Tax

TAX EXEMPTION AND EXCLUSION
General Rule

But since taxes are what we pay for civilized society, or
are the lifeblood of the nation, the law frowns against
exemptions from taxation and statutes granting tax
exemptions are thus construed in strictissimi juris
against the taxpayers and liberally in favor of the taxing
authority. (MCIAA v. Marcos, G.R. No. 120082
September 11, 1996)

Entrenched in our jurisprudence is the principle that tax
refunds are in the nature of tax exemptions which are
construed in strictissimi juris against the taxpayer and
liberally in favor of the government. As tax refunds
involve a return of revenue from the government, the
claimant must show indubitably the specific provision of
law from which her right arises; it cannot be allowed to
exist upon a mere vague implication or inference nor
can it be extended beyond the ordinary and reasonable
intendment of the language actually used by the
legislature in granting the refund. (COMMISSIONER OF
INTERNAL REVENUE v. ROSEMARIE ACOSTA G.R. No.
154068 August 3, 2007)

Well-settled in this jurisdiction is the fact that actions
for tax refund, as in this case, are in the nature of a
claim for exemption and the law is construed in
strictissimi juris against the taxpayer. The pieces of
evidence presented entitling a taxpayer to an
exemption are also strictissimi scrutinized and must be
duly proven. (KEPCO PHILIPPINES CORPORATION v.
COMMISSIONER OF INTERNAL REVENUE G.R. No.
179961 January 31, 2011)

The legislative intent, as shown by the discussions in the
Bicameral Conference Meeting, is to require PAGCOR to
pay corporate income tax; hence, the omission or
removal of PAGCOR from exemption from the payment
of corporate income tax. It is a basic precept of
statutory construction that the express mention of one
person, thing, act, or consequence excludes all others as
expressed in the familiar maxim expressio unius est
exclusio alterius. (PHILIPPINE AMUSEMENT AND
GAMING CORPORATION (PAGCOR) v. THE BUREAU OF
INTERNAL REVENUE G.R. No. 172087 March 15, 2011)

It is a basic precept of statutory construction that the
express mention of one person, thing, act, or
consequence excludes all others as expressed in the
familiar maxim expressio unius est exclusio alterius. Not
being a local water district, a cooperative registered
under R.A. No. 6938, or a non-stock and non-profit
hospital or educational institution, petitioner clearly
does not belong to the exception and it is therefore
incumbent upon it to point to some provisions of
theLGC that expressly grant its exemption from local
taxes. (NATIONAL POWER CORPORATION v. CITY OF
CABANATUAN G.R. No. 149110 April 9, 2003)

Definitely, the taxability of a party cannot be blandly
glossed over on the basis of a supposed "broad,
pragmatic analysis" alone without substantial
supportive evidence, lest governmental operations
suffer due to diminution of much needed funds. While
international comity is invoked in this case on the
nebulous representation that the funds involved in the
loans are those of a foreign government, scrupulous
care must be taken to avoid opening the floodgates to
the violation of our tax laws. (COMMISSIONER OF
INTERNAL REVENUE v. MITSUBISHI METAL
CORPORATION G.R. No. L-54908 January 22, 1990)

The claimed statutory exemption of the John Hay SEZ
from taxation should be manifest and unmistakable
from the language of the law on which it is based; it
must be expressly granted in a statute stated in a
language too clear to be mistaken. If it were the intent
of the legislature to grant to the John Hay SEZ the same
tax exemption and incentives given to the Subic SEZ, it
would have so expressly provided in the R.A. No. 7227.
(JOHN HAY PEOPLES ALTERNATIVE COALITION, et al. v.
VICTOR LIM, et al., G. R. No. 119775, October 24, 2003)

The Court in PLDT v. City of Davao, held that in
approving Section 23 of RA No. 7925, Congress did not
intend it to operate as a blanket tax exemption to all
telecommunications entities. The Court also clarified
the meaning of the word "exemption" in Section 23 of
RA 7925: that the word "exemption" as used in the
statute refers or pertains merely to an exemption from
regulatory or reporting requirements of the
Department of Transportation and Communication or
the National Transmission Corporation and not to an
exemption from the grantees tax liability. (SMART
COMMUNICATIONS, INC. v.THE CITY OF DAVAO, G.R. No.
155491, July 21, 2009)

In Philippine Long Distance Telephone Company (PLDT)
v. Province of Laguna, the issue that the Court had to
resolve was whether PLDT was liable to pay franchise
tax to the Province of Laguna in view of the "in lieu of all
taxes" clause in its franchise and Section 23 of RA 7925.
Applying the rule of strict construction of laws granting
tax exemptions and the rule that doubts are resolved in
favor of municipal corporations in interpreting statutory
provisions on municipal taxing powers, the Court held
that Section 23 of RA 7925 could not be considered as
having amended petitioner's franchise so as to entitle it
to exemption from the imposition of local franchise
taxes. (SMART COMMUNICATIONS, INC. v.THE CITY OF
DAVAO, G.R. No. 155491, July 21, 2009)

The "in lieu of all taxes" clause in a legislative franchise
should categorically state that the exemption applies to
both local and national taxes; otherwise, the exemption
claimed should be strictly construed against the
taxpayer and liberally in favor of the taxing authority.
(SMART COMMUNICATIONS, INC. v.THE CITY OF DAVAO,
G.R. No. 155491, July 21, 2009)

PLDTs contention that the in-lieu-of-all-taxes clause
does not refer to tax exemption but to tax exclusion
and hence, the strictissimi juris rule does not apply. The
Supreme Court explains that these two terms actually
mean the same thing, such that the rule that tax
exemption should be applied in strictissimi juris against
the taxpayer and liberally in favor of the government
applies equally to tax exclusions (PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY vs PROVINCE OF
LAGUNA G.R. No. 151899, August 16, 2005)

Exceptions

However, if the grantee of the exemption is a political
subdivision or instrumentality, the rigid rule of
construction does not apply because the practical effect
of the exemption is merely to reduce the amount of
money that has to be handled by the government in the
course of its operations. (MCIAA v. Marcos, G.R. No.
120082, September 11, 1996)

There is parity between tax refund and tax exemption
only when the former is based either on a tax
exemption statute or a tax refund statute. Obviously,
that is not the situation here since Fortune Tobaccos
claim for refund is premised on its erroneous payment
of the tax, or better still, the governments exaction in
the absence of a law. (COMMISSIONER OF INTERNAL
REVENUE v. FORTUNE TOBACCO CORPORATION, G.R.
Nos. 167274-75, July 21, 2008)

A claim for tax refund may be based on statutes
granting tax exemption or tax refund and in such case,
the rule of strict interpretation against the taxpayer is
applicable as the claim for refund partakes of the nature
of an exemption, a legislative grace, which cannot be
allowed unless granted in the most explicit and
categorical language. Tax refunds (or tax credits), on the
other hand, are not founded principally on legislative
grace but on the legal principle which underlies all
quasi-contracts abhorring a persons unjust enrichment
at the expense of another. (COMMISSIONER OF
INTERNAL REVENUE v. FORTUNE TOBACCO
CORPORATION, G.R. Nos. 167274-75, July 21, 2008)

As a necessary corollary, when the taxpayers
entitlement to a refund stands undisputed, the State
should not misuse technicalities and legalisms, however
exalted, to keep money not belonging to it. The
government is not exempt from the application of
solutio indebiti, a basic postulate proscribing one,
including the State, from enriching himself or herself at
the expense of another. (COMMISSIONER OF INTERNAL
REVENUE v. FORTUNE TOBACCO CORPORATION, G.R.
Nos. 167274-75, September 11, 2013)

VALUE-ADDED TAX

In general

As its name implies, the Value-Added Tax system is a tax
on the value added by the taxpayer in the chain of
transactions. For simplicity and efficiency in tax
collection, the VAT is imposed not just on the value
added by the taxpayer, but on the entire selling price of
his goods, properties or services. (COMMISSIONER OF
INTERNAL REVENUE vs. SAN ROQUE POWER
CORPORATION, G.R. No. 187485, February 12, 2013)

However, the taxpayer is allowed a refund or credit on
the VAT previously paid by those who sold him the
inputs for his goods, properties, or services. The net
effect is that the taxpayer pays the VAT only on the
value that he adds to the goods, properties, or services
that he actually sells. (COMMISSIONER OF INTERNAL
REVENUE vs. SAN ROQUE POWER CORPORATION, G.R.
No. 187485, February 12, 2013)

VAT is a tax on transactions, imposed at every stage of
the distribution process on the sale, barter, exchange of
goods or property, and on the performance of services,
even in the absence of profit attributable thereto. The
term "in the course of trade or business" requires the
regular conduct or pursuit of a commercial or an
economic activity, regardless of whether or not the
entity is profit-oriented. (COMMISSIONER OF INTERNAL
REVENUE vs. COURT OF APPEALS, G.R. No. 125355,
March 30, 2000)

The VAT is not a license tax; it is not a tax on the
exercise of a privilege, much less a constitutional right.
It is imposed on the sale, barter, lease or exchange of
goods or properties or the sale or exchange of services
and the lease of properties purely for revenue purposes.
(ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE
and THE COMMISSIONER OF INTERNAL REVENUE, G.R.
No. 115455, October 30, 1995)

Characteristics/Elements of a VAT-Taxable transaction

VAT is not a singular-minded tax on every transactional
level; its assessment bears direct relevance to the
taxpayer's role or link in the production chain. Hence, as
affirmed by Section 99 [now Sec. 105] of the Tax Code
and its subsequent incarnations, the tax is levied only
on the sale, barter or exchange of goods or services by
persons who engage in such activities, in the course of
trade or business. (COMMISSIONER OF INTERNAL
REVENUE vs. MAGSAYSAY LINES, INC., G.R. No. 146984.
July 28, 2006)

The Court rules that given the undisputed finding that
the transaction in question was not made in the course
of trade or business of the seller, NDC that is, the sale is
not subject to VAT pursuant to Section 99 [now Sec. 105]
of the Tax Code, no matter how the said sale may hew
to those transactions deemed sale as defined under
Section 100 [now Sec. 106]. (COMMISSIONER OF
INTERNAL REVENUE vs. MAGSAYSAY LINES, INC., G.R.
No. 146984. July 28, 2006)

Thus, there must be a sale, barter or exchange of goods
or properties before any VAT may be levied. Certainly,
there was no such sale, barter or exchange in the
subsidy given by SIS to Sony; it was but a dole out by SIS
and not in payment for goods or properties sold,
bartered or exchanged by Sony. (COMMISSIONER OF
INTERNAL REVENUE vs. SONY PHILIPPINES, INC., G.R. No.
178697, November 17, 2010)

Goods or properties must be used directly or indirectly
in the production or sale of taxable goods and services.
(Kepco Philipppines Corp. v. CIR, G.R. No. 179356,
December 14, 2009)

it is immaterial whether the primary purpose of a
corporation indicates that it receives payments for
services rendered to its affiliates on a reimbursement-
on-cost basis only, without realizing profit, for purposes
of determining liability for VAT on services rendered. As
long as the entity provides service for a fee,
remuneration or consideration, then the service
rendered is subject to VAT. (COMMISSIONER OF
INTERNAL REVENUE vs. COURT OF APPEALS, G.R. No.
125355, March 30, 2000)

Impact of tax

Under Section 105 of the Tax Code, VAT is imposed on
any person who, in the course of trade or business, sells
or renders services for a fee. In other words, the seller
of services, who in this case is the tollway operator, is
the person liable for VAT. The latter merely shifts the
burden of VAT to the tollway user as part of the toll fees.
(RENATO V. DIAZ and AURORA MA. F. TIMBOL vs. THE
SECRETARY OF FINANCE, G.R. No. 193007, July 19, 2011)

Incidence of tax

The seller who is liable for the VAT may shift or pass on
the amount of VAT it paid on goods, properties or
services to the buyer. In such a case, what is transferred
is not the seller's liability but merely the burden of the
VAT. (RENATO V. DIAZ and AURORA MA. F. TIMBOL vs.
THE SECRETARY OF FINANCE, G.R. No. 193007, July 19,
2011)

Thus, the seller remains directly and legally liable for
payment of the VAT, but the buyer bears its burden
since the amount of VAT paid by the former is added to
the selling price. Once shifted, the VAT ceases to be a
tax and simply becomes part of the cost that the buyer
must pay in order to purchase the good, property or
service. (RENATO V. DIAZ and AURORA MA. F. TIMBOL
vs. THE SECRETARY OF FINANCE, G.R. No. 193007, July
19, 2011)

A seller who is directly and legally liable for the
payment of an indirect tax, such as the VAT on goods or
services is not necessarily the person who ultimately
bears the burden of the same tax. It is the final
purchaser of consumer of such goods or services who,
although not directly and legally liable for the payment
thereof, ultimately bears the burden of the tax. (Contex
v. CIR, G.R. No. 151135, July 2, 2004)

In the case of the VAT, the law minimizes the regressive
effects of indirect taxation by providing for zero rating
of certain transactions, while granting exemptions to
other transactions. On the other hand, the transactions
which are subject to the VAT are those which involve
goods and services which are used or availed of mainly
by higher income groups. (ARTURO M. TOLENTINO v.
THE SECRETARY OF FINANCE and THE COMMISSIONER
OF INTERNAL REVENUE, G.R. No. 115455, October 30,
1995)

Tax credit method

Destination principle
According to the Destination Principle, goods and
services are taxed only in the country where these are
consumed. In connection with the said principle, the
Cross Border Doctrine mandates that no VAT shall be
imposed to form part of the cost of the goods destined
for consumption outside the territorial border of the
taxing authority. Hence, actual export of goods and
services from the Philippines to a foreign country must
be free of VAT, while those destined for use or
consumption within the Philippines shall be imposed
with 10% VAT. (ATLAS CONSOLIDATED MINING AND
DEVELOPMENT CORPORATION vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. Nos. 141104 & 148763, June 8,
2007)

Applying the destination principle to the exportation of
goods, automatic zero rating is primarily intended to be
enjoyed by the seller who is directly and legally liable
for the VAT, making such seller internationally
competitive by allowing the refund or credit of input
taxes that are attributable to export sales.
(COMMISSIONER OF INTERNAL REVENUE vs. SEAGATE
TECHNOLOGY (PHILIPPINES), G.R. No. 153866, February
11, 2005)

Under the cross-border principle of the VAT system
being enforced by the Bureau of Internal Revenue (BIR),
no VAT shall be imposed to form part of the cost of
goods destined for consumption outside of the
territorial border of the taxing authority. If exports of
goods and services from the Philippines to a foreign
country are free of the VAT, then the same rule holds
for such exports from the national territory except
specifically declared areas to anecozone.
11, 2005)

While an ecozone is geographically within the
Philippines, it is deemed a separate customs territory
and is regulated in laws as foreign soul. Sales by
supplies outside the borders of ecozone to this separate
customs territory are deemed exports and treated as
export sales. (CIR v. Seksui Jushi Phils, Inc. G.R. No.
149671, July 21, 2006)

For as long as the goods remain within the zone,
whether we call it an economic zone or a freeport zone,
for as long as we say in this law that all goods entering
this particular territory will be duty-free and tax-free,
for as long as they remain there, consumed there or re-
exported or destroyed in that place, then they are not
subject to duties and taxes in accordance with the laws
of the Philippines. (Coconut Oil Refiners Association v.
Executive Secretary, G.R. No. 132527, July 29, 2005)

VAT on sale of goods or properties

Goods, as commonly understood in the business sense,
refer to the product which the VAT-registered person
offers for sale to the public. With respect to real estate
dealers, it is the real properties themselves which
constitute their goods. Such real properties are the
operating assets of the real estate dealer. (Fort
Bonifacio Development Corporation vs. CIR, G.R. Nos.
158885 and 170630, April 2, 2009)

Requisites of taxability of sale of goods or properties
Mindanao IIs sale of the Nissan Patrol is said to be an
isolated transaction. However, it does not follow that an
isolated transaction cannot be an incidental transaction
for purposes of VAT liability. Indeed, a reading of
Section 105 of the 1997 Tax Code would show that a
transaction "in the course of trade or business" includes
"transactions incidental thereto." (MINDANAO II
GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 193301, March 11, 2013)

Prior to the sale, the Nissan Patrol was part of
Mindanao IIs property, plant, and equipment.
Therefore, the sale of the Nissan Patrol is an incidental
transaction made in the course of Mindanao IIs
business which should be liable for VAT. (MINDANAO II

Zero-rated sales of goods or properties, and effectively
zero-rated sales of goods or properties

Zero-rated transactions generally refer to the export
sale of goods and supply of services. The tax rate is set
at zero and when applied to the tax base, such rate
obviously results in no tax chargeable against the
purchaser. The seller of such transactions charges no
output tax, but can claim a refund of or a tax credit
certificate for the VAT previously charged by suppliers.
11, 2005)

Effectively zero-rated transactions, however, refer to
the sale of goods or supply of services to persons or
entities whose exemption under special laws or
international agreements to which the Philippines is a
signatory effectively subjects such transactions to a zero
rate. Again, as applied to the tax base, such rate does
not yield any tax chargeable against the purchaser. The
seller who charges zero output tax on such transactions
can also claim a refund of or a tax credit certificate for
the VAT previously charged by suppliers.
11, 2005)

If respondent is located in an export processing zone
within that ecozone, sales to the export processing zone,
even without being actually exported, shall in fact be
viewed as constructively exported under EO 226.
Considered as export sales, such purchase transactions
by respondent would indeed be subject to a zero rate.
11, 2005)

PAGCOR's exemption from VAT under Section 108 (B) (3)
of R.A. No. 8424 has been thoroughly and extensively
discussed in Commissioner of Internal Revenue v.
Acesite (Philippines) Hotel Corporation. Acesite sought
the refund of the amount it paid as VAT on the ground
that its transaction with PAGCOR was subject to zero
rate as it was rendered to a tax-exempt entity. The
Court ruled that PAGCOR and Acesite were both exempt
from paying VAT. (PHILIPPINE AMUSEMENT AND
GAMING CORPORATION (PAGCOR) vs. THE BUREAU OF

No prior application for the effective zero rating of its
transactions is necessary. The BIR regulations
additionally requiring an approved prior application for
effective zero rating cannot prevail over the clear VAT
nature of respondent's transactions. Other than the
general registration of a taxpayer the VAT status of
which is aptly determined, no provision under our VAT
law requires an additional application to be made for
such taxpayer's transactions to be considered
effectively zero-rated. (COMMISSIONER OF INTERNAL
REVENUE vs. SEAGATE TECHNOLOGY (PHILIPPINES), G.R.
No. 153866, February 11, 2005)

The Omnibus Investments Code of 1987 recognizes as
export sales the sales of export products to another
producer or to an export trader, provided that the
export products are actually exported. For purposes of
VAT zero-rating, such producer or export trader must be
registered with the BOI and is required to actually
export more than 70% of its annual production. (ATLAS
CONSOLIDATED MINING AND DEVELOPMENT
CORPORATION vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. Nos. 141104 & 148763, June 8, 2007)

In terms of the VAT computation, zero rating and
exemption are the same, but the extent of relief that
results from either one of them is not. In both instances
of zero rating, there is total relief for the purchaser
from the burden of the tax but in an exemption there is
only partial relief, because the purchaser is not allowed
any tax refund of or credit for input taxes paid.
11, 2005)

Transactions deemed sale
a) Transfer, use or consumption not in the course of
business of goods/properties originally intended for
sale or use in the course of business
b) Distribution or transfer to shareholders, investors or
creditors
c) Consignment of goods if actual sale not made within
60 days from date of consignment
d) Retirement from or cessation of business with
respect to inventories on hand

VAT on sale of service and use or lease of properties

Service has been defined as the art of doing something
useful for a person or company for a fee or useful labor
or work rendered or to be rendered another for a fee.
(CIR v. American Express International, Inc., G.R. No.
152609, June 29, 2005)

By qualifying "services" with the words "all kinds,"
Congress has given the term "services" an all-
encompassing meaning. The listing of specific services
are intended to illustrate how pervasive and broad is
the VAT's reach rather than establish concrete limits to
its application; thus, every activity that can be imagined
as a form of "service" rendered for a fee should be
deemed included unless some provision of law
especially excludes it. (RENATO V. DIAZ and AURORA
MA. F. TIMBOL vs. THE SECRETARY OF FINANCE, G.R. No.
193007, July 19, 2011)

Tollway operators not only come under the broad term
"all kinds of services," they also come under the specific
class described in Section 108 as "all other franchise
grantees" who are subject to VAT, "except those under
Section 119 of this Code." Tollway operators are
franchise grantees and they do not belong to exceptions
(the low-income radio and/or television broadcasting
companies with gross annual incomes of less than P10
million and gas and water utilities) that Section 119
spares from the payment of VAT. (RENATO V. DIAZ and
AURORA MA. F. TIMBOL vs. THE SECRETARY OF
FINANCE, G.R. No. 193007, July 19, 2011)

In specifically including by way of example electric
utilities, telephone, telegraph, and broadcasting
companies in its list of VAT-covered businesses, Section
108 opens other companies rendering public service for
a fee to the imposition of VAT. Businesses of a public
nature such as public utilities and the collection of tolls
or charges for its use or service is a franchise. (RENATO
V. DIAZ and AURORA MA. F. TIMBOL vs. THE SECRETARY
OF FINANCE, G.R. No. 193007, July 19, 2011)

In the case of CIR v. Court of Appeals (CA), the Court
had the occasion to rule that services rendered for a fee
even on reimbursement-on-cost basis only and without
realizing profit are also subject to VAT. In that case,
COMASERCO rendered service to its affiliates and, in
turn, the affiliates paid the former reimbursement-on-
cost which means that it was paid the cost orexpense
that it incurred although without profit.
(COMMISSIONER OF INTERNAL REVENUE vs. SONY
PHILIPPINES, INC., G.R. No. 178697, November 17, 2010)

Among those included in the enumeration is the lease
of motion picture films, films, tapes and discs. This,
however, is not the same as the showing or exhibition
of motion pictures or films. The legislative intent is not
to impose VAT on persons already covered by the
amusement tax and this holds true even in the case of
cinema/theater operators taxed under the LGC of 1991
precisely because the VAT law was intended to replace
the percentage tax on certain services. (CIR v. SM Prime
Holdings, Inc. and First Asia Realty Development Corp.,
G.R. No. 183505, February 26, 2010)

VAT exempt transactions

In general

An exempt transaction involves goods or services which,
by their nature, are specifically listed in and expressly
exempted from the VAT under the Tax Code, without
regard to the tax status VAT-exempt or not of the
party to the transaction. Indeed, such transaction is not
subject to the VAT, but the seller is not allowed any tax
refund of or credit for any input taxes paid.
11, 2005)

An exempt party, on the other hand, is a person or
entity granted VAT exemption under the Tax Code, a
special law or an international agreement to which the
Philippines is a signatory, and by virtue of which its
taxable transactions become exempt from the VAT.
Such party is also not subject to the VAT, but may be
allowed a tax refund of or credit for input taxes paid,
depending on its registration as a VAT or non-VAT
taxpayer. (COMMISSIONER OF INTERNAL REVENUE vs.
SEAGATE TECHNOLOGY (PHILIPPINES), G.R. No. 153866,
February 11, 2005)

By extending the exemption to entities or individuals
dealing with PAGCOR, the legislature clearly granted
exemption also from indirect taxes. It must be noted
that the indirect tax of VAT, as in the instant case, can
be shifted or passed to the buyer, transferee, or lessee
of the goods, properties, or services subject to VAT.
Thus, by extending the tax exemption to entities or
individuals dealing with PAGCOR in casino operations, it
is exempting PAGCOR from being liable to indirect taxes.
(PHILIPPINE AMUSEMENT AND GAMING CORPORATION
(PAGCOR) vs. THE BUREAU OF INTERNAL REVENUE, G.R.
No. 172087, March 15, 2011)

The rationale for the exemption from indirect taxes
provided for in P.D. 1869 and the extension of such
exemption to entities or individuals dealing with
PAGCOR in casino operations are best elucidated from
the 1987 case of Commissioner of Internal Revenue v.
John Gotamco & Sons, Inc., where the absolute tax
exemption of the World Health Organization (WHO)
upon an international agreement was upheld. We held
in said case that the exemption of contractee WHO
should be implemented to mean that the entity or
person exempt is the contractor itself who constructed
the building owned by contractee WHO, and such does
not violate the rule that tax exemptions are personal
because the manifest intention of the agreement is to
exempt the contractor so that no contractor's tax may
be shifted to the contractee WHO.
(PHILIPPINEAMUSEMENT AND GAMING CORPORATION
(PAGCOR) vs. THE BUREAU OF INTERNAL REVENUE, G.R.
No. 172087, March 15, 2011)

Pawnshops- considered as non-bank financial
intermediary is exempted from VAT but liable to
percentage tax. (Tambunting Pawnshop, Inc. v. CIR, G.R.
No. 179085, January 21, 2010)

Input tax and output tax, defined

Under the present method that relies on invoices, an
entity can credit against or subtract from the VAT
charged on its sales or outputs the VAT paid on its
purchases, inputs and imports. (COMMISSIONER OF
INTERNAL REVENUE vs. SEAGATE TECHNOLOGY
(PHILIPPINES), G.R. No. 153866, February 11, 2005)

If at the end of a taxable quarter the output taxes
charged by a seller are equal to the input taxes passed
on by the suppliers, no payment is required. It is when
the output taxes exceed the input taxes that the excess
has to be paid. (COMMISSIONER OF INTERNAL REVENUE
vs. SEAGATE TECHNOLOGY (PHILIPPINES), G.R. No.
153866, February 11, 2005)

Sources of input tax
a) Purchase or importation of goods
b) Purchase of real properties for which a VAT has
actually been paid
c) Purchase of services in which VAT has actually been
paid
d) Transactions deemed sale
e) Presumptive input
f) Transitional input

Prior payment of taxes is not necessary before a
taxpayer could avail of the 8% transitional input tax
credit: first, it was never mentioned in Section 105 of
the old NIRC [now Sec. 111] that prior payment of taxes
is a requirement; second, since the law (Section 105 of
the NIRC) does not provide for prior payment of taxes,
to require it now would be tantamount to judicial
legislation which, to state the obvious, is not allowed;
third, a transitional input tax credit is not a tax refund
per se but a tax credit; fourth, if the intent of the law
were to limit the input tax to cases where actual VAT
was paid, it could have simply said that the tax base
shall be the actual value-added tax paid; and fifth, this
Court had already declared that prior payment of taxes
is not required in order to avail of a tax credit. (FORT
BONIFACIO DEVELOPMENT CORPORATION vs.
COMMISSIONER OF INTERNAL REVENUE, G.R. No.
173425, January 22, 2013)

Section 112 of the Tax Code does not prohibit cash
refund or tax credit of transitional input tax in the case
of zero-rated or effectively zero-rated VAT registered
taxpayers, who do not have any output VAT. The phrase
"except transitional input tax" in Section 112 of the Tax
Code was inserted to distinguish creditable input tax
from transitional input tax credit. (FORT BONIFACIO
DEVELOPMENT CORPORATION vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 173425, January 22, 2013)

It is apparent that the transitional input tax credit
operates to benefit newly VAT-registered persons,
whether or not they previously paid taxes in the
acquisition of their beginning inventory of goods,
materials and supplies. During that period of transition
from non-VAT to VATstatus, the transitional input tax
credit serves to alleviate the impact of the VAT on the
taxpayer. (FORT BONIFACIO DEVELOPMENT
CORPORATION vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 173425, January 22, 2013)

Persons who can avail of input tax credit

In a VAT-exempt transaction, the seller is not allowed to
charge VAT to his customer. Since no output tax is
shifted by the seller, there is no output tax against
which the related input taxes may be credited. Neither
can he credit this input tax against the VAT due on other
sales. In this case, he is treated as the end user who will
shoulder the cost of the input VAT. (COMMISSIONER OF
INTERNAL REVENUE vs. SAN ROQUE POWER

Unlike the input taxes related to exempt sales, input
taxes related to zero-rated sales may be credited
against output taxes on other sales and in case it is not
fully utilized, the excess may be carried over to the
succeeding quarter or quarters and there is no
prescription period for the carry-over. The law gives the
taxpayer another option for the recovery of used input
taxes: application for refund or tax credit certificate.
(COMMISSIONER OF INTERNAL REVENUE vs. SAN
ROQUE POWER CORPORATION, G.R. No. 187485,
February 12, 2013)

Refund or tax credit of excess input tax

If, however, the input taxes exceed the output taxes,
the excess shall be carried over to the succeeding
quarter or quarters. Should the input taxes result from
zero-rated or effectively zero-rated transactions or from
the acquisition of capital goods, any excess over the
output taxes shall instead be refunded to the taxpayer
or credited against other internal revenue taxes.
11, 2005)

While a tax liability is essential to the availment or use
of any tax credit, prior tax payments are not. On the
contrary, for the existence or grant solely of such credit,
neither a tax liability nor a prior tax payment is needed.
(FORT BONIFACIO DEVELOPMENT CORPORATION vs.
173425, January 22, 2013)

As regards Section 110, while the law only provides for
a tax credit, a taxpayer who erroneously or excessively
pays his output tax is still entitled to recover the
payments he made either as a tax credit or a tax refund.
In this case, since petitioner still has available
transitional input tax credit, it filed a claim for refund to
recover the output VAT it erroneously or excessively
paid for the 1st quarter of 1997. Thus, there is no
reason for denying its claim for tax refund/credit. (FORT
BONIFACIO DEVELOPMENT CORPORATION vs.
173425, January 22, 2013)

Even if the law does not expressly state that the
Ironcons excess creditable VAT withheld is refundable,
it may be the subject-of a claim for refund as an
erroneously collected tax under Sec. 204 (C) and 229 of
the NIRC. It should be clarified that this ruling only
refers to creditable VAT withheld pursuant to Sec. 114
of the NIRC prior to its amendment. After its
amendment by R.A. 9337, the amount withheld under
Sec. 114 of the NIRC is now treated as final VAT, no
longer under the creditable withholding tax system (CIR
v. Ironcon Builders and Development Corp., G.R. No.
180042, February 8, 2010)

The input VAT is not "excessively" collected as
understood under Section 229 because at the time the
input VAT is collected the amount paid is correct and
proper. The person legally liable for the input VAT
cannot claim that he overpaid the input VAT by the
mere existence of an "excess" input VAT. The term
"excess" input VAT simply means that the input VAT
available as credit exceeds the output VAT, not that the
input VAT is excessively collected because it is more
than what is legally due. Thus, the taxpayer who legally
paid the input VAT cannot claim for refund or credit of
the input VAT as "excessively" collected under Section
229. (COMMISSIONER OF INTERNAL REVENUE vs. SAN
February 12, 2013)

If such "excess" input VAT is an "excessively" collected
tax, the taxpayer should be able to seek a refund or
credit for such "excess" input VAT whether or not he
has output VAT. The VAT System does not allow such
refund or credit and such "excess" input VAT is not an
"excessively" collected tax under Section 229.
February 12, 2013)

Who may claim for refund/apply for issuance of tax
credit certificate

Having determined that respondent's purchase
transactions are subject to a zero VAT rate, the tax
refund or credit is in order. To repeat, the VAT is a tax
imposed on consumption, not on business. Although
respondent as an entity is exempt, the transactions it
enters into are not necessarily so. The VAT payments
made in excess of the zero rate that is imposable may
certainly be refunded or credited. (COMMISSIONER OF
INTERNAL REVENUE vs. SEAGATE TECHNOLOGY
(PHILIPPINES), G.R. No. 153866, February 11, 2005)

Period to file claim/apply for issuance of tax credit
certificate

The Court, in San Roque, ruled that equitable estoppel
had set in when respondent issued BIR Ruling No. DA-
489-03 which was a general interpretative rule, which
effectively misled all taxpayers into filing premature
judicial claims with the CTA. Thus, taxpayers could rely
on the ruling from its issuance on 10 December 2003 up
to its reversal on 6 October 2010, when CIR v. Aichi
Forging Company of Asia, lnc. was promulgated.
(PROCTER & GAMBLE ASIA PTE LTD. vs.COMMISSIONER
OF INTERNAL REVENUE, G.R. No. 202071, February 19,
2014)

In a nutshell, the rules on the determination of the
prescriptive period for filing a tax refund or credit of
unutilized input VAT, as provided in Section 112 of the
Tax Code, are as follows:
(1) An administrative claim must be filed with the
CIR within two years after the close of the
taxable quarter when the zero-rated or
effectively zero-rated sales were made.
(2) The CIR has 120 days from the date of
submission of complete documents in
support of the administrative claim within
which to decide whether to grant a refund
or issue a tax credit certificate. The 120-day
period may extend beyond the two-year
period from the filing of the administrative
claim if the claim is filed in the later part of
the two-year period. If the 120-day period
expires without any decision from the CIR,
then the administrative claim may be
considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA
within 30 days from the receipt of the CIRs
decision denying the administrative claim or
from the expiration of the 120-day period
without any action from the CIR.
(4) All taxpayers, however, can rely on BIR
Ruling No. DA-489-03 from the time of its
issuance on 10 December 2003 up to its
reversal by this Court in Aichi on 6 October
2010, as an exception to the mandatory and
jurisdictional 120+30 day periods.
(COMMISSIONER OF INTERNAL REVENUE
vs.TOLEDO POWER, INC., G.R. No. 183880,
January 20, 2014)

The lessons of this case may be summed up as
follows:

A. Two-Year Prescriptive Period
1. It is only the administrative claim that must be
filed within the two-year prescriptive period. (Aichi)
2. The proper reckoning date for the two-year
prescriptive period is the close of the taxable
quarter when the relevant sales were made. (San
Roque)
3. The only other rule is the Atlas ruling, which
applied only from 8 June 2007 to 12 September
2008. Atlas states that the two-year prescriptive
period for filing a claim for tax refund or credit of
unutilized input VAT payments should be counted
from the date of filing of the VAT return and
payment of the tax. (San Roque)

B. 120+30 Day Period
1. The taxpayer can file an appeal in one of two
ways: (1) file the judicial claim within thirty days
after the Commissioner denies the claim within the
120-day period, or (2) file the judicial claim within
thirty days from the expiration of the 120-day
period if the Commissioner does not act within the
120-day period.
2. The 30-day period always applies, whether there
is a denial or inaction on the part of the CIR.
3. As a general rule, the 3 0-day period to appeal is
both mandatory and jurisdictional. (Aichi and San
Roque)
4. As an exception to the general rule, premature filing
is allowed only if filed between10 December 2003 and 5
October 2010, when BIR Ruling No. DA-489-03 was still
in force. (San Roque)
5. Late filing is absolutely prohibited, even during the
time when BIR Ruling No. DA-489-03 was in force. (San
Roque) (COMMISSIONER OF INTERNAL REVENUE vs.
MINDANAO II GEOTHERMAL PARTNERSHIP, G.R. No.
191498, January 15, 2014)

It is indisputable that compliance with the 120-day
waiting period is mandatory and jurisdictional. Failure
to comply with the 120-day waiting period violates a
mandatory provision of law. It violates the doctrine of
exhaustion of administrative remedies and renders the
petition premature and thus without a cause of action,
with the effect that the CTA does not acquire
jurisdiction over the taxpayers petition. (MINDANAO II

Stated otherwise, the two-year prescriptive period does
not refer to the filing of the judicial claim with the CTA
but to the filing of the administrative claim with the
Commissioner. As held in Aichi, the "phrase within two
years x x x apply for the issuance of a tax credit or
refund refers to applications for refund/credit with the
CIR and not to appeals made to the CTA." (MINDANAO II

San Roque's failure to comply with the 120-day
mandatory period renders its petition for review with
the CTA void as Article 5 of the Civil Code provides,
"Acts executed against provisions of mandatory or
prohibitory laws shall be void, except when the law
itself authorizes their validity." San Roque's void
petition for review cannot be legitimized by the CTA or
this Court because Article 5 of the Civil Code states that
such void petition cannot be legitimized "except when
the law itself authorizes [its] validity," and there is no
law authorizing the petition's validity. (COMMISSIONER
OF INTERNAL REVENUE vs. SAN ROQUE POWER

Sec. 112(A) clearly provides in no uncertain terms that
unutilized input VAT payments not otherwise used for
any internal revenue tax due the taxpayer must be
claimed within two years reckoned from the close of
the taxable quarter when the relevant sales were
made pertaining to the input VAT regardless of
whether said tax was paid or not. The reckoning frame
would always be the end of the quarter when the
pertinent sales or transaction was made, regardless
when the input VAT was paid. (COMMISSIONER OF
INTERNAL REVENUE vs. MIRANT PAGBILAO
CORPORATION, G.R. No. 172129. September 12, 2008)

This prescriptive period has no relation to the date of
payment of the "excess" input VAT since the "excess"
input VAT may have been paid for more than two years
but this does not bar the filing of a judicial claim for
"excess" VAT under Section 112 (A), which has a
different reckoning period from Section 229. Moreover,
the person claiming the refund or credit of the input
VAT is not the person who legally paid the input VAT.
February 12, 2013)

The mere filing by a taxpayer of a judicial claim with the
CTA before the expiration of the 120-day period cannot
operate to divest the Commissioner of his jurisdiction to
decide an administrative claim within the 120-day
mandatory period, unless the Commissioner has clearly
given cause for equitable estoppel to apply as expressly
recognized in Section 246 of the Tax Code.
February 12, 2013)

Because the 120+30 day period is jurisdictional, the
issue of whether petitioner complied with the said time
frame may be broached at any stage, even on appeal.
(NIPPON EXPRESS (PHILIPPINES) CORPORATION vs.
196907, March 13, 2013)

Invoicing requirements

In general

For a judicial claim for refund to prosper, however,
respondent must not only prove that it is a VAT
registered entity and that it filed its claims within the
prescriptive period. It must substantiate the input VAT
paid by purchase invoices or official receipts: 1) A "sales
or commercial invoice" is a written account of goods
sold or services rendered indicating the prices charged
therefor or a list by whatever name it is known which is
used in the ordinary course of business evidencing sale
and transfer or agreement to sell or transfer goods and
services; and 2) A "receipt" on the other hand is a
written acknowledgment of the fact of payment in
money or other settlement between seller and buyer of
goods, debtor or creditor, or person rendering services
and client or customer. (ATLAS CONSOLIDATED MINING
AND DEVELOPMENT CORPORATION vs. COMMISSIONER
OF INTERNAL REVENUE, G.R. Nos. 141104 & 148763,
June 8, 2007)

The requisite that the receipt be issued showing the
name, business style, if any, and address of the
purchaser, customer or client is precise so that when
the books of accounts are subjected to a tax audit
examination, all entries therein could be shown as
adequately supported and proven as legitimate
business transactions. The absence of official receipts
issued in the taxpayer's name is tantamount to non-
compliance with the substantiation requirements
provided by law. (BONIFACIO WATER CORPORATION
(formerly BONIFACIO VIVENDI WATER CORPORATION)
vs. THE COMMISSIONER OF INTERNAL REVENUE, G.R.
No. 175142, July 22, 2013)

Taxpayers claiming for a refund or tax credit certificate
must comply with the strict and mandatory invoicing
and accounting requirements provided under the 1997
NIRC, as amended, and its implementing rules and
regulations. Thus, the change of petitioner's name to
"Bonifacio GDE Water Corporation," being unauthorized
and without approval of the SEC, and the issuance of
official receipts under that name which were presented
to support petitioner's claim for tax refund, cannot be
used to allow the grant of tax refund or issuance of a
tax credit certificate in petitioner's favor. (BONIFACIO
WATER CORPORATION (formerly BONIFACIO VIVENDI
WATER CORPORATION) vs. THE COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 175142, July 22, 2013)

Failure to print the word zero-rated on the invoices or
receipts is fatal to a claim for credit of refund of input
VAT on zero-rated sales (J.R.A. Philippines, Inc. v. CIR,
G.R. No. 177127, October 11, 2010)
If the claim for refund/ tax credit certificate is based on
the existence of zero-rated sales by the taxpayer but it
fails to comply with the invoicing requirements in the
issuance of sales invoices (e.g. failure to indicate the
TIN), its claim for tax credit/refund of VAT on its
purchases shall be denied considering that the invoice it
is issuing to its customers does not depict its being a
VAT-registered taxpayer whose sales are classified as
zero-rated sales. Nonetheless, this treatment is without
prejudice to the right of the taxpayer to charge the
input taxes to the appropriate expense account or asset
account subject to depreciation, whichever is applicable
(Panasonic Comm. Imaging Corp. of the Phil. v. CIR, G.R.
No. 178090, February 8, 2010)

LOCAL GOVERNMENT TAXATION

Fundamental principles

The fundamental law did not intend the delegation to
be absolute and unconditional; the constitutional
objective obviously is to ensure that, while the local
government units are being strengthened and made
more autonomous, the legislature must still see to it
that (a) the taxpayer will not be over-burdened or
saddled with multiple and unreasonable impositions; (b)
each local government unit will have its fair share of
available resources, (c) the resources of the national
government will not be unduly disturbed; and (d) local
taxation will be fair, uniform, and just.(Manila Electric
Co. v. Province of Laguna, G.R. No. 131359, May 05,
1999)

Nature and source of taxing power

Under the now prevailing Constitution, where there is
neither a grant nor prohibition by statute, the taxing
power of local governments must be deemed to exist
although Congress may provide statutory limitations
and guidelines in order to safeguard the viability and
self-sufficiency of local government units by directly
granting them general and broad tax powers. (City
Government of San Pablo, Laguna, et al., v. Reyes, et al.,
G.R. No. 127708, March 25, 1999)

a) Grant of local taxing power under the local
government code

Local governments do not have the inherent power to
tax except to the extent that such power might be
delegated to them either by the basic law or by statute.
Presently, under Article X of the 1987 Constitution, a
general delegation of that power has been given in
favor of local government units. (Manila Electric
Company vs Province of Laguna, G.R. No. 131359, May 5,
1999)

b) Authority to prescribe penalties for tax violations
c) Authority to grant local tax exemptions
d) Withdrawal of exemptions
e) Authority to adjust local tax rates
f) Residual taxing power of local governments
g) Authority to issue local tax ordinances

An ordinance carries with it the presumption of validity.
The question of reasonableness though is open to
judicial inquiry.(Victorias Milling Co., Inc. v. Municipality
of Victorias, G.R. No. L-21183, September 27, 1968)
Local taxing authority

Procedure for approval and effectivity of tax
ordinances

It is clear under Sec. 188 of R.A. No. 7160 and Art. 277
of its implementing rules that the requirement of
publication is MANDATORY and leaves no choice. The
use of the word "shall" in both provisions is imperative,
operating to impose a duty that may be enforced (Coca-
Cola Bottlers Phil., Inc. v. City of Manila, G.R. No.
156252, June 27, 2006)

It is categorical, therefore, that a public hearing be held
prior to the enactment of an ordinance levying taxes,
fees, or charges; and that such public hearing be
conducted as provided under Section 277 of the
Implementing Rules and Regulations of the Local
Government Code.(Ongsuco v. Malones, G.R. No.
182065, October 27, 2009)

Scope of taxing power

The taxing power of cities, municipalities and municipal
districts may be used (1) upon any person engaged in
any occupation or business, or exercising any privilege
therein; (2) for services rendered by those political
subdivisions or rendered in connection with any
business, profession or occupation being conducted
therein, and (3) to levy, for public purposes just and
uniform taxes, licenses or fees (Philippine Match Co.,
Ltd. v. City of Cebu, G.R. No. L-30745, January 18, 1978)

Specific taxing power of Local Government Units
a) Taxing powers of provinces
(i) Tax on transfer of real property ownership
(ii) Tax on business of printing and publication
(iii) Franchise tax

As commonly used, a franchise tax is "a tax on the
privilege of transacting business in the state and
exercising corporate franchises granted by the state."
To determine whether the petitioner is covered by
franchise tax, the following requisites should concur: (1)
that petitioner has a "franchise" in the sense of a
secondary or special franchise; and (2) that it is
exercising its rights or privileges under this franchise
within the territory of the respondent city government.
(National Power Corporation v. City of Cabanatuan, G.R.
No. 149110, April 09, 2003)

Meralco is subject to the local franchise tax. Its
exemption has been withdrawn under Sec. 137 and Sec.
193 of RA 7160. The LGU (San Pablo and Laguna) is
correct on relying the provisions of Secs. 137 & 193 that
Meralcos tax exemption has been withdrawn. Sec. 137
authorizes the province to impose franchise tax
notwithstanding any exemption granted by any law or
other special law. The local franchise tax is imposable
despite any exemption enjoyed under special laws. Sec.
193 provides the withdrawal of all tax exemptions or
incentives granted to or presently enjoyed by all
persons whether natural or juridical including GOCCs.
Thus, any existing tax exemption or incentive enjoyed
by Meralco under existing law was clearly intended to
be withdrawn. Further, the LGC contains a general
repealing clause in its Sec. 534 (f).

Accordingly, we held in Mactan Cebu Intl Airport
Authority v. Marcos, 261 SCRA 667, that Sec. 193 of the
LGC prescribes the general rule, viz., the tax exemptions
or incentives granted to persons are withdrawn upon
effectivity of RA 7160, except to those entities
enumerated. Invoking the non-impairment clause is
non-availing because a franchise granted is subject to
amendment, or repeal by Congress when public interest
so requires, which restriction was not only present in
1935 Constitution (Art. XIV, Sec. 8) but in the 1973 (Art.
XIV, Sec. 5), as well as in the 1987 Constitution (Art. XII,
Sec. 11). With or without reservation clause, franchises
are subject to alterations as an exercise of police power
or the power to tax. (City of San Pablo v. Judge Reyes,
305 SCRA 353; Meralco v. Prov. Of Laguna, 306 SCRA
750)

(v) Tax on sand, gravel and other quarry services

Under the Local Tax Code. there is no question that the
authority to impose the license fees collected from the
hauling of sand and gravel excavated properly belongs
to the province concerned and not to the municipality
where they are found which is specifically prohibited
under Section 22 of the same Code "from levying taxes,
fees and charges that the province or city is authorized
to levy in this Code." (Municipality of San Fernando, La
Union v. Sta. Romana, G.R. No. L-30159, March 31, 1987)

In order for an entity to legally undertake a quarrying
business, he must first comply with all the requirements
imposed not only by the national government, but also
by the local government unit where his business is
situated. Particularly, Section 138 (2) of RA 7160
requires that such entity must first secure a governor's
permit prior to the start of his quarrying operations|||
(Province of Cagayan v. Lara, G.R. No. 188500, July 24,
2013)
The principle that when a company is taxed on its main
business, it is no longer taxable for engaging in an
activity that is but a part of, incidental to, and necessary
to such main business, applies to business taxes and not
to taxes such as the sand and gravel tax imposed by the
provincial government, based on the reasoning that the
incidental activity could not be treated as a business
separate and distinct from the main business of the
taxpayer as the sand and gravel tax is an excise tax
imposed on the privilege of extracting sand and gravel.
It is settled that provincial governments can levy excise
taxes on quarry resources independently from national
government. (Lepanto Consolidated Mining Company v.
Ambanloc, G.R. No. 180639, June 29, 2010)

(v) Professional tax
(vi) Amusement tax

Resorts, swimming pools, bath houses, hot springs, and
tourist spots are not among those places expressly
mentioned by Section 140 of the LGC as being subject
to amusement taxes. (Principle of Ejusdem Generis)
(Pelizloy Realty Corp. v. Province of Benguet, G.R. No.
183137, April 10, 2013)

In determining the meaning of the phrase "other places
of amusement," under Sec. 13 of the Local Tax Code,
one must refer to the prior enumeration of theaters,
cinematographs, concert halls and circuses with artistic
expression as their common characteristic. Professional
basketball games do not fall under the same category as
theaters, cinematographs, concert halls and circuses as
the latter basically belong to artistic forms of
entertainment while the former caters to sports and
gaming. (Philippine Basketball Assn. v. Court of Appeals,
G.R. No. 119122, August 08, 2000)

It is the intent of the legislature not to impose VAT on
persons already covered by the amusement tax. (CIR v.
SM Prime Holdings, Inc., G.R. No. 183505, February 26,
2010)

(vii) Tax on delivery truck/van

Taxing powers of municipalities

Tax on various types of businesses

Business taxes imposed in the exercise of police power
for regulatory purposes are paid for the privilege of
carrying on a business in the year the tax was paid. It is
paid at the beginning of the year as a fee to allow the
business to operate for the rest of the year. It is
deemed a prerequisite to the conduct of business.|||
(Mobil Philippines Inc. v. City Treasurer of Makati, G.R.
No. 154092, July 14, 2005)

When a municipality or city has already imposed a
business tax on manufacturers, etc. of liquors, distilled
spirits, wines, and any other article of commerce,
pursuant to Section 143 (a) of the LGC, said municipality
or city may no longer subject the same manufacturers,
etc. to a business tax under Section 143 (h) of the same
Code. Section 143 (h) may be imposed only on
businesses that are subject to excise tax, VAT, or
percentage tax under the NIRC, and that are "not
otherwise specified in preceding paragraphs". (City of
Manila v. Coca-Cola Bottlers Philippines, Inc., G.R. No.
181845, August 04, 2009)

By its very nature a condominium corporation is not
engaged in business, and any profit that it derives is
merely incidental, hence it may not be subject to
business taxes. (Yamane , etc. v. BA Lepanto
Condominium Corporation, G. R. No. 154993, October
25, 2005)

Rules on payment of business tax

Tax should be computed based on gross receipts; the
right to receive income, and not the actual receipt,
determines when to include the amount in gross
income. The imposition of local business tax based on
petitioners gross revenue will inevitably result in the
constitutionally proscribed double taxation taxing of
the same person twice by the same jurisdiction for the
same thing inasmuch as petitioners revenue or
income for a taxable year will definitely include its gross
receipts already reported during the previous year and
for which local business tax has already been paid.
(Ericsson Telecoms vs. City of Pasig. G.R. NO. 176667,
November 22, 2007)

Fees and charges for regulation & licensing

A municipality is authorized to impose three kinds of
licenses: 1) license for regulation of useful occupations
or enterprises; 2) license for restriction or regulation of
non-useful occupations or enterprises; and 3) license for
revenue. The first two easily fall within the broad police
power granted under the general welfare clause; the
third class, however, is for revenue purposes. (Victorias
Milling Co., Inc. v. Municipality of Victorias, G.R. No. L-
21183, September 27, 1968)

Situs of tax collected

The power to levy an excise upon the performance of
an act or the engaging in an occupation does not
depend upon the domicile of the person subject to the
excise, nor upon the physical location of the property
and in connection with the act or occupation taxed, but
depends upon the place in which the act is performed
or occupation engaged in. (Allied Thread Co., Inc. v. City
Mayor of Manila, G.R. No. L-40296, November 21, 1984)

Under a city ordinance which imposes tax on sales of
goods in the city, the city can validly tax sales to
customers outside of the city as long as the orders were
booked and paid for, and the goods were delivered to
the carrier, in the city. The goods can be regarded as
sold in the city because delivery to the carrier is delivery
to the buyer.||| (Philippine Match Co., Ltd. v. City of
Cebu, G.R. No. L-30745, January 18, 1978)

Common limitations on the taxing powers of LGUs

The fundamental law did not intend the delegation to
be absolute and unconditional; the constitutional
objective obviously is to ensure that, while the local
government units are being strengthened and made
more autonomous, the legislature must still see to it
that (a) the taxpayer will not be over-burdened or
saddled with multiple and unreasonable impositions; (b)
each local government unit will have its fair share of
available resources; (c) the resources of the national
government will not be unduly disturbed; and (d) local
taxation will be fair, uniform, and just. (Manila Electric
Company vs Province of Laguna, G.R. No. 131359, May 5,
1999)

While the power to tax by local governments may be
exercised by local legislative bodies, no longer merely
be virtue of a valid delegation as before, but pursuant
to direct authority conferred by Section 5, Article X of
the Constitution, the basic doctrine on local taxation
remains essentially the same, the power to tax is *still+
primarily vested in the Congress. (Quezon City, et al., v.
ABS-CBN Broadcasting Corporation, G. R. No. 166408,
October 6, 2008 citing City Government of Quezon City,
et al. v. Bayan Telecommunications, Inc., G.R. No.
162015, March 6, 2006, 484 SCRA 169 in turn referring
to Mactan Cebu International Airport Authority, v.
Marcos, G.R. No. 120082, September 11, 1996, 261
SCRA 667, 680)

Section 133(e) of RA No. 7160 prohibits the imposition,
in the guise of wharfage, of fees as well as all other
taxes or charges in any form whatsoever on goods or
merchandise. It is therefore irrelevant if the fees
imposed are actually for police surveillance on the
goods, because any other form of imposition on goods
passing through the territorial jurisdiction of the
municipality is clearly prohibited by Section 133(e).
(Palma Development Corp. v. Municipality of Malangas,
G.R. No. 152492, October 16, 2003)

The language of Section 133 (h) of RA No. 7160 makes
plain that the prohibition with respect to petroleum
products extends not only to excise taxes thereon, but
all "taxes, fees and charges." ||| While local
government units are authorized to burden all such
other class of goods with "taxes, fees and charges",
excepting excise taxes, a specific prohibition is imposed
barring the levying of any other type of taxes with
respect to petroleum products. (Petron Corporation v.
Tiangco, G.R. No. 158881, April 16, 2008)

Taxpayers remedies

As a general precept, a taxpayer may file a complaint
assailing the validity of the ordinance and praying for a
refund of its perceived overpayments without first filing
a protest to the payment of taxes due under the
ordinance. (Jardine Davies Insurance Brokers Inc. v.
Aliposa, G.R. No. 118900, February 27, 2003)

Civil remedies by the LGU for collection of revenues

a) Local governments lien for delinquent taxes, fees or
charges
b) Civil remedies, in general
(i) Administrative action
(ii) Judicial action

Unlike the National Internal Revenue Code, the Local
Tax Code does not contain any specific provision
prohibiting courts from enjoining the collection of local
taxes. Such Statutory lapse or intent, however it may be
viewed, may have allowed preliminary injunction where
local taxes are involved but cannot negate the
procedural rules and requirements under Rule 58.
(Valley Trading Co., Inc. v. CFI of Isabela, Branch II, G.R.
No. L-49529, March 31, 1989)

Real property taxation

As a general principle, a charitable institution does not
lose its character as such and its exemption from taxes
simply because it derives income from paying patients,
whether out-patient, or confined in the hospital, or
receives subsidies from the government, so long as the
money received is devoted or used altogether to the
charitable object which it is intended to achieve; and no
money inures to the private benefit of the persons
managing or operating the institution. (Lung Center of
the Phil. v. Quezon City, G.R. No. 144104, June 29, 2004)

Under the 1973 and 1987 Constitutions and Rep. Act No.
7160 in order to be entitled to the exemption, the
petitioner is burdened to prove, by clear and
unequivocal proof, that (a) it is a charitable institution;
and (b) its real properties are ACTUALLY, DIRECTLY and
EXCLUSIVELY used for charitable purposes. "Exclusive" is
defined as possessed and enjoyed to the exclusion of
others; debarred from participation or enjoyment; and
"exclusively" is defined, "in a manner to exclude; as
enjoying a privilege exclusively." (Lung Center of the
Phil. v. Quezon City, G.R. No. 144104, June 29, 2004)

Under Section 234(a), real property owned by the
Republic is exempt from real estate tax except when the
government gives the beneficial use of the real property
to a taxable entity. The justification for the exception to
the exemption is that the real property, although
owned by the Republic, is not devoted to public use or
public service but devoted to the private gain of a
taxable person. (Manila International Airport Authority
v. Court of Appeals, G.R. No. 155650, July 20, 2006)

In MIAA v. Court of Appeals & Paraaque City, 495 SCRA
591 [2006], the Supreme Court resolved this issue that
MIAA is not a government owned or controlled
corporation but a government instrumentality vested
with corporate powers and performing essential public
services. MIAA is not subject to any local tax except
when its properties are used by taxable entity or if the
beneficial use of real property owned by the Republic is
given to a taxable entity.

The airport lands and buildings of MIAA are properties
devoted to public use and thus are properties of public
dominion. They are owned by the State or the Republic
under Art. 420 of the NCC. Hence, the properties of
MIAA are exempted from the real property tax under
Sec. 234(a) LGC. Only those portions of the NAIA Pasay
properties which are leased to taxable persons like
private parties are the ones subject to the real property
tax by Pasay City. (MIAA v. City of Pasay, 583 SCRA 234)

Appraisal and assessment of real property tax

Real properties shall be appraised at the current and
fair market value prevailing in the locality where the
property is situated and classified for assessment
purposes on the basis of its actual use. (Allied Banking
Corporation, etc., v. Quezon City Government, et al., G.
R. No. 154126, October 11, 2005)

In fixing the value of real property, assessors have to
consider all the circumstances and elements of value
and must exercise prudent discretion in reaching
conclusions. (Allied Banking Corporation, etc., v.
Quezon City Government, et al., G. R. No. 154126,
October 11, 2005)

Declaration of real property

A tax declaration does not prove ownership; it is merely
an indicium of a claim of ownership. Neither tax
receipts nor declaration of ownership for taxation
purposes are evidence of ownership or of the right to
possess realty when not supported by other effective
proofs. (De Vera-Cruz v. Miguel, G.R. No. 144103,
August 31, 2005)

Although tax declarations or realty tax payment of
property are not conclusive evidence of ownership,
nevertheless, they are good indicia of possession in the
concept of owner, for no one in his right mind would be
paying taxes for a property that is not in his actual or
constructive possession. They constitute at least proof
that the holder has a claim of title over the property.
(Heirs of Santiago v. Heirs of Santiago, G.R. No. 151440,
June 17, 2003)

It is `the duty of each person' acquiring real estate in
the city to make a new declaration thereof, with the
advertence that failure to do so shall make the
assessment in the name of the previous owner 'valid
and binding on all persons interested, and for all
purposes, as though the same had been assessed in the
name of its actual owner.' (Heirs of Tajonera v. Court of
Appeals, G.R. No. L-26677, March 27, 1981)

Remedies of LGUs for collection of real property tax
(i) Issuance of notice of delinquency for real property
tax payment

With regard to determining to whom the notice of sale
should have been sent, settled is the rule that, for
purposes of real property taxation, the registered
owner of the property is deemed the taxpayer. Thus, in
identifying the real delinquent taxpayer, a local
treasurer cannot rely solely on the tax declaration but
must verify with the Register of Deeds who the
registered owner of the particular property is. (Spouses
Hu v. Spouses Unico, G.R. No. 146534, September 18,
2009)

It has been ruled that the notices and publication, as
well as the legal requirements for a tax delinquency sale,
are mandatory; and the failure to comply therewith can
invalidate the sale. The prescribed notices must be sent
to comply with the requirements of due process. (De
Knecht v. Court of Appeals, G.R. No. 108015, 109234,
May 20, 1998)

The delinquent taxpayer referred to under Sec. 72 of PD
No. 464 is the actual owner of the property at the time
of the delinquency and mere compliance by the
provincial or city treasurer with Sec. 65 of the decree is
no longer enough. The notification to the right person,
i.e., the real owner, is an essential and indispensable
requirement of the law, non-compliance with which
renders the auction sale void. (Estate of Jacob v. Court
of Appeals, G.R. No. 120435, 120974, December 22,
1997)

(ii) Local governments lien
(iii) Remedies in general
(iv) Resale of real estate taken for taxes, fees or charges
(v) Further levy until full payment of amount due

6. Refund or credit of real property tax
a) Payment under protest
b) Repayment of excessive collections

Taxpayers remedies
a) Contesting an assessment of value of real property
(i) Appeal to the Local Board of Assessment Appeals
(ii) Appeal to the Central Board of Assessment Appeals
(iii) Effect of payment of tax

b) Payment of real property tax under protest
(i) File protest with local treasurer

The protest contemplated under Sec. 252 of R.A. 7160 is
needed where there is a question as to the
reasonableness of the amount assessed. Hence, if a
taxpayer disputes the reasonableness of an increase in a
real estate tax assessment, he is required to "first pay
the tax" under protest; otherwise, the city or municipal
treasurer will not act on his protest. (Ty v. Trampe, G.R.
No. 117577, December 01, 1995)

The trial court has no jurisdiction to entertain a Petition
for Prohibition absent petitioner's payment, under
protest, of the tax assessed as required by Sec. 64 of the
RPTC. Payment of the tax assessed under protest, is a
condition sine qua non before the trial court could
assume jurisdiction over the petition and failure to do
so, the RTC has no jurisdiction to entertain it. (Manila
Electric Co. v. Barlis, G.R. No. 114231, May 18, 2001)

Under then Sec. 30 of PD 464 [now under Sec. 226, LGC],
having failed to appeal the real property assessments to
the LBAA, taxpayer now cannot assail the validity of the
tax assessment before the courts. For failure to exhaust
administrative remedies, the assessment became final.
Under Sec. 64 of PD 464 [now under Sec. 252, LGC), the
taxpayer must first pay under protest and then assail
the validity of the assessment. (Davao Oriental Electric
Coop vs. Prov. Dvo. of Oriental, 576 SCRA 645)

(ii) Appeal to the Local Board of Assessment Appeals

Under Section 226 of R.A. No 7160, the last action of
the local assessor on a particular assessment shall be
the notice of assessment; it is this last action which
gives the owner of the property the right to appeal to
the LBAA. The procedure likewise does not permit the
property owner the remedy of filing a motion for
reconsideration before the local assessor. (Fels Energy,
Inc. v. Province of Batangas, G.R. No. 168557, 170628,
February 16, 2007)

(iii) Appeal to the Central Board of Assessment Appeals
(iv) Appeal to the CTA
(v) Appeal to the Supreme Court

TAXPAYERS SUIT

It is hornbook principle that a taxpayer is allowed to sue
where there is a claim that public funds are illegally
disbursed, or that public money is being deflected to
any improper purpose, or that there is wastage of
public funds through the enforcement of an invalid or
unconstitutional law. For a taxpayer's suit to prosper,
two requisites must be met namely, (1) public funds
derived from taxation are disbursed by a political
subdivision or instrumentality and in doing so, a law is
violated or some irregularity is committed; and (2) the
petitioner is directly affected by the alleged act. (LBP v.
Cacayuran, G.R. No. 191667, April 17, 2013)

What is a taxpayers suit? In the case of a taxpayer, he is
allowed to sue where there is a claim that public funds
are illegally disbursed, or that public money is being
deflected to any improper purpose, or that there is a
wastage of public funds through the enforcement of an
invalid or unconstitutional law. Before he can invoke
the power of judicial review, however, he must
specifically prove that he has sufficient interest in
preventing the illegal expenditure of money raised by
taxation and that he would sustain a direct injury as a
result of the enforcement of the questioned statute or
contract. It is not sufficient that he has merely a general
interest common to all members of the public. At all
events, courts are vested with discretion as to whether
or not a taxpayer's suit should be entertained. This
Court opts to grant standing to most of the petitioners,
given their allegation that any impending transmittal to
the Senate of the Articles of Impeachment and the
ensuing trial of the Chief Justice will necessarily involve
the expenditure of public funds. (Francisco, Jr. vs.
Nagmamalasakit na mga Manananggol ng mga
Manggagawang Pilipino, 415 SCRA 44)

Distinguished from citizens suit

Taxpayers have been allowed to sue where there is a
claim that public funds are illegally disbursed or that
public money is being deflected to any improper
purpose, or that public funds are wasted through the
enforcement of an invalid or unconstitutional law. On
the other hand, as citizens, petitioners have must fulfill
the standing requirement given that the issues they
have raised may be classified as matters "of
transcendental importance, of overreaching significance
to society, or of paramount public interest." (Belgica v.
Ochoa, G.R. No. 208566, 208493, 209251, L-20768,
November 19, 2013)

What is a citizens suit? When suing as a citizen, the
interest of the petitioner assailing the constitutionality
of a statute must be direct and personal. He must be
able to show, not only that the law or any government
act is invalid, but also that he sustained or is in
imminent danger of sustaining some direct injury as a
result of its enforcement, and not merely that he suffers
thereby in some indefinite way. It must appear that the
person complaining has been or is about to be denied
some right or privilege to which he is lawfully entitled or
that he is about to be subjected to some burdens or
penalties by reason of the statute or act complained of.
In fine, when the proceeding involves the assertion of a
public right, the mere fact that he is a citizen satisfies
the requirement of personal interest. (Francisco, Jr. vs.

Requisites for challenging the constitutionality of a tax
measure or act of taxing authority
a) Concept of locus standi as applied in taxation

Legal standing or locus standi has been defined as a
personal and substantial interest in the case such that
the party has sustained or will sustain direct injury as a
result of the governmental as that is being challenged.
The gist of the question of standing is whether a party
alleges such personal stake in the outcome of the
controversy as to assure the concrete adverseness
which sharpens the presentation of issues upon which
the court depends for illumination of difficult
constitutional questions.

To invest him with locus standi, the plaintiff has to
adequately show that he is entitled to judicial
protection and has a sufficient interest in the
vindication of the asserted public right. In case of
taxpayers suits, the party suing as a taxpayer must
prove that he has sufficient interest in preventing the
illegal expenditure of money raised by taxation. (Public
Interest Center vs. Roxas, 513 SCRA 457)

Locus standi, however, is merely a matter of procedure
and it has been recognized that in some cases, suits are
not brought by parties who have been personally
injured by the operation of a law or any other
government act but by concerned citizens, taxpayers or
voters who actually sue in the public interest.

Consequently, the Court, in a catena of cases, has
invariably adopted a liberal stance on locus standi,
including those cases involving taxpayers. The prevailing
doctrine in taxpayers suits is to allow taxpayers to
question contracts entered into by the national
government or government-owned or controlled
corporations allegedly in contravention of law. A
taxpayer is allowed to sue where there is a claim that
public funds are illegally disbursed, or that money is
being deflected to any improper purpose, or that there
is wastage of public funds through the enforcement of
an invalid or unconstitutional law. Significantly, a
taxpayer need not be a party to the contract to
challenge its validity. (Abaya vs. Ebdane, Jr. 515 SCRA
720)

b) Doctrine of transcendental importance

What is transcendental importance? There being no
doctrinal definition of transcendental importance, the
following instructive determinants are instructive: (1)
the character of the funds or other assets involved in
the case, (2) the presence of a clear case of disregard of
a constitutional or statutory prohibition by the public
respondent agency or instrumentality of the
government, and the (3) the lack of any other party with
a more direct and specific interest in raising the
questions being raised. The Court has adopted a liberal
attitude on locus standi where the petitioner is able to
craft an issue of transcendental significance to the
people, as when the issues raised are of paramount
importance to the public. (Francisco, Jr. vs.

Only a person who stands to be benefited or injured by
the judgment in the suit or entitled to the avails of the
suit can file a complaint or petition. Respondents claim
that petitioner is not a proper party-in-interest as he
was unable to show that he has sustained or is in
immediate or imminent danger of sustaining some
direct and personal injury as a result of the execution
and enforcement of the assailed contracts or
agreements. Moreover, they assert that not all
government contracts can justify a taxpayers suit
especially when no public funds were utilized in
contravention of the Constitution or a law. We
explicated in Chavez v. PCGG, 299 SCRA 744 (1998), that
in cases where issues of transcendental public
importance are presented, there is no necessity to show
that petitioner has experienced or is in actual danger of
suffering direct and personal injury as the requisite
injury is assumed. We find our ruling in Chavez v. PEA,
384 SCRA 152 (2002), as conclusive authority on locus
standi in the case at bar since the issues raised in this
petition are averred to be in breach of the fair diffusion
of the countrys natural resources and the
constitutional right of a citizen to information which
have been declared to be matters of transcendental
public importance. Moreover, the pleadings especially
those of respondents readily reveal that public funds
have been indirectly utilized in the Project by means of
Smokey Mountain Project Participation Certificates
(SMPPCs) bought by some government agencies. Hence,
petitioner, as a taxpayer, is a proper party to the instant
petition before the court. (Chavez vs. NHA, 530 SCRA
235)

c) Ripeness for judicial determination

ANTI-DUMPING DUTY (Sec 301, Tariff and Customs
Code)

Definition
Dumping occurs when foreign producers sell their
products to an importer in the
domestic market at prices lower than in their own
national markets, or at prices below
cost of production, the sale or importation of which
injures or threatens to injure a
domestic industry producing like or comparable
products or retards the establishment of
a potential industry. It is a form of price discrimination
between two national markets.

Elements of dumping
There are four (4) elements of dumping, namely:
Like Product - product produced by the domestic
industry which is identical
or alike in all respects to the article under consideration,
or in the absence of such a product,
another product which, although not alike in all
respects, has characteristics closely resembling
those of the product under consideration.

Price Difference - amount by which the normal value
(the price prevailing in the
exporting country) exceeds the export price (selling
price to an importer
in the Philippines).

Injury - means material injury to a domestic industry,
threat of material injury or
material retardation of the establishment of a domestic
industry. Injury test must
be based on positive evidence and shall involve an
objective examination of both
(a) the volume of the dumped imports and the effect of
dumped imports on prices in the
domestic market for like product, and (b) the
consequent impact of these imports on
the domestic producers of such products.

Causal Link - refers to a finding that the material
injury suffered by the domestic industry is the
direct result of the importation of the dumped
product. It must be clear that the injury
suffered is directly attributable to the alleged dumping.

Normal value
The foreign producer's domestic selling price is referred
to as the "normal value" of
the article. It is the comparable price in the ordinary
course of trade for the like product when
destined for consumption in the country of export or
origin.

Export price
"Export price" refers to (1) the ex-factory price at the
point of sale for export; or
(2) the price assessed at the free-on-board (F.O.B.) level
(at the point of shipment) of the allegedly
dumped product.

In cases where (1) or (2) cannot be used, the export
price may be constructed based on such
reasonable bases as the Secretary of Trade and
Industry/Agriculture or the Commission may
determine.

The export price of an imported product is the price at
which such product has been
purchased or agreed to be purchased, at arms length
transaction, by the person by whom or
for whose account the product is imported, excluding
any post exportation charges such as
ocean freight and overseas insurance.

Arms length transaction
An arms length transaction refers to a transaction
where the price is not affected by
any relationship between the buyer and the seller, of if
there is no compensation, reimbursement,
benefit, or other consideration given in respect of the
price.

Domestic industry
"Domestic industry" refers to the domestic producers of
like products as a whole or to those
whose collective output of the products constitutes a
major proportion of the total domestic
production of those products in the industry concerned.
When producers are related to the exporters or
importers or are themselves importers of the alleged
dumped articles, the term "domestic industry" may
be interpreted as referring to the rest of the producers.

Comparable price

"Comparable price" means the domestic price in the
exporting country at the same level
of trade which is sold or offered for sale at wholesale on
the date of exportation to the Philippines.

Non-market economy
A non-market economy refers to the country of
export or origin where the government
(1) has a monopoly, or substantial monopoly, of
trade; and (2) determines, or
substantially influences, the domestic prices of the
products in that country.

Price depression
Price depression refers to the extent by which the
domestic producer reduces its selling price
in order to compete with the allegedly dumped product.

Price suppression

Price suppression refers to the extent by which the
allegedly dumped product prevents the
domestic producer from increasing the selling price of
its own like product to a level that will allow
full recovery of its cost of production.

Price undercutting
Price undercutting is the extent by which the allegedly
dumped product is consistently
sold at a price below the domestic selling price of the
like product.

SCOPE AND COVERAGE

A dumping protest may cover any specific kind or class
of a foreign product which is being
imported, sold or is likely to be sold, into the Philippines
at a price less than its normal value, the
importation or sale of which might injure, or retard the
establishment of, or is likely to injure an
industry producing like products in the Philippines.

Importations exempted from anti-dumping protest

The following shipments and/or consignments shall not
be subject to anti-dumping
protest:
Products imported by, or consigned to,
government agencies not organized for profit
and particularly designated by law or proper authorities
to import, directly or through awardees; such
articles as would stabilize and/or supplement shortages;
and
Conditionally duty-free importations enumerated
under Section 105 of the Tariff and
Customs Code, as amended.

Anti-Dumping Act of 1999
Republic Act No. 8752, otherwise known as the Anti-
Dumping Act of 1999, which amended
Section 301 of the Tariff and Customs Code of the
Philippines, provides protection to a domestic
industry which is being injured, or is likely to be injured
by the dumping of products imported into or
sold in the Philippines.

PROCEDURE
Who may file
A protest may be filed by, or on behalf of, the domestic
industry, in writing and embodied
in a notarized form.

What is the threshold of support by producers for the
protest (application)
to be accepted?
(a) support by domestic producers whose collective
output constitutes more than fifty percent
(50%) of the total production of the like product
produced by the domestic industry; and
(b) support by producers accounting for at least 25% of
the total domestic production of the
product alleged to be dumped.

Who else, aside from the domestic industry, may
initiate an anti-dumping
investigation?
In special circumstances, DTI or DA may, on its own
motion, initiate an anti-dumping investigation
without having received a written application by or on
behalf of a domestic industry. The concerned
authorities should have sufficient evidence of dumping,
injury and a causal link to justify the initiation
of the investigation.

Is the protestant (petitioner) required to post a bond
together with his protest?
Yes, the protestant shall post a surety bond to answer
for any damages which the importer/
protestee may sustain by reason of the filing of frivolous
petition, to be released only upon affirmative
preliminary determination.

What is the de minimis rule?
The protest/application shall be immediately rejected
and the investigation terminated if:
the margin of dumping is de minimis, i.e. less than 2%,
expressed as a percentage, of the
export price; or
the volume of imports from a particular country is less
than 3% of all imports of like products
into the importing country.
However, this rule does not apply when countries with
individual shares
of less than 3% collectively account for more than 7% of
imports of the product under investigation;
or
the injury is negligible.

Price undertaking
Price undertaking is a voluntary commitment by the
exporter to increase his price or to cease
exporting to the Philippines at a dumped price, thereby
eliminating the material injury to the domestic
industry.

Offer of price undertaking shall be made only after a
preliminary affirmative determination of
dumping and injury to the domestic industry.

An undertaking to increase prices or cease exportation
at dumped prices may not be accepted
if its acceptance is impractical, e.g., if the number of
actual or potential foreign exporters is too large,
or other reasons, including reasons of general policy.

Stages of an anti-dumping investigation
Prima Facie Determination
The DTI-BIS or DA, upon acceptance of the properly
documented protest/application, has
five (5) working days to decide whether the facts would
constitute a dumping case. In its
determination, the DTI-BIS or DA undertakes an in-
depth evaluation of the data submitted or provided,
together with
any other information obtained independently.

The following information are to be provided when
applying for the levy of anti-dumping duty:
- volume of the domestic production of the producers
making the application;
- description of the alleged dumped product;
- names of the exporting countries, each known
exporter or foreign producer, and a list of
the importers of the products; and
- information on dumping:
> prices at which the product is sold in the domestic
market of the exporting country, and
export prices;
> injury and causality;
> volume of dumped imports; and
> adverse effects of such imports on domestic prices
and on the domestic industries.

Preliminary Determination
Once a prima facie case has been established, DTI-BIS or
DA initiates the preliminary
determination. Before proceeding to initiate an
investigation, the DTI or DA Secretary notifies the
government of the country of export or origin about the
impending dumping investigation.

Within two (2) days from the initiation of the
investigation, the DTI-BIS or DA notifies all
known interested parties about the initiation of the
investigation and sends a proforma respondents
questionnaire to all the interested parties.

Not later than thirty (30) working days from receipt of
the answer of the respondents and other
interested parties, the Secretary shall make a
preliminary determination of the need for the
imposition of a provisional anti-dumping duty on the
basis of the application, the answer of the respondents,
and the respective supporting documents or
information.

The requirement of the dumping bond (equivalent to
the amount of provisionally calculated
dumping margin) shall be made not sooner than sixty
(60) days from the date of initiation of the
investigation and only for a period of four (4) months.

The Secretary of DTI or DA shall immediately terminate
the anti-dumping investigation upon
finding that:
- the margin of dumping is de minimis, i.e., less than
two percent (2%) of the export price; or
- the volume of imports from a particular country is less
than three percent (3%) of all imports
of like products. However, this rule does not apply
when countries with individual shares of less than
3% collectively account for more than 7% of imports of
the product under investigation; or
- the injury is negligible.

Final Determination
In the conduct of its final determination, the
Commission notifies all interested parties, receives
representations and/or other submissions, and holds
preliminary conference and public consultations.
Investigators conduct ocular plant inspection and
examination of books of accounts of all concerned
parties domestically and in the exporting countries.
From its receipt of the advice from the Secretary of
DTI/DA, the Commission has 120 days to
complete its own inquiry and submit its report of
findings to either Secretary.

Issuance of Department Order
The DTI or DA Secretary shall, within ten (10) days from
receipt of the affirmative final
determination by the Commission, issue a Department
Order imposing an anti-dumping duty on the
dumped product, unless he has earlier accepted an
undertaking from the foreign exporter to
increase prices or cease exportation at dumped prices.
In case of a negative finding by the Commission,
either Secretary shall issue, through the
Secretary of Finance, after the lapse of the period for
the petitioner to appeal to the Court of
Tax Appeals, an Order for the Commissioner of Customs
to immediately release the anti-dumping bond
to the importer.

When may the determination of dumping not be
appropriate?
when sales in the domestic market of the exporting
country are not made in the ordinary
course of trade (e.g. sales are made below the cost of
production); and
when the volume of sales in the domestic markets is
low.

For purposes of determining dumping in the
aforementioned instances, with what is the
export price compared as permitted by the WTO
Agreement and the domestic law?
a comparable price charged for the like product when
exported to a third country; or
a constructed value, calculated on the basis of the
production costs of the imported
product, plus general, selling and administrative costs,
and profits.

What are the economic factors to be considered in
determining material injury to the
domestic industry? threat of material injury?
actual or potential decline in output, sales, market
share, profits, productivity, return on
investments, or utilization of capacity;
effects on domestic prices; and
actual or potential effects on cash flow, inventories,
employment, wages, growth, and ability
to raise capital or investments.

What factors are considered by the Commission in
determining the existence of a threat
of material injury?

a significant rate of increase in the importation of the
dumped product into the domestic
market indicating the likelihood of substantially
increased importations;
sufficient freely disposable, or an imminent,
substantial increase in, production capacity of the
foreign exporter indicating the likelihood of
substantially increased dumped exports in the
domestic
market, taking into account the availability of other
export markets to absorb any additional exports;
whether dumped products are entering at prices that
will have a significantly depressing or
suppressing effect on domestic prices, and will likely
increase demand for further importation of the
dumped products; and
inventories of the product being investigated.

What factors other than dumped imports may cause
the non-levy of anti-dumping duties?
contraction in demand or changes in the patterns of
consumption;
trade restrictive practices of, and competition
between, foreign and domestic producers;
developments in technology and export performance;
and
productivity of the domestic industry.

Remedies/measures imposed against dumping
Provisional Measure - takes the form of a
provisional duty - cash or documentary security -
equal to the estimated difference between the normal
value and the export price of the protested
article. It is applied only after the DTI-BIS or DA has
made a preliminary affirmative determination
no sooner than 60 days from the initiation of the case.
Definitive Duty - final anti-dumping duty imposed, in
addition to the regular duty and other
charges, on a protested product imported from a
specific country. It may be the full margin of dumping
or a lesser amount adequate to remove the injury to
the domestic industry.

Lesser duty rule
Even after it is established that dumped imports are
causing injury to the domestic industry,
the decision on whether the amount of duty should be
the full margin of dumping or less should be
made by the authorities. If a lesser duty is adequate to
remove the injury to the domestic industry,
the lesser duty should be levied.

DURATION OF MEASURES

What is the lifetime of the anti-dumping measures?
Provisional anti-dumping duty four (4) months,
extendible to six (6) months
Definitive anti-dumping duty effective for five (5)
years from imposition

Sunset review
It is a review that may be initiated by any interested
party or upon own motion of the
Commission before the sunset date, (i.e., the 5th year)
to determine whether the expiry of the
anti-dumping duty would likely lead to a continuation or
recurrence of dumping and injury.

Interim review?
It is a review conducted by the Commission, motu
proprio or upon the direction of the
Secretary or upon petition of any interested party to
determine whether:
the need for the continued imposition of the anti-
dumping duty is no longer necessary to
offset dumping taking into consideration the need to
protect the existing domestic industry; or
the existing duty is not sufficient to counteract the
dumping which is causing injury.
At least one (1) year should have elapsed since the
imposition of the anti-dumping duty before
an interim review can be made.

Newcomer review?
It is a review carried out on an accelerated basis for the
purpose of determining individual
margins of dumping for new exporters (new shippers)
in the exporting country in question which
have not exported the product during the period of
investigation on which the measures were based.
The new foreign exporters may request for
such review provided they are not related to any
foreign exporter who is subject to the anti-dumping
duty. The application must be submitted to the
Commission in writing and must contain :
i. a description of the foreign exporters products; and
ii. the basis of the request.

JUDICIAL REVIEW
What are the actions available to the aggrieved
and/or interested party?
appeal - within thirty (30) days from receipt
of notice of the final ruling, a petition for
review of such ruling may be filed with the Court of Tax
Appeals by any party in an anti-dumping
investigation who is adversely affected by the final
ruling in connection with the imposition of an
anti-dumping duty
- the filing of such petition for review shall not in any
way stop or suspend the imposition
and collection of the anti-dumping duty.

PHILIPPINE COMMITMENTS VIS--VIS THE WTO
AGREEMENT ON ANTI-DUMPING
PRACTICES
What previously WTO-inconsistent provisions in the old
dumping law (Section 301) have been
amended/revised by the new law to align it with the
WTO Agreement?
withholding of the release of questioned importation
pending the determination of a
prima facie case of dumping;
imposition of provisional measure immediately upon
finding of a prima facie case, effective
up to the final determination of dumping;
inclusion of substitutes in the definition of like
products;
country-specific application of anti-dumping duty;
period of submission of replies to questionnaire
limited to 10 days; and
retroactive application of definitive anti-dumping duty
on all importations within 150 days
immediately preceding the filing of the protest.

STRENGTHENING OF THE ANTI-DUMPING MECHANISM
What provisions in the new anti-dumping law
strengthen the mechanism against dumped
imports?
proactive implementation by concerned authorities,
including commercial and agricultural
attaches;
penalty clause prescribing sanctions on (a) concerned
government authorities in addition to
those provided in the Revised Penal Code and the Anti-
Graft and Corrupt Practices Act - for the
failure of implementing authorities to initiate,
investigate and prosecute anti-dumping cases;
(b) importers who are found guilty of dumping;
elimination of the Special Committee on Anti-
Dumping as the deciding authority and, in lieu
thereof, the Tariff Commission;
shortening of the statutory investigative timetable
from 150 days to 120 days for the
Commission to complete its formal investigation and
submit its report of findings to the Secretary of
DTI/DA;
creation of a Special Unit within the implementing
agencies to undertake the tasks mandated
under the Anti-Dumping Duty Act of 1999; and
earmarking of the anti-dumping duty collected for the
capacity building/strengthening of the
implementing agencies.

CONTENTIOUS PROVISIONS IN THE ANTI-DUMPING
ACT OF 1999
What provisions in the new law drew strong negative
reactions from certain concerned sectors?
The discretion of the Tariff Commission to require or
not the imposition of anti-dumping duty
even in cases where all the elements of dumping have
been established
The penalty clause prescribing the following punitive
damages to be imposed on any importer
who knowingly engages in importation of dumped
products:
- revocation of the importers license or charter to do
business;
- disqualification of responsible officers from holding
official position in other business entities
in the Philippines; and
- fine equal to twice the definitive anti-dumping duty
imposed.
The requirement for the posting of surety bond by the
petitioner/protestant upon filing of
an anti-dumping protest to answer for any damages
which the importer/protestee may sustain by
reason of the filing of a frivolous petition.

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