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PRE-BAR REVIEW IN

TAXATION

COVERAGE OF TAXATION
1) General Principles of Taxation 2) NIRC Include: CTR Act of 1997 (R.A. 8424)

Continuation

Provisions already in effect Exclude: EVAT Exclude: Percentage Taxes, Excise Taxes and Documentary Stamp Taxes

Continuation .

(3) Tariff and Customs Code Exclude: Arrastre and Classification of Commodities

Continuation .

(4) Republic Act No. 1125 Creating the Court of Tax Appeals (5) The Local Govt. Code on Taxation

GENERAL PRINCIPLES Importance Foundations Validity

CONCEPT Inherent power Exercised through the legislature Impose burdens

Continuation .

Upon subjects and


objects W/in its jurisdiction To meet recognized objects of govt.

NATURE
INHERENT POWER Basis, manifestation LEGISLATIVE Basis, manifestation

THEORY OF TAXATION

Lifeblood The power to destroy

BASIS OR RATIONALE Symbiotic

relationship Jurisdiction

PURPOSES OR OBJECTIVES

Revenue Sumptuary Compensatory

PRINCIPLES, CHARACTERISTICS, CANONS OF A SOUND


TAX SYSTEM Fiscal adequacy Administrative feasibility Theoretical justice

TAXATION DISTINGUISHED
Police power
Eminent domain

BASIS FOR DISTINCTIONS


Purpose Amount Property taken Disposition of property

Continuation .

Compensation Relation to the nonimpairment clause Imposing authority

LIMITATIONS Purpose Kinds


Inherent Constitutional

INHERENT Public purpose No improper delegation Territoriality

Continuation .

Govt. exemption
respected Comity recognized

No double taxation

PUBLIC PURPOSE
Meaning When should it exist ?

TAXPAYERs SUIT Injury aspect


Zone of protection Transcendental importance

LOCUS STANDI
*INJURY ASPECT
*ZONE OF PROTECTION

TRANSCENDENTAL IMPORTANCE

NO IMPROPER DELEGATION Completeness


Sufficiently determinate standards

CONSTITUTIONAL DELEGATION Flexible tariff clause


Delegation to local governments

TERRITORIALITY
Meaning

BASIS
Jurisdiction
Symbiotic relation

EXCEPTIONS

OUTSIDE
TAXED

OUTSIDE - TAXED Resident citizens


taxed on incomes from without Mobilia sequuntur personam

OUTSIDE
TAXED

INSIDE NOT TAXED

INSIDE - NOT TAXED Comity - In par parem


non habet imperium Reciprocity

OUTSIDE
TAXED

INSIDE NOT TAXED * COMITY

* RECIPROCITY

SITUS Meaning
Basis Situs of property taxes Real. Lex situs Lex rei sitae

Continuation .

Personal
Tangible. Mobilia sequuntur personam Intangible. Business situs

Situs of excise taxes


Situs of transfer taxes

BASIS OF SITUS OF INCOME TAXATION Domicillary theory Nationality theory


Doctrine of source

GENERAL PRINCIPLES OF INCOME TAXATION

Individuals, incldg estates and trusts Corporations

INDIVIDUALS Citizens
Residents w/in w/o Non-residents, OCWs, seamen w/in Aliens w/in

CORPORATIONS
Domestic w/in w/o Foreign w/in

FROM WITHIN Interest


Dividends
Domestic Foreign 50% 3 years

Services

Continuation .

Rentals & royalties

Sale of
Real property Personal property

FROM WITHOUT Interest


Dividends
Domestic Foreign 50% 3 years

Compensation

Continuation

Rentals & royalties

Gains from sale of


Real property

CONSTITUTIONAL LIMITATIONS General or indirect Specific or direct

GENERAL OR INDIRECT Due process


Equal protection Freedom of the press

Continuation .

Religious freedom Non-impairment clause Law making Executive clemency

DUE PROCESS Substantive Procedural


Notice Hearing

EQUAL PROTECTION No discrimination vs. Uniformity Valid classification

VALID CLASSIFICATION Substantial


distinctions Germane to the issue

Continuation .

Applicable not only to existing conditions Applicable to all members of the same class

DOUBLE TAXATION

No specific
prohibition Violates equal protection

DIRECT DUPLICATE TAXATION

Same:
Taxing authority Subject or object Purpose Taxing period

Continuation .

Taxing all for first time w/o taxing all for the second time

EASING DOUBLE TAXATION Tax treaties - exemption


Tax deduction Tax credit

FREEDOM OF THE PRESS

RELIGIOUS FREEDOM

NON-IMPAIRMENT CLAUSE Obligations of contract


Overrides taxing power Police power superior

LAW MAKING
One subject one title
Three readings Printed copies

EXECUTIVE CLEMENCY Penal provisions No tax amnesty

SPECIFIC OR DIRECT No imprisonment for


poll tax Uniform & equitable

Continuation .

Progressive system Delegation Supreme Court review

Continuation .

Law making Utilization Tax exemptions

TAX SYSTEMS Regressive system


Proportional system Progressive system

SUPREME COURT REVIEW Tax, impose, assessment or toll Penalty

LAW MAKING Origination Presidential veto Title

UTILIZATION No use for religious


Special purpose tax Automatic release of LGUs share

TAX EXEMPTIONS
Majority vote Real property tax exemption

Continuation .

Revenues and assets

Non-profit, n/s
Proprietary, coops

Grants, endowments

REAL PROPERTY TAX EXEMPTIONS

Charitable institutions, churches, parsonages and convents appurtenant thereto, mosques, non-profit cemeteries All lands, buildings and

Continuation .

improvements of all kinds,

Actually, directly and exclusively used for Religious, charitable and educational purposes

REVENUES AND ASSETS


Non-profit, non-stock Educational institutions Actually, directly and exclusively used

Continuation .

Educational purposes

REVENUES AND ASSETS


Proprietary educational institutions, incldg those cooperatively owned

Continuation .

Exempt subject to limitations provided by law


Dividends Provisions for reinvestment

EXEMPT DONATIONS
Subject to conditions set by law All grants, endowments, donations, contributions

Continuation .

Used, actually, directly and exclusively For educational purposes

TAXES
Enforced contributions
To raise revenues To fulfill objectives of government

SOURCES OF TAX LAWS Constitution Tax legislation

TAX LEGISLATION National tax laws NIRC TCCP

Continuation .

Local tax laws

Tax ordinances

Misc. tax laws


Land transport taxes VRB taxes

CLASSIFICATION Subject or object


Personal, poll, capitation
Property Excise

Continuation .

Who bears burden


Direct Indirect

Continuation .

Amount
Specific Ad valorem Compound

Continuation .

Purpose
General, fiscal, or revenue Special or regulatory

Continuation .

Authority imposing
National Local

Continuation .

Gradation or rate
Proportional Progressive or graduated Regressive

Continuation .

Source
Constitutional
Statutory Treaty Contractual Licensing ordinance

TAX VS. DEBT Basis


Failure to pay Mode of payment Assignability

Continuation .

Interest

Authority Prescription

SET-OFF
NATIONAL

NO SET-OFF

SOLUTIO INDEBETI

NO SET-OFF

LOCAL
LEGAL COMP.

LEGAL COMPENSATION Mutuality of parties


Debtors/creditors Both debts due and demandable

TAX VS. TOLL


Purpose
Amount Authority

TAX VS. SPECIAL ASSESSMENTS Subject


Liability Basis Application

TAX VS. LICENSE FEE Purpose


Basis Amount

Continuation .

Time of payment

Effect of nonpayment Surrender

TAX EXEMPTIONS
Tax exemptions
Broad Narrow

PRINCIPLES
Strictissimi juris
No exemption by implication Power to tax, exempt Restrictions Vs. tax amnesty

KINDS
Clarity Express Implied

Continuation .

Extent
Total Partial

Continuation .

Intent
Intentional Accidental or by omission

TAX AVOIDANCE VS. TAX EVASION Means and methods


Amount Validity

END OF GENERAL PRINCIPLES !!!


The next topic is Tax Remedies including R.A. No. 1125