LAW ON TAXATION

References:
Dimaampao, Tax Principles and Remedies, Income Taxation
Lim, Virginia Comprehensive Reviewer in Taxation
Domondon, Taxation Vol.1
Aban, Law of Basic Taxation
Mamalateo, Reviewer on Taxation
Recalde, A Treatise on Philippine Internal Revenue Taxes
Valencia, Income Taxation
Vitug Acosta,
Sababan, Taxation
II. National Internal Revenue Code (NIRC) of 1997, as amended
A. Income taxation
a. Conwi Vs CTA 213 SCRA 83
a) Definition
b) Nature
8. Income
a) Definition
b) Nature
c) When income is taxable
(i) Methods of Ascertaining Income
a. Networth Method
b. Expenditures Method
(ii) Realization of income
(a) Tests of realization
(b) Actual vis--vis constructive receipt
(iii) Recognition of income
(i)
Methods of accounting
Accounting Methods:
a. Cash Basis Method
b. Accrual Method
Case:
a) Fernandez Hermanos Inc Vs CIR GR No. L-21551 Sept 30, 1969
b) CIR Vs Isabela Cultural Corporation GR No. 172231 Feb 12, 2007
Tests in determining whether income is earned for tax purposes

(i) Realization test

(ii) Claim of right doctrine or doctrine of ownership, command, or control
(iii) Economic benefit test, doctrine of proprietary interest
(iv) Severance test Theory of Separability
(v) All events test
(vi) Substantial alteration test
(vii) Flow of Wealth Theory
(viii) Doctrine of Proprietary interest
(ix) Doctrine of Constructive receipt of income
Case:
Limpan Investment Corp Vs CIR 17 SCRA 703
(x) Equivalent of Cash Doctrine
Exception:
Doctrine of Involuntary Conversion of Property
Installment payment vis--vis deferred payment vis--vis percentage completion (in
long-term contracts)
Accounting Period /Taxable period (Sec 43-44 NIRC)
a) Calendar period
b) Fiscal period
c) Short period
Cases:
a. Republic Vs Dela Rama 18 SCRA 861
b. CIR Vs Javier 199 SCRA 824
Income Taxes
Kinds Internal Revenue Taxes:
Capital Gain Sec 39(A) NIRC
Ordinary Gain
Presumed Gain - Sec 24(d) NIRC; Sec 28 (A) (3); Sec 27 (E) (4)
1. Income tax systems
a) Global tax system
b) Schedular tax system

c) Semi-schedular or semi-global tax system

2. Features of the Philippine income tax law
a) Direct tax
b) Progressive
c) Comprehensive
d) Semi-schedular or semi-global tax system
3. Criteria in imposing Philippine income tax
a) Citizenship principle
b) Residence principle
c) Source principle
Sec 23 NIRC
4. Types of Philippine income tax based on source
5. Kinds of taxpayers
A) Individual taxpayers
Sec 23 A-D, NIRC
(i) Citizens
(a) Resident citizens Sec 23 A in relation to Sec 42
(b) Non-resident citizens Sec 22 E, Sec 23 B
Seconded Employees
OCWs
Seamen
Professionals with Fixed Base
(ii) Aliens Sec 23 D
(a) Resident aliens Sec 22 F
Test:
(b) Non-resident aliens Sec 22 G
(1) Engaged in trade or business Sec 25 A
(2) Not engaged in trade or business Sec 25 B
Case:

a) CIR Vs Juliane Baier-Nickel GR No. 153793 Aug 29, 2006

(iii) Special class of individual employees Sec 25 C-E
(a) Minimum wage earner
B) Corporations Sec 22 B
Definition
Levels of Tax Liability of Corporations
Case: CIR V Batangas Tayabas Bus Co 102 Phil 822
Condominium Corporation
Tax Treatment
(i) Domestic corporations Sec 22 C, Sec 23 E, Sec 27 NIRC
Definition
Tax Treatment
Case: CIR Vs PAL GR No. 160528 Oct 9, 2006
(ii) Foreign corporations Sec 22 D, Sec 23 F
(a) Resident foreign corporations Sec 22 H
Branch
Subsidiary
Cases:
Marubeni Vs CIR 177 SCRA 500
Winship Vs Philippine Trust Co., 90 Phil 744
(b) Non-resident foreign corporations Sec 22 I, 28, NIRC
Case:
CIR Vs BOAC 149 SCRA 395
CIR Vs Procter and Gamble 204 SCRA 277
(iii) Joint venture and consortium
Exempt JV
Taxable JV
c) Partnerships
Partnership: Co-ownership; and GPP
Sec 22 (b); 26, 73 (D), NIRC
Case:
a. Ona Vs CIR 45 SCRA 78
b. Obillos Vs CIR, L-681185, Oct 29, 1985
A) Fiduciary taxpayers
Definition
Obligations
Tax Liability
Case: Tan Vs Del Rosario GR no. 109289 Oct 3, 1994 (SUPRA)
c.1) Estates Sec 60 (a) (3)

c.2) Trusts
Kinds of Trusts
Employees Trust
Tax Treatment
Sec 22 J, 60-64 NIRC
Cases:
a) CIR Vs Visayas Electric 23 SCRA 715
b) CIR Vs CA 207 SCRA 487
c) DBP Vs COA GR No. 144516 Feb 11, 2004
Registration of Taxpayers
Sec 236 (A) NIRC
6. Person Enjoying Special Tax Treatment
a) Exempt Corporations
Exempt Individuals:
RA 9504 Minimum Wage Earners/ personal and additional exemptions
Senior Citizens
Sec 4 (b) RA 9994
Tax treaty
Case:
a. Reagan Vs CIR 30 SCRA 968
b. CIR Vs Robertson, 143 SCRA 796
Exempt Corporations:
Sec 27 , NIRC
Sec 30 A-K
Non-Stock Nonprofit Educ and Hosp Vs Proprietary NonProfict Educ and Hosp
Case:
a. CIR Vs St Lukes Medical Center GR 195909 and 195960 Sept 26,2012
Omnibus Investment Code
RA 8502 Jewelry Industry Development Act of 1998
RA 7916 as amended by RA 8748 PEZA Law
RA 9520 New Cooperative Code of 2008
Case:
a. Dumaguete Cathedral Credit Cooperative Vs CIR GR 182722, January 22,
2010
b. CIR Vs CA GR 124043 Oct 14, 1998
c. CIR Vs CA GR 115346 April 18,1997