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Tax exemptions are limited to those granted by law. However, no law granting any tax
exemption shall be passed without the concurrence of a majority of all the members of
the Congress. (Article VI, Section 28, par. 4). The Constitution expressly grants tax
exemption on certain entities/institutions such as (1) charitable institutions, churches,
parsonages or convents appurtenant thereto, mosques, and nonprofit cemeteries and
all lands, buildings and improvements actually, directly and exclusively used for
religious, charitable or educational purposes (Article VI, Section 28, paragraph 3); (2)
non-stock non-profit educational institutions used actually, directly and exclusively for
educational purposes. (Article XVI, Section 4(3))
In addition to national taxes, the Constitution provides for local government taxation.
(Article X, Section 5) (Article X, Section 6) Parenthetically, the Local Government Code
provides that all local government units are granted general tax powers, as well as other
revenue-raising powers like the imposition of service fees and charges, in addition to
those specifically granted to each of the local government units. But no such taxes, fees
and charges shall be imposed without a public hearing having been held prior to the
enactment of the ordinance. The levy must not be unjust excessive, oppressive,
confiscatory or contrary to a declared national economic policy (Section 186 and 187)
Further, there are common limitations to the grant of the power to tax to the local
government, such that taxes like income tax, documentary stamp tax, etc. cannot be
imposed by the local government.
II. Laws
The basic source of Philippine tax law is the National Internal Revenue Law, which
codifies all tax provisions, the latest of which is embodied in Republic Act No. 8424
(The Tax Reform Act of 1997). It amended previous national internal revenue codes,
which was approved on December 11, 1997. A copy of the Tax Reform Act of 1997,
which took effect on January 1, 1998, can be found here.
Local taxation is treated separately in this Guide. There are, however, special laws that
separately provide special tax treatment in certain situations. (See attached matrix on
special laws)
III. Treaties
The Philippines has entered into several tax treaties for the avoidance of double taxation
and prevention of fiscal evasion with respect to income taxes. At present, there are 31
Philippine Tax Treaties in force.
International Tax Affairs Division of the BIR, which is under the Deputy Commissioner
for Legal and Inspection Group.
The Philippine Treaty Series, edited and annotated by Haydee Yorac and published by
Law Publishing House, University of the Philippines, is available in seven (7) volumes,
covering the years 1944 to 1978 . The Philippine Treaty Index, by Benjamin Domingo,
covers the years 1978 to 1982. A copy of the Philippine Treaty Index is available in the
Department of Foreign Affairs (DFA) Library. These publications contain treaties entered
into by the Philippines. Tax privileges and exemptions granted under treaties to which
the Philippines is a signatory are recognized under Philippine tax law. Copies of treaties
entered into by the Philippines with other countries and/or international organizations,
from 1983 up to the present, are available at the DFA Library.
IV.
Administrative Material
define rules and regulations for the effective enforcement of the provisions of the
National Internal Revenue Code (NIRC) and related statutes.
Revenue Memorandum Orders (RMOs) are issuances that provide directives or
instructions; prescribe guidelines; and outline processes, operations, activities,
workflows, methods and procedures necessary in the implementation of stated policies,
goals, objectives, plans and programs of the Bureau in all areas of operations, except
auditing.
Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the
Commissioner of Internal Revenue with respect to the provisions of the Tax Code and
other tax laws, as applied to a specific set of facts, with or without established
precedents, and which the Commissioner may issue from time to time for the purpose of
providing taxpayers guidance on the tax consequences in specific situations. BIR
Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null
and void ab initio.
Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and
applicable portions, as well as amplifications, of laws, rules, regulations and precedents
issued by the BIR and other agencies/offices.
BIR Rulings are the official position of the Bureau to queries raised by taxpayers and
other stakeholders relative to clarification and interpretation of tax laws.
Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings,
Revenue Memorandum Circulars, Revenue Memorandum Rulings, and BIR Rulings are
found here.
V. Case Law
In the Philippines, Supreme Court decisions form part of the law of the land. As such,
decisions by the Supreme Court (sc.judiciary.gov.ph) in the exercise of its power to
review, revise, reverse, modify or affirm on appeal or certiorari, as the law or the Rules
of Court may provide, final judgments and orders of lower courts cases involving the
legality of any tax, impost, assessment, or toll or any penalty imposed in relation thereto
are adhered to and recognized as binding interpretations of Philippine tax law. Court of
Appeals and Court of Tax Appeals decisions which have become final and executory
are also recognized interpretations of Philippine tax law.
VI. Treatises and other books
There are no Philippine treatises exclusively devoted to Philippine Tax law but various
Philippine authors have come up with annotated versions of the Tax Code. These books
can be purchased from Rex Bookstore and Central Law Publishing, Inc.
VII. Periodicals
Periodicals on Philippine tax law are the:
(1) Philippine Revenue Service (copies available in the BIR Library), published by the
BIR from 1969-1980;
(2) Philippine Revenue Journal (copies available in the BIR Library) which was both
published by the Bureau of Internal Revenue from 1969 to 2000; and
(3) the Tax Monthly, published by the National Tax Research Center (NTRC) (copies
available in the BIR Library and the NTRC).
VIII. Local Government Tax Law
Local government taxation in the Philippines is based on the constitutional grant of the
power to tax to the local governments.
Local taxes may be imposed, as the Constitution grants, to each local government unit,
the power to create its own sources of revenues and to levy taxes, fees, and charges
which shall accrue to the local governments (Article X, Section 5). With respect to
national taxes, local Government units shall have a just share, as determined by law, in
the national taxes which shall be automatically released to them (Article X, Section 6).
However, certain taxes, such as the following, may not be imposed by local government
units: (Section 133, Local Government Code and Tax Law and Jurisprudence by Vitug &
Acosta, copyright 2000)
(1) Income tax, except when levied on banks and other financial institutions;
(2) Documentary stamp tax;
(3) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa,
except as otherwise provided in the Local Government Code (Code) (except taxes
levied on the transfer of real property ownership under Section 135, and Section 151 of
the Code);
(4) Customs duties, registration fees of vessels (except license fees imposed under
Section 149, and Section 151 of the Code), wharfage on wharves, tonnage dues and all
other kinds of customs fees, charges and dues except wharfage on wharves
constructed and maintained by the local government unit concerned;
(5) Taxes, fees, charges and other impositions upon goods carried into or out of, or
passing through, the territorial jurisdictions of local governments in the guise of charges
for wharfage, tolls for bridges or otherwise, or other taxes in any form whatever upon
such goods or merchandise;
(6) Taxes, fees or charges on agricultural and aquatic products when sold by marginal
farmers or fishermen;
(7) Taxes on business enterprises certified by the Board of Investments as pioneer or
non-pioneer for a period of six and four years, respectively, from the date of registration;
(8) Excise taxes on articles enumerated under the National Internal Revenue Code and
taxes, fees, or charges on petroleum products, but not a tax on the business of
importing, manufacturing or producing said products (Patron vs. Pililla, 198 SCRA 82);
1. Undertake comprehensive studies on the need for additional revenue for accelerated
national development and the sources from which this might most equitably be derived;
2. Re-examine the existing tax system and tax policy structure;
3. Conduct researches on taxation for the purpose of improving the tax system and tax
policy;
4. Pass upon all tax measures and revenue proposal;
5. Recommend of such reforms and revisions as may be necessary to improve revenue
collection and to formulate sound tax policy and a more efficient tax structure.