Narrow Sense
tax, the only those which only those granted by
Narrow Sense – Exemption of a particular class. An
entire class of the same conditions are exempted from
taxes supposedly imposed on a bigger class
Atty:
In the narrow sense the grant of immunity, express of
implied in a particular provision or entity on particular
class from the tax of a property or on excise tax which
persons or entities generally be the same taxing
districts are obliged to pay.
Example:
GR: All income earners are subject to tax
EXP: Minimum Wage Earners
Note:
 Whether narrow sense or broad sense that is
an exemption which they don’t pay taxes – it
doesn’t matter which sense we are looking at.
 When there is exemption from taxation, the
State is diverting itself from prerogative to
collect taxes upon certain objects and subjects
of taxation
Nature of Tax exemption
A. Mere personal privilege of the grantee –
cannot be assigned or transferred without the
consent of the Legislature.
B. Generally revocable by the government –
EXC: Unless founded on a contract with
valuable consideration
C. Implies a waiver on the part of the
government of its right to collect taxes due
to it.
D. Not necessarily discriminatory, provided it has
reasonable foundation or rational basis
The exemption is provided in the law itself or the
Atty: The national government has the inherent
constitution.
power to tax, so it also has the inherent power
to grant exemption. Since the local government
only has the constitutionally granted power to
Congress will it be able to exercise the
exemption. Rightfully so, congress has granted
local government units the power to exempt
subject to the approval of the Sanguniang
Panlungsod, Sanguniang Panlalawigan or
Bayan(the legislative body of the local
government).
RATIONALE OF TAX EXEMPTION
Such exemption will benefit the body of the
people and not particular individuals or private
interest and that the public benefit is sufficient
to offset the monetary loss entailed in the
grant of the exemption.
The exemption is granted pursuant to non-
revenue purpose of taxation as when public
interest will be sub serve when the exemption
is allowed.
Example of exemption granted by law because
public interest will be sub serve by the
exemption E.g Senior Citizens Act
Atty: We’re willing to let go of the taxes
because of the benefit we get from exempting
foreign investors registered under (PEZA )
Grounds for Tax Exemption
A. It may be based on contract.
When the charter provides for such
exemption
TN: In such a case, the public which is
represented by the government is
supposed to receive a full equivalent
therefor
B. It may be based on some ground of public
policy.
TN: To encourage new industries or to foster
charitable institutions. Here, the government need
not receive any consideration in return for the tax
exemption.
C. It may be created in a treaty on grounds of
reciprocity or to lessen the rigors of international or
multiple taxation.
TN: Recognition of international comity
TN: Equity is NOT a ground for tax exemption.
Exemption from tax is allowable only if there is a clear
provision. While equity cannot be used as a basis or
justification for tax exemption, a law may validly
authorize the condonation of taxes on equitable
considerations
AS TO MANNER OF CREATION
A. Express or affirmative – when certain persons,
property or transactions are, by express provision,
exempted from all or certain taxes.
- When the provision itself provides for
exemption
TN: May be made by provisions of the
Constitution, statutes, treaties, ordinances,
franchises, or contracts.
B. Implied exemption or exemption by omission –
when a tax is levied on certain classes of persons,
properties or transactions without mentioning the
other classes. Every tax statute, in a very real
sense, makes exemptions since all those not
mentioned are deemed exempted.
- When the law did not include it in the list of
those exempted. Ex. PAGCOR
TN: The omission may be either accidental or
intentional. Exemptions are not presumed, but when
public property is involved, exemption is the rule, and
taxation, the exception.
AS TO SCOPE OR EXTENT
A. Total exemption – when certain persons,
property or transactions are exempted, expressly or
implied, from all taxes entirely.
B. B. Partial exemption – when certain persons,
property or transactions are exempted, expressly or
implied, from certain taxes in part
Ex. Basic personal exemption and additional exemption
AS TO OBJECT
A. Personal exemption – granted directly in favor
of certain persons
Ex. Basic personal exemption of 50k and additional
exemption of 25k for each dependent up with a
maximum of 4 dependents; However, these have been
repealed by the TRAIN Law effective January 1, 2018.
B. Impersonal exemption – granted directly in favor of
a certain class of property
Ex. Property
TN: There cannot be simultaneous exemption under
two laws
CONSTRUCTION OF TAX EXEMPTION
STATUTES
General rule
Tax exemption statutes are construed strictly against
the taxpayer and liberally in favor of the government.
A. In the construction of tax statutes, in case of
doubt, exemptions are not favored and are
construed strictissimi juris against the taxpayer.
B. The fundamental theory is that all taxable
property should bear its share in the cost and
expenses of the government.
C. Taxation is the rule and exemption the exception,
and therefore, he who claims exemption must be
able to justify his claim or right thereto, by a grant
expressed in terms ―too plain to be mistaken and
too categorical to be misinterpreted.
 D. Claims for an exemption must be able to point out tax exemption be granted also those tax amnesties as
some provision of law creating the right, and well.
cannot be allowed to exist upon a mere vague
implication or inference. DISTINGUISHED FROM TAX EXEMPTION

E. Refunds are in the nature of exemption, and must

be construed strictly against the Tax Amnesty Tax Exemption
grantee/taxpayer. Immunity from all criminal Immunity from all civil
and civil obligations arising liability only
Exceptions from non- payment of
taxes

A. When the law itself expressly provides for a liberal (Immunity from all civil,
construction, that is, in case of doubt, it shall be criminal, and
resolved in favor of exemption. administrative liabilities)
B. When the exemption is in favor of the
government itself or its agencies, or of religious, A general pardon given to A privilege, a freedom
charitable, and educational institutions because all Taxpayers from a charge or burden of
the general rule is that they are exempt from tax. which others are subjected

C. When the exemption is granted under special Applies to past tax periods, Generally prospective in
circumstances to special classes of persons. hence of retroactive application
application
D. If there is an express mention or if the taxpayer
falls within the purview of the exemption by clear
legislative intent, the rule on strict construction CONSTRUCTION OF TAX LAWS
does not apply.
General rule:
E. If exemption refers to public property (in case of
public property, the general rule is exemption and Tax laws should be construed strictly against the
taxation is the exception) government and in favour of the tax payer.
F. Solutio indebiti
Atty: Taxes are burden which was endured by the tax
Q: When will you apply the strict construction? payer not presumed to go beyond what the law
expressly provides.
A: Only if there is doubt as to the interpretation of the
REMEMBER:
law exempting the person of the property. If there is no
doubt, no need to apply the strict construction.
Tax laws should be construed strictly against the
government.
TAX AMNESTY
Tax exemption should be construed strictly against the
A tax amnesty is a general pardon or intentional tax payer .
overlooking by the State of its authority to impose
Same goes of exclusion should be construed against
penalties on persons otherwise guilty of evasion or
the tax payer.
violation of a revenue or tax law.

Atty: Government decided not to pursue civil or
administrative penalties against a tax payer who give
the tax payer a clean slate only congress can grant tax
amnesties provided by the constitutional limitation.
(require approval of MAJORITY of the Congress for the
Tax refund should be construed against the tax payer.
Tax amnesty should also be construed against the tax
payer.
Tax Rules and Regulations
Atty: Given probative value, respected by the courts
but not binding.
Tax Rulings
Tax rulings are specific positions by the BIR on matters
or facts to a specific taxpayer. It is applicable only to the
particular taxpayer.
Atty: Tax Ruling rendered in favour of the tax payer, is
not meant to be construed as a perpetual exemption. It
will be subject of reversal later on.
Penal Provisions of Tax Laws
It is construed strictly against the government, because
we’re are talking about criminal law. So it’s always in
favour of the accused.
Prospectively on Tax Laws
It means that tax laws are prospective in operation
unless there is legislative intent which it should operate
retrospectively. When the law is silent on how it should
operate then, it should be construed against
retrospectively.
Same application of tax rules and rulings, it should be
construed prospectively BUT there is an exception
provided under
Sec.246 NIRC. Where tax rulings or circulars may be
given retroactive application
a. where the tax payer deliberately mistake or
omits material of facts from his return or any
document required of him by the BIR
b. Where the facts subsequently gathered by the
BIR are materially different from the facts on
which the ruling is based;or
c. Where the taxpayer acted in bad faith
Imperceptibility of Taxes
Taxes being the lifeblood of the government collections
and assessment thereof is deemed imprescriptible
UNLESS otherwise provided.
So the assessment and the collection of taxes should
not prescribe otherwise the government will lose its
right to collect taxes EXCEPT the tax code otherwise
provide.
Prescription in Tax Code
3 years in collection, 4 years in assessment subject to
variations depending on the provision.
Nature of Internal Revenue Law
It is not political in nature, meaning it will continue
enforce while the Philippines is being concurred or
under occupation.
Example: Japanese period tax code is applicable
Note:
It is civil and not penal in nature even there are penal
provisions in the law.
Note:
In construction of tax laws take into consideration the
legislative intent.
GENERAL RULE:
The tax statute strictly against the government liberally
in favour of the tax payer.
EXCEPT:
Tax exemptions, tax refund strictly construed against
the tax payer.
MANDATORY AND DIRECTORY PROVISIONS OF TAX LAWS
Directory provisions – those designed merely for the
information or direction of officers or to secure
methodical and systematic modes of proceedings.
Ex. Revenue memorandum circulars issued by BIR to
guide personnel on matters of regulation.
Mandatory provisions – those intended for the
security of the citizens or which are designed to ensure
equality of taxation or certainty as to the nature and
amount of each person‘s tax.
 Ex. Remedies under the tax code (security); tax rate
(equality)

EXCLUSIVE AUTHORITY OF THE SECRETARY OF

FINANCE TO PROMULGATE RULES AND REGULATIONS

This is without prejudice to the power of the

Commissioner of Internal Revenue to make rulings or
opinions in connection with the implementation of the
provisions of internal revenue laws, including rulings on
the classification of articles for sales tax and similar
purposes.

A. Promulgation: Secretary of Finance

B. Recommendation: Commissioner of Internal
Revenue
C. Administrative rulings: Commissioner of
Internal Revenue

Distinguish

Revenue Ruling Revenue Regulation

Official position of the BIR Issued by the Sec. Of

commissioner to queries Finance upon the
raised by the BIR for recommendation of CIR
certain/specific issues of
law or administration in Examples: Rules for the
relation on the provision effective enforcement of
of the tax code. the tax code

CIR issues revenue ruling DOF issues revenue

regulations

Sources of Tax Laws in the Philippines

1. Constitution (primary source)

2. Legislations or statutes
3. Administrative Rules and Regulations
4. Ruling and Opinion of Tax Officials
5. Judicial Decisions (in accordance of the NCC
Art.8)
6. Tax Treaties and Agreements