PM Reyes 2014 To 2018 Tax Jurisprudence QA

QUESTIONS AND ANSWERS ON SIGNIFICANT
SUPREME COURT TAXATION LAW JURISPRUDENCE

FROM JANUARY 2013 TO JUNE 2018
PIERRE MARTIN D. REYES
GENERAL PRINCIPLES Q. The City of Manila imposed against ABC

a tax on manufacturers under Section 14 of
Q. What is a tax amnesty? the Revenue Code of Manila and at the same
time a tax on other businesses under Section
A tax amnesty is a general pardon or 21 of the same Code. ABC argues that the
intentional overlooking by the State of its collection of taxes under both Sections 14
authority to impose penalties on persons and 21 of the Code constitutes double
otherwise guilty of evasion or violation of a taxation. Is ABC correct?
revenue or tax law. It partakes of an absolute
forgiveness or waiver by the government of its Yes. While the City of Manila could impose
right to collect what is due it and to give tax against ABC a manufacturer's tax under
evaders who wish to relent a chance to start Section 14 of the Revenue Code of Manila, it
with a clean slate. A tax amnesty, much like a cannot at the same time impose the tax under
tax exemption, is never favored nor presumed Section 21 of the same code; otherwise, an
in law. The grant of a tax amnesty, similar to obnoxious double taxation would set in.
a tax exemption, must be construed strictly
against the taxpayer and liberally in favor of Citing its previous ruling in The City of Manila
the taxing authority. (Commissioner of v. Coca-cola Bottlers, Inc., G.R. No. 181845,
Internal Revenue v. Philippine Aluminum August 4, 2009, there is indeed double
Wheels, G.R. No. 216161, August 9, 2017; LG taxation if the taxpayer is subjected to the
Electronics Philippines v. Commissioner of taxes under both Sections 14 and 21 of Tax
Internal Revenue, G.R. No. 165451, Ordinance No. 7794, since these are being
December 3, 2015; CS Garments, Inc. v. imposed: (1) on the same subject matter – the
Commissioner of Internal Revenue, G.R. No. privilege of doing business in the City of
182399, March 12, 2014) Manila; (2) for the same purpose - to make
persons conducting business within the City
Q. When will a taxpayer be entitled to the of Manila contribute to city revenues; (3) by
immunities and privileges of a tax amnesty the same taxing authority-petitioner City of
program? Manila; (4) within the same taxing jurisdiction
- within the territorial jurisdiction of the City of
Amnesty taxpayers may immediately enjoy Manila; (5) for the same taxing periods – per
the privileges and immunities under a Tax calendar year; and (6) of the same kind or
Amnesty Law, provided they fulfill the character - a local business tax imposed on
suspensive conditions imposed therein. gross sales or receipts of the business (City of
(Commissioner of Internal Revenue v. Manila v. Cosmos Bottling Corporation, G.R.
Covanta Energy Philippine Holdings, G.R. No. 196681, June 27, 2018)
No. 203160, January 24, 2018; CS Garments,
Inc. v. Commissioner of Internal Revenue, Q. The City of Manila assessed and collected
G.R. No. 182399, March 12, 2014) taxes from certain taxpayers pursuant to
either Section 15 (Tax on Wholesalers,
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NOTICE
This material supplements the author’s 2013 Bar Reviewer and its supplements. No portion of this
work may be copied or reproduced without the written permission of the author. Possessors may
reproduce and distribute this supplement provided the name of the author remains clearly
associated with my work and no alterations in the form and content of this supplement are made.
SUPREME COURT TAXATION LAW JURISPRUDENCE FOR THE 2018 BAR
Distributors, or Dealers) or Section 17 (Tax CIR argues that XYZ Airlines has no
on Retailers). The City imposed additional personality to file the subject tax refund
taxes pursuant to Section 21 of the Revenue claim because it is not the statutory
Code. Section 21 imposes a tax on a person taxpayer. Does XYZ Airlines have
who sold goods and services in the course of personality to file the refund?
trade or business based on a certain
percentage of his gross sales or receipts in Yes. The rule in the Silkair case is inapplicable
the preceding calendar year. The taxpayers to a case where the party to which the
contend the imposition of the tax under economic burden is shifted is provided an
Section 21 constituted double taxation exemption from both direct and indirect taxes.
because they were already paying local In Silkair, the Court held that the the proper
business taxes pursuant to Section 15 or party to question, or seek a refund of, an
Section 17. Is there double taxation? indirect tax is the statutory taxpayer, the
person on whom the tax is imposed by law
Yes. Firstly, because Section 21 of the and who paid the same even if he shifts the
Revenue Code of Manila imposed the tax on a burden thereof to another.
person who sold goods and services in the
course of trade or business based on a certain The abovementioned rule should not apply to
percentage of his gross sales or receipts in the instances where the law clearly grants the
preceding calendar year, while Section 15 and party to which the economic burden of the tax
Section 17 likewise imposed the tax on a is shifted an exemption from both direct and
person who sold goods and services in the indirect taxes. In which case, the latter must
course of trade or business but only identified be allowed to claim a tax refund even if it is
such person with particularity, namely, the not considered as the statutory taxpayer
wholesaler, distributor or dealer (Section 15), under the law.
and the retailer (Section 17), all the taxes –
being imposed on the privilege of doing The Court applied the Maceda case, where it
business in the City of Manila in order to make upheld the National Power Corporation’s
the taxpayers contribute to the city’s revenues (NPC) claim for a tax refund since its own
– were imposed on the same subject matter charter specifically granted it an exemption
and for the same purpose. Secondly, the taxes from both direct and indirect taxes.
were imposed by the same taxing authority
(the City of Manila) and within the same The propriety of a tax refund claim is hinged
jurisdiction in the same taxing period (i.e., per on the kind of exemption which forms its
calendar year). Thirdly, the taxes were all in basis. If the law confers an exemption from
the nature of local business taxes. (Nursery both direct or indirect taxes, a claimant is
Care Corporation v. Treasurer of Manila, G.R. entitled to a tax refund even if it only bears the
No. 180651, July 30, 2014). economic burden of the applicable tax. On the
other hand, if the exemption conferred only
Q. ABC Petroleum sold XYZ Airlines applies to direct taxes, then the statutory
petroleum fuel. ABC Petroleum passed on taxpayer is regarded as the proper party to file
the related excise tax to XYZ Airlines. Now, the refund claim, (Commissioner of Internal
XYZ Airlines sought to refund the said excise Revenue v. Philippine Airlines, G.R. Nos.
taxes on the basis of the tax exemption 212536-37, August 27, 2014; Philippine
privileges provided for in its franchise. The
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NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, 2015 Bar
Supplement, 2016 Bar Supplement, 2017 Bar Supplement, Tax Audit Primer, and Flowchart of Tax
Remedies. No portion of this work may be copied or reproduced without the written permission of the
author. Possessors may reproduce and distribute this supplement provided the name of the author
remains clearly associated with the work and no alterations in the form and content of this supplement
are made. No stamping is allowed.
Airlines v. Commissioner of Internal Section 135 (a), in fulfillment of international

Revenue, G.R. No. 198759, July 1, 2013) agreement and practice to exempt aviation
fuel from excise tax and other impositions,
NOTE: This was later clarified in Chevron prohibits the passing of the excise tax to
Philippines v. Commissioner of Internal international carriers who buys petroleum
Revenue, G.R. No. 210836, September 1, products from local manufacturers/sellers
2015. In Chevron, the Supreme Court held such as respondent. However, the Court
that, as a general rule, it is the statutory agreed that there was a need to reexamine
taxpayer, not the party who only bears the the effect of denying the domestic
economic burden, who is entitled to claim the manufacturers/sellers’ claim for refund of the
tax refund or tax credit. However, this rule excise taxes they already paid on petroleum
does not apply where the law grants the party products sold to international carriers, and its
(to whom the economic burden of the tax is serious implications on our Government’s
shifted) an exemption from both direct and commitment to the goals and objectives of the
indirect taxes. Such party may claim the Chicago Convention.
refund or tax credit even if it is not the
statutory taxpayer. The general rule applied in Under the basic international law principle of
the case because Chevron did not pass on the pacta sunt servanda, we have the duty to
excise taxes. fulfill our treaty obligations in good faith. This
entails harmonization of national legislation
Q. ABC Petroleum sold to various with treaty provisions. Sec. 135(a) of the NIRC
international airlines petroleum fuel. ABC embodies our compliance with our
Petroleum is prohibited from passing on the undertakings under the Chicago Convention
said excise taxes to the international airlines and various bilateral air service agreements
as the latter are exempt from excise tax not to impose excise tax on aviation fuel
under Section 135. Thus, ABC Petroleum purchased by international carriers from
sought to refund the said excise taxes. The domestic manufacturers or suppliers.
BIR argues that pursuant to the Philippine Construction of the tax exemption provision in
Acetylene case, a tax exemption being question should give primary consideration to
enjoyed by the buyer cannot be the basis of its broad implications on our commitment
a claim for tax exemption by the under international agreements.
manufacturer or seller of the goods for any (Commissioner of Internal Revenue v.
tax due to it as the manufacturer or seller. Pilipinas Shell, G.R. No. 188497, February 19,
Can ABC Petroleum refund the said excise 2014)
taxes?
Q. A non-stock, non-profit educational
Yes. A petroleum company, as the statutory institution argues that is rental income from
taxpayer who is directly liable to pay the restaurants/canteens and bookstores
excise tax on its petroleum products, is operating within its campus are exempt
entitled to a refund or credit of the excise from income tax considering that such
taxes it paid for petroleum products sold to revenues derived therefrom are used for
international carriers, the latter having been educational purposes. The BIR argues that
granted exemption from the payment of said under the Tax Code, income of whatever
excise tax under Sec. 135 (a) of the NIRC. kind and character of a non-stock and non-
profit educational institution from any of its
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properties, real or personal, or from any of dated July 25, 2016 as cited in Commissioner
its activities conducted for profit regardless of Internal Revenue v. St. Paul College of
of the disposition made of such income shall Makati, G.R. No. 215383, March 8, 2017)
be subject to income tax. Is the BIR correct?
Q. St. Lukes Medical Center (SLMC) is a
No. The income, revenues and assets of non- hospital organized as a non-stock and non-
stock, non-profit educational institutions profit corporation. It admits both paying and
proved to have been used actually, directly, non-paying patients. The BIR claimed that
and exclusively for education purposes are SLMC was liable for income tax at 10% as
exempt from duties and taxes. provided under Section 27(B) of the NIRC.
SLMC argues that it is a non-stock, non-
There is a distinction between the tax profit institution for charitable and social
treatment of non-stock, non-profit welfare purposes exempt from income tax
educational institutions and proprietary under Section 30(E) and (G) of the NIRC. Is
educational institutions. The latter is granted SLMC correct?
tax exemption conditioned only on the actual,
direct and exclusive use of their revenues and No. To be exempt, Section 30(E) and (G) of
assets for educational purposes while tax the NIRC requires an institution to operate
exemptions for the former are subject to exclusively for charitable or social welfare
limitations imposed by law such as Section purpose. In case an exempt institution earns
30(H) of the Tax Code. The Tax Code cannot income from its profit activities, it will not lose
qualify the exemption constitutionally- its tax exemption. However, its income from
granted to non-stock, non-profit educational profit activities shall be subject to income tax.
institutions. (Commissioner of Internal For proprietary educational institutions and
Revenue v. De La Salle University, G.R. No. hospitals, the rate shall be 10%.
196596, 198841, and 198941, November 9, (Commissioner of Internal Revenue v. St.
2016) Luke’s Medical Center, G.R. No. 203514,
February 13, 2017)
It is clear and unmistakable from the
Constitution that non-stock, non-profit Q. Is a Revenue Regulation which treats
educational institutions are constitutionally petroleum and petroleum products brought
exempt from tax on all revenues derived in into Freeport and economic zones (FEZs) as
pursuance of its purpose as an educational taxable importations valid and
institution and used actually, directly and constitutional?
exclusively for educational purposes. This
constitutional exemption gives the non-stock, No. Such a revenue regulation is invalid and
non profit educational institutions a distinct unconstitutional because:
character. And for the constitutional
exemption to be enjoyed, jurisprudence and 1. It erroneously considers petroleum and
tax rulings affirm the doctrinal rule that there petroleum products brought into a FEZ
are only two requisites: (1) The school must be as taxable importations. Goods
non-stock and non-profit; and (2) The income brought into an FEZ remain to be in
is actually, directly and exclusively used for foreign territory and are not therefore
educational purposes. There are no other goods introduced into Philippine
conditions and limitations. (RMO 44-2016
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customs territory subject to Philippine Corporation, the executing agency. Is the

customs and tax laws; BIR correct?
2. It illegally imposes taxes upon Freeport
and economic zones (FEZs), which, by No. The subject taxes was erroneously
law, enjoy tax and duty-free incentives collected from the taxpayer, considering that
on its importations; the obligation to pay the same had already
3. It illegally amends the law – a power been assumed by the Philippine Government
vested solely on the Legislature. by virtue of its Exchange of Notes with the
Regulations may not enlarge, alter, Japanese Government. Case law explains that
restrict, or otherwise go beyond the an exchange of notes is considered as an
provisions of the law they administer. executive agreement, which is binding on the
The revenue regulation, an executive State even without Senate concurrence.
issuance, attempts to withdraw the tax
incentives clearly accorded by the Further, the Tax Code vests upon the CIR,
Legislature to FEZ enterprises. being the head of the BIR, the authority to
(Secretary of Finance v. Lazatin, G.R. credit or refund taxes which are erroneously
No. 210588, November 29, 2016) collected by the government. This specific
statutory mandate cannot be overridden by
Q. The governments of Japan and the averse interpretations made through mere
Philippines executed an Exchange of Notes, administrative issuances, which - as argued
whereby the former agreed to extend a loan by the CIR - shifts to the executing agencies
amounting to Forty Billion Four Hundred the power to refund the subject taxes.
Million Japanese Yen (¥40,400,000,000) to (Mitsubishi Corporation – Manila Branch v.
the latter for the implementation of a Coal- Commissioner of Internal Revenue, G.R. No.
Fired Thermal Power Plant Project. In 175772, June 29, 2017)
Paragraph 5 (2) of the Exchange of Notes,
the Philippine Government, by itself or INCOME TAX
through its executing agency, i.e. National
Power Corporation, undertook to assume all
Q. ABC Airways is a foreign airline. While it
taxes imposed by the Philippines on
did not carry passengers and/or cargo to or
Japanese contractors, i.e. Mitsubishi
from the Philippines, ABC maintains a
Corporation, engaged in the Project.
general sales agent of its tickets in the
Mitsubishi Corporation included in its
Philippines. Is the sale of the tickets taxable
income tax payments to the BIR income
as income from sources within the
pertaining to the Japanese Government-
Philippines?
funded portion of the project. Thus,
Mitsubishi filed for a claim for refund. The
A. Yes. An offline international air carrier
BIR argues that (a) Mitsubishi is not entitled
selling passage tickets in the Philippines,
to the refund as the Exchange of Notes
through a general sales agent, is a resident
cannot be read as a treaty validly granting
foreign corporation doing business in the
tax exemption considering the lack of
Philippines. As such, it is taxable under
Senate concurrence; and (b) that, based on
Section 28(A)(1), and not Section 28(A)(3) of
a revenue memorandum circular it issued,
the 1997 National International Revenue
the proper remedy of Mitsubishi is to recover
Code, subject to any applicable tax treaty to
or obtain a refund from the National Power
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which the Philippines is a signatory. (Air realized from the sale of lands and/or
Canada v. Commissioner of Internal buildings. The National Internal Revenue Code
Revenue, G.R. No. 169507, January 11, 2016) of 1997 does not impose the 6% capital gains
tax on the gains realized from the sale of
Q. ABC is a PEZA-registered corporation machineries and equipment. Therefore, only
engaged in the business of manufacturing the presumed gain from the sale of
microprocessors. After its registration, ABC petitioner’s land and/or building may be
constructed buildings and purchased subjected to the 6% capital gains tax. The
machineries and equipment. ABC failed to income from the sale of petitioner’s
commence operations. ABC sold the said machineries and equipment is subject to the
building and its machineries and equipment provisions on normal corporate income tax.
to another PEZA-registered enterprise. Are (SMI-ED Philippines v. Commissioner of
properties considered “capital assets” or Internal Revenue, G.R. No. 175410,
ordinary assets”? November 12, 2014)
A. The properties are not among the Q. A law was passed granting income tax
exclusions enumerated in Section 39(A)(1) of exemption for minimum wage earners
the National Internal Revenue Code of 1997 (MWE) as well as increase in personal and
which defines “ordinary assets.” None of the additional exemptions. The law became
properties were used in trade or ordinary effective on July 6, 2008. The BIR issued a
course of business because petitioner never revenue regulation providing for (a) the
commenced operations. They were not part of prorated application of the personal and
the inventory. None of them were stocks in additional exemptions for taxable year 2008
trade. Based on the definition of capital assets and for the period of applicability of the
under Section 39 of the National Internal MWE exemption for taxable year 2008 to
Revenue Code of 1997, they are capital begin only on 6 July 2008; and (b) the
assets. (SMI-ED Philippines v. Commissioner disqualification of MWEs who earn purely
of Internal Revenue, G.R. No. 175410, compensation income, whether in the
November 12, 2014) private or public sector, from the privilege of
availing themselves of the MWE exemption
Q. Differentiate between the tax treatment in case they receive compensation related
of capital gains of individuals and benefits exceeding the statutory ceiling of
corporations from the sale of real properties. P30,000 (now P82,000). Is the revenue
regulation valid?
A. Capital gains of individuals and
corporations from the sale of real properties No. The personal and additional exemptions
are taxed differently. Individuals are taxed on should be applied to the entire taxable year
capital gains from sale of all real properties 2008. The test is whether the new set of
located in the Philippines and classified as personal and additional exemptions was
capital assets. For corporations, the National available at the time of the filing of the income
Internal Revenue Code of 1997 treats the sale tax return. In other words, while the status of
of land and buildings, and the sale of the individual taxpayers is determined at the
machineries and equipment, differently. close of the taxable year, their personal and
Domestic corporations are imposed a 6% additional exemptions - and consequently the
capital gains tax only on the presumed gain computation of their taxable income - are
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reckoned when the tax becomes due, and not Republic of Germany, a foreign government.
while the income is being earned or received. Section 32(B)(7)(a) of the Tax Code, as
As in the case of the adjusted personal and amended, exempts from income tax income
additional exemptions, the MWE exemption derived from investments in the Philippines in
should apply to the entire taxable year 2008, loans by financing institutions owned,
and not only from 6 July 2008 onwards. controlled, or enjoying refinancing from
foreign governments. (Commissioner of
The revenue regulations adds a requirement Internal Revenue v. Meralco, G.R. No.
not found in the law by effectively declaring 181459, June 9, 2014)
that an MWE who receives other benefits in
excess of the statutory limit is no longer In 2001, the Caucus of Development NGO
entitled to the exemption provided by the law. Networks (CODE-NGO) with the assistance
To be exempt, one must be an MWE, a term of its financial advisors, requested an
that is clearly defined. Section 22(HH) says approval from the Department of Finance
he/she must be one who is paid the statutory for the issuance by the Bureau of Treasury
minimum wage if he/she works in the private of 10-year zero-coupon treasury bonds. The
sector, or not more than the statutory said bonds would initially be purchased by a
minimum wage in the non-agricultural sector special purpose vehicle on behalf of CODE-
where he/she is assigned, if he/she is a NGO and then repackaged and sold at a
government employee. Thus, one is either an premium to investors as Poverty Eradication
MWE or he/she is not. Simply put, MWE is the and Alleviation Certificates or PEACe Bonds.
status acquired upon passing the litmus test - The net proceeds from the sale will be used
whether one receives wages not exceeding to endow a permanent fund to finance
the prescribed minimum wage.(Soriano v. meritorious activities and projects of
Secretary of Finance, G.R. Nos. 184450, accredited non-government organizations
184508, 184538, and 185234, January 24, (NGOs) throughout the country. The BIR
2017) issued BIR Ruling No. 020-2001 which
confirmed that the PEACe Bonds would not
Q. MERALCO obtained a loan from be classified as deposit substitutes and
Norddeutsche Landesbank Girozentrale would not be subject to the corresponding
(NORD/LB) Singapore Branch, which is a withholding tax. This was reiterated in
foreign government-owned financing subsequent rulings. During the auction,
institution of Germany. Under the loan RBCB which participated on behalf of
agreement, the income received by CODE-NGO was declared the winning
NORD/LB, by way of MERALCO’s interest bidder having tendered the lowest bids.
payments, shall be paid in full without RCBC entered into an underwriting
deductions, as MERALCO shall bear the agreement with CODE-NGO whereby RBCB
obligation of paying and remitting to the BIR was appointed as the Issue Manager and
the final withholding tax. MERALCO paid Lead Underwriter for the offering of the
and remitted to the BIR the corresponding PEACe Bonds. In the agreement, CODE-NGO
final withholding taxes. Is the income represented that all income derived from the
derived by NORD/LB subject to income tax? Bonds, inclusive of premium on redemption
and gains on the trading of the same, are
A. No. NORD/LB is owned, controlled or exempt from all forms of taxation as
enjoying refinancing from the Federal confirmed by BIR Rulings. RCBC then sold
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the government bonds in the secondary However, a reading of the underwriting

market. However, in 2011, the BIR issued agreement and RCBC term sheet reveals that
BIR Ruling No. 370-2011 declaring that the the settlement dates for the sale and
PEACe Bonds being deposit substitutes are distribution by RCBC Capital (as underwriter
subject to the 20% final withholding tax. for CODE-NGO) of the PEACe Bonds to
Pursuant to this ruling, the Secretary of various undisclosed investors would fall on
Finance directed the Bureau of Treasury to the same day, October 18, 2001, when the
withhold a 20% final tax from the face value PEACe Bonds were supposedly issued to
of the PEACe Bonds upon their payment at CODE-NGO/RCBC. In reality, therefore, the
maturity on October 18, 2011. Is the discount entire borrowing received by the Bureau of
or interest income arising from the PEAce Treasury in exchange for the PEACe Bonds
bonds subject to the 20% final withholding was sourced directly from the undisclosed
tax? number of investors to whom RCBC
Capital/CODE-NGO distributed the PEACe
A. No. The term ‘deposit substitutes’ shall Bonds — all at the time of origination or
mean an alternative form of obtaining funds issuance. However, the number of investors to
from the public other than deposits, through which the PEACe Bonds were sold to by RCBC
the issuance, endorsement, or acceptance of is not known. Should there have been a
debt instruments for the borrower’s own simultaneous sale to 20 or more
account, for the purpose of relending or lenders/investors, the PEACe Bonds are
purchasing of receivables and other deemed deposit substitutes and RCBC
obligations, or financing their own needs or Capital/CODE-NGO would have been obliged
the needs of their agent or dealer. The term to pay the 20% final withholding tax on the
'public' means borrowing from twenty (20) or interest or discount from the PEACe Bonds.
more individual or corporate lenders at any Further, the obligation to withhold the 20%
one time). Based on this definition, the number final tax on the corresponding interest from
of lenders is determinative of whether a debt the PEACe Bonds would likewise be required
instrument should be considered a deposit of any lender/investor had the latter turned
substitute and consequently subject to the around and sold said PEACe Bonds, whether
20% final withholding tax. in whole or part, simultaneously to 20 or more
lenders or investors.
BIR Ruling No. 370-2011 is void because it
completely disregarded the 20 or more lender It must be noted, however, that interest
rule. The transactions executed for the sale of income received by individuals from long-term
the PEACe Bonds are: (1) the issuance of the deposits or investments with a holding period
Bonds by the Bureau of Treasury to of not less than five (5) years is exempt from
RCBC/CODE-NGO; and (2) the sale and the final tax. Thus, should the PEACe Bonds
distribution by RCBC (underwriter) on be found to be within the coverage of deposit
behalfof CODE-NGO of the PEACe Bonds to substitutes, the proper procedure was for the
undisclosed investors. It may seem that there Bureau of Treasury to pay the face value of
was only one lender — RCBC on behalf of the PEACe Bonds to the bondholders and for
CODE-NGO — to whom the PEACe Bonds the Bureau of Internal Revenue to collect the
were issued at the time of origination. unpaid final withholding tax directly from
RCBC Capital/CODE-NGO, or any lender or
investor if such be the case, as the withholding
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agents. (Banco de Oro v. Republic, G.R. No. and preferred shares. The preferred shares
G.R. No. 198756, January 13, 2015) were solely and exclusively subscribed by an
affiliate non-resident foreign corporation.
Q. The BIR contends that the 20-lender rule The taxpayer’s Board of Directors
should not strictly apply to issuances of authorized a redemption of the preferred
government debt instruments, which by shares. The BIR argues that while the
nature, are borrowings from the public. payment of the original subscription price
Considering that the PEACe Bonds were could not be taxed as it represented return
intended to be freely tradable in the of capital, the additional amount of the
secondary market to 20 or more redemption price represented accumulated
lenders/investors, they, like other similarly dividends in arrears, subject to 15% final
situated government securities-awarded to withholding tax. The taxpayer had no
19 or less Government Securities Eligible unrestricted retained earnings. Is the BIR
Dealers (GSEDs) in the primary market but correct?
freely tradable to 20 or more
lenders/investors in the secondary market No. Dividends means any distribution out of
should be treated as deposit substitutes earnings or profits. In this case, the taxpayer
subject to the 20% final withholding tax. Is did not have unrestricted retained earnings.
the BIR’s contention correct? The primary feature of an ordinary dividends
is that the distribution should be in the nature
No. The definition of deposit substitutes in of a recurring return on stocks. In this case,
Section 22(Y) specifically defined "public" to there is no periodic distribution of dividends,
mean "twenty (20) or more individual or but rather a payment for redemption of
corporate lenders at any one time." Hence, preferred shares. If the distribution is in the
reckoning of whether there are 20 or more nature of a recurring return on stock it is an
individuals or corporate lenders is crucial in ordinary dividend. However, if the corporation
determining the tax treatment of the yield is really winding up its business or
from the debt instrument. In other words, if recapitalizing and narrowing its activities, the
there are 20 or more lenders, the debt distribution may properly be treated as in
instrument is considered a deposit substitute complete or partial liquidation and as
and subject to 20% final withholding tax. payment by the corporation to the stockholder
for his stock. (Commissioner of Internal
The existence of 20 or more lenders should be Revenue v. Goodyear Philippines, G.R. No.
reckoned at the time when the successful 216130, August 3, 2016)
GSED-bidder distributes (either by itself or
through an underwriter) the government Q. Is the prior application for an ITAD ruling
securities to final holders. When the GSED pursuant to RMO No. 1-2000 necessary
sells the government securities to 20 or more before a taxpayer can avail of the
investors, the government securities are preferential tax rates under income tax
deemed to be in the nature of a deposit treaties entered into by the Philippines with
substitute, taxable as such. (Banco de Oro v. other countries?
Republic, G.R. No. 198756, August 16, 2016)
A. No. Treaties have the force and effect of
Q. The authorized capital stock of a law. The obligation to comply with a tax treaty
taxpayer was divided into common shares must take precedence over the objective of
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RMO No. 1-2000. Not only is the requirement Certificate,” such choice precluded the other
illogical, but it is also an imposition that is not option to carry over. Is the taxpayer correct?
found at all in the applicable tax treaties. The
BIR should not impose additional No. The irrevocability rule is limited only to the
requirements that would negate the option of carry-over. There is nothing in the
availment of the reliefs provided for under law which prevents the taxpayer who
international agreements, especially since originally opted for a refund or TCC to shift to
said tax treaties do not provide for any the carry-over of the excess creditable taxes
prerequisite at all for the availment of the to the taxable quarters of the succeeding
benefits under said agreements. The taxable years. However, if the taxpayer
application for a tax treaty relief from the BIR decides to shift its option to carry-over, it may
should merely operate to confirm the no longer revert to its original choice due to
entitlement of the taxpayer to the relief. So the irrevocability rule. Here, the taxpayer is
long as the taxpayer requests for confirmation barred from recovering its excess creditable
before it filed its administrative claim for tax for 2006 through refund or TCC since it
refund, the same should be deemed constructively chose the option of carry-over
substantial compliance with RMO No. 1-2000. when, despite its initial option to refund, it
(Deutsche Bank AG Manila v. Commissioner subsequently indicated in its 2007 ITR that it
of Internal Revenue, G.R. No. 188550, carried over the 2006 excess creditable tax
August 19, 2013;CBK Power Company and applied the same against income tax due
Limited v. CIR, G.R. No. 193383-84 and G.R. for 2007. (University Physicians Services,
No. 193407-08, January 15, 2015) Inc. – Management, Inc. v. Commissioner of
Internal Revenue, G.R. No. 205955, 7 March
2018)
Q. The taxpayer initially opted to be
refunded of its excess creditable tax for Q. When is the payor/employer obliged to
2006 through the issuance of a tax credit deduct and withhold the related withholding
certificate. The taxpayer subsequently taxes on accrued bonuses?
indicated in its 2007 ITR that it carried over
the 2006 excess creditable tax and applied The obligation of the payor/employer to
the same against income tax due for 2007. deduct and withhold the related withholding
The taxpayer filed with the BIR a claim for tax arises at the time the income was paid or
refund and/or issuance of a TCC for the accrued or recorded as expense in the
alleged excess credit for 2006. This was later payor’s/employer’s books, whichever comes
elevated to the Court of Tax Appeals (CTA). first.
Both CTA Division and CTA En Banc ruled In ING Bank v. Commissioner of Internal
that the taxpayer effectively exercised the Revenue, G.R. No. 167679, July 22, 2015, at
carry-over option when it included the issue is whether ING Bank was liable for
excess tax credit for 2006 in the original ITR deficiency withholding tax on accrued
for 2007. The taxpayer, on the other hand, bonuses for the taxable years 1996 and 1997.
contended that the option to be refunded The accrued bonuses were recorded in ING
through the issuance of a TCC is irrevocable. Bank’s books as expenses for taxable years
Thus, when it indicated in its annual ITR for 1996 and 1997, although no withholding of
2006 the option “To be issued a Tax Credit tax was effected. ING Bank asserted that the
liability of the employer to withhold the tax
Page 10 of 49
NOTICE
does not arise until such bonus is actually the related withholding tax arises at the
distributed. Since the supposed bonuses were time the income was paid or accrued or
not distributed to the officers and employees recorded as an expense in the
in 1996 and 1997 but were distributed in the payor’s/employer’s books, whichever
succeeding year when the amounts of the comes first.
bonuses were finally determined, ING Bank
asserts that its duty as employer to withhold Q. The BIR assessed ABC with deficiency
the tax during these taxable years did not final withholding taxes (FWT) on interest
arise. payments on loan agreements with XYZ for
the taxable year 2000. The CTA found that
The Supreme Court ruled that ING bank is ABC was not liable for the said deficiency
liable for the withholding tax on the bonuses FWT since its liability for interest payment
since it claimed the same as expenses in the became due and demandable only on June 1,
year they were accrued. Three provisions of 2002. The BIR contends that ABC was liable
the NIRC of 1997, as amended, were to pay the interest from the date of the
reconciled: execution of the contract on January 5, 2000,
1. Section 72 (now Section 79), which not from the date of first payment on June 1,
provides that an employer is required to 2002. Is the BIR correct?
deduct and pay the income tax on
compensation paid to its employees, No. Under Section 2.57.4 of RR No. 2-98, the
either actually or constructively. obligation of ABC to deduct or withhold tax
2. Section 39 (now Section 35), which arises at the time an income is paid or
provides that deductions from gross payable, whichever comes first. Further, the
income are taken for the taxable year in same Section provides that the term
which “paid or accrued” or “paid or “payable” reers to the date the obligation
incurred” is dependent upon the becomes due, demandable or legally
method of accounting income and enforceable. (Edison (Bataan) Cogeneration
expenses adopted by the taxpayer. If Corporation v. Commissioner of Internal
the taxpayer is on cash basis, the Revenue, G.R. No. 201665, August 30, 2017)
expense is deductible in the year it was
paid, regardless of the year it was
incurred. If he is on the accrual method, DONOR’S TAX
he can deduct the expense upon
accrual thereof. Q. Philamlife owns 498,590 shares in
3. Section 29(j) (now Section 34(K)), which Philam Care Health Systems. To divest itself
provides that, as a condition for of interests in the health maintenance
deductibility of an expense, the tax organization industry, Philamlife sold the
required to be withheld on the amount said shares to STI Investments at a price
paid or payable must be shown to have lower than their book value. The BIR
been remitted to the BIR by the contends that donor’s tax became
withholding agent. imposable on the price difference. Philamlife
argues that the same is not subject to
Reconciling the above provisions, the donor’s tax as there was no donative intent.
Court held that the obligation of the Is the Philamlife correct?
payor/employer to deduct and withhold
Page 11 of 49
NOTICE
No. The absence of donative intent, if that be corporation is doing business outside the
the case, does not exempt the sales of stock Philippines. (Sitel v. Commissioner of Internal
transaction from donor's tax since Sec. 100 of Revenue, G.R. No. 201326, February 8, 2017)
the Tax Code categorically states that the
amount by which the fair market value of the Q. What are the rules on the determination
property exceeded the value of the of the prescriptive period for filing a tax
consideration shall be deemed a gift. Thus, refund or credit of unutilized input VAT?
even if there is no actual donation, the
difference in price is considered a donation by The rules are as follows:
fiction of law. Pursuant to RR 6-2008, “fair
market value” shall be, in the case of shares of 1. An administrative claim must be filed
stock not listed and traded in the local stock with the CIR within two years after the
exchanges, the book value of the shares of close of the taxable quarter when the
stock as shown in the financial statements zero-rated or effectively zero-rated
duly certified by an independent certified sales were made.
public accountant nearest to the date of sale
shall be the fair market value. The difference 2. The CIR has 120 days from the date of
between the book value and the selling price submission of complete documents in
in the sales transaction is taxable donation support of the administrative claim
subject to donor’s tax. (Philippine American within which to decide whether to
Life and General Insurance Company v. The grant a refund or issue a tax credit
Secretary of Finance and Commissioner of certificate. The 120-day period may
Internal Revenue, G.R. No. 210987, extend beyond the two-year period
November 24, 2014) from the filing of the administrative
claim if the claim is filed in the later part
VALUE-ADDED TAX of the two-year period. If the 120-day
period expires without any decision
Q. Invoking Section 108(B)(2) of the Tax from the CIR, then the administrative
Code, a business process outsourcing claim may be considered to be denied
company filed a claim for refund or credit of by inaction.
input VAT attributable to zero-rated sales of
its call services to foreign corporations. Is it 3. A judicial claim must be filed with the
indispensable that the said company prove CTA within 30 days from the receipt of
that the recipient of its call services are the CIR’s decision denying the
foreign corporations doing business outside administrative claim or from the
the Philippines? expiration of the 120-day period
without any action from the CIR.
Yes. An essential condition to qualify for zero-
rating under Section 108(B)(2) of the Tax 4. All taxpayers, however, can rely on BIR
Code is that the service-recipient must be Ruling No. DA-489-03 from the time of
doing business outside the Philippines. A its issuance on 10 December 2003 up
taxpayer claiming for a VAT refund or credit to its reversal by this Court in Aichi on 6
under Section 108(B)(2) has the burden to October 2010, as an exception to the
prove not only that the recipient of the service mandatory and jurisdictional 120+30
is a foreign corporation, but also that said day periods. (Team Energy
Page 12 of 49
NOTICE
Corporation v. Commissioner of G.R. No. 195175 & 199645, August 10,

Internal Revenue, G.R. No. 197663 & 2015; Commissioner of Internal
G.R. No. 197770, March 14, 2018; Revenue v. Toledo Power Company,
Team Sual Corporation v. G.R. No. 196415 & 196451, December
Commissioner of Internal Revenue, 2, 2015; Commissioner of Internal
G.R. Nos. 201225-26, April 18, 2018; Revenue v. Mirant Pagbilao
CE Luzon Geothermal v. Corporation, G.R. No. 180434, January
Commissioner of Internal Revenue, 20, 2016; Silicon Philippines v.
G.R. No. 197526, July 26, 2017; Aichi Commissioner of Internal Revenue,
Forging Company v. Commissioner of G.R. No. 182737, March 2, 2016;
Internal Revenue, G.R. No. 193525, Miramar Fish Company Inc. v. CIR,
August 30, 2017; Procter & Gamble G.R. No. 185432, June 4, 2014; Visayas
Asia v. Commissioner of Internal Geothermal Power Company v. CIR,
Revenue, G.R. No. 205652, September G.R. No. 197525, June 4, 2014; CIR v.
6, 2017; Mindanao I Geothermal Mindanao II Geothermal Partnership,
Partnership v. Commissioner of G.R. No. 189440, June 18, 2014;
Internal Revenue, G.R. No. 197519, Taganito Mining Corporation v. CIR,
November 8, 2017; Commissioner of G.R. No. 197591, June 18, 2014; San
Internal Revenue, G.R. No. 209306, Roque Power Corporation v. CIR, G.R.
September 27, 2017; Harte-Hanks No. 205543, June 30, 2014; CIR v. CE
Philippines v. Commissioner of Luzon Geothermal Power Company,
Internal Revenue, G.R. No. 205721, G.R. No. 190198, September 17, 2014;
September 14, 2016; Tekenaka CNK Power Company Limited v. CIR,
Corporation v. Commissioner of G.R. No. 202066 and G.R. No. 205353,
Internal Revenue, G.R. No. 193321, September 30, 2014; CIR v. Aichi, G.R.
October 19, 2016; Commissioner of No. 183421, October 22, 2015; CIR v.
Internal Revenue v. Deutsche Burmeistor, G.R. No. 190021, October
Knowledge Services, G.R. No. 211072, 22, 2014; Taganito Mining
November 7, 2016; Deutsche Corporation v. CIR, G.R. No. 198076,
Knowledge Services Pte v. November 19, 2014; AT&T
Commissioner of Internal Revenue, Communications Services Phils., Inc. v.
G.R. No. 197980, December 1, 2016; CIR, G.R. No. 185969, November 19,
Sitel v. Commissioner of Internal 2014; Taganito Mining Corporation v.
Revenue, G.R. No. 201326, February 8, CIR, G.R. No. 201195, November 26,
2017; Visayas Geothermal v. 2014; CBK Power Company Limited v.
Commissioner of Internal Revenue, CIR, G.R. No. 198928, December 3,
G.R. No. 205279, April 26 2017; 2014; Mindanao II Geothermal
Marubeni Philippines v. Commissioner Partnership v. CIR, G.R. No. 204745,
of Internal Revenue, G.R. 198485, June December 8, 2014; Panay Power
5, 2017; Cargill Philippines, Inc. v. CIR, Corporation v. CIR, G.R. No. 203351,
G.R. No. 203774, March 11, 2015; January 21, 2015; Nippon Express
Commissioner of Internal Revenue v. (Philippines) Corporation v. CIR, G.R.
Air Liquide, G.R. No. 210646, July 29, No. 185666, February 4, 2015;
2015; Commissioner of Internal Northern Mindanao Power
Revenue v. Toledo Power Company, Corporation v. CIR, G.R. No. 185115,
Page 13 of 49
NOTICE
February 18, 2015; Cargill Philippines, The Commissioner's inaction on the

Inc. v. CIR, G.R. No. 203774, March 11, taxpayer’s claim during the 120-day period is
2015) "deemed a denial," pursuant to Section 7(a)(2)
of Republic Act No. 1125, as amended by
Q. What is the exception to the rule that the Section 7 of Republic Act No. 9282. The
two-year prescriptive period within which taxpayer has 30 days from the expiration of
the administrative claim must be filed should the 120-day period to file
be counted from the close of the taxable its judicial claim with the Court of Tax
quarter when the relevant sales were made? Appeals. Its failure to do so shall render
the Commissioner's "deemed a denial"
Reckoning the two-year period from the date decision as final and unappealable. (Team
of payment of the output tax is allowed if the Energy Corporation v. Commissioner of
claim is filed between 8 June 2007 and 12 Internal Revenue, G.R. No. 197663 & G.R. No.
September 2008, when the Atlas Doctrine 197770, March 14, 2018)
was still in effect. (Visayas Geothermal
Power Company v. CIR, G.R. No. 197525, NOTE: Previously, in Rohm Apollo
June 4, 2014; AT&T Communications Semiconductor Philippines v Commissioner
Services Phils., Inc. v. CIR, G.R. No. 185969, of Internal Revenue, G.R. No. 168950,
November 19, 2014) January 14, 2015, the Supreme Court has
unequivocally stated that the CIR’s inaction
NOTE: Previously, in Atlas Consolidated within the 120-day period is a decision in
Mining v Commissioner of Internal Revenue, itself. When the 120-day period lapses and
G.R. Nos. 141104 & 148763, June 8, 2007, the there is inaction on the part of the CIR, the
Supreme Court held that the two-year taxpayer must no longer wait for the CIR to
prescriptive period should be reckoned from decide. The inaction is already a decision
the date of the return and payment of the tax denying the refund claim. Consequently, the
due, which should be made within twenty (20) taxpayer must file his appeal within 30 days
days from the end of each quarter. The Atlas from the lapse of the 120-day period.
doctrine was abandoned in Commissioner of
Internal Revenue v Mirant Pagbilao Q. What is the distinction between an
Corporation, G.R. No. 172129, September 12, ‘excess input VAT” and an “excessively
2008, where the Supreme Court held that the collected” tax?
two-year period should be reckoned from the
close of the taxable quarter where the The input VAT is not “excessively” collected as
relevant sales were made. The Mirant ruling understood under Section 229 because at the
adopted the verbal legis rule, thus applying time the input VAT is collected the amount
Section 112(A) in computing the two-year paid is correct and proper. The input VAT is a
prescriptive period in claiming refund or credit tax liability of, and legally paid by, a VAT-
of input VAT. registered seller of goods, properties or
services used as input by another VAT-
Q. In a refund of unutilized input taxes, is the registered person in the sale of his own goods,
inaction of the Commissioner “deemed a properties, or services. This tax liability is true
denial” or a decision denying the claim? even if the seller passes on the input VAT to
the buyer as part of the purchase price. The
second VAT- registered person, who is not
Page 14 of 49
NOTICE
legally liable for the input VAT, is the one who payment because they all refer to payment of
applies the input VAT as credit for his own taxes not legally due. Under the VAT System,
output VAT. there is no claim or issue that the “excess”
input VAT is “excessively or in any manner
In a claim for refund or credit of “excess” input wrongfully collected.” (Coca-Cola Philippines
VAT under Section 110(B) and Section 112(A), v. Commissioner of Internal Revenue, G.R.
the input VAT is not “excessively” collected as No. 222428, February 19, 2018; CE Luzon
understood under Section 229. At the time of Geothermal v. Commissioner of Internal
payment of the input VAT the amount paid is Revenue, G.R. No. 197526, July 26, 2017)
the correct and proper amount. Under the VAT
System, there is no claim or issue that the Q. When does the 120-day period begin to
input VAT is “excessively” collected, that is, run?
that the input VAT paid is more than what is
legally due. The person legally liable for the A distinction must be made between claims
input VAT cannot claim that he overpaid the filed before June 14, 2014 and claims filed on
input VAT by the mere existence of an June 14, 2014 to present.
“excess” input VAT. The term “excess” input
VAT simply means that the input VAT Claims filed prior to Claims filed on
available as credit exceeds the output VAT, June 14, 2014 (RMC 49- June 14, 2014 to
not that the input VAT is excessively collected 2003 – prevailing rule) present (RMC
because it is more than what is legally due. 54-2014 –
Thus, the taxpayer who legally paid the input prevailing rule)
VAT cannot claim for refund or credit of the
input VAT as “excessively” collected under 1. The CIR has 120 days 1. As it now
Section 229. from the date of stands, RMC
submission of complete 54-2014
Any suggestion that the “excess” input VAT documents to decide a dated June
under the VAT System is an “excessively” claim for tax credit or 11, 2014
collected tax under Section 229 may lead refund. Pursuant to mandates
taxpayers to file a claim for refund or credit for RMC No. 49-2003, that the
such “excess” input VAT under Section 229 as from the date an application
an ordinary tax refund or credit outside of the administrative claim for for VAT
VAT System. excess unutilized VAT refund/tax
is filed, a taxpayer has credit must
From the plain text of Section 229, it is clear 30 days within which to be
that what can be refunded or credited is a tax submit the accompanied
that is “erroneously, x x x illegally, x x x documentary by complete
excessively or in any manner wrongfully requirements sufficient supporting
collected.” In short, there must be a wrongful to support his claim. documents.
payment because what is paid, or part of it, is
2. If in the course of the 2. Under the
not legally due. As the Court held in Mirant, investigation and current rule,
Section 229 should “apply only to instances of
processing of the claim, the reckoning
erroneous payment or illegal collection of additional documents of the 120-
internal revenue taxes.” Erroneous or
are required for the day period
wrongful payment includes excessive
Page 15 of 49
NOTICE
proper determination has been Section 112(A) of the December 8,

of the legitimacy of the withdrawn NIRC. 2015)
claim, the taxpayer- from the
claimants shall submit taxpayer by
such documents within RMC 54- Thus, for claims filed prior to June 14, 2014,
thirty (30) days from 2014, since it the 120-day period begins to run from the
request of the requires him date of submission of complete documents
investigating/processin at the time he supporting the administrative claim. If there is
g office. Notice, by way files his claim no evidence showing that the taxpayer was
of a request from the to complete required to submit – or actually submitted –
tax collection authority his additional documents after the filing of the
to produce the supporting administrative claim, it is presumed that the
complete documents in documents complete documents accompanied the claim
these cases, is and attest when it was filed. (Silicon Philippines v.
essential. that he will no Commissioner of Internal Revenue, G.R. No.
longer submit 182737, March 2, 2016)
3. Then, upon filing by the any other
taxpayer of his Failure of the taxpayer to submit all relevant
document to documents is not fatal to its claim for refund
complete documents to prove his
support his application, or tax credit of unutilized input VAT. If the
claim. taxpayer indeed failed to submit the complete
or expiration of the Further, the
period given, the BIR documents in support of its application, the
taxpayer is CIR could have informed the taxpayer of its
has 120 days within barred from
which to decide the failure. (Commissioner of Internal Revenue v.
submitting Toledo Power Company, G.R. No. 196415 &
claim for tax credit or additional
refund. 196451, December 2, 2015; Pilipinas Total
documents Gas v. Commissioner of Internal Revenue,
4. Should the taxpayer, after he has G.R. No. 207112, December 8, 2015)
on the date of filing, filed his
manifest that he no administrativ Q. A taxpayer filed a claim for refund or tax
longer wishes to e claim. Thus, credit of unutilized input VAT. The CIR
submit any other the 120-day argued that the 120-day period for her to
additional documents has to be decide has not yet commenced as the
to complete his counted from taxpayer failed to submit the complete
administrative claim, the filing of documents as enumerated in RMO 53-98. Is
the 120-day period the the CIR’s contention correct?
allowed to the BIR administrativ
begins to run from the e claim. No. The CIR’s reliance on RMO 53-98 is
date of filing. (Pilipinas misplaced. There is nothing in Section 112 of
Total Gas v. the NIRC, RR 3-88 or RMO 53-98 itself that
5. In all cases, whatever Commissione requires submission of the complete
documents a taxpayer r of Internal documents enumerated in RMO 53-98 for a
intends to file to Revenue, grant of a refund or credit of input VAT. The
support his claim must G.R. No. subject of RMO 53-98 states that it is a
be completed within 207112, “Checklist of Documents to be Submitted by a
the 2-year period under
Page 16 of 49
NOTICE
Taxpayer upon Audit of his Tax Liabilities x x period should be counted from said date. Is
x.” Even assuming that RMO 53-98 applies, it ABC correct?
specifically states that some documents are
required to be submitted by the taxpayer “if No. To allow the taxpayer’s position to prevail
applicable.” If the taxpayer indeed failed to would set a dangerous precedent, as the
submit the complete documents in support of reckoning period for the 120 days would be at
its application, the CIR could have informed the mercy of taxpayers. They will then submit
the taxpayer of its failure. In this case, the CIR complete supporting documents even after
did not inform the taxpayer of the document it the two-year prescriptive period for filing an
failed to submit, even up to the present administrative claim has lapsed. This is
petition. (CIR v. Team Sual Corporation, G.R. obviously not the intention of the law. The
No. 205055, July 18, 2014) burden of proving entitlement to a tax refund
is on the taxpayer. It is logical to assume that
Q. Who determines when the completeness in order to discharge this burden, the law
of documents submitted in a claim for refund intends the filing of an application for a refund
or tax credit of unutilized input taxes? to necessarily include the filing of complete
supporting documents to prove entitlement
It is the taxpayer who ultimately determines for the refund. Otherwise, the mere filing of an
when complete documents have been application without any supporting document
submitted for the purpose of commencing and would be as good as filing a mere scrap of
continuing the running of the 120-day period. paper.
To allow the CIR to determine the
completeness of the documents submitted Peculiar to this case is that prior to the alleged
and, thus, dictate the running of the 120-day completion of its supporting documents, the
period, would undermine these objectives, as taxpayer had already filed its judicial claim
it would provide the CIR the unbridled power with the CTA. Assuming arguendo that the
to indefinitely delay the administrative claim, 120-day period should commence to run only
which would ultimately prevent the filing of a upon receipt of the complete documents or
judicial claim with the CTA. Whether these from 20 September 2010, the judicial claim
documents are actually complete as required will still fail. By that time, the period for filing
by law – is for the CIR and the courts to an administrative application for a refund
determine. (Pilipinas Total Gas v. would have already on 30 June 2010 or two
Commissioner of Internal Revenue, G.R. No. (2) years from the close of the taxable quarter
207112, December 8, 2015) when the relevant sales were made. (Hedcor,
Inc. v. Commissioner of Internal Revenue,
Q. ABC filed its administrative claim for the G.R. No. 207575, July 15, 2015)
refund of excess and unused input VAT for
the 2nd quarter of taxable year 2008 on 28 Q. If the taxpayer fails to submit a document
December 2009. Counting 120+30 days, the at the administrative level, can the taxpayer
taxpayer should have elevated the same to cure such failure by filing the said document
the CTA on 27 May 2010. The judicial claim in its judicial claim before the CTA?
was belatedly filed on 6 July 2010. ABC now A distinction must, thus, be made between an
argues that it filed its complete documents administrative claimed appealed due to
on 20 September 2010 and thus the 120-day inaction and those dismissed at the
Page 17 of 49
NOTICE
administrative level due to the failure of the A taxpayer cannot

taxpayer to submit supporting documents. cure its failure to
submit a document
Administrative If the judicial claim requested by the
claim dismissed by is an appeal due to BIR at the
the BIR due to the inaction of the BIR administrative
taxpayer’s failure level by filing the
to submit said document
complete before the CTA.
documents
despite
notice/request Q. What is the distinction between a ‘receipt’
and an ‘invoice’ as evidence in a claim for
refund or tax credit of unutilized input VAT?
The judicial claim The CTA may give
before the CTA credence to all To claim a refund of unutilized or excess
would be evidence input VAT, purchase of goods or properties
dismissible, not for presented by the must be supported by VAT invoices, while
lack of jurisdiction, taxpayer, including purchase of services must be supported by
but for the those that may not VAT official receipts. (Team Energy
taxpayer’s failure have been Corporation v. Commissioner of Internal
to substantiate the submitted to the Revenue, G.R. No. 197663 & G.R. No. 197770,
claim at the CIR as the case is March 14, 2018; Tekenaka Corporation v.
administrative being essentially Commissioner of Internal Revenue, G.R. No.
level. decided in the first 193321, October 19, 2016; Nippon Express
instance. The (Philippines) Corporation v. CIR, G.R. No.
In case of claims taxpayer must 185666, February 4, 2015; Northern
dismissed at the prove every minute Mindanao Power Corporation v. CIR, G.R.
administrative aspect of its case No. 185115, February 18, 2015)
level due to the by presenting and
failure of the formally offering its Q. What is the effect of the absence and
taxpayer to submit evidence to the non-printing of the word “zero-rated” in the
supporting CTA, which must taxpayer’s invoices to the claim for refund or
documents, it is, necessarily include tax credit of unutilized input VAT?
thus, crucial for a whatever is
taxpayer in a required for the An applicant for a claim for tax refund or tax
judicial claim for administrative credit must not only prove entitlement to the
refund or tax credit claim. (Pilipinas claim but also compliance with all the
to show that its Total Gas v. documentary and evidentiary requirements. A
administrative Commissioner of claim for the refund of creditable input taxes
claim should have Internal Revenue, must be evidenced by a VAT invoice or official
been granted in the G.R. No. 207112, receipt in accordance with the invoicing
first place. December 8, 2015) requirements. The failure to indicate the
words “zero-rated” on the invoices and
receipts issued by a taxpayer would result in
Page 18 of 49
NOTICE
the denial of the claim for refund or tax credit. If the taxpayer paid the input VAT, the proper
(Eastern Telecommunications Philippines v. recourse is not a claim for tax refund or credit
Commissioner of Internal Revenue, G.R. No. against the government, but reimbursement
183531, March 25, 2015; Miramar Fish against the seller who shifted the output VAT.
Company Inc. v. CIR, G.R. No. 185432, June (Coral Bay Nickel Corporation v.
4, 2014; Eastern Telecommunications Commissioner of Internal Revenue, G.R. No.
Philippines v. CIR, G.R. No. 183531, March 190506, June 13, 2016)
25, 2015)
Q. ABC Mining Corporation purchased and
Q. What is the effect of the absence of imported dump trucks. ABC filed a claim for
the statement that the seller is a VAT- refund of the full input VAT relating to its
registered person to the claim for refund or importation of said dump trucks, treated as
tax credit of unutilized input VAT? capital goods. Will ABC’s claim prosper?
Section 113 of the NIRC of 1997, as amended, No. The claim will not prosper because the law
categorically provides that a VAT-registered requires that the related input VAT be
entity, like petitioner, shall issue a duly properly amortized over the estimated useful
registered VAT invoice or official receipt, life of the capital goods in the taxpayer’s
which must contain “a statement that the subsidiary ledger. Here, the claim for refund is
seller is a VAT-registered person.” Non- for the full amount of the input VAT on the
compliance is fatal to the claim. (Miramar Fish importation, rather than for an amortized
Company Inc. v. CIR, G.R. No. 185432, June amount, thus the claim must fail. (Taganito
4, 2014) Mining Corporation v. CIR, G.R. No. 201195,
November 26, 2014)
Q. Can an entity located within an ECOZONE
be entitled to refund of its unutilized input NOTE: Capital goods or properties refers to
taxes? goods or properties with estimated useful life
greater than 1 year and which are treated as
No. ECOZONES are by legal fiction foreign depreciable assets under Sec. 34(F) of the tax
territory. Thus, sales made by suppliers from Code, used directly or indirectly in the
a customs territory to a purchaser located production or sale of taxable goods or
within an ECOZONE shall be considered services.
exportations. Following the Cross Border
Doctrine and Destination Principle, no VAT Q. ABC Corporation purchased from the
shall be imposed to form part of the cost of government in 1995 portion of the Fort
goods destined for consumption outside the Bonifacio reservation, now known as the
territorial border of the taxing authority. Fort Bonifacio Global City. No VAT on the
sale of the land was passed on by the
As such, purchases of goods and services that government to ABC. On January 1, 1996,
are destined for consumption within the Republic Act 7716 took effect, which
ECOZONE should be free of VAT. No input extended the coverage of the VAT to sale of
should be paid on such purchases and thus real properties held primarily for sale to
the entity located within the ECOZONE is not customers or held for lease in the ordinary
entitled to claim a tax refund or credit. course of business. In September 1996, ABC
submitted to the BIR an inventory of all its
Page 19 of 49
NOTICE
real properties, claiming that it is entitled to Q. A Letter of Authority (LOA) was issued
the transitional input tax credit on said authorizing the BIR officers to examine the
inventories. ABC started selling Global City books of account of the taxpayer for the
lots in October 2006. For the 1st quarter of taxable year 1998 only or, since the taxpayer
1997, ABC paid output taxes on the sale of adopted a fiscal year, for the period April 1,
lots after deducting input taxes. Realizing 1997 to March 31, 1998. The deficiency tax
that the transitional input taxes were not assessment which the BIR eventually issued
applied against the output VAT, which against the taxpayer was based on
would have resulted to no net output VAT disallowance of expenses reported in fiscal
liability (the transitional input taxes being year 1999, or for the period April 1, 1998 to
higher), FBDC filed a claim for refund for the March 31, 1999. Is the assessment valid?
VAT payment. The BIR argues that (1)
transitional input tax is limited to No. The LOA gives notice to the taxpayer that
improvements to real properties; and (2) it is under investigation for possible deficiency
there should have been prior payment of tax assessment; at the same time it authorizes
taxes. Is the BIR correct? or empowers a designated revenue officer to
examine, verify, and scrutinize a taxpayer's
No. There is nothing in the law that prohibits books and records, in relation to internal
the inclusion of real properties, together revenue
with the improvements thereon, in the
beginning inventory of goods, materials and tax liabilities for a particular period. In this
supplies, based on which inventory the case, the LOA shows that the period of
transitional input tax credit is computed. examination is the taxable year 1998. A valid
Further, there is nothing in the law that LOA does not necessarily clothe validity to an
indicates that prior payment of taxes is assessment issued on it, as when the revenue
necessary for the availment of the transitional officers designated in the LOA act in excess or
input tax credit. All that is required is for the outside of the authority granted them under
taxpayer to file a beginning inventory with the said LOA. The taxable year covered by the
BIR. (Fort Bonifacio Development assessment being outside of the period
Corporation v CIR, G.R. Nos. 175707, specified in the LOA, the assessment issued
180035, and 181092, November 19, 2014) against the taxpayer is void. (Commissioner
of Internal Revenue v. Lancaster, G.R. No.
NOTE: The same issues have been passed 183408, July 12, 2017)
upon in Fort Bonifacio Development
Corporation v CIR, G.R. No. 173425, January Q. The BIR issued a Letter of Authority
22, 2013; Fort Bonifacio Development authorizing its revenue officers to examine
Corporation v CIR, G.R. No. 173425, the taxpayer’s books of accounts and other
September 4, 2012; Fort Bonifacio accounting records for all internal revenue
Development Corporation v CIR, G.R. Nos. taxes for the period “Fiscal Year Ending
158885 and 170680, October 2, 2009; Fort 2003 and Unverified Prior Years.” Is the
Bonifacio Development Corporation v CIR, assessment made pursuant to this Letter of
G.R. Nos. 158885 and 170680, April 2, 2009. Authority valid?
TAX REMEDIES UNDER THE NIRC Partly. A LOA which contains a specified year
and unverified prior years is not entirely void.
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The assessment for the year clearly specified of the accrual of the penalties and
remains to be valid while the assessments surcharges be considered as the due date for
which pertain to the unverified prior years are payment?
void for having been unspecified on separate
LOAs. (Commissioner of Internal Revenue v. (1) A Final Assessment Notice that does not
De La Salle University, G.R. No. 196596, contain a definite due date for payment by the
198841, and 198941, November 9, 2016) taxpayer is void.
Q. Is an assessment based merely on a (2) The reckoning date of the accrual of

Letter Notice (LN) valid? penalties and surcharges cannot be
considered as the due date for payment of tax
No. An assessment based only on a LN is void. liabilities In the absence of an actual due date,
A Letter of Authority (LOA) cannot be a FAN does not contain a definite and actual
dispensed with just because none of the demand to pay. (Commissioner of Internal
financial books or records being physically Revenue v. Fitness by Design, Inc., G.R. No.
kept was examined. The SC opined that the 215957, November 9, 2016)
statutory requirement of a LOA is not
dependent on whether the taxpayer may be Q. The BIR issued a Final Assessment Notice
required to physically open his books or against a taxpayer for deficiency expanded
financial records but only on whether a withholding tax for the taxable year 1994. It
taxpayer is being subject to examination. A merely contained a tabulation of the alleged
LN is issued only for the purpose of notifying deficiency taxes due. Only the resulting
the taxpayer that a discrepancy is found interest, surcharge and penalty were
based on the BIR’s RELIEF System and provided with legal basis. Is the assessment
nothing more. valid?
Revenue Memorandum Order (RMO) No. 32- No. Section 228 of the Tax Code provides that
2005 states that in case the discrepancies the taxpayer shall be informed in writing of
shown in the LN remained unresolved within the law and the facts on which the
120 days from issuance of the LN, the revenue assessment is made. Otherwise, the
officer shall recommend the issuance of a LOA assessment is void. (CIR v. United Salvage
to replace the LN. Due process requires that and Towage (Phils.), Inc., G.R. No. 197515,
the revenue officer should secure first a LOA July 2, 2014)
before proceeding with the further
examination and assessment of a taxpayer. Q. The BIR issued a Letter of Authority to
The Court cannot convert or treat the LN into examine the books of account and other
the LOA required under the law. If no LOA is accounting records of the taxpayer for
secured, the assessment on the basis of a LN income and withholding taxes for the period
is void. (Medicard Philippines v. 1997 to 1999. BIR then sent a Notice of
Commissioner of Internal Revenue, G.R. No. Informal Conference. Attached thereto is a
222743, April 5, 2017) Summary Report containing an explanation
of the legal and factual bases for the
Q. (1) What is the consequence if a FAN does deficiency assessment. The taxpayer
not contain a definite due date for payment requested for copies of working papers
by the taxpayer? (2) Can the reckoning date indicating how the deficiency withholding
Page 21 of 49
NOTICE
taxes were computed. The BIR promptly the BIR as well as an update of information
responded in a letter-reply. Thereafter, the contained in its BIR Certificate of
taxpayer received a PAN which contained Registration. ABC was assessed for
the computations of its deficiency income deficiency income taxes. The Final
and withholding taxes. Attached to the PAN Assessment Notice was sent via registered
was the detailed explanation of the mail to ABC’s former address in Las Pinas
particular provision of law and revenue City. Is the assessment valid?
regulation violated. The taxpayer replied to
the PAN. The BIR replied in a letter No. The taxpayer’s right to due process is
explaining the factual and legal bases of the violated when there is no valid notice of
deficiency assessment and denying the assessment sent to it. Here, the CIR was
reply. A FAN and demand letter were then aware of the new address and yet sent the
issued, unaccompanied by any written assessment to the taxpayer’s former address.
explanation of the legal and factual bases of As a consequence thereof, the running of the
the deficiency taxes assessed against the three-year period was not suspended and
taxpayer. Is the assessment valid? had already prescribed.1
A. Although the FAN and demand letter Q. On January 9, 1996, the BIR issued a
issued to the taxpayer were not accompanied Final Assessment Notice against the
by a written explanation of the legal and taxpayer for deficiency expanded
factual bases of the deficiency taxes assessed withholding tax for the taxable year 1992,
against the petitioner, the records showed 1994, and 1998. The BIR issued a
that the BIR in its letter responded to the Preliminary Collection Letter for the
taxpayer’s reply to the PAN, explaining at deficiency EWT for the taxable year 1992 on
length the factual and legal bases of the February 21, 2002. The BIR argues that its
deficiency tax assessments. Considering the right to collect the EWT for taxable year
foregoing exchange of correspondence and 1992 has not yet prescribed. Is the BIR
documents between the parties, the correct?
requirement of Section 228 was substantially
complied with. The BIR had fully informed the No. The statute of limitations on assessment
taxpayer in writing of the factual and legal and collection of national internal revenue
bases of the deficiency taxes assessment, taxes was shortened from five (5) years to
which enabled the latter to file an "effective" three (3) years by virtue of Batas Pambansa
protest. Petitioner's right to due process was Blg. 700. Thus, the BIR has three (3) years
thus not violated. (Samar-I Electric from the date of actual filing of the tax return
Cooperative v. CIR, G.R. No. 193100, to assess a national internal revenue tax or to
December 10, 2014) commence court proceedings for the
collection thereof without an assessment.
Q. ABC Corporation was dissolved by However, when it validly issues an
shortening its corporate term. As a result assessment within the three (3)-year period, it
thereof, ABC moved out of its address in Las has another three (3) years within which to
Pinas City and transferred to Calamba collect the tax due by distraint, levy, or court
Laguna. ABC sent a notice of dissolution to proceeding. The assessment of the tax is
1Commissioner of Internal Revenue v BASF Coating + Inks Phils.,

Inc., G.R. No. 198677, November 26, 2014
Page 22 of 49
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deemed made and the three (3)-year period correct?

for collection of the assessed tax begins to run
on the date the assessment notice had been No. If the pleadings or the evidence on record
released, mailed or sent to the taxpayer. In this show that the claim is barred by prescription,
case, the Preliminary Collection Letter was the court is mandated to dismiss the claim
issued only on February 21, 2002, despite the even if prescription is not raised as a defense.
fact that the FAN was issued as early as Under the then applicable Section 319(c)
January 9, 1996. Clearly, five (5) long years [now, 222(c)] of the National Internal Revenue
had already lapsed, beyond the three (3)-year Code (NIRC) of 1977, as amended, any
prescriptive period, before collection was internal revenue tax which has been assessed
pursued by the BIR. (CIR v. United Salvage within the period of limitation may be
and f (Phils.), Inc., G.R. No. 197515, July 2, collected by distraint or levy, and/or court
2014) proceeding within three years following the
assessment of the tax. The assessment of the
NOTE: It must be noted that in this case, no tax is deemed made and the three-year period
evidence was formally offered to prove when for collection of the assessed tax begins to run
the taxpayer filed its returns and paid the on the date the assessment notice had been
corresponding EWT for taxable year 1992. released, mailed or sent by the BIR to the
Further, it must be emphasized that there are taxpayer. In this case, although there was no
conflicting views on the proper prescriptive allegation as to when the assessment notice
period for the collection of national internal had been released, mailed or sent to BPI, still,
revenue taxes in case a regular return is filed. the latest date that the BIR could have
Some hold the view that the prescriptive released, mailed or sent the assessment
period is five (5) years while others opine that notice was on the date BPI received the same
it is three (3) years. on 16 June 1989. Counting the three- year
prescriptive period from 16 June 1989, the BIR
Q. On June 16, 1989, the taxpayer received a had until 15 June 1992 to collect the assessed
final assessment notice issued by the BIR, DST. (BPI v. CIR, G.R. No. 181836, July 9,
finding the taxpayer liable for deficiency 2014)
documentary stamp tax for the taxable year
1985. The taxpayer filed a protest on June Q. On April 19, 1989, the BIR issued a FAN
23, 1989 requesting for reinvestigation finding the taxpayer liable for deficiency
and/or reconsideration. The BIR denied the DST for the taxable years 1982 to 1986. On
request for reconsideration on August 4, May 8, 1989, the taxpayer filed its protest.
1998. On January 4, 1998, the taxpayer filed On December 6, 2001, the BIR rendered a
its petition for review before the CTA. The decision denying the protest. The taxpayer
taxpayer argued that the assessment may elevated the same to the CTA arguing that
be invalidated because the statute of the right of the BIR to collect the assessed
limitations on collection had already expired. DST is already barred by prescription. The
The CIR contended that the issue of taxpayer contends that the government had
prescription cannot be raised for the first three years from 19 April 1989, the date the
time on appeal. Further, the CIR alleged that former received the assessment of the CIR,
even assuming that the issue of prescription to collect the tax. Within that time frame,
can be raised, the protest letter interrupted however, neither a warrant of distraint or
the prescriptive period to collect. Is the CIR
Page 23 of 49
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levy was issued, nor a collection case filed in Q. The taxpayer filed its income tax return in
court. Is the taxpayer correct? 1995. In 2014, the BIR issued a final
assessment notice. The taxpayer argued
Yes. The Bureau of Internal Revenue (BIR) prescription as its defense. The BIR, on the
issued the assessment for deficiency DST on other hand, contends that the assessment is
19 April 1989, when the applicable rule was based on fraud and thus the period of
Section 319(c) of the National Internal assessment is 10 years, not 3 years. Is the
Revenue Code of 1977, as amended. In that BIR correct?
provision, the time limit for the government to
collect the assessed tax is set at three years, No Fraud is a question of fact that should be
to be reckoned from the date when the BIR alleged and duly proven. To avail of the 10-
mails/releases/sends the assessment notice year period to assess, the BIR should show
to the taxpayer. Further, Section 319(c) states that the facts upon which the fraud is based
that the assessed tax must be collected by is communicated to the taxpayer. The BIR
distraint or levy and/or court proceeding must include the basis for its allegations of
within the three-year period. In this case, the fraud in the assessment notice.
records do not show when the assessment (Commissioner of Internal Revenue v. Fitness
notice was mailed, released or sent to the by Design, Inc., G.R. No. 215957, November
taxpayer. Nevertheless, the latest possible 9, 2016)
date that the BIR could have released, mailed
or sent the assessment notice was on the Q. The BIR’s audit investigation revealed
same date that the taxpayer received it, 19 that there were undeclared VATable sales
April 1989. Assuming therefore that 19 April more than 30% of that declared in a
1989 is the reckoning date, the BIR had three taxpayer’s VAT returns. The BIR concluded
years to collect the assessed DST. However, that there was prima facie evidence of a
the records show that there was neither a false return warranting the application of
warrant of distraint or levy served on the the ten (10) year prescriptive period to
taxpayer’s properties nor a collection case assess. The taxpayer argues that the BIR’s
filed in court by the BIR within the three-year right to assess had already prescribed
period. (China Banking Corporation v. CIR, considering that the 3-year period had
G.R. No. 172509, February 4, 2015) lapsed and that the CIR should substantiate
with clear and convincing evidence its claim
Q. Will the mere filing of a protest suspend that it filed a false return for the 10-year
the running of the statute of limitations? period to apply. Is the taxpayer correct?
A. No. The protest must be in the form of a No. A mere showing that the returns filed by
request for reinvestigation. Further, a request the taxpayer were false, notwithstanding the
for reinvestigation alone will not suspend the absence of intent to defraud, is sufficient to
statute of limitations. Two things must concur: warrant the application of the ten (10) year
there must be a request for reinvestigation prescriptive period under Section 222 of the
and the CIR must have granted it. (China NIRC.
Banking Corporation v. Commissioner of
Internal Revenue, G.R. No. 172509, February Under Section 248(B) of the NIRC, there is a
4, 2015) prima facie evidence of a false return if there
is a substantial underdeclaration of taxable
Page 24 of 49
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sales, receipt or income. The failure to report 220835, July 26, 2017; Philippine Daily
sales, receipts or income in an amount Inquirer v. Commissioner of Internal
exceeding 30% what is declared in the returns Revenue, G.R. No. 213943, March 22, 2017)
constitute substantial underdeclaration.
Q. If the taxpayer actively participated in the
A prima facie evidence is one which that will administrative investigation by filing a
establish a fact or sustain a judgment unless request for reinvestigation, which resulted in
contradictory evidence is produced. In other a reduced assessment, does that fact
words, when there is a showing that a amount to estoppel that prescription can no
taxpayer has substantially underdeclared its longer be invoked?
sales, receipt or income, there is a
presumption that it has filed a false return. As No. The doctrine of estoppel cannot be
such, the CIR need not immediately present applied as an exception to the statute of
evidence to support the falsity of the return, limitations on the assessment of taxes
unless the taxpayer fails to overcome the considering that there is a detailed
presumption against it. (Commissioner of procedure for the proper execution of the
Internal Revenue v. Asalus Corporation, G.R. waiver, which the BIR must strictly follow. The
No. 221590, February 22, 2017) BIR cannot hide behind the doctrine of
estoppel to cover its failure to comply with
HOWEVER: To warrant the application of the RMO 20-90 and RDAO 05-01, which the BIR
10-year prescriptive period, the filing of a false itself had issued. Having caused the defects in
return must be intentional and not due to the waivers, the BIR must bear the
honest mistake. Entry of wrong information consequence. It cannot simply shift the blame
due to mistake, carelessness, or ignorance, to the taxpayer. (Commissioner of Internal
without intent to evade tax, does not Revenue v. Systems Technology Institute,
constitute a false return. (Philippine Daily G.R. No. 220835, July 26, 2017)
Inquirer v. Commissioner of Internal
Revenue, G.R. No. 213943, March 22, 2017) Q. Can a waiver of the statute of limitations
which does not comply with the
Q. What is the effect of failure of the waiver requirements specified under RMO No. 20-
to strictly conform to the requirements of a 90 and RDAO No. 01-05 become valid?
waiver of the statute of limitations under
RMO 20-90? Yes. Generally, a waiver of the statute of
limitations that does not comply with the
The requirements are mandatory and must requisites for its validity specified under RMO
strictly be followed. Defective and invalid No. 20-90 and RDAO 01-05 is invalid, but
waivers of Statute of Limitations do not may still be valid due to peculiar
extend the CIR's period to issue assessments. circumstances. In Commissioner of Internal
Thus, the right of the government to assess or Revenue v. Next Mobile, G.R. No. 212825,
collect the alleged deficiency taxes is already December 7, 2015, five (5) waivers were
barred by prescription. Assessments issued executed by the taxpayer and the BIR. The
by the BIR beyond the three-year prescriptive, CTA found the following defects: (1) they were
are considered void and of no legal effect. executed without a notarized board authority;
(Commissioner of Internal Revenue v. (2) the dates of acceptance by the BIR were
Systems Technology Institute, G.R. No. not indicated therein; and (3) the fact of
Page 25 of 49
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receipt by respondent of its copy of the 4. The Court cannot tolerate a highly
Second Waiver was not indicated on the face suspicious situation. In this case, after
of the original Second Waiver. the taxpayer voluntarily executing the
waivers, insisted on their invalidity by
The Court ruled that, due to peculiar raising the very same defects it caused.
circumstances and as exception to the On the other hand, the BIR miserably
general rule, the supposedly invalid waivers failed to exact from the taxpayer
may be considered valid for the following compliance with its rules. The BIR’s
reasons: negligence in the compliance of its
1. If the parties are in pari delicto or “in duties was so gross such that it seemed
equal fault” and thus they shall have no that it consented to the mistakes in the
action against each other. Taxpayer waivers. Such a situation is dangerous
violated RMO No. 20-90 which states and open to abuse by unscrupulous
that in case of a corporate taxpayer, taxpayers who intend to escape their
the waiver must be signed by its responsibility to pay taxes by mere
responsible officials and RDAO 01-05 expedient of hiding behind
which requires the presentation of a technicalities.
written and notarized authority to the Further, the Court said that while the BIR
BIR. Similarly, BIR violates its own rules was also at fault here because it was
when it did not ensure that the waiver careless in complying with the
is duly signed by an authorized requirements of RMO No. 20-90 and
representative and by not ensuring that RDAO 01-05, such negligence may be
the delegation of authority is in writing addressed by enforcing the provisions
and duly notarized. imposing administrative liabilities upon the
2. Parties who do not come to Court with officers responsible for these errors. The
clean hands cannot be allowed to BIR's right to assess and collect taxes
benefit from their own wrongdoing. should not be jeopardized merely because
Taxpayer should not be allowed to of the mistakes and lapses of its officers,
benefit from the flaws in its own especially in cases like this where the
waivers and successfully insist on their taxpayer is obviously in bad faith.
invalidity in order to evade its (Commissioner of Internal Revenue v.
responsibility to pay taxes. Next Mobile, G.R. No. 212825, December
7, 2015)
3. Taxpayer is estopped from questioning
the validity of its waivers. The taxpayer Q. ABC received a Letter of Authority for the
executed 5 waivers and delivered them examination of its books of accounts for
to the BIR and did not raise any internal revenue purposes for the taxable
objection against their validity until the year 2004. On October 9, 2007, the parties
BIR assessed taxes against it. In its executed a Waiver to extend the prescriptive
Letter Protest to the BIR, respondent period for the year 2004 to June 20, 2008. On
did not even question the validity of the the part of ABC, this was signed by its
Waivers or call attention to their Finance Manager. The waiver was followed
alleged defects. by another waiver extending the
prescriptive period to November 30, 2008.
Page 26 of 49
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Thereafter, the BIR issued a PAN. ABC filed execute them. Second, the taxpayer
a protest against the PAN arguing that it not benefitted from the waivers executed as it
liable for the deficiency taxes. It did not raise gave the taxpayer more time to comply with
as an issue the invalidity of the waiver and the audit requirements of the BIR.
the prescription of the BIR’s right to assess.
In its protest against the FAN, ABC argued (2) Yes, the assessment is void because it was
that the year being audited in the FAN has served beyond the extended period. The
already prescribed at the time such FAN was FAN/FLD was mailed on December 4, 2008.
mailed on December 4, 2008. ABC received Since the validity period of the second waiver
the FAN on December 5, 2008 which is 5 is only until November 30, 2008, prescription
days after the waiver it issued had had already set in at the time the FAN and the
prescribed. In the CTA, ABC further argued FLD were actually mailed on December 4,
that the signatories in the waivers were not 2008. (Commissioner of Internal Revenue v.
duly sanctioned to act on its behalf. Transitions Optical Philippines, G.R. No.
227544, November 22, 2017)
(1) Are the two waivers valid?
(2) Is the assessment barred already by Q. PAGCOR received a Final Assessment
prescription? Notice (FAN) signed by the Regional
Director. Claiming exemption based on its
(1) Estoppel applies against a taxpayer who charter, PAGCOR timely filed a protest to the
did not only raise at the earliest opportunity its FAN. After 203 days, PAGCOR elevated its
representative's lack of authority to execute protest to the CIR. After 209 days, PAGCOR
two (2) waivers of defense of prescription, but filed a Petition for Review with the CTA.
was also accorded, through these waivers, Does the CTA have jurisdiction over the
more time to comply with the audit appeal?
requirements of the Bureau of Internal
Revenue. A. No, a protesting taxpayer has only three
options:
Citing its previous ruling in Commissioner of
Internal Revenue v. Next Mobile, Inc., G.R. No. 1. If the protest is wholly or partially
212825, December 7, 2015, a defective denied by the CIR or his authorized
waiver will be upheld when both the taxpayer representative, then the taxpayer may
and the BIR were in pari delicto. In this case, appeal to the CTA within 30 days from
the Bureau of Internal Revenue was at fault receipt of the whole or partial denial of
when it accepted the waivers despite their the protest.
non-compliance with the requirements of 2. If the protest is wholly or partially
RMO No. 20-90 and RDAO No. 05-01. The denied by the CIR's authorized
taxpayer’s acts also show its implied representative, then the taxpayer may
admission of the validity of the waivers. First, appeal to the CIR within 30 days from
the taxpayer never raised the invalidity of the receipt of the whole or partial denial of
Waivers at the earliest opportunity, either in the protest.
its Protest to the PAN, Protest to 3. If the CIR or his authorized
the FAN, or Supplemental Protest to the FAN. representative failed to act upon the
It thereby impliedly recognized these waivers' protest within 180 days from
validity and its representatives' authority to submission of the required supporting
Page 27 of 49
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documents, then the taxpayer may An application for tax abatement is deemed
appeal to the CTA within 30 days from approved only upon issuance of a termination
the lapse of the 180-day period. letter by the BIR. The last step in the
abatement process is the issuance of the
A whole or partial denial by the CIR's termination letter. The presentation of the
authorized representative may be appealed to termination letter is essential as it proves that
the CIR or the CTA. A whole or partial denial the taxpayer’s application for tax abatement
by the CIR may be appealed to the CTA. The has been approved. Thus, without a
CIR or the CIR's authorized representative's termination letter, a tax assessment cannot be
failure to act may be appealed to the CTA. considered closed or terminated.
There is no mention of an appeal to the CIR (Commissioner of Internal Revenue v.
from the failure to act by the CIR's authorized Asiatrust Development Bank, G.R. Nos.
representative. (PAGCOR v. BIR, G.R. No. 201680-81, April 19, 2017)
208731, January 27, 2016)
Q. A taxpayer filed its administrative claim
Q. Can the BIR collect deficiency taxes from and judicial claim for refund of tax
a corporation subject of rehabilitation erroneously or illegally collected only 13
proceedings and where a Commencement days apart. The BIR argues that this does
Order has already been issued? not satisfy the requirement of exhaustion of
administrative remedies. Is the BIR correct?
No. Section 16 of RA 10142 or the Financial
Rehabilitation and Insolvency Act (FRIA) No. Section 229 of the Tax Code states that
provides that upon issuance of a judicial claims for refund of tax erroneously or
Commencement Order which includes a Stay illegally collected must be filed within 2 years
or Suspension Order – all actions or from the date of payment of the tax or penalty
proceedings, in court or otherwise, for the providing further that the same may not be
enforcement of “claims” against a distressed maintained until a claim for refund or credit
company shall be suspended. has been duly filed with the CIR.
“Claims” includes all claims of the Section 229 does not mean that the taxpayer
government, whether national or local, must await the final resolution of its
including taxes, tariffs and customs duties. administrative claim. Section 229 only
Creditors, including the government, must requires that the administrative claim should
ventilate their claims before the rehabilitation. first be filed. The purpose of the administrative
Thus, it is improper for the BIR to collect, or claim is to serve as notice of warning to the
even attempt to collect deficiency taxes CIR that court action would follow unless the
outside of the rehabilitation proceedings in tax erroneously or illegally collected is
willful disregard of a Commencement Order refunded. (Commissioner of Internal Revenue
lawfully issued by a Rehabilitation Court. v. Goodyear Philippines, G.R. No. 216130,
(Bureau of Internal Revenue v. Lepanto August 3, 2016)
Ceramics, G.R. No. 224764, April 24, 2017)
Q. Can the date of issuance of a BIR Ruling
Q. When is an application for tax abatement confirming the tax-exemption status of a
deemed approved? taxpayer be used as the reckoning point of
the prescriptive period for recovery of
Page 28 of 49
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erroneously or illegally assessed or collected No. In claims for refund of tax erroneously or
internal revenue taxes? illegally collected, both the administrative and
judicial claims for refund should be filed within
A. No. The claim for refund must be filed the two-year prescriptive period. The two-
within two (2) years from the date of payment year prescriptive period is counted from the
of the tax regardless of any supervening date of the payment of the tax or penalty.
cause that may arise after payment. While the
prescriptive period of two (2) years In this case, the tax involved in the case is the
commences to run from the time that the final withholding tax on the taxpayer’s
refund is ascertained, the propriety thereof is interest income on its foreign currency
determined by law (in this case, from the date denominated loan. Final withholding taxes
of payment of tax), and not upon the discovery are considered as full and final payment of the
by the taxpayer of the erroneous or excessive income tax due and thus are not subject to
payment of taxes. The issuance of the BIR of any adjustments. Thus, the two-year
a Ruling declaring the tax-exempt status of a prescriptive period shall commence to run
taxpayer, if at all, is merely confirmatory in from the time the refund is ascertained, i.e.
nature. Such ruling is not the operative act date such tax was paid, and not upon
from which an entitlement of refund is discovery of the taxpayer of the erroneous or
determined. (Commissioner of Internal excessive payment of taxes. (Metropolitan
Revenue v. Meralco, G.R. No. 181459, June 9, Bank and Trust Company v. Commissioner
2014) of Internal Revenue, G.R. No. 182582, April
17, 2017)
Q. A taxpayer-bank extended a foreign
currency denominated loan to a company. Q. For taxpayers using the On-line Electronic
As agreed, the company withheld and paid Documentary Stamp Metering Machine (DS
to the BIR the final withholding tax on metering machine), what should be deemed
taxpayer-bank’s interest income on the said the “date of payment” of the DST for the
loan. However, the taxpayer-bank purpose of counting the two-year
mistakenly remitted the same amounts to prescriptive period for filing a claim for a
the BIR on April 25, 2001. Thus, the refund or tax credit?
taxpayer-bank filed its administrative claim
for refund on December 27, 2002 while the The “date of payment” of the DST when the
judicial claim was filed only on September prescriptive period to file a claim for
10, 2003. The taxpayer-bank argues that the refund/credit must commence shall be the
two-year prescriptive period of its claim for date when the documentary stamps are
refund should be reckoned not from April 25, imprinted upon the documents and not the
2001, when it remitted the tax to the BIR but date of purchase of documentary stamps for
at the time it filed its Final Adjustment loading or reloading on the DS metering
Return or Annual Income Tax Return for the machine.
taxable year of 2001, or in April 2002, as it
was only at this time that its right to refund The payment of the DST and the filing of the
was ascertained. Is the taxpayer-bank DST Declaration Return upon
correct? loading/reloading of the DS Metering machine
must not be considered as the “date of
payment” when the prescriptive period to file
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a claim for refund/credit must commence. For Note: The case involved a claim for refund
DS metering machine users, the payment of pursuant to Section 229 of the Tax Code.
DST upon loading/reloading is merely an
advanced payment for future application. The Q. What are the requisites for claiming a
liability of the payment of DST falls due only refund of excess creditable withholding
upon occurrence of the taxable transaction. taxes?
(Philippine Bank of Communications v.
Commissioner of Internal Revenue, G.R. No. The requisites for claiming a refund of excess
194065, June 20, 2016) creditable withholding taxes are:
Q. Whether evidence not presented in the 1. The claim for refund was filed within
administrative claim for refund in the Bureau the two-year prescriptive period;
of Internal Revenue can be presented in the
Court of Tax Appeals? 2. The fact of withholding is established
by a copy of a statement
Yes. The Court of Tax Appeals is not limited by duly issued by the payor (withholding
the evidence presented in the administrative agent) to the payee, showing the
claim in the Bureau of Internal Revenue. The amount of tax withheld therefrom; and
claimant may present new and additional
evidence to the Court of Tax Appeals to 3. The income upon which the taxes
support its case for tax refund. The power of were withheld was included in the
the Court of Tax Appeals to exercise its income tax return of the recipient as
appellate jurisdiction does not preclude it from part of the gross income.
considering evidence that was not presented (Commissioner of Internal Revenue v.
in the administrative claim in the Bureau of Cebu Holding, G.R. No. 189792, June
Internal Revenue. 29, 2018; Commissioner of Internal
Revenue v. Team (Philippines)
Parties are expected to litigate and prove Operations Corporation, G.R. No.
every aspect of their case anew and formally 179260, April 2, 2014.)
offer all their evidence. No value is given to
documentary evidence submitted in the Q. What is the competent proof to establish
Bureau of Internal Revenue unless it is the fact that the creditable taxes were
formally offered in the Court of Tax Appeals. withheld?
Thus, the review of the Court of Tax Appeals
is not limited to whether or not the The certificate of creditable tax withheld at
Commissioner committed gross abuse of source is the competent proof to establish the
discretion, fraud, or error of law, as contended fact that taxes are withheld. It is not
by the Commissioner. As evidence is necessary for the person who executed and
considered and evaluated again, the scope of prepared the certificate of creditable tax
the Court of Tax Appeals' review covers withheld at source to be presented and to
factual findings. (Philippine Airlines v. testify personally to prove the authenticity of
Commissioner of Internal Revenue, G.R. No. the certificates. It must be noted that upon
206079-80 & 206309, January 17, 2018) presentation of a withholding tax certificate
complete in its relevant details and with a
written statement that it was made under the
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penalties of perjury, the burden of evidence statement, duly issued by the payor to the
then shifts to the Commissioner of Internal payee, showing the amount paid and the
Revenue to prove that (1) the certificate is not income tax withheld from that amount. Any
complete; (2) it is false; or (3) it was not issued document, other than quarterly ITRs may be
regularly. (CIR v. PNB, G.R. No. 180290, used to establish that indeed the non-carry
September 29, 2014) over clause has been complied with, provided
that such is competent, relevant and part of
Q. Is proof of actual remittance of the the records. (Winebrenner & Inigo Insurance
withheld taxes required before the taxpayer Brokers, Inc., G.R. No. 206526, January 28,
may claim for a refund of creditable 2015)
withholding tax?
The taxpayer need not submit the quarterly
No. Proof of actual remittance of the withheld returns to show that it did not carry-over the
taxes is not required before the taxpayer may excess withholding tax to the succeeding
claim for a tax refund/tax credit certificates. It quarter. When the taxpayer is able to
is not a requirement for claiming a tax refund establish prima facie its right to the refund by
of creditable withholding taxes. (CIR v. Team testimonial and object evidence, it is the BIR
(Philippines) Operations Corporation, G.R. that should present rebuttal evidence to shift
No. 179260, April 2, 2014; CIR v. PNB, G.R. the burden of evidence back to the taxpayer.
No. 180290, September 29, 2014) Indeed, the BIR ought to have its own copies
of the taxpayer’s quarterly returns on file, on
Q. The BIR contends that, in a refund of the basis of which it could rebut the taxpayer’s
excess creditable withholding taxes, the claim that it did not carry over its unutilized
taxpayer must present its quarterly returns and excess creditable withholding taxes for
because such quarterly returns would show the immediately succeeding quarters. The
that it did not carry-over the excess BIR's failure to present such vital document
withholding tax to the succeeding quarter. Is during the trial in order to bolster its
the BIR correct? contention against the taxpayer’s claim for
the tax refund is fatal. (CIR v. Team
No. Proving that no carry-over has been made (Philippines) Energy Corporation, G.R. No.
does not absolutely require the presentation 188016, January 14, 2015)
of the quarterly ITRs. Requiring that the ITR or
the FAR of the succeeding year be presented Q. In claims for excess and unutilized
to the BIR in requesting a tax refund has no creditable withholding tax, is the
basis in law and jurisprudence. First, Section presentation of the Certificates of Creditable
76 of the Tax Code does not mandate it. Withholding Tax Withheld at Source (BIR
Second, Section 5 of RR 12-94, amending Form No. 2307) required to prove that the
Section 10(a) of RR 6-85, merely provides that taxpayer did not use the claimed creditable
claims for refund of income taxes deducted withholding tax to pay for his/its tax
and withheld from income payments shall be liabilities?
given due course only (1) when it is shown on
the ITR that the income payment received is In claims for excess and unutilized creditable
being declared part of the taxpayer’s gross withholding tax, the probative value of BIR
income; and (2) when the fact of withholding Form 2307, which is basically a statement
is established by a copy of the withholding tax showing the amount paid for the subject
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transaction and the amount of tax withheld not utilize the creditable taxes withheld, the
therefrom, is to establish only the fact of PNB should have likewise presented the
withholding of the claimed creditable Certificate of Creditable Tax Withheld at
withholding tax. There is nothing in BIR Form Source (BIR Forms No. 2307) issued to
No. 2307 which would establish either Gotesco in relation to the creditable taxes
utilization or non-utilization, as the case may withheld reported in its tax returns. Is the
be, of the creditable withholding tax. There is BIR Form 2307 necessary?
no basis in law or jurisprudence to say that the
BIR Form No. 2307 is the only evidence to The submission of BIR Forms 2307 is to prove
prove that the taxpayer did not use the the fact of withholding of the excess
claimed creditable withholding tax to pay for creditable withholding tax being claimed for
his/its tax liabilities. (Philippine National Bank refund. This is clear in the provision of Section
v. Commissioner of Internal Revenue, G.R. 58.3, RR 2-98, as amended, and in various
No. 206019, March 18, 2015) rulings of the Court. In the words of Section
2.58.3, RR 2-98, “That the fact of withholding
Q. Gotesco, a corporation engaged in the is established by a copy of a statement duly
real estate business, secured a loan from issued by the payor (withholding agent) to the
PNB with a six-hectare property as payee showing the amount paid and the
collateral. Gotesco defaulted on its loan amount of tax withheld therefrom.”
obligations. Thus, PNB foreclosed the
mortgaged property. A certificate of sale Hence, the probative value of BIR Form 2307,
was issued in favor of PNB. As it prepared which is basically a statement showing the
for the consolidation of its ownership over amount paid for the subject transaction and
the property, PNB withheld and remitted to the amount of tax withheld therefrom, is to
the BIR withholding taxes equivalent to 6% establish only the fact of withholding of the
of the bid price. Thereafter, PNB filed an claimed creditable withholding tax. There is
administrative claim for the refund of excess nothing in BIR Form No. 2307, which would
withholding taxes. PNB explained that it it establish either utilization or non-utilization,
should have applied the five percent (5%) as the case may be, of the creditable
creditable withholding tax rate on the sale of withholding tax. While perhaps it may be
ordinary asset, considering that Gotesco is necessary to prove that the taxpayer did not
primarily engaged in the real estate use the claimed creditable withholding tax to
business. While PNB was able to establish pay for his/its tax liabilities, there is no basis in
the fact of tax withholding and the law or jurisprudence to say that BIR Form No.
remittance thereof to the BIR, the CTA found 2307 is the only evidence that may be
that PNB failed to present evidence to prove adduced to prove such non-use. (Philippine
that Gotesco did not utilize the withheld National Bank v. CIR, G.R. No. 206019,
taxes to settle its tax liabilities. On Motion March 18, 2015)
for Reconsideration, PNB eventually offered
as evidence the Income Tax Return of
Gotesco to show that the excess withholding LOCAL GOVERNMENT TAXATION
tax payments were not used by Gotesco to
settle its tax liabilities. The CTA denied the Q. Do LGUs have the power to impose taxes
Motion for Reconsideration and insisted on the gross receipts of keepers of garages,
that, to sufficiently prove that Gotesco did cars for rent or hire driven by the lessee,
Page 32 of 49
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transportation contractors, persons who subject properties were within its territorial
transport passenger or freight for hire, and jurisdiction, Uniwide no longer paid local
common carriers by land, air, or water? taxes to the City of Pasig. For purposes of
complying with local tax liabilities in case of
No. Section 133(j) of the LGC clearly and a boundary dispute between local
unambiguously proscribes LGUs from governments, to whom should the taxpayer
imposing a tax on the gross receipts of pay its local business tax and realty taxes?
transportation contractors and common
carriers. Exemption of transportation The taxpayer should pay its local business tax
contractors and common carriers from local to the City of Pasig who has the apparent
business tax is consistent with the intent of right to levy and collect local business tax and
our laws, which is to prevent the duplication realty taxes on the subject properties on the
of the so-called common carriers tax. (City of basis of the TCTs. Under the Local
Manila v Hon. Colet and Malaysian Air Government Code, local business taxes are
System, G.R. No. 120051, December 10, payable for every separate or distinct
2014) establishment or place where business
subject to the tax is conducted, which must be
Q. Do LGUs have the power to impose taxes paid by the person conduct the same. The
on persons or entities engaged in the situs of taxation shall be paid to the local
business of manufacturing and distribution government where such branch or sales outlet
of petroleum products? is located. For real property taxes, collection is
vested in the locality where the property is
No. Among the common limitations on the situated. In determining the location for
taxing powers of LGUs provided under purposes of identifying the local government
Section 133 of the LGC are “excise taxes on entitled to collect taxes, the taxpayer should
articles enumerated under the National follow the location stated in the certificate of
Internal Revenue Code, as amended, and title until amended through proper judicial
taxes, fees or charges on petroleum products.” proceedings. (Municipality of Cainta v. City of
The prohibition with respect to petroleum Pasig and Uniwide, G.R. No. 176703, June
products extends not only to excise taxes 28, 2017)
thereon, but all “taxes, fees or charges.”
(Batangas City v. Pilipinas Shell, G.R. No. Q. On 26 December 1992, the Sangguniang
187631, July 8, 2015) Bayan of the Municipality of Pasig enacted
Ordinance No. 25 which imposed a franchise
Q. Uniwide conducted business in buildings tax on all business venture operations
and establishments constructed on parcels carried out through a franchise within the
of land covered by Transfer Certificates of municipality. On 25 January 1995, the
Title (TCTs) issued by the Registry of Deeds Municipality of Pasig was converted into a
of Pasig City. In the said TCTs, the location highly urbanized city now known as the City
of the parcels of land is indicated as being in of Pasig. The City Treasurer assessed the
Pasig. From 1989 to 1996, Uniwide paid Manila Electric Company for deficiency
business and realty taxes, fees, and other franchise taxes for the period 1996 to 1999
charges to the City of Pasig. However, pursuant to Municipal Ordinance No. 25.
beginning 1997 and after receiving notice Does the City of Pasig have valid basis for its
from the Municipality of Cainta that the
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imposition of franchise tax for the period year. (City of Manila v. Cosmos Bottling
1996 to 1999? Corporation, G.R. No. 196681, June 27, 2018)
No. The power to impose franchise tax Q.In the imposition of the surcharge on local
belongs to the province by virtue of Section taxes due and unpaid, should the 25%
137 of the Local Government Code. On the surcharge be computed yearly based on the
other hand, Section 142 of the Code provides unpaid tax due for each particular year?
that the municipalities are prohibited from
levying the taxes specifically provided to No. Section 168 of the Local Government
provinces. Section 151 empowers the cities to Code categorically provides that the local
levy taxes, fees and charges allowed to both government unit may impose a surcharge not
provinces and municipalities. Unlike a city, a exceeding 25% of the amount of taxes, fees,
municipality is bereft of authority to levy or charges not paid on time. The surcharge is
franchise tax, thus, the ordinance enacted for a civil penalty imposed once for late payment
that purpose is void. of a Contrast this with the succeeding
provisions on interest, which was imposable
The ordinance in question was enacted in at the rate not exceeding 2% per month of the
1992 when the local government of Pasig was unpaid taxes until fully paid. The fact that the
still a municipality and, as such, had no interest charge is made proportionate to the
authority to levy franchise tax. The conversion period of delay, whereas the surcharge is not,
of the municipality into a city does not lend clearly reveals the legislative intent for the
validity to the void ordinance. The ordinance is different modes in their application. If the
void for being in direct contravention with legislative intent was to make the 25%
Section 142 of the Local Government Code. surcharge proportionate to the period of
Being void, it cannot be given any legal effect. delay, the law should have provided for the
An assessment and collection pursuant to the same in clear terms. (NPC v. City of
said ordinance is legally infirm. (City of Pasig Cabanatuan, G.R. No. 177332, October 1,
v. Manila Electric Company, G.R. No. 181710, 2014)
March 7, 2018)
Q. On January 15, 2007, ABC protested, thru
Q. The City of Manila assessed ABC local a letter, the imposition of business tax under
business taxes for the taxable year 2007 Section 21 of the Manila Revenue Code on
using the gross sales for the calendar year the ground that it constitutes double
2005. ABC argues that the computation of taxation. The City Treasurer acknowledged
the business tax should be on the basis of its receipt of the letter but said that she will
gross sales in 2006 which amount was lower await the formal protest. On March 27, 2007,
than the gross sales in 2005. Is ABC correct? ABC wrote a letter-reply reiterating that
ABC already protested. On April 17, 2007,
Yes. Section 14 of the Revenue Code of ABC filed a Petition for Review with the
Manila, which is derived from Section 143(a) Regional Trial Court (“RTC”). On appeal, the
of the Local Government Code, provides that CTA ruled that ABC belatedly filed its
an assessment for business tax should be petition with RTC by 1 day. ABC countered it
computed based on the taxpayer’s gross timely filed now claiming that reckoning
sales or receipts of the preceding calendar point should be from March 27, 2007. Was
the petition timely filed?
Page 34 of 49
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ABC then filed its refund with the RTC of

No. Section 195 of the Local Government Manila. The City of Manila argues that the
Code states that the taxpayer shall have thirty assessment against ABC became final and
(30) days from the receipt of the denial of the executory when the latter effectively
protest or from the lapse of the sixty (60)-day abandoned its protest and instead sued in
period prescribed herein within which to court for the refund of the assessed taxes. Is
appeal with the court of competent the City of Manila correct?
jurisdiction otherwise the assessment
becomes conclusive and unappealable. No. A taxpayer who had protested and paid
In the instant case, the period within which the an assessment is not precluded from later on
City Treasurer must act on the protest, and the instituting an action for refund or credit.
consequent period to appeal a “denial due to
inaction,” should be reckoned from January While Section 196 does not expressly mention
15, 2007, the date the taxpayer filed its an assessment made by the local treasurer,
protest, and not March 27, 2007. (China this simply means that its applicability does
Banking Corporation v. City Treasurer of not depend upon the existence of an
Manila, G.R. No. 204117, July 1, 2015) assessment notice. By consequence, a
taxpayer may proceed to the remedy of refund
Note: The Court likewise stated that, at any of taxes even without a prior protest against
rate, the RTC has no jurisdiction. Following an assessment that was not issued in the first
R.A. No. 9282, the authority to exercise either place. This is not to say that an application for
original or appellate jurisdiction over local tax refund can never be precipitated by a
cases depended on the amount of the claim. previously issued assessment, for it is entirely
In cases where the amount sought to be possible that the taxpayer, who had received
refunded is below the jurisdictional amount of a notice of assessment, paid the assessed tax,
the RTC, the Metropolitan, Municipal, and fee or charge believing it to be erroneous or
Municipal Circuit Trial Courts (“MTC”) have illegal. Thus, under such circumstance, the
jurisdiction. RTC has jurisdiction if amount taxpayer may subsequently direct his claim
exceeds exceed P300,000 outside Metro pursuant to Section 196 of the LGC.
Manila (P400,000 in Metro Manila); MTC if
amount does not exceed P300,000 outside When a taxpayer is assessed a deficiency
Metro Manila (P400,000 in Metro Manila). local tax, fee or charge, he may protest it
under Section 195 even without making
Q. The City of Manila assessed ABC local payment of such assessed tax, fee or. charge.
business taxes. ABC protested the This is because the law on local government
assessment arguing that it constitutes as taxation, save in the case of real property tax,
double taxation. ABC tendered payment of does not expressly require ''payment under
what they believe to be the correct protest" as a procedure prior to instituting the
computation of their local business tax. The appropriate proceeding in court. This implies
payment was refused by the City Treasurer. that the success of a judicial action
ABC also received a letter from the City questioning the validity or correctness of the
Treasurer denying their protest. ABC then assessment is not necessarily hinged on the
paid the assessment and filed a claim for previous payment of the tax under protest.
refund with the Office of the City Treasurer Needless to say, there is nothing to prevent
raising the same grounds in their protest.
Page 35 of 49
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the taxpayer from paying the tax under (Section 195) and at the same time
protest or simultaneous to a protest. seeking a refund of the taxes. It would
be illogical for the taxpayer to only seek
Thus, a taxpayer facing an assessment may a reversal of the assessment without
protest it and alternatively: (1) appeal the praying for the refund of taxes. Once
assessment in court, or (2) pay the the assessment is set aside by the
tax and thereafter seek a refund. (City of court, it follows as a matter of course
Manila v. Cosmos Bottling Corporation, G.R. that all taxes paid under the erroneous
No. 196681, June 27, 2018) or invalid assessment are refunded to
the taxpayer. The same implication
Q. What are the remedies of the taxpayer in should ensue even if the taxpayer were
case of an assessment for deficiency local to style his suit in court as an action for
taxes? refund or recovery of erroneously paid
or illegally collected tax as pursued
Where an assessment is to be protested or under Section 196 of the LGC. In such a
disputed, the taxpayer may proceed (a) suit for refund, the taxpayer cannot
without payment, or (b) with payment of the successfully prosecute his theory of
assessed tax, fee or charge. Whether there is erroneous payment or illegal collection
payment of the assessed tax or not, the of taxes without necessarily assailing
protest in writing must be made within sixty the validity or correctness of the
(60) days from receipt of the notice of assessment he had administratively
assessment; otherwise, the assessment shall protested.
become final and conclusive. Additionally, the
subsequent court action must be initiated Note that where an assessment is issued, the
within thirty (30) days from denial or inaction taxpayer cannot choose to pay the
by the local treasurer; otherwise, the assessment and thereafter seek a refund at
assessment becomes conclusive and any time within the full period of two years
unappealable. from the date of payment as Section 196 may
suggest. If refund is pursued, the taxpayer
a. Where no payment is made, the must administratively question the validity or
taxpayer's procedural remedy is correctness of the assessment in the 'letter
governed strictly by Section 195. That claim for refund' within 60 days from receipt
is, in case of whole or partial denial of of the notice of assessment, and thereafter
the protest, or inaction by the local bring suit in court within 30 days from either
treasurer, the taxpayer's only recourse decision or inaction by the local treasurer.
is to appeal the assessment with the (City of Manila v. Cosmos Bottling
court of competent jurisdiction. The Corporation, G.R. No. 196681, June 27, 2018)
appeal before the court does not seek a
refund but only questions the validity or REAL PROPERTY TAXATION
correctness of the assessment.
b. Where payment was made, the Q. May submarine communications cables

taxpayer may thereafter maintain an be classified as taxable real property by the
action in court questioning the validity local governments?
and correctness of the assessment
Page 36 of 49
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Yes. Submarine or undersea communications taxpayer to meet the needs of its operations
cables are akin to electric transmission lines and thus real property subject to real
which the Court has previously declared as property tax. The taxpayer, on the other
“machinery” subject to real property tax under hand, contends that, under the Civil Code,
the Local Government Code to the extent that they are movables by nature. Is the taxpayer
the equipment's location is determinable to be correct?
within the taxing authority's jurisdiction. Both
electric lines and communications cables, in No. The characterization of machinery as real
the strictest sense, are not directly adhered to property is governed by the Local Government
the soil but pass through posts, relays or Code and not the Civil Code. In this case, the
landing stations, but both may be classified phrase pertaining to physical facilities for
under the term "machinery" as real property production in the definition of ‘machinery’ in
under Article 415(5) of the Civil Code for the the Local Government Code is comprehensive
simple reason that such pieces of equipment enough to include road equipment and mini
serve the owner's business or tend to meet the haulers as actually, directly, and exclusively
needs of his industry or works that are on real used by the taxpayer to meet the needs of its
estate. (Capitol Wireless v. Provincial operations in palm oil production. (Provincial
Treasurer of Batangas, G.R. No. 180110, Assessor of Agusan del Sur v. Filipinas Palm
May 30, 2016) Oil Plantation, G.R. No. 183416, October 5,
2016)
Q. Does the exemption from real property
taxes given to cooperatives exclude real Q. Is the Philippine Economic Zone Authority
property leased to other persons? (PEZA) exempt from the payment of real
property taxes?
No. The Local Government Code exempts duly
registered cooperatives from payment of real Yes. The PEZA is exempt from the payment of
property taxes without distinction. Nothing in real property taxes. The general rule is that
the law suggests that real property tax real properties are subject to real property
exemption only applies when the property is taxes. This is true especially since the Local
used by the cooperative itself. Thus, the Government Code has withdrawn exemptions
exemption from real property taxes given to from real property taxes of all persons,
cooperatives applies regardless of whether or whether natural or juridical. Exceptions to the
not the land owned is leased. The instance rule are however also provided in the Local
that the real property is leased to either an Government Code. Under Section 133(o), local
individual or corporation is not a ground for government units have no power to levy taxes
withdrawal of tax exemption. (Provincial of any kind on the national government, its
Assessor of Agusan del Sur v. Filipinas Palm agencies and instrumentalities and local
Oil Plantation, G.R. No. 183416, October 5, government units. Specifically on real
2016) property taxes, Section 234 enumerates the
persons and real property exempt from real
Q. A taxpayer is engaged in palm oil property taxes, which includes “real property
production. The Local Assessor argues that, owned by the Republic of the Philippines or
under the Local Government Code, its ‘road any of its political subdivisions except when
equipment’ and ‘mini haulers’ should be the beneficial use thereof has been granted,
considered machinery directly used by the for consideration or otherwise, to a taxable
Page 37 of 49
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person.” The PEZA is an instrumentality of the fund is prefixed with “may,” thus, “may levy
national government. Being an and collect an annual tax of one percent
instrumentality of the national government, (1%).” There is no limiting qualifier to the
the PEZA cannot be taxed by local articulated rate of 1% which unequivocally
government units. Further, the real properties indicates that any and all special education
under the PEZA’s title are owned by the fund collections must be at such rate. Setting
Republic of the Philippines. Properties of the rate of the additional levy for the special
public dominion, even if titled in the name of education fund at less than 1% is within the
an instrumentality as in this case, remain taxing power of local government units.
owned by the Republic of the Philippines. (City (Demaala v. COA, G.R. No. 199752, February
of Lapu-Lapu v. PEZA, G.R. No. 184203 & 17, 2015)
187583, November 26, 2014)
Q. The Provincial Treasurer assessed ABC
NOTE: Even the PEZA’s lands and buildings for real property taxes on its submarine
whose beneficial use have been granted to cables. Thereafter, ABC received a Warrant
other persons may not be taxed with real of Levy and a Notice of Auction Sale. ABC
property taxes. The PEZA may only lease its filed a Petition for Prohibition and
lands and buildings to PEZA-registered Declaration of Nullity of Warrant of Levy,
economic zone enterprises and entities. These Notice of Auction Sale and/or Auction Sale
PEZA-registered enterprises and entities, with the RTC. ABC argues that the
which operate within economic zones, are not submarines cables are not subject to tax.
subject to real property taxes. Under Section Further, ABC argues that such issue involves
24 of the Special Economic Zone Act of 1995, purely questions of law and, thus,
no taxes, whether local or national, shall be exhaustion of administrative remedies is not
imposed on all business establishments required. Is ABC’s remedy proper?
operating within the economic zones.
No. In disputes involving real property
Q. May a municipality within the taxation, the general rule is to require the
Metropolitan Manila Area, a city, or a taxpayer to first avail of administrative
province have an additional levy on real remedies and pay the tax under protest before
property for the special education fund at allowing any resort to a judicial action, except
the rate of less than 1%.? when the assessment itself is alleged to be
illegal or is made without legal authority. The
Yes. Section 235 of the Local Government instant case, however, is one replete with
Code provides that “a province or city, or a questions of fact instead of pure questions of
municipality within the Metropolitan Manila law, which renders its filing in a judicial forum
Area, may levy and collect an annual tax of improper because it is instead cognizable by
one percent (1%) on the assessed value of real local administrative bodies like the Board of
property which shall be in addition to the basic Assessment Appeals, which are the proper
real property tax. The proceeds thereof shall venues for trying these factual issues such as
exclusively accrue to the Special Education the extent and status of the taxpayer’s
Fund (SEF).” The operative phrase in Section ownership of the system, the actual length of
235’s grant to municipalities in Metro Manila, the cable/s that lie in Philippine territory, and
cities, and provinces of the power to impose the corresponding assessment and taxes due
an additional levy for the special education on the same. (Capitol Wireless v. Provincial
Page 38 of 49
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Treasurer of Batangas, G.R. No. 180110, under the Local under protest the
May 30, 2016) Government Code assessed tax and
before resorting to filing an appeal
Q. Distinguish between an illegal judicial action. The with the Local and
assessment and an erroneous assessment taxpayer must first Central Board of
of real property taxes in terms of remedies pay the real Assessment
to be taken? property tax under Appeals. The
protest. Should the taxpayer shall file a
A. An erroneous assessment is different from taxpayer find the complaint for
an illegal assessment, and the proper remedy action on the injunction before
of a taxpayer issued an assessment depends protest the Regional Trial
on whether the assessment was erroneous or unsatisfactory, the Court to enjoin the
illegal. taxpayer may local government
appeal with the unit from collecting
Local Board of real property taxes.
Erroneous Illegal Assessment Assessment The party
Assessment Appeals within 60 unsatisfied with
days from receipt the decision of the
An erroneous An assessment is of the decision on Regional Trial
assessment illegal if it was the protest. If the Court shall file an
“presupposes that made without taxpayer is still appeal, not a
the taxpayer is authority under the unsatisfied after petition for
subject to the tax law. appealing with the certiorari, before
but is disputing the Local Board of the Court of Tax
correctness of the Assessment Appeals, the
amount assessed.” Appeals, the complaint being a
With an erroneous taxpayer may local tax case
assessment, the appeal with the decided by the
taxpayer claims Central Board of Regional Trial
that the local Assessment Court. The appeal
assessor erred in Appeals within 30 shall be filed within
determining any of days from receipt fifteen (15) days
the items for of the Local from notice of the
computing the real Board’s decision. trial court’s
property tax, i.e., The decision of the decision. The Court
the value of the Central Board of of Tax Appeals’
real property or the Assessment decision may then
portion thereof Appeals is be appealed before
subject to tax and appealable before the Supreme Court
the proper the Court of Tax through a petition
assessment levels. Appeals En Banc. for review on
The taxpayer must The taxpayer may The Court of Tax certiorari under
exhaust the directly resort to Appeals’ decision Rule 45 of the
administrative judicial action may then be Rules of Court
remedies provided without paying appealed before raising pure
Page 39 of 49
NOTICE
the Supreme Court questions of law.

through a petition (City of Lapu-Lapu The “fresh period rule” in Neypes does not
for review on v. PEZA, G.R. No. apply as the appeal from a decision of the
certiorari under 184203 & 187583, LBAA to the CBAA is administrative in nature,
Rule 45 of the November 26, not judicial. (National Power Corporation v.
Rules of Court 2014) The Provincial Treasurer of Benguet, G.R.
raising pure No. 209303, November 14, 2016)
questions of law.
TARIFF AND CUSTOMS DUTIES
Q. A taxpayer argues that payment under Q.New Frontier Sugar Corporation imported
protest is not required before it could raw cane sugar from Thailand. The Bureau
challenge the authority of the local of Customs found that there was a violation
government to assess tax on its tax exempt of Joint Order No. 1-91, in relation to
properties before the LBAA. Is the taxpayer paragraph (f), Section 2530 of the Tariff and
correct? Customs Code (TCCP) for failure to subject
the shipment to pre-shipment inspection
No. Settled is the rule that should the and for lack of a Clean Report of Findings
taxpayer/real property owner question the (CRF). The BOC asserts that pursuant to
excessiveness or reasonableness of the Joint Order No. 1-91, the shipment shall be
assessment, the law directs that the taxpayer subject to automatic seizure. Is the BOC
should first pay the tax due before his protest correct?
can be entertained.
No. A Warrant of Seizure and Detention
A claim for exemption from the payment of (WSD) is a condition precedent, before any
real property taxes does not question the seizure proceeding can be formally initiated.
assessor’s authority to assess and collect The following mandatory procedures must be
such taxes, but pertains to the observed in a seizure case: (1) that a WSD
reasonableness or correctness of the must first be issued upon making any seizure;
assessment by the local assessor. Thus, and (2) that a written notice of such seizure
payment under protest is required. (National must be served upon the owner or importer or
Power Corporation v. The Provincial his agent. Failure to comply with the foregoing
Treasurer of Benguet, G.R. No. 209303, procedural requirements would negate the
November 14, 2016) propriety of having the subject shipment of
the importer seized and forfeited in favor of
Q. Does the filing of a Motion for the Government in all cases.
Reconsideration before the LBAA toll the 30-
day period within which to appeal before the Further, the shipment could not be deemed
CBAA? liable for seizure or even forfeiture on the
ground of violation of Section 2530(f) of the
No. Filing of a Motion for Reconsideration TCCP, as amended, for it must be proven first
before the Local Board of Assessment that fraud has been committed by or there
Appeals (LBAA) will not toll the 30-day period was bad faith on the part of the
within which to appeal before the Central importer/consignee to evade payment of the
Board of Assessment Appeals (CBAA). duties due and demandable. (COC v. New
Page 40 of 49
NOTICE
Frontier Sugar Corporation, G.R. No. without having totally avoid, the
163055, June 11, 2014) been cleared by payment of correct
the BOC or other taxes, duties and
Q. Can a forfeiture proceeding be instituted authorized other charges.
on the basis of a certification issued by the government Such goods and
Philippine Coast Guard that the vessel did agencies, to evade articles pass
not log in or submitted any Master’s Oath of the payment of through the BOC,
Safe Departure? correct taxes, but the processing
duties and other and clearing
No. There must be a prior showing of probable charges. Such procedures are
cause before any proceeding for seizure goods and articles attended by
and/or forfeiture is instituted. The do not undergo the fraudulent acts in
determination must be made by the BOC who processing and order to evade the
ordered the forfeiture. Once established, the clearing payment of correct
burden of proof is shifted to the claimant. procedures at the taxes, duties, and
BOC, and are not other charges.
A forfeiture proceeding cannot be instituted declared through Often committed
on the basis of a certification issued by the submission of by means of
Philippine Coast Guard that the vessel did not import documents, misclassification of
log in or submitted any Master’s Oath of Safe such as the import the nature, quality
Departure. (Commissioner of Customs v. entry and internal or value of goods
William Singson and Triton Shipping revenue and articles,
Corporation, G.R. No. 181007, November 21, declaration. undervaluation in
2016) terms of their price,
quality or weight,
Q. Distinguish “unlawful importation” under and misdeclaration
Section 3601 of the TCCP from “various of their kind.
fraudulent practices against customs
revenue” under Section 3602 of the TCCP?
(Bureau of Customs v. Hon. Devanadera, G.R.
No. 193253, September 8, 2015)
Unlawful Fraudulent
Importation Practices (Technical
(Outright Q. Who has jurisdiction to hear and
smuggling)
smuggling) determine questions involving the seizure
and forfeiture of dutiable goods?
Goods and articles Goods and articles
The Collector of Customs has exclusive
of commerce are are brought into
jurisdiction over seizure and forfeiture
brought into the the country
proceedings, and regular courts cannot
country without through fraudulent,
interfere with his exercise thereof or stifle or
the required falsified or
put it at naught. The Collector of Customs
importation erroneous
sitting in seizure and forfeiture proceedings
documents, or are declarations, to
has exclusive jurisdiction to hear and
disposed of in the substantially
determine all questions touching on the
local market reduce, if not
seizure and forfeiture of dutiable goods.
Page 41 of 49
NOTICE
Regional trial courts are devoid of any Revenue as “other matters” arising under the
competence to pass upon the validity or NIRC or other laws administered by the BIR.
regularity of seizure and forfeiture (Philippine American Life and General
proceedings conducted by the BOC and to Insurance Company v. The Secretary of
enjoin or otherwise interfere with these Finance and Commissioner of Internal
proceedings. Regional trial courts are Revenue, G.R. No. 210987, November 24,
precluded from assuming cognizance over 2014; Banco de Oro v. Republic, G.R. No. G.R.
such matters even through petitions for No. 198756, January 13, 2015)
certiorari, prohibition or mandamus. (Agriex
Co. Ltd. v. Commissioner of Customs, G.R. Q. Does the CTA have jurisdiction relative to
No. 158150, September 10, 2014) matters involving the validity of a rule or
regulation issued by the Bureau of Internal
JUDICIAL REMEDIES Revenue?
Q. Does the CTA have the power to issue Yes. The Court of Tax Appeals can now rule
writs of certiorari in its appellate not only on the propriety of an assessment or
jurisdiction? tax treatment of a certain transaction, but also
on the validity of the revenue regulation or
Yes. The Court of Tax Appeals has the power revenue memorandum circular on which the
to issue writs of certiorari in the exercise of its assessment is based. It is now within the
appellate jurisdiction. The CTA can rule not power of the Court of Tax Appeals, through its
only on the propriety of an assessment or tax power of certioriari, to rule on the validity of a
treatment of a certain transaction, but also on particular administrative rule or regulation so
the validity of the revenue regulation or long as it is within its appellate jurisdiction.
revenue memorandum circular on which the (Philippine American Life and General
assessment is based, so long as it is within its Insurance Company v. The Secretary of
appellate jurisdiction. (City of Manila v. Hon. Finance and Commissioner of Internal
Grecia-Cuerdo, G.R. No. 175723, February 4, Revenue, G.R. No. 210987, November 24,
2014) 2014)
Q. Is an adverse ruling of the Secretary of Q. The Philippine Ports Authority (PPA)

Finance in the exercise of its power of review received a letter from the City Assessor for
under Section 4 of the NIRC appealable to the assessment and collection of real
the Court of Tax Appeals? property taxes against its administered
properties. It appealed the assessment to
Yes. Review by the Secretary of Finance the Local Board of Assessment Appeals
pursuant to Section 4 of the NIRC, as (LBAA) through the Office of the City
amended, of a BIR Ruling is appealable to the Treasurer. While the case was pending, the
Court of Tax Appeals. The Court opined that City of Davao posted a notice of sale of
Section 7(a)(1) of RA 1125, as amended by delinquent real properties including the
RA 9282, addresses the seeming gap in the properties of the PPA. The LBAA dismissed
law as it vests in the Court of Tax Appeals, the appeal. The PPA appealed before the
albeit impliedly, with jurisdiction over the Central Board of Assessment Appeals
appeal from the Secretary of Finance’s review (CBAA) and was denied. Thus, it filed an
of rulings of the Commissioner of Internal appeal with the CTA. The PPA claimed it did
Page 42 of 49
NOTICE
not receive any warrant of levy and thus it necessary, to control auxiliary and incidental
filed a Petition for Certiorari with the Court matters and to prohibit or restrain acts which
of Appeals (CA). The CTA ruled in favor of might interfere with its exercise of jurisdiction
the PPA declaring the properties as exempt over petitioner's appeal.
from real property tax and declaring void the
assessments issued. The CA, on the other Even if the law had vested the Court of
hand, dismissed the petition ruling that the Appeals with jurisdiction to issue injunctive
CTA has exclusive jurisdiction and said that relief in real property tax cases such as this,
the PPA should have applied for issuance of the Court of Appeals was still correct in
a writ of injunction or prohibition. PPA filed dismissing the petition before it. Once a court
a Motion for Reconsideration with the CA acquires jurisdiction over a case, it also has
and was denied. Hence, the PPA filed a the power to issue all auxiliary writs
Petition for Review with the Supreme Court. necessary to maintain and exercise its
Does the CA have jurisdiction to issue the jurisdiction, to the exclusion of all other courts.
injunctive relief prayed for by PPA? Thus, once the Court of Tax Appeals acquired
jurisdiction over petitioner's appeal, the Court
No. When a tax case is pending on appeal of Appeals would have been precluded from
with the CTA, the CTA has exclusive taking cognizance of the case. (Philippine
jurisdiction to enjoin the levy of taxes and Ports Authority v. The City of Davao, G.R. No.
auction of the taxpayer’s properties in 190324, June 6, 2018)
relation to that case. Section 7(a)(5) of RA No.
1125, as amended by RA No. 9282 provides Q. Does the CTA have exclusive jurisdiction
that the CTA has exclusive appellate to determine the constitutionality or validity
jurisdiction over decisions of the CBAA in the of tax laws, rules and regulations, and other
exercise of its appellate jurisdiction over cases administrative issuances of the CIR?
involving the assessment and taxation of real
property originally decided by the provincial or Yes. The CTA has exclusive jurisdiction to
city board of assessment appeals. determine the constitutionality or validity of
tax laws, rules and regulations, and other
The CTA has the power to determine whether administrative issuances of the Commissioner
or not there has been grave abuse of of Internal Revenue.
discretion in cases falling within its exclusive
appellate jurisdiction and its power to issue The CTA has not only jurisdiction to pass upon
writs of certiorari. the constitutionality or validity of a tax law or
regulation when raised by the taxpayer as a
The Court of Tax Appeals had jurisdiction over defense in disputing or contesting an
PPA’s appeal to resolve the question of assessment or claiming a refund, but also
whether or not it was liable for jurisdiction to take cognizance of cases
real property tax. The real property tax liability directly challenging the constitutionality or
was the very reason for the acts which validity of a tax law or regulation or
petitioner wanted to have enjoined. It was, administrative issuance (revenue orders,
thus, the Court of Tax Appeals, and not the revenue memorandum circulars, rulings).
Court of Appeals, that had the power to
preserve the subject of the appeal, to give The law intends the CTA to have exclusive
effect to its final determination, and, when jurisdiction to resolve all tax problems.
Page 43 of 49
NOTICE
Petitions for writs of certiorari against the acts the CIR or the COC in the exercise of their
and omissions of the said quasi-judicial quasi-legislative powers to interpret tax laws.
agencies should, thus, be filed before the CTA.
Except for local tax cases, actions directly
challenging the constitutionality or validity of
a tax law or regulation or administrative
issuance may be filed directly before the CTA. Q. Can a taxpayer directly question a tax
ruling with the Supreme Court?
With respect to administrative issuances
(revenue orders, revenue memorandum No. Rulings of the CIR (including Revenue
circulars, or rulings), these are issued by the Memorandum Circulars) are appealable to the
Commissioner under its power to make rulings Court of Tax Appeals, and not to any other
or opinions in connection with the courts. If a remedy in the administrative
implementation of the provisions of internal machinery can still be resorted to, then such
revenue laws. Tax rulings, on the other hand, remedy must first be exhausted before the
are official positions of the Bureau on inquiries court’s power of judicial review can be sought.
of taxpayers who request clarification on In questioning the validity of a Revenue
certain provisions of the National Internal Memorandum Circular, taxpayers should not
Revenue Code, other tax laws, or their resort directly to the Supreme Court.
implementing regulations. Hence, the Taxpayers should comply with the doctrine of
determination of the validity of these administrative remedies and the rule on
issuances clearly falls within the exclusive hierarchy of courts. (Bloomberry Resorts and
appellate jurisdiction of the CTA, subject to Hotels v. Bureau of Internal Revenue, G.R.
prior review by the Secretary of Finance. No. 212530, August 10, 2016)
(Steel Corporation v. Bureau of Customs &
Bureau of Internal Revenue, G.R. No. Interpretative rulings of the Bureau of Internal
220502, February 12, 2018; Banco de Oro v. Revenue are reviewable by the Secretary of
Republic, G.R. No. 198756, August 16, 2016) Finance. However, in one case, the Supreme
Court has held that because of special
NOTE: This reverses the previous ruling of the circumstances - namely: the question involved
Supreme Court in Clark Investors and is purely legal; the urgency of judicial
Locators Association v. Secretary of intervention given impending maturity of the
Finance, G.R. No. 200670, July 6, 2015 where PEACe Bonds; and the futility of an appeal to
it held that the proper remedy to assail a the Secretary of Finance as the latter
Revenue Regulation is via a special civil action appeared to have adopted the challenged
of declaratory relief under Rule 63 which falls Bureau of Internal Revenue rulings - there
under the exclusive jurisdiction of the Regional was no need to exhaust all administrative
Trial Courts. remedies before seeking judicial relief directly
with the Supreme Court. (Banco de Oro v.
This likewise reverses the ruling of the Republic, G.R. No. 198756, August 16, 2016)
Supreme Court in Commissioner of Internal
Revenue v. Court of Tax Appeals and Petron Q. The National Power Corporation (NPC)
Corporation, G.R. No. 207843, July 15, 2015 received a notice of franchise tax
where it held that the CTA has no jurisdiction delinquency from the Provincial Government
to determine the validity of a ruling issued by of Bataan. NPC argued that it was exempt
Page 44 of 49
NOTICE
from the local franchise tax. Eventually, the Q. Does the CTA have jurisdiction over cases
Provincial Government issued Warrants of asking for the cancellation and withdrawal
Levy on 14 properties owned by NPC in of a warrant of distraint and/or levy?
Limay, Bataan. The same were likewise sold
via public auction where the Provincial Yes. Section 7 of RA No. 9282 provides that
Government was the winning bidder. NPC the CTA has jurisdiction over other matters
filed a Petition for declaration of nullity of arising under the National Internal Revenue
foreclosure sale with prayer for preliminary Code or other laws administered by the
mandatory injunction with the Regional Trial Bureau of Internal Revenue. (Commissioner
Court (RTC). The RTC dismissed the same. of Internal Revenue v. Bank of the Philippine
NPC appealed to the Court of Appeals (CA). Islands, G.R. No. 224327, June 11, 2018)
The Provincial Government of Bataan
moved to dismiss the same for lack of Q. Does the Secretary of Justice have
jurisdiction of the CA over the subject matter jurisdiction to review disputed assessments
as the suit was essentially a local tax case involving government owned and controlled
questioning the validity of the imposition of corporations?
the local franchise tax. Is the Provincial
Government of Bataan correct? No. Under Presidential Decree No. 242 (PD
242), all disputes and claims solely between
Yes. The Court of Tax Appeals is vested with government agencies and offices, including
the exclusive appellate jurisdiction over, government-owned or controlled
among others, appeals from the "decisions, corporations, shall be administratively settled
orders or resolutions of the Regional Trial or adjudicated by the Secretary of Justice, the
Courts in local tax cases originally decided or Solicitor General, or the Government
resolved by them in the exercise of their Corporate Counsel, depending on the issues
original or appellate jurisdiction." and government agencies involved. The use of
the word "shall" in PD 242 means that
The case a quo is a local tax case that is within administrative settlement or adjudication of
the exclusive appellate jurisdiction of the disputes and claims between government
Court of Tax Appeals. Parenthetically, the agencies and offices, including government
case arose from the dispute between Napocor owned or controlled corporations, is not
and the Provincial Government of Bataan over merely permissive but mandatory and
the purported franchise tax delinquency of imperative.
Napocor. Although the complaint filed with
the trial court is a “Petition for declaration of The second paragraph of Section 4 of the
nullity of foreclosure sale with prayer for 1997 NIRC, providing for the exclusive
preliminary mandatory injunction,” the appellate jurisdiction of the CTA as regards
petition essentially assails the correctness of the CIR's decisions on matters involving
the local franchise tax assessments by the disputed assessments, refunds in internal
Provincial Government of Bataan. (Napocor v. revenue taxes, fees or other charges, penalties
Provincial Government of Bataan, G.R. No. imposed in relation thereto, or
180654, March 6, 2017) other matters arising under NIRC, is in conflict
with PD 242. To harmonize Section 4 of the
1997 NIRC with PD 242, the following
interpretation should be adopted:
Page 45 of 49
NOTICE
Q. Does the CTA have jurisdiction over a

1. As regards private entities and the petition for certiorari assailing a Department
BIR, the power to decide disputed of Justice (DOJ) resolution in a preliminary
assessments, refunds of internal investigation involving tax and tariff
revenue taxes, fees or other charges, offenses?
penalties in relation thereto, or other
matters arising under the NIRC or other Jurisdiction over a petition for certiorari
laws administered by the. BIR is vested assailing a DOJ resolution in a preliminary
in the CIR subject to the exclusive investigation involving tax and tariff offenses
appellate jurisdiction of the CTA, in is now with the CTA, not the Court of Appeals
accordance with Section 4 of the NIRC; (“CA”).
and In Bureau of Customs v. Hon. Devanadera,
G.R. No. 193253, September 8, 2015, the
2. Where the disputing parties Supreme Court said that the elementary rule
are all public entities (covers disputes is that the Court of Appeals has jurisdiction to
between the BIR and other review the resolution of the DOJ through a
government entities), the case shall be petition for certiorari under Rule 65 of the
governed by PD 242. Rules of Court on the ground that the
Secretary of Justice committed grave abuse of
Even if the 1997 NIRC, a general statute, is a his discretion amounting to excess or lack of
later act, PD 242, which is a special law, will jurisdiction. However, with the enactment of
still prevail and is treated as an exception to Republic Act (RA) No. 9282 expanding the
the terms of the 1997 NIRC with regard solely CTA’s jurisdiction, it is no longer clear which
to intragovernmental disputes. PD 242 is a between the CA and the CTA has jurisdiction
special law while the 1997 NIRC is a general to review through a petition for certiorari the
law, insofar as disputes solely between or DOJ resolution in preliminary investigations
among government agencies are concerned. involving tax and tariff offenses. The Supreme
(Power Sector Assets and Liabilities Court then declared that the CA’s original
Management Corporation v. Commissioner jurisdiction over a petition for certiorari
of Internal Revenue, G.R. No. 198146, assailing the DOJ resolution in a preliminary
August 8, 2007) investigation involving tax and tariff offenses
was necessarily transferred to the CTA
NOTE: Previously, the Supreme Court ruled pursuant to Section 7 of RA No. 9282,
that the Secretary of Justice does not have amending R.A. No. 1125.
jurisdiction to review disputed assessments
and it is the CTA that has the exclusive Q. Does the CTA en banc have jurisdiction
appellate jurisdiction to review, among others, over interlocutory orders issued by the CTA
the decisions of the Commissioner of Internal Division?
Revenue in cases involving disputed
assessments. (Commissioner of Internal No. The CTA en banc has jurisdiction over final
Revenue v. Secretary of Justice and orders or judgments but not over interlocutory
Philippine Amusement and Gaming orders issued by the CTA in division. An
Corporation, G.R. No. 177387, November 9, interlocutory order may not be questioned on
2016) appeal. (Commissioner of Internal Revenue
v. Court of Tax Appeals and CBK Power, G.R.
Page 46 of 49
NOTICE
No. 203054-55, July 29, 2015) of judgment at all. The Rules of Court are silent
as to whether a collegial court sitting en banc
Q. The BIR issued several assessment may annul a final judgment of its own
notices to the taxpayer for deficiency income division.The silence of the Rules may be
tax and VAT for the taxable years 1999 to attributed to the need to preserve the
2002. The taxpayer filed protests, but they principles that there can be no hierarchy
were denied by the BIR. The taxpayer then within a collegial court between its divisions
filed a Petition for Review with the CTA in and the en banc, and that a court's judgment,
Division. The CTA Division denied the once final, is immutable.
Petition. The CTA Division likewise denied
the Motion for Reconsideration. The Further, a direct petition for annulment of a
taxpayer then appealed directly to the judgment of the CTA to the Supreme Court,
Supreme Court. Does the Supreme Court meanwhile, is likewise unavailing, for the
have jurisdiction? same reason that there is no identical remedy
with the High Court to annul a final and
No. The Court is without jurisdiction to review executory judgment of the Court of Appeals.
decisions rendered by a division of the CTA, The proper remedy of the taxpayer is to file a
exclusive appellate jurisdiction over which is petition for certiorari under Rule 65, which can
vested in the CTA en banc. RA 1125, as be filed as an original action with the Supreme
amended by RA 9282, provides that the CTA Court and not before the CTA En Banc.
en banc shall have exclusive jurisdiction over (Commissioner of Internal Revenue v. Kepco
appeals from the decision of its divisions. A Ilijan Corporation, G.R. No. 199422, June 21,
party adversely affected by the resolution of 2016)
the CTA division may, on motion for
reconsideration, file a petition for review with
the CTA en banc. Thereafter, the decision or Q. What is the effect of filing a Petition for
ruling of the CTA en banc may be elevated to Review with the CTA En Banc without filing
this Court. Simply stated, no decision of the a prior motion for reconsideration or new
CTA division may be elevated to this Court trial before the CTA Division?
under Rule 45 of the 1997 Rules of Civil
Procedure without passing through the CTA The filing of a motion for reconsideration or
en banc. (Duty Free Philippines v. BIR, G.R. No. new trial before the CTA Division is an
197228, October 8, 2014) indispensable requirement for filing an appeal
before the CTA En Banc. Failure to file such
Q. Does the CTA En Banc have jurisdiction to motion for reconsideration or new trial is
take cognizance of a petition for annulment cause for dismissal of the appeal before the
of judgment to annul and set aside a final CTA En Banc. (City of Manila v. Cosmos
decision of a CTA division ? Bottling Corporation, G.R. No. 196681, June
27, 2018)
No. The Revised Rules of the CTA and even
the Rules of Court which apply suppletorily Q. Within sixty days from receipt of the
thereto provide for no instance in which the en resolution of the CTA En Banc on the Motion
banc may reverse, annul or void a final for Reconsideration of the CTA En Banc
decision of a division. The Revised Rules of the Decision, the taxpayer filed a Petition for
CTA provide for no instance of an annulment Certiorari with the Supreme Court alleging
Page 47 of 49
NOTICE
grave abuse of discretion amounting to lack The CTA may Where the issue to
or excess of jurisdiction on the part of the determine whether be resolved is
CTA En Banc when it issued the assailed there are taxes whether the
decision and resolution. Did the taxpayer that should have taxpayer is entitled
avail of the proper remedy? been paid in lieu of to a refund or credit
the taxes paid. of its unutilized
No. The taxpayer adopted the wrong remedy Determining the input VAT, the
in assailing the resolution of the CTA En Banc. proper category of correctness of the
What the petitioner should have done to tax that should VAT returns is not
question the decision of the CTA En Banc was have been paid is an issue. Thus,
to file before the Supreme Court a petition for not an assessment. there is no need for
review under Rule 45 of the same Rules of It is an incidental the Court to
Court in conformity with Section 11 of R.A. No. matter necessary determine whether
9282. A petition for certiorari under Rule 65 of for the resolution of the taxpayer is
the Rules of Court is a special civil action that the principal issue, liable for deficiency
may be resorted to only in the absence of which is whether VAT.
appeal or any plain, speedy and adequate the taxpayer is (Commissioner of
remedy in the ordinary course of law.54 In this entitled to the Internal Revenue
case, there is a plain, speedy and adequate refund (SMI-ED v. Toledo Power
remedy that is available - appeal by certiorari Philippines v. Company, G.R. No.
under Rule 45. (Aichi Forging Company v. Commissioner of 196415 & 196451,
Commissioner of Internal Revenue, G.R. No. Internal Revenue, December 2, 2015)
193625, August 30, 2017; Bureau of Internal G.R. No. 175410,
Revenue v. Hon. Ernesto Acosta, G.R. No. November 12,
195320, April 23, 2018) 2014)
Q. May the Courts determine, in a claim for

refund, whether there are taxes that should Q. May the requirement of a bond for the
have been paid in lieu of the taxes paid? CTA to suspend the collection of tax be
dispensed with?
A. A distinction between a claim for refund or
credit of erroneously paid taxes under Section Yes. The authority of the CTA to issue such
228 of the NIRC of 1997, as amended, and a injunctive writs to restrain the collection of tax
claim for refund or credit of unutilized input and to dispense with the deposit of the
taxes under Section 112 of the NIRC of 1997, amount claimed or the filing of the required
as amended: bond is not simply confined to cases where
prescription has set in. Whenever it is
determined that the method employed by the
Claim for refund or Claim for refund or CIR in the collection of tax is not sanctioned by
credit of credit of unutilized law or jeopardies the interests of a taxpayer
erroneously paid input taxes under for being patently in violation of the law, the
taxes under Section 112 of the bond requirement under Section 11 of R.A.
Section 228 of the NIRC of 1997 1125 should be dispensed with. (Pacquiao v.
NIRC of 1997 Court of Tax Appeals – First Division, G.R.
No. 2133394, April 6, 2016)
Page 48 of 49
NOTICE
The requirement of the bond as a condition

precedent to suspension of collection applies
only in cases where the processes by which
the collection ought to be made by means
thereof are carried out in consonance with the
law, not when the processes are in plain
violation of the law that they have to be
suspended for jeopardizing the interests of
the taxpayer.
The CTA should conduct a preliminary hearing

to ascertain and rule whether the bond may
be dispensed or reduced. The CTA should
consider other factors recognized by law
towards suspending the collection of the
assessment, like whether or not the
assessment would jeopardize the interest of
the taxpayer, or whether the means adopted
by the CIR in determining the liability of the
taxpayer was legal and valid. (Tridharma
Marketing Corporation v. Court of Tax
Appeals and Commissioner of Internal
Revenue, G.R. No. 215950, June 20, 2016)
***Nothing else follows***
Page 49 of 49
NOTICE

PM Reyes 2014 To 2018 Tax Jurisprudence QA

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PM Reyes 2014 To 2018 Tax Jurisprudence QA

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QUESTIONS AND ANSWERS ON SIGNIFICANT

SUPREME COURT TAXATION LAW JURISPRUDENCE

PIERRE MARTIN D. REYES

GENERAL PRINCIPLES Q. The City of Manila imposed against ABC

Airlines v. Commissioner of Internal Section 135 (a), in fulfillment of international

customs territory subject to Philippine Corporation, the executing agency. Is the

the government bonds in the secondary However, a reading of the underwriting

Corporation v. Commissioner of G.R. No. 195175 & 199645, August 10,

February 18, 2015; Cargill Philippines, The Commissioner's inaction on the

proper determination has been Section 112(A) of the December 8,

administrative level due to the failure of the A taxpayer cannot

Q. Is an assessment based merely on a (2) The reckoning date of the accrual of

1Commissioner of Internal Revenue v BASF Coating + Inks Phils.,

deemed made and the three (3)-year period correct?

ABC then filed its refund with the RTC of

b. Where payment was made, the Q. May submarine communications cables

the Supreme Court questions of law.

Q. Is an adverse ruling of the Secretary of Q. The Philippine Ports Authority (PPA)

Q. Does the CTA have jurisdiction over a

Q. May the Courts determine, in a claim for

The requirement of the bond as a condition

The CTA should conduct a preliminary hearing

***Nothing else follows***

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