Taxation Law Tips

(c) The supply of scien

commercial knowl
(d) The supply of any a
subsidiary to, an
enabling the app
such property o
paragraph (a),
mentioned in p
Tax Situs Rules (Section 23, Tax Code)
knowledge or inf
paragraph (c);
(e) The supply of services
employee in conn
Within
or rights belongi
Non resident Citizen
operation of any
Overseas contract worker1
apparatus purcha
Alien (whether resident or not)
person;
Foreign Corporation (whether engaged in trade or
(f) Technical advice, assi
business or not)
connection with
administration of
Income Sources from Within the Philippines
commercial unde
(Section 42, Tax Code)
scheme; and
(g)
The
use of or the right
Income
(i) Motion pictur
Interests
Interests derived from sources
(ii) Films or vid
and interests on bonds, notes or other interest-bearing
with
television; an
obligation of residents, corporate or otherwise
(iii) Tapes fo
Dividends
broadcasting.
Sale of Real Property
Gains, profits and income
located in the Philippines
Sale of Personal Property
As determined in Subsect
(Income from sources pa
the Philippines)
Taxable Income From Sources Within the
Philippines (Section 42, Tax Code)

Services
Rentals and Royalties

A seaman who is a citizen of the Philippines and

who receives compensation for services rendered
abroad as a member of the complement of a vessel
engaged exclusively in international trade shall be
treated as an overseas contract worker.

General Rule
From the items of gross income specified in
Subsection (A) of this Section, there shall be
deducted the expenses, losses and other deductions
properly allocated
and aservices
ratableperformed
part of
Compensation
for laborthereto
or personal
expenses,
interests, losses and other deductions
in the
Philippines
effectively
the business or trade
From
propertyconnected
located inwith
the Philippines
conducted exclusively within the Philippines which
cannot definitely be allocated to some items or class
gross
That such
items
of
(a)ofThe
use income:
of or the Provided,
right or privilege
to use
in the
deductions shall be allowed only if fully
substantiated by all the information necessary for its
calculation. The remainder, if any, shall be treated in
full as taxable income from sources within the
(b)Philippines.
The use of, or the right to use in the Philippines any

E
No deductions for in
shall be allowed fro
specified in subsectio
actually incurred to
connection with the c
business in the Philip

Gross Income From Sources Without the

Philippines
Income
Interests

Rules
Other than those deri
Philippines as provided
(A) of this Section

Dividends

Other than those derived from sources within the

The transfer
by a nonresident
alien
or Subsection
a foreign
Philippines
as provided
in paragraph
(2) of
corporation
to anyone of any share of stock issued by
(A)
of this Section
a domestic corporation
shall not
effected or
made
Services
Compensation
for labor
or be
personal
services
in its book unless:
performed
(1) the
transferor
hasPhilippines
filed with
the
Rentals and Royalties
From property
located
without the
or from
Commissioner
a bond conditioned
upon the
any interest
in such property
including rentals
or
future
any income
tax
royalties for
the payment
use of orbyforhim
theofprivilege
of using
thatPhilippines,
may be due patents,
on the gains
derivedsecret
from
without the
copyrights,
processes such
and transfer,
formulas,orgoodwill, trademarks, trade
brands, franchises and other like properties
(2) theand
Commissioner
has the
certified
the
Sale of Real Property
Gains, profits
income from
sale that
of real
taxes, ifwithout
any, imposed
in this Title and due on
property located
the Philippines
the gain realized from such sale or transfer
have been paid. It shall be the duty of the
transferor and the corporation the shares of
Taxable Income From Sources Without the
which are sold or transferred, to advise the
Philippines
transferee of this requirement.
Rule: From the items of gross income specified in
Subsection (C) of this Section there shall be deducted
the expenses, losses, and other deductions properly
apportioned or allocated thereto and a ratable part of
any expense, loss or other deduction which cannot
definitely be allocated to some items or classes ofExclusions from Gross Income (Section 32 (b),
gross income. The remainder, if any, shall be treated Tax Code)
in full as taxable income from sources without the
Items Excluded
Rules
Philippines.
1. Life Insurance
Exception: If such am
under an agreement
Income From Sources Partly Within and
interest payments shall
Partly Without the Philippines
2. Amount received by Insured as return of
Rule: In the case of gross income derived frompremium
PROVIDED that suc
sources partly within and partly without the 3. Gifts, bequests and devises
shall be included in gros
Philippines, the taxable income may first be computed
Amounts received, th
by deducting the expenses, losses or other deductions4. Compensation for injuries or sicknesses
Insurance or under Wo
apportioned or allocated thereto and a ratable part of
compensation for perso
any expense, loss or other deduction which cannot
the amounts of any dam
definitely be allocated to some items or classes of
or agreement, on accoun
gross income; and the portion of such taxable income
To the extent required b
attributable to sources within the Philippines may be 5. Income Exempt under Treaty
upon the Government o
determined by processes or formulas of general
(a) In accordance with
apportionment prescribed by the Secretary of 6. Retirement Benefits, Pensions, Gratuities, etc.
plan2 maintained by the
Finance.
1. The retiring offici
service of the same emp
Gains, profits and income from the sale of personal
2. Employee availing
property produced (in whole or in part) by the
of age at the time of his
taxpayer within and sold without the Philippines, or
produced (in whole or in part) by the taxpayer without
and sold within the Philippines, shall be treated as
derived partly from sources within and partly from2 means a pension, gratuity, stock bonus or profitsharing plan maintained by an employer for the
sources without the Philippines.
benefit of some or all of his officials or employees,
Gains, profits and income derived from the purchase wherein contributions are made by such employer for
of personal property within and its sale without the the officials or employees, or both, for the purpose of
Philippines, or from the purchase of personal property distributing to such officials and employees the
without and its sale within the Philippines shall be earnings and principal of the fund thus accumulated,
treated as derived entirely form sources within the and wherein its is provided in said plan that at no
country in which sold: Provided, however, That gain time shall any part of the corpus or income of the fund
from the sale of shares of stock in a domestic be used for, or be diverted to, any purpose other than
corporation shall be treated as derived entirely formfor the exclusive benefit of the said officials and
sources within the Philippines regardless of where the employees.
said shares are sold.

3. Availed of only once.

7. Miscellaneous Items

exclusion under this sub

Thirty thousand pesos (
(b) Any amount received by an official or employee or(i) Benefits received by o
by his heirs from the employer as a consequence of: national and local gover
1. Separation of such official or employee from theAct No. 6686;
service of the employer because of death sickness or(ii) Benefits received by
other physical disability; or
Presidential Decree No.
2. Any cause beyond the control of the said official orMemorandum Order No
employee.
(iii) Benefits received by
covered by Presidential
(c) social security benefits, retirement gratuities,Memorandum Order No
pensions and other similar benefits received byand
resident or nonresident citizens of the Philippines or(iv) Other benefits such
aliens who come to reside permanently in theChristmas bonus: Provid
Philippines from foreign government agencies andThirty thousand pesos (
other institutions, private or public.
through rules and regul
of Finance, upon recom
(d) Payments of benefits due or to become due to anyCommissioner, after con
person residing in the Philippines under the laws ofeffect on the same of the
the United States administered by the United Statestaxable year.
Veterans Administration.
(f) GSIS, SSS, Medicare
(e) Benefits received from or enjoyed under the SocialGSIS, SSS, Medicare an
Security System in accordance with the provisions ofunion dues of individua
Republic Act No. 8282.
(g) Gains from the Sale
(f) Benefits received from the GSIS under Republic ActCertificate of Indebtedn
No. 8291, including retirement gratuity received bysame or exchange or ret
government officials and employees.
or other certificate of in
(a) Income derived from investments in themore than five (5) years
Philippines in loans, stocks, bonds or other domestic
securities, or from interest on deposits in banks in the
Philippines by (i) foreign governments, (ii) financing(h) Gains from Redemp
institutions owned, controlled, or enjoying refinancing
- Gains realized by the
from foreign governments, and (iii) international or
regional financial institutions established by foreignshares of stock in a mut
Section 22 (BB) of this C
governments.
(b) Income Derived by the Government or its Political
Subdivisions. - Income derived from any public utility
or from the exercise of any essential governmental
function accruing to the Government of the Philippines
or to any political subdivision thereof.
(c) Prizes and Awards. - Prizes and awards made
primarily in recognition of religious, charitable,
scientific, educational, artistic, literary, or civic
achievement but only if:
(i)
The recipient
selected incurred
without any to
action
on his
How
should was
interest
acquire
part
to enterused
the contest
or proceeding;
andexercise of
property
in trade
business or
(ii)
The recipientbe
is treated?
not required to render substantial
a profession
future services as a condition to receiving the prize or
award.
(d) Prizes and Awards in sports Competition. - All
prizes
awardsof
granted
to athletes
localbe
and
A: At and
the option
the taxpayer,
theyinmay
allowed
international sports competitions and tournaments
as a deduction or treated as a capital expenditure.
whether held in the Philippines or abroad and
(Section 34
(b)(3),
Tax Code)
sanctioned
by their
national
sports associations.
(e) 13
received by officials and employees of public and
private entities: Provided, however, That the total

What is the rule if the taxpayer dies during the

taxable year?
In general, what are the allowabe deductions
His estate may still claim the personal and additional
from the gross income?
exemptions for himself and his dependent(s) as if he
died at the close of such year.
A:
Note:
a.

Expenses
a.

b.

If the spouse or any of the dependents dies or if any of

such dependents marries, becomes twenty-one (21)
Ordinary and Necessary Trade,
years old or becomes gainfully employed during the
Business or Professional Expenses
taxable year, the taxpayer may still claim the same
exemptions as if the spouse or any of the dependents
Expenses Allowable to Privatedied, or as if such dependents married, became
Educational Institutions
twenty-one (21) years old or became gainfully
employed at the close of such year.

b.

Interest

c.

Taxes

d.

Losses

e.

Bad Debts

f.

Depreciation

g.

Depletion of Oil and Gas Wells and Mines

h.

Charitable and Other Contributions

i.

Research and Development

j.

Pension Trusts

Define Capital Assets.

k.

l.

The term 'capital assets' means property held by the

taxpayer (whether or not connected with his trade or
business), but does not include stock in trade of the
taxpayer or other property of a kind which would
properly be included in the inventory of the taxpayer
if on hand at the close of the taxable year, or property
held by the taxpayer primarily for sale to customers in
the ordinary course of his trade or business, or
property used in the trade or business, of a character
which is subject to the allowance for depreciation
provided in Subsection (F) of Section 34; or real
property used in trade or business of the taxpayer.

Define Net Capital Gain

Additional Requirements for Deductibility of
Certain Payments
The term 'net capital gain' means the excess of the
gains from sales or exchanges of capital assets over
the losses from such sales or exchanges.
Optional Standard Deduction

Define Net Capital Loss

m. Premium Payments on Health and/or
Hospitalization Insurance of an Individual
Taxpayer
The term 'net capital loss' means the excess of the
losses from sales or exchanges of capital assets over
the gains from such sales or exchanges.
If the taxpayer marries or should have
additional dependent(s) during the taxable
year is he entitled to claim additional
Gross Estate
exemption? If yes, how much?
Items Included
Yes. The taxpayer may claim the corresponding
Decedent's Interest
additional exemption in full for such year.

Rule
To the extent of the
at the time of his de

Transfer in Contemplation of Death

Proceeds of Life Insurance

Revocable Transfer

Prior Interests

Transfers of Insufficient Consideration

Capital of the Surviving Spouse

property, or (b) the

conjunction with an
persons who shall p
the income therefro
sale for an adequate
money or money's w
To the extent of the
estate of the decease
administrator, as in
out by the decedent
of whether or not th
revocation, or to the
receivable by any be
policy of insurance,
stipulated that the d
irrevocable.
Except as otherwise
Subsections (B), (C)
apply to the transfer
rights, powers and r
severally enumerate
whether made, crea
or relinquished befo
Code
If any one of the tra
or powers enumerat
Subsections (B), (C)
made, created, exerc
consideration in mo
not a bona fide sale
consideration in mo
shall be included in
of the fair market va
property otherwise t
such transaction, ov
consideration receiv
The capital of the su
shall not, for the pur
deemed a part of his

Computation of Net Estate

Deductions Allowed

Property Passing Under General Power of

Appointment

Citizen/ Resident
Expenses, Losses, Indebtedness, and taxes
Property Previously Taxed
Transfers for Public Use
The Family Home
Standard Deduction
Medical Expenses
Amount Received by Heirs Under Republic Act No.
4917
Share in the Conjugal Property

Non Resident
Expenses, Losses, Ind
Property Previously T
Transfers for Public U
Share in the Conjuga

Authority of the Commissioner to

Compromise, Abate and Refund or Credit
Taxes
Grounds for compromise:

with the preceding Sections or any of the rulings or

circulars promulgated by the Commissioner shall not
be given retroactive application if the revocation,
modification or reversal will be prejudicial to the
taxpayers, except in the following cases:

(a) Where the taxpayer deliberately misstates or omits

(1) A reasonable doubt as to the validity of the claim
material facts from his return or any document
against the taxpayer exists; or
required of him by the Bureau of Internal Revenue;
(2) The financial position of the taxpayer
demonstrates a clear inability to pay the assessed tax. (b) Where the facts subsequently gathered by the
Bureau of Internal Revenue are materially different
The compromise settlement of any tax liability shall from the facts on which the ruling is based; or
be subject to the following minimum amounts:
(c) Where the taxpayer acted in bad faith.
For cases of financial incapacity, a minimum
compromise rate equivalent to ten percent (10%) of What are the fundamental principles on the
the basic assessed tax; and
taxing powers of LGUS?
For other cases, a minimum compromise rate
equivalent to forty percent (40%) of the basic assessed
tax.
Note:
Where the basic tax involved exceeds One million
pesos (P1,000.000) or where the settlement offered is
less than the prescribed minimum rates, the
compromise shall be subject to the approval of the
Evaluation Board which shall be composed of the
Commissioner and the four (4) Deputy
Commissioners.
Grounds for abatement or cancellation of a tax
liability
(1) The tax or any portion thereof appears to be
unjustly or excessively assessed; or
(2) The administration and collection costs involved
do not justify the collection of the amount due.

1. Uniform in each local government unit;

2. Shall:
a) be equitable and based as far as
practicable on the taxpayers ability to
pay;
b) be levied and collected only for public
purpose;
c)
not be unjust, excessive, oppressive,
or confiscatory;
d) not be contrary to law, public policy,
national economic policy, or in the restraint
of trade;
3. Collection shall in no case be let to any
private person;
4. shall inure solely to the benefit of, and be
subject to the disposition by, the local
government unit levying
5. Each local government unit shall, as far as
practicable, evolve a progressive system
of taxation. (LGC, Sec. 130)

What are the exceptions to the compromise of What are the common limitations on the
criminal violations?
taxing power of LGUs?
(a) those already filed in court, or
(b) those involving fraud.
Can injunction issue to restrain collection of
tax?

LGUs, unless otherwise provided by LGC,

CANNOT impose tax on the following:
1. Income tax3;
2. Documentary stamp tax;
3. Estate, inheritance, gifts, legacies, and other
aquisitions mortis causa4;
4. Customs duties, registration fees of vessel
and wharfage on wharves, tonnage dues, and

No. No court shall have the authority to grant an

injunction to restrain the collection of any national
internal revenue tax, fee or charge imposed by this
3 EXCEPT banks and other financial institution
Code.
Do the rulings of the BIR have retroactive
effect?
NO. Any revocation, modification or reversal of any of
the rules and regulations promulgated in accordance

4 EXCEPT otherwise provided under LGC

all other kinds of customs fees, charges andWhich municipality has tax jurisdiction for
dues5;
sale transactions of entities with different
5. Upon goods carried into or out of, or passing outlets?
through, the territorial jurisdictions of local
government units in the guise of charges
A. The municipality where such branch or sales
for wharfage, tolls for bridges or
outlet is located. (LGC, Sec. 150)
otherwise, or other taxes, fees, or charges in
any form whatsoever upon such goods or
merchandise;
Which municipality has tax jurisdiction in
6. On agricultural and aquatic products
when sold by marginal farmers or fishermen; cases where the business entity subject to tax
7. on business enterprises certified to by the has no branch or sale outlet?
Board of Investments as pioneer or nonpioneer for a period of 6 and 4 years,A. The city or municipality where the sale or
respectively from the date of registration;
transaction is made. (LGC, Sec. 150)
8. Excise taxes on articles enumerated under
NIRC;
9. Percentage or (VAT) on sales, barters orWhen may LGUs exercise the power to tax?
exchanges or similar transactions on goods
or services6;
1. When such tax to be imposed are not
10. On the gross receipts of transportation
otherwise specifically enumerated
contractors and persons engaged in the
herein or taxed under the provisions of the
transportation of passengers or freight by
NIRC, or other applicable laws;
hire and common carriers by air, land or
water7;
11. On premiums paid by way or reinsurance
2. When such tax is not unjust, excessive,
or retrocession;
oppressive, confiscatory or contrary to
12. For the registration of motor vehicles
declared national policy;
and for the issuance of all kinds of
licenses or permits for the driving thereof8;
13. On Philippine products actually exported9;
3. When there is public hearing for the
14. On Countryside and Barangay Business
ordinance levying such
Enterprises and cooperatives duly
registered under "Cooperative Code of the
What are the requirements for the conduct of
Philippines" respectively; and;
15. Of any kind on the National Government, itspublic hearing of taxing ordinance by LGUs?
agencies and instrumentalities, and
local government units. (LGC, Sec. 133)
1. Shall be conducted for the purpose; and

5 EXCEPT

wharfage on wharves constructed and

maintained by the local government unit concerned

2. Prior to the enactment thereof

Question on the constitutionality of local tax
ordinance

6 EXCEPT otherwise provided under LGC

When to make?
A. Withing 30 days from the effectivity.

7 EXCEPT otherwise provided under LGC

8 EXCEPT tricycles

How to make?
A. By appeal to the Secretary of Justice who shall
render decision within 60 days from the date
of receipt of appeal.
What is the effect of appeal?

9 EXCEPT otherwise provided under LGC

A. It shall not have the effect of suspending the
effectivity of the ordinance and the accrual

and payment of the tax, fee, or charge levied What is the process in protest of assessment?
therein
What is the remedy if the Secretary of Justice
does not act on the appeal?
A. If within 30 days after receipt of the decision or the
lapse of the 60 period the aggrieved party may file
appropriate proceedings with a court of competent
jurisdiction.

1. The local treasurer or his duly authorized

representative shall issue a notice of
assessment stating the nature of the tax, fee,
or charge, the amount of deficiency, the
surcharges, interests and penalties.
2. Within 60 days from the receipt, the taxpayer
may file a written protest with the local
treasurer contesting the assessment.

(LGC Sec. 187)

3. Otherwise, the assessment shall become final
and executory;

Taxpayers Remedies (Local Taxes)

4. The local treasurer shall decide the protest

within 60 days from the time of its filing.

When local taxes shall be assessed?

A. Within 5 years from the date they became due. No
action for the collection of such taxes, fees, or charges,
whether administrative or judicial, shall be instituted
after the expiration of such period.
Is there an exception to such period?
A. Yes. In case of fraud or intent to evade the payment
of taxes, fees, or charges, the same may be assessed
within 10 years from discovery of the fraud or intent
to evade payment.
When an action for collection for local taxes
shall be instituted?
A. Within 5 years from the date of assessment by
administrative or judicial action. No such action shall
be instituted after the expiration of said period.
When the running
suspended?

of

such

periods

be

5. If

the protest is wholly or partly

meritorious, notice shall be cancelled; if
the local treasurer finds the assessment to
be wholly or partly correct, protest shall
be denied wholly or partly with notice to the
taxpayer.

6. The taxpayer shall have 30 days from the

receipt of the denial of the protest or from
the lapse of the 60 day period prescribed
herein within which to appeal with the court
of competent jurisdiction
7. If he does not appeal within the period, the
assessment
becomes
conclusive
and
unappealable. (LGC, Sec. 195)
Real Property Tax Code
Guide Provisions

SECTION 198. Fundamental Principles. The

appraisal, assessment, levy and collection of real
property tax shall be guided by the following
(1) The treasurer is legally prevented from making the fundamental principles:
assessment of collection;
A. When:

(a) Real property shall be appraised at its current

(2) The taxpayer requests for a reinvestigation and and fair market value;
executes a waiver in writing before expiration of the
period within which to assess or collect; and
(b) Real property shall be classified for assessment
purposes on the basis of its actual use;
(3) The taxpayer is out of the country or otherwise
(c) Real property shall be assessed on the basis of a
cannot be located.
uniform classification within each local government
unit;
(LGC, Sec. 194)

Q: What value sho

based on fundame
Tax Code?

A: According to the
property shall be app
market value. (CurF

Q: How should rea

assessment purpos

A: According to the
property shall be clas
basis of its actual us

TARIFF AND CUSTOMS CODE OF THE

(d) The appraisal, assessment, levy and collection of PHILIPPINES
real property tax shall not be let to any private
person; and
What is the territorial jurisdiction of the
Bureau of Customs?
(e) The appraisal and assessment of real property
For the due and effective exercise of the
shall be equitable.
powers conferred by law and to the extent
requisite therefor, said bureau shall have the
right of supervision and police authority over
all seas within the jurisdiction of the
Philippines and over all coasts, ports,
airports, harbors, bays, rivers and inland
waters navigable from the sea. (Section 603,
TCCP)
When can a dwelling house be searched?
A dwelling house may be entered and searched
only upon warrant issued by a judge or justice
of the peace, upon sworn application showing
probable case and particularly describing the
place to be searched and person or thing to be
seized. (Section 2209, TCCP)
SECTION 240. Special Levy by Local Government
Units. A province, city or municipality may impose
a special levy on the lands comprised within its
territorial jurisdiction specially benefited by public
works projects or improvements funded by the local
government unit concerned: Provided, however,
That the special levy shall not exceed sixty percent
(60%) of the actual cost of such projects and
improvements, including the costs of acquiring land
and such other real property in connection
therewith: Provided, further, That the special levy
shall not apply to lands exempt from basic real
property tax and the remainder of the land portions
of which have been donated to the local government
unit concerned for the construction of such projects
or improvements.
SECTION 256. Remedies For The Collection Of Real
Property Tax. For the collection of the basic real
property tax and any other tax levied under this
Title, the local government unit concerned may avail
of the remedies by administrative action through
levy on real property or by judicial action.

When can a party protest?

When a ruling or decision of the Collector is
made whereby liability for duties, fees, or
other money charge is determined, except the
fixing of fines in seizure cases, the party
adversely affected may protest such ruling or
decision by presenting to the Collector at the
time when payment of the amount claimed to
be due the Government is made, or within
thirty days thereafter, a written protest setting
forth his objections to the ruling or decision in
question, together with the reasons therefor.
No protest shall be considered unless payment
of the amount due after final liquidation has
first been made. (Section 2308, TCCP)

NOTE: In all cases subject to protest, the claim for

refund of customs duties may be foreclosed only when
the interested party claiming refund fails to file a
written protest before the Collector of Customs. This
written protest which must set forth the claimants
objection to the ruling or decision in question together
with the reasons therefor must be made either at the
time when payment of the amount claimed to be due
the government is made or within fifteen (15) days
thereafter. Once a written protest is seasonably filed
with the Collector of Customs the failure or inaction of
the latter to promptly perform his mandated duty
under the Tariff and Customs Code should not be

allowed to prejudice the right of the party adversely tax cases to the CTA, it can reasonably be assumed
affected thereby. (Nestle Philippines, Inc., v. that the law intended to transfer also such power as is
Honorable Court Of Appeals, Court Of Tax Appeals deemed necessary, if not indispensable, in aid of such
appellate jurisdiction. (Philam Life v. Secretary of
and Commissioner Of Customs [2001])
Finance [2014])

What is the scope of a protest?

2. Requirements for claims for refund or tax credit

arising from zero-rated or effectively zero-rated sales
a.

Claimant must be a VAT-registered person.

b.

The application of TCC is filed with the BIR

or DOF center within 2 years after the close
of the taxable quarter when the sales were
made and with the CTA within 30 days from
the date of receipt of denial or in case of
inaction by the CIR from the lapse of 120
days from date of filing.

c.

Input tax payments were not applied against

output tax during the period and in the
succeeding period unless a separate claim is
filed.

What is the recourse of the person aggrieved

by the decision or action of the Collector?

d.

Claimant must deduct from its quarterly VAT

return the input tax being claimed as refund.

The person aggrieved by the decision or action of the

Collector in any matter presented upon protest or by
his action in any case of seizure may, within fifteen
days after notification in writing by the Collector of
his action or decision, give written notice to the
Collector of his desire to have the matter reviewed by
the Commissioner. Thereupon the Collector shall
forthwith transmit all the records of the proceedings
to the Commissioner, who shall approve, modify or
reverse the action or decision of the Collector and take
such steps and make such orders as may be necessary
to give effect to his decision.

e.

Claimed input VAT payments are directly

attributable to zero-rated or effectively zerorated sales.

f.

The acceptable foreign currency exchange

proceeds have been duly accounted for in
accordance with the rules and regulation of
BSP; the recipient of services should be
doing business outside the Philippines.

g.

Claimed input vat payments are supported

by VAT invoice sales and receipts.

h.

VAT return for the succeeding quarter

covered by the claimed for refund must be
submitted to the CTA.

The scope of a protest shall be limited to the subject

matter of a single adjustment or other independent
transaction; but any number of issue may be raised in
a protest with reference to the particular item or items
constituting the subject matter of the protest. (Section
2309, TCCP)

NOTE: Single adjustment refers to the entire

content of one liquidation, including all duties, fees,
surcharges or fines incident thereto.

Other Tips:

1. On the strength of Section 1, Article VIII of the 1987

Constitution, it can be fairly interpreted that the
power of the CTA includes that of determining
whether or not there has been grave abuse ofUnder Sec. 204(C), NIRC, the following conditions
discretion amounting to lack or excess of jurisdiction
on the part of the RTC in issuing an interlocutorymust be met for tax refund:
order in cases falling within the exclusive appellate
jurisdiction of the tax court. It, thus, follows that the a. There must be a written claim for refund filed by
CTA, by constitutional mandate, is vested with the taxpayer with the Commissioner.
jurisdiction to issue writs of certiorari in these cases.
In transferring exclusive jurisdiction over appealed

b. The claim for refund must be a categorical demand member, organizer, officer or any specific person."
for reimbursement.
The use of lands, buildings and improvements of the
institution is but a part of its operations.
c. The claim for refund must be filed within two (2)
years from date of payment of the tax or penalty
regardless of any supervening cause.

ALBANO MAGIC TIPS **

6% Capital gains tax shall be imposed upon
3. What is meant by actual, direct and exclusive use of capital gains presumed to have been realized
the property for charitable purposes is the direct and on
immediate and actual application of the property itself 1. sale of real property
to the purposes for which the charitable institution is 2. located in the Philippines
3. not used in trade or business
organized. It is not the use of the income from the real
based on the gross selling price (GSP) or current fair
property that is determinative of whether the property market value (FMV) whichever is higher. [Section 24
is used for tax-exempt purposes. (Lung Center v. (D)(1), NIRC 1997]
Quezon City, [2004])
What is the exception on the imposition of 6%
capital gains tax on sale of real property
located in the Philippines, not used in trade or
COMPARISON OF LUNG CENTER AND ST. LUKESbusiness?
Capital gains presumed to have been realized
DOCTRINE
from the sale or disposition of principal
residence by natural persons shall be exempt
For real property taxes, the incidental generation offrom capital gains tax provided that:
(1) the proceeds of which is fully utilized in
income is permissible because the test of exemption is
acquiring or constructing a new principal
the use of the property. The test requires that the
business within 18 calendar months from the
institution use the property in a certain way, i.e. for a
date of sale or disposition
charitable purpose. Thus, the Court held that the Lung
(2) historical cost shall be carried over to the
Center of the Philippines did not lose its charitable
new principal residence built or acquired
character when it used a portion of its lot for
(3)
the BIR Commissioner shall have been duly
commercial purposes. The effect of failing to meet the
notified by the taxpayer within 30 days from
use requirement is simply to remove from the tax
the date of disposition of his intention to
exemption that portion of the property not devoted to
avail of the tax exemption
charity.
(4) tax exemption can be availed of only once
every 10 years
(5) if there is no full utilization of the proceeds
of disposition, the portion shall be subject to
In the NIRC, Congress decided to extend the
capital gains tax. [Section 24 (D)(2), NIRC
exemption to income taxes. Both the organization and
1997]
operations of the charitable institution must be
devoted "exclusively" for charitable purposes.Q:Considering the constitutional provision
However, under Lung Center, any profit by agranting tax exemption to non-stock
charitable institution must not only be plowed back corporations such as those formed exclusively
"whenever necessary or proper," but must be "devoted for religious, charitable or social welfare
or used altogether to the charitable object which it is purposes, explain the meaning of the last
intended to achieve." The operations of the charitable paragraph of Section 30 of the 1997 Tax Code
institution generally refer to its regular activities. which states that income of whatever kind
Section 30(E) of the NIRC requires that these and character of the foregoing organizations
operations be exclusive to charity. There is also a from any of their properties, real or personal,
specific requirement that "no part of [the] net income or from any of their activities conducted for
or asset shall belong to or inure to the benefit of any profit regardless of the disposition made of

such income shall be subject to tax imposed

under this Code. (Bar exam question)

Code. The excess of the fair market value over the

selling price is a deemed gift.

A: The exemption contemplated in the Constitution

covers real estate tax on real properties actually,
Q: When to file an administrative claim with
directly and exclusively used for religious, charitable
the CIR?
or social welfare purposes. It does not cover
A:
exemption from the imposition of the income tax
General rule: Section 112(A) and Mirant
which is within the context of Section 30 of the Tax
Within 2 years from the close of the taxable quarter
Code. As a rule, non-stock non-profit corporations
when the sales were made.
organized for religious, charitable or social welfare
Exception:
purposes are exempt from income tax on their income
Within 2 years from the date of payment of the output
received by them as such. However, if these religious,
VAT, if the administrative claim was filed from June
charitable or social welfare corporations derive
8, 2007 (promulgation of Atlas) to September 12,
income from their properties or any of their activities
2008 (promulgation of Mirant).
conducted for profit, the income tax shall be imposed
on said items of income irrespective of their
disposition. (Section 30, NIRC; CIR vs YMCA, 1998)
Q: When to file a judicial claim with the CTA?
Q: (Bar exam question)
General rule: Section 112(D); not Section 229
A, an individual, sold to B, his brotheri.
Within 30 days from the full or partial
in-law, his lot with a market value of
denial of the administrative claim by the
P1,000,000.00 for P600,000.00. As cost in
CIR; or
the lot is P 100,000.00. B is financially
ii.
Within 30 days from the expiration of
capable of buying the lot. A also owns X Co.,
the 120-day period provided to the CIR
which has a fast growing business.
to decide on the claim. This is
A sold some of his shares of stock in X
mandatory and jurisdictional beginning
Co. to his key executives in X Co. These
January 1, 1998 (effectivity of 1997
executives are not related to A. The selling
NIRC).
price is P3,000,000.00 which is the book
Exception: BIR Ruling No. DA-489-03
value of the shares sold but with a market
The judicial claim need not await the expiration of the
value of P5,000,000.00. As cost in the shares 120-day period, if such was filed from December 10,
sold is P1,000,000.00. The purpose of A in
2003 (issuance of BIR Ruling No. DA-489-03) to
selling the shares is to enable his key
October 6, 2010 (promulgation of Aichi).
executives to acquire proprietary interest in
the business and have a personal stake in its Q: What is the exception as to period of
business.
limitation of assessment and collection of
Explain if the above transactions are taxes?
subject to donors tax.
A: In the case of false or fraudulent return
with intent to evade tax or of failure to file a
return, the tax may be assessed, or a
The first transaction where a lot was sold by proceeding in court for the collection of such
A to his brother-in-law for a price below its fair
tax may be filed without assessment at any
market value will not be subject to donors tax if the time within 10 years after the discovery of the
lot qualifies as a capital asset. The transfer for less
falsity, fraud or omission. [Section 222(a),
than adequate and full consideration which gives rise NIRC]
to a deemed gift, does not apply to a sale of property
subject to capital gains tax (Sec. 100, NIRC).
Q: Distinguish a false return from a fraudulent
However, if the lot sold is an ordinary asset, the excess return. (Bar exam question)
of the fair market value over the consideration
A: The distinction between a false return and a
received shall be considered as a gift subject to the
fraudulent return is that the first merely implies a
donors tax.
deviation from the truth or fact whether intentional or
The sale of shares of stock below the fair
not, whereas the second is intentional and deceitful
market value thereof is subject to the donors tax
with the sole aim of evading the payment of the
pursuant to the provisions of Sec. 100 of the Tax
correct tax due.
A:

filed within thirty (30) days from payment of

the tax to the provincial, city treasurer or
municipal treasurer, in the case of a
Guide Provisions
municipality within Metropolitan Manila
Area, who shall decide the protest within sixty
SECTION 234. Exemptions from Real (60) days from receipt.
Property Tax. The following are exempted
from payment of the real property tax:
(b) The tax or a portion thereof paid under
Real Property Tax Code

protest shall be held in trust by the treasurer

(a) Real property owned by the Republic of concerned.
the Philippines or any of its political
subdivisions except when the beneficial use (c) In the event that the protest is finally
thereof has been granted, for consideration decided in favor of the taxpayer, the amount
or otherwise, to a taxable person;
or portion of the tax protested shall be
refunded to the protestant, or applied as tax
(b)
Charitable
institutions,
churches, credit against his existing or future tax
parsonages or convents appurtenant thereto, liability.
mosques, non-profit or religious cemeteries
and all lands, buildings, and improvements (d) In the event that the protest is denied or
actually, directly, and exclusively used for upon the lapse of the sixty-day period
religious, charitable or educational purposes; prescribed in subparagraph (a), the taxpayer
may avail of the remedies as provided for in
(c) All machineries and equipment that are Chapter 3, Title II, Book II of this Code.
actually, directly and exclusively used by local
water districts and government-owned or
-controlled corporations engaged in the
supply and distribution of water and/or
generation and transmission of electric
power;
(d) All real property owned by duly registered
cooperatives as provided for under R.A. No.
6938; and
(e) Machinery and
pollution
control
protection.

equipment used for

and
environmental

Except as provided herein, any exemption

from payment of real property tax previously
granted to, or presently enjoyed by, all
persons, whether natural or juridical,
including
all
government-owned
or
-controlled
corporations
are
hereby
withdrawn upon the effectivity of this Code.

SECTION 252. Payment Under Protest.

a) No protest shall be entertained unless the
taxpayer first pays the tax. There shall be
annotated on the tax receipts the words paid
under protest. The protest in writing must be

Q: Within what da
be field from paym
city treasurer or m
in the case of a m
Manila Area?

A: The protest shoul

the payment of the t
municipal treasurer.
Metropolitan Manila
sixty (60) days from

Q: What are the r

may avail in the ev
upon the lapse
prescribed in the
provincial, city tr
and in the cas
Metropolitan Man

A: According to th
event that the pro
of
the
sixty-d
subparagraph (a)
remedies as prov
Book II of this Cod

Chapter 3, Title
Government Code

Ass

Section 226. Local

owner or person hav
is not satisfied with
municipal assessor in
within sixty (60) da
written notice of ass
Assessment Appe
filing a petition un
for the purpose,
declarations and
submitted in supp

Section 227. Or
Functions of the Loca

(a) The Bo
province o
Registrar o
or city pro
engineer as
an ex of
compensati

witnesses,
inspection,
and subpoe
the Board
purpose o
necessarily
in judicial p

(c) The sec

owner of th
interest th
assessor wit
In case the
the revision
duty to not
person havi
using the fo
owner of th
interest th
satisfied wi
within thir
decision of
Board of
provided. T
be final and

Section 230. Cent

The Central Board
composed of a chai
appointed by the Pre
seven (7) years, wit
appointed, the chair
years, one member
member for three (3
shall be only for the
predecessor. In no ca
designated in a te
chairman and the m
citizens, at least fort
appointment, and m
Accountants for at
preceding their appo
of Assessment App
equivalent to the ra
Standardization Law
emoluments. The m
salary grade equival
the Salary Standard
and other emolume
jurisdiction over all a
Board of Assessment

There shall be Hear

Central Board of As
service laws, rules a

appropriations for
Appeals shall be incl
of Finance in the co
Act.

Section 231. Effect

Property Tax. - App
made under the prov
suspend the collecti
on the property invo
city assessor, withou
depending upon the