Tax Supplements

BY THE TAX LAWYER-SUPERVISORS OF

KPMG R.G. MANABAT & CO.
November 2016

I. CORPORATE INCOME TAX

TAX RATES
Regular corporate income tax (RCIT)

30%
30% of taxable income from all
sources

Domestic corporations

30% of taxable income from

Philippine sources

Resident foreign corporations

30% of gross income from

Philippine sources

Non-resident foreign corporations

Minimum corporate income tax (MCIT)
-

2% of gross income

th

Applicable beginning on the 4 year immediately

following the year in which the corporation commenced
its business operations, when the MCIT is greater than the
RCIT
Any excess of the MCIT over the RCIT of a year shall be
carried forward and credited against the RCIT for the three
immediately succeeding taxable years.

Philippine source rules (taxability of income received within and without the Philippines)
Taxpayer

Income Within

Income Without

Domestic Corporation

Foreign Corporation

Some Source Rules in Determining Income from Within and Without

Type of Income
Interest
Dividends
Services
Rentals and Royalties
Gains from sale of real property

Tax Situs
Residence of the debtor
Generally, the residence of the corporation
Place where performed
Place where property is located (rentals) or where the rights are exercised
(royalties)
Place where property is located

Place where the title transfers [P. F. Collier, Inc. (Philippine Branch), vs. CIR, CTA
Case No. 4355 dated 09 November 1995]
Gains from sale of personal
property

However:
Gains from the sale of shares of a domestic corporation considered as
derived from sources within regardless where sold

II. INDIVIDUAL INCOME TAX

CLASSIFICATION OF
INDIVIDUAL TAXPAYERS

TAX RATE
Taxable Income

Resident
Citizens

But Not
Over

Over

Citizens
Nonresident
Citizens

Resident
Aliens

Aliens
Nonresident
Aliens

Engaged in
Trade or
Business
within the
Philippines

Plus

Of Excess
Over

10,000.00

5%

10,000.00

30,000.00

500.00

10%

10,000.00

30,000.00

70,000.00

2,500.00

15%

30,000.00

70,000.00

140,000.00

8,500.00

20%

70,000.00

140,000.00

250,000.00

22,500.00

25%

140,000.00

250,000.00

500,000.00

50,000.00

30%

250,000.00

125,000.00

32%

500,000.00

500,000.00
Not Engaged
in Trade or
Business
within the
Philippines

Tax Due

25% of Gross Income

Note: Special rates will apply for aliens employed by regional or area headquarters or regional
operating headquarters of multinational companies, oshore banking units, and petroleum
service contractors and subcontractors.

EXCLUSION FROM GROSS INCOME

13 th month pay
and other benets

PHP82,000.00 per year

Any amount in excess of PHP82,000.00 shall
be subject to tax

PERSONAL AND ADDITIONAL EXEMPTION

for individuals who are either earning compensation income, engaged in business,
or deriving income from the practice of profession
Personal Exemption

Php50,000.00 for the taxpayer

Additional Exemption

PHP25,000.00 per qualied dependent (maximum of 4

dependents)

Premium Payments on Health

and/or Hospitalization Insurance

PHP 2,400.00 for the taxpayer whose familys gross

income does not exceed PHP250,000.00 for the
taxable year

Philippine source rules (taxability of income received

within and without the Philippines)

Taxpayer

Income Within

Income Without

Resident Citizen

Non - resident citizen and

OFW

Alien (Resident/Non resident)

III. VALUE-ADDED TAX

Value-Added Tax (VAT) is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties or
services in the Philippines and on importation of goods into the Philippines (Sec.4.105-2, RR No.16-2005)
Cross Border Doctrine or Destination Principle - 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. (CIR vs
Seagate Technology (Philippines) GR No. 153866, February 02, 2011)
PERSONS LIABLE FOR VAT
a. Any person who in the course of trade or business (i) Sell, barters, exchanges goods or properties
(seller or transferor); (ii) Leases goods or properties (lessor); or (iii) Renders services (service
providers).
b. Imports goods (importer) the person who brings goods into the Philippines, whether or not made
in the course of trade or business. (Sec.4.105-1, RR No. 16-2005)
IN THE COURSE OF TRADE OR BUSINESS (RULE OF REGULARITY)
Regular conduct or pursuit of a commercial or an economic activity, including transactions incidental
thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-prot
private organization (irrespective of the disposition of its net income and whether or not it sells
exclusively to members or their guests), or government entity.
Non-resident persons who perform services in the Philippines are deemed to be making sales in the course of
trade or business, even if the performance of services is not regular. (Sec. 105, NIRC; Sec. 4-105-3, RR No.
16-2005).
A transaction is considered to be in the course of trade or business when it is: (1) regularly
conducted; and (2) undertaken in pursuit of a commercial or economic activity.
(Kepco Ilijan Corporation v. CIR, CTA Case No. 8091, October 23, 2012)

TRANSACTIONS SUBJECT TO VAT

Sales
Goods/Properties
Object of
Taxation

All tangible and

intangible
objects which
are capable of
pecuniary
estimation. (Sec.
106, NIRC).
Sale or lease of
goods or
properties, the
gross annual
sales exceed
Php1,919,500

In the case of real property:

1. Residential lot with gross
selling price (GSP) exceeding
Php1,919,500;
2. Residential house and lot
or other residential
dwellings with GSP
exceeding Php3,199,200 (RR
No.16-2011);
3. Sale, transfer or disposal
(from same seller) within a
12-month period of 2 or
more adjacent residential
lots/house and lots, etc. in
favor of one buyer for the
purpose of utilizing them as
one residential area. The
aggregate value of the
adjacent properties exceeds:
For residential lots:
Php1,919,500
For residential house
and lots, etc.:
P3,199,200 (RR No. 132012).

Services
Performance of all
kinds of services in the
Philippines for others
for a fee, remuneration
or consideration
whether in kind or in
cash (Sec. 108(A),
NIRC).

Importations
Importations
Importation of
goods by any
person, who may
or may not be
engaged in trade
or business in the
Philippines (RR No.
15-2005).

Service has been

dened 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 to another
for a fee (CIR v.
American Express
International, Inc., G.R.
No. 152609, June 29,
2005).

TRANSACTIONS DEEMED SALE (Sec. 106[B], NIRC; Sec 4.106-[b], RR No. 16-2005)
1. Transfer, use, consumption not in the course of business of goods or properties
originally intended for sale or for use in the course of business;
2. Distribution or transfer to:
a. Shareholders or investors share in prots of VAT-registered person; or
b. Creditors in payment of debt or obligation;
3. Consignments of goods if actual sale is not made (and not returned) within 60 days
following the date such goods were consigned;
4. Retirement from or cessation of business with respect to all goods on hand, whether
capital goods, stock-in-trade, supplies or materials as of the date of such retirement or
cessation.

ZERO-RATED SALES OF VAT-REGISTERED PERSONS

ZERO-RATED SALES
I.

For sale of goods:

Export Sales - The term 'export sales' means:
(1) The sale and actual shipment of goods from the Philippines to a foreign country (actual export sale), which
must be paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the BSP
(2) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local exportoriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the
said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the BSP
(3) Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed 70% of
total annual production
(4) Sale of gold to the BSP
(5) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment
Code of 1987, and other special laws
(6) The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international
air transport operations
Foreign Currency Denominated Sale - sale to a nonresident of goods assembled or manufactured in the
Philippines (except automobiles and non-essential goods subject to excise tax) for delivery to a resident in the
Philippines, paid for in acceptable foreign currency and accounted for in accordance with BSP rules and
regulations (Sec.106[A][2][b in relation to Sec. 149 and 150],NIRC).

II.

For sale of services:

(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines
which goods are subsequently exported and paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the BSP
(2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business
conducted outside the Philippines or to a non-resident person not engaged in business who is outside the
Philippines when the services are performed and paid for in acceptable foreign currency and accounted for
in accordance with the rules and regulations of the BSP

ZERO-RATED SALES
(3) Services rendered to persons engaged in international shipping or air transport operations, including lease of
property for use thereof
(4) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods
for an enterprise whose export sales exceed 70% of total annual production
(5) Transport of passengers and cargo by domestic air or sea carriers from the Philippines to a foreign country
(6) Sale of power fuel generated through renewable sources of energy. Provided, however, that zero-rating shall
not extend to the sale of services related to the maintenance or operation of plants and generating said
power
III.

Sales to persons or entities whose exemption under special laws or international agreements to which the
Philippines is a signatory eectively subjects such sales to zero rate.
There are two types of zero-rated sales: automatically zero-rated sales and
effectively zero-rated sales. In an eectively zero-rated transaction, the VATregistered seller of goods or services is required to le with the BIR an application
and secure approval for zero-rating. In an automatically zero-rated transaction,
the VAT-registered seller need not le an application for zero-rating. Under
current VAT regulations, eectively zero-rated sales refer to local sale of goods
and properties by a VAT-registered person to a person or entity who was granted
indirect tax exemption under special laws or international agreement. Examples
of eectively zero-rated sales are sales to Asian Development Bank (ADB),
International Rice Research Institute (IRRI), etc.

VAT-EXEMPT TRANSACTIONS
VAT-EXEMPT TRANSACTIONS
SALE or
IMPORTATION
Sale or importation
of agricultural and
marine food
products in their
original state,
livestock and poultry
of a kind generally
used as, or yielding
or producing foods
for human
consumption; and
breeding stock and
genetic materials
therefor

SALE

IMPORTATION

Sale of real
properties not
primarily held for
sale to customers or
held for lease in the
ordinary course of
trade or business or
real property
utilized for low-cost
and socialized
housing

Importation of
personal and
household eects
belonging to the
residents of the
Philippines
returning from
abroad and
nonresident citizens
coming to resettle
in the Philippines:
provided, that such
goods are exempt
from customs duties
under the Tari and
Customs Code of
the Philippines

SERVICES
Services subject to
percentage taxes

OTHERS
Lease of a
residential units, if
the monthly rental:
(a) does not exceed
Php12,800
regardless of the
aggregate rentals
received by the
lessor;
(b) Exceeds
Php12,800 but the
aggregate rentals
received by the
lessor do not exceed
P1,919,500,
however, the same
shall be subject to
3% percentage tax
(RR No. 16-2011)

VAT-EXEMPT TRANSACTIONS
SALE or
IMPORTATION

SALE

IMPORTATION

SERVICES

OTHERS

Sale or importation
of fertilizers; seeds,
seedlings and
ngerlings; sh,
prawn, livestock and
poultry feeds,
including
ingredients,
whether locally
produced or
imported, used in
the manufacture of
nished feeds

Export sales by
persons who are not
VAT registered

Importation of
professional
instruments and
implements,
wearing apparel,
domestic animals,
and personal
household eects
belonging to
persons coming to
settle in the
Philippines for their
own use or arriving
within 90 days
before/after their
arrival

Services by
agricultural contract
growers and milling
for others of palay
into rice, corn into
grits and sugar cane
into raw sugar

Gross receipts from

lending activities by
credit or multipurpose
cooperatives duly
registered with the
CDA

Sale or importation
or lease of
passenger or cargo
vessels and aircraft,
including engine,
equipment and
spare parts thereof
for domestic or
international
transport operations
weighing 150 tons
and above and
which complies with
the age limit
provided by law

Sales by agricultural
cooperatives of food
and non-food
products (whether
in original or
processed form)
duly registered and
in good standing
with the
Cooperative
Development
Authority (CDA) to:
(a) THEIR MEMBERS
- VAT-exempt
whether or not the
cooperative is the
producer of the
goods; or
(b)NON-MEMBERS VAT-exempt only if
the cooperative is
the producer

Importation of fuel,
goods and supplies
by persons engaged
in international
shipping or air
transport
operations directly
to a foreign port
without stopping at
any other port in
the Philippines

Medical, dental,
hospital and
veterinary services
except rendered by
professionals

Transactions which
are exempt under
international
agreements to which
the Philippines is a
signatory or under
special laws, except
those under
Presidential Decree
No. 529 (Petroleum
Exploration
Concessionaires
under the Petroleum
Act of 1949)

VAT-EXEMPT TRANSACTIONS
SALE or IMPORTATION

SALE

IMPORTATION

SERVICES

OTHERS

Sale or importation,
printing or publication of
books and any
newspaper, magazine,
review, or bulletin which
appears at regular
intervals with xed prices
for subscription and sale
and which is not devoted
principally to the
publication of paid
advertisements

Sales by non-agricultural,
non- electric and noncredit cooperatives duly
registered with the CDA;
provided, that the share
capital contribution of
each member does not
exceed Php15,000 and
regardless of the
aggregate capital and net
surplus ratably
distributed among the
members

Importation of lifesaving equipment,

safety and rescue
equipment and
communication and
navigational safety
equipment, steel plates
and other metal plates,
used for shipping
transport operations

Services of banks, nonbank nancial

intermediaries performing
quasi-banking functions,
and other non-bank
nancial intermediaries
such as money changers
and pawnshops

Transport of passengers
by international carriers
(R.A. No.10378, approved
March 7, 2013)

Importation of capital
equipment, machinery,
spare parts, life-saving
and navigational
equipment, steel plates
and other metal plates
to be used in the
construction, repair,
renovation or alteration
of any merchant vessel
operated or to be
operated in the
domestic trade

Services rendered by
individuals pursuant to an
employer-employee
relationship

Sale or lease of goods or

properties or the
performance of services
other than the
transactions mentioned
in the preceding
paragraphs, the gross
annual sales and/or
receipts do NOT exceed
the amount of
Php1,919,500

Educational services
rendered by private
educational institutions,
duly accredited by the
DECS, CHED and TESDA,
and those rendered by
government educational
institutions

Services rendered by
Regional or area
headquarters which act as
supervisory,
communications and
coordinating centers for
their aliates, subsidiaries
or branches in the AsiaPacic Region and do not
earn or derive income from
the Philippines

REFUND OR TAX CREDIT OF INPUT VAT in Zero-rated and

Eectively Zero-rated sales of goods, properties or services
(Commissioner of Internal Revenue vs. Mindanao II
Geothermal Partnership, G.R. No. 191498, January 15, 2014)
To claim refund or tax credit, claimant must comply with the following criteria:
a)
The taxpayer is VAT-registered;
b)
The taxpayer is engaged in zero-rated or eectively zero-rated sales;
c)
The input taxes are due or paid;
d)
The input taxes are not transitional input taxes;
e)
The input taxes have not been applied against output taxes during and in the
succeeding quarters;
f)
The input taxes claimed are attributable to zero-rated or eectively zero-rated sales;
g)
For zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2),
the acceptable foreign currency exchange proceeds have been duly accounted for in
accordance with the rules and regulations of the BSP;
h)
Where there are both zero-rated or eectively zero-rated sale and taxable or exempt sales,
and the input taxes cannot be directly and entirely attributed to any of these sales, it shall
be allocated proportionately on the basis of the volume of sales.

PRESCRIPTIVE PERIOD IN CLAIMS FOR VAT REFUND

Any VAT-registered person, whose sales are zero-rated or eectively zero-rated may, within two (2)
years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax
credit certicate or refund of creditable input tax (Sec. 112[A], NIRC).
The taxpayer can le his administrative claim at anytime within the two-year prescriptive period. The
Commissioner of Internal Revenue (CIR) has 120 days from the date of submission of complete
documents to decide whether or not to grant the claim. If the claim is not acted upon within the
120-day period, such inaction shall be deemed a denial of the application for tax refund or credit.
In case of denial, the taxpayer can appeal by ling a judicial claim within 30 days after the CIR denies
the claim within the 120-day period. A judicial claim can be led within 30 days after the expiration
of the 120-day period if the CIR does not act within the 120-day period (RMC No. 54-2014, dated
June 11, 2014) (CIR v. Aichi Forging Company of Asia, Inc., GR No. 184823, October 06, 2010).

OTHER VAT CONSIDERATIONS

Condominium corporations subject to VAT and income tax.
The association dues, membership fees, and other assessments/charges collected by condominium
corporations constitute income payment or compensation for benecial services that the
condominium corporations provide to their members and tenants. Thus, the gross receipts of the
condominium corporations, including association dues, membership fees and other assessments and
charges are subject to VAT and income tax and subject to applicable withholding taxes under existing
regulations (RMC No. 65-2012, October 31, 2012).

IV. REAL PROPERTY TAXATION

Properties Exempt from Real Property Tax (Sec. 234, LGC)
1. Real property owned by the Republic of the Philippines or its political subdivisions except:
when benecial use has been granted to a taxable person;
2. Charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques,
non-prot or religious cemeteries, and lands buildings and improvements actually directly and
exclusively used for religious, charitable or educational purposes;
3. Machinery and equipment actually, directly, and exclusively used by local water districts and
GOCCs engaged in the supply and distribution of water and/or generation and transmission of
electric power;
4. Real property owned by duly registered cooperatives under RA 6938; and
5. Machinery and equipment for pollution control and environmental protection.

Actual Use of Property as Basis for

Assessment (Sec. 217, LGC)
Real property shall be classied, valued and assessed on the basis of actual use regardless of where
located, whoever owns it, and whoever uses it.
Unpaid realty taxes attach to the property and are chargeable against the person who had actual or
benecial use and possession of it regardless of whether or not he is the owner. To impose the RPT on
the subsequent owner which was neither the owner nor the benecial user of the property during
the designated periods would not only be contrary to law but also unjust (Estate of Lim v. City of
Manila,GR No. 90639, Feb 21, 1990).

What Are Considered as Idle Lands:

(Sec. 237,LGC)
Agricultural lands
More than 1 hectare if more than of which remain uncultivated or unimproved by the
owner of the property or person having legal interest therein
Not Idle Lands:
Agricultural lands planted to permanent or perennial crops with at least 50 trees to a
hectare
Lands actually used for grazing purposes shall likewise not be considered idle lands
Non-Agricultural Lands
More than 1,000sq. m. in area if more than of which remain uncultivated or unimproved
by the owner of the property or person having legal interest therein

REMEDIES IN REAL PROPERTY TAXATION

Administrative
1. Lien superior to all liens, charges or encumbrances and is enforceable by administrative or judicial action. It is
extinguished only upon payment of tax and related interests and expenses. (Sec. 257, LGC)
2. Levy issuance of Warrant by the LGU treasurer on, before or simultaneously with the institution of civil action for
collection of delinquent tax (Sec. 258, LGC); Procedure is as follows:
a. Advertisement and Sale or Auction (within 30 days after service of warrant) by posting and publication;
b. Sale;
c. Report of Sale (within 30 days after sale) and Preparation of Certicate of Sale (containing the name of the purchaser,
description of the property, amount of delinquent tax and its interests, expenses);
d. Redemption (within 1 year from date of sale);
e. Issuance of Final Deed to Purchaser (upon the delinquent taxpayers failure to redeem); and
f. The proceeds of the sale in excess of the delinquent tax, the interest due thereon and the expenses of sale shall be
remitted to the owner of real property or person having legal interest. (Secs. 258, 260, 261, and 262 of the LGC)
3. Distraint with notice of delinquency posted and published. Personal property may be distained to eect payment.
(Sec. 254, LGC)
4. Purchase of property by local treasurer for want of bidder in case there is no bidder for the real property advertised or if
the highest bid for an amount insucient to pay the RPT and other costs. (Sec. 263, LGC)

Prescriptive Periods for the Collection of RPT (Sec. 270, LGC)

1. Basic RPT and any other tax levied under the title on RPT ve years from the date they became due.
2. When there is fraud or intent to evade the payment of taxes ten years from discovery of the fraud or intent to evade
payment

GROUNDS FOR THE SUSPENSION OF THE RUNNING OF THE PRESCRIPTIVE PERIODS:

1. The treasurer is legally prevented from the collection of the tax;
2. The taxpayer requests for a reinvestigation and executes a waiver in writing before the expiration of the period within
which to collect; and
3. The taxpayer is out of the country or otherwise cannot be located. (Sec.270, LGC)
What procedure and remedy should be observed by a taxpayer in questioning the validity of a real property tax
assessment?
1. The Assessor of the city or municipality submits an assessment to the city or municipal Treasurer;
2. The city or municipal Treasurer informs the public when the tax shall be paid;
3. The city or municipal Treasurer assesses and collects the real property tax starting January 1;
4. The taxpayer should pay the tax under protest;
5. The taxpayer should le written protest within 30 days from the date of payment to the city or municipal Treasurer;
6. The city or municipal Treasurer is given 60 days from ling of protest to decide;
7. The city or municipal Treasurer denies the protest or fails to decide within the 60- day period;
8. The taxpayer should appeal the denial of the protest within 60 days from receipt thereof or from the lapse of the 60 day
period to the LBAA;
9. The LBAA is given 120 days to decide the case;
10. The taxpayer may appeal an adverse decision within 30 days from receipt of the decision to the CBAA; and
11. If the CBAAs decision is still adverse, the taxpayer has the remedy of ling an appeal not to the CTA in Division but to the
CTA sitting En Banc, via Rule 43 of the Rules of Court, then to the Supreme Court. (Secs. 248, 249, 246, 252, 226, 229 of
the LGC; Sec. 9 of RA No. 9282)

V. DONORS TAX AND ESTATE TAX

ESTATE TAX

DONORS TAX

Tax on privilege to transfer property upon ones

death

Tax on privilege to transfer property during ones

lifetime

Applicability: Individuals only

Applicability: Individuals and Corporations

Generally imposed on donations mortis causa

Generally imposed on donations inter vivos

Tax rate: 5% - 20%

Tax rate: 2% - 15%

Donee -stranger: 30% of the net gift

Extension for payment is allowed

Extension for payment is not allowed

Exemption from Net Estate: Php200,000.00

Time of ling of returns: within 6 months from the
decedents death
Payment of tax: at the time the return was led by
executor/administrator/heirs

Exemption from Net Gift: Php100,000.00

Time of ling of returns: within 30 days after the
date the gift was made
Payment of tax: paid at the time of ling of the
return

Revenue Regulations No. 2-2003

DEDUCTIBLE ITEMS IN THE ESTATE OF A DECEDENT
(citizen or resident alien)
1. Actual funeral expenses or amount equal to 5% of
gross estate, whichever is lower, but not exceeding
Php 200,000

a. Expenses, losses, indebtedness and taxes

2. Judicial expenses in testamentaryor intestate

proceedings
3. Claims against estate
4. Claims of the deceased against insolvent persons
5. Unpaid mortgages, taxes and casualty loss

b. Property previously taxed

c. Transfers for public use
d. Family Home
e. Standard deduction
f.

Medical expenses

g. Amount received by heirs from the

decedents employer as a consequence of
the death in accordance with RA 4917
h. Net share of surviving spouse in conjugal
partnership or community property

Current FMV but not exceeding Php 1M; excess of

the Php 1M subject to estate tax
Php 1M;
Within 1 year before the death; must be
substantiated by receipts and not exceeding
Php 500,000

PROPERTY PREVIOUSLY TAXED

(VANISHING DEDUCTION)
1. Any property of the decedent situated in the Philippines
2. Property acquired within 5 yrs prior to decedents death or
Transferred to decedent by gift within 5 yrs prior to his death,
either as:
a. Received by decedent from donor as gift;
b. From prior decedent as gift/bequest/device/inheritance; or
c. Acquired in exchange for property received.
3. Donors / estate tax imposed was determined and paid
Amount of Deduction
a.
b.
a.
b.

a.
b.

a.
b.

a.
b.

100% of value; if
Prior decedent died within 1 yr. prior to decedents death
OR
Property was transferred as gift within 1 yr. prior to decedents death
80% of value; if
Prior decedent died more than 1 yr. but not more than 2 yrs. prior to
decedents death
OR
Property was transferred as gift more than 1 yr. but not more than
2 yrs. prior to decedents death
60% of value; if
Prior decedent died more than 2 yrs. but not more than 3 yrs. prior to
decedents death
OR
Property was transferred as gift more than 2 yrs. but not more than
3yrs. prior to decedents death

For Recall
100% value = 1 yr.

80% value
= >1 yr. but <2 yrs.

60% value
= >2 yrs. but <3 yrs.

40% of value; if
Prior decedent died more than 3 yrs. but not more than 4 yrs. prior to
decedents death
OR
Property was transferred as gift more than 3 yrs. but not more than
4 yrs. prior to decedents death

40% value
= >3 yrs. but < 4 yrs.

20% of value; if
Prior decedent died more than 4 yrs. but not more than 5 yrs. prior to
decedents death
OR
Property was transferred as gift more than 4 yrs. but not more than
5yrs. prior to decedents death

20% value
= >4 yrs. but < 5 yrs.

PROCEDURE IN TAX ASSESSMENTS

(NIRC and RR No. 18-2013)
Issuance of Letter
Notice/eLA within
the prescriptive period
of the assessment

Issuance of Preliminary
Assessment Notice
(PAN)

Taxpayer
dis agrees

eLA with the following

ndings:
1.

2.

3.

4.

5.
5.

Deciency due to
error in the
taxpayers
computation as
appearing in the
return
Withholding tax:
discrepancy
between tax
withheld and tax
remitted
Refund of excess
creditable
withholding tax
which was already
carried -over and
applied against
existing tax liabilities
Non -payment of
excise tax due on
excisable articles
and
Transfer
Transfer of
of locally
locally
purchased
purchased or
or imported
articles
by articles
an exempt
imported
by
person
to
a
nonan exempt person
exempt
to a nonperson.
-exempt
person.

Taxpayer fails to
respond

15 days from PAN

Taxpayers response

Protest; Request for

Reconsideration

15 days

Issuance of Formal
Letter of Demand
and Final
Assessment Notice
(FLD/ FAN)

Protest; Request for

Reinvestigation

30 days

Tax payer fails to le protest

Assessment
becomes nal
executory and
demandable

60 days

Submission of
relevant
supporting documents
documents

Await FDDA and

appeal to the CTA
within 30 days from
receipt thereof

INACTION within 180 days

from ling of Protest

30 days from the expiration

of the 180 days

CTA
Petition for Review
under Rule 42

Final Decision
on Disputed
Assessment
(FDDA)

30 days from FDDA

ADMINISTRATIVE
APPEAL
Request for
Reconsideration with
the Commissioner

INACTION within 180 days

from Protest or submission
of documents

Denial of the
administrative appeal*

30 days from receipt of denial

INACTION within 180 days

from submission of documents

30 days from the expiration of

the 180 days

*In case of a denial of the administrative

appeal, the taxpayer may file a Motion for
Reconsideration but the same will not toll
the 30-day period to appeal to the CTA.

Await FDDA and

appeal to the CTA
30 days from
receipt thereof

Prepared by:

Atty. Ana Francessca A. Reyes

Atty. Ana Margarita A. Mortel
Atty. Angelie B. Santamina
Atty. Anne Gillian G. Suba-Rodriguez
Atty. Arik Aaron C. Abu
Atty. Aventino S. Gopico III
Atty. Carlo John R. Pascual
Atty. Chad Martin D. Moscoso
Atty. Chandine Kaye P. Villegas
Atty. Glenn D. Delos Santos
Atty. Iris Fatima V. Cero
Atty. Kathleen Teresa M. Ramos
Atty. Leah Francesca M. Castillo
Atty. Maria Carmela D. Hautea
Atty. Maria Emma Gille A. Mercado
Atty. Maria Gracia D. Dyoco, CPA
Atty. Ma. Veronica S. Guangco
Atty. Raynan A. Larosa
Atty. Ruth V. Ricardo
Atty. Julius Patrick C. Acosta

With assistance from:

Atty. Michael Angelo D. Adrid

LIST OF ACRONYMS USED

Acronym

Denition

ADB

Asian Development Bank

CBAA

Central Board of
Assessment Appeals

LBAA

Local Board of Assessment

Appeals

LGC

Local Government Code

LGU

Local Government Unit

CDA

Cooperative Development
Authority

MCIT

Minimum Corporate
Income Tax

CHED

Commission on Higher
Education

NIRC

National Internal Revenue

Code

CIR

Commissioner of Internal
Revenue

OFW

Overseas Filipino Workers

PAN

Preliminary Assessment
Notice

PEZA

Philippine Economic Zone

Authority

RA

Republic Act

RCIT

Regular Corporate Income

Tax

RMC

Revenue Memorandum
Circular

RPT

Real Property Tax

RR

Revenue Regulation

SBMA

Subic Bay Metropolitan

Authority

TESDA

Technical Education and

Skills Development
Authority

VAT

Value Added Tax

CTA

Court of Tax Appeals

DECS

Department of Education,
Culture, and Sports (now
DepEd)

ELA

Electronic Letter of
Authority

FAN

Final Assessment Notice

FDDA

Final Decision on Disputed

Assessment

FLD
FMV
GOCC

Formal Letter of Demand

Fair Market Value
Government Owned and
Controlled Corporation

GSP

Gross Selling Price

IRRI

International Rice Research

Institute

This Tax Supplements is a personal undertaking and product of the collaborative eorts
of the lawyer-supervisors of KPMG R.G. Manabat & Co. (KPMG RGM&Co) as an aid in
studying for the 2016 Philippine Bar Examinations. This is not an ocial publication of
KPMG RGM&Co. While this material may contain some highlights of the general principles
of Philippine taxation, it is not meant to be an exhaustive discussion on the subject.