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other than as a mere return of capital. 3. Capital - resource of person which can be used in producing goods and services.

from sources abroad until the date of his arrival 2Sec.00e1 CTR*.3 -. ) resi+ent alien means an individual whose residence is within the *hilippines and who is not a citizen thereof. 4Sec.00f5 #. ) non-resi+ent alien means an individual whose residence is not within the *hilippines and who is not a citizen thereof. 4Sec.0045 .. ,he term tra+e or business includes the performance of the functions of as a public office. 4Sec. 00S5 +. ,he term tra+e1 business or profession shall not include performance of services by the taxpayer as an employee. 4Sec. 00 CC5 /. ) non-resi+ent alien in+i,i+ual who shall come to the *hilippines and stay therein for an aggregate period of more than 167 days during any calendar year shall be deemed a nonresident alien doing business in the *hilippines 8ection 22!9 notwithstanding 5Sec. 062A32738 9. ,he term corporation shall include: 1. *artnerships, no matter how formed or created, except !i general professional partnerships and !ii a ;oint venture or consortium formed for the purpose of underta1ing construction pro;ects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the 9overnment0 2. ;oint-stoc1 companies0 3. ;oint accounts !cuentas en participacion 3. associations0 or <. insurance companies 5Sec. 002!38. =. ) 4eneral *rofessional *artners(ip means: a a partnership formed by persons for the sole purpose of exercising their common profession0 and b no part of the income of which is derived from engaging in any trade or business 48ec. 22!- 5. - if t(e requirements are met1 it is exempt from income taxation. (. ?. 9omestic Corporation >created or organized in the *hils. or under its law 4 8ec. 22!# 5 $orei:n corporation > a corporation which is not domestic 5Sec. 002938

Requisites for Income to be Taxable:


1. gain or profit 2. realized or received 3. not excluded by law or treaty

TESTS ON TA A!I"IT# O$ INCO%E


1. $lo& of 'ealt( Test - whether any gain or the flow of wealth profit was derived from the transaction. 2. Reali)ation Test - unless the income is deemed "realized," there is no taxable income. 3. Economic-!enefit *rinciple - flow of wealth realized is taxable only to the extent that the taxpayer is economically benefited.

C"ASSI$ICATION O$ TA *A#ERS:
a. In+i,i+uals 1 citizens 1 1.1. resident citizens !"# 2 1.2. non-resident citizens !$"# 1.3 %#&' 2 aliens (.1 resident aliens !") (.2 non-resident aliens 2.2.1.engaged in trade or business within the *hils. !$")+,3 2.2.2.$ot engaged in trade or business within the *hilippines !$")$+,b. Corporations 1 .omestic !.# 2 /oreign 2.1 resident foreign corporation !"/# 2.2 non-resident foreign corporation !$"/# c. Estates d. Trusts

-n+er R.A. ./0/ or t(e CTR*:


). A non-resi+ent citi)en means1 a $ilipino citi)en: 1. who establishes to the satisfaction of the #ommissioner the fact of their physical presence abroad with a definite intention to reside therein0 2. who leave the *hilippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis0 3. who wor1 and derive income from abroad and whose employment thereat re2uires them to be physically present abroad most of the time during the taxable year0 3. who are previously considered as a non-resident and who arrive in the *hilippines at anytime during the taxable year to reside thereat permanently shall be considered non-resident for the taxable year in which he arrives in the *hilippines with respect to his income derived

@. Resi+ent $orei:n Corporation > engaged in trade or business within the *hilippines 5Sec. 002;38 A. Non-resi+ent $orei:n Corp. > not engaged in trade or business within the *hilippines 5Sec. 002I38

,he income of taxable estates and trusts shall be


taxed in the same manner as any other individual taxpayer. 48ec. B7 !) 5

ON"# RESI9ENT CITI<ENS an+ 9O%ESTIC COR*ORATIONS are taxable for income +eri,e+ from sources &it(in an+ &it(out t(e *(ilippines. All ot(er income taxpa=ers are taxable onl= for income +eri,e+ from sources &it(in t(e *(ilippines.

3. <. B. D.

$%,+: income therefrom is taxable #ompensation for in;uries or sic1ness0 (ncome exempt under ,reaty0 "etirement benefits, pension, gratuities, etc. Ciscellaneous items

>IN9S O$ INCO%E TA ES -N9ER R.A. ./0/:


!1 !2 !3 !3 $et (ncome ,ax 9ross (ncome ,ax /inal (ncome ,ax *referential "ates or 8pecial "ates of (ncome ,ax !< (mproperly )ccumulated +arnings ,ax !B Cinimum #orporate (ncome ,ax !D %ptional corporate (ncome tax

Retirement !enefits1 *ension1 4ratuities1 Etc.: 1. those derived under ".). DB31 !pertains to
private firms without retirement trust fund 0

2. those received by officials and employees of


private employers in accordance with a reasonable private benefit plan0 Requisites: a in the service of the same employer for at least 17 years0 b at least <7 years old0 c must be availed of only once d plan approved by the -(" 2R.R. 0?.3@ separation pay because of death, sic1ness, or other physical disability or for any cause beyond the control of the official or employee0 social security benefits, retirement gratuities, pensions and other similar benefits received by citizens and aliens who come to reside permanently here from foreign sources private or public0 benefits due to residents under the laws of the J.8. administered by the J.8. Keterans )dministration 888 benefits0 and 98(8 benefits.

3. NET INCO%E TA 9efinition: Ceans gross income less deductions


andEor personal and additional exemptions 2Sec. 371 RA ./0/3

3.

NET INCOME TAX FORMULA


+ntire (ncome +xclusions and (ncome sub;ect to /inal ,ax!e.g. *assive (ncome 9ross (ncome Aess: .eductions !andEor addFl exemptions, if applicable $et ,axable (ncome ,ax "ates $et (ncome ,ax .ue Aess: ,ax #redit, if any ,ax 8till due, if any Aess:

<. B. D.

%iscellaneous Items
1. *assive income derived by foreign government in the *hilippines0 2. (ncome derived from any public utility or from the exercise of any governmental function0 3. *rizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement !#2A)"+8 : Requisites: a. recipient selected without any action on his part0 b. recipient not re2uired to render substantial future services. 3. *rizes and awards granted to athletes in sports competitions and sanctioned by their national sports association 0 <. 13th month pay and other benefits up to *37,777.770 B. 98(8,888, Cedicare and union dues of individuals0 D. 9ains derived from debt securities with a maturity of more than < years0 6. 9ains from redemption of shares in Cutual /und

4ROSS INCO%E
9efinition: (ncludes but not limited to the following : 1. compensation0 2. business income0 3. gains form dealings in property0 3. interests0 <. rents0 B. royalties0 D. dividends0 6. annuities0 G. prizes and winnings0 17. pensions0 11. partnerFs share in the net income of the general professional partnership 2Sec. 301 CTR*3 >E#: . -(9 #)"H*I

9E9-CTIONS
9efinition: (tems or amounts which the law allows to be deducted from gross income in order to arrive at the taxable income.

Exclusions from 4ross Income: 1. proceeds of life insurance


$%,+: if the proceeds are retained by the insurer, the interest thereon is taxable0 2. "eturn of premium0 3. 9ift, be2uest or devise0

>in+s of 9e+uctions:

1. Optional stan+ar+ +e+uctions >17L of the gross income. 0. Itemi)e+ +e+uctions !a ordinary AN9 necessary expenses !b interests !c taxes !d losses !e bad debts !f depreciation of property0 !g depletion of oil and gas wells and mines0 !h charitable and other contributions0 !i research and development0 !; pension trust contributions of employees0 and !1 premium payments on health andEor hospitalization insurance 3. *ersonal an+ a++itional exemptions 3. Special +e+uctions A applicable only to (nsurance companies, whether domestic or foreign. 2Sec. 3B1 CTR*3. a. OR9INAR# AN9 NECESSAR# E *ENSES:

<.

interest paid in advance thru discount or otherwise, E CE*T that it is deductible in the year indebtedness is paid.

c. TA ES:

Requisites to be deductible:

1. must be in connection with taxpayerFs business0 2. tax must be imposed by law on , and payable by, taxpayer0 and 3. paid or incurred during the taxable year.

Exceptions:
1. 2. 3. 3. <.

Necessar= Expense - appropriate and helpful in


the development of taxpayerMs business. of business.

income tax0 estate and donorFs tax0 special assessments0 excess electric consumption tax0 foreign income tax, war profits and excess profits tax, if the taxpayer ma1es use of tax credit0 and B. final taxes, being in the nature of income tax. - ,axes allowed as deductions, when refunded or credited, shall be included as part of gross income in the year of receipt to the extent of the income tax benefit of said deduction !,ax -enefit "ule . - /or $")+,- and "/#, taxes paid or incurred are allowed as deductions only if and to the extent that they are connected from income within the *hilippines. +. "OSSES:

Or+inar= Expense - normal or usual in the line


Requisites of !usiness Expense to be 9e+uctible: 1. ordinary and necessary0 2. paid or incurred wEin the taxable year0 3. paid or incurred in carrying on a trade or business0 3. substantiated with official receipts or other ade2uate records.

Requisites to be deductible: 1. actually sustained0 2. connected with the business, trade or profession0 and 3. not compensated by insurance or otherwise.
T(e follo&in: losses are subCect to special rules un+er t(e CTR* 2taDe note of t(e pertinent pro,isions3: 1. #apital losses 2. 8ecurities becoming worthless 3. &ash sales 3. &agering losses <. )bandonment losses B. Aosses of mines other than oil and gas wells e. !A9 9E!TS

Capital Expen+iture:

)n expenditure that benefits not only the current period but also future periods. (t is not deductible but depreciable, E CE*T, if the taxpayer is a non-profit proprietary educational institution which may elect either to deduct the capital expense or depreciate it.

b. INTEREST:

Requisites to be deductible:

Requisites to be deductible:

1. debt belongs to the taxpayer0 2. debt must be related to the business or profession of the taxpayer0 3. interest should be legally due0 3. interest paid or accrued during the taxable year. interest paid on indebtedness to finance petroleum explorations0 interest on transactions by related parties !transactions-at-arms-length : interest to purchase or carry tax-exempt obligations0 dividend payments cannot be deducted as interest0 and

Interest *a=ments not 9e+uctible:


1. 2. 3. 3.

1. Kalid and subsisting debt0 2. .ebt must be actually ascertained to be worthless and uncollectible0 3. %bligation is not between related parties !8ec. 3B b #,"* 0 3. .ebt is expensed within the year0 and <. .ebt is connected with profession, trade or business.

Equitable 9octrine of Tax !enefit

) recovery of bad debts previously deducted from gross income constitutes taxable income if in the year the account was written off, the deduction resulted in a tax benefit.

f.

9E*RECIATION: 1. Cust be reasonable0 2. Cust be on property used in the conduct of the business0 3. Cust be expensed during the taxable year0

Requisites to be deductible:

:. 9E*"ETION O$ OI" AN9 4AS 'E""S AN9 %INES - same re2uisites as depreciation (. C;ARITA!"E AN9 OT;ER CONTRI!-TIONS

3. .ependent does not include the parents, brothers and sisters of the taxpayer. 3. (f there is any change of status at any time during the taxable year, the law expressly favors the taxpayer. <. /or a $")+,-, only to the extent allowed by his country to /ilipinos not residing therein, but not to exceed the above amounts. )dditionally, he must file a true and accurate return of the total income received by such $")+,- from all sources within the *hilippines.

OT;ER INCO%E TA ES AS 9E$INE9


7. $inal Income Tax > is derived by multiplying the tax rate on the particular income sub;ect to a final income tax. ,hus, the income sub;ect to final income tax is no longer sub;ect to the net income tax0 otherwise, there would be a violation of prohibited double taxation. )pplicable to passive income and from sources derived from within the *hilippines as determined under Sec. /0 of t(e CTR*. .eductions andEor personal and additional exemptions are not allowed. 0. Income subCect to *referential or Special Rates > here, the income derived by a particular individual or corporation belonging to a class of income taxpayer is sub;ect to either a preferential or special rate. 3. Improperl= Accumulate+ Earnin:s Tax > a tax e2uivalent to 17L of the improperly accumulated taxable income of every corporation formed or availed of for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting earnings and profits to accumulate instead of being divided or distributed. /. %inimum Corporate Income Tax > ) tax at the rate of 2L based on gross income imposed on domestic and resident foreign corporations not covered by a special income tax system, beginning the 3th taxable year in which such corporation commenced its business operations. It is impose+ &(ene,er suc( corporation (as 2a3 zero or negative net taxable income0 or 2b3 the amount of minimum corporate income tax is greater than the normal income tax due from such corporation. 6. Optional Corporate Income Tax - ,he *resident, upon recommendation of the 8ecretary of /inance may, effective ?an. 1, 2777, allow corporations the option to be taxed at 1<L of gross income sub;ect to the following conditions: 1 ) tax effort ratio of 27L of 9$*0 2 ) ratio of 37L of income tax to total tax revenue0 3 ) K), tax effort of 3L of 9$* 3 ) %.GL ratio of #onsolidated *ublic 8ector /inancial *osition to 9$*. $.-.: )vailable only to firms whose ratio of cost of sales to gross sales or receipts from all sources does not exceed <<L.

*artial 9e+uction:
-

not in excess of <L of taxable income in case of a corporation not in excess of 17L of the taxable income in case of an individual

9e+uctible in $ull:

1. .onations to the government 2. .onation to certain foreign institutions international organizations. 3. .onations to certain accredited $9%Fs .

or

*ERSONA" E E%*TIONS Amounts of *ersonal Exemptions 2Sec. 36 of


CTR*3: 1. 8ingle individual or married individual ;udicially decreed as legally separated with no 2ualified dependents: *27,777 2. =ead of the family: *2<,777 3. +ach married person: *32,777

;ea+ of t(e $amil=:

1. Jnmarried or legally separated person with one or both parents, or one or more brothers or sisters, or one or more legitimate, recognized natural or legally adopted children living with and dependent upon the taxpayer for their chief support0 and 2. &here such brother E sister or children are not more than 21 years of age, unmarried and not gainfully employed, or where such dependents regardless of age, are incapable of self > support because of mental or physical defect.

A++itional Exemption for 9epen+ents: Eualifications of a +epen+ent:

*6,777 for each dependent not to exceed 3.

1. legitimate, illegitimate or legally adopted child of the taxpayer 2. chiefly dependent upon and living with the taxpayer 3. not more than 21 years old, unmarried )$. not gainfully employed or where such dependents regardless of age are incapable of self-support because of mental of physical defect.

Clarificator= Illustrations:

1. (f only 1G years old but married, not 2ualified as a dependent. 2. +ven if 2< years old but physically incapacitated, 2ualified as a dependent.

<

INCO%E TA INCI9ENCE ON SA"ES OR E C;AN4ES O$ *RO*ERT# Sale on Exc(an:e of Or+inar= Assets


9eneral rules of income taxation apply to both as to the gain and as to the loss.

Transaction Resultin: in Taxable 4ains but Non-Reco:nition of "osses a. 8ale or exchange between related parties0 b. &ash sales by non-dealers of securities and when not sub;ect to the stoc1 transfer tax0 c. +xchanges not solely in 1ind in merger and consolidation0 and d. 8ales or exchanges that are not at arms length.

In+i,i+uals Exempt $rom $ilin: Income Tax Return: 1. (ndividual whose gross income does not exceed total personal and additional exemptions0 2. (ndividual with respect to pure compensation income derived from sources within the *hils., the income tax on which has been correctly withheld0 3. (ndividual whose sole income has been sub;ected to final withholding income tax0 3. (ndividual who is exempt from income tax.

TRANS$ER TA ES
TRANS$ER TA 1. ,ax on transfer of property. 2. "ates are lower --<L to 27L estate tax -- 2L to 1< L donorFs tax 3. Aesser exemptions INCO%E TA 1. ,ax on income 2. "ates are higher -- <L to 32L

Sale or Exc(an:e of Real *ropert=1 an+ S(ares of StocDs of 9omestic Corporation ;el+ as Capital Assets SubCect to Capital 4ains Tax As to individuals and domestic corporations 1. On real propert= > each independent transaction is sub;ect to the final tax of BL on the gross selling price or the fair mar1et value at the time of sale, whichever is higher, regardless of gain or loss 2. S(ares of stocD of domestic corporation not traded thru a local exchange taxed at the rate of <L for net capital gains not over *177,, and 17L in excess of *177,.

3. Core exemptions

ESTATE TA ESTATE TAX FORMULA


9ross +state !8ec. 6< !1 .eductions !8ec. 6B !2 $et share of the 88 in the #* $et +state Aess: +xemptions !first *277,777 exemption, 8ec. 63 $et ,axable +state ,ax rate !8ec. 63 +state ,ax due Aess: ,ax #redit 4if any5 !8ec. 6B4+5 or 1174-5 +state ,ax .ue, if any Aess:

Tax Exempt Exc(an:es:

a. +xchange solely in 1ind in mergers and consolidation0 b. +xchange of property for stoc1s resulting in a change in corporate control

$I"IN4 O$ TA RET-RN AN9 *A#%ENT O$ T;E TA


Tax Return > (t is the sole declaration of taxpayer that incorporates all the dataEfacts necessary for government to determine the amount of tax. ,here is pain of per;ury if not correct.

*ersons Require+ to $ile Income Tax Return:


A. In+i,i+ual 1. "esident citizen0 2. $on-resident citizen on income from within the *hil.0 3. "esident alien on income from within the *hil.0 3. $")+,- on income from within the *hil. <. )n individual !citizens E aliens engaged in business or practice of a profession within the *hil. regardless of the amount of gross income0 B. (ndividual deriving compensation income concurrently from two or more employers at any time during the taxable year0 D. (ndividual whose pure compensation income derived from sources within the *hil. exceeds *B7,777. !. Taxable Estate an+ Trust C. 4eneral *rofessional *artners(ip 9. Corporation 1. $ot exempt from income tax0 2. +xempt from income tax under 8ec. 37 of $("# but has not shown proof of exemption.

4ROSS ESTATE 2Sec. .61 CTR*3 A. As to resi+ent alien or $ilipino +ece+ent - all real, tangible personal, intangible personal property wherever situated. A. As to non-resi+ent alien +ece+ent - all real and tangible personal property situated in the *hil. - (ntangible personal property with a situs in the *hil. Jnless exempted on the basis of reciprocity. Inclusions in t(e 4ross Estate 2Sec. .61 CTR*3:
a. .ecedentFs interest b. ,ransfer in contemplation of death c. "evocable transfer d. ,ransfer under general power of appointment e. *roceeds of life insurance f. ,ransfers for insufficient consideration g. *rior interests

Exempt Transmissions 2Sec. .B1 CTR*3:

1. ,he merger of usufruct in the owner of the na1ed title0 2. /ideicommisary substitution0

3. ,he transmission from the first heir, legatee or donee in favor of another beneficiary, in accordance with the will of the predecessor0 and 3. )ll be2uests, devices, legacies or transfers to social welfare, cultural and charitable institutions no part of the net income of which inures to the benefit of any individual0 *rovided, that not more than 37L of the said be2uests, legacies or transfers shall be used by such institutions for administration purposes.

1. arising from fire, storm, shipwrec1, or other casualty, robbery, theft or embezzlement0 2. $ot compensated by insurance or otherwise0 3. $ot claimed as deduction in an income tax return of the taxable estate0 3. %ccurring during the settlement of the estate0 and <. %ccurring before the last day for the payment of the estate tax !last day to pay: six months after the decedentFs death .

Falue of 4ross Estate:

Transfer for *ublic -se:

,he gross estate shall be valued at its fair mar1et value at the time of death of the decedent.

9e+uctions from t(e 4ross Estate


). /or resident aliens and citizens !+A(,, ,K/8)C 1. +xpenses, losses, indebtedness, taxes, etc. !+A(,-/?##JA, a. funeral expenses b. ;udicial expenses c. claims against the estate d. claims against insolvent person e. unpaid mortgages f. taxes g. losses 2. ,ransfer for public use 3. Kanishing deduction 3. /amily home <. 8tandard deduction B. Cedical expenses D. )mounts received by heirs under ") 3G1D !"etirement -enefits -. /or non-resident aliens !+A(,-,K 1. +xpenses, losses, indebtedness, taxes, etc. !/?##JA, 2. ,ransfer for public use 3. Kanishing deduction 9E9-CTIONS ON ESTATE TA A**"ICA!"E TO RESI9ENT A"IENS AN9 CITI<ENS:

Requisites to be deductible: 1. ,he disposition is in a last will and testament 2. ,o ta1e effect after death 3. (n favor of the government of the *hil., or any political subdivision thereof 3. /or exclusive public purposes.

Fanis(in: 9e+uction:

Requisites to be deductible: 1. the present decedent died within < years from transfer of the property from a prior decedent or donor. 2. ,he property must be located in the *hils. 3. ,he property formed part of the taxable estate of the prior decedent, or of the taxable gift of the donor. 3. ,he estate tax or donorFs tax on the gift must have been finally determined and paid. <. ,he property must be identified as the one received from the prior decedent, or something ac2uired in exchange therefor. B. $o vanishing deduction on the property was allowable to the estate of the prior decedent.

$amil= ;ome:

Requisites to be deductible: 1. 8aid family home must have been the decedentFs family home. 2. 8aid fact must be certified to by the barangay captain of the locality where it is located. 3. Caximum of *1,777,777

%e+ical Expenses:

$uneral Expenses:

,he amount deductible is the lowest among the following: 1. actual funeral expenses 2. <L of the gross estate 3. *277,777

Requisites to be deductible: 1. incurred within one year prior to his death 2. 8ubstantiated with receipts 3. Caximum of *<77,777 9E9-CTIONS ON ESTATE TA A**"ICA!"E TO NON-RESI9ENT A"IENS 7. +xpenses, losses, indebtedness and taxes

Claims a:ainst t(e Estate:

Requisites to be deductible: 1. ,he debt instrument must be notarized 2. (f loan was contracted within 3 years before the death of the decedent, the administrator or executor shall submit a statement showing the disposition of the proceeds of the loan. $.-.: ,hese re2uisites do not apply if the claim did not arise from contractual obligations.

!+A(,
$ormula: *hil. 9ross +state &orld 9ross +state 2. ,ransfer for public use. 3. Kanishing deduction *hilippines. N &orld +A(,

Taxes:

on

property

in

the

The following are not deductible: 1. income tax on income received after death 2. property taxes not accrued before death 3. estate tax

Estate Tax Cre+it


FORMULA: a. One forei:n countr= onl=:

"osses:

Requisites to be deductible:

3 - ,he tax credit is whichever is lower between: 1. +state tax paid to the foreign country 2. $,+, foreign country N *hil. estate tax $,+, world !$,+ - $et ,axable +state b. %ore t(an one forei:n countr= - ,he credit shall be that which is the lower amount between Aimit ) and Aimit "imit A. &hichever is lower between: 1. +state tax paid to foreign country 2. $,+, foreign country N *hil. estate tax $,+, world "imit !. &hichever is lower between: 1. total of estate taxes paid to all foreign countries 2. $,+ outside *hil. N *hil. estate tax $,+, world

c.

their legitimate, illegitimate or adopted children to the extent of the first *17,777. b. 9ifts made to or for the use of the $ational 9overnment or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said government. 9ifts in favor of educational, charitable, religious, cultural or social welfare corporation, institutions, foundations, trust or philanthropic organization, research institution or organization, accredited non-government organization !$9% . *rovided, that no more than 37L of said gifts shall be used by such donee for administration purposes. 2. 9ifts made by a non-resident not a citizen of the *hil. a. same as !b b. same as !c except accredited nongovernment organization !$9%

Tax cre+it for +onorGs taxes pai+ to a forei:n


countr=:

7.
9ONORGS TA Requisites: 2A9IC3
1. capacity of the donor 2. donative intent 3. delivery, whether actual or constructive, of the sub;ect gift 3. acceptance by the donee

.onor was a /ilipino citizen or resident alien 2. )t time of foreign donation 3. .onorFs taxes of any character and description 3. )re imposed and paid by the authority of a foreign country.

"imitations on tax cre+it:

Stran:er - a person who is not a brother, sister,

spouse, ancestor and lineal descendant, or of a relative by consanguinity in the collateral within the 3th civil degree.

FORMULA:

a. %n the 1st donation of a year:


9ross gifts Aess: .eductions from gross gifts $et gifts N ,ax "ate .onorFs tax on the net gifts xxx xxx xxx xxx

1. ,he amount of the credit in respect to the tax paid to any country shall not exceed the same proportion of the tax against which such credit is ta1en, which the decedentFs net gifts situated within such country taxable under the $("# bears to his entire net gift0 and 0. ,he total amount of the credit shall not exceed the same proportion of the tax against which such credit is ta1en, which the decedentFs net gift situated outside the *hilippines taxable under the $("# bears to his entire net gift.

FORMULA:

a. /or donorFs taxes paid to one foreign country


$9 situated in a foreign country N *., +ntire net gifts O ,ax credit limit !$9 - $et 9ifts0 *., - *hil. .onorMs ,ax

b. %n donation of a subse2uent date during the year: 9ross gifts made on this date Aess: .eductions from gross gifts $et gifts )dd: )ll prior net gifts within the year )ggregate net gifts N ,ax "ate .onorFs tax on aggregate net gifts Aess: .onorFs tax on all prior net gifts .onorFs tax on the net gifts on this date xxx xxx xxx xxx xxx xxx xxx xxx xxx

b. /or donorFs taxes paid to two or more foreign


country $9 outside the *hil. +ntire net gifts O,ax credit limit N *.,

Exemption of certain :ifts:


1. 9ifts made by a resident a. dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents to each of

,he allowable tax credit is the lower amount between the tax credit limit under !a and !b .

E *AN9E9 FA"-E A99E9 TA

*ersons liable to *a= t(e FAT: 2 S ! E " S I3


1. )ny person whether natural of ;uridical who, in the course of trade or business, sells, barters, exchanges, or leases goods or properties, or renders services0 2. )ny person who imports goods whether for business or non-business purpose0 and provided, gross receipts is more than *<<7,777.77, otherwise,

$orei:n Currenc= 9enominate+ Sales > sales to

non-residents of goods assembled or manufactured in the *hilippines for delivery to residents in the *hilippines and paid for in convertible foreign currency remitted through the ban1ing system in the *hilippines.

ZERO-RATED VS EXEM!T TRANSACTIONS


R+"%-"),+. +N+C*, ,")$8)#,(%$8

more than *177, but less than *<<7, >3L percentage tax less than *177, > no business tax liability

Extent: )ll value added tax is removed

%nly removes the value added tax at the exempt stage

Transactions SubCect to FAT: 2S I T S 3


1. every sale, barter, or exchange, leases goods or properties made in the course of trade or business0 0. transactions deemed sale for K), purposes0 3. importation of goods0 and 3. every sale of service made in the course of trade or business other than services rendered by persons sub;ect to Pother percentage taxesQ. Claim for refund: ,axpayer can claim the refund of input taxes passed on to him by the supplier, etc. or credit such input taxes against his liabilities for output taxes on his other nonzero rated transactions Scope: 9enerally, taxable sales, and ta1en into account in determining turn-over or sales for sales for K),registration purposes. Registration requirement: Rero-rated person may still register for K),. ,axpayer is not entitled to credit or refund of the input tax passed on to him by the supplier, etc.

Elements of FAT :
1. sale must be made in the *hilippines0 2. sale must be of taxable goods, properties or services0 and 3. sale must be made by a taxable person in the course or furtherance of his business.

$ot taxable sales and therefore not ta1en into account in determining turn-over or K),registration purposes

Rate Structure un+er t(e FAT S=stem:


1 1. 0% rate for export sales and persons whose sales are effectively zero-rated and zero-rated sales of services0 and 2. 10% for all other articles and transactions covered by the K),.

+xempt person may not register for K),.

Input Tax tax on purchase price of goods which is passed on or shifted to a buyer E purchaser Elessee by the supplier E seller E lessor. (t is the K), paid by a K),-registered person in the course of his trade or business.

Re:istration Requirements:
7. %an+ator= A every person who in the course of trade or business, sells, barters, exchanges, leases goods or services for others, if the aggregate amount of actual or expected gross sales and E or gross receipts exceeds *<<7, for any 12-month period. 0. Optional -- any of the following persons may, at their option, apply for K), registration: a. seller of goods or services whose taxable sale or gross receipts do not exceed *66H, for any 12-month period0 b. seller of agricultural or marine food products in their original state0 c. seller of fertilizer, seeds, seedlings and fingerlings, fish live stoc1 and poultry feeds, including ingredients whether locally produced or imported, used in the manufacture of finished foods0 d. seller of non-food agricultural, marine and forest products in their original state0

Output Tax-- K), due on the sale of taxable

goods or services by any person registered or re2uired to register for K), purposes.

Transitional Input Tax Cre+it person who becomes liable to K), or any person who elects to be a K),-registered person shall, sub;ect to the filing of an inventory of goods, material and supplies e2uivalent to 6L of value of such inventory or the actual K), paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax.

Export Sales sale and shipment or exportation

of goods from the *hilippines to a foreign #ountry irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported, or foreign-currency denominated sales.

e. seller of cotton and cotton seeds in the original state, and copra. " ##0 FANC $ N % : Ite&' ( t) e* re+er t) exp)rt 'a,e' )-,.

Transactions +eeme+ sales for FAT purposes 2Sec. 7HI!3


1. ,ransfer, use or consumption not in the course of trade or business of goods originally intended for sale or for use in the course of business0 2. .istribution or transfer to share-holders or investors as share in the profits of the K), -registered persons0 3. #onsignment of goods if actual sale is not made within B7 days following the date of consignment0 3. .istribution or transfer to creditors in payment of debt0 <. "etirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.

1. *lace of sale! with branch or sales outlet therein : Cunicipality or city where the branch or outlet is located. 2. *lace of sale !no branch or sales outlet : Cunicipality or city of principal office !not in the place of sale . 3. (f manufacturer, assembler, contractor, producer or exporter !C)#*+ with factory, pro;ect office, plant or plantation !/*** : a. 37L of recorded sales in the principal office: city or municipality where the principal office is located0 b. D7L of recorded sales in the principal office: city or municipality where the /*** is located !pro rata if /*** are located in different municipalities or cities . c. (f plantation is located in some other place than that where the factory is located, the foregoing D7L shall be subdivided as follows: - B7L to the city or municipality where the factory is located, - 37L to the city or municipality where the plantation is located.

III. "OCA" TA ATION


9efinition:
,he power of local government unit to !1 create its own sources of revenue and !2 to levy taxes, fees, and charges. "See Sec #* Art X* 1/01 C)-'t2t3t2)- a-4 Sec 15/* L6C$

$un+amental *rinciples 4o,ernin: "ocal Taxation:


1. 8hall be uniform in each local sub-unit 2. 8hall be e2uitable and based as much as possible on the taxpayerFs ability to pay 3. Aevied for public purposes 3. 8hall not be un;ust, excessive, oppressive, or confiscatory <. 8hall not be contrary to law, public policy, national economic policy, or in restraint of trade B. #ollection of local taxes and other impositions shall not be let to any person D. ,he revenues collected under the #ode shall inure solely to the benefit of, and sub;ect to disposition by, the A9J levying the tax or other imposition unless otherwise specifically provided therein 6. +ach A9J shall, as far as practicable, evolve a progressive system of taxation.

Nature of t(e Taxin: *o&er of "ocal 4o,ernments


1. $ot inherent0 2. +xercised only if delegated to them by law or #onstitution. 3. $ot absolute0 sub;ect to limitations provided by law.

Aspects of "ocal Taxin: *o&er

1. Aocal taxation, and 2. "eal property taxation N ! : !oth aspects are governed b" the #ocal $overnment Code %#$C&

9octrine of preemption or exclusion

&here the $ational 9overnment elects to tax a particular area, it impliedly withholds from the local government the delegated power to tax the same field. ,his doctrine principally rests upon the intention of #ongress.

IF. REA" *RO*ERT# TA ATION


9efinitions:

7. Real *ropert= Taxation: ) direct tax on


ownership of lands and buildings or other improvements thereon payable regardless of whether the property is used or not. 2. Real propert= > sub;ect to the definition given by Art '() of the Civil Code. 3. Impro,ement > valuable addition made to a property or an amelioration in its condition amounting to more than a mere replacement of parts.

Exclu+e+ impositions 2pursuant to t(e +octrine of preemption3: 1. ,axes which are levied under the $("#, unless otherwise provided by A9# of 1GG10 2. ,axes, fees, etc. which are imposed under the ,ariffs and #ustoms #ode0 3. ,axes, fees, etc., the imposition of which contravenes existing governmental policies or which violates the fundamental principles of taxation0 and 3. ,axes, fees and other charges imposed under special law.

C(aracteristics:
1. 2. 3. 3.

Situs of %unicipal Taxation 2Sec. 76H1 7??7 "4C3

.irect on ownership0 ad valorem tax proportionate creates a single indivisible obligation 6. local tax >e=: SA*O"

% ) * 8 A

17

Taxin: Aut(orities:

1. *rovince, at the rate of not S 1L of assessed value0 2. #ity at the rate of not S 2L0 and 3. Cunicipality within Cetro Canila at the rate of not S 2L.

IF. TARI$$ AN9 C-STO%S CO9E


9E$INITIONS:
1. Tariff: #ustoms duties, toll or tribute payable upon merchandise to the 9ovFt. 2. Custom 9uties: ,ax assessed upon merchandise from or exported to, a foreign country. "6arc2a 7 Exec3t27e Sec * 511 SCRA 551 81//59$ N ! : Customs and tariffs are s"non"mous with one another The" both refer to the taxes imposed on imported or exported wares* articles* or merchandise

Extent of t(e po&er to le,=:

1. -asic real property tax0 2. 1L additional real estate tax to finance the 8pecial +ducation /und0 3. <L additional tax on idle lands0 and 3. 8pecial levy or special assessments !may be imposed even by municipalities outside Cetro Canila .

$un+amental *rinciples 4o,ernin: Real *ropert= Taxation


$ 1. "eal property shall be appraised at its current and fair mar1et value0 2. "eal property shall be classified for assessment purposes on the basis of actual use. 3. "eal property shall be assessed on the basis of uniform classification within each A9J * 3. ,he appraisal, assessment, levy and collection of "*,ax shall not be let to any private person. E <. ,he appraisal and assessment of real property shall be e2uitable. >e=: $E---*

T;E !-REA- O$ C-STO%S 2!OC3 $unctions of t(e !ureau of Customs 2ACE0S33:


a. Assessment and collection of revenues from imported articles and all other impositions under the tariff and customs laws0 b. Control smuggling and related frauds0 c. Supervision and control over the entrance and clearance of vessels and aircraft engaged in foreign commerce0 d. Enforcement of ,## and related laws0 e. Supervision and control over the handling of foreign mails arriving in the *hilippines0 f. Supervise and control all import and export cargoes for the protection of government revenue0 g. Exclusive original ;urisdiction over seizure and forfeiture cases under the tariff and customs laws.

*roperties Exempt from Real *ropert= Tax 2Sec. 7?31 7??7 "4C3:
1. "eal property owned by the government except when the beneficial use thereof has been granted to a taxable person0 2. charitable institutions, churches, personages or convents appurtenant thereto, mos2ues, nonprofit or religious cemeteries and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes !)rt. K(, 8ec. 26, #onstitution 0 3. machineries and e2uipment that are actually, directly and exclusively used by local water utilities and 9%##Fs engaged in the supply and distribution of water andEor electric power0 3. real property owned by duly registered cooperatives as provided for in ") BG360 and <. machinery and e2uipment used for pollution control and environmental protection.

Juris+iction of Collector of Customs o,er importation of articles 1. #ause all articles for importation to be entered in the customhouse, 2. #ause all such articles to be appraised and classified, 3. )ssess and collect the duties, taxes and other charges thereon, and 3. =old possession of all imported articles until the duties, taxes and other charges are paid thereon. 2Sec. 70HI1 TCC3

Territorial Curis+iction of t(e !OC:

9ut= of Real *ropert= O&ners be:innin: 7??7:


"eal property owner must file with )ssessorFs %ffice a sworn statement of real property value whether exempt or non-exempt. +very buyer of real property must ma1e a new declaration thereof. !/ailure to do so shall ma1e the assessment in the name of the previous owner binding .

1. )ll seas within the ;urisdiction of the *hilippines 2. )ll coasts, ports, airports, harbors, bays, rivers and inland waters whether navigable or not from the sea. 27st par1 Sec. IH31 TCC3

'(en tariff an+ customs applie+:


%nly after importation has begun but before importation is terminated. +mportation begins: a. when the conveying vessel or aircraft b. enters the ;urisdiction of the *hil. c. with intention to unload therein +mportation is deemed terminated: a. !i upon payment of the duties, taxes and other charges due upon the articles. !ii

11

and legal permit for withdrawal shall have been granted. b. (n case the articles are free of duties, taxes and other charges, until they have legally left the ;urisdiction of the customs 2Sec. 70H01 TCC3

Re:ular 9uties:

1. A+ ,alorem +ut=: ,his is a duty based on the


value of the imported article.

2. Specific +ut=: ,his is a duty based on the 3.


dutiable weight of goods !either the gross weight, legal weight, or net weight . Alternatin: +uties: ,his is a duty which alternates ad valorem and specific. Compoun+ 9ut=: ,his is a duty consisting of ad valorem and specific duties. a. b. c. d. .umping duty #ountervailing duty Car1ing duty .iscriminatory duty

ARTIC"ES -N9ER TCC %A# EIT;ER !E:


a. 8ub;ect to duty b. *rohibited from being imported !*rohibited importation c. #onditionally-free from tariff and customs duties !conditionally-free importation d. /ree from ,# duties !duty-free

3.

Special +uties

(mported goods must be entered in a customhouse at their port of entry otherwise they shall be considered as contraband and the importer is liable for smuggling !8ee 8ec. 171, ,## .

Nature of special customs +uties:

8pecial customs duties are additional import duties imposed on specific 1inds of imported articles under certain conditions.

"IA!I"IT# $OR C-STO%S 9-TIES $eneral Rule: )ll importations E exportations of


goods are sub;ect to customs duties 2Sec. 7H61 TCC3. Exceptions: a. +xemptions under the ,##0 b. +xemptions granted to govFt agencies, instrumentalities or 9%##s with existing contracts, commitments, agreements, or obligations with foreign countries0 c. +xemptions of international organizations pursuant to agreements or special laws0 and d. +xemptions granted by the *res. of the *hil. upon recommendation of $+.) 2Sec. 7H61 TCC3.

*urpose of special customs +uties:

,he special customs duties are imposed for the protection of consumers and manufacturers, as well as *hil. products from undue competition posed by foreign-made products.

"iabilit= of importer for custom +uties:

a. A personal +ebt which can be discharged only by payment in full thereof0 b. A lien upon the imported articles while they are in custody or sub;ect to the control of the govFt 2Sec. 70H/1 TCC3.

9ra&bacD

) device resorted to for enabling a commodity affected by taxes to be exported and sold in foreign mar1ets upon the same terms as if it had not been taxed at all "U. C:2ac) S)-' 7' C),,ect)r )+ C3't)&'* 5; !:2, #<5$

Import Entr=

(t is a declaration to the -%# showing particulars of the imported article that will enable the customs authorities to determine the correct duties. )n importer is re2uired to file an import entry. (t must be accomplished from disembar1ing of last cargo from vessel.

Transaction ,alue un+er RA .7.7

(t is the invoice value of the goods plus freight, insurance, costs, expenses and other necessary expenses. ,his replaces the =ome #onsumption Kalue as basis of valuation of goods.

C"ASSI$ICATION O$ C-STO% 9-TIES:

12

S!ECIAL DUTIES COM!ARED


.JC*($9 .J,T (mposed upon foreign products with value lower than their fair mar1et value to the detriment of local products. #%J$,+"K)(A($9 .J,T (mposed upon foreign goods en;oying subsidy thus allowing them to sell at lower prices to the detriment of local products similarly situated. +2uivalent to the bounty, subsidy, or subvention. 8ec. of /inance C)"@($9 .J,T (mposed upon those not properly mar1ed as to place of origin of the goods. .(8#"(C($),%"T .J,T (mposed upon goods coming from countries that discriminates against *hilippine products.

$),J"+

)C%J$,E "),+ (C*%8($9 )J,=%"(,T

.ifference between the actual price and the normal value of the article. 8pecial #ommittee on )nti.umping !composed of the 8ec. of /inance as #hairman0 Cembers: the 8ec. of .,(0 and either the 8ec. of )griculture if article in 2uestion is agri. product or the 8ec. of Aabor if non-agri.

<L ad valorem of articles

)ny amount not exceeding 177L ad valorem of the sub;ect articles *resident of the *hilippines

#ommissioner of #ustoms

$lexible Tariff Clause

,he *resident may fix tariff rates, import and export 2uotas, etc. under ,## 2See Sec. 0.1 Art. FI1 Constitution an+ Sec. /H71 TCC3

Exception: (n;unction may be issued by the


#,) in aid of its appellate ;urisdiction under ") 112< !see re2uisites thereof, under the subheading P#ourt of ,ax )ppeals,Q infra. .

F. TA RE%E9IES
TA RE%E9IES -N9ER T;E NATIONA" INTERNA" REFEN-E CO9E
I TAX REMEDIES 6OVERNMENT OF T=E

T(e follo&in: are :enerall= t(e tax reme+ies of t(e :o,ernment to effect collection of taxes:
). ,ax Aien !8ec. 21G -. #ompromise !8ec. 273 #. .istraint !)ctual and #onstructive !8ecs. 27<-276 .. Aevy !8ec. 27D+. /orfeiture of *roperty !8ec. 21< /. #ivil )ction !8ec. 227 9. #riminal )ction !8ecs. 227, 221, and 22G =. 8uspension of business operations in violation of K), !8ec. 11< (. +nforcement of )dministrative /ine

Importance
1. 2.

,hey enhance and support the governmentFs tax collection. ,hey are safeguards of taxpayerFs rights against arbitrary action.

A. Tax "ien

Tax collection cannot be restraine+ b= court inCunction 2Sec. 07?1 CTR*3 ,ustification: Aifeblood ,heory.

9efinition: (t is a legal claim or charge on property, either real or personal, established by law as a securit= in default of the payment of taxes !<1 )m?ur 661 . 9enerally, it attaches to the property irrespective of ownership or transfer thereof.

Extent an+ nature:

13 ,he tax, together with interests, penalties, and costs that may accrue in addition thereto is a lien upon all propert= an+ ri:(ts to propert= belon:in: to t(e taxpa=er. ,he lien shall not be valid against any mortgagee, purchaser, or ;udgment creditor until notice of such lien shall be filed by the #ommissioner of (nternal "evenue in the %ffice of the "egister of .eeds of the province or city where the property of the taxpayer is situated or located !Sec. 07?1 CTR*3.

1.
2.

the basic tax involved exceeds *1,777,777.77, or the settlement offered is less than the minimum compromise rates !C#" .

N ! : ,he C#" may be less than the prescribed rates of 17L or 37L, as the case may be, provided it is approved by the +valuation -oard.

Compromise of Criminal Fiolations

!. Compromise
9efinition: ) contract whereby the parties, by reciprocal concessions, avoid a litigation or put an end to one already commenced !Art. 0H0., Ne& Ci,il Co+e .

$eneral Rule: #riminal violations may be compromised. Exceptions: 1. ,hose already filed in court 2. ,hose involving fraud 48ec. 273!) , #,"*5.

Requisites 2TAO3:

7. ,he taxpayer must have a tax liabilit=. 0. ,here must be an offer !by the taxpayer of 3.
an amount to be paid by the taxpayer ,here must be an acceptance !by the #ommissioner or taxpayer as the case may be of the offer in the settlement of the original claim.

Officers aut(ori)e+ to compromise:

7. ,he Commissioner of Internal Re,enue


!#(" is the only official vested with power and discretion to compromise criminal and civil cases arising from violations of the ,ax #ode !8ecs. D# and 273, #,"* . Subor+inate officials may preliminarily enter into a compromise. ,he effects are: i. Acceptance of an offer of compromise: not final and may be reviewed by the #ommissioner. ii. ReCection of an offer of compromise: final and binding unless revo1ed or set aside by the #ommissioner. !9ibbs vs. #ollector, 1D *hil. 232

Extent of t(e CommissionerGs +iscretion to compromise criminal ,iolations: 7. !efore the complaint is filed with the .rosecutor/s -ffice: ,he #(" has full discretion to compromise except those involving fraud. 0. After the complaint is filed with the .rosecutor/s -ffice but before the information is filed with the court: ,he #(" can still compromise provided the prosecutor must give consent. 3. After information is filed with the court: ,he #(" is no longer permitted to compromise with or without the consent of the *rosecutor !*eople vs. Cagdaluyo, )pril 27, 1GB1 .

Reme+= in case t(e taxpa=er refuses or

0.

fails to abi+e t(e tax compromise: 7. Enforce the compromise a. (f it is a Cu+icial compromise, it can be enforced b= mere execution. ) ;udicial compromise is one where a decision based on the compromise agreement is rendered by the court on re2uest of the parties. b. )ny other compromise is extraCu+icial and li1e any other contract can only be enforced b= court action. 0. "egard it as rescin+e+ and insist upon original demand !)rt. 2731, #ivil #ode .

Commissioner ma= compromise an= internal re,enue tax &(en A 1. ) reasonable +oubt as to the validity of the claim against the taxpayer exists0 or 2. ,he financial position of the taxpayer demonstrates a clear inabilit= to pa= the assessed tax 48ec. 273!) , #,"*5. (n such case, the taxpayer should waive the confidentiality privilege on ban1 deposits under ") 137< !8ee 8ec. B/2, #,"* .

Compromise *enalt=

(t is an amount of money which the taxpayer pays to compromise a tax violation. ,his is paid in lieu of criminal prosecution. ) taxpayer cannot be compelled to pay a compromise penalty. (f he does not want to pay, the #(" must institute a criminal action.

C. 9istraint
9efinition: (t is the seizure by the government of personal property, tangible or intangible, to enforce the payment of taxes. ,he property may be offered in a public sale, if taxes are not voluntarily paid. (t is a summary remedy.

%inimum compromise rates 2%CR3 of an=


tax liabilities: 7. +n case of financial incapacit": C#" O 17L of the basic assessed tax 2. -ther cases: C#" O 37L of the basic assessed tax 48ec. 273!) , #,"*5

Appro,al of t(e compromise b= t(e E,aluation !oar+ is require+ &(en:

T&o t=pes of +istraint:

13

7. Actual: there is ta1ing of possession of the


personal property from the taxpayer by the government. *hysical transfer of possession is not always re2uired. ,his is true in the case of intangible property such as stoc1s and credits. Constructi,e: the owner is merely prohibited from disposing of his property. .isposition

IF 9isposition of procee+s of sale !8ec. 27G, #,"* .

0.

3. StocDs an+ ot(er securities: -y serving a


copy of the warrant of distraint upon the a. taxpayer an+ b. upon the president, manager, treasurer or other responsible officer of the corporation, company or association which issued the said stoc1 and securities !8ec. 276, #,"* .

Requisites for t(e exercise of t(e reme+=


of +istraint: 7. ,he taxpayer must be +elinquent !except in constructive distraint in the payment of tax0 0. ,here must be a subse2uent +eman+ for its payment !assessment 0 3. ,he taxpayer must fail to pa= the tax at the time re2uired0 and 3. ,he period within which to assess or collect the tax has not =et prescribe+.

/. !anD accounts: ,hey shall be garnished by


serving a warrant of distraint upon the a. taxpayer an+ b. upon the president, manager, treasurer, or other responsible officer of the ban1. $-: Jpon receipt of the warrant of distraint, the ban1 shall turn over to the #ommissioner so much of the ban1 accounts as may be sufficient to satisfy the claim of the government !8ec. 276, #,"* .

Nature of t(e &arrant of +istraint or le,=

,he warrant is a summary procedure PforcingQ the taxpayer to pay. ,he receipt of a warrant may or may not parta1e the character of a final decision. (f it is an indication of a final decision, the taxpayer may appeal to the #,) within 37 days from service of the warrant.

6. 9ebts an+ cre+its: -y serving a copy of the


warrant of distraint upon the a. person owing the debts or b. having in his possession or under his control such credits or c. upon his agent. $-: ,he warrant of distraint shall be sufficient authority to the person owing the debts or having in his possession or under his control any credits belonging to the taxpayer to pay to the #ommissioner the amount of such debts or credits !8ec. 276, #,"* .

9uties of t(e officer ser,in: t(e &arrant of

+istraint: 7. Ca1e an account of the personal properties distrained0 0. Si:n the list of personal properties distrained to which shall be added, a statement of the sum demanded and note of the time and place of sale0 3. "ea,e either with the owner or person from whose possession such personal properties were ta1en, or at the dwelling or place of business of such person with someone of suitable age and discretion !8ec. 276, #,"*

*roce+ures for t(e actual +istraint or :arnis(ment: 1. *ersonal *ropert= 8ervice of &arrant of .istraint I Ser,ice of t(e &arrant of +istraint upon the person in possession of the taxpayerFs property !8ec. 276, #,"* . II *ostin: of notice in not less than two !2 public places in the municipality or city !8ec. 27G, #,"* III $otice to the taxpayer specifying the time an+ place of sale and the articles distrained.

T(e taxpa=erGs propert= ma= be place+ un+er constructi,e +istraint &(en (e: 7. is retirin: from any business sub;ect to tax0 or 2. is intending to > a. lea,e the *hilippines, or b. remo,e his property therefrom, or c. (i+e or conceal his property, or 3. is performing any act tending to obstruct the proceeding for collecting the tax due or which may be due from him !8ec. 27B, $("# .

*osting of $otice

*roce+ure for t(e constructi,e +istraint of


personal propert=: #(" shall re2uire the taxpayer or ,axpayer any person having possession must sign or control of such property to !a receipt si:n a receipt covering the property distrained an+ ,axpayerFs oblig. to preserve

$otice of ,ime and *lace of 8ale

!b obligate himself to 7. preser,e the same intact and unaltered and

1<

0. not to +ispose of the same


in any manner whatsoever without the express authority of the #ommissioner of (nternal "evenue. "emedy when taxpayer didnFt sign receipt (f the taxpayer or person in possession of the property refuses or fails to si:n t(e receipt referred to, the revenue officer effecting the constructive distraint shall !a proceed to prepare a list of such property and !b in the presence of two !2 witnesses lea,e a cop= thereof in the premises where the property distrained is located, after whGch the said property shall be deemed to have been placed under constructive distraint. CONSTRUCTIVE #%$8,"J#,(K+ .(8,")($, Cade on the property of any taxpayer, whether delin2uent or not ,he taxpayer is merely prohibited from disposing of his property +ffected by re2uiring the taxpayer to sign a receipt of the property or by the revenue officer preparing and leaving a list of such property $ot necessarily so

"eal property may be levied upon before1 simultaneousl=1 or after t(e +istraint of personal property belonging to the delin2uent !8ec. 27D-, #,"* 0 and the remedy by distraint and levy may be repeated if necessary until the full amount, including all expenses, is collected !8ec. 21D, #,"* .

*roce+ure of le,= on real propert=:


*repare #ertificate of Aevy I *reparation of a duly authenticated certificate containing: !a +escription of t(e propert= levied !b name of t(e taxpa=er, and !c the amounts of tax an+ penalt= +ue from him. ,his certificate shall operate with the force of a legal execution throughout the *hilippines !8ec. 27D-, #,"* . II Ser,ice of &ritten notice to the delin2uent taxpayer or occupant of the property. ,he proper "egister of .eeds shall also be notified of the levy !8ec. 27D-, #,"* . III A+,ertisement of t(e time an+ place of sale of the taxpayerFs property or so much thereof as may be necessary to satisfy the claim within 27 days after levy, and it shall cover a period of at least 37 days !8ec. 213, #,"* . IF Sale at public auction to the highest bidder !8ec. 213, #,"* . F 9isposition of procee+s of sale. (n case the proceeds of the sale exceed the claim !taxes, penalties and interest and cost of the sale, the excess shall be turned over to the owner of the property !8ec. 213, #,"* .

ACTUAL VS DISTRAINT )#,J)A .(8,")($, Cade only on the property of a delin2uent taxpayer ,here is ta1ing of possession

8ervice of $otice

,ime and *lace of 8ale

+ffected by leaving a list of distrained property or by service of a warrant of distraint or garnishment

8ale

)n immediate step for collection of taxes -oth )re summary remedies for the collection of taxes0 "efer only to personal property0 and #annot be availed of where the amount of the tax involved is not more than *177

.isposition

9. "e,= 9efinition: (t refers to the act of seizure of DISTRAINT VS LEV>


.(8,")($, "efers to personal property /orfeiture by the government is not provided ,he taxpayer is not given the right of A+KT "efers to property /orfeiture authorized real is real propert= in order to enforce the payment of taxes. ,he property may be offered in a public sale, if after seizure, the taxes are not voluntarily paid.

Requisites for t(e exercise of t(e reme+=


of le,=: 8ame as in the remedy of distraint.

'(en ma= le,= be effecte+K

,he right of redemption is granted

1B

redemption with respect to distrained personal property.

in case of real property levied upon and sold, or forfeited to the government. -oth )re summary remedies for the collection of taxes0 and #annot be availed of where the amount of the tax involved is not more than *177

Abatement T(e Commissioner ma= abate or cancel a


tax liabilit= &(en: 1. ,he tax or any portion thereof appears to be unCustl= or excessi,el= assesse+0 or 2. ,he administration and collection costs involved +o not Custif= t(e collection of the amount due 48ec. 273!) , #,"*5.

E. $orfeiture
9efinition: divestiture of property without compensation, in conse2uence of a default or offense.

*rescripti,e *erio+s for t(e Assessment an+ Collection of Taxes Rationale of (erein prescripti,e perio+s:
8uch periods are designated to secure the taxpayers against unreasonable investigation after the lapse of the period prescribed. ,hey are also beneficial to the government because tax officers will be obliged to act promptly.

Enforcement of t(e reme+= of forfeiture:

7. In case of personal propert= A ,he


forfeiture of chattels and removable fixtures of any sort is enforced b= sei)ure an+ sale or +estruction of the specific forfeited property. In case of real propert= A ,he forfeiture of real property is enforced by a Cu+:ment of con+emnation an+ sale in a legal action or proceeding, civil or criminal, as the case may re2uire.

0.

Rules on *rescription:

Effect of t(e forfeiture of propert= &it( respect to title t(ereto: ,he effect is to transfer the title to the specific thing from the owner to the government.

1. &hen the tax law itself is silent on prescription, the tax is imprescriptible0 2. &hen no return is re2uired, tax is imprescriptible0 $-: "emedy of taxpayer is to file a return. 3. .efense of prescription is waivable0 3. *rovisions on prescription, being remedial in nature, should be liberally interpreted to carry out its intent.

$. Ci,il Actions 9efinition: /or tax remedy purposes, these


are actions instituted by the government to collect internal revenue taxes. (t includes filing by the government with the probate court claims against the deceased taxpayer.

*rescripti,e *erio+ for t(e assessment of


taxes: $eneral Rule: ,="++ !3 T+)"8 after the date the return is due or filed, whichever is later !8ec. 273, #,"* . Exceptions: 1. /)(AJ"+ ,% /(A+ ) "+,J"$: ,+$ !17 T+)"8 from the date of the discovery of the omission to file the return !8ec.2224a5 0 2. /)A8+ %" /").JA+$, "+,J"$ with ($,+$,(%$ ,% +K).+ ,=+ ,)N: ,+$ !17 T+)"8 from the date of the discovery of the falsity or fraud !8ec.222 0 3. )9"++C+$, ($ &"(,($9 to the extension !not reduction of the period to assess between the #(" and the taxpayer before the expiration of the 3-year period. $-: ,he extended period agreed upon can further be extended by a subse2uent written agreement made before the expiration of the extended period previously agreed upon !8ec. 2224b5 . 3. &"(,,+$ &)(K+" or "+$J$#(),(%$ of the original three !3 year limitation, signed by the taxpayer !8ambrano vs. #,) 171 *hil. 1 .

'(en resorte+ toK

1. &hen a tax is assessed but the assessment


becomes final and unappealable because t(e taxpa=er fails to file an a+ministrati,e protest &it( t(e CIR &it(in 3H +a=s from receipt0 or &hen a protest against assessment is filed and a decision of the #(" was rendered but the said decision becomes final, executory, and demandable for failure of t(e taxpa=er to appeal t(e +ecision to t(e CTA &it(in 3H +a=s from receipt of t(e +ecision.

2.

'(ere to file: #ivil actions for the collection


of delin2uent taxes are filed in the regular courts and not before the #,).

9efenses &(ic( are preclu+e+ b= final an+ executor= assessments: 1. (nvalidity or illegality of the assessment0 and 2. *rescription of the governmentFs right to assess.

1D

*rescripti,e *erio+ for t(e Collection of Taxes: $eneral .eriods for the Collection of Taxes: < years > from assessment or within period for collection agreed upon in writing before expiration of the <-year period !8ec. 222, #,"* . 17 years > without assessment in case of false or fraudulent return with intent to evade or failure to file return !8ec. 222, #,"* .

/iling of claim for refun+ or tax cre+it within 2 years from date of payment regardless of any supervening cause !8ec. 22G, #,"* .

Ju+icial

4roun+s for suspension of t(e runnin: of

t(e statute of limitations: 7. &hen the CIR is pro(ibite+ from ma1ing the assessment or beginning the distraint or levy or a proceeding in court, and for sixty !B7 days thereafter0 0. &hen the taxpa=er requests for a reconsi+eration which is granted by the #("0 3. &hen the taxpa=er cannot be locate+ in the address given by him in the return, unless he informs the #(" of any change in his address. /. &hen the warrant of distraint or levy is duly served, an+ no propert= is locate+0 and 6. &hen the taxpa=er is out of t(e *(ilippines !8ec. 223, #,"* .

7. Ci,il Action A a. Appeal to t(e Court of Tax Appeals > within 37 days from receipt of decision on the protest or from the lapse of 167 days due to inaction of the #ommissioner !8ec. 226, #,"* . b. )ction to contest forfeiture of chattel !8ec. 231, #,"* 0 and c. )ction for +ama:es !8ec. 22D, #,"* . 0. Criminal Action A a. /iling of criminal complaint a:ainst errin: !IR officials an+ emplo=ees. b. InCunction > when the #,) in its opinion the collection by the -(" may ;eopardize taxpayer.

$ilin: of claim for Tax Refun+ or Tax Cre+it 4roun+s for filin: a claim for tax refun+ or
tax cre+it: 7. ,ax is collected erroneousl= or ille:all=. 0. *enalty is collected &it(out aut(orit=. 3. 8um collected is excessi,e.

A tax return is consi+ere+ $I"E9 for purposes of startin: t(e runnin: of t(e perio+ of limitations if: 7. ,he return is ,ali+ > it has complied substantially with the re2uirements of the law0 and 2. ,he return is appropriate > it is a return for the particular tax re2uired by law. A +efecti,e tax return is t(e same as if no return &as file+ at all.

TAX REFUND VS TAX CREDIT


,)N "+/J$. ,he taxpayer as1s for restitution of the money paid as tax ,wo-year period to file claim with the #(" starts after the payment of the tax or penalty ,)N #"+.(, ,he taxpayer as1s that the money so paid be applied to his existing tax liability ,wo-year period starts from the date such credit was allowed !in case credit is wrongly made .

II TAX REMEDIES OF T=E TAX!A>ER 4eneral Reme+ies of a Taxpa=er A+ministrati,e


7. !efore *a=ment A a. *rotest > filing a petition for reconsideration or reinvestigation within 37 days from receipt of assessment !8ec. 226, #,"* 0 ) protest is a vital document which is a formal declaration of resistance of the taxpayer. (t is a repository of all arguments. (t can be used in court in case administrative remedies have been exhausted. (t is also the formal act of the taxpayer 2uestioning the official actuation of the #(". ,his is e2uivalent to a pleading. b. Enterin: into a compromise !8ec. 273, #,"* . 0. After *a=ment A

Requisites of Tax Refun+ or Tax Cre+it

7. #laim must be in &ritin:0 0. (t must be filed with the #(" within T'O 203
#EARS after the payment of the tax or penalty. &here the payment was made by wrongly crediting a prior over payment, the two year period should start from the date such credit was allowed. 8how proof of pa=ment.

3.

Suspension of t(e T&o-=ear *rescripti,e

*erio+: 1. ,here is a pending litigation between the 9overnment and the taxpayer0 and 0. #(" in that litigated case agreed to abide by the decision of the 8# as to the collection of taxes relative thereto "!a-a. E,ectr2c C) 7' C),,ect)r* Ma. 50* 1/#0$

16

Re:lementar= *erio+s in Income Tax Impose+ b= "a& upon t(e Taxpa=er 2pursuant to Re,. Re:. No. 70-??1 Sec. 00. of t(e CTR*1 an+ Rules of Court3
-(" ma1es a tax assessment

distraint > considered sold to the A9J !8ec. 1D<, A9# .

Juris+iction of courts o,er local taxation cases:


1. ,he #ourt of ,ax )ppeals has no ;urisdiction over local taxation cases. 2. "egular ;udicial courts are not prohibited from en;oining the collection of local taxes, sub;ect to "ule <6 !*reliminary (n;unction of the "ules of #ourt.

(f taxpayer is not satisfied with the assessment file a protest within 37 days from receipt thereof

Submit supportin: +ocuments within B7 days from date of the filing of the protest

(f protest is denied, ele,ate the matter to the #ommissioner of (nternal "evenue !#(" within 37 days from receipt of the decision of the #("Fs duly authorized representative officer

*rescripti,e *erio+s in t(e Assessment an+ Collection of "ocal Taxes *rescripti,e *erio+s of Assessment
1. Aocal taxes, fees, or charges > /(K+ !< T+)"8 from the date they became due. !8ec. 1G3, A9# . 2. &hen there is fraud or intent to evade the payment of taxes, fees or charges > ,+$ !17 T+)"8 from discovery of the fraud or intent to evade the payment !8ec. 1G3, A9# .

Appeal to t(e Court of Tax Appeals 2CTA3 within 37 days from receipt of final decision of #(" or his duly authorized representative !the taxpayer has the option to appeal straight to the #,) upon receipt of the decision of the #("Fs duly authorized representative

(f the #(" or his duly authorized representative fails to act on t(e protest &it(in 7.H +a=s from date of submission by taxpayer, the latter may appeal within 37 days from lapse of the 167 day period

*rescripti,e *erio+ of Collection

Aocal taxes, fees, or charges may be collected &(,=($ /(K+ !< T+)"8 from the date of assessment by administrative or ;udicial action. $o such action shall be instituted after the expiration of such period !8ec. 1G3, A9# .

Appeal to t(e Court of Appeals !#) within 1< days from receipt of the #,)Fs decision

Appeal to t(e Supreme Court within 1< days from receipt of the #)Fs decision

As a :eneral rule1 pa=ment un+er protest


is not require+ un+er t(e NIRC1 except &(en partial pa=ment of uncontro,erte+ taxes is require+ as pro,i+e+ un+er RR 70-??.

4roun+s for t(e Suspension of t(e Runnin: of t(e *rescripti,e *erio+s: 1. ,he treasurer is legally prevented from the assessment or collection of the tax0 2. ,he taxpayer re2uests for a reinvestigation and executes a waiver in writing before the expiration of the period within which to assess or collect0 and 3. ,he taxpayer is out of the country or otherwise cannot be located !8ec. 1G3, A9# .

TA RE%E9IES -N9ER T;E "OCA" 4OFERN%ENT CO9E 2"4C3


"OCA" TA ATION RE%E9IES I TAX REMEDIES OF T=E LOCAL 6OVERNMENT UNITS T(e follo&in: are t(e Ci,il Reme+ies of t(e "ocal 4o,ernment -nits 2"4-3 to effect collection of taxes:
1. 2. 3. 3. <. ,ax Aien !8ec. 1D3, A9# .istraint !8ec. 1D<, A9# Aevy !8ec. 1D<, A9# #ivil )ction !8ec. 163, A9# *urchase of property by A9Js for want of bidder !8ec. 161, A9# 0 *roperty distrained not disposed within 127 days from date of

II TAX TAX!A>ER

REMEDIES

OF

T=E

T(e follo&in: are t(e reme+ies of t(e taxpa=er in local taxation: (. )dministrative ). *rotest > within B7 days from receipt of assessment !8ec. 1G< A9# . *ayment under protest not necessary -. *a=ment L subsequent refun+ or tax cre+it > within 2 yrs. from payment of tax to local treasurer !8ec. 1GB A9# (t is to be noted that, unli1e in internal revenue taxes, the super,enin: cause applies in local taxation because the period for the filing of claims for refund or credit of local taxes is counted not necessarily from the date of payment but from the date the taxpayer is entitled to a refund or credit.

1G #. Ri:(t of re+emption > 1 yr. /rom the date of sale or from the date of forfeiture !8ec. 161 A9# ((. ?udicial ). Appeal > any 2uestion on constitutionality or legality of tax ordinance within 37 days from effectivity thereof to 8ecretary of ?ustice !8ec. 16D A9# -. Court action > within 37 days after receipt of decision or lapse of B7 days of 8ecretary of ?usticeFs inaction !8ec. 16D A9# - within 37 days from receipt when protest of assessment is denied !8ec. 1G< A9# - if no action is ta1en by the treasurer in refund cases and the two year period is about to lapse !8ec. 1G< A9# - if remedies available does not provide plain, speedy and ade2uate remedy. C. Action for +eclarator= relief .. InCunction > if irreparable damage would be caused to the taxpayer and no ade2uate remedy is available.

). )ppeal > within B7 days from assessment of provincial, city or municipal assessor to A-)) !8ec. 22B A9# within 37 days from receipt of decision of A-)) to #-)) !8ec. 237 A9# in case of denial of refund or credit, appeal to -)) as in protest case !8ec. 2<3 A9# -. #ourt )ction > appeal of #-))Fs decision to 8upreme #ourt by certiorari. #. 8uit assailing validity of tax0 recovery of refund of taxes paid !8ec. B3 *. 3B3 . .. 8uit to declare invalidity of tax due to irregularity in assessment and collection !8ec. B3 *. 3B3 . +. 8uit assailing the validity of tax sale !8ec. 63 *. 3B3

Con+onation of Real *ropert= Taxes

REA" *RO*ERT# TA RE%E9IES I TAX REMEDIES OF T=E LOCAL 6OVERNMENT TO EFFECT COLLECTION OF TAXES
1. "eal *roperty tax lien !8ecs. 23B and 2<1, A9# 0 2. .istraint !8ec. 2<3, A9# 0 3. Aevy !8ec. 2<3, A9# 0 3. #ivil )ction > formal demand not re2uired !8ec. 2BB, A9# 0 <. *urchase of property by local treasurer for want of bidder !8ec. 2B3, A9# .

a. "eal property taxes may be condoned wholly or partially in a given local government unit when i. ,here is general failure of crops0 ii. ,here is substantial decrease in the price of agricultural or agribased products0 or iii. ,here is calamity. b. -y the *resident of the *hilippines when public interest so re2uires.

TA RE%E9IES -N9ER T;E TARI$$ AN9 C-STO%S CO9E 2TCC3


Reme+ies of t(e 4o,ernment to effect collection of taxes:
1. ,ax Aien !8ec. 1273 ,## 2. "eduction of customs dutiesEcompromise > sub;ect to approval of 8ec. of /inance !8ec. D7G, 231B ,## 3. #ivil )ction !8ec. 1273 ,## 3. #riminal )ction <. 8eizure, 8earch, )rrest !8ec. 227<, 2217, 2211 ,## E forfeiture !8ec. 2<37 ,##

M*ropert= 9isco,ere+ for t(e $irst TimeN

*roperty that for so many years had not been declared and when discovered owner must pay bac1 taxes plus incremental penalties. )ssessed taxes shall cover not more than ten !17 years prior to the date of the initial assessment.

Reme+ies of t(e taxpa=er: II TAX REMEDIES OF T=E TAX!A>ER


(. )dministrative ). *rotest > payment under protest is re2uired within 37 days to provincial, city, or municipal treasurer -. "efund or tax credit > within 2 years from the date the tax payer is entitled thereto !8ec. 2<3 A9# #. "edemption of real property !8ec. 2B1 A9# ((. ?udicial (. )dministrative ). *rotest a. )ny importer or interested party if dissatisfied with published value within 1< days from date of publication b. ,axpayer > within 1< days from assessment. *ayment under protest is necessary !8ec. 2376, 2217 ,## -. "efund > abatement or drawbac1 !8ec. 1D71-1D76 ,## #. 8ettlement of any seizure by payment of fine or redemption > -J, this shall

27 not be allowed in any case where importation is absolutely prohibited or the release would be contrary to law !8ec. 237D ,## ((. ?udicial 2 ). )ppeal > within 1< days to #ommissioner 3 after notification by collector of his decision !8ec. 2313 ,## within 37 days from receipt of decision of the #ommissioner or 8ecretary of /inance to the #,) !8ec. 2373 ,##, 8ec. D ") 112< -. )ction to 2uestion the legality of seizure #. )bandonment !8ec. 1671 ,##

,he party adversely affected !the protestant may file a written protest on his foregoing liability with the #ollector within 1< days after paying the li2uidated amount !the payment under protest rule applies

=earing within 1< days from receipt of the duly presented protest. Jpon termination of the hearing, the #ollector shall decide on the same within 37 days

(f decision is adverse to the protestant

(f decision is adverse to the 9overnment

T&o Din+s of procee+in:s in t(e !ureau of Customs 2!OC3:


1. Customs protest cases 2. Customs sei)ure an+ forfeiture cases

)ppeal with the #ommissioner within 1< days from notice

)utomatic review by #ommissioner

A. Customs *rotest Cases


9efinition: ,hese are cases which deal solely with liability for customs duties, fees, and other charges. by

)utomatic review the 8ec. of /inance

)ppeal with the #ourt of ,ax )ppeals within 37 days from notice

'(en customs protest applicable:

(f decision of #ommissioner or 8ec. of /inance is adverse to the protestant, he may appeal to the #), and 8# under the same procedure on the left

,he customs protest is re2uired to be filed only in case the liability of the taxpayer for duties, taxes, fees and other charges is determined and the taxpayer disputes said liability.

)ppeal with the #ourt of )ppeals within 1< days from notice

'(en Customs protest NOT require+

#,), )ppeal by certiorari with the 8upreme #ourt within 1< days from notice

&here there is no dispute, but the claim for refund arises by reason of the happening of supervening events such as when the raw material imported is utilized in the production of finished products subse2uently exported and a duty drawbac1 is claimed.

Requirements for maDin: a protest:

a. must be in &ritin: b. must point out the particular +ecision or rulin: of t(e Collector of Customs to which exception is ta1en or ob;ection made0 c. must state the :roun+s relied upon for relief0 d. must be limite+ to the sub;ect matter of a sin:le a+Custment0 e. must be file+ when the amount claimed is paid or &it(in 76 +a=s after the payment0 f. protestant must furnis( samples of :oo+s under protest when re2uired.

Reasons for t(e automatic re,ie& of +ecisions a+,erse to t(e 4o,ernment 1. ,o protect the interest of the 9overnment 2. ) favorable decision will not be appealed by the taxpayer and certainly a #ollector will not appeal his own decision. 3. Aifeblood ,heory

!. Sei)ure an+ $orfeiture Cases


9efinition: ,hese refer to matters involving
smuggling. (t is administrative and civil in nature and is directed against the res or imported articles and entails a determination of the legality of their importation. ,hese are actions in rem.

*roce+ure on Customs *rotest Cases:


,he #ollector acting within his ;urisdiction shall cause the imported goods to be entered at the customhouse

Smu::lin:

,he #ollector shall assess, li2uidate, and collect the duties thereon, or detain the said goods if the party liable does not pay the same

). )n act of any person who shall: 4 1. /raudulently import any article contrary to 5 law, or 6 2. )ssist in so doing, or 7 3. "eceive, conceal, buy, sell, facilitate, 8 transport, conceal or sell such article 9 1nowing its illegal importation 2Sec. 3IH71 10 TCC3 3. +xport contrary to law. !Sec. 367/1 TCC3

21 -. ,he *hilippines is divided into various ports of entry > entry other than port of entry, will be 8CJ99A($9. these are in reality attempts to review the #ommissionerMs actuations. $either replevin filed with the ",# will issue. Rationale: .octrine of *rimary ?urisdiction.

E,i+ence for con,iction in smu::lin: cases. Cere possession of the article in 2uestion J$A+88 defendant could explain that his possession is lawful to the satisfaction of the court 2Sec. 3IH71 TCC3. *ayment of the tax due after apprehension is not a valid defense "R)4r2?3e@ 7 CA* 5;0 SCRA 500$

Contraban+: )rticles of prohibited importations or exportations. 2Sec. 367/1 TCC3 T(in:s subCect to confiscation in smu::lin: cases: )nything that was used for smuggling is sub;ect to confiscation, li1e the vessel, plane, etc. "L,a&a4) 7' C)&& )+ C3't)&'* 1/0A$ +N#+*,(%$: #ommon carriers that are not privately chartered cannot be confiscated.

*ersons (a,in: police aut(orit= to enforce t(e Tariff L Customs "a&s an+ effect searc(es1 sei)ures an+ arrests: a. officials of the -%#, district collectors, police officers, agents, inspectors, and guests of the -%#0 b. officers of the *hil. $avy and other members of the )/* and national law enforcement agencies when authorized by the #ommissioner of #ustoms c. officials of the -(" on all cases falling within the regular performances of their duties, when the payment of internal taxes are involved0 d. officers generally empowered by law to effect arrests and execute processes of courts, when acting under the direction of the #ollector. 2Sec. 00H31 TCC3

Ri:(t of customs officers to effect sei)ure

A+ministrati,e an+ Ju+icial *roce+ures relati,e to Customs Sei)ures an+ $orfeitures .etermination of probable cause and issuance of warrant

L arrest a. Cay seize any vessel, aircraft, cargo, article, animal or other movable property when the same is sub;ect to forfeiture or liable for any time as imposed under tariff and customs laws, rules U regulations b. Cay exercise such powers only in conformity with the laws and provisions of the ,## 2Sec. 00H63

)ctual seizure of the articles

Aisting of description, appraisal and classification of seized property

"eport of seizure to the #omm. of #ustoms and the #hairman, #omm. on )udit

9octrine of ;ot *ursuit

Requisites: 7. O,er Fessels a. )n act is done in *hil. &aters which constitutes a violation of the tariff and customs laws b. a pursuit of such vessel began within the ;urisdictional waters which i. may continue beyond the maritime zone, and ii. the vessel may be seized on the high seas. 0. O,er Importe+ Articles a. ,here is a violation of the tariff and customs laws b. )s a conse2uence they may be pursued in the *hils. c. &ith ;urisdiction over them at any place therein for the enforcement of the law. 2 0n+ par. Sec. IH31 TCC3

(ssuance by the #ollector of a warrant of detention

$otification to owner or importer

/ormal hearing

.istrict collector renders his decisions

(f decision is not favorable to the aggrieved owner or importer

(f decision is not favorable to the 9overnment

)utomatic review by the #ommissioner

)ppeal by the aggrieved owner or importer

RTC ,s. !OC

,he ",#s do not have ;urisdiction over seizure and forfeiture proceedings conducted by the -%# and to interfere with these proceedings. ,he #ollector of #ustoms has exclusive ;urisdiction over all 2uestions touching on the seizure and forfeiture of dutiable goods. $o petitions for certiorari, prohibition or mandamus filed with the ",# will lie because

Requirements for customs forfeiture

7. ,he &ron:ful maDin: by the owner,


importer, exporter or consignee of any declaration or affidavit, or the wrongful ma1ing or delivery by the same persons of any invoice, letter or paper - all touching on the importation or exportation of merchandise.0 and

22

0. ,hat such declaration, affidavit, invoice,


letter or paper is false. "Far),a-* Br 7 CTA* 511 SCRA 5/0$

*laces &(ere searc(es L sei)ures ma= be

con+ucte+: a. enclosures b. dwelling house !there must be search warrant issued by a ;udge c. vessels or aircrafts and persons or articles conveyed therein +. vehicles, beasts and persons e. persons arriving from foreign countries.

1. #riminal proceedings are actions in personam while seizure or forfeiture proceedings are actions in rem. 2. #ustoms compromise does not extinguish criminal liability !*eople vs. .esiderio, $ov. 2B, 1GB< .

)t any time prior to the sale, the delin2uent

importer ma= settle (is obli:ations with the -ureau of #ustoms, in which case the aforesaid articles may be delivered upon payment of the corresponding duties and taxes and compliance with all other legal re2uirements 2Sec. 76H.1 TCC3

!ur+en of proof in sei)ure or forfeiture:


claimant !8ec. 2<3<, ,## .

Abatement

Requirements for manifest

) manifest in coastwise trade for cargo and passengers transported from one place or port in the *hilippines to another is re2uired when one or both of such places is a port of entry !8ec. G7B, ,## . Canifests are also re2uired of vessel from a foreign port !8ec. 177<, ,## .

,he reduction or non-imposition of customs duties on certain imported materials as a result of: 1. .amage incurred during voyage0 2. .eficiency in contents pac1ages 3. Aoss or destruction of articles after arrival 3. .eath or in;ury of animals

Euer=: Is manifest require+ onl= for importe+ :oo+sK $o. )rticles sub;ect to seizure do not have to be imported goods. Canifests are also re2uired for articles found on vessels or aircraft engaged in coastwise trade "R2?)r 7' R)'a,e'* 111 SCRA 100$.

-nmanifeste+ Car:o is subCect to $orfeiture whether the act of smuggling is established or not under the principle of res ipsa lo2uitur. (t is enough that the cargo was unmanifested and that there was no showing that payment of duties thereon had been made for it to be sub;ect to forfeiture.

Car:o1 sea store1 an+ pro,isions +istin:uis(e+: 1. Car:o: )rticle of value !including foreign currencies , usually movables, other than those as part of sea stores or provisions. 2. Sea Store: (t is where the passengers can buy their necessities. 3. *ro,isions: ,hose necessary for the subsistence of the crew.

$rau+ulent *ractices consi+ere+ as Criminal Offenses a:ainst Customs Re,enue "a&s: a. Jnlawful importation0 b. +ntry of imported or exported article by means of any false or fraudulent practices, invoice, declaration, affidavit, or other documents0 c. +ntry of goods at less than their true weights or measures or upon a classification as to 2uality or value0 d. *ayment of less than the amount due0 e. /iling any false or fraudulent claim for the payment of drawbac1 or refund of duties upon the exportation of merchandise0 or f. /iling any affidavit, certificate or other document to secure to himself or others the payment of any drawbac1, allowance or refund of duties on the exportation of mdse. greater than that legally due thereon. 2Sec. 3IH01 TCC3

Settlement of $orfeiture Cases

FI. CO-RT O$ TA A**EA"S 2RA 77063


1. (t is a ;udicial body0 2. (t is a court of special ;urisdiction0 3. (t is not governed by technical rules of evidence.

$eneral Rule: 8ettlement of cases by payment of fine or redemption of forfeited property is allo&e+. Exceptions: 1. the importation is absolutel= pro(ibite+ or 2. the surrender of the property to the person offering to redeem would be contrar= to la&, or 3. when there is frau+. 2Sec. 03HB1 TCC3

Salient features of t(e CTA:

*o&ers of t(e CTA: T(e follo&in: are t(e po&ers of t(e CTA:
1. 2. 3. 3. to administer oat(s0 to recei,e e,i+ence0 to summon witnesses by subpoena0 to re2uire production or papers or documents by subpoena +uces tecum@

Acquittal in Criminal C(ar:e NOT Res Ju+icata in Sei)ure or $orfeiture *rocee+in:s Reasons:

23 <. to punish contempt0 B. to promul:ate rules an+ re:ulations for the conduct of its business0 D. to assess +ama:e against appellant if appeal to #,) is found to be frivolous or dilatory0 6. to suspen+ t(e collection of t(e tax pen+in: appeal0 and G. to ren+er +ecisions on cases brought before it. "+)8%$: 8tate can never be in estoppel and lifeblood theory. "CIR 7' !r)cter a-4 6a&(,e !:2,' M+? C)rp $

Simultaneous filin: of an application for

Requisites for a Fali+ Suspension of Collection of t(e Tax pen+in: Appeal: There must be a 1. 8howing that collection of the tax may Ceopar+i)e t(e interest of the government and E or the taxpayer0 2. 9eposit of the amount claimed or file a surety bond for not more than double the amount of tax with the #ourt when re2uired0 and 3. 8howing by taxpayer that appeal is not fri,olous nor +ilator=.

refun+ or cre+it an+ institution of a case before t(e CTA allo&e+ ,he law fixes the same period of two !2 years for filing a claim for refund with the #ommissioner and for filing a case with the #,). ,he two-year period for both starts from the date after the payment of the tax or penalty, or from the approval of the application for credit. Obser,ation: (f we are not going to allow the taxpayer to file a refund before the #,) and let him wait for the #("Fs decision, and the latter failed to render a decision within the 2year period, the said taxpayer can no longer file a refund before the #,) because his right to appeal has prescribed.

Juris+iction of t(e CTA: Exclusi,e appellate Curis+iction to re,ie&


on appeal: 1. decisions of #(" in > a. disputed assessments, refunds of internal revenue taxes, fees or other charges0 penalties imposed in relation thereto0 or b. other matters arising under the $("#, or other law or part of law administered by the -(". 2. decision of #ommissioner of #ustoms in > a. cases involving liability from custom duties, fees or other money charges0 seizure, detention or release of property affected0 fines, forfeitures or other penalties imposed in relation thereto0 or b. other matters arising under the #ustoms Aaw, or other law or part of law administered by the -ureau of #ustoms

MOt(er mattersN

,hose controversies which can be considered within the scope of the function of the -(" E -%# under e;usdem generis rule !e.g. action for the nullity of distraint and levy0 2uestioning the propriety of the assessment0 collection of compromise penalties .

4eneral Rule: $ew issues cannot be raised


for the first time on appeal. Exceptions: 1. .efense of prescription "+)8%$: ,his is a statutory right "V2'a.aLa-4 Tra-'p)rtat2)- 7' C),,ect)r$ 2. +rrors of administrative officials

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