Вы находитесь на странице: 1из 29

BAR QUESTIONS 2015 & 2014

By: LJC

I.

2015 (20 QUESTIONS)


PRINCIPLES OF A SOUND TAX SYSTEM

I.

A. Fiscal Adequacy
B. Equality or Theoretical justice
C. Administrative feasibility
II.

Winnings of a resident citizen in a match


held abroad. Prize in USD, may it be
excluded from his gross income; US
already withheld income taxes, how to
apply for purpose of computing his income
tax in the Philippines

the court has held that in case the Commissioner


failed to act on the disputed assessment within the
180 day period from the date of submission of
documents, a taxpayer can either:
1. File a petition for review with the CTA within 30
days after the expiration of the 180-day period; or
2. Await the final decision of the Commissioner on
the disputed assessments and appeal such final
decision to the CTA within 30 days after receipt of
a copy of such decision.
(These options are mutually exclusive and resort
to one bars the application of the other)

a. Yes, Under the Tax Code, the income within


and without of a resident citizen is taxable.
b. No. Under the law, all prizes and awards
granted to athletes in local and international
sports competitions and tournaments
whether held in the Philippines or abroad

2014 (29 QUESTIONS)


REMEDIES: INACTION OF CIR ON PROTESTED
ASSESSMENT

II.

DONORS TAX
CONTRIBUTIONS

ON

CASH

AND

CAMPAIGN

and sanctioned by their national sports


associations are EXCLUDED from gross
income. The exclusion find application only
to amateur athletes where the prize was
given in an event sanctioned by the
appropriate national sports association
affiliated with the

Philippine Olympic Committee and not to


professional athletes like Mr. A. therefore,
the prize money would not qualify as an
exclusion from Mr. As gross income.

c. The income taxes withheld and paid to the


US govt may be claimed by Mr. A, either as
a deduction from his gross income or as a
tax credit from the income tax due, when he
computes his Philippine income tax liability
for taxable year 2013.
III.

RC bought ready-to-wear goods from a


NRC; income from the sale taxable; if NRA
and the goods are produced in China, is the
NRAs income from the sale of goods to Ms.

III.

As a rule, contributions given to candidates or


political parties are NOT subject to donors tax as
provided under the Omnibus Election Code and RA
7166
Section 13 of RA 7166 specifically states that any
contribution in cash or in kind to any candidate or
political party or coalition of parties for campaign
purposes, duly reported to the Commission shall not
be subject to the payment of any gift tax (donors tax)
Moreover, while campaign contributions are generally
not subject to donors tax, it can be subject to income
tax on the part of the recipient (candidate)
If not duly reported to the commission, such
contributions will be subject to donors tax

TAX DEDUCTIBILITY of a Donation made to a chapel


of stock and profit school
-

No, the donation is not deductible. The chapel owned


by privately-owned university hence the donation for
the maintenance of the chapel is a donation to the
university. The donation to be deductible must comply
with the requirement that the net income of the done
MUST NOT inure to the benefit of any private
stockholder or individual.

C taxable in the Philippines


a. Yes, the income of Ms. B from the sale of
ready-to-wear goods to Ms. C is taxable. A
NRC is taxable only on income derived from
sources within the Philippines. (Section 23
(B), NIRC). In line with the source rule of
income taxation, since the goods are
produced and sold within the Philippines,
Ms. Bs Philippine sourced income is
taxable in the Philippines.
b. Yes, but only a proportionate part of the
income. Gains, profits and income from the
sale of personal property produced by the
taxpayer without and sold within the
Philippines, shall be treated as derived
partly from sources within and partly from
sources without the Philippines (Section
42E, NIRC)
IV.

Tax treatments A&B both employees of


AAA Corp, got married in February 14,
2011; gave birth to triplets on December 29
2011; June 25, 2013 they had twins. What

IV.

In the instant case, the university is granting yearly


dividends to its stockholders which is a clear violation
of the law appertaining to the so-called private
inurement doctrine thereby making the donation nondeductible (Section 34(H)(1), NIRC)

VAT REFUND; MANDATORY 120 + 20 DAY RULE


a. No, the CTA is not correct. The two-year period to file
for refund refers to the ADMINSITRATIVE CLAIM
and does not refer to period within which to elevate
the claim to the CTA. The filing of the administrative
claim for refund was timely done because it is made
within 2 years from the end of the quarted when the
zero-rated transaction took place (Section 112(A)
NIRC).
-The rule on VAT refunds is 2 years to file the claim
with the BIR, plus 120 days for the Comissioner to act
and inaction after 120 days is deemed adverse
decision on the claim, appealable to the CTA within
30 days from the lapse of the 120 days period. (CIR
vs. Aichi Forging Company of Asia, 2010)
b. No. My answer would not be the same. GC did not

are their personal exemptions/ deductions


a. For 2010, A&B are each entitled to personal
exemption of 50k

wait for the decision of the CIR or the lapse of the


120 day period. For this reason, the filing of the
judicial claim with the CTA is premature.
CIR vs. Mindanao Geothermal (2014)

b. For 2011, A&B are each entitled to basic


SUMMARY OF RULES ON PRESCRIPTIVE PERIODS FOR CLAIMING
personal exemption of 50k. in addition to his
REFUND OR CREDIT OF INPUT VAT
basic personal exemption, Mr. A could claim
additional personal exemptions for 3 The lessons of this case may be summed up as follows:
QUALIFIED DEPENDENT CHILDREN in A. Two-Year Prescriptive Period
the amount of 25k for each child. (Section
1. It is only the administrative claim that must be filed within the two35B, NIRC)
c. For 2013, A&B are each entitled basic
personal exemptions of 50k. Mr. A could
claim additional personal exemptions for 4
QUALIFIED DEPENDET CHILDREN in the
amount of 25k for each child. (Section 35B,
NIRC)

year prescriptive period. (Aichi) 2. The proper reckoning date for the
two-year prescriptive period is the close of the taxable quarter when
the relevant sales were made. (San Roque)
3. The only other rule is the Atlas ruling, which applied only from 8
June 2007 to 12 September 2008. Atlas states that the two-year
prescriptive period for filing a claim for tax refund or credit of
unutilized input VAT payments should be counted from the date of
filing of the VAT return and payment of the tax. (San Roque)

B. 120+30 Day Period

V.

Tax treatment of the CASH DIVIDENDS


received from BBB Inc by the following
stockholders:
a. RC a FWT for 10% shall be imposed

1. The taxpayer can file an appeal in one of two ways: (1) file the
judicial claim within thirty days after the Commissioner denies the
claim within the 120-day period, or (2) file the judicial claim within
thirty days from the expiration of the 120-day period if the
Commissioner does not act within the 120-day period.

upon the CD actually or constructively


received by a RC from BBB Inc. (Section 24
(b)(2), NIRC)
b. NRA-ETB a FWT of 20% shall be
imposed upon the CD actually or
constructively received by a NRAETB from
BBB Inc. (Section 25 (a) (2), NIRC)
c. NRA-NETB a FWT of 25% of the ENTIRE
INCOME received from ALL sources within
the Philippines, including the CD received
from BBB Inc.
d. DC Dividends received by a DC from
another DC, such as BBB,Incc, shall not be
subject to tax (Section 27 (d) (4), NIRC)
e. NRFC generally subject to an income tax
of 30% to be withheld at source. However, a
FWT of 15% is imposed on the amount of
cash dividends received from a DC like
BBB, Inc. of the tax sparing rule applies.
Pursuant to this rule, the lower rate of tax
would apply if the country in which the
NRFC is domiciled would allow as tax credit
against the tax due from it, taxes deemed
paid in the Philippines of 15% representing

2. The 30-day period always applies, whether there is a denial or


inaction on the part of the CIR.
3. As a general rule, the 3 0-day period to appeal is both mandatory
and jurisdictional. (Aichi and San Roque)
4. As an exception to the general rule, premature filing is allowed
only if filed between 10 December 2003 and 5 October 2010, when
BIR Ruling No. DA-489-03 was still in force. (San Roque)
5. Late filing is absolutely prohibited, even during the time when BIR
Ruling No. DA-489-03 was in force. (San Roque)

V.

COURT OF TAX APPEALS; JURISDICTION OVER A


SPECIAL CIVIL ACTION FOR CERTIORARI
-

the CTA can entertain a petition for Certiorari under


its expanded jurisdiction
The CTA shall have exclusive appellate jurisdiction to
review by appeal Decisions, orders or resolutions of
the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their
original or appellate jurisdiction;
In a recent case decided by the SC, it was held that
the CTA has certiorari powers over the issue of grave
abuse of discretion on the part of the RTC in issuing

the difference between the regular income


tax rate and the preferential rate.
VI.

an interlocutory order in cases falling within the


exclusive appellate jurisdiction of the tax court, as this
is inherent to its exercise of appellate jurisdiction.
(City of Manila vs. Hon. Caridad H. Grecia-Cuerdo)

DOUBLE TAXATION in a strict sense vs. DB


in a broad sense
VI.
-

Double taxation in the strict sense pertains


to the direct double taxation. This means
that the taxpayer is taxed twice by the same
taxing authority, within the same taxing
jurisdiction, for the same property and same
purpose. Example: Imposition of FWT on
CD and requiring the taxpayer to declare
this tax-paid income in his income tax
returns.
On the other hand, DT in the Broad Sense
pertains to INDIRECT DT. This extends to
all cases in which there is a burden of 2 or
more impositions. It is the DT other than
those covered by direct DT. Example:
Subjecting the interest income of banks on
their deposits with other banks to the 5%
gross receipts tax (GRT) despite of the
same income having been subjected to
20% FWT, is only a case of indirect double

SMUGGLING
Is committed by any person who shall fraudulently
IMPORT or bring into the Philippines, or assist in so
doing, any article, contrary to law, or shall receive,
conceal, buy, sell or any manner facilitate the
transportation, concealment or sale of such article after
importation, knowing the same to have been imported
contrary to law.

VII.

Injunction to enjoin collection of local taxes


-

Yes. The petition for certiorari will prosper. The RTC


has no jurisdiction to entertain any action concerning
the validity of a Tax Ordinance and to enjoin the
imposition of taxes levied by it. Any question on the
legality of the tax ordinance can only be raised on
appeal with the SOJ and the appeal shall not have
the effect of suspending the effectivity of the
ordinance and the accrual and the payment of the tax

taxation. The GRT is a tax on the privilege


of engaging in business while the FWT is a
tax on the privilege of earning income.
VII.

VIII.

levied therein. (Section 187, LGC)


-

Is the Immediate appeal to the CTA en banc


of the adverse decision of the CTA division
a proper remedy
- No, CCC Inc should first file a Motion for
reconsideration or motion for new trial with
the CTA Division. Before the CTA en banc
could take cognizance of the petition for
review concerning a case falling under its
exclusive appellate jurisdiction, the litigant
must sufficiently show that it sought prior
reconsideration or moved for a new trial
with the concerned CTA division

VAT; DC entered into a LEASE agreement


with a NRFC concerning a property in the
Philippines; contract was signed in
Singapore
-

Pataka Corp is not correct. Lease of


properties shall be subject to VAT
irrespective of the place where the

VIII.

The prohibition on the issuance of a writ of injunction


to enjoin the collection of taxes applies only to
national internal revenue taxes, and not to local taxes.
The LGC does not specifically prohibit an injunction
enjoining the collection of taxes. A principle deeply
embedded in our jurisprudence is that taxes being the
lifeblood of the government should be collected
promptly, without unnecessary hindrance or delay. In
line with this principle, the NIRC expressly provides
that no court shall have the authority to grant an
injunction to restrain the collection of any national
internal review tax, fee or charge imposed by the
Code. An exception to this rule obtains only when in
the opinion of the CTA the collection thereof may
jeopardize the interest of the government and/or the
taxpayer. Nevertheless, it must be emphasized that
although there is no express prohibition in the LGC,
injunctions enjoining the collection of local taxes are
frowned upon. Courts, therefore, should exercise
extreme caution in issuing such injuncitons.

VAT Imposed on Incidental transactions

IX.

contract of lease was executed if the


property is leased or used in the
Philippines.

Yes, the sale of the delivery van is subject to VAY


being a transaction incidental to the catering business
which is a VAT-registered activity of MKI.

TAX REFUNDS; Administrative and judicial


claims procedure

VAT is imposed on a sale or transaction entered into


by a person in the course of trade or business, if it is:
a. Regularly conducted and
b. Undertaken in pursuit of a commercial or
economic activity and in
c. Transactions
INCIDENTAL
to
pursuit
of
commercial activity considered as entered into
in the course of trade or business and are subject
to 12% VAT

a. The SC ruled that the 30-day period after


the expiration of the 120-day period fixed by
law for the CIR to act on the claim for refund
is jurisdictional and failure to comply would
bar the appeal and deprive the CTA of its
jurisdiction to entertain the appeal (CIR vs.
Aichi Forging Company of Asia)
b. The administrative claim must be filed with
the CIR within 2 years from the close of the
taxable quarter when the zero-rated sales
were made. The CIR has 120 days from the
date of submission of complete documents
in support of the claim to decide. If the CIR
decides within the 120-day period or the
120-day period expires without the CIR
rendering a decision , the taxpayer has 30
days to file a petition for review with the

IX.

Tax
consequences
indebtedness

of

CANCELLATION

of

No. Mr. Pokemon is not correct. The cancellation of


his indebtedness up to the amount of 75k resulted to
a taxable income subject to income tax.

Section 50 of RR No. 2 otherwise known as the


Income Tax Regulations, provides for the proper tax
treatment of cancellation and forgiveness
Cancellation and forgiveness of indebtedness may

CTA reckoned from the receipt of adverse


decision or from the lapse of the 120-day
period.
As a general rule, the 30-day period to
appeal
is
BOTH
mandatory
and
jurisdictional. As an exception to the general
rule, premature filing is allowed only if filed
between December 10, 2003 and October
5, 2010, when BIR Ruling No. DA-489-03
was still in force prior to the reversal of the
aforesaid ruling by the CTA in Aichi case
on October 6, 2010 (CIR vs. Mindanao II)
X.

WON each of the ff individuals is required


to file an INCOME TAX RETURN:
a. Filipino citizen residing outside the
Philippines on his income from sources
outside the Philippines NRC - Not
required ;
b. RA on income derived from sources within
required
c. RC earning purely compensation income
from 2 employers within the Philippines,

amount to a payment of income, to a gift, or to a


capital
transaction,
dependent
upon
the
circumstances. If for example, an individual performs
services for a creditor, who, in consideration thereof
cancels the debt, income to that amount is realized
X.

GROSS INCOME; EXCLUSIONS


Gross Income means all income derived from whatever
source, including but not limited to the following:
INCLUSION:
1. compensation for services
2. gross income from trade or business or the exercise
of a profession
3. gains derived from dealings in property
4. interests
5. rents
6. royalties
7. dividends
8. annuities
9. prizes and winnings
10. pensions and
11. partners distributive share from the net income of the
GPP

whose income taxes have been withheld


Required
d. RC who is a minimum wage earner Not
required
e. An individual whose sole income has been
subjected to FWT not required
XI.

EXCLUSIONS:
1. Proceeds of life insurance policy
2. Amount received by the insured as return of
premium
3. Gifts, bequests, devises or descent
4. Compensation for injuries or sickness
5. Income exempt under treaty
6. Retirement benefits, pensions, gratuities and
others
a. retirement benefits received from foreign
institutions whether public or private
b. veterans benefits
c. retirement benefits received from private firms
whether individual or corporation
d. separation pay
e. SSS
f. GSIS

What are de minimis benefits and how are


they taxed? Give three examples of de
minimis benefits
-

De minimis benefits are facilities and


privileges furnished or offered by an
employer to his employees, which are not
considered as compensation subject to
income tax and consequently to withholding
tax, if such facilities or privileges are of
relatively small value and are offered or
furnished by the employer merely as means
of promoting the health, goodwill,
contentment, or efficiency of his employees.
If received by rank-and-file employees they
are exempt from income tax on wages; if
received by supervisory or managerial
employees, they are exempt from the FBT.

XI.

SITUS OF TAXATION
-

No. the compensation for services rendered by Single


Star was not performed in the Philippines. Hence it is
not taxable in the Philippines.

10

XII.

Examples of De minimis benefits:


1. monetized unused vacation leave credits
of private employees not exceeding 10
days during the year;
2. monetized value of vacation and sick
leave credits paid to govt officials and
employees;
3. medical cash allowance to dependents
of employees, not exceeding P750 per
employee per semester or P125 per
month;
4. Rice subsidy of P1,500 or 1 sack of 50
kg rice per month amounting to not more
than P1,500

Take note: the place where the services were


actually rendered is the situs of taxation
XII.

GROSS INCOME; ALLOWABLE DEDUCTIONS


-Advertising expense to maintain some form of goodwill
is a capital expenditure and is not an Ordinary
advertising expense that can be claimed as deduction
from gross income; hence, it should have been
amortized over a reasonable period.

CAPITAL GAINS TAX 6%; Conditions of Sale


or disposition of the house and lot/Family
Home to be exempt from CGT
In order for Mr. H to be exempted from the
payment of CGT on the sale or disposition of
the house and lot where his family lives, the
following conditions must be complied with:

Income of NRFC is subject to tax only if the source of


the income is within the Philippines. Source is the
situs of the activity which produced the income. And
since the source of the income where the managerial
services in HK, the income derived from the activities
is not subject to Philippine income taxation.

- to be deductible, an advertising expense should not


only be necessary but also ordinary.
XIII.

CAPITAL GAINS TAX as a result of foreclosure sale


-

No. CGT is not paid when redemption is paid within 1

11

1. The proceeds of the sale is FULLY


UTILIZED in acquiring or constructing NEW
principal residence within 18 calendar
months from the date of sale or disposition;
2. The historical cost or adjusted basis of the
RP sold or disposed will be carried over to
the new principal residence built or
acquired;
3. The Commission has been DULY
NOTIFICED, through a prescribed return,
within 30 days from the date of sale or
disposition of the persons intention to avail
of the tax exemption; and
4. The exemption was availed only ONCE
every 10 years (Section 24 (d) (2), NIRC)
XIII.

XIV.

year after the foreclosure sale.


Section 3 Capital Gains Tax
(1) In case the mortgagor exercises his right of
redemption within 1 year from the issuance of the
certificate of sale, no capital gains tax shall be
imposed because no capital gains has been
derived by the mortgagor and no sale or transfer
of real property was realized XXX
RR No. 4-99 has curbed the inequity of imposing a
capital gains tax even before the expiration of the
redemption period since there is yet no transfer of title
and no profit or gain is realized by the mortgagor at
the time of foreclosure sale but only upon expiration
of the redemption period.

GROSS ESTATE; Non-Resident Citizen

Which court has jurisdiction to review


Mr. X, a Filipino residing in Alabama, U.S.A., died on January 2, 2013 after
rulings of the Secretary of Finance in the undergoing a major heart surgery. He left behind to his wife and two (2) kids
exercise of the latters power of review?
several properties, to wit:
-

It is the CTA that has jurisdiction over


rulings of the SOF

(1) Family home in Makati City;

There is no provision in law that expressly


provides where exactly the adverse ruling of

(3) Proceeds of health insurance from Take Care, a health


maintenance organization in the Philippines; and

(2) Condominium unit in Las Pias City;

12

the SOF under Section 4 of the NIRC is


(4) Land in Alabama, U.S.A.
appealable. However, RA 1125, as
amended, addresses the seeming gap in The following expenses were paid:
the law as it vests upon the CTA, albeit
(1) Funeral expenses;
impliedly, with jurisdiction over the case as
other matter arising under the NIRC or
(2) Medical expenses; and
other laws administered by the BIR.
(3) Judicial expenses in the testate proceedings.
Furthermore, the SC held that the
jurisdiction to review the ruling of the SOF
on the issues raised against a ruling of the
CIR , pertains to the CTA in the exercise of What are the items that must be considered as part of the
its appellate jurisdiction.
gross estate income of Mr. X?

XIV.

MCIT; distinctions between RCIT and MCIT


a. Under the Tax Code, MCIT is only
applicable beginning on the 4 th taxable year
following the commencement of the
business operation.
b. RCIT and MCIT
1. AS TO TAXPAYER: RCIT applies to ALL
CORPORATE TAXPAYERS; while MCIT

All the items enumerated are considered as part of


the gross estate income of Mr. X
As a rule, in determining the gross estate income of a
Resident/NRC/RA all properties wherever situated,
real or personal, tangible or intangible plus items are
includible in gross estate. Hence, all of the items
mentioned form part of the gross estate.

What are the items that may be considered as deduction from


the gross estate?

13

applies
to
DOMESTIC
CORPORATIONS
and
RESIDENT
FOREIGN CORPORATIONS;

2. AS TO TAX RATE: RCIT is 30%; MCIT


is 2%

3. AS TO TAX BASE: RCIT is based on


the net taxable income; MCIT is based
on gross income
4. AS TO PERIOD OF APPLICABILITY:
RCIT is applicable once the corporation
commenced its business operation,
MCIT is applicable beginning on the 4th
taxable
year
following
the
commencement of business operation.

XV.

in determining the net estate of a RC/NRC/RA


gross estate less ordinary and special deductions +
exclusions allowed.
a. Funeral expenses P200,000 is the maximum
allowed by law;
b. Medical expenses not to exceed P500,000
c. Family Home equivalent to its FMW but not to
exceed 1M whichever is lower
d. Standard deduction P1M
e. Judicial expense there is no limitation expense.
As long as it is paid or incurred in connection with
the preservation, administration or settlement of
the estate, it may be claimed as deductions.
Judicial expenses also include extra-judicial
expenses.

PRE-ASSESSMENT NOTICE; When required

Exceptions to Prior Notice of the Assessment Pursuant to Section


228 of the Tax Code , as amended, a PAN shall not be required in
5. AS TO IMPOSITION: MCIT is imposed any of the following cases:
whenever it is greater than the RCIT of
a)
When the finding for any deficiency tax is the result of
the corporation
mathematical error in the computation of the tax as appearing on the
face of the return; or

14

XV.

Optional
Standard
Deduction
(OSD);
When a discrepancy has been determined between the tax
Taxpayer is a Doctor; Expenses not entirely "(b)
withheld and the amount actually remitted by the withholding agent; or
covered by receipts; Options
-

XVI.

In order the maximize his deductions, Dr. K


may avail of the OSD which is n amount not
exceeding 40% of his gross sales or gross
receipts. The OSD can be claimed without
being required to present proof or evidence
of expenses paid or incurred by him.

"(c)
When a taxpayer who opted to claim a refund or tax credit of
excess creditable withholding tax for a taxable period was determined to
have carried over and automatically applied the same amount
claimed against the estimated tax liabilities for the taxable quarter or
quarters of the succeeding taxable year; or
"(d)
When the excise tax due on excisable articles has not been
paid; or

Real Property Tax; reclaimed properties;


When an article locally purchased or imported by an exempt
when it is leased to a taxable entity is it "(e)
person, such as, but not limited to, vehicles, capital equipment,
entitled to RPT
a. the reclaimed properties are not subject to
RPT because LLL is a government
instrumentality. Under the law, real property
owned by the RP is exempt from RPT
unless the beneficial use thereof has been
granted to a taxable person. When the title
of the real property is transferred to LLL, the
RP remains the owner of the RP. Thus,
such arrangement does not result in the
loss of the tax exemption.

machineries and spare parts, has been sold, traded or transferred to


non-exempt persons.

XVI.

When to File Protest to Deficiency Assessment


-

Pursuant to Section 228 of the Tax Code, as


amended, a PAN shall not be required in any of the
following cases: (i) when the fining of any deficiency
tax is the result of mathematical error in the
computation of the tax appearing on the face of the
tax return filed by the taxpayer

15

b. No. As a rule, properties owned by the RP


are exempt from RPT except when the
beneficial use thereof has been granted, for
consideration or otherwise, to a taxable
person. When LLL leased out portions of
the reclaimed properties to taxable entities,
such as fast food restaurants, the reclaimed
properties are subject to RPT.
XVII. Donors tax; proper valuation in computing
the donors tax; donor donated parcels of
land to his 2 children
-

The valuation of Mr. Ls gift to his children is


the FMW of the property at the time of
donation. The FMV is the higher of the FMV
as determined by the Commissioner or the
FMV as shown in the schedule of values
fixed by the provincial and city assessors. In
this case, for the purpose of computing
donors tax, the proper valuation is the
value prepared by the City Assessors
amounting to P2.5M because it is higher
than the FMV determined by the CIR.

It is the FLD and Assessment Notice that must be


administratively protested or disputed within 30 days
and not the PAN. The counting of the 30 days within
which to institute an appeal in the CTA commences
from the date of receipt of the decision of the CIR on
the disputed assessment, not from the date the
assessment was issued.

In this case, Mr.Tiaga must first await the FAN/FLD to


be issued and thereafter file his protest thereon.

XVII. DOCUMENTARY STAMP TAX; non-payment vis a vis


admissibility as evidence
-

No. The contract of sale is not admissible for failure to


Pay the DST.

The DST, as detailed in the Tax Code, is an excise


tax imposed on the person making, signing, issuing,
accepting, or transferring the document. As such, the
tax is imposed on the privilege of conducting a
particular business or transaction and not on the
business or transaction itself. The law taxes the
document because because of the transaction so the

16

tax becomes due and payable at the time the


transaction is accomplished, usually, at the time of
the issuance of the document. The DST may be
imposed on Loan Agreements, Deeds of Sale,
Certificate of Deposits, Issuance of Shares of Stock,
among others.

XVIII. TARIFF and CUSTOMS CODE; when does


importation begin and deemed terminated;
cases where the decision of the collector is
automatically
reviewed
by
the
Commissioner of Customs then appealed to
the SOF
a. Importation begins when the carrying
vessel or aircraft enters the jurisdiction of
the Philippines with intention to unlade
therein. Importation is deemed terminated
upon payment of duties, taxes and other
charges due upon the articles, or secured
to be paid, at a port of entry and the legal
permit for withdrawal shall have been
granted, or in case said articles are free of
duties, taxes and other charges, until they
have legally left the jurisdiction of Customs

A document, which has been imposed a DST, and


has been signed, issued, accepted and transferred
without payment of the corresponding DST, will not be
recorded, nor shall it be admissible as evidence in
court until such DST has been paid.

Section 201 of the NIRC, providing that no document


shall be admitted in evidence until the requisite
stamps have been affixed thereto. Considering that
no documentary stamp was ever affixed on the deed
of sale, such should not be admitted into evidence.

XVIII. Taxpayers Remedies Involving Collection of RPT


b. Whenever the decision of the COC in any
LGC
seizure proceedings is adverse to the
government,
the
said
decision
is
automatically elevated to the COC for What are the administrative remedies available to Madam X in
review, and if such decision is affirmed by order to contest the assessment and their respective

17

XIX.

the COC, the same shall be automatically prescriptive periods?


elevated to and be finally reviewed by the
SOF.
1. Assessor submits assessment roll to Local Treasurer (LT).
posting of notice of deadline for payment at a conspicuous
Taxing powers of the LGUs; City approved
place at the LGU hall or publish the same in a newspaper of
an ordinance levying customs duties and
general circulation in the LGU once a week for 2
fees on goods coming into the territorial
consecutive weeks. LT collects the tax starting January 1 of
jurisdiction of the city; grounds to oppose
calendar year.
the ordinance
2. Owner PAYS the tax. Written protest must be filed within 30
days from payment before the LT.
- The ordinance can be opposed on the
3. LT must decide within 60 days from receipt of protest. If LT
ground of being ultra vires. The taxing
does not decided within 60 days, or if LT rejects protest,
powers of LGUs, such as M City, CANNOT
Taxpayer may appeal within 60 days from receipt of notice/
EXTEND to the levy of taxes, fees and
lapse of 60 days to the LBAA. If LT grants protest, the
charges already imposed by the national
amount of tax protested shall be refunded or applied as tax
government, and this includes, among
credit. Refund or tax credit must be claimed with the LT
others, the levy of customs duties under the
within 2 years from date taxpayer is entitled to such. If LT
Tariff and Customs Code
does not act on claim for refund/tax credit within 60 days,
OR does not grant the refund/tax credit, taxpayer may
- Any question on the constitutionality or
appeal within 30 days from receipt of notice/lapse of 60 days
legality of tax ordinances may be raised on
to LBAA
appeal within 30 days from the effectivity to
4. LBAA must decide within 120 days from receipt of appeal
the SOJ. The SOJ shall render a decision
5. If LBAA rejects protest/refund, owner may appeal to CBAA
within 60 days from the date of receipt of
within 30 days from receipt of notice.
the appeal. Thereafter, within 30 days after
6. If CBAA rejects protest/refund, owner may appeal to CTA en

18

XX.

XXI.

receipt of the decision or the lapse of the


banc within 30 days from receipt of the decision (Rule 43,
sixty-day period without the SOJ acting
ROC)
upon the appeal, the aggrieved party may
May Madam X refuse to pay the deficiency assessment during
file appropriate proceedings with the RTC.
the pendency of her appeal?
CIVIL ACTION for the recovery of the CIVIL
- No. Payment under Protest is Mandatory.
LIABILITY for taxes.
- Section 252 emphatically directs that the taxpayer/
- The criminal action and the corresponding
real property owner questioning the protest can be
civil action for the recovery of the civil
entertained. As a matter of fact, the words paid
liability for taxes and penalties shall at all
under protest shall be annotated on the receipts.
times be simultaneously instituted with, and
Consequently, only after such payment has been
jointly determined in the same proceeding
made by the taxpayer may he file a protest in writing
before the CTA. The filing of he criminal
(within 30 days from said payment of tax) to the
action is deemed to necessarily carry with it
provincial, city or municipal treasurer, who shall
the filing of the civil action, and no right to
decide the protest within 60 days from its receipt. In
reserve the filing of such civil action
no case is the LT obliged to entertain the protest
separately from the criminal action shall be
unless the tax due has been paid.
recognized. (Section 7 (b) (1) of RA 9282)
- Payment of the tax assessed under protest, is a
Claim for refund or tax credit; Effect of
condition sine qua non jurisdiction over the petition
failure to indicate the words zero-rated on
can be assumed.
the invoices and receipts
- The restriction upon the power of the courts to
a. the appeal of MMM, Inc. must be denied.
impeach tax assessment without a prior payment,

19

MMM, Inc.s position that the requirements


under RR No. 7-96 should not prevail over a
taxpayers substantive right to claim tax
refund or credit is unmeritorious. The SOF
has the authority to promulgate the
necessary rules and regulations for the
effective enforcement of the provisions of
the NIRC. Such rules and regulations are
given weight and respect by the courts in
view of the rule-making authority given to
those who formulate them and their specific
expertise in their respective fields.
-

An applicant for a claim for tax refund or tax


credit must not only prove entitlement to the
claim, but also compliance with all the
documentary and evidentiary requirements.
Consequently, the CTA and the CTA en
banc correctly ruled that the failure to
indicate the words zero-rated on the
invoices and receipts issued by a taxpayer
would result in the denial of the claim for
refund
or
tax
credit.
(Eastern
Telecommunications Philippines, Inc vs.
CIR, 2015)

under protest, of the taxes assessed is consistent


with the doctrine that taxes are the lifeblood of the
nation and as such their collection cannot be
curtailed by injunction or any like action; otherwise,
the state, or in this case, the local government unit,
shall be crippled in dispensing the needed services to
the people, and its machinery gravely disabled.
XIX.

TAX ON CONDOMINIUM DUES


-

the lawyer of the condominium corporations is


correct. The association dues, membership fees, and
other assessments/ charges do not constitute income
of the unit owners and the condominium corporation
is not created as a business entity. The collection si
the money of the unit owners pooled together and will
be preserving the building and its premises which
they themselves own and possess (First e-bank tower
condo vs. BIR)

In the case of Office Metro Philippines, Inc vs, CIR,


the Court only dealt with the EWT issue as the VAT
Section 105 shows that the transactions in the course
of trade or business (sells, barters, exchanges,
leases of goods or properties, renders services,

20

b. No, my answer will be different if the claim


for refund is effectively zero-rated sales in
2012. The requirement to print the word
zero-rated is no longer by mere
regulations but is now clearly provided by
law as follows if the sale is subject to
zero percent (0%) value-added tax, the
term zero rated sale shall be written or
printed prominently on the invoice or
receipt. Failure to comply with this invoicing
requirement is fatal to a claim for refund of
input taxes attributable to the zero-rated
sale (Section 113 (B) (2) (c), NIRC).
Moreover, as recently ruled by the SC, the
subsequent incorporation of Sec 4.108-1 of
RR 7-95 in Sec. 113 of the NIRC as
introduced in RA 9337, actually confirmed
the validity of the imprinting requirement on
VAT invoices or official receipts- a case
falling under the principle of legislative
approval of administrative interpretation by
reenactment. (Northern Mindanao Power
Corp vs. CIR, 2015)

import goods) are those subject to VAT. I the case of


a condominium corporation, the function of the entity
is merely for administrative purposes and not a trade
or business. Thus, payments in the form of
association dues should not be subjected to VAT.
XX.

ALLOWABLE DEDUCTIONS; GROSS ESTATE


-

No. I do not agree with the BIR

For claims against the estate: [ to be allowed as


deduction] that at the time the indebtedness was
incurred the debt instrument was duly notarized, and,
if the loan was contracted within 3 years before the
death of the decedent, the administrator or executor
shall submit a statement showing the disposition of
the proceeds of the loan;

Claims required to be presented against a


decedents estate is generally construed to mean
debts or demands of a pecuniary nature which could
have been enforced against the deceased in his
lifetime, or liability contracted by the deceased before
his death. Therefore, the claims existing at the time of
death are significant to, and should be made the

21

XXII. Conditions for allowing the deductions of:


Claims against the estate; Medical
Expenses

a. In order that claims against the estate may


be allowed as deductions from the gross
estate of a citizen or resident alien for
purposes of imposing the estate tax, the law
requires that at the time the indebtedness
was incurred, the debt instrument was duly
notarized. In addition, if the loan was
contracted within 3 years before the death
of the decedent, the executor or
administrator shall submit a statement
showing the disposition of the proceeds of
the loan. (Section 86 (a) (1) (c), NIRC)
b. The conditions for the allowance of medical
expenses as deductions from the gross
estate of a citizen or resident alien are:
(1) medical expenses must have been
incurred within 1 year before the death
of the decedent;
(2) that the medical expenses are duly

basis of, the determination of allowable deductions.


On the other hand, allowable deductions for unpaid
mortgages or any indebtedness with respect to
property provides that:
The said mortgage/indebtedness must have
been contracted during the decedents lifetime
in good faith for an adequate and full
consideration in money or moneys worth;
The value of the decedents interest in the
property mortgaged is included in the value of
the gross estate (must be undiminished by
said mortgage/indebtedness)
Must not include:
a. any income tax upon received after the
death of the decedent
b. property taxes not accrued before his death
c. any estate tax
Therefore, it is only when the deduction is claimed for
unpaid mortgages is it required that the interest of the
decedent in the property mortgaged be included in
the value of the gross estate. If the deduction was for
claims made against the estate, the same is not
required.

22

substantiated with receipts; and


(3) the total amount thereof, whether paid or
unpaid, does not exceed P500,000.00

XXI.

TAX EVASION
-

Haelton Corporation is liable for the deficiency


income tax as a result of tax evasion. The purpose of
selling first the property to Mr. Belly is to create a tax
shelter. He never controlled the property and did not
enjoy the normal benefits and burdens of ownership.
The sale to him was merely a tax ploy, a sham, and
without business purpose and economic substance.
The intermediary transaction, which was prompted
more on the mitigation of tax liabilities than for
legitimate business purpose constitutes one of tax
evasion. However, being a corporation, Haelton can
only be liable for civil fraud which is a civil liability
rather than a criminal fraud which can only be
committed by natural persons. (CIR vs. Benigno
Toda, Jr, September 14, 2004)

XXII. DOUBLE TAXATION


-

means taxing the same property twice when it should


be taxed only once; it is tantamount to taxing the
same person twice by the same jurisdiction for the
same thing (Victorias Milling Co. vs. Municipality of
Victorias,
Negro
Occidental,
Gr.
No.
L-

23

21183,September 27, 1968)


XXIII. TAX AVOIDANCE
-

is a tax saving device within the means sanctioned by


law

XXIV. TAXABILITY
OF
PARTNERSHIP

GENERAL

PROFESSIONAL

(a) What are the items in the above mentioned earnings


which should be included in the computation of ABC
Law Firms gross income? Explain.
-

ALL the items in the above mentioned earnings are


included in the computation of ABC Law Firms gross
income.
For the purposes of computing the distributive share
of the partners, the net income of the General
Professional Partnership shall be computed in the
same manner as a corporation.

(b) What are the items in the above-mentioned payments


which may be considered as deductions from the gross
income of ABC Law firm? Explain.

24

ALL the items in the above-mentioned payments may


be considered as deductions from the gross income.
The GPPs income is ultimately taxed to the partners
comprising it. In computing for taxable income, all
expenses that are ordinary and necessary, incurred
or paid for the practice of a profession, are allowed as
deductions.
As such a GPP may claim either itemized deduction
or optional standard deduction.

(C) If ABC Law firm earns net income in 2012, what, if any, is
the tax consequence on the part of ABC Law Firm insofar as
the payment of income tax is concerned? What, if any, is the
tax consequence on the part of A, B, and C as individual
partners, insofar as the payment of income tax is concerned?
- Pursuant to Section 26 of the Tax Code, a GPP is not subject to
income tax. However, the partners shall be liable to pay income tax
on their separate and individual capacities for their respective
distributive share in the net income of the GPP.
XXV. VAT-able transactions
-

Sales of shares of stock-listed and traded through the

25

LOCAL stock exchange


XXVI. DEDUCTIBLE EXPENSES; EXPENSES FOR ILLEGAL
PURPOSES
-

No. the payment to the officer in exchange for said


officers revelation of trade secrets is not a deductible
expense.
Section 32 (A)(1)c): Bribes, Kickbacks and Other
Similar Payments No deductions from the gross
income shall be allowed

XXVII. PERSONAL/ ADDITIONAL EXEMPTIONS


-

Yes being a purely compensation income earner, he


is entitled to personal exemption of 50k

Is he entitled to additional exemptions? If so, how much?


- NO.
- While his parents and minor siblings are living with
and dependent upon him for financial support, they
are NOT qualified dependents for purposes of
additional exemptions. The term dependent for
purposes of the additional personal exemption would
include only Legitimate, illegitimate or legally adopted

26

child (Section 35B, NIRC)


What is the effect of the taxes withheld from his salaries on his
taxable income?
-

XXVIII.
-

the taxes withheld from his salaries will NOT affect his
taxable income because they are not allowed as tax
deductions but as tax credits. Tax deductions reduce
the taxable income while tax credits reduce the tax
liability. (CIR vs. Central Luzon Drug Corporation,
April 15, 2005)
TAX LAWS; Characteristics
adhere to uniformity and equality when all taxable
articles or kinds of property of the same class are
taxable at the same rate

XXIX. TAX REMEDIES; Refund of Local tax


(A) If you are Atty. ELP, what advice will you give
Doa Evelina so that she can recover the subject
local business taxes?
- I will advice her to seek a refund of the amount of local

27

business taxes they previously paid to the city, plus


interest
- a Perusal of Section 196 of the LGC reveals that in
order to be entitled to a refund/credit of local taxes, the
following procedural requirements must concur:
1. the taxpayer concerned must file a written claim for
refund/credit with the local treasurer;
2. the case or proceeding for refund has to be filed within
2 years from the date of payment of the tax, fee or
charge or from the date the taxpayer is entitled to a
refund or credit.
(B) If Doa Evelina eventually recovers the local
business taxes, must the same be considered as
income taxable by the national government?
-

YES
Section 34 (C) of the TAX CODE: Taxes allowed
under this Subsection, when refunded or credited,
shall be included as part of the gross income in the
year of receipt to the extent of the income tax benefit
of said deduction.

28

29