Professional Documents
Culture Documents
College of Law
1.7. Basic Principles of a sound tax system (FAT) What is the legal status of an
unsound tax system?
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Fiscal adequacy
Administrative feasibility
Theoretical justice
(For discussion on Aug. 16, 2017) Students will be evaluated based on graded recitation.
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1.12. Tax exemption It is a grant of immunity, express or implied, to particular persons
or corporations from the obligation to pay taxes (51 Am. Jur. 503).
Kinds of Tax Exemption: (1) Constitutional exemption, (2) Statutory
exemption, (3) Express exemption, (4) Implied exemption, (5) Unilateral
exemption, (6) Contractual exemption, (7) Partial exemption, and (8) Total
exemption.
1.14. Forms of Escape from Taxation: Tax Avoidance and Tax Evasion
CIR v. Javier, 199 SCRA 824
CIR v. Benigno P. Toda, Jr., 438 SCRA 290
(For discussion on Aug. 23, 2017) Students will be evaluated based on graded recitation.
(For discussion on Aug. 30, 2017) Students will be evaluated based on graded recitation.
Source of income taxable in the Philippines for the different classes of taxpayers
Section 23, NIRC.
Rules in determining the source of income Section 42, NIRC.
Gross income from sources within the Philippines
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Gross income from sources without the Philippines
Income partly within or partly without the Philippines
Different classes of income for income tax purposes Sections 24, 25, 27 &
28, NIRC:
Returnable income compensation income, income from trade, business
or practice of profession
Fringe benefits for managerial and supervisory employees
Passive investment income
Capital gains either subject to schedular or global tax regime
Exempt income
Definition of Taxable Income Section 31, NIRC
Exclusions from gross income and the reasons for their exclusion Section
32(B), NIRC
Proceeds of life insurance policy
Return of premium to the insured
Value of property acquired by gift, bequest or devise
Amount received through accident or health insurance
Income exempt under tax treaty
Retirement benefits, pensions, gratuities, etc. RA No. 7641 amending
Article 287 of the Labor Code; RA No. 4917. Scope of exemption of an
employees trust Section 60, NIRC.
Benefits/separation pay received due to involuntary separation from
employment
Thirteenth month pay and other benefits treatment of excess over de
minimis benefits
Prizes and awards in recognition of specified achievements and those
received in sports competition
Exclusions intended to enhance the capital market
(For discussion on Sept. 06, 2017) Students will be evaluated based on graded
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recitation.
Itemized deductions from gross income Section 34, NIRC
Ordinary and necessary expenses
- ESSO v. CIR, 175 SCRA 149
- CIR v. CTA & Smith Kline & French Overseas Co., 127 SCRA 9, G.R.
No. L-54108, January 17, 1984
- General Foods Corporation v. Commissioner, G.R. No. 143672, April
24, 2003
Interest
Tax Arbitrage Rule
Optional Treatment of interest incurred to acquire business property
Rule on a cash basis individual paying interest in advance
Related party interest payments (double taxed)
Financing petroleum explorations
Palanca v. Commissioner, 18 SCRA 496
Taxes
Taxes not allowed as deduction destroys the progressivity of income
tax; not business connected; may result to double benefit
Optional treatment of foreign income taxes paid
Losses
Casualty losses The tax side of disasters. (Read also RR No. 12-77 &
10-79)
Related party losses incurred in a transaction conducted for profit.
Capital loss deductible only from capital gain
- China Bank Corp. v. CIR & CTA, 336 SCRA 178
Net Operating Loss Carry-over (NOLCO)
Bad debts
- PRC v. Commissioner, 256 SCRA 667 (1995)
Depreciation
- Basilan Estates, Inc. v. Commissioner, 21 SCRA 17
- Fernandez Hermanos, Inc. v. Commissioner, 29 SCRA 552
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Personal and additional exemptions Section 35, NIRC
(For discussion on Sept. 13, 2017) Students will be evaluated based on graded recitation.
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Capital gain from sale of shares of stock not traded in the stock exchange
Intercorporate dividends
(For discussion on Sept. 20, 2017) Students will be evaluated based on graded recitation.
2.2 Transfer Taxes
Donation inter vivos v. donation mortis causa. What is being taxed?
Tax credit for estate taxes paid in a foreign country Whom and when
allowed and other limitations imposed by law
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Administrative Provisions
Notice of death when required (Section 89, NIRC)
Filing of the estate tax return
Effects of non-payment of the estate tax
(For discussion on Sept. 27, 2017) Students will be evaluated based on graded recitation.
(For discussion on Oct. 4, 2017) Students will be evaluated based on graded recitation.
2.4 Tax remedies under the NIRC
Methods of collection of internal revenue taxes self assessment and
withholding tax
Legal basis of audit (Section 6(A), NIRC)
Procedure in the conduct of audit by BIR
Presentation of Books of Accounts & sanctions for failure to present
them for examination (Section 266, NIRC)
Procedures for the assessment and collection of internal revenue taxes
(government enforcement)
What is an assessment?
- Alhambra Cigar v.Collector, 1959
- CIR v. Pascor Realty Corp.,1999
Requisites of a valid assessment Section 203; Section 228; CIR v. Azucena
Reyes -2006; Gabriel v. CIR -2004.
Period of limitation on assessment Section 203 & 222, NIRC
When is the assessment deemed made? Basilan Estates Inc.,v. CIR, 21 SCRA
17
Taxpayers remedies against an assessment
Remedy before payment Section 228, NIRC
- Request for re-investigation
- Request for reconsideration
Remedy after payment
- Claim for refund of erroneously paid taxes Section 204 & 229,
NIRC
- Legal requirements of a claim for refund
Taxpayers remedy against CIRs inaction on a protest alternative
remedies which are mutually exclusive
- RCBC v. CIR, G.R. No. 168498, April 24, 2007
Period of limitation on Collection
- Section 222, NIRC rules if there is an assessment made by the
BIR
- Evangelista v. Collector, October 15, 1957
- Ungab v. Cusi, 97 SCRA 887
Exceptions to the prescriptive periods on assessment and collection
Section 222, NIRC
Requisites of a valid waiver CIR v. Kudos Metal Corporation, G.R. No.
178087, May 5, 2010
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Suspension of the prescriptive periods Section 223, NIRC
- Republic v. Kerr & Co., 25 SCRA 208
- BPI v. Commissioner, G.R. No. 139736, October 17, 2005
- Republic v. Salud Hizon, G.R. No. 130430, December 13, 1999
Authority of the Commissioner to compromise and abate taxes Section
204, NIRC
Government collection remedies
- Section 219; Section 207(A); Section 207(B); Section 205(b);
Section 224, NIRC
- Republic vs. Patanao, G.R. No. L-22356, July 21, 1967
- CIR vs. Suyoc Consolidated Mining Co., 104 Phil 819
- Republic vs. Acebedo, 22 SCRA 135
- CIR vs. Philippine Global Communications, Inc. G.R. No. L-167146,
October 31, 2006
(For discussion on Oct. 11, 2017) Students will be evaluated based on graded recitation.
(For discussion on Oct. 18, 2017) Students will be evaluated based on graded recitation.
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Situs of local taxation
Principal office and branch operations Section 143, LGC
Manufacturers, assemblers, contractors, producers, and exporters
WITH factories, project offices, plants, and plantations
Common revenue raising powers Section 153-154, LGC
Community Tax Who can levy? Who are liable? Amount due? Who are
exempt?
Collection of Business Taxes Sections 165, 166, 167, 168, 169 and 170,
LGC
Prescription of assessment and collection Section 194, LGC
Taxpayers remedies
Protest against a newly enacted ordinance Section 187, LGC
Protest against an assessment
Claim for refund or tax credit
Civil remedies by the LGU for collection of taxes
Ilo-ilo Bottlers vs. Ilo-ilo City, G.R. No. L-52019, August 19, 1988
Arabay vs. CFI, 66 SCRA 617 (1975)
Allied Thread vs. City of Manila, G.R. No. L-40296, Nov. 21, 1984
Mobil Philippines Inc. vs. City Treasurer of Makati, G.R. No. L-154092, July
14, 2005
Hagonoy Market Vendor Association vs. Municipality of Hagonoy Bulacan,
G.R. No. L-137621, February 6, 2002
(For discussion on Oct. 25, 2017) Students will be evaluated based on graded recitation.
(For discussion on Nov. 08, 2017) Students will be evaluated based on graded recitation.
Definition of Tariffs and Duties Nestle Phils. V. Court of Appeals, G.R. No. 134114,
July 6, 2001
General rule on duty imposition Section 101; Section 1205, TCC
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Purpose of imposition of duties
The flexible tariff clause Section 401, TCC
Requirements of importation
Beginning and ending of importation
Obligations of the importer cargo manifest; import entry; declaration of correct
weight or value; liability for payment of duties; liquidation of duties; keeping of
records
Importation in violation of the TCC What constitutes smuggling?
Government remedies
o Administrative/extrajudicial
Tax lien applies only if importation is neither prohibited nor improperly
made - Section 1204, TCC
Administrative fines and forfeitures applies when importation is unlawful
or the importation is prohibited Section 2530 & 2531, TCC
- Llamado v. Com. of Customs, G.R. No. L-28809, May 16, 1983
Reduction of customs duties/compromise Secs. 709 and 2316, TCC
Seizure, search, arrest Secs. 2205, 2210 and 2211, TCC
o Judicial Remedies
Civil action Section 1204, TCC
Criminal action
(For discussion on Nov. 15, 2017) Students will be evaluated based on graded recitation.
5.3 Suit impugning the validity of tax measures or acts of taxing authorities
Taxpayers suit
Citizens suit
Requisites for challenging the validity of tax measures or acts of taxing
authorities
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