Professional Documents
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TAXATION
To raise revenue
No limit
POLICE POWER
EMINENT DOMAIN
1. Purpose
To promote public welfare
through regulations
1. Amount of Exaction
Limited to the cost of
regulation, issuance of the
license or surveillance
2. Benefits Received
No direct benefit is received; a
healthy economic standard of
society is attained
4. Non-impairment of Contracts
Contracts may be impaired
Contracts may be impaired
NIEL S. DEFENSOR
University of Negros Occidental5. Transfer of Property Rights
Recoletos
6. Scope
All persons, property,
and privileges
E. Purpose of taxation
1. Revenue-raising
PRIMARY: To raise revenue in order to support
the government expenses
2. Non-revenue/special or regulatory
SECONDARY (PRREP)
1) Promotion of General Welfare
2) Regulation
3) Reduction of social inequality
4) encourage the growth of local
industries
5) protect our local industries against
unfair competition
PAL vs. EDU
It is possible for an exaction to be both a tax
and a regulation. License fees and charges,
looked to as a source of revenue as well as a
means regulation. The fees may properly
regarded as taxes even though they also serve
as an instrument of regulation. If the purpose
is primarily revenue, or if revenue is at least
one of the real and substantial purposes, then
the exaction is properly called a tax.
CALTEX vs.. CIR
Taxation is no longer a measure merely to
raise revenue to support the existence of the
government. Taxes may be levied with a
regulatory purpose to provide means for
rehabilitation and stabilization of a threatened
industry which is affected with public interest
as to be within the police power of the State.
F. Principles of sound tax system (FAT)
1. Fiscal adequacy
2. Administrative feasibility
3. Theoretical justice
FISCAL ADEQUACY : VIOLATION VALID
Sources of revenue should be sufficient
to meet the demands of public
expenditure
rights
be capable of
and
effective
ILLUSTRATIONS
OF
THE
LIFEBLOOD
THEORY
1) Collection of the taxes may not be
enjoined by injunction
2) Taxes could not be the subject of
compensation or set off
3) A valid tax may result in destruction of
the taxpayers property
4) Taxation is an unlimited and plenary
power
NECESSITY THEORY
Existence of a government is a necessity and
cannot continue without any means to pay
expense
BENEFITS
PROTECTION
THEORY
(Benefits-Protection / Reciprocity Theory)
NIEL S. DEFENSOR
University of Negros OccidentalMarshallRecoletos
and Holmes Dictum Reconciled
Although the power to tax is almost unlimited,
it must not be exercised in an arbitrary
manner. If the abuse is so great so as to
destroy the natural and fundamental rights of
people, it is the duty of the judiciary to hold
such an act unconstitutional.
Power of Judicial Review in Taxation
As long as the legislature, in imposing a
tax, does not violate applicable constitutional
limitations or restrictions, it is not within the
province of the courts to inquire into the
wisdom or policy of the exaction, the motives
behind it, the amount to be raised or the
persons, property or other privileges to be
taxed. The courts power in taxation is limited
only to the application and interpretation of
the law.
Note: The principle of judicial non-interference
extends.
1. Prospectivity of Tax Laws
Taxes must be imposed prospectively and not
retroactively. But if the intent of the law
makers is to apply it retroactively, such law
must clearly state that the intention is such.
Prospectivity simply means, if a tax law is
enacted to day, it has to effect tomorrow and
in the years to come...and not to affect the
past.
2. Doctrine of Imprescriptibility of taxes
General Rule: Taxes are imprescriptible
Exception: They are prescriptible if the tax
laws provide for statute of limitations
Prescriptive Periods: 1) Prescriptive periods for
the assessment and collection of taxes
a. NIRC
10 years if return is tainted with falsity
or fraud
3 years if there is no fraud
b. Tariff and customs code
It does not express any general statute of
limitation; it provided, however, that when
articles have entered and passed free of duty
or final adjustment of duties made, with
subsequent delivery, such entry and passage
free of duty or settlement of duties will, after
the expiration of one (1) year, from the date of
the final payment of duties, in the absence of
fraud or protest, be final and conclusive upon
all parties, unless the liquidation of import
entry was merely tentative. (Sec 1603,TCC)
c. Local Government Code
Local Taxes, fees, or charges shall be assessed
within five (5) years from the date they became
due. In case of fraud or intent to evade the
payment of taxes, fees or charges the same may
NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
-An excise
tax upon certain property
NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
Who Can Claim Tax Credit
1) Citizens of the Philippines
2) Domestic corporations
City of Baguio Vs. De Leon
The argument against double taxation may not
be invoked where one tax is imposed by the
state and the other imposed by the city, it
being widely recognized that there is nothing
inherently obnoxious in the requirement that
license fees or taxes be exacted with respect
to the same occupation, calling or activity by
both the state and a political subdivision
thereof. And where the statute or ordinance in
question applies equally to all persons, firms
and corporations placed in a similar situation,
there is no infringement of the rule on equality.
Villanueva Vs. City of Iloilo
An ordinance imposing a municipal tax on
tenement houses was challenged because the
owners already pay real estate taxes and also
income taxes under the NIRC. The Supreme
Court held that there was no double taxation.
The same tax may be imposed by the National
Government as well as the local government.
There is nothing inherently obnoxious in the
exaction of license fees or taxes with respect
to the same occupation, calling or activity by
both the state and a political subdivision
thereof. Further, a license tax may be levied
upon a business or occupation although the
land used in connection therewith is subject to
property tax.
Sparing Rule same dividend earned by a
NRFC within the Phil. is reduced by imposing a
lower rate of 15% (in lieu of the 35%), on the
condition that the country to which the NRFC is
domiliced shall allow a credit against the tax
due from the NRFC, taxes deemed to have
been paid in the Phil. (Sec.28 B 5b) (CIR vs
Procter & Gamble)(GR No. 66838, Dec. 2,
1991)
3. Exemption
Exemption from taxation is the grant of
immunity to particular persons or corporations
or to persons or corporations of a particular
class from a tax which others generally within
the same taxing district are obliged to pay.
4. Escape from taxation
a) Shifting of tax burden
(i) Ways of shifting the tax burden
(ii) Taxes that can be shifted
(iii) Meaning of impact and incidence of
taxation
SHIFTING
Shifting is the transfer of the burden of a tax
by the original payer or the one on whom the
NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
by law to
pay the tax or the one on whom the
tax is formally assessed. In short, he or she is
the subject of the tax.
2. BACKWARD SHIFTING
When the burden of the tax is transferred from
the consumer or purchaser through the factors
of distribution to the factors of production
CAPITALIZATION
Reduction is the price of the taxed object equal
to the capitalized value of future taxes on the
property sold.
TRANSFORMATION
b) Tax avoidance
TAX AVOIDANCE
Tax avoidance is the exploitation of the
taxpayer of legally permissible alternative tax
rates or methods of assessing taxable property
or income in order to avoid or reduce tax
liability
Also known as tax minimization
not punishable by law
DELPHERS TRADERS CORP vs. IAC (157 SCRA
349)
The Supreme Court upheld the estate planning
scheme resorted to by the Pacheco family in
converting their property to shares of stock in
NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
Failure
of the taxpayer to declare for
taxation purposes his true and actual
income derived from his business for
two (2) consecutive years is an
indication of his fraudulent intent to
cheat the government of its due taxes
TAX EXEMPTION
Tax Exemption
It is the grant of immunity to particular
persons or corporations or to persons or
corporations of a particular class from a
tax which persons and corporations
generally within the same state or
taxing district are obliged to pay. It is
an immunity or privilege; it is freedom
from a financial charge or burden to
which others are subjected.
Exemption is allowed only if there is a
clear provision there for.
It is not necessarily discriminatory as
long as there is a reasonable
foundation or rational basis.
Exemptions are not presumed, but
when public property is involved,
exemption is the rule and taxation is
the exemption.
Rationale for granting tax exemptions
Its avowed purpose is some public
benefit or interests which the
lawmaking body considers sufficient to
offset the monetary loss entailed in the
grant of the exemption.
The theory behind the grant of tax
exemptions is that such act will benefit
the body of the people. It is not based
on the idea of lessening the burden of
the individual owners of property.
Grounds for granting tax exemptions
CPR
1) May be based on contract. In such a case,
the public, which is represented by the
government is supposed to receive a full
equivalent therefor, i.e. charter of a
corporation.
2) May be based on some ground of public
policy, i.e., to encourage new industries or to
foster charitable institutions. Here, the
government need not receive any
consideration in return for the tax exemption.
3) May be based on grounds of reciprocity or
to lessen the rigors of international double or
multiple taxation
Note: Equity is not a ground for tax
exemption. Exemption is allowed only if there
NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
Exemption of public property from taxation
does not extend to improvements therein
made by occupants or claimants at their own
expense.
KINDS OF TAX EXEMPTIONS
ACCORDING TO SCOPE OR EXTENT
1) TOTAL
When certain persons, property or transactions
are exempted, expressly or impliedly from all
taxes
2) PARTIAL
When certain persons, property or transactions
are exempted, expressly or impliedly from
certain taxes, either entirely or in part.
3) There can be no simultaneous exemptions
under two laws, when one grants partial
exemption while other grants total exemption.
Does provision in a statute granting exemption
from all taxes include indirect taxes?
NO. As a general rule, indirect taxes are not
included in the grant of such exemption unless
it is expressly stated.
Nature of power to grant tax exemption
1) National government
The power to grant tax exemptions is an
attribute of sovereignty for the power to
prescribe who or what persons or property
shall not be taxed.
It is inherent in the exercise of the power to
tax that the sovereign state be free to select
the subjects of taxation and to grant
exemptions therefrom.
Unless restricted by the Constitution, the
legislative power to exempt is as broad as its
power to tax.
2) Local governments
Municipal corporations are clothed with no
inherent power to tax or grant tax exemptions.
But the moment the power to impose a
particular tax is granted, they also have the
power to grant exemption therefrom unless
forbidden by some provision of the
Constitution or the law
The legislature may delegate its power to
grant tax exemptions to the same extent that
it may exercise the power to exempt.
Basco vs. PAGCOR (196 SCRA 52): The power
to tax municipal corporations must always
NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
thegovernment
and its agencies
Petitioner cannot invoke the rule on stritissimi
juris with respect to the interpretation of
statutes granting tax exemptions to the NPC.
The rule on strict interpretation does not apply
in the case of exemptions in favor of a political
subdivision or instrumentality of the
government. [Maceda v. Macaraig]
Davao Gulf v. Commissioner, 293 SCRA 76
(1998)
A tax cannot be imposed unless it is supported
by the clear and express language of a statute;
on the other hand, once the tax is
unquestionably imposed, a claim of
exemption from tax payers must be clearly
shown and based on language in the law too
plain to be mistaken. Since the partial refund
authorized under Section 5, RA 1435, is in the
nature of a tax exemption, it must be
construed strictissimi juris against the grantee.
Hence, petitioners claim of refund on the
basis of the specific taxes it actually paid must
expressly be granted in a statute stated in a
language too clear to be mistaken.
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
Taxes cannot
be subject to compensation for
the simple reason that the government and
the taxpayer are not creditors and debtors of
each other. There is a material distinction
between a tax and a debt. Debts are due to
the government in its corporate capacity, while
taxes are due to the government in its
sovereign capacity.
Exception: The Supreme Court allowed set-off
in the case of Domingo v. Garlitos [8 SCRA
443] [in re: claim for payment of unpaid
services of a government employee vis--vis
the estate tax from his estate]. The fact that
the court having jurisdiction of the estate had
found that the claim of the estate against the
government has been appropriated for the
purpose by a corresponding law shows that
both the claim of the government for
inheritance taxes and the claim of the
intestate for services rendered have already
became overdue and demandable as well as
fully liquidated. Compensation therefore takes
place by operation of law
In the case of Republic v. Ericta, [173 SCRA
623], The SC allowed taxes due from the
taxpayer to be considered paid through the
delivery of certificates of indebtedness. It held
that: In effect, while judgment shall be
rendered in favour of the Republic against
Sampaguita for unpaid taxes, judgment ought
at the same time issue for Sampaguita
commanding payment to it by the Republic of
the same sum representing the face value of
the certificate of indebtedness assigned to it
and for recovery of which it had specifically
prayed in its counterclaim.
*This can be construed as an exemption.
In CIR v. Esso Standard, [172 SCRA 364],
the SC allowed the overpaid income tax of
1959 to be considered tax credit against the
deficiency income tax of 1960. It held that
The obligation to return the money
mistakenly paid arises from the moment the
payment is made, and not from the time that
the payee admits the obligation to reimburse.
The obligation of the payee to reimburse an
amount paid to him results from the mistake,
not from the payees confession of the mistake
or recognition of the obligation to reimburse.
Requisites of Compensation in taxation
(Domingo v. Garlitos)
1.That the tax assessed and the claim against
the government be fully liquidated.
2.That the tax assessed and the claim against the
NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
findings
of the audit office as confirmed by
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Exceptions
1.
2.
3.
4.
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
except business-related
transactions) from
total assets (net of prepaid expenses, deferred
charges, pre-operating expenses, as well as
appraisal increases in fixed assets), taken from
the latest audited financial statements,
provided that in the case of an individual
taxpayer, he has no other leviable properties
under the law other than his family home;
(Sec. 3, RR. 302002).
a. The taxpayer is a compensation earner with
no other source of income and the familys
gross monthly compensation does not exceed
(P10,500/month if single; P21,000/month if
married), and that it appears that the taxpayer
possesses no other leviable/ distrainable
assets, other than his family home; or
a. The taxpayer has been granted by the SEC
or by any competent tribunal a moratorium or
suspension of payments to creditors, or
otherwise declared bankrupt or insolvent.
(Sec. 3, RR. 07-2001)
The Congressional Oversight Committee,
under Section 290 of the 1997 NIRC is
empowered to require the BIR:
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
Compromise
Penalty
It is an amount of money that the taxpayer
pays to compromise a tax violation. This is
paid in lieu of criminal prosecution. A taxpayer
cannot be compelled to pay a compromise
penalty. If he does not want to pay, the CIR
must institute a criminal action.
8. TAX AMNESTY
Tax amnesty, being a general pardon or
intentional overlooking by the State of its
authority to impose penalties on persons
otherwise guilty of evasion or violation of a
revenue to collect what otherwise would be
due it and, in this sense, prejudicial thereto. It
is granted particularly to tax evaders who wish
to relent and are willing to reform, thus giving
them a chance to do so and thereby become a
part of the new society with a clean slate.
[Republic v. Intermediate Appellate Court, 196
SCRA 335]
Like tax exemption, tax amnesty is never
favored nor presumed in law. It is granted by
statute. The terms of the amnesty must also
be construed against the taxpayer and
liberally in favor of the government.
Nature Of Tax Amnesty
1. General or intentional overlooking by the
state of its authority to impose penalties on
persons otherwise guilty of evasion or violation
of a revenue or tax law.
2. Partakes of an absolute forgiveness of
waiver of the government of its right to collect.
3. To give tax evaders, who wish to relent and
are willing to reform a chance to do so.
RULES ON TAX AMNESTY
1. Tax amnesty
a) like tax exemption, it is never favored nor
presumed and construed strictly against the
taxpayer (must show complete compliance
with the law)
2.Government not estopped from questioning
the tax liability even if amnesty tax payments
were already received.
Reason: Erroneous application and
enforcement of the law by public officers do
not block subsequent correct application of the
statute. The government is never estopped by
mistakes or errors of its agents.
Basis: Lifeblood Theory
3.Defense of tax amnesty, like insanity, is a
personal defense.
Reason: Relates to the circumstances of a
particular accused and not the character of the
acts charged in the information.
Tax amnesty
Tax exemption
Prospective
application
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
corporations
of a particular class from a tax of
which persons and corporations generally
within the same state or taxing district are
obliged to pay. Tax exemptions are not favored
and are construed strictissimi juris against the
taxpayer.
CONSTRUCTION AND INTERPRETATION OF
TAX LAWS
Construction of Tax Laws
1. Public purpose is always presumed.
2. If the law is clear, apply the law in
accordance to its plain and simple tenor.
3. A statute will not be construed as imposing
a tax unless it does so clearly, expressly
and unambiguously.
4. In case of doubt, it is construed most
strongly against the Government, and
liberally in favor of the taxpayer.
5. Provisions of a taxing act are not to be
extended by implication.
6. Tax laws operate prospectively unless the
purpose of the legislature to give
retrospective effect is expressly declared or
may be implied from the language used.
7. Tax laws are special laws and prevail over a
general law.
Nature of Internal revenue laws
1) Internal revenue laws are not political in
nature.
2) Tax laws are civil and not penal in nature.
Not political in nature
Internal revenue laws are not political in
nature. They are deemed to be laws of the
occupied territory and not of the occupying
enemy.
Civil Not penal in nature
Tax laws are civil and not penal in nature,
although there are penalties provided for their
violation.
The purpose of tax laws in imposing penalties
for delinquencies is to compel the timely
payment of taxes or to punish evasion or
neglect of duty in respect thereof.
9. Construction and Interpretation of Tax
Laws
(a) Tax Laws
1) General Rule:
When the language is plain
the rule of strict construction as against the
government is not applicable where the
language of statute is plain as to no doubt to
its legislative intent.
Where legislative intent must be consider
Tax statutes are to receive a reasonable
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
I. SCOPE AND LIMITATION OF TAXATION
1. Inherent Limitation
a) Public Purpose
General rule
Taxation is the rule
Exemptions are highly disfavoured and not
presumed
Exceptions
a. when law provides for a liberal construction
NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
inherent
power to tax. [Basco v.
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PAGCOR].
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
KIND OF TAX
Personal or Community Tax
SITUS
Residence or domicile of the taxpayer
Business Tax
Excise or Privilege Tax
Sales Tax
Income Tax
Place of Business
Where the act is performed or where occupation is
pursued
Where the sale is consummated
Consider: (1) citizenship, (2) residence,
(3) source of income (Sec 42, 23, NIRC of 1997)
Transfer Tax
Donors Tax
Estate Tax
Franchise Tax
C) TERRITORIAL
i. Meaning of situs
Situs-place where a thing is considered for
taxation. It is necessary for the exercise of
dominion/authority of a state over a subject
matter.
The determination of the situs of taxation
depends on various factors including the:
1. Nature of the tax;
2.Subject matter thereof (e.g. persons,
property, act or or activity);
3.Possible protection and benefit that may
accrue both to the government and the
taxpayer;
4.Residence or citizenship of the taxpayer; and
5.Source of income.
6. Situs of excise, privilege, business, or
occupation being taxed
*Lex Rei Situs -where the property is located
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NIEL S. DEFENSOR
University of Negros Occidentaltax both Recoletos
in his place of residence and domicile
and the place where those are found.
This is, therefore, an exception to the decision
of the Supreme Court in Wells Fargo v. CIR.
This has since been incorporated in Sec. 104 of
the NIRC.
Sec. 104, NIRC- No tax shall be collected for
intangible personal property if the decedent at
time of his death was citizen and resident of a
foreign country.
Multiplicity of suits
Multiplicity of situs, or the taxation of the same
income or intangible subjects in several taxing
jurisdictions, arises from various factors:
(d)International comity
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
NIEL S. DEFENSOR
2016 Tax Law Bar Exam Coverage
University of Negros Occidental2
Coverage
Recoletos
0
exemption
e) Revocation of tax exemption
6. Compensation and set-off
7. Compromise
8. Tax amnesty
a)
Definition
b) Distinguished from tax exemption
9. Construction and
interpretation of:
a) Tax laws
(i) General rule
(ii) Exception
b) Tax exemption and exclusion
(i) General rule
(ii) Exception
c) Tax rules and regulations
(i) General rule only
d) Penal provisions of tax laws
e) Non-retroactive application to taxpayers
(i) Exceptions
I. Scope and limitation of taxation
1. Inherent
limitations
a) Public
purpose
b) Inherently legislative
(i) General rule
(ii) Exceptions
(a) Delegation to local governments
(b) Delegation to the President
(c) Delegation to administrative
agencies
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
2
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
4. Refund
K. Definition, nature, and characteristics of taxes
L. Requisites of a valid tax
M. Tax as distinguished from other forms of exactions
1. Tariff
2. Toll
3. License fee
4. Special assessment
5. Debt
N. Kinds of
taxes
1. As to object
a) Personal, capitation, or poll
tax
b) Property tax
c) Privilege tax
2. As to burden or
incidence a) Direct
b) Indirect
3. As to tax
rates
a) Specific
b) Ad valorem
c) Mixed
4. As to purposes
a) General or fiscal
b) Special, regulatory, or sumptuary
5. As to scope or authority to impose
a) National internal revenue taxes
b) Local real property tax, municipal tax
6.
As
to
graduation
a)
Progressive
b)
Regressive
c) Proportionate
II. National Internal Revenue Code (NIRC) of 1997, as amended
A. Income taxation
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
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
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
4. Types of Philippine income tax
5. Taxable period
a) Calendar
period
b) Fiscal period
c) Short period
6. Kinds of taxpayers
a) Individual taxpayers
(i) Citizens
(a) Resident citizens
(b) Non-resident citizens
(ii) Aliens
(a) Resident aliens
(b) Non-resident aliens
(1) Engaged in trade or business
(2) Not engaged in trade or business
(iii) Special class of individual employees
(a) Minimum wage
earner b) Corporations
(i) Domestic corporations
(ii) Foreign corporations
(a) Resident foreign corporations
(b) Non-resident foreign corporations
(iii) Joint venture and
consortium
c) Partnerships
d) General professional
partnerships
e) Estates and trusts
f) Co-ownerships
7. Income
taxation
a) Definition
b) Nature
c) General principles
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
8. Income
a)
Definition
b) Nature
c) When income is taxable
(i) Existence of income
(ii) Realization of income
(a) Tests of realization
(b) Actual vis--vis constructive receipt
(iii) Recognition of income
[Exclude: Methods of accounting]
d) 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
(v) All events test
9. Gross
income
a)
Definition
b) Concept of income from whatever source derived
c) Gross income vis--vis net income vis--vis taxable
income
d) Classification of income as to source
(i) Gross income and taxable income from sources within the
Philippines
(ii) Gross income and taxable income from sources without the
Philippines
(iii) Income partly within or partly without the Philippines
e) Sources of income subject to tax
(i) Compensation income
(ii) Fringe benefits
(a) Special treatment of fringe benefits
(b) Definition
(c) Taxable and non-taxable fringe benefits
(iii) Professional income
(iv) Income from business
(v) Income from dealings in property
(a)
Types
of
properties
(1)
Ordinary
assets
(2)
Capital
assets
(b) Types of gains from dealings in property
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
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NIEL S. DEFENSOR
University of Negros OccidentalRecoletos
(2)
Dividends
(3) Services
(4) Rentals
(5)
Royalties
(6) Sale of real property
(7) Sale of personal property
(8) Shares of stock of domestic corporation
(f) Situs of income taxation (see page 2 under inherent
limitations, territorial)
(g) Exclusions from gross
income
(1) Rationale for the exclusions
(2) Taxpayers who may avail of the exclusions
(3) Exclusions distinguished from deductions and tax credit
(4) Under the Constitution
(a) Income derived by the government or its political
subdivisions from the exercise of any essential
governmental function
(5) Under the Tax Code
(a) Proceeds of life insurance policies
(b) Return of premium paid
(c) Amounts received under life insurance,
endowment or annuity contracts
(d) Value of property acquired by gift, bequest,
devise or descent
(e) Amount received through accident or health insurance
(f) Income exempt under tax treaty
(g) Retirement benefits, pensions, gratuities, etc.
(h) Winnings, prizes, and awards, including those in
sports competition
(6) Under special laws
(a) Personal Equity and Retirement Account
(h) Deductions from gross
income
(1) General rules
(a) Deductions must be paid or incurred in
connection with the taxpayers trade, business
or profession
(b) Deductions must be supported by adequate
receipts or invoices (except standard
deduction)
(c) Additional requirement relating to withholding
(2) Return of capital (cost of sales or services)
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University of Negros OccidentalRecoletos
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University of Negros OccidentalRecoletos
(d) Losses
(1) Requisites for
deductibility
(2) Other types of
losses
(a) Capital
losses
(b) Securities becoming worthless
(c) Losses on wash sales of stocks or securities
(d) Wagering
losses
(e) Net Operating Loss Carry-Over
(NOLCO)
(e) Bad debts
(1) Requisites for
deductibility
(2) Effect of recovery of bad debts
(f) Depreciation
(1) Requisites for
deductibility
(2) Methods of computing depreciation allowance
(a) Straight-line
method
(b) Declining-balance method
(c) Sum-of-the-years-digit method
[Exclude: Computation of depreciation
allowance]
(g) Charitable and other contributions
(1) Requisites for
deductibility
(2) Amount that may be deducted
(h) Contributions to pension trusts
(1) Requisites for
deductibility
(i) Deductions under special laws
(4) Optional standard deduction
(a) Individuals, except non-resident aliens
(b) Corporations, except non-resident foreign corporations
(c) Partnerships
(5) Personal and additional exemption (R.A. No. 9504,
Minimum
Wage Earner Law)
(a) Basic personal exemptions
(b) Additional exemptions for taxpayer with dependents
(c) Status-at-the-end-of-the-year rule
(d) Exemptions claimed by non-resident aliens
(6) Items not
deductible
(a) General rules
(b) Personal, living or family expenses
(c) Amount paid for new buildings or for
permanent improvements (capital
expenditures)
(d) Amount expended in restoring property (major repairs)
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University of Negros OccidentalRecoletos
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0
profession
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University of Negros OccidentalRecoletos
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University of Negros OccidentalRecoletos
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University of Negros OccidentalRecoletos
16.
17.
18.
19.
20.
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University of Negros OccidentalRecoletos
B. Estate tax
1. Basic principles
2. Definition
3. Nature
4. Purpose or object
5. Time and transfer of properties
6. Classification of decedent
7. Gross estate vis--vis net estate
8. Determination of gross estate and net estate
9. Composition of gross estate
10. Items to be included in gross estate
11. Deductions from estate
12. Exclusions from estate
13. Tax credit for estate taxes paid in a foreign country
14. Exemption of certain acquisitions and transmissions
15. Filing of notice of death
16. Estate tax return
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University of Negros OccidentalRecoletos
C. Donors tax
1. Basic principles
2. Definition
3. Nature
4. Purpose or object
5. Requisites of valid donation
6. Transfers which may be constituted as donation
a) Sale/exchange/transfer of property for insufficient
consideration
b) Condonation/remission of debt
7. Transfer for less than adequate and full consideration
8. Classification of donor
9. Determination of gross gift
10. Composition of gross gift
11. Valuation of gifts made in property
12. Tax credit for donors taxes paid in a foreign country
13. Exemptions of gifts from donors tax
14. Person liable
15. Tax basis
D. Value-Added Tax
(VAT)
1. Concept
2. Characteristics/Elements of a VAT-Taxable transaction
3. Impact of tax
4. Incidence of tax
5. Tax credit method
6. Destination principle
7. Persons liable
8. VAT on sale of goods or properties
a) Requisites of taxability of sale of goods or properties
9. Zero-rated sales of goods or properties, and effectively zero-rated
sales of goods or properties
10. 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
11. VAT exempt transactions
a) VAT exempt transactions, in general
12. Refund or tax credit of excess input tax
a) Who may claim for refund/apply for issuance of tax credit
certificate
b) Period to file claim/apply for issuance of tax credit
certificate
c) Manner of giving refund
d) Destination principle or cross-border doctrine
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University of Negros OccidentalRecoletos
[Exclude:
(i) Change or cessation of status as VAT-registered person
(ii) VAT on importation of goods
(iii) VAT on sale of service and use or lease of properties
(iv) Zero-rated sale of services
(v) Input tax and output tax, defined
(vi) Sources of input tax
(vii) Persons who can avail of input tax credit
(viii) Determination of output/input tax; VAT payable;
excess input tax credits
(ix) Substantiation of input tax credits
(x) Invoicing requirements
(xi) Filing of return and payment
(xii) Withholding of final VAT on sales to government]
E. Tax remedies under the
NIRC
1. Taxpayers
remedies
a) Assessment
(i) Concept of assessment
(a) Requisites for valid assessment
(b) Constructive methods of income determination
(c) Inventory method for income determination
(d) Jeopardy assessment
(e) Tax delinquency and tax deficiency
(ii) Power of the Commissioner to make assessments and prescribe
additional requirements for tax administration and enforcement
(a) Power of the Commissioner to obtain information,
and to summon/examine, and take testimony of
persons
(iii) When assessment is made
(a) Prescriptive period for assessment
(1) False, fraudulent, and non-filing of
returns
(b) Suspension of running of statute of limitations
(iv) General provisions on additions to
the tax
(a) Civil penalties
(b) Interest
(c) Compromise penalties
(v) Assessment process
(a) Tax audit
(b) Notice of informal conference
(c) Issuance of preliminary assessment notice
(d) Exceptions to issuance of preliminary assessment notice
(e) Reply to preliminary assessment notice
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University of Negros OccidentalRecoletos
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2016 Tax Law Bar Exam Coverage
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(a) Authority of the Commissioner
to compromise and abate taxes
(ix) Civil and criminal actions
(a) Suit to recover tax based on false or fraudulent
returns
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University of Negros OccidentalRecoletos
c) Refund
(i) Grounds and requisites for refund
(ii) Requirements for refund as laid down by cases
(a) Necessity of written claim for refund
(b) Claim containing a categorical demand for reimbursement
(c) Filing of administrative claim for refund and the
suit/proceeding before the CTA within 2 years from date
of payment regardless of any supervening cause
(iii) Legal basis of tax refunds
(iv) Statutory basis for tax refund under the tax code
(a) Scope of claims for refund
(b) Necessity of proof for claim or refund
(c) Burden of proof for claim of refund
(d) Nature of erroneously-paid tax/illegally assessed collected
(e) Tax refund vis--vis tax credit
(f) Essential requisites for claim of refund
(v) Who may claim/apply for tax refund/tax credit
(a) Taxpayer/withholding agents of non-resident foreign
corporation
(vi) Prescriptive period for recovery of tax erroneously or illegally
collected
(vii) Other consideration affecting tax refunds
2. Government remedies
a) Administrative
remedies
(i) Tax lien
(ii) Levy and sale of real property
(iii) Forfeiture of real property to the government for want of bidder
(iv) Further distraint and levy
(v) Suspension of business operation
(vi) Non-availability of injunction to restrain
collection of tax
b) Judicial remedies
3. Statutory offenses and
penalties
a) Civil penalties
(i)
Surcharge
(ii)
Interest
(a) In general
(b) Deficiency interest
(c) Delinquency interest
(d) Interest on extended payment
4. Compromise and abatement of
taxes
a) Compromise
b) Abatement
F. Organization and Function of the Bureau of Internal Revenue
1. Rule-making authority of the Secretary of Finance
a) Authority of Secretary of Finance to promulgate rules and
regulations
b) Specific provisions to be contained in rules and regulations
NIEL S. DEFENSOR
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c) Non-retroactivity of rulings 9
2. Power of the Commissioner to suspend the business operation of a
taxpayer
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University of Negros OccidentalRecoletos
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2016 Tax Law Bar Exam Coverage
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1 powers of
6. Common limitations on the taxing
LGUs
7. Collection of business tax
a) Tax period and manner of
payment
b) Accrual of tax
c) Time of payment
d) Penalties on unpaid taxes, fees or charges
e) Authority of treasurer in collection and inspection of books
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University of Negros OccidentalRecoletos
8. Taxpayers remedies
a) Periods of assessment and collection of local taxes, fees or
charges
b) Protest of assessment
c)Claim for refund of tax credit for erroneously or illegally collected
tax, fee or charge
9. 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
B. Real property taxation
1. Fundamental principles
2. Nature of real property tax
3. Imposition of real property tax
a) Power to levy real property tax
b) Exemption from real property tax
4. Appraisal and assessment of real property tax[CONCEPT ONLY]
5. Collection of real property tax
a) Date of accrual of real property tax and
special levies
b) Collection of tax
(i) Collecting authority
(ii) Duty of assessor to furnish local treasurer with assessment rolls
(iii) Notice of time for collection of tax
c) Periods within which to collect real
property tax
d) Special rules on payment
(i) Payment of real property tax in installments
(ii) Interests on unpaid real property tax
(iii) Condonation of real property tax
e) Remedies of LGUs for collection of real property tax
(i) Issuance of notice of delinquency for real property tax payment
(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
7. 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
(ii) Appeal to the Local Board of Assessment
Appeals
(iii) Appeal to the Central Board of Assessment
Appeals
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University of Negros OccidentalRecoletos
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University of Negros OccidentalRecoletos
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University of Negros OccidentalRecoletos
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University of Negros OccidentalRecoletos
I. Remedies
1. Government
a) Administrative/extrajudicial
(i) Search, seizure, forfeiture,
arrest
b) Judicial
(i) Rules on appeal including jurisdiction
2. Taxpayer
a) Protest
b) Abandonment
c) Abatement and refund
V. Judicial Remedies (R.A. No. 1125, as amended, and the Revised Rules of
the
Court of Tax Appeals)
A. Jurisdiction of the Court of Tax Appeals
1. Exclusive appellate jurisdiction over civil tax cases
a) Cases within the jurisdiction of the court en banc
b) Cases within the jurisdiction of the court in divisions
2. Criminal cases
a) Exclusive original jurisdiction
b) Exclusive appellate jurisdiction in criminal cases
B. Judicial procedures
1. Judicial action for collection of
taxes a) Internal revenue
taxes
b) Local taxes
(i) Prescriptive period
2. Civil cases
a) Who may appeal, mode of appeal, effect of appeal
(i) Suspension of collection of tax
a) Injunction not available to restrain collection
(ii) Taking of evidence
(iii) Motion for reconsideration or new
trial
b) Appeal to the CTA, en banc
c) Petition for review on certiorari to the Supreme Court
3. Criminal cases
a) Institution and prosecution of criminal actions
(i) Institution of civil action in criminal
action
b) Appeal and period to appeal
(i) Solicitor General as counsel for the people and government
officials sued in their official capacity
c) Petition for review on certiorari to the Supreme Court
C. Taxpayers suit impugning the validity of tax measures or acts of taxing
authorities
1. Taxpayers suit, defined
2. Distinguished from citizens suit
3. Requisites for challenging the constitutionality of a tax measure or
act of taxing authority
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a) Concept of locus standi as applied
in taxation
b) Doctrine of transcendental
importance c) Ripeness for judicial
determination
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University of Negros OccidentalRecoletos
IMPORTANT NOTES:
1. This listing of covered topics is not intended and should not be used by the law
schools as a course outline. This was drawn up for the limited purpose of ensuring
that Bar candidates are guided on the coverage of the 2016 Bar Examinations.
2. All Supreme Court decisions - pertinent to a given Bar subject and its listed topics,
and promulgated up to May 31, 2015 - are examinable materials within the
coverage of the 2016 Bar Examinations.