.
!ule= >ovt 3or1ers ,0ot- o''icers or non7o''icers2
granted T#P on a %earl% 0asis exempt 'rom
income tax.
t-ere is no /uali'ication as to vacation or sic1
leave.
Ta1e 4ote o' 3 cases.
V 0e reminded o' E8 2(1. Fec. 2. $&.2 par.
($. !!27(&. !!1"72** ,32.
Case of Jialcita
retired 'rom D8L. contention= T#P s-ould 0e
exempt 'rom income tax pursuant to t-e old la3.
FC= on a di''erent ground E T#P is exempt
0ecause it is similar to !etirement pa%. t-us
exempt 0ut t-e rulings application is limited onl%
to D8L emplo%ees.
Borromeo case'
Fame as t-e Cialcita case
Issues= 584 t-e T#P is su0Kect to income tax and
584 C8#) and !)T) are included6
FC= !I#ED T#P is ExemptY
;odi'ied= t-e rule applies not onl% to D8L o''icers
0ut also to CFC commissioners.
C)""I--I)9%R v CA-TAK%:A
7 Casta]eda EDD) o''icer in P-il. Em0ass% in
England.
1. T#P is exempt.
2. !uling applies to DD) o''icers.
/' Does t-e rule or decision applies to >ovt
o''icials onl%6
A' 4o. PD22*= Exemption applies to 0ot- private
and pu0lic sectors,62
it does not matter i' T#P is vacation or sic1
leave.
!!27(&. Fec. 2.$&.1 par. ,a2,$2
V L)4. 1((& E t-e rule applies to 0ot- private
and pu0lic sectors.
E82(1 ,FEPT.. 2***2
V 8''icer in govt receiving T#P is al3a%s
exempt 3-et-er or not vacation or sic1 leave is
granted.
;odi'ied !!27(&=
V T#P 3ill onl% appl% to private sectors
V i' granted on a %earl% 0asis E ma% 0e su0Kect
to tax= +)C)TI84 #E)+E
1. ;8!E T:)4 1* D)<F @ T)A)B#E
2. #EFF T:)4 1* D)<F @ EAE;PT
C. 7iscella)eous ite,s (Sec. B 4 (A$
(a$ i)co,e +erive+ by forei-) GovHt
ESec. B 4 (A$ (a$F
/' 5-at 1ind o' income6
A'
1. investments in=
a. loans
0. stoc1s
c. 0onds
d. ot-er domestic securities
2. interest 'rom deposits in Ban1s in t-e
P-ilippines.
/' 5-o are income earners6
A'
4$
TAXATON
1. 'oreign government
2. 'inancing institutions o3ned. controlled or
enKo%ing re7'inancing 'rom 'oreign govtsM
and
3. intl or regional 'inancial institutions
esta0lis-ed 0% 'oreign govts ,esta0lis-ed
in t-e P-ilippines2
T)TE 48TE= i' plain 'oreign corp.. su0Kect to DIT
2*S.
EA);P#EF o' exclusions=
a. Brunei >ovt earns interest 0% depositing
mone% in ;a1ati Ban1 E Exclusion.
0. F;C7 Ftoc1 dividends to 3. Brunei >ovt.
exclusion
c. Income derived 0% t-e >ovt or its political
su0divisions ,Fec. 32 B ,$2 ,02
a. exercise o' pu0lic utilit%
0. exercise o' an% essential govt 'unction.
V accruing to t-e govt.
d priJes and a3ards ,Fec. 32 B $ c2
V primaril% 'or religious. c-arita0le.
scienti'ic. educational. artistic. literar% or civic
ac-ievements=
1. recipient 3as selected 3it-out an% action
on -is part to enter t-e contest or
proceedingsM
2. t-e recipient 3as not re/uired to render
su0stantial 'uture services as a condition
to receive t-e priJe or a3ard.
D. priJes and a3ards in sports ,Fec. 32B $ d2
1. granted to at-letesM
2. local or intl competitionsM
3. -eld -ere or a0roadM
4. sanctioned 0% t-e natl sports associations.
E. 13
t-
mont- pa% and ot-er 0ene'its ,Fec. 32B $
e2
/' Do %ou include C-ristmas 0onus in %our IT!6
A' 4o. 0ecause t-e la3 sa%s 13
t-
mont- pa% and
Oot-er 0ene'itsPBPsimilar 0ene'itsP E xmas 0onus
is included in t-e categor%.
/' 5-o can increase t-e 3*.*** limit6
A' T-e Fec. o' Dinance.
/' )pplica0le to 3-om6
A' 1. govtM and
2. Private institutions.
D. >FIF. FFF. ;edicare and ot-er contri0utions
,Fec. 32 B $ '2
must 0e deducted 'rom t-e >I not 4IT 0ecause
it is an exclusion.
7credita0le 3it--olding tax is an exclusion7 must
0e deducted 'irst 'rom t-e >I 0e'ore %ou compute
t-e 4IT. 8t-er3ise. %ou are including in t-e >I
somet-ing t-at is excluded 'rom t-e same.
>. >ains 'rom t-e Fale o' 0onds. de0entures. or
ot-er Certi'icate o' inde0tedness. ,Fec. 32 B $ g2
/' 5-% %ears6
A' certi'icate o' inde0tedness is similar to Ban1
Interest in a long term deposit.
7 Fec. 32 B $ g is similar or t-e same as 24 B in
long term deposit.
:. >ains 'rom redemption o' s-ares in mutual
'und ,Fec. 32 B $ -2
1. Discal <ear E means an accounting period o' 12
mont-s ending on t-e last da% o' an% mont-
ot-er t-an Decem0er.
2. Calendar %ear E a period o' 12 mont-s
0eginning on Lanuar% and ending on Decem0er.
/' Business expense incurred in De0ruar% 2**".
is it possi0le to include it 'or )pril 2**"6
A' %es. it is possi0le or it is possi0le i' 'iscal %ear
is emplo%ed. i' it 'alls under t-e 'iscal %ear and all
t-e elements are present.
7 related to trade or 0usiness.
!E)F84= Capital loss -as no connection to t-e
trade or 0usiness.
T)TE 48TE=
'or taxpa%ers lia0le 'or income 3it-in and
3it-out ,!C H DC22. t-e% can claim deduction 'or
expenses incurred 3it-in and 3it-out.
'or taxpa%ers 3-o are lia0le onl% 'or income
3it-in. t-e% can claim a deduction 'or expenses
incurred 3it-in t-e P-ilippines.
Fec. 34 ) EAPE4FEF
1. Dor t-ose 0usiness expenses not enumerated
under ). <ou need to prove t-at it is an ordinar%
and necessar% expense.
2. Dor t-ose enumerated under ). all %ou -ave to
prove is t-at it is incurred during t-e taxa0le
%ear.
4&
TAXATON
De0. 12. 2**$ ,Fec. 34 ). Expenses2
/' Did t-e la3 de'ine 3-at is reasona0le6
A' 4o. 'or salaries and 3ages all t-at is re/uired
0% la3 is 'or it to 0e reasona0le.
7 'or ot-er 'orms o' compensation. t-ere must 0e
services actuall% rendered.
3G9=NL%2 &ase
D= involves a corporation engaged in selling 'is-
nets. and t-e corporation -ave a land sold
t-roug- a 0ro1er.
t-ere 3as su0stantial pro'its gained 'rom t-e
sale o' a land 3-ic- 3as sold 0% a 0ro1er. T-e
pro'it 3as in turn given to t-e 3or1ers as special
0onus.
t-e corporation claimed t-e 0onus as a
deduction.
IFFIE= F-ould t-e deduction 0e allo3ed6
:= T-e FC did not allo3 t-e deduction. 'or ot-er
'orms o' compensation. it must 0e made or given
'or services actuall% rendered.
in t-is case. it 3as proven t-at t-e sale 3as not
made 0% t-e emplo%ees. no e''ort or services
actuall% rendered 0% t-em 0ecause t-e sale 3as
made t-roug- a 0ro1er.
/' !easona0le Travel Expenses. 5-at is t-e

re/uirement6
A'
1. Travel must 0e in pursuit o' 0usiness.
trade or pro'ession.
2. Travel expense 3-ile a3a% 'rom -ome.
/' Is t-ere a travel expense 3-ic- 3as not in
pursuit o' 0usiness6
A' %es. t-ose 3-ic- are considered as 'ringe
0ene'its ,DB2. expenses 'or 'oreign travel is
considered a DB onl% i' it is not in pursuit o' t-e
trade or 0usiness.
/' can %ou claim it under Fec. 34 ) ,12,a2,ii26
A' 4o. %ou can claim it under Fec. 34 ) ,12,a2,i2
last paragrap-.
/' !easona0le )llo3ances 'or rentals 'or meralco
0ills. re/uirements6
A'
1. re/uired as a condition 'or t-e
continued use or possession. 'or t-e
purpose o' t-e trade. 0usiness or
possession o' t-e propert%.
2. taxpa%er -as not ta1en an% title or no
e/uit% ot-er t-an a lessor.
/' !easona0le allo3ance 'or entertainment.
amusement and recreation expenses. 3-at is t-e
re/uirement6
A'
1. connected 3it- t-e development.
management. and operation o' t-e trade
,D8;2M
2. Does not exceed t-e limits or ceiling
set 0% t-e Fecretar% o' DinanceM and
3. 4ot contrar% to la3. morals. good
customs. pu0lic polic% or pu0lic order.
/' :o3 a0out 0ri0e. 1ic10ac1s. and ot-er similar
pa%ments
A' even 3it-out t-is provisions. 1ic10ac1s 3ill not
pass t-e re/uirement o' ,i2 ordinar% and ,ii2
necessar% -ence not deducti0le
EXPENSES A$$OLAB$E TO P&GATE
EFECATONA$ NSTTETON
/' 5-% onl% private educational institution is
mentioned and no ot-er taxpa%ers6
A' it re'ers to section 2$ 'or Private Educational
Institution given to t-e educational institution.
>E4E!)# !I#E= 3" ) ,22 and 3" ) ,32
expenditures 'or capital outla%s not deducti0le as
0usiness expense
EACEPTI84= Private Educ. Institution can claim it
under Fec. 34 ) ,22
BESNESS EXPENSE !s. A$$OLANCE FO&
FEP&ECATON
BIFI4EFF EAPE4FE
1. 4o carr%7over
2. can 0e claimed 'or one %ear onl%.
3. i' t-e amount o' capital outla% is su0stantial. it
cannot accommodate all o' t-e expenses
incurred.
A$$OLANCE FO& FEP&ECATON
1. T-ere is carr% over
2. %ou can claim it 'or a longer period depending
on t-e li'e span o' t-e propert%.
4(
TAXATON
3. it can accommodate all o' t-e expenses
incurred.
taxpa%ers allo3a0le deduction 'or
interest expense s-all 0e deducted 0% an
amount e/ual to 42S ,!! 1*72***2 o' t-e
interest income su0Kect to DIT.
/' 5-o claims t-is deduction6
A' t-e de0tor claims t-is deduction.
/' 5-at 1ind o' interest is t-is6
A' interest on loan.
interest on de0t 7 3-en one 0orro3s mone% to
'inance -is 0usiness interest in connection 3it-
t-e taxpa%ers pro'ession trade or 0usiness.
&EFSCOENTN< OF PAPE&S ' 2Sec. =6 B C
a7
a 0orro3er or taxpa%er can claim t-e interest
paid in advance as itemiJed deduction 3-en -e
'iled -is income tax return ,IT!2 depending on
3-et-er or not t-e principal o0ligation -as 0een
paid.
1. i' t-e entire amount or entire principal
o0ligation -as 0een paid E t-e entire amount o'
interest can 0e claimed as itemiJed deduction.
2. i' onl% [ o' t-e o0ligation -ad 0een paid. t-en
t-e entire amount o' [ o' t-at interest can 0e
claimed as a deduction.
3. i' no pa%ment -ad 0een paid on t-e principal
o0ligation. t-e advance interest paid cannot 0e
claimed as a deduction on t-e %ears t-at it 3as
paid.
&E/E&EMENTS FO& &EFSCOENTN< OF
PAPE&S'
1. incurred 3it-in t-e taxa0le %ear.
2. individual taxpa%er reporting income on a cas-
0asis.
4o deduction s-all 0e allo3ed in respect
to t-e 'ollo3ing interest=
1. i' 3it-in t-e taxa0le %ear an individual
taxpa%er reporting income on t-e cas- 0asis
incurs an inde0tedness on 3-ic- an interest is
paid in advance or t-roug- discount or ot-er3ise.
2. i' 0ot- taxpa%er and t-e person to 3-om t-e
pa%ments -as 0een made or is to 0e made are
persons speci'ied under Fec. 3" ,B2=
a. mem0er o' a 'amil%
0. 0et. an individual and a corp.. more t-an *S
in advance o' t-e outstanding stoc1 o' 3-ic- is
o3ned directl% or indirectl% 0% or 'or suc-
individualM
c. Bet. 2 corp.. more t-an *S in value o' t-e
outstanding stoc1 o' eac- o' 3-ic- is o3ned.
directl% or indirectl%. 0% or 'or t-e same
individual.
d. 0et. t-e grantor and a 'iduciar% o' an% trustM
e. 0et. t-e 'iduciar% o' a trust and t-e 'iduciar% o'
anot-er trust i' t-e same person is a grantor 3it-
respect to eac- trustM or
'. 0et. a 'iduciar% o' trust and a 0ene'iciar% o'
suc- trust.
/' 5-o are not allo3ed to claim interest under
sec 3" B6
A' interest incurred 0et3een related parties.
/' 5-at i' -al'70rot-er6
A' not allo3ed to claim deduction 'or interest.
T)TE 48TE= interest incurred 'rom t-e
exploration o' petroleum re'ers not Kust in
interest incurred on loan o' mone% 0ut also
interest incurred 'or installment pa%ments.
/' 5-o are related parties6
A' individuals and corporations.
OPTONA$ T&EATMENT OF NTE&EST
EXPENSE'
1. interest incurred to ac/uire propert% used in
trade. 0usiness or exercise o' pro'ession can 0e
claimed a an itemiJe deductionW
a. on interestM or
0. depreciation ,as capital expenditure62
/' 5-at is t-is interest income6
A' t-e mone% 0orro3ed 3as deposited in a 0an1
so t-at it 3ill 3arn interest. ,!!1372***2
I##IFT!)TI84=
1. loan o' 1; 'rom a 0an1 3it- an interest o' 2*S
2. 2*S o' 1; is P-p2**.*** 0ut %ou cannot claim
t-is 3-ole amount as a deduction.
3. 3-en %ou deposited t-e 1; in t-e 0an1. it
earned a 0an1 interest su0Kect to DIT 3ort-
P-p1*.***.**.
4. 42S ,!!2 o' 1*.*** @ 4.2** ,!! (33$2
*
TAXATON
. P-p2**T74.2**@ P-p1(.&**B t-is is t-e
amount %ou can claim as a deduction.
=6 C TAXES'
!EGIIFITEF=
1. taxes must paid or incurred 3it-in t-e taxa0le
%ear
2. it must 0e incurred in connection 3it- trade or
0usiness.
3. can 0e claimed as=
a- a deductionM or 34 C 1H2
$- tax credit 34 C 3H$
/' 5-ere s-ould it 0e deducted6
A'
1. i' claimed as a deduction. it s-ould 0e
deducted 'rom t-e gross incomeM
2. i' claimed as a tax credit. it s-ould 0e
deducted 'rom t-e 4et Income Tax due
,0ottom o' t-e 'ormula2
7'R&9RI %R9G &3S'
7 Discount o' senior citiJens
FC= discount claimed 0% senior citiJens s-all
create a tax credit and must 0e deducted at t-e
0ottom o' t-e 'ormula.
/' 5-at is a tax deduction6 Example6
A' Tax deduction is allo3ed i' t-e taxes 3ere
paid or incurred 3it-in t-e taxa0le %ear and it
must 0e connected to t-e trade. 0usiness or
pro'ession o' t-e tax pa%er.
%&ample is 0usiness tax.
/' 5-o are entitled to claim it6
A' t-ose lia0le to pa% 4IT. ,Tax credit onl% 'or
4IT2
/' 5-at is a tax credit6
A' re'ers to t-e taxpa%ers rig-t to deduct
'rom t-e income tax due t-e amount o' tax
t-e taxpa%er paid to 'oreign countr%. su0Kect to
limitations.
/' 5-at is t-e tax credit 0eing re'erred to under
34 C ,326
A' credit against taxes 'or taxes o' 'oreign
countr%.
/' 5-at are t-e ot-er tax credit under t-e code6
A'
1. !) "42 E selling goods and commodities to
senior citiJens. t-e discount claimed is treated as
a tax credit.
2. income tax paid to 'oreign countr%.
3. Input tax on +at
4. Credita0le 3B-olding tax s%stem under 4IT
. Tax credit certi'icate.
G= 5-o are allo3ed to claim it6
)= !C and DC onl%.
/' suppose %ou paid t-e 1**T 4IT to IF. can %ou
claim as a deduction t-e 3-ole 1**T6 3-at is t-e
'ormula6
same procedure 'or ,12 income tax paid to
'oreign countr%M ,22 estate tax paid to 'oreign
countr%M and ,32 Donors tax paid to 'oreign
countr%.
A' For*()a'
FTEP 1
>I 'rom sources 3Bin
4IT= UUUUUUUUUUUUUUUUUUUUU
>I 'rom entire 3orld
FTEP 2
Guotient x !)TE @ amount 3Bc can 0e claimed as
a deduction
A' %ou cannot claim t-e 3-ole 1**T. %ou can
onl% claim t-e product o' t-e /uotient times t-e
rate
T)TE 48TE= deduct at t-e 0ottom o' t-e 'ormula
, sa computation ng >I2
/' Fuppose %ou are a !C. %ou pa% 4IT to IF. 3ill
%ou 0e a0le to claim it as a tax deduction6
A' 1. generall%. %ou can claim it as tax credit.
2. %ou can claim under Fec. 34 C ,12 0
i' t-e taxpa%er did not signi'% in -is return -is
intention to avail -imsel' o' t-e 0ene'it o' tax
credit 'or taxes paid to 'oreign countr%.
taxes incurred not related to t-e trade or
0usiness. %ou -ave t-e option to=
a. claim it as tax creditM or
0. claim it as a deduction
la3 gives %ou t-is privilege.
/' 5-en is taxes not allo3ed as a deduction6
A' Fec. 34 C ,12
1
TAXATON
1. Income taxM
2. Income tax imposed 0% aut-orit% o' an%
'oreign countr%M
3. Estate and Donor taxM and
4. taxes assessed against local 0ene'its o'
a 1ind tending to increase t-e value o' t-e
propert%.
/' 5-o are not allo3ed to claim deductions6
A' Inder 34 C ,32 7 4!C. 4!)M and 4B!DC
T)TE 48TE=
1. 4!)E and 4DC E allo3ed deduction onl% i' and
to t-e extent t-at t-e% are connected 3it-
income 'rom sources 3it-in t-e P-ils.
2. Taxes t-at -ad 0een allo3ed as deduction 0ut
are later in re'unded s-ould 0e treated as part o'
t-e gross income during t-e %ear t-at it is
received ,34 1 last paragrap-2
/' 5-ic- 3ould %ou c-oose6 Tax credit or
deduction6
A' tax credit 0ecause it is deducted 'rom t-e
taxa0le income 3-ile deductions are deducted
'rom t-e >I.
D8!;I#)= >I7DEDICTI84 @ 4ET I4C8;E x !)TE
@ T)A)B#E 4ET I4C8;E E T)A C!EDIT2
=6 F $OSSES
/' Is al3a%s a re/uirement t-at it is incurred in
pursuit o' trade. 0us. or pro'ession6
A' 4o. Fec. 34 D,12 provides 'or 2 1inds o' losses=
a. incurred in pursuit o' trade. 0us. or
pro'essionM
0. propert% connected 3it- t.0.p. i' t-e
loss arises 'rom 'ire. storms. s-ip3rec1s or
ot-er casualties or 'rom ro00er%. t-e't or
em0eJJlement ,arising 'rom natural calamit%2.
A'
1. #oss actuall% sustained during t-e
taxa0le %ear
2. 4ot compensated 'or 0% insurance or
ot-er 'orms o' indemnit%.
3. 4ot claimed as a deduction 'or estate
tax purposes.
/' T-is is %our itemiJed deduction 3-ic- can
0e claimed as a deduction 'rom6
A' >ross income
T)TE 48TE=
T-e itemiJed deduction o' losses. -o3ever. is
not con'ined to section 34B. it is also 'ound under
section &") ,12 ,e2 3-ic- also pertains to
deductions availa0le under t-e estate tax la3.
#osses 3it-in six ,"2 mont-s a'ter t-e deat- o'
t-e decedent can 0e claimed as itemiJed
deduction o' losses under Fection 34B. :o3ever.
ma% 0e claimed as deduction under estate tax
return provided t-at t-e same are not claimed as
itemiJed deduction o' losses under Fection 34B.
/' :o3 man% carr%7overs do 3e -ave under t-e
Code6
A' 3. 4amel%=
1. Fection 2$ E ,322 Carr% 'or3ard o' excess
minimum Tax
2. Fection 3( D 4et Capital #oss Carr%7 over
3. Fection 3( D 3 4et 8perating #oss Carr%7
8ver.
JNFS OF $OSSES ANF T0E& CA&&;+
OGE&S'
3. 2R%=N3RI L2SS J N2L&2 / L0 above1
/' 5-% is t-ere a need 'or a carr% over under
Fec. 34 D N 3-en %ou can claim t-e loss 'rom
0ot- capital and ordinar% loss6
A' i' t-e loss exceeds t-e income 'or t-e taxa0le
%ear. %ou cannot deduct t-e entire amount o'
loss 'rom %our income 'or t-at %ear so t-e excess
ma% 0e deducted 'or t-e taxa0le %ear 'ollo3ing
t-e loss.
B. CAPTA$ $OSS O NET CAPTA$ $OSS
CA&&; OGE& /L . above1
N'/ &3P=/3L
L2SS &3RRI-
2K'R
N'/ 2P'R3/=NG
L2SS &3RRI-
2K'R
1. taxpa%ers is an
individual onl% not
corporation.
2. involves net
capital loss
3. carr%7over as loss
'rom sale o' capital
asset in t-e next
succeeding %ear
1. taxpa%er ma% 0e
an individual or
corpM
2. losses incurred
or connected 3it-
T or BM
3. Business losses
not previousl% o''7
set as a deduction
'rom t-e >I carried
over as suc- 'or
t-e next 3
2
TAXATON
4. can onl% 0e
deducted 'rom
capital gains.
consecutive %earsM
4. can 0e deducted
'rom capital gains
andBor ordinar%
gains.
NET OPE&ATN< $OSS CA&&; !EGII!E;E4TF=
1.4et operating loss o' t-e 0usiness or enterprise
incurred 3Bin t-e taxa0le %ear
2. not previousl% o''7set as a deduction 'rom t-e
>I
3. carried over as a deduction 'rom t-e >I 'or t-e
next 3 consecutive taxa0le %ears immediatel%
'ollo3ing t-e %ear o' suc- loss.
/' Can t-e period 0e extended6
A' %es. 'or mines ot-er t-an oil and gas 3ell.
1. net operating loss 3Bout t-e 0ene'it
incentives provided 0% la3M
2. incurred in an% o' t-e 'irst 1* %ears o'
operation.
3. carried over as a deduction 'rom t-e >I
'or t-e next %ears 'ollo3ing suc- loss.
4. no su0stantial c-ange in t-e o3ners-ip
o' t-e 0usiness or enterprise.
/' 5-at is t-e limit6
A' $S o' t-e nominal value o' outstanding
s-ares is -eld 0% or on 0e-al' o' t-e same
personsB corporation
individual no pro0lem. pro0lem lies 3it-
corporations or enterprises.
)B)4D84;E4T #8FFEF
1. contract area 3-ere petroleum operations are
underta1en is partiall% or 3-oll% a0andonedM
all ,12 accumulated exploration and ,22
development expenditures pertaining t-ereto
s-all 0e allo3ed as a deduction.
2. a producing 3ell is su0se/uentl% a0andoned=
unamortiJed cost and undepreciated cost o'
e/uipment directl% used t-erein s-all 0e allo3ed
as a deduction in t-e %ears it 3as a0andoned.
T)TE 48TE=
1. i' a0andoned 3ell is reentered and production
is resumedM or
2. i' e/uipment or 'acilities are restored into
service in t-e %ear o' resumption or restoration
and s-all amortiJed or depreciated.
/' 5-at is t-e Tax 0ene'it rule6
A' #ast Par. o' Fec. 34 E ,12= recover% o' 0ad
de0ts previousl% allo3ed as deduction in t-e
preceding %ear s-all 0e included as part o' t-e
gross income in t-e %ear o' recover% to t-e
extent o' t-e income tax 0ene'its o' said
deduction.
/' 5-at is a Bad De0t6
A' Bad de0ts s-all re'er to t-ose de0ts resulting
'rom t-e 3ort-lessness or incollecti0ilit% in 3-ole
or in part o' amounts due t-e taxpa%er 0% ot-ers.
arising 'rom mone% lent or 'rom uncollecti0le
amounts o' income 'rom goods sold and services
rendered.
C0NA BANJ GS. CA
0ad de0ts can onl% 0e claimed i' pursuant to a
contract o' loan
7 no 0ad de0ts 'or loss o' instruments.
/' 5-o claims it6
A' a. creditor
0.mone% lender
/' 5-at %ear can it 0e claimed6
A' can 0e claimed in t-e %ear it 3as actuall% sit
ascertained to 0e 3ort-less and c-arged o''.
meaning cancelled in t-e 0oo1s o' account.
/' Do %ou need to 'ile an action 0e'ore %ou can
claim6
A' 4o. all %ou -ave to do is prove t-at %ou did
exert e''ort to claim or recover t-e same.
/' 5-at cannot 0e deducted as 0ad de0ts6
A'
1. de0ts not incurred in connection 3it- t-e
trade. 0usiness and pro'ession o' taxpa%er.
2. transactions. mered into 0et3een
parties mentioned under Fection 3" ,B2
namel%.
a2 0et3een mem0ers o' t-e 'amil%
020et3een an individual 3-o o3ns more
t-an 3*S o' outstanding capital stoc1 o' a
corporation and t-at corporation
c2 0et3een t3o ,22 corporations more t-at
*S o' t-e outstanding capital stoc1 o'
3
TAXATON
3-ic- is o3ned 0% or 'or t-e same
individual
d20et3een a grantor and 'iduciar% o' an%
trust
e2 0et3een t3o ,22 'iduciaries o' t3o ,22
trusts 3-o -as t-e same grantor
'2 0et3een a 'iduciar% o' a trust and a0ove
'iduciar% o' suc- trust
-%CURITI%- B%C)"I9A ?)RT8*%--
1. ascertained to 0e 3ort-less and c-arged
o'' 3it-in t-e taxa0le %ear
2. capital asset
3. taxpa%er. ot-er t-an a Ban1 or trust
compan% incorporated under P-il. #a3s
4. su0stantial part o' 0usiness is t-e receipt
o' deposit
. considered as a loss 'rom t-e sale o'
capital assets on t-e last da% o' suc- taxa0le
%ear
=6 F FEP&ECATON
/' 5-at is depreciation6
A' It is t-e gradual dimension in t-e service or
use'ul value o' tangi0le propert% due 'rom
ex-austion. 3ear and tear and normal
o0solescence.
/' 5-at 1ind o' propert% is involved6
A' 1. !eal propert% except parcel o' land
2. Personal Propert%
R%>UI-IT%-'
1. depreciation deduction must 0e
reasona0le
2. 'or t-e ex-austion. 3ear and tear.
including reasona0le allo3ance 'or
o0solescence
3. propert% used in t-e trade o' 0usiness
/' 5-at do %ou mean 0% Oreasona0le
allo3anceP6
A' it s-all include. 0ut not limited to. an
allo3ance computed in accordance 3it- rules
and regulations prescri0ed 0% t-e Fecretar% o'
Dinance. upon recommendation o' t-e
Commissioner. under an% o' t-e 'ollo3ing
met-ods=
1.Ftraig-t7line met-od
2.Declining 0alance met-od
3.Fum7o'7t-e7%ear7digital met-odM and
4.an% ot-er met-od 3-ic- ma% 0e prescri0ed
0% t-e Fecretar% o' Dinance upon
recommendation o' t-e Commissioner
FEP&ECATON OF P&OPE&TES ESEF N
PET&O$EEM OPE&ATONS
1. properties directl% related to production
o' petroleum
2. allo3ed under ,12 straig-t line or ,22
declining 0alance met-od
3. use'ul li'e o' properties used or related
to production o' petroleum s-all 0e ten
,1*2 %ears or suc- s-orter li'e as ma%
0e permitted 0% t-e Commissioner.
4. 'or propert% not used directl% in t-e
production o' petroleum ,12 depreciated
under t-e straig-t line met-od. and use'ul
li'e is onl% 'ive ,2 %ears
FEP&ECATON OF P&OPE&TES ESEF N
MNN< OPE&ATONS
)##85)4CE D8! DEP!ECI)TI84=
1.all properties used in mining operations ot-er
t-an petroleum operations s-all 0e computed as
'ollo3s=
a. i' t-e expected li'e is ten ,1*2 %ears or less E
normal rate o' depreciation
0. i' t-e expected li'e is more t-an ten ,1*2 %ears
E depreciated over an% num0er o' %ears 0et3een
'ive ,2 %ears and t-e expected li'e.
R%>UIR%"%9T-'
1. depreciation is allo3ed as a deduction 'rom
"1M and
2. contractor noti'ies t-e Commissioner at
t-e 0eginning o' t-e depreciation period
3-ic- depreciation rate s-all 0e used.
DEP!ECI)TI84 DEDICTIB#E B< 4!)ETB 8! !DC
reasona0le allo3ance 'or t-e deterioration o'
propert%
1- arising out o' its use or
emplo%ment
2- or non7use in t-e 0usiness. trade or
pro'ession
3- propert% is located in t-e
P-ilippines
=6 < FEP$ETON OF O$ an. <AS LE$$S an.
MNES
onl% deduction 3-ic- is a not sel' executing
deduction
/' 5-at is depletion6
4
TAXATON
A' t-e ex-austion 3ear and tear o' natural
resources as in mines. oil. and gas 3ells
t-e natural resources called O3asting assetsP
DEP!ECI)TI84 vs. DEP#ETI84
1.involves propert% 1. involves natural
resources
2. ordinar% 3ear and
tear o' e/uipment
2. ordinar% 3ear and
tear o' natural
resources

T)TE 48TE=
E/uipment used in mining operation is
deducti0le in depreciation
/' ;et-od 'or computing depletion6
A' cost depletion met-od
/' to 3-om allo3ed6
A' onl% mining entities o3ning economic interest
in mineral deposits
Economic interest= capital investments in
mineral deposits
=60 C0A&TAB$E & OT0E& CONT&BETONS
T)TE 48TE=
1.uni/ue 0ecause deducted 'rom t-e taxa0le net
income and not 'rom t-e gross income
second step o' t-e 'ormula deduction
/' 5-o is claiming t-e deduction6
A' t-e donor
/' 5-o are t-e Donees6
A' 1.>overnment o' t-e P-ilippines or an% o'
its agencies or an% political su0division
t-ereo' exclusivel% 'or pu0lic purpose
2. )ccredited Domestic corporation or
association organiJed and operated
exclusivel% 'or religions. lion. c-arita0le.
scienti'ic. %out- and sports development.
cultural or educational purposes or 'or t-e
re-a0ilitation o' veterans. or to social
3el'are institution. or to non7government
organiJation and no part o' its net income inures
to t-e 0ene'it o' an% private stoc1 -older or
individual
/' :o3 man% 1inds o' deduction6
A' T3o ,22 1inds=
1.partial deduction
1*S o' taxa0le income in case o' an
individual
S o' taxa0le income in case o'
corporations
2. 'ull Btotal deduction
/' 5-ic- o' t-e t3o 1inds is t-e >eneral !ule6
A' >eneral !ule= Partial deduction
Exception= Total BDull deduction
/' Fuppose ;r. ) made a cas- donation o' P1;.
:o3 muc- can -e claim as a deduction6
A' Dirst determine t-e taxa0le income o' ;r )
since -e is an individual. -e can onl% deduct 1*S
o' -is taxa0le income.
G= 5-at i' t-e Donee is not one o' t-ose
mentioned under t-e la3. can -e claim a
deduction6
)= 4o.
T)TE 48TE= Donee is never an individual.
/' I' t-e Donor is a pure compensation income
earner and -e donates P1**.*** to t-e c-urc-.
can -e claim it as a deduction6
A' 4o. pure compensation income earner can
onl% claim a deduction under Fec 34 ;
/' I' Donee is t-e P-ilippine >overnment. 3-at is
t-e re/uirement6
A' it must 0e made exclusivel% 'or pu0lic
purposes
/' 5-at i' t-e Donee is a province6
A' t-ere must 0e a /uali'ication t-at it is 'or
pu0lic purpose
/' I' t-e Donee is a Domestic Corporation.
3-at is t-e re/uirement6
A' no part o' its income inures to t-e 0ene'it o'
an% private s-are-older or individual
/' 5-at are t-ose contri0utions 3-ic- can 0e
deducti0le in 'ull6
A' 1.Donations to t-e >overnment E no con'lict
3it- partial ,di''erent re/uirement2
Partial donated 'or exclusivel% pu0lic
purposes
Dull. used in underta1ing priorit% activities
o' 4ED)
2.Donations to certain Doreign Institutions or
International 8rganiJations
in compliance 3it- agreement. treaties
or commitment entered into 0% t-e P-ilippine
>overnment and suc- donees
TAXATON
3.Donations to )ccredited 4on7government
organiJations 4on7government organiJation. non7
pro'it domestic corporation
!EGII!E;E4TF=
1. organiJed and operated exclusivel% 'or
scienti'ic. researc-. educational. c-aracter
0uilding and %out- and sport development.
-ealt-. social 3el'are. cultural or c-arita0le
purposes or a com0ination t-ereo'
2. no part o' t-e net income o' 3-ic- inures to
t-e 0ene'it o' an% private individual
3. uses t-e contri0utions directl% 'or t-e active
conduct o' t-e activities constituting t-e purpose
or 'unction 'or 3-ic- it is organiJed and operated
4. annual administrative expense does not
exceed 3*S o' t-e total expenses and
. in case o' dissolution. t-e assets o' 3-ic-
3ould 0e distri0uted to=
a2 anot-er nonpro'it domestic corporation
organiJed 'or similar purpose or purposes
02 to t-e state 'or pu0lic purpose
c2 distri0uted 0% t-e court to anot-er
organiJation to 0e used in suc- a manner
3-ic- 3ould accomplis- t-e general purpose
'or 3it-in t-e dissolve organiJation 3as
organiJed
=6 &ESEA&C0 ANF FEGE$OPMENT
In t-e old la3. t-is is not allo3ed as a
deduction. To remed% t-is. t-e% 'elt t-at t-ose
s-ould 0e a separate deduction 'or researc- and
development.
!EGIIFITEF=
tax pa%er ma% treat researc- and development
expenditures as ordinar% and necessar%
expenses provided=
1. it is paid or incurred during t-e taxa0le %ear
2. incurred in connection 3it- trade. 0usiness or
pro'essionM and
3. not c-argea0le to capital account.
/' Treated as suc- 3-en6
A' during t-e taxa0le %ear it is paid or incurred
A")RTIJATI)9 ); C%RTAI9 R%-%ARC8 A9:
:%<%*)("%9T %M(%9:ITUR%-
at t-e election o' t-e taxpa%er. t-e 'ollo3ing
s-all or ma% 0e treated as de'erred expenses=
a. paid or incurred 0% t-e taxpa%er in
connection 3it- -is trade. 0usiness or
pro'essionM
0. not treated as expenses under par 1 and
c. c-argea0le to capital account 0ut not
c-argea0le to propert% o' a c-aracter 3-ic- is
su0Kect to depreciation or depletion
/' :o3 to compute taxa0le income=
)= de'erred expenses s-all 0e allo3ed as
deduction rata0l% distri0uted over a period o' not
less t-an 1* mont-s as ma% 0e elected 0% t-e
taxpa%er ,0eginning 3it- t-e mont- t-e
taxpa%er 'irst realiJes 0ene'its 'rom
expenditures.2
t-e election or option ma% 0e exercised 'or an%
taxa0le %ear a'ter t-e e''ectivit% o' t-e code 0ut
not later t-an t-e time prescri0ed 0% la3 'or 'iling
t-e return 'or suc- taxa0le %ear.
#I;IT)TI84 84 DEDICTI84
/' 5-en not deducti0le6
A' 1.)n% expenditure 'or t-e
,12 ac/uisition or improvement o' land or
,22 'or t-e improvement o' propert% to 0e
used in connection 3it- researc- and
development o' a c-aracter 3-ic- is
su0Kect to depreciation and depletion and
o''ice site
2. )n% expenditure paid or incurred 'or
t-e purpose o' undermining t-e
existence. location. extent or /ualit% o'
an% deposit o' one or ot-er mineral
including oil or gas.
not 'or mineral exploration
=6 J PENSON T&EST
/' Claimed 0% 5-om6
A' t-e emplo%er
/M 5-at is a Pension Trust contri0ution6
A' a deduction applica0le onl% to emplo%er on
account o' its contri0ution to a private pension
plan 'or t-e 0ene'it o' its emplo%ee deduction is
purel% 0usiness in c-aracter.
/' !e/uisites6
A'
1.t-e emplo%er must -ave esta0lis-ed a pension
or retirement plan to provide 'or t-e pa%ment or
reasona0le pension o' -is emplo%ees
2. pension plan must 0e reasona0le and actuall%
soundM
3. it must 0e 'unded 0% t-e emplo%er
"
TAXATON
4. t-e amount contri0uted must no longer 0e
su0Kect to -is control or disposition
. t-e amount -as not %et 0een allo3ed as a
deduction and
". t-e amount -as or is apportioned in e/ual
parts over a period o' 1* consecutive %ears
0eginning 3it- t-e %ear in 3-ic- t-e trans'er or
pa%ment is made.
=6 J AFFTONA$ &E/E&EMENTS FO&
FEFECTB$T; OF CE&TAN PA;MENTS
allo3ed as a deduction onl% i' s-o3n t-at t-e
tax re/uired to 0e deducted and 3it--eld t-ere
'rom -as 0een paid to t-e BI! in accordance 3it-
Fection & and Fection &1
=6 $ OPTONA$ STANFA&F FEFECTON
=I9:- ); :%:UCTI)9-'
1.ItemiJed deduction
2.8ptional Ftandard Deduction
3.Personal B)dditional Deduction
OPTONA$ STANFA&F FEFECTON =
can 0e availed o' 0% an individual 3-o ma%
elect a standard deduction in an amount not
exceeding 1*S o' -is gross income
ma% appl% in lieu o' t-e ot-er deductions
under Fection 34
t-e taxpa%er must signi'% in -is return -is
intention to elect t-e optional standard
deduction. ot-er3ise. -e s-all 0e considered as
-aving availed o' t-e itemiJed deduction.
/' 5-o can claim t-is deduction6
A' all individual taxpa%ers except non resident
alien not engaged in trade or 0usiness
,4!)4ETB2
Reason' -e is not lia0le to pa% 0% 3a% o' t-e 4IT.
t-us. 'ollo3s -e cannot claim t-is deduction
0ecause -e is lia0le to pa% 0% 3a% o' >IT.
T)TE 48TE=
can co7exist 3it- personal and B or additional
exemption
=6 M P&EMEM PA;MENTS ON 0EA$T0
ANF -O& 0OSPTA$HATON NSE&ANCE OF
AN NFGFEA$ TAXPA;E&
'or ,12 :ealt- and Binsurance
,22 :ospitaliJation
!EGII!E;E4TF=
1. amount o' premiums. paid 0% taxpa%er
'or -imsel' and mem0ers o' -is 'amil%.
2. amount o' premiums s-ould not exceed
,12 P2.4** per 'amil% or ,22 P2** a mont-
3. gross income o' t-e 'amil% 'or t-e
taxa0le %ear is not more t-an P2*.***
/' 5-o can avail o' t-is deduction6
A'
1.individual taxpa%er earning purel%
compensation income during t-e %earM
2. individual taxpa%er availing itemiJed or
optional standard deductionM and
3. individual taxpa%er earning 0ot-
compensation income and income 'rom
0usiness
SECTON =@ A$$OLANCE FO& PE&SONA$
EXEMPTON FO& NFGFEA$ TAXPA;E&
/' 5-en do 3e appl% t-is6
A' appl% i' individual taxpa%er is pa%ing 0% 3a%
o' 4IT
/M 5-o are taxpa%er6
A' t-ose mentioned under Fection 24 ,)2
1. !C
2. 4!C
3. 8C5
4. !)
all can claim 0ot- personal and additional
exemption

/' 5-% not include 4!)ETB6 Can t-e latter
claim an% exemption6
A' 4!)ETB is not included 0ecause Fection 3 )
re'ers to Fection 24 )
4!)ETB can claim personal deductions 0ut not
additional exemptions pursuant to Fec 3 D
!EGII!E;E4TF=
1.4!)ETB s-ould 'ile a true and accurate return
2. t-e amount to 0e claimed as personal
exemptions s-ould not exceed t-e amount
provided 'or under P-ilippine #a3s
T)TE 48TE=
)E;8P= can 0e a !) or 4!)ETB
BASC PE&SONA$ EXEMPTONS'
1. Fingle individualM or individual
Kudiciall% decreed as legall%
separated 3it- no /uali'ied
dependents.
2*. ***
$
TAXATON
2. Dor -ead o' t-e 'amil% E can 0e
single or legall% separated 3it-
/uali'ied dependents.
2. ***
3. Dor eac- married individual E i'
onl% one o' t-e spouse. earns or
derives gross income. onl% suc-
spouse can claim t-e personal
exemption.
32. ***
/' 5-o is t-e O-ead o' t-e 'amil%P6
A' 1.unmarried or legall% separated man or
3oman
2. 5it- ,12 one or 0ot- parties or
,22 5it- one or more 0rot-ers and sisters
,32 3it- one or more legitimate.
recogniJed. natural or legall% adopted
c-ildren
3. living 3it- and dependents upon -im 'or
t-eir c-ie' support
4. 3-ose suc- 0rot-er or sisters or c-ildren
are
,12 not more t-an 11 %ears old and
,22 not gain'ull% emplo%ed.
,32 unmarried
. 8!. regardless o' age. t-e same are
incapa0le o' sel' support 0ecause o' mental
or p-%sical de'ect.
/' 5-% do 3e -ave to determine 3-o t-e -ead
o' t-e 'amil% is6
A' onl% legall% separated individuals can claim
additional exemptions i' t-e% -ave /uali'ied
dependents.
T)TE 48TE=
!.). $432 and !! 27(&= a senior citiJen can also
0e a dependent.
/' Can a 3ido3er claim exemptions6
A' exemptions must 0e strictl% construed.
3ido3er not included in t-e list under
Fection 3 ) E 0ut can claim under sec 3B
3ido3er. married or used to 0e married
;)!!IED I4DI+IDI)#F
eac- legall% married individuals can claim t-e
personal exemption. :us0and and 3i'e @
P"4.***
/' 5-o are allo3ed to claim6
A' 4ormall% . it is t-e -us0and 3-o claims
unless -e executes a 3aiver t-at t-e 3i'e
3ill claim t-e same ,!!27(&2
Additional %&emptions' /04B1
7additional exemption o' P&.*** 'or eac-
dependent not execeeding 'our ,42
G= 5-o can claim t-e same6
)= 1.;arried couples= onl% one o' t-e
spouses can claim itM
2.legall% separated individuals= can 0e
claimed 0% t-e spouse 3-o -as custod% o' t-e
c-ild or c-ildren
t-e additional exemption claimed 0% 0ot-
s-all not exceed t-e maximum additional
exemption -erein allo3ed.
/' De'ine OdependentsP
A' legitimate. illegitimate or legall% adopted c-ild
c-ie'l% dependent upon and living 3it- t-e
taxpa%er i' suc- dependent is ,12 not more t-an
21 %ears o' age. ,22 unmarried. and ,32 not
gain'ull% emplo%ed or ,42 i' suc- dependent.
regardless o' age is incapa0le o' sel' support
0ecause o' mental or p-%sical de'ect.
/' 5-at i' 3ido3er -as illegitimate c-ildren.
can claim additional exemption6
A' can claim. can 0e considered as -ead o'
t-e 'amil% 3B dependent
/' 5-at i' t-e c-ildren are temporaril% a3a%
'rom t-e parents6
A' still considered living 3it- parents. can claim
exemption
C8A9A% ); -TATU-' /-%C 04 C1
/' !ec1oning Period6
A' end o' t-e %ear or close o' suc- %ear 3-en
suc- c-ange o' status occurred.
T)TE 48TE=
al3a%s c-oose t-e -ig-er amount o' exemption
i' %ou are 'iling a return covering t-e period
3it-in 3-ic- t-e c-ange o' status occurred
1. i' t-e taxpa%er s-ould ,12 marr% or ,22 -ave
additional dependents during t-e taxa0le %ear.
-e ma% claim t-e corresponding exemption in 'ull
'or t-e %ear.
Illustration'
1.Fingle Lan 1. 2**
2.;arried Lune 1. 2** E on )pril 1. 2**" E
status= legall% married can claim P 32.***
&
TAXATON
2. i' t-e taxpa%er s-ould die during t-e taxa0le
%ear. estate can claim personal exemption.
Illustration
1.Lan. 2. 2** taxpa%er married 3B one c-ild
can claim on )pril 1. 2**"
P32.***X
P&.***
In t-is case. as i' t-e c-ange o' status occurred
at t-e close o' taxa0le %ear. I' taxpa%ers spouse
or c-ild dies 3it-in t-e taxa0le %ear or t-e
dependents 0ecame ,12 gain'ull% emplo%ed ,22
got married or ,32 0ecame 21 as i' t-e c-ange as
status occurred at t-e close o' taxa0le %ear.
Illustration'
1. Taxpa%ers tragic stor% 3i'e died Lan. 2. 2**
and c-ild died t-e next da% t-en anot-er c-ild
eloped and get married.
2. Taxpa%er despite t-e traged% can claim ton o'
mone% on )pril 1. 2**".
P 32.***
P 1".*** ,&.*** per c-ild2
4&.***
Section =A. te*s not Fe.(ctib)e
=A A. Aeneral Rule' In computing net income. no
deduction s-all 0e allo3ed=
,12 Personal. living or 'amil% expenses E not
related to trade or 0usiness
,22 Fection 3" ) ,22 and Fection 3" ) ,32 Aeneral
Rule' 4o deductions allo3ed 'or
1. )n% amount paid out 'or ne3 0uildings or 'or
permanent improvements. or 0etterments.
made to increase t-e value o' an% propert% or
estate
2. )n% amount expanded in restoring propert%
or in ma1ing good t-e ex-austion t-ereo' 'or
3-ic- an allo3ance is or -as 0een made.
%&ceptions'
1. 8ption granted to Private Educational
Institution to deduct t-e same as capital
outla%s.
T)TE 48TE=
)mount paid 'or ne3 0uildings. can 0e
deducted i' it involves intangi0le drilling and
development cost incurred in petroleum
operations ,Fec 34 " ,)2
P&EMEMS PAF ON $FE NSE&ANCE
PO$C; '
1. covering t-e li'e o' an% o''icer or
emplo%ee or an% person 'inanciall%
invested in an% trade o' 0usiness carried
on 0% t-e taxpa%er.
2. taxpa%er is directl% or indirectl% t-e
0ene'iciar% under suc- polic%.
$OSSES F&OM SA$ES O& EXC0AN<ES OF
P&OPE&T; /between related parties1
12 0et3een 'amil% mem0ers
/' 5-o is considered t-e O'amil% o' t-e
taxpa%er6P
A' a. 0rot-ers and sister ,3-ole is [ 0lood2
0. spouses
c. ancestors
d. lineal descendants
/' are uncles or nieces included6
A' no
N FONO&DS TAX
!elatives includes relatives 0% consanguinit%
3it-in t-e 4
t-
civil code. 4ep-e3 is a stranger
and relative ang nep-e3.
22 individual and corporations
>en. !ule= 48 DEDICTI84
Except= distri0ution in li/uidation or less
t-an *S o' t-e outstanding capital stoc1
32 T3o corporations
42 >rantor or Diduciar%
2 T3o 'iduciaries o' t3o trust
"2 Diduciar% and 0ene'iciar% o' trust
Sec. =? S,ecia) ,ro!isions regar.ing
.e.(ctions o" ins(rance co*,anies.
Codal Provisions
Fection 3&= #osses Drom 5as- Fales o' Ftoc1 or
Fecurities
/' 5-at is a 3as- sale6
A' It is a sales or ot-er disposition o' stoc1
securities 3-ere su0stantiall% identical securities
are purc-ased 3it-in "1 da%s. 0eginning 3* da%s
0e'ore t-e sale and ending 3* da%s a'ter t-e sale.
/' 5-at period6
A' "1 da% period 0eginning 3* da%s 0e'ore and
ending 3* da%s a'ter t-e sale
/' Lan 2* %ou purc-ased s-are o' stoc1. and
disposed o' t-e same on De0 . 2**. Is t-is a
3as- sale6
A' 4o
(
Z P4*.***
TAXATON
/' I' it is a loss in 3as- sale. -appens6
A' <enera) &()e' ,Fec 131 !! 4o. 22
gains 'rom 3as- sale are taxa0le 0ut
losses are non7deducti0le
%&ception'
unless claim is made 0% a dealer in stoc1 or
securities and 3it- respect to a transaction made
in t-e ordinar% course o' t-e 0usiness o' suc-
dealer
/' !eason 3-% losses in 3as- sale cannot 0e
deducted6
A' 1. to avoid too muc- speculation in
t-e mar1et
2. taxpa%er not telling t-e trut-.
0ecause -e ma% sa% -e incurred a
loss instead o' a gain
Section 6>. Feter*ination o" A*o(nt an.
&ecognition o" <ain or $oss
G'N'R3L R9L'< T-is is totall% irrelevant i'
t-e income is su0Kect to 'it. In 'it gain is
presumed.
'?&'P/< sale o' s-ares o' stoc1 3-ere %ou
-ave to determine actual gain or loss
/' 5-en is t-ere a gain6
A' excess o' t-e amount realiJed over t-e 0asis
or adKusted 0asis 'or determining gain. ,amount
realiJed 'rom t-e sale or ot-er disposition o'
propert%2
/' 5-en is t-ere a loss6
A' t-e amount realiJed is not in excess o' B or
)B
=llustratio)< 1(&$ Bar ,Luan dela CruJ sold
Ke3elr% 'or 3**.*** 2 contract o' sale
amount realiJed is 3**.***
/' 5-at 3ill 0e t-e 0asis o' t-e gain6
A' Fec. 4* B ,12. propert% 3as ac/uired 0%
purc-ase
Cost= purc-ase price X expenses
/' I' t-ere is a gain. is t-e 3-ole gain su0Kect to
income tax6
A' it depends
i' ordinar% asset @ 1**S is su0Kect to
income tax
i' capital assets
a. s-ort term,less t-an 12 mont-s2 = 1**S
taxa0le
0. long term ,more t-an 12 mont-s2= *S
taxa0le
/' suppose propert% sold is a parcel o' land 3ill
t-e rule 0e t-e same6
A' 4o. and it depends
ordinar% asset= appl% t-e cost
capital asset= "S D;+ or selling price 3-ic-
ever is -ig-er
G= Do 3e appl% t-e -olding period6
)= 4o. -olding period does not appl% to t-e sale
o' real propert%. T-is is an a0solute rule=
I' realt% is ordinar% E -olding period does
not appl%.
I' realt% is capital asset E "S D;+ or selling
price applies.
:olding period applies onl% to sale o' personal
propert% 3-ic- is a capital asset except sale o'
s-ares o' stoc1s.
:olding period also do not appl% to
corporations.
/' I' t-e propert% is ac/uired t-roug-
in-eritance. 3-at is t-e 0asis6
A' Fec 4* B ,22 'air mar1et value or price as o'
t-e date o' ac/uisition.
/' Fuppose it 3as a sale o' personal propert%. do
3e appl% t-e same principles6
A' 4o.
/' 5-at i' it involves a sale o' real propert%6
A' )ppl% t-e same principles
Fuppose it 3as a result o' s3indling. t-e't.
ro00er% or esta'a. do 3e appl% t-e same
principles6
A' #a3 is silent. ta1e note o' t-e old CI) ruling
on t-is one
/' De0 14. 2**". %our >> gave %ou a Ke3elr% in
Fept %our >> 0rea1s up 3it- %ou. >> re/uest
t-e Ke3elr% 0e returned 0ut %ou alread% sold
it 'or P2**.***. 5ill t-e entire P2**.*** 0e
included in gross income6
A' Basis= ,12 same as i' it 3ould 0e in t-e -ands
o' t-e Donor ,D;+ as o' date o' ac/uisition2M
or ,22 last o3ner 3-o did not ac/uire t-e
same 0% gi't ,cost2
/' I' it involves a parcel o' land6
A' appl% t-e same rules Fection 4* B ,42 3-at is
t-e 0asis6
"*
TAXATON
1. Propert% 3as ac/uired 'or less t-an
an ade/uate consideration in mone%
or mone%s 3ort-= t-e 0asis 3ould 0e
t-e amount paid 0% t-e trans'eree 'or
t-e propert%.
/' Fection 4* B ,2 3-at is t-e 0asis6 A' 4* C ,2
i' t-e propert% 3as ac/uired in a transaction
3-ere gain or loss is not recogniJed ,pursuant to
a merger or consolidation plan2
a. corporation. part% to a merger or consolidation.
exc-anges propert% solel% 'or stoc1s in anot-er
corporation. also a part% to t-e merger or
consolidation
0. is a part% to t-e merger or consolidation.
solel% 'or t-e stoc1s o' anot-er corporation also a
part% to t-e merger or consolidation. or
c. Fecurit% -older o' a corporation. part% to
a merger or consolidation. exc-anges -is
securities solel% 'or stoc1 or securit% in
anot-er corporation. also a part% to t-e
merger or consolidation. E person
trans'ers propert% to corporation to gain
control
6> C EXC0AN<E OF P&OPE&T;
A%9%RA* RU*%' In sale or exc-ange o' propert%.
t-e control amount o' gain or loss s-all 0e
recogniJed.
1. gain is taxa0le
2. losses are deducti0le
%&ception' I' permanent to a merger or
consolidation plan. no gain or loss s-all 0e
recogniJed
1. gain is exempt
2. losses are not deducti0le
R%>UI-IT%-'
1. t-e transaction involves a contract o'
exc-ange
2. t-e parties are mem0ers o' t-e merger or
consolidation
3. t-e su0Kect matter is onl% limited or
con'ined 3it- t-e one provided 'or 0% la3
;erger and Consolidation in corporation code
and tax code are not t-e same.
Fec 4* ,22 ,a2
a corporation 3-ic- is a part% to a merger
or consolidation. e&changes property solely
for stocB in a corporation 3-ic- is a part% to
t-e merger or consolidation
Illustration'
Trans'eror gives 1;
Trans'eree gives $**.*** @ not tax0le
gain P3**.***
I' ot-er propert% received 0% trans'eree ,4* C
,32 ,a2 TRA9-;%R%%
i' t-e part% receives not Kust t-e su0Kect
matter permitted to 0e received= lie i' t-e
part% receives mone% and Bor propert%. t-e
gain. i' an%. 0ut not t-e loss. s-all 0e
recogniJed ,meaning taxa0le2 0ut in an
amount not in excess o' t-e sum o' t-e
mone% and t-e D;+ o' suc- ot-er propert%
received.
,4* C ,32 ,02 TRA9-;%R)R
1.Trans'eror corporation receives mone% and B or
propert%. distri0utes it pursuant to t-e merger or
consolidation plan
no gain to t-e corporation s-all 0e recogniJed
2. Trans'eror corporation receives mone% and B or
propert%. does not distri0ute it pursuant to t-e
merger or consolidation plan
t-e gain s-all 0e recogniJed 0ut in an amount
not in excess o' t-e sum o' suc- mone% and t-e
D;+ o' suc- ot-er propert% so received.
/' 5-at is t-e rule6
A' 4* C ,32 ,a2
1. gain taxa0le
2. loss not deducti0le
4* C ,32 ,02
It depends on how distributed'
1. pursuant to t-e merger or consolidation
plan=
gain exempt
loss not deducti0le
2. not pursuant to merger or consolidation
plan=
gain taxa0le
loss not deducti0le.
Sec 6> C 257 2b7
a s-are-older e&changes stocB in a
corporation 3-ic- is a part% to a merger or
consolidation. solely for the stocB of another
corporation 3-ic- is a part% to t-e merger or
consolidation
Sec 6> C 2C7 2c7
a securit% -older o' a corporation 3-ic- is a
part% to t-e merger or consolidation.
e&changes his securities in such corporation,
solely for stocB securities in another
corporation
"1
TAXATON
T-e rule is similar in 4* C ,32. ,a2. ,02 and ,c2
alt-oug- di''erent propert% are involve. t-at is
3-% t-e last paragrap- o' 4* C is a separate
paragrap-.
T-ere'ore. Fec 4* C ,32 ,a.0.c2 t-e rule is
1. gain exempt
6>c )ast ,aragra,h
t-e trans'eree 0ecomes a stoc1-older. parties
are not mem0ers o' t-e merger
t-e individual 3ants to 0e a s-are-older 0ut
does not 3ant to purc-ase s-ares 0ut 3illing
to give up propert% as a result o' t-e
exc-ange . t-e person gains control o' t-e
corporation
T-e rule is=
a. gain is exempt
!e/uisites=
1. T-ere is ) contract o' exc-ange
3-ere propert% 3as trans'erred 0% t-e
person in exc-ange o' stoc1 or unit o'
participation in a corporation.
2. )s a result. t-e person alone or
toget-er 3it- ot-ers ,not exceeding o'
4 persons2 gains control o' t-e
corporation.
/' 5-at is control6
A' o3ners-ip o' stoc1s in a corporation
possessing at least 1S o' total voting
po3er.
Sec 6> B 2@7
non applica0ilit% o' income tax is onl%
temporar%
Reason ' Basis 3ill 0e 4* C ,2
1. 4* C ,2 ,a2 Trans'eror
0asis o' stoc1 or securities received 0% t-e
trans'eror= same as t-e 0asis o' t-e propert%.
stoc1 or securities exc-anged=
decreased 0% t-e ,12 mone% and ,22 D;+ o'
t-e propert% receivedM and
increased 0% ,a2 amount treated as
dividend and ,02 amount o' gain
recogniJed
2. 4* C ,2 ,02 Trans'eree
as it 3ould 0e in t-e -ands o' trans'eror
increased 0% t-e amount o' gain recogniJed.
Sec 6> 2c7 267 Ass(*,tion o" $iabi)ity
1. Taxpa%er. in connection 3it- t-e
exc-anges descri0ed E receives securities
or stoc1s permitted ,no gains recogniJed2
E it is sole consideration o' t-e same E t-e
ot-er part% assumes lia0ilit% o' t-e same
E t-e ac/uisition o' lia0ilit% not treated as
mone% and B or ot-er propert% E t-e
exc-ange still 'alls 3it-in t-e exceptions.
2. I' amount o' lia0ilities assumed X amount
o' lia0ilities to 3-ic- propert% is su0Kected
to exceeds 7 adKusted 0asis o' t-e
propert% trans'erred E t-e excess s-all 0e
considered a gain 'rom t-e sale o' a
capital asset or o' propert% 3-ic- is not a
capital asset. as t-e case ma% 0e.
SECTON 65 NGENTO&ES
(urpose' C-ange o' inventor% to determine
clearl% t-e income o' an% taxpa%erB to re'lect t-e
true income.
*imitation'
1. once ever% 3 %ears
2. approval o' t-e secretar% o' 'inance
Section 6= Acco(nting Perio.s
1. Discal %ear
2. use o' calendar %ear
a. no annual accounting
0. does not 1eep 0oo1s o' account
c. individuals
Ise o' met-od as in t-e opinion o' t-e
commissioner clearl% re'lects t-e income=
1. no accounting met-od -as 0een emplo%ed
2. t-e met-od does not clearl% re'lect t-e
income
Sec 66 Perio. in %hich ite*s o" <ross
nco*e inc)(.e. an. Sec 6@ Perio. "or
%hich Fe.(ctions an. Cre.it Taken
Inder Fec 44 amount o' all items o' gross
income s-all 0e included in t-e gross income
'or t-e taxa0le %ear in 3-ic- t-e% are
received 0% t-e taxpa%er
Inder Fec 4 deductions s-all 0e ta1en 'or
t-e taxa0le %ear in 3-ic- Opaid or accruedP or
Opaid or incurred.P
Fec 44 and Fec 4 are mentioned in t-e code
0ecause o' t-e deat- o' t-e person.
Illustration'
"2
TAXATON
Dacts= taxpa%er dies in t-e middle o' t-e %ear
Lanuar% 1. 2**" E Lune 1. 2**"
Lune 2". 2**" to Dec 31. 2**" t-e estate is
t-e taxpa%er
Fo t-e income and deductions 'rom Lan 1 to
Lune 2.. included in t-e computation
Section 6A Change o" Acco(nting Perio.
/' 5-o is t-e taxpa%er6
A' corporation ,taxpa%er ot-er t-an individual2
/' 5-at 1inds o' accounting period6
A' 1.'iscal %ear
2. calendar %ear
/' C-anges contemplated6
A' 1. 'iscal to calendar
2. calendar to 'iscal
3. 'iscal to anot-er 'iscal
3it- t-e approval o' t-e Commissioner. net
income s-all 0e computed on t-e 0asis o' t-e
ne3 accounting period.
/' Calendar to calendar. correct6
A' not correct statement
Section 6? 2A7
Ta&payer' Corporation
1. Discal to calendar
separate 'inal or adKusted return s-all 0e
made 'or t-e period 0et3een t-e so close o'
t-e last 'iscal %ear 'or 3-ic- t-e return 3as
made and ,22 t-e 'ollo3ing Dec 31.
2. Calendar to Discal
made 'or t-e period 0et3een t-e close o' t-e
last calendar %ear and t-e date designated as
t-e close o' t-e 'iscal %ear.
3. Discal to 'iscal
made 'or t-e period 0et3een t-e close o' t-e
'ormer 'iscal %ear and t-e date designated as
t-e close o' t-e ne3 'iscal %ear.
Dile return indicating t-e c-ange in
accounting met-od
Section 64 Acco(nting "or $ong Ter*
Contracts
/' 5-o are t-e pro'essionals involved6
A' applies to arc-itects and engineers
/' 5-at is a long term contract6
A' it means 0uilding. installation or construction
contracts covering a period in excess o' one ,12
%ear.
/' Basis o' income6
A' a. persons 3-ose gross income is derived in
3-ole or in part 'rom suc- contract s-all
report suc- income upon t-e 0asis o'
percentage o' consumption.
0. t-e return s-all 0e accompanied 0% a
certi'icate o' arc-itects or engineers s-o3ing
t-e percentage o' completion
c. deduction o' expenditures made during t-e
taxa0le %ear. on account o' t-e contract is
allo3ed
Section 63 nsta))*ent Basis
contemplates a seller o' t-e propert%
/' Is it important to 1no3 i' t-e propert% is
personal or real6
A' <es
/' Fale o' !eal Propert% is it important to 1no3 i'
it is a casual sale or regular sale6
A' 4o
Re$uirement' T-e initial pa%ments do not
exceed 2S o' t-e selling price.
/' I' t-e initial pa%ment exceeds 2S 3-at do
%ou call it6
A' called de'erred sale
/' Conse/uence6
A' %ou must pa% t-e 3-ole amount o' t-e tax
/' Fale o' Personal Propert%. is it important to
1no3 i' it is a casual or regular sale6
A' <es
Casual -ale has Re$uirements'
1. selling price exceeds P1.***
2. initial pa%ment not exceeding 2S
selling price
!egular sale no re/uirements
&ase of 4aLas
1. su0Kect matter
2. sold 0% 3a%
3. agreement
"3
TAXATON
4. cas- deposit
. post dated promissor% notes
,installments2
3. 1
st
installment promissor% note 3as
disconnected
4. 2
nd
installment exc-anged 3it- cas- 7
t-ese t3o exceeds t-e selling price
. %ou onl% compute cas-
:= Initial pa%ment exceeds 2S installment 0asis
is not applica0le
RR .G -ection 264= In pa%ment 0% 3a% o'
installment promissor% note. 0ills o' exc-ange
and c-ec1s 3ill not 0e considered in computing
t-e 2S initial do3npa%ment.
Section @> A))ocation o" nco*e an.
Fe.(ctions
tremendous po3er o' t-e Commissioner to
allocate t-e income and deduction o' several
corporations -aving t-e same interest.
/' Fame interest6
A' stoc1-olders su0stantiall% t-e same
/' #imitations6
A' 4one
T-at is 3-% it is a great source o' corruption
Section @5 n.i!i.(a) &et(rns
Lho are reK(ire. to "i)e: 2T&7
1. !C
2. 4!C
3. !)
4. 4!)ETB E sources 3it-in
/' 5-o is not mentioned in Fec 1 0ut lia0le to
pa% 0% 3a% o' 4IT6
A' 8C5B seaman
%&ception'
!C 8! )#IE4F= engaged in trade or practice o'
pro'ession in P-il. F-all 'ile IT! regardless o' t-e
amount o' gross income.
/' I' 8D5 is exempt 'rom 'iling a return. 3-at is
-e re/uired to 'ile6
A' In'ormation !eturn
/' 3-o are not re/uired to 'ile a return6
A'
a. an individual 3-ose gross income does
not exceed -is total personal and
additional exemptions 'or dependents
0. 3or1er ,compensation income earners2
regardless o' t-e amount o' compensation
s-all not re/uired to 'ile IT! 0ecause t-e
management 'iles it. ,!! 372**22
c. individuals 3-ose sole income is su0Kect
to DIT
d. individuals 3-o are exempt 'rom income
tax
%&ception' IT
1. t-e management 'iles an incorrect return
2. t-e emplo%ee -as t3o or more emplo%er
@5 A 2=7
A' not re/uired to 'ile IT! ma% 0e re/uired to 'ile
in'ormation return
@5 B + Lhere to "i)e:
1. aut-oriJed agent 0an1
2. revenue district o''icer
3. collection agent
4. dul% aut-oriJed treasurer o' t-e cit% or
municipalit% 3-ere taxpa%er resides or -as
principal place o' 0usiness
. o''ice o' commissioner E i' no legal
residence or place o' 0usiness in P-il
@5 C
/' 5-en to 'ile6
A' 'iled on or 0e'ore t-e 1
t-
da% o' )pril eac-
%ear
1 C ,12 E 4IT Pa%ers using C<
t3o da%s provided ,calendar2
1. on )pril 1M or
2. 0e'ore )pril 1 ,Lanuar%. De0 or ;arc-2
not Decem0er 0ecause t-e calendar %ear is
not %et over
Discal %ear= 1
t-
da% o' t-e 4
t-
mont- 'ollo3ing
t-e close o' t-e 'iscal %ear.
@5 C 2C7 in.i!i.(a)s s(bIect to ta# on ca,ita)
gains
%&ception' >eneral !ules Fec &
1. Fale o' s-ares o' stoc1s
return 'iled 3it-in 3* da%s a'ter eac-
transaction and
Dinal consolidated return on or 0e'ore )pril 1
2.Fale o' !eal Propert%
return 'iled 3it-in 3* da%s 'ollo3ing eac- sale
@5 F 0(sban. an. Li"e
1. Pure compensation income earner E separate
return RR 0N.CCC E pure compensation income
earner regardless o' amount o' income not 'ile
IT!.
"4
TAXATON
2. 4ot pure compensation= Koint return
@5 E. &et(rn o" Parent to nc)(.e nco*e o"
Chi).ren
unmarried minor receives income 'rom
propert% received 'rom living parent E included in
t-e parents IT!.
%&ception'
1.Donors tax -as 0een paid
2.Propert% exempt 'rom donors tax
@5 F. Persons En.er Fisabi)ity
/' 5-o ma1es t-e return6
A'
1.dul% aut-oriJed agent
2. dul% aut-oriJed representatives
3. guardians
4.ot-er persons c-arged 3it- t-e care o' -is
person or propert%
0ot- incapacitated taxpa%er and agent 3ill
0e lia0le 'or=
1.erroneous return
2. 'alse or 'raudulent return
@5 < Signat(re Pres(*e. Correct
prima 'acie evidence t-e return 3as actuall%
signed 0% t-e taxpa%er
Section @C Cor,oration &et(rn
go 0ac1 to Fec 1 ) ,22
<enera) &()e' Fec & Dinal Income
Tax
return and credita0le 3it--olding tax return
is 'iled mont-l%
%&ception' Fale o' F-ares o' Ftoc1s
,Fec 1 ) ,222 Fale o' !eal Propert%
!! 71$72**3= Fale o' !eal Propert% su0Kect
to 'inal 3it--olding tax. t-e 0u%er is deemed
t-e agent.
-ale of -hares of -tocBs
/' !easons 'or 'iling Dinal Income tax or Dinal
Consolidated !eturn6
A' !easons=
1- DIT 3-ose actual determination o' gain
or loss
2- in connection 3it- Fec 24 C t-e 0asis o'
t-e tax is not t-e gross income 0ut t-e
net capital gains realiJed.
In connection with -ec DC'
actual determination o' loss or gain
'ile a return 3it-in 3* da%s 'rom date o'
transaction
TAJE NOTE' In all ot-er income su0Kect to DIT.
t-e gains are presumed
NCOME OF MNO&S
/' ;inor 0elo3 1&= 5ill it 0e included in t-e
;inors IT!6
A' it depends
1. income 'rom propert% received 'rom
parents included in parents IT!
%&cept'
a.Donors tax paid
0.Propert% exempt 'rom donors tax
2. income 'rom minors o3n industr%
;inors IT! accomplis-ed 0% guardian or
parents
/' i' t-e individual is exempt 'rom income tax.
can 0e re/uired to 'ile a return6
A' >eneral !ule= 4o
%&ceptions'
1.engaged in trade or 0usinessM or
2.exercise o' pro'ession E Fec 1 ) ,22
SEC @C CO&PO&ATON &ETE&NS
ARe$uirements
Taxpa%er= DC or !DC ,except 4!DC2
IT! Diled= 1. T!IE )4D )CCI!)TE
a. /uarterl% income tax return
0. 'inal or adKusted income tax return
Diled 0%=
1.PresidentM
2.+ice President
3. 8t-er principal o''icer
IT! must 0e s3orn 0% suc- o''icer and t-e
treasurer or assistant treasurer
B Ta&able +ear
1. 'iscalM or 2. calendar
corporation cannot c-ange accounting met-od
emplo%ed 3it-out t-e approval or prior approval
o' t-e commissioner ,Fec 4$2
C Return of Corporation Contemplatory
:issolution or Recognition
1.5it-in 3* da%s a'ter=
a. t-e adoption 0% t-e corporation o' a
resolution or plan 'or its dissolutionM or
0. li/uidation o' t-e 3-ole or an% part o' its
capital stoc1. including a corporation 3-ic-
-as 0een noti'ied o' possi0le involuntar%
dissolution 0% t-e FECM or
"
TAXATON
c. 'or its reorganiJation
2.!ender a correct return veri'ied under oat-
setting 'orm=
a. 'orms o' t-e resolution or planM
0. suc- ot-er in'ormation prescri0ed
3.Fecure a tax clearance 'rom t-e BI! and 'ile it
3it- t-e FEC
4.T-erea'ter. FEC issued a Certi'icate o'
Dissolution or !eorganiJation.
: -ale of -tocBs O ITR
loo1 at t-e previous notes a0out it
Section @= E#tension o" Ti*e to Fi)e &et(rns
/' To 3-om granted6
A' Corporations
Arounds' ;eritorious case
su0Kect to t-e provisions o' Fec " Time
Extension
Section @6 &et(rns or &ecei!ersB Tr(stees
in Bankr(,tcy or Assignees
t-e a'orementioned persons s-all ma1e
returns o' net income as and 'or suc-
corporation in t-e same manner and 'orm as
suc- organiJation is re/uired to ma1e.
Section @@ &et(rns o" <enera) Pro"essiona)
Partnershi,
'ile a return o' its income setting 'ort-
1. items o' gross income and o' deductions
allo3ed 0% t-is title ,Title II E Tax on
Income2
2. 4ames o' partners
3. Taxpa%er identi'ication num0er ,TI42
4. address o' partners
. s-ares o' eac- partners
>PP is exempt 'rom corporate income tax
/' 5-% is t-e >PP o0liged to 'ile a return6
A' to determine t-e s-ares o' eac- partners
Section @A Pay*ent an. Assess*ent o"
nco*e Ta# "or n.i!i.(a)s an. Cor,orations
A (ayment of Ta&
/' 5-o pa%s t-e tax o' tramp vessels6
A' 1.t-e s-ipping agents and or t-e -us0anding
agent
2.in t-eir a0sence. t-e captains t-ereo'
t-ose people are re/uired to 'ile a return and
pa% t-e tax due 0e'ore departure
/' 5-at is t-e e''ect o' 'ailure to 'ile t-e return
and pa% t-e tax due6
A' 1.Bureau o' Customs ma% -old t-e vessel and
prevent its departure until=
a. proo' o' pa%ment o' tax is presentedM or
0. a su''icient 0ond is 'iled to ans3er 'or t-e
tax due.
Installment (ayments
Tax due= more t-an P2.***
Taxpa%er= individuals onl% ,ot-er t-an
corporation2
Elect to pa% t-e tax in t3o ,22 e/ual
installments
a. 1
st
installment= paid at t-e time t-e return
is 'iled
0. 2
nd
installment on or 0e'ore Lul% 1
'ollo3ing t-e close o' t-e calendar %ear
/' 5-at is t-e e''ect o' non pa%ment on t-e date
'ixed6
A' T-e 3-ole amount o' tax unpaid 0ecomes due
and demanda0le toget-er 3it- t-e
delin/uenc% penalties.
(ayment of capital gains ta& '
/= Paid 3-en6
A' on t-e date t-e return is 'iled
Avail e&emption for capital gains'
a. no pa%ments s-all 0e re/uiredM
0. i' %ou 'ail to /uali'% 'or exemption E tax
due s-all immediatel% 0ecome due and
pa%a0le and su0Kect to penalties
c. seller pa%s tax E su0mit intention or proo'
o' intent 3it-in six ,"2 mont-s 'rom t-e
registration o' document trans'erring
/' 3-en is t-e real propert% entitled to re'und6
A' upon veri'ication o' compliance 3it- t-e
re/uirements 'or exemption.
!eport gains on installments under Fec 4( E
tax due 'rom eac- installment pa%ment s-all
0e paid 3it-in 3* da%s 'rom t-e receipt o'
suc- pa%ments.
4o registration o' document trans'erring
real propert%
1. 3it-out a certi'ication 'rom commissioner
or -is dul% aut-oriJe representative t-at
a. trans'er -as 0een reported
0. tax -as 0een paid
""
TAXATON
B Assessment and (ayment of :eficiency Ta&
!eturn is 'iled. t-e commissioner examiner and
assess t-e correct amount o' tax
tax de'icienc% discovered s-all 0e paid upon
notice and demand 'rom t-e commissioner.
0 I9-TA9C%- C)9T%"(*AT%:
1. 'ile t-e return and pa% t-e tax
2. 'ile t-e return 0ut not pa% t-e tax
3. not 'ile t-e return and not pa% t-e tax
Section @? Lithho).ing o" Ta# at So(rce
A ?ithholding of Ta&es
su0Kect to t-e !ules and !egulations t-e
Fection o' Dinance ma% promulgate. upon
recommendation o' commissioner= !e/uire t-e
'iling up o' certain income tax return 0% certain
income pa%ees.
/' Enumeration is all a0out 3-at6
AM Enumer ation a0out Dinal Income Tax
%&cept' >ross Income Tax
1. 2 B ,4!)4ETB2
2. 2& B ,4!DC2
B. 5it--olding o' Credita0le Tax at Fource
T-e Fec. o' Dinance. upon
recommendation o' t-e commissioner
re/uire t-e 3it--olding o' a tax on t-e
items o' income pa%a0le to natural or
Kuridical persons. residing in t-e P-il. 0%
pa%or7corporationB personW t-e same s-all
0e credited against t-e income tax lia0ilit%
o' t-e taxpa%er 'or t-e taxa0le %ear. )t t-e
rate o' not less t-an 1S 0ut not more t-an
32S t-ereo'.
/' 5-at is t-e maximum6
A' ;aximum= no3 3S pursuant to !) (33$
/' 5-en 3ill %ou allo3 3it--olding 0e%ond 1S6
A'
Dor 4IT 1S is t-e maximum
1. DIT E t-e amount o' 3it--olding is totall%
2. >IT 7 e/ual to t-e amount o' tax
Ta& ;ree Covenant Bond
t-e 0onds. mortgages. deeds o' trust or ot-er
similar o0ligations o'
DC or !DC
contains a contract or provision 3-ere t-e
o0ligor ,de0tor2 agrees to pa% t-e tax imposed
-erein
normall% 0et3een t-e creditor and de0tor
/' 5-o pa%s t-e tax6
A' Creditor pa%s t-e tax 0% virtue o' an
agreement t-e de0tor assumes t-e lia0ilit% and
t-e creditor is no3 'ree 'rom pa%ment o' tax
0e'ore it can trans'er t-e propert% to t-e 0u%er.
Section @4 &et(rns an. Pay*ent o" Ta#es
Lithhe). at So(rce
A >uarterly Returns and (ayment of Ta&es
?ithheld at -ource
1. covered 0% a return and paid to=
a. aut-oriJed agent 0an1
0. revenue district o''icer
c. collection agent
d. dul% aut-oriJed treasurer o' cit% or
municipalit% 3-ere 3it--olding agent -as=
1. -is legal residenceM or
2. principal place o' 0usinessM or
3. i' corporation . 3-ere principal
o''ice is located
2.Tax deducted and 3it--eld
-eld as a special 'und in trust 'or t-e
government until paid to t-e collecting o''icers.
3.!eturn 'or 'inal 3it--olding tax
'iled and paid 3it-in 2 da%s 'rom t-e close o'
eac- calendar /uarter
4.!eturn 'or Credita0le 3it--olding taxes
'iled and paid not later t-an last da% o' t-e
mont- 'ollo3ing t-e close o' t-e /uarter during
3-ic- 3it--olding 3as made
. Commissioner. 3it- approval o' Fec Dinance
re/uire 3it--olding agents to pa% or deposit
taxes at more 're/uent intervals 3-ere necessar%
to protect t-e interest o' t-e government
B -tatement of Income (ayments "ade and
Ta&es ?ithheld
5it--olding agent s-all 'urnis- pa%ee a
3ritten statement s-o3ing=
1. income or ot-er pa%ments made 0% 5:)
during suc- /uarter or %ear and
2. amount o' tax deducted and 3it--eld
statement given simultaneousl% upon pa%ment
at t-e re/uest o' t-e pa%ee.
Creditable withholding ta&es
1. corporate pa%ee E not later t-an t-e 2*
t-
da% 'ollo3ing t-e close o' t-e /uarter
2. individuals pa%ee E not later t-an ;arc- 1
o' t-e 'ollo3ing %ear
"$
TAXATON
;inal ?ithholding ta&es
t-e statement s-ould 0e given to t-e pa%ee
on or 0e'ore Lanuar% 31 o' t-e succeeding
%ear.
C Annual Information Return
5it--olding agent s-all su0mit to t-e
commissioner an annual in'ormation return
containing =
1. t-e list o' pa%ees and income re/uired
2. amount o' taxes 3it--eld 'rom eac-
pa%ees
3. ot-er pertinent in'ormation re/uired
Fina) Lithho).ing Ta#' A&
'iled on or 0e'ore Lanuar% 31 o' t-e
succeeding %ear
Creditable withholding ta&' AIR
not later t-an ;arc- 1 o' t-e %ear 'ollo3ing t-e
%ear 'or 3-ic- t-e annual report is 0eing
su0mitted
Commissioner ma% grant 5:) reasona0le
extension o' time to 'urnis- and su0mit t-e
return re/uired -erein.
: Income of Recipient
1. Income upon 3-ic- an% credita0le tax is
re/uired to 0e 3it--eld at source s-all 0e
included in t-e return o' its recipient.
2. t-e excess o' t-e amount o' tax so
3it--eld over t-e tax due on -is return
s-all 0e re'unded
3. income tax collected at source is less t-an
t-e tax due on -is return E di''erence s-all
0e paid
4. all taxes 3it--eld
1. considered trust 'und
2. maintained in separate account
3. not commingled 3it- ot-er 'unds o'
5:)
% Registration with Register of :eeds
4o registration o' an% document
trans'erring real propert% s-all 0e e''ected 0%
t-e !egister o' Deeds unless t-e
commissioner or -is dul% aut-oriJe
representative -as certi'ied t-at t-e trans'er
,12 -as 0een reported and ,22 tax due -as
0een paid
!egister o' Deeds re/uires pa%ment o' tax
0e'ore trans'er o' propert%
Section @3 Ta# on Pro"its Co))ectib)e "ro*
O%ner o" other Persons
Tax imposed under t-is title upon gains. pro'its
and income not 'alling under t-e 'oregoing and
not returned and paid 0% virtue o' t-e 'oregoing
s-all 0e assessed 0% personal return
Intent and (urpose of this Title
1. )ll gains. pro'its and income o' a taxa0le
class s-all 0e c-arged and assessed 3it-
t-e corresponding tax.
2. Faid tax 0e paid 0% t-e o3ner o' t-e
gains. pro'it or income or t-e person
-aving t-e receipt. custod%. control or
disposal o' t-e same
:etermination of )wnership'
determined as o' t-e %ear 'or 3-ic- a return
is re/uired to 0e 'iled
"&
TAXATON
To,ics (n.er Ta# C'
Estate Ta#
Fections &47($ see sec. 1*4 read t-e case o'
Campos !ueda vs. CI! >! N #7132*,42F23&2
Ipon reading sec. & ,B2 read +idal de
!oces vs. Posadas & P-il. 1*&
DiJon vs. Posadas $ P-il 4"
Fec. & ,>2 compare 3it- sec. 1**
sec. & ,:2 compare 3it- sec. &" ,C2
Ipon reading sec. &" see !! 272**3
Ipon reading sec. (4 see ;arcos vs.
Fandigan0a%an 2$3 FC!) 4$
Fec. ($
Fonors Ta# $a%
Fections (&71*4
> and Cumulative met-ods o' 'iling
donors tax returns sections (( ,)2. 1*3 ,)2
,12 and !! 272**3
Fections 1** and & ,(2
&e*e.ies En.er the nterna) &e!en(e
Co.e
Fections 2*2722(
!! 127((
P-oenix vs Comm 14 FC!) 2
Basilan vs. Comm. 21 FC!) 1$
<a0ut vs. DloKo 11 FC!) 2$&
Inion F-ipping vs. Comm 1& FC!) 4$
Comm. vs. T;A 2* FC!) 1&4
Comm. vs. P-ilamli'e 244 FC!)
Comm. vs. C) H BPI 3*1 FC!) 43
BPI vs. Comm. 3"3 FC!) &4*
7Prescription sections 2*3 and 222 o' 4I!C.
sec. 1(4 o' t-e #>C. sec. 2$* o' t-e #>C. sec.
1"*3 o' Tari'' and Customs Code
7Protest sec. 22& o' 4I!C and !! 127(( sec.
1( o' #>C. 22 #>C. sec. 2313 o' Tari'' H
Customs Code and !) $"1
&e*e.ies (n.er $oca) Ta#ation
Fections 12&71(" o' #>C
"(
TAXATON
Proceed 1
st
to sec. 1&" read Bulacan vs.
C) 2(( FC!) 442
T-en proceed to 1&$
T-en to 11
12&
Inder sec. 133 ,e2 read Palma vs.
;alangas 413 FC!) $2
Inder 133 ,-2 read Pililia vs. Petron 1(&
FC!) &2
Inder 133 ,i2 read Dirst :oldings Co. vs.
0atangas Cit% 3** FC!) ""1
Inder 133 ,l2 read Butuan vs. #T8 322
FC!) &*
Inder 13$ read sec. 1(3 o' #>C
;isamis vs. Caga%an de 8ro 1&1 FC!) 3&
!e%es vs. Fan Pa0lo Cit% 3* FC!) 33
;eralco vs. #aguna 3*" FC!) $*
P#DT vs. Davao Cit% 3"3 FC!) 22
Co7relate sec. 13( and 14$ o' #>C
Inder sec. 14* o' t-e #>C see sec. 12 o'
t-e Internal !evenue Code
Inder sec. 1* o' t-e #>C read t-e
'ollo3ing=
P-il. ;atc- vs. Ce0u &1
FC!) ((
)llied T-read vs.
;anila 133 FC!) 33&
Fipocat vs. F-ell 1*
P-il. 12"3
Iloilo Bottles vs. Iloilo
Cit% 1"4 FC!) "*$
&e*e.ies (n.er &ea) Pro,erty Ta#
Fections 1($72(4
Fec. 23
#!T vs. ;anila 342 FC!) "(2
Ce0u Cit% vs. ;actan 2"1 FC!) ""$
&e*e.ies (n.er Fa*i)y C(sto*s $a%
$oca) Ta#ation
&ea) Estate Ta#ation
Tari"" & C(sto*s Co.e
Fpecial Customs Dut% sec. 3*173*4 o' TCC
!egular Customs Dut% sec. 1*4 o' TCC
!) $"31
Co(rt o" Ta# a,,ea)s 2 &A4C=C7
Ga)(e A..e. Ta#
Fections 1*711
!ead !) (33$
!ead )B)T)D) vs Comm. >! 1"&*". Fept.
1. 2**
ESTATE TAX
SECTON 46
T-ere are 3 Fu0Kects 3-ic- uses t-e OestateP
1. Income tax to 0e -eld 0% t-e estate under
Kudicial settlement and during t-e
pendenc% o' Kudicial settlement
2. Estate Tax
3. Inder t-e #ocal >overnment Code7 T-e
real estate Tax
T-ere are 3 trans'er taxes
1. Estate tax ,sec &4 to ($ o' 4I!C2
2. Donors Tax ,sec (&71*4 4I!C2
3. Trans'er o' a realt% to 0e imposed 0%
provinces and cities ,sec 13. #>C2
4ote= 0eginning t-e %ear 1($3. 'ormer Pres. )po
#a1a% ;arcos a0olis-ed in-eritance tax and
dones tax 0% virtue o' PD "(
&ATES OF ESTATE TAX
/' 5-at is t-e 'ormula 'or Estate tax6
A' >ross Estate ,Fec &2
7 Deductions ,Fec &". par a 0 c2
@@@@@@@@@@@@@@@@@@@@@@@@@
4et Estate ,taxa0le estate2
$*
TAXATON
A !ate ,dont include t-e 1
st
2**.**** 'or t-is
is exempt2
@@@@@@@@@@@@@@@@@@@@@@@@@
Taxa0le net estate
7 Tax credit ,i' an%2
@@@@@@@@@@@@@@@@@@@@@@@@
Tax due
SEC. 5>6. %efi)itio)s. 7 Dor purposes o' t-is
Title. t-e terms Pgross estateP and PgiftsP include
real and personal propert%. 3-et-er tangi0le or
intangi0le. or mixed. 3-erever situated=
(rovided, however. T-at 3-ere t-e decedent or
donor 3as a nonresident alien at t-e time o' -is
deat- or donation. as t-e case ma% 0e. -is real
and personal propert% so trans'erred 0ut 3-ic-
are situated outside t-e P-ilippines s-all not 0e
included as part o' -is Pgross estateP or Pgross
giftP' (rovided, further. T-at 'ranc-ise 3-ic-
must 0e exercised in t-e P-ilippinesM s-ares.
o0ligations or 0onds issued 0% an% corporation or
sociedad anonima organiJed or constituted in
t-e P-ilippines in accordance 3it- its la3sM
s-ares. o0ligations or 0onds 0% an% 'oreign
corporation eig-t%7'ive percent ,&S2 o' t-e
0usiness o' 3-ic- is located in t-e P-ilippinesM
s-ares. o0ligations or 0onds issued 0% an%
'oreign corporation i' suc- s-ares. o0ligations or
0onds -ave ac/uired a 0usiness situs in t-e
P-ilippinesM s-ares or rig-ts in an% partners-ip.
0usiness or industr% esta0lis-ed in t-e
P-ilippines. s-all 0e considered as situated in t-e
P-ilippines= (rovided, still further. t-at no tax
s-all 0e collected under t-is Title in respect o'
intangi0le personal propert%= ,a2 i' t-e decedent
at t-e time o' -is deat- or t-e donor at t-e time
o' t-e donation 3as a citiJen and resident o' a
'oreign countr% 3-ic- at t-e time o' -is deat- or
donation did not impose a trans'er tax o' an%
c-aracter. in respect o' intangi0le personal
propert% o' citiJens o' t-e P-ilippines not
residing in t-at 'oreign countr%. or ,02 i' t-e la3s
o' t-e 'oreign countr% o' 3-ic- t-e decedent or
donor 3as a citiJen and resident at t-e time o'
-is deat- or donation allo3s a similar exemption
'rom trans'er or deat- taxes o' ever% c-aracter
or description in respect o' intangi0le personal
propert% o3ned 0% citiJens o' t-e P-ilippines not
residing in t-at 'oreign countr%.
QSec 104 -over)s bot8 estate ta0 a)+
+o)orHs ta0
TAM(A+%R-
ESTATE FONO&DS
Resi+e)t &iti1e) Resi+e)t citi1e)
No)-resi+e)t &iti1e) No)-resi+e)t &iti1e)
Resi+e)t 3lie) Resi+e)t 3lie)
No)-resi+e)t 3lie) No)-resi+e)t 3lie)
%o,estic
&or.oratio)
*orei-)
&or.oratio)s
A &or.oratio) is not capa0le o' natural
deat- t-ere'ore not lia0le to estate tax. 0ut
it ma% enter into a contract o' donation
T-e importance 3-% taxpa%ers s-ould 0e
distinguis-ed=
1. FEC 1*4= 0ot- estate and donors
2. Fec &= 'or estate=
a. decedent is a 9RA for estate
b :onor is a 9RA or ;C
Their liability is with respect to property
deemed located in the (hilippines as when the
properties are located abroad they are e#e*,t.
To t-e rest o' t-e taxpa%ers s-all -ave
lia0ilit% on propert% located inside or outside t-e
P-ilippines
T-e lia0ilit% to pa% estate tax is di''erent 'rom
t-e /uestion on 3-et-er i' %ou 3ere t-e
administrator. do %ou include t-at in t-e estate
tax return=
I' t-e decedent is a 4!). t-e lia0ilit% is
t-at all propert% located in t-e P-ilippines is
su0Kect to estate tax under sec 1*4 and sec &.
Dor t-e inclusion under par d. sec &". includes all
properties located -ere or a0road 'or purposes o'
determining deductions
?Fec 1*4 is relevant ON$; to 4!) and DC.
0ecause t-e% s-all onl% 0e lia0le 'or properties
located 3it-in. 3it- regard to t-ose located
outside, e&empt
STES OF TAXES'
1. SEC 5>6 P QSit(s o" estate an.
FonorDs Ta#Q
2. SEC 6C P RSit(s o" nco*e
Ta#ationQ
3. SEC 5@> 2$<C7 P Sit(s o" $oca)
Ta#ationP
5-at are t-e Intangi0le Personal Pro,erty
deemed located in t-e P-ilippines=
1. F&ANC0SE to 0e exercised in t-e P-ils.M
$1
TAXATON
#9 ) legislative enactment aut-oriJing a
person. natural or Kuridical to engage in
trade or 0usiness. I' it is exercised
outside. it is deemed located outside t-e
P-ilippines.
2. BONFSB NOTES an. OB$<ATONS
issued 0% :omestic Corporations
a. 4o 'urt-er re/uirement. )utomatic
3. BONFSB NOTES an. OB$<ATONS
issued 0% Doreign Corporations
a. at least &S o' t-e 0usiness o' t-e
corporation is located in t-e
P-ilippinesM or
4. suc- ac/uired 0usiness situs in t-e
P-ilippines
. F-ares or rig-ts in a 0usiness. partners-ip
or industr% esta0lis-ed in t-e P-ilippines
EXEMPTONS' ,4!)BDC FEC1*42 !ECIP!8CIT<
1. Doreign la3 o' suc- 'oreign countr% do
not impose transfer ta& on intangi0le
personal propert% o3ned 0% Dilipinos 3-o
are not residing in t-at 'oreign countr%
provided t-at t-e resident is a 'oreigner is
a resident o' t-at 'oreign countr%M RO&Q
2. Doreign la3 o' t-at 'oreigner or 'oreign
corporation allows e&emption on
intangi0le personal propert% o3ned 0%
Dilipinos 3-o are not residing in t-at
'oreign countr% provided t-at t-e resident
is a 'oreigner is a resident o' t-at 'oreign
countr%
BA& /EESTON 533A'
) >erman national donated -is s-ares o'
stoc1s in a 'oreign corporation to -is Dilipina
girl'riend. Fince t-e donor is a 4!). is t-e
donors tax la3 o' t-e P-ilippines applica0le6
,anal%Je t-at o' t-e donor not t-e donee as 3e
do not -ave donees tax no3ada%s2

>E4E!)##<. t-e 4!) is not lia0le 0ecause
s-ares o' stoc1s in a 'oreign corporation is. as a
rule. .ee*e. located a0road. :o3ever. 0% 3a%
o' exception 3-en at least &S o' t-e 0usiness
is located in t-e P-ilippines or it ac/uired
0usiness situs in t-e P-ilippines.
I' t-e 'oreigner is a german national 0ut
-e is residing in t-e Inited Ftates. is t-e
exception applica0le6
NOB t-e >erman national must 0e
residing also in >erman%. and secondl%. it is
re/uired t-at t-e intangi0le personal propert%
o3ned 0% Dilipinos in >erman% is exempt 'rom
trans'er tax in t-at 'oreign countr% and provided
t-at t-e Dilipino is not residing in t-at countr%.
&37P2S R9'%3 K. &=R ( G.R. No. L-1B50$
C>>3 BA&
)ntonio Campos !ueda as administrator
o' t-e estate o' t-e deceased Do]a ;aria
Cerdeira. 'rom t-e decision o' t-e respondent
Collector o' Internal !evenue. assessing against
and demanding 'rom t-e 'ormer t-e sum
P1"1.&$4.( as de'icienc% estate and in-eritance
taxes. including interest and penalties. on t-e
trans'er o' intangi0le personal properties
situated in t-e P-ilippines and 0elonging to said
;aria Cerdeira. a Fpanis- national. 0% reason o'
-er marriage to a Fpanis- citiJen and 3as a
resident o' Tangier. ;orocco 'rom 1(31 up to -er
deat- on Lanuar% 2. 1(. )t t-e time o' -er
demise s-e le't. among ot-ers. intangi0le
personal properties in t-e P-ilippines.
8n Feptem0er 2(. 1(. petitioner 'iled a
provisional estate and in-eritance tax return on
all t-e properties o' t-e late ;aria Cerdeira. 8n
t-e same date. respondent. pending
investigation. issued an assessment 'or state
and in-eritance taxes 3-ic- tax lia0ilities 3ere
paid 0% petitioner. 8n 4ovem0er 1$. 1(. an
amended return 3as 'iled 3-erein intangi0le
personal properties 3it- t-e value o'
P3(".3*&.(* 3ere claimed as exempted 'rom
taxes. 8n 4ovem0er 23. 1(. respondent.
pending investigation. issued anot-er
assessment 'or estate and in-eritance taxes in
t-e amounts o' P2*2.2"2.4* and P2"$.4*2.&4.
respectivel%. or a total o' P4"(."".24 . In a
letter dated Lanuar% 11. 1(". respondent
denied t-e re/uest 'or exemption on t-e ground
t-at t-e la3 o' Tangier is not reciprocal to
Fection 122 o' t-e 4ational Internal !evenue
Code. :ence. respondent demanded t-e
pa%ment o' t-e sums o' P23(.43(.4(
representing de'icienc% estate and in-eritance
taxes including ad valorem penalties.
surc-arges. interests and compromise penalties.
In a letter dated De0ruar% &. 1(". and received
0% respondent on t-e 'ollo3ing da%. petitioner
re/uested 'or t-e reconsideration o' t-e decision
den%ing t-e claim 'or tax exemption o' t-e
intangi0le personal properties and t-e imposition
o' t-e 2S and S ad valorem penalties.
:o3ever. respondent denied re/uest. in -is
letter dated ;a% . 1(" and received 0%
petitioner on ;a% 21. 1(". !espondent
premised t-e denial on t-e grounds t-at t-ere
$2
TAXATON
3as no reciprocit% Q3it- Tangier. 3-ic- 3as
moreoverR a mere principalit%. not a 'oreign
countr%. Conse/uentl%. respondent demanded
t-e pa%ment o' t-e sums o' P$3.&1.21 and
P&&.*23.$4 respectivel%. or a total o'
P1"1.&$4.( as de'icienc% estate and in-eritance
taxes including surc-arges. interests and
compromise penalties.
IFFIE= T-e principal /uestion as noted dealt 3it-
t-e reciprocit% aspect as 3ell as t-e insisting 0%
t-e Collector o' Internal !evenue t-at Tangier
3as not a 'oreign countr% 3it-in t-e meaning o'
Fection 122.
!uling= Contention o' t-e Collector o' Internal
!evenue. t-e appealed decision states= ^In 'ine.
3e 0elieve. and so -old. t-at t-e expression
^'oreign countr%^. used in t-e last proviso o'
Fection 122 o' t-e 4ational Internal !evenue
Code. re'ers to a government o' t-at 'oreign
po3er 3-ic-. alt-oug- not an international
person in t-e sense o' international la3. does not
impose trans'er or deat- upon intangi0le person
properties o' our citiJens not residing t-erein. or
3-ose la3 allo3s a similar exemption 'rom suc-
taxes. Court o' Tax )ppeals admitted evidence
su0mitted 0% t-e administrator petitioner
)ntonio Campos !ueda. consisting o' ex-i0its o'
la3s o' Tangier to t-e e''ect t-at ^t-e trans'ers
0% reason o' deat- o' mova0le properties.
corporeal or incorporeal. including 'urniture and
personal e''ects as 3ell as o' securities. 0onds.
s-ares. 3ere not su0Kect. on t-at date and in
said Jone. to t-e pa%ment o' an% deat- tax.
3-atever mig-t -ave 0een t-e nationalit% o' t-e
deceased or -is -eirs and legatees.^
It is. t-ere'ore. not necessar% t-at Tangier
s-ould -ave 0een recogniJed 0% our >overnment
order to entitle t-e petitioner to t-e exemption
0ene'its o' t-e proviso o' Fection 122 o' our Tax
Code.
SEC 4@' <ross estate
gross estate include real and personal
propert%. 3-et-er tangi0le or intangi0le. or
mixed. 3-erever situated ,Sec 5>67
9RA' :ecedent @ :onor O property situated
outside of (hilippines not included on the
gross estate
/' Tax credits under P-ilippine Estate tax6
1. Estate paid to a 'oreign countr% ,sec 0. par E2
2. T-e input tax under +)T ,sec 11*. par 02
3. Tax credit against an% internal revenue tax
,sec2*42
/' In case o' Contro!ersy. 3-et-er t-e
applica0le tax is estate tax or donors tax. 3-% is
it t-at t-e government al3a%s insists t-e
pa%ment o' estate tax and t-e taxpa%er al3a%s
insist on t-e Donors tax6
T-e rate o' t-e estate tax is -ig-er t-an t-e
donors tax ,su0K. to certain exceptions2
>ross estate in sec & is #84>E! t-at t-e
gross gi't in sec (& par 0
G= 5-% is it t-at t-e gross gi't provided 'or in a
s-ort par and 3-% t-e gross estate provided in a
ver% long par6
T-ere are 3 reasons=
1. I' t-e propert% is trans'erred )DTE! t-e
deat- o' t-e trans'eror regardless o' an%
surrounding circumstance. t-e applica0le
Trans'er tax s-all al3a%s 0e OEFT)TE
T)AP. 0ut i' trans'erred DI!I4> T:E
#IDETI;E o' t-e trans'eror. 3e D8 48T
)#5)<F appl% D848!s T)A
2. 5e C)448T appl% t-e donors tax made
)DTE! t-e deat- o' t-e trans'eror. t-e
rule is )BF8#ITE. EFT)TE tax s-all 0e
applied
Section 4@ <ross Estate 2inc)(sion7
I. A:ecedentIs interest /-%C 54 par a1
T-e la3 did not sa% decedents o%nershi,.
t-ere'ore t-is does not onl% include properties
o3ned 0% t-e decedent at t-e time o' -is deat-.
0ut also it ma% include propert% 0% 3-ic- t-e
decedent -as onl% interest on t-e propert%
%&ample'
CONT&ACT OF ESEF&ECT
I' t-e contract o' usu'ruct is 'or a 'ixed period o'
time. lets sa% 'or %ears. and a'ter 2 %ears. t-e
usu'ructur% died. Is t-e contract o' Isu'ruct
terminated 0% t-e deat- o' t-e usu'ructur%6
. 48. it is 'or a 'ixed period o' time and t-e
usu'ructur% died onl% a'ter 2 %ears 3-en t-e
contract is 'or . :ence t-e use o' t-e
propert% s-all 0e in-erited 0% t-e -eirs o'
t-e usu'ructor%
. 4ormall%. upon t-e deat- o' t-e na1ed
o3ner or t-e usu'ructur%. t-e contract o'
usu'ruct is terminated2
$3
TAXATON
. I' t-e usu'ructur% dies. t-e merger o' t-e
usu'ructur% in t-e na1ed o3ner is EAE;PT
,Fec &$ par a2
I4C#IDEF=
propert%
,12 o3ned at t-e time o' deat- and
,22 propert% not o3ned at t-e time o' deat-
/' is t-ere a con'lict 0et3een Fec && a and Fec
&$ a6 :o3 do %ou reconcile6
A' 4o con'lict
1.Fection &$ a contemplates a situation
3-ere t-e usu'ruct is terminated 0% t-e
deat- o' t-e part%.
2.Fection &&a contemplates a usu'ruct 'or a
'ixed period and t-e contract still exist.
Contract o' lease included
/' :o3 do %ou determine t-e value o' usu'ruct6
A' Fec. && a provides to determine t-e value o'
t-e rig-t o' usu'ruct. ta1e into account the
probable life of the beneficiary
/ra)sfer +uri)- t8e life ti,e
4ormall% Donors tax
8owever there are e&ceptions'
1.trans'er in contemplation o' deat- ,&B2
2.revoca0le trans'er ,& C2
3.trans'er 'or insu''icient consideration
. /R3NS*'R =N &2N/'7PL3/=2N 2*
%'3/5 (S'& C5 .ar b$
/' 5-at are trans'ers deemed in contemplation
o' deat-6
)= B% virtue o' Fupreme Court decisionM and
B% t-e Tax Code 3-en propert% 3as
trans'erred during t-e li'etime 0ut t-e decedent=
a. retains possession or receive
income or 'ruits o' propert%M or
0. retains t-e rig-t to designate
persons 3-o 3ill possess t-e
propert% or t-e rig-t to receive
'ruits or income
c. !evoca0le Trans'ers
FIP!E;E C8I!T DECIFI84=
Roces case<
D= during li'etime. t-e 'ollo3ing document 3ere
instituted or executed simultaneousl%
1.3ill and 2. donation
T-e -eirs insisted to pa% Donors tax. Posados
t-e collector tried to collect in-eritance tax.
uni$ue thing' Donees 3ere also t-e -eirs in t-e
last 3ill and testament
Donees 3anted to pa% donors tax 0ecause it is
al3a%s lo3er t-an t-e estate tax except 3-en
t-e donee is a stranger
:= t-is is a trans'er in contemplation o' deat-
%i1o) &ase<
D= ) Deed o' Donation 3as executed 0% DiJon.
DiJon died several da%s t-erea'ter and t-e
son is claiming t-at t-e tax t-at s-ould 0e
imposed is t-e donors taxB
son claims Donors tax
:=Trans'ers in contemplation o' deat-
2. revocable tra)sfers are included in t-e
gross estate
Reason' t-e decedent retains tremendous
po3er and control over t-e propert%

2. =rrevocable tra)sfers are not included in
t-e gross estate= exempt
Reason' t-e decedent losses control over t-e
propert%
9otice 9ot Re$uired because the person has the
control over the property
: (roperty passing under general power of
appointment .CC3 BAR
I' %ou read t-e code. it is similar to Fec & par.
B. -o3ever t-e one to 0e understood -ere is t-at
part o' t-e title Ogeneral po3er o' appointment
Fame 3it- 'idei commissar% su0stitution
3 parties=
1.testator B decedent
2.1
st
-eir E upon deat-. -e 0eing t-e
'iduciar%. it is exempt ,sec&$ par 02
3.2
nd
-eir

G= 5-% exempt6
)= T-e 'irst -eir as 'iduciar% did not c-oose as
3-o 3ill 0e t-e second -eir ,'ideicomissar%2
since it 3as t-e testator 3-o c-ose t-e latter
Inder IF #a3s=
T-e 1
st
-eir died and propert% 3ould 0e
trans'erred to t-e second -eir
T-e estate o' t-e 1
st
-eir is lia0le 'or estate
tax 'or t-e reason t-at -e is t-e one 3-o
c-ooses t-e 2
nd
-eir
$4
TAXATON
TA=% 9)T%' To determine 3-et-er included in
Estate or not. 1no3 3-o -as t-e c-oice to
designate t-e 2
nd
-eir=
i' decedent instructs t-e 1
st
-eir t-at -e can
trans'er t-e propert% to 3-omever -e 3ants
included in gross estate
1
st
-eir c-oice E included in gross estate
% (roceeds of *ife Insurance
Under income ta&, this is an e&clusion /sec 0.
par b2 R b.1 sub#ect to certain re$uirements If
upon the death of the testator insurance has
been paid it is e&empt
1. T-e decedent insured -imsel'M and
2. Bene'iciar% is t-e estate represented 0% t-e
executor or administrator 3-et-er revoca0le
or irrevoca0le=
included in gross estate 3-et-er
designation is revoca0le or irrevoca0le
Bene'iciar% is 3
rd
person or t-ose ot-er t-an t-e
estate=
revoca0le included in t-e gross estate
irrevoca0le not included in t-e gross estate
?'or t-e same reason o' control over t-e
proceeds
G= )re t-e re/uirements t-e same as income tax
under sec 32 01 H 026
)= 4o. B1 re/uires onl% one re/uirement to 0e
exempt 'rom I4C8;E tax= t is ,ayab)e (,on
the .eath regar.)ess o" %ho is the
bene"iciaryB re!ocab)e or irre!ocab)eB by
insta))*ent or a*orti1ation7B %ith
PR2K=S2, i" there is an agree*ent as to the
=N/'R'S/B then that interest is no )onger
e#e*,t.
%MA"(*%'
T-e proceeds o' li'e insurance is P-p1;.
and t-e insurer and t-e insured agreed t-at
t-ere 3ill 0e pa%ment o' interest o' "T. T-e "T
interest is no longer exempt as P!8CEEDF and
I4TE!EFT are DIDDE!E4T
In Sec =C ,ar BC. insurance paid a'ter a 'ixed
num0er o' time. sa% 1* %ears. and a'ter t-at 1*
%ears. t-e insured is still alive and 1ic1ing. -e
3as paid 1;. Is t-e entire amount o' 1; exempt
'rom income tax6
NOB the entire a*o(nt is not e#e*,t.
1. Determine 'irst t-e act(a) premium paid
during t-e existence o' t-e contract. let us
sa% P-p1**T 3as paid as premium and t-e
P-p(**T 3as t-e e/uivalent o' t-e return.
2. T-e 1**T is t-e one exempt and t-e (**T
is t-e one su0Kect to income tax ,sec 32 par
)&2
Is it su0Kect to GAT:
T-e one su0Kect to +)T is t-e 4847#IDE
Insurance except C!8P Insurance ,Fec 1*&. Par
). ;iddle part2
G= 5-at a0out #IDE6
It is not su0Kect to +)T since it is alread%
su0Kect to percentage tax 3-ic- is in t-e
nature o' a BIFI4EFF T)A under sec 5C=.
B)FIF= t-e (rinciple = I' one is su0Kect to
percentage tax t-en. as a general rule. it is
no longer su0Kect to +)T or +ice +ersa
; (rior Interest 9 irrelevant provision
T-e one re'erred to in t-is paragrap- are t-e
items provided 'or in Fec & par B ,trans'er in
contemplation o' deat-2. par C ,revoca0le
trans'er2. par E ,proceeds o' li'e Insurance2. as
to 3-et-er it -appened 0e'ore or a'ter t-e
codi'icationBe''ectivit% o' t-e code 'or t-e 'irst
time in 1(&(.
A Transfer for insufficient consideration
/' Fimilar or in connection 3it- Fec 1** ,Donors
tax2 can %ou appl% t-e t3o ,22 provisions
simultaneousl%6
A' 4o. alternative application. one or t-e ot-er
0ut not 0ot- ,Estate 2R Donors2 depending
upon t-e time o' trans'er 8! motive o' t-e
trans'eror=
estate tax
1. 5-en motive o' t-e trans'eror 'or
trans'erring t-e propert% 'or #EFF t-an
t-e ade/uate consideration. it F:)## 0e
0ecause o' impending deat- or ma%0e
due to a terminal disease
Donors tax
2. 5-en t-e motive 'or trans'er is
0ecause o' generosity or kin.ness.
0ecause t-e b(yer or trans"eree is a
re)ati!e or "rien.

$
TAXATON
0OLEGE&B t-e code provides t-at in case o'
bo)a fi+e sale 'or an )DEGI)TE and DI##
consideration in mone% or mone%s 3ort-. t-e
same s-all not 0e considered as Trans'er 'or
inade/uate consideration
%&ample' ) parcel o' land in metro manila 3as
sold 0% t-e o3ner 'or a selling price 3-ic- is ver%
muc- lo3er t-an t-e ade/uate 'air mar1et value.
3it- t-e D;+ o' 1; 0ut it 3as sold 'or P-p"**T
0ecause t-e 0u%er is a relative. Is it su0Kect to
trans'er tax6
)= T-e 'acts o' t-e /uestion are ver% clear. T-ere
is no need to /uali'%. Due to t-e relation o' t-e
parties. it 3as trans'erred 'or less t-an t-e
ade/uate consideration.
Fec 1** sa%s t-at D848!s Tax is applied i' t-e
real propert% is ot-er t-an t-e one mentioned is
Fec 24 par D1 ,real propert% located in t-e
P-ilippines 3-ic- is a CA(ITA* A--%T2. I' !eal
Deed o' Donation 3as executed 7Donors Tax 3ill
appl%.
5-%6
It is not su0Kect to Donors Tax 0ecause t-e
applica0le tax is t-e DIT 3-ic- is "S erroneousl%
1no3n as capital gains tax
5-at does Fec 24. par D1 sa%6
T-e tax applica0le 'or t-e sale. 0arter or
exc-ange. and ot-er modes o' disposition ,3-ic-
includes Trans'er 'or #ess t-an t-e )de/uate
Consideration2
T-e 0asis 0eing t-e >!8FF FE##I4>
P!ICE or t-e D)I! ;)!TET +)#IE. 3-ic-ever is
:I>:E!
/' 5ill %our ans3er 0e t-e same i' F-ares 8'
Ftoc1s are sold6
A' 4o. ans3er not t-e same. F-ares 8' Ftoc1s is
not t-e t%pe o' propert% contemplated in Fec
24 D ,12
in t-is case. t-e amount 0% 3-ic- t-e D;+
o' prop exceeds t-e value o' t-e
consideration. it s-all 0e deemed a gi't and
included in t-e computation o' t-e gross gi't=
su0Kect to Donors Tax
/' 5-at is t-e su0Kect matter in & >6
A' paragrap-s & B. & C. & D
-ale in good faith as a defense'
1.under Fection 1** is not a de'ense as t-e
p-rase Oexcept in a 0ona 'ide saleP
2. under Fection & >. it is a de'ense
8 Capital of -urviving -pouse
correlate 3it- Fec &" C
0ot- spea1 o' legall% married individual onl%
5-at are t-ese properties6
pertains to t-e separate propert% o' spouse
3-o survived
#et us ma1e a correction=
capital -ere is used in its generic sense. to
include t-e parap-ernal propert% o' t-e 3i'e
surviving spouse ma% 0e man or 3oman ,di
lagging namamata% %ung 3i'e. Paminsan
minsan lang.2
Is t-e OcapitalP or Oparap-ernalP propert% or
Os-are in t-e marriage settlementP. as t-e case
ma% 0e. su0Kect to EFT)TE T)A6
)= 4o. in all cases 0ecause under sec & par -.
t-e separate propert% o' t-e surviving spouse.
t-e la3 sa%s. it is not to 0e included in t-e gross
estate and t-ere'ore. EAE;PT.
5-at a0out Section 4A ,ar c:
T-at t-e s-are o' t-e surviving spouse in t-e
conKugal partners-ip ,*S2 s-ould 0e
included 0ut not su0Kect to estate tax
0ecause it is a deduction
5-% s-ould 3e include t-e s-are o' t-e
surviving spouse t-en deduct it6
T-e relevance lies in determining 3-et-er or
not it complies 3it- t-e re/uirements under
section &( and section (*=
1. 5ritten notice o' deat- is re/uired
3-en t-e >!8FF EFT)TE exceeds
P-p2*T. 8!. 3-en TRA9-;%R is sub#ect
to ta& /-ec 531G
2. Estate Tax return
d. determine 3-et-er gross value is
at least P2**.*** ,Fec (*2M or
e. regardless o' t-e value o' t-e
estate. it consist o' registered or
registra0le propert% suc- as real
propert%. motor ve-icle. s-ares o'
stoc1 or ot-er similar propert%
$"
TAXATON
3. Durt-er. i' gross value is at least 2;.
t-e return 3ill 0e supported 0% a
statement certi'ied 0% a CP).
SECTON 4A
/' 5-o are t-e taxpa%ers under &" )6
A' 1.!C
2.4!C
3.!)
/' 5-o is t-e taxpa%er under &" B6
A' 4!)
/' 5-% do 3e need to 1no3 t-is6
A' 4!) cannot avail o' t-e 'ollo3ing deductions=
1.'amil% income
2.standard deduction
3.-ospitaliJation
4.retirement pa% under !) 4(1$
A %e+uctio)s 3lloGe+ to t8e 'state of a
&iti1e) or Resi+e)t
)1. Expenses. $osses. nde0tedness and Taxes
,E#IT2
a$ *9N'R3L '?P'NS'S (.ar 31 a$
1.)ctual Duneral Expenses ,die no3 pa%
later2M or
2.amount e/ual to S o' gross estate
appl% 3-ic-ever is lo3er
*imitation'
a2 )mount e/ual to S o' gross estate
s-ould not exceed P2**.*** ,0asis is t-e
gross value2
&& C+C>>=
Ftates t-ose expenses incurred 0e'ore t-e
0urial
Fets limitation as to amount
4ot to exceed P-p2**T as to t-e value
meaning 3it-out deductions and in 48 case
e&ceed S o' t-e gross estate value
G= Fuppose it is onl% P-p1T. is t-ere an
instance 3-erein it 3ould not 0e allo3ed6
)= <EF. i' t-e amount exceeds S o' t-e gross
estate value
G= 5-% is t-e gross estate o' t-e )0solute
Communit% 3ould 0e included in t-e 4est Estate
t-en to 0e deducted6
)= To determine t-e gross estate. T-e
importance isM
a. to determine t-e limitation o' t-e
'uneral expense 0ecause t-e 0asis is
not t-e net estate 0ut t-e gross value
o' t-e estateM
0. to determine on 3-et-er t-e -eirs o'
t-e decedent 3ill ma1e a 3ritten
notice o' t-e deat- o' t-e person to
t-e BI! ,sec &(2 t-at it s-ould 0e at
least 3it- a gross value o' 2*.***
c. 'or purposes o' 'iling t-e return. t-e
genera) r()e t-at t-e gross value is
at least 2**.*** ,sec (*2
d. I' t-e gross value o' t-e estate is at
least 2;. t-e certi'ication issued 0% a
CP) ,sec (*2
<oing Back to && C+C>>=
T-e actual 'uneral expense s-all include=
a. purc-asors mourning apparel ,0lac1
clot-es2
0. Dood and drin1s
c. Pu0lication 'or deat- notices
d. Telecommunication expenses incurred
in'orming relatives o' t-e deceasedM
e. Cost o' 0urial plot. tom0stones.
monument or mausoleum 0ut not t-eir
up1eep ,onl% to t-e value 3-ere -e is
0uried2
'. Interment or cremation c-arges
g. )nd ot-er necessar% expenses incurred
'or t-e purpose o' t-e rites and
ceremonies incident to t-e
intermentB0urial
Feath anni!ersary and t-ose incurred a'ter
t-e 0urial. as it necessaril% 'ollo3s, s-all not 0e
included as a deduction
b$ :9%=&=3L '?P'NS'S (.ar 31 b$
9 Bot- t-e 4I!C and !! 272**3 provides Kudicial
expenses as deductions ,0ot- testamentar% and
intestate2
9 no limitation as to t-e amount o' t-e expense
G= 5-at a0out i' it is e#tra+I(.icia) sett)e*ent
o' estate. are t-ese also deducti0le6
3< I'S, alt-oug- t-e 4I!C and !! 272**3 is
silent. t-e FC. in t-e case o' Pa;o)ar vs
&o,,issio)er (BC S ###$, considered extra7
Kudicial settlement as deducti0le.
Pa;o)ar vs &o,,issio)er (BC S ###$
$$
TAXATON
D= Pedro PaKonar. a mem0er o' t-e P-ilippine
Fcout. Bataan Contingent. during t-e second
5orld 5ar. 3as a part o' t-e in'amous Deat-
;arc- 0% reason o' 3-ic- -e su''ered s-oc1 and
0ecame insane. :is sister Lose'ina PaKonar
0ecame t-e guardian over -is person. 3-ile -is
propert% 3as placed under t-e guardians-ip o'
t-e P-ilippine 4ational Ban1 ,P4B2 0% t-e !TC31.
in Fpecial Proceedings. :e died on Lanuar% 1*.
1(&&. :e 3as survived 0% -is t3o 0rot-ers Isidro
and >regorio. -is sister Lose'ina. nep-e3s
Concordio Landog and ;ario Landog and niece
Conc-ita Landog.
8n ;a% 11. 1(&&. t-e P4B 'iled an accounting o'
t-e decedent_s propert% under guardians-ip
valued at P3.*3$."$2.*(. :o3ever. t-e P4B did
not 'ile an estate tax return. instead it advised
Pedro PaKonar_s -eirs to execute an extraKudicial
settlement and to pa% t-e taxes on -is estate.
8n )pril . 1(&&. pursuant to t-e assessment 0%
t-e Bureau o' Internal !evenue ,BI!2. t-e estate
o' Pedro PaKonar paid taxes in t-e amount o'
P2.$.
8n Decem0er 1(. 1(&&. pursuant to a second
assessment 0% t-e BI! 'or de'icienc% estate tax
in t-e amount o' P1.2$.$(*.(&. Lose'ina
PaKonar. in -er capacit% as administratrix 'iled a
protest on Lanuar% 11. 1(&( 3it- t-e BI! pra%ing
t-at t-e estate tax pa%ment in t-e amount o'
P1.2$.$(*.(&. or at least some portion o' it. 0e
returned to t-e -eirs. :o3ever. on )ugust 1.
1(&(. 3it-out 3aiting 'or -er protest to 0e
resolved 0% t-e BI!. PaKonar 'iled a petition 'or
revie3 3it- t-e CT). pra%ing 'or t-e re'und o'
P1.2$.$(*.(&. or in t-e alternative.
P&4*.2*2.*". as erroneousl% paid estate tax.
8n ;a% ". 1((3. t-e CT) ordered t-e
Commissioner o' Internal !evenue to re'und
Lose'ina PaKonar t-e amount o' P22.&.(.
representing erroneousl% paid estate tax 'or t-e
%ear 1(&&. )mong t-e deductions 'rom t-e gross
estate allo3ed 0% t-e CT) 3ere t-e amounts o'
P"*.$3 ,notarial 'ee 'or t-e ExtraKudicial
Fettlemen2t and P*.*** ,attorne%_s 'ees in
Fpecial Proceedings 'or guardians-ip2.
8n Lune 1. 1((3. t-e CI! 'iled a motion 'or
reconsideration. t-at t-e notarial 'ee 'or t-e
ExtraKudicial Fettlement and t-e attorne%_s 'ees
in t-e guardians-ip proceedings are not
deducti0le expenses.
8n Lune $. 1((4. t-e CT) issued t-e assailed
!esolution ordering t-e CI! to re'und PaKonar..
t-e amount o' P$".*2.42 representing
erroneousl% paid estate tax 'or t-e %ear 1(&&.
t-e validit% o' t-e deduction o' t-e notarial 'ee
'or t-e ExtraKudicial Fettlement and t-e
attorne%_s 'ees in t-e guardians-ip proceedings.
CI! 'iled a petition 'or revie3. 3-ere on
Decem0er 21. 1((. t-e Court o' )ppeals denied
t-e Commissioner_s petition
Issue= 5-et-er or not extra7Kudicial expenses
ma% 0e allo3ed as a deduction
:= T-is la3 -as 0een copied 'rom I.F. In IF.
expenses to 0e claimed as a deduction 0ot-
Kudicial and extra Kudicial expenses. T-e notarial
'ee paid 'or t-e extraKudicial settlement is clearl%
a deducti0le expense since suc- settlement
e''ected a distri0ution o' Pedro PaKonar_s estate
to -is la3'ul -eirs. Fimilarl%. t-e attorne%_s 'ees
paid to P4B 'or acting as t-e guardian o' Pedro
PaKonar_s propert% during -is li'etime s-ould also
0e considered as a deducti0le administration
expense. P4B provided a detailed accounting o'
decedent_s propert% and gave advice as to t-e
proper settlement o' t-e latter_s estate. acts
3-ic- contri0uted to3ards t-e collection o'
decedent_s assets and t-e su0se/uent
settlement o' t-e estate. T-e Decem0er 21.
1(( Decision o' t-e Court o' )ppeals is
)DDI!;ED.
&. &lai,s a-ai)st t8e estate (.ar 31 c$
T-is means t-at t-e decedent -ere is t-e
de0tor or t-e Estate is t-e de0tor
G= I' t-e decedent is t-e de0tor. is t-e executor
or administrator allo3ed to claim t-e
inde0tedness as a deduction6
)= <EF. provided
Re$uirements'
1. include t-e amount o' inded0tedness in
t-e gross estateM
2. at t-e time t-e inde0tedness 3as incurred
t-e de0t instrument 3as dul% notariJedM
3. loan contracted 3it-in 3 da%s 0e'ore
deat-. t-e administrator or executor s-all
su0mit a statement s-o3ing -o3 t-e
proceeds o' t-e loan 3as dispensed
4. !! 272**3 ,additional !e/uirement2
T-e creditor. 3-et-er a natural or Kuridical
person. s-ould execute a certi'ication or an
a''idavit to t-e e''ect t-at t-e decedent is
t-e de0tor
$&
TAXATON
I' creditor is a C8!P8!)TI84. all o''icers o'
t-e corporation must sign
+$ &lai,s a-ai)st i)solve)t .erso) (.ar 31
+$
T-e decedentBEstate is t-e creditor
!! 272**3
Re$uirement'
t-e onl% re/uirement is t-at t-e ,onl%2
amount o' loan is included in t-e gross estate
notariJation and certi'ication not re/uired
e$. 9).ai+ 7ort-a-e, ta0es a)+ losses (.ar
31 e$

3 expenses provided =
1. ;ortgage Inde0tedness
2. Taxes 3-ic- accrued 0e'ore t-e deat- o'
decedent
3. #oss 0% virtue o' natural calamities
48TE=
To 0e recogniJed as a deduction must 'irst
0e included in t-e gross estate
I' t-e loan is an accommodation loan. it must
0e included as a receiva0le o' t-e estate
Inpaid mortgage
1. +alue o' t-e decedents interest in t-e
propert% is undiminis-ed 0% suc- mortgageM
2. Included in t-e value o' t-e gross estateM
Illustration'
1 million D;+ 0ut mortgage is onl% "**.*** %ou
include 1 million
/' In unpaid mortgage 3-o is t-e mortgagor6
decedent mortgagor7de0tor 3-ere until -e
died. -e 'ailed to pa% t-e mortgage
inded0tedness
G= is it an allo3a0le deduction6
)= <EF. provided t-at t-e amount o' t-e value o'
t-e propert% is included in t-e >ross Estate
G= ) land valued at 1; as mortgage 'or *T.
)= In order to 0e a deduction to 0e allo3ed=
1. Include t-e value o' t-e propert%
undiminis-edM
2. Do not deduct t-e value o' t-e mortgage
:ence. t-e entire amount o' 1; s-ould 0e
included
Taxes
G= Is real estate tax a deduction6
)= <es. it accrued prior to t-e decedents deat-
/= t-e taxes re'erred to in t-ese section are
t-ose 3-ic- accrued prior to t-e deat- o' t-e
decedent. Is estate tax included6
)= 48. Estate tax accrues upon t-e deat- o' t-e
decedent. It 3ill onl% 0e allo3ed i' it accrued
prior to t-e decedents deat-.
#osses
B% virtue o' natural calamit% to 0e deducti0le=
1. losses incurred during t-e settlement o'
t-e estateM
2. arising 'rom 'ire. storms. s-ip3rec1 or
ot-er casualties. or 'rom ro00er%. t-e't or
em0eJJlement
3. Fuc- loss is 48T compensated 0%
insuranceM
4. )t t-e time o' t-e 'iling. suc- losses -ave
0een claimed as a deduction 'or income
tax purposes ,sec 34 par d2M
. Fuc- losses 3ere incurred not later t-an
t-e last da% o' pa%ment o' t-e estate tax
,sec (1)2. six mont-s a'ter deat- o' t-e
decedent.
3. Pro.erty Previously /a0e+ (.ar 3$
/' Lhy is this the *ost "a!orite in the BA&:
A' 4ecause it covers bot8 'S/3/' a)+
%2N2RHs /a0
Partiall% 1no3n as O+anis-ing Deduction
!eturnP
)pplica0le to 0ot- Estate and Donors Tax
)pplies to natural persons
)c/uires propert% 0% virtue o' In-eritance or
donation
)'ter ac/uisition. t-at person 3-o ac/uired
t-e propert% died
a. 5it-in %ears E 2*S deduction o' t-e
value o' propert%
0. 5it-in 4 %ears E 4*S
c. 5it-in 3 %ears E "*S
d. 5it-in 2 %ears E &*S
e. 5it-in 1 %ear E 1**S
/' 5-at i' ac/uired t-roug- purc-ase or an%
ot-er modes o' ac/uisition ot-er t-an donation
or in-eritance6
A' 4ot appl%. t-e propert% must 0e ac/uired 0%
in-eritance or donation
2.Estate tax or Donors tax alread% paid 0% t-e
Estate o' t-e Decedent ,1
st
par2
$(
TAXATON
3.)n% person 3-o died 3it-in 'ive ,2 %ears
prior to t-e deat- o' t-e decedent
%&ample' A. died in Lanuar% 2**&. Prior to -is
deat-. -e received a propert% 'rom < in ;arc- o'
2**$. :o3 muc- 3ill 0e deducted 'rom t-e gross
estate6
)= T-e amount 3-ic- can 0e deducted 'rom t-e
gross estate is 1**S o' t-e value o' t-e propert%
received 0% A. Fince A died 3it-in 1 %ear 'rom
t-e time t-e propert% 3as donated. 'rom t-e
ta0le 1**S o' t-e propert% can 0e claimed 0%
t-e executor as vanis-ing deduction. provided.
t-at t-e donors tax or estate tax imposed 0% t-e
code 3as paid 'or t-e trans'er.

B)! GIEFTI84=
Fuppose t-e person 3-o died 3it-in 1 died and it
3as in-erited 0% t-e son. suppose t-e son also
died 3it-in a %ear or 2 %ears. s-ould 3e still
appl% t-e Ovanis-ing deductionP
)= 4o more. ,last Fec &" par )22
/' 5-at are t-e amounts6
A' Prior Decedent died 3it-in=
1. %ears E 2*S
2. 4%ears E 4*S
3. 3 %ears 7"*S
4. 2 %ears E &*S
. 1 %ear 71**S
/' Fuppose t-e person died 3it-in 1 %ear and it
3as in-erited 0% son. suppose t-e son also
died 3it-in 1 %ear or ma% 0e 2 %ears. s-ould
3e appl% t-e vanis-ing deductions6
A' 4o more ,last par Fec &" )22
A=. Trans"er to the <o!DtB Po)itica)
S(b.i!isionB inc)(.ing Agencies an.
nstr(*enta)ities E#c)(si!e)y "or PEB$C
PE&POSE 2PA& A=7
Important is t-e p-rase Opu0lic purposeP
Compare to sec &$ par d
Sec 4A Par A= Sec 4? Par .
Exclusive 'or pu0lic
purpose
Focial 3el'are
C-arita0le institution
Cultural Institution
777not-ing 'ollo3s777 4ot more t-an 3*S
s-all 0e used 'or
administrative
purposes
amount o' all 0e/uest. legacies. devises or
trans'ers
Recipient' government or an% political
su0division
exclusivel% 'or pu0lic purpose
Ta1e 4ote= 3*S o' 3-ic- not used 'or
administrative purpose is not a re/uirement
34. *37=LI 527' (.ar 34$
amount e/uivalent to t-e current D;+ o' t-e
Damil% :ome o' decedent.
*imit' D;+ s-ould not exceed 1 million
ot-er3ise t-e excess 3ill 0e su0Kect to estate
tax.
>' I' t-e -ouse is onl% $**T
A' 84#< up to $**T s-all 0e considered a
deduction

G= I' it is 1.";6
)= ;aximum o' 1; s-all 0e considered a
deduction. t-e excess s-all 0e su0Kect to estate
tax
RR .N.CC0
Re$uirements'
1. Person is legall% married
a. >eneral !ule= i' single not allo3ed to
claim
0. Except= i' -ead o' t-e 'amil%
2. Damil% :ome actual residence o' t-e
decedent
3. Certi'ication o' Baranga% Captain o' localit%
4. T-e amount o' t-e 'amil% -ome must 0e
included in t-e estate
G= Dilipino 3-o is a permanent resident o' t-e
Inited Ftates. 3-en -e died. t-e administrator
argued t-at under Fec &" par ). it includes
t-ere. non7resident citiJen. is -e allo3ed6
)= 48. T-e 'amil% -ome must 0e t-e )CTI)#
residence o' t-e decedent ,!! 272**32 an not
onl% t-at. generall%. -e must 0e #E>)##<
married or a single person 3-o is t-e -ead o' t-e
'amil%
G= Is t-ere con'lict 3it- 4!)6
)= 4!) in !! 272**3 is speci'ic. Fec &" par )1
35. S/3N%3R% %'%9&/=2NS (.ar 35$
Don not con'use 3it- optional standard
deduction ,sec 34 par #2 as t-at pertain to
income taxation
Ip to t-e extent o' 1;
&*
TAXATON
B8T: !! 272**3 and t-e 4I!C do not re/uire
'urt-er re/uirement. :E4CE. automatic
,!C. 4!C. !)2 Fec &" par )
3#. 7'%=&3L '?P'NS'S (.ar 3#$
Re$uirements'
1. amount not exceeding P**.***
2. medical expenses incurred 0% t-e
decedent 3it-in one ,12 %ear prior to -is
deat-.
3. must 0e dul% su0stantiated 3it- receipt
BA& /EESTON C>>='
) person 3as -ospitaliJed 'or 2 %ears.
and a'ter t-e lapse o' 2 %ears. t-at person died
in t-e -ospital. :is expense is 11*T. Can t-e
4**T 0e claimed as a deduction o'
-ospitaliJation expenses6
)= 48. T-e computation o' t-e amount s-all not
exceed **T. as provided 0% la3. and s-ould
onl% 0e 3it-in 1 %ear to 0e computed up to t-e
deat- o' t-e decedent. -ence. %ou -ave to
determine -o3 muc- is spent 3it-in t-e span o'
1 %ear immediatel% 0e'ore -is deat- since t-e
'acts state t3o %ears.
3A. R'/=R'7'N/ P3I (.ar 3A$
9ot all retirement pays are :%:UCTIB*%
)ther than RA D326, not considered
deductions
9N%'R R3 4"1A
(R'/=R'7'N/ P3I W=/5 PR=K3/' PL3N$
Re$uirements'
1. plan dul% approved 0% t-e BI!
2. person at least * %ears old
3. must at least 0e 1* %ears in service
4. ma% 0e availed onl% once
TA=% 9)T%' T-is is a deduction in t-e nature o'
exemption. all ot-er retirement plan is excluded
/' I' %our relative receives a retirement plan
'rom t-e >FIF or t-e FFF6
)= T-ese are not deductions ,Fec 32 par B",a2
>FIF7 group sex isnt sa'e
FFF E sa'et% sex services
BI! E 0lo3 Ko0 is recommended
?C-ec1 retirement pa% as a deduction 'or t-e
t3o 1inds o' retirement plan
4. %e+uctio)s 3lloGe+ to No)-resi+e)t
'states
S the decedent is a nonNresident alien
A$$OLEF NOT A$$OLEF
E # I T
,)12
Damil% -ome
,)42
+anis-ing deductions
,)22
Ftandard deduction
,)2
Trans'ers 'or pu0lic
use,)32
:ospital expenses
,)"2
!etirement pa%
,)$2
G= 5-at a0out t-e one mentioned in sec &" )16
)= t-at is a deduction -ere. 0ecause paragrap- B
sa%s. Odeductions provided 'or in t-e succeeding
su0section )1P. t-e enumeration 0eginning 'rom
actual 'uneral expenses to mortgage
inde0tedness.
&. S8ares i) t8e &o);u-al Pro.erty
T-e s-are o' t-e surviving spouse in t-e
conKugal partners-ip ,*S2 s-ould 0e included
0ut not su0Kect to estate tax 0ecause it is a
deduction
5-% s-ould 3e include t-e s-are o' t-e
surviving spouse t-en deduct it6
t-e relevance lies in determining 3-et-er or
not it complies 3it- t-e re/uirements under
section &( and section (*=
5ritten notice o' deat- is re/uired 3-en t-e
>!8FF EFT)TE exceeds P-p2*T. 8!. 3-en
TRA9-;%R is sub#ect to ta&G
Estate Tax return
determine 3-et-er gross value is at least
P2**.*** ,Fec (*2M or
regardless o' t-e value o' t-e estate. it consist o'
registered or registra0le propert% suc- as real
propert%. motor ve-icle. s-ares o' stoc1 or ot-er
similar propert%
Durt-er. i' gross value is at least 2;. t-e return
3ill 0e supported 0% a statement certi'ied 0% a
CP).
: "iscellaneous (rovisions
Dor 4!)= 4o deduction s-all 0e allo3ed unless.
t-e executor. administrator or -eir. included in
t-e return t-e value at t-e time o' -is deat-
&1
TAXATON
t-at part o' -is gross estate not situated in t-e
P-ilippines. Dor proper deduction must include
E. 0elo3
% Ta& Credit for %state Ta& (aid to ;oreign
Country
SECTON 4? ,go 0ac1 to discussion on Fec &
par D2
EXEMPTON OF CE&TAN AC/ESTON ANF
T&ANSMSSONS ,as discussed. exempt2
1. ;erger o' usu'ruct in t-e o3ner o' t-e na1ed
titleM
2. transmission or deliver% o' t-e in-eritance or
legac% 0% t-e 'iduciar% -eir or legatee to t-e
'ideicommissar%M
3. transmission 'rom t-e 'irst -eir. legatee or
legac% donee in 'avor o' anot-er 0ene'iciar%. in
accordance 3it- t-e desire o' t-e predecessorM
4. )ll 0e/uest. devises. legacies or trans'ers to
,12 social 3el'are ,22 cultural and ,32 c-arita0le
institution
Re$uirements'
1.no part o' t-e net income insures to t-e
0ene'it o' an% individualM
2.not more t-an 3*S o' donation ,BD#2 s-all
0e used 0% suc- institutions 'or administration
purposes.
G= 5-% is it t-at 3-en more t-an 3*S. it is no
longer a deduction6
)= T-e ver% purpose 'or 3-ic- t-e propert% -as
0een donated. t-at it 3ill 0e 'or c-arita0le. social
3el'are and cultural. 3ill 0e rendered
meaningless or negator%
SECTON 44
FETE&MNATON OF T0E GA$EE OF T0E
ESTATE
G= :o3 to determine t-e usu'ruct ,sec && par )2
)= It is 0ased on t-e B)FIC FT)4D)!D ;8!)#IT<
T)B#E 0eing used in t-e Inited Ftates
G= Due to t-e merger 3it- t-e o3ner o' t-e
usu'ruct is exempt. -o3 come t-e value 3ill 0e
determined6
)= T-e value o' t-e usu'ruct s-all 0e determined
'or t-e purpose o' imposition o' t-e estate tax
, Fec && par 12

AUsufruct
1.Determine value o' rig-t o' usu'ruct=
consider t-e pro0a0le li'e o' t-e 0ene'iciar%
0ased on t-e latest Basic Ftandard ;ortalit%
Ta0le
B(roperties
'air mar1et value o' t-e Estate at t-e time o'
deat-
1.D;+ determined 0% Commissioner
2.D;+ sc-edule o' values 'ixed 0% t-e
Provincial or Cit% )ssessors
G= T-e BI!. a'ter %ears 'rom t-e deat- o' t-e
decedent assessed no3 t-e propert%. personal
propert%. at t-e time o' deat-. it is onl% valued at
1;. %ears t-erea'ter. it 3as alread% 4;. Is t-e
BI! correct6
)= 4o. T-e 0asis t-ere must 0e Oat t-e time o'
t-e deat-
8' t-e decedentP
T-is is 'or personal propert% as a rule
!! 272**3
) di''erent tule in determining t-e value
o' t-e s-ares o' stoc1s ,also personal propert%2
It all depends on 3-et-er listed or
unlisted in t-e local stoc1 exc-ange
a. I4#IFTED C8;;84 F:)!EF E 0asis s-all
0e 0ased on its B88T +)#IE
0. I4#IFTED P!EDE!!ED F:)!EF E0asis
s-all 0e t-e P)! +)#IE
c. #IFTED F:)!EF 8D FT8CTF E 'luctuates
T-e value o' t-e s-ares listed in t-e stoc1
mar1et 'luctuates
Determine t-e -ig-est and lo3est. <ou use
t-e -ig-est immediatel% 0e'ore t-e deat-
,arit-metic ;ean2
&ea) Pro,erty 2Sec 44 ,ar B7
It s-ould 0e t-e valuedetermined 0% t-e
Commissioner o' t-e Internal !evenue7
Conal +alueM or
T-e value determined 0% t-e cit% assessors
o''ice
5-ic-ever is :I>:E!
SECTON 43 NOTCE OF FEAT0 TO BE F$EF
/' 5-at is t-e Basis6
A' t-e gross estate o' t-e person
G= ) person died. do %ou in'orm t-e BI! in
3riting6
)= It depends. I' t-e >!8FF value o' t-e estate is
at least 2*.***.
&2
TAXATON
/'5-en is t-e notice re/uired to 0e 'iled6
A' 1. all cases o' trans'er su0Kect to tax
2.alt-oug- exempt. 3-en gross values o' t-e
estate exceeds P2**.***
/' 5-en 'iled6
A' 3it-in t3o ,22 mont-s
1. a'ter decedents deat-
2. same period a'ter /uali'%ing as executor
or administrator
give a 3ritten notice
/' I' t-e Net Estate is at least P1$.*** 3ill %ou
in 'orm t-e commissioner6
A' %es. t-e gross is at least 374 million
G= 5-%6
)= T-e gross 3ill -ave=
1. T-e FT)4D)!D DEDICTI84 8D 1;
2. T-e deduction o' t-e D);I#< :8;E 1;
3. 5-ere t-e >!8FF value o' t-e decedent
0elongs to par ) ,2;2 t-e net estate 3ould
0e P-p*.**
SECTON 3> ESTATES TAX &ETE&NS
/' 5-en re/uired to 'ile return6
A' 1. all cases o' trans'er su0Kect to tax
2. even t-oug- exempt. gross value o' t-e
estate exceeds P2**.***
3. regardless o' gross value o' t-e estate.
3-en t-e same consists o' registered or
registra0le prop suc- as=
1.real propert%
2.motor ve-icle
3. s-ares o' stoc1s
4. ot-er similar propert% 3-ere clearance
'rom BI! necessar% 'or trans'er o'
o3ners-ip in t-e name o' t-e trans'eree
return must set 'ort- t-e 'ollo3ing=
1.value o' t-e gross estate at time o' deat-
2.deductions allo3ed
3.in'ormation necessar% to esta0lis- correct
taxes
/' 5-at i' Estate is exempt 0ecause it is o'
minimal value ,2**.*** and 0elo3=Fec &42. is
it re/uired to 'ile a return6
A' Aeneral Rule' 4o
%&ception'
a. gross value exceeds P2**.***
0.estate contains registra0le propert%
G= 3-at i' t-e gross value is 0elo3 2**.***6
)= >eneral !ule= Diling is not re/uired. EACEPT i'
t-e propert% involved constitute resgistra0le
propert% li1e s-ares o' stoc1s. motor ve-icle and
parcels o' land
/' i' t-e estate or gross estate exceeds 2 million.
3-at is t-e re/uirement6
A' return must 0e dul% certi'ied 0% a CP)
SECTON 35
Time of ;iling
>E4E!)# !I#E= T-e time 'or pa%ing t-e estate
tax is at t-e time t-e return is 'iled 9 9 9 O(A+
A- +)U ;I*%!
'iled 3it-in " mont-s 'rom decedents deat-
3it-in 3* da%s 'or 'iling t-e return
3it-in 3* da%s a'ter promulgation o' suc-
order
1.certi'ied cop% o' t-e sc-edule o' partition and
2.order o' court approving t-e same
%&tension of Time
;iling Time' 3* da%s
Arounds' meritorious cases
?ho grants' Commissioner
Extension 'or P)<;E4T o' t-e tax
a. Extra7Kudicial E s-all not 0e more t-an 2
%ears
0. Ludicial E s-all not exceed %ears
G= I' t-e extension 'or pa%ment is granted. 3-at
is t-e o0ligation o' t-e administratorBexecutor6
)M Dile a 0ond not more t-an dou0le t-e amount
o' tax
Fec (1 par C sa%s=
T-e primar% lia0ilit% 'alls upon t-e
administratorBexecutor. i' -e 'ailed to pa%
t-e su0sidiar% lia0ilit% 'alls upon t-e -eirs.
T-e primar% lia0ilit% o' t-e
administratorBexecutor is not personal.
-ence -e must 0e reim0ursed.
G= is t-e o0ligation o' t-e -eirs to pa% t-e tax.
Koint or solidar%6
)= L8I4T. Fec (1 par C sa%s Ot-e o0ligation o' t-e
-eir to pa% t-e tax lia0ilit% s-all not 0e more
t-an t-e s-are in t-e estateP onl% up to t-e
extent o' -is s-are.
(lace of filing'
return s-all 0e 'iled 3it-=
1.aut-oriJed agent 0an1
2.revenue district o''icer
3. collection o''icer
4. dul% aut-oriJed treasurer
&3
TAXATON
cit% or municipalit% in 3-ic- decedent 3as
domiciled at t-e time o' -is deat-
/' 5-at i' non resident6
A' 4! 3it- no legal residence -ere. 3it- t-e
o''ice o' t-e commissioner.
/' #et us sa% t-ere are 3 compulsor% -eirs.
namel% ). B. and C. ) renounces -is in-eritance
coming 'rom t-e parents. 0ut ) renounces -is
in-eritance in 'avor o' -is 2 si0lings. 0rot-er and
sister B and C. Is t-is su0Kect to donors tax6
A' 48. It is exempt.
/' But i' in t-e given example. ) said OI am
renouncing m% in-eritance. 0ut I am giving it to
m% sister BP. is t-is su0Kect to donors tax6
A' <EF. !enunciation is to t-e disadvantage o'
t-e 0rot-er.
SECTON 3C
FSC0A&<E OF T0E EXECETO& or
AFMNST&ATO&
/' " yo( %ant to be re)ie!e. "ro* )iabi)ity
as an e#ec(tor-a.*inistrator:
A' 1. Dile a 3ritten application 3it- t-e BI!
stating t-at %ou 3ant to 0e a0solved 'rom t-e
lia0ilit% to 0e done 3it-in 1 %ear
a. I' t-ere -as 0een a !ETI!4 'iled
;ust 0e done 3it-in 1 %ear 'rom t-e time
t-e reurn -as 0een 'iled
0. I' !ETI!4 -as not 0een 'iled
T-e 1 %ear s-ould 0e counted 'ron t-e 'iling
o' t-e 3ritten application
SECTON 3=
FEFCENC; ASSESSMENT
:eficiency O amount 3-ic- t-e estate tax
exceeds t-e amount s-o3n in t-e return. no
amount 3as s-o3n or i' t-ere is no return. t-e
amount 0% 3-ic- t-e tax exceeds t-e amounts
previousl% assessed
5-ere t-e taxpa%er s-all receive a notice o'
assessment
T-ese 3 provisions sa% t-at i' %ou 'ile t-e
reurn and pa% t-e tax. 0ut t-e tax is not
enoug-. %ou are going to receive an
assessment. again O8!P I' %ou 'iled t-e
return 0ut did not pa% t-e tax O8!P %ou did
not 'ile t-e return nor paid t-e tax=
o I4C8;E T)A ,sec & par B2
o EFT)TE T)A ,Fec (32
o Donors Tax , sec 1*4. last portion2
SECTON 36
PA;MENT BEFO&E FE$GE&; B;
EXECETO&-AFMNST&ATO&
T-e Kudge ma% aut-oriJe t-e administrator
to deliver or distri0ute to an% part% in
interested in t-e estate P!8+IDED t-at a
CE!TIDIC)TI84 'rom t-e Commissioner t-at
t-e estate -as 0een paid
;)!C8F vs. F)4DI>)4B)<)4 ,2$3 FC!) 4$2
D= BI! to collect estate tax 0ut t-e estate is
under Kudicial settlement. Is it necessar% 'or t-e
BI! to as1 permission 'rom t-e !TC Kudge
-olding t-e case.
:= 48. T-e 'unction o' t-e Kudge in t-e Kudicial
settlement is di''erent 'rom t-e 'unction o' t-e
BI!. T-e Kudge s-all partition t-e propert% and
t-e BI! to collect t-e tax
SECTON 3@
Persons ob)ige. to Noti"y the B&
G= 5-o are t-ese persons o0liged to noti'% t-e
BI! in case t-e% encounter execution o'
documents. certain acts or transactions 3-ic-
3ill reveal t-e pa%ment o' estate tax6
)=
1.an attorne% 3-o executed t-e extraKudicial
partition or a Kudicial settlement 3-ere -e 3as
o0liged to 'ile a petition or pleading 3it- t-e
courtM
2. ) notar% pu0lic 3-o notariJed t-e t-e
settlement o' estate 3-et-er Kudicial or
extraKudicial
3.T-e cit% provincial engineer 3-o made t-e
cadastral surve% 'or purposes o' partition
Section 3A
&estit(tion
I' a'ter pa%ment. ne3 o0ligations o' t-e
decedent appears. upon satis'action o' 3-ic-.
t-e% s-all -ave t-e rig-t to restitution o' t-e
proportional part o' t-e tax paid.
SECTON 3?
Fece.entDs Bank Acco(nts
Incidentall%. in section (4. 0e'ore t-e Kudge s-all
distri0ute t-e propert%. t-e Kudge s-ould secure
t-e certi'ication o' pa%ment o' estate tax.
T-e proo' to 0e presented -ere 0% t-e parties is
not the estate ta# recei!e.. t-at is not
enoug-. t-e la3 sa%s certi"icate o" ,ay*ent
&4
TAXATON
o" ta#. 3-ic- mean to sa%. %ou -ave to present
t-e recei,t.
&ECEPT@ t-e certi'ication in t-e nature o' an
a''idavit signed 0% t-e BI! o''icer t-at indeed
t-e tax -as 0een paid. ,relate to sec. (42
G= Is t-ere an instance t-at t-e executor.
administrator or -eir can 3it-dra3 3it-out t-e
certi'icate o' pa%ment or even 3it-out t-e
pa%ment o' estate tax6
)= T-e la3 sa%s %ou are allo3ed to 3it-dra3
mone% not exceeding 3*T. ,0e'ore it 3as 2*T2
G= 5-at i' t-e 0an1 account is a c-ec1ing
account6
)= T-ere is a remed% alt-oug- it is illegal and
immoral. Text me i' %ou 3ant to 1no3
FONO&DS TAX
SECTON 34
Imposition of Tax
(A) There shall be levied, assessed, collected and paid
upon the transfer by any person, resident or
nonresident, of the property by gift, a tax, computed as
provided in Section 99.
(B) The tax shall apply hether the transfer is in trust
or otherise, hether the gift is direct or indirect, and
hether the property is real or personal, tangible or
intangible.
)
>!8FF >IDT ,FEC(& par B2
. DEDICTI84F ,FEC 1*1. par ) H B2
@@@@@@@@@@@@@@
4ET >IDT ,T)A)B#E >IDT2
A !)TE ,1
FT
1**.*** is exempt2
PPPPPPPPPPPPPP
T)A)B#E 4ET >IDT
. T)A C!EDIT ,i' an%2
@@@@@@@@@@@@@@
D848!s T)A
G= 5-at are t-e tax credits possi0le
1. Fec 1*1. par C
Donors tax paid to a 'oreign countr%
2. Fec 11* par B. last
p-rase
Input tax under t-e +)T s%stem 3-ere it ma% 0e
claimed against an% o' t-e internal revenue tax
3. Fec 2*4 ,Tax Credit
Certi'icate2
Tax credit ma% 0e claimed against an% internal
revenue tax except 3it--olding tax
SECTON 33 Rates of Tax Payable by Donor. -
(A) In General. ! The tax for each calendar year
shall be computed on the basis of the total net gifts
made during the calendar year in accordance ith the
folloing schedule. "f the net gift is#
OGE&

BET NOT
OGE&
TAX
S0A$$ BE

P$E
S
EXCESS
OF
&
TAXATON

P 1**.*** EAE;PT
P
1**.***
2**.*** * 2S P1**.***
2**.*** **.*** 2.*** 4S 2**.***
**.*** 1.***.*** 14.*** "S **.***
1.***.**
*
3.***.*** 44.*** &S 1.***.***
3.***.**
*
.***.*** 2*4.*** 1*S 3.***.***
.***.**
*
1*.***.**
*
4*4.*** 12S .***.***
1*.***.*
**
1.**4.*** 1S 1*.***.**
*

G= 5-at are t-e properties to 0e included6
a. !eal
0. Personal
c. Tangi0le
d. Intangi0le
4ote= Fec (( ) and Fec 1*3 par )1
T-e understanding o' t-e splitting met-od
o' 'iling a donors tax return and t-e cumulative
3a% o' 'iling t-e return
Inder t-e tax code. it is onl% t-e t3o
rated gi't in one calendar %ear. t-at is t-e
cumulative
In !! 272**3=
Inder t-e estate tax. t-ere is no suc- t-ing as
cumulative or splitting. t-at is not so true in
donors tax
G= 5-at is t-e reason 3-% t-ere is cumulative or
splitting6
)= In donors tax. t-ere are t3o rates ,Fec (( par
B2
1. T-e 'luctuation rates 'rom 2 to 1
i' t-e degree is a relativeM
2. T-e 'lat rate o' 3*S i' t-e done is
a stranger
>enerall%. 'or donations made to relatives.
t-e cumulative mode is relevant. :o3ever.
0% 3a% o' exception. 3-en t-e amount o'
donation is 1*; and a0ove. t-e cumulative
met-od is no longer relevant since in t-at
cae. t-e rate applica0le is 1S. -ence it is as
i' t-e rate is 'ixed.
" the Fonee is'
SECTON 33A &E$ATGE
)'ter division into 2 or 3. Kust once or several
donations. P!8+IDED. t-e net gi't a'ter division
is 1*; or lo3er t-an 1*;. t-en t-e rate 3ill var%
depending upon t-e availa0ilit% o' ot-er
deductions.
G= 5-o are t-e relatives6
1. Brot-er. sister ,'ull or -al'70lood2.
spouses. ancestor and lineal
descendant
2. !elative 0% consanguinit% in t-e
collateral line 3it-in t-e 4
t-
degree o'
relations-ip
G= 5-at do %ou mean 0% FP#ITTI4>6
Fplitting is allo3ed 3-en 2 or more donations
3ill 0e executed in 2 or more C)#E4D)! %ears.
3-et-er t-e done is a relative or a stranger. in
0ot- cases it ma% 0e applied. -o3ever it is onl%
material i' it a relative.
%&ample' 1st donation 3as on Decem0er 2$.
2**. t-e 2
nd
donation 3as on Lanuar% 3. 2**".
5-at s-ould 0e t-e met-od to 0e emplo%ed6
)= Fplitting met-od
)'ter division. it 3as 0elo3 1*; net gi't. and 3e
cannot give t-e exact 'igure since it 3ill depend
upon t-e availa0ilit% o' deductions. 3-at 3ill 0e
t-e rate6
)= t-e rate ma%0e & or ma%0e " depending on
t-e availa0ilit% o' t-e deductions
G= 5-at do %ou mean 0% CI;I#)TI+E6
)= 2 or more donations made 3it-in 84E
calendar %ear
%&ample
T-e amount o' t-e donors tax is &.***M on
Decem0er 2$. 2**. t-e taxpa%er immediatel%
'iled t-e return and paid t-e tax o' &.***M on
Lanuar% 3. 2**". -e made anot-er donation to
t-e same done. a relativeM t-e value o' t-e
propert% 0eing 0elo3 1*;. appl%ing t-e ne3
rate depending upon t-e availa0ilit% o' ot-er
deductions. -e also paid &.***M in cumulative.
can %ou do t-at6
)= 48. it s-all 0e more t-an 1".***

&"
TAXATON
In Lanuar% 2**. %ou made a donation to a
relative to 3-ic- t-e tax s-ould 0e paid 3it-in
3* da%s. so %ou paid &.***M ;a% 2** %ou made
anot-er donation. 3-at do %ou include6
)= <ou -ave to include t-e value o' t-e
propert% on t-e donation made in Lanuar% 2**
0ecause 0ot- donations 3ere made in t-e same
calendar %ear
I' a'ter computing. it sa%s t-ere 24.***. are 3e
going to pa% t-e 24.***6
)= 48. %ou 3ill onl% pa% 1".*** 0ecause 3e
-ave previousl% paid &.*** alread%
FG= Fir. anong Talo1o-an 0a %an6
48. -indi ito 1alo1o-an 0ecause t-e rate o' t-e
tax 3ill 0e increased as t-e value o' t-e propert%
donated increases 0ecause t-e 2 donations 3ere
cumulative.
SECTON 33B ST&AN<E&
(B) Tax Payable by Donor if Donee is a
Stranger. ! $hen the donee or beneficiary is stranger,
the tax payable by the donor shall be thirty percent
(%&') of the net gifts. (or the purpose of this tax, a
"stranger", is a person ho is not a#
()) Brother, sister (hether by hole or half!
blood), spouse, ancestor and lineal descendant* or
(+) ,elative by consanguinity in the collateral
line ithin the fourth degree of relationship.
It does not 'ollo3M %ou cannot do t-at 0ecause
t-e donors tax t-at s-ould 0e paid is a 'lat rate
o' 3*S
G= ) donation 3as made on Decem0er 2$.
1((4d. several da%s t-erea'ter on Lanar% 3.
1((. anot-er donation 3as made. t-e done is
t-e F84M no3 t-e BI! examiner said. Osince t-e
donation 3as made 0et3een several da%s onl%.
3-% not include t-e value o' t-e propert% %ou
-ave donated on Decem0er 2$. 1((4 to t-is
donation on Lanuar% 3. 1((P. Is t-e examiner
correct6
)= 48. 3-ere t-e donation 3ere made in
di''erent %ears. %ou cannot appl% t-e
cumulative 3-et-er t-e done is a relative or not
,!! 272**32
T-e donation 3as made t-roug- splitting. one
3as mad 12B2$B2***. t-e second one 3as
made 1B3B2**1. )'ter division. t-e net gi't 'or
eac- donation 3er exactl% 1**T eac- ,net gi't
divided into 22. Do %ou no3 sa% t-at t-e
taxpa%er 3ill pa% less 0ecause t-e met-od
applied 3as splitting6
)= 48 as t-e donation is exempt. Fec (( par
B provides t-at i' t-e 4ET >IDT is at least 1**1
or 0elo3 it is EAE;PT.
Do not get me 3rongM cumulative and splitting
applies to B8T: relatives and strangers. onl%
t-at it is material 3-en t-e done is a relative.
SECTON 33 ,ar C
Contrib(tion "or P(r,oses o" E)ection
(C) Any contribution in cash or in -ind to any
candidate, political party or coalition of parties for
campaign purposes shall be governed by the .lection
/ode, as amended
G= i' t-e done is a candidate in t-e next
election. is t-e donor exempt6
)= 5-ile it is true t-at FEC (( par C is totall%
silent a0out it. and t-ere'ore i' t-e la3 is silent.
3e do not presume exemption ,t-ere -as to 0e
an explicit provisions in t-e la32 0ut
considering t-e election code as mended in
1((2 0% !) $1"". sec 13 3-ere it sa%s. Oi' t-e
t-e done is a candidate. a political part% or a
coalition o' political parties. t-e donation is
EAE;PT 'rom donors tax P!8+IDED t-e
donation 3as properl% reported to t-e o''ice o'
t-e C8;E#EC
SECTON 5>>
Trans"er "or ina.eK(ate consi.eration
$here property, other than real property
referred to in Section +0(1), is transferred for less
than an ade2uate and full consideration in money or
money3s orth, then the amount by hich the fair
mar-et value of the property exceeded the value of the
consideration shall, for the purpose of the tax imposed
by this /hapter, be deemed a gift, and shall be
included in computing the amount of gifts made
during the calendar year.
,Compare 3it- Fec & >2
1. Trans'er 'or less t-an t-e ade/uate
consideration
2. Dont con'use 3it- Fec &3 par >.
estate
3. Do not impose t-e tax simultaneousl%
&$
TAXATON
4. It s-ould 0e onl% eit-er o' t-e t3o
depending upon t-e motive or intent
o' t-e trans'eror
EFT)TE T)A7 motive is impending deat-
D848!s T)A7 motive is generosit% or 1indness
2**2 and 2**( Bar Guestion=
5-at are t-e properties 3-ic- ma% 0e t-e
su0Kect o' a trans'er 'or less t-an t-e ade/uate
consideration 3-ere t-e applica0le trans'er tax
s-all 0e donors tax6
)= )n% 1ind o' propert%. real. personal.
intangi0le or tangi0le2 provided it is not t-e one
mentioned in Fec 24 par D1 , real propert%
located in t-e P-ilippines 3-ic- is a capital
asset2
G= :o3 a0out t-at stated in Fec & par >6
)n% 1ind o' propert% also provided it is t-e one
mentioned in sec & par B. trans'er in
contemplation o' deat-. C ,revoca0le trans'er2
and D ,propert% passing under t-e general
po3er o' appointment2
G= :o3 a0out t-e de'ense o' Bona ;ide -ale in
good 'ait-6
)= T-is is a de'ense onl% 'or sec & par > and not
a de'ense 'or Fec 1** 0ecause not-ing is
mentioned.
SECTON 5>5 E#e*,tion o" Certain <i"ts
The folloing gifts or donations shall be exempt from
the tax provided for in this /hapter#

(A) In the Case of Gifts Made by a Resident. -
In t-is section. 3e -ave to determine i' t-e donor
0elongs to Paragrap- ) or B.
G= 5-o are t-e six persons lia0le to pa% donors
tax
Ta#,ayer Sectio
n
Check
!esident CitiJen 1*1
par )
!esident )lien 1*1
par )
Domestic Corporation 1*1
par )
PD 14$
4onresident
Corporation
1*1
par )
&" par )
4onresident )lien 1*1
par B
Doreign Corporation 1*1
par B
Section 5>5 ,ar A5
()) 1ories or gifts made on account of marriage
and before its celebration or ithin one year
thereafter by parents to each of their legitimate,
recogni4ed natural, or adopted children to the extent
of the first Ten thousand pesos (5)&,&&&)#
G= 5-at is t-e importance o' determining
3-et-er t-e taxpa%er 0elongs to par ) or B6
)= T-e re/uirement o' deducti0ilit% 3-ere t-e
done is classi'ied under section 1*3)3. t-ere
are 'ive re/uirements. I' t-e donor is under B.
t-e re/uirement is onl% reduced 0% one.
1. I' t-e donor 0elongs to par ). t-e
deduction o' a do3r% provided 'or in
sec 1*1 par )1. is not a deduction i'
t-e donor 0elongs to par B
2. 5it- regard to t-e 3
rd
par ,sec 1*1 par
)32. 3-ere t-e donees or trans'erees are
educational institution. social 3el'are.
c-arita0le. re-a0ilitation. religious
institutions. organiJation 'or t-e
re-a0ilitation o' t-e veterans. Ta1e note t-at
t-ere are re/uirements i' t-e done
0elongs to par ). no3 i' t-e done 0elongs to
par B t-en t-ose re/uirements is do3n to
one.
1(&( B)! GIEFTI84=
T-e 'at-er o' t-e 'amil% died. T-e surviving
spuse entered into a marriage contract. )'ter
several %ears. 0ecause s-e could no longer
endure t-e cold mornings o' 4ovem0er ,not
included in t-e 0ar /uestion2. During t-e
cele0ration. one o' t-e c-ildren donated a
propert%. )ssume t-at t-e propert% donated did
not exceed t-e limitation o' 1*T Is it a do3r%
3-ic- is a deduction6
)= 4o. Inder sec 1*1 par )1. t-e donor s-ould
0e t-e 'at-er. mot-er or 0ot-. donating propert%
to t-e legitimate. recogniJed natural and
adopted c-ildren P!8+IDED=
1. T-e amount o' t-e propert% donated did
not exceed 1*T O)4DP
2. It must 0e given or donated at t-e time o'
t-e cele0ration o' marriage or 3it-in 1
%ear 'rom t-e cele0ration o' marriage.
SECTON 5>5 ,ar AC
(+) 6ifts made to or for the use of the 7ational
6overnment or any entity created by any of its
&&
TAXATON
agencies hich is not conducted for profit, or to any
political subdivision of the said 6overnment* and
4ote==
Donee is t-e 4ational >overnment. Political
Fu0divisions and t-e )gencies and
Instrumentalities O48T C84DICTED D8!
P!8DITP
Inder Fec &" )3 it sa%s t-ere Oexclusivel% 'or
pu0lic purposeP
F);E !I#EF )PP#<. -ence. EAE;PT
FECTI84 1*1 par )3
,22 6ifts in favor of an educational and8or
charitable, religious, cultural or social elfare
corporation, institution, accredited nongovernment
organi4ation, trust or philanthropic organi4ation or
research institution or organi4ation# Provided,
however, that not more than thirty percent (%&')
of said gifts shall be used by such donee for
administration purposes. (or the purpose of the
exemption, a 3non!profit educational and8or
charitable corporation, institution, accredited
nongovernment organi4ation, trust or philanthropic
organi4ation and8or research institution or
organi4ation3 is a school, college or university
and8or charitable corporation, accredited
nongovernment organi4ation, trust or philanthropic
organi4ation and8or research institution or
organi4ation, incorporated as a nonstoc- entity,
paying no dividends, governed by trustees ho
receive no compensation, and devoting all its
income, hether students3 fees or gifts, donation,
subsidies or other forms of philanthropy, to the
accomplishment and promotion of the purposes
enumerated in its Articles of "ncorporation.
G= 5-at are t-e re/uirements so t-at t-e donor
ma% 0e exempted6
1. 4ot more t-an 3*S o'
t-e propert% donated s-all 0e used 'or
administrative purposes
2. T-e done must 0e
484FT8CT and 484P!8DIT
3. ;ust 0e governed 0%
trustees 3-o do not receive compensation
4. Done do not distri0ute
an% dividend
. T-e gross received as
income s-all onl% 0e used in accordance 3it-
t-e purposes em0odied in t-e articles o'
incorporation
SECTON 5>5 ,ar B
(B) In the Case of Gifts Made by a onresident
ot a Citi!en of the Philippines. -
()) 6ifts made to or for the use of the 7ational
6overnment or any entity created by any of its
agencies hich is not conducted for profit, or to any
political subdivision of the said 6overnment.
(+) 6ifts in favor of an educational and8or
charitable, religious, cultural or social elfare
corporation, institution, foundation, trust or
philanthropic organi4ation or research institution
or organi4ation# Provided, however, That not more
than thirty percent (%&') of said gifts shall be used
by such donee for administration purposes.
G= i' donor is DC or 4!) is do3r% a deduction6
)= Do3r% is 48T a DEDICTI84
G= ) c-inese !) 3-o lives in ;anila entered into
a contract o' marriage. During t-e cele0ration.
t-e 'at-er 3-o is a permanent resident o'
Tai3an donated to t-e ne3l%3ed couple. let us
sa%. it is 2** ***. Is a do3r% deemed to 0e a
deduction6
)= 48. T-e D848! is a 4!) as t-e 'acts states
-e is a resident o' T)I5)4.
Fince -e 0elongs to t-ose listed in par B. t-at
do3r% is not a deduction and t-ere'ore not
EAE;PT
SECTON 5>5 ,ar C
(C) Tax Credit for Donor"s Taxes Paid to a
#oreign Co$ntry. -
(1) In General. ! The tax imposed by this Title
upon a donor ho as a citi4en or a resident at the
time of donation shall be credited ith the amount of
any donor3s tax of any character and description
imposed by the authority of a foreign country.
(2) %imitations on Credit. ! The amount of the
credit ta-en under this Section shall be sub9ect to
each of the folloing limitations#
(a) The amount of the credit in respect to the tax
paid to any country shall not exceed the same
proportion of the tax against hich such credit is
ta-en, hich the net gifts situated ithin such
country taxable under this Title bears to his entire
net gifts* and
(b) The total amount of the credit shall not exceed
the same proportion of the tax against hich such
credit is ta-en, hich the donor3s net gifts situated
outside the 5hilippines taxable under this title bears
to his entire net gifts.
4ote= !elate to Fec &" par E
) tax credit 3-ere t-e donors tax paid to a
'oreign countr%
&(
TAXATON
FECTI84 1*2
&al$ation of Gifts Made in Property. ! "f the gift
is made in property, the fair mar-et value thereof at the
time of the gift shall be considered the amount of the
gift. "n case of real property, the provisions of Section
::(B) shall apply to the valuation thereof.
!elate to Fec &4 par B
In determining t-e value o' t-e propert%
donated. 'or purposes o' imposition o' tax. 0ot-
estate and donors tax provides 'or t-e same
procedure 'or personal as 3ell as real propert%.
T-e% also -ave common rrules 'or s-ares o'
stoc1 under t-e revenue regulation. even under
t-e imposition o' DIT "S.
5-en 3e sa% t-e value determined 0% t-e CI! or
t-e Cit% assessor 3-ic-ever is -ig-er. Isuall%.
t-is is t-e one c-osen 0% t-e commissioner
1no3n as t-e Conal value.
FECTI84 1*3
#iling of Ret$rn and Payment of Tax. - A)
Re'$irements. ! any individual ho ma-es any
transfer by gift (except those hich, under Section )&),
are exempt from the tax provided for in this /hapter)
shall, for the purpose of the said tax, ma-e a return
under oath in duplicate. The return shall se forth#
()) .ach gift made during the calendar year hich is
to be included in computing net gifts*
(+) The deductions claimed and alloable*
(%) Any previous net gifts made during the same
calendar year*
(0) The name of the donee* and
(;) Such further information as may be re2uired
by rules and regulations made pursuant to la.
(B) Time and Pla(e of #iling and Payment. ! The
return of the donor re2uired in this Section shall be filed
ithin thirty (%&) days after the date the gift is made
and the tax due thereon shall be paid at the time of
filing. .xcept in cases here the /ommissioner
otherise permits, the return shall be filed and the tax
paid to an authori4ed agent ban-, the ,evenue 1istrict
<fficer, ,evenue /ollection <fficer or duly authori4ed
Treasurer of the city or municipality here the donor
as domiciled at the time of the transfer, or if there be
no legal residence in the 5hilippines, ith the <ffice of
the /ommissioner. "n the case of gifts made by a
nonresident, the return may be filed ith the 5hilippine
.mbassy or /onsulate in the country here he is
domiciled at the time of the transfer, or directly ith the
<ffice of the /ommissioner.

48TE= It simple OP)<7as E<8I7DI#E
T-e la3 sa%s t-e tax s-ould 0e paid 3it-in 3*
da%s and t-e return must 0e 'iled 3it-in 3* da%s.
G= Is t-ere an extension in t-e 'iling6
)= 4one. t-e extension 3as a0olis-ed 0% t-e
CT!P
FECTI84 1*4
Definitions. ! (or purposes of this Title, the terms
"gross estate" and "gifts" include real and personal
property, hether tangible or intangible, or mixed,
herever situated# Provided, however, That here the
decedent or donor as a nonresident alien at the time of
his death or donation, as the case may be, his real and
personal property so transferred but hich are situated
outside the 5hilippines shall not be included as part of
his "gross estate" or "gross gift": Provided, further,
That franchise hich must be exercised in the
5hilippines* shares, obligations or bonds issued by any
corporation or sociedad anonima organi4ed or
constituted in the 5hilippines in accordance ith its
las* shares, obligations or bonds by any foreign
corporation eighty!five percent (:;') of the business of
hich is located in the 5hilippines* shares, obligations
or bonds issued by any foreign corporation if such
shares, obligations or bonds have ac2uired a business
situs in the 5hilippines* shares or rights in any
partnership, business or industry established in the
5hilippines, shall be considered as situated in the
5hilippines# Provided, still further, that no tax shall be
collected under this Title in respect of intangible
personal property# (a) if the decedent at the time of his
death or the donor at the time of the donation as a
citi4en and resident of a foreign country hich at the
time of his death or donation did not impose a transfer
tax of any character, in respect of intangible personal
property of citi4ens of the 5hilippines not residing in
that foreign country, or (b) if the las of the foreign
country of hich the decedent or donor as a citi4en
and resident at the time of his death or donation allos
a similar exemption from transfer or death taxes of
every character or description in respect of intangible
personal property oned by citi4ens of the 5hilippines
not residing in that foreign country.
The term "deficiency" means# (a) the amount by
hich tax imposed by this /hapter exceeds the amount
shon as the tax by the donor upon his return* but the
amount so shon on the return shall first be increased
by the amount previously assessed (or collected ithout
assessment) as a deficiency, and decreased by the
amounts previously abated, refunded or otherise
repaid in respect of such tax, or (b) if no amount is
shon as the tax by the donor, then the amount by
hich the tax exceeds the amounts previously assessed,
(or collected ithout assessment) as a deficiency, but
such amounts previously assessed, or collected ithout
assessment, shall first be decreased by the amount
previously abated, refunded or otherise repaid
(*
TAXATON
+alue )dded Tax
,)mended 0% !epu0lic )ct (33$2
G= 5-at is t-e 'ormula 'or +)T6
)=
8ITPIT T)A
. I4PIT T)A
@@@@@@@@@@
+)T Pa%a0le
SEC. 10. Persons %iable. ! Any person ho, in the
course of trade or business, sells barters, exchanges,
leases goods or properties, renders services, and any
person ho imports goods shall be sub9ect to the value!
added tax (=AT) imposed in Sections )&> to )&: of this
/ode.
The value!added tax is an indirect tax and the amount
of tax may be shifted or passed on to the buyer,
transferee or lessee of the goods, properties or services.
This rule shall li-eise apply to existing contracts of
sale or lease of goods, properties or services at the time
of the effectivity of ,epublic Act 7o. ??)>.
The phrase "in the course of trade or business" means
the regular conduct or pursuit of a commercial or an
economic activity, including transactions incidental
thereto, by any person regardless of hether or not the
person engaged therein is a nonstoc-, nonprofit private
organi4ation (irrespective of the disposition of its net
income and hether or not it sells exclusively to
members or their guests), or government entity.
The rule of regularity, to the contrary notithstanding,
services as defined in this /ode rendered in the
5hilippines by nonresident foreign persons shall be
considered as being course of trade or business.
G= +)T is applica0le to 3-at 1ind o' transactions6
)= +)T is applica0le to t-e 'ollo3ing transactions
1. Fale o' Commodities o' goods
2. Fale o' Fervices
3. Exportation
4. Importation
G= Dor +)T to appl%. 3-at are t-e re/uisites6
)=
1. Transactions must 0e +)T transactions
,preceding /uestion2
2. >E4E!)##<. must 0e done in t-e course
o' trade or 0usiness
G= Is t-ere an instance 3-ere +)T applies
alt-oug- suc- sale is not made in t-e !E>I#)!
course o' trade or 0usiness6
)=
1. I;P8!T)TI84
2. I4CIDE4T)# T8 BIFI4EFF
3. T!)4F)CTI84F DEE;ED F)#E alt-oug-
IF8#)TED 84E
4. FE!+ICEF in t-e P:I#F. B< 4!)
T)A)TI84 I4DE! T:E #8C)# >8+E!4;E4T
C8DE=
1. #ocal Tax
2. !eal Propert% Tax
$OCA$ TAXATON /T25,, 256, then go to T242,
2.5 down1
/' ;a%or Bina% o' ;a1ati ordered t-e collection
o' elevator tax ,'or elevator in t-e cit% -all2. Is
t-e order o' ;a%or Bina% legall% tena0le6
A' 48. T-ere s-ould al3a%s 0e a ta& ordinance
a'ter conducting a public hearing. ,\1&"2
ta& ordinance
/' Can BI! collect t-e tax even in t-e a0sence
o' a revenue regulation6
A' <EF.
/' Can a province. cit%. municipalit% or
0aranga% collect t-e tax i' t-ere is no tax
ordinance6
A' 48.
/' 5-% is it t-at t-ere s-ould 0e a tax ordinance
as re/uired 0% \1&"6
A' T-e rationale is not mentioned in \1&". 0ut i'
%ou read t-e ot-er provisions o' t-e #>C. %ou 3ill
come to set o' conclusions o' t-e reason 3-%
t-ere must 0e a tax ordinance.
V In most o' t-ese provisions. it al3a%s sa%=
oneNhalf if the town or municipality shall collect a
ta& of not e&ceeding 2U of the gross receipt
T)TE 48TE= T-ere is no exact amountM -ence. it
is t-e tax ordinance 3-ic- 3ill 'ix t-e exact
amount.
public hearing
(1
TAXATON
In Congress. t-e re/uirement is not a0solute
,0% discretion onl%2. Inder local taxation ,last
p-rase o' \1&"2. t-e re/uirement is )BF8#ITE.
R%+%- vs -%CR%TAR+ /0.C -CRA D5,1
D= In t-e municipalit% o' Fan Luan ,Kust 0eside
;andalu%ong2 t-ere 3as a tax ordinance
passed. !e%es. a resident. claims t-at t-ere
3as no pu0lic -earing conducted. -e
maintains t-at under \1&" last p-rase. t-ere
s-ould al3a%s 0e a pu0lic -earing.
:= T-e FC said= O%es. t-at re/uirement is an
a0solute one. 0ut since t-e petitioner 'ailed
to produce evidence to support -is
allegation. i' t-ere is no proo' presented
ot-er t-an -is o3n statement. 3e -ere0% rule
t-at t-e ordinance 3as passed in accordance
to t-e procedure mandated 0% la3P. 5-ile it
is true t-at a pu0lic -earing is an a0solute
re/uirement. -e 3-o alleges. must prove t-e
same.
/' I' %ou dont agree 3it- t-e validit% or t-e
Constitutionalit% o' t-e tax ordinance. 3-at 3ill
0e %our remed%6
A' 5it-in 3* da%s 'rom t-e e''ectivit% o' t-e
ordinance. t-e taxpa%er s-ould 'ile an appeal
3it- t-e o''ice o' t-e Fecretar% o' t-e D8L ,\1&$2
R%+%- vs -%CR%TAR+ /0.C -CRA D5,1
D= !e%es asserted t-e validit% and
Constitutionalit% o' t-e tax ordinance onl%
a'ter t-e lapse o' t-irt% ,3*2 da%s ,per-aps
-is la3%er 3as t-in1ing t-at an ordinar%
statute ma% 0e contested an%time 3it- t-e
!TC. C) or FC2.
:= 5it- regard to a tax ordinance. 3 -ave a
speci'ic rule. 'ailure to assail t-e validit% 3it-
t-e speci'ic period o' time. is 'atal to t-e
taxpa%er. Fince it 3as 'iled 0e%ond t-e
3*da% period. 3e do not distur0 t-e validit%
o' t-e ordinance.
/' 5it-in 3-at period s-ould t-e Fec. o' Lustice
decide6
A' 5it-in "* da%s 'rom t-e time t-e appeal 3as
'iled. Dailure to decide 3it-in t-is time. t-e
taxpa%er -as t-e remed% to 'ile an action 3it-
t-e regular courts.
V I' t-e decision 3as made 3it-in t-e "* da%
period. and receives t-e decision. -is remed% is
to 'ile an appeal 3it-in 3*da%s 'orm t-e receipt
o' t-e decision to court o' competent Kurisdiction
!TC.
V Beginning April .0, .CCD. 'rom t-e ruling o'
t-e !TC. pursuant to !) (2&2 ,t-e la3 upli'ting
t-e standards o' t-e CT)2. t-e ruling o' !TC on
local tax cases. is appeala0le to t-e CT) en
0anc.
T58 )PPE)#F DECIDED B< T:E CT) E4 B)4C=
1. decisions o' !TC involving local tax cases
2. decision o' t-e Central Board o'
)ssessment )ppeals.
V Drom CT) en 0anc. t-e appeal must 0e 'ile
3it- t-e FC 3it-in 1da%s.
V >o to \11=
T-e cit% could impose t-e tax alread%
imposed 0% t-e province o' 0% t-e municipalit%.
/' 5-at are t-e numerous taxes imposa0le 0%
t-e province 3-ic- a cit% no3 allo3ed to
impose6
A' T-ose enumerated in \13 to \141 o' t-e #>C
!easons 3-% a municipalit% 3anted to 0e
converted into a cit%=
1. \11
2. \233 ,real estate tax2
V In addition. t-e la3 sa%s t-at t-e cit% could
increase t-e rate o' t-e tax 0% not more t-an
*S o' t-e maximum EACEPT t-ose enumerated
in \13(=
a2 pro'essional tax
02 amusement tax
A. <enera) Princi,)es /T2.5N20C1
reiteration o' t-e Constitutional tax
provisions
notice t-at t-e Constitutional limitations on
taxation do not onl% appl% to t-e national
government 0ut also to local government units.
B. Fe"initions ,\1322
Local /a0i)- 3ut8ority /T20.1
'or a province. it is t-e provincial 0oard or
t-e provincial council ,sangguniang
panlala3igan2
'or a cit%. 3e -ave t-e cit% council
,sangguniang panlusod2
'or t-e municipalit%. 3e -ave t-e
municipal council ,sangguniang
pang0a%an2
(2
TAXATON
'or t-e 0aranga% or 0arrio. 3e -ave t-e
0aranga% council.
C. Co**on )i*itations on the ta#ing ,o%er
o" the $<EDs ,\1332
V Inder t-e old la3 t-is 3as \ o' t-e #ocal Tax
Code.
/' 5-% common6
A' Because t-e limitations or pro-i0itions appl%
to all #>Is. t-e provinces. cities. municipalities
and 0aranga%s.
T3o Common Crimes /under T2001
1. a0solute pro-i0ition
2. relative pro-i0ition
It s-all 0e unla3'ul 'or t-e #>Is to collect=
=. Income Ta& %MC%(T when levied on banBs
and other financing institutions /T200/A11
V t-e term Oot-er 'inancing institution s-all
include mone% c-anger. lending investor.
pa3ns-op /T202/%11
V rate o' tax= does not mention rate o'
tax. so long as it is O'air. Kust and reasona0leP
V It cannot 0e Opro-i0ited taxation. 0ecause
t-e element o' Oimposed 0% t-e same taxing
po3erP is not present. 8ne is imposed 0% t-e
national government and t-e ot-er is 0% t-e
#>I.
==. :ocumentary -tamp Ta& /T200/B11
V a0solute pro-i0ition
===. %state ta&, inheritance, donations inter vivos,
donations mortis causa %MC%(T in T204
/T200/C11
V trans'er tax on t-e trans'er o' realt% to 0e
imposed 0% provinces and cities ,\132
48TE= t-is is not a real estate tax. t-is is
a local tax.
=K. Custom duties, charges or fees for the
registration of vessels or ships, wharfages fees
and wharage dues %MC%(T if the wharf had been
established, maintained and operated by the
locality /T200/:11
V 3-ar'age due E is a custom 'ee imposed
on t-e 3eig-t o' t-e cargoes.
V 3-ar' E a pier
V special lev% on pu0lic 3or1s ,\24*2
V allo3s provinces cities and municipalities
to impose a special real estate tax 1no3n as
Ospecial lev% or pu0lic 3or1sP
V let us sa% t-e municipalit% esta0lis-ed a
pier 'or a minimal value o' P1*;M out o'
P1*;. under \24*. "*S o' t-is ma% 0e
recoveredM t-e ot-er 4*S ma% 0e recovered
0% 3ar'age due.
v. Ta&, fee or charge for goods or commodities
coming out or passing through the territorial
#urisdiction even if in the guise of a toll or a fee
/T200/%11
V an a0solute pro-i0ition
V commodities mar1eted in a pu0lic
mar1et. lets sa% in t-e cit% o' Pasig. 3-ere
t-e commodities came 'rom #aguna t-en to
Tana%. Cainta. Ta%ta%M Kust imagine i' eac- o'
t-e to3ns 3ill impse 1peso 'or ever% -ead o'
a c-ic1en or *cents 'or ever% 0undle o'
vegeta0le.
(A*"A :%<IT C)R( v "A*A9AA- JA"B)A9AA
:%* -UR /220 -CRA 46.1
D= ;unicipal council passed a tax ordinance
entitled Opolice surveillance 'eeP 3-ic-
provide t-at )## motor ve-icle passing
t-roug- a particular street in t-e to3n proper
o' ;alangas 3-ic- 3ill lead to t-e pier or
3-ar' 3ill pa% a certain sum o' mone%
3-et-er it is camote. copra. pala%.or rice.
8ne o' t-e o3ners o' t-e motor ve-icle is
Palma Devt Corp. carr%ing copra. 0anana
and coconut to 0e loaded in a s-ip doc1ed at
pier o' ;alangas. T-e la3%er o' petitioner
assailed t-e validit% o' t-e ordinance stating
t-at it is a clear violation o' \133,E2.
:= It is not t-e title o' t-e ordinance 3-ic- is
controlling 0ut it is t-e essence o' t-e
su0stance o' t-e tax ordinance. T-e tax
ordinance clearl% violated \133,E2. t-ere'ore.
t-e FC -ad no option 0ut to declare t-e tax
ordinance null and void 'or 0eing in violation
o' t-e la3.
K=. Ta&es, fees or charges on agricultural and
a$uatic products when sold by marginal farmers
or fishermen /T200/;11
/' Don )ntonio Dlorendo. a person coming
'rom Pampanga 3-o settled in Davao Cit%.
emplo%ed t-ousands o' 3or1ers in t-e
di''erent 0anana plantation. Can t-e #>I
impose tax on t-e agricultural product 3-ic-
is a 0anana6
A' <EF. T-e #>I can impose 0ecause Don
)ntonio is not a marginal 'armer. It is onl%
pro-i0ited i' it is sold 0% a marginal 'armer.
V ;arginal Darmer E a 'armer or a
'is-erman 'or su0sistence onl%. 3-ose
immediate mem0ers are t-e immediate
mem0ers o' t-e 'amil% ,\131,P22
K==. Ta&, fee or charge on pioneer and nonN
pioneer enterprise duly registered with the
board of investments for a period of ,yrs and
Dyrs respectively /200/A11
(3
TAXATON
V relative pro-i0ition 0ecause a'ter t-e
period. t-e #>I concerned ma% no3
impose t-e tax.
K===. %&cise ta& on articles and ta&, fees and
charges on petroleum products /T200/A11
V relative pro-i0ition since under \143,:2. it
sa%s t-ere t-at taxes 3-ic- are pro-i0ited
suc- as excise tax. percentage tax and value
added tax nonet-eless. t-e #>I ma% impose
a tax not exceeding 2S o' t-e gross receipt
,'or cities 3S2.
V ;% 'ormer student an assistant in t-e cit%
legal attorne% in a cit% in ;etro ;anila.
received a summon 'rom t-e !TC ,on
complaint o' a supermar1et in ;etro ;anila2
/uestioning t-e validit% o' t-e tax ordinance
under \143,:2 since t-e rate imposed 3as
3S
I said. Oineng. una 'ile 1a%o ng motion to
dismiss. 4a1 ng puta. a0sent 1a na naman
ata e-. %ou invo1e \11 stating t-at a cit%
can impose a tax -ig-er t-an t-e rate
provided 'or 0% la3 not more t-an *S o' t-e
maximum ,*S o' t-e maximum o' 2S is 1.
t-ere'ore. 2X1 is 3S2P
BU*ACA9 v CA /.33 -CRA DD.1
?'irst case decide 0% t-e FC 3-ic- interpreted
0ot- t-e #>C and t-e 4I!C.
D= T-e t-en governor. 80et Pangani0an
toget-er 3it- -is provincial council passed an
ordinance imposing tax on /uarr%ing under
t-e provision o' \13& o' t-e #>C. T-e
pro0lem is t-at t-e ordinance applies to )##
entities /uarr%ing in t-e province. 8ne o' t-e
taxpa%ers. !epu0lic Cement o0liged to pa%
t-e tax. argued t-at under \13& o' t-e #>C.
t-e tax on /uarr%ing on 3-ic- t-e province
ma% 0e allo3ed s-all onl% 0e 3it- regard to
/uarr%ing private land. and not onl% t-at 0ut
under \133,:2. t-ere is a pro-i0ition to
impose excise tax and tax on /uarr%ing
under t-e I!C is an excise tax.
:= T-e tax on /uarr%ing allo3ed to provincial
governments s-all onl% 0e 3it- regard to
lands 3-ic- are pu0lic lands. and since t-is is
a private tax on /uarr%ing re'ers to a lot
3it-out an% distinction. :ence. i' t-e #>C
made a /uali'ication as to t-e 1ind o' land
,3-ere it sa%s it s-ould 0e pu0lic land2. 0%
implication. it s-ould re'er to private land
under \11 ,alt-oug- t-e la3 did not
distinguis-2M and since it is a tax 0% t-e
national government. it s-ould 0e collected
0% t-e BI! ,not t-e #>I2. and also t-e FC
agreed t-at it is an excise tax 3-ere #>Is
are pro-i0ited 'rom collectingM t-us. t-e FC
declared t-e tax ordinance null and void 'or
0eing contrar% to la3.
V Fir. 3-% is it a pro0lem 3-en t-e la3 is
clear t-at under \13&. it s-all onl% appl% to
pu0lic land6
Per-aps t-e provincial council t-oug-t
t-at t-e su0Kect matter o' t-e tax ordinance
ma% 0e a su0Kect matter provided in an%
0oo1 including t-e I!C. or 3orse. t-at it ma%
impose a tax on a su0Kect matter not
mentioned in an% 0oo1.
;oral lesson= alt-oug- a tax ordinance
ma% 0e passed even i' t-e su0Kect matter is
not provided 'or in an% la3. it -as to compl%
3it- t-e limitations.
(%TR)9 v (%9I**A /235 -CRA 5,1
? T-e 'acts -ere arose under t-e old la3 under
\ ,no3 \1332 o' t-e local tax code ,PD 2312
D= Petron -as a 'actor%Bplant in Penilla 3-ere
t-e ra3 materials petroleum products are
0eing converted into re'ined petroleum
products. T-e municipal council o' Penilla
imposed a tax 0% 3a% o' a tax ordinance
sa%ing t-at t-e% are invo1ing t-e old \1(
,no3 \143,)22 stating t-at municipalities are
aut-oriJed to impose tax o' t-e manu'acture
o' an% commodit%. -ence. since it is
manu'acture o' a petroleum product. t-e #>I
must e aut-oriJed. :o3ever. Petron o0Kected
since under \ ,no3 \133,:22. t-e pro-i0ition
includes t-e pro-i0ition to impose excise tax
and not onl% t-at. under t-is par.. t-e tax on
petroleum products is an excise tax. Inder
t-is par.. t-e la3 is clear it does not onl%
pro-i0it t-e imposition o' tax. 'ee or c-arge
over petroleum products.
:= T-e controlling provision -ere t-e old \1(
,no3 \143,)22 t-at #>Is are aut-oriJed to
impose t-e 0usiness tax 'or t-e
manu'acturing over an% 1ind o' commodit%
0% and petroleum product is Oan% 1ind o'
commodit%P.
/' 5-at do %ou t-in16
A' I dont agree 3it- t-is ruling 0ecause
0et3een \133,:2 and \143,)2. it is t-e
'ormer 3-ic- is more speci'ic.
=?. <alue added ta& and percentage /T200/I1
%MC%(T T2D0/81
V !elative pro-i0ition.
?. Ta&, fee or charge on common carriers
whether by land, water or air /T200/711
;IR-T 8)*:I9A C) vBATA9AA- CIT+ /0CC
-CRA ,,21
? 2
nd
FC ruling discussing 0ot- t-e I!C and #>C.
D= T-is revealed to t-e pu0lic t-e existence o' 2
ver% 0ig oil pipelines coming 'orm Batangas
(4
TAXATON
Cit% 3it- a distance o' more t-an 1**1m. one
going to Pandacan 8il Depot and t-e ot-er
one is going to Brg%. Bicutan. Taguig. T-e
Batangas Cit% council deemed it necessar% to
impose a tax on t-e gross receipt o' t-e 1
st
-olding compan% 'or t-e operation o' t-e oil
pipeline. 0ut t-e operator argued t-at t-e oil
pipeline is not a common carrier.
:= T-e FC reasoned out li1e in t-e case o'
(a#unar v Comm /0.5-CRA,,,1. sa%ing t-at
O3e -ave copied t-e code o' carrier la3 'orm
t-e IF 3-ere t-e de'inition o' a common
carrier is one -a0ituall% carr%ing not onl%
individuals or passengers 0ut also goods or
commodities. and since t-e oil pipelines is
-a0ituall% carr%ing petroleum products 3-ic-
is a commodit%. 3e rule t-is as a common
carrier 3-ic- is under \133,L2. #>I is
pro-i0ited 'rom imposing tax on common
carriers. and not onl% t-at 0ut under \1$* o'
t-e #>C. t-e la3 is ver% explicit. t-at )##
#>Is are pro-i0ited to impose percentage
tax on common carriersP. 5it- t-at. t-e tax
ordinance passed 3as declared null and void
'or 0eing contrar% to la3.
?=. (remiums on reNinsurance /T200/=11
V a0solute pro-i0ition.
?==. Ta&, fee or charge on registration of motor
vehicles and for the issuance of license and
permit for driving thereof %MC%(T tricycles
/T200/*11
BATUA9 CIT+ v *T) /0.. -CRA 5C41
I= 5-ic- 'unction 3as delegated to t-e #>I6
T-e #T8 registering motor ve-icles OorP t-e
#TD!B granting 'ranc-ise and regulation o'
common carriers6
:= Inder \133,#2. t-e 'unction o' t-e #T8 is
pro-i0ited. an t-ere'ore 3-at ma% 0e
delegated to t-e #>I is t-e 'unction o'
#TD!B.
?===. Ta&, fee or charge on e&portation of
products and is actually e&ported %MC%(T under
T2D0/C1 where the *AU is authoriHed to impose
business ta& on e&portation /T200/"11
?=K. Ta&, fee or charge on cooperatives duly
registered under the cooperative cod /RA ,3051
and Business =alaBalan /RA ,52C1 /T200/911
V ) cooperative is exempt 'rom local tax.
provided it is dul% registered 3it- t-e
cooperative code and t-e cooperative
development aut-orit% OorP Business
Tala1alan ,not 1al1alan2
?K. Ta&, fee or charge over the national
government, political subdivisions and agencies
and instrumentalities of the government
/T200/)11
V !elative pro-i0ition since it admits o' an
exception under \14 o' t-e #>C 3-ere it
sa%s t-at a #>I ma% 0e aut-oriJed to impose
a 'ee or c-arge 'or t-e operation o' a pu0lic
utilit% provided it is o3ned. maintained and
operated 0% suc- #>I.
9AIA v (ARA9A>U% /7U*+ .CC,1
:= FC ruled in 'avor o' t-e airport. Parana/ue
0eing a #>I cant impose tax on a
government instrumentalit%. )irport o3ned
0% t-e government is not an agenc%. it 0eing
an instrumentalit%.
/' ;a% t-e government tax itsel' it t-e
taxing po3er is t-e local government6
A' 48. T-e local government cannot impose
tax on t-e national government. and 3it-
more reason t-at it cannot impose a tax 3it-
e/ual #>I.
F. Ta#es that can either be i*,ose. by
Pro!inces or Cities
=. ta& on transfer of realty /T2041
4ote t-at t-is is not a real estate tax. t-is is a
local tax 'or t-e simple reason t-at it is not
provide 'or under t-e topic o' real estate tax
,\1(&72&*2
#a3 sa%s Oit s-ould not exceed [ o' 1S o'
t-e considerationP ,48TE= do not use Jonal value
since t-is is used onl% under t-e I!C. not t-e
#>C.
/' Fince all t-e provinces and cities must 'ollo3
t-e limitation o' t-e rate ,not exceeding [ o'
1S2. is it violative o' t-e e/ual protection clause6
A' 48. 0ecause t-e sangguninan -ad to
determine t-e actual rate considering t-e status
o' t-e province.
/' 5-% is t-at ;a1ati 'ix t-e rate o' $S or 3B4
o' 1S6
A' Because cities are aut-oriJed to increase t-e
rate o' *S o' t-e maximum. t-at is *S o' [ is
2S ,*X2 is $S2.
48TE= Do not appl% trans'er o' realt% pursuant
to !) ""$ ,C)!P2 t-is is t-e Compre-ensive
)grarian !e'orm Program t-is is exempt.
==. ta& on printing an publication /T20,1
4ormall%. a province cannot impose t-is
0ecause t-e tax on 0usiness can onl% 0e
imposed 0% a cit% or municipalit% EACEPT t-is
(
TAXATON
one. on printing and pu0lication o' magaJines
and periodicals.
===. franchise ta& /T2061
T-e old national 'ranc-ise tax under t-e old
tax code 3as alread% a0olis-ed.
5e still -ave 'ranc-ise tax ot-er t-an t-is
one. 1no3n as national 'ranc-ise tax provided
'or in t-e repu0lic act granting 'ranc-ise.
T3o 1inds o' Dranc-ise Tax=
1. local 'ranc-ise tax ,under #>C \13$2
2. national 'ranc-ise tax ,provided 'or in t-e
statute or repu0lic act aut-oriJing t-e
'ranc-ise2
/' ;a% #>Is impose local 'ranc-ise tax6
A' 5e -ave to consider -ere man% supreme
court decisions and also \1(3 o' t-e #>C.
Inder \1(3. it sa%s t-ere Ounless especiall%
provided 'or in t-is code. exemptions granted to
natural Kuridical persons are -ere0% 3it-dra3n
,a0olis-ed2 EACEPT=
1. local 3ater districts
2. cooperatives registered under t-e
cooperative code ,!) "(3&2
3. non7pro'it and non7stoc1 educational
institution.
BA-C) v (AAC)R /236 -CRA 4.1
D= T-e cit% council passed a tax ordinance
imposing tax on P)>C8!. an agenc% o' t-e
government. P)>C8! o0Kected sa%ing t-at
t-e local cit% is pro-i0ited under t-e old local
aut-orit% act to impose tax on an agenc% o'
t-e government.
:= T-e FC declared null and void t-e tax
ordinance sa%ing ;anila cannot do t-at.
C%BU v "ACTA9 /.,2 -CRA ,,61
D= Ce0u government 3as tr%ing to collect real
estate tax 'rom t-e ;actan airport ,note= real
propert% tax is a territorial tax. meaning it
s-ould onl% 0e collected 3it-in its territorial
Kurisdiction2. #a3%ers o' ;actan airport
argued t-at under \13,82. Ce0u. a #>I.
cannot impose tax on an agenc% o' t-e
government. and t-e% also invo1ed t-e ruling
in B)FC8.
:= T-e la3%er o' ;actan airport is devoid o' an%
merit at all. it is 1**S erroneous since t-e
real estate tax is not a local tax. -ence. 3-%
invo1e a FC ruling and codal provision 3-ic-
can onl% 0e applied to local tax. T-ere'ore.
;actan airport s-ould pa% !eal Propert% Tax.
Be'ore t-e codi'ication in 1((1 ,to ta1e e''ect
Lanuar% 1. 1((22. local taxation 3as em0odied in
a separate 0oo1 1no3n as #ocal Tax Code ,PD
2312 3-ile real propert% tax 3as provided 'or in
a separate 0oo1 1no3n as !eal Propert% Tax
Code ,PD 4"42
*RT v CIT+ ); "A9I*A /0D. -CRA ,3.1
D= T-e ;anila cit% government tried to collect
real propert% tax 0ut t-e management o' t-e
#!T said Ono %ou cannot do t-at to us since it
is exclusivel% 'or pu0lic useP.
:= 48. %ou are not exclusivel% 'or pu0lic use
since ever% time a person 3ants to use t-e
#!T -e -as to pa%.
/' 5-% not use t-e de'ense t-at it is o3ned 0%
t-e government6
A' Because in real estate tax. t-e de'ense t-at it
is o3ned 0% t-e government is not a de'ense.
T-e #>C in \1((,B2 and in \21$. 0ot-
provisions sa%s t-at t-e 0asis 'or t-e imposition
o' real estate tax is t-e )CTI)# IFE o' an%0od%
3-o is using t-at ,ma%0e in t-e concept o'
usu'ructuar% or in t-e concept o' a lessee. or in
t-e concept o' an o3ner2M t-e 0asis is not
o3ners-ip.
in \134. t-e taxes -ere must not onl% 0e
imposed 0% provinces. it ma% also 0e imposed 0%
cities in line 3it- \11 t-ose enumerated in
\13 to 141.
CAAA+A9 :% )R) %*%CTRIC C) v "I-A"I-
)CCI:%9TA* /252 -CRA 051
? T-is 3as t-e prevailing rule 'or more t-an
1*%ears 'rom 1(&&
:= In t-e 'ranc-ise or t-e repu0lic act. t-ere are
onl% t3o ,22 1inds o' 'ranc-ise. one is a
'ranc-ise 3-ic- provide 'or a condition t-at
t-is tax ,re'erring to t-e 'ranc-ise tax2 s-all
0e in lieu o' all ot-er taxes. and t-e ot-er
'ranc-ise is t-e one 3-ic- do not provide 'or
suc- provisionM t-e province or t-e cit% can
impose local 'ranc-ise tax i' t-e 'ranc-ise
0elong to t-e second example.
R%+%- v -A9 (AB*) CIT+ /0C4 -CRA 0401
? :ere t-e FC uni'orml% ruled
:= ) provision on exemption under \1(3 dont
onl% re'er to exemptions provided 'or 0%
di''erent statutes. 0ut it includes t-ose 3-ic-
claim exemptions 0% virtue o' t-e case o'
("
TAXATON
Cagayan de )ro ,0ecause FC decisions are
also la3s2.
(*:T v :A<A) /0,0 -CRA 64C1
D= T-e 'ranc-ise -olders o' Fmart and >lo0e are
claiming exemptions 'rom t-e local 'ranc-ise
tax 0ecause t-e% are sa%ing t-at t-e% are
-olding a 'ranc-ise 3-ic- sa%s t-at it is a
'ranc-ise enacted 0% t-e -ouse o' Congress
in 1(( 3-ic- carries 3it- it an exemption
'orm local 'ranc-ise tax.
:= B% t-e ver% explicit provision o' \1(3. t-e
removal o' exemptions granted 0% di''erent
statutes and also 0% FC decisions applies
onl% to statutes and decided 0% t-e FC on or
0e'ore Lan. 1. 1((2. 0ecause \1(3 sa%s Oupon
e''ectivit% o' t-is la3P. Dor exemptions
covered 0% \1(3 t-ere'ore. Fmart and >lo0e
are aut-oriJed to claim exemptions 0ecause
t-e statue ,!) $*&22 3as enacted on 1((.
=K. ta& on sand, gravel and other $uarry
resources /T2051
5e are t-roug- 3it- t-at in t-e case o'
Bulacan
K. professional ta& /T2031
t-is must 0e correlated 3it- t-e tax under
\14$.
48TE t-at t-is is an exemption to t-e rule
t-at a cit% ma% increase t-e rate o' t-e tax
under \11 o' t-e #>C. t-e increase is not
allo3ed.
0ot- \13( and \14$ are taxes imposed on
persons exercising pro'essional calling.
Section 5=3 Section 56?
are to 0e imposed
0% provinces and
cities
are to 0e imposed
0% municipalities
and cities
are applica0le to
3or1ers 3-o must
pass a
government
examination ,e.g.
engineers.
p-%sicians. etc2
are applica0le to
persons 3-o are
3or1ing 0ut are
not re/uired to
ta1e government
examinations
t-ere is a
maximum ,P3**2
48TE= it is not
al3a%s 3**. since
t-e exact amt
must 0e 'ixed 0%
It does not
provide 'or an%
amount. t-e onl%
re/uirement is
t-at it must 0e
reasona0le
t-e ordinance.
K=. amusement ta& /T2DC1
under t-e I!C. t-ere is also amusement tax
under \12.
(BA v >U%J)9 CIT+ /206 -CRA 0451
D= T-e cit% government enacted a tax ordinance
tr%ing to collect amusement tax including
amusement tax on t-e PB) ,in )raneta.
Cu0ao2M 0ut PB) and Ono. 3e are alread%
pa%ing amusement tax to t-e national
government t-roug- t-e BI! 0ecause o' \12
o' t-e I!CP
:= GC government can no longer collect on t-e
ground t-at it is alread% 0eing collected 0%
t-e national government and secondl%. in t-e
enumerations o' amusement under \14*. %ou
3ill never see pro'essional 0as1et0all. ;ost
o' all. it is t-e intention o' t-e aut-or t-at it is
onl% t-e national government.
?na1 ng putang 1atanga-an %an.. t-e local tax
code PD 231 3as enacted in 1($4 3-en 3e dont
-ave an% pro'essional 0as1et0all.. since
pro'essional 0as1et0all 3as 0orn ;a% 1($.
? ano 0a dapt tama di%an6 0ot- t-e national
government and t-e GC government can collect.
T-ere is no violation o' t-e pro-i0ited dou0le
taxation. 0ecause t-e taxing po3ers are
di''erent. and not onl% t-at \14* spea1s o'
amusement tax on admission 'ee 0ut under
\12. it is a0ut gross receipts.
K==. delivery van /T2D21
/' 5-at i' not a deliver% van. 0ut Osa1oP lang6
A' T-e applica0le tax is under \143,>2
,peddlers tax. one imposed 0% municipalities
and cities.
I' ma% dalang sasa1%an. %ari si%a ng province
sa tax.
48TE= \137141. t-ese are taxes t-at can 0e
imposed 0% P!8+I4CEF and CITIEF.
\14371* are taxes to 0e imposed 0%
;I4ICIP)#ITIEF. 3-ic- can also 0e imposed 0%
CITIEF.
E. Ta#es that can either be i*,ose. by
M(nici,a)ities or Cities
=. Business Ta& /T2D0/AN811
($
TAXATON
a. manu'acturing. repac1ing. processing.
including t-e manu'acturer o' permitted
li/uor and also its dealer
0. 3-olesaling
c. exportation
d. retailing
e. contractors tax
'. tax on 0an1ing institution and 'inancing
institution
g. peddlers tax
-. t-e exemption under \133,i2
/' I' %ou -ave t3o 0ranc-es. -o3 man%
0usiness taxes do %ou -ave to pa%6
A' <ou pa% onl% one 0usiness tax ,\14"2
I*)NI*) B)TT*%R- v I*)NI*) CIT+ /2,D -CRA
,C61
D= Ilo7ilo Bottlers 3as alread% pa%ing a 0usiness
tax on manu'acturing under \143,)2 to t-e
cit% government 0% virtue o' a tax ordinance.
#ater on. t-e% are o0liged to pa% 0% virtue o'
anot-er tax ordinance imposing 0usiness tax
on 3-olesaling. 4aturall%. Ilo7ilo Bottlers
argued. O-o3 could it 0e. i' %ou manu'acture.
it necessar% 'ollo3s t-at %ou sell t-e
commodit% so. 3it- t-e pa%ment o' t-e
0usiness tax on manu'acturing. it carries 3it-
it t-e 0usiness o' 3-olesalingP.
:= 48. %ou -ave to determine t-e mar1eting
s%stem o' t-e compan%. I' 3-olesaling is also
0eing done in t-e place o' manu'acture. t-e
0usiness tax on 3-olesaling s-ould no longer
0e paid it s-ould onl% 0e t-e 0usiness tax on
manu'acturing. But i' t-e mar1eting s%stem
o' t-e compan% provides t-at 3-olesaling
s-all 0e done in a separate place ,ma%0e
several 1ilometers a3a%2. t-e manu'acturer
must still pa% t-e 0usiness tax on 3-olesale
0ecause no3 it could 0e argued t-at t-e%
-ave t-e separate 0usiness o' 3-olesaling.
/' 8n t-e 0usiness o' retailing. s-ould t-e
0usiness tax o' retailing 0e imposed 0% t-e cit%
or 0% t-e municipalit% O8!P 0% t-e 0aranga% in
t-e cit% or t-e 0arrio in t-e municipalit%6
A' \143,D2 must 0e correlated 3it- \12. t-e
tax to 0e imposed 0% t-e 0aranga%.
It depends=
a. cit%
V i' t-e gross receipt o' t-e retailer
exceeds P*T in a minimum o' one
%ear. it is t-e rig-t and privilege o' a
cit% to impose t-e 0usiness tax on
retailing.
0. 0aranga%
V i' t-e gross receipt o' t-e retailer did
not exceed P*T. it is t-e 0aranga%
council 3-ere t-e 0usiness o' retailing
is located.
c. municipalit%
not exceed P3*T 3it-in a period o'
one %ear.
d. 0arrio
not exceed P3*T 3it-in a period o'
one %ear.
48TE= T-ese distinctions do not appl% in
3-olesaling. T-ese are onl% 'or retailing.
Paragrap- := 'or t-e imposition o' excise
tax. percentage tax and value added tax. t-e
municipalit% ma% impose a tax not exceeding 2S
o' t-e gross receipt ,3it- regard to a cit%. it ma%
go as 'ar as 3S2
==. "unicipalities in "etro "anila who can
increase their rate /T2DD1
!ig-t no3 t-ere are onl% t3o municipalities=
1. Fan Luan
2. Pateros
===. (rofessional Ta& /T2D61
3e are t-roug- 3it- t-at
=K. ;ees for sealing and licensing of weights and
measures /T2D51
K. ;ishery rentals, fees and charges /T2D31
F. Sit(s o" Ta# ,\1*2
T-e tax re'erred to in -ere is t-e 0usiness tax
on 3-olesaling and retailing.
/' !D; is manu'acturing commodities. one o'
t-em is F3i't -otdogs. t-is is 0eing sold not onl%
in ;andalu%ong. ;etro ;anila. 0ut also to t-e
inter countr% 'rom Batanes to Ta3i7ta3i. 5-ere
s-ould t-e 0usiness tax o' 3-olesaling or t-e
0usiness tax o' retailing 0e paid6 F-ould it 0e in
t-e principal o''ice ,;andalu%ong2 OorP t-e place
3-ere t-e commodities are sold6
A' It 3ill 0e paid in t-e place 3-ere it -ad 0een
sold P!8+IDED t-ere is a 0ranc- o''ice or a sales
outlet ,\1*,)22.
I' it so -appens t-at t-e compan% -as a
'actor% di''erent 'rom t-e place 3-ere t-e
(&
TAXATON
principal o''ice is located 3*S s-ould 0e pain
in t-e principal o''ice and $*S in t-e
municipalit% or cit% 3-ere t-e 0ranc- is located.
(8I* "ATC8%- v C%BU /52 -CRA 331
D= P-il ;atc-es 3ere produced in 4agta-an.
;anila. In Ce0u cit%. t-ere 3as a 3are-ouse
3-ere t-e matc-es 3ere stored. ;an% o' t-e
customers. 0% 3a% o' 3-olesale in t-e
3are-ouse in Ce0u Cit%. t-e% came 'rom
di''erent to3ns o' t-e +isa%an !egion. ;a%
t-e 0usiness tax ordinance o' Ce0u 0e
imposed on t-ose transactions even i' t-e
0u%ers did not come 'rom t-e territorial
Kurisdiction o' Ce0u6
:= Fince in t-is case t-e contract 0oo1ed and
paid. meaning. it 3as negotiated per'ected
and consummated in t-e 3are-ouse 3-ere it
3as located in Ce0u Cit%. t-e Ce0u Cit%
government -as t-e rig-t to collect 0usiness
tax.
/' 5-at i' t-ere is an agreement t-at
commodities 3ould 0e delivered and t-at t-e
0u%er 3ould 0e 3aiting in some ot-er to3n. is
t-e ans3er still t-e same6
A' <EF. t-e ans3er is still t-e same 0ecause
deliver% to t-e carrier is deliver% to t-e 0u%er
3-ere deliver% -as 0een termed 3it-in t-e
territorial Kurisdiction o' Ce0u.
-8%** v C%BUC)T, CA"ARI9%- -UR /2C4 (8I*
2C,01
D= T-e petroleum products 3ere purc-ased at
t-e motor ve-icle traversing t-e neig-0oring
to3ns o' Ce0ucot li1e Bason. Dimalaon. all
to3ns in Camarines 4orte. T-e contract o'
sale 3as negotiated and per'ected in
di''erent municipalities 3-ere t-e motor
ve-icle o' F-ell 3as traveling.
:= )lt-oug- t-e oil depot 3as located in
Ce0ucot. t-e said municipalit% cannot impose
tax on t-at 0ecause t-e contract o' sale 3as
negotiated and per'ected in t-e di''erent
near0% to3ns o' Camarines.
/' Is t-ere a con'lict 3it- t-e case o' -hell and
(hil "atches6
A' 484E. )s a matter o' 'act. t-ese t3o
decisions complement eac- ot-er.
<. Ta#ing Po%ers o" the Barangay ,\122
8nl% a minimal sum ,'air and reasona0le2
Po3er to impose tax=
1. 8n commercial 0reeding o' 'ig-ting coc1s.
coc1'ig-ts and coc1pits
V must 0e 'or commercial purposes
2. 8n places o' recreation 3-ic- c-arge
administration 'ee
3. 8n 0ill0oards. sign0oards. neon signs and
outdoor advertisements
V especiall% 'or t-e 0arrios and 0aranga%s
along t-e -ig-3a%
4. Dor 0aranga% clearance
V i' %ou 3ant to engage in t-e 0usiness o'
retailing or 3-olesaling i' 0aranga%
captain 3ill not approve t-at 3it-in
$da%s go to t-e municipal -all or cit% -all
'or approval
. Dor t-e use o' 0aranga% propert%
V 'or instance t-e 0aranga% -as a plaJa.
0. Co**on &e!en(e &aising Po%ers ,\137
12
/' 5-% common6
A' )ll t-e #>I could impose t-e same. But it
does not 'ollo3 t-at all t-e provinces. cities.
municipalities could impose t-e same. 8nl% t-e
#>I 3-ic- operate. esta0lis-. maintain t-e
entit%
I' esta0lis-ed 0% t-e province. it s-ould onl%
0e t-e province.
T-ese are=
1. service 'ee and c-arges
V 'or services rendered
2. pu0lic utilit% c-arges
V provided o3ned. operate and maintained
0% t-em
3. toll 'ees and c-arges
V tax or toll 'or t-e use o' a 0ridge or a
street
Padua 'iled a civil action in t-e ;a1atI
!TC tr%ing to stop t-e government 'orm
collecting a toll 'ree in t-e Fout- Express
including t-e 4ort- express3a% alleging t-at -e
is a''ected as a taxpa%er 0ecause -e is 'rom
Parana/ue. :e argued t-at i' %ou use t-e
propert% o' t-e government li1e a street or a
pu0lic plaJa. %ou do not pa%. :e made t-e
analog%. t-at i' %ou go to #uneta. %ou do not pa%
t-e cit% government o' ;anila.
T-e ;a1ati !TC. t-e C) and FC -ad a
uni'orm ruling t-at t-e operator s-ould 0e
pro-i0ited 'rom collecting 'urt-er toll 'ess
0ecause i' t-e operator -ad alread% recovered
-is investment and earned an income alread%.
((
TAXATON
-e s-ould 0e stopped. )s argue 0% t-e FC. it
copied t-e argument o' t-e la3%er ,re= #uneta2.
V 48TE= t-at !es Ludicata do not appl%
-ere.
5-en t-e ruling 0ecame 'inal an
executor% in 1((3. t-e 4ort- and Fout- Express
3ere totall% dismantled and totall% destro%ed 0%
t-e DP5: to give 3a% to t-e 'inal and executor%
ruling o' t-e Court. t-at It s-ould no longer 0e
collected.
)'ter several mont-s. t-e government
announced in t-e radio t-at t-e part% in t-e case
o' Padua. mutuall% agreed t-at t-e collection
s-all 0e resumed in order to -ave mone% 'or t-e
maintenance and repair o' t-e -ig-3a%.
Exceptions to \1 ,collection o' toll 'ees2
1. mem0ers o' )DP
2. mem0ers o' t-e P;P
3. post o''ice personnel delivering mail
4. p-%sicall% -andicapped
. disa0led citiJens " %ears and older.
. Co**(nity Ta# ,\1"2
In t-e old da%s. 1no3n as Oresidence tax
certi'icate.
/' I' t-e Dilipino is a resident o' a 'oreign
countr% ,4!C2. is -e lia0le to pa% t-e communit%
tax certi'icate6
A' 48. 0ecause t-e 0asis o' imposition o' t-is
tax is 3-et-er or not %ou are an in-a0itant o' t-e
P-ilippines. ;eaning %ou are a resident o' t-e
P-ilippines.
/' 5-at a0out a 'oreigner residing in t-e
P-ilippines ,!)26
A' <EF. <ou -ave to pa% unless t-e 'oreigner is a
trans7investor 'or not more t-an 3mont-s.
T-is is applied to 0ot- natural and Kuridical
persons.
!e/uirements=
1. 'or a natural person at least 1& %ears
o' age
2. 'or corporations upon registration 3it-
t-e FEC
/' 5-at i' %ou 0ecome 1& in t-e mont- o'
Lanuar% or 4ovem0er or Decem0er6
A' Dor t-ose 3-o cele0rated t-eir 0irt-da%
0e'ore Lul% 1 ,t-at is up to Lune 3*2. t-e% are
lia0le to pa% t-e tax. 'or t-is %ear.
Dor t-ose 3-o cele0rated t-eir 0irt-da% on or
a'ter Lul% 1. t-e% are not %et lia0le to pa% t-is
%ear. 0ut -ave to 3ait until next %ear.
/' Is t-ere a di''erence 'or t-ose 3-o reac-ed
1& in t-e mont-s o' Lan7De07;arc- and t-ose
3-o reac-ed 1& in t-e mont-s o' )pril7;a%7Lune6
A' <EF. Dor t-ose 3-o cele0rated 0irt-da%s in
t-e mont-s o' Lan7De07;arc-. t-e% -ave a grace
period o' 2*da%s 3it-in 3-ic- to pa%. T-ose 3-o
cele0rated t-eir 1&
t-
0irt-da% in t-e mont- o'
)pril7;a%7Lune. t-e% do not -ave an% grace
period at all. t-e% -ave to pa% t-e tax
immediatel%.
/' I' %ou -ave a communit% tax certi'icate 'or
t-is %ear ,2**"2. can it 0e used onl% until
Decem0er 31. 2**"6
A' 48. It s-all 0e valid up to )pril 1. 2**$.
,\1"3,C22
J. Accr(a) o" the Ta# ,\1""2
Lanuar% 1
/' 5-at i' t-e tax 3as onl% approved in t-e
mont- o' ;a% 2**". do %ou -ave to 3ait until
Lanuar% 2**$6
A' 48. <ou -ave t-e rig-t to collect t-at in Lul%
1. 0ecause t-e la3 is sa%ing t-at Oit s-ould 0e
collected in t-e next succeeding /uarterP ,\1"$2
;a%or Bina% -ad a tax ordinance in ;a%. sa0i ng
mga 0ata ni%a= O0osing. collect na ta%o ng LuneP.
Bina%= O-indi nga pup3ede. mag-inta% pa ta%o
ng Lul% 1P.
/' 5-at i' t-e tax ordinance -ad 0een existing
'or several %ears alread%6
A' T-e time o' accrual 3ill al3a%s 0e Lanuar% 1.
&EMEFES ENFE& T0E NTE&NA$ &EGENEE
COFE
1. !emedies o' t-e >overnment
2. !emedies o' t-e Taxpa%er
Re,e+ies of t8e -over),e)t<
1. )ssessment
1**
TAXATON
2. Collection
Inder t-e 4I!C. assessment and collection -ave
2 1inds=
1. 4ormalB8rdinar% assessment and
collection E Fec. 2*3. 4I!C
2. )0normalBExtraordinar% assessment and
collection E Fec. 222. 4I!C
. 9ormal@)rdinary assessment and
collection
T-ere 3as a return 'iled and it is
not 'raudulent and not 'alse
. Abnormal@%&traordinary assessment and
collection
T-ere 3as=
1. an omission or 'ailure to 'ile t-e
returnM
2. i' t-ere 3as a return 'iled. it 3as
'raudulent. orM
3. t-e return 3as 'alse
/' Is a 'alse and 'raudulent return presumed6
A' 48. 'alse and 'raudulent return is not
presumed. T-e 0urden o' proo' to prove t-at t-e
return 3as 'alse and 'raudulent lies against t-e
government t-roug- t-e BI!.
T-e mere 'act t-at t-e return is erroneous
3ill not ma1e t-e return 'raudulent. it must 0e
proven 0% t-e BI!.
/' 5-% is it important to 1no3 3-et-er t-e
assessment is under normal or a0normal
condition6
A' It is important to 1no3 0ecause t-e
prescriptive period 0et3een normal and
a0normal assessment di''er.
Prescri.tive Perio+ for 3ssess,e)t
5. 9ormal@)rdinary Assessment O 0 years
from the time the return has been filed /not
the payment of the ta&1 /-ec .C0, 9IRC1
3 5a%s o' 'iling t-e return under Fec. 2*3.
4I!C=
1. 'iled 0e'ore t-e deadline ,'or an%
tax under 4I!C2
2. 'iled on t-e date o' deadline
3. 'iled a'ter t-e deadline
2 5a%s o' counting t-e 3 %ear period o'
)ssessment=
1. i' return is 'iled 0e'ore or on t-e
da% o' t-e deadline. t-e
prescriptive period starts on t-e
date o' t-e deadlineM
2. i' return is 'iled a'ter t-e deadline.
t-e prescriptive period starts on
t-e date t-e return -as 0een 'iled.
V Dor t-e calendar %ear o' 2**4. a return must
0e 'iled and paid 'or 4et Income Tax on or 0e'ore
)pril 1. 2**. Fince -e 3as not a0le to meet
t-e deadline. t-e taxpa%er is no3 0eing assessed
'or tax due 'or 2**4. To minimiJe interest and
surc-arges. it -as 0een suggested 0% t-e BI!
t-at t-e taxpa%er 'ile a late return. Fupposed -e
'iled -is return covering 2**4 on )pril 1. 2**".
In t-is example. t-e rec1oning point is t-e
deadline o' )pril 1. 2**. T-e starting point o'
t-e counting t-e 3 %r. period is on t-e date t-e
return is 'iled 3-ic- is )pril 1. 2**".
V Fuppose it is not a late 'iling o' return. t-e
counting o' t-e period is on t-e date o' t-e
deadline 3-ic- is )pril 1.
. Abnormal@%&traordinary Assessment
t-e government -as 2 options=
a. )ssess and Collect
V t-e prescriptive period 'or
OassessmentP s-all 0e 1* %ears 'rom t-e
discover% o' none 'iling or 'alse or
'raudulent return ,Fec. 222. par. o. 4I!C2
V t-e prescriptive period 'or
OcollectionP s-all 0e %ears 'rom t-e
date o' 'inal assessment ,Fec. 222. par c.
4I!C2
0. Collect 5it-out )ssessment t-roug-
Ludicial )ction
V since t-ere is Ono assessmentP t-ere
is no prescriptive period 'or assessment
V prescriptive period 'or OcollectionP
s-all 0e 1* %ears 'rom t-e date o'
discover% o' none 'iling o' return or 'alse
or 'raudulent return.
T-ese options are availa0le onl% i' t-e
)ssessment is under t-e
)0normalBExtraordinar% Conditions.
T-ese are not availa0le under
4ormalB8rdinar% )ssessment
Prescri.tive Perio+ for &ollectio)
5. 9ormal@)rdinary Collection E Fec. 2*3 did
not provide 'or t-e prescriptive period 'or t-e
collection
7 Intention o' t-e aut-or= %ears 'rom
t-e date o' 'inal assessment
1*1
TAXATON
!easons= ,Fa0a0an agrees 3it- t-e %ear
prescriptive period2
Prescriptive period o' collection under 1
st
option on )0normal )ssessment is
%ears 'rom 'inal assessment ,Fec. 222.
par c. 4I!C2
1. under t-e old code o' 1(3(. 1($$. and
1(&. i' t-e prescriptive period 'or
collection under a0normal is 3 %ears.
t-en t-e prescriptive period 'or
collection under normal is also 3
%ears. I' no3 a da%s. it is %ears in
a0normal. t-e prescriptive period 'or
normal s-ould also 0e %ears.
2. to sa% t-at t-ere is a prescriptive
period 'or collection under )0normal
and t-ere is none under 4ormal is too
a0normal. It s-ould 0e t-e ot-er 3a%
around.
. Abnormal@%&traordinary Collection
a. assess and collect E %ears 'rom t-e
'inal assessment
0. collect 3it-out assessment t-roug-
Kudicial action E 1* %ears 'rom date o'
discover% o' none 'iling. or 'alse. or
'raudulent return.
/' :o3 to appl% t-ese periods6
A' )nnual net income tax return 'iled 0%
individual using a calendar %ear. T-e return
s-ould 0e 'iled on or 0e'ore )pril 1. 2***. It
3as 'iled on )pril 1. 2***.
/ 5it-out stating t-e date o' 'inal assessment.
can it 0e collected in 2**$6
A' Inder normal condition. 'irst determine t-e
date o' 'inal assessment. I' t-e BI! 'inall%
assessed t-e tax in 4ovem0er 2**1. t-en 2**$
is 3a% 0e%ond t-e %ear period to collect. Count
t-e prescriptive period 'or collection 'rom t-e
date o' 'inal assessment.
/' ,same 'acts2 Fupposed it 3as 'inall% assed on
;arc- 2**3. can it 0e collected in 2**$6
A' <es. 0ecause it is 3it-in t-e prescriptive
period o' %ears.
BA-I*A9 v C)""I--I)9%R /.2 -CRA 261
D= Fupposed t-e notice o' assessment 3as given
3it-in t-e period 0ut it 3as received 0% t-e
taxpa%er outside t-e period.
I= 5-et-er or not t-e assessment is 3it-in t-e
period o' 3 %ears.
:= <es. It is 3it-in t-e period. I' t-e notice is
sent t-roug- registered mail. t-e running o'
t-e prescriptive period is OstoppedP. 5-at
matters is t-e sending o' t-e notice is made
3it-in t-e period o' prescription.
It is t-e sending o' t-e notice and not t-e
receipt t-at tolls t-e prescriptive period.
/' 5-at i' t-e return -as 0een amended. -o3
3ould %ou compute t-e period o' assessment6
A' 4I!C is silent.
(8)%9IM v C)""I-I)9%R /2D -CRA 4.1
I' t-e amendment o' t-e return is su0stantial
as distinguis-ed 'rom super'icial. t-e counting o'
t-e prescriptive period is also amended. T-e
prescriptive period s-all 0e rec1oned on t-e date
t-e su0stantial amendment 3as made. I' t-e
amendment is super'icial. t-e counting o' t-e
prescriptive period is still t-e original period.
Proce.(re "or Assess*ent 2Sec. CC4B N&CM
&& 5C+337
Fteps o' assessment
1. Fec. 22&. 4I!C ,2 steps2
2. !! 127(( ,3 steps2
2 Fteps under Fec. 22&. 4I!C
1. Pre7assessment notice
2. Dinal assessment notice
3 Fteps under !! 127((
1. 4otice o' In'ormal Con'erence
2. Preliminar% )ssessment 4otice
3. Dormal #etter o' Demand and 4otice to
Pa% t-e Tax
P&OCEFE&E 2Sec. CC4B N&CM && 5C+337
1. Ipon receipt o' t-e notice o' in'ormal
con'erence. 'ile a repl% 3it-in 1 da%s
'rom receipt o' noticeM
2. Dailure to 'ile a repl%. 2 t-ings ma%
-appen=
a. BI! 3ill send again t-e 4otice o'
In'ormal Con'erence or
0. BI! 3ill send a Preliminar% 4otice o'
)ssessment
3. Ipon receipt o' Preliminar% )ssessment
4otice ,P)42. 'ile a repl% 3it-in 1 da%s
'rom receipt
4. Dailure to 'ile a repl% 3ill result in eit-er=
a. BI! 3ill repeat P)4
0. Declare t-e taxpa%er in de'ault. and
send %ou a Dinal )ssessment 4otice
,D)42
1*2
TAXATON
. Ipon receipt o' D)4. taxpa%er ma% 'ile a
protest 3it-in 3* da%s.
/' Is D)4 t-e one appeala0le to t-e Court o' Tax
)ppeals ,CT)26
A' 48. T-is is 0ecause \22&. 4I!C and !! 127((
re/uires t-e ex-austion o' administrative
remed% o' protest. )'ter t-e receipt o' D)4 or
'ormal demand 3it-in 3*da%s must 'ile a protest
0e'ore t-e o''ice o' t-e commissioner o' internal
revenue.
FO&MS OF P&OTEST
1. #ocal Tax ,Fec. 12. #ocal >overnment
Code ,#>C22
2. !eal Propert% Tax ,Fec. 22. #>C2
3. Tari'' and Customs Code ,Fec. 2313. !)
$"12
In all protest under t-e di''erent codes.
pa%ment under protest is onl% necessar% under
t-e O!eal Estate TaxP.
RR 1-""
I' t-e taxpa%er receives 2 'inal assessments.
one under t-e 4et Income Tax ,4IT2 and t-e
ot-er in +)T. I' t-e taxpa%er dont 3ant to 'ile
protest under +)T 0ut 3ant to 'ile a protest
under 4IT. T-e taxpa%er in order to 0e allo3ed
to 'ile a protest under t-e 4IT must 'irst pa% t-e
+)T 3-ere -e does not intend to 'ile a protest.
T-is is not Opa%ment under protestP 0ecause.
pa%ment under protest is t-e one mentioned in
!eal Propert% Tax under Fec. 22. #>C.
Inder 4I!C. Protest is re'erred to as=
1. disputing o' 'inal assessment or
2. 'ile a motion 'or reconsideration or
reinvestigation
/' 5-at s-ould 0e done a'ter 'iling a protest6
A' Count "*da%s is t-e period to 'ile t-e
necessar% documents and receipts in support o'
t-e protest.
/' 5-at is t-e e''ect o' 'ailure to 'ile t-e
supporting documents6
A' Dailure to 'ile t-e necessar% and supporting
documents 3it-in t-e "*da% period. to 0e
counted on t-e da% t-e protest is 'iled. t-e 'inal
assessment s-all 0ecome 'inal and executor%.
8n t-e 1
st
da% %ou 'iled t-e necessar%
document. %ou -ave to count anot-er period.
3-ic- is 1&* da%s 'rom t-e da% %ou 'iled t-e
necessar% documents.
!elevance o' t-e 1&* Da%s= 1&* da%s is t-e
time given to t-e BI! to decide t-e case
/' Fupposed it did not decide t-e case 3it-in
1&*da%s6
A' Do not invo1e t-e #ascano case 0ecause it
3as reKected 0% !) (2&2
In t-e #ascano case. 0e'ore %ou 'ile an
appeal alt-oug- t-e 1&* da%s -ave lapsed. %ou
-ave to 3ait 'or t-e BI! to ta1e positive action.
T-e case 3as ruled onl% 0% t-e CT). -ence it
is not a la3. T-e Kurisdiction o' t-e CT) -as 0een
amended 0% !) (2&2.
!) (2&2 provides t-at in case o' inaction o'
t-e commissioner a'ter t-e lapse o' 1&*da%s.
remed% is to 'ile an appeal.
!! 127(( sa%s t-at a'ter lapse o' 1&*da%s
0ut 3it-in 3*da%s a'ter 1&*da%s. t-at is t-e time
to 'ile an appeal.
/' Fupposed t-e BI! rule 3it-in 1&*6
A' 5it-in 3*da%s 'rom receipt o' t-e decision
'ile an appeal to t-e CT) sitting in division.
/' Fupposed t-e CT) decided not in %our 'avor6
A' Dile a motion 'or reconsideration 3it-in
1da%s to t-e same division deciding t-e case.
/' Fupposed t-e CT). in division decided not in
%ou 'avor6
A' Dile an appeal to t-e CT) sitting en 0anc.
/' Fupposed t-e CT) en 0anc decided not in
%our 'avor6
A' Dile an appeal 3it-in 1da%s 'rom receipt o'
decision to Fupreme Court.
/' During t-e pendenc% o' t-e protest in t-e
o''ice o' t-e Commissioner. supposed %ou
receive a notice o' collection. lev% andB or
distraint. 3-at is %our remed%6
A'
2 +AB%- v C)""I--I)9%R /24C -CRA .651
. U9I)9 -8I((I9A *I9%- v C)""I--I)9%R
/254 -CRA 4D61
I34'S v. &277=SS=2N'R (150 S&R3 AC$
D= T-e taxpa%er receives a notice o' collection
3-ile 3aiting 'or t-e decision o' -is protest.
:e t-en 'iled an OappealP 3it- t-e CT)
contending -is protest -as 0een denied
0ecause -e did not receive a decision 0ut
1*3
TAXATON
receive a notice o' collection.
Fimultaneousl%. t-e BI! 'iled 0e'ore t-e CDI
an Oordinar% civil actionP 'or t-e collection o'
sum o' mone%. 5-en t-e Kudge o' t-e CDI.
3as a0out to conduct t-e -earing o' t-e
case. t-e taxpa%er 'iled an inKunction 3it- t-e
FC to pro-i0it t-e Kudge o' t-e CDI contending
t-at a single cause o' action is pending in t3o
courts. one in t-e CT) and anot-er in CDI.
:= InKunction 3as granted pro-i0iting t-e Ludge
o' t-e CDI and re/uiring t-e Ludge to trans'er
t-e records to t-e CT) sa%ing t-at t-e
remed% made 0% t-e taxpa%er 3as t-e
correct remed%.
/' 5as t-e appeal made on time6
A' <es. 3-en t-e BI! 'iled an ordinar% action.
t-e protest is deemed denied. :ence an appeal
is a proper remed%.
ENON S0PPN< $NES !. COMMSSONE&
D= T-e taxpa%er 3as 3aiting 'or t-e decision o'
-is protest. But instead. -e received a notice
o' collection. Immediatel%. -e 'iled a ;otion
'or !econsideration and Clari'ication as1ing
3-et-er -is protest -as 0een denied. T-e
BI! did not repl% or ans3er 0ut instead 'iled
an 8rdinar% Civil )ction 0e'ore t-e CDI.
5-en t-e taxpa%er received summons. -e
did not ans3er 0ut instead 'iled an )ppeal
0e'ore t-e CT).
I= 5-et-er or not t-e remed% o' )ppeal 3as t-e
correct remed% and 5-et-er or not it 3as
'iled on time.
:= <es. T-e remed% o' appeal is t-e correct
remed% and t-e appeal 3as 'iled on time.
T-e rec1oning period 3it-in 3-ic- to 'ile an
appeal is t-e time t-e taxpa%er received t-e
summons.
5-ile an )ppeal is pending 0e'ore t-e CT). t-e
CT) 3ill determine=
1. I' t-e decision 3as made 3it-in 1&* da%s.
3-et-er t-e appeal 3as made 3it-in 3*
da%s 'rom t-e receipt o' t-e said decision.
or
2. i' t-ere 3as no decision a'ter t-e lapse o'
1&* da%s. 3-et-er t-e appeal 3as made
3it-in 3* da%s upon t-e expiration or t-e
lapse o' t-e 1&*7da% period.
/' Pending appeal 3it- t-e CT). can t-e BI!
amend t-e 'inal assessment6
A' 2 FC:88#F 8D T:8I>:T=
1. AU%RR%R) v C)""I--I)9%R /23
-CRA .41
2. BATA9AA- v C)**%CT)R /2C. (8I*
5..1
<EE&&E&O !. COMMSSONE& 253 SC&A C@7
0' 4o. Because it is no longer t-e disputed
assessment.
BATAN<AS !. CO$$ECTO& 25>C P0$ 4CC7
0' <es. In order to avoid multiplicit% o' suits
)CC8!DI4> T8 LIFTICE +ITI>=
43/3NG3S v. &2LL'&/2R (10 P5=L C$ =S
/5' 4'//'R R9L=NG
P&OTEST ENFE& $OCA$ TAX 2Sec. 53@B
$<C7
Inder 4I!C. protest is 'iled in t-e 8''ice o'
t-e Commissioner
Inder #>C. protest is 'iled 3it- t-e same Cit%
or Provincial or ;unicipal Treasurer 3-o issued
t-e assessment
Period to 'ile Protest
"* da%s 'rom receipt o' assessment
/' I' t-e treasurer did not decide 3it-in a "*da%
period. remed%6
A' >o to t-e court o' competent Kurisdiction
,!TC2
/' I' t-e !TC decided not in %ou 'avor6
A' Dile an appeal 3it- CT) en 0anc ,0eginning
)pril 23. 2**42
/' I' t-e CT) decided not in %our 'avor6
A' )ppeal to t-e FC.
48TE=
Pursuant to !) (2&2. direct appeal to CT) en
0anc can 0e made 'rom=
1. Decision o' t-e !TC involving local
taxation exercising appellate Kurisdiction
2. Decision o' t-e Central Board o'
)ssessment )ppeal exercising appellate
Kurisdiction.
P&OTEST ENFE& &EA$ P&OPE&T; TAX
2Secs. CCAB C=>B an. C@C7
!emed% s-all 0e t-e same
Sec. C@CB $<C
I' t-e taxpa%er receives a 4otice o'
)ssessment 'rom municipal. cit%. or
provincial treasurer. t-e remed% is to 'ile
1*4
TAXATON
a protest 0ut t-ere must 0e 'irst Pa%ment
Inder Protest.
7 T-is is t-e onl% instance 3-ere
pa%ment under protest is necessar%
/' :o3 is pa%ment under protest made6
A' )t t-e 0ac1 o' t-e receipt t-ere 3ill 0e an
annotation t-at t-ere 3as a pa%ment under
protest 3it-in "*da%s 'rom receipt o' t-e notice
o' assessment 3it-in t-e same treasurer 3-o
issued t-e assessment.
/' I' t-e treasurer rules against t-e taxpa%er.
remed%6
A' T-e remed% is to 'ile an appeal to t-e #ocal
Board o' )ssessment 3it-in 3*da%s 'rom t-e
receipt o' t-e decision.
/' Drom t-e decision o' t-e #ocal Board o'
)ssessment6
A' )ppeal s-ould 0e made to t-e Central Board
o' )ssessment )ppeal.
Beginning )pril 23. 2**4. t-e ruling o' t-e
Central Board o' )ssessment )ppeal is no longer
'inal. It can no3 0e appealed to t-e CT). sitting
en 0anc.
P&OTEST ENFE& T0E TA&FF ANF
CESTOMS COFE 2TCC7 2Sec. C=5=B as
a*en.e. by &A ?A@57
Dormerl%. t-e automatic appeal under t-e
TCC applied onl% to protestM 0ut no3 a da%s. t-e
automatic appeal applies to 0ot- protest and
'or'eiture.
Dor Dor'eiture Inder t-e Tari'' and Customs Code
!e'ers to t-e 8rder o' t-e Collector
con'iscating t-e imported goods or commodities
%octri)e of Pri,ary :uris+ictio)
I' t-e Collector ordered t-e 'or'eiture o' t-e
imported commodities t-e order o' t-e Collector
s-all 0e to t-e exclusion o' all government
o''ices and aut-orit%.
Importer o' C-emical. under t-e TCC. t-e
custom duties is onl% P2$ 0ut t-e collector sa%s
it s-ould 0e P2. T-e importer 3ill t-en 'ile a
protest 3it- t-e 8''ice o' t-e Collector.
In t-e old da%s. t-ere is an automatic appeal
'rom t-e decision o' t-e collector under protest.
But under !) $"1. t-e remed% o' automatic
appeal is applica0le to 0ot- protest and
'or'eiture.
I. In both cases of protest and forfeiture, if the
importer lose the case and the government wins,
the remedy is to file an appeal within 24 days
before the )ffice of the Commissioner
Drom t-e ruling o' t-e Commissioner. t-e
importer s-ould 'ile an appeal 3it-in 3*
da%s 0e'ore t-e CT). sitting in division.
Drom t-e ruling o' t-e CT) in division. t-e
importer s-ould 'ile an ;! 3it-in 1 da%s
0e'ore t-e same division -earing t-e
case.
Drom t-e ruling o' t-e CT) in division.
deciding on t-e ;!. t-e importer s-ould
'ile an appeal 3it-in 1 da%s 0e'ore t-e
CT) sitting en 0anc.
Drom t-e CT) en 0anc. appeal to FC
3it-in 1 da%s.
III. If the importerNta&payer wins the
case, the government lose the case,
-ec .020 of TCC as amended by RA
6,42, there shall be an automatic
review within 24 days
/' 5-ere s-ould t-e automatic revie3 0e
made6
A' It depends. Pu0lis- t-e value o' t-e
commodit%.
1. ID P ;I##I84 8! ;8!E E )IT8;)TIC
!E+IE5 F:)## BE BED8!E T:E
FEC!ET)!< 8D T:E DEPT. 8D DI4)4CE.
2. ID #EFF T:)4 P ;I##I84 E
)IT8;)TIC !E+IE5 F:)## BE BED8!E
T:E 8DDICE 8D T:E C8;;IFFI84E!
/' Fuppose t-e commissioner decide or did not
decide 3it-in 3*da%s. 3-at -appens6
A' I' t-e commissioner reverses t-e ruling o' t-e
collector. t-e ruling is 'inal and executor%.
I' t-e commissioner a''irms or did not decide
3it-in 3*da%s. t-ere s-all 0e an automatic
appeal 0e'ore t-e sec. o' 'inance.
/' Bet3een t-e t3o 3-ic- 3ill 0e appealed to
t-e CT)6
A' T-e decision o' t-e secretar% 3-ic- passes
t-roug- t-e o''ice o' t-e commissioner ,!)
(2&22
But not all t-e decision o' t-e secretar%
3-ic- passes t-e o''ice o' t-e commissioner
a''irms or did not decide 3it-in 3*da%s and
appealed 0e'ore t-e secretar% o' 'inance 3ill
appeal to t-e CT) 0e allo3ed.
1*
TAXATON
T-ere are 3 instances 3-en t-e Fecretar% o'
Dinance renders a decision appeala0le to t-e
CT)=
1. decision o' t-e Fecretar% 0% virtue o'
automatic revie3 passing t-roug- t-e
Commissioner
2. cases o' anti7dumping dut%. 3-ere t-e
anti7dumping dut% 3as ordered 0% t-e
Fecretar%
3. decision o' t-e Fecretar% o' Dinance on
countervening dut%.
COMP&OMSE 2Sec. C>6B N&C7
3 Guestions as1ed in 2**4 B)!=
1. ;a% t-e >overnment compromise
criminal cases and civil cases6
2. Fupposed t-e corporation is alread%
dissolved. can t-e stoc1-older 0e o0liged
to pa%6
3. Fuppose t-e civil case 'iled 0% t-e BI! is
'inal and executor. can it 0e su0Kect to
compromise6
CAN T0E&E BE COMP&OMSE N'
5. CI+I# C)FEF6
7 <EF. I4 )4< FT)>E 8D T:E
P!8CEEDI4>
7 EACEPT 5:E4 T:E CI+I# C)FE IF
)#!E)D< DI4)# )4D EAECIT8!<
BEC)IFE IT 5I## BE +I8#)TI+E 8D
T:E FEP)!)TI84 8D P85E!F
C. C!I;I4)# C)FEF6
7 <EF. EACEPT=
a. ID )#!E)D< DI#ED I4 C8I!T ,!TC2
8!M
0. ID IT I4+8#+EF D!)ID
=. ID T:E C8!P8!)TI84 IF )#!E)D<
DIFF8#+ED. C)4 T:E FT8CT:8#DE! BE
:E#D #I)B#E T8 P)< T)A6
7 >E4E!)# !I#E= 48
7 EACEPT=
a. ID IT IF P!8+E4 T:)T T:E )FFETF
8D T:E C8P8!)TI84 IF T)TE4 B<
84E FT8CT:8#DE! 8!M
0. ID T:E FT8CT:8#DE! DID 48T
P)< :IF I4P)ID FIBFC!IPTI84
;inimum )mount to 0e Compromised ,Fec. 2*42
1. I' t-e ground is 'inancial incapacit% o' t-e
taxpa%er. t-e minimum s-all not 0e less
t-an 1*S o' t-e original assessment.
2. I' 0ased on ot-er grounds. t-e minimum
amount s-all not 0e lo3er t-an 4*S o'
t-e original assessment.
/' Can it 0e lo3er t-an t-at prescri0ed 0% la36
A' )s a rule. no. EACEPT. i' allo3ed 0% t-e
evaluation 0oard consisting o' t-e=
a2 commissionerM and
02 deput% commissioner.
Instances 3-en t-e Dinal )ssessment 0ecomes
'inal and executor=
1. I' t-e taxpa%er did not 'ile t-e protest on
time
2. Dailure to su0mit t-e supporting
documents 3it-in t-e "*7da% period
3. )'ter t-e lapse o' t-e 1&*7da% period. %ou
did not 'ile an appeal 3it-in t-e 3*7da%
period to t-e CT)
4. )n appeal 3as 'iled 0ut made 0e%ond t-e
reglementar% period to appeal
MET0OFS OF CO$$ECTON 2SEC. C>@7
5. 7udicial Action
a. Civil
0. Criminal
C. Administrative Action
a. Distraint
0. #ev%
c. Tax lien
/' 5-% is it important to 1no3 3-et-er t-e 'inal
assessment is under normal or a0normal
conditions6
A' It is important 0ecause o' t-e re/uirement
under \222. I' t-e 'inal assessment 0ecomes
'inal and executor%. t-e government ,BI!2 can
exercise t-e remedies under \2* in an% order or
simultaneousl% ,\2*$2. But it is not al3a%s t-e
case. 0ecause t-e rig-t o' t-e government to
collect is limited in case o' a0normal
assessmentBcollection under \222. Inder t-e
second option. t-e rig-t o' t-e government is
limited to Kudicial action eit-er civil or criminal.
)dministrative remedies suc- as distraint. lev%.
or tax lien is not availa0le under suc- condition.
/' In distraint. lev% or tax lien. is t-e 1* %ear
period o' collection applica0le6
A' 4o. onl% t-e %ear period s-ould appl%.
%istrai)t
Tinds=
1. Constructive ,Fec. 2*"2
2. Distraint o' Intangi0le ,Fec. 2*&2
3. )ctual ,Fec. 2*$. par. a. and Fec. 2*(2
5. Constructive :istraint
1*"
TAXATON
T-e distraining o''icer s-all ma1e a list o' t-e
personal propert% o' t-e propert% to 0e distraint
in t-e presence o' t-e o3ner o' t-e propert% or
t-e person in possession o' t-e propert%.
T-e o3ner s-all 0e re/uested to sign t-e
receipt.
/' 5-at i' t-e o3ner re'uses to sign t-e receipt6
A' Fec. 2*"= T-e distraining o''icer s-all re/uire
2 individuals 3it-in t-e neig-0or-ood 3it- t-e
3arning t-at t-e% s-ould not allo3 t-e taxpa%er
to dispose. trans'er. or sell t-e propert% su0Kect
o' distraint.
>rounds 'or Constructive Distraint ,Fec. 2*"2=
1. T-e taxpa%er intends to leave t-e
P-ilippines
2. T-e taxpa%er leaves t-e P-ilippines
3. T-e taxpa%er ceases or retires 'rom
0usiness
4. T-e taxpa%er o0structs t-e collection o'
t-e tax.
T:EFE >!8I4DF )#F8 )4F5E! T:E
GIEFTI84= 5:)T )!E T:E T)A)B#E PE!I8D
#EFFE! T:)4 12 ;84T:F6
C. :istraint of Intangible (roperty
#imited to 3 Intangi0le Properties=
1. F-ares o' stoc1s
2. Ban1 accounts
3. Credits and de0its
-hare of stocBs
5arrant o' distraint 'urnis-ed to t-e
taxpa%er or t-e o''icer o' t-e corporation 3it-
t-e 3arning t-at t-e propert% is su0Kect o'
distraint and it s-ould not dispose o' it.
BanB Accounts
taxpa%er or t-e o''icer o' t-e 0an1 3it- t-e
3arning t-at t-e taxpa%er s-ould not 0e
allo3ed to 3it-dra3.
:ebits and Credits
de0tor and creditor
=. Actual :istraint
Personal propert% s-all 0e p-%sicall%
ta1en 0% t-e distraining o''icer.
5it-in 1* da%s 'rom t-e receipt o' t-e
3arrant. a report o' t-e distraint s-all 0e
su0mitted to t-e BI! ,Fec. 2*$. par a last
par.2
T-e propert% su0Kect o' distraint s-all 0e
sold at a pu0lic auction EACEPT 0an1
accounts and de0its and credits.
V 4otice o' sale s-all 0e 0% posting in 2
conspicuous place. stating t-e date and
t-e place o' t-e sale ,4o pu0lication
re/uirement2
Fec. 211= a'ter t-e sale and 3it-in 2
da%s. a report s-all 0e made to t-e BI!
/' I' t-e propert% sold is a personal propert%. is
t-ere a rig-t o' redemption6
A' 48. T-e rule is a0solute.
/' I' t-e propert% is a personal propert%. is t-ere
a rig-t o' preemption6
A' FEC. 21*= Be'ore t-e sc-eduled sale. t-e
taxpa%er is allo3ed to recover t-e propert% 0%
pa%ing all t-e propert% 0% pa%ing all t-e proper
c-arges as 3ell as t-e interest. cost and
penalties.
During t-e Fc-eduled )uction Fale. 2 T-ings ma%
-appen=
1. T-ere is 0idder and t-e 0id is enoug-
2. T-ere is no 0idder or t-ere is a 0idder 0ut
t-e 0id is not enoug-
/' 5-at is t-e relevance o' 1no3ing t-e
di''erence6
A' 1. If there is a bidder and the bid is enough
V In case o' insu''icienc%. t-ere s-all 0e
'urt-er distraint to cover t-e lia0ilit%. ,\21$2
V In case o' excess. t-e excess s-all 0e
returned to t-e taxpa%er.
2. If there is no bidder or the bid is not
enough
V It 3ill 0e purc-ase 0% t-e government
and t-e later sold in a pu0lic auction again
,\2122
V In case o' insu''icienc%. no 'urt-er
distraint. \21$ applies onl% i' t-ere 3as a
0idder.
V In case o' excess. t-e excess s-all not 0e
returned to t-e taxpa%er 0ut s-all 0e
remitted to t-e national treasur%.
Levy
1*$
TAXATON
8t-er t-an t-e delin/uent taxpa%er.
3arrant o' lev% is served to t-e register o'
deeds -aving Kurisdiction over t-e real
propert% ,Fec. 2132
5it-in 1* da%s 'rom t-e receipt o' t-e
3arrant. a report o' t-e lev% s-all 0e
su0mitted to t-e BI! ,Fec. 2*$ ,02 last par2
4otice o' Fale in Pu0lic )uction=
1. Posting in 2 conspicuous places
2. Pu0lication in ne3spaper o' general
circulation once a 3ee1 'or 3 consecutive
3ee1s.
/' Is t-ere a rig-t o' pre emption6
A' <es. \213.
/' Is t-ere a rig-t o' redemption6
A' <es.
2 T-ings ma% -appen in a Pu0lic )uction=
1. T-ere is a 0idder and t-e 0id is enoug-
2. T-ere is no 0idder or t-e 0id is not
enoug-
/' 5-at i' t-ere is no 0idder or t-e 0id is not
enoug-6
A' Dor'eiture s-all 0e made ,\212
3 De'initions o' Dor'eiture under t-e Internal
!evenue Code
1. +iolation o' Excise Tax #a3 ,Fec. 2242
2. I' t-ere is no 0idder or t-e 0id is not
enoug- ,Fec. 212
3. T-e order o' t-e Collector to con'iscate
imported commodities ,Fec. 2313. TCC2
!elevance o' t-e C-oice o' 5ords=
Inder sec. 212. t-e la3 sa%s Opurc-aseP
Inder sec. 21. t-e la3 sa%s O'or'eitureP
V under 21= t-e real propert% s-all 0e
automaticall% registered in t-e name o'
t-e >overnment ,'or'eiture2
V under 212= t-e real propert% is not
automaticall% registered in t-e name o'
t-e >overnment ,purc-ase2
/' I' sold at a private sale. 3-at is t-e
re/uirement6
A' T-ere must 0e an approval o' t-e Fecretar%
o' Dinance ,\21"2
/' )'ter sale. i' t-ere 3as de'icienc%6
A' T-ere s-all 0e no 'urt-er lev%. 0ecause \21
sa%s t-at it s-all 0e to t-e total satis'action o'
t-e taxpa%er.
/' )'ter sale. i' t-ere 3as an excess6
A' It s-all not 0e returned to t-e taxpa%er 0ut
s-all 0e remitted to t-e national treasur%.
Sec. C5?' t-is is onl% true i' t-ere 3as no
0idder or t-e 0id 3as not enoug- 0ecause o' t-e
provisions o' t-e Fecs. 212. 21. and 21"
Sec. C54' no court s-all issue an inKunction to
restrain t-e collection o' tax under t-is code
Determine 3-at 1ind o' inKunction is re'erred to
-ere=
1. Pro-i0itor% E re'erred in Fec. 21& 0ecause
it restrains t-e collection o' tax.
2. ;andator%
/' Is t-e provision limited to Otax under t-is
codeP6
A' #imited to internal revenue taxes. EACEPT=
CT) ,!egular Court2 !) 112 and (2&2= CT) is
aut-oriJed to issue inKunction to restrain t-e
collection o' taxes or 'ees collected under ot-er
code.
/' Is t-e rule o' distraint or lev% t-e same under
local taxation6
A' <es. local tax.
V \1$ 'or DIFT!)I4T
V \1$" 'or #E+<
/' :o3 a0out real propert% tax6
A' 4o. distraint is not aut-oriJed ,\2". #>C2.
0ecause t-e remed% is onl% 7udicial Action and
*evy.
/a0 Lie)
4on pa%ment o' tax. t-e government -as t-e
rig-t to claim a lien over t-e propert% o' t-e
taxpa%er
1. 4I!C E Fec. 21(. 4I!C
2. #ocal Tax E Fec. 1$3. 4I!C
3. !eal Propert% Tax E Fec. 2$. 4I!C
/' Fupposed a parcel o' land is a0out to 0e
levied 0% t-e government. 0ut t-e same is 0eing
'oreclosed 0% t-e mortgagee. 3-ic- o' t-e 2
o0ligee. t-e government or t-e mortgagee s-all
0e pre'erred6
A' \21(. last portion= T-e government is t-e
pre'erred one i' t-e lien is annotated and
recorded in t-e registr% o' deed. In t-e a0sence
o' annotation in t-e registr% o' deeds. t-e
mortgagee is pre'erred.
1*&
TAXATON
/' Do 3e -ave t-e same rule under #ocal Tax
and !eal Propert% Tax6
A' 48. Bot- \1$3 and \2$. t-e government is
al3a%s t-e pre'erred one. T-e lien can onl% 0e
removed 0% pa%ment o' tax. interest and
penalt%.
Sec. CC>' approving o' 'iling an ordinar% civil
action 'or violation o' t-e internal revenue code
T-e approval must 0e made 0% t-e
Commissioner o' Internal !evenue
5=>2N v. R'P94L=& (B0 S&R3 5A4$
F' )n ordinar% civil action 'or violation o' t-e tax
code 3as 'iled in t-e cit% o' Fan Dernando.
But t-e 'iling 3as onl% approved 0% t-e
!evenue !egional Director o' Central #uJon.
T-e plainti'' opposed t-e 'iling in t-e court on
t-e ground t-at it s-ould 0e approved 0% t-e
Commissioner and t-e !evenue !D.
0' Fec. 22* s-ould 0e read 3it- Fec. $ o' t-e
4I!C
V >eneral !ule= po3ers and 'unctions
o' t-e Commissioner ma% 0e delegated
0ut not to a position lo3er t-an a Division
C-ie'
V Inder Fec. $. t-ere are po3ers 3-ic-
can not 0e delegated
a2 Po3er to recommend to t-e
Fecretar% o' Dinance to issue rules
and regulation
02 Po3er to decide a case o' 'ist
impression
c2 Po3er to enter into a compromise
agreement
d2 Po3er to assign BI! o''icer in t-e
place o' production su0Kect to
income tax
V Fince t-e case does not 'all under t-e
pro-i0ited delegation. t-e 'iling o' t-e
case is legal and tena0le.
Decision o' t-e Commissioner o' Internal
!evenue ,CI!2 is appeala0le to CT).
/' 5-en is a decision o' t-e cir appeala0le to
t-e Fecretar% o' Dinance6
A' \4. on matters o' interpretation o' tax la3s.
SEC. CC=' SESPENSON OF T0E &ENNN<
OF P&ESC&PTGE PE&OF
/' ) Dilipino taxpa%er 3ent to Canada. a'ter
1%ears -e 3ent 0ac1. -e is 0eing assessed 0%
t-e BI! under normal assessment. :as t-e rig-t
o' t-e government to asses t-e tax alread%
prescri0ed6
A' 48. 5-en -e 3ent to Canada. t-e running o'
t-e prescri0ed period is suspended.
/' 5-at i' t-e c-ange o' address is 3it-in t-e
P-ilippines. sa% onl% 'rom manila to Pasa% Cit%.
is t-e running o' t-e prescriptive period
suspended6
A' In order t-at t-e running o' t-e prescriptive
period 3ill not 0e suspended. especiall% i' t-e
c-ange is district o''ice. \223 provides t-at t-e
taxpa%er must send a 3ritten notice o' c-ange o'
address to t-e BI!.
In t-e a0sence o' t-e 3ritten notice. t-e
period 3ill 0e suspended.
/' C-ange o' address is 'rom P-ilippines to
a0road6
A' T-e period 3ill 0e suspended.
8t-er >rounds 'or Fuspension=
1. During collection i' t-ere is no propert%
'ound. t-e period is suspended
2. I' t-e BI! is pro-i0ited 'rom ma1ing
assessment suc- 3-en t-e su0Kect
propert% is under litigation
3. In distraint o' lev%. t-e BI! o''icer cant
locate t-e propert%
C$AM FO& &EFENF 2SEC CC37
5ritten claim 'or re'und=
1. Fec. 22(. 4I!C
2. Fec. 112. +)T
3. Fec. 13". #ocal Tax
4. Fec. 23. !eal Propert% Tax
. 4one except sec. 1"*3. Tari'' and Custom
Lritten c)ai* "or re"(n. (n.er the in,(t
ta# 2Sec. 55C7
Period is also 2 %ears 'rom t-e close o' t-e
taxa0le /uarter 3-en t-e transaction 3as made
/' Can 3e appl% \22( to +)T6
A' <es. 0ecause t-ere is no con'lict. \112 is
re'und under input tax s%stem.
\22( is re'und 'or=
1. errors in pa%ment orM
2. collected 3it-out aut-orit%M or
3. assessment 3it-out aut-orit%.
T-e period to claim re'und is 2%ears.
Foctrine o" EK(itab)e &eco(,*ent
1*(
TAXATON
I' a taxpa%er is entitled to a 3ritten claim 'or
re'und 0ut t-e prescriptive period to claim -as
lapsed. t-e taxpa%er is allo3ed to credit -is
3ritten claim 'or re'und 3-ic- -e 'ailed to
recover to -is existing tax lia0ilit%.
Computed 'romM
a. Individual E counted on t-e da% t-e tax
-as 0een paid
1. pa%ing 0% 3a% o' 3it--olding tax
s%stem. t-e rec1oning point is t-e end
o' t-e taxa0le %ear.
2. pa%ing 0% 3a% o' installment.
rec1oning point is t-e date t-e last
installment is paid.
3. i' sold to pu0lic auction t-roug-
distraint or lev%. t-e date t-e
proceeds is applied to t-e satis'action
o' t-e tax lia0ilit%.
0. Corporation
1. Existing
7 1((2. ??? v. Commissioner ,2* FC!)
1&42
7 1((. Commissioner v. P-ilam li'e
,244 FC!) 44"2
7 1((&. Commissioner v. CT) ,3*1
FC!) 432
2. 4on7existing
7 2**1. BPI v. Commissioner ,3"3 FC!)
&4*2
1. Existing E t-e counting o' t-e prescriptive
period is 2 %ears on t-e da% t-e annual
adKusted return is 'iled. 0ecause it is at
t-at da% t-at t-e tax lia0ilit% is 1no3n.
2. 4on7existing E t-e counting o' t-e
prescriptive period s-ould also 0e
rec1oned on t-e da% t-e annual return is
'iled. But t-e corporation is no longer
re/uired to 3ait till t-e taxa0le period is
over to 'ile t-e return. Ipon receipt o' a
notice 'rom t-e FEC to dissolve t-e
corporation. 3it-in 3* da%s t-erea'ter. a
return s-ould 0e 'iled.
/' Fuppose t-ere is a supervening event. and
t-e taxpa%er 3as not a0le to 'ile a 3ritten claim
o' re'und 3it-in t-e period6
A' !egardless o' supervening event. a 3ritten
claim 'or re'und must 0e 'iled 3it-in 2%ears.
/' Fuppose t-e 2 %ear period is a0out to expire
and t-ere is no decision %et as to %our re'und6
A' !emed% is to 'ile an appeal 0e'ore t-e CT)
,deemed a denial2
/' Fuppose t-e BI! decided 3it-in 2 %ears
against t-e re'und6
A' )ppeal 3it-in 3*da%s 'rom t-e decision.
provided it is still 3it-in t-e 2 %ear period.
/' Fuppose t-ere is onl% 21da%s remaining a'ter
receiving t-e decision. 3-en to 'ile an appeal6
A' 5it-in 21da%s 0e'ore t-e end o' t-e 2 %ear
period.
) 3ritten claim 'or re'und s-ould 0e 'iled
3it-in 2 %ears
Fec 2*4 ,c2 last p-rase= in case o' over
pa%ment a 3ritten claim is not necessar%
0ecause a return constitutes a 3ritten claim 'or
re'und.
/' ;a% t-e commissioner o' internal revenue
open t-e 0an1 account o' a taxpa%er6
A' >eneral !ule= 48. EACEPT=
1. To determine t-e gross value o' t-e
estateM and
2. To enter into a compromise agreement.
,under \2*4,)22
T-e 3ritten claim 'or re'und to determine t-e
gross value o' t-e estate 0ecause t-e taxpa%er is
alread% dead
In case o' compromise. t-ere must 0e consent
11*
TAXATON
111

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