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MEMORY AID IN TAXATION LAW

SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS


Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
1
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
I.GENERAL PRINCIPLES
' THE POWER OF TAXATION
= Defii!i"#
1. T$%$!i": Power by which the sovereign
raises revenue to defray the necessary
expenses of the government from among
those who in some measure are privileged
to enjoy its benefits and must bear its
burden.
2. T$%e#: Enforced proportional contribution
from properties and persons levied by the
tate by virtue of its sovereignty for the
support of government and for public
needs.
= CHARACTERISTICS OF TAXES
1. forced charge!
2. generally payable in money!
". levied by the legislature!
#. assessed with some reasonable rule of
apportionment!
$. imposed by the tate within its jurisdiction!
%. levied for public purpose.
= THEORIES OR BASES OF TAXATION
1. Life&'""( T)e"*+
&axes are the lifeblood of the nation.
'ithout revenue raised from taxation( the
government will not survive( resulting in
detriment to society. 'ithout taxes( the
government would be paraly)ed for lac* of
motive power to activate and operate it. -C&R vs
Alue, &nc., et. al..
&llustrations o" Li"eblood '%eory
a. +ollection of taxes may not be enjoined
by injunction.
b. &axes could not be the subject of
compensation and set,off.
c. - valid tax may result in destruction of
the taxpayer.s property.
2. Ne,e##i!+ T)e"*+
&he existence of a government is a
necessity( and it cannot continue without any
means to pay for expenses( thus the imposition
of taxes to defray such expenses.

$. Marshall Dictu'
-P".e* !" !$% i# !)e /".e* !"
(e#!*"+0 / describes the unlimitedness
of the power and the degree of vigor
with which the taxing power may be
employed in order to raise revenue.
&. (li"er )endell Hol'es Dictu'
-P".e* !" !$% i# "! !)e /".e* !"
(e#!*"+ .)i'e !)i# ,"1*! 23S S1/*e4e
C"1*!5 #i!#0 / power to tax *nows no
limits except those expressly stated in
the +onstitution.
/ars%all and 0olmes Dictums Reconciled
-lthough the power to tax is almost
unlimited( it must not be exercised in an arbitrary
manner. 'e have courts to which people may
see* redress in case of irregularities.
". Beefi!#6P*"!e,!i" T)e"*+
&here exist reciprocal duties of
protection and support between tate and its
inhabitants. 0nhabitants pay taxes and in return
receive benefits and protection from the tate.
= IMPORTANCE OF TAXES
&axes are the lifeblood of the
government and so should be calculated
without unnecessary hindrance! therefore( their
prompt and imperious availability is an
imperious need.
= INTERPRETATION AND CONSTR3CTION OF TAX
STAT3TES
1aws imposing taxes are liberally
construed in favor of the taxpayer and strictly
against the government.
Re$#": 2urdens are not to be imposed
nor presumed to be imposed beyond what the
statutes expressly and clearly impart.
&ax exemptions 3including tax amnesties
and tax condonations4 are not presumed and(
when granted( are strictly construed against the
taxpayer and liberally in favor of the taxing
authority. 3Principle of strictissimi 1uris4
Re$#": 1ifeblood doctrine.
= GENERAL R3LE: TAXES ARE PERSONAL TO THE
TAXPAYER.
&llustrations
1. +orporation5s tax delin6uency cannot be
enforced against the stoc*holder 3+orporate
Entity 7octrine4. 2xce+tion3 toc*holders
may be held liable for unpaid taxes of a
dissolved corporation if the corporate assets
have passed into their hands or when
stoc*holders have unpaid subscriptions to
the capital of the corporation.
2. &ransfer tax on the estate cannot be
assessed against the heirs or beneficiaries.
2xce+tion3 0f prior to the payment of the
transfer tax( the properties of the decedent
have been distributed to any beneficiary(
then such beneficiary shall be subsidiarily
liable for the payment of such portion of the
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
2
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
estate tax as his distributive share bears to
the total value of the net estate 3ec. 819+:
of +&RP4.
= NAT3RE OF THE TAXING POWER
1. attribute of sovereignty and emanates from
necessity( relin6uishment of which is never
presumed!
2. legislative in character! and
". subject to inherent and constitutional
limitations.
= P3RPOSE AND OB7ECTI8ES OF TAXATION
1. Re9e1e
2. N"6Re9e1e , still a tax but imposed
under its non,revenue objective 2:e+:
PR
2
EP5
a. Regulation!
b. Promotion of general welfare!
c. Reduction of social ine6uality!
d. Encouragement of economic growth!
and
e. Protectionism.
= SCOPE OF LEGISLATI8E TAXING POWER 2:e+:
; -P-<5
1. Subject to be taxed( provided it is within its
jurisdiction!
2. Amount or rate of the tax!
". Purposes for its levy( provided it be for public
purpose!
#. :ind of tax to be collected!
$. Apportionment of the tax!
%. Situs of taxation! and
=. Method of collection.
= POWER OF 73DICIAL RE8IEW IN TAXATION
-s long as the legislature( in imposing a
tax( does not violate applicable constitutional
limitations or restrictions( the courts have no
concern with the wisdom or policy of the
exaction( the political or other collateral motives
behind it( the amount to be raised( or the
persons( property or other privileges to be taxed.
= ASPECTS OF TAXATION
1. 1evy or imposition of the tax! and
2. Enforcement or tax administration
= BASIC CHARACTERISTICS OF A SO3ND TAX
SYSTEM 2:e+: >-&5
A sound tax system must be
1. sufficient to meet governmental
expenditures 2Fi#,$' $(e;1$,+5!
2. capable of being effectively enforced
2A(4ii#!*$!i9e fe$#i&i'i!+5! and
". based on the taxpayer5s ability to pay
2T)e"*e!i,$' <1#!i,e5.
= *A+A*,(-! P(.,CE P()ER A-D
EM,-E-* D(MA,- D,S*,-&/,SHED
TAXATION
POLICE
POWER
EMINENT
DOMAIN
Purpose
&o raise
revenue
&o promote
public welfare
through
regulations
&o facilitate the
tate5s need of
property for
public use
A'ount o$ e0action
?ot limited

1imited ?o exaction!
just
compensation
is paid by the
@overnment
1ene$its
?o special or
direct benefits
are received
by the
taxpayer
?o direct
benefits are
received!
damnum
abs)ue in1uria
is attained
7irect benefits
result in the
form of just
compensation
-on2i'pair'ent o$ contracts
+ontracts
may not be
impaired
+ontracts
may be
impaired
+ontracts may
be impaired
E$$ect o$ trans$er
&axes paid
become part
of the public
funds
?o transfer
but only
restraint on
the exercise
of property
rights
Property is
ta*en by the
tate upon
payment of just
compensation
Scope
0t affects all
persons(
property( and
excises
0t affects all
persons(
property(
privileges(
and even
rights
0t affects only
the particular
property
compre,
hended
1asis
Public
necessity
Public
necessity and
right of tate
and of public
to self,
protection and
self,
preservation
?ecessity of
the public for
private
property
= IMPOSITIONS NOT STRICTLY CONSIDERED AS
TAXES
1. T"'' / amount charged for the cost and
maintenance of property used!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
2. Pe$'!+ punishment for the commission of
a crime!
". C"4/*"4i#e /e$'!+ / amount collected in
lieu of criminal prosecution in cases of tax
violations!
#. S/e,i$' $##e##4e! / levied only on land
based wholly on the benefit accruing
thereon as a result of improvements or
public wor*s underta*en by government
within the vicinity!
$. Li,e#e fee / regulatory imposition in the
exercise of the police power of the tate!
%. M$*=i fee / exaction designed to stabili)e
the currency!
=. De&! 3 a tax is not a debt but is an
obligation imposed by law.
A. S1&#i(+ legislative grant of money in aid
of a private enterprise deemed to promote
the public welfare.
8. C1#!"4 (1!ie# $( fee# / duties charged
upon commodities on their being imported
into or exported from a country!
1B. Re9e1e 22 broad term that includes not
only taxes but income from other sources
as well!
11. I4/"#! in its general sense( it signifies
any tax( tribute or duty. 0n its limited sense(
it means a duty on imported goods and
merchandise.
= .,CE-SE 4EE 5S. *A+
LICENSE FEE TAX
1asis
Police power Power of taxation.
Purpose
&o regulate &o raise revenue.
.i'itation
1imited to costs of 314
issuing the license!
and 324 necessary
inspection or police
surveillance
0nherent and
constitutional
limitations.
E$$ect o$ non2pa6'ent
;a*es the business
illegal.
7oes not ma*e the
business illegal.
= *A+ 5S. DE1*
TAX DEBT
1asis
1aw +ontract or judgment.
E$$ect o$ non2pa6'ent
0mprisonment 3except
in case of poll tax4
?o imprisonment
Mode o$ Pa6'ent
TAX DEBT
Payable in money Payable in money(
property or services
Assignabilit6
?ot assignable -ssignable
Set 3o$$
;ay not be a subject
of compensation or
set,off
;ay be a subject of
compensation or set,
off
,nterest
7oes not draw interest
unless delin6uent
7raws interest if
stipulated or delayed
Authorit6
0mposed by public
authority
+an be imposed by
private individuals
= SET6OFF
E General Rule3 &axes cannot be the subject of
compensation or set,off.
ReasonsC
1. 1ifeblood theory
2. &axes are not contractual obligation but
arise out of duty to the government.
". &he government and the taxpayers are
not mutually creditors and debtors of
each other.
E 2xce+tion3 'here both claims already
became overdue and demandable as well as
fully li6uidated( or where the government and the
taxpayer are in their own right reciprocally
debtors and creditors of each other(
compensation ta*es place by operation of law.
= DOCTRINE OF E>3ITABLE RECO3PMENT NOT
FOLLOWED IN THE PHILIPPINES
&hus( a tax presently being assessed
against a taxpayer 'a6 not be recouped or set,
off against an overpaid tax the refund of which is
already barred by prescription.
ReasonC 1ifeblood theory
= CLASSIFICATION OF TAXES
As to sub1ect matter3
1. Pe*#"$' !$% / also *nown as
capitali)ation or poll tax.
2. P*"/e*!+ !$% / assessed on property of
a certain class.
". E%,i#e !$% / imposed on the exercise of
a privilege.
#. C1#!"4 (1!ie# / duties charged upon
commodities on being imported into or
exported from a country.
$. L",$' !$%e# / taxes levied by local
government units pursuant to validly
delegated power to tax.
As to burden3
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
#
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
1. Di*e,! !$% / incidence and impact of taxation
fall to one person and cannot be shifted to
another.
2. I(i*e,! !$% / incidence and liability for the
tax fall to one person but the burden thereof
can be passed on to another.
As to +ur+ose3
1. Gee*$' !$%e# / taxes levied for ordinary or
general purpose of the government.
2. S/e,i$' !$%e# / levied for a special purpose.
As to measure o" a++lication3
1. S/e,ifi, !$%, tax imposed by the head or
number or by some standard of weight or
measurement.
2. A( 9$'"*e4 !$% / tax imposed upon the
value of the article.
As to rate3
1. P*"=*e##i9e !$%e# / rate increases as the
tax base increases.
2. Re=*e##i9e !$%e# / rate increases as tax
base decreases.
' SIT3S OF TAXATION
Si!1# "f T$%$!i" an inherent mandate that
taxation shall only be exercised on persons(
properties and excises within the territory of the
taxing power.
= FACTORS THAT DETERMINE THE SIT3S OF
TAXATION
1. ?ature of the tax!
2. ubject matter of the tax!
". +iti)enship of the taxpayer!
#. Residence of the taxpayer! and
$. ource of income
= APPLICATION OF SIT3S OF TAXATION
:i( Of T$% Si!1#
T$% " /e*#"# / residence of the taxpayer
C"441i!+ !$% / residence or domicile of
the person taxed
B1#ie## !$% / where business is
conducted
P*i9i'e=e "*
",,1/$!i" !$%
/ where occupation is
pursued
S$'e# !$% / where transaction ta*es
place
Re$' /*"/e*!+ !$% where property is located
-lex rei sitae.
Pe*#"$' /*"/e*!+
!$%
/ tangible! where it is
physically located
/ intangibleC subject to
ec. 1B# of +&RP and
principle of mobilia
se6uuntur personam!
I,"4e T$% / where income is earned
or residence or citi)enship
of the taxpayer
:i( Of T$% Si!1#
T*$#fe* !$% / residence or citi)enship
of the taxpayer or location
of the property
F*$,)i#e !$% / tate which granted the
franchise
T$% "
,"*/"*$!i"# $(
"!)e* <1(i,i$'
e!i!ie#
law of incorporation
=SIT3S OF TAXATION OF INTANGIBLE PERSONAL
PROPERTY
EGeneral Rule3 itus of intangible personal
property is the domicile of the owner pursuant to
the principle of the mobilia se)uuntur +ersonam.
E2xce+tions3
1. 'hen the property has ac6uired a
business situs in another jurisdiction!
2. 'hen an express provision of the
statute provide for another rule.
&llustration3 >or purposes of estate and
donor5s taxes( the following intangible
properties are deemed with a situs in the
PhilippinesC
a. franchise which must be exercised in the
Philippines!
b. shares( obligations or bonds issued by a
corporation organi)ed and constituted in
the Philippines in accordance with its
laws!
c. shares( obligations or bonds issued by a
foreign corporation A$D of the business
of which is located in the Philippines!
d. shares( obligations or bonds issued by a
foreign corporation if such shares(
obligations or bonds have ac6uired a
business situs in the Philippines! and
e. shares or rights in any partnership(
business or industry established in the
Philippines. -4ec. 567, R.A. 8797 or t%e
C'R#.:
' LIMITATIONS ON THE
POWER TO TAX
A. INHERENT LIMITATIONS 2:e+: P0?E5
1. Public Purpose of taxes!
2. Non,delegability of the taxing power!
". &erritoriality or Situs of taxation!
#. &ax Exemption of government!
$. International comity
= TEST IN DETERMINING P3BLIC P3RPOSE
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
1. 7E&F &E& , whether the thing to be
furthered by the appropriation of public
revenue is something which is the duty of
the state( as a government( to provide
2. PRG;G&0G? G> @E?ER-1 'E1>-RE &E& ,
whether the proceeds of the tax will directly
promote the welfare of the community in
e6ual measure.

= NON6DELEGABILITY OF THE TAXING POWER
&he power of taxation is peculiarly and
exclusively legislative. +onse6uently( the taxing
power as a general rule may not be delegated.
= NON6DELEGABLE LEGISLATI8E POWER
1. selection of property to be taxed!
2. determination of the purposes for which
taxes shall be levied!
". fixing of the rate of taxation!
#. rules of taxation in general
= DELEGABLE LEGISLATI8E POWER
1. -uthority of the President to fix tariff rates(
import and export 6uotas -Art. (&, 4ec.
98;9<, 5=8> Constitution..
2. Power of local government units to tax
subject to limitations as may be provided by
1ocal @overnment +ode -Art. ?, 4ec. @,
5=8> Constitution..
". 'hen the delegation relates merely to
administrative implementation that may call
for some degree of discretionary powers
under a set of sufficient standards
expressed by law or implied from the policy
and purpose of the -ct.
= SIT3S OF TAXATION AS A LIMITATION ON THE
POWER TO TAX 3ee the subheading on itus of
&axation( supra.4
= EXEMPTION OF THE GO8ERNMENT FROM TAXES
-s a matter of public policy( property of
the tate or any of its political subdivisions
devoted to government uses and purposes are
generally exempt from taxation.
SPECIFIC R3LES C
1. &he G"9e*4e! i# !$% e%e4/!. However(
it can also tax itself.
2. 0n case of ="9e*4e! e!i!ie# !)*"1=)
.)i,) !)e S!$!e e%e*,i#e# (i*e,!'+ i!#
="9e*4e!$' f1,!i"#? !)e =ee*$' *1'e
i# !$% e%e4/!i". 3'e## !)e '$.
e%/*e##'+ /*"9i(e# f"* e%e4/!i".
". 0n case of GOCC#? !)e *1'e i# !$%$!i" $(
e%e4/!i" i# !)e e%,e/!i".
N.B.3 ?otwithstanding the provisions of
existing laws to the contrary( @G++s(
agencies and instrumentalities are subject to
the "2D tax on ordinary corporations e%,e/!
the @0( ( PH0+( P+G and P-@+GR
34ec. 9> -C., N&RC..
#. G"9e*4e! e(1,$!i"$' i#!i!1!i"# $*e
e%e4/! from taxes. &heir income( however(
of whatever *ind and character from any of
their properties( real or personal or from any
of their activities conducted for profit
regardless of disposition made of such
income shall be subject to tax -4ec. A6, +ar.
5, N&RC..
$. F"* /1*/"#e# "f i,"4e !$%$!i"? income
derived from any public utility or from the
exercise of any essential governmental
function accruing to the @overnment or to
any political subdivision thereof shall be
exempt from income tax -4ec. A9, +ar. -B.,
no. > -B., N&RC..
7onations in favor of governmental
institutions are considered as income on the
part of the donee. uch donations( however(
are not considered as taxable income
subject to tax as donations are considered
as exclusions from the computation of the
gross income.
%. F"* /1*/"#e# "f e#!$!e !$%$!i"? any
transfer for public use made by the decedent
during his lifetime in favor of the government
or any political subdivision for exclusively
public purposes are considered as
deductible from the gross estate.
=. F"* /1*/"#e# "f (""*@# !$%? gifts in favor
of or for the use of the national government
or any entity created by any of its agencies(
which is not conducted for profit or to any
political subdivision of the said government
is deductible from the gross donations.
= INTERNATIONAL COMITY
-mong the generally accepted principles
of international law 3adopted in the Phil.
+onstitution / -rt. 00( ec. 24 are the principles of
soverein e)uality amon states and of their
"reedom "rom suit $it%out t%eir consent.
&hese principles limit the authority of the
government to effectively impose taxes on a
sovereign state and its instrumentalities( as well
as on its property held( and activities underta*en
in that capacity. Even where one enters the
territory of another( there is an implied
understanding that the former does not thereby
submit itself to the authority and jurisdiction of
the latter.
B. C"#!i!1!i"$' Li4i!$!i"#
1. D1e P*",e## "f L$. -4ec.5, Art. &&& o" t%e
Constitution.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= RE>3ISITES
a. &he interests of the public generally as
distinguished from those of a particular
class re6uire the intervention of the
tate! 3substantive limitation4 and
b. &he means employed must be
reasonably necessary to the
accomplishment of the purpose and not
unduly oppressive. 3procedural
limitation4
= 0n a string of cases( the + held that in order
that due process of law will not be violated( the
imposition of the tax must not be done in an
arbitrary( despotic( capricious( or whimsical
manner.
2. E;1$' P*"!e,!i" "f !)e L$. -4ec. 5, Art.
&&& o" t%e Constitution.
= RE>3ISITES FOR A 8ALID CLASSIFICATION
a. ;ust not be arbitrary!
b. ;ust be based upon substantial
distinctions!
c. ;ust be germane to the purposes of
law!
d. ;ust not be limited to existing conditions
only! and
e. ;ust apply e6ually to all members of a
class.
". 3if"*4i!+? E;1i!$&i'i!+? $(
P*"=*e##i9i!+ "f T$%$!i" -Art. (&, 4ec. 98
-5. o" t%e Constitution.
= Defii!i"#
$. 3if"*4i!+: -ll taxable articles or *inds
of property of the same class shall be
taxed at the same rate. - tax is uniform
when it operates with the same force
and effect in every place where the
subject of it is found.
&. E;1i!$&i'i!+: &axation is said to be
e6uitable when its burden falls to those
better able to pay.
,. P*"=*e##i9i!+: Rate increases as the
tax base increases.
#. N"6i4/$i*4e! "f C"!*$,!# -Art. &&&,
4ec. 56 o" t%e Constitution.
&he rule( however( does not apply to
public utility franchises or right since they
are subject to amendment( alteration or
repeal by the +ongress when the public
interest so re6uires -Caayan 2lectric
#o$er B Li%t Co., &nc. vs. C&R.. &hus( the
removal of income tax exemption in a
franchise is not a violation of the non,
impairment of contracts 3RC#& vs. C&R..
$. N"6i4/*i#"4e! f"* N"6/$+4e! "f
P"'' T$% -Art. &&&, 4ec. 96 o" t%e
Constitution.
%. O*i=i "f A//*"/*i$!i"? Re9e1e? $(
T$*iff Bi''# -Art. (&, 4ec. 97 o" t%e
Constitution: &olentino vs. ec. of >inance..
=. N"6if*i=e4e! "f Re'i=i"1# F*ee("4
$( W"*#)i/ -Art. &&&, 4ec. 97 o" t%e
Constitution.
= AMERICAN BIBLE SOCIETY 8S. CITY OF MANILA
AND TOLENTINO 8S. SEC. OF FINANCE R3LINGS
RECONCILED
&he imposition in the former is a license
tax which is intended to regulate the exercise of
freedom of religion while in the latter is a
revenue tax. 'ith respect to revenue tax(
+ongress can choose anyone who will be taxed.
0ts imposition is a political 6uestion.
A. De'e=$!i" "f Le=i#'$!i9e A1!)"*i!+ !" !)e
P*e#i(e! !" Fi% T$*iff R$!e#? I4/"*! $(
E%/"*! >1"!$# -Art. (&&&, 4ec. 98-9. o" t%e
Constitution.
8. T$% E%e4/!i" "f P*"/e*!ie# A,!1$''+?
Di*e,!'+? $( E%,'1#i9e'+ 3#e( f"*
Re'i=i"1#? C)$*i!$&'e $( E(1,$!i"$'
P1*/"#e# 3ee Art. (&, 4ec. 98-A. o" t%e
Constitution! 1ladoc vs. +ommissioner!
Province of -bra vs. Hernando4. &his
provision refers only to property taxes.
= TEST IN DETERMINING EXEMPTION:
Actual use of the property and "! the
ownership thereof.
= S3MMARY OF R3LES:
$. F"* /1*/"#e# "f i,"4e !$%$!i"? the
income of non,stoc* corporations operating
exclusively for charitable and religious
purposes( no part of the income of which
inures to the benefit of any member(
organi)er or officer or any specific person
shall be exempt from tax.
However( the income of whatever *ind
and nature from any of their properties( real
or personal or from any of their activities for
profit *e=$*('e## of the disposition made of
such income shall be subject to tax -4ec.
A6, +ar. 2 and last +ar., N&RC..
&. F"* /1*/"#e# "f i,"4e !$%$!i"?
donations received by religious( charitable(
and educational institutions are considered
as income but not taxable income as they
are items of exclusion.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
=
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
Gn the part of the donor( such
donations are deductible expense provided
that no part of the income of which inures to
the benefit of any private stoc*holder or
individual in an amount not exceeding 1BD
in case of an individual( and $D in case of a
corporation( of the taxpayer5s taxable
income derived from trade or business or
profession -4ec. A7-0., N&RC..
,. F"* /1*/"#e# "f (""*@# $( e#!$!e
!$%$!i"? donations in favor of religious and
charitable institutions are generally not
subject to tax provided( however( that not
more than "BD of the said be6uest( devise(
or legacy or transfer shall be used for
administration purposes -4ec. 8> and 565,
N&RC..
1B. M$<"*i!+ 8"!e "f $'' Me4&e*# "f
C"=*e## Re;1i*e( i C$#e "f $
Le=i#'$!i9e G*$! "f T$% E%e4/!i"# -Art.
(&, 4ec. 98 -7. o" t%e Constitution.
11. N"6i4/$i*4e! "f !)e S1/*e4e C"1*!@#
71*i#(i,!i" i T$% C$#e# -Art. (&&&, 4ec.
9-5. and Art. (&&&, 4ec.@-b. o" t%e
Constitution.
12. T$% E%e4/!i" "f Re9e1e# $( A##e!#
"f? i,'1(i= G*$!#? E(".4e!#?
D"$!i"#? "* C"!*i&1!i"# !"?
E(1,$!i"$' I#!i!1!i"# -Art. ?&(, 4ecs.
7-A. and -7. o" t%e Constitution.
1". O!)e* P*"9i#i"# "f !)e C"#!i!1!i"
W)i,) $*e Re'$!e( !" T$%$!i"
a. Power of the President to veto item or
items in an -ppropriation( Revenue( or
&ariff 2ill -Art. (&, 4ec. 9> -9..
b. ?ecessity of an a -ppropriation before
;oney may be paid out of the Public
&reasury -Art. (&, 4ec. 9= -5..
c. ?on,appropriation of Public ;oney or
Property for the benefit of any +hurch(
ect( or ystem of religion. -Art. (&, 4ec.
9=-9.
d. &reatment of &axes 1evied for a pecial
Purpose.-Art.(&, 4ec. 9= -A..
e. 0nternal Revenue -llotments to 1ocal
@overnment Enits. -Art.?, 4ec.C.
' DO3BLE TAXATION
= Defii!i": &axing the same subject twice
when it should be taxed only once. -lso *nown
as duplicate taxation.
= IS DO3BLE TAXATION PROHIBITED IN THE
PHILIPPINESA
N". &here is no constitutional prohibition
against double taxation in the Philippines. 0t is
something not favored but permissible -#e+si
Cola Bottlin Co. v. City o" Butuan, 5=C8..
= :INDS OF DO3BLE TAXATION 2:EY: 7&5
1. Di*e,! (1/'i,$!e !$%$!i"B"&"%i"1#: 7&
in the objectionable or prohibited sense.
REASONC &his constitutes a violation of
substantive due process. &he same property
is taxed twice when it should be taxed only
once.
2lements3
a. the same property is taxed twice when it
should only be taxed once!
b. both taxes are imposed on the same
property or subject matter for the same
purpose!
c. imposed by the same taxing authority!
d. within the same jurisdiction
e. during the same taxing period! and
f. covering the same *ind or character of
tax.
2. I(i*e,! ("1&'e !$%$!i": ?ot legally
objectionable. &he absence of one or more of
the foregoing elements of direct 7& ma*es the
7& indirect.
= RELIEFS FROM EFFECTS OF DO3BLE TAXATION
1. T$% (e(1,!i"#
ExampleC Ianishing deductions in transfer
taxes.
2. T$% ,*e(i!#
&llustrations3
>or I-& purposes( the tax on inputs or
items that go into the manufacture of
finished products 3which are eventually sold4
may be credited against or deducted from
the output tax or tax on the finished product.
>oreign income taxes may be credited
against the Phil. 0ncome tax( subject to
certain limitations( by citi)ens( including
members of general professional
partnerships or beneficiaries of estates or
trusts 3+ro rata4( as well as domestic
corporations.
- tax credit is granted for estate taxes
paid to a foreign country on the estate of
citi)ens and resident aliens subject to
certain limitations.
&he donor5s tax imposed upon a citi)en
or a resident shall be credited with the
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
A
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
amount of any donor5s tax imposed by the
authority of a foreign country( subject to
certain limitations.
". E%e4/!i"#
#. T*e$!ie# .i!) "!)e* #!$!e#
$. P*i,i/'e "f *e,i/*",i!+
' FORMS OF ESCAPE FROM
TAXATION
= THE FOLLOWING ARE THE FORMS OF ESCAPE
FROM TAXATION 2:e+: E+-&E5
1. Shifting
2. Capitali)ation
3. Transformation
4. Avoidance
5. Exemption
6. Evasion,unlawful
A. SHIFTING
= Defii!i": Process by which tax burden is
transferred from statutory taxpayer -im+act o"
taxation. to another -incident o" taxation. without
violating the law.
&llustration3 Ialue added tax. &he seller
is re6uired by law to pay the tax( but the burden
is actually shifted or passed on to the buyer.
= I4/$,! "f !$%$!i" / point on which tax is
originally imposed.
= I,i(e!# "f !$%$!i" / point on which the tax
burden finally rests or settles down.
B. CAPITALIZATION
= Defii!i": Reduction in the price of the taxed
object e6ual to the capitali)ed value of future
taxes which the purchaser expects to be called
upon to pay.
C. TRANSFORMATION
= Defii!i": &he manufacturer or producer
upon whom the tax has been imposed( fearing
the loss of his mar*et if he should add the tax to
the price( pays the tax and endeavors to recoup
himself by improving his process of production(
thereby turning out his units at a lower cost.
D. TAX A8OIDANCE
= Defii!i": exploitation by the taxpayer of
'e=$''+ /e*4i##i&'e alternative tax rates or
methods of assessing taxable property or
income( in order to avoid or reduce tax liability.
E. TAX E8ASION
= Defii!i": Ese by the taxpayer of i''e=$' "*
f*$1(1'e! 4e$# to defeat or lessen the
payment of the tax.
= INDICIA OF FRA3D IN TAX E8ASION
1. failure to declare for taxation purposes true
and actual income derived from business for
two consecutive years! or
2. substantial underdeclaration of income tax
returns of the taxpayer for four consecutive
years coupled with intentional overstatement
of deductions.
F. TAX EXEMPTION
= Defii!i": - grant of immunity( express or
implied( to particular persons or corporations
from the obligation to pay taxes.
= :INDS OF TAX EXEMPTIONS
As to basis3
1. C"#!i!1!i"$': 0mmunities from taxation
which originate from the constitution
2. S!$!1!"*+: &hose which emanate from
legislation
As to "orm3
1. E%/*e##: Expressly granted by organic or
statute law
2. I4/'ie(: 'hen particular persons(
properties( or excises are deemed exempt
as they fall outside the scope of the taxing
provision itself.
As to extent3
1. T"!$': +onnotes absolute immunity.
2. P$*!i$': Gne where a collection of a part of
the tax is dispensed with.
As to ob1ect3
1. Pe*#"$': granted directly in favor of
certain persons
2. I4/e*#"$': granted directly in favor of a
certain class of property
= PRINCIPLES GO8ERNING TAX EXEMPTIONS
1. Exemptions from taxation are highly
(i#f$9"*e( i '$..
2. He who claims an exemption must be able
to justify his claim by the ,'e$*e#! =*$! of
organic or statute law. 0f ambiguous( there
is no tax exemption. &axation is the rule( tax
exemption is the exception.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
8
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
". He who claims an exemption must justify
that the 'e=i#'$!1*e i!e(e( !" e%e4/!
)i4 by words too plain to be mista*en.
#. He who claims exemption should
,"9i,i='+ /*"9e that he is exempted.
$. &ax exemption must be #!*i,!'+ ,"#!*1e(
against the taxpayer.
%. &ax exemptions are "! /*e#14e(.
=. +onstitutional grants of tax exemptions are
#e'f6e%e,1!i=.
A. &ax exemptions are /e*#"$'.
8. De(1,!i"# for income tax purposes
parta*e of the nature of tax exemptions!
hence( they are also to be strictly construed
against the taxpayer.
= WHEN EXEMPTIONS ARE CONSTR3ED LIBERALLY
IN FA8OR OF GRANTEE
1. 'hen the law so provides for such liberal
construction.
2. Exemptions from certain taxes( granted
under special circumstances to special
classes of persons.
". Exemptions in favor of the government( its
political subdivisions or instrumentalities.
#. Exemptions to traditional exemptees( such
as those in favor of religious and charitable
institutions.
' TAX ENFORCEMENT AND
ADMINISTRATION
= SO3RCES OF TAX LAWS 2:e+: PE+
2
&R-
21&5
1. Statutes
2. Presidential 7ecrees
3. Executive Grders
4. Constitution
5. Court 7ecisions
6. Tax +odes
7. Revenue Regulations
8. Administrative issuances
9. B0R Rulings
10. Local &ax Grdinances
11. Tax treaties and conventions with foreign
countries
= RE>3ISITES OF TAX REG3LATIONS 2:e+C R-1P5
1. Reasonable
2. 'ithin the $uthority conferred
". ?ot contrary to 'aw
#. ;ust be /ublished
= RETROACTI8ITY OF BIR R3LINGS
E General Rule3 P*"#/e,!i9e.
E 2xce+tions3
1. 'here the taxpayer deliberately misstates or
omits material facts from his return or any
document re6uired of him by the 20R!
2. 'here the facts subse6uently gathered by
the 20R are materially different from the facts
on which the ruling is based! and
". 'here the taxpayer acted in bad faith.
= AGENCIES IN8OL8ED IN TAX ADMINISTRATION
1. 20R
2. 2ureau of +ustoms
". Provincial( city( and municipal assessors
and treasurers
= R3LE OF -NO ESTOPPEL AGAINST THE
GO8ERNMENT0
E General Rule3 &he @overnment is not
estopped by the mista*es or errors of its agents!
erroneous application and enforcement of law by
public officers do not bloc* the subse6uent
correct application of statutes.
E 2xce+tion3 0n the interest of justice and fair
play( as where injustice will result to the
taxpayer.
ORGANIZATION AND F3NCTION OF THE
B3REA3 OF INTERNAL RE8EN3E 2BIR5
= 20R shall be under the supervision and control
of the 7ept. of >inance 3ec.24
= POWERS AND D3TIES OF THE BIR: 7Sec. 8!
C*RP9 -+EE -sp
1. Assessment and Collection of national
internal revenueC
a4 taxes
b4 fees
c4 charges
2. Enforcement of all
a4 forfeitures
b4 fines and
c4 penalties
connected therewith
". Execution of all judgments decided in
20R5s favor by
a4 the +ourt of &ax -ppeals 3+&-4 and
b4 the ordinary courts
#. @ive effect to and Administer the
#upervisory and /olice Powers
conferred to it by the +ode or by other
laws.
= OFFICIALS OF THE BIR:
1. one chief ,,, +ommissioner of 0nternal
Revenue 3+ommissioner4
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
1B
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
2. four assistant chiefs ,,, 7eputy
+ommissioners -4ec.A.
= POWERS OF THE COMMISSIONER:
0. SECTION # 3power to interpret tax law and
decide tax cases4 ;emory -idC 07
C. I!e*/*e! /*"9i#i"# "f !)i# C"(e $(
"!)e* !$% '$.# #1&<e,! !" *e9ie. "f !)e
Se,*e!$*+ "f Fi$,e
2. De,i(e:
a4 disputed assessment
b4 refunds of internal revenue taxes(
fees and charges
c4 penalties imposed in relation thereto
d4 other matters arising from this +ode
or other laws or portions thereof
administered by the 20R subject to
the exclusive appellate jurisdiction of
the +&-
= ASSESSMENT DEFINED
0t is a finding by the taxing agency that
the taxpayer has not paid his correct taxes. 0t is
also a written notice to a taxpayer to the effect
that the amount stated therein is due as a tax(
and containing a demand for the payment
thereof.
= B3RDEN OF PROOF IN PRE6ASSESSMENT
PROCEEDINGS
&here is a presumption of correctness
on the part of the +0R( thus the burden of proof
is on the taxpayer. Gtherwise( the finding of the
+0R will be conclusive and the +0R will assess
the taxpayer. uch finding is conclusive even if
+0R is wrong if the taxpayer does not controvert.
= PRINCIPLES GO8ERNING TAX ASSESSMENTS
2:e+: P-7775
1. -ssessments are prima facie /resumed
correct and made in good faith
2. -ssessments should be based on $ctual
facts
". -ssessment is (iscretionary on the part of
the +ommissioner
#. &he authority vested in the +ommissioner
to assess taxes may be (elegated.
$. -ssessments must be (irected to the right
party.
00. SECTION D 3power to obtain information(
summon( examine and ta*e testimony of
persons4 ExG&,+
3. F"* !)e C"44i##i"e* !" $#,e*!$i:
3a4 correctness of any return or in ma*ing a
return where none has been made
3b4 liability of any person for any internal
revenue tax or in correcting such liability
3c4 tax compliance

&he +ommissioner is authori)edC
14 to Examine any relevant 2oo*( paper(
record or other data
24 to Obtain any information 3costs( volume
of production( receipts( sales( gross
income( etc4( on a regular basis fromC
i. any person other than the person
under investigation or
ii. any office or officer of the
nationalJlocal government( gov5t
agencies and instrumentalities
32ang*o entral( gov5t owned and
controlled corporations4
"4 &o Summon
i. the person liable for tax or re6uired
to file a return or
ii. any officer or employee of such
person or
iii. any person having in his
possessionJcustodyJcare
,, the boo*s of accounts(
,, accounting records of entries
relating to the business of the
person liable for tax or any other
person
to produce such boo*s( papers(
records( and other data and to give
testimony
#4 &o ta*e the Testimony of the person
concerned( under oath as may be
relevant to the in6uiry
$4 &o cause revenue officers and
employees to ma*e a Canvass of any
revenue district or region
, nothing in ection $ shall be construed
as granting the +ommissioner the authority to
in6uire into ban* deposits other than as provided
for under sec. % 3>4 of the +ode.
000. E+&0G? % 3power to ma*e assessments(
prescribe additional re6uirements for tax
administration and enforcement
E. E%$4i$!i" "f *e!1*# $(
(e!e*4i$!i" "f !$% (1eF
-. -fter a return has been filed the
+ommissioner or his representative may
authori)e
i. the Examination of any taxpayer and
ii. the -ssessment of the correct
amount of tax!
2. >ailure to file a return shall not prevent
the commissioner from authori)ing the
examination of any taxpayer!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
11
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
K -ny tax or deficiency tax so assessed
shall be paid upon notice and demand
from the +ommissioner or his
representative
K -ny return( statement or declaration
"iled in any authori)ed office shall not be
withdrawn! but within t%ree years from
date of filing( the same may be modified(
changed or amended! provided that no
notice for audit or investigation of such
return( has in the meantime( been
actually served upon the taxpayer.
D. F$i'1*e !" #1&4i! *e;1i*e( *e!1*# $(
"!)e* (",14e!#F
0f a person
i. fails to file a re6uired return or report
at the time prescribed or
ii. 'illfully or otherwise files a false or
fraudulent return(
&he +ommissioner shall ;a*e or -mend the
return from
i. his own *nowledge or
ii. from such information as he can
obtain through testimony or otherwise
which shall be prima facie correct and
sufficient for all legal purposes
G. I9e!"*+6!$Hi=? S1*9ei''$,e?
P*e#14/!i9e G*"## S$'e#F
-. +ommissioner may( at any time during
the taxable year
3a4 order the inventory ta*ing of goods
of any taxpayer or
3b4 may place the business operations
of any person 3naturalJjuridical4
under observation or urveillance
if there is reason to believe that
such is not declaring his correct
income( sales or receipts for tax
purposes.
&he findings may be used as
basis for assessing the taxes and
shall be deemed prima facie correct.
2. +ommissioner may prescribe a
;inimum amount of gross receipts(
sales and taxable base 3ta*ing into
account the sales and income of other
persons engaged in similar business4C
i. 'hen a person has failed to issue
receipts as re6uired by sec.11"
30nvoice re6uirements for I-&,
registered persons4 and ec. 2"=
30ssuance of Receipts or
+ommercial 0nvoices4 or
ii. 'hen the boo*s of accounts or
records do not correctly reflect the
declarations made or re6uired to be
made in a return(
uch minimum amount shall be
considered correct.

I. Te*4i$!e !$%$&'e /e*i"(F
+ommissioner shall declare the tax
period of a taxpayer &erminated and send
notice to the taxpayer of such decision
with a re6uest for immediate payment of the
tax when it has come to the *nowledge of
the +ommissionerC 9R0RHG:
a4 that a taxpayer is Retiring from
business subject to tax or
b4 is 0ntending to leave the Phils. or
c4 to Remove his property therefrom
or
d4 to Hide or conceal his property or
e4 is performing any act tending to
Gbstruct the proceedings for the
collection of tax
J. P*e#,*i&e Re$' P*"/e*!+ 8$'1e#F
&he +ommissioner is authori)ed toC
a. 7ivide the Phils. into different )ones or
areas and
b. determine the fair mar*et Ialue of real
properties located in each )one or area
Dor tax +ur+oses, t%e value o" t%e
+ro+erty s%all be $%ic%ever is %i%er o"3
a. Dair marEet value as determined by
t%e Commissioner: or
b. Dair marEet value as s%o$n in t%e
sc%edule o" values o" t%e +rovincial
and city assessors.
K. A1!)"*i!+ !" I;1i*e i!" B$H De/"#i!
F
?otwithstanding R.-. 1#B$ 32an*
ecrecy 1aw4 the +ommissioner is
authori)ed to in6uire into the 2an* deposits
ofC
3a4 a decedent to determine his gross
estate
3b4 a taxpayer who has filed an application
to compromise payment of tax liability by
reason of financial incapacity
'%e tax+ayerFs a++lication "or
com+romise s%all not be considered
unless %e $aives in $ritin %is +rivilee
under RA 576@ and ot%er eneral or
s+ecial la$s. 4uc% $aiver s%all
aut%orize t%e Commissioner to in)uire
into %is banE de+osits.
C0. A1!)"*i!+ !" Re=i#!e* !$% $=e!#F
a. &he +ommissioner shall accredit and
Register( individuals and general
professional partnerships and their rep. who
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
12
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
prepare and file tax returns and other papers
or who appear before the 20R
b. &he +ommissioner shall create national
and regional accreditation boards.
'%ose $%o are denied accreditation
may a++eal t%e same to t%e 4ec. *"
Dinance $%o s%all rule on t%e a++eal $it%in
C6 days "rom recei+t o" suc% a++eal. Dailure
to do so $it%in t%e +rescribed +eriod s%all
be deemed as a++roval "or accreditation.
CC. A1!)"*i!+ !" P*e#,*i&e A((i!i"$'
Re;1i*e4e!#F
&he +ommissioner may prescribe the
manner of compliance with any
documentary or procedural Re6uirement for
the submission or preparation of financial
statements accompanying tax returns.
0I. SECTION = 3-uthority to 7elegate Power 4
C2. T)e C"44i##i"e* 4$+ (e'e=$!e !)e
/".e*# 9e#!e( i )i4 !"
, subordinate officials with ran*
e6uivalent to 7ivision +hief or higher(
subject to limitationsJrestrictions imposed
under the rules and regulations
EL+EP&( 3the following powers shall
?G& be delegated4 9R0R +o- -:
a4 power to Recommend the
promulgation of rules and
regulations by the ec. Gf >inance
b4 power to 0ssue rulings of first
impression or to Reverse( revo*e
modify any existing rule of the 20R
c4 power to +ompromise or -bate any
tax liability
EL+EP&( the regional
evaluation board may compromiseC
1. assessments issued by regional
offices involving deficiency taxes
of P$BB(BBB or less and
2. minor criminal violations as may
be determined by the rules
Reional 2valuation Board is
com+osed o"C
i. Regional 7irector as +hairman
ii. -sst. Regional 7irector
iii. Heads of the 1egal( -ssessment
and +ollection 7iv.
iv. Revenue 7istrict Gfficer having
jurisdiction over the taxpayer
d4 power to -ssign or reassign internal
revenue officers to establishments
where articles subject to excise tax
are *ept.
= 2DL S3RCHARGE ON THE AMO3NT OF THE TAX
D3E IS IMPOSED IN THE FOLLOWING CASES
1. failure to file any return and pay the tax due
thereon as re6uired under the &ax +ode or
regulations on the date prescribed
2. filing a return with the wrong internal
revenue officer
". failure to pay the deficiency tax within the
time prescribed for its payment
#. failure to pay the full or part of the amount
of tax shown on any return re6uired to be
filed under the &ax +ode or regulations or
the full amount of tax due for which no
return is re6uired to be filed( on or before
the date prescribed for its payment
= D0L S3RCHARGE ON THE AMO3NT OF TAX OR
DEFICIENCY TAX IS IMPOSED IN THE FOLLOWING
CASES
1. 'illful neglect to file the return within the
period prescribed
2. 'illful filing of false or fraudulent return
II.NATIONAL TAXATION
A. INCOME TAXATION
= Defii!i"#
1. I,"4e T$% / tax on all yearly profits arising
from property( possessions( trade or business( or
as a tax on a person5s income( emoluments(
profits and the li*e -C5 CJ4 5@@=.
/ tax on income( whether gross
or net. -9> Am. Jur. A68.
2. I,"4e / all wealth which flows into the
taxpayer other than as a mere return of capital.
". C$/i!$' / resource of person which can be
used in producing goods and services.
I,"4e C$/i!$'
-ll wealth which flows
into the taxpayer
other than as a mere
return of capital.
>und or property
which can be used in
producing goods or
services
>low of 'ealth >und or property
ource of wealth 'ealth
= RE>3ISITES FOR INCOME TO BE TAXABLE
1. &here must be a gain or profit.
2. &he gain must be reali)ed or received.
". &he gain must not be excluded by law or
treaty from taxation.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
1"
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= TESTS ON TAXABILITY OF INCOME
1. F'". "f We$'!) Te#! / &he determining factor
for the imposition of income tax is whether any
gain was derived from the transaction.
2. Re$'iM$!i" Te#! , unless the income is
deemed Mreali)ed(M there is no taxable income.
". E,""4i,6Beefi! P*i,i/'e , flow of wealth
reali)ed is taxable only to the extent that the
taxpayer is economically benefited.
= CLASSIFICATION OF TAXPAYERS
a. I(i9i(1$'#
14 citi)ens
1 1.1 resident citi)ens 2RC5
2 1.2 non,resident citi)ens 2NRC5
24 aliens
2.1 resident aliens 2RA5
2.2 non,resident aliens 2NRA5
2.2.1 engaged in trade or business
within the Phils. 2NRAETB5
" 2.2.2 ?ot engaged in trade or
business within the Philippines
2NRANETB5
b. C"*/"*$!i"#
14 7omestic 2DC5
24 >oreign
2.1 resident foreign corporation 2RFC5
2.2 non,resident foreign corporation
2NRFC5
c. E#!$!e#
d. T*1#!#
e. P$*!e*#)i/#
' INDI8ID3ALS
= WHO ARE TAXABLEA
1. Re#i(e! Ci!iMe
2. N"6*e#i(e! Ci!iMe
- non2resident citi#en means( a
>ilipino citi)enC
a. who establishes to the satisfaction of the
+ommissioner the fact of their physical
presence abroad with a definite intention
to reside therein!
b. who leaves the Philippines during the
taxable year to reside abroad( either as
an immigrant or for employment on a
permanent basis!
c. who wor*s and derives income from
abroad and whose employment thereat
re6uires him to be physically present
abroad most of the time during the
taxable year!
d. who is previously considered as a non,
resident and who arrives in the
Philippines at anytime during the taxable
year to reside thereat permanently shall
be considered non,resident for the
taxable year in which he arrives in the
Philippines with respect to his income
derived from sources abroad until the
date of his arrival ;4ec.99 -2.<
". Resident alien G means an individual whose
residence is within the Philippines and who
is not a citi)en thereof. ;4ec.99 -D.<
#. -on2resident alien engaged in trade or
business :ithin the Phils. 2:e+C
?R-E&25
- non2resident alien means an
individual whose residence is not within the
Philippines and who is not a citi)en thereof.
;4ec.99 -G.<
&he term trade or business includes
the performance of the functions of a public
office. ;4ec. 99 -4.<
&he term trade! business or
pro$ession shall not include performance of
services by the taxpayer as an employee.
;4ec. 99 -CC.<
- non,resident alien individual who shall
come to the Philippines and stay therein for
an aggregate period of more than 1AB days
during any calendar year shall be deemed a
nonGresident alien doin business in t%e
#%ili++ines 4ection 99-G. not$it%standin
;4ec. 9@-A.-5.<
$. -on2resident aliens not engaged in trade
or business :ithin the Phils. 3:e+C
?R-?E&24
= ONLY RESIDENT CITIZENS are taxable for
income derived from sources $it%in and $it%out
t%e #%ili++ines. -ll other individual income
taxpayers are taxable only for income derived
from sources $it%in t%e #%ili++ines.
N*'23 -n "9e*#e$# ,"!*$,! ."*He* 2OCW5 is
taxable only on income derived from sources
within the Philippines. 9ec. 2" 3243+4:
- #e$4$ is considered as an G+'
provided the following re6uirements are metC
1. receives compensation for services
rendered abroad as a member of the
complement of a vessel! and
2. such vessel is engaged exclusively in
international trade.
= T$% R$!e#: Please refer to Ae% A.
' CORPORATIONS
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
1#
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= WHO ARE TAXABLEA
1. D"4e#!i, C"*/"*$!i" / created or
organi)ed in the Phils. or under its law ;4ec.
99-C.<
2. Re#i(e! F"*ei= C"*/"*$!i" / engaged
in trade or business within the Philippines
;4ec. 99-0.<
". N"6*e#i(e! F"*ei= C"*/"*$!i" / not
engaged in trade or business within the
Philippines ;4ec. 99-&.<
= CORPORATION
,ncludes:
1. Partnerships( no matter how created or
organi)ed!
2. Noint,stoc* companies!
". Noint accounts 3cuentas en participacion4
#. -ssociations! or
$. 0nsurance companies ;4ec. 99-B.<.
E0cludes:
1. @eneral professional partnerships!
2. Noint venture or consortium formed for
the purpose of underta*ing construction
projects or engaging in petroleum( coal(
geothermal and other energy operations
pursuant to an operating or consortium
agreement under a service contract with
the @overnment!
= CORPORATIONS EXEMPT FROM INCOME
TAXATION 2FOR INCOME REALIZED AS S3CH5 3NDER
RA JE2E
1. &hose enumerated under 4ec. A6.
Exempt corporations are subject to
income tax on their income from any of
their properties( real or personal( or from
any other activities conducted for profit(
reardless o" t%e dis+osition made o"
suc% income.
2. 'ith respect to @G++5s( the general rule is
that these corporations are taxable as any
other corporation exceptC
a. @0
b.
c. PH0+
d. P+G
e. P-@+GR ;4ec. 9> -C.<
". Regional or -rea Head6uarters under 4ec.
99 -DD.
N*'23 Regional o+eratin head6uarters
under 4ec. 99-22. shall pay a tax of 1BD of
their taxable income.
= ONLY DOMESTIC CORPORATIONS are
taxable for income derived from sources $it%in
and $it%out the Philippines. -ll other corporate
income taxpayers are taxable only for income
derived from sources $it%in the Philippines.
= T$% R$!e#C Please refer to Ae% B.
' ESTATES AND TR3STS
E#!$!e ,refers to the mass of properties left by a
deceased person.
= R3LES ON TAXABILITY OF ESTATE
1. -n estate under administration or judicial
settlement is a taxable entity.
2. -n estate( the settlement of which is not the
object of judicial testamentary or intestate
proceedings is not a taxable entity. &he
income thereof is taxable directly to the heir
or beneficiary.
= ESTATES 3NDER 73DICIAL SETTLEMENT
E General Rule3 -n estate under judicial
settlement is subject to income tax in the same
manner as individuals. 0ts status is the same as
the status of the decedent prior to his death.
E 2xce+tions3
1. &he entitlement to personal exemption is
limited only to P2B(BBB.
2. ?o additional exemption is allowed.
". &he distribution to the heirs during the
taxable year of estate income is
deductible from the taxable income of
the estate. uch distributed income shall
form part of the respective heirs5 taxable
income.
'here no such distribution to
the heirs is made during the taxable
year that the income is earned( and
such income is subjected to income tax
payment by the estate( the subse6uent
distribution thereof is no longer taxable
on the part of the recipient.
= ESTATES -(* 3NDER 73DICIAL SETTLEMENT /
subject to income tax as co,ownership.
&he tax treatment of co,ownership is
similar to general professional partnership.
Hence( the tax liability on income is levied
directly on the co,owners. &he co,ownership
income and deductions are simply apportioned
to the co,owners to the extent of their respective
interests therein( regardless of whether such
income is distributed or not.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
1$
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
T*1#! - - right to the property( whether real or
personal( held by one person for the benefit of
another.
= WHEN TR3STS ARE TAXABLE ENTITIES
1. - trust( the income of which is to be
accumulated
2. - trust in which the fiduciary may( at his
discretion( either distribute or accumulate the
income.
= R3LES ON TAXABILITY OF THE INCOME OF A
TR3ST
1. &he income of the trust for the taxable year
which is to be distributed to the beneficiaries
, "ilin and +ayment o" tax lie on t%e
bene"iciaries.
2. &he income of the trust which is to be
accumulated or held for future distribution
whether consisting of ordinary income or
gain from the sale of assets included in the
McorpusM of the estate / "ilin o" return and
+ayment o" tax become t%e burden o" t%e
trustee or "iduciary.
EL+EP&0G?C
a4 0n the case of a revocable trust( the
income of the trust will be returned by
the grantor.
b4 0n a trust where the income is held for
the benefit of the grantor( the income of
the trust becomes income to the grantor.
c4 0n the case of trust administered in a
foreign country( the income of the trust!
undiminished by any amount distributed
to the beneficiaries shall be taxed to the
trustee.
= I**e9",$&'e T*1#!# 3irrevocable both as to
corpus and as to income4 / taxed exactly in the
same way as estates under judicial settlement
and its status as an individual is that of the
trustor. 0t is entitled to the minimum personal
exemption 3P2B(BBB4 and distribution of trust
income during the taxable tear to the
beneficiaries is deductible from the trust5s
taxable income.
= Re9",$&'e T*1#!# / the trustor( not the trust
itself( is subject to the payment of income tax on
the trust income.
' PARTNERSHIPS
Ender the tax code we have only two *inds
of partnership for tax purposes. 'e have theC
1. Gee*$' P*"fe##i"$' P$*!e*#)i/# , formed
by persons forC
a4 the sole purpose of exercising a
common profession and
b4 no part of the income of which is
derived from engaging in any trade or
business. ;4ec. 99-B.<.
2. T$%$&'e "* B1#ie## P$*!e*#)i/ , -ll other
partnerships except general professional
partnerships no matter( how created or
organi)ed.
&eneral co2partnerships 7&CP9 are
partnerships which are by law assimilated to
be within the context of( and so legally
contemplated as( corporations. &he
partnership itself is subject to corporate
taxation. &he individual partners are
considered stoc*holders and( therefore(
profits distributed to them by the partnership
are taxable as dividends.
= LIABILITY OF A PARTNERSHIP
1. Gee*$' P*"fe##i"$' P$*!e*#)i/ ., &hey
are not sub1ect to income tax( but are
re6uired to file returns of their income for the
purpose of furnishing information as to the
share of each partner in the net gain or
profit( which each partner shall include in his
individual return.
&he net income 3income for distribution4
shall be computed in the same manner as a
corporation. 7ate of filing of the return is
-pril 1$ of each year.
2. T$%$&'e "* B1#ie## P$*!e*#)i/ , &he
income tax of this type of Partnership is
com+uted and taxed liEe t%at o" a
cor+oration. &his *ind of partnership( li*e a
regular corporation( is also re6uired to file a
6uarterly corporate income tax return.
2eginning taxable Fear 18A#( all *inds of
partnership are under the calendar year
basis. >iling and payment of 6uarterly return
is within %B days after the end of each
6uarter while the annual return is on or
before -pril 1$ of the following year.
= LIABILITY OF A PARTNER
0n the taxation of a partner in a partnership it
is very important to *now what *ind of
partnership( he belongs to. &he following rules
should be ta*en into account.
C. S)$*e "f $ /$*!e* i =ee*$' /*"fe##i"$'
P$*!e*#)i/
a4 Each partner shall report as ross
income 3business income4 his
distributed share actually or
constructively received in the net income
of the partnership. &he same share shall
be subject to creditable withholding tax
of 1BD. &hey are liable in t%eir se+arate
and individual ca+acity. 3ee -e% C6
34
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
1%
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
b4 hare of a partner in the loss of a
general professional partnership may be
ta*en by the individual partner in his
return of income.
c4 Each partner in a general professional
partnership shall( report as gross income
his distributed share in the net income of
the @PP( based on his agreed ratio(
whether he( avails of itemi)ed or optional
standard deduction.
d4 Payments made to a partners of a @PP
for services rendered shall be
considered as ordinary business income
subject to ec. 2#- 3Effective Nanuary 1(
18A24
2. S)$*e "f $ /$*!e* i T$%$&'e "* B1#ie##
/$*!e*#)i/
a4 hare of a partner in the net income of
a taxable or business partnership
3dividend4 shall be subject to a final
tax as follows.
188A , %D
1888 , AD
2BBB and onward , 1BD
3ee Ae% A 24
b4 hare of a partner in the loss of a
taxable or business partnership
maybe ta*en by the individual partner
in his return of income.
c4 Payments made to a partner of a
business or taxable partnership for
services rendered shall be considered
as compensation income subject to
sec. 2#-.
' :INDS OF INCOME TAXES
3NDER R.A. JE2E
314 ?et 0ncome &ax
324 Gptional corporate 0ncome tax
3"4 ;inimum +orporate 0ncome &ax
3#4 0mproperly -ccumulated Earnings &ax
3$4 Preferential Rates or pecial Rates of
0ncome &ax
3%4 @ross 0ncome &ax
3=4 >inal 0ncome &ax
3A4 >ringe 2enefits &ax
2C5 NET INCOME TAX
= Defii!i": ;eans gross income less
deductions andJor personal and additional
exemptions -4ec. A5, RA 8797.
= NET INCOME TAX FORM3LA
Entire 0ncome
1essC Exclusions and 0ncome subject to >inal
&ax3e.g. Passive 0ncome4
@ross 0ncome
1essC 7eductions 3andJor add5l exemptions( if
applicable4
?et &axable 0ncome
X &ax Rates
?et 0ncome &ax 7ue
1essC &ax +redit( if any
&ax till due( if any
' GROSS INCOME
= Defii!i": ;eans all income derived from
whatever source( including but not limited to the
following -4ec. A9.: 3:e+C CIG
2
AR
2
6P
2
D 4
1. Compensation!
2. Gross income from profession( trade
or business!
". Gains form dealings in property!
#. Interests!
$. Rents!
%. Royalties!
=. Dividends!
A. Annuities!
8. Pri)es and winnings!
1B. Pensions!
11. Partner5s share in the net income of
the general professional partnership
ee Ae% C for detailed discussion of
items
= EXCL3SIONS FROM GROSS INCOME
1. proceeds of life insurance
N*'2C if the proceeds are retained by the
insurer( the interest thereon is taxable!
2. Return of insurance premium!
". @ift( be6uest or devise
N*'2C income therefrom is taxable!
#. +ompensation for personal injuries or
sic*ness( whether by suit or agreement
N*'2C &he phrase Opersonal injuriesP should
be given a restrictive meaning to refer only
to physical injuries!
$. 0ncome exempt under &reaty!
%. Retirement benefits( pension( gratuities( etc.
=. ;iscellaneous items
= RETIREMENT BENEFITS? PENSION? GRAT3ITIES?
ETC.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
1=
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
1. those derived under R.-. =%#1 3pertains to
private firms without retirement trust fund4!
2. those received by officials and employees of
private employers in accordance with a
reasonable private benefit plan!
Re)uisitesC
a4 in the service of the same employer
for at least 1B years!
b4 at least $B years old!
c4 must be availed of only once
d4 plan approved by the 20R 3R.R.9G
=84!
". separation pay because of death( sic*ness(
or other physical disability or for any cause
beyond the control of the official or
employee 3e.g. retrenchment4!
#. social security benefits( retirement gratuities(
pensions and other similar benefits received
by citi)ens and aliens who come to reside
permanently here from foreign sources
private or public!
$. benefits due to residents under the laws of
the E.. administered by the E.. Ieterans
-dministration
%. benefits! and
=. @0 benefits.
= MISCELLANEO3S ITEMS
1. Passive income derived in the Philippines
byC
a4 >oreign governments!
b4 >inancing institutions owned(
controlled or enjoying refinancing from
foreign governments
c4 0nternational or regional financial
institutions established by foreign
governments
2. 0ncome derived from any public utility or
from the exercise of any governmental
function!
". Pri)es and awards made primarily in
recognition of *eligious( ,)$ritable( #cientific(
educational( $rtistic( 'iterary( or ,ivic
achievement 3:e+C Re+haE / -1+4
Re)uisitesC
a. recipient selected without any action on
his part! and
b. recipient not re6uired to render
substantial future services.
#. Pri)es and awards granted to athletes in
sports competitions and sanctioned by their
national sports association !
$. 1"
th
month pay and other benefits up to
P"B(BBB.BB!
%. @0(( ;edicare and union dues of
individuals!
=. @ains derived from debt securities with a
maturity of more than $ years!
A. @ains from redemption of shares in ;utual
>und.
' DED3CTIONS
= Defii!i"C 0tems or amounts which the law
allows to be deducted from gross income in
order to arrive at the taxable income.
= BASIC PRINCIPLES GO8ERNING DED3CTIONS
1. &he taxpayer see*ing a deduction must
point to some specific provisions of the
statute authori)ing the deduction! and
2. He must be able to prove that he is
entitled to the deduction authori)ed or
allowed. -Atlas Consolidated /inin B
Dev. Cor+. vs. Comm..
". -ny amount paid or payable which is
otherwise deductible from( or ta*en into
account in computing gross income or
for which depreciation or amorti)ation
may be allowed( shall be allowed as
deduction only if it is shown that the tax
re6uired to be deducted and withheld
therefrom has been paid to the 20R.
-4ec. A7;!<.
N*'23 7eductions for income tax purposes
parta*e of the nature of tax exemptions! hence(
if tax exemptions are to be strictly construed(
then it follows that deductions must also be
strictly construed.
= TAXPAYERS WHO CANNOT A8AIL OF DED3CTIONS
FROM GROSS INCOME
1. +iti)ens and resident aliens whose
income is purely compensation income
3except for premium payments on health
andJor hospitali)ation insurance4!
2. ?on,resident aliens not engaged in
trade or business in the Philippines! and
". ?on,resident foreign corporation
= :INDS OF DED3CTIONS
1. O/!i"$' #!$($*( (e(1,!i"# 2OSD5 /
1BD of the gross income.
N*'23 &he G7 may be availed of only by
individuals 3except nonresident alien4 who
are "! purely compensation income
earners.
2. Pe*#"$' $( $((i!i"$' e%e4/!i"#
-vailable only to individuals 3business
income and compensation income earners4.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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1A
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
?R-E&2 may be entitled to personal
exemptions 3only4 subject to reciprocity( i.e.(
3a4 the country of which he is a subject or
citi)en has an income tax law! and
3b4 the income tax law of his country
allows personal exemption to citi)ens
of the Philippines not residing therein(
but deriving income therefrom and not
to exceed the amount allowed in
+&RP.
&he personal exemption shall the be
e6ual to that allowed by the income tax law
of his country to a citi)en of the Philippines
not residing therein( or the amount provided
in the +&RP( whichever is lower.
3. I!e4iMe( (e(1,!i"#
3:e+C G0&a1o2 , 77+haRPP4
3a4 "rdinary -?7 necessary expenses
3b4 interests
3c4 !$xes
3d4 '"sses
3e4 &ad debts
3f4 (epreciation of property!
3g4 (epletion of oil and gas wells and mines!
3h4 ,)$ritable and other contributions!
3i4 *esearch and development!
3j4 /ension trust contributions of
employees! and
3*4 /remium payments on health andJor
hospitali)ation insurance. 3&his is the
only deduction which a compensation
income earner may claim as a
deduction.4
#. S/e,i$' (e(1,!i"# / applicable only to
0nsurance companies( whether domestic or
foreign. 3ec. "=( +&RP4.
' PERSONAL EXEMPTIONS
= AMO3NTS OF PERSONAL EXEMPTIONS ;SEC. <=>
1. P 2B(BBB , ingle individual or married
individual judicially decreed legally
separated without 6ualified dependent
children.
2. P 2$(BBB , Head of the family or married
individual judicially decreed legally
separated with 6ualified dependent children.
". P "2(BBB , >or each legally married
individual.
= ADDITIONAL EXEMPTION FOR DEPENDENTS
P A(BBB , >or each of the 6ualified dependent
children not exceeding four 3#4 in number.

&he additional exemption refers only to
6ualified dependent children such as legitimate(
recogni)ed natural( illegitimate and legally
adopted.
&he proper claimant of the additional
exemption is the husband being the head of
the family except under the following casesC
a4 Husband is unemployed
b4 Husband is wor*ing abroad li*e an G>'
or a seaman
c4 Husband explicitly waived his right of
the exemption in favor of his wife in the
withholding exemption certificate.
= HEAD OF THE FAMILY
1. Enmarried or legally separated person with
one or both parents( or one or more brothers
or sisters( or one or more legitimate(
recogni)ed natural or legally adopted
children living with and dependent upon the
taxpayer for their chief support! and
2. 'here such brother J 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.
- Senior citi#en isC
a4 any resident citi)en of the Philippines
b4 at least sixty %B years old( including those
who have retired from both government
offices and private enterprises( and
c4 has an income of not more than ixty
thousand pesos 3%B(BBB4 per annum subject
to the review of the ?ational Economic
7evelopment -uthority 3?E7-4 every three
years.
Parents( brothers and sisters 6ualify the
taxpayer( to the personal exemption of P2$(BBB
as head of the family but not to t%e additional
exem+tion o" #8,666.
Clari"icatory &llustrations3
1. 0f only 18 years old but married( not 6ualified
as a dependent.
2. Even if 2$ years old but physically
incapacitated( 6ualified as a dependent.
". 0f there is any change of status at any time
during the taxable year( the law expressly
favors the taxpayer.
= ?R-E&2 may deduct personal exemption
3not additional exemption4( but only to the
extent allowed by his country to >ilipinos not
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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18
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
residing therein( and shall not exceed the
aforementioned amounts.
' ITEMIZED DED3CTIONS
A. ORDINARY AND NECESSARY EXPENSES
Ne,e##$*+ E%/e#e , appropriate and
helpful in the development of taxpayer.s
business and are intended to minimi)e losses or
to increase profits. &hese are the day,to,day
expenses.
O*(i$*+ E%/e#e , normal or usual in
relation to the taxpayer5s business and the
surrounding circumstance.
= RE>3ISITES OF B3SINESS EXPENSE TO BE
DED3CTIBLE
1. ordinary and necessary!
2. paid or incurred wJin the taxable year!
". paid or incurred in carrying on a trade or
business!
#. substantiated with official receipts or
other ade6uate records.
$. if subject to withholding taxes proof of
payment to the 2ureau of 0nternal
Revenue must be shown.
%. must be reasonable 3when the expense
is not lavish( extravagant or excessive
under the circumstances4
C$/i!$' E%/e(i!1*e , -n expenditure that
benefits not only the current period but also
future periods. 0t is not deductible but
depreciable( 2?C2#'( if the taxpayer is a non,
profit proprietary educational institution which
may elect either to deduct the capital expense or
depreciate it.
ee Ae% D , 2usiness Expenses
B. INTEREST
I!e*e#! 6 shall refer to the payment for the use
or forbearance or detention of money( regardless
of the name it is called or denominated. 0t
includes the amount paid for the borrower.s use
of( money during the term of the loan( as well as
for his detention of money after the due date for
its repayment.
= RE>3ISITES FOR DED3CTIBILITY:
7RR -o. ?<28@@@9
314 &here must be an indebtedness!
324 &here should be an interest expense
pai d or incurred upon such
indebtedness!
3"4 &he indebtedness must be that of the
taxpayer!
3#4 &he indebtedness must be connected with
the taxpayer.s trade( business or exercise
of profession!
3$4 &he interest expense must have been paid
or incurred during the taxable year!
3%4 &he interest must have been stipulated in
writing!
3=4 &he interest must be legally due!
3A4 &he interest arrangement must not be
between related taxpayers!
384 &he interest must not be incurred to finance
petroleum operations! and
31B4 0n case of interest incurred to ac6uire
property used in trade( business or
exercise of profession( the same( was not
treated as a capital expenditure.
= R3LES ON DED3CTIBILITY OF INTEREST
EXPENSE
314 @eneral Rule , 0n general( the amount of
interest expense paid or incurred within a
taxable year of indebtedness in connection
with the taxpayer.s trade business or
exercise of profession( shall be allowed as a
deduction from the taxpayer.s gross income.
324 1imitation , &he amount of interest expense
paid incurred by a taxpayer in connection
with his trade( business or exercise of a
profession from an existing indebtedness
shall be reduced by an amount e6ual the
following percentages of interest income
earned which had been subjected to final
withholding depending on the year when the
interest income earned( vi)C
#1D ,beginning Nanuary 1( 188A
"8D , beginning Nanuary 1( 1888
"AD , beginning Nanuary 1( 2BBB and
thereafter
I''1#!*$!i":
Gn Nune 1( 2BBB +ompany L hasC
a4 Gbtained a loan from -2+ >inancing
+orporation in connection with the operation
of its business and its interest expense on
the loan amounted to P 12B(BBB.
b4 7eposit account in 7E> 2an* and derived
interest income thereof amounting to
P2BB(BBB on which the final tax of P#B(BBB
has been withheld.
-ssume that +ompany L5s net income
before the deduction of interest expense is
P$BB(BBB.
&he deductible expense shall be computed
as followsC
2BBB
?et 0ncome before interest expense P$BB(BBB
1essC 0nterest Expense P 12B(BBB
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
2B
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
1essC "AD of interest
income from deposit
3"AD x P2BB(BBB4 =%(BBB
De(1,!i&'e I!e*e#! e%/e#e EE?000
&axable 0ncome P #$%(BBB
= DED3CTIBLE INTEREST EXPENSE
14 0nterest on taxes( such as those paid for
deficiency or delin6uency( since taxes are
considered indebtedness 3provided that the
tax is a deductible tax( except in the case of
income tax4. However( fines( penalties( and
surcharges on account of taxes are not
deductible. &he interest on unpaid business
tax shall not be subjected to the limitation on
deduction.
24 0nterest paid by a corporation on scrip
dividends
"4 0nterest,on deposits paid by authori)ed
ban*s of the BanEo 4entral n #ili+inas
to depositors( if it is shown that the tax on
such interest was wi thhel d and dead.
#4 0nterest paid by a corporate taxpayer who is
liable on a mortgage upon real property of
which the said corporation is the legal or
e6uitable owner( even though it is not
directly liable for the indebtedness.
= NON6DED3CTIBLE INTEREST EXPENSE
14 -n individual taxpayer reporting income on
the cash basis incurs an indebtedness on
which an interest is paid in advance through
discount or otherwi seC
allowed as a deduction in the year the
indebtedness is paid
if the indebtedness is payable +eriodic
amortization on( the amount of interest
which corresponds to the amount of the
principal amorti)ed or paid during the
year shall be allowed as deduction in
such taxable year.
24 0nterest paid on indebtedness between
related taxpayer
"4 0f the indebtedness is incurred to finance
petroleum exploration
#4 0nterest on preferred( stoc*( which in reality
is dividend
$4 0nterest on unpaid salaries and bonuses
%4 0nterest calculated for cost *eeping on
account of capital or surplus invested in
business which does not represent charges
arising under interest,bearing obligation.
=4 0nterest paid when there is no stipulation for
the payment thereof.
= OPTIONAL TREATMENT OF INTEREST EXPENSE
-t the option of the taxpayer( interest
incurred to ac)uire +ro+erty used in trade or
business may be allowed as a deduction or
treated as ca+ital ex+enditure. ;4ec A7 -B.-A.<
C. TAXES
= RE>3ISITES FOR DED3CTIBILITY
1. must be in connection with taxpayer5s
business!
2. tax must be imposed by law on( and payable
by taxpayer 3direct tax4! and
". paid or incurred during the taxable year.
= TAXES NOT DED3CTIBLE
1. income tax!
2. estate and donor5s tax!
". special assessments!
#. excess electric consumption tax!
$. foreign income tax( war profits and excess
profits tax( if the taxpayer ma*es use of tax
credit! and
6. final taxes( being in the nature of income
tax.
= &axes allowed as deductions( when refunded
or credited( shall be included as part of gross
income in the year of receipt to the extent of the
income tax benefit of said deduction 3T$% Beefi!
R1'e4.
= >or ?R-E&2 and R>+( taxes paid or incurred
are allowed as deductions only if and to the
extent that they are connected from income
within the Philippines.
= Exception to re6uirement that only such
persons on whom the tax is imposed by law can
claim deduction thereofC
24 &axes of shareholder upon his interest as
such and paid by the corporation without
reimbursement from him( can be claimed by
the corporation as deduction.
"4 - corporation paying the tax for the holder
its bonds or other obligation containing a
tax,free covenant clause cannot claim
deduction for such taxes paid by it pursuant
to such covenant.
D. LOSSES
L"##e# , Refer to such losses which do not
come under the category of bad debts( inventory
losses( depreciation( etc.( and which arise in
taxpayer.s profession( trade or business.
= RE>3ISITES FOR DED3CTIBILITY:
14 -ctually sustained during the taxable year
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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21
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
24 +onnected with the trade( business or
profession
"4 Evidenced by a close and completed
transaction
#4 ?ot compensated for by insurance or other
form of indemnity
$4 ?ot claimed as a deduction for estate tax
purposes
%4 ?otice of loss must be filed with the 2ureau
of 0nternal Revenue within #$ days from the
date of discovery of the casualty or robbery(
theft or embe))lement.
= &he taxpayer5s failure to record in his boo*s
the alleged loss proves that the loss had not
been suffered( hence( not deductible. -City
Lumber vs. Commissioner.
CATEGORY AND TYPES OF LOSSES
C5 O*(i$*+ '"##e#
-a. &ncurred in trade or business, or +ractice
o" +ro"ession
C. Ne! "/e*$!i= '"## ,$**+6"9e*
Refers to the excess of allowable
deductions over gross income of the
business for any taxable year which had
not been previously offset as deduction
from gross income.
+an be carried over as a deduction from
gross income for the next " consecutive
years immediately following the year of
such loss.
>or mines( other that oil and gas well(
net operating loss incurred in any of the
first ten years of operation may be
carried over for the next $ years.
Re)uirements3
0. &he taxpayer was not exempt from
income tax in the year of such net
operating loss!
00. &here has been " substantial change
in the ownership of the business or
enterprise.
&here is no substantial change in
the ownership of the business whenC
a. not less than =$D in nominal
value of the outstanding issued
shares is held by or on behalf of
the same persons! or
b. not less than =$D of the paid up
capital is held by or on behalf of
the same person.
(b) *" +ro+erty. connected, $it% t%e trade,
business or +ro"ession, i" t%e loss arises
"rom "ires, storms, s%i+$recE or ot%er
casualties, or "rom robbery, t%e"t, or
embezzlement.
1. &otal destruction
&he net boo* value 3cost less
accumulated depreciation4 immediately
preceding the casualty( to be reduced by
any amount of insurance or
compensation received.
2. Partial 7estruction
&he replacement cost to restore the
property to its normal operating
condition( but in no case shall the
deductible loss be more than the net
boo* value of the property as a whole(
immediately before casualty.
&he excess over the net boo* value
immediately before the casualty should
be capitali)ed( subject to depreciation
over the remaining useful life of the
property.
25 C$/i!$' '"##e# 2'"##e# $*e (e(1,!i&'e "'+?
!" !)e e%!e! "f ,$/i!$' =$i#5
3a4 1osses from sale or exchange of capital
assets
3b4 1osses resulting from securities
becoming worthless and which are
capital assets.
3c4 1osses from short sales of property.
3d4 1osses due to failure to exercise
privilege or option to buy or sell
property.
35 S/e,i$' :i(# "f L"##e#
3a4 Haerin losses , deductible only to the
extent of gain or winnings. ;4ec. A7 -D.
-C.<
3b4 Losses on $as% sales o" stocEs , not
deductible because these are
considered to be artificial loss.
W$#) #$'e# / a sale or other
disposition of stoc* or securities where
substantially identical securities are
ac6uired or purchased within %1,day
period( beginning "B days before the
sale and ending "B days after the sale.
;4ec. A8<
E General rule3 1osses from wash
sales are not deductible.
E 2xce+tion3 'hen the sale is
made by a (e$'e* in stoc* or securities
and with respect to a transaction made
in the ordinary course of the business of
such dealer( losses from such sale is
deductible.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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22
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= ELEMENTS OF WASH SALES
a.&he sale or other disposition of stoc*
resulted to a loss!
b.&here was an ac6uisition or contract
or option for ac6uisition of stoc* or
securities within "B days before the
sale or "B days after the sale! and
c. &he stoc* or securities sold were
substantially the same as those
ac6uired within the %1,day period.
3c4 Abandonment losses in petroleum
operation and producing well.
a. 0n case a contract area where
petroleum operations are
underta*en is partially or wholly
abandoned( all accumulated
exploration and development
expenditures pertaining thereto shall
be allowed as a deduction.
b. 0n case a producing well is
abandoned( the unamorti)ed cost
thereof( as well as the
undepreciated cost of e6uipment
directly used therein( shall be
allowed as deduction in the year the
well( e6uipment or facility is
abandoned.
2(5 Losses due to voluntary removal o"
buildin incident to renewal or
replacements , deductible expense from
gross income.
3e4 Loss o" use"ul value o" ca+ital assets
due to charges in business conditions ,
deductible expense only to the extent of
actual loss sustained 3after adjustment
for improvement( depreciation and
salvage value4
3f4 Losses "rom sales or exc%anes o"
+ro+erty bet$een related tax+ayers
,losses of this nature is not deductible
but gains are taxable.
3g4 Losses o" "armers , if incurred in the
operation of farm business( it is
deductible.
E. BAD DEBTS
B$( (e&!# 6 shall refer to those debts resulting
from the worthlessness or uncollectibility( in
whole or in part( of amounts due the taxpayer by
others( arising from money lent or from
uncollectible amounts of income from goods sold
or services rendered.
= RE>3ISITES FOR DED3CTIBILITY:
14 Existing indebtedness due to the taxpayer
which must be valid and legally
demandable!
24 +onnected with the taxpayer.s trade(
business or practice of profession!
"4 ;ust not be sustained in a transaction
entered into between related parties!
#4 -ctually ascertained to be worthless and
uncollectible as of the end of the taxable
year! and
5) -ctually charged off the( boo*s of accounts
of the taxpayer as of the end of the. taxable
year!
= E>3ITABLE DOCTRINE OF TAX BENEFIT
- 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. DEPRECIATION
De/*e,i$!i" , the gradual diminution in the
service or useful value of tangible property due
from exhaustion( wear and tear and normal
obsolescence.
&he term also applies to amorti)ation of
intangible assets( the use of which in trade or
business i s o" limited duration.
= RE>3ISITES FOR DED3CTIBILITY:
14 &he allowance for depreciation must be
reasonable.
24 0t must be for property use or employment in
trade or business or out of its not being used
temporarily during the year.
"4 &he allowance must be charged off within
the taxable( year.
#4 chedule on the allowance must be
attached to the return.
= PROPERTY HELD BY ONE PERSON FOR LIFE WITH
THE REMAINDER TO ANOTHER PERSON
&he deduction shall be computed as if the
life tenant were the absolute owner of the
property and( as such the expense shall accrue
to him.
= PROPERTY HELD IN TR3ST
-llowable deduction shall be apportioned
between the income beneficiaries( and the
trustees in accordance with the pertinent
provisions of the instrument creating or in the
absence of such provisions( on the basis of the
trust income allowable to each.
= METHODS OF DEPRECIATION
&he term Mreasonable allowanceM shall
include 3but not limited to4 an allowance
computed in accordance( $it% the regulations
prescribed by the 7epartment of >inance( under
any of the following methods
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
2"
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
14 traight,line method
24 7eclining,balance method
"4 um of the years,digit method
#4 -ny other method which may be prescribed
by the 7epartment of >inance upon
recommendation of the +ommissioner of
0nternal Revenue.
Me!)"(# "f De/*e,i$!i"
<ind >ormula
14 traight,line cost, salvage value
estimated life
24 7eclining balance cost / depreciation x Rate
estimated life
"4 um of the years
digits 3F74
nth period x 3cost,salvage4
F7
0llustrationC - machine is used in the
manufacturing department of +orporation -(
compute the depreciation per annum with the
following factsC
+ost Q P1$(BBB alvage IalueQ P$(BBB
14 traight 1ine ;ethod with estimated life Q $ years
1$(BBB / $(BBB Q P2(BBB
$ years
24 7eclining balance with rate of 2BBD
Fear 1C 1$(BBB / B x 2BBD Q P%(BBB
$
Fear 2C 1$(BBB / %(BBB x 2BBD Q P"(%BB
$
"4 um of the years digits
F7 for $ years Q $R#R"R2R1 or 1$
Fear 1C $J1$ x 31$(BBB / $(BBB4 Q P"(""".""
Fear 2C #J1$ x 31$(BBB / $(BBB4 Q P2(%%%.%=
= AGREEMENT AS TO 3SEF3L LIFE ON WHICH
DEPRECIATION RATE IS BASED:
&he 2ureau of 0nternal Revenue and the
taxpayer may agreed in writing on the useful life
of the property to be depreciated. &he agreed
rate may be modified if justified by facts or
circumstances. &he change shall not be
effective before the taxable year on which notice
in writing by certified mail or registered mail is
served by the party initiating.
= SPECIAL TYPES OF DEPRECIATION
3b4 Petroleum Gperations
7epreciation of all properties directly
related to production of petroleum shall
be allowed under straight,line 314 or
declining balance 3724 method
;ay shift from 72 to 1 method
Eseful lifeC 1B years or shorter life as
allowed by the +ommissioner
Eseful life of property not directly related
to productionC $ years under straight line
method
3c4 ;ining Gperations
7epreciation on all properties in mining
operations other than petroleum
operations at the normal rate if expected
life is less than 1B years.
0f expected life is more than 1B years(
depreciation shall be any number of
years between $ years and the expected
life.
3d4 7epreciation deductible by non,resident
aliens engaged in tradeJbusiness or non,
resident corporation
Gnly when such property is located in
t%e #%ili++ines.
G. DEPLETION OF OIL AND GAS WELLS AND
MINES
De/'e!i" , exhaustion of natural resources as
in mines( oil( and gas wells. &he natural
resources are called Owasting assetsP. -s the
physical units representing such resources are
extracted an d sold( such assets move towards
exhaustion.
<nown as cost of depletion allowance
for mines( oil gas wells and other natural
deposits starting calendar year 18=% and fiscal
year beginning Nul y 1(18=$
= TO WHOM ALLOWED
Gnly mining entities owning economic
interest in mineral deposits.
2conomic interest means interest in
minerals in place investment therein or secured
by operating or contract agreement for which
income is derived( and return of capital
expected( from the extraction of mineral.
;ere economic or pecuniary advantage
to be derived by production by one who has no
capital investment in the mineral deposit does
not amount to economic interest.
= FEAT3RES:
a4 0ntangible Exploration and development
drilling cost in petroleum exploration shall be
treated either asC
14 revenue expenditures! or
24 capital expenditures
b4 &he total amount of deductible for
exploration and development expenditures
shall not exceed $BD of net income from
mining operation. &he excess shall be
carri ed forward to the succeeding year until
fully deducted.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
2#
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
H. CHARITABLE AND OTHER CONTRIB3TIONS
= RE>3ISITES FOR DED3CTIBILITY:
14 &he contribution or gift must be actually
paid.
24 0t must be given to the organi)ations
specified in the code.
"4 &he net income of the institution must not
inure to the benefit of any private
stoc*holder or individual.
= 8AL3ATION:
+haritable contribution of /*"/e*!+ other
than money shall be based on the ac6uisition
cost of said property.
ee Ae% E / +ontributions and
7onations
I. RESEARCH AND DE8ELOPMENT 2RND5
?atureC - taxpayer may treat research and
development expenditures in two waysC
5. Revenue 2x+enditures
= Re;1i#i!e#:
0. Paid or incurred during the taxable year
00. Grdinary and necessary expenses in
connection with trade business or
profession
000. ?ot chargeable to capital account
9. De"erred ex+enses
= Re;1i#i!e#:
0. Paid or incurred in connection with
trade( business( or profession
00. ?ot treated as expense
000. +hargeable to capital account but not
chargeable to property subject to
depreciation or depletion.
A4"1! (e(1,!i&'e:
-mount ratably distributed over a
period of %B months beginning with the
month( taxpayer reali)ed benefits from
such expenditures.
= EXCL3SION FROM RESEARCH AND
DE8ELOPMENT EXPENDIT3RES
14 -ny expenditure for the ac6uisition or
improvement of land or for the improvement
of property to be used in connection with
research and development subject to
depreciation and depletion.
24 -ny expenditure paid or incurred for the
purpose of ascertaining the existence(
location( extent or 6uality of any deposit of
ore or other mineral including oil or gas.
7. PENSION TR3ST CONTRIB3TIONS
Pe#i" T*1#! C"!*i&1!i"# , a deduction
applicable only to the employer on account of its
contribution to a private pension plan for the
benefit of its employee. &his deduction is purely
business in character.
= RE>3ISITES FOR DED3CTIBILITY:
2. &he employer must have established a
pension or retirement plan to provide for the
payment of reasonable pensions to his
employees!
". &he pension plan is reasonable and
actuarially sound!
#. 0t must be funded by the employer!
$. &he amount contributed must be no longer
subject to the control and disposition of the
employer!
%. &he payment has not yet been allowed as a
deduction! and
=. &he deduction is apportioned in e6ual parts
over a period of 1B consecutive years
beginning with the year in which the transfer
or payment is made.
k. PREMI3M PAYMENTS ON HEALTH ANDBOR
HOSPITALIZATION INS3RANCE.
0t is an amount of premium on health andJor
hospitali)ation paid by an individual taxpayer
3head of family or married4( for himself and
members of his family during the taxable year.
= RE>3ISITES FOR DED3CTIBILITY:
14 0nsurance must have actually been ta*en
24 &he amount of premium deductible do not
exceed P2(#BB per family or P2BB per
month during the taxable ear.
"4 &hat said family has a gross income of not
more than P2$B(BBB for the taxable year.
#4 0n case of married individual( only the
spouse claiming additional exemption shall
be entitled to this deduction.
= WHO MAY A8AIL OF THE DED3CTION:
a4 0ndividual taxpayers earning purely
compensation income during the year.
b4 0ndividual taxpayer earning business income
or in practice of hi s profession whether
availing of itemi)ed or optional standard
deductions during the year.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
2$
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
c4 0ndividual taxpayer earning both
compensation( and business or practice of
profession during the year.
' NON6DED3CTIBLE EXPENSES
IN THE TAX CODE
= REASON FOR NON6DED3CTIBILITY:
14 Personal expenses
24 +apital expenditures
"4 0tems not normally subject to income tax and
therefore are not deductible.
#4 0tems ta*en advantage of by the taxpayer to
avoid payment of income tax.
= SPECIFIC ITEMS: 2Se,!i" 3G5
1. Personal( living or family expenses!
2. -mount paid out for new buildings or for
permanent improvements( or betterment
made to increase the value of any property
or estate(
EL+EP& that intangible drilling and
development cost incurred in petroleum
operations are deductible!
". -mount expended in restoring property or in
ma*ing good the exhaustion thereof for
which an allowance has been made!
4. Premiums paid on any life insurance policy
covering the life of any officer or employee(
or of any person financially interested in any
trade or business carried on by the taxpayer(
individual or corporate( when the taxpayer is
directly or indirectly a beneficiary under such
policy. ;4ec. AC<
5. 1osses from sales or exchanges of property
bet:een related ta0pa6ers. 9ec. "%:
TRANSACTIONS BETWEEN RELATED PARTIES
2. 2etween members of the family!
S>amily5 includes only the brothers(
sisters 3whether by the whole or half blood4(
spouse( ancestors( and lineal descendants
of the taxpayer.
". Except in the case of distributions in
li6uidationC
a. between an individual and a corporation
more than $BD in value of the
outstanding stoc* of which is owned(
directly or indirectly( by or for such
individual!
b. between two corporations more than
$BD in value of the outstanding stoc* of
each of which is owned( directly or
indirectly( by or for the same individual( if
either one of such corporations( with
respect to the taxable year of the
corporation preceding the date of the
sale of exchange was a personal
holding company or a foreign personal
holding company! or
#. 2etween the grantor and a fiduciary of any
trust!
$. 2etween the fiduciary of a trust and the
fiduciary of another trust if the same person
is a grantor with respect to each trust!
%. 2etween a fiduciary of a trust and a
beneficiary of such trust.
= CONSE>3ENCES
1. 0nterest expense is not allowed as a
deduction if both the taxpayer and the
person to whom the payment was made
are persons specified above. ;4ec. A7
-B.-9.<
2. 2ad debts sustained in a transaction
entered into between parties mentioned
above are not deductible. ;4ec. A7 -2.
-5.<
3. 1osses from sales or exchanges of
property between persons specified
above are not deductible. ;4ec AC -B.<
225 OPTIONAL CORPORATE
INCOME TAX
Se,!i" 2I 2A5
=CORPORATION S3B7ECT TO:
a4 7omestic corporations
b4 Resident foreign corporations
= RATE OF TAX AND DATE OF EFFECTI8ITY
CDL "f !)e =*"## i,"4e effective Nanuary
1( 2BBB
= CONDITIONS OR RE>3IREMENTS:
a4 - tax ratio of 2BD of @ross ?ational
Products
b4 - ratio of #BD income tax collection of
total tax revenues
c4 - I-& tax effort of #D of @?P
d4 - B.8D ration of consolidated public
sector financial position to @?P
= OTHER FEAT3RES:
a4 -vailable only to firms whose ratio
ofC
+ost of sales
Q$$D @ross sales or receipts from
all sources
b4 &he election shall be irrevocable for three
3"4 consecutive years
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
2%
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= MEANING OF GROSS INCOME
@eneral concept , gross income meansC
@ross sales
1essC
14 ales Return!
24 7iscount and allowances
"4 +ost of goods sold , means all
business expenses directly incurred
to produce the merchandise to bring
them to their present location and
use.
235 MINIM3M CORPORATE
INCOME TAX 2MCIT5
Se,!i" 2I 2E5
= WHO ARE CO8EREDA
;+0& is imposed on domestic and
resident foreign corporations
a. 'henever such corporation has )ero or
negative taxable income! or
b. 'henever the amount of ;+0& is
greater than the normal income tax due
from such corporation determined under
ection 2=9-: of the +&RP.
= LIMITATIONS
a. &he ;+0& shall apply only to domestic
and resident foreign corporations
subject to the normal corporate income
tax 3income tax rates under ec 2=9-: of
the +&RP4.
b. 0n the case of a domestic corporation
whose operations or activities are partly
covered by the regular income tax
system and partly covered under a
special income tax system( the ;+0&
s%all a++ly on o+erations covered by t%e
reular cor+orate income tax system.
c. 0n computing for the ;+0& due from a
resident foreign corporation( only the
gross income from sources within the
Philippines shall be considered for such
purpose.
= WHEN DOES A CORPORATION BECOME LIABLE
3NDER THE MCITA
;+0& is imposed beginning on the fourth
taxable year immediately following the year in
which such corporation commenced its
business. &he taxable year in which the
business operations commenced shall be the
year when the corporation registers with the 20R.
= C$**+ F"*.$*( "f !)e E%,e## Mii414 T$%
-ny excess of ;+0& over the normal
income tax can be carried forward on an
annual basis.
&he excess can be credited against the
normal income tax due in the next "
immediately succeeding taxable years.
-ny amount of the excess ;+0& which
cannot be credited against the normal income
tax due in the next ",year period shall be
forfeited.
= RELIEF FROM MCIT
&he ecretary of >inance is authori)ed
to suspend the imposition of the ;+0& on any
corporation which suffers losses because ofC
a. prolonged labor dispute!
b. force majeure! or
c. legitimate business reverses.
O4ubstantial losses "rom a +roloned labor
dis+uteM means losses arising from a stri*e
staged by the employees which lasted for more
than six 3%4 months within a taxable period and
which has caused the temporary shutdown of
business operations.
ODorce ma1eureM means a cause due to an
irresistible force as by M-ct of @odM li*e
lightning( earth6ua*e( storm( flood and the li*e.
&his term shall also include armed conflicts
li*e war and insurgency.
OLeitimate business reversesM shall include
substantial losses sustained due to fire(
robbery( theft( or embe))lement( or for other
economic reason as determined by the
ecretary of >inance.
= TAX RATEC 2L "f =*"## i,"4e or taxable
base pertinent to a tradingJmerchandising
concern or a service entity
= T$% B$#eC @RG 0?+G;E
= MEANING OF GROSS INCOME
@eneral concept , gross income meansC
@ross sales
1essC
14 ales Return!
24 7iscount and allowances
"4 +ost of goods sold , means all
business expenses directly incurred
to produce the merchandise to bring
them to their present location and
use.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
2=
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
<0?7 G> 2E0?E
A . 'radin or /erc%andisin Concern
G*"## I,"4e Q
gross salesJ
receipts less sales
returns( discounts
and allowances
and cost o" oods
sold
C"#! "f S$'e# Q
1. 0nvoice cost of the
goods sold!
2. import duties!
3. freight in
transporting the goods
to the place where the
goods are actually
sold!
4. insurance while
the goods are in
transit.
B. Manu$acturing
G*"## I,"4e
3ame4
C"#! "f S$'e# O -ll cost
of production of finished
goods( such as
1.raw materials used!
2.direct labor!
".manufacturing
overhead!
#.freight cost!
$.insurance premiums!
%.other costs incurred to
bring the raw materials
to the factory or
warehouse.
C. Ser"ices
G*"## I,"4e O
@ross receipts
less sales returns(
allowances(
discounts and
costs o" services
C"#! "f Se*9i,e# O -ll
direct costs and expenses
necessarily incurred to
provide the services
re6uired by the customers
and clients includingC
a. alaries and employee
benefits of personnel(
consultants and
specialists directly
rendering the service!
b. +ost of facilities
directly utili)ed in
providing the service.
0t shall "! i,'1(e
i!e*e#! e%/e#e exce+t
"or banEs and ot%er
"inancial institutions.
ee Ae% F for clarification of the 20R
as to the items comprising ross recei+ts and
cost o" services for purposes of computing the
gross income on sale of services which shall be
the basis of the 2D ;+0&. 7RMC A28@@<9
@ross income excludes passive income
subject to final tax.
Gther income and Extraordinary 0ncome are
included since RR 8,8A provides that gross
sales include sales contributory to income
taxable under the regular corporate tax.
ee Ae% G for interplay of normal tax(
optional corporate income tax and ;+0&
IMPROPERLY ACC3M3LATED
EARNINGS 2IAE5 TAX
Se,!i" 2K
Revenue Regulations ?o. 2 , 2BB1
= Defii!i": I&m+ro+erly accumulated earnins
-&A2.J are the profits of a corporation that are
permitted to accumulate instead of being
distributed by a corporation to its shareholders
for the purpose of avoidin t%e income tax with
respect to its shareholders or the shareholders
of another corporation.
= RATE: 1BD of the 0mproperly -ccumulated
&axable 0ncome 3in addition to other taxes4.
B,'properl6 Accu'ulated *a0able ,nco'eC
&axable income for the year
-ddC
0ncome exempt from tax!
0ncome excluded from gross income!
0ncome subject to final tax!
?et operating loss carry,over 3?G1+G4
&otal
1essC
0ncome tax paidJpayable for the taxable year
7ividends actually or constructively paidJissued
from the applicable year5s taxable income
-mount reserved for the reasonable needs
of the business as defined in the Regulations
&ax base of improperly accumulated earnings tax
= EXCL3SIONS
>or corporations using the calendar
basis the accumulated earnings tax shall
not apply on 0-E as of 7ec. "1( 188=.
>or fiscal year basis( the tax shall not
apply to the 12,month period of fiscal
year 188=,188A.
0-E as of the end of a calendar or fiscal
year period on or after 7ec. "1( 188A shall
be subject to the 1BD tax on such 0-EF
= WHO ARE CO8EREDA
E General Rule3 &he 0-E tax shall apply to
every corporation formed or availed 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. &hese areC
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
2A
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
1.Domestic cor+orations as defined under the
&ax +ode!
2.+orporations which are classified as closelyG
%eld cor+orations.
those corporations at least fifty percent
3$BD4 in value of the outstanding capital
stoc* or at least fifty percent 3$BD4 of
the total combined voting power of all
classes of stoc* entitled to vote is
owned directly or indirectly by or for not
more than twenty 32B4 individuals.
7omestic corporations not falling under
the aforesaid definition are( therefore(
publicly,held corporations.
E 2xce+tion3 &he said tax shall not apply toC
a. Publicly held corporations
b. 2an*s and other non,ban*s >inancial
intermediaries
c. 0nsurance companies
d. &axable partnerships
e. @eneral professional partnerships
f. ?on, taxable joint ventures and
g. Enterprises duly registered with the
Philippine Economic Tone -uthority
3PET-4 under R.-. =81%( and
enterprises registered pursuant to the
2ases +onversion and 7evelopment
-ct of 1882 under R.-. =22=( as well
as other enterprises duly registered
under special economic )ones
declared by law which enjoy payment
of special tax rate on their registered
operations or activities in lieu of other
taxes( national or local.
= E8IDENCE OF P3RPOSE TO A8OID INCOME TAX
1. &he fact that any corporation is a mere
holding company or investment company
shall be prima facie evidence of a purpose
to avoid the tax upon its shareholders or
members.
0nstances indicative of purpose to avoid
income tax upon shareholdersC
a. 0nvestment of substantial earnings and
profits of the corporation in unrelated
business or in stoc* or securities of
unrelated business!
b. 0nvestment in bonds and other long,
term securities!
c. -ccumulation of earnings in excess of
1BBD of paid,up capital( not otherwise
intended for the reasonable needs of
the business as defined in these
Regulations
2. &he fact that the earnings or profits of a
corporation are permitted to accumulate
beyond the reasonable needs o" t%e
business shall be determinative of the
purpose to avoid the tax upon its
shareholders or members unless the
corporation( by the clear preponderance of
evidence( shall prove the contrary.
IReasonable needs o" t%e businessJ
includes the reasonably anticipated needs
of the business such asC
a. -llowance for the increase in the
accumulation of earnings up to 1BBD of
the paid,up capital of the corporation as
of 2alance heet date( inclusive of
accumulations ta*en from other years!
b. Reserved for definite corporate
expansion projects or programs as
approved by the 2oard of 7irectors or
e6uivalent body!
c. Reserved for building( plants or
e6uipment ac6uisition as approved by
the 2oard of 7irectors or e6uivalent
body!
d. Reserved for compliance with any loan
covenant or pre,existing obligation
established under a legitimate business
agreement!
e. Earnings re6uired by law or applicable
regulations to be retained by the
corporation or in respect of which there
is legal prohibition against its
distribution!
f. 0n the case of subsidiaries of foreign
corporations in the Philippines( all
undistributed earnings intended or
reserved for investments within the
Philippines as can be proven by
corporate records andJor relevant
documentary evidence.
&he controllin intention o" t%e tax+ayer is
that which is manifested at t%e time o"
accumulation( not subse6uently declared
intentions which are merely the product of
afterthought. - speculative and indefinite
purpose will not suffice.
7efiniteness of planJs coupled with actionJs
ta*en towards its consummation are essential.
= PERIOD FOR PAYMENT OF DI8IDENDB PAYMENT
OF IAET.
, dividends must be declared and paid or
issued not later than one year following the close
of the taxable year( otherwise( the 0-E&( if any(
should be paid within fifteen 31$4 days thereafter.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
28
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
2E5 INCOME S3B7ECT TO
PREFERENTIAL OR SPECIAL RATES
Pertains to income derived by a
particular individual or corporation belonging to a
class of income taxpayer that is subject to either
a preferential or special rate. Please refer to
Ae% H.
2D5 GROSS INCOME TAX
= GROSS INCOME TAX 2GIT5 FORM3LA
Entire 0ncome
1essC Exclusions and 0ncome subject to >inal
&ax3e.g. Passive 0ncome4
@ross 0ncome
X &ax Rates
?et 0ncome &ax 7ue
= GIT APPLIES TO
1. ?on,resident alien not engaged in trade
or business! and
2. ?on,resident foreign corporation.
= TAX RATES: Please refer to -nnex - and 2.
2G5 FINAL INCOME TAX
= GENERAL PRINCIPLES
1. 0t is constituted as a full and final
payment of the income tax due from the payee
on a particular type of income subject to final
withholding tax 3>'&4.
&he finality of the withholding tax is
limited only to the payee5s income tax liability
and does not extend to other taxes that may be
imposed on said income.
2. &he income subjected to final income
tax is no longer subject to the net income tax!
otherwise( there would be a violation of
prohibited double taxation.
". &he liability for the payment of the tax
rests primarily on the payor as withholding
agent.
#. &he payee is not re6uired to file an
income tax return for the particular income
subjected to >'&.
$. &he rate of the final tax is multiplied to
the gross income. &hus( deductions andJor
personal and additional exemptions are not
allowed.
= T$% R$!e#C Please refer to Ae% L 2C625 in
relation to -nnex - and 2.
2I5 FRINGE BENEFIT TAX 2FBT5
= Defii!i"#: OF*i=e Beefi! T$%P is a $inal
inco'e ta0 on the employee which shall be
withheld and paid by the employer on a 6uarterly
basis.
OF*i=e &eefi!P means any good(
service( or other benefit furnished or granted by
an employer( in cash or in *ind( in addition to
basic salaries( to an individual employee 3except
ran* and file employees4 such as( but not limited
to the followingC
1. Housing
2. Expense -ccount
". Iehicle of any *ind
#. Household personnel( such as maid( driver
and others
$. 0nterest on loan at less than mar*et rate to
the extent of the difference between the
mar*et rate and actual rate granted.
%. ;embership fees( dues and other expenses
borne by the employer for the employee in
social and athletic clubs and similar
organi)ations
=. Expenses for foreign travel
A. Holiday and vacation expenses
8. Educational assistance to the employee or
his dependents! and
1B. 1ife or health insurance and other non,lire
insurance premiums or similar amounts on
excess of what the law allows.
ee Ae% I for detailed discussion of
items.
= PERSONS LIABLE
&he EMPLOYER 3as a withholding
agent4( whether individual( professional
partnership or a corporation( regardless
of whether the corporation is taxable or
not( or the government and its
instrumentalities
= TAX RATE: "2D 3from Nanuary 1( 2BBB
onwards4 of the Grossed u+ /onetary (alue
-G/(. of fringe benefits.
0n the case of aliens( the tax rates to be
applied on fringe benefit shall be as followsC
1. ?R-?E2& 2$D
2. -liens employed by regional HG 1$ D
". -liens employed by G2E 1$D
#. -liens employed by Petroleum ervice
$. +ontractors and ubcontractors
= -GM80 OF THE FRINGE BENEFIT REPRESENTS
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"B
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
1. the whole amount of income reali)ed by
the employee which includes the net
amount of money or net monetary value
of property which has been received!
plus
2. the amount of fringe benefit tax thereon
otherwise due from the employee but
paid by the employer for and in behalf of
the employee.
OGM8P of the fringe benefit shall be
determined by dividing the monetary value of the
fringe benefit by the G*"##e( 1/ (i9i#"*. &he
@rossed up divisor is the difference between
1BBD and the applicable rates.
YEAR
GROSSED 3P
DI8ISOR
RATE
188A %%D "#D >'&
1888 %=D ""D >'&
2BBB
onwards
%AD
"2D >'&
= FRINGE BENEFITS NOT S3B7ECT TO FBT
-. >ringe benefits not considered as gross
income ,
1. if it is re6uired or necessary to the
business of employer
2. if it is for the convenience or
advantage of employer
2. >ringe 2enefit that is not taxable under
ec. "2 324 / Exclusions from @ross
0ncome
+. >ringe benefits not taxable under ec.
"" >ringe 2enefit &axC
1. >ringe 2enefits which are authori)ed
and exempted under special laws(
such as the 1"th month Pay and
Gther 2enefits with the ceiling of
P"B(BBB.
2. +ontributions of the employer for the
benefit of the employee to
retirement( insurance and
hospitali)ation benefit plans!
". 2enefits given to the Ran* and >ile
Employees( whether granted under
a collective bargaining agreement or
not! and
#. &he De minimis benefits / benefits
which are relatively small in value
offered by the employer as a means
of promoting goodwill( contentment(
efficiency of Employees
&he term IRanD and 4ile
E'plo6eesJ shall mean all employees
who are holding neither managerial nor
supervisory position as defined in the
1abor +ode
0n the case of ran* and file
employees( fringe benefits other than
those excluded from gross income
under the &ax +ode and other special
laws( are taxable under the individual
normal tax rate.
= DED3CTIBILITY TO THE TAXABLE INCOME OF THE
EMPLOYER
E General Rule3 &he amount of taxable fringe
benefit and the fringe benefits tax shall
constitute allowable deductions from gross
income of the employer.
E 2xce+tion3
0f the basis for computation of the fringe
benefits tax is the depreciation value( the )onal
value or the fair mar*et value( only the actual
fringe benefits tax paid shall constitute a
deductible expense for the employer. &he value
of the fringe benefit shall not be deductible and
shall be presumed to have been tac*ed on or
actually claimed as depreciation expense by the
employer. Provided( however( that if the
aforesaid )onal value or fair mar*et value of the
said property is greater than its cost subject to
depreciation( the excess amount shall be
allowed as a deduction from the employer.s
gross income as fringe benefit expense. 34ec.
9.AA;D<, Re". Reg. -o. <2EF.
= EXAMPLE OF DE MINIMIS BENEFITS NOT
S3B7ECT TO FBT 2RR -o. F28@@@ and ?@28@@@9
3a4 ;oneti)ed unused vacation leave credits of
PR0I-&E employees not exceeding 31B4
days during the year -?7 &HE ;G?E&0TE7
I-1EE G> 1E-IE +RE70& P-07 &G
@GIER?;E?& G>>0+0-1 -?7 E;P1GFEE
3b4 ;edical cash allowance to dependents of
employees not exceeding P=$B.BB per
employee per semester or P12$ per month!
3c4 Rice subsidy of P1(BBB.BB or one 314 sac* of
$B*g. rice per month amounting to not more
than P1(BBBCBB(
3d4 Eniform and clothing allowance not
exceeding P"(BBB per annum!
3e4 -ctual yearly medical benefits not exceeding
P1B(BBB per annum!
3f4 1aundry allowance not exceeding P"BB per
month!
3g4 Employees achievement awards e. g. for
length of service or safety achievement(
which must be in the form of a tangible
personal property other than cash or gift
certificate( with an annual monetary value of
not exceeding P1B(BBB received by the
employee under an established written plan
which does not discriminate

in favor paid
employees!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"1
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
' CAPITAL GAINS AND LOSSES
IN GENERAL
CONCEPT OF CAPITAL ASSETS
Ender the tax code( there is no definition for
the term Mcapital assetsM. 'hat it gives is the
meaning of ordinary assetsC
1. O*(i$*+ $##e!#
a. toc* in trade of the taxpayer or other
properties of a *ind which would
properly be included in the inventory of
the taxpayer!
b. Property held by the taxpayer primarily
for sale to customers in the ordinary
course of business!
c. Property used in trade or business and
subject to depreciation! and
d. Real property used in trade or business.
2. C$/i!$' A##e!# include all property held by
the taxpayer whether or not connected in
trade or business but not including those
enumerated above 3U14 as ordinary assets.
C$/i!$' G$i C$/i!$' L"##
&he gain derived
from the sale or
exchange of capital
assets.
&he loss incurred
from the sale or
exchange of capital
assets.
= TRANSACTION RES3LTING IN TAXABLE GAINS
B3T NON6RECOGNITION OF LOSSES
a. ale or exchange between related parties!
b. 'ash sales by non,dealers of securities and
when not subject to the stoc* transfer tax!
c. Exchanges not solely in *ind in merger and
consolidation! and
d. ales or exchanges that are not at arms
length.
RE>3ISITES FOR RECOGNITION
OF CAPITAL GAINBLOSS
1. &he transaction must involve property
classified as capital asset! and
2. &he transaction must be a sale or exchange
or one considered as e6uivalent to a sale or
exchange.
Ne! C$/i!$' G$i Ne! C$/i!$' L"##
&he excess of the
gains from
salesJexchanges of
capital assets over
the gains from such
salesJexchanges.
&he excess of the
losses from sales or
exchanges of capital
assets over the gains
from such sales or
exchanges.
R3LES ON THE RECOGNITION
OF CAPITAL GAINS OR LOSSES
I(i9i(1$' C"*/"*$!i"
Holding Period
&he percentages of
gain or loss to be ta*en
into account shall be the
ff.C
a.1BBD , if the capital
assets has been
held for 12 mos. or
less! and
b.$BD , if the capital
asset has been held
for more than 12
mos.
+apital gains
and losses are
recogni)ed to the
extent of 1BBD.
3&here is no
holding period4
?on,deductibility of ?et
+apital losses
+apital losses are
allowed only to extent
of the capital gains!
hence( the net capital
loss is not deductible.
+apital losses are
allowed only to
extent of the
capital gains!
hence( the net
capital loss is not
deductible.
EL+EP&0G? C 0f any
domestic ban* or
trust company( a
substantial part of
whose business is
the receipt of
deposits( sells any
bond( debenture(
note or certificate or
other evidence of
indebtedness issued
by any corporation
3including one issued
by a government or
political subdivision4
?et +apital 1oss +arry /
Gver
-11G'E7
&he net capital loss 3in
an amount not in excess
of the taxable income
before personal
exemption for such year4
shall be treated in the
succeeding year 3but not
beyond 12 months4 as a
deduction as short,term
capital loss 3at 1BBD4
from the net capital
gains.
?G& -11G'E7
TAX EXEMPT EXCHANGES
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"2
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
ales or exchanges resulting in non,
recognition of gains or lossesC
1. Exchange solely in Eind in legitimate
4e*=e*# $( ,"#"'i($!i"! includesC
a. 2etween the corporations which are
parties to the merger or consolidation
3property for stoc*s4!
b. 2etween a stoc*holder of a corporation
party to a merger or consolidation and
the other party corporation 3stoc* for
stoc*4!
c. 2etween a security holder of a
corporation party to a merger or
consolidation and the other party
corporation 3securities for securities4
2. Exchange of property for stoc*s resulting in
ac6uisition of corporate control by a person(
alone or together with others not exceeding
four.
O+ontrolP means ownership of stoc*s in
a corporation amounting to at least $1D of
the total voting power of all classes of stoc*s
entitled to vote.
= SALE ON EXCHANGE OF ORDINARY ASSETS
@eneral rules of income taxation apply
to both as to the gain and as to the loss.
ee Ae% C6C 3@ross 0ncome / @ains
from dealings in property4
ee Ae% 7 / @uidelines 3+apital or
Grdinary asset4
CAPITAL GAINS AND LOSSES6
SHARES OF STOC:
&he taxation of shares of stoc* whether
or not listed and traded in the stoc* exchange is
subject to final tax.
= WHO ARE LIABLE TO THE TAX
1. 0ndividual taxpayer( citi)en or alien
2. +orporate taxpayer( domestic or foreign
". Gther taxpayers such as estate( trust( trust
funds and pension among others.
= RATES OF TAX
1. S)$*e# "f #!",H "! !*$(e( !)*"1=) $ '",$'
#!",H e%,)$=e , ?et capital gains derived
during the taxable year from sale( exchange(
or transfer shall be taxed as follows 3on a
per transaction basis4C
?ot over P 1BB(BBB , $D
Gver P 1BB(BBB , 1BD
2. S)$*e# "f #!",H 'i#!e( !)*"1=) $ '",$' #!",H
e%,)$=e / V of 1D of the gross selling
price of the stoc*.
= EXCEPTIONS TO THE TAX
14 @ains derived by dealers in securities.
24 -ll other gains which are specifically
exempt from income tax under existing
investment incentives and other special
laws.
BIR R3LING CEG6KJ
32asis for computing gain or loss4
&he fair mar*et value 3>;I4 of the sale
of shares not traded but listed in the stoc*
exchange is the highest closing price on the
day the shares were sold( transferred or
exchanged.
'hen no sale is made in the stoc*
exchange( the >;I shall be the highest
selling price on the day nearest to the day of
sale( transfer or exchange.
>or shares not listed in the exchange( the
>;I shall be the boo* value nearest the
valuation date
&he above rules shall be used in
computing for the net capital gainJloss for
disposition of shares.
= IMPORTANT FEAT3RES
1. ale of shares of stoc* of a domestic
corporation listed and traded in a local stoc*
exchange and that of initial public offering
shall be subject to Percentage tax 32usiness
&ax4
2. +apital losses sustained during the year 3not
listed and traded in a local stoc* exchange4
shall be allowed as a capital loss deductible
on the same taxable year only 3no carry,
over4
". &he entire amount of capital gain and capital
loss 3not listed and traded in a local stoc*
exchange4 shall be considered without
ta*ing into account holding period
irrespective of who is the taxpayer 3all
1BBD4
#. ?on,deductibility of losses on wash sales.
= FILING AND PAYMENT OF TAX
1) Li#!e( $( T*$(e( i !)e S!",H E%,)$=e ,
&he stoc*bro*er shall turn over the tax
collected to the 2.0.R. within "ive -@. ban*ing
days from the date of collection.
2) N"! !*$(e( !)*"1=) !)e #!",H e%,)$=e , 0t
shall be paid by the seller on a per transaction
basis upon filing of the re6uired return within
A6 days following each sale or other
disposition of shares of stoc*.
CAPITAL GAINS AND LOSSES6
SALE OR OTHER DISPOSITION
OF REAL PROPERTY
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
""
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= PERSONS LIABLE AND TRANSACTIONPS
AFFECTED
-5. &ndividual tax+ayers, estate and trust
ale or exchange or other disposition of real
property considered as capital assets.
&he said sale shall include Mpacto de retro
saleM and other conditional sale.
-9. Domestic and Resident Dorein Cor+oration
ale or exchange or disposition of lands
andJor building which are not actually used in
business and are treated as capital asset.
= RATE AND BASIS OF TAX
- final tax of %D is based on the gross
selling price or fair mar*et value or )onal value
whichever is higher.
= EXEMPTION OF CERTAIN INDI8ID3ALS FROM THE
CAPITAL GAINS TAX ON THE SALE OR DISPOSITION
OF A PRINCIPAL RESIDENCE
Conditions:
1. ale or disposition of the old principal
residence!
2. 2y $!1*$' /e*#"# , citi)en or resident alien
individual taxable under ec. 2# of the +ode
3does not include an estate or a trust4!
". &he proceeds of which is fully utili)ed in 3a4
ac6uiring or 3b4 constructing a new principal
residence within eighteen 31A4 calendar
months from date of sale or disposition!
#. ?otify the +ommissioner within thirty 3"B4
days from the date of sale or disposition
through a prescribed return of his intention
to avail the tax exemption!
$. +an only be availed of only once every ten
31B4 years!
%. &he historical cost or adjusted basis of his
old principal residence sold( exchanged or
disposed shall be carried over to the cost
basis of his new principal residence
=. 0f there is no full utili)ation( the portion of the
gains presumed to have been reali)ed shall
be subject to capital gains tax.
' GROSS INCOME FROM DIFFERENT
SO3RCES
ee Ae% :
' ACCO3NTING PERIODS AND
METHODS OF ACCO3NTING
I. ACCO3NTING PERIODS
-. @E?ER-1 RE1E -4ec. 7A.C
&axable income is computed upon the basis
of taxpayer5s annual accounting period 3fiscal or
calendar year4 in accordance with the method of
accounting employed
0f no method of accounting employed or
method does not clearly reflect the income(
computation shall be made in accordance wJ
such method as the opinion of the
+ommissioner clearly reflects the income.
taxable income is computed based on
calendar year ifC
1. accounting period is other than a fiscal
year
2. taxpayer has no accounting period
". taxpayer does not *eep boo*s
#. taxpayer is an individual
Fi#,$' +e$*C accounting period of 12 months
ending on the last day of any month other
than 7ecember
C$'e($* +e$*C accounting period from
Nanuary 1 to 7ecember "1
2. PER0G7 0? 'H0+H 0&E; G> @RG 0?+G;E
0?+1E7E7 -4ec. 77.
-mount of all items of gross income shall be
included in the gross income for the taxable
year in which received by the taxpayer(
unless( any such amounts are to be properly
accounted for in a different period under
methods of accounting permitted
0n case of death of taxpayerC include for the
taxable year in which falls the date of his
death( all amounts which accrued up to the
date of his death! if not otherwise properly
includible in respect of such period or a prior
period
+. PER0G7 >GR 'H0+H 7E7E+&0G? -?7 +RE70&
&-<E? -4ec. 7@.
7eductions provided in this &itle shall be
ta*en for the taxable year in which Spaid or
incurred( dependent upon the method of
accounting upon the basis of which the net
income is computed( unless( in order to
reflect the income( deductions should be
ta*en as of a different period.
0n case of death of taxpayerC deductions
allowed for the taxable period in which falls
the date of his death( amounts accrued up to
the date of his death if not otherwise
properly allowable in respect of such period
or a prior period
7. +H-?@E G> -++GE?&0?@ PER0G7 -4ec.7C.
<inds of changes
- from fiscal year to calendar year
- from calendar year to fiscal year
- from one fiscal year to another
Effect of changeC ?et income( shall( with the
approval of the +ommissioner( be computed
on the basis of the new accounting period(
subject to ec. #=
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"#
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
E. >0?-1 GR -7NE&;E?& RE&ER? >GR - PER0G7
G> 1E &H-? 12 ;G?&H
3-4 RE&ER? >GR HGR& PER0G7 REE1&0?@
>RG; +H-?@E G> -++GE?&0?@ PER0G7
taxpayer is other than an individual
with the approval of the +ommissioner
0f change is from fiscal year to calendar
yearC
- separate final or adjustment return
be made for the period between the
close of the last fiscal year for which
return was made and the following
7ecember "1
0f change is from calendar year to fiscal
yearC
- separate final or adjustment return
be made for the period between the
close of the last calendar for which
return was made and the date
designated as the close of the fiscal
year
0f change is from one fiscal year to
anotherC
- separate final or adjustment return
be made for the period between the
close of the former fiscal year and
the date designated as the close of
the new fiscal year
324 0?+G;E +G;PE&E7 G? 2-0 G> HGR&
PER0G7
0n what casesW
1. where a separate final or
adjustment return is made on
account of a change in accounting
period
2. in all other cases where a
separate final or adjustment return
is re6uire or permitted by RXR
prescribed by ec. of >inance.
upon recommendation of
+ommissioner
2oth shall be made for a fractional part
of a year
&hen income is computed on the basis
of the short period for which separate
final or adjustment return is made
II. METHODS OF ACCO3NTING
-. +-H ;E&HG7
Recognition of income and expense
dependent on inflow or outflow of cash
2. -++RE-1 ;E&HG7
;ethod under which income( gains and
profits are included in gross income when
earned whether received or not( and
expenses are allowed as deductions when
incurredC although not yet paid. 0t is the
right to receive and not the actual receipt
that determines the inclusion of the
amount in gross income
ExamplesC
- interest or rent income earned but
not yet received
- rent expense accrued but not yet
paid
- wages due to wor*ers but
remaining unpaid
+. -++GE?&0?@ >GR 1G?@,&ER; +G?&R-+&
LonGterm contractsC building(
installation or construction contracts
covering a period in excess of 1 yr
Persons whose gross income is derived
in whole or in part from such contracts
shall report such income upon the basis
of +ercentae o" com+letion
&he return is accompanied by a return
certificate of architects or engineers
showing the percentage of completion
during the taxable year of the entire
wor* performed under the contract
7eductions from gross incomeC all
expenditures made during the taxable
year on account of the contractC account
being ta*en of the material and supplies
on hand at the beginning and end of the
taxable period for use in connection with
the wor* under the contract but not yet
so applied.
-mended return may be permitted
Jre6uired by the +ommissionerC if upon
completion of contract( taxable income
has not been clearly reflected for any
year3s4
7. 0?&-11;E?& 2-0
1. -1E G> 7E-1ER 0? PERG?-1 PRGPER&F
- Ender rules and regulations prescribed
by the ec. of >inance( upon
recommendation of the +ommissioner! a
person who regularly sells or otherwise
disposes of personal property on the
installment plan may return as income
there from in any taxable year that
proportion of the installment payments
actually received in that year( which the
gross profit reali)ed or to e reali)ed
when payment is completed( bears to
the contract price.
ExampleC ale in 2BBB
+ontract price 3+P4
3installments receivable4 P2BB( BBB
+ost 1$B(BBB
@ross profit 3@P4 $B( BBB
0nstallments payable in 2 e6ual annual
installments
@PJ+P ratio Q $B(BBBJ2BB(BBB Q 2$D
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"$
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
+ollections in 2BBB Q P1BB(BBB
0ncome for 2BBB
Q P1BB(BBB x 2$D Q P2$(BBB
2. PERG?-1&F -1E G> RE-1&F -?7 +-E-1
-1E G>
- &n cases o"C
a4 casual sale or other casual
disposition of personal property
3other than inventory on hand of the
taxpayer at the close of the taxable
year4 for a price Y P1(BBB( or
b4 sale or other disposition of real
property( if in either case the initial
payments do not exceed 2$D of the
selling price
- 0o$ may income be returnedC same as
in sales of dealer in personal property
above
- 0nitial paymentsC payments received in
cash or property other than evidences of
indebtedness of the purchaser during
the taxable period in which the sale or
other disposition is made
". -1E G> RE-1 PRGPER&F +G?07ERE7 -
+-P0&-1 -E& 2F 0?70I07E-1
- individual who sells of disposes of real
property( considered as capital asset
and is otherwise 6ualified to report the
gain under 324 above may pay the
capital gains tax in installments under
rules and regulations to be promulgated
by the ec. of >inance( upon
recommendation of the +ommissioner
#. +H-?@E >RG; -++RE-1 &G 0?&-11;E?&
2-0
- taxpayer must be entitled to benefits
under 314 hereof sales of dealers in
personal property
- in computing income for the year of
change or any subse6uent yearC
amounts actually received during any
such year on account of sales or other
dispositions of property made in any
prior year shall not be excluded
E. -11G+-&0G? G> 0?+G;E -?7 7E7E+&0G?
-pplicable toC cases of 2 or more
organi)ations( trades or businesses
3incorporated and organi)ed within the
Philippines4 owned or controlled
directly Jindirectly by the same interest
+ommissioner is authori)ed to
distribute( apportion or allocate gross
income or deductions between or
among such organi)ation( trade or
business( if he determines that such
distribution( apportionment or allocation
is necessary in order to prevent evasion
of taxes or clearly to reflect the income
of any such organi)ation( trade or
business.
' FILING OF TAX RET3RN AND
PAYMENT OF THE TAX
= T$% Re!1* / - report prepared by the
taxpayer showing to internal revenue officers an
enumeration of taxable amounts and description
of taxable transactions( allowable deductions(
amounts subject to tax and the tax payable by
the taxpayer to the government correct 3elf,
assessment4. &here is pain of perjury if the
return is not.
= PERSONS RE>3IRED TO FILE INCOME TAX
RET3RN
-. I(i9i(1$'
1. Resident citi)en!
2. ?on,resident citi)en on income from
within the Phil.!
". Resident alien on income from within the
Phil.!
#. ?R-E&2 on income from within the Phil.
$. -n individual 3citi)ens J aliens4 engaged
in business or practice of a profession
within the Phil. regardless of the amount
of gross income!
%. 0ndividual deriving compensation income
concurrently from two or more
employers at any time during the taxable
year!
=. 0ndividual whose pure compensation
income derived from sources within the
Phil. exceeds P%B(BBB.
2. T$%$&'e E#!$!e $( T*1#!
+. Gee*$' P*"fe##i"$' P$*!e*#)i/
7. C"*/"*$!i"
1. ?ot exempt from income tax!
2. Exempt from income tax under ec. "B
of ?0R+ but has not shown proof of
exemption.
= INDI8ID3ALS EXEMPT FROM FILING INCOME TAX
RET3RN
1. 0ndividual whose gross income does not
exceed total personal and additional
exemptions!
2. 0ndividual with respect to pure compensation
income derived from sources within the
Phils.( the income tax on which has been
correctly withheld!
". 0ndividual whose sole income has been
subjected to final withholding income tax!
#. 0ndividual who is exempt from income tax.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"%
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= S3BSTIT3TED FILING OF INCOME TAX RET3RNS
BY EMPLOYEES RECEI8ING P3RELY
COMPENSATION INCOME. ;Section A! RR <28@@8>
Re;1i#i!e#:
14 &he employee receives purely
compensation income 3regardless of
amount4 during the taxable year.
24 &he employee receives the income only
from one employer during the taxable
year.
"4 &he amount of tax due from the employee
at the end of the year e6uals the amount
of tax withheld by the employer.
#4 &he employee.s spouse also complies with
all three 3"4 conditions stated above.
= INDI8ID3ALS NOT >3ALIFIED FOR S3BSTIT3TED
FILING 2STILL RE>3IRED TO FILE5
1. 0ndividuals deriving compensation from 2 or
more employers concurrently or
successively during the taxable year.
2. Employees deriving compensation income(
regardless of the amount( whether from a
single or several employers during the
calendar year( the income tax of which has
not been withheld correctly 3i.e. tax due is
not e6ual to the tax withheld4 resulting to
collectible or refundable return.
". Employees whose monthly gross
compensation income does not exceed
P$(BBB or the statutory minimum wage(
whichever is higher( and opted for non,
withholding of tax on said income.
#. 0ndividuals deriving other non,business(
non,profession,related income in addition to
compensation income not otherwise subject
to final tax.
$. 0ndividuals receiving purely compensation
income from a single employer although the
income tax of which has been correctly
withheld( but whose spouse falls under 1 to
# above.
%. ?on,resident aliens engaged in trade or
business in the Philippines deriving purely
compensation income( or compensation
income and other non,business( non,
profession,related income.
N*'23 ?on,filing of 0&R( for employees who are
6ualified for the substituted filing shall be
*#'&*NAL for the taxable year 2BB1( the
returns for which shall be filed on or before -pril
1$( 2BB2. &hereafter( substituted filing where
applicable shall be /ANDA'*RK. ;4ec @ RR AG
9669
= RE>3IREMENT OF BAN:S FOR S3BMISSION OF
AN ITR FOR LOAN OR CREDIT CARD APPLICATIONS
,
2an*s may re6uire the submission of 20R >orm
?o. 1=BB 3for employees not entitled to
substituted filing of 0&R4. However( for
employees entitled to substituted filing of 0&R(
the submission of the Noint +ertification will
suffice.
7"i! Ce*!ifi,$!i" , 0t is a sworn statement
made by the employer and employee which
serves the following purposesC
14 0t contains the employee.s consent that 20R
>orm ?o. 1%B#+> may be considered his
substituted return( in lieu of 20R >orm ?o.
1=BB( which the employee no longer filed.
24 0t contains the employer.s certification that
he has reported the employee.s income to
the 20R and that he has remitted the taxes
on the employee.s income( as indicated in
20R >orm ?o. 1%B#,+>.
"4 0t serves as proof of financial capacity in
case the employee decides to apply for a
ban* loan or a credit,card( or for any other
purpose( as if he had in fact filed a 20R >orm
?o. 1=BB.
= INDI8ID3ALS RE>3IRED TO FILE AN
INFORMATION RET3RN.
0ndividuals not re6uired to file an income tax
return may nevertheless be re6uired to file an
information return pursuant to rules and(
regulations prescribed by the ecretary of
>inance upon recommendation of the
+ommissioner.
= PLACE OF FILING
1. 1egal residence , authori)ed agent ban*!
Revenue 7istrict Gfficer! +ollection agent or
duly authori)ed treasurer
2. Principal place of business
". 'ith the Gffice of the +ommissioner
= TIME FOR FILING 3Pays as you file system4
-pril 1$ , for those earning sole
compensation income or solely business(
practice of profession or combination of
business and compensation.
= RET3RN AND PAYMENT OF ESTIMATED INCOME
TAX BY INDI8ID3AL 3E1> E;P1GFE7 GR PR-+&0+E
G> PRG>E0G?4
1. >irst 6uarter , -pril 1$ of current year
2. econd 6uarter ,-ugust 1$ of current year
". &hird 6uarter / ?ovember 1$ of current year
#. >inal 6uarter , -pril 1$ of the following year.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"=
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
?oteC 'hen the tax due is in excess of P2(BBB ,
the taxpayer may elect to pay in two 324 e6ual
installmentsC
1
st
installment ,-pril 1$
2
nd
installment , on or before Nuly 1$
= EXTENSION OF TIME TO FILE RET3RN
&he +ommissioner may on meritorious
cases grant a reasonable extension of time for
filing income tax return and may subject the
imposition of twenty 32B4 percent interest per
annum from the original due date.
= RET3RN OF H3SBAND AND WIFE
Fi'e "e 2C5 *e!1* for the taxpayer year if
following re6uisites complied!
3a4 ;arried individuals 3citi)ens( resident
or nonresident aliens4
3b4 7o not derived income purely from
compensation.
If i4/*$,!i,$&'e !" fi'e "e *e!1*C each
spouse file a separate return of income but
the return so filed shall be consolidated by
the 2ureau for the purposes of verification
for the year.
= 3NMARRIED MINOR
0ncome of unmarried minors derived from
property received by the living parent shall
be included in the return of the parent(
exceptC
3a4 when donor5s tax has been paid on such
property( or
3b4 when transfer of such property is
exempt from donor5s tax
= PERSONS 3NDER DISABILITY
0f a taxpayer is unable to ma*e his own
return( it may be made by his
1.duly authori)ed agents!
2.representative!
".by guardian!
#.other person charged with the care of his
person or property!
who will assume the responsibility of
ma*ing the return and incurring penalties
provided for erroneous( false or fraudulent
return.
= RET3RN OF ESTATE AND TR3ST AND
PARTNERSHIP
Estate and &rust with gross income of P2B(BBB
or more and partnership 3whether professional
or business4 shall file their income tax return on
or before -pril 1$.
= TAX RET3RNS OF GENERAL PROFESSIONAL
PARTNERSHIPS 2GPP5
Each @PP shall file in duplicate( a return of
its income 3except those income exempt4
hall set forthC
- items of gross income or deductions
allowed
- names of partners
- &0?
- hare of each partner
= TAX RET3RN OF A CORPORATION .
&hose re6uired to fileC
a4 +orporation subject to tax having existed
during the taxable year( whether with income
or not.
b4 +orporation in the process of li6uidation or
receivership.
c4 0nsurance company doing business in the
Philippines or deriving income therein
d4 >oreign corporation having income from
within the Philippines
= FILING OF RET3RN 3Pay as you file system4
Zuarterly( returns for the first three 3"4
6uarters on a strictly sixty 3%B4 day basis and the
final or adjusted return on the 1$th day of the
fourth 3#th4 month following the close of either a
,
fiscal on calendar year.
= WHO SHALL FILEA
&he return shall be filed by the president(
vice,president( or other principal officer( and shall
be sworn to by such officer and by the treasurer
or assistant treasurer.
' WITHHOLDING TAX
= WITHHOLDING TAXES
:INDS :
1. 'ithholding &ax at ourceC
3a4 >inal 'ithholding &ax
3b4 +reditable 'ithholding &ax 3Expanded
withholding tax4
2. 'ithholding &ax on +ompensation 3'ages4
". 'ithholding &ax on +reditable Ialue,-dded
&ax
#. 'ithholding of Percentage &ax
= WITHHOLDING TAX ON COMPENSATION
Every employer must withhold from
compensation paid( an amount computed in
accordance with the regulations.
EL+EP&0G?C
'here such compensation income of an
individualC
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"A
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
3a4 does not exceed the statutory minimum
wages! or
3b4 five thousand 3P$(BBB4 monthly 3P%B(BBB a
year4
$%ic%ever is %i%er.
=ELEMENTS OF WITHHOLDING ON COMPENSATION
1. &here must me an employer,employee
relationship
2. &here must be payment of compensation or
wages for services rendered
". &here must be a payroll period
= COMPENSATION EXEMPTEDC
1. Remunerations received as an incident of
employment
2. Remunerations paid for agriculture labor
". Remunerations paid for domestic services
#. Remunerations for casual not in the course
of an employer.s trade or business.
$. +ompensation for services of a citi)en(
resident of the Philippines( for a foreign
government or an international organi)ation
%. 7amages
=. 1ife insurance
A. -mount received by the insured as return of
premium
8. +ompensation for injuries and sic*ness
1B. 0ncome exempt under treaty
11. &hirteenth 31"th4 month pay and other
benefits
12. @0! ! Philhealtb and other
contributions(
= TAX6FREE CO8ENANT BONDSC ;Section =G 7c9>
C"9e$! B"(# / bonds( mortgages( deeds
of trust and other similar obligations of
domesticJresident foreign corporation which
contain a contractJprovision by which the obligor
agrees
3a4 to pay any portion of the tax imposed upon
the oblige!
3b4 to reimburse the oblige for any portion of
the tax! or
3c4 to pay the interest without deduction for
any tax which the obligor may be
re6uiredJpermitted to pay or to retain
therefrom.
Gbligor shall deduct and $it%%old a tax Q
A6L o" t%e interest and ot%er +ayments
whether interest is payable annually or at a
shorter period! whether bonds( securities(
obligations had beenJwill be
issuedJmar*eted and the interest and other
payments paid within and without the
Philippines if the interest or other payment is
payable to a non,resident alien or a citi)en
or resident of the Philippines
= INCOME OF RECIPIENTC ;Section =G 7d9>
0ncome which any creditable tax is re6uired
to be withheld at source shall be included in
the return of its recipient.
&he excess of the amount tax withheld over
the tax due on his return shall be refunded
to him( subject to ection 2B# 3abatement(
refundJcredit taxes4.
0f amount withheld at source is less t%an the
tax due on his return( the difference is paid
in accordance with ection $% 3payment and
assessment of income tax4.
-ll taxes withheld shall be considered as
trust fund and maintained in a separate
account and not commingled with any other
funds of the withholding agent.
= REGISTRATION WITH REGISTER OF DEEDSC
;Section =G 7e9>
7ocument transferring real property can not
be registered unless the +ommissioner or
his duly authori)ed representative certified
that such transfer has been reported and
capital gains or creditable withholding tax
has been paid.
ee Ae% L / 'ithholding &ax
B. TRANSFER TAXES
TRANSFER TAX INCOME TAX
&ax on transfer of
property.
&ax on income
Rates are lower
,,$D to 2BD ,
estate tax
,, 2D to 1$ D ,
donor5s tax
Rates are higher
,, $D to "2D
1esser exemptions ;ore exemptions
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
"8
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
2C5 ESTATE TAXATION
= ESTATE TAX FORM3LA
@ross Estate 3ec. A$4
1essC 314 7eductions 3ec. A%4
324 ?et share of the in the +P
?et &axable Estate
X &ax rate 3ec. A#4
Estate &ax due
1essC &ax +redit 9if any: 3ec. A%9E: or 11B92:
Estate &ax 7ue( if any

'GROSS ESTATE
= A DECEDENT@S GROSS ESTATE INCL3DES 7Sec.
F=! C*RP9
RESIDENT N NON6
RESIDENT CITIZEN?
RESIDENT ALIEN
DECEDENT
NON6RESIDENT
ALIEN DECEDENT
1. Real property
wherever situated
1. Real property
situated in the Phils.
2( Personal property
wherever situated
a. &angible( and
b. 0ntangible
2. Personal property
a4 &angible property
situated in the
Philippines
b4 0ntangible personal
property with a situs in
the Phils. unless
exempted on the
basis of reciprocity.
= THE LAW THAT GO8ERNS THE IMPOSITION OF
ESTATE TAX.
&he statute in force at t%e time o" deat%
o" t%e decedent shall govern estate taxation.
= INTANGIBLE PERSONAL PROPERTIES WITH A
SIT3S IN THE PHIL. 7Sec. ?@A! C*RP9
a. >ranchise which must be exercised in the
Philippines!
b. hares( obligations or bonds issued by any
corporation or sociedad anonima organi)ed
or constituted in the Philippines in
accordance with its laws!
c. hares( obligations or bonds issued by any
foreign corporation eighty,five per centum
3A$D4 of the business of which is located in
the Philippines!
d. hares( obligations or bonds issued by any
foreign corporation( if such shares(
obligations or bonds have ac6uired a
business situs in the Philippines!
e. hares or rights in any partnership( business
or industry established in the Philippines.
= INTANGIBLE PERSONAL PROPERTY? WITH A SIT3S
IN THE PHILIPPINES? OF A DECEDENT WHO IS A
NON6RESIDENT ALIEN SHALL NOT FORM PART OF
THE GROSS ESTATE IF 7SEC. ?@A! C*RP9:
a. the decedent at the time of his death was a
citi)en and resident of a foreign country
which at the time of his death
1. (i( "! i4/"#e $ !*$#fe* !$% "* (e$!)
!$% of any character
2. in respect of intangible personal
property of citi)ens of the Philippines
not residing in that foreign country! or
b. the laws of the foreign country of which the
decedent was a citi)en and resident at the
time of his death
1. $''". $ #i4i'$* e%e4/!i" from
transfer taxes or death taxes of every
character
2. in respect of intangible personal
property owned by citi)ens of the
Philippines not residing in that foreign
country 2RECIPROCITY5.
ee Ae% M / @ross Estate
= 8AL3ATION OF THE GROSS ESTATE
&he properties comprising the gross
estate shall be valued based on their fair mar*et
value as of the time of death.
P*"/e*!+ 8$'1$!i"
14 Real Property , fair mar*et value
a4 as determined by the
+ommissioner or
b4 as shown in the schedule
of values fixed by the
provincial and city
assessors
'H0+HEIER 0 H0@HER
24 hares of toc*
Enlisted
+ommon hares
Preferred hares
1isted
6 boo* value
, par value
6 arithmetic mean between
the highest and lowest
6uotation at a date nearest
the date of death( if none is
available on the date of
death itself.
"4 Right to usufruct(
use or habitation( as
well as that of
annuity
, shall be ta*en into account
the probable life of the
beneficiary in accordance
with the latest basic
standard mortality table( to
be approved by the
ecretary of >inance( upon
recommendation of the
0nsurance +ommissioner.
#4 Personal property , whether tangible or
intangible( appraised at
>;I. Oentimental valueP is
practically disregarded.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
#B
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= INCL3SIONS IN THE GROSS ESTATE 7Sec. F=!
C*RP9 <eyC T
3
RIP
2
a. 7ecedent5s Interest
b. Transfer in contemplation of death
c. Revocable transfer
d. Transfer under general power of
appointment
e. Proceeds of life insurance
f. Transfers for insufficient consideration
g. Prior interests
= DECEDENT@S INTEREST
&o the extent of the interest in property
of the decedent at the time of his death.
= TRANSFER IN CONTEMPLATION OF DEATH
-. - transfer motivated by the thought of
impending death although death may not be
imminent! or
2. - transfer by which the decedent retained
for his life or for any period which does not
in fact end before his deathC
1. the possession or enjoyment of( or the
right to the income from the property( or
2. the right( either alone or in conjunction
with any person( to designate the person
who shall possess or enjoy the property
or the income therefrom.
E 2xce+tion3 bona fide sale for an ade6uate and
full consideration in money or money5s worth.
= RE8OCABLE TRANSFER
- transfer whereby the terms of
enjoyment of the property may be altered,
amended, revoEed or terminated by the
decedent alone or in conjunction with any other
person( or where any such power is relin6uished
in contemplation of the decedent5s death. 0t is
enough that the decedent had the power to alter(
amend or revo*e though he did not exercise
such power.
E 2xce+tion3 bona fide sale for an ade6uate and
full consideration in money or money5s worth.
= TRANSFER 3NDER GENERAL POWER OF
APPOINTMENT
- power of appointment is the right to
designate the person or persons who will
succeed to the property of the prior decedent.
&he general power of appointment may
be exercised by the decedentC
1. by will! or
2. by deed executed in contemplation of his
death! or
". by deed under which he has retained for his
life or for any period not ascertainable
without reference to his death or for any
period which does not in fact end before his
deathC
a. the possession or enjoyment of( or the
right to the income from the property! or
b. the right( either alone or in conjunction
with any person( to designate the
persons who shall possess or enjoy the
property or the income therefrom.
E 2xce+tion3 bona fide sale for an ade6uate and
full consideration in money or money5s worth.
= PROCEEDS OF LIFE INS3RANCE
Proceeds of life insurance ta*en by the
decedent on his own life shall be included in the
gross estate if the beneficiary isC
a. the estate of the decedent( his executor or
administrator 3regardless whether the
designation is revocable or irrevocable4! or
b. a third person other than the estate(
executor or administrator where the
designation of the beneficiary is re"ocable.
= TRANSFERS FOR INS3FFICIENT CONSIDERATION
&he value to be included in the gross
estate is the excess of the fair mar*et value of
the property at the time of the decedent5s death
over the consideration received. &his is
applicable in cases of transfer in contemplation
of death( revocable transfer and transfer under
general power of appointment made for a
consideration but is not a bona fide sale for an
ade6uate and full consideration in money or
money5s worth.
= PRIOR INTERESTS
-ll transfers( trusts( estates( interests(
rights( powers and relin6uishment of powers
made( created( arising( existing( exercised or
relin6uished before or after the effectivity of the
+&RP.
= PROPERTY RELATIONS BETWEEN H3SBAND AND
WIFE
&he property relations under between
the spouses shall be governed by contract
3marriage settlement4 executed before the
marriage( which may beC
1. -bsolute community of property
2. +onjugal partnership of gains
". +omplete separation of property
#. -ny other property relationship
0n the absence of such contract( or if the contract
is voidC
3a4 Gn marriages contracted before -ugust "(
18AA( the system of conjugal partnership of
gains shall govern!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
#1
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
3b4 Gn marriages contracted on or after -ugust
"( 18AA 3effectivity of the >amily +ode of the
Philippines4( the system of absolute
community of property shall govern.
= CON73GAL PARTNERSHIP OF GAINS
@ross Estate of the decedent who died
under this system shall consist of the followingC
a4 &he exclusive +ro+erties of the decedent
which consists of the followingC
1. &hat which is brought into the marriage
as his or her own!
2. &hat which each ac6uires( during the
marriage( by lucrative title 3by
inheritance or donation4.
". &hat which is ac6uired by right of
redemption or by exchange with other
properties belonging to only one of the
spouses.
#. &hat which is purchased with the
exclusive money of the wife or the
husband.
-ndC
b4 &he con1ual +ro+erties
-ll property of the marriage is presumed
to belong to the conjugal partnership( unless
it be proven that it pertains exclusively to the
husband or to the wife.
0ncluded areC
1. &hat which is ac6uired by onerous title
during marriage at the expense of the
common fund( whether the ac6uisition
be for the partnership or for only one of
the spouses!
2. &hat which is ac6uired by the industry or
wor*( or as profession of the spouses( or
of either of them!
". &he fruits( natural( industrial or civil due
or received during the marriage from the
common property as well as the net
fruits from the exclusive property of each
spouse!
#. &he share of either spouse in the hidden
treasure which law awards to the finder
or owner of the property where the
treasure is found!
$. &hose ac6uired through occupation
such as fishing and hunting!
%. 1ivestoc* existing upon the dissolution
of the partnership in excess of the
number of each *ind brought to the
marriage by either spouse!
=. &hose which ac6uired by chance( such
as winnings from gambling or betting.
However( losses therefrom shall be
borne exclusively by the loser,spouse
3ec. 11=( >amily +ode4
A. 0mprovements on the separate property
of the souses at the expense of the
partnership( or through the industry of
the spouses( or either of them
= ABSOL3TE COMM3NITY OF PROPERTY
@ross Estate of the decedent who died
under this system shall consist of the followingC
a4 &he exclusive +ro+erties of the decedent
which consists of the followingC
1. Property ac6uired during the marriage
by gratuitous title by either spouse and
the fruits as well as the income thereof
if any( unless it is expressly stipulated by
the donor testate or grantor that they
shall form part of the community
property.
2. Property for personal and exclusive use
of either spouse. However( jewelry shall
form part of the community property.
". Property ac6uired before the marriage
either spouse who has legitimate
descendants by a former marriage and
fruits as well as the income there are
any of suc% property.
b4 &he con1ual +ro+erties3
0n general( the community property will
consist of all properties owned by the
spouses at the time of celebration of the
marriage or ac6uired thereafter.
Property ac6uired during the marriage will
be presumed to belong to the community(
unless it can be proven to be exclusive
property.
&he family home constituted by the
husband and wife is community property.
Exclusive property does not become
community property just because it is
used as family home.
= EXEMPT TRANSMISSIONS 7Sec. FG! C*RP9
1. &he merger of usufruct in the owner of the
na*ed title!
2. >ideicommisary substitution!
". &he transmission from the first heir( legatee
or donee in favor of another beneficiary( in
accordance with the will of the predecessor!
and
#. -ll be6uests( 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 individual!
Provided( that not more than "BD of the said
be6uests( legacies or transfers shall be used
by such institutions for administration
purposes.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
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#2
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
' DED3CTIONS ON GROSS
ESTATE APPLICABLE TO
RESIDENT ALIENS
AND CITIZENS
7Re"enue Regulations 828@@<9
= &he following are deductible from the gross
estate of citi)ens and resident aliens 3<eyC E10&(
&I>-;4
1. Expenses( losses( indebtedness( taxes(
etc. 3<eyC E10&,>N++E1&4
a. funeral expenses
b. judicial expenses of the testamen,
tary or intestate proceedings
c. claims against the estate
d. claims against insolvent person
e. unpaid mortgages
f. taxes
g. losses
2. &ransfer for public use
". Ianishing deduction
#. >amily home
$. tandard deduction e6uivalent to one
million pesos 3P1(BBB(BBB4
%. ;edical expenses
=. -mounts received by heirs under R-
#81= 3Retirement 2enefits4
A. +onjugal share of the surviving spouse
= F3NERAL EXPENSES
&he amount deductible is the lowest among
the followingC
1. actual funeral expenses
2. $D of the gross estate
". P2BB(BBB.
&t includes t%e "ollo$in3
1. ;ourning apparel of the surviving spouse
and unmarried minor children of the
deceased( bought and used in the occasion
of the burial.
2. Expenses of the wa*e preceding the burial
including food and drin*s.
". Publication charges for death notices.
#. &elecommunication expenses in informing
relatives of the deceased.
$. +ost of burial plot. &ombstone monument or
mausoleum but not their up*eep. 0n case
deceased owns a family estate or several
burial lots( only the value corresponding to
the plot where he is buried is deductible.
%. 0nterment fees and charges.
=. -ll other expenses incurred for the
performance of the ritual and ceremonies
incident to the interment.
Expenses incurred a"ter the interment( such
as for prayers( masses( entertainment( or the
li*e are not deductible.
-ny portion of the funeral and burial
expenses borne or de"rayed by relatives and
"riends of the deceased are not deductible.
=73DICIAL EXPENSES OF THE TESTAMENTARY OR
INTESTATE PROCEEDINGS.
Expenses allowed as deduction under
this category are thoseC
1. incurred in the inventory,ta*ing of assets
comprising the gross estate(
2. administration(
". payment of debts of the estate(
#. as well as the distribution of the estate
among the heirs.
0n short( these deductible items are
expenses incurred during the settlement of the
estate but not beyond the last day prescribed by
law( or the extension thereof( for the filing of the
estate tax return.
Judicial ex+enses may include3
3a4 >ees of executor or administrator!
3b4 -ttorney.s fees!
3c4 +ourt fees!
3d4 -ccountant.s fees!
3e4 -ppraiser.s fees!
3f4 +ler* hire!
3g4 +osts of preserving and distributing the
estate!
3h4 +osts of storing or maintaining property of
the estate! and
3i4 2ro*erage fees for selling property of the
estate.
= CLAIMS AGAINST THE ESTATE
&he word MclaimsM is generally construed
to mean debts or demands of a +ecuniary
nature which could have been enforced against
the deceased in his lifetime and could have been
reduced to simple money judgments.
+laims against the estate or indebtedness in
respect of property may arise out ofC
314 +ontract!
324 &ort! or
3"4 Gperation of 1aw.
ReHuisites $or deductibilit6:
1. &he liability represents a personal obligation
of the deceased existing at the time of his
death except unpaid obligations incurred
incident to his death such as unpaid funeral
expenses 3i.e.( expenses incurred up to the
time of interment4 and unpaid medical
expenses which are classified under a
different category of deductions!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
#"
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
2. &he liability was contracted in good faith and
for ade6uate and full consideration in money
or money.s worth!
". &he claim must be a debt or claim which is
valid in law and enforceable in court!
#. &he indebtedness must not have been
condoned by the creditor or the action to
collect from the decedent must not have
prescribed.
= S3BSTANTIATION RE>3IREMENTS:
0? +-E G> 0;P1E 1G-? C
1. &he debt instrument must be duly
notarized at the time the indebtedness
was incurred( except for loans granted by
financial institutions where notari)ation is
not part of the business practiceJpolicy of
the financial institution,lender!
2. 7uly notari)ed +ertification from the
creditor as to the unpaid balance of the
debt( including interest as of the time of
death.
". 0n accordance with the re6uirements as
prescribed in existing or prevailing internal
revenue issuances( proof of financial
capacity of the creditor to lend the amount
at the time the loan was granted( as well
as its latest audited balance sheet with a
detailed schedule of its receivable
showing the unpaid balance of the
decedent,debtor.
#. - statement under oath executed by the
administrator or executor of the estate
reflecting the disposition of the proceeds
of the loan if said loan was contracted
within three 3"4 years prior to the death of
the decedent!
0> &HE E?P-07 G210@-&0G? -RGE >RG; PER+H-E
G> @GG7 ERI0+E
314 Pertinent documents evidencing the
purchase of goods or service as duly
ac*nowledged( executed and signed by
decedentdebtor and creditor( and
statement of account given by the creditor
as duly received by the decedentdebtor!
324 7uly notari)ed +ertification from the
creditor as to the unpaid balance of the
debt( including interest as of the time of
death.
0n any of these cases( the one who
issues the certification must not be a
relative of the decedent,debtor within the
fourth civil degree( either by consanguinity
or affinity( except when the re6uirement
below is complied with.
- copy of the promissory note or other
evidence of the indebtedness must be
filed with the R7G having jurisdiction over
the borrower within fifteen days from the
execution thereof
3"4 +ertified true copy of the latest audited
balance sheet of the creditor with a
detailed schedule of its receivable
showing the unpaid balance of the
decedent,debtor.
;oreover( a certified true copy of the
updated latest subsidiary ledgerJrecords of
the debt of the debtor,decedent( 3certified
by the creditor( i.e.( the officers mentioned
in the preceding paragraphs4 should
li*ewise be submitted.
= 3NPAID MORTGAGE
0n case unpaid mortgage payable is
being claimed by the estate( verification must be
made as to who was the beneficiary of the loan
proceeds.
0f the loan is found to be merely an
accommodation loan where the loan proceeds
went to another person( the value of the unpaid
loan must be included as a receivable of the
estate.
0f there is a legal impediment to
recogni)e the same as receivable of the estate(
said unpaid obligationJmortgage payable shall
not be allowed as a deduction from the gross
estate. 0n all instances( the mortgaged property(
&G &HE EL&E?& G> &HE 7E+E7E?&. 0?&ERE&
&HERE0?( should always form part of the gross
taxable estate.
= TAXES
&axes which have accrued as of the death of
the decedent which were unpaid as of the time
of death.
'%e "ollo$in are not deductible
1. income tax on income received after death
2. property taxes not accrued before death
". estate tax
= LOSSES
ReHuisites $or deductibilit6
1. arising from fire( storm( shipwrec*( or other
casualty( robbery( theft or embe))lement!
2. ?ot compensated by insurance or otherwise!
". ?ot claimed as deduction in an income tax
return of the taxable estate!
#. Gccurring during the settlement of the
estate! and
$. Gccurring before the last day for the
payment of the estate tax 3last day to payC
six months after the decedent5s death4.
= TRANSFER FOR P3BLIC 3SE
ReHuisites $or deductibilit6:
1. &he disposition is in a last will and testament
2. &o ta*e effect after death
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
##
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
". 0n favor of the government of the Phil.( or
any political subdivision thereof
#. >or exclusive public purposes.
N.B.3 &his should also include be6uests(
devices( or transfers to social welfare( cultural
and charitable institutions.
= 8ANISHING DED3CTION
, the deduction allowed from the gross
estate for properties which were subject to
donor5s or estate taxes. 0t is called vanishing
deduction because the deduction allowed
diminishes over a period of five years. &he rate
of deduction depends on the period from the
date of transfer to the death of the decedent( as
followsC
PERIOD DED3CTION
1 year or less 1BBD
Y 1 year / 2 years ABD
Y 2 years / " years %BD
Y " years / # years #BD
Y # years / $ years 2BD
ReHuisites $or deductibilit6:
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 Phils.
". &he property formed part of the taxable
estate of the prior decedent( or of the
taxable gift of the donor.
#. &he estate tax or donor5s 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 ac6uired in exchange therefor.
%. ?o vanishing deduction on the property was
allowable to the estate of the prior decedent.
ee Ae% N / Ianishing 7eduction
= FAMILY HOME
1. &he family home must be the actual
residential home of the decedent and his
family at the time of his death( as certi"ied by
t%e Baranay Ca+tain of the locality where
the family home is situated!
2. &he total value of the family home must be
included as part of the gross estate of the
decedent! and
". -llowable deduction must be in an amount
e6uivalent to
3a4 the current fair mar*et value of the
family home as declared or included in
the gross estate( or
3b4 the extent of the decedent.s interest
3whether conjugalJcommunity or
exclusive property4(
.)i,)e9e* i# '".e*( but not
exceeding P1(BBB(BBB
ee Ae% O / >amily Home
= STANDARD DED3CTION
- deduction in the amount of Gne
;illion Pesos 3P1(BBB(BBB4 shall be allowed as
an additional deduction $it%out need o"
substantiation .
&he full amount of P1(BBB(BBB shall be
allowed as deduction for the benefit of the
decedent.
= MEDICAL EXPENSES
-ny amount of medical expenses
incurred within one year from death in
excess of >ive Hundred &housand Pesos
3P$BB(BBB4 s%all no loner be allo$ed as a
deduction under this subsection.
?either can any unpaid amount thereof
in excess of the P$BB(BBB threshold nor any
unpaid amount for medical expenses
incurred prior to the one,year period from
date of death be allowed to be deducted
from the gross estate as claim against the
estate.
= AMO3NT RECEI8ED BY HEIRS 3NDER REP3BLIC
ACT NO. EKCI
-ny amount received by the heirs from
the decedent.s employer as a conse)uence o"
t%e deat% o" t%e decedentGem+loyee in
accordance with Republic -ct ?o. #81= is
allowed as a deduction provided that the amount
of the separation benefit is included as part of
the gross estate of the decedent.
= NET SHARE OF THE S3R8I8ING SPO3SE IN THE
CON73GAL PARTNERSHIP OR COMM3NITY
PROPERTY.
-fter deducting the allowable deductions
appertaining to the conjugal or community
properties included in the gross estate( the share
of the surviving spouse must be removed to
ensure that only the decedent.s interest in the
estate is taxed.
ee Ae% P $( > / 0llustrative problems
on estate taxation 3+onjugal Partnership and
-bsolute +ommunity / with deductions4
' DED3CTIONS ON GROSS
ESTATE APPLICABLE TO
NON6RESIDENT ALIENS
= THE FOLLOWING ARE DED3CTIBLE FROM THE
GROSS ESTATE OF NON6RESIDENT ALIENS
1. Expenses( losses( indebtedness and taxes
2:e+: E10&5
F"*41'$:
Phil. @ross Estate L 'orld E10&
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
#$
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
'orld @ross Estate
2. &ransfer for public use
". Ianishing deduction on property in the
Philippines.
#. +onjugal share of the surviving spouse
' ESTATE TAX CREDIT
= - tax credit is granted for estate taxes paid to
a foreign country on the estate of citi)ens and
resident aliens subject to the following limitations
$. Oe f"*ei= ,"1!*+ "'+
# , &he tax credit is whichever is lower
between
1. Estate tax paid to the foreign country
2. ?&E( foreign country L Phil. estate tax
?&E( world
3NTE , ?et &axable Estate4
&. M"*e !)$ "e f"*ei= ,"1!*+
, &he credit shall be that which is the lower
amount between 1imit - and 1imit 2
Li4i! A. 'hichever is lower betweenC
1. Estate tax paid to a foreign country
2. ?&E( foreign country L Phil. estate tax
?&E( world
Li4i! B. 'hichever is lower betweenC
1. total of estate taxes paid to all foreign
countries
2. ?&E outside Phil. L Phil. estate tax
?&E( world
ee Ae% R/ Estate &ax +redit
' SETTLEMENT OF THE
ESTATE TAX
= AN ESTATE TAX RET3RN IS RE>3IRED TO BE
FILED
1. when the estate is subject to estate tax! or
2. when the estate is not subject to estate tax
but the gross estate exceeds P 2BB(BBB! or
". regardless of the amount of the gross
estate( where the gross estate consists of
registered or registrable property such as
motor vehicle or shares of stoc* or other
similar property for which clearance from the
20R is re6uired as a condition precedent for
the transfer of ownership thereof in the
name of the transferee.
= THE ESTATE TAX RET3RN SHALL BE 3NDER OATH
STATING THE FOLLOWING
1. &he value of the gross estate of the
decedent at the time of his death( or in the
case of a non,resident( not citi)en of the
Philippines( that part of his gross estate
situated in the Philippines!
2. &he deductions from the gross estate!
". uch part of such information as may at the
time be ascertainable and such
supplemental data as may be necessary to
establish the correct estate tax.
= FILING OF THE ESTATE TAX RET3RN
&he estate tax return shall be fi'e(
.i!)i #i% 2G5 4"!)# after the death of the
decedent. &he 20R may( in meritorious cases(
grant an extension of not exceeding thirty days
3"B4 for the filing of the estate tax return.
= WHEN THE GROSS ESTATE EXCEEDS P
2?000?000? THE ESTATE TAX RET3RN SHALL BE
ACCOMPANIED BY A STATEMENT WHICH IS
CERTIFIED BY AN INDEPENDENT CERTIFIED P3BLIC
ACCO3NTANT STATING
1. the itemi)ed assets of the decedent with its
corresponding gross value at the time of his
death( or in the case of a non,resident( not
citi)en of the Philippines( that part of his
gross estate situated in the Philippines!
2. the itemi)ed deductions from the gross
estate!
". the amount of tax due( whether paid or still
due and outstanding.
= PAYMENT OF THE ESTATE TAX D3E
&he estate tax due shall paid at the time
when the estate tax return is filed.
'hen the +ommissioner finds that the
payment of the estate tax on the due date would
impose undue hardships upon the estate or any
heirC
a. the payment of the estate tax may be
extended for a period not to exceed five 3$4
years if there is a judicial settlement of the
estate! or
b. the payment of the estate tax may be
extended for a period not to exceed two 324
years if there is an extra,judicial settlement
of the estate.
= LIABILITY FOR PAYMENT
&he estate tax shall be paid by the
executor or administrator before delivery to any
beneficiary of his distributive share of the estate.
uch beneficiary to the extent of his
distributive share of the estate( be subsidiarily
liable for the payment of such portion of the
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
#%
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
estate tax as his distributive share bears to the
value of the total net estate.
225 DONOR@S TAX

= RE>3ISITES 2:e+: -70+5
1. Capacity of the donor
2. 7onative Intent
". Delivery( whether actual or constructive( of
the subject gift
#. Acceptance by the donee
- gift that is incomplete because of reserved
powers( becomes complete when eitherC
314 the donor renounces the power! or
324 his right to exercise the reserved power
ceases because of the happening of some
event or contingency or the fulfillment of
some condition( other than because of the
donor.s death.
Renunciation by the surviving spouse of
hisJher share in the conjugal partnership or
absolute community a"ter t%e dissolution o"
t%e marriae in favor of the heirs of the
deceased spouse or any other personJs is
subject to donor.s tax.
'hereas eneral renunciation by an heir(
including the surviving spouse( of hisJher
share in the hereditary estate left by the
decedent is not subject to donor.s tax(
unless specifically and categorically done in
favor of identified heirJs to the exclusion or
disadvantage of the other co,heirs in the
hereditary estate.
= STRANGER , a person who is not a brother(
sister( spouse( ancestor and lineal descendant(
or of a relative by consanguinity in the collateral
within the #
th
civil degree.
- legally adopted child is entitled to all t%e
ri%ts and obliations +rovided by la$ to
leitimate c%ildren( and therefore( donation
to him shall not be considered as donation
made to stranger.
7onation made between business
organi)ations and those made between an
individual and a business organi)ation shall
be considered as donation made to a
stranger.
= 8AL3ATION OF GIFTS OF PROPERTY
&he fair mar*et value of the property
given at the time of the gift shall be the value of
the gift.
= INTANGIBLE PERSONAL PROPERTIES WITH A
SIT3S IN THE PHIL. 3same as in estate tax subject
to the reciprocity rule4
4or'ula:
$. O !)e C
#!
("$!i" "f $ +e$*
@ross gifts xxx
1essC 7eductions from gross gifts xxx
?et gifts
L &ax Rate
xxx
xxx
7onor5s tax on the net gifts
&. O ("$!i" "f $ #1&#e;1e! ($!e (1*i=
!)e +e$*
@ross gifts made on this date xxx
1essC 7eductions from gross gifts xxx
?et gifts xxx
-ddC -ll prior net gifts within the year xxx
-ggregate net gifts
L &ax Rate
xxx
xxx
7onor5s tax on aggregate net gifts xxx
1essC 7onor5s tax on all prior net gifts xxx
7onor5s tax on the net gifts on this date xxx
=EXEMPTION OF CERTAIN GIFTS
1. @ifts made by a resident
a. 7owries or gifts made on account of
marriage and before its celebration or
within one year thereafter by parents to
each of their legitimate( illegitimate or
adopted children to the extent of the
first P1B(BBB.
b. @ifts made to or for the use of the
?ational @overnment or any entity
created by any of its agencies which is
not conducted for profit( or to any
political subdivision of the said
government.
c. @ifts in favor of educational( charitable(
religious( cultural or social welfare
corporation( institutions( foundations(
trust or philanthropic organi)ation(
research institution or organi)ation(
accredited non,government organi)ation
3?@G4. Provided( that no more than
"BD of said gifts shall be used by such
donee for administration purposes.
2. @ifts made by a non,resident not a citi)en of
the Phil.
a. same as 3b4
b. same as 3c4 except accredited non,
government organi)ation 3?@G4
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
#=
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= A NON6PROFIT ED3CATIONAL ANDBOR
CHARITABLE CORPORATION? INSTIT3TION?
ACCREDITED NON6GO8ERNMENT ORGANIZATION?
TR3ST OR PHILANTROPHIC ORGANIZATION?
RESEARCH INSTIT3TION OR ORGANIZATION IS
1. one incorporated as a non,stoc* entity
2. paying no dividends
". governed by trustees who receive no
compensation( and
#. devoting all its income whether students5
fees or gifts( donations( subsidies or other
forms of philantrophy to the accomplishment
and promotion of the purposes enumerated
in its -rticles of 0ncorporation.
= TAX CREDIT FOR DONOR@S TAXES PAID TO A
FOREIGN CO3NTRY
1. 7onor was a >ilipino citi)en or resident alien
2. -t time of foreign donation
". 7onor5s taxes of any character and
description
#. -re imposed and paid by the authority of a
foreign country.
= LIMITATIONS ON TAX CREDIT
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 ta*en( which the decedent5s
net gifts situated within such country taxable
under the ?0R+ bears to his entire net gift!
and
2. &he total amount of the credit shall not
exceed the same proportion of the tax
against which such credit is ta*en( which the
decedent5s net gift situated outside the
Philippines taxable under the ?0R+ bears to
his entire net gift.
= FORM3LA OF TAX CREDIT LIMIT
$. F"* (""*@# !$%e# /$i( !" "e f"*ei=
,"1!*+
?@ situated in a foreign country L P7&
Entire net gifts
Q &ax credit limit
3?@ , ?et @ifts! P7& , Phil. 7onor.s &ax4
&. F"* (""*@# !$%e# /$i( !" !." "* 4"*e
f"*ei= ,"1!*+
?@ outside the Phil. L P7&
Entire net gifts
Q&ax credit limit
&he allowable tax credit is the lower
amount between the tax credit limit under 3a4
and 3b4.
= FILING OF RET3RN AND PAYMENT OF THE TAX
&he donor5s tax return is filed and the
donor5s tax due is paid within thirty 3"B4 days
after the date the gift is made.
&he return shall be under oath in
duplicate setting forthC
1. Each gift made during the calendar year
which is to be included in computing net
gifts!
2. &he deductions claimed and allowable!
". -ny previous net gifts made during the same
calendar year!
#. &he name of the donee!
$. Relationship of the donor to the donee! and
%. uch further information as may be re6uired
by rules and regulations made pursuant to
law.
= TAX RATE
0f the donee is $ #!*$=e*( the rate of tax
shall be "BD of the net gifts.
0f the donee is "! $ #!*$=e*( the rate
shall be from 2D to 1$D of the net gifts.
ee Ae% S, 7onor5s &ax
C. EXPANDED 8AL3E
ADDED TAX
I-& or Ialue -dded &ax is a uniform tax
imposed on each sale of goods or services in
the course of trade or business as they pass
along the distribution chain( culminating with
their sale to the final consumer. 0t is also levied
on the importation of goods whether in the
course of business or not.
I-& is a tax imposed on consumer items
that are processed or manufactures. 0t is
imposed at each stage in the production of a
good or service.
Every person or firm that handles a
product during its transformation from raw
materials to finished goods pays for I-&.
&he amount of I-& is determined by the
value that the person or firm adds to the
materials or services it buys from other persons
or firms.
= AD8ANTAGESBBENEFITS OF 8AT
1. Eliminates the cascading effect of the sales
tax system
2. ?eutralC uniform in rate
". E6uitableC proportional to its price
#. Promotes an efficient and simplified tax
system by eliminating a number of
percentage taxes previously imposed
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
#A
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
$. Easy to administer and comply with
%. Provides chec*s and counter,chec*s
because of its self,policing features
=. Expected to generate greater revenues
since the EI-& law establishes a wider tax
base
A. &he )ero,rating mechanism boasts the
export industry by subjecting export sales to
BD rate
= ELEMENTS OF 8AT
1. sale must be made in the Philippines!
2. sale must be of taxable goods(
properties or services! and
". sale must be made by a taxable person
in the course or furtherance of his
business.
= TRANSACTIONS S3B7ECT TO 8AT 2:e+: 0&5
1. every #ale( barter( or exchange( leases
goods or properties made in the course
of trade or business!
2. !ransactions deemed sale for I-&
purposes!
". importation of goods! and
#. every sale of #ervice made in the course
of trade or business other than services
rendered by persons subject to Oother
percentage taxes.P
= OB7ECTS OF TRANSACTIONS S3B7ECT TO 8AT
1. @oods
3a4 &angibleJ0ntangible
3b4 +apitalJGrdinary
2. Properties
". ervices
= RATE STR3CT3RE 3NDER THE 8AT SYSTEM
1. @I rate for export sales and persons
whose sales are effectively )ero,rated
and )ero,rated sales of services! and
2. ?@I for all other articles and
transactions covered by the I-&.
= PERSONS LIABLE TO PAY THE 8AT 2:e+:
2E105
1. -ny person whether natural or juridical who(
in the course of trade or business( #ells(
&arters( exchanges( or 'eases goods or
properties( or renders #ervices!
2. -ny person who imports goods whether for
business or non,business purpose! and
provided( gross receipts is more than
P$$B(BBB.BB( otherwise(
more than P1BB& but less than P$$B& /
"D percentage tax
less than P1BB& / no business tax liability
0n the strict sense( however( it refers
only toC
314 ;anufacturers
324 Producers
3"4 'holesalers
3#4 Retailers
3$4 &raders
3%4 0mporters
3=4 ellers and lessors or properties 3real or
personal4
3A4 Persons rendering services li*e bro*ers(
contractors( etc.

= IN THE CO3RSE OF TRADE OR B3SINESS /
means the regular conduct or pursuit of a
commercial or an economic activity( including
transactions incidental thereto( by any person
regardless of whether or not the person engaged
therein is a non,stoc*( non,profit private
organi)ation( or government entity.
= FORM3LA FOR 8AT PAYABLE
Gutput &axes P xxx
1essC 0nput &axes xxx
I-& P-F-21E P xxx
= INP3T TAX 3 tax " /1*,)$#e /*i,e "f =""(#
which is passed on or shifted to a buyerJ
purchaserJlessee by the supplierJsellerJlessor.
0t is the I-& paid by a I-&,registered
person in the course of his trade or business.
= O3TP3T TAX I-& due " !)e #$'e "f !$%$&'e
=""(# "* #e*9i,e# by any person registered or
re6uired to register for I-& purposes.
= TRANSITIONAL INP3T TAX CREDIT 3 person who
becomes liable to I-& or any person who elects
to be a I-&,registered person shall( subject to
the filing of an inventory of goods( material and
supplies e6uivalent to AD of value of such
inventory or the actual I-& paid on such goods(
materials and supplies( whichever is higher(
which shall be creditable against the output tax.
= JER(2RA*ED 5S. E+EMP*
*RA-SAC*,(-S
ZERO6RATED
EXEMPT
TRANSACTIONS
E0tent
-ll value added tax is
removed
Gnly removes the
value added tax at
the exempt stage
Clai' $or re$und
&axpayer can claim the
refund of input taxes

&axpayer is not entitled
to credit or refund of
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
#8
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
ZERO6RATED
EXEMPT
TRANSACTIONS
passed on to him by
the supplier( etc. or
credit such input taxes
against his liabilities
for output taxes on his
other non,)ero rated
transactions
the input tax passed
on to him by the
supplier( etc.
Scope
@enerally( taxable
sales( and ta*en into
account in determining
turn,over or sales for
sales for I-&,
registration purposes.

?ot taxable sales and
therefore not ta*en into
account in determining
turn,over or I-&,
registration purposes
Registration reHuire'ent
Tero,rated person may
still register for I-&.
Exempt person may
not register for I-&.
= Re=i#!*$!i" Re;1i*e4e!#
1. M$($!"*+ 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 J or gross receipts
exceeds P$$B& for any 12,month period.
2. O/!i"$' ,, any of the following persons
may( at their option( apply for I-&
registrationC 2:e+: $$B >-?+5
a. seller of goods or services whose
taxable sale or gross receipts do not
exceed PDD0& for any 12,month
period!
b. seller of $gricultural or marine food
products in their original state!
c. seller of fertili)er( seeds( seedlings
and fingerlings( fish live stoc* and
poultry feeds(
including ingredients whether locally
produced or imported( used in the
manufacture
of finished foods!
d. seller of on,food agricultural(
marine and forest products in their
original state!
e. seller of ,otton and cotton seeds in
the original state( and copra.
N.B.3 0tems b to e( refer to export sales only
O 8AT ON SALE OF GOODS AND
PROPERTIES
-4ection 56C.
-S$'e0 is a transfer of ownership of property in
consideration of money received or to be
received.
= TRANSACTIONS DEEMED SALES FOR 8AT
P3RPOSES 7Sec. ?@K19 9&77+R:
1. Transfer( use or consumption not in the
course of trade or business of goods
originally intended for sale or for use in the
course of business!
2. Distribution or transfer to share,holders or
investors as share in the profits of the I-&
,registered persons!
". Distribution or transfer to creditors in
payment of debt!
#. Consignment of goods if actual sale is not
made within %B days following the date of
consignment!
$. Retirement from or cessation of business(
with respect to inventories of taxable goods
existing as of such retirement or cessation.
= WHO SHALL PAY THE 8ATA
&he seller or transferor of goods or
properties.
= TAX BASE
&he 1BD I-& is based on the gross
selling price.
G*"## #e''i= /*i,e means the total
amount of money or its e6uivalent which the
purchaser pays or is obligated to pay to the
seller in consideration of the sale( barter or
exchange( excluding the value,added tax. &he
excise tax( if any( on such goods shall form part
of the gross selling price.
= TAX RATES
1. &en percent 31BD4 of the gross selling price.
2. Tero percent 3BD4 of the gross selling price
in the following casesC
a. Export sales
b. >oreign currency denominated sale
c. ales to persons or entities whose
exemption under special laws or
international agreements to which the
Philippines is a signatory effectively
subjects such sales to )ero rate.
= EXPORT SALES
1. &he sale and actual shipment of goods from
the Philippines to the foreign country
irrespective of any shipping
arrangement that may be agreed upon
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$B
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
which may influence or determine the
transfer of ownership of the goods so
exported( and
paid for in acceptable foreign currency
or its e6uivalent in goods and services(
and accounted for in accordance with
the rules and regulations of the 2ang*o
entral ng Pilipinas 32P4.
2. ale of raw material or pac*aging materials
to a non,resident buyer
for delivery to a resident local export,
oriented enterprise
to be used in manufacturing( processing(
pac*ing or repac*ing in the Philippines
of the said buyer5s goods! and
paid for in acceptable foreign currency
and accounted for in accordance with
the rules and regulations of the 2P
". ale of raw material or pac*aging materials
to export,oriented enterprise( whose export
sales exceed =BD of the total annual
production!
#. ale of gold to the 2P! and
$. &hose considered export sales under E.G.
22% 3Gmnibus 0nvestment +ode of 18A=4(
and other special laws.
= FOREIGN C3RRENCY DENOMINATED SALES
Re;1i#i!e#:
3a4 sales to non,residents of goods 3except
automobiles and non,essential goods
subject to excise tax4
3b4 assembled or manufactured in the
Philippines
3c4 for delivery to residents in the Philippines!
and
3d4 paid for in convertible foreign currency
remitted through the ban*ing system in the
Philippines.
2xam+le o" entities exem+ted under s+ecial
la$sC duly registered or accredited
enterprises with the ubic 2ay metropolitan
-uthority and the +lar* 7evelopment
-uthority
2xam+le o" entities exem+ted under
international areements to $%ic% t%e
#%ili++ines is a sinatory! direct sales to the
-sian 7evelopment 2an* and 0nternational
Rice Research 0nstitute.
O 8AT ON IMPORTATION
OF GOODS
-4ection 56>.
&he importation of goods shall be
subject to the value,added tax whether the
importation is for sale or use in business( or for
personal use.
= WHO SHALL PAY THE 8ATA
&he importer( prior to the release of such
goods from customs custody.
= TAX RATE AND TAX BASE
&he imported goods shall be subject to the
value,added tax of 1BDC
a. 2ased on the total value used by the 2ureau
of +ustoms in determining tariff and customs
duty plus custom duties( excise tax( if any(
and other charges prior to the removal of the
goods from customs custody! or
b. 2ased on the landed cost when customs
duties are determined on the basis of the
6uantity or volume of the goods.
-L$(e( ,"#!0 means the invoice cost(
freight( insurance( customs duties( excise
tax( if any( and other charges prior to the
removal of the goods from the customs
custody.
= TRANSFER OF GOODS BY TAX6EXEMPT PERSON
'hen a person who is exempt from the
value,added tax on his importation subse6uently
sells( transfers or exchanges in the Philippines
such imported article to a non,exempt person or
entity( the purchaser( transferee or assignee
shall be re6uired to pay the value,added tax.
= 8AT ON IMPORTATION AS INP3T TAX
&he seller of goods or services who
imports goods( materials( supplies or
depreciable assets can claim the value,added
taxes paid on the importation as input taxes
creditable against the output taxes on his sales.

O 8AT ON SALE OF SER8ICES
N 3SE OR LEASE OF PROPERTIES
-4ection 568.
&ransactions subject to I-& cover any sale(
or exchange of services in the course of trade or
business( including the use or lease of
properties.
= TAX BASE
&he =*"## *e,ei/!# of the sale or exchange of
services( which means cash or its e6uivalent
actually received or constructively received
3excluding the value,added tax4 asC
a. payments on the contract price(
compensation( service fee( rental or royalty!
b. payments for materials supplied with the
services!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$1
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
c. deposits or advance payments on the
contract for services.
= TAX RATES
1. &en percent 31BD4 of the gross receipts.
2. Tero percent 3BD4 of the gross receipts in
the following casesC 9P0+:
a. Processing( manufacturing or repac*ing
of goodsC
>or other persons doing business
outside the Philippines!
&he goods are subse6uently
exported!
&he services are paid for in
acceptable foreign currency and
accounted for in accordance with
the rules and regulations of the
2ang*o entral ng Pilipinas.
b. Services other than 3a4 above( if the
consideration is paid in acceptable
foreign currency and accounted for in
accordance with the rules and
regulations of the 2P!
c. Services rendered to persons or entities
whose exemption under special laws or
international agreements to which the
Phil. is a signatory effectively subjects
such services to )ero rate!
d. ervices rendered to vessels engaged
exclusively in International shipping!
e. ervices performed by subcontractors
andJor Contractors in processing(
converting( or manufacturing goods for
an enterprise whose export sales
exceed seventy percent 3=BD4 of the
total annual production.
' TAX REMEDIES 3NDER THE
NATIONAL INTERNAL RE8EN3E
CODE
,. *A+ REMED,ES (4 *HE
&(5ER-ME-*
= IMPORTANCE
1. &hey enhance and support the
government5s tax collection.
2. &hey are safeguards of taxpayer5s
rights against arbitrary action.
= TAX COLLECTION CANNOT BE RESTRAINED BY
CO3RT IN73NCTION 7Sec. 8?E! C*RP9
Justi"ication3 1ifeblood &heory.
2xce+tion3 0njunction may be issued by the
+&- in aid of its appellate jurisdiction under
R- 112$ 3see re6uisites thereof( under the
subheading O+ourt of &ax -ppeals(P infra.4.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$2
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= T)e f"''".i= $*e =ee*$''+ !)e !$%
*e4e(ie# "f !)e ="9e*4e! !" effe,!
,"''e,!i" "f !$%e#
A. +ompromise -4ec. 967.
B. 7istraint 3-ctual and +onstructive4
-4ecs. 96@G968.
C. 1evy -4ec. 96>B.
D. &ax 1ien -4ec. 95=.
E. +ivil -ction -4ec. 996.
F. +riminal -ction -4ecs. 996, 995, and
99=.
G. >orfeiture of Property -4ec. 997G99@.
H. uspension of business operations in
violation of I-& -4ec. 55@.
0. Enforcement of -dministrative >ine
= &he remedies of distraint and levy as well as
collection by civil and criminal actions may( in
the discretion of the +ommissioner( be pursued
singly or independently of each other( or all of
them simultaneously.
A. COMPROMISE
= Defii!i": - contract whereby the parties( by
reciprocal concessions( avoid litigation or put an
end to one already commenced -Art. 9698, Ne$
Civil Code..
= RE>3ISITES 2:e+: &-G5
1. &he taxpayer must have a !$% 'i$&i'i!+.
2. &here must be an "ffe* 3by the taxpayer of
an amount to be paid by the taxpayer4
". &here must be an $,,e/!$,e 3by the
+ommissioner or taxpayer as the case may
be4 of the offer in the settlement of the
original claim.
= OFFICERS A3THORIZED TO COMPROMISE
C. &he C"44i##i"e* "f I!e*$' Re9e1e
3+0R4 with respect to criminal and civil cases
arising from violations of the &ax +ode
;4ecs. >-C. and 967, C'R#<. &his power of
the +0R is discretionary and once exercised
by him cannot be reviewed or interfered with
by the +ourts -!o++el, #%ili++ines vs. C&R,
8> #%il @@5..
2. 2y the Regional Evaluation 2oard
composed of the Regional 7irector as
+hairman( -ssistant Regional 7irector( the
heads of the 1egal( -ssessment and
+ollection 7ivisions and the Revenue
7istrict Gfficer having jurisdiction over the
taxpayer( as members! on assessments
issued by the regional offices involving basic
taxes of P$BB(BBB or less( and minor
criminal violations.
= COMMISSIONER MAY COMPROMISE THE PAYMENT
OF ANY INTERNAL RE8EN3E TAX WHEN
1. - *e$#"$&'e ("1&! as to the validity of the
claim against the taxpayer exists! "*
2. &he financial position of the taxpayer
demonstrates a ,'e$* i$&i'i!+ !" /$+ the
assessed tax ;4ec. 967-A., C'R#<. 0n such
case( the taxpayer should waive the
confidentiality privilege on ban* deposits
under R- 1#B$ ;4ec. C-D.-9., C'R#<.
= MINIM3M COMPROMISE RATES 2MCR5 OF ANY
TAX LIABILITY
1. &n case o" "inancial inca+acity3 ;+R Q 1BD
of the basic assessed tax
2. *t%er cases3 ;+R Q #BD of the basic
assessed tax ;4ec. 967-A., C'R#<
= APPRO8AL OF THE COMPROMISE BY THE
E8AL3ATION BOARD IS RE>3IRED WHEN
1. the basic tax involved exceeds
P1(BBB(BBB.BB( "*
2. the settlement offered is less than the
;+R.
N.B.3 &he ;+R may be less than the prescribed
rates of 1BD or #BD( as the case may be(
provided it is approved by the Evaluation 2oard
3composed of the 20R +ommissioner and the #
20R 7eputy +ommissioners4
= COMPROMISE OF CRIMINAL 8IOLATIONS
E General Rule3 -ll criminal violations under the
+&RP may be compromised.
E 2xce+tions3
1. &hose already filed in court
2. &hose involving fraud ;4ec. 967-B., C'R#<.
= EXTENT OF THE COMMISSIONER@S DISCRETION
TO COMPROMISE CRIMINAL 8IOLATIONS
C. Be"ore t%e com+laint is "iled $it% t%e
#rosecutorFs *""ice3 &he +0R has full
discretion to compromise except those
involving fraud.
2. A"ter t%e com+laint is "iled $it% t%e
#rosecutorFs *""ice but be"ore t%e
in"ormation is "iled $it% t%e court3 &he +0R
can still compromise provided the
prosecutor must give consent.
3. A"ter in"ormation is "iled $it% t%e court3 &he
+0R is no longer permitted to compromise
with or without the consent of the Prosecutor
-#eo+le vs. /adaluyo, A+ril 96, 5=C5..
= REMEDY IN CASE THE TAXPAYER REF3SES OR
FAILS TO ABIDE THE TAX COMPROMISE
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$"
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
1. Ef"*,e the compromise
a. 0f it is a <1(i,i$' ,"4/*"4i#e( it can be
enforced &+ 4e*e e%e,1!i". - judicial
compromise is one where a decision
based on the compromise agreement is
rendered by the court on re6uest of the
parties.
b. -ny other compromise is e%!*$<1(i,i$'
and li*e any other contract can only be
enforced &+ ,"1*! $,!i".
2. Regard it as *e#,i(e( and insist upon
original demand -Art. 9675, Civil Code..
= COMPROMISE PENALTY
0t is an amount of money which the
taxpayer pays to compromise a tax violation.
&his is paid in lieu of criminal prosecution. -
taxpayer cannot be compelled to pay a
compromise penalty. 0f he does not want to pay(
the +0R must institute a criminal action.
= COMPROMISE 8S. ABATEMENT
Co'pro'ise involves a reduction of the
taxpayer5s liability( while abate'ent means that
the entire tax liability of the taxpayer is
cancelled.
C. DISTRAINT
= Defii!i": 0t is the sei)ure by the government
of personal property( tangible or intangible( to
enforce the payment of taxes. &he property may
be offered in a public sale( if taxes are not
voluntarily paid. 0t is a summary remedy.
= NAT3RE OF THE WARRANT OF DISTRAINT OR
LE8Y
&he warrant is a summary procedure
OforcingP the taxpayer to pay. &he receipt of a
warrant may or may not parta*e the character of
a final decision. 0f it is an indication of a final
decision( the taxpayer may appeal to the +&-
within "B days from service of the warrant.
= TWO TYPES OF DISTRAINT
1. A,!1$': there is ta*ing of possession of the
personal property from the taxpayer by the
government. Physical transfer of possession
is not always re6uired. &his is true in the
case of intangible property such as stoc*s
and credits.
2. C"#!*1,!i9e: the owner is merely
prohibited from disposing of his property.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$#
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
ervice of
'arrant of
7istraint
3ec.2BA4
= AC*/A. 5S. C(-S*R/C*,5E
D,S*RA,-*
ACT3AL DISTRAINT
CONSTR3CTI8E
DISTRAINT
;ade only on the
property of a
delin6uent taxpayer
;ade on the property
of any taxpayer(
whether delin6uent or
not
&here is ta*ing of
possession
&he taxpayer is
merely prohibited
from disposing of his
property
Effected by leaving a
list of distrained
property or by service
of a warrant of distraint
or garnishment
Effected by re6uiring
the taxpayer to sign a
receipt of the property
or by the revenue
officer preparing and
leaving a list of such
property
-n immediate step
for collection of taxes
?ot necessarily so
2oth
-re summary remedies for the collection of
taxes!
Refer only to personal property! and
+annot be availed of where the amount of the
tax involved is not more than P1BB
= RE>3ISITES FOR THE EXERCISE OF THE REMEDY
OF DISTRAINT
1. &he taxpayer must be (e'i;1e! 3except in
constructive distraint4 in the payment of tax!
2. &here must be a subse6uent (e4$( for its
payment 3assessment4!
". &he taxpayer must f$i' !" /$+ the tax at the
time re6uired! and
#. &he period within which to assess or collect
the tax has "! +e! /*e#,*i&e(.
= PERSONS WHO SHALL SEIZE AND DISTRAINT
PERSONAL PROPERTY 2ACT3AL DISTRAINT5
1. -mount of delin6uent tax is more than
P1(BBB(BBB / +ommissioner or his duly
authori)ed representatives.
2. -mount of delin6uent tax is P1(BBB(BBB or
less / Revenue 7istrict Gfficer. -4ec.
96>-A., C'R#.
= PROCED3RES FOR THE ACT3AL DISTRAINT OR
GARNISHMENT
I
Either by the +0R or his duly
authori)ed representative! or
by the Revenue 7istrict Gfficer
II
'ith respect toC
1.Personal property /
3a4 upon the owner of the
goods( chattels( or
other personal
property! or
3b4 upon the person
from whose possession
such properties are
ta*en.
2. toc*s and other securities
3a4 upon the taxpayer! and
3b4 upon the president(
manager( treasurer or
other responsible offi,
cer of the corporation(
company or association
which issued the said
stoc* and securities.
". 2an* accounts shall be gar,
nished by serving a warrant
of distraint /
3a4 upon the taxpayer! and
3b4 upon the president(
manager( treasurer( or
other responsible
officer of the ban*.
N.B.3 Epon receipt of the
warrant of distraint( the ban*
shall turn over to the
+ommissioner so much of the
ban* accounts as may be
sufficient to satisfy the claim
of the government.
#. 7ebts and credits /
3a4 person owing the debts!
3b4 having in his possession
or under his control such
credits! or
3c4 upon his agent.
N.B.3 &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.
+ommence,
ment of
distraint
proceedings
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$$
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
III
?otice specifying the time and
place of sale and the articles
distrained. &he posting shall be
made in not less than two 324
public places in the city or muni,
cipality where the distraint is
made. Gne place for posting of
such notice is at the Gffice of
the ;ayor of such city or munici,
pality.
I8
3ee Ae% T / 7istraint of
Personal Property4
= THE TAXPAYER@S PROPERTY MAY BE PLACED
3NDER CONSTR3CTI8E DISTRAINT WHEN HE
1. is *e!i*i= from any business subject to tax!
2. is intending to /
a. 'e$9e the Philippines(
b. *e4"9e his property therefrom(
c. )i(e or conceal his property(
". is performing any act tending to "&#!*1,! the
proceeding for collecting the tax due or which
may be due from him -4ec. 96C, C'R#..
= PROCED3RE FOR THE CONSTR3CTI8E DISTRAINT
OF PERSONAL PROPERTY
+0R shall re6uire the taxpayer or
any person having possession
or control of such property to 3a4
#i= a receipt covering the
property distrained $(
3b4 obligate himself to
1. /*e#e*9e the same intact
and unaltered and
2. "! !" (i#/"#e of the same
in any manner whatsoever
without the express
authority of the
+ommissioner of 0nternal
Revenue.
0f the taxpayer or person in
possession of the property
*ef1#e# "* f$i'# !" #i= !)e
*e,ei/! referred to( the revenue
officer effecting the constructive
distraint shall 3a4 proceed to
/*e/$*e $ 'i#! of such property
and 3b4 in the presence of two
324 witnesses 'e$9e $ ,"/+
thereof in the premises where
the property distrained is
located( after which the said
property shall be deemed to
have been placed under
constructive distraint.
D. LE8Y
= Defii!i": 0t refers to the act of sei)ure of
*e$' /*"/e*!+ in order to enforce the payment of
taxes. &he property may be offered in a public
sale( if after sei)ure( the taxes are not voluntarily
paid.
= RE>3ISITES FOR THE EXERCISE OF THE REMEDY
OF LE8Y: ame as in the remedy of distraint.
= WHEN MAY LE8Y BE EFFECTEDA
Real property may be levied upon
&ef"*e? #i41'!$e"1#'+? "* $f!e* !)e (i#!*$i!
of personal property belonging to the delin6uent
;4ec. 96>-B., C'R#<: and the remedy by distraint
and levy may be repeated if necessary until the
full amount( including all expenses( is collected
-4ec. 95>, C'R#..
= PROCED3RE OF LE8Y ON REAL PROPERTY

I
Preparation of a duly authen,
ticated certificate containingC
3a4 (e#,*i/!i" "f !)e /*"/e*!+
levied!
3b4 $4e "f !)e !$%/$+e*( and
3c4 the $4"1!# "f !$% $(
/e$'!+ (1e from him. &his
certificate shall operate with
the force of a legal
execution throughout the
Philippines -4ec. 96>B,
C'R#..
II
ervice of written notice toC
3a4 the delin6uent taxpayer! or
3b4 if he is absent from the
Philippines( to his agent of
manager of the business in
respect to which the liability
arose! or
3c4 to the occupant of the
property.
3d4 &he proper Register of
7eeds shall also be notified
of the levy -4ec. 96>B,
C'R#..
III
&he $(9e*!i#e4e! #)$''
,"!$i:
-a. the amount of tax and
penalties due!
-b. name of the taxpayer
against whom taxes are
levied!
Prepare
+ertificate
of 1evy
ervice of
?otice
-dvertise,
ment of the
&ime and
Place of
ale
&axpayer
must sign
receipt
&axpayer5s
oblig. to
preserve
Remedy
when
taxpayer
didn5t sign
receipt
Posting of
?otice
3ec. 2B8(
?0R+4
ale of
Property
7istrained
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$%
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
7c9 short description the
property to be sold.
&he advertisement #)$'' &e
4$(e .i!)i 20 ($+# $f!e* !)e
'e9+? $( !)e #$4e #)$'' &e f"*
$ /e*i"( "f $! 'e$#! 30 ($+#. I!
#)$'' &e effe,!1$!e( &+:
3a4 posting a notice at the main
entrance of the municipal
building or city hall and in a
public and conspicuous
place in the barrio or district
in which the real property
lies! and
2&5 by publication once a wee*
for " wee*s in a newspaper
of general circulation in the
municipality or city where
the property is located
-4ec. 95A, C'R#..
I8
3ee -nnex & / 1evy of
Real Property 4
= D,S*RA,-* 5S. .E5L
DISTRAINT LE8Y
Refers to personal
property
Refers to real
property
>orfeiture by the
government is not
provided
>orfeiture is
authori)ed
&he taxpayer is not
given the right of
redemption with
respect to distrained
personal property.
&he right of
redemption is granted
in case of real property
levied upon and sold(
or forfeited to the
government.
2oth
-re summary remedies for the collection of
taxes! and
+annot be availed of where the amount of the
tax involved is "! more than P1BB
D. FORFEIT3RE
= Defii!i": divestiture of property without
compensation( in conse6uence of a default or
offense.
= ENFORCEMENT OF THE REMEDY OF FORFEIT3RE
1. I ,$#e "f /e*#"$' /*"/e*!+ &he
forfeiture of chattels and removable fixtures
of any sort is enforced &+ #eiM1*e $( #$'e
"* (e#!*1,!i" of the specific forfeited
property.
2. I ,$#e "f *e$' /*"/e*!+ &he forfeiture of
real property is enforced by a <1(=4e! "f
,"(e4$!i" $( #$'e in a legal action or
proceeding( civil or criminal( as the case
may re6uire.
". I ,$#e "f (i#!i''e( #/i*i!#? 'i;1"*#? ,i=$*#?
,i=$*e!!e# 4$1f$,!1*e(? /*"(1,!# "f
!"&$,," $( $//$*$!1# 1#e( f"* !)ei*
/*"(1,!i" Epon forfeiture( may be
destroyed by order of the +ommissioner
where the sale may be injurious to public
health or prejudicial to law enforcement.
#. O!)e* $*!i,'e# #1&<e,! !" e%,i#e !$% .)i,)
)$9e &ee 4$1f$,!1*e( "* *e4"9e( i
9i"'$!i" "f !)e C"(e? (ie# f"* /*i!i= "*
4$Hi= f$He *e9e1e #!$4/# $( '$&e'#
Epon forfeiture may be sold or destroyed at
the discretion of the +ommissioner.
>orfeited property shall not be destroyed
until at least 2B days from sei)ure.
= EFFECT OF THE FORFEIT3RE OF PROPERTY: &he
effect is to transfer the title to the specific thing
from the owner to the government. -ll the
proceeds in case of a sale go to the coffers of
the government -M.4. vs. 4uria, 96 #%il 5CA..
Enli*e in sei)ure for the enforcement of a tax
lien wherein the residue( after deducting the tax
liability and expenses will go to the taxpayer
-BanE o" t%e #%il. &sland vs. 'rinidad, 79 #%il.
996..
E. TAX LIEN
= Defii!i": 0t is a legal claim or charge on
property( either real or personal( established by
law as a #e,1*i!+ in default of the payment of
taxes -@5 AmJur 885.. @enerally( it attaches to
the property irrespective of ownership or transfer
thereof.
= EXTENT AND NAT3RE
&he tax( together with interests( penalties(
and costs that may accrue in addition thereto i#
$ 'ie 1/" $'' /*"/e*!+ $( *i=)!# !"
/*"/e*!+ &e'"=i= !" !)e !$%/$+e*.
&he lien shall not be valid against any
mortgagee( purchaser( or judgment creditor 1!i'
notice of such lien shall be filed by the
+ommissioner of 0nternal Revenue in the Gffice
of the Register of 7eeds of the province or city
ale
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$=
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
where the property of the taxpayer is situated or
located -4ec. 95=, C'R#..
F. CI8IL ACTIONS
= Defii!i": >or tax remedy purposes( these
are actions instituted by the government to
collect internal revenue taxes. 0t includes filing
by the government with the probate court claims
against the deceased taxpayer.
= WHEN RESORTED TOA
1. 'hen a tax is assessed but the assessment
becomes final and unappealable because
!)e !$%/$+e* f$i'# !" fi'e $ $(4ii#!*$!i9e
/*"!e#! .i!) !)e CIR .i!)i 30 ($+# f*"4
*e,ei/!! "*
2. 'hen a protest against assessment is filed
and a decision of the +0R was rendered but
the said decision becomes final( executory(
and demandable for f$i'1*e "f !)e !$%/$+e*
!" $//e$' !)e (e,i#i" !" !)e CTA .i!)i
30 ($+# f*"4 *e,ei/! "f !)e (e,i#i".
= WHERE TO FILE: +ivil actions for the collection
of delin6uent taxes are filed in the regular courts
and not before the +&-.
= THE APPRO8AL OF THE CIR IS ESSENTIAL IN
CI8IL CASES. However( under the present set,up
of the 2ureau of 0nternal Revenue 320R4( a
Regional 7irector can initiate a civil suit for the
collection of taxes even without the approval of
the +0R. Ender the present set,up( the 20R is
decentrali)ed into several revenue regions.
uch region is headed by a Regional 7irector
who is an alter ego of the +0R within his region.
= DEFENSES WHICH ARE PRECL3DED BY FINAL
AND EXEC3TORY ASSESSMENTS
1. 0nvalidity or illegality of the assessment! and
2. Prescription of the government5s right to
assess.
' ABATEMENT
= THE COMMISSIONER MAY ABATE OR CANCEL A
TAX LIABILITY WHEN
1. &he tax or any portion thereof appears to be
1<1#!'+ "* e%,e##i9e'+ $##e##e(! "*
2. &he administration and collection costs
involved (" "! <1#!if+ !)e ,"''e,!i" of the
amount due ;4ec. 967-B., C'R#<.
". &he +ommissioner may also( even without a
claim therefor( refund or credit any tax where
on the face of the return upon which
payment was made such payment appears
clearly to have been erroneously paid -4ec.
99=, C'R#..
' PRESCRIPTI8E PERIODS
FOR THE ASSESSMENT AND
COLLECTION OF TAXES
= RATIONALE OF HEREIN PRESCRIPTI8E PERIODS
uch 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.
= R3LES ON PRESCRIPTION
1. 'hen the tax law itself is silent on
prescription( the tax is imprescriptible!
2. 'hen no return is re6uired( tax is
imprescriptible!
?2C Remedy of taxpayer is to file a return.
". 7efense of prescription is waivable!
#. Provisions on prescription( being remedial in
nature( should be liberally interpreted to
carry out its intent.

= PRESCRIPTI8E PERIOD FOR THE ASSESSMENT OF
TAXES
E General Rule3
&HREE 3"4 FE-R after the date the
return is due or filed( whichever is later -4ec.
96A, C'R#..
E 2xce+tions3
1. >-01ERE &G >01E - RE&ER?C &E? 31B4
FE-R from the date of the discovery of the
omission to file the return -4ec.999;A<.:
2. >-1E GR >R-7E1E?& RE&ER? with
0?&E?&0G? &G EI-7E &HE &-LC &E? 31B4
FE-R from the date of the discovery of the
falsity or fraud -4ec.999 ;A<.:
N.B.3 ?othing in ection 2223-4 shall be
construed to authori)e the examination and
investigation or in6uiry into any tax return
filed in accordance with the provisions of
any tax amnesty law or decree.
". -@REE;E?& 0? 'R0&0?@ to the
e%!e#i" of the period to assess between
the +0R and the taxpayer before the
expiration of the ",year period. ?2C &he
extended period agreed upon can further be
extended by a subse6uent written
agreement made before the expiration of the
extended period previously agreed upon
-4ec. 999;b<..
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$A
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
#. 'R0&&E? '-0IER or RE?E?+0-&0G? of
the original three 3"4 year limitation( signed
by the tax+ayer -4ambrano vs. C'A, 565
#%il. 5..
= PRESCRIPTI8E PERIOD FOR THE COLLECTION OF
TAXES
General #eriods "or t%e Collection o" 'axes
$ years / from assessment or within
period for collection agreed upon in writing
before expiration of the $,year period -4ec. 999,
C'R#..
1B years / without assessment in case
of false or fraudulent return with intent to evade
or failure to file return -4ec. 999, C'R#..
= GRO3NDS FOR S3SPENSION OF THE R3NNING OF
THE STAT3TE OF LIMITATIONS
1. 'hen the CIR i# /*")i&i!e( from ma*ing
the assessment or beginning the distraint or
levy or a proceeding in court( and for sixty
3%B4 days thereafter!
2. 'hen the !$%/$+e* *e;1e#!# f"* $
*e,"#i(e*$!i" which is granted by the
+0R!
". 'hen the !$%/$+e* ,$"! &e '",$!e( in
the address given by him in the return(
unless he informs the +0R of any change in
his address.
#. 'hen the warrant of distraint or levy is duly
served( $( " /*"/e*!+ i# '",$!e(! and
$. 'hen the !$%/$+e* i# "1! "f !)e
P)i'i//ie# -4ec. 99A, C'R#..
= A TAX RET3RN IS CONSIDERED FILED FOR
P3RPOSES OF STARTING THE R3NNING OF THE
PERIOD OF LIMITATIONS IF
1. &he return is 9$'i( / it has complied
substantially with the re6uirements of the
law! and
2. &he return is $//*"/*i$!e / it is a
return for the particular tax re6uired by law.
= A DEFECTI8E TAX RET3RN IS THE SAME AS IF NO
RET3RN WAS FILED AT ALL.
,,. *A+ REMED,ES (4 *HE *A+PALER
' GENERAL REMEDIES OF A
TAXPAYER
= ADMINISTRATI8E
1. Bef"*e P$+4e!
$. P*"!e#! / filing a petition for
reconsideration or reinvestigation within
"B days from receipt of assessment
'ithin %B days from filing of protest( all
relevant supporting documents should
have been submitted( otherwise( the
assessment shall become >0?-1 /
cannot be appealed -4ec. 998, C'R#..
- protest is a vital document
which is a formal declaration of
resistance of the taxpayer. 0t is a
repository of all arguments. 0t can be
used in court in case administrative
remedies have been exhausted. 0t is
also the formal act of the taxpayer
6uestioning the official actuation of the
+0R. &his is e6uivalent to a pleading.
&. E!e*i= i!" $ ,"4/*"4i#e -4ec.
967, C'R#..
2. Af!e* P$+4e!
>iling of ,'$i4 f"* *ef1( "* !$% ,*e(i!
within 2 years from date of payment
regardless of any supervening cause -4ec.
99=, C'R#..
= 73DICIAL
1. Ci9i' A,!i"
a. A//e$' !" !)e C"1*! "f T$% A//e$'# /
within "B days from receipt of decision
on the protest or from the lapse of 1AB
days due to inaction of the
+ommissioner -4ec. 998, C'R#..
b. -ction to ,"!e#! f"*fei!1*e of chattel
-4ec. 9A5, C'R#.: and
c. -ction for ($4$=e# -4ec. 99>, C'R#..
2. C*i4i$' A,!i"
a. >iling of ,*i4i$' ,"4/'$i! $=$i#!
e**i= BIR "ffi,i$'# $( e4/'"+ee#.
b. I<1,!i" / when the +&- in its opinion
the collection by the 20R may jeopardi)e
taxpayer.
' FILING OF CLAIM FOR
TAX REF3ND OR TAX CREDIT
= GRO3NDS FOR FILING A CLAIM FOR TAX REF3ND
OR TAX CREDIT
1. &ax is collected e**"e"1#'+ "* i''e=$''+.
2. Penalty is collected .i!)"1! $1!)"*i!+.
". um collected is e%,e##i9e.
= *A+ RE4/-D 5S. *A+ CRED,*
TAX REF3ND TAX CREDIT
&he taxpayer as*s
for restitution of the
money paid as tax
&he taxpayer as*s
that the money so paid
be applied to his
existing tax liability
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
$8
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
TAX REF3ND TAX CREDIT
&wo,year period to
file claim with the +0R
starts after the
payment of the tax or
penalty
&wo,year period
starts from the date
such credit was
allowed 3in case credit
is wrongly made4.
= RE>3ISITES OF TAX REF3ND OR TAX CREDIT
1. +laim must be i .*i!i=!
2. 0t must be filed with the +0R within TWO 225
YEARS after the payment of the tax or
penalty. 3ee Ae% 3 / +ommencement
of two,year period4
?2C ?o suit or proceeding shall be begun
after the expiration of the said two 324 years
*e=$*('e## "f $+ #1/e*9ei= ,$1#e that
may arise after payment. 'here the
payment was made by wrongly crediting a
prior over payment( the two,year period
should start from the date such credit was
allowed. 0f the tax is paid in installments( the
two 324 year period shall be counted from
the date of final payment.
". how /*""f "f /$+4e!.
= S3SPENSION OF THE TWO6YEAR PRESCRIPTI8E
PERIOD
1. &here is a pending litigation between the
@overnment and the taxpayer! and
2. +0R in that litigated case agreed to abide by
the decision of the + as to the collection of
taxes relative thereto -#anay 2lectric Co. vs.
Collector, /ay 98, 5=@8..
= TAX CREDIT CERTIFICATE
1. ;ay be applied against any internal revenue
tax( EL+EP& withholding taxes(
2. Griginal copy is surrendered to the revenue
office(
3. ?o tax refund will be given resulting from
availment of incentives granted by law
where no actual payment was made 34ec.
967C,C'R#..
= FORFEIT3RE OF CASH REF3NDBTAX CREDIT
1. >orfeiture of refund in favor of the
government when a refund chec* or warrant
remains unclaimed or uncashed within $
years from date of mailing or delivery.
2. >orfeiture of &ax +redit / a tax credit
certificate which remains unutili)ed after $
years from date of issue( shall be invalid(
E?1E revalidated -4ec. 9A6, C'R#..
' REGLEMENTARY PERIODS IN
INCOME TAX IMPOSED BY LAW
3PON THE TAXPAYER
2P3RS3ANT TO RE8. REG. NO. C26KK?
SEC. 22J OF THE CTRP? AND R3LES
OF CO3RT5
20R ma*es a !$% $##e##4e!
-
0f taxpayer is not satisfied with the assessment
fi'e $ /*"!e#! within "B days from receipt thereof
-
S1&4i! #1//"*!i= (",14e!# within %B days
from date of the filing of the protest
-
0f protest is denied( e'e9$!e the matter to the
+ommissioner of 0nternal Revenue 3+0R4 within
"B days from receipt of the decision of the +0R5s
duly authori)ed representative officer
-
A//e$' !" !)e C"1*! "f T$% A//e$'# 2CTA5
within "B days from receipt of final decision of
+0R "* his duly authori)ed representative 3the
taxpayer has the option to appeal straight to the
+&- upon receipt of the decision of the +0R5s
duly authori)ed representative4
-
0f the +0R or his duly authori)ed representative
f$i'# !" $,! " !)e /*"!e#! .i!)i CJ0 ($+#
from date of submission by taxpayer( the latter
may $//e$' within "B days from lapse of the
1AB,day period
-
A//e$' !" !)e C"1*! "f A//e$'# 3+-4 within 1$
days from receipt of the +&-5s decision
-
A//e$' !" !)e S1/*e4e C"1*! within 1$ days
from receipt of the +-5s decision
= NOTES
1. -s a general rule( payment under
protest is not re6uired under the ?0R+(
except when partial payment of
uncontroverted taxes is re6uired under
RR 12,88. &he +ommissioner may(
even without a written claim therefor(
refund or credit any tax( where on the
face of the return upon which payment
was made( such payment appears
clearly to have been erroneously paid.
2. 0n case of the +0R5s fi$' denial of the
claim for refund( the "B,day period to
appeal with the +&- must be .i!)i the
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%B
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
2,year peremptory period for instituting
judicial action.
ee Ae% 8, -ssessment Process and
-ppeal
III. LOCAL TAXATION
NAT3RE AND SO3RCE OF LOCAL TAXING POWER
&he power of local government unitC
1. to create its own sources of revenue and
2. to levy taxes( fees( and charges
-4ee 4ec. @, Art. ?, 5=8> Constitution and
4ec. 59=, LGC.
= NAT3RE OF THE TAXING POWER OF LOCAL
GO8ERNMENTS
1. ?ot inherent!
2. Exercised only if delegated to them by
law or +onstitution.
". ?ot absolute! subject to limitations
provided by law.
= ASPECTS OF LOCAL TAXING POWER
1. 1ocal taxation 3levy of taxes( fees(
charges and other impositions4( and
2. Real property taxation
N.B.3 Bot% as+ects are overned by t%e Local
Government Code -LGC..
= F3NDAMENTAL PRINCIPLES GO8ERNING LOCAL
TAXATION 7Sec. ?<@! .&C9
1. hall be uniform in each local sub,unit
2. hall be e6uitable and based as much
as possible on the taxpayer5s ability to
pay
". 1evied for public purposes
#. hall not be unjust( excessive(
oppressive( or confiscatory
$. hall not be contrary to law( public
policy( national economic policy( or in
restraint of trade
%. +ollection of local taxes and other
impositions shall not be let to any
person
=. &he revenues collected under the +ode
shall inure solely to the benefit of( and
subject to disposition by( the 1@E
levying the tax or other imposition
unless otherwise specifically provided
therein
A. Each 1@E shall( as far as practicable(
evolve a progressive system of taxation.
= LOCAL TAXING A3THORITY 7Sec. ?<8! .&C9
hall be exercised by the S$==1i$ of the
local government unit concerned through an
appropriate "*(i$,e.
= POWER TO PRESCRIBE PENALTIES FOR TAX
8IOLATIONS AND LIMITATIONS THEREON 7Sec. =?K!
.&C9
14 &he sanggunian of a local government unit
is authori)ed to prescribe fines or other
penalties for violation of tax ordinances
a. in no case shall fines be less than
P1(BBB nor more than P$(BBB
b. nor shall imprisonment be less than
one 314 month nor more than six 3%4
months.
24 uch fine or other penalty or both shall be
imposed at the discretion of the court.
"4 &he sangguniang barangay may prescribe a
fine of not less than P1BB. nor more than
P1(BBB
= POWER TO AD73ST LOCAL TAX RATES 7Sec.
?E?! .&C9.
-djustment should be made not o"tener t%an
once every "ive -@. years( but in no case
shall the adjustment exceed ten percent
31BD4 of the rates fixed under the 1ocal
@overnment +ode
= POWER TO GRANT LOCAL TAX EXEMPTIONS
7Sec. ?E8! .&C9
1ocal government units may( !)*"1=)
"*(i$,e# (1'+ $//*"9e(( grant tax exemptions(
incentives or reliefs under such terms and
conditions as they may deem necessary.M
= TAX EXEMPTIONS EXISTING BEFORE THE
EFFECTI8ITY OF THE LOCAL GO8ERNMENT CODE
HA8E BEEN ABOLISHED 7Sec. ?E<! .&C9
Enless otherwise provided in this +ode( tax
exemptions or incentives granted to( or presently
enjoyed by all persons( whether natural or
juridical( i,'1(i= ="9e*4e!6".e( "*
,"!*"''e( ,"*/"*$!i"#( EXCEPT:
1. local water districts(
2. cooperatives duly registered under R.-.
%8"A(
". non,stoc* and non,profit hospitals and
#. educational institutions(
are hereby withdrawn upon the effectivity of
this +ode.M
'hile sanggunians may grant tax
exemptions( tax incentives or tax reliefs(
such grant shall not appl6 to regulator6
$ees which are levied under the police
power of local government units.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%1
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
&ax exemptions shall be conferred through
the issuance of a tax exemption certificate(
which shall be non2trans$erable.
= G3IDE OF SANGG3NIANS IN GRANTING OF TAX
EXEMPTIONS? TAX RELIEFS AND TAX INCENTI8ES
7Art. 8F8;b>! Rules and Regulations ,'ple'enting the
.ocal &o"ern'ent Code o$ ?EE?9.
1. *n t%e rant o" tax exem+tions or tax relie"sC
a. &ax exemptions or tax reliefs may be
granted in cases ofC
14 natural calamities(
24 civil disturbance(
"4 general failure of crops( or
#4 adverse economic conditions such
as substantial decrease in prices of
agricultural or agri,based products.
b. &he grant of exemptions or relief shall
be through an ordinance.
c. -ny exemption or relief granted to a
type or *ind of business shall apply to all
businesses similarly situated.
d. -ny exemption or relief granted shall
ta*e effect only during the next calendar
year for a period not exceeding twelve
3124 months as may be provided in the
ordinance.
0n the case of shared revenues( the
exemption or relief shall only extend to the local
government unit granting such exemption or
relief.
9. *n t%e rant o" tax incentives3
a. &he tax incentives shall be granted only to
new investments in the locality and the
ordinance shall prescribe the terms and
conditions therefor.
b. &he grant of tax incentive shall be for a
definite period not exceeding one 314
calendar year.
c. &he grant of tax incentives shall be by
ordinance passed prior to the first 31st4 day
of Nanuary of any year.
d. -ny tax incentive granted to a type or *ind of
business shall apply to all businesses
similarly situated.
= LE8YING OF LOCAL TAXES 6 LOCAL TAX
ORDINANCES
Re;1i#i!e#:
1. Procedure applicable to local government
ordinances( in general( shall also apply to
tax ordinances -4ec. 58>, LGC.
2. Procedural detailsC -4ecs. @7, @@ and @=,
LGC..
a. necessity of a 6uorum in the various
sanggunians or local legislative councils(
b. submission for approval to the local
chief executive
c. the matter of veto and overriding the
same
d. publication and effectivity
". Public hearings are re6uired before any
local tax ordinance may be enacted -4ec.
58>, LGC.
#. 'ithin ten 31B4 days after their approval(
publication in full for three 3"4 consecutive
days in a newspaper of local circulation.
However( in provinces( cities and
municipalities where there are no
newspapers of local circulation( the
same may be posted in at least two 324
conspicuous and publicly accessible
places -4ec. 588, LGC..
$. hall be furnished to the respective local
treasurers for public dissemination 3ec.
1A8( 1@+4.
= RESID3AL TAXING POWERS OF LOCAL
GO8ERNMENTS. 7Sec. ?FK! .&C9.
1ocal governments can also impose those
taxes( fees and charges which
2. do not fall within the scope of taxes
which are enumerated under the 1ocal
@overnment +ode(
". as well as those which are levied on
subjects or bases which are not taxed
under the ?ational 0nternal Revenue
+ode or other applicable laws.
4ub1ect to t%e "ollo$in conditions3
a. shall not be unjust( excessive(
oppressive( confiscatory or contrary
to declared national policy!
b. the ordinance levying such taxes(
fees or charges shall not be enacted
without any prior /1&'i, )e$*i=
conducted for the purpose.
= DOCTRINE OF PREEMPTION OR EXCL3SION
'here the ?ational @overnment elects to
tax a particular area( it impliedly withholds from
the local government the delegated power to tax
the same field. &his doctrine principally rests
upon the intention of +ongress.
= E%,'1(e( i4/"#i!i"# 2/1*#1$! !" !)e
(",!*ie "f /*ee4/!i"5
1. &axes which are levied under the ?0R+(
unless otherwise provided by 1@+ of
1881!
2. &axes( fees( etc. which are imposed
under the &ariffs and +ustoms +ode!
". &axes( fees( etc.( the imposition of which
contravenes existing governmental
policies or which violates the
fundamental principles of taxation!
#. &axes( fees and other charges imposed
under special law.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%2
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= COMMON LIMITATIONS ON LOCAL TAXING
POWER -4ec. 5AA, LGC.
1ocal government units cannot levyC
907E+P- / 2EP /&RRE+,@:
3a4 Income tax( except on ban*s and other
financial institutions!
3b4 Documentary stamp tax!
3c4 Estate tax( inheritance( gifts( legacies and
other ac6uisitions mortis causa except as
otherwise provided
3d4 Customs duties( registration fees of vessels
and wharfage on wharves( tonnage dues
and all other *inds of customs fees( charges
and dues except wharfage on wharves
constructed and maintained by the local
government unit concerned!
3e4 &axes( fees( charges and other impositions
upon goods carried into or out of( or Passing
through( the territorial jurisdictions of local
government units in the guise of charges for
wharfage( tolls for bridges or otherwise.
3f4 &axes( fees or charges on Agricultural and
a6uatic products when sold by marginal
farmers or fishermen!
3g4 &axes on business enterprises certified by
the Board of 0nvestments as pioneer or
non,pioneer for a period of % and # years(
respectively( from the date of registration!
3h4 Excise taxes on articles enumerated under
the ?ational 0nternal Revenue +ode( as
amended( and taxes( fees or charges on
petroleum products!
3i4 Percentage or value,added tax 3I-&4 on
sales( barters or exchanges or similar
transactions on goods or services except as
otherwise provided herein!
3j4 &axes on the gross receipts of
Transportation contractors and persons
engaged in the transportation of passengers
or freight by hire and common carriers by
air( land or water( except as provided in the
+ode!
3*4 &axes on premiums paid by way of
Reinsurance or retrocession!
3l4 &axes( fees or charges for the Registration
of motor vehicles and for the issuance of all
*inds of licenses or permits for the driving
thereof( except tricycle!
3m4 &axes( fees or other charges on Philippine
products actually Exported( except as
otherwise provided in the +ode!
3n4 &axes( fees or charges on Countryside and
barangay business enterprises and
coo+eratives duly registered under R.-.
%A1B and R.-. %8"A( 3+ooperatives +ode of
the Philippines4 ! and
3o4 &axes( fees or charges of any *ind on the
?ational Government( its agencies and
instrumentalities( and local government
units.
2A5 PRO8INCES
-4ecs. 5A7 to 575, LGC.
ee Ae% W ,
2B5 M3NICIPALITIES
-4ec. 57A.
ee Ae% X ,
= RATES OF TAX WITHIN METRO MANILA -4ec.
57A.
- shall not exceed by $BD the maximum
rates prescribed in a,h of ec. 1#"
= FEES AND CHARGES -4ec. 57>.
&he municipality may impose and collect
such reasonable fees and charges on business
and occupation except professional taxes
reserved for provinces.
= FISHERY RENTALS? FEES AND CHARGES -4ec.
57=.
;unicipalities shall have the exclusive
authority to grant fishery privileges in the
municipal waters.
&he sanggunian mayC
3a4 @rant fishery privileges to erect fish corrals(
oysters( or other a6uatic beds or bangus fry
areas
1. 7uly registered organi)ations and
cooperatives of marginal fishermen shall
have preferential right.
2. &he sanggunian may re6uire a public
bidding pursuant to an ordinance for the
grant of privilege.
". the absence of such organi)ations and
cooperatives or their failure to exercise
their preferential right( other parties may
participate in the public bidding.
3b4 @rant the privilege to gather( ta*e or catch
bangus fry( prawn fry or fry of other species
and fish from the municipal waters by nets
or other fishing gears to marginal fishermen
free of rental or fee.
3c4 0ssue licences for the operation of fishing
vessels of three 3"4 tons or less.
= SIT3S OF THE TAX -4ec. 5@6.
Dor +ur+oses o" collection o" taxes under
4ection 57A -tax on business 4.
-B*$,) "* S$'e# Offi,e0 is a fixed place in a
locality which conducts operations of the
business as an extension of the principal office.
QP*i,i/$' Offi,eQ is the head or main office of
the business. &he city or municipality specifically
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%"
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
mentioned in the -rticles of 0ncorporation or
official registration papers as being the official
address of said principal office shall be
considered the situs thereof.
3a4 -ll sales made in a locality $%ere t%ere is a
branc% or sales o""ice or $are%ouseC
,, shall be recorded in said branch or sales office
or warehouse! and
,, the tax shall be payable to the city or
municipality where the same is located.
3b4 0n cases where t%ere is no suc% branc%,
sales o""ice or $are%ouse in t%e locality where
the sale is madeC
,,the sale shall be recorded in t%e +rinci+al o""ice
along with the sales made by said principal
office! and
,,the tax s%all accrue to t%e city or munici+ality
$%ere said +rinci+al o""ice is located.
SALES ALLOCATION
, shall apply to manufacturers( assemblers(
contractors( producers and exporters .i!)
f$,!"*ie#? /*"<e,! "ffi,e#? /'$!# $( /'$!$!i"# in
the pursuit of their business. 3;-+PE with
>PPP4
3a4 &hirty percent 3"BD4 of all sales recorded in
the principal office shall be taxable by the
city or municipality where the principal office
is located( and
eventy percent 3=BD4 of all sales
recorded in the principal office shall be
taxable by the city or municipality where the
factory( project office( plant or plantation is
located.
3b4 0n case of a /'$!$!i" '",$!e( $! $ /'$,e
"!)e* !)$ !)e /'$,e .)e*e !)e f$,!"*+ i#
'",$!e(( said seventy +ercent ->6L. s%all be
divided as followsC
i. %BD to the city or municipality where the
factory is located! and
ii. #BD to the city or municipality where the
plantation is located.
3c4 0n cases where a manufacturer( assembler(
producer( exporter or contractor )$# 2 "*
4"*e f$,!"*ie#? /*"<e,! "ffi,e#? /'$!# "*
/'$!$!i"# '",$!e( i (iffe*e! '",$'i!ie#? the
seventy percent 3=BD4 sales allocation shall
be /*"*$!e( among the localities where such
factories( project offices( plants and
plantations are located in /*"/"*!i" !" !)ei*
*e#/e,!i9e 9"'14e# "f /*"(1,!i" during the
period for which the tax is due.
&he foregoing sales allocation shall be
applied irrespective of whether or not sales are
made in the locality where the factory( project
office( plant or plantation is located.
2C5 CITIES
-4ec. 5@5.
&he city may levy the taxes( fees( and
charges which the province or municipality
may impose.
&he tax rates that the city may levy may
exceed the maximum rates allowed for the
province or municipality by not more than
$BD except the rates of professional and
amusement taxes.

2D5 BARANGAYS
-4ec. 5@9.
2arangays may levy the following taxes(
fees( and charges which shall accrue exclusively
to themC 9&a2G:
1. T$xes , Gn stores or retailers with fixed
business establishments with the gross
sales or receipts for the preceding calendar
year of P$B(BBB or less 3for barangays in the
cities4 and P"B(BBB or less 3for barangays in
municipalities4
R$!e Q not exceeding 1D of such gross
sales or receipts.
2. Service >ees or +harges , >or services
rendered in connection with the regulation or
the use of barangay,owned properties or
service facilities such as palay( copra or
tobacco dryers
". Barangay +learance , ?o city or municipality
may issue any license or permit fee for any
business or activity unless a clearance is
first obtained from the barangay where such
business or activity is located or conducted.
#. Other >ees and +harges , &he barangay
may levy reasonable fees and chargesC
3CRB4
a. Gn Commercial breeding of fighting
coc*s( coc*fights and coc*pits!
b. Gn places of Recreation which charge
admission fees! and
c. Gn Billboards( signboards( neon signs
and outdoor advertisements.
= COMMON RE8EN3E6RAISING POWERS OF
LG3S -4ec. 5@A to 5@@. 9P&:
a. Service fees and charges for services
rendered
b. Public Etility +harges for the operation of
public utilities owned( operated and
maintained by 1@Es within their
jurisdiction.
c. Toll fees or charges for the use of any
public road( pier or wharf( waterway(
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%#
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
bridge( ferry or telecommunication system
funded and constructed by the local
government unit concerned
EL+EP&0G?C
1.officers and enlisted men of the ->P and
P?P!
2.post office personnel delivering mail!
and
".physically handicapped and disabled
citi)ens who are sixty,five 3%$4 years
or older.
= COMM3NITY TAX -4ec. 5@C.
+ities or municipalities may levy a
community tax.
I. INDI8ID3ALS LIABLE : -4ec. 5@>.
a. every inhabitant of the Philippines!
b. eighteen 31A4 years of age or over!
c. under any of the following instancesC
1. who has been regularly employed on a
wage or salary basis for at least t%irty
-A6. consecutive $orEin days during
any calendar year! or
2. who is engaged in business or
occupation! or
". who owns real property with an
aggregate assessed value of P1(BBB or
more! or
#. who is re6uired by law to file an income
tax return
TAX RATE Q P$.BB and an annual additional tax
of P1.BB for every P1(BBB of income regardless
of whether from business( exercise of profession
or from property which in no case shall exceed
P$(BBB.
0n case of husband and wife( the
additional tax herein imposed shall be based
upon the total property owned by them and the
total gross receipts or earnings derived by them.
II. 73RIDICAL PERSONS : -4ec. 5@8.
Every corporation no matter how created or
organi)ed( whether domestic or resident foreign(
engaged in or doing business in the Philippines
shall pay an annual community tax.
TAX RATE Q P$BB and an annual additional tax
which in no case shall exceed P1B(BBB in
accordance with the following scheduleC
3a4 >or every #@,666 $ort% o" real +ro+erty
owned by it during the preceding year
based on the valuation used for the
payment of the real property tax , P2.00!
and
3b4 >or every #@,666 o" ross recei+ts or
earnins derived by it from its business in
the Philippines during the preceding year ,
P2.00.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%$
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
&he dividends received by a cor+oration
shall( for the purpose of the additional tax( be
considered as +art o" t%e ross recei+ts or
earnings of said corporation.
= THE FOLLOWING ARE EXEMPT FROM THE
COMM3NITY TAX: -4ec. 5@=.
314 7iplomatic and consular representatives!
and
324 &ransient visitors when their stay in the
Philippines does not exceed three 3"4
months.
PLACE OF PAYMENT: place of residence of the
individual( or in the place where the principal
office of the juridical entity is located.
TIME OF PAYMENT: accrue on the 1
st
day of
Nanuary of each year which shall be paid not
later than the last day of >ebruary of each
year.
PENALTIES FOR DELIN>3ENCY: an interest of
2#D per annum from the due date until it is
paid shal be added to the amount due.
- community tax certificate may also be
issued to any person or corporation not subject
to the community tax upon payment of P1.BB
-4ec. 5C9, LGC..
= PRESENTATION OF COMM3NITY TAX
CERTIFICATE ON CERTAIN OCCASIONS -4ec. 5CA.
I(i9i(1$'
1. 'hen an individual subject to the
community tax ac*nowledges any
document before a notary public!
2. ta*es the oath of office upon election or
appointment to any position in the
government service!
". receives any license( certificate or permit
from any public authority! pays any tax or
fee!
#. receives any money from any public fund!
$. transacts other official business! or
%. receives any salary or wage from any
person or corporation.
&he presentation of the community tax
certificate shall not be re6uired in connection
with the registration of a voter.
C"*/"*$!i"
1. receives any license( certificate or permit
from any public authority!
2. pays any tax or fee!
". receives money from public funds! or
#. transacts other official business.
= &he city of municipal treasurer deputi)es the
barangay treasurer to collect the community tax
in their respective jurisdictions. -4ec. 5C7, LCG.
= &he proceeds of the community tax actually
and directly collected by the city or municipal
treasurer shall accrue entirely to the general
fund of the city or municipality concerned
= Proceeds of the community tax collected
t%rou% t%e baranay treasurers shall be
$//"*!i"e( $# f"''".#C
- $BD accrues to the general fund of the city
or municipality concerned! and
- $BD accrues to the barangay where the tax
is collected.
= COLLECTION OF LOCAL TAXES
3a4 T$% Pe*i"( $( M$e* "f P$+4e! / -4ec.
5C@, LGC.
Enless otherwise provided( the tax
period shall be the calendar year.
uch taxes( fees( and charges may be
paid in 6uarterly installments.
3b4 A,,*1$' "f T$% 6 -4ec. 5CC, LGC.
Enless otherwise provided( shall accrue
on the first day of Nanuary of each year.
However( new taxes( fees or charges( or
changes in the rates thereof( shall accrue on
the "irst day o" t%e )uarter next "ollo$in the
effectivity of the ordinance imposing such
new levies or rates.
3c4 Ti4e "f P$+4e! / -4ec. 5C>, LGC.
Enless otherwise provided shall be paid
$it%in t%e "irst t$enty -96. days o" January
or of each subse6uent 6uarter as the case
may be.
;ay( for a justifiable reason or cause( be
extended without surcharges or penalties(
but only for a period not exceedin six -C.
mont%s.
3d4 S1*,)$*=e# $( Pe$'!ie# " 3/$i( T$%e#?
Fee# "* C)$*=e# / -4ec. 5C8, LGC.
urcharge not exceeding 2$D of the
amount of taxes( fees or charges including
surcharges( until such amount is fully paid.
2ut in no case shall the total interest on
the unpaid amount or portion thereof exceed
thirty,six 3"%4 months.
3e4 I!e*e#!# " O!)e* 3/$i( Re9e1e# , -4ec.
5C=, LGC.
-n interest thereon at the rate not
exceeding 2D per month from the date it is
due until it is paid( but in no case shall the
total interest on the unpaid amount or
portion thereof exceed thirty,six 3"%4
months.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%%
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= COLLECTION OF LOCAL RE8EN3ES BY THE
TREAS3RER / -4ec. 5C8, LGC.
-ll local taxes( fees and charges shall be
collected by the provincial( city( municipal or
barangay treasurer( or their duly authori)ed
deputies.
&he provincial( city or municipal treasurer
may designate the barangay treasurer or his
deputy to collect local taxes( fees or charges.
0n case a bond is re6uired for the purpose(
the provincial( city or municipal government shall
pay the premiums thereon in addition to the
premiums of the bond that may be re6uired
under the +ode 3ec. 1=B( 1@+4.
' TAX REMEDIES
3NDER THE LOCAL GO8ERNMENT
CODE 2LGC5
,. *A+ REMED,ES (4 *HE .(CA.
&(5ER-ME-* /-,*S
= CI8IL REMEDIES OF THE LOCAL GO8ERNMENT
3NITS 2LG35 TO EFFECT COLLECTION OF TAXES
1. &ax 1ien -4ec. 5>A, LGC. / superior to all
liens( charges or encumbrances
2. 7istraint 3ec. 1=$( 1@+4
". 1evy 3ec. 1=%( 1@+4
#. +ivil -ction 3ec. 1A"( 1@+4
$. Purchase of property by 1@Es for want of
bidder 3ec. 1A1( 1@+4! Property distrained
not disposed within 12B days from date of
distraint / considered sold to the 1@E
concerned for the amount of the assessment
made thereon( the tax delin6uencies shall
be cancelled 3ec. 1=$( 1@+4.
= 73RISDICTION OF CO3RTS O8ER LOCAL
TAXATION CASES
1. &he +ourt of &ax -ppeals has no jurisdiction
over local taxation cases.
2. Regular judicial courts are not prohibited
from enjoining the collection of local taxes(
subject to Rule $A 3Preliminary 0njunction4 of
the Rules of +ourt.
' PRESCRIPTI8E PERIODS IN THE
ASSESSMENT AND COLLECTION OF
LOCAL TAXES
= PRESCRIPTI8E PERIODS OF ASSESSMENT
?. 1ocal taxes( fees( or charges / FI8E 2D5
YEARS from the date they became due.
-4ec. 5=7, LGC..
8. 'hen there is fraud or intent to evade
the payment of taxes( fees or charges /
TEN 2C05 YEARS "rom discovery of the
fraud or intent to evade the payment
-4ec. 5=7, LGC..
= PRESCRIPTI8E PERIOD OF COLLECTION
1ocal taxes( fees( or charges may be
collected WITHIN FI8E 2D5 YEARS from the date
of assessment by administrative or judicial
action. ?o such action shall be instituted after
the expiration of such period -4ec. 5=7, LGC..
= GRO3NDS FOR THE S3SPENSION OF THE
R3NNING OF THE PRESCRIPTI8E PERIODS
1. &he treasurer is legally prevented from the
assessment or collection of the tax!
2. &he taxpayer re6uests for a reinvestigation
and executes a waiver in writing before the
expiration of the period within which to
assess or collect! and
". &he taxpayer is out of the country or
otherwise cannot be located 3ec. 18#(
1@+4.
,,. *A+ REMED,ES (4 *HE
*A+PALER
= REMEDIES OF THE TAXPAYER IN LOCAL
TAXATION
= ADMINISTRATI8E
-. 2efore assessment
1. A//e$' / any 6uestion on
constitutionality or legality of tax ordinance
within "B days from effectivity thereof to
ecretary of Nustice -4ec. 58> LGC.
2. De,'$*$!"*+ *e'ief whenever
applicable.
2. -fter assessment
1. P*"!e#! / within %B days from receipt of
assessment -4ec. 5=@ LGC.. Payment
under protest not necessary
2. P$+4e! N #1&#e;1e! *ef1( "* !$%
,*e(i! / within 2 years from payment of tax
to local treasurer -4ec. 5=C LGC.. 0t is to
be noted that( unli*e in internal revenue
taxes( the #1/e*9ei= ,$1#e $//'ie# in
local taxation because the period for the
filing of claims for refund or credit of local
taxes is counted not necessarily from the
date of payment but from the date the
taxpayer is entitled to a refund or credit.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%=
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
". Ri=)! "f *e(e4/!i" / 1 year from the
date of sale or from the date of forfeiture
-4ec. 585, LGC..
00. 73DICIAL
A. C"1*! $,!i" / within "B days after receipt
of decision or lapse of %B days of
ecretary of Nustice5s inaction -4ec. 58>
LGC.
, within "B days from receipt when
protest of assessment is denied -4ec.
5=@ LGC.
, if no action is ta*en by the treasurer
in refund cases and the two year period
is about to lapse -4ec. 5=@ LGC.
, if remedies available does not provide
plain( speedy and ade6uate remedy.
2. A,!i" f"* (e,'$*$!"*+ *e'ief
C. I<1,!i" / if irreparable damage would
be caused to the taxpayer and no
ade6uate remedy is available.
I8. REAL PROPERTY
TAXATION
= Defii!i"#
1. Re$' P*"/e*!+ T$%$!i" - direct tax on
ownership of lands and buildings or other
improvements thereon payable regardless of
whether the property is used or not(
although the value may vary in accordance
with such factor.
Ender the 1@+( it covers the
administration( appraisal( assessment( levy
and collection of Real Property &ax( i.e. tax
on land and building and other structures
and improvements on it( including
machineries.
2. Re$' /*"/e*!+ / subject to the definition
given by Art. 75@ o" t%e Civil Code.
". I4/*"9e4e! / valuable addition made to a
property or an amelioration in its condition
amounting to more than a mere replacement
of parts.
= CHARACTERISTICS OF REAL PROPERTY TAX
97-P01:
1. Direct tax on the Gwnership of real
property
2. Ad valorem tax. &he value is based on
the tax base.
". Proportionate / the tax is calculated on
the basis of a certain percentage of the
value assessed.
#. Indivisible single obligation
$. Local tax
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%A
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= TAXING A3THORITIES
LG3 R$!e "f B$#i, Re$'
P*"/e*!+ T$%
1. Province not Y 1D of assessed
value
2. +ity not Y 2D
". ;unicipality
within ;etro
;anila
not Y 2D.
= F3NDAMENTAL PRINCIPLES GO8ERNING REAL
PROPERTY TAXATION 3FE363P4 -4ec. 5C@, LGC.
1. Real property shall be appraised at its
current and Fair mar*et value!
2. Real property shall be classified for
assessment purposes on the basis of actual
3se.
". Real property shall be assessed on the
basis of 3niform classification within each
1@E
#. &he appraisal( assessment( levy and
collection of RP &ax shall not be let to any
Private person
$. &he appraisal and assessment of real
property shall be E6uitable.
= EXTENT OF THE POWER TO LE8Y 92E / 0:
1. Basic real property tax!
1. 1D additional real estate tax to finance
the pecial Education >und! -4ec. 9AC.
2. $D additional ad valorem tax on Idle
lands! -4ec. 9AC, LGC. and
3. Special levy or special assessments
3may be imposed even by municipalities
outside ;etro ;anila4 on lands
comprised within its territorial jurisdiction
s+ecially bene"ited by public wor*s(
projects or improvements funded by the
local government unit concerned -4ec.
976, LGC..
= FOR P3RPOSES OF REAL PROPERTY TAXATION
IDLE LANDS SHALL INCL3DE: 34ec. 9A>, LGC.
14 -gricultural lands 4"*e !)$ "e )e,!$*e in
area "e6)$'f "f .)i,) *e4$i 1,1'!i9$!e( or
unimproved by the owner of the property or
person having legal interest therein.
-gricultural lands planted to permanent
or perennial crops with at least $B trees to a
hectare shall not be considered idle lands.
1ands actually used for gra)ing
purposes shall li*ewise not be considered
idle lands! and
24 1ands ot%er t%an aricultural located in a
city or municipality 4"*e !)$ "e !)"1#$(
#;1$*e 4e!e*# in area "e6)$'f "f .)i,)
*e4$i 11!i'iMe( "* 1i4/*"9e( by the
owner of the property or person having legal
interest therein.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
%8
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= CLASSIFICATION OF LANDS for purposes of
assessment 4ec. 958 - a. 9+-R;0&:
1. Commercial
2. Agricultural
". Residential
#. Mineral
$. Industrial
%. Timberland
=. Special
= SPECIAL CLASSES OF REAL PROPERTY -42C.
95C, LGC. 9H+ / 1@:
1. Hospitals
2. Cultural and Scientific purposes
". owned by Local water districts
#. GG++s rendering essential public services
in the supply and distribution of water andJor
generation or transmission of electric power.
= PROPERTIES EXEMPT FROM REAL PROPERTY
TAX 2Sec. ?E< .&C5
1. Real property owned by the government
except when the beneficial use thereof has
been granted to a taxable person!
2. +haritable institutions( churches(
personages or convents appurtenant
thereto( mos6ues( non,profit or religious
cemeteries and all lands( buildings and
improvements actually( directly and
exclusively used for religious( charitable or
educational purposes -Art. (&, 4ec. 98,
Constitution.:
". ;achineries and e6uipment that are actually(
directly and exclusively used by local water
utilities and @G++5s engaged in the supply
and distribution of water andJor electric
power!
#. Real property owned by duly registered
cooperatives as provided for in R- %8"A!
and
$. ;achinery and e6uipment used for pollution
control and environmental protection.
= ACT3AL 3SE OF PROPERTY AS BASIS FOR
ASSESSMENT 2Sec. 8?G .&C5
Real property shall be classified( valued
and assessed on the basis of actual use
reardless o" $%ere located, $%oever o$ns it,
and $%oever uses it.
&EP 1C DECLARATION OF REAL PROPERTY
1. De,'$*$!i" &+ O.e* "* A(4ii#!*$!"* -4ec.
969G96A.
Dor ne$ly ac)uired +ro+erty /
3a4 ;ust file with the assessor within %B
days from date of transfers a
3b4 worn statement containing the fair
mar*et value and description of the
property.
Dor im+rovement on +ro+erty
a4 ;ust file within %B days upon
completion or occupation 3whichever
comes earlier4 a
b4 worn statement containing the fair
mar*et value and description of the
property.
2. De,'$*$!i" &+ P*"9i,i$'BCi!+BM1i,i/$'
A##e##"* -4ec. 967.
WHEN: Gnly when the person under ec.
2B2 re"uses or "ails to ma*e a declaration
within the prescribed time.
?o oath by the assessor is
re6uired.
N"!e#C PROOF OF EXEMPTION OF REAL
PROPERTY FROM TAXATION , -4ec. 96C.
WHO: 2y any person or for whom real
property is declared.
+laim for exemption must be filed
with the assessor together with sufficient
documentary evidence to support claim
WHEN: within "B days from the date of
declaration of property.
N"!e#C IF PROPERTY DECLARED FOR THE
FIRST TIME , -4ec. 999.
0f 7eclared for the first time( real property
shall be assessed for bac* taxesC
a4 >or "! 4"*e !)$ C0 +e$*# prior to date of
initial assessment
b4 &axes shall be computed on the basis of
applicable schedule of values in force
during the corresponding period.
&EP 2C LISTING OF REAL PROPERTY IN THE
ASSESSMENT ROLLS -42C. 96@, 96>.
-ll declarations shall be *ept and filed under a
uniform classification system to be established
by the provincial( city or municipal assessor.
&EP "C APPRAISAL AND 8AL3ATION OF REAL
PROPERTY -42C4. 959G957, 997G99@.
DETERMINATION OF FAIR MAR:ET 8AL3E 2FM85
FOR LAND
5. -ssessor of the provinceJcity or
municipality may summon the owners of
the properties to be affected and may taEe
de+ositions concerning the property( its
ownership( amount( nature and value -4ec.
95A, LGC.
9. -ssessor prepares a schedule of >;I for
different classes of properties.
A. anggunian enacts an ordinance
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
=B
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
7. &he schedule of >;I is published in a
newspaper of general circulation in the
province( city or municipality concerned or
in the absence thereof( shall be posted in
the provincial capitol( city or municipal hall
and in two other conspicuous public
places therein -4ec. 959, LGC.
FOR MACHINERY
1. >or 2rand new machineryC >;I is the
ac6uisition cost
2. 0n all other casesC >;I
Q Remaining eco. life L Replacement +ost
Estimated eco. life
&EP #C DETERMINE ASSESSED 8AL3E
-42C. 958.
DETERMINE ASSESSED 8AL3E
PROCED3RE
1. &a*e the schedule of >;I
2. A##e##e( 8$'1e Q >;I x -ssessment level
". &ax Q -ssessed value x &ax rate
&EP $C PAYMENT AND COLLECTION OF TAX
WHEN: Nanuary of every year and such will
constitute as a superior lien. -4ec. 97C.
HOW:
a4 basic real property tax in # e6ual
installments 3;arch "1( Nune "B(
eptember "B( 7ecember "B4
b4 special levy / governed by ordinance
N"!e#C INTEREST FOR LATE PAYMENT
- two percent 22L5 f"* e$,) 4"!) on unpaid
amount until the delin6uent amount is paid
- provided in no case shall the total interest
exceed thirty,six 3"%4 months.
N"!e#C FOR AD8ANCE AND PROMPT PAYMENT
3a4 -dvance payment / discount not
exceeding 2BD of annual tax -4ec. 9@5,
LCG.
3b4 Prompt payment / discount not
exceeding 1BD of annual tax due 3-rt
"#2 0RR4
WHO COLLECTS: The provincial( city( municipal
or barangay treasurer.
PERIOD TO COLLECT: -4ec. 9>6.
- within five 3$4 years from the date they
become due
- within ten 31B4 years from discovery of fraud(
in case there is fraud or intent to evade
S3SPENSION OF PRESCRIPTI8E PERIOD: -4ec. 9>6.
1. local treasurer is 'e=$''+ /*e9e!e( to collect
tax.
2. the owner or property re6uests for
*ei9e#!i=$!i" and .*i!e# $ .$i9e* before
expiration of period to collect
". the owner of property is "1! "f !)e ,"1!*+ or
,$"! &e '",$!e(.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
=1
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
REAL PROPERTY TAX REMEDIES
,. *A+ REMED,ES (4 *HE .(CA.
&(5ER-ME-* *( E44EC*
C(..EC*,(- (4 *A+ES
0. ADMINISTRATI8E
5.Real Property tax lien -4ecs. 97C and 9@5,
LGC. / superior to all liens( charges or
encumbrances!
9.7istraint -4ec. 9@7;B<, LGC.:
A.1evy -4ec. 9@7;A<, LGC.:
7.Purchase of property by local treasurer for
want of bidder -4ec. 9CA, LGC..
00. 73DICIAL
1. +ivil -ction / filed by the local treasurer
within $ years from( due date. >ormal
demand not re6uired -4ec. 9CC, LGC.:
= -PROPERTY DISCO8ERED FOR THE FIRST TIME0
Property that for so many years had not
been declared and when discovered owner must
pay bac* taxes plus incremental penalties.
-ssessed taxes shall cover not more than ten
31B4 years prior to the date of the initial
assessment.
' PRESCRIPTI8E PERIODS IN THE
COLLECTION OF REAL
PROPERTY TAXES
1. 2asic real property tax and any other tax
levied under the title on Real Property
&axation/ >0IE 3$4 FE-R from the date
they became due. -4ec. 9>6, LGC..
<. 'hen there is fraud or intent to evade
the payment of taxes / &E? 31B4
FE-R from discovery of the fraud or
intent to evade the payment -4ec. 9>6,
LGC..
= GRO3NDS FOR THE S3SPENSION OF THE
R3NNING OF THE PRESCRIPTI8E PERIODS
1. &he treasurer is legally prevented from the
assessment or collection of the tax!
2. &he taxpayer re6uests for a reinvestigation
and executes a waiver in writing before the
expiration of the period within which to
assess or collect! and
". &he taxpayer is out of the country or
otherwise cannot be located 3ec. 2=B(
1@+4.
,,. *A+ REMED,ES (4 *HE *A+PALER
00. ADMINISTRATI8E
A. P*"!e#! payment under protest is
re6uired within "B days to provincial( city(
or municipal treasurer. NO
PROTEST SHALL BE ENTERTAINED 3NLESS
THE TAX IS FIRST PAID. -4ec. 9@9 LGC.
B. Ref1( "* !$% ,*e(i! / within 2 years from
the date the tax payer is entitled
thereto -4ec. 9@A LGC.
C. Re(e4/!i" "f *e$' /*"/e*!+ -4ec. 9C5
LGC.
APPEALS IN REAL PROPERTY TAXATION
within %B days
GwnerJPerson with legal interest
must fileC
1. 'ritten Petition under Gath
2. 'ith upporting 7ocuments
within "B days

within 1$ days
within 1$ days
D. A//e$' / within %B days from assessment
of provincial( city or municipal assessor to
12-- -4ec. 99C LGC.
- within "B days from receipt of decision
of 12-- to +2-- -4ec. 9A6 LGC.
- in case of denial of refund or credit(
appeal to 2-- as in protest case -4ec.
9@A LGC.
00. 73DICIAL
A. C"1*! A,!i" / appeal of +2--5s decision
to upreme +ourt by certiorari.
B. S1i! $##$i'i= 9$'i(i!+ "f !$%R *e,"9e*+ "f
*ef1( "f !$%e# /$i( -4ec. C7 #D 7C7..
PRO8INCIAL? CITY OR M3NICIPAL ASSESSOR
LOCAL BOARD OF ASSESSMENT APPEALS
312-- should decide within 12B days from
receipt of petition4
CENTRAL BOARD OF ASSESSMENT APPEALS
CO3RT OF APPEALS
S3PREME CO3RT
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
=2
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
C. S1i! !" (e,'$*e i9$'i(i!+ "f !$% (1e !"
i**e=1'$*i!+ i $##e##4e! $(
,"''e,!i" -4ec. C7 #D 7C7..
D. S1i! $##$i'i= !)e 9$'i(i!+ "f !$% #$'e
-4ec. 8A #D 7C7.
= C"("$!i" "f Re$' P*"/e*!+ T$%e#
a. Real property taxes may be condoned
wholly or partially in a given local
government unit when
i. &here is general failure of crops!
ii. &here is substantial decrease in the
price of agricultural or agri,based
products! or
iii. &here is calamity.
b. 2y the President of the Philippines when
public interest so re6uires.
8. TARIFF AND
C3STOMS CODE
= Defii!i"#
1. T$*iff: +ustoms duties( toll or tribute
payable upon merchandise to the @ov5t.
2. C1#!"4 D1!ie#: &ax assessed upon
merchandise from or exported to( a
foreign country. -Garcia v. 2xecutive
4ec., 955 4CRA 99> ;5==9<.

N.B.3 Customs and tari""s are synonymous $it%
one anot%er. '%ey bot% re"er to t%e taxes
im+osed on im+orted or ex+orted $ares,
articles, or merc%andise.
= Me$i= $( S,"/e "f !)e T$*iff $(
C1#!"4# L$.#
0nclude not only the provisions of the
&ariff and +ustoms +ode 3&++4 and regulations
pursuant thereto( but all other laws and
regulations which are subject to the 2ureau of
+ustoms 32G+4 or otherwise within its
jurisdiction.
-s to its scope( therefore( tariff and
customs laws extend not only to the provisions
of the &++ but to all other laws as well( the
enforcement of which is entrusted to the 2G+.
' THE B3REA3 OF C3STOMS 2BOC5
= F3NCTIONS OF THE B3REA3 OF C3STOMS 2:e+:
-+E
2

"
5
a. Assessment and collection of revenues
from imported articles and all other
impositions under the tariff and customs
laws!
b. Control smuggling and related frauds!
c. Supervision and control over the
entrance and clearance of vessels and
aircraft engaged in foreign commerce!
d. Enforcement of &++ and related laws!
e. Supervision and control over the
handling of foreign mails arriving in the
Philippines!
f. Supervise and control all import and
export cargoes for the protection of
government revenue!
g. Exclusive original jurisdiction over
sei)ure and forfeiture cases under the
tariff and customs laws.
= 73RISDICTION OF COLLECTOR OF C3STOMS
O8ER 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(
". -ssess and collect the duties( taxes and
other charges thereon( and
4. Hold possession of all imported articles
until the duties( taxes and other charges
are paid thereon. -4ec. 596C, 'CC.

= TERRITORIAL 73RISDICTION OF THE BOC
1. -ll seas within the jurisdiction of the
Philippines
2. -ll coasts( ports( airports( harbors( bays(
rivers and inland waters whether
navigable or not from the sea. -5
st
+ar,
4ec. C6A, 'CC.

= WHEN TARIFF AND C3STOMS APPLIED
Gnly after importation has begun but
before importation is terminated.
&m+ortation beins3
a. when the conveying vessel or aircraft
b. enters the jurisdiction of the Phil.
c. with intention to unload therein
&m+ortation is deemed terminated3
a. 3i4 upon payment of the duties( taxes
and other charges due upon the
articles.
3ii4 and legal permit for withdrawal
shall have been granted.
b. 0n case the articles are free of
duties( taxes and other charges(
until they have legally left the
jurisdiction of the customs -4ec.
5969, 'CC.
= ARTICLES 3NDER TCC
/ay eit%er be3
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
="
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
1. S1&<e,! !" (1!+ /
a. 1ive animals and animal products!
b. Iegetable products!
c. -nimal or vegetable fats! oils and their
cleavage products! prepared edible
fats! animal or vegetable waxes!
d. Prepared foodstuffs! beverages(
spirits and vinegar! tobacco and
manufactured tobacco substitutes!
e. ;ineral products!
f. Products of chemical or allied
industries!
g. Plastics and articles thereof! rubber
and articles thereof!
h. Raw hides and s*ins! leather( etc.!
i. 'ood and articles of wood( etc.!
j. Pulp of wood( etc.!
*. &extiles and textile articles!
l. -rticles of stone! plaster( cement( etc.!
m. >ootwear( headgear( etc.!
n. ?atural or cultured pearls
preciousJsemi,precious stones!
o. 2ase metals and articles of base
metals!
p. ;achinery and mechanical
appliances! electric e6uipment! sound
recorders( etc.!
6. Iehicles( aircraft( vessels and
associated transport e6uipment!
r. Gptical( photographic( medical(
surgical instruments( etc.!
s. -rms( ammunition( parts and
accessories!
t. ;iscellaneous manufactured articles!
and
u. 'or*s of art( collector.s pieces arid
anti6ues -4ec. 567, 'itle 5, 'CC..
2. P*")i&i!e( f*"4 &ei= i4/"*!e(
3Prohibited importation4
a. -bsolutely prohibited such asC
weapons of war! gambling devices!
narcotics or prohibited drugs!
immoral( obscene or insidious articles!
and those prohibited under special
laws -4ec.569, 'CC..
b. Zualifiedly prohibited
". C"(i!i"$''+6f*ee f*"4 !$*iff $(
,1#!"4# (1!ie# 3conditionally,free
importation4
a. &hose provided in ec. 1B$( &++!
b. &hose granted to government
agencies( @G++s with agreements
with foreign countries!
c. &hose given to international
institutions entitled to exemption by
agreement or special laws! and
d. &hose that may be granted by the
President upon ?E7-5s
recommendation.
#. F*ee f*"4 TC (1!ie# 3duty,free4
0mported 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 -4ee 4ec. 565,
'CC..
-ll articles when imported from any
country into the Philippines shall be subject to
duty upon each importation( even though
previously exported from the Philippines( except
as otherwise specifically provided for in the &++
or other laws.
= LIABILITY FOR C3STOMS D3TIES
E General Rule3 -ll importations J exportations
of goods are subject to customs duties -4ec.
56@, 'CC..
E 2xce+tions3
a. Exemptions under the &++!
b. Exemptions granted to gov5t agencies(
instrumentalities or @G++s with existing
contracts( commitments( agreements( or
obligations with foreign countries!
c. Exemptions of international
organi)ations pursuant to agreements or
special laws! and
d. Exemptions granted by the Pres. of the
Phil. upon recommendation of ?E7-
-4ec. 56@, 'CC..

= LIABILITY OF IMPORTER FOR C3STOM D3TIES
a. - /e*#"$' (e&! which can be
discharged only by payment in full
thereof!
b. - 'ie upon the imported articles while
they are in custody or subject to the
control of the gov5t -4ec. 5967, 'CC..

= DRAWBAC:
- device resorted to for enabling a
commodity affected by taxes to be exported and
sold in foreign mar*ets upon the same terms as
if it had not been taxed at all -My C%iaco 4ons
vs. Collector o" Customs, 97 #%il @C9.
= IMPORT ENTRY
0t is a declaration to the 2G+ showing
particulars of the imported article that will enable
the customs authorities to determine the correct
duties. -n importer is re6uired to file an import
entry. 0t must be accomplished from
disembar*ing of last cargo from vessel.
= TRANSACTION 8AL3E 3NDER RA JCJC
0t is the invoice value of the goods plus freight(
insurance( costs( expenses and other necessary
expenses. &his replaces the Home +onsumption
Ialue as basis of valuation of goods.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
=#
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= CLASSIFICATION OF C3STOM D3TIES
A. Re=1'$* D1!ie# those which are imposed
and collected merely as a source of revenue.
1. A( 9$'"*e4 (1!+: &his is a duty based
on the value of the imported article.
2. S/e,ifi, (1!+: &his is a duty based on
the dutiable weight of goods 3either the
gross weight( legal weight( or net
weight4.
". A'!e*$!i= (1!ie#: &his is a duty which
alternates ad valorem and specific.
#. C"4/"1( D1!+: &his is a duty
consisting of ad valorem and specific
duties.

B. S/e,i$' (1!ie# / those which are imposed
and collected in addition to the ordinary customs
duties usually to protect local industries against
foreign competition.
a. 7umping duty
b. +ountervailing duty
c. ;ar*ing duty
d. 7iscriminatory duty

= NAT3RE OF SPECIAL C3STOMS D3TIES
pecial customs duties are additional import
duties imposed on specific *inds of imported
articles under certain conditions.
= P3RPOSE OF SPECIAL C3STOMS D3TIES
&he special customs duties are imposed for the
protection of consumers and manufacturers( as
well as Phil. products from undue competition
posed by foreign,made products.

= SPEC,A. D/*,ES C(MPARED
D3MPING D3TY CO3NTER8AILING D3TY MAR:ING D3TY
DISCRIMINATORY
D3TY
-ature
0mposed upon foreign
products with value lower than
their fair mar*et value to the
detriment of local products.
0mposed upon foreign
goods enjoying subsidy
thus allowing them to sell
at lower prices to the
detriment of local products
similarly situated.
0mposed upon
those not properly
mar*ed as to
place of origin of
the goods.
0mposed upon
goods coming from
countries that
discriminate against
Philippine products.
A'ountMRate
7ifference between the actual
price and the normal value of
the article.
E6uivalent to the
bounty( subsidy( or
subvention.
$D ad
valorem of articles
-ny amount not
exceeding 1BBD ad
valorem of the
subject articles
,'posing Authorit6
pecial +ommittee on -nti,
7umping 3composed of the
ec. of >inance as +hairman!
;embersC the ec. of 7&0! and
either the ec. of -griculture if
article in 6uestion is agri.
product or the ec. of 1abor if
non,agri.4
ec. of >inance +ommissioner
of +ustoms
President of the
Philippines
= FLEXIBLE TARIFF CLA3SE
&he President may fix tariff rates( import and
export 6uotas( etc. under &++ -4ee 4ec. 98, Art.
(&, Constitution and 4ec. 765, 'CC.
a. to increase( reduce or remove existing
protective rates of import duty 3including any
necessary change in classification4.
&he existing rates may be increased or
decreased to any level( on one or several
stages but in no case shall the increased
rate of import duty be higher than a
maximum of one hundred 31BBD4 per cent
ad valorem
b. to establish import 6uota or to ban imports of
any commodity( as may be necessary! and
c. to impose an additional duty on all imports
not exceeding ten 31BD4 per cent ad
valorem whenever necessaryC
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
=$
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= LIMITATIONS IMPOSED REGARDING THE FLEXIBLE
TARIFF CLA3SE C
i. +onduct by the &ariff +ommission of an
investigation in a +ublic %earin.
&he +ommission shall also hear the
views and recommendations of any
government office( agency or instrumentality
concerned.
&he +ommission shall submit their
findings and recommendations to the ?E7-
within thirty 3"B4 days after the termination of
the public hearings.
&he ?E7- thereafter submits its
recommendation to the President.
ii. &he power of the President to increase or
decrease the rates of import duty within the
abovementioned limits fixed in the +ode
s%all include t%e modi"ication in t%e "orm o"
duty.
0n such a case the corresponding ad
valorem or specific e6uivalents of the duty
with respect to the imports from the principal
competing foreign country for the most
recent representative period shall be used
as bases 3ec. #B1( &++4.
' THE TARIFF COMMISSION 2TC5
= F1,!i"# "f !)e T$*iff C"44i#i":
&he +ommission shall investigate /
1. the administration of and the fiscal and
industrial effects of the tariff and customs
laws of this country now in force or which
may hereafter be enacted!
2. the relations between the rates of duty on
raw materials and the finished or partly
finished products!
". the effects of ad valorem and specific duties
and of compound specific and ad valorem
duties!
#. all 6uestions relative to the arrangement of
schedules and classification of articles in the
several schedules of the tariff law!
$. the tariff relations between the Philippines
and "orein countries( commercial treaties(
preferential provisions( economic alliances(
the effect of export bounties and preferential
transportation rates!
%. the volume of importations( compared with
domestic production and consumption!
=. conditions( causes( and effects relating to
competition of foreign industries with those
of the Philippines( including dumping and
cost of production! and
A. in general( to investigate the operation of
customs and tariff laws( including their
relation to the national revenues( their effect
upon the industries and labor of the country
and to submit reports of its investigation as
provided.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
=%
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
' TAX REMEDIES
3NDER THE TARIFF AND C3STOMS
CODE 2TCC5
= REMEDIES OF THE GO8ERNMENT TO EFFECT
COLLECTION OF TAXES
1. &ax 1ien -4ec. 5967 'CC.
2. Reduction of customs
dutiesJcompromise / subject to
approval of ec. of >inance -4ec.
>6=, 9A5C 'CC.
". +ivil -ction -4ec. 5967 'CC.
#. +riminal -ction
$. ei)ure( earch( -rrest -4ec. 996@,
9956, 9955 'C+4J forfeiture -4ec.
9@A6 'CC.
= REMEDIES OF THE TAXPAYER
0. ADMINISTRATI8E
A. P*"!e#!
a. -ny importer or interested party
if dissatisfied with published value
within 1$ days from date of
publication( or within $ days from the
date the importer is entitled to
refund if payment is rendered
erroneous or illegal by events
occurring after the payment.
b. &axpayer / within 1$ days from
assessment. Payment under
protest is necessary -4ec. 9A68,
9956 'CC.
B. Ref1( /
a. - written claim for refund may
be submitted by the importer in
abatement cases on missing
pac*ages( deficiencies in the
contents of pac*ages or shortages
before arrival of the goods in the
Philippines( articles lost or destroyed
after such arrival( dead or injured
animals( and for manifest clerical
errors! and
b. 7rawbac* cases where the
goods are re,exported -4ec. 5>65G
5>68 'CC..
C. Se!!'e4e! "f $+ #eiM1*e &+
/$+4e! "f fie "* *e(e4/!i" / 2E&
this shall not be allowed in any case
where importation is absolutely
prohibited( or the release would be
contrary to law( or when there is an
actual and intentional fraud -4ec. 9A6>
'CC..
D. A//e$' / within 1$ days to
+ommissioner after notification by
collector of his decision -4ec. 9A5A
'CC..
00. 73DICIAL
-. A//e$' / within "B days from receipt of
decision of the +ommissioner or
ecretary of >inance to the +&- -4ec.
976A 'CC, 4ec. > RA 559@.
2. A,!i" !" ;1e#!i" !)e 'e=$'i!+ "f
#eiM1*e
+. A&$("4e! -4ec. 5865 'CC.
= TWO :INDS OF PROCEEDINGS IN THE B3REA3 OF
C3STOMS 2BOC5
1. C1#!"4# /*"!e#! ,$#e#
2. C1#!"4# #eiM1*e $( f"*fei!1*e ,$#e#
A. C3STOMS PROTEST CASES
= Defii!i": &hese are cases which deal solely
with liability for customs duties( fees( and other
charges.
= WHEN C3STOMS PROTEST APPLICABLE
&he customs protest is re6uired 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.
= WHEN C3STOMS PROTEST NOT RE>3IRED
'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 utili)ed in the production of
finished products subse6uently exported and a
duty drawbac* is claimed.
= RE>3IREMENTS FOR MA:ING A PROTEST
a. must be i .*i!i=
b. must point out the particular (e,i#i" "*
*1'i= "f !)e C"''e,!"* "f C1#!"4# to
which exception is ta*en or objection
made!
c. must state the =*"1(# relied upon for
relief!
d. must be 'i4i!e( to the subject matter of
a #i='e $(<1#!4e!!
e. must be fi'e( when the amount claimed
is paid or .i!)i CD ($+# after the
payment!
f. protestant must f1*i#) #$4/'e# "f
=""(# under protest when re6uired.
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
==
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
= PROCED3RE ON C3STOMS PROTEST CASES
&he +ollector acting within his jurisdiction shall
cause the imported goods to be entered at the
customhouse
-
&he +ollector shall assess( li6uidate( and collect
the duties thereon( or detain the said goods if
the party liable does not pay the same
-
&he party adversely affected 3the protestant4
may file a written protest on his foregoing liability
with the +ollector within 1$ days after paying the
li6uidated amount 3the payment under protest
rule applies4
-
Hearing within 1$ days from receipt of the duly
presented protest. Epon termination of the
hearing( the +ollector shall decide on the same
within "B days
u ^
0f decision is adverse
to the protestant
0f decision is adverse
to the government
- -
-ppeal with the
+ommissioner within
1$ days from notice
-utomatic Review by
the +ommissioner
-
-
-ppeal with the +ourt
of &ax -ppeals within
"B days from notice
-utomatic review by
the ecretary of
>inance
-
-
-ppeal with the +ourt
of -ppeals within 1$
days from notice
-
-ppeal by certiorari
with the upreme
+ourt within 1$ days
from notice
0f decision of
+ommissioner or
ecretary of >inance is
adverse to the
protestant( he may
appeal to the +&-( +-
and + under the
same procedure on
the left.

= REASONS FOR THE A3TOMATIC RE8IEW OF
DECISIONS AD8ERSE TO THE GO8ERNMENT
1. &o protect the interest of the @overnment
2. - favorable decision will not be appealed by
the taxpayer and certainly a +ollector will
not appeal his own decision.
". 1ifeblood &heory
B. SEIZ3RE AND FORFEIT3RE CASES
= Defii!i": &hese refer to matters involving
smuggling. 0t 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.
= SM3GGLING
-. -n act of any person who shallC
1 1. >raudulently import any article contrary to
2 law( or
3 2. -ssist in so doing( or
4 ". Receive( conceal( buy( sell( facilitate(
5 transport( conceal or sell such article
6 *nowing its illegal importation -4ec. AC65,
7 'CC.
#. Export contrary to law. -4ec. A@57, 'CC.
2. &he Philippines is divided into various ports
of entry / entry other than port of entry( will
be ;E@@10?@.
= CONTRABAND: -rticles of prohibited
importations or exportations. -4ec. A@57, 'CC.
= E8IDENCE FOR CON8ICTION IN SM3GGLING
CASES
;ere possession of the article in 6uestion ,
E?1E defendant could explain that his
possession is lawful to the satisfaction of the
court -4ec. AC65, 'CC.. Payment of the tax due
after apprehension is not a valid defense
-Rodriuez v. CA, 978 4CRA 988.
= THINGS S3B7ECT TO CONFISCATION IN
SM3GGLING CASES
-nything that was used for smuggling is
subject to confiscation( li*e the vessel( plane(
etc. -Llamado vs. Comm. o" Customs, 5=8A..
E 2xce+tion3 +ommon carriers that are not
privately chartered cannot be confiscated.
= RIGHT OF C3STOMS OFFICERS TO EFFECT
SEIZ3RE N ARREST
a. ;ay sei)e any vessel( aircraft( cargo(
article( animal or other movable property
when the same is subject to forfeiture or
liable for any time as imposed under
tariff and customs laws( rules X
regulations
b. ;ay exercise such powers only in
conformity with the laws and provisions
of the &++ -4ec. 996@.
= COMMON CARRIERSR FORFEIT3RE
+ommon carriers are generally not subject
to forfeiture although if the owner has
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
=A
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
*nowledge of its use in smuggling and was a
consenting party( it may also be forfeited.
0f a motor vehicle is hired to carry smuggled
goods but it has no +ertificate of Public
+onvenience 3+P+4( it is not a common
carrier. 0t is thus subject to forfeiture( and
lac* of personal *nowledge of the owner or
the carrier is not a defense to forfeiture.
= PROPERTIES NOT S3B7ECT TO FORFEIT3RE IN
THE ABSENCE OF PRIMA FACIE E8IDENCE /
&he forfeiture of the vehicle( vessel or
aircraft shall not be effected if it is established
that the owner thereof or his agent in charge of
the means of conveyance used as aforesaid has
no Eno$lede o" or +artici+ation in t%e unla$"ul
actC
Provided( however( that a prima facie
presumption shall exist against the vessel(
vehicle or aircraft under any of the following
circumstancesC
a. 0f the conveyance has been used for
smuggling at least twice before!
b. 0f the owner is not in the business for
which the conveyance is generally
used! and
c. 0f the owner is financially not in a
position to own such conveyance.
= DOCTRINE OF HOT P3RS3IT
Re)uisites
C. O9e* 8e##e'#
a. -n act is done in Phil. 'aters which
constitutes a violation of the tariff
and customs laws
b. a pursuit of such vessel began
within the jurisdictional waters which
i. may continue beyond the
maritime )one( and
ii. the vessel may be sei)ed on the
high seas.
2. O9e* I4/"*!e( A*!i,'e#
a. &here is a violation of the tariff and
customs laws
b. -s a conse6uence they may be
pursued in the Phil.
c. 'ith jurisdiction over them at any
place therein for the enforcement of
the law. -9
nd
+ar. 4ec. C6A, 'CC.
= R*C "s. 1(C
&he R&+s do not have jurisdiction over
sei)ure and forfeiture proceedings conducted by
the 2G+ and to interfere with these proceedings.
&he +ollector of +ustoms has exclusive
jurisdiction over all 6uestions touching on the
sei)ure and forfeiture of dutiable goods. ?o
petitions for certiorari( prohibition or mandamus
filed with the R&+ will lie because these are in
reality attempts to review the +ommissioner.s
actuations. ?either replevin filed with the R&+
will issue. R$!i"$'e: 7octrine of Primary
Nurisdiction.
= PERSONS HA8ING POLICE A3THORITY TO
ENFORCE THE TARIFF N C3STOMS LAWS AND
EFFECT SEARCHES? SEIZ3RES AND ARRESTS
a. officials of the 2G+( district collectors(
police officers( agents( inspectors( and
guests of the 2G+!
b. officers of the Phil. ?avy and other
members of the ->P and national law
enforcement agencies when authori)ed
by the +ommissioner of +ustoms
c. officials of the 20R on all cases falling
within the regular performances of their
duties( when the payment of internal
taxes are involved!
d. officers generally empowered by law to
effect arrests and execute processes of
courts( when acting under the direction
of the +ollector. -4ec. 996A, 'CC.
= ADMINISTRATI8E AND 73DICIAL PROCED3RES
RELATI8E TO C3STOMS SEIZ3RES AND
FORFEIT3RES
7etermination of probable cause and
issuance of warrant
-
-ctual sei)ure of the articles
-
1isting of description( appraisal and
classification of sei)ed property
-
Report of sei)ure to the +omm. of +ustoms
and the +hairman( +omm. on -udit
-
0ssuance by the +ollector of a warrant of
detention
-
?otification to owner or importer
-
>ormal hearing
-
7istrict collector renders his decisions
u ^
0f decision is not
favorable to the
aggrieved owner or
importer
0f decision is not
favorable to the
government
- -
-ppeal by the -utomatic Review by
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
=8
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
aggrieved owner or
importer
the +ommissioner

= RE>3IREMENTS FOR C3STOMS FORFEIT3RE
1. &he .*"=f1' 4$Hi= by the owner(
importer( exporter or consignee of any
declaration or affidavit( or the wrongful
ma*ing or delivery by the same persons of
any invoice( letter or paper , all touching on
the importation or exportation of
merchandise.! and
2. &hat such declaration( affidavit( invoice(
letter or paper is f$'#e. -Darolan, Jr. v. C'A,
95> 4CRA 9=8.
= PLACES WHERE SEARCHES N SEIZ3RES MAY BE
COND3CTED
a. enclosures
b. dwelling house 3there must be search
warrant issued by a judge4
c. vessels or aircrafts and persons or
articles conveyed therein
d. vehicles( beasts and persons
e. persons arriving from foreign countries.

= B3RDEN OF PROOF IN SEIZ3RE OR FORFEIT3RE
, claimant -4ec. 9@A@, 'CC..
= RE>3IREMENTS FOR MANIFEST
- manifest in coastwise trade for cargo
and passengers transported from one place or
port in the Philippines to another is re6uired
when one or both of such places is a port of
entry -4ec. =6C, 'CC.. ;anifests are also
re6uired of vessel from a foreign port -4ec.
566@, 'CC..
= >3ERY: IS MANIFEST RE>3IRED ONLY FOR
IMPORTED GOODSA
?o. -rticles subject to sei)ure do not
have to be imported goods. ;anifests are also
re6uired for articles found on vessels or aircraft
engaged in coastwise trade -Rior vs. Rosales,
55> 4CRA >86..
= 3NMANIFESTED CARGO IS S3B7ECT TO
FORFEIT3RE whether the act of smuggling is
established or not under the principle of res ipsa
lo6uitur. 0t 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 subject to forfeiture.

= CARGO? SEA STORE? AND PRO8ISIONS
DISTING3ISHED
1. C$*=": -rticle of value 3including foreign
currencies4( usually movables( other than
those as part of sea stores or provisions.
2. Se$ S!"*e: 0t is where the passengers can
buy their necessities.
3. P*"9i#i"#: &hose necessary for the
subsistence of the crew.
= SETTLEMENT OF FORFEIT3RE CASES
E General Rule3 ettlement of cases by
payment of fine or redemption of forfeited
property is $''".e(.
E 2xce+tions3
1. the importation is $&#"'1!e'+ /*")i&i!e( or
2. the surrender of the property to the person
offering to redeem would be ,"!*$*+ !"
'$.( or
". when there is f*$1(. -4ec. 9A6>, 'CC.
= AC>3ITTAL IN CRIMINAL CHARGE NOT RES
73DICATA IN SEIZ3RE OR FORFEIT3RE
PROCEEDINGS
Reasons3
1. +riminal proceedings are actions in
personam while sei)ure or forfeiture
proceedings are actions in rem.
2. +ustoms compromise does not extinguish
criminal liability -#eo+le vs. Desiderio, Nov.
9C, 5=C@..
= -t any time prior to the sale( the delin6uent
importer 4$+ #e!!'e )i# "&'i=$!i"# with the
2ureau of +ustoms( in which case the aforesaid
articles may be delivered upon payment of the
corresponding duties and taxes and compliance
with all other legal re6uirements -4ec. 5@68,
'CC.
= ABATEMENT
&he reduction or non,imposition of
customs duties on certain imported materials as
a result ofC
1. 7amage incurred during voyage!
2. 7eficiency in contents pac*ages
". 1oss or destruction of articles after arrival
#. 7eath or injury of animals
= FRA3D3LENT PRACTICES CONSIDERED AS
CRIMINAL OFFENSES AGAINST C3STOMS RE8EN3E
LAWS
a. Enlawful importation!
b. Entry of imported or exported article by
means of any false or fraudulent
practices( invoice( declaration( affidavit(
or other documents!
c. Entry of goods at less than their true
weights or measures or upon a
classification as to 6uality or value!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
AB
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
d. Payment of less than the amount due!
e. >iling any false or fraudulent claim for
the payment of drawbac* or refund of
duties upon the exportation of
merchandise! or
f. >iling any affidavit( certificate or other
document to secure to himself or others
the payment of any drawbac*(
allowance or refund of duties on the
exportation of mdse. greater than that
legally due thereon. -4ec. AC69, 'CC.
8II. CO3RT OF TAX
APPEALS 2RA CC2D5
' S$'ie! fe$!1*e# "f !)e CTA
1. 0t is a judicial body!
2. 0t is a court of special jurisdiction!
". 0t is not governed by technical rules of
evidence.
' P".e*# "f !)e CTA
= THE FOLLOWING ARE THE POWERS OF THE CTA
1. to administer "$!)#!
2. to *e,ei9e e9i(e,e!
". to summon witnesses by #1&/"e$!
#. to re6uire production or papers or
documents by #1&/"e$ (1,e# !e,14R
$. to punish ,"!e4/!!
%. to /*"41'=$!e *1'e# $( *e=1'$!i"# for
the conduct of its business!
=. to $##e## ($4$=e against appellant if
appeal to +&- is found to be frivolous or
dilatory!
A. to #1#/e( !)e ,"''e,!i" "f !)e !$%
/e(i= $//e$'! and
8. to *e(e* (e,i#i"# on cases brought
before it.
' 71*i#(i,!i" "f !)e CTA

= EXCL3SI8E APPELLATE 73RISDICTION TO RE8IEW
ON APPEAL
1. decisions of +0R in /
a. disputed assessments( refunds of internal
revenue taxes( fees or other charges!
penalties imposed in relation thereto! or
b. other matters arising under the ?0R+( or
other law or part of law administered by
the 20R.
2. decision of +ommissioner of +ustoms in /
a. cases involving liability from custom
duties( fees or other money charges!
sei)ure( detention or release of property
affected! fines( forfeitures or other
penalties imposed in relation thereto! or
b. other matters arising under the +ustoms
1aw( or other law or part of law
administered by the 2ureau of +ustoms.
". decision of the ecretary of >inance( such
as the imposition of dumping or
countervailing duty 3ec. "B1( &++( as
amended by P7 1#%#4( and in automatic
review cases where such decision of the
ecretary of >inance is adverse to the
taxpayer.
?.2.C Grdinary tax collection cases initiated by
the @overnment falls outside the +&-5s
jurisdiction( the reason being that said action is
not a case involving a disputed assessment.
= -OTHER MATTERS0
&hose controversies which can be
considered within the scope of the
function of the 20R J 2G+ under
ejusdem generis rule 3e.g. action for the
nullity of distraint and levy! 6uestioning
the propriety of the assessment!
collection of compromise penalties4.
= THIRTY6DAY PRESCRIPTI8E PERIOD FOR APPEAL
tarts to run from the date the taxpayer
receives the appealable decision. 0f the
taxpayer5s re6uest for reconsideration 3i.e.( the
protest is denied or the original assessment is
maintained( the appealable decision is the
decision denying the re6uest for reconsideration.
&he said period is jurisdictional and non,
extendible. Re6uests or motions for
reconsideration( however( operate to suspend
the running of the period to appeal. - pro forma
re6uest for reconsideration or one which is
directed to the ecretary of >inance does not
suspend the running of the "B,day reglamentary
period.
= GENERAL R3LE: ?ew issues cannot be raised
for the first time on appeal.
E2xce+tions3
1. 7efense of prescription
RE-G?C &his is a statutory right -(isayan
Land 'rans+ortation vs Collector.
2. Errors of administrative officials
RE-G?C tate can never be in estoppel
and lifeblood theory. -C&R vs #rocter and
Gamble #%ils. /". Cor+..
= TAX COLLECTION NOT S3SPENDED D3RING
APPEAL
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
MEMORY AID IN TAXATION LAW
SAN BEDA COLLEGE OF LAW 2003 CENTRALIZED BAR OPERATIONS
Reproduction in any form of this copy is strictly prohibited!!!
A1
TAXATION LAW COMMITTEE: Chairperson: Rhodaline Regoso; Asst. Chairperson & EDP: Maricel Alisuag; Subject
Heads:unelet Mataro! Michelle Al"are#! E$ren Di#on! %han &uieb; Me'bers: Alexis Cervantes. Leizl Calimaran, Berna
Quibal, Noreli De Claro, Jocelyn Gamboa, Albert Rodriuez, !arla Cabel, Rodol"o Quitolbo, Liam #adananan, #aul
La$rence Lim, Alder Delloro, Jo%n &van 'ablizo, Ria &baviosa, #anc%o (as)uez, Aileen Roxas, Lei" *+i,a
-n appeal to the +&- from a decision of
the +0R shall not suspend the payment( levy(
distraintandJor slae of any of the property of the
taxpayer. However( the CTA i# e4/".e*e( !"
#1#/e( !)e ,"''e,!i" of internal revenue
taxes and custom duties "'+ .)e !)e*e .$#
$
1. showing that collection of the tax may
<e"/$*(iMe !)e i!e*e#! of the government
and J or the taxpayer!
2. (e/"#i! of the amount claimed or file a
surety bond for not more than double the
amount of tax with the +ourt when re6uired!
and
". showing by taxpayer that appeal is "!
f*i9"'"1# "* (i'$!"*+.
= SIM3LTANEO3S FILING OF AN APPLICATION FOR
REF3ND OR CREDIT AND INSTIT3TION OF A CASE
BEFORE THE CTA ALLOWED
&he law fixes the same period of two 324
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.
(bser"ation: 0f we are not going to allow
the taxpayer to file a refund before the +&-
and let him wait for the +0R5s decision( and
the latter failed to render a decision within
the 2,year period( the said taxpayer can no
longer file a refund before the +&- because
his right to appeal has prescribed.