Review Notes For Taxation 2: Ňas, Marie Mae Buliyat, Wilhelmina Diwa, Feliza Kadatar

REVIEW NOTES FOR TAXATION 2 1
TRANSFER TAXATION decedent and other benefits that accrue to the estate
and the heirs, the state collects the tax.
Transfer Taxes
b.) Redistribution of Wealth Theory
• those imposed upon the gratuitous disposition of Estate tax is a contributing factor to the inequalities
private property in wealth and income. The imposition of death tax
reduces the property received by the successor
• Under our law, they are taxes levied on the
-09 bringing about a more equitable distribution of
transmission of private properties from a prior
008 wealth in society.
decedent to his heirs in the case of estate tax, or from
M2
O
a donor to a donee in the case of donor’s tax. c.) Ability to pay theory
RC The receipt of inheritance places assets in the hands
Kinds of Transfer Taxes
BA of the heirs and beneficiaries thereby creating an
ability to pay the tax and thus, ability to contribute to
1. Death / Estate taxes governmental income; and
- those levied on the gratuitous transfers of property upon
one’s death, formerly comprised of the estate and inheritance d.) Privilege theory or State Partnership theory
taxes: Both taxes are now integrated into one estate tax. Inheritance is not a right but a privilege granted by
the state and large estates have been acquired only
2. Gift Taxes with the protection of the state. The State, as a
- Are imposed on the gratuitous transfers of property during “passive and silent partner” in the accumulation of
one’s lifetime, formerly comprised of the donor’s and donee’s property has the right to collect the share which is
gift taxes; both taxes are now integrated into a donor’s tax. properly due to it.
Incidence or burden of estate of tax

I. DEATH / ESTATE TAX Three views on who is the taxpayer in estate taxation:
Estate tax 1. PREDECESSOR – the object of the tax is the

property which has been held or accumulated by the
• graduated tax imposed on the privilege of the deceased and the tax has fallen upon him in the sense
decedent to transmit property at death and is base on it has affected the amount of the property which he
the entire net estate, regardless of the number heirs could dispose.
and relations to the decedent.
2. SUCCESSOR – the tax is not paid by the predecessor
• a “transfer” tax not a property tax. who has no liability till he dies and who is free to
ignore the duty if he wishes, while the successor
• tax on the right to transmit property at death and on comes into less than he would have, and has no kind
certain transfers which are made by the statute the of redress.
equivalent of testamentary dispositions.
3. No Personal Incidence - the estate tax has no personal
Nature of Estate Tax incidence at all, merely falling upon the estate as
• It is not a direct tax on property nor is it a capitation such.
tax, that is, the tax is laid neither on the property, nor
on the transferee or transferor, but on the right of the Law applicable
decedent to transmit his estate. Estate taxation is governed by the statute in force at
• It is not a property tax but an excise tax. the time of the death of the decedent.
Purpose and justification of estate tax: Reciprocity

The following theories have been advanced to justify death There is reciprocity if the foreign country of which
taxation: (BRAP) the decedent was a citizen or resident at the time of his death:
a.) Benefit-Received Theory 1.) Did not impose an estate tax; or

For the performance of services rendered by the 2.) Allowed a similar exemption from estate tax with respect
government in the distribution of the estate of the to intangible personal property owned by Filipino citizens
residing in that foreign country.
Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,
2008 Chairman: Genevieve Shontogan, V.Chairman: Scarlet Banawol, Members: Kristine Beňas, Marie Mae Buliyat, Wilhelmina Diwa, Feliza Kadatar,
Charlene Lagua, Claryll Anne Laminato, Shandra Diane Mappang
2009 Chairman: Norwayne Salman, V.Chairman: Carlo Rimas, Members: Shayne Ann Basco, Lota Marie Buan, Marie Mae Buliyat, Precious Madio,
Jefferson Malacas, Karen Moster, Clarence Rimando, Genevieve Shontogan
The gross estate extends to gratuitous transfers made

Note: by the decedent during his lifetime which are treated by
1. Reciprocity applies only when: the law as substitutes for testamentary dispositions. They
a.) The property is an intangible; and are transfers inter vivos in form but mortis causa in
b.) The decedent is a nonresident alien substance.
2. The following intangibles are deemed located in the Rationale for taxability:
Philippines: (an exception to the principle of Res Mobilia
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Sequuntur Personam and Situs of Taxation)
008 To reach such transfers which are really substitutes
M2 for testamentary dispositions and thus prevent the evasion
a.) Franchises which must be exercised in the Philippines;
O of the estate tax.
b.) Shares, obligations or bonds issued by any corporation or
RC
sociedad anonima organized or constituted in the
BA These transfers are:
Philippines in accordance with its laws; a.) transfers in contemplation of death (sec.85 b);
c.) Shares, obligations or bonds issued by any foreign b.) transfers with retention or reservation of certain
corporation 85% of the business of which is located in the rights (sec.85 b);
Philippines; c.) revocable transfers (sec.85 c)
d.) Shares, obligations or bonds issued by any foreign d.) transfers of property arising under a general power
corporation if such shares obligations or bonds have of appointment ( sec.85 d); and
acquired a business situs in the Philippines; and e.) transfers for insufficient consideration (sec.85 g)
e.) Shares or rights in any partnership, business, or industry
established in the Philippines. Note:
Transfers by virtue of a bona fide sale of property for
GROSS ESTATE an adequate and full consideration in money or money’s
• the total value of all property, whether real or worth are excluded and not taxable.
personal, tangible or intangible belonging to the INCLUSIONS IN THE GROSS ESTATE (CR2IG DIP)
decedent at the time of his death, situated within or
outside the Philippines, where such decedent was a 1) Decedent’s interest at a specific property
resident or citizen of the Philippines. - To the extent of the interest therein of the decedent at the
• In the case of a nonresident alien decedent, it shall time of his death. (Sec. 85 A)
include only property situated in the Philippines.
- Ex: partnership interest, dividends
Property Included in the Gross Estate (INCLUSIONS): 2) Transfer in contemplation of death

A. In case of resident citizens, nonresident citizens and - A transfer with the thought of death.
resident aliens: - The term “in contemplation of death” means that the
1. Real Property within and without the Philippines; impelling or controlling motive is the thought of death,
2. Tangible personal property within and without the regardless of whether the transferor is near the possibility
Philippines; and of death or not, which induces the disposition of the
3. Intangible personal property within and without the property for the purpose of avoiding the tax.
Philippines. - Example: donation was made concurrently with the
execution of a will (Vidal de Rocs vs. Posadas, 58 Phil
B. In cases of nonresident aliens: 108)
1. Real property within the Philippines;
2. Tangible personal property within the Philippines and;  Circumstances taken into account in determining in
3. Intangible personal property within the Philippines, unless whether the transfer was made in contemplation of death:
there is reciprocity in which case, it is not taxable. A.) Age and state of health of the decedent at the time of
the gift;
Note: These are either: B.) Length of time between the gift and the date of death;
A) Properties actually owned at the time of death and
B) Properties deemed by law to be owned by the decedent C.) Concurrent making of a will or making a will within a
under Sec. 85 short time after the transfer.
Inter Vivos Transfers Subject to Estate Tax Note: Check the factual settings before and at time of death
because proximity to death is not always conclusive.
B. Transfer with retention of interest in respect to:

 Examples of motives precluding the category of a - 1. The possession or enjoyment of or the right to the
transfer in contemplation of death: income from the property; or
2. The right either alone or in conjunction with any person,
a.) To relieve the donor from the burden of management; to designate the person who shall possess or enjoy the
b.) To save income or property taxes; property or the income therefrom. And such interest is
c.) To settle family litigated and unlitigated disputes; retained by the decedent for his life or for any period
d.) -09To provide independent income for dependents; which does not in fact end before his death.
e.) 008To see the children enjoy the property while the
M2 donor is alive; C. Transfer with reversionary interest, wherein there is a
f.) O To protect the family from hazards of business possibility that the transferred property may return to the
RC operations; decedent or his estate or that it may become subject to a
g.) BA To reward services rendered power of disposition by the decedent.
- Ex: A transfers his property to B in naked ownership and to
C in usufruct throughout C’s lifetime subject to the condition
Note: that if C predeceases A, the property shall return to A. If A
The THREE (3) YEAR PRESUMPTION provides that any dies during C’s lifetime, the value of the reversionary interest
transfer of a material part of his property in the nature of a of A at death is included in his gross estate.
final disposition or distribution thereof made by the decedent
within three years prior to his death without such adequate and 3.) Revocable transfer
full consideration shall, unless shown to the contrary, be - the decedent has full control of disposition of property
deemed to be have been made in contemplation of death. - even if the control is not exercised, it is enough that it is
exists
This provision, however, has been already deleted in Sec. 100 - A transfer where:
(b) now sec. 85 (B) of the Tax Code by PD No. 1705. a.) The decedent or in conjunction with any other person has
reserved the right to alter, amend, revoke, or terminate; or
Under BIR Ruling No. 261 September 2, 1987, the law does b.) Any such power is relinquished in contemplation of the
not specify the number of years prior to a decedent’s death decedent’s death.
within which a transfer can be considered in contemplation of
death. The power to alter, amend or revoke shall be considered to
exist on the date of the decedent’s death even though:
Note: In relation to transfers with retention of rights which are a.) the exercise of the power is subject to a precedent
made in contemplation of death – if the right of retention by giving of notice; or
the Decedent is co-terminous with his lifetime. b.) The alteration, amendment or revocation takes effect
only upon the expiration of a stated period after the
- Ex: X has a house and lot which he transferred to Y exercise of the power.
a) with the condition that X will use it while X lives
- Effect: Still part of estate of X as he has control over it If the notice has not been given or the power
has not been exercised on or before the decedent’s
b) with the condition that X will use it only for 10 years and death, such notice or the power shall be considered to
then X dies before 10 years have been given or exercised on the date of the
- Effect: Not part of the estate of X as he is not the actual decedent’s death.
owner
4.) Transfer of property under a general power of
3.) Transfer with retention or reservation of certain rights appointment
- This contemplates the instances where the owner transfers
his property during his lifetime but still retains economic - A transfer where the donor of the power of appointment
benefits (the possession or enjoyment of the property or the authorizes the donee of such power to designate any person he
power to designate the person who may exercise such rights). chooses to be given the right over the appointed property.
- It includes: - The transferee may choose freely any person who will own
A. Transfer without retention of interest but intended to take the property after he dies
effect at or after the decedents death.
- Example: donations mortis causa. - Rationale: the will of the transferee is followed; hence, part
of transferee’s estate
- Presumption: proceeds are revocable

* Note: the decedent is the transferee in this provision - include in the estate only if it is revocable as the decedent
retained control over the proceeds
General power of appointment vs. special power of
appointment: 7.) Prior Interest
- Except as otherwise specifically provided therein,
A.) A power is general, when it authorizes the donee of subsections (B), (C), (E) of Section 85 referring to transfer
the power to appoint any person he pleases including
-09 in contemplation of death, revocable transfer and proceeds
himself, thus having a full dominion over the
008 of life insurance respectively shall apply to the transfers,
M2property as if he owned it. trusts, estates, interests, rights, powers and relinquishment
O of powers as severally enumerated and described therein,
B.) It is special when, the donee can appoint only among
RC whether made, created, arising, existing, exercised or
BAa restricted or designated class of persons other than relinquished before or after the effectivity of the CTRP.
himself.
NOTE:
Note: In most of these transfers the property remains
If the power of appointment is general, it makes the substantially that of the transferor during his lifetime
appointed property a part of the donee’s property. notwithstanding the transfer since he still retains either the
“beneficial ownership” or “naked title” to the property.
Under a general power of appointment, title to the
property is legally transferred to the donee. Therefore the
property shall form part of the gross estate of the donee. EXCLUSIONS FROM THE GROSS ESTATE
1. Merger of usufruct in the owner of the naked title

5.) Transfer for insufficient consideration - ex: X has a house and lot. X gave the title to Z.
- A transfer that is not a bona fide sale of property for an X also allows Y to use the same and that in case Y dies, the
adequate and full consideration in money or money’s use goes to Z. What are the effects?
worth. The excess of the fair market value at the time of a) If X dies – include the house and lot in X’s estate
death over the value of the consideration received by the b) If Y dies – exclude from the estate of Y as the will of X is
decedent shall form part of his gross estate. being followed, there is a merger of usufruct in Z (the owner
of the naked title).
- However, if the purported absolute sale inter vivos by the
decedent is shown to be fictitious, then the total value of 2. Fideicommisary and transmissions from the first heir,
the property transferred is subject to inclusion in the legatee, or donee in favor of another beneficiary, in
taxable estate. accordance with the desire of the predecessor
- ex: X has a house and lot. In the will of X, Y may have the
- Ex: X owns a house and lot, he wants to help Y so he sells title to the house and lot but in case Y dies, the property will
his house worth P5M for only P1M. At the time of X’s go to Z. What are the effects?
death, his house and lot is worth P10M. a) If X dies – include as part of X’s estate as he actually owns
How much is included in the gross estatre of X? 10-1 = 9M it
b) If Y dies – excluded from the estate of Y as he has no
- Ex: X bought a car worth P1.3M. X needed money so he control over its disposition
sells his car to Y for only P1M. This is not a transfer for
insufficient consideration as this is a bona fide transfer at - Ex: X has a house and lot which he wants to give to Y but Y
arm’s length; hence, a valid transfer. is a minor at the moment so that X institutes T to hold the
property in trust for Y until Y reaches the age of majority. X
6.) Proceeds of life insurance died. The property passed to T. T died. Y reached the age of
- Proceeds of life insurance taken by the decedent on his own majority. Effect if T dies: Not part of estate of T.
life shall be included in the gross estate if the beneficiary:
A.) Is the estate of the decedent, his executor, or Note: Common reasons for 1 and 2 – the will of the first
administrator (regardless whether the designation is decedent is followed, the second decedent has no control over
revocable or irrevocable); or the disposition.
B.) Third person other than the estate, executor,
administrator but the designation of the beneficiary is 3. Transfers to social welfare, cultural, and charitable
revocable. institutions
- Requisites: F. Retirement benefits of employees of private firms from

a) Qualified organization private pension plans approved by the BIR.
b) Not more than 30% will be used for administrative G. Amount received for war damages.
purposes H. Grants and donations to the Intramuros administration.
- Reason: to encourage such transfers ALLOWABLE DEDUCTIONS FROM THE GROSS
ESTATE
4. Proceeds of insurance not includible in the gross estate - Granted by mere legislative grace
of the decedent
-09 - Construed strictly against the taxpayer
a) Amount receivable by any beneficiary irrevocably
008 - Requisites:
designated in the policy of insurance by the insured.
M2 a) Substantiate the claim for deduction
b) Proceeds of a group insurance policy taken out by a
O b) Identify the provision granting the deduction.
company for its employees.
RC The provision must be clear and definite.
c) Proceeds of insurance policies issued by the GSIS to
BA
government officials and employees. RESIDENT DECEDENT
d) Benefits accruing under the Social Security Act.
e) Proceeds of life insurance payable to the heirs of deceased A. Ordinary Deductions (ELIT):
members of the military personnel of the United States Army
or Philippine Army under laws administered by the United 1) Funeral Expenses
States Veterans Administration. - The amount deductible is equal to 5% of the gross estate or
f) Accident insurance proceeds. the amount of the actual funeral expenses whichever is lower,
but in no case to exceed P200,000;
5. Separate property of the surviving spouse.
- “Actual funeral expenses” are those which were actually
Note: incurred in connection with the interment or burial of the
In the determination of the gross estate, the nature of the deceased and paid for from the estate of said deceased.
property, whether common property of the spouses,
separate or exclusive property either of the deceased or of
the surviving spouse, becomes of vital importance. - Funeral expenses include:
a) Costs of coffin, tombstone, mausoleum, and
What regime of property relations shall govern the burial lot;
spouses? b) Funeral parlor fees;
c) Mourning clothing of the surviving spouse and
Under the Civil Code, the husband and wife who got the unmarried minor children;
married before August 3, 1988 are governed by the d) Costs of obituary notices; and
Conjugal Partnership of Gains, while those who got e) Expenses during the wake.
married on or after August 3, 1988 are governed by the
Absolute Community of Property, unless a different - The following cannot be deducted under funeral expenses:
regime was agreed upon in the marriage settlement. a) Cash advances of the surviving spouse and the heirs;
b) Expenses paid by the relatives and friends; and
EXEMPTION FROM ESTATE TAX c) Expenses after the burial.
A. The first P200, 000.00 value of the estate (sec. 84 NIRC) - Requisites:
B. The merger of the usufruct in the owner of the naked title. a) The expenses must be due to the interment, wake and
C. The transmission from the first heir, legatee, or donee in burial; hence, expenses on the death anniversary are
favor of another beneficiary in accordance with the desire not included
of the predecessor. b) The expenses must have been shouldered by the estate
D. All bequest, devises, legacies or transfers to social welfare, and not by other people
cultural and charitable institutions, no part of the net
income of which inured to the benefit of any individual 2) Judicial expenses of the testamentary or intestate
and provided that not more than 30% of the said bequest, proceedings
etc shall be used by such institution for administration - Requisite: “administration expenses” to those actually
purposes. incurred in the administration of the estate.
E. Intangible personal property of non-resident aliens under
the principle of reciprocity. - Examples:
a) fees of the executor or administrator;
b) attorney’s fees;
c) accountant’s fees; - ex: X obtained a 3M loan from Y and executed a Real Estate
d) court fees; Mortgage over his house and lot worth 5M. X paid 1M. X
e) salaries of employees; and died.
f) All other expense related to the administration of Effect: in the estate of X, include the 5M in the gross estate of
the estate. X and claim as deduction the unpaid 2M.
Note:
-09 • Accommodated Loan
008This includes “all expenses necessary to settle or - Ex: X owns a house and lot worth 5M. Y obtained a 3M loan
preserve the estate” hence, extrajudicial expenses are
M2 from Z with X’s house and lot as collateral. Y paid 1M. Z
included.
O died. X died.
Effect: Include in the gross estate of X the 5M as receivable
RC
BA Expenses not essential to the proper settlement of the from Y (reason: right of reimbursement); and claim as
estate but incurred for the individual benefit of the heirs, deduction the unpaid 2M.
legatees, or devisees are not allowed as deductions.
- ex: expenses to be declared as administrator vs. an 6) Casualty Losses (TRECUSO)
oppositor is a personal expense - They include all losses incurred during the settlement of the
estate arising from fires, storms, shipwreck or other
casualties or from robbery, theft or embezzlement.
- Requisites for deductibility:
a) Losses not compensated by an insurance or
3) Claims against the decedent’s estate otherwise;
- Debts or obligations of the decedent that is enforceable b) Losses that were not claimed as a deduction for income
against the estate provided that the following requisites are tax purposes; and
met: c) Losses incurred not later than the last day for
a) They were contracted in good faith and for an adequate payment of the estate tax (6 months from death).
and full consideration in money or money’s worth. d) Include the worth of the property in the gross estate
b) They must be existing against the estate. e) File a sworn declaration of the fact of loss within 45
c) They must be legally enforceable obligations of the days from its occurrence
decedent and ought to be enforced by the claimants.
d) They must be reasonably certain in amount; and; 7) Unpaid Taxes
e) At the time the indebtedness was incurred, the debt - Unpaid income tax on income due or received before
instrument was duly notarized and if the loan was death of the decedent, and real property taxes, which have
contracted within three (3) years before the death of accrued prior to the death of the decedent (real property
the decedent, the administrator or executor shall taxes accrued at the beginning of the year but may be paid
submit a statement showing the disposition of the before or at the end of each quarter) are deductible.
proceeds of the loan.
- Income taxes upon income received after the death of the
decedent, or property taxes not accrued before his death,
4) Claims against the insolvent persons or any estate tax cannot be deducted because they are
- Requisites for deductibility: chargeable to the income of the estate.
a) The amount of said claims has been initially included
as part of the gross estate; and - except: estate tax because estate tax liability is determined at
b) The incapacity of the debtors to pay their obligations is the time of death
proven and not merely alleged.
5) Unpaid mortgages indebtedness B. Vanishing / Alternating Deduction Or Property

Previously Taxed
- Requisites for deductibility: - an amount allowed to reduce the taxable estate of a decedent
a) The fair market value of the property mortgaged where the property was:
without deducting the mortgage indebtedness has a. received by him from prior decedent by gift, bequest,
been initially included as part of his gross estate; devise or inheritance, or
b) The mortgage indebtedness was contracted in good b. transferred to him by gift, has been the object of
faith and for an adequate and full consideration in previous transfer deduction.
money or money’s worth.
- VANISHING DEDUCTION: because the rate of C. Transfers For Public Use

deduction gradually diminishes and entirely vanishes - Requisites:
depending upon the time interval between the two (2) 1. The disposition must be testamentary in character.
successive transfers. 2. To take effect after death.
3. In favor of the government of the Philippines, or any
- ALTERNATING DEDUCTION: because the present political subdivision thereof.
decedent’s estate cannot claim it if the prior decedent’s 4. Exclusively for public purpose.
estate claimed it
-09 5. Included in the gross estate
008
- Factors necessary in vanishing deduction, these are;
M2 Query: If in a will the property was bequeathed to a city and
a. There are two (2) deceased persons and the first is
O the an NGO, are the tax effects the same? No.
donor; and
RC a) City - included in the gross estate and claimed as deduction
b. The second decedent dies within five (5) years after
BA the b) NGO – excluded from the gross estate and subject to the
death of the prior decedent or in the case of gifts the limitation that not more than 30% must be used for
decedent – donee dies within the same period after the administrative purposes
date of the gift.
- Rationale: D. Family Home

The deduction operates to ease the harshness of - Refers to the dwelling house, including the land on which
successive taxation of the same property within a relatively it is situated, where the husband and wife, or an
short period of time. unmarried person who is the head of the family and
members of their immediate family resides as certified by
Requisites for deductibility: the Barangay Captain of the locality.
1. The present decedent must have acquired the property by
inheritance or by donation. - For the purpose of availing of a family home deduction to
2. The property must have been acquired within five (5) the extent provided by law, a person may constitute only
years prior to the death of the present decedent one family home.
3. The property must have formed part of the gross estate of
the prior decedent if acquired by inheritance, or the taxable - The amount deductible is equivalent to the current fair
gift of the donor if acquired by donation. market value of the decedent’s family home if said
4. The estate tax or the donor’s tax, as the case may be, must current fair market value exceeds P1,000,000, the excess
have been paid on the previous transfer. shall be subject to estate tax.
5. The property must be identified as the one received from
the prior decedent or from the donor, as the case may be. - Requisites to be deductible:
6. The estate of the prior decedent must not have previously a. The family home must be the actual residential home of the
availed of the vanishing deduction on the subject property. decedent and his family at the time of his death. (Decedent
is married and has dependents or is a head of family with
Procedure in computing vanishing deductions: dependents.)
1. Value taken of property previously taxed b. Such fact must be certified by the Barangay Captain of the
Less:Mortgage paid by the present decedent on property locality where the family is situated.
previously mortgaged by prior decedent / donor, if any c. The total value of the family home must be included in the
(Ist deduction) gross estate of the decedent.
= Initial basis d. The allowable deduction must be in an amount equivalent to
the current fair market value of the family home as
2. Initial basis divided by the value of the gross estate of declared or included in the gross estate not exceeding
present decedent X Expenses, and transfer for public purpose P1, 000,000.
=2nddeduction
E. Standard Deduction Of P1, 000,000.00
3. Initial Basis - on top of other deductions, unlike the optional standard
Less: 2nd deduction deduction which is in lieu of other deductions; hence, it does
Final Basis not include the P 200,000 exemption
Multiplied by rate deduction (sec.86 (A.2), NIRC)
Vanishing Deduction F. Medical Expenses
- Requisites:
a. Must be incurred by the decedent within one (1) year
prior to his death 1. Prove that the foreign estate tax has been paid
b. Must be duly substantiated by receipts; and 2. Prove reciprocity : that in the decedent’s foreign country, a
c. Must not exceed P500, 000 similar tax credit is given to Filipinos
*Opinion of JB: medical expense must be related to the cause Limitations on tax credit:
of death as it is the estate that is being settled. Otherwise, if A.)The tax credit limit for estate taxes paid to one foreign
not related, it is a personal expense. country is determined by the following:
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G. Amounts Received By Heirs Under RA 4917 From
008 TAX CREDIT LIMIT=
The Decedent’s Employer As A Consequence Of The
M2
Death Of The Decedent–Employee, Provided That Such
O Decedent’s Net Estate situated in a foreign country x Phil.
Amount Is Included In The Gross Estate Of The Decedent.
RC Estate tax of the Entire net estate
- retirement benefits
BA
- Requisite: include in gross estate B.) The tax credit limit for estate taxes paid to two or more
countries is determined as follows:
H. NET SHARE OF THE SURVIVING SPOUSE IN THE
CONJUGAL / COMMUNITY PROPERTY. TAX CREDIT LIMIT =
- Requisite: Include the entire amount in the gross estate then
deduct the share of the surviving spouse Decedent’s net estate situated outside of the Phil X Phil.
- Ex: H owns a car worth 1M and a house and lot worth 5M Estate tax of Entire net Estate
W owns a truck worth 2M and jewelry worth 10M
H and W owns a conjugal lot worth 20M Note:
H died. 1.) Under limitation A the allowable tax credit is the lower
amount between the tax credit limit and the estate tax paid
Gross estate of H: to the foreign country.
Exclusive Conjugal
5 M house and lot 20 M lot 2.) Under limitation B the allowable tax credit is the lower
1M car _________ _______ amount between the tax credit limit computed under (A)
6M 20 M and that computed under (B)
Total gross estate = 26 M
Then claim as deduction the 10M, which is the ½ share of B.) IF DECEDENT IS A NON – RESIDENT ALIEN
the surviving spouse in the conjugal lot.
The deductions allowed to citizens or residents of the
- Ex: H and W died simultaneously. In computing the gross Philippines are also extended to a non-resident alien decedent
estate of H and W, their shares ½ shares as to the conjugal lot with respect to his estates situated in the Philippines at the
may immediately be split as there is no surviving spouse left. time of his death.
I) Tax Credit For Estate Tax Paid To A Foreign Country In case of deductions for expenses, losses,
- The estate tax imposed by the tax code shall be credited with indebtedness and taxes, the amount of the allowable deduction
the amount of any estate tax paid to a foreign country. is limited only to the proportion of such deductions with the
- Concept: if a property located in the Philippines was already value of such part of his gross estate which at the time of his
subjected to estate tax abroad and the same property is also death, is situated in the Philippines, bears to the value of his
subjected to estate tax in the Philippines, the foreign tax paid entire gross estate wherever situated. (Sec. 86 (B))
is allowed to reduce his Philippine estate tax
Formula:
- Purpose: minimize the effect of international double taxation Allowable deduction of non-resident estate =
- applicable only to residents and citizens, not to NRA since Philippine Gross Estate x Deductions Claimed
he is taxed only on his properties within the Philippines; Entire Gross estate
hence, the NRA will not be made to pay estate taxes twice for
his property located abroad = no international double taxation As a prerequisite to the deduction, it must be
= no tax credit. (Sec. 86 (E)(2)) included in the return required to be filed the value at the time
of his death, of that part of the gross estate of the non-resident
- Requisites:
not situated in the Philippines, to determine the ratable portion approved by the Sec. of Finance, upon recommendation of the
of the deduction for expenses allowable. Insurance Commissioner
Valuation of Property Filing of Notice of Death

The estate shall be appraised at its fair market value (FMV) at
the time of death of the decedent (Sec.88, NIRC). This is Where the gross value of the estate exceeds P 20,000 although
regardless of any subsequent contingency affecting the estate.
-09 exempt, the executor, administrator, or any of the legal heirs
(Lorenzo vs. Posadas, 64 Phil. 353)
008 shall give, within 2 months after the decedent’s death or
M2 within like period after the executor or administrator qualifies
1. Real Property
O as such, a written notice thereof, to the Commissioner of
- higher amount of :
RC Internal Revenue. (Sec. 89, NIRC)
a) FMV as determined by the Commissioner
BA
- This is the zonal value (of the land) as fixed by the CIR, - Contents of the letter:
and can be obtained from the BIR website or regional 1. The fact that the decedent died
office 2. Residence of the decedent
3. Date of death
b) FMV fixed by the provincial or city assessor
- This is the value as shown in the tax declaration of - Effect of failure to file notice: subject to penalty not lower
the property than P1,000
- Use this amount for real properties with no zonal
values (i.e. real properties other than land such as * Note: Filing with the nearest Revenue District Office is
buildings and improvements) sufficient compliance.
* Note : The law does not state that the prevailing market rate Filing of Return and Payment of Tax
or the consideration as a basis for determining the FMV
1.) By whom?
* Note: If there are no improvements in the property, get a • An estate tax return under oath is required by law to
Certificate of No-improvement, (which you can get only after be filed by the executor, administrator, or any of the
obtaining a Certificate of Non-tax delinquency) and attach legal heirs:
these to the estate tax return.
a.) Where the gross value of the estate exceeds
2. Personal Properties P200,000 though exempt from the estate tax; or
a) Shares of Stock
- book or par value at the time of death, and can be obtained b.) Regardless of the gross value of the estate, where
by writing a letter of inquiry, asking for a formal certification the said estate consists of registered or
from the corporation which issued the shares of stock as to the registrable real property, such as real property
value of such stock at the time of death of the decedent (land, bank accounts, others with definite
records), motor vehicle, shares of stock or other
b) Inventories similar property for which a clearance from the
- value as stated in the invoices (i.e.: price at purchase); or the Bureau of Internal Revenue is required as a
prevailing market rate (ask for the value from those engaged condition precedent for the transfer of ownership
in the same business); or if value cannot be definitely thereof in the name of the transferee.
ascertained, state the approximate reasonable value (but this
will be subject to the discretion of the BIR inspector) 2.) When to file?
• The return shall be filed within 6 months from
c) Motor vehicles the decedent’s death.
- these depreciate 20% per year from purchase • The Commissioner shall have the authority to
- Hence, motor vehicles are fully liquidated and has no estate grant, in meritorious cases, a reasonable
tax liability after 5 years but include in the gross estate placing extension not exceeding 30 days for filing the
zero as the amount (to secure a tax clearance therefor) return.
3. Right to Usufruct, use or habitation; or annuity 3.) Where to file?
- probable life of the beneficiary shall be taken into account, in Except in cases where the Commissioner otherwise
accordance with the latest basic mortality table, to be permits, the return shall be filed with:
* if the decedent is a resident * Note: To avoid the imposition of penalties while there is no
a) an authorized agent bank extra/judicial settlement yet, any heir may file a sworn
b) Revenue District Officer declaration to the BIR stating the fact of death, that the estate
c) Revenue Collection Officer has not yet been settled and the list of the properties included
d) duly authorized treasurer of the city or in the estate, as basis for payment of estate tax.
municipality where the decedent was domiciled
-09 at the time of his death, or If Gross Estate >2M, additional requirement:
008 - must submit a certificate of an independent CPA stating:
M2 1. itemized assets of the decedent with corresponding
O gross value at the time of his death;
* if the decedent is a non-resident
RC or if NRA, that part of his gross estate situated in the
BA a) with the Revenue District Office where his Philippines
executor/administrator is registered 2. itemized deductions from the gross estate
b) with the Revenue District Office having 3. amount of tax due, whether paid or still due and
jurisdiction over the residence of the outstanding
executor/administrator
e) with the Office of the Commissioner if the Liability for Payment of Estate Tax
decedent has no executor or administrator
• Primarily Liable : Executor or administrator - before
4.) Copies: delivery to any beneficiary of his distributive shares.
The return shall be filed in triplicate, two (2) for the BIR After due payment, the executor or administrator shall be
and one (1) copy for the taxpayer. discharged from personal liability.
5.) When to Pay • Subsidiarily Liable : Beneficiary - to the extent of his

Pay the estate tax at the time you will file your estate tax distributive share, liable for the portion of the estate tax as
return. (Pay as you file system) his distributive share bears to the value of the total net
estate.
6.) Extension for Payment:
- allowed in meritorious cases when the Commisioner NOTE: There are two ways the government may enforce
finds that the payment of the esate tax on the due date collection of estate taxes from the decedent’s heirs:
would impose undue hardships upon the estate or any heir 1. It can collect from all the heirs the amount of the estate tax
: proportionate to the inheritance they received.
2. It can subject properties of the estate which are in the hands
At most 2 years – if estate extrajudicially settled of the heirs/transferees to the payment of the tax. (CIR vs.
At most 5 years – if estate judicially settled Pineda, 21 SCRA 105)
- NOTE: The taxpayer must not be guilty of NOTE: The heirs have a solidary obligation to settle the
a) negligence estate. Hence, the BIR can collect from or sue any of the heirs,
b) intentional disregard of the rules and regulations, or but only up to the amount of that heir’s share in the hereditary
c) fraud estate. This is without prejudice to such heir’s right of
reimbursement from his co-heirs of their share in the payment
- the taxpayer may also be required to pay a bond not of the estate tax. (CIR vs. Pineda, 21 SCRA 105)
exceeding double the amount of tax and with such sureties, as
the Commissioner deems necessary
Measures to Insure Payment of Estate Tax
* Note: The filing of the estate tax return is not sufficient to a. No judge shall authorize the executor or judicial
obtain a tax clearance, the administrator/executor/heir must administrator to deliver a distributive share to any party
submit additional documents to determine the correctness of interested in the estate unless a certification from the
the values stated by him in the estate tax return. Commissioner that the estate tax has been paid as shown.
- such as the title of the land, tax declaration of the land and its (Sec.94)
improvements or Certificate of No-improvement, vicinity map - by the court requiring the executor/administrator to submit
to fix the exact location and zonal value, etc. an inventory of properties of the estate, these properties are to
(Read: Revenue Memorandum Order 15-2003) be distributed only after payment of estate taxes and receipt of
clearance by the Commissioner or his duly authorized administrator of the estate or any of the heirs of the decedent
representative may, upon authorization by the Commissioner of Internal
- NOTE: The approval of the probate court is not required Revenue withdraw an amount not exceeding P 20,00 without
before estate taxes may be collected. The enforcement and the said certification . (Sec. 97)
collection of taxes are executive in nature. (Marcos II vs. CA,
273 SCRA 47) - For this purpose, all withdrawal slips shall contain a
statement to the effect that all of the joint depositors are still
-09 b. Registers of Deeds shall not register in the living at the time of withdrawal by any one of the joint
Registry of Property any document transferring real property
008 depositors and such statement shall be under oath. Otherwise,
any document transferring real property or real right therein or
M2 the joint depositor will be liable for perjury (Sec. 267).
any chattel mortgage, by way of gift inter vivos or mortis
O
causa, legacy or inheritance, unless certification from the
RC - joint accounts covered by this rule include “and” and
commissioner that the tax has been paid and the y shall
BA “and/or” accounts, but do not include an account subject to a
immediately notify the Commissioner, Regional Director, Survivorship Agreement with a survivor-take-all feature
Revenue District Officer, or Revenue collection Officer or (because there is an automatic transfer of right to the survivor;
treasurer of the city or municipality where their officer are hence, not included in gross estate of the joint depositor who
located, of the non-payment of the tax discovered by them. died – tax avoidance scheme)
(Sec. 95)
- before the properties are transferred in the name of the heirs, g. The estate tax together with interest, penalties, and
a Certificate Authorizing Registration (CAR) must be shown costs that may accrue in addition thereto constitutes a lien
upon all property and rights to property belonging to the
c. Any lawyer notary public, or any Government taxpayer. The lien attaches when the taxpayer neglects or
Officer who, by reason of his official duties, intervenes in the refuses to pay after demand. (Sec. 219)
preparation or acknowledgement of documents regarding
partition or disposal of donation inter vivos or mortis causa, h. In judicial settlement of estates, the court is
legacy or inheritance, shall have the duty of furnishing the required to furnish the commissioner of Internal Revenue a
Commissioner, etc., with copies of such documents and any certified copy of the schedule of participation and the court
information whatsoever, which may facilitate the collection of order approving the same within 30 days after its
the aforementioned tax. (Sec. 95) promulgation. (Sec. 91(b));
- ex: deed of extrajudicial settlement, deed of donation
i. The estate tax shall be paid by the executor or
d. Neither shall a debtor of a deceased pay his debts administrator before delivery to any beneficiary his
to the heirs, legatees, executor or administrator of his creditor, distributive share of the estate (Sec. 91 (c)). He may be
unless a certification of the Commissioner that the tax fixed discharged from personal liability for deficiency in the estate
has been paid is shown; but he may pay the executor or tax only after written application to the commissioner and
judicial administrator without said certification if the credit is upon determination that no such deficiency appears. (Sec.
included in the inventory of the estate of the deceased. (Sec. 92)
95)
- else: debtor may be personally liable for the payment of the NOTE: Additional Readings
lost tax, like a withholding agent who fails to withhold taxes 1. Revenue Regulation 2-2003
2. Revenue Memorandum Order 15-2003
e. Corporations, sociedad anonima, partnerships,
business or industry organized in the Philippines shall not
transfer in their books any shares obligations, bonds or rights TAX TIPS: Avoidance of Estate Tax Liability
by way of gift inter vivos or mortis causa, legacy or 1. Maximize your claims for deductions such as the use of the
inheritance to the new owner unless a certification from the transfers falling under the exclusions from gross estate.
Commissioner that the taxes fixed and due thereon have been
is shown; (Sec. 97) 2. Donate properties to your relatives as the tax rates for
- obligation of corporate secretary donor’s taxes are lower than for estate taxes.
f. If a bank has knowledge of the death of a person 3. Estate Planning (Section 40 (c), NIRC)
who maintained a bank deposit account alone or jointly with - execute a Deed of Exchange; the properties of at most 5
another, it shall not allow any withdrawal from the said joint persons in exchange for shares of stock in order to obtain
deposit account unless the Commissioner has certified that the control of the corporation (more than 51% ownership)
estate taxes imposed thereon have been paid. However, the - this exchange is not taxable for income tax purposes
- more tax savings if real properties are exchanged not a tax on the property as such because its imposition does
- the properties in the deed will no longer be part of the not rest upon general ownership.
gross estate as it is now owned by the corporation
- the stock shares will be included in the gross estate but the - The tax is imposed without reference to the death of the
tax would be lower as the value at time of death might still donor unlike in the case of estate tax.
be the same original value at the time of exchange; on the
other hand, if there was no exchange the estate tax for the • Donation / Gift
land would be higher as the value of the land at time of
-09 - an act of liberality whereby a person disposes gratuitously of
death will be higher than at the time of the acquisition.
008 a thing or right in favor of another who accepts it.
M2
4. Set up a living trust
O - For tax purposes, the term has a much wider meaning, it
- Trust: obligation imposed by a person regarding his
RC
includes:
property
BA
- Create an irrevocable trust over your properties so that a. any transfer in trust or otherwise, whether the gift is
they will not form part of your gross estate when you die. direct or indirect, and whether the property is real or
This is because the Irrevocable Trust is a new taxpayer personal, tangible or intangible. (Sec. 98)
created.
- Ex: grandfather (Grantor) during his lifetime would like to b. any transfer of property by gift, except in forced sales
give certain properties to his grandchild. Until he reaches and in the sale of real property which is a capital asset,
the age of maturity, the properties will be held in trust by X for less than and adequate and full consideration in
(trustee) for the grandchild (Beneficiary). money or money’s worth. (Sec. 100)
c. Condonation or remission of debt, where the creditor

merely desires to benefit a debtor and without any
consideration therefore cancels the debt.
Requisites Of A Taxable Gift:

1.) CAPACITY of the donor to make the donation;
2.) DONATIVE INTENT or INTENT on the part of the
DISTINCTION BETWEEN DONOR’S AND ESTATE donor to make a gift;
TAX 3.) DELIVERY, whether actual or constructive, of the
gift; and
DONOR’S TAX ESTATE TAX 4.) ACCEPTANCE of the gift by the donee.
Tax on the privilege to Tax on the privilege to
transmit property during the transmit property upon one’s Note:
lifetime of the donor death A. The donee, unlike the donor need not be capacitated.
Tax rates are lower (2 to 15) Tax rates are higher (5 to20) B. donor’s tax applies now to both natural and juridical
Exemption is only P Tax exemption is persons.
100,000.00 P200,000.00 C. donative intent must be present in direct gift but with
Notice of donation is Notice of death is required respect to indirect gift, e.g. transfer of property for less
generally not required than an adequate and full consideration, donative intent is
Extension of payment is not Extension of payment may superfluous. Thus, donative intent is not always essential
provided be granted by the to constitute a gift.
Commissioner of Internal D. In Abello vs. CIR (Feb. 25, 2005), donative intent is
Revenue evidenced by a reduction of patrimony of one and an
Payable within 30 days from Payable within 6 months increase in patrimony to the other.
the date of gift from the date of death
Imposed on the net gift Imposed on the net estate Purposes Of Gift Tax
1.) The gift tax was enacted originally to supplement the
II. DONOR’S TAX / GIFT TAX estate and inheritance taxes by preventing their avoidance
through the taxation of gifts inter vivos.
A. NATURE 2.) The donor’s tax is also intended to prevent the
- It is an excise (privilege) tax, imposed on the privilege of the avoidance of income tax through the device of splitting
donor to give or on the privilege of the done to receive. It is income among numerous/different donees with the donor

thereby escaping the effect of the progressive rates of strangers

income taxation. 3.) donations made between business organizations
are considered donations made to strangers
Kinds Of Gift Taxes: (RR 2-2003)
1. Donor’s tax or tax levied on the act of giving; it
supplements the estate tax; and Note: Donees who have no blood relation to the donor are
2. Donee’s tax or tax levied on the act of receiving; it considered strangers to the donor, such as those made to one’s
was formerly the counterpart of the inheritance tax, which
-09 in-laws or to juridical persons.
has been integrated into an estate tax.
008
M2 2. Value of the Gift
*Both taxes have now been integrated into a donor’s tax.
O - the higher the value of the gift, the higher the gift taxes
RC
Parties To A Donation:
BA
1. Donor - the Person who disposes of his property or right. C. DEDUCTIONS / EXEMPTIONS FROM GIFT TAX
2. Donee - the Person who receives the property or right.
1. Gifts Made by a Resident:
Properties Included In The Term “Gift”
a.) Dowries or gifts made on account of marriage before its
(A). In the case of resident citizens, non-resident citizens celebration or within one year thereafter by parents to each of
and resident aliens: their legitimate, illegitimate or adopted children to the extent
1. Real property within and without the Philippines. of the first P10,000.00.
2. Tangible personal property within and without the
Philippines; and Requisites:
3. Intangible personal property within and without the 1. The donation must be given on account of marriage.
Philippines. 2. The parent must give it to his child.
3. The child must be either the legitimate, recognized
(B.) In the case of non-resident aliens: natural or legally adopted child of the donor, and;
1. Real property within the Philippines.
4. It must be given before or one year after the
2. Tangible personal property within the Philippines.
celebration of the marriage.
3. Intangible personal property within the Philippines,
unless there is reciprocity in which case, it is not
b.) Gifts made to or for the use of the National Government or
taxable.
any of its agencies which is not conducted for profit, or to any
political subdivision of the said government.
Note:
The specific items includible in the “gross estate” are
c.) Gifts in favor of educational, charitable, religious, cultural
applicable to and are embraced by the term “gift”.
or social welfare corporation, institutions, foundations, trust or
philanthropic organization, research institution or
organization, or accredited non-government organization.
B. FACTORS AFFECTING LIABILITY FOR GIFT
Provided, that no more than 30% of said gifts shall be used by
TAXES
such donee for administration purposes.
1. Relationship of the donor and the donee
Note:
a) when the donee is considered a stranger to the
For purposes of exemption, a non-profit educational
donor, the donor’s tax shall be 30% of the net gifts.
and/or charitable corporation, institution, accredited non-
b) when the donee is a relative of the donor, the tax
government organization, trust or philanthropic
shall be based on the 2-15% table under Sec. 99(A).
organization is defined as:
• school, trust or university and/ or charitable
• Stranger
corporation, foundation trust or philanthropic
1.) one who is not a :
organization and/ or research institution or
(a) brother/sister (whole or half blood), spouse,
organization incorporated as a non-stock entity:
ancestor and lineal descendant
(b) relative by consanguinity in the collateral line • paying no dividends.
within the fourth degree of relationship • governed by trustees who receive no compensation;
2.) donations made between individuals and business and
organizations are considered donations to
• devoting all its income to the accomplishment and D. TAX TREATMENT OF PROPERTIES
promotion of the purposes enumerated in its articles TRANSFERRED FOR LESS THAN FULL / ADEQUATE
of incorporation. CONSIDERATION
General Rule: The amount by which the FMV of the property

exceeded the value of the consideration shall be deemed a gift
Note:
Only donations made to non-stock, non-profit educational
-09 Exception: real properties classified as capital assets (not used
institutions are exempt from gift taxes as although Article 14
008 in business) as there were already subjected to Capital Gains
of the Constitution states that
M2 proprietary educational Tax
institutions may be given the same privileges subject to a
O
guideline; as a guideline, the NIRC does not provide for such
RC
exemption to them.
BA E. TAX TREATMENT OF POLITICAL
CONTRIBUTIONS
2. Gifts made by a Non-Resident Alien - any contribution in cash or in kind to any candidate, political
a.) Gifts made to or for the use of the National Government party or coalition of parties for campaign purposes shall be
or any entity created by of its agencies which is not governed by the Election Code; hence, this is not subject to
conducted for profit, or to any political subdivision of gift tax (report to COMELEC?)
the said government.
b.) Gifts in favor of educational, charitable, religious, F. TAX CREDIT FOR DONOR’S TAXES PAID TO A
cultural or social welfare corporation, institution, FOREIGN COUNTRY
foundations trust or philanthropic organization, research 1. Donor was a Filipino citizen or resident alien, at the time
organization or institution; Provided, that no more than of foreign donation
30% of said gifts shall be used by such donee for 2. Donor’s taxes of any character and description are imposed
administration purposes. and paid by the authority of a foreign country.
Note: doesn’t include accredited NGO
Note:
1. Intangible personal property in the gross gift of a NON- Limitations:
RESIDENT ALIEN donor shall be taxable in the Philippines, A.) For donor’s tax paid to one foreign country;
if the PRINCIPLE OF RECIPROCITY is not cognizable.
The amount of tax credit in respect to the tax paid to
2. Intangible personal properties considered situated in the any country shall not exceed the same proportion of the
Philippines. tax against which credit is taken which the net gifts
situated within such country taxable under the National
• Franchise which must be exercised in the Philippines Internal Revenue Code bears to his entire net gift, and
• Shares of stocks issued by any corporation or
sociedad anonima organized or constituted in the B.) For donor’s tax paid to two or more foreign countries:
Philippines in accordance with its laws.
The total amount of the credit shall not exceed the
• Shares of stocks issued by any foreign corporation
same proportion of the tax against which such credit is
85% of the business of which is situated in the
taken, which the donor’s net gift situated outside the
Philippines.
Philippines taxable under the National Internal Revenue
• Shares of stock issued by a foreign corporation, if Code bears to his entire net gift.
such shares, obligations, or bonds, have acquired a
business situs in the Philippines; and
• Shares or rights in any partnership, business or
industry established in the Philippines.
Formula:
1. Donor’s Tax Paid to 1 Foreign Country
Tax Credit Limit =
Net gift situated in a foreign country X Phil. Donor’s Tax

- the law in force at the time of the perfection / completion of

Entire net gifts the donation shall govern the imposition of donor’s tax. A
donation is considered as completed FOR TAX PURPOSES
at the time the donee accepts the gift.
2. Donor’s Taxes paid to 2 or more Foreign Countries
J. ADMINISTRATIVE PROVISIONS
Tax Credit Limit =
-09 1. Filing of notice of donation
Net gifts outside the Philippines X Phil. Donor’s Tax
008
M2 General Rule: Filing of notice of donation is not required
O Entire net gifts Exception: if the donor wishes to claim exemption from tax
RC and the donee is an organization under Sec.101(A3) and Sec.
Note: BA 101 (B2)
• Under limitation A the allowable tax credit limit is
the LOWER AMOUNT between the tax credit limit Requisites to be exempt from gift tax :
and the gift tax paid to the foreign country. 1. Donor is engaged in business
2. Donee is any of the organizations mentioned under Sec.
• Under limitation B the allowable tax credit is the 101(A3) and Sec. 101 (B2)
LOWER AMOUNT between the tax credits; limit 3. Donor must give notice to the RDO on every donation
computed under A and that computed Under B. worth at least P50,000.
4. The notice must be given within 30 days from the
Note: Void Donations Are Not Subject To Donor’s Tax issuance by the donee of a Certificate of Donation.
Such as: 5. The certificate of Donation must be attached to the
• Between husband and wife, even if the relationship has notice.
not been solemnized.
2. Filing of Donor’s Tax Return
• Between persons guilty of adultery or concubinage.
- within 30 days after the completion of the gift
• Between those found guilty of the same criminal offenses. - donation is completed FOR TAX PURPOSES at the time the
• Between those made to a public officer or his wife, donee accepts the gift
descendants, ascendants by reason of his office. - Contents:
1. Gifts made during the calendar year
Note: Effects Of General And Specific Renunciation 2. Deductions claimed and allowed
- An heir’s general renunciation of inheritance in favor of a 3. Previous net gifts made during the year
co-heir is not subject to donor’s tax, but if it is specifically 4. Name of the done
renounced in favor of a co-heir to the exclusion of others, it 5. Relationship of the donor and the done
shall be subject to donor’s tax. 6. Other information as may be required
Note: Renunciation of a surviving spouse of his/her share 3. Payment of Donor’s Tax

in the conjugal partnership or absolute community after - pay as you file the tax return
dissolution of marriage - Note: if the donor’s tax was paid for the transfer, there is no
- whether made in favor of the heirs of the deceased spouse or more need to subject the transfer again to estate tax. Applying
in favor of a third person, the same is subject to donor’s tax the Back Tax Theory, there is no tax that remained unpaid
regarding this transfer.
G. NET GIFT 4. Extensions For Payment Of Donor’s Tax

- the total amount of gifts less the allowable deductions and - the NIRC does not provide for any extension for payment of
specific exemptions. gift tax, as it is presumed that if you can donate, you still have
- the total net gifts made during the SAME calendar year is sufficient properties to pay for the tax. Unlike in estate tax
used as basis for computing the donor’s tax where extension is granted, because the payment of the tax
may cause undue hardship on the heirs specifically for non-
H. VALUATION liquid properties which requires time to be sold first to be
- the gift tax is based on the fair market value of the gift at the converted into cash for payment of the estate tax.
time it was given
TAX TIPS : Avoidance of Gift Taxes
I. LAW APPLICABLE

Execute a Deed of Extra-judicial Settlement with simultaneous the right of W to question the validity of the donation
general renunciation of all inheritance without her consent.
(by operation of law, the renounced inheritance will go to the
co-heirs anyway). PROBLEMS
1. Donations made by X
PROBLEMS ON DOWRY DEDUCTION January – 300,000 to his brother
1. A is the child of H and W April – 400,000 to his sister
January – A got married, H and W gave him P2,000
-09 August – 500,000 to his mother
March – H and W gave A P2,000
008
April – H and W gave A another P2,000
M2 Compute donor’s tax:
Can the parents claim dowry deduction even if these were
O a) For January donation
made on a staggered basis?
RC = 300,000 * (percentage in the 2 to 15% table) = tax
BA b) For April Donation
- Yes, provided these were made on account of marriage, = (300,000 + 400,000) * (2 to 15% table) = tax
before the marriage or 1 year thereafter. c) For August Donation
= (300,000 + 400,000 + 700,000) * (2 to 15% table)
2. January - A married B and was given dowry = tax less tax paid for January and April
February – B died 2. X wants to give Y 200,000, will there be tax savings to X if
December – A married C and was given dowry he will donate one time the amount of 200,000 or should he
Can the parents of A still claim dowry deduction even if it was split by donating 100,000 on December 2007 and 100,000 on
claimed already for the January dowry? January 2008?
- There is no rule on the matter yet but it is submitted that as it - It depends if X and Y are relative or not.
was made on account of 2 different marriages, the deduction
for the December dowry may be made. a) relatives – yes, there will be savings as under the table in
Section 99, the first 100,000 is exempt from Donor’s tax. No
3. A and C are the children of H and W donor’s tax will then be paid for both donations.
January - A married B, given dowry
February – C married D, given dowry b) strangers – nom there will be no tax savings. A flat rate if
Can H and W claim dowry deduction for both? 30% is imposed on donations made between strangers; hence,
-Yes, as the dowries were given to different children the same amount of P60,000 donor’s tax will be paid whether
made one time or split.
4. H and W jointly donated to their child A 1M on account of
his marriage to B. Show computation. 3. X died and left 1M each to his heirs A, B, C. The heirs
agreed to settle extrajudicially.
For each of H and W the computation is:
500,000 – to A 250,000 a) A renounced his inheritance in favor of B. Is there liability
- to B 250,000 for donor’s tax?
A B - Yes, this is a case of waiver. A is deemed to have accepted

250,000 250,000 the property before he gave it to B as one cannot give what
-10,000 _______ one does not own. A specific renunciation is taxable.
240,000 250,000
*2 to 15% * 30% b) A renounced his share without specifying a co-heir who
3, 600 75,000 will receive the same. Is there liability for donor’s tax?
Note: Do not deduct the first 100,000 in case of donee- - No donor’s tax because as if A never inherited anything from
relatives as this is incorporated already in the table under X and the transfer was made directly from X to B and C.
Section 99.
General Rule: H and W are considered separate and distinct VALUE ADDED TAX
taxpayers for purposes of donor’s tax.
Exception: What was donated is a conjugal property and only A. Value Added Tax
H signed. There is only one donor, without prejudice to - Indirect Tax

- It is not the tax itself which is shifted or passed but it is the E. Zero rating vs. Exemption
burden to pay the tax
 Why? Tax is Personal. Seller is still liable, only that the a. A zero-rated scale is taxable transaction, but does not
economic burden is shouldered by the buyer. result in an output tax while an exempted transaction
is not subject to the output tax;
b. The input VAT on the purchases of VAT-registered
B. Transactions Subject to VAT (ISBEL) person with zero-rated sales may be allowed as tax
a. Importation – whether or not in the regular course of
-09 credits or refunded while the seller in an exempt
008 business transaction is not entitled to any input tax on his
b. Sale
M2 purchases despite the issuance of a VAT invoice or
O conducted in the receipt; and
c. Barter
RC c. Persons engaged in transactions which are zero-rated,
BA regular course being subject to VAT, are required to register while
d. Exchange of business registration is option for VAT-exempt persons.
e. Lease
F. Tax Credits
* The phrase “in the course of business” means the regular conduct a. Transitional Input Tax Credits (Sec. 111(A),
or pursuit of a commercial or an economic activity, including NIRC, as amended by RA 9337)
transactions incidental thereto, by any person regardless of whether b. Presumptive Input Tax Credits (Sec. 111(B),
or not the person engaged therein is a non-stock, non-profit private NIRC, as amended by RA 9337)
organization (irrespective of the disposition of its net income and
whether or not it sells exclusively to members or their guests), or
government entity.
TAX ADMINISTRATION AND ENFORCEMENT
* VAT becomes due when the following conditioned concur:
A. Tax Administration: Its general concepts
a. There is sale, barter, exchange, transfer or similar - is the power of the Bureau of Internal
transactions, either for nominal or valuable consideration, Revenue (BIR) to enforced and administer
intended to transfer ownership of, or title to, articles imported, taxes.
milled, produced or manufactured; and
B. Government agencies involved in tax
b. The sale is consummated, not merely perfected, in the administration
Philippines. The place where the title to the thing passes - the BIR and Bureau of Customs are tasked
determines the place of delivery or tax situs. to implement revenues laws as the case
may be.
C. Specific Characteristics of VAT
C. The Bureau of Internal Revenue
a. Consumption Based Tax
- the person who last consumes the product absorbs a. Composition Functions
the effect of VAT - The Bureau of Internal Revenue shall have
a chief to be known as Commissioner of
1. Destination Principle Internal Revenue, hereinafter referred to as
- Goods are destined to be consumed in the the Commissioner and four (4) assistant
Philippines chiefs to be known as Deputy
Commissioners. (Sec. 3, NIRC)
2. Cross-border principle
- Goods going out of the Philippines shall not be b. Powers and Duties
subjected to tax since these goods are not destined i. In general
to be consumed in the Phils.
- The Bureau of Internal Revenue shall be
*VAT is imposed only on whatever value was added. under the supervision and control of the
Department of Finance and its powers and
D. Exempt Transactions (Sec. 109, NIRC, as amended duties shall comprehend the assessment
by RA 9337) and collection of all national internal
revenue taxes, fees, and charges, and the
enforcement of all forfeitures, penalties, - the Bureau has the power to issue rules and
and fines connected therewith, including issuances as the case may be but subject to
the execution of judgments in all cases the following rule:
decided in its favor by the Court of Tax
Appeals and the ordinary courts. The SEC. 246. Non-Retroactivity of Rulings. -
Bureau shall give effect to and administer Any revocation, modification or reversal of any of
the supervisory and police powers the rules and regulations promulgated in accordance
-09 conferred to it by this Code or other laws. with the preceding Sections or any of the rulings or
008 (Sec. 2, NIRC) circulars promulgated by the Commissioner shall not
be given retroactive application if the revocation,
M2
O ii. Specific modification or reversal will be prejudicial to the
RC 1. Interpret tax laws and decide taxpayers, except in the following cases:
BA cases (Sec.4, NIRC)
(a) Where the taxpayer deliberately misstates or
- The power to interpret the provisions of omits material facts from his return or any document
this Code and other tax laws shall be under required of him by the Bureau of Internal Revenue;
the exclusive and original jurisdiction of the
Commissioner, subject to review by the (b) Where the facts subsequently gathered by the
Secretary of Finance. Bureau of Internal Revenue are materially different
from the facts on which the ruling is based; or
The power to decide disputed assessments,
refunds of internal revenue taxes, fees or (c) Where the taxpayer acted in bad faith.
other charges, penalties imposed in relation
thereto, or other matters arising under this 2. Examination of Books of Accounts
Code or other laws or portions thereof (Sec. 5, NIRC)
administered by the Bureau of Internal - the Bureau has the power to examine
Revenue is vested in the Commissioner, books of accounts of every person
subject to the exclusive appellate (taxpayer) engaged in a business
jurisdiction of the Court of Tax Appeals.
a. however before a tax official
a. BIR Issuances and rules could inquire into said books of
relevant thereto accounts a letter of authority is
required.
The power to issue regulations is
expressly conferred in the Tax b. What is “third-party verification
Code. Thus, the Secretary of rule”?
Finance, upon the recommendation
of the Commissioner, shall - In ascertaining the correctness of any return,
promulgate all needful rules and or in making a return when none has been made,
regulations for the effective or in determining the liability of any person for
enforcement of the provisions of any internal revenue tax, or in collecting any
the Tax Code. (see Sec.244, such liability, or in evaluating tax compliance,
NIRC). The rules and regulations the Commissioner is authorized to obtain on a
of the Bureau shall contain, among regular basis from any person other than the
others, provisions specifying, person whose internal revenue tax liability is
prescribing or defining the time and subject to audit or investigation, or from any
manner of canvassing revenue office or officer of the national and local
regions, form of labels, conditions governments, government agencies and
to be observed by revenue officers instrumentalities, including the Bangko Sentral
respecting the institutions and ng Pilipinas and government-owned or
conduct of legal actions. (see -controlled corporations, any information such
Sec.245, NIRC) as, but not limited to, costs and volume of
production, receipts or sales and gross incomes
of taxpayers, and the names, addresses, and
financial statements of corporations, mutual fund
companies, insurance companies, regional by any one of the joint depositors and such statement shall be
operating headquarters of multinational under oath by the said depositors.
companies, joint accounts, associations, joint
ventures of consortia and registered partnerships, d. Summons persons, take testimony
and their members;
In ascertaining the correctness of any return, or in
c. Inquiry into bank deposits (Sec 6 {f}), making a return when none has been made, or in determining
-09
NIRC) the liability of any person for any internal revenue tax, or in
008 collecting any such liability, or in evaluating tax compliance,
M2
General Rule: the Commissioner is authorized:
O
RC 1. To summon the person liable for tax or required to
BA The Bureau of Internal Revenue has no file a return, or any officer or employee of such person, or any
power to inquire into the bank deposits of a person having possession, custody, or care of the books of
person or taxpayer. accounts and other accounting records containing entries
relating to the business of the person liable for tax, or any
Exceptions: other person, to appear before the Commissioner or his duly
authorized representative at a time and place specified in the
Notwithstanding any contrary provision of summons and to produce such books, papers, records, or other
Republic Act No. 1405 and other general or special data, and to give testimony (Sec.5 {c}, NIRC)
laws, the Commissioner is hereby authorized to
inquire into the bank deposits of: 2. To take such testimony of the person concerned,
under oath, as may be relevant or material to such inquiry
1) a decedent to determine his gross estate; (Sec.5 {d}, NIRC)
and
(2) any taxpayer who has filed an - To summon the person liable for tax or
application for compromise of his tax liability under required to file a return, or any officer or employee of such
Sec. 204 (A) (2) of this Code by reason of financial person, or any person having possession, custody, or care of
incapacity to pay his tax liability. the books of accounts and other accounting records containing
entries relating to the business of the person liable for tax, or
In case a taxpayer files an application to compromise any other person, to appear before the Commissioner or his
the payment of his tax liabilities on his claim that his financial duly authorized representative at a time and place specified in
position demonstrates a clear inability to pay the tax assessed, the summons and to produce such books, papers, records, or
his application shall not be considered unless and until he other data, and to give testimony.
waives in writing his privilege under Republic Act No. 1405
or under other general or special laws, and such waiver shall 3. Power to assess and prescribe requirements for tax
constitute the authority of the Commissioner to inquire into administration
the bank deposits of the taxpayer.
a. Power to examine returns (Sec. 6 {a},
Such limited power of the Commissioner does not NIRC)
conflict with R.A 1405 or the Secrecy of Bank Deposits Law - After a return has been filed as
because the provisions of the Tax Code granting this power required under the provisions of this Code,
are an exception to the said legislation. the Commissioner or his duly authorized
representative may authorize the
If the bank has knowledge of the death of a person, examination of any taxpayer and the
who maintained a bank deposit account either alone or jointly assessment of the correct amount of tax:
with another, it shall not allow any withdrawal from the said Provided, however; That failure to file a
deposit account, unless the Commissioner has certified that the return shall not prevent the Commissioner
transfer taxes imposed thereon have been paid. However the from authorizing the examination of any
administrator of the estate or any one of the heirs of the taxpayer.
decedent may, upon authorization by the Commissioner, Any return, statement of
withdraw an amount not exceeding twenty thousand pesos declaration filed in any office authorized to
(P20, 000.00) without the certification. For this purpose all receive the same shall not be withdrawn:
withdrawal slips shall contain a statement to the effect that all Provided, That within three (3) years from
of the joint depositors are still living at the time of withdrawal the date of such filing, the same may be
modified, changed, or amended: Provided, importation of any article subject to excise

further, That no notice for audit or tax under Title VI of this Code or in the
investigation of such return, statement or manufacture or repair or sale, of any die for
declaration has in the meantime been printing, or making of stamps, or labels shall
actually served upon the taxpayer. upon conviction for each act or omission, be
punished by a fine of not less than Five
i. Amendment of Returns thousand pesos (P5,000) but not more than
-09 Ten thousand pesos (P10,000), or suffer
008 When a report required by law as a imprisonment of not less than two (2) years
M2 basis for the assessment of any national and one (1) day but not more than four (4)
O internal revenue tax shall not be forthcoming years, or both. (see Sec.270, NIRC)
RC within the time fixed by laws or rules and
BA regulations or when there is reason to
believe that any such report is false,
incomplete or erroneous, the Commissioner b. Power to make a returns (Sec.6 {b},
shall assess the proper tax on the best NIRC)
evidence obtainable.
In case a person fails to file a
required return or other document at the What is “Best Evidence
time prescribed by law, or willfully or Obtainable Rule”?
otherwise files a false or fraudulent return
or other document, the Commissioner shall - In case a person fails to file a required
make or amend the return from his own return or other document at the time
knowledge and from such information as prescribed by law, or willfully or otherwise
he can obtain through testimony or files a false or fraudulent return or other
otherwise, which shall be prima facie document, the Commissioner shall make or
correct and sufficient for all legal purposes. amend the return from his own knowledge
(Sec. 6 {b}, NIRC) and from such information as he can obtain
through testimony or otherwise, which
shall be prima facie correct and sufficient
ii. Rule on confidentiality of tax for all legal purposes.
returns and exceptions thereto
(Sec.71 and 270, NIRC)
c. Power to conduct inventory taking,
- After the assessment shall have surveillance and to issue presumptive
been made, as provided in this Title, the gross sales/receipts (see Sec.6 {c},
returns, together with any corrections NIRC)
thereof which may have been made by the - The Commissioner may, at any time during
Commissioner, shall be filed in the Office of the taxable year, order inventory-taking of goods of
the Commissioner and shall constitute any taxpayer as a basis for determining his internal
public records and be open to inspection as revenue tax liabilities, or may place the business
such upon the order of the President of the operations of any person, natural or juridical, under
Philippines, under rules and regulations to observation or surveillance if there is reason to
be prescribed by the Secretary of Finance, believe that such person is not declaring his correct
upon recommendation of the Commissioner. income, sales or receipts for internal revenue tax
purposes. The findings may be used as the basis for
assessing the taxes for the other months or quarters of
The Commissioner may, in each the same or different taxable years and such
year, cause to be prepared and published in assessment shall be deemed prima facie correct.
any newspaper the lists containing the
names and addresses of persons who have When it is found that a person has failed to
filed income tax returns. (see Sec.71, NIRC) issue receipts and invoices in violation of the
requirements of Sections 113 and 237 of the Tax
Any internal revenue officer who is Code, or when there is reason to believe that the
or shall become interested, directly or books of accounts or other records do not correctly
indirectly, in the manufacture, sale or reflect the declarations made or to be made in a
return required to be filed under the provisions of this • when the taxpayer is retiring form
Code, the Commissioner, after taking into account business
the sales, receipts, income or other taxable base of
other persons engaged in similar businesses under e. Power to fix real property values (see
similar situations or circumstances or after Sec.6 {e}, NIRC)
considering other relevant information may prescribe
a minimum amount of such gross receipts, sales and - The Commissioner is authorized to divide
-09taxable base, and such amount so prescribed shall be the Philippines into different zones or areas
008prima facie correct for purposes of determining the and shall, upon consultation with competent
M2 internal revenue tax liabilities of such person. appraisers both from the private and public
O
RC sectors, determine the fair market value of
real properties located in each zone or area.
BA d. Power to terminate tax period (see For purposes of computing any internal
Sec. 6 {d}), NIRC) revenue tax, the value of the property shall
- When it shall come to the knowledge of be whichever the higher is of:
the Commissioner that a taxpayer is
retiring from business subject to tax, or is
(1) The fair market value as
intending to leave the Philippines or to
determined by the Commissioner, or
remove his property therefore or to hide or
(2) The fair market value as shown
conceal his property, or is performing any
in the schedule of values of the
act tending to obstruct the proceedings for
Provincial and City Assessors.
the collection of the tax for the past or
current quarter or year or to render the
f. Power to accredit tax agents (see Sec.6
same totally or partly ineffective unless
{g}, NIRC)
such proceedings are begun immediately,
- The Commissioner shall accredit and
the Commissioner shall declare the tax
register, based on their professional
period of such taxpayer terminated at any
competence, integrity and moral fitness,
time and shall send the taxpayer a notice of
individuals and general professional
such decision, together with a request for
partnerships and their representatives who
the immediate payment of the tax for the
prepare and file tax returns, statements,
period so declared terminated and the tax
reports, protests, and other papers with or
for the preceding year or quarter, or such
who appear before, the Bureau for
portion thereof as may be unpaid, and said
taxpayers. Within one hundred twenty
taxes shall be due and payable immediately
(120) days from January 1, 1998, the
and shall be subject to all the penalties
Commissioner shall create national and
hereafter prescribed, unless paid within the
regional accreditation boards, the members
time fixed in the demand made by the
of which shall serve for three (3) years,
Commissioner.
and shall designate from among the senior
officials of the Bureau, one (1) chairman
- the BIR has the power to terminate tax
and two (2) members for each board,
period under the following instances:
subject to such rules and regulations as the
Secretary of Finance shall promulgate
• when the taxpayer conceals his
upon the recommendation of the
properties with the intention to evade Commissioner.
taxes
• when the taxpayer is leaving the Individuals and general professional
Philippines with the intention to partnerships and their representatives who
evade taxes are denied accreditation by the
• when the taxpayer is obstructing Commissioner and/or the national and
proceedings for the collection of regional accreditation boards may appeal
taxes such denial to the Secretary of Finance,
• when the taxpayer is removing who shall rule on the appeal within sixty
properties with the intention of (60) days from receipt of such appeal.
evading taxes Failure of the Secretary of Finance to rule
on the Appeal within the prescribed period
shall be deemed as approval of the

application for accreditation of the i. Non-delegable powers in relation to
appellant. Section 16 of NIRC
g. Power to prescribe - the following are the powers which the

procedural/documentary requirements Bureau of Internal Revenue cannot
- the BIR has the power to prescribe the delegate:
-09 manner of filing of a returns
008 a. the power to compromise
M2 h. Power to delegate (see Sec.7, NIRC)
O - The Commissioner may delegate the - as a general rule the power of the BIR to
RC powers vested in him under the pertinent compromise cannot be delegated to other
BA provisions of the Tax Code to any or such administrative agencies unless in the
subordinate officials with the rank following grounds:
equivalent to a division chief or higher, 1. a reasonable doubt as to
subject to such limitations and restrictions the validity of the claim
as may be imposed under rules and against the taxpayer
regulations to be promulgated by the exists
Secretary of finance, upon 2. financial inability to pay
recommendation of the Commissioner:
Provided, however, That the following The compromise settlement of any tax liability shall
powers of the Commissioner shall not be be subject to the following minimum accounts:
delegated:
a. For cases of financial inability to pay, a
(a) The power to recommend the minimum compromise rate equivalent to ten
promulgation of rules and regulations by the per cent (10%) of the basic tax assessed
Secretary of Finance;
b. For other cases, a minimum compromise
(b) The power to issue rulings of first rate equivalent to forty percent (40%) of the
impression or to reverse, revoke or modify basic tax assessed.
any existing ruling of the Bureau;
Where the basic tax involved exceeds One million
(c) The power to compromise or abate, pesos (P 1,000,000.00) or where the settlement
under Sec. 204 (A) and (B) of this Code, any offered is less than the prescribed minimum rates, the
tax liability: Provided, however, That compromise shall be subject to the approval of the
assessments issued by the regional offices Evaluation Board which shall be composed of the
involving basic deficiency taxes of Five Commissioner and the Deputy Commissioners.
hundred thousand pesos (P500,000) or less,
and minor criminal violations, as may be All criminal violations may be compromised except
determined by rules and regulations to be those
promulgated by the Secretary of finance,
upon recommendation of the Commissioner, a. those already filed in court
discovered by regional and district officials, b. those involving fraud (see Sec.
may be compromised by a regional 204 {a}, NIRC)
evaluation board which shall be composed
of the Regional Director as Chairman, the The taxpayer’s offer to compromise shall
Assistant Regional Director, the heads of the not be considered, unless and until he
Legal, Assessment and Collection Divisions waives in writing his privilege under RA
and the Revenue District Officer having 1405 or under other general or special laws,
jurisdiction over the taxpayer, as members; and such waiver shall constitute the
authority of the Commissioner to inquire
(d) The power to assign or reassign internal into his bank deposits. (see Sec. 6 {f},
revenue officers to establishments where NIRC)
articles subject to excise tax are produced or
kept. b. power to abate
(2) The financial position of the taxpayer

The BIR may abate or cancel tax liability demonstrates a clear inability to pay the
when: assessed tax.
a. the tax or any portion thereof The compromise settlement of any tax
appears to be unjustly or liability shall be subject to the following
excessively assessed minimum amounts:
-09 b. the administration and
008 collection costs involved do
 For cases of financial incapacity, a
M2 not justify the collection of the
minimum compromise rate
O amount due
RC equivalent to ten percent (10%) of
the basic assessed tax; and
BA The power to compromise or abate shall not be
delegated by the Commissioner, except in the  For other cases, a
following cases; minimum compromise rate
equivalent to forty percent (40%)
a. assessments issued by the of the basic assessed tax.
regional offices involving
basic taxes of Where the basic tax involved exceeds One million pesos
P 500,000.00 or less (P1,000.000) or where the settlement offered is less than the
prescribed minimum rates, the compromise shall be subject to
b. Minor criminal violations. the approval of the Evaluation Board which shall be composed
These cases may be of the Commissioner and the four (4) Deputy Commissioners.
compromised by the regional
evaluation board. (see Sec.7, (B) Abate or Cancel a Tax Liability, when:
NIRC)
(1) The tax or any portion thereof appears
i. Enforcement of police power (see to be unjustly or excessively assessed; or
Sec.15, NIRC) (2) The administration and collection costs
involved do not justify the collection of the
The Commissioner, the Deputy Commissioners, the amount due.
Revenue Regional Directors, the Revenue District
Officers and other internal revenue officers shall have All criminal violations may be
authority to make arrests and seizures for the compromised except: (a) those already filed
violation of any penal law, rule or regulation in court, or (b) those involving fraud.
administered by the Bureau of Internal Revenue. Any
person so arrested shall be forthwith brought before a D. The rule on estoppel in relation to tax
court, there to be dealt with according to law. administration
a. Against the government
j. Authority to Abate and Compromise
Tax Liabilities (see Sec.6 {f}{2}, 204 in The error made by a tax official in the assessment of his tax
relation to Rev. Regs.30-2002 as liabilities does not have the effect of relieving the taxpayer
amended by RR No.8-2004) from the obligation to pay the full amount of his tax liability,
for taxes are fixed by law and the government is never
SEC. 204. Authority of the Commissioner to estopped to collect the legitimate taxes because of the errors
Compromise, Abate and Refund or Credit Taxes. - committed by its agents. However, like other principles, the
The Commissioner may - principle of estoppel also admits exceptions in the interest of
justice and fair play. The Commissioner is precluded from
(A) Compromise the Payment of any Internal adopting a position inconsistent with one previously taken
Revenue Tax, when: where in justice would result therefore or where there has been
a misrepresentation.
(1) A reasonable doubt as to the validity of
the claim against the taxpayer exists; or Any mistakes committed by the
agents of the sovereign, namely government officials and

employees are their own and cannot bind the government, c. Kinds of Assessment
which cannot be placed on estoppel on account of the mistakes
of its agents. d. Statute of Limitation on Assessment of Internal
Revenue Taxes (Sections 203, 222, NIRC)
b. Against the taxpayer
General rule (sec203)
E. Assessments and its governing principles Internal revenue taxes shall be assessed within three
-09 years after the last day prescribed for the filing of the
008
a. Definition return, and no proceeding in court without
M2
The notice and demand for payment of a tax liability assessment for the collection of sluch taxes shall
O
should not be confused with assessment relative to begun after the expiration of such period.
RC
real property taxation which refers to the listing and
BA
evaluation of taxable real property. Exceptions (sec.222)
In the case of a false of fraudulent return with intent
b. What constitutes an assessment to evade tax or of failure to file a return, the tax
collection may be filed without an assessment at any
i. CIR v. Pascor Realty, 29 June 1999 time within ten years after the discovery of the
Neither the NIRC nor the revenue regulations falsity, fraud or omission:
governing the protest of assessments provide a
specific definition of form of an assessment however If before the expiration of the time prescribed in the
the NIRC defines the specific function and effects of tax codes for the assessment of the tax, both the
an assessment: commissioner and the taxpayer have agreed in
writing to its assessment after such time, the tax may
be assessed within the period agreed upon.
• An assessment must be sent to and received by a
tax payer, and must demand payment of the taxes
i. RMO 20-90, Philippine Journalist Inc., v. CIR,
described therein within a specific period.
G.R. No. 162852, 16 December 2004
• Issuance of an assessment is vital in determining
the period of limitation regarding its proper Appellate Jurisdiction of the CTA is not limited to
issuance and the period within which to protest. cases which involve decisions of the CIR on matters
• An assessment is deemed made only when the relating to assessments or refunds. The second part of
collector of Internal Revenue releases or mails or the provision covers other cases that arise out of the
sends such notice to the tax payer. NIRC or related laws and administered by the BIR.
• An assessment is not necessary before acriminal The wording of the provision is clear and simple. It
charge can be filed. gives the CTA the Jurisdiction to determine if the
• Before an assessment is issued, there is by practice, warrant of distraint and levy issued by the BIR is
a pre-assessment notice sent to the tax payer.The valid and to rule if the waiver of stature of limitations
tax Payer is then given a chance to submit position was validly effected.
papers and documents to prove that the assessment
is unwarranted. If the commissioner is unsatisfied, A waiver of the statute of limitations under the
an assessment signed by him/her is then sent to the NIRC, to a certain extent, is a derogation of the
tax payer informing the latter specifically and taxpayer’s right to security against prolonged and
clearly that an assessment has been made against unscrupulous investigations and must therefore be
him/her. In contrast, the criminal charge need not carefully and strictly construed. The waiver of the
go through all this. statute of limitations is not a waiver of the right to
invoke the defense of prescription as erroneously
ii. CIR v. Reyes, G.R. No. 159694, January 27, held by the CA. It is an agreement between the
2006 taxpayer and the BIR that the period to issue an
assessment and collect the taxes due id extended to a
Tax payers shall be informed in writing of the law date certain.
and the facts on which the assessment and the
assessment is made; otherwise the assessment shall The waiver does not mean that the taxpayer
be void. (2nd paragraph of section 228 is clear and relinquishes the right to invoke prescription
mandatory) unequivocally particularly where the language of the
document is equivocal. For the purpose of
safeguarding taxpayers from any unreasonable the assessment and collection of tax, as required by
examination, investigation or assessment, out tax law the tax code and implementing rules, will not suspend
provides a statute of limitation in collection of taxes. the running thereof. (Exception: section 224)
Thus the law on prescription, being a remedial
measure should be liberally construed in order to Wherein the statute of limitations on assessment and
afford such protection/ collection of taxes is considered suspended, when the
tax payer request for a reinvestigation which is
ii. CIR v. CA and Carnation, G. R. No. 115712, 25
-09 granted by the commissioner.
February 1999
008
M2 f. Procedure in the process of assessment (Section 228)
O Finality of findings of facts as a matter of principle,
RC this court will not set aside the conclusion reached by i. Estate of the Late Juliana Diez Vda. De Gabriel
BA an agency such as the CTA unless there has been an v. CIR, G.R. No. 155541, January 27, 2004
abuse or improvident exercise of authority. By the
very nature of its function, dedicated exclusively to The rule that an assessment is deemed made for the
the study and consideration of tax problems and has purpose of giving effect to such assessment when the
necessarily developed an expertise of the subject. notice is released, mailed or sent to the taxpayer to
effectuate the assessment requires that the notice
e. Instances where the running of the prescriptive must be sent to the taxpayer, and not merely to a
period is suspended (section 223) disinterested party. Although there is no specific
requirement that the taxpayer should receive that
i. Republic v. Hizon, 13 December 1999 notice within the said period, due process requires at
the very least that such notice actually be received.
Sec. 229 of the code mandates that a request for
reconsideration must be made within thirty (30) days When an estate is under administration, notice must
from the tax payer’s receipt of tax deficiency be sent to the administrator of the estate.
assessment, otherwise the assessment becomes final,
unappealable and, therefore, demandable. The notice ii. CIR v. Reyes, G.R. No. 159694, January 27,
of assessment for respondent’s tax deficiency was 2006
issued by petitioner on July 18, 1986. On the other
hand, respondent made her request for The tax payers shall be informed in writing of the law
reconsideration thereof only on November 3. 1992, and facts on which the assessment is made otherwise
without stating when she received the notice of tax the assessment itself is void.
assessment. She explained that she was constrained
to ask for a reconsideration in order to avoid the iii. CIR v. BPI, G.R. No. 134062, 17, April 2007
harrrasment of BIR collectors. In all likelihood, she
must have been referring to the distraint and levy of The inevitable conclusion is that BPI’s failure to
her properties by petitioner’s agents which took place protest the assessments within the 30-day period
of January 12, 1989. Even assuming that she first provided in the former section 270 meant that they
learned of the deficiency assessment on this date her became final and unappealable. Thus, the CTA
request for reconsideration was nonetheless filed late correctly dismissed BPI’s appeal for lack of
since she made it more than 30 days thereafter. jurisdiction. BPI was, from then on barred from
Hence, her request for reconsideration did not disputing the correctness of the assessments or
suspend the running for the prescriptive period invoking any defense that would reopen the question
provided under section 223. Although the of its liability on the merits. Not only that. There
commissioner acted on her request by eventually arose a presumption of correctness when BPI failed
denying it on August 11, 1994, this is of no moment to protest the assessments: Tax assessments by tax
and does not distract from the fact that the assessment examiners are presumed correct and made in good
had become demandable faith. The taxpayer has the duty to prove otherwise.
In the absence of proof of any irregularities in the
ii. BPI v. CIR, G.R. No. 139736, 17 October 2005 performance of duties, an assessment duly made by a
BIR examiner and approved by his superior offices
The court had consistently ruled in a number of cases will not be disturbed. All presumptions are in favor
that a request for reconsideration by the tax payer of the correctness of tax assessments.
without a valid waiver of the prescriptive period for
iv. PNOC v. Court of Appeals, G.R. No., 109976, In case where a return is filed beyond the three year
April 26, 2005 period shall be counted form the day the return was
filed.
The defense of prescription of the period for the
assessment and collection of tax liabilities shall be j. Is assessment necessary before a taxpayer could be
deemed waived when such defense was not properly prosecuted for violation of the NIRC?
pleaded and the facts alleged and evidenced
-09submitted by the parties were not sufficient to i. Ungab v. Cusi, May 30, 1980
008support a finding by the supreme court on the matter
M2 – prescription, being a matter of defense, imposes the What is involved here is not collection of taxes where
O burden on the taxpayer to prove that the full period of the assessment of the commissioner of internal
RC the limitation has expired, and this requires him to revenue may be reviewed by the court of tax appeals,
BA positively establish the date when the period started but a criminal prosecution for violations of the NIRC
running and when the same was fully accomplished. which is within the recognizance of the CFI. While
there can be no civil action to enforce collection
g. Instances when pre-assessment is not required before the assessment procedures provided in the
(Section 228) code have been followed, there is no requirement for
A preassessment notice shall not be required in the the precise computation and assessment of the tax
following cases: before there can be a criminal prosecution under the
• When any tax deficiency is the result of code.
mathematical error in the computation of the
tax as appearing on the face of the return. ii. CIR v. CA, G.R. No. 119322, 4 June 1996
• When a discrepancy has been determined
between the tax withheld and the amount Reading Ungab carefully, the pronouncement therein
actually remitted by the withholding agent. that deficiency assessment is not necessary prior to
• When a taxpayer who opted to claim a refund prosecution is pointedly and deliberately qualified by
or tax credit of excess creditable withholding the Court with following statement quoted form
tax for a taxable period was determined to Guzik v. U. S.: “the crime is complete when the
have carried over and automatically applied violator has knowingly and willfully filed a
the same amount claimed against the estimated fraudulent return with intent to evade and defeat a
tax liabilities for the taxable quarter or quarters part or all of the tax.” In plain words, for criminal
of the succeeding taxable year. prosecution to proceed before assessment, there must
be a prima facie showing of willful attempt to evade
• When the excise tax due on exciseable articles
taxes. There was willful attempt to evade tax in
has not been paid.
Ungab because of the taxpayer’s failure to declare in
• When the article locally purchased or imported his income tax return “his income derived from
by an exempt person has been sold, traded, or banana saplings.” In the mind of the trial court and
transferred to non-exempt persons. the Court of Appeals, Fortune’s situation is quite
apart factually since the registered wholesale price of
h. Governing principles concerning assessment the goods. Approved by the BIR, is presumed to be
the actual wholesale price, therefore, not fraudulent
Injunction is not available to restrain the collection of and unless and until the BIR has made a final
internal revenue taxes. determination of what is supposed to be the correct
taxes, the taxpayer should not be placed in the
Exception: the Court of Appeals may issue crucible of criminal prosecution. Herein lies a whale
injunctions against administrative collection, when of difference between Ungab and the case at bar.
collection could jeopardize the interest of the
Government or taxpayer. iii. CIR v. Pascor Realty, 29 June 1999
i. When do we reckon the period when the assessment The issuance of an assessment is vital in determining
was made? the period of limitation regarding its proper issuance
and the period within which to protest it. Section 203
Internal revenue taxes shall be assessed within three of NIRC provides that internal revenue taxes must be
years after the last day prescribed by law for the assessed within three years from the last day within
filing of the return. which to file the return. Section 222, on the other
hand, specifies a period of ten years in case a b. Filing of claim for tax credit
fraudulent return with intent to evade was submitted B. Judicial
or in case of failure to file a return. Also, Section 228 (1) Civil action
of the same law states that said assessment may be a. Appeal to the Court of Tax Appeals
protested only within thirty days from receipt thereof. b. Action to contest forfeiture of chattel;
Necessarily, the taxpayer must be certain that a and
specific document constitutes an assessment. c. Action for Damages
Otherwise, confusion would arise regarding the
-09 (2) Criminal Action
period within which t make an assessment or to
008 Filing of complaint against erring Bureau of
M2protest the same, or whether interest and penalty may Internal Revenue officials and employees
Oaccrue thereon.
RC 2. Remedies available to the government
k. Are the procedures outlined in Section 228 of the NIRC
BA
retroactive? Applicability of the Doctrine Exhaustion of Administrative
Remedies
i. CIR v. Reyes, G.R. No. 159694, January 27, - No civil or criminal action for the recovery
2006 of taxes shall be filed in court without the
approval of the Commissioner. (Sec. 220,
The general rule is that statutes are prospective. NIRC)
However, statutes that are remedial, or that do not
create new or take away vested rights, do not fall
under the general rule against the retroactive
operation of statutes. Clearly, Section 228 provides
for the procedure in case an assessment is protested.
The provision does not create new or take away Remedies Available to Taxpayers
vested rights. In both instances, it can surely be
applied retroactively. Moreover, RA 8424 does not A. Before Payment
state, either expressly or by necessary implication,
that pending actions are excepted from the operation 1. Protest (Section 228, NIRC)
of section 228, or that applying it to pending Protest is a vital document which is a formal
proceedings would impair vested rights. declaration of resistance of the taxpayer. It is a
repository of all arguments. It can be used in court in
INTERNAL REVENUE TAX REMEDIES case administrative remedies have been exhausted. It
is also the formal act of the taxpayer questioning the
Tax Remedies: Its general concepts official actuation of the CIR. This is equivalent to a
pleading. It may be a:
Importance: They exist to enhance the Government’s
tax collection efforts, they, too, come in as safeguards against Request for reconsideration- a plea for the
arbitrary action. While taxes are the lifeblood of the re-evaluation of an assessment on the basis of
Government and should be collected without unnecessary existing records without need of additional evidence.
hindrance, such collection must nevertheless be made in It may involve a question of fact or law or both.
accordance with law as any arbitrariness will negate the very
reason or the Government itself. Request for reinvestigation- a plea for
reinvestigation of an assessment on the basis of
Classification: newly-discovered or additional evidence that a
taxpayer intends to present in the reinvestigation. It
1. Remedies in favor of the taxpayer may also involve question of fact or law or both.
A. Administrative
(1) Before Payment Requirements of a valid protest
a. Filing of a petition or request for 1. In writing;
reconsideration or reinvestigation 2. Addressed to the CIR;
(Administrative Protest); 3. Must be accompanied by a waiver of the Statute of
b. Entering into compromise Limitations in favor of the government;
(2) After Payment 4. States the Facts, applicable law rules and
a. Filing of claim for tax refund; and regulations and jurisprudence on which his protest
is based; otherwise, his protest shall be considered The decision of the Commissioner or his duly rep shall (a)
void and without force and effect on the event the state the facts, applicable law, rules and regulations or
letter of protest submitted by the taxpayer is jurisprudence on which his protest is based, otherwise the
accepted; protest shall be considered void and without force and effect,
5. Contains the following: in which case the same shall not be considered a decision a
1. Name of the taxpayer and address for the disputed assessment and (b) that the same is his final decision.
immediate past three taxable years; (sec. 3.1.5, RR 12-99)
2. Nature of request whether reinvestigation or
-09
reconsideration specifying newly discovered
008
evidence that he intends to present it is a
M2 B.Indirect Denial
request for reinvestigation;
O a. Commissioner did not rule on the taxpayer’s MR of the
3. Taxable periods covered by the assessment;
RC assessment – it was only when respondent received summons
4. Amounts and kind/s of tax involved, and
BA on the civil action for the collection of deficiency income tax
Assessment Notice Number; that the period to appeal commenced to run. (CIR vs. Union
5. Date of receipt of assessment notice or letter of Shipping
demand; b. Referral by the Commissioner of request for reinvestigation
6. Itemized statement of the findings to which the to the Solicitor General (Republic vs.Lim Tian Teng Sons)
taxpayer agrees, if any, as a basis for computing the tax c. Reiterating the demand for immediate payment of the
due, which amount should be paid immediately upon deficiency tax due to taxpayer’s continued refusal to execute
the filing of the protest. For this purpose, the protest waiver (CIR vs. Ayala Securities Corp.)
shall not be deemed validly filed unless payment of the d. Preliminary collection letter may serve as assessment notice
agreed portion of the tax is paid first; (United Int’l Pictures vs. CIR)
7. Itemized schedule of the adjustments with which the
taxpayer does not agree; Acts of BIR Commissioner Considered as Denial of Protest
8. Statement of facts and/or law in support of the protest; which serves as a Basis for Appeal to CTA:
and
9. Documentary evidence as it may deem necessary and 1. Filing by the BIR of a civil suit for collection of
relevant to support its protest to be submitted within the deficiency tax (CIR v. Union Shipping Corp . 185 SCRA
sixty (60) days from the filing of the protest. If the 547)
taxpayer fails to comply with this requirement, the 2. Indication to the taxpayer by the Commissioner in
assessment shall become final. (Revenue Regulation clear and unequivocal language of his final denial. (CIR v.
No. 12-85, dated Nov. 27, 1985.) Union Shipping Corp)
3. BIR demand letter reiterating his previous demand
Effect of a protest on the period to collect deficiency taxes: to pay, sent to taxpayer after his protest of the assessment
(Surigao Electric Co. Inc. v. CTA, 57 SCRA 523)
The prescriptive period is arrested by the taxpayer's request 4. The actual issuance of a warrant of distraint and
for re-examination or reinvestigation even if he has not levy in certain cases cannot be considered as final decision on
previously waived it (CIR vs. Wyeth, G.R. No. 76281,Sep 30, a disputed settlement (CIR v. Union Shipping Corp)
1991)
b. Effect of protest filed out of time
Failure of the BIR to act within the 180-day period.
The pendency of the taxpayer's appeal in the Court of Tax
If the Commissioner or his duly authorized representative fails Appeals and in the Supreme Court had the effect of
to act on the taxpayer’s protest within 180 days from the date temporarily staying the hands of the said Commissioner. If the
of submission by the taxpayer of the required documents in taxpayer's stand that the pendency of the appeal did not stop
support of his protest, the taxpayer may appeal to the CA the running of the period because the Court of Tax Appeals
within 30 days from the lapse of the 180-day period. did not have jurisdiction over the case of taxes is upheld,
taxpayers would be encouraged to delay the payment of taxes
in the hope of ultimately avoiding the same. Under the
Administrative actions taken during the 180-day period. circumstances, the running of the prescriptive period was
1. Grant of the Protest suspended. Deficiency Percentage Taxes must be imposed.
2. Denial of Protest: (PROTECTOR'S SERVICES, INC., petitioner, vs. CA, G.R.
No. 118176, 2000 Apr 12)
A. Direct Denial
Remedies from a denial of protest
1. Motion for reconsideration return. This is so because at that point, it can already be
2. Appeal to the Court of Tax Appeals(RA 1125, as amended determined whether there has been an overpayment by the
by RA 9282) taxpayer. Moreover, under Sec. 49 (a) by the NIRC (now Sec.
56(a), 1997 NIRC), payment is made at the time the return is
2. Compromise filed. (CIR V CA, CTA, BPI, GR No. 117254. January 21,
1999)
B. After Payment There is some likelihood that the above rule could apply also
-09 to individuals who are self employed (i.e., in business and
1. Refund (Section 229, NIRC)
008 professional practice) as well as estates and trusts, which are
M2 The Legal Principle of quasi-contracts or solutio likewise required to file quarterly returns.
indebiti (see Art. 2142 & 2154 of the Civil Code). The
O
Government is within the scope of the principle of solutio
RC The prescriptive period of two years should commence to run
indebiti. (CIR vs. Fireman’s Fund Insurance Co.)
BA only from the time that the refund is ascertained, which can
only be determined after a final adjustment return is
a. Must be strictly construed against taxpayer accomplished.(CIR V PHILAMLIFE, 244 SCRA 446. May
29, 1995)
Grounds for filing a claim for refund:
Erroneously or illegally assessed or collected internal revenue 2. In case of Amended Returns
taxes;
3. In case of taxpayers contemplating dissolution
Taxpayer pays under the mistake of fact, as for instance in a
case where he is not aware of the existing exemption in his c. Who has the personality to file a claim for refund?
favor at the time payments were made.
A tax is illegally collected if payments are made under duress. The duty of the withholding agent to withhold the
corresponding tax arises at the time of such accrual. The
1. Penalties imposed without authority; and withholding agent/corporation is then obliged to remit the tax
2. Any sum alleged to have been excessive or in any to the Government since it already and properly belongs to
manner wrongfully collected. the Government. If a withholding agent who is personally
The value of internal revenue stamps when they are returned liable for income tax withheld at source fails to pay said
in good condition by the purchaser may also be redeemed. withholding tax, an assessment for said deficiency
withholding tax would, therefore, be legal and proper.
b. Period within which to file a claim for refund (FILIPINAS SYNTHETIC FIBER CORP. V CA, GR
No.113347. June 14, 1996)
1. General Rule is two years from the date of payment
The two-year prescriptive period provided in Section 292 d. Is setting-off of taxes against a pending claim for refund
(now Section 230 of the Tax Code should be computed from allowed?
the time of filing the Adjustment Return or Annual Income e. Is automatic application of excess tax credits allowed?
Tax Return and final payment of income tax.(CIR vs. TMX f. Effect of existing tax liability on a pending claim for refund
SALES, G.R. No. 83736, 1992 Jan 15,) g. Period of validity of a tax refund/credit
1. Returns are not actionable documents for purposes of the rules
The rationale in computing the two-year prescriptive period on civil procedure and evidence
with respect to the petitioner corporation's claim for refund h. Refund and Protest are mutually exclusive remedies
from the time it filed its final adjustment return is the fact that
it was only then that ACCRAIN could ascertain whether it
made profits or incurred losses in its business operations. The
"date of payment", therefore, in ACCRAIN's case was when i. Is the taxpayer entitled to claim interest on the
its tax liability, if any, fell due upon its filing of its final refunded tax?
adjustment return. (ACCRA vs CA, G.R. No. 96322, 1991
Dec 20) General Rule: The Government cannot be required to pay
interest on taxes refunded to the taxpayer, unless:
The two-year period for prescription should be counted from
the date of payment of the tax, which for actions for refund of 1. The Commissioner acted with patent arbitrariness
corporate income tax should be computed from the time of
actual filing of the adjustment return or annual income tax
Arbitrariness presupposes inexcusable or obstinate disregard  Three (3)years from the following,
of legal provisions. (CIR vs. Victorias Milling Corp., Inc. L- whichever comes later:
19607, Nov. 29, 1966.) 1. The last day prescribed by law for filing
the return
2. In case of Income Tax withheld on the wages of employees 2. The day when the return was actually
Any excess of the taxes withheld over the tax due from the filed
taxpayer shall be returned or credited within 3 months from  Ten (10) years after the discovery of the
the fifteenth (15th) day of April. Refund or credit after such
-09
falsity, fraud or omission in case of:
time earn interest at the rate of 6% per annum, starting after
008
1. False or fraudulent return with intent to
the lapse of the 3-month period to the date the refund or credit
M2
evade tax, or
is made (Sec 79 (c) (2) 1997 NIRC
O
2. Failure to file a return
Within the period agreed upon, when both
RC

b. BA Other Remedies the TP and the Commissioner have agreed in
writing, before the expiration of the period
1. Action to Contest Forfeiture of Chattel (Sec. 231) in Sec. 203 for the assessment of the tax.
In case of seizure of personal property under claim for CASES:

forfeiture, the owner desiring to contest the validity of the
forfeiture may bring an action: REPUBLIC V. HIZON, DEC. 13, 1999
a. Before sale or destruction of the property to • Revenue Adm. Order No. 10-95 specifically
recover the property from the person seizing the property or in authorizes the Litigation and Prosecution
possession thereof upon filing of the proper bond to enjoin the section of the Legal Division of regional
sale. district offices to institute the necessary civil
b. After the sale and within 6 months to and criminal actions for tax collection. As
recover the net proceeds realized at the sale (see. Sec. 231, the complaint filed in this case was signed
1997 NIRC) by the BIR’s Chief of Legal Division for
Region 4 and verified by the Regional
Action partakes the nature of an ordinary civil action for Director, there was, therefore, compliance
recovery of personal property or the net proceeds of its sale with the law.
which must be brought in the ordinary courts and not the CTA
• Sec. 7 of NIRC, authorizes the BIR
Commissioner to delegate the powers vested
2. Redemption of Property Sold (Sec. 214)
in him under the pertinent provision of the
Code to any subordinate official with the
rank equivalent to a division chief or higher.
Remedies available to the Government
CIR V. JAVIER, JULY 31, 1991
A. No Injunction to restrain collection of taxes
• There was no actual intentional fraud in
( Sec. 218, NIRC)
G.R. No Court shall have the authority to grant an filing the return. Private respondent’s
injunction to restrain the collection of any national notation on the tax return was at most an
internal revenue tax, fee, or charge imposed by the error or mistake of fact or law not
NIRC. constituting fraud, an invitation for
EXC: CTA may enjoin the collection of Internal investigation and private respondent had
Revenue taxes. literally” laid his cards on the table.
REQUISITES: PNOC V. CA, APRIL 26, 2005
1. there is a pending case before the CTA
(ancillary remedy, not a main cause of action)
2. identify that the collection of tax is C. OVERVIEW OF REMEDIES (SECTION 205)
prejudicial to the interest of either the TP or 1. Tax Lien (Sec 219, NIRC)
government.
 When a taxpayer neglects or refuses to pay
B. Period within which the government could collect his internal revenue tax liability after
( Secs. 203, 222, NIRC) demand, the amount so demanded shall be a
Assessment of Tax Liability lien in favor of the government from the
time the assessment was made by the
Commissioner until paid with interest,
penalties, and costs that may secure in 2. The financial position of the taxpayer
addition thereto, upon all property and rights demonstrates a clear inability to pay the
to property belonging to the taxpayer. assessed tax
 Lien shall not be valid against any

mortgagee, purchaser or judgment creditor Cases that may be compromised
until notice of such lien shall be filed by the
-09 Commissioner in the Register of Deeds of 1. Delinquent accounts
008 the province or city where the property of 2. Cases under administrative protest
M2 the taxpayer is located. 3. Cases disputed before the courts
O 4. Cases for collection already filed in courts
RC
 A tax lien created in favor of the 5. Criminal violations except those already filed, and
BA
government is superior to all other claims those involving fraud.
and preferences, even to that of a private
litigant predicated on a court judgment. Cases that cannot be compromised
Extinguishment of Tax Lien 1. Withholding tax cases

1. Payment or remission of the tax 2. Criminal tax fraud cases
2. Prescription of the right of the government to assess 3. Criminal cases already filed in court
or collect. 4. Delinquent accounts with duly approved schedule of
3. Failure to file notice of such lien in the office of installment payments
register of Deeds, purchases or judgment creditor. 5. Cases where reduction of payments had already been
4. Destruction of the property subject to the lien. granted.
NOTE: In Nos. 1 and 2, there is no more tax liability while 6. cases already decided and are final and executory
under nos. 3 and 4, the taxpayer is still liable.
Compromise of criminal violation

CASE: CIR V. NLRC, NOV. 09, 1994
• A tax lien created in favor of the • In criminal violations, the compromise
government is superior to all other claims • must be made prior to the filing of the information in
and preferences, even to that of a private court.
litigant predicated on a court judgment. The • All criminal violations may be compromised except:
tax lien attaches not only from the service of
the warrant of distraint of personal property 1. those already filed in court; and
but from the time the tax became due and 2. those involved in fraud.
payable.
Limitations:
2. Compromise 1. Minimum compromise rate:
 CIR may compromise both civil and a. 10% of the basic tax assessed – in case of
criminal liability of the taxpayer. financial incapacity.
b. 40% of basic tax assessed – other cases.
REQUISITES: 2. Subject to approval of the Evaluation Board
1. The taxpayer have a tax liability a. When basic tax involved exceeds
2. There must be an offer by the taxpayer P1,000,000.00 or
of an amount to be paid by the taxpayer b. Where settlement offered is less than the
3. There must be an acceptance by the prescribed minimum rates.
Commissioner or the taxpayer as the
case may be of the offer in the Delegation of Power to Compromise
settlement of the original claim General Rule: The power to compromise or abate shall not
be delegated by the commissioner.
Grounds for compromise Exception: The Regional Evaluation Board may compromise
1. A reasonable doubt as to the validity of the the assessment issued by the regional offices involving basic
claim against the taxpayer exists; or taxes of P 500,000.00 or less.
Remedy in case of failure to comply:
The CIR may either:
a. Enforce the compromise, or products, manufactured oils,

b. Regard it as rescinded and insists upon the original demand. miscellaneous products, non-
essential items a petroleum
3. Distraint and/or Levy products) manufactured or removed
4. Civil Action in violation of the Tax Code.
5. Criminal Action 2. Dies for printing or making IR
6. Forfeiture stamps, labels and tags, in imitation
-09  Implies a divestiture of property without of or purport to be lawful stamps,
008
compensation, in consequence of a default labels or tags.
M2
or offense.
O Where to be sold:
RC a. Public sale: provided, there is notice given
 It includes the idea of not only losing but
BA not less than 20 days.
also having the property transferred to b. Private sale: provided, it is with the
another with out the consent of the owner approval of the Secretary of Finance.
and wrongdoer.
Right of Redemption:
Effect: Transfer the title to the specific thing from the a. Personal entitled – taxpayer or anyone for
owner to the government. him
b. Time to redeem – within one (1) year from
When available: forfeiture
a. No bidder for the real property exposed for c. Amount to be paid – full amount of the taxes
sale. and penalties, plus interest and cost of the
b. If highest bid is for an amount insufficient to sale
pay the taxes, penalties and costs. d. To whom paid – Commissioner or the
With in two days thereafter, a return of the Revenue Collection Officer
proceeding is duly made. e. Effect of failure to redeem – forfeiture shall
become absolute.
How enforced:
a. In case of personal property – by seizure and NOTE:
sale or destruction of the specific forfeited The Register of Deeds is duty bound to transfer the
property. title of property forfeited to the government with out
b. In case of real property – by a judgment of necessity of an order from a competent court.
condemnation and sale in a legal action or 7. Suspension of Business Operations
proceeding, civil or criminal, as the case 8. Enforcement of Administrative Fines
may require.
D. ADMINISTRATIVE REMEDIES IN DETAIL
When forfeited property to be destroyed or sold: (SECS. 206-217, NIRC)
a. To be destroyed – by order of the CIR when A. DISTRAINT - Seizure by the government of personal
the sale for consumption or use of the property, tangible or intangible, to enforce the payment of
following would be injurious to the public faces, to be followed by its public sale, if the taxes are not
health or prejudicial to the enforcement of voluntarily paid.
the law: (at least 20 days after seizure) KINDS
1. distilled spirits a. Actual – There is taking of possession of personal property
2. liquors out of the taxpayer into that of the government. In case of
3. cigars intangible property, taxpayer is also diverted of the power of
4. cigarettes, and other manufactured control over the property.
products of tobacco b. Constructive – The owner is merely prohibited from
5. playing cards disposing of his personal property.
6. All apparatus used in or about the
illicit production of such articles.
b. To be sold or destroyed – depends upon the
discretion of CIR
1. All other articles subject to exercise
tax, (wine, automobile, mineral Difference between Actual and Constructive Distraint
Actual Constructive of business and with someone of suitable

Made on the property only of May be made on the age and discretion
a delinquent taxpayer. property of any taxpayer b. Statement of the sum demanded.
whether delinquent or not c. Time and place of sale.
There is actual taking or Taxpayer is merely
possession of the property. prohibited from disposing of 2. In case of intangible property:
his property. a. Stocks and other securities
Effected by having a list of the
-09
Effected by requiring the Serving a copy of the warrant upon
distraint property or by service
008
taxpayer to sign a receipt of taxpayer and upon president, manager,
or warrant of distraint or
M2
the property or by leaving a treasurer or other responsible officer of the
garnishment.
O
list of same issuing corporation, company or association.
An immediate step for
RC
Such immediate step is not b. Debts and credits
collection of taxes where
BA
necessary; tax due may not 1. Leaving a copy of the warrant with the
amount due is definite. be definite or it is being person owing the debts or having in his
questioned. possession such credits or his agent.
2. Warrant shall be sufficient authority for
such person to pay CIR his credits or
Requisites:
debts.
1. Taxpayer is delinquent in the payment of tax.
2. Subsequent demand for its payment.
c. Bank Accounts – garnishment
3. Taxpayer must fail to pay delinquent tax at time
1. Serve warrant upon taxpayer and
required.
president, manager, treasurer or
4. Period with in to assess or collect has not yet
responsible officer of the bank.
prescribed.
2. Bank shall turn over to CIR so much of
the bank accounts as may be sufficient.
When remedy not available:
Where amount involved does not exceed P100.
How constructive Distraint Effected
In keeping with the provision on the abatement of the
1. Require taxpayer or person in possession to:
collection of tax as the cost of same might even be more than
- Sign a receipt covering property distrained
P100.
- Obligate him to preserve the same
Procedure:
properties.
1. Service of warrant of distraint upon taxpayer or upon
- Prohibit him from disposing the property
person in possession of taxpayer’s personal property.
from disposing the property in any manner,
2. Posting of notice is not less than two places in the
with out the authority of the CIR.
municipality or city and notice to the taxpayer
2. Where Taxpayer or person in possession refuses to
specifying time and place of sale and the articles
sign:
distrained.
- Officer shall prepare list of the property
3. Sale at public auction to highest bidder
distrained.
4. Disposition of proceeds of the sale.
- In the presence of two witnesses of
sufficient age and discretion, leave a copy in
the premises where property is located.
Who may effect distraint Amount Involved
1. Commissioner or his duly In excess of
Grounds of Constructive Distraint
authorized representative P1,000,000.00
1. Taxpayer is retiring from any business subject to tax.
2. Revenue District Officer P1,000,000.00 or
2. Taxpayer is intending to leave the Philippines; or
(RDO) less
3. To remove his property there from.
4. Taxpayer hides or conceals his property.
5. Taxpayer acts tending to obstruct collection
proceedings.
How Actual Distraint Effected NOTE:

1. In case of Tangible Property: 1. Bank accounts may be distrained without violating
a. Copy of an account of the property the confidential nature of bank accounts for no
distrained, signed by the officer, left either inquiry is made. BIR simply seizes so much of the
with the owner or person from whom deposit with out having to know how much the
property was taken, at the dwelling or place
deposits are or where the money or any part of it bidder or the highest bid is not
came from. sufficient to pay the taxes,
2. If at any time prior to the consummation of the sale, penalties and costs.
all proper charges are paid to the officer conducting Taxpayer no given the right Taxpayer can redeem
the same, the goods distrained shall be restored to the of redemption properties levied upon and
owner. sold/forfeited to the
3. When the amount of the bid for the property under government.
-09distraint is not equal to the amount of the tax or is
008very much less than the actual market value of 1. Both are summary remedies for collection of taxes.
M2 articles, the CIR or his deputy may purchase the 2. Both cannot be availed of where amount involved is
O distrained property on behalf of the national not more than P100.
RC government.
NOTE:
BA
B. LEVY OF REAL PROPERTY - an act of 1. It is the duty of the Register of Deeds concerned
seizure of real property in order to enforce the payment of upon registration of the declaration of forfeiture, to
taxes. The property may be sold at public sale, if after seizure transfer the title to the property with out of an order
the taxes are not voluntarily paid. from a competent court
NOTE: The requisites are the same as that of distraint. 2. The remedy of distraint or levy may be repeated if
necessary until the full amount, including all
Procedure: expenses, is collected.
1. International Revenue officer shall prepare a duly
authenticated certificate showing C. GARNISHMENT
a. Name of taxpayer Bank Accounts – garnishment
b. Amount of tax and 1. Serve warrant upon taxpayer and president, manager,
c. Penalty due. treasurer or responsible officer of the bank.
- enforceable throughout the Philippines 2. Bank shall turn over to CIR so much of the bank accounts
2. Officer shall write upon the certificate a description as may be sufficient.
of the property upon which levy is made.
3. Service of written notice to: E. JUDICIAL REMEDIES IN DETAIL (SEC 220, NIRC)
a. The taxpayer, and 1. Period within which the action may be filed
b. RD where property is located.
4. Advertisement of the time and place of sale. Civil and Criminal Actions:
5. Sale at public auction to the highest bidder. 1. Brought in the name of the Government of
6. Disposition of proceeds of sale. the Philippines.
NOTE: The excess shall be turned over to owner. 2. Conducted by Legal Officer of BIR
Redemption of property sold or forfeited 3. Must be with the approval of the CIR, in
a. Person entitled: Taxpayer or anyone for him case of action, for recovery of taxes, or
b. Time to redeem: one year from date of sale or enforcement of a fine, penalty or forfeiture.
forfeiture
- Begins from registration of the deed of sale or A. CIVIL CASES (SECS 203,222,NIRC)
declaration of forfeiture.  Three (3)years from the following,
- Cannot be extended by the courts. whichever comes later:
c. Possession pending redemption: owner not 3. The last day prescribed by law for filing
deprived of possession the return
d. Price: Amount of taxes, penalties and interest 4. The day when the return was actually
thereon from date of delinquency to the date of sale filed
together with interest on said purchase price at 15%  Ten (10) years after the discovery of the
per annum from date of purchase to date of falsity, fraud or omission in case of:
redemption. 3. False or fraudulent return with intent to
evade tax, or
Difference between Distraint and Levy 4. Failure to file a return
Distraint Levy  Within the period agreed upon, when both
personal property real property the TP and the Commissioner have agreed in
forfeiture by government, not forfeiture by government writing, before the expiration of the period
provided authorized where there is no in Sec. 203 for the assessment of the tax.
• When should it run again: When the proceeding is

Where to File dismissed for reason not constituting jeopardy.
1) Court of Tax Appeals- where the principal amount of taxes
and fees exclusive of charges and penalties claimed is one Where to file
million pesos and above 1) Court of Tax Appeals- on criminal offenses arising from
2) RTC, Mun. TC, Metro TC- where the principal amount of violations of the NIRC or TCC and other laws administered by
taxes and fees, exclusive of charges and penalties claimed is the BIR and the BOC, where the principal amount of taxes and
less thanP1,000,000.00 (Sec 7[c], RA 9282)
-09 fees, exclusive of charges and penalties claimed is
008  The approval of the CIR is essential in civil P1,000,000.00 and above.
M2 cases (Sec. 220). However under Sec. 7 of 2) RTC, Mun. TC, Metro TC- on criminal offenses arising
O NIRC, the Commissioner may delegate from violations of the NIRC or TCC and
suchpower to a Regional Director.
RC
other laws administered by the BIR and the BOC, where the
principal amount of taxes and fess
BA
 Actions instituted by the government to collect exclusive of charges and penalties claimed is less than
internal revenue taxes in regular courts (RTC or P1,000,000.00 or where there is no specified amount claimed
MTCs, depending on the amount involved). It (Sec 7[b], RA 9282)
includes filing by the government with the probate
court claims against the deceased taxpayer. CASES:
 Resorted to when the tax liability becomes final and REPUBLIC V. HIZON, DEC. 13, 1999 (re: approval of filing
unappealable, or when the decision of the of civil and criminal actions)
Commissioner becomes final or executory. When: • Revenue Adm. Order No. 10-95 specifically
authorizes the Litigation and Prosecution section of
• A tax is assessed and the assessment becomes final the Legal Division of regional district offices to
and unappealable because the taxpayer institute the necessary civil and criminal actions for
fails to file an administrative protest with the BIR tax collection. As the complaint filed in this case was
within 30 days from the receipt of the assessment. signed by the BIR’s Chief of Legal Division for
• When an administrative protest filed by the taxpayer Region 4 and verified by the Regional Director, there
against the assessment is denied, in whole and in part was, therefore, compliance with the law.
or Is not acted upon within 180 days from submission • Sec. 7 of NIRC, authorizes the BIR Commissioner to
of the documents, and delegate the powers vested in him under the pertinent
• The taxpayer adversely affected by the decision or provision of the Code to any subordinate official with
inaction fails to file an appeal with the CTA within the rank equivalent to a division chief or higher.
30 days from receipt of said decision or from the •
lapse of the180 day period. CIR V. LA SUERTE CIGAR, JULY 04, 1992 (re:
participation of the Office of the Solicitor General)
B. CRIMINAL CASES ( TITLE X, NIRC; SEC. 281, • The institution or commencement before a proper
NIRC) court of civil and criminal actions and proceedings
arising under the Tax Reform Act which "shall be
 All violations of any provision of the tax code shall conducted by legal officers of the Bureau of Internal
prescribe after five (5) years. Revenue" is not in dispute. An appeal from such
court, however, is not a matter of right. Section 220
NOTE: of the Tax Reform Act must not be understood as
• When should it commence: The five (5) year overturning the long established procedure before
prescriptive period shall begin to run from the this Court in requiring the Solicitor General to
a. If known, day of the commission of the violation. represent the interest of the Republic. This Court
b. If not known, from the time of discovery and the continues to maintain that it is the Solicitor General
institution of judicial proceeding for its who has the primary responsibility to appear for the
investigation and punishment. government in appellate proceedings.
• When is it interrupted:
a. When a proceeding is instituted against the • PNOC V. CA, APRIL 26, 2005
guilty person
b. When the offender is absent from the • LIM V. CA, OCT. 18, 1990 ( re: prescription of
Philippines. criminal actions, Sec, 281, NIRC)

• should be filed 5 years from the (1) day of the

commission of the violation of the law, and if the Penalty: 50% of the amount due, in addition to the tax
same shall be not known, from the (2) discovery required to be paid
thereof and the institution of the judicial proceedings
for its investigation and punishment. a. In case of willful neglect to file the return
within the period prescribed by the NIRC or
MARCOS II V. CA, JUNE 5, 1997 (re: enforcement of tax rule.
liability during pendency of probate proceedings)
-09 b. In case a false or fraudulent return is
• The BIR is authorized to collect estate tax deficiency
008 willfully made.
through the summary remedy of the levying upon and
M2
O
sale of properties of a decedent, without the cognition CASE: CIR V. JAVIER, JULY 31, 1991
RC
and authority of the court sitting in probate over the • There was no actual intentional fraud in
supposed will of the deceased, because the collection filing the return. Private respondent’s
BA
of estate tax is executive in character. As such the notation on the tax return was at most an
estate tax is exempted from the application of the error or mistake of fact or law not
statute of the non – claims, and this is justified by the constituting fraud, an invitation for
necessity of the government finding, immortalized in investigation and private respondent had
the maxim that taxes are the lifeblood of the literally” laid his cards on the table.
government
2. INTEREST- This is an increment on any unpaid
E. EFFECTS OF FAILURE TO PAY THE TAX ON amount of tax assessed at the rate of 20% per annum
TIME: ADDITIONS TO THE TAX (CHAPTER I, TITLE or such higher rate as may be prescribed by the regulations
X, NIRC) from the date prescribed for payment until the amount
is fully paid.
1. SURCHARGES- a civil penalty imposed by law as
an addition to the main tax required to be paid. It is not a Classes of interest
criminal penalty but a civil administrative sanction provided
primarily as safeguard for the protection of the State 1. Deficiency interest
revenue and to reimburse the government for the 2. Delinquency interest
expenses of investigation and the loss resulting from 3. Interest on extended payment
the taxpayer’s fraud. A surcharge added to the main tax
is subject to interest. Deficiency interest
a. ORDINARY (SEC. 248A, NIRC) • Any deficiency in the tax due shall be subject to the
interest of 20% per annum which shall be assessed
Penalty: 25% of the amount due, in addition to the tax and collected from the date prescribed for its
required to be paid payment until the full payment thereof.
a. Failure to file any return and to pay the tax When delinquency interest imposed?
due thereon as required by the NIRC or
rules. • Delinquency interest is imposed in case of failure to
b. Filing a return with an internal revenue pay:
officer other than those with whom the 1. The amount of the tax due on any return required
return is required to be fired. Not authorized to be filed; or
officer. 2. The amount of tax due for which no return is
c. Failure to pay the deficiency tax within the required; or
time prescribed for its payment in the notice 3. A deficiency tax or any surcharge or interest
of assessment. thereon on the issue date appearing in the notice
d. Failure to pay the full or part of the amount and demand of the Commissioner.
of tax shown on any return, or the full
amount of tax due for which no return is • Rate is 20% per annum until the amount is fully paid
required to be filed, on or before the date which interest shall form part of the tax.
prescribed for its payment.
Interest on Extended Payment.
b. FRAUD PENALTY (SEC. 248B, NIRC)
1) any person who is qualified and elects to pay the tax on delegation as before, but pursuant to direct
installment but fails to pay the tax, or any installment, or any authority conferred by Section 5, Article X
part on or before the date prescribed; or of the Constitution. The important legal
2) where the Commissioner has authorized an extension of effect of Section 5 is that henceforth, in
time within which to pay a tax or a deficiency tax or any part interpreting statutory provisions on
thereof, municipal fiscal powers, doubts will have to
3) from the date of notice and demand until it is paid. resolved in favor of municipal
-09 corporations.”
Compromise Penalty
008
1. It is a certain amount of money which the taxpayer
M2 ii. Meralco vs. Province of Laguna, May 5,
pays to compromise a tax violation.
O 1999
2. It is pain in lieu of a criminal prosecution.
RC
3. Since it is voluntary in character, the same may be
BA “Prefatorily, it might be well to recall that
collected only if the taxpayer is willing to pay them. local governments do not have the inherent
power to tax except to the extent that such
Failure to File Certain Information Returns (Sec. 250, power might be delegated to them either by
NIRC) the basic law or by statute. Presently, under
A) Penalty: P 1,000 for each failure Article X of the 1987 Constitution, a general
B) The aggregate amount for all such failure shall not exceed delegation of that power has been given in
P 25,000 during a calendar year favor of local government units. The 1987
C) Upon notice and demand by the Commissioner Constitution has a counterpart provision in
D) Unless it is shown that such failure is due to reasonable the 1973 Constitution, which did come out
cause and not to willful neglect. with a similar delegation of revenue making
In the case of each failure to file: powers to local governments. Under the
1) information return; regime of the 1935 Constitution no similar
2) statement or list; delegation of tax powers was provided, and
3) keep any record; local government units instead derived their
4) supply any information tax powers under a limited statutory
E) required by this Code or by the Commissioner on the date authority. Whereas, then, the delegation of
prescribed thereof. tax powers granted at that time by statute to
local governments was confined and defined
(outside of which the power was deemed
LOCAL TAXATION withheld), the present constitutional rule
(starting with the 1973 Constitution),
A. Local Taxation: General Concepts however, would broadly confer such tax
1. Nature of Local Taxing Power powers subject only to specific exceptions
that the law might prescribe. Under the now
a. Constitutional Provision (Section 5, Article X) prevailing Constitution, where there is
neither a grant nor a prohibition by statute,
“Each local government unit shall have the power the tax power must be deemed to exist
to create its own sources of revenues and to levy although Congress may provide statutory
taxes, fees and charges subject to such guidelines limitations and guidelines. The basic
and limitations as the Congress may provide, rationale for the current rule is to safeguard
consistent with the basic policy of local the viability and self-sufficiency of local
autonomy. Such taxes, fees, and charges shall government units by directly granting them
accrue exclusively to the local governments.” general and broad tax powers. Nevertheless,
the fundamental law did not intend the
b. Delegated Power delegation to be absolute and unconditional;
i. City of San Pablo Laguna vs. Reyes, March the constitutional objective obviously is to
25, 1999 ensure that, while the local government units
are being strengthened and made more
“The power to tax is primarily vested in autonomous, the legislature must still see to
Congress. However, in our jurisdiction, it it that (a) the taxpayer will not be over-
may be exercised by local legislative bodies, burdened or saddled with multiple and
no longer merely by virtue of a valid unreasonable impositions; (b) each local
government unit will have its fair share of resilience in matters of local development on
available resources, (c) the resources of the the part of local government leaders.” The
national government will not be unduly only way to shatter this culture of
disturbed; and (d) local taxation will be fair, dependence is to give the LGUs a wider role
uniform, and just.” in the delivery of basic services, and confer
them sufficient powers to generate their own
iii. Mactan Cebu International Airport sources for the purpose. To achieve this
-09 Authority vs. Marcos, September 11, 1996 goal, section 3 of Article X of the 1987
008 Constitution mandates Congress to enact a
M2 “The taxing powers of local government local government code that will, consistent
O units cannot extend to the levy of, inter alia, with the basic policy of local autonomy, set
RC “taxes, fees and charges of any kind on the the guidelines and limitations to this grant of
BA National Government, its agencies and taxing powers.”
instrumentalities, and local government
units”; however, pursuant to Section 232,
provinces, cities, and municipalities in the - Extent of the Power of Congress in Local
Metropolitan Manila Area may impose the Taxation
real property tax except on, inter alia, “real - City Govt. of Quezon City vs. Bayantel, March
property owned by the Republic of the 6, 2006
Philippines or any of its political
subdivisions except when the beneficial use “The power to tax is primarily vested in the
thereof has been granted, for consideration Congress; however, in our jurisdiction, it may be
or otherwise, to a taxable person,” as exercised by local legislative bodies, no longer
provided in item (a) of the first paragraph of merely be virtue of a valid delegation as before,
Section 234.” but pursuant to direct authority conferred by
Section 5, Article X of the Constitution. Under
iv. NAPOCOR vs. City of Cabanatuan, April 9, the latter, the exercise of the power may be
2003 subject to such guidelines and limitations as the
Congress may provide which, however, must be
“In recent years, the increasing social consistent with the basic policy of local
challenges of the times expanded the scope autonomy.
of state activity, and taxation has become a
tool to realize social justice and the Clearly then, while a new slant on the subject of
equitable distribution of wealth, economic local taxation now prevails in the sense that the
progress and the protection of local former doctrine of local government units
industries as well as public welfare and delegated power to tax had been effectively
similar objectives. Taxation assumes even modified with Article X, Section 5 of the 1987
greater significance with the ratification of Constitution now in place, .the basic doctrine on
the 1987 Constitution. Thenceforth, the local taxation remains essentially the same. For
power to tax is no longer vested exclusively as the Court stressed in Mactan, "the power to
on Congress; local legislative bodies are tax is [still] primarily vested in the Congress."
now given direct authority to levy taxes, fees
and other charges pursuant to Article X, In net effect, the controversy presently before the
section 5 of the 1987 Constitution. Court involves, at bottom, a clash between the
inherent taxing power of the legislature, which
This paradigm shift results from the necessarily includes the power to exempt, and
realization that genuine development can be the local government’s delegated power to tax
achieved only by strengthening local under the aegis of the 1987 Constitution.”
autonomy and promoting decentralization of
governance. For a long time, the country’s 2. Fundamental Principles in the exercise of Local
highly centralized government structure has Taxing Power (Sec. 130, LGC)
bred a culture of dependence among local
government leaders upon the national 3. Exercise of Local Taxing Power
leadership. It has also “dampened the spirit
of initiative, innovation and imaginative
B. Common Limitations on the Exercise of Local Taxing (j) Taxes on the gross receipts of transportation
Power contractors and persons engaged in the
transportation of passengers or freight by hire
1. The Principle of Preemption / Exclusionary Rule and common carriers by air, land or water,
(Sec. 133, LGC) except as provided in this Code."
- If the national government elects to tax a
particular subject within a Local Government It is clear that the legislative intent in excluding
-09 Unit, it is impliedly withholding the power of from the taxing power of the local government
008 LGU to tax the same. unit the imposition of business tax against
M2 - Adopted in the Philippines despite non- common carriers is to prevent a duplication of
O prohibition of double taxation unless expressly the so-called "common carrier's tax."
RC allowed by Congress.
BA Petitioner is already paying three (3%) percent
2. Cases: common carrier's tax on its gross sales/earnings
a. Province of Bulacan vs. CA, November 27, 1998 under the National Internal Revenue Code.[19]
A province may not levy excise taxes on articles To tax petitioner again on its gross receipts in its
already taxed by the National Internal Revenue transportation of petroleum business would
Code. It is clearly apparent from Section 151 of defeat the purpose of the Local Government
the National Internal Revenue Code levies a tax Code.
on all quarry resources, regardless of origin,
whether extracted from public or private land. c. Palma Development Corp. vs. Municipality of
Thus, a province may not ordinarily impose Malangas, October 16, 2003 (Sec. 133e)
taxes on stones, sand, gravel, earth and other
quarry resources, as the same are already taxed By express language of Sections 153 and 155 of
under the National Internal Revenue Code. The RA No. 7160, local government units, through
province can, however, impose a tax on stones, their Sanggunian, may prescribe the terms and
sand, gravel, earth and other quarry resources conditions for the imposition of toll fees or
extracted from public land because it is expressly charges for the use of any public road, pier or
empowered to do so under the Local wharf funded and constructed by them. A
Government Code. As to stones, sand, gravel, service fee imposed on vehicles using municipal
earth and other quarry resources extracted from roads leading to the wharf is thus valid.
private land, however, it may not do so, because However, Section 133(e) of RA No. 7160
of the limitation provided by Section 133 of the prohibits the imposition, in the guise of
Code in relation to Section 151 of the National wharfage, of fees -- as well as all other taxes or
Internal Revenue Code. charges in any form whatsoever -- on goods or
merchandise. It is therefore irrelevant if the fees
b. First Philippine Industrial Corp. vs. CA, imposed are actually for police surveillance on
December 9, 1998 (Section 133j; Local Tax on the goods, because any other form of imposition
Common Carriers) on goods passing through the territorial
jurisdiction of the municipality is clearly
There is no doubt that petitioner is a "common prohibited by Section 133(e).
carrier" and, therefore, exempt from the business d. Batangas Power Corp. vs. Batangas City, April
tax as provided for in Section 133 (j), of the 28, 2004 (Section 133g)
Local Government Code, to wit:
Sec. 133 (g) of the LGC, which proscribes local
"Section 133. Common Limitations on the government units (LGUs) from levying taxes on
Taxing Powers of Local Government Units. – BOI-certified pioneer enterprises for a period of
Unless otherwise provided herein, the exercise of six years from the date of registration, applies
the taxing powers of provinces, cities, specifically to taxes imposed by the local
municipalities, and barangays shall not extend to government, like the business tax imposed by
the levy of the following : Batangas City on BPC in the case at bar.
Reliance of BPC on the provision of Executive
xxx xxx xxx Order No. 226,[18] specifically Section 1,
Article 39, Title III, is clearly misplaced as the
six-year tax holiday provided therein which
commences from the date of commercial operation of the same. Section 133(l) is
operation refers to income taxes imposed by the only for franchise where to grant the same is
national government on BOI-registered pioneer within the discretion of LGUs. The permit to
firms. Clearly, it is the provision of the Local drive is issued by LTO.
Government Code that should apply to the tax
claim of Batangas City against the BPC. The 6- 4. Time of Payment (Section 167, LGC)
year tax exemption of BPC should thus
-09 commence from the date of BPC’s registration Unless otherwise provided in LGC, all local taxes,
008 with the BOI on July 16, 1993 and end on July fees, and charges shall be paid within the first twenty
M2 15, 1999. (20) days of January or of each subsequent quarter, as
O the case may be. The Sanggunian concerned may, for
3.RC Local Taxing Power cannot extend to: a justifiable reason or cause, extend the time for
BA payment of such taxes, fees, or charges without
- Those already covered by the National surcharges or penalties, but only for a period not
Internal Revenue Code, i.e. Income tax, exceeding six (6) months.
Transfer tax, VAT, percentage tax, Excise
Tax, Documentary Stamp Tax; 5. Surcharges, Interests and Penalties
- Those already covered by the Tariff and C. Residual Power to Tax (Sec. 186)
Customs Code; - The power of LGU to tax even of not expressly
- Duties upon products about to be granted by the LGC provided that there is no
exported and goods passing express prohibition.
through territorial jurisdiction
cannot be taxed by LGUs. D. Specific Taxing Units
1. Provinces may tax:
- Taxation of the National Government, i. Transfer of Real Property ownership
including its agencies and instrumentalities - Onerous or gratuitous
as we as local government units; - Preemption rule is not applicable
- ½ of 1%
- Those subjects not within the ambit of real
taxation by reason of public policy, i.e. ii. Printing and Publication
Cooperatives registered under RA 6938
(CDA);
- Those enjoying privileges as granted by the iii. Franchise Tax

Board of Investments (Investments Priorities - Government franchise, whether primary or
Plan); secondary, i.e. public utility companies
- Both pioneer and non-pioneer - If the franchise grants tax exemption and the
enterprises enjoy such kind of same was executed prior to 1991 LGC, it is
privileges under the Omnibus deemed revoked by reason of the law’s blanket
Investments Code. revocation.
- At a rate not exceeding ½ of 1% of the Gross
- Taxes on agricultural or aquatic products Amount receipt of the preceding calendar year
sold by marginal enterprises;
iv. Professional Tax
- Taxes, fees, or charges for the registration of - Those who have passed government licensure
motor vehicles and for the issuance of all examinations are the ones liable
kinds of licenses or permits for the driving - Amount – not exceeding Php 300.00
thereof, except tricycles. - Imposed by the city or province where the
taxpayer’s principal office is located
- LTO vs. Butuan – Congress has no intention - With employer-employee relationship –
to delegate issuance of permits to LGUs. liability to PTR depends on the extent of
The intention of the law is to centralize services provided. If services provided is
issuance of permits to drive motor vehicles exclusive to the employer, PTR is not
including tricycles is to monitor the necessary, otherwise, the employee is liable.
4) Levy (Sec. 174 and 176,. LGC)

v. Sand and Gravel Tax
- Imposed on extraction of sand, gravel and
other quarry resources • Contents of assessment:
- Not more than 10% of the FMV of what was
extracted 1. Meralco vs. Barlis (Feb. 1, 2002) - A notice of
- Case: Province of Bulacan vs. CA assessment as provided for in the Real Property
-09
Tax Code should effectively inform the taxpayer
008vi. Amusement Tax
M2 - As high as 30% of the value of a specific property, or proportion
O - Applies to theaters, cinemas, concert halls, thereof subject to tax, including the discovery,
RC boxing stadiums, circuses and other places of listing, classification, and appraisal of properties.
BA amusements. The petitioner is also correct in pointing out that
the last paragraph of the said notices that inform
vii. Taxes on Delivery trucks the taxpayer that in case payment has already
been made, the notices may be disregarded is an
2. Cities may tax those that may be taxed by a province
and a municipality. They may impose a tax rate indication that it is in fact a notice of collection.
which is 50% higher than the rates being imposed by It could only qualify as a notice of collection if
provinces and municipalities. there is an unmistakable demand for payment of
back taxes.
3. Municipalities
i. Business permit
ii. Community Taxes • Who is entitled to the notice of assessment
iii. May levy taxes, fees, and charges not otherwise
levied by provinces (Sec. 142) 1. Talusan vs. Tayag, (April 04, 2001) - Cases
involving an auction sale of land for the collection
of delinquent taxes are in personam. Thus, notice
REMEDIES IN LOCAL TAXATION by publication, though sufficient in proceedings in
rem, does not as a rule satisfy the requirement of
A. REMEDIES OF THE GOVERNMENT proceedings in personam. As such, mere
publication of the notice of delinquency would not
a. ADMINISTRATIVE suffice, considering that the procedure in tax sales
is in personam. It was, therefore, still incumbent
1) Local Government’s Lien (Sec 173, LGC)
upon the city treasurer to send the notice of tax
2) Assessment by the Local Treasurer delinquency directly to the taxpayer in order to
protect the interests of the latter.
3) Distraint of goods, chattels or effect and
other personal properties of whatever In the present case, the notice of
delinquency was sent by registered mail to the
character (Sec. 174 and 175, LGC)
permanent address of the registered owner in
Manila. In that notice, the city treasurer of Baguio
a. Seizure
City directed him to settle the charges
immediately and to protect his interest in the
b. Accounting of distrained goods
property. Under the circumstances, we hold that
the notice sent by registered mail adequately
c. Publication
protected the rights of the taxpayer, who was the
registered owner of the condominium unit.
d. Release of distrained property upon
For purposes of the real property tax, the
payment prior to sale registered owner of the property is deemed the
taxpayer. Hence, only the registered owner is
e. Procedure of sale entitled to a notice of tax delinquency and other
proceedings relative to the tax sale. Not being
f. Disposition of proceeds
registered owners of the property, petitioners i. Surcharge – not exceeding 25% of the amount of
cannot claim to have been deprived of such taxes, fees or charges not paid on time and
notice. In fact, they were not entitled to it.
ii. Interest – not exceeding 2% per month of the
b. JUDICIAL (Sec. 174, LGC) unpaid taxes, fees or charges, including
surcharges, until such amount is fully paid, BUT
1) Civil Action in the court in no case shall the total interest on the unpaid
-09 amount or portion thereof exceed 36 months.
008 2) Filed by Local Treasurer
M2 B. REMEDIES OF THE TAXPAYER
O 3) Within 5 years from the date the
a. ADMINISTRATIVE
taxes, fees or charges became due
RC
BA
• Appeal to the Secretary of Justice; Re:
newly enacted tax ordinance (Sec. 187,
• Period within which to collect – LGC) – Any question on the
within 5 years from the date of constitutionality or legality of tax
assessment by administrative or ordinances or revenue measures; Within 30
judicial action days from its effectivity.
1. Drilon vs. Lim, (August 4, 1994) -

c. OTHER PROVISIONS Section 187 authorizes the Secretary of
Justice to review only the constitutionality
• Accrual of the tax – (Sec. 166, LGC) or legality of the tax ordinance and, if
warranted, to revoke it on either or both of
- General rule: All local taxes, fees, and charges these grounds. When he alters or modifies
shall accrue on the 1st day of January of each year. or sets aside a tax ordinance, he is not also
permitted to substitute his own judgment
- Except: for the judgment of the local government
that enacted the measure. Secretary Drilon
i. Unless otherwise provided in the LGC, did set aside the Manila Revenue Code, but
he did not replace it with his own version
ii. New taxes, fees or charges, or changes in the rates of what the Code should be. He did not
thereof, shall accrue on the 1 st day of the quarter pronounce the ordinance unwise or
next following the effectivity of the ordinance unreasonable as a basis for its annulment.
imposing such new levies or rates He did not say that in his judgment it was a
bad law. What he found only was that it
Time of payment – (Sec. 167, LGC) was illegal. All he did in reviewing the said
measure was determine if the petitioners
- General Rule: All local taxes, fees and charges
were performing their functions is
shall be paid within the first 20 days of January or
accordance with law, that is, with the
of each subsequent quarter, as the case may be.
prescribed procedure for the enactment of
- Except: tax ordinances and the grant of powers to
the city government under the Local
i. Unless otherwise provided by the LGC Government Code. As we see it, that was
an act not of control but of mere
ii. The Sanggunian concerned may, for a justifiable supervision.
reason or cause, extend the time for payment of
such taxes, fees, or charges or penalties, but only 2. Hagonoy Market Vednors Assn. vs.
for a period not exceeding 6 months. Municipality of Hagonoy. Bulacan,
(February 6, 2002) - Sec. 187, LGC
• Surcharges, Interests and Penalties – (Sec. 168, requires that an appeal of a tax ordinance
LGC) or revenue measure should be made to the
Secretary of Justice within 30 days from
- Sanggunian may impose: effectivity of the ordinance and even
during its pendency, the effectivity of the
assailed ordinance shall not be suspended. provincial, city or municipal assessor in the
In the case at bar, Municipal Ordinance No. assessment of his property; Within 60 days
28 took effect in October 1996. Petitioner from receipt of the written notice of
filed its appeal only in December 1997, assessment; Appeal to the BAA of the
more than a year after the effectivity of the province or city by filing a petition under
ordinance in 1996. Clearly, the Secretary of oath and copies of the tax declarations and
Justice correctly dismissed it for being affidavits or documents in support of
-09 time-barred. At this point, it is apropos to appeal.
008 state that the timeframe fixed by law for
M2 parties to avail of their legal remedies - Sec. 252 (d), LGC – In the event that the
O before competent court is not a "mere protest is denied or upon the lapse of the
RC technicality" that can be easily brushed 60-day period to decide, the taxpayer may
BA aside. The periods stated in the section are appeal to the BAA.
mandatory. Ordinance No. 28 is a revenue
measure adopted by the municipality of • Protest of the assessment (Sec. 226 and
Hagonoy to fix and collect public market 252, LGC)
stall rentals. Being its lifeblood, collection
of revenues by the government is of - Pay under protest and such shall be
paramount importance. The funds for the annotated in the tax receipt
operation of its agencies and provision of
basic services to its inhabitants are largely - Protest in writing must be filed within 30
derived from its revenues and collections. days from payment of the tax to the
Thus, it is essential that the validity of provincial, city or municipal treasurer, who
revenue measures is not left uncertain for a shall decide the protest within 60 days from
considerable length of time. Hence, the receipt.
law provided a time limit for an aggrieved
- The tax or a portion thereof paid under
party to assail the legality of revenue
protest shall be held in trust by the
measures and tax ordinances.
treasurer concerned.
3. Ty vs. Trampe, (December 1, 1995) –
- Protest decided in favor of taxpayer – the
Petitioners failed to appeal the assessment
amount or portion of the tax protested shall
of their properties to the Board of
be refunded to the protestant or applied as
Assessment Appeal within sixty (60) days
tax credit against his existing or future tax
from the date of receipt of the written
liability.
Notice of Assessment, and if it is true that
petitioner, as alleged in their pleadings, - Protest denied or upon lapse of the period
was not afforded the opportunity to appeal to decide - appeal to the BAA.
to the board of assessment appeal, then
they could have availed of the provisions of • Claim for refund (Sec. 253, LGC)
Section 252, of the same R.A. 7160 by
paying the real estate tax under protest. - When an assessment of basic real property
Because of petitioner’s failure to avail of tax, or any other tax levied is found to be
either Sections 226 or 252 of R.A. 7160, illegal or erroneous and the tax is
they failed to exhaust administrative accordingly reduced or adjusted,
remedies provided for by law before
bringing the case to Court. Therefore the - The taxpayer may file a written claim for
filing of this case before this Court is refund or credit of taxes and interests
premature, the same not falling under the
exception because the issue involved is not - With the provincial or city treasurer
a question of law but of fact.
- Within 2 years from the date the taxpayer
• Appeal to the Board of Assessment is entitled to such reduction or adjustment.
Appeals (Secs. 226 and 252, LGC) –
- The provincial or city treasurer shall decide
- Sec. 226, LGC – Any owner or person who the claim for refund or credit within 60
is not satisfied with the action of the days from receipt
- In case the claim is denied, the taxpayer  Provisions of LGC are applied nationwide
may appeal to the BAA. but rates imposed are different per LGU
ordinance
• Remedies from a denial of the protest
and refund The real property tax has been considered and held to
be national, despite the fact that in practice it is local in its
- It should not only be the written claim imposition and utilization.
-09 before the treasurer that must be filed in 2
008 years but the taxpayer must also be able to Justice Vitug points out that: “The real property tax
M2 file a case in court before the expiration of has been considered and held to be a national, not a local tax
O the 2 year period. in Meralco Securities Industrial Corp v. CBAA, 114 SCRA
RC 260. The Court said that realty tax has always been imposed
BA - There is no appellate remedy from the by the national law-making body. The real estate tax is
denial of the treasurer before the regular enforced throughout the Philippines and not in a particular
court but an independent and original political subdivision, although the bulk of the tax proceeds
action for refund. accrue to the various local government units where the
property is located. Under the Local Government Code, local
b. JUDICIAL
government units are mandated to fix a uniform rate of basic
real property tax applicable to their respective localities, the
• Questioning Tax Sale
proceeds of which exclusively accrue to them. (See Secs. 233
and 271, LGC)”, [Page 479, Tax Law and Jurisprudence, 2000
Edition by Justice Vitug and Judge Acosta].
REAL PROPERTY TAXATION
Real Property Tax, defined CHARACTERISTIC OF REAL PROPERTY TAX:

A direct tax on ownership of lands and buildings or 1. Direct tax on the ownership of real property
other improvements thereon 2. Ad Valorem tax. The value is based on the tax base
Payable regardless of whether the property 3. Proportion - the tax is calculated on the basis of a
is used or not, certain percentage of the value assessed
although the value may vary in 4. Indivisible single obligation
accordance with such factor. 5. Local Tax
A. Governing Law C. Fundamental Principles Governing Appraisal and

Historical Background: Assessment of Real Property (Section 198, LGC)
1. Commonwealth Act No. 470 – Old 1. Real property shall be appraised at its
Assessment Law current and fair market value.
- since 1920 2. Real property shall be classified for
2. Real Property Tax Code (Presidential Decree assessment purposes on the basis of its actual
No. 464, as amended) use.
- June 1, 1974 3. Real property shall be assessed on the basis
3. Local Government Code (Republic Act No. of a uniform standard within each local
7160) government unit.
- January 1, 1992 4. The appraisal, assessment, and collection of
- The changes however were only on the tax real property tax shall not be let to any
rate ceilings and assessment levels. private person; and
5. The appraisal and assessment of real
The Local Government Code covers the property shall be equitable.
administration, appraisal, assessment, levy and
collection of Real Property Tax, i.e. tax on land and building D. Properties Covered (Sec. 232, LGC)
and other structures and improvements on it, including 1. Land,
machineries. (Subject to the definition given by Art. 415 2. Buildings
of the New Civil Code) 3. Machinery and
4. Other improvements not otherwise
B. Nature of Real Property Tax – National or Local? exempted under said code (Sec 232, LGC)
 Hybrid of national and local tax

Machinery – embraces machines, equipment, therefrom without breaking the material or

mechanical contrivances, instruments, appliances or deterioration of the object;
apparatus which may or may not be attached,
permanently or temporarily, to the real property. It (4) Statues, reliefs, paintings or other objects for use
includes the physical facilities for production, the or ornamentation, placed in buildings or on lands by
installations and appurtenant service facilities, those the owner of the immovable in such a manner that it
which are mobile, selfpowered or self-propelled, and reveals the intention to attach them permanently to
-09those not permanently attached to the real property the tenements;
008which are actually, directly, and exclusively used to
M2 meet the needs of the particular industry, business or (5) Machinery, receptacles, instruments or
O activity and which by their very nature and purpose implements intended by the owner of the tenement
RC are designed for, or necessary to its manufacturing, for an industry or works which may be carried on in a
BA mining, logging, commercial, industrial or building or on a piece of land, and which tend
agricultural purposes. (Sec. 199 [o], LGC) directly to meet the needs of the said industry or
works;
Machinery which are of general purpose use
including but not limited to office equipment,
typewriters, telephone equipment, breakable or easily (6) Animal houses, pigeon-houses, beehives, fish
damaged containers (glass or cartons), ponds or breeding places of similar nature, in case
microcomputers, facsimile machines, telex machine, their owner has placed them or preserves them with
cash dispensers, furnitures and fixtures, freezers, the intention to have them permanently attached to
refrigerators, display cases or racks, fruit juice or the land, and forming a permanent part of it; the
beverage automatic dispensing machines which are animals in these places are included;
not directly and exclusively used to meet the needs
of a particular industry, business or activity shall not (7) Fertilizer actually used on a piece of land;
be considered within the definition of machinery.
(Sec. 290 [o], IRR of RA 7160) (8) Mines, quarries, and slag dumps, while the matter
thereof forms part of the bed, and waters either
Improvements include valuable additions made to a running or stagnant;
property or an amelioration in its condition,
amounting to more than a mere repair or replacement (9) Docks and structures which, though floating, are
of parts involving capital expenditures and labor, intended by their nature and object to remain at a
which is intended to enhance its value, beauty or fixed place on a river, lake, or coast;
utility or to adopt it for new or further purposes.
(10) Contracts for public works, and servitudes and
Note: Although the term real property has not been
other real rights over immovable property. “
expressly defined in the LGC, early decisions of the
Supreme Court in Mindanao Bus Co. v City Assessor of
Cagayan de Oro, 6 SCRA `97; Board of Assessment In Caltex vs. CBAA, May 31, 1982:
Appeals v Meralco, 119 PHIL 328; Manila Electric Co. v
Board of Assessment Appeals,10 SCRA 68) seem to suggest Machinery and equipment, consisting of
that Art. 415 of the Civil Code could also be controlling, underground tanks, elevated tanks, water tanks,
to wit:. gasoline pumps, computing pumps, water pumps, car
washer, car and truck hoists, air compressors and
“Art. 415. The following are immovable property: similar articles, installed by Caltex (Philippines) Inc.
(1) Land, buildings, roads and constructions of all in its gasoline stations, located on leased land, have
kinds adhered to the soil; been held to be real property subject to the tax. (real
properties which have characteristics of permanency,
(2) Trees, plants, and growing fruits, while they are the lease is for a long period of time)
attached to the land or form an integral part of an
immovable; 2001 BAR QUESTION: Under Article 415
of the Civil Code, in order for machinery and
(3) Everything attached to an immovable in a fixed equipment to be considered real property, they
manner, in such a way that it cannot be separated must be placed by the owner of the land and,
in addition, must tend to directly meet the
needs of the industry or works carried on by improvements actually, directly and

the owner. Oil companies, such as Caltex and exclusively used for religious,
Shell, install underground tanks in the charitable, or educational purposes.
gasoline stations located in land leased by the - traditional exemptees
oil companies from others. Are those
underground tanks, which were not placed c. All pieces of machinery and equipment
there by the owner of the land but by the that are actually, directly, and exclusively
-09lessee, considered real property for purposes used by local water districts, and
008of real property taxation under the LGC? government – owned or controlled
M2 SUGGESTED ANSWER FROM UP LAW corporations engaged in the supply and
O CENTER: Yes. The underground tanks distribution of water and/or generation and
RC
although installed by the lessee, Shell and transmission of electric power.
Caltex, are considered as real property for
BA
purposes of the imposition of real property d. All real property owned by duly
taxes. It is only for purposes of executing a registered cooperatives as provided for
final judgment that these machinery and under RA 6938, and
equipment, installed by the lessee on a leased e. Machinery and equipment used for
land, would not be considered as real pollution control and environmental
property. But in the imposition of real protection.
property tax, the underground tanks are
taxable as necessary fixtures of the gasoline
station without which the gasoline station 2. Section 238, LGC
would not be operational. (Caltex v. CBAA, Idle Lands Exempt From Tax:
114 SCRA 296). By reason of:
a. force majeure
SPECIAL CLASSES OF REAL PROPERTY (Sec. 216, b. civil disturbance
LGC) c. natural calamity
1. HOSPITALS d. any cause which
2. CULTURAL and SCIENTIFIC purposes legally/physically prevents the owner of the
3. owned and used by LOCAL WATER property or
DISTRICTS person having legal interest therein from
4. GOCCs rendering essential public services improving,
in the supply and distribution of water and/or utilizing, or cultivating the same
generation or transmission of electric power.
What Are Considered as Idle Lands: (Sec. 237,
E. Properties Exempt LGC)
1. Section 234, LGC 1. Agricultural lands – More than 1 hectare if more
a. Real property owned by the Republic of than ½ of which remain uncultivated or unimproved by the
the Philippines or any of its political owner of the property or person having legal interest therein.
subdivisions except when the beneficial use thereof has
been granted, for consideration Not Idle Lands:
or otherwise, to a taxable person; � Agricultural lands planted to permanent or
perennial crops with at least 50 trees to a hectare
- except: when beneficial use � Lands actually used for grazing purposes
thereof is granted to a taxable person
- cases of MIAA and MCAA: 2. Non-Agricultural Lands – More than 1,000 sq.
GOCCs are not automatically exempt from m. in area if more than ½ of which remain uncultivated or
real property tax, depending on its charter unimproved by the owner of the property or person having
giving it exemption legal interest therein.
- charter enacted after LGC so that
the exemption is not revoked Proof of Tax Exemption:
Every person by or for whom real property is
b. Charitable institutions, churches, declared who shall claim the exemption shall file with the
parsonages, or convents appurtenant provincial, city or municipal assessor within 30 days from date
thereto, mosques, non profit or religious of declaration of real property sufficient documentary
cemeteries, and all lands, buildings, and
evidence in support of such claim (i.e. corporate charters, 1. In MIAA v. Paranaque, July 20,
title of ownership,articles of incorporation, contracts, 2006, the Court declared the Airport Lands
affidavits, etc.) and Buildings of the Manila International
Airport Authority exempt from the real
3. Constitutional Exemptions estate tax imposed by the City of Parañaque.
- actually, directly, exclusively used for The Court declared void all the real estate
religious, educational and charitable tax assessments issued by the City of
-09 purposes are exempt from real property tax Parañaque on the Airport Lands and
008 Buildings of the MIAA, except for the
M2Query: To where does the exemption attach? To the portions that the MIAA has leased to private
Oproperty or to the entity? parties. The Court based its ruling under
RC Section 2(10) and (13) of the Introductory
BACase: X owns a parcel of land, leased by church. Provisions of the Administrative Code,
May X claim exemption from Real Property which governs the legal relation and status
Taxation? Yes, exemption attaches on property as of government units, agencies and offices
long as exclusively used for religious purchases. within the entire government machinery,
under which MIAA is a government
Case: School - not subject to Real Property Tax if instrumentality and not a government-owned
directly used for educational purposes. or controlled corporation. Under Section
A. Has a mansion near the school where the 133(o) of the Local Government Code,
president of the school resides and where guests MIAA as a government instrumentality is
may be accommodated - incidental, president has not a taxable person because it is not subject
to live near school to "[t]axes, fees or charges of any kind" by
local governments. The only exception is
B. Near the school is a hospital where when MIAA leases its real property to a
medical students are trained - incidental to "taxable person" as provided in Section
operation of the school (Herrera vs. CBAA – use 234(a) of the Local Government Code, in
as trainee students) which case the specific real property leased
becomes subject to real estate tax. Thus,
C. Near the school is a men’s dorm, a only portions of the Airport Lands and
student center Buildings leased to taxable persons like
– exempt, incidental to operation of the school private parties are subject to real estate tax
by the City of Parañaque.
D. Near the school is another school
building with 2 floors used as classrooms while 2 Under Article 420 of the Civil
floors are for commercial stores. Code, the Airport Lands and Buildings of
- incidental to operation of school (Bishop of MIAA, being devoted to public use, are
Neva Segovia Case – vegetable garden near properties of public dominion and thus
convent is incidental to convent operation) owned by the State or the Republic of the
- that part not used for educational purpose is Philippines. Article 420 specifically
subject to real property tax mentions "ports x x x constructed by the
- As to the land, pro-rate according to use, one- State," which includes public airports and
half taxed pursuant to Abra Valley College Case seaports, as properties of public dominion
and owned by the Republic. As properties of
public dominion owned by the Republic,
there is no doubt that the Airport Lands and
Buildings are expressly exempt from real
Note: estate tax under Section 234(a) of the Local
Incidental exemptions Government Code.
promulgated prior to 1987 Constitution – meant,
primarily used for the purposes even if not Furthermore, the Court made a distinction
solely. between a GOCC and an instrumentality.
Thus:
CASES:

Government-owned or controlled altogether to the charitable object which it is

corporation refers to any agency organized intended to achieve; and no money inures to
as a stock or non-stock corporation, vested the private benefit of the persons managing
with functions relating to public needs or operating the institution. However, those
whether governmental or proprietary in portions of its real property that are leased to
nature, and owned by the Government private entities are not exempt from real
directly or through its instrumentalities property taxes as these are not actually,
-09 either wholly, or, where applicable as in the directly and exclusively used for charitable
008 case of stock corporations, to the extent of at purposes.
M2 least fifty-one (51) percent of its capital
O stock: x x x “Under the 1973 and 1987
Constitutions and Rep. Act No. 7160 in
RC
A government-owned or controlled order to be entitled to the exemption, the
BA
corporation must be "organized as a stock or petitioner is burdened to prove, by clear and
non-stock corporation." MIAA is not unequivocal proof, that (a) it is a charitable
organized as a stock or non-stock institution; and (b) its real properties are
corporation. MIAA is not a stock ACTUALLY, DIRECTLY and
corporation because it has no capital stock EXCLUSIVELY used for charitable
divided into shares. MIAA has no purposes. "Exclusive" is defined as
stockholders or voting shares. possessed and enjoyed to the exclusion of
others; debarred from participation or
MIAA is also not a non-stock corporation enjoyment; and "exclusively" is defined, "in
because it has no members. a manner to exclude; as enjoying a privilege
exclusively." If real property is used for one
Since MIAA is neither a stock nor a non- or more commercial purposes, it is not
stock corporation, MIAA does not qualify as exclusively used for the exempted purposes
a government-owned or controlled but is subject to taxation. The words
corporation. "dominant use" or "principal use" cannot be
substituted for the words "used exclusively"
without doing violence to the Constitutions
Thus, for an entity to be considered as a and the law. Solely is synonymous with
GOCC, it must either be organized as a exclusively.
stock or non-stock corporation. Two
requisites must concur before one may be
classified as a stock corporation, namely: (1) What is meant by actual, direct and
that it has capital stock divided into shares, exclusive use of the property for charitable
and (2) that it is authorized to distribute purposes is the direct and immediate and
dividends and allotments of surplus and actual application of the property itself to
profits to its stockholders. If only one the purposes for which the charitable
requisite is present, it cannot be properly institution is organized. It is not the use of
classified as a stock corporation. As for non- the income from the real property that is
stock corporations, they must have members determinative of whether the property is
and must not distribute any part of their used for tax-exempt purposes.
income to said members.
The petitioner failed to discharge
2. In Lung Center of the Philippines its burden to prove that the entirety of its
vs. Quezon City, June 29, 2004, the Court real property is actually, directly and
held that Lung Center of the Philipines, a exclusively used for charitable purposes.
charitable institution does not lose its While portions of the hospital are used for
character as such and its exemption from the treatment of patients and the
taxes simply because it derives income from dispensation of medical services to them,
paying patients, whether out-patient, or whether paying or non-paying, other
confined in the hospital, or receives portions thereof are being leased to private
subsidies from the government, so long as individuals for their clinics and a canteen.
the money received is devoted or used Further, a portion of the land is being leased
to a private individual for her business
enterprise under the business name 4. In DIGITEL vs. Province of Pangasinan,

"Elliptical Orchids and Garden Center." February 23, 2007, the Court ruled that in
view of the unequivocal intent of Congress
Accordingly, the Court held that to exempt from real property tax those real
the portions of the land leased to private properties actually, directly and exclusively
entities as well as those parts of the hospital used by petitioner DIGITEL in the pursuit of
leased to private individuals are not exempt its franchise, respondent Province of
-09
from such taxes. On the other hand, the Pangasinan can only levy real property tax
008
portions of the land occupied by the hospital on the remaining real properties of the
M2
and portions of the hospital used for its grantee located within its territorial
O
patients, whether paying or non-paying, are jurisdiction not part of the above-stated
RC
exempt from real property taxes.” classification. Said exemption, however,
BA merely applies from the time of the
Analysis: effectivity of petitioner DIGITEL’s
Is Lung Center liable for Real Property Tax? legislative franchise and not a moment
Yes. sooner.
a. exclusively used means solely
used for charitable purposes 5. In Philippine Fisheries Development
b. exemption in its charter Authority vs. Court of Appeals, July 31,
revoked by new LGC 2007, the Court reversed the Court of
c. incidental exemption no longer Appeal’s decision which held that petitioner
recognized Philippine Fisheries Development Authority
d. taxed on orchidarium, canteen, is liable to pay real property taxes on the
private clinics land and buildings of the Iloilo Fishing Port
Complex which are owned by the Republic
Query: are the older cases now not of the Philippines but operated and governed
applicable so that they are now by the Authority.
taxable?
- not clear as to the extent The Court ruled that the Authority
of Lung Center case as to is not a GOCC but an instrumentality of the
areas which used to be national government which is generally
considered as real exempt from payment of real property tax.
property tax exempted as However, said exemption does not apply to
incidental the portions of the IFPC which the Authority
- If city decides to tax SLU leased to private entities. With respect to
on its hospital, parking lot, these properties, the Authority is liable to
etc., use as ground that pay real property tax.
they should be exempt due
to necessity, do not use the The Authority should be classified
word “incidental” as an instrumentality of the national
government. As such, it is generally exempt
3. In LRTA vs. CBAA, October 12, 2000, from payment of real property tax, except
though the creation of the LRTA was those portions which have been leased to
impelled by public service – to provide mass private entities.
transportation in MM- its operations
undeniably partakes of ordinary business. . . F. May LGUs grant exemption? Yes
Given that it is engage in a service-oriented
commercial endeavour, its carriage ways Power to Grant Local Exemptions (Sec. 192 LGC)
and terminal stations are patrimonial - LGUs, may through ordinances duly approved, grant tax
property subject to tax, notwithstanding its exemptions, incentives or reliefs under such terms and
claim of being a GOCC. conditions, as they may deem necessary.
Under its charter, LRT is not - Although powerless to grant RPT exemption, LGU in MM
exempt from real property tax. Taxation is can exempt the 5% ad valorem
the rule and exemption is the exception.
tax on idle lands. 1. The preparation of Schedule of Fair Market

Values.
- LGUs (within and outside MM) may also grant condonation 2. The enactment of Ordinances:
which actually partake of a) levying an annual "ad valorem" tax on
exemption. real property and an additional tax accruing to the
SEF.
G. Who are liable for the Real Property Taxes b) fixing the assessment levels to be applied
1. Ownership vs. Use
-09 to the market values of real
008 properties;
M2 Doctrine of Ownership c) providing necessary appropriation to
O - owner is liable defray expenses incident to general revision of real
RC property assessments; and
BA Doctrine of Use d) adopting the Schedule of Fair Market
- property is exempt due to Use Values prepared by the assessors.
(REC-religious, educational,
charitable) The preparation of fair market values as a preliminary step in
the conduct of general revision was set forth in Section 212 of
Actual Use of Property as Basis for R.A. 7160, to wit: (1) The city or municipal assessor shall
Assessment (Sec. 217, LGC) prepare a schedule of fair market values for the different
Real property shall be classified, valued and classes of real property situated in their respective Local
assessed on the basis of actual use regardless of Government Units for the enactment of an ordinance by the
where located, whoever owns it, and whoever uses it. sanggunian concerned. (2) The schedule of fair market values
shall be published in a newspaper of general circulation in the
Beneficial User May Be Liable if: province, city or municipality concerned or the posting in the
* he leased property from the provincial capitol or other places as required by law.
government
* he leased property from an The Court also laid down the procedure in computing
exempt owner the real property tax. With the introduction of assessment
* use is not exempt from real levels, tax rates could be maintained, although tax payments
property tax can be made either higher or lower depending on their
percentage (assessment level) applied to the fair market value
2. In Testate Estate of Concordia Lim vs. Manila, of property to derive its assessed value which is subject to tax.
February 21, 1990, GSIS foreclosed the property mortgaged Moreover, classes and values of real properties can be given
by Lim and for failure to redeem, owned by GSIS for the proper consideration, like assigning lower assessment levels to
years 1977 to 1978. In 1979, heirs of Lim repurchased residential properties and higher levels to properties used in
the property. Manila sought to levy real property tax on business. The procedural steps in computing the real property
heirs for back taxes covering 1977 and 1978. tax are as follows:
Who is lible for the back taxes? 1) Ascertain the assessment level of the property
a. not the heirs because they were not the owners nor 2) Multiply the market value by the applicable
beneficial owners at the time assessment level of the property
b. not GSIS because at the time it was exempt 3) Find the tax rate which corresponds to the class
c. beneficial users or those using the property for (use) of the property and multiply the assessed value by
commercial use must pay however not the applicable tax rates.
made liable since not impleaded
H. Procedure in Real Property Taxation
In Lopez vs. City of Manila, February 19, 1999, the

Court discussed the steps to be followed for the mandatory
conduct of General Revision of Real Property assessments, The computation of real property tax is cited below:
pursuant to the provision of Sec. 219, of R.A. No. 7160 which
are as follows: Market Value
Pxxx

Multiplied by Assessment Level (x %) a. file w/in 60 DAYS upon completion or

occupation (whichever is earlier)
Assessed Value Pxxx b. SWORN statement containing FMV and
description of property
Multiplied by Rate of Tax (x %)
b. Provincial / City / Municipal Assessor
(Sec. 204)
-09 Real Property Tax WHEN only when the person under Sec 202 refuses
008 Pxx or fails to make the declaration
M2 within the prescribed time. No oath by assessor is required
1. Declaration of Real Properties – whose duty?
O • NOTE: IF FILING FOR EXEMPTION (Sec.
RC 206)
BA DECLARATION OF REAL PROPERTY WHAT person claiming exemptions must file with
assessor sufficient documentary
It shall be the responsibility of the owner, evidence to support claim
administrator or their representatives to WHEN within 30 days from the date of
declare, under oath, the true value of real DECLARATION of property
property, taxable or exempt, within 60 days • IF required evidence is not submittedwithin 30
after the acquisition. The sworn declaration days, the property will be listed as taxable in the roll
shall be filed once every 3 years before June • IF proven to be tax-exempt, property will be
30th of the year commencing 1992. The dropped from the roll
failure or refusal to make that declaration
within the prescribed period would authorize • NOTE: IF PROPERTY DECLARED FOR THE
the provincial or city assessor to declare the FIRST TIME (Sec. 222)
property in the name of the defaulting owner, If declared for 1st time, real property shall be
if known, or against an unknown owner as the assessed for back taxes
case may be, and to assess the property for a) for not more than ten (10) years prior to
taxation. (Secs. 201-204 LGC). the date of initial assessment
b) taxes shall be computed on the basis of
In the case of Testate Estate of Concordia Lim V. applicable schedule of values in force during the
City of Manila, February 21, 1990, it was held that the corresponding periods
unpaid tax attaches to the property and is chargeable against *Assessor will compare the entry on file with the
the person who had actual or beneficial use and Registry of Deeds and the assessment roll in his office.
possession of it regardless of whether or not he is the
owner. To impose the real property tax on the subsequent c. building officials
owner who was neither the owner nor the beneficial user of Prior to construction of building, as required in
the property during the designated periods would not only procuring building permit.
be contrary to law but also unjust. Permit transmitted by building officials to Registry of
Deeds.
d. Geodetic engineers - For lands surveyed

e. Notaries Public - For document notarization, must
a. Owner or Administrator (Secs. 202-203, LGC) furnish the assessors a copy
When: once every 3 years during the
period from January 1 to June 30 2. Valuation by Assessors
What: file a sworn declaration with the
assessor with description of the Assessment
property - the act or process of determining the value of a property, or
� IF newly acquired property - proportion thereof subject to tax, including the discovery,
a. files with assessor within 60 DAYS from listing, classification, and appraisal of properties.
date of transfer a
b. SWORN statement containing FMV and Appraisal
description of property - the act or process of determining the value of property as of a
� IF improvement on real property specific date for a specific purpose.

LISTING OF REAL PROPERTY IN THE 3. Sanggunian enacts an ordinance.

ASSESSMENT ROLLS 4. The schedule of FMV is published in a newspaper of
(Secs. 205, 207) general circulation in the province city or municipality
concerned or in the absence thereof shall be posted in the
� Listing of all Real Property whether taxable or exempt provincial capitol city or municipal hall places therein (Sec.
within the jurisdiction of LGU in the assessment roll. 212, LGC)
o Undivided real property – in the name of the estate or heirs
or devisees
-09 Classification of Land for purposes of assessment - Sec
o Corporation, partnership and association – same as
008 218, LGC
individuals
M2 1. Commercial – land devoted principally for the object of
o Owned by the Republic of the Philippines, its
O profit and is not classified as agricultural, industrial,
instrumentalities, political subdivisions, beneficial use is
RC mineral, timber, or residential land
transferred to a taxable person – in the name of the
BA 2. Agricultural – land devoted principally to the planting of
possessor trees, raising of crops, livestock and poultry, dairying, salt
making, inland fishing and similar aquacultural
� All declarations shall be kept and filed under a uniform activities, and other agricultural activities
classification system to be established by the provincial, city 3. Residential – land principally devoted to habitation
or municipal assessor. 4.Mineral- lands which minerals, metallic or non-metallic,
exist in sufficient quantity or grade to justify the
Steps in assessment of Real Property : necessary expenditures to extract and utilize such materials
1. Listing of all properties subject to the tax; and 5. Industrial-land devoted principally to industrial activity as
2. The valuation of such properties. capital investment and is not classified as agricultural,
commercial, timber, mineral or residential land
In Callanta vs. Ombudsman, January 30, 1998, 6. Timberland
where the issue was whether officials and employees of the 7. Special
Office of the City Assessor may reduce the new assessed - Classification of lands made by respective sanggunian in
values of real properties upon requests of the affected property accordance with zoning ordinances.
owners, the Court ruled that forestall the practice of initially -It is based on actual use. Actual use refers to the purpose for
setting unreasonably high reassessment values only to which the property is principally or predominantly
eventually change them to unreasonably lower values upon utilized by the person in possession thereof.
"requests" of property owners, the law gives no such authority
to the city assessor or his subalterns.. . Thus, petitioners' For Machinery
unauthorized reduction of the assessed values ineluctably 1. For Brand New machinery : FMV is acquisition cost
resulted in the local government's deprivation of the 2. In all other cases:
corresponding revenues. Lost or reduced revenues undeniably FMV = Remaining economic life x Replacement cost
translate into damages or injury within the contemplation of
the law. The city government of Cebu, therefore, had every DETERMINE ASSESSED VALUE (Sec. 218)
legal right to feel aggrieved and to institute the proceeding
against petitioners. Procedure
1. take the schedule of FMV (Fair Market Value)
3. Preparation of Schedule of Fair Market Values 2. Assessed value = FMV x Assessment level
3. Real Property Tax = Assessed value x Allowable Real
APPRAISAL AND VALUATION OF REAL Property Tax rate
PROPERTY
(Sec 212-214, 224-225) 4.Enactment of a Real Property Tax Ordinance
How to determine Fair Market Value: Barangays cannot impose realty taxes.
Municipalities cannot fix real estate tax rates.
For Land
1. Assessor of the province/city or municipality may summon Procedure:
the owners of the properties to be affected and may take a.hearing and modification of prepared schedule
depositions concerning the property, its ownership amount, b.publication
nature and value. (sec. 213,LGC) c.adoption of the schedule
2. Assessor prepares a schedule of FMV for different classes d.adoption of real property ordinance with
of properties. assessment levels
Hospital Medical Arts Center (CHHMAC) building which

Coverage / Types of Real Property Tax: should be classified as “special”. Sec. 216, LGC states that:
1. Basic real property tax / Annual Ad Valorem Tax
For real property not specifically exempted SEC. 216. Special Classes of Real
a.Provinces – not more than 1% of assessed value; Property.––All lands, buildings, and
b.Cities, Municipalities in MM – not more than 2% other improvements thereon actually,
of assessed value directly and exclusively used for
-09 hospitals, cultural or scientific
2. Special levies:
008 purposes, and those owned and used
M2 a. Special Education Fund (SEF) by local water districts, and
O - 1% additional real estate tax to finance the SEF government-owned or controlled
(Sec.236) – within MM area only
RC corporations rendering essential
BA public services in the supply and
b. Additional Ad Valorem on the Lands distribution of water and/or
– not exceeding 5% of the assessed value of the generation and transmission of
property (Sec. 236, LGC) electric power shall be classified as
special.
c. Special Assessments/ For Public Works iii. Provide for appropriations

- on lands specially benefited by public works, iv. Adopt Schedule of Fair Market Values
projects or improvements funded by the LGU
- May be imposed even by municipalities outside Fair Market Value and Assessed Value – What’s the
MM provided: difference?
- Special levy shall not exceed 60% of the Fair Market Value (FMV)
actual cost of such projects and improvements, including the - price at which a property may be sold by a
costs of acquiring land and such other real property in seller who is not compelled to sell and bought by a
connection therewith not apply to lands exempt from basic buyer who is not compelled to buy
real property tax and the remainder of the land have been
donated to the local government unit concerned for the Assessed Value or Assessment Value (AV)
construction of said projects. (Sec. 240, LGC). - fair market value of the real property
multiplied by the assessment level. It is synonymous
Special Levy with taxable value.
Requirements for validity:
1. infrastructure project financed by government
whereby real property owners benefit from it Payment of Tax
2. not more than 60% of actual cost of project
3. not less than five but not more than ten years When: January 1 of every year (Sec 246)
4. thru an ordinance The tax shall constitute as superior lien (Sec. 246)
a. nature of project
b. extent of project How:
c. cost spent a. basic real prop tax in 4 equal installments (Mar 31,Jun
d. metes and bounds 30,Sep 30, Dec 31)
b. special levy - governed by ordinance
What may be done:
i. levy ad valorem taxes (see above) Interest for Late Payment
ii. Fix Assessment levels - two percent (2%) each month on unpaid amount until the
Assessment level – is the percentage applied to the delinquent amt is paid.
fair market value to determine the taxable or taxation value - provided in no case shall the total interest exceed thirty-six
of the property. (36) months
In City Assessor of Cebu City vs. Association of Advance and Prompt Payment
Benevola de Cebu, June 8, 2007, applying Secs. 215-216, of a) advance payment - discount not exceeding 20% of annual
LGC, in line with City Tax Ordinance LXX of Cebu City, the tax (Sec 251, LGC)
10% special assessment should be imposed for the Chong Hua b) prompt payment - discount not exceeding 10% of annual
tax due(Art 342 IRR)
Collection of Tax (Sec.247, LGC)

The collection of the real property tax with interest
thereon and related expenses and the enforcement of the
remedies provided by the LGC or any applicable laws shall be
the responsibility of the city or municipal treasurer concerned.
The city or municipal treasurer my deputize the
barangay treasurer to collect all taxes on real property located
-09
in the barangay provided the barangay treasurer is properly
008
bonded.
M2
O
Who Collects:
RC
The provincial, city, municipal or barangay treasurer
BA
Period Within Which To Collect (Sec 270):

Within five (5) yrs from the date they become due within ten
(10) yrs. from discovery of fraud, in case there is fraud or
intent to evade
Period of prescription shall be SUSPENDED when: (Sec

270, LGC)
1. local treasurer is legally prevented to collect tax
2. the owner of prop requests for reinvestigation and writes a
waiver before expiration of period to collect
3. the owner of the property is out of the country or cannot
be located


Review Notes For Taxation 2: Ňas, Marie Mae Buliyat, Wilhelmina Diwa, Feliza Kadatar

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REVIEW NOTES FOR TAXATION 2 1

Incidence or burden of estate of tax

Estate tax 1. PREDECESSOR – the object of the tax is the

Purpose and justification of estate tax: Reciprocity

a.) Benefit-Received Theory 1.) Did not impose an estate tax; or

The gross estate extends to gratuitous transfers made

Property Included in the Gross Estate (INCLUSIONS): 2) Transfer in contemplation of death

B. Transfer with retention of interest in respect to:

- Presumption: proceeds are revocable

1. Merger of usufruct in the owner of the naked title

- Requisites: F. Retirement benefits of employees of private firms from

5) Unpaid mortgages indebtedness B. Vanishing / Alternating Deduction Or Property

- VANISHING DEDUCTION: because the rate of C. Transfers For Public Use

- Rationale: D. Family Home

Valuation of Property Filing of Notice of Death

5.) When to Pay • Subsidiarily Liable : Beneficiary - to the extent of his

c. Condonation or remission of debt, where the creditor

Requisites Of A Taxable Gift:

Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,

thereby escaping the effect of the progressive rates of strangers

General Rule: The amount by which the FMV of the property

1. Donor’s Tax Paid to 1 Foreign Country

Tax Credit Limit =

Net gift situated in a foreign country X Phil. Donor’s Tax

- the law in force at the time of the perfection / completion of

Note: Renunciation of a surviving spouse of his/her share 3. Payment of Donor’s Tax

G. NET GIFT 4. Extensions For Payment Of Donor’s Tax

Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,

A B - Yes, this is a case of waiver. A is deemed to have accepted

Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,

modified, changed, or amended: Provided, importation of any article subject to excise

shall be deemed as approval of the

g. Power to prescribe - the following are the powers which the

(2) The financial position of the taxpayer

Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,

In case of seizure of personal property under claim for CASES:

 Lien shall not be valid against any

Extinguishment of Tax Lien 1. Withholding tax cases

Compromise of criminal violation

a. Enforce the compromise, or products, manufactured oils,

Actual Constructive of business and with someone of suitable

How Actual Distraint Effected NOTE:

• When should it run again: When the proceeding is

Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,

• should be filed 5 years from the (1) day of the

- Those enjoying privileges as granted by the iii. Franchise Tax

4) Levy (Sec. 174 and 176,. LGC)

1. Drilon vs. Lim, (August 4, 1994) -

Real Property Tax, defined CHARACTERISTIC OF REAL PROPERTY TAX:

A. Governing Law C. Fundamental Principles Governing Appraisal and

Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,

Machinery – embraces machines, equipment, therefrom without breaking the material or

needs of the industry or works carried on by improvements actually, directly and

Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,

Government-owned or controlled altogether to the charitable object which it is

enterprise under the business name 4. In DIGITEL vs. Province of Pangasinan,

tax on idle lands. 1. The preparation of Schedule of Fair Market

H. Procedure in Real Property Taxation

In Lopez vs. City of Manila, February 19, 1999, the

Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,

Multiplied by Assessment Level (x %) a. file w/in 60 DAYS upon completion or

d. Geodetic engineers - For lands surveyed

Prepared by TAX LAW COMMITTEE – Adviser: Atty. Jason Barlis,